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 ...................................... 33
INDEX DESCRIPTIONS ......................................................... 33
RAINIER INVESTMENT MANAGEMENT MUTUAL FUNDS [LOGO}
601 Union Street, Suite 2801
Seattle, Washington 98101
(800) 248-6314
This report and the financial statements contained herein are provided for the
general information of the shareholders of the Rainier Investment Management
Mutual Funds. This report is not authorized for distribution to prospective
investors in the Funds unless preceded or accompanied by an effective
prospectus. For more information on any Fund, including charges and expenses,
call (800) 248-6314 for a free prospectus. Read it carefully before you invest
or send money.
<PAGE>
LETTER TO SHAREHOLDERS
Dear Shareholders,
As Chairman of 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 period ending March 31, 1999. The audit of
the financial statements was performed by KPMG LLP.
As you review this Report, you will find commentary describing the equity
and fixed-income capital markets for the fiscal year ending March 31, 1999.
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.
The last year has been challenging for our highly diversified Growth at a
Reasonable Price equity philosophy. Despite strong performance by the S&P 500
Stock Index, market breadth was extremely narrow. For example, just five stocks
accounted for over 50% of the S&P return for the March quarter. At the same
time, mid- and particularly small-capitalization companies were suffering
bear-market losses. The Russell 2000(R) Index of smaller companies lost over 16%
for the year ending March and thus underperformed the S&P 500 by nearly 35
percentage points!
We have made a few strategic adjustments in this extreme market
environment. The number of equity holdings in all of our Portfolios has been
reduced. The Portfolios are still very diversified, but we wish to scrutinize
our holdings even more. Our portfolio management team has increased the average
capitalization in the Core and Balanced Portfolios. Much of the underperformance
in those Portfolios can be attributed to diversification into companies of all
sizes. Rainier is still committed to that concept, but is not blind to the
narrowness of the current market. Finally, we are more willing to purchase
"high-priced" growth stocks on a selective basis where fundamentals are
compelling.
We also reopened the Small/Mid Cap Equity Portfolio. The Advisor is not
experiencing any difficulty managing the Portfolio; rather, its motivation is
that the valuations of smaller company equities appear to be extremely
attractive, and that this could be an especially opportune time to invest in
small- and mid-cap stocks. We believe the reopening is in the best interests of
the shareholders, and the Advisor has covered all of the expenses for the
reopening, not the shareholders.
Thank you again for your investment in the Rainier Investment Management
Mutual Funds.
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 $5.2 billion of
discretionary assets for primarily institutional clients.
EQUITY COMMENTS
The twelve-month period ending March 31, 1999 marked yet another year of
strong double-digit returns for the major U.S. equity benchmarks. The Dow Jones
Industrial Average pierced 10,000, and the Standard & Poor's 500 Stock Index
exceeded 1,300. The journey to these unprecedented levels was, however, fraught
with danger. Financial market turmoil in numerous emerging markets prevailed for
much of 1998, placing enormous stress on the world monetary system.
The Small/Mid Cap Equity, Core Equity and Balanced Portfolios faced the
challenge of a continued market preference for richly valued
large-capitalization growth issues. We view the extreme differential between the
performance of large growth stocks and the rest of the market as highly unusual,
and we see potential for a significant rebound in secondary issues in the months
ahead. A critical variable for improving breadth in the U.S. market will be
improvement in the global economy.
The resilience of the U.S. stock market given the global financial crisis
of 1998 was truly extraordinary. Certainly, there were weeks and months when
pessimism gripped the markets. But bullish sentiment has repeatedly resurfaced.
Perhaps the key reason is the perception that the internet and other
technological innovations will have a revolutionary impact on the global
economy. While we recognize that the oft-repeated phrase "the internet changes
everything" has merit, we will not abandon our investment discipline. Strong
earnings and cash flow growth with reasonable multiples are still the foundation
of our approach, even in an age of euphoric "dot-com" investing.
James R. Margard, CFA; David A. Veterane, CFA;
Peter M. Musser, CFA; Mark H. Dawson, CFA
FIXED INCOME COMMENTS
It was a wild ride in the fixed-income markets during the year ending March
1999, and, although the returns were positive, the road to year-end was
decidedly not much fun. Interest rates rose between 30 and 70 basis points
overall. The domestic economy continued to surge within an environment of low
inflation and tight labor. The impeachment proceedings and the direction of
Federal Reserve sentiment kept investors wary. Then the default of Russia,
pressures upon Latin America and hedge fund asset dislocations led to a
tremendous flight-to-quality movement into U.S. Treasuries. From mid-July until
the end of August investor thinking went from confidence and no inflation or
recession in sight to fears of deflation. Corporate spreads widened to
twenty-year highs and the perception of deteriorating fundamentals led to market
gridlock. Even off-the-run Treasuries underperformed the more liquid benchmarks.
Then, when uncertainty was at its worst, Japan took some conservative steps
toward solving its banking crisis, the United States agreed to fund the
International Monetary Fund, and Brazil was in the process of diverting a
devaluation. The Federal Reserve, in an attempt to restore stability, took a
total of three baby steps of 25 basis points each to lower overnight rates to
4.75%. The equity market responded with a roaring rally and the bond market
retreated modestly. Corporate spreads have tightened nearly to the levels of a
year ago.
Looking forward, interest rates will likely remain rangebound with an
upward bias but will continue to provide competitive returns.
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: It was a difficult six months for the Small/Mid Cap Equity
Portfolio. The Portfolio was confronted with an unusually challenging
environment-the ongoing preference of investors for high-P/E large-cap shares,
and a narrow group of industries. Despite enduring some setbacks, a number of
stocks in the Portfolio generated excellent results, including Forest Labs,
Men's Wearhouse, Hartford Life, MindSpring, Mohawk Industries and Century
Telephone. A broad-based reversal in the fortunes of small-cap stocks is not yet
evident. We believe, however, that we are in the final stages of investor
capitulation, and that the seeds for a powerful rally are being sown. The
unprecedented gap between small- and large-cap shares is unlikely to continue.
We anticipate an improvement in corporate profitability and world economic
growth, both of which should restore investors' willingness to embrace the
traditional rationale for investing in smaller stocks-rapid earnings growth,
greater earnings leverage and higher potential return. Meanwhile, we remained
focused on the foundation of our approach-earnings growth, strong cash flow and
reasonable valuations.
SMALL/MID CAP EQUITY PORTFOLIO:
Small/Mid Russell Russell Russell Consumer
Cap Equity Midcap(TM) 2500(TM) 2000(R) Price
Portfolio Index Index Index Index
--------- ----- ----- ----- -----
05/10/94 $10,000 $10,000 10,000 $10,000 $10,000
03/31/95 11,938 11,261 10,999 11,495 10,272
03/31/96 16,520 15,190 14,279 14,539 10,563
03/31/97 18,197 16,185 15,519 14,611 10,855
03/31/98 28,138 23,327 22,015 20,750 11,004
03/31/99 23,303 23,069 19,095 17,377 11,194
TOTAL RETURNS for Periods Ending March 31, 1999
Inception to
6 Months 1 Year 3 Years* 3/31/99*
-------- ------ -------- --------
Small/Mid Cap Equity Portfolio 9.1% (17.2)% 12.2% 18.9%
Russell Midcap(TM) Index 17.9 (1.1) 16.6 18.6
Russell 2500(TM) Index 11.8 (13.3) 10.2 14.1
Russell 2000(R) Index 10.0 (16.3) 7.7 12.0
Consumer Price Index 0.9 1.7 2.0 2.3
*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 more or less than their original cost. Small-company
investing may involve greater risks and volatility, as the value of
small-company stocks may be adversely affected by less-liquid markets.
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 Portfolio posted sharply higher results in the six
months ending March 31, rising 27.5%, exceeding the 27.3% return of the Standard
& Poor's 500 Stock Index. Despite a brief and powerful rally by secondary stocks
in October and November, market leadership remained concentrated in the largest
growth stocks. Technology shares, in particular, generated eye-popping
returns-the Portfolio's positions in America Online, Microsoft, Sun
Microsystems, Tellabs, Cisco Systems and IBM notched results that were well
above the major market averages. Other stocks that performed exceptionally well
included Dayton Hudson, Viacom, MCI Worldcom and United Technologies. We are
encouraged by the strong earnings results that have been reported in the first
quarter of 1999, and believe that the favorable swing in corporate profitability
will lead to an improvement in market breadth. We are therefore maintaining our
positions in select secondary stocks, which we think are deeply undervalued and
poised to rebound. We have also modestly increased our exposure to cyclical
companies, such as Georgia Pacific and Mead, which we think will benefit from an
upturn in the level of global economic growth.
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
03/31/99 31,318 31,881 11,194
TOTAL RETURNS for Periods Ending March 31, 1999
Inception to
6 Months 1 Year 3 Years* 3/31/99*
-------- ------ -------- --------
Core Equity Portfolio 27.5% 8.6% 24.2% 26.3%
Standard & Poor's 500 Stock Index 27.3 18.5 28.1 26.8
Russell 1000(R) Index 26.9 16.7 26.8 26.0
Consumer Price Index 0.9 1.7 2.0 2.3
*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 more or less than their original cost.
5
<PAGE>
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 recorded nearly a 17% return for the six
months ending March 31. Bolstered by large positions in America Online,
Microsoft and other technology stalwarts, the equity component of the Portfolio
rose more than 29%. We maintained an equity exposure at the upper end of our
typical range of 55-D65%, finishing the period with 64% of the assets invested
in stocks, 33% in bonds and 1% in cash. The Portfolio pursues an equity strategy
that is virtually the same as the Core Portfolio. Anticipating a slow but
gradual improvement in global economic growth in 1999, we have modestly shifted
some of our defensive holdings to those with greater cyclical exposure. As is
the case with the Core Portfolio, we are also maintaining a meaningful exposure
to secondary stocks that we think have the potential to recover from depressed
levels. Since declining to record lows in October, interest rates have been in a
generally rising trend. The composition of the Portfolio in Treasuries and
high-quality intermediate-duration corporates produced outperformance relative
to the broad-based indices.
Balanced Balanced Consumer
Portfolio Index Price Index
--------- ----- -----------
05/10/94 $10,000 $10,000 $10,000
03/31/95 11,223 11,034 10,272
03/31/96 14,094 13,241 10,563
03/31/97 15,762 15,044 10,855
03/31/98 21,209 18,896 11,004
03/31/99 22,741 21,346 11,194
TOTAL RETURNS for Periods Ending March 31, 1999
Inception to
6 Months 1 Year 3 Years* 3/31/99*
-------- ------ -------- --------
Balanced Portfolio 16.9% 7.2% 17.3% 18.3%
Balanced Index (50/40/10) 13.4 12.8 17.3 16.8
Standard & Poor's 500 Stock Index 27.3 18.5 28.1 26.8
Lehman Brothers Govt./Corp. 0.1 6.6 7.0 7.5
Intermediate Bond Index
Consumer Price Index 0.9 1.7 2.0 2.3
*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 more 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 last two calendar quarters were marked by rising
interest rates, a narrowing of credit quality spreads and a mixed yield curve
environment. Treasury yields rose between 65 and 90 basis points, but moved
upward from historically low levels. Cash equivalents barely budged as the
Federal Reserve took three 25-basis-point steps to lower overnight rates to
4.75%. The continued unwinding of flight-to-quality flows associated with last
autumn's global financial crisis contributed to outperformance of the corporate
sector over Governments. The belief that the Fed is now on hold and that rates
will be less volatile going forward helped mortgage-backed products. The yield
curve took a number of twists and turns ending up steeper overall. There was
strong demand for market liquidity as the increasing new volume of
mega-offerings by issuers was generally well received by investors. Your
Portfolio, while moderately overweighted in Treasuries, emphasized off-the-run
issues for incremental yield. Corporate holdings are of the highest quality,
including participation by the Portfolio in the largest domestic debt offering
to date of AT&T Corp. in March.
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
03/31/99 13,716 14,138 11,194
TOTAL RETURNS for Periods Ending March 31, 1999
Inception to
6 Months 1 Year 3 Years* 3/31/99*
-------- ------ -------- --------
Intermediate Fixed Income Portfolio (0.7)% 6.5% 6.3% 6.7%
Lehman Brothers Govt./Corp.
Intermediate Bond Index 0.1 6.6 7.0 7.5
91-Day Treasury Bill Index 2.3 4.9 5.1 5.2
Consumer Price Index 0.9 1.7 2.0 2.3
*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 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, 1999
COMMON STOCKS (99.24%) SHARES VALUE
- --------------------------------------------------------------------------------
AUTOS AND TRANSPORTATION (3.86%)
Air Transportation (0.94%)
Airborne Freight Corporation 78,650 $ 2,447,981
Southwest Airlines Co. 52,143 1,577,326
------------
Total Air Transportation 4,025,307
------------
Auto Parts/Original Equipment (0.55%)
Arvin Industries, Inc. 69,850 2,353,072
------------
Railroads (0.90%)
Kansas City Southern Industries, Inc. 67,800 3,864,600
------------
Truckers (1.47%)
USFreightways Corporation 192,250 6,320,219
------------
Total Autos and Transportation 16,563,198
------------
CONSUMER DISCRETIONARY (17.86%)
Advertising Agencies (0.50%)
Catalina Marketing Corporation* 24,875 2,136,141
------------
Consumer Electronics (1.09%)
Electronic Arts Inc.* 19,275 915,562
MindSpring Enterprises, Inc.* 43,750 3,765,234
------------
Total Consumer Electronics 4,680,796
------------
Cosmetics (0.56%)
Avon Products, Inc. 51,000 2,400,187
------------
Education Services (1.19%)
Sylvan Learning Systems, Inc.* 186,250 5,098,594
------------
Electrical Household Appliances (1.07%)
Maytag Corporation 76,175 4,599,066
------------
Household Furnishings (1.16%)
Blyth Industries, Inc.* 211,725 5,002,003
------------
Leisure Time (1.36)%
Action Performance Companies, Inc.* 193,675 5,834,459
------------
Restaurants (2.42%)
CEC Entertainment, Inc.* 102,875 $ 3,690,641
Outback Steakhouse, Inc.* 205,125 6,717,844
------------
Total Restaurants 10,408,485
------------
Retail (6.48%)
Jones Apparel Group, Inc.* 125,350 3,501,966
The Men's Wearhouse, Inc.* 419,100 12,101,512
Saks Holdings, Inc.* 125,125 3,253,250
Staples, Inc.* 98,050 3,223,394
Zale Corporation* 168,925 5,775,123
------------
Total Retail 27,855,245
------------
Shoes (1.71%)
The Timberland Company* 55,600 3,506,275
Wolverine World Wide, Inc. 404,575 3,843,463
------------
Total Shoes 7,349,738
------------
Wholesalers (0.32%)
United Stationers Inc.* 91,400 1,393,850
------------
Total Consumer Discretionary 76,758,564
------------
CONSUMER STAPLES (6.63%)
Beverages (2.92%)
Canandaigua Brands Inc.* 155,500 7,833,312
Suiza Foods Corporation* 139,950 4,714,566
------------
Total Beverages 12,547,878
------------
Drug and Grocery Store Chain (0.71%)
Rite Aid Corp. 53,400 1,335,000
Wild Oats Markets, Inc.* 63,650 1,726,506
------------
Total Drug and Grocery Store Chain 3,061,506
------------
Foods (3.00%)
Corn Products International, Inc. 163,400 3,911,388
The Earthgrains Company 167,125 3,708,086
The Quaker Oats Company 20,431 1,278,214
Smithfield Foods, Inc.* 176,775 4,010,583
------------
Total Foods 12,908,271
------------
TOTAL CONSUMER STAPLES 28,517,655
------------
See Accompanying Notes to Financial Statements
8
<PAGE>
FINANCIAL SERVICES (17.01%)
Banks/Outside New York City (5.45%)
First American Corporation 279,725 $10,314,859
North Fork Bancorporation, Inc. 168,325 3,555,866
Prime Bancshares, Inc. 55,750 790,953
Summit Bancorp 225,425 8,791,575
------------
Total Banks/Outside New York City 23,453,253
------------
Finance Companies (1.58%)
Capital One Financial Corporation* 14,500 2,189,500
The FINOVA Group Inc. 88,875 4,610,391
------------
Total Finance Companies 6,799,891
------------
Financial/Miscellaneous (1.70%)
Nationwide Financial Services, Inc. 174,225 7,317,450
------------
Insurance (2.82%)
ACE Limited 186,000 5,800,875
Everest Reinsurance Holdings, Inc. 69,600 2,170,650
Hartford Life, Inc. Cl. A 68,225 3,752,375
Stirling Cooke Brown Holdings Limited* 55,800 390,600
------------
Total Insurance 12,114,500
------------
Savings and Loan (3.94%)
Astoria Financial Corporation 139,700 6,985,000
Bank United Corp. Cl. A 198,750 8,123,906
Golden State Bancorp Inc. Warrants* 381,750 1,849,102
------------
Total Savings and Loan 16,958,008
------------
Securities Brokerage and Services (1.52%)
Legg Mason, Inc. 50,075 1,686,902
Lehman Brothers Holdings Inc.* 80,950 4,836,762
------------
Total Securities Brokerage and Services 6,523,664
------------
TOTAL FINANCIAL SERVICES 73,166,766
------------
HEALTH CARE (10.93%)
Drugs and Pharmaceuticals (8.32%)
Andrx Corporation* 39,225 3,574,378
Chiron Corporation* 169,950 3,728,278
Forest Laboratories, Inc.* 194,450 10,962,119
Genzyme Corporation* 216,825 10,936,111
PathoGenesis Corporation* 154,875 2,061,773
Teva Pharmaceuticals Industries Limited ADR 94,775 4,495,889
------------
Total Drugs and Pharmaceuticals 35,758,548
------------
Health Care Facilities (1.51%)
HCR Manor Care, Inc.* 189,700 $ 4,327,531
Total Renal Care Holdings Inc.* 198,050 2,178,550
------------
Total Health Care Facilities 6,506,081
------------
Health Care Management Services (0.28%)
United HealthCare Corporation 23,250 1,223,531
------------
Medical and Dental Instruments and Supplies (0.82%)
Henry Schein, Inc.* 95,350 2,407,588
Safeskin Corporation* 151,650 1,127,897
------------
TOTAL MEDICAL AND DENTAL INSTRUMENTS AND SUPPLIES 3,535,485
------------
TOTAL HEALTH CARE 47,023,645
------------
INTEGRATED OILS (3.39%)
Oil/Integrated Domestic (3.39%)
Amerada Hess Corporation 73,550 3,700,484
The Coastal Corporation 119,775 3,952,575
USX-Marathon Group 252,025 6,930,688
------------
Total Oil/Integrated Domestic 14,583,747
------------
MATERIALS AND PROCESSING (10.07%)
Building Materials (0.77%)
Masco Corporation 118,200 3,339,150
------------
Chemicals (2.02%)
The BFGoodrich Company 253,050 8,682,778
------------
Diversified Materials and Processing (0.60%)
Georgia-Pacific Group* 34,500 2,561,625
------------
Diversified Production (1.18%)
Pentair Inc. 151,050 5,097,938
------------
Metal Fabricating (1.63%)
General Cable Corporation 245,525 2,593,358
Precision Castparts Corp. 109,225 4,396,306
------------
Total Metal Fabricating 6,989,664
------------
Metals and Minerals/Miscellaneous (0.47%)
Titanium Metals Corporation 351,725 2,022,419
------------
Paper (1.32%)
The Mead Corporation 184,550 5,674,912
------------
Textile Products (2.08%)
Mohawk Industries, Inc. 297,543 8,926,290
------------
TOTAL MATERIALS AND PROCESSING 43,294,776
------------
See Accompanying Notes to Financial Statements.
9
<PAGE>
OTHER (1.78%)
Multi-Sector Companies (1.78%)
Crane Co. 94,850 $ 2,294,184
Johnson Controls, Inc. 54,800 3,418,150
McDermott International, Incorporated 76,200 1,928,812
------------
Total Multi-Sector Companies 7,641,146
------------
OTHER ENERGY (0.82%)
Oil/Crude Producers (0.82%)
Newfield Exploration Company* 155,500 3,518,188
------------
PRODUCER DURABLES (2.22%)
Identification Control and Filter Devices (0.77%)
American Power Conversion Corporation* 122,475 3,306,825
------------
Machinery/Industrial and Specialty (1.16%)
Applied Power Inc. 83,200 2,267,200
Ingersoll-Rand Company 55,500 2,754,188
------------
Total Machinery/Industrial and Specialty 5,021,388
------------
Office Furniture and Business Equipment (0.29%)
HON INDUSTRIES Inc. 56,450 1,238,371
------------
TOTAL PRODUCER DURABLES 9,566,584
------------
TECHNOLOGY (15.73%)
Communications Technology (1.24%)
General Instrument Corporation* 34,425 1,043,508
Tellabs, Inc.* 43,950 4,296,112
------------
Total Communications Technology 5,339,620
------------
Computer Services, Software and Systems (6.61%)
Cadence Design Systems, Inc.* 210,875 5,430,031
Cambridge Technology Partners (Massachusetts), Inc.* 135,425 1,879,022
Check Point Software Technologies, Ltd.* 155,425 6,683,275
Novell, Inc.* 187,000 4,710,063
Symantec Corporation* 284,600 4,820,413
Visio Corporation* 132,900 3,737,812
Walker Interactive Systems, Inc.* 277,850 1,180,862
------------
Total Computer Services, Software and Systems 28,441,478
------------
Computer Technology (1.32%)
Computer Sciences Corporation* 103,025 5,685,692
------------
Electronics/Other (1.07%)
SLI, Inc.* 219,100 4,601,100
------------
Electronics/Semi-Conductors (4.40%)
Analog Devices, Inc.* 228,375 $ 6,794,156
Atmel Corporation* 216,500 3,288,094
Celestica Inc.* 88,150 2,859,366
EG&G, Inc.* 60,400 1,593,050
Xilinx, Inc.* 108,700 4,409,144
------------
Total Electronics/Semi-Conductors 18,943,810
------------
Electronics/Technology (0.74%)
Symbol Technologies, Inc.* 70,250 3,161,250
------------
Internet Services (0.35%)
ZDNet Group* 42,300 1,522,800
------------
TOTAL TECHNOLOGY 67,695,750
------------
UTILITIES AND REITS (8.94%)
Real Estate Investment Trusts (0.71%)
LTC Properties, Inc. 34,625 424,156
Nationwide Health Properties, Inc. 138,225 2,626,275
------------
Total Real Estate Investment Trusts 3,050,431
------------
Utilities/Electrical (1.80%)
PECO Energy Company* 167,275 7,736,469
------------
Utilities/Gas Pipelines (0.55%)
Columbia Energy Group 45,037 2,353,183
------------
Utilities/Miscellaneous (1.66%)
New Century Energies, Inc. 209,800 7,146,313
------------
Utilities/Telecommunications (4.22%)
Century Telephone Enterprises, Inc. 180,392 12,672,538
Frontier Corporation 105,725 5,484,484
------------
Total Utilities/Telecommunications 18,157,022
------------
TOTAL UTILITIES AND REITS 38,443,418
------------
TOTAL COMMON STOCKS (cost $436,090,856) $426,773,437
------------
SHORT-TERM INVESTMENTS (0.40%) Par Value Value
- --------------------------------------------------------------------------------
VARIABLE RATE DEMAND NOTES** (0.40%)
American Family Financial Services
4.5696% 07-28-1999 $520,000 $520,000
Warner-Lambert Company
4.5700% 07-28-1999 503,205 503,206
Wisconsin Corporate Central Credit Union
4.6087% 07-13-1999 70,000 70,000
See Accompanying Notes to Financial Statements.
10
<PAGE>
Wisconsin Electric Power Company
4.5696% 07-14-1999 $600,000 $ 600,000
------------
TOTAL VARIABLE RATE DEMAND NOTES
(cost $1,693,206) 1,693,206
------------
TOTAL SHORT-TERM INVESTMENTS
(cost $1,693,206) $ 1,693,206
------------
TOTAL INVESTMENTS IN SECURITIES (99.64%)
(cost $437,784,062)*** $428,466,643
------------
OTHER ASSETS LESS LIABILITIES (0.36%) $ 1,560,907
------------
NET ASSETS (100.00%) $430,027,550
============
* 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 $441,505,812.
CORE EQUITY PORTFOLIO [LOGO]
MARCH 31, 1999
COMMON STOCKS (99.30%) Shares Value
- --------------------------------------------------------------------------------
BASIC INDUSTRY (3.83%)
Chemical/Major (0.55%)
E.I. du Pont de Nemours and Company 86,200 $ 5,004,988
------------
Chemical/Specialty (1.32%)
The BFGoodrich Company 349,625 11,996,508
------------
Metals (0.45%)
Alcoa Inc. 74,760 3,079,178
Titanium Metals Corporation 173,405 997,079
------------
Total Metals 4,076,257
------------
Paper and Forest Products (1.51%)
Georgia-Pacific Corporation* 53,350 3,961,238
The Mead Corporation 318,325 9,788,494
------------
Total Paper and Forest Products 13,749,732
------------
TOTAL BASIC INDUSTRY 34,827,485
------------
CAPITAL GOODS (6.61%)
Aerospace/Industrial (1.05%)
Ingersoll-Rand Company 167,199 8,297,250
Precision Castparts Corp. 32,550 1,310,138
------------
Total Aerospace/Industrial 9,607,388
------------
Capital Goods/Miscellaneous (0.63%)
General Cable Corporation 7,025 $ 74,202
Johnson Controls, Inc. 91,525 5,708,872
------------
Total Capital Goods/Miscellaneous 5,783,074
------------
Diversified/Manufacturing (3.02%)
Pentair Inc. 73,200 2,470,500
Tyco International Ltd. 266,700 19,135,725
United Technologies Corporation 43,250 5,857,672
------------
Total Diversified/Manufacturing 27,463,897
------------
Multi-Sector Companies (0.41%)
Crane Co. 152,750 3,694,641
------------
Pollution Control (1.50%)
Waste Management, Inc. 307,800 13,658,625
------------
TOTAL CAPITAL GOODS 60,207,625
------------
CONGLOMERATES (3.11%)
General Electric Company 256,350 28,358,719
------------
CONSUMER CYCLICAL (8.17%)
Appliances (0.79%)
Maytag Corporation 119,800 7,232,925
------------
Autos and Auto Parts (1.03%)
Arvin Industries, Inc. 44,175 1,488,145
Ford Motor Company 139,575 7,920,881
------------
Total Autos and Auto Parts 9,409,026
------------
See Accompanying Notes to Financial Statements.
11
<PAGE>
Building Materials (0.69%)
Masco Corporation 223,875 $ 6,324,469
------------
Consumer Cyclical/Miscellaneous (0.65%)
Action Performance Companies, Inc.* 84,675 2,550,834
Mohawk Industries, Inc.* 112,575 3,377,250
------------
Total Consumer Cyclical/Miscellaneous 5,928,084
------------
Office Furniture (0.25%)
HON INDUSTRIES Inc. 105,050 2,304,534
------------
Retail (4.76%)
Dayton Hudson Corporation 173,000 11,526,125
The Home Depot, Inc. 220,220 13,708,695
The Men's Wearhouse, Inc.* 220,662 6,371,615
Saks Holdings, Inc.* 194,500 5,057,000
Staples, Inc.* 140,150 4,607,431
Zale Corporation* 60,125 2,055,523
------------
Total Retail 43,326,389
------------
TOTAL CONSUMER CYCLICAL 74,525,427
------------
CONSUMER SERVICES (4.49%)
Cable Television (2.17%)
Time Warner, Inc. 166,825 11,855,002
Viacom Inc. Cl. B* 94,750 7,953,078
------------
Total Cable Television 19,808,080
------------
Education (0.29%)
Sylvan Learning Systems, Inc.* 95,230 2,606,921
------------
Health Care Services (1.59%)
HCR Manor Care, Inc.* 293,475 6,694,898
Henry Schein, Inc.* 105,650 2,667,663
Total Renal Care Holdings Inc.* 145,500 1,600,500
United HealthCare Corporation 66,525 3,500,878
------------
Total Health Care Services 14,463,939
------------
Publishing/Newspapers (0.40%)
The New York Times Company Cl. A 129,125 3,680,063
------------
Restaurants (0.04%)
Outback Steakhouse, Inc.* 11,685 382,667
------------
TOTAL CONSUMER SERVICES 40,941,670
------------
CONSUMER STAPLES (20.04%)
Biotechnology (0.84%)
Chiron Corporation* 220,650 4,840,509
Genzyme Corporation* 54,900 $ 2,769,019
------------
Total Biotechnology 7,609,528
------------
Drugs (7.23%)
American Home Products Corporation 141,975 9,263,869
Bristol-Myers Squibb Company 109,325 7,030,964
Forest Laboratories, Inc.* 111,225 6,270,309
Johnson & Johnson* 76,975 7,211,595
Merck & Co, Inc. 352,225 28,244,042
Pharmacia & Upjohn, Inc.* 109,850 6,851,894
Teva Pharmaceuticals Industries Limited ADR 20,000 948,750
------------
Total Drugs 65,821,423
------------
Foods/Beverages (5.15%)
Anheuser-Busch Companies, Inc. 116,525 8,877,748
Canandaigua Brands, Inc.* 132,775 6,688,541
Corn Products International, Inc. 149,125 3,569,680
The Earthgrains Company 142,700 3,166,156
PepsiCo, Inc. 367,110 14,386,123
The Quaker Oats Company 126,700 7,926,669
Smithfield Foods, Inc.* 101,500 2,302,781
------------
Total Foods/Beverages 46,917,698
------------
Food/Drug Retail (0.84%)
Albertson's Inc. 76,775 4,169,842
Rite Aid Corp. 140,925 3,523,125
------------
Total Food/Drug Retail 7,692,967
------------
Health Care (0.82%)
Guidant Corporation* 118,750 7,184,375
STERIS Corporation* 10,525 280,228
------------
Total Health Care 7,464,603
------------
Hospital Supplies (1.46%)
Baxter International Inc. 201,275 13,284,150
------------
Household Products/Cosmetics (2.93%)
Avon Products, Inc. 205,750 9,683,109
Blyth Industries, Inc. 174,550 4,123,744
Kimberly-Clark Corporation 101,300 4,856,069
The Procter & Gamble Company 81,950 8,025,978
------------
Total Household Products/Cosmetics 26,688,900
------------
Tobacco (0.77%)
Philip Morris Companies Inc. 199,000 7,002,313
------------
TOTAL CONSUMER STAPLES 182,481,582
------------
See Accompanying Notes to Financial Statements.
12
<PAGE>
ENERGY (6.10%)
Natural Gas Diversified (0.90%)
The Coastal Corporation 247,825 $ 8,178,225
------------
Oil Services (0.70%)
Halliburton Company 99,725 3,839,412
McDermott International, Incorporated 101,025 2,557,195
------------
Total Oil Services 6,396,607
------------
Oil/Integrated Domestic (2.36%)
Amerada Hess Corporation 164,925 8,297,789
USX-Marathon Group 478,675 13,163,562
------------
Total Oil/Integrated Domestic 21,461,351
------------
Oil/Integrated International (2.14%)
Mobil Corporation 195,150 17,173,200
Texaco Inc.* 40,850 2,318,238
------------
Total Oil/Integrated International 19,491,438
------------
TOTAL ENERGY 55,527,621
------------
FINANCIAL (17.06%)
Banks (5.07%)
BANK ONE CORPORATION 161,250 8,878,828
BankAmerica Corporation 87,672 6,191,835
First American Corporation 130,575 4,814,953
Fleet Financial Group, Inc. 134,550 5,062,444
PNC Bank Corp. 209,210 11,624,231
Summit Bancorp 118,875 4,636,125
U.S. Bancorp 146,700 4,996,969
------------
Total Banks 46,205,385
------------
Finance Companies (3.11%)
Associates First Capital Corporation 235,662 10,604,790
The FINOVA Group Inc. 67,825 3,518,422
Household International, Inc. 310,475 14,165,422
------------
Total Finance Companies 28,288,634
------------
Financial/Miscellaneous (1.38%)
Morgan Stanley Dean Witter & Co. 125,800 12,572,138
------------
Financial Services (3.32%)
American Express Company 76,775 9,021,062
Marsh & McLennan Companies, Inc. 285,874 21,208,277
------------
Total Financial Services 30,229,339
------------
Insurance (2.89%)
ACE Limited 89,700 $ 2,797,519
The Allstate Corporation 214,100 7,935,081
American International Group, Inc. 42,625 5,141,641
Hartford Life, Inc. Cl. A 82,650 4,545,750
Nationwide Financial Services, Inc. 139,380 5,853,960
------------
Total Insurance 26,273,951
------------
Savings and Loan (1.29%)
Astoria Financial Corporation 42,100 2,105,000
Bank United Corp. Cl. A 80,625 3,295,547
Golden State Bancorp Inc. Warrants* 204,925 992,605
Washington Mutual, Inc. 130,825 5,347,472
------------
Total Savings and Loan 11,740,624
------------
TOTAL FINANCIAL 155,310,071
------------
TECHNOLOGY (20.81%)
Computer Peripherals (0.75%)
American Power Conversion Corporation* 79,410 2,144,070
EMC Corporation* 36,350 4,643,712
------------
Total Computer Peripherals 6,787,782
------------
Computer Software/Services (8.29%)
America Online, Inc.* 158,700 23,170,200
Cadence Design Systems, Inc.* 175,825 4,527,494
Microsoft Corporation* 450,510 40,376,959
Novell, Inc.* 164,750 4,149,641
Symantec Corporation* 193,425 3,276,136
------------
Total Computer Software/Services 75,500,430
------------
Computer Systems (4.08%)
Hewlett-Packard Company 133,925 9,081,789
International Business Machines Corporation 90,145 15,978,201
Sun Microsystems, Inc.* 96,550 12,074,784
------------
Total Computer Systems 37,134,774
------------
Computer Technology (0.88%)
Computer Sciences Corporation* 145,075 8,006,327
------------
Electronic Systems (0.01%)
Symbol Technologies, Inc.* 2,325 104,625
------------
Networking/Communications Equipment (5.05%)
Ascend Communications, Inc.* 67,225 5,625,892
Cisco Systems, Inc.* 121,862 13,351,505
See Accompanying Notes to Financial Statements.
13
<PAGE>
General Instrument Corporation* 77,750 $ 2,356,797
Nokia Corporation Cl. A, ADR* 39,175 6,101,506
Northern Telecom Ltd. 51,165 3,178,626
Tellabs, Inc.* 157,595 15,404,911
------------
Total Networking/Communications Equipment 46,019,237
------------
Semi-Conductors (1.75%)
Intel Corporation 134,225 15,955,997
------------
TOTAL TECHNOLOGY 189,509,172
------------
TRANSPORTATION (0.65%)
Airlines/Air Freight (0.28%)
Southwest Airlines Co. 83,868 2,537,007
------------
Trucking (0.37%)
USFreightways Corporation 101,250 3,328,594
------------
TOTAL TRANSPORTATION 5,865,601
------------
UTILITIES AND REITS (8.41%)
Communications (6.78%)
Bell Atlantic Corporation 339,245 17,534,726
Century Telephone Enterprises, Inc. 85,615 6,014,454
MCI WorldCom Incorporated* 247,550 21,923,647
SBC Communications Inc. 108,050 5,091,856
US WEST, Inc. 203,525 11,206,595
------------
Total Communications 61,771,278
------------
Electric/Natural Gas (1.44%)
Columbia Energy Group 99,125 5,179,281
New Century Energies, Inc. 171,350 5,836,609
PECO Energy Company 46,300 2,141,375
------------
Total Electric/Natural Gas 13,157,265
------------
Real Estate Investment Trusts (0.19%)
Innkeepers USA Trust 87,700 $ 816,706
Nationwide Health Properties, Inc. 45,875 871,625
------------
Total Real Estate Investment Trusts 1,688,331
------------
TOTAL UTILITIES AND REITS 76,616,874
------------
TOTAL COMMON STOCKS (cost $758,931,810) $904,171,847
------------
SHORT-TERM INVESTMENTS (0.61%) Par Value Value
- --------------------------------------------------------------------------------
Variable Rate Demand Notes** (0.61%)
Warner-Lambert Company
4.5700% 07-28-1999 $ 3,962,991 $ 3,962,991
Wisconsin Corporate Central Credit Union
4.6087% 07-13-1999 1,632,327 1,632,326
------------
TOTAL VARIABLE RATE DEMAND NOTES (cost $5,595,317) 5,595,317
------------
TOTAL SHORT-TERM INVESTMENTS (cost $5,595,317) $ 5,595,317
------------
TOTAL INVESTMENTS IN SECURITIES (99.91%)
(cost $764,527,127)*** $909,767,164
------------
OTHER ASSETS LESS LIABILITIES (0.09%) $ 820,282
------------
NET ASSETS (100.00%) $910,587,446
============
* 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 $770,370,457.
See Accompanying Notes to Financial Statements.
14
<PAGE>
BALANCED PORTFOLIO [LOGO]
MARCH 31, 1999
LONG-TERM DEBT SECURITIES (33.73%) Par Value Value
- --------------------------------------------------------------------------------
CORPORATE BONDS (20.05%)
FINANCE (18.03%)
Automobile (1.76%)
Ford Motor Credit Company
6.375% 04-15-2000 $190,000 $191,960
7.500% 11-15-1999 25,000 25,327
General Motors Acceptance Corporation
5.500% 12-15-2001 500,000 493,996
5.750% 11-10-2003 1,000,000 991,971
------------
Total Automobile 1,703,254
------------
Banks (2.33%)
Citicorp
7.125% 06-01-2003 1,000,000 1,037,494
NationsBank Corporation
6.125% 07-15-2004 1,200,000 1,211,814
------------
Total Banks 2,249,308
------------
Consumers (3.81%)
American General Finance Corporation
6.875% 01-15-2000 50,000 50,546
Avco Financial Services, Inc. Senior Note
6.000% 08-15-2002 800,000 801,038
Beneficial Corporation Medium Term Note
6.350% 12-03-2001 700,000 702,873
8.050% 04-02-1999 450,000 450,000
Sears Roebuck Acceptance Corp. Medium Term Note
7.110% 06-19-2001 650,000 667,075
Sears, Roebuck and Co.
6.670% 07-07-2003 1,000,000 1,015,139
------------
Total Consumers 3,686,671
------------
Diversified (3.31%)
Associates Corporation of North America Senior Note
5.750% 11-01-2003 1,000,000 991,678
6.000% 06-15-2000 25,000 25,149
7.500% 04-15-2002 100,000 104,993
Associates Corporation of North America
6.375% 06-01-2000 $ 75,000 $ 75,757
Associates Corporation of North America, Medium Term Note
6.840% 07-03-2001 700,000 718,021
Commercial Credit Company
6.500% 06-01-2005 1,000,000 1,009,126
6.875% 05-01-2002 200,000 205,302
General Electric Capital Corporation
6.660% 05-01-2018 75,000 75,860
------------
Total Diversified 3,205,886
------------
Insurance (2.63%)
Hartford Life, Inc.
6.900% 06-15-2004 1,000,000 1,029,476
ReliaStar Financial Corp.
6.500% 11-15-2008 1,000,000 1,008,250
Travelers Property Casualty Corp.
6.750% 04-15-2001 500,000 507,450
------------
Total Insurance 2,545,176
------------
Leasing Companies (0.99%)
International Lease Finance Corporation Medium Term Note
6.250% 10-15-2000 500,000 505,326
6.340% 02-01-2000 450,000 455,670
------------
Total Leasing Companies 960,996
------------
Other (3.20%)
Dean Witter, Discover & Co.
6.250% 03-15-2000 30,000 30,198
6.750% 08-15-2000 200,000 203,034
Merrill Lynch & Co., Inc. Medium Term Note
5.880% 01-15-2004 500,000 497,341
Merrill Lynch & Co., Inc.
6.000% 02-12-2003 500,000 501,807
7.375% 08-17-2002 30,000 31,347
Morgan Stanley Group Inc.
5.750% 02-15-2001 500,000 499,214
6.125% 10-01-2003 215,000 216,920
Salomon Smith Barney Holdings Inc.
6.625% 07-01-2002 1,100,000 1,120,407
Total Other 3,100,268
------------
TOTAL FINANCE 17,451,559
------------
See Accompanying Notes to Financial Statements.
15
<PAGE>
INDUSTRIAL (2.02%)
Energy and Related Goods and Services (0.43%)
Texaco Capital Inc. Medium Term Note
7.250% 08-01-2002 $400,000 $416,649
------------
Medical and Related Goods and Services (0.05%)
SmithKline Beecham Corporation Medium Term Note
6.625% 10-01-2005 50,000 51,042
------------
Telephone (1.54%)
AT&T Corp.
5.625% 03-15-2004 1,500,000 1,494,531
------------
TOTAL INDUSTRIAL 1,962,222
------------
TOTAL CORPORATE BONDS 19,413,781
------------
U.S. GOVERNMENT SECURITIES (12.59%)
U.S. TREASURY NOTES (12.59%)
7.125% 02-29-2000 400,000 408,000
6.750% 04-30-2000 1,000,000 1,019,063
5.750% 10-31-2000 700,000 707,657
7.750% 02-15-2001 970,000 1,016,985
6.625% 03-31-2002 400,000 423,125
6.375% 08-15-2002 2,500,000 2,591,408
6.250% 02-15-2003 425,000 440,539
5.750% 08-15-2003 700,000 714,219
7.000% 07-15-2006 2,500,000 2,735,157
6.500% 10-15-2006 2,000,000 2,131,876
------------
TOTAL U.S. TREASURY NOTES 12,188,029
------------
FOREIGN BONDS (U.S. DOLLAR DENOMINATED) (1.10%)
Hydro-Quebec
7.375% 02-01-2003 350,000 369,110
Province of Ontario
7.375% 01-27-2003 650,000 692,601
------------
TOTAL FOREIGN BONDS 1,061,711
------------
TOTAL LONG-TERM DEBT SECURITIES (cost $32,513,544) $ 32,663,521
------------
COMMON STOCKS (64.71%) Shares Value
- --------------------------------------------------------------------------------
BASIC INDUSTRY (2.76%)
Chemical/Major (0.39%)
E.I. du Pont de Nemours and Company 6,400 $ 371,600
------------
Chemical/Specialty (1.10%)
The BFGoodrich Company 31,125 1,067,977
------------
Metals (0.23%)
Alcoa Inc. 5,450 224,472
------------
Paper and Forest Products (1.04%)
Georgia-Pacific Corporation* 3,800 282,150
The Mead Corporation 23,475 721,856
------------
Total Paper and Forest Products 1,004,006
------------
TOTAL BASIC INDUSTRY 2,668,055
------------
CAPITAL GOODS (4.72%)
Aerospace/Industrial (0.80%)
Ingersoll-Rand Company 12,000 595,500
Precision Castparts Corp. 4,500 181,125
------------
Total Aerospace/Industrial 776,625
------------
Diversified/Manufacturing (2.14%)
Pentair Inc. 5,050 170,437
Tyco International Ltd. 20,200 1,449,350
United Technologies Corporation 3,350 453,716
------------
Total Diversified/Manufacturing 2,073,503
------------
Miscellaneous (0.43%)
Johnson Controls, Inc. 6,725 419,472
------------
Multi-Sector Companies (0.36%)
Crane Co. 14,400 348,300
------------
Pollution Control (0.99%)
Waste Management, Inc. 21,550 956,281
------------
TOTAL CAPITAL GOODS 4,574,181
------------
CONGLOMERATES (1.58%)
General Electric Company 13,875 1,534,922
------------
CONSUMER CYCLICAL (5.50%)
Appliances (0.52%)
Maytag Corporation 8,325 502,622
------------
See Accompanying Notes to Financial Statements.
16
<PAGE>
Autos and Auto Parts (0.70%)
Arvin Industries, Inc. 3,575 $ 120,433
Ford Motor Company 9,800 556,150
------------
Total Autos and Auto Parts 676,583
------------
Building Materials (0.41%)
Masco Corporation 14,000 395,500
------------
Consumer Cyclical/Miscellaneous (0.51%)
Action Performance Companies, Inc.* 7,750 233,469
Mohawk Industries, Inc.* 8,800 264,000
------------
Total Consumer Cyclical/Miscellaneous 497,469
------------
Office Furniture (0.15%)
HON INDUSTRIES Inc. 6,875 150,820
------------
Retail (3.21%)
Dayton Hudson Corporation 12,700 846,137
The Home Depot, Inc. 15,675 975,769
The Men's Wearhouse, Inc.* 14,850 428,794
Saks Holdings, Inc.* 13,050 339,300
Staples, Inc.* 10,650 350,119
Zale Corporation* 4,800 164,100
------------
Total Retail 3,104,219
------------
TOTAL CONSUMER CYCLICAL 5,327,213
------------
CONSUMER SERVICES (3.00%)
Cable Television (1.59%)
Time Warner, Inc. 11,575 822,549
Viacom Inc. Cl. B* 8,575 719,764
------------
Total Cable Television 1,542,313
------------
Education (0.15%)
Sylvan Learning Systems, Inc.* 5,462 149,522
------------
Health Care Services (0.92%)
HCR Manor Care, Inc.* 18,325 418,039
Henry Schein, Inc.* 4,600 116,150
Total Renal Care Holdings Inc.* 10,125 111,375
United HealthCare Corporation 4,650 244,706
------------
Total Health Care Services 890,270
------------
Publishing/Newspapers (0.34%)
The New York Times Company 11,475 327,038
------------
Restaurants (0.00%)
Outback Steakhouse, Inc.* 1 16
------------
TOTAL CONSUMER SERVICES 2,909,159
------------
CONSUMER STAPLES (13.18%)
Biotechnology (0.55%)
Chiron Corporation* 17,275 $ 378,970
Genzyme Corporation* 3,025 152,574
------------
Total Biotechnology 531,544
------------
Drugs (4.83%)
American Home Products Corporation 9,900 645,975
Bristol-Myers Squibb Company 6,850 440,541
Forest Laboratories, Inc.* 7,700 434,087
Johnson & Johnson* 5,350 501,228
Merck & Co, Inc. 25,050 2,008,697
Pharmacia & Upjohn, Inc.* 7,625 475,609
Teva Pharmaceuticals Industries Limited ADR 3,650 173,147
------------
Total Drugs 4,679,284
------------
Foods/Beverages (3.16%)
Anheuser-Busch Companies, Inc. 6,625 504,742
Canandaigua Brands, Inc.* 8,950 450,856
Corn Products International, Inc. 9,650 230,997
The Earthgrains Company 11,375 252,383
PepsiCo, Inc. 25,950 1,016,916
The Quaker Oats Company 7,500 469,219
Smithfield Foods, Inc.* 6,025 136,692
------------
Total Foods/Beverages 3,061,805
------------
Food/Drug Retail (0.75%)
Albertson's Inc. 8,900 483,381
Rite Aid Corp. 9,475 236,875
------------
Total Food/Drug Retail 720,256
------------
Health Care (0.52%)
Guidant Corporation* 8,350 505,175
------------
Hospital Supplies (0.94%)
Baxter International Inc. 13,825 912,450
------------
Household Products/Cosmetics (1.92%)
Avon Products, Inc. 13,125 617,695
Blyth Industries, Inc. 11,975 282,910
Kimberly-Clark Corporation 8,350 400,278
The Procter & Gamble Company 5,675 555,795
------------
Total Household Products/Cosmetics 1,856,678
------------
Tobacco (0.51%)
Philip Morris Companies Inc. 14,000 492,625
------------
TOTAL CONSUMER STAPLES 12,759,817
------------
See Accompanying Notes to Financial Statements.
17
<PAGE>
ENERGY (3.97%)
Natural Gas Diversified (0.60%)
The Coastal Corporation 17,750 $ 585,750
------------
Oil/Integrated Domestic (1.54%)
Amerada Hess Corporation 11,175 562,242
USX-Marathon Group 33,650 925,375
------------
Total Oil/Integrated Domestic 1,487,617
------------
Oil/Integrated International (1.42%)
Mobil Corporation 13,775 1,212,200
Texaco Inc.* 2,850 161,738
------------
Total Oil/Integrated International 1,373,938
------------
Oil Services (0.41%)
Halliburton Company* 5,700 219,450
McDermott International, Incorporated 6,900 174,656
------------
Total Oil Services 394,106
------------
TOTAL ENERGY 3,841,411
------------
FINANCIAL (10.87%)
Banks (3.39%)
BANK ONE CORPORATION 11,600 638,725
BankAmerica Corporation 6,015 424,809
First American Corporation 11,000 405,625
Fleet Financial Group, Inc. 6,450 242,681
PNC Bank Corp. 13,500 750,094
Summit Bancorp 12,175 474,825
U.S. Bancorp 10,100 344,031
------------
Total Banks 3,280,790
------------
Finance Companies (2.06%)
Associates First Capital Corporation 16,348 735,660
The FINOVA Group Inc. 4,950 256,781
Household International, Inc. 21,950 1,001,469
------------
Total Finance Companies 1,993,910
------------
Financial/Miscellaneous (0.47%)
Morgan Stanley Dean Witter & Co. 4,550 454,715
------------
Financial Services (2.24%)
American Express Company 5,350 628,625
Marsh & McLennan Companies, Inc. 20,775 1,541,245
------------
Total Financial Services 2,169,870
------------
Insurance (1.81%)
ACE Limited 6,025 $ 187,905
The Allstate Corporation 13,500 500,344
American International Group, Inc. 3,125 376,953
Hartford Life, Inc. Cl. A 3,900 214,500
Nationwide Financial Services, Inc. 11,325 475,650
------------
Total Insurance 1,755,352
------------
Savings and Loan (0.90%)
Astoria Financial Corporation 3,375 168,750
Bank United Corp. Cl. A 6,275 256,491
Golden State Bancorp Inc. Warrants* 15,900 77,016
Washington Mutual, Inc. 9,000 367,875
------------
Total Savings and Loan 870,132
------------
TOTAL FINANCIAL 10,524,769
------------
TECHNOLOGY (13.35%)
Computer Peripherals (0.55%)
American Power Conversion Corporation* 5,400 145,800
EMC Corporation* 3,050 389,638
------------
Total Computer Peripherals 535,438
------------
Computer Software/Services (5.39%)
America Online, Inc.* 10,575 1,543,950
Cadence Design Systems, Inc.* 13,825 355,994
Microsoft Corporation* 32,700 2,930,737
Novell, Inc.* 8,900 224,169
Symantec Corporation* 9,800 165,988
------------
Total Computer Software/Services 5,220,838
------------
Computer Systems (2.73%)
Hewlett-Packard Company 9,700 657,781
International Business Machines Corporation 6,250 1,107,813
Sun Microsystems, Inc.* 6,975 872,311
------------
Total Computer Systems 2,637,905
------------
Computer Technology (0.57%)
Computer Sciences Corporation* 10,075 556,014
------------
Networking/Communications Equipment (2.96%)
Ascend Communications, Inc.* 3,650 305,459
Cisco Systems, Inc.* 8,237 902,466
General Instrument Corporation* 800 24,250
18
<PAGE>
Nokia Corporation Cl. A, ADR* 2,700 $ 420,525
Northern Telecom Inc. 3,475 215,884
Tellabs, Inc.* 10,175 994,606
------------
Total Networking/Communications Equipment 2,863,190
------------
Semi-Conductors (1.15%)
Intel Corporation 9,400 1,117,425
------------
TOTAL TECHNOLOGY 12,930,810
------------
TRANSPORTATION (0.58%)
Airlines/Air Freight (0.21%)
Southwest Airlines Co. 6,700 202,675
------------
Trucking (0.37%)
USFreightways Corporation 11,025 362,447
------------
Total Transportation 565,122
------------
UTILITIES AND REITS (5.20%)
Communications (4.29%)
Bell Atlantic Corporation 22,250 1,150,047
Century Telephone Enterprises, Inc. 5,725 402,181
MCI WorldCom Incorporated* 17,900 1,585,269
SBC Communications Inc. 6,625 312,203
US WEST, Inc. 12,800 704,800
------------
Total Communications 4,154,500
------------
Electric/Natural Gas (0.91%)
Columbia Energy Group 7,050 368,362
New Century Energies, Inc. 12,075 411,305
PECO Energy Company 2,100 97,125
------------
Total Electric/Natural Gas 876,792
------------
TOTAL UTILITIES AND REITS 5,031,292
------------
TOTAL COMMON STOCKS (cost $52,257,333) $ 62,666,751
------------
SHORT-TERM INVESTMENTS (1.18%) Par Value Value
- --------------------------------------------------------------------------------
Variable Rate Demand Notes** (1.18%)
General Mills, Inc.
4.5438% 11-08-1999 $ 1,143,847 $ 1,143,847
------------
TOTAL VARIABLE RATE DEMAND NOTES (cost $1,143,847) 1,143,847
------------
TOTAL SHORT-TERM INVESTMENTS (cost $1,143,847) $ 1,143,847
------------
TOTAL INVESTMENTS IN SECURITIES (99.62%)
(cost $85,914,724)*** $ 96,474,119
------------
OTHER ASSETS LESS LIABILITIES (0.38%) $ 369,760
------------
NET ASSETS (100.00%) $ 96,843,879
============
* 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 $86,297,410.
19
<PAGE>
INTERMEDIATE FIXED INCOME PORTFOLIO [LOGO]
MARCH 31, 1999
LONG-TERM DEBT SECURITIES (92.24%) Par Value Value
CORPORATE BONDS (39.94%)
FINANCE (29.06%)
Automobile (2.99%)
Ford Motor Credit Company
6.375% 04-15-2000 $75,000 $75,774
7.500% 11-15-1999 25,000 25,327
General Motors Acceptance Corporation, Medium Term Note
6.500% 12-06-2004 500,000 509,040
------------
Total Automobile 610,141
------------
Banks (3.99%)
Bank One, N.A (3.99%)
7.375% 12-01-2002 780,000 814,433
------------
Consumer (5.42%)
Beneficial Corporation, Medium Term Note
6.510% 12-03-2003 500,000 502,633
Household Finance Corporation, Medium Term Note
7.000% 09-18-2001 600,000 603,761
------------
Total Consumer 1,106,394
------------
Credit Card (0.49%)
Discover Credit Corp
8.350% 05-06-1999 100,000 100,232
------------
Diversified (4.63%)
American General Finance Corporation
6.875% 01-15-2000 25,000 25,273
Associates Corporation of North America
7.500% 05-15-1999 100,000 100,254
Associates Corporation of North America,
Medium Term Note
6.375% 06-01-2000 25,000 25,252
Associates Corporation of North America,
Medium Term Senior Note
6.840% 07-03-2000 300,000 307,723
Commercial Credit Company
6.500% 06-01-2005 $300,000 $ 302,738
General Electric Capital Corporation
6.660% 05-01-2018 180,000 182,065
------------
Total Diversified 943,305
------------
Leasing Companies (0.99%)
International Lease Finance Corporation,
Medium Term Note
6.250% 10-15-2000 200,000 202,130
Other (10.55%)
Merrill Lynch & Co., Inc., Medium Term Note
5.880% 01-15-2004 375,000 373,006
Dean Witter, Discover & Co.
6.250% 03-15-2000 40,000 40,264
Morgan Stanley Dean Witter & Co.
5.625% 01-20-2004 500,000 494,073
Morgan Stanley Group Inc.
6.125% 10-01-2003 200,000 201,786
6.375% 12-05-2003 25,000 25,412
Salomon Smith Barney Holdings Inc.
6.625% 07-01-2002 1,000,000 1,018,552
------------
Total Other 2,153,093
------------
TOTAL FINANCE 5,929,728
------------
INDUSTRIAL (10.88%)
Consumer (4.97%)
Sears, Roebuck and Co.
6.670% 07-07-2003 1,000,000 1,015,139
------------
Retail/Apparel and Shoes (2.00%)
Nordstrom Credit, Inc., Medium Term Note
7.890% 02-14-2000 400,000 407,488
------------
Telephone (3.91%)
AT&T Corp
5.625% 03-15-2004 800,000 797,083
------------
TOTAL INDUSTRIAL 2,219,710
------------
TOTAL CORPORATE BONDS 8,149,438
------------
See Accompanying Notes to Financial Statements.
20
<PAGE>
U.S. GOVERNMENT AND AGENCY OBLIGATIONS (50.40%)
U.S. TREASURY OBLIGATIONS (50.40%)
Certificate of Accrual on Treasury Securities
0.000% 11-15-1999 $100,000 $ 97,136
------------
U.S. Treasury Notes
7.500% 11-15-2001 600,000 634,688
6.625% 03-31-2002 1,000,000 1,040,625
6.375% 08-15-2002 1,200,000 1,243,876
5.750% 08-15-2003 1,500,000 1,530,469
7.250% 05-15-2004 1,000,000 1,089,688
7.000% 07-15-2006 2,300,000 2,516,345
6.500% 10-15-2006 2,000,000 2,131,876
------------
Total U.S. Treasury Notes 10,187,567
------------
TOTAL U.S. TREASURY OBLIGATIONS 10,284,703
------------
TOTAL U.S. GOVERNMENT AND AGENCY OBLIGATIONS $ 10,284,703
------------
FOREIGN BONDS (U.S. DOLLAR DENOMINATED) (1.90%)
HydroQuebec
7.375% 02-01-2003 125,000 131,825
Province of Ontario
7.375% 01-27-2003 240,000 255,730
------------
TOTAL FOREIGN BONDS 387,555
------------
TOTAL LONG-TERM DEBT SECURITIES (cost $18,717,255) $ 18,821,696
------------
SHORT-TERM INVESTMENTS (6.72%) Par Value Value
- --------------------------------------------------------------------------------
Variable Rate Demand Notes** (6.72%)
General Mills, Inc.
4.544% 11-08-1999 $171,499 $ 171,499
Pitney Bowes Inc.
4.544% 08-03-1999 478,371 478,371
Wisconsin Corporate Central Credit Union
4.609% 07-13-1999 721,438 721,438
------------
TOTAL VARIABLE RATE DEMAND NOTES (cost $1,371,308) 1,371,308
------------
TOTAL SHORT-TERM INVESTMENTS (cost $1,371,308) $ 1,371,308
------------
TOTAL INVESTMENTS IN SECURITIES (98.96%)
(cost $20,088,563)*** $ 20,193,004
------------
OTHER ASSETS LESS LIABILITIES (1.04%) $ 212,148
------------
NET ASSETS (100.00%) $ 20,405,152
============
** The variable-rate securities are subject to a demand feature which reduces
the remaining maturity.
*** Aggregate cost for federal income tax purposes is $20,088,563.
See Accompanying Notes to Financial Statements.
21
<PAGE>
STATEMENTS OF ASSETS AND LIABILITIES
RAINIER INVESTMENT MANAGEMENT MUTUAL FUNDS
MARCH 31, 1999
<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 $437,784,062, $764,527,127,
$85,914,724 and $20,088,563 respectively) $ 428,466,643 $909,767,164 $ 96,474,119 $20,193,004
Cash -- 10,487 -- --
Receivables
Investment securities sold 6,719,070 3,593,838 275,245 --
Fund shares sold 181,870 153,777 56,497 --
Dividends and interest 243,928 899,360 657,345 334,741
Net deferred organization costs 1,586 1,586 1,586 1,586
Prepaid expenses 28,925 66,933 24,305 277
------------- ------------ ------------ -----------
Total assets 435,642,022 914,493,145 97,489,097 20,529,608
------------- ------------ ------------ -----------
LIABILITIES
Cash overdraft due to custodian -- -- 8,099 --
Payables for investment securities
purchased 5,023,160 2,347,011 60,037 --
Fund shares redeemed 92,944 678,973 2,003 --
Distributions to shareholders -- -- 469,741 99,992
Due to Investment Advisor (Note 3) 421,795 767,781 72,138 8,397
Deferred Trustees Compensation (Note 5) 1,823 3,038 608 608
Other accrued expenses 74,750 108,896 32,592 15,459
------------- ------------ ------------ -----------
Total liabilities 5,614,472 3,905,699 645,218 124,456
------------- ------------ ------------ -----------
Net assets $ 430,027,550 $910,587,446 $ 96,843,879 $20,405,152
============= ============ ============ ===========
COMPOSITION OF NET ASSETS
Paid-in capital $ 467,970,423 $750,345,981 $ 84,985,444 $20,303,828
Accumulated undistributed net investment
income (loss) 5,158 95,100 (8,273) (3,836)
Accumulated undistributed net realized
gain (loss) on investments (28,630,612) 14,906,328 1,307,313 719
Net unrealized appreciation (depreciation)
on investments (9,317,419) 145,240,037 10,559,395 104,441
------------- ------------ ------------ -----------
Net assets $ 430,027,550 $910,587,446 $ 96,843,879 $20,405,152
============= ============ ============ ===========
Number of shares issued and outstanding
(unlimited shares authorized) no par value 21,706,014 35,930,533 5,799,268 1,666,530
============= ============ ============ ===========
Net asset value per share $ 19.81 $ 25.34 $ 16.70 $ 12.24
============= ============ ============ ===========
</TABLE>
See Accompanying Notes to Financial Statements.
22
<PAGE>
STATEMENTS OF OPERATIONS
RAINIER INVESTMENT MANAGEMENT MUTUAL FUNDS
FOR THE FISCAL YEAR ENDING MARCH 31, 1999
<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 $ 5,974,359 $10,324,729 $ 719,665 $ --
Interest income 323,397 607,293 1,797,695 1,106,051
------------- ----------- ----------- -----------
Total income 6,297,756 10,932,022 2,517,360 1,106,051
------------- ----------- ----------- -----------
Expenses
Investment advisory fees (Note 3) 4,406,813 6,039,183 592,133 92,971
Custodian fees 147,621 214,778 44,892 3,832
Administration fees (Note 3) 245,534 331,567 84,586 18,598
Fund accounting fees 60,189 67,319 34,550 26,332
Transfer agent fees 41,556 48,763 15,199 5,981
Legal fees 8,359 14,945 2,211 551
Distribution fees (Note 3) 1,296,121 2,013,061 211,476 18,598
Insurance 5,847 8,052 854 245
Audit fees 24,764 38,349 7,242 7,219
Miscellaneous fees 21,394 37,339 5,022 1,857
Reports to shareholders 71,871 69,186 13,510 4,000
Registration fees 158,510 204,929 12,567 4,001
Trustees fees 8,710 12,306 5,145 5,111
Amortization of deferred organization costs 4,249 4,249 4,249 4,249
------------- ----------- ----------- -----------
Total expenses 6,501,538 9,104,026 1,033,636 193,545
Less: expenses reimbursed/waived (Note 3) -- -- (27,004) (90,188)
------------- ----------- ----------- -----------
Net expenses 6,501,538 9,104,026 1,006,632 103,357
------------- ----------- ----------- -----------
Net investment income (loss) (203,782) 1,827,996 1,510,728 1,002,694
------------- ----------- ----------- -----------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Net realized gain (loss) on investments sold (28,570,141) 31,449,581 4,358,246 422,596
Net change in unrealized appreciation
(depreciation) on investments (79,168,758) 37,171,114 2,497,259 (301,373)
------------- ----------- ----------- -----------
Net gain (loss) on investments (107,738,899) 68,620,695 6,855,505 121,223
------------- ----------- ----------- -----------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS ($107,942,681) $70,448,691 $ 8,366,233 $ 1,123,917
============= =========== =========== ===========
</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
03/31/99 03/31/98 03/31/99 03/31/98
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations
Net investment income (loss) ($ 203,782) ($ 183,051) $ 1,827,996 $ 1,616,874
Net realized gain (loss) on investments
sold (28,570,141) 41,050,081 31,449,581 66,867,764
Net change in unrealized appreciation
(depreciation) on investments (79,168,758) 69,643,055 37,171,114 104,559,153
------------- ------------- ------------- -------------
Increase (decrease) in net assets
resulting from operations (107,942,681) 110,510,085 70,448,691 173,043,791
------------- ------------- ------------- -------------
Distributions to shareholders
From net investment income (42,403) (13,604) (2,181,041) (1,469,662)
From net realized gain on investments
sold (19,938,706) (31,425,265) (42,700,545) (62,718,809)
------------- ------------- ------------- -------------
Total distributions (19,981,109) (31,438,869) (44,881,586) (64,188,471)
------------- ------------- ------------- -------------
Capital share transactions
Proceeds from shares sold 278,151,655 340,494,460 408,690,850 364,293,961
Net asset value of shares issued on
reinvestment of distributions 19,640,243 30,892,800 43,346,167 61,029,604
Cost of shares redeemed (255,522,649) (71,117,233) (265,681,232) (96,143,437)
------------- ------------- ------------- -------------
Net increase from capital share
transactions 42,269,249 300,270,027 186,355,785 329,180,128
------------- ------------- ------------- -------------
Net increase (decrease) in net assets (85,654,541) 379,341,243 211,922,890 438,035,448
NET ASSETS
Beginning of period 515,682,091 136,340,848 698,664,556 260,629,108
------------- ------------- ------------- -------------
End of period $ 430,027,550 $ 515,682,091 $ 910,587,446 $ 698,664,556
============= ============= ============= =============
CHANGE IN SHARES OUTSTANDING
Shares sold 12,280,568 15,058,868 17,068,322 15,990,331
Shares issued on reinvestment of
distributions 967,976 1,419,060 1,878,898 2,845,203
Shares redeemed (12,232,763) (3,138,581) (11,335,251) (4,261,129)
------------- ------------- ------------- -------------
Net increase in shares outstanding 1,015,781 13,339,347 7,611,969 14,574,405
============= ============= ============= =============
</TABLE>
See Accompanying Notes to Financial Statements.
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
03/31/99 03/31/98 03/31/99 03/31/98
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations
Net investment income (loss) $ 1,510,728 $ 1,110,474 $ 1,002,694 $ 1,174,187
Net realized gain (loss) on investments sold 4,358,246 6,644,465 422,596 12,053
Net change in unrealized appreciation
(depreciation) on investments 2,497,259 8,026,713 (301,373) 615,125
------------ ------------ ------------ ------------
Increase (decrease) in net assets
resulting from operations 8,366,233 15,781,652 1,123,917 1,801,365
------------ ------------ ------------ ------------
Distributions to shareholders
From net investment income (1,518,814) (1,106,230) (1,002,770) (1,165,960)
From net realized gain on investments sold (5,222,707) (7,227,079) (450,583) --
------------ ------------ ------------ ------------
Total distributions (6,741,521) (8,333,309) (1,453,353) (1,165,960)
------------ ------------ ------------ ------------
Capital share transactions
Proceeds from shares sold 36,319,404 24,528,609 8,934,910 4,057,430
Net asset value of shares issued on
reinvestment of distributions 6,517,285 8,173,577 1,450,801 1,159,961
Cost of shares redeemed (20,341,670) (8,056,659) (9,612,188) (5,195,120)
------------ ------------ ------------ ------------
Net increase from capital share transactions 22,495,019 24,645,527 773,523 22,271
------------ ------------ ------------ ------------
Net increase (decrease) in net assets 24,119,731 32,093,870 444,087 657,676
NET ASSETS
Beginning of period 72,724,148 40,630,278 19,961,065 19,303,389
------------ ------------ ------------ ------------
End of period $ 96,843,879 $ 72,724,148 $ 20,405,152 $ 19,961,065
============ ============ ============ ============
CHANGE IN SHARES OUTSTANDING
Shares sold 2,295,716 1,535,463 705,059 325,627
Shares issued on reinvestment of distributions 412,053 533,121 115,787 94,075
Shares redeemed (1,241,975) (487,729) (758,029) (414,956)
------------ ------------ ------------ ------------
Net increase in shares outstanding 1,465,794 1,580,855 62,817 4,746
============ ============ ============ ============
</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 For the fiscal From 05/10/94
year ending year ending year ending year ending through
03/31/99 03/31/98 03/31/97 03/31/96 03/31/95*
-------------- -------------- -------------- -------------- -------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 24.92 $ 18.54 $ 17.89 $ 13.89 $ 12.00
-------- -------- -------- -------- -------
Income from investment operations
Net investment income (loss) (0.01) (0.01) 0.05 0.05 0.10
Net realized and unrealized gain
(loss) on investments (4.24) 8.71 2.43 5.17 2.18
-------- -------- -------- -------- -------
Total from investment operations (4.25) 8.70 2.48 5.22 2.28
-------- -------- -------- -------- -------
Distributions
From net investment income (0.01) (0.01) (0.06) (0.06) (0.07)
From net realized gains (0.85)1 (2.31) (1.77) (1.16) (0.32)
-------- -------- -------- -------- -------
Total distributions (0.86) (2.32) (1.83) (1.22) (0.39)
-------- -------- -------- -------- -------
Net asset value, end of period $ 19.81 $ 24.92 $ 18.54 $ 17.89 $ 13.89
======== ======== ======== ======== =======
Total return (17.18%) 48.68% 14.57% 38.38% 19.38%+
======== ======== ======== ======== =======
Net assets at end of period (in 000's) $430,028 $515,682 $136,341 $ 79,495 $10,120
======== ======== ======== ======== =======
Ratio of expenses to average net assets
Before expense reimbursement/recoupment 1.25% 1.26% 1.33% 1.46% 2.93%++
After expense reimbursement/recoupment n/a n/a 1.40% 1.48% 1.48%++
====== ====== ====== ====== ======
Ratio of net investment income
(loss) to average net assets,
after expense reimbursement/recoupment (0.04%) (0.06%) 0.27% 0.66% 1.40%++
====== ====== ====== ====== ======
Portfolio turnover rate 143.70% 107.17% 130.54% 151.37% 152.21%
====== ====== ====== ====== ======
</TABLE>
26
<PAGE>
<TABLE>
<CAPTION>
Core Equity Portfolio
-----------------------------------------------------------------------------
For the fiscal For the fiscal For the fiscal For the fiscal From 05/10/94
year ending year ending year ending year ending through
03/31/99 03/31/98 03/31/97 03/31/96 03/31/95*
-------------- -------------- -------------- -------------- -------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 24.67 $ 18.97 $ 17.53 $ 13.84 $ 12.00
--------- -------- -------- -------- -------
Income from investment operations
Net investment income (loss) 0.05 0.07 0.13 0.11 0.11
Net realized and unrealized gain
(loss) on investments 1.95 8.86 2.86 5.13 2.00
--------- -------- -------- -------- -------
Total from investment operations 2.00 8.93 2.99 5.24 2.11
--------- -------- -------- -------- -------
Distributions
From net investment income (0.07) (0.07) (0.13) (0.11) (0.07)
From net realized gains (1.26)2 (3.16) (1.42) (1.44) (0.20)
--------- -------- -------- -------- -------
Total distributions (1.33) (3.23) (1.55) (1.55) (0.27)
--------- -------- -------- -------- -------
Net asset value, end of period $ 25.34 $ 24.67 $ 18.97 $ 17.53 $ 13.84
======== ======== ======== ======== =======
Total return 8.64% 49.64% 17.88% 38.64% 17.87%+
======== ======== ======== ======== =======
Net assets at end of period (in 000's) $910,587 $698,665 $260,629 $107,665 $20,430
======== ======== ======== ======== =======
Ratio of expenses to average net assets
Before expense reimbursement/recoupment 1.13% 1.14% 1.18% 1.30% 1.86%++
After expense reimbursement/recoupment n/a n/a 1.22% 1.29% 1.29%++
======== ======== ======== ======== =======
Ratio of net investment income (loss)
to average net assets, after expense
reimbursement/recoupment 0.23% 0.37% 0.74% 1.07% 1.25%++
======== ======== ======== ======== =======
Portfolio turnover rate 132.91% 119.88% 146.12% 138.02% 133.18%
======== ======== ======== ======== =======
</TABLE>
* Commencement of operations 05/10/94.
+ Not Annualized.
++ Annualized.
1 Of this amount, the fund designates $0.17 as a capital gain dividend per
IRC Section 852(b)(3).
2 Of this amount, the fund designates $0.68 as a capital gain dividend per
IRC Section 852(b)(3).
See Accompanying Notes to Financial Statements.
27
<PAGE>
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 For the fiscal From 05/10/94
year ending year ending year ending year ending through
03/31/99 03/31/98 03/31/97 03/31/96 03/31/95*
-------------- -------------- -------------- -------------- -------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 16.78 $ 14.76 $ 14.53 $ 12.96 $ 12.00
-------- -------- -------- -------- -------
Income from investment operations
Net investment income (loss) 0.28 0.35 0.37 0.38 0.30
Net realized and unrealized gain
(loss) on investments 0.85 4.46 1.28 2.82 1.13
-------- -------- -------- -------- -------
Total from investment operations 1.13 4.81 1.65 3.20 1.43
-------- -------- -------- -------- -------
Distributions
From net investment income (0.28) (0.35) (0.37) (0.37) (0.31)
From net realized gains (0.93)1 (2.44) (1.05) (1.26) (0.16)
-------- -------- -------- -------- -------
Total distributions (1.21) (2.79) (1.42) (1.63) (0.47)
-------- -------- -------- -------- -------
Net asset value, end of period $ 16.70 $ 16.78 $ 14.76 $ 14.53 $ 12.96
======== ======== ======== ======== =======
Total return 7.22% 34.57% 11.83% 25.58% 12.23%+
======== ======== ======== ======== =======
Net assets at end of period (in 000Os) $ 96,844 $ 72,724 $ 40,630 $ 32,080 $13,724
======== ======== ======== ======== =======
Ratio of expenses to average net assets
Before expense reimbursement/recoupment 1.22% 1.28% 1.31% 1.50% 2.29%++
After expense reimbursement/recoupment 1.19% 1.19% 1.19% 1.19% 1.19%++
======== ======== ======== ======== =======
Ratio of net investment income (loss) to
average net assets, after expense
reimbursement/recoupment 1.78% 2.09% 2.50% 2.76% 3.04%++
======== ======== ======== ======== =======
Portfolio turnover rate 108.28% 102.98% 133.68% 114.85% 92.40%
======== ======== ======== ======== =======
</TABLE>
28
<PAGE>
<TABLE>
<CAPTION>
Intermediate Fixed Income Portfolio
-----------------------------------------------------------------------------
For the fiscal For the fiscal For the fiscal For the fiscal From 05/10/94
year ending year ending year ending year ending through
03/31/99 03/31/98 03/31/97 03/31/96 03/31/95*
-------------- -------------- -------------- -------------- -------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 12.45 $ 12.08 $ 12.33 $ 12.00 $ 12.00
-------- -------- -------- -------- -------
Income from investment operations
Net investment income (loss) 0.68 0.71 0.65 0.70 0.57
Net realized and unrealized gain
(loss) on investments 0.11 0.37 (0.25) 0.34 --
-------- -------- -------- -------- -------
Total from investment operations 0.79 1.08 0.40 1.04 0.57
-------- -------- -------- -------- -------
Distributions
From net investment income (0.68) (0.71) (0.64) (0.70) (0.57)
From net realized gains (0.32)2 -- (0.01) (0.01) --
-------- -------- -------- -------- -------
Total distributions (1.00) (0.71) (0.65) (0.71) (0.57)
-------- -------- -------- -------- -------
Net asset value, end of period $ 12.24 $ 12.45 $ 12.08 $ 12.33 $ 12.00
======== ======== ======== ======== =======
Total return 6.49% 9.11% 3.35% 8.85% 4.92%+
======== ======== ======== ======== =======
Net assets at end of period (in 000Os) $ 20,405 $ 19,961 $ 19,303 $ 9,740 $ 6,370
======== ======== ======== ======== =======
Ratio of expenses to average net assets
Before expense reimbursement/recoupment 1.04% 1.19% 1.53% 2.17% 2.44%++
After expense reimbursement/recoupment 0.55% 0.55% 0.95% 0.95% 0.95%++
======== ======== ======== ======== =======
Ratio of net investment income (loss) to
average net assets, after expense
reimbursement/recoupment 5.39% 5.73% 5.42% 5.69% 5.57%++
======== ======== ======== ======== =======
Portfolio turnover rate 54.59% 15.99% 8.37% 15.49% 5.21%
======== ======== ======== ======== =======
</TABLE>
* Commencement of operations 05/10/94.
+ Not Annualized.
++ Annualized.
1 Of this amount, the fund designates $0.45 as a capital gain dividend per
IRC Section 852(b)(3).
2 Of this amount, the fund designates $0.24 as a capital gain dividend per
IRC Section 852(b)(3).
See Accompanying Notes to Financial Statements.
29
<PAGE>
NOTES TO FINANCIAL STATEMENTS
RAINIER INVESTMENT MANAGEMENT MUTUAL FUNDS
MARCH 31, 1999
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 supervision of the
Board of Trustees. There were no such securities held during the year ending
March 31, 1999.
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 investment accounts.
The Small/Mid Cap Equity Portfolio has a capital loss carryforward of
$24,908,862 expiring on March 31, 2007.
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.
30
<PAGE>
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 agreement, 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%
This agreement may be terminated by either party upon 60 days' written
notice.
Effective 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.
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.
Effective 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.
For the fiscal year beginning April 1, 1998, the Intermediate Fixed Income
Portfolio is not subject to the $40,000 annual minimum.
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, 1999
were as follows:
Fund Purchases Sales
- ----------------------------------- -------------- --------------
Small/Mid Cap Equity Portfolio $ 758,189,559 $ 728,059,285
Core Equity Portfolio 1,202,775,059 1,053,195,877
Balanced Portfolio 99,368,768 82,409,072
Intermediate Fixed Income Portfolio 1,670,236 786,231
The Balanced Portfolio and Intermediate Fixed Income Portfolio purchased
$7,483,753 and $7,992,592 respectively, and sold $5,472,500 and $9,478,047,
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, 1999, based on costs for federal income tax purposes
were as follows:
31
<PAGE>
NOTES TO FINANCIAL STATEMENTS, CONTINUED
Gross Gross Net
Unrealized Unrealized Unrealized
Fund Appreciation Depreciation Appr./(Depr.)
- ------------------------- ------------ ------------ -------------
Small/Mid Cap Equity $ 4,980,813 $18,019,982 ($ 13,039,169)
Core Equity 141,265,318 1,868,611 139,396,707
Balanced 10,247,886 71,177 10,176,709
Intermediate Fixed Income 106,535 2,094 104,441
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 $6,000 per year plus $1,500 for each meeting of the
Board of Trustees attended and any travel expenses incurred in such meetings.
On December 10, 1998, the Trust approved a Deferred Compensation Plan for
Trustees (the "Plan"). Trustees are entitled to receive $1,500 per quarter and
$1,500 per meeting attended, which is allocated among the Funds. Trustees can
elect to receive payment in cash or defer payments provided for in the Plan. If
a trustee elects to defer payment, the Plan provides for the creation of a
deferred payment account (phantom share account). This account accumulates the
deferred fees earned and the value of the account is adjusted to reflect a value
which would have been earned if the account had been invested in a designated
investment. The Funds recognize as trustee expense amounts accrued as meetings
are attended plus the change in the value of the phantom share account.
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, 1999, 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, 1999 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, 1999, 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.
KPMG LLP
Seattle, Washington
May 17, 1999
32
<PAGE>
DIRECTORY OF FUNDS' SERVICE PROVIDERS
INVESTMENT ADVISOR
Rainier Investment Management, Inc.,(R) 601 Union Street, Suite 2801,
Seattle, WA 98101
DISTRIBUTOR
First Fund Distributors, Inc., 4455 E. Camelback Road, Suite 261-E,
Phoenix, AZ 85018
ADMINISTRATOR
Investment Company Administration LLC, 2020 E. Financial Way, Suite 100,
Glendora, CA 91741
CUSTODIAN, TRANSFER AGENT AND FUND ACCOUNTANT
Firstar Mutual Fund Services LLC, 615 E. Michigan Street,
Milwaukee, WI 53202
INDEPENDENT AUDITORS
KPMG LLP, 3100 Two Union Square, 601 Union Street, Seattle, WA 98101
LEGAL COUNSEL
Paul, Hastings, Janofsky & Walker LLP, 345 California Street,
San Francisco, CA 94104
INDEX DESCRIPTIONS
The Standard & Poor's 500 Stock Index is an unmanaged index composed of 500
industrial, utility, transportation and financial companies of the U.S. markets.
The Index represents about 75% of New York Stock Exchange ("NYSE") market
capitalization and 30% of NYSE issues. It is a capitalization-weighted index
calculated on a total return basis with dividends reinvested.
The Russell 1000(R) Index, the Russell Midcap(a) Index, the Russell 2000(R)
Index and the Russell 2500(TM) Index are unmanaged indices composed of the
equities of companies ranging in value from approximately $1.4 to $271.6
billion, $1.4 to $10.3 billion, $221.9 million to $1.4 billion, and $221.9
million to $3.7 billion, respectively, as of May 31, 1998.
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
