RAINIER
INVESTMENT
MANAGEMENT Annual Report
Mutual Funds
audited
March 31, 1998
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
INDEPENDENT AUDITORS' REPORT .............................................. 32
DIRECTORY OF FUNDS'
SERVICE PROVIDERS ......................................................... 32
INDEX DESCRIPTIONS ........................................................ 33
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.
1
<PAGE>
LETTER TO SHAREHOLDERS
Dear Shareholders,
As Chairman of the Rainier Investment Management Mutual Funds and a fellow
shareholder in the Funds, I'd like to express our appreciation for your valued
investment in one of the four Portfolios covered in this report. If you are a
new shareholder, welcome! This report, known as the "Annual Report," contains
audited financial statements for the fiscal year ending March 31, 1998. The
audit of the financial statements was performed by KPMG Peat Marwick LLP.
As you review this Report, you will find commentary describing the general
environment of the equity and fixed-income capital markets for the fiscal year
ending March 31, 1998. Also, you will see commentaries for each of the four
Portfolios, which cover the last six months, followed by investment total
returns. Finally, this Report contains financial statements detailing the
expenses and holdings of the Portfolios.
This past year has been a very exciting one. Stock market returns continue to
be unprecedented, with returns in our Small/Mid Cap and Core Equity Portfolios
reaching nearly 50%. In May we celebrated the three-year anniversary of the
Funds, and received 5-Star Ratings from Morningstar in both of the equity funds.
The national media has not forgotten us, either, with recognition in numerous
publications including Mutual Funds, Kiplinger's, The Wall Street Journal,
Investor's Business Daily, U.S. News & World Report, Money, The Value Line
Mutual Fund Survey, Forbes, Los Angeles Times, Barron's, Louis Rukeyser's Wall
Street, and many others.
I am very pleased to report to you that the Funds continue to operate to our
satisfaction on all fronts. Asset growth has been strong but steady. New
shareholder growth has been robust, with over 30,000 shareholders now invested
in the Funds. Just after the close of the fiscal year we announced the
limitation of new shareholders into the Small/Mid Cap Equity Portfolio. Only
investors who currently own shares of the Small/Mid Cap Equity Portfolio may
continue to purchase shares in their existing accounts. We believe that this
limitation is in the best interest of our current shareholders. Our
long-standing philosophy is that this pre-emptive measure will allow our
investment managers the best opportunity to achieve excellent performance over
the long term. Our other three Portfolios remain open to all investors.
If you have any ideas that can help us improve our service to you, please
call us. Thank you again for your investment in the Rainier Investment
Management Mutual Funds. We look forward to 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
<PAGE>
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 $5.3 billion of
discretionary assets for primarily institutional clients.
Equity Comments
For equity investors, the year ending March 31, 1998, was extraordinary by
every measure. Powered by the twin forces of strong earnings and low inflation,
the Standard & Poor's 500 Index rose 48%, one of the best twelve-month periods
in history. Concern about the potential negative impact from turmoil in Asian
financial markets triggered some selling pressure in the third and fourth
quarters of 1997. Confidence returned in the first quarter of 1998, and stocks
finished the period within a whisker of all-time highs.
From many perspectives, the American economy is in the best overall shape in
decades. Inflation remains subdued, profitability levels are high, unemployment
is low and consumer confidence is buoyant. Large-scale mergers are reshaping
American business, positioning companies to compete and prosper in a global
economy. We have been surprised by the continued surge in stock prices, however,
and wonder if stock "euphoria" has caused prices to get ahead of fundamentals.
It is not surprising that equity investors are enthusiastic - for the past
ten years the average annual return has been nearly 19%, far above the long-term
average of 11%. Nonetheless, we are uncomfortable with the "growth at any price"
attitude that has crept into the market. As the market has moved ever higher, we
have reached our price targets in numerous stocks, especially the leading
large-cap names. Looking forward, mid-cap stocks appear to offer excellent
opportunity; both the Core and Balanced Portfolios have meaningful exposure to
these liquid, but less known companies. We think this is a prudent strategy in
the context of the elevated level of the market, and one that will reward our
shareholders.
James R. Margard, CFA; David A. Veterane, CFA;
Peter M. Musser, CFA; Mark H. Dawson, CFA
Fixed Income Comments
The performance of the economy during the year ending March 31, 1998, was
little short of awesome! GDP growth registered the highest rate in ten years,
the private sector created three million new jobs, unemployment levels fell to a
27-year low, and inflation fell to a 35-year low of under 1.3%. During the year,
the Federal Reserve Board continued its bias toward higher interest rates, yet
did not act again after an initial hike of 25 basis points in March 1997. It has
actually been the bond market itself that has done the "heavy lifting" for now
by re-pricing itself in anticipation of the actual event.
The yield curve flattened over the course of the year, held up at the short
end by monetary policy. Longer maturities reacted to benign inflation and high
real interest rates with a rally that brought rates down 3/4-1 1/4% overall.
Buyers tended to venture out on the credit curve to capture incremental yield in
this low interest rate environment, and the credit rating agencies were generous
with upgrades.
The uncertainty over the impact of Asia's woes on the U.S. economy added fuel
to the fire as investors purchased Treasuries in a flight to quality. America
was the place to invest. Accelerating tax receipts, thanks in part to a strong
stock market and tight labor markets, have led to the expectation of a budget
surplus and a scarcity of bonds due to reduced issuance.
Going forward, the continuing good times may raise some concern for the Fed,
which would prefer to be "pre-emptive" in containing growth. Bonds may become
range bound at slightly higher rate levels, but will still offer competitive
returns in the marketplace.
Patricia L. Frost, CEO;
Michael E. Raney, CFA
3
<PAGE>
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 returned 11.9% for the six
months ending March 31, modestly ahead of the Russell Midcap(TM) Index and well
ahead of the Russell 2000(R) Index. Small-cap stocks, after performing well in
the middle of last year, declined more in the final quarter of 1997 and
recovered less in the first quarter of 1998 compared to large-cap issues. The
Portfolio overcame lackluster performance in small stocks by being overweighted
in mid-caps and through adept trading and stock selection. Positions that
delivered particularly strong results included Crestar Financial, Hartford Life,
Forest Labs, Cognizant, Herman Miller, Parametric Technology and Century
Telephone. The "bull case" for secondary stocks is still intact; similar
earnings growth can be found at much lower prices. Still, investors have
preferred the liquidity and familiarity of large-cap shares, and have not shown
an inclination to re-allocate equities towards smaller companies. At some point,
we think this will occur. Currently, approximately two thirds of the Fund is
invested in mid-caps and one third in small-caps.
COMPARISON OF CHANGE IN VALUE OF $10,000
SMALL/MID CAP RUSSELL RUSSELL CONSUMER
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
03/31/98 28,138 23,327 20,750 11,004
<TABLE>
<CAPTION>
Total Returns Inception
for Periods Ending March 31, 1998 3 Months 6 Months 1 Year 3 Years* to 3/31/98*
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Small/Mid Cap Equity Portfolio 11.0% 11.9% 48.7% 33.1% 30.5%
- -----------------------------------------------------------------------------------------
Russell Midcap(TM) Index 10.8 12.0 44.1 27.5 24.3
- -----------------------------------------------------------------------------------------
Russell 2000(R) Index 10.1 6.4 42.0 24.4 20.6
- -----------------------------------------------------------------------------------------
Consumer Price Index 0.6 0.6 1.4 2.4 2.5
- -----------------------------------------------------------------------------------------
</TABLE>
*Annualized returns. Inception date 5/10/94.
See page 33 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 or less than their original cost.
4
<PAGE>
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: The Core Equity Portfolio generated a return of 15.7% for the six
months ending March 31, but lagged the 17.2% increase in the Standard & Poor's
500 Index. Market leadership came primarily from "big" stocks. Large-cap shares
that contributed to gains in the Portfolio included Disney, Lucent, Ford, United
Technologies and Worldcom. Sector performance was spread fairly evenly, with the
best results coming from consumer cyclicals such as Mohawk Industries, Tommy
Hilfiger and Staples. The energy sector, hit by a sharp decline in crude oil
prices in the first quarter, was the weakest group. Although we maintain
exposure to all economic sectors of the market, our holdings in particular
industries vary considerably. In the technology group, for example, we have
limited direct exposure to the personal computer industry (with the notable
exception of Microsoft). In the financial sector, our weightings in bank stocks
have declined in favor of consumer finance, thrifts and specialty insurance
issues. With a skeptical view towards the valuation level of mega-cap stocks, we
are maintaining an above-average exposure to mid-cap issues.
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
03/31/98 28,826 26,915 11,004
<TABLE>
<CAPTION>
Total Returns Inception
for Periods Ending March 31, 1998 3 Months 6 Months 1 Year 3 Years* to 3/31/98*
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Core Equity Portfolio 13.2% 15.7% 49.6% 34.7% 31.3%
- -----------------------------------------------------------------------------------------
Standard & Poor's 500 Stock Index 13.9 17.2 48.0 32.8 29.0
- -----------------------------------------------------------------------------------------
Russell 1000(R) Index 13.4 16.8 48.3 32.4 28.5
- -----------------------------------------------------------------------------------------
Consumer Price Index 0.6 0.6 1.4 2.4 2.5
- -----------------------------------------------------------------------------------------
</TABLE>
*Annualized returns. Inception date 5/10/94.
See page 33 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 or less than their original cost.
5
<PAGE>
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 was a steadfast performer over the last
six months, rising 11.9%. The equity strategy in the Portfolio is the same as
that of the Core Equity Portfolio. The fixed-income component is invested in
high-quality, intermediate-term corporate and U.S. Government issues. Results
were again paced by the equity component of the Portfolio. Disney, SBC
Communications, Northern Telecom, Merck and Fleet Financial were among the
stocks that delivered particularly notable results. Mid-cap stocks that fared
well included Washington Mutual, Sysco and Sylvan Learning Systems. Interest
rates declined moderately in the final three months of 1997, but were little
changed in the first quarter of 1998. As a result, fixed-income returns were
largely limited to "coupon" income. The stock exposure in the Portfolio at the
end of March was at the upper end of its policy range of 35%-65%. The Balanced
Portfolio continues to offer investors significant exposure to stocks with less
risk than a pure equity fund. At year-end the asset mix of the Portfolio was 67%
stocks, 28% bonds and 5% cash.
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
03/31/98 21,209 26,915 18,896 11,004
<TABLE>
<CAPTION>
Total Returns Inception
for Periods Ending March 31, 1998 3 Months 6 Months 1 Year 3 Years* to 3/31/98*
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balanced Portfolio 9.2% 11.9% 34.6% 23.6% 21.3%
- -----------------------------------------------------------------------------------------
Balanced Index (50/40/10) 7.6 10.3 27.3 19.7 17.8
- -----------------------------------------------------------------------------------------
Standard & Poor's 500 Stock Index 13.9 17.2 48.0 32.8 29.0
- -----------------------------------------------------------------------------------------
Lehman Brothers Govt./Corp.
Intermediate Bond Index 1.6 3.7 9.7 8.0 7.7
- -----------------------------------------------------------------------------------------
Consumer Price Index 0.6 0.6 1.4 2.4 2.5
- -----------------------------------------------------------------------------------------
</TABLE>
*Annualized returns. Inception date 5/10/94.
See page 33 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 or less than their original cost. The Advisor is
currently limiting fund expenses, which enhances return.
6
<PAGE>
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 bond market continued to be volatile during the period
between September 1997 and March 1998 as yields reacted first to global
concerns, and then focused once again upon the continuing strength of the U.S.
domestic economy. Interest rates fell through mid-January as investors sought
the safe haven of U.S. dollar-denominated assets. The growing evidence of a
budget surplus leading to less debt issuance fueled the fire. But then some
questions were raised about whether or not the Federal Reserve Board may have to
slow down this freight train of good times. With rates well below 6% and with
little incentive to take maturity extension risk, some profits were taken and
yields retraced half of the downward movement, ending 1/4% to 1/2% below
September levels. The Portfolio continued to avoid the rich ten-year sector and
concentrated on yield inversions in seven- and eight-year maturities and
generous incremental returns in three- to five-year corporate issues. Interest
rates may be range bound at slightly higher levels going forward, and we will
emphasize quality and liquidity in Portfolio construction.
COMPARISON OF CHANGE IN VALUE OF $10,000
LEHMAN
INTERMEDIATE GOVERNMENT/CORPORATE 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
03/31/98 12,880 13,358 11,004
<TABLE>
<CAPTION>
Total Returns Inception
for Periods Ending March 31, 1998 3 Months 6 Months 1 Year 3 Years* to 3/31/98*
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Intermediate Fixed Income Portfolio 1.4% 3.7% 9.1% 7.1% 6.7%
- -----------------------------------------------------------------------------------------
Lehman Brothers Govt./Corp.
Intermediate Bond Index 1.6 3.7 9.7 8.0 7.7
- -----------------------------------------------------------------------------------------
91-Day Treasury Bill Index 1.3 2.6 5.3 5.4 5.3
- -----------------------------------------------------------------------------------------
Consumer Price Index 0.6 0.6 1.4 2.4 2.5
- -----------------------------------------------------------------------------------------
</TABLE>
*Annualized return. Inception date 5/10/94.
See page 33 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. The Advisor is
currently limiting fund expenses, which enhances return.
7
<PAGE>
SCHEDULES OF INVESTMENTS
Small/Mid Cap Equity Portfolio
March 31, 1998
COMMON STOCKS
(97.79%) Shares Value
- --------------------------------------------------------------------------------
AUTOS AND TRANSPORTATION (2.90%)
Air Transportation (0.80%)
Expeditors International
of Washington Inc.* 17,000 $ 728,875
Southwest Airlines Co. 114,713 3,391,188
------------
Total Air Transportation 4,120,063
------------
Auto Parts/Original Equipment (1.30%)
Arvin Industries Inc. 86,950 3,559,516
Mascotech Inc. 136,600 3,150,338
------------
Total Auto Parts/
Original Equipment 6,709,854
------------
Auto Trucks and Parts (0.10%)
Paccar Inc. 9,975 594,136
------------
Truckers (0.70%)
U.S. Freightways Corp. 100,000 3,600,000
------------
TOTAL AUTOS AND
TRANSPORTATION 15,024,053
------------
CONSUMER DISCRETIONARY (14.00%)
Consumer Electronics (0.65%)
Brightpoint Inc.* 193,900 3,332,656
------------
Cosmetics (0.52%)
Windmere-Durable Holdings* 102,150 2,655,900
------------
Education Services (0.73%)
Sylvan Learning Systems Inc.* 79,850 3,762,931
------------
Leisure Time (0.88%)
Action Performance Cos. Inc.* 128,325 4,515,436
------------
Restaurants (0.50%)
ShowBiz Pizza Time Inc.* 79,200 2,638,350
------------
Retail (6.38%)
Consolidated Stores Corp.* 40,000 1,717,500
General Nutrition Companies Inc.* 123,325 4,902,169
Gymboree Corp.* 162,775 4,211,803
Intimate Brands Inc. 120,350 3,256,972
Pacific Sunwear Of California* 101,700 4,220,550
Staples Inc.* 201,475 4,671,702
<PAGE>
The Men's Wearhouse Inc.* 143,000 $ 5,291,000
Williams-Sonoma Inc.* 46,300 2,679,613
Zale Corp.* 65,000 1,876,875
------------
Total Retail 32,828,184
------------
Services/Commercial (0.52%)
Cognizant Corp. 46,450 2,665,069
------------
Shoes (0.43%)
The Timberland Co.* 31,200 2,230,800
------------
Textile Apparel Manufacturer (3.10%)
North Face Inc.* 163,975 3,976,394
St. John Knits Inc. 77,950 3,683,138
Tommy Hilfiger Corp.* 139,080 8,353,493
------------
Total Textile Apparel Manufacturer 16,013,025
------------
Toys (0.29%)
Cannondale Corp.* 89,475 1,481,930
------------
TOTAL CONSUMER
DISCRETIONARY 72,124,281
------------
CONSUMER STAPLES (6.80%)
Beverage: Brewers (Wine) (0.70%)
Canandaigua Brands Inc.* 63,825 3,646,003
------------
Foods (6.10%)
Corn Products International Inc.* 69,950 2,509,456
Dean Foods Co. 104,900 5,277,781
Dole Food Co. Inc. 68,475 3,312,478
Earthgrains Co. 63,450 2,803,697
Flowers Industries Inc. 197,650 4,632,422
McCormick and Co. Inc. 118,150 3,810,338
Sysco Corp. 114,700 2,939,188
The Quaker Oats Co. 108,156 6,191,931
------------
Total Foods 31,477,291
------------
TOTAL CONSUMER STAPLES 35,123,294
------------
FINANCIAL SERVICES (16.71%)
Banks/Outside New York City (2.55%)
Crestar Financial Corp. 98,550 5,826,769
North Fork Bancorporation Inc. 98,450 3,802,631
Prime Bancshares Inc. 48,050 1,231,281
UnionBanCal Corp. 23,200 2,314,200
------------
Total Banks/Outside New York City 13,174,881
------------
See Accompanying Notes to Financial Statements.
8
<PAGE>
Diversified Financial Services (0.32%)
Liberty Financial Co. Inc. 42,225 $ 1,670,527
------------
Finance Companies (1.29%)
Firstplus Financial Group Inc.* 158,812 6,670,104
------------
Financial/Miscellaneous (0.74%)
Executive Risk Inc. 53,350 3,801,188
------------
Insurance/Life (2.92%)
AmerUs Life Holdings Inc. 111,150 3,598,481
Hartford Life Inc. 176,950 8,239,234
Reliastar Financial Corp. 70,450 3,245,103
------------
Total Insurance/Life 15,082,818
------------
Insurance/Multi-Line (0.70%)
Hartford Financial Services Group 33,425 3,626,613
------------
Insurance/Property and Casualty (2.77%)
Everest Reinsurance Holdings Inc. 153,700 6,320,913
Orion Capital Corp. 50,050 2,737,109
Stirling Cooke Brown Holdings Ltd. 65,250 1,729,125
W.R. Berkley Corp. 74,212 3,515,794
------------
Total Insurance/Property and Casualty 14,302,941
------------
Investment Management Company (1.63%)
Donaldson, Lufkin & Jenrette
Securities Corp. 26,275 2,230,091
T. Rowe Price & Associates Inc. 88,150 6,203,556
------------
Total Investment
Management Company 8,433,647
------------
Savings and Loan (3.78%)
Bank United Corp. 103,000 5,150,000
Golden State Bancorp Inc.* 302,675 12,245,777
Washington Mutual Inc. 28,975 2,078,051
------------
Total Savings and Loan 19,473,828
------------
TOTAL FINANCIAL SERVICES 86,236,547
------------
HEALTH CARE (10.92%)
Biotechnology Research and Production (0.29%)
NeXstar Pharmaceuticals Inc.* 131,600 1,513,400
------------
Drugs and Pharmaceuticals (5.77%)
Forest Laboratories Inc.* 154,150 5,780,625
Genzyme Corp.* 162,700 5,206,400
Immunex Corp.* 86,975 5,859,941
Neurex Corp.* 111,050 2,651,319
PathoGenesis Corp.* 195,100 6,535,850
R.P. Scherer Corp.* 55,150 3,722,625
------------
Total Drugs and Pharmaceuticals 29,756,760
------------
Electronics/Medical Systems (0.73%)
DENTSPLY International Inc. 120,350 3,753,416
------------
<PAGE>
Health Care Facilities (0.71%)
Sun Healthcare Group Inc.* 195,300 $ 3,637,463
------------
Health Care Management Services (0.32%)
Medpartners Inc.* 158,600 1,625,650
------------
Medical and Dental
Instruments and Supplies (3.10%)
Dura Pharmaceuticals Inc.* 182,050 4,482,981
Henry Schein Inc.* 61,650 2,558,475
Mentor Corp. 76,050 2,100,881
Respironics Inc.* 132,950 3,847,241
Steris Corp.* 55,675 3,006,450
------------
Total Medical and Dental
Instruments and Supplies 15,996,028
------------
TOTAL HEALTH CARE 56,282,717
------------
INTEGRATED OILS (1.56%)
Oil/Integrated Domestic (1.56%)
Coastal Corp. 60,750 3,956,344
USX-Marathon Group 108,350 4,076,669
------------
Total Oil/Integrated Domestic 8,033,013
------------
MATERIALS AND PROCESSING (9.95%)
Building Materials (1.00%)
Armstrong World Industries Inc. 29,100 2,518,969
Centex Corp. 68,800 2,623,000
------------
Total Building Materials 5,141,969
------------
Chemicals (1.18%)
The B.F. Goodrich Co. 119,550 6,104,522
------------
Diversified Materials (0.58%)
Pentair Inc. 66,725 2,985,944
------------
Metals and Minerals Miscellaneous (0.87%)
Titanium Metals Corp.* 165,650 4,493,256
------------
Metal Fabricating (1.51%)
Precision Castparts Corp. 63,625 3,765,805
Wyman-Gordon Co.* 175,850 4,022,569
------------
Total Metal Fabricating 7,788,374
------------
Paints and Coatings (1.00%)
H.B. Fuller Co. 43,125 2,582,109
RPM Inc. 144,400 2,572,125
------------
Total Paints and Coatings 5,154,234
------------
Paper (2.09%)
Fort James Corp. 97,450 4,464,428
MEAD Corp. 59,575 2,133,530
Wausau-Mosinee Paper Corp. 100,900 2,327,006
Willamette Industries Inc. 49,550 1,861,222
------------
Total Paper 10,786,186
------------
See Accompanying Notes to Financial Statements.
9
<PAGE>
Schedule of Investments -- Small/Mid Cap Equity Portfolio, continued
Textile Products (1.72%)
Mohawk Industries Inc.* 195,968 $ 6,172,992
Unifi Inc. 73,000 2,719,250
------------
Total Textile Products 8,892,242
------------
TOTAL MATERIALS
AND PROCESSING 51,346,727
------------
OTHER (1.35%)
Multi-Sector Companies (1.35%)
Crane Co. 62,050 3,288,650
Lancaster Colony Corp. 86,250 3,660,234
------------
Total Multi-Sector Companies 6,948,884
------------
OTHER ENERGY (3.85%)
Energy/Miscellaneous (0.96%)
Swift Energy Co.* 149,620 2,552,891
Valero Energy Corp. 71,225 2,377,134
------------
Total Energy/Miscellaneous 4,930,025
------------
Machinery/Oil Well Equipment and Services (1.13%)
Baker Hughes Inc. 45,400 1,827,350
Smith International Inc.* 42,400 2,334,650
Willbros Group Inc.* 99,750 1,639,641
------------
Total Machinery/Oil Well
Equipment and Services 5,801,641
------------
Offshore Drilling (0.54%)
Ensco International Inc. 100,625 2,792,344
------------
Oil/Crude Producers (1.22%)
Burlington Resources Inc. 93,400 4,477,363
Comstock Resources Inc.* 168,300 1,830,263
------------
Total Oil/Crude Producers 6,307,626
------------
TOTAL OTHER ENERGY 19,831,636
------------
PRODUCER DURABLES (8.19%)
Identification Control and Filter Devices (4.04%)
American Power Conversion* 155,450 4,459,472
Computer Products Inc.* 166,650 3,885,028
Flowserve Corp. 92,100 3,004,762
Honeywell Inc. 45,900 3,795,355
Hubbell Inc. 39,350 1,982,256
Parker Hannifin Corp. 72,425 3,711,780
------------
Total Identification Control
and Filter Devices 20,838,653
------------
Machinery/Agricultural (0.23%)
AGCO Corp. 39,700 1,178,594
------------
<PAGE>
Machinery/Industrial and Specialty (0.75%)
Ingersoll-Rand Co. 81,000 $ 3,882,938
------------
Office Furniture and Business (1.30%)
Herman Miller Inc. 78,000 2,615,438
Hon Industries Inc. 63,500 2,333,625
U.S. Office Products Co.* 91,300 1,734,700
------------
Total Office Furniture and Business 6,683,763
------------
Pollution Control (0.87%)
U.S. Filter Corp.* 127,250 4,469,656
------------
Telecommunications Equipment (1.00%)
General Cable Corp. 113,500 5,150,063
------------
TOTAL PRODUCER DURABLES 42,203,667
------------
TECHNOLOGY (10.27%)
Communications Technology (1.57%)
Premiere Technologies Inc.* 118,575 4,105,658
Scientific-Atlanta Inc. 204,550 4,001,508
------------
Total Communications Technology 8,107,166
------------
Computer Services Software and Systems (6.70%)
Cadence Design Systems Inc.* 226,150 7,830,444
Parametric Technology Corp.* 192,350 6,407,658
Platinum Technology Inc.* 230,850 5,944,388
Symantec Corp.* 271,900 7,324,306
Systems and Computer
Technology Corp.* 107,925 4,451,906
Walker Interactive Systems Corp.* 131,350 2,569,534
------------
Total Computer Services
Software and Systems 34,528,236
------------
Computer Technology (0.94%)
Sequent Computer Systems Inc.* 156,100 2,848,825
Tandy Corp. 42,350 1,990,450
------------
Total Computer Technology 4,839,275
------------
Electronics/Technology (1.06%)
Symbol Technologies Inc. 110,650 5,442,597
------------
TOTAL TECHNOLOGY 52,917,274
------------
UTILITIES AND REITS (11.29%)
Real Estate Investment Trusts (1.28%)
American Health Properties Inc. 45,250 1,199,125
Innkeepers USA Trust 60,650 993,144
LTC Properties Inc. 45,000 869,062
Nationwide Health Properties Inc. 79,000 1,975,000
Omega Healthcare Investors Inc. 39,950 1,558,050
------------
Total Real Estate Investment Trusts 6,594,381
------------
See Accompanying Notes to Financial Statements.
10
<PAGE>
Utilities/Electrical (3.06%)
CMS Energy Corp. 69,850 $ 3,278,584
FPL Group Inc. 128,425 8,251,307
Pinnacle West Capital Corp. 95,775 4,256,002
------------
Total Utilities/Electrical 15,785,893
------------
Utilities/Gas Distributors (3.19%)
Columbia Energy Group 68,900 5,356,975
Consolidated Natural Gas Co. 81,900 4,724,605
K.N. Energy Inc. 67,600 3,992,625
Questar Corp. 57,750 2,400,234
------------
Total Utilities/Gas Distributors 16,474,439
------------
Utilities/Miscellaneous (1.42%)
New Century Energies Inc. 144,875 7,298,078
------------
Utilities/Telecommunications (2.34%)
Century Telephone Enterprises Inc. 147,050 8,988,430
LCI International Inc.* 80,000 3,080,000
------------
Total Utilities/Telecommunications 12,068,430
------------
TOTAL UTILITIES AND REITS 58,221,221
------------
TOTAL COMMON STOCKS
(cost $434,441,975) $504,293,314
------------
SHORT-TERM INVESTMENTS
(3.58%) Par Value Value
- -------------------------------------------------------------------------------
VARIABLE RATE DEMAND NOTES** (3.58%)
American Family
5.2656% 10-26-1998 $ 1,478,231 $ 1,478,231
General Mills Inc.
5.2925% 05-18-1998 $ 4,051,602 $ 4,051,602
Johnson Controls Inc.
5.2925% 09-28-1998 3,493,198 3,493,198
Pitney Bowes
5.2925% 08-03-1998 1,806,000 1,806,000
Sara Lee
5.2875% 10-28-1998 1,697,817 1,697,817
Warner Lambert
5.2660% 10-26-1998 5,917,494 5,917,494
------------
TOTAL VARIABLE RATE DEMAND
NOTES (COST $18,444,342) 18,444,342
------------
TOTAL SHORT-TERM INVESTMENTS
(COST $18,444,342) $ 18,444,342
------------
TOTAL INVESTMENTS IN
SECURITIES (101.37%)
(cost $452,886,317)*** $522,737,656
------------
LIABILITIES IN EXCESS OF
OTHER ASSETS (-1.37%) ($7,055,565)
------------
NET ASSETS (100.00%) $515,682,091
============
*Non-Income Producing Security.
**The variable-rate securities are subject to a demand feature which reduces
the remaining maturity.
***Aggregate cost for federal income tax purposes is $453,244,905.
Core Equity Portfolio
March 31, 1998
COMMON STOCKS
(98.18%) Shares Value
- --------------------------------------------------------------------------------
BASIC INDUSTRY (4.85%)
Chemical/Major (0.20%)
E.I. duPont de Nemours and Co. 20,700 $ 1,407,600
------------
Chemical/Specialty (1.29%)
RPM Inc. 61,312 1,092,120
The B.F. Goodrich Co. 154,725 7,900,645
------------
Total Chemical/Specialty 8,992,765
------------
Metals (1.56%)
Aluminum Co. of America 108,500 $ 7,466,156
Titanium Metals Corp.* 125,300 3,398,763
------------
Total Metals 10,864,919
------------
Paper and Forest Products (1.80%)
Fort James Corp. 168,075 7,699,936
MEAD Corp. 89,925 3,220,439
Willamette Industries Inc. 44,550 1,673,409
------------
Total Paper and Forest Products 12,593,784
------------
TOTAL BASIC INDUSTRY 33,859,068
------------
See Accompanying Notes to Financial Statements.
11
<PAGE>
Schedule of Investments -- Core Equity Portfolio, continued
CAPITAL GOODS (4.50%)
Aerospace/Industrial (2.17%)
Ingersoll-Rand Co. 110,974 $ 5,319,816
Parker Hannifin Corp. 118,300 6,062,875
Precision Castparts Corp. 33,125 1,960,586
Wyman-Gordon Co.* 82,400 1,884,900
------------
Total Aerospace/Industrial 15,228,177
------------
Agriculture/Construction Equipment (0.25%)
Deere & Co. 28,400 1,759,025
------------
Electric Equipment (1.28%)
General Electric Co. 103,700 8,937,644
------------
Miscellaneous Capital Goods (0.53%)
Flowserve Corp. 56,150 1,831,894
Hubbell Inc. 37,600 1,894,100
------------
Total Miscellaneous Capital Goods 3,725,994
------------
Truck Manufacturing (0.27%)
Paccar Inc. 32,100 1,911,956
------------
TOTAL CAPITAL GOODS 31,562,796
------------
CONSUMER CYCLICAL (9.61%)
Apparel (0.21%)
Unifi Inc. 40,000 1,490,000
------------
Autos and Auto Parts (0.70%)
Arvin Industries Inc. 19,900 814,656
Ford Motor Co. 55,700 3,610,056
Mascotech Inc. 20,400 470,475
------------
Total Autos and Auto Parts 4,895,187
------------
Building Materials (0.52%)
Armstrong World Industries Inc. 41,812 3,619,351
------------
Miscellaneous Consumer Cyclical (2.55%)
Action Performance Cos. Inc.* 117,900 4,148,606
Cannondale Corp.* 11,000 182,188
Mohawk Industries Inc.* 119,025 3,749,288
Tommy Hilfiger Corp.* 161,575 9,704,598
------------
Total Miscellaneous Consumer Cyclical 17,784,680
------------
Office Furniture (0.57%)
Herman Miller Inc. 69,700 2,337,128
Hon Industries Inc. 45,600 1,675,800
------------
Total Office Furniture 4,012,928
------------
Restaurants (0.02%)
ShowBiz Pizza Time* 5,000 166,563
------------
Retail (5.04%)
Consolidated Stores Corp.* 34,550 1,483,491
General Nutrition Companies Inc.* 101,425 4,031,644
<PAGE>
Gymboree Corp.* 25,000 $ 646,875
Intimate Brands Inc. 161,925 4,382,095
North Face Inc.* 83,350 2,021,238
Pacific Sunwear Of California* 6,350 263,525
Staples Inc.* 315,450 7,314,497
St. John Knits Inc. 49,300 2,329,425
Tandy Corp. 26,250 1,233,750
The Men's Wearhouse Inc. * 108,200 4,003,400
Williams Sonoma Inc.* 73,850 4,274,069
Zale Corp.* 110,000 3,176,250
------------
Total Retail 35,160,259
------------
TOTAL CONSUMER CYCLICAL 67,128,968
------------
CONSUMER SERVICES (3.08%)
Education (0.40%)
Sylvan Learning Systems Inc.* 58,250 2,745,031
------------
Healthcare Services (0.54%)
Medpartners Inc.* 170,750 1,750,188
Sun Healthcare Group Inc.* 110,050 2,049,681
------------
Total Healthcare Services 3,799,869
------------
Miscellaneous Consumer Services (1.03%)
Cognizant Corp. 77,075 4,422,178
Henry Schein Inc.* 67,150 2,786,725
------------
Total Miscellaneous Consumer Services 7,208,903
------------
Office Supplies (0.35%)
U.S. Office Products Co.* 127,100 2,414,900
------------
Water Treatment (0.76%)
U.S. Filter Corp.* 151,500 5,321,438
------------
TOTAL CONSUMER SERVICES 21,490,141
------------
CONSUMER STAPLES (20.82%)
Biotechnology (2.06%)
Genzyme Corp.* 184,250 5,896,000
Immunex Corp.* 78,600 5,295,675
Neurex Corp.* 45,050 1,075,569
PathoGenesis Corp.* 63,250 2,118,875
------------
Total Biotechnology 14,386,119
------------
Drugs (7.88%)
American Home Products Corp. 47,975 4,575,616
Bristol-Myers Squibb Co. 122,875 12,817,398
Dura Pharmaceuticals Inc.* 150,250 3,699,906
Forest Laboratories Inc.* 156,600 5,872,500
Merck & Co. Inc. 102,600 13,171,275
R.P. Scherer Corp.* 45,450 3,067,875
SmithKline Beecham PLC 187,900 11,755,494
------------
Total Drugs 54,960,064
------------
See Accompanying Notes to Financial Statements.
12
<PAGE>
Foods (7.16%)
Canandaigua Brands Inc.* 67,800 $ 3,873,075
ConAgra Inc. 47,150 1,514,694
Corn Products International Inc.* 77,225 2,770,447
Dean Foods Co. 96,450 4,852,641
Dole Food Co. Inc. 93,100 4,503,713
Earthgrains Co. 85,550 3,780,241
Flowers Industries Inc. 92,675 2,172,070
McCormick and Co. Inc. 84,400 2,721,900
PepsiCo Inc. 285,625 12,192,617
Sysco Corp. 156,500 4,010,313
The Quaker Oats Co. 133,325 7,632,856
------------
Total Foods 50,024,567
------------
Health Care (0.49%)
Respironics Inc.* 91,050 2,634,759
Steris Corp.* 15,000 810,000
------------
Total Health Care 3,444,759
------------
Hospital Supplies (0.35%)
DENTSPLY International Inc. 79,250 2,471,609
------------
Household Products (1.14%)
Kimberly-Clark Corp. 128,250 6,428,531
Windmere-Durable Holdings Inc.* 58,150 1,511,900
------------
Total Household Products 7,940,431
------------
Medical Devices (0.12%)
Mentor Corp. 30,000 828,750
------------
Miscellaneous Consumer Staples (0.40%)
Lancaster Colony Corp. 66,412 2,818,359
------------
Tobacco (1.22%)
Philip Morris Co. Inc. 205,250 8,556,359
------------
TOTAL CONSUMER STAPLES 145,431,017
------------
CREDIT CYCLICAL (0.51%)
Home Builders (0.51%)
Centex Corp. 93,050 3,547,531
------------
ENERGY (7.16%)
Natural Gas Diversified (0.85%)
Coastal Corp. 91,250 5,942,656
------------
Oil/Gas Production (1.12%)
Burlington Resources Inc. 120,750 5,788,453
Comstock Resources Inc.* 94,800 1,030,950
Swift Energy Co.* 60,775 1,036,973
------------
Total Oil/Gas Production 7,856,376
------------
<PAGE>
Oil/Integrated Domestic (1.90%)
Phillips Petroleum Co. 112,350 $ 5,610,478
USX-Marathon Group 167,050 6,285,256
Valero Energy Corp. 41,750 1,393,406
------------
Total Oil/Integrated Domestic 13,289,140
------------
Oil/Integrated International (2.04%)
Mobil Corp. 185,850 14,240,756
------------
Oil Services (1.25%)
Baker Hughes Inc. 87,550 3,523,888
Ensco International Inc. 93,200 2,586,300
Smith International Inc.* 47,100 2,593,444
------------
Total Oil Services 8,703,632
------------
TOTAL ENERGY 50,032,560
------------
FINANCIAL (17.30%)
Banks (4.65%)
Crestar Financial Corp. 73,785 4,362,538
Fleet Financial Group 130,300 11,083,644
PNC Bank Corp. 177,000 10,608,938
The Chase Manhattan Corp. 40,500 5,462,438
UnionBanCal Corp. 10,000 997,500
------------
Total Banks 32,515,058
------------
Finance Companies (3.13%)
Firstplus Financial Group Inc.* 135,750 5,701,500
Household International Inc. 117,500 16,185,625
------------
Total Finance Companies 21,887,125
------------
Financial Services (3.45%)
American Express Co. 44,950 4,126,972
Marsh & McLennan Cos. Inc. 160,925 14,050,764
T. Rowe Price & Associates Inc. 40,425 2,844,909
Travelers Group Inc. 51,000 3,060,000
------------
Total Financial Services 24,082,645
------------
Insurance (3.78%)
Allstate Corp. 92,325 8,488,130
AmerUs Life Holdings Inc. 30,250 979,344
Everest Reinsurance Holdings Inc. 77,050 3,168,681
Executive Risk Inc. 8,700 619,875
Hartford Financial Services Group 37,150 4,030,775
Hartford Life Inc. 71,175 3,314,086
Orion Capital Corp. 30,450 1,665,234
Reliastar Financial Corp. 55,150 2,540,347
W.R. Berkley Corp. 33,437 1,584,078
------------
Total Insurance 26,390,550
------------
Miscellaneous Financial (0.25%)
Liberty Financial Co. Inc. 44,887 1,775,842
------------
See Accompanying Notes to Financial Statements.
13
<PAGE>
Schedule of Investments -- Core Equity Portfolio, continued
Savings and Loan (2.04%)
Bank United Corp. 65,000 $ 3,250,000
Golden State Bancorp Inc.* 196,475 7,502,889
Washington Mutual Inc. 48,275 3,462,223
------------
Total Savings and Loan 14,215,112
------------
TOTAL FINANCIAL 120,866,332
------------
TECHNOLOGY (17.59%)
Aerospace (1.68%)
Lockheed Martin Corp. 38,475 4,328,438
United Technologies Corp. 79,375 7,327,304
------------
Total Aerospace 11,655,742
------------
Communications Peripherals (1.05%)
American Power Conversion Corp.* 140,500 4,030,594
Computer Products Inc.* 63,250 1,474,516
Premiere Technologies Inc.* 53,400 1,848,975
------------
Total Communications Peripherals 7,354,085
------------
Computer Services (0.39%)
Systems and Computer
Technology Corp.* 66,550 2,745,188
------------
Computer Software (6.16%)
Adobe Systems Inc.
Cadence Design Systems Inc.* 205,150 7,103,319
Microsoft Corp.* 222,805 19,941,048
Parametric Technology Corp.* 181,950 6,061,209
Platinum Technology Inc.* 185,850 4,785,638
Symantec Corp.* 190,300 5,126,206
------------
Total Computer Software 43,017,420
------------
Computer Systems (2.76%)
IBM 101,850 10,579,668
Sequent Computer Systems Inc.* 98,200 1,792,150
Sun Microsystems Inc.* 166,300 6,937,828
------------
Total Computer Systems 19,309,646
------------
Distribution (0.41%)
Brightpoint Inc.* 166,150 2,855,703
------------
Electronic Systems (1.49%)
Honeywell Inc. 91,100 7,532,831
Symbol Technologies Inc. 58,550 2,879,928
------------
Total Electronic Systems 10,412,759
------------
Miscellaneous Technology (0.36%)
General Cable Corp. 55,750 2,529,656
------------
Networking Equipment (0.75%)
Cisco Systems Inc.* 77,000 5,264,875
------------
Telecommunications Equipment (2.54%)
Northern Telecom Ltd. 145,875 9,427,172
<PAGE>
Scientific-Atlanta Inc. 266,500 $ 5,213,406
Tellabs Inc.* 46,050 3,091,106
------------
Total Telecommunications Equipment 17,731,684
------------
TOTAL TECHNOLOGY 122,876,758
------------
TRANSPORTATION (1.15%)
Airlines (0.61%)
Southwest Airlines Co. 144,388 4,268,455
------------
Trucking (0.54%)
U.S. Freightways Corp. 104,325 3,755,700
------------
TOTAL TRANSPORTATION 8,024,155
------------
UTILITIES AND REITS (11.61%)
Communications (6.30%)
Ameritech Corp. 47,100 2,328,506
Bell Atlantic Corp. 146,103 14,975,558
Century Telephone Enterprises Inc. 72,050 4,404,056
LCI International Inc.* 93,050 3,582,425
SBC Communications Inc. 243,750 10,633,594
Worldcom Inc.* 187,825 8,088,214
------------
Total Communications 44,012,353
------------
Electric (2.08%)
CMS Energy Corp. 1,850 86,834
Duke Energy Corp. 89,700 5,342,755
FPL Group Inc. 69,945 4,493,966
New Century Energies Inc. 48,075 2,421,778
Pinnacle West Capital Corp. 48,950 2,175,216
------------
Total Electric 14,520,549
------------
Natural Gas (2.70%)
Columbia Energy Group 94,075 7,314,330
Consolidated Natural Gas Co. 102,360 5,904,893
K.N. Energy Inc. 60,150 3,552,609
Questar Corp. 49,950 2,076,048
------------
Total Natural Gas 18,847,880
------------
Real Estate Investment Trusts (0.53%)
American Health Properties Inc. 12,925 342,513
Innkeepers USA Trust 63,900 1,046,363
LTC Properties Inc. 42,700 824,644
Nationwide Health Properties Inc. 31,500 787,500
Omega Healthcare Investors Inc. 18,700 729,300
------------
Total Real Estate Investment Trusts 3,730,320
------------
TOTAL UTILITIES AND REITS 81,111,102
------------
TOTAL COMMON STOCKS
(cost $ 577,861,505) $685,930,428
------------
See Accompanying Notes to Financial Statements.
14
<PAGE>
SHORT-TERM INVESTMENTS
(2.66%) Par Value Value
- --------------------------------------------------------------------------------
VARIABLE RATE DEMAND NOTES** (2.66%)
American Family
5.2656% 10-26-1998 $ 3,627,599 $ 3,627,599
General Mills Inc.
5.2925% 05-18-1998 2,441,995 2,441,995
Johnson Controls Inc.
5.2925% 09-28-1998 3,716,755 3,716,755
Pitney Bowes
5.2925% 08-03-1998 3,027,340 3,027,340
Sara Lee
5.2875% 10-28-1998 1,836,528 1,836,528
Warner-Lambert
5.2660% 10-26-1998 3,954,756 3,954,756
------------
TOTAL VARIABLE RATE DEMAND
NOTES (cost $18,604,973) 18,604,973
------------
TOTAL SHORT-TERM INVESTMENTS
(cost $18,604,973) $18,604,973
------------
TOTAL INVESTMENTS
IN SECURITIES (100.84%)
(cost $ 596,466,478)*** $704,535,401
------------
LIABILITIES in excess of
OTHER ASSETS (-0.84%) ($5,870,845)
------------
NET ASSETS (100.00%) $698,664,556
============
*Non-Income Producing Security.
**The variable-rate securities are subject to a demand feature which reduces
the remaining maturity.
***Aggregate cost for federal income tax purposes is $596,949,974.
Balanced Portfolio
March 31, 1998
LONG-TERM DEBT SECURITIES
(28.24%) Par Value Value
- --------------------------------------------------------------------------------
CORPORATE BONDS (13.96%)
FINANCE (13.64%)
Automobile (1.04%)
Ford Motor Credit Co.
6.3750% 04-15-2000 $ 190,000 $ 191,149
Ford Motor Credit Medium Term Note
5.9000% 06-09-1998 75,000 75,010
GMAC Medium Term Note
5.5000% 12-15-2001 500,000 487,162
------------
Total Automobile 753,321
------------
Consumers (3.63%)
American General Finance
6.8750% 01-15-2000 50,000 50,722
Beneficial Corp. Medium Term Note
8.0500% 04-02-1999 200,000 203,845
6.3500% 12-03-2001 700,000 701,592
Sears Roebuck & Co.
6.6700% 07-07-2003 $ 1,000,000 $ 1,020,577
Sears Roebuck Acceptance Corp. Medium Term Note
7.1100% 06-19-2001 650,000 666,587
------------
Total Consumers 2,643,323
------------
Diversified (2.70%)
Associates Corp. of North America
6.0000% 06-15-2000 25,000 24,995
7.5000% 04-15-2002 100,000 104,657
Associates Corp. of North America
Medium Term Notes
8.0000% 10-27-1999 50,000 51,468
6.3750% 06-01-2000 75,000 75,534
6.8400% 07-03-2001 700,000 715,086
Commercial Credit TRV
6.8750% 05-01-2002 200,000 204,432
6.5000% 06-01-2005 500,000 505,631
General Electric Capital
6.6600% 05-01-2018 75,000 76,080
Household Finance Co. Medium Term Note
7.0000% 05-15-2000 200,000 203,438
------------
Total Diversified 1,961,321
------------
See Accompanying Notes to Financial Statements.
15
<PAGE>
Schedule of Investments -- Balanced Portfolio, continued
Insurance (0.98%)
Allstate Corp.
5.8750% 06-15-1998 $ 200,000 $ 199,982
Travelers PPTY
6.7500% 04-15-2001 500,000 509,472
------------
Total Insurance 709,454
------------
Leasing Companies (1.31%)
International Lease Finance
6.2500% 10-15-2000 500,000 502,324
International Lease Finance
Medium Term Note
6.3400% 02-01-2002 450,000 452,262
------------
Total Leasing Companies 954,586
------------
Other (3.98%)
Dean Witter Discovry and Co.
6.2500% 03-15-2000 30,000 30,179
6.7500% 08-15-2000 200,000 203,481
Merrill Lynch
7.3750% 08-17-2002 30,000 31,366
7.0500% 04-15-2003 55,000 55,021
6.0000% 02-12-2003 500,000 496,432
Merrill Lynch Medium Term Note
7.0500% 06-04-2001 350,000 358,912
Morgan Stanley Group
6.1250% 10-01-2003 215,000 213,468
Morgan Stanley Group
Medium Term Note
5.7500% 02-15-2001 500,000 496,089
Smith Barney Shearson
6.6250% 07-01-2002 1,000,000 1,010,702
------------
Total Other 2,895,650
------------
TOTAL FINANCE 9,917,655
------------
INDUSTRIAL (0.32%)
Automotive (0.04%)
Ford Motor Co.
7.5000% 11-15-1999 25,000 25,559
Energy and Related Goods and Services (0.21%)
Texaco Capital Medium Term Note
7.2500% 08-01-2002 150,000 156,890
Medical and Related Goods and Services (0.07%)
SmithKline Beecham PLC Corp.
Medium Term Note
6.6250% 10-01-2005 50,000 50,910
------------
TOTAL INDUSTRIAL 233,359
------------
TOTAL CORPORATE BONDS 10,151,014
------------
U.S. GOVERNMENT
SECURITIES (13.99%)
U.S. TREASURY NOTES (13.99%)
7.1250% 02-29-2000 $ 400,000 $ 410,875
6.7500% 04-30-2000 1,000,000 1,022,188
5.7500% 10-31-2000 700,000 702,188
7.7500% 02-15-2001 970,000 1,023,654
7.5000% 11-15-2001 400,000 423,625
6.3750% 08-15-2002 1,500,000 1,540,314
6.2500% 02-15-2003 425,000 435,360
5.7500% 08-15-2003 700,000 702,407
7.2500% 08-15-2004 1,200,000 1,298,250
6.5000% 05-15-2005 1,000,000 1,044,376
6.5000% 08-15-2005 1,500,000 1,567,501
------------
TOTAL U.S. TREASURY NOTES 10,170,738
------------
FOREIGN BONDS (U.S. DOLLAR
DENOMINATED) (0.29%)
Hydro Quebec
7.3750% 02-01-2003 50,000 52,488
Ontario Global Bond
7.3750% 01-27-2003 150,000 157,648
------------
TOTAL FOREIGN BONDS 210,136
------------
TOTAL LONG-TERM
DEBT SECURITIES
(cost $ 20,217,368) $20,531,888
------------
COMMON STOCKS
(67.44%) Shares Value
- --------------------------------------------------------------------------------
BASIC INDUSTRY (3.37%)
Chemical/Major (0.28%)
E.I. duPont de Nemours and Co. 3,000 $ 204,000
-----------
Chemical/Specialty (0.79%)
RPM Inc. 3,437 61,222
The B.F. Goodrich Co. 10,075 514,455
-----------
Total Chemical/Specialty 575,677
-----------
Metals (1.02%)
Aluminum Co. of America 7,250 498,891
Titanium Metals Corp.* 9,050 245,481
-----------
Total Metals 744,372
-----------
Paper and Forest Products (1.28%)
Fort James Corp. 11,500 526,844
MEAD Corp. 5,850 209,503
Willamette Industries Inc. 5,000 187,813
-----------
Total Paper and Forest Products 924,160
-----------
TOTAL BASIC INDUSTRY 2,448,209
-----------
See Accompanying Notes to Financial Statements.
16
<PAGE>
CAPITAL GOODS (3.06%)
Aerospace/Industrial (1.41%)
Ingersoll-Rand Co. 7,825 $ 375,111
Parker Hannifin Corp. 6,725 344,656
Precision Castparts Corp. 2,425 143,530
Wyman-Gordon Co. 7,000 160,125
-----------
Total Aerospace/Industrial 1,023,422
-----------
Agriculture/Construction Equipment (0.19%)
Deere & Co. 2,250 139,359
-----------
Electric Equipment (1.01%)
General Electric Co. 8,500 732,594
-----------
Miscellaneous Capital Goods (0.22%)
Flowserve Corp. 5,000 163,125
-----------
Truck Manufacturing (0.23%)
Paccar Inc. 2,825 168,264
-----------
TOTAL CAPITAL GOODS 2,226,764
-----------
CONSUMER CYCLICAL (6.80%)
Apparel (0.18%)
Unifi Inc. 3,550 132,238
-----------
Autos and Auto Parts (0.66%)
Arvin Industries Inc. 3,500 143,281
Ford Motor Co. 3,050 197,678
Mascotech Inc. 5,950 137,222
-----------
Total Autos and Auto Parts 478,181
-----------
Building Materials (0.35%)
Armstrong World Industries Inc. 2,975 257,523
-----------
Miscellaneous Consumer Cyclical (1.56%)
Action Performance Cos. Inc.* 8,000 281,500
Mohawk Industries Inc.* 5,300 166,950
Tommy Hilfiger Corp.* 11,400 684,713
-----------
Total Miscellaneous Consumer Cyclical 1,133,163
-----------
Office Furniture (0.43%)
Herman Miller Inc. 5,000 167,656
Hon Industries Inc.* 4,000 147,000
-----------
Total Office Furniture 314,656
-----------
Restaurants (0.09%)
ShowBiz Pizza Time Inc.* 2,000 66,625
-----------
Retail (3.53%)
Consolidated Stores Corp.* 3,450 148,134
General Nutrition Companies Inc.* 7,900 314,025
Intimate Brands Inc. 11,450 309,866
<PAGE>
North Face Inc.* 6,175 $ 149,744
Pacific Sunwear Of California* 5,000 207,500
Staples Inc.* 23,250 539,109
St. John Knits Inc. 5,700 269,325
The Men's Wearhouse Inc.* 6,500 240,500
Williams Sonoma Inc.* 3,700 214,138
Zale Corp.* 5,950 171,806
-----------
Total Retail 2,564,147
-----------
TOTAL CONSUMER CYCLICAL 4,946,533
-----------
CONSUMER SERVICES (2.22%)
Education (0.27%)
Sylvan Learning Systems Inc.* 4,175 196,747
-----------
Healthcare Services (0.30%)
Medpartners Inc.* 10,000 102,500
Sun Healthcare Group Inc.* 6,200 115,475
-----------
Total Healthcare Services 217,975
-----------
Miscellaneous Consumer Services (0.89%)
Cognizant Corp. 7,375 423,141
Henry Schein Inc.* 5,450 226,175
-----------
Total Miscellaneous Consumer Services 649,316
-----------
Office Supplies (0.19%)
U.S. Office Products Co.* 7,150 135,850
-----------
Water Treatment (0.57%)
U.S. Filter Corp.* 11,800 414,475
-----------
TOTAL CONSUMER SERVICES 1,614,363
-----------
CONSUMER STAPLES (14.26%)
Biotechnology (1.35%)
Genzyme Corp. * 12,900 412,800
Immunex Corp.* 3,900 262,763
Neurex Corp.* 7,250 173,094
PathoGenesis Corp.* 4,000 134,000
-----------
Total Biotechnology 982,657
-----------
Drugs (5.45%)
American Home Products Corp. 3,225 307,584
Bristol-Myers Squibb Co. 8,400 876,225
Dura Pharmaceuticals Inc.* 8,750 215,469
Forest Laboratories Inc.* 14,250 534,375
Merck & Co. Inc. 7,000 898,625
R.P. Scherer Corp.* 3,800 256,500
SmithKline Beecham PLC 14,000 875,875
-----------
Total Drugs 3,964,653
-----------
See Accompanying Notes to Financial Statements.
17
<PAGE>
Schedule of Investments -- Balanced Portfolio, continued
Foods (4.82%)
Canandaigua Brands Inc.* 5,000 $ 285,625
ConAgra Inc. 2,850 91,556
Corn Products International Inc.* 5,350 191,931
Dean Foods Co. 7,450 374,828
Dole Food Co. Inc. 8,775 424,490
Earthgrains Co. 5,750 254,078
Flowers Industries Inc. 9,500 222,656
PepsiCo Inc. 19,750 843,078
Sysco Corp. 11,200 287,000
The Quaker Oats Co. 9,200 526,700
-----------
Total Foods 3,501,942
-----------
Health Care (0.48%)
Respironics Inc.* 11,950 345,803
-----------
Hospital Supplies (0.36%)
DENTSPLY International Inc. 8,500 265,094
-----------
Household Products (0.81%)
Kimberly-Clark Corp. 8,850 443,606
Windmere-Durable Holdings Inc.* 5,550 144,300
-----------
Total Household Products 587,906
-----------
Medical Devices (0.17%)
Mentor Corp. 4,500 124,313
-----------
Tobacco (0.82%)
Philip Morris Co. Inc. 14,375 599,258
-----------
TOTAL CONSUMER STAPLES 10,371,626
-----------
CREDIT CYCLICAL (0.25%)
Home Builders (0.25%)
Centex Corp. 4,800 183,000
-----------
ENERGY (4.80%)
Natural Gas Diversified (0.43%)
Coastal Corp. 4,900 319,113
-----------
Oil/Gas Production (1.10%)
Burlington Resources Inc. 10,450 500,947
Comstock Resources Inc.* 18,000 195,750
Swift Energy Co.* 5,500 93,844
-----------
Total Oil/Gas Production 790,541
-----------
Oil/Integrated Domestic (1.42%)
Phillips Petroleum Co. 8,525 425,717
USX-Marathon Group 13,000 489,125
Valero Energy Corp. 3,500 116,813
-----------
Total Oil/Integrated Domestic 1,031,655
-----------
<PAGE>
Oil/Integrated International (1.05%)
Mobil Corp. 9,950 $ 762,419
-----------
Oil Services (0.80%)
Baker Hughes Inc. 5,350 215,338
Ensco International Inc. 5,300 147,075
Smith International Inc. 4,000 220,250
-----------
Total Oil Services 582,663
-----------
TOTAL ENERGY 3,486,391
-----------
FINANCIAL (11.91%)
Banks (3.22%)
Crestar Financial Corp. 5,550 328,144
Fleet Financial Group 11,600 986,725
PNC Bank Corp. 11,700 701,269
The Chase Manhattan Corp. 2,400 323,700
-----------
Total Banks 2,339,838
-----------
Finance Companies (1.94%)
Firstplus Financial Group Inc.* 8,050 338,100
Household International Inc. 7,800 1,074,450
-----------
Total Finance Companies 1,412,550
-----------
Financial Services (2.31%)
American Express Co. 2,650 243,303
Marsh & McLennan Cos. Inc. 11,750 1,025,922
T. Rowe Price & Associates Inc. 2,800 197,050
Travelers Group Inc. 3,550 213,000
-----------
Total Financial Services 1,679,275
-----------
Insurance (2.98%)
Allstate Corp. 6,350 583,803
Everest Reinsurance Holdings Inc. 4,600 189,175
Executive Risk Inc. 4,600 327,750
Hartford Financial Services Group 2,975 322,788
Hartford Life Inc. 6,325 294,508
Orion Capital Corp.* 2,750 150,391
Reliastar Financial Corp. 3,750 172,734
W.R. Berkley Corp. 2,737 129,665
-----------
Total Insurance 2,170,814
-----------
Savings and Loan (1.46%)
Bank United Corp. 4,650 232,500
Golden State Bancorp Inc.* 15,900 607,180
Washington Mutual Inc. 3,100 222,328
-----------
Total Savings and Loan 1,062,008
-----------
TOTAL FINANCIAL 8,664,485
-----------
See Accompanying Notes to Financial Statements.
18
<PAGE>
PRODUCER DURABLES (1.00%)
Identification Control and Filter Devices (1.00%)
Honeywell Inc. 6,700 $ 554,005
Hubbell Inc. 3,400 171,275
-----------
Total Identification Control
and Filter Devices 725,280
-----------
TECHNOLOGY (10.54%)
Aerospace (1.08%)
Lockheed Martin Corp. 2,600 292,500
United Technologies Corp. 5,250 484,640
-----------
Total Aerospace 777,140
-----------
Communications Peripherals (0.17%)
Computer Products Inc.* 5,250 122,391
-----------
Computer Peripherals (0.39%)
American Power Conversion* 10,000 286,875
-----------
Computer Software (4.18%)
Cadence Design Systems Inc.* 15,500 536,688
Microsoft Corp.* 15,175 1,358,162
Parametric Technology Corp.* 12,800 426,400
Platinum Technology Inc.* 11,950 307,712
Symantec Corp.* 15,200 409,450
-----------
Total Computer Software 3,038,412
-----------
Computer Service (0.29%)
Systems and Computer
Technology Corp.* 5,175 213,469
-----------
Computer Systems (1.88%)
IBM 7,000 727,124
Sequent Computer Systems Inc.* 5,600 102,200
Sun Microsystems Inc.* 12,925 539,215
-----------
Total Computer Systems 1,368,539
-----------
Distribution (0.37%)
Brightpoint Inc.* 15,850 272,422
-----------
Electronic Systems (0.15%)
Symbol Technologies Inc. 2,225 109,442
-----------
Miscellaneous Telecommunications
Equipment (1.62%)
Northern Telecom Ltd. 8,500 549,312
Scientific Atlanta Inc. 18,150 355,058
Tellabs Inc. 4,100 275,213
-----------
Total Miscellaneous
Telecommunications Equipment 1,179,583
-----------
Networking Equipment (0.41%)
Cisco Systems Inc.* 4,375 299,141
-----------
TOTAL TECHNOLOGY 7,667,414
-----------
<PAGE>
TRANSPORTATION (0.95%)
Airlines (0.46%)
Southwest Airlines Co. 11,250 $ 332,578
-----------
Miscellaneous Transportation (0.12%)
Expeditors International
of Washington Inc.* 2,000 85,750
-----------
Trucking (0.37%)
U.S. Freightways Corp. 7,500 270,000
-----------
TOTAL TRANSPORTATION 688,328
-----------
UTILITIES AND REITS (8.28%)
Communications (4.48%)
Ameritech Corp. 3,325 164,380
Bell Atlantic Corp. 10,300 1,055,750
Century Telephone Enterprises Inc. 6,600 403,426
LCI International Inc.* 9,000 346,500
SBC Communications Inc. 16,225 707,816
Worldcom Inc.* 13,575 584,573
-----------
Total Communications 3,262,445
-----------
Electric (1.26%)
Duke Energy Corp. 4,200 250,163
FPL Group Inc. 5,000 321,250
New Century Energies Inc. 3,600 181,350
Pinnacle West Capital Corp. 3,675 163,308
-----------
Total Electric 916,071
-----------
Natural Gas (2.00%)
Columbia Energy Group 6,375 495,655
Consolidated Natural Gas Co. 9,750 562,452
K.N. Energy Inc. 4,300 253,969
Questar Corp. 3,450 143,392
-----------
Total Natural Gas 1,455,468
-----------
Real Estate Investment Trusts (0.54%)
Innkeepers USA Trust 7,500 122,813
LTC Properties Inc. 2,550 49,247
Nationwide Health Properties Inc. 5,000 125,000
Omega Healthcare Investors Inc. 2,400 93,600
-----------
Total Real Estate Investment Trusts 390,660
-----------
TOTAL UTILITIES AND REITS 6,024,644
-----------
TOTAL COMMON STOCKS
(cost $41,299,421) $49,047,037
===========
See Accompanying Notes to Financial Statements.
19
<PAGE>
Schedule of Investments -- Balanced Portfolio, continued
SHORT-TERM INVESTMENTS
(5.26%) Par Value Value
- --------------------------------------------------------------------------------
VARIABLE RATE DEMAND NOTES** (5.26%)
General Mills Inc.
5.2925% 05-18-1998 $ 934,641 $ 934,641
Johnson Controls Inc.
5.2925% 09-28-1998 2,537,603 2,537,603
Pitney Bowes
5.2925% 08-03-1998 335,584 335,584
Sara Lee
5.2875% 10-28-1998 24,174 24,174
-----------
TOTAL VARIABLE RATE DEMAND
NOTES (cost $3,832,002) 3,832,002
-----------
TOTAL SHORT-TERM
INVESTMENTS (cost $3,832,002) $3,832,002
-----------
TOTAL INVESTMENTS
IN SECURITIES (100.94%)
(cost $65,348,791)*** $73,410,927
-----------
LIABILITIES IN EXCESS
OF OTHER ASSETS (-0.94%) ($686,779)
-----------
NET ASSETS (100.00%) $72,724,148
===========
*Non-Income Producing Security.
**The variable-rate securities are subject to a demand feature which reduces
the remaining maturity.
***Aggregate cost for federal income tax purposes is $65,417,989.
Intermediate Fixed Income Portfolio
March 31, 1998
LONG-TERM DEBT SECURITIES
(96.98%) Par Value Value
- --------------------------------------------------------------------------------
CORPORATE BONDS (36.45%)
FINANCE (36.32%)
Automobile (3.16%) Ford Motor Credit Co.
6.3750% 04-15-2000 $ 75,000 $ 75,453
Ford Motor Credit Medium Term Note
5.9000% 06-09-1998 50,000 50,007
GMAC Medium Term Note
6.5000% 12-06-2004 500,000 505,200
-----------
Total Automobile 630,660
-----------
Banks (4.11%)
Banc One Corp.
7.3750% 12-01-2002 780,000 820,116
-----------
Consumers (7.76%)
American General Finance
6.8750% 01-15-2000 25,000 25,361
Beneficial Corp. Medium Term Note
Sears Roebuck & Co.
6.6700% 07-07-2003 $ 1,000,000 $ 1,020,577
-----------
Total Consumers 1,548,734
-----------
Credit Card (2.59%)
Discover Credit Medium Term Note
8.3500% 05-06-1999 100,000 102,481
Nordstrom Credit Medium Term Note
7.8900% 02-14-2000 400,000 414,067
-----------
Total Credit Card 516,548
-----------
Diversified (7.64%)
Associates Corp. of North America
7.5000% 05-15-1999 100,000 101,647
Associates Corp. of North America
Medium Term Notes
6.3750% 06-01-2000 25,000 25,178
6.8400% 07-03-2001 300,000 306,465
Commercial Credit TRV
6.5000% 06-01-2005 300,000 303,379
General Electric Capital
6.6600% 05-01-2018 180,000 182,592
Household Finance Co. Medium Term Note
7.0000% 09-18-2001 600,000 605,039
-----------
Total Diversified 1,524,300
-----------
See Accompanying Notes to Financial Statements.
20
<PAGE>
Insurance (1.25%)
Allstate Corp.
5.8750% 06-15-1998 $ 250,000 $ 249,978
Leasing Companies (1.01%)
International Lease Finance
6.2500% 10-15-2000 200,000 200,930
Other (8.80%)
Dean Witter Discovry and Co.
6.2500% 03-15-2000 40,000 40,240
Merrill Lynch
7.0500% 04-15-2003 100,000 100,038
Merrill Lynch
Medium Term Note
7.0500% 06-04-2001 375,000 384,549
Morgan Stanley Group
6.1250% 10-01-2003 200,000 198,575
6.3750% 12-05-2003 25,000 25,083
Salomon Smith Barney Holdings
6.6250% 07-01-2002 1,000,000 1,010,702
-----------
Total Other 1,759,187
-----------
TOTAL FINANCE 7,250,453
-----------
INDUSTRIAL (0.13%)
Automotive (0.13%)
Ford Motor Co.
7.5000% 11-15-1999 25,000 25,559
-----------
TOTAL CORPORATE BONDS 7,276,012
-----------
U.S. GOVERNMENT AND
AGENCY OBLIGATIONS (58.61%)
U.S. TREASURY OBLIGATIONS (58.61%)
Certificate of Accrual
Treasury Securities
6.5800%* 11-15-1999 100,000 91,347
-----------
U.S. Treasury Notes
7.1250% 02-29-2000 300,000 308,156
7.7500% 02-15-2001 1,380,000 1,456,332
7.5000% 11-15-2001 1,000,000 1,059,063
6.6700% 03-31-2002 1,000,000 1,033,126
6.3750% 08-15-2002 1,200,000 1,232,251
6.2500% 02-15-2003 350,000 358,532
5.7500% 08-15-2003 800,000 802,750
7.2500% 05-15-2004 1,000,000 1,079,376
7.2500% 08-15-2004 1,250,000 1,352,345
6.5000% 05-15-2005 1,400,000 1,462,126
6.5000% 08-15-2005 $ 1,400,000 $ 1,463,001
-----------
Total U.S. Treasury Notes 11,607,058
-----------
TOTAL U.S. TREASURY
OBLIGATIONS 11,698,405
-----------
TOTAL U.S. GOVERNMENT AND
AGENCY OBLIGATIONS $11,698,405
-----------
FOREIGN BONDS
(U.S. DOLLAR DENOMINATED) (1.92%)
Hydro Quebec
7.3750% 02-01-2003 125,000 131,222
Ontario Global Bond
7.3750% 01-27-2003 240,000 252,238
-----------
TOTAL FOREIGN BONDS 383,460
-----------
TOTAL LONG-TERM
DEBT SECURITIES
(cost $18,952,063) $19,357,877
-----------
SHORT-TERM INVESTMENTS
(2.00%) Par Value Value
- --------------------------------------------------------------------------------
VARIABLE RATE DEMAND NOTES** (2.00%)
General Mills Inc.
5.2925% 05-18-1998 $ 42,006 $ 42,006
Johnson Controls Inc.
5.2925% 09-28-1998 278,679 278,679
Pitney Bowes
5.2925% 08-03-1998 79,785 79,785
-----------
TOTAL VARIABLE RATE DEMAND
NOTES (cost $400,470) 400,470
-----------
TOTAL SHORT-TERM
INVESTMENTS (cost $400,470) $400,470
-----------
TOTAL INVESTMENTS
IN SECURITIES (98.98%)
(cost $19,352,533)*** $19,758,347
-----------
OTHER ASSETS LESS
LIABILITIES (1.02%) $202,718
-----------
NET ASSETS (100.00%) $19,961,065
===========
*Bond Equivalent Yield.
**The variable-rate securities are subject to a demand feature which reduces
the remaining maturity.
***Aggregate cost for federal income tax purposes is $19,352,533.
See Accompanying Notes to Financial Statements
21
<PAGE>
STATEMENTS OF ASSETS AND LIABILITIES
Rainier Investment Management Mutual Funds
March 31, 1998
<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 (Note 2)
(cost of $452,886,317, $596,466,478,
$65,348,791 and $19,352,533 respectively) $522,737,656 $704,535,401 $ 73,410,927 $ 19,758,347
Cash 125,100 -- -- --
Receivables
Investment securities sold 2,147,307 437,016 22,411 --
Fund shares sold 640,147 769,561 5,905 --
Dividends and interest 271,938 634,306 430,044 322,117
Due from Investment Advisor (Note 3) -- -- -- 486
Net deferred organization costs 5,835 5,835 5,835 5,835
Prepaid expenses 59,834 96,643 16,299 6,882
---------------------------------------------------------
Total assets 525,987,817 706,478,762 73,891,421 20,093,667
---------------------------------------------------------
LIABILITIES
Payables for investment securities purchased 9,388,550 7,216,602 802,858 --
Fund shares redeemed 408,989 4,396 -- --
Distributions to shareholders -- -- 286,009 107,449
Due to Investment Advisor (Note 3) 453,666 568,432 55,408 --
Other accrued expenses 54,521 24,776 22,998 25,153
---------------------------------------------------------
Total liabilities 10,305,726 7,814,206 1,167,273 132,602
---------------------------------------------------------
Net assets $515,682,091 $698,664,556 $ 72,724,148 $ 19,961,065
=========================================================
COMPOSITION OF
NET ASSETS
Paid-in capital $426,182,627 $563,990,196 $ 62,492,807 $ 19,530,305
Accumulated undistributed
net investment income 35,473 476,171 1,985 13,112
Accumulated undistributed
net realized gain on investments 19,612,652 26,129,266 2,167,220 11,834
Net unrealized appreciation
on investments 69,851,339 108,068,923 8,062,136 405,814
---------------------------------------------------------
Net assets $515,682,091 $698,664,556 $ 72,724,148 $ 19,961,065
=========================================================
Number of shares issued and outstanding
(unlimited shares authorized) no par value 20,690,233 28,318,564 4,333,474 1,603,713
=========================================================
Net asset value per share $ 24.92 $ 24.67 $ 16.78 $ 12.45
=========================================================
</TABLE>
See Accompanying Notes to Financial Statements.
22
<PAGE>
STATEMENTS OF OPERATIONS
Rainier Investment Management Mutual Funds
For the year ending March 31, 1998
<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 $ 3,057,094 $ 6,006,927 $ 479,614 $ --
Interest income 452,685 555,133 1,264,497 1,282,770
---------------------------------------------------------------
Total income 3,509,779 6,562,060 1,744,111 1,282,770
---------------------------------------------------------------
Expenses
Investment advisory fees (Note 3) 2,479,135 3,230,869 370,829 102,469
Custodian fees 81,154 109,726 30,808 5,063
Administration fees (Note 3) 176,247 219,235 52,913 40,000
Fund accounting fees 45,426 71,611 26,476 26,363
Transfer agent fees 37,224 44,973 15,571 10,788
Legal fees 7,249 11,701 1,500 748
Distribution fees (Note 3) 727,289 1,076,956 132,439 20,488
Insurance 4,521 8,461 1,381 635
Audit fees 17,002 36,091 8,502 8,502
Miscellaneous fees 10,999 16,086 4,811 2,906
Reports to shareholders 33,245 48,088 8,623 4,248
Registration fees 61,483 59,533 13,124 10,001
Trustees fees 7,607 7,607 7,573 7,607
Amortization of deferred organization costs 4,249 4,249 4,249 4,249
---------------------------------------------------------------
Total expenses 3,692,830 4,945,186 678,799 244,067
Less: expenses reimbursed (Note 3) -- -- (45,162) (135,484)
---------------------------------------------------------------
Net expenses 3,692,830 4,945,186 633,637 108,583
---------------------------------------------------------------
Net investment income (loss) (183,051) 1,616,874 1,110,474 1,174,187
---------------------------------------------------------------
NET REALIZED AND
UNREALIZED GAIN
ON INVESTMENTS
Net realized gain on investments sold 41,050,081 66,867,764 6,644,465 12,053
Net change in unrealized appreciation
on investments 69,643,055 104,559,153 8,026,713 615,125
---------------------------------------------------------------
Net gain on investments 110,693,136 171,426,917 14,671,178 627,178
---------------------------------------------------------------
NET INCREASE IN
NET ASSETS RESULTING
FROM OPERATIONS $ 110,510,085 $ 173,043,791 $ 15,781,652 $ 1,801,365
===============================================================
</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 fiscal For the fiscal For the fiscal For the fiscal
year ending year ending year ending year ending
03/31/98 03/31/97 03/31/98 03/31/97
----------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE IN
NET ASSETS
Operations
Net investment income (loss) ($ 183,051) $ 292,102 $ 1,616,874 $ 1,382,321
Net realized gain (loss) on
investments sold 41,050,081 16,142,537 66,867,764 30,203,631
Net change in unrealized appreciation
(depreciation) on investments 69,643,055 (3,369,874) 104,559,153 (2,396,132)
----------------------------------------------------------------
Increase in net assets resulting
from operations 110,510,085 13,064,765 173,043,791 29,189,820
----------------------------------------------------------------
Distributions to shareholders
From net investment income (13,604) (308,354) (1,469,662) (1,262,143)
From net realized gain on investments sold (31,425,265) (10,030,448) (62,718,809) (13,714,949)
----------------------------------------------------------------
Total distributions (31,438,869) (10,338,802) (64,188,471) (14,977,092)
----------------------------------------------------------------
Capital share transactions
Proceeds from shares sold 340,494,460 96,287,091 364,293,961 176,244,166
Net asset value of shares issued on
reinvestment of distributions 30,892,800 10,111,612 61,029,604 13,857,557
Cost of shares redeemed (71,117,233) (52,278,448) (96,143,437) (51,350,687)
----------------------------------------------------------------
Net increase from
capital share transactions 300,270,027 54,120,255 329,180,128 138,751,036
----------------------------------------------------------------
Net increase in net assets 379,341,243 56,846,218 438,035,448 152,963,764
NET ASSETS
Beginning of period 136,340,848 79,494,630 260,629,108 107,665,344
----------------------------------------------------------------
End of period $ 515,682,091 $ 136,340,848 $ 698,664,556 $ 260,629,108
================================================================
CHANGE IN SHARES
OUTSTANDING
Shares sold 15,058,868 5,221,248 15,990,331 9,611,640
Shares issued on reinvestment of distributions 1,419,060 567,235 2,845,203 776,911
Shares redeemed (3,138,581) (2,882,015) (4,261,129) (2,787,624)
----------------------------------------------------------------
Net increase in shares outstanding 13,339,347 2,906,468 14,574,405 7,600,927
================================================================
</TABLE>
24
<PAGE>
<TABLE>
<CAPTION>
Intermediate Fixed
Balanced Portfolio Income Portfolio
------------------------------------------------------------
For the fiscal For the fiscal For the fiscal For the fiscal
year ending year ending year ending year ending
03/31/98 03/31/97 03/31/98 03/31/97
------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE IN
NET ASSETS
Operations
Net investment income (loss) $ 1,110,474 $ 978,989 $ 1,174,187 $ 791,019
Net realized gain (loss) on
investments sold 6,644,465 4,125,731 12,053 (219)
Net change in unrealized appreciation
(depreciation) on investments 8,026,713 (1,187,032) 615,125 (330,754)
------------------------------------------------------------
Increase in net assets resulting
from operations 15,781,652 3,917,688 1,801,365 460,046
------------------------------------------------------------
Distributions to shareholders
From net investment income (1,106,230) (983,196) (1,165,960) (800,647)
From net realized gain on investments sold (7,227,079) (2,897,392) -- (5,863)
------------------------------------------------------------
Total distributions (8,333,309) (3,880,588) (1,165,960) (806,510)
------------------------------------------------------------
Capital share transactions
Proceeds from shares sold 24,528,609 28,696,866 4,057,430 10,867,359
Net asset value of shares issued on
reinvestment of distributions 8,173,577 3,801,012 1,159,961 748,944
Cost of shares redeemed (8,056,659) (23,984,319) (5,195,120) (1,706,775)
------------------------------------------------------------
Net increase from
capital share transactions 24,645,527 8,513,559 22,271 9,909,528
------------------------------------------------------------
Net increase in net assets 32,093,870 8,550,659 657,676 9,563,064
NET ASSETS
Beginning of period 40,630,278 32,079,619 19,303,389 9,740,325
------------------------------------------------------------
End of period $ 72,724,148 $ 40,630,278 $ 19,961,065 $ 19,303,389
============================================================
CHANGE IN SHARES
OUTSTANDING
Shares sold 1,535,463 1,939,290 325,627 887,089
Shares issued on reinvestment of distributions 533,121 262,719 94,075 61,083
Shares redeemed (487,729) (1,657,681) (414,956) (139,004)
------------------------------------------------------------
Net increase in shares outstanding 1,580,855 544,328 4,746 809,168
============================================================
</TABLE>
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 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 fiscal For the fiscal For the fiscal From 05/10/94
year ending year ending year ending through
03/31/98 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 (loss) (0.01) 0.05 0.05 0.10
Net realized and unrealized
gain (loss) on investments 8.71 2.43 5.17 2.18
-------------------------------------------------------------------
Total from investment operations 8.70 2.48 5.22 2.28
-------------------------------------------------------------------
Distributions
From net investment income (0.01) (0.06) (0.06) (0.07)
From net realized gains (2.31) (1.77) (1.16) (0.32)
-------------------------------------------------------------------
Total distributions (2.32) (1.83) (1.22) (0.39)
-------------------------------------------------------------------
Net asset value, end of period $ 24.92 $ 18.54 $ 17.89 $ 13.89
===================================================================
Total return 48.68% 14.57% 38.38% 19.38%+
===================================================================
Net assets at end of period (in 000's) $ 515,682 $ 136,341 $ 79,495 $ 10,120
Ratio of expenses to average net assets
Before expense reimbursement/recoupment 1.26% 1.33% 1.46% 2.93%++
After expense reimbursement/recoupment n/a 1.40% 1.48% 1.48%++
===================================================================
Ratio of net investment income (loss)
to average net assets, net of expense
reimbursement/recoupment (0.06%) 0.27% 0.66% 1.40%++
===================================================================
Portfolio turnover rate 107.17% 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 fiscal For the fiscal For the fiscal From 05/10/94
year ending year ending year ending through
03/31/98 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 (loss) 0.07 0.13 0.11 0.11
Net realized and unrealized
gain (loss) on investments 8.86 2.86 5.13 2.00
-------------------------------------------------------------------
Total from investment operations 8.93 2.99 5.24 2.11
-------------------------------------------------------------------
Distributions
From net investment income (0.07) (0.13) (0.11) (0.07)
From net realized gains (3.16) (1.42) (1.44) (0.20)
-------------------------------------------------------------------
Total distributions (3.23) (1.55) (1.55) (0.27)
-------------------------------------------------------------------
Net asset value, end of period $ 24.67 $ 18.97 $ 17.53 $ 13.84
===================================================================
Total return 49.64% 17.88% 38.64% 17.87%+
===================================================================
Net assets at end of period (in 000's) $ 698,665 $ 260,629 $ 107,665 $ 20,430
===================================================================
Ratio of expenses to average net assets
Before expense reimbursement/recoupment 1.14% 1.18% 1.30% 1.86%++
After expense reimbursement/recoupment n/a 1.22% 1.29% 1.29%++
===================================================================
Ratio of net investment income (loss)
to average net assets, net of expense
reimbursement/recoupment 0.37% 0.74% 1.07% 1.25%++
===================================================================
Portfolio turnover rate 119.88% 146.12% 138.02% 133.18%
===================================================================
Average commission rate paid^ $ 0.0587 $ 0.0591 $ 0.0575 --
===================================================================
</TABLE>
* 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, continued
Rainier Investment Management Mutual Funds
For a share outstanding throughout the period
<TABLE>
<CAPTION>
Balanced Portfolio
----------------------------------------------------------------
For the fiscal For the fiscal For the fiscal From 05/10/94
year ending year ending year ending through
03/31/98 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 (loss) 0.35 0.37 0.38 0.30
Net realized and unrealized
gain (loss) on investments 4.46 1.28 2.82 1.13
---------------------------------------------------------------
Total from investment operations 4.81 1.65 3.20 1.43
---------------------------------------------------------------
Distributions
From net investment income (0.35) (0.37) (0.37) (0.31)
From net realized gains (2.44) (1.05) (1.26) (0.16)
---------------------------------------------------------------
Total distributions (2.79) (1.42) (1.63) (0.47)
---------------------------------------------------------------
Net asset value, end of period $ 16.78 $ 14.76 $ 14.53 $ 12.96
===============================================================
Total return 34.57% 11.83% 25.58% 12.23%+
===============================================================
Net assets at end of period (in 000's) $ 72,724 $ 40,630 $ 32,080 $ 13,724
===============================================================
Ratio of expenses to average net assets
Before expense reimbursement/recoupment 1.28% 1.31% 1.50% 2.29%++
After expense reimbursement/recoupment 1.19% 1.19% 1.19% 1.19%++
===============================================================
Ratio of net investment income (loss)
to average net assets, net of expense
reimbursement/recoupment 2.09% 2.50% 2.76% 3.04%++
===============================================================
Portfolio turnover rate 102.98% 133.68% 114.85% 92.40%
===============================================================
Average commission rate paid^ $ 0.0589 $ 0.0576 $ 0.0587 --
===============================================================
</TABLE>
28
<PAGE>
<TABLE>
<CAPTION>
Intermediate Fixed Income Portfolio
-----------------------------------------------------------------------
For the fiscal For the fiscal For the fiscal From 05/10/94
year ending year ending year ending through
03/31/98 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 (loss) 0.71 0.65 0.70 0.57
Net realized and unrealized
gain (loss) on investments 0.37 (0.25) 0.34 --
-----------------------------------------------------------------------
Total from investment operations 1.08 0.40 1.04 0.57
-----------------------------------------------------------------------
Distributions
From net investment income (0.71) (0.64) (0.70) (0.57)
From net realized gains -- (0.01) (0.01) --
-----------------------------------------------------------------------
Total distributions (0.71) (0.65) (0.71) (0.57)
-----------------------------------------------------------------------
Net asset value, end of period $ 12.45 $ 12.08 $ 12.33 $ 12.00
=======================================================================
Total return 9.11% 3.35% 8.85% 4.92%+
-----------------------------------------------------------------------
Net assets at end of period (in 000's) $ 19,961 $ 19,303 $ 9,740 $ 6,370
=======================================================================
Ratio of expenses to average net assets
Before expense reimbursement/recoupment 1.19% 1.53% 2.17% 2.44%++
After expense reimbursement/recoupment 0.55% 0.95% 0.95% 0.95%++
=======================================================================
Ratio of net investment income (loss)
to average net assets, net of expense
reimbursement/recoupment 5.73% 5.42% 5.69% 5.57%++
=======================================================================
Portfolio turnover rate 15.99% 8.37% 15.49% 5.21%
=======================================================================
Average commission rate paid^ -- -- -- --
=======================================================================
</TABLE>
* 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
March 31, 1998
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 securities held during the year ending March 31,
1998.
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
paid-in capital, 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 (as
the distribution coordinator) 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 Services 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 year ending March 31, 1998 were as
follows:
Fund Purchases Sales
Small/Mid Cap
Equity Portfolio $566,942,330 $307,328,413
Core Equity Portfolio 769,162,392 509,596,016
Balanced Portfolio 63,627,906 50,612,097
Intermediate Fixed
Income Portfolio 3,045,916 1,215,691
The Balanced Portfolio and Intermediate Fixed Income Portfolio purchased
$3,630,629 and $3,723,925, respectively, and sold $718,063 and $1,511,407,
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 March 31, 1998, 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 $81,356,150 $11,863,399 $69,492,751
Core Equity 117,963,974 10,378,547 107,585,427
Balanced 8,729,845 736,907 7,992,938
Intermediate
Fixed Income 411,059 5,245 405,814
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>
INDEPENDENT AUDITORS' REPORT
The Board of Trustees and Shareholders
Rainier Investment Management Mutual Funds
We have audited the accompanying statements of assets and liabilities,
including the schedules of investments, of Rainier Investment Management Mutual
Funds (comprised of Small/Mid Cap Equity, Core Equity, Balanced and Intermediate
Fixed Income Portfolios), as of March 31, 1998, and the related statements of
operations for the year then ended, the statements of changes in net assets for
each of the years in the two-year period then ended, and the financial
highlights for the periods indicated herein. These financial statements and
financial highlights are the responsibility of the Funds' management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of March
31, 1998 by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the aforementioned Funds of Rainier Investment Management Mutual Funds as of
March 31, 1998, the results of their operations, the changes in their net
assets, and their financial highlights for the periods indicated herein in
conformity with generally accepted accounting principles.
/s/ KPMG Peat Marwich LLP
Seattle, Washington
May 11, 1998
"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, 2020 E. Financial Way, Suite 100,
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
32
<PAGE>
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 $1.1 to $198.3 billion, $1.1 to $8.0 billion, and
$171.1 million to $1.1 billion, respectively, as of May 31, 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.
33
