[RAINIER INVESTMENT MANAGEMENT MUTUAL FUNDS LOGO]
SEMI-ANNUAL REPORT
UNAUDITED
SEPTEMBER 30, 1999
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 ......................................... 14
Intermediate Fixed Income Portfolio ........................ 18
STATEMENTS OF ASSETS AND LIABILITIES ............................... 20
STATEMENTS OF OPERATIONS ........................................... 21
STATEMENTS OF CHANGES IN NET ASSETS ................................ 22
FINANCIAL HIGHLIGHTS ............................................... 24
NOTES TO FINANCIAL STATEMENTS ...................................... 28
DIRECTORY OF FUNDS' SERVICE PROVIDERS .............................. 31
INDEX DESCRIPTIONS ................................................. 31
[RAINIER INVESTMENT MANAGEMENT MUTUAL FUNDS LOGO]
601 Union Street, Suite 2801
Seattle, Washington 98101
(800) 248-6314
www.rainierfunds.com
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,
visit our web site or call the number above to receive 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. This report,
known as the "Semi-Annual Report," contains unaudited financial statements for
the period ending September 30, 1999. The last audited Annual Report was
produced as of March 31, 1999, our fiscal year end.
As you review this Report, you will find commentary describing the equity
and fixed-income capital markets for the six months ending September 30, 1999.
Also, you will see commentaries for each of the four Portfolios, followed by
investment total returns. Finally, this Report contains financial statements
detailing the expenses and holdings of the Portfolios.
The equity markets were markedly different in the second and third quarters
of 1999. During the second quarter the market broadened nicely with smaller
capitalization shares significantly outperforming larger capitalization issues.
In this welcomed broadening 73 stocks accounted for 100% of the S&P 500 Stock
Index's return in the June quarter. Unfortunately, in the September quarter, the
market snapped back to the all-too-familiar narrowness in a sharply negative
quarter. By the end of September only 11 stocks accounted for 100% of the S&P
500 Index's year-to-date return. Also of note, the technology sector at the end
of September made up 25% of the S&P 500 Index weighting. Just 10 years ago this
weighting was 8%.
Fortunately, the strategic adjustments we have made over the last year or
so have helped us navigate effectively. Performance in the Core Equity, Balanced
and Intermediate Fixed Income Portfolios for the last six months has been good
relative to our benchmarks. We lagged by 2.6% in the Small/Mid Cap Equity
Portfolio for the entire six-month period, but actually outperformed in four of
those months. Our equity team believes that the mostly stylistically based under
performance that we experienced in the Small/Mid Cap Portfolio in the December
1998 through April 1999 period is behind us, and we are tenacious in our efforts
to make up lost ground.
Shareholders should also be aware that the Advisor is implementing a
"business interruption plan." A remote "hot site" will offer a redundant
operating environment where portfolio managers and back-office staff can
continue to function should a disaster or business interruption, such as a fire
or power outage, shut down our main office. We hope we never have to use the
site, but should disaster strike, we will be better prepared than most to carry
on.
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
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COMMENTS FROM INVESTMENT ADVISOR
ABOUT THE ADVISOR: The Investment Advisor to the Funds is Rainier
Investment Management, Inc.(R) (RIM) located in Seattle, Washington. RIM is one
of America's leading investment advisory firms, managing $5.0 billion of
discretionary assets for primarily institutional clients.
EQUITY COMMENTS
The U.S. equity market, during the six months ending September 30,
displayed a severely split personality. An exuberant second-quarter market
featured a sharp rebound in depressed cyclicals and small stocks, apparently
ending the narrow large-cap growth leadership that had prevailed the previous
fifteen months. By mid-summer, however, the strength of the economy was such
that investors began to fear that monetary tightening by the Federal Reserve
would lead to an eventual slowing in economic growth. Then we saw this market's
darker side. Poof! Most of the second-quarter gains evaporated and investors
were spooked out of the very stocks they had rushed to buy just a few months
earlier.
Despite the Jekyll and Hyde behavior of the markets, the Small/Mid Cap
Equity, Core Equity and Balanced Portfolios generated positive returns. The best
results came from the Small/Mid Cap Portfolio, which was bolstered by its
positions in rapidly growing technology companies. In fact, most small-stock
measurements exceeded the performance of large-capitalization benchmarks for the
six-month period. Both the Core and Balanced Portfolios exceeded the returns of
their primary benchmarks.
This torturous equity market has rewarded success beyond imagination, and
at the same time punished slight disappointments with ruthlessness. What is
clear is that investors want growth/revenue, earnings and cash flow, and are
willing to pay extraordinary prices to obtain it. Our approach has always sought
to balance the objective of maximizing earnings growth without sacrificing a
price discipline. Tempting as it may be to abandon, we are persuaded that
consistently above average growth over time will do just as well, with lower
risk, than hyper-growth will do at any given moment.
James R. Margard, CFA;
David A. Veterane, CFA;
Peter M. Musser, CFA;
Mark H. Dawson, CFA
FIXED INCOME COMMENTS
The Federal Reserve Board raised overnight lending rates one-quarter
percent in June and again in August and signaled a neutral directive going
forward. Interest rates rose approximately one-half percent across all
maturities during the last two quarters, all within a market environment that
has become increasingly short-term oriented. U.S. companies brought many primary
underwritings to market earlier than usual in anticipation of year-end financing
needs, not wishing to take chances during the Y2K fourth quarter. Yield spreads
of U.S. Treasury issues to corporate bonds widened moderately in response to the
increasing supply, but the comfort level of investors remains high relative to
the credit fears of last autumn.
The economy overall has remained strong, but growth and near-record low
unemployment have yet to ignite core inflation. Rate moves to date have largely
anticipated Federal Reserve policy, resulting in some illiquidity, particularly
around Federal Open Market Committee meeting dates.
The aggregate bond market produced slightly negative returns during the
last six months, with shorter maturities outperforming. The underachieving
sector was the thirty-year U.S. Treasury bond, down five percent.
Mortgage-backed issues did well, owing to higher coupon performance and more
relative stability due to lessened concerns of callability.
Going forward the outlook is uncertain. Inflation is expected to increase,
but at a manageable pace. Productivity may slow and quality of workers becomes a
concern at the end of a cycle of full employment. The Federal Reserve remains
vigilant and will likely emphasize a tighter policy directive.
Patricia L. Frost, CEO;
Michael E. Raney, CFA
3
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PORTFOLIO INVESTMENT RETURNS
SMALL/MID CAP EQUITY PORTFOLIO
OBJECTIVE: The Small/Mid Cap Equity Portfolio seeks to provide investors
with maximum long-term capital appreciation. The Investment Advisor constructs a
diversified portfolio of small and medium capitalization common stocks.
COMMENTARY: The Small/Mid Cap Equity Portfolio was our best performing fund
over the six months ending September 30, rising 6.3%. Although we lagged the
benchmarks that track small stocks, the Russell 2000(R) and 2500(TM) indices, we
comfortably exceeded the return of the Russell Midcap(TM) Index. After a
difficult first quarter, the Portfolio rebounded in a healthy fashion in April
and May. Ebbing confidence in the earnings prospects of smaller stocks eroded
returns in the third quarter. The strongest results came from technology
holdings such as Legato Systems, Check Point Software and Symantec. The
projected earnings growth outlook for the Portfolio currently stands at over 26%
for the coming year, one of the highest levels it has reached in recent years.
Given that the average P/E multiple for the Portfolio is only 16X, we think the
underlying characteristics of the Portfolio are extremely attractive at this
time. Although very few sectors are participating, the improved performance of
secondary indices during the last six months offers evidence that the relative
performance of small stocks has "turned the corner."
SMALL/MID-CAP EQUITY PORTFOLIO
Small/Mid Russell Russell Consumer
Cap Equity 2500(TM) 2000 (R) Price
Portfolio Index Index Index
--------- ----- ----- -----
05/10/94 $10,000 10,000 $10,000 $10,000
03/31/95 11,938 10,999 11,495 10,272
03/31/96 16,520 14,279 14,539 10,563
03/31/97 18,197 15,519 14,611 10,855
03/31/98 28,138 22,015 20,750 11,004
03/31/99 23,303 19,095 17,377 11,194
09/30/99 24,762 20,791 18,810 11,391
TOTAL RETURNS for Periods Ending September 30, 1999
Inception
6 Months 1 Year 3 Years* 5 Years* to 9/30/99*
-------- ------ -------- -------- -----------
Small/Mid Cap Equity Portfolio 6.3% 16.0% 11.6% 18.5% 18.3%
Russell 2500(TM) Index 8.9 21.8 11.0 14.7 14.5
Russell 2000(R) Index 8.2 19.1 8.7 12.4 12.4
Consumer Price Index 1.8 2.6 2.1 2.4 2.4
* Annualized returns. Inception date 5/10/94.
See page 31 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
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CORE EQUITY PORTFOLIO
OBJECTIVE: The Core Equity Portfolio seeks to maximize long-term capital
appreciation. The Fund invests primarily in a diversified portfolio of common
stocks of U.S. companies.
COMMENTARY: The Core Equity Portfolio rose 1.9% during the six months
ending in September, compared to a 0.4% increase in the Standard & Poor's 500
Stock Index. Technology stocks such as Sun Microsystems, Nortel Networks and
Tellabs were, once again, a key factor in performance results. Other stocks that
delivered superior results included Bell Atlantic, Mobil and Tyco International.
While we share the market's enthusiasm for technology shares, which now comprise
25% of the S&P 500 Index and a similar amount in the Core Portfolio, we would
not be surprised to see increased volatility in this sector as a result of
Y2K-related order disruptions. Other sectors, such as communication services,
financials, energy and consumer cyclicals, may offer greater opportunities in
the near-term. We have increased our exposure to telecommunications stocks, by
boosting our weightings in ALLTEL and MCI WorldCom. We also are positive about
the earnings prospects for financials, primarily because of the significantly
enhanced competitive position of many U.S. banking and insurance companies, but
also because we do not anticipate meaningful further deterioration in the
inflation outlook.
CORE EQUITY PORTFOLIO:
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
09/30/99 31,910 31,997 11,391
TOTAL RETURNS for Periods Ending September 30, 1999
Inception
6 Months 1 Year 3 Years* 5 Years* to 9/30/99*
-------- ------ -------- -------- -----------
Core Equity Portfolio 1.9% 29.9% 22.1% 24.8% 24.0%
Standard & Poor's 500 Stock Index 0.4 27.8 25.1 25.0 24.1
Russell 1000(R) Index 0.1 27.0 23.8 24.2 23.3
Consumer Price Index 1.8 2.6 2.1 2.4 2.4
* Annualized returns. Inception date 5/10/94.
See page 31 for index descriptions. Total return assumes reinvestment of
dividends and distributions. Past performance is not predictive of future
results. Investment return will fluctuate so that an investor's shares, when
redeemed, may be worth more or less than their original cost.
5
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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 appreciated 1.3% during the six months
ending in September. While both equity and fixed-income assets generated
positive returns, both were under considerable pressure. Large contributors to
equity performance included Cisco Systems, Nortel Networks, and Sun
Microsystems, as technology stocks paused in late spring only to take charge
again in recent months. Consumer and industrial cyclicals joined financials as
weaker sectors. Fixed-income returns were lackluster due to Federal Reserve
tightening and indications of global economic strength. Looking forward, the
equity markets may be hard pressed to gain valuation expansion due to rising
interest rates. We are, however, encouraged by the positive profit growth
environment. Furthermore, we believe that the Fed will act in moderation over
the next year, that Y2K will not have a meaningful impact on the markets, and
that global economic recovery will continue at a steady pace. If so, this would
be positive for our investment style and strategies. The Portfolio finished the
period with an asset mix of 61% stocks, 35% bonds and 4% cash.
BALANCED PORTFOLIO:
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
09/30/99 23,036 21,496 11,391
TOTAL RETURNS for Periods Ending September 30, 1999
Inception
6 Months 1 Year 3 Years* 5 Years* to 9/30/99*
-------- ------ -------- -------- -----------
Balanced Portfolio 1.3% 18.4% 16.0% 17.4% 16.7%
Balanced Index (50/40/10) 0.7 14.2 15.6 15.8 15.3
Standard & Poor's 500 Stock Index 0.4 27.8 25.1 25.0 24.1
Lehman Brothers Govt./Corp.
Intermediate Bond Index 0.5 0.6 6.3 7.1 6.9
Consumer Price Index 1.8 2.6 2.1 2.4 2.4
*Annualized returns. Inception date 5/10/94.
See page 31 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
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INTERMEDIATE FIXED INCOME PORTFOLIO
OBJECTIVE: The Intermediate Fixed Income Portfolio seeks to provide
investors with current income. The Fund invests primarily in a diversified
portfolio of investment grade, intermediate-term debt securities providing
current income. The Portfolio does not use risky derivative instruments.
COMMENTARY: The overriding influence over fixed-income investment returns
during the two quarters ending September 30 was the action of the Federal
Reserve to push up the overnight lending rate in two steps to 5.25%. The moves
were largely anticipated. Yields rose between 40 and 60 basis points and the
yield curve flattened to a 45 basis point difference between the two- and
thirty-year U.S. Treasury bonds. Performance of the indices ranged from slightly
positive for shorter maturities to negative for longer maturities. In this
market environment the Portfolio benefited on a relative basis in several ways.
The short to intermediate duration of the bonds and the commitment of a portion
of the assets to cash equivalents retained portfolio stability while preserving
the future opportunity to invest at higher interest rate levels. The quality of
assets remains high and the positioning of Treasuries in the Portfolio has
maintained liquidity in a market that is looking toward year-end with some
trepidation. We continue to emphasize off-the-run governments and corporates
within the finance sector to afford incremental yield.
INTERMEDIATE FIXED INCOME PORTFOLIO:
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
09/30/99 13,787 14,192 11,391
TOTAL RETURNS for Periods Ending September 30, 1999
Inception
6 Months 1 Year 3 Years* 5 Years* to 9/30/99*
-------- ------ -------- -------- -----------
Intermediate Fixed Income Portfolio 0.5% (0.2)% 5.8% 6.3% 6.1%
Lehman Brothers Govt./Corp.
Intermediate Bond Index 0.5 0.6 6.3 7.1 6.9
91-Day Treasury Bill Index 2.3 4.6 5.0 5.2 5.2
Consumer Price Index 1.8 2.6 2.1 2.4 2.4
* Annualized returns. Inception date 5/10/94.
See page 31 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
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SCHEDULES OF INVESTMENTS
Small/Mid Cap Equity Portfolio
September 30, 1999 (unaudited)
COMMON STOCKS (98.61%) SHARES VALUE
- --------------------------------------------------------------------------------
AUTOS AND TRANSPORTATION (3.39%)
Air Transportation (0.28%)
Southwest Airlines Co. 72,540 $ 1,101,694
------------
Auto Parts/Original Equipment (1.11%)
Arvin Industries, Inc. 140,350 4,342,078
------------
Railroads (1.20%)
Kansas City Southern Industries, Inc. 101,575 4,716,889
------------
Truckers (0.80%)
USFreightways Corporation 66,225 3,137,409
------------
Total Autos and Transportation 13,298,070
------------
CONSUMER DISCRETIONARY (16.16%)
Consumer Products (1.90%)
Blyth Industries, Inc. 207,200 5,814,550
Jore Corporation 137,750 1,644,391
------------
Total Consumer Products 7,458,941
------------
Education Services (1.09%)
Sylvan Learning Systems, Inc. 220,800 4,278,000
------------
Household Equipment and Products (1.09%)
The Black & Decker Corporation 93,725 4,282,061
------------
Household Furnishings (1.61%)
Mohawk Industries, Inc. 316,293 6,306,092
------------
Jewelry, Watches and Gemstones (1.36%)
Tiffany & Co. 89,000 5,334,438
------------
Leisure Time (1.16%)
Action Performance Companies, Inc. 216,125 4,552,133
------------
Rental and Leasing Services (0.83%)
Dollar Thrifty Automotive Group, Inc. 157,625 3,260,867
------------
Restaurants (1.63%)
CEC Entertainment, Inc. 25,298 $ 907,548
Foodmaker, Inc. 34,350 856,603
Outback Steakhouse, Inc. 89,073 2,268,578
Papa John's International, Inc. 57,100 2,355,375
------------
Total Restaurants 6,388,104
------------
Retail (2.43%)
Family Dollar Stores, Inc. 16,950 358,069
The Men's Wearhouse, Inc. 425,750 9,153,625
------------
Total Retail 9,511,694
------------
Services/Commercial (2.59%)
ACNielsen Corporation 157,950 3,583,491
Central Parking Corporation 94,700 2,769,975
Republic Services, Inc. 348,450 3,789,394
------------
Total Services/Commercial 10,142,860
------------
Shoes (0.46%)
The Timberland Company 46,250 1,806,641
------------
TOTAL CONSUMER DISCRETIONARY 63,321,831
------------
CONSUMER STAPLES (5.71%)
Beverages (2.80%)
Canandaigua Brands, Inc. 65,300 3,901,675
Suiza Foods Corporation 188,600 7,072,500
------------
Total Beverages 10,974,175
------------
Foods (2.90%)
The Earthgrains Company 163,400 3,615,225
McCormick & Company, Incorporated 40,000 1,322,500
The Quaker Oats Company 46,700 2,889,563
Smithfield Foods, Inc. 132,875 3,554,406
------------
Total Foods 11,381,694
------------
TOTAL CONSUMER STAPLES 22,355,869
------------
FINANCIAL SERVICES (13.60%)
Banks/Outside New York City (3.86%)
City National Corporation 215,525 7,233,558
See Accompanying Notes to Financial Statements.
8
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Compass Bancshares, Inc. 210,950 $ 5,273,750
North Fork Bancorporation, Inc. 69,325 1,351,838
Pacific Century Financial Corporation 42,850 875,747
Prime Bancshares, Inc. 17,650 401,538
------------
Total Banks/Outside New York City 15,136,431
------------
Finance/Small Loan (0.57%)
SLM Holding Corporation 51,925 2,232,775
------------
Financial/Miscellaneous (1.29%)
Nationwide Financial Services, Inc. 143,250 5,067,469
------------
Financial Data Processing Services and Systems (2.13%)
Advent Software, Inc. 134,087 8,346,916
------------
Insurance (1.72%)
ACE Limited 178,900 3,030,119
Hartford Life, Inc. Cl. A 75,125 3,699,906
------------
Total Insurance 6,730,025
------------
Real Estate Investment Trusts (1.15%)
Innkeepers USA Trust 169,025 1,405,020
Nationwide Health Properties, Inc. 186,450 3,099,731
------------
Total Real Estate Investment Trusts 4,504,751
------------
Savings and Loan (2.88%)
Astoria Financial Corporation 139,700 4,295,775
Bank United Corp. Cl. A 203,850 6,599,644
Golden State Bancorp Inc., Litigation
Tracking Warrants 313,300 372,044
------------
Total Savings and Loan 11,267,463
------------
TOTAL FINANCIAL SERVICES 53,285,830
------------
HEALTH CARE (5.89%)
Drugs and Pharmaceuticals (5.89%)
Forest Laboratories, Inc. 203,025 8,552,428
Genzyme Corporation 79,175 3,567,823
Teva Pharmaceuticals Industries Limited ADR 156,525 7,875,164
Watson Pharmaceuticals, Inc. 101,425 3,099,802
------------
Total Drugs and Pharmaceuticals 23,095,217
------------
INTEGRATED OILS (3.66%)
Oil/Integrated Domestic (3.07%)
The Coastal Corporation 167,975 6,876,477
Kerr-McGee Corporation 93,675 5,157,980
------------
Total Oil/Integrated Domestic 12,034,457
------------
Oil/Integrated International (0.59%)
Tesoro Petroleum Corporation 140,225 $ 2,313,713
------------
TOTAL INTEGRATED OILS 14,348,170
------------
MATERIALS AND PROCESSING (7.74%)
Building/Miscellaneous (1.39%)
SLI, Inc. 255,800 5,451,738
------------
Chemicals (1.42%)
Hercules Incorporated 194,500 5,567,563
------------
Diversified Materials and Processing (1.86%)
Georgia-Pacific Group 179,925 7,286,963
------------
Metal Fabricating (0.70%)
Quanex Corporation 107,175 2,746,359
------------
Milling/Fruit and Grain (1.32%)
Corn Products International, Inc. 170,450 5,188,072
------------
Paper (1.04%)
The Mead Corporation 118,900 4,087,188
------------
TOTAL MATERIALS AND PROCESSING 30,327,883
------------
OTHER (2.12%)
Multi-Sector Companies (2.12%)
Crane Co. 133,475 2,994,845
Johnson Controls, Inc. 55,500 3,680,344
McDermott International, Incorporated 80,100 1,622,025
------------
Total Multi-Sector Companies 8,297,214
------------
OTHER ENERGY (6.46%)
Machinery/Oil Well Equipment and Services (1.40%)
Baker Hughes Incorporated 33,950 984,550
Noble Drilling Corporation 205,925 4,504,609
------------
Total Machinery/Oil Well Equipment
and Services 5,489,159
------------
Oil/Crude Producers (5.06%)
Apache Corporation 168,975 7,297,608
Barrett Resources Corporation 168,700 6,231,356
Devon Energy Corporation 152,400 6,315,075
------------
Total Oil/Crude Producers 19,844,039
------------
TOTAL OTHER ENERGY 25,333,198
------------
See Accompanying Notes to Financial Statements.
9
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SCHEDULE OF INVESTMENTS -- SMALL/MID CAP EQUITY PORTFOLIO, CONTINUED
PRODUCER DURABLES (3.89%)
Aerospace (1.61%)
The BFGoodrich Company 217,100 $ 6,295,900
------------
Identification Control and Filter Devices (0.22%)
American Power Conversion Corporation 45,000 855,000
------------
Machinery/Industrial and Specialty (0.65%)
Tecumseh Products Company Cl. A 50,975 2,555,122
------------
Production Technology Equipment (1.41%)
Teradyne, Inc. 156,775 5,526,319
------------
TOTAL PRODUCER DURABLES 15,232,341
------------
TECHNOLOGY (22.14%)
Communications Technology (1.37%)
ADC Telecommunications, Inc. 80,350 3,369,678
Ramp Networks, Inc. 91,575 2,014,650
------------
Total Communications Technology 5,384,328
------------
Computer Services, Software and Systems (13.90%)
Check Point Software Technologies, Ltd. 143,725 12,135,774
Citrix Systems, Inc. 110,100 6,819,319
Intuit Inc. 61,050 5,351,414
Legato Systems, Inc. 247,950 10,809,070
N2H2, Inc. 91,825 901,033
Rational Software Corporation 134,525 3,939,060
Sapient Corporation 5,450 513,663
Siebel Systems, Inc. 66,800 4,450,550
Symantec Corporation 164,650 5,922,255
Whittman-Hart, Inc. 93,975 3,644,468
------------
Total Computer Services, Software and Systems 54,486,606
------------
Computer Technology (0.95%)
Computer Sciences Corporation 52,875 3,717,773
------------
Electronics/Semi-Conductors (3.51%)
Analog Devices, Inc. 179,025 9,175,031
Celestica Inc. 92,625 4,573,359
------------
Total Electronics/Semi-Conductors 13,748,390
------------
Electronics/Technology (2.40%)
Symbol Technologies, Inc. 279,925 9,412,478
------------
TOTAL TECHNOLOGY 86,749,580
------------
UTILITIES (7.85%)
Utilities/Electrical (4.00%)
PECO Energy Company 188,200 $ 7,057,500
Pinnacle West Capital Corporation 108,425 3,943,959
Texas Utilities Company 125,000 4,664,063
------------
Total Utilities/Electrical 15,665,522
------------
Utilities/Miscellaneous (0.99%)
New Century Energies, Inc. 115,950 3,877,078
------------
Utilities/Telecommunications (2.86%)
CenturyTel, Inc. 275,888 11,207,950
------------
TOTAL UTILITIES 30,750,550
------------
TOTAL COMMON STOCKS (cost $390,280,280) $386,395,748
------------
SHORT-TERM INVESTMENTS (0.73%) PAR VALUE VALUE
- --------------------------------------------------------------------------------
VARIABLE RATE DEMAND NOTES* (0.73%)
American Family Financial Services
5.044% 03-21-2000 $1,363,258 $1,363,258
Wisconsin Corporate Central Credit Union
5.093% 04-01-2000 796,660 796,660
Wisconsin Electric Power Company
5.044% 04-04-2000 704,043 704,043
TOTAL VARIABLE RATE DEMAND NOTES (cost $2,863,961) 2,863,961
------------
TOTAL SHORT-TERM INVESTMENTS (cost $2,863,961) $2,863,961
------------
TOTAL INVESTMENTS IN SECURITIES (99.34%) (cost $393,144,241) $389,259,709
------------
OTHER ASSETS LESS LIABILITIES (0.66%) $ 2,592,576
------------
NET ASSETS (100.00%) $391,852,285
============
* The variable-rate securities are subject to a demand feature which reduces
the remaining maturity.
See Accompanying Notes to Financial Statements.
10
<PAGE>
CORE EQUITY PORTFOLIO
September 30, 1999 (unaudited)
COMMON STOCKS (98.12%) SHARES VALUE
- --------------------------------------------------------------------------------
BASIC INDUSTRY (3.56%)
Agricultural Products (0.42%)
Corn Products International, Inc. 117,725 $ 3,583,255
------------
Chemicals/Specialty (0.55%)
Hercules Incorporated 164,425 4,706,666
------------
Metals (0.62%)
Alcoa Inc. 84,160 5,223,180
------------
Paper and Forest Products (1.97%)
Georgia-Pacific Corporation 161,950 6,558,975
The Mead Corporation 296,775 10,201,641
------------
Total Paper and Forest Products 16,760,616
------------
TOTAL BASIC INDUSTRY 30,273,717
------------
CAPITAL GOODS (8.47%)
Aerospace (0.79%)
The BFGoodrich Company 232,175 6,733,075
------------
Capital Goods/Miscellaneous (0.61%)
Johnson Controls, Inc. 86,400 5,159,113
------------
Diversified/Manufacturing (3.35%)
Tyco International Ltd. 159,375 16,455,469
United Technologies Corporation 201,925 11,976,677
------------
Total Diversified/Manufacturing 28,432,146
------------
Multi-Sector Companies (3.72%)
Crane Co. 80,350 1,802,853
General Electric Company 251,450 29,812,541
------------
Total Multi-Sector Companies 31,615,394
------------
TOTAL CAPITAL GOODS 71,939,728
------------
COMMUNICATION SERVICES (8.64%)
Communications (8.64%)
ALLTEL Corporation 172,400 12,132,650
AT&T Corp. 109,050 4,743,675
Bell Atlantic Corporation 208,545 14,037,685
CenturyTel, Inc. 213,247 8,663,159
MCI WorldCom Incorporated 229,050 16,462,969
SBC Communications Inc. 339,800 $ 17,351,038
------------
TOTAL COMMUNICATIONS 73,391,176
------------
CONSUMER CYCLICAL (8.14%)
Autos and Auto Parts (1.34%)
Arvin Industries, Inc. 58,550 1,811,391
Ford Motor Company 189,900 9,530,606
------------
Total Autos and Auto Parts 11,341,997
------------
Consumer Cyclical/Miscellaneous (0.18%)
Mohawk Industries, Inc. 77,175 1,538,677
------------
Education (0.14%)
Sylvan Learning Systems, Inc. 63,139 1,223,318
------------
Household Equipment and Products (0.74%)
The Black & Decker Corporation 116,050 5,302,034
Blyth Industries, Inc. 35,925 1,008,145
------------
Total Household Equipment and Products 6,310,179
------------
Retail (5.67%)
Dayton Hudson Corporation 268,250 16,111,766
Family Dollar Stores, Inc. 93,150 1,967,794
The Home Depot, Inc. 215,445 14,784,913
The Men's Wearhouse, Inc. 229,162 4,926,983
Staples, Inc. 291,000 6,347,438
Tiffany & Co. 66,200 3,967,862
------------
Total Retail 48,106,756
------------
Services/Commercial (0.07%)
AC Nielsen Corporation 24,975 566,620
------------
TOTAL CONSUMER CYCLICAL 69,087,547
------------
CONSUMER STAPLES (10.50%)
Entertainment (2.22%)
Fox Entertainment Group, Inc. Cl. A 290,650 5,588,619
Time Warner, Inc. 218,550 13,276,912
------------
Total Entertainment 18,865,531
------------
Foods/Beverages (4.83%)
Anheuser-Busch Companies, Inc. 264,025 18,498,252
Canandaigua Brands, Inc. 65,600 3,919,600
The Earthgrains Company 64,900 1,435,913
See Accompanying Notes to Financial Statements.
11
<PAGE>
SCHEDULE OF INVESTMENTS -- CORE EQUITY PORTFOLIO, CONTINUED
PepsiCo, Inc. 415,585 $ 12,571,445
The Quaker Oats Company 73,450 4,544,719
------------
Total Foods/Beverages 40,969,929
------------
Food/Drug Retail (1.78%)
CVS Corporation 189,175 7,720,705
Safeway Inc. 193,375 7,360,336
------------
Total Food/Drug Retail 15,081,041
------------
Household Products/Cosmetics (1.71%)
The Procter & Gamble Company 154,750 14,507,813
------------
TOTAL CONSUMER STAPLES 89,424,314
------------
ENERGY (8.70%)
Machinery/Oil Well Equipment and Services (0.64%)
Baker Hughes Incorporated 84,250 2,443,250
Noble Drilling Corporation 135,925 2,973,359
------------
Total Machinery/Oil Well Equipment and Services 5,416,609
------------
Natural Gas Diversified (1.07%)
The Coastal Corporation 222,850 9,122,922
------------
Oil/Crude Producers (1.45%)
Apache Corporation 284,850 12,301,959
------------
Oil/Integrated Domestic (0.69%)
Kerr-McGee Corporation 106,950 5,888,934
------------
Oil/Integrated International (4.39%)
Conoco Inc. Cl. A 115,450 3,203,738
Conoco Inc. Cl. B 313,787 8,589,925
Mobil Corporation 137,350 13,838,013
Texaco Inc. 184,850 11,668,656
------------
Total Oil/Integrated International 37,300,332
------------
Oil Services (0.46%)
Halliburton Company 95,725 3,924,724
------------
TOTAL ENERGY 73,955,480
------------
FINANCIAL (13.44%)
Banks (1.97%)
The Chase Manhattan Bank 37,325 2,813,372
Fleet Financial Group, Inc. 254,900 9,335,713
PNC Bank Corp. 72,060 4,565,898
------------
Total Banks 16,714,983
------------
Diversified Financial Services (1.58%)
Citigroup Inc. 305,450 13,439,800
------------
Finance/Small Loan (0.06%)
SLM Holding Corporation 11,925 512,775
------------
Finance Companies (1.33%)
Associates First Capital Corporation 313,237 $ 11,276,532
------------
Financial/Miscellaneous (2.29%)
Freddie Mac 166,175 8,641,100
Morgan Stanley Dean Witter & Co. 120,800 10,773,850
------------
Total Financial/Miscellaneous 19,414,950
------------
Financial Services (4.05%)
American Express Company 50,225 6,761,541
Kansas City Southern Industries, Inc. 156,075 7,247,733
Marsh & McLennan Companies, Inc. 297,074 20,349,568
------------
TOTAL FINANCIAL SERVICES 34,358,842
------------
INSURANCE (1.95%)
American International Group, Inc. 116,037 10,087,967
Hartford Life, Inc. Cl. A 67,725 3,335,456
Nationwide Financial Services, Inc. 89,355 3,160,933
------------
Total Insurance 16,584,356
------------
Savings and Loan (0.21%)
Bank United Corp. Cl. A 41,525 1,344,372
Washington Mutual, Inc. 13,850 405,112
------------
Total Savings and Loan 1,749,484
------------
Total Financial 114,051,722
------------
HEALTH CARE (8.99%)
Drugs (7.19%)
American Home Products Corporation 39,425 1,636,137
Amgen Inc. 85,450 6,964,175
Forest Laboratories, Inc. 90,550 3,814,418
Johnson & Johnson 137,825 12,662,672
Merck & Co., Inc. 270,525 17,533,402
Pharmacia & Upjohn, Inc. 242,825 12,050,191
Teva Pharmaceuticals Industries Limited ADR 100,625 5,062,695
Watson Pharmaceuticals, Inc. 44,700 1,366,144
------------
Total Drugs 61,089,834
------------
Hospital Supplies (0.90%)
Baxter International Inc. 126,825 7,641,206
------------
Medical Devices (0.90%)
Guidant Corporation 142,350 7,633,519
------------
TOTAL HEALTH CARE 76,364,559
------------
See Accompanying Notes to Financial Statements.
12
<PAGE>
SCHEDULE OF INVESTMENTS -- CORE EQUITY PORTFOLIO, CONTINUED
TECHNOLOGY (26.05%)
Computer Peripherals (0.79%)
EMC Corporation 94,150 $ 6,725,841
------------
Computer Services (0.94%)
Computer Sciences Corporation 113,875 8,006,836
------------
Computer Software (5.94%)
Citrix Systems, Inc. 110,675 6,854,933
Legato Systems, Inc. 115,605 5,039,655
Microsoft Corporation 402,785 36,477,217
Siebel Systems, Inc. 46,900 2,087,028
------------
Total Computer Software 50,458,833
------------
Computer Systems (5.33%)
Hewlett-Packard Company 73,800 6,789,600
International Business Machines Corporation 141,440 17,167,280
Sun Microsystems, Inc. 229,300 21,324,900
------------
Total Computer Systems 45,281,780
------------
Electronic Systems (0.75%)
Symbol Technologies, Inc. 187,925 6,318,978
------------
Internet (0.79%)
Yahoo! Inc. 37,600 6,749,200
------------
Networking/Communications Equipment (6.85%)
Cisco Systems, Inc. 276,749 18,974,603
General Instrument Corporation 91,850 4,420,281
Lucent Technologies Inc. 99,226 6,437,287
Nokia Corporation Cl. A, ADR 106,825 9,594,220
Nortel Networks Corporation 269,730 13,756,230
Tellabs, Inc. 87,590 4,987,156
------------
Total Networking/Communications Equipment 58,169,777
------------
Production Technology Equipment (0.55%)
Teradyne, Inc. 131,650 4,640,663
------------
Semi-Conductors (4.11%)
Analog Devices, Inc. 97,300 4,986,625
Intel Corporation 225,650 16,768,616
Texas Instruments, Incorporated 97,750 8,039,938
Vitesse Semiconductor Corporation 59,850 5,109,694
------------
Total Semi-Conductors 34,904,872
------------
TOTAL TECHNOLOGY 221,256,780
------------
TRANSPORTATION (0.28%)
Southwest Airlines Co. 156,827 2,381,809
------------
UTILITIES (1.30%)
Electric/Natural Gas (1.30%)
The AES Corporation 110,800 $ 6,537,200
Duke Power Company 81,450 4,489,931
------------
Total Electric/Natural Gas 11,027,131
------------
TOTAL COMMON STOCKS (cost $707,032,832) $833,153,963
------------
SHORT-TERM INVESTMENTS (2.43%) PAR VALUE VALUE
- --------------------------------------------------------------------------------
VARIABLE RATE DEMAND NOTES* (2.43%)
American Family Financial Services
5.044% 03-21-2000 $ 560,000 $ 560,000
General Mills, Inc. 5.028% 03-03-2000 4,847,561 4,847,561
Pitney Bowes Inc. 5.028% 02-04-2000 5,842,876 5,842,876
Warner-Lambert Company 5.044% 02-26-2000 4,128,870 4,128,870
Wisconsin Corporate Central Credit Union
5.093% 04-01-2000 1,275,756 1,275,756
Wisconsin Electric Power Company
5.044% 04-04-2000 3,971,740 3,971,740
------------
TOTAL VARIABLE RATE DEMAND NOTES (cost $20,626,802) 20,626,802
------------
TOTAL SHORT-TERM INVESTMENTS (cost $20,626,802) $20,626,802
------------
TOTAL INVESTMENTS IN SECURITIES (100.55%) (cost $727,659,634) $853,780,765
------------
LIABILITIES IN EXCESS OF OTHER ASSETS (-0.55%) $ (4,664,204)
------------
NET ASSETS (100.00%) $849,116,561
============
* The variable-rate securities are subject to a demand feature which reduces the
remaining maturity.
See Accompanying Notes to Financial Statements.
13
<PAGE>
BALANCED PORTFOLIO
September 30, 1999 (unaudited)
LONG-TERM DEBT SECURITIES (34.48%) PAR VALUE VALUE
- --------------------------------------------------------------------------------
CORPORATE BONDS (20.81%)
FINANCE (18.80%)
Automobile (1.76%)
Ford Motor Credit Company
7.500% 11-15-1999 $ 25,000 $ 25,052
6.125% 04-28-2003 190,000 186,208
General Motors Acceptance Corporation
5.500% 12-15-2001 500,000 488,883
5.750% 11-10-2003 1,000,000 961,740
-----------
Total Automobile 1,661,883
-----------
Banks (3.04%)
BankAmerica Corporation
6.625% 06-15-2004 700,000 695,029
Citicorp
7.125% 06-01-2003 1,000,000 1,009,620
NationsBank Corporation
6.125% 07-15-2004 1,200,000 1,160,073
-----------
Total Banks 2,864,722
-----------
Consumers (3.37%)
American General Finance Corporation
6.875% 01-15-2000 50,000 50,187
Avco Financial Services, Inc. Senior Note
6.000% 08-15-2002 800,000 789,433
Beneficial Corporation Medium-Term Note
6.350% 12-03-2001 700,000 699,035
Sears Roebuck Acceptance Corp. Medium-Term Note
7.110% 06-19-2001 650,000 652,742
Sears, Roebuck and Co.
6.670% 07-07-2003 1,000,000 987,741
-----------
TOTAL CONSUMERS 3,179,138
-----------
Diversified (3.32%)
Associates Corporation of North America
Senior Note
6.000% 06-15-2000 25,000 25,001
7.500% 04-15-2002 100,000 102,222
5.750% 11-01-2003 1,000,000 963,071
Associates Corporation of North America
Medium Term Note
6.840% 07-03-2001 $ 700,000 $ 703,885
Associates Corporation of North America
6.375% 06-01-2000 75,000 75,222
Commercial Credit Company
6.875% 05-01-2002 200,000 203,052
6.500% 06-01-2005 1,000,000 980,688
General Electric Capital Corporation
6.660% 05-01-2018 75,000 75,277
-----------
Total Diversified 3,128,418
-----------
Insurance (3.07%)
Hartford Life, Inc.
6.900% 06-15-2004 1,000,000 994,295
ReliaStar Financial Corp.
6.500% 11-15-2008 1,500,000 1,399,241
Travelers Property Casualty Corp.
6.750% 04-15-2001 500,000 503,973
-----------
Total Insurance 2,897,509
-----------
Investment Banker/Broker (3.23%)
Dean Witter, Discover & Co.
6.250% 03-15-2000 30,000 30,045
6.750% 08-15-2000 200,000 200,791
Merrill Lynch & Co., Inc. Medium-Term Note
5.880% 01-15-2004 500,000 482,880
Merrill Lynch & Co., Inc.
7.375% 08-17-2002 30,000 30,581
6.000% 02-12-2003 500,000 489,237
Morgan Stanley Group Inc.
5.750% 02-15-2001 500,000 496,841
6.125% 10-01-2003 215,000 210,210
Salomon Smith Barney Holdings Inc.
6.625% 07-01-2002 1,100,000 1,103,041
-----------
Total Investment Banker/Broker 3,043,626
-----------
Leasing Companies (1.01%)
International Lease Finance
Corporation Medium-Term Note
6.340% 02-01-2000 450,000 449,687
6.250% 10-15-2000 500,000 500,060
Total Leasing Companies 949,747
-----------
TOTAL FINANCE 17,725,043
-----------
See Accompanying Notes to Financial Statements.
14
<PAGE>
INDUSTRIAL (2.01%)
Energy and Related Goods and Services (0.43%)
Texaco Capital Inc. Medium Term Note
7.250% 08-01-2002 $ 400,000 $ 407,038
-----------
Medical/Drugs (0.05%)
SmithKline Beecham
Corporation Medium-Term Note
6.625% 10-01-2005 50,000 49,188
-----------
Telephone (1.53%)
AT&T Corp.
5.625% 03-15-2004 1,500,000 1,439,532
-----------
TOTAL INDUSTRIAL 1,895,758
-----------
TOTAL CORPORATE BONDS 19,620,801
-----------
U.S. GOVERNMENT SECURITIES (12.58%)
U.S. TREASURY NOTES (12.58%)
7.125% 02-29-2000 400,000 403,500
6.750% 04-30-2000 1,000,000 1,008,750
5.750% 10-31-2000 700,000 702,188
7.750% 02-15-2001 970,000 997,585
6.625% 03-31-2002 400,000 414,625
6.375% 08-15-2002 2,500,000 2,541,408
6.250% 02-15-2003 425,000 430,711
5.750% 08-15-2003 700,000 698,032
7.000% 07-15-2006 2,500,000 2,625,783
6.500% 10-15-2006 2,000,000 2,045,000
-----------
TOTAL U.S. TREASURY NOTES 11,867,582
-----------
FOREIGN BONDS (U.S. DOLLAR DENOMINATED) (1.09%)
Yankee-Electric Distribution (0.38%)
Hydro-Quebec
7.375% 02-01-2003 350,000 358,294
-----------
Regional Agency ADR (0.71%)
Province of Ontario
7.375% 01-27-2003 650,000 668,070
-----------
TOTAL FOREIGN BONDS 1,026,364
-----------
TOTAL LONG-TERM DEBT SECURITIES (cost $33,179,481) $32,514,747
-----------
COMMON STOCKS (61.64%) SHARES VALUE
- --------------------------------------------------------------------------------
BASIC INDUSTRY (2.09%)
Agricultural Products (0.23%)
Corn Products International, Inc. 7,050 $ 214,584
-----------
Chemical/Specialty (0.31%)
Hercules Incorporated 10,100 289,113
-----------
Metals (0.39%)
Alcoa Inc. 5,900 366,169
-----------
Paper and Forest Products (1.16%)
Georgia-Pacific Corporation 12,175 493,088
The Mead Corporation 17,475 600,703
-----------
Total Paper and Forest Products 1,093,791
-----------
TOTAL BASIC INDUSTRY 1,963,657
-----------
CAPITAL GOODS (4.86%)
Aerospace (0.50%)
The BFGoodrich Company 16,275 471,975
-----------
Diversified/Manufacturing (2.11%)
Tyco International Ltd. 11,375 1,174,469
United Technologies Corporation 13,700 812,581
-----------
Total Diversified/Manufacturing 1,987,050
-----------
Miscellaneous (0.35%)
Johnson Controls, Inc. 5,025 333,220
-----------
Multi-Sector Companies (1.90%)
Crane Co. 6,500 145,844
General Electric Company 13,875 1,645,054
-----------
Total Multi-Sector Companies 1,790,898
-----------
TOTAL CAPITAL GOODS 4,583,143
-----------
COMMUNICATIONS SERVICES (5.47%)
Communications (5.47%)
ALLTEL Corporation 11,550 812,831
AT&T Corp. 7,850 341,475
Bell Atlantic Corporation 14,700 989,494
CenturyTel, Inc. 15,112 613,925
MCI WorldCom Incorporated 16,100 1,157,188
SBC Communications Inc. 24,325 1,242,095
-----------
TOTAL COMMUNICATIONS 5,157,008
-----------
See Accompanying Notes to Financial Statements.
15
<PAGE>
SCHEDULE OF INVESTMENTS -- BALANCED PORTFOLIO, CONTINUED
CONSUMER CYCLICAL (5.17%)
Autos and Auto Parts (0.81%)
Arvin Industries, Inc. 2,975 $ 92,039
Ford Motor Company 13,425 673,767
-----------
Total Autos and Auto Parts 765,806
-----------
Consumer Cyclical/Miscellaneous (0.12%)
Mohawk Industries, Inc. 5,800 115,638
-----------
Education (0.04%)
Sylvan Learning Systems, Inc. 1,862 36,076
-----------
Household Equipment and Products (0.50%)
The Black & Decker Corporation 10,275 469,439
-----------
Retail (3.65%)
Dayton Hudson Corporation 19,500 1,171,219
Family Dollar Stores, Inc. 6,975 147,347
The Home Depot, Inc. 15,675 1,075,697
The Men's Wearhouse, Inc. 16,575 356,363
Staples, Inc. 20,725 452,064
Tiffany & Co. 4,075 244,245
-----------
Total Retail 3,446,934
-----------
Services/Commercial (0.05%)
ACNielsen Corporation 1,925 43,673
-----------
TOTAL CONSUMER CYCLICAL 4,877,566
-----------
CONSUMER STAPLES (6.92%)
Entertainment (1.42%)
Fox Entertainment Group, Inc. Cl. A 18,525 391,341
Time Warner, Inc. 15,550 944,663
-----------
Total Entertainment 1,336,004
-----------
Foods/Beverages (3.30%)
Anheuser-Busch Companies, Inc. 18,700 1,310,169
Canandaigua Brands, Inc. 5,950 355,513
PepsiCo, Inc. 29,375 888,594
The Quaker Oats Company 9,000 556,875
-----------
Total Foods/Beverages 3,111,151
-----------
Food/drug Retail (1.11%)
CVS Corporation 13,075 533,623
Safeway Inc. 13,475 512,892
-----------
Total Food/Drug Retail 1,046,515
-----------
Household Products/Cosmetics (1.10%)
The Procter & Gamble Company 11,050 $ 1,035,938
-----------
TOTAL CONSUMER STAPLES 6,529,608
-----------
ENERGY (5.60%)
Machinery/Oil Well Equipment and Services (0.41%)
Baker Hughes Incorporated 6,250 181,250
Noble Drilling Corporation 9,300 203,438
-----------
Total Machinery/Oil Well Equipment and Services 384,688
-----------
Natural Gas Diversified (0.65%)
The Coastal Corporation 15,075 617,133
-----------
Oil/Crude Producers (0.95%)
Apache Corporation 20,725 895,061
-----------
Oil/Integrated Domestic (0.53%)
Kerr-McGee Corporation 9,000 495,563
-----------
Oil/Integrated International (2.81%)
Conoco Inc. Cl. A 14,200 394,050
Conoco Inc. Cl. B 16,674 456,458
Mobil Corporation 10,150 1,022,613
Texaco Inc. 12,275 774,859
-----------
Total Oil/Integrated International 2,647,980
-----------
Oil Services (0.25%)
Halliburton Company 5,700 233,700
-----------
TOTAL ENERGY 5,274,125
-----------
FINANCIAL (8.47%)
Banks (1.27%)
The Chase Manhattan Bank 2,525 190,322
Fleet Financial Group, Inc. 18,450 675,731
PNC Bank Corp. 6,400 337,200
-----------
Total Banks 1,203,253
-----------
Diversified Financial Services (1.01%)
Citigroup Inc. 21,550 948,200
-----------
Finance Companies (0.79%)
Associates First Capital Corporation 20,748 746,928
-----------
Financial/Miscellaneous (1.55%)
Freddie Mac 11,550 600,600
Morgan Stanley Dean Witter & Co. 9,600 856,200
-----------
Total Financial/Miscellaneous 1,456,800
-----------
See Accompanying Notes to Financial Statements.
16
<PAGE>
Financial Services (2.56%)
American Express Company 3,600 $ 484,650
Kansas City Southern Industries, Inc. 10,850 503,847
Marsh & McLennan Companies, Inc. 20,775 1,423,088
-----------
Total Financial Services 2,411,585
-----------
Insurance (1.18%)
American International Group, Inc. 8,293 720,973
Hartford Life, Inc. Cl. A 4,800 236,400
Nationwide Financial Services, Inc. 4,475 158,303
-----------
Total Insurance 1,115,676
-----------
Savings and Loan (0.11%)
Bank United Corp. Cl. A 3,325 107,647
-----------
TOTAL FINANCIAL 7,990,089
-----------
HEALTH CARE (5.60%)
Drugs (4.48%)
American Home Products Corporation 2,550 105,825
Amgen Inc. 5,925 482,888
Forest Laboratories, Inc. 6,700 282,238
Johnson & Johnson 9,625 884,297
Merck & Co, Inc. 19,175 1,242,780
Pharmacia & Upjohn, Inc. 17,050 846,106
Teva Pharmaceuticals Industries Limited ADR 7,500 377,344
-----------
Total Drugs 4,221,478
-----------
Hospital Supplies (0.56%)
Baxter International Inc. 8,825 531,706
-----------
Medical Devices (0.56%)
Guidant Corporation 9,925 532,227
-----------
TOTAL HEALTH CARE 5,285,411
-----------
TECHNOLOGY (16.63%)
Computer Peripherals (0.44%)
EMC Corporation 5,800 414,338
-----------
Computer Services (0.68%)
Computer Sciences Corporation 9,125 641,602
-----------
Computer Software (3.94%)
Citrix Systems, Inc. 5,875 363,883
Legato Systems, Inc. 9,400 409,781
Microsoft Corporation 28,475 $ 2,578,767
Siebel Systems, Inc. 5,450 363,106
-----------
Total Computer Software 3,715,537
-----------
Computer Systems (3.36%)
Hewlett-Packard Company 5,000 460,000
International Business Machines Corporation 9,975 1,210,716
Sun Microsystems, Inc. 16,150 1,501,950
-----------
Total Computer Systems 3,172,666
-----------
Electronic Systems (0.47%)
Symbol Technologies, Inc. 13,225 444,691
-----------
Internet (0.52%)
Yahoo! Inc. 2,725 489,138
-----------
Networking/Communications Equipment (4.25%)
Cisco Systems, Inc. 19,549 1,340,328
General Instrument Corporation 4,800 231,000
Lucent Technologies Inc. 7,072 458,796
Nokia Corporation Cl. A, ADR 7,550 678,084
Nortel Networks Corporation 19,150 976,650
Tellabs, Inc. 5,750 327,391
-----------
TOTAL NETWORKING/COMMUNICATIONS EQUIPMENT 4,012,249
-----------
PRODUCTION TECHNOLOGY EQUIPMENT (0.29%)
Teradyne, Inc. 7,700 271,425
-----------
Semi-Conductors (2.68%)
Analog Devices, Inc. 6,875 352,344
Intel Corporation 16,000 1,189,000
Texas Instruments, Incorporated 6,900 567,525
Vitesse Semiconductor Corporation 4,850 414,069
-----------
Total Semi-Conductors 2,522,938
-----------
TOTAL TECHNOLOGY 15,684,584
-----------
UTILITIES (0.84%)
Electric/Natural Gas (0.84%)
The AES Corporation 7,950 469,050
Duke Power Company 5,800 319,725
-----------
Total Electric/Natural Gas 788,775
-----------
TOTAL COMMON STOCKS (cost $49,418,318) $58,133,961
-----------
See Accompanying Notes to Financial Statements.
17
<PAGE>
SHORT-TERM INVESTMENTS (3.87%) PAR VALUE VALUE
- --------------------------------------------------------------------------------
Variable Rate Demand Notes* (3.87%)
American Family Financial Services
5.044% 03-21-2000 $ 575,844 $ 575,844
Pitney Bowes Inc.
5.028% 02-04-2000 1,507,308 1,507,309
Warner-Lambert Company
5.044% 02-26-2000 420,000 420,000
Wisconsin Corporate Central Credit Union
5.093% 04-01-2000 877,891 877,891
Wisconsin Electric Power Company
5.044% 04-04-2000 267,014 267,013
-----------
Total Variable Rate Demand Notes (cost $3,648,057) 3,648,057
-----------
TOTAL SHORT-TERM INVESTMENTS (cost $3,648,057) $ 3,648,057
-----------
TOTAL INVESTMENTS IN SECURITIES (99.99%)
(cost $82,962,656) $94,296,765
-----------
OTHER ASSETS LESS LIABILITIES (0.01%) $ 13,152
-----------
NET ASSETS (100.00%) $94,309,917
===========
* The variable-rate securities are subject to a demand feature which reduces
the remaining maturity.
INTERMEDIATE FIXED INCOME PORTFOLIO
September 30, 1999 (unaudited)
LONG-TERM DEBT SECURITIES (82.33%) PAR VALUE VALUE
- --------------------------------------------------------------------------------
CORPORATE BONDS (33.70%)
FINANCE (23.56%)
Automobile (2.78%)
Ford Motor Credit Company
7.500% 11-15-1999 $ 25,000 $ 25,053
6.125% 04-28-2003 75,000 73,503
General Motors Acceptance
Corporation, Medium-Term Note
6.500% 12-06-2004 500,000 492,736
-----------
Total Automobile 591,291
-----------
Banks (3.75%)
Bank One, N.A.
7.375% 12-01-2002 780,000 797,438
Consumer (2.44%)
American General Finance Corporation
6.875% 01-15-2000 25,000 25,093
Beneficial Corporation, Medium-Term Note
6.510% 12-03-2003 $ 500,000 $ 494,422
-----------
Total Consumer 519,515
-----------
Diversified (3.78%)
Associates Corporation of North America,
Medium Term Note
6.840% 07-03-2001 300,000 301,665
Associates Corporation of North America
6.375% 06-01-2000 25,000 25,074
Commercial Credit Company
6.500% 06-01-2005 300,000 294,206
General Electric Capital Corporation
6.660% 05-01-2018 180,000 180,665
-----------
Total Diversified 801,610
-----------
Investment Banker/Broker (9.88%)
Dean Witter, Discover & Co.
6.250% 03-15-2000 40,000 40,060
Merrill Lynch & Co., Inc. Medium-Term Note
5.880% 01-15-2004 375,000 362,160
Morgan Stanley Dean Witter & Co.
5.625% 01-20-2004 500,000 477,592
See Accompanying Notes to Financial Statements.
18
<PAGE>
Morgan Stanley Group Inc.
6.125% 10-01-2003 $ 200,000 $ 195,545
6.375% 12-05-2003 25,000 24,622
Salomon Smith Barney Holdings Inc.
6.625% 07-01-2002 1,000,000 1,002,765
-----------
Total Investment Banker/Broker 2,102,743
-----------
Leasing Companies (0.94%)
International Lease Finance Corporation
Medium-Term Note
6.250% 10-15-2000 200,000 200,025
-----------
TOTAL FINANCE 5,012,622
-----------
INDUSTRIAL (10.14%)
Consumer (4.64%)
Sears, Roebuck and Co.
6.670% 07-07-2003 1,000,000 987,742
-----------
Retail/Apparel and Shoes (1.89%)
Nordstrom Credit, Inc. Medium-Term Note
7.890% 02-14-2000 400,000 402,855
-----------
Telephone (3.61%)
AT&T Corp.
5.625% 03-15-2004 800,000 767,750
-----------
TOTAL INDUSTRIAL 2,158,347
-----------
TOTAL CORPORATE BONDS 7,170,969
-----------
U.S. GOVERNMENT AND AGENCY OBLIGATIONS (46.87%)
U.S. TREASURY OBLIGATIONS (46.87%)
Certificate of Accrual on Treasury Securities
0.000% 11-15-1999 100,000 99,379
-----------
U.S. Treasury Notes
7.500% 11-15-2001 600,000 621,938
6.625% 03-31-2002 1,000,000 1,021,250
6.375% 08-15-2002 1,200,000 1,219,876
5.750% 08-15-2003 1,500,000 1,495,782
7.250% 05-15-2004 1,000,000 1,055,000
7.000% 07-15-2006 2,300,000 2,415,720
6.500% 10-15-2006 2,000,000 2,045,000
-----------
Total U.S. Treasury Notes 9,874,565
-----------
TOTAL U.S. TREASURY OBLIGATIONS 9,973,944
-----------
TOTAL U.S. GOVERNMENT AND AGENCY OBLIGATIONS $ 9,973,944
-----------
FOREIGN BONDS (U.S. DOLLAR DENOMINATED) (1.76%)
Yankee-Electric Distribution (0.60%)
Hydro-Quebec
7.375% 02-01-2003 $ 125,000 $ 127,962
-----------
Regional Agency/ADR (1.16%)
Province of Ontario
7.375% 01-27-2003 240,000 246,672
-----------
TOTAL FOREIGN BONDS 374,634
-----------
TOTAL LONG-TERM DEBT SECURITIES (cost $17,852,750) $17,519,547
-----------
SHORT-TERM INVESTMENTS (16.66%) PAR VALUE VALUE
- --------------------------------------------------------------------------------
VARIABLE RATE DEMAND NOTES* (16.66%)
General Mills, Inc.
5.028% 03-03-2000 $1,009,755 $ 1,009,755
Warner-Lambert Company
5.044% 02-26-2000 1,000,000 1,000,000
Wisconsin Corporate Central Credit Union
5.093% 04-01-2000 1,000,000 1,000,000
Wisconsin Electric Power Company
5.044% 04-04-2000 535,821 535,820
-----------
TOTAL VARIABLE RATE DEMAND NOTES (cost $3,545,575) 3,545,575
-----------
TOTAL SHORT-TERM INVESTMENTS (cost $3,545,575) $ 3,545,575
-----------
TOTAL INVESTMENTS IN SECURITIES (98.99%)
(cost $21,418,325) $21,065,122
-----------
OTHER ASSETS LESS LIABILITIES (1.01%) $ 215,884
-----------
NET ASSETS (100.00%) $21,281,006
-----------
* The variable-rate securities are subject to a demand feature which reduces
the remaining maturity.
See Accompanying Notes to Financial Statements.
19
<PAGE>
STATEMENTS OF ASSETS AND LIABILITIES
RAINIER INVESTMENT MANAGEMENT MUTUAL FUNDS
SEPTEMBER 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
Small/Mid Intermediate
Cap Equity Core Equity Balanced Fixed Income
Portfolio Portfolio Portfolio Portfolio
------------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
ASSETS
Investments in securities at market value
(Note 2) (cost of $393,144,241, $727,659,634,
$86,245,856 and $21,418,325 respectively) $ 389,259,709 $853,780,765 $94,296,765 $ 21,065,122
Cash 71 6,943 610 --
Receivables
Investment securities sold 5,247,474 1,635,762 -- --
Fund shares sold 71,294 397,270 16,123 --
Dividends and interest 395,833 767,619 666,363 332,505
Other receivables -- 14,446 -- --
Net deferred organization costs 1,310 1,310 1,310 1,310
Prepaid expenses 51,309 52,698 13,831 8,841
------------- ------------ ----------- ------------
Total assets 395,027,000 856,656,813 94,995,002 21,407,778
------------- ------------ ----------- ------------
LIABILITIES
Payables for investment securities purchased 2,289,061 2,725,697 178,343 --
Fund shares redeemed 375,243 3,970,839 -- --
Distributions to shareholders -- -- 407,412 90,902
Due to Investment Advisor (Note 3) 363,567 721,370 74,234 1,207
Deferred trustees compensation (Note 5) 1,823 3,038 608 608
Other accrued expenses 145,021 119,308 24,488 34,055
------------- ------------ ----------- ------------
Total liabilities 3,174,715 7,540,252 685,085 126,772
------------- ------------ ----------- ------------
Net assets $ 391,852,285 $849,116,561 $94,309,917 $ 21,281,006
============= ============ =========== ============
COMPOSITION OF NET ASSETS
Paid-in capital $ 402,075,083 $671,017,434 $81,926,206 $ 21,631,193
Accumulated undistributed net investment
income (loss) (402,037) 49,323 2,851 3,145
Accumulated undistributed net realized
gain (loss) on investments (5,936,229) 51,928,673 4,329,952 (129)
Net unrealized appreciation (depreciation)
on investments (3,884,532) 126,121,131 8,050,908 (353,203)
------------- ------------ ----------- ------------
Net assets $ 391,852,285 $849,116,561 $94,309,917 $ 21,281,006
============= ============ =========== ============
Number of shares issued and outstanding
(unlimited shares authorized) no par value 18,618,364 32,891,814 5,619,485 1,775,429
============= ============ =========== ============
Net asset value per share $ 21.05 $ 25.82 $ 16.78 $ 11.99
============= ============ =========== ============
</TABLE>
See Accompanying Notes to Financial Statements.
20
<PAGE>
STATEMENTS OF OPERATIONS
RAINIER INVESTMENT MANAGEMENT MUTUAL FUNDS
FOR THE SIX MONTHS ENDING SEPTEMBER 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
Small/Mid Intermediate
Cap Equity Core Equity Balanced Fixed Income
Portfolio Portfolio Portfolio Portfolio
------------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Income
Dividend income $ 2,120,498 $ 4,631,137 $ 319,369 $ --
Interest income 153,976 432,065 1,056,386 616,745
------------ ------------ ----------- ---------
Total income 2,274,474 5,063,202 1,375,755 616,745
------------ ------------ ----------- ---------
Expenses
Investment advisory fees (Note 3) 1,812,878 3,445,232 341,662 48,045
Custodian fees 56,906 111,223 21,318 2,633
Administration fees (Note 3) 109,107 182,933 48,805 10,677
Fund accounting fees 26,837 39,753 16,673 12,442
Transfer agent fees 21,075 31,023 7,765 6,018
Legal fees 2,868 6,317 703 141
Distribution fees (Note 3) 533,199 1,148,411 122,023 10,677
Insurance 1,577 3,475 386 77
Audit fees 11,130 18,551 3,709 3,709
Miscellaneous fees 7,521 11,029 3,510 2,006
Reports to shareholders 22,562 25,069 4,513 2,006
Registration fees 71,939 79,336 12,949 10,017
Trustees fees 3,836 6,392 1,279 1,279
Amortization of deferred organization costs 234 234 234 234
------------ ------------ ----------- ---------
Total expenses 2,681,669 5,108,978 585,528 109,961
Less: expenses reimbursed/waived (Note 3) -- -- (4,701) (51,239)
------------ ------------ ----------- ---------
Net expenses 2,681,669 5,108,978 580,827 58,722
------------ ------------ ----------- ---------
Net investment income (loss) (407,195) (45,776) 794,928 558,023
------------ ------------ ----------- ---------
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS
Net realized gain (loss) on investments sold 22,694,383 37,022,345 3,022,639 (848)
Net change in unrealized appreciation
(depreciation) on investments 5,432,887 (19,118,906) (2,508,486) (457,644)
------------ ------------ ----------- ---------
Net gain (loss) on investments 28,127,270 17,903,439 514,153 (458,492)
------------ ------------ ----------- ---------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $ 27,720,075 $ 17,857,663 $ 1,309,082 $ 99,531
============ ============ =========== =========
</TABLE>
See Accompanying Notes to Financial Statements.
21
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
RAINIER INVESTMENT MANAGEMENT MUTUAL FUNDS
<TABLE>
<CAPTION>
Small/Mid Cap Equity Portfolio Core Equity Portfolio
For the six For the fiscal For the six For the fiscal
months ending year ending months ending year ending
09/30/99* 03/31/99 09/30/99* 03/31/99
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations
Net investment income (loss) $ (407,195) $ (203,782) $ (45,776) $ 1,827,996
Net realized gain (loss) on investments sold 22,694,383 (28,570,141) 37,022,345 31,449,581
Net change in unrealized appreciation
(depreciation) on investments 5,432,887 (79,168,758) (19,118,906) 37,171,114
------------- ------------- ------------- -------------
Increase (decrease) in net assets resulting
from operations 27,720,075 (107,942,681) 17,857,662 70,448,691
------------- ------------- ------------- -------------
Distributions to shareholders
From net investment income -- (42,403) -- (2,181,041)
From net realized gain on investments sold -- (19,938,706) -- (42,700,545)
------------- ------------- ------------- -------------
Total distributions -- (19,981,109) -- (44,881,586)
------------- ------------- ------------- -------------
CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold 44,653,408 278,151,655 124,362,548 408,690,850
Net asset value of shares issued on
reinvestment of distributions -- 19,640,243 -- 43,346,167
Cost of shares redeemed (110,548,748) (255,522,649) (203,691,095) (265,681,232)
------------- ------------- ------------- -------------
Net increase (decrease) from capital
share transactions (65,895,340) 42,269,249 (79,328,547) 186,355,785
------------- ------------- ------------- -------------
Net increase (decrease) in net assets (38,175,265) (85,654,541) (61,470,885) 211,922,890
NET ASSETS
Beginning of period 430,027,550 515,682,091 910,587,446 698,664,556
------------- ------------- ------------- -------------
End of period $ 391,852,285 $ 430,027,550 $ 849,116,561 $ 910,587,446
============= ============= ============= =============
CHANGE IN SHARES OUTSTANDING
Shares sold 2,086,164 12,280,568 4,672,429 17,068,322
Shares issued on reinvestment of distributions -- 967,976 -- 1,878,898
Shares redeemed (5,173,814) (12,232,763) (7,711,148) (11,335,251)
------------- ------------- ------------- -------------
Net increase (decrease) in shares outstanding (3,087,650) 1,015,781 (3,038,719) 7,611,969
============= ============= ============= =============
</TABLE>
See Accompanying Notes to Financial Statements.
22
<PAGE>
<TABLE>
<CAPTION>
Intermediate Fixed
Balanced Portfolio Income Portfolio
---------------------------- ----------------------------
For the six For the fiscal For the six For the fiscal
months ending year ending months ending year ending
09/30/99* 03/31/99 09/30/99* 03/31/99
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations
Net investment income (loss) $ 794,929 $ 1,510,728 $ 558,023 $ 1,002,694
Net realized gain (loss) on investments sold 3,022,639 4,358,246 (848) 422,596
Net change in unrealized appreciation
(depreciation) on investments (2,508,486) 2,497,259 (457,644) (301,373)
------------ ------------ ------------ ------------
Increase (decrease) in net assets
resulting from operations 1,309,082 8,366,233 99,531 1,123,917
------------ ------------ ------------ ------------
Distributions to shareholders
From net investment income (783,805) (1,518,814) (551,042) (1,002,770)
From net realized gain on investments sold -- (5,222,707) -- (450,583)
------------ ------------ ------------ ------------
Total distributions (783,805) (6,741,521) (551,042) (1,453,353)
------------ ------------ ------------ ------------
Capital share transactions
Proceeds from shares sold 9,135,047 36,319,404 3,079,357 8,934,910
Net asset value of shares issued on
reinvestment of distributions 831,866 6,517,285 556,039 1,450,801
Cost of shares redeemed (13,026,150) (20,341,670) (2,308,031) (9,612,188)
------------ ------------ ------------ ------------
Net increase (decrease) from capital
share transactions (3,059,238) 22,495,019 1,327,365 773,523
------------ ------------ ------------ ------------
Net increase (decrease) in net assets (2,533,962) 24,119,731 875,854 444,087
NET ASSETS
Beginning of period 96,843,879 72,724,148 20,405,152 19,961,065
------------ ------------ ------------ ------------
End of period $ 94,309,917 $ 96,843,879 $ 21,281,006 $ 20,405,152
============ ============ ============ ============
CHANGE IN SHARES OUTSTANDING
Shares sold 529,388 2,295,716 253,965 705,059
Shares issued on reinvestment of distributions 48,763 412,053 46,046 115,787
Shares redeemed (757,934) (1,241,975) (191,113) (758,029)
------------ ------------ ------------ ------------
Net increase (decrease) in shares outstanding (179,783) 1,465,794 108,898 62,817
============ ============ ============ ============
</TABLE>
* Unaudited.
See Accompanying Notes to Financial Statements.
23
<PAGE>
FINANCIAL HIGHLIGHTS
The following information should be read in conjunction with the financial
statements and notes thereto appearing elsewhere in this Semi-Annual Report. The
calculations are based on a share outstanding for each period.
RAINIER INVESTMENT MANAGEMENT MUTUAL FUNDS
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
<TABLE>
<CAPTION>
Small/Mid Cap Equity Portfolio
---------------------------------------------------------------------------------------------
For the six For the fiscal For the fiscal For the fiscal For the fiscal From 05/10/94
months ending year ending year ending year ending year ending through
09/30/99* 03/31/99 03/31/99 03/31/98 03/31/96 03/31/95**
------------- --------------- -------------- -------------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of period $ 19.81 $ 24.92 $ 18.54 $ 17.89 $ 13.89 $ 12.00
-------- -------- -------- -------- -------- -------
Income from investment
operations
Net investment income (loss) (0.02) (0.01) (0.01) 0.05 0.05 0.10
Net realized and unrealized
gain (loss) on investments 1.26 (4.24) 8.71 2.43 5.17 2.18
-------- -------- -------- -------- -------- -------
Total from investment
operations 1.24 (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 $ 21.05 $ 19.81 $ 24.92 $ 18.54 $ 17.89 $ 13.89
======== ======== ======== ======== ======== =======
Total return 6.26%+ (17.18%) 48.68% 14.57% 38.38% 19.38%+
======== ======== ======== ======== ======== =======
Net assets at end of period
(in 000's) $391,852 $430,028 $515,682 $136,341 $ 79,495 $10,120
======== ======== ======== ======== ======== =======
Ratio of expenses to average
net assets
Before expense
reimbursement/recoupment 1.26% 1.25% 1.26% 1.33% 1.46% 2.93%++
After expense
reimbursement/recoupment n/a n/a n/a 1.40% 1.48% 1.48%++
====== ====== ====== ====== ====== ======
Ratio of net investment income
(loss) to average net assets,
after expense
reimbursement/recoupment (0.19%) (0.04%) (0.06%) 0.27% 0.66% 1.40%++
====== ====== ====== ====== ====== ======
Portfolio turnover rate 88.94%+ 143.70% 107.17% 130.54% 151.37% 152.21%
====== ====== ====== ====== ====== ======
</TABLE>
24
<PAGE>
<TABLE>
<CAPTION>
Core Equity Portfolio
---------------------------------------------------------------------------------------------
For the six For the fiscal For the fiscal For the fiscal For the fiscal From 05/10/94
months ending year ending year ending year ending year ending through
09/30/99* 03/31/99 03/31/99 03/31/98 03/31/96 03/31/95**
------------- --------------- -------------- -------------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of period $ 25.34 $ 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 0.48 1.95 8.86 2.86 5.13 2.00
--------- --------- -------- -------- -------- -------
Total from investment
operations 0.48 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 $ 25.82 $ 25.34 $ 24.67 $ 18.97 $ 17.53 $ 13.84
========= ======== ======== ======== ======== =======
Total return 1.89%+ 8.64% 49.64% 17.88% 38.64% 17.87%+
======== ======== ======== ======== ======== =======
Net assets at end of period
(in 000's) $849,177 $910,587 $698,665 $260,629 $107,665 $20,430
======== ======== ======== ======== ======== =======
Ratio of expenses to average
net assets
Before expense
reimbursement/recoupment 1.11% 1.13% 1.14% 1.18% 1.30% 1.86%
After expense
reimbursement/recoupment n/a n/a n/a 1.22% 1.29% 1.29%
======== ======== ======== ======== ======== =======
Ratio of net investment income
(loss) to average net assets,
after expense
reimbursement/recoupment (0.01%) 0.23% 0.37% 0.74% 1.07% 1.25%++
======== ======== ======== ======== ======== =======
Portfolio turnover rate 50.65%+ 132.91% 119.88% 146.12% 138.02% 133.18%+
======== ======== ======== ======== ======== =======
</TABLE>
* Unaudited
** Commencement of operations 05/10/94.
+ Not Annualized.
++ Annualized for periods of less than one year.
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.
25
<PAGE>
RAINIER INVESTMENT MANAGEMENT MUTUAL FUNDS
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
<TABLE>
<CAPTION>
Balanced Portfolio
----------------------------------------------------------------------------------------------
For the six For the fiscal For the fiscal For the fiscal For the fiscal From 05/10/94
months ending year ending year ending year ending year ending through
09/30/99* 03/31/99 03/31/99 03/31/98 03/31/96 03/31/95**
------------- --------------- -------------- -------------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of period $ 16.70 $ 16.78 $ 14.76 $ 14.53 $ 12.96 $ 12.00
-------- -------- -------- -------- -------- -------
Income from investment
operations
Net investment income (loss) 0.14 0.28 0.35 0.37 0.38 0.30
Net realized and unrealized
gain (loss) on investments 0.08 0.85 4.46 1.28 2.82 1.13
-------- -------- -------- -------- -------- -------
Total from investment
operations 0.22 1.13 4.81 1.65 3.20 1.43
-------- -------- -------- -------- -------- -------
Distributions
From net investment income (0.14) (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 (0.14) (1.21) (2.79) (1.42) (1.63) (0.47)
-------- -------- -------- -------- -------- -------
Net asset value, end of period $ 16.78 $ 16.70 $ 16.78 $ 14.76 $ 14.53 $ 12.96
======== ======== ======== ======== ======== =======
Total return 1.30%+ 7.22% 34.57% 11.83% 25.58% 12.23%+
======== ======== ======== ======== ======== =======
Net assets at end of period
(in 00Os) $ 94,310 $ 96,844 $ 72,724 $ 40,630 $ 32,080 $13,724
======== ======== ======== ======== ======== =======
Ratio of expenses to average
net assets
Before expense
reimbursement/recoupment 1.20% 1.22% 1.28% 1.31% 1.50% 2.29%
After expense
reimbursement/recoupment 1.19% 1.19% 1.19% 1.19% 1.19% 1.19%
======== ======== ======== ======== ======== =======
Ratio of net investment income
(loss) to average net assets,
after expense
reimbursement/recoupment 1.63% 1.78% 2.09% 2.50% 2.76% 3.04%
======== ======== ======== ======== ======== =======
Portfolio turnover rate 34.39%+ 108.28% 102.98% 133.68% 114.85% 92.40%+
======== ======== ======== ======== ======== =======
</TABLE>
26
<PAGE>
<TABLE>
<CAPTION>
Intermediate Fixed Income Portfolio
----------------------------------------------------------------------------------------------
For the six For the fiscal For the fiscal For the fiscal For the fiscal From 05/10/94
months ending year ending year ending year ending year ending through
09/30/99* 03/31/99 03/31/99 03/31/98 03/31/96 03/31/95**
------------- --------------- -------------- -------------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of period $ 12.24 $ 12.45 $ 12.08 $ 12.33 $ 12.00 $ 12.00
-------- -------- -------- -------- -------- -------
Income from investment
operations
Net investment income (loss) 0.31 0.68 0.71 0.65 0.70 0.57
Net realized and unrealized
gain (loss) on investments (0.25) 0.11 0.37 (0.25) 0.34 --
-------- -------- -------- -------- -------- -------
Total from investment
operations 0.06 0.79 1.08 0.40 1.04 0.57
-------- -------- -------- -------- -------- -------
Distributions
From net investment income (0.31) (0.68) (0.71) (0.64) (0.70) (0.57)
From net realized gains -- (0.32)2 -- (0.01) (0.01) --
-------- -------- -------- -------- -------- -------
Total distributions (0.31) (1.00) (0.71) (0.65) (0.71) (0.57)
-------- -------- -------- -------- -------- -------
Net asset value, end of period $ 11.99 $ 12.24 $ 12.45 $ 12.08 $ 12.33 $ 12.00
======== ======== ======== ======== ======== =======
Total return 0.52%+ 6.49% 9.11% 3.35% 8.85% 4.92%+
======== ======== ======== ======== ======== =======
Net assets at end of period
(in 000Os) $ 21,281 $ 20,405 $ 19,961 $ 19,303 $ 9,740 $ 6,370
======== ======== ======== ======== ======== =======
Ratio of expenses to average
net assets++
Before expense
reimbursement/recoupment 1.03% 1.04% 1.19% 1.53% 2.17% 2.44%
After expense
reimbursement/recoupment 0.55% 0.55% 0.55% 0.95% 0.95% 0.95%
======== ======== ======== ======== ======== =======
Ratio of net investment income
(loss) to average net assets,
after expense
reimbursement/recoupment 5.22% 5.39% 5.73% 5.42% 5.69% 5.57%
======== ======== ======== ======== ======== =======
Portfolio turnover rate 0.40%+ 54.59% 15.99% 8.37% 15.49% 5.21%+
======== ======== ======== ======== ======== =======
</TABLE>
* Unaudited.
** Commencement of operations 05/10/94.
+ Not Annualized.
++ Annualized for periods of less than one year.
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.
27
<PAGE>
NOTES TO FINANCIAL STATEMENTS
RAINIER INVESTMENT MANAGEMENT MUTUAL FUNDS
SEPTEMBER 30, 1999 (UNAUDITED)
NOTE 1. ORGANIZATION
Rainier Investment Management Mutual Funds (the "Trust") was organized as a
business trust in Delaware on December 15, 1993 and is registered under the
Investment Company Act of 1940, as amended (the "1940 Act"), as a diversified,
open-end management investment company. The Trust consists of four separate
series of portfolios: Small/Mid Cap Equity Portfolio, Core Equity Portfolio,
Balanced Portfolio, and Intermediate Fixed Income Portfolio (each a "Fund" and
collectively the "Funds").
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES
The following significant accounting policies are consistently followed by
the Funds in the preparation of its financial statements, and such policies are
in conformity with generally accepted accounting principles for investment
companies.
A) SECURITY VALUATION: The Funds invest in a range of securities, generally
including equities and U.S. Government securities. Equity securities are valued
at the last sale price (for exchange-listed securities) 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 six months ending
September 30, 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. As of March 31, 1999, 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
28
<PAGE>
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 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.
The Investment Advisor has contractually 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. This contract has a one-year
term, renewable at the end of each fiscal year. 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.
Effective 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 six months ending September
30, 1999 were as follows:
Fund Purchases Sales
- ---- --------- -----
Small/Mid Cap Equity Portfolio $370,789,877 $439,294,837
Core Equity Portfolio 448,810,428 537,730,534
Balanced Portfolio 32,299,594 37,442,279
Intermediate Fixed Income Portfolio 72,781 875,176
There were no purchases or sales of U.S. Government securities by the
Small/Mid Cap Equity Portfolio, Core Equity Portfolio, Balanced Portfolio and
Intermediate Fixed Income Portfolio.
The aggregate unrealized appreciation and depreciation of portfolio
securities at September 30, 1999, based on costs for federal income tax purposes
were as follows:
29
<PAGE>
Gross Gross Net
Unrealized Unrealized Unrealized
Fund Appreciation Depreciation Appr./(Depr.)
- ---- ------------ ------------ -------------
Small/Mid Cap Equity $ 17,485,784 $21,370,316 ($ 3,884,532)
Core Equity 131,226,599 5,105,468 126,121,131
Balanced 8,389,621 338,712 8,050,909
Intermediate Fixed Income 0 353,203 (353,203)
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,
which is allocated among the Funds.
On December 10, 1998, the Trust approved a Deferred Compensation Plan for
Trustees (the "Plan"). 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 at the end of each quarter 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.
30
<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 2000(R) Index and the Russell 2500(a)
Index are unmanaged indices composed of the equities of companies ranging in
value from approximately $1.4 to $407.2 billion, $178.2 million to $1.3 billion,
and $178.2 million to $3.8 billion, respectively, as of May 31, 1999.
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.
31
<PAGE>
RAINIER INVESTMENT MANAGEMENT MUTUAL FUNDS
601 Union Street, Suite 2801
Seattle, Washington 98101
(800) 248-6314
www.rainierfunds.com
