UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number 811-07462
WM Variable Trust
(Exact name of registrant as specified in charter)
1201 Third Avenue, 22nd Floor, Seattle, WA 98101
(Address of principal executive offices) (Zip code)
Jeffrey L. Lunzer
1201 Third Avenue, 22nd Floor, Seattle, WA 98101
(Name and address of agent for service)
Registrant's telephone number, including area code: (206) 461-3800
Date of fiscal year end: December 31, 2004
Date of reporting period: December 31, 2004
ITEM 1. REPORTS TO STOCKHOLDERS
[WM VARIABLE TRUST LOGO]
ANNUAL REPORT
December 31, 2004
WM VARIABLE TRUST
VT Equity Funds
VT Fixed-Income Funds
VT Money Market Funds
WM Variable Trust
VT EQUITY FUNDS
VT REIT Fund
VT Equity Income Fund
VT Growth & Income Fund
VT West Coast Equity Fund
VT Mid Cap Stock Fund
VT Growth Fund
VT Small Cap Value Fund
VT Small Cap Growth Fund
VT International Growth Fund
VT FIXED-INCOME FUNDS
VT Short Term Income Fund
VT U.S. Government Securities Fund
VT Income Fund
VT MONEY FUNDS
VT Money Market Fund
At the WM Group of Funds, our passion is
piecing together individual investments
into comprehensive portfolios to make
your financial plan more effective.
The WM Variable Trust (VT) Funds may not be purchased directly, but are
currently available through the WM Strategic Asset Manager and the WM Advantage
variable annuities issued by American General Life. They are also available
through the WM Diversified Strategies and WM Diversified Strategies (III)
variable annuities issued by AIG SunAmerica Life Assurance Company, the WM
Diversified Strategies (III) (New York) variable annuity issued by First
SunAmerica Life Insurance Company, and the WM LifeAccumulator variable universal
life insurance policy issued by Farmers New World Life Insurance Company. They
may also be available through other select variable insurance products and
retirement plans. The VT Funds may not have been available for sale for all
products for the time periods shown on pages 6-30.
Withdrawals made prior to age 59 1/2 may be subject to a 10% IRS tax penalty.
Table of Contents
1 Message from the President
2 Economy & Financial Markets: Review & Outlook
WM Variable Trust Investment Strategy
6 VT REIT Fund
8 VT Equity Income Fund
10 VT Growth & Income Fund
12 VT West Coast Equity Fund
14 VT Mid Cap Stock Fund
16 VT Growth Fund
18 VT Small Cap Value Fund
20 VT Small Cap Growth Fund
22 VT International Growth Fund
24 VT Short Term Income Fund
26 VT U.S. Government Securities Fund
28 VT Income Fund
30 VT Money Market Fund
31 Expense Information
33 Financial Statements
94 Notes to Financial Statements
102 Report of Independent Registered Public Accounting Firm
103 Other Information
NOT FDIC OR NCUA/NCUSIF INSURED
MAY LOSE VALUE - NOT A DEPOSIT - NO BANK OR
CREDIT UNION GUARANTEE - NOT INSURED BY ANY
FEDERAL GOVERNMENT AGENCY
[PHOTO OF WILLIAM G.PAPESH]
Dear Investor,
During my 36 years in the investment management business, I have seen many
changes--some caused a lasting impact and others came into fashion but
then quickly faded. Thankfully, there have also been a few things that
have remained the same. Among the most important of these is our long-term
investment philosophy.
One test of our consistent investment approach can be found in the
performance of our WM VT Strategic Asset Management (SAM) Portfolios. We
believe these results validate our forecasting, portfolio construction,
risk management, and asset allocation processes, which have taken years to
build.We are also thankful to the important partners who have helped us
deliver our investment promise to shareholders so successfully: our
investment management, fund distribution, and shareholder servicing teams,
as well as the WM Group of Funds Board of Trustees.
EXPANDING OUR CAPABILITIES
Our fund family is committed to seeking ways to improve our investment
process. As part of these ongoing efforts, in May of 2004 we launched our
new WM VT Small Cap Value Fund, which invests in undervalued smaller
companies. (Note that small-cap stocks may have additional risks,
including greater price volatility.) With the addition of this new Fund,
our VT SAM Portfolios can invest in up to 14 distinct asset classes, which
expands our choice of investments while increasing our portfolio
diversification opportunities.
BENEFITING FROM A STRONG FOUNDATION
I am proud to be only the fourth president of our fund family, which can trace
its roots back more than six decades. From my vantage point, I believe our
strong heritage has been built on trust and integrity. Although these
characteristics are intangible, they are essential to building strong
shareholder relationships and are the foundation of our organization.
Our heritage includes producing positive results guided by a fund's stated
investment objective. The powerful combination of consistent fund performance
and quality shareholder services has produced shareholder satisfaction that has
resulted in a very low redemption rate relative to our peers in the fund
industry. We will continue striving to meet the expectations of our existing
shareholders while attracting new investors and assets under management.
Based on our achievements this year and our continuous efforts to improve our
processes, I am extremely positive about our direction and ability to assist you
in meeting your financial goals. On behalf of the entire company, we thank you
for your continued support and confidence.
Sincerely,
/s/ William G. Papesh
- ---------------------
William G. Papesh
President
Economy & Financial Markets: Review & Outlook
[LOGO]
MODERATE ECONOMIC GROWTH AMID AN ABNORMAL RECOVERY
Fiscal year 2004--the 12 months from January 1, 2004 through December 31, 2004
- --was a transition period for the U.S. economy, which experienced a cyclical
rebound accompanied by a shift from consumer to business spending. Improved
corporate productivity, stronger cash flows, and profit growth all indicated
that a cyclical recovery was underway as the year progressed. This rebound was
powered by the Federal Reserve's very successful reflation policy, which allowed
the economy to benefit from the lowest interest rates seen in 45 years.
While we believe the economy continues to improve, this recovery has shown some
unusual characteristics. Historically, in a normal recovery, businesses add more
jobs, which in turn gives individuals the confidence to increase spending. In
this recovery, businesses restrained both capital expenditures and new hiring
for most of the period. Despite the bad news, consumers kept spending even as
layoffs continued. What allowed consumers to keep spending were record levels of
home refinancings and a general willingness to assume debt.
What also made this period unusual was that the economic slowdown was not
restricted to the U.S. In addition, Europe and Asia (with the exception of Japan
and China) suffered from slow economic growth, which reduced demand for U.S.
imports. Furthermore, news about terrorism and the war in Iraq reduced investor
confidence.
REFLATION POLICY HELPS PROFITABILITY
The economy began the period on a firm footing thanks to the Federal Reserve's
powerful reflation policy. Low interest rates and growing corporate earnings
helped propel corporate profitability to its highest levels in 20 years and
allowed businesses to repair their balance sheets.
In this environment, stocks traded within a relatively narrow range prior to the
presidential election, but finished the year with
VALUE OF A $10,000 INVESTMENT DECEMBER 31,1994 - DECEMBER 31,2004
[LINE GRAPH]
LEHMAN BROTHERS
AGGREGATE
DATE BOND INDEX S&P 500 INFLATION
12/31/1994 10,000 10,000 10,000
Jan-95 10,198 10,260 10,040
Feb-95 10,441 10,658 10,080
Mar-95 10,504 10,974 10,113
Apr-95 10,651 11,293 10,147
May-95 11,064 11,739 10,167
Jun-95 11,144 12,015 10,187
Jul-95 11,120 12,415 10,187
Aug-95 11,254 12,448 10,214
Sep-95 11,364 12,970 10,234
Oct-95 11,511 12,925 10,268
Nov-95 11,684 13,493 10,261
Dec-95 11,848 13,743 10,254
Jan-96 11,926 14,216 10,314
Feb-96 11,718 14,352 10,347
Mar-96 11,636 14,490 10,401
Apr-96 11,571 14,703 10,442
May-96 11,548 15,082 10,461
Jun-96 11,703 15,144 10,468
Jul-96 11,734 14,470 10,488
Aug-96 11,714 14,777 10,508
Sep-96 11,918 15,607 10,541
Oct-96 12,183 16,035 10,575
Nov-96 12,391 17,252 10,595
Dec-96 12,276 16,914 10,595
Jan-97 12,314 17,964 10,629
Feb-97 12,345 18,110 10,662
Mar-97 12,208 17,357 10,689
Apr-97 12,391 18,393 10,701
May-97 12,509 19,522 10,695
Jun-97 12,657 20,393 10,708
Jul-97 12,999 22,012 10,721
Aug-97 12,889 20,788 10,741
Sep-97 13,079 21,927 10,768
Oct-97 13,269 21,195 10,795
Nov-97 13,330 22,176 10,788
Dec-97 13,465 22,558 10,775
Jan-98 13,637 22,808 10,796
Feb-98 13,626 24,452 10,816
Mar-98 13,672 25,704 10,837
Apr-98 13,744 25,964 10,856
May-98 13,874 25,517 10,876
Jun-98 13,992 26,553 10,889
Jul-98 14,021 26,272 10,902
Aug-98 14,250 22,473 10,915
Sep-98 14,583 23,914 10,928
Oct-98 14,506 25,858 10,954
Nov-98 14,589 27,425 10,954
Dec-98 14,633 29,004 10,948
Jan-99 14,736 30,217 10,974
Feb-99 14,479 29,277 10,987
Mar-99 14,558 30,448 11,020
Apr-99 14,605 31,626 11,101
May-99 14,476 30,880 11,101
Jun-99 14,430 32,594 11,101
Jul-99 14,369 31,577 11,134
Aug-99 14,362 31,419 11,161
Sep-99 14,529 30,558 11,214
Oct-99 14,583 32,493 11,234
Nov-99 14,581 33,152 11,241
Dec-99 14,511 35,105 11,241
Jan-00 14,463 33,343 11,268
Feb-00 14,638 32,712 11,335
Mar-00 14,831 35,912 11,428
Apr-00 14,788 34,831 11,434
May-00 14,781 34,117 11,441
Jun-00 15,088 34,956 11,508
Jul-00 15,226 34,411 11,527
Aug-00 15,447 36,548 11,541
Sep-00 15,544 34,618 11,601
Oct-00 15,646 34,472 11,621
Nov-00 15,903 31,756 11,628
Dec-00 16,199 31,912 11,621
Jan-01 16,463 33,044 11,694
Feb-01 16,606 30,031 11,741
Mar-01 16,689 28,130 11,768
Apr-01 16,619 30,316 11,815
May-01 16,719 30,519 11,868
Jun-01 16,782 29,777 11,888
Jul-01 17,158 29,485 11,855
Aug-01 17,356 27,639 11,855
Sep-01 17,557 25,406 11,908
Oct-01 17,924 25,891 11,868
Nov-01 17,676 27,877 11,848
Dec-01 17,563 28,123 11,801
Jan-02 17,706 27,712 11,829
Feb-02 17,877 27,177 11,876
Mar-02 17,581 28,199 11,942
Apr-02 17,922 26,490 12,009
May-02 18,074 26,294 12,009
Jun-02 18,231 24,422 12,016
Jul-02 18,452 22,517 12,030
Aug-02 18,764 22,666 12,069
Sep-02 19,068 20,202 12,090
Oct-02 18,980 21,980 12,110
Nov-02 18,974 23,274 12,110
Dec-02 19,367 21,906 12,084
Jan-03 19,384 21,332 12,137
Feb-03 19,652 21,012 12,230
Mar-03 19,636 21,216 12,304
Apr-03 19,799 22,964 12,277
May-03 20,167 24,174 12,257
Jun-03 20,127 24,484 12,271
Jul-03 19,451 24,914 12,284
Aug-03 19,579 25,400 12,331
Sep-03 20,098 25,131 12,371
Oct-03 19,911 26,553 12,358
Nov-03 19,959 26,787 12,324
Dec-03 20,162 28,191 12,311
Jan-04 20,324 28,709 12,371
Feb-04 20,543 29,109 12,438
Mar-04 20,697 28,669 12,518
Apr-04 20,159 28,219 12,558
May-04 20,079 28,605 12,632
Jun-04 20,193 29,160 12,672
Jul-04 20,393 28,195 12,652
Aug-04 20,782 28,308 12,658
Sep-04 20,839 28,614 12,685
Oct-04 21,014 29,052 12,752
Nov-04 20,846 30,228 12,758
Dec-04 21,037 31,256 12,795
Data shown is past performance and does not guarantee future results.
Source: Ibbotson Associates. The S&P 500 is a broad-based index intended to
represent the U.S. equity market. The Lehman Brothers Aggregate Bond Index is a
broad-based index intended to represent the U.S. fixed-income market. Returns
shown for indices assume reinvestment of all dividends and distributions.
Inflation is measured by the Consumer Price Index for all urban consumers.
Indices are unmanaged, and individuals cannot invest directly in an index.
This economic and financial market analysis represents the opinions of WM
Advisors, Inc. It should not be considered as investment advice. No forecast
based on the opinions expressed can be guaranteed, and they may be subject to
change without notice.
2
the S&P 500 posting a total return of 10.87%. As the year progressed,
geopolitical concerns, slow job growth, and rising oil prices added to investor
uncertainty. The re-election of President George W. Bush in November produced a
strong post-election rally that continued through year end. Companies in
cyclical growth sectors, such as energy and utilities, performed best. At the
style level, value stocks outpaced growth stocks, while mid- and small-cap
stocks significantly outperformed large-cap stocks.
Starting from historically low short-term interest rates, which effectively
created 0% inflation-adjusted interest rates, bond markets were concerned about
inflation and Federal Reserve policy shifts, and had a volatile year. The second
quarter was one of the worst for the Treasury market since 1980, but in the
third quarter, Treasuries rebounded strongly. That exceptional reversal was
attributed to concerns that the increase in oil prices, which moved to over $50
per barrel in late September, would curb consumer spending and further reduce
growth in an already slowing economy. In the fourth quarter,Treasuries leveled
off, shrugging off news about a weakening U.S. dollar, rising short-term
interest rates, and an improving U.S. economy.
LOOKING AHEAD
Looking ahead, we continue to be concerned about several factors: global excess
capacity, which curtails corporate pricing power; the large federal deficit,
which can raise interest rates and curb individual savings; the declining U.S.
dollar, which makes U.S. financial assets less attractive; volatile oil prices;
and the timing of future interest rate hikes.
Our fixed-income outlook assumes the Federal Reserve (the Fed) will continue its
stated policy of gradual short-term interest rate increases. As a result, we
expect the yield curve will continue to flatten with short-term rates moving up
more than longer-term rates. As the Fed moves to increase short-term interest
rates, our long-term interest rate scenario remains positive. Given these
competing factors, we are positioned neutrally with respect to interest rate
risk. From a sector standpoint, we view mortgages as offering the best value.
Mortgages generally do well in a stable to modestly rising interest rate
environment. We also believe high-yield securities should continue to benefit
from a growing economy.
Our equity outlook is for the economy to continue to grow, but at a slower pace
accompanied by moderate inflation. In this environment, we continue to focus on
companies that we believe can generate organic growth and not only pay
dividends, but also increase them. In a slow-growth environment, dividends can
become a larger component of total return, which makes these companies more
attractive.
We also believe an important element of a sustained recovery is higher
employment, rather than increases in consumer debt.
MARKET PERFORMANCE AS OF DECEMBER 31, 2004
1 Year 5 Year 10 Year
- ------------------------------------ ------ ------- -------
S&P 500 10.87% -2.30% 12.07%
Energy 31.54% 8.77% 14.15%
Industrials 18.03% 2.78% 13.07%
Consumer Staples 8.16% 4.78% 11.24%
Telecommunication Services 19.85% -14.60% 5.29%
Utilities 24.28% 3.73% 8.16%
Financials 10.89% 7.26% 17.65%
Health Care 1.68% 2.76% 15.01%
Consumer Discretionary 13.24% -0.51% 12.08%
Materials 13.19% 5.22% 8.61%
Information Technology 2.56% -16.17% 13.02%
LEHMAN BROTHERS AGGREGATE BOND INDEX 4.34% 7.71% 7.72%
Data shown is past performance and does not guarantee future results.
Source: Ibbotson Associates. Equity sectors are represented by S&P 500 sector
categories. Returns shown for indices and sectors are annualized returns and
assume reinvestment of all dividends and distributions. Indices are unmanaged,
and individuals cannot invest directly in an index.
3
Economy & Financial Markets: Review & Outlook
[LOGO]
WM GROUP OF FUNDS CELEBRATES ITS HERITAGE
With investment management roots dating back to 1939, WM Advisors, Inc.,
investment advisor to the WM VT Funds, is a company well-versed in the
management of long-term assets. During this fiscal year, one of our retail
funds, the WM Equity Income Fund, celebrated its 65th year in operation, which
puts it among the oldest mutual funds in the United States.
This retail fund was launched in 1939 as the Composite Bond Fund, one of the
first 50 mutual funds in the U.S. Some 65 years later, the fund continues to
operate today as the WM Equity Income Fund. Its Variable Trust counterpart, the
WM VT Equity Income Fund, is a component of all of our WM VT Strategic Asset
Management (SAM) Portfolios. (The WM VT Equity Income Fund was launched on April
28, 1998 and is available only through variable insurance products and certain
retirement plans.)
The origins of WM Advisors began with Murphey Favre & Co., of Spokane,
Washington, a firm that can in turn trace its roots back to 1888. At that time,
its founder, Alonzo M. Murphey, offered his services as "money to loan" to
potential home buyers. Within four years, Murphey had secured backing from
certain San Francisco banks and insurance companies, and the firm became more
active in the mortgage and bond markets. As it matured, the company developed an
investment business based on selling only premium quality equities, targeting a
balanced portfolio approach, and never using margin.
MAJOR MARKET EVENTS JANUARY 1, 2004 - DECEMBER 31, 2004
[LINE GRAPH]
DATE PX LAST
1/2/2004 1,108.48
1/5/2004 1,122.22
1/6/2004 1,123.67
1/7/2004 1,126.33
1/8/2004 1,131.92
1/9/2004 1,121.86
1/12/2004 1,127.23
1/13/2004 1,121.22
1/14/2004 1,130.52
1/15/2004 1,132.05
1/16/2004 1,139.83
1/20/2004 1,138.77
1/21/2004 1,147.62
1/22/2004 1,143.94
1/23/2004 1,141.55
1/26/2004 1,155.37
1/27/2004 1,144.05
1/28/2004 1,128.48
1/29/2004 1,134.11
1/30/2004 1,131.13
2/2/2004 1,135.26
2/3/2004 1,136.03
2/4/2004 1,126.52
2/5/2004 1,128.59
2/6/2004 1,142.76
2/9/2004 1,139.81
2/10/2004 1,145.54
2/11/2004 1,157.76
2/12/2004 1,152.11
2/13/2004 1,145.81
2/17/2004 1,156.99
2/18/2004 1,151.82
2/19/2004 1,147.06
2/20/2004 1,144.11
2/23/2004 1,140.99
2/24/2004 1,139.09
2/25/2004 1,143.67
2/26/2004 1,144.91
2/27/2004 1,144.94
3/1/2004 1,155.97
3/2/2004 1,149.10
3/3/2004 1,151.04
3/4/2004 1,154.88
3/5/2004 1,156.86
3/8/2004 1,147.20
3/9/2004 1,140.58
3/10/2004 1,123.89
3/11/2004 1,106.78
3/12/2004 1,120.57
3/15/2004 1,104.49
3/16/2004 1,110.70
3/17/2004 1,123.75
3/18/2004 1,122.32
3/19/2004 1,109.78
3/22/2004 1,095.40
3/23/2004 1,093.95
3/24/2004 1,091.33
3/25/2004 1,109.19
3/26/2004 1,108.06
3/29/2004 1,122.47
3/30/2004 1,127.00
3/31/2004 1,126.21
4/1/2004 1,132.17
4/2/2004 1,141.81
4/5/2004 1,150.57
4/6/2004 1,148.16
4/7/2004 1,140.53
4/8/2004 1,139.32
4/12/2004 1,145.20
4/13/2004 1,129.44
4/14/2004 1,128.17
4/15/2004 1,128.84
4/16/2004 1,134.61
4/19/2004 1,135.82
4/20/2004 1,118.15
4/21/2004 1,124.09
4/22/2004 1,139.93
4/23/2004 1,140.60
4/26/2004 1,135.53
4/27/2004 1,138.11
4/28/2004 1,122.41
4/29/2004 1,113.89
4/30/2004 1,107.30
5/3/2004 1,117.49
5/4/2004 1,119.55
5/5/2004 1,121.53
5/6/2004 1,113.99
5/7/2004 1,098.70
5/10/2004 1,087.12
5/11/2004 1,095.45
5/12/2004 1,097.28
5/13/2004 1,096.44
5/14/2004 1,095.70
5/17/2004 1,084.10
5/18/2004 1,091.49
5/19/2004 1,088.68
5/20/2004 1,089.19
5/21/2004 1,093.56
5/24/2004 1,095.41
5/25/2004 1,113.05
5/26/2004 1,114.94
5/27/2004 1,121.28
5/28/2004 1,120.68
6/1/2004 1,121.20
6/2/2004 1,124.99
6/3/2004 1,116.64
6/4/2004 1,122.50
6/7/2004 1,140.42
6/8/2004 1,142.18
6/9/2004 1,131.33
6/10/2004 1,136.47
6/14/2004 1,125.29
6/15/2004 1,132.01
6/16/2004 1,133.56
6/17/2004 1,132.05
6/18/2004 1,135.02
6/21/2004 1,130.30
6/22/2004 1,134.41
6/23/2004 1,144.06
6/24/2004 1,140.65
6/25/2004 1,134.43
6/28/2004 1,133.35
6/29/2004 1,136.20
6/30/2004 1,140.84
MAJOR MARKET EVENTS
- -------------------
JANUARY 5
One day after Federal Reserve Governor suggests rates should remain low, S&P 500
closes at 1122.22.
JANUARY 14
Commerce Dept. announces that trade deficit shrank to $38 billion in Nov. '03.
JANUARY 28
Fed releases statement that market interprets as moving closer to raising
interest rates.
JANUARY 30
Estimates for 4th quarter '03 consumer spending growth released. Down
significantly from prior quarter.
FEBRUARY
U.S. dollar falls to record lows against the euro.
FEBRUARY 11
Fed says the economy is continuing to expand. S&P 500 closes at 1157.76, its
high for the fiscal year.
MARCH 8-15
Terror attack on a train in Madrid, Spain is linked to al Qaeda. S&P 500 begins
slide from 1147.20 to 1104.49.
MARCH 16
Fed meeting leaves rates unchanged.
MARCH 25
Corporate profits report strong as economy gains 4.1% in 4th quarter '03.
MAY 3
WM VT Small Cap Value Fund is launched.
MAY 4
Fed keeps short-term interest rates at 1.00%.
MAY 7
Strong employment report fuels speculation that the Fed will raise rates.
JUNE 1 Oil prices spike higher.
JUNE 23
S&P 500 closes at 1144.06, its high for the quarter.
JUNE 30
Fed increases short-term interest rates for the first time in 4 years by 1/4
point to 1.25%.
Source: Bloomberg L.P. (S&P 500 data). Indices are unmanaged, and
individuals cannot invest directly in an index.
4
One year after the formation of the firm's first investment company, Congress
enacted the Investment Company Act of 1940. As part of this act, investment
companies were required to have a manager or corporate advisor to hold the
management contract. This led to the firm's creation of the Bond Research
Company in 1944, which became the Composite Research & Management Company in
1952. The ownership of this company remained in place until 1982 when it was
acquired by Washington Mutual Savings Bank and evolved to become WM Advisors,
Inc.
ALIGNING FUND MANAGEMENT AND SHAREHOLDER GOALS
Over the past 65 years, the WM Group of Funds has grown into a nationally
recognized family of funds. Today, the WM Group of Funds offers 24 retail mutual
funds and 18 Variable Trust funds. Including institutional assets, WM Advisors
has assets under management totaling more than $22 billion.*
"There is great continuity here, not only in terms of operating funds that have
such a long history, but also in terms of how our fund management and oversight
practices have advanced as the entire financial services industry has evolved,"
says William G. Papesh, President of WM Advisors."While we have strived to keep
pace with changes in market conditions, the financial services industry, and the
regulatory environment, we also still follow many of the same investment
principles that these Funds and our founders developed many decades ago."
Foremost among these principles have been trust and integrity. During its
65-year history, our fund family has had only four presidents. Each president
had a long tenure because each one took the values of long-term investing,
consistency of purpose, trust, and integrity very seriously. These values are
still at work today for the Funds' management, staff, and board of trustees.
For more information about the individual WM Variable Trust Funds, please see
the following pages.
*As of December 31, 2004.
[LINE GRAPH]
DATE PX LAST
7/1/2004 1,128.94
7/2/2004 1,125.38
7/6/2004 1,116.21
7/7/2004 1,118.33
7/8/2004 1,109.11
7/9/2004 1,112.81
7/12/2004 1,114.35
7/13/2004 1,115.14
7/14/2004 1,111.47
7/15/2004 1,106.69
7/16/2004 1,101.39
7/19/2004 1,100.90
7/20/2004 1,108.67
7/21/2004 1,093.88
7/22/2004 1,096.84
7/23/2004 1,086.20
7/26/2004 1,084.07
7/27/2004 1,094.83
7/28/2004 1,095.42
7/29/2004 1,100.43
7/30/2004 1,101.72
8/2/2004 1,106.62
8/3/2004 1,099.69
8/4/2004 1,098.63
8/5/2004 1,080.70
8/6/2004 1,063.97
8/9/2004 1,065.22
8/10/2004 1,079.04
8/11/2004 1,075.79
8/12/2004 1,063.23
8/13/2004 1,064.80
8/16/2004 1,079.34
8/17/2004 1,081.71
8/18/2004 1,095.17
8/19/2004 1,091.23
8/20/2004 1,098.35
8/23/2004 1,095.68
8/24/2004 1,096.19
8/25/2004 1,104.96
8/26/2004 1,105.09
8/27/2004 1,107.77
8/30/2004 1,099.15
8/31/2004 1,104.24
9/1/2004 1,105.91
9/2/2004 1,118.31
9/3/2004 1,113.63
9/7/2004 1,121.30
9/8/2004 1,116.27
9/9/2004 1,118.38
9/10/2004 1,123.92
9/13/2004 1,125.82
9/14/2004 1,128.33
9/15/2004 1,120.37
9/16/2004 1,123.50
9/17/2004 1,128.55
9/20/2004 1,122.20
9/21/2004 1,129.30
9/22/2004 1,113.56
9/23/2004 1,108.36
9/24/2004 1,110.11
9/27/2004 1,103.52
9/28/2004 1,110.06
9/29/2004 1,114.80
9/30/2004 1,114.58
10/1/2004 1,131.50
10/4/2004 1,135.17
10/5/2004 1,134.48
10/6/2004 1,142.05
10/7/2004 1,130.65
10/8/2004 1,122.14
10/11/2004 1,124.39
10/12/2004 1,121.84
10/13/2004 1,113.65
10/14/2004 1,103.29
10/15/2004 1,108.20
10/18/2004 1,114.02
10/19/2004 1,103.23
10/20/2004 1,103.66
10/21/2004 1,106.49
10/22/2004 1,095.74
10/25/2004 1,094.81
10/26/2004 1,111.09
10/27/2004 1,125.40
10/28/2004 1,127.44
10/29/2004 1,130.20
11/1/2004 1,130.51
11/2/2004 1,130.54
11/3/2004 1,143.20
11/4/2004 1,161.67
11/5/2004 1,166.17
11/8/2004 1,164.89
11/9/2004 1,164.08
11/10/2004 1,162.91
11/11/2004 1,173.48
11/12/2004 1,184.17
11/15/2004 1,183.81
11/16/2004 1,175.43
11/17/2004 1,181.94
11/18/2004 1,183.55
11/19/2004 1,170.34
11/22/2004 1,177.24
11/23/2004 1,176.94
11/24/2004 1,181.76
11/26/2004 1,182.65
11/29/2004 1,178.57
11/30/2004 1,173.82
12/1/2004 1,191.37
12/2/2004 1,190.33
12/3/2004 1,191.17
12/6/2004 1,190.25
12/7/2004 1,177.07
12/8/2004 1,182.81
12/9/2004 1,189.24
12/10/2004 1,188.00
12/13/2004 1,198.68
12/14/2004 1,203.38
12/15/2004 1,205.72
12/16/2004 1,203.21
12/17/2004 1,194.22
12/20/2004 1,194.65
12/21/2004 1,205.45
12/22/2004 1,209.57
12/23/2004 1,210.13
12/27/2004 1,204.92
12/28/2004 1,213.54
12/29/2004 1,213.45
12/30/2004 1,213.55
12/31/2004 1,211.92
AUGUST 10
Fed hikes rates again by 1/4 point.
SEPTEMBER 21
Fed raises rates for third time this year to 1.75%. Says it will continue
tightening policy at a "measured" pace.
SEPTEMBER 27
Fannie Mae reaches agreement with its regulator to address improper accounting
procedures.
SEPTEMBER 28 Oil hits $50 per barrel.
OCTOBER 22
Oil prices climb to over $56 per barrel.
OCTOBER 29
Estimates for 3rd quarter '04 consumer spending growth released. Up strongly
from prior quarter.
NOVEMBER
Oil prices decline.
NOVEMBER 2
President George W. Bush re-elected.
NOVEMBER 10
Fed raises interest rates by 1/4 point to 2.00%
DECEMBER
U.S. consumer confidence hits 5-month high.
DECEMBER 14
For the fifth time this year, the Fed raises rates by 1/4 point. Fed funds rate
ends 2004 at 2.25%.
DECEMBER 21
Fannie Mae ousts senior executives over accounting irregularities.
DECEMBER 28
Euro hits all-time high against U.S. dollar.
DECEMBER 29
National Association of Realtors announces record high sales of existing homes
in November.
DECEMBER 31
S&P 500 closes at 1211.92.
Source: Bloomberg L.P. (S&P 500 data). Indices are unmanaged, and
individuals cannot invest directly in an index.
5
VT REIT FUND
ANNUAL TOTAL RETURNS (1)
Class 1 shares
(Calendar Year)
2004 +33.08%
INVESTMENT STRATEGY
Real estate investment trusts (REITs) turned in strong results during the period
primarily due to historically low interest rates and solid growth in funds from
operations(FFO). (FFO defines a REIT's operating record and provides an
indication of cash performance.) With their solid yields and earnings growth,
REITs performed very strongly through March, only to fall sharply in April as
interest rates rose. However, as the year progressed, investors moved back into
REIT. The asset class (as measured by the NAREIT All REIT Index(2) rose over
30% for the one-year period.
Other factors that contributed to Fund performance included:
- - Rising dividends: REIT returns are comprised of dividend income and price
appreciation, and rising cash flow generally means higher dividends passed
on to shareholders.
- - Increased attractiveness as REITs are considered more stable and typically
less impacted by election results compared to equities. As a result, they
became a preferred equity sector during this presidential election year.
Data shown is past performance and does not guarantee future results. Current
performance, including the most recent month-end results, which may be higher or
lower than the data shown, can be obtained by calling 800-222-5852. An
investment's return and principal value will fluctuate, so it may be worth more
or less upon redemption. Performance shown below does not account for fees,
expenses, and charges of any variable insurance contract or retirement plan. If
these fees were reflected, performance would be lower.
REIT securities are subject to risk factors associated with the real estate
industry and tax factors of REIT registration.
AVERAGE ANNUAL TOTAL RETURNS (1) AS OF DECEMBER 31, 2004
1 Year Since Inception Inception Date
- ----------------------- ------- --------------- --------------
CLASS 1 SHARES 33.08% 39.07% 5/1/03
CLASS 2 SHARES 32.72% 36.13% 8/4/03
NAREIT All REIT Index (2) 30.41% 37.95%
VALUE OF A $10,000 INVESTMENT (1, 3) MAY 1, 2003 - DECEMBER 31, 2004
- - Class 1 shares
- - NAREIT ALL REIT Index(2)
[LINE GRAPH]
CLASS 1 NAREIT ALL
DATE SHARES REIT INDEX(2)
Apr-03 10,000 10,000
May-03 10,510 10,612
Jun-03 10,730 10,888
Jul-03 11,340 11,458
Aug-03 11,421 11,508
Sep-03 11,791 11,870
Oct-03 12,061 12,125
Nov-03 12,571 12,673
Dec-03 13,041 13,108
Jan-04 13,631 13,672
Feb-04 13,951 13,971
Mar-04 14,740 14,754
Apr-04 12,640 12,502
May-04 13,420 13,385
Jun-04 13,915 13,785
Jul-04 13,946 13,791
Aug-04 14,927 14,877
Sep-04 14,989 14,906
Oct-04 15,756 15,584
Nov-04 16,462 16,307
Dec-04 17,352 17,093
1 Performance reflects ongoing fund expenses, which may have been waived,
and assumes reinvestment of all dividends and capital gains. Performance
does not reflect the impact of federal, state, or municipal taxes. If it
did, performance would be lower.
2 The National Association of Real Estate Investment Trust (NAREIT) All REIT
Index reflects the aggregate performance of all publicly traded REITs that
own, develop, and manage properties. Returns shown for the index assume
reinvestment of all dividends and distributions, and since-inception
returns shown for the index are calculated from 4/30/03. Indices are
unmanaged, and individuals cannot invest directly in an index.
3 Performance of Class 2 shares (offered as of 8/03) will differ.
6
PORTFOLIO MANAGER
Richard E. Helm, CFA
WM Advisors, Inc.
- - Heightened investor interest as several new REIT initial public offerings
were launched.
- - Greater demand from institutional investors looking for diversification
opportunities and exposure to a different, liquid asset class.
The Fund benefited from solid performance in most REIT sectors, particularly
retail REITs. Non-REIT gaming company Mandalay Resort Group was the strongest
performer, followed by mall owner Macerich and New York office building REIT SL
Green Realty. Apartment owner AvalonBay Communities was also up strongly during
the year. Mortgage REIT firm Friedman Billings Ramsey and apartment REIT company
Apartment Investment & Management Company detracted from Fund performance.
Historically low interest rates led the Fund to become defensive in key sectors
and to underweight mortgage REITs during most of the fiscal year.
With slower U.S. economic growth and modestly rising employment, we believe cash
flow at real estate companies should continue to strengthen. If interest rates
continue to rise at a measured pace in response to a moderately growing economy,
we believe REITs as a whole may perform well as rising demand for commercial
real estate will support cash flow growth. Relative valuations among sectors
(office, retail, housing, etc.) will determine the best opportunities, with
retail REITs the likeliest to show the most significant growth.
TOP 10 HOLDINGS(4,5) AS OF DECEMBER 31, 2004
% of Net Assets Total Return
--------------- ------------
General Growth Properties Inc. 5.01% 35.96%
Simon Property Group Inc. 4.73% 46.66%
Equity Residential 4.53% 29.50%
Mills Corporation 4.29% 52.37%
Macerich Company 4.11% 48.39%
Equity Office Properties Trust 3.67% 9.06%
Corporate Office Properties Trust 3.61% 45.16%
Developers Diversified Realty Corp. 3.60% 38.86%
Kimco Realty Corp. 3.57% 35.56%
Alexandria Real Estate Equities Inc. 3.29% 33.65%
FUND CHARACTERISTICS
AS OF DECEMBER 31, 2004
- -----------------------
Weighted Average Market
Capitalization: $ 5.7 billion
Weighted Average P/E
(based on trailing
earnings): 28.0
Turnover: 13%
Number of Securities: 41
Total Net Assets: $ 52 million
PORTFOLIO COMPOSITION(4)
As of
12/31/04
[PIE CHART]
As of As of
12/31/04 12/31/03 Change
-------- -------- ------
Industrial/Office 26% 26% 0%
Retail 26% 22% +4%
Residential 13% 12% +1%
Common Stocks 7% 7% 0%
Specialty 6% 7% -1%
Lodging/Resorts 5% 6% -1%
Diversified 4% 5% -1%
Health Care 4% 5% -1%
Mortgage/Financial 3% 3% 0%
Self Storage 3% 3% 0%
Cash Equivalents 3% 4% -1%
4 May not reflect the current portfolio composition.
5 Performance information provided for individual securities held by the
Fund represents performance for the fiscal year ended 12/31/04. The Fund
may not have held these securities throughout the entire period.
7
VT Equity Income Fund*
ANNUAL TOTAL RETURNS(1)
Class 1 shares
(Calendar Year)
- ---------------
2004 +19.12%
2003 +30.10%
2002 -12.51%
2001 +7.92%
2000 +17.19%
1999 +2.49%
* As of 8/1/00, the WM VT Bond & Stock Fund became the WM VT Equity Income Fund,
and the Fund's objectives and strategies changed. This information should be
considered when reviewing past performance. Please review the prospectus for
detailed information.
INVESTMENT STRATEGY
Our value discipline of seeking to buy stocks on dips and sell into euphoric
rallies to reduce volatility was rewarded during this fiscal year. That core
philosophy, combined with our stock selection and traditionally low turnover to
contain fund costs, again proved profitable for the period.
Assisting the Fund's returns during the period were real estate investment trust
(REIT) securities. REITs have been among the top-performing equity market
sectors over the past few years. Historically low interest rates, rising funds
from operations, and continued interest from both retail and institutional
investors have fueled their rise.
The Fund also benefited from maintaining its core focus on common stocks with
growing dividends, and we saw numerous companies initiate and/or raise their
dividends substantially during the period. Many industries, such as gaming, that
traditionally paid little or no dividends enjoyed strong cash flows and returned
some of that cash to shareholders, boosting their share prices as well. The
Fund's positions in the market's higher-yielding equity sectors, such as energy,
Data shown is past performance and does not guarantee future results. Current
performance, including the most recent month-end results, which may be higher or
lower than the data shown, can be obtained by calling 800-222-5852. An
investment's return and principal value will fluctuate, so it may be worth more
or less upon redemption. Performance shown below does not account for fees,
expenses, and charges of any variable insurance contract or retirement plan. If
these fees were reflected, performance would be lower.
REIT securities are subject to risk factors associated with the real estate
industry and tax factors of REIT registration.
AVERAGE ANNUAL TOTAL RETURNS(1) AS OF DECEMBER 31, 2004
1 Year 5 Year Since Inception Inception Date
------ ------ --------------- --------------
CLASS 1 SHARES 19.12% 11.39% 9.30% 4/28/98
CLASS 2 SHARES 18.82% - 9.42% 5/1/01
S&P 500/Barra Value Index(2) 15.71% 2.48% 3.95%
S&P 500(2) 10.87% -2.30% 2.82%
- - Class 1 shares
- - S&P 500/Barra Value Index(2)
- - S&P 500(2)
VALUE OF A $10,000 INVESTMENT(1,3) APRIL 28, 1998 - DECEMBER 31, 2004
[LINE GRAPH]
CLASS 1 S&P 500/BARRA
DATE SHARES VALUE INDEX(2) S&P 500(2)
Apr-98 10,000 10,000 10,000
May-98 9,800 9,859 9,828
Jun-98 9,821 9,934 10,227
Jul-98 9,550 9,718 10,119
Aug-98 8,777 8,156 8,655
Sep-98 9,248 8,652 9,210
Oct-98 9,850 9,329 9,959
Nov-98 10,222 9,815 10,563
Dec-98 10,302 10,159 11,171
Jan-99 10,433 10,365 11,638
Feb-99 10,172 10,142 11,276
Mar-99 10,263 10,449 11,727
Apr-99 10,554 11,350 12,181
May-99 10,605 11,149 11,893
Jun-99 10,732 11,577 12,553
Jul-99 10,571 11,221 12,162
Aug-99 10,330 10,937 12,101
Sep-99 10,099 10,509 11,769
Oct-99 10,230 11,102 12,514
Nov-99 10,422 11,036 12,768
Dec-99 10,562 11,451 13,521
Jan-00 10,240 11,087 12,842
Feb-00 10,180 10,394 12,599
Mar-00 10,804 11,478 13,831
Apr-00 10,773 11,401 13,415
May-00 10,924 11,437 13,140
Jun-00 10,824 10,985 13,463
Jul-00 10,803 11,205 13,253
Aug-00 11,079 11,956 14,076
Sep-00 11,396 11,954 13,333
Oct-00 11,856 12,178 13,277
Nov-00 11,682 11,554 12,231
Dec-00 12,377 12,149 12,291
Jan-01 12,653 12,662 12,727
Feb-01 12,581 11,822 11,566
Mar-01 12,447 11,355 10,834
Apr-01 12,918 12,125 11,676
May-01 13,205 12,253 11,754
Jun-01 13,149 11,856 11,469
Jul-01 13,408 11,650 11,356
Aug-01 13,305 10,977 10,645
Sep-01 12,672 9,934 9,785
Oct-01 12,630 9,934 9,972
Nov-01 13,159 10,565 10,737
Dec-01 13,356 10,726 10,831
Jan-02 13,304 10,432 10,673
Feb-02 13,242 10,338 10,467
Mar-02 13,853 10,867 10,861
Apr-02 13,407 10,323 10,203
May-02 13,449 10,364 10,127
Jun-02 12,736 9,710 9,406
Jul-02 11,791 8,660 8,672
Aug-02 12,025 8,720 8,730
Sep-02 10,868 7,723 7,781
Oct-02 11,345 8,365 8,465
Nov-02 12,035 8,953 8,964
Dec-02 11,684 8,488 8,437
Jan-03 11,409 8,255 8,216
Feb-03 11,207 8,031 8,093
Mar-03 11,335 8,020 8,171
Apr-03 12,130 8,813 8,845
May-03 12,873 9,462 9,311
Jun-03 13,112 9,531 9,430
Jul-03 13,233 9,743 9,596
Aug-03 13,430 9,953 9,783
Sep-03 13,551 9,773 9,679
Oct-03 14,163 10,442 10,227
Nov-03 14,415 10,536 10,317
Dec-03 15,202 11,187 10,858
Jan-04 15,585 11,385 11,057
Feb-04 15,991 11,642 11,211
Mar-04 16,024 11,562 11,042
Apr-04 15,619 11,276 10,868
May-04 15,761 11,406 11,017
Jun-04 16,216 11,653 11,231
Jul-04 15,837 11,432 10,859
Aug-04 16,049 11,555 10,903
Sep-04 16,428 11,775 11,021
Oct-04 16,673 11,953 11,189
Nov-04 17,520 12,536 11,642
Dec-04 18,110 12,945 12,038
1 Performance reflects ongoing fund expenses, which may have been waived,
and assumes reinvestment of all dividends and capital gains. Performance
does not reflect the impact of federal, state, or municipal taxes. If it
did, performance would be lower.
2 The S&P 500/Barra Value Index is constructed by ranking the securities in
the S&P 500 by price-to-book ratio and including the securities with the
lowest price-to-book ratios that represent approximately half of the
market capitalization of the S&P 500. The S&P 500 is a broad-based index
intended to represent the U.S. equity market. Returns shown for the
indices assume reinvestment of all dividends and distributions, and
since-inception returns shown for the indices are calculated from 4/30/98.
Indices are unmanaged, and individuals cannot invest directly in an index.
3 Performance of Class 2 shares (offered as of 5/01) will differ.
8
PORTFOLIO MANAGER
Richard E. Helm, CFA
WM Advisors, Inc.
telecommunications, and utilities, also made positive contributions.
Asset allocation shifts during the year were modest, though REITs were reduced
as prices rose and valuations became less attractive. The Fund remained
underweighted in financial stocks during the year as interest rates rose, which
helped performance. We also had overweighted positions in consumer staples and
underweighted positions in energy, which detracted from performance.
In terms of individual holdings, Mandalay Resort Group (gaming), Harris
Corporation (technology), Valero Energy (oil refining), and Monsanto
(agriculture) experienced stronger returns. Underperformers included AU
Optronics (technology), General Motors (industrials), and Mylan Laboratories
(pharmaceuticals).
Looking ahead, we expect the U.S. economy to continue its moderate upward trend.
As the Fund's investment process seeks to capitalize on the impact of the
market's gyrations, high stock market volatility provides the Fund with
opportunities to add or reduce holdings as valuations fluctuate. This includes
not only building long-term core positions, but also complementing these core
holdings with smaller investments in more opportunistic situations. Just as we
expect mixed economic and corporate news to continue, we likewise expect higher
market volatility to continue, and we believe the Fund is well-positioned to
capitalize on the opportunities such developments may present.
TOP 10 HOLDINGS(4,5) AS OF DECEMBER 31, 2004
% of Net Assets Total Return
--------------- ------------
The Neiman Marcus Group Inc. 2.26% 34.57%
Harrah's Entertainment Inc. 2.22% 37.74%
Citigroup Inc. 2.11% 2.72%
FPL Group Inc. 2.06% 18.73%
Bank of America Corp. 2.04% 21.50%
Magna International Inc. 1.93% 5.09%
Baker Hughes Inc. 1.90% 34.28%
Pfizer Inc. 1.89% -22.31%
ACE Ltd. 1.84% 5.26%
Countrywide Financial Corp. 1.82% 48.15%
FUND CHARACTERISTICS
AS OF DECEMBER 31, 2004
- -----------------------
Weighted Average Market
Capitalization: $ 57.2 billion
Weighted Average P/E
(based on estimated
earnings): 14.4
Beta:(6) 0.82
Fund Standard Deviation:(7) 12.71
S&P 500 Standard Deviation:(7) 15.81
Turnover: 26%
Number of Securities: 102
Total Net Assets: $213.6 million
PORTFOLIO COMPOSITION(4)
As of
12/31/04
[PIE CHART]
As of As of
12/31/04 12/31/03 Change
-------- -------- ------
Financials 25% 24% +1%
Consumer Discretionary 14% 15% -1%
Energy 8% 7% +1%
Industrials 8% 8% 0%
REITs 8% 8% 0%
Consumer Staples 7% 7% 0%
Health Care 6% 7% -1%
Information Technology 6% 6% 0%
Materials 5% 3% +2%
Utilities 4% 4% 0%
Corporate Bonds 2% 2% 0%
Telecommunication Services 2% 3% -1%
Convertibles 1% 3% -2%
Cash Equivalents 4% 3% +1%
4 May not reflect the current portfolio composition.
5 Performance information provided for individual securities held by the
Fund represents performance for the fiscal year ended 12/31/04. The Fund
may not have held these securities throughout the entire period.
6 Source: Lipper, Inc. Beta is a quantitative measure of the Fund's
historical volatility relative to the overall market (S&P 500). A beta
above 1 indicates more volatility than the market, and a beta below 1
indicates less volatility. Results are calculated using three-month
rolling returns for Class 1 shares for the three-year period ended
12/31/04.
7 Source: Ibbotson Associates and Lipper, Inc. Standard deviation measures
the historical fluctuation of returns around the arithmetic average return
of the investment.The higher the standard deviation (as one measure of
risk), the greater the variability of the investment returns. Results are
calculated for the three-year period ended 12/31/04, and Fund results are
for Class 1 shares.
9
VT Growth & Income Fund
ANNUAL TOTAL RETURNS (1)
Class 1 shares
(Calendar Year)
- ---------------
2004 +9.08%
2003 +26.80%
2002 -21.16%
2001 -3.51%
2000 +2.36%
1999 +18.11%
1998 +18.98%
1997 +28.50%
1996 +21.81%
1995 +32.41%
INVESTMENT STRATEGY
During the first half of 2004, the stock market remained in a fairly tight
trading range as investors focused on the conflict in Iraq and nervously
anticipated the end of the Federal Reserve's accommodative monetary policy. By
the fourth quarter, the markets were growing comfortable with the Federal
Reserve's new series of small, steady interest rate increases. Investors also
breathed a sigh of relief after the U.S. presidential election and as record
high oil prices began to decline. The result was a year-end stock market rally.
Although overall market volatility was not excessive for the year, there were
significant swings at the individual stock level.
These conditions resulted in less emphasis on sector selection and more focus on
individual stock selection. We continued our undeviating discipline of
identifying good companies and purchasing them when their valuations become
attractive.
Energy was the best-performing sector during the period and the Fund benefited
from an overweighted position in this sector. Holdings in BP (+22%), Exxon Mobil
(+28%)
Data shown is past performance and does not guarantee future results. Current
performance, including the most recent month-end results, which may be higher or
lower than the data shown, can be obtained by calling 800-222-5852. An
investment's return and principal value will fluctuate, so it may be worth more
or less upon redemption. Performance shown below does not account for fees,
expenses, and charges of any variable insurance contract or retirement plan. If
these fees were reflected, performance would be lower.
AVERAGE ANNUAL TOTAL RETURNS(1) AS OF DECEMBER 31, 2004
Since
1 Year 5 Year 10 Year Inception Inception Date
------ ------ ------- --------- --------------
CLASS 1 SHARES 9.08% 1.50% 12.11% 10.81% 1/12/94
CLASS 2 SHARES 8.78% - - 3.69% 11/6/01
S&P 500(2) 10.87% -2.30% 12.07% 11.05%
- - Class 1 shares
- - S&P 500(2)
VALUE OF A $10,000 INVESTMENT(1,3) DECEMBER 31, 1994 - DECEMBER 31, 2004
[LINE GRAPH]
CLASS 1
DATE SHARES S&P 500(2)
DEC-94 10,000 10,000
Jan-95 10,214 10,260
Feb-95 10,621 10,658
Mar-95 11,007 10,974
Apr-95 11,221 11,293
May-95 11,638 11,739
Jun-95 11,848 12,015
Jul-95 12,281 12,415
Aug-95 12,333 12,448
Sep-95 12,652 12,970
Oct-95 12,332 12,925
Nov-95 13,013 13,493
Dec-95 13,239 13,743
Jan-96 13,672 14,216
Feb-96 13,961 14,352
Mar-96 14,188 14,490
Apr-96 14,497 14,703
May-96 14,663 15,082
Jun-96 14,456 15,144
Jul-96 13,700 14,470
Aug-96 14,163 14,777
Sep-96 14,806 15,607
Oct-96 14,987 16,035
Nov-96 16,217 17,252
Dec-96 16,126 16,914
Jan-97 17,165 17,964
Feb-97 17,221 18,110
Mar-97 16,679 17,357
Apr-97 17,311 18,393
May-97 18,485 19,522
Jun-97 18,960 20,393
Jul-97 20,736 22,012
Aug-97 20,100 20,788
Sep-97 21,018 21,927
Oct-97 20,051 21,195
Nov-97 20,418 22,176
Dec-97 20,725 22,558
Jan-98 20,822 22,808
Feb-98 22,440 24,452
Mar-98 23,286 25,704
Apr-98 23,482 25,964
May-98 22,819 25,517
Jun-98 23,481 26,553
Jul-98 22,507 26,272
Aug-98 18,672 22,473
Sep-98 20,255 23,914
Oct-98 22,114 25,858
Nov-98 23,554 27,425
Dec-98 24,659 29,004
Jan-99 25,416 30,217
Feb-99 24,864 29,277
Mar-99 25,677 30,448
Apr-99 27,392 31,626
May-99 27,086 30,880
Jun-99 28,451 32,594
Jul-99 27,540 31,577
Aug-99 26,802 31,419
Sep-99 26,129 30,558
Oct-99 27,290 32,493
Nov-99 28,043 33,152
Dec-99 29,125 35,105
Jan-00 27,730 33,343
Feb-00 26,821 32,712
Mar-00 29,674 35,912
Apr-00 29,769 34,831
May-00 30,240 34,117
Jun-00 29,862 34,956
Jul-00 28,912 34,411
Aug-00 30,858 36,548
Sep-00 30,318 34,618
Oct-00 31,167 34,472
Nov-00 29,057 31,756
Dec-00 29,809 31,912
Jan-01 32,328 33,044
Feb-01 30,890 30,031
Mar-01 29,351 28,130
Apr-01 30,822 30,316
May-01 31,574 30,519
Jun-01 30,889 29,777
Jul-01 30,839 29,485
Aug-01 29,149 27,639
Sep-01 26,739 25,406
Oct-01 27,057 25,891
Nov-01 28,531 27,877
Dec-01 28,765 28,123
Jan-02 27,776 27,712
Feb-02 27,156 27,177
Mar-02 28,579 28,199
Apr-02 26,587 26,490
May-02 26,938 26,294
Jun-02 25,072 24,422
Jul-02 23,013 22,517
Aug-02 23,368 22,666
Sep-02 20,923 20,202
Oct-02 22,490 21,980
Nov-02 23,637 23,274
Dec-02 22,675 21,906
Jan-03 22,254 21,332
Feb-03 21,731 21,012
Mar-03 21,798 21,216
Apr-03 23,568 22,964
May-03 24,916 24,174
Jun-03 25,457 24,484
Jul-03 25,439 24,914
Aug-03 25,762 25,400
Sep-03 25,744 25,131
Oct-03 26,717 26,553
Nov-03 27,059 26,787
Dec-03 28,748 28,191
Jan-04 29,259 28,709
Feb-04 29,719 29,109
Mar-04 29,222 28,669
Apr-04 29,222 28,219
May-04 29,427 28,605
Jun-04 30,098 29,160
Jul-04 28,873 28,195
Aug-04 29,165 28,308
Sep-04 29,252 28,614
Oct-04 29,270 29,052
Nov-04 30,373 30,228
Dec-04 31,357 31,256
1 Performance reflects ongoing fund expenses, which may have been waived,
and assumes reinvestment of all dividends and capital gains. Performance
does not reflect the impact of federal, state, or municipal taxes. If it
did, performance would be lower.
2 The S&P 500 is a broad-based index intended to represent the U.S. equity
market. Returns shown for the index assume reinvestment of all dividends
and distributions, and since-inception returns shown for the index are
calculated from 12/31/93. Indices are unmanaged, and individuals cannot
invest directly in an index.
3 Performance of Class 2 shares (offered as of 11/01) will differ.
10
PORTFOLIO MANAGER
Stephen Q. Spencer, CFA
WM Advisors, Inc.
and Schlumberger (+24%) far outpaced the overall market as the price of oil
exceeded $50 per barrel.(5) The industrial sector was also a strong performer
and Tyco was one of the Fund's top-performing stocks (+35%), complemented by
Boeing (+25%). The Fund was underweighted in technology, which helped
performance since technology was one of the worst-performing sectors of the
market. However, some of the Fund's technology holdings, especially Motorola
(+39%) and Computer Associates (+14%), produced returns well above those of the
sector.
The most significant detriment to performance was in health care. Several health
care holdings were hurt by isolated events: a recall of the blockbuster drug
Vioxx (Merck; -28%), the associated fallout on Celebrex (Pfizer; -22%), and a
poorly conceived plan to acquire King Pharmaceuticals (Mylan Laboratories;
- -30%).
Our overall economic outlook is positive. We believe the economy is showing
appropriate growth at this stage of the economic cycle and should continue to
grow within a moderate inflation environment, albeit at a slower pace than over
the past year. This outlook does not suggest that we change our strategy. We
continue to focus on companies that we believe can generate organic growth and
not only pay dividends, but also grow dividends. In a slow-growth environment,
dividends can become a larger component of total return, which may improve the
attractiveness of these companies. We remain poised to take advantage of any
opportunities as they become attractively priced.
TOP 10 HOLDINGS(4,5) AS OF DECEMBER 31, 2004
% of Net Assets Total Return
--------------- ------------
Carnival Corp. 4.33% 46.74%
Bank of America Corp. 4.24% 21.50%
Tyco International Ltd. 3.12% 35.41%
Freddie Mac 2.90% 28.75%
The Allstate Corporation 2.85% 23.12%
JPMorgan Chase & Co. 2.70% 9.97%
Avon Products Inc. 2.57% 16.31%
Honeywell International Inc. 2.44% 8.20%
Wells Fargo & Co. 2.40% 8.97%
First Data Corp. 2.37% 3.72%
FUND CHARACTERISTICS
AS OF DECEMBER 31, 2004
Weighted Average Market
Capitalization: $ 93.7 billion
Weighted Average P/E
(based on estimated
earnings): 15.9
Beta:(6) 0.96
Fund Standard Deviation:(7) 14.63
S&P 500 Standard Deviation:(7) 15.81
Turnover: 11%
Number of Securities: 58
Total Net Assets: $ 274.2 million
PORTFOLIO COMPOSITION(4)
As of
12/31/04
[PIE CHART]
As of As of
12/31/04 12/31/03 Change
-------- -------- ------
Financials 23% 24% -1%
Information Technology 14% 12% +2%
Consumer Discretionary 13% 11% +2%
Industrials 12% 9% +3%
Health Care 11% 16% -5%
Consumer Staples 10% 10% 0%
Energy 8% 8% 0%
Utilities 4% 4% 0%
Materials 1% 1% 0%
Telecommunication Services 1% 1% 0%
Cash Equivalents 3% 4% -1%
4 May not reflect the current portfolio composition.
5 Performance information provided for individual securities held by the
Fund represents performance for the fiscal year ended 12/31/04. The Fund
may not have held these securities throughout the entire period.
6 Source: Lipper, Inc. Beta is a quantitative measure of the Fund's
historical volatility relative to the overall market (S&P 500). A beta
above 1 indicates more volatility than the market, and a beta below 1
indicates less volatility. Results are calculated using three-month
rolling returns for Class 1 shares for the three-year period ended
12/31/04.
7 Source: Ibbotson Associates and Lipper, Inc. Standard deviation measures
the historical fluctuation of returns around the arithmetic average return
of the investment.The higher the standard deviation (as one measure of
risk), the greater the variability of the investment returns. Results are
calculated for the three-year period ended 12/31/04, and Fund results are
for Class 1 shares.
11
VT West Coast Equity Fund
ANNUAL TOTAL RETURNS(1)
Class 1 shares
(Calendar Year)
- ---------------
2004 +13.03%
2003 +43.35%
2002 -22.55%
2001 +6.88%
2000 +6.30%
1999 +40.37%
INVESTMENT STRATEGY
For the fiscal year ended December 31, 2004, the Fund benefited from positions
in energy and materials stocks. These were the big winners this period as
increased global demand and a weaker U.S. dollar helped exporters in the Fund's
geographic area.
Throughout the period, the Fund benefited from its exposure to small-cap stocks,
which outperformed large-cap stocks. However, the Fund has tried to move closer
to its benchmark weighting in large caps and has taken profits in some small-cap
holdings because of concerns about valuations.
China's demand for goods and services continues to heat up, and while there
remains a question of how strong a future player it may be, we believe it will
continue to impact the U.S. market in the coming year. Our position in Oregon
Steel Mills saw a dramatic turnaround in return versus last year primarily due
to anticipation of strong global demand for its oil and gas piping. Steel prices
also doubled this period, which helped to boost returns. Technology stocks, in
which we had a 2% overweighted position, had a volatile year and ended the
period lower as customers
Data shown is past performance and does not guarantee future results. Current
performance, including the most recent month-end results, which may be higher or
lower than the data shown, can be obtained by calling 800-222-5852. An
investment's return and principal value will fluctuate, so it may be worth more
or less upon redemption. Performance shown below does not account for fees,
expenses, and charges of any variable insurance contract or retirement plan. If
these fees were reflected, performance would be lower.
Small-cap and mid-cap stocks may have additional risks, including greater price
volatility. There may be additional investment risks due to the Fund's
concentration in the West Coast region of the United States.
AVERAGE ANNUAL TOTAL RETURNS(1) AS OF DECEMBER 31, 2004
1 Year 5 Year Since Inception Inception Date
------ ------ --------------- --------------
CLASS 1 SHARES 13.03% 7.35% 12.45% 4/28/98
CLASS 2 SHARES 12.72% - 9.74% 11/6/01
Russell 3000(R) Index(2) 11.95% -1.16% 3.28%
- - Class 1 Shares
- - Russell 3000(R) Index(2)
VALUE OF A $10,000 INVESTMENT(1,3) APRIL 28, 1998 - DECEMBER 31, 2004
[LINE GRAPH]
CLASS 1 RUSSELL 3000
DATE SHARES INDEX(2)
Apr-98 10,000 10,000
May-98 9,470 9,753
Jun-98 9,290 10,083
Jul-98 8,720 9,899
Aug-98 7,019 8,383
Sep-98 7,689 8,954
Oct-98 8,499 9,634
Nov-98 9,699 10,224
Dec-98 10,938 10,874
Jan-99 11,228 11,243
Feb-99 10,539 10,845
Mar-99 10,859 11,243
Apr-99 11,469 11,751
May-99 11,989 11,527
Jun-99 12,852 12,109
Jul-99 12,902 11,742
Aug-99 12,952 11,609
Sep-99 12,496 11,311
Oct-99 13,125 12,021
Nov-99 13,621 12,357
Dec-99 15,354 13,146
Jan-00 15,232 12,630
Feb-00 17,473 12,748
Mar-00 17,961 13,746
Apr-00 16,734 13,262
May-00 16,115 12,889
Jun-00 17,576 13,271
Jul-00 17,504 13,036
Aug-00 18,992 14,003
Sep-00 17,697 13,369
Oct-00 16,748 13,179
Nov-00 15,311 11,964
Dec-00 16,320 12,165
Jan-01 17,686 12,581
Feb-01 15,983 11,431
Mar-01 15,138 10,686
Apr-01 16,708 11,543
May-01 18,064 11,635
Jun-01 19,731 11,421
Jul-01 18,279 11,233
Aug-01 17,872 10,570
Sep-01 14,612 9,638
Oct-01 15,624 9,862
Nov-01 16,931 10,622
Dec-01 17,442 10,771
Jan-02 17,254 10,637
Feb-02 16,877 10,420
Mar-02 17,870 10,876
Apr-02 17,243 10,305
May-02 16,594 10,186
Jun-02 15,784 9,452
Jul-02 14,092 8,701
Aug-02 13,581 8,742
Sep-02 12,538 7,823
Oct-02 13,347 8,446
Nov-02 14,401 8,957
Dec-02 13,507 8,451
Jan-03 13,304 8,243
Feb-03 13,176 8,107
Mar-03 12,996 8,193
Apr-03 13,976 8,862
May-03 15,380 9,397
Jun-03 15,712 9,524
Jul-03 16,300 9,742
Aug-03 17,047 9,958
Sep-03 16,834 9,850
Oct-03 18,254 10,446
Nov-03 18,681 10,590
Dec-03 19,365 11,074
Jan-04 19,803 11,305
Feb-04 19,941 11,458
Mar-04 19,760 11,322
Apr-04 19,066 11,087
May-04 19,387 11,248
Jun-04 20,133 11,472
Jul-04 19,084 11,038
Aug-04 19,019 11,084
Sep-04 19,630 11,254
Oct-04 19,962 11,439
Nov-04 21,043 11,971
Dec-04 21,889 12,397
1 Performance reflects ongoing fund expenses, which may have been waived,
and assumes reinvestment of all dividends and capital gains. Performance
does not reflect the impact of federal, state, or municipal taxes. If it
did, performance would be lower.
2 The Russell 3000(R) Index measures the performance of the 3,000 largest
U.S. companies based on total market capitalization, which represents
approximately 98% of the investable U.S. equity market. Returns shown for
the index assume reinvestment of all dividends and distributions, and
since-inception returns shown for the index are calculated from 4/30/98.
Indices are unmanaged, and individuals cannot invest directly in an index.
3 Performance of Class 2 shares (offered as of 11/01) will differ.
12
PORTFOLIO MANAGER
Philip M. Foreman, CFA
WM Advisors, Inc.
over-ordered semiconductor components in the fourth quarter of 2003 while 2004
saw decreasing demand. Our underweighting in utilities, due to the unfavorable
West Coast regulatory environment, was a slight detriment to performance. In
contrast, our position in AT&T Wireless made a significant contribution to Fund
performance after the company was acquired by Cingular.
The Fund is well-diversified with exposure to all current benchmark sectors
except utilities and consumer non-durables. We are overweighted in industrials
(due to a desire to be exposed to projected capital spending trends on the West
Coast) as well as health care. The Fund's strategy of being invested nearly
equally in small-, mid-, and large-sized companies has the potential to benefit
in any market advance.
Looking ahead, we anticipate slow U.S. economic growth in a moderate inflation
environment. Job growth will be slow, but we anticipate it to gradually
increase. Positive Social Security reform could have significant implications
for the health care and financial services industries. While a post-presidential
election rally occurred as the fiscal year ended, we believe the market should
eventually reflect more of a low-growth environment.
TOP 10 HOLDINGS(4,5) AS OF DECEMBER 31, 2004
% of Net Assets Total Return
--------------- ------------
Wells Fargo & Co. 3.38% 8.97%
Microsoft Corp. 2.92% 8.92%
PACCAR Inc. 2.91% 47.28%
ChevronTexaco Corp. 2.42% 25.57%
U.S. Bancorp 2.15% 10.48%
The Boeing Company 2.11% 24.86%
Starbucks Corp. 1.91% 88.06%
Expeditors Intl. of
Wash. Inc. 1.77% 49.04%
Costco Wholesale Corp. 1.70% -20.26%
Washington Federal Inc. 1.66% 7.15%
FUND CHARACTERISTICS
AS OF DECEMBER 31, 2004
Weighted Average Market
Capitalization: $ 38.2 billion
Weighted Average P/E
(based on estimated
earnings): 18.5
Beta:(6) 1.00
Fund Standard Deviation:(7) 16.50
S&P 500 Standard Deviation:(7) 15.81
Turnover: 17%
Number of Securities: 119
Total Net Assets: $127.6 million
PORTFOLIO COMPOSITION(4)
As of
12/31/04
[PIE CHART]
As of As of
12/31/04 12/31/03 Change
-------- -------- ------
Financials 19% 18% +1%
Consumer Discretionary 17% 17% 0%
Information Technology 17% 21% -4%
Industrials 16% 13% +3%
Health Care 13% 11% +2%
Energy 6% 4% +2%
Materials 4% 5% -1%
Consumer Staples 3% 3% 0%
REITs 2% 2% 0%
Telecommunication Services 1% 1% 0%
Cash Equivalents 2% 5% -3%
4 May not reflect the current portfolio composition.
5 Performance information provided for individual securities held by the
Fund represents performance for the fiscal year ended 12/31/04. The Fund
may not have held these securities throughout the entire period.
6 Source: Lipper, Inc. Beta is a quantitative measure of the Fund's
historical volatility relative to the overall market (S&P 500). A beta
above 1 indicates more volatility than the market, and a beta below 1
indicates less volatility. Results are calculated using three-month
rolling returns for Class 1 shares for the three-year period ended
12/31/04.
7 Source: Ibbotson Associates and Lipper, Inc. Standard deviation measures
the historical fluctuation of returns around the arithmetic average return
of the investment. The higher the standard deviation (as one measure of
risk), the greater the variability of the investment returns. Results are
calculated for the three-year period ended 12/31/04, and Fund results are
for Class 1 shares.
13
VT Mid Cap Stock Fund
ANNUAL TOTAL RETURNS(1)
CLASS 1 SHARES
(CALENDAR YEAR)
2004 +14.59%
2003 +27.73%
2002 -10.35%
2001 +11.99%
INVESTMENT STRATEGY
During the fiscal year, the Fund benefited from the continued economic recovery
that began in 2003. Although the pace of this recovery has slowed, it still
provided strong tailwinds that allowed the majority of companies in the
portfolio to record double-digit earnings growth. Stocks of all risk profiles
performed moderately well in 2004, but the value category continued to outpace
the growth category.
The Fund benefited slightly from its underweighted position in the information
technology (IT) sector. This sector declined dramatically in 2004 as earnings
growth expectations were reduced. Although many of our IT holdings also
faltered, they performed better than the overall sector. The Fund also benefited
from an overweighted position in energy stocks as strong oil and gas prices
caused a dramatic increase in share prices.
We did not make any dramatic shifts in the sector allocations of the Fund during
2004. However, the market's shift from rewarding the IT sector toward rewarding
the energy and materials sectors altered the Fund's weightings during the year.
This was an
Data shown is past performance and does not guarantee future results. Current
performance, including the most recent month-end results, which may be higher or
lower than the data shown, can be obtained by calling 800-222-5852. An
investment's return and principal value will fluctuate, so it may be worth more
or less upon redemption. Performance shown below does not account for fees,
expenses, and charges of any variable insurance contract or retirement plan. If
these fees were reflected, performance would be lower.
Small-cap and mid-cap stocks may have additional risks, including greater price
volatility.
AVERAGE ANNUAL TOTAL RETURNS(1) AS OF DECEMBER 31, 2004
1 Year Since Inception Inception Date
------ --------------- --------------
CLASS 1 SHARES 14.59% 12.39% 5/1/00
CLASS 2 SHARES 14.28% 9.30% 5/1/01
S&P MidCap 400(2) 16.48% 8.29%
- - Class 1 shares
- - S&P MidCap 400(2)
VALUE OF A $10,000 INVESTMENT(1,3) MAY 1, 2000 - DECEMBER 31, 2004
[LINE GRAPH]
CLASS 1 S&P MIDCAP
DATE SHARES 400(2)
Apr-00 10,000 10,000
May-00 10,210 9,875
Jun-00 9,980 10,020
Jul-00 10,150 10,178
Aug-00 10,860 11,314
Sep-00 10,751 11,236
Oct-00 10,951 10,855
Nov-00 10,651 10,036
Dec-00 11,741 10,804
Jan-01 12,171 11,044
Feb-01 12,141 10,414
Mar-01 11,700 9,640
Apr-01 12,350 10,703
May-01 12,780 10,953
Jun-01 13,188 10,909
Jul-01 13,127 10,746
Aug-01 12,737 10,395
Sep-01 11,487 9,102
Oct-01 11,897 9,504
Nov-01 12,407 10,211
Dec-01 13,148 10,739
Jan-02 12,698 10,683
Feb-02 12,698 10,696
Mar-02 13,469 11,461
Apr-02 13,379 11,407
May-02 13,508 11,214
Jun-02 12,803 10,393
Jul-02 11,870 9,386
Aug-02 11,993 9,433
Sep-02 11,070 8,673
Oct-02 11,387 9,048
Nov-02 11,983 9,572
Dec-02 11,788 9,179
Jan-03 11,583 8,911
Feb-03 11,429 8,699
Mar-03 11,480 8,772
Apr-03 11,881 9,409
May-03 12,794 10,189
Jun-03 12,866 10,318
Jul-03 13,092 10,684
Aug-03 13,431 11,170
Sep-03 13,266 10,999
Oct-03 14,192 11,830
Nov-03 14,594 12,242
Dec-03 15,057 12,449
Jan-04 15,263 12,719
Feb-04 15,695 13,024
Mar-04 15,541 13,080
Apr-04 15,396 12,651
May-04 15,777 12,913
Jun-04 16,299 13,207
Jul-04 15,627 12,591
Aug-04 15,459 12,558
Sep-04 15,741 12,930
Oct-04 15,941 13,136
Nov-04 16,791 13,919
Dec-04 17,253 14,503
1 Performance reflects ongoing fund expenses, which may have been waived,
and assumes reinvestment of all dividends and capital gains. Performance
does not reflect the impact of federal, state, or municipal taxes. If it
did, performance would be lower.
2 The S&P MidCap 400 is a weighted index of the common stocks of 400
mid-size companies. Returns shown for the index assume reinvestment of all
dividends and distributions, and since-inception returns shown for the
index are calculated from 4/30/00. Indices are unmanaged, and individuals
cannot invest directly in an index.
3 Performance of Class 2 shares (offered as of 5/01) will differ.
14
PORTFOLIO MANAGER
Daniel R. Coleman
WM Advisors, Inc.
action of the market and not a portfolio management decision.
Several individual holdings provided relatively strong performance during the
period. Among them was Adobe (+61%), which recorded strong sales and earnings
growth based on the introduction of new and upgraded software products.(5)
Mandalay Resort Group (+60%), enjoyed dramatic increases in revenues and
profits, but more importantly, it agreed to be acquired by MGM Mirage at a
substantial premium. Two other investments, Charter One Financial and GreenPoint
Financial Corp., were acquired during 2004. The premiums paid for these
companies averaged over 30% and significantly aided Fund performance.
On the negative side, the sale of J.C. Penney early in 2004 detracted from
performance. We thought the turnaround story at J.C. Penney had played out and
sold our investment too soon. Also, our investment in Synopsys and Electronics
for Imaging fell in value due to weaker-than-expected earnings.
We are optimistic about the Fund's outlook and believe many of our holdings are
poised to show strong earnings growth that hopefully will be rewarded by the
market. We continue to sell investments that appreciate through our
capitalization ceiling and reinvest in smaller companies that we believe can
grow as quickly for a longer period of time. We also continue to search for
undervalued mid-cap companies that have strong balance sheets, cash flows, and
earnings growth prospects.
TOP 10 HOLDINGS(4,5) AS OF DECEMBER 31, 2004
% of Net Assets Total Return
--------------- ------------
The Neiman Marcus Group Inc. 2.91% 34.57%
North Fork Bancorporation 2.57% 10.24%
HCC Insurance Holdings Inc. 2.52% 5.19%
Tiffany & Co. 2.51% -28.79%
Fidelity National Financial Inc. 2.43% 32.25%
Cabot Corp. 2.40% 23.54%
YUM! Brands Inc. 2.29% 37.84%
HNI Corp. 2.22% 0.79%
The Valspar Corporation 2.22% 2.74%
A.G.Edwards Inc. 2.21% 21.32%
FUND CHARACTERISTICS
AS OF DECEMBER 31, 2004
Weighted Average Market
Capitalization: $ 5.8 billion
Weighted Average P/E
(based on estimated 16.8
earnings):
Beta:(6) 0.72
Fund Standard Deviation:(7) 12.21
S&P 500 Standard 15.81
Deviation:(7)
Turnover: 32%
Number of Securities: 63
Total Net Assets: $ 114.4 million
PORTFOLIO COMPOSITION (4)
As of
12/31/04
[PIE CHART]
As of As of
12/31/04 12/31/03 Change
-------- -------- ------
Financials 18% 19% -1%
Consumer Discretionary 17% 15% +2%
Industrials 13% 10% +3%
Information Technology 12% 14% -2%
Health Care 9% 12% -3%
Energy 8% 8% 0%
Utilities 6% 5% +1%
Materials 5% 3% +2%
Consumer Staples 3% 5% -2%
REITs 2% 0% +2%
Telecommunication Services 0% 1% -1%
Cash Equivalents 7% 8% -1%
4 May not reflect the current portfolio composition.
5 Performance information provided for individual securities held by the
Fund represents performance for the fiscal year ended 12/31/04. The Fund
may not have held these securities throughout the entire period.
6 Source: Lipper, Inc. Beta is a quantitative measure of the Fund's
historical volatility relative to the overall market (S&P 500). A beta
above 1 indicates more volatility than the market, and a beta below 1
indicates less volatility. Results are calculated using three-month
rolling returns for Class 1 shares for the three-year period ended
12/31/04.
7 Source: Ibbotson Associates and Lipper, Inc. Standard deviation measures
the historical fluctuation of returns around the arithmetic average return
of the investment.The higher the standard deviation (as one measure of
risk), the greater the variability of the investment returns. Results are
calculated for the three-year period ended 12/31/04, and Fund results are
for Class 1 shares.
15
VT Growth Fund
ANNUAL TOTAL RETURNS(1)
Class 1 Shares
(Calendar Year)
2004 +8.22%
2003 +29.18%
2002 -31.01%
2001 -29.05%
2000 -22.04%
1999 +97.09%
1998 +59.04%
1997 +11.24%
1996 +16.15%
1995 +37.34%
1994 +2.69%
INVESTMENT STRATEGY
The following three firms shared management responsibilities for the WM VT
Growth Fund during the fiscal year: Columbia Management Advisors, Inc., Janus
Capital Management, and OppenheimerFunds, Inc.
Columbia cited strong stock selection in consumer staples, materials, and
industrials as primary drivers of Fund performance during the period. Its
overweighting in the consumer discretionary and materials sectors contributed
positively to total return. Columbia's best performers included Kinetic
Concepts, Cognizant Technology, and Symantec.
Janus attributed the Fund's outperformance as partly due to several well-chosen
investments in the energy and consumer staples industries. Moderating these
gains was the Fund's lack of exposure to telecommunications, which did well
during the period, and an overweighted position in information technology.
Janus maintained a stock-by-stock focus during the period while also moderating
risk by eliminating redundant positions and making tactical reductions in select
sectors. In the process, it streamlined holdings to reflect its strongest
convictions. Weak performers
Data shown is past performance and does not guarantee future results. Current
performance, including the most recent month-end results, which may be higher or
lower than the data shown, can be obtained by calling 800-222-5852. An
investment's return and principal value will fluctuate, so it may be worth more
or less upon redemption. Performance shown below does not account for fees,
expenses, and charges of any variable insurance contract or retirement plan. If
these fees were reflected, performance would be lower.
International investing involves increased risks due to currency fluctuations,
political or social instability, and differences in accounting standards.
AVERAGE ANNUAL TOTAL RETURNS (1) AS OF DECEMBER 31, 2004
1 Year 5 Year 10 Year Since Inception Inception Date
------ ------ ------- --------------- --------------
CLASS 1 SHARES 8.22% -11.81% 11.49% 11.10% 5/7/93
CLASS 2 SHARES 8.01% - - 0.32% 11/6/01
Russell 1000(R)
Growth Index(2) 6.30% -9.29% 9.59% 9.14%
- - Class 1 shares
- - Russell 1000(R) Growth Index(2)
VALUE OF A $10,000 INVESTMENT(1,3) DECEMBER 31,1994 - DECEMBER 31, 2004
[LINE GRAPH]
CLASS 1 RUSSELL 1000
DATE SHARES GROWTH INDEX(2)
DEC-94 10,000 10,000
Jan-95 10,105 10,213
Feb-95 10,418 10,641
Mar-95 10,644 10,953
Apr-95 11,019 11,193
May-95 11,454 11,583
Jun-95 12,125 12,030
Jul-95 12,911 12,531
Aug-95 12,990 12,545
Sep-95 13,400 13,123
Oct-95 13,043 13,132
Nov-95 13,680 13,643
Dec-95 13,732 13,721
Jan-96 13,995 14,180
Feb-96 14,650 14,440
Mar-96 14,755 14,459
Apr-96 15,497 14,839
May-96 15,803 15,357
Jun-96 15,133 15,378
Jul-96 14,026 14,477
Aug-96 14,973 14,851
Sep-96 15,999 15,932
Oct-96 15,461 16,027
Nov-96 15,950 17,231
Dec-96 15,950 16,893
Jan-97 16,727 18,077
Feb-97 15,969 17,954
Mar-97 14,902 16,983
Apr-97 15,161 18,111
May-97 16,227 19,418
Jun-97 16,867 20,195
Jul-97 18,294 21,980
Aug-97 17,339 20,695
Sep-97 18,351 21,713
Oct-97 17,856 20,909
Nov-97 17,786 21,798
Dec-97 17,740 22,042
Jan-98 18,327 22,701
Feb-98 20,032 24,408
Mar-98 20,987 25,382
Apr-98 21,806 25,732
May-98 21,160 25,002
Jun-98 23,168 26,532
Jul-98 23,092 26,357
Aug-98 19,192 22,401
Sep-98 21,539 24,121
Oct-98 22,284 26,060
Nov-98 23,810 28,043
Dec-98 28,215 30,573
Jan-99 31,962 32,367
Feb-99 30,927 30,888
Mar-99 34,876 32,516
Apr-99 36,679 32,558
May-99 34,662 31,559
Jun-99 37,442 33,768
Jul-99 35,970 32,694
Aug-99 36,938 33,227
Sep-99 38,770 32,529
Oct-99 41,685 34,985
Nov-99 46,346 36,871
Dec-99 55,610 40,706
Jan-00 55,727 38,796
Feb-00 62,565 40,694
Mar-00 63,516 43,607
Apr-00 57,761 41,532
May-00 52,568 39,438
Jun-00 54,109 42,428
Jul-00 53,146 40,659
Aug-00 57,222 44,338
Sep-00 54,372 40,144
Oct-00 51,936 38,245
Nov-00 43,471 32,608
Dec-00 43,358 31,577
Jan-01 45,396 33,759
Feb-01 36,720 28,027
Mar-01 32,835 24,978
Apr-01 38,834 28,137
May-01 37,778 27,724
Jun-01 36,324 27,080
Jul-01 34,275 26,403
Aug-01 30,858 24,244
Sep-01 27,899 21,824
Oct-01 28,309 22,970
Nov-01 30,177 25,177
Dec-01 30,768 25,129
Jan-02 29,812 24,685
Feb-02 27,146 23,660
Mar-02 27,988 24,479
Apr-02 26,144 22,481
May-02 25,733 21,937
Jun-02 23,229 19,908
Jul-02 21,315 18,813
Aug-02 21,611 18,870
Sep-02 19,766 16,913
Oct-02 21,588 18,464
Nov-02 22,909 19,466
Dec-02 21,223 18,121
Jan-03 20,767 17,681
Feb-03 20,424 17,600
Mar-03 20,676 17,927
Apr-03 22,406 19,252
May-03 23,659 20,212
Jun-03 23,817 20,491
Jul-03 24,455 21,002
Aug-03 25,206 21,524
Sep-03 24,682 21,294
Oct-03 26,049 22,491
Nov-03 26,367 22,727
Dec-03 27,414 23,513
Jan-04 27,959 23,993
Feb-04 28,052 24,147
Mar-04 27,802 23,698
Apr-04 27,188 23,423
May-04 27,666 23,858
Jun-04 28,189 24,157
Jul-04 26,937 22,792
Aug-04 26,708 22,680
Sep-04 27,187 22,895
Oct-04 27,643 23,253
Nov-04 28,669 24,052
Dec-04 29,672 24,995
1 Performance reflects ongoing fund expenses, which may have been waived,
and assumes reinvestment of all dividends and capital gains. Performance
does not reflect the impact of federal, state, or municipal taxes. If it
did, performance would be lower.
2 The Russell 1000(R) Growth Index measures the performance of those Russell
1000(R) Index securities with higher price-to-book ratios and higher
forecasted growth values. Returns shown for the index assume reinvestment
of all dividends and distributions, and since-inception returns shown for
the index are calculated from 4/30/93. Indices are unmanaged, and
individuals cannot invest directly in an index.
3 Performance of Class 2 shares (offered as of 11/01) will differ.
16
PORTFOLIO MANAGERS
Alexander S. Macmillan III, CFA and E. Marc Pinto, CFA Jane Putnam, CFA
Paul J. Berlinguet Janus Capital Management OppenheimerFunds, Inc.
Columbia Management
Advisors, Inc.
included wireless handset and semiconductor manufacturers, such as Nokia. Strong
performers included biotech stocks, such as OSI Pharmaceuticals.
Oppenheimer reported strong returns from health care stocks in biotechnology,
health insurance, medical products (Johnson & Johnson), and certain European
pharmaceutical firms. Other sectors that contributed positively to performance
included industrials (General Electric) and energy. On the negative side,
Cypress Semiconductor and VERITAS detracted from performance. As prices declined
for technology stocks, Oppenheimer trimmed holdings in relatively smaller cap
cyclical technology names and increased exposure to more stable, bellwether
companies, such as Cisco Systems.
Looking forward, Oppenheimer is generally optimistic about economic
fundamentals. Although the shift from recovery to sustainable growth makes
earnings and revenue comparisons less robust, the environment still appears
favorable. Over time, such conditions tend to favor growth-oriented stocks, and
valuations of many growth stocks stand at attractive levels. Oppenheimer
believes continued economic growth may set the stage for broad-based,
earnings-driven gains among growth-oriented stocks.
Columbia expects economic and corporate earnings growth to slow modestly in
2005. Inflation should be contained, but there are concerns about higher energy
prices. The firm remains focused on holding well-positioned growth issues.
Janus is fairly upbeat about the economy and notes the recent deceleration
doesn't mean the economy has stopped growing. Consumer spending remains strong,
aided by continued low interest rates, and the employment landscape looks
better. Janus continues to refine its holdings, seeking an optimal blend of
well-established growth companies.
TOP 10 HOLDINGS(4,5) AS OF DECEMBER 31, 2004
% of Net Assets Total Return
--------------- ------------
General Electric Co. 3.94% 20.68%
Microsoft Corp. 3.84% 8.92%
Cisco Systems Inc. 2.04% -20.26%
Yahoo! Inc. 2.02% 67.36%
Medtronic Inc. 1.95% 2.68%
Exxon Mobil Corp. 1.91% 28.04%
Time Warner Inc. 1.87% 8.12%
Comcast Corp. 1.81% 1.49%
Procter & Gamble Co. 1.77% 12.38%
Citigroup Inc. 1.75% 2.72%
FUND CHARACTERISTICS
AS OF DECEMBER 31, 2004
Weighted Average Market Capitalization: $ 93.4 billion
Weighted Average P/E 19.9
(based on estimated earnings):
Beta:(6) 1.05
Fund Standard Deviation:(7) 16.40
S&P 500 Standard Deviation:(7) 15.81
Turnover: 66%
Number of Securities: 183
Total Net Assets: $ 247 million
PORTFOLIO COMPOSITION(4)
As of
12/31/04
[PIE CHART]
As of As of
12/31/04 12/31/03 Change
-------- -------- ------
Information Technology 24% 27% -3%
Consumer Discretionary 18% 18% 0%
Health Care 18% 15% +3%
Industrials 12% 10% +2%
Financials 10% 11% -1%
Consumer Staples 7% 6% +1%
Energy 4% 5% -1%
Materials 2% 2% 0%
Other 1% 1% 0%
Cash Equivalents 4% 5% -1%
4 May not reflect the current portfolio composition.
5 Performance information provided for individual securities held by the
Fund represents performance for the fiscal year ended 12/31/04. The Fund
may not have held these securities throughout the entire period.
6 Source: Lipper, Inc. Beta is a quantitative measure of the Fund's
historical volatility relative to the overall market (S&P 500). A beta
above 1 indicates more volatility than the market, and a beta below 1
indicates less volatility. Results are calculated using three-month
rolling returns for Class 1 shares for the three-year period ended
12/31/04.
7 Source: Ibbotson Associates and Lipper, Inc. Standard deviation measures
the historical fluctuation of returns around the arithmetic average return
of the investment.The higher the standard deviation (as one measure of
risk), the greater the variability of the investment returns. Results are
calculated for the three-year period ended 12/31/04, and Fund results are
for Class 1 shares.
17
VT Small Cap Value Fund
INVESTMENT STRATEGY
Small-cap stocks, and small-cap value stocks in particular, performed well from
the Fund's commencement date on May 3, 2004 through the fiscal year end. During
this period, the Fund benefited from a significant overweighting in energy
stocks. High oil prices provided a meaningful boost to earnings and cash flow
for the exploration and production companies held by the Fund.
We also had positive relative performance from overweightings in the raw
materials and industrial sectors. Strong global demand for raw materials helped
raw materials stocks, as well as transportation companies that benefited from
charging higher rates for moving raw materials around the globe.
The Fund was significantly underweighted in financial stocks, which was a slight
disadvantage as that sector performed well. Concern over the flattening yield
curve has led us to remain underweighted in this sector.
We were also underweighted in technology, which was a weak-performing sector for
the period. We are gradually increasing our exposure to the sector as we see
valuations improve.
Data shown is past performance and does not guarantee future results. Current
performance, including the most recent month-end results, which may be higher or
lower than the data shown, can be obtained by calling 800-222-5852. An
investment's return and principal value will fluctuate, so it may be worth more
or less upon redemption. Performance shown below does not account for fees,
expenses, and charges of any variable insurance contract or retirement plan. If
these fees were reflected, performance would be lower.
Small-cap and mid-cap stocks may have additional risks, including greater price
volatility. International investing involves increased risks due to currency
fluctuations, political or social instability, and differences in accounting
standards.
AVERAGE ANNUAL TOTAL RETURNS (1) AS OF DECEMBER 31, 2004
Since Inception Inception Date
--------------- --------------
CLASS 1 SHARES 22.70% 5/3/04
Russell 2000(R) Value Index(2) 20.57%
- - Class 1 shares
- - Russell 2000(R) Value Index(2)
VALUE OF A $10,000 INVESTMENT(1) MAY 3,2004 - DECEMBER 31, 2004
[LINE GRAPH]
CLASS 1 RUSSELL 2000
DATE SHARES VALUE INDEX(2)
Apr-04 10,000 10,000
May-04 9,840 10,121
Jun-04 10,260 10,635
Jul-04 10,180 10,146
Aug-04 10,280 10,245
Sep-04 10,820 10,651
Oct-04 11,050 10,816
Nov-04 12,020 11,776
Dec-04 12,270 12,057
1 Periods less than one year are not annualized. Performance reflects
ongoing fund expenses, which may have been waived, and assumes
reinvestment of all dividends and capital gains. Performance does not
reflect the impact of federal, state, or municipal taxes. If it did,
performance would be lower.
2 The Russell 2000(R) Value Index measures the performance of those Russell
2000(R) Index securities with lower price-to-book ratios and lower
forecasted growth values. Returns shown for the index assume reinvestment
of all dividends and distributions, and since-inception returns shown for
the index are calculated from 4/30/04. Indices are unmanaged, and
individuals cannot invest directly in an index.
18
PORTFOLIO MANAGER
David W. Simpson, CFA
WM Advisors, Inc.
The Fund has gradually trimmed its energy exposure as those stocks outperformed.
However, we remain significantly overweighted in the sector as we think
fundamentals favor strong energy prices. We see improved valuations in
technology and health care, both areas where the Fund has small exposure, and we
are modestly adding to those positions. We are not very enamored with consumer
stocks since we think high energy prices erode consumer purchasing power.
For the period, the Fund held about 22% in non-U.S. stocks, which benefited from
a weaker U.S. dollar. Stocks that contributed positively to performance included
Peyto Energy Trust (energy); Tesma (auto parts); Duratek (industrials); and
Biosite (health care).
Stocks that detracted from performance included Independence Air
(transportation) and Kellwood (consumer discretionary).
Small-cap stocks have outperformed the larger stock indices for six consecutive
years. While we believe small-cap stocks offer decent returns for the long-term
investor, we caution that outperformance is unlikely to continue uninterrupted.
Valuations appear quite rich, although earnings have been steadily growing.
Issues that face the investor include the "twin deficits" (federal and trade),
but we do not see any immediate catalyst that could lead to a major correction
or bear market. However, as observers of stock market history, we are aware that
such catalysts are often apparent only in hindsight.
TOP 10 HOLDINGS(3,4) AS OF DECEMBER 31 , 2004
% of Net Assets Total Return
--------------- ------------
Atari Inc. 2.26% 8.52%
Jarden Corp. 2.22% 22.37%
A/S Dampskibsselskabet TORM 2.13% 38.17%
Hutchinson Technology Inc. 2.08% 21.43%
Cimarex Energy Co. 1.99% 36.33%
Geac Computer Corp. Ltd. 1.99% 25.06%
Fording Canadian Coal Trust 1.83% 103.73%
OmniVision Technologies Inc. 1.75% -35.04%
Oriental Financial Group Inc. 1.71% 10.59%
Metal Management Inc. 1.69% 32.58%
FUND CHARACTERISTICS
AS OF DECEMBER 31, 2004
Weighted Average Market
Capitalization: $ 1.0 billion
Weighted Average P/E
(based on estimated earnings): 13.9
Turnover: 50%
Number of Securities: 79
Total Net Assets: $42.7 million
PORTFOLIO COMPOSITION(3)
As of
12/31/04
[PIE CHART]
As of
12/31/04
--------
Industrials 13%
Energy 12%
Information Technology 11%
Financials 10%
Materials 10%
Consumer Staples 8%
Consumer Discretionary 7%
Health Care 7%
REITs 6%
Options 3%
Telecommunication Services 3%
Utilities 1%
Cash Equivalents 9%
(3) May not reflect the current portfolio composition.
(4) Performance information provided for individual securities held by the
Fund represents performance from 5/3/04 to 12/31/04. The Fund may not have
held these securities throughout the entire period.
19
VT Small Cap Growth Fund
ANNUAL TOTAL RETURNS(1)
Class 1 shares
(Calendar Year)
2004 +4.68%
2003 +71.40%
2002 -47.15%
2001 -12.73%
2000 -10.58%
1999 +71.09%
1998 +8.09%
1997 +12.59%
1996 +10.04%
1995 +30.99%
INVESTMENT STRATEGY
The stock market turned increasingly defensive as 2004 progressed, with value
stocks significantly outperforming their growth counterparts.This marked the
fourth time in five years that value significantly outperformed growth, and
small-cap growth stocks struggled during the year. With the Fund's higher
beta(6) and exposure to emerging technology and biotechnology, the market's bias
toward value worked against the Fund this year.
The Fund continues to be overweighted in the technology and health care sectors,
which were areas that came under pressure mid-year. However, these sectors ended
2004 with stronger performance, as investors' appetite for risk increased.
Technology is the Fund's largest sector, but the size of its individual
technology holdings is generally small because we try to diversify the event
risk associated with small-cap growth technology companies.
Although exposure to technology and biotechnology generally increases the
beta(6) of the Fund, we believe that these are areas of growth with many
opportunities for investors
Data shown is past performance and does not guarantee future results. Current
performance, including the most recent month-end results, which may be higher or
lower than the data shown, can be obtained by calling 800-222-5852. An
investment's return and principal value will fluctuate, so it may be worth more
or less upon redemption. Performance shown below does not account for fees,
expenses, and charges of any variable insurance contract or retirement plan. If
these fees were reflected, performance would be lower.
Small-cap and mid-cap stocks may have additional risks, including greater price
volatility.
AVERAGE ANNUAL TOTAL RETURNS (1) AS OF DECEMBER 31, 2004
1 Year 5 Year 10 Year Since Inception Inception Date
------ ------ ------- --------------- --------------
CLASS 1 SHARES 4.68% -5.84% 8.29% 8.04% 1/12/94
CLASS 2 SHARES 4.49% - - -2.44% 5/1/01
Russell 2000(R)Growth Index (2) 14.31% -3.57% 7.12% 6.21%
- - Class 1 shares
- - Russell 2000(R) Growth Index(2)
VALUE OF A $10,000 INVESTMENT(1,3) DECEMBER 31, 1994 - DECEMBER 31, 2004
[LINE GRAPH]
DATE CLASS 1 RUSSELL 2000
SHARES GROWTH INDEX(2)
DEC-94 10,000 10,000
Jan-95 10,000 9,796
Feb-95 10,285 10,249
Mar-95 10,247 10,548
Apr-95 10,095 10,706
May-95 10,095 10,846
Jun-95 10,878 11,594
Jul-95 11,650 12,497
Aug-95 12,022 12,650
Sep-95 12,594 12,911
Oct-95 12,146 12,276
Nov-95 12,356 12,817
Dec-95 13,099 13,102
Jan-96 12,908 12,993
Feb-96 13,652 13,585
Mar-96 14,547 13,854
Apr-96 14,976 14,918
May-96 15,596 15,684
Jun-96 15,012 14,664
Jul-96 13,138 12,874
Aug-96 14,197 13,827
Sep-96 14,756 14,539
Oct-96 14,334 13,912
Nov-96 14,472 14,299
Dec-96 14,413 14,578
Jan-97 13,933 14,942
Feb-97 13,590 14,039
Mar-97 12,639 13,048
Apr-97 12,707 12,897
May-97 14,168 14,835
Jun-97 14,888 15,338
Jul-97 14,971 16,124
Aug-97 15,127 16,607
Sep-97 16,134 17,933
Oct-97 15,865 16,855
Nov-97 16,011 16,454
Dec-97 16,229 16,464
Jan-98 16,052 16,245
Feb-98 17,453 17,679
Mar-98 18,200 18,421
Apr-98 18,086 18,534
May-98 16,778 17,186
Jun-98 16,828 17,362
Jul-98 15,615 15,912
Aug-98 12,286 12,240
Sep-98 13,356 13,481
Oct-98 14,366 14,184
Nov-98 15,904 15,285
Dec-98 17,515 16,668
Jan-99 17,323 17,418
Feb-99 15,700 15,825
Mar-99 15,615 16,388
Apr-99 16,313 17,835
May-99 17,466 17,864
Jun-99 18,860 18,805
Jul-99 19,409 18,224
Aug-99 19,079 17,542
Sep-99 19,455 17,881
Oct-99 20,441 18,339
Nov-99 23,668 20,277
Dec-99 29,964 23,850
Jan-00 32,251 23,628
Feb-00 43,058 29,126
Mar-00 38,235 26,065
Apr-00 30,527 23,433
May-00 28,036 21,380
Jun-00 34,383 24,142
Jul-00 32,795 22,073
Aug-00 36,222 24,395
Sep-00 33,915 23,183
Oct-00 31,707 21,300
Nov-00 26,659 17,432
Dec-00 26,792 18,499
Jan-01 30,972 19,996
Feb-01 25,022 17,254
Mar-01 20,976 15,686
Apr-01 24,085 17,606
May-01 25,672 18,014
Jun-01 28,606 18,506
Jul-01 23,958 16,927
Aug-01 22,312 15,869
Sep-01 16,758 13,310
Oct-01 18,815 14,590
Nov-01 21,571 15,808
Dec-01 23,381 16,793
Jan-02 21,017 16,195
Feb-02 18,735 15,148
Mar-02 21,181 16,464
Apr-02 18,199 16,108
May-02 16,081 15,166
Jun-02 14,720 13,880
Jul-02 12,109 11,747
Aug-02 11,614 11,741
Sep-02 10,894 10,893
Oct-02 12,177 11,444
Nov-02 13,933 12,578
Dec-02 12,357 11,710
Jan-03 12,515 11,392
Feb-03 11,952 11,088
Mar-03 11,749 11,255
Apr-03 13,032 12,320
May-03 15,372 13,708
Jun-03 15,620 13,973
Jul-03 16,790 15,029
Aug-03 17,713 15,836
Sep-03 17,826 15,436
Oct-03 20,167 16,769
Nov-03 20,617 17,316
Dec-03 21,180 17,394
Jan-04 22,844 18,307
Feb-04 22,755 18,280
Mar-04 22,598 18,366
Apr-04 21,023 17,444
May-04 20,889 17,791
Jun-04 21,248 18,383
Jul-04 18,367 16,732
Aug-04 18,255 16,373
Sep-04 19,200 17,278
Oct-04 19,605 17,698
Nov-04 20,866 19,193
Dec-04 22,172 19,882
1 Performance reflects ongoing fund expenses, which may have been waived,
and assumes reinvestment of all dividends and capital gains. Performance
does not reflect the impact of federal, state, or municipal taxes. If it
did, performance would be lower.
2 The Russell 2000(R) Growth Index measures the performance of those Russell
2000(R) Index securities with higher price-to-book ratios and higher
forecasted growth values. Returns shown for the index assume reinvestment
of all dividends and distributions, and since-inception returns shown for
the index are calculated from 12/31/93. Indices are unmanaged, and
individuals cannot invest directly in an index.
3 Performance of Class 2 shares (offered as of 5/01) will differ.
20
PORTFOLIO MANAGER
Linda C. Olson, CFA
WM Advisors, Inc.
with long-term horizons. Of course, they also must be able to accept short-term
volatility.
Individual holdings that added to Fund performance included Building Materials
Holding Corp., United Natural Foods, and Dendreon. Negative contributors
included Primus Telecom, Digimarc, and Primus Knowledge Solutions, which was
acquired by Art Technology Group.
Growth and value performance have historically run in cycles, and so we believe
it is beneficial for investors to have exposure to both styles. With
improvements in the economy and in investors' appetite for risk, growth
investing could be poised to outperform in the near term. Also fueling that
possibility is the likelihood that interest rates will continue to rise in 2005.
When rates have gone up in the past, growth has typically outperformed value in
small-cap equities.
We continue to diligently search for and invest in companies that we believe
have strong management teams, superior products and services, and high barriers
to entry. We also seek companies that are perceived market leaders and
attractively valued. We believe these qualities represent companies that could
be strong long-term holdings for our shareholders.
TOP 10 HOLDINGS(4,5) AS OF DECEMBER 31, 2004
% of Net Assets Total Return
--------------- ------------
Digimarc Corp. 2.71% -29.92%
Gevity HR Inc. 2.46% -6.50%
Hewitt Associates Inc. 2.42% 7.06%
SonoSite Inc. 2.32% 57.98%
Lionbridge Technologies Inc. 2.30% -30.00%
Euronet Worldwide Inc. 2.30% 44.24%
West Marine Inc. 2.15% -10.00%
Intrawest Corp. 2.10% 25.22%
Affiliated Managers Group Inc. 2.09% 46.01%
aQuantive Inc. 2.02% -12.78%
FUND CHARACTERISTICS
AS OF DECEMBER 31, 2004
Weighted Average Market
Capitalization: $ 850 million
Weighted Average P/E 22.6
(based on estimated earnings):
Beta:(6) 1.68
Fund Standard Deviation:(7) 30.49
S&P 500 Standard Deviation:(7) 15.81
Turnover: 41%
Number of Securities: 76
Total Net Assets: $ 56.7 million
PORTFOLIO COMPOSITION (4)
As of
12/31/04
[PIE CHART]
As of As of
12/31/04 12/31/03 Change
-------- -------- ------
Health Care 21% 20% +1%
Consumer Discretionary 16% 14% +2%
Industrials 12% 10% +2%
Software 11% 11% 0%
Financials 8% 9% -1%
Internet Software & Services 8% 10% -2%
Communications Equipment 4% 3% +1%
Consumer Staples 4% 4% 0%
Electronic Equipment &
Instruments 4% 3% +1%
Energy 3% 4% -1%
IT Services 2% 2% 0%
Materials 2% 1% +1%
Semiconductors &
Semiconductor Equipment 2% 4% -2%
Computers & Peripherals 1% 1% 0%
Telecommunication Services 1% 1% 0%
Cash Equivalents 1% 3% -2%
4 May not reflect the current portfolio composition.
5 Performance information provided for individual securities held by the
Fund represents performance for the fiscal year ended 12/31/04. The Fund
may not have held these securities throughout the entire period.
6 Source: Lipper, Inc. Beta is a quantitative measure of the Fund's
historical volatility relative to the overall market (S&P 500). A beta
above 1 indicates more volatility than the market, and a beta below 1
indicates less volatility. Results are calculated using three-month
rolling returns for Class 1 shares for the three-year period ended
12/31/04.
7 Source: Ibbotson Associates and Lipper, Inc. Standard deviation measures
the historical fluctuation of returns around the arithmetic average return
of the investment.The higher the standard deviation (as one measure of
risk), the greater the variability of the investment returns. Results are
calculated for the three-year period ended 12/31/04, and Fund results are
for Class 1 shares.
21
VT International Growth Fund
ANNUAL TOTAL RETURNS (1)
Class 1 shares
(Calendar Year)
2004 +13.60%
2003 +35.51%
2002 -15.71%
2001 -17.78%
2000 -19.84%
1999 +51.96%
1998 +5.20%
1997 -2.64%
1996 +9.04%
1995 +6.61%
1994 +1.88%
INVESTMENT STRATEGY
Concerns about global economic growth and future corporate profits kept a lid on
international equities, although some non-U.S. markets broke through desultory
summer trading patterns to post positive returns. As the year ended, emerging
market stocks outperformed their developed market counterparts. Returns for U.S.
dollar-based investors were enhanced by dollar weakness against several
currencies. Rising oil and raw materials prices helped the energy and materials
sectors post solid gains. The technology sector fell the hardest.
Countries with euro-based economies continued to rely on exports for their main
source of growth as domestic demand in the region remained anemic. A combination
of weak income growth and high unemployment left the euro area with a very
cautious consumer. The Japanese market suffered from concerns about the
sustainability of the country's nascent domestic growth.
Many of our long-held positions in areas such as wireless telecommunications and
certain European and Japanese banks were
Data shown is past performance and does not guarantee future results. Current
performance, including the most recent month-end results, which may be higher or
lower than the data shown, can be obtained by calling 800-222-5852. An
investment's return and principal value will fluctuate, so it may be worth more
or less upon redemption. Performance shown below does not account for fees,
expenses, and charges of any variable insurance contract or retirement plan. If
these fees were reflected, performance would be lower.
International investing involves increased risks due to currency fluctuations,
political or social instability, and differences in accounting standards.
AVERAGE ANNUAL TOTAL RETURNS (1) AS OF DECEMBER 31, 2004
1 Year 5 Year 10 Year Since Inception Inception Date
------ ------ ------- --------------- --------------
CLASS 1 SHARES 13.60% -3.08% 4.46% 5.09% 5/7/93
CLASS 2 SHARES 13.33% - - 9.83% 11/6/01
Morgan Stanley Capital
International EAFE Index(2) 20.70% -0.80% 5.94% 6.50%
- - Class 1 shares
- - Morgan Stanley Capital International EAFE Index(2)
VALUE OF A $10,000 INVESTMENT (1,3) DECEMBER 31, 1994 - DECEMBER 31, 2004
[LINE GRAPH]
MORGAN STANLEY
CAPITAL
CLASS 1 INTERNATIONAL
DATE SHARES EAFE INDEX(2)
DEC-94 10,000 10,000
Jan-95 9,564 9,618
Feb-95 9,460 9,593
Mar-95 9,669 10,194
Apr-95 9,956 10,581
May-95 10,017 10,457
Jun-95 9,885 10,276
Jul-95 10,397 10,918
Aug-95 10,229 10,505
Sep-95 10,300 10,713
Oct-95 10,133 10,428
Nov-95 10,221 10,721
Dec-95 10,662 11,155
Jan-96 11,005 11,203
Feb-96 10,970 11,243
Mar-96 11,084 11,485
Apr-96 11,242 11,821
May-96 11,224 11,606
Jun-96 11,321 11,675
Jul-96 10,813 11,336
Aug-96 10,938 11,363
Sep-96 11,206 11,668
Oct-96 11,116 11,551
Nov-96 11,643 12,013
Dec-96 11,626 11,862
Jan-97 11,679 11,449
Feb-97 11,750 11,639
Mar-97 11,652 11,685
Apr-97 11,893 11,749
May-97 12,616 12,516
Jun-97 13,166 13,209
Jul-97 13,573 13,426
Aug-97 12,400 12,426
Sep-97 13,065 13,124
Oct-97 11,671 12,119
Nov-97 11,302 11,998
Dec-97 11,320 12,106
Jan-98 11,440 12,662
Feb-98 12,197 13,478
Mar-98 12,862 13,896
Apr-98 13,185 14,008
May-98 13,084 13,944
Jun-98 12,667 14,053
Jul-98 12,730 14,199
Aug-98 11,037 12,442
Sep-98 10,473 12,064
Oct-98 11,016 13,325
Nov-98 11,632 14,011
Dec-98 11,909 14,567
Jan-99 12,062 14,528
Feb-99 11,693 14,185
Mar-99 12,175 14,781
Apr-99 12,636 15,382
May-99 12,123 14,593
Jun-99 12,953 15,165
Jul-99 13,528 15,620
Aug-99 13,733 15,681
Sep-99 14,041 15,843
Oct-99 14,688 16,440
Nov-99 15,828 17,015
Dec-99 18,096 18,545
Jan-00 17,171 17,369
Feb-00 17,798 17,840
Mar-00 18,229 18,536
Apr-00 17,378 17,565
May-00 16,516 17,140
Jun-00 17,482 17,813
Jul-00 16,547 17,070
Aug-00 16,887 17,222
Sep-00 15,558 16,387
Oct-00 14,857 16,003
Nov-00 14,261 15,407
Dec-00 14,505 15,958
Jan-01 14,856 15,950
Feb-01 13,559 14,755
Mar-01 12,869 13,779
Apr-01 14,059 14,745
May-01 13,464 14,236
Jun-01 12,838 13,659
Jul-01 12,442 13,412
Aug-01 12,045 13,075
Sep-01 10,549 11,753
Oct-01 11,063 12,054
Nov-01 11,741 12,499
Dec-01 11,927 12,574
Jan-02 11,379 11,906
Feb-02 11,483 11,991
Mar-02 12,184 12,646
Apr-02 12,172 12,737
May-02 12,218 12,910
Jun-02 11,612 12,401
Jul-02 10,454 11,179
Aug-02 10,301 11,156
Sep-02 9,214 9,961
Oct-02 9,958 10,497
Nov-02 10,585 10,975
Dec-02 10,053 10,607
Jan-03 9,651 10,165
Feb-03 9,426 9,932
Mar-03 9,119 9,744
Apr-03 10,017 10,711
May-03 10,584 11,370
Jun-03 10,833 11,651
Jul-03 11,252 11,935
Aug-03 11,588 12,225
Sep-03 11,791 12,604
Oct-03 12,605 13,390
Nov-03 12,773 13,690
Dec-03 13,622 14,761
Jan-04 13,765 14,971
Feb-04 14,005 15,319
Mar-04 14,089 15,411
Apr-04 13,634 15,075
May-04 13,646 15,140
Jun-04 13,791 15,478
Jul-04 13,330 14,978
Aug-04 13,451 15,047
Sep-04 13,657 15,442
Oct-04 14,082 15,971
Nov-04 14,882 17,066
Dec-04 15,475 17,815
1 Performance reflects ongoing fund expenses, which may have been waived,
and assumes reinvestment of all dividends and capital gains. Performance
does not reflect the impact of federal, state, or municipal taxes. If it
did, performance would be lower.
2 The Morgan Stanley Capital International (MSCI) EAFE Index is a
broad-based, capitalization-weighted index of equity markets representing
21 countries in Europe, Australasia, and the Far East. Returns shown for
the index assume reinvestment of all dividends and distributions, and
since-inception returns shown for the index are calculated from 4/30/93.
Indices are unmanaged, and individuals cannot invest directly in an index.
3 Performance of Class 2 shares (offered as of 11/01) will differ.
22
PORTFOLIO MANAGER
International Equity Team
Capital Guardian Trust Company
top contributors as the market sought stocks of cash-generating companies.
Portfolio holdings in metals and mining also added value during the year. Other
holdings that added to Fund performance included America Movil, Infosys
Technologies, and Wesfarmers.
Stock selection in the health care sector, primarily within the Fund's
pharmaceutical holdings, hurt returns. Despite this under-performance, we feel
that investor concerns about health care costs and drug pricing are already
reflected in drug stock valuations.
Fund performance was also hurt by stock selection in the information technology,
consumer staples, and industrial sectors.
We believe the global economy is settling into a sustainable, albeit slower,
pace of growth and that energy costs will be less of a factor. In Japan, we
expect a secular recovery, despite some near-term weakness, and we own stocks
that could benefit from this trend. In Europe, despite concerns about domestic
demand and the strong euro, we are encouraged by some improvements in business
costs, as well as potential restructuring and industrial consolidation.
Although many of our largest holdings have produced the earnings we expected,
their stock prices have not followed suit.We believe many of these stocks are
attractive based on their price-to-earnings, cash flows, and dividend yields,
and the companies could create more value for shareholders through higher
dividends and stock repurchases. These characteristics should position the Fund
well for the future.
TOP 10 HOLDINGS(4,5) AS OF DECEMBER 31, 2004
% of Net Assets Total Return
--------------- ------------
Vodafone Group PLC 3.68% 11.78%
Sanofi-Aventis 2.97% 8.20%
Royal Dutch Petroleum Co. 2.59% 13.93%
Novartis AG 1.81% 12.97%
AstraZeneca PLC 1.52% -23.23%
Royal Bank of Scotland 1.43% 17.84%
BNP Paribas SA 1.42% 18.35%
Nestle SA 1.37% 6.99%
Banco Bilbao Vizcaya Argentaria 1.37% 33.09%
ABN AMRO Holding NV 1.36% 19.82%
FUND CHARACTERISTICS
AS OF DECEMBER 31, 2004
Weighted Average Market
Capitalization: $ 46.7 billion
Weighted Average P/E
(based on trailing earnings): 17.6
Beta:(6) 0.98
Fund Standard Deviation:(7) 16.09
S&P 500 Standard Deviation:(7) 15.81
Turnover: 23%
Number of Securities: 238
Total Net Assets: $ 92.2 million
GEOGRAPHIC BREAKDOWN(4)
As of
12/31/04
[PIE CHART]
As of As of
12/31/04 12/31/03 Change
-------- -------- ------
Japan 23% 21% +2%
United Kingdom 17% 17% 0%
France 10% 11% -1%
Netherlands 10% 10% 0%
Switzerland 10% 9% +1%
Germany 6% 5% +1%
Canada 4% 4% 0%
Spain 4% 3% +1%
Australia 3% 2% +1%
Hong Kong 1% 2% -1%
Other Countries 10% 11% -1%
Cash Equivalents 2% 5% -3%
4 May not reflect the current portfolio composition.
5 Performance information provided for individual securities held by the
Fund represents performance for the fiscal year ended 12/31/04. The Fund
may not have held these securities throughout the entire period.
6 Source: Lipper, Inc. Beta is a quantitative measure of the Fund's
historical volatility relative to the overall market (S&P 500). A beta
above 1 indicates more volatility than the market, and a beta below 1
indicates less volatility. Results are calculated using three-month
rolling returns for Class 1 shares for the three-year period ended
12/31/04.
7 Source: Ibbotson Associates and Lipper, Inc. Standard deviation measures
the historical fluctuation of returns around the arithmetic average return
of the investment.The higher the standard deviation (as one measure of
risk), the greater the variability of the investment returns. Results are
calculated for the three-year period ended 12/31/04, and Fund results are
for Class 1 shares.
23
VT Short Term Income Fund
ANNUAL TOTAL RETURNS(1)
Class 1 shares
(Calendar Year)
2004 +2.07%
2003 +5.52%
2002 +6.26%
2001 +8.15%
2000 +8.23%
1999 +2.89%
1998 +5.28%
1997 +5.90%
1996 +3.74%
1995 +9.30%
INVESTMENT STRATEGY
This fiscal year was characterized by sluggish economic growth early on,
followed by strong jobs reports and a spike in interest rates between April and
May. Rates peaked during May and June, and then gradually declined as concerns
about lackluster job growth dragged on the market.
At its June meeting, the Federal Reserve (the Fed) raised short-term interest
rates for the first time in four years. Its statement signaled that the Fed
planned to gradually alter its accommodative monetary policy.
In subsequent months, the Fed raised rates four more times, so that the federal
funds rate ended 2004 at 2.25%.
As a result, rates on the front end of the yield curve rose, which flattened the
yield curve. For the one-year period ended December 31, 2004, the two-year U.S.
Treasury note was up 125 basis points in yield, while the five-year Treasury
note was up only 36 basis points.
This created a challenging environment in the front end of the yield curve as
rates
Data shown is past performance and does not guarantee future results. Current
performance, including the most recent month-end results, which may be higher or
lower than the data shown, can be obtained by calling 800-222-5852. An
investment's return and principal value will fluctuate, so it may be worth more
or less upon redemption. Performance shown below does not account for fees,
expenses, and charges of any variable insurance contract or retirement plan. If
these fees were reflected, performance would be lower.
Fixed-income investments are subject to interest rate risk, and their value will
decline as interest rates rise. There may be additional credit and default risks
associated with lower-rated securities. REIT securities are subject to risk
factors associated with the real estate industry and tax factors of REIT
registration.
AVERAGE ANNUAL TOTAL RETURNS(1) AS OF DECEMBER 31 , 2004
1 Year 5 Year 10 Year Since Inception Inception Date
------ ------ ------- --------------- --------------
CLASS 1 SHARES 2.07% 6.02% 5.71% 5.04% 1/12/94
CLASS 2 SHARES 1.60% - - 4.08% 11/6/01
Citigroup Broad Investment-Grade
Credit 1-3 Years Index(2) 1.94% 6.28% 6.66% 6.15%
- - Class 1 shares
- - Citigroup Broad Investment-Grade Credit 1-3 Years Index(2)
VALUE OF A $10,000 INVESTMENT (1,3) DECEMBER 31, 1994 - DECEMBER 31, 2004
[LINE GRAPH]
CITIGROUP
BROAD
INVESTMENT
CLASS 1 GRADE CREDIT
DATE SHARES 1-3 YR INDEX(2)
DEC-94 10,000 10,000
Jan-95 10,000 10,143
Feb-95 10,084 10,293
Mar-95 10,164 10,362
Apr-95 10,248 10,464
May-95 10,458 10,661
Jun-95 10,500 10,724
Jul-95 10,500 10,778
Aug-95 10,585 10,850
Sep-95 10,627 10,905
Oct-95 10,757 11,001
Nov-95 10,843 11,100
Dec-95 10,930 11,191
Jan-96 11,017 11,292
Feb-96 10,929 11,254
Mar-96 10,885 11,252
Apr-96 10,885 11,261
May-96 10,885 11,295
Jun-96 10,975 11,379
Jul-96 11,020 11,425
Aug-96 11,065 11,468
Sep-96 11,156 11,579
Oct-96 11,247 11,719
Nov-96 11,339 11,812
Dec-96 11,339 11,814
Jan-97 11,386 11,880
Feb-97 11,432 11,908
Mar-97 11,432 11,905
Apr-97 11,479 12,002
May-97 11,573 12,089
Jun-97 11,621 12,180
Jul-97 11,765 12,335
Aug-97 11,765 12,340
Sep-97 11,861 12,442
Oct-97 11,910 12,522
Nov-97 11,959 12,543
Dec-97 12,008 12,625
Jan-98 12,057 12,753
Feb-98 12,107 12,770
Mar-98 12,137 12,832
Apr-98 12,187 12,902
May-98 12,237 12,978
Jun-98 12,287 13,044
Jul-98 12,337 13,113
Aug-98 12,438 13,214
Sep-98 12,590 13,393
Oct-98 12,642 13,411
Nov-98 12,642 13,456
Dec-98 12,643 13,520
Jan-99 12,695 13,608
Feb-99 12,643 13,565
Mar-99 12,748 13,684
Apr-99 12,800 13,747
May-99 12,747 13,729
Jun-99 12,796 13,772
Jul-99 12,796 13,792
Aug-99 12,850 13,828
Sep-99 12,951 13,933
Oct-99 12,951 13,979
Nov-99 13,006 14,025
Dec-99 13,011 14,062
Jan-00 13,011 14,072
Feb-00 13,120 14,176
Mar-00 13,142 14,248
Apr-00 13,198 14,245
May-00 13,198 14,291
Jun-00 13,336 14,468
Jul-00 13,448 14,587
Aug-00 13,560 14,713
Sep-00 13,655 14,858
Oct-00 13,712 14,864
Nov-00 13,883 15,003
Dec-00 14,083 15,185
Jan-01 14,257 15,473
Feb-01 14,315 15,599
Mar-01 14,471 15,744
Apr-01 14,530 15,796
May-01 14,588 15,939
Jun-01 14,647 16,013
Jul-01 14,823 16,242
Aug-01 14,940 16,375
Sep-01 15,116 16,549
Oct-01 15,234 16,696
Nov-01 15,174 16,679
Dec-01 15,234 16,672
Jan-02 15,293 16,726
Feb-02 15,351 16,761
Mar-02 15,235 16,682
Apr-02 15,469 16,819
May-02 15,587 16,965
Jun-02 15,640 17,025
Jul-02 15,640 17,122
Aug-02 15,762 17,262
Sep-02 15,945 17,436
Oct-02 15,822 17,391
Nov-02 15,944 17,520
Dec-02 16,188 17,788
Jan-03 16,311 17,861
Feb-03 16,433 18,011
Mar-03 16,494 18,072
Apr-03 16,677 18,236
May-03 16,860 18,412
Jun-03 16,887 18,487
Jul-03 16,757 18,356
Aug-03 16,757 18,387
Sep-03 17,017 18,604
Oct-03 16,952 18,546
Nov-03 16,952 18,567
Dec-03 17,083 18,708
Jan-04 17,148 18,779
Feb-04 17,213 18,888
Mar-04 17,344 18,973
Apr-04 17,149 18,781
May-04 17,084 18,751
Jun-04 17,100 18,766
Jul-04 17,168 18,858
Aug-04 17,304 19,035
Sep-04 17,371 19,035
Oct-04 17,439 19,106
Nov-04 17,371 19,020
Dec-04 17,439 19,075
1 Performance reflects ongoing fund expenses, which may have been waived,
and assumes reinvestment of all dividends and capital gains. Performance
does not reflect the impact of federal, state, or municipal taxes. If it
did, performance would be lower.
2 The Citigroup Broad Investment-Grade Credit 1-3 Years Index measures the
performance of bonds, including U.S. and non-U.S. corporate securities and
non-U.S. sovereign and provincial securities, with maturities between one
and three years. Returns shown for the index assume reinvestment of all
dividends and distributions, and since-inception returns shown for the
index are calculated from 12/31/93. Indices are unmanaged, and individuals
cannot invest directly in an index.
3 Performance of Class 2 shares (offered as of 11/01) will differ.
24
PORTFOLIO MANAGER
Craig V. Sosey
WM Advisors, Inc.
increased substantially. Fund performance was driven by an overweighting in
corporate bond positions that did well as spreads tightened. This was especially
true in lower quality (Baa-rated) bonds that tightened much more than A or
higher-rated bonds(5). Positive contributions also came from asset-and
mortgage-backed securities, especially in the shorter-end maturities (between
one and five years). Positions in real estate investment trusts and the gaming
and leisure sectors also boosted Fund performance.
The Fund maintained its overall portfolio weightings, but continued to
overweight corporate bonds. Since spreads between lower- and higher-quality
rated corporates compressed during the period, we capitalized on that situation
to add higher-quality names without sacrificing much yield. The Fund also
increased its positions in asset-backed and mortgage-backed securities at
attractive spreads.
We believe the economy will continue growing slowly, accompanied by measured
increases in short-term interest rates. In this environment, we remain defensive
and expect weaker corporate securities to underperform higher-quality names. As
a result, we favor high-quality corporate issues. Asset-backed and
mortgage-backed securities could also perform well in this environment, and we
will look to add to these positions as appropriate. We anticipate steady
returns, despite a challenging outlook characterized by compression in corporate
spreads and the likelihood that rates will increase.
[GRAPHICS]
FUND CHARACTERISTICS
AS OF DECEMBER 31, 2004
Weighted Average Maturity
(Years): 2.2
Weighted Average Duration
(Years): 1.7
Turnover: 17%
Number of Securities: 89
Total Net Assets: $55.7 million
PORTFOLIO COMPOSITION (4)
As of
12/31/04
[PIE CHART]
As of As of
12/31/04 12/31/03 Change
-------- -------- ------
Domestic Corporate Bonds 67% 64% +3%
Mortgage-Backed Bonds 8% 9% -1%
Asset-Backed Bonds 5% 5% 0%
Foreign Corporate
Bonds (U.S. $) 4% 5% -1%
Government Agency 2% 4% -2%
U.S. Treasuries 2% 3% -1%
Cash Equivalents 12% 10% +2%
4 May not reflect the current portfolio composition.
5 Ratings are provided by Moody's Investors Service (Moody's). The ratings
represent Moody's opinion of the credit quality of securities and are
intended to reflect the issuer's ability to pay back principal and
interest.
25
VT U.S. Government Securities Fund
ANNUAL TOTAL RETURNS (1)
Class 1 shares
(Calendar Year)
2004 +3.78%
2003 +2.14%
2002 +8.87%
2001 +7.79%
2000 +9.73%
1999 +0.51%
1998 +7.03%
1997 +9.42%
1996 +3.69%
1995 +16.89%
1994 -4.04%
INVESTMENT STRATEGY
The main performance drivers for the Fund during this fiscal year were low
interest rates and the resulting high level of mortgage refinancing. As the
period began, economic growth was slow and interest rates were near historical
lows. In this environment, mortgages, which represent the majority of the Fund's
holdings, prepaid extremely fast as homeowners refinanced their existing loans.
This detracted from Fund performance as premium-priced mortgage securities were
repaid at par and the proceeds had to be invested at lower rates.
In addition, the Fund's duration (a measure of price sensitivity to interest
rate movements) was slightly long at the start of the period, so as rates spiked
up quickly in April, performance was hurt. Expecting flat-to-higher rates, we
then shortened duration to be more defensive. However, the Fund slightly
underperformed as rates drifted back down due to sluggish job growth.
The Fund increased its exposure to mortgage instruments mainly because mortgages
offer attractive spreads and generally perform well
Data shown is past performance and does not guarantee future results. Current
performance, including the most recent month-end results, which may be higher or
lower than the data shown, can be obtained by calling 800-222-5852. An
investment's return and principal value will fluctuate, so it may be worth more
or less upon redemption. Performance shown below does not account for fees,
expenses, and charges of any variable insurance contract or retirement plan. If
these fees were reflected, performance would be lower.
Fixed-income investments are subject to interest rate risk, and their value will
decline as interest rates rise. Neither the principal of government bond funds
nor their yields are guaranteed by the U.S. government.
AVERAGE ANNUAL TOTAL RETURNS (1) AS OF DECEMBER 31, 2004
1 Year 5 Year 10 Year Since Inception Inception Date
------ ------ ------- --------------- --------------
CLASS 1 SHARES 3.78% 6.42% 6.89% 5.71% 5/6/93
CLASS 2 SHARES 3.59% - - 3.94% 11/6/01
Citigroup Mortgage Index(2) 4.81% 7.20% 7.57% 6.62%
- - Class 1 shares
- - Citigroup Mortgage Index(2)
VALUE OF A $10,000 INVESTMENT(1, 3) DECEMBER 31,1994 - DECEMBER 31,2004
[LINE GRAPH]
CLASS 1 CITIGROUP
DATE SHARES MORTGAGE INDEX(2)
DEC-94 10,000 10,000
Jan-95 10,208 10,224
Feb-95 10,460 10,485
Mar-95 10,526 10,528
Apr-95 10,660 10,669
May-95 11,027 11,014
Jun-95 11,084 11,073
Jul-95 11,062 11,095
Aug-95 11,187 11,197
Sep-95 11,244 11,297
Oct-95 11,427 11,401
Nov-95 11,622 11,534
Dec-95 11,691 11,677
Jan-96 11,796 11,767
Feb-96 11,597 11,674
Mar-96 11,550 11,634
Apr-96 11,479 11,581
May-96 11,408 11,566
Jun-96 11,539 11,714
Jul-96 11,514 11,761
Aug-96 11,514 11,763
Sep-96 11,707 11,961
Oct-96 11,976 12,193
Nov-96 12,184 12,361
Dec-96 12,124 12,306
Jan-97 12,161 12,411
Feb-97 12,211 12,425
Mar-97 12,062 12,322
Apr-97 12,213 12,509
May-97 12,339 12,625
Jun-97 12,477 12,770
Jul-97 12,797 13,007
Aug-97 12,682 12,983
Sep-97 12,875 13,138
Oct-97 13,109 13,280
Nov-97 13,122 13,325
Dec-97 13,265 13,446
Jan-98 13,438 13,571
Feb-98 13,398 13,612
Mar-98 13,410 13,665
Apr-98 13,490 13,741
May-98 13,637 13,838
Jun-98 13,759 13,899
Jul-98 13,814 13,967
Aug-98 14,059 14,094
Sep-98 14,197 14,263
Oct-98 14,267 14,247
Nov-98 14,143 14,313
Dec-98 14,199 14,384
Jan-99 14,270 14,484
Feb-99 14,130 14,430
Mar-99 14,238 14,529
Apr-99 14,295 14,601
May-99 14,180 14,503
Jun-99 14,105 14,469
Jul-99 14,061 14,371
Aug-99 14,018 14,362
Sep-99 14,251 14,607
Oct-99 14,295 14,684
Nov-99 14,323 14,696
Dec-99 14,270 14,647
Jan-00 14,182 14,535
Feb-00 14,331 14,706
Mar-00 14,467 14,863
Apr-00 14,467 14,871
May-00 14,467 14,883
Jun-00 14,742 15,204
Jul-00 14,804 15,301
Aug-00 15,004 15,528
Sep-00 15,143 15,694
Oct-00 15,237 15,810
Nov-00 15,440 16,044
Dec-00 15,665 16,301
Jan-01 15,870 16,554
Feb-01 15,997 16,645
Mar-01 16,103 16,753
Apr-01 16,087 16,771
May-01 16,151 16,875
Jun-01 16,216 16,899
Jul-01 16,503 17,213
Aug-01 16,664 17,370
Sep-01 16,903 17,625
Oct-01 17,159 17,865
Nov-01 16,967 17,701
Dec-01 16,887 17,637
Jan-02 17,015 17,810
Feb-02 17,190 18,004
Mar-02 16,982 17,822
Apr-02 17,286 18,153
May-02 17,430 18,286
Jun-02 17,568 18,434
Jul-02 17,801 18,642
Aug-02 17,985 18,806
Sep-02 18,184 18,944
Oct-02 18,201 19,016
Nov-02 18,151 18,999
Dec-02 18,384 19,198
Jan-03 18,400 19,252
Feb-03 18,533 19,383
Mar-03 18,516 19,377
Apr-03 18,583 19,451
May-03 18,700 19,460
Jun-03 18,689 19,501
Jul-03 18,251 19,148
Aug-03 18,374 19,273
Sep-03 18,705 19,602
Oct-03 18,617 19,536
Nov-03 18,634 19,592
Dec-03 18,774 19,784
Jan-04 18,879 19,911
Feb-04 19,019 20,084
Mar-04 19,106 20,172
Apr-04 18,791 19,817
May-04 18,721 19,754
Jun-04 18,866 19,926
Jul-04 19,011 20,113
Aug-04 19,285 20,443
Sep-04 19,304 20,472
Oct-04 19,431 20,648
Nov-04 19,359 20,588
Dec-04 19,487 20,740
1 Performance reflects ongoing fund expenses, which may have been waived,
and assumes reinvestment of all dividends and capital gains. Performance
does not reflect the impact of federal, state, or municipal taxes. If it
did, performance would be lower.
2 The Citigroup Mortgage Index represents the mortgage-backed securities
component of Citigroup's Broad Investment-Grade Bond Index. It consists of
30- and 15-year agency-issued (GNMA, FNMA, and FHLMC) pass-through
securities as well as FNMA and FHLMC balloon mortgages. Returns shown for
the index assume reinvestment of all dividends and distributions, and
since-inception returns shown for the index are calculated from 4/30/93.
Indices are unmanaged, and individuals cannot invest directly in an index.
3 Performance of Class 2 shares (offered as of 11/01) will differ.
26
PORTFOLIO MANAGER
Craig V. Sosey
WM Advisors, Inc.
in a slowly rising interest rate environment. In March, we began adding
non-agency mortgages, after the Board of Trustees approved an amendment to Fund
investment policies that allowed such purchases to a limited extent. Non-agency
mortgages comprised about 10% of the Fund's holdings at the end of the period.
These securities add yield while also increasing diversification and reducing
exposure to Fannie Mae and Freddie Mac. As a defensive measure, the Fund also
added higher-coupon mortgages.
The Fund is defensively positioned because we anticipate slowly rising interest
rates in a low-growth economy. We continue to hold a near-benchmark weighting in
mortgages, and we expect to maintain a short-to-neutral duration position to
limit interest rate risk. We will look to add higher-coupon mortgages. We
believe these issues should perform well and limit duration extension in a
rising rate environment, as prepayments on these mortgages do not slow as
dramatically as those on lower-coupon mortgages.
In addition, we plan to continue selectively adding non-agency mortgages to
potentially increase returns.
[GRAPHICS]
FUND CHARACTERISTICS
AS OF DECEMBER 31, 2004
Weighted Average Maturity 4.2
(Years):
Weighted Average Duration 3.4
(Years):
Turnover: 28%
Number of Securities: 195
Total Net Assets: $276.6 million
PORTFOLIO COMPOSITION (4)
As of
12/31/04
(PIE CHART)
As of As of
2/31/04 12/31/03 Change
------- -------- ------
FHLMC/FGLMC 32% 32% 0%
FNMA 24% 25% -1%
CMOs 19% 13% +6%
GNMA 10% 8% +2%
U.S. Treasuries 8% 8% 0%
Government Agency 4% 8% -4%
Cash Equivalents 3% 6% -3%
4 May not reflect the current portfolio composition.
27
VT Income Fund
ANNUAL TOTAL RETURNS(1)
Class 1 shares
(Calendar Year)
2004 +5.56%
2003 +9.78%
2002 +9.61%
2001 +8.08%
2000 +10.45%
1999 -2.16%
1998 +7.45%
1997 +11.35%
1996 +0.43%
1995 +25.09%
1994 -8.13%
INVESTMENT STRATEGY
During this fiscal year, the Fund was generally more aggressive in corporate
credit quality compared to its peer group, and this strategy proved beneficial
as lower-rated companies improved their balance sheets. Within sectors, we
maintained overweighted positions in health care, utilities, and gaming, which
we favor as long-term holdings. Financial services and banking presented less
relative value than other sectors, and we underweighted these issues. We favored
mortgages, which have generally done well in a stable-to-rising interest-rate
environment. As a consequence of overweighting corporates and mortgages, we
minimized holdings in U.S. Treasury securities.
The Fund saw price appreciation from non-Treasury sectors--mortgages, high
yield, and corporates--which contributed to relative performance. Corporate
securities benefited from a gradually strengthening economy. Mortgages presented
a favorable risk-reward profile and benefited from tighter spreads as interest
rates remained relatively stable. Steady intermediate-maturity interest
Data shown is past performance and does not guarantee future results. Current
performance, including the most recent month-end results, which may be higher or
lower than the data shown, can be obtained by calling 800-222-5852. An
investment's return and principal value will fluctuate, so it may be worth more
or less upon redemption. Performance shown below does not account for fees,
expenses, and charges of any variable insurance contract or retirement plan. If
these fees were reflected, performance would be lower.
Fixed-income investments are subject to interest rate risk, and their value will
decline as interest rates rise. Lower-rated securities are subject to additional
credit and default risks. International investing involves increased risks due
to currency fluctuations, political or social instability, and differences in
accounting standards.
AVERAGE ANNUAL TOTAL RETURNS(1) AS OF DECEMBER 31, 2004
1 Year 5 Year 10 Year Since Inception Inception Date
------ ------ ------- --------------- ---------------
CLASS 1 SHARES 5.56% 8.68% 8.35% 6.85% 5/7/93
CLASS 2 SHARES 5.31% - - 7.18% 11/6/01
Citigroup Broad Investment-Grade
Bond Index(2) 4.48% 7.73% 7.74% 6.75%
- - Class 1 shares
- - Citigroup Broad Investment-Grade Bond Index(2)
VALUE OF A $10,000 INVESTMENT(1, 3) DECEMBER 31,1994 - DECEMBER 31,2004
[LINE GRAPH]
CITIGROUP
BROAD
INVESTMENT
CLASS 1 GRADE BOND
DATE SHARES INDEX(2)
DEC-94 10,000 10,000
Jan-95 10,221 10,207
Feb-95 10,519 10,446
Mar-95 10,586 10,506
Apr-95 10,733 10,650
May-95 11,436 11,073
Jun-95 11,482 11,151
Jul-95 11,343 11,128
Aug-95 11,619 11,256
Sep-95 11,781 11,362
Oct-95 12,027 11,514
Nov-95 12,250 11,694
Dec-95 12,508 11,855
Jan-96 12,496 11,936
Feb-96 12,042 11,733
Mar-96 11,911 11,649
Apr-96 11,765 11,562
May-96 11,741 11,556
Jun-96 11,911 11,705
Jul-96 11,936 11,736
Aug-96 11,837 11,720
Sep-96 12,096 11,924
Oct-96 12,460 12,192
Nov-96 12,700 12,393
Dec-96 12,561 12,284
Jan-97 12,536 12,332
Feb-97 12,587 12,346
Mar-97 12,382 12,221
Apr-97 12,590 12,396
May-97 12,707 12,512
Jun-97 12,902 12,661
Jul-97 13,459 13,004
Aug-97 13,220 12,892
Sep-97 13,472 13,082
Oct-97 13,728 13,270
Nov-97 13,809 13,333
Dec-97 13,984 13,469
Jan-98 14,163 13,642
Feb-98 14,122 13,633
Mar-98 14,163 13,686
Apr-98 14,218 13,757
May-98 14,427 13,889
Jun-98 14,582 14,003
Jul-98 14,553 14,032
Aug-98 14,723 14,247
Sep-98 15,151 14,583
Oct-98 14,820 14,518
Nov-98 15,008 14,598
Dec-98 15,024 14,643
Jan-99 15,172 14,751
Feb-99 14,760 14,493
Mar-99 14,902 14,576
Apr-99 14,977 14,624
May-99 14,767 14,489
Jun-99 14,643 14,440
Jul-99 14,612 14,382
Aug-99 14,581 14,372
Sep-99 14,727 14,545
Oct-99 14,789 14,588
Nov-99 14,743 14,587
Dec-99 14,701 14,520
Jan-00 14,653 14,479
Feb-00 14,796 14,648
Mar-00 15,029 14,839
Apr-00 14,918 14,794
May-00 14,838 14,781
Jun-00 15,192 15,090
Jul-00 15,338 15,227
Aug-00 15,565 15,445
Sep-00 15,640 15,550
Oct-00 15,690 15,650
Nov-00 15,920 15,903
Dec-00 16,237 16,204
Jan-01 16,590 16,471
Feb-01 16,656 16,618
Mar-01 16,716 16,704
Apr-01 16,562 16,626
May-01 16,647 16,734
Jun-01 16,698 16,789
Jul-01 17,157 17,177
Aug-01 17,396 17,366
Sep-01 17,345 17,579
Oct-01 17,770 17,934
Nov-01 17,634 17,687
Dec-01 17,549 17,582
Jan-02 17,719 17,721
Feb-02 17,889 17,891
Mar-02 17,633 17,596
Apr-02 17,974 17,931
May-02 18,092 18,083
Jun-02 18,058 18,217
Jul-02 18,022 18,434
Aug-02 18,415 18,756
Sep-02 18,647 19,054
Oct-02 18,611 18,969
Nov-02 18,736 18,965
Dec-02 19,234 19,359
Jan-03 19,413 19,375
Feb-03 19,751 19,650
Mar-03 19,804 19,632
Apr-03 20,161 19,805
May-03 20,784 20,171
Jun-03 20,794 20,135
Jul-03 20,040 19,455
Aug-03 20,134 19,589
Sep-03 20,758 20,102
Oct-03 20,683 19,917
Nov-03 20,815 19,975
Dec-03 21,117 20,175
Jan-04 21,343 20,342
Feb-04 21,533 20,560
Mar-04 21,723 20,716
Apr-04 21,119 20,177
May-04 20,948 20,091
Jun-04 21,145 20,209
Jul-04 21,367 20,409
Aug-04 21,809 20,813
Sep-04 21,929 20,867
Oct-04 22,150 21,051
Nov-04 22,031 20,874
Dec-04 22,293 21,075
1 Performance reflects ongoing fund expenses, which may have been waived,
and assumes reinvestment of all dividends and capital gains. Performance
does not reflect the impact of federal, state, or municipal taxes. If it
did, performance would be lower.
2 The Citigroup Broad Investment-Grade Bond Index measures the performance
of bonds, including U.S. and non-U.S. corporate securities and non-U.S.
sovereign and provincial securities. It includes institutionally traded
U.S. Treasury, government-sponsored, mortgage, asset-backed, and
investment-grade securities. Returns shown for the index assume
reinvestment of all dividends and distributions, and since-inception
returns shown for the index are calculated from 4/30/93. Indices are
unmanaged, and individuals cannot invest directly in an index.
3 Performance of Class 2 shares (offered as of 11/01) will differ.
28
PORTFOLIO MANAGER
Gary J. Pokrzywinski, CFA
WM Advisors, Inc.
rates caused price change to play a small part in return from U.S. Treasuries.
The Fund's corporate bond sector benefited from overweightings in utilities, oil
and gas, and gaming. Positive contributions came from El Paso Natural Gas, a
natural gas pipeline company, which sold assets, paid down debt, and improved
its access to funding. Our position in Petroleos de Venezuela, an oil company,
benefited significantly from high oil prices. Riviera, a Las Vegas casino
operator, saw continued positive operating performance from the strong gaming
market.
Negative performance came from the Fund's underweighting in industrial products,
a sector that benefited from an improving economy and a falling dollar. Holdings
that adversely affected Fund performance included DVI, a bankrupt health care
company that received less from asset sales than expected, and Great Lakes
Dredge & Dock Co., which was hurt by federal budget delays and funding cuts.
Rising oil prices hurt our position in United Air Lines.
Looking ahead, we continue to expect an environment characterized by slow,
relatively modest growth accompanied by contained inflation, which is typically
beneficial for financial assets. Given the Federal Reserve's intent to normalize
short-term interest rates, we believe the yield curve will continue to flatten,
with short-term rates moving up more than those of 10-year Treasury bonds. (The
yield curve is the distribution of yields relative to maturities.) Because of
structural deflationary forces, our long-term interest rate scenario remains
positive. Given these competing factors, we are positioned neutrally with
respect to duration and interest rate risk.
[GRAPHICS]
FUND CHARACTERISTICS
AS OF DECEMBER 31, 2004
Weighted Average Maturity (Years): 6.7
Weighted Average Duration (Years): 4.8
Turnover: 20%
Number of Securities: 128
Total Net Assets: $208.9 million
PORTFOLIO COMPOSITION(4)
As of
12/31/04
[PIE CHART]
As of As of
12/31/04 12/31/03 Change
-------- -------- ------
Domestic 59% 56% +3%
Corporate Bonds
Mortgage-Backed
Bonds/CMOs 21% 26% -5%
Foreign
Corporate
Bonds (U.S. $) 10% 7% +3%
U.S. Treasuries 6% 5% +1%
Foreign
Government
Bonds (U.S. $) 1% 1% 0%
Cash Equivalents 3% 5% -2%
4 May not reflect the current portfolio composition.
29
PORTFOLIO MANAGER
VT Money Market Fund Scott J. Peterson, CFA
WM Advisors, Inc.
INVESTMENT STRATEGY
Because money market investments are closely tied to the federal funds rate, the
actions of the Federal Reserve (the Fed) have a substantial impact on WM VT
Money Market Fund performance. After keeping the federal funds rate steady for
one year, the Fed raised it from 1.00% to 1.25% on June 30, 2004. Following the
expectations of many economists and investors, the Fed raised rates by 0.25%
increments another four times during 2004, and the federal funds rate ended the
year at 2.25%. The Fed continues to state that additional rate hikes will be
implemented at a measured pace, depending on changes in economic conditions.
During this fiscal year, the Fund's 7-day simple yield (annualized) increased
from 0.52% on December 31, 2003 to 1.70% on December 31, 2004 as the Fed
increased its target rate from 1.00% to 2.25% during the period. Some of the
difference between the Fund's yield and the Fed's target rate was due to Fund
expenses. The Fund's assets decreased from $23 million on December 31, 2003 to
$20 million on December 31, 2004.
Data shown is past performance and does not guarantee future results. Current
performance, including the most recent month-end results, which may be higher or
lower, can be obtained by calling 800-222-5852. Performance shown below does not
account for fees, expenses, and charges of any variable insurance contract or
retirement plan. If these fees were reflected, performance would be lower.
An investment in the Fund is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency. Although the Fund seeks to
preserve the value of your investment at $1.00 per share, it is possible to lose
money by investing in the Fund.
The 7-day simple yield more closely reflects current Fund earnings than the
total return data.
AVERAGE ANNUAL TOTAL RETURNS(1) AS OF DECEMBER 31, 2004
1 Year 5 Year 10 Year Since Inception Inception Date
------ ------ ------- --------------- --------------
CLASS 1 SHARES 0.85% 2.45% 3.72% 3.65% 5/10/93
CLASS 2 SHARES 0.59% - - 0.74% 11/6/01
FUND YIELDS AND AVERAGE MATURITY (2)
AS OF DECEMBER 31, 2004
7-Day 7-Day Weighted
Simple Yield Effective Yield Average Maturity
(Class 1 Shares) (Class 1 Shares) (Days)
--------------- ---------------- ----------------
VT MONEY
MARKET FUND 1.70% 1.71% 42
PORTFOLIO COMPOSITION (3)
AS OF DECEMBER 31 , 2004
Taxable Municipal Bonds 29%
Corporate Bonds and Notes 28%
Certificates of Deposit 14%
Commercial Paper (Domestic and Yankee) 9%
Medium Term Notes 7%
Repurchase Agreement 7%
Funding Agreement 3%
U.S. Government Agency Obligations 3%
1 Performance reflects ongoing fund expenses, which may have been waived,
and assumes reinvestment of all dividends and capital gains. Performance
does not reflect the impact of federal, state, or municipal taxes. If it
did, performance would be lower. Performance results benefited from an
agreement between WM Advisors and its affiliates to limit the Fund's
expenses.
2 The 7-day simple yield is calculated based on the income generated by an
investment in the Fund over a 7-day period and is expressed as an annual
percentage rate. The 7-day effective yield is calculated similarly to the
7-day simple yield but assumes that income earned from the Fund's
investments is reinvested and compounded.
3 May not reflect the current portfolio composition.
30
Expense Information
WM VARIABLE TRUST
As a shareholder of the VT REIT Fund, VT Equity Income Fund, VT Growth & Income
Fund, VT West Coast Equity Fund, VT Mid Cap Stock Fund, VT Growth Fund, VT Small
Cap Value Fund, VT Small Cap Growth Fund, VT International Growth Fund, VT Short
Term Income Fund, VT U.S. Government Securities Fund, VT Income Fund or VT Money
Market Fund, (the "Funds"), you incur ongoing costs, including management fees,
distribution and/or service fees, and other Fund expenses. This example is
intended to help you understand your ongoing costs (in dollars) of investing in
the Funds and to compare these costs with the ongoing costs of investing in
other mutual funds. Expenses shown below and on the following page do not
account for fees, expenses and charges of any variable insurance contract or
retirement plan. If these fees had been reflected, expenses would have been
higher.
The example is based on an investment of $1,000 invested at the beginning of the
period and held for the entire period July 1, 2004 to December 31, 2004.
ACTUAL EXPENSES:
The first section of the table below provides information about actual account
values and actual expenses. You may use the information in these columns,
together with the amount you invested, to estimate the expenses that you paid
over the period. Simply divide your account value by $1,000 (for example, an
$8,600 account value divided by $1,000 = 8.6), then multiply the result by the
number in the third column under the heading entitled "Expenses Paid During
Period" to estimate the expenses you paid on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES:
The second section of the table below provides information about hypothetical
account values and hypothetical expenses based on each Fund's actual expense
ratios and an assumed rate of return of 5% per year before expenses (rather than
each Fund's actual rate of return). The hypothetical account values and expenses
may not be used to estimate the actual ending balance or expenses you paid for
the period. You may use this information to compare the ongoing costs of
investing in the Funds and other funds. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholder reports
of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as separate
account expenses. Therefore, the hypothetical section of the table is useful in
comparing ongoing costs only, and will not help you compare the relative total
costs of owning different funds. In addition, if these transactional costs were
included, the cost shown would have been higher.
HYPOTHETICAL
ACTUAL EXPENSES (5% RETURN BEFORE EXPENSES)
----------------------------------- ------------------------------------
EXPENSES EXPENSES
BEGINNING ENDING PAID DURING BEGINNING ENDING PAID DURING
ACCOUNT ACCOUNT PERIOD* ACCOUNT ACCOUNT PERIOD*
VALUE VALUE 07/01/2004- VALUE VALUE 07/01/2004 EXPENSE
07/01/2004 12/31/2004 12/31/2004 07/01/2004 12/31/2004 12/31/2004 RATIO
---------- ---------- ---------- ---------- ---------- ---------- -------
VT REIT Fund
Class 1 ........................ $1,000 $1,247 $4.91 $1,000 $1,021 $4.42 0.87%
Class 2 ........................ 1,000 1,245 6.32 1,000 1,020 5.69 1.12%
VT Equity Income Fund
Class 1 ........................ $1,000 $1,117 $3.51 $1,000 $1,022 $3.35 0.66%
Class 2 ........................ 1,000 1,116 4.84 1,000 1,021 4.62 0.91%
VT Growth & Income Fund
Class 1 ........................ $1,000 $1,042 $4.05 $1,000 $1,021 $4.01 0.79%
Class 2 ........................ 1,000 1,041 5.34 1,000 1,020 5.28 1.04%
VT West Coast Equity Fund
Class 1 ........................ $1,000 $1,087 $3.57 $1,000 $1,022 $3.46 0.68%
Class 2 ........................ 1,000 1,086 4.88 1,000 1,020 4.72 0.93%
VT Mid Cap Stock Fund
Class 1 ........................ $1,000 $1,059 $4.19 $1,000 $1,021 $4.12 0.81%
Class 2 ........................ 1,000 1,058 5.48 1,000 1,020 5.38 1.06%
VT Growth Fund
Class 1 ........................ $1,000 $1,053 $4.85 $1,000 $1,020 $4.77 0.94%
Class 2 ........................ 1,000 1,051 6.14 1,000 1,019 6.04 1.19%
VT Small Cap Value Fund
Class 1 ........................ $1,000 1,196 5.19 $1,000 $1,020 $5.43 1.07%
VT Small Cap Growth Fund
Class 1 ........................ $1,000 $1,043 $4.93 $1,000 $1,020 $4.88 0.96%
Class 2 ........................ 1,000 $1,044 $6.22 1,000 1,019 6.14 1.21%
VT International Growth Fund
Class 1 ........................ $1,000 $1,122 $6.24 $1,000 $1,019 $5.94 1.17%
Class 2 ........................ 1.000 1.120 7.57 1,000 1,018 7.20 1.42%
31
Expense Information (continued)
WM VARIABLE TRUST
HYPOTHETICAL
ACTUAL EXPENSES (5% RETURN BEFORE EXPENSES)
----------------------------------- ------------------------------------
EXPENSES EXPENSES
BEGINNING ENDING PAID DURING BEGINNING ENDING PAID DURING
ACCOUNT ACCOUNT PERIOD* ACCOUNT ACCOUNT PERIOD*
VALUE VALUE 07/01/2004- VALUE VALUE 07/01/2004- EXPENSE
07/01/2004 12/31/2004 12/31/2004 07/01/2004 12/31/2004 12/31/2004 RATIO
---------- ---------- ---------- ---------- ---------- ---------- -------
VT Short Term Income Fund
Class 1 ............................. $1,000 $1,020 $3.05 $1,000 $1,022 $3.05 0.60%
Class 2 ............................. 1,000 1,016 4.31 1,000 1,021 4.32 0.85%
VT U.S. Government Securities Fund
Class 1 ............................. $1,000 $1,033 $2.76 $1,000 $1,022 $2.75 0.54%
Class 2 ............................. 1,000 1,032 4.03 1,000 1,021 4.01 0.79%
VT Income Fund
Class 1 ............................. $1,000 $1,054 $2.79 $1,000 $1,022 $2.75 0.54%
Class 2 ............................. 1,000 1,054 4.08 1,000 1,021 4.01 0.79%
VT Money Market Fund
Class 1 ............................. $1,000 $1,006 $3.13 $1,000 $1,022 $3.15 0.62%
Class 2 ............................. 1,000 1,005 4.38 1,000 1,021 4.42 0.87%
* Expenses are equal to each Fund's annualized expense ratio, multiplied by the
average account value over the period, multiplied by the 184 days in the most
recent fiscal half-year, divided by 366 days in the year (to reflect the
one-half year period).
32
Financial Statements:
Portfolio of Investments
VT REIT FUND
December 31, 2004
VALUE
SHARES (000s)
- ------ -----
REAL ESTATE INVESTMENT TRUSTS (REITS) - 89.6%
DIVERSIFIED - 4.3%
22,200 iStar Financial Inc. ...................... $1,005
16,000 Vorado Realty Trust ....................... 1,218
------
Total Diversified ......................... 2,223
------
HEALTH CARE - 3.8%
37,400 Health Care Property Investors, Inc.** .... 1,036
23,000 Healthcare Realty Trust, Inc............... 936
------
Total Health Care ......................... 1,972
------
INDUSTRIAL/OFFICE - 25.7%
INDUSTRIAL - 6.0%
21,500 AMB Property Corporation .................. 868
14,000 CenterPoint Properties Trust .............. 671
37,000 ProLogis .................................. 1,603
------
3,142
------
MIXED - 1.9%
29,000 Duke Realty Corporation................ 990
------
OFFICE - 17.8%
23,000 Alexandria Real Estate Equities, Inc....... 1,712
18,000 Arden Realty, Inc.......................... 679
16,500 Boston Properties, Inc..................... 1,067
28,000 CarrAmerica Realty Corporation ............ 924
64,000 Corporate Office Properties Trust ......... 1,878
65,500 Equity Office Properties Trust ............ 1,907
17,500 SL Green Realty Corporation ............... 1,060
------
9,227
------
Total Industrial/Office ................... 13,359
------
LODGING/RESORTS - 5.2%
58,000 Equity Inns Inc............................ 681
32,000 Hospitality Properties Trust .............. 1,472
32,300 Host Marriott Corporation ................. 559
------
Total Lodging/Resorts ..................... 2,712
------
MORTGAGE/FINANCIAL - 3.2%
34,600 Annaly Mortgage Management, Inc.** ........ 679
19,500 Friedman, Billings, Ramsey Group, Inc.,
Class A** ................................. 378
9,500 Redwood Trust, Inc......................... 590
------
Total Mortgage/Financial .................. 1,647
------
RESIDENTIAL - 13.4%
APARTMENTS - 13.4%
42,000 Apartment Investment & Management
Company, Class A ......................... 1,619
22,000 AvalonBay Communities, Inc................. 1,656
65,000 Equity Residential ........................ 2,352
54,500 United Dominion Realty Trust, Inc.......... 1,351
------
Total Residential ......................... 6,978
------
RETAIL - 25.7%
REGIONAL MALLS - 18.1%
72,000 General Growth Properties, Inc............. $2,603
34,000 Macerich Company .......................... 2,135
35,000 Mills Corporation ......................... 2,232
38,000 Simon Property Group, Inc.................. 2,457
------
9,427
------
SHOPPING CENTERS - 7.6%
42,200 Developers Diversified Realty Corporation.. 1,872
32,000 Kimco Realty Corporation .................. 1,856
3,600 Pan Pacific Retail Properties, Inc......... 226
------
3,954
------
Total Retail .............................. 13,381
------
SELF STORAGE - 2.8%
18,000 Public Storage, Inc........................ 1,004
10,000 Shurgard Storage Centers, Inc., Class A ... 440
------
Total Self Storage ........................ 1,444
------
SPECIALTY - 5.5%
44,500 Capital Automotive REIT ................... 1,581
33,000 Plum Creek Timber Company, Inc............. 1,268
------
Total Specialty ........................... 2,849
------
Total REITS
(Cost $30,658) .......................... 46,565
------
COMMON STOCKS - 7.5%
CONSUMER DISCRETIONARY - 4.7%
CONSUMER DURABLES & APPAREL - 2.0%
26,500 D.R. Horton, Inc. ........................ 1,068
------
HOTELS, RESTAURANTS & LEISURE - 2.7%
20,700 Harrah's Entertainment, Inc.** ............ 1,385
------
Total Consumer Discretionary .............. 2,453
------
FINANCIALS - 2.8%
BANKS - 0.7%
10,000 Countrywide Financial Corporation ......... 370
------
INSURANCE - 2.1%
23,000 Fidelity National Financial, Inc........... 1,050
------
Total Financials .......................... 1,420
------
Total Common Stocks
(Cost $2,450) ........................... 3,873
------
See Notes to Financial Statements.
33
Portfolio of Investments (Continued)
VT REIT FUND
December 31, 2004
PRINCIPAL
AMOUNT VALUE
(000s) (000s)
- --------- ------
REPURCHASE AGREEMENT - 2.6%
(Cost $1,351)
$ 1,351 Agreement with Morgan Stanley, 0.500%
dated 12/31/2004, to be repurchased at
$1,351,000 on 01/03/2005
(Collateralized by U.S. Treasury Note,
3.000% due 07/15/2012,
market value $1,397,000)................. $ 1,351
-------
SHORT-TERM INVESTMENT - 4.0%
(Cost $2,083)
2,083 Mellon GSL DBT
II Collateral Fund++.... 2,083
-------
TOTAL INVESTMENTS (Cost $36,542*) ... 103.7% 53,872
OTHER ASSETS (LIABILITIES) (Net) .... (3.7) (1,902)
----- -------
NET ASSETS .......................... 100.0% $51,970
===== =======
- ----------
* Aggregate cost for federal tax purposes is $36,560.
** Some or all of these securities are on loan at December 31, 2004, and have
an aggregate market value of $1,982,000, representing 3.8% of the total
net assets of the Fund (Collateral Value $2,083,000).
++ Represents investment purchased with cash collateral for securities
loaned.
See Notes to Financial Statements.
34
Portfolio of Investments
VT EQUITY INCOME FUND
December 31, 2004
VALUE
SHARES (000s)
- ------ -------
COMMON STOCKS - 85.5%
CONSUMER DISCRETIONARY - 13.9%
AUTOMOBILES & COMPONENTS - 3.1%
60,200 General Motors Corporation** .......... $ 2,412
50,000 Magna International Inc., Class A ..... 4,127
-------
6,539
-------
CONSUMER DURABLES & APPAREL - 3.8%
67,500 D.R. Horton, Inc....................... 2,721
140,000 Mattel, Inc............................ 2,728
30,000 NIKE Inc., Class B .................... 2,721
-------
8,170
-------
HOTELS, RESTAURANTS & LEISURE - 4.0%
32,500 Carnival Corporation** ................ 1,873
71,000 Harrah's Entertainment, Inc............ 4,749
57,500 McDonald's Corporation ................ 1,844
-------
8,466
-------
RETAILING - 3.0%
54,000 May Department Stores Company ......... 1,587
67,500 Neiman Marcus Group Inc., Class A ..... 4,829
-------
6,416
-------
Total Consumer Discretionary .......... 29,591
-------
CONSUMER STAPLES - 7.1%
FOOD & STAPLES RETAILING - 1.5%
94,500 Wal-Mart de Mexico SA de CV, ADR ...... 3,237
-------
FOOD, BEVERAGE & TOBACCO - 4.8%
50,500 Altria Group, Inc. .................... 3,086
64,500 ConAgra Foods, Inc..................... 1,900
59,700 Diageo PLC, Sponsored ADR ............. 3,455
32,500 Hershey Foods Corporation ............. 1,805
-------
10,246
-------
HOUSEHOLD & PERSONAL PRODUCTS - 0.8%
32,000 Procter & Gamble Company .............. 1,762
-------
Total Consumer Staples ................ 15,245
-------
ENERGY - 8.4%
95,000 Baker Hughes Inc. ..................... 4,054
43,500 BP PLC, Sponsored ADR ................. 2,540
39,484 ChevronTexaco Corporation ............. 2,073
25 280 ConocoPhillips Company ................ 2,195
30,500 Royal Dutch Petroleum Company(F) ...... 1,750
26,500 Schlumberger Ltd....................... 1,774
79,394 Valero Energy Corporation ............. 3,605
-------
Total Energy .......................... 17,991
-------
FINANCIALS - 25.0%
BANKS - 8.9%
92,602 Bank of America Corporation ........... 4,352
104,998 Countrywide Financial Corporation ..... 3,886
76,000 North Fork Bancorporation, Inc......... 2,193
92,200 TCF Financial Corporation** ........... 2,963
72,000 U.S. Bancorp .......................... 2,255
55,000 Wells Fargo & Company ................. 3,418
-------
19,067
-------
DIVERSIFIED FINANCIALS - 7.5%
57,000 Allied Capital Corporation** .......... 1,473
93,500 Citigroup Inc.......................... 4,505
38,000 Fannie Mae ............................ 2,706
20,000 Franklin Resources, Inc................ 1,393
50,000 JPMorgan Chase & Company .............. 1,950
44,500 Morgan Stanley ........................ 2,471
25,600 T. Rowe Price Group, Inc............... 1,592
-------
16,090
-------
INSURANCE - 8.6%
92,000 ACE Ltd................................ 3,933
90,500 AFLAC Inc.............................. 3,605
51,000 Allstate Corporation .................. 2,638
59,000 Fidelity National Financial, Inc....... 2,695
68,700 HCC Insurance Holdings, Inc............ 2,275
40,000 XL Capital Ltd., Class A .............. 3,106
-------
18,252
-------
Total Financials ...................... 53,409
-------
HEALTH CARE - 5.8%
HEALTH CARE EQUIPMENT & SERVICES - 0.8%
30,500 Becton Dickinson & Company ............ 1,732
-------
PHARMACEUTICALS & BIOTECHNOLOGY - 5.0%
65,000 Abbott Laboratories ................... 3,032
57,000 Johnson & Johnson ..................... 3,615
150,000 Pfizer Inc............................. 4,034
-------
10,681
-------
Total Health Care ..................... 12,413
-------
INDUSTRIALS - 8.2%
CAPITAL GOODS - 6.1%
29,500 Boeing Company ........................ 1,527
20,500 General Dynamics Corporation .......... 2,144
71,500 General Electric Company .............. 2,610
47,000 Northrop Grumman Corporation .......... 2,555
43,000 PACCAR Inc............................. 3,460
24,000 Tyco International Ltd................. 858
-------
13,154
-------
COMMERCIAL SERVICES & SUPPLIES - 0.8%
56,500 Waste Management Inc................... 1,692
-------
TRANSPORTATION - 1.3%
32,000 United Parcel Service, Inc., Class B... 2,735
-------
Total Industrials ..................... 17,581
-------
See Notes to Financial Statements.
35
Portfolio of Investments (continued)
VT EQUITY INCOME FUND
December 31, 2004
VALUE
SHARES (000s)
- ------ -------
COMMON STOCKS - (CONTINUED)
INFORMATION TECHNOLOGY - 6.4%
COMMUNICATIONS EQUIPMENT - 2.7%
54,500 Harris Corporation .......................... $ 3,368
153,000 Nokia Oyj, Sponsored ADR .................... 2,397
-------
5,765
-------
COMPUTERS & PERIPHERALS - 1.4%
67,300 Hewlett-Packard Company ..................... 1,411
16,000 International Business Machines
Corporation .............................. 1,577
-------
2,988
-------
ELECTRONIC EQUIPMENT & INSTRUMENTS - 1.3%
49,000 Diebold, Inc. ............................... 2,731
-------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT - 1.0%
83,000 Microchip Technology Inc. ................... 2,213
-------
Total Information Technology ................ 13,697
-------
MATERIALS - 4.5%
38,000 Alcoa Inc. .................................. 1,194
71,000 Cemex SA de CV, Sponsored ADR ............... 2,586
45,000 Dow Chemical Company ........................ 2,228
65,000 Monsanto Company ............................ 3,611
-------
Total Materials ............................. 9,619
-------
TELECOMMUNICATION SERVICES - 2.5%
5,000 Mobile TeleSystems OJSC,
Sponsored ADR** ............................ 693
49,500 Verizon Communications Inc. ................. 2,005
95,000 Vodafone Group PLC, Sponsored ADR ........... 2,601
-------
Total Telecommunication Services ............ 5,299
-------
UTILITIES - 3.7%
59,000 FPL Group, Inc. ............................. 4,410
36,500 Pinnacle West Capital Corporation ........... 1,621
52,000 Southern Company** .......................... 1,743
-------
Total Utilities ............................. 7,774
-------
Total Common Stocks
(Cost $139,036) ........................... 182,619
-------
REAL ESTATE INVESTMENT TRUSTS (REITS) - 7.5%
27,800 AMB Property Corporation .................... 1,123
25,000 Apartment Investment & Management
Company, Class A .......................... 963
12,900 Arden Realty, Inc. .......................... 487
10,100 CarrAmerica Realty Corporation .............. 333
26,500 Corporate Office Properties Trust ........... 778
13,500 Developers Diversified Realty Corporation ... 599
12,200 Duke Realty Corporation ..................... 416
36,000 Equity Office Properties Trust .............. 1,048
39,500 Equity Residential .......................... 1,429
51,000 General Growth Properties, Inc. ............. 1,844
32,200 Health Care Property Investors, Inc.. ....... 892
18,000 Hospitality Properties Trust ................ 828
10,500 Kimco Realty Corporation .................... 609
14,000 Macerich Company ............................ 879
28,500 Plum Creek Timber Company, Inc. ............. 1,096
15,200 ProLogis .................................... 659
13,000 Shurgard Storage Centers, Inc., Class A ..... 572
22,000 Simon Property Group, Inc. .................. 1,423
-------
Total REITS
(Cost $9,889) ............................. 15,978
-------
PRINCIPAL
AMOUNT
(000s)
- ---------
CONVERTIBLE SECURITIES - 1.2%
CONVERTIBLE BONDS AND NOTES - 1.2%
$ 850 RadiSys Corporation, Conv. Sub. Note,
5.500% due 08/15/2007 ................. 855
1,750 TriQuint Semiconductor, Inc.,
Conv. Sub. Note,
4.000% due 03/01/2007 ................. 1,702
-----
Total Convertible Securities
(Cost $2,194) ......................... 2,557
-----
FIXED INCOME SECURITIES - 1.7%
CORPORATE BONDS AND NOTES - 1.6%
100 Aetna Inc., Company Guarantee,
7.125% due 08/15/2006 .................. 105
500 Aetna Inc., Sr. Note,
7.875% due 03/01/2011 .................. 586
45 Baxter International Inc., Note,
7.125% due 02/01/2007 .................. 48
300 CBS Corporation, Sr. Note,
7.150% due 05/20/2005 .................. 304
1,000 ERAC USA Finance Company, Note,
7.350% due 06/15/2008++ ................ 1,106
59 Raytheon Company, Sr. Note,
6.150% due 11/01/2008 .................. 63
1,000 TELUS Corporation, Note,
8.000% due 06/01/2011 .................. 1,187
100 Texas-New Mexico Power Company,
Sr. Note, 6.250% due 01/15/2009......... 106
-----
Total Corporate Bonds and Notes
(Cost $3,138) .......................... 3,505
-----
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED
SECURITIES- 0.1%
FEDERAL HOME LOAN MORTGAGE CORPORATION
(FHLMC) - 0.1%
53 6.500% due 09/01/2030 ................... 56
35 7.000% due 09/01/2030 ................... 37
-----
Total U.S. Government Agency
Mortgage-Backed Securities
(Cost $85) ............................. 93
-----
Total Fixed Income Securities
(Cost $3,223) ......................... 3,598
-----
36
See Notes to Financial Statements.
Portfolio of Investments (continued)
VT EQUITY INCOME FUND
December 31, 2004
VALUE
SHARES (000s)
- ------ --------
WARRANTS - 0.0% +++
(Cost $0)
250 V2 Music Holdings PLC,
Expires 05/07/2008+,++... $ 0***--
--------
PRINCIPAL
AMOUNT
(000s)
- ---------
REPURCHASE AGREEMENT - 4.0%
(Cost $8,549)
$ 8,549 Agreement with Morgan Stanley, 0.500%
dated 12/31/2004, to be repurchased at
$8,549,000 on 01/03/2005
(Collateralized by U.S. Treasury Note,
3.000% due 07/15/2012,
market value $8,838,000)................. 8,549
-----
SHORT-TERM INVESTMENT - 5.2%
(COST $11,101)
11,101 Mellon GSL DBT II
Collateral Fund++++.... 11,101
---------
TOTAL INVESTMENTS (Cost $173,992*)....... 105.1% 224,402
OTHER ASSETS (LIABILITIES) (Net) ........ (5.1) (10,791)
----- ---------
NET ASSETS .............................. 100.0% $ 213,611
===== =========
- ----------
* Aggregate cost for federal tax purposes is $174,390.
** Some or all of these securities are on loan at December 31, 2004, and have
an aggregate market value of $10,739,000, representing 5.0% of the total
net assets of the Fund (Collateral Value $11,101,000).
*** Value of security is less than $500.
+ Non-income producing security.
++ Security acquired in a transaction exempt from registration under Rule
144A of the Securities Act of 1933, as amended.
+++ Amount represents less than 0.1% of the net assets of the Fund.
++++ Represents investment purchased with cash collateral for securities
loaned.
- -- Represents fair value as determined in good faith under the direction of
the Board of Trustees.
GLOSSARY OF TERMS
ADR - American Depositary Receipt
(F) - Foreign Shares
See Notes to Financial Statements.
37
Portfolio of Investments
VT GROWTH & INCOME FUND
December 31, 2004
VALUE
SHARES (000s)
------ ----------
COMMON STOCKS - 96.7%
CONSUMER DISCRETIONARY - 12.8%
CONSUMER DURABLES & APPAREL - 1.5%
207,000 Mattel, Inc. ..................................... $ 4,034
----------
HOTELS, RESTAURANTS & LEISURE - 4.4%
206,000 Carnival Corporation** ........................... 11,872
----------
MEDIA - 5.7%
111,000 Comcast Corporation, Class A+..................... 3,694
105,000 Comcast Corporation, Special Class A+............. 3,448
341,000 Liberty Media Corporation, Class A+............... 3,744
132,000 Viacom Inc., Class B ............................. 4,804
----------
15,690
----------
RETAILING - 1.2%
127,000 Gap, Inc. ........................................ 2,682
14,000 Kohl's Corporation+............................... 689
----------
3,371
----------
Total Consumer Discretionary...................... 34,967
----------
CONSUMER STAPLES - 10.2%
FOOD & STAPLES RETAILING - 3.4%
77,000 Costco Wholesale Corporation ..................... 3,728
321,000 Kroger Company+................................... 5,630
----------
9,358
----------
FOOD, BEVERAGE & TOBACCO - 1.8%
93,000 PepsiCo Inc. ..................................... 4,855
----------
HOUSEHOLD & PERSONAL PRODUCTS - 5.0%
182,000 Avon Products, Inc................................ 7,043
55,000 Kimberly-Clark Corporation........................ 3,620
55,000 Procter & Gamble Company.......................... 3,029
----------
13,692
----------
Total Consumer Staples............................ 27,905
----------
ENERGY - 7.9%
92,000 BP PLC, Sponsored ADR............................. 5,373
89,000 Exxon Mobil Corporation........................... 4,562
81,000 Royal Dutch Petroleum Company (F) ................ 4,648
49,000 Schlumberger Ltd. ................................ 3,281
85,000 Unocal Corporation................................ 3,675
----------
Total Energy...................................... 21,539
----------
FINANCIALS - 23.5%
BANKS - 9.1%
247,280 Bank of America Corporation....................... 11,620
46,000 North Fork Bancorporation, Inc. .................. 1,327
104,000 Wachovia Corporation.............................. 5,470
106,000 Wells Fargo & Company............................. 6,588
----------
25,005
----------
DIVERSIFIED FINANCIALS - 7.9%
133,000 Citigroup Inc. ................................... 6,408
108,000 Freddie Mac ...................................... 7,959
190,000 JPMorgan Chase & Company.......................... 7,412
----------
21,779
----------
INSURANCE - 6.5%
115,000 ACE Ltd. .......................................... 4,916
151,000 Allstate Corporation.............................. 7,810
77,000 American International Group Inc.................. 5,057
----------
17,783
----------
Total Financials.................................. 64,567
----------
HEALTH CARE - 11.2%
HEALTH CARE EQUIPMENT & SERVICES - 4.3%
98,000 Baxter International Inc. ........................ 3,385
81,000 Cardinal Health Inc. ............................. 4,710
75,000 Medtronic, Inc. .................................. 3,725
----------
11,820
----------
PHARMACEUTICALS & BIOTECHNOLOGY - 6.9%
127,000 Bristol-Myers Squibb Company...................... 3,254
74,000 Johnson & Johnson................................. 4,693
66,000 Merck & Company, Inc. ............................ 2,121
188,000 Pfizer Inc. ...................................... 5,055
124,000 Teva Pharmaceutical Industries Ltd.,
Sponsored ADR..................................... 3,703
----------
18,826
----------
Total Health Care................................. 30,646
----------
INDUSTRIALS - 11.7%
CAPITAL GOODS - 10.1%
112,000 Boeing Company.................................... 5,798
115,000 General Electric Company.......................... 4,198
189,000 Honeywell International Inc. ..................... 6,693
46,000 Lockheed Martin Corporation....................... 2,555
239,000 Tyco International Ltd. .......................... 8,542
----------
27,786
----------
COMMERCIAL SERVICES & SUPPLIES - 1.6%
54,000 Apollo Group, Inc., Class A+...................... 4,358
----------
Total Industrials................................. 32,144
----------
INFORMATION TECHNOLOGY - 13.7%
COMMUNICATIONS EQUIPMENT - 1.8%
293,000 Motorola, Inc..................................... 5,039
----------
COMPUTERS & PERIPHERALS - 3.6%
175,000 Hewlett-Packard Company........................... 3,670
63,000 International Business Machines
Corporation ..................................... 6,210
----------
9,880
----------
See Notes to Financial Statements.
38
Portfolio of Investments (continued)
VT GROWTH & INCOME FUND
December 31, 2004
VALUE
SHARES (000s)
------ ----------
COMMON STOCKS - (CONTINUED)
INFORMATION TECHNOLOGY -- (CONTINUED)
IT SERVICES - 2.4%
153,000 First Data Corporation ........................... $ 6,509
----------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT - 1.6%
32,351 Freescale Semiconductor Inc., Class B + .......... 594
156,000 Intel Corporation ................................ 3,649
----------
4,243
----------
SOFTWARE - 4.3%
180,000 Computer Associates International, Inc.** ........ 5,591
234,000 Microsoft Corporation ............................ 6,250
----------
11,841
----------
Total Information Technology ..................... 37,512
----------
MATERIALS - 0.7%
65,000 Alcoa Inc. ....................................... 2,042
----------
TELECOMMUNICATION SERVICES - 1.2%
132,000 SBC Communications Inc. .......................... 3,402
----------
UTILITIES - 3.8%
62,000 FPL Group, Inc.** ................................ 4,635
103,000 NiSource Inc. .................................... 2,346
76,000 Pinnacle West Capital Corporation ................ 3,375
----------
Total Utilities .................................. 10,356
----------
Total Common Stocks
(Cost $204,395) ................................. 265,080
----------
WARRANTS - 0.0% +++
(Cost $0)
19,439 Lucent Technologies Inc.,
Expires 12/10/2007 ............................. 31
----------
PRINCIPAL
AMOUNT VALUE
(000s) (000s)
--------- ----------
REPURCHASE AGREEMENT - 4.2%
(Cost $11,471)
$ 11,471 Agreement with Morgan Stanley, 0.500%
dated 12/31/2004, to be repurchased at
$11,471,000 on 01/03/2005
(Collateralized by U.S. Treasury Note,
3.000% due 07/15/2012,
market value $11,859,000) ................... $ 11,471
----------
SHORT-TERM INVESTMENT - 3.5%
(Cost $9,770)
9,770 Mellon GSL DBT II
Collateral Fund ++ .......................... 9,770
----------
TOTAL INVESTMENTS (Cost $225,636*) ..........................104.4% 286,352
OTHER ASSETS (LIABILITIES) (Net) ............................ (4.4) (12,152)
----- ----------
NET ASSETS ................................................. 100.0% $ 274,200
===== ==========
- ----------
* Aggregate cost for federal tax purposes $228,091.
** Some or all of these securities are on loan at December 31, 2004, and have
an aggregate market value of $9,438,000, representing 3.4% of the total
net assets of the Fund (Collateral Value $9,770,000).
+ Non-income producing security.
++ Represents investment purchased with cash collateral for securities
loaned.
+++ Amount represents less than 0.1% of the net assets of the Fund.
GLOSSARY OF TERMS
ADR -- American Depositary Receipt
(F) -- Foreign Shares
See Notes to Financial Statements.
39
Portfolio of Investments
VT WEST COAST EQUITY FUND
December 31, 2004
VALUE
SHARES (000s)
------ ----------
COMMON STOCKS - 95.6%
CONSUMER DISCRETIONARY - 16.7%
AUTOMOBILES & COMPONENTS - 1.9%
69,300 Monaco Coach Corporation ......................... $ 1,426
7,000 Superior Industries International, Inc.** ........ 203
9,800 Toyota Motor Corporation,
Sponsored ADR ................................... 802
----------
2,431
----------
CONSUMER DURABLES & APPAREL - 3.9%
15,524 Columbia Sportswear Company+ ..................... 926
14,900 KB Home .......................................... 1,556
42,500 Mattel, Inc. ..................................... 828
18,625 NIKE Inc., Class B ............................... 1,689
----------
4,999
----------
HOTELS, RESTAURANTS & LEISURE - 4.0%
84,300 Hilton Hotels Corporation ........................ 1,917
39,070 Starbucks Corporation+ ........................... 2,436
129,460 WestCoast Hospitality Corporation + .............. 790
----------
5,143
----------
MEDIA -5.1%
30,000 Getty Images, Inc.+ .............................. 2,066
21,300 Knight-Ridder, Inc. .............................. 1,426
4,500 McClatchy Company, Class A ....................... 323
51,600 Univision Communications Inc.,
Class A +** ..................................... 1,510
42,700 Walt Disney Company .............................. 1,187
----------
6,512
----------
RETAILING - 1.8%
4,200 Blue Nile, Inc.+ ................................. 116
46,085 Building Materials Holding Corporation ........... 1,764
27,200 Hollywood Entertainment Corporation + ............ 356
10,400 Restoration Hardware, Inc. + ..................... 60
----------
2,296
----------
Total Consumer Discretionary ..................... 21,381
----------
CONSUMER STAPLES - 3.3%
FOOD & STAPLES RETAILING - 2.2%
44,920 Costco Wholesale Corporation ..................... 2,175
33,590 Kroger Company + ................................. 589
----------
2,764
----------
HOUSEHOLD & PERSONAL PRODUCTS - 1.1%
13,100 Clorox Company ................................... 772
14,700 Estee Lauder Companies Inc., Class A ............. 673
----------
1,445
----------
Total Consumer Staples ........................... 4,209
----------
ENERGY - 6.0%
35,600 Apache Corporation ............................... 1,800
58,800 Chevron Texaco Corporation ....................... 3,088
38,500 Nabors Industries Ltd. + ......................... 1,975
12,800 Occidental Petroleum Corporation ................. 747
----------
Total Energy ..................................... 7,610
----------
FINANCIALS-19.1%
BANKS - 13.2%
44,500 Bank of America Corporation ...................... 2,091
34,300 Banner Corporation ............................... 1,070
14,000 City National Corporation ........................ 989
38,000 East West Bancorp, Inc. .......................... 1,594
30,800 Greater Bay Bancorp** ............................ 859
13,000 KeyCorp .......................................... 441
8,400 Pacific Capital Bancorp .......................... 285
87,800 U.S. Bancorp ..................................... 2,750
6,200 UCBH Holdings, Inc. .............................. 284
3,000 United PanAm Financial Corporation + ............. 57
79,998 Washington Federal, Inc. ......................... 2,123
69,423 Wells Fargo & Company ............................ 4,315
----------
16,858
----------
DIVERSIFIED FINANCIALS - 4.1%
121,800 Charles Schwab Corporation ....................... 1,457
41,700 Citigroup Inc. ................................... 2,009
5,900 Countrywide Financial Corporation ................ 219
19,800 Franklin Resources, Inc. ......................... 1,379
3,655 Piper Jaffray Companies, Inc.+ .................. 175
----------
5,239
----------
INSURANCE - 1.8%
7,800 RenaissanceRe Holdings Ltd. ...................... 406
22,500 StanCorp Financial Group, Inc. ................... 1,856
----------
2,262
----------
Total Financials ................................. 24,359
----------
HEALTH CARE - 12.8%
HEALTH CARE EQUIPMENT & SERVICES - 5.4%
3,900 Affymetrix, Inc.+** .............................. 143
20,200 Applera Corporation-Applied Biosystems
Group ........................................... 422
15,300 Caremark Rx, Inc.+ ............................... 603
8,680 Health Net, Inc.+ ................................ 251
135,400 OraSure Technologies, Inc.+ ...................... 910
12,300 ResMed Inc.+ ..................................... 628
62,325 SonoSite, Inc.+ .................................. 2,116
30,000 Varian Medical Systems, Inc.+ .................... 1,297
9,500 VCA Antech, Inc.+ ................................ 186
4,500 Zimmer Holdings, Inc.+ ........................... 361
----------
6,917
----------
See NOtes to Financial Statements.
40
Portfolio of Investments (continued)
VT WEST COAST EQUITY FUND
December 31, 2004
VALUE
SHARES (000s)
------ -----------
COMMON STOCKS - (CONTINUED)
HEALTH CARE -(CONTINUED)
PHARMACEUTICALS & BIOTECHNOLOGY -7.4%
22,000 Allergan, Inc.** ........................... $ 1,784
25,307 Amgen, Inc.+ ............................... 1,623
9,000 Amylin Pharmaceuticals, Inc.+ .............. 210
4,500 Bristol-Myers Squibb Company ............... 115
131,155 Corixa Corporation+ ........................ 477
37,000 Dendreon Corporation+ ...................... 399
43,325 EDEN Bioscience Corporation+ ............... 42
19,100 Genentech, Inc.+ ........................... 1,040
26,155 ICOS Corporation+** ........................ 740
8,800 Neurocrine Biosciences, Inc.+ .............. 434
56,800 Pfizer Inc. ................................ 1,527
31,900 Watson Pharmaceuticals, Inc.+ .............. 1,047
-----------
9,438
-----------
Total Health Care .......................... 16,355
-----------
INDUSTRIALS - 15.5%
CAPITAL GOODS - 11.9%
52,011 Boeing Company ............................. 2,693
19,800 Cascade Corporation ........................ 791
23,200 Dionex Corporation+ ........................ 1,315
37,540 Electro Scientific Industries, Inc.+ ....... 742
55,000 Greenbrier Companies, Inc. ................. 1,862
1,600 Jacobs Engineering Group Inc.+ ............. 76
25,900 Northrop Grumman Corporation ............... 1,408
46,100 PACCAR Inc.................................. 3,710
20,700 Precision Castparts Corporation ............ 1,359
35,200 Simpson Manufacturing Company, Inc. ........ 1,228
-----------
15,184
-----------
COMMERCIAL SERVICES & SUPPLIES - 1.0%
43,000 Robert Half International Inc. ............. 1,266
-----------
TRANSPORTATION - 2.6%
33,060 Alaska Air Group, Inc.+ ................... 1,107
40,500 Expeditors International of
Washington, Inc.** ....................... 2,263
-----------
3,370
-----------
Total Industrials .......................... 19,820
-----------
INFORMATION TECHNOLOGY - 17.5%
COMMUNICATIONS EQUIPMENT - 1.2%
77,200 Cisco Systems, Inc.+ ....................... 1,490
-----------
COMPUTERS & PERIPHERALS - 1.9%
115,100 Advanced Digital Information Corporation+ 1,153
57,600 Hewlett-Packard Company .................... 1,208
5,100 InFocus Corporation+ ....................... 47
-----------
2,408
-----------
VALUE
SHARES (000s)
------ -----------
ELECTRONIC EQUIPMENT & INSTRUMENTS - 1.4%
21,690 Microvision, Inc.+** ....................... $ 152
49,120 Tektronix, Inc. ............................ 1,484
6,000 Trimble Navigation Ltd.+ ................... 198
-----------
1,834
-----------
INTERNET SOFTWARE & SERVICES - 0.7%
401,040 Art Technology Group, Inc.+ ................ 601
81,900 WatchGuard Technologies, Inc.+ ............. 363
-----------
964
-----------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT - 4.5%
28,125 Applied Materials, Inc.+ ................... 481
31,000 Credence Systems Corporation+ .............. 284
30,790 FEI Company+ ............................... 646
73,830 Intel Corporation .......................... 1,727
9,000 KLA-Tencor Corporation+** .................. 419
74,780 Lattice Semiconductor Corporation+.......... 426
47,800 LSI Logic Corporation+ ..................... 262
4,400 Novellus Systems, Inc.+ .................... 123
101,600 Pixelworks, Inc.+ .......................... 1,152
45,600 TriQuint Semiconductor, Inc.+............... 203
-----------
5,723
-----------
SOFTWARE - 7.8%
46,800 Actuate Corporation+ ....................... 119
30,000 Adobe Systems Inc........................... 1,882
7,500 Electronic Arts Inc.+ ...................... 463
34,200 Fair Isaac Corporation ..................... 1,254
139,330 Microsoft Corporation ...................... 3,722
38,700 Quest Software, Inc.+** .................... 617
39,790 RadiSys Corporation+ ....................... 778
38,000 Siebel Systems, Inc.+ ...................... 399
7,900 SupportSoft, Inc.+ ......................... 53
21,300 Sybase, Inc.+ .............................. 425
7,800 Symantec Corporation+ ...................... 201
-----------
9,913
-----------
Total Information Technology ............... 22,332
-----------
MATERIALS - 3.7%
48,000 Oregon Steel Mills, Inc.+ .................. 974
55,230 Schnitzer Steel Industries, Inc., Class A .. 1,874
28,035 Weyerhaeuser Company ....................... 1,884
-----------
Total Materials ............................ 4,732
-----------
TELECOMMUNICATION SERVICES - 1.0%
63,600 Nextel Partners, Inc., Class A+ ........... 1,243
-----------
Total Common Stocks
(Cost $90,374) ........................... 122,041
-----------
REAL ESTATE INVESTMENT TRUSTS (REITS) - 2.3%
28,500 AMB Property Corporation ................... 1,151
45,100 Plum Creek Timber Company, Inc. ............ 1,734
2,700 Shurgard Storage Centers, Inc., Class A .... 119
-----------
Total REITS
(Cost $2,222) ............................ 3,004
-----------
See Notes to Financial Statements.
41
Portfolio of Investments (continued)
VT WEST COAST EQUITY FUND
December 31, 2004
PRINCIPAL
AMOUNT VALUE
(000s) (000s)
------ -----------
REPURCHASE AGREEMENT - 2.0%
(Cost $2,511)
$ 2,511 Agreement with Morgan Stanley, 0.500%
dated 12/31/2004, to be repurchased at
$2,511,000 on 01/03/2005
(Collateralized U.S. Treasury Note,
3.000% due 07/15/2012,
market value $2,596,000).................. $ 2,511
-----------
SHORT-TERM INVESTMENT - 5.9%
(Cost $7,471)
7,471 Mellon GSL DBT II
Collateral Fund++......................... 7,471
-----------
TOTAL INVESTMENTS (Cost $102,578*).................105.8% 135,027
OTHER ASSETS (LIABILITIES) (Net)................... (5.8) (7,386)
----- -----------
NET ASSETS.........................................100.0% $ 127,641
===== =======
- ----------
* Aggregate cost for federal tax purposes is $102,918.
** Some or all of these securities are on loan at December 31, 2004, and have
an aggregate market value of $7,251,000, representing 5.7% of the total
net assets of the Fund (Collateral Value $7,471,000).
+ Non-income producing security.
++ Represents investment purchased with cash collateral for securities
loaned.
GLOSSARY OF TERMS
ADR -- American Depositary Receipt
See Notes to Financial Statements.
42
Portfolio of Investments
VT MID CAP STOCK FUND
December 31, 2004
VALUE
SHARES (000s)
------ -----------
COMMON STOCKS - 91.3%
CONSUMER DISCRETIONARY - 16.7%
AUTOMOBILES & COMPONENTS - 2.5%
30,100 Magna International Inc., Class A .......... $ 2,485
12,500 Superior Industries International, Inc.**... 363
-----------
2,848
-----------
CONSUMER DURABLES & APPAREL - 4.1%
60,200 Jones Apparel Group, Inc. .................. 2,201
126,200 Mattel, Inc. ............................... 2,460
-----------
4,661
-----------
HOTELS, RESTAURANTS & LEISURE - 3.4%
7,900 Mandalay Resort Group ...................... 557
19,600 Papa John's International, Inc.+ ........... 675
55,600 Yum! Brands, Inc. .......................... 2,623
-----------
3,855
-----------
RETAILING - 6.7%
46,600 Neiman Marcus Group Inc., Class A** ........ 3,334
47,200 Saks Inc. .................................. 685
89,900 Tiffany & Company ......................... 2,874
20,100 Weight Watchers International, Inc.+** ..... 825
-----------
7,718
-----------
Total Consumer Discretionary ............... 19,082
-----------
CONSUMER STAPLES -3.1%
FOOD, BEVERAGE & TOBACCO - 1.6%
20,900 Dean Foods Company+ ........................ 688
21,100 Hershey Foods Corporation................... 1,172
-----------
1,860
-----------
HOUSEHOLD & PERSONAL PRODUCTS - 1.5%
37,600 Estee Lauder Companies Inc., Class A ....... 1,721
-----------
Total Consumer Staples ..................... 3,581
-----------
ENERGY - 8.1%
41,300 Baker Hughes Inc. .......................... 1,762
47,900 Nabors Industries Ltd.+ .................... 2,457
30,800 Noble Energy, Inc........................... 1,899
67,600 Tidewater Inc. ............................. 2,407
17,400 Unocal Corporation ......................... 753
-----------
Total Energy ............................... 9,278
-----------
FINANCIALS - 18.5%
BANKS - 6.4%
101,826 North Fork Bancorporation, Inc. ............ 2,937
73,300 TCF Financial Corporation .................. 2,356
75,500 Washington Federal, Inc. ................... 2,004
-----------
7,297
-----------
DIVERSIFIED FINANCIALS - 4.2%
58,400 A.G. Edwards, Inc. ......................... 2,524
27,700 Ambac Financial Group, Inc. ................ 2,275
-----------
4,799
-----------
INSURANCE - 7.9%
60,887 Fidelity National Financial, Inc. .......... 2,781
87,000 HCC Insurance Holdings, Inc. ............... 2,881
30,200 MGIC Investment Corporation ................ 2,081
30,491 PMI Group, Inc. ............................ 1,273
-----------
9,016
-----------
Total Financials ........................... 21,112
-----------
HEALTH CARE - 9.4%
HEALTH CARE EQUIPMENT & SERVICES - 8.2%
12,200 AmerisourceBergen Corporation .............. 716
48,500 Covance Inc.+ .............................. 1,879
27,300 Express Scripts, Inc., Class A+ ............ 2,087
93,602 IMS Health Inc.............................. 2,173
56,100 Universal Health Services, Inc., Class B ... 2,496
-----------
9,351
-----------
PHARMACEUTICALS & BIOTECHNOLOGY - 1.2%
18,800 Andrx Corporation+ ........................ 410
55,525 Mylan Laboratories Inc. .................... 982
-----------
1,392
-----------
Total Health Care .......................... 10,743
-----------
INDUSTRIALS - 13.0%
CAPITAL GOODS - 5.8%
70,700 Federal Signal Corporation ................. 1,249
49,900 Lincoln Electric Holdings, Inc. ............ 1,723
23,400 PACCAR Inc. ................................ 1,883
34,600 Teleflex Inc. .............................. 1,797
-----------
6,652
-----------
COMMERCIAL SERVICES & SUPPLIES - 4.4%
59,100 HNI Corporation ............................ 2,544
72,400 Republic Services, Inc. .................... 2,429
-----------
4,973
-----------
TRANSPORTATION - 2.8%
57,500 Alaska Air Group, Inc.+ .................... 1,926
72,000 AMR Corporation+** ......................... 788
38,700 Continental Airlines, Inc., Class B+........ 524
-----------
3,238
-----------
Total Industrials .......................... 14,863
-----------
INFORMATION TECHNOLOGY - 11.7%
COMPUTERS & PERIPHERALS - 0.9%
58,600 Electronics for Imaging, Inc.+ ............. 1,020
-----------
See Notes to Financial Statements.
43
Portfolio of Investments (continued)
VT MID CAP STOCK FUND
December 31, 2004
VALUE
SHARES (000s)
------ -----------
COMMON STOCKS - (CONTINUED)
INFORMATION TECHNOLOGY - (CONTINUED)
ELECTRONIC EQUIPMENT & INSTRUMENTS - 1.8%
33,100 Arrow Electronics, Inc.+ ................... $ 804
22,300 Diebold, Inc................................ 1,243
-----------
2,047
-----------
IT SERVICES - 1.6%
59,500 Acxiom Corporation ......................... 1,565
19,600 Convergys Corporation+ ..................... 294
-----------
1,859
-----------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT - 2.2%
94,250 Microchip Technology Inc. .................. 2,513
-----------
SOFTWARE - 5.2%
24,200 Adobe Systems Inc........................... 1,518
117,000 BMC Software Inc.+ ......................... 2,176
168,100 Siebel Systems, Inc.+ ...................... 1,765
25,100 Synopsys, Inc.+ ............................ 493
-----------
5,952
-----------
Total Information Technology ............... 13,391
-----------
MATERIALS - 4.6%
71,100 Cabot Corporation .......................... 2,750
50,800 Valspar Corporation ........................ 2,541
-----------
Total Materials ............................ 5,291
-----------
TELECOMMUNICATION SERVICES - 0.6%
15,100 United States Cellular Corporation+ 676
-----------
UTILITIES - 5.6%
29,600 FPL Group, Inc. ............................ 2,213
87,600 NiSource Inc.** ........................... 1,995
49,800 Pinnacle West Capital Corporation........... 2,212
-----------
Total Utilities ............................ 6,420
-----------
Total Common Stocks
(Cost $77,168) ............................ 104,437
-----------
REAL ESTATE INVESTMENT TRUST (REIT) - 1.8%
(Cost $1,496)
55,900 General Growth Properties, Inc. ........... 2,021
-----------
PRINCIPAL
AMOUNT VALUE
(000s) (000s)
--------- -----------
REPURCHASE AGREEMENT - 7.3%
(Cost $8,360)
$ 8,360 Agreement with Morgan Stanley, 0.500%
dated 12/31/2004, to be repurchased at
$8,360,000 on 01/03/2005
(Collateralized by U.S. Treasury Note,
3.000% due 07/15/2012,
market value $8,643,000) ........... $ 8,360
-----------
SHORT-TERM INVESTMENT - 5.3%
(Cost $6,134)
6,134 Mellon GSL DBT II
Collateral Fund++ .................. 6,134
-----------
TOTAL INVESTMENTS (Cost $93,158*) .................. 105.7% 120,952
OTHER ASSETS (LIABILITIES) (Net) ................... (5.7) (6,525)
----- -----------
NET ASSETS ......................................... 100.0% $ 114,427
===== ===========
- ---------------
* Aggregate cost for federal tax purposes is $93,824.
** Some or all of these securities are on loan at December 31, 2004, and have
an aggregate market value of $5,852,000, representing 5.1% of the total
net assets of the Fund (Collateral Value $6,134,000).
+ Non-income producing security.
++ Represents investment purchased with cash collateral for securities
loaned.
See Notes to Financial Statements.
44
Portfolio of Investments
VT GROWTH FUND
December 31, 2004
VALUE
SHARES (000s)
------ -----------
COMMON STOCKS - 94.5%
CONSUMER DISCRETIONARY - 18.1%
CONSUMER DURABLES & APPAREL - 0.7%
7,120 Coach, Inc.+ ............................... $ 402
15,605 NIKE Inc., Class B ......................... 1,415
-----------
1,817
-----------
HOTELS, RESTAURANTS & LEISURE - 3.2%
29,650 Carnival Corporation** ..................... 1,709
64,685 Hilton Hotels Corporation .................. 1,471
11,030 Marriott International, Inc., Class A ...... 695
35,870 McDonald's Corporation ..................... 1,150
50,580 Royal Caribbean Cruises Ltd.** ............. 2,753
-----------
7,778
-----------
MEDIA - 7.8%
30,200 Clear Channel Communications, Inc........... 1,011
133,500 Comcast Corporation, Special Class A+ ...... 4,384
72,575 Gemstar-TV Guide International, Inc.+ ...... 430
46,076 Liberty Media Corporation, Class A+ ........ 506
10,380 News Corporation, Class A** ................ 194
91,590 News Corporation, Class B** ................ 1,758
10,300 Omnicom Group Inc. ......................... 868
234,107 Time Warner Inc.+ .......................... 4,551
30,750 Univision Communications Inc., Class A+ .... 900
84,220 Viacom Inc., Class B ....................... 3,065
47,050 Walt Disney Company ........................ 1,308
8,950 XM Satellite Radio Holdings Inc.,
Class A+** ............................... 337
-----------
19,312
-----------
RETAILING - 6.4%
4,650 Bed Bath & Beyond Inc.+ .................... 185
44,810 Best Buy Company, Inc. ..................... 2,663
8,250 Chico's FAS, Inc.+** ....................... 376
4,730 eBay Inc.+ ................................. 550
15,100 Federated Department Stores, Inc............ 873
57,310 Gap, Inc.** ................................ 1,210
82,725 Home Depot, Inc............................. 3,536
8,430 J.C. Penney Company, Inc. ..................
(Holding Company) ........................ 349
17,820 Lowe's Companies, Inc. ..................... 1,026
7,840 Nordstrom, Inc. ............................ 366
51,320 Staples, Inc. .............................. 1,730
52,710 Target Corporation ......................... 2,737
7,950 Williams-Sonoma, Inc.+ ..................... 279
-----------
15,880
-----------
Total Consumer Discretionary ............... 44,787
-----------
CONSUMER STAPLES - 6.9%
FOOD & STAPLES RETAILING - 1.5%
15,880 Costco Wholesale Corporation ............... 769
9,710 Sysco Corporation .......................... 370
44,030 Wal-Mart Stores Inc. ....................... 2,326
8,950 Walgreen Company ........................... 343
-----------
3,808
-----------
FOOD, BEVERAGE & TOBACCO - 2.6%
10,150 Altria Group, Inc........................... 620
26,430 Anheuser-Busch Companies, Inc. ............. 1,341
10,020 Coca-Cola Company .......................... 417
3,430 Hershey Foods Corporation .................. 191
72,935 PepsiCo Inc. ............................... 3,807
-----------
6,376
-----------`
HOUSEHOLD & PERSONAL PRODUCTS - 2.8%
11,710 Alberto-Culver Company, Class B............. 569
14,400 Avon Products, Inc. ........................ 557
3,900 Colgate-Palmolive Company .................. 199
17,710 Estee Lauder Companies Inc., Class A ....... 811
5,040 Kimberly-Clark Corporation ................. 332
78,590 Procter & Gamble Company ................... 4,329
-----------
6,797
-----------
Total Consumer Staples ..................... 16,981
-----------
ENERGY - 3.8%
5,620 Amerada Hess Corporation ................... 463
9,580 Burlington Resources Inc. .................. 417
7,260 Devon Energy Corporation ................... 283
3,230 EOG Resources, Inc. ........................ 231
91,050 Exxon Mobil Corporation .................... 4,667
22,195 Halliburton Company ........................ 871
17,157 Kinder Morgan Management LLC+ .............. 698
4,940 Murphy Oil Corporation ..................... 397
5,860 National-Oilwell, Inc.+ .................... 207
15,880 Schlumberger Ltd............................ 1,063
2,450 Smith International, Inc.+ ................. 133
-----------
Total Energy ............................... 9,430
-----------
FINANCIALS - 9.9%
BANKS - 0.6%
23,920 Countrywide Financial Corporation .......... 885
4,920 North Fork Bancorporation, Inc. ............ 142
6,020 Wells Fargo & Company ...................... 374
-----------
1,401
-----------
See Notes to Financial Statements.
45
Portfolio of Investments (continued)
VT GROWTH FUND
December 31, 2004
VALUE
SHARES (000s)
------ -----------
COMMON STOCKS - (CONTINUED)
FINANCIALS - (CONTINUED)
DIVERSIFIED FINANCIALS - 7.0%
66,380 American Express Company ................... $ 3,742
7,940 Bear Steams Companies Inc. ................. 812
88,510 Citigroup Inc. ............................. 4,264
12,900 Goldman Sachs Group, Inc. .................. 1,342
42,826 JPMorgan Chase & Company ................... 1,671
30,860 MBNA Corporation ........................... 870
3,570 Merrill Lynch & Company, Inc. .............. 213
66,085 Morgan Stanley ............................. 3,669
13,440 SLM Corporation ............................ 718
-----------
17,301
-----------
INSURANCE - 2.3%
6,600 Allstate Corporation ....................... 341
49,065 American International Group Inc. .......... 3,222
4,330 Chubb Corporation .......................... 333
22,570 Prudential Financial, Inc. ................. 1,241
3,830 RenaissanceRe Holdings Ltd ................. 200
3,970 XL Capital Ltd., Class A ................... 308
-----------
5,645
-----------
Total Financials ........................... 24,347
-----------
HEALTH CARE - 17.5%
HEALTH CARE EQUIPMENT & SERVICES - 7.0%
5,170 Alcon, Inc ................................. 417
11,520 Applera Corporation-Applied Biosystems
Group .................................... 241
20,515 Biomet, Inc.** ............................. 890
34,500 Caremark Rx, Inc.+ ......................... 1,360
4,870 Kinetic Concepts, Inc.+ .................... 372
5,320 Laboratory Corporation of America
Holdingst+** ............................. 265
95,960 Medtronic, Inc. ............................ 4,766
25,750 Millipore Corporation+ ..................... 1,283
1,550 Quest Diagnostics Inc....................... 148
7,330 St. Jude Medical, Inc.+ .................... 307
19,840 Stryker Corporation ........................ 957
41,520 UnitedHealth Group Inc. .................... 3,655
26,640 Varian Medical Systems, Inc.+ .............. 1,152
5,710 Waters Corporation+ ........................ 267
3,610 WellPoint Inc+ ............................. 415
9,130 Zimmer Holdings, Inc.+** ................... 732
-----------
17,227
-----------
PHARMACEUTICALS & BIOTECHNOLOGY - 10.5%
17,830 Abbott Laboratories ........................ 832
47,170 Amgen, Inc.+ ............................... 3,026
2,970 Biogen Idec Inc.+** ........................ 198
6,340 Digene Corporation+ ........................ 166
26,820 Eli Lilly & Company ........................ 1,522
67,855 Genentech, Inc.+** ......................... 3,694
34,030 Gilead Sciences, Inc.+ ..................... 1,191
67,280 Johnson & Johnson .......................... 4,267
8,620 Medimmune, Inc.+ ........................... 234
28,046 Merck & Company, Inc. ...................... 901
36,204 Novartis AG ................................ 1,824
11,590 Novartis AG, ADR ........................... 586
113,060 Pfizer Inc ................................. 3,040
4,720 Pharmaceutical Product
Development, Inc.+ ....................... 195
3,210 Roche Holding AG-Genusschein ............... 369
44,630 Sanofi-Aventis, ADR ........................ 1,787
71,602 Teva Pharmaceutical Industries Ltd.,
Sponsored ADR ............................ 2,138
-----------
25,970
-----------
Total Health Care .......................... 43,197
-----------
INDUSTRIALS- 12.1%
CAPITAL GOODS - 8.6%
12,060 American Standard Companies Inc.+ .......... 498
1,900 Caterpillar, Inc............................ 185
22,280 Empresa Brasileira de
Aeronautica SA, ADR ...................... 745
263,090 General Electric Company ................... 9,603
14,900 Honeywell International Inc. ............... 528
17,910 Ingersoll-Rand Company, Class A ............ 1,438
4,290 ITT Industries, Inc. ....................... 362
19,660 Lockheed Martin Corporation ................ 1,092
7,750 Northrop Grumman Corporation ............... 421
12,480 Raytheon Company ........................... 485
12,520 Rockwell Automation, Inc. .................. 621
2,710 Rockwell Collins, Inc. ..................... 107
107,620 Tyco International Ltd...................... 3,846
12,450 United Technologies Corporation ............ 1,287
-----------
21,218
-----------
COMMERCIAL SERVICES & SUPPLIES - 1.1%
15,895 Apollo Group, Inc., Class A+ ............... 1,283
12,060 Cendant Corporation ........................ 282
6,770 Manpower Inc. .............................. 327
32,150 Waste Management Inc. ...................... 962
-----------
2,854
-----------
See Notes to Financial Statements.
46
Portfolio of Investments (continued)
VT GROWTH FUND
December 31, 2004
VALUE
SHARES (000s)
------ --------
COMMON STOCKS - (CONTINUED)
INDUSTRIALS - (CONTINUED)
TRANSPORTATION - 2.4%
12,390 Expediters International of
Washington, Inc.** ........................... $ 693
35,060 FedEx Corporation .............................. 3,453
20,770 United Parcel Service, Inc., Class B ........... 1,775
--------
5,921
--------
Total Industrials .............................. 29,993
--------
INFORMATION TECHNOLOGY - 23.5%
COMMUNICATIONS EQUIPMENT - 4.4%
12,960 Avaya Inc.+ .................................... 223
259,050 Cisco Systems, Inc.+ ........................... 5,000
133,390 Lucent Technologies Inc.+ ...................... 501
163,670 Motorola, Inc. ................................. 2,815
78,040 Nokia Oyj, Sponsored ADR ....................... 1,223
8,750 QUALCOMM Inc. .................................. 371
21,470 Telefonaktiebolaget LM Ericsson,
Sponsored ADR+ ............................... 676
--------
10,809
--------
COMPUTERS & PERIPHERALS - 4.2%
69,585 Dell Computer Corporation+ ..................... 2,932
31,030 EMC Corporation+ ............................... 461
41 ,730 International Business Machines Corporation..... 4,114
26,560 Lexmark International, Inc.+ ................... 2,258
99,910 Sun Microsystems, Inc.+ ........................ 537
--------
10,302
--------
ELECTRONIC EQUIPMENT & INSTRUMENTS - 1.5%
35,140 Agilent Technologies, Inc.+ .................... 847
26,090 Ingram Micro Inc., Class A+ .................... 543
8,810 L-3 Communications Holdings, Inc. .............. 645
27,120 PerkinElmer, Inc. .............................. 610
25,170 Tektronix, Inc. ............................... 760
12,210 Thermo Electron Corporation+ ................... 369
--------
3,774
--------
INTERNET SOFTWARE & SERVICES - 2.0%
3,190 VeriSign Inc.+ ................................. 107
131,350 Yahoo! Inc.+ ................................... 4,949
--------
5,056
--------
IT SERVICES - 0.3%
16,170 Accenture Ltd., Class A+ ....................... 437
3,260 Automatic Data Processing, Inc. ................ 144
4,720 Cognizant Technology Solutions
Corporation+ ................................... 200
--------
781
--------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT - 4.7%
26,390 Altera Corporation+ ............................ 546
17,240 Analog Devices, Inc. ........................... 636
35,065 Applied Materials, Inc.+ ....................... 600
22,200 Broadcom Corporation, Class A+ ................. 717
12,963 Freescale Semiconductor Inc., Class B+ ......... 238
147,200 Intel Corporation .............................. 3,443
2,210 Linear Technology Corporation .................. 86
3,880 Microchip Technology Inc. ...................... 103
6,078 Samsung Electronics Company
Ltd., GDR** .................................. 1,323
5,630 Teradyne, Inc.+ ................................ 96
152,920 Texas Instruments Inc. ....................... 3,765
--------
11,553
SOFTWARE - 6.4% --------
25,830 Adobe Systems Inc. ............................. 1,621
5,710 Amdocs Ltd.+ ................................... 150
36,490 Cadence Design Systems, Inc.+** ................ 504
26,920 Citrix Systems, Inc.+ .......................... 660
11,800 Intuit Inc.+** ................................. 519
15,200 Mercury Interactive Corporation+ ............... 692
351,363 Microsoft Corporation .......................... 9,385
22,460 Novell, Inc.+ .................................. 152
19,570 Oracle Corporation+ ............................ 269
39,340 SAP AG, Sponsored ADR .......................... 1,739
--------
15,691
--------
Total Information Technology ................... 57,966
--------
MATERIALS - 2.0%
17,640 Air Products & Chemicals, Inc. ................. 1,023
2,810 Alcan Inc. ..................................... 138
6,070 Dow Chemical Company .......................... 300
19,690 E.I. du Pont de Nemours & Company .............. 966
32,230 Praxair, Inc. .................................. 1,423
9,340 Rio Tinto PLC, Sponsored ADR ................... 1,113
--------
Total Materials ............................... 4,963
--------
TELECOMMUNICATION SERVICES - 0.7%
13,650 AT&T Corporation ............................... 260
31,170 Sprint Corporation-FON Group ................... 775
20,420 Telefonos de Mexico SA de CV, Class L,
Sponsored ADR ................................ 782
--------
Total Telecommunication Services ............... 1,817
--------
Total Common Stocks
(Cost $202,203) .............................. 233,481
--------
See Notes to Financial Statements.
47
Portfolio of Investments (continued)
VT GROWTH FUND
December 31, 2004
PRINCIPAL
AMOUNT VALUE
(000s) (000s)
-------- --------
COMMERCIAL PAPER - 1.3%
(Cost $3, 199)
$ 3,200 Prudential Funding LLC,
2.100% due 01/03/2005++ ...................... $ 3,199
--------
U.S. GOVERNMENT AGENCY DISCOUNT NOTE -1.2%
(Cost $3,000)
FEDERAL NATIONAL MORTGAGE ASSOCIATION
(FNMA) - 1.2%
3,000 1.650% due 01/03/2005++ ........................ 3,000
--------
REPURCHASE AGREEMENT - 2.2%
(Cost $5,342)
5,342 Agreement with Morgan Stanley, 0.500%
dated 12/31/2004, to be repurchased at
$5,342,000 on 01/03/2005
(Collateralized by U.S. Treasury Note,
3.000% due 07/15/2012,
market value $5,523,000) ...................... 5,342
--------
SHORT-TERM INVESTMENT - 4.4%
(Cost $10,866)
10,866 Mellon GSL DBT II
Collateral Fund+++ ............................ 10,866
--------
TOTAL INVESTMENTS (Cost $224,610*) ....................103.6% 255,888
OTHER ASSETS (LIABILITIES) (Net) ...................... (3.6) (8,896)
----- --------
NET ASSETS ............................................100.0% $246,992
===== ========
SCHEDULE OF FORWARD FOREIGN CURRENCY CONTRACTS
FORWARD FOREIGN CURRENCY CONTRACTS TO SELL
CONTRACTS TO DELIVER
(000s)
NET
UNREAIZED
EXPIRATION LOCAL VALUE IN IN EXCHANGE DEPRECIATION
DATE CURRENCY U.S. $ FOR U.S. $ OF CONTRACTS
- ---------- ----------- -------- ----------- ------------
03/04/2005 EUR 40 54 48 $ (6)
04/15/2005 EUR 140 191 173 (18)
------------
Net Unrealized Depreciation of Forward Foreign
Currency Contracts ....................................... $ (24)
============
GLOSSARY OF TERMS
ADR - American Depositary Receipt
EUR - EURO
GDR - Global Depositary Receipt
- ---------------------
* Aggregate cost for federal tax purposes is $226,256.
** Some or all of these securities are on loan at December 31, 2004, and have
an aggregate market value of $10,451,000, representing 4.2% of the total
net assets of the Fund (Collateral Value $10,866,000).
+ Non-income producing security.
++ Rate represents annualized yield at date of purchase.
+++ Represents investment purchased with cash collateral for securities
loaned.
See Notes to Financial Statements.
48
Portfolio of Investments
VT SMALL CAP VALUE FUND
December 31 , 2004
VALUE
SHARES (000S)
------ ------
COMMON STOCKS - 74.9%
CONSUMER DISCRETIONARY - 7.3%
CONSUMER DURABLES & APPAREL - 1.9%
9,900 Kellwood Company.................................. $ 341
13,800 RC2 Corporation+.................................. 450
---------
791
---------
MEDIA - 2.6%
14,200 Carmike Cinemas, Inc.............................. 519
42,500 Reader's Digest Association, Inc.................. 591
---------
1,110
---------
RETAILING - 2.8%
29,400 Blockbuster Inc., Class A**....................... 280
34,000 Blockbuster Inc., Class B......................... 300
33,400 Movie Gallery, Inc................................ 637
---------
1,217
---------
Total Consumer Discretionary...................... 3,118
---------
CONSUMER STAPLES - 6.4%
FOOD & STAPLES RETAILING - 2.4%
20,300 Fresh Del Monte Produce Inc. (F).................. 601
17,000 John B. Sanfilippo & Son, Inc.+................... 438
---------
1,039
---------
FOOD, BEVERAGE & TOBACCO - 0.8%
39,000 National Beverage Corporation..................... 325
---------
HOUSEHOLD & PERSONAL PRODUCTS - 3.2%
10,400 Central Garden & Pet Company+..................... 434
21,800 Jarden Corporation+**............................. 947
---------
1,381
---------
Total Consumer Staples............................ 2,745
---------
ENERGY - 8.7%
22,400 Cimarex Energy Company+........................... 849
32,100 Comstock Resources, Inc.+......................... 708
1,600 Encore Acquisition Company+....................... 56
16,700 Plains Exploration & Production
Company+.......................................... 434
14,300 St.Mary Land & Exploration Company................ 597
14,200 Stone Energy Corporation+......................... 640
13,100 Tesoro Petroleum Corporation+..................... 417
---------
Total Energy...................................... 3,701
---------
FINANCIALS - 10.2%
BANKS - 6.5%
26,000 Dime Community Bancshares......................... 466
26,000 Flagstar Bancorp, Inc.**.......................... 587
15,300 Harbor Florida Bancshares, Inc.................... 529
25,740 Oriental Financial Group Inc...................... 729
18,710 U.S.B. Holding Company, Inc....................... 466
---------
2,777
---------
INSURANCE - 3.7%
15,400 Navigators Group, Inc.+........................... $ 464
13,800 Stewart Information Services Corporation.......... 575
35,100 Universal American Financial
Corporation+.................................... 543
---------
1,582
---------
Total Financials.................................. 4,359
---------
HEALTH CARE - 7.0%
HEALTH CARE EQUIPMENT & SERVICES - 3.6%
3,000 Biosite Inc.+..................................... 185
112,400 Gene Logic Inc.+.................................. 414
12,700 Kindred Healthcare, Inc.+......................... 380
20,100 Owens & Minor, Inc................................ 566
---------
1,545
---------
PHARMACEUTICALS & BIOTECHNOLOGY - 3.4%
30,900 Andrx Corporation+................................ 674
23,500 Bradley Pharmaceuticals, Inc.+**.................. 456
9,200 Lannett Company, Inc.+............................ 91
5,300 Par Pharmaceutical Companies, Inc.+............... 219
---------
1,440
---------
Total Health Care................................. 2,985
---------
INDUSTRIALS - 13.5%
CAPITAL GOODS - 4.7%
17,000 Cubic Corporation................................. 428
13,900 DRS Technologies, Inc.+........................... 594
20,200 Griffon Corporation+**............................ 545
21,200 Lennox International Inc.......................... 431
---------
1,998
---------
COMMERCIAL SERVICES & SUPPLIES - 1.5%
25,900 Duratek Inc.+..................................... 645
---------
TRANSPORTATION - 7.3%
17,100 Alaska Air Group, Inc.+........................... 573
30,500 AMR Corporation+**................................ 334
29,500 Continental Airlines, Inc., Class B+**............ 399
22,000 Dampskibsselskabet Torm A/S, ADR.................. 908
15,100 Genesee & Wyoming Inc., Class A+.................. 425
28,300 OMI Corporation................................... 477
---------
3,116
---------
Total Industrials................................. 5,759
---------
INFORMATION TECHNOLOGY - 10.7%
COMPUTERS & PERIPHERALS - 2.1%
25,700 Hutchinson Technology Inc.+**..................... 888
---------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT - 4.3%
59,000 Axcelis Technologies, Inc.+....................... 480
67,000 Credence Systems Corporation+..................... 613
40,700 OmniVision Technologies, Inc.+**.................. 747
---------
1,840
---------
See Notes to Financial Statements.
49
Portfolio of Investments (continued)
VT SMALL CAP VALUE FUND
December 31, 2004
VALUE
SHARES (000s)
- ------ ---------
COMMON STOCKS - (CONTINUED)
INFORMATION TECHNOLOGY - (CONTINUED)
SOFTWARE - 4.3%
329,500 Atari, Inc.+** ......................... $ 966
115,400 Geac Computer Corporation Ltd. (F)+ .... 848
---------
1,814
---------
Total Information Technology ........... 4,542
---------
MATERIALS - 7.5%
11,200 Albemarle Corporation .................. 434
11,800 Century Aluminum Company+ .............. 310
9,300 Headwaters Inc.+ ....................... 265
69,500 Kingsgate Consolidated Ltd. ............ 133
26,800 Metal Management, Inc. ................. 720
60,400 Randgold Resources Ltd., ADR+ .......... 689
192,600 Wheaton River Minerals Ltd. (F)+ ....... 628
---------
Total Materials ........................ 3,179
---------
TELECOMMUNICATION SERVICES - 2.7%
29,300 Asia Satellite Telecommunications
Holdings Ltd., Sponsored ADR ............ 548
17,200 USA Mobility, Inc.+ ..................... 607
---------
Total Telecommunication Services ........ 1,155
---------
UTILITIES - 0.9%
11,400 Suburban Propane Partners LP ............ 396
---------
Total Common Stocks
(Cost $26,243) ....................... 31,939
---------
CANADIAN INCOME TRUSTS - 8.3%
ENERGY - 3.8%
23,800 Bonavista Energy Trust .................. 539
13,200 Peyto Energy Trust** .................... 527
34,200 Vermilion Energy Trust** ................ 574
---------
1,640
---------
FOOD, BEVERAGE & TOBACCO - 1.6%
44,000 Connors Brothers Income Fund ............ 685
---------
MATERIALS - 2.9%
10,100 Fording Canadian Coal Trust** ........... 779
35,900 TimberWest Forest Corporation ........... 452
---------
1,231
---------
Total Canadian Income Trusts
(Cost $2,394) ...................... 3,556
----------
REAL ESTATE INVESTMENT TRUSTS (REITS) - 5.7%
4,700 Alexandria Real Estate Equities, Inc. ... 350
20,700 Cedar Shopping Centers Inc. ............. 296
14,800 Entertainment Properties Trust .......... 659
40,100 Equity Inns Inc. ........................ 471
7,000 Sovran Self Storage, Inc. ............... 295
32,100 Winston Hotels, Inc. .................... 379
---------
Total REITS
(Cost $1,900) ........................ 2,450
---------
VALUE
CONTRACTS (000s)
- --------- ---------
PURCHASED PUT OPTIONS - 2.5%
1,025 iShares Russell 2000 Index,
Expires January 2006 @ $95 ............... $ 151
1,975 iShares Russell 2000 Index,
Expires January 2007 @ $95 ............... 612
3,100 Nasdaq 100 Index,
Expires January 2007 @ $29 ............... 310
---------
Total Purchased Put Options
(Cost $2,233) ......................... 1,073
---------
PRINCIPAL
AMOUNT
(000s)
- ---------
REPURCHASE AGREEMENT - 9.5%
(Cost $4,031)
$ 4,031 Agreement with Morgan Stanley, 0.500%
dated 12/31/2004, to be repurchased at
$4,031,000 on 01/03/2005
(Collateralized by U.S. Treasury Note,
3.000% due 07/15/2012,
market value $4,167,000) ................. 4,031
---------
SHORT-TERM INVESTMENT - 16.8%
(Cost $7,157)
7,157 Mellon GSL DBT II
Collateral Fund++ ........................ 7,157
---------
TOTAL INVESTMENTS (Cost $43,958*) ............ 117.7% 50,206
OTHER ASSETS (LIABILITIES) (Net) ............ (17.7) (7,538)
----- ---------
NET ASSETS 100.0% $ 42,668
===== =========
- ------------------
* Aggregate cost for federal tax purposes is $43,966.
** Some or all of these securities are on loan at December 31, 2004, and have
an aggregate market value of $6,331,000, representing 14.8% of the total
net assets of the Fund (Collateral Value $7,157,000).
+ Non-income producing security.
++ Represents investment purchased with cash collateral for securities
loaned.
SCHEDULE OF FORWARD FOREIGN CURRENCY CONTRACTS
FORWARD FOREIGN CURRENCY CONTRACTS TO BUY
CONTRACTS TO RECEIVE
(000s)
NET
UNREALIZED
EXPIRATION LOCAL VALUE IN IN EXCHANGE APPRECIATION
DATE CURRENCY U.S. $ FOR U.S. $ OF CONTRACTS
- ---------- -------- -------- ----------- -------------
01/05/2005 AUD 4 3 3 $ --*
-------------
- ----------
* Amount represents less than $500.
GLOSSARY OF TERMS
ADR - American Depositary Receipt
AUD - Australian Dollar
(F) - Foreign Shares
See Notes to Financial Statements.
50
Portfolio of Investments
VT SMALL CAP GROWTH FUND
December 31, 2004
VALUE
SHARES (000s)
------ ------
COMMON STOCKS - 99.1%
CONSUMER DISCRETIONARY - 16.3%
CONSUMER DURABLES & APPAREL - 1.2%
23,900 Quiksilver, Inc. + ......................... $ 712
--------
HOTELS, RESTAURANTS & LEISURE - 3.6%
51,700 Intrawest Corporation ...................... 1,188
28,400 Steiner Leisure Ltd. + ...................... 849
--------
2,037
--------
MEDIA - 3.6%
128,000 aQuantive Inc. +............................. 1,144
4,100 Getty Images Inc. +.......................... 282
195,400 NTN Communications, Inc. +................... 624
--------
2,050
--------
RETAILING - 7.9%
40,100 AnnTaylor Stores Corporation + .............. 863
27,900 Blue Nile, Inc. +** ......................... 771
21,300 Building Materials Holding Corporation ...... 816
35,200 Pacific Sunwear of California, Inc. + ...... 783
49,300 West Marine, Inc. + ........................ 1,220
--------
4,453
--------
Total Consumer Discretionary ................ 9,252
--------
CONSUMER STAPLES - 3.6%
FOOD & STAPLES RETAILING - 3.6%
148,800 SunOpta Inc. + ............................. 1,069
31,100 United Natural Foods, Inc. + ................ 967
--------
Total Consumer Staples....................... 2,036
--------
ENERGY - 2.7%
149,900 Hydrogenics Corporation +.................... 725
138,200 Quantum Fuel Systems Technologies
Worldwide, Inc. + ** ....................... 832
--------
Total Energy................................. 1,557
--------
FINANCIALS - 7.6%
BANKS - 1.3%
2,800 First Mutual Bancshares, Inc. ............... 73
15,000 Frontier Financial Corporation .............. 579
5,000 Pacific Continental Corporation ............. 78
--------
730
--------
DIVERSIFIED FINANCIALS - 6.3%
17,450 Affiliated Managers Group, Inc. + **......... 1,182
27,108 American Capital Strategies Ltd. **.......... 904
50,100 First Albany Companies Inc. ................. 486
19,800 Investors Financial Services Corporation .... 990
--------
3,562
--------
Total Financials ............................ 4,292
--------
HEALTH CARE - 21.3%
HEALTH CARE EQUIPMENT & SERVICES - 7.8%
36,100 Accredo Health, Inc. + ...................... $ 1,000
26,300 Advanced Neuromodulation Systems, Inc. + .... 1,038
28,700 Affymetrix, Inc. +**......................... 1,049
38,700 SonoSite, Inc. + ........................... 1,314
--------
4,401
--------
PHARMACEUTICALS & BIOTECHNOLOGY - 13.5%
72,800 Antigenics Inc. +**......................... 737
94,000 Cell Genesys, Inc. +**....................... 762
150,800 Corixa Corporationt +**...................... 549
71,200 Dendreon Corporation +....................... 768
134,600 Emisphere Technologies, Inc.+**.............. 545
20,800 Medicis Pharmaceutical
Corporation, Class A** ...................... 730
31,100 Myriad Genetics, Inc. +...................... 700
82,500 Neose Technologies, Inc.+.................... 554
85,400 Pain Therapeutics, Inc. +.................... 616
64,100 Pharmacyclics, Inc.+......................... 671
43,700 Sangamo BioSciences Inc. +................... 262
34,400 Zymogenetics, Inc.+.......................... 791
--------
7,685
--------
Total Health Care ........................... 12,086
--------
INDUSTRIALS - 12.0%
COMMERCIAL SERVICES & SUPPLIES - 12.0%
164,900 Digimarc Corporation +...................... 1,537
50,100 Euronet Worldwide, Inc.+..................... 1,304
38,777 First Consulting Group, Inc. +............... 237
67,900 Gevity HR, Inc. ............................. 1,396
42,780 Hewitt Associates, Inc. Class A +........... 1,369
103,600 Wireless Facilities, Inc. +.................. 978
-------
Total Industrials............................ 6,821
-------
INFORMATION TECHNOLOGY - 32.2%
COMMUNICATIONS EQUIPMENT - 4.4%
44,900 InterDigital Communications Corporation +..... 993
62,000 REMEC, Inc. + ................................ 447
43,600 ViaSat, Inc. + ............................... 1,058
-------
2,498
-------
COMPUTERS & PERIPHERALS - 1.1%
86,900 Immersion Corporation +....................... 634
-------
ELECTRONIC EQUIPMENT & INSTRUMENTS - 3.8%
37,500 Microvision, Inc. + **....................... 263
42,100 Photon Dynamics, Inc. + ...................... 1,022
25,700 Trimble Navigation Ltd. + .................... 849
-------
2,134
-------
See Notes to Financial Statements.
51
Portfolio of Investments (continued)
VT SMALL CAP GROWTH FUND
December 31, 2004
VALUE
SHARES (000s)
------ ---------
COMMON STOCKS - (CONTINUED)
INFORMATION TECHNOLOGY - (CONTINUED)
INTERNET SOFTWARE & SERVICES - 8.3%
41,433 Ariba, Inc. + ............................... $ 688
202,555 Art Technology Group, Inc. + ............... 304
155,500 Corillian Corporation +...................... 765
804,613 Intraware, Inc. + .......................... 941
116,600 Online Resources Corporation + ............. 888
209,592 SumTotal Systems, Inc. + **.. ............... 1,090
--------
4,676
--------
IT SERVICES - 2.3%
194,000 Lionbridge Technologies, Inc. + ............. 1,304
--------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT - 1.8%
8,720 FEI Company +................................ 183
29,200 Pixelworks, Inc. + **....................... 331
26,400 Power Integrations, Inc. + .................. 522
--------
1,036
--------
SOFTWARE - 10.5%
23,400 ANSYS, Inc. + .............................. 750
522,000 BSQUARE Corporation+......................... 778
28,042 NetIQ Corporation + ........................ 342
120,200 Nuance Communications Inc. + ................ 498
194,200 ONYX Software Corporation + ................ 621
57,100 PDF Solutions, Inc. + ...................... 920
27,500 Quest Software, Inc. + ...................... 439
245,700 ScanSoft, Inc. + ............................ 1,029
101,200 SkillSoft PLC, ADR + ....................... 572
-------
5,949
-------
Total Information Technology................ 18,231
-------
MATERIALS - 2.6%
31,900 Headwaters Inc. + .......................... 909
244,600 Liquidmetal Technologies Inc. + ** .......... 537
-------
Total Materials............................. 1,446
-------
TELECOMMUNICATION SERVICES - 0.8%
19,870 Gilat Satellite Networks Ltd. + ............ 121
104,600 Primus Telecommunications Group, Inc. + ..... 333
-------
Total Telecommunication Services............. 454
-------
Total Common Stocks
(Cost $47,598).............................. 56,175
-------
PRINCIPAL
AMOUNT VALUE
(000s) (000s)
- --------- --------
REPURCHASE AGREEMENT - 0.8%
(Cost $448)
$ 448 Agreement with Morgan Stanley, 0.500%
dated 12/31/2004, to be repurchased at
$448,000 on 01/03/2005
(Collateralized by U.S. Treasury Note,
3.000% due 07/15/2012,
market value $463,000)..................... $ 448
--------
SHORT-TERM INVESTMENT - 14.0%
(Cost $7,925)
7,925 Mellon GSL DBT II
Collateral Fund ++ ................. 7,925
--------
TOTAL INVESTMENTS (Cost $55,971*).................. 113.9% 64,548
OTHER ASSETS (LIABILITIES) (Net)................... (13.9) (7,873)
----- --------
ET ASSETS......................................... 100.0% $ 56,675
===== ========
- ---------
* Aggregate cost for federal tax purposes is $64,598.
** Some or all of these securities are on loan at December 31, 2004, and have
an aggregate market value of $7,139,000, representing 12.6% of the total net
assets of the Fund (Collateral Value $7,925,000).
+ Non-income producing security.
++ Represents investment purchased with cash collateral for securities loaned.
GLOSSARY OF TERMS
ADR -- American Depositary Receipt
See Notes to Financial Statements.
52
Portfolio of Investments
VT INTERNATIONAL GROWTH FUND
December 31, 2004
VALUE
SHARES (000s)
------ ------
COMMON STOCKS - 97.0%
JAPAN - 21.9%+++
2,800 Advantest Corporation ....................... $ 240
38,000 AEON Company Ltd............................. 634
1,230 Aiful Corporation............................ 135
2,000 Bridgestone Corporation...................... 40
5,700 Canon Inc.**................................. 308
1,000 Chubu Electric Power Company Inc............. 24
1,300 Daito Trust Construction Company, Ltd........ 62
15,000 Daiwa House Industry Company Ltd............. 171
31 East Japan Railway Company................... 172
6,100 FANUC Ltd.................................... 399
38,000 Furukawa Electric Company Ltd. +**........... 211
2,900 Hirose Electric Company Ltd.................. 339
2,100 Hoya Corporation............................. 237
25,000 Japan Airlines System Corporation +**....... 72
16,900 Kansai Electric Power Company Inc............ 343
28,000 Konica Minolta Holdings Inc.................. 372
43 Millea Holdings, Inc......................... 638
33,200 Mitsubishi Corporation....................... 429
67,000 Mitsubishi Estate Company Ltd................ 785
44,000 Mitsubishi Heavy Industries Ltd.............. 125
59 Mitsubishi Tokyo Financial Group, Inc........ 599
23,000 Mitsui & Company, Ltd........................ 206
23,000 Mitsui Fudosan Company Ltd................... 279
62,000 Mitsui Sumitomo Insurance Company Ltd........ 539
3,300 Murata Manufacturing Company Ltd............. 185
33,000 NEC Corporation.............................. 205
2,500 Nidec Corporation............................ 305
35,000 Nikko Cordial Corporation.................... 185
12,000 Nikon Corporation............................ 148
2,600 Nintendo Company Ltd......................... 327
2,000 Nippon Electric Glass Company, Ltd........... 51
62 Nippon Telegraph & Telephone Corporation..... 278
75,000 Nissan Motor Company Ltd.**.................. 815
3,600 Nitto Denko Corporation...................... 197
7,000 OMRON Corporation............................ 167
5,500 ORIX Corporation............................. 747
8,000 Ricoh Company, Ltd........................... 154
2,400 Rohm Company Ltd............................. 248
22,600 Sankyo Company Ltd........................... 511
37,000 Sekisui House Ltd.** ........................ 431
1,600 Shimamura Company Ltd........................ 117
24,000 Shionogi & Company Ltd....................... 332
3,400 SMC Corporation.............................. 389
4,600 SOFTBANK Corporation......................... 224
22,000 Sompo Japan Insurance Inc.................... 224
4,442 Sony Corporation............................. 172
64,000 Sumitomo Chemical Company Ltd................ 314
31,000 Sumitomo Corporation......................... 267
107 Sumitomo Mitsui Financial Group, Inc.**...... 778
31,000 Suzuki Motor Corporation..................... 566
7,700 Takeda Pharmaceutical Company Ltd............ 388
2,300 TDK Corporation ............................ 170
10,300 Tokyo Electron Ltd.......................... 634
56,000 TOKYO GAS Company Ltd.**.................... 230
15,600 Toyota Motor Corporation.................... 635
205 UFJ Holdings, Inc. +........................ 1,242
4,000 Unicharm Corporation........................ 192
37 Yahoo! Japan Corporation +................. 178
4,700 Yamada Denki Company, Ltd................... 201
3,800 Yamanouchi Pharmaceutical Company Ltd....... 148
29,200 Yamato Transport Company Ltd................ 433
--------
20,147
--------
UNITED KINGDOM - 16.5%
7,400 Anglo American PLC .......................... 175
31,000 ARM Holdings PLC ............................ 66
8,700 Associated British Foods PLC................. 130
38,600 AstraZeneca PLC.............................. 1,400
10,300 AstraZeneca PLC (F).......................... 374
14,410 BAE SYSTEMS PLC ............................. 64
16,800 Barclays PLC................................. 189
80,200 BG Group PLC................................. 545
18,937 BHP Billiton PLC............................. 222
9,400 Brambles Industries PLC...................... 47
52,920 Centrica PLC................................. 240
40,700 Diageo PLC................................... 581
4,400 GlaxoSmithKline PLC.......................... 103
54,800 HBOS PLC..................................... 892
43,600 HSBC Holdings PLC............................ 736
15,600 Johnston Press PLC........................... 162
20,200 Lloyds TSB Group PLC......................... 184
52,500 National Grid Group PLC...................... 500
56,300 Pearson PLC.................................. 679
5,500 Reckitt Benckiser PLC........................ 166
57,500 Reed Elsevier PLC............................ 531
32,100 Rentokill Initial PLC........................ 91
10,500 Rio Tinto PLC................................ 309
39,100 Royal Bank of Scotland Group PLC++ .......... 1,315
34,300 Shell Transport & Trading Company PLC........ 292
16,980 Smiths Group PLC............................. 268
27,500 Standard Chartered PLC....................... 511
63,000 TI Automotive Ltd., Class A+ ................ 0***#
52,700 Unilever PLC................................ 518
1,249,498 Vodafone Group PLC.......................... 3,389
10,600 Wolseley PLC................................ 198
20,000 Xstrata PLC................................. 358
--------
15,235
--------
FRANCE - 10.5%
8,800 Accor SA.................................... 385
18,100 BNP Paribas SA.............................. 1,311
23,500 Bouygues SA++**............................. 1,086
3,000 Compagnie Generale des Etablissements
Michelin, Class B........................ 192
3,500 Dassault Systemes SA........................ 177
See Notes to Financial Statements.
53
Portfolio of Investments (Continued)
VT INTERNATIONAL GROWTH FUND
December 31, 2004
VALUE
SHARES (000s)
------ ------
COMMON STOCKS - (CONTINUED)
FRANCE - (CONTINUED)
4,100 Essilor International SA ............................. $ 321
6,600 Groupe Danone ........................................ 610
3,941 L'Air Liquide SA ..................................... 729
3,900 L'Oreal SA ........................................... 296
4,400 Renault SA ........................................... 368
34,200 Sanofi-Aventis ....................................... 2,733
1,333 Sanofi-Aventis (F) ................................... 107
6,100 Schneider Electric SA ................................ 425
2,500 Societe Generale Group ............................... 253
14,000 STMicroelectronics NV ................................ 273
1,300 STMicroelectronics NV (F) ............................ 25
13,000 Vivendi Universal SA+ ................................ 415
-----------
9,706
-----------
NETHERLANDS - 10.1%
47,402 ABN AMRO Holding NV .................................. 1,256
71,793 AEGON NV ............................................. 979
6,250 Heineken Holding NV, Class A ......................... 189
27,700 Heineken NV .......................................... 924
25,231 ING Groep NV ......................................... 764
125,800 Koninklijke (Royal) KPN NV ........................... 1,195
5,300 Koninklijke (Royal) Numico NV+ ....................... 191
6,000 Koninklijke (Royal) Philips Electronics NV ........... 159
8,500 Reed Elsevier NV ..................................... 116
41,500 Royal Dutch Petroleum Company ........................ 2,389
2,900 Royal Dutch Petroleum Company (F) .................... 166
10,200 TPG NV ............................................... 277
5,700 Unilever NV .......................................... 382
10,197 VNU NV ............................................... 301
-----------
9,288
-----------
SWITZERLAND - 9.8%
3,000 Adecco SA ............................................ 151
33,094 Compagnie Financiere Richemont AG,
A Units ............................................. 1,102
14,326 Credit Suisse Group+ ................................. 602
16,012 Holcim Ltd. .......................................... 965
4,825 Nestle SA ............................................ 1,262
33,065 Novartis AG .......................................... 1,666
1,492 Roche Holding AG-Genusschein ......................... 172
311 Serono SA ............................................ 205
13,096 Swiss Reinsurance Company ............................ 934
2,425 Swisscom AG .......................................... 955
2,515 Syngenta AG .......................................... 267
1,700 Synthes, Inc.+ ....................................... 191
6,953 UBS AG ............................................... 583
-----------
9,055
-----------
GERMANY - 5.6%
4,400 Allianz AG ........................................... 584
18,100 Bayerische Hypo-und Vereinsbank AG+ .................. 411
4,100 Bayerische Motoren Werke (BMW) AG .................... 185
19,100 DaimlerChrysler AG ................................... 915
3,400 Deutsche Bank AG ..................................... 302
5,546 Deutsche Boerse AG ................................... 334
4,800 E.ON AG .............................................. 437
17,900 Infineon Technologies AG+ ............................ 194
2,500 Metro AG ............................................. 138
2,657 Muenchener Rueckversicherungs-
Gesellschaft AG++ .................................... 327
1,600 SAP AG ............................................... 286
1,200 SAP AG, Sponsored ADR ................................ 53
7,500 Siemens AG ........................................... 636
6,500 ThyssenKrupp AG ...................................... 143
4,000 Volkswagen AG ........................................ 181
-----------
5,126
-----------
SPAIN - 4.2%
71,100 Banco Bilbao Vizcaya Argentaria SA ................... 1,261
34,300 Banco Santander Central Hispano SA ................... 426
8,400 Iberdrola SA** ....................................... 213
21,500 Industria de Diseno Textil SA (Inditex)** ............ 634
5,400 Repsol YPF SA ........................................ 141
63,790 Telefonica SA ........................................ 1,202
-----------
3,877
-----------
CANADA - 4.0%
20,200 Abitibi-Consolidated Inc. ............................ 139
16,200 Alcan Inc.** ......................................... 795
8,700 Cameco Corporation ................................... 304
800 Great-West Lifeco Inc.** ............................. 18
10,600 Inco Ltd. (F)+ ....................................... 390
4,500 Manulife Financial Corporation** ..................... 208
4,200 National Bank of Canada** ............................ 174
4,500 Potash Corporation of Saskatchewan Inc. .............. 375
6,500 Suncor Energy Inc. ................................... 230
10,100 TELUS Corporation** .................................. 293
20,900 Thomson Corporation** ................................ 737
-----------
3,663
-----------
AUSTRALIA - 2.9% +++
27,700 Amcor Ltd. ........................................... 160
18,545 Australia & New Zealand Banking
Group Ltd. ........................................... 299
27,800 Brambles Industries Ltd.** ........................... 151
37,212 Foster's Group Ltd. .................................. 169
44,100 Insurance Australia Group Ltd. ....................... 222
7,714 National Australia Bank Ltd. ......................... 174
28,800 Promina Group Ltd. ................................... 122
24,587 QBE Insurance Group Ltd. ............................. 296
32,928 Rinker Group Ltd. .................................... 275
7,300 Wesfarmers Ltd. ...................................... 228
11,800 Westpac Banking Corporation .......................... 180
43,100 WMC Resources Ltd. ................................... 244
16,200 Woolworths Ltd. ...................................... 191
-----------
2,711
-----------
See Notes to Financial Statements.
54
Portfolio of Investments (Continued)
VT INTERNATIONAL GROWTH FUND
December 31, 2004
VALUE
SHARES (000s)
------ ------
COMMON STOCKS - (CONTINUED)
HONG KONG - 1.5% +++
19,000 Cheung Kong Holdings Ltd. ............................ $ 189
30,200 Esprit Holdings Ltd.++ ............................... 183
176,500 Hang Lung Properties Ltd. ............................ 273
10,600 Hang Seng Bank Ltd. .................................. 147
144,000 Johnson Electric Holdings Ltd. ....................... 140
170,000 Li & Fung Ltd. ....................................... 287
20,500 Swire Pacific Ltd., Class A .......................... 171
-----------
1,390
-----------
SWEDEN - 1.3%
12,900 Assa Abloy AB, B Shares .............................. 220
6,700 ForeningsSparbanken AB ............................... 167
5,200 Scania AB, Class B ................................... 206
136,000 Telefonaktiebolaget LM Ericsson, B Shares+ ........... 434
5,000 Telefonaktiebolaget LM Ericsson,
Sponsored ADR+ ............................... 157
-----------
1,184
-----------
SINGAPORE - 1.2% +++
621,214 Singapore Telecommunications, Ltd.++ ................. 907
21,000 United Overseas Bank Ltd. ............................ 177
-----------
1,084
-----------
SOUTH KOREA - 1.2% +++
2,485 Samsung Electronics Company Ltd. ..................... 1,081
-----------
ITALY - 0.9%
23,250 Eni SpA .............................................. 582
47,300 UniCredito Italiano SpA .............................. 272
-----------
854
-----------
NORWAY - 0.8%
20,700 DnB Holding ASA ...................................... 204
2,300 Norsk Hydro ASA ...................................... 181
5,100 Norske Skogindustrier ASA ............................ 110
18,200 Statoil ASA .......................................... 286
-----------
781
-----------
DENMARK - 0.7%
6,300 Novo Nordisk A/S, Class B ............................ 344
7,200 TDC A/S .............................................. 305
-----------
649
-----------
IRELAND - 0.7%
15,185 CRH PLC .............................................. 406
8,500 Elan Corporation PLC, ADR + .......................... 232
-----------
638
-----------
MEXICO - 0.7%
8,100 America Movil SA de CV, Series L, ADR ................ 424
4,700 Telefonos de Mexico SA de CV, Class L,
Sponsored ADR ...................................... 180
-----------
604
-----------
TAIWAN - 0.5% +++
58,296 Taiwan Semiconductor Manufacturing
Company Ltd., Sponsored ADR ...................... 495
-----------
FINLAND - 0.4%
24,500 Nokia Oyj ............................................ 387
800 UPM-Kymmene Oyj ...................................... 18
-----------
405
-----------
BRAZIL - 0.4%
15,000 Companhia Vale do Rio Doce,
Sponsored ADR .................................... 366
-----------
BELGIUM - 0.3%
13,600 SES GLOBAL, FDR ...................................... 176
2,800 UCB Group SA ......................................... 142
-----------
318
-----------
AUSTRIA - 0.3%
4,000 Erste Bank der oesterreichischen
Sparkassen AG .................................... 214
3,127 Telekom Austria AG ................................. 59
-----------
273
-----------
INDIA - 0.3%
3,800 Infosys Technologies Ltd.,
Sponsored ADR** .................................. 263
-----------
UNITED STATES - 0.2%
7,932 News Corporation (F), CDI ............................ 148
-----------
SOUTH AFRICA - 0.1%
2,400 Sasol Ltd ............................................ 52
-----------
RUSSIA - 0.0% ****
6,200 YUKOS, ADR +**........................................ 16
-----------
Total Common Stocks
(Cost $69,012) ................................ 89,409
-----------
CONVERTIBLE PREFERRED STOCKS - 0.8%
JAPAN - 0.8% +++
6,000,000 Sumitomo Mitsui Finance Group Inc. (F),
Conv. Pfd., 2.250% due 07/11/2005................ 140
24,000,000 Sumitomo Mitsui Finance Group Inc. (F),
Conv. Pfd., 2.250% due 07/11/2005++ ........... 558
-----------
Total Convertible Preferred Stocks
(Cost $279).................................... 698
-----------
PREFERRED STOCK - 0.1%
(Cost $12)
SOUTH KOREA - 0.1% +++
210 Samsung Electronics Company Ltd ...................... 61
-----------
See Notes to Financial Statements.
55
Portfolio of Investments (continued)
VT INTERNATIONAL GROWTH FUND
December 31, 2004
PRINCIPAL
AMOUNT VALUE
(000s) (000s)
- ------------ -------
CONVERTIBLE BONDS - 0.1%
(Cost $68)
SWITZERLAND -0.1%
$ 95 Credit Suisse Group Financial, Conv. Jr. Bond,
6.000% due 12/23/2005 ........................ $ 114
--------
REPURCHASE AGREEMENT - 2.1%
(Cost $1,955)
1,955 Agreement with Morgan Stanley, 0.500%
dated 12/31/2004, to be repurchased at
$1,955,000 on 01/03/2005
(Collateralized by U.S. Treasury Note,
3.000% due 07/15/2012,
market value $2,021,000)....................... 1,955
--------
SHORT-TERM INVESTMENT - 5.8%
(Cost $5,375)
5,375 Mellon GSL DBT II
Collateral Fund ++++........................ 5,375
--------
TOTAL INVESTMENTS (Cost $76,701*).................... 105.9% 97,612
OTHER ASSETS (LIABILITIES) (Net)..................... (5.9) (5,427)
----- --------
NET ASSETS........................................... 100.0% $ 92,185
===== ========
- ------------
* Aggregate cost for federal tax purposes is $78,016.
** Some or all of these securities are on loan at December 31, 2004, and have
an aggregate market value of $5,130,000, representing 5.6% of the total
net assets of the Fund (Collateral Value $5,375,000).
*** Value of security is $0.
**** Amount represents less than 0.1% of the total net assets of the Fund.
+ Non-income producing security.
++ Security acquired in a transaction exempt from registration under Rule
144A of the Securities Act of 1933, as amended.
+++ Investments in the areas of the Pacific Rim at December 31, 2004 are 30.0%
of the total net assets of the Fund.
++++ Represents investment purchased with cash collateral for securities
loaned.
# Represents fair value as determined in good faith under the direction of
the Board of Trustees.
See Notes to Financial Statements.
56
PORTFOLIO OF INVESTMENTS (CONTINUED)
VT INTERNATIONAL GROWTH FUND
December 31, 2004
SCHEDULE OF FORWARD FOREIGN CURRENCY CONTRACTS
FORWARD FOREIGN CURRENCY CONTRACTS TO
BUY CONTRACTS TO RECEIVE
(000s)
NET
UNREALIZED
APPRECIATION
EXPIRATION LOCAL VALUE IN IN EXCHANGE (DEPRECIATION)
DATE CURRENCY U.S.$ FOR U.S. $ OF CONTRACTS
- ------------ ---------- --------- ------------ --------------
01/05/2005 CAD 10 8 8 $ --***
06/30/2005 GBP 453 861 861 --***
---------------
$ --***
---------------
AT DECEMBER 31, 2004, SECTOR DIVERSIFICATION IS AS FOLLOWS (UNAUDITED):
% OF VALUE
SECTOR DIVERSIFICATION NET ASSETS (000S)
---------------------- ---------- ----------
COMMON STOCKS:
Banks ...................................... 16.1% $ 14,859
Telecommunication Services ................. 11.1 10,273
Pharmaceuticals & Biotechnology ............ 9.6 8,857
Materials .................................. 8.2 7,540
Insurance .................................. 5.5 5,091
Food, Beverage & Tobacco ................... 5.4 4,956
Energy ..................................... 5.3 4,880
Automobiles & Components ................... 4.2 3,897
Capital Goods .............................. 4.1 3,780
Semiconductors & Semiconductor Equipment ... 3.9 3,571
Media ...................................... 3.5 3,265
Consumer Durables & Apparel ................ 3.2 2,917
Diversified Financials ..................... 2.5 2,336
Retailing .................................. 2.4 2,209
Utilities .................................. 2.2 1,987
Real Estate Investment Trusts .............. 1.7 1,526
Electronic Equipment & Instruments ......... 1.3 1,236
Commercial Services & Supplies ............. 1.3 1,169
Communications Equipment ................... 1.1 978
Other ...................................... 4.4 4,082
------- ----------
TOTAL COMMON STOCKS ........................ 97.0 89,409
CONVERTIBLE PREFERRED STOCKS ............... 0.8 698
PREFERRED STOCK ............................ 0.1 61
CONVERTIBLE BONDS .......................... 0.1 114
REPURCHASE AGREEMENT ....................... 2.1 1,955
SHORT-TERM INVESTMENT ...................... 5.8 5,375
------- ----------
TOTAL INVESTMENTS .......................... 105.9 97,612
OTHER ASSETS AND LIABILITIES (Net) ......... (5.9) (5,427)
------- ----------
NET ASSETS ................................. 100.0% $ 92,185
======= ==========
FORWARD FOREIGN CURRENCY CONTRACTS TO SELL
CONTRACTS TO DELIVER
(000s)
NET
UNREALIZED
APPRECIATION/
EXPIRATION LOCAL VALUE IN IN EXCHANGE (DEPRECIATION)
DATE CURRENCY U.S. $ FOR U.S. $ OF CONTRACTS
- ---------- ----------------- -------- ------------ --------------
01/05/2005 JPY 2,672 26 25 $ (1)
01/24/2005 JPY 51,391 502 471 (31)
02/17/2005 CHF 234 206 199 (7)
03/01/2005 CHF 1,179 1,040 1,037 (3)
03/01/2005 JPY 28,568 280 280 --***
06/27/2005 EUR 227 309 307 (2)
06/30/2005 CHF 599 531 527 (4)
06/30/2005 EUR 245 334 334 --***
-------------
$ (48)
-------------
Net Unrealized Depreciation of Forward Foreign
Currency Contracts ............................... $ (48)
=============
- ------------------
*** Amount represents less than $500.
GLOSSARY OF TERMS
ADR -- American Depositary Receipt
CAD -- Canadian Dollar
CDI -- Chess Depositary Interest Receipt
CHF -- Swiss Franc
EUR -- EURO
(F) -- Foreign Shares
FDR -- Fiduciary Depositary Receipt
GBP -- Great Britain Pound Sterling
JPY -- Japanese Yen
See Notes to Financial Statements.
57
PORTFOLIO OF INVESTMENTS
VT SHORT TERM INCOME FUND
December 31, 2004
PRINCIPAL
AMOUNT VALUE
(000s) (000s)
- --------- --------
CORPORATE BONDS AND NOTES - 70.5%
FINANCIAL SERVICES - 11.8%
$ 1,000 Berkshire Hathaway Inc. Note,
3.375% due 10/15/2008 .................. $ 989
CIT Group Inc., Sr. Note:
1,000 7.375% due 04/02/2007 .................. 1,080
500 7.625% due 08/16/2005 .................. 514
500 Goldman Sachs Group, Inc., Note,
4.125% due 01/15/2008 ................... 507
Household Finance Corporation, Note:
1,500 5.750% due 01/30/2007 ................... 1,567
250 7.875% due 03/01/2007 ................... 272
1,500 Rollins Truck Leasing Corporation, Deb.,
8.375% due 02/15/2007 ................... 1,637
--------
6,566
--------
REAL ESTATE INVESTMENT TRUSTS/PROPERTY - 9.8%
1,000 CPG Partners LP, Note,
3.500% due 03/15/2009 ................... 963
750 Developers Diversified Realty Corporation,
Sr. Note, 6.625% due 01/15/2008 ......... 800
800 Duke-Weeks Realty Corporation, Note,
7.375% due 08/01/2007 ................... 876
600 EOP Operating LP, Note,
7.750% due 11/15/2007 ................... 663
1,000 Health Care Property Investors Inc.,
Note,
6.875% due 06/08/2005 ................... 1,016
1,000 Nationwide Health Properties Inc., Note,
9.750% due 03/20/2008 ................... 1,140
--------
5,458
--------
BANKS - 9.6%
750 Capital One Bank, Sr. Note,
8.250% due 06/15/2005 ................... 767
1,000 Fifth Third Bank, Note,
2.700% due 01/30/2007 ................... 985
1,000 J.P. Morgan Chase & Company, Note,
5.350% due 03/01/2007 ................... 1,038
1,500 MBNA America Bank N.A., Note,
6.500% due 06/20/2006 ................... 1,566
1,000 U.S. Bank N.A., Note,
2.850% due 11/15/2006 ................... 992
--------
5,348
--------
HEALTH CARE - 4.6%
1,500 Amgen Inc., Sr. Note,
4.000% due 11/18/2009** ................. 1,497
1,000 Cardinal Health, Inc., Note,
6.250% due 07/15/2008 ................... 1,057
--------
2,554
--------
UTILITIES - 4.6%
1,000 Constellation Energy Group, Inc., Note,
6.350% due 04/01/2007 ................... 1,057
350 Pacific Gas & Electric Company, First
Mortgage,
3.600% due 03/01/2009 ................... 345
350 Sempra Energy, Note,
4.750% due 05/15/2009 ................... 357
750 Texas-New Mexico Power Company,
Sr. Note,
6.250% due 01/15/2009 ................... 793
--------
2,552
--------
CABLE TV - 4.2%
1,250 AOL Time Warner Inc., Note,
6.150% due 05/01/2007 ................... 1,323
1,000 Cox Enterprises, Inc., Note,
4.375% due 05/01/2008** .................. 1,000
--------
2,323
--------
TELECOMMUNICATIONS - 4.2%
750 Deutsche Telekom International
Finance BV, Company Guarantee,
8.250% due 06/15/2005 ................... 768
500 TELUS Corporation, Note,
7.500% due 06/01/2007 ................... 543
1,000 Verizon Global Funding Corporation,
Note,
4.000% due 01/15/2008 1,009
--------
2,320
--------
AUTO MANUFACTURING & PARTS - 3.7%
1,000 Ford Motor Credit Company, Note,
6.500% due 01/25/2007 ................... 1,041
1,000 Toyota Motor Credit Corporation, Note,
5.650% due 01/15/2007 ................... 1,043
--------
2,084
--------
FOOD - 3.7%
1,000 ConAgra Inc., Sr. Note,
9.875% due 11/15/2005 ................... 1,052
1,000 Safeway Inc., Sr. Note,
6.150% due 03/01/2006 ................... 1,031
--------
2,083
--------
AIRLINES - 3.7%
2,000 Southwest Airlines Company, Pass-through
Certificates,
5.496% due 11/01/2006 .................. 2,061
--------
GAMING - 3.6%
1,000 Carnival Corporation, Company Guarantee,
3.750% due 11/15/2007 .................. 1,002
1,000 Harrah's Operating Company, Inc.,
Company Guarantee,
5.500% due 07/01/2010 .................. 1,036
--------
2,038
--------
CONSUMER PRODUCTS/SERVICES - 2.8%
1,000 PHH Corporation, Note,
6.000% due 03/01/2008 .................. 1,055
500 Sealed Air Corporation, Conv. Sr. Note,
3.000% due 06/30/2033** ................ 518
--------
1,573
--------
See Notes to Financial Statements.
58
Portfolio of Investments (continued)
VT SHORT TERM INCOME FUND
December 31, 2004
PRINCIPAL
AMOUNT VALUE
(000s) (000s)
- ---------- -------
CORPORATE BONDS AND NOTES - (CONTINUED)
INFORMATION TECHNOLOGY - 1.9%
$ 1,000 Computer Science Corporation, Note,
6.750% due 06/15/2006 ................. $ 1,047
-------
PAPER/FOREST PRODUCTS - 0.9%
500 Weyerhaeuser Company, Note,
6.000% due 08/01/2006 ................. 520
-------
RETAIL - 0.9%
500 CVS Corporation, Note,
4.000% due 09/15/2009 ................. 498
-------
AEROSPACE/DEFENSE - 0.5%
250 Boeing Capital Corporation, Sr. Note,
5.650% due 05/15/2006 ................. 258
-------
Total Corporate Bonds and Notes
(Cost $38,321) ........................ 39,283
-------
ASSET-BACKED SECURITIES (ABS) - 5.6%
642 Atlantic City Electric
Transition Funding LLC,
Series 2003-1, Class A1,
2.890% due 07/20/2011 ................. 632
1,000 Capital One Multi-Asset
Execution Trust,
Series 2003-A6, Class A6,
2.950% due 08/17/2009 ................. 994
67 FFCA Secured Lending Corporation, Series
1999-2, Class WA1A,
7.130% due 05/18/2026** ............... 67
Green Tree Financial Corporation:
227 Series 1995-1, Class B2,(in default),
9.200% due 06/15/2025 ................. 125
80 Series 1995-6, Class B1,
7.700% due 09/15/2026 ................. 57
79 Green Tree Home Improvement,Series
1995-D, Class B2,
7.450% due 09/15/2025 ............... 79
134 Mid-State Trust,Series 4, Class A,
8.330% due 04/01/2030 ................. 144
1,000 WFS Financial Owner Trust,Series 2004-3,
Class A4,
3.930% due 02/17/2012 ................. 1,004
-------
Total ABS
(Cost $3,243) ......................... 3,102
-------
COLLATERALIZED MORTGAGE OBLIGATIONS (CMO) - 3.9%
Federal Home Loan Mortgage Corporation:
70 Series 2541, Class LU,
4.000% due 12/15/2027 ................. 70
1,000 Series 2552, Class KB,
4.250% due 06/15/2027 ................. 1,005
1,071 Government National Mortgage Association,
Series 2002-70, Class PA,
4.500% due 08/20/2032 ................. 1,076
-------
Total CMO
(Cost $2,151) ......................... 2,151
-------
U.S.GOVERNMENT AGENCY MORTGAGE-BACKED
SECURITIES-3.1%
FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA) - 1.0%
$ 271 6.500% due 01/01/2014 ................ $ 288
220 8.000% due 05/01/2027 ................ 240
29 8.500% due 11/01/2017 ................ 32
-------
Total FNMA
(Cost $521) ........................... 560
-------
ADJUSTABLE RATE MORTGAGE-BACKED SECURITIES
(ARMS) - 0.9%
24 Federal Home Loan Mortgage
Corporation (FHLMC),
3.642% due ll/01/2021+ ................ 25
Federal National Mortgage
Association (FNMA):
11 3.796% due 01/01/2019+ ................ 11
2 3.813% due 11/01/2022+ ................ 2
10 4.000% due 11/01/2021+ ................ 10
23 4.646% due 11/01/2035+ ................ 23
426 4.660% due 11/01/2032+ ................ 432
5 5.555% due 04/01/2019+ ................ 6
-------
Total ARMS
(Cost $518) ........................... 509
-------
FEDERAL HOME LOAN MORTGAGE CORPORATION
(FHLMC) - 0.7%
329 6.000% due 05/01/2017 ................. 344
23 9.500% due 08/01/2016 ................. 26
-------
Total FHLMC
(Cost $357) ........................... 370
-------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
(GNMA) - 0.5%
31 8.000% due 06/15/2009-08/15/2012 ...... 33
29 9.000% due 12/15/2020-04/20/2025 ...... 33
198 10.000% due 12/15/2017-04/15/2025 ..... 221
15 11.000% due 12/15/2015 ................ 17
-------
Total GNMA
(Cost $291) ............................ 304
-------
Total U.S. Government Agency Mortgage-
Backed Securities
(Cost $1,687) ......................... 1,743
-------
U.S. GOVERNMENT AGENCY OBLIGATION - 1.8%
(Cost $997)
1,000 Federal Home Loan Mortgage
Corporation, Bond,
3.250% due 02/25/2008 ................. 994
-------
U.S. TREASURY NOTE - 1.8%
(Cost $1,000)
1,000 2.000% due 05/15/2006 ................. 989
-------
COMMERCIAL MORTGAGE-BACKED SECURITIES
(CMBS) - 0.7%
(Cost $387)
389 GMAC Commercial Mortgage Securities
Inc.,
Series 1999-CTL1, Class A,
7.151% due 12/15/2016** ............... 409
-------
See Notes to Financial Statements.
59
Portfolio of Investments(continued)
VT SHORT TERM INCOME FUND
December 31, 2004
PRINCIPAL
AMOUNT VALUE
(OOOS) (000S)
------ -------
REPURCHASE AGREEMENT- 11.6%
(Cost $6,448)
$ 6,448 Agreement with Morgan Stanley, 0.500%
dated 12/31/2004, to be repurchased at
$6,448,000 on 01/03/2005
(Collateralized by U.S. Treasury Note,
3.000% due 07/15/2012,
market value $6,666,000)....................... $ 6,448
-----------
TOTAL INVESTMENTS++ (Cost $54,234*)............... 99.0% 55,119
OTHER ASSETS (LIABILITIES) (Net) ................. 1 .0 551
----- -----------
NET ASSETS ...................................... 100.0% $ 55,670
===== ===========
- ----------
* Aggregate cost for federal tax purposes is $54, 188.
** Security acquired in a transaction exempt from registration under Rule
144A of the Securities Act of 1933, as amended.
+ Variable rate security. The interest rate shown
reflects the rate in effect at December 31, 2004.
++ All securities segregated as collateral for futures
contracts.
UNREALIZED
NUMBER OF VALUE DEPRECIATION
CONTRACTS (000S) (000S)
- --------- ------ ------------
FUTURES CONTRACTS-SHORT POSITION
35 U.S. 5 Year Treasury Note,
March 2005 ............ $ 3,834 $ (32)
===========
See Notes to Financial Statements.
60
Portfolio of Investments
VT U.S. GOVERNMENT SECURITIES FUND
December 31, 2004
PRINCIPAL
AMOUNT VALUE
(000s) (000s)
- --------- --------
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED
SECURITIES - 65.9%
FEDERAL HOME LOAN MORTGAGE CORPORATION (FHLMC) - 31.9%
$ 3,522 4.000% due 08/01/2018.............................................. $ 3,451
10,981 4.500% due 04/01/2018-08/01/2033................................... 10,901
22,182 5.000% due 04/01/2018-05/01/2034................................... 22,124
28,414 5.500% due 12/01/2008-11/01/2034................................... 28,983
13,450 6.000% due 01/01/2013-05/01/2034................................... 13,960
5,387 6.500% due 11/01/2016-01/01/2032................................... 5,678
2,510 7.000% due 04/01/2008-04/01/2032................................... 2,667
155 7.500% due 02/01/2031.............................................. 166
123 8.000% due 07/01/2007-12/01/2030................................... 130
111 8.500% due 07/01/2029.............................................. 121
60 8.750% due 01/01/2013.............................................. 63
--------
Total FHLMC
(Cost $87,719).................................................... 88,244
--------
FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA) - 24.2%
2,958 4.500% due 12/01/2018.............................................. 2,958
17,311 5.000% due 04/01/2018-06/01/2034................................... 17,533
22,508 5.500% due 01/01/2017-09/01/2034................................... 22,940
5,401 6.000% due 12/01/2016-02/01/2034................................... 5,632
13,713 6.500% due 09/01/2024-07/01/2034................................... 14,426
1,626 7.000% due 08/01/2028-11/01/2031................................... 1,726
285 7.500% due 11/01/2029.............................................. 307
595 8.000% due 05/01/2022-09/01/2027................................... 645
416 8.500% due 02/01/2023-10/01/2027................................... 457
187 9.000% due 09/01/2030.............................................. 205
--------
Total FNMA
(Cost $66,516).................................................... 66,829
--------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (GNMA) - 9.8%
9,838 5.500% due 07/20/2033-03/20/2034................................... 10,048
12,561 6.000% due 02/20/2029-08/15/2034................................... 13,035
2,392 6.500% due 03/20/2031-04/20/2034................................... 2,517
589 7.000% due 01/15/2028-06/20/2031................................... 626
695 7.500% due 01/15/2023-11/15/2023................................... 752
45 7.750% due 12/15/2029.............................................. 49
214 8.000% due 07/15/2026-06/20/2030................................... 233
--------
Total GNMA
(Cost $26,994).................................................... 27,260
--------
Total U.S. Government Agency Mortgage-Backed Securities
(Cost $181,229)................................................... 182,333
--------
COLLATERALIZED MORTGAGE OBLIGATIONS (CMO) - 18.6%
1,835 Banc of America Mortgage Securities, Inc.,
Pass-through Certificates, Series 2004-4,
Class 2A1,
5.500% due 05/25/2034.............................................. 1,857
2,266 Countrywide Alternative Loan Trust, Series
2003-13T1, Class A1,
4.000% due 08/25/2033.............................................. 2,235
Countrywide Home Loans:
$ 3,629 Series 2003-50, Class A1,
5.000% due 11/25/2018.............................................. 3,663
4,000 Series 2004-4, Class A5,
5.250% due 05/25/2034.............................................. 4,027
Credit Suisse First Boston Mortgage
Securities Corporation, Pass-through
Certificates:
3,124 Series 2003-08, Class 1A1,
5.750% due 04/25/2033.............................................. 3,189
4,000 Series 2003-11, Class 1A3,
4.500% due 06/25/2033.............................................. 4,023
Federal Home Loan Mortgage Corporation:
4,500 Series 2449, Class ND,
6.500% due 05/15/2030.............................................. 4,639
1,382 Series 2551, Class QK,
5.500% due 01/15/2033.............................................. 1,409
2,256 Series 2575, Class LM,
4.500% due 05/15/2032.............................................. 2,275
Federal National Mortgage Association:
3,000 Grantor Trust, Series 2000-T5, Class B,
7.300% due 05/25/2010.............................................. 3,449
3,170 Series 2002-16, Class TM,
7.000% due 04/25/2032.............................................. 3,307
Federal National Mortgage Association,
REMIC, Pass-through Certificates:
51 Series 1989-90, Class E,
8.700% due 12/25/2019.............................................. 54
1,095 Series 1992-55, Class DZ,
8.000% due 04/25/2022.............................................. 1,146
4,000 GSR Mortgage Loan Trust, Pass-through
Certificates, Series 2003-4F, Class 2A3,
5.000% due 05/25/2033.............................................. 4,051
3,000 Residential Funding Mortgage Security,
Series 2003-S20, Class 1A4,
5.500% due 12/25/2033.............................................. 3,001
Vendee Mortgage Trust:
3,853 Series 2000-2, Class G,
7.500% due 10/15/2009.............................................. 3,932
5,000 Series 2000-3, Class 2H,
7.500% due 11/15/2014.............................................. 5,223
--------
Total CMO
(Cost $51,300)..................................................... 51,480
--------
U.S. TREASURY OBLIGATIONS - 7.9%
U.S. TREASURY NOTES - 7.2%
1,000 3.500% due 12/15/2009.............................................. 995
3,000 4.000% due 02/15/2014.............................................. 2,959
2,000 4.250% due 11/15/2013.............................................. 2,013
3,000 4.375% due 05/15/2007.............................................. 3,084
5,000 4.750% due 05/15/2014.............................................. 5,212
3,000 5.000% due 08/15/2011.............................................. 3,195
2,000 5.750% due 08/15/2010.............................................. 2,203
350 6.250% due 02/15/2007.............................................. 373
--------
20,034
--------
See Notes to Financial Statements.
61
Portfolio of Investments (continued)
VT U.S. GOVERNMENT SECURITIES FUND
December 31, 2004
PRINCIPAL
AMOUNT VALUE
(000s) (000s)
- --------- --------
U.S. TREASURY OBLIGATIONS - (CONTINUED)
U.S. TREASURY BONDS - 0.7%
$ 1,300 6.250% due 08/15/2023.............................................. $ 1,523
300 12.750% due 11/15/2010............................................. 325
--------
1,848
--------
Total U.S. Treasury Obligations
(Cost $21,314).................................................... 21,882
--------
U.S. GOVERNMENT AGENCY OBLIGATIONS - 4.5%
Federal Home Loan Bank, Bond:
2,000 4.500% due 09/16/2013.............................................. 2,017
2,000 5.125% due 03/06/2006.............................................. 2,047
2,500 6.500% due 08/14/2009.............................................. 2,787
3,000 7.375% due 02/12/2010.............................................. 3,465
2,000 Housing Urban Development, Government
Guarantee, Series 99-A,
6.160% due 08/01/2011.............................................. 2,132
--------
Total U.S. Government Agency Obligations
(Cost $11,751)..................................................... 12,448
--------
REPURCHASE AGREEMENT - 2.6%
(Cost $7,040)
7,040 Agreement with Morgan Stanley, 0.500%
dated 12/31/2004, to be repurchased at
$7,040,000 on 01/03/2005
(Collateralized by U.S. Treasury Note,
3.000% due 07/15/2012,
market value $7,278,000)................................... 7,040
--------
TOTAL INVESTMENTS (Cost $272,634*)..................................... 99.5% 275,183
OTHER ASSETS (LIABILITIES) (Net)....................................... 0.5 1,390
----- --------
NET ASSETS............................................................. 100.0% $276,573
===== ========
- --------------------------------
* Aggregate cost for federal tax purposes is $272,933.
GLOSSARY OF TERMS
REMIC -- Real Estate Mortgage Investment Conduit
See Notes to Financial Statements.
62
Portfolio of Investments
VT INCOME FUND
December 31, 2004
PRINCIPAL
AMOUNT VALUE
(000s) (000s)
- --------- --------
CORPORATE BONDS AND NOTES - 68.8%
FINANCIAL SERVICES/BANKS - 11.3%
$ 1,000 Abbey National PLC, Sub. Note,
6.690% due 10/17/2005.............................................. $ 1,025
500 American General Corporation, Note,
7.500% due 07/15/2025.............................................. 616
1,000 American General Finance, Inc.,
MTN, Series I,
4.625% due 05/15/2009.............................................. 1,019
400 Banc One Corporation, Sub. Note,
10.000% due 08/15/2010.............................................. 505
1,000 Bank of America Corporation, Sub. Note,
7.800% due 02/15/2010.............................................. 1,164
500 CIT Group Inc., Sr. Note,
7.750% due 04/02/2012.............................................. 593
3,000 Citigroup, Inc., Note,
6.500% due 01/18/2011.............................................. 3,354
1,000 Farmers Insurance Exchange, Note,
6.000% due 08/01/2014**............................................ 1,016
2,500 Goldman Sachs Group, Inc., Bond,
6.875% due 01/15/2011.............................................. 2,824
1,000 Hartford Life Insurance Company, Deb.,
7.650% due 06/15/2027.............................................. 1,210
1,500 Jefferies Group, Inc., Sr. Note,
7.750% due 03/15/2012.............................................. 1,704
1,000 Legg Mason, Inc., Sr. Note,
6.750% due 07/02/2008.............................................. 1,090
2,000 Merrill Lynch & Company Inc., Note,
6.000% due 02/17/2009.............................................. 2,148
1,500 Morgan Stanley Dean Witter & Company,
Note,
6.750% due 04/15/2011.............................................. 1,685
1,100 NCNB Corporation, Sub. Note,
9.375% due 09/15/2009.............................................. 1,340
2,250 Wells Fargo & Company, Sub. Note,
4.625% due 04/15/2014.............................................. 2,225
--------
23,518
--------
OIL & GAS - 7.9%
1,200 ANR Pipeline Company, Deb.,
9.625% due 11/01/2021.............................................. 1,517
1,750 Consolidated Natural Gas Company, Sr. Note,
6.850% due 04/15/2011.............................................. 1,977
2,500 El Paso Natural Gas Company, Deb.,
7.500% due 11/15/2026.............................................. 2,622
1,000 Enterprise Products Partners LP, Company
Guarantee,
6.375% due 02/01/2013.............................................. 1,074
1,404 Express Pipeline LP, Sub. Note,
7.390% due 12/31/2017**............................................ 1,446
Petro-Canada:
500 Deb.,
9.250% due 10/15/2021.............................................. 687
1,000 Note,
4.000% due 07/15/2013.............................................. 938
2,500 Petrobras International Finance Company,
Sr. Note,
9.750% due 07/06/2011.............................................. 3,013
1,000 Southern Natural Gas Company, Sr. Note,
8.000% due 03/01/2032.............................................. 1,096
500 Tesoro Petroleum Corporation, Note,
8.000% due 04/15/2008.............................................. 546
1,500 XTO Energy Inc., Sr. Note,
6.250% due 04/15/2013.............................................. 1,644
--------
16,560
--------
TRANSPORTATION/AUTO - 7.7%
2,000 Burlington Northern Santa Fe Corporation, Deb.,
8.125% due 04/15/2020.............................................. 2,609
346 Continental Airlines Inc., Pass-through
Certificates, Series 1997-4C,
6.800% due 07/02/2007.............................................. 315
420 CSX Transportation, Inc., Deb.,
9.750% due 06/15/2020.............................................. 587
400 Ford Holdings Inc., Company Guarantee,
9.300% due 03/01/2030.............................................. 470
250 Ford Motor Company, Deb.,
8.900% due 01/15/2032.............................................. 285
2,000 Ford Motor Credit Company, Note,
7.375% due 10/28/2009.............................................. 2,160
1,000 General Motors Corporation, Deb.,
9.400% due 07/15/2021.............................................. 1,132
Norfolk Southern Corporation:
1,000 Bond,
7.800% due 05/15/2027.............................................. 1,256
580 Deb.,
9.750% due 06/15/2020.............................................. 822
2,500 Sr. Note,
6.200% due 04/15/2009.............................................. 2,711
2,000 Southwest Airlines Company, Pass-through
Certificates, Series A-4,
9.150% due 07/01/2016.............................................. 2,394
750 Trailer Bridge, Inc., Sr. Sec. Note,
9.250% due 11/15/2011**............................................ 775
1,136 United Air Lines Inc., Pass-through
Certificates, (in default),
9.560% due 10/19/2018.............................................. 473
--------
15,989
--------
CONSUMER PRODUCTS/SERVICES - 6.6%
1,750 Carnival Corporation, Deb.,
7.200% due 10/01/2023.............................................. 2,040
1,000 Cendant Corporation, Note,
6.875% due 08/15/2006.............................................. 1,052
2,500 ConAgra, Inc., Sr. Note,
7.125% due 10/01/2026.............................................. 2,981
Mattel, Inc., Note:
500 6.125% due 07/15/2005.............................................. 508
1,000 7.300% due 06/13/2011.............................................. 1,122
1,500 Reed Elsevier Capital Inc., Company
Guarantee,
6.750% due 08/01/2011.............................................. 1,690
1,000 Royal Caribbean Cruises Ltd., Sr. Note,
8.000% due 05/15/2010.............................................. 1,135
1,500 Sealed Air Corporation,
Conv. Sr. Note,
3.000% due 06/30/2033**............................................ 1,553
See Notes to Financial Statements.
63
Portfolio of Investments (Continued)
VT INCOME FUND
December 31, 2004
PRINCIPAL
AMOUNT VALUE
(000s) (000s)
- --------- --------
CORPORATE BONDS AND NOTES - (CONTINUED)
CONSUMER PRODUCTS/SERVICES - (CONTINUED)
$ 1,500 Waste Management Inc., Sr. Note,
7.375% due 08/01/2010.............................................. $ 1,721
--------
13,802
--------
TELECOMMUNICATIONS - 5.9%
4,000 Deutsche Telekom Finance, Bond,
8.500% due 06/15/2010.............................................. 4,771
1,700 Northern Telecom Capital Inc., Company
Guarantee,
7.400% due 06/15/2006.............................................. 1,768
2,000 Qwest Corporation, Note,
8.875% due 03/15/2012**............................................ 2,320
1,000 TELUS Corporation, Note,
8.000% due 06/01/2011.............................................. 1,187
2,000 Vodafone Group PLC, Note,
7.750% due 02/15/2010.............................................. 2,323
--------
12,369
--------
UTILITIES - 5.8%
1,500 Arizona Public Service Company, Note,
6.500% due 03/01/2012.............................................. 1,670
1,850 Illinois Power Company, First Mortgage,
7.500% due 06/15/2009.............................................. 2,088
1,000 Metropolitan Edison Company, Sr. Note,
4.950% due 03/15/2013.............................................. 1,002
2,250 Pacific Gas & Electric Company,
First Mortgage,
4.200% due 03/01/2011.............................................. 2,228
1,500 PacifiCorp, First Mortgage,
4.950% due 08/15/2014.............................................. 1,518
500 Public Service Company of New Mexico,
Sr. Note,
4.400% due 09/15/2008.............................................. 505
1,500 Southwestern Electric Power Company, Note,
5.375% due 04/15/2015.............................................. 1,533
1,500 Texas-New Mexico Power Company, Sr. Note,
6.250% due 01/15/2009.............................................. 1,585
--------
12,129
--------
REAL ESTATE INVESTMENT TRUSTS - 5.2%
1,000 Arden Realty LP, Note,
5.200% due 09/01/2011.............................................. 1,010
1,000 Developers Diversified Realty Corporation,
Note,
4.625% due 08/01/2010.............................................. 994
2,000 Health Care Property Investors, Inc., Note,
6.000% due 03/01/2015.............................................. 2,126
2,500 Healthcare Realty Trust, Inc., Sr. Note,
8.125% due 05/01/2011.............................................. 2,916
Nationwide Health Properties Inc., Note:
1,000 7.060% due 12/05/2006.............................................. 1,047
2,500 9.750% due 03/20/2008.............................................. 2,849
--------
10,942
--------
HEALTH CARE - 4.8%
1,500 Aetna Inc., Sr. Note,
7.375% due 03/01/2006.............................................. 1,562
2,000 Cardinal Health, Inc., Note,
6.750% due 02/15/2011.............................................. 2,203
DVI, Inc., Sr. Note, (in default):
400 9.875% due 02/01/2004++............................................ 68
900 9.875% due 02/01/2004++............................................ 153
2,000 HCA Inc., Sr. Note,
8.750% due 09/01/2010.............................................. 2,289
250 HIH Capital Ltd., Conv. Note,
7.500% due 09/25/2006.............................................. 246
750 IVAX Corporation, Conv. Sr. Sub. Note,
4.500% due 05/15/2008.............................................. 754
3,000 Tenet Healthcare Corporation, Sr. Note,
6.375% due 12/01/2011.............................................. 2,797
--------
10,072
--------
MEDIA - 3.4%
1,500 Comcast Cable Communications Inc., Sr. Note,
7.125% due 06/15/2013.............................................. 1,741
2,500 Cox Communications Inc., Note,
7.875% due 08/15/2009.............................................. 2,840
1,200 News America Holdings Inc., Sr. Deb.,
8.000% due 10/17/2016.............................................. 1,466
500 Tele-Communications, Inc., Sr. Deb.,
7.875% due 08/01/2013.............................................. 601
300 Time Warner Inc., Deb.,
9.150% due 02/01/2023.............................................. 403
--------
7,051
--------
INFORMATION TECHNOLOGY - 2.5%
1,000 BEA Systems Inc., Conv. Sub. Note,
4.000% due 12/15/2006.............................................. 1,007
2,500 Conexant Systems Inc., Conv. Sub. Note,
4.000% due 02/01/2007.............................................. 2,275
1,000 Extreme Networks, Inc., Conv. Sub. Note,
3.500% due 12/01/2006.............................................. 982
1,000 TriQuint Semiconductor, Inc., Conv. Sub. Note,
4.000% due 03/01/2007.............................................. 973
--------
5,237
--------
GAMING - 2.4%
500 Harrah's Operating Company Inc., Company
Guarantee,
8.000% due 02/01/2011.............................................. 581
2,000 Park Place Entertainment Corporation, Sr. Note,
7.500% due 09/01/2009.............................................. 2,235
2,000 Riviera Holdings Corporation, Company
Guarantee,
11.000% due 06/15/2010............................................. 2,245
--------
5,061
--------
RETAIL - 1.9%
1,000 Fred Meyer Inc., Company Guarantee,
7.450% due 03/01/2008.............................................. 1,103
2,500 Safeway Inc., Note,
7.500% due 09/15/2009.............................................. 2,829
--------
3,932
--------
See Notes to Financial Statements.
64
Portfolio of Investments (continued)
VT INCOME FUND
December 31, 2004
PRINCIPAL
AMOUNT VALUE
(000s) (000s)
- ----------- ------------
CORPORATE BONDS AND NOTES - (CONTINUED)
INDUSTRIAL PRODUCTS - 1.6%
$ 104 Covanta Energy Corporation,
Sr. Sec. Note,
8.250% due 03/15/2011 .................. $ 98
2,000 Noranda Inc., Note,
6.000% due 10/15/2015 .................. 2,098
Weyerhaeuser Company:
500 Deb.,
7.375% due 03/15/2032 .................. 595
500 Note,
6.750% due 03/15/2012 .................. 564
------------
3,355
------------
FOREIGN GOVERNMENT (U.S. DOLLAR DENOMINATED) - 1.1%
1,114 Federative Republic of Brazil, C-Bond,
8.000% due 04/15/2014 .................. 1,147
1,000 United Mexican States, Bond,
9.875% due 02/01/2010 .................. 1,232
------------
2,379
------------
AEROSPACE/DEFENSE - 0.7%
1,000 Boeing Company, Deb.,
8.750% due 08/15/2021 .................. 1,340
------------
Total Corporate Bonds and Notes
(Cost $131,253) ........................ 143,736
------------
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED
SECURITIES - 20.4%
FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA) - 10.3%
8,037 4.000% due 09/01/2018-10/01/2018 ......... 7,863
2,042 5.000% due 01/01/2018 .................... 2,078
6,032 5.500% due 03/01/2033-06/01/2033 ......... 6,135
1,097 6.000% due 04/01/2032 .................... 1,137
1,778 6.500% due 05/01/2031-05/01/2032 ......... 1,866
68 7.000% due 01/01/2030 .................... 72
2,000 7.630% due 02/01/2010 .................... 2,243
------------
Total FNMA
(Cost $21,173) ......................... 21,394
------------
FEDERAL HOME LOAN MORTGAGE CORPORATION (FHLMC) - 9.4%
3,451 4.500% due 08/01/2033 .................... 3,340
10,775 5.000% due 04/01/2018-05/01/2033 ......... 10,865
2,602 5.500% due 11/01/2017-05/01/2031 ......... 2,683
1,624 6.000% due 03/01/2031-05/01/2032 ......... 1,680
565 6.500% due 06/01/2029-08/01/2029 ......... 594
394 7.000% due 01/01/2032 .................... 418
28 9.000% due 01/01/2025 .................... 31
------------
Total FHLMC
(Cost $19,536) ......................... 19,611
------------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (GNMA) - 0.7%
$ 790 6.000% due 05/20/2032 .................... $ 819
588 7.000% due 06/20/2031 .................... 623
51 9.000% due 02/15/2025 .................... 58
------------
Total GNMA
(Cost $1,432) .......................... 1,500
------------
Total U.S. Government Agency Mortgage-
Backed Securities
(Cost $42,141) ......................... 42,505
------------
U.S. TREASURY NOTES - 6.3%
6,000 3.375% due 11/15/2008 .................... 5,986
7,250 3.375% due 12/15/2008 .................... 7,229
------------
Total U.S. Treasury Notes
(Cost $13,207) ......................... 13,215
------------
SHARES
RIGHTS - 0.0% +++
(Cost $19)
5,250 Danielson Holding Corporation-Rights+ .... 35#
------------
PRINCIPAL
AMOUNT
(000S)
- -----------
REPURCHASE AGREEMENT - 3.2%
(Cost $6,763)
$ 6,763 Agreement with Morgan Stanley, 0.500%
dated 12/31/2004, to be repurchased at
$6,763,000 on 01/03/2005
(Collateralized by U.S.
Treasury Note, 3.000% due
07/15/2012, market value
$6,992,000) ............................ 6,763
------------
TOTAL INVESTMENTS (Cost $193,383*) .................. 98.7% 206,254
OTHER ASSETS (LIABILITIES) (Net) .................... 1.3 2,674
---- ------------
NET ASSETS .......................................... 100% $ 208,928
==== ============
- ---------------------------
* Aggregate cost for federal tax purposes is $193,896.
** Security acquired in a transaction exempt from registration under Rule
144A of the Securities Act of 1933, as amended.
+ Non-income producing security.
++ Defaulted security is past maturity but continues to be valued in
recognition of future potential worth.
+++ Amount represents less than 0.1% of the total net assets of the Fund.
# Represents fair value as determined in good faith under the direction of
the Board of Trustees.
GLOSSARY OF TERMS
MTN -- Medium Term Note
See Notes to Financial Statements.
65
Portfolio of Investments
VT MONEY MARKET FUND
December 31, 2004
PRINCIPAL
AMOUNT VALUE
(000S) (000s)
--------- ------
COMMERCIAL PAPER (DOMESTIC) - 3.0%
(Cost $598)
$ 600 Cooperative Association of Tractor Dealers
Inc. Series A,
2.125% due 03/11/2005+++ ........................ $ 598
--------
COMMERCIAL PAPER (YANKEE) - 5.6%
400 ABN AMRO Bank NV North America,
1.970% due 01/24/2005+++......................... 400
725 UBS Finance (D.E.) LLC,
2.630% due 06/15/2005+++ ........................ 716
--------
Total Commercial Paper (Yankee)
(Cost $1,116).................................... 1,116
--------
CERTIFICATES OF DEPOSIT (YANKEE) - 13.9%
700 Bank of Nova Scotia,
2.348% due 06/24/2005++ ......................... 700
1,000 Canadian Imperial Bank of Commerce,
2.373% due 01/31/2005++.......................... 1,000
1,100 Royal Bank of Canada,
2.343% due 01/24/2005++ ........................ 1,100
--------
Total Certificates of Deposit (Yankee)
(Cost $2,800).................................... 2,800
--------
MEDIUM TERM NOTES - 7.0%
700 JPMorgan Chase & Co., Series C,
2.610% due 02/24/2005++.......................... 700
700 Norwest Corporation, Series F,
6.500% due 06/01/2005 .......................... 712
--------
Total Medium Term Notes
(Cost $1,412) ................................... 1,412
--------
CORPORATE BONDS AND NOTES - 28.3%
800 ACF Parking Ltd, Note,
(LOC: Fifth Third Bank),
2.420% due 05/01/2022+ .......................... 800
655 Allstate Corporation, Sr. Note,
7.875% due 05/01/2005............................ 667
619 Bank of America Corporation, Note,
7.875% due 05/16/2005 ........................... 632
769 Everett Clinic, P.S., Bond,
(LOC: Bank of America),
2.089% due 05/01/2022+ .......................... 769
500 Gutwein Properties & Company, Note,
(LOC: Fifth Third Bank),
2.420% due 12/01/2024+ .......................... 500
955 Lauren Company LLC, Bond,
(LOC: Wells Fargo Bank),
2.520% due 07/01/2033+** ........................ 955
850 SouthTrust Bank NA, Note,
2.230% due 05/02/2005++ ......................... 850
500 U.S. Bank NA, Note,
2.220% due 07/18/2005 ........................... 500
--------
Total Corporate Bonds and Notes
(Cost $5,673).................................... 5,673
--------
TAXABLE MUNICIPAL BONDS - 29.0%
750 California Statewide Communities
Development Authority, MFHR, (Hallmark
House Apartments), Series ZZ-T,
(FNMA Collateral),
2.530% due 12/15/2036+........................... 750
975 Connecticut State Housing Finance Authority,
Housing Revenue, (Housing Mortgage
Finance Program), Series F-1,
(AMBAC Insured),
2.420% due 11/15/2016+ .......................... 975
855 Illinois Health Facilities Authority, Health
Care Revenue, (Loyola University Health
System), Series C, (MBIA Insured),
2.400% due 07/01/2024+........................... 855
920 New York State Housing Finance Agency,
Housing Revenue, (West 20th Street
Project), Series B, (FNMA Collateral),
2.450% due 05/15/2033+ .......................... 920
900 Oakland-Alameda County, California,
Coliseum Authority, Lease Revenue,
(Coliseum Project), Series D,
(LOC: Wachovia Bank),
2.450% due 02/01/2011+ .......................... 900
500 Shelby County, Tennessee, Health,
Educational & Housing Facilities Board,
MFHR, Series A-T, (LOC: Bank of
America),
2.400% due 07/01/2022+ ............................ 500
570 Washington State Housing Finance
Commission, MFHR, (Bremerton Project),
Series B, (FNMA Collateral),
2.480% due 05/15/2033+ .......................... 570
340 Washington State Housing Finance
Commission, Nonprofit Revenue, (Pioneer
Human Services Projects), Series B,
(LOC: U.S. Bank),
2.600% due 08/01/2019+........................... 340
--------
Total Taxable Municipal Bonds
(Cost $5,810).................................... 5,810
--------
U.S. GOVERNMENT AGENCY OBLIGATION - 3.0%
(Cost $599)
FEDERAL HOME LOAN BANK (FHLB) - 3.0%
600 1.520% due 05/17/2005 ............................. 599
--------
FUNDING AGREEMENT - 2.5%
(Cost $500)
500 New York Life Insurance,
2.220% due 08/03/2005++*** ........................ 500#
--------
See Notes to Financial Statements.
66
Portfolio of Investments (continued)
VT MONEY MARKET FUND
December 31, 2004
PRINCIPAL
AMOUNT VALUE
(000s) (000s)
- ----------- -----------
REPURCHASE AGREEMENT - 7.1%
(Cost $1,432)
$ 1,432 Agreement with Morgan Stanley, 0.500%
dated 12/31/2004, to be repurchased at
$1,432,000 on 01/03/2005
(Collateralized by U.S. Treasury Note,
3.000% due 07/15/2012,
market value $1,480,000) ...................................... $ 1,432
-----------
TOTAL INVESTMENTS (Cost $19,940*) ................................. 99.4% 19,940
OTHER ASSETS (LIABILITIES) (Net) .................................. 0.6 124
----- -----------
NET ASSETS ........................................................ 100.0% $ 20,064
===== ===========
- ----------
* Aggregate cost for federal tax purposes.
** Security acquired in a transaction exempt from registration under Rule
144A of the Securities Act of 1933, as amended.
*** Security is restricted and illiquid. It was acquired on August 4, 2004,
and has a value of $0.02 per Fund share at December 31, 2004.
+ Variable rate securities payable upon demand with not more that five
business days' notice, and secured by bank letters of credit or guarantees
by certain corporations. The interest rate shown reflects the rate in
effect at December 31, 2004.
++ Floating rate security whose interest rate is reset periodically based on
an index.
+++ Rate represents discount rate on purchase date.
# Represents fair value as determined in good faith under the direction of
the Board of Trustees.
GLOSSARY OF TERMS
AMBAC -- American Municipal Bond Assurance Corporation
FNMA -- Federal National Mortgage Association
LOG -- Letter of Credit
MBIA -- Municipal Bond Investors Assurance
MFHR -- Multi-family Housing Revenue
See Notes to Financial Statements.
67
Statements of Assets and Liabilities
WM VARIABLE TRUST
December 31, 2004
(In thousands)
VT EQUITY VT GROWTH & VT WEST COAST VT MID CAP
VT REIT INCOME INCOME EQUITY STOCK VT GROWTH
FUND FUND FUND FUND FUND FUND
------- --------- ----------- ------------- ---------- ---------
ASSETS:
Investments, at value:
Securities ................................ $50,438 $204,752 $265,111 $125,045 $106,458 $239,680
Repurchase Agreements ..................... 1,351 8,549 11,471 2,511 8,360 5,342
Investments held as collateral for
securities loaned ....................... 2,083 11,101 9,770 7,471 6,134 10,866
------- -------- -------- -------- -------- --------
Total Investments (a) ..................... 53,872 224,402 286,352 135,027 120,952 255,888
Cash ........................................ 1 --* 1 --* --* 180
Unrealized appreciation of forward
foreign currency contracts ................ -- -- -- -- -- --
Dividends and/or interest receivable ........ 217 439 295 193 125 196
Receivable for Fund shares sold ............. 28 68 33 46 3 3
Receivable for investment securities sold ... -- -- -- 192 1,095 2,806
Prepaid expenses ............................ --* 1 1 --* --* 1
------- -------- -------- -------- -------- --------
Total Assets .............................. 54,118 224,910 286,682 135,458 122,175 259,074
------- -------- -------- -------- -------- --------
LIABILITIES:
Payable upon return of securities loaned .... 2,083 11,101 9,770 7,471 6,134 10,866
Unrealized depreciation of forward foreign
currency contracts ........................ -- -- -- -- -- 24
Payable for Fund shares redeemed ............ --* 30 13 21 3 69
Payable for investment securities purchased.. -- -- 2,458 209 1,502 869
Investment advisory fee payable ............. 34 111 173 67 72 183
Distribution fees payable ................... --* 5 1 2 1 --*
Variation margin ............................ -- -- -- -- -- --
Accrued legal and audit fees ................ 28 31 32 30 25 32
Accrued printing and postage expenses ....... 2 18 32 14 9 29
Accrued expenses and other payables ......... 1 3 3 3 2 10
------- -------- -------- -------- -------- --------
Total Liabilities ......................... 2,148 11,299 12,482 7,817 7,748 12,082
------- -------- -------- -------- -------- --------
NET ASSETS .................................. $51,970 $213,611 $274,200 $127,641 $114,427 $246,992
======= ======== ======== ======== ======== ========
(a) Investments, at cost .................... $36,542 $173,992 $225,636 $102,578 $ 93,158 $224,610
======= ======== ======== ======== ======== ========
- ----------
* Amount represents less than $500.
See Notes to Financial Statements.
68
VT U.S.
VT SMALL CAP VT SMALL CAP VT INTERNATIONAL VT SHORT TERM GOVERNMENT VT MONEY
VALUE GROWTH GROWTH INCOME SECURITIES VT INCOME MARKET
FUND FUND FUND FUND FUND FUND FUND
- ------------ ------------ ---------------- ------------- ---------- --------- ---------
$ 39,018 $ 56,175 $ 90,282 $ 48,671 $ 268,143 $ 199,491 $ 18,508
4,031 448 1,955 6,448 7,040 6,763 1,432
7,157 7,925 5,375 -- -- -- --
-------- -------- -------- -------- --------- -------- -------
50,206 64,548 97,612 55,119 275,183 206,254 19,940
--* 1 1 --* 1 14 --*
--* -- 1 -- -- -- --
72 13 152 616 1,581 2,752 50
-- 3 33 9 37 54 112
-- 309 26 --* -- 26 --
-- --* --* --* --* 1 --*
-------- -------- -------- -------- --------- -------- -------
50,278 64,874 97,825 55,744 276,802 209,101 20,102
-------- -------- -------- -------- --------- -------- -------
7,157 7,925 5,375 -- -- -- --
-- -- 49 -- -- -- --
-- 3 8 9 50 20 1
380 188 17 -- -- -- --
30 41 119 23 117 88 7
-- 1 --* 1 3 5 1
-- -- -- 5 -- -- --
31 31 32 30 30 30 24
8 8 13 4 20 25 4
4 2 27 2 9 5 1
-------- -------- -------- -------- --------- -------- -------
7,610 8,199 5,640 74 229 173 38
-------- -------- -------- -------- --------- -------- -------
$ 42,668 $ 56,675 $ 92,185 $ 55,670 $ 276,573 $208,928 $20,064
======== ======== ======== ======== ========= ======== =======
$ 43,958 $ 55,971 $ 76,701 $ 54,234 $ 272,634 $193,383 $19,940
======== ======== ======== ======== ========= ======== =======
See Notes to Financial Statements.
69
Statements of Assets and Liabilities (continued)
WM VARIABLE TRUST
December 31, 2004
(In thousands)
VT EQUITY VT GROWTH & VT WEST COAST VT MID CAP
VT REIT INCOME INCOME EQUITY STOCK VT GROWTH
FUND FUND FUND FUND FUND FUND
------- --------- ----------- ------------- ---------- ---------
NET ASSETS CONSIST OF:
Undistributed net investment income .............. $ 1,264 $ 3,778 $ 3,426 $ 927 $ 525 $ 1,292
Accumulated net realized gain/(loss)
on investment transactions ..................... 1,887 (1,305) (32,927) (3,103) 7,073 (105,692)
Net unrealized appreciation of investments ....... 17,330 50,410 60,716 32,449 27,794 31,254
Paid-in capital .................................. 31,489 160,728 242,985 97,368 79,035 320,138
------- --------- --------- --------- -------- ---------
Total Net Assets ............................... $51,970 $ 213,611 $ 274,200 $ 127,641 $114,427 $ 246,992
======= ========= ========= ========= ======== =========
NET ASSETS:
Class 1 Shares ................................... $51,632 $ 189,517 $ 270,775 $ 119,371 $108,347 $ 245,637
======= ========= ========= ========= ======== =========
Class 2 Shares ................................... $ 338 $ 24,094 $ 3,425 $ 8,270 $ 6,080 $ 1,355
======= ========= ========= ========= ======== =========
SHARES OUTSTANDING:
Class 1 Shares ................................... 3,044 11,654 14,885 5,837 6,589 18,857
======= ========= ========= ========= ======== =========
Class 2 Shares ................................... 20 1,489 189 406 372 105
======= ========= ========= ========= ======== =========
CLASS 1 SHARES:**
Net asset value, offering and redemption price per
share of beneficial interest outstanding ....... $ 16.96 $ 16.26 $ 18.19 $ 20.45 $ 16.44 $ 13.03
======= ========= ========= ========= ======== =========
CLASS 2 SHARES:**
Net asset value, offering and redemption price per
share of beneficial interest outstanding ....... $ 16.90 $ 16.18 $ 18.10 $ 20.35 $ 16.36 $ 12.94
======= ========= ========= ========= ======== =========
- ----------
* Amount represents less than $500.
** Net asset value is not shown in thousands.
See Notes to Financial Statements.
70
VT U.S.
VT GOVERNMENT VT VT MONEY
VT SMALL CAP VT SMALL CAP INTERNATIONAL VT SHORT TERM SECURITIES INCOME MARKET
VALUE FUND GROWTH FUND GROWTH FUND INCOME FUND FUND FUND FUND
- ------------- ------------ ------------- ------------- ----------- -------- ---------
$ 203 $ -- $ 474 $ 2,091 $ 12,193 $ 11,974 $ --
1,508 (23,677) (12,957) (565) (3,603) (1,630) --*
6,248 8,577 20,868 853 2,549 12,871 --
34,709 71,775 83,800 53,291 265,434 185,713 20,064
--------- --------- ----------- ----------- ---------- -------- --------
$ 42,668 $ 56,675 $ 92,185 $ 55,670 $ 276,573 $208,928 $ 20,064
========= ========= =========== =========== ========== ======== ========
$ 42,668 $ 53,049 $ 91,875 $ 48,574 $ 263,816 $185,570 $ 14,660
========= ========= =========== =========== ========== ======== ========
$ 3,626 $ 310 $ 7,096 $ 12,757 $ 23,358 $ 5,404
========= =========== =========== ========== ======== ========
3,477 5,384 7,197 18,850 24,643 16,749 14,675
========= ========= =========== =========== ========== ======== ========
371 24 2,769 1,196 2,121 5,406
========= =========== =========== ========== ======== ========
$ 12.27 $ 9.85 $ 12.77 $ 2.58 $ 10.71 $ 11.08 $ 1.00
========= ========= =========== =========== ========== ======== ========
$ 9.77 $ 12.71 $ 2.56 $ 10.66 $ 11.01 $ 1.00
========= =========== =========== ========== ======== ========
See Notes to Financial Statements.
71
Statement of Operations
WM VARIABLE TRUST
For the Year Ended December 31, 2004
(In thousands)
VT EQUITY VT WEST
VT REIT INCOME VT GROWTH & COAST VT MID CAP VT GROWTH
FUND FUND INCOME FUND EQUITY FUND STOCK FUND FUND
-------- ---------- ----------- ----------- ---------- ---------
INVESTMENT INCOME:
Dividends.................................... $ 1,866 $ 4,344 $ 5,402 $ 1,719 $ 1,243 $ 3,252
Interest..................................... 19 731 101 64 100 132
Foreign withholding taxes.................... -- (8) (34) -- (4) (30)
Securities lending income.................... 3 113 16 12 12 30
-------- ---------- ----------- ----------- ---------- ---------
Total investment income................... 1,888 5,180 5,485 1,795 1,351 3,384
-------- ---------- ----------- ----------- ---------- ---------
EXPENSES:
Investment advisory fee...................... 351 1,148 1,956 720 753 1,957
Class 2 Shares distribution fees............. --* 43 8 17 12 3
Custodian fees............................... 3 8 9 11 7 52
Legal and audit fees......................... 22 35 38 34 28 37
Trustees' fees............................... 1 5 7 3 3 6
Other........................................ 7 27 37 22 19 43
-------- ---------- ----------- ----------- ---------- ---------
Total expenses............................ 384 1,266 2,055 807 822 2,098
Fees reduced by custodian credits............ --* --* --* --* --* (2)
-------- ---------- ----------- ----------- ---------- ---------
Net expenses.............................. 384 1,266 2,055 807 822 2,096
-------- ---------- ----------- ----------- ---------- ---------
NET INVESTMENT INCOME/(LOSS)................. 1,504 3,914 3,430 988 529 1,288
-------- ---------- ----------- ----------- ---------- ---------
NET REALIZED AND UNREALIZED GAIN/(LOSS)
ON INVESTMENTS:
Net realized gain/(loss) on:
Security transactions...................... 1,619 5,976 3,952 3,511 7,731 10,848
Forward foreign currency contracts
and foreign currency transactions........ -- -- -- -- -- (41)
Futures contracts.......................... -- -- -- -- -- --
-------- ---------- ----------- ----------- ---------- ---------
Net realized gain/(loss) on investment
transactions............................. 1,619 5,976 3,952 3,511 7,731 10,807
-------- ---------- ----------- ----------- ---------- ---------
Capital gain distributions received.......... 3 -- -- -- -- --
-------- ---------- ----------- ----------- ---------- ---------
Net change in unrealized
appreciation/depreciation of:
Securities................................. 9,865 23,367 15,399 9,975 5,864 5,821
Forward foreign currency contracts......... -- -- -- -- -- 21
Foreign currency, futures contracts and
other assets and liabilities............. -- -- -- -- -- --*
-------- ---------- ----------- ----------- ---------- ---------
Net change in unrealized
appreciation/depreciation of investment
transactions............................... 9,865 23,367 15,399 9,975 5,864 5,842
-------- ---------- ----------- ----------- ---------- ---------
Net realized and unrealized gain/(loss)
on investments.............................. 11,487 29,343 19,351 13,486 13,595 16,649
-------- ---------- ----------- ----------- ---------- ---------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS............................. $ 12,991 $ 33,257 $ 22,781 $ 14,474 $ 14,124 $ 17,937
======== ========== =========== =========== ========== =========
- --------------
* Amount represents less than $500.
** The VT Small Cap Value Fund commenced operations on May 3, 2004.
See Notes to Financial Statements.
72
VT U.S.
VT SMALL VT GOVERNMENT VT MONEY
VT SMALL CAP CAP GROWTH INTERNATIONAL VT SHORT TERM SECURITIES VT INCOME MARKET
VALUE FUND** FUND GROWTH FUND INCOME FUND FUND FUND FUND
- ------------ ---------- ------------- ------------- ---------- ---------- --------
$ 437 $ 171 $ 1,836 $ -- $ -- $ -- $ --
31 4 43 2,406 12,282 12,777 299
(26) (2) (196) -- -- -- --
22 53 53 -- -- -- --
- ------------ ---------- ------------- ------------- ---------- ---------- --------
464 226 1,736 2,406 12,282 12,777 299
- ------------ ---------- ------------- ------------- ---------- ---------- --------
207 477 735 277 1,292 1,051 92
-- 8 1 19 36 57 9
7 14 103 7 18 10 2
32 32 36 33 37 37 25
1 2 2 1 6 6 1
15 9 59 18 52 45 8
- ------------ ---------- ------------- ------------- ---------- ---------- --------
262 542 936 355 1,441 1,206 137
--* --* --* --* (1) --* --*
- ------------ ---------- ------------- ------------- ---------- ---------- --------
262 542 936 355 1,440 1,206 137
- ------------ ---------- ------------- ------------- ---------- ---------- --------
202 (316) 800 2,051 10,842 11,571 162
- ------------ ---------- ------------- ------------- ---------- ---------- --------
1,507 9,800 1,065 23 211 518 1
2 -- (137) -- -- -- --
-- -- -- (119) -- -- --
- ------------ ---------- ------------- ------------- ---------- ---------- --------
1,509 9,800 928 (96) 211 518 1
- ------------ ---------- ------------- ------------- ---------- ---------- --------
-- -- -- -- -- -- --
- ------------ ---------- ------------- ------------- ---------- ---------- --------
6,248 (5,156) 9,208 (848) (1,147) (1,287) --
-- -- (8) -- -- -- --
--* -- 2 30 -- -- --
- ------------ ---------- ------------- ------------- ---------- ---------- --------
6,248 (5,156) 9,202 (818) (1,147) (1,287) --
- ------------ ---------- ------------- ------------- ---------- ---------- --------
7,757 4,644 10,130 (914) (936) (769) 1
- ------------ ---------- ------------- ------------- ---------- ---------- --------
$ 7,959 $ 4,328 $ 10,930 $ 1,137 $ 9,906 $ 10,802 $ 163
============ ========== ============= ============= ========== ========== ========
See Notes to Financial Statements.
73
Statement of Changes in Net Assets
WM VARIABLE TRUST
For the Year Ended December 31, 2004
(In thousands)
VT EQUITY
VT REIT INCOME VT GROWTH & VT WEST COAST VT MID CAP VT GROWTH
FUND FUND INCOME FUND EQUITY FUND STOCK FUND FUND
------- --------- ----------- ------------- ---------- ---------
Net investment income/(loss) ................. $ 1,504 $ 3,914 $ 3,430 $ 988 $ 529 $ 1,288
Net realized gain/(loss) on
investment transactions ..................... 1,619 5,976 3,952 3,511 7,731 10,807
Capital gain distributions received .......... 3 -- -- -- -- --
Net change in unrealized appreciation/
depreciation of investments ................. 9,865 23,367 15,399 9,975 5,864 5,842
------- -------- ----------- ------------- ---------- ---------
Net increase in net assets resulting
from operations ............................. 12,991 33,257 22,781 14,474 14,124 17,937
Distributions to shareholders from:
Net investment income:
Class 1 Shares ............................ (624) (2,972) (2,661) (277) (318) --
Class 2 Shares ............................ (1) (274) (29) (10) (9) --
Net realized gains on investments:
Class 1 Shares ............................ (322) -- -- -- (1,560) --
Class 2 Shares ............................ (1) -- -- -- (76) --
Net increase/(decrease) in net assets from
Fund share transactions:
Class 1 Shares ............................ 1,027 12,872 5,101 886 12,385 37,965
Class 2 Shares ............................ 306 8,506 476 2,206 1,748 (21)
------- -------- ----------- ------------- ---------- ---------
Net increase/(decrease) in net assets ........ 13,376 51,389 25,668 17,279 26,294 55,881
NET ASSETS:
Beginning of year ............................ 38,594 162,222 248,532 110,362 88,133 191,111
------- -------- ----------- ------------- ---------- ---------
End of year .................................. $51,970 $213,611 $ 274,200 $ 127,641 $ 114,427 $ 246,992
======= ======== =========== ============= ========== =========
Undistributed net investment income
at end of year .............................. $ 1,264 $ 3,778 $ 3,426 $ 927 $ 525 $ 1,292
======= ======== =========== ============= ========== =========
- -------------
* The VT Small Cap Value Fund commenced operations on May 3, 2004.
See Notes to Financial Statements.
74
VT U.S.
VT GOVERNMENT VT MONEY
VT SMALL CAP VT SMALL CAP INTERNATIONAL VT SHORT TERM SECURITIES VT INCOME MARKET
VALUE FUND* GROWTH FUND GROWTH FUND INCOME FUND FUND FUND FUND
- ------------ ------------ ------------- ------------- ---------- --------- --------
$ 202 $ (316) $ 800 $ 2,051 $ 10,842 $ 11,571 $ 162
1,509 9,800 928 (96) 211 518 1
-- -- -- -- -- -- --
6,248 (5,156) 9,202 (818) (1,147) (1,287) --
--------- ---------- ----------- ---------- ---------- --------- --------
7,959 4,328 10,930 1,137 9,906 10,802 163
-- -- (969) (1,841) (9,806) (11,009) (138)
-- -- (2) (296) (519) (1,314) (24)
-- -- -- -- -- -- --
-- -- -- -- -- -- --
34,709 (21,914) 7,807 2,787 59,999 (7,019) (5,538)
-- 745 99 1,098 (3,523) 2,327 2,335
--------- ---------- ----------- ---------- ---------- --------- --------
42,668 (16,841) 17,865 2,885 56,057 (6,213) (3,202)
-- 73,516 74,320 52,785 220,516 215,141 23,266
--------- ---------- ----------- ---------- ---------- --------- --------
$ 42,668 $ 56,675 $ 92,185 $ 55,670 $ 276,573 $ 208,928 $ 20,064
========= ========== =========== ========== ========== ========= ========
$ 203 $ -- $ 474 $ 2,091 $ 12,193 $ 11,974 $ --
========= ========== =========== ========== ========== ========= ========
See Notes to Financial Statements.
75
Statement of Changes in Net Assets (continued)
WM VARIABLE TRUST
For the Year Ended December 31, 2003
(In thousands)
VT EQUITY VT MID CAP
VT REIT INCOME VT GROWTH & VT WEST COAST STOCK VT GROWTH
FUND** FUND INCOME FUND EQUITY FUND FUND FUND
-------- ---------- ----------- ------------- ----------- ---------
Net investment income/(loss) ................. $ 905 $ 3,414 $ 2,690 $ 341 $ 326 $ (67)
Net realized gain/(loss) on
investment transactions ..................... 68 (7,316) (12,089) (1,579) 2,422 (2,956)
Net change in unrealized appreciation/
depreciation of investments ................. 7,465 39,347 59,580 32,401 15,142 44,951
-------- ---------- ----------- ------------- ---------- ---------
Net increase in net assets
resulting from operations ................... 8,438 35,445 50,181 31,163 17,890 41,928
Distributions to shareholders from:
Net investment income:
Class 1 Shares ............................. -- (3,038) (2,491) (224) (210) --
Class 2 Shares ............................. -- (197) (20) (5) (4) --
Net realized gains on investments:
Class 1 Shares ............................. -- (545) -- -- -- --
Class 2 Shares ............................. -- (37) -- -- -- --
Net increase/(decrease) in net assets from
Fund share transactions:
Class 1 Shares ............................. 30,156 7,840 (10,738) 7,200 4,304 12,725
Class 2 Shares ............................. --* 3,990 962 1,688 1,071 414
-------- ---------- ----------- ------------- ---------- ---------
Net increase/(decrease) in net assets ........ 38,594 43,458 37,894 39,822 23,051 55,067
NET ASSETS:
Beginning of year ............................ -- 118,764 210,638 70,540 65,082 136,044
-------- ---------- ----------- ------------- ---------- ---------
End of year .................................. $ 38,594 $ 162,222 $ 248,532 $ 110,362 $ 88,133 $ 191,111
======== ========== =========== ============= ========== =========
Undistributed net investment income
at end of year .............................. $ 769 $ 3,301 $ 2,686 $ 295 $ 323 $ 45
======== ========== =========== ============= ========== =========
- ----------
* Amount represents less than $500.
** The VT REIT Fund commenced operations on May 1, 2003.
*** Formerly the VT Small Cap Stock Fund.
See Notes to Financial Statements.
76
VT U.S.
VT SMALL CAP VT GOVERNMENT VT MONEY
GROWTH INTERNATIONAL VT SHORT TERM SECURITIES VT INCOME MARKET
FUND*** GROWTH FUND INCOME FUND FUND FUND FUND
- ------------ ------------- ------------- ---------- --------- --------
$ (191) $ 534 $ 1,994 $ 8,526 $ 11,471 $ 190
(17,773) (1,832) (29) (21) 422 --
52,475 19,869 433 (4,385) 6,477 --
- --------- --------- --------- --------- --------- --------
34,511 18,571 2,398 4,120 18,370 190
-- (748) (2,610) (8,731) (10,778) (175)
-- (1) (129) (855) (925) (15)
-- -- -- -- -- --
-- -- -- -- -- --
(2,281) 5,729 5,370 35,286 7,807 (13,568)
742 51 4,976 4,662 12,637 (1,610)
- --------- --------- --------- --------- --------- --------
32,972 23,602 10,005 34,482 27,111 (15,178)
40,544 50,718 42,780 186,034 188,030 38,444
- --------- --------- --------- --------- --------- --------
$ 73,516 $ 74,320 $ 52,785 $ 220,516 $ 215,141 $ 23,266
========= ========= ========= ========= ========= ========
$ -- $ 748 $ 2,135 $ 10,306 $ 12,311 $ --
========= ========= ========= ========= ========= ========
See Notes to Financial Statements.
77
Statement of Changes in Net Assets -- Capital Stock Activity
WM VARIABLE TRUST
(In thousands)
VT REIT FUND+ VT EQUITY INCOME FUND VT GROWTH & INCOME FUND
------------------------ ---------------------- ------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
12/31/04 12/31/03 12/31/04 12/31/03 12/31/04 12/31/03
---------- --------- ---------- ---------- ---------- ----------
AMOUNT
CLASS 1:
Sold .............................. $ 3,161 $30,249 $ 17,076 $ 19,128 $17,117 $ 24,465
Issued as reinvestment of
dividends ......................... 946 -- 2,972 3,583 2,661 2,491
Redeemed (3,080) (93) (7,176) (14,871) (14,677) (37,694)
-------- ------- -------- -------- ------- --------
Net increase/(decrease) ........... $ 1,027 $30,156 $ 12,872 $ 7,840 $ 5,101 $(10,738)
======== ======= ======== ======== ======= ========
CLASS 2:
Sold .............................. $ 361 $ 5 $ 9,694 $ 4,300 $ 964 $ 1,060
Issued as reinvestment of
dividends ......................... 2 -- 274 234 29 20
Redeemed
(57) (5) (1,462) (544) (517) (118)
-------- ------- -------- -------- ------- --------
Net increase ...................... $ 306 $ --* $ 8,506 $ 3,990 $ 476 $ 962
======== ======= ======== ======== ======= ========
SHARES
CLASS 1:
Sold ............................. 230 2,967 1,175 1,576 999 1,618
Issued as reinvestment of dividends 71 -- 206 295 153 164
Redeemed .......................... (216) (8) (490) (1,305) (853) (2,755)
-------- ------- -------- -------- ------- --------
Net increase/(decrease) 85 2,959 891 566 299 (973)
======== ======= ======== ======== ======= ========
CLASS 2:
Sold .............................. 24 --** 660 352 56 71
Issued as reinvestment of dividends --** -- 19 19 1 1
Redeemed .......................... (4) --** (101) (47) (30) (8)
-------- ------- -------- -------- ------- --------
Net increase ...................... 20 --** 578 324 27 64
======== ======= ======== ======== ======= ========
VT SMALL CAP GROWTH FUND+++ VT INTERNATIONAL GROWTH FUND VT SHORT TERM INCOME FUND
--------------------------- ---------------------------- -------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
12/31/04 12/31/03 12/31/04 12/31/03 12/31/04 12/31/03
---------- ----------- ---------- ---------- ---------- -----------
AMOUNT
CLASS 1:
Sold .................... $ 4,692 $ 13,819 $ 8,357 $ 8,003 $ 4,963 $ 10,800
Issued as reinvestment of
dividends ............... -- -- 969 748 1,841 2,610
Redeemed ................ (26,606) (16,100) (1,519) (3,022) (4,017) (8,040)
-------- -------- ------- ------- ------- --------
Net increase/(decrease) $(21,914) (2,281) $ 7,807 $ 5,729 $ 2,787 $ 5,370
======== ======== ======= ======= ======= ========
CLASS 2:
Sold .................... $ 1,547 $ 968 $ 112 $ 63 $ 3,276 $ 5,547
Issued as reinvestment of
dividends ............... -- -- 2 1 296 129
Redeemed (802) (226) (15) (13) (2,474) (700)
-------- -------- ------- ------- ------- --------
Net increase/(decrease) $ 745 $ 742 $ 99 $ 51 $ 1,098 $ 4,976
======== ======== ======= ======= ======= ========
SHARES
CLASS 1:
Sold .................... 519 2,306 726 828 1,902 4,081
Issued as reinvestment of
dividends ............... -- -- 86 80 731 1,000
Redeemed ................ (2,658) (1,971) (132) (340) (1,542) (3,032)
-------- -------- ------- ------- ------- --------
Net increase/(decrease) (2,139) 335 680 568 1,091 2,049
======== ======== ======= ======= ======= ========
CLASS 2:
Sold .................... 170 125 9 7 1,257 2,120
Issued as reinvestment of
dividends ............... -- -- --** --** 118 50
Redeemed ................ (89) (30) (1) (2) (960) (265)
-------- -------- ------- ------- ------- --------
Net increase/(decrease) 81 95 8 5 415 1,905
======== ======== ======= ======= ======= ========
- ----------------
* Amount represents less than $500.
** Amount represents less than 500 shares.
+ The VT REIT Fund commenced operations on May 1, 2003.
++ The VT Small Cap Value Fund commenced operations on May 3, 2004.
+++ Formerly the VT Small Cap Stock Fund.
78 See Notes to Financial Statements
VT WEST COAST
EQUITY FUND VT MID CAP STOCK FUND VT GROWTH FUND VT SMALL CAP VALUE FUND++
- -------------------- --------------------- -------------------- -------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED PERIOD ENDED
12/31/04 12/31/03 12/31/04 12/31/03 12/31/04 12/31/03 12/31/04
- --------- --------- --------- --------- --------- --------- ---------
$ 9,806 $ 12,538 $ 12,260 $ 10,754 $ 48,627 $ 27,111 $ 36,284
277 224 1,878 210 -- -- --
(9,197) (5,562) (1,753) (6,660) (10,662) (14,386) (1,575)
- --------- --------- --------- --------- --------- --------- ---------
$ 886 $ 7,200 $ 12,385 $ 4,304 $ 37,965 $ 12,725 $ 34,709
========= ========= ========= ========= ========= =========
$ 3,190 $ 2,076 $ 1,995 $ 1,196 $ 543 $ 507
10 5 85 4 -- --
(994) (393) (332) (129) (564) (93)
- --------- --------- --------- --------- --------- ---------
$ 2,206 $ 1,688 $ 1,748 $ 1,071 $ (21) $ 414
========= ========= ========= ========= ========= =========
529 820 812 832 3,961 2,706 3,631
15 15 123 16 -- -- --
(504) (413) (115) (574) (876) (1,462) (154)
- --------- --------- --------- --------- --------- --------- ---------
40 422 820 274 3,085 1,244 3,477
========= ========= ========= ========= ========= ========= =========
172 133 132 95 45 48
1 --** 6 --** -- --
(55) (28) (22) (11) (46) (9)
- --------- --------- --------- --------- --------- ---------
118 105 116 84 (1) 39
========= ========= ========= ========= ========= =========
VT U.S. GOVERNMENT
SECURITIES FUND VT INCOME FUND VT MONEY MARKET FUND
- ---------------------- ---------------------- ----------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
12/31/04 12/31/03 12/31/04 12/31/03 12/31/04 12/31/03
- --------- --------- --------- --------- --------- ---------
$ 70,555 $ 53,760 $ 10,152 $ 18,940 $ 7,321 $ 11,839
9,806 8,731 11,009 10,778 138 175
(20,362) (27,205) (28,180) (21,911) (12,997) (25,582)
- --------- --------- --------- --------- --------- ---------
$ 59,999 $ 35,286 $ (7,019) $ 7,807 $ (5,538) $ (13,568)
========= ========= ========= ========= ========= =========
$ 1,227 $ 9,784 $ 6,098 $ 15,366 $ 5,866 $ 3,108
519 855 1,314 925 24 15
(5,269) (5,977) (5,085) (3,654) (3,555) (4,733)
- --------- --------- --------- --------- --------- ---------
$ (3,523) $ 4,662 $ 2,327 $ 12,637 $ 2,335 $ (1,610)
========= ========= ========= ========= ========= =========
6,590 4,980 928 1,704 7,321 11,839
953 815 1,057 971 138 175
(1,903) (2,518) (2,588) (1,988) (12,997) (25,582)
- --------- --------- --------- --------- --------- ---------
5,640 3,277 (603) 687 (5,538) (13,568)
========= ========= ========= ========= ========= =========
114 896 555 1,397 5,866 3,108
51 80 127 84 24 15
(495) (563) (466) (337) (3,555) (4,733)
- --------- --------- --------- --------- --------- ---------
(330) 413 216 1,144 2,335 (1,610)
========= ========= ========= ========= ========= =========
See Notes to Financial Statements.
79
Financial Highlights
For a Fund share outstanding throughout each period.
VT REIT Fund CLASS 1
-------------------
YEARS ENDED DECEMBER 31 2004 2003(3)
------- -------
NET ASSET VALUE, BEGINNING OF PERIOD ........................................... $ 13.04 $ 10.00
------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ....................................................... 0.49(5) 0.36(5)
Net realized and unrealized gain on investments ............................. 3.74 2.68
------- -------
Total from investment operations ............................................ 4.23 3.04
------- -------
LESS DISTRIBUTIONS:
Dividends from net investment income ........................................ (0.20) --
Dividends from net realized capital gains ................................... (0.11) --
------- -------
Total distributions ......................................................... (0.31) --
------- -------
NET ASSET VALUE, END OF PERIOD ................................................... $ 16.96 $ 13.04
======= =======
TOTAL RETURN(1) .................................................................. 33.08% 30.40%
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) ........................................ $51,632 $38,593
Ratio of operating expenses to average net assets ........................... 0.88% 1.00%(7)
Ratio of net investment income to average net assets ........................ 3.43% 4.21%(7)
Portfolio turnover rate ..................................................... 13% 3%
Ratio of operating expenses to average net assets without
fee waivers, expenses reimbursed and/or fees reduced by
credits allowed by the custodian(2) ........................................ 0.88% 1.00%(7)
VT EQUITY INCOME FUND CLASS 1
--------------------------------------------------------------
YEARS ENDED DECEMBER 31 2004 2003 2002 2001 2000
-------- -------- -------- ------- --------
NET ASSET VALUE, BEGINNING OF PERIOD .......................... $ 13.90 $ 11.01 $ 12.87 $ 12.11 $ 10.50
-------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income .................................... 0.32(5) 0.31(5) 0.36(5) 0.42(5) 0.36(5)
Net realized and unrealized gain/(loss) on investments ... 2.30 2.95 (1.95) 0.54 1.42
-------- -------- -------- -------- --------
Total from investment operations ......................... 2.62 3.26 (1.59) 0.96 1.78
-------- -------- -------- -------- --------
LESS DISTRIBUTIONS:
Dividends from net investment income ..................... (0.26) (0.31) (0.25) (0.12) (0.17)
Dividends from net realized capital gains ................ -- (0.06) (0.02) (0.08) --
-------- -------- -------- -------- --------
Total distributions ...................................... (0.26) (0.37) (0.27) $ (0.20) (0.17)
-------- -------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD ................................ $ 16.26 $ 13.90 $ 11.01 $ 12.87 $ 12.11
======== ======== ======== ======== ========
TOTAL RETURN(1) .............................................. 19.12% 30.10% (12.51)% 7.92% 17.19%
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) ..................... $189,517 $149,603 $112,304 $ 97,982 $ 46,744
Ratio of operating expenses to average net assets ........ 0.67% 0.70% 0.70% 0.70% 0.98%
Ratio of net investment income to average net assets ..... 2.15% 2.63% 3.04% 3.29% 3.31%
Portfolio turnover rate ................................ 26% 23% 16% 15% 40%
Ratio of operating expenses to average net assets without
fee waivers, expenses reimbursed and/or fees reduced by
credits allowed by the custodian(2) ..................... 0.67% 0.70% 0.70% 0.70% 0.99%
- ----------
(1) Total return is not annualized for periods less than one year. The total
return would have been lower if certain fees had not been waived and/or
expenses reimbursed by the investment advisor or if fees had not been
reduced by credits allowed by the custodian.
(2) Ratio of operating expenses to average net assets includes expenses paid
indirectly.
(3) The VT REIT Fund commenced operations on May 1, 2003.
(4) The VT REIT Fund commenced selling Class 2 shares on August 5, 2003.
(5) Per share numbers have been calculated using the average shares method.
(6) The VT Equity Income Fund commenced selling Class 2 shares on May 1, 2001.
(7) Annualized.
See Notes to Financial Statements.
80
CLASS 2
- --------------------
2004 2003(4)
- -------- -------
$ 13.03 $ 11.20
- -------- -------
0.45(5) 0.28(5)
3.73 1.55
- -------- -------
4.18 1.83
- -------- -------
(0.20) --
(0.11) --
- -------- -------
(0.31) --
- -------- -------
$ 16.90 $ 13.03
======== =======
32.72% 16.34%
$ 338 $ 1
1.13% 1.25%(7)
3.18% 3.96%(7)
13% 3%
1.13% 1.25%(7)
CLASS 2
- ----------------------------------------------------
2004 2003 2002 2001(6)
- --------- -------- ---------- ---------
$ 13.85 $ 10.99 $ 12.87 $ 12.64
- --------- -------- ---------- ---------
0.28(5) 0.29(5) 0.32(5) 0.22(5)
2.30 2.93 (1.93) 0.21
- --------- -------- ---------- ---------
2.58 3.22 (1.61) 0.43
- --------- -------- ---------- ---------
(0.25) (0.30) (0.25) (0.12)
-- (0.06) (0.02) (0.08)
- --------- -------- ---------- ---------
(0.25) (0.36) (0.27) (0.20)
- --------- -------- ---------- ---------
$ 16.18 $ 13.85 $ 10.99 $ 12.87
========= ======== ========== =========
18.82% 29.73% (12.67)% 3.40%
$ 24,094 $ 12,619 $ 6,460 $ 658
0.92% 0.95% 0.95% 0.94%(7)
1.90% 2.38% 2.79% 3.05%(7)
26% 23% 16% 15%
0.92% 0.95% 0.95% 0.94%(7)
See Notes to Financial Statements.
81
Financial Highlights
For a Fund share outstanding throughout each period.
VT GROWTH & INCOME FUND CLASS 1
-------------------------------------------------------------
YEARS ENDED DECEMBER 31 2004 2003 2002 2001 2000
-------- -------- -------- -------- --------
NET ASSET VALUE, BEGINNING OF PERIOD ........................... $ 16.85 $ 13.45 $ 17.18 $ 18.23 $ 18.58
-------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income.................................... 0.23(4) 0.19(4) 0.15(4) 0.09 0.07(4)
Net realized and unrealized gain/(loss) on investments... 1.29 3.39 (3.77) (0.70) 0.37
-------- -------- -------- -------- --------
Total from investment operations ........................ 1.52 3.58 (3.62) (0.61) 0.44
-------- -------- -------- -------- --------
LESS DISTRIBUTIONS:
Dividends from net investment income .................... (0.18) (0.18) (0.11) (0.06) (0.04)
Dividends from net realized capital gains ............... -- -- -- (0.38) (0.75)
-------- -------- -------- -------- --------
Total distributions ..................................... (0.18) (0.18) (0.11) (0.44) (0.79)
-------- -------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD ................................. $ 18.19 $ 16.85 $ 13.45 $ 17.18 $ 18.23
======== ======== ======== ======== ========
TOTAL RETURN(1) ................................................ 9.08% 26.80% (21.16)% (3.51)% 2.36%
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) .................... $270,775 $245,820 $209,337 $319,171 $309,992
Ratio of operating expenses to average net assets ....... 0.79% 0.83% 0.81% 0.78% 0.97%
Ratio of net investment income to average net assets .... 1.33% 1.28% 1.01% 0.54% 0.39%
Portfolio turnover rate ................................. 11% 16% 20% 25% 31%
Ratio of operating expenses to average net assets without
fee waivers, expenses reimbursed and/or fees reduced by
credits allowed by the custodian(2) ................... 0.79% 0.83% 0.81% 0.78% 0.97%
VT WEST COAST EQUITY FUND CLASS 1
-------------------------------------------------------------
YEARS ENDED DECEMBER 31 2004 2003 2002 2001 2000
-------- -------- -------- -------- --------
NET ASSET VALUE, BEGINNING OF PERIOD.......................... $ 18.14 $ 12.69 $ 16.70 $ 16.01 $ 15.14
-------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income.................................... 0.16(4) 0.06(4) 0.06(4) 0.10(4) 0.13(4)
Net realized and unrealized gain/(loss) on investments... 2.20 5.43 (3.79) 1.03 0.84
-------- -------- -------- -------- --------
Total from investment operations......................... 2.36 5.49 (3.73) 1.13 0.97
-------- -------- -------- -------- --------
LESS DISTRIBUTIONS:
Dividends from net investment income..................... (0.05) (0.04) (0.08) (0.09) --
Dividends from net realized capital gains................ -- -- (0.20) (0.35) (0.10)
-------- -------- -------- -------- --------
Total distributions...................................... (0.05) (0.04) (0.28) (0.44) (0.10)
-------- -------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD ............................... $ 20.45 $ 18.14 $ 12.69 $ 16.70 $ 16.01
======== ======== ======== ======== ========
TOTAL RETURN(1)............................................... 13.03% 43.35% (22.55)% 6.88% 6.30%
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's)..................... $119,371 $105,160 $ 68,227 $ 83,835 $ 71,307
Ratio of operating expenses to average net assets........ 0.69% 0.71% 0.71% 0.70% 0.91%
Ratio of net investment income to average net assets..... 0.87% 0.42% 0.42% 0.59% 0.76%
Portfolio turnover rate.................................. 17% 16% 20% 19% 33%
Ratio of operating expenses to average net assets without
fee waivers, expenses reimbursed and/or fees reduced by
credits allowed by the custodian(2).................... 0.69% 0.71% 0.71% 0.70% 0.91%
- ----------
(1) Total return is not annualized for periods less than one year. The total
return would have been lower if certain fees had not been waived and/or
expenses reimbursed by the investment advisor or if fees had not been
reduced by credits allowed by the custodian.
(2) Ratio of operating expenses to average net assets includes expenses paid
indirectly.
(3) The Fund commenced selling Class 2 shares on November 6, 2001.
(4) Per share numbers have been calculated using the average shares method.
(5) Amount represents less than $0.01 per share.
(6) The amount shown may not agree with the change in the aggregate gains and
losses of portfolio securities due to the timing of sales and redemptions
of Fund shares.
(7) Annualized.
See Notes to Financial Statements.
82
CLASS 2
- --------------------------------------------------------
2004 2003 2002 2001(3)
- ----------- -------- ------------- -------
$ 16.79 $ 13.42 $ 17.18 $ 16.59
- ----------- -------- ------------- -------
0.19(4) 0.15(4) 0.11(4) 0.00(5)
1.28 3.39 (3.76) 0.59(6)
- ----------- -------- ------------- -------
1.47 3.54 (3.65) 0.59
- ----------- -------- ------------- -------
(0.16) (0.17) (0.11) --
-- -- -- --
- ----------- -------- ------------- -------
(0.16) (0.17) (0.11) --
- ----------- -------- ------------- -------
$ 18.10 $ 16.79 $ 13.42 $ 17.18
=========== ======== ============= =======
8.78% 26.49% (21.33)% 3.56%
$ 3,425 $ 2,712 $ 1,301 $ 112
1.04% 1.08% 1.06% 1.03%(7)
1.08% 1.03% 0.76% 0.29%(7)
11% 16% 20% 25%
1.04% 1.08% 1.06% 1.03%(7)
CLASS 2
- --------------------------------------------------------
2004 2003 2002 2001(3)
- ----------- -------- ------------- -------
$ 18.08 $ 12.67 $ 16.70 $ 15.52
- ----------- -------- ------------- -------
0.11(4) 0.02(4) 0.02(4) 0.01(4)
2.19 5.41 (3.77) 1.17
- ----------- -------- ------------- -------
2.30 5.43 (3.75) 1.18
- ----------- -------- ------------- -------
(0.03) (0.02) (0.08) --
-- -- (0.20) --
- ----------- -------- ------------- -------
(0.03) (0.02) (0.28) --
- ----------- -------- ------------- -------
$ 20.35 $ 18.08 $ 12.67 $ 16.70
=========== ======== ============= =======
12.72% 42.93% (22.67)% 7.60%
$ 8,270 $ 5,202 $ 2,313 $ 58
0.94% 0.96% 0.96% 0.95%(7)
0.62% 0.17% 0.17% 0.34%(7)
17% 16% 20% 19%
0.94% 0.96% 0.96% 0.95%(7)
See Notes to Financial Statements.
83
Financial Highlights
For a Fund share outstanding throughout each period.
VT MID CAP STOCK FUND CLASS 1
---------------------------------------------------------
YEARS ENDED DECEMBER 31 2004 2003 2002 2001 2000(3)
---------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD ............................. $ 14.63 $ 11.49 $ 13.14 $ 11.74 $ 10.00
-------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ..................................... 0.08(5) 0.06(5) 0.04(5) 0.03(5) 0.01(5)
Net realized and unrealized gain/(loss) on investments .... 2.03 3.12 (1.36) 1.38 1.73
-------- -------- -------- -------- --------
Total from investment operations .......................... 2.11 3.18 (1.32) 1.41 1.74
-------- -------- -------- -------- --------
LESS DISTRIBUTIONS:
Dividends from net investment income ...................... (0.05) (0.04) (0.03) (0.01) --
Dividends from net realized capital gains ................. (0.25) -- (0.30) -- --
-------- -------- -------- -------- --------
Total distributions ....................................... (0.30) (0.04) (0.33) (0.01) --
-------- -------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD ................................... $ 16.44 $ 14.63 $ 11.49 $ 13.14 $ 11.74
======== ======== ======== ======== ========
TOTAL RETURN(1) .................................................. 14.59% 27.73% (10.35)% 11.99% 17.40%
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) ...................... $108,347 $ 84,408 $ 63,119 $ 71,988 $ 56,717
Ratio of operating expenses to average net assets ......... 0.81% 0.83% 0.84% 0.82% 1.04%(7)
Ratio of net investment income to average net assets ...... 0.54% 0.47% 0.32% 0.21% 0.14%(7)
Portfolio turnover rate ................................... 32% 37% 28% 30% 13%
Ratio of operating expenses to average net assets without
fee waivers, expenses reimbursed and/or fees reduced
by credits allowed by the custodian(2) ................ 0.81% 0.83% 0.84% 0.82% 1.04%(7)
VT GROWTH FUND CLASS 1
--------------------------------------------------------
YEARS ENDED DECEMBER 31 2004 2003 2002 2001 2000
--------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD ............................. $ 12.04 $ 9.32 $ 13.51 $ 22.99 $ 38.54
-------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income/(loss) .............................. 0.07 (0.00)(6) (0.01)(5) 0.02(5) (0.03)(5)
Net realized and unrealized gain/(loss) on investments .... 0.92 2.72 (4.18) (6.24) (6.61)
-------- -------- -------- -------- --------
Total from investment operations .......................... 0.99 2.72 (4.19) (6.22) (6.64)
-------- -------- -------- -------- --------
LESS DISTRIBUTIONS:
Dividends from net investment income ...................... -- -- -- (0.37) (0.02)
Dividends from net realized capital gains ................. -- -- -- (2.89) (8.89)
-------- -------- -------- -------- --------
Total distributions ....................................... -- -- -- (3.26) (8.91)
-------- -------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD ................................... $ 13.03 $ 12.04 $ 9.32 $ 13.51 $ 22.99
======== ======== ======== ======== ========
TOTAL RETURN(1) .................................................. 8.22% 29.18% (31.01)% (29.05)% (22.04)%
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) ...................... $245,637 $189,837 $135,422 $167,483 $306,551
Ratio of operating expenses to average net assets ......... 0.94% 0.98% 1.00% 0.94% 1.10%
Ratio of net investment income/(loss) to average net
assets .................................................... 0.58% (0.04)% (0.05)% 0.11% (0.10)%
Portfolio turnover rate ................................... 66% 75% 171% 92% 83%
Ratio of operating expenses to average net assets without
fee waivers, expenses reimbursed and/or fees reduced by
credits allowed by the custodian(2) ................... 0.95% 0.98% 1.00% 0.94% 1.11%
- --------------------------------
(1) Total return is not annualized for periods less than one year. The total
return would have been lower if certain fees had not been waived and/or
expenses reimbursed by the investment advisor or if fees had not been
reduced by credits allowed by the custodian.
(2) Ratio of operating expenses to average net assets includes expenses paid
indirectly.
(3) The VT Mid Cap Stock Fund commenced operations on May 1, 2000.
(4) The VT Mid Cap Stock Fund commenced selling Class 2 shares on May 1, 2001.
(5) Per share numbers have been calculated using the average shares method.
(6) Amount represents less than $0.01 per share.
(7) Annualized.
(8) The VT Growth Fund commenced selling Class 2 shares on November 6, 2001.
(9) The amount shown may not agree with the change in the aggregate gains and
losses of portfolio securities due to the timing of sales and redemptions
of Fund shares.
See Notes to Financial Statements.
84
CLASS 2
- ----------------------------------------------------------------
2004 2003 2002 2001(4)
- ----------------------------------------------------------------
$ 14.58 $ 11.46 $ 13.13 $ 12.35
- ---------- ----------- ------------- ------------
0.04(5) 0.03(5) 0.01(5) (0.00)(5)(6)
2.02 3.11 (1.36) 0.79
- ---------- ----------- ------------- ------------
2.06 3.14 (1.35) 0.79
- ---------- ----------- ------------- ------------
(0.03) (0.02) (0.02) (0.01)
(0.25) -- (0.30) --
- ---------- ----------- ------------- ------------
(0.28) (0.02) (0.32) (0.01)
- ---------- ----------- ------------- ------------
$ 16.36 $ 14.58 $ 11.46 $ 13.13
========== =========== ============= ============
14.28% 27.45% (10.54)% 6.38%
$ 6,080 $ 3,725 $ 1,962 $ 668
1.06% 1.08% 1.09% 1.07%(7)
0.29% 0.22% 0.07% (0.04)%(7)
32% 37% 28% 30%
1.06% 1.08% 1.09% 1.07%(7)
CLASS 2
- ----------------------------------------------------------------
2004 2003 2002 2001(8)
- ----------------------------------------------------------------
$ 11.98 $ 9.30 $ 13.51 $ 12.81
- ---------- ----------- ------------- ------------
0.04 (0.03) (0.03)(5) (0.00)(5)(6)
0.92 2.71 (4.18) 0.70(9)
- ---------- ----------- ------------- ------------
0.96 2.68 (4.21) 0.70
- ---------- ----------- ------------- ------------
-- -- -- --
-- -- -- --
- ---------- ----------- ------------- ------------
-- -- -- --
- ---------- ----------- ------------- ------------
$ 12.94 $ 11.98 $ 9.30 $ 13.51
========== =========== ============= ============
8.01% 28.82% (31.16)% 5.46%
$ 1,355 $ 1,274 $ 622 $ 31
1.19% 1.23% 1.25% 1.19%(7)
0.33% (0.29)% (0.30)% (0.14)%(7)
66% 75% 171% 92%
1.20% 1.23% 1.25% 1.19%(7)
See Notes to Financial Statements.
85
Financial Highlights
For a Fund share outstanding throughout each period.
VT SMALL CAP VALUE FUND CLASS 1
--------
YEAR ENDED DECEMBER 31 2004(3)
--------
NET ASSET VALUE, BEGINNING OF PERIOD ........................ $ 10.00
--------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ................................... 0.06
Net realized and unrealized gain on investments ......... 2.21
--------
Total from investment operations ........................ 2.27
--------
LESS DISTRIBUTIONS:
Dividends from net investment income .................... --
Dividends from net realized capital gains ............... --
--------
Total distributions ..................................... --
--------
NET ASSET VALUE, END OF PERIOD .............................. $ 12.27
========
TOTAL RETURN(1) ............................................. 22.70%
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) .................... $ 42,668
Ratio of operating expenses to average net assets ....... 1.08%(4)
Ratio of net investment income to average net assets .... 0.83%(4)
Portfolio turnover rate ................................. 50%
Ratio of operating expenses to average net assets without
fee waivers, expenses reimbursed and/or fees reduced by
credits allowed by the custodian(2).................... 1.08%(4)
VT SMALL CAP GROWTH FUND(5) CLASS 1
------------------------------------------------------------
YEARS ENDED DECEMBER 31 2004 2003 2002 2001 2000
-------- -------- -------- -------- --------
NET ASSET VALUE, BEGINNING OF PERIOD ........................ $ 9.41 $ 5.49 $ 11.37 $ 16.03 $ 19.13
-------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment loss ..................................... (0.05) (0.02)(7) (0.02)(7) (0.06)(7) (0.10)
Net realized and unrealized gain/(loss) on investments .. 0.49 3.94 (5.27) (1.69) (1.65)
-------- -------- -------- -------- --------
Total from investment operations ........................ 0.44 3.92 (5.29) (1.75) (1.75)
-------- -------- -------- -------- --------
LESS DISTRIBUTIONS:
Dividends from net investment income .................... -- -- -- -- --
Dividends from net realized capital gains ............... -- -- (0.59) (2.91) (1.35)
-------- -------- -------- -------- --------
Total distributions ..................................... -- -- (0.59) (2.91) (1.35)
-------- -------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD .............................. $ 9.85 $ 9.41 $ 5.49 $ 11.37 $ 16.03
======== ======== ======== ======== ========
TOTAL RETURN(1) ............................................. 4.68% 71.40% (47.15)% (12.73)% (10.58)%
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) .................... $ 53,049 $ 70,806 $ 39,476 $ 73,367 $ 82,288
Ratio of operating expenses to average net assets ....... 0.98% 1.00% 1.00% 0.95% 1.11%
Ratio of net investment loss to average net assets ...... (0.56)% (0.31)% (0.31)% (0.44)% (0.61)%
Portfolio turnover rate ................................. 41% 67% 29% 46% 49%
Ratio of operating expenses to average net assets without
fee waivers, expenses reimbursed and/or fees reduced by
credits allowed by the custodian(2) ................... 0.98% 1.00% 1.00% 0.95% 1.11%
- --------------------------------
(1) Total return is not annualized for periods less than one year. The total
return would have been lower if certain fees had not been waived and/or
expenses reimbursed by the investment advisor or if fees had not been
reduced by credits allowed by the custodian.
(2) Ratio of operating expenses to average net assets includes expenses paid
indirectly.
(3) The VT Small Cap Value Fund commenced operations on May 3, 2004.
(4) Annualized.
(5) Formerly the VT Small Cap Stock Fund.
(6) The VT Small Cap Growth Fund commenced selling Class 2 shares on May 1,
2001.
(7) Per share numbers have been calculated using the average shares method.
See Notes to Financial Statements.
86
Class 2
- -------------------------------------------------------
2004 2003 2002 2001(6)
- --------- --------- --------- ---------
$ 9.35 $ 5.47 $ 11.36 $ 14.41
- --------- --------- --------- ---------
(0.07) (0.04)(7) (0.03)(7) (0.05)(7)
0.49 3.92 (5.27) (0.09)
- --------- --------- --------- ---------
0.42 3.88 (5.30) (0.14)
- --------- --------- --------- ---------
-- -- -- --
-- -- (0.59) (2.91)
- --------- --------- --------- ---------
-- -- (0.59) (2.91)
- --------- --------- --------- ---------
$ 9.77 $ 9.35 $ 5.47 $ 11.36
========= ========= ========= =========
4.49% 70.93% (47.28)% (3.00)%
$ 3,626 $ 2,710 $ 1,068 $ 440
1.23% 1.25% 1.25% 1.20%(4)
(0.81)% (0.56)% (0.56)% (0.69)%(4)
41% 67% 29% 46%
1.23% 1.25% 1.25% 1.20%(4)
See Notes to Financial Statements.
87
Financial Highlights
For a Fund share outstanding throughout each period.
VT INTERNATIONAL GROWTH FUND CLASS 1
-------------------------------------------------------------
YEARS ENDED DECEMBER 31 2004 2003 2002 2001 2000
--------- --------- --------- --------- ---------
NET ASSET VALUE, BEGINNING OF PERIOD ........................ $ 11.38 $ 8.51 $ 10.21 $ 13.65 $ 17.63
--------- --------- --------- --------- ---------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ................................... 0.12(4) 0.09(4) 0.04(4) 0.04 0.02(4)
Net realized and unrealized gain/(loss) on investments... 1.41 2.91 (1.63) (2.39) (3.42)
--------- --------- --------- --------- ---------
Total from investment operations ........................ 1.53 3.00 (1.59) (2.35) (3.40)
--------- --------- --------- --------- ---------
LESS DISTRIBUTIONS:
Dividends from net investment income .................... (0.14) (0.13) (0.11) (0.09) (0.43)
Dividends from net realized capital gains ............... -- -- -- (1.00) (0.15)
--------- --------- --------- --------- ---------
Total distributions ..................................... (0.14) (0.13) (0.11) (1.09) (0.58)
--------- --------- --------- --------- ---------
NET ASSET VALUE, END OF PERIOD .............................. $ 12.77 $ 11.38 $ 8.51 $ 10.21 $ 13.65
========= ========= ========= ========= =========
TOTAL RETURN(1) ............................................. 13.60% 35.51% (15.71)% (17.78)% (19.84)%
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) .................... $ 91,875 $ 74,138 $ 50,625 $ 49,178 $ 67,227
Ratio of operating expenses to average net assets ....... 1.16% 1.21% 1.26% 1.19% 1.31%
Ratio of net investment income to average net assets .... 0.99% 0.94% 0.49% 0.33% 0.11%
Portfolio turnover rate ................................. 23% 22% 30% 34% 40%
Ratio of operating expenses to average net assets without
fee waivers, expenses reimbursed and/or fees reduced by
credits allowed by the custodian(2) ................... 1.16% 1.21% 1.26% 1.19% 1.31%
VT SHORT TERM INCOME FUND CLASS 1
-------------------------------------------------------------
YEARS ENDED DECEMBER 31 2004 2003 2002 2001 2000
--------- --------- --------- --------- ---------
NET ASSET VALUE, BEGINNING OF PERIOD ........................ $ 2.63 $ 2.65 $ 2.60 $ 2.44 $ 2.39
--------- --------- --------- --------- ---------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ................................... 0.10(4) 0.11(4) 0.14(4) 0.15(4) 0.14
Net realized and unrealized gain/(loss) on investments... (0.05) 0.04 0.02 0.05 0.05
--------- --------- --------- --------- ---------
Total from investment operations ........................ 0.05 0.15 0.16 0.20 0.19
--------- --------- --------- --------- ---------
LESS DISTRIBUTIONS:
Dividends from net investment income .................... (0.10) (0.17) (0.11) (0.04) (0.14)
Dividends from net realized capital gains ............... -- -- -- -- --
--------- --------- --------- --------- ---------
Total distributions ..................................... (0.10) (0.17) (0.11) (0.04) (0.14)
--------- --------- --------- --------- ---------
NET ASSET VALUE, END OF PERIOD .............................. $ 2.58 $ 2.63 $ 2.65 $ 2.60 $ 2.44
========= ========= ========= ========= =========
TOTAL RETURN(1) ............................................ 2.07% 5.52% 6.26% 8.15% 8.23%
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) .................... $ 48,574 $ 46,628 $ 41,592 $ 50,343 $ 43,479
Ratio of operating expenses to average net assets ....... 0.61% 0.63% 0.62% 0.60% 0.80%
Ratio of net investment income to average net assets .... 3.74% 4.31% 5.42% 5.77% 5.66%
Portfolio turnover rate ............................... 17% 38% 41% 44% 17%
Ratio of operating expenses to average net assets without
fee waivers, expenses reimbursed and/or fees reduced by
credits allowed by the custodian(2) ................... 0.61% 0.63% 0.62% 0.60% 0.81%
- --------------------------------
(1) Total return is not annualized for periods less than one year. The total
return would have been lower if certain fees had not been waived and/or
expenses reimbursed by the investment advisor or if fees had not been
reduced by credits allowed by the custodian.
(2) Ratio of operating expenses to average net assets includes expenses paid
indirectly.
(3) The Fund commenced selling Class 2 shares on November 6, 2001.
(4) Per share numbers have been calculated using the average shares method.
(5) Amount represents less than $0.01 per share.
(6) The amount shown may not agree with the change in the aggregate gains and
losses of portfolio securities due to the timing of sales and redemptions
of Fund shares.
(7) Amount represents less than $500.
(8) Annualized.
See Notes to Financial Statements.
88
CLASS 2
- -------------------------------------------------------
2004 2003 2002 2001(3)
- ------- ------- ------- -------
$ 11.34 $ 8.49 $ 10.21 $ 9.78
- ------- ------- ------- -------
0.09(4) 0.06(4) 0.02(4) 0.00(5)
1.41 2.90 (1.63) 0.43(6)
- ------- ------- ------- -------
1.50 2.96 (1.61) 0.43
- ------- ------- ------- -------
(0.13) (0.11) (0.11) --
-- -- -- --
- ------- ------- ------- -------
(0.13) (0.11) (0.11) --
- ------- ------- ------- -------
$ 12.71 $ 11.34 $ 8.49 $ 10.21
======= ======= ======= =======
13.33% 35.10% (15.91)% 4.40%
$ 310 $ 182 $ 93 $ 0(7)
1.41% 1.46% 1.51% 1.40%(8)
0.74% 0.69% 0.24% 0.12%(8)
23% 22% 30% 34%
1.41% 1.46% 1.51% 1.40%(8)
CLASS 2
- -------------------------------------------------------
2004 2003 2002 2001(3)
- ------- ------- ------- -------
$ 2.62 $ 2.64 $ 2.60 $ 2.60
- ------- ------- ------- -------
0.09(4) 0.10(4) 0.13(4) 0.02(4)
(0.05) 0.04 0.02 (0.02)(6)
- ------- ------- ------- -------
0.04 0.14 0.15 0.00(5)
- ------- ------- ------- -------
(0.10) (0.16) (0.11) --
-- -- -- --
- ------- ------- ------- -------
(0.10) (0.16) (0.11) --
- ------- ------- ------- -------
$ 2.56 $ 2.62 $ 2.64 $ 2.60
======= ======= ======= =======
1.60% 5.46% 5.86% 0.00%
$ 7,096 $ 6,157 $ 1,188 $ 20
0.86% 0.88% 0.87% 0.85%(8)
3.49% 4.06% 5.17% 5.52%(8)
17% 38% 41% 44%
0.86% 0.88% 0.87% 0.85%(8)
See Notes to Financial Statements.
89
Financial Highlights
For a Fund share outstanding throughout each period.
VT U.S. GOVERNMENT SECURITIES FUND CLASS 1
---------------------------------------------------------------
YEARS ENDED DECEMBER 31 2004 2003 2002 2001 2000
--------- ---------- --------- --------- ----------
NET ASSET VALUE, BEGINNING OF PERIOD ........................ $ 10.75 $ 11.05 $ 10.55 $ 9.93 $ 9.62
--------- ---------- --------- --------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ................................... 0.45(4) 0.46(4) 0.59(4) 0.61(4) 0.62(4)
Net realized and unrealized gain/(loss) on investments... (0.06) (0.23) 0.33 0.16 0.29
--------- ---------- --------- --------- ----------
Total from investment operations ........................ 0.39 0.23 0.92 0.77 0.91
--------- ---------- --------- --------- ----------
LESS DISTRIBUTIONS:
Dividends from net investment income .................... (0.43) (0.53) (0.42) (0.15) (0.60)
Dividends from net realized capital gains ............... -- -- -- -- --
--------- ---------- --------- --------- ----------
Total distributions ..................................... (0.43) (0.53) (0.42) (0.15) (0.60)
--------- ---------- --------- --------- ----------
NET ASSET VALUE, END OF PERIOD .............................. $ 10.71 $ 10.75 $ 11.05 $ 10.55 $ 9.93
========= ========== ========= ========= ==========
TOTAL RETURN(1) ............................................. 3.78% 2.14% 8.87% 7.79% 9.73%
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) .................... $ 263,816 $ 204,193 $ 173,770 $ 136,904 $ 108,848
Ratio of operating expenses to average net assets ....... 0.54% 0.56% 0.56% 0.56% 0.76%
Ratio of net investment income to average net assets .... 4.21% 4.26% 5.45% 5.89% 6.35%
Portfolio turnover rate ................................. 28% 46% 41% 31% 10%
Ratio of operating expenses to average net assets without
fee waivers, expenses reimbursed and/or fees reduced by
credits allowed by the custodian(2) ..................... 0.54% 0.56% 0.56% 0.56% 0.76%
VT INCOME FUND CLASS 1
---------------------------------------------------------------
YEARS ENDED DECEMBER 31 2004 2003 2002 2001 2000
--------- ---------- --------- --------- ----------
NET ASSET VALUE, BEGINNING OF PERIOD ........................ $ 11.18 $ 10.79 $ 10.31 $ 9.70 $ 9.35
--------- ---------- --------- --------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ................................... 0.61(4) 0.63(4) 0.69(4) 0.67(4) 0.65(4)
Net realized and unrealized gain/(loss) on investments .. (0.03) 0.42 0.27 0.11 0.30
--------- ---------- --------- --------- ----------
Total from investment operations ........................ 0.58 1.05 0.96 0.78 0.95
--------- ---------- --------- --------- ----------
LESS DISTRIBUTIONS:
Dividends from net investment income .................... (0.68) (0.66) (0.48) (0.17) (0.60)
Dividends from net realized capital gains ............... -- -- -- -- --
--------- ---------- --------- --------- ----------
Total distributions ..................................... (0.68) (0.66) (0.48) (0.17) (0.60)
--------- ---------- --------- --------- ----------
NET ASSET VALUE, END OF PERIOD .............................. $ 11.08 $ 11.18 $ 10.79 $ 10.31 $ 9.70
========= ========== ========= ========= =========
TOTAL RETURN(1) ............................................. 5.56% 9.78% 9.61% 8.08% 10.45%
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) .................... $ 185,570 $ 193,953 $ 179,844 $ 154,826 $ 127,505
Ratio of operating expenses to average net assets ....... 0.55% 0.56% 0.56% 0.55% 0.74%
Ratio of net investment income to average net assets .... 5.53% 5.74% 6.64% 6.69% 6.81%
Portfolio turnover rate ................................. 20% 24% 21% 33% 2%
Ratio of operating expenses to average net assets without
fee waivers, expenses reimbursed and/or fees reduced by
credits allowed by the custodian (2) .................. 0.55% 0.56% 0.56% 0.55% 0.75%
- -------------------
(1) Total return is not annualized for periods less than one year. The total
return would have been lower if certain fees had not been waived and/or
expenses reimbursed by the investment advisor or if fees had not been
reduced by credits allowed by the custodian.
(2) Ratio of operating expenses to average net assets includes expenses paid
indirectly.
(3) The Fund commenced selling Class 2 shares on November 6, 2001.
(4) Per share numbers have been calculated using the average shares method.
(5) The amount shown may not agree with the change in the aggregate gains and
losses of portfolio securities due to the timing of sales and redemptions
of Fund shares.
(6) Annualized.
See Notes to Financial Statements.
90
CLASS 2
- ---------- ---------- ---------- ----------
2004 2003 2002 2001(3)
- ---------- ---------- ---------- ----------
$ 10.70 $ 11.02 $ 10.55 $ 10.70
- ---------- ---------- ---------- ----------
0.42(4) 0.44(4) 0.56(4) 0.09(4)
(0.06) (0.23) 0.33 (0.24)(5)
- ---------- ---------- ---------- ----------
0.36 0.21 0.89 (0.15)
- ---------- ---------- ---------- ----------
(0.40) (0.53) (0.42) --
-- -- -- --
- ---------- ---------- ---------- ----------
(0.40) (0.53) (0.42) --
- ---------- ---------- ---------- ----------
$ 10.66 $ 10.70 $ 11.02 $ 10.55
========== ========== ========== ==========
3.59% 1.87% 8.57% (1.40)%
$ 12,757 $ 16,323 $ 12,264 $ 753
0.79% 0.81% 0.81% 0.81%(6)
3.96% 4.01% 5.20% 5.64%(6)
28% 46% 41% 31%
0.79% 0.81% 0.81% 0.81%(6)
CLASS 2
- ---------- ---------- ---------- ----------
2004 2003 2002 2001(3)
- ---------- ---------- ---------- ----------
$ 11.12 $ 10.77 $ 10.31 $ 10.45
- ---------- ---------- ---------- ----------
0.58(4) 0.60(4) 0.65(4) 0.10(4)
(0.03) 0.41 0.29 (0.24)(5)
- ---------- ---------- ---------- ----------
0.55 1.01 0.94 (0.14)
- ---------- ---------- ---------- ----------
(0.66) (0.66) (0.48) --
-- -- -- --
- ---------- ---------- ---------- ----------
(0.66) (0.66) (0.48) --
- ---------- ---------- ---------- ----------
$ 11.01 $ 11.12 $ 10.77 $ 10.31
========== ========== ========== ==========
5.31% 9.47% 9.40% (1.34)%
$ 23,358 $ 21,188 $ 8,186 $ 362
0.80% 0.81% 0.81% 0.80%(6)
5.28% 5.49% 6.39% 6.44%(6)
20% 24% 21% 33%
0.80% 0.81% 0.81% 0.80%(6)
See Notes to Financial Statements.
91
FINANCIAL HIGHLIGHTS
For a Fund share outstanding throughout each period.
VT MONEY MARKET FUND CLASS 1
----------------------------------------------------------------------
2004 2003 2002 2001 2000
------------ ------------ ---------- ----------- ----------
YEARS ENDED DECEMBER 31
NET ASSET VALUE, BEGINNING OF PERIOD . . . . . . . . . . $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------------ ------------ ---------- ----------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income . . . . . . . . . . . . . . . . 0.008 0.006 0.014(4) 0.036 0.056
Net realized and unrealized loss on investments . . . -- -- -- (0.000)(5) --
------------ ------------ ---------- ----------- ----------
Total from investment operations . . . . . . . . . . 0.008 0.006 0.014 0.036 0.056
------------ ------------ ---------- ----------- ----------
LESS DISTRIBUTIONS:
Dividends from net investment income . . . . . . . . . (0.008) (0.006) (0.014) (0.036) (0.056)
Dividends from net realized capital gains . . . . . . -- -- -- -- --
------------ ------------ ---------- ----------- ----------
Total distributions . . . . .. . . . . . . . . . . . . (0.008) (0.006) (0.014) (0.036) (0.056)
------------ ------------ ---------- ----------- ----------
NET ASSET VALUE, END OF PERIOD . . . . . . . . . . . . . $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
============ ============ ========== =========== ==========
TOTAL RETURN(1) . . . . . . . . . . . . . . . . . . . . . 0.85% 0.65% 1.39% 3.68% 5.79%
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) . . . . . . . . . $ 14,660 $ 20,198 $ 33,766 $ 28,563 $ 18,265
Ratio of operating expenses to average net assets . . . 0.63% 0.60% 0.57% 0.62% 0.76%
Ratio of net investment income to average net assets .. 0.84% 0.67% 1.32% 3.41% 5.57%
Ratio of operating expenses to average net assets without
fee waivers, expenses reimbursed and/or fees reduced by
credits allowed by the custodian(2) . . . . . . . . . 0.63% 0.60% 0.57% 0.62% 0.78%
- ----------------------
(1) Total return is not annualized for periods less than one year. The total
return would have been lower if certain fees had not been waived and/or
expenses reimbursed by the investment advisor or if fees had not been
reduced by credits allowed by the custodian.
(2) Ratio of operating expenses to average net assets includes expenses paid
indirectly.
(3) The Fund commenced selling Class 2 shares on November 6, 2001.
(4) Per share numbers have been calculated using the average shares method.
(5) Amount represents less than $0.001 per share.
(6) Annualized.
See Notes to Financial Statements.
92
CLASS 2
- ------------------------------------------------------
2004 2003 2002 2001(3)
- ---------- ---------- ---------- ----------
$ 1.00 $ 1.00 $ 1.00 $ 1.00
- ---------- ---------- ---------- ----------
0.006 0.004 0.011(4) 0.002
-- -- -- (0.000)(5)
- ---------- ---------- ---------- ----------
0.006 0.004 0.011 0.002
- ---------- ---------- ---------- ----------
(0.006) (0.004) (0.011) (0.002)
-- -- -- --
- ---------- ---------- ---------- ----------
(0.006) (0.004) (0.011) (0.002)
- ---------- ---------- ---------- ----------
$ 1.00 $ 1.00 $ 1.00 $ 1.00
========== ========== ========== ==========
0.59% 0.40% 1.13% 0.22%
$ 5,404 $ 3,068 $ 4,679 $ 189
0.88% 0.85% 0.82% 0.87%(6)
0.59% 0.42% 1.07% 3.16%(6)
0.88% 0.85% 0.82% 0.87%(6)
See Notes to Financial Statements.
93
Notes To Financial Statements
WM VARIABLE TRUST
1. ORGANIZATION AND BUSINESS
WM Variable Trust (the "Trust") was organized as a Massachusetts business trust
on January 29, 1993. The Trust is registered under the Investment Company Act of
1940, as amended (the "1940 Act"), as an open-end management investment company.
The Trust consists of 13 funds ("Funds") and 5 portfolios ("Portfolios"). The VT
REIT, VT Equity Income, VT Growth & Income, VT West Coast Equity, VT Mid Cap
Stock, VT Growth, VT Small Cap Value, VT Small Cap Growth (formerly, VT Small
Cap Stock), VT International Growth, VT Short Term Income, VT U.S. Government
Securities, VT Income and VT Money Market Funds are included in this report. The
VT Small Cap Value Fund commenced operations on May 3, 2004.
WM Advisors, Inc. (the "Advisor" or "WM Advisors") serves as investment advisor
to the Trust. The Advisor is a wholly-owned subsidiary of Washington Mutual,
Inc. ("Washington Mutual"), a publicly owned financial services company.
The Trust is authorized to issue an unlimited number of shares of beneficial
interest, each without par value. Each Fund may offer two classes of shares:
Class 1 shares and Class 2 shares. These shares are issued and redeemed only in
connection with investments in, and payments under, variable annuity and
variable life insurance contracts (collectively "Variable Insurance Contracts"),
as well as certain qualified retirement plans. The VT Small Cap Value Fund is
not currently offering Class 2 shares.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies, in conformity
with accounting principles generally accepted in the United States of America
("generally accepted accounting principles"), which are consistently followed by
the Funds in the preparation of their financial statements.
PORTFOLIO VALUATION:
Securities that are primarily traded on a U.S. exchange (excluding securities
traded through the Nasdaq National Market System, which are valued at the Nasdaq
official closing price) are valued at the last sale price on that exchange or,
if there were no sales during the day (and no official closing price on such
day), at the mean of the current day's bid and asked prices. Securities traded
only on over-the-counter markets (other than the Nasdaq National Market System
and the U.S. Government Securities System) are valued at the mean of the current
day's bid and asked prices.
The value of a foreign security is determined in its functional currency as of
the close of trading on the foreign exchange on which it is traded or at the
close of the New York Stock Exchange, if that is earlier, or if there has been
movement in the U.S. market and/or other economic indicators that exceed a
specified threshold, the foreign security is fair valued. The value is then
converted into its U.S. dollar equivalent using prevailing exchange rates on the
day the value of the foreign security is determined.
Options are generally valued at the last sale price or, in the absence of a last
sale price, at the mean of the current day's bid and asked prices. The value of
a futures contract equals the unrealized gain or loss on the contract, which is
determined by marking the contract to the current settlement price for a like
contract acquired on the day on which the futures contract is being valued.
Debt securities of U.S. issuers (other than short-term investments), including
municipal securities, are valued by one or more independent pricing services
(each a "Pricing Service") retained by the Trust. When, in the judgment of a
Pricing Service, market quotations for these securities are readily available,
they are valued at the mean between the quoted bid and asked prices. Short-term
debt securities that mature in 60 days or less are valued at amortized cost,
which approximates market value.
Securities for which market quotations are not readily available are valued at
fair value as determined by or under the direction of the Board of Trustees.
The investments of the VT Money Market Fund are valued on the basis of amortized
cost in accordance with Rule 2a-7 of the 1940 Act, which approximates market
value. Amortized cost valuation involves initially valuing an instrument at its
cost and thereafter assuming a constant amortization to maturity of any discount
or premium, as long as the amortized cost fairly reflects the market-based net
asset value per share. Certain other assets may be valued by the Advisor under
the supervision of the Board of Trustees.
REPURCHASE AGREEMENTS:
Each Fund may enter into repurchase agreement transactions. A repurchase
agreement is a purchase of an underlying debt obligation subject to an agreement
by the seller to repurchase the obligation at an agreed upon price and time. It
is each Fund's policy that its custodian take possession of the underlying
collateral securities. The fair value of the collateral is at all times at least
equal to the total amount of the repurchase obligation. In the event of
counterparty default, the Fund would seek to use the collateral to offset losses
incurred. There is potential loss to the Fund in the event the Fund is delayed
or prevented from exercising its right to dispose of the collateral securities,
including the risk of a possible decline in the value of the underlying
94
Notes to Financial Statements (continued)
WM Variable Trust
securities during the period while the Fund seeks to assert its rights. WM
Advisors, acting under the supervision of the Board of Trustees, reviews the
value of the collateral and the creditworthiness of those banks and
broker-dealers with whom each Fund enters into repurchase agreements.
FUTURES CONTRACTS:
Certain Funds may enter into futures transactions. The underlying value of a
futures contract is incorporated within the unrealized
appreciation/(depreciation) shown in the Portfolio of Investments under the
caption "Futures Contracts." Upon entering into a futures contract, the Fund is
required to deposit with the broker an amount of cash or cash equivalents equal
to a certain percentage of the contract amount (known as an initial margin
deposit). Subsequent payments (known as variation margins) are made or received
by the Fund each day, depending on the daily fluctuation of the value of the
contract. The daily changes in contract value are recorded as unrealized gains
or losses and the Fund recognizes a realized gain or loss when the contract is
closed. Should market conditions change unexpectedly, the Funds may not achieve
the anticipated benefits of the futures contracts and may realize a loss. The
use of futures transactions involves the risk of imperfect correlation in
movements in the price of futures contracts, interest rates and the underlying
hedged assets.
PURCHASED OPTION CONTRACTS:
Certain Funds may enter into put and call option contracts. These Funds may use
option contracts to manage their exposure to the stock and bond markets and to
fluctuations in interest rates and currency values. Upon entering into a put or
call option, the premium paid is recorded as an investment. The daily changes in
contract value are recorded as unrealized gains or losses. When a purchased
option expires, the Fund will realize a loss in the amount of the cost of the
option. When the Fund enters into a closing sale transaction, the Fund will
realize a gain or loss depending on whether the sales proceeds from the closing
sale transaction are greater or less than the cost of the option plus related
transaction costs. When the Fund exercises a put option, the Fund will realize a
gain or loss from the sale of the underlying security and the proceeds from such
sale will be decreased by the premium originally paid. When the Fund exercises a
call option, the cost of the security, which the Fund purchases upon exercise,
will be increased by the premium originally paid. The risk associated with
purchasing options is limited to the premium originally paid.
FOREIGN CURRENCY:
The books and records of the Funds are maintained in U.S. dollars. Foreign
currencies, investments and other assets and liabilities are translated into
U.S. dollars on a daily basis using prevailing exchange rates. Purchases and
sales of investment securities, income and expenses are translated on the
respective dates of such transactions.
Unrealized gains and losses, not relating to securities, which result from
changes in foreign currency exchange rates have been included in unrealized
appreciation/(depreciation) of investments. Unrealized gains and losses of
securities, which result from changes in foreign currency exchange rates as well
as changes in market prices of securities, have been included in unrealized
appreciation/(depreciation) of investments. Net realized foreign currency gains
and losses, which result from changes in exchange rates between trade date and
settlement date on investment transactions as well as the difference between the
amounts of interest and dividends recorded on the books of the Funds and the
amount actually received, have been included in realized gains/(losses) on
investment transactions. Foreign currency gains and losses, which result from
fluctuations in exchange rates between the initial purchase trade date and
subsequent sale trade date, have been included in realized gains/(losses) on
investment transactions.
FORWARD FOREIGN CURRENCY CONTRACTS:
Certain Funds may enter into forward foreign currency contracts. Forward foreign
currency contracts are agreements to exchange one currency for another at a
future date and at a specified price. These Funds may use forward foreign
currency contracts to facilitate transactions in foreign securities and to
manage the Funds' foreign currency exposure. These contracts are valued daily,
and a Fund's net equity therein, representing unrealized gain or loss on the
contracts as measured by the difference between the forward foreign exchange
rates at the dates of entry into the contracts and the forward rates at the
reporting date, is included in the "Statements of Assets and Liabilities".
Realized and unrealized gains and losses are included in the "Statements of
Operations". Due to the risks, the Funds could incur losses up to the entire
contract amount, which may exceed the net unrealized value shown in the
"Statements of Assets and Liabilities".
95
Notes to Financial Statements (continued)
WM VARIABLE TRUST
ILLIQUID INVESTMENTS:
Each Fund may invest a portion of its net assets in securities that are not
readily marketable, including: (1) repurchase agreements with maturities greater
than seven calendar days; (2) time deposits maturing in more than seven calendar
days; (3) certain futures contracts and options; (4) certain variable rate
demand notes having a demand period of more than seven calendar days; and (5)
securities, the disposition of which are restricted under Federal securities
laws, excluding certain Rule 144A securities, as defined in the following
paragraph.
Illiquid securities generally cannot be sold or disposed of in the ordinary
course of business (within seven calendar days) at approximately the value at
which the Funds have valued the investments. This may have an adverse effect on
the Fund's ability to dispose of particular illiquid securities at fair market
value and may limit the Fund's ability to obtain accurate market quotations for
purposes of valuing the securities and calculating the net asset value of shares
of the Fund. The Funds may also purchase securities that are not registered
under the Securities Act of 1933, as amended (the "Act"), but that can be sold
to qualified institutional buyers in accordance with Rule 144A under the Act
("Rule 144A Securities"). Rule 144A Securities generally must be sold only to
other qualified institutional buyers. If a particular investment in Rule 144A
Securities is not determined to be liquid under the guidelines established by
the Board of Trustees, that investment will be subject to a Fund's limitation on
investment in illiquid securities.
SECURITIES TRANSACTIONS AND INVESTMENT INCOME:
Securities transactions are recorded on a trade date basis. Realized gains and
losses from securities sold are recorded on the identified cost basis.
Securities purchased or sold on a when-issued or delayed-delivery basis may be
settled a month or more after the trade date; interest income is not accrued
until settlement date. Each Fund instructs the custodian to segregate assets of
the Fund with a current value at least equal to the amount of its when-issued
purchase commitments.
Interest income on debt securities is accrued daily. Premiums and discounts are
amortized using the interest method. Paydown gains and losses on mortgage-backed
and asset-backed securities are presented as an adjustment to interest income.
Dividend income is recorded on the ex-dividend date, except certain dividends
from foreign securities are recorded as soon as the information is available to
the Funds if informed after the ex-dividend date. The Funds estimate components
of distributions from Real Estate Investment Trusts (REITs). Distributions
received in excess of income are recorded as a reduction of the cost of the
related investments. Each Fund's investment income and realized and unrealized
gains and losses are allocated among the classes of that Fund based upon the
relative average net assets of each class.
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS:
Dividends from net investment income and distributions of any net capital gains
earned by a Fund are declared and paid annually, with the exception of the VT
Money Market Fund from which dividends from net investment income are declared
daily and paid monthly.
Distributions from income and capital gains are determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles. These differences are primarily due to differing treatments of
income and gains on various investment securities held by the Funds,
redesignated distributions and differing characterization of distributions made
by each Fund. At December 31, 2004, the following adjustments have been
reflected in the components of net assets on the "Statements of Assets and
Liabilities" to present these balances on an income tax basis, excluding certain
temporary differences:
INCREASE/
INCREASE/ (DECREASE)
DECREASE (DECREASE) ACCUMULATED
PAID-IN UNDISTRIBUTED NET REALIZED
CAPITAL INCOME/(LOSS) GAIN/(LOSS)
NAME OF PORTFOLIO (000S) (000S) (000S)
- ----------------- -------- ------------- ------------
VT REIT Fund.......................... $ -- $ (384) $ 384
VT Equity Income Fund................. -- (191) 191
VT West Coast Equity Fund............. -- (69) 69
VT Mid Cap Stock Fund................. -- --* --*
VT Growth Fund........................ -- (41) 41
VT Small Cap Value Fund............... -- 1 (1)
VT Small Cap Growth Fund.............. (316) 316 --
VT International Growth Fund.......... (30) (103) 133
VT Short Term Income Fund............. (241) 42 199
VT U.S. Government Securities Fund.... -- 1,370 (1,370)
VT Income Fund........................ (91) 415 (324)
- ----------
*Amount represents less than $500.
The above adjustments are not reflected in the calculation of net investment
income per share presented in the Financial Highlights.
96
Notes to Financial Statements (continued)
WM VARIABLE TRUST
FEDERAL INCOME TAXES:
It is each Fund's policy to qualify as a regulated investment company by
complying with the requirements of the Internal Revenue Code of 1986, as amended
(the "Code"), applicable to regulated investment companies and by distributing
substantially all of its earnings to its shareholders. Therefore, no federal
income or excise tax provision is required.
It is each Fund's policy to meet the diversification requirements of the Code so
that variable annuity and variable life contracts funded by the Trust will not
fail to qualify as annuities and life insurance contracts for tax purposes.
EXPENSES:
General expenses of the Trust are allocated to all the Funds and Portfolios of
the Trust based upon the relative average net assets of each Fund and Portfolio.
Operating expenses directly attributable to a class of shares are charged to the
operations of that class of shares. Expenses of each Fund not directly
attributable to the operations of any class of shares are prorated among the
classes to which the expenses relate based on the relative average net assets of
each class of shares.
USE OF ESTIMATES:
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts and disclosures in the financial statements. Actual
results could differ from those estimates.
3. INVESTMENT ADVISORY AND OTHER TRANSACTIONS
WM Advisors serves as investment advisor to the Trust. The Advisor is entitled
to a monthly fee at an annual rate based upon a percentage of the average daily
net assets of each Fund at the following rates:
FROM $0 FROM $25 FROM $50 FROM $100 FROM $125 FROM $200 FROM $250 FROM $400 FROM $500 FROM $2
TO $25 TO $50 TO $100 TO $125 TO $200 TO $250 TO $400 TO $500 MILLION TO TO OVER
NAME OF FUND MILLION MILLION MILLION MILLION MILLION MILLION MILLION MILLION $2 BILLION $3 BILLION $3 BILLION
- -------------------- ------- ------- -------- --------- --------- --------- --------- --------- ---------- ---------- ----------
VT REIT Fund ....... 0.800% 0.800% 0.800% 0.800% 0.800% 0.800% 0.800% 0.800% 0.750% 0.700% 0.650%
VT Equity Income
Fud ............. 0.625% 0.625% 0.625% 0.625% 0.625% 0.625% 0.625% 0.625% 0.500% 0.500% 0.500%
VT Growth &
Income Fund ..... 0.800% 0.800% 0.800% 0.750% 0.750% 0.700% 0.700% 0.650% 0.575% 0.575% 0.575%
VT West Coast
Equity Fund ..... 0.625% 0.625% 0.625% 0.625% 0.625% 0.625% 0.625% 0.625% 0.500% 0.500% 0.500%
VT Mid Cap Stock
Fund ............ 0.750% 0.750% 0.750% 0.750% 0.750% 0.750% 0.750% 0.750% 0.750% 0.750% 0.700%
VT Growth Fund ..... 0.950% 0.875% 0.875% 0.875% 0.875% 0.875% 0.825% 0.825% 0.750% 0.700% 0.650%
VT Small Cap
Value Fund ...... 0.850% 0.850% 0.850% 0.850% 0.850% 0.850% 0.850% 0.850% 0.850% 0.850% 0.850%
VT Small Cap
Growth Fund ..... 0.900% 0.850% 0.850% 0.850% 0.850% 0.850% 0.850% 0.850% 0.750% 0.750% 0.750%
VT International
Growth Fund ..... 0.950% 0.950% 0.850% 0.850% 0.750% 0.750% 0.750% 0.750% 0.750% 0.750% 0.700%
VT Short Term
Income Fund ..... 0.500% 0.500% 0.500% 0.500% 0.500% 0.450% 0.450% 0.450% 0.400% 0.400% 0.400%
VT U.S. Government
Securities Fund . 0.500% 0.500% 0.500% 0.500% 0.500% 0.500% 0.500% 0.500% 0.500% 0.500% 0.450%
VT Income Fund ..... 0.500% 0.500% 0.500% 0.500% 0.500% 0.500% 0.500% 0.500% 0.500% 0.500% 0.450%
VT Money Market
Fund ............ 0.450% 0.450% 0.450% 0.450% 0.450% 0.450% 0.450% 0.450% 0.450% 0.450% 0.450%
97
Notes to Financial Statements (continued)
WM VARIABLE TRUST
Effective January 1, 2005, the Advisor will change its monthly fee based upon
average daily net assets for the indicated Funds to the following annual rates:
FROM $0 FROM $200 FROM $400 FROM $500 FROM $1 FROM $2
TO $200 TO $400 TO $500 MILLION TO TO $2 TO $3 OVER $3
NAME OF FUND MILLION MILLION MILLION $1 BILLION BILLION BILLION BILLION
- ---------------------------- ------- --------- --------- ---------- ------- ------- -------
VT Growth & Income Fund .... 0.750% 0.700% 0.650% 0.575% 0.575% 0.575% 0.575%
VT Mid Cap Stock Fund ...... 0.750% 0.750% 0.750% 0.750% 0.700% 0.650% 0.600%
VT Growth Fund ............. 0.800% 0.800% 0.800% 0.750% 0.750% 0.700% 0.650%
VT Small Cap Value Fund .... 0.850% 0.850% 0.850% 0.750% 0.750% 0.750% 0.700%
VT Small Cap Growth Fund ... 0.850% 0.850% 0.850% 0.750% 0.750% 0.750% 0.700%
VT U.S. Government
Securities Fund ........... 0.500% 0.500% 0.500% 0.500% 0.500% 0.450% 0.450%
VT Income Fund ............. 0.500% 0.500% 0.500% 0.500% 0.500% 0.450% 0.450%
VT Money Market Fund ....... 0.450% 0.450% 0.450% 0.450% 0.400% 0.400% 0.400%
Custodian fees for certain Funds have been reduced by credits allowed by the
Funds' custodian for uninvested cash balances. The Funds could have invested
this cash in income producing securities. Fees reduced by credits allowed by the
custodian for the year ended December 31, 2004 are shown separately in the
"Statements of Operations".
4. TRUSTEES' FEES
No officer or employee of Washington Mutual or its subsidiaries receives any
compensation from the Trust for serving as an officer or Trustee of the Trust.
The Trust, together with other mutual funds advised by WM Advisors, pay each
Trustee who is not an officer or employee of Washington Mutual or its
subsidiaries, a per annum retainer plus attendance fees for each meeting at
which they are present. The Lead Trustee, Committee Chairs and Committee Members
receive additional remuneration for these services to the Trust. Trustees are
also reimbursed for travel and out-of-pocket expenses. Each Trustee serves in
the same capacity for all 42 funds within the WM Group of Funds.
5. DISTRIBUTION PLANS
Each of the Funds has adopted a distribution plan, pursuant to Rule 12b-1 under
the 1940 Act, applicable to Class 2 shares of the Funds (a "Rule 12b-1 Plan").
Under the Rule 12b-1 Plan, WM Funds Distributor, Inc. (the "Distributor"), a
registered broker-dealer and a wholly-owned subsidiary of Washington Mutual, may
receive a fee at an annual rate of 0.25% of the average daily net assets
attributable to Class 2 shares. This fee may be used to cover the expenses of
the Distributor primarily intended to result in the sale of such shares,
including payments to the Distributor's representatives or others for selling
shares. The Rule 12b-1 Plan shall remain in effect from year to year, provided
such continuance is approved annually by vote of the Board of Trustees,
including a majority of those Trustees who are not "interested persons" of the
Trust, as defined in the 1940 Act, and who have no direct or indirect financial
interest in the operation of the distribution plan or any agreements related to
the plan.
98
Notes to Financial Statements (continued)
WM VARIABLE TRUST
6. PURCHASES AND SALES OF SECURITIES
The aggregate cost of purchases and proceeds from sales of securities, excluding
U.S. Government and short-term investments, for the year ended December 31,
2004, are as follows:
PURCHASES SALES
NAME OF FUND (000S) (000S)
- ---------------------------------- --------- --------
VT REIT Fund ........................ $ 7,645 $ 5,671
VT Equity Income Fund ............... 65,455 46,810
VT Growth & Income Fund ............. 34,606 26,431
VT West Coast Equity Fund ........... 24,975 18,856
VT Mid Cap Stock Fund ............... 41,553 29,991
VT Growth Fund ...................... 173,072 138,476
VT Small Cap Value Fund* ........... 46,776 15,513
VT Small Cap Growth Fund ............ 22,503 42,042
VT International Growth Fund ........ 26,778 17,827
VT Short Term Income Fund ........... 9,267 4,582
VT U.S. Government Securities Fund... 27,635 1,922
VT Income Fund ...................... 16,457 9,326
*The VT Small Cap Value Fund commenced operations on May 3, 2004.
The aggregate cost of purchases and proceeds from sales of U.S. Government
securities, excluding short-term investments, for the year ended December 31,
2004, are as follows:
PURCHASES SALES
NAME OF FUND (000S) (000S)
- --------------------------------------- --------- --------
VT Short Term Income Fund ............. $ 1,685 $ 3,429
VT U.S. Government Securities Fund .... 104,519 67,505
VT Income Fund ........................ 23,455 33,362
7. LENDING OF SECURITIES
Certain Funds may lend securities to brokers, dealers and other financial
organizations to earn additional income. The Funds also continue to receive
interest or dividends on the securities loaned. Each security loan is
collateralized with assets in an amount equal to or greater than the current
market value of the loaned securities. There is a risk of delay in receiving
collateral, that the collateral could lose value or become valueless, or in
recovering the securities loaned or even a loss of rights in collateral should
the borrower fail financially.
At December 31, 2004, each of the Funds with outstanding loans of securities to
certain brokers, dealers or other financial institutions has segregated cash
and/or securities at least equal to the market value of securities loaned with
the Funds' custodian. The Funds currently invest the segregated cash in Mellon
GSL DBT II which is a common collective trust that invests in high grade short
term investments.
8. TRANSACTIONS WITH AFFILIATES
At December 31, 2004, the WM Variable Trust Portfolios hold investments in a
number of the Funds. The figures presented below represent the percentage of
shares outstanding of each Fund owned by the Portfolios:
PORTFOLIOS
---------------------------------------------------------------------------------------
VT FLEXIBLE VT CONSERVATIVE VT CONSERVATIVE VT STRATEGIC
INCOME BALANCED VT BALANCED GROWTH GROWTH
NAME OF FUND PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
- -------------------------------------- ----------- --------------- ----------- --------------- ------------
VT REIT Fund ......................... 4.9% 2.9% 44.9% 31.2% 14.3%
VT Equity Income Fund ................ 3.7% 2.0% 30.6% 21.7% 9.4%
VT Growth & Income Fund .............. 5.7% 2.0% 31.7% 26.4% 13.1%
VT West Coast Equity Fund ............ 1.9% 1.5% 26.3% 21.6% 11.7%
VT Mid Cap Stock Fund ................ 5.9% 2.1% 33.5% 26.7% 15.6%
VT Growth Fund ....................... 5.0% 2.1% 33.7% 26.8% 12.3%
VT Small Cap Value Fund .............. 5.8% 2.4% 41.5% 33.5% 16.9%
VT Small Cap Growth Fund ............. 4.0% 1.7% 27.6% 23.1% 11.1%
VT International Growth Fund ......... -- 2.8% 38.8% 32.0% 16.2%
VT Short Term Income Fund ............ 45.1% 6.2% 12.9% -- --
VT U.S. Government Securities Fund ... 25.3% 5.9% 38.8% 11.4% --
VT Income Fund ....................... 25.5% 5.7% 35.4% 6.9% --
99
Notes to Financial Statements (continued)
WM VARIABLE TRUST
9. COMPONENTS OF DISTRIBUTABLE EARNINGS
At December 31, 2004, the components of distributable earnings on a tax basis
and the tax character of distributions paid during 2004 and 2003 are as follows:
(IN THOUSANDS)
---------------------------------------------------------------------------------
VT VT VT VT VT
VT EQUITY GROWTH & WEST COAST MID CAP VT SMALL CAP
REIT INCOME INCOME EQUITY STOCK GROWTH VALUE
FUND FUND FUND FUND FUND FUND FUND
--------- --------- --------- ---------- -------- ------- ----------
Gross tax unrealized appreciation.... $ 17,337 $ 51,837 $ 66,133 $ 38,962 $ 27,238 $ 33,718 $ 7,569
Gross tax unrealized depreciation.... (25) (1,825) (7,872) (6,853) (110) (4,086) (1,329)
-------- -------- -------- -------- -------- -------- --------
Net tax unrealized appreciation ..... $ 17,312 $ 50,012 $ 58,261 $ 32,109 $ 27,128 $ 29,632 $ 6,240
======== ======== ======== ======== ======== ======== ========
Undistributed ordinary income ....... $ 1,761 $ 3,778 $ 3,426 $ 927 $ 1,243 $ 1,284 $ 1,551
Undistributed accumulated gains ..... $ 1,409 $ -- $ -- $ -- $ 7,021 $ -- $ --
Tax Composition of Distributions:
2004
Ordinary income ..................... $ 699 $ 3,246 $ 2,690 $ 287 $ 327 $ - $ --
Long-term capital gain .............. $ 249 $ -- $ -- $ -- $ 1,636 $ - $ --
2003
Ordinary income ..................... $ -- $ 3,598 $ 2,511 $ 229 $ 214 $ - $ --
Long-term capital gain .............. $ -- $ 219 $ -- $ -- $ -- $ - $ --
VT VT VT VT U.S. VT
SMALL CAP INTERNATIONAL SHORT TERM GOVERNMENT VT MONEY
GROWTH GROWTH INCOME SECURITIES INCOME MARKET
FUND FUND FUND FUND FUND FUND
--------- ------------- ---------- ---------- --------- ------
Gross tax unrealized appreciation... $ 6,775 $ 21,671 $ 1,232 $ 3,664 $ 14,629 $ --
Gross tax unrealized depreciation... (6,825) (2,075) (301) (1,414) (2,271) --
------- -------- ------- -------- -------- -----
Net tax unrealized appreciation/
(depreciation) ................... $ (50) $ 19,596 $ 931 $ 2,250 $ 12,358 $ --
======= ======== ======= ======== ======== =====
Undistributed ordinary income ...... $ -- $ 1,510 $ 2,091 $ 12,193 $ 11,974 $ --
Undistributed accumulated gains .... $ -- $ -- $ -- $ -- $ -- $ --
Tax Composition of Distributions:
2004
Ordinary income .................... $ -- $ 971 $ 2,137 $ 10,325 $ 12,323 $ 162
Long-term capital gain ............. $ -- $ -- $ -- $ -- $ -- $ --
2003
Ordinary income .................... $ -- $ 749 $ 2,739 $ 9,586 $ 11,703 $ 190
Long-term capital gain ............. $ -- $ -- $ -- $ -- $ -- $ --
10. POST OCTOBER LOSS
Under the current tax law, capital and currency losses realized after October
31, may be deferred and treated as occurring on the first day of the following
fiscal year. For the year ended December 31, 2004, the following funds have
elected to defer capital losses occurring between November 1, 2004 and December
31, 2004 as follows:
CAPITAL LOSSES CURRENCY LOSSES
NAME OF PORTFOLIO (000S) (000S)
- -------------------------------------- -------------- ---------------
VT Growth Fund ....................... $ -- $ 16
VT Small Cap Value Fund .............. 165 --
VT International Growth Fund ......... -- 92
VT U.S. Government Securities Fund ... 334 --
Such losses will be treated as arising on the first day of the year ended
December 31, 2005.
100
Notes to Financial Statements (continued)
WM VARIABLE TRUST
11. CAPITAL LOSS CARRYFORWARDS
At December 31, 2004, the following Funds have available for federal income tax
purposes unused capital losses as follows:
(IN THOUSANDS)
------------------------------------------------------------------------------
EXPIRING EXPIRING EXPIRING EXPIRING EXPIRING EXPIRING EXPIRING EXPIRING
NAME OF FUND IN 2005 IN 2006 IN 2007 IN 2008 IN 2009 IN 2010 IN 2011 IN 2012
- ------------------------------------- -------- -------- -------- -------- -------- -------- -------- --------
VT Equity Income Fund ............... $ -- $ -- $ -- $ -- $ -- $ -- $ 907 $ --
VT Growth & Income Fund ............. -- -- -- -- 12,511 8,844 9,117 --
VT West Coast Equity Fund ........... -- -- -- -- -- 1,080 1,683 --
VT Growth Fund ...................... -- -- -- -- 60,480 37,621 5,944 --
VT Small Cap Growth Fund ............ -- -- -- -- -- 1,961 13,089 --
VT International Growth Fund ........ -- -- -- -- 3,342 5,109 4,184 --
VT Short Term Income Fund ........... 76 52 115 76 35 -- 112 85
VT U.S. Government Securities Fund ... 161 -- -- 17 -- -- 1,673 1,119
VT Income Fund ...................... -- -- 292 176 -- 202 -- --
VT Money Market Fund ................ -- -- --* -- --* -- -- --
- -------------
*Amount represents less than $500.
12. INDUSTRY AND GEOGRAPHIC CONCENTRATION AND OTHER RISK FACTORS
While no individual fund is intended as a complete investment program, this is
especially true for funds that concentrate their investments such as those
investing in particular industries or regions.
The VT REIT Fund concentrates its investments in real estate investment trust
("REIT") securities or debt securities of issuers that are principally engaged
in the U.S. real estate or related industries. The VT REIT Fund could be
adversely impacted by economic trends within this industry.
The VT West Coast Equity Fund concentrates its investments in companies located
or doing business in Alaska, California, Idaho, Montana, Oregon and Washington.
The VT West Coast Equity Fund could be adversely impacted by economic trends
within this region.
Certain Funds may invest a portion of their assets in foreign securities of
developing or emerging markets countries; enter into forward foreign currency
transactions; lend their portfolio securities; enter into a stock index,
interest rate and currency futures contracts, and options on such contracts;
enter into interest rate swaps or purchase or sell interest rate caps or floors;
enter into other types of options transactions; make short sales; purchase zero
coupon and payment-in-kind bonds; enter into repurchase or reverse repurchase
agreements; purchase and sell "when-issued" securities and engage in
"delayed-delivery" transactions; and enter into various other investment
practices, each with inherent risks. The risks involved in investing in foreign
securities include those resulting from future adverse political and economic
developments and the possible imposition of currency exchange restrictions or
other foreign laws or restrictions. The risks involved in investing in a high
concentration of a single sector include those resulting from future adverse
political and economic developments or regulatory occurrences and the potential
for adverse effects to the financial conditions of the industries within the
sector due to market fluctuations.
From time to time, one or more of the Funds used for investment by a Portfolio
may experience relatively large investments or redemptions due to reallocations
or rebalancings by the Portfolios. These transactions will affect the Funds,
since the Funds that experience redemptions as a result of the reallocations or
rebalancings may have to sell portfolio securities and the Funds that receive
additional cash will have to invest such cash. While it is impossible to predict
the overall impact of these transactions over time, there could be adverse
effects on portfolio management to the extent that the Funds may be required to
sell securities or invest cash at times when they would not otherwise do so.
These transactions could also have tax consequences if sales of securities
resulted in gains and could also increase transaction costs. The Advisor is
committed to minimizing such impact on the Funds to the extent it is consistent
with pursuing the investment objectives of the Portfolios. The Advisor may
nevertheless face conflicts in fulfilling its responsibilities. The Advisor
will, at all times, monitor the impact on the Funds of transactions by the
Portfolios.
101
Report of Independent Registered Public Accounting Firm
TO THE TRUSTEES AND SHAREHOLDERS OF
WM VARIABLE TRUST
We have audited the accompanying statements of assets and liabilities, including
the portfolios of investments, of WM Variable Trust REIT Fund, WM Variable Trust
Equity Income Fund, WM Variable Trust Growth & Income Fund, WM Variable Trust
Growth Fund, WM Variable Trust Income Fund, WM Variable Trust Money Market Fund,
WM Variable Trust Mid Cap Stock Fund, WM Variable Trust Small Cap Value Fund, WM
Variable Trust Small Cap Growth Fund, WM Variable Trust International Growth
Fund, WM Variable Trust Short Term Income Fund, WM Variable Trust U.S.
Government Securities Fund and WM Variable Trust West Coast Equity Fund (all
funds of WM Variable Trust) (collectively the "Funds") as of December 31, 2004,
and the related statements of operations for the year then ended, the statements
of changes in net assets for each of the two years in the period then ended, and
the financial highlights for each of the five years in the period then ended.
These financial statements and financial highlights are the responsibility of
the Funds' management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes consideration of internal control over financial reporting as a basis
for designing audit procedures that are appropriate in the circumstances, but
not for the purpose of expressing an opinion on the effectiveness of the Funds'
internal control over financial reporting. Accordingly, we express no such
opinion. An audit also includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. Our procedures
included confirmation of securities owned as of December 31, 2004, by
correspondence with the custodian and brokers; where replies were not received
from brokers, we performed other auditing procedures. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
aforementioned Funds as of December 31, 2004, the results of their operations
for the year then ended, the changes in their net assets for each of the two
years in the period then ended, and the financial highlights for each of the
five years in the period then ended, in conformity with accounting principles
generally accepted in the United States of America.
Deloitte & Touche LLP
Boston, Massachusetts
February 18, 2005
102
Other Information (unaudited)
WM VARIABLE TRUST
1. TAX INFORMATION
The following tax information represents the amount of each distribution made by
the following Funds which may qualify for the dividends received deduction
available to corporate shareholders.
NAME OF FUND
- ------------
VT REIT Fund ......................... 7.73%
VT Equity Income Fund ................ 100.00%
VT Growth & Income Fund .............. 100.00%
VT West Coast Equity Fund ............ 100 00%
VT Mid Cap Stock Fund ................ 100.00%
If the Fund meets the requirements of Section 853 of the Code, the Fund may
elect to pass through to its shareholders credits for foreign taxes paid. The
total amount of income received by the VT International Growth Fund from sources
within foreign countries and possessions of the United States was $0.2543 per
share (representing a total of $1,836,312). The total amount of taxes paid to
such countries was $0.0272 per share (representing a total of $196,227).
2. TRUSTEES AND OFFICERS INFORMATION
TRUSTEES AND OFFICERS:
NAME, AGE, AND ADDRESS(1) LENGTH OF PRINCIPAL OCCUPATION(S) DURING OTHER DIRECTORSHIPS
OF NON-INTERESTED TRUSTEE(4) TIME SERVED(2) PAST 5 YEARS HELD BY TRUSTEE
- ---------------------------- ------------------------ ------------------------------------ --------------------------
Wayne L. Attwood, M.D. Composite Funds-11 Years Retired doctor of internal medicine None.
Age 75 WM Group of and gastroenterology.
Funds-6 years
Kristianne Blake Composite Funds-3 years CPA specializing in personal Frank Russell Investment Company;
Age 50 WM Group of financial and tax planning. Russell Insurance Funds; Avista
Funds-6 years Corporation; St. George's School
Edmond R. Davis, Esq. Sierra Funds-8 years Partner at the law firm of Davis Braille Institute of America, Inc;
Age 76 WM Group of & Whalen LLP. Prior thereto, Children's Bureau of Southern
Funds-6 years partner at the law firm of Brobeck, California, Children's Bureau
Phlegar & Harrison, LLP. Foundation; Fifield Manors,
Inc.
Carrol R. McGinnis Griffin Funds-3 years Founder of McGinnis Investments. Baptist Foundation of Texas;
Age 61 WM Group of Prior thereto, President and Chief Concord Trust Company.
Funds-5 years Operating Officer of Transamerica
Fund Management Company.
Alfred E. Osborne, Jr., Ph.D. Sierra Funds-7 years Senior Associate Dean, University of Nordstrom Inc.; K2, Inc.; First
Age 60 WM Group of California at Los Angeles Anderson Pacific Advisors' Capital, Crescent
Funds-6 years Graduate School of Management, and and New Income Funds; EMAK
Faculty Director of the Harold Price Worldwide, Inc.; Member of
Center for Entrepreneurial Studies, Investment Company Institute
University of California at Los National Board of
Angeles. Governors; Director of Independent
Council Directors and Member of
Communication & Education
Committee.
Daniel L. Pavelich Composite Funds-1 year Retired Chairman and CEO of BDO Catalytic, Inc.; Vaagen Bros.
Age 60 WM Group of Seidman, LLP. Lumber, Inc.
Funds-6 years
Jay Rockey Composite Funds-3 Founder and Senior Counsel of The Downtown Seattle Association; WSU
Age 76 years Rockey Company, now Rockey, Foundation
WM Group of Hill & Knowlton.
Funds-6 years
Richard C. Yancey Composite Funds-23 years Retired Managing Director of AdMedia Partners Inc.; Czech and
(Lead Trustee) WM Group of Dillon, Read & Co., an Investment Slovak American Enterprise Fund
Age 78 Funds-6 years Bank now part of UBS.
103
Other Information (unaudited) (continued)
WM VARIABLE TRUST
NAME, AGE, AND ADDRESS(1) LENGTH OF PRINCIPAL OCCUPATION(S) DURING OTHER DIRECTORSHIPS
OF INTERESTED TRUSTEE(3)(4) TIME SERVED(2) PAST 5 YEARS HELD BY TRUSTEE
- --------------------------- ----------------------- ------------------------------- -----------------------------
Anne V. Farrell Composite Funds-4 years President Emeritus of the
Age 69 WM Group of Seattle Foundation. Washington Mutual, Inc.; REI
Funds-6 years
Michael K. Murphy Composite Funds-3 years Chairman of CPM Development Washington Mutual, Inc.
Age 67 WM Group of Corporation.
Funds-6 years
William G. Papesh, Composite Funds-9 years President and Director of the Member of Investment Company
President and CEO WM Group of Advisor Transfer Agent and Institute Board of Governors.
Age 61 Funds-6 years Distributor.
POSITION(S) HELD WITH REGISTRANT
NAME, AGE, AND ADDRESS(1) & PRINCIPAL OCCUPATION(S) DURING
OF OFFICER(4) LENGTH OF TIME SERVED PAST 5 YEARS
- ------------------------- -------------------------------------------- ---------------------------------------------------------
Wendi B. Bernard Assistant Vice President Assistant Vice President of the Advisor.
Age 36 and Assistant Secretary since 2003.
Jeffrey L. Lunzer, CPA First Vice President, Chief Financial First Vice President of the Advisor, Transfer Agent and
Age 43 Officer and Treasurer since 2003. Distributor. Prior to 2003,senior level positions at the
Columbia Funds and Columbia Management Co.
William G. Papesh President and CEO since 1987. Prior to 1987, President and Director of the Advisor, Transfer Agent
Age 61 other officer positions since 1972. and Distributor.
Gary Pokrzywinski Senior Vice President since 2004. Senior Vice President and Director of the Advisor,
Age 43 Prior to 2004, other officer positions Transfer Agent and Distributor.
held since 1999.
Debra Ramsey Senior Vice President since 2004. Senior Vice President and Director of the Advisor,
Age 51 Transfer Agent and Distributor.
John T. West First Vice President, Secretary, First Vice President of the Advisor, Transfer Agent
Age 49 Chief Compliance Officer and Anti-Money and Distributor.
Laundering Compliance Officer since 2004.
Prior to 2004, other officer positions
held since 1993.
Randall L. Yoakum Senior Vice President since 2001. Senior Vice President, Chief Investment Strategist of the
Age 45 Prior to 2001, other officer positions Advisor. Director of the Advisor, Transfer Agent and
held since 1999. Distributor from 1999 to 2004. Prior thereto senior
positions at D.A. Davidson and Boatmen's Trust.
- -----------
Note: The Statement of Additional Information includes additional information
about Fund Trustees and Officers and is available, without charge, upon request
by calling 1-800-222-5852.
(1) The address for all Trustees and Officers is 1201 Third Avenue, 22nd
Floor, Seattle, WA, 98101.
(2) The Sierra Funds merged with the Composite Funds on March 23, 1998 to form
the WM Group of Funds. The Griffin Funds merged with the WM Group of Funds
on March 5, 1999.
(3) Trustees are considered interested due to their affiliation with
Washington Mutual, Inc. or the Funds.
(4) The Trustees oversee 42 Portfolios and Funds in the Fund Complex. Each
Trustee and executive officer shall hold the indicated positions until his
or her resignation or removal.
3. PORTFOLIO INFORMATION
SCHEDULES OF INVESTMENTS
The Trust files its complete schedules of portfolio holdings with the Securities
and Exchange Commission ("SEC") for the first and third quarters of each fiscal
year on Form N-Q. The Trust's Form N-Q is available, without charge and upon
request, by calling 1-800-222-5852. The Trust's Form N-Q is available at
http://www.sec.gov and also may be reviewed and copied at the SEC's Public
Reference Room ("PRR") in Washington, DC. Information regarding the operation of
the PRR may be obtained by calling 1-800-SEC-0330.
PROXY VOTING INFORMATION
The policies and procedures that the Trust uses to determine how to vote proxies
relating to portfolio securities held by the Fund are included in the Trust's
Statement of Additional Information which is available, without charge and upon
request, by calling 1-800-222-5852. Information regarding how the Fund voted
proxies relating to portfolio securities during the most recent twelvemonth
period ended June 30 is available at http://www.wmgroupoffunds.com. This
information is also available at http: //www. sec .gov.
104
[WM VARIABLE TRUST LOGO]
Investment returns and unit value of an investment will fluctuate, and an
investor's units when redeemed may be worth more or less than their original
cost.
This annual report is published for the general information of the shareholders
of the WM Variable Trust. This material is not authorized for distribution
unless preceded or accompanied by a current prospectus that includes more
information regarding the risk factors, expenses, policies, and objectives of
the contract. Investors should read the prospectus carefully before investing.
To obtain an additional prospectus, please call 800-222-5852.
The WM Variable Trust Funds are advised by WM Advisors, Inc. (WMAI).They are
available through variable insurance products distributed by WM Funds
Distributor, Inc. (WMFD) and sold through WM Financial Services, Inc. (WMFS) and
independent broker/ dealers. WMAI, WMFD, and WMFS are affiliates of Washington
Mutual, Inc.
Distributed by:
WM Funds Distributor, Inc.
Member NASD
[WM VARIABLE Trust LOGO]
PRESORTED
WM Funds Distributor, Inc. STANDARD
12009 Foundation Place, Suite 350 US POSTAGE PAID
Gold River, CA 95670 LOS ANGELES, CA
PERMIT #1831
[WM VARIABLE TRUST LOGO]
ANNUAL REPORT
December 31, 2004
WM VT STRATEGIC ASSET MANAGEMENT PORTFOLIOS
WM VT Strategic Asset Management Portfolios
VT Flexible Income Portfolio
VT Conservative Balanced Portfolio
VT Balanced Portfolio
VT Conservative Growth Portfolio
VT Strategic Growth Portfolio
At the WM Group of Funds, our passion is piecing together individual
investments into comprehensive portfolios to make your financial plan more
effective.
The WM Variable Trust (VT) Funds may not be purchased directly, but are
currently available through the WM Strategic Asset Manager and the WM Advantage
variable annuities issued by American General Life. They are also available
through the WM Diversified Strategies and WM Diversified Strategies(III)
variable annuities issued by AIG SunAmerica Life Assurance Company, the WM
Diversified Strategies(III) (New York) variable annuity issued by First
SunAmerica Life Insurance Company, and the WM LifeAccumulator variable universal
life insurance policy issued by Farmers New World Life Insurance Company. They
may also be available through other select variable insurance products and
retirement plans. The VT SAM Portfolios may not have been available for sale for
all products for the time periods shown on pages 8 - 17.
Withdrawals made prior to age 59 1/2 may be subject to a 10% IRS tax penalty.
Table of Contents
1 Message from the President
2 Economy & Financial Markets: Review & Outlook
6 Our SAM Process and Asset Allocation Team VT SAM Portfolio Investment
Strategy
8 VT Flexible Income Portfolio
10 VT Conservative Balanced Portfolio
12 VT Balanced Portfolio
14 VT Conservative Growth Portfolio
16 VT Strategic Growth Portfolio
18 Expense Information
20 Financial Statements
34 Notes to Financial Statements
38 Report of Independent Registered Public Accounting Firm
39 Other Information
Not FDIC or NCUA/NCUSIF Insured
May Lose Value - Not a Deposit - No Bank or Credit Union Guarantee
- - Not Insured by any Federal Government Agency
Dear Investor,
[PHOTO OF WILLIAM G. PAPESH]
During my 36 years in the investment management business, I have seen many
changes -- some caused a lasting impact and others came into fashion but then
quickly faded. Thankfully, there have also been a few things that have remained
the same. Among the most important of these is our long-term investment
philosophy.
One test of our consistent investment approach can be found in the performance
of our WM VT Strategic Asset Management (SAM) Portfolios. We believe these
results validate our forecasting, portfolio construction, risk management, and
asset allocation processes, which have taken years to build. We are also
thankful to the important partners who have helped us deliver our investment
promise to shareholders so successfully: our investment management, fund
distribution, and shareholder servicing teams, as well as the WM Group of Funds
Board of Trustees.
EXPANDING OUR CAPABILITIES
Our fund family is committed to seeking ways to improve our investment process.
As part of these ongoing efforts, in May of 2004 we launched our new WM VT Small
Cap Value Fund, which invests in undervalued smaller companies. (Note that
small-cap stocks may have additional risks, including greater price volatility.)
With the addition of this new Fund, our VT SAM Portfolios can invest in up to 14
distinct asset classes, which expands our choice of investments while increasing
our portfolio diversification opportunities.
BENEFITING FROM A STRONG FOUNDATION
I am proud to be only the fourth president of our fund family, which can trace
its roots back more than six decades. From my vantage point, I believe our
strong heritage has been built on trust and integrity. Although these
characteristics are intangible, they are essential to building strong
shareholder relationships and are the foundation of our organization.
Our heritage includes producing positive results guided by a fund's stated
investment objective. The powerful combination of consistent fund performance
and quality shareholder services has produced shareholder satisfaction that has
resulted in a very low redemption rate relative to our peers in the fund
industry. We will continue striving to meet the expectations of our existing
shareholders while attracting new investors and assets under management.
Based on our achievements this year and our continuous efforts to improve our
processes, I am extremely positive about our direction and ability to assist you
in meeting your financial goals. On behalf of the entire company, we thank you
for your continued support and confidence.
Sincerely,
/s/ William G. Papesh
- ---------------------
William G. Papesh
President
Economy & Financial Markets: Review & Outlook
[LOGO]
MODERATE ECONOMIC GROWTH AMID AN ABNORMAL RECOVERY
Fiscal year 2004 - the 12 months from January 1, 2004 through December 31, 2004
- - was a transition period for the U.S. economy, which experienced a cyclical
rebound accompanied by a shift from consumer to business spending. Improved
corporate productivity, stronger cash flows, and profit growth all indicated
that a cyclical recovery was underway as the year progressed. This rebound was
powered by the Federal Reserve's very successful reflation policy, which allowed
the economy to benefit from the lowest interest rates seen in 45 years.
While we believe the economy continues to improve, this recovery has shown some
unusual characteristics. Historically, in a normal recovery, businesses add more
jobs, which in turn gives individuals the confidence to increase spending. In
this recovery, businesses restrained both capital expenditures and new hiring
for most of the period. Despite the bad news, consumers kept spending even as
layoffs continued. What allowed consumers to keep spending were record levels of
home refinancings and a general willingness to assume debt.
What also made this period unusual was that the economic slowdown was not
restricted to the U.S. In addition, Europe and Asia (with the exception of Japan
and China) suffered from slow economic growth, which reduced demand for U.S.
imports. Furthermore, news about terrorism and the war in Iraq reduced investor
confidence.
REFLATION POLICY HELPS PROFITABILITY
The economy began the period on a firm footing thanks to the Federal Reserve's
powerful reflation policy. Low interest rates and growing corporate earnings
helped propel corporate profitability to its highest levels in 20 years and
allowed businesses to repair their balance sheets.
In this environment, stocks traded within a relatively narrow range prior to the
presidential election, but finished the year with the S&P 500 posting a total
return of 10.87%. As the year progressed, geopolitical concerns, slow job
growth, and rising oil prices added to investor uncertainty. The re-election of
President George W. Bush in November
VALUE OF A $10,000 INVESTMENT DECEMBER 31, 1994 - DECEMBER 31, 2004
[LINE CHART]
VALUE OF $10,000
LB AGGREGATE S&P 500 TR
BOND TR (%TOTAL U.S. INFLATION
DATE (%TOTAL RETURN) RETURN) (%PRICE RETURN)
12/31/1994 10,000 10,000 10,000
Jan-95 10,198 10,260 10,040
Feb-95 10,441 10,658 10,080
Mar-95 10,504 10,974 10,113
Apr-95 10,651 11,293 10,147
May-95 11,064 11,739 10,167
Jun-95 11,144 12,015 10,187
Jul-95 11,120 12,415 10,187
Aug-95 11,254 12,448 10,214
Sep-95 11,364 12,970 10,234
Oct-95 11,511 12,925 10,268
Nov-95 11,684 13,493 10,261
Dec-95 11,848 13,743 10,254
Jan-96 11,926 14,216 10,314
Feb-96 11,718 14,352 10,347
Mar-96 11,636 14,490 10,401
Apr-96 11,571 14,703 10,442
May-96 11,548 15,082 10,461
Jun-96 11,703 15,144 10,468
Jul-96 11,734 14,470 10,488
Aug-96 11,714 14,777 10,508
Sep-96 11,918 15,607 10,541
Oct-96 12,183 16,035 10,575
Nov-96 12,391 17,252 10,595
Dec-96 12,276 16,914 10,595
Jan-97 12,314 17,964 10,629
Feb-97 12,345 18,110 10,662
Mar-97 12,208 17,357 10,689
Apr-97 12,391 18,393 10,701
May-97 12,509 19,522 10,695
Jun-97 12,657 20,393 10,708
Jul-97 12,999 22,012 10,721
Aug-97 12,889 20,788 10,741
Sep-97 13,079 21,927 10,768
Oct-97 13,269 21,195 10,795
Nov-97 13,330 22,176 10,788
Dec-97 13,465 22,558 10,775
Jan-98 13,637 22,808 10,796
Feb-98 13,626 24,452 10,816
Mar-98 13,672 25,704 10,837
Apr-98 13,744 25,964 10,856
May-98 13,874 25,517 10,876
Jun-98 13,992 26,553 10,889
Jul-98 14,021 26,272 10,902
Aug-98 14,250 22,473 10,915
Sep-98 14,583 23,914 10,928
Oct-98 14,506 25,858 10,954
Nov-98 14,589 27,425 10,954
Dec-98 14,633 29,004 10,948
Jan-99 14,736 30,217 10,974
Feb-99 14,479 29,277 10,987
Mar-99 14,558 30,448 11,020
Apr-99 14,605 31,626 11,101
May-99 14,476 30,880 11,101
Jun-99 14,430 32,594 11,101
Jul-99 14,369 31,577 11,134
Aug-99 14,362 31,419 11,161
Sep-99 14,529 30,558 11,214
Oct-99 14,583 32,493 11,234
Nov-99 14,581 33,152 11,241
Dec-99 14,511 35,105 11,241
Jan-00 14,463 33,343 11,268
Feb-00 14,638 32,712 11,335
Mar-00 14,831 35,912 11,428
Apr-00 14,788 34,831 11,434
May-00 14,781 34,117 11,441
Jun-00 15,088 34,956 11,508
Jul-00 15,226 34,411 11,527
Aug-00 15,447 36,548 11,541
Sep-00 15,544 34,618 11,601
Oct-00 15,646 34,472 11,621
Nov-00 15,903 31,756 11,628
Dec-00 16,199 31,912 11,621
Jan-01 16,463 33,044 11,694
Feb-01 16,606 30,031 11,741
Mar-01 16,689 28,130 11,768
Apr-01 16,619 30,316 11,815
May-01 16,719 30,519 11,868
Jun-01 16,782 29,777 11,888
Jul-01 17,158 29,485 11,855
Aug-01 17,356 27,639 11,855
Sep-01 17,557 25,406 11,908
Oct-01 17,924 25,891 11,868
Nov-01 17,676 27,877 11,848
Dec-01 17,563 28,123 11,801
Jan-02 17,706 27,712 11,829
Feb-02 17,877 27,177 11,876
Mar-02 17,581 28,199 11,942
Apr-02 17,922 26,490 12,009
May-02 18,074 26,294 12,009
Jun-02 18,231 24,422 12,016
Jul-02 18,452 22,517 12,030
Aug-02 18,764 22,666 12,069
Sep-02 19,068 20,202 12,090
Oct-02 18,980 21,980 12,110
Nov-02 18,974 23,274 12,110
Dec-02 19,367 21,906 12,084
Jan-03 19,384 21,332 12,137
Feb-03 19,652 21,012 12,230
Mar-03 19,636 21,216 12,304
Apr-03 19,799 22,964 12,277
May-03 20,167 24,174 12,257
Jun-03 20,127 24,484 12,271
Jul-03 19,451 24,914 12,284
Aug-03 19,579 25,400 12,331
Sep-03 20,098 25,131 12,371
Oct-03 19,911 26,553 12,358
Nov-03 19,959 26,787 12,324
Dec-03 20,162 28,191 12,311
Jan-04 20,324 28,709 12,371
Feb-04 20,543 29,109 12,438
Mar-04 20,697 28,669 12,518
Apr-04 20,159 28,219 12,558
May-04 20,079 28,605 12,632
Jun-04 20,193 29,160 12,672
Jul-04 20,393 28,195 12,652
Aug-04 20,782 28,308 12,658
Sep-04 20,839 28,614 12,685
Oct-04 21,014 29,052 12,752
Nov-04 20,846 30,228 12,758
Dec-04 21,037 31,256 12,795
Data shown is past performance and does not guarantee future results.
Source: Ibbotson Associates. The S&P 500 is a broad-based index intended to
represent the U.S. equity market. The Lehman Brothers Aggregate Bond Index is a
broad-based index intended to represent the U.S. fixed-income market. Returns
shown for indices assume reinvestment of all dividends and distributions.
Inflation is measured by the Consumer Price Index for all urban consumers.
Indices are unmanaged, and individuals cannot invest directly in an index.
This economic and financial market analysis represents the opinions of WM
Advisors. It should not be considered as investment advice. No forecast based on
the opinions expressed can be guaranteed, and they may be subject to change
without notice.
2
produced a strong post-election rally that continued through year end. Companies
in cyclical growth sectors, such as energy and utilities, performed best. At the
style level, value stocks outpaced growth stocks, while mid- and small-cap
stocks significantly outperformed large-cap stocks.
Starting from historically low short-term interest rates, which effectively
created 0% inflation-adjusted interest rates, bond markets were concerned about
inflation and Federal Reserve policy shifts, and had a volatile year. The second
quarter was one of the worst for the Treasury market since 1980, but in the
third quarter, Treasuries rebounded strongly. That exceptional reversal was
attributed to concerns that the increase in oil prices, which moved to over $50
per barrel in late September, would curb consumer spending and further reduce
growth in an already slowing economy. In the fourth quarter, Treasuries leveled
off, shrugging off news about a weakening U.S. dollar, rising short-term
interest rates, and an improving U.S. economy.
LOOKING AHEAD
Looking ahead, we continue to be concerned about several factors: global excess
capacity, which curtails corporate pricing power; the large federal deficit,
which can raise interest rates and curb individual savings; the declining U.S.
dollar, which makes U.S. financial assets less attractive; volatile oil prices;
and the timing of future interest rate hikes.
Our fixed-income outlook assumes the Federal Reserve (the Fed) will continue its
stated policy of gradual short-term interest rate increases. As a result, we
expect the yield curve will continue to flatten with short-term rates moving up
more than longer-term rates. As the Fed moves to increase short-term interest
rates, our long-term interest rate scenario remains positive. Given these
competing factors, we are positioned neutrally with respect to interest rate
risk. From a sector standpoint, we view mortgages as offering the best value.
Mortgages generally do well in a stable to modestly rising interest rate
environment. We also believe high-yield securities should continue to benefit
from a growing economy.
Our equity outlook is for the economy to continue to grow, but at a slower pace,
accompanied by moderate inflation. In this environment, we continue to focus on
companies that we believe can generate organic growth and not only pay
dividends, but also increase them. In a slow-growth environment, dividends can
become a larger component of total return,which makes these companies more
attractive.
We also believe an important element of a sustained recovery is higher
employment, rather than increases in consumer debt.
DIVERSIFICATION AND RISK MANAGEMENT
As long-term investors,we develop strategies designed to reduce volatility and
provide competitive risk-adjusted returns. Unlike many other fund managers, we
do not rebalance our Portfolios to static benchmark allocations. Instead, we
continually reallocate the Portfolios to future targets to take advantage of
changing market conditions. This is how we practice active portfolio management,
and we believe it can serve investors well.
To better illustrate how our Portfolio activities transpired over the past year,
the chart on the following pages shows portfolio allocation actions over the
period as market activities unfolded.
MARKET PERFORMANCE AS OF DECEMBER 31, 2004
1 Year 5 Year 10 Year
------ ------- -------
S&P 500 10.87% -2.30% 12.07%
Energy 31.54% 8.77% 14.15%
Industrials 18.03% 2.78% 13.07%
Consumer Staples 8.16% 4.78% 11.24%
Telecommunication Services 19.85% -14.60% 5.29%
Utilities 24.28% 3.73% 8.16%
Financials 10.89% 7.26% 17.65%
Health Care 1.68% 2.76% 15.01%
Consumer Discretionary 13.24% -0.51% 12.08%
Materials 13.19% 5.22% 8.61%
Information Technology 2.56% -16.17% 13.02%
LEHMAN BROTHERS AGGREGATE BOND INDEX 4.34% 7.71% 7.72%
Data shown is past performance and does not guarantee future results.
Source: Ibbotson Associates. Equity sectors are represented by S&P 500 sector
categories. Returns shown for indices and sectors are annualized returns and
assume reinvestment of all dividends and distributions. Indices are unmanaged,
and individuals cannot invest directly in an index.
3
Economy & Financial Markets: Review & Outlook
VT STRATEGIC ASSET MANAGEMENT (SAM) PORTFOLIOS:
DYNAMIC REALLOCATION PROCESS AT WORK
January - March 2004
- - Widened diversification levels to manage risk and participate in cyclical
market advances.
- - Continued to favor small- and mid-cap stocks while taking profits in small-cap
growth stocks to maintain desired diversification.
- - Maintained overweightings in traditional value sectors and in cyclically
sensitive sectors that could benefit from economic growth.
- - Took profits in corporate issues and increased holdings in mortgage-backed
bonds.
April - June 2004
- - Slightly enhanced equity exposure and decreased bond exposure in certain
Portfolios.
- - Expanded a position in small-cap value stocks to enhance diversification and
provide new investment opportunities within this asset class.
- - Added to large-cap growth stocks and decreased positions in large-cap value
stocks.
- - Slightly decreased corporate bond and high-yield bond holdings in response to
a rising interest rate environment.
MAJOR MARKET EVENTS JANUARY 1, 2004 - DECEMBER 31, 2004
[LINE CHART]
DATE PX LAST
1/2/2004 1,108.48
1/5/2004 1,122.22
1/6/2004 1,123.67
1/7/2004 1,126.33
1/8/2004 1,131.92
1/9/2004 1,121.86
1/12/2004 1,127.23
1/13/2004 1,121.22
1/14/2004 1,130.52
1/15/2004 1,132.05
1/16/2004 1,139.83
1/20/2004 1,138.77
1/21/2004 1,147.62
1/22/2004 1,143.94
1/23/2004 1,141.55
1/26/2004 1,155.37
1/27/2004 1,144.05
1/28/2004 1,128.48
1/29/2004 1,134.11
1/30/2004 1,131.13
2/2/2004 1,135.26
2/3/2004 1,136.03
2/4/2004 1,126.52
2/5/2004 1,128.59
2/6/2004 1,142.76
2/9/2004 1,139.81
2/10/2004 1,145.54
2/11/2004 1,157.76
2/12/2004 1,152.11
2/13/2004 1,145.81
2/17/2004 1,156.99
2/18/2004 1,151.82
2/19/2004 1,147.06
2/20/2004 1,144.11
2/23/2004 1,140.99
2/24/2004 1,139.09
2/25/2004 1,143.67
2/26/2004 1,144.91
2/27/2004 1,144.94
3/1/2004 1,155.97
3/2/2004 1,149.10
3/3/2004 1,151.04
3/4/2004 1,154.88
3/5/2004 1,156.86
3/8/2004 1,147.20
3/9/2004 1,140.58
3/10/2004 1,123.89
3/11/2004 1,106.78
3/12/2004 1,120.57
3/15/2004 1,104.49
3/16/2004 1,110.70
3/17/2004 1,123.75
3/18/2004 1,122.32
3/19/2004 1,109.78
3/22/2004 1,095.40
3/23/2004 1,093.95
3/24/2004 1,091.33
3/25/2004 1,109.19
3/26/2004 1,108.06
3/29/2004 1,122.47
3/30/2004 1,127.00
3/31/2004 1,126.21
4/1/2004 1,132.17
4/2/2004 1,141.81
4/5/2004 1,150.57
4/6/2004 1,148.16
4/7/2004 1,140.53
4/8/2004 1,139.32
4/12/2004 1,145.20
4/13/2004 1,129.44
4/14/2004 1,128.17
4/15/2004 1,128.84
4/16/2004 1,134.61
4/19/2004 1,135.82
4/20/2004 1,118.15
4/21/2004 1,124.09
4/22/2004 1,139.93
4/23/2004 1,140.60
4/26/2004 1,135.53
4/27/2004 1,138.11
4/28/2004 1,122.41
4/29/2004 1,113.89
4/30/2004 1,107.30
5/3/2004 1,117.49
5/4/2004 1,119.55
5/5/2004 1,121.53
5/6/2004 1,113.99
5/7/2004 1,098.70
5/10/2004 1,087.12
5/11/2004 1,095.45
5/12/2004 1,097.28
5/13/2004 1,096.44
5/14/2004 1,095.70
5/17/2004 1,084.10
5/18/2004 1,091.49
5/19/2004 1,088.68
5/20/2004 1,089.19
5/21/2004 1,093.56
5/24/2004 1,095.41
5/25/2004 1,113.05
5/26/2004 1,114.94
5/27/2004 1,121.28
5/28/2004 1,120.68
6/1/2004 1,121.20
6/2/2004 1,124.99
6/3/2004 1,116.64
6/4/2004 1,122.50
6/7/2004 1,140.42
6/8/2004 1,142.18
6/9/2004 1,131.33
6/10/2004 1,136.47
6/14/2004 1,125.29
6/15/2004 1,132.01
6/16/2004 1,133.56
6/17/2004 1,132.05
6/18/2004 1,135.02
6/21/2004 1,130.30
6/22/2004 1,134.41
6/23/2004 1,144.06
6/24/2004 1,140.65
6/25/2004 1,134.43
6/28/2004 1,133.35
6/29/2004 1,136.20
6/30/2004 1,140.84
JANUARY 5
One day after Federal Reserve Governor suggests rates should remain low, S&P 500
closes at 1122.22.
JANUARY 14
Commerce Dept. announces that trade deficit shrank to $38 billion in Nov. '03.
JANUARY 28
Fed releases statement that market interprets as moving closer to raising
interest rates.
JANUARY 30
Estimates for 4th quarter '03 consumer spending growth released. Down
significantly from prior quarter.
FEBRUARY
U.S. dollar falls to record lows against the euro.
FEBRUARY 11
Fed says the economy is continuing to expand. S&P 500 closes at 1157.76.
MARCH 8-15
Terror attack on a train in Madrid, Spain is linked to al Qaeda. S&P 500 begins
slide from 1147.20 to 1104.49.
MARCH 16
Fed meeting leaves rates unchanged.
MARCH 25
Corporate profits report strong as economy gains 4.1% in 4th quarter '03.
MAY 3
WM VT Small Cap Value Fund is launched.
MAY 4
Fed keeps short-term interest rates at 1.00%.
MAY 7
Strong employment report fuels speculation that the Fed will raise rates.
JUNE 1 Oil prices spike higher.
JUNE 30
Fed increases short-term interest rates for the first time in 4 years by 1/4
point to 1.25%.
Source: Bloomberg L.P. (S&P 500 data). Indices are unmanaged, and individuals
cannot invest directly in an index.
4
July - September 2004
- - Kept diversification levels high to participate in cyclical advances and to
manage risk.
- - Continued to hold positions in high-yield securities and mortgage-backed
issues.
- - Maintained positions in cyclically sensitive sectors that could benefit from
economic growth.
- - Continued to hold non-U.S. stocks to increase diversification.
October - December 2004
- - Maintained exposure to small-cap and mid-cap equities, which performed well in
the post-election rally.
- - Positioned the Portfolios in sectors capable of benefiting from the continuing
economic expansion.
- - Kept diversification levels high to participate in cyclical advances and to
manage risk.
[LINE CHART]
DATE PX LAST
7/1/2004 1,128.94
7/2/2004 1,125.38
7/6/2004 1,116.21
7/7/2004 1,118.33
7/8/2004 1,109.11
7/9/2004 1,112.81
7/12/2004 1,114.35
7/13/2004 1,115.14
7/14/2004 1,111.47
7/15/2004 1,106.69
7/16/2004 1,101.39
7/19/2004 1,100.90
7/20/2004 1,108.67
7/21/2004 1,093.88
7/22/2004 1,096.84
7/23/2004 1,086.20
7/26/2004 1,084.07
7/27/2004 1,094.83
7/28/2004 1,095.42
7/29/2004 1,100.43
7/30/2004 1,101.72
8/2/2004 1,106.62
8/3/2004 1,099.69
8/4/2004 1,098.63
8/5/2004 1,080.70
8/6/2004 1,063.97
8/9/2004 1,065.22
8/10/2004 1,079.04
8/11/2004 1,075.79
8/12/2004 1,063.23
8/13/2004 1,064.80
8/16/2004 1,079.34
8/17/2004 1,081.71
8/18/2004 1,095.17
8/19/2004 1,091.23
8/20/2004 1,098.35
8/23/2004 1,095.68
8/24/2004 1,096.19
8/25/2004 1,104.96
8/26/2004 1,105.09
8/27/2004 1,107.77
8/30/2004 1,099.15
8/31/2004 1,104.24
9/1/2004 1,105.91
9/2/2004 1,118.31
9/3/2004 1,113.63
9/7/2004 1,121.30
9/8/2004 1,116.27
9/9/2004 1,118.38
9/10/2004 1,123.92
9/13/2004 1,125.82
9/14/2004 1,128.33
9/15/2004 1,120.37
9/16/2004 1,123.50
9/17/2004 1,128.55
9/20/2004 1,122.20
9/21/2004 1,129.30
9/22/2004 1,113.56
9/23/2004 1,108.36
9/24/2004 1,110.11
9/27/2004 1,103.52
9/28/2004 1,110.06
9/29/2004 1,114.80
9/30/2004 1,114.58
10/1/2004 1,131.50
10/4/2004 1,135.17
10/5/2004 1,134.48
10/6/2004 1,142.05
10/7/2004 1,130.65
10/8/2004 1,122.14
10/11/2004 1,124.39
10/12/2004 1,121.84
10/13/2004 1,113.65
10/14/2004 1,103.29
10/15/2004 1,108.20
10/18/2004 1,114.02
10/19/2004 1,103.23
10/20/2004 1,103.66
10/21/2004 1,106.49
10/22/2004 1,095.74
10/25/2004 1,094.81
10/26/2004 1,111.09
10/27/2004 1,125.40
10/28/2004 1,127.44
10/29/2004 1,130.20
11/1/2004 1,130.51
11/2/2004 1,130.54
11/3/2004 1,143.20
11/4/2004 1,161.67
11/5/2004 1,166.17
11/8/2004 1,164.89
11/9/2004 1,164.08
11/10/2004 1,162.91
11/11/2004 1,173.48
11/12/2004 1,184.17
11/15/2004 1,183.81
11/16/2004 1,175.43
11/17/2004 1,181.94
11/18/2004 1,183.55
11/19/2004 1,170.34
11/22/2004 1,177.24
11/23/2004 1,176.94
11/24/2004 1,181.76
11/26/2004 1,182.65
11/29/2004 1,178.57
11/30/2004 1,173.82
12/1/2004 1,191.37
12/2/2004 1,190.33
12/3/2004 1,191.17
12/6/2004 1,190.25
12/7/2004 1,177.07
12/8/2004 1,182.81
12/9/2004 1,189.24
12/10/2004 1,188.00
12/13/2004 1,198.68
12/14/2004 1,203.38
12/15/2004 1,205.72
12/16/2004 1,203.21
12/17/2004 1,194.22
12/20/2004 1,194.65
12/21/2004 1,205.45
12/22/2004 1,209.57
12/23/2004 1,210.13
12/27/2004 1,204.92
12/28/2004 1,213.54
12/29/2004 1,213.45
12/30/2004 1,213.55
12/31/2004 1,211.92
AUGUST 10
Fed hikes rates again by 1/4 point.
SEPTEMBER 21
Fed raises rates for third time this year to 1.75%. Says it will continue
tightening policy at a "measured" pace.
SEPTEMBER 27
Fannie Mae reaches agreement with its regulator to address improper accounting
procedures.
SEPTEMBER 28 Oil hits $50 per barrel.
OCTOBER 22
Oil prices climb to over $56 per barrel.
OCTOBER 29
Estimates for 3rd quarter '04 consumer spending growth released. Up strongly
from prior quarter.
NOVEMBER
Oil prices decline.
NOVEMBER 2
President George W. Bush re-elected.
NOVEMBER 10
Fed raises interest rates by 1/4 point to 2.00%
DECEMBER
U.S. consumer confidence hits 5-month high.
DECEMBER 14
For the fifth time this year, the Fed raises rates by 1/4 point. Fed funds rate
ends 2004 at 2.25%.
DECEMBER 21
Fannie Mae ousts senior executives over accounting irregularities.
DECEMBER 28
Euro hits all-time high against U.S. dollar.
DECEMBER 29
National Association of Realtors announces record high sales of existing homes
in November.
DECEMBER 31
S&P 500 closes at 1211.92.
Source: Bloomberg L.P. (S&P 500 data). Indices are unmanaged, and
individuals cannot invest directly in an index.
5
Our SAM Process And Asset Allocation Team
OUR 3-STEP PROCESS FOR ACTIVE ASSET ALLOCATION
The five WM VT Strategic Asset Management (SAM) Portfolios are constructed and
managed according to a highly disciplined and dynamic process:
STEP 1:
SETTING LONG-TERM ASSET ALLOCATION TARGETS FOR EACH PORTFOLIO.
Extensive research into risk and asset classes forms the basis for strategic
decisions about each Portfolio's long-term asset allocation policies. This
research involves analyzing historical and projected risk, return, and
correlation between asset classes. The results help position the Portfolios to
maximize the potential for returns at their assigned risk level.
WM ADVISORS
Asset Allocation Team
[LOGO]
[PHOTO OF RANDALL L. YOAKUM]
RANDALL L. YOAKUM, CFA
Chief Investment Strategist and Senior
Co-Portfolio Manager of the VT SAM Portfolios
Mr. Yoakum currently serves as chairman of the Asset Allocation Team and works
closely with Mr. Meighan and Mr. Pokrzywinski in establishing economic strategy.
He was instrumental in developing the investment policies at WM Advisors from
1987 to 1994, as well as after rejoining the company in 1999. His investment
management experience dates back to 1984. He holds the Chartered Financial
Analyst designation and has a B.B.A. from Pacific Lutheran University and an
M.B.A. from Arizona State University.
[PHOTO OF MICHAEL D. MEIGHAN]
MICHAEL D. MEIGHAN, CFA
Co-Portfolio Manager of the VT SAM Portfolios
Mr. Meighan oversees the Team analysts and works collaboratively with Mr. Yoakum
and Mr. Pokrzywinski in developing the asset allocation and investment outlook
for the Portfolios as well as formulating economic strategy. Mr. Meighan has
been instrumental in developing the current investment policy for the Portfolios
since joining WM Advisors in 1999. His investment management experience dates
back to 1994. He holds the Chartered Financial Analyst designation and has a
B.S. from Santa Clara University and an M.B.A. from Gonzaga University.
6
STEP 2:
DEVELOPING A NEAR-TERM INVESTMENT OUTLOOK THAT DETERMINES HOW MUCH RISK EACH
PORTFOLIO SHOULD TAKE.
Research into dozens of global and domestic market forces shapes the Asset
Allocation Team's outlook for the economy and capital markets. This view of
investment conditions determines the Team's tactical decisions about each
Portfolio's exact equity and fixed-income allocations.
Here are just some of the criteria tracked for this step:
Federal Reserve monetary Government budget State and federal fiscal
policy deficits policy
Consumer debt Tax policy Trade pacts
Corporate profits Demographic trends Interest rate changes
Elections Mortgage demand Business confidence
Employment trends Business spending Geopolitical risks
Consumer spending Inflationary pressures Wage and payroll trends
Currency flows Housing trends Investment flows
Commodity prices GDP growth Import prices
Yield spreads Historical financial Factory capacity utilization
Stock market volume market returns Market capitalization
Capital goods expenditures Inventories relative values
Historical asset class Investor psychology Productivity growth
returns Technology trends Asset class correlations
Cyclical and secular Risk-return Business activity
economic trends characteristics Performance attribution by
Volatility analysis Stock valuations allocation and sector
Consumer confidence
STEP 3:
CONSTRUCTING EACH PORTFOLIO'S SPECIFIC MIX OF ASSET CLASSES.
The Team refines its tactical decisions by examining hundreds of possible
Portfolio compositions. Combinations of equity styles, sectors, and
capitalizations, as well as bond ratings and maturity structures, are analyzed
before each Portfolio is built.
CONTINUOUS ACTIVE MANAGEMENT
Once the Portfolios are constructed, the Team continually monitors and
reallocates them to take advantage of changing investment conditions -- unlike
many funds of funds that are only periodically rebalanced to static models. We
also repeatedly test the Portfolios' structure by assessing how fund allocations
and holdings affect performance. This dynamic process works toward optimizing
the Portfolios for building long-term investment value.
[PHOTO OF GARY J. POKRZYWINSKI]
GARY J. POKRZYWINSKI, CFA
Head of Investments and Senior Portfolio Manager
Mr. Pokrzywinski helps develop the outlook and policy for the fixed-income
assets within the Portfolios. He is also instrumental in developing economic
strategy with Mr. Yoakum and Mr. Meighan. Mr. Pokrzywinski joined WM Advisors in
1992 and currently manages the WM VT Income Fund and WM High Yield Fund. He
holds the Chartered Financial Analyst designation and has a B.B.A. from the
University of Wisconsin.
[PHOTO OF CHARLES D. AVERILL]
CHARLES D. AVERILL, CFA
Senior Quantitative Analyst
Mr. Averill is dedicated to the Asset Allocation Team as a Senior Quantitative
Analyst. His responsibilities include the ongoing analysis of both the current
and potential fund holdings, as well as the structural model underlying the
asset allocation process. To help examine the performance of the VT SAM
Portfolios' holdings, he also develops performance attribution procedures. Mr.
Averill holds the Chartered Financial Analyst designation and has been with WM
Advisors since 1990. Before joining the firm, he taught economics at Gonzaga
University and worked as a newspaper editor. He has a B.A. in Economics from
Reed College and an M.A. in Economics from Princeton University.
[PHOTO OF NICOLE VERBRUGGHE]
NICOLE VERBRUGGHE, CFA
Quantitative Analyst
Ms. Verbrugghe works with the Asset Allocation Team as a Quantitative Analyst.
She gathers and analyzes economic data in order to track indicators that
specifically affect the VT SAM Portfolios. She continually reviews holdings and
performance characteristics of the underlying funds and assesses how the
weighting of each fund influences the five Portfolios' investment policies and
goals. Ms. Verbrugghe joined WM Advisors in 2001 and holds the Chartered
Financial Analyst designation. Before joining the Asset Allocation Team, Ms.
Verbrugghe worked for 12 years in financial accounting and analysis. She holds a
B.A. in Mathematics from Whitman College.
7
VT Flexible Income Portfolio
ANNUAL TOTAL RETURNS(1)
Class 1 shares
(Calendar Year)
2004 +6.47%
2003 +13.30%
2002 +2.14%
2001 +4.84%
2000 +5.79%
1999 +8.58%
1998 +11.75%
INVESTMENT STRATEGY
As of December 31, 2004, the WM VT Strategic Asset Management (SAM) Flexible
Income Portfolio was diversified among 12 funds representing 13 major asset
classes. This structure allows the Portfolio to manage risk through allocations
among the underlying WM Funds. The Portfolio held a 26%/74%
equity-to-fixed-income ratio at the end of the year, but made several
adjustments earlier in the period that allowed it to benefit from strong
performance in certain stock and bond sectors. The Portfolio's underlying WM
Funds all made positive contributions to performance for the year.
While the Federal Reserve raised short-term interest rates five times during
2004, yields on short-term notes rose and yields on longer-term bonds fell from
their peaks. During the first and second quarters of this year, the Portfolio
trimmed corporate bond positions by reducing exposure to the WM VT Income Fund
and WM High Yield Fund, and built positions in mortgage securities
Data shown is past performance and does not guarantee future results. Current
performance, including the most recent month-end results, which may be higher or
lower than the data shown, can be obtained by calling 800-222-5852. An
investment's return and principal value will fluctuate, so it may be worth more
or less upon redemption. Performance shown below does not account for fees,
expenses, and charges of any variable insurance contract or retirement plan. If
these fees were reflected, performance would be lower.
Fixed-income investments are subject to interest rate risk, and their value will
decline as interest rates rise.
AVERAGE ANNUAL TOTAL RETURNS(1) AS OF DECEMBER 31, 2004
1 Year 5 Year Since Inception Inception Date
------ ------ --------------- --------------
CLASS 1 SHARES 6.47% 6.44% 7.50% 9/9/97
CLASS 2 SHARES 6.24% - 6.74% 11/6/01
Lehman Brothers Aggregate Bond Index(2) 4.34% 7.71% 6.91%
S&P 500(2) 10.87% -2.30% 5.72%
Capital Market Benchmark(2) 5.67% 5.90% 6.94%
LEHMAN
CLASS BROTHERS CAPITAL
1 AGGREGATE MARKET
DATE SHARES S&P 500(2) BOND INDEX(2) BENCHMARK(2)
Aug-97 10,000 10,000 10,000 10,000
Sep-97 10,110 10,548 10,148 10,228
Oct-97 10,110 10,196 10,295 10,278
Nov-97 10,140 10,668 10,343 10,411
Dec-97 10,231 10,851 10,447 10,530
Jan-98 10,350 10,972 10,581 10,662
Feb-98 10,541 11,763 10,572 10,809
Mar-98 10,650 12,365 10,608 10,950
Apr-98 10,721 12,490 10,663 11,018
May-98 10,741 12,275 10,765 11,064
Jun-98 10,872 12,773 10,856 11,229
Jul-98 10,832 12,638 10,879 11,223
Aug-98 10,471 10,811 11,056 11,045
Sep-98 10,772 11,504 11,315 11,393
Oct-98 10,962 12,439 11,255 11,529
Nov-98 11,173 13,193 11,319 11,722
Dec-98 11,433 13,952 11,353 11,885
Jan-99 11,624 14,536 11,434 12,051
Feb-99 11,453 14,084 11,234 11,808
Mar-99 11,681 14,647 11,295 11,954
Apr-99 11,925 15,214 11,332 12,077
May-99 11,804 14,855 11,232 11,935
Jun-99 11,951 15,679 11,196 12,036
Jul-99 11,848 15,190 11,149 11,921
Aug-99 11,797 15,114 11,143 11,904
Sep-99 11,854 14,700 11,273 11,949
Oct-99 12,020 15,630 11,314 12,136
Nov-99 12,175 15,948 11,313 12,184
Dec-99 12,416 16,887 11,259 12,280
Jan-00 12,280 16,039 11,222 12,124
Feb-00 12,437 15,736 11,357 12,196
Mar-00 12,720 17,275 11,507 12,563
Apr-00 12,603 16,755 11,474 12,459
May-00 12,529 16,412 11,468 12,403
Jun-00 12,737 16,815 11,707 12,671
Jul-00 12,737 16,553 11,813 12,724
Aug-00 13,082 17,581 11,985 13,029
Sep-00 13,041 16,653 12,060 12,958
Oct-00 13,064 16,583 12,140 13,015
Nov-00 12,878 15,276 12,339 12,981
Dec-00 13,134 15,351 12,568 13,187
Jan-01 13,565 15,896 12,773 13,452
Feb-01 13,366 14,446 12,884 13,300
Mar-01 13,205 13,532 12,949 13,184
Apr-01 13,361 14,583 12,894 13,345
May-01 13,484 14,681 12,972 13,427
Jun-01 13,510 14,324 13,021 13,403
Jul-01 13,656 14,184 13,313 13,617
Aug-01 13,622 13,296 13,466 13,572
Sep-01 13,374 12,222 13,622 13,478
Oct-01 13,633 12,455 13,907 13,755
Nov-01 13,734 13,410 13,715 13,814
Dec-01 13,768 13,528 13,627 13,767
Jan-02 13,768 13,331 13,737 13,816
Feb-02 13,779 13,073 13,871 13,870
Mar-02 13,836 13,565 13,640 13,790
Apr-02 13,847 12,743 13,905 13,837
May-02 13,904 12,649 14,023 13,910
Jun-02 13,701 11,748 14,145 13,809
Jul-02 13,486 10,832 14,316 13,727
Aug-02 13,655 10,903 14,558 13,930
Sep-02 13,531 9,718 14,794 13,808
Oct-02 13,746 10,573 14,726 14,000
Nov-02 14,008 11,196 14,722 14,161
Dec-02 14,064 10,538 15,026 14,229
Jan-03 14,086 10,262 15,040 14,165
Feb-03 14,154 10,108 15,247 14,278
Mar-03 14,210 10,206 15,235 14,296
Apr-03 14,595 11,047 15,362 14,627
May-03 15,049 11,629 15,647 14,998
Jun-03 15,132 11,778 15,616 15,013
Jul-03 14,923 11,985 15,091 14,662
Aug-03 15,052 12,219 15,191 14,797
Sep-03 15,295 12,089 15,594 15,079
Oct-03 15,493 12,773 15,449 15,138
Nov-03 15,609 12,886 15,486 15,194
Dec-03 15,935 13,561 15,644 15,477
Jan-04 16,157 13,811 15,769 15,633
Feb-04 16,284 14,003 15,939 15,811
Mar-04 16,343 13,791 16,059 15,859
Apr-04 15,995 13,575 15,641 15,480
May-04 15,971 13,761 15,579 15,472
Jun-04 16,159 14,028 15,667 15,602
Jul-04 16,100 13,563 15,822 15,622
Aug-04 16,317 13,617 16,125 15,874
Sep-04 16,438 13,765 16,168 15,942
Oct-04 16,582 13,975 16,304 16,098
Nov-04 16,727 14,541 16,174 16,126
Dec-04 16,967 15,036 16,322 16,355
1 The Portfolio's performance through 12/31/99 benefited from the agreement of
WM Advisors and its affiliates to limit the Portfolio's expenses. Performance
reflects ongoing expenses and assumes reinvestment of all dividends and
capital gains. It also reflects ongoing fund expenses paid by the Portfolio's
applicable Funds, which include the effects of expense reimbursement.
Performance does not reflect the impact of federal, state, or municipal taxes.
If it did, performance would be lower.
2 The Lehman Brothers Aggregate Bond Index is a broad-based index intended to
represent the U.S. fixed-income market. The S&P 500 is a broad-based index
intended to represent the U.S. equity market. The Capital Market Benchmark is
intended to represent a relevant proxy for market and Portfolio performance.
It is allocated as follows: 20% S&P 500 and 80% Lehman Brothers Aggregate Bond
Index. Returns shown for the indices assume reinvestment of all dividends and
distributions, and since-inception returns shown for the indices are
calculated from 8/31/97. Indices are unmanaged, and individuals cannot invest
directly in an index.
3 Performance of Class 2 shares (offered as of 11/01) will differ.
8
by increasing exposure to the WM VT U.S. Government Securities Fund.
In May 2004, we launched the new WM VT Small Cap Value Fund, which provides a
way to further diversify the Portfolio's holdings among undervalued small-cap
assets. For the year, small-cap and mid-cap stocks performed better than
large-cap stocks, while value outperformed growth. The WM VT Small Cap Value
Fund posted strong returns relative to the other underlying WM VT Equity Funds
for the period.
The Portfolio also benefited from real estate holdings in the WM VT REIT Fund,
which is part of the Portfolio's overweighted position in value securities. This
Fund closed the year with the highest performance of all the underlying WM VT
Funds.
Looking forward, we believe the economy has entered the self-sustaining phase of
the current recovery, but we feel any benefits may be muted by longer-term
challenges. Although the re-election of President George W. Bush removed some
degree of market uncertainty in the short term, secular forces remain that could
curtail future economic growth. These include the large federal deficit and
current account imbalance, overspent consumers, and a low level of personal
savings. Corporate profitability and price-to-earnings ratios may be difficult
to increase in this low-growth environment. This combination of factors has
caused us to remain conservative and focus on diversification and risk
management to pursue long-term investment objectives.
PORTFOLIO CHARACTERISTICS AS OF DECEMBER 31, 2004
Equity/Fixed-Income Allocation:(4) 26% Equity/74% Fixed-Income
Weighted Average Market Capitalization (Equities): $61.8 billion
Weighted Average P/E (Equities):(5) 17.0
Beta:(6) 0.18
Portfolio Standard Deviation:(7) 3.90
S&P 500 Standard Deviation:(7) 15.81
Turnover: 5%
Number of Securities:(8) 1,204
Total Net Assets: $216.8 million
ASSET CLASS DIVERSIFICATION (4)
As of As of
12/31/04 12/31/03 Change
-------- -------- ------
Mortgage- & Asset-Backed Bonds 34% 30% +4%
Investment-Grade Corporate Bonds 22% 22% 0%
High-Yield Corporate Bonds 8% 9% -1%
U.S. Large-Cap Growth Stocks 7% 5% +2%
U.S. Large-Cap Value Stocks 7% 8% -1%
U.S. Government Securities 6% 7% -1%
U.S. Mid-Cap Value Stocks 4% 3% +1%
Convertible Securities 2% 3% -1%
REITs 2% 2% 0%
U.S. Mid-Cap Growth Stocks 2% 3% -1%
U.S. Small-Cap Growth Stocks 1% 2% -1%
U.S. Small-Cap Value Stocks 1% 1% 0%
Cash Equivalents 4% 5% -1%
4 May not reflect current allocations.
5 Based on estimated earnings.
6 Source: Lipper, Inc. Beta is a quantitative measure of the Portfolio's
historical volatility relative to the overall market (S&P 500). A beta
above 1 indicates more volatility than the market, and a beta below 1
indicates less volatility. Results are calculated using three-month
rolling returns for Class 1 shares for the three-year period ended
12/31/04.
7 Source: Ibbotson Associates and Lipper, Inc. Standard deviation measures the
historical fluctuation of returns around the arithmetic average return of
the investment. The higher the standard deviation (as one measure of risk),
the greater the variability of the investment returns. Results are
calculated for the three-year period ended 12/31/04, and Portfolio results
are for Class 1 shares.
8 Represents the sum of securities held by the underlying WM Funds. Some
securities may be held by more than one WM Fund.
9
VT CONSERVATIVE BALANCED PORTFOLIO*
ANNUAL TOTAL RETURNS(1)
Class 1 shares
(Calendar Year)
2004 +8.21%
2003 +17.09%
2002 -2.26%
2001 +2.40%
2000 +5.03%
1999 +1.88%
*As of 8/1/00, the VT Income Portfolio became the VT Conservative Balanced
Portfolio, and the Portfolio's objectives and strategies changed. This
information should be considered when reviewing past performance. Please review
the prospectus for detailed information.
INVESTMENT STRATEGY
As of December 31, 2004, the WM VT Strategic Asset Management (SAM) Conservative
Balanced Portfolio was diversified among 13 funds representing 14 major asset
classes. This structure allows the Portfolio to manage risk through allocations
in the underlying WM Funds. The Portfolio held a 40%/60% equity-to-fixed-income
ratio during the first half of the year, but made several adjustments that
allowed it to benefit from strong performance in certain stock and bond sectors.
The Portfolio's underlying WM Funds all made positive contributions to
performance for the year.
While the Federal Reserve raised short-term interest rates five times during
2004, yields on short-term notes rose and yields on longer-term bonds fell from
their peaks. During the first and second quarters of this year, the Portfolio
trimmed corporate bond positions by reducing exposure to the WM VT Income Fund
and WM High Yield Fund, and built larger positions in mortgage
Data shown is past performance and does not guarantee future results. Current
performance, including the most recent month-end results, which may be higher or
lower than the data shown, can be obtained by calling 800-222-5852. An
investment's return and principal value will fluctuate, so it may be worth more
or less upon redemption. Performance shown below does not account for fees,
expenses, and charges of any variable insurance contract or retirement plan. If
these fees were reflected, performance would be lower.
Fixed-income investments are subject to interest rate risk, and their value will
decline as interest rates rise.
AVERAGE ANNUAL TOTAL RETURNS(1) AS OF DECEMBER 31, 2004
1 Year 5 Year Since Inception Inception Date
------ ------ --------------- --------------
CLASS 1 SHARES 8.21% 5.90% 5.32% 4/23/98
CLASS 2 SHARES 7.88% - 7.17% 11/6/01
Lehman Brothers Aggregate Bond Index(2) 4.34% 7.71% 6.59%
S&P 500(2) 10.87% -2.30% 2.82%
Capital Market Benchmark(2) 6.99% 3.99% 5.49%
LEHMAN
CLASS BROTHERS CAPITAL
1 AGGREGATE MARKET
DATE SHARES S&P 500(2) BOND INDEX(2) BENCHMARK(2)
Mar-98 10,000
Apr-98 10,000 10,000 10,000 10,000
May-98 10,090 9,828 10,095 9,988
Jun-98 10,163 10,227 10,181 10,201
Jul-98 10,183 10,119 10,202 10,170
Aug-98 10,233 8,655 10,368 9,681
Sep-98 10,383 9,210 10,611 10,065
Oct-98 10,323 9,959 10,555 10,361
Nov-98 10,404 10,563 10,615 10,648
Dec-98 10,423 11,171 10,647 10,912
Jan-99 10,493 11,638 10,722 11,141
Feb-99 10,363 11,276 10,535 10,886
Mar-99 10,446 11,727 10,593 11,096
Apr-99 10,538 12,181 10,627 11,289
May-99 10,497 11,893 10,533 11,124
Jun-99 10,472 12,553 10,499 11,349
Jul-99 10,482 12,162 10,455 11,179
Aug-99 10,461 12,101 10,450 11,153
Sep-99 10,568 11,769 10,571 11,109
Oct-99 10,600 12,514 10,610 11,414
Nov-99 10,621 12,768 10,609 11,507
Dec-99 10,619 13,521 10,558 11,745
Jan-00 10,597 12,842 10,524 11,485
Feb-00 10,694 12,599 10,651 11,482
Mar-00 10,787 13,831 10,792 12,023
Apr-00 10,787 13,415 10,760 11,857
May-00 10,744 13,140 10,755 11,756
Jun-00 10,918 13,463 10,979 12,018
Jul-00 10,995 13,253 11,078 12,009
Aug-00 11,360 14,076 11,239 12,411
Sep-00 11,251 13,333 11,310 12,196
Oct-00 11,217 13,277 11,385 12,224
Nov-00 10,905 12,231 11,571 11,959
Dec-00 11,153 12,291 11,787 12,116
Jan-01 11,581 12,727 11,979 12,406
Feb-01 11,255 11,566 12,083 12,018
Mar-01 11,012 10,834 12,143 11,750
Apr-01 11,285 11,676 12,092 12,086
May-01 11,399 11,754 12,165 12,162
Jun-01 11,422 11,469 12,211 12,071
Jul-01 11,456 11,356 12,485 12,186
Aug-01 11,342 10,645 12,628 11,965
Sep-01 10,956 9,785 12,775 11,662
Oct-01 11,171 9,972 13,042 11,898
Nov-01 11,365 10,737 12,862 12,165
Dec-01 11,422 10,831 12,779 12,161
Jan-02 11,364 10,673 12,883 12,149
Feb-02 11,319 10,467 13,008 12,126
Mar-02 11,456 10,861 12,792 12,187
Apr-02 11,376 10,203 13,040 12,034
May-02 11,399 10,127 13,151 12,060
Jun-02 11,128 9,406 13,265 11,779
Jul-02 10,819 8,672 13,426 11,498
Aug-02 10,934 8,730 13,653 11,645
Sep-02 10,635 7,781 13,874 11,251
Oct-02 10,922 8,465 13,810 11,616
Nov-02 11,233 8,964 13,806 11,888
Dec-02 11,164 8,437 14,092 11,756
Jan-03 11,153 8,216 14,104 11,639
Feb-03 11,164 8,093 14,299 11,666
Mar-03 11,199 8,171 14,288 11,706
Apr-03 11,601 8,845 14,406 12,150
May-03 12,048 9,311 14,674 12,541
Jun-03 12,135 9,430 14,645 12,590
Jul-03 12,053 9,596 14,153 12,425
Aug-03 12,194 9,783 14,246 12,571
Sep-03 12,358 9,679 14,624 12,718
Oct-03 12,628 10,227 14,488 12,936
Nov-03 12,745 10,317 14,522 13,001
Dec-03 13,074 10,858 14,671 13,353
Jan-04 13,284 11,057 14,788 13,516
Feb-04 13,413 11,211 14,948 13,678
Mar-04 13,448 11,042 15,060 13,657
Apr-04 13,132 10,868 14,668 13,358
May-04 13,156 11,017 14,609 13,400
Jun-04 13,345 11,231 14,693 13,550
Jul-04 13,201 10,859 14,838 13,451
Aug-04 13,357 10,903 15,122 13,627
Sep-04 13,489 11,021 15,162 13,708
Oct-04 13,644 11,189 15,290 13,861
Nov-04 13,872 11,642 15,167 14,019
Dec-04 14,147 12,038 15,307 14,287
1 The Portfolio's performance through 12/31/03 benefited from the agreement of
WM Advisors and its affiliates to limit the Portfolio's expenses. Performance
reflects ongoing expenses and assumes reinvestment of all dividends and
capital gains. It also reflects ongoing fund expenses paid by the Portfolio's
applicable Funds, which include the effects of expense reimbursement.
Performance does not reflect the impact of federal, state, or municipal taxes.
If it did, performance would be lower.
2 The Lehman Brothers Aggregate Bond Index is a broad-based index intended to
represent the U.S. fixed-income market. The S&P 500 is a broad-based index
intended to represent the U.S. equity market. The Capital Market Benchmark is
intended to represent a relevant proxy for market and Portfolio performance.
It is allocated as follows: 40% S&P 500 and 60% Lehman Brothers Aggregate Bond
Index. Returns shown for the indices assume reinvestment of all dividends and
distributions, and since-inception returns shown for the indices are
calculated from 4/30/98. Indices are unmanaged, and individuals cannot invest
directly in an index.
3 Performance of Class 2 shares (offered as of 11/01) will differ.
10
securities by increasing exposure to the WM VT U.S. Government Securities Fund.
In May 2004, we launched the new WM VT Small Cap Value Fund, which provides a
way to further diversify the Portfolio's holdings among undervalued small-cap
assets. For the year, small-cap and mid-cap stocks performed better than
large-cap stocks, while value outperformed growth. The WM VT Small Cap Value
Fund posted strong returns relative to the other underlying WM VT Equity Funds
for the period.
The Portfolio also benefited from real estate holdings in the WM VT REIT Fund,
which is part of the Portfolio's overweighted position in value securities. This
Fund closed the year with the highest performance of all the underlying WM VT
Funds.
Looking forward,we believe the economy has entered the self-sustaining phase of
the current recovery, but we feel any benefits may be muted by longer-term
challenges. Although the re-election of President George W. Bush removed some
degree of market uncertainty in the short term, secular forces remain that could
curtail future economic growth. These include the large federal deficit and
current account imbalance, overspent consumers, and a low level of personal
savings. Corporate profitability and price-to-earnings ratios may be difficult
to increase in this low-growth environment. This combination of factors has
caused us to remain conservative and focus on diversification and risk
management to pursue long-term investment objectives.
PORTFOLIO CHARACTERISTICS AS OF DECEMBER 31, 2004
Equity/Fixed-Income Allocation:(4) 43% Equity/57% Fixed-Income
Weighted Average Market Capitalization (Equities): $59.2 billion
Weighted Average P/E (Equities):(5) 17.0
Beta:(6) 0.33
Portfolio Standard Deviation:(7) 5.59
S&P 500 Standard Deviation:(7) 15.81
Turnover: 1%
Number of Securities:(8) 1,442
Total Net Assets: $61.3 million
ASSET CLASS DIVERSIFICATION(4)
As of As of
12/31/04 12/31/03 Change
-------- -------- ------
Mortgage- & Asset-Backed Bonds 27% 25% +2%
Investment-Grade Corporate Bonds 15% 16% -1%
U.S. Large-Cap Value Stocks 11% 11% 0%
U.S. Large-Cap Growth Stocks 9% 8% +1%
High-Yield Corporate Bonds 7% 8% -1%
U.S. Government Securities 5% 5% 0%
U.S. Mid-Cap Value Stocks 5% 5% 0%
Foreign Stocks 4% 3% +1%
U.S. Mid-Cap Growth Stocks 4% 4% 0%
REITs 3% 3% 0%
Convertible Securities 2% 3% -1%
U.S. Small-Cap Growth Stocks 2% 3% -1%
U.S. Small-Cap Value Stocks 2% 1% +1%
Cash Equivalents 4% 5% -1%
4 May not reflect current allocations.
5 Based on estimated earnings.
6 Source: Lipper, Inc. Beta is a quantitative measure of the Portfolio's
historical volatility relative to the overall market (S&P 500). A beta above 1
indicates more volatility than the market, and a beta below 1 indicates less
volatility. Results are calculated using three-month rolling returns for Class
1 shares for the three-year period ended 12/31/04.
7 Source: Ibbotson Associates and Lipper, Inc. Standard deviation measures the
historical fluctuation of returns around the arithmetic average return of the
investment. The higher the standard deviation (as one measure of risk), the
greater the variability of the investment returns. Results are calculated for
the three-year period ended 12/31/04, and Portfolio results are for Class 1
shares.
8 Represents the sum of securities held by the underlying WM Funds. Some
securities may be held by more than one WM Fund.
11
VT Balanced Portfolio
ANNUAL TOTAL RETURNS(1)
Class 1 shares
(Calendar Year)
2004 +10.12%
2003 +22.74%
2002 -8.78%
2001 +0.13%
2000 +0.49%
1999 +27.71%
1998 +17.18%
INVESTMENT STRATEGY
As of December 31, 2004, the WM VT Strategic Asset Management (SAM) Balanced
Portfolio was diversified among 13 funds representing 14 major asset classes.
This structure allows the Portfolio to manage risk through allocations in the
underlying WM Funds. The Portfolio held a 61%/39% equity-to-fixed-income ratio
during most of the year, but made several adjustments that allowed it to benefit
from strong performance in certain stock and bond sectors. The Portfolio's
underlying WM Funds all made positive contributions to performance for the year.
In May 2004, we launched the new WM VT Small Cap Value Fund, which provides a
way to further diversify the Portfolio's holdings among undervalued small-cap
assets. For the year, small-cap stocks performed better than large-cap stocks,
while value outperformed growth. As a result of this sector's performance, as
well as the Fund's advantageous stock picking, the WM VT Small Cap Value Fund
posted strong returns
Data shown is past performance and does not guarantee future results. Current
performance, including the most recent month-end results, which may be higher or
lower than the data shown, can be obtained by calling 800-222-5852. An
investment's return and principal value will fluctuate, so it may be worth more
or less upon redemption. Performance shown below does not account for fees,
expenses, and charges of any variable insurance contract or retirement plan. If
these fees were reflected, performance would be lower.
Fixed-income investments are subject to interest rate risk, and their value will
decline as interest rates rise.
AVERAGE ANNUAL TOTAL RETURNS(1) AS OF DECEMBER 31, 2004
1 Year 5 Year Since Inception Inception Date
------ ------ --------------- --------------
CLASS 1 SHARES 10.12% 4.41% 9.16% 6/3/97
CLASS 2 SHARES 9.83% - 7.58% 11/6/01
Lehman Brothers Aggregate Bond Index(2) 4.34% 7.71% 7.10%
S&P 500(2) 10.87% -2.30% 6.40%
Capital Market Benchmark(2) 8.29% 1.98% 7.09%
LEHMAN
CLASS BROTHERS CAPITAL
1 AGGREGATE MARKET
DATE SHARES S&P 500(2) BOND INDEX(2) BENCHMARK(2)
May-97 10,000 10,000 10,000 10,000
Jun-97 10,190 10,446 10,119 10,315
Jul-97 10,680 11,275 10,392 10,917
Aug-97 10,350 10,648 10,304 10,516
Sep-97 10,700 11,232 10,456 10,924
Oct-97 10,390 10,857 10,608 10,769
Nov-97 10,390 11,360 10,657 11,087
Dec-97 10,470 11,555 10,764 11,247
Jan-98 10,599 11,683 10,902 11,380
Feb-98 11,109 12,526 10,893 11,869
Mar-98 11,409 13,167 10,931 12,250
Apr-98 11,579 13,300 10,987 12,349
May-98 11,439 13,071 11,092 12,269
Jun-98 11,654 13,602 11,186 12,610
Jul-98 11,533 13,458 11,210 12,541
Aug-98 10,376 11,512 11,392 11,535
Sep-98 10,718 12,250 11,659 12,086
Oct-98 11,181 13,245 11,597 12,651
Nov-98 11,654 14,048 11,663 13,139
Dec-98 12,267 14,857 11,698 13,609
Jan-99 12,689 15,478 11,781 13,989
Feb-99 12,397 14,997 11,575 13,631
Mar-99 12,927 15,597 11,639 13,988
Apr-99 13,409 16,200 11,676 14,331
May-99 13,101 15,818 11,573 14,077
Jun-99 13,625 16,696 11,536 14,528
Jul-99 13,459 16,175 11,488 14,231
Aug-99 13,448 16,094 11,482 14,186
Sep-99 13,577 15,653 11,615 14,018
Oct-99 14,027 16,644 11,658 14,571
Nov-99 14,611 16,982 11,657 14,748
Dec-99 15,664 17,982 11,601 15,241
Jan-00 15,349 17,079 11,563 14,761
Feb-00 15,915 16,757 11,703 14,665
Mar-00 16,432 18,395 11,857 15,604
Apr-00 15,956 17,842 11,823 15,304
May-00 15,691 17,476 11,817 15,113
Jun-00 16,027 17,906 12,063 15,462
Jul-00 15,844 17,627 12,172 15,374
Aug-00 16,562 18,721 12,349 16,036
Sep-00 16,244 17,733 12,427 15,568
Oct-00 16,158 17,658 12,509 15,569
Nov-00 15,371 16,267 12,714 14,936
Dec-00 15,738 16,346 12,950 15,091
Jan-01 16,509 16,927 13,161 15,511
Feb-01 15,728 15,383 13,276 14,717
Mar-01 15,186 14,409 13,342 14,187
Apr-01 15,776 15,529 13,286 14,824
May-01 15,996 15,633 13,366 14,919
Jun-01 16,033 15,253 13,417 14,723
Jul-01 15,930 15,104 13,717 14,769
Aug-01 15,613 14,158 13,875 14,281
Sep-01 14,751 13,014 14,036 13,656
Oct-01 15,090 13,263 14,329 13,926
Nov-01 15,566 14,280 14,132 14,490
Dec-01 15,759 14,406 14,041 14,529
Jan-02 15,521 14,195 14,155 14,450
Feb-02 15,339 13,921 14,292 14,338
Mar-02 15,736 14,445 14,055 14,566
Apr-02 15,397 13,569 14,328 14,150
May-02 15,363 13,469 14,449 14,135
Jun-02 14,804 12,510 14,575 13,580
Jul-02 14,097 11,534 14,751 13,011
Aug-02 14,224 11,610 15,001 13,150
Sep-02 13,553 10,348 15,244 12,378
Oct-02 14,109 11,259 15,174 13,010
Nov-02 14,676 11,922 15,169 13,467
Dec-02 14,375 11,221 15,483 13,104
Jan-03 14,258 10,927 15,497 12,902
Feb-03 14,177 10,763 15,711 12,857
Mar-03 14,200 10,868 15,698 12,928
Apr-03 14,917 11,763 15,829 13,610
May-03 15,658 12,383 16,123 14,142
Jun-03 15,829 12,541 16,091 14,240
Jul-03 15,888 12,762 15,550 14,199
Aug-03 16,148 13,011 15,653 14,402
Sep-03 16,266 12,873 16,068 14,462
Oct-03 16,847 13,602 15,918 14,899
Nov-03 17,072 13,721 15,956 14,991
Dec-03 17,641 14,440 16,119 15,524
Jan-04 17,985 14,706 16,248 15,744
Feb-04 18,186 14,911 16,423 15,944
Mar-04 18,186 14,685 16,547 15,847
Apr-04 17,735 14,455 16,116 15,533
May-04 17,831 14,653 16,052 15,635
Jun-04 18,157 14,937 16,143 15,853
Jul-04 17,771 14,443 16,303 15,601
Aug-04 17,939 14,501 16,615 15,757
Sep-04 18,169 14,657 16,660 15,876
Oct-04 18,411 14,881 16,799 16,075
Nov-04 18,930 15,484 16,665 16,414
Dec-04 19,426 16,011 16,818 16,810
1 The Portfolio's performance through 12/31/98 benefited from the agreement of
WM Advisors and its affiliates to limit the Portfolio's expenses. Performance
reflects ongoing expenses and assumes reinvestment of all dividends and
capital gains. It also reflects ongoing fund expenses paid by the Portfolio's
applicable Funds, which include the effects of expense reimbursement.
Performance does not reflect the impact of federal, state, or municipal taxes.
If it did, performance would be lower.
2 The Lehman Brothers Aggregate Bond Index is a broad-based index intended to
represent the U.S. fixed-income market. The S&P 500 is a broad-based index
intended to represent the U.S. equity market. The Capital Market Benchmark is
intended to represent a relevant proxy for market and Portfolio performance.
It is allocated as follows: 60% S&P 500 and 40% Lehman Brothers Aggregate Bond
Index. Returns shown for the indices assume reinvestment of all dividends and
distributions, and since-inception returns shown for the indices are
calculated from 5/31/97. Indices are unmanaged, and individuals cannot invest
directly in an index.
3 Performance of Class 2 shares (offered as of 11/01) will differ.
12
relative to the other underlying WM VT Equity Funds for the period.
The Portfolio also benefited from real estate holdings in the WM VT REIT Fund,
which is part of the Portfolio's overweighted position in value securities. This
Fund closed the year with the highest performance of all the underlying WM VT
Funds.
During the first and second quarters of this year, the Portfolio trimmed
corporate bond positions by reducing exposure to the WM VT Income Fund and WM
High Yield Fund, and built positions in mortgage securities by increasing
exposure to the WM VT U.S. Government Securities Fund. Mortgages can provide
favorable opportunities in the current interest rate environment.
Looking forward, we believe the economy has entered the self-sustaining phase of
the current recovery, but we feel any benefits may be muted by longer-term
challenges. Although the re-election of President George W. Bush removed some
degree of market uncertainty in the short term, secular forces remain that could
curtail future economic growth. These include the large federal deficit and
current account imbalance, overspent consumers, and a low level of personal
savings. Corporate profitability and price-to-earnings ratios may be difficult
to increase in this low-growth environment. This combination of factors has
caused us to remain conservative and focus on diversification and risk
management to pursue long-term investment objectives.
PORTFOLIO CHARACTERISTICS AS OF DECEMBER 31, 2004
Equity/Fixed-Income Allocation:(4) 62% Equity/38% Fixed-Income
Weighted Average Market Capitalization (Equities): $58.6 billion
Weighted Average P/E (Equities):(5) 17.0
Beta:(6) 0.54
Portfolio Standard Deviation:(7) 8.52
S&P 500 Standard Deviation:(7) 15.81
Turnover: 4%
Number of Securities:(8) 1,442
Total Net Assets: $631.9 million
ASSET CLASS DIVERSIFICATION(4)
As Of As Of
12/31/04 12/31/03 Change
--------- --------- -------
Mortgage- & Asset-Backed Bonds 17% 15% +2%
U.S. Large-Cap Value Stocks 16% 17% -1%
U.S. Large-Cap Growth Stocks 14% 12% +2%
U.S. Mid-Cap Value Stocks 8% 7% +1%
Investment-Grade Corporate Bonds 7% 9% -2%
Foreign Stocks 6% 5% +1%
U.S. Mid-Cap Growth Stocks 6% 6% 0%
High-Yield Corporate Bonds 5% 6% -1%
REITs 5% 5% 0%
U.S. Government Securities 3% 3% 0%
U.S. Small-Cap Growth Stocks 3% 4% -1%
U.S. Small-Cap Value Stocks 3% 2% +1%
Convertible Securities 1% 2% -1%
Cash Equivalents 6% 7% -1%
4 May not reflect current allocations.
5 Based on estimated earnings.
6 Source: Lipper, Inc. Beta is a quantitative measure of the Portfolio's
historical volatility relative to the overall market (S&P 500). A beta above
1 indicates more volatility than the market, and a beta below 1 indicates
less volatility. Results are calculated using three-month rolling returns for
Class 1 shares for the three-year period ended 12/31/04.
7 Source: Ibbotson Associates and Lipper, Inc. Standard deviation measures the
historical fluctuation of returns around the arithmetic average return of the
investment.The higher the standard deviation (as one measure of risk), the
greater the variability of the investment returns. Results are calculated for
the three-year period ended 12/31/04, and Portfolio results are for Class 1
shares.
8 Represents the sum of securities held by the underlying WM Funds. Some
securities may be held by more than one WM Fund.
13
VT Conservative Growth Portfolio
ANNUAL TOTAL RETURNS(1)
<Table>
<Caption>
CLASS 1
SHARES
(Calendar
Year)
2004 +11.78%
2003 +28.74%
2002 -15.52%
2001 -3.56%
2000 -2.49%
1999 +39.36%
1998 +19.91%
</Table>
Investment Strategy
As of December 31, 2004, the WM VT Strategic Asset Management (SAM) Conservative
Growth Portfolio was diversified among 12 funds representing 14 major asset
classes. This structure allows the Portfolio to manage risk through allocations
in the underlying WM Funds. The Portfolio held a 81%/19% equity-to-fixed-income
ratio at the end of the year, but made several adjustments earlier in the period
that allowed it to benefit from strong performance in certain stock and bond
sectors. The Portfolio's underlying WM Funds all made positive contributions to
performance for the year.
In May 2004, we launched the new WM VT Small Cap Value Fund, which provides a
way to further diversify the Portfolio's holdings among undervalued small-cap
assets. For the year, small-cap stocks performed better than large-cap stocks,
while value outperformed growth. As a result of this sector's performance, as
well as the Fund's advantageous stock picking, the WM VT Small Cap Value Fund
posted strong returns.
Data shown is past performance and does not guarantee future results. Current
performance, including the most recent month-end results, which may be higher or
lower than the data shown, can be obtained by calling 800-222-5852. An
investment's return and principal value will fluctuate, so it may be worth more
or less upon redemption. Performance shown below does not account for fees,
expenses, and charges of any variable insurance contract or retirement plan. If
these fees were reflected, performance would be lower.
Fixed-income investments are subject to interest rate risk, and their value will
decline as interest rates rise.
AVERAGE ANNUAL TOTAL RETURNS (1) AS OF DECEMBER 31, 2004
1 Year 5 Year Since Inception Inception Date
------- ------- ---------------- --------------
CLASS 1 SHARES 11.78% 2.71% 9.60% 6/3/97
CLASS 2 SHARES 11.58% - 7.62% 11/6/01
Lehman Brothers Aggregate Bond Index(2) 4.34% 7.71% 7.10%
S&P 500(2) 10.87% -2.30% 6.40%
Capital Market Benchmark(2) 9.59% -0.12% 6.81%
VALUE OF A $10,000 INVESTMENT(1,3) JUNE 3, 1997 - DECEMBER 31,2004
LEHMAN
CLASS BROTHERS CAPITAL
1 AGGREGATE MARKET
DATE SHARES S&P 500(2) BOND INDEX(2) BENCHMARK(2)
May-97 10,000 10,000 10,000 10,000
Jun-97 10,300 10,446 10,119 10,381
Jul-97 10,860 11,275 10,392 11,096
Aug-97 10,420 10,648 10,304 10,584
Sep-97 10,851 11,232 10,456 11,079
Oct-97 10,421 10,857 10,608 10,815
Nov-97 10,401 11,360 10,657 11,226
Dec-97 10,492 11,555 10,764 11,404
Jan-98 10,622 11,683 10,902 11,534
Feb-98 11,312 12,526 10,893 12,197
Mar-98 11,713 13,167 10,931 12,704
Apr-98 11,883 13,300 10,987 12,820
May-98 11,593 13,071 11,092 12,667
Jun-98 11,859 13,602 11,186 13,100
Jul-98 11,619 13,458 11,210 12,994
Aug-98 10,034 11,512 11,392 11,534
Sep-98 10,525 12,250 11,659 12,178
Oct-98 11,097 13,245 11,597 12,958
Nov-98 11,750 14,048 11,663 13,601
Dec-98 12,583 14,857 11,698 14,236
Jan-99 13,155 15,478 11,781 14,733
Feb-99 12,774 14,997 11,575 14,314
Mar-99 13,466 15,597 11,639 14,788
Apr-99 14,128 16,200 11,676 15,255
May-99 13,818 15,818 11,573 14,941
Jun-99 14,572 16,696 11,536 15,595
Jul-99 14,326 16,175 11,488 15,193
Aug-99 14,316 16,094 11,482 15,131
Sep-99 14,429 15,653 11,615 14,834
Oct-99 15,085 16,644 11,658 15,597
Nov-99 15,936 16,982 11,657 15,849
Dec-99 17,536 17,982 11,601 16,582
Jan-00 17,168 17,079 11,563 15,903
Feb-00 17,999 16,757 11,703 15,701
Mar-00 18,706 18,395 11,857 16,972
Apr-00 17,937 17,842 11,823 16,553
May-00 17,485 17,476 11,817 16,279
Jun-00 17,900 17,906 12,063 16,668
Jul-00 17,588 17,627 12,172 16,490
Aug-00 18,596 18,721 12,349 17,358
Sep-00 18,066 17,733 12,427 16,646
Oct-00 17,911 17,658 12,509 16,611
Nov-00 16,643 16,267 12,714 15,618
Dec-00 17,100 16,346 12,950 15,736
Jan-01 18,118 16,927 13,161 16,234
Feb-01 16,891 15,383 13,276 15,078
Mar-01 16,050 14,409 13,342 14,328
Apr-01 17,007 15,529 13,286 15,207
May-01 17,277 15,633 13,366 15,307
Jun-01 17,291 15,253 13,417 15,021
Jul-01 16,992 15,104 13,717 14,970
Aug-01 16,404 14,158 13,875 14,254
Sep-01 15,073 13,014 14,036 13,366
Oct-01 15,473 13,263 14,329 13,625
Nov-01 16,205 14,280 14,132 14,424
Dec-01 16,493 14,406 14,041 14,506
Jan-02 16,094 14,195 14,155 14,360
Feb-02 15,750 13,921 14,292 14,166
Mar-02 16,405 14,445 14,055 14,545
Apr-02 15,795 13,569 14,328 13,897
May-02 15,706 13,469 14,449 13,838
Jun-02 14,885 12,510 14,575 13,073
Jul-02 13,876 11,534 14,751 12,290
Aug-02 13,967 11,610 15,001 12,396
Sep-02 13,005 10,348 15,244 11,358
Oct-02 13,715 11,259 15,174 12,148
Nov-02 14,425 11,922 15,169 12,718
Dec-02 13,932 11,221 15,483 12,173
Jan-03 13,748 10,927 15,497 11,920
Feb-03 13,587 10,763 15,711 11,810
Mar-03 13,610 10,868 15,698 11,900
Apr-03 14,492 11,763 15,829 12,704
May-03 15,375 12,383 16,123 13,287
Jun-03 15,593 12,541 16,091 13,417
Jul-03 15,804 12,762 15,550 13,517
Aug-03 16,120 13,011 15,653 13,745
Sep-03 16,178 12,873 16,068 13,701
Oct-03 16,962 13,602 15,918 14,296
Nov-03 17,232 13,721 15,956 14,403
Dec-03 17,935 14,440 16,119 15,037
Jan-04 18,333 14,706 16,248 15,282
Feb-04 18,568 14,911 16,423 15,485
Mar-04 18,533 14,685 16,547 15,321
Apr-04 18,042 14,455 16,116 15,048
May-04 18,206 14,653 16,052 15,202
Jun-04 18,601 14,937 16,143 15,456
Jul-04 18,007 14,443 16,303 15,077
Aug-04 18,150 14,501 16,615 15,183
Sep-04 18,435 14,657 16,660 15,322
Oct-04 18,707 14,881 16,799 15,535
Nov-04 19,443 15,484 16,665 16,014
Dec-04 20,047 16,011 16,818 16,478
1 The Portfolio's performance through 12/31/99 benefited from the agreement of
WM Advisors and its affiliates to limit the Portfolio's expenses. Performance
reflects ongoing expenses and assumes reinvestment of all dividends and
capital gains. It also reflects ongoing fund expenses paid by the Portfolio's
applicable Funds, which include the effects of expense reimbursement.
Performance does not reflect the impact of federal, state, or municipal
taxes. If it did, performance would be lower.
2 The Lehman Brothers Aggregate Bond Index is a broad-based index intended to
represent the U.S. fixed-income market. The S&P 500 is a broad-based index
intended to represent the U.S. equity market. The Capital Market Benchmark is
intended to represent a relevant proxy for market and Portfolio performance.
It is allocated as follows: 80% S&P 500 and 20% Lehman Brothers Aggregate
Bond Index. Returns shown for the indices assume reinvestment of all
dividends and distributions, and since-inception returns shown for the
indices are calculated from 5/31/97. Indices are unmanaged, and individuals
cannot invest directly in an index.
3 Performance of Class 2 shares (offered as of 11/01) will differ.
14
relative to the other underlying WM VT Equity Funds for the period.
The Portfolio also benefited from real estate holdings in the WM VT REIT Fund,
which is part of the Portfolio's overweighted position in value securities. This
Fund closed the year with the highest performance of all the underlying WM VT
Funds.
During the second quarter of this year, the Portfolio trimmed corporate bond
positions by reducing exposure to the WM VT Income Fund and WM High Yield Fund,
and built positions in mortgage securities by increasing exposure to the WM VT
U.S. Government Securities Fund. Mortgages can provide favorable opportunities
in the current interest rate environment.
Looking forward, we believe the economy has entered the self-sustaining phase of
the current recovery, but we feel any benefits may be muted by longer-term
challenges. Although the re-election of President George W.Bush removed some
degree of market uncertainty in the short term, secular forces remain that could
curtail future economic growth. These include the large federal deficit and
current account imbalance, overspent consumers, and a low level of personal
savings. Corporate profitability and price-to-earnings ratios may be difficult
to increase in this low-growth environment. This combination of factors has
caused us to remain conservative and focus on diversification and risk
management to pursue long-term investment objectives.
PORTFOLIO CHARACTERISTICS AS OF DECEMBER 31, 2004
Equity/Fixed-Income Allocation:(4) 81% Equity/19% Fixed-Income
Weighted Average Market Capitalization (Equities): $59.3 billion
Weighted Average P/E (Equities):(5) 17.1
Beta:(6) 0.76
Portfolio Standard Deviation:(7) 11.70
S&P 500 Standard Deviation:(7) 15.81
Turnover: 10 %
Number of Securities:(8) 1,353
Total Net Assets: $377.4 million
ASSET CLASS DIVERSIFICATION (4)
As Of As Of
12/31/04 12/31/03 Change
--------- --------- -------
U.S. Large-Cap Value Stocks 22% 22% 0%
U.S. Large-Cap Growth Stocks 19% 16% +3%
U.S. Mid-Cap Value Stocks 11% 9% +2%
Foreign Stocks 8% 7% +1%
Mortgage- & Asset-Backed Bonds 8% 7% +1%
U.S. Mid-Cap Growth Stocks 7% 8% -1%
REITs 6% 6% 0%
U.S. Small-Cap Growth Stocks 4% 6% -2%
U.S. Small-Cap Value Stocks 4% 2% +2%
High-Yield Corporate Bonds 3% 5% -2%
Investment-Grade Corporate Bonds 2% 5% -3%
Convertible Securities 1% 2% -1%
U.S. Government Securities 1% 1% 0%
Cash Equivalents 4% 4% 0%
4 May not reflect current allocations.
5 Based on estimated earnings.
6 Source: Lipper, Inc. Beta is a quantitative measure of the Portfolio's
historical volatility relative to the overall market (S&P 500). A beta above
1 indicates more volatility than the market, and a beta below 1 indicates
less volatility. Results are calculated using three-month rolling returns for
Class 1 shares for the three-year period ended 12/31/04.
7 Source: Ibbotson Associates and Lipper, Inc. Standard deviation measures the
historical fluctuation of returns around the arithmetic average return of the
investment. The higher the standard deviation (as one measure of risk), the
greater the variability of the investment returns. Results are calculated for
the three-year period ended 12/31/04, and Portfolio results are for Class 1
shares.
8 Represents the sum of securities held by the underlying WM Funds. Some
securities may be held by more than one WM Fund.
15
VT Strategic Growth Portfolio
ANNUAL TOTAL RETURNS(1)
Class 1 Shares
(Calendar Year)
- ---------------
2004 +12.83%
2003 +33.07%
2002 -20.53%
2001 -6.25%
2000 -3.73%
1999 +47.95%
1998 +26.19%
Investment Strategy
As of December 31, 2004, the WM VT Strategic Asset Management (SAM) Strategic
Growth Portfolio was diversified among 10 funds representing 11 major asset
classes. This structure allows the Portfolio to manage risk through allocations
in the underlying WM Funds. The Portfolio held a 92%/8% equity-to-fixed-income
ratio for the latter half of the year, but made several adjustments earlier in
the period that allowed it to benefit from strong performance in certain stock
sectors. The Portfolio's underlying WM Funds all made positive contributions to
performance for the year.
During the first quarter of this year, the Portfolio added to its allocation in
the WM VT Growth Fund to achieve the desired growth/value mix. A broad-based
equity rally during the fourth quarter fueled positive performance from all the
underlying WM VT Equity Funds.
In May 2004, we launched the new WM VT Small Cap Value Fund, which provides a
Data shown is past performance and does not guarantee future results. Current
performance, including the most recent month-end results, which may be higher or
lower than the data shown, can be obtained by calling 800-222-5852. An
investment's return and principal value will fluctuate, so it may be worth more
or less upon redemption. Performance shown below does not account for fees,
expenses, and charges of any variable insurance contract or retirement plan. If
these fees were reflected, performance would be lower.
AVERAGE ANNUAL TOTAL RETURNS (1) AS OF DECEMBER 31, 2004
1 Year 5 Year Since Inception Inception Date
------- ------- ---------------- --------------
CLASS 1 SHARES 12.83% 1.49% 10.64% 6/3/97
CLASS 2 SHARES 12.54% - 7.50% 11/6/01
S&P 500(2) 10.87% -2.30% 6.40%
Russell 3000(R) Index (2) 11.95% -1.16% 6.83%
CLASS
1 RUSSELL 3000
DATE SHARES S&P 500(2) INDEX(2)
Apr-97
May-97 10,000 10,000 10,000
Jun-97 10,320 10,446 10,416
Jul-97 10,970 11,275 11,233
Aug-97 10,550 10,648 10,777
Sep-97 11,041 11,232 11,388
Oct-97 10,610 10,857 11,005
Nov-97 10,630 11,360 11,426
Dec-97 10,700 11,555 11,655
Jan-98 10,861 11,683 11,716
Feb-98 11,711 12,526 12,553
Mar-98 12,171 13,167 13,176
Apr-98 12,361 13,300 13,305
May-98 12,061 13,071 12,976
Jun-98 12,411 13,602 13,415
Jul-98 12,170 13,458 13,171
Aug-98 10,424 11,512 11,153
Sep-98 11,005 12,250 11,914
Oct-98 11,637 13,245 12,818
Nov-98 12,390 14,048 13,602
Dec-98 13,504 14,857 14,468
Jan-99 14,256 15,478 14,959
Feb-99 13,794 14,997 14,430
Mar-99 14,646 15,597 14,959
Apr-99 15,429 16,200 15,634
May-99 15,137 15,818 15,337
Jun-99 16,039 16,696 16,112
Jul-99 15,744 16,175 15,623
Aug-99 15,755 16,094 15,445
Sep-99 15,878 15,653 15,050
Oct-99 16,704 16,644 15,994
Nov-99 17,804 16,982 16,441
Dec-99 19,976 17,982 17,490
Jan-00 19,639 17,079 16,805
Feb-00 20,923 16,757 16,961
Mar-00 21,697 18,395 18,289
Apr-00 20,617 17,842 17,645
May-00 20,015 17,476 17,149
Jun-00 20,595 17,906 17,657
Jul-00 20,130 17,627 17,345
Aug-00 21,442 18,721 18,631
Sep-00 20,677 17,733 17,787
Oct-00 20,408 17,658 17,535
Nov-00 18,661 16,267 15,918
Dec-00 19,230 16,346 16,186
Jan-01 20,522 16,927 16,739
Feb-01 18,827 15,383 15,209
Mar-01 17,649 14,409 14,218
Apr-01 19,054 15,529 15,358
May-01 19,395 15,633 15,481
Jun-01 19,453 15,253 15,196
Jul-01 18,871 15,104 14,945
Aug-01 18,016 14,158 14,063
Sep-01 16,132 13,014 12,823
Oct-01 16,592 13,263 13,122
Nov-01 17,600 14,280 14,132
Dec-01 18,028 14,406 14,331
Jan-02 17,458 14,195 14,152
Feb-02 16,966 13,921 13,863
Mar-02 17,897 14,445 14,471
Apr-02 17,031 13,569 13,711
May-02 16,900 13,469 13,552
Jun-02 15,824 12,510 12,576
Jul-02 14,464 11,534 11,576
Aug-02 14,522 11,610 11,631
Sep-02 13,254 10,348 10,408
Oct-02 14,123 11,259 11,237
Nov-02 15,014 11,922 11,917
Dec-02 14,329 11,221 11,243
Jan-03 14,078 10,927 10,968
Feb-03 13,828 10,763 10,787
Mar-03 13,851 10,868 10,900
Apr-03 14,879 11,763 11,791
May-03 15,929 12,383 12,503
Jun-03 16,186 12,541 12,672
Jul-03 16,534 12,762 12,962
Aug-03 16,939 13,011 13,250
Sep-03 16,915 12,873 13,105
Oct-03 17,912 13,602 13,898
Nov-03 18,236 13,721 14,090
Dec-03 19,069 14,440 14,734
Jan-04 19,532 14,706 15,042
Feb-04 19,798 14,911 15,245
Mar-04 19,693 14,685 15,063
Apr-04 19,207 14,455 14,752
May-04 19,416 14,653 14,966
Jun-04 19,894 14,937 15,263
Jul-04 19,136 14,443 14,686
Aug-04 19,241 14,501 14,747
Sep-04 19,580 14,657 14,974
Oct-04 19,883 14,881 15,219
Nov-04 20,804 15,484 15,927
Dec-04 21,515 16,011 16,494
1 The Portfolio's performance through 12/31/99 benefited from the agreement of
WM Advisors and its affiliates to limit the Portfolio's expenses. Performance
reflects ongoing expenses and assumes reinvestment of all dividends and
capital gains. It also reflects ongoing fund expenses paid by the Portfolio's
applicable Funds, which include the effects of expense reimbursement.
Performance does not reflect the impact of federal, state, or municipal
taxes. If it did, performance would be lower.
2 The S&P 500 is a broad-based index intended to represent the U.S. equity
market. The Russell 3000(R) Index measures the performance of the 3,000
largest U.S. companies based on total market capitalization, which represents
approximately 98% of the investable U.S. equity market. Returns shown for the
indices assume reinvestment of all dividends and distributions, and
since-inception returns shown for the indices are calculated from 5/31/97.
Indices are unmanaged, and individuals cannot invest directly in an index.
3 Performance of Class 2 shares (offered as of 11/01) will differ.
16
way to further diversify the Portfolio's holdings among undervalued small-cap
assets. For the year, small-cap stocks performed better than large-cap stocks,
while value outperformed growth. As a result of this sector's performance, as
well as the Fund's advantageous stock picking, the WM VT Small Cap Value Fund
posted strong returns relative to the other underlying WM VT Equity Funds for
the period.
The Portfolio also benefited from real estate holdings in the WM VT REIT Fund,
which is part of the Portfolio's overweighted position in value securities. This
Fund closed the year with the highest performance of all the underlying WM VT
Funds.
Looking forward, we believe the economy has entered the self-sustaining phase of
the current recovery, but we feel any benefits may be muted by longer-term
challenges. Although the re-election of President George W. Bush removed some
degree of market uncertainty in the short term, secular forces remain that could
curtail future economic growth. These include the large federal deficit and
current account imbalance, overspent consumers, and a low level of personal
savings. Corporate profitability and price-to-earnings ratios may be difficult
to increase in this low-growth environment. This combination of factors has
caused us to remain conservative and focus on diversification and risk
management to pursue long-term investment objectives.
PORTFOLIO CHARACTERISTICS AS OF DECEMBER 31, 2004
Equity/Fixed-Income Allocation:(4) 92% Equity/8% Fixed-Income
Weighted Average Market Capitalization (Equities): $57.8 billion
Weighted Average P/E (Equities):(5) 17.1
Beta:(6) 0.93
Portfolio Standard Deviation:(7) 14.29
S&P 500 Standard Deviation:(7) 15.81
Turnover: 4%
Number of Securities:(8) 1,030
Total Net Assets: $164.2 million
ASSET CLASS DIVERSIFICATION(4)
As Of As Of
12/31/04 12/31/03 Change
-------- -------- ------
U.S. Large-Cap Value Stocks 24% 26% -2%
U.S. Large-Cap Growth Stocks 21% 18% +3%
U.S. Mid-Cap Value Stocks 13% 12% +1%
Foreign Stocks 9% 9% 0%
U.S. Mid-Cap Growth Stocks 9% 10% -1%
REITs 6% 5% +1%
U.S. Small-Cap Growth Stocks 5% 7% -2%
U.S. Small-Cap Value Stocks 5% 3% +2%
High-Yield Corporate Bonds 3% 3% 0%
Convertible Securities 1% 2% -1%
Investment-Grade Corporate Bonds 0% 1% -1%
Cash Equivalents 4% 4% 0%
4 May not reflect current allocations.
5 Based on estimated earnings.
6 Source: Lipper, Inc. Beta is a quantitative measure of the Portfolio's
historical volatility relative to the overall market (S&P 500). A beta above
1 indicates more volatility than the market, and a beta below 1 indicates
less volatility. Results are calculated using three-month rolling returns for
Class 1 shares for the three-year period ended 12/31/04.
7 Source: Ibbotson Associates and Lipper, Inc. Standard deviation measures the
historical fluctuation of returns around the arithmetic average return of the
investment. The higher the standard deviation (as one measure of risk), the
greater the variability of the investment returns. Results are calculated for
the three-year period ended 12/31/04, and Portfolio results are for Class 1
shares.
8 Represents the sum of securities held by the underlying WM Funds. Some
securities may be held by more than one WM Fund.
17
Expense Information
WM VARIABLE TRUST STRATEGIC ASSET MANAGEMENT PORTFOLIOS
As a shareholder of the VT Flexible Income Portfolio, VT Conservative Balanced
Portfolio, VT Balanced Portfolio, VT Conservative Growth Portfolio or VT
Strategic Growth Portfolio (the "Portfolios"), you incur ongoing costs,
including management fees, distribution and/or service fees, and other
Portfolio expenses. This example is intended to help you understand your
ongoing costs (in dollars) of investing in the Portfolios and to compare these
costs with the ongoing costs of investing in other mutual funds. This example
does not include expenses of the Underlying Funds (see Notes to Financial
Statements-note 1 on page 34.) An example including expenses of the Underlying
Funds appears on the following page. Also note expenses shown below and on the
following page do not account for fees, expenses, and charges of any variable
insurance contract or retirement plan. If these fees had been reflected,
expenses would have been higher.
The example is based on an investment of $1,000 invested at the beginning of
the period and held for the entire period July 1, 2004 to December 31, 2004.
ACTUAL EXPENSES:
The first section of the table below provides information about actual account
values and actual expenses. You may use the information in these columns,
together with the amount you invested, to estimate the expenses that you paid
over the period. Simply divide your account value by $1,000 (for example, an
$8,600 account value divided by $1,000 = 8.6), then multiply the result by the
number in the third column under the heading entitled "Expenses Paid During
Period" to estimate the expenses you paid on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES:
The second section of the table below provides information about hypothetical
account values and hypothetical expenses based on each Portfolio's actual
expense ratios and an assumed rate of return of 5% per year before expenses
(rather than each Portfolio's actual rate of return). The hypothetical account
values and expenses may not be used to estimate the actual ending balance or
expenses you paid for the period. You may use this information to compare the
ongoing costs of investing in the Portfolios and other funds. To do so, compare
this 5% hypothetical example with the 5% hypothetical examples that appear in
the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as separate
account expenses. Therefore, the hypothetical section of the table is useful in
comparing ongoing costs only, and will not help you compare the relative total
costs of owning different funds. In addition, if these transactional costs were
included, the cost shown would have been higher.
HYPOTHETICAL
ACTUAL EXPENSES (5% RETURN BEFORE EXPENSES)
---------------- --------------------------
EXPENSES EXPENSES
BEGINNING ENDING PAID DURING BEGINNING ENDING PAID DURING
ACCOUNT ACCOUNT PERIOD* ACCOUNT ACCOUNT PERIOD*
VALUE VALUE 07/01/2004- VALUE VALUE 07/01/2004- EXPENSE
07/01/2004 12/31/2004 12/31/2004 07/01/2004 12/31/2004 12/31/2004 RATIO
---------- ---------- ------------ ----------- ----------- ---------- ------
VT Flexible Income Portfolio
Class 1 ............................. $1,000 $1,050 $1.44 $1,000 $1,024 $1.42 0.28%
Class 2 ............................. 1,000 1,049 2.73 1,000 1,022 2.69 0.53%
VT Conservative Balanced Portfolio
Class 1 ............................. $1,000 $1,060 $1.71 $1,000 $1,023 $1.68 0.33%
Class 2 ............................. 1,000 1,059 3.00 1,000 1,022 2.95 0.58%
VT Balanced Portfolio
Class 1 ............................. $1,000 $1,070 $1.40 $1,000 $1,024 $1.37 0.27%
Class 2 ............................. 1,000 1,068 2.70 1,000 1,023 2.64 0.52%
VT Conservative Growth Portfolio
Class 1 ............................. $1,000 $1,078 $1.41 $1,000 $1,024 $1.37 0.27%
Class 2 ............................. 1,000 1,077 2.71 1,000 1,023 2.64 0.52%
VT Strategic Growth Portfolio
Class 1 ............................. $1,000 $1,081 $1.52 $1,000 $1,024 $1.48 0.29%
Class 2 ............................. 1,000 1,080 2.82 1,000 1,022 2.75 0.54%
* Expenses are equal to each Portfolio's annualized expense ratio, multiplied by
the average account value over the period, multiplied by the 184 days in the
most recent fiscal half-year, divided by 366 days in the year (to reflect the
one-half year period).
18
Expense Information (continued)
WM VARIABLE TRUST STRATEGIC ASSET MANAGEMENT PORTFOLIOS
The following table sets forth the estimated ongoing aggregate expenses of the
Portfolios, including expenses of the Underlying Funds, based upon expenses
shown in the table above for each Portfolio and corresponding expenses for each
Underlying Fund's Class 1 shares. These estimates assume a constant allocation
by each Portfolio of its assets among the Underlying Funds identical to the
actual allocation of the Portfolio at December 31, 2004. A Portfolio's actual
expenses may be higher as a result of changes in the allocation of the
Portfolio's assets among the Underlying Funds, the expenses of the Underlying
Funds and/or the Portfolio's own expenses.
HYPOTHETICAL
ACTUAL EXPENSES (5% RETURN BEFORE EXPENSES)
---------------- -------------------------
EXPENSES EXPENSES
BEGINNING ENDING PAID DURING BEGINNING ENDING PAID DURING
ACCOUNT ACCOUNT PERIOD* ACCOUNT ACCOUNT PERIOD*
VALUE VALUE 07/01/2004- VALUE VALUE 07/01/2004- EXPENSE
07/01/2004 12/31/2004 12/31/2004 07/01/2004 12/31/2004 12/31/2004 RATIO
---------- ---------- ---------- ---------- ---------- ----------- ---------
VT Flexible Income Portfolio
Class 1 ........................... $1,000 $1,050 $4.53 $1,000 $1,021 $4.47 0.88%
Class 2 ........................... 1,000 1,049 5.82 1,000 1,019 5.74 1.13%
VT Conservative Balanced Portfolio
Class 1 ........................... $1,000 $1,060 $5.07 $1,000 $1,020 $4.98 0.98%
Class 2 ........................... 1,000 1,059 6.36 1,000 1,019 6.24 1.23%
VT Balanced Portfolio
Class 1 ........................... $1,000 $1,070 $5.15 $1,000 $1,020 $5.03 0.99%
Class 2 ........................... 1,000 1,068 6.45 1,000 1,019 6.29 1.24%
VT Conservative Growth Portfolio
Class 1 ........................... $1,000 $1,078 $5.69 $1,000 $1,020 $5.53 1.09%
Class 2 ........................... 1,000 1,077 7.00 1,000 1,018 6.80 1.34%
VT Strategic Growth Portfolio
Class 1 ........................... $1,000 $1,081 $5.96 $1,000 $1,019 $5.79 1.14%
Class 2 ........................... 1,000 1,080 7.27 1,000 1,018 7.05 1.39%
* Expenses are equal to each Portfolio's annualized expense ratio, multiplied by
the average account value over the period, multiplied by the 184 days in the
most recent fiscal half-year, divided by 366 days in the year (to reflect the
one-half year period).
19
Financial Statements:
Portfolios of Investments
VT FLEXIBLE INCOME PORTFOLIO
December 31, 2004
VALUE
SHARES (000S)
------ ---------
INVESTMENT COMPANY SECURITIES -- 99.6%
489,015 WM VT Equity Income Fund ................ $ 7,951
852,932 WM VT Growth & Income Fund .............. 15,515
944,721 WM VT Growth Fund+....................... 12,310
1,833,821 WM High Yield Fund ...................... 15,422
4,806,612 WM VT Income Fund ....................... 53,257
410,431 WM VT Mid Cap Stock Fund ................ 6,748
149,765 WM VT REIT Fund ......................... 2,540
9,758,297 WM VT Short Term Income Fund ............ 25,176
229,534 WM VT Small Cap Growth Fund+ ............ 2,261
200,475 WM VT Small Cap Value Fund+ ............. 2,460
6,527,138 WM VT U.S. Government Securities Fund ... 69,906
117,113 WM VT West Coast Equity Fund ............ 2,395
-------
Total Investment Company Securities
(Cost $195,819)......................... 215,941
-------
PRINCIPAL
AMOUNT
(000S)
---------
REPURCHASE AGREEMENT -- 0.4%
(Cost $906)
$ 906 Agreement with Morgan Stanley,
0.500% dated 12/31/2004, to be
repurchased at $906,000 on
01/03/2005 (Collateralized by U.S.
Treasury Note, 3.000% due 07/15/2012,
market value $937,000).............. 906
----------
TOTAL INVESTMENTS (Cost $196,725*) .......... 100.0% 216,847
OTHER ASSETS (LIABILITIES) (NET) ............ 0.0 (40)
----- ----------
NET ASSETS .................................. 100.0% $ 216,807
===== ==========
- ----------------
* Aggregate cost for federal tax purposes is $197,613.
+ Non-income producing security.
VT CONSERVATIVE BALANCED PORTFOLIO
December 31, 2004
VALUE
SHARES (000S)
------ -----------
INVESTMENT COMPANY SECURITIES -- 99.0%
257,234 WM VT Equity Income Fund................. $ 4,183
303,383 WM VT Growth & Income Fund............... 5,519
407,619 WM VT Growth Fund+....................... 5,311
439,713 WM High Yield Fund....................... 3,698
1,067,735 WM VT Income Fund........................ 11,830
203,058 WM VT International Growth Fund.......... 2,593
148,446 WM VT Mid Cap Stock Fund................. 2,440
89,074 WM VT REIT Fund.......................... 1,511
1,339,133 WM VT Short Term Income Fund............. 3,455
97,926 WM VT Small Cap Growth Fund+............. 965
82,873 WM VT Small Cap Value Fund+.............. 1,017
1,515,356 WM VT U.S. Government Securities Fund.... 16,229
95,563 WM VT West Coast Equity Fund............. 1,954
-----------
Total Investment Company Securities
(Cost $54,446) ......................... 60,705
-----------
PRINCIPAL
AMOUNT
(000S)
---------
REPURCHASE AGREEMENT -- 1.5%
(Cost $884)
$ 884 Agreement with Morgan Stanley,
0.500% dated 12/31/2004, to be
repurchased at $884,000 on
01/03/2005 (Collateralized by U.S.
Treasury Note, 3.000% due 07/15/2012,
market value $914,000)......... 884
-------
TOTAL INVESTMENTS (Cost $55,330*) ......... 100.5% 61,589
OTHER ASSETS (LIABILITIES) (NET) .......... (0.5) (286)
----- -------
NET ASSETS ................................ 100.0% $61,303
===== =======
- --------------------
* Aggregate cost for federal tax purposes is $56,026.
+ Non-income producing security.
See Notes to Financial Statements.
20
Portfolios of Investments
VT BALANCED PORTFOLIO
December 31, 2004
VALUE
SHARES (000S)
- ------------------------------------------------------------------- ----------
INVESTMENT COMPANY SECURITIES -- 98.1%
4,023,480 WM VT Equity Income Fund ......................... $ 65,422
4,774,723 WM VT Growth & Income Fund ....................... 86,852
6,395,468 WM VT Growth Fund+ ............................... 83,333
3,763,999 WM High Yield Fund ............................... 31,655
6,670,830 WM VT Income Fund ................................ 73,913
2,802,797 WM VT International Growth Fund .................. 35,792
2,329,188 WM VT Mid Cap Stock Fund ......................... 38,292
1,374,811 WM VT REIT Fund .................................. 23,317
2,785,163 WM VT Short Term Income Fund ..................... 7,186
1,588,044 WM VT Small Cap Growth Fund+ ..................... 15,642
1,443,248 WM VT Small Cap Value Fund+ ...................... 17,708
10,025,670 WM VT U.S. Government Securities Fund ............ 107,375
1,640,456 WM VT West Coast Equity Fund ..................... 33,547
---------
Total Investment Company Securities
(Cost $528,365) ................................ 620,034
---------
PRINCIPAL
AMOUNT
(000S)
- ----------------------------------------------------------
REPURCHASE AGREEMENT -- 1.9%
(Cost $11,896)
$ 11,896 Agreement with Morgan Stanley,
0.500% dated 12/31/2004, to be
repurchased at $11,896,000 on
01/03/2005 (Collateralized by U.S.
Treasury Note, 3.000% due 07/15/2012,
market value $12,298,000) .............. 11,896
-----------------
TOTAL INVESTMENTS (Cost $540,261*) ....................... 100.0% 631,930
OTHER ASSETS (LIABILITIES)(Net) .......................... 0.0 (52)
----- -----------------
NET ASSETS ............................................... 100.0% $ 631,878
===== =================
- --------------------
* Aggregate cost for federal tax purposes is $551,784.
+ Non-income producing security.
VT CONSERVATIVE GROWTH PORTFOLIO
December 31, 2004
VALUE
SHARES (000S)
- -------------------------------------------------------------------- ---------
INVESTMENT COMPANY SECURITIES -- 99.9%
2,852,070 WM VT Equity Income Fund ......................... $ 46,375
3,976,624 WM VT Growth & Income Fund ....................... 72,335
5,078,192 WM VT Growth Fund+ ............................... 66,169
1,776,216 WM High Yield Fund ............................... 14,938
1,295,400 WM VT Income Fund ................................ 14,353
2,313,489 WM VT International Growth Fund .................. 29,543
1,860,467 WM VT Mid Cap Stock Fund ......................... 30,586
954,570 WM VT REIT Fund .................................. 16,189
1,327,426 WM VT Small Cap Growth Fund+ ..................... 13,075
1,164,201 WM VT Small Cap Value Fund+ ...................... 14,285
2,958,063 WM VT U.S. Government Securities Fund ............ 31,681
1,347,084 WM VT West Coast Equity Fund ..................... 27,548
---------
Total Investment Company Securities
(Cost $339,342) ................................ 377,077
---------
PRINCIPAL
AMOUNT
(000S)
- -------------------------------------------------------
REPURCHASE AGREEMENT -- 0.2%
(Cost $776)
$ 776 Agreement with Morgan Stanley,
0.500% dated 12/31/2004, to be
repurchased at $776,000 on
01/03/2005 (Collateralized by U.S.
Treasury Note, 3.000% due 07/15/2012,
market value $802,000) .............. 776
-----------------
TOTAL INVESTMENTS (Cost $340,118*) .................... 100.1% 377,853
OTHER ASSETS (LIABILITIES) (Net) ...................... (0.1) (439)
----- -----------------
NET ASSETS ............................................ 100.0% $ 377,414
===== =================
- --------------------
* Aggregate cost for federal tax purposes is $348,809.
+ Non-income producing security.
See Notes to Financial Statements.
21
Portfolio of Investments
VT STRATEGIC GROWTH PORTFOLIO
December 31, 2004
VALUE
SHARES (000S)
- ----------------------------------------------------- --------------
INVESTMENT COMPANY SECURITIES -- 99.3%
1,237,978 WM VT Equity Income Fund ........... $ 20,129
1,978,982 WM VT Growth & Income Fund ......... 35,998
2,330,332 WM VT Growth Fund+ ................. 30,364
942,559 WM High Yield Fund ................. 7,927
1,170,299 WM VT International Growth Fund .... 14,945
1,083,757 WM VT Mid Cap Stock Fund ........... 17,817
439,190 WM VT REIT Fund .................... 7,449
641,459 WM VT Small Cap Growth Fund+ ....... 6,318
586,364 WM VT Small Cap Value Fund+ ........ 7,195
728,118 WM VT West Coast Equity Fund ....... 14,890
--------------
Total Investment Company Securities
(Cost $144,067) ................. 163,032
--------------
PRINCIPAL
AMOUNT
(000S)
- -------------------------------------------------------
REPURCHASE AGREEMENT -- 0.7%
(Cost $1,135)
$ 1,135 Agreement with Morgan Stanley,
0.500% dated 12/31/2004, to be
repurchased at $1,135,000 on
01/03/2005 (Collateralized by U.S.
Treasury Note, 3.000% due 07/15/2012,
market value $1,173,000) ............. 1,135
----------------
TOTAL INVESTMENTS (Cost $145,202*) ..................... 100.0% 164,167
OTHER ASSETS (LIABILITIES) (Net) ....................... 0.0 31
----- ----------------
NET ASSETS ............................................. 100.0% $ 164,198
===== ================
- --------------------
* Aggregate cost for federal tax purposes is $149,426.
+ Non-income producing security.
See Notes to Financial Statements.
22
Statements of Assets and Liabilities
WM VARIABLE TRUST STRATEGIC ASSET MANAGEMENT PORTFOLIOS
December 31, 2004
(In thousands)
VT FLEXIBLE VT CONSERVATIVE VT CONSERVATIVE VT STRATEGIC
INCOME BALANCED VT BALANCED GROWTH GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------ --------------- ------------ --------------- ------------
ASSETS:
Investments, at value (a)........................ $ 216,847 $ 61,589 $ 631,930 $ 377,853 $ 164,167
Receivable for Portfolio shares sold............. 112 32 379 116 143
Prepaid expenses and other assets................ 1 1 2 2 1
------------ --------------- ------------ --------------- ------------
Total Assets................................... 216,960 61,622 632,311 377,971 164,311
------------ --------------- ------------ --------------- ------------
LIABILITIES:
Payable for Portfolio shares redeemed............ 47 275 178 393 31
Investment advisory fee payable.................. 18 5 53 32 14
Administration fee payable....................... 27 8 79 47 20
Distribution fees payable........................ 14 5 34 15 7
Accrued legal and audit fees..................... 23 22 23 23 22
Accrued printing and postage expenses............ 23 3 64 46 18
Accrued expenses and other payables.............. 1 1 2 1 1
------------ --------------- ------------ --------------- ------------
Total Liabilities.............................. 153 319 433 557 113
------------ --------------- ------------ --------------- ------------
NET ASSETS....................................... $ 216,807 $ 61,303 $ 631,878 $ 377,414 $ 164,198
============ =============== ============ =============== ============
(a) Investments, at cost......................... $ 196,725 $ 55,330 $ 540,261 $ 340,118 $ 145,202
============ =============== ============ =============== ============
NET ASSETS CONSIST OF:
Undistributed net investment income.............. $ 7,162 $ 1,512 $ 11,823 $ 4,594 $ 1,070
Accumulated net realized loss on investment
transactions................................... (618) (740) (30,445) (29,720) (14,046)
Net unrealized appreciation of investments....... 20,122 6,259 91,669 37,735 18,965
Paid-in capital.................................. 190,141 54,272 558,831 364,805 158,209
------------ --------------- ------------ --------------- ------------
Total Net Assets............................... $ 216,807 $ 61,303 $ 631,878 $ 377,414 $ 164,198
============ =============== ============ =============== ============
NET ASSETS:
Class 1 Shares................................... $ 149,055 $ 40,458 $ 467,076 $ 303,584 $ 130,069
============ =============== ============ =============== ============
Class 2 Shares................................... $ 67,752 $ 20,845 $ 164,802 $ 73,830 $ 34,129
============ =============== ============ =============== ============
SHARES OUTSTANDING:
Class 1 Shares................................... 10,571 3,422 29,055 17,972 7,050
============ =============== ============ =============== ============
Class 2 Shares................................... 4,833 1,773 10,309 4,396 1,857
============ =============== ============ =============== ============
CLASS 1 SHARES:*
Net asset value, offering and redemption price
per share of beneficial interest outstanding... $ 14.10 $ 11.82 $ 16.08 $ 16.89 $ 18.45
============ =============== ============ =============== ============
CLASS 2 SHARES:*
Net asset value, offering and redemption price
per share of beneficial interest outstanding... $ 14.02 $ 11.75 $ 15.99 $ 16.80 $ 18.38
============ =============== ============ =============== ============
- --------------------
* Net asset value is not shown in thousands.
See Notes to Financial Statements.
23
Statements of Operations
WM VARIABLE TRUST STRATEGIC ASSET MANAGEMENT PORTFOLIOS
For the Year Ended December 31, 2004
(In thousands)
VT FLEXIBLE VT CONSERVATIVE VT CONSERVATIVE VT STRATEGIC
INCOME BALANCED VT BALANCED GROWTH GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------ --------------- ------------ --------------- ------------
INVESTMENT INCOME:
Dividends from investment company securities..... $ 7,858 $ 1,713 $ 13,538 $ 5,679 $ 1,520
Interest......................................... 8 6 167 12 11
------------ --------------- ------------ --------------- ------------
Total investment income...................... 7,866 1,719 13,705 5,691 1,531
------------ --------------- ------------ --------------- ------------
EXPENSES:
Investment advisory fee.......................... 199 51 569 347 141
Administration fee............................... 298 77 853 521 211
Class 2 Shares distribution fees................. 131 38 320 144 59
Custodian fees................................... 3 3 3 3 3
Legal and audit fees............................. 28 25 37 31 26
Trustees' fees................................... 5 1 15 9 4
Printing and postage expenses.................... 24 6 70 42 19
Other............................................ 8 5 18 13 7
------------ --------------- ------------ --------------- ------------
Total expenses............................... 696 206 1,885 1,110 470
Fees reduced by custodian credits --* --* --* --* --*
------------ --------------- ------------ --------------- ------------
Net expenses................................. 696 206 1,885 1,110 470
------------ --------------- ------------ --------------- ------------
NET INVESTMENT INCOME............................ 7,170 1,513 11,820 4,581 1,061
------------ --------------- ------------ --------------- ------------
NET REALIZED AND UNREALIZED
GAIN ON INVESTMENTS:
Net realized gain/(loss) on investment
transactions................................... 1,040 100 (1,817) (3,295) (3,320)
Capital gain distributions received.............. 113 42 693 564 294
Net change in unrealized appreciation/
depreciation of investments.................... 4,230 2,632 45,389 37,392 19,805
------------ --------------- ------------ --------------- ------------
Net realized and unrealized gain on investments.. 5,383 2,774 44,265 34,661 16,779
------------ --------------- ------------ --------------- ------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS...................... $ 12,553 $ 4,287 $ 56,085 $ 39,242 $ 17,840
============ =============== ============ =============== ============
- --------------------
* Amount represents less than $500.
See Notes to Financial Statements.
24
Statements of Changes in Net Assets
WM VARIABLE TRUST STRATEGIC ASSET MANAGEMENT PORTFOLIOS
For the Year Ended December 31, 2004
(In thousands)
VT FLEXIBLE VT CONSERVATIVE VT CONSERVATIVE VT STRATEGIC
INCOME BALANCED VT BALANCED GROWTH GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------ --------------- ------------ --------------- ------------
Net investment income............................ $ 7,170 $ 1,513 $ 11,820 $ 4,581 $ 1,061
Net realized gain/(loss) on investment
transactions................................... 1,040 100 (1,817) (3,295) (3,320)
Capital gain distributions received.............. 113 42 693 564 294
Net change in unrealized appreciation/
depreciation of investments.................... 4,230 2,632 45,389 37,392 19,805
------------ --------------- ------------ --------------- ------------
Net increase in net assets resulting from
operations..................................... 12,553 4,287 56,085 39,242 17,840
Distributions to shareholders from:
Net investment income:
Class 1 Shares............................... (4,929) (737) (8,194) (3,986) (773)
Class 2 Shares............................... (1,693) (297) (2,224) (737) (137)
Net increase/(decrease) in net assets from
Portfolio share transactions:
Class 1 Shares .............................. 1,532 6,646 13,188 (8,954) 11,273
Class 2 Shares............................... 31,560 10,676 62,119 27,108 16,152
------------ --------------- ------------ --------------- ------------
Net increase in net assets....................... 39,023 20,575 120,974 52,673 44,355
NET ASSETS:
Beginning of year................................ 177,784 40,728 510,904 324,741 119,843
------------ --------------- ------------ --------------- ------------
End of year...................................... $ 216,807 $ 61,303 $ 631,878 $ 377,414 $ 164,198
============ =============== ============ =============== ============
Undistributed net investment income
at end of year................................. $ 7,162 $ 1,512 $ 11,823 $ 4,594 $ 1,070
============ =============== ============ =============== ============
See Notes to Financial Statements.
25
Statements of Changes in Net Assets (continued)
WM VARIABLE TRUST STRATEGIC ASSET MANAGEMENT PORTFOLIOS
For the Year Ended December 31, 2003
(In thousands)
VT FLEXIBLE VT CONSERVATIVE VT CONSERVATIVE VT STRATEGIC
INCOME BALANCED VT BALANCED GROWTH GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
----------- --------------- ------------ --------------- ------------
Net investment income.......................... $ 6,603 $ 1,027 $ 10,283 $ 4,628 $ 881
Net realized loss on investment transactions... (1,044) (369) (13,373) (13,354) (4,837)
Capital gain distributions received............ 24 8 178 144 49
Net change in unrealized appreciation/
depreciation of investments.................. 13,783 4,168 90,583 77,616 30,938
----------- --------------- ----------- --------------- -----------
Net increase in net assets resulting from
operations................................... 19,366 4,834 87,671 69,034 27,031
Distributions to shareholders from
net investment income:
Class 1 Shares............................. (3,460) (518) (8,745) (5,270) (1,233)
Class 2 Shares............................. (438) (92) (1,167) (480) (70)
Net increase/(decrease) in net assets from
Portfolio share transactions:
Class 1 Shares............................. 3,941 7,355 17,869 (2,482) 7,462
Class 2 Shares............................. 22,967 6,146 49,336 19,765 10,041
----------- --------------- ----------- --------------- -----------
Net increase in net assets..................... 42,376 17,725 144,964 80,567 43,231
NET ASSETS:
Beginning of year.............................. 135,408 23,003 365,940 244,174 76,612
----------- --------------- ----------- --------------- -----------
End of year.................................... $ 177,784 $ 40,728 $ 510,904 $ 324,741 $ 119,843
=========== =============== =========== =============== ===========
Undistributed net investment income
at end of year............................... $ 6,611 $ 1,031 $ 10,389 $ 4,709 $ 909
=========== =============== =========== =============== ===========
See Notes to Financial Statements.
26
Statements of Changes in Net Assets -- Capital Stock Activity
WM VARIABLE TRUST STRATEGIC ASSET MANAGEMENT PORTFOLIOS
(In thousands)
VT FLEXIBLE VT CONSERVATIVE VT BALANCED
INCOME PORTFOLIO BALANCED PORTFOLIO PORTFOLIO
-------------------------- -------------------------- --------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
12/31/04 12/31/03 12/31/04 12/31/03 12/31/04 12/31/03
----------- ----------- ----------- ----------- ----------- -----------
AMOUNT
CLASS 1:
Sold ................................. $ 22,582 $ 28,141 $ 12,881 $ 11,763 $ 54,025 $ 64,152
Issued as reinvestment of dividends .. 4,929 3,460 737 518 8,194 8,745
Redeemed ............................. (25,979) (27,660) (6,972) (4,926) (49,031) (55,028)
----------- ----------- ----------- ----------- ----------- -----------
Net increase ......................... $ 1,532 $ 3,941 $ 6,646 $ 7,355 $ 13,188 $ 17,869
=========== =========== =========== =========== =========== ===========
CLASS 2:
Sold ................................. $ 31,697 $ 23,497 $ 12,072 $ 6,847 $ 64,500 $ 51,752
Issued as reinvestment of dividends .. 1,693 438 297 92 2,224 1,167
Redeemed ............................. (1,830) (968) (1,693) (793) (4,605) (3,583)
----------- ----------- ----------- ----------- ----------- -----------
Net increase ......................... $ 31,560 $ 22,967 $ 10,676 $ 6,146 $ 62,119 $ 49,336
=========== =========== =========== =========== =========== ===========
SHARES
CLASS 1:
Sold ................................. 1,639 2,179 1,140 1,136 3,563 4,804
Issued as reinvestment of dividends .. 370 264 67 50 551 648
Redeemed ............................. (1,892) (2,143) (618) (485) (3,234) (4,227)
----------- ----------- ----------- ----------- ----------- -----------
Net increase ......................... 117 300 589 701 880 1,225
=========== =========== =========== =========== =========== ===========
CLASS 2:
Sold ................................. 2,312 1,809 1,074 656 4,281 3,834
Issued as reinvestment of dividends .. 127 33 27 9 150 87
Redeemed ............................. (134) (75) (150) (74) (305) (268)
----------- ----------- ----------- ----------- ----------- -----------
Net increase ......................... 2,305 1,767 951 591 4,126 3,653
=========== =========== =========== =========== =========== ===========
VT CONSERVATIVE VT STRATEGIC
GROWTH PORTFOLIO GROWTH PORTFOLIO
-------------------------- --------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
12/31/04 12/31/03 12/31/04 12/31/03
----------- ----------- ----------- -----------
AMOUNT
CLASS 1:
Sold ................................. $ 28,188 $ 38,262 $ 27,082 $ 21,723
Issued as reinvestment of dividends .. 3,986 5,270 773 1,233
Redeemed ............................. (41,128) (46,014) (16,582) (15,494)
----------- ----------- ----------- -----------
Net increase/(decrease) .............. $ (8,954) $ (2,482) $ 11,273 $ 7,462
=========== =========== =========== ===========
CLASS 2:
Sold ................................. $ 30,924 $ 22,137 $ 18,524 $ 10,877
Issued as reinvestment of dividends .. 737 480 137 70
Redeemed ............................. (4,553) (2,852) (2,509) (906)
----------- ----------- ----------- -----------
Net increase ......................... $ 27,108 $ 19,765 $ 16,152 $ 10,041
=========== =========== =========== ===========
SHARES
CLASS 1:
Sold ................................. 1,792 2,872 1,598 1,563
Issued as reinvestment of dividends .. 257 390 46 87
Redeemed ............................. (2,628) (3,586) (979) (1,157)
----------- ----------- ----------- -----------
Net increase/(decrease) .............. (579) (324) 665 493
=========== =========== =========== ===========
CLASS 2:
Sold ................................. 1,980 1,632 1,100 741
Issued as reinvestment of dividends .. 48 36 8 5
Redeemed ............................. (292) (212) (150) (60)
----------- ----------- ----------- -----------
Net increase ......................... 1,736 1,456 958 686
=========== =========== =========== ===========
See Notes to Financial Statements.
27
Financial Highlights
For a Portfolio share outstanding throughout each period
VT FLEXIBLE INCOME PORTFOLIO CLASS 1
--------------------------------------------------------------
YEARS ENDED DECEMBER 31 2004 2003 2002 2001 2000
--------- --------- --------- --------- ---------
NET ASSET VALUE, BEGINNING OF PERIOD ............................ $ 13.71 $ 12.41 $ 12.23 $ 11.90 $ 11.86
--------- --------- --------- --------- ---------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income .................................... 0.51(6) 0.56(6) 0.41(6) 0.17(6)
Net realized and unrealized gain/(loss) on investments ... 0.35 1.08 (0.15) 0.40 0.58(6)
--------- --------- --------- --------- 0.10
Total from investment operations ......................... 0.86 1.64 0.26 0.57 ---------
--------- --------- --------- --------- 0.68
---------
LESS DISTRIBUTIONS:
Dividends from net investment income(1) .................. (0.47) (0.34) (0.08) (0.15)
Dividends from net realized capital gains ................ -- -- -- (0.09) (0.58)
--------- --------- --------- --------- (0.06)
Total distributions ...................................... (0.47) (0.34) (0.08) (0.24) ---------
--------- --------- --------- --------- (0.64)
NET ASSET VALUE, END OF PERIOD .................................. $ 14.10 $ 13.71 $ 12.41 $ 12.23 ---------
========= ========= ========= ========= $ 11.90
TOTAL RETURN(2) ................................................. 6.47% 13.30% 2.14% 4.84% =========
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA: 5.79%
Net assets, end of period (in 000's) ..................... $ 149,055 $ 143,283 $ 125,992 $ 90,860
Ratio of operating expenses to average net assets(3) ..... 0.28% 0.30% 0.30% 0.33% $ 40,049
Ratio of net investment income to average net assets ..... 3.67% 4.33% 3.37% 1.43% 0.31%
Portfolio turnover rate .................................. 5% 4% 9% 1% 4.84%
Ratio of operating expenses to average net assets without 14%
fee waivers, expenses reimbursed and/or fees reduced
by credits allowed by the custodian(3)(4) ............ 0.28% 0.30% 0.30% 0.33% 31%
VT CONSERVATIVE BALANCED PORTFOLIO CLASS 1
----------------------------------------------------
YEARS ENDED DECEMBER 31 2004 2003 2002 2001
--------- --------- ---------- ---------
NET ASSET VALUE, BEGINNING OF PERIOD ............................. $ 11.15 $ 9.73 $ 10.04 $ 9.90
--------- --------- ---------- ---------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ..................................... 0.34(6) 0.36(6) 0.31(6) 0.13
Net realized and unrealized gain/(loss) on investments .... 0.56 1.29 (0.54) 0.10
--------- --------- ---------- ---------
Total from investment operations .......................... 0.90 1.65 (0.23) 0.23
--------- --------- ---------- ---------
LESS DISTRIBUTIONS:
Dividends from net investment income(1) ................... (0.23) (0.23) (0.07) (0.09)
Dividends from net realized capital gains ................. -- -- (0.01) --
--------- --------- ---------- ---------
Total distributions ....................................... (0.23) (0.23) (0.08) (0.09)
--------- --------- ---------- ---------
NET ASSET VALUE, END OF PERIOD ................................... $ 11.82 $ 11.15 $ 9.73 $ 10.04
========= ========= ========== =========
TOTAL RETURN(2) .................................................. 8.21% 17.09% (2.26)% 2.40%
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) ...................... $ 40,458 $ 31,600 $ 20,759 $ 14,221
Ratio of operating expenses to average net assets(3) ...... 0.33% 0.31% 0.30% 0.41%
Ratio of net investment income to average net assets ...... 3.02% 3.48% 3.20% 1.36%
Portfolio turnover rate ................................... 1% 6% 9% 2%
Ratio of operating expenses to average net assets without
fee waivers, expenses reimbursed and/or fees reduced
by credits allowed by the custodian(3)(4) ............. 0.33% 0.36% 0.41% 0.53%
VT CONSERVATIVE BALANCED PORTFOLIO CLASS 1
---------
YEARS ENDED DECEMBER 31 2000
---------
NET ASSET VALUE, BEGINNING OF PERIOD ........................... $ 9.90
---------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ................................... 0.49(6)
Net realized and unrealized gain/(loss) on investments .. (0.00)(8)
---------
Total from investment operations ........................ 0.49
---------
LESS DISTRIBUTIONS:
Dividends from net investment income(1) ................. (0.49)
Dividends from net realized capital gains ............... (0.00)(8)
---------
Total distributions ..................................... (0.49)
---------
NET ASSET VALUE, END OF PERIOD ................................. $ 9.90
=========
TOTAL RETURN(2) ................................................ 5.03%
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) .................... $ 8,736
Ratio of operating expenses to average net assets(3) .... 0.37%
Ratio of net investment income to average net assets .... 4.99%
Portfolio turnover rate ................................. 67%
Ratio of operating expenses to average net assets without
fee waivers, expenses reimbursed and/or fees reduced
by credits allowed by the custodian(3)(4) ........... 0.44%
- ----------
(1) Includes dividends paid from the short-term portion of capital gain
distributions received from the Underlying Funds.
(2) Total return is not annualized for periods less than one year. The total
return would have been lower if certain fees had not been waived and/or
expenses reimbursed by the investment advisor or if fees had not been
reduced by credits allowed by the custodian.
(3) The Portfolio will indirectly bear its prorated share of expenses of the
Underlying Funds.
(4) Ratio of operating expenses to average net assets includes expenses paid
indirectly.
(5) The Portfolio commenced selling Class 2 shares on November 6, 2001.
(6) Per share numbers have been calculated using the average shares method.
(7) Annualized.
(8) Amount represents less than $0.01 per share.
See Notes to Financial Statements.
28
CLASS 2
- ---------------------------------------------------
2004 2003 2002 2001(5)
- --------- --------- --------- ---------
$ 13.65 $ 12.38 $ 12.23 $ 12.18
0.47(6) 0.53(6) 0.38(6) 0.02(6)
0.36 1.07 (0.15) 0.03
- --------- --------- --------- ---------
0.83 1.60 0.23 0.05
- --------- --------- --------- ---------
(0.46) (0.33) (0.08) --
-- -- -- --
- --------- --------- --------- ---------
(0.46) (0.33) (0.08) --
- --------- --------- --------- ---------
$ 14.02 $ 13.65 $ 12.38 $ 12.23
========= ========= ========= =========
6.24% 13.02% 1.89% 0.41%
$ 67,752 $ 34,501 $ 9,416 $ 182
0.53% 0.55% 0.55% 0.58%(7)
3.42% 4.08% 3.12% 1.18%(7)
5% 4% 9% 1%
0.53% 0.55% 0.55% 0.58%(7)
CLASS 2
- ---------------------------------------------------
2004 2003 2002 2001(5)
- --------- --------- --------- ---------
$ 11.11 $ 9.71 $ 10.04 $ 9.92
- --------- --------- --------- ---------
0.31(6) 0.33(6) 0.29(6) 0.01
0.55 1.29 (0.54) 0.11
- --------- --------- --------- ---------
0.86 1.62 (0.25) 0.12
- --------- --------- --------- ---------
(0.22) (0.22) (0.07) --
-- -- (0.01) --
- --------- --------- --------- ---------
(0.22) (0.22) (0.08) --
- --------- --------- --------- ---------
$ 11.75 $ 11.11 $ 9.71 $ 10.04
========= ========= ========= =========
7.88% 16.83% (2.47)% 1.21%
$ 20,845 $ 9,128 $ 2,244 $ 205
0.58% 0.56% 0.55% 0.66%(7)
2.77% 3.23% 2.95% 1.11%(7)
1% 6% 9% 2%
0.58% 0.61% 0.66% 0.78%(7)
See Notes to Financial Statements.
29
Financial Highlights
For a Portfolio share outstanding throughout each period.
VT BALANCED PORTFOLIO CLASS 1
----------------------------------------------------
YEARS ENDED DECEMBER 31 2004 2003 2002 2001 2000
-------- -------- -------- -------- --------
NET ASSET VALUE, BEGINNING OF PERIOD ...................................... $ 14.88 $ 12.42 $ 13.91 $ 14.50 $ 14.92
-------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ................................................ 0.32(6) 0.33(6) 0.32(6) 0.17(6) 0.41(6)
Net realized and unrealized gain/(loss) on investments ............... 1.16 2.46 (1.53) (0.15) (0.32)
-------- -------- -------- -------- --------
Total from investment operations ..................................... 1.48 2.79 (1.21) 0.02 0.09
-------- -------- -------- -------- --------
LESS DISTRIBUTIONS:
Dividends from net investment income(1) .............................. (0.28) (0.33) (0.28) (0.25) (0.43)
Dividends from net realized capital gains ............................ -- -- -- (0.36) (0.08)
-------- -------- -------- -------- --------
Total distributions .................................................. (0.28) (0.33) (0.28) (0.61) (0.51)
-------- -------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD ............................................ $ 16.08 $ 14.88 $ 12.42 $ 13.91 $ 14.50
======== ======== ======== ======== ========
TOTAL RETURN(2) ........................................................... 10.12% 22.74% (8.78)% 0.13% 0.49%
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) ................................. $467,076 $419,273 $334,605 $354,082 $305,399
Ratio of operating expenses to average net assets(3) ................. 0.28% 0.29% 0.29% 0.28% 0.29%
Ratio of net investment income to average net assets ................. 2.13% 2.50% 2.52% 1.22% 2.76%
Portfolio turnover rate .............................................. 4% 7% 22% 8% 15%
Ratio of operating expenses to average net assets without fee waivers,
expenses reimbursed and/or fees reduced by credits allowed by the
custodian(3)(4) .................................................. 0.28% 0.29% 0.29% 0.28% 0.29%
VT CONSERVATIVE GROWTH PORTFOLIO CLASS 1
----------------------------------------------------
YEARS ENDED DECEMBER 31 2004 2003 2002 2001 2000
-------- -------- -------- -------- --------
NET ASSET VALUE, BEGINNING OF PERIOD .................................... $ 15.32 $ 12.16 $ 14.87 $ 16.46 $ 17.10
-------- -------- -------- ------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income .............................................. 0.21(6) 0.23(6) 0.23(6) 0.17(6) 0.27(6)
Net realized and unrealized gain/(loss) on investments ............. 1.58 3.23 (2.51) (0.72) (0.69)
-------- -------- -------- -------- --------
Total from investment operations ................................... 1.79 3.46 (2.28) (0.55) (0.42)
-------- -------- -------- -------- --------
LESS DISTRIBUTIONS:
Dividends from net investment income(1) ............................ (0.22) (0.30) (0.41) (0.61) (0.07)
Dividends from net realized capital gains .......................... -- -- (0.02) (0.43) (0.15)
-------- -------- -------- -------- --------
Total distributions ................................................ (0.22) (0.30) (0.43) (1.04) (0.22)
-------- -------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD .......................................... $ 16.89 $ 15.32 $ 12.16 $ 14.87 $ 16.46
======== ======== ======== ======== ========
TOTAL RETURN(2) ......................................................... 11.78% 28.74% (15.52)% (3.56)% (2.49)%
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) ............................... $303,584 $284,165 $ 229,564 $309,608 $293,442
Ratio of operating expenses to average net assets(3) ............... 0.28% 0.30% 0.29% 0.28% 0.28%
Ratio of net investment income to average net assets ............... 1.36% 1.75% 1.77% 1.11% 1.59%
Portfolio turnover rate ............................................ 10% 11% 19% 7% 13%
Ratio of operating expenses to average net assets without fee
waivers, expenses reimbursed and/or fees reduced by credits
allowed by the custodian(3)(4) .................................. 0.28% 0.30% 0.29% 0.28% 0.28%
- ----------------
(1) Includes dividends paid from the short-term portion of capital gain
distributions received from the Underlying Funds.
(2) Total return is not annualized for periods less than one year. The total
return would have been lower if certain fees had not been waived and/or
expenses reimbursed by the investment advisor or if fees had not been
reduced by credits allowed by the custodian.
(3) The Portfolio will indirectly bear its prorated share of expenses of the
Underlying Funds.
(4) Ratio of operating expenses to average net assets includes expenses paid
indirectly.
(5) The Portfolio commenced selling Class 2 shares on November 6, 2001.
(6) Per share numbers have been calculated using the average shares method.
(7) The amount shown may not agree with the change in the aggregate gains and
losses of portfolio securities due to the timing of sales and redemptions
of Portfolio shares.
(8) Annualized.
See Notes to Financial Statements.
30
CLASS 2
- -----------------------------------------------------------------
2004 2003 2002 2001(5)
- ----------- ----------- ----------- -----------
$ 14.82 $ 12.39 $ 13.91 $ 13.52
- ----------- ----------- ----------- -----------
0.28(6) 0.30(6) 0.29(6) 0.02(6)
1.16 2.45 (1.53) 0.37(7)
- ----------- ----------- ----------- -----------
1.44 2.75 (1.24) 0.39
- ----------- ----------- ----------- -----------
(0.27) (0.32) (0.28)
-- -- -- --
- ----------- ----------- ----------- -----------
(0.27) (0.32) (0.28) --
- ----------- ----------- ----------- -----------
$ 15.99 $ 14.82 $ 12.39 $ 13.91
=========== =========== =========== ===========
9.83% 22.46% (9.00)% 2.88%
$ 164,802 $ 91,631 $ 31,335 $ 1,452
0.53% 0.54% 0.54% 0.53%(8)
1.88% 2.25% 2.27% 0.97%(8)
4% 7% 22% 8%
0.53% 0.54% 0.54% 0.53%(8)
CLASS 2
- -------------------------------------------------------------
2004 2003 2002 2001(5)
- ---------- ---------- ---------- ----------
$ 15.25 $ 12.13 $ 14.87 $ 14.24
- ---------- ---------- ---------- ----------
0.17(6) 0.20(6) 0.19(6) 0.01(6)
1.58 3.20 (2.50) 0.62(7)
- ---------- ---------- ---------- ----------
1.75 3.40 (2.31) 0.63
- ---------- ---------- ---------- ----------
(0.20) (0.28) (0.41) --
-- -- (0.02) --
- ---------- ---------- ---------- ----------
(0.20) (0.28) (0.43) --
- ---------- ---------- ---------- ----------
$ 16.80 $ 15.25 $ 12.13 $ 14.87
========== ========== ========== ==========
11.58% 28.36% (15.72)% 4.42%
$ 73,830 $ 40,576 $ 14,610 $ 1,127
0.53% 0.55% 0.54% 0.53%(8)
1.11% 1.50% 1.52% 0.86%(8)
10% 11% 19% 7%
0.53% 0.55% 0.54% 0.53%(8)
See Notes to Financial Statements.
31
Financial Highlights
For a Portfolio share outstanding throughout each period.
VT STRATEGIC GROWTH PORTFOLIO CLASS 1
--------------------------------------------------------------------
YEARS ENDED DECEMBER 31 2004 2003 2002 2001 2000
--------- --------- --------- --------- ---------
NET ASSET VALUE, BEGINNING OF PERIOD....................... $ 16.46 $ 12.55 $ 16.45 $ 18.61 $ 19.59
--------- --------- --------- --------- ---------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income................................. 0.14(6) 0.14(6) 0.15(6) 0.16(6) 0.13(6)
Net realized and unrealized gain/(loss) on
investments.......................................... 1.96 3.98 (3.47) (1.27) (0.84)
--------- --------- --------- --------- ---------
Total from investment operations...................... 2.10 4.12 (3.32) (1.11) (0.71)
--------- --------- --------- --------- ---------
LESS DISTRIBUTIONS:
Dividends from net investment income(1)............... (0.11) (0.21) (0.54) (0.57) (0.11)
Dividends from net realized capital gains............. -- -- (0.04) (0.48) (0.16)
--------- --------- --------- --------- ---------
Total distributions................................... (0.11) (0.21) (0.58) (1.05) (0.27)
--------- --------- --------- --------- ---------
NET ASSET VALUE, END OF PERIOD............................. $ 18.45 $ 16.46 $ 12.55 $ 16.45 $ 18.61
========= ========= ========= ========= =========
TOTAL RETURN(2) ........................................... 12.83% 33.07% (20.53)% (6.25)% (3.73)%
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's).................. $ 130,069 $ 105,077 $ 73,936 $ 97,401 $ 98,431
Ratio of operating expenses to average net assets(3).. 0.29% 0.31% 0.32% 0.31% 0.30%
Ratio of net investment income to average net assets.. 0.80% 0.99% 1.06% 0.95% 0.67%
Portfolio turnover rate .............................. 4% 9% 16% 5% 12%
Ratio of operating expenses to average net assets
without fee waivers,expenses reimbursed and/or fees
reduced by credits allowed by the custodian(3)(4).. 0.29% 0.31% 0.32% 0.31% 0.30%
- --------------
(1) Includes dividends paid from the short-term portion of capital gain
distributions received from the Underlying Funds.
(2) Total return is not annualized for periods less than one year. The total
return would have been lower if certain fees had not been waived and/or
expenses reimbursed by the investment advisor or if fees had not been
reduced by credits allowed by the custodian.
(3) The Portfolio will indirectly bear its prorated share of expenses of the
Underlying Funds.
(4) Ratio of operating expenses to average net assets includes expenses paid
indirectly.
(5) The Portfolio commenced selling Class 2 shares on November 6, 2001.
(6) Per share numbers have been calculated using the average shares method.
(7) The amount shown may not agree with the change in the aggregate gains and
losses of portfolio securities due to the timing of sales and redemptions
of Portfolio shares.
(8) Annualized.
See Notes to Financial Statements.
32
CLASS 2
- -------------------------------------------------
2004 2003 2002 2001(5)
- ------- ----------- ---------- -----------
$ 16.42 $ 12.54 $ 16.45 $15.54
- ------- ------- ------- ------
0.09(6) 0.10(6) 0.11(6) 0.01(6)
1.97 3.98 (3.44) 0.90(7)
- ------- ------- ------- ------
2.06 4.08 (3.33) 0.91
- ------- ------- ------- ------
(0.10) (0.20) (0.54) --
-- -- (0.04) --
- ------- ------- ------- ------
(0.10) (0.20) (0.58) --
- ------- ------- ------- ------
$ 18.38 $ 16.42 $ 12.54 $16.45
======= ======= ======= ======
12.54% 32.76% (20.59)% 5.86%
$34,129 $14,766 $ 2,676 $ 319
0.54% 0.56% 0.57% 0.56%(8)
0.55% 0.74% 0.81% 0.70%(8)
4% 9% 16% 5%
0.54% 0.56% 0.57% 0.56%(8)
See Notes to Financial Statements.
33
Notes to Financial Statements
WM VARIABLE TRUST STRATEGIC ASSET MANAGEMENT PORTFOLIOS
1. ORGANIZATION AND BUSINESS
WM Variable Trust (the "Trust") was organized as a Massachusetts business trust
on January 29, 1993. The Trust is registered under the Investment Company Act of
1940, as amended (the "1940 Act"), as an open-end management investment company.
The Trust consists of 13 funds and 5 portfolios. The VT Flexible Income, VT
Conservative Balanced, VT Balanced, VT Conservative Growth and VT Strategic
Growth Portfolios (each a "Portfolio" and collectively, the "Portfolios") are
included in this report.
The Trust is authorized to issue an unlimited number of shares of beneficial
interest, each without par value. Each Portfolio may offer two classes of
shares: Class 1 shares and Class 2 shares. These shares are issued and redeemed
only in connection with investments in, and payments under, variable annuity and
variable life insurance contracts (collectively "Variable Insurance Contracts"),
as well as certain qualified retirement plans including affiliated plans of
Washington Mutual, Inc. ("Washington Mutual"), a publicly owned financial
services company. At December 31, 2004, "The Washington Mutual Retirement
Savings and Investment Plan" held approximately 39%, 27%, 10%, 11% and 36% of
the outstanding shares in the VT Flexible Income, VT Conservative Balanced, VT
Balanced, VT Conservative Growth and VT Strategic Growth Portfolios,
respectively.
Each of the Portfolios invests, within certain percentage ranges, in Class 1
shares of various funds in the Trust and Class I shares of WM High Yield Fund
(collectively, the "Underlying Funds"). WM Advisors, Inc. (the "Advisor" or "WM
Advisors"), a wholly-owned subsidiary of Washington Mutual, serves as investment
advisor to the Portfolios. The Advisor may alter these percentage ranges when it
deems appropriate. The assets of each Portfolio will be allocated among the
Underlying Funds in accordance with its investment objective based on the
Advisor's outlook for the economy, the financial markets and the relative market
valuations of the Underlying Funds. In addition, in order to meet liquidity
needs or for temporary defensive purposes, each Portfolio may invest its assets
directly in cash, stock or bond index futures, options, money market securities
and certain short-term debt instruments, including repurchase agreements.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies, in conformity
with accounting principles generally accepted in the United States of America
("generally accepted accounting principles"), which are consistently followed by
the Portfolios in the preparation of their financial statements.
PORTFOLIO VALUATION:
Investments in the Underlying Funds are valued at net asset value per Class 1 or
Class I share of the respective Underlying Funds determined as of the close of
the New York Stock Exchange on each valuation date. Short-term debt securities
that mature in 60 days or less are valued at amortized cost which approximates
market value.
REPURCHASE AGREEMENTS:
Each Portfolio may enter into repurchase agreement transactions. A repurchase
agreement is a purchase of an underlying debt obligation subject to an agreement
by the seller to repurchase the obligation at an agreed upon price and time. It
is each Portfolio's policy that its custodian take possession of the underlying
collateral securities. The fair value of the collateral is at all times at least
equal to the total amount of the repurchase obligation. In the event of
counterparty default, the Portfolio would seek to use the collateral to offset
losses incurred. There is potential loss to the Portfolio in the event the
Portfolio is delayed or prevented from exercising its right to dispose of the
collateral securities, including the risk of a possible decline in the value of
the underlying securities during the period while the Portfolio seeks to assert
its rights. WM Advisors, acting under the supervision of the Board of Trustees,
reviews the value of the collateral and the creditworthiness of those banks and
broker-dealers with whom each Portfolio enters into repurchase agreements.
SECURITIES TRANSACTIONS AND INVESTMENT INCOME:
Securities transactions are recorded on a trade date basis. Realized gains and
losses from securities sold are recorded on the identified cost basis.
Interest income on debt securities is accrued daily. Dividend income is recorded
on the ex-dividend date. Each Portfolio's investment income and realized and
unrealized gains and losses are allocated among the classes of that Portfolio
based upon the relative average net assets of each class.
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS:
Dividends from net investment income and distributions of any net capital gains
earned by a Portfolio are declared and paid annually.
34
Notes to Financial Statements (continued)
WM VARIABLE TRUST STRATEGIC ASSET MANAGEMENT PORTFOLIOS
Distributions from income and capital gains are determined in accordance with
income tax regulations, which may differ from generally accepted accounting
principles. These differences are primarily due to differing treatments of
income and gains on various investments held by the Portfolios, redesignated
distributions and differing characterization of distributions made by each
Portfolio. At December 31, 2004, the following adjustments have been reflected
in the components of net assets on the "Statement of Assets and Liabilities" to
present these balances on an income tax basis, excluding certain temporary
differences:
INCREASE
INCREASE/ INCREASE ACCUMULATED
(DECREASE) UNDISTRIBUTED NET REALIZED
PAID-IN CAPITAL NET INVESTMENT LOSS
NAME OF PORTFOLIO (000S) INCOME (000S) (000S)
- ---------------------------------------- --------------- -------------- -------------
VT Flexible Income Portfolio............ $ --* $ 3 $ (3)
VT Conservative Balanced Portfolio...... -- 2 (2)
VT Balanced Portfolio................... --* 32 (32)
VT Conservative Growth Portfolio........ (1) 27 (26)
VT Strategic Growth Portfolio........... -- 10 (10)
- ----------------------
* Amount represents less than $500.
The above adjustments are not reflected in the calculation of net investment
income per share presented in the Financial Highlights.
FEDERAL INCOME TAXES:
It is each Portfolio's policy to qualify as a regulated investment company by
complying with the requirements of the Internal Revenue Code of 1986, as amended
(the "Code"), applicable to regulated investment companies and by distributing
substantially all of its earnings to its shareholders. Therefore, no federal
income or excise tax provision is required.
It is each Portfolio's policy to meet the diversification requirements of the
Code so that variable annuity and variable life contracts funded by the Trust
will not fail to qualify as annuities and life insurance contracts for tax
purposes.
EXPENSES:
General expenses of the Trust are allocated to all the Funds and Portfolios of
the Trust based upon the relative average net assets of each Fund and Portfolio.
In addition, the Portfolios will indirectly bear their prorated share of the
expenses of the Underlying Funds. Operating expenses directly attributable to a
class of shares are charged to the operations of that class of shares. Expenses
of each Portfolio not directly attributable to the operations of any class of
shares are prorated among the classes to which the expenses relate based on the
relative average net assets of each class of shares.
USE OF ESTIMATES:
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts and disclosures in the financial statements. Actual
results could differ from those estimates.
3. INVESTMENT ADVISORY AND OTHER TRANSACTIONS
WM Advisors provides its proprietary asset allocation services to the
Portfolios, formulates the Portfolios' investment policies, analyzes economic
and market trends, exercises investment discretion over the assets of the
Portfolios and monitors the allocation of each Portfolio's assets and each
Portfolio's performance. For its investment advisory services to the Portfolios,
WM Advisors is entitled to a monthly fee at an annual rate of 0.100% of each
Portfolio's average daily net assets.
WM Shareholder Services, Inc. (the "Administrator"), a wholly-owned subsidiary
of Washington Mutual, serves as administrator of the Portfolios. For its
administrative services to the Portfolios, the Administrator is entitled to a
monthly fee at an annual rate of 0.150% of each Portfolio's average daily net
assets.
Effective January 1, 2005, the Advisor and the Administrator will change their
monthly fees based upon average net assets. The Advisor's monthly fee will be at
an annual rate of 0.100% of each Portfolio's average daily net assets up to $1
billion and an annual rate of 0.075% of each Portfolio's average daily net
assets over $1 billion. The Administrator's monthly fee will be at an annual
rate of 0.150% of each Portfolio's average daily net assets up to $1 billion and
an annual rate of 0.125% of each Portfolio's average daily net assets over $1
billion.
35
Notes to Financial Statements (continued)
WM VARIABLE TRUST STRATEGIC ASSET MANAGEMENT PORTFOLIOS
Custodian fees for certain Portfolios have been reduced by credits allowed by
the Portfolio's custodian for uninvested cash balances. The Portfolios could
have invested this cash in income producing investments. Fees reduced by credits
allowed by the custodian for the year ended December 31, 2004 are shown
separately in the "Statements of Operations".
4. TRUSTEES' FEES
No officer or employee of Washington Mutual or its subsidiaries receives any
compensation from the Trust for serving as an officer or Trustee of the Trust.
The Trust, together with other mutual funds advised by WM Advisors, pays each
Trustee who is not an officer or employee of Washington Mutual or its
subsidiaries, a per annum retainer plus attendance fees for each meeting at
which they are present. The Lead Trustee, Committee Chairs and Committee Members
receive additional remuneration for these services to the Trust. Trustees are
also reimbursed for travel and out-of-pocket expenses. Each Trustee serves in
the same capacity for all 42 funds within the WM Group of Funds.
5. DISTRIBUTION PLANS
Each of the Portfolios has adopted a distribution plan, pursuant to Rule 12b-l
under the 1940 Act, applicable to Class 2 shares of the Portfolios (a "Rule
12b-1 Plan"). Under the Rule 12b-1 Plan, WM Funds Distributor, Inc. (the
"Distributor"), a registered broker-dealer and a wholly-owned subsidiary of
Washington Mutual, may receive a fee at an annual rate of 0.25% of the average
daily net assets attributable to Class 2 shares. This fee may be used to cover
the expenses of the Distributor primarily intended to result in the sale of such
shares, including payments to the Distributor's representatives or others for
selling shares. The Rule 12b-1 Plan shall remain in effect from year to year,
provided such continuance is approved annually by vote of the Board of Trustees,
including a majority of those Trustees who are not "interested persons" of the
Trust, as defined in the 1940 Act, and who have no direct or indirect financial
interest in the operation of the distribution plan or any agreements related to
the plan.
6. PURCHASES AND SALES OF INVESTMENTS
The aggregate cost of purchases and proceeds from sales of Underlying Funds for
the year ended December 31, 2004, are as follows:
PURCHASES SALES
NAME OF PORTFOLIO (000S) (000S)
- ------------------------------------- --------- -------
VT Flexible Income Portfolio......... $ 43,150 $ 9,265
VT Conservative Balanced Portfolio... 18,087 500
VT Balanced Portfolio................ 103,817 23,135
VT Conservative Growth Portfolio..... 54,131 35,375
VT Strategic Growth Portfolio........ 33,450 5,900
7. COMPONENTS OF DISTRIBUTABLE EARNINGS
At December 31, 2004, the components of distributable earnings on a tax basis
and the tax character of distributions paid during 2004 and 2003 are as follows:
(IN THOUSANDS)
------------------------------------------------------------------------
VT FLEXIBLE VT CONSERVATIVE VT CONSERVATIVE VT STRATEGIC
INCOME BALANCED VT BALANCED GROWTH GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
----------- --------------- ----------- --------------- ------------
Gross tax unrealized appreciation .... $19,234 $ 5,563 $ 80,146 $ 47,496 $19,404
Gross tax unrealized depreciation .... -- -- -- (18,452) (4,663)
------- ------- -------- -------- -------
Net tax unrealized
appreciation/(depreciation) ......... $19,234 $ 5,563 $ 80,146 $ 29,044 $14,741
======= ======= ======== ======== =======
Undistributed ordinary income ........ 7,162 1,512 11,823 4,594 $ 1,070
Undistributed accumulated gains ...... $ 270 $ -- $ -- $ -- $ --
Tax Composition of Distributions:
2004
Ordinary income ...................... $ 6,622 $ 1,034 $ 10,418 $ 4,723 $ 910
Long-term capital gain ............... $ -- $ -- $ -- $ -- $ --
2003
Ordinary income ...................... $ 3,898 $ 610 $ 9,912 $ 5,750 $ 1,303
Long-term capital gain ............... $ -- $ -- $ -- $ -- $ --
36
Notes to Financial Statements (continued)
WM VARIABLE TRUST STRATEGIC ASSET MANAGEMENT PORTFOLIOS
8. CAPITAL LOSS CARRYFORWARDS
At December 31, 2004, the following Portfolios have available for federal income
tax purposes unused capital losses as follows:
(IN THOUSANDS)
--------------------------------------
EXPIRING EXPIRING EXPIRING EXPIRING
NAME OF PORTFOLIO IN 2009 IN 2010 IN 2011 IN 2012
- --------------------------------------- -------- -------- -------- --------
VT Conservative Balanced Portfolio..... $ -- $ -- $ 44 $ --
VT Balanced Portfolio.................. 3,740 4,364 3,460 7,358
VT Conservative Growth Portfolio....... -- 5,709 6,564 8,756
VT Strateaic Growth Portfolio.......... -- 3,815 1,560 4,447
9. RISK FACTORS OF THE PORTFOLIOS
Investing in the Underlying Funds through the Portfolios involves certain
additional expenses and tax results that would not be present in a direct
investment in the Underlying Funds. For example, under certain circumstances, an
Underlying Fund may determine to make payment of a redemption request by a
Portfolio wholly or partly by a distribution in kind of securities from its
portfolio, instead of cash, in accordance with the rules of the Securities and
Exchange Commission. In such cases, the Portfolios may hold securities
distributed by an Underlying Fund until the Advisor determines that it is
appropriate to dispose of such securities.
Certain Underlying Funds may invest a portion of their assets in foreign
securities; enter into forward foreign currency transactions; lend their
portfolio securities; enter into stock index, interest rate and currency futures
contracts, and options on such contracts; enter into interest rate swaps or
purchase or sell interest rate caps or floors; enter into other types of options
transactions; make short sales; purchase zero coupon and payment-in-kind bonds;
enter into repurchase or reverse repurchase agreements; purchase and sell
"when-issued" securities and enter into "delayed-delivery" transactions; and
enter into various other investment practices, each with inherent risks. In
addition, the VT REIT Fund could be adversely impacted by economic trends in the
real estate industry; the VT West Coast Equity Fund by economic trends in the
West Coast region; and the WM High Yield Fund by the conditions affecting
issuers of lower rated securities.
The officers and Trustees, the Advisor, the Distributor and Transfer Agent of
the Portfolios serve in the same capacity for the Underlying Funds. Conflicts
may arise as these persons and companies seek to fulfill their fiduciary
responsibilities to both the Portfolios and the Underlying Funds.
From time to time, one or more of the Underlying Funds used for investment by a
Portfolio may experience relatively large investments or redemptions due to
reallocations or rebalancings by the Portfolios. These transactions will affect
the Underlying Funds, since the Underlying Funds that experience redemptions as
a result of the reallocations or rebalancings may have to sell portfolio
securities and the Underlying Funds that receive additional cash will have to
invest such cash. While it is impossible to predict the overall impact of these
transactions over time, there could be adverse effects on portfolio management
to the extent that the Underlying Funds may be required to sell securities or
invest cash at times when they would not otherwise do so. These transactions
could also have tax consequences if sales of securities resulted in gains and
could also increase transaction costs. The Advisor is committed to minimizing
such impact on the Underlying Funds to the extent it is consistent with pursuing
the investment objectives of the Portfolios. The Advisor may nevertheless face
conflicts in fulfilling its responsibilities. The Advisor will, at all times,
monitor the impact on the Underlying Funds of transactions by the Portfolios.
37
Report of Independent Registered Public Accounting Firm
TO THE TRUSTEES AND SHAREHOLDERS OF
WM VARIABLE TRUST STRATEGIC ASSET MANAGEMENT PORTFOLIOS
We have audited the accompanying statements of assets and liabilities, including
the portfolios of investments, of WM Variable Trust Strategic Growth Portfolio,
WM Variable Trust Conservative Growth Portfolio, WM Variable Trust Balanced
Portfolio, WM Variable Trust Conservative Balanced Portfolio and WM Variable
Trust Flexible Income Portfolio (collectively, the "Portfolios") as of December
31, 2004, and the related statements of operations for the year then ended, the
statements of changes in net assets for each of the two years in the period then
ended, and the financial highlights for each of the five years in the period
then ended. These financial statements and financial highlights are the
responsibility of the Portfolios' management. Our responsibility is to express
an opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes consideration of internal control over financial reporting as a basis
for designing audit procedures that are appropriate in the circumstances, but
not for the purpose of expressing an opinion on the effectiveness of the
Portfolios' internal control over financial reporting. Accordingly, we express
no such opinion. An audit also includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. Our procedures
included confirmation of securities owned as of December 31, 2004, by
correspondence with the custodian. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the aforementioned Portfolios as of December 31, 2004, the results of their
operations for the year then ended, the changes in their net assets for each of
the two years in the period then ended, and their financial highlights for each
of the five years in the period then ended, in conformity with accounting
principles generally accepted in the United States of America.
Deloitte & Touche LLP
Boston, Massachusetts
February 18, 2005
38
Other Information (unaudited)
1. TAX INFORMATION
Of the distributions made by the following Portfolios, the corresponding
percentages represent the amount of each distribution which may qualify for the
dividends received deduction available to corporate shareholders.
NAME OF FUND
- ------------
VT Flexible Income Portfolio........... 4.60%
VT Conservative Balanced Portfolio..... 11.73%
VT Balanced Portfolio.................. 19.89%
VT Conservative Growth Portfolio....... 34.93%
VT Strategic Growth Portfolio.......... 80.48%
2. TRUSTEES AND OFFICERS INFORMATION
TRUSTEES AND OFFICERS:
NAME, AGE, AND ADDRESS(1) LENGTH OF PRINCIPAL OCCUPATION(S) DURING OTHER DIRECTORSHIPS
OF NON-INTERESTED TRUSTEE(4) TIME SERVED(2) PAST 5 YEARS HELD BY TRUSTEE
- -------------------------------- ------------------------- ---------------------------------- -----------------------------------
Wayne L. Attwood, M.D. Composite Funds- 11 years Retired doctor of internal None.
Age 75 WM Group of medicine and gastroenterology.
Funds-6 years
Kristianne Blake Composite Funds-3 years CPA specializing in personal Frank Russell Investment Company;
Age 50 WM Group of financial and tax planning. Russell Insurance Funds; Avista
Funds-6 years Corporation; St. George's School
Edmond R. Davis, Esq. Sierra Funds-8 years Partner at the law firm of Davis & Braille Institute of America, Inc;
Age 76 WM Group of Whalen LLP. Prior thereto, partner Children's Bureau of Southern
Funds-6 years at the law firm of Brobeck, California, Children's Bureau
Phlegar & Harrison, LLP. Foundation; Fifield Manors, Inc.
Carrol R. McGinnis Griffin Funds-3 years Founder of McGinnis Investments. Baptist Foundation of Texas;
Age 61 WM Group of Prior thereto, President and Chief Concord Trust Company.
Funds-5 years Operating Officer of Transamerica
Fund Management Company.
Alfred E. Osborne, Jr., Ph.D. Sierra Funds-7 years Senior Associate Dean, University Nordstrom Inc.; K2, Inc.; First
Age 60 WM Group of of California at Los Angeles Pacific Advisors' Capital, Crescent
Funds-6 years Anderson Graduate School of and New Income Funds; EMAK
Management, and Faculty Director Worldwide, Inc.; Member of
of the Harold Price Center for Investment Company Institute
Entrepreneurial Studies, National Board of Governors;
University of California at Los Director of Independent Directors
Angeles. Council and Member of Communication
& Education Committee.
Daniel L. Pavelich Composite Funds-1 year Retired Chairman and CEO of BDO Catalytic, Inc.; Vaagen Bros.
Age 60 WM Group of Seidman, LLP. Lumber, Inc.
Funds-6 years
Jay Rockey Composite Funds-3 years Founder and Senior Counsel of Downtown Seattle Association; The
Age 76 WM Group of The Rockey Company, now Rockey, Rainier Club; WSU Foundation
Funds-6 years Hill & Knowlton.
Richard C. Yancey (Lead Trustee) Composite Funds-23 years Retired Managing Director of AdMedia Partners Inc.; Czech and
Age 78 WM Group of Dillon, Read & Co., an Investment Slovak American Enterprise Fund
Funds-6 years Bank now part of UBS.
NAME, AGE, AND ADDRESS(1) LENGTH OF PRINCIPAL OCCUPATION(S) DURING OTHER DIRECTORSHIPS
OF INTERESTED TRUSTEE(4) TIME SERVED(2) PAST 5 YEARS HELD BY TRUSTEE
- -------------------------------- ------------------------- ---------------------------------- -----------------------------------
Anne V. Farrell Composite Funds-4 years President Emeritus of the Seattle Washington Mutual, Inc.; REI
Age 69 WM Group of Foundation.
Funds-6 years
Michael K. Murphy Composite Funds-3 years Chairman of CPM Development Washington Mutual, Inc.
Age 67 WM Group of Corporation.
Funds-6 years
William G. Papesh, Composite Funds-9 years President and Director of the Member of Investment Company
President and CEO WM Group of Advisor, Transfer Agent and Institute Board of Governors.
Age 61 Funds-6 years Distributor.
39
Other Information (unaudited) (continued)
POSITION(S) HELD WITH REGISTRANT
NAME, AGE, AND ADDRESS(1) & PRINCIPAL OCCUPATION(S) DURING
OF OFFICER(4) LENGTH OF TIME SERVED PAST 5 YEARS
- -------------------------- ------------------------------------- ---------------------------------------------
Wendi B. Bernard Assistant Vice President and Assistant Vice President of the Advisor.
Age 36 Assistant Secretary since 2003.
Jeffrey L. Lunzer, CPA First Vice President, Chief First Vice President of the Advisor,
Age 43 Financial Officer and Transfer Agent and Distributor. Prior to
Treasurer since 2003. 2003, senior level positions at the
Columbia Funds and Columbia Management Co.
William G. Papesh President and CEO since 1987. Prior President and Director of the Advisor,
Age 61 to 1987, other officer positions Transfer Agent and Distributor.
since 1972.
Gary Pokrzywinski Senior Vice President since 2004. Senior Vice President and Director of
Age 43 Prior to 2004, other officer the Advisor, Transfer Agent and
positions held since 1999. Distributor.
Debra Ramsey Senior Vice President since 2004. Senior Vice President and Director of
Age 51 the Advisor, Transfer Agent and Distributor.
John T. West First Vice President, Secretary, Chief First Vice President of the Advisor,
Age 49 Compliance Officer and Anti-Money Transfer Agent and Distributor.
Laundering Compliance Officer since
2004. Prior to 2004, other officer
positions held since 1993.
Randall L. Yoakum Senior Vice President since 2001. Senior Vice President, Chief Investment
Age 44 Prior to 2001, other officer Strategist of the Advisor. Director of the
positions held since 1999. Advisor, Transfer Agent and Distributor from
1999 to 2004. Prior thereto, senior
positions at D.A. Davidson and Boatmen's
Trust.
__________
Note: The Statement of Additional Information includes additional information
about Fund Trustees and Officers and is available, without charge, upon request
by calling 1-800-222-5852.
(1) The address for all Trustees and Officers is 1201 Third Avenue, 22nd
Floor, Seattle, WA, 98101.
(2) The Sierra Funds merged with the Composite Funds on March 23, 1998 to form
the WM Group of Funds. The Griffin Funds merged with the WM Group of Funds
on March 5, 1999.
(3) Trustees are considered interested due to their affiliation with
Washington Mutual, Inc. or the Funds.
(4) The Trustees oversee 42 Portfolios and Funds in the Fund Complex. Each
Trustee and executive officer shall hold the indicated positions until his
or her resignation or removal.
3. PORTFOLIO INFORMATION
SCHEDULES OF INVESTMENTS
The Trust files its complete schedule of portfolio holdings with the Securities
and Exchange Commission ("SEC") for the first and third quarters of each fiscal
year on Forms N-Q. The Trusts' Forms N-Q are available, without charge and upon
request, by calling 1-800-222-5852. The Trusts' Form N-Q are also available at
http://www.sec.gov and also may be reviewed and copied at the SEC's Public
Reference Room ("PRR") in Washington, DC. Information regarding the operation of
the PRR may be obtained by calling 1-800-SEC-0330.
PROXY VOTING INFORMATION
The policies and procedures that the Trust uses to determine how to vote proxies
relating to portfolio securities held by the Fund are included in the Trust's
Statement of Additional Information which is available, without charge and upon
request, by calling 1-800-222-5852. Information regarding how the Fund voted
proxies relating to portfolio securities during the most recent twelve-month
period ended June 30 is available at http://www.wmgroupoffunds.com. This
information is also available at http://www.sec.gov.
40
[WM VARIABLE TRUST LOGO]
Investment returns and unit value of an investment will fluctuate, and an
investor's units when redeemed may be worth more or less than their original
cost.
This annual report is published for the general information of the shareholders
of the WM Variable Trust. This material is not authorized for distribution
unless preceded or accompanied by a current prospectus that includes more
information regarding the risk factors, expenses, policies, and objectives of
the contract. Investors should read the prospectus carefully before investing.
To obtain an additional prospectus, please call 800-222-5852.
The WM Variable Trust Funds are advised by WM Advisors, Inc. (WMAI). They are
available through variable insurance products distributed by WM Funds
Distributor, Inc. (WMFD) and sold through WM Financial Services, Inc. (WMFS) and
independent broker/ dealers. WMAI, WMFD, and WMFS are affiliates of Washington
Mutual, Inc.
Distributed by:
WM Funds Distributor, Inc.
Member NASD
[WM VARIABLE TRUST LOGO]
WM Funds Distributor, Inc.
12009 Foundation Place, Suite 350
Gold River, CA 95670
PRESORTED
STANDARD
US POSTAGE PAID
LOS ANGELES, CA
PERMIT #1831
ITEM 2. CODE OF ETHICS
The registrant has adopted a code of ethics that applies to the registrant's
principal executive officer, principal financial officer and principal
accounting officer, a copy of which is attached hereto.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT
The Board of Trustees of the registrant has determined that there is at least
one Trustee who is an audit committee financial expert serving on its Audit
Committee and has designated Daniel L. Pavelich as an "audit committee financial
expert." Mr. Pavelich is "independent," as such term has been defined by the
Securities and Exchange Commission (the "SEC") for purposes of implementing
Section 407 of the Sarbanes Oxley Act of 2002. The SEC has stated that the
designation or identification of a person as an audit committee financial expert
pursuant to this Item 3 of Form N-CSR does not impose on such person any duties,
obligations or liability that are greater than the duties, obligations and
liability imposed on such person as a member of the Audit Committee and the
Board of Trustees in the absence of such designation or identification.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES
(a) Audit Fees
2003 2004
- ---- ----
$400,660 $456,700
(b) Audit-Related Fees
2003 2004
- ---- ----
None None
For the last two fiscal years, no audit-related fees were required to be
approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X.
(c) Tax Fees
2003 2004
- ---- ----
$38,190 $39,295
The tax fees consist of fees billed in connection with reviewing the federal
regulated investment company income tax returns for WM Variable Trust for the
tax years ended December 31, 2003 and December 31, 2004.
For the last two fiscal years, no tax fees were required to be approved pursuant
to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X.
(d) All Other Fees
For the last two fiscal years, no other fees were required to be approved
pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X.
(e) (1) Pre-approval Policies and Procedures
Pursuant to the Audit Committee charter, the Audit Committee of the registrant
will review and pre-approve or disapprove its principal accountant's engagement
for all services with the registrant and its principal accountant's engagement
for non-audit services with the registrant's investment advisor (not including a
sub-advisor whose role is primarily portfolio management and is sub-contracted
or overseen by another investment advisor) and any entity controlling,
controlled by or under common control with the investment advisor that provides
ongoing services to the funds in accordance with paragraph (c)(7)(i) of Rule
2-01 of Regulation S-X, if the engagement relates directly to the operations and
financial reporting of the registrant.
(2) None of the services described in paragraphs (b) through (d) of this Item 4
were approved by the Audit Committee pursuant to paragraph (c)(7)(i)(C) of Rule
2-01 of Regulation S-X.
(f) Not applicable.
(g) For the fiscal year ended December 31, 2004, the registrant's principal
accountant billed aggregate non-audit fees in the amount of $39,000 for
services rendered to the registrant, WM Advisors, Inc., WM Funds
Distributor, Inc., WM Shareholder Services, Inc. and WM Financial Services,
Inc. For the fiscal year ended December 31, 2003, the registrant's principal
accountant billed aggregate non-audit fees in the amount of $435,350 for
services rendered to the registrant, WM Advisors, Inc., WM Funds
Distributor, Inc., WM Shareholder Services, Inc. and WM Financial Services,
Inc.
(h) The Audit Committee has considered whether the provision of non-audit
services that were rendered to the registrant's investment advisor (not
including any subadvisor whose role is primarily portfolio management and is
subcontracted with or overseen by another investment advisor), and any entity
controlling, controlled by, or under common control with the investment advisor
that provides ongoing services to the registrant that were not pre-approved
pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible
with maintaining the principal accountant's independence.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS
Not Applicable.
ITEM 6. SCHEDULE OF INVESTMENTS
Not Applicable.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES
Not Applicable.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES
Not Applicable.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANIES AND AFFILIATED PURCHASERS
Not Applicable.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable.
ITEM 11. CONTROLS AND PROCEDURES:
(a) The registrant's principal executive officer and principal financial officer
have concluded, based on their evaluation of the effectiveness of the design and
operation of the registrant's disclosure controls and procedures as of a date
within 90 days of the filing date of this report on Form N-CSR, that the design
and operation of such procedures are effective to provide reasonable assurance
that information required to be disclosed by the registrant in the reports that
it files or submits on Form N-CSR is recorded, processed, summarized, and
reported within the time periods specified in the SEC's rules and forms.
(b) There have been no changes in the registrant's internal control over
financial reporting (as defined in Rule 30a-3(d) under the Investment Company
Act of 1940, as amended) that occurred during the registrant's second fiscal
half-year that have materially affected, or are reasonably likely to materially
affect, the registrant's internal control over financial reporting.
ITEM 12. EXHIBITS
(a) Registrant's Code of Ethics. The registrant's code of ethics required to
be disclosed under Item 2 of Form N-CSR attached hereto at Exhibit 99.CODE ETH.
(b) A separate certification for each principal executive officer and principal
financial officer of the registrant as required by Rule 30a-2 of the Investment
Company Act of 1940 attached hereto as Exhibit 99.CERT.
(c) Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
attached hereto as Exhibit 99.906 CERT.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
WM Variable Trust
By: /s/ Jeffrey L. Lunzer
Jeffrey L. Lunzer
Treasurer and Chief Financial Officer
March 4, 2005
By: /s/ William G. Papesh
William G. Papesh
President and Chief Executive Officer
March 4, 2005