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, 2005
Date of reporting period: June 30, 2005
ITEM 1. REPORTS TO STOCKHOLDERS
[WM VARIABLE TRUST LOGO]
[GRAPHIC]
SEMIANNUAL REPORT
June 30, 2005
WM VARIABLE TRUST
VT Equity Funds
VT Fixed-Income Funds
VT Money Market Fund
[GRAPHIC]
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 FUND
VT Money Market Fund
[GRAPHIC]
At the WM Group of Funds, our passion is piecing individual investments
together 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 2-14.
Withdrawals made prior to age 59 1/2 may be subject to a 10% IRS tax penalty.
TABLE OF CONTENTS
1 Letter from the President
WM Variable Trust Performance and Composition:
2 VT REIT Fund
3 VT Equity Income Fund
4 VT Growth & Income Fund
5 VT West Coast Equity Fund
6 VT Mid Cap Stock Fund
7 VT Growth Fund
8 VT Small Cap Value Fund
9 VT Small Cap Growth Fund
10 VT International Growth Fund
11 VT Short Term Income Fund
12 VT U.S. Government Securities Fund
13 VT Income Fund
14 VT Money Market Fund
15 Expense Information
17 Financial Statements
78 Notes to Financial Statements
85 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]
Since my last letter to you, the financial markets have continued to be volatile
and uncertain. No more certain have been issues at home--such as rising oil
prices and the ongoing Social Security debate--not to mention events abroad.
Amid this uncertainty, I am proud to say that we have remained as committed as
ever to effective asset allocation and consistent investment discipline. We
trust that these core commitments can continue to build value for you over time.
We are delighted to note that as a result of our efforts, the retail funds of
the WM Group of Funds were once again recognized for their 5-year results by
Barron's, as they have been every year since 1999. In addition, over the last
five years retail assets in the WM Group of Funds-- from a combination of net
shareholder purchases and fund performance--have increased by 133%, while
industry assets during that period increased by 18%.(1) The stock market (as
measured by the S&P 500(2)) fell by 11% over the same five years through 2004.
BARRON'S ANNUAL FUND FAMILY RANKINGS
YEAR 5-YEAR RANKING 1-YEAR RANKING
- ---- -------------- --------------
2004 #15 out of 67 #46 out of 73
2003 #5 out of 70 #41 out of 75
2002 #1 out of 72 #7 out of 81
2001 #5 out of 70 #6 out of 88
2000 #11 out of 65 #44 out of 84
1999 #9 out of 68 #9 out of 92
THE ENDURING VALUE OF MUTUAL FUNDS
We believe that these figures reflect not only the attractiveness of the WM
Group of Funds, but also the enduring value of mutual funds as an investment
vehicle for our shareholders. While some investors are lured away by alternative
strategies such as wrap accounts or hedge funds, we think mutual funds continue
to represent one of the most cost-effective vehicles investors can use to gain
diversified access to U.S. and foreign securities markets. We also believe that
our business remains one that can significantly aid investors in achieving their
long-term financial objectives--among the most important of which is laying a
foundation for their retirement years.
The recent debate over Social Security policy highlights this need more than
ever. Regardless of one's political position, we think it has become
increasingly clear that one of the best solutions to the Social Security
quandary is for Americans to reduce their dependence on that program. We firmly
believe that investors and their advisors will be well served by continuing to
focus on long-term strategies that can build wealth independent of the
wranglings of government policy.
PRIDE IN OUR HERITAGE
As a firm, we are proud of our 66 years of intensive asset management
experience. We believe this heritage will serve our shareholders well as
financial markets and world events continue to produce the unexpected. As
always, our focus remains on pursuing the highest risk-adjusted returns for
investors, and we thank you again for your ongoing confidence and support.
Sincerely,
/s/ William G. Papesh
- --------------------------
William G. Papesh
President
Note regarding Barron's rankings: The retail funds mentioned above, which are
managed by WM Advisors, are sold by financial professionals to members of the
public. WM VT Funds and Portfolios are not included in Barron's fund family
rankings.
PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS. Barron's rankings are for
periods ended 12/31 and are determined using weighted calculations based on the
performance of each family's funds as tracked by Lipper. To qualify for the
rankings, Barron's requires that a fund family offer funds within a wide array
of asset classes. For the periods shown above, the WM Group of Funds did not
qualify for 10-year rankings because it did not have the appropriate fund
qualifications with 10-year performance. To calculate the results, Lipper ranks
each fund's return versus those of others in the same category, placing the best
performers in the first percentile. Next, all funds in a given family that fit a
particular asset class category are averaged together on an asset-weighted
basis. Finally, each family's percentile rankings in the broad categories are
combined to create the final ranking.
(1) Source: WM Group of Funds and the Investment Company Institute. Figures
are for the 5-year period ended 12/31/04. They are based on long-term
assets only and do not include money market funds.
(2) The S&P 500 is a broad-based index intended to represent the U.S. equity
market. Indices are unmanaged, and individuals cannot invest directly in
an index.
[GRAPHIC]
VT REIT Fund PORTFOLIO MANAGER
David W. Simpson, CFA
WM Advisors, Inc.
[GRAPHIC]
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.
AVERAGE ANNUAL TOTAL RETURNS(1) AS OF JUNE 30, 2005
Since
6-Month(2) 1-Year Inception Inception Date
---------- ------ --------- --------------
CLASS 1 SHARES 4.65% 30.50% 31.69% 5/1/03
CLASS 2 SHARES 4.52% 30.17% 28.53% 8/5/03
NAREIT All REIT Index(3) 4.90% 30.08% 30.94%
PORTFOLIO COMPOSITION(4)
As of
6/30/05]
[PIE CHART]
As of As of
6/30/05 12/31/04 Change
------- -------- ------
Retail 28% 26% +2%
Industrial/Office 26% 26% 0%
Residential 12% 13% -1%
Common Stocks 7% 7% 0%
Lodging/Resorts 6% 5% +1%
Specialty 6% 6% 0%
Diversified 4% 4% 0%
Health Care 3% 4% -1%
Self Storage 3% 3% 0%
Mortgage/Financial 2% 3% -1%
Cash Equivalents 3% 3% 0%
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. The VT Equity Income Fund's performance
in 1998 benefited from the agreement of WM Advisors and its affiliates to
limit the Fund's expenses.
2 Periods of less than one year are not annualized.
2
[GRAPHIC]
PORTFOLIO MANAGER VT Equity Income Fund*
Randall L. Yoakum, CFA
WM Advisors, Inc.
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.
Richard E. Helm of WM Advisors managed the VT REIT Fund from 5/1/03 to 7/31/05
and the VT Equity Income Fund from 5/1/01 to 7/31/05.
* 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 see the prospectus for
detailed information.
AVERAGE ANNUAL TOTAL RETURNS(1) AS OF JUNE 30, 2005
6-Month(2) 1-Year 5-Year Since Inception Inception Date
---------- ------ ------ --------------- --------------
CLASS 1 SHARES 4.52% 16.72% 11.83% 9.30% 4/28/98
CLASS 2 SHARES 4.33% 16.42% - 9.36% 5/1/01
S&P 500/Barra Value Index(3) 0.09% 11.18% 3.36% 3.68%
S&P 500(3) -0.81% 6.31% -2.38% 2.50%
PORTFOLIO COMPOSITION(4)
As of
6/30/05
[PIE CHART]
As of As of
6/30/05 12/31/04 Change
------- -------- ------
Financials 26% 25% +1%
Consumer Discretionary 13% 14% -1%
Energy 10% 8% +2%
Health Care 8% 6% +2%
Industrials 8% 8% 0%
Information Technology 7% 6% +1%
REITs 7% 8% -1%
Consumer Staples 5% 7% -2%
Utilities 5% 4% +1%
Convertible Securities 3% 1% +2%
Materials 3% 5% -2%
Telecommunication Services 2% 2% 0%
Corporate Bonds 1% 2% -1%
Cash Equivalents 2% 4% -2%
3 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. 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. Since-inception returns shown for the NAREIT
All REIT Index are calculated from 4/30/03. Since-inception returns shown
for the S&P 500/Barra Value Index and S&P 500 are calculated from 4/30/98.
Indices are unmanaged, and individuals cannot invest directly in an index.
4 May not reflect the current portfolio composition.
3
[GRAPHIC]
VT Growth & Income Fund PORTFOLIO MANAGER
Stephen Q. Spencer, CFA
WM Advisors, Inc.
[GRAPHIC]
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,
AVERAGE ANNUAL TOTAL RETURNS(1) AS OF JUNE 30, 2005
Since Inception
6-Month(2) 1-Year 5-Year 10-Year Inception Date
---------- ------ ------ ------- --------- ---------
CLASS 1 SHARES 0.29% 4.49% 1.05% 10.26% 10.35% 1/12/94
CLASS 2 SHARES 0.12% 4.21% - - 3.21% 11/6/01
S&P 500(3) -0.81% 6.31% -2.38% 9.94% 10.46%
PORTFOLIO COMPOSITION(4)
As of
6/30/05
[PIE CHART]
As of As of
6/30/05 12/31/04 Change
------- -------- ------
Financials 23% 23% 0%
Consumer Discretionary 14% 13% +1%
Information Technology 13% 14% -1%
Health Care 11% 11% 0%
Consumer Staples 10% 10% 0%
Energy 10% 8% +2%
Industrials 10% 12% -2%
Utilities 5% 4% +1%
Materials 1% 1% 0%
Telecommunication Services 1% 1% 0%
Cash Equivalents 2% 3% -1%
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. The VT Growth & Income Fund's performance
in 1995 benefited from the agreement of WM Advisors and its affiliates to
limit the Fund's expenses. The VT West Coast Equity Fund's performance in
1998 benefited from the agreement of WM Advisors and its affiliates to
limit the Fund's expenses.
2 Periods of less than one year are not annualized.
4
[GRAPHIC]
PORTFOLIO MANAGE VT West Coast Equity Fund
Philip M. Foreman, CFA
WM Advisors, Inc.
and charges of any variable insurance contract or retirement plan. If these fees
were reflected, performance would be lower.
VT West Coast Equity Fund: 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 JUNE 30, 2005
6-Month(2) 1-Year 5-Year Since Inception Inception Date
---------- ------ ------- --------------- --------------
CLASS 1 SHARES -1.33% 7.27% 4.21% 11.34% 4/28/98
CLASS 2 SHARES -1.44% 7.03% - 7.93% 11/6/01
Russell 3000(R) Index(3) -0.01% 8.05% -1.35% 6.49%
PORTFOLIO COMPOSITION(4)
As of
6/30/05
[PIE CHART]
As of As of
6/30/05 12/31/04 Change
------- -------- ------
Financials 18% 19% -1%
Health Care 16% 13% +3%
Information Technology 16% 17% -1%
Industrials 15% 16% -1%
Consumer Discretionary 14% 17% -3%
Energy 7% 6% +1%
Consumer Staples 4% 3% +1%
Materials 3% 4% -1%
REITs 3% 2% +1%
Telecommunication Services 1% 1% 0%
Cash Equivalents 3% 2% +1%
3 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. Since-inception returns shown for the S&P 500 are
calculated from 12/31/93. Since-inception returns shown for the Russell
3000(R) Index are calculated from 4/30/98. Indices are unmanaged, and
individuals cannot invest directly in an index.
4 May not reflect the current portfolio composition.
5
[GRAPHIC]
VT Mid Cap Stock Fund PORTFOLIO MANAGER
Daniel R. Coleman
WM Advisors, Inc.
[GRAPHIC]
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,
AVERAGE ANNUAL TOTAL RETURNS(1) AS OF JUNE 30, 2005
6-Month(2) 1-Year 5-Year Since Inception Inception Date
---------- ------ ------ --------------- --------------
CLASS 1 SHARES 5.09% 11.25% 12.68% 12.21% 5/1/00
CLASS 2 SHARES 4.91% 10.95% - 9.40% 5/1/01
S&P MidCap 400(3) 3.85% 14.03% 8.49% 8.25%
PORTFOLIO COMPOSITION(4)
As of
6/30/05
[PIE CHART]
As of As of
6/30/05 12/31/04 Change
------- -------- ------
Financials 18% 18% 0%
Consumer Discretionary 15% 17% -2%
Industrials 15% 13% +2%
Health Care 12% 9% +3%
Information Technology 11% 12% -1%
Energy 8% 8% 0%
Utilities 6% 6% 0%
Materials 5% 5% 0%
Consumer Staples 2% 3% -1%
REITs 2% 2% 0%
Cash Equivalents 6% 7% -1%
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 Periods of less than one year are not annualized.
6
[GRAPHIC]
VT Growth Fund
PORTFOLIO MANAGERS
Alan Blake, CFA E. Marc Pinto, CFA Jane Putnam, CFA
Salomon Brothers Asset Management, Inc. Janus Capital Management, LLC OppenheimerFunds, Inc.
and charges of any variable insurance contract or retirement plan. If these fees
were reflected, performance would be lower.
VT Mid Cap Stock Fund: Small-cap and mid-cap stocks may have additional risks,
including greater price volatility.
VT Growth Fund: 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 JUNE 30, 2005
Since Inception
6-Month(2) 1-Year 5-Year 10-Year Inception Date
---------- ------ ------- ------- --------- ---------
CLASS 1 SHARES -1.15% 4.04% -11.53% 9.24% 10.52% 5/7/93
CLASS 2 SHARES -1.27% 3.78% - - -0.07% 11/6/01
Russell 1000(R) Growth Index(3) -1.72% 1.68% -10.36% 7.40% 8.59%
PORTFOLIO COMPOSITION(4)
As of
6/30/05
[PIE CHART]
As of As of
6/30/05 12/31/04 Change
------- -------- ------
Information Technology 27% 24% +3%
Consumer Discretionary 21% 18% +3%
Health Care 21% 18% +3%
Financials 9% 10% -1%
Industrials 9% 12% -3%
Consumer Staples 7% 7% 0%
Energy 4% 4% 0%
Materials 1% 2% -1%
Telecommunication Services 1% 0% +1%
Other 0% 1% -1%
Cash Equivalents 0% 4% -4%
3 The S&P MidCap 400 is a weighted index of the common stocks of 400
mid-size companies. 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 indices assume reinvestment of all dividends and distributions.
Since-inception returns shown for the S&P MidCap 400 are calculated from
4/30/00. Since-inception returns shown for the Russell 1000(R) Growth
Index are calculated from 4/30/93. Indices are unmanaged, and individuals
cannot invest directly in an index.
4 May not reflect the current portfolio composition.
7
[GRAPHIC]
VT Small Cap Value Fund PORTFOLIO MANAGER
David W. Simpson, CFA
WM Advisors, Inc.
[GRAPHIC]
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,
AVERAGE ANNUAL TOTAL RETURNS(1) AS OF JUNE 30, 2005
Since
6-Month(2) 1-Year Inception Inception Date
---------- ------ --------- --------------
CLASS 1 SHARES 3.71% 24.02% 22.93% 5/3/04
Russell 2000(R) Value Index(3) 0.90% 14.39% 18.29%
PORTFOLIO COMPOSITION(4)
As of
6/30/05
[PIE CHART]
As of As of
6/30/05 12/31/04 Change
------- -------- ------
Industrials 15% 13% +2%
Energy 14% 12% +2%
Materials 13% 10% +3%
Financials 11% 10% +1%
Consumer Discretionary 9% 7% +2%
Information Technology 9% 11% -2%
Consumer Staples 7% 8% -1%
Health Care 7% 7% 0%
REITs 5% 6% -1%
Options 2% 3% -1%
Telecommunication Services 2% 3% -1%
Utilities 1% 1% 0%
Cash Equivalents 5% 9% -4%
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. The VT Small Cap Growth Fund's
performance in 1995 benefited from the agreement of WM Advisors and its
affiliates to limit the Fund's expenses.
2 Periods of less than one year are not annualized.
8
[GRAPHIC]
PORTFOLIO MANAGERS
Emerging Growth Team James W. Oberweis, CFA VT Small Cap Growth Fund
Delaware Management Company Oberweis Asset Management, Inc.
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. VT Small Cap Value Fund: 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 JUNE 30, 2005
Since Inception
6-Month(2) 1-Year 5-Year 10-Year Inception Date
---------- ------ ------- ------- --------- ---------
CLASS 1 SHARES -9.54% -5.62% -10.22% 6.31% 6.74% 1/12/94
CLASS 2 SHARES -9.72% -5.77% - - -4.52% 5/1/01
Russell 2000(R) Growth Index(3) -3.58% 4.29% -4.51% 5.16% 5.60%
PORTFOLIO COMPOSITION(4)
As of
6/30/05
[PIE CHART]
As of As of
6/30/05 12/31/04 Change
------- -------- ------
Health Care 28% 21% +7%
Consumer Discretionary 15% 16% -1%
Industrials 11% 12% -1%
Internet Software & Services 9% 8% +1%
Semiconductors &
Semiconductor Equipment 6% 2% +4%
Communications Equipment 5% 4% +1%
Financials 5% 8% -3%
Consumer Staples 4% 4% 0%
Energy 4% 3% +1%
Software 3% 11% -8%
Computers & Peripherals 2% 1% +1%
IT Services 2% 2% 0%
Telecommunication Services 1% 1% 0%
Electronic Equipment &
Instruments 0% 4% -4%
Materials 0% 2% -2%
Cash Equivalents 5% 1% +4%
3 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.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 indices assume reinvestment of all dividends and distributions.
Since-inception returns shown for the Russell 2000(R) Value Index are
calculated from 4/30/04. Since-inception returns shown for the Russell
2000(R) Growth Index are calculated from 12/31/93. Indices are unmanaged,
and individuals cannot invest directly in an index.
4 May not reflect the current portfolio composition.
9
[GRAPHIC]
VT International Growth Fund PORTFOLIO MANAGER
International Equity Team
Capital Guardian Trust Company
[GRAPHIC]
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,
AVERAGE ANNUAL TOTAL RETURNS(1) AS OF JUNE 30, 2005
Since Inception
6-Month(2) 1-Year 5-Year 10-Year Inception Date
---------- ------- ------- ------- --------- ----------
CLASS 1 SHARES -2.28% 9.65% -2.86% 4.34% 4.68% 5/7/93
CLASS 2 SHARES -2.40% 9.30% - - 7.72% 11/6/01
Morgan Stanley Capital
International EAFE Index(3) -0.85% 14.13% -0.17% 5.57% 6.15%
GEOGRAPHIC BREAKDOWN(4)
As of
6/30/05
[PIE CHART]
As of As of
6/30/05 12/31/04 Change
------- -------- ------
Japan 24% 23% +1%
United Kingdom 15% 17% -2%
France 10% 10% 0%
Netherlands 9% 10% -1%
Switzerland 9% 10% -1%
Germany 6% 6% 0%
Spain 5% 4% +1%
Canada 4% 4% 0%
Australia 2% 3% -1%
Hong Kong 2% 1% +1%
Sweden 2% 1% +1%
Other Countries 9% 9% 0%
Cash Equivalents 3% 2% +1%
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. The VT International Growth Fund's
performance in 1998 benefited from the agreement of WM Advisors and its
affiliates to limit the Fund's expenses. The VT Short Term Income Fund's
performance between 1995 and 1998 benefited from the agreement of WM
Advisors and its affiliates to limit the Fund's expenses.
2 Periods of less than one year are not annualized.
10
[GRAPHIC]
PORTFOLIO MANAGER VT Short Term Income Fund
Craig V. Sosey
WM Advisors, Inc.
and charges of any variable insurance contract or retirement plan. If these fees
were reflected, performance would be lower.
VT International Growth Fund: International investing involves increased risks
due to currency fluctuations, political or social instability, and differences
in accounting standards.
VT Short Term Income Fund: 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 JUNE 30, 2005
Since Inception
6-Month(2) 1-Year 5-Year 10-Year Inception Date
---------- ------ ------ ------- --------- ----------
CLASS 1 SHARES 0.83% 2.82% 5.68% 5.28% 4.89% 1/12/94
CLASS 2 SHARES 0.95% 2.55% - - 3.78% 11/6/01
Citigroup Broad Investment-Grade
Credit 1-3 Years Index(3) 1.09% 2.74% 5.91% 6.03% 6.67%
PORTFOLIO COMPOSITION(4)
As of
6/30/05
[PIE CHART]
As of As of
6/30/05 12/31/04 Change
------- -------- ------
Domestic Corporate Bonds 62% 67% -5%
Mortgage-Backed
Bonds/CMOs 15% 8% +7%
Asset-Backed Bonds 5% 5% 0%
Foreign Corporate
Bonds (U.S. $) 5% 4% +1%
U.S. Government Agency 5% 2% +3%
U.S. Treasuries 2% 2% 0%
Cash Equivalents 6% 12% -6%
3 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.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 indices assume reinvestment of all dividends and
distributions. Since-inception returns shown for the MSCI EAFE Index are
calculated from 4/30/93. Since-inception returns shown for the Citigroup
Broad Investment-Grade Credit 1-3 Years Index are calculated from
12/31/93. Indices are unmanaged, and individuals cannot invest directly in
an index.
4 May not reflect the current portfolio composition.
11
[GRAPHIC]
VT U.S. Government Securities Fund PORTFOLIO MANAGER
Craig V. Sosey
WM Advisors, Inc.
[GRAPHIC]
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,
AVERAGE ANNUAL TOTAL RETURNS(1) AS OF JUNE 30, 2005
Since Inception
6-Month(2) 1-Year 5-Year 10-Year Inception Date
---------- ------ ------ ------- --------- ---------
CLASS 1 SHARES 1.88% 5.22% 6.13% 6.00% 5.64% 5/6/93
CLASS 2 SHARES 1.73% 4.97% - - 3.88% 11/6/01
Citigroup Mortgage Index(3) 2.15% 6.31% 6.86% 6.70% 6.52%
PORTFOLIO COMPOSITION(4)
As of
6/30/05
[PIE CHART]
As of As of
6/30/05 12/31/04 Change
------- -------- ------
FHLMC/FGLMC 35% 32% +3%
FNMA 24% 24% 0%
CMOs 18% 19% -1%
GNMA 8% 10% -2%
U.S. Government Agency 7% 4% +3%
U.S. Treasuries 5% 8% -3%
Cash Equivalents 3% 3% 0%
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.The VT U.S. Government Securities Fund's
performance in 1995 and 1998 benefited from the agreement of WM Advisors
and its affiliates to limit the Fund's expenses. On 3/1/04, the investment
policies of the Fund were modified. As a result, the Fund's performance
for periods prior to that date may not be representative of the
performance it would have achieved had its current investment policies
been in place.
2 Periods of less than one year are not annualized.
12
[GRAPHIC]
PORTFOLIO MANAGERS VT Income Fund
Gary J. Pokrzywinski, CFA and
John R. Friedl, CFA
WM Advisors, Inc.
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.VT U.S. Government Securities Fund: Neither the
principal of government bond funds nor their yields are guaranteed by the U.S.
government. VT Income Fund: Lower-rated securities are subject to additional
credit and default risks.
AVERAGE ANNUAL TOTAL RETURNS(1) AS OF JUNE 30, 2005
Since Inception
6-Month(2) 1-Year 5-Year 10-Year Inception Date
---------- ------ ------ ------- --------- ---------
CLASS 1 SHARES 2.11% 7.65% 8.42% 7.09% 6.74% 5/7/93
CLASS 2 SHARES 1.96% 7.42% - - 6.74% 11/6/01
Citigroup Broad Investment-Grade
Bond Index(3) 2.61% 7.00% 7.46% 6.85% 6.69%
PORTFOLIO COMPOSITION(4)
As of
6/30/05
[PIE CHART]
As of As of
6/30/05 12/31/04 Change
------- -------- ------
Domestic Corporate Bonds 61% 59% +2%
Mortgage-Backed Bonds 20% 21% -1%
Foreign Corporate
Bonds (U.S. $) 9% 10% -1%
U.S. Treasuries 7% 6% +1%
Foreign Government
Bonds (U.S. $) 1% 1% 0%
Cash Equivalents 2% 3% -1%
3 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.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 indices assume reinvestment of all
dividends and distributions, and since-inception returns shown for the
indices are calculated from 4/30/93. Indices are unmanaged, and
individuals cannot invest directly in an index.
4 May not reflect the current portfolio composition.
13
[GRAPHIC]
VT Money Market Fund PORTFOLIO MANAGER
Scott J. Peterson, CFA
WM Advisors, Inc.
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 JUNE 30, 2005
Since Inception
6-Month(2) 1-Year 5-Year 10-Year Inception Date
---------- ------ ------ ------- --------- ---------
CLASS 1 SHARES 1.03% 1.62% 2.11% 3.55% 3.58% 5/10/93
CLASS 2 SHARES 0.91% 1.36% - - 0.89% 11/6/01
FUND YIELDS (3)
AS OF JUNE 30, 2005
7-Day 7-Day
Simple Yield Effective Yield
(Class 1 Shares) (Class 1 Shares)
---------------- ----------------
VT MONEY MARKET FUND 2.54% 2.57%
PORTFOLIO COMPOSITION (4)
AS OF JUNE 30, 2005
Corporate Bonds and Notes 38%
Taxable Municipal Bonds 28%
Commercial Paper (Yankee) 24%
Repurchase Agreement 6%
Funding Agreement 3%
Other 1%
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. The Fund's performance between 1995 and
1999 benefited from the agreement of WM Advisors and its affiliates to
limit the Fund's expenses.
2 Periods of less than one year are not annualized.
3 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.
4 May not reflect the current portfolio composition.
14
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. Please note that 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 January 1, 2005 to June 30, 2005.
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
PAID PAID
BEGINNING ENDING DURING BEGINNING ENDING DURING
ACCOUNT ACCOUNT PERIOD* ACCOUNT ACCOUNT PERIOD*
VALUE VALUE 01/01/2005- VALUE VALUE 01/01/2005- EXPENSE
01/01/2005 06/30/2005 06/30/2005 01/01/2005 06/30/2005 06/30/2005 RATIO
---------- ---------- ----------- ---------- ---------- ----------- -------
VT REIT Fund
Class 1 .......................... $ 1,000 $ 1,046 $ 4.47 $ 1,000 $ 1,020 $ 4.41 0.88%
Class 2 .......................... 1,000 1,045 5.73 1,000 1,019 5.66 1.13%
VT Equity Income Fund
Class 1 .......................... $ 1,000 $ 1,045 $ 3.35 $ 1,000 $ 1,022 $ 3.31 0.66%
Class 2 .......................... 1,000 1,043 4.61 1,000 1,020 4.56 0.91%
VT Growth & Income Fund
Class 1 .......................... $ 1,000 $ 1,003 $ 3.82 $ 1,000 $ 1,021 $ 3.86 0.77%
Class 2 .......................... 1,000 1,001 5.06 1,000 1,020 5.11 1.02%
VT West Coast Equity Fund
Class 1 .......................... $ 1,000 $ 987 $ 3.35 $ 1,000 $ 1,021 $ 3.41 0.68%
Class 2 .......................... 1,000 986 4.58 1,000 1,020 4.66 0.93%
VT Mid Cap Stock Fund
Class 1 .......................... $ 1,000 $ 1,051 $ 4.07 $ 1,000 $ 1,021 $ 4.01 0.80%
Class 2 .......................... 1,000 1,049 5.33 1,000 1,020 5.26 1.05%
VT Growth Fund
Class 1 .......................... $ 1,000 $ 988 $ 4.39 $ 1,000 $ 1,020 $ 4.46 0.89%
Class 2 .......................... 1,000 987 5.62 1,000 1,019 5.71 1.14%
VT Small Cap Value Fund
Class 1 .......................... $ 1,000 $ 1,037 $ 4.85 $ 1,000 $ 1,020 $ 4.81 0.96%
VT Small Cap Growth Fund
Class 1 .......................... $ 1,000 $ 905 $ 5.53 $ 1,000 $ 1,019 $ 5.86 1.17%
Class 2 .......................... 1,000 903 6.70 1,000 1,018 7.10 1.42%
15
Expense Information (continued)
WM VARIABLE TRUST
HYPOTHETICAL
ACTUAL EXPENSES (5% RETURN BEFORE EXPENSES)
-------------------------------------- -------------------------------------
EXPENSES EXPENSES
PAID PAID
BEGINNING ENDING DURING BEGINNING ENDING DURING
ACCOUNT ACCOUNT PERIOD* ACCOUNT ACCOUNT PERIOD*
VALUE VALUE 01/01/2005- VALUE VALUE 01/01/2005- EXPENSE
01/01/2005 06/30/2005 06/30/2005 01/01/2005 06/30/2005 06/30/2005 RATIO
---------- ---------- ----------- ---------- ---------- ----------- -------
VT International Growth Fund
Class 1 ............................. $ 1,000 $ 977 $ 5.54 $ 1,000 $ 1,019 $ 5.66 1.13%
Class 2 ............................. 1,000 976 6.76 1,000 1,018 6.90 1.38%
VT Short Term Income Fund
Class 1 ............................. $ 1,000 $ 1,008 $ 2.99 $ 1,000 $ 1,022 $ 3.01 0.60%
Class 2 ............................. 1,000 1,010 4.24 1,000 1,021 4.26 0.85%
VT U.S. Government Securities Fund
Class 1 ............................. $ 1,000 $ 1,019 $ 2.70 $ 1,000 $ 1,022 $ 2.71 0.54%
Class 2 ............................. 1,000 1,017 3.95 1,000 1,021 3.96 0.79%
VT Income Fund
Class 1 ............................. $ 1,000 $ 1,021 $ 2.71 $ 1,000 $ 1,022 $ 2.71 0.54%
Class 2 ............................. 1,000 1,020 3.96 1,000 1,021 3.96 0.79%
VT Money Market Fund
Class 1 ............................. $ 1,000 $ 1,010 $ 3.34 $ 1,000 $ 1,021 $ 3.36 0.67%
Class 2 ............................. 1,000 1,009 4.58 1,000 1,020 4.61 0.92%
* Expenses are equal to each Fund's annualized expense ratio, multiplied by
the average account value over the period, multiplied by the 181 days in
the most recent fiscal half-year, divided by 365 days in the year (to
reflect the one-half year period).
16
Financial Statements:
Portfolio of Investments
VT REIT FUND
June 30, 2005 (unaudited)
VALUE
SHARES (000s)
------ -------------
REAL ESTATE INVESTMENT TRUSTS (REITS) - 89.9%
DIVERSIFIED - 4.2%
700 Colonial Properties Trust ...................... $ 31
22,200 iStar Financial Inc. ........................... 923
17,000 Vornado Realty Trust ........................... 1,367
-------------
Total Diversified .............................. 2,321
-------------
HEALTH CARE - 3.4%
37,400 Health Care Property Investors, Inc. ........... 1,011
23,000 Healthcare Realty Trust, Inc. .................. 888
-------------
Total Health Care .............................. 1,899
-------------
INDUSTRIAL/OFFICE - 26.1%
INDUSTRIAL - 5.0%
25,500 AMB Property Corporation ....................... 1,107
40,500 ProLogis ....................................... 1,630
-------------
2,737
-------------
MIXED - 1.8%
31,500 Duke Realty Corporation ........................ 998
-------------
OFFICE - 19.3%
29,000 Alexandria Real Estate Equities, Inc. .......... 2,130
18,000 Arden Realty, Inc. ............................. 647
20,500 Boston Properties, Inc. ........................ 1,435
31,500 CarrAmerica Realty Corporation ................. 1,140
69,000 Corporate Office Properties Trust .............. 2,032
65,500 Equity Office Properties Trust ................. 2,168
17,500 SL Green Realty Corporation** .................. 1,129
-------------
10,681
-------------
Total Industrial/Office ........................ 14,416
-------------
LODGING/RESORTS - 5.8%
68,000 Equity Inns, Inc. .............................. 905
32,000 Hospitality Properties Trust ................... 1,410
50,800 Host Marriott Corporation ...................... 889
-------------
Total Lodging/Resorts .......................... 3,204
-------------
MORTGAGE/FINANCIAL - 2.0%
34,600 Annaly Mortgage Management, Inc.** ............. 620
9,500 Redwood Trust, Inc.** .......................... 490
-------------
Total Mortgage/Financial ....................... 1,110
-------------
RESIDENTIAL - 11.5%
APARTMENTS - 11.5%
27,000 AvalonBay Communities, Inc. .................... 2,182
65,000 Equity Residential ............................. 2,393
74,000 United Dominion Realty Trust, Inc. ............. 1,780
-------------
Total Residential .............................. 6,355
-------------
RETAIL - 27.6%
REGIONAL MALLS - 16.6%
47,000 General Growth Properties, Inc. ................ 1,931
35,600 Macerich Company ............................... 2,387
35,000 Mills Corporation .............................. 2,128
38,000 Simon Property Group, Inc. ..................... 2,755
-------------
9,201
-------------
SHOPPING CENTERS - 11.0%
42,200 Developers Diversified Realty Corporation. ..... 1,939
24,000 Equity One, Inc. ............................... 545
32,000 Kimco Realty Corporation ....................... 1,885
25,500 Pan Pacific Retail Properties, Inc. ............ 1,693
-------------
6,062
-------------
Total Retail 15,263
-------------
SELF STORAGE - 2.9%
18,000 Public Storage, Inc. ........................... 1,138
10,000 Shurgard Storage Centers, Inc., Class A ........ 460
-------------
Total Self Storage ............................. 1,598
-------------
SPECIALTY - 6.4%
44,500 Capital Automotive REIT ........................ 1,699
16,400 Global Signal Inc. ............................. 617
33,000 Plum Creek Timber Company, Inc. ................ 1,198
-------------
Total Specialty ................................ 3,514
-------------
Total REITs
(Cost $32,675) ............................. 49,680
-------------
COMMON STOCKS - 6.8%
CONSUMER DISCRETIONARY - 3.6%
CONSUMER DURABLES & APPAREL - 1.7%
23,900 D.R. Horton, Inc. .............................. 899
-------------
CONSUMER SERVICES - 1.9%
14,700 Harrah's Entertainment, Inc. ................... 1,059
-------------
Total Consumer Discretionary ................... 1,958
-------------
FINANCIALS - 3.2%
BANKS - 1.7%
10,000 Countrywide Financial Corporation .............. 386
7,000 St. Joe Company ................................ 571
-------------
957
-------------
INSURANCE - 1.5%
23,000 Fidelity National Financial, Inc. .............. 821
-------------
Total Financials ............................... 1,778
-------------
Total Common Stocks
(Cost $2,476) .............................. 3,736
-------------
See Notes to Financial Statements.
17
Portfolio of Investments (continued)
VT REIT FUND
June 30, 2005 (unaudited)
PRINCIPAL
AMOUNT VALUE
(000s) (000s)
--------- -------------
REPURCHASE AGREEMENT - 3.3%
(Cost $1,855)
$ 1,855 Agreement with Morgan Stanley, 2.850%
dated 06/30/2005, to be repurchased at
$1,855,000 on 07/01/2005
(Collateralized by U.S. Treasury Note,
2.000% due 01/15/2014,
market value $1,913,000) .................... $ 1,855
-------------
SHORT-TERM INVESTMENT - 4.2%
(Cost $2,298)
2,298 Mellon GSL DBT II
Collateral Fund++ ........................... 2,298
-------------
TOTAL INVESTMENTS (Cost $39,304*) ........................... 104.2% 57,569
OTHER ASSETS (LIABILITIES) (NET) ............................ (4.2) (2,330)
----- -------------
NET ASSETS .................................................. 100.0% $ 55,239
===== =============
- --------------------
* Aggregate cost for federal tax purposes.
** Some or all of these securities are on loan at June 30, 2005, and have an
aggregate market value of $2,239,000, representing 4.1% of the total net
assets of the Fund (Collateral Value $2,298,000).
++ Represents investment purchased with cash collateral for securities
loaned.
See Notes to Financial Statements.
18
Portfolio of Investments
VT EQUITY INCOME FUND
June 30, 2005 (unaudited)
VALUE
SHARES (000s)
------ ------------
COMMON STOCKS - 87.0%
CONSUMER DISCRETIONARY - 12.9%
AUTOMOBILES & COMPONENTS - 3.9%
62,100 Autoliv, Inc. ................................. $ 2,720
72,700 General Motors Corporation** .................. 2,472
54,000 Magna International Inc., Class A ............. 3,798
------------
8,990
------------
CONSUMER DURABLES & APPAREL - 3.3%
71,000 D.R. Horton, Inc. ............................. 2,670
127,000 Mattel, Inc. .................................. 2,324
30,000 NIKE Inc., Class B ............................ 2,598
------------
7,592
------------
CONSUMER SERVICES - 2.8%
32,500 Carnival Corporation .......................... 1,773
42,500 Harrah's Entertainment, Inc. .................. 3,063
65,500 McDonald's Corporation ........................ 1,818
------------
6,654
------------
RETAILING - 2.9%
64,000 May Department Stores Company ................. 2,570
42,500 Neiman Marcus Group, Inc., Class A ............ 4,119
------------
6,689
------------
Total Consumer Discretionary .................. 29,925
------------
CONSUMER STAPLES - 5.5%
FOOD & STAPLES RETAILING - 1.4%
80,500 Wal-Mart de Mexico SA de CV, ADR .............. 3,266
------------
FOOD, BEVERAGE & TOBACCO - 2.9%
43,500 Altria Group, Inc. ............................ 2,813
64,500 ConAgra Foods, Inc. ........................... 1,494
41,700 Diageo PLC, Sponsored ADR ..................... 2,473
------------
6,780
------------
HOUSEHOLD & PERSONAL PRODUCTS - 1.2%
52,000 Procter & Gamble Company ...................... 2,743
------------
Total Consumer Staples ........................ 12,789
------------
ENERGY - 9.8%
85,000 Baker Hughes Inc.** ........................... 4,349
37,500 BP PLC, Sponsored ADR ......................... 2,339
35,484 Chevron Corporation ........................... 1,984
43,760 ConocoPhillips Company ........................ 2,516
99,100 GlobalSantaFe Corporation ..................... 4,044
47,000 Schlumberger Ltd. ............................. 3,569
50,894 Valero Energy Corporation ..................... 4,026
------------
Total Energy .................................. 22,827
------------
FINANCIALS - 25.8%
BANKS - 7.3%
92,602 Bank of America Corporation ................... 4,223
129,000 North Fork Bancorporation, Inc. ............... 3,624
87,200 TCF Financial Corporation ..................... 2,257
72,000 U.S. Bancorp .................................. 2,102
78,000 Wells Fargo & Company ......................... 4,803
------------
17,009
------------
DIVERSIFIED FINANCIALS - 8.5%
57,000 Allied Capital Corporation** .................. 1,659
96,500 Citigroup Inc. ................................ 4,461
84,998 Countrywide Financial Corporation ............. 3,282
26,000 Franklin Resources, Inc. ...................... 2,001
37,000 Freddie Mac ................................... 2,414
64,000 JPMorgan Chase & Company ...................... 2,260
39,500 Morgan Stanley ................................ 2,073
25,600 T. Rowe Price Group, Inc. ..................... 1,603
------------
19,753
------------
INSURANCE - 10.0%
93,000 ACE Ltd. ...................................... 4,171
96,500 AFLAC Inc. .................................... 4,177
70,000 Allstate Corporation .......................... 4,182
81,000 Fidelity National Financial, Inc. ............. 2,891
108,500 HCC Insurance Holdings, Inc. .................. 4,109
50,700 XL Capital Ltd., Class A ...................... 3,773
------------
23,303
------------
Total Financials .............................. 60,065
------------
HEALTH CARE - 7.7%
HEALTH CARE EQUIPMENT & SERVICES - 3.0%
40,000 Becton Dickinson & Company .................... 2,099
76,000 HCA, Inc. ..................................... 4,307
10,000 Smith & Nephew PLC, Sponsored ADR ............. 494
------------
6,900
------------
PHARMACEUTICALS & BIOTECHNOLOGY - 4.7%
52,000 Abbott Laboratories ........................... 2,549
64,300 Johnson & Johnson ............................. 4,179
150,000 Pfizer Inc. ................................... 4,137
------------
10,865
------------
Total Health Care ............................. 17,765
------------
INDUSTRIALS - 8.3%
CAPITAL GOODS - 5.7%
29,500 Boeing Company ................................ 1,947
20,500 General Dynamics Corporation .................. 2,246
66,500 General Electric Company ...................... 2,304
51,000 Northrop Grumman Corporation .................. 2,818
43,000 PACCAR Inc. ................................... 2,924
19,000 Rockwell Automation, Inc. ..................... 925
------------
13,164
------------
See Notes to Financial Statements.
19
'
Portfolio of Investments (continued)
VT EQUITY INCOME FUND
June 30, 2005 (unaudited)
VALUE
SHARES (000s)
------ ------------
COMMON STOCKS - (CONTINUED)
INDUSTRIALS - (CONTINUED)
COMMERCIAL SERVICES & SUPPLIES - 1.2%
40,000 Paychex, Inc. ................................. $ 1,302
56,500 Waste Management Inc. ......................... 1,601
------------
2,903
------------
TRANSPORTATION - 1.4%
100,000 Cathay Pacific Airways Limited ADR ............ 910
33,500 United Parcel Service, Inc., Class B .......... 2,317
------------
3,227
------------
Total Industrials ............................. 19,294
------------
INFORMATION TECHNOLOGY - 6.6%
COMMUNICATIONS EQUIPMENT - 2.2%
85,000 Harris Corporation** .......................... 2,653
153,000 Nokia Oyj, Sponsored ADR ...................... 2,546
------------
5,199
------------
COMPUTERS & PERIPHERALS - 1.6%
92,300 Hewlett-Packard Company ....................... 2,170
20,000 International Business Machines
Corporation ................................. 1,484
------------
3,654
------------
ELECTRONIC EQUIPMENT & INSTRUMENTS - 1.0%
49,000 Diebold, Inc. ................................. 2,210
------------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT - 1.8%
61,000 Intel Corporation ............................. 1,590
90,000 Microchip Technology Inc. ..................... 2,666
------------
4,256
------------
Total Information Technology .................. 15,319
------------
MATERIALS - 3.2%
38,000 Alcoa Inc. .................................... 993
61,000 Cemex SA de CV, Sponsored ADR ................. 2,587
45,000 Dow Chemical Company .......................... 2,004
31,000 Monsanto Company .............................. 1,949
------------
Total Materials ............................... 7,533
------------
TELECOMMUNICATION SERVICES - 2.4%
39,000 Mobile TeleSystems OJSC, Sponsored ADR ........ 1,313
49,500 Verizon Communications Inc. ................... 1,710
104,000 Vodafone Group PLC, Sponsored ADR ............. 2,529
------------
Total Telecommunication Services .............. 5,552
------------
UTILITIES - 4.8%
128,000 FPL Group, Inc. ............................... 5,384
47,500 Pinnacle West Capital Corporation ............. 2,111
105,000 Southern Company** ............................ 3,640
------------
Total Utilities ............................... 11,135
------------
Total Common Stocks
(Cost $158,590) .............................. 202,204
------------
REAL ESTATE INVESTMENT TRUSTS (REITS) - 6.6%
27,800 AMB Property Corporation** .................... 1,207
12,900 Arden Realty, Inc. ............................ 464
6,500 AvalonBay Communities, Inc. ................... 525
10,100 CarrAmerica Realty Corporation** .............. 365
26,500 Corporate Office Properties Trust ............. 780
16,500 Developers Diversified Realty Corporation ..... 758
12,200 Duke Realty Corporation ....................... 386
36,000 Equity Office Properties Trust ................ 1,192
29,500 Equity Residential ............................ 1,086
21,000 General Growth Properties, Inc. ............... 863
32,200 Health Care Property Investors, Inc. .......... 871
18,000 Hospitality Properties Trust** ................ 793
18,000 Host Marriott Corporation ..................... 315
10,500 Kimco Realty Corporation ...................... 619
11,000 Macerich Company .............................. 738
12,000 Mills Corporation ............................. 730
24,000 Plum Creek Timber Company, Inc. ............... 871
15,200 ProLogis ...................................... 612
13,000 Shurgard Storage Centers, Inc., Class A ....... 598
19,000 Simon Property Group, Inc. .................... 1,377
8,900 United Dominion Realty Trust, Inc.** .......... 214
------------
Total REITs
(Cost $9,476) ................................ 15,364
------------
PRINCIPAL
AMOUNT
(000s)
---------
CONVERTIBLE SECURITIES - 2.9%
CONVERTIBLE BONDS AND NOTES - 2.9%
$ 1,500 Continental Airlines, Inc., Conv. Sr. Note,
5.000% due 06/15/2023 ............................. 1,327
600 CV Therapeutics, Inc., Conv. Sr. Sub. Deb.,
2.000% due 05/16/2023 ............................. 504
1,500 deCODE genetics, Inc., Conv. Sr. Note,
3.500% due 04/15/2011 ............................. 1,376
600 Echostar Communications, Conv. Sub. Note,
5.750% due 05/15/2008 ............................. 599
884 Northwest Airlines Corporation, Conv. Sr. Note,
6.625% due 05/15/2023 ............................. 419
850 RadiSys Corporation, Conv. Sub. Note,
5.500% due 08/15/2007 ............................. 834
1,750 TriQuint Semiconductor, Inc., Conv. Sub. Note,
4.000% due 03/01/2007 ............................. 1,708
Total Convertible Securities
(Cost $6,426) ..................................... 6,767
FIXED INCOME SECURITIES - 1.4%
CORPORATE BONDS AND NOTES - 1.4%
100 Aetna Inc., Company Guarantee,
7.125% due 08/15/2006 ............................. 103
500 Aetna Inc., Sr. Note,
7.875% due 03/01/2011 ............................. 584
See Notes to Financial Statements.
20
Portfolio of Investments (continued)
VT EQUITY INCOME FUND
June 30, 2005 (unaudited)
PRINCIPAL
AMOUNT VALUE
(000s) (000s)
-------- ---------
FIXED INCOME SECURITIES - (CONTINUED)
CORPORATE BONDS AND NOTES - (CONTINUED)
$ 45 Baxter International Inc., Note,
7.125% due 02/01/2007 ............................ $ 47
1,000 ERAC USA Finance Company, Note,
7.350% due 06/15/2008++ .......................... 1,080
59 Raytheon Company, Sr. Note,
6.150% due 11/01/2008 ............................ 62
1,000 TELUS Corporation, Note,
8.000% due 06/01/2011 ............................ 1,171
100 Texas-New Mexico Power Company, Sr. Note,
6.250% due 01/15/2009 ............................ 106
---------
Total Corporate Bonds and Notes
(Cost $2,837) ...................... 3,153
---------
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES - 0.0%+++
FEDERAL HOME LOAN MORTGAGE CORPORATION (FHLMC) - 0.0%+++
53 6.500% due 09/01/2030 .............................. 55
29 7.000% due 09/01/2030 .............................. 31
---------
Total U.S. Government Agency
Mortgage-Backed Securities (Cost $79) ............ 86
---------
Total Fixed Income Securities (Cost $2,916) ........ 3,239
---------
SHARES
------
WARRANTS - 0.0%+++
(Cost $0)
250 V2 Music Holdings PLC, Expires 05/07/2008+,++ .. 0***
---
PRINCIPAL
AMOUNT VALUE
(000s) (000s)
-------- ---------
REPURCHASE AGREEMENT - 2.4%
(Cost $5,539)
$ 5,539 Agreement with Morgan Stanley, 2.850% dated
06/30/2005, to be repurchased at $5,539,000 on
07/01/2005 (Collateralized by U.S. Treasury
Note, 2.000% due 01/15/2014, market value
$5,712,000) ...................................... $ 5,539
---------
SHORT-TERM INVESTMENT - 4.6%
(Cost $10,791)
10,791 Mellon GSL DBT II Collateral Fund++++ ............. 10,791
---------
TOTAL INVESTMENTS (Cost $193,738*) ............................. 104.9% 243,904
OTHER ASSETS (LIABILITIES)(NET) ................................ (4.9) (11,466)
----- ---------
NET ASSETS ..................................................... 100.0% $ 232,438
===== =========
- --------------------------
* Aggregate cost for federal tax purposes.
** Some or all of these securities are on loan at June 30, 2005, and have an
aggregate market value of $10,478,000, representing 4.5% of the total net
assets of the Fund (Collateral Value $10,791,000).
*** 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 total net assets of the Fund.
++++ Represents investment purchased with cash collateral for securities
loaned.
GLOSSARY OF TERMS
ADR -- American Depositary Receipt
See Notes to Financial Statements.
21
Portfolio of Investments
VT GROWTH & INCOME FUND
June 30, 2005 (unaudited)
VALUE
SHARES (000s)
------ ---------
COMMON STOCKS - 97.7%
CONSUMER DISCRETIONARY - 14.3%
CONSUMER DURABLES & APPAREL - 1.4%
208,000 Mattel, Inc. .................................. $ 3,807
---------
CONSUMER SERVICES - 5.5%
65,000 Apollo Group, Inc., Class A+ .................. 5,084
189,000 Carnival Corporation** ........................ 10,310
---------
15,394
---------
MEDIA - 5.1%
112,000 Comcast Corporation, Class A+ ................. 3,438
105,000 Comcast Corporation, Special Class A+** ....... 3,145
343,000 Liberty Media Corporation, Class A+ ........... 3,495
132,000 Viacom Inc., Class B .......................... 4,227
---------
14,305
---------
RETAILING - 2.3%
110,000 Gap, Inc. ..................................... 2,173
40,000 Kohl's Corporation+ ........................... 2,236
20,000 Neiman Marcus Group, Inc., Class A ............ 1,938
---------
6,347
---------
Total Consumer Discretionary .................. 39,853
---------
CONSUMER STAPLES - 9.8%
FOOD & STAPLES RETAILING - 2.9%
83,000 Costco Wholesale Corporation .................. 3,720
220,500 Kroger Company+ ............................... 4,196
---------
7,916
---------
FOOD, BEVERAGE & TOBACCO - 1.8%
93,000 PepsiCo Inc. .................................. 5,015
---------
HOUSEHOLD & PERSONAL PRODUCTS - 5.1%
182,000 Avon Products, Inc. ........................... 6,889
55,000 Kimberly-Clark Corporation .................... 3,442
74,000 Procter & Gamble Company ...................... 3,904
---------
14,235
---------
Total Consumer Staples ........................ 27,166
---------
ENERGY - 10.1%
92,000 BP PLC, Sponsored ADR ......................... 5,739
89,000 ExxonMobil Corporation ........................ 5,115
118,000 GlobalSantaFe Corporation ..................... 4,814
81,000 Royal Dutch Petroleum Company (F) ............. 5,257
49,000 Schlumberger Ltd. ............................. 3,721
51,000 Unocal Corporation ............................ 3,318
---------
Total Energy .................................. 27,964
---------
FINANCIALS - 22.6%
BANKS - 8.7%
227,280 Bank of America Corporation ................... 10,366
96,000 North Fork Bancorporation, Inc. ............... 2,697
104,000 Wachovia Corporation .......................... 5,158
95,000 Wells Fargo & Company ......................... 5,850
---------
24,071
---------
DIVERSIFIED FINANCIALS - 7.2%
133,000 Citigroup Inc. ................................ 6,148
108,000 Freddie Mac ................................... 7,045
190,000 JPMorgan Chase & Company ...................... 6,711
---------
19,904
---------
INSURANCE - 6.7%
116,000 ACE Ltd. ...................................... 5,203
151,000 Allstate Corporation .......................... 9,022
78,000 American International Group Inc. ............. 4,532
---------
18,757
---------
Total Financials .............................. 62,732
---------
HEALTH CARE - 11.2%
HEALTH CARE EQUIPMENT & SERVICES - 4.6%
73,000 Baxter International Inc. ..................... 2,708
81,000 Cardinal Health Inc. .......................... 4,664
105,000 Medtronic, Inc. ............................... 5,438
---------
12,810
---------
PHARMACEUTICALS & BIOTECHNOLOGY - 6.6%
128,000 Bristol-Myers Squibb Company .................. 3,197
75,000 Johnson & Johnson ............................. 4,875
67,000 Merck & Company, Inc. ......................... 2,064
159,000 Pfizer Inc. ................................... 4,385
125,000 Teva Pharmaceutical Industries Ltd.,
Sponsored ADR ............................... 3,893
---------
18,414
---------
Total Health Care ............................. 31,224
---------
INDUSTRIALS - 10.0%
CAPITAL GOODS - 10.0%
78,000 Boeing Company ................................ 5,148
116,000 General Electric Company ...................... 4,019
189,000 Honeywell International Inc. .................. 6,923
58,000 Lockheed Martin Corporation ................... 3,763
14,000 Rockwell Automation, Inc. ..................... 682
252,000 Tyco International Ltd. ....................... 7,358
---------
Total Industrials ............................. 27,893
---------
See Notes to Financial Statements.
22
Portfolio of Investments (continued)
VT GROWTH & INCOME FUND
June 30, 2005 (unaudited)
VALUE
SHARES (000s)
------ ------------
COMMON STOCKS - (CONTINUED)
INFORMATION TECHNOLOGY - 12.4%
COMMUNICATIONS EQUIPMENT - 1.6%
247,000 Motorola, Inc. .................................... $ 4,510
---------
COMPUTERS & PERIPHERALS - 3.2%
176,000 Hewlett-Packard Company ........................... 4,138
63,000 International Business Machines
Corporation ...................................... 4,674
---------
8,812
---------
IT SERVICES - 2.0%
141,000 First Data Corporation ............................ 5,660
---------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT - 1.7%
32,351 Freescale Semiconductor Inc., Class B+ ............ 685
157,000 Intel Corporation ................................. 4,092
---------
4,777
---------
SOFTWARE - 3.9%
183,304 Computer Associates International, Inc.** ......... 5,037
234,000 Microsoft Corporation ............................. 5,813
---------
10,850
---------
Total Information Technology ................. 34,609
---------
MATERIALS - 1.1%
116,000 Alcoa Inc. ........................................ 3,031
---------
TELECOMMUNICATION SERVICES - 1.1%
132,000 SBC Communications Inc. ........................... 3,135
---------
UTILITIES - 5.1%
108,000 FPL Group, Inc. ................................... 4,542
103,000 NiSource Inc. ..................................... 2,547
77,000 Pinnacle West Capital Corporation ................. 3,423
104,000 Southern Company .................................. 3,606
---------
Total Utilities ................................... 14,118
---------
Total Common Stocks
(Cost $214,035) .................................. 271,725
---------
PRINCIPAL
AMOUNT VALUE
(000s) (000s)
-------- ---------
REPURCHASE AGREEMENT - 2.0%
(Cost $5,700)
$ 5,700 Agreement with Morgan Stanley, 2.850% dated
06/30/2005, to be repurchased at $5,700,000 on
07/01/2005 (Collateralized by U.S. Treasury
Note, 2.000% due 01/15/2014, market value
$5,878,000) ...................................... $ 5,700
---------
SHORT-TERM INVESTMENT - 1.9%
(Cost $5,199)
5,199 Mellon GSL DBT II
Collateral Fund++ ................................ 5,199
---------
TOTAL INVESTMENTS (Cost $224,934*) ............................. 101.6% 282,624
OTHER ASSETS (LIABILITIES)(NET) ................................ (1.6) (4,365)
----- ---------
NET ASSETS ..................................................... 100.0% $ 278,259
===== =========
- ------------------------
* Aggregate cost for federal tax purposes.
** Some or all of these securities are on loan at June 30, 2005, and have an
aggregate market value of $4,938,000, representing 1.8% of the total net
assets of the Fund (Collateral Value $5,199,000).
+ Non-income producing security.
++ Represents investment purchased with cash collateral for securities
loaned.
GLOSSARY OF TERMS
ADR -- American Depositary Receipt
(F) -- Foreign Shares
See Notes to Financial Statements.
23
Portfolio of Investments
VT WEST COAST EQUITY FUND
June 30, 2005 (unaudited)
VALUE
SHARES (000s)
------ ---------
COMMON STOCKS - 94.0%
CONSUMER DISCRETIONARY - 14.3%
AUTOMOBILES & COMPONENTS - 1.5%
70,300 Monaco Coach Corporation ...................... $ 1,208
9,800 Toyota Motor Corporation, Sponsored ADR ....... 701
---------
1,909
---------
CONSUMER DURABLES & APPAREL - 3.3%
13,724 Columbia Sportswear Company+** ................ 678
18,000 KB Home ....................................... 1,372
33,000 Mattel, Inc. .................................. 604
17,525 NIKE Inc., Class B ............................ 1,517
---------
4,171
---------
CONSUMER SERVICES - 3.7%
73,300 Hilton Hotels Corporation ..................... 1,748
37,670 Starbucks Corporation+ ........................ 1,946
129,460 WestCoast Hospitality Corporation+ ............ 890
---------
4,584
---------
MEDIA - 4.6%
24,900 Getty Images, Inc.+ ........................... 1,849
19,000 Knight-Ridder, Inc. ........................... 1,165
4,500 McClatchy Company, Class A .................... 295
51,600 Univision Communications Inc., Class A+** ..... 1,422
41,700 Walt Disney Company ........................... 1,050
---------
5,781
---------
RETAILING - 1.2%
4,700 Blue Nile, Inc.+** ............................ 154
17,985 Building Materials Holding Corporation ........ 1,246
10,400 Restoration Hardware, Inc.+ ................... 85
---------
1,485
---------
Total Consumer Discretionary .................. 17,930
---------
CONSUMER STAPLES - 3.8%
FOOD & STAPLES RETAILING - 2.1%
48,620 Costco Wholesale Corporation .................. 2,179
26,790 Kroger Company+ ............................... 510
---------
2,689
---------
HOUSEHOLD & PERSONAL PRODUCTS - 1.7%
22,570 Clorox Company ................................ 1,257
20,700 Estee Lauder Companies Inc., Class A .......... 810
---------
2,067
---------
Total Consumer Staples ........................ 4,756
---------
ENERGY - 7.3%
25,400 Apache Corporation ............................ 1,641
1,700 CARBO Ceramics Inc. ........................... 134
33,800 Chevron Corporation ........................... 1,890
3,300 ExxonMobil Corporation ........................ 189
38,500 Nabors Industries Ltd.+ ....................... 2,334
19,000 Occidental Petroleum Corporation .............. 1,462
22,000 Unocal Corporation ............................ 1,431
---------
Total Energy .................................. 9,081
---------
FINANCIALS - 17.8%
BANKS - 12.2%
44,500 Bank of America Corporation ................... 2,030
32,600 Banner Corporation ............................ 913
13,000 City National Corporation ..................... 932
37,000 East West Bancorp, Inc. ....................... 1,243
27,100 Greater Bay Bancorp ........................... 715
2,000 KeyCorp ....................................... 66
8,400 Pacific Capital Bancorp ....................... 312
82,400 U.S. Bancorp .................................. 2,406
15,400 UCBH Holdings, Inc. ........................... 250
3,700 United PanAm Financial Corporation+ ........... 101
87,997 Washington Federal, Inc. ...................... 2,070
69,423 Wells Fargo & Company ......................... 4,275
---------
15,313
---------
DIVERSIFIED FINANCIALS - 4.1%
121,800 Charles Schwab Corporation .................... 1,374
37,700 Citigroup Inc. ................................ 1,743
5,900 Countrywide Financial Corporation ............. 228
21,000 Franklin Resources, Inc. ...................... 1,616
3,655 Piper Jaffray Companies, Inc.+ ................ 111
---------
5,072
---------
INSURANCE - 1.5%
4,100 RenaissanceRe Holdings Ltd. ................... 202
22,500 StanCorp Financial Group, Inc. ................ 1,723
---------
1,925
---------
Total Financials .............................. 22,310
---------
HEALTH CARE - 15.6%
HEALTH CARE EQUIPMENT & SERVICES - 6.5%
6,300 Affymetrix, Inc.+** ........................... 340
20,200 Applera Corporation-Applied Biosystems Group .. 397
14,600 Caremark Rx, Inc.+ ............................ 650
800 Cooper Companies, Inc. ........................ 49
3,700 DaVita, Inc.+ ................................. 168
8,680 Health Net, Inc.+ ............................. 331
119,000 OraSure Technologies, Inc.+** ................. 1,189
12,300 ResMed Inc.+ .................................. 812
59,625 SonoSite, Inc.+ ............................... 1,851
31,000 Varian Medical Systems, Inc.+** ............... 1,157
21,500 VCA Antech, Inc.+ ............................. 521
7,800 Zimmer Holdings, Inc.+ ........................ 594
---------
8,059
---------
PHARMACEUTICALS & BIOTECHNOLOGY - 9.1%
21,500 Abbott Laboratories ........................... 1,054
22,000 Allergan, Inc. ................................ 1,875
27,307 Amgen, Inc.+ .................................. 1,651
See Notes to Financial Statements.
24
Portfolio of Investments (continued)
VT WEST COAST EQUITY FUND
June 30, 2005 (unaudited)
VALUE
SHARES (000s)
------ ---------
COMMON STOCKS - (CONTINUED)
HEALTH CARE - (CONTINUED)
PHARMACEUTICALS & BIOTECHNOLOGY - (CONTINUED)
9,300 Amylin Pharmaceuticals, Inc.+** ............... $ 195
117,155 Corixa Corporation+ ........................... 513
4,000 CV Therapeutics, Inc.+** ...................... 90
37,000 Dendreon Corporation+ ......................... 194
43,325 EDEN Bioscience Corporation+** ................ 33
19,300 Genentech, Inc.+ .............................. 1,549
26,155 ICOS Corporation+** ........................... 554
13,600 Johnson & Johnson ............................. 884
3,400 Martek Biosciences Corporation+** ............. 129
8,800 Neurocrine Biosciences, Inc.+ ................. 370
46,800 Pfizer Inc. ................................... 1,291
35,300 Watson Pharmaceuticals, Inc.+ ................. 1,043
---------
11,425
---------
Total Health Care ............................. 19,484
---------
INDUSTRIALS - 14.7%
CAPITAL GOODS - 11.4%
42,511 Boeing Company ................................ 2,806
18,700 Cascade Corporation ........................... 809
23,800 Dionex Corporation+ ........................... 1,038
37,540 Electro Scientific Industries, Inc.+ .......... 671
47,000 Greenbrier Companies, Inc. .................... 1,273
18,200 Jacobs Engineering Group Inc.+ ................ 1,024
25,900 Northrop Grumman Corporation .................. 1,431
45,600 PACCAR Inc. ................................... 3,101
12,000 Precision Castparts Corporation ............... 935
38,900 Simpson Manufacturing Company, Inc. ........... 1,188
---------
14,276
---------
COMMERCIAL SERVICES & SUPPLIES - 1.1%
3,200 Avery Dennison Corporation .................... 170
6,700 Copart, Inc.+ ................................. 159
42,000 Robert Half International Inc. ................ 1,049
---------
1,378
---------
TRANSPORTATION - 2.2%
33,060 Alaska Air Group, Inc.+ ....................... 984
35,800 Expeditors International of
Washington, Inc.** ........................... 1,783
---------
2,767
---------
Total Industrials ............................. 18,421
---------
INFORMATION TECHNOLOGY - 16.4%
COMMUNICATIONS EQUIPMENT - 1.2%
77,200 Cisco Systems, Inc.+ .......................... 1,475
---------
COMPUTERS & PERIPHERALS - 1.8%
115,100 Advanced Digital Information Corporation+ ..... 875
57,600 Hewlett-Packard Company ....................... 1,354
5,100 InFocus Corporation+ .......................... 21
---------
2,250
---------
ELECTRONIC EQUIPMENT & INSTRUMENTS - 1.2%
21,690 Microvision, Inc.+** .......................... 111
49,120 Tektronix, Inc. ............................... 1,143
6,000 Trimble Navigation Ltd.+ ...................... 234
---------
1,488
---------
INTERNET SOFTWARE & SERVICES - 0.6%
401,040 Art Technology Group, Inc.+ ................... 421
81,900 WatchGuard Technologies, Inc.+ ................ 321
---------
742
---------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT - 4.5%
28,125 Applied Materials, Inc. ....................... 455
31,000 Credence Systems Corporation+ ................. 281
29,790 FEI Company+ .................................. 679
73,830 Intel Corporation ............................. 1,924
9,000 KLA-Tencor Corporation** ...................... 393
74,780 Lattice Semiconductor Corporation+ ............ 332
47,800 LSI Logic Corporation+ ........................ 406
5,400 Novellus Systems, Inc.+ ....................... 133
101,600 Pixelworks, Inc.+** ........................... 872
45,600 TriQuint Semiconductor, Inc.+ ................. 152
---------
5,627
---------
SOFTWARE - 7.1%
46,800 Actuate Corporation+ .......................... 88
44,600 Adobe Systems Inc. ............................ 1,276
7,500 Electronic Arts Inc.+ ......................... 425
32,200 Fair Isaac Corporation ........................ 1,175
8,000 Macromedia, Inc.+ ............................. 306
143,330 Microsoft Corporation ......................... 3,560
38,700 Quest Software, Inc.+** ....................... 527
39,790 RadiSys Corporation+ .......................... 643
41,000 Siebel Systems, Inc. .......................... 365
11,200 SupportSoft, Inc.+ ............................ 58
21,300 Sybase, Inc.+ ................................. 391
7,800 Symantec Corporation+** ....................... 170
---------
8,984
---------
Total Information Technology .................. 20,566
---------
MATERIALS - 2.9%
39,300 Oregon Steel Mills, Inc.+ ..................... 676
51,130 Schnitzer Steel Industries, Inc., Class A ..... 1,212
28,035 Weyerhaeuser Company .......................... 1,784
---------
Total Materials ............................... 3,672
---------
TELECOMMUNICATION SERVICES - 1.2%
59,700 Nextel Partners, Inc., Class A+** ............. 1,503
---------
Total Common Stocks
(Cost $91,940) ............................... 117,723
---------
See Notes to Financial Statements.
25
Portfolio of Investments (continued)
VT WEST COAST EQUITY FUND
June 30, 2005 (unaudited)
VALUE
SHARES (000s)
------ ---------
REAL ESTATE INVESTMENT TRUSTS (REITS) - 2.6%
30,000 AMB Property Corporation ...................... $ 1,303
11,000 Health Care Property Investors, Inc. .......... 298
45,100 Plum Creek Timber Company, Inc. ............... 1,637
---------
Total REITs
(Cost $2,493) ................................ 3,238
---------
RINCIPAL
AMOUNT
(000s)
---------
REPURCHASE AGREEMENT - 3.5%
(Cost $4,342)
$ 4,342 Agreement with Morgan Stanley, 2.850% dated
06/30/2005, to be repurchased at
$4,342,000 on 07/01/2005 (Collateralized
by U.S. Treasury Note, 2.000% due 01/15/2014,
market value $4,478,000) ....................... 4,342
---------
SHORT-TERM INVESTMENT - 8.1%
(Cost $10,201)
10,201 Mellon GSL DBT II Collateral Fund++ .............. 10,201
---------
TOTAL INVESTMENTS (Cost $108,976*) ............................ 108.2% 135,504
OTHER ASSETS (LIABILITIES) (NET) .............................. (8.2) (10,221)
----- ---------
NET ASSETS .................................................... 100.0% $ 125,283
===== =========
- ------------------------
* Aggregate cost for federal tax purposes.
** Some or all of these securities are on loan at June 30, 2005, and have an
aggregate market value of $9,540,000, representing 7.6% of the total net
assets of the Fund (Collateral Value $10,201,000).
+ 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.
26
Portfolio of Investments
VT MID CAP STOCK FUND
June 30, 2005 (unaudited)
VALUE
SHARES (000s)
------ ---------
COMMON STOCKS - 91.9%
CONSUMER DISCRETIONARY - 14.4%
AUTOMOBILES & COMPONENTS - 2.5%
38,300 Magna International Inc., Class A ............. $ 2,694
12,500 Superior Industries International, Inc.** ..... 296
---------
2,990
---------
CONSUMER DURABLES & APPAREL - 3.7%
64,300 Jones Apparel Group, Inc. ..................... 1,996
126,200 Mattel, Inc. .................................. 2,310
---------
4,306
---------
CONSUMER SERVICES - 2.6%
19,600 Papa John's International, Inc.+ .............. 784
44,800 Yum! Brands, Inc. ............................. 2,333
---------
3,117
---------
RETAILING - 5.6%
29,800 Neiman Marcus Group, Inc., Class A ............ 2,888
71,500 Tiffany & Company** ........................... 2,342
27,800 Weight Watchers International, Inc.+ .......... 1,435
---------
6,665
---------
Total Consumer Discretionary .................. 17,078
---------
CONSUMER STAPLES - 2.4%
FOOD, BEVERAGE & TOBACCO - 0.4%
13,000 Dean Foods Company+ ........................... 458
2,600 TreeHouse Foods, Inc.+ ........................ 74
---------
532
---------
HOUSEHOLD & PERSONAL PRODUCTS - 2.0%
59,400 Estee Lauder Companies Inc., Class A .......... 2,325
---------
Total Consumer Staples ........................ 2,857
---------
ENERGY - 8.3%
20,600 Cimarex Energy Company+ ....................... 802
44,900 Nabors Industries Ltd.+ ....................... 2,722
36,200 Noble Energy, Inc.** .......................... 2,738
26,200 Tesoro Corporation ............................ 1,219
63,100 Tidewater Inc. ................................ 2,405
---------
Total Energy .................................. 9,886
---------
FINANCIALS - 17.7%
BANKS - 6.4%
103,426 North Fork Bancorporation, Inc. ............... 2,905
89,700 TCF Financial Corporation ..................... 2,322
100,550 Washington Federal, Inc. ...................... 2,365
---------
7,592
---------
DIVERSIFIED FINANCIALS - 3.7%
55,400 A.G. Edwards, Inc. ............................ 2,501
26,400 Ambac Financial Group, Inc. ................... 1,842
---------
4,343
---------
INSURANCE - 7.6%
78,287 Fidelity National Financial, Inc. ............. 2,794
82,000 HCC Insurance Holdings, Inc. .................. 3,105
30,200 MGIC Investment Corporation ................... 1,970
30,491 PMI Group, Inc. ............................... 1,188
---------
9,057
---------
Total Financials .............................. 20,992
---------
HEALTH CARE - 11.7%
HEALTH CARE EQUIPMENT & SERVICES - 10.0%
12,200 AmerisourceBergen Corporation ................. 844
58,800 Covance Inc.+ ................................. 2,638
9,300 Edwards Lifesciences Corporation+ ............. 400
51,800 Express Scripts, Inc., Class A+ ............... 2,589
97,102 IMS Health Inc. ............................... 2,405
47,700 Universal Health Services, Inc., Class B ...... 2,966
---------
11,842
---------
PHARMACEUTICALS & BIOTECHNOLOGY - 1.7%
44,000 Andrx Corporation+ ............................ 894
55,525 Mylan Laboratories Inc. ....................... 1,068
---------
1,962
---------
Total Health Care ............................. 13,804
---------
INDUSTRIALS - 14.9%
CAPITAL GOODS - 6.0%
75,700 Federal Signal Corporation .................... 1,181
74,000 Lincoln Electric Holdings, Inc. ............... 2,453
23,400 PACCAR Inc. ................................... 1,591
30,900 Teleflex Inc. ................................. 1,835
---------
7,060
---------
COMMERCIAL SERVICES & SUPPLIES - 5.2%
101,500 Allied Waste Industries, Inc.+** .............. 805
55,800 HNI Corporation ............................... 2,854
69,100 Republic Services, Inc. ....................... 2,488
---------
6,147
---------
TRANSPORTATION - 3.7%
44,000 Alaska Air Group, Inc.+ ....................... 1,309
128,000 AMR Corporation+** ............................ 1,550
107,100 Continental Airlines, Inc., Class B+** ........ 1,423
38,200 Northwest Airlines Corporation+** ............. 174
---------
4,456
---------
Total Industrials ............................. 17,663
---------
INFORMATION TECHNOLOGY - 10.9%
COMPUTERS & PERIPHERALS - 1.7%
72,900 Electronics for Imaging, Inc.+ ................ 1,534
18,400 Network Appliance, Inc.+ ...................... 520
---------
2,054
---------
See Notes to Financial Statements.
27
Portfolio of Investments (continued)
VT MID CAP STOCK FUND
June 30, 2005 (unaudited)
VALUE
SHARES (000s)
------ ------------
COMMON STOCKS - (CONTINUED)
INFORMATION TECHNOLOGY - (CONTINUED)
ELECTRONIC EQUIPMENT & INSTRUMENTS - 2.0%
46,600 Arrow Electronics, Inc.+** .................... $ 1,266
24,000 Diebold, Inc. ................................. 1,082
---------
2,348
---------
IT SERVICES - 1.1%
47,500 Acxiom Corporation ............................ 992
19,600 Convergys Corporation+ ........................ 279
---------
1,271
---------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT - 2.4%
97,050 Microchip Technology Inc. ..................... 2,875
---------
SOFTWARE - 3.7%
11,400 Adobe Systems Inc. ............................ 326
107,700 BMC Software Inc.+ ............................ 1,933
188,900 Siebel Systems, Inc. .......................... 1,681
25,100 Synopsys, Inc.+ ............................... 419
---------
4,359
---------
Total Information Technology .................. 12,907
---------
MATERIALS - 5.1%
78,100 Cabot Corporation ............................. 2,577
21,000 Lubrizol Corporation .......................... 882
52,800 Valspar Corporation ........................... 2,550
---------
Total Materials ............................... 6,009
---------
TELECOMMUNICATION SERVICES - 0.6%
13,400 United States Cellular Corporation+ ........... 669
---------
UTILITIES - 5.9%
55,400 FPL Group, Inc. ............................... 2,330
91,500 NiSource Inc. ................................. 2,263
53,100 Pinnacle West Capital Corporation ............. 2,360
---------
Total Utilities ............................... 6,953
---------
Total Common Stocks
(Cost $81,534) .............................. 108,818
---------
REAL ESTATE INVESTMENT TRUST (REIT) - 2.0%
(Cost $1,499)
55,900 General Growth Properties, Inc. ............... 2,297
---------
PRINCIPAL
AMOUNT VALUE
(000s) (000s)
--------- ---------
REPURCHASE AGREEMENT - 6.2%
(Cost $7,364)
$ 7,364 Agreement with Morgan Stanley, 2.850% dated
06/30/2005, to be repurchased at $7,365,000
on 07/01/2005 (Collateralized by U.S.
Treasury Note, 2.000% due 01/15/2014, market
value $7,594,000) ........................... $ 7,364
---------
SHORT-TERM INVESTMENT - 4.6%
(Cost $5,444)
5,444 Mellon GSL DBT II
Collateral Fund++ ........................... 5,444
---------
TOTAL INVESTMENTS (Cost $95,841*) .......................... 104.7% 123,923
OTHER ASSETS (LIABILITIES) (NET) ........................... (4.7) (5,564)
----- ---------
NET ASSETS ................................................. 100.0% $ 118,359
===== =========
- ------------------
* Aggregate cost for federal tax purposes.
** Some or all of these securities are on loan at June 30, 2005, and have an
aggregate market value of $5,201,000, representing 4.4% of the total net
assets of the Fund (Collateral Value $5,444,000).
+ Non-income producing security.
++ Represents investment purchased with cash collateral for securities
loaned.
See Notes to Financial Statements.
28
Portfolio of Investments
VT GROWTH FUND
June 30, 2005 (unaudited)
VALUE
SHARES (000s)
------ ---------
COMMON STOCKS - 99.7%
CONSUMER DISCRETIONARY - 21.2%
AUTOMOBILES & COMPONENTS - 0.4%
21,610 Harley-Davidson, Inc.** ....................... $ 1,072
---------
CONSUMER DURABLES & APPAREL - 0.8%
21,830 NIKE Inc., Class B ............................ 1,890
---------
CONSUMER SERVICES - 3.3%
21,920 Apollo Group, Inc., Class A+ .................. 1,714
16,370 Carnival Corporation .......................... 893
34,145 Hilton Hotels Corporation ..................... 814
24,480 McDonald's Corporation ........................ 679
46,955 Royal Caribbean Cruises Ltd. .................. 2,271
24,365 Starbucks Corporation+ ........................ 1,259
---------
7,630
---------
MEDIA - 6.0%
9,800 Clear Channel Communications, Inc. ............ 303
82,500 Comcast Corporation, Special Class A+** ....... 2,471
39,690 News Corporation, Class B** ................... 669
360,760 Time Warner Inc.+ ............................. 6,028
16,350 Univision Communications Inc., Class A+** ..... 451
46,520 Viacom Inc., Class B .......................... 1,490
105,450 Walt Disney Company ........................... 2,655
---------
14,067
---------
RETAILING - 10.7%
119,000 Amazon.com Inc.+ .............................. 3,937
29,800 Bed Bath & Beyond Inc.+ ....................... 1,245
38,445 Best Buy Company, Inc. ........................ 2,635
84,180 eBay Inc.+ .................................... 2,779
8,100 Federated Department Stores, Inc. ............. 594
171,720 Home Depot, Inc. .............................. 6,680
149,935 IAC/InterActiveCorp+** ........................ 3,606
10,830 J.C. Penney Company, Inc.
(Holding Company) ........................... 569
6,910 Lowe's Companies, Inc. ........................ 402
70,690 Staples, Inc. ................................. 1,507
9,070 Target Corporation ............................ 494
11,050 Williams-Sonoma, Inc.+** ...................... 437
---------
24,885
---------
Total Consumer Discretionary .................. 49,544
---------
CONSUMER STAPLES - 6.9%
FOOD & STAPLES RETAILING - 0.7%
7,280 Costco Wholesale Corporation .................. 326
28,530 Wal-Mart Stores Inc. .......................... 1,375
---------
1,701
---------
FOOD, BEVERAGE & TOBACCO - 3.3%
3,100 Campbell Soup Company ......................... 95
60,100 Coca-Cola Company ............................. 2,509
53,350 PepsiCo Inc. .................................. 2,877
29,800 Wm. Wrigley Jr. Company ....................... 2,052
---------
7,533
---------
HOUSEHOLD & PERSONAL PRODUCTS - 2.9%
610 Estee Lauder Companies Inc., Class A .......... 24
65,900 Gillette Company .............................. 3,337
64,555 Procter & Gamble Company** .................... 3,405
---------
6,766
---------
Total Consumer Staples ........................ 16,000
---------
ENERGY - 3.7%
1,900 Apache Corporation ............................ 123
65,400 ExxonMobil Corporation ........................ 3,759
11,300 GlobalSantaFe Corporation ..................... 461
24,975 Halliburton Company ........................... 1,194
10,525 Kinder Morgan Management LLC+ ................. 484
10,885 Occidental Petroleum Corporation .............. 837
3,200 Pride International, Inc.+ .................... 82
15,280 Schlumberger Ltd. ............................. 1,160
2,600 Smith International, Inc. ..................... 166
8,500 Transocean Inc.+ .............................. 459
---------
Total Energy .................................. 8,725
---------
FINANCIALS - 9.2%
BANKS - 0.2%
10,400 Bank of America Corporation ................... 474
---------
DIVERSIFIED FINANCIALS - 6.3%
67,225 American Express Company ...................... 3,578
45,610 Citigroup Inc. ................................ 2,109
27,645 Countrywide Financial Corporation ............. 1,067
7,130 Goldman Sachs Group, Inc. ..................... 728
15,726 JPMorgan Chase & Company ...................... 556
2,600 Lehman Brothers Holdings Inc. ................. 258
52,050 Merrill Lynch & Company, Inc. ................. 2,863
68,135 Morgan Stanley ................................ 3,575
---------
14,734
---------
INSURANCE - 2.7%
43,940 American International Group Inc. ............. 2,553
34 Berkshire Hathaway, Inc., Class A+ ............ 2,839
9,620 Prudential Financial, Inc. .................... 632
2,600 The Hartford Financial Services Group, Inc. ... 194
---------
6,218
---------
Total Financials .............................. 21,426
---------
HEALTH CARE - 20.7%
HEALTH CARE EQUIPMENT & SERVICES - 6.6%
5,700 Aetna Inc. .................................... 472
33,840 Biomet, Inc. .................................. 1,172
33,785 Caremark Rx, Inc.+ ............................ 1,504
3,020 Laboratory Corporation of America Holdings+ ... 151
87,545 Medtronic, Inc ................................ 4,534
See Notes to Financial Statements.
29
Portfolio of Investments (continued)
VT GROWTH FUND
June 30, 2005 (unaudited)
VALUE
SHARES (000s)
------ ------------
COMMON STOCKS - (CONTINUED)
HEALTH CARE - (CONTINUED)
HEALTH CARE EQUIPMENT & SERVICES - (CONTINUED)
12,050 Millipore Corporation+ ........................ $ 684
15,840 Stryker Corporation ........................... 753
98,800 UnitedHealth Group Inc. ....................... 5,151
24,485 Varian Medical Systems, Inc.+** ............... 914
5,210 Waters Corporation+ ........................... 194
---------
15,529
---------
PHARMACEUTICALS & BIOTECHNOLOGY - 14.1%
10,390 Abbott Laboratories ........................... 509
101,905 Amgen, Inc.+ .................................. 6,161
55,090 Biogen Idec Inc.+ ............................. 1,898
67,250 Eli Lilly & Company ........................... 3,747
90,935 Genentech, Inc.+ .............................. 7,300
8,480 Gilead Sciences, Inc.+ ........................ 373
61,400 Johnson & Johnson ............................. 3,991
16,446 Merck & Company, Inc. ......................... 507
30,844 Novartis AG ................................... 1,465
137,200 Pfizer Inc. ................................... 3,784
54,705 Sanofi-Aventis, ADR ........................... 2,242
28,682 Teva Pharmaceutical Industries Ltd.,
Sponsored ADR ............................... 893
---------
32,870
---------
Total Health Care ............................. 48,399
---------
INDUSTRIALS - 8.6%
CAPITAL GOODS - 6.8%
12,300 3M Company .................................... 889
13,180 Empresa Brasileira de Aeronautica SA, ADR ..... 436
2,200 General Dynamics Corporation .................. 241
251,978 General Electric Company ...................... 8,731
9,900 Honeywell International Inc. .................. 363
8,670 Ingersoll-Rand Company, Class A ............... 619
11,360 Lockheed Martin Corporation ................... 737
21,730 Raytheon Company .............................. 850
75,875 Tyco International Ltd. ....................... 2,216
13,680 United Technologies Corporation ............... 702
---------
15,784
---------
COMMERCIAL SERVICES & SUPPLIES - 0.2%
15,150 Waste Management Inc. ......................... 429
---------
TRANSPORTATION - 1.6%
7,190 Expeditors International of Washington, Inc. .. 358
43,590 FedEx Corporation ............................. 3,531
---------
3,889
---------
Total Industrials ............................. 20,102
---------
INFORMATION TECHNOLOGY - 27.1%
COMMUNICATIONS EQUIPMENT - 7.2%
284,500 Cisco Systems, Inc.+ .......................... 5,437
81,800 Juniper Networks, Inc.+ ....................... 2,060
83,890 Lucent Technologies Inc.+** ................... 244
343,150 Motorola, Inc. ................................ 6,266
40,710 Nokia Oyj, Sponsored ADR ...................... 677
6,900 QUALCOMM Inc. ................................. 228
26,475 Research In Motion Ltd.+ ...................... 1,952
---------
16,864
---------
COMPUTERS & PERIPHERALS - 3.3%
107,755 Dell Computer Corporation+ .................... 4,257
17,030 EMC Corporation+ .............................. 234
18,520 International Business Machines Corporation ... 1,374
25,315 Lexmark International, Inc.+ .................. 1,641
44,110 Sun Microsystems, Inc.+ ....................... 165
---------
7,671
---------
ELECTRONIC EQUIPMENT & INSTRUMENTS - 0.8%
18,740 Agilent Technologies, Inc.+ ................... 431
17,090 Ingram Micro Inc., Class A+ ................... 268
6,510 L-3 Communications Holdings, Inc. ............. 499
16,420 PerkinElmer, Inc. ............................. 310
13,870 Tektronix, Inc. ............................... 323
---------
1,831
---------
INTERNET SOFTWARE & SERVICES - 2.0%
52,100 Akamai Technologies, Inc.+ .................... 684
111,635 Yahoo! Inc.+ .................................. 3,868
---------
4,552
---------
IT SERVICES - 0.3%
18,600 Automatic Data Processing, Inc. ............... 781
---------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT - 7.6%
7,390 Altera Corporation+ ........................... 146
9,840 Analog Devices, Inc. .......................... 367
23,600 Broadcom Corporation, Class A+ ................ 838
3,700 Fairchild Semiconductor International, Inc.+ .. 55
223,060 Intel Corporation ............................. 5,813
5,008 Samsung Electronics Company Ltd., GDR . ....... 1,197
274,713 Texas Instruments Inc. ........................ 7,711
59,509 Xilinx, Inc. .................................. 1,518
---------
17,645
---------
SOFTWARE - 5.9%
25,360 Adobe Systems Inc. ............................ 726
8,600 Autodesk, Inc. ................................ 295
17,990 Cadence Design Systems, Inc.+ ................. 246
8,820 Citrix Systems, Inc.+ ......................... 191
21,200 Electronic Arts Inc.+ ......................... 1,200
9,800 Mercury Interactive Corporation+** ............ 376
323,978 Microsoft Corporation ......................... 8,048
76,900 Red Hat, Inc.+ ................................ 1,007
See Notes to Financial Statements.
30
Portfolio of Investments (continued)
VT GROWTH FUND
June 30, 2005 (unaudited)
VALUE
SHARES (000s)
------ ------------
COMMON STOCKS - (CONTINUED)
SOFTWARE - (CONTINUED)
38,315 SAP AG, Sponsored ADR ......................... $ 1,659
---------
13,748
---------
Total Information Technology .................. 63,092
---------
MATERIALS - 1.6%
10,140 Air Products & Chemicals, Inc. ................ 611
19,590 E.I. du Pont de Nemours & Company ............. 843
18,730 Praxair, Inc. ................................. 873
11,440 Rio Tinto PLC, Sponsored ADR .................. 1,395
---------
Total Materials ............................... 3,722
---------
TELECOMMUNICATION SERVICES - 0.7%
56,235 China Mobile (Hong Kong) Ltd. ................. 1,045
20,170 Sprint Corporation-FON Group .................. 506
---------
Total Telecommunication Services .............. 1,551
---------
Total Common Stocks
(Cost $212,687) ............................. 232,561
---------
PRINCIPAL
AMOUNT
(000s)
---------
REPURCHASE AGREEMENT - 0.5%
(Cost $1,042)
$ 1,042 Agreement with Morgan Stanley, 2.850%
dated 06/30/2005, to be repurchased
at $1,042,000 on 07/01/2005
(Collateralized by U.S. Treasury Note,
2.000% due 01/15/2014, market value
$1,075,000) ................................. 1,042
---------
SHORT-TERM INVESTMENT - 2.9%
(Cost $6,813)
6,813 Mellon GSL DBT II
Collateral Fund++ ........................... 6,813
---------
TOTAL INVESTMENTS (Cost $220,542*) ......................... 103.1% 240,416
OTHER ASSETS (LIABILITIES)(NET) ............................ (3.1) (7,210)
----- ---------
NET ASSETS ................................................. 100.0% $ 233,206
===== =========
- --------------
* Aggregate cost for federal tax purposes.
** Some or all of these securities are on loan at June 30, 2005, and have an
aggregate market value of $6,463,000, representing 2.8% of the total net
assets of the Fund (Collateral Value $6,813,000).
+ 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 DEPRECIATION
DATE CURRENCY U.S. $ FOR U.S. $ OF CONTRACTS
- ---------- -------- -------- ----------- ------------
07/15/2005 EUR 140 170 183 $ (13)
09/09/2005 EUR 40 49 52 (3)
-----------
$ (16)
-----------
FORWARD FOREIGN CURRENCY CONTRACTS TO SELL
CONTRACTS TO DELIVER
(000s)
NET
UNREALIZED
EXPIRATION LOCAL VALUE IN IN EXCHANGE APPRECIATION
DATE CURRENCY U.S. $ FOR U.S. $ OF CONTRACTS
- ---------- -------- -------- ----------- ------------
07/15/2005 EUR 140 170 181 $ 11
09/09/2005 EUR 40 49 53 4
-----------
$ 15
-----------
Net Unrealized Depreciation of Forward Foreign
Currency Contracts ............................................. $ (1)
===========
GLOSSARY OF TERMS
ADR -- American Depositary Receipt
EUR -- EURO
GDR -- Global Depositary Receipt
See Notes to Financial Statements.
31
Portfolio of Investments
VT SMALL CAP VALUE FUND
June 30, 2005 (unaudited)
VALUE
SHARES (000s)
------ ------------
COMMON STOCKS - 79.9%
CONSUMER DISCRETIONARY - 9.0%
AUTOMOBILES & COMPONENTS - 1.9%
51,300 Tenneco Automotive, Inc.+ ..................... $ 854
---------
CONSUMER DURABLES & APPAREL - 0.6%
9,900 Kellwood Company .............................. 266
---------
MEDIA - 2.6%
15,700 Carmike Cinemas, Inc. ......................... 482
39,500 Reader's Digest Association, Inc. ............. 652
---------
1,134
---------
RETAILING - 3.9%
28,900 Movie Gallery, Inc. ........................... 764
4,600 Neiman Marcus Group, Inc., Class A ............ 446
13,400 RC2 Corporation+ .............................. 503
---------
1,713
---------
Total Consumer Discretionary .................. 3,967
---------
CONSUMER STAPLES - 5.0%
FOOD & STAPLES RETAILING - 2.7%
22,500 Fresh Del Monte Produce, Inc. (F) ............. 606
25,000 John B. Sanfilippo & Son, Inc.+ ............... 576
---------
1,182
---------
FOOD, BEVERAGE & TOBACCO - 0.0%***
1,900 National Beverage Corporation+ ................ 15
---------
HOUSEHOLD & PERSONAL PRODUCTS - 2.3%
9,700 Central Garden & Pet Company+ ................. 476
10,100 Jarden Corporation+** ......................... 545
---------
1,021
---------
Total Consumer Staples ........................ 2,218
---------
ENERGY - 9.4%
23,600 Cimarex Energy Company+ ....................... 918
28,100 Comstock Resources, Inc.+ ..................... 711
13,700 Encore Acquisition Company+ ................... 562
24,700 St. Mary Land & Exploration Company ........... 716
13,600 Stone Energy Corporation+ ..................... 665
13,100 Tesoro Corporation ............................ 609
---------
Total Energy .................................. 4,181
---------
FINANCIALS - 10.8%
BANKS - 5.2%
16,380 Capital Corporation of the West ............... 455
24,000 Dime Community Bancshares ..................... 365
24,800 Flagstar Bancorp, Inc.** ...................... 470
37,640 Oriental Financial Group, Inc. ................ 574
18,210 U.S.B. Holding Company, Inc. .................. 426
---------
2,290
---------
INSURANCE - 5.6%
20,100 Navigators Group, Inc.+ ....................... 695
13,300 Safety Insurance Group, Inc. .................. 449
6,400 State Auto Financial Corporation .............. 199
15,700 Stewart Information Services Corporation ...... 659
10,700 United Fire & Casualty Company ................ 475
---------
2,477
---------
Total Financials .............................. 4,767
---------
HEALTH CARE - 6.7%
HEALTH CARE EQUIPMENT & SERVICES - 2.2%
131,100 Gene Logic, Inc.+ ............................. 434
14,000 Kindred Healthcare, Inc.+ ..................... 555
---------
989
---------
PHARMACEUTICALS & BIOTECHNOLOGY - 4.5%
23,900 Andrx Corporation+ ............................ 485
47,700 Bradley Pharmaceuticals, Inc.+** .............. 513
11,400 Kos Pharmaceuticals, Inc.+ .................... 747
45,100 Lannett Company, Inc.+ ........................ 235
---------
1,980
---------
Total Health Care ............................. 2,969
---------
INDUSTRIALS - 15.4%
CAPITAL GOODS - 4.3%
21,600 Cubic Corporation ............................. 383
13,800 DRS Technologies, Inc. ........................ 708
20,200 Griffon Corporation+** ........................ 448
17,800 Lennox International, Inc. .................... 377
---------
1,916
---------
COMMERCIAL SERVICES & SUPPLIES - 1.6%
30,500 Duratek, Inc.+ ................................ 707
---------
TRANSPORTATION - 9.5%
15,400 Alaska Air Group, Inc.+ ....................... 458
50,500 AMR Corporation+** ............................ 612
40,900 Continental Airlines, Inc., Class B+** ........ 543
12,900 Dampskibsselskabet Torm A/S, ADR .............. 693
100,100 Delta Air Lines, Inc.+** ...................... 376
14,700 Genesee & Wyoming Inc., Class A+ .............. 400
135,000 Northwest Airlines Corporation+ ............... 616
27,300 OMI Corporation ............................... 519
---------
4,217
---------
Total Industrials ............................. 6,840
---------
INFORMATION TECHNOLOGY - 9.0%
COMPUTERS & PERIPHERALS - 1.4%
16,300 Hutchinson Technology, Inc.+** ................ 627
---------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT - 4.3%
76,600 Axcelis Technologies, Inc.+ ................... 525
73,900 Credence Systems Corporation+ ................. 669
50,000 OmniVision Technologies, Inc.+** .............. 680
---------
1,874
---------
See Notes to Financial Statements.
32
Portfolio of Investments (continued)
VT SMALL CAP VALUE FUND
June 30, 2005 (unaudited)
VALUE
SHARES (000s)
------ ------------
COMMON STOCKS - (CONTINUED)
INFORMATION TECHNOLOGY - (CONTINUED)
SOFTWARE - 3.3%
201,100 Atari, Inc.+ .................................. $ 559
104,800 Geac Computer Corporation Ltd. (F)+ ........... 913
---------
1,472
---------
Total Information Technology .................. 3,973
---------
MATERIALS - 11.3%
26,900 Century Aluminum Company+ ..................... 549
31,100 Goldcorp Inc.** ............................... 491
8,400 Headwaters, Inc.+ ............................. 289
27,600 Inmet Mining Corporation+ ..................... 357
395,200 Kingsgate Consolidated Ltd. ................... 854
48,000 Metal Management, Inc. ........................ 929
454,300 Minara Resources Ltd. ......................... 719
57,700 Randgold Resources Ltd., ADR+** ............... 811
---------
Total Materials ............................... 4,999
---------
TELECOMMUNICATION SERVICES - 2.4%
27,200 Asia Satellite Telecommunications Holdings
Ltd., Sponsored ADR ......................... 479
19,700 USA Mobility, Inc.+ ........................... 578
---------
Total Telecommunication Services ............ .. 1,057
---------
UTILITIES - 0.9%
11,400 Suburban Propane Partners LP** ................ 408
---------
Total Common Stocks
(Cost $30,389) .............................. 35,379
---------
CANADIAN INCOME TRUSTS - 7.5%
ENERGY - 3.9%
22,400 Bonavista Energy Trust ........................ 568
13,700 Harvest Energy Trust .......................... 303
500 Peyto Energy Trust ............................ 12
32,800 Vermilion Energy Trust ........................ 625
11,200 Zargon Energy Trust ........................... 229
---------
1,737
---------
FOOD, BEVERAGE & TOBACCO - 1.6% ......................
56,500 Connors Brothers Income Fund .................. 696
---------
MATERIALS - 2.0%
5,100 Fording Canadian Coal Trust** ................. 470
34,800 TimberWest Forest Corporation ................. 419
---------
889
---------
Total Canadian Income Trusts
(Cost $2,540) ................................ 3,322
---------
REAL ESTATE INVESTMENT TRUSTS (REITS) - 4.7%
4,500 Alexandria Real Estate Equities, Inc. ......... 330
13,300 Entertainment Properties Trust ................ 612
38,200 Equity Inns, Inc. ............................. 508
7,000 Sovran Self Storage, Inc. ..................... 318
30,600 Winston Hotels, Inc. .......................... 345
---------
Total REITs
(Cost $1,539) ............................... 2,113
---------
VALUE
CONTRACTS (000s)
--------- ---------
PURCHASED PUT OPTIONS - 2.5%
364 iShares Russell 2000 Index,
Expires January 2006 @ $95 ................... $ 9
1,410 iShares Russell 2000 Index,
Expires January 2007 @ $110 .................. 356
3,950 iShares Russell 2000 Index,
Expires January 2007 @ $95 ................... 504
3,100 NASDAQ-100 Index,
Expires January 2007 @ $29 ................... 232
---------
Total Purchased Put Options
(Cost $2,092) ................................ 1,101
---------
PRINCIPAL
AMOUNT
(000s)
- ----------
REPURCHASE AGREEMENT - 3.7%
(Cost $1,630)
$ 1,630 Agreement with Morgan Stanley, 2.850% dated
06/30/2005, to be repurchased at $1,630,000
on 07/01/2005 (Collateralized by U.S.
Treasury Note, 2.000% due 01/15/2014, market
value $1,681,000) ............................... 1,630
---------
SHORT-TERM INVESTMENT - 9.2%
(Cost $4,076)
4,076 Mellon GSL DBT II
Collateral Fund++ ............................... 4,076
---------
TOTAL INVESTMENTS (Cost $42,266*) .............................. 107.5% 47,621
OTHER ASSETS (LIABILITIES) (NET) ............................... (7.5) (3,339)
----- ---------
NET ASSETS ..................................................... 100.0% $ 44,282
===== =========
- -----------------
* Aggregate cost for federal tax purposes.
** Some or all of these securities are on loan at June 30, 2005, and have an
aggregate market value of $3,858,000 representing 8.7% of the total net
assets of the Fund (Collateral Value $4,076,000).
*** Amount represents less than 0.01% of the total net assets of the Fund.
+ Non-income producing security.
++ Represents investment purchased with cash collateral for securities
loaned.
GLOSSARY OF TERMS
ADR -- American Depositary Receipt
(F) -- Foreign Shares
See Notes to Financial Statements.
33
Portfolio of Investments
VT SMALL CAP GROWTH FUND
June 30, 2005 (unaudited)
VALUE
SHARES (000s)
------ ----------
COMMON STOCKS - 95.3%
CONSUMER DISCRETIONARY - 15.5%
CONSUMER DURABLES & APPAREL - 4.6%
5,100 Carter's, Inc.+................................ $ 298
6,338 Charles & Colvard Ltd.**....................... 156
24,800 Coach, Inc.+................................... 832
13,700 Desarrolladora Homex SA de CV, ADR+............ 376
14,988 Warnaco Group, Inc.+........................... 348
----------
2,010
----------
CONSUMER SERVICES - 3.8%
800 BJ's Restaurants Inc.+......................... 16
10,256 Cheesecake Factory, Inc.+...................... 356
9,050 Ctrip.com International Ltd., ADR+............. 461
4,346 Four Seasons Hotels, Inc. ..................... 287
8,051 RARE Hospitality International, Inc.+.......... 245
10,669 Sonic Corporation+............................. 326
----------
1,691
----------
RETAILING - 7.1%
7,787 America's Car-Mart, Inc.+...................... 175
23,593 Audible, Inc.+................................. 410
7,098 Blue Nile, Inc.+............................... 232
7,450 Build-A-Bear-Workshop, Inc.+**................. 175
6,483 Guitar Center, Inc.+**......................... 378
15,315 Hibbett Sporting Goods, Inc.+.................. 580
8,467 Stamps.com, Inc.+.............................. 159
4,903 Tractor Supply Company+........................ 241
13,938 Urban Outfitters, Inc.+........................ 790
----------
3,140
----------
Total Consumer Discretionary................... 6,841
----------
CONSUMER STAPLES - 3.5%
FOOD & STAPLES RETAILING - 1.3%
15,948 Central European Distribution Corporation+..... 596
----------
FOOD, BEVERAGE & TOBACCO - 0.9%
4,725 Hansen Natural Corporation+**.................. 400
----------
HOUSEHOLD & PERSONAL PRODUCTS - 1.3%
9,095 Parlux Fragrances, Inc.+**..................... 252
7,595 USANA Health Sciences, Inc.+................... 321
----------
573
----------
Total Consumer Staples......................... 1,569
----------
ENERGY - 4.0%
11,500 ATP Oil & Gas Corporation+..................... 269
37,743 Carrizo Oil & Gas, Inc.+....................... 644
19,236 Veritas DGC, Inc.+............................. 534
8,359 Whiting Petroleum Corporation+................. 303
----------
Total Energy................................... 1,750
----------
FINANCIALS - 5.0%
BANKS - 3.2%
11,242 Brookline Bancorp, Inc. ....................... 183
3,493 Downey Financial Corporation**................. 256
2,872 Mercantile Bank Corporation.................... 126
11,200 Signature Bank+................................ 273
11,100 Westcorp....................................... 582
----------
1,420
----------
DIVERSIFIED FINANCIALS - 0.4%
9,100 First Cash Financial Services, Inc.+........... 194
----------
INSURANCE - 1.4%
10,324 Delphi Financial Group, Inc., Class A.......... 456
7,042 Hub International Ltd. ........................ 137
----------
593
----------
Total Financials............................... 2,207
----------
HEALTH CARE - 28.6%
HEALTH CARE EQUIPMENT & SERVICES - 15.8%
400 Adeza Biomedical Corporation+.................. 7
7,700 Advisory Board Company+........................ 375
26,194 Align Technology, Inc.+**...................... 193
5,478 American Healthways, Inc.+..................... 232
15,900 Animas Corporation+**.......................... 320
10,388 ArthroCare Corporation+........................ 363
8,227 Aspect Medical Systems, Inc.+.................. 245
7,214 Centene Corporation+........................... 242
21,254 Conceptus, Inc.+............................... 120
7,696 Conor Medsystems, Inc.+........................ 118
8,050 HealthExtras, Inc.+............................ 162
7,148 Hologic, Inc.+................................. 284
9,300 Immucor, Inc.+................................. 269
15,498 IntraLase Corporation+**....................... 304
6,086 Kensey Nash Corporation+....................... 184
11,748 Kyphon, Inc.+.................................. 409
8,750 Laserscope+**.................................. 363
14,339 LCA-Vision, Inc. .............................. 695
9,259 LHC Group, Inc.+............................... 168
12,850 Merge Technologies, Inc.+...................... 241
16,413 SFBC International, Inc.+...................... 634
5,142 Shamir Optical Industry Ltd.+.................. 83
9,001 Syneron Medical Ltd.+.......................... 329
20,266 Ventiv Health, Inc.+........................... 391
18,100 VNUS Medical Technologies, Inc.+............... 218
----------
6,949
----------
PHARMACEUTICALS & BIOTECHNOLOGY - 12.8%
15,800 Amylin Pharmaceuticals, Inc.+**................ 331
17,200 Anika Therapeutics, Inc.+...................... 198
20,966 CV Therapeutics, Inc.+**....................... 470
7,900 Digene Corporation+............................ 219
21,900 Dyax Corporation+.............................. 103
19,200 Encysive Pharmaceuticals, Inc.+................ 208
See Notes to Financial Statements.
34
Portfolio of Investments (continued)
VT SMALL CAP GROWTH FUND
June 30, 2005 (unaudited)
VALUE
SHARES (000s)
------ ----------
COMMON STOCKS - (CONTINUED)
HEALTH CARE - (CONTINUED)
PHARMACEUTICALS & BIOTECHNOLOGY - (CONTINUED)
28,000 Isolagen, Inc.+**................................ $ 115
13,250 Kos Pharmaceuticals, Inc.+....................... 868
32,404 LifeCell Corporation+............................ 512
6,999 Medicis Pharmaceutical Corporation,
Class A**........................................ 222
11,738 MGI Pharma, Inc.+**.............................. 255
23,169 Nektar Therapeutics+............................. 390
14,889 POZEN, Inc.+..................................... 122
15,802 Protein Design Labs, Inc.+**..................... 319
10,100 Rigel Pharmaceuticals, Inc.+..................... 201
15,137 Salix Pharmaceuticals Ltd.+...................... 267
6,300 SeraCare Life Sciences, Inc.+.................... 88
15,783 United Therapeutics Corporation+................. 761
----------
5,649
----------
Total Health Care................................ 12,598
----------
INDUSTRIALS - 10.7%
CAPITAL GOODS - 6.4%
10,363 A.S.V., Inc.+.................................... 420
5,748 American Science & Engineering, Inc.+............ 255
20,414 Ceradyne, Inc.+.................................. 491
7,522 Engineered Support Systems, Inc. ................ 270
9,133 Lincoln Electric Holdings, Inc. ................. 303
8,394 MTC Technologies, Inc.+.......................... 309
8,200 NCI Building Systems, Inc.+...................... 269
5,400 Trex Company, Inc.+.............................. 139
21,501 TurboChef Technologies, Inc.+**.................. 385
----------
2,841
----------
COMMERCIAL SERVICES & SUPPLIES - 2.9%
13,565 Collectors Universe, Inc.+....................... 238
5,426 CRA International Inc.+.......................... 292
1,000 LECG Corporation+................................ 21
6,335 Portfolio Recovery Associates, Inc.+............. 266
14,248 Resources Connection, Inc.+...................... 331
6,959 TRM Corporation+................................. 117
----------
1,265
----------
TRANSPORTATION - 1.4%
10,200 Knight Transportation, Inc. ..................... 248
6,601 Old Dominion Freight Line, Inc.+................. 177
10,805 Universal Truckload Services, Inc.+.............. 183
----------
608
----------
Total Industrials................................ 4,714
----------
INFORMATION TECHNOLOGY - 26.8%
COMMUNICATIONS EQUIPMENT - 4.8%
31,550 AudioCodes Ltd.+................................. 314
38,882 Glenayre Technologies, Inc.+..................... 147
26,867 Ixia+............................................ 522
26,500 NMS Communications Corporation+.................. 76
19,821 Openwave Systems Inc.+**......................... 325
11,917 Orckit Communications Ltd.+...................... 315
12,542 SafeNet, Inc.+................................... 427
----------
2,126
----------
COMPUTERS & PERIPHERALS - 1.5%
5,910 Hutchinson Technology, Inc.+**................... 228
12,300 M-Systems Flash Disk Pioneers Ltd.+.............. 236
9,000 Synaptics, Inc.+................................. 192
----------
656
----------
ELECTRONIC EQUIPMENT & INSTRUMENTS - 0.3%
19,344 Merix Corporation+............................... 113
----------
INTERNET SOFTWARE & SERVICES - 8.7%
24,526 Akamai Technologies, Inc.+....................... 322
72,889 aQuantive, Inc.+**............................... 1,292
4,145 Digital River, Inc.+............................. 132
13,397 Greenfield Online, Inc.+......................... 163
30,932 Interwoven, Inc.+................................ 233
38,630 iVillage, Inc.+.................................. 231
33,400 Jupitermedia Corporation+........................ 572
19,636 Marchex, Inc., Class B+**........................ 295
39,378 MatrixOne, Inc.+................................. 197
30,903 ValueClick, Inc.+................................ 381
----------
3,818
----------
IT SERVICES - 1.9%
19,985 Euronet Worldwide, Inc.+......................... 581
22,650 RightNow Technologies, Inc.+..................... 272
----------
853
----------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT - 6.2%
9,400 Cymer, Inc.+**................................... 248
14,600 Integrated Device Technology, Inc.+.............. 157
25,525 Mattson Technology, Inc.+........................ 183
27,363 O2Micro International Ltd.+...................... 384
11,595 Power Integrations, Inc.+........................ 250
32,822 PowerDsine Ltd.+................................. 328
11,600 Silicon Motion Technology Corporation,
ADR+............................................. 122
15,400 SiRF Technology Holdings, Inc.+.................. 272
14,689 Skyworks Solutions, Inc.+........................ 108
20,525 Tessera Technologies, Inc.+...................... 686
----------
2,738
----------
SOFTWARE - 3.4%
22,152 Agile Software Corporation+...................... 140
10,221 Concur Technologies, Inc.+....................... 108
8,423 Manhattan Associates, Inc.+**.................... 162
22,836 Online Resources Corporation+.................... 258
16,303 PDF Solutions, Inc.+............................. 214
4,973 Sonic Solutions+................................. 92
26,978 SupportSoft, Inc.+............................... 140
See Notes to Financial Statements.
35
Portfolio of Investments (continued)
VT SMALL CAP GROWTH FUND
June 30, 2005 (unaudited)
VALUE
SHARES (000s)
------ ----------
COMMON STOCKS - (CONTINUED)
INFORMATION TECHNOLOGY - (CONTINUED)
SOFTWARE - (CONTINUED)
6,115 TALX Corporation............................... $ 177
32,500 TIBCO Software Inc.+........................... 212
----------
1,503
----------
Total Information Technology................... 11,807
----------
TELECOMMUNICATION SERVICES - 1.2%
7,986 Inphonic, Inc.+**.............................. 123
14,760 JAMDAT Mobile Inc.+**.......................... 408
----------
Total Telecommunication Services............... 531
----------
Total Common Stocks
(Cost $38,629)................................. 42,017
----------
REAL ESTATE INVESTMENT TRUST (REIT) - 0.4%
(Cost $163)
6,150 RAIT Investment Trust.......................... 184
----------
PRINCIPAL
AMOUNT
(000s)
---------
REPURCHASE AGREEMENT - 4.5%
(Cost $1,956)
$ 1,956 Agreement with Morgan Stanley,
2.850% dated 06/30/2005, to
be repurchased at $1,956,000
on 07/01/2005 (Collateralized
by U.S. Treasury Note, 2.000%
due 01/15/2014, market value
$2,017,000)..................... 1,956
----------
SHORT-TERM INVESTMENT - 16.2%
(Cost $7,145)
7,145 Mellon GSL DBT II
Collateral Fund++............... 7,145
----------
TOTAL INVESTMENTS (Cost $47,893*)................... 116.4% 51,302
OTHER ASSETS (LIABILITIES) (NET).................... (16.4) (7,217)
----- ----------
NET ASSETS.......................................... 100.0% $ 44,085
===== ==========
- -----------------
* Aggregate cost for federal tax purposes.
** Some or all of these securities are on loan at June 30, 2005, and have an
aggregate market value of $6,853,000, representing 15.5% of the total net
assets of the Fund (Collateral Value $7,145,000).
+ 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.
36
Portfolio of Investments
VT INTERNATIONAL GROWTH FUND
June 30, 2005 (unaudited)
VALUE
SHARES (000s)
------ ----------
COMMON STOCKS - 96.7%
JAPAN - 24.4% ****
6,900 Advantest Corporation**......................... $ 510
38,000 AEON Company Ltd. .............................. 579
1,845 Aiful Corporation............................... 138
9,000 Astellas Pharma Inc. ........................... 308
6,000 Bridgestone Corporation**....................... 116
6,900 Canon Inc.**.................................... 363
5,800 Chubu Electric Power Company Inc.**............. 139
4,700 Daito Trust Construction Company, Ltd. ......... 176
15,000 Daiwa House Industry Company Ltd. .............. 172
31 East Japan Railway Company...................... 159
9,100 FANUC Ltd. ..................................... 578
38,000 Furukawa Electric Company Ltd.+................. 147
2,900 Hirose Electric Company Ltd. ................... 319
2,100 Hoya Corporation................................ 242
25,000 Japan Airlines Corporation**.................... 67
16,900 Kansai Electric Power Company Inc. ............. 340
8,000 Kao Corporation................................. 189
43 Millea Holdings, Inc. .......................... 578
38,700 Mitsubishi Corporation**........................ 526
90,000 Mitsubishi Estate Company Ltd. ................. 991
69 Mitsubishi Tokyo Financial Group, Inc.**........ 585
23,000 Mitsui & Company, Ltd.**........................ 218
11,000 Mitsui Fudosan Company Ltd. .................... 123
24,000 Mitsui Sumitomo Insurance Company Ltd. ......... 216
72 Mizuho Financial Group, Inc. ................... 326
3,300 Murata Manufacturing Company Ltd. .............. 168
33,000 NEC Corporation................................. 179
2,000 Nidec Corporation............................... 212
12,000 Nikon Corporation**............................. 136
2,100 Nintendo Company Ltd. .......................... 220
13,000 Nippon Electric Glass Company, Ltd. ............ 196
155 Nippon Telegraph & Telephone Corporation........ 664
75,000 Nissan Motor Company Ltd.**..................... 743
4,400 Nitto Denko Corporation......................... 252
7,000 OMRON Corporation............................... 154
4,800 ORIX Corporation................................ 720
17,000 Ricoh Company, Ltd. ............................ 266
3,500 Rohm Company Ltd. .............................. 338
22,600 Sankyo Company Ltd.**........................... 434
22,000 Sekisui House Ltd.**............................ 222
1,600 Shimamura Company Ltd. ......................... 135
2,700 Shin-Etsu Chemical Company Ltd. ................ 102
4,800 SMC Corporation................................. 524
14,800 SOFTBANK Corporation**.......................... 580
22,000 Sompo Japan Insurance Inc. ..................... 222
4,442 Sony Corporation................................ 153
14,000 Sumitomo Chemical Company Ltd. ................. 64
62,000 Sumitomo Corporation............................ 497
273 Sumitomo Mitsui Financial Group, Inc.**......... 1,846
54,500 Suzuki Motor Corporation........................ 856
3,200 T&D Holdings, Inc. ............................. 151
10,100 Takeda Pharmaceutical Company Ltd. ............. 501
2,300 TDK Corporation................................. 157
10,300 Tokyo Electron Ltd. ............................ 545
56,000 TOKYO GAS Company Ltd.**........................ 210
4,900 Toyota Motor Corporation........................ 175
3,000 Trend Micro Inc. ............................... 107
228 UFJ Holdings, Inc.+............................. 1,188
3,400 Unicharm Corporation............................ 137
72 Yahoo! Japan Corporation........................ 151
6,200 Yamada Denki Company, Ltd. ..................... 357
34,200 Yamato Transport Company Ltd. .................. 475
----------
22,142
----------
UNITED KINGDOM - 14.5%
7,400 Anglo American PLC.............................. 174
31,000 ARM Holdings PLC................................ 63
38,600 AstraZeneca PLC................................. 1,598
800 AstraZeneca PLC (F)............................. 33
14,637 BHP Billiton PLC................................ 187
29,200 Bradford & Bingley PLC.......................... 171
9,400 Brambles Industries PLC......................... 52
18,400 Diageo PLC...................................... 271
14,900 Hanson PLC...................................... 143
72,800 HBOS PLC........................................ 1,122
31,800 HSBC Holdings PLC............................... 507
15,600 Johnston Press PLC.............................. 134
37,200 Lloyds TSB Group PLC............................ 315
14,500 National Grid Transco PLC....................... 141
12,000 Northern Rock PLC............................... 171
56,300 Pearson PLC..................................... 663
5,500 Reckitt Benckiser PLC........................... 162
57,500 Reed Elsevier PLC............................... 551
27,700 Rolls-Royce Group PLC+.......................... 143
49,900 Royal Bank of Scotland Group PLC++.............. 1,507
13,300 Scottish & Southern Energy PLC.................. 241
34,300 Shell Transport & Trading Company PLC........... 334
31,000 Standard Chartered PLC.......................... 567
31,000 Tesco PLC....................................... 177
63,000 TI Automotive Ltd., Class A+.................... 0***
52,700 Unilever PLC.................................... 509
1,152,398 Vodafone Group PLC.............................. 2,808
10,600 Wolseley PLC.................................... 223
9,400 Xstrata PLC..................................... 181
----------
13,148
----------
FRANCE - 10.0%
8,800 Accor SA........................................ 413
8,200 AXA............................................. 205
22,800 BNP Paribas SA.................................. 1,564
23,500 Bouygues SA++................................... 974
3,500 Carrefour SA.................................... 170
3,000 Compagnie Generale des Etablissements
Michelin, Class B**............................. 183
3,500 Dassault Systemes SA**.......................... 170
2,000 Essilor International SA........................ 137
See Notes to Financial Statements.
37
Portfolio of Investments (continued)
VT INTERNATIONAL GROWTH FUND
June 30, 2005 (unaudited)
VALUE
SHARES (000s)
------ ----------
COMMON STOCKS - (CONTINUED)
FRANCE - (CONTINUED)
5,400 Groupe Danone...................................... $ 475
1,840 L'Air Liquide SA................................... 314
3,900 L'Oreal SA......................................... 280
2,200 Lafarge SA......................................... 201
28,900 Sanofi-Aventis..................................... 2,375
1,333 Sanofi-Aventis (F)................................. 110
9,800 Schneider Electric SA.............................. 739
2,500 Societe Generale Group**........................... 254
8,900 STMicroelectronics NV.............................. 143
800 Total SA........................................... 188
5,900 Vivendi Universal SA............................... 186
----------
9,081
----------
NETHERLANDS - 9.3%
48,682 ABN AMRO Holding NV................................ 1,199
43,437 AEGON NV........................................... 563
5,100 Euronext NV........................................ 173
6,250 Heineken Holding NV................................ 175
27,700 Heineken NV........................................ 856
25,231 ING Groep NV....................................... 713
125,800 Koninklijke (Royal) KPN NV......................... 1,056
5,300 Koninklijke (Royal) Numico NV+..................... 212
18,000 Reed Elsevier NV................................... 251
32,900 Royal Dutch Petroleum Company...................... 2,150
2,900 Royal Dutch Petroleum Company (F).................. 188
6,500 TNT NV............................................. 165
5,700 Unilever NV........................................ 370
12,026 VNU NV............................................. 336
----------
8,407
----------
SWITZERLAND - 8.7%
3,000 Adecco SA**........................................ 137
28,783 Compagnie Financiere Richemont AG, A
Units+**........................................... 968
14,326 Credit Suisse Group................................ 565
17,812 Holcim Ltd. ....................................... 1,084
3,981 Nestle SA.......................................... 1,019
33,065 Novartis AG........................................ 1,575
5,253 Roche Holding AG-Genusschein....................... 665
11,526 Swiss Reinsurance Company.......................... 709
1,490 Swisscom AG........................................ 486
1,548 Syngenta AG........................................ 159
1,700 Synthes, Inc. ..................................... 187
4,753 UBS AG............................................. 371
----------
7,925
----------
GERMANY - 6.1%
5,400 Allianz AG**....................................... 621
11,500 Bayer AG**......................................... 384
13,900 Bayerische Hypo-und Vereinsbank AG+................ 362
4,100 Bayerische Motoren Werke (BMW) AG**................ 187
7,700 DaimlerChrysler AG**............................... 313
3,400 Deutsche Bank AG................................... 266
2,889 Deutsche Boerse AG................................. 226
9,000 E.ON AG**.......................................... 803
24,600 Infineon Technologies AG+.......................... 230
4,700 SAP AG**........................................... 819
3,100 SAP AG, Sponsored ADR.............................. 134
12,000 Siemens AG......................................... 876
7,900 Volkswagen AG**.................................... 362
----------
5,583
----------
SPAIN - 5.3%
5,300 Altadis, SA........................................ 222
66,400 Banco Bilbao Vizcaya Argentaria SA**............... 1,025
60,100 Banco Santander Central Hispano SA................. 698
11,500 Iberdrola SA**..................................... 304
15,500 Industria de Diseno Textil SA (Inditex)**.......... 399
37,100 Repsol YPF SA**.................................... 950
74,869 Telefonica SA...................................... 1,227
----------
4,825
----------
CANADA - 3.8%
21,600 Abitibi-Consolidated Inc.**........................ 96
16,200 Alcan Inc. ........................................ 486
8,700 Cameco Corporation................................. 388
11,900 Inco Ltd. (F)...................................... 449
1,900 Magna International Inc., Class A**................ 133
2,800 Manulife Financial Corporation**................... 134
9,800 Methanex Corporation............................... 161
4,200 National Bank of Canada**.......................... 187
6,101 Noranda, Inc. ..................................... 105
7,200 Potash Corporation of Saskatchewan Inc. ........... 687
2,900 Suncor Energy Inc. ................................ 137
10,100 TELUS Corporation**................................ 345
5,100 Thomson Corporation**.............................. 171
----------
3,479
----------
AUSTRALIA - 2.5% ****
27,700 Amcor Ltd. ........................................ 141
8,145 Australia & New Zealand Banking Group Ltd. ........ 135
27,800 Brambles Industries Ltd.**......................... 173
37,212 Foster's Group Ltd. ............................... 151
44,100 Insurance Australia Group Ltd. .................... 202
28,800 Promina Group Ltd. ................................ 103
25,089 QBE Insurance Group Ltd. .......................... 306
39,128 Rinker Group Ltd. ................................. 417
7,300 Wesfarmers Ltd. ................................... 222
11,800 Westpac Banking Corporation........................ 179
16,450 Woolworths Ltd. ................................... 207
----------
2,236
----------
SWEDEN - 1.8%
12,900 Assa Abloy AB, B Shares............................ 166
11,700 Atlas Copco AB, Class A............................ 186
4,600 Sandvik AB......................................... 171
See Notes to Financial Statements.
38
Portfolio of Investments (continued)
VT INTERNATIONAL GROWTH FUND
June 30, 2005 (unaudited)
VALUE
SHARES (000s)
- ---------- --------
COMMON STOCKS - (CONTINUED)
SWEDEN - (CONTINUED)
3,700 Svenska Cellulosa AB, Class B................ $ 118
251,000 Telefonaktiebolaget LM Ericsson, B Shares.... 806
5,000 Telefonaktiebolaget LM Ericsson,
Sponsored ADR+**........................... 160
--------
1,607
--------
HONG KONG - 1.5% ****
22,200 Esprit Holdings Ltd.++........................ 161
62,000 Hang Lung Group Ltd........................... 110
113,500 Hang Lung Properties Ltd...................... 167
144,000 Johnson Electric Holdings Ltd................. 133
170,000 Li & Fung Ltd................................. 353
159,000 PCCW Ltd...................................... 99
19,000 Sung Hung Kai Properties Ltd.................. 188
20,500 Swire Pacific Ltd., Class A................... 181
--------
1,392
--------
SINGAPORE - 1.4% ****
20,000 DBS Group Holdings Ltd........................ 170
544,215 Singapore Telecommunications Ltd.++........... 892
21,000 United Overseas Bank Ltd.**................... 177
2,100 United Overseas Land Ltd...................... 3
--------
1,242
--------
SOUTH KOREA - 1.3% ****
2,485 Samsung Electronics Company Ltd............... 1,187
--------
MEXICO - 1.1%
16,900 America Movil SA de CV, Series L, ADR......... 1,007
--------
DENMARK - 0.8%
6,300 Novo Nordisk A/S, Class B..................... 321
10,200 TDC A/S....................................... 437
--------
758
--------
TAIWAN - 0.6% ****
61,210 Taiwan Semiconductor Manufacturing Company
Ltd., Sponsored ADR......................... 558
--------
SOUTH AFRICA - 0.6%
20,000 Sasol Ltd..................................... 544
--------
BELGIUM - 0.5%
4,100 Fortis........................................ 114
13,600 SES GLOBAL, FDR............................... 199
2,800 UCB Group SA.................................. 136
--------
449
--------
AUSTRIA - 0.5%
4,000 Erste Bank der oesterreichischen
Sparkassen AG................................ 200
1,000 Raiffeisen International Bank Holding AG+ .... 64
7,583 Telekom Austria AG**.......................... 148
--------
412
--------
IRELAND - 0.4%
15,185 CRH PLC....................................... 403
--------
FINLAND - 0.3%
8,100 Nokia Oyj..................................... 136
13,100 Stora Enso Oyj - R Shares..................... 168
--------
304
--------
NORWAY - 0.3%
20,700 DnB NOR ASA................................... 216
5,100 Norske Skogindustrier ASA..................... 84
--------
300
--------
INDIA - 0.3%
3,800 Infosys Technologies Ltd., Sponsored ADR...... 294
--------
ITALY - 0.3%
10,250 Eni SpA....................................... 264
--------
BRAZIL - 0.2%
7,000 Companhia Vale do Rio Doce, Sponsored ADR..... 178
--------
UNITED STATES - 0.1%
7,932 News Corporation (F), CDI..................... 129
--------
PORTUGAL - 0.1%
11,000 Portugal Telecom, SGPS, SA.................... 104
--------
RUSSIA - 0.0% +++
1,700 YUKOS, ADR+**................................. 4
--------
Total Common Stocks (Cost $72,130)............ 87,962
--------
PREFERRED STOCK - 0.1%
(Cost $12)
SOUTH KOREA - 0.1% ****
210 Samsung Electronics Company Ltd............... 69
--------
PRINCIPAL
AMOUNT
(000s)
- ----------
CONVERTIBLE BONDS - 0.1%
(Cost $69)
SWITZERLAND - 0.1%
$ 95 Credit Suisse Group Financial, Conv. Jr. Bond,
6.000% due 12/23/2005....................... 102
--------
REPURCHASE AGREEMENT - 3.2%
(Cost $2,915)
2,915 Agreement with Morgan Stanley, 2.850%
dated 06/30/2005, to be repurchased at
$2,915,000 on 07/01/2005
(Collateralized by U.S. Treasury Note,
2.000% due 01/15/2014, market value
$3,006,000)................................. 2,915
--------
See Notes to Financial Statements.
39
Portfolio of Investments (continued)
VT INTERNATIONAL GROWTH FUND
June 30, 2005 (unaudited)
PRINCIPAL
AMOUNT VALUE
(000s) (000s)
- ---------- --------
SHORT-TERM INVESTMENT - 12.1%
(Cost $10,971)
$ 10,971 Mellon GSL DBT II Collateral Fund++++.... $ 10,971
--------
TOTAL INVESTMENTS (Cost $86,097*).......................... 112.2% 102,019
OTHER ASSETS (LIABILITIES) (NET)........................... (12.2) (11,093)
----- --------
NET ASSETS................................................. 100.0% $ 90,926
===== ========
- ----------
* Aggregate cost for federal tax purposes.
** Some or all of these securities are on loan at June 30, 2005, and have an
aggregate market value of $10,228,000, representing 11.2% of the total net
assets of the Fund (Collateral Value $10,971,000).
*** Value of security is $0.
**** Investments in the areas of the Pacific Rim at June 30, 2005 are 31.8% 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.
+++ Amount represents less than 0.1% of the total net assets of the Fund.
++++ Represents investment purchased with cash collateral for securities loaned.
See Notes to Financial Statements.
40
Portfolio of Investments (continued)
VT INTERNATIONAL GROWTH FUND
June 30, 2005 (unaudited)
SCHEDULE OF FORWARD FOREIGN CURRENCY CONTRACTS
FORWARD FOREIGN CURRENCY CONTRACTS TO BUY
CONTRACTS TO RECEIVE NET
(000s) UNREALIZED
----------------------------------------------------- APPRECIATION/
EXPIRATION LOCAL VALUE IN IN EXCHANGE (DEPRECIATION)
DATE CURRENCY U.S. $ FOR U.S. $ OF CONTRACTS
- ---------- ------------------- -------- ----------- --------------
07/01/2005 CHF 29 22 22 $ --***
07/01/2005 EUR 41 50 50 --***
07/01/2005 JPY 15,153 137 138 (1)
07/05/2005 CHF 16 13 13 --***
07/05/2005 JPY 5,423 49 49 --***
07/05/2005 ZAR 142 21 21 --***
07/07/2005 CHF 234 183 183 --***
07/13/2005 EUR 102 124 134 (10)
07/29/2005 CAD 192 157 154 3
09/28/2005 GBP 440 786 793 (7)
---------
$ (15)
---------
FORWARD FOREIGN CURRENCY CONTRACTS TO BUY
CONTRACTS TO RECEIVE NET
(000s) UNREALIZED
------------------------------------------------------ APPRECIATION/
EXPIRATION LOCAL VALUE IN IN EXCHANGE (DEPRECIATION)
DATE CURRENCY U.S. $ FOR U.S. $ OF CONTRACTS
- ---------- -------------------- -------- ----------- --------------
07/05/2005 CAD 45 37 37 $ --***
07/05/2005 EUR 27 33 33 --***
07/05/2005 GBP 26 47 47 --***
07/07/2005 CHF 234 183 195 12
07/07/2005 EUR 378 458 487 29
07/07/2005 JPY 52,301 472 486 14
07/13/2005 ZAR 823 124 134 10
07/20/2005 JPY 51,302 463 480 17
07/29/2005 CAD 575 470 460 (10)
08/18/2005 CHF 260 203 214 11
09/20/2005 CHF 480 377 396 19
09/28/2005 CHF 1,011 794 793 (1)
-----------
$ 101
-----------
Net Unrealized Appreciation of Forward Foreign Currency Contracts... $ 86
===========
- -----------
*** Amount represents less than $500.
AT JUNE 30, 2005, SECTOR DIVERSIFICATION IS AS FOLLOWS:
% OF VALUE
SECTOR DIVERSIFICATION NET ASSETS (000s)
- ---------------------------------------- ---------- ---------
COMMON STOCKS:
Banks..................................... 17.7% $ 16,051
Telecommunication Services................ 11.2 10,148
Pharmaceuticals & Biotechnology........... 9.3 8,440
Materials................................. 7.9 7,160
Energy.................................... 5.2 4,759
Capital Goods............................. 4.9 4,583
Food, Beverage & Tobacco.................. 4.7 4,260
Insurance................................. 4.4 4,010
Semiconductors & Semiconductor Equipment.. 4.2 3,864
Automobiles & Components.................. 3.4 3,068
Media..................................... 2.9 2,620
Utilities................................. 2.4 2,178
Diversified Financials.................... 2.4 2,151
Retailing................................. 2.3 2,046
Consumer Durables & Apparel............... 2.1 1,896
Real Estate Investment Trusts (REITs)..... 1.7 1,582
Commercial Services & Supplies............ 1.6 1,488
Internet Software & Services.............. 1.4 1,231
Software.................................. 1.2 1,123
Communications Equipment.................. 1.2 1,102
Other..................................... 4.6 4,202
-------- ---------
TOTAL COMMON STOCKS....................... 96.7 87,962
PREFERRED STOCK........................... 0.1 69
CONVERTIBLE BONDS......................... 0.1 102
REPURCHASE AGREEMENT...................... 3.2 2,915
SHORT-TERM INVESTMENT..................... 12.1 10,971
-------- ---------
TOTAL INVESTMENTS......................... 112.2 102,019
OTHER ASSETS AND LIABILITIES (NET)........ (12.2) (11,093)
-------- ---------
NET ASSETS................................ 100.0% $ 90,926
======== =========
GLOSSARY OF TERMS
ADR -- American Depositary Receipt
CAD -- Canadian Dollar
CDI -- CHESS Depositary Interest
CHF -- Swiss Franc
EUR -- EURO
(F) -- Foreign Shares
FDR -- Fiduciary Depositary Receipt
GBP -- Great Britain Pound Sterling
JPY -- Japanese Yen
ZAR -- South Africa Rand
See Notes to Financial Statements.
41
Portfolio of Investments
VT SHORT TERM INCOME FUND
June 30, 2005 (unaudited)
PRINCIPAL
AMOUNT VALUE
(000s) (000s)
- ---------- --------
CORPORATE BONDS AND NOTES - 66.0%
FINANCIAL SERVICES - 11.9%
$ 1,000 Berkshire Hathaway Inc., Note,
3.375% due 10/15/2008....................... $ 974
CIT Group Inc., Sr. Note:
1,000 7.375% due 04/02/2007....................... 1,054
500 7.625% due 08/16/2005....................... 502
500 Goldman Sachs Group, Inc., Note,
4.125% due 01/15/2008....................... 500
Household Finance Corporation, Note:
1,500 5.750% due 01/30/2007....................... 1,539
250 7.875% due 03/01/2007....................... 265
1,500 Rollins Truck Leasing Corporation, Deb.,
8.375% due 02/15/2007....................... 1,590
-------
6,424
-------
BANKS - 10.4%
1,000 Fifth Third Bank, Note,
2.700% due 01/30/2007....................... 978
1,000 JPMorgan Chase & Company, Note,
5.350% due 03/01/2007....................... 1,020
1,500 MBNA America Bank N.A., Note,
6.500% due 06/20/2006....................... 1,535
1,000 SB Treasury Company LLC, Bond,
9.400% to 06/30/2008;
10.925% due 12/29/2049**.................... 1,122
1,000 U.S. Bank N.A., Note,
2.850% due 11/15/2006....................... 984
-------
5,639
-------
REAL ESTATE INVESTMENT TRUSTS/PROPERTY - 8.0%
1,000 CPG Partners LP, Note,
3.500% due 03/15/2009....................... 965
750 Developers Diversified Realty Corporation,
Sr. Note,
6.625% due 01/15/2008....................... 784
800 Duke-Weeks Realty Corporation, Note,
7.375% due 08/01/2007....................... 848
600 EOP Operating LP, Note,
7.750% due 11/15/2007....................... 645
1,000 Nationwide Health Properties Inc., Note,
9.750% due 03/20/2008....................... 1,108
-------
4,350
-------
HEALTH CARE - 4.7%
1,500 Amgen Inc., Sr. Note,
4.000% due 11/18/2009....................... 1,490
1,000 Cardinal Health, Inc., Note,
6.250% due 07/15/2008....................... 1,048
-------
2,538
-------
UTILITIES - 4.7%
1,000 Constellation Energy Group, Inc., Note,
6.350% due 04/01/2007....................... 1,035
350 Pacific Gas & Electric Company, First
Mortgage,
3.600% due 03/01/2009....................... 342
350 Sempra Energy, Note,
4.750% due 05/15/2009....................... 353
750 Texas-New Mexico Power Company, Sr. Note,
6.250% due 01/15/2009....................... 791
-------
2,521
-------
CABLE TV - 4.2%
1,250 AOL Time Warner Inc., Note,
6.150% due 05/01/2007....................... 1,294
1,000 Cox Enterprises, Inc., Note,
4.375% due 05/01/2008**..................... 992
-------
2,286
-------
AUTO MANUFACTURING & PARTS - 3.8%
1,000 Ford Motor Credit Company, Note,
6.500% due 01/25/2007....................... 1,007
1,000 Toyota Motor Credit Corporation, Note,
5.650% due 01/15/2007....................... 1,024
-------
2,031
-------
FOOD - 3.8%
1,000 ConAgra Inc., Sr. Note,
9.875% due 11/15/2005....................... 1,019
1,000 Safeway Inc., Sr. Note,
6.150% due 03/01/2006....................... 1,011
-------
2,030
-------
GAMING - 3.7%
1,000 Carnival Corporation, Company Guarantee,
3.750% due 11/15/2007....................... 991
1,000 Harrah's Operating Company, Inc., Company
Guarantee, 5.500% due 07/01/2010............ 1,033
-------
2,024
-------
CONSUMER PRODUCTS/SERVICES - 2.8%
1,000 PHH Corporation, Note,
6.000% due 03/01/2008....................... 1,031
500 Sealed Air Corporation, Conv. Sr. Note,
3.000% due 06/30/2033**..................... 497
-------
1,528
-------
TELECOMMUNICATIONS - 2.8%
500 TELUS Corporation, Note,
7.500% due 06/01/2007....................... 529
1,000 Verizon Global Funding Corporation, Note,
4.000% due 01/15/2008....................... 997
-------
1,526
-------
PAPER/FOREST PRODUCTS - 1.9%
1,000 Weyerhaeuser Company, Note,
6.000% due 08/01/2006....................... 1,018
-------
AIRLINES - 1.9%
1,000 Southwest Airlines Company, Pass-through
Certificates,
5.496% due 11/01/2006....................... 1,018
-------
See Notes to Financial Statements.
42
Portfolio of Investments (continued)
VT SHORT TERM INCOME FUND
June 30, 2005 (unaudited)
PRINCIPAL
AMOUNT VALUE
(000s) (000s)
- ---------- -------
CORPORATE BONDS AND NOTES - (CONTINUED)
RETAIL - 0.9%
$ 500 CVS Corporation, Note,
4.000% due 09/15/2009....................... $ 496
-------
AEROSPACE/DEFENSE - 0.5%
250 Boeing Capital Corporation, Sr. Note,
5.650% due 05/15/2006....................... 254
-------
Total Corporate Bonds and Notes
(Cost $35,309).............................. 35,683
-------
ASSET-BACKED SECURITIES (ABSs) - 5.2%
574 Atlantic City Electric Transition Funding LLC,
Series 2003-1, Class A1,
2.890% due 07/20/2011....................... 560
1,000 Capital One Multi-Asset Execution Trust,
Series 2003-A6, Class A6,
2.950% due 08/17/2009....................... 988
80 Green Tree Financial Corporation, Series
1995-6, Class B1,
7.700% due 09/15/2026....................... 75
62 Green Tree Home Improvement, Series 1995-D,
Class B2, 7.450% due 09/15/2025............. 62
120 Mid-State Trust, Series 4, Class A,
8.330% due 04/01/2030....................... 130
1,000 WFS Financial Owner Trust, Series 2004-3,
Class A4,
3.930% due 02/17/2012....................... 995
-------
Total ABSs
(Cost $2,835)............................... 2,810
-------
COLLATERALIZED MORTGAGE OBLIGATIONS (CMOs) - 12.1%
1,000 Banc of America Mortgage Securities, Inc.,
Pass-through Certificates, Series 2003-6,
Class 1A30,
4.750% due 08/25/2033....................... 1,000
1,108 Cendant Mortgage Corporation, Series 2003-
3P, Class A1,
5.500% due 04/25/2020**..................... 1,123
991 Chase Mortgage Finance Corporation, Series
2005-S1, Class 1A8,
5.500% due 05/25/2035....................... 1,010
768 Credit Suisse First Boston Mortgage Securities
Corporation, Pass-through Certificates,
Series 2003-29, Class 4A1,
6.000% due 12/25/2033....................... 785
829 Federal Home Loan Mortgage Corporation,
Series 2552, Class KB,
4.250% due 06/15/2027....................... 829
859 Government National Mortgage Association,
Series 2002-70, Class PA,
4.500% due 08/20/2032....................... 859
886 GSR Mortgage Loan Trust, Pass-through
Certificates, Series 2005-1F, Class 2A1,
6.000% due 02/25/2035....................... 910
-------
Total CMOs
(Cost $6,527)............................... 6,516
-------
U.S. GOVERNMENT AGENCY OBLIGATIONS - 4.6%
Federal Home Loan Mortgage Corporation: Bond,
1,000 3.250% due 02/25/2008....................... 983
1,000 Note,
4.125% due 07/12/2010....................... 1,004
500 Federal National Mortgage Association, Note,
3.000% to 07/16/2006;
5.800% due 07/16/2013....................... 497
-------
Total U.S. Government Agency Obligations
(Cost $2,490)............................... 2,484
-------
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES - 2.7%
FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA) - 0.8%
233 6.500% due 01/01/2014......................... 243
173 8.000% due 05/01/2027......................... 186
25 8.500% due 11/01/2017......................... 27
-------
Total FNMA
(Cost $432)................................. 456
-------
ADJUSTABLE RATE MORTGAGE-BACKED SECURITIES (ARMs) - 0.8%
23 Federal Home Loan Mortgage Corporation
(FHLMC),
3.756% due 11/01/2021+...................... 24
Federal National Mortgage Association (FNMA):
10 4.000% due 11/01/2021+...................... 10
10 4.062% due 01/01/2019+...................... 10
2 4.355% due 11/01/2022+...................... 2
351 4.649% due 11/01/2032+...................... 356
20 4.823% due 11/01/2035+...................... 21
5 5.611% due 04/01/2019+...................... 5
-------
Total ARMs
(Cost $436)................................. 428
-------
FEDERAL HOME LOAN MORTGAGE CORPORATION (FHLMC) - 0.6%
288 6.000% due 05/01/2017......................... 298
18 9.500% due 08/01/2016......................... 19
-------
Total FHLMC
(Cost $309)................................. 317
-------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (GNMA) - 0.5%
27 8.000% due 06/15/2009-08/15/2012.............. 27
24 9.000% due 12/15/2020-04/20/2025.............. 26
172 10.000% due 12/15/2017-04/15/2025............. 198
14 11.000% due 12/15/2015........................ 15
-------
Total GNMA
(Cost $252)................................. 266
-------
Total U.S. Government Agency Mortgage-Backed
Securities (Cost $1,429).................... 1,467
-------
U.S. TREASURY NOTE - 1.8%
(Cost $1,000)
1,000 2.000% due 05/15/2006......................... 988
-------
See Notes to Financial Statements.
43
Portfolio of Investments (continued)
VT SHORT TERM INCOME FUND
June 30, 2005 (unaudited)
PRINCIPAL
AMOUNT VALUE
(000s) (000s)
- ---------- --------
COMMERCIAL MORTGAGE-BACKED SECURITIES (CMBS) - 0.6%
(Cost $331)
$ 333 GMAC Commercial Mortgage Securities Inc.,
Series 1999-CTL1, Class A,
7.151% due 02/15/2008**..................... $ 344
--------
REPURCHASE AGREEMENT - 9.7%
(Cost $5,245)
5,245 Agreement with Morgan Stanley, 2.850% dated
06/30/2005, to be repurchased at
$5,245,000 on 07/01/2005 (Collateralized by
U.S. Treasury Note, 2.000% due 01/15/2014,
market value $5,409,000).................... 5,245
--------
TOTAL INVESTMENTS++ (Cost $55,166*)..................... 102.7% 55,537
OTHER ASSETS (LIABILITIES) (NET)........................ (2.7) (1,453)
----- --------
NET ASSETS.............................................. 100.0% $ 54,084
===== ========
- ----------
* 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.
+ Variable rate security. The interest rate shown reflects the rate in effect
at June 30, 2005.
++ 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,
September 2005............... $3,811 $ (4)
==========
See Notes to Financial Statements.
44
Portfolio of Investments
VT U.S. GOVERNMENT SECURITIES FUND
June 30, 2005 (unaudited)
PRINCIPAL
AMOUNT VALUE
(000s) (000s)
- --------- --------
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES - 66.6%
FEDERAL HOME LOAN MORTGAGE CORPORATION (FHLMC) - 34.6%
$ 3,311 4.000% due 08/01/2018......................... $ 3,243
14,872 4.500% due 04/01/2018-06/01/2035.............. 14,702
26,702 5.000% due 04/01/2018-06/01/2035.............. 26,777
28,677 5.500% due 12/01/2008-11/01/2034.............. 29,196
14,953 6.000% due 01/01/2013-05/01/2034.............. 15,381
4,626 6.500% due 11/01/2016-01/01/2032.............. 4,817
2,000 7.000% due 04/01/2008-04/01/2032.............. 2,111
129 7.500% due 02/01/2031......................... 138
113 8.000% due 07/01/2007-12/01/2030.............. 119
111 8.500% due 07/01/2029......................... 121
42 8.750% due 01/01/2013......................... 43
--------
Total FHLMC
(Cost $96,420) 96,648
--------
FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA) - 23.8%
2,720 4.500% due 12/01/2018......................... 2,713
19,539 5.000% due 04/01/2018-06/01/2035.............. 19,711
24,875 5.500% due 01/01/2017-09/01/2034.............. 25,286
4,510 6.000% due 12/01/2016-02/01/2034.............. 4,652
11,035 6.500% due 09/01/2024-07/01/2034.............. 11,475
1,309 7.000% due 08/01/2028-11/01/2031.............. 1,382
229 7.500% due 11/01/2029......................... 246
510 8.000% due 05/01/2022-09/01/2027.............. 549
287 8.500% due 02/01/2023-10/01/2027.............. 312
157 9.000% due 09/01/2030......................... 174
--------
Total FNMA
(Cost $66,495).............................. 66,500
--------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (GNMA) - 8.2%
8,623 5.500% due 07/20/2033-03/20/2034.............. 8,799
10,469 6.000% due 02/20/2029-08/15/2034.............. 10,811
1,827 6.500% due 03/20/2031-04/20/2034.............. 1,905
479 7.000% due 01/15/2028-06/20/2031.............. 507
557 7.500% due 01/15/2023-11/15/2023.............. 604
45 7.750% due 12/15/2029......................... 49
165 8.000% due 07/15/2026-06/20/2030.............. 178
--------
Total GNMA
(Cost $22,724).............................. 22,853
--------
Total U.S. Government Agency Mortgage-Backed
Securities (Cost $185,639).................. 186,001
--------
COLLATERALIZED MORTGAGE OBLIGATIONS (CMOs) - 18.5%
Banc of America Mortgage Securities, Inc.,
Pass-through Certificates:
3,500 Series 2003-6, Class 1A30,
4.750% due 08/25/2033....................... 3,501
1,590 Series 2004-4, Class 2A1,
5.500% due 05/25/2034....................... 1,602
1,646 Countrywide Alternative Loan Trust,
Series 2003-13T1, Class A1,
4.000% due 08/25/2033....................... 1,621
Countrywide Home Loans:
3,264 Series 2003-50, Class A1,
5.000% due 11/25/2018....................... 3,284
4,000 Series 2004-4, Class A5,
5.250% due 05/25/2034....................... 4,044
Credit Suisse First Boston Mortgage
Securities Corporation, Pass-through
Certificates:
3,602 Series 2003-11, Class 1A3,
4.500% due 06/25/2033....................... 3,602
2,565 Series 2003-8, Class 1A1,
5.750% due 04/25/2033....................... 2,613
Federal Home Loan Mortgage Corporation:
4,500 Series 2449, Class ND,
6.500% due 05/15/2030....................... 4,599
1,382 Series 2551, Class QK,
5.500% due 01/15/2033....................... 1,421
1,862 Series 2575, Class LM,
4.500% due 05/15/2032....................... 1,869
Federal National Mortgage Association:
3,000 Grantor Trust, Series 2000-T5, Class B,
7.300% due 05/25/2010....................... 3,406
2,554 Series 2002-16, Class TM,
7.000% due 04/25/2032....................... 2,656
5,689 Series 2003-58, Class PI,
5.000% due 02/25/2027....................... 428
Federal National Mortgage Association,
REMIC, Pass-through Certificates:
47 Series 1989-90, Class E,
8.700% due 12/25/2019....................... 50
979 Series 1992-55, Class DZ,
8.000% due 04/25/2022....................... 1,023
GSR Mortgage Loan Trust, Pass-through
Certificates:
3,022 Series 2003-4F, Class 2A3,
5.000% due 05/25/2033....................... 3,037
3,544 Series 2005-1F, Class 2A1,
6.000% due 02/25/2035....................... 3,640
3,000 Residential Funding Mortgage Security,
Series 2003-S20, Class 1A4,
5.500% due 12/25/2033....................... 3,013
Vendee Mortgage Trust:
978 Series 2000-2, Class G,
7.500% due 10/15/2009....................... 979
5,000 Series 2000-3, Class 2H,
7.500% due 11/15/2014....................... 5,150
--------
Total CMOs
(Cost $51,696)................................ 51,538
--------
U.S. GOVERNMENT AGENCY OBLIGATIONS - 6.7%
Federal Home Loan Bank, Bond:
2,000 4.500% due 09/16/2013....................... 2,040
2,000 5.125% due 03/06/2006....................... 2,019
2,500 6.500% due 08/14/2009....................... 2,739
3,000 7.375% due 02/12/2010....................... 3,424
Federal National Mortgage Association: Note:
2,000 5.500% due 07/18/2012....................... 2,002
See Notes to Financial Statements.
45
Portfolio of Investments (continued)
VT U.S. GOVERNMENT SECURITIES FUND
June 30, 2005 (unaudited)
PRINCIPAL
AMOUNT VALUE
(000s) (000s)
- --------- ------
U.S. GOVERNMENT AGENCY OBLIGATIONS - (CONTINUED)
$ 2,000 6.000% due 02/03/2020........................................... $ 2,004
2,500 3.000% to 07/16/2006;
5.800% due 07/16/2013........................................... 2,482
2,000 Housing Urban Development, Government
Guarantee, Series 99-A,
6.160% due 08/01/2011........................................... 2,120
----------
Total U.S. Government Agency Obligations
(Cost $18,173).................................................. 18,830
----------
U.S. TREASURY OBLIGATIONS - 5.1%
U.S. TREASURY NOTES - 5.0%
1,000 3.500% due 12/15/2009........................................... 991
3,000 4.000% due 02/15/2014........................................... 3,019
2,000 4.250% due 11/15/2013........................................... 2,049
5,000 4.750% due 05/15/2014........................................... 5,307
2,000 5.750% due 08/15/2010........................................... 2,187
350 6.250% due 02/15/2007........................................... 365
----------
13,918
----------
U.S. TREASURY BOND - 0.1%
300 12.750% due 11/15/2010............................................. 310
----------
Total U.S. Treasury Obligations
(Cost $13,847).................................................. 14,228
----------
REPURCHASE AGREEMENT - 7.0%
(Cost $19,581)
19,581 Agreement with Morgan Stanley, 2.850% dated 06/30/2005, to be
repurchased at $19,583,000 on 07/01/2005 (Collateralized by U.S.
Treasury Note,
2.000% due 01/15/2014, market value $20,193,000)........ 19,581
----------
TOTAL INVESTMENTS (Cost $288,936*) 103.9% 290,178
OTHER ASSETS (LIABILITIES) (NET) (3.9) (10,759)
----- ----------
NET ASSETS 100.0% $ 279,419
===== ==========
- --------------
* Aggregate cost for federal tax purposes.
GLOSSARY OF TERMS
REMIC -- Real Estate Mortgage Investment Conduit
See Notes to Financial Statements.
46
Portfolio of Investments
VT INCOME FUND
June 30, 2005 (unaudited)
PRINCIPAL
AMOUNT VALUE
(000s) (000s)
------ ------
CORPORATE BONDS AND NOTES - 70.0%
FINANCIAL SERVICES/BANKS - 11.2%
$ 1,000 Abbey National PLC, Sub. Note,
6.690% due 10/17/2005................................................ $ 1,008
500 American General Corporation, Note,
7.500% due 07/15/2025................................................ 635
1,000 American General Finance, Inc.,
MTN, Series I,
4.625% due 05/15/2009................................................ 1,006
400 Banc One Corporation, Sub. Note,
10.000% due 08/15/2010............................................... 497
1,000 Bank of America Corporation, Sub. Note,
7.800% due 02/15/2010................................................ 1,145
500 CIT Group Inc., Sr. Note,
7.750% due 04/02/2012................................................ 587
3,000 Citigroup Inc., Note,
6.500% due 01/18/2011................................................ 3,316
1,000 Farmers Insurance Exchange, Note,
6.000% due 08/01/2014**.............................................. 1,044
2,500 Goldman Sachs Group, Inc., Bond,
6.875% due 01/15/2011................................................ 2,791
1,000 Hartford Life Insurance Company, Deb.,
7.650% due 06/15/2027................................................ 1,300
1,500 Jefferies Group, Inc., Sr. Note,
7.750% due 03/15/2012................................................ 1,723
1,000 Legg Mason, Inc., Sr. Note,
6.750% due 07/02/2008................................................ 1,076
2,000 Merrill Lynch & Company Inc., Note, 6.000% due 02/17/2009.............. 2,112
1,500 Morgan Stanley Dean Witter & Company, Note,
6.750% due 04/15/2011................................................ 1,663
1,100 NCNB Corporation, Sub. Note,
9.375% due 09/15/2009................................................ 1,311
2,250 Wells Fargo & Company, Sub. Note,
4.625% due 04/15/2014................................................ 2,260
----------
23,474
----------
OIL & GAS - 8.3%
1,200 ANR Pipeline Company, Deb.,
9.625% due 11/01/2021................................................ 1,528
1,750 Consolidated Natural Gas Company, Sr. Note,
6.850% due 04/15/2011................................................ 1,955
2,500 El Paso Natural Gas Company, Deb.,
7.500% due 11/15/2026................................................ 2,644
1,000 Enterprise Products Partners LP, Company Guarantee,
6.375% due 02/01/2013................................................ 1,085
1,385 Express Pipeline LP, Sub. Note,
7.390% due 12/31/2017**.............................................. 1,536
775 Hanover Compressor Company, Sr. Note,
8.625% due 12/15/2010................................................ 824
Petro-Canada:
500 Deb.,
9.250% due 10/15/2021................................................ 704
1,000 Note,
4.000% due 07/15/2013................................................ 948
2,500 Petrobras International Finance Company, Sr. Note,
9.750% due 07/06/2011................................................ 2,975
1,000 Southern Natural Gas Company, Sr. Note,
8.000% due 03/01/2032................................................ 1,142
500 Tesoro Petroleum Corporation, Note,
8.000% due 04/15/2008................................................ 530
1,500 XTO Energy Inc., Sr. Note,
6.250% due 04/15/2013................................................ 1,626
----------
17,497
----------
CONSUMER PRODUCTS/SERVICES - 7.5%
2,000 Allied Waste North America, Inc., Sr. Note,
7.250% due 03/15/2015**.............................................. 1,945
1,750 Carnival Corporation, Deb.,
7.200% due 10/01/2023................................................ 2,148
1,000 Cendant Corporation, Note,
6.875% due 08/15/2006................................................ 1,028
2,500 ConAgra, Inc., Sr. Note,
7.125% due 10/01/2026................................................ 3,034
Mattel, Inc., Note:
500 6.125% due 07/15/2005................................................ 500
1,000 7.300% due 06/13/2011................................................ 1,118
1,500 Reed Elsevier Capital Inc., Company Guarantee,
6.750% due 08/01/2011................................................ 1,671
1,000 Royal Caribbean Cruises Ltd., Sr. Note,
8.000% due 05/15/2010................................................ 1,112
1,500 Sealed Air Corporation, Conv. Sr. Note,
3.000% due 06/30/2033**.............................................. 1,491
1,500 Waste Management Inc., Sr. Note,
7.375% due 08/01/2010................................................ 1,679
----------
15,726
----------
TRANSPORTATION/AUTO - 7.3%
2,000 Burlington Northern Santa Fe Corporation, Deb.,
8.125% due 04/15/2020................................................ 2,651
172 Continental Airlines Inc., Pass-through Certificates, Series 1997-4C,
6.800% due 07/02/2007................................................ 148
420 CSX Transportation, Inc., Deb.,
9.750% due 06/15/2020................................................ 609
400 Ford Holdings Inc., Company Guarantee,
9.300% due 03/01/2030................................................ 382
250 Ford Motor Company, Deb.,
8.900% due 01/15/2032................................................ 229
2,000 Ford Motor Credit Company, Note,
7.375% due 10/28/2009................................................ 1,956
1,000 General Motors Corporation, Deb.,
9.400% due 07/15/2021................................................ 920
Norfolk Southern Corporation:
Bond:
963 5.640% due 05/17/2029................................................ 1,010
37 7.800% due 05/15/2027................................................ 49
580 Deb.,
9.750% due 06/15/2020................................................ 845
2,500 Sr. Note,
6.200% due 04/15/2009................................................ 2,668
2,000 Southwest Airlines Company, Pass-through Certificates, Series A-4,
9.150% due 07/01/2016................................................ 2,486
See Notes to Financial Statements.
47
Portfolio of Investments (continued)
VT INCOME FUND
June 30, 2005 (unaudited)
PRINCIPAL
AMOUNT VALUE
(000s) (000s)
------ ------
CORPORATE BONDS AND NOTES - (CONTINUED)
TRANSPORTATION/AUTO - (CONTINUED)
$ 1,000 Trailer Bridge, Inc., Sr. Sec. Note,
9.250% due 11/15/2011................................................ $ 1,011
1,136 United Air Lines Inc.,
Pass-through Certificates, (in default),
9.560% due 10/19/2018................................................ 436
----------
15,400
----------
UTILITIES - 6.3%
1,500 Arizona Public Service Company, Note,
6.500% due 03/01/2012................................................ 1,669
104 Covanta Energy Corporation, Sr. Sec. Note,
8.250% due 03/15/2011................................................ 94
1,850 Illinois Power Company, First Mortgage,
7.500% due 06/15/2009................................................ 2,066
1,000 Metropolitan Edison Company, Sr. Note,
4.950% due 03/15/2013................................................ 1,018
2,250 Pacific Gas & Electric Company, First Mortgage,
4.200% due 03/01/2011................................................ 2,213
PacifiCorp, First Mortgage:
1,500 4.950% due 08/15/2014................................................ 1,531
1,000 5.250% due 06/15/2035................................................ 1,004
500 Public Service Company of New Mexico, Sr. Note,
4.400% due 09/15/2008................................................ 501
1,500 Southwestern Electric Power Company, Note,
5.375% due 04/15/2015................................................ 1,558
1,500 Texas-New Mexico Power Company, Sr. Note,
6.250% due 01/15/2009................................................ 1,581
----------
13,235
----------
TELECOMMUNICATIONS - 5.7%
4,000 Deutsche Telephone Finance, Bond,
8.500% due 06/15/2010................................................ 4,640
1,700 Northern Telecom Capital Inc., Company Guarantee,
7.400% due 06/15/2006................................................ 1,730
2,000 Qwest Corporation, Note,
9.125% due 03/15/2012**.............................................. 2,185
1,000 TELUS Corporation, Note,
8.000% due 06/01/2011................................................ 1,171
2,000 Vodafone Group PLC, Note,
7.750% due 02/15/2010................................................ 2,286
----------
12,012
----------
REAL ESTATE INVESTMENT TRUSTS (REITS) - 5.6%
Arden Realty LP, Note:
1,000 5.200% due 09/01/2011................................................ 1,016
1,000 5.250% due 03/01/2015................................................ 1,009
1,000 Developers Diversified Realty Corporation, Note,
4.625% due 08/01/2010................................................ 993
2,000 Health Care Property Investors, Inc., Note,
6.000% due 03/01/2015................................................ 2,125
2,500 Healthcare Realty Trust, Inc., Sr. Note,
8.125% due 05/01/2011................................................ 2,866
Nationwide Health Properties Inc., Note:
1,000 7.060% due 12/05/2006................................................ 1,026
2,500 9.750% due 03/20/2008................................................ 2,771
----------
11,806
----------
HEALTH CARE - 4.8%
1,500 Aetna Inc., Sr. Note,
7.375% due 03/01/2006................................................ 1,532
2,000 Cardinal Health, Inc., Note,
6.750% due 02/15/2011................................................ 2,205
DVI, Inc., Sr. Note, (in default):
400 9.875% due 02/01/2004++.............................................. 31
900 9.875% due 02/01/2004++.............................................. 71
2,000 HCA Inc., Sr. Note,
8.750% due 09/01/2010................................................ 2,283
250 HIH Capital Ltd., Conv. Note,
7.500% due 09/25/2006................................................ 249
750 IVAX Corporation, Conv. Sr. Sub. Note,
4.500% due 05/15/2008................................................ 752
3,000 Tenet Healthcare Corporation, Sr. Note,
6.375% due 12/01/2011................................................ 2,872
----------
9,995
----------
MEDIA - 3.4%
1,500 Comcast Cable Communications Inc., Sr. Note,
7.125% due 06/15/2013................................................ 1,722
2,500 Cox Communications, Inc., Note,
7.875% due 08/15/2009................................................ 2,804
1,200 News America Holdings Inc., Sr. Deb.,
8.000% due 10/17/2016................................................ 1,477
500 Tele-Communications, Inc., Sr. Deb.,
7.875% due 08/01/2013................................................ 596
300 Time Warner Inc., Deb.,
9.150% due 02/01/2023................................................ 413
----------
7,012
----------
GAMING - 3.0%
500 Harrah's Operating Company Inc., Company Guarantee,
8.000% due 02/01/2011................................................ 574
1,350 Old Evangeline Downs LLC / Diamond Jo LLC, Company Guarantee,
8.750% due 04/15/2012................................................ 1,266
2,000 Park Place Entertainment Corporation, Sr. Note,
7.500% due 09/01/2009................................................ 2,215
2,000 Riviera Holdings Corporation, Company Guarantee,
11.000% due 06/15/2010............................................... 2,220
----------
6,275
----------
RETAIL - 1.8%
1,000 Fred Meyer Inc., Company Guarantee,
7.450% due 03/01/2008................................................ 1,076
2,500 Safeway Inc., Note,
7.500% due 09/15/2009................................................ 2,761
----------
3,837
----------
See Notes to Financial Statements.
48
Portfolio of Investments (continued)
VT INCOME FUND
June 30, 2005 (unaudited)
PRINCIPAL
AMOUNT VALUE
(000s) (000s)
- --------- --------
CORPORATE BONDS AND NOTES - (CONTINUED)
INFORMATION TECHNOLOGY - 1.6%
$ 2,500 Conexant Systems Inc., Conv. Sub. Note,
4.000% due 02/01/2007............................... $ 2,306
1,000 Extreme Networks, Inc., Conv. Sub. Note,
3.500% due 12/01/2006............................... 975
---------
3,281
---------
INDUSTRIAL PRODUCTS - 1.6%
2,000 Noranda Inc., Note,
6.000% due 10/15/2015............................... 2,103
Weyerhaeuser Company:
500 Deb.,
7.375% due 03/15/2032............................... 592
500 Note,
6.750% due 03/15/2012............................... 551
---------
3,246
---------
FOREIGN GOVERNMENT (U.S. DOLLAR DENOMINATED) - 1.2%
Federal Republic of Brazil:
750 Bond,
9.250% due 10/22/2010............................... 838
500 Note,
8.750% due 02/04/2025............................... 518
1,000 United Mexican States, Bond,
9.875% due 02/01/2010............................... 1,212
---------
2,568
---------
AEROSPACE/DEFENSE - 0.7%
1,000 Boeing Company, Deb.,
8.750% due 08/15/2021............................... 1,396
---------
Total Corporate Bonds and Notes
(Cost $136,074)..................................... 146,760
---------
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED
SECURITIES - 20.3%
FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA) - 11.2%
7,521 4.000% due 09/01/2018-10/01/2018...................... 7,380
1,901 5.000% due 01/01/2018................................. 1,924
9,290 5.500% due 03/01/2033-02/01/2035...................... 9,439
926 6.000% due 04/01/2032................................. 951
1,456 6.500% due 05/01/2031-05/01/2032...................... 1,510
67 7.000% due 01/01/2030................................. 70
2,000 7.630% due 02/01/2010................................. 2,233
---------
Total FNMA............................................
(Cost $23,261) 23,507
---------
FEDERAL HOME LOAN MORTGAGE CORPORATION (FHLMC) - 8.5%
3,290 4.500% due 08/01/2033................................. 3,222
9,921 5.000% due 04/01/2018-05/01/2033...................... 10,000
2,300 5.500% due 11/01/2017-05/01/2031...................... 2,357
1,380 6.000% due 03/01/2031-05/01/2032...................... 1,417
519 6.500% due 06/01/2029-08/01/2029...................... 540
305 7.000% due 01/01/2032................................. 322
24 9.000% due 01/01/2025................................. 27
---------
Total FHLMC
(Cost $17,824)...................................... 17,885
---------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (GNMA) - 0.6%
$ 657 6.000% due 05/20/2032................................. 677
459 7.000% due 06/20/2031................................. 484
31 9.000% due 02/15/2025................................. 35
---------
Total GNMA
(Cost $1,148)....................................... 1,196
---------
Total U.S. Government Agency Mortgage-Backed
Securities (Cost $42,233)........................... 42,588
---------
U.S. TREASURY OBLIGATIONS - 6.6%
U.S. TREASURY NOTES - 4.4%
2,000 3.375% due 11/15/2008................................. 1,980
7,250 3.375% due 12/15/2008................................. 7,180
---------
9,160
---------
U.S. TREASURY BOND - 2.2%
4,000 5.375% due 02/15/2031................................. 4,721
---------
Total U.S. Treasury Obligations
(Cost $13,840)...................................... 13,881
---------
SHARES
RIGHTS - 0.0% +++
(Cost $18)
5,250 Danielson Holding Corporation-Rights+................. 62***
---------
PRINCIPAL
AMOUNT
(000s)
- ---------
REPURCHASE AGREEMENT - 2.2%
(Cost $4,686)
$ 4,686 Agreement with Morgan Stanley, 2.850% dated 06/30/2005,
to be repurchased at $4,686,000 on 07/01/2005
(Collateralized by U.S. Treasury Note, 2.000% due
01/15/2014, market value$4,832,000)..................... 4,686
------
TOTAL INVESTMENTS (Cost $196,851*).................................... 99.1% 207,977
OTHER ASSETS (LIABILITIES)(NET)....................................... 0.9 1,872
----- ---------
NET ASSETS............................................................ 100.0% $ 209,849
===== =========
- --------------
* 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.
+ 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.
49
Portfolio of Investments
VT MONEY MARKET FUND
June 30, 2005 (unaudited)
PRINCIPAL
AMOUNT VALUE
(000s) (000s)
- --------- ------
COMMERCIAL PAPER (YANKEE) - 24.4%
$ 800 ABN AMRO Bank NV North America,
3.050% due 07/22/2005+++...................... $ 799
800 Allied Irish Banks NA,
3.320% due 09/09/2005+++...................... 795
700 Credit Suisse First Boston,
2.960% due 07/11/2005+++...................... 700
800 Dexia Delaware LLC,
3.130% due 08/24/2005+++...................... 796
800 Societe Generale North America,
3.140% due 08/09/2005+++...................... 797
600 UBS Finance (D.E.) LLC,
3.400% due 10/14/2005+++...................... 594
-------------
Total Commercial Paper (Yankee)
(Cost $4,481)................................. 4,481
-------------
CORPORATE BONDS AND NOTES - 38.3%
800 ACF Parking Ltd, Note,
(LOC: Fifth Third Bank),
3.340% due 05/01/2022+........................ 800
800 Bank One Corporation, Note, Series C,
3.494% due 02/27/2006++....................... 801
700 Citigroup, Inc., Note,
5.750% due 05/10/2006......................... 712
754 Everett Clinic, P.S., Bond,
(LOC: Bank of America),
3.320% due 05/01/2022+........................ 754
495 Gutwein Properties & Company, Note,
(LOC: Fifth Third Bank),
3.340% due 12/01/2024+........................ 495
855 Lauren Company LLC, Bond,
(LOC: Wells Fargo Bank),
3.370% due 07/01/2033+**...................... 855
800 National City Bank, Note,
2.500% due 04/17/2006......................... 792
700 PNC Bank NA,
3.060% due 10/03/2005++....................... 700
620 Suntrust Bank, Note,
2.125% due 01/30/2006......................... 615
500 U.S. Bank NA, Note,
2.220% due 07/18/2005......................... 500
-------------
Total Corporate Bonds and Notes
(Cost $7,024)................................. 7,024
-------------
TAXABLE MUNICIPAL BONDS - 27.6%
750 California Statewide Communities
Development Authority, MFHR,
(Hallmark House Apartments),
Series ZZ-T, (FNMA Collateral),
3.400% due 12/15/2036+........................ 750
855 Illinois Health Facilities Authority, Health
Care Revenue, (Loyola University
Health System), Series C, (MBIA Insured),
3.340% due 07/01/2024+........................ 855
800 Michigan State Housing Development
Authority, Rental Housing Revenue,
Series C, (FGIC Insured),
3.330% due 10/01/2020+........................ 800
920 New York State Housing Finance Agency,
Housing Revenue, (West 20th Street
Project), Series B, (FNMA Collateral),
3.330% due 05/15/2033+........................ 920
700 Oakland-Alameda County, California,
Coliseum Authority, Lease Revenue,
(Coliseum Project), Series D,
(LOC: Wachovia Bank),
3.320% due 02/01/2011+........................ 700
500 Shelby County, Tennessee, Health,
Educational & Housing Facilities Board,
MFHR, Series A-T,
(LOC: Bank of America),
3.250% due 07/01/2022+........................ 500
530 Washington State Housing Finance
Commission, MFHR, (Bremerton Project),
Series B, (FNMA Collateral),
3.350% due 05/15/2033+........................ 530
-------------
Total Taxable Municipal Bonds
(Cost $5,055)................................. 5,055
-------------
FUNDING AGREEMENT - 2.7%
(Cost $500)
500 New York Life Insurance,
3.240% due 08/03/2005++***.................... 500++
-------------
REPURCHASE AGREEMENT - 6.3%
(Cost $1,156)
1,156 Agreement with Morgan Stanley, 2.850%
dated 06/30/2005, to be repurchased at
$1,156,000 on 07/01/2005
(Collateralized by U.S. Treasury Note,
2.000% due 01/15/2014,
market value $1,192,000)...................... 1,156
-------------
TOTAL INVESTMENTS (Cost $18,216*)............................. 99.3% 18,216
OTHER ASSETS (LIABILITIES) (NET).............................. 0.7 129
----- -------------
NET ASSETS.................................................... 100.0% $ 18,345
===== =============
- -------------------
* 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 $0.03 per Fund share at June 30, 2005.
+ 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 June 30, 2005.
++ 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
FGIC -- Federal Guaranty Insurance Corporation
FNMA -- Federal National Mortgage Association
LOC -- Letter of Credit
MBIA -- Municipal Bond Investors Assurance
MFHR -- Multi-family Housing Revenue
See Notes to Financial Statements.
50
This Page Intentionally Left Blank.
51
Statements of Assets and Liabilities
WM VARIABLE TRUST
June 30, 2005 (unaudited)
(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............................... $ 55,271 $ 233,113 $ 277,425 $ 125,303 $ 118,479 $ 233,603
Investments held as collateral for
securities loaned..................... 2,298 10,791 5,199 10,201 5,444 6,813
---------- ------------ ----------- ------------- ---------- ----------
Total Investments (a).................... 57,569 243,904 282,624 135,504 123,923 240,416
Cash.......................................... --* 26 1 1 --* --
Unrealized appreciation of forward foreign
currency contracts....................... -- -- -- -- -- 15
Dividends and/or interest receivable.......... 210 423 304 80 96 204
Receivable for Fund shares sold............... -- 57 2 19 --* 1
Receivable for investment securities sold..... -- -- 773 268 168 406
Prepaid expenses.............................. 1 5 6 3 2 5
---------- ------------ ----------- ------------- ---------- ----------
Total Assets............................. 57,780 244,415 283,710 135,875 124,189 241,047
---------- ------------ ----------- ------------- ---------- ----------
LIABILITIES:
Payable upon return of securities loaned...... 2,298 10,791 5,199 10,201 5,444 6,813
Unrealized depreciation of forward foreign
currency contracts....................... -- -- -- -- -- 16
Payable for Fund shares redeemed.............. 3 52 26 56 126 415
Payable for investment securities purchased... 184 963 -- 232 157 --
Investment advisory fee payable............... 36 119 169 65 73 157
Distribution fees payable..................... --* 6 1 2 1 --*
Due to custodian.............................. -- -- -- -- -- 382
Variation margin.............................. -- -- -- -- -- --
Accrued legal and audit fees.................. 17 19 19 18 15 19
Accrued printing and postage expenses......... 2 21 35 17 13 33
Accrued expenses and other payables........... 1 6 2 1 1 6
---------- ------------ ----------- ------------- ---------- ----------
Total Liabilities........................ 2,541 11,977 5,451 10,592 5,830 7,841
---------- ------------ ----------- ------------- ---------- ----------
NET ASSETS.................................... $ 55,239 $ 232,438 $ 278,259 $ 125,283 $ 118,359 $ 233,206
========== ============ =========== ============= ========== ==========
(a) Investments, at cost...................... $ 39,304 $ 193,738 $ 224,934 $ 108,976 $ 95,841 $ 220,542
========== ============ =========== ============= ========== ==========
- --------------
* Amount represents less than $500.
See Notes to Financial Statements.
52
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
- ------------ ------------ ---------------- ------------- ---------- --------- -----------
$ 43,545 $ 44,157 $ 91,048 $ 55,537 $ 290,178 $ 207,977 $ 18,216
4,076 7,145 10,971 -- -- -- --
- ------------ ------------ ---------------- ------------- ---------- --------- -----------
47,621 51,302 102,019 55,537 290,178 207,977 18,216
1 23 1 -- 1 -- --*
-- -- 116 -- -- -- --
80 14 210 669 1,607 2,825 --
--* 4 2 3 -- 195 97
854 366 188 --* -- -- 59
1 1 1 1 5 4 --*
- ------------ ------------ ---------------- ------------- ---------- --------- -----------
48,557 51,710 102,537 56,210 291,791 211,001 18,372
- ------------ ------------ ---------------- ------------- ---------- --------- -----------
4,076 7,145 10,971 -- -- -- --
-- -- 30 -- -- -- --
-- 15 1 58 3 1 --*
141 410 362 2,016 12,206 1,001 --
31 30 201 22 114 86 7
-- 1 --* 1 2 5 1
-- -- -- --* -- 7 --
-- -- -- 5 -- -- --
18 19 19 18 19 18 15
7 3 14 6 26 33 4
2 2 13 --* 2 1 --*
- ------------ ------------ ---------------- ------------- ---------- --------- -----------
4,275 7,625 11,611 2,126 12,372 1,152 27
- ------------ ------------ ---------------- ------------- ---------- --------- -----------
$ 44,282 $ 44,085 $ 90,926 $ 54,084 $ 279,419 $ 209,849 $ 18,345
============ ============ ================ ============= ========== ========= ===========
$ 42,266 $ 47,893 $ 86,097 $ 55,166 $ 288,936 $ 196,851 $ 18,216
============ ============ ================ ============= ========== ========= ===========
See Notes to Financial Statements.
53
Statements of Assets and Liabilities (continued)
WM VARIABLE TRUST
June 30, 2005 (unaudited)
(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/
(accumulated net investment loss)............... $ 1,067 $ 3,010 $ 1,725 $ 361 $ 1,057 $ 275
Accumulated net realized gain/(loss) on
investment transactions......................... 465 5,893 (30,864) 744 3,674 (97,481)
Net unrealized appreciation of investments........... 18,265 50,166 57,690 26,528 28,082 19,873
Paid-in capital...................................... 35,442 173,369 249,708 97,650 85,546 310,539
------- --------- ----------- ------------- ---------- ---------
Total Net Assets............................ $55,239 $ 232,438 $ 278,259 $ 125,283 $ 118,359 $ 233,206
======= ========= =========== ============= ========== =========
NET ASSETS:
Class 1 Shares........................................ $54,260 $ 201,518 $ 275,127 $ 116,904 $ 111,810 $ 232,001
======= ========= =========== ============= ========== =========
Class 2 Shares........................................ $ 979 $ 30,920 $ 3,132 $ 8,379 $ 6,549 $ 1,205
======= ========= =========== ============= ========== =========
SHARES OUTSTANDING:
Class 1 Shares........................................ 3,243 12,054 15,267 5,837 6,960 18,113
======= ========= =========== ============= ========== =========
Class 2 Shares........................................ 59 1,859 175 420 409 95
======= ========= =========== ============= ========== =========
CLASS 1 SHARES:**
Net asset value, offering and redemption price
per share of beneficial interest outstanding..... $ 16.73 $ 16.72 $ 18.02 $ 20.03 $ 16.07 $ 12.81
======= ========= =========== ============= ========== =========
CLASS 2 SHARES:**
Net asset value, offering and redemption price
per share of beneficial interest outstanding..... $ 16.65 $ 16.63 $ 17.94 $ 19.95 $ 15.99 $ 12.74
======= ========= =========== ============= ========== =========
- --------------
* Amount represents less than $500.
** Net asset value is not shown in thousands.
See Notes to Financial Statements.
54
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
- ------------ ------------ ---------------- ------------- ---------- --------- -----------
$ 172 $ (163) $ (97) $ 1,065 $ 5,995 $ 5,611 $ --
2,449 (23,709) (10,832) (661) (3,007) (1,096) --*
5,355 3,409 16,004 367 1,242 11,126 --
36,306 64,548 85,851 53,313 275,189 194,208 18,345
- ------------ ------------ --------- ------------- ---------- --------- -----------
$ 44,282 $ 44,085 $ 90,926 $ 54,084 $ 279,419 $ 209,849 $ 18,345
============ ============ ========= ============= ========== ========= ===========
$ 44,282 $ 40,581 $ 90,342 $ 48,132 $ 268,846 $ 187,240 $ 13,710
============ ============ ========= ============= ========== ========= ===========
$ 3,504 $ 584 $ 5,952 $ 10,573 $ 22,609 $ 4,635
============ ========= ============= ========== ========= ===========
3,607 4,552 7,339 19,259 25,772 17,557 13,725
============ ============ ========= ============= ========== ========= ===========
397 48 2,392 1,015 2,130 4,637
============ ========= ============= ========== ========= ===========
$ 12.28 $ 8.91 $ 12.31 $ 2.50 $ 10.43 $ 10.66 $ 1.00
============ ============ ========= ============= ========== ========= ===========
$ 8.83 $ 12.25 $ 2.49 $ 10.41 $ 10.61 $ 1.00
============ ========= ============= ========== ========= ===========
See Notes to Financial Statements.
55
Statement of Operations
WM VARIABLE TRUST
For the Six Months Ended June 30, 2005 (unaudited)
(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
-------- --------- ----------- ------------- ---------- ---------
INVESTMENT INCOME:
Dividends............................. $ 1,106 $ 3,299 $ 2,698 $ 706 $ 1,415 $ 1,263
Interest.............................. 28 396 99 53 97 74
Foreign withholding taxes............. -- (26) (26) (1) (4) (14)
Securities lending income............. 10 46 8 12 22 9
-------- --------- ----------- ------------- ---------- ---------
Total investment income............. 1,144 3,715 2,779 770 1,530 1,332
-------- --------- ----------- ------------- ---------- ---------
EXPENSES:
Investment advisory fee............... 201 682 1,002 382 424 947
Class 2 Shares distribution fees...... 1 34 4 10 8 2
Custodian fees........................ 1 4 6 5 4 32
Legal and audit fees.................. 14 18 19 16 13 19
Trustees' fees........................ 1 2 3 1 1 3
Other................................. 6 16 20 12 11 50
-------- --------- ----------- ------------- ---------- ---------
Total expenses...................... 224 756 1,054 426 461 1,053
Fees reduced by custodian credits..... --* --* --* --* --* (1)
-------- --------- ----------- ------------- ---------- ---------
Net expenses........................ 224 756 1,054 426 461 1,052
-------- --------- ----------- ------------- ---------- ---------
NET INVESTMENT INCOME/(LOSS).......... 920 2,959 1,725 344 1,069 280
-------- --------- ----------- ------------- ---------- ---------
NET REALIZED AND UNREALIZED
GAIN/(LOSS) ON INVESTMENTS:
Net realized gain/(loss) on:
Security transactions................ 623 7,198 2,063 3,847 4,345 8,228
Forward foreign currency contracts
and foreign currency transactions... -- -- -- -- -- (17)
Futures contracts.................... -- -- -- -- -- --
-------- --------- ----------- ------------- ---------- ---------
Net realized gain/(loss) on
investment transactions............. 623 7,198 2,063 3,847 4,345 8,211
-------- --------- ----------- ------------- ---------- ---------
Capital gain distributions received... 1 -- -- -- -- --
-------- --------- ----------- ------------- ---------- ---------
Net increase from payment
by the Advisor**..................... -- -- -- -- -- --
-------- --------- ----------- ------------- ---------- ---------
Net change in unrealized
appreciation/depreciation of:
Securities........................... 935 (244) (3,026) ( 5,921) 288 ( 11,404)
Forward foreign currency contracts... -- -- -- -- -- 24
Foreign currency, futures contracts
and other assets and liabilities.... -- -- -- -- -- (1)
-------- --------- ----------- ------------- ---------- ---------
Net change in unrealized
appreciation/depreciation of
investment transactions.............. 935 (244) (3,026) ( 5,921) 288 ( 11,381)
-------- --------- ----------- ------------- ---------- ---------
Net realized and unrealized
gain/(loss) on investments............ 1,559 6,954 (963) ( 2,074) 4,633 (3,170)
-------- --------- ----------- ------------- ---------- ---------
NET INCREASE/(DECREASE) IN
NET ASSETS RESULTING
FROM OPERATIONS...................... $ 2,479 $ 9,913 $ 762 $ ( 1,730) $ 5,702 $ (2,890)
======== ========= =========== ============= ========== =========
- --------------
* Amount represents less than $500.
** See Note 3 in Notes to Financial Statements.
See Notes to Financial Statements.
56
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
- ------------ ------------ ---------------- ------------- ---------- --------- --------
$ 336 $ 68 $ 1,538 $ -- $ -- $ -- $ --
32 14 28 1,237 6,775 6,212 255
(29) (1) (155) -- -- -- --
36 30 44 -- -- -- --
- ------------ ------------ ---------------- ------------- ---------- --------- --------
375 111 1,455 1,237 6,775 6,212 255
- ------------ ------------ ---------------- ------------- ---------- --------- --------
181 196 409 135 687 516 42
-- 4 1 8 14 29 6
5 13 64 4 10 5 1
16 16 17 15 19 17 16
1 1 1 1 3 2 --
1 44 22 7 22 21 3
- ------------ ------------ ---------------- ------------- ---------- --------- --------
204 274 514 170 755 590 68
--* --* --* --* --* --* --*
- ------------ ------------ ---------------- ------------- ---------- --------- --------
204 274 514 170 755 590 68
- ------------ ------------ ---------------- ------------- ---------- --------- --------
171 (163) 941 1,067 6,020 5,622 187
- ------------ ------------ ---------------- ------------- ---------- --------- --------
2,295 (202) 1,948 (60) 596 534 --
(4) -- 177 -- -- -- --
-- -- -- (36) -- -- --
- ------------ ------------ ---------------- ------------- ---------- --------- --------
2,291 (202) 2,125 (96) 596 534 --
- ------------ ------------ ---------------- ------------- ---------- --------- --------
-- -- -- -- -- -- --
- ------------ ------------ ---------------- ------------- ---------- --------- --------
-- 170 -- -- -- -- --
- ------------ ------------ ---------------- ------------- ---------- --------- --------
(893) (5,168) (4,989) (514) (1,307) (1,745) --
--* -- 134 -- -- -- --
--* -- (9) 28 -- -- --
- ------------ ------------ ---------------- ------------- ---------- --------- --------
(893) (5,168) (4,864) (486) (1,307) (1,745) --
- ------------ ------------ ---------------- ------------- ---------- --------- --------
1,398 (5,200) (2,739) (582) (711) (1,211) --
- ------------ ------------ ---------------- ------------- ---------- --------- --------
$ 1,569 $ (5,363) $ (1,798) $ 485 $ 5,309 $ 4,411 $ 187
============ ============ ================ ============= ========== ========= ========
See Notes to Financial Statements.
57
STATEMENT OF CHANGES IN NET ASSETS
WM VARIABLE TRUST
For the Six Months Ended June 30, 2005 (unaudited)
(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 investment income/(loss)............... $ 920 $ 2,959 $ 1,725 $ 344 $ 1,069 $ 280
Net realized gain/(loss) on investment
transactions............................. 623 7,198 2,063 3,847 4,345 8,211
Capital gain distributions received........ 1 -- -- -- -- --
Net increase from payment
by the Advisor*.......................... -- -- -- -- -- --
Net change in unrealized
appreciation/ depreciation of
investments.............................. 935 (244) (3,026) (5,921) 288 (11,381)
---------- ------------ ------------ ------------- ---------- ---------
Net increase/(decrease) in net
assets resulting from operations......... 2,479 9,913 762 (1,730) 5,702 (2,890)
Distributions to shareholders
from:
Net investment income:
Class 1 Shares....................... (1,095) (3,268) (3,393) (864) (519) (1,293)
Class 2 Shares....................... (22) (459) (33) (46) (18) (4)
Net realized gains on investments:
Class 1 Shares....................... (2,005) -- -- -- (7,313) --
Class 2 Shares....................... (41) -- -- -- (431) --
Net increase/(decrease) in net
assets from Fund share transactions:
Class 1 Shares....................... 3,328 6,621 6,989 17 5,902 (9,469)
Class 2 Shares....................... 625 6,020 (266) 265 609 (130)
---------- ------------ ------------ ------------- ---------- ---------
Net increase/(decrease) in net assets...... 3,269 18,827 4,059 (2,358) 3,932 (13,786)
NET ASSETS:
Beginning of period........................ 51,970 213,611 274,200 127,641 114,427 246,992
---------- ------------ ------------ ------------- ---------- ---------
End of period.............................. $ 55,239 $ 232,438 $ 278,259 $ 125,283 $ 118,359 $ 233,206
========== ============ ============ ============= ========== =========
Undistributed net investment
income/(accumulated net investment
loss) at end of period................... $ 1,067 $ 3,010 $ 1,725 $ 361 $ 1,057 $ 275
========== ============ ============ ============= ========== =========
- -----------
* See Note 3 in Notes to Financial Statements.
See Notes to Financial Statements.
58
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
- ------------ ------------ ---------------- ------------- ---------- --------- ---------
$ 171 $ (163) $ 941 $ 1,067 $ 6,020 $ 5,622 $ 187
2,291 (202) 2,125 (96) 596 534 --
-- -- -- -- -- -- --
-- 170 -- -- -- -- --
(893) (5,168) (4,864) (486) (1,307) (1,745) --
--------- --------- --------- --------- --------- --------- ---------
1,569 (5,363) (1,798) 485 5,309 4,411 187
(202) -- (1,503) (1,866) (11,782) (10,718) (145)
-- -- (9) (227) (436) (1,267) (42)
(1,350) -- -- -- -- -- --
-- -- -- -- -- -- --
1,597 (7,433) 1,759 987 11,704 8,431 (950)
-- 206 292 (965) (1,949) 64 (769)
--------- --------- --------- --------- --------- --------- ---------
1,614 (12,590) (1,259) (1,586) 2,846 921 (1,719)
42,668 56,675 92,185 55,670 276,573 208,928 20,064
--------- --------- --------- --------- --------- --------- ---------
$ 44,282 $ 44,085 $ 90,926 $ 54,084 $ 279,419 $ 209,849 $ 18,345
========= ========= ========= ========= ========= ========= =========
$ 172 $ (163) $ (97) $ 1,065 $ 5,995 $ 5,611 $ --
========= ========= ========= ========= ========= ========= =========
See Notes to Financial Statements.
59
Statement of Changes in Net Assets (continued)
WM VARIABLE TRUST
For the Year Ended 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 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.
60
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
- ------------ ------------ ---------------- ------------- ----------- -------------- -----------
$ 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.
61
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
--------------------------- --------------------------- ---------------------------
PERIOD PERIOD PERIOD
ENDED ENDED ENDED
06/30/05 YEAR ENDED 06/30/05 YEAR ENDED 06/30/05 YEAR ENDED
(UNAUDITED) 12/31/04 (UNAUDITED) 12/31/04 (UNAUDITED) 12/31/04
------------ ------------ ------------ ------------ ------------ ------------
AMOUNT
CLASS 1:
Sold ................................. $ 456 $ 3,161 $ 7,059 $ 17,076 $ 8,710 $ 17,117
Issued as reinvestment of dividends .. 3,100 946 3,268 2,972 3,393 2,661
Redeemed ............................. (228) (3,080) (3,706) (7,176) (5,114) (14,677)
----------- ----------- ----------- ----------- ----------- -----------
Net increase/(decrease) .............. $ 3,328 $ 1,027 $ 6,621 $ 12,872 $ 6,989 $ 5,101
=========== =========== =========== =========== =========== ===========
CLASS 2:
Sold ................................. $ 780 $ 361 $ 7,464 $ 9,694 $ 414 $ 964
Issued as reinvestment of dividends .. 63 2 459 274 33 29
Redeemed ............................. (218) (57) (1,903) (1,462) (713) (517)
----------- ----------- ----------- ----------- ----------- -----------
Net increase/(decrease) .............. $ 625 $ 306 $ 6,020 $ 8,506 $ (266) $ 476
=========== =========== =========== =========== =========== ===========
SHARES
CLASS 1:
Sold ................................. 28 230 433 1,175 480 999
Issued as reinvestment of dividends .. 185 71 194 206 187 153
Redeemed ............................. (14) (216) (227) (490) (285) (853)
----------- ----------- ----------- ----------- ----------- -----------
Net increase/(decrease) .............. 199 85 400 891 382 299
=========== =========== =========== =========== =========== ===========
CLASS 2:
Sold ................................. 48 24 459 660 23 56
Issued as reinvestment of dividends .. 4 -- * 27 19 2 1
Redeemed ............................. (13) (4) (116) (101) (39) (30)
----------- ----------- ----------- ----------- ----------- -----------
Net increase/(decrease) .............. 39 20 370 578 (14) 27
=========== =========== =========== =========== =========== ===========
VT SMALL CAP GROWTH FUND VT INTERNATIONAL GROWTH FUND VT SHORT TERM INCOME FUND
--------------------------- --------------------------- ---------------------------
PERIOD PERIOD PERIOD
ENDED ENDED ENDED
06/30/05 YEAR ENDED 06/30/05 YEAR ENDED 06/30/05 YEAR ENDED
(UNAUDITED) 12/31/04 (UNAUDITED) 12/31/04 (UNAUDITED) 12/31/04
------------ ------------ ------------ ------------ ------------ ------------
AMOUNT
CLASS 1:
Sold ................................. $ 808 $ 4,692 $ 1,333 $ 8,357 $ 826 $ 4,963
Issued as reinvestment of dividends .. -- -- 1,503 969 1,866 1,841
Redeemed ............................. (8,241) (26,606) (1,077) (1,519) (1,705) (4,017)
----------- ----------- ----------- ----------- ----------- -----------
Net increase/(decrease) .............. $ (7,433) $ (21,914) $ 1,759 $ 7,807 $ 987 $ 2,787
=========== =========== =========== =========== =========== ===========
CLASS 2:
Sold ................................. $ 535 $ 1,547 $ 290 $ 112 $ 553 $ 3,276
Issued as reinvestment of dividends .. -- -- 9 2 227 296
Redeemed ............................. (329) (802) (7) (15) (1,745) (2,474)
----------- ----------- ----------- ----------- ----------- -----------
Net increase/(decrease) .............. $ 206 $ 745 $ 292 $ 99 $ (965) $ 1,098
=========== =========== =========== =========== =========== ===========
SHARES
CLASS 1:
Sold ................................. 91 519 106 726 322 1,902
Issued as reinvestment of dividends .. -- -- 122 86 750 731
Redeemed ............................. (923) (2,658) (86) (132) (663) (1,542)
----------- ----------- ----------- ----------- ----------- -----------
Net increase/(decrease) .............. (832) (2,139) 142 680 409 1,091
=========== =========== =========== =========== =========== ===========
CLASS 2:
Sold ................................. 64 170 24 9 216 1,257
Issued as reinvestment of dividends .. -- -- 1 --* 91 118
Redeemed ............................. (38) (89) (1) (1) (684) (960)
----------- ----------- ----------- ----------- ----------- -----------
Net increase /(decrease) ............. 26 81 24 8 (377) 415
=========== =========== =========== =========== =========== ===========
- -----------
* Amount represents less than 500 shares.
+ The VT Small Cap Value Fund commenced operations on May 3, 2004.
See Notes to Financial Statements.
62
VT WEST COAST EQUITY FUND VT MID CAP STOCK FUND VT GROWTH FUND VT SMALL CAP VALUE FUND+
- ----------------------------- ----------------------------- ----------------------------- ------------------------------
PERIOD PERIOD PERIOD PERIOD
ENDED ENDED ENDED ENDED
06/30/05 YEAR ENDED 06/30/05 YEAR ENDED 06/30/05 YEAR ENDED 06/30/05 PERIOD ENDED
(UNAUDITED) 12/31/04 (UNAUDITED) 12/31/04 (UNAUDITED) 12/31/04 (UNAUDITED) 12/31/04
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- --------------
$ 2,364 $ 9,806 $ 1,134 $ 12,260 $ 1,470 $ 48,627 $ 145 $ 36,284
864 277 7,832 1,878 1,293 -- 1,552 --
(3,211) (9,197) (3,064) (1,753) (12,232) (10,662) (100) (1,575)
- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
$ 17 $ 886 $ 5,902 $ 12,385 $ (9,469) $ 37,965 $ 1,597 $ 34,709
============ ============ ============ ============ ============ ============ ============ ============
$ 1,057 $ 3,190 $ 693 $ 1,995 $ 42 $ 543
46 10 449 85 4 --
(838) (994) (533) (332) (176) (564)
- ------------ ------------ ------------ ------------ ------------ ------------
$ 265 $ 2,206 $ 609 $ 1,748 $ (130) $ (21)
============ ============ ============ ============ ============ ============
120 529 70 812 115 3,961 12 3,631
43 15 487 123 99 -- 126 --
(163) (504) (186) (115) (958) (876) (8) (154)
- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
--* 40 371 820 (744) 3,085 130 3,477
============ ============ ============ ============ ============ ============ ============ ============
54 172 42 132 3 45
2 1 28 6 --* --
(42) (55) (33) (22) (13) (46)
- ------------ ------------ ------------ ------------ ------------ ------------
14 118 37 116 (10) (1)
============ ============ ============ ============ ============ ============
VT U.S. GOVERNMENT
SECURITIES FUND VT INCOME FUND VT MONEY MARKET FUND
- ------------------------------ ------------------------------ ------------------------------
PERIOD PERIOD PERIOD
ENDED ENDED ENDED
06/30/05 YEAR ENDED 06/30/05 YEAR ENDED 06/30/05 YEAR ENDED
(UNAUDITED) 12/31/04 (UNAUDITED) 12/31/04 (UNAUDITED) 12/31/04
- ------------- ------------- ------------- ------------- ------------- -------------
$ 4,111 $ 70,555 $ 2,082 $ 10,152 $ 4,304 $ 7,321
11,782 9,806 10,718 11,009 145 138
(4,189) (20,362) (4,369) (28,180) (5,399) (12,997)
- ------------ ------------ ------------ ------------ ------------ ------------
$ 11,704 $ 59,999 $ 8,431 $ (7,019) $ (950) $ (5,538)
============ ============ ============ ============ ============ ============
$ 226 $ 1,227 $ 1,561 $ 6,098 $ 2,259 $ 5,866
436 519 1,267 1,314 42 24
(2,611) (5,269) (2,764) (5,085) (3,070) (3,555)
- ------------ ------------ ------------ ------------ ------------ ------------
$ (1,949) $ (3,523) $ 64 $ 2,327 $ (769) $ 2,335
============ ============ ============ ============ ============ ============
384 6,590 188 928 4,304 7,321
1,135 953 1,015 1,057 145 138
(390) (1,903) (395) (2,588) (5,399) (12,997)
- ------------ ------------ ------------ ------------ ------------ ------------
1,129 5,640 808 (603) (950) (5,538)
============ ============ ============ ============ ============ ============
21 114 142 555 2,259 5,866
42 51 120 127 42 24
(244) (495) (253) (466) (3,070) (3,555)
- ------------ ------------ ------------ ------------ ------------ ------------
(181) (330) 9 216 (769) 2,335
============ ============ ============ ============ ============ ============
See Notes to Financial Statements.
63
Financial Highlights
For a Fund share outstanding throughout each period.
CLASS 1
----------------
SIX MONTHS YEARS ENDED
ENDED DECEMBER 31
06/30/05 ------------------------------
VT REIT FUND (UNAUDITED) 2004 2003 (3)
- ----------------------------------------------------------- ---------------- ------------- --------------
NET ASSET VALUE, BEGINNING OF PERIOD ......................... $ 16.96 $ 13.04 $ 10.00
------------- --------- -----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income .................................... 0.30(5) 0.49(5) 0.36(5)
Net realized and unrealized gain on investments .......... 0.49 3.74 2.68
------------- --------- -----------
Total from investment operations ......................... 0.79 4.23 3.04
------------- --------- -----------
LESS DISTRIBUTIONS:
Dividends from net investment income ..................... (0.36) (0.20) --
Dividends from net realized capital gains ................ (0.66) (0.11) --
------------- --------- -----------
Total distributions ...................................... (1.02) (0.31) --
------------- --------- -----------
NET ASSET VALUE, END OF PERIOD ............................... $ 16.73 $ 16.96 $ 13.04
============= ========= ===========
TOTAL RETURN (1) ............................................. 4.65% 33.08% 30.40%
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000s) ...................... $ 54,260 $ 51,632 $ 38,593
Ratio of operating expenses to average net assets ........ 0.88%(7) 0.88% 1.00%(7)
Ratio of net investment income to average net assets ..... 3.67%(7) 3.43% 4.21%(7)
Portfolio turnover rate .................................. 8% 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%(7) 0.88% 1.00%(7)
CLASS 1
-----------
SIX MONTHS
ENDED YEARS ENDED DECEMBER 31
06/30/05 --------------------------------------------------------
VT EQUITY INCOME FUND (UNAUDITED) 2004 2003 2002 2001 2000
- ------------------------------------------------------------ ------------ ----------- ----------- ----------- --------- ---------
NET ASSET VALUE, BEGINNING OF PERIOD ....................... $ 16.26 $ 13.90 $ 11.01 $ 12.87 $ 12.11 $ 10.50
--------- -------- -------- -------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ................................. 0.22(5) 0.32(5) 0.31(5) 0.36(5) 0.42(5) 0.36(5)
Net realized and unrealized gain/(loss) on
investments ......................................... 0.52 2.30 2.95 (1.95) 0.54 1.42
--------- -------- -------- -------- ------- -------
Total from investment operations ...................... 0.74 2.62 3.26 (1.59) 0.96 1.78
--------- -------- -------- -------- ------- -------
LESS DISTRIBUTIONS:
Dividends from net investment income .................. (0.28) (0.26) (0.31) (0.25) (0.12) (0.17)
Dividends from net realized capital gains ............. -- -- (0.06) (0.02) (0.08) --
--------- -------- -------- -------- ------- -------
Total distributions ................................... (0.28) (0.26) (0.37) (0.27) (0.20) (0.17)
--------- -------- -------- -------- ------- -------
NET ASSET VALUE, END OF PERIOD ............................. $ 16.72 $ 16.26 $ 13.90 $ 11.01 $ 12.87 $ 12.11
========= ======== ======== ======== ======= =======
TOTAL RETURN (1) ........................................... 4.52% 19.12% 30.10% (12.51)% 7.92% 17.19%
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000s) ................... $ 201,518 $189,517 $149,603 $112,304 $97,982 $46,744
Ratio of operating expenses to average net assets ..... 0.66%(7) 0.67% 0.70% 0.70% 0.70% 0.98%
Ratio of net investment income to average net assets .. 2.74%(7) 2.15% 2.63% 3.04% 3.29% 3.31%
Portfolio turnover rate ............................... 12% 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).. 0.66%(7) 0.67% 0.70% 0.70% 0.70% 0.99%
- --------------
(1) Total return is not annualized for periods of 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.
64
CLASS 2
- ---------------
SIX MONTHS YEARS ENDED
ENDED DECEMBER 31
06/30/05 ---------------------------------
(UNAUDITED) 2004 2003 (4)
- --------------- ----------- ----------------
$ 16.90 $ 13.03 $ 11.20
- ------------ -------- -------------
0.29(5) 0.45(5) 0.28(5)
0.47 3.73 1.55
- ------------ -------- -------------
0.76 4.18 1.83
- ------------ -------- -------------
(0.35) (0.20) --
(0.66) (0.11) --
- ------------ -------- -------------
(1.01) (0.31) --
- ------------ -------- -------------
$ 16.65 $ 16.90 $ 13.03
============ ======== =============
4.52% 32.72% 16.34%
$ 979 $ 338 $ 1
1.13%(7) 1.13% 1.25%(7)
3.42%(7) 3.18% 3.96%(7)
8% 13% 3%
1.13%(7) 1.13% 1.25%(7)
CLASS 2
- --------------
SIX MONTHS
ENDED YEARS ENDED DECEMBER 31
06/30/05 ------------------------------------------------------------
(UNAUDITED) 2004 2003 2002 2001 (6)
- -------------- ------------ ----------- ------------- -------------
$ 16.18 $ 13.85 $ 10.99 $ 12.87 $ 12.64
- ----------- --------- -------- ---------- ----------
0.20(5) 0.28(5) 0.29(5) 0.32(5) 0.22(5)
0.50 2.30 2.93 (1.93) 0.21
- ----------- --------- -------- ---------- ----------
0.70 2.58 3.22 (1.61) 0.43
- ----------- --------- -------- ---------- ----------
(0.25) (0.25) (0.30) (0.25) (0.12)
-- -- (0.06) (0.02) (0.08)
- ----------- --------- -------- ---------- ----------
(0.25) (0.25) (0.36) (0.27) (0.20)
- ----------- --------- -------- ---------- ----------
$ 16.63 $ 16.18 $ 13.85 $ 10.99 $ 12.87
=========== ========= ======== ========== ==========
4.33% 18.82% 29.73% (12.67)% 3.40%
$ 30,920 $ 24,094 $ 12,619 $ 6,460 $ 658
0.91%(7) 0.92% 0.95% 0.95% 0.94%(7)
2.49%(7) 1.90% 2.38% 2.79% 3.05%(7)
12% 26% 23% 16% 15%
0.91%(7) 0.92% 0.95% 0.95% 0.94%(7)
See Notes to Financial Statements.
65
Financial Highlights
For a Fund share outstanding throughout each period.
CLASS 1
------------
SIX MONTHS
ENDED YEARS ENDED DECEMBER 31
06/30/05 ----------------------------------------------------------
VT GROWTH & INCOME FUND (UNAUDITED) 2004 2003 2002 2001 2000
- ------------------------------------------------------------ ------------ ----------- ----------- ----------- ---------- -----------
NET ASSET VALUE, BEGINNING OF PERIOD........................ $ 18.19 $ 16.85 $ 13.45 $ 17.18 $ 18.23 $ 18.58
--------- -------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income................................... 0.11(4) 0.23(4) 0.19(4) 0.15(4) 0.09 0.07(4)
Net realized and unrealized gain/
(loss) on investments.................................. (0.05) 1.29 3.39 (3.77) (0.70) 0.37
--------- -------- -------- -------- -------- --------
Total from investment operations........................ 0.06 1.52 3.58 (3.62) (0.61) 0.44
--------- -------- -------- -------- -------- --------
LESS DISTRIBUTIONS:
Dividends from net investment income.................... (0.23) (0.18) (0.18) (0.11) (0.06) (0.04)
Dividends from net realized capital gains............... -- -- -- -- (0.38) (0.75)
--------- -------- -------- -------- -------- --------
Total distributions..................................... (0.23) (0.18) (0.18) (0.11) (0.44) (0.79)
--------- -------- -------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD.............................. $ 18.02 $ 18.19 $ 16.85 $ 13.45 $ 17.18 $ 18.23
========= ======== ======== ======== ======== ========
TOTAL RETURN (1)............................................ 0.29% 9.08% 26.80% (21.16)% (3.51)% 2.36%
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000s)..................... $ 275,127 $270,775 $245,820 $209,337 $319,171 $309,992
Ratio of operating expenses to average net assets ...... 0.77%(7) 0.79% 0.83% 0.81% 0.78% 0.97%
Ratio of net investment income to average net assets.... 1.27%(7) 1.33% 1.28% 1.01% 0.54% 0.39%
Portfolio turnover rate................................. 7% 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)... 0.77%(7) 0.79% 0.83% 0.81% 0.78% 0.97%
CLASS 1
------------
SIX MONTHS
ENDED YEARS ENDED DECEMBER 31
06/30/05 ----------------------------------------------------------
VT WEST COAST EQUITY FUND (UNAUDITED) 2004 2003 2002 2001 2000
- ----------------------------------------------------------- ------------ ---------- ----------- ----------- ---------- -----------
NET ASSET VALUE, BEGINNING OF PERIOD....................... $ 20.45 $ 18.14 $ 12.69 $ 16.70 $ 16.01 $ 15.14
--------- -------- -------- -------- ------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income................................. 0.06 0.16(4) 0.06(4) 0.06(4) 0.10(4) 0.13(4)
Net realized and unrealized gain/(loss) on investment. (0.33) 2.20 5.43 (3.79) 1.03 0.84
--------- -------- -------- -------- ------- --------
Total from investment operations...................... (0.27) 2.36 5.49 (3.73) 1.13 0.97
--------- -------- -------- -------- ------- --------
LESS DISTRIBUTIONS:
Dividends from net investment income.................. (0.15) (0.05) (0.04) (0.08) (0.09) --
Dividends from net realized capital gains............. -- -- -- (0.20) (0.35) (0.10)
--------- -------- -------- -------- ------- --------
Total distributions................................... (0.15) (0.05) (0.04) (0.28) (0.44) (0.10)
--------- -------- -------- -------- ------- --------
NET ASSET VALUE, END OF PERIOD............................. $ 20.03 $ 20.45 $ 18.14 $ 12.69 $ 16.70 $ 16.01
. ========= ======== ======== ======== ======= ========
TOTAL RETURN (1).......................................... (1.33)% 13.03% 43.35% (22.55)% 6.88% 6.30%
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000s).................. $ 116,904 $119,371 $105,160 $ 68,227 $83,835 $ 71,307
Ratio of operating expenses to average net assets.... 0.68%(7) 0.69% 0.71% 0.71% 0.70% 0.91%
Ratio of net investment income to average net assets 0.58%(7) 0.87% 0.42% 0.42% 0.59% 0.76%
Portfolio turnover rate.............................. 7% 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)....................................... 0.68%(7) 0.69% 0.71% 0.71% 0.70% 0.91%
----------------
(1) Total return is not annualized for periods of 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.
66
CLASS 2
- ---------------
SIX MONTHS
ENDED YEARS ENDED DECEMBER 31
06/30/05 --------------------------------------------------------------
(UNAUDITED) 2004 2003 2002 2001 (3)
- --------------- ------------ ------------- ------------- ----------------
$ 18.10 $ 16.79 $ 13.42 $ 17.18 $ 16.59
- ------------ --------- ---------- ---------- -------------
0.09(4) 0.19(4) 0.15(4) 0.11(4) 0.00(5)
(0.07) 1.28 3.39 (3.76) 0.59(6)
- ------------ --------- ---------- ---------- -------------
0.02 1.47 3.54 (3.65) 0.59
- ------------ --------- ---------- ---------- -------------
(0.18) (0.16) (0.17) (0.11) --
-- -- -- -- --
- ------------ --------- ---------- ---------- -------------
(0.18) (0.16) (0.17) (0.11) --
- ------------ --------- ---------- ---------- -------------
$ 17.94 $ 18.10 $ 16.79 $ 13.42 $ 17.18
============ ========= ========== ========== =============
0.12% 8.78% 26.49% (21.33)% 3.56%
$ 3,132 $ 3,425 $ 2,712 $ 1,301 $ 112
1.02%(7) 1.04% 1.08% 1.06% 1.03%(7)
1.02%(7) 1.08% 1.03% 0.76% 0.29%(7)
7% 11% 16% 20% 25%
1.02%(7) 1.04% 1.08% 1.06% 1.03%(7)
CLASS 2
- --------------
SIX MONTHS
ENDED YEARS ENDED DECEMBER 31
06/30/05 -------------------------------------------------------------------
(UNAUDITED) 2004 2003 2002 2001 (3)
- ------------- ------------- --------------- ------------- ----------------
$ 20.35 $ 18.08 $ 12.67 $ 16.70 $ 15.52
- ------------ ---------- ------------ ---------- -------------
0.03 0.11(4) 0.02(4) 0.02(4) 0.01(4)
(0.32) 2.19 5.41 (3.77) 1.17
- ------------ ---------- ------------ ---------- -------------
(0.29) 2.30 5.43 (3.75) 1.18
- ------------ ---------- ------------ ---------- -------------
(0.11) (0.03) (0.02) (0.08) --
-- -- -- (0.20) --
- ------------ ---------- ------------ ---------- -------------
(0.11) (0.03) (0.02) (0.28) --
- ------------ ---------- ------------ ---------- -------------
$ 19.95 $ 20.35 $ 18.08 $ 12.67 $ 16.70
============ ========== ============ ========== =============
(1.44)% 12.72% 42.93% (22.67)% 7.60%
$ 8,379 $ 8,270 $ 5,202 $ 2,313 $ 58
0.93%(7) 0.94% 0.96% 0.96% 0.95%(7)
0.33%(7) 0.62% 0.17% 0.17% 0.34%(7)
7% 17% 16% 20% 19%
0.93%(7) 0.94% 0.96% 0.96% 0.95%(7)
See Notes to Financial Statements.
67
Financial Highlights
For a Fund share outstanding throughout each period.
CLASS 1
----------------------------------------------------------------------
SIX MONTHS
ENDED YEARS ENDED DECEMBER 31
06/30/05 -------------------------------------------------------
(UNAUDITED) 2004 2003 2002 2001 2000(3)
----------- -------- ------- ------- ------- -------
VT MID CAP STOCK FUND
NET ASSET VALUE, BEGINNING OF PERIOD ................... $ 16.44 $ 14.63 $ 11.49 $ 13.14 $ 11.74 $ 10.00
-------- -------- ------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income/(loss) ................ 0.15 0.08(5) 0.06(5) 0.04(5) 0.03(5) 0.01(5)
Net realized and unrealized gain/(loss) on
investments ............................... 0.69 2.03 3.12 (1.36) 1.38 1.73
-------- -------- ------- ------- ------- -------
Total from investment operations ............ 0.84 2.11 3.18 (1.32) 1.41 1.74
-------- -------- ------- ------- ------- -------
LESS DISTRIBUTIONS:
Dividends from net investment income ........ (0.08) (0.05) (0.04) (0.03) (0.01) --
Dividends from net realized capital gains ... (1.13) (0.25) -- (0.30) -- --
-------- -------- ------- ------- ------- -------
Total distributions ......................... (1.21) (0.30) (0.04) (0.33) (0.01) --
-------- -------- ------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD ......................... $ 16.07 $ 16.44 $ 14.63 $ 11.49 $ 13.14 $ 11.74
======== ======== ======= ======= ======= =======
TOTAL RETURN(1) ........................................ 5.09% 14.59% 27.73% (10.35)% 11.99% 17.40%
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000s) ......... $111,810 $108,347 $84,408 $63,119 $71,988 $56,717
Ratio of operating expenses to average net
assets .................................... 0.80%(7) 0.81% 0.83% 0.84% 0.82% 1.04%(7)
Ratio of net investment income/(loss) to
average net assets ........................ 1.91%(7) 0.54% 0.47% 0.32% 0.21% 0.14%(7)
Portfolio turnover rate ..................... 13% 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) ....... 0.80%(7) 0.81% 0.83% 0.84% 0.82% 1.04%(7)
CLASS 1
--------------------------------------------------------------------------
SIX MONTHS
ENDED YEARS ENDED DECEMBER 31
06/30/05 -----------------------------------------------------------
(UNAUDITED) 2004 2003 2002 2001 2000
---------- -------- -------- -------- -------- --------
VT GROWTH FUND
NET ASSET VALUE, BEGINNING OF PERIOD ............... $ 13.03 $ 12.04 $ 9.32 $ 13.51 $ 22.99 $ 38.54
-------- -------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income/(loss) ............ 0.02(5) 0.07 (0.00)(6) (0.01)(5) 0.02(5) (0.03)(5)
Net realized and unrealized gain/
(loss) on investments ................. (0.17) 0.92 2.72 (4.18) (6.24) (6.61)
-------- -------- -------- -------- -------- --------
Total from investment operations ........ (0.15) 0.99 2.72 (4.19) (6.22) (6.64)
-------- -------- -------- -------- -------- --------
LESS DISTRIBUTIONS:
Dividends from net investment
income ................................ (0.07) -- -- -- (0.37) (0.02)
Dividends from net realized capital
gains ................................. -- -- -- -- (2.89) (8.89)
-------- -------- -------- -------- -------- --------
Total distributions ..................... (0.07) -- -- -- (3.26) (8.91)
-------- -------- -------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD ..................... $ 12.81 $ 13.03 $ 12.04 $ 9.32 $ 13.51 $ 22.99
======== ======== ======== ======== ======== ========
TOTAL RETURN(1) .................................... (1.15)% 8.22% 29.18% (31.01)% (29.05)% (22.04)%
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL
DATA:
Net assets, end of period (in 000s) ..... $232,001 $245,637 $189,837 $135,422 $167,483 $306,551
Ratio of operating expenses to
average net assets .................... 0.89%(7) 0.94% 0.98% 1.00% 0.94% 1.10%
Ratio of net investment income/
(loss) to average net assets .......... 0.24%(7) 0.58% (0.04)% (0.05)% 0.11% (0.10)%
Portfolio turnover rate ................. 50% 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) ........... 0.89%(7) 0.95% 0.98% 1.00% 0.94% 1.11%
- -----------------------
(1) Total return is not annualized for periods of 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.
68
CLASS 2
- -----------------------------------------------------------------
SIX MONTHS
ENDED YEARS ENDED DECEMBER 31
06/30/05 ------------------------------------------------
(UNAUDITED) 2004 2003 2002 2001(4)
- ----------- --------- -------- --------- -------
$ 16.36 $ 14.58 $ 11.46 $ 13.13 $ 12.35
- ----------- --------- -------- --------- -------
0.12 0.04(5) 0.03(5) 0.01(5) (0.00)(5)(6)
0.69 2.02 3.11 (1.36) 0.79
- ----------- --------- -------- --------- -------
0.81 2.06 3.14 (1.35) 0.79
- ----------- --------- -------- --------- -------
(0.05) (0.03) (0.02) (0.02) (0.01)
(1.13) (0.25) -- (0.30) --
- ----------- --------- -------- --------- -------
(1.18) (0.28) (0.02) (0.32) (0.01)
- ----------- --------- -------- --------- -------
$ 15.99 $ 16.36 $ 14.58 $ 11.46 $ 13.13
=========== ========= ======== ========= =======
4.91% 14.28% 27.45% (10.54)% 6.38%
$ 6,549 $ 6,080 $ 3,725 $ 1,962 $ 668
1.05%(7) 1.06% 1.08% 1.09% 1.07%(7)
1.66%(7) 0.29% 0.22% 0.07% (0.04)%(7)
13% 32% 37% 28% 30%
1.05%(7) 1.06% 1.08% 1.09% 1.07%(7)
CLASS 2
- ----------------------------------------------------------------------
SIX MONTHS
ENDED YEARS ENDED DECEMBER 31
06/30/05 --------------------------------------------------
(UNAUDITED) 2004 2003 2002 2001(8)
- ----------- --------- -------- -------- ----------
$ 12.94 $ 11.98 $ 9.30 $ 13.51 $ 12.81
- ----------- --------- -------- -------- ----------
(0.00)(5)(6) 0.04 (0.03) (0.03)(5) (0.00)(5)(6)
(0.16) 0.92 2.71 (4.18) 0.70(9)
- ----------- --------- -------- -------- ----------
(0.16) 0.96 2.68 (4.21) 0.70
- ----------- --------- -------- -------- ----------
(0.04) -- -- -- --
-- -- -- -- --
- ----------- --------- -------- -------- ----------
(0.04) -- -- -- --
- ----------- --------- -------- -------- ----------
$ 12.74 $ 12.94 $ 11.98 $ 9.30 $ 13.51
=========== ========= ======== ======== ==========
(1.27)% 8.01% 28.82% (31.16)% 5.46%
$ 1,205 $ 1,355 $ 1,274 $ 622 $ 31
1.14%(7) 1.19% 1.23% 1.25% 1.19%(7)
(0.01)%(7) 0.33% (0.29)% (0.30)% (0.14)%(7)
50% 66% 75% 171% 92%
1.14%(7) 1.20% 1.23% 1.25% 1.19%(7)
See Notes to Financial Statements.
69
Financial Highlights
For a Fund share outstanding throughout each period.
CLASS 1
----------------------------
SIX MONTHS YEAR
ENDED ENDED
06/30/05 DECEMBER 31
(UNAUDITED) 2004 (3)
----------- -----------
VT SMALL CAP VALUE FUND
NET ASSET VALUE, BEGINNING OF PERIOD .............................. $ 12.27 $ 10.00
----------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income .................................. 0.05 0.06
Net realized and unrealized gain on investments ........ 0.41 2.21
----------- ----------
Total from investment operations ....................... 0.46 2.27
----------- ----------
LESS DISTRIBUTIONS:
Dividends from net investment income ................... (0.06) --
Dividends from net realized capital gains .............. (0.39) --
----------- ----------
Total distributions .................................... (0.45) --
----------- ----------
NET ASSET VALUE, END OF PERIOD .................................... $ 12.28 $ 12.27
=========== ==========
TOTAL RETURN(1) 3.71% 22.70%
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000s) .................... $ 44,282 $ 42,668
Ratio of operating expenses to average net assets ...... 0.96%(4) 1.08%(4)
Ratio of net investment income to average net assets ... 0.81%(4) 0.83%(4)
Portfolio turnover rate ................................ 26% 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) 0.96%(4) 1.08%(4)
CLASS 1
-------------------------------------------------------------------------
SIX MONTHS
ENDED YEARS ENDED DECEMBER 31
06/30/05 --------------------------------------------------------
(UNAUDITED) 2004 2003 2002 2001 2000
----------- ------- ------- ------- ------- -------
VT SMALL CAP GROWTH FUND
NET ASSET VALUE, BEGINNING OF PERIOD .................. $ 9.85 $ 9.41 $ 5.49 $ 11.37 $ 16.03 $ 19.13
-------- ------- ------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment loss ........................ (0.03) (0.05) (0.02)(6) (0.02)(6) (0.06)(6) (0.10)
Net realized and unrealized gain/(loss)
on investments ........................... (0.91) 0.49 3.94 (5.27) (1.69) (1.65)
-------- ------- ------- ------- ------- -------
Total from investment operations ........... (0.94) 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 ........................ $ 8.91 $ 9.85 $ 9.41 $ 5.49 $ 11.37 $ 16.03
======== ======= ======= ======= ======= =======
TOTAL RETURN(1) ....................................... (9.54)%(7) 4.68% 71.40% (47.15)% (12.73)% (10.58)%
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000s) ........ $ 40,581 $53,049 $70,806 $39,476 $73,367 $82,288
Ratio of operating expenses to average net
assets ................................... 1.17%(4) 0.98% 1.00% 1.00% 0.95% 1.11%
Ratio of net investment loss to average
net assets ............................... (0.69)%(4) (0.56)% (0.31)% (0.31)% (0.44)% (0.61)%
Portfolio turnover rate .................... 218% 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) ...... 1.17%(4) 0.98% 1.00% 1.00% 0.95% 1.11%
- --------------------
(1) Total return is not annualized for periods of 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) The VT Small Cap Growth Fund commenced selling Class 2 shares on May 1,
2001.
(6) Per share numbers have been calculated using the average shares method.
(7) In 2005, 0.31% of the VT Small Cap Growth Fund's total return for Class 1
and Class 2 shares consists of reimbursements by the Advisor. Excluding
the reimbursements, the total return would have been (9.85)% and (10.03)%
for Class 1 and Class 2 shares, respectively. (See Note 3 in Notes to
Financial Statements.)
See Notes to Financial Statements.
70
CLASS 2
- ----------------------------------------------------------------------
SIX MONTHS
ENDED YEARS ENDED DECEMBER 31
06/30/05 ----------------------------------------------------
(UNAUDITED) 2004 2003 2002 2001(5)
- ----------- --------- -------- --------- ---------
$ 9.77 $ 9.35 $ 5.47 $ 11.36 $ 14.41
- ---------- --------- -------- --------- ---------
(0.04) (0.07) (0.04)(6) (0.03)(6) (0.05)(6)
(0.90) 0.49 3.92 (5.27) (0.09)
- ---------- --------- -------- --------- ---------
(0.94) 0.42 3.88 (5.30) (0.14)
- ---------- --------- -------- --------- ---------
-- -- -- -- --
-- -- -- (0.59) (2.91)
- ---------- --------- -------- --------- ---------
-- -- -- (0.59) (2.91)
- ---------- --------- -------- --------- ---------
$ 8.83 $ 9.77 $ 9.35 $ 5.47 $ 11.36
========== ========= ======== ========= =========
(9.72)%(7) 4.49% 70.93% (47.28)% (3.00)%
$ 3,504 $ 3,626 $ 2,710 $ 1,068 $ 440
1.42%(4) 1.23% 1.25% 1.25% 1.20%(4)
(0.94)%(4) (0.81)% (0.56)% (0.56)% (0.69)%(4)
218% 41% 67% 29% 46%
1.42%(4) 1.23% 1.25% 1.25% 1.20%(4)
See Notes to Financial Statements.
71
Financial Highlights
For a Fund share outstanding throughout each period.
CLASS 1
----------------------------------------------------------------------
SIX MONTHS
ENDED YEARS ENDED DECEMBER 31
06/30/05 ------------------------------------------------------
(UNAUDITED) 2004 2003 2002 2001 2000
----------- ------- ------- ------- ------- -------
VT INTERNATIONAL GROWTH FUND
NET ASSET VALUE, BEGINNING OF PERIOD .................... $ 12.77 $ 11.38 $ 8.51 $ 10.21 $ 13.65 $ 17.63
---------- ------- ------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ........................ 0.13(4) 0.12(4) 0.09(4) 0.04(4) 0.04 0.02(4)
Net realized and unrealized gain/(loss) on
investments ................................ (0.38) 1.41 2.91 (1.63) (2.39) (3.42)
---------- ------- ------- ------- ------- -------
Total from investment operations ............. (0.25) 1.53 3.00 (1.59) (2.35) (3.40)
---------- ------- ------- ------- ------- -------
LESS DISTRIBUTIONS:
Dividends from net investment income ......... (0.21) (0.14) (0.13) (0.11) (0.09) (0.43)
Dividends from net realized capital gains .... -- -- -- -- (1.00) (0.15)
---------- ------- ------- ------- ------- -------
Total distributions .......................... (0.21) (0.14) (0.13) (0.11) (1.09) (0.58)
---------- ------- ------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD .......................... $ 12.31 $ 12.77 $ 11.38 $ 8.51 $ 10.21 $ 13.65
========== ======= ======= ======= ======= =======
TOTAL RETURN(1) ......................................... (2.28)% 13.60% 35.51% (15.71)% (17.78)% (19.84)%
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000s) .......... $ 90,342 $91,875 $74,138 $50,625 $49,178 $67,227
Ratio of operating expenses to average net
assets ..................................... 1.13%(8) 1.16% 1.21% 1.26% 1.19% 1.31%
Ratio of net investment income to average
net assets ................................. 2.08%(8) 0.99% 0.94% 0.49% 0.33% 0.11%
Portfolio turnover rate ...................... 20% 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) ........ 1.13%(8) 1.16% 1.21% 1.26% 1.19% 1.31%
CLASS 1
----------------------------------------------------------------------
SIX MONTHS
ENDED YEARS ENDED DECEMBER 31
06/30/05 ------------------------------------------------------
(UNAUDITED) 2004 2003 2002 2001 2000
----------- ------- ------- ------- ------- -------
VT SHORT TERM INCOME FUND
NET ASSET VALUE, BEGINNING OF PERIOD ..................... $ 2.58 $ 2.63 $ 2.65 $ 2.60 $ 2.44 $ 2.39
---------- ------- ------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ......................... 0.05(4) 0.10(4) 0.11(4) 0.14(4) 0.15(4) 0.14
Net realized and unrealized gain/(loss) on
investments ................................. (0.03) (0.05) 0.04 0.02 0.05 0.05
---------- ------- ------- ------- ------- -------
Total from investment operations .............. 0.02 0.05 0.15 0.16 0.20 0.19
---------- ------- ------- ------- ------- -------
LESS DISTRIBUTIONS:
Dividends from net investment income .......... (0.10) (0.10) (0.17) (0.11) (0.04) (0.14)
Dividends from net realized capital gains ..... -- -- -- -- -- --
---------- ------- ------- ------- ------- -------
Total distributions ........................... (0.10) (0.10) (0.17) (0.11) (0.04) (0.14)
---------- ------- ------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD ........................... $ 2.50 $ 2.58 $ 2.63 $ 2.65 $ 2.60 $ 2.44
========== ======= ======= ======= ======= =======
TOTAL RETURN(1) .......................................... 0.83% 2.07% 5.52% 6.26% 8.15% 8.23%
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000s) ........... $ 48,132 $48,574 $46,628 $41,592 $50,343 $43,479
Ratio of operating expenses to average net
assets ...................................... 0.60%(8) 0.61% 0.63% 0.62% 0.60% 0.80%
Ratio of net investment income to average
net assets .................................. 3.97%(8) 3.74% 4.31% 5.42% 5.77% 5.66%
Portfolio turnover rate ....................... 12% 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) ......... 0.60%(8) 0.61% 0.63% 0.62% 0.60% 0.81%
- -------------------
(1) Total return is not annualized for periods of 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.
72
CLASS 2
- ----------------------------------------------------------------------------
SIX MONTHS
ENDED YEARS ENDED DECEMBER 31
06/30/05 ----------------------------------------------------------
(UNAUDITED) 2004 2003 2002 2001(3)
- ------------ ----------- ----------- ---------- ----------
$ 12.71 $ 11.34 $ 8.49 $ 10.21 $ 9.78
- ------------ ----------- ----------- ---------- ----------
0.11(4) 0.09(4) 0.06(4) 0.02(4) 0.00(5)
(0.37) 1.41 2.90 (1.63) 0.43(6)
- ------------ ----------- ----------- ---------- ----------
(0.26) 1.50 2.96 (1.61) 0.43
- ------------ ----------- ----------- ---------- ----------
(0.20) (0.13) (0.11) (0.11) --
-- -- -- -- --
- ------------ ----------- ----------- ---------- ----------
(0.20) (0.13) (0.11) (0.11) --
- ------------ ----------- ----------- ---------- ----------
$ 12.25 $ 12.71 $ 11.34 $ 8.49 $ 10.21
============ =========== =========== ========== ==========
(2.40)% 13.33% 35.10% (15.91)% 4.40%
$ 584 $ 310 $ 182 $ 93 $ 0(7)
1.38%(8) 1.41% 1.46% 1.51% 1.40%(8)
1.83%(8) 0.74% 0.69% 0.24% 0.12%(8)
20% 23% 22% 30% 34%
1.38%(8) 1.41% 1.46% 1.51% 1.40%(8)
CLASS 2
- ----------------------------------------------------------------------------
SIX MONTHS
ENDED YEARS ENDED DECEMBER 31
06/30/05 ----------------------------------------------------------
(UNAUDITED) 2004 2003 2002 2001(3)
- ------------ ----------- ----------- ---------- ----------
$ 2.56 $ 2.62 $ 2.64 $ 2.60 $ 2.60
- ------------ ----------- ----------- ---------- ----------
0.05(4) 0.09(4) 0.10(4) 0.13(4) 0.02(4)
(0.03) (0.05) 0.04 0.02 (0.02)(6)
- ------------ ----------- ----------- ---------- ----------
0.02 0.04 0.14 0.15 0.00(5)
- ------------ ----------- ----------- ---------- ----------
(0.09) (0.10) (0.16) (0.11) --
-- -- -- -- --
- ------------ ----------- ----------- ---------- ----------
(0.09) (0.10) (0.16) (0.11) --
- ------------ ----------- ----------- ---------- ----------
$ 2.49 $ 2.56 $ 2.62 $ 2.64 $ 2.60
============ =========== =========== ========== ==========
0.95% 1.60% 5.46% 5.86% 0.00%
$ 5,952 $ 7,096 $ 6,157 $ 1,188 $ 20
0.85%(8) 0.86% 0.88% 0.87% 0.85%(8)
3.72%(8) 3.49% 4.06% 5.17% 5.52%(8)
12% 17% 38% 41% 44%
0.85%(8) 0.86% 0.88% 0.87% 0.85%(8)
See Notes to Financial Statements.
73
Financial Highlights
For a Fund share outstanding throughout each period.
CLASS 1
------------
SIX MONTHS
ENDED YEARS ENDED DECEMBER 31
06/30/05 -------------------------------------------------------------
(UNAUDITED) 2004 2003 2002 2001 2000
------------ --------- --------- --------- --------- --------
VT U.S. GOVERNMENT SECURITIES FUND
NET ASSET VALUE, BEGINNING OF PERIOD ............... $ 10.71 $ 10.75 $ 11.05 $ 10.55 $ 9.93 $ 9.62
-------- --------- --------- --------- --------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ......................... 0.23(4) 0.45(4) 0.46(4) 0.59(4) 0.61(4) 0.62(4)
Net realized and unrealized gain/(loss) on
investments .................................. (0.03) (0.06) (0.23) 0.33 0.16 0.29
-------- --------- --------- --------- --------- --------
Total from investment operations .............. 0.20 0.39 0.23 0.92 0.77 0.91
-------- --------- --------- --------- --------- --------
LESS DISTRIBUTIONS:
Dividends from net investment income .......... (0.48) (0.43) (0.53) (0.42) (0.15) (0.60)
Dividends from net realized capital gains ..... -- -- -- -- -- --
-------- --------- --------- --------- --------- --------
Total distributions ........................... (0.48) (0.43) (0.53) (0.42) (0.15) (0.60)
-------- --------- --------- --------- --------- --------
NET ASSET VALUE, END OF PERIOD ..................... $ 10.43 $ 10.71 $ 10.75 $ 11.05 $ 10.55 $ 9.93
======== ========= ========= ========= ========= ========
TOTAL RETURN (1) ................................... 1.88% 3.78% 2.14% 8.87% 7.79% 9.73%
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000s) ........... $268,846 $ 263,816 $ 204,193 $ 173,770 $ 136,904 $108,848
Ratio of operating expenses to average net
assets ....................................... 0.54%(6) 0.54% 0.56% 0.56% 0.56% 0.76%
Ratio of net investment income to average net
assets ....................................... 4.40%(6) 4.21% 4.26% 5.45% 5.89% 6.35%
Portfolio turnover rate ....................... 20% 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%(6) 0.54% 0.56% 0.56% 0.56% 0.76%
CLASS 1
--------------
SIX MONTHS
ENDED YEARS ENDED DECEMBER 31
06/30/05 ----------------------------------------------------------
(UNAUDITED) 2004 2003 2002 2001 2000
-------------- -------- -------- --------- --------- --------
VT INCOME FUND
NET ASSET VALUE, BEGINNING OF PERIOD ............... $ 11.08 $ 11.18 $ 10.79 $ 10.31 $ 9.70 $ 9.35
----------- -------- -------- --------- --------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ......................... 0.30(4) 0.61(4) 0.63(4) 0.69(4) 0.67(4) 0.65(4)
Net realized and unrealized gain/(loss) on
investments ................................... (0.07) (0.03) 0.42 0.27 0.11 0.30
----------- -------- -------- --------- --------- --------
Total from investment operations .............. 0.23 0.58 1.05 0.96 0.78 0.95
----------- -------- -------- --------- --------- --------
LESS DISTRIBUTIONS:
Dividends from net investment income .......... (0.65) (0.68) (0.66) (0.48) (0.17) (0.60)
Dividends from net realized capital gains ..... -- -- -- -- -- --
----------- -------- -------- --------- --------- --------
Total distributions ........................... (0.65) (0.68) (0.66) (0.48) (0.17) (0.60)
----------- -------- -------- --------- --------- --------
NET ASSET VALUE, END OF PERIOD ..................... $ 10.66 $ 11.08 $ 11.18 $ 10.79 $ 10.31 $ 9.70
=========== ======== ======== ========= ========= ========
TOTAL RETURN (1) ................................... 2.11% 5.56% 9.78% 9.61% 8.08% 10.45%
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000s) ........... $ 187,240 $185,570 $193,953 $ 179,844 $ 154,826 $127,505
Ratio of operating expenses to average net
assets ...................................... 0.54%(6) 0.55% 0.56% 0.56% 0.55% 0.74%
Ratio of net investment income to average net
assets ...................................... 5.48%(6) 5.53% 5.74% 6.64% 6.69% 6.81%
Portfolio turnover rate ....................... 6% 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) ................ 0.54%(6) 0.55% 0.56% 0.56% 0.55% 0.75%
- ----------
(1) Total return is not annualized for periods of 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.
74
CLASS 2
- -------------
SIX MONTHS
ENDED YEARS ENDED DECEMBER 31
06/30/05 --------------------------------------------------------
(UNAUDITED) 2004 2003 2002 2001(3)
- ------------- ---------- ---------- ---------- ---------
$ 10.66 $ 10.70 $ 11.02 $ 10.55 $ 10.70
- ------------- ---------- ---------- ---------- ---------
0.22(4) 0.42(4) 0.44(4) 0.56(4) 0.09(4)
(0.03) (0.06) (0.23) 0.33 (0.24)(5)
- ------------- ---------- ---------- ---------- ---------
0.19 0.36 0.21 0.89 (0.15)
- ------------- ---------- ---------- ---------- ---------
(0.44) (0.40) (0.53) (0.42) --
-- -- -- -- --
- ------------- ---------- ---------- ---------- ---------
(0.44) (0.40) (0.53) (0.42) --
- ------------- ---------- ---------- ---------- ---------
$ 10.41 $ 10.66 $ 10.70 $ 11.02 $ 10.55
============= ========== ========== ========== =========
1.73% 3.59% 1.87% 8.57% (1.40)%
$ 10,573 $ 12,757 $ 16,323 $ 12,264 $ 753
0.79%(6) 0.79% 0.81% 0.81% 0.81%(6)
4.15%(6) 3.96% 4.01% 5.20% 5.64%(6)
20% 28% 46% 41% 31%
0.79%(6) 0.79% 0.81% 0.81% 0.81%(6)
CLASS 2
- -------------
SIX MONTHS
ENDED YEARS ENDED DECEMBER 31
06/30/05 --------------------------------------------------------
(UNAUDITED) 2004 2003 2002 2001(3)
- ------------- ---------- ---------- ---------- ---------
$ 11.01 $ 11.12 $ 10.77 $ 10.31 $ 10.45
- ------------- ---------- ---------- ---------- ---------
0.28(4) 0.58(4) 0.60(4) 0.65(4) 0.10(4)
(0.06) (0.03) 0.41 0.29 (0.24)(5)
- ------------- ---------- ---------- ---------- ---------
0.22 0.55 1.01 0.94 (0.14)
- ------------- ---------- ---------- ---------- ---------
(0.62) (0.66) (0.66) (0.48) --
-- -- -- -- --
- ------------- ---------- ---------- ---------- ---------
(0.62) (0.66) (0.66) (0.48) --
- ------------- ---------- ---------- ---------- ---------
$ 10.61 $ 11.01 $ 11.12 $ 10.77 $ 10.31
============= ========== ========== ========== =========
1.96% 5.31% 9.47% 9.40% (1.34)%
$ 22,609 $ 23,358 $ 21,188 $ 8,186 $ 362
0.79%(6) 0.80% 0.81% 0.81% 0.80%(6)
5.23%(6) 5.28% 5.49% 6.39% 6.44%(6)
6% 20% 24% 21% 33%
0.79%(6) 0.80% 0.81% 0.81% 0.80%(6)
See Notes to Financial Statements.
75
Financial Highlights
For a Fund share outstanding throughout each period.
CLASS 1
-------------
SIX MONTHS
ENDED YEARS ENDED DECEMBER 31
06/30/05 -------------------------------------------------------
(UNAUDITED) 2004 2003 2002 2001 2000
------------- -------- -------- -------- -------- -------
VT MONEY MARKET FUND
NET ASSET VALUE, BEGINNING OF PERIOD................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------------- -------- -------- -------- -------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.010 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............... 0.010 0.008 0.006 0.014 0.036 0.056
------------- -------- -------- -------- -------- -------
LESS DISTRIBUTIONS:
Dividends from net investment income........... (0.010) (0.008) (0.006) (0.014) (0.036) (0.056)
Dividends from net realized capital gains...... -- -- -- -- -- --
------------- -------- -------- -------- -------- -------
Total distributions............................ (0.010) (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 $ 1.00
============= ======== ======== ======== ======== =======
TOTAL RETURN (1).................................... 1.03% 0.85% 0.65% 1.39% 3.68% 5.79%
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000s)............ $ 13,710 $ 14,660 $ 20,198 $ 33,766 $ 28,563 $18,265
Ratio of operating expenses to average net
assets....................................... 0.67%(6) 0.63% 0.60% 0.57% 0.62% 0.76%
Ratio of net investment income to average net
assets....................................... 2.07%(6) 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).................. 0.67%(6) 0.63% 0.60% 0.57% 0.62% 0.78%
- ----------
(1) Total return is not annualized for periods of 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.
76
Class 2
- ------------
Six Months
Ended Years Ended December 31
06/30/05 ----------------------------------------------------------
(unaudited) 2004 2003 2002 2001(3)
- ------------ --------- --------- ----------- -----------
$ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- ------------ --------- --------- ----------- -----------
0.009 0.006 0.004 0.011(4) 0.002
-- -- -- -- (0.000)(5)
- ------------ --------- --------- ----------- -----------
0.009 0.006 0.004 0.011 0.002
- ------------ --------- --------- ----------- -----------
(0.009) (0.006) (0.004) (0.011) (0.002)
-- -- -- -- --
- ------------ --------- --------- ----------- -----------
(0.009) (0.006) (0.004) (0.011) (0.002)
- ------------ --------- --------- ----------- -----------
$ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
============ ========= ========= =========== ===========
0.91% 0.59% 0.40% 1.13% 0.22%
$ 4,635 $ 5,404 $ 3,068 $ 4,679 $ 189
0.92%(6) 0.88% 0.85% 0.82% 0.87%(6)
1.82%(6) 0.59% 0.42% 1.07% 3.16%(6)
0.92%(6) 0.88% 0.85% 0.82% 0.87%(6)
See Notes to Financial Statements.
77
Notes to Financial Statements (unaudited)
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 (each a "Fund" and collectively, the "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, VT International Growth, VT Short Term Income, VT U.S. Government
Securities, VT Income and VT Money Market Funds are included in this report.
WM Advisors, Inc. (the "Advisor") 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
commenced offering Class 2 shares on July 1, 2005.
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 reported sales 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
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
which may rely on the assistance of one or more pricing services.
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 and does not take into account unrealized capital gains or losses.
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.
78
Notes to Financial Statements (unaudited) (continued)
WM VARIABLE TRUST
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
securities during the period while the Fund seeks to assert its rights. The
Advisor, 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.
79
Notes to Financial Statements (unaudited) (continued)
WM VARIABLE TRUST
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".
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; (5)
securities, the disposition of which are restricted under Federal securities
laws, excluding certain Rule 144A securities, as defined in the following
paragraph; and (6) certain over-the-counter options.
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, the investment will be subject to a Fund's limitation on
investment in illiquid securities as indicated above.
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.
80
Notes to Financial Statements (unaudited) (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
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 $50 FROM $100 FROM $125 FROM $200 FROM $250 FROM $400 FROM $500 FROM $1 FROM $2
TO $50 TO $100 TO $125 TO $200 TO $250 TO $400 TO $500 MILLION TO TO TO OVER
NAME OF FUND MILLION MILLION MILLION MILLION MILLION MILLION MILLION $1 BILLION $2 BILLION $3 BILLION $3 BILLION
- ----------------- ------- -------- --------- --------- --------- --------- --------- ---------- ---------- ---------- ----------
VT REIT Fund .... 0.800% 0.800% 0.800% 0.800% 0.800% 0.800% 0.800% 0.750% 0.075% 0.700% 0.650%
VT Equity Income
Fund .......... 0.625% 0.625% 0.625% 0.625% 0.625% 0.625% 0.625% 0.500% 0.500% 0.500% 0.500%
VT Growth &
Income Fund ... 0.750% 0.750% 0.750% 0.750% 0.700% 0.700% 0.650% 0.575% 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% 0.500% 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% 0.700% 0.650% 0.600%
VT Growth Fund .. 0.800% 0.800% 0.800% 0.800% 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% 0.850% 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% 0.850% 0.850% 0.850% 0.850% 0.750% 0.750% 0.750% 0.700%
VT International
Growth Fund ... 0.950% 0.850% 0.850% 0.750% 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% 0.450% 0.450% 0.450% 0.400% 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% 0.450% 0.450%
VT Income Fund .. 0.500% 0.500% 0.500% 0.500% 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% 0.450% 0.450% 0.450% 0.450% 0.400% 0.400% 0.400%
During the period, the VT Small Cap Growth Fund received payments from the
Advisor totaling $170,192 in connection with a trading error. This error
occurred during the transition to new sub-advisors in April 2005. Subsequent to
June 30, 2005, after final determination of the costs associated with the error,
the Advisor made additional payments to the Fund totaling $18,696.
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 six months ended June 30, 2005, are shown separately in the
"Statements of Operations".
81
Notes to Financial Statements (unaudited) (continued)
WM VARIABLE TRUST
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 the Advisor, 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.
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 six months ended June 30,
2005, are as follows:
PURCHASES SALES
NAME OF FUND (000s) (000s)
- ------------------------------------- ------------ ----------
VT REIT Fund ........................ $ 5,370 $ 3,950
VT Equity Income Fund ............... 42,139 26,352
VT Growth & Income Fund ............. 25,843 18,266
VT West Coast Equity Fund ........... 8,905 10,915
VT Mid Cap Stock Fund ............... 14,278 14,254
VT Growth Fund ...................... 118,984 116,729
VT Small Cap Value Fund ............. 11,600 10,312
VT Small Cap Growth Fund ............ 101,525 110,299
VT International Growth Fund ........ 18,404 17,490
VT Short Term Income Fund ........... 6,827 5,265
VT U.S. Government Securities Fund .. 11,634 10,523
VT Income Fund ...................... 8,631 4,535
The aggregate cost of purchases and proceeds from sales of U.S. Government
securities, excluding short-term investments, for the six months ended June 30,
2005, are as follows:
PURCHASES SALES
NAME OF FUND (000s) (000s)
- ------------------------------------- ------------ ----------
VT Equity Income Fund ............... $ -- $ 6
VT Short Term Income Fund ........... 1,491 710
VT U.S. Government Securities Fund... 44,886 42,758
VT Income Fund ...................... 8,595 7,850
82
Notes to Financial Statements (unaudited) (continued)
WM VARIABLE TRUST
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 June 30, 2005, 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. PORTFOLIO OWNERSHIP AND OTHER FACTORS
At June 30, 2005, the WM Variable Trust Portfolios held 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 TOTAL
- ----------------------------- ----------- --------------- ----------- --------------- ------------ ------
VT REIT Fund ................ 4.8% 2.7% 44.2% 30.7% 14.3% 96.7%
VT Equity Income Fund ....... 3.7% 2.0% 29.4% 20.9% 9.6% 65.6%
VT Growth & Income Fund...... 5.7% 2.3% 32.2% 26.7% 14.0% 80.9%
VT West Coast Equity Fund.... 1.9% 1.6% 26.4% 21.5% 12.0% 63.4%
VT Mid Cap Stock Fund ....... 6.0% 2.2% 34.0% 26.0% 15.9% 84.1%
VT Growth Fund .............. 5.2% 2.3% 35.3% 25.4% 13.0% 81.2%
VT Small.Cap Value Fund...... 5.8% 2.4% 41.5% 33.4% 16.9% 100.0%
VT Small.Cap Growth Fund..... 4.7% 1.5% 25.7% 21.3% 11.4% 64.6%
VT International Growth
Fund ....................... -- 2.9% 38.6% 31.9% 16.6% 90.0%
VT Short.Term Income Fund.... 47.6% 6.9% 13.4% -- -- 67.9%
VT U.S. Government
Securities Fund ............ 26.0% 6.6% 39.3% 11.7% -- 83.6%
VT Income Fund .............. 25.7% 6.0% 36.0% 7.0% -- 74.7%
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.
83
Notes to Financial Statements (unaudited) (continued)
WM VARIABLE TRUST
9. UNREALIZED APPRECIATION/(DEPRECIATION)
At June 30, 2005, the aggregate gross unrealized appreciation/(depreciation) on
a tax basis 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
---------- --------- ----------- ------------ ----------- ----------- ---------
Tax basis unrealized
appreciation ............ $ 18,397 $ 53,061 $ 67,228 $ 35,196 $ 28,838 $ 26,023 $ 8,005
Tax basis unrealized
depreciation ........... (132) (2,895) (9,538) (8,668) (756) (6,149) (2,650)
---------- -------- ---------- ----------- ---------- ---------- --------
Net tax unrealized
appreciation ............ $ 18,265 $ 50,166 $ 57,690 $ 26,528 $ 28,082 $ 19,874 $ 5,355
========== ======== ========== =========== ========== ========== ========
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
----------- ------------- ----------- ----------- ----------- -------
Tax basis unrealized
appreciation ............. $ 4,654 $ 17,801 $ 676 $ 2,919 $ 13,940 $ --
Tax basis unrealized
depreciation ............. (1,245) (1,879) (305) (1,677) (2,814) --
---------- -------- ---------- ---------- ---------- -------
Net tax unrealized
appreciation ............. $ 3,409 $ 15,922 $ 371 $ 1,242 $ 11,126 $ --
========== ======== ========== ========== ========== =======
10. 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, 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.
84
Other Information (unaudited)
WM VARIABLE TRUST
BOARD APPROVAL OF INVESTMENT ADVISORY AND SUB-ADVISORY AGREEMENTS
Each year, the Board of Trustees of the Trust (the "Board"), including a
majority of the Trustees who are not interested persons of the Trust (the
"Independent Trustees"), is required to determine whether to continue the
Trust's advisory agreements. The Investment Company Act of 1940, as amended,
requires that the Board request and evaluate, and that the investment manager
furnish, such information as may reasonably be necessary to evaluate the terms
of the Trust's advisory agreements. In February 2005, the Board and the
Independent Trustees approved the Investment Sub-Advisory Agreements with
Delaware Management Company ("Delaware") and Oberweis Asset Management
("Oberweis"), and in May 2005, the Board and the Independent Trustees approved
the continuation of the Trust's Amended and Restated Investment Management
Agreement with the Advisor and Investment Sub-Advisory Agreements with Capital
Guardian Trust Company ("Capital Guardian"), Janus Capital Management LLC
("Janus") and OppenheimerFunds, Inc. ("Oppenheimer") (collectively, the
"Agreements") for an additional one-year term beginning July 1, 2005, in each
case following the recommendation of the Investment Committee (the "Committee"),
a majority of the members of which are Independent Trustees, and the
recommendations of the Independent Trustees as a whole. The material factors and
conclusions that formed the basis for the Committee's recommendation and the
subsequent approval by the Board and the Independent Trustees are required to be
in this report and are discussed below.
REVIEW PROCESS:
The Independent Trustees received assistance and advice, including a written
memorandum, regarding the legal standards applicable to the consideration of
advisory arrangements from independent counsel to the Trust and the Independent
Trustees. The Independent Trustees discussed the continuation of the Agreements
with representatives of the Advisor and in private session with independent
legal counsel at which no representatives of the Advisor were present. The
Committee, in deciding to recommend continuation of the Agreements, and the
Board and the Independent Trustees, in approving such continuation, did not
identify any particular information that was all-important or controlling, and
each Trustee attributed different weights to the various factors. The Trustees
evaluated all information available to them on a Fund-by-Fund basis, and their
deliberations were made separately in respect of each Fund. This summary
describes the most important, but not all, of the factors considered by the
Board, the Independent Trustees and the Committee. The Board, the Independent
Trustees and the Committee considered the fact that each of the Funds is managed
in a style substantially identical to that of a corresponding series of WM Trust
I or WM Trust II (each, a "Retail Fund"), and reviewed the Funds simultaneously
with their review of the corresponding Retail Funds.
MATERIALS REVIEWED:
During the course of each year, the Board receives a wide variety of materials
relating to the services provided by the Advisor, its affiliates and the
sub-advisors, including reports on: each Fund's investment results; portfolio
construction; portfolio composition; portfolio trading practices; performance
attribution; shareholder services; the Advisor's views on the economy and
capital markets; and other information relating to the nature, extent and
quality of services provided by the Advisor, its affiliates and the sub-advisors
to the Funds. In addition, in connection with its annual consideration of the
Agreements,(1) the Board requests and reviews supplementary information
regarding the terms of the Agreements, the Funds' investment results, advisory
fee and total expense comparisons, financial and profitability information
regarding the Advisor and its affiliates, descriptions of various functions
undertaken by the Advisor, such as compliance monitoring, and information about
the personnel providing investment management and administrative services to the
Funds. The Board requested and evaluated performance and expense information for
other investment companies compiled by Lipper Inc., a third-party data provider
("Lipper"). The Board, the Independent Trustees and the Committee also
considered information regarding "revenue sharing" arrangements that the Advisor
and its affiliates have entered into with various intermediaries that sell
shares of the Funds. The Board also requested and reviewed information relating
to other services provided to the Funds by the Advisor and its affiliates under
other agreements, including information regarding so-called "fall-out" benefits
to the Advisor and its affiliates due to their other relationships with the
Funds. The Board, the Independent Trustees and the Committee also received and
reviewed comparative performance information regarding the Retail Funds at each
of the quarterly Board and Committee meetings.
(1) The Trust's Investment Sub-Advisory Agreements with Delaware and Oberweis
were approved by shareholders at a meeting held on March 24, 2005, and
automatically continue until two years from the date of execution.
85
Other Information (unaudited) (continued)
WM VARIABLE TRUST
NATURE, EXTENT AND QUALITY OF SERVICES:
Nature and Extent of Services -- In considering the approval and continuation of
the Agreements for the current year, the Board, the Independent Trustees and the
Committee evaluated the nature and extent of the services provided by the
Advisor, its affiliates and the sub-advisors. The Advisor or the relevant
sub-advisor, as applicable, formulates each Fund's investment policies (subject
to the terms of the prospectus), analyzes economic trends and capital market
developments, evaluates the risk/return characteristics of each Fund, constructs
each Fund's portfolio, monitors each Fund's investment performance, and reports
to the Board, the Independent Trustees and the Committee. Capital Guardian
provides sub-advisory services to the VT International Growth Fund. Janus,
Oppenheimer, and Salomon Brothers Asset Management, Inc. ("Salomon")(2) each
provide sub-advisory services to the VT Growth Fund. Delaware and Oberweis
provide sub-advisory services to the VT Small Cap Growth Fund. The Board, the
Independent Trustees and the Committee considered information concerning the
investment philosophy and investment process used by the Advisor and the
sub-advisors in managing the Funds. In this context, the Board, the Independent
Trustees and the Committee considered the in-house research capabilities of the
Advisor and the sub-advisors as well as other sources available to the Advisor
and the sub-advisors, including research services available to the Advisor and
the sub-advisors as a result of securities transactions effected for the Funds
and other investment advisory clients of the Advisor and the sub-advisors. The
Board, the Independent Trustees and the Committee considered the managerial and
financial resources available to the Advisor and the sub-advisors and concluded
that they would be sufficient to meet any reasonably foreseeable obligations
under the Agreements. The Board, the Independent Trustees and the Committee
noted that the standard of care under the Agreements was comparable to that
found in many investment advisory agreements, and considered the record of the
Advisor in resolving potential disputes arising under its investment advisory
agreement with the WM Group of Funds in the best interests of shareholders.
Quality of Services -- The Board, the Independent Trustees and the Committee
considered the quality of the services provided by the Advisor and the
sub-advisors and the quality of the resources of each that are available to the
Funds. The Board, the Independent Trustees and the Committee considered the
investment experience and professional qualifications of the personnel of the
Advisor, its affiliates and the sub-advisors and the size and functions of their
staffs as well as the reputations of the Advisor and the sub-advisors. The
Board, the Independent Trustees and the Committee considered the complexity of
managing the Funds relative to other types of funds, including the complexity of
overseeing multiple sub-advisors to certain Funds. The Board, the Independent
Trustees and the Committee also received and reviewed information regarding the
quality of non-investment advisory services provided to the Funds by the Advisor
and its affiliates under other agreements.
The Board, the Independent Trustees and the Committee concluded that the
services provided by the Advisor and the sub-advisors have benefited and should
continue to benefit the Funds and their shareholders. The Board, the Independent
Trustees and the Committee concluded that the investment philosophies,
processes, and research capabilities of the Advisor and the sub-advisors were
well suited to the Funds, given their investment objectives and policies. The
Board, the Independent Trustees and the Committee concluded that the scope of
the services provided to the Funds by the Advisor, its affiliates and the
sub-advisors were consistent with the Funds' operational requirements,
including, in addition to their investment objectives, compliance with the
Funds' investment restrictions, tax and reporting requirements and related
shareholder services. The Board, the Independent Trustees and the Committee
concluded that the nature, scope and quality of the services provided by the
Advisor, its affiliates and the sub-advisors were sufficient, in light of the
resources dedicated by the Advisor and the sub-advisors and their integrity,
personnel, systems and financial resources, to merit approval of the
continuation of the Agreements.
PORTFOLIO MANAGEMENT SERVICES AND PERFORMANCE:
In their evaluation of the quality of the portfolio management services provided
by the Advisor and the sub-advisors, the Board, the Independent Trustees and the
Committee considered the professional credentials and investment experience of
the Funds' portfolio managers. The Board and the Independent Trustees considered
whether the Funds operated within their investment objectives and their record
of compliance with their investment restrictions. The Board, the Independent
Trustees and the Committee reviewed information comparing the Funds' historical
performance to relevant market indices for the 1-, 3- and 5-year periods ended
March 31, 2005 and to performance information for other investment companies
with similar investment objectives over the 1-, 3-, 5-, 10-year and since
inception periods ended January 31, 2005 derived from data compiled by
Lipper.(3) The Board, the Independent Trustees and the Committee reviewed
performance for the period ended March 31, 2005 for each Fund and for those
Funds that had underperformed relative to the benchmark index or peer group
provided by Lipper, including the VT REIT Fund,
(2) The Trust's Investment Sub-Advisory Agreement with Salomon was approved by
shareholders at a meeting held on February 3, 2005, and automatically
continues until two years from the date of execution of the agreement.
(3) For Delaware and Oberweis, the Board, the Independent Trustees and the
Committee considered information relating to the investment performance of
accounts managed in a style similar to that used with respect to the VT
Small Cap Growth Fund. The Board, the Independent Trustees and the Committee
reviewed performance over various time periods, including 1-, 3- and 5-year
periods, and considered information provided by the Advisor regarding its
expectations with respect to the relative performance of Delaware and
Oberweis under different market conditions and during different phases of
the market cycle, the expected volatility of such returns, and factors
identified by Delaware and Oberweis as contributing to performance.
86
Other Information (unaudited) (continued)
WM VARIABLE TRUST
the VT Small Cap Growth Fund, the VT International Growth Fund and the VT U.S.
Government Securities Fund, they discussed with the Advisor the reasons for such
underperformance and the Advisor's plans to monitor and address performance
issues. In addition, the Board, the Independent Trustees and the Committee
focused closely on the relative performance of the VT Growth Fund and the VT
Equity Income Fund. The Board, the Independent Trustees and the Committee
discussed, in particular, the fact that Lipper had changed the categorizations
of the VT Growth Fund and the VT Equity Income Fund. The Board, the Independent
Trustees and the Committee considered that the VT Growth Fund had outperformed
relative to the index benchmark due to strong stock selections made by Janus and
Oppenheimer. They considered the Advisor's report to the Committee that Capital
Guardian was consistently performing in accordance with its stated investment
style and that the relatively poor performance ranking of the VT International
Growth Fund masked the fact that the Fund tended to be less volatile and that
the peer group had a very tight performance range. The Board, the Independent
Trustees and the Committee concluded that the Advisor's and the sub-advisors'
performance records and investment processes used in managing the Funds were
sufficient to merit approval of the continuation of the Agreements.
MANAGEMENT FEES AND EXPENSES:
The Board, the Independent Trustees and the Committee reviewed information,
including comparative information provided by Lipper, regarding the advisory,
transfer agent, and service and distribution fees paid to the Advisor and its
affiliates, and to the sub-advisors, and the total expenses borne by the Funds.
The Board, the Independent Trustees and the Committee reviewed the transfer
agency fees paid by the Funds to WM Shareholder Services, Inc. (the "Transfer
Agent"), an affiliate of the Advisor, as well as the distribution (12b-1) fees
paid to the Distributor. They considered the Funds' management fees relative to
their respective peer groups as determined by Lipper. The Board, the Independent
Trustees and the Investment Committee considered the fees paid to the Advisor
and the sub-advisors by other clients, and the services provided to such clients
relative to the fees paid by, and services provided to, the Funds. They
discussed the general downward trend in total expense ratios for the Funds. The
Committee considered the anticipated effect of a proposed management fee
reduction for the VT Growth Fund. The Board, the Independent Trustees and the
Committee discussed certain Funds with investment advisory and total expenses
significantly below peers (e.g., VT Equity Income, VT International Growth and
VT West Coast Equity Funds). The Board, the Independent Trustees and the
Committee also considered that the fees and total expenses of the VT Growth Fund
exceeded those of its peers, and supported the Advisor's proposed reduction of
its fees for that Fund. The Board, the Independent Trustees and the Committee
concluded that the fees to be charged under the Agreements bore a reasonable
relationship to the scope and quality of the services provided.
PROFITABILITY AND ECONOMIES OF SCALE:
Profitability -- The Board, the Independent Trustees and the Committee reviewed
information regarding the cost of services provided by the Advisor and its
affiliates and the profitability (before and after distribution expenses and
prior to taxes) of the Advisor's relationship with the Funds.(4) The Board, the
Independent Trustees and the Committee considered trends in the profitability of
the Advisor and its affiliates, and information provided by Lipper regarding the
pre- and post-marketing profitability of other investment advisers with
publicly-traded parent companies. The Board, the Independent Trustees and the
Committee considered that the Advisor and the sub-advisors must be able to pay
and retain experienced professional personnel at competitive rates to provide
services to the Funds (and in connection therewith reviewed and considered
changes in the structure of compensation of the investment professionals of the
Advisor including a change in the performance-based component of the
compensation and the introduction of options and restricted stock rather than
vesting periods for cash bonuses) and that maintaining the financial viability
of the Advisor is important in order for it to continue to provide significant
services to the Funds and their shareholders. The Board, the Independent
Trustees and the Committee considered the impact of previously-negotiated fee
reductions on the profitability of the Advisor and the year-to-year trends in
pre-distribution margins for the Advisor over a four-year period in which the
Funds' assets grew 41% and complex-wide assets more than doubled. The Board, the
Independent Trustees and the Committee also considered the effect on the
Advisor's revenues of new breakpoints for the VT Growth Fund at current asset
levels. The Board, the Independent Trustees and the Committee considered the
breakpoint schedule for each sub-advisor and the fact that the Advisor's fees
with respect to sub-advised Funds are often reduced due to the breakpoint
schedule applicable to the Advisor even though the breakpoints applicable to any
particular sub-advisor may not have been reached. In connection with the review
of the various breakpoint schedules, the Board, the Independent Trustees and the
Committee reviewed a graph showing
(4) The Board noted that the fees payable to the Advisor under its advisory
agreements with respect to the sub-advised Funds are reduced by the total
fees paid to the sub-advisors. The Board, the Independent Trustees and the
Committee did not evaluate the profitability to the sub-advisors of their
relationships with the Funds because they concluded that negotiations
between the Advisor and the sub-advisors had been entirely at arm's-length.
87
Other Information (unaudited) (continued)
WM VARIABLE TRUST
the effective fees for the Advisor at different asset levels. The Board, the
Independent Trustees and the Committee also considered the differences in the
breakpoint schedules for Capital Guardian, Janus and Oppenheimer. In addition,
the Board, the Independent Trustees and the Committee considered information
regarding the direct and indirect benefits the Advisor and the sub-advisors
receive as a result of their relationships with the Funds, including
compensation paid to the Advisor, the sub-advisors and the Advisor's affiliates,
including transfer agency fees to the Transfer Agent and 12b-1 fees to the
Distributor as well as research provided to the Advisor and the sub-advisors in
connection with portfolio transactions effected on behalf of the Funds (soft
dollar arrangements), and reputational benefits.
Economies of Scale -- The Board, the Independent Trustees and the Committee
reviewed the extent to which the Advisor and the sub-advisors may realize
economies of scale in managing and supporting the Funds and the current level of
Fund assets in relation to the breakpoints in each Fund's advisory fees. The
Board, the Independent Trustees and the Committee also considered the breakpoint
schedules for each sub-advisor. The Board, the Independent Trustees and the
Committee considered the extent to which any economies of scale might be
realized (if at all) by the Advisor or the sub-advisors across a variety of
products and services, including the Retail Funds, and not only in respect of a
single Fund. The Board, the Independent Trustees and the Committee considered
the savings for the Funds that had been achieved due to breakpoints previously
implemented as a result of negotiations between the Advisor and the Board.
The Board, the Independent Trustees and the Committee concluded that the Funds'
cost structure was reasonable given the scope and quality of the services
provided to the Funds and that the Advisor and the sub-advisors were sharing any
economies of scale with the Funds and their shareholders.
ADDITIONAL CONSIDERATIONS:
The Board, the Independent Trustees and the Committee also considered possible
conflicts of interest associated with the provision of investment advisory
services by the Advisor and the sub-advisors to other clients and the fact that
such clients of the Advisor were then limited to those affiliated with AIG
(representing approximately $5.5 billion in assets under management as of April
30, 2005). The Trustees considered the procedures of the Advisor and the
sub-advisors designed to fulfill their fiduciary duties to advisory clients with
respect to possible conflicts of interest, including the codes of ethics, the
integrity of the systems in place to ensure compliance with the foregoing, and
the record of the Advisor and the sub-advisors in these matters. The Board, the
Independent Trustees and the Committee also received and considered information
concerning procedures of the Advisor and the sub-advisors with respect to the
execution of portfolio transactions.
CONCLUSIONS:
Based on their review, including their consideration of each of the factors
referred to above, the Board, the Independent Trustees and the Committee
concluded that the Agreements, including the fees payable to the Advisor and the
sub-advisors, are fair and reasonable to the Funds and their shareholders given
the scope and quality of the services provided to the Funds and such other
considerations as the Trustees considered relevant in the exercise of their
reasonable business judgment and that the continuation of the Agreements was in
the best interests of the Funds and their shareholders. The Board and
Independent Trustees unanimously approved the continuation of the Agreements.
OTHER FUND 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 at
http://www.wmgroupoffunds.com. The Trust's Form N-Q is 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.
88
Other Information (unaudited) (continued)
WM VARIABLE TRUST
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.
SPECIAL MEETINGS OF SHAREHOLDERS
A special meeting of shareholders of the VT Growth Fund of the WM Variable Trust
was convened on February 3, 2005, at which shareholders approved the following:
A sub-advisory agreement for the Fund among the Fund, WM Advisors, Inc. and
Salomon.
AFFIRMATIVE AGAINST ABSTAINED TOTAL
------------ -------- ---------- -----------
Voted Shares .............. 17,085,368 475,320 1,198,124 18,758,812
% of Outstanding Shares ... 89.879% 2.500% 6.303% 98.682%
% of Shares Voted ......... 91.079% 2.534% 6.387% 100.000%
A special meeting of shareholders of the VT Small Cap Growth Fund of the WM
Variable Trust was convened on March 24, 2005, at which shareholders approved
the following:
A sub-advisory agreement for the Fund among the Fund, WM Advisors, Inc. and
Oberweis.
AFFIRMATIVE AGAINST ABSTAINED TOTAL
------------ -------- ---------- ----------
Voted Shares ............. 5,226,827 195,891 314,907 5,737,625
% of Outstanding Shares .. 91.097% 3.414% 5.489% 100.000%
% of Shares Voted ........ 91.097% 3.414% 5.489% 100.000%
A sub-advisory agreement for the Fund among the Fund, WM Advisors, Inc. and
Delaware.
AFFIRMATIVE AGAINST ABSTAINED TOTAL
------------ -------- ---------- -----------
Voted Shares .............. 5,242,583 187,788 307,254 5,737,625
% of Outstanding Shares ... 91.372% 3.273% 5.355% 100.000%
% of Shares Voted ......... 91.372% 3.273% 5.355% 100.000%
89
[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 semiannual 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. PRSRT STD
1100 Investment Blvd., Suite 200 U.S. Postage
El Dorado Hills, CA 95762 PAID
Permit 2310
Sacramento, CA
VTSAR (8/29/05)
[WM VARIABLE TRUST LOGO]
[GRAPHIC]
SEMIANNUAL REPORT
June 30, 2005
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
[GRAPHIC]
At the WM Group of Funds, our passion is piecing individual investments
together 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 2-6.
Withdrawals made prior to age 59 1/2 may be subject to a 10% IRS tax penalty.
TABLE OF CONTENTS
1 Letter from the President
VT SAM Portfolio Performance and Composition:
2 VT Flexible Income Portfolio
3 VT Conservative Balanced Portfolio
4 VT Balanced Portfolio
5 VT Conservative Growth Portfolio
6 VT Strategic Growth Portfolio
7 Expense Information
9 Financial Statements
24 Notes to Financial Statements
29 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 WILLIAM G. PAPESH]
Since my last letter to you, the financial markets have continued to be volatile
and uncertain. No more certain have been issues at home -- such as rising oil
prices and the ongoing Social Security debate -- not to mention events abroad.
Amid this uncertainty, I am proud to say that we have remained as committed as
ever to effective asset allocation and consistent investment discipline. We
trust that these core commitments can continue to build value for you over time.
We are delighted to note that as a result of our efforts, the retail funds of
the WM Group of Funds were once again recognized for their 5-year results by
Barron's, as they have been every year since 1999. In addition, over the last
five years retail assets in the WM Group of Funds --
from a combination of net shareholder purchases and fund performance -- have
increased by 133%, while industry assets during that period increased by 18%.(1)
The stock market (as measured by the S&P 500(2) fell by 11% over the same five
years through 2004.
BARRON'S ANNUAL FUND FAMILY RANKINGS
YEAR 5-YEAR RANKING 1-YEAR RANKING
- ---- -------------- --------------
2004 #15 out of 67 #46 out of 73
2003 #5 out of 70 #41 out of 75
2002 #1 out of 72 #7 out of 81
2001 #5 out of 70 #6 out of 88
2000 #11 out of 65 #44 out of 84
1999 #9 out of 68 #9 out of 92
THE ENDURING VALUE OF MUTUAL FUNDS
We believe that these figures reflect not only the attractiveness of the WM
Group of Funds, but also the enduring value of mutual funds as an investment
vehicle for our shareholders. While some investors are lured away by alternative
strategies such as wrap accounts or hedge funds, we think mutual funds continue
to represent one of the most cost-effective vehicles investors can use to gain
diversified access to U.S. and foreign securities markets. We also believe that
our business remains one that can significantly aid investors in achieving their
long-term financial objectives -- among the most important of which is laying a
foundation for their retirement years.
The recent debate over Social Security policy highlights this need more than
ever. Regardless of one's political position, we think it has become
increasingly clear that one of the best solutions to the Social Security
quandary is for Americans to reduce their dependence on that program. We firmly
believe that investors and their advisors will be well served by continuing to
focus on long-term strategies that can build wealth independent of the
wranglings of government policy.
PRIDE IN OUR HERITAGE
As a firm, we are proud of our 66 years of intensive asset management
experience. We believe this heritage will serve our shareholders well as
financial markets and world events continue to produce the unexpected. As
always, our focus remains on pursuing the highest risk-adjusted returns for
investors, and we thank you again for your ongoing confidence and support.
Sincerely,
/s/ William G. Papesh
- ---------------------
William G. Papesh
President
Note regarding Barron's rankings:The retail funds mentioned above, which are
managed by WM Advisors, are sold by financial professionals to members of the
public.WM VT Funds and Portfolios are not included in Barron's fund family
rankings.
PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS. Barron's rankings are for
periods ended 12/31 and are determined using weighted calculations based on the
performance of each family's funds as tracked by Lipper.To qualify for the
rankings, Barron's requires that a fund family offer funds within a wide array
of asset classes. For the periods shown above, the WM Group of Funds did not
qualify for 10-year rankings because it did not have the appropriate fund
qualifications with 10-year performance.To calculate the results, Lipper ranks
each fund's return versus those of others in the same category, placing the best
performers in the first percentile. Next, all funds in a given family that fit a
particular asset class category are averaged together on an asset-weighted
basis. Finally, each family's percentile rankings in the broad categories are
combined to create the final ranking.
(1) Source: WM Group of Funds and the Investment Company Institute. Figures are
for the 5-year period ended 12/31/04. They are based on long-term assets
only and do not include money market funds.
(2) The S&P 500 is a broad-based index intended to represent the U.S. equity
market. Indices are unmanaged, and individuals cannot invest directly in an
index.
[GRAPHIC]
VT Flexible Income Portfolio
PORTFOLIO MANAGER
Asset Allocation Team
WM Advisors, Inc.
[GRAPHIC]
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,
AVERAGE ANNUAL TOTAL RETURNS(1) AS OF JUNE 30, 2005
6-Month (2) 1-Year 5-Year Since Inception Inception Date
---------- ------ ------- --------------- --------------
CLASS 1 SHARES 1.43% 6.49% 6.20% 7.20% 9/9/97
CLASS 2 SHARES 1.32% 6.25% - 6.18% 11/6/01
Lehman Brothers Aggregate Bond Index(3) 2.52% 6.81% 7.41% 6.79%
S&P 500(3) -0.81% 6.31% -2.38% 5.23%
Capital Market Benchmark(3) 1.87% 6.78% 5.63% 6.74%
PORTFOLIO COMPOSITION (4)
As of As of
6/30/05 12/31/04 Change
------- -------- ------
Mortgage- & Asset-Backed Bonds 35% 34% +1%
Investment-Grade Corporate Bonds 21% 22% -1%
High-Yield Corporate Bonds 9% 8% +1%
U.S. Large-Cap Value Stocks 8% 7% +1%
U.S. Large-Cap Growth Stocks 6% 7% -1%
U.S. Government Securities 6% 6% 0%
U.S. Mid-Cap Value Stocks 3% 4% -1%
U.S. Mid-Cap Growth Stocks 3% 2% +1%
Convertible Securities 2% 2% 0%
REITs 2% 2% 0%
U.S. Small-Cap Growth Stocks 1% 1% 0%
U.S. Small-Cap Value Stocks 1% 1% 0%
Cash Equivalents 3% 4% -1%
Note: Pages 34 and 35 provide information about certain WM Funds in which the VT
Flexible Income and VT Conservative Balanced Portfolios invest a significant
portion of their assets (i.e., more than 25%). For additional information about
these and other WM Funds, please see the WM Variable Trust semiannual report,
which is available online at wmgroupoffunds.com or by calling 800-222-5852.
(1) Performance reflects ongoing expenses and assumes reinvestment of all
dividends and capital gains. It also reflects ongoing fund expenses paid by
the Portfolios' 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. The VT Flexible
Income Portfolio's performance between 1997 and 1999 benefited from the
agreement of WM Advisors and its affiliates to limit the Portfolio's
expenses. The VT Conservative Balanced Portfolio's performance between 1998
and 2003 benefited from the agreement of WM Advisors and its affiliates to
limit the Portfolio's expenses.
(2) Periods of less than one year are not annualized.
[GRAPHIC]
VT Conservative Balanced Portfolio*
PORTFOLIO MANAGER
Asset Allocation Team
WM Advisors, Inc.
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.
* 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 see
the prospectus for detailed information.
AVERAGE ANNUAL TOTAL RETURNS (1) AS OF JUNE 30, 2005
6-Month (2) 1-Year 5-Year Since Inception Inception Date
---------- ------ ------ --------------- --------------
CLASS 1 SHARES 1.21% 7.30% 5.57% 5.12% 4/23/98
CLASS 2 SHARES 1.06% 6.98% - 6.47% 11/6/01
Lehman Brothers Aggregate Bond Index(3) 2.52% 6.81% 7.41% 6.49%
S&P 500(3) -0.81% 6.31% -2.38% 2.50%
Capital Market Benchmark(3) 1.21% 6.72% 3.76% 5.28%
PORTFOLIO COMPOSITION (4)
As of As of
6/30/05 12/31/04 Change
------- -------- ------
Mortgage- & Asset-Backed Bonds 29% 27% +2%
Investment-Grade Corporate Bonds 14% 15% -1%
U.S. Large-Cap Value Stocks 11% 11% 0%
U.S. Large-Cap Growth Stocks 9% 9% 0%
High-Yield Corporate Bonds 7% 7% 0%
U.S. Government Securities 5% 5% 0%
U.S. Mid-Cap Value Stocks 5% 5% 0%
Foreign Stocks 4% 4% 0%
U.S. Mid-Cap Growth Stocks 4% 4% 0%
REITs 3% 3% 0%
Convertible Securities 2% 2% 0%
U.S. Small-Cap Growth Stocks 2% 2% 0%
U.S. Small-Cap Value Stocks 2% 2% 0%
Cash Equivalents 3% 4% -1%
(3) 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: VT Flexible Income Portfolio: 20% S&P 500 and
80% Lehman Brothers Aggregate Bond Index; VT Conservative Balanced
Portfolio: 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 8/31/97 (for the VT Flexible Income Portfolio) or 4/30/98
(for the VT Conservative Balanced Portfolio). Indices are unmanaged, and
individuals cannot invest directly in an index.
(4) May not reflect the current portfolio composition.
3
[GRAPHIC]
VT Balanced Portfolio
PORTFOLIO MANAGER
Asset Allocation Team
WM Advisors, Inc.
[GRAPHIC]
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,
AVERAGE ANNUAL TOTAL RETURNS (1) AS OF JUNE 30, 2005
6-Month (2) 1-Year 5-Year Since Inception Inception Date
----------- ------ ------ --------------- --------------
CLASS 1 SHARES 1.00% 8.05% 4.13% 8.71% 6/3/97
CLASS 2 SHARES 0.89% 7.76% - 6.78% 11/6/01
Lehman Brothers Aggregate Bond Index(3) 2.52% 6.81% 7.41% 6.97%
S&P 500(3) -0.81% 6.31% -2.38% 5.89%
Capital Market Benchmark(3) 0.55% 6.62% 1.80% 6.71%
PORTFOLIO COMPOSITION (4)
As of As of
6/30/05 12/31/04 Change
------- -------- ------
Mortgage- & Asset-Backed Bonds 17% 17% 0%
U.S. Large-Cap Value Stocks 17% 16% +1%
U.S. Large-Cap Growth Stocks 15% 14% +1%
U.S. Mid-Cap Value Stocks 7% 8% -1%
Investment-Grade Corporate Bonds 7% 7% 0%
U.S. Mid-Cap Growth Stocks 7% 6% +1%
Foreign Stocks 5% 6% -1%
High-Yield Corporate Bonds 5% 5% 0%
REITs 5% 5% 0%
U.S. Government Securities 3% 3% 0%
U.S. Small-Cap Growth Stocks 3% 3% 0%
U.S. Small-Cap Value Stocks 3% 3% 0%
Convertible Securities 2% 1% +1%
Cash Equivalents 4% 6% -2%
Note: For information about the underlying WM Funds of the VT SAM Portfolios,
please see the WM Variable Trust semiannual report, which is available online at
wmgroupoffunds.com or by calling 800-222-5852.
(1) Performance reflects ongoing expenses and assumes reinvestment of all
dividends and capital gains. It also reflects ongoing fund expenses paid by
the Portfolios' 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. The Portfolios'
performance between 1997 and 1998 benefited from the agreement of WM
Advisors and its affiliates to limit the Portfolios' expenses.
(2) Periods of less than one year are not annualized.
4
[GRAPHIC]
VT Conservative Growth Portfolio
PORTFOLIO MANAGER
Asset Allocation Team
WM Advisors, Inc.
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 JUNE 30, 2005
6-Month (2) 1-Year 5-Year Since Inception Inception Date
----------- ------ ------ --------------- --------------
CLASS 1 SHARES 0.74% 8.58% 2.44% 9.09% 6/3/97
CLASS 2 SHARES 0.57% 8.30% - 6.71% 11/6/01
Lehman Brothers Aggregate Bond Index(3) 2.52% 6.81% 7.41% 6.97%
S&P 500(3) -0.81% 6.31% -2.38% 5.89%
Capital Market Benchmark(3) -0.13% 6.48% -0.25% 6.36%
PORTFOLIO COMPOSITION (4)
As of As of
6/30/05 12/31/04 Change
------- -------- ------
U.S. Large-Cap Value Stocks 23% 22% +1%
U.S. Large-Cap Growth Stocks 19% 19% 0%
U.S. Mid-Cap Value Stocks 9% 11% -2%
U.S. Mid-Cap Growth Stocks 9% 7% +2%
Foreign Stocks 8% 8% 0%
Mortgage- & Asset-Backed Bonds 8% 8% 0%
REITs 6% 6% 0%
U.S. Small-Cap Growth Stocks 4% 4% 0%
U.S. Small-Cap Value Stocks 4% 4% 0%
High-Yield Corporate Bonds 3% 3% 0%
Investment-Grade Corporate Bonds 2% 2% 0%
Convertible Securities 1% 1% 0%
U.S. Government Securities 1% 1% 0%
Cash Equivalents 3% 4% -1%
(3) 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: VT Balanced Portfolio: 60% S&P 500 and 40%
Lehman Brothers Aggregate Bond Index; VT Conservative Growth Portfolio: 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.
(4) May not reflect the current portfolio composition.
5
[GRAPHIC]
VT Strategic Growth Portfolio
PORTFOLIO MANAGER
Asset Allocation Team
WM Advisors, Inc.
[GRAPHIC]
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 JUNE 30, 2005
6-Month (2) 1-Year 5-Year Since Inception Inception Date
----------- ------ ------ --------------- --------------
CLASS 1 SHARES 0.51% 8.70% 0.98% 10.02% 6/3/97
CLASS 2 SHARES 0.41% 8.44% - 6.56% 11/6/01
S&P 500(3) -0.81% 6.31% -2.38% 5.89%
Russell 3000(R) Index(3) -0.01% 8.05% -1.35% 6.39%
PORTFOLIO COMPOSITION (4)
As of As of
6/30/05 12/31/04 Change
------- -------- ------
U.S. Large-Cap Value Stocks 26% 24% +2%
U.S. Large-Cap Growth Stocks 21% 21% 0%
U.S. Mid-Cap Value Stocks 11% 13% -2%
U.S. Mid-Cap Growth Stocks 11% 9% +2%
Foreign Stocks 9% 9% 0%
REITs 6% 6% 0%
U.S. Small-Cap Growth Stocks 5% 5% 0%
U.S. Small-Cap Value Stocks 4% 5% -1%
High-Yield Corporate Bonds 3% 3% 0%
Convertible Securities 1% 1% 0%
Cash Equivalents 3% 4% -1%
Note: For information about the underlying WM Funds of the VT SAM Portfolios,
please see the WM Variable Trust semiannual report, which is available online at
wmgroupoffunds.com or by calling 800-222-5852.
(1) 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. The Portfolio's
performance between 1997 and 1999 benefited from the agreement of WM Advisors
and its affiliates to limit the Portfolio's expenses.
(2) Periods of less than one year are not annualized.
(3) 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.
(4) May not reflect the current portfolio composition
6
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 24.) An example including expenses of the Underlying Funds appears on the
following page. Please note that 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 January 1, 2005 to June 30, 2005.
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 01/01/2005- VALUE VALUE 01/01/2005- EXPENSE
01/01/2005 06/30/2005 06/30/2005 01/01/2005 06/30/2005 06/30/2005 RATIO
---------- ---------- ----------- ---------- ---------- ----------- -------
VT Flexible Income Portfolio
Class 1............................... $ 1,000 $ 1,014 $ 1.45 $ 1,000 $ 1,023 $ 1.45 0.29%
Class 2............................... 1,000 1,013 2.70 1,000 1,022 2.71 0.54%
VT Conservative Balanced Portfolio
Class 1............................... $ 1,000 $ 1,012 $ 1.70 $ 1,000 $ 1,023 $ 1.71 0.34%
Class 2............................... 1,000 1,011 2.94 1,000 1,022 2.96 0.59%
VT Balanced Portfolio
Class 1............................... $ 1,000 $ 1,010 $ 1.40 $ 1,000 $ 1,023 $ 1.40 0.28%
Class 2............................... 1,000 1,009 2.64 1,000 1,022 2.66 0.53%
VT Conservative Growth Portfolio
Class 1............................... $ 1,000 $ 1,007 $ 1.39 $ 1,000 $ 1,023 $ 1.40 0.28%
Class 2............................... 1,000 1,006 2.64 1,000 1,022 2.66 0.53%
VT Strategic Growth Portfolio
Class 1............................... $ 1,000 $ 1,005 $ 1.49 $ 1,000 $ 1,023 $ 1.51 0.30%
Class 2............................... 1,000 1,004 2.73 1,000 1,022 2.76 0.55%
* Expenses are equal to each Portfolio's annualized expense ratio, multiplied
by the average account value over the period, multiplied by the 181 days in
the most recent fiscal half-year, divided by 365 days in the year (to
reflect the one-half year period).
7
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 June 30, 2005. 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)
-------------------------------------- --------------------------------------
ESTIMATED ESTIMATED
AGGREGATE AGGREGATE
EXPENSES EXPENSES
BEGINNING ENDING PAID DURING BEGINNING ENDING PAID DURING ESTIMATED
ACCOUNT ACCOUNT PERIOD* ACCOUNT ACCOUNT PERIOD* AGGREGATE
VALUE VALUE 01/01/2005- VALUE VALUE 01/01/2005- EXPENSE
01/01/2005 06/30/2005 06/30/2005 01/01/2005 06/30/2005 06/30/2005 RATIO
---------- ---------- ----------- ---------- ---------- ----------- ---------
VT Flexible Income Portfolio
Class 1............................... $ 1,000 $ 1,014 $ 4.44 $ 1,000 $ 1,020 $ 4.46 0.89%
Class 2............................... 1,000 1,013 5.69 1,000 1,019 5.71 1.14%
VT Conservative Balanced Portfolio
Class 1............................... $ 1,000 $ 1,012 $ 4.89 $ 1,000 $ 1,020 $ 4.91 0.98%
Class 2............................... 1,000 1,011 6.13 1,000 1,019 6.16 1.23%
VT Balanced Portfolio
Class 1............................... $ 1,000 $ 1,010 $ 4.83 $ 1,000 $ 1,020 $ 4.86 0.97%
Class 2............................... 1,000 1,009 6.08 1,000 1,019 6.11 1.22%
VT Conservative Growth Portfolio
Class 1............................... $ 1,000 $ 1,007 $ 5.28 $ 1,000 $ 1,020 $ 5.31 1.06%
Class 2............................... 1,000 1,006 6.51 1,000 1,018 6.56 1.31%
VT Strategic Growth Portfolio
Class 1............................... $ 1,000 $ 1,005 $ 5.67 $ 1,000 $ 1,019 $ 5.71 1.14%
Class 2............................... 1,000 1,004 6.91 1,000 1,018 6.95 1.39%
* Expenses are equal to each Portfolio's annualized expense ratio, multiplied
by the average account value over the period, multiplied by the 181 days in
the most recent fiscal half-year, divided by 365 days in the year (to
reflect the one-half year period).
8
Financial Statements:
Portfolios of Investments
VT FLEXIBLE INCOME PORTFOLIO
June 30, 2005 (Unaudited)
VALUE
SHARES (000s)
------ --------------
INVESTMENT COMPANY SECURITIES - 99.8%
EQUITY FUNDS - 24.1%
507,912 WM VT Equity Income Fund................................ $ 8,492
886,861 WM VT Growth & Income Fund.............................. 15,981
941,754 WM VT Growth Fund....................................... 12,064
439,987 WM VT Mid Cap Stock Fund................................ 7,071
159,522 WM VT REIT Fund......................................... 2,669
234,341 WM VT Small Cap Growth Fund+............................ 2,088
208,864 WM VT Small Cap Value Fund.............................. 2,565
119,381 WM VT West Coast Equity Fund............................ 2,391
--------------
Total Equity Funds
(Cost $41,349)......................................... 53,321
--------------
FIXED INCOME FUNDS -- 75.7%
1,896,506 WM High Yield Fund...................................... 15,570
5,068,168 WM VT Income Fund....................................... 54,027
10,313,340 WM VT Short Term Income Fund............................ 25,783
6,953,369 WM VT U.S. Government Securities Fund................... 72,524
--------------
Total Fixed Income Funds
(Cost $165,113)........................................ 167,904
--------------
Total Investment Company Securities
(Cost $206,462)........................................ 221,225
--------------
PRINCIPAL
AMOUNT
(000s)
---------
REPURCHASE AGREEMENT -- 0.3%
(Cost $701)
$ 701 Agreement with Morgan Stanley, 2.850%
dated 06/30/2005, to be repurchased at
$701,000 on 07/01/2005 (Collateralized by U.S.
Treasury Note, 2.000% due 01/15/2014, market
value $723,000).................................. 701
----------
TOTAL INVESTMENTS (Cost $207,163*)........................................ 100.1% 221,926
OTHER ASSETS (LIABILITIES) (NET).......................................... (0.1) (211)
----- ----------
NET ASSETS................................................................ 100.0% $ 221,715
===== ==========
- -----------
* Aggregate cost for federal tax purpose.
+ Non-income producing security.
VT CONSERVATIVE BALANCED PORTFOLIO
June 30, 2005 (unaudited)
VALUE
SHARES (000s)
------------ -----------
INVESTMENT COMPANY SECURITIES -- 99.7%
EQUITY FUNDS -- 40.9%
275,092 WM VT Equity Income Fund....................... $ 4,599
356,240 WM VT Growth & Income Fund..................... 6,419
413,025 WM VT Growth Fund.............................. 5,291
217,373 WM VT International Growth Fund................ 2,667
162,708 WM VT Mid Cap Stock Fund....................... 2,615
89,070 WM VT REIT Fund................................ 1,490
72,163 WM VT Small Cap Growth Fund+................... 643
87,913 WM VT Small Cap Value Fund..................... 1,080
99,907 WM VT West Coast Equity Fund................... 2,001
-----------
Total Equity Funds
(Cost $22,093)................................. 26,805
-----------
FIXED INCOME FUNDS -- 58.8%
467,333 WM High Yield Fund............................. 3,837
1,174,002 WM VT Income Fund.............................. 12,515
1,495,394 WM VT Short Term Income Fund................... 3,738
1,765,128 WM VT U.S. Government Securities Fund.......... 18,410
-----------
Total Fixed Income Funds
(Cost $38,315)................................. 38,500
-----------
Total Investment Company Securities
(Cost $60,408)................................. 65,305
-----------
PRINCIPAL
AMOUNT
(000s)
---------
REPURCHASE AGREEMENT -- 0.2%
(Cost $139)
$ 139 Agreement with Morgan Stanley,
2.850% dated 06/30/2005, to be
repurchased at $139,000 on
07/01/2005 (Collateralized by U.S.
Treasury Note, 2.000% due 01/15/2014,
market value $143,000).................. 139
---------
TOTAL INVESTMENTS (Cost $60,547*)........................ 99.9% 65,444
OTHER ASSETS (LIABILITIES) (NET)......................... 0.1 64
----- ---------
NET ASSETS............................................... 100.0% $ 65,508
===== =========
- -----------
* Aggregate cost for federal tax purposes.
+ Non-income producing security.
See Notes to Financial Statements.
9
Portfolios of Investments
VT BALANCED PORTFOLIO
June 30, 2005 (unaudited)
VALUE
SHARES (000s)
--------- -----------
INVESTMENT COMPANY SECURITIES - 99.2%
EQUITY FUNDS - 63.7%
4,095,702 WM VT Equity Income Fund................ $ 68,480
4,966,480 WM VT Growth & Income Fund.............. 89,496
6,430,263 WM VT Growth Fund....................... 82,372
2,854,308 WM VT International Growth Fund......... 35,022
2,504,059 WM VT Mid Cap Stock Fund................ 40,240
1,458,453 WM VT REIT Fund......................... 24,400
1,272,774 WM VT Small Cap Growth Fund+............ 11,340
1,495,496 WM VT Small Cap Value Fund.............. 18,365
1,652,593 WM VT West Coast Equity Fund............ 33,102
-----------
Total Equity Funds
(Cost $ 333,623)....................... 402,817
-----------
FIXED INCOME FUNDS - 35.5%
3,903,374 WM High Yield Fund...................... 32,047
7,080,177 WM VT Income Fund....................... 75,474
2,898,136 WM VT Short Term Income Fund............ 7,245
10,517,541 WM VT U.S. Government Securities Fund... 109,698
-----------
Total Fixed Income Funds
(Cost $ 214,048)....................... 224,464
-----------
Total Investment Company Securities
(Cost $ 547,671)....................... 627,281
-----------
PRINCIPAL
AMOUNT
(000s)
------------
REPURCHASE AGREEMENT - 0.8%
(Cost $4,781)
$ 4,781 Agreement with Morgan Stanley,
2.850% dated 06/30/2005, to be
repurchased at $4,781,000 on
07/01/2005 (Collateralized by U.S.
Treasury Note, 2.000% due 01/15/2014,
market value $4,930,000)............... 4,781
--------
TOTAL INVESTMENTS (Cost $552,452*)...................... 100.0% 632,062
OTHER ASSETS (LIABILITIES) (NET)........................ 0.0 159
----- --------
NET ASSETS.............................................. 100.0% $632,221
===== ========
- ------------
* Aggregate cost for federal tax purposes.
+ Non-income producing security.
VT CONSERVATIVE GROWTH PORTFOLIO
June 30, 2005 (unaudited)
VALUE
SHARES (000s)
- --------- ---------------
INVESTMENT COMPANY SECURITIES - 99.9%
EQUITY FUNDS - 83.4%
2,905,277 WM VT Equity Income Fund........................................ $ 48,576
4,121,959 WM VT Growth & Income Fund...................................... 74,278
4,627,782 WM VT Growth Fund............................................... 59,282
2,354,484 WM VT International Growth Fund................................. 28,889
1,918,717 WM VT Mid Cap Stock Fund........................................ 30,834
1,012,644 WM VT REIT Fund................................................. 16,942
1,055,695 WM VT Small Cap Growth Fund+.................................... 9,406
1,203,508 WM VT Small Cap Value Fund...................................... 14,779
1,347,166 WM VT West Coast Equity Fund.................................... 26,984
---------------
Total Equity Funds
(Cost $272,634)................................................ 309,970
---------------
FIXED INCOME FUNDS - 16.5%
1,728,637 WM High Yield Fund.............................................. 14,192
1,378,961 WM VT Income Fund............................................... 14,700
3,129,013 WM VT U.S. Government Securities Fund........................... 32,635
---------------
Total Fixed Income Funds
(Cost $58,225)................................................. 61,527
---------------
Total Investment Company Securities
(Cost $330,859)................................................ 371,497
---------------
TOTAL INVESTMENTS (Cost $330,859*).............................................. 99.9% 371,497
OTHER ASSETS (LIABILITIES) (NET)................................................ 0.1 237
----- ---------------
NET ASSETS...................................................................... 100.0% $ 371,734
===== ===============
- -----------
* Aggregate cost for federal tax purposes.
+ Non-income producing security.
See Notes to Financial Statements.
10
Portfolio of Investments
VT STRATEGIC GROWTH PORTFOLIO
June 30, 2005 (unaudited)
VALUE
SHARES (000s)
----------- ---------
INVESTMENT COMPANY SECURITIES -- 99.8%
EQUITY FUNDS -- 94.9%
1,330,876 WM VT Equity Income Fund............................. $ 22,252
2,154,212 WM VT Growth & Income Fund........................... 38,819
2,357,959 WM VT Growth Fund.................................... 30,205
1,229,852 WM VT International Growth Fund...................... 15,090
1,174,704 WM VT Mid Cap Stock Fund............................. 18,878
473,236 WM VT REIT Fund...................................... 7,917
566,283 WM VT Small Cap Growth Fund+......................... 5,046
611,073 WM VT Small Cap Value Fund........................... 7,504
748,682 WM VT West Coast Equity Fund......................... 14,996
---------
Total Equity Funds
(Cost $143,554)..................................... 160,707
---------
FIXED INCOMEFUND -- 4.9%
1,011,871 WM High Yield Fund................................... 8,308
---------
Total Fixed Income Fund
(Cost $8,077)....................................... 8,308
---------
Total Investment Company Securities
(Cost $151,631)..................................... 169,015
---------
TOTAL INVESTMENTS (Cost $151,631*)........................ 99.8% 169,015
OTHER ASSETS (LIABILITIES) (NET).......................... 0.2 404
----- ---------
NET ASSETS................................................ 100.0% $ 169,419
===== =========
- -------------
* Aggregate cost for federal tax purposes.
+ Non-income producing security.
See Notes to Financial Statements.
11
Statements of Assets and Liabilities
WM VARIABLE TRUST STRATEGIC ASSET MANAGEMENT PORTFOLIOS
June 30, 2005 (unaudited)
(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)................... $ 221,926 $ 65,444 $ 632,062 $ 371,497 $ 169,015
Receivable for Portfolio shares sold........ 58 101 476 349 463
Prepaid expenses and other assets........... 14 13 21 317 213
------------- --------------- ----------- --------------- ------------
Total Assets............................. 221,998 65,558 632,559 372,163 169,691
------------- --------------- ----------- --------------- ------------
LIABILITIES:
Payable for Portfolio shares redeemed....... 182 15 82 158 148
Investment advisory fee payable............. 18 5 52 31 14
Administration fee payable.................. 27 8 78 46 21
Distribution fees payable................... 15 5 37 17 8
Due to custodian............................ -- -- -- 113 48
Accrued legal and audit fees................ 15 14 16 15 14
Accrued printing and postage expenses....... 25 2 72 48 18
Accrued expenses and other payables......... 1 1 1 1 1
------------- --------------- ----------- --------------- ------------
Total Liabilities........................ 283 50 338 429 272
------------- --------------- ----------- --------------- ------------
NET ASSETS.................................. $ 221,715 $ 65,508 $ 632,221 $ 371,734 $ 169,419
============= =============== =========== =============== ============
(a) Investments, at cost.................... $ 207,163 $ 60,547 $ 552,452 $ 330,859 $ 151,631
============= =============== =========== =============== ============
NET ASSETS CONSIST OF:
Undistributed net investment income......... $ 7,921 $ 1,954 $ 13,854 $ 5,461 $ 1,659
Accumulated net realized loss
on investment transactions................ (451) (588) (25,960) (35,585) (13,127)
Net unrealized appreciation
of investments............................ 14,763 4,897 79,610 40,638 17,384
Paid-in capital............................. 199,482 59,245 564,717 361,220 163,503
------------- --------------- ----------- --------------- ------------
Total Net Assets......................... $ 221,715 $ 65,508 $ 632,221 $ 371,734 $ 169,419
============= =============== =========== =============== ============
NET ASSETS:
Class 1 Shares.............................. $ 147,640 $ 41,205 $ 453,621 $ 288,593 $ 129,641
============= =============== =========== =============== ============
Class 2 Shares.............................. $ 74,075 $ 24,303 $ 178,600 $ 83,141 $ 39,778
============= =============== =========== =============== ============
SHARES OUTSTANDING:
Class 1 Shares.............................. 10,690 3,529 28,472 17,180 7,037
============= =============== =========== =============== ============
Class 2 Shares.............................. 5,393 2,093 11,267 4,975 2,167
============= =============== =========== =============== ============
CLASS 1 SHARES:*
Net asset value, offering and redemption
price per share of beneficial interest
outstanding............................... $ 13.81 $ 11.68 $ 15.93 $ 16.80 $ 18.42
============= =============== =========== =============== ============
CLASS 2 SHARES:*
Net asset value, offering and redemption
price per share of beneficial interest
outstanding............................... $ 13.74 $ 11.61 $ 15.85 $ 16.71 $ 18.35
============= =============== =========== =============== ============
- -----------
* Net asset value is not shown in thousands.
See Notes to Financial Statements.
12
Statements of Operations
WM VARIABLE TRUST STRATEGIC ASSET MANAGEMENT PORTFOLIOS
For the Six Months Ended June 30, 2005 (unaudited)
(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....... $ 8,324 $ 2,085 $ 14,821 $ 6,079 $ 1,946
Interest........................................... 6 5 120 3 6
----------- --------------- ----------- --------------- ------------
Total investment income........................ 8,330 2,090 14,941 6,082 1,952
----------- --------------- ----------- --------------- ------------
EXPENSES:
Investment advisory fee............................ 135 31 309 183 82
Administration fee................................. 134 47 464 275 123
Class 2 Shares distribution fees................... 87 28 211 97 46
Custodian fees..................................... 1 1 1 2 1
Legal and audit fees............................... 14 11 20 16 13
Trustees' fees..................................... 2 1 7 4 2
Printing and postage expenses...................... 11 2 30 16 6
Other.............................................. 14 13 22 19 15
----------- --------------- ----------- --------------- ------------
Total expenses................................. 398 134 1,064 612 288
Fees reduced by custodian credits.................. --* --* --* --* --*
----------- --------------- ----------- --------------- ------------
Net expenses................................... 398 134 1,064 612 288
----------- --------------- ----------- --------------- ------------
NET INVESTMENT INCOME.............................. 7,932 1,956 13,877 5,470 1,664
----------- --------------- ----------- --------------- ------------
NET REALIZED AND UNREALIZED
LOSS ON INVESTMENTS:
Net realized gain/(loss) on investment
transactions..................................... (193) (107) 394 (8,956) (842)
Capital gain distributions received................ 639 259 4,091 3,091 1,761
Net change in unrealized appreciation/
depreciation of investments...................... (5,359) (1,362) (12,059) 2,903 (1,581)
----------- --------------- ----------- --------------- ------------
Net realized and unrealized loss on investments.... (4,913) (1,210) (7,574) (2,962) (662)
----------- --------------- ----------- --------------- ------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS.............................. $ 3,019 $ 746 $ 6,303 $ 2,508 $ 1,002
=========== =============== =========== =============== ============
- ----------
* Amount represents less than $500.
See Notes to Financial Statements.
13
Statements of Changes in Net Assets
WM VARIABLE TRUST STRATEGIC ASSET MANAGEMENT PORTFOLIOS
For the Six Months Ended June 30, 2005 (unaudited)
(In thousands)
VT FLEXIBLE VT CONSERVATIVE VT CONSERVATIVE VT STRATEGIC
INCOME BALANCED VT BALANCED GROWTH GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
----------- --------------- ----------- --------------- ------------
Net investment income........................... $ 7,932 $ 1,956 $ 13,877 $ 5,470 $ 1,664
Net realized gain/(loss) on investment
transactions................................. (193) (107) 394 (8,956) (842)
Capital gain distributions received............. 639 259 4,091 3,091 1,761
Net change in unrealized appreciation/
depreciation of investments.................. (5,359) (1,362) (12,059) 2,903 (1,581)
----------- --------------- ----------- --------------- ------------
Net increase in net assets resulting from
operations................................... 3,019 746 6,303 2,508 1,002
Distributions to shareholders from:
Net investment income:
Class 1 Shares.............................. (4,878) (980) (8,714) (3,689) (868)
Class 2 Shares.............................. (2,295) (534) (3,132) (914) (207)
Net realized gains on investments:
Class 1 Shares.............................. (186) -- -- -- --
Class 2 Shares.............................. (93) -- -- -- --
Net increase/(decrease) in net assets from
Portfolio share transactions:
Class 1 Shares.............................. 1,589 1,245 (9,267) (13,147) (265)
Class 2 Shares.............................. 7,752 3,728 15,153 9,562 5,559
----------- --------------- ----------- --------------- ------------
Net increase/(decrease) in net assets........... 4,908 4,205 343 (5,680) 5,221
NET ASSETS:
Beginning of period............................. 216,807 61,303 631,878 377,414 164,198
----------- --------------- ----------- --------------- ------------
End of period................................... $ 221,715 $ 65,508 $ 632,221 $ 371,734 $ 169,419
=========== =============== =========== =============== ============
Undistributed net investment income
at end of period............................. $ 7,921 $ 1,954 $ 13,854 $ 5,461 $ 1,659
=========== =============== =========== =============== ============
See Notes to Financial Statements.
14
Statements of Changes in Net Assets (continued)
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.
15
Statements of Changes in Net Assets -- Capital Stock Activity
WM VARIABLE TRUST STRATEGIC ASSET MANAGEMENT PORTFOLIOS
(In thousands)
VT FLEXIBLE VT CONSERVATIVE
INCOME PORTFOLIO BALANCED PORTFOLIO VT BALANCED PORTFOLIO
-------------------------- ---------------------------- --------------------------
PERIOD PERIOD PERIOD
ENDED ENDED ENDED
06/30/05 YEAR ENDED 06/30/05 YEAR ENDED 06/30/05 YEAR ENDED
(UNAUDITED) 12/31/04 (UNAUDITED) 12/31/04 (UNAUDITED) 12/31/04
----------- ----------- ----------- ----------- ----------- -----------
AMOUNT
CLASS 1:
Sold........................... $ 6,879 $ 22,582 $ 4,332 $ 12,881 $ 14,685 $ 54,025
Issued as reinvestment of
dividends.................... 5,064 4,929 980 737 8,714 8,194
Redeemed....................... (10,354) (25,979) (4,067) (6,972) (32,666) (49,031)
----------- ----------- ----------- ----------- ----------- -----------
Net increase/(decrease)........ $ 1,589 $ 1,532 $ 1,245 $ 6,646 $ (9,267) $ 13,188
=========== =========== =========== =========== =========== ===========
CLASS 2:
Sold........................... $ 9,685 $ 31,697 $ 4,567 $ 12,072 $ 19,775 $ 64,500
Issued as reinvestment of
dividends.................... 2,388 1,693 534 297 3,132 2,224
Redeemed....................... (4,321) (1,830) (1,373) (1,693) (7,754) (4,605)
----------- ----------- ----------- ----------- ----------- -----------
Net increase................... $ 7,752 $ 31,560 $ 3,728 $ 10,676 $ 15,153 $ 62,119
=========== =========== =========== =========== =========== ===========
SHARES
CLASS 1:
Sold........................... 489 1,639 369 1,140 926 3,563
Issued as reinvestment of
dividends.................... 368 370 84 67 546 551
Redeemed....................... (738) (1,892) (346) (618) (2,055) (3,234)
----------- ----------- ----------- ----------- ----------- -----------
Net increase/(decrease)........ 119 117 107 589 (583) 880
=========== =========== =========== =========== =========== ===========
CLASS 2:
Sold........................... 695 2,312 392 1,074 1,251 4,281
Issued as reinvestment of
dividends.................... 174 127 46 27 197 150
Redeemed....................... (309) (134) (118) (150) (490) (305)
----------- ----------- ----------- ----------- ----------- -----------
Net increase................... 560 2,305 320 951 958 4,126
=========== =========== =========== =========== =========== ===========
VT CONSERVATIVE VT STRATEGIC
GROWTH PORTFOLIO GROWTH PORTFOLIO
---------------------------- -----------------------------
PERIOD PERIOD
ENDED ENDED
06/30/05 YEAR ENDED 06/30/05 YEAR ENDED
(UNAUDITED) 12/31/04 (UNAUDITED) 12/31/04
------------ ----------- ----------- ------------
AMOUNT
CLASS 1:
Sold............................. $ 8,124 $ 28,188 $ 9,171 $ 27,082
Issued as reinvestment of
dividends...................... 3,689 3,986 868 773
Redeemed......................... (24,960) (41,128) (10,304) (16,582)
------------ ----------- ----------- ------------
Net increase/(decrease).......... $ (13,147) $ (8,954) $ (265) $ 11,273
============ =========== =========== ============
CLASS 2:
Sold............................. $ 13,043 $ 30,924 $ 8,081 $ 18,524
Issued as reinvestment of
dividends...................... 914 737 207 137
Redeemed......................... (4,395) (4,553) (2,729) (2,509)
------------ ----------- ----------- ------------
Net increase..................... $ 9,562 $ 27,108 $ 5,559 $ 16,152
============ =========== =========== ============
SHARES
CLASS 1:
Sold............................. 488 1,792 508 1,598
Issued as reinvestment of
dividends...................... 219 257 47 46
Redeemed......................... (1,499) (2,628) (568) (979)
------------ ----------- ----------- ------------
Net increase/(decrease).......... (792) (579) (13) 665
============ =========== =========== ============
CLASS 2:
Sold............................. 791 1,980 450 1,100
Issued as reinvestment of
dividends...................... 54 48 11 8
Redeemed......................... (266) (292) (151) (150)
------------ ----------- ----------- ------------
Net increase..................... 579 1,736 310 958
============ =========== =========== ============
See Notes to Financial Statements.
16
This Page Intentionally Left Blank.
17
Financial Highlights
For a Portfolio share outstanding throughout each period.
CLASS 1
----------------------------------------------------------------------
SIX MONTHS
ENDED YEARS ENDED DECEMBER 31
06/30/05 ------------------------------------------------------
(UNAUDITED) 2004 2003 2002 2001 2000
----------- -------- -------- -------- ------- -------
VT FLEXIBLE INCOME PORTFOLIO
NET ASSET VALUE, BEGINNING OF PERIOD................ $ 14.10 $ 13.71 $ 12.41 $ 12.23 $ 11.90 $ 11.86
----------- -------- -------- -------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income........................... 0.52(6) 0.51(6) 0.56(6) 0.41(6) 0.17(6) 0.58(6)
Net realized and unrealized gain/(loss) on
investments.................................... (0.32) 0.35 1.08 (0.15) 0.40 0.10
----------- -------- -------- -------- ------- -------
Total from investment operations ............... 0.20 0.86 1.64 0.26 0.57 0.68
----------- -------- -------- -------- ------- -------
LESS DISTRIBUTIONS:
Dividends from net investment income(1)......... (0.47) (0.47) (0.34) (0.08) (0.15) (0.58)
Dividends from net realized capital gains....... (0.02) -- -- -- (0.09) (0.06)
----------- -------- -------- -------- ------- -------
Total distributions............................. (0.49) (0.47) (0.34) (0.08) (0.24) (0.64)
----------- -------- -------- -------- ------- -------
NET ASSET VALUE, END OF PERIOD...................... $ 13.81 $ 14.10 $ 13.71 $ 12.41 $ 12.23 $ 11.90
=========== ======== ======== ======== ======= =======
TOTAL RETURN(2)..................................... 1.43% 6.47% 13.30% 2.14% 4.84% 5.79%
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000s)............. $ 147,640 $149,055 $143,283 $125,992 $90,860 $40,049
Ratio of operating expenses to average net
assets(3)...................................... 0.29%(7) 0.28% 0.30% 0.30% 0.33% 0.31%
Ratio of net investment income to average net
assets......................................... 7.45%(7) 3.67% 4.33% 3.37% 1.43% 4.84%
Portfolio turnover rate......................... 0%(8) 5% 4% 9% 1% 14%
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%(7) 0.28% 0.30% 0.30% 0.33% 0.31%
CLASS 1
---------------------------------------------------------------------
SIX MONTHS
ENDED YEARS ENDED DECEMBER 31
06/30/05 -----------------------------------------------------
(UNAUDITED) 2004 2003 2002 2001 2000
----------- -------- -------- -------- ------- --------
VT CONSERVATIVE BALANCED PORTFOLIO
NET ASSET VALUE, BEGINNING OF PERIOD................. $ 11.82 $ 11.15 $ 9.73 $ 10.04 $ 9.90 $ 9.90
----------- -------- -------- -------- ------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income............................ 0.37(6) 0.34(6) 0.36(6) 0.31(6) 0.13 0.49(6)
Net realized and unrealized gain/(loss) on
investments..................................... (0.23) 0.56 1.29 (0.54) 0.10 (0.00)(9)
----------- -------- -------- -------- ------- --------
Total from investment operations................. 0.14 0.90 1.65 (0.23) 0.23 0.49
----------- -------- -------- -------- ------- --------
LESS DISTRIBUTIONS:
Dividends from net investment income (1)......... (0.28) (0.23) (0.23) (0.07) (0.09) (0.49)
Dividends from net realized capital gains........ -- -- -- (0.01) -- (0.00)(9)
----------- -------- -------- -------- ------- --------
Total distributions (0.28) (0.23) (0.23) (0.08) (0.09) (0.49)
----------- -------- -------- -------- ------- --------
NET ASSET VALUE, END OF PERIOD....................... $ 11.68 $ 11.82 $ 11.15 $ 9.73 $ 10.04 $ 9.90
=========== ======== ======== ======== ======= ========
TOTAL RETURN(2)...................................... 1.21% 8.21% 17.09% (2.26)% 2.40% 5.03%
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000s).............. $ 41,205 $ 40,458 $ 31,600 $ 20,759 $14,221 $ 8,736
Ratio of operating expenses to average net
assets(3)....................................... 0.34%(7) 0.33% 0.31% 0.30% 0.41% 0.37%
Ratio of net investment income to average net
assets.......................................... 6.34%(7) 3.02% 3.48% 3.20% 1.36% 4.99%
Portfolio turnover rate.......................... 1% 1% 6% 9% 2% 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)................................ 0.34%(7) 0.33% 0.36% 0.41% 0.53% 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 of 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 1%.
(9) Amount represents less than $0.01 per share.
See Notes to Financial Statements.
18
CLASS 2
- -------------------------------------------------------------------------
SIX MONTHS
ENDED YEARS ENDED DECEMBER 31
06/30/05 ------------------------------------------------------
(UNAUDITED) 2004 2003 2002 2001(5)
- ------------ -------- -------- -------- -------
$ 14.02 $ 13.65 $ 12.38 $ 12.23 $ 2.18
- ------------ -------- -------- -------- -------
0.50(6) 0.47(6) 0.53(6) 0.38(6) 0.02(6)
(0.32) 0.36 1.07 (0.15) 0.03
- ------------ -------- -------- -------- -------
0.18 0.83 1.60 0.23 0.05
- ------------ -------- -------- -------- -------
(0.44) (0.46) (0.33) (0.08) --
(0.02) -- -- -- --
- ------------ -------- -------- -------- -------
(0.46) (0.46) (0.33) (0.08) --
- ------------ -------- -------- -------- -------
$ 13.74 $ 14.02 $ 13.65 $ 12.38 $ 12.23
============ ======== ======== ======== =======
1.32% 6.24% 13.02% 1.89% 0.41%
$ 74,075 $ 67,752 $ 34,501 $ 9,416 $ 182
0.54%(7) 0.53% 0.55% 0.55% 0.58%(7)
7.20%(7) 3.42% 4.08% 3.12% 1.18%(7)
0%(8) 5% 4% 9% 1%
0.54%(7) 0.53% 0.55% 0.55% 0.58%(7)
CLASS 2
- -------------------------------------------------------------------------
SIX MONTHS
ENDED YEARS ENDED DECEMBER 31
06/30/05 ------------------------------------------------------
(UNAUDITED) 2004 2003 2002 2001(5)
- ------------ -------- -------- -------- -------
$ 11.75 $ 11.11 $ 9.71 $ 10.04 $ 9.92
- ------------ -------- -------- -------- -------
0.35(6) 0.31(6) 0.33(6) 0.29(6) 0.01
(0.23) 0.55 1.29 (0.54) 0.11
- ------------ -------- -------- -------- -------
0.12 0.86 1.62 (0.25) 0.12
- ------------ -------- -------- -------- -------
(0.26) (0.22) (0.22) (0.07) --
-- -- -- (0.01) --
- ------------ -------- -------- -------- -------
(0.26) (0.22) (0.22) (0.08) --
- ------------ -------- -------- -------- -------
$ 11.61 $ 11.75 $ 11.11 $ 9.71 $ 10.04
============ ======== ======== ======== =======
1.06% 7.88% 16.83% (2.47)% 1.21%
$ 24,303 $ 20,845 $ 9,128 $ 2,244 $ 205
0.59%(7) 0.58% 0.56% 0.55% 0.66%(7)
6.09%(7) 2.77% 3.23% 2.95% 1.11%(7)
1% 1% 6% 9% 2%
0.59%(7) 0.58% 0.61% 0.66% 0.78%(7)
See Notes to Financial Statements.
19
Financial Highlights
For a Portfolio share outstanding throughout each period.
CLASS 1
------------------------------------------------------------------------
SIX MONTHS
ENDED YEARS ENDED DECEMBER 31
06/30/05 --------------------------------------------------------
(UNAUDITED) 2004 2003 2002 2001 2000
----------- -------- -------- -------- -------- --------
VT BALANCED PORTFOLIO
NET ASSET VALUE, BEGINNING OF PERIOD................. $ 16.08 $ 14.88 $ 12.42 $ 13.91 $ 14.50 $ 14.92
----------- -------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income........................... 0.36(6) 0.32(6) 0.33(6) 0.32(6) 0.17(6) 0.41(6)
Net realized and unrealized gain/(loss) on
investments.................................... (0.20) 1.16 2.46 (1.53) (0.15) (0.32)
----------- -------- -------- -------- -------- --------
Total from investment operations................ 0.16 1.48 2.79 (1.21) 0.02 0.09
----------- -------- -------- -------- -------- --------
LESS DISTRIBUTIONS:
Dividends from net investment income(1)......... (0.31) (0.28) (0.33) (0.28) (0.25) (0.43)
Dividends from net realized capital gains -- -- -- -- (0.36) (0.08)
----------- -------- -------- -------- -------- --------
Total distributions............................. (0.31) (0.28) (0.33) (0.28) (0.61) (0.51)
----------- -------- -------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD....................... $ 15.93 $ 16.08 $ 14.88 $ 12.42 $ 13.91 $ 14.50
=========== ======== ======== ======== ======== ========
TOTAL RETURN(2)...................................... 1.00% 10.12% 22.74% (8.78)% 0.13% 0.49%
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000s)............. $ 453,621 $467,076 $419,273 $334,605 $354,082 $305,399
Ratio of operating expenses to average net
assets(3)...................................... 0.28%(8) 0.28% 0.29% 0.29% 0.28% 0.29%
Ratio of net investment income to average net
assets......................................... 4.56%(8) 2.13% 2.50% 2.52% 1.22% 2.76%
Portfolio turnover rate......................... 0%(9) 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%(8) 0.28% 0.29% 0.29% 0.28% 0.29%
CLASS 1
------------------------------------------------------------------------
SIX MONTHS
ENDED YEARS ENDED DECEMBER 31
06/30/05 --------------------------------------------------------
(UNAUDITED) 2004 2003 2002 2001 2000
----------- -------- -------- -------- -------- --------
VT CONSERVATIVE GROWTH PORTFOLIO
NET ASSET VALUE, BEGINNING OF PERIOD................. $ 16.89 $ 15.32 $ 12.16 $ 14.87 $ 16.46 $ 17.10
----------- -------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income........................... 0.25(6) 0.21(6) 0.23(6) 0.23(6) 0.17(6) 0.27(6)
Net realized and unrealized gain/(loss) on
investments.................................... (0.12) 1.58 3.23 (2.51) (0.72) (0.69)
----------- -------- -------- -------- -------- --------
Total from investment operations................ 0.13 1.79 3.46 (2.28) (0.55) (0.42)
----------- -------- -------- -------- -------- --------
LESS DISTRIBUTIONS:
Dividends from net investment income(1)......... (0.22) (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) (0.22) (0.30) (0.43) (1.04) (0.22)
----------- -------- -------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD....................... $ 16.80 $ 16.89 $ 15.32 $ 12.16 $ 14.87 $ 16.46
=========== ======== ======== ======== ======== ========
TOTAL RETURN(2)...................................... 0.74% 11.78% 28.74% (15.52)% (3.56)% (2.49)%
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000s)............. $ 288,593 $303,584 $284,165 $229,564 $309,608 $293,442
Ratio of operating expenses to average net
assets(3)...................................... 0.28%(8) 0.28% 0.30% 0.29% 0.28% 0.28%
Ratio of net investment income to average net
assets......................................... 3.03%(8) 1.36% 1.75% 1.77% 1.11% 1.59%
Portfolio turnover rate......................... 3% 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%(8) 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 of 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.
(9) Amount represents less than 1%.
See Notes to Financial Statements.
20
CLASS 2
- -------------------------------------------------------------------------
SIX MONTHS
ENDED YEARS ENDED DECEMBER 31
06/30/05 ------------------------------------------------------
(UNAUDITED) 2004 2003 2002 2001(5)
- ------------ -------- -------- -------- -------
$ 15.99 $ 14.82 $ 12.39 $ 13.91 $ 13.52
- ------------ -------- -------- -------- -------
0.34(6) 0.28(6) 0.30(6) 0.29(6) 0.02(6)
(0.20) 1.16 2.45 (1.53) 0.37(7)
- ------------ -------- -------- -------- -------
0.14 1.44 2.75 (1.24) 0.39
- ------------ -------- -------- -------- -------
(0.28) (0.27) (0.32) (0.28) --
-- -- -- -- --
- ------------ -------- -------- -------- -------
(0.28) (0.27) (0.32) (0.28) --
- ------------ -------- -------- -------- -------
$ 15.85 $ 15.99 $ 14.82 $ 12.39 $ 13.91
============ ======== ======== ======== =======
0.89% 9.83% 22.46% (9.00)% 2.88%
$ 178,600 $164,802 $ 91,631 $ 31,335 $ 1,452
0.53%(8) 0.53% 0.54% 0.54% 0.53%(8)
4.31%(8) 1.88% 2.25% 2.27% 0.97%(8)
0%(9) 4% 7% 22% 8%
0.53%(8) 0.53% 0.54% 0.54% 0.53%(8)
CLASS 2
- -------------------------------------------------------------------------
SIX MONTHS
ENDED YEARS ENDED DECEMBER 31
06/30/05 ------------------------------------------------------
(UNAUDITED) 2004 2003 2002 2001(5)
- ------------ -------- -------- -------- -------
$ 16.80 $ 15.25 $ 12.13 $ 14.87 $ 14.24
- ------------ -------- -------- -------- -------
0.23(6) 0.17(6) 0.20(6) 0.19(6) 0.01(6)
(0.13) 1.58 3.20 (2.50) 0.62(7)
- ------------ -------- -------- -------- -------
0.10 1.75 3.40 (2.31) 0.63
- ------------ -------- -------- -------- -------
(0.19) (0.20) (0.28) (0.41) --
-- -- -- (0.02) --
- ------------ -------- -------- -------- -------
(0.19) (0.20) (0.28) (0.43) --
- ------------ -------- -------- -------- -------
$ 16.71 $ 16.80 $ 15.25 $ 12.13 $ 14.87
============ ======== ======== ======== =======
0.57% 11.58% 28.36% (15.72)% 4.42%
$ 83,141 $ 73,830 $ 40,576 $ 14,610 $ 1,127
0.53%(8) 0.53% 0.55% 0.54% 0.53%(8)
2.78%(8) 1.11% 1.50% 1.52% 0.86%(8)
3% 10% 11% 19% 7%
0.53%(8) 0.53% 0.55% 0.54% 0.53%(8)
See Notes to Financial Statements.
21
Financial Highlights
For a Portfolio share outstanding throughout each period.
CLASS 1
------------------------------------------------------------------------
SIX MONTHS
ENDED YEARS ENDED DECEMBER 31
06/30/05 --------------------------------------------------------
(UNAUDITED) 2004 2003 2002 2001 2000
----------- -------- -------- -------- -------- --------
VT STRATEGIC GROWTH PORTFOLIO
NET ASSET VALUE, BEGINNING OF PERIOD................. $ 18.45 $ 16.46 $ 12.55 $ 16.45 $ 18.61 $ 19.59
----------- -------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income........................... 0.19(6) 0.14(6) 0.14(6) 0.15(6) 0.16(6) 0.13(6)
Net realized and unrealized gain/(loss) on
investments.................................... (0.10) 1.96 3.98 (3.47) (1.27) (0.84)
----------- -------- -------- -------- -------- --------
Total from investment operations................ 0.09 2.10 4.12 (3.32) (1.11) (0.71)
----------- -------- -------- -------- -------- --------
LESS DISTRIBUTIONS:
Dividends from net investment income(1)......... (0.12) (0.11) (0.21) (0.54) (0.57) (0.11)
Dividends from net realized capital gains....... -- -- -- (0.04) (0.48) (0.16)
----------- -------- -------- -------- -------- --------
Total distributions............................. (0.12) (0.11) (0.21) (0.58) (1.05) (0.27)
----------- -------- -------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD....................... $ 18.42 $ 18.45 $ 16.46 $ 12.55 $ 16.45 $ 18.61
=========== ======== ======== ======== ======== ========
TOTAL RETURN(2)...................................... 0.51% 12.83% 33.07% (20.53)% (6.25)% (3.73)%
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000s)............. $ 129,641 $130,069 $105,077 $ 73,936 $ 97,401 $ 98,431
Ratio of operating expenses to average net
assets(3)...................................... 0.30%(8) 0.29% 0.31% 0.32% 0.31% 0.30%
Ratio of net investment income to average net
assets......................................... 2.09%(8) 0.80% 0.99% 1.06% 0.95% 0.67%
Portfolio turnover rate ........................ 1% 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).............. 0.30%(8) 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 of 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.
22
CLASS 2
- -------------------------------------------------------------------------
SIX MONTHS
ENDED YEARS ENDED DECEMBER 31
06/30/05 ------------------------------------------------------
(UNAUDITED) 2004 2003 2002 2001(5)
- ------------ -------- -------- -------- -------
$ 18.38 $ 16.42 $ 12.54 $ 16.45 $ 15.54
- ------------ -------- -------- -------- -------
0.17(6) 0.09(6) 0.10(6) 0.11(6) 0.01(6)
(0.10) 1.97 3.98 (3.44) 0.90(7)
- ------------ -------- -------- -------- -------
0.07 2.06 4.08 (3.33) 0.91
- ------------ -------- -------- -------- -------
(0.10) (0.10) (0.20) (0.54) --
-- -- -- (0.04) --
- ------------ -------- -------- -------- -------
(0.10) (0.10) (0.20) (0.58) --
- ------------ -------- -------- -------- -------
$ 18.35 $ 18.38 $ 16.42 $ 12.54 $ 16.45
============ ======== ======== ======== =======
0.41% 12.54% 32.76% (20.59)% 5.86%
$ 39,778 $ 34,129 $ 14,766 $ 2,676 $ 319
0.55%(8) 0.54% 0.56% 0.57% 0.56%(8)
1.84%(8) 0.55% 0.74% 0.81% 0.70%(8)
1% 4% 9% 16% 5%
0.55%(8) 0.54% 0.56% 0.57% 0.56%(8)
See Notes to Financial Statements.
23
Notes to Financial Statements (unaudited)
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 ("Funds") and 5 portfolios (each a "Portfolio"
and collectively, the "Portfolios"). The VT Flexible Income, VT Conservative
Balanced, VT Balanced, VT Conservative Growth and VT Strategic Growth 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 June 30, 2005, "The Washington Mutual Savings Plan" held
approximately 40%, 30%, 11%, 13% and 40% 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"), a
wholly owned subsidiary of Washington Mutual, serves as investment advisor to
the Portfolios and the Underlying Funds. 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. The Advisor, 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.
24
Notes to Financial Statements (unaudited) (continued)
WM VARIABLE TRUST STRATEGIC ASSET MANAGEMENT PORTFOLIOS
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.
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.
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
The Advisor 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,
the Advisor is entitled to a monthly fee at an annual rate of 0.100% of each
Portfolio's average daily net assets up to $1 billion and 0.075% of each
Portfolio's average daily net assets over $1 billion.
Under an agreement effective as of May 1, 2005, the Advisor serves as
administrator to the Portfolios. For its administrative services to the
Portfolios, the Advisor is entitled to a monthly fee at an annual rate of 0.150%
of each Portfolio's average daily net assets up to $1 billion and 0.125% of each
Portfolio's average daily net assets over $1 billion. Prior to May 1, 2005, WM
Shareholder Services (the "Transfer Agent"), a wholly owned subsidiary of
Washington Mutual, Inc., served as administrator to the 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 six months ended June 30, 2005, 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 the Advisor, 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.
25
Notes to Financial Statements (unaudited) (continued)
WM VARIABLE TRUST STRATEGIC ASSET MANAGEMENT PORTFOLIOS
5. DISTRIBUTION PLANS
Each of the Portfolios has adopted a distribution plan, pursuant to Rule 12b-1
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 six months ended June 30, 2005, are as follows:
PURCHASES SALES
NAME OF PORTFOLIO (000s) (000s)
- ---------------------------------- --------- -------
VT Flexible Income Portfolio.......... $ 11,736 $ 900
VT Conservative Balanced Portfolio.... 6,844 775
VT Balanced Portfolio................. 21,762 2,850
VT Conservative Growth Portfolio...... 12,423 11,950
VT Strategic Growth Portfolio......... 10,406 2,000
7. UNREALIZED APPRECIATION/(DEPRECIATION)
At June 30, 2005, the aggregate gross unrealized appreciation/(depreciation) on
a tax basis are as follows:
(IN THOUSANDS)
----------------------------------------------------------------------------------
VT FLEXIBLE VT CONSERVATIVE VT CONSERVATIVE VT STRATEGIC
INCOME BALANCED VT BALANCED GROWTH GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
----------- --------------- ----------- --------------- ------------
Tax basis unrealized appreciation..... $ 15,853 $ 5,225 $ 79,610 $ 50,990 $ 21,867
Tax basis unrealized depreciation..... (1,090) (328) -- (10,352) (4,483)
----------- --------------- ----------- --------------- ------------
Net tax unrealized appreciation....... $ 14,763 $ 4,897 $ 79,610 $ 40,638 $ 17,384
=========== =============== =========== =============== ============
8. UNDERLYING FUNDS
The following is a summary of investment objectives and risk factors of the
Underlying Funds, and Portfolio ownership in the Underlying Funds. The WM Group
of Funds semiannual report, which is available online at wmgroupoffunds.com or
by calling 800-222-5852, contains more information regarding the Underlying
Funds.
INVESTMENT OBJECTIVES OF UNDERLYING FUNDS:
The investment objectives of the Underlying Funds are as follows:
WM VT REIT Fund Seeks to provide a high level of current income and intermediate to long-term
capital appreciation.
WM VT Equity Income Fund Seeks to provide a relatively high level of current income and long-term growth
of income and capital.
WM VT Growth & Income Fund Seeks to provide long-term capital growth. Current income is a secondary
consideration.
WM VT West Coast Equity Fund Seeks to provide long-term growth of capital.
WM VT Mid Cap Stock Fund Seeks to provide long-term capital appreciation.
WM VT Growth Fund Seeks to provide long-term capital appreciation.
WM VT Small Cap Value Fund Seeks to provide long-term capital appreciation.
WM VT Small Cap Growth Fund Seeks to provide long-term capital appreciation.
26
Notes to Financial Statements (unaudited) (continued)
WM VARIABLE TRUST STRATEGIC ASSET MANAGEMENT PORTFOLIOS
WM VT International Growth Fund Seeks to provide long-term capital appreciation.
WM VT Short Term Income Fund Seeks to provide as high a level of current income as is consistent with prudent
investment management and stability of principal.
WM VT U.S. Government Securities Fund Seeks to provide a high level of current income consistent with safety and
liquidity.
WM VT Income Fund Seeks to provide a high level of current income consistent with preservation of
capital.
WM High Yield Fund Seeks to provide a high level of current income.
RISK FACTORS OF UNDERLYING FUNDS:
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, Oregon and Washington. The VT West
Coast Equity Fund could be adversely impacted by economic trends within this
region.
The WM High Yield Fund concentrates its investments in lower rated debt
securities, which may be more susceptible to adverse economic conditions than
investment grade holdings. These securities are often subordinated to the prior
claims of other senior lenders, and uncertainties exist as to an issuer's
ability to meet principal and interest payments.
Certain Underlying 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.
PORTFOLIO OWNERSHIP IN THE UNDERLYING FUNDS:
At June 30, 2005, the Portfolios held investments in a number of the Underlying
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 TOTAL
- ----------------------------- ----------- --------------- ----------- --------------- ------------ -----
VT REIT Fund................. 4.8% 2.7% 44.2% 30.7% 14.3% 96.7%
VT Equity Income Fund........ 3.7% 2.0% 29.4% 20.9% 9.6% 65.6%
VT Growth & Income Fund...... 5.7% 2.3% 32.2% 26.7% 14.0% 80.9%
VT West Coast Equity Fund.... 1.9% 1.6% 26.4% 21.5% 12.0% 63.4%
VT Mid Cap Stock Fund........ 6.0% 2.2% 34.0% 26.0% 15.9% 84.1%
VT Growth Fund............... 5.2% 2.3% 35.3% 25.4% 13.0% 81.2%
VT Small Cap Value Fund...... 5.8% 2.4% 41.5% 33.4% 16.9% 100.0%
27
Notes to Financial Statements (unaudited) (continued)
WM VARIABLE TRUST STRATEGIC ASSET MANAGEMENT PORTFOLIOS
PORTFOLIOS
-------------------------------------------------------------------------------
VT FLEXIBLE VT CONSERVATIVE VT CONSERVATIVE VT STRATEGIC
INCOME BALANCED VT BALANCED GROWTH GROWTH
NAME OF FUND PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO TOTAL
- --------------------------------------- ----------- --------------- ----------- --------------- ------------ -----
VT Small Cap Growth Fund............... 4.7% 1.5% 25.7% 21.3% 11.4% 64.6%
VT International Growth Fund........... - 2.9% 38.6% 31.9% 16.6% 90.0%
VT Short Term Income Fund.............. 47.6% 6.9% 13.4% - - 67.9%
VT U.S. Government Securities Fund..... 26.0% 6.6% 39.3% 11.7% - 83.6%
VT Income Fund......................... 25.7% 6.0% 36.0% 7.0% - 74.7%
High Yield Fund........................ 2.0% 0.5% 4.0% 1.8% 1.0% 9.3%*
- ----------------
* Does not include approximately 63% of the High Yield Fund held by WM Strategic
Asset Management Portfolios, LLC, which is managed in a style substantially
identical to that of the Portfolios.
OTHER FACTORS OF UNDERLYING FUNDS:
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.
The officers and Trustees, the Advisor, the Distributor and the 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.
28
Other Information (unaudited)
WM VARIABLE TRUST STRATEGIC ASSET MANAGEMENT PORTFOLIOS
BOARD APPROVAL OF INVESTMENT ADVISORY AGREEMENT
Each year, the Board of Trustees of the Trust (the "Board"), including a
majority of the Trustees who are not interested persons of the Trust (the
"Independent Trustees"), is required to determine whether to continue the
Trust's advisory agreements. The Investment Company Act of 1940, as amended,
requires that the Board request and evaluate, and that the investment manager
furnish, such information as may reasonably be necessary to evaluate the terms
of the Trust's advisory agreement. In May 2005, the Board and the Independent
Trustees approved the continuation of the Trust's Amended and Restated
Investment Management Agreement with the Advisor (the "Agreement") for an
additional one-year term beginning July 1, 2005, following the recommendation of
the Investment Committee (the "Committee"), a majority of the members of which
are Independent Trustees, and the recommendation of the Independent Trustees as
a whole. The material factors and conclusions that formed the basis for the
Committee's recommendation and the subsequent approval by the Board and the
Independent Trustees are required to be in this report and are discussed below.
REVIEW PROCESS:
The Independent Trustees received assistance and advice, including a written
memorandum, regarding the legal standards applicable to the consideration of
advisory arrangements from independent counsel to the Trust and the Independent
Trustees. The Independent Trustees discussed the continuation of the Agreement
with representatives of the Advisor and in private session with independent
legal counsel at which no representatives of the Advisor were present. The
Committee, in deciding to recommend continuation of the Agreement, and the Board
and the Independent Trustees, in approving such continuation, did not identify
any particular information that was all-important or controlling, and each
Trustee attributed different weights to the various factors. The Trustees
evaluated all information available to them on a Portfolio-by-Portfolio basis,
and their deliberations were made separately in respect of each Portfolio. This
summary describes the most important, but not all, of the factors considered by
the Board, the Independent Trustees and the Committee. The Board, the
Independent Trustees and the Committee considered the fact that each of the
Portfolios is managed in a style substantially identical to that of a
corresponding series of WM Strategic Asset Management Portfolios LLC (each, a
"SAM Portfolio"), and reviewed the Portfolios simultaneously with their review
of the corresponding SAM Portfolios.
MATERIALS REVIEWED:
During the course of each year, the Board receives a wide variety of materials
relating to the services provided by the Advisor and its affiliates, including
reports on: each Portfolio's investment results; portfolio construction;
portfolio composition; performance attribution; shareholder services; the
Advisor's views on the economy and capital markets; and other information
relating to the nature, extent and quality of services provided by the Advisor
and its affiliates to the Portfolios. With respect to performance attribution,
the Board, the Independent Trustees and the Committee focused in particular on
the Balanced Portfolio, as the corresponding performance attribution for the
other Portfolios typically varies in proportion to the greater or lesser risk
profiles of those Portfolios. In addition, in connection with its annual
consideration of the Trust's advisory arrangements, the Board requests and
reviews supplementary information regarding the terms of the Agreement,
performance and expense information for other investment companies derived from
data compiled by Lipper Inc., a third-party data provider ("Lipper"), and
materials prepared by Cerulli Associates, a research and consulting firm
("Cerulli"), with respect to the costs of mutual fund wrap accounts, as well as
additional information prepared by the Advisor, including financial and
profitability information regarding the Advisor and its affiliates, descriptions
of various functions undertaken by the Advisor, such as compliance monitoring
practices, and information about the personnel providing investment management
to the Portfolios. The Board, the Independent Trustees and the Committee also
considered information regarding "revenue sharing" arrangements that the Advisor
and its affiliates have entered into with various intermediaries that sell
shares of the Portfolios. The Board also requested and reviewed information
relating to other services provided to the Portfolios by the Advisor and its
affiliates under other agreements, including information regarding so-called
"fall-out" benefits to the Advisor and its affiliates due to their other
relationships with the Portfolios, such as the administrative services contract
with the Advisor described below. The Board and the Committee also received and
reviewed comparative performance information regarding the SAM Portfolios at
each of the quarterly Board and Committee meetings.
29
Other Information (unaudited) (continued)
WM VARIABLE TRUST STRATEGIC ASSET MANAGEMENT PORTFOLIOS
NATURE, EXTENT AND QUALITY OF SERVICES:
Nature and Extent of Services -- In considering the continuation of the
Agreement for the current year, the Board, the Independent Trustees and the
Committee evaluated the nature and extent of the services provided by the
Advisor and its affiliates. The Advisor formulates each Portfolio's investment
policies (subject to the terms of the prospectus), analyzes economic trends and
capital market developments with a view to optimizing asset allocations,
evaluates the consistency, style and quality of the investment services provided
to the Underlying Funds in which the Portfolios invest (the "Underlying Funds"),
evaluates the risk/return characteristics of each of the Underlying Funds by
reference to the specific security holdings of each Underlying Fund, constructs
each Portfolio, monitors each Portfolio's investment performance and reports to
the Board and the Committee. The Board, the Independent Trustees and the
Committee noted that the Advisor also provides administrative services
(including supervision of all aspects of the operations of the Portfolios except
those provided by the Advisor under the Agreement or under the Trust's
administration agreement, providing office facilities, clerical, accounting and
bookkeeping services, preparing shareholder reports, Board materials, tax
returns, and filings with the SEC and other regulatory authorities) to the
Portfolios, for which it receives additional compensation (prior to May 2005,
these services were provided by the Transfer Agent). The Board, the Independent
Trustees and the Committee considered information concerning the investment
philosophy and investment process used by the Advisor in managing the
Portfolios. In this context, the Board, the Independent Trustees and the
Committee considered the in-house research capabilities of the Advisor as well
as other resources available to the Advisor, including research services
available to the Advisor as a result of securities transactions effected for the
Underlying Funds. The Board, the Independent Trustees and the Committee
considered the managerial and financial resources available to the Advisor and
concluded that they would be sufficient to meet any reasonably foreseeable
obligations under the Agreement. The Board, the Independent Trustees and the
Committee noted that the standard of care under the Agreement was comparable to
that found in many investment advisory agreements, and considered the record of
the Advisor in resolving potential disputes arising under its investment
advisory agreements with the WM Group of Funds in the best interests of
shareholders.
Quality of Services -- The Board, the Independent Trustees and the Committee
considered the quality of the services provided by the Advisor and the quality
of the Advisor's resources that are available to the Portfolios. The Board, the
Independent Trustees and the Committee considered the investment experience and
professional qualifications of the personnel of the Advisor and its affiliates
and the size and functions of their staffs, as well as the reputation of the
Advisor. The Board, the Independent Trustees and the Committee considered the
complexity of managing the Portfolios relative to other types of funds including
both other funds that pursue their objectives through investments in mutual
funds (so-called "funds-of-funds") that simply rebalance their portfolios on a
periodic basis and mutual fund wrap accounts that offer asset allocation
services. In evaluating the scope and quality of the services provided by the
Advisor to the Portfolios, the Board, the Independent Trustees and the Committee
members also drew on their experiences as directors or trustees of the
Underlying Funds and, for certain Trustees, other funds. The Board, the
Independent Trustees and the Committee also received and reviewed information
regarding the quality of non-investment advisory services provided to the
Portfolios by the Advisor and its affiliates under other agreements.
The Board, the Independent Trustees and the Committee concluded that the
services provided by the Advisor have benefited and should continue to benefit
the Portfolios and their shareholders. The Board, the Independent Trustees and
the Committee concluded that the investment philosophy, process, and research
capabilities of the Advisor were well suited to the Portfolios, given their
investment objectives and policies. The Board, the Independent Trustees and the
Committee concluded that the scope of the services provided to the Portfolios by
the Advisor and its affiliates under the Agreement and the administrative
services agreement was consistent with the Portfolios' operational requirements,
including, in addition to their investment objectives, compliance with the
Portfolios' investment restrictions, tax and reporting requirements and related
shareholder services. The Board, the Independent Trustees and the Committee
concluded that the nature, scope and quality of the services provided by the
Advisor were sufficient, in light of the resources dedicated by the Advisor and
its integrity, personnel, systems and financial resources, to merit approval of
the continuation of the Agreement.
30
Other Information (unaudited) (continued)
WM VARIABLE TRUST STRATEGIC ASSET MANAGEMENT PORTFOLIOS
PORTFOLIO MANAGEMENT SERVICES AND PERFORMANCE:
In their evaluation of the quality of the portfolio management services provided
by the Advisor, the Board, the Independent Trustees and the Committee considered
the professional credentials and investment experience of the Portfolios'
portfolio managers. The Board, the Independent Trustees and the Committee
considered whether the Portfolios operated within their investment objectives
and their record of compliance with their investment restrictions. The Board,
the Independent Trustees and the Committee reviewed information comparing the
Portfolios' historical performance to relevant market indices for the 1-, 3- and
5-year periods ended March 31, 2005 and to performance information for other
investment companies with similar investment objectives over the 1-, 3-, 5-,
10-year and since inception periods ended January 31, 2005 derived from data
compiled by Lipper. The Board, the Independent Trustees and the Committee
focused, in particular, on the performance comparisons of the Balanced Portfolio
as compared to other mutual funds categorized by Lipper as "balanced funds." The
Board, the Independent Trustees and the Committee considered the difficulty in
identifying peer groups for the Portfolios other than the Balanced Portfolio.
The Board, the Independent Trustees and the Committee determined that those
Portfolios that did not have as readily identifiable peer groups performed
consistently with their risk profiles relative to the Balanced Portfolio and
that such Portfolios' performance should be and was symmetrically arrayed around
the performance of the Balanced Portfolio. The Board, the Independent Trustees
and the Committee noted that the Portfolios, other than the Flexible Income
Portfolio, had performed well relative to their index benchmarks over the 3- and
5-year periods and that the Balanced Portfolio had outperformed its peers for
the 3- and 5-year periods, though it had underperformed its peers during the
most recent year. The Board, the Independent Trustees and the Committee
discussed with the Advisor the reasons for this recent underperformance and the
Advisor's plans to monitor and address performance issues. The Board, the
Independent Trustees and the Committee noted the Flexible Income Portfolio's
exposure to equities accounted for its recent underperformance, its relatively
good longer term performance and short-term volatility, in each case, relative
to funds that invested exclusively in debt securities. The Board, the
Independent Trustees and the Committee considered the "core" allocations for the
Portfolios and reviewed the performance attribution analysis prepared by the
Advisor. The Board, the Independent Trustees and the Committee concluded that
the Advisor's performance record and investment process used in managing the
Portfolios were sufficient to merit approval of the continuation of the
Agreement.
MANAGEMENT FEES AND EXPENSES:
The Board, the Independent Trustees and the Committee reviewed information,
including comparative information provided by Lipper, regarding the advisory,
transfer agent, and service and distribution fees paid to the Advisor and its
affiliates and the total expenses borne by the Portfolios. The Board, the
Independent Trustees and the Committee considered both the total expenses borne
directly by the Portfolios and the total expenses borne on an aggregate basis,
including the expenses borne indirectly through the Portfolios' investments in
the Underlying Funds. They discussed the general downward trend in total expense
ratios for the Portfolios. The Board, the Independent Trustees and the Committee
reviewed the administrative fees paid by the Portfolios to the Advisor and its
affiliates, as well as the distribution (12b-1) fees paid to the Distributor.
The Board, the Independent Trustees and the Committee considered the fees paid
to the Advisor by other clients, and the services provided to such clients
relative to the fees paid by, and services provided to, the Portfolios. The
Board, the Independent Trustees and the Committee considered the peer groups
identified by Lipper for the Portfolios, including Lipper peer groups comprised
of funds with similar investment objectives that invest directly in portfolio
securities, and Lipper peer groups comprised exclusively of funds-of-funds. The
Board, the Independent Trustees and the Committee noted that there were
relatively few funds-of-funds identified by Lipper. The Board, the Independent
Trustees and the Committee concluded that the Lipper peer groups comprised of
funds with similar investment objectives that invest directly in portfolio
securities represented the best mutual fund analogue to the Portfolios,
particularly the Balanced Portfolio. The Board, the Independent Trustees and the
Committee considered the similarity of the Portfolios to mutual fund wrap
accounts, and reviewed and considered a report provided by Cerulli on mutual
fund wrap accounts, including data on average annual advisory fees. The Board,
the Independent Trustees and the Committee considered information provided by
Lipper comparing the aggregate total expenses of funds-of-funds (including
underlying fund expenses) identified by Lipper relative to the Portfolios. The
Committee considered the anticipated effect on the Portfolios' expense ratios of
proposed management fee reductions for the Growth Fund, an Underlying Fund. The
Board, the Independent Trustees and the Committee concluded that the fees to be
charged under the Agreement bore a reasonable relationship to the scope and
quality of the services provided.
31
Other Information (unaudited) (continued)
WM VARIABLE TRUST STRATEGIC ASSET MANAGEMENT PORTFOLIOS
PROFITABILITY AND ECONOMIES OF SCALE:
Profitability -- The Board, the Independent Trustees and the Committee reviewed
information regarding the cost of services provided by the Advisor and its
affiliates and the profitability (before and after distribution expenses and
prior to taxes) of their relationships with the Portfolios. The Board, the
Independent Trustees and the Committee considered trends in the profitability of
the Advisor and its affiliates, and information provided by Lipper regarding the
pre- and post-marketing profitability of other investment advisers with
publicly-traded parent companies. The Board, the Independent Trustees and the
Committee considered that the Advisor must be able to pay and retain experienced
professional personnel at competitive rates to provide services to the
Portfolios (and in connection therewith reviewed and considered changes in the
structure of compensation of the Advisor's investment professionals, including a
change in the performance-based component of the compensation and the
introduction of options and restricted stock rather than vesting periods for
cash bonuses) and that maintaining the financial viability of the Advisor is
important in order for it to continue to provide significant services to the
Portfolios and their shareholders. The Board, the Independent Trustees and the
Committee considered the impact of previously-negotiated fee reductions on the
profitability of the Advisor and the year-to-year trends in pre-distribution
margins for the Advisor, over a four-year period in which the Portfolios' assets
grew 29% and complex-wide assets more than doubled. The Board, the Independent
Trustees and the Committee also considered that new breakpoints for an
Underlying Fund would reduce revenues to the Advisor at current asset levels. In
addition, the Board, the Independent Trustees and the Committee considered
information regarding the direct and indirect benefits the Advisor receives as a
result of its relationship with the Portfolios, including compensation paid to
the Advisor and its affiliates under other agreements, such as administrative
fees to the Advisor and 12b-1 fees to the Distributor, as well as research
provided to the Advisor in connection with portfolio transactions effected on
behalf of the Underlying Funds (soft dollar arrangements) and reputational
benefits.
Economies of Scale -- The Board, the Independent Trustees and the Committee
reviewed the extent to which the Advisor may realize economies of scale in
managing and supporting the Portfolios and the current level of Portfolio assets
in relation to the breakpoints in each Portfolio's advisory fees. The Board, the
Independent Trustees and the Committee considered the savings for the Portfolios
that had been achieved due to breakpoints previously implemented as a result of
negotiations between the Advisor and the Board. The Board, the Independent
Trustees and the Committee considered the extent to which any economies of scale
might be realized (if at all) by the Advisor across a variety of products and
services, including the SAM Portfolios, and not only in respect of a single
Portfolio, and took into account the fact that the Advisor had agreed to
advisory fee breakpoints on assets based in part on the combined assets of all
the Portfolios.
The Board, the Independent Trustees and the Committee concluded that the
Portfolios' cost structure was reasonable given the scope and quality of the
services provided to the Portfolios and that the Advisor was sharing any
economies of scale with the Portfolios and their shareholders.
ADDITIONAL CONSIDERATIONS:
The Board, the Independent Trustees and the Committee also considered possible
conflicts of interest associated with the provision of investment advisory
services by the Advisor to other clients and the fact that such clients of the
Advisor were then limited to those affiliated with AIG (representing
approximately $5.5 billion in assets under management as of April 30, 2005). The
Trustees considered the procedures of the Advisor designed to fulfill its
fiduciary duties to its advisory clients with respect to possible conflicts of
interest, including the codes of ethics, the integrity of the systems in place
to ensure compliance with the foregoing, and the record of the Advisor in these
matters.
CONCLUSIONS:
Based on their review, including their consideration of each of the factors
referred to above, the Board, the Independent Trustees and the Committee
concluded that the Agreement, including the fees payable to the Advisor, is fair
and reasonable to the Portfolios and their shareholders given the scope and
quality of the services provided to the Portfolios and such other considerations
as the Trustees considered relevant in the exercise of their reasonable business
judgment and that the continuation of the Agreement was in the best interests of
the Portfolios and their shareholders. The Board and the Independent Trustees
unanimously approved the continuation of the Agreement
32
Other Information (unaudited) (continued)
WM VARIABLE TRUST STRATEGIC ASSET MANAGEMENT PORTFOLIOS
OTHER 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 at
http://www.wmgroupoffunds.com. The Trust's Form N-Q is 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 Portfolio 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
Portfolio 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.
33
Other Information (unaudited) (continued)
PORTFOLIO MANAGER
VT U.S. Government Securities Fund Craig V. Sosey
WM Advisors, Inc.
Note: Pages 34 and 35 provide information about certain WM Funds in which the VT
Flexible Income and VT Conservative Balanced Portfolios invest a significant
portion of their assets (i.e., more than 25%). For additional information about
these and other WM Funds, please see the WM Variable Trust semiannual report,
which is available online at wmgroupoffunds.com or by calling 800-222-5852.
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
AVERAGE ANNUAL TOTAL RETURNS(1) AS OF JUNE 30, 2005
6-Month(2) 1-Year 5-Year 10-Year Since Inception Inception Date
---------- ------ ------ ------- --------------- --------------
CLASS 1 SHARES 1.88% 5.22% 6.13% 6.00% 5.64% 5/6/93
CLASS 2 SHARES 1.73% 4.97% - - 3.88% 11/6/01
Citigroup Mortgage Index(3) 2.15% 6.31% 6.86% 6.70% 6.52%
PORTFOLIO COMPOSITION(4)
As of 6/30/05
[PIE CHART]
As of As of
6/30/05 12/31/04 Change
------- -------- ------
FHLMC/FGLMC 35% 32% +3%
FNMA 24% 24% 0%
CMOs 18% 19% -1%
GNMA 8% 10% -2%
U.S. Government Agency 7% 4% +3%
U.S. Treasuries 5% 8% -3%
Cash Equivalents 3% 3% 0%
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. The VT U.S. Government Securities Fund's
performance in 1995 and 1998 benefited from the agreement of WM Advisors
and its affiliates to limit the Fund's expenses. On 3/1/04, the investment
policies of the Fund were modified. As a result, the Fund's performance
for periods prior to that date may not be representative of the
performance it would have achieved had its current investment policies
been in place.
2 Periods of less than one year are not annualized.
34
PORTFOLIO MANAGERS
Gary J. Pokrzywinski, CFA and VT Income Fund
John R. Friedl, CFA
WM Advisors, Inc.
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.VT U.S. Government Securities Fund: Neither the
principal of government bond funds nor their yields are guaranteed by the U.S.
government. VT Income Fund: Lower-rated securities are subject to additional
credit and default risks.
AVERAGE ANNUAL TOTAL RETURNS(1) AS OF JUNE 30, 2005
6-Month(2) 1-Year 5-Year 10-Year Since Inception Inception Date
---------- ------ ------ ------- --------------- --------------
CLASS 1 SHARES 2.11% 7.65% 8.42% 7.09% 6.74% 5/7/93
CLASS 2 SHARES 1.96% 7.42% - - 6.74% 11/6/01
Citigroup Broad Investment-Grade
Bond Index(3) 2.61% 7.00% 7.46% 6.85% 6.69%
PORTFOLIO COMPOSITION(4)
As of 6/30/05
[PIE CHART]
As of As of
6/30/05 12/31/04 Change
------- -------- ------
Domestic Corporate Bonds 61% 59% +2%
Mortgage-Backed Bonds 20% 21% -1%
Foreign Corporate
Bonds (U.S. $) 9% 10% -1%
U.S. Treasuries 7% 6% +1%
Foreign Government
Bonds (U.S. $) 1% 1% 0%
Cash Equivalents 2% 3% -1%
3 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. 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 indices assume
reinvestment of all dividends and distributions, and since-inception
returns shown for the indices are calculated from 4/30/93. Indices are
unmanaged, and individuals cannot invest directly in an index.
4 May not reflect the current portfolio composition.
35
This Page Intentionally Left Blank.
36
[GRAPHIC]
[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 semiannual 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. PRSRT STD
1100 Investment Blvd., Suite 200 U.S. Postage
El Dorado Hills, CA 95762 PAID
Permit 2310
Sacramento, CA
VTSAMSAR (8/29/05)
ITEM 2. CODE OF ETHICS
Not applicable for this filing.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT
Not applicable for this filing.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Not applicable for this filing.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS
Not Applicable for this filing.
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 second fiscal quarter of the
period covered by this report that have materially affected, or are reasonably
likely to materially affect, the registrant's internal control over financial
reporting.
ITEM 12. EXHIBITS
(a) 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.
(b) Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
attached hereto as Exhibit 99.906 CERT.
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
WM Variable Trust
By: /s/ William G. Papesh
William G. Papesh
President and Chief Executive Officer
September 2, 2005
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
September 2, 2005
By: /s/ William G. Papesh
William G. Papesh
President and Chief Executive Officer
September 2, 2005