SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO.)
FILED BY THE REGISTRANT [X]
FILED BY A PARTY OTHER THAN THE REGISTRANT [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted
by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
WM VARIABLE TRUST
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Q & A
SMALL CAP GROWTH FUND PROPOSED SUB-ADVISORY AGREEMENT
Q. WHY AM I RECEIVING THIS PROXY STATEMENT?
The Board of Trustees of WM Variable Trust, on behalf of its Small Cap Growth
Fund (the "Fund"), has scheduled a special meeting of shareholders on March 16,
2005 at 10:00 a.m., Pacific time for the purpose of approving sub-advisory
agreements relating to the Fund between WM Advisors, Inc. (the "Advisor"), the
Fund, and Oberweis Asset Management, Inc. ("Oberweis"), and between the Advisor,
the Fund, and Delaware Management Company ("Delaware Management"). The Board
believes that the proposed agreements would be in the best interest of
shareholders and recommends that you vote "FOR" their approval.
Q. WHY IS THE BOARD PROPOSING SUB-ADVISORS FOR THE FUND?
As part of its ongoing evaluation of the Fund and its investment advisors, the
Advisor has determined that the Fund would benefit from allocating its assets
among two sub-advisors. [The Advisor believes that the investment styles of
Oberweis and Delaware Management (each a "Proposed Sub-Advisor") are
complementary and that allocating the Fund's assets among these two sub-advisors
could benefit the Fund by reducing volatility. In addition, the introduction of
Oberweis and Delaware Management would enable the Advisor to focus its direct
equity management resources on value-oriented portfolios, while leveraging the
Advisor's existing asset allocation and sub-advisory oversight expertise.]
Q. WILL THE PROPOSAL AFFECT THE TOTAL ADVISORY FEES PAID BY THE FUND?
No. This change will not affect the Fund's aggregate advisory fee.
Q. HOW WILL THE ADVISOR ALLOCATE THE FUND'S ASSETS AMONG THE PROPOSED SUB-
ADVISORS?
The Advisor will determine the proportion of the Fund's assets, if any, to be
managed by each sub-advisor. The Advisor currently intends to allocate one half
of the Fund's assets to each sub-advisor.
Q. HOW DO I CAST MY VOTE?
Most shareholders cast their votes by completing and signing the enclosed proxy
card and mailing it back in the postage-paid reply envelope. However, you can
use any of the following convenient methods:
- - Mail -- sign and date your proxy card, and mail it back in the enclosed
postage-paid envelope.
- - Touch tone telephone -- please refer to your proxy card.
- - Internet -- please refer to your proxy card.
Your vote is important to us and will help ensure that the proposals in the
proxy statement can be acted upon.
Please take the time to read the proxy statement thoroughly. If you have any
questions, please contact your investment representative or call (800) 222-5852.
Thank you for your time, consideration and vote.
[WM Group Letterhead]
February 23, 2005
DEAR SMALL CAP GROWTH FUND SHAREHOLDER:
The enclosed proxy statement solicits your vote as a shareholder of the Small
Cap Growth Fund (the "Fund") for the purpose of approving sub-advisory
agreements with two sub-advisors: Oberweis Asset Management, Inc. ("Oberweis")
and Delaware Management Company ("Delaware Management"). This proxy statement is
designed to give you information about the proposed agreements. After you have
reviewed this material carefully, we encourage you to follow the Board of
Trustees' recommendation by voting "FOR" the proposed agreements.
The Fund is managed by WM Advisors, Inc. (the "Advisor") and currently has no
sub-advisors. Portfolio diversification and strategic asset allocation have long
been key tenets of the Advisor's investment philosophy. Mindful of the
relatively volatile nature of small cap growth equity investing, the Advisor
believes the Fund could benefit from allocating Fund assets among the two
sub-advisors. [The Advisor believes that the investment styles of Oberweis and
Delaware Management (each a "Proposed Sub-Advisor") are complementary and that
allocating the Fund's assets among these two sub-advisors could benefit the Fund
by reducing volatility. In addition, the introduction of Oberweis and Delaware
Management would enable the Advisor to focus its direct equity management
resources on value-oriented portfolios, while leveraging the Advisor's existing
asset allocation and sub-advisory oversight expertise.]
These proposals will NOT change the total advisory fees paid by the Fund.
A special meeting of shareholders has been scheduled for March 16, 2005 at 10:00
a.m., Pacific time, at the main office of the Fund at 1201 Third Avenue,
Seattle, Washington 98101. While you are invited to attend the meeting, most
shareholders cast their vote by completing the accompanying proxy card. Your
vote is essential. Please vote as soon as possible using any of the following
methods:
- Mail -- sign and date your proxy card, and mail it back in the
enclosed postage-paid envelope.
- Touch tone telephone -- please refer to your proxy card.
- Internet -- please refer to your proxy card.
If you have questions, please contact your financial representative or call
(800) 222-5852.
Your vote is important to us and is needed to ensure that the proposed
agreements in the proxy statement can be acted upon. We look forward to
receiving your vote soon.
Sincerely,
William G. Papesh
President
VOTE TODAY BY MAIL,
TOUCH-TONE PHONE AT (800) 690-6903 OR THE INTERNET
BY LOGGING ONTO WWW.PROXYWEB.COM
WM GROUP OF FUNDS
SMALL CAP GROWTH FUND
WM VARIABLE TRUST
1201 THIRD AVENUE
SEATTLE, WASHINGTON 98101
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON MARCH 16, 2005
TO THE SHAREHOLDERS OF THE SMALL CAP GROWTH FUND:
Notice is hereby given that a Special Meeting of Shareholders of the WM Small
Cap Growth Fund (the "Fund"), a series of WM Variable Trust, will be held on
March 16, 2005 at 10:00 a.m., Pacific time, at the main office of the Fund at
1201 Third Avenue, Seattle, Washington 98101, for the following purposes:
1. To approve or disapprove a sub-advisory agreement for the Fund among the Fund
WM Advisors, Inc. and Oberweis Asset Management, Inc.;
2. To approve or disapprove a sub-advisory agreement for the Fund among the
Fund, WM Advisors, Inc. and Delaware Management Company,
3. To consider and act upon any other matters which may properly come before the
meeting or any adjournment thereof.
Shareholders of record at the close of business on February 1, 2005 are entitled
to notice of, and to vote at, the Meeting.
By order of the Board of Trustees,
John T. West, Secretary
February 23, 2005
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YOUR VOTE IS IMPORTANT
PLEASE RESPOND -- YOUR VOTE IS IMPORTANT WHETHER OR NOT YOU PLAN TO ATTEND THE
MEETING. PLEASE COMPLETE, SIGN, DATE AND MAIL THE ENCLOSED PROXY IN THE ENCLOSED
POSTAGE PREPAID ENVELOPE SO THAT YOU WILL BE REPRESENTED AT THE MEETING.
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WM GROUP OF FUNDS
SMALL CAP GROWTH FUND
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation of proxies
on behalf of the Board of Trustees (the "Trustees") of WM Variable Trust (the
"Trust") for use at the Special Meeting of Shareholders of the Small Cap Growth
Fund (the "Fund"), a series of the Trust, to be held at 10:00 a.m., Pacific
time, on March 16, 2005, at 1201 Third Avenue, Seattle, Washington, and at any
adjournment or adjournments thereof (the "Meeting"). This Proxy Statement and
its enclosures are being mailed to shareholders beginning on or about February
23, 2005.
A COPY OF THE TRUST'S MOST RECENT ANNUAL REPORT MAY BE OBTAINED WITHOUT CHARGE
BY WRITING TO WM FUNDS DISTRIBUTOR, INC., P.O. BOX 9757, PROVIDENCE, RHODE
ISLAND 02940-9757 OR BY CALLING (800) 222-5852.
I. GENERAL
All shareholders of record of the Fund as of the close of business on February
1, 2005, the record date for determining shareholders entitled to vote at the
Meeting (the "Record Date"), are entitled to one vote for each share of
beneficial interest of the Fund held as of that date, and each fractional share
shall be entitled to a proportional fractional vote. The aggregate number of
shares of beneficial interest of the Fund for all classes issued and outstanding
as of the Record Date was [___________].
Timely, properly executed proxies will be voted as you instruct. IF NO
SPECIFICATION IS MADE, SHARES WILL BE VOTED FOR THE APPROVAL OF THE SUB-ADVISORY
AGREEMENTS. At any time before it has been voted, the enclosed proxy may be
revoked by the signer by a written revocation received by the Secretary of the
Trust, by properly executing a later-dated proxy or by attending the Meeting,
requesting the return of any previously delivered proxy and voting in person.
The holders of a majority of the shares of the Fund outstanding as of the Record
Date, present in person or represented by proxy, constitute a quorum for the
transaction of business by the shareholders of the Fund at the Meeting. Votes
cast by proxy or in person at the Meeting will be counted by persons appointed
by the Trust as tellers for the Meeting. The tellers will count the total number
of votes cast "for" approval of Proposals 1 and 2 for purposes of determining
whether sufficient affirmative votes have been cast for each Proposal. The
tellers will count all shares represented by proxies that reflect
abstentions and "broker non-votes" (i.e., shares held by brokers or nominees as
to which (i) instructions have not been received from the beneficial owners or
the persons entitled to vote and (ii) the broker or nominee does not have
discretionary voting power on a particular matter) as shares that are present
and entitled to vote for purposes of determining the presence of a quorum.
Abstentions and broker non-votes will have the same effect as a negative vote on
each Proposal.
Solicitation of proxies by personal interview, mail, telephone and facsimile may
be made by officers and Trustees of the Trust and employees of WM Advisors,
Inc., the Fund's investment advisor (the "Advisor"), and its affiliates. [The
Trust has retained [ ] , to aid in the tabulation of proxies.]
[The costs of retaining [ ] and other expenses incurred in connection with the
solicitation of proxies, and the costs of holding the Meeting, will be borne by
the Fund. The anticipated cost associated with the solicitation of proxies by
[________] is [$________].
Portfolio diversification and strategic asset allocation have long been key
tenets of the investment philosophy of the Advisor. Mindful of the relatively
volatile nature of small cap growth equity investing, the Advisor believes the
Fund could benefit from entering into sub-advisory agreements (the "Proposed
Agreements") with Oberweis Asset Management, Inc. ("Oberweis") and Delaware
Management Company ("Delaware Management"). Under the Proposed Agreements, each
sub-advisor will invest the portion of the Fund allocated to it primarily in
equity securities of small cap growth companies using its own distinct
investment philosophy and process. The Advisor believes that the investment
styles of Oberweis and Delaware Management (each a "Proposed Sub-Advisor") are
complementary and that allocating the Fund's assets among the Proposed
Sub-Advisors could benefit the Fund by reducing volatility. In addition, the
introduction of Oberweis and Delaware Management would enable the Advisor to
focus its direct equity management resources on value-oriented portfolios, while
leveraging the Advisor's existing asset allocation and sub-advisory oversight
expertise.
The Advisor will determine the proportion of the Fund's assets, if any, to be
managed by each sub-advisor. The Advisor currently intends to allocate one half
of the Fund's assets to each sub-advisor.
In order for Oberweis and Delaware Management to serve as sub-advisors to the
Fund, the Investment Company Act of 1940, as amended (the "1940 Act"), requires
approval of the Proposed Agreements by both the Trustees and the Fund's
shareholders.
[The Proposed Agreements were unanimously approved by the Trustees, including
those Trustees who are not "interested persons" (as defined in the 1940 Act) of
any party to the Proposed Agreements (the "Independent Trustees"), on February
17, 2005. The Trustees, including a majority of the Independent Trustees, are
recommending approval of the Proposed Agreements by shareholders. If
shareholders of the Fund do not approve either or both of the Proposed
Agreements, the Trustees will consider what further actions to
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take. Such actions could include considering one or more other sub-advisors for
the Fund.]
A description of the Proposed Agreements, the services to be provided
sthereunder, and the procedures for termination and renewal thereof is set forth
below under "Description of the Proposed Agreements." Such description is
qualified in its entirety by reference to the form of Proposed Agreements set
forth in Appendix A to this Proxy Statement. Additional information about
Oberweis and Delaware Management is set forth below under "Additional
Information."
DESCRIPTION OF THE PROPOSED AGREEMENTS
In order to assist it in carrying out its responsibilities as manager of the
Fund, the Advisor has proposed to retain Oberweis and Delaware Management under
the Proposed Agreements to render sub-advisory services to the Fund under the
supervision of the Advisor and the Trustees.
Each Proposed Agreement provides that, subject to the supervision of the
Trustees and the Advisor, the applicable Proposed Sub-Advisor will, with respect
to the portion of the Fund's assets allocated to it, make investment decisions
for the Fund in accordance with the Fund's investment objectives and policies as
stated in the Fund's Prospectus and Statement of Additional Information as in
effect and as supplemented from time to time and in conformity with the Trust's
Master Trust Agreement, the 1940 Act and the Investment Advisers Act of 1940, as
amended (the "Advisers Act"). For its portion of the Fund, each Proposed
Sub-Advisor will also place purchase and sale orders for securities to
effectuate the investment decisions made, maintain books and records with
respect to the securities transactions and furnish to the Trust's Board of
Trustees such quarterly, annual and special reports as the Board may reasonably
request; treat confidentially and as proprietary information of the Fund all
records and other information relative to the Fund and prior, present or
potential shareholders; and supervise investments and conduct a continuous
program of investment, evaluation and, if appropriate, sale and reinvestment.
Each Proposed Agreement further provides that the applicable Proposed
Sub-Advisor shall not use such records and information for any purpose other
than performance of its responsibilities and duties thereunder. In addition, the
Proposed Sub-Advisor will furnish the Fund or the Advisor with whatever
statistical information the Fund or the Advisor may reasonably request with
respect to the investments that the Fund may hold or consider purchasing.
Each Proposed Agreement provides that it will continue in effect for an initial
term of two years from its date of execution and thereafter so long as it is
approved at least annually in accordance with the 1940 Act. The 1940 Act
requires that, after the initial two-year term, each Proposed Agreement be
approved at least annually by (i) the vote, cast in person at a meeting called
for the purpose, of a majority of the Independent Trustees and (ii) the majority
vote of the full Board of Trustees or the vote of a majority of the outstanding
voting securities (as defined in the 1940 Act) of the Fund. Each Proposed
Agreement terminates automatically in the event of their assignment or upon
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any termination of the advisory agreement between the Trust and the Advisor.
Each Proposed Agreement may be terminated without penalty on thirty days'
written notice, by the Advisor, the Board of Trustees of the Trust or by a vote
of holders of a majority of the Funds' shares, and upon sixty days' written
notice by the applicable Proposed Sub-Advisor.
Each Proposed Agreement provides that the applicable Proposed Sub-Advisor shall
not be subject to any liability to the Trust, the Fund or the Advisor, or to any
shareholder, officer, director or Trustee thereof, for any act or omission in
the course of, or connected with, rendering services thereunder, in the absence
of willful misfeasance, bad faith, gross negligence or reckless disregard of its
obligations and duties.
Each Proposed Agreement also provides that, for the period during which the
Proposed Agreement is in effect, the Fund will pay the Advisor a monthly fee
equal to the excess, if any, of the fee otherwise payable to the Advisor under
the Advisory Agreement dated as of May 11, 2004 between the Advisor and the Fund
(the "Advisory Agreement") over the total fees paid by the Fund pursuant to the
sub-advisory agreements with respect to the Fund.
II. APPROVAL OF SUB-ADVISORY AGREEMENTS WITH EACH OF OBERWEIS AND DELAWARE
MANAGEMENT.
TRUSTEES' CONSIDERATIONS
[In determining whether to approve the Proposed Agreements, the Trustees met
with the relevant investment advisory personnel of the Advisor and the proposed
portfolio managers from the Proposed Sub-Advisor. The Trustees also considered
information provided by the Advisor and each Proposed Sub-Advisor relating to
the education, experience, and number of investment professionals and other
personnel providing services under the Proposed Agreements for the purpose of
evaluating Oberweis's and Delaware Management's fitness to serve as investment
advisors to the Fund. The Trustees also took into account the time and attention
that would be devoted by senior management of each Proposed Sub-Advisor to the
Fund. The Trustees evaluated the level of skill required to manage the Fund and
concluded that the resources that each Proposed Sub-Advisor would devote to the
Fund were appropriate to fulfill effectively their respective duties under the
applicable Proposed Agreement. The Trustees also considered the business
reputation and financial resources of each Proposed Sub-Advisor and concluded
that it would be able to meet any reasonably foreseeable obligations under the
Proposed Agreement.]
[The Trustees considered information concerning the investment philosophy and
investment process proposed to be applied by each Proposed Sub-Advisor in
managing the Fund. In this context, the Trustees considered the in-house
research capabilities of each Proposed Sub-Advisor as well as other sources
available to each Proposed Sub-Advisor's personnel, including research services
available to each Proposed Sub-Advisor that would result from securities
transactions effected for the Fund and other investment
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advisory clients of each Proposed Sub-Advisor. The Trustees concluded that the
investment philosophy, process, and research capabilities of Oberweis and
Delaware Management were well suited to the Fund, given its investment objective
and policies.]
[The Trustees considered the scope of the services to be provided by each
Proposed Sub-Advisor to the Fund under the applicable Proposed Agreement
relative to services provided by third parties to other mutual funds and
services provided by Oberweis and Delaware Management currently to mutual funds
and other clients. The Trustees considered the services to be provided by the
Advisor with respect to the Fund, including oversight by the Advisor of the
advisory services to be provided by each Proposed Sub-Advisor, and other
non-advisory services provided by the Advisor. The Trustees noted that the
standard of care applicable to each Proposed Sub-Advisor under the Proposed
Agreements was comparable to that found in most mutual fund investment advisory
agreements. The Trustees concluded that the scope of the services to be provided
to the Fund by each Proposed Sub-Advisor was consistent with the Fund's
operational requirements, including, in addition to its investment objective,
compliance with the Fund's investment restrictions, tax and reporting
requirements and related shareholder services.]
[The Trustees evaluated the record of each Proposed Sub-Advisor with respect to
regulatory compliance. The Trustees also evaluated the procedures of each
Proposed Sub-Advisor designed to fulfill its fiduciary duties to its advisory
clients with respect to possible conflicts of interest, including the code of
ethics of each Proposed Sub-Advisor (regulating the personal trading of its
officers and employees), the procedures by which each Proposed Sub-Advisor
allocates trades among its various investment advisory clients, the integrity of
the systems in place to ensure compliance with the foregoing, and the record of
each Proposed Sub-Advisor in these matters. The Trustees also received and
considered information concerning procedures of each Proposed Sub-Advisor with
respect to the execution of portfolio transactions.]
[The Trustees considered information relating to the investment performance of
accounts managed by each Proposed Sub-Advisor in a style similar to that it
would use with respect to the Fund and relative to funds managed similarly by
other advisors. The Trustees reviewed performance over various periods,
including one-, three- and five-year periods, and considered information
presented by the Advisor with respect to its expectations regarding the relative
performance of each Proposed Sub-Advisor under different market conditions and
during different phases of a market cycle, the volatility of such returns, as
well as factors identified by each Proposed Sub-Advisor as contributing to
performance. The Trustees concluded that the scope and quality of the services
expected to be provided by each Proposed Sub-Advisor, as well as the investment
performance of comparable investment advisory clients of each Proposed
Sub-Advisor, were sufficient, in light of market conditions, performance
attribution, the resources dedicated by the Proposed Sub-Advisor and its
integrity, its personnel and systems and its financial resources, to merit
approval of the applicable Proposed Agreement.]
5
[In reaching that conclusion, the Trustees also gave substantial consideration
to the fees payable under the Proposed Agreements. The Trustees not only took
into account the actual dollar amount of fees to be paid by the Fund directly to
each Proposed Sub-Advisor, but also took into account so-called "fallout
benefits" to each Proposed Sub-Advisor, such as any incremental increase to its
reputation derived from serving as investment advisor to the Fund. The Trustees
also considered fees paid to each Proposed Sub-Advisor, and services provided by
each Proposed Sub-Advisor, under other advisory contracts, concluding that,
considering the relative complexity of the investment management
responsibilities under such contracts, the fees to be paid to each Proposed
Sub-Advisor and the services to be provided by each Proposed Sub-Advisor under
the applicable Proposed Agreement bore a reasonable relationship to such fees
and services.]
[The Trustees also considered the effective fees under the Proposed Agreements,
as a percentage of assets at different asset levels, and possible economies of
scale to each Proposed Sub-Advisor and concluded that the fee levels reflect an
appropriate sharing of these economies of scale. The Trustees also considered
the fact that, under the Proposed Agreements, the fees payable to the Advisor by
the Fund are reduced by the total fees paid by the Fund under the Proposed
Agreements and the possible impact of each Proposed Sub-Advisor's fees on the
profitability of the Advisor. The Trustees did not evaluate the expected
profitability of Oberweis or Delaware Management with respect to the Fund, both
because of the lack of actual operating history and because the Trustees
concluded that the negotiations between the Advisor and each Proposed
Sub-Advisor regarding the Proposed Agreements had been entirely at arms-length.]
[In evaluating the Fund's sub-advisory fees, the Trustees also took into account
the complexity of investment management for the Fund relative to other types of
funds. The Trustees concluded that generally greater research intensity and
trading acumen is required for equity funds such as the Fund, as compared to
funds investing in primarily debt obligations.]
[In considering to recommend approval of more than one sub-advisor, the Trustees
also took into account the fact that common holdings across one or more
sub-advisors will create the possibility of "wash sales," i.e., the sale of a
security within 30 days of its purchase or vice versa. For example, if Oberweis
were to sell a security from the portion of the Fund managed by it and Delaware
Management were to purchase the same security within 30 days, that would
constitute a "wash sale," even though different sub-advisors were responsible
for the purchase and sale decisions. "Wash sales" are disadvantageous from a tax
perspective because gains are recognized on a current basis, but losses are
deferred.]
[The Trustees also took into account the fact that the Fund will experience
higher portfolio turnover in connection with the initial allocation of Fund
assets to Oberweis and Delaware Management, with the attendant brokerage,
custodian, and other transactional costs (estimated by the Advisor, based on its
contemplated initial allocation, at approximately [___]% of the Fund's assets).
Future reallocations among the sub-advisors may also result in higher portfolio
turnover and related costs.]
6
[Based on the foregoing, the Trustees concluded that the fees to be paid under
each Proposed Agreement were fair and reasonable, given the scope and quality of
the services proposed to be rendered by the Proposed Sub-Advisor. The Trustees
unanimously approved, and recommend that shareholders of the Fund approve, each
Proposed Agreement.]
SUB-ADVISORY FEES
The Fund would pay fees to Oberweis and Delaware Management under the Proposed
Agreements, although the amount paid by the Fund to the Advisor would be reduced
by amounts paid to Oberweis and Delaware Management.
Under the Proposed Agreement with Oberweis, Oberweis would receive fees on a
monthly basis calculated at an annual rate of 0.60% of the average daily net
assets of the Fund and the Small Cap Growth series of WM Variable Trust
(together, the "Combined Assets") under management by Oberweis on the first $250
million of such assets, 0.50% of the next $250 million of such Combined Assets,
and 0.40% of such assets in excess of $500 million. If the Proposed Agreement
with Oberweis had been in effect for the fiscal year ended December 31, 2004,
the Advisor estimates that Oberweis would have received fees equal to [__]% of
the Combined Assets managed by Oberweis, assuming that Oberweis had managed a
portion of the Combined Assets equal to the portion of the Combined Assets that
the Advisor expects to initially allocate to Oberweis.
Under the Proposed Agreement with Delaware Management, Delaware Management would
receive fees on a monthly basis calculated at an annual rate of 0.60% of the
average daily net assets of the Fund and the Small Cap Growth series of WM
Variable Trust under management by Delaware Management on the first $250 million
of such assets, 0.50% of the next $250 million of such Combined Assets, and
0.40% of such Combined Assets in excess of $500 million. If the Proposed
Agreement with Delaware Management had been in effect for the fiscal year ended
December 31, 2004, Delaware Management would have received fees equal to [___]%
of the Combined Assets managed by Delaware Management, assuming that Delaware
Management had managed a portion of the Combined Assets equal to the portion of
the Combined Assets that the Advisor expects to initially allocate to Delaware
Management.
To the extent that the Fund may pay lower fees to Oberweis or Delaware
Management for sub-advisory services provided to the Fund, the Advisor may have
a financial incentive to allocate more assets to the sub-advisor that receives
lower fee payments.
TRUSTEES' RECOMMENDATION
THE TRUSTEES OF THE TRUST RECOMMEND THAT SHAREHOLDERS OF THE FUND VOTE FOR
APPROVAL OF THE PROPOSED AGREEMENTS.
7
Approval of each Proposed Agreement requires the vote of a majority of the
outstanding voting securities as defined in the 1940 Act. A "majority of the
outstanding voting securities," as defined in the 1940 Act, means the lesser of
(1) 67% of the shares of the Fund represented at the Meeting, if more than 50%
of the shares of the Fund are represented at the Meeting, or (2) more than 50%
of the outstanding shares of the Fund.
III. ADDITIONAL INFORMATION
The Trust is an open-end management investment company organized in 1989 as a
business trust under the laws of The Commonwealth of Massachusetts. The Trust is
a series investment company with seven investment portfolios. The Fund is one of
those portfolios and is diversified.
The Principal Executive Officer and Directors of the Advisor and their principal
occupations are listed below. The address for each is 1201 Third Avenue,
Seattle, WA 98101.
NAME PRINCIPAL OCCUPATION
---- --------------------
William G. Papesh Director and President of the Advisor;
WM Funds Distributor, Inc. and WM
Shareholder Services, Inc.
Michael L. Amato Director of the Advisor, WM Funds
Distributor, Inc. and WM Shareholder
Services, Inc. and Senior Vice President of
Washington Mutual Bank, Washington
Mutual Bank, FA and Washington Mutual
Bank fsb.
Mike E. Brandeberry Director of the Advisor and Senior Vice
President of Washington Mutual Bank, Washington
Mutual Bank, FA and Washington Mutual Bank fsb.
Melissa R. Martinez Director of the Advisor, WM Funds
Distributor, Inc. and WM Shareholder
Services, Inc. and Senior Vice President of
Washington Mutual Bank.
Scott Pelkola Director of the Advisor, WM Funds
Distributor, Inc. and WM Shareholder
Services, Inc. and Senior Vice President of
Washington Mutual Bank, Washington
Mutual Bank, FA and Washington Mutual
Bank fsb.
Gary J. Pokrzywinski Director and Senior Vice President of the
Advisor; Director of WM Funds
Distributor, Inc. and WM Shareholder
Services, Inc.
Debra C. Ramsey Director and Senior Vice President of the
Advisor, WM Funds Distributor, Inc. and WM
Shareholder Services, Inc.
8
By virtue of their positions with the Advisor and its affiliates, each of the
foregoing may have an interest in shareholder approval of the Proposed
Agreements.
INFORMATION ABOUT THE ADVISOR
The Advisor is registered under the Advisers Act and has been in the investment
management business since 1944. The Advisor is a subsidiary of Washington
Mutual, Inc. The principal address of Washington Mutual, Inc. is 1201 Third
Avenue, Seattle, Washington 98101.
ADVISORY AGREEMENT
The Advisor currently acts as the Fund's investment advisor pursuant to the
Advisory Agreement, which was last approved by the Fund's shareholders on
December 23, 1997. The Advisory Agreement was submitted for shareholder approval
at such time in connection with the consolidation of the investment advisory
businesses of the Advisor and Sierra Investment Advisors Corporation, the
Trust's previous investment advisor.
The Advisor's responsibilities under the Advisory Agreement include formulating
the Fund's investment policies (subject to the terms of the prospectus),
analyzing economic trends, directing and evaluating the investment services
provided by any sub-advisors and monitoring the Fund's investment performance
and reporting to the Trustees, as well as providing certain administrative
services for the Fund. In connection with its service as investment advisor to
the Fund, the Advisor may engage one or more sub-advisors to provide investment
advisory services to the Fund and may change or eliminate any such sub-advisor
if it deems such action to be in the best interests of the Fund and its
shareholders. Where the Advisor has not delegated such duties to a sub-advisor,
it is responsible for managing the investment and reinvestment of the Fund's
assets.
The Advisory Agreement provides that it will, unless sooner terminated in
accordance with the Advisory Agreement, continue in effect with respect to the
Fund for a period of two years from its effective date and thereafter on an
annual basis with respect to the Fund, provided such continuance is approved at
least annually by the vote of a majority of the Independent Trustees and either:
(a) by the vote of a majority of the Trustees, or (b) by the vote of a majority
of the outstanding voting securities of the Fund. The Advisory Agreement
provides that it terminates automatically in the event of its assignment (as
defined by the 1940 Act) by the Advisor. The Advisory Agreement provides that it
may be amended only in accordance with the 1940 Act.
The Advisory Agreement may be terminated at any time without the payment of any
penalty, by the Trust by vote of a majority of the Trustees, including a
majority of the Independent Trustees, or by a vote of a majority of the
outstanding voting securities of
9
the Fund upon 60 days' written notice to the Advisor or by the Advisor at any
time, without the payment of any penalty, upon 60 days' written notice to the
Trust.
The Advisory Agreement provides that the Advisor shall not be subject to any
liability arising out of any services rendered by it under the Advisory
Agreement, except by reason of willful misfeasance, bad faith, or gross
negligence in the performance of its duties, or by reason of reckless disregard
of its obligations and duties under the Advisory Agreement.
The Advisory Agreement provides that the Advisor shall pay the expenses incurred
by it in connection with its activities under the Advisory Agreement.
[Under the Advisory Agreement, the Fund pays the Advisor a monthly advisory fee
based on the excess, if any, of (i) 0.85% of the first $500 million, 0.75% of
the next $2.5 billion, and 0.70% thereafter, of the Fund's average daily net
assets over (ii) the fees paid by the Fund directly to its sub-advisor or
sub-advisors.]
FEES PAID
For the fiscal year ended December 31, 2004, the Fund paid advisory fees to the
Advisor, and distribution fees to the WM Funds Distributor, Inc. (the
"Distributor") as follows: advisory fees: $476,666; distribution fees: $410,425.
If the fees in the Proposed Agreement had been in effect during such fiscal
year, and assuming Oberweis and Delaware Management had managed the Fund's
assets, the net advisory fees paid to the Advisor would have been [$ ],
representing a decrease of [ ]% from the net advisory fees actually paid to the
Advisor.
INFORMATION ABOUT OBERWEIS
Oberweis, located at 951 Ice Cream Drive, North Aurora, Illinois 60542, is a
boutique investment firm established in 1997 that focuses on investments in
rapidly growing companies. It provides investment advice to funds, institutions,
and individual investors on a broad range of investment products. As of December
31, 2004, Oberweis had approximately $925 million in assets under management.
[Oberweis has informed the Advisor that it has no financial condition that is
reasonably likely to impair its financial ability to fulfill its commitment to
the Fund under the Proposed Agreement.]
The Principal Executive Officers and Directors of Oberweis and their principal
occupations are listed below. The address for each is 951 Ice Cream Drive, North
Aurora, Illinois 60542.
10
NAME PRINCIPAL OCCUPATION
---- --------------------
James W. Oberweis, CFA Director, President, Portfolio Manager, and
Principal, Oberweis Asset Management,
Inc.
Martin L. Yokosawa Senior Vice President, Portfolio Manager, and
Principal, Oberweis Asset Management, Inc.
Kenneth S. Farsalas, CFA Vice President, Portfolio Manager, and Principal
Oberweis Asset Management, Inc.
David I. Covas, CFA Vice President, Analyst, and Principal, Oberweis
Asset Management, Inc.
Patrick B. Joyce, CPA Director, Executive Vice President, Chief Financial
Officer and Principal Oberweis Asset Management,
Inc.
Brian K. Lee Director of Marketing & Client Service and
Principal, Oberweis Asset Management, Inc.
Steven J. LeMire Vice President, Operations and Principal, Oberweis
Asset Management, Inc.
If the Proposed Agreement is approved by shareholders, James W. Oberweis will be
primarily responsible for the day-to-day management of the portion of the Fund's
portfolio managed by Oberweis.
INFORMATION ABOUT DELAWARE MANAGEMENT
Delaware Management, located at 2005 Market Street, Philadelphia, Pennsylvania
19103, is a series of Delaware Management Business Trust, which is an indirect,
wholly owned subsidiary of Delaware Management Holdings, Inc. ("DMH"). DMH and
its subsidiaries provide a broad range of investment services to both
institutional and individual clients. As of September 30, 2004, DMH and its
subsidiaries had approximately $90 billion in assets under management, including
$7 billion in growth equity assets and $4.8 billion in small cap assets. DMH and
Delaware Management are indirect, wholly-owned subsidiaries, and subject to the
ultimate control of Lincoln National Corporation ("Lincoln National"). Lincoln
National, with headquarters in Philadelphia, Pennsylvania is a diversified
organization with operations in many aspects of the financial services industry,
including insurance and investment management. [Delaware Management has informed
the Advisor that it has no financial condition that is reasonably likely to
impair its financial ability to fulfill its commitment to the Fund under the
Proposed Agreement.]
11
The Principal Executive Officer and Trustees of Delaware Management and their
principal occupations are listed below. The address for each is 2005 Market
Street, Philadelphia, Pennsylvania 19103.
NAME PRINCIPAL OCCUPATION
---- --------------------
Jude T. Driscoll Trustee and President / Chief Executive
Officer of Delaware Management
John B. Fields Trustee and Senior Vice President / Senior
Portfolio Manager of Delaware
Management
Richelle S. Maestro Trustee and Executive Vice President /
General Counsel / Secretary of Delaware
Management
See Yeng Quek Trustee and Executive Vice President /
Managing Director / Chief Investment
Officer, Fixed Income of Delaware
Management
If the Proposed Agreement is approved by shareholders, the following members of
the investment team will be primarily responsible for the day-to-day management
of the portion of the Fund's portfolio managed by Delaware Management.
NAME PRINCIPAL OCCUPATION
---- --------------------
Jerry Frey Chief Investment Officer, Delaware Management
Company
Steve Lampe Healthcare/Portfolio Manager & Analyst, Delaware
Management Company
Marshall Bassett Consumer & Retail/ Portfolio Manager & Analyst,
Delaware Management Company
John Heffern Financial/Business Services/ Portfolio Manager &
Analyst, Delaware Management Company
Jeff Hynoski Technology/ Portfolio Manager & Analyst, Delaware
Management Company
OTHER SIMILAR FUNDS ADVISED OR SUB-ADVISED BY OBERWEIS
12
Please see below information on similar mutual funds sub-advised/advised by
Oberweis or any of its affiliates.
The Oberweis Emerging Growth Portfolio, with $175.6 million in assets as of
December 31, 2004, is managed by Oberweis in a substantially similar style to
that it proposes to use for the Small Cap Growth Fund, although actual portfolio
holdings may slightly vary. Oberweis receives advisory and non-advisory fees
totaling .85% of the average daily net assets on the first $50 million and .80%
on amounts over $50 million. Oberweis also subadvises (in a substantially
similar style to that it proposes to use for the Small Cap Growth Fund) portions
of the portfolios of other investment companies. Oberweis receives an advisory
fee of 0.70% for Optimum Small Cap Growth Fund, for which it managed
approximately $26.5 million as of December 31, 2004. Oberweis receives an
advisory fee of 0.60% from GVIT Small Cap Growth Fund for which it managed
approximately $87.5 million in assets as of December 31, 2004. Oberweis receives
an advisory fee of 0.55% from JP Morgan Multi-Manager Small Cap Growth Fund, for
which it managed approximately $24.8 million in assets as of December 31, 2004.
OTHER SIMILAR FUNDS ADVISED OR SUB-ADVISED BY DELAWARE MANAGEMENT
Please see below information on funds sub-advised/advised by Delaware Management
that are managed by the same team that would manage the Fund and are managed in
a substantially similar manner. There may be differences in holdings and other
portfolio characteristics between the Delaware Management funds listed below and
the Fund.
ASSET LEVEL AS OF
TYPE OF CLIENT 12/31/04 FEE
- -------------- ----------------- --------------------
Mercantile Capital 96,977,927 0.70% on First 1000M
Opportunities 0.60% Over 1000M
Simt Small Cap Growth Fund 204,393,718 0.50% on all
Siit Small Cap Fund 145,958,625 0.50% on all
First Funds Capital 120,573,215 0.70% on First 50M
Appreciation
First Horizon Capital 5,247,232 0.65% Over 50M
Appreciation 0.60% on all
Diversified Small Cap Growth 108,525,645 0.50% on all
DCGTX-DPT Small Cap Growth 2,079,932 0.92%
II Equity Fund
DSCIX-Small Cap Growth 42,044,272 (all classes) 1.35% for I class
Mutual Fund
PORTFOLIO TRANSACTIONS AND BROKERAGE
BROKERAGE AND RESEARCH SERVICES
13
Most of the purchases and sales of securities for the Fund, whether transacted
on a securities exchange or over-the-counter, will be effected in the primary
trading market for the securities. Decisions to buy and sell securities for the
Fund will be made by the Advisor, or by Oberweis or Delaware Management, each of
which also is responsible for placing these transactions, subject to the overall
review of the Trustees. Although investment decisions for the Fund will be made
independently from those of the other accounts managed by the Advisor, Oberweis
or Delaware Management, investments of the type the Fund may make may also be
made by those other accounts. When the Fund and one or more other accounts
managed by the Advisor, Oberweis or Delaware Management are prepared to invest
in, or desire to dispose of, the same security, available investments or
opportunities for sales will be allocated in a manner believed by the Advisor,
Oberweis or Delaware Management to be equitable to each. In some cases, this
procedure may adversely affect the price paid or received by the Fund or the
size of the position obtained or disposed of by the Fund. In other cases,
however, it is believed that coordination and the ability to participate in
volume transactions will be to the benefit of the Fund.
There is frequently no stated commission in the case of securities traded in the
over-the-counter markets, but the prices of those securities include undisclosed
commissions or concessions, and the prices at which securities are purchased
from and sold to dealers include a dealer's mark-up or mark-down.
In selecting brokers or dealers to execute portfolio transactions on behalf of
the Fund, the Advisor, Oberweis, or Delaware Management, as applicable, seeks to
obtain execution of Fund transactions at prices that are advantageous to the
Fund and at commission rates that are reasonable in relation to the benefits
received. However, the Advisory Agreement authorizes the Advisor, and the
Proposed Agreements authorize Oberweis and Delaware Management, to select
brokers or dealers on the basis that they provide brokerage, research, or other
services or products (as those terms are defined in Section 28(e) of the
Securities Exchange Act of 1934, as amended) to the Fund and/or other accounts
serviced by the Proposed Sub-Advisor or the Advisor. The Advisor or the
applicable Proposed Sub-Advisor may cause the Fund to pay a broker or dealer an
amount of commission for effecting a securities transaction in excess of the
amount of commission or dealer spread another broker or dealer would have
charged for effecting that transaction if the Advisor or the applicable Proposed
Sub-Advisor determines in good faith that such amount of commission was
reasonable in relation to the value of the brokerage and research products
and/or services provided by such broker or dealer. This determination, with
respect to brokerage and research services or products, may be viewed in terms
of either that particular transaction or the overall responsibilities that the
Advisor or the applicable Proposed Sub-Advisor and their affiliates have with
respect to the Fund and to accounts over which they exercise investment
discretion.
Consistent with applicable provisions of the 1940 Act, the rules and exemptions
adopted by the Securities and Exchange Commission (the "SEC") thereunder, and
relevant interpretive and "no-action" positions taken by the SEC's staff, the
Trustees have adopted procedures pursuant to Rule 17e-1 under the 1940 Act to
ensure that all portfolio
14
transactions with affiliates will be fair and reasonable. Under the procedures
adopted, portfolio transactions for the Fund may be executed through any
affiliated broker (other than affiliated persons of the Trust solely because the
broker is an affiliated person of another sub-advisor, who are generally not
treated as affiliated brokers) if, subject to other conditions in the Rule 17e-1
procedures, in the judgment of the Advisor or the applicable sub-advisor, the
use of an affiliated broker is likely to result in price and execution at least
as favorable as those of other qualified broker-dealers, and if, in the
transaction an affiliated broker charges the Fund a rate consistent with those
charged for comparable transactions in comparable accounts of the broker's most
favored unaffiliated clients. Over-the-counter purchases and sales are
transacted directly with principal market makers except in those cases in which
better prices and executions may be obtained elsewhere.
BROKERAGE TRANSACTIONS WITH AFFILIATES
During the fiscal year ended December 31, 2004, the Fund did not pay any
brokerage commissions to any broker then affiliated with the Advisor or any
sub-advisor to the Fund.
OWNERSHIP OF SHARES AND VOTING INFORMATION
As of the Record Date, to the knowledge of the Trust, the Trustees and officers
of the Trust, as a group, owned less than one percent of each class of shares of
the Fund and of the Fund as a whole. The following table shows each Trustee's
aggregate range of shares owned in the WM Group of Funds.
EQUITY SECURITIES OWNERSHIP TABLE
(DOLLAR RANGES)
(AS OF FEBRUARY 1, 2005)
AGGREGATE DOLLAR
RANGE OF SHARES
OWNED IN THE WM
GROUP OF FUNDS
----------------
INDEPENDENT TRUSTEES*
Wayne L. Attwood, M.D. B
Kristianne Blake E
Edmond R. Davis, Esq. D
Carrol R. McGinnis E
Alfred E. Osborne, Jr. Ph.D. B
Daniel L. Pavelich E
Jay Rockey E
Richard C. Yancey E
15
INTERESTED TRUSTEES
Anne V. Farrell E
Michael K. Murphy C
William G. Papesh E
*For purposes of this table, the term "Independent Trustee" means those Trustees
who are not "interested persons" as defined by the 1940 Act.
A = $1 to $10,000
B = $10,001 to $50,000
C = $50,001 to $100,000
D = $100,001 to $250,000
E = over $250,000
As of the Record Date, except as noted below, no persons owned of record or
beneficially 5% or more of the noted class of shares of the Fund:
Shares
Beneficially Percentage of
Owned Shares Owned
------------ -------------
Class A
[N/A] [___] [___]
Class B
[N/A] [___] [___]
Class C
[N/A] [___] [___]
Class I
[WM Strategic Asset Management Portfolios [___] [___]
1201 Third Avenue
Seattle, Washington 98101]
CERTAIN TRUSTEES AND OFFICERS OF THE TRUST
The following persons are both officers or Trustees of the Trust and officers or
directors of the Advisor: William G. Papesh, Director and President of the
Advisor, is the President and Chief Executive Officer of the Trust; Gary J.
Pokrzywinski, Director and Senior Vice President of the Advisor, is Senior Vice
President of the Trust; Debra C. Ramsey, Director and Senior Vice President of
the Advisor, is Senior Vice President of the Trust; Randall L. Yoakum, Senior
Vice President of the Advisor, is Senior Vice President of the Trust; Jeffrey L.
Lunzer, First Vice President of the Advisor, is First Vice President, Chief
Financial Officer and Treasurer of the Trust; John T. West, First Vice President
of the Advisor, is First Vice
16
President, Chief Compliance Officer, Secretary and Anti-Money Laundering
Compliance Officer of the Trust; and Wendi B. Bernard, Assistant Vice President
of the Advisor, is Assistant Vice President and Assistant Secretary of the
Trust.
No persons act as both officers or Trustees of the Trust and officers or
directors of Oberweis or Delaware Management.
TRANSFER AGENT AND PRINCIPAL UNDERWRITER
The Fund's transfer agent is WM Shareholder Services, Inc., which has a
principal business address of 1201 Third Avenue, Seattle, Washington 98101. The
Fund's principal underwriter is WM Funds Distributor, Inc., which has a
principal business address of 12009 Fountain Place, Suite 350, Gold River,
California 95670.
OTHER MATTERS
In the event that a quorum is not present for purposes of acting on the Proposed
Agreements or if sufficient votes in favor of the Proposed Agreements are not
received by the time of the Meeting, the persons named as proxies may propose
one or more adjournments of the Meeting to permit further solicitation of
proxies. In addition, if in the judgment of persons named as proxies, it is
advisable to defer action on one or more proposals, the persons named as proxies
may propose one or more adjournments of the Meeting with respect to such
proposal or proposals. Any such adjournment will require the affirmative vote of
a plurality of the shares present in person or represented by proxy at the
session of the Meeting to be adjourned. The persons named as proxies will vote
in favor of such adjournment those proxies which they are entitled to vote in
favor of the Proposed Agreements. They will vote against any such adjournment
those proxies required to be voted against the Proposed Agreements and will not
vote any "broker non-votes" or any proxies that direct them to abstain from
voting on the Proposed Agreements.
Although the Meeting is called to transact any other business that may properly
come before it, the only business that management intends to present or knows
that others will present is the consideration of the Proposed Agreements, as
mentioned in the Notice of Special Meeting. However, you are being asked on the
enclosed proxy to authorize the persons named therein to vote in accordance with
their judgment with respect to any additional matters which properly come before
the Meeting, and on all matters incidental to the conduct of the Meeting.
17
SHAREHOLDER PROPOSALS AT FUTURE MEETINGS
The Trust does not hold annual or other regular meetings of shareholders.
Shareholder proposals to be presented at any future meeting of shareholders of
the Trust must be received by the Trust at a reasonable time before the Trust
begins to print and mail its proxy materials in order for such proposals to be
considered for inclusion in the proxy materials relating to that meeting.
February 23, 2005
18
APPENDIX A
INVESTMENT SUB-ADVISORY AGREEMENT
THE SMALL CAP GROWTH FUND OF WM VARIABLE TRUST
EFFECTIVE AS OF ____________
This Investment Sub-Advisory Agreement is made and entered into as of
this______ day of __[month]__, 200_, among WM Advisors, Inc. ("WM Advisors"), a
corporation organized under the laws of the state of Washington, WM Variable
Trust, a business trust formed under the laws of the Commonwealth of
Massachusetts (the "Trust"), on behalf of its Small Cap Growth Fund series (the
"Fund"), and Oberweis Asset Management, Inc. (the "Sub-Advisor"), a corporation
organized under the laws of the state of Illinois
Whereas, the Trust is an open-end, management investment company and is so
registered under the Investment Company Act of 1940, as amended (the "1940
Act");
Whereas, the Trust offers a number of investment portfolios, each with its
own investment objective and strategies, and of which one investment portfolio
is the Fund;
Whereas, WM Advisors is engaged in the business of rendering investment
advisory and management services, is registered as an investment adviser under
the Investment Advisers Act of 1940, as amended (the "Advisers Act"), and is the
investment advisor of the Fund;
Whereas, the Sub-Advisor is engaged in the business of rendering
investment advisory and management services and is registered as an investment
adviser under the Advisers Act; and
Whereas, WM Advisors desires to retain the Sub-Advisor to furnish
investment sub-advisory and management services to the Fund and the Sub-Advisor
is willing to furnish such services;
NOW, THEREFORE, in consideration of the mutual agreements herein
contained, it is hereby agreed by and between the parties hereto as follows:
1. Investment Description; Appointment
WM Advisors desires to employ such portion of the capital of the Fund as may
from time to time be determined by WM Advisors by investing and reinvesting in
investments of the kind and in accordance with the limitations specified in the
Trust's Master Trust Agreement, as amended, the Bylaws, as amended, and in the
Prospectus and Statement of Additional Information relating to the Fund as in
effect and which may be amended from
19
time to time, and in such manner and to such extent as may from time to time be
approved by the Board of Trustees of the Trust. Copies of the Fund's Prospectus
and Statement of Additional Information, Bylaws, and the Trust's Master Trust
Agreement, each as amended, have been submitted to the Sub-Advisor. WM Advisors
agrees to provide copies of all amendments or supplements to the Fund's
Prospectus and Statement of Additional Information, Bylaws, and the Trust's
Master Trust Agreement to the Sub-Advisor during the continuance of this
Agreement before or at the time such amendments or supplements become effective
provided, however, that if any such amendment or supplement relates to the
Sub-Advisor or may reasonably be expected to materially affect the Sub-Advisor's
duties or obligations under this Agreement, WM Advisors agrees to provide copies
of such amendment or supplement prior to its effectiveness. WM Advisors agrees
to furnish the Sub-Advisor with resolutions approved by the Board of Trustees of
the Trust to the extent they may affect the duties of the Sub-Advisor, a
certified copy of any financial statements or reports prepared for the Fund by
the Trust's independent registered public accountants, and with copies of any
financial statements or reports made by the Fund to its shareholders or to any
governmental body or securities exchange, and any further materials or
information which the Sub-Advisor may reasonably request to enable it to perform
the services hereunder. WM Advisors desires to employ and hereby appoints the
Sub-Advisor to act as investment sub-adviser to the portion of the Fund
allocated to the Sub-Advisor by WM Advisors from time to time. The Sub-Advisor
accepts the appointment and agrees to furnish the services described herein for
the compensation set forth below
2. Services as Investment Sub-Advisor
Subject to the supervision of the Board of Trustees of the Trust and of WM
Advisors, the Fund's investment adviser, the Sub-Advisor will, solely with
respect to the portion of the Fund allocated to the Sub-Advisor by WM Advisors,
(a) maintain and implement compliance procedures that are reasonably designed to
ensure its compliance with the applicable provisions of the Trust's Master Trust
Agreement, and to prevent violations of the "Federal Securities Laws" (as
defined in Rule 38a-1 under the 1940 Act); (b) make investment decisions in
accordance with the Fund's investment objectives and policies as stated in the
Fund's Prospectus and Statement of Additional Information as in effect and,
after notice to the Sub-Advisor, and which may be amended from time to time; (c)
place purchase and sale orders on behalf of the Fund to effectuate the
investment decisions made; (d) maintain books and records with respect to the
securities transactions of the Fund in accordance with the 1940 Act and the
Advisers Act and the rules adopted thereunder and furnish to the Trust's Board
of Trustees such quarterly, annual and special reports as the Board may
reasonably request; and (e) except as permitted in this section or elsewhere in
this Agreement treat confidentially and as proprietary information of the Trust,
all records and other information relative to the Trust and to prior, present or
potential shareholders and will not knowingly use or disclose such records and
information for any purpose other than performance of its responsibilities and
duties hereunder, except after prior notification to and approval in writing by
the Trust, which approval shall not be unreasonably withheld and such records
may not be withheld where the Sub-Advisor may be exposed to civil or criminal
contempt proceedings for failure to comply, when requested to divulge such
information by duly constituted authorities, or
20
when so requested by the Trust. The Sub-Advisor will supervise the Fund's
investments and conduct a continuous program of investment, evaluation and, if
appropriate, sale and reinvestment of the Fund's assets. The Sub-Advisor has
responsibility for providing investment services and advice only with respect to
such discrete portion of the Fund as may from time to time be allocated to the
Sub-Advisor by WM Advisors. Subject to the supervision of WM Advisors and in
accordance with the investment objectives and policies as stated in the Fund's
Prospectus and Statement of Additional Information, the Sub-Advisor is
authorized, in its discretion and without prior consultation with WM Advisors,
to buy, sell, lend and otherwise trade in any stocks, bonds, and other
securities and investment instruments on behalf of the Fund, without regard to
the length of time the securities have been held and the resulting rate of
portfolio turnover or any tax considerations, and so long as consistent with the
Fund's investment objectives and policies, the majority or the whole of the
portion of the Fund may be invested in such proportions of stocks, bonds, other
securities or investment instruments, or cash as the Sub-Advisor shall
determine. In addition, the Sub-Advisor will furnish the Fund or WM Advisors
with whatever statistical information the Fund or WM Advisors may reasonably
request with respect to the investments that the Fund may hold or contemplate
purchasing in the portion of the Fund under the Sub-Advisor's management. The
Sub-Advisor will not consult with any other sub-advisors of any other funds
within the Trust (or any sub-advisors with respect to any other portion of the
Fund) concerning the transactions in securities or other assets of the Fund or
any other funds of the Trust other than for purposes of complying with the
conditions of paragraphs (a) and (b) of Rule 12d3-1 under the 1940 Act.
The Sub-Advisor agrees to comply with the requirements of the 1940 Act, the
Advisers Act, the Securities Act of 1933, the Securities Exchange Act of 1934,
as amended (the "1934 Act"), the Commodity Exchange Act and the respective rules
and regulations thereunder, to the extent applicable, as well as with all other
applicable federal and state laws, rules, regulations and case law that relate
to the services and relationships described hereunder and to the conduct of its
business as a registered investment adviser. No supervisory activity undertaken
by WM Advisors shall limit the Sub-Advisor's full responsibility for any of the
foregoing.
3. Brokerage
Subject to (a) the over-riding objective of obtaining the best possible
execution of orders; and (b) review and approval of the Board of Trustees of the
Trust, which may be conducted as often as the Trustees of the Trust may
determine, the Sub-Advisor shall place all orders for the purchase and sale of
securities for the Fund with brokers or dealers selected by the Sub-Advisor,
which may include brokers or dealers affiliated with the Sub-Advisor. All
transactions with any affiliated person of the Trust, or where any such
affiliated person acts as broker or agent in connection with any such
transaction, shall be accomplished in compliance with the 1940 Act, the Advisers
Act, the 1934 Act, as amended, the rules adopted thereunder and the procedures
adopted thereunder by the Trust. Purchase or sell orders for the Fund may be
aggregated with contemporaneous purchase or sell orders of other clients of the
Sub-Advisor; provided that (a) no advisory account will be favored by the
Sub-Advisor over any other account; (b) each client of the
21
Sub-Advisor who participates in such an aggregated order will participate at the
average share price, with all transaction costs shared on a pro rata basis; (c)
only advisory clients' transactions will be aggregated for such an aggregated
order; and (d) the accounts of clients whose orders are aggregated will be
segregated on the Sub-Advisor's books and records so as to identify the
particular client who has the beneficial interest therein. The Sub-Advisor shall
use its best efforts to obtain execution of Fund transactions at prices which
are advantageous to the Fund and at commission rates that are reasonable in
relation to the benefits received. However, the Sub-Advisor may select brokers
or dealers on the basis that they provide brokerage, research, or other services
or products to the Fund and/or other accounts serviced by the Sub-Advisor. The
Sub-Advisor may pay a broker or dealer an amount of commission for effecting a
securities transaction in excess of the amount of commission or dealer spread
another broker or dealer would have charged for effecting that transaction if
the Sub-Advisor determines in good faith that such amount of commission was
reasonable in relation to the value of the brokerage and research products
and/or services provided by such broker or dealer. This determination, with
respect to brokerage and research services or products, may be viewed in terms
of either that particular transaction or the overall responsibilities which the
Sub-Advisor and its affiliates have with respect to the Fund and to accounts
over which they exercise investment discretion, and not all such services or
products may be used by the Sub-Advisor in managing the Fund; provided that with
respect to such transaction and such determination the affiliates of the
Sub-Advisor shall have the same responsibilities to the Fund as the Sub-Advisor
has under this Agreement. Notwithstanding the forgoing, the Sub-Advisor may not
compensate a broker or dealer (including a government securities or municipal
securities broker or dealer) for any promotion or sale of shares of any
investment company, including the Fund, by directing to the broker or dealer the
Fund's portfolio securities transactions or any remuneration, including but not
limited to any commission, mark-up, mark-down, or other fee (or portion thereof)
received or to be received from the Fund's portfolio transactions effected
through a broker or dealer.
4. Information Provided to the Trust and WM Advisors
The Sub-Advisor will keep the Trust and WM Advisors informed of
developments materially affecting the Fund of which the Sub-Advisor becomes
aware and will, on its own initiative, furnish the Trust and WM Advisors on at
least a quarterly basis with whatever information the Sub-Advisor believes is
appropriate for this purpose. Further, the Sub-Advisor shall notify WM Advisors
immediately upon detection of (a) any material failure to manage the Fund in
accordance with its investment objectives and policies or any applicable law; or
(b) any material breach of any of the Fund's or the Sub-Advisor's policies,
guidelines or procedures
5. Standard of Care
The Sub-Advisor shall exercise its best judgment in rendering the services
described in paragraphs 2-4 above. Except as may otherwise be provided by
federal securities laws, the Sub-Advisor shall not be liable for any error of
judgment or mistake of law or for any loss suffered by the Fund in connection
with the matters to which this Agreement relates except a loss resulting from
willful misfeasance, bad faith or gross
22
negligence on its part in the performance of its duties or from reckless
disregard by it of its obligations and duties under this Agreement (the conduct
excepted in this sentence shall be referred to as "Disqualifying Conduct").
6. Compensation
In consideration of the services rendered pursuant to this Agreement, the
Trust, on behalf of the Fund, will pay the Sub-Advisor on the first business day
of each month a fee for the previous month according to the schedule of fees
detailed in Annex A attached to this Agreement. Upon any termination of this
Agreement before the end of a month, the fee for such part of that month shall
be prorated according to the proportion that such period bears to the full
monthly period and shall be payable upon the date of termination of this
Agreement. For the purpose of determining fees payable to the Sub-Advisor, the
value of the Fund's net assets under management by the Sub-Advisor shall be
computed at the times and in the manner specified in the Fund's Prospectus or
Statement of Additional Information relating to the Fund as from time to time in
effect.
7. Expenses
The Sub-Advisor will bear all of its expenses in performing its services
under this Agreement, which expenses shall not include brokerage fees or
commissions in connection with the effectuation of securities transactions. The
Sub-Advisor shall not be required to bear any expenses of the Trust, the Fund or
WM Advisors. The Trust will bear certain other expenses to be incurred in its
operation, including but not limited to: organizational expenses, taxes,
interest, brokerage fees and commissions, if any; fees of trustees of the Trust
who are not officers, directors or employees of the Sub-Advisor, WM Advisors, or
any of their affiliates; Securities and Exchange Commission fees and state Blue
Sky qualification fees; all fees, including out-of-pocket expenses of
custodians, transfer and dividend disbursing agents and transaction charges of
custodians; insurance premiums; outside auditing and legal expenses; costs of
maintenance of the Trust's existence; costs attributable to investor services,
including without limitation, telephone and personnel expenses; costs of
preparing and printing prospectuses and statements of additional information for
regulatory purposes and for distribution to existing shareholders; costs of
shareholders' reports and meetings of the shareholders of the Fund and of the
officers or Board of Trustees of the Trust; and any extraordinary expenses. In
addition, the Fund pays a distribution fee pursuant to the terms of a
Distribution Plan adopted under Rule 12b-1 of the 1940 Act. Any reimbursement of
investment advisory fees required by any expense limitation provision shall be
the sole responsibility of WM Advisors.
8. Services to Other Companies or Accounts
WM Advisors understands that the Sub-Advisor now acts, will continue to
act and may act in the future as investment adviser to fiduciary and other
managed accounts and as investment adviser to one or more other investment
companies or series of investment companies, and WM Advisors has no objection to
the Sub-Advisor so acting, provided that whenever the Fund and one or more other
accounts or investment companies advised
23
by the Sub-Advisor have available funds for investment, investments suitable and
appropriate for each will be allocated in accordance with procedures reasonably
believed to be equitable to each entity. Similarly, opportunities to sell
securities will be allocated in an equitable manner. WM Advisors recognizes that
in some cases this procedure may limit the size of the position that may be
acquired or disposed of for the Fund. In addition, WM Advisors understands that
the persons employed by the Sub-Advisor to assist in the performance of the
Sub-Advisor's duties hereunder will not devote their full time to such service
and nothing contained herein shall be deemed to limit or restrict the right of
the Sub-Advisor or any affiliate of the Sub-Advisor to engage in and devote time
and attention to other business or to render services of whatever kind or
nature. WM Advisors recognizes and agrees that the Sub-Advisor may provide
advice to other clients which may differ from or be identical to advice given
with respect to the Fund.
9. Term of Agreement
This Agreement shall become effective as of the date first written above,
shall continue for a period of two years thereafter, and shall continue in
effect for a period of more than two years thereafter only so long as such
continuance is specifically approved at least annually by (a) the Board of
Trustees of the Trust or (b) a vote of a "majority" (as defined in the 1940 Act)
of the Fund's outstanding voting securities, provided that in either event the
continuance is also approved by a majority of the Board of Trustees who are not
"interested persons" (as defined in the 1940 Act) of any party to this
Agreement, by vote cast in person at a meeting called for the purpose of voting
on such approval. This Agreement is terminable, without penalty, on 30 days'
written notice, by WM Advisors, the Board of Trustees for the Trust or by vote
of holders of a majority of the Fund's shares, or upon 60 days' written notice
by the Sub-Advisor and will terminate automatically upon any termination of the
advisory agreement between the Trust and WM Advisors. In addition, this
Agreement will also terminate automatically in the event of its assignment (as
defined in the 1940 Act). The Sub-Advisor agrees to notify the Trust of any
circumstances that, to its best knowledge and belief, might result in this
Agreement being deemed to be assigned.
10. Representations of WM Advisors and the Sub-Advisor
WM Advisors represents that (a) a copy of the Trust's Master Trust
Agreement, dated February 22, 1989, together with all amendments thereto, is on
file in the office of the Secretary of the Commonwealth of Massachusetts, (b)
the appointment of the Sub-Advisor has been duly authorized, (c) it has acted
and will continue to act in conformity with the 1940 Act and other applicable
laws, and (d) it is authorized to perform the services herein.
The Sub-Advisor represents that it is authorized to perform the services
described herein. Further, the Sub-Advisor represents that it maintains errors
and omissions insurance coverage in an appropriate amount and shall provide
prior written notice to WM Advisors (a) of any material changes in its insurance
policies or insurance coverage; or (b) if any material claims will be made on
its insurance policies. Furthermore, the
24
Sub-Advisor shall upon reasonable request provide WM Advisors any information it
may reasonably require concerning the amount of or scope of such insurance.
11. Indemnification
WM Advisors shall indemnify and hold harmless the Sub-Advisor from and
against any and all claims, losses, liabilities or damages (including reasonable
attorneys' fees and other related expenses), howsoever arising from or in
connection with this Agreement or the performance by the Sub-Advisor of its
duties hereunder; provided, however, that nothing contained herein shall require
that the Sub-Advisor be indemnified for Disqualifying Conduct.
Sub-Advisor shall indemnify and hold harmless WM Advisors and the Fund
from and against any and all claims, losses, liabilities or damages (including
reasonable attorneys' fees and other related expenses), howsoever arising from
or in connection with this Agreement attributable to Disqualifying Conduct.
12. Amendment of this Agreement
No provision of this Agreement may be changed, waived, discharged or
terminated orally, but only by an instrument in writing signed by the party
against which enforcement of the change, waiver, discharge or termination is
sought.
13. Indemnification Use of Names
The parties agree and acknowledge that the Sub-Advisor is the sole owner
of the name and mark "Oberweis" and that all use of any designation comprised in
whole or part of Oberweis (a "Sub-Advisor Mark") under this Agreement shall
inure to the benefit of the Sub-Advisor. The use by the Trust on its own behalf
or on behalf of the Fund of any Sub-Advisor Mark in any advertisement or sales
literature or other materials promoting the Fund shall be with the consent of
the Sub-Advisor. The Trust and WM Advisors shall not, without the consent of the
Sub-Advisor, make representations regarding the Sub-Advisor intended to be
disseminated to the investing public in any disclosure document, advertisement
or sales literature or other materials promoting the Fund. Such consent shall
not be required for any documents or other materials intended for broker-dealer
use only, for use by the Trust's trustees and for internal use by the Trust and
WM Advisors. Consent by the Sub-Advisor to such use of any Sub-Advisor Mark and
any such representation shall not be unreasonably withheld and shall be deemed
to be given if no written objection is received by the Trust, the Fund or WM
Advisors within 3 business days after the request is made by the Trust, the Fund
or WM Advisors for such use of any Sub-Advisor Mark or any such representation.
Upon termination of this Agreement for any reason, the Trust and WM Advisors
shall cease all use of any Sub-Advisor Mark(s) as soon as reasonably
practicable.
The Sub-Advisor agrees and acknowledges that the Trust is the sole owner
of the name and mark "WM Variable Trust" and WM Advisors is the sole owner of
the name and mark "WM Advisors, Inc." and that any and all use of any
designation comprised in whole or in part of "WM Variable Trust" or "WM
Advisors, Inc." (each a "WM Mark")
25
under this Agreement shall inure to the benefit of the Trust or WM Advisors,
respectively. The use by the Sub-Advisor on its own behalf of any WM Mark in any
advertisement or sales literature or other materials promoting the Sub-Advisor
shall be with the consent of the Trust or WM Advisors, respectively. The
Sub-Advisor shall not, without the consent of the Trust or WM Advisors, as
applicable, make representations regarding the Trust, the Fund or WM Advisors in
any disclosure document, advertisement or sales literature or other materials
promoting the Sub-Advisor. Consent by the Trust and WM Advisors to such use of
any WM Mark and any such representations shall not be unreasonably withheld and
shall be deemed to be given if no written objection is received by the
Sub-Advisor within 5 business days after the request by the Sub-Advisor is made
for such use of any WM Mark or any such representations. Upon termination of
this Agreement for any reason, the Sub- Advisor shall cease any and all use of
any WM Mark as soon as reasonably practicable.
14. Declaration of Trust and Limitation of Liability
A copy of the Master Trust Agreement of the Trust is on file with the
Secretary of State of The Commonwealth of Massachusetts, and notice is hereby
given that this Agreement is executed by an officer of the Trust, as an officer
and not individually, on behalf of the Trustees of the Trust, as trustees and
not individually, on further behalf of the Fund, and that the obligations of
this Agreement with respect to the Fund shall be binding upon the assets and
properties of the Fund only and shall not be binding upon the assets and
properties of any other series of the Trust or upon any of the Trustees,
officers, employees, agents or shareholders of the Fund or the Trust
individually.
15. Entire Agreement; Amendment of Management Agreement
This Agreement constitutes the entire agreement among the parties hereto,
except that WM Advisors and the Trust are also parties to an Investment
Management Agreement relating to the Fund dated May 11, 2004 as Amended and
Restated (the "Management Agreement").
The Trust and WM Advisors hereby amend the Management Agreement, for so
long as this Agreement shall remain in effect, to provide that: (a) The Trust,
on behalf of the Fund, shall pay to WM Advisors a monthly fee equal to the
excess, if any, of (i) the fee set forth in Section 5 of the Management
Agreement (the "Management Fee") over (ii) the fee paid by the Fund under this
Agreement or any other sub-advisory agreement with respect to the Fund; (b) WM
Advisors shall not be entitled to any other fees under the Management Agreement
with respect to the Fund; (c) The Trust acknowledges and agrees that, for so
long as Sub-Advisor meets the standard of care set forth in this Agreement, WM
Advisors shall have no obligation to (i) furnish a continuous investment program
for the Fund, (ii) determine from time to time what securities will be
purchased, retained or sold by the Fund, and what portion of the Fund's assets
will be held as cash, or (iii) place orders for the purchase and sale of
portfolio securities for the Fund with brokers or dealers selected by WM
Advisors; (d) Notwithstanding this Agreement, WM Advisors remains authorized to
determine what securities or other property shall be purchased or sold by or for
the Fund; (e) In exchange for the fee paid by the Fund under
26
the Management Agreement and in recognition of its obligation to select and
monitor the Sub-Advisor, and not for the services provided by the Sub-Advisor
pursuant to the Sub-Advisory Agreement, WM Advisors shall indemnify and hold the
Trust harmless from and against any and all claims, costs, expenses (including
attorneys' fees), losses, damages, charges, payments and liabilities of any sort
or kind which may be asserted against the Trust or for which the Trust may be
held liable arising out of or attributable to any actual or alleged failure of
Sub-Advisor to meet the standard of care set forth in this Agreement.
16. Governing Law
This Agreement shall be governed in accordance with the laws of The
Commonwealth of Massachusetts. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to such jurisdiction be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms or provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction.
17. Miscellaneous
(a) Unless WM Advisors or the Trust gives the Sub-Advisor written
instructions to the contrary, the Sub-Advisor shall vote all proxies solicited
by or with respect to the issuers of securities in which assets of the portion
of the Fund under the Sub-Advisor's management may be invested. The Sub-Advisor
shall use its best good faith judgment to vote such proxies in a manner which
best serves the interests of the Fund's shareholders.
(b) WM Advisors shall provide the Sub-Advisor with a copy of the Fund's
agreement (the "Custody Agreement") with the custodian (the "Custodian")
designated to hold the assets of the Fund and any modification thereto in
advance. The Fund's assets shall be maintained in the custody of the Custodian
identified in, and in accordance with the terms and conditions of, the Custody
Agreement. The Sub-Advisor shall have no liability for the acts or omissions of
the Custodian. Any assets added to the portion of the Fund to be managed by the
Sub-Advisor shall be delivered directly to the Custodian. WM Advisors shall
instruct the Fund's Custodian and other appropriate parties to promptly forward
proxies related to securities within the portion of the Fund managed by the
Sub-Advisor to the Sub-Advisor, and the Sub-Advisor shall have no liability for
failing to vote the proxy for an issuer when it has not received the proxy
statement for that issuer. The Sub-Advisor shall under no circumstances act as
custodian for the Fund.
(c) The Sub-Advisor may perform its services through any employee, officer
or agent of the Sub-Advisor, and the Trust and the Fund shall not be entitled to
the advice, recommendation, or judgment of any specific person.
(d) In the performance of its duties hereunder, the Sub-Advisor is and
shall be an independent contractor and, unless otherwise expressly provided
herein or otherwise authorized in writing, shall have no authority to act for or
represent the Fund, the Trust,
27
or WM Advisors in any way or otherwise be deemed to be an agent of the Fund, the
Trust, or WM Advisors. If any occasion should arise in which the Sub-Advisor
gives any advice to its clients concerning the shares of the Fund, the
Sub-Advisor will act solely as investment counsel for such clients and not in
any way on behalf of the Fund.
(e) The headings of paragraphs contained in this Agreement are provided
for convenience only, form no part of this Agreement and shall not affect its
construction.
(f) This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(g) WM Advisors and the Trust's Board of Trustees understand that the
value of investments made for the Fund may go up as well as down, is not
guaranteed and that investment decisions will not always be profitable. The
Sub-Advisor has not made and is not making any guarantees, including any
guarantee as to any specific level of performance of the Fund. WM Advisors and
the Trust's Board of Trustees acknowledge that the Fund is designed for the
described investment objective and is not intended as a complete investment
program. They also understand that investment decisions made on behalf of the
Fund by the Sub-Adviser are subject to various market and business risks.
(h) All written notices, requests or other communications to any party
hereunder shall be given to the following addresses and telecopy numbers, or
such other address and telecopy number communicated to the other parties from
time to time:
If to WM Advisors, Inc. to: Cindy M. Kim
1201 Third Avenue 22nd Floor Seattle, WA 98101
If to the Fund, to: Attn: J.B. Kittredge of Ropes & Gray LLC
One International Place Boston, MA 02110-2624
If to the Sub-Advisor, to: Attn: James W. Oberweis
951 Ice Cream Drive, Suite 200 North Aurora, IL 60542
(i) The Sub-Advisor is permitted to include the performance of the portion
of the Fund managed by the Sub-Advisor in calculating the performance of its
composites and identify the Fund to third parties as a client; provided, that
the Sub-Advisor shall indemnify the Fund and WM Advisors, Inc. for any liability
that results from such use.
18. Confidential Information
"Confidential Information" of any party shall mean ideas, expressions,
trade secrets, customer lists, products, policies, forms, business methods,
business plans, software and information from third parties (such as software
and its related documentation) for which such party has a duty of
confidentiality, as well as information which from all relevant circumstances
should reasonably be assumed by a party to be confidential information, whether
any of which is marked "Confidential Information" or
28
not. Each party will make reasonable effort to advise each other party when
information disclosed to that other party is Confidential Information.
Confidential Information relating to a party shall be held in confidence by each
other party to the same extent and in at least the same manner as such party
protects its own Confidential Information, but in no case to a lesser extent or
manner than a reasonable degree of care under the circumstances. Confidential
Information shall not be disclosed to third parties without specific written
permission of the protected party. Each party shall, however, be permitted to
disclose relevant aspects of each other party's Confidential Information to its
officers, agents, subcontractors and employees to the extent that such
disclosure is reasonably necessary for the performance of its duties and
obligations under this Agreement; provided, however, that such party shall take
all reasonable measures to ensure that Confidential Information of the other
party is not disclosed or duplicated in contravention of the provisions of the
Agreement by such officers, agents, sub contractors, and employees.
The obligations in this Section 18 shall not restrict any disclosure by
any party pursuant to any applicable state or federal laws, or by order of any
court or government agency (provided that the disclosing party shall give prompt
notice to the non-disclosing party of such order) and shall not apply with
respect to information which (1) is independently developed by the other party
without violating the disclosing party's proprietary rights, (2) is or becomes
publicly known (other than through unauthorized disclosure), (3) is
intentionally disclosed by the owner of such information to a third party free
of any obligation of confidentiality, (4) is already known by such party without
an obligation of confidentiality other than pursuant to this Agreement or of any
confidentiality agreements entered into before the effective date of this
Agreement as evidenced by the written records of such party, or (5) is
rightfully received by a party free of any obligation of confidentiality.
The parties agree that they shall abide by the provisions of the
Gramm-Leach-Bliley Act ("GLB") and other applicable privacy laws and shall each
establish commercially reasonable controls to ensure the confidentiality of the
Confidential Information and to ensure that the Confidential Information is not
disclosed contrary to the provisions of this Agreement, GLB or any other
applicable privacy laws and regulations. Without limiting the foregoing, each
party shall implement such physical and other security measures as are necessary
to (i) ensure the security and confidentiality of the Confidential Information
(ii) protect against any threats or hazards to the security and integrity of the
Confidential Information and (iii) protect against any unauthorized access to or
use of the Confidential Information. To the extent that any duties and
responsibilities under the Agreement are delegated to an agent or other
subcontractor, the party shall take reasonable steps to ensure that such agents
and subcontractor adhere to the same requirements. Each party shall have the
right, during regular office hours and upon reasonable notice, to audit the
other party to ensure compliance with the terms of this Agreement, GLB and other
privacy laws and regulations.
Notwithstanding the foregoing, the provisions of this Section 18 shall
impose no obligations on the Fund.
29
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first written above.
WM ADVISORS, INC. WM VARIABLE TRUST, on behalf
of its Small Cap Growth Fund series
By_____________________________ By________________________
Name: William G. Papesh Name: John T. West
Title: President Title: First Vice President
OBERWEIS ASSET MANAGEMENT, INC.
By________________________ Dated: _________________
Name: James W. Oberweis
Title: President
30
ANNEX A
1. For purposes of calculating the fee to be paid to the Sub-Advisor under this
Agreement:
"Fund Assets" shall mean the net assets of the portion of the Fund managed
by the Sub-Advisor;
"Other Assets" shall mean the net assets of the portion of the Growth Fund
series of WM Variable Trust managed by the Sub-Advisor.
"Combined Assets" shall mean the sum of Fund Assets and Other Assets; and
"Average Daily Net Fund Assets," "Average Daily Net Other Assets" and
"Average Daily Net Combined Assets" shall mean the average of the value of
the Fund Assets, Other Assets or Combined Assets, as the case may be, on
each business day.
2. The Sub-Advisor fee shall be paid in arrears (within 10 days of end of month)
based upon the Average Daily Net Combined Assets during the preceding month. The
fee payable for the month shall be calculated by applying the annual rate, as
set forth in the fee schedule below, to the Average Daily Net Combined Assets,
and dividing by twelve. The portion of the monthly fee to be paid by the Fund
shall be prorated based upon the Average Daily Net Fund Assets as compared to
the Average Daily Net Combined Assets. For a month in which this Agreement
becomes effective or terminates, the portion of the Sub-Advisor fee due
hereunder shall be prorated on the basis of the number of days that the
Agreement is in effect during the month.
3. The following fee schedule shall be used to calculate the fee to be paid to
the Sub-Advisor under this Agreement:
First Next Over
$250 $250 $500
Million Million Million
- ------- ------- -------
0.60% 0.50% 0.40%
31
INVESTMENT SUB-ADVISORY AGREEMENT
THE SMALL CAP GROWTH FUND OF WM VARIABLE TRUST
EFFECTIVE AS OF ____________
This Investment Sub-Advisory Agreement is made and entered into as of
this______ day of [month], 200 , among WM Advisors, Inc. ("WM Advisors"), a
corporation organized under the laws of the state of Washington, WM Variable
Trust, a business trust formed under the laws of the Commonwealth of
Massachusetts (the "Trust"), on behalf of its Small Cap Growth Fund series (the
"Fund"), and Delaware Management Company, a series of Delaware Management
Business Trust, (the "Sub-Advisor"), a statutory trust organized under the laws
of the state of Delaware.
Whereas, the Trust is an open-end, management investment company and is so
registered under the Investment Company Act of 1940, as amended (the "1940
Act");
Whereas, the Trust offers a number of investment portfolios, each with its
own investment objective and strategies, and of which one investment portfolio
is the Fund;
Whereas, WM Advisors is engaged in the business of rendering investment
advisory and management services, is registered as an investment adviser under
the Investment Advisers Act of 1940, as amended (the "Advisers Act"), and is the
investment advisor of the Fund;
Whereas, the Sub-Advisor is engaged in the business of rendering
investment advisory and management services and Delaware Management Business
Trust, of which the Sub-Advisor is a series, is registered as an investment
adviser under the Advisers Act; and
Whereas, WM Advisors desires to retain the Sub-Advisor to furnish
investment sub-advisory and management services to the Fund and the Sub-Advisor
is willing to furnish such services;
NOW, THEREFORE, in consideration of the mutual agreements herein
contained, it is hereby agreed by and between the parties hereto as follows:
1. Investment Description; Appointment
WM Advisors desires to employ such portion of the capital of the Fund as
may from time to time be determined by WM Advisors by investing and reinvesting
in investments of the kind and in accordance with the limitations specified in
the Trust's Master Trust Agreement, as amended, the Bylaws, as amended, and in
the Prospectus and Statement of Additional Information relating to the Fund as
in effect and which may be amended from time to time, and in such manner and to
such extent as may from time to time be approved by the Board of Trustees of the
Trust. Copies of the Fund's Prospectus and Statement of Additional Information,
Bylaws, and the Trust's Master Trust
32
Agreement, each as amended, have been or will be submitted to the Sub-Advisor.
WM Advisors agrees to provide copies of all amendments or supplements to the
Fund's Prospectus and Statement of Additional Information, Bylaws, and the
Trust's Master Trust Agreement to the Sub-Advisor during the continuance of this
Agreement before or at the time such amendments or supplements become effective;
provided, however, that if any such amendment or supplement relates to the
Sub-Advisor or may reasonably be expected to materially affect the Sub-Advisor's
duties or obligations under this Agreement, WM Advisors agrees to provide copies
of such amendment or supplement prior to its effectiveness. WM Advisors agrees
to furnish the Sub-Advisor with resolutions approved by the Board of Trustees of
the Trust to the extent they may affect the duties of the Sub-Advisor, a copy of
any financial statements or reports prepared for the Fund by the Trust's
independent registered public accountants, and with copies of any financial
statements or reports made by the Fund to its shareholders or to any
governmental body or securities exchange, and any further materials or
information which the Sub-Advisor may reasonably request to enable it to perform
its services hereunder. WM Advisors desires to employ and hereby appoints the
Sub-Advisor to act as investment sub-adviser to the portion of the Fund
allocated to the Sub-Advisor by WM Advisors from time to time. The Sub-Advisor
accepts the appointment and agrees to furnish the services described herein for
the compensation set forth below.
2. Services as Investment Sub-Advisor
Subject to the supervision of the Board of Trustees of the Trust and of WM
Advisors, the Fund's investment adviser, the Sub-Advisor will, solely with
respect to the portion of the Fund allocated to the Sub-Advisor by WM Advisors,
(a) maintain and implement compliance procedures that are reasonably designed to
ensure its compliance with Rule 206(4)-7 of the Advisers Act and to prevent
violations of the "Federal Securities Laws" (as defined in Rule 38a-1 under the
1940 Act) (b) make investment decisions in accordance with the Fund's investment
objectives and policies as stated in the Fund's Prospectus and Statement of
Additional Information as in effect and, after notice to the Sub-Advisor, and
which may be amended from time to time; (c) place purchase and sale orders on
behalf of the Fund to effectuate the investment decisions made; (d) maintain
books and records with respect to the securities transactions of the Fund in
accordance with the 1940 Act and the Advisers Act and the rules adopted
thereunder and furnish to the Trust's Board of Trustees such quarterly, annual
and special reports as the Board may reasonably request; and (e) except as
permitted in this section or elsewhere in this Agreement treat confidentially
and as proprietary information of the Trust, all records and other information
relative to the Trust and to prior, present or potential shareholders and will
not knowingly use or disclose such records and information for any purpose other
than performance of its responsibilities and duties hereunder, except after
prior notification to and approval in writing by the Trust, which approval shall
not be unreasonably withheld and such records may not be withheld where the
Sub-Advisor may be exposed to civil or criminal contempt proceedings for failure
to comply, when requested to divulge such information by duly constituted
authorities, or when so requested by the Trust. The Sub-Advisor will supervise
the Fund's investments and conduct a continuous program of investment,
evaluation and, if appropriate, sale and reinvestment of the Fund's assets in
the portion of the Fund under the Sub-Advisor's
33
management. The Sub-Advisor has responsibility for providing investment services
and advice only with respect to such discrete portion of the Fund as may from
time to time be allocated to the Sub-Advisor by WM Advisors. Subject to the
supervision of WM Advisors and in accordance with the investment objectives and
policies as stated in the Fund's Prospectus and Statement of Additional
Information, the Sub-Advisor is authorized, in its discretion and without prior
consultation with WM Advisors, to buy, sell, lend and otherwise trade in any
stocks, bonds, and other securities and investment instruments on behalf of the
Fund, without regard to the length of time the securities have been held and the
resulting rate of portfolio turnover or any tax considerations, and so long as
consistent with the Fund's investment objectives and policies, the majority or
the whole of the Fund may be invested in such proportions of stocks, bonds,
other securities or investment instruments, or cash as the Sub-Advisor shall
determine. In addition, the Sub-Advisor will furnish the Fund or WM Advisors
with whatever statistical information the Fund or WM Advisors may reasonably
request with respect to the investments that the Fund may hold or contemplate
purchasing in the portion of the fund under the Sub-Advisor's management. The
Sub-Advisor will not consult with any other sub-advisors of any other funds
within the Trust (or any sub-advisors with respect to any other portion of the
Fund) concerning the transactions in securities or other assets of the Fund or
any other funds of the Trust other than for purposes of complying with the
conditions of paragraphs (a) and (b) of Rule 12d3-1 under the 1940 Act.
The Sub-Advisor agrees to comply with the requirements of the 1940 Act, the
Advisers Act, the Securities Act of 1933, the Securities Exchange Act of 1934,
as amended (the "1934 Act"), the Commodity Exchange Act and the respective rules
and regulations thereunder, to the extent applicable, as well as with all other
applicable federal and state laws, rules, regulations and case law that relate
to the services and relationships described hereunder and to the conduct of its
business as a registered investment adviser. No supervisory activity undertaken
by WM Advisors shall limit the Sub-Advisor's full responsibility for any of the
foregoing.
3. Brokerage
Subject to (a) the over-riding objective of obtaining the best possible
execution of orders; and (b) review and approval of the Board of Trustees of the
Trust, which may be conducted as often as the Trustees of the Trust may
determine, the Sub-Advisor shall place all orders for the purchase and sale of
securities for the Fund with brokers or dealers selected by the Sub-Advisor,
which may include brokers or dealers affiliated with the Sub-Advisor. All
transactions with any affiliated person of the Trust, or where any such
affiliated person acts as broker or agent in connection with any such
transaction, shall be accomplished in compliance with the 1940 Act, the Advisers
Act, the 1934 Act, as amended, the rules adopted thereunder and the procedures
adopted thereunder by the Trust. Purchase or sell orders for the Fund may be
aggregated with contemporaneous purchase or sell orders of other clients of the
Sub-Advisor; provided that (a) no advisory account will be favored by the
Sub-Advisor over any other account; (b) each client of the Sub-Advisor who
participates in such an aggregated order will participate at the average share
price, with all transaction costs shared on a pro rata basis; (c) only advisory
clients' transactions will be aggregated for such an aggregated order; and (d)
the accounts of
34
clients whose orders are aggregated will be segregated on the Sub-Advisor's
books and records so as to identify the particular client who has the beneficial
interest therein. The Sub-Advisor shall use its best efforts to obtain execution
of Fund transactions at prices which are advantageous to the Fund and at
commission rates that are reasonable in relation to the benefits received.
However, the Sub-Advisor may select brokers or dealers on the basis that they
provide brokerage, research, or other services or products to the Fund and/or
other accounts serviced by the Sub-Advisor. The Sub-Advisor may pay a broker or
dealer an amount of commission for effecting a securities transaction in excess
of the amount of commission or dealer spread another broker or dealer would have
charged for effecting that transaction if the Sub-Advisor determines in good
faith that such amount of commission was reasonable in relation to the value of
the brokerage and research products and/or services provided by such broker or
dealer. This determination, with respect to brokerage and research services or
products, may be viewed in terms of either that particular transaction or the
overall responsibilities which the Sub-Advisor and its affiliates have with
respect to the Fund and to accounts over which they exercise investment
discretion, and not all such services or products may be used by the Sub-Advisor
in managing the Fund; provided that with respect to such transaction and such
determination the affiliates of the Sub-Advisor shall have the same
responsibilities to the Fund as the Sub-Advisor has under this Agreement.
Notwithstanding the forgoing, the Sub-Advisor may not compensate a broker or
dealer (including a government securities or municipal securities broker or
dealer) for any promotion or sale of shares of any investment company, including
the Fund, by directing to the broker or dealer the Fund's portfolio securities
transactions or any remuneration, including but not limited to any commission,
mark-up, mark-down, or other fee (or portion thereof) received or to be received
from the Fund's portfolio transactions effected through a broker or dealer.
4. Information Provided to the Trust and WM Advisors
The Sub-Advisor will keep the Trust and WM Advisors informed of
developments related to the Sub-Advisor, or its affiliates, their business,
condition or prospects, including without limitation material regulatory
investigations, that may materially affect the Fund of which the Sub-Advisor
becomes aware and will, on its own initiative, furnish the Trust and WM Advisors
on at least a quarterly basis with whatever information the Sub-Advisor believes
is appropriate for this purpose. For purposes of the preceding sentence only,
the term "affiliate" shall mean (i) affiliates of the Sub-Advisor controlled by
Delaware Management Holdings, Inc. (or its successor), which directly or
indirectly controls the Sub-Advisor, and (ii) any registered broker-dealer or
registered investment adviser under common control with the Sub-Advisor.
Further, the Sub-Advisor shall notify WM Advisors immediately upon detection of
(a) any material failure to manage the Fund in accordance with its investment
objectives and policies or any applicable law; or (b) any material breach of any
of the Fund's or the Sub-Advisor's policies, guidelines or procedures. WM
Advisors agrees to provide Sub-Advisor with all relevant Fund policies,
guidelines and procedures.
5. Standard of Care
35
The Sub-Advisor shall exercise its best judgment in rendering the services
described in paragraphs 2-4 above. Except as may otherwise be provided by
federal securities laws, the Sub-Advisor shall not be liable for any error of
judgment or mistake of law or for any loss suffered by the Fund in connection
with the matters to which this Agreement relates, except a loss resulting from
willful misfeasance, bad faith or gross negligence on its part in the
performance of its duties or from reckless disregard by it of its obligations
and duties under this Agreement (the conduct excepted in this sentence shall be
referred to as "Disqualifying Conduct").
6. Compensation
In consideration of the services rendered pursuant to this Agreement, the
Trust, on behalf of the Fund, will pay the Sub-Advisor on the first business day
of each month a fee for the previous month according to the schedule of fees
detailed in Annex A attached to this Agreement. Upon any termination of this
Agreement before the end of a month, the fee for such part of that month shall
be prorated according to the proportion that such period bears to the full
monthly period and shall be payable upon the date of termination of this
Agreement. For the purpose of determining fees payable to the Sub-Advisor, the
value of the Fund's net assets under management by the Sub-Advisor shall be
computed at the times and in the manner specified in the Fund's Prospectus or
Statement of Additional Information relating to the Fund as from time to time in
effect.
7. Expenses
The Sub-Advisor will bear all of its expenses in performing its services
under this Agreement, which expenses shall not include brokerage fees or
commissions in connection with the effectuation of securities transactions. The
Sub-Advisor shall not be required to bear any expenses of the Trust, the Fund or
WM Advisors. The Trust will bear certain other expenses to be incurred in its
operation, including but not limited to: organizational expenses, taxes,
interest, brokerage fees and commissions, if any; fees of trustees of the Trust
who are not officers, directors or employees of the Sub-Advisor, WM Advisors, or
any of their affiliates; Securities and Exchange Commission fees and state Blue
Sky qualification fees; all fees, including out-of-pocket expenses of
custodians, transfer and dividend disbursing agents and transaction charges of
custodians; insurance premiums; outside auditing and legal expenses; costs of
maintenance of the Trust's existence; costs attributable to investor services,
including without limitation, telephone and personnel expenses; costs of
preparing and printing prospectuses and statements of additional information for
regulatory purposes and for distribution to existing shareholders; costs of
shareholders' reports and meetings of the shareholders of the Fund and of the
officers or Board of Trustees of the Trust; and any extraordinary expenses. In
addition, the Fund pays a distribution fee pursuant to the terms of a
Distribution Plan adopted under Rule 12b-1 of the 1940 Act. Any reimbursement of
advisory fees required by any expense limitation provision shall be the sole
responsibility of WM Advisors.
36
8. Services to Other Companies or Accounts
WM Advisors understands that the Sub-Advisor now acts, will continue to act
and may act in the future as investment adviser to fiduciary and other managed
accounts and as investment adviser to one or more other investment companies or
series of investment companies, and WM Advisors has no objection to the
Sub-Advisor so acting, provided that whenever the Fund and one or more other
accounts or investment companies advised by the Sub-Advisor have available funds
for investment, investments suitable and appropriate for each will be allocated
in accordance with procedures reasonably believed to be equitable to each
entity. Similarly, opportunities to sell securities will be allocated in an
equitable manner. WM Advisors recognizes that in some cases this procedure may
limit the size of the position that may be acquired or disposed of for the Fund.
In addition, WM Advisors understands that the persons employed by the
Sub-Advisor to assist in the performance of the Sub-Advisor's duties hereunder
will not devote their full time to such service and nothing contained herein
shall be deemed to limit or restrict the right of the Sub-Advisor or any
affiliate of the Sub-Advisor to engage in and devote time and attention to other
business or to render services of whatever kind or nature. WM Advisors
recognizes and agrees that the Sub-Advisor may provide advice to other clients
which may differ from or be identical to advice given with respect to the Fund.
9. Term of Agreement
This Agreement shall become effective as of the date first written above,
shall continue for a period of two years thereafter, and shall continue in
effect for a period of more than two years thereafter only so long as such
continuance is specifically approved at least annually by (a) the Board of
Trustees of the Trust or (b) a vote of a "majority" (as defined in the 1940 Act)
of the Fund's outstanding voting securities, provided that in either event the
continuance is also approved by a majority of the Board of Trustees who are not
"interested persons" (as defined in the 1940 Act) of any party to this
Agreement, by vote cast in person at a meeting called for the purpose of voting
on such approval. This Agreement is terminable, without penalty, on 30 days'
written notice, by WM Advisors, the Board of Trustees for the Trust or by vote
of holders of a majority of the Fund's shares, or upon 60 days' written notice
by the Sub-Advisor and will terminate automatically upon any termination of the
advisory agreement between the Trust and WM Advisors. In addition, this
Agreement will also terminate automatically in the event of its assignment (as
defined in the 1940 Act). The Sub-Advisor agrees to notify the Trust of any
circumstances that, to its best knowledge and belief, might result in this
Agreement being deemed to be assigned.
10. Representations of WM Advisors and the Sub-Advisor
WM Advisors represents and acknowledges, for itself and on behalf of the
Fund, that (a) a copy of the Trust's Master Trust Agreement, dated February 22,
1989, together with all amendments thereto, is on file in the office of the
Secretary of the Commonwealth of Massachusetts, (b) the appointment of the
Sub-Advisor has been duly authorized, (c) it has acted and will continue to act
in conformity with the 1940 Act and other applicable laws, (d) it is authorized
to perform the services herein, and (e) it has
37
received a copy of Part II of Sub-Advisor's current Form ADV, at least 48 hours
prior to signing this Agreement.
The Sub-Advisor represents that it is authorized to perform the services
described herein. Further, the Sub-Advisor represents that it maintains errors
and omissions insurance coverage in an appropriate amount and shall provide
prior written notice to WM Advisors (a) of any material changes in its insurance
policies or insurance coverage; or (b) if any material claims will be made on
its insurance. Furthermore, the Sub-Advisor shall upon reasonable request
provide WM Advisors any information it may reasonably require concerning the
amount of or scope of such insurance.
11. Indemnification
WM Advisors shall indemnify and hold harmless the Sub-Advisor from and
against any and all claims, losses, liabilities or damages (including reasonable
attorneys' fees and other related expenses), howsoever arising from or in
connection with this Agreement or the performance by the Sub-Advisor of its
duties hereunder; provided, however, that nothing contained herein shall require
that the Sub-Advisor be indemnified for Disqualifying Conduct.
Sub-Advisor shall indemnify and hold harmless WM Advisors and the Fund from
and against any and all claims, losses, liabilities or damages (including
reasonable attorneys' fees and other related expenses), howsoever arising from
or in connection with this Agreement attributable to Disqualifying Conduct.
12. Amendment of this Agreement
No provision of this Agreement may be changed, waived, discharged or
terminated orally, but only by an instrument in writing signed by the party
against which enforcement of the change, waiver, discharge or termination is
sought.
13. Indemnification Use of Names
The parties agree and acknowledge that the Sub-Advisor is the sole owner of
the name and mark "Delaware Management Company, a series of Delaware Management
Business Trust," and that all use of any designation comprised in whole or part
of Delaware Management Company, a series of Delaware Management Business Trust,
(a "Sub-Advisor Mark") under this Agreement shall inure to the benefit of the
Sub-Advisor. The use by the Trust on its own behalf or on behalf of the Fund of
any Sub-Advisor Mark in any advertisement or sales literature or other materials
promoting the Fund shall be with the consent of the Sub-Advisor. The Trust and
WM Advisors shall not, without the consent of the Sub-Advisor, make
representations regarding the Sub-Advisor intended to be disseminated to the
investing public in any disclosure document, advertisement or sales literature
or other materials promoting the Fund. Such consent shall not be required for
any documents or other materials intended for broker-dealer use only, for use by
the Trust's trustees and for internal use by the Trust and WM Advisors. Consent
by the Sub-Advisor to such use of any Sub-Advisor Mark and any such
representation shall not be unreasonably withheld and shall be deemed to be
given if no written objection is received
38
by the Trust, the Fund or WM Advisors within 3 business days after the request
is made by the Trust, the Fund or WM Advisors for such use of any Sub-Advisor
Mark or any such representation. Upon termination of this Agreement for any
reason, the Trust and WM Advisors shall cease all use of any Sub-Advisor Mark(s)
as soon as reasonably practicable.
The Sub-Advisor agrees and acknowledges that the Trust is the sole owner of
the name and mark "WM Variable Trust" and WM Advisors is the sole owner of the
name and mark "WM Advisors, Inc." and that any and all use of any designation
comprised in whole or in part of "WM Variable Trust" or "WM Advisors, Inc."
(each a "WM Mark") under this Agreement shall inure to the benefit of the Trust
or WM Advisors, respectively. Except as used to identify the Fund to third
parties as a client, the use by the Sub-Advisor on its own behalf of any WM Mark
in any advertisement or sales literature or other materials promoting the
Sub-Advisor shall be with the consent of the Trust or WM Advisors, respectively.
The Sub-Advisor shall not, without the consent of the Trust or WM Advisors, as
applicable, make representations regarding the Trust, the Fund or WM Advisors in
any disclosure document, advertisement or sales literature or other materials
promoting the Sub-Advisor. Consent by the Trust and WM Advisors to such use of
any WM Mark and any such representations shall not be unreasonably withheld and
shall be deemed to be given if no written objection is received by the
Sub-Advisor within 5 business days after the request by the Sub-Advisor is made
for such use of any WM Mark or any such representations. Upon termination of
this Agreement for any reason, the Sub- Advisor shall cease any and all use of
any WM Mark as soon as reasonably practicable.
14. Declaration of Trust and Limitation of Liability
A copy of the Master Trust Agreement of the Trust is on file with the
Secretary of State of The Commonwealth of Massachusetts, and notice is hereby
given that this Agreement is executed by an officer of the Trust, as an officer
and not individually, on behalf of the Trustees of the Trust, as trustees and
not individually, on further behalf of the Fund, and that the obligations of
this Agreement with respect to the Fund shall be binding upon the assets and
properties of the Fund only and shall not be binding upon the assets and
properties of any other series of the Trust or upon any of the Trustees,
officers, employees, agents or shareholders of the Fund or the Trust
individually.
15. Entire Agreement; Amendment of Management Agreement
This Agreement constitutes the entire agreement among the parties hereto,
except that WM Advisors and the Trust are also parties to an Investment
Management Agreement relating to the Fund dated May 11, 2004 as Amended and
Restated (the "Management Agreement").
The Trust and WM Advisors hereby amend the Management Agreement, for so
long as this Agreement shall remain in effect, to provide that: (a) The Trust,
on behalf of the Fund, shall pay to WM Advisors a monthly fee equal to the
excess, if any, of (i) the fee set forth in Section 5 of the Management
Agreement (the "Management Fee") over
39
(ii) the fee paid by the Fund under this Agreement or any other sub-advisory
agreement with respect to the Fund; (b) WM Advisors shall not be entitled to any
other fees under the Management Agreement with respect to the Fund; (c) The
Trust acknowledges and agrees that, for so long as Sub-Advisor meets the
standard of care set forth in this Agreement, WM Advisors shall have no
obligation to (i) furnish a continuous investment program for the Fund, (ii)
determine from time to time what securities will be purchased, retained or sold
by the Fund, and what portion of the Fund's assets will be held as cash, or
(iii) place orders for the purchase and sale of portfolio securities for the
Fund with brokers or dealers selected by WM Advisors; (d) Notwithstanding this
Agreement, WM Advisors remains authorized to determine what securities or other
property shall be purchased or sold by or for the Fund; (e) In exchange for the
fee paid by the Fund under the Management Agreement and in recognition of its
obligation to select and monitor the Sub-Advisor, and not for the services
provided by the Sub-Advisor pursuant to the Sub-Advisory Agreement, WM Advisors
shall indemnify and hold the Trust harmless from and against any and all claims,
costs, expenses (including attorneys' fees), losses, damages, charges, payments
and liabilities of any sort or kind which may be asserted against the Trust or
for which the Trust may be held liable arising out of or attributable to any
actual or alleged failure of Sub-Advisor to meet the standard of care set forth
in this Agreement.
16. Governing Law
This Agreement shall be governed in accordance with the laws of The
Commonwealth of Massachusetts. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to such jurisdiction be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms or provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction.
17. Miscellaneous
(a) Unless WM Advisors or the Trust gives the Sub-Advisor written
instructions to the contrary, the Sub-Advisor shall vote all proxies solicited
by or with respect to the issuers of securities in which assets of the portion
of the Fund under the Sub-Advisor's management may be invested. The Sub-Advisor
shall use its best good faith judgment to vote such proxies in a manner which
best serves the interests of the Fund's shareholders. The Fund shall cause all
proxies received by it or on its behalf that relate to securities within the
portion of the Fund managed by the Sub-Advisor to be delivered to the
Sub-Advisor or its agent on a timely basis.
(b) WM Advisors shall provide the Sub-Advisor with a copy of the Fund's
agreement (the "Custody Agreement") with the custodian (the "Custodian")
designated to hold the assets of the Fund and any modification thereto in
advance. The Fund's assets shall be maintained in the custody of the Custodian
identified in, and in accordance with the terms and conditions of, the Custody
Agreement. The Sub-Advisor shall have no liability for the acts or omissions of
the Custodian. Any assets added to the portion of the
40
Fund to be managed by the Sub-Advisor shall be delivered directly to the
Custodian. The Sub-Advisor shall under no circumstances act as custodian for the
Fund.
(c) The Sub-Advisor may perform its services through any employee, officer
or agent of the Sub-Advisor, and the Trust and the Fund shall not be entitled to
the advice, recommendation, or judgment of any specific person.
(d) In the performance of its duties hereunder, the Sub-Advisor is and
shall be an independent contractor and, unless otherwise expressly provided
herein or otherwise authorized in writing, shall have no authority to act for or
represent the Fund, the Trust, or WM Advisors in any way or otherwise be deemed
to be an agent of the Fund, the Trust, or WM Advisors. If any occasion should
arise in which the Sub-Advisor gives any advice to its clients concerning the
shares of the Fund, the Sub-Advisor will act solely as investment counsel for
such clients and not in any way on behalf of the Fund.
(e) The headings of paragraphs contained in this Agreement are provided
for convenience only, form no part of this Agreement and shall not affect its
construction.
(f) This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(g) All written notices, requests or other communications to any party
hereunder shall be given to the following addresses and telecopy numbers, or
such other address and telecopy number communicated to the other parties from
time to time:
If to WM Advisors, to: Attn: Cindy Kim
1201 Third Avenue 22nd Floor Seattle, WA 98101
If to the Fund, to: Attn: J. B. Kittredge of Ropes & Gray LLP
One International Place Boston, MA 02110-2624
If to the Sub-Advisor, to: Attn: Patrick Coyne
2005 Market Street, Philadelphia, PA 19103, with a copy to General Counsel
at same address
(h) The Sub-Advisor is permitted to include the performance of the portion
of the Fund managed by the Sub-Advisor in calculating the performance of its
composites; provided, that the Sub-Advisor shall indemnify the Fund and WM
Advisors for any liability that results from such use.
18. Confidential Information
"Confidential Information" of any party shall mean ideas, expressions,
trade secrets, customer lists, products, policies, forms, business methods,
business plans, software and information from third parties (such as software
and its related documentation) for which such party has a duty of
confidentiality, as well as information
41
which from all relevant circumstances should reasonably be assumed by a party to
be confidential information, whether any of which is marked "Confidential
Information" or not. Each party will make reasonable effort to advise each other
party when information disclosed to that other party is Confidential
Information. Confidential Information relating to a party shall be held in
confidence by each other party to the same extent and in at least the same
manner as such party protects its own Confidential Information, but in no case
to a lesser extent or manner than a reasonable degree of care under the
circumstances. CONFIDENTIAL INFORMATION SHALL NOT BE DISCLOSED TO THIRD PARTIES
WITHOUT SPECIFIC WRITTEN PERMISSION OF THE PROTECTED PARTY. Each party shall,
however, be permitted to disclose relevant aspects of each other party's
Confidential Information to its officers, agents, subcontractors and employees
to the extent that such disclosure is reasonably necessary for the performance
of its duties and obligations under this Agreement; provided, however, that such
party shall take all reasonable measures to ensure that Confidential Information
of the other party is not disclosed or duplicated in contravention of the
provisions of the Agreement by such officers, agents, sub contractors, and
employees.
The obligations in this Section 18 shall not restrict any disclosure by
any party pursuant to any applicable state or federal laws, or by order of any
court or government agency (provided that, the disclosing party shall give
prompt notice to the non-disclosing party of such order) and shall not apply
with respect to information which (1) is independently developed by the other
party without violating the disclosing party's proprietary rights, (2) is or
becomes publicly known (other than through unauthorized disclosure), (3) is
intentionally disclosed by the owner of such information to a third party free
of any obligation of confidentiality, (4) is already known by such party without
an obligation of confidentiality other than pursuant to this Agreement or of any
confidentiality agreements entered into before the effective date of this
Agreement as evidenced by the written records of such party, or (5) is
rightfully received by a party free of any obligation of confidentiality.
The parties agree that they shall abide by the provisions of the
Gramm-Leach-Bliley Act ("GLB") and other applicable privacy laws and shall each
establish commercially reasonable controls to ensure the confidentiality of the
Confidential Information and to ensure that the Confidential Information is not
disclosed contrary to the provisions of this Agreement, GLB or any other
applicable privacy laws and regulations. Without limiting the foregoing, each
party shall implement such physical and other security measures as are necessary
to (i) ensure the security and confidentiality of the Confidential Information
(ii) protect against any threats or hazards to the security and integrity of the
Confidential Information and (iii) protect against any unauthorized access to or
use of the Confidential Information. To the extent that any duties and
responsibilities under the Agreement are delegated to an agent or other
subcontractor, the party shall take reasonable steps to ensure that such agents
and subcontractor adhere to the same requirements. Each party shall have the
right, during regular office hours and upon reasonable notice, to audit the
other party to ensure compliance with the terms of this Agreement, GLB and other
privacy laws and regulations.
42
Notwithstanding the foregoing, the provisions of this Section 18 shall
impose no obligations on the Fund.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first written above.
WM ADVISORS, INC. WM VARIABLE TRUST, on behalf of its Small
Cap Growth Fund series
By_____________________________ By________________________
Name: William G. Papesh Name: John T. West
Title: President Title: First Vice President
DELAWARE MANAGEMENT COMPANY,
a series of DELAWARE MANAGEMENT BUSINESS TRUST
By________________________ Dated: _________________
Name:
Title:
43
ANNEX A
1. For purposes of calculating the fee to be paid to the Sub-Advisor under this
Agreement:
"Fund Assets" shall mean the net assets of the portion of the Fund managed
by the Sub-Advisor;
"Other Assets" shall mean the net assets of the portion of the Growth Fund
series of WM Trust managed by the Sub-Advisor.
"Combined Assets" shall mean the sum of Fund Assets and Other Assets; and
"Average Daily Net Fund Assets," "Average Daily Net Other Assets" and
"Average Daily Net Combined Assets" shall mean the average of the value of
the Fund Assets, Other Assets or Combined Assets, as the case may be, on
each business day.
2. The Sub-Advisor fee shall be paid in arrears (within 10 days of month end)
based upon the Average Daily Net Combined Assets during the preceding month. The
fee payable for the month shall be calculated by applying the annual rate, as
set forth in the fee schedule below, to the Average Daily Net Combined Assets,
and dividing by twelve. The portion of the monthly fee to be paid by the Fund
under this Agreement shall be prorated based upon the Average Daily Net Fund
Assets as compared to the Average Daily Net Combined Assets. For a month in
which this Agreement becomes effective or terminates, the portion of the
Sub-Advisor fee due hereunder shall be prorated on the basis of the number of
days that the Agreement is in effect during the month.
3. The following fee schedule shall be used to calculate the fee to be paid to
the Sub-Advisor under this Agreement:
First Next Over
$250 $250 $500
Million Million Million
- ------- ------- -------
0.60% 0.50% 0.40%
44
-PLEASE FOLD AND DETACH CARD AT PERFORATION BEFORE
MAILING-
WM GROUP OF FUNDS
SMALL CAP GROWTH FUND
PROXY SOLICITED BY THE BOARD OF TRUSTEES
PROXY FOR SPECIAL MEETING OF SHAREHOLDERS ON MARCH 16, 2005
The undersigned hereby revokes all previous proxies for his or her or its shares
and appoints William G. Papesh and John T. West, and each of them separately,
proxies with power of substitution to each, and hereby authorizes them to
represent and to vote, as designated on the reverse side, at the Special Meeting
of Shares of the Small Cap Growth Fund (the "Fund"), a series of WM Variable
Trust, on March 16, 2005 at 10:00 a.m. Pacific time (the "Meeting"), and any
adjournments(s) thereof, all of the shares of the Fund which the undersigned
would be entitled to vote if personally present.
IF THIS PROXY IS PROPERLY EXECUTED, THE VOTES ENTITLED TO BE CAST BY THE
UNDERSIGNED WILL BE CAST IN THE MANNER DIRECTED, AND WILL BE VOTED IN THE
DISCRETION OF THE PROXY HOLDER(S) ON ANY OTHER MATTERS THAT MY PROPERLY COME
BEFORE THE MEETING OR ANY ADJOURNMENT(S) THEREOF. IF THIS PROXY IS PROPERLY
EXECUTED BUT NO DIRECTION IS MADE, SUCH VOTES ENTITLED TO BE CAST BY THE
UNDERSIGNED WILL BE CAST "FOR" EACH PROPOSAL.
PLEASE VOTE, SIGN AND DATE THIS PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED
ENVELOPE.
DATE
__________________________________________________
__________________________________________________
Signature(s) NOTE: Please sign exactly as your name appears on this proxy card.
All joint owners should sign. When signing as executor, administrator, attorney,
trustee or guardian or as custodian for a minor, please give full title as such.
If a corporation, please sign in full corporate name and indicate the signer's
office. If a partner, sign in the partnership name.
________________________________________________________________________________
-PLEASE FOLD AND DETACH CARD AT PERFORATION BEFORE
MAILING-
Please fill in box(es) as shown using black or blue ink or number 2 pencil |X|
PLEASE DO NOT USE FINE POINT PENS.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY
THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED
FOR THE PROPOSALS.
49
In their discretion, the proxies are authorized to vote upon such other matters
that may properly come before the Meeting or any adjournment(s) thereof. The
Trustees recommend a vote FOR the Proposals.
FOR AGAINST ABSTAIN
1.To approve the Sub-Advisory Agreement
relating to the Fund among the Fund, WM [ ] [ ] [ ]
Advisors, Inc. and Oberweis Asset Management Inc.
2. To approve the Sub-Advisory Agreement
relating to the Fund among the Fund, WM [ ] [ ] [ ]
Advisors, Inc. and Delaware Management Company.
PLEASE SIGN AND DATE ON THE REVERSE SIDE AND
RETURN PROMPTLY IN THE ENCLOSED
ENVELOPE. VOTE TODAY BY MAIL USING THE ENCLOSED POSTAGE
-PAID ENVELOPE.
VOTE BY TOUCHTONE PHONE AT (800) 690-6903, OR VOTE VIA THE
INTERNET BY
LOGGING ONTO WWW.PROXYWEB.COM.
50