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 811-07577
WM Strategic Asset Management Portfolios, LLC
(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: October 31, 2006
Date of reporting period: April 30, 2006
ITEM 1. REPORTS TO STOCKHOLDERS
(WM GROUP OF FUNDS LOGO)
WM STRATEGIC ASSET MANAGEMENT PORTFOLIOS
Semiannual Report (GRAPHIC)
April 30, 2006 The sophistication of a managed account
with the simplicity of a mutual fund.
WM Strategic Asset Management Portfolios
AT THE WM GROUP OF FUNDS, OUR PASSION IS PIECING INDIVIDUAL INVESTMENTS TOGETHER
INTO COMPREHENSIVE PORTFOLIOS TO MAKE YOUR FINANCIAL PLAN MORE EFFECTIVE.
(GRAPHIC)
Table of Contents
1 Letter from the President
WM SAM Portfolio Performance and Composition:
2 Flexible Income Portfolio
3 Conservative Balanced Portfolio
4 Balanced Portfolio
5 Conservative Growth Portfolio
6 Strategic Growth Portfolio
7 Glossary
8 Expense Information
10 Financial Statements
25 Notes to Financial Statements
30 Supplemental Information
NOT FDIC INSURED
MAY LOSE VALUE - NOT A DEPOSIT - NO BANK GUARANTEE
NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY
Dear Shareholder,
(PHOTO OF WILLIAM G. PAPESH)
Securities markets have spent recent months reacting to a complicated mix of
economic data that has generally been positive for equities but challenging for
bonds. An upswing in economic growth, continuing strength in corporate
profits, and elevated energy prices prompted the Federal Reserve to continue
raising short-term interest rates in an effort to contain inflationary
pressures. For the six months ended April 30, 2006, the S&P 500 climbed
9.64%, while the Lehman Brothers Aggregate Bond Index edged up 0.56%.(1)
REACHING COMPANY MILESTONES
The past six months and the six months that lie ahead mark important milestones
for the WM Group of Funds. In January, our assets under management exceeded $20
billion for the first time in the company's history. This growth was primarily
due to the success of our WM SAM Portfolios. In July, the Portfolios will
celebrate their own accomplishment--their 10-year anniversary. Few asset
allocation funds today can claim a decade-long track record. We are enormously
proud that hundreds of thousands of shareholders have chosen to pursue their
financial goals through our disciplined active asset allocation process.
TAKING STEPS TO LOWER EXPENSES
But we haven't been content simply to rest on our achievements. Effective
November 1, 2005, we instituted a new fee schedule that significantly lowered
the management fees on the WM SAM Portfolios. Additional breakpoints help ensure
that fees will decline even further as Portfolio assets grow. We believe that
lower expenses create better investment value for our shareholders and help
position our asset allocation funds to maintain their industry leadership.
Shareholders can also take advantage of services that may help lower certain
expenses. On the back cover, you'll find information about our e-delivery
program. When you choose to receive documents like this report by e-mail, you
gain the convenience of electronic delivery and storage while reducing printing
and mailing costs.
SHAPING OUR BOARD COMPOSITION
From my perspective, you can certainly be proud of your Board of Trustees and
the stewardship role they perform for your benefit. In November, Michael (Mike)
Murphy, a Director of Washington Mutual, Inc., retired from the WM Group of
Funds Board of Trustees after 11 years of diligent service. Concurrently, the
Board elected independent Trustee Richard (Dick) Yancey to the position of
chairman. Dick has been a tireless advocate of shareholder interests in the more
than three decades that he has served on our Board. Both he and Mike have my
gratitude for their many years of wise counsel.(2)
Our Board is now composed of nine members, more than 75% of whom are not
affiliated with Washington Mutual, Inc. I believe this structure, which
emphasizes independence, supports strong fund oversight and governance.
Underlying all of our efforts is the expectation that these steps can ultimately
create value for our shareholders. On behalf of everyone at the WM Group of
Funds, thank you for your support and confidence.
Sincerely,
/s/ William G. Papesh
- -------------------------------------
William G. Papesh
President
(1) The S&P 500 is a broad-based index intended to represent the U.S.equity
market. The Lehman Brothers Aggregate Bond Index is a broad-based index
intended to represent the U.S.fixed-income market. Indices are
unmanaged, and individuals cannot invest directly in an index.
(2) Lengths of service include board membership with Composite Funds, a
precedecessor to the WM Group of Funds.
(GRAPHIC) 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. Your
investment's return and principal value will fluctuate, so it may be worth more
or less upon redemption. A sales charge may apply as follows: Class A shares:
maximum up-front sales charge of 4.5% (Flexible Income Portfolio) or 5.5%
(Conservative Balanced Portfolio); Class B shares: contingent deferred sales
charge of 5%, which
AVERAGE ANNUAL TOTAL RETURNS (1, 2) AS OF APRIL 30, 2006
6-Month 1-Year 5-Year Since Inception Inception Date
------- ------ ------ --------------- --------------
CLASS A SHARES Net Asset Value(3) 3.47% 5.28% 5.06% 6.87% 7/25/96
With Sales Charge -1.21% 0.51% 4.09% 6.36%
CLASS B SHARES Net Asset Value(3) 3.07% 4.37% 4.26% 6.22% 7/25/96
With Sales Charge -1.93% -0.63% 3.91% 6.22%
CLASS C SHARES Net Asset Value(3) 3.09% 4.42% 4.26% 4.62% 3/1/02
With Sales Charge 2.09% 3.42% 4.26% 4.62%
CLASS R-1 SHARES Net Asset Value(3) 3.20% 4.61% 4.33% 0.20% 3/1/06
CLASS R-2 SHARES Net Asset Value(3) 3.28% 4.83% 4.58% 0.20% 3/1/06
Lehman Brothers Aggregate Bond Index(4) 0.56% 0.71% 5.16% 6.34%
S&P 500(4) 9.64% 15.42% 2.70% 9.36%
Capital Market Benchmark(4) 2.34% 3.55% 4.86% 7.17%
Average annual total returns (1, 2) (with sales charge for Class A, B, and C
shares) as of 3/31/06:
Class A Shares: 0.50% (1-year), 4.31% (5-year), 6.39% (since inception)
Class B Shares: -0.63% (1-year), 4.14% (5-year), 6.25% (since inception)
Class C Shares: 3.43% (1-year), 4.48% (5-year), 4.67% (since inception)
Class R-1 Shares: 4.46% (1-year), 4.53% (5-year), -0.06% (since inception)
Class R-2 Shares: 4.69% (1-year), 4.79% (5-year), -0.06% (since inception)
PORTFOLIO COMPOSITION(5)
As of As of
Asset Class 4/30/06 10/31/05 Change
- ----------- ------- -------- ------
Mortgage- & Asset-Backed Bonds 37% 38% -1%
Investment-Grade Corporate Bonds 18% 17% +1%
High-Yield Corporate Bonds 9% 8% +1%
U.S.Government Securities 7% 6% +1%
U.S.Large-Cap Growth Stocks 7% 6% +1%
U.S.Large-Cap Value Stocks 6% 7% -1%
U.S.Mid-Cap Growth Stocks 4% 3% +1%
U.S.Mid-Cap Value Stocks 2% 2% 0%
Convertible Securities 2% 2% 0%
REITs 2% 2% 0%
Non-U.S.Developed Market Stocks 1% 1% 0%
U.S.Small-Cap Growth Stocks 1% 2% -1%
U.S.Small-Cap Value Stocks 1% 1% 0%
Cash Equivalents 3% 5% -2%
Note: Pages 34 and 35 provide information about those WM Funds in which the
Flexible Income and Conservative Balanced Portfolios invest a significant
portion of their assets. For additional information about these and other WM
Funds, please see the WM Group of Funds 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. For Class C, R-1, and R-2 shares, performance for periods
prior to inception is hypothetical, based on Class A share returns adjusted
for the respective expenses of the share class. Performance does not
reflect the impact of federal, state, or municipal taxes. If it did,
performance would be lower. The Flexible Income Portfolio's performance
between 1996 and 1999 and the Conservative Balanced Portfolio's performance
between 1996 and 2003 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.
2
PORTFOLIO MANAGER Conservative Balanced Portfolio* (GRAPHIC)
Asset Allocation Team
WM Advisors, Inc.
declines over 5 years (5-5-4-3-2-0%);Class C shares: contingent deferred sales
charge of 1% on redemptions made during the first 12 months. See the prospectus
for details. Performance listed with sales charge reflects the maximum sales
charge.
Equity investments involve greater risk, including heightened volatility, than
fixed-income investments.
Fixed-income investments are subject to interest rate risk, and their value will
decline as interest rates rise.
* As of 8/1/00, the Income Portfolio became the 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, 2) AS OF APRIL 30, 2006
6-Month 1-Year 5-Year Since Inception Inception Date
------- ------ ------ --------------- --------------
CLASS A SHARES Net Asset Value(3) 5.47% 8.57% 5.41% 5.36% 7/25/96
With Sales Charge -0.33% 2.59% 4.24% 4.76%
CLASS B SHARES Net Asset Value(3) 5.08% 7.77% 4.61% 4.71% 7/25/96
With Sales Charge 0.08% 2.76% 4.28% 4.71%
CLASS C SHARES Net Asset Value(3) 5.12% 7.74% 4.67% 5.71% 3/1/02
With Sales Charge 4.12% 6.74% 4.67% 5.71%
CLASS R-1 SHARES Net Asset Value(3) 5.19% 7.90% 4.75% 0.96% 3/1/06
CLASS R-2 SHARES Net Asset Value(3) 5.28% 8.12% 5.00% 0.96% 3/1/06
Lehman Brothers Aggregate Bond Index(4) 0.56% 0.71% 5.16% 6.34%
S&P 500(4) 9.64% 15.42% 2.70% 9.36%
Capital Market Benchmark(4) 4.13% 6.43% 4.47% 7.89%
Average annual total returns(1, 2) (with sales charge for Class A, B, and C
shares) as of 3/31/06:
Class A Shares: 1.93% (1-year), 4.63% (5-year), 4.75% (since inception)
Class B Shares: 1.96% (1-year), 4.67% (5-year), 4.70% (since inception)
Class C Shares: 5.93% (1-year), 5.06% (5-year), 5.71% (since inception)
Class R-1 Shares: 7.13% (1-year), 5.14% (5-year), 0.50% (since inception)
Class R-2 Shares: 7.38% (1-year), 5.40% (5-year), 0.50% (since inception)
PORTFOLIO COMPOSITION(5)
As of As of
Asset Class 4/30/06 10/31/05 Change
- ----------- ------- -------- ------
Mortgage- & Asset-Backed Bonds 29% 31% -2%
Investment-Grade Corporate Bonds 12% 11% +1%
High-Yield Corporate Bonds 7% 6% +1%
U.S.Government Securities 5% 5% 0%
U.S.Large-Cap Growth Stocks 11% 10% +1%
U.S.Large-Cap Value Stocks 10% 11% -1%
U.S.Mid-Cap Growth Stocks 6% 5% +1%
Non-U.S.Developed Market Stocks 5% 5% 0%
U.S.Mid-Cap Value Stocks 3% 3% 0%
REITs 3% 3% 0%
Emerging Market Stocks 2% 1% +1%
U.S.Small-Cap Growth Stocks 2% 2% 0%
Convertible Securities 1% 2% -1%
U.S.Small-Cap Value Stocks 1% 1% 0%
Cash Equivalents 3% 4% -1%
(3) Net asset value is not adjusted for sales charge.
(4) See page 7 for definitions of indices. Returns shown for the indices assume
reinvestment of all dividends and distributions, and since-inception
returns shown for the indices are calculated from 7/31/96. Indices are
unmanaged, and individuals cannot invest directly in an index.
(5) May not reflect the current portfolio composition.
3
(GRAPHIC) 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. Your
investment's return and principal value will fluctuate, so it may be worth more
or less upon redemption. A sales charge may apply as follows:Class A shares:
maximum up-front sales charge of 5.5%; Class B shares: contingent deferred sales
charge of 5%, which declines over 5 years
AVERAGE ANNUAL TOTAL RETURNS(1, 2) AS OF APRIL 30, 2006
6-Month 1-Year 5-Year Since Inception Inception Date
------- ------ ------ --------------- --------------
CLASS A SHARES Net Asset Value(3) 7.52% 12.32% 5.50% 8.84% 7/25/96
With Sales Charge 1.57% 6.12% 4.30% 8.21%
CLASS B SHARES Net Asset Value(3) 7.21% 11.49% 4.71% 8.16% 7/25/96
With Sales Charge 2.21% 6.49% 4.37% 8.16%
CLASS C SHARES Net Asset Value(3) 7.12% 11.46% 4.69% 6.65% 3/1/02
With Sales Charge 6.12% 10.46% 4.69% 6.65%
CLASS R-1 SHARES Net Asset Value(3) 7.26% 11.65% 4.80% 1.80% 3/1/06
CLASS R-2 SHARES Net Asset Value(3) 7.34% 11.88% 5.05% 1.80% 3/1/06
S&P 500(4) 9.64% 15.42% 2.70% 9.36%
Lehman Brothers Aggregate Bond Index(4) 0.56% 0.71% 5.16% 6.34%
Capital Market Benchmark(4) 5.95% 9.37% 3.97% 8.50%
Average annual total returns(1, 2) (with sales charge for Class A, B, and C
shares) as of 3/31/06:
Class A Shares: 4.67% (1-year), 4.96% (5-year), 8.21% (since inception)
Class B Shares: 4.84% (1-year), 5.02% (5-year), 8.16% (since inception)
Class C Shares: 8.87% (1-year), 5.35% (5-year), 6.64% (since inception)
Class R-1 Shares: 10.01% (1-year), 5.44% (5-year), 1.15% (since inception)
Class R-2 Shares: 10.26% (1-year), 5.70% (5-year), 1.15% (since inception)
PORTFOLIO COMPOSITION(5)
As of As of
Asset Class 4/30/06 10/31/05 Change
- ----------- ------- -------- ------
U.S.Large-Cap Growth Stocks 17% 15% +2%
U.S.Large-Cap Value Stocks 15% 16% -1%
U.S.Mid-Cap Growth Stocks 9% 7% +2%
Non-U.S.Developed Market Stocks 8% 7% +1%
U.S.Mid-Cap Value Stocks 4% 5% -1%
REITs 4% 4% 0%
U.S.Small-Cap Growth Stocks 3% 3% 0%
Emerging Market Stocks 2% 1% +1%
U.S.Small-Cap Value Stocks 2% 2% 0%
Convertible Securities 1% 1% 0%
Mortgage- & Asset-Backed Bonds 18% 19% -1%
High-Yield Corporate Bonds 5% 5% 0%
Investment-Grade Corporate Bonds 5% 6% -1%
U.S.Government Securities 3% 3% 0%
Cash Equivalents 4% 6% -2%
Note: For information about the underlying WM Funds of the SAM Portfolios,
please see the WM Group of Funds 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. For Class C, R-1, and R-2 shares, performance for periods
prior to inception is hypothetical, based on Class A share returns adjusted
for the respective expenses of the share class. Performance does not
reflect the impact of federal, state, or municipal taxes. If it did,
performance would be lower. The Portfolios'performance between 1996 and
1999 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
PORTFOLIO MANAGER Conservative Growth Portfolio (GRAPHIC)
Asset Allocation Team
WM Advisors, Inc.
(5-5-4-3-2-0%);Class C shares:contingent deferred sales charge of 1% on
redemptions made during the first 12 months. See the prospectus for
details. Performance listed with sales charge reflects the maximum sales charge.
Equity investments involve greater risk, including heightened volatility, than
fixed-income investments.
Fixed-income investments are subject to interest rate risk, and their value will
decline as interest rates rise.
AVERAGE ANNUAL TOTAL RETURNS (1, 2) AS OF APRIL 30, 2006
Since Inception
6-Month 1-Year 5-Year Inception Date
------- ------ ------ --------- ---------
CLASS A SHARES Net Asset Value(3) 9.50% 15.82% 5.08% 9.35% 7/25/96
With Sales Charge 3.50% 9.43% 3.90% 8.73%
CLASS B SHARES Net Asset Value(3) 9.08% 14.88% 4.28% 8.65% 7/25/96
With Sales Charge 4.07% 9.88% 3.93% 8.65%
CLASS C SHARES Net Asset Value(3) 9.08% 14.93% 4.28% 7.36% 3/1/02
With Sales Charge 8.08% 13.93% 4.28% 7.36%
CLASS R-1 SHARES Net Asset Value(3) 9.23% 15.13% 4.39% 2.51% 3/1/06
CLASS R-2 SHARES Net Asset Value(3) 9.32% 15.37% 4.64% 2.51% 3/1/06
S&P 500(4) 9.64% 15.42% 2.70% 9.36%
Lehman Brothers Aggregate Bond Index(4) 0.56% 0.71% 5.16% 6.34%
Capital Market Benchmark(4) 7.78% 12.37% 3.38% 8.99%
Average annual total returns (1, 2) (with sales charge for Class A, B, and C
shares) as of 3/31/06:
Class A Shares: 7.07% (1-year), 4.94% (5-year), 8.71% (since inception)
Class B Shares: 7.41% (1-year), 4.97% (5-year), 8.64% (since inception)
Class C Shares: 11.51% (1-year), 5.32% (5-year), 7.32% (since inception)
Class R-1 Shares: 12.58% (1-year), 5.42% (5-year), 1.68% (since inception)
Class R-2 Shares: 12.84% (1-year), 5.68% (5-year), 1.68% (since inception)
PORTFOLIO COMPOSITION(5)
As of As of
Asset Class 4/30/06 10/31/05 Change
- ----------- ------- -------- ------
U.S. Large-Cap Growth Stocks 22% 20% +2%
U.S. Large-Cap Value Stocks 20% 20% 0%
U.S. Mid-Cap Growth Stocks 12% 10% +2%
Non-U.S. Developed Market Stocks 10% 10% 0%
U.S. Mid-Cap Value Stocks 5% 7% -2%
REITs 5% 5% 0%
U.S. Small-Cap Growth Stocks 4% 4% 0%
Emerging Market Stocks 3% 1% +2%
U.S. Small-Cap Value Stocks 3% 3% 0%
Convertible Securities 1% 1% 0%
Mortgage- & Asset-Backed Bonds 7% 9% -2%
High-Yield Corporate Bonds 2% 3% -1%
Investment-Grade Corporate Bonds 2% 2% 0%
U.S. Government Securities 1% 1% 0%
Cash Equivalents 3% 4% -1%
(3) Net asset value is not adjusted for sales charge.
(4) See page 7 for definitions of indices. Returns shown for the indices assume
reinvestment of all dividends and distributions, and since-inception
returns shown for the indices are calculated from 7/31/96. Indices are
unmanaged, and individuals cannot invest directly in an index.
(5) May not reflect the current portfolio composition.
5
(GRAPHIC) Strategic Growth Portfolio PORTFOLIO MANAGER
Asset Allocation Team
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 than the data shown, can be obtained by calling 800-222-5852. Your
investment's return and principal value will fluctuate, so it may be worth more
or less upon redemption. A sales charge may apply as follows: Class A
shares:maximum up-front sales charge of 5.5%;Class B shares:contingent deferred
sales charge of 5%, which declines over 5 years (5-5-4-3-2-0%); Class C shares:
contingent deferred sales charge of 1% on redemptions made during the first 12
months. See the prospectus for details. Performance listed with sales charge
reflects the maximum sales charge.
Equity investments involve greater risk, including heightened volatility, than
fixed-income investments.
AVERAGE ANNUAL TOTAL RETURNS (1, 2) AS OF APRIL 30, 2006
Since Inception
6-Month 1-Year 5-Year Inception Date
------- ------ ------ --------- ---------
CLASS A SHARES Net Asset Value(3) 10.60% 18.06% 4.48% 10.16% 7/25/96
With Sales Charge 4.52% 11.58% 3.31% 9.53%
CLASS B SHARES Net Asset Value(3) 10.26% 17.18% 3.69% 9.49% 7/25/96
With Sales Charge 5.26% 12.17% 3.35% 9.49%
CLASS C SHARES Net Asset Value(3) 10.23% 17.21% 3.71% 7.64% 3/1/02
With Sales Charge 9.23% 16.21% 3.71% 7.64%
CLASS R-1 SHARES Net Asset Value(3) 10.34% 17.38% 3.83% 2.87% 3/1/06
CLASS R-2 SHARES Net Asset Value(3) 10.43% 17.63% 4.08% 2.87% 3/1/06
S&P 500(4) 9.64% 15.42% 2.70% 9.36%
Russell 3000(R) Index(4) 10.70% 18.08% 3.94% 9.70%
Average annual total returns (1, 2) (with sales charge for Class A, B, and C
shares) as of 3/31/06:
Class A Shares: 8.64% (1-year), 4.68% (5-year), 9.51% (since inception)
Class B Shares: 9.05% (1-year), 4.72% (5-year), 9.48% (since inception)
Class C Shares: 13.09% (1-year), 5.08% (5-year), 7.58% (since inception)
Class R-1 Shares: 14.26% (1-year), 5.20% (5-year), 1.99% (since inception)
Class R-2 Shares: 14.52% (1-year), 5.46% (5-year), 1.99% (since inception)
PORTFOLIO COMPOSITION(5)
As of As of
Asset Class 4/30/06 10/31/05 Change
- ----------- ------- -------- ------
U.S. Large-Cap Growth Stocks 25% 22% +3%
U.S. Large-Cap Value Stocks 21% 23% -2%
U.S. Mid-Cap Growth Stocks 13% 11% +2%
Non-U.S. Developed Market Stocks 12% 11% +1%
U.S.Mid-Cap Value Stocks 6% 8% -2%
REITs 5% 6% -1%
Emerging Market Stocks 4% 2% +2%
U.S. Small-Cap Growth Stocks 4% 5% -1%
U.S. Small-Cap Value Stocks 3% 4% -1%
Convertible Securities 1% 1% 0%
High-Yield Corporate Bonds 3% 3% 0%
Cash Equivalents 3% 4% -1%
Note: For information about the underlying WM Funds of the SAM Portfolios,
please see the WM Group of Funds 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. For Class C, R-1, and R-2 shares, performance for periods
prior to inception is hypothetical, based on Class A share returns adjusted
for the respective expenses of the share class. Performance does not
reflect the impact of federal, state, or municipal taxes. If it did,
performance would be lower. The Portfolio's performance between 1996 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) Net asset value is not adjusted for sales charge.
(4) See page 7 for definitions of indices. Returns shown for the indices assume
reinvestment of all dividends and distributions, and since-inception
returns shown for the indices are calculated from 7/31/96. Indices are
unmanaged, and individuals cannot invest directly in an index.
(5) May not reflect the current portfolio composition.
6
Glossary (GRAPHIC)
DEFINITIONS OF INDICES
CAPITAL MARKET BENCHMARK:
A benchmark intended to represent a relevant proxy for market and Portfolio
performance. It is allocated as follows: Flexible Income Portfolio:20% S&P 500
and 80% Lehman Brothers Aggregate Bond Index;Conservative Balanced Portfolio:40%
S&P 500 and 60% Lehman Brothers Aggregate Bond Index;Balanced Portfolio:60% S&P
500 and 40% Lehman Brothers Aggregate Bond Index;and Conservative Growth
Portfolio:80% S&P 500 and 20% Lehman Brothers Aggregate Bond Index.
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.
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.
LEHMAN BROTHERS AGGREGATE BOND INDEX:
A broad-based index intended to represent the U.S. fixed-income market.
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.
S&P 500:
A broad-based index intended to represent the U.S. equity market.
7
Expense Information
As a shareholder of the Flexible Income Portfolio, Conservative Balanced
Portfolio, Balanced Portfolio, Conservative Growth Portfolio or Strategic Growth
Portfolio (collectively, "the Portfolios"), you incur two types of costs: (1)
transaction costs, including sales charges (loads) on purchase of Class A shares
and, if applicable, contingent deferred sales charges on redemption of shares
and (2) ongoing costs, including management fees, distribution and/or service
fees, and other Portfolio expenses. The example below 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.
The example is based on an investment of $1,000 invested at the beginning of the
period and held for the entire period November 1, 2005, to April 30, 2006.
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 = $8.60), 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 ratio 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 mutual funds. To do so,
compare this 5% hypothetical example with the 5% hypothetical examples that
appear in the shareholder reports of the other mutual 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 sales
charges (loads). 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 mutual 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 11/1/05- VALUE VALUE 11/1/05- EXPENSE
11/1/05 4/30/06 4/30/06 11/1/05 4/30/06 4/30/06 RATIO
--------- ------- ----------- --------- ------- ----------- -------
Flexible Income Portfolio
Class A ....................... $1,000 $1,035 $3.38 $1,000 $1,021 $3.36 0.67%
Class B ....................... 1,000 1,031 7.25 1,000 1,018 7.20 1.44%
Class C ....................... 1,000 1,031 7.20 1,000 1,018 7.15 1.43%
Class R-1 ..................... 1,000 1,002 7.05 1,000 1,018 7.10 1.42%
Class R-2 ..................... 1,000 1,002 5.81 1,000 1,019 5.86 1.17%
Conservative Balanced Portfolio
Class A ....................... $1,000 $1,055 $3.46 $1,000 $1,021 $3.41 0.68%
Class B ....................... 1,000 1,051 7.37 1,000 1,018 7.25 1.45%
Class C ....................... 1,000 1,051 7.27 1,000 1,018 7.15 1.43%
Class R-1 ..................... 1,000 1,010 7.08 1,000 1,018 7.10 1.42%
Class R-2 ..................... 1,000 1,010 5.83 1,000 1,019 5.86 1.17%
Balanced Portfolio
Class A ....................... $1,000 $1,075 $3.40 $1,000 $1,022 $3.31 0.66%
Class B ....................... 1,000 1,072 7.35 1,000 1,018 7.15 1.43%
Class C ....................... 1,000 1,071 7.29 1,000 1,018 7.10 1.42%
Class R-1 ..................... 1,000 1,018 7.00 1,000 1,018 7.00 1.40%
Class R-2 ..................... 1,000 1,018 5.75 1,000 1,019 5.76 1.15%
Conservative Growth Portfolio
Class A ....................... $1,000 $1,095 $3.53 $1,000 $1,021 $3.41 0.68%
Class B ....................... 1,000 1,091 7.52 1,000 1,018 7.25 1.45%
Class C ....................... 1,000 1,091 7.41 1,000 1,018 7.15 1.43%
Class R-1 ..................... 1,000 1,025 7.08 1,000 1,018 7.05 1.41%
Class R-2 ..................... 1,000 1,025 5.82 1,000 1,019 5.81 1.16%
Strategic Growth Portfolio
Class A ....................... $1,000 $1,106 $3.71 $1,000 $1,021 $3.56 0.71%
Class B ....................... 1,000 1,103 7.61 1,000 1,018 7.30 1.46%
Class C ....................... 1,000 1,102 7.61 1,000 1,018 7.30 1.46%
Class R-1 ..................... 1,000 1,029 7.19 1,000 1,018 7.15 1.43%
Class R-2 ..................... 1,000 1,029 5.94 1,000 1,019 5.91 1.18%
* 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
Expense Information (continued)
The following table sets forth the estimated ongoing aggregate expenses of the
Portfolios, including expenses of Class I shares of various funds in the WM
Group of Funds (collectively, the "Underlying Funds"), based upon expenses shown
in the table on the prior page for each Portfolio and corresponding expenses for
each Underlying Fund's Class I 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 April 30, 2006. A Portfolio's
actual aggregate 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 11/1/05- VALUE VALUE 11/1/05- EXPENSE
11/1/05 4/30/06 4/30/06 11/1/05 4/30/06 4/30/06 RATIO
--------- ------- ----------- --------- ------- ----------- ---------
Flexible Income Portfolio
Class A ....................... $1,000 $1,035 $ 6.26 $1,000 $1,019 $ 6.21 1.24%
Class B ....................... 1,000 1,031 10.12 1,000 1,015 10.04 2.01%
Class C ....................... 1,000 1,031 10.07 1,000 1,015 9.99 2.00%
Class R-1 ..................... 1,000 1,002 9.88 1,000 1,015 9.94 1.99%
Class R-2 ..................... 1,000 1,002 8.64 1,000 1,016 8.70 1.74%
Conservative Balanced Portfolio
Class A ....................... $1,000 $1,055 $ 6.47 $1,000 $1,018 $ 6.36 1.27%
Class B ....................... 1,000 1,051 10.37 1,000 1,015 10.19 2.04%
Class C ....................... 1,000 1,051 10.27 1,000 1,015 10.09 2.02%
Class R-1 ..................... 1,000 1,010 10.02 1,000 1,015 10.04 2.01%
Class R-2 ..................... 1,000 1,010 8.77 1,000 1,016 8.80 1.76%
Balanced Portfolio
Class A ....................... $1,000 $1,075 $ 6.79 $1,000 $1,018 $ 6.61 1.32%
Class B ....................... 1,000 1,072 10.74 1,000 1,014 10.44 2.09%
Class C ....................... 1,000 1,071 10.68 1,000 1,014 10.39 2.08%
Class R-1 ..................... 1,000 1,018 10.31 1,000 1,015 10.29 2.06%
Class R-2 ..................... 1,000 1,018 9.06 1,000 1,016 9.05 1.81%
Conservative Growth Portfolio
Class A ....................... $1,000 $1,095 $ 7.06 $1,000 $1,018 $ 6.80 1.36%
Class B ....................... 1,000 1,091 11.04 1,000 1,014 10.64 2.13%
Class C ....................... 1,000 1,091 10.94 1,000 1,014 10.54 2.11%
Class R-1 ..................... 1,000 1,025 10.49 1,000 1,014 10.44 2.09%
Class R-2 ..................... 1,000 1,025 9.24 1,000 1,016 9.20 1.84%
Strategic Growth Portfolio
Class A ....................... $1,000 $1,106 $ 7.26 $1,000 $1,018 $ 6.95 1.39%
Class B ....................... 1,000 1,103 11.16 1,000 1,014 10.69 2.14%
Class C ....................... 1,000 1,102 11.15 1,000 1,014 10.69 2.14%
Class R-1 ..................... 1,000 1,029 10.61 1,000 1,014 10.54 2.11%
Class R-2 ..................... 1,000 1,029 9.36 1,000 1,016 9.30 1.86%
* 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).
9
Financial Statements:
Portfolios of Investments
FLEXIBLE INCOME PORTFOLIO
April 30, 2006 (unaudited)
VALUE
SHARES (000S)
- ---------- ----------
INVESTMENT COMPANY SECURITIES -- 100.0%
EQUITY FUNDS -- 25.1%
2,006,377 WM Equity Income Fund ................................ $ 43,097
2,164,574 WM Growth & Income Fund .............................. 57,253
3,871,525 WM Growth Fund ....................................... 67,132
1,299,536 WM Mid Cap Stock Fund ................................ 26,809
495,218 WM REIT Fund ......................................... 9,464
633,278 WM Small Cap Growth Fund+ ............................ 10,525
840,251 WM Small Cap Value Fund .............................. 10,344
283,799 WM West Coast Equity Fund ............................ 12,152
----------
Total Equity Funds
(Cost $168,026) ................................... 236,776
----------
FIXED-INCOME FUNDS -- 74.9%
7,173,736 WM High Yield Fund ................................... 61,766
26,157,228 WM Income Fund ....................................... 234,630
49,141,980 WM Short Term Income Fund ............................ 113,027
28,527,699 WM U.S. Government Securities Fund ................... 296,117
----------
Total Fixed-Income Funds
(Cost $717,975) ................................... 705,540
----------
Total Investment Company Securities
(Cost $886,001) ................................... 942,316
----------
PRINCIPAL
AMOUNT
(000S)
- ----------
REPURCHASE AGREEMENT -- 0.0%
(Cost $631)
$ 631 Agreement with Credit Suisse First Boston Corporation,
4.660% dated 04/28/2006, to be repurchased at
$631,000 on 05/01/2006 (collateralized by U.S.
Treasury obligations, having various interest rates
and maturities, market value $644,000) ............ 631
----------
TOTAL INVESTMENTS (Cost $886,632*) ........................ 100.0% 942,947
OTHER ASSETS (LIABILITIES) (NET) .......................... 0.0 (382)
----- ----------
NET ASSETS ................................................ 100.0% $ 942,565
===== ==========
- ----------
* Aggregate cost for federal tax purposes.
+ Non-income producing security.
CONSERVATIVE BALANCED PORTFOLIO
April 30, 2006 (unaudited)
VALUE
SHARES (000S)
- ---------- ----------
INVESTMENT COMPANY SECURITIES -- 100.0%
EQUITY FUNDS -- 44.6%
2,815,774 WM Equity Income Fund ................................ $ 60,483
2,019,125 WM Growth & Income Fund .............................. 53,406
3,751,521 WM Growth Fund ....................................... 65,051
2,798,155 WM International Growth Fund ......................... 36,292
1,105,141 WM Mid Cap Stock Fund ................................ 22,799
689,167 WM REIT Fund ......................................... 13,170
481,229 WM Small Cap Growth Fund+ ............................ 7,998
649,244 WM Small Cap Value Fund .............................. 7,992
613,497 WM West Coast Equity Fund ............................ 26,270
----------
Total Equity Funds
(Cost $226,976) ................................... 293,461
----------
FIXED-INCOME FUNDS -- 55.4%
4,383,526 WM High Yield Fund ................................... 37,742
13,063,828 WM Income Fund ....................................... 117,183
16,232,291 WM Short Term Income Fund ............................ 37,334
16,660,750 WM U.S. Government Securities Fund ................... 172,939
----------
Total Fixed-Income Funds
(Cost $373,637) ................................... 365,198
----------
TOTAL INVESTMENTS (Cost $600,613*) ........................ 100.0% 658,659
OTHER ASSETS (LIABILITIES) (NET) .......................... 0.0 (318)
----- ----------
NET ASSETS ................................................ 100.0% $ 658,341
===== ==========
- ----------
* Aggregate cost for federal tax purposes.
+ Non-income producing security.
10 See Notes to Financial Statements.
Portfolios of Investments
BALANCED PORTFOLIO
April 30, 2006 (unaudited)
VALUE
SHARES (000S)
- ---------- ----------
INVESTMENT COMPANY SECURITIES -- 99.5%
EQUITY FUNDS -- 66.5%
26,946,984 WM Equity Income Fund ................................ $ 578,821
21,457,315 WM Growth & Income Fund .............................. 567,546
42,515,561 WM Growth Fund ....................................... 737,220
30,638,839 WM International Growth Fund ......................... 397,386
11,915,636 WM Mid Cap Stock Fund ................................ 245,819
7,531,965 WM REIT Fund ......................................... 143,936
5,768,340 WM Small Cap Growth Fund+ ............................ 95,870
7,733,169 WM Small Cap Value Fund .............................. 95,195
6,634,135 WM West Coast Equity Fund ............................ 284,074
----------
Total Equity Funds
(Cost $2,448,272) ................................. 3,145,867
----------
FIXED-INCOME FUNDS -- 33.0%
25,433,065 WM High Yield Fund ................................... 218,979
54,048,934 WM Income Fund ....................................... 484,819
19,434,919 WM Short Term Income Fund ............................ 44,700
78,012,714 WM U.S. Government Securities Fund ................... 809,772
----------
Total Fixed-Income Funds
(Cost $1,582,262) ................................. 1,558,270
----------
Total Investment Company Securities
(Cost $4,030,534) ................................. 4,704,137
----------
PRINCIPAL
AMOUNT
(000S)
- ----------
REPURCHASE AGREEMENT -- 0.5%
(Cost $24,158)
$ 24,158 Agreement with Credit Suisse First Boston Corporation,
4.660% dated 04/28/2006, to be repurchased at
$24,167,000 on 05/01/2006 (collateralized by U.S.
Treasury obligations, having various interest rates
and maturities, market value $24,672,000) ......... 24,158
----------
TOTAL INVESTMENTS (Cost $4,054,692*) ...................... 100.0% 4,728,295
OTHER ASSETS (LIABILITIES) (NET) .......................... 0.0 (739)
----- ----------
NET ASSETS ................................................ 100.0% $4,727,556
===== ==========
- ----------
* Aggregate cost for federal tax purposes.
+ Non-income producing security.
CONSERVATIVE GROWTH PORTFOLIO
April 30, 2006 (unaudited)
VALUE
SHARES (000S)
- ---------- ----------
INVESTMENT COMPANY SECURITIES -- 100.0%
EQUITY FUNDS -- 86.2%
28,915,307 WM Equity Income Fund ................................ $ 621,101
23,170,107 WM Growth & Income Fund .............................. 612,849
42,973,502 WM Growth Fund ....................................... 745,161
30,779,687 WM International Growth Fund ......................... 399,213
12,431,078 WM Mid Cap Stock Fund ................................ 256,453
8,172,200 WM REIT Fund ......................................... 156,171
6,535,643 WM Small Cap Growth Fund+ ............................ 108,622
8,726,038 WM Small Cap Value Fund .............................. 107,417
7,049,293 WM West Coast Equity Fund ............................ 301,851
----------
Total Equity Funds
(Cost $2,624,636) ................................. 3,308,838
----------
FIXED-INCOME FUNDS -- 13.8%
11,432,453 WM High Yield Fund ................................... 98,433
16,575,350 WM Income Fund ....................................... 148,681
27,096,842 WM U.S. Government Securities Fund ................... 281,265
----------
Total Fixed-Income Funds
(Cost $526,963) ................................... 528,379
----------
Total Investment Company Securities
(Cost $3,151,599) ................................. 3,837,217
----------
PRINCIPAL
AMOUNT
(000S)
- ----------
REPURCHASE AGREEMENT -- 0.1%
(Cost $3,468)
$ 3,468 Agreement with Credit Suisse First Boston Corporation,
4.660% dated 04/28/2006, to be repurchased at
$3,469,000 on 05/01/2006 (collateralized by U.S.
Treasury obligations, having various interest rates
and maturities, market value $3,542,000) .......... 3,468
----------
TOTAL INVESTMENTS (Cost $3,155,067*) ...................... 100.1% 3,840,685
OTHER ASSETS (LIABILITIES) (NET) .......................... (0.1) (2,493)
----- ----------
NET ASSETS ................................................ 100.0% $3,838,192
===== ==========
- ----------
* Aggregate cost for federal tax purposes.
+ Non-income producing security.
See Notes to Financial Statements. 11
Portfolio of Investments
STRATEGIC GROWTH PORTFOLIO
April 30, 2006 (unaudited)
VALUE
SHARES (000S)
- ---------- ----------
INVESTMENT COMPANY SECURITIES -- 99.9%
EQUITY FUNDS -- 95.9%
18,490,819 WM Equity Income Fund ................................ $ 397,183
14,874,421 WM Growth & Income Fund .............................. 393,428
30,542,764 WM Growth Fund ....................................... 529,611
21,172,001 WM International Growth Fund ......................... 274,601
9,145,804 WM Mid Cap Stock Fund ................................ 188,678
4,878,455 WM REIT Fund ......................................... 93,227
4,293,361 WM Small Cap Growth Fund+ ............................ 71,356
5,634,050 WM Small Cap Value Fund .............................. 69,355
4,831,638 WM West Coast Equity Fund ............................ 206,891
----------
Total Equity Funds
(Cost $1,813,128) ................................. 2,224,330
----------
FIXED-INCOME FUND -- 4.0%
(Cost $86,089)
10,926,587 WM High Yield Fund ................................... 94,078
----------
Total Investment Company Securities
(Cost $1,899,217) ................................. 2,318,408
----------
PRINCIPAL
AMOUNT
(000S)
- ----------
REPURCHASE AGREEMENT -- 0.2%
(Cost $3,453)
$ 3,453 Agreement with Credit Suisse First Boston Corporation,
4.660% dated 04/28/2006, to be repurchased at
$3,454,000 on 05/01/2006 (collateralized by U.S.
Treasury obligations, having various interest rates
and maturities, market value $3,526,000) .......... 3,453
----------
TOTAL INVESTMENTS (Cost $1,902,670*) ...................... 100.1% 2,321,861
OTHER ASSETS (LIABILITIES) (NET) .......................... (0.1) (1,550)
----- ----------
NET ASSETS ................................................ 100.0% $2,320,311
===== ==========
- ----------
* Aggregate cost for federal tax purposes.
+ Non-income producing security.
12 See Notes to Financial Statements.
Statements of Assets and Liabilities
April 30, 2006 (unaudited)
(In thousands)
FLEXIBLE CONSERVATIVE CONSERVATIVE STRATEGIC
INCOME BALANCED BALANCED GROWTH GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
--------- ------------ ---------- ------------ ----------
ASSETS:
Investments, at cost .......................... $886,632 $600,613 $4,054,692 $3,155,067 $1,902,670
======== ======== ========== ========== ==========
Investments, at value ......................... $942,947 $658,659 $4,728,295 $3,840,685 $2,321,861
Cash .......................................... 8 -- 30 17 18
Dividends and/or interest receivable .......... -- -- 9 2 1
Receivable for Portfolio shares sold .......... 1,738 1,323 11,713 6,689 5,683
Receivable for investment securities sold ..... 1,200 800 -- -- --
Prepaid expenses and other assets ............. 13 8 59 48 29
-------- -------- ---------- ---------- ----------
Total Assets ............................... 945,906 660,790 4,740,106 3,847,441 2,327,592
-------- -------- ---------- ---------- ----------
LIABILITIES:
Payable for Portfolio shares redeemed ......... 2,401 1,835 6,953 5,041 3,604
Payable for investment securities purchased ... -- -- 1,158 468 1,458
Investment advisory fee payable ............... 244 169 1,205 978 589
Shareholder servicing and distribution
fees payable ............................... 510 347 2,401 2,020 1,244
Transfer agent fees payable ................... 50 27 218 225 48
Due to custodian .............................. -- 14 -- -- --
Accrued expenses and other payables ........... 136 57 615 517 338
-------- -------- ---------- ---------- ----------
Total Liabilities .......................... 3,341 2,449 12,550 9,249 7,281
-------- -------- ---------- ---------- ----------
NET ASSETS .................................... $942,565 $658,341 $4,727,556 $3,838,192 $2,320,311
======== ======== ========== ========== ==========
NET ASSETS CONSIST OF:
Undistributed net investment income/
(accumulated net investment loss) .......... $ 1,708 $ 520 $ (2,846) $ (4,379) $ 1,495
Accumulated net realized gain/(loss) on
investment transactions .................... (3,189) 1,339 (8,941) (21,577) (20,597)
Net unrealized appreciation of investments .... 56,315 58,046 673,603 685,618 419,191
Paid-in capital ............................... 887,731 598,436 4,065,740 3,178,530 1,920,222
-------- -------- ---------- ---------- ----------
Total Net Assets ........................... $942,565 $658,341 $4,727,556 $3,838,192 $2,320,311
======== ======== ========== ========== ==========
See Notes to Financial Statements. 13
Statements of Assets and Liabilities (continued)
April 30, 2006 (unaudited)
(In thousands)
FLEXIBLE CONSERVATIVE CONSERVATIVE STRATEGIC
INCOME BALANCED BALANCED GROWTH GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
--------- ------------ ---------- ------------ ----------
NET ASSETS:
Class A Shares ........................ $436,956 $314,467 $2,383,520 $1,814,922 $1,055,180
======== ======== ========== ========== ==========
Class B Shares ........................ $350,457 $173,052 $1,475,448 $1,136,051 $ 736,887
======== ======== ========== ========== ==========
Class C Shares ........................ $155,152 $170,822 $ 868,564 $ 887,057 $ 528,238
======== ======== ========== ========== ==========
Class R-1 Shares ...................... $ -- $ -- $ 24 $ 162 $ 6
======== ======== ========== ========== ==========
Class R-2 Shares ...................... $ -- $ -- $ -- $ -- $ --
======== ======== ========== ========== ==========
SHARES OUTSTANDING:
Class A Shares ........................ 38,565 28,924 168,668 114,009 59,980
======== ======== ========== ========== ==========
Class B Shares ........................ 30,976 15,945 104,665 73,684 44,033
======== ======== ========== ========== ==========
Class C Shares ........................ 13,780 15,803 61,930 57,938 31,489
======== ======== ========== ========== ==========
Class R-1 Shares ...................... -- -- 2 10 --
======== ======== ========== ========== ==========
Class R-2 Shares ...................... -- -- -- -- --
======== ======== ========== ========== ==========
CLASS A SHARES:**
Net asset value per share of
beneficial interest
outstanding* ........................ $ 11.33 $ 10.87 $ 14.13 $ 15.92 $ 17.59
======== ======== ========== ========== ==========
Maximum sales charge .................. 4.50% 5.50% 5.50% 5.50% 5.50%
======== ======== ========== ========== ==========
Maximum offering price per share of
beneficial interest outstanding ..... $ 11.86 $ 11.50 $ 14.95 $ 16.85 $ 18.61
======== ======== ========== ========== ==========
CLASS B SHARES:**
Net asset value and offering price
per share of beneficial interest
outstanding* ........................ $ 11.31 $ 10.85 $ 14.10 $ 15.42 $ 16.73
======== ======== ========== ========== ==========
CLASS C SHARES:**
Net asset value and offering price
per share of beneficial interest
outstanding* ....................... $ 11.26 $ 10.81 $ 14.02 $ 15.31 $ 16.78
======== ======== ========== ========== ==========
CLASS R-1 SHARES:**
Net asset value and offering price
per share of beneficial interest
outstanding ........................ $ 11.32 $ 10.86 $ 14.12 $ 15.92 $ 17.59
======== ======== ========== ========== ==========
CLASS R-2 SHARES:**
Net asset value and offering price
per share of beneficial interest
outstanding ........................ $ 11.32 $ 10.86 $ 14.12 $ 15.92 $ 17.59
======== ======== ========== ========== ==========
- ----------
* Redemption price per share is equal to net asset value per share less any
applicable contingent deferred sales charge.
** Net asset value and maximum offering price are not shown in thousands.
14 See Notes to Financial Statements.
Statements of Operations
For the Six Months Ended April 30, 2006 (unaudited)
(In thousands)
FLEXIBLE CONSERVATIVE CONSERVATIVE STRATEGIC
INCOME BALANCED BALANCED GROWTH GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
--------- ------------ --------- ------------ ---------
INVESTMENT INCOME:
Dividends from investment company
securities ................................. $21,225 $12,270 $ 69,867 $ 45,023 $ 23,663
Interest ...................................... 11 21 966 79 61
------- ------- -------- -------- --------
Total investment income .................... 21,236 12,291 70,833 45,102 23,724
------- ------- -------- -------- --------
EXPENSES:
Investment advisory fee ....................... 1,522 1,004 7,088 5,688 3,400
Custodian fees ................................ 7 2 1 1 4
Legal and audit fees .......................... 20 17 50 42 30
Trustees'fees ................................. 9 6 41 33 19
Other ......................................... 218 152 812 747 612
Shareholder servicing and distribution fees:
Class A Shares ............................. 555 379 2,816 2,121 1,219
Class B Shares ............................. 1,829 859 7,244 5,533 3,550
Class C Shares ............................. 787 815 4,019 4,061 2,378
Class R-1 Shares ........................... -- -- -- -- --
Class R-2 Shares ........................... -- -- -- -- --
Transfer agent fees:
Class A Shares ............................. 128 88 639 581 387
Class B Shares ............................. 140 66 557 471 314
Class C Shares ............................. 52 50 249 300 201
Recordkeeping/administration fees:
Class R-1 Shares ........................... -- -- -- -- --
Class R-2 Shares ........................... -- -- -- -- --
------- ------- -------- -------- --------
Total expenses ............................. 5,267 3,438 23,516 19,578 12,114
Fees reduced by custodian credits ............. --* --* --* --* --*
------- ------- -------- -------- --------
Net expenses ............................... 5,267 3,438 23,516 19,578 12,114
------- ------- -------- -------- --------
NET INVESTMENT INCOME ......................... 15,969 8,853 47,317 25,524 11,610
------- ------- -------- -------- --------
NET REALIZED AND UNREALIZED
GAIN ON INVESTMENTS:
Net realized gain/(loss) on investment
transactions ............................... (709) 229 5,597 5,826 6,656
Capital gain distributions received ........... 4,115 4,104 45,198 45,982 32,414
Net change in unrealized appreciation/
depreciation of investments ................ 12,197 19,744 219,381 238,165 159,900
------- ------- -------- -------- --------
Net realized and unrealized gain on
investments ................................ 15,603 24,077 270,176 289,973 198,970
------- ------- -------- -------- --------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS .................. $31,572 $32,930 $317,493 $315,497 $210,580
======= ======= ======== ======== ========
- ----------
* Amount represents less than $500.
See Notes to Financial Statements. 15
Statements of Changes in Net Assets
(In thousands)
FLEXIBLE CONSERVATIVE
INCOME PORTFOLIO BALANCED PORTFOLIO BALANCED PORTFOLIO
------------------------ ------------------------ ------------------------
SIX MONTHS SIX MONTHS SIX MONTHS
ENDED ENDED ENDED
4/30/06 YEAR ENDED 4/30/06 YEAR ENDED 4/30/06 YEAR ENDED
(UNAUDITED) 10/31/05 (UNAUDITED) 10/31/05 (UNAUDITED) 10/31/05
----------- ---------- ----------- ---------- ----------- ----------
Net investment income/(loss) ................ $ 15,969 $ 25,572 $ 8,853 $ 11,225 $ 47,317 $ 50,245
Net realized gain/(loss) on investment
transactions ............................. (709) (294) 229 24 5,597 (671)
Capital gain distributions received ......... 4,115 1,239 4,104 1,041 45,198 11,568
Net change in unrealized appreciation/
depreciation of investments .............. 12,197 (4,746) 19,744 9,351 219,381 179,183
-------- -------- -------- -------- ---------- ----------
Net increase in net assets resulting
from operations .......................... 31,572 21,771 32,930 21,641 317,493 240,325
Distributions to shareholders from:
Net investment income:
Class A Shares ........................ (8,495) (12,642) (4,928) (6,169) (30,267) (31,381)
Class B Shares ........................ (5,535) (9,207) (2,137) (2,814) (13,999) (13,452)
Class C Shares ........................ (2,404) (3,397) (2,067) (2,133) (7,970) (5,984)
Class R-1 Shares ...................... -- -- -- -- -- --
Class R-2 Shares ...................... -- -- -- -- -- --
Net realized gains on investments:
Class A Shares ........................ (1,189) (1,159) (454) (307) -- --
Class B Shares ........................ (1,004) (1,306) (263) (231) -- --
Class C Shares ........................ (424) (401) (243) (146) -- --
Class R-1 Shares ...................... -- -- -- -- -- --
Class R-2 Shares ...................... -- -- -- -- -- --
Net increase/(decrease) in net assets from
Portfolio share transactions:
Class A Shares ........................ (11,971) 88,792 11,810 79,532 125,935 511,715
Class B Shares ........................ (38,494) (33,003) (3,054) 4,826 (30,699) (7,480)
Class C Shares ........................ (9,028) 35,589 12,874 52,920 87,201 223,780
Class R-1 Shares ...................... -- -- -- -- 24 --
Class R-2 Shares ...................... -- -- -- -- -- --
-------- -------- -------- -------- ---------- ----------
Net increase/(decrease) in net assets .... (46,972) 85,037 44,468 147,119 447,718 917,523
NET ASSETS:
Beginning of period/year .................... 989,537 904,500 613,873 466,754 4,279,838 3,362,315
-------- -------- -------- -------- ---------- ----------
End of period/year .......................... $942,565 $989,537 $658,341 $613,873 $4,727,556 $4,279,838
======== ======== ======== ======== ========== ==========
Undistributed net investment income/
(accumulated net investment loss)
at end of period/year .................... $ 1,708 $ 2,173 $ 520 $ 799 $ (2,846) $ 2,073
======== ======== ======== ======== ========== ==========
16 See Notes to Financial Statements.
CONSERVATIVE STRATEGIC
GROWTH PORTFOLIO GROWTH PORTFOLIO
- ------------------------ -----------------------
SIX MONTHS SIX MONTHS
ENDED ENDED
4/30/06 YEAR ENDED 4/30/06 YEAR ENDED
(UNAUDITED) 10/31/05 (UNAUDITED) 10/31/05
- ----------- ---------- ---------- ----------
$ 25,524 $ 14,329 $ 11,610 $ (937)
5,826 (2,370) 6,656 (2,613)
45,982 12,156 32,414 8,964
238,165 220,107 159,900 155,476
---------- ---------- ---------- ----------
315,497 244,222 210,580 160,890
(14,883) (11,899) (5,112) (1,610)
(8,753) (2,201) (3,135) --
(6,374) (2,378) (2,034) --
-- -- -- --
-- -- -- --
-- -- -- --
-- -- -- --
-- -- -- --
-- -- -- --
-- -- -- --
117,358 300,718 78,256 206,269
(10,417) (22,833) (1,534) 535
96,810 203,027 67,428 110,472
160 -- 6 --
-- -- -- --
---------- ---------- ---------- ----------
489,398 708,656 344,455 476,556
3,348,794 2,640,138 1,975,856 1,499,300
---------- ---------- ---------- ----------
$3,838,192 $3,348,794 $2,320,311 $1,975,856
========== ========== ========== ==========
$ (4,379) $ 107 $ 1,495 $ 166
========== ========== ========== ==========
See Notes to Financial Statements. 17
Statements of Changes in Net Assets -- Capital Stock Activity
(In thousands)
FLEXIBLE INCOME PORTFOLIO
ISSUED AS
REINVESTMENT NET INCREASE/
SOLD OF DIVIDENDS REDEEMED (DECREASE)
----------------- ---------------- ------------------- -----------------
AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES
-------- ------ ------- ------ --------- ------- -------- ------
SIX MONTHS ENDED 4/30/06 (UNAUDITED):
Class A Shares ....... $ 75,714 6,669 $ 8,362 741 $ (96,047) (8,469) $(11,971) (1,059)
Class B Shares ....... 16,525 1,458 5,634 499 (60,653) (5,358) (38,494) (3,401)
Class C Shares ....... 24,321 2,158 2,454 218 (35,803) (3,179) (9,028) (803)
Class R-1 Shares ..... -- -- -- -- -- -- -- --
Class R-2 Shares ..... -- -- -- -- -- -- -- --
YEAR ENDED 10/31/05:
Class A Shares ....... $209,417 18,516 $11,907 1,055 $(132,532) (11,727) $ 88,792 7,844
Class B Shares ....... 60,992 5,423 9,136 810 (103,131) (9,139) (33,003) (2,906)
Class C Shares ....... 81,325 7,239 3,329 297 (49,065) (4,370) 35,589 3,166
CONSERVATIVE BALANCED PORTFOLIO
ISSUED AS
REINVESTMENT NET INCREASE/
SOLD OF DIVIDENDS REDEEMED (DECREASE)
----------------- --------------- ----------------- ----------------
AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES
-------- ------ ------ ------ -------- ------ ------- -----
SIX MONTHS ENDED 4/30/06 (UNAUDITED):
Class A Shares ....... $ 57,838 5,373 $4,851 452 $(50,879) (4,729) $11,810 1,096
Class B Shares ....... 14,431 1,342 2,276 213 (19,761) (1,837) (3,054) (282)
Class C Shares ....... 29,252 2,733 2,211 207 (18,589) (1,734) 12,874 1,206
Class R-1 Shares ..... -- -- -- -- -- -- -- --
Class R-2 Shares ..... -- -- -- -- -- -- -- --
YEAR ENDED 10/31/05:
Class A Shares ....... $143,665 13,693 $5,799 553 $(69,932) (6,655) $79,532 7,591
Class B Shares ....... 34,134 3,265 2,710 258 (32,018) (3,061) 4,826 462
Class C Shares ....... 73,937 7,088 2,045 196 (23,062) (2,211) 52,920 5,073
BALANCED PORTFOLIO
ISSUED AS
REINVESTMENT NET INCREASE/
SOLD OF DIVIDENDS REDEEMED (DECREASE)
----------------- ---------------- ------------------- -----------------
AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES
-------- ------ ------- ------ --------- ------- -------- ------
SIX MONTHS ENDED 4/30/06 (UNAUDITED):
Class A Shares ....... $348,154 25,106 $27,801 2,018 $(250,020) (18,051) $125,935 9,073
Class B Shares ....... 84,479 6,106 13,179 961 (128,357) (9,292) (30,699) (2,225)
Class C Shares ....... 151,077 10,983 7,337 537 (71,213) (5,176) 87,201 6,344
Class R-1 Shares ..... 27 2 -- -- (3) -- 24 2
Class R-2 Shares ..... -- -- -- -- -- -- -- --
YEAR ENDED 10/31/05:
Class A Shares ....... $793,211 60,281 $28,968 2,194 $(310,464) (23,564) $511,715 38,911
Class B Shares ....... 195,378 14,915 12,481 948 (215,339) (16,412) (7,480) (549)
Class C Shares ....... 325,240 24,889 5,544 423 (107,004) (8,188) 223,780 17,124
18 See Notes to Financial Statements.
Statements of Changes in Net Assets -- Capital Stock Activity (continued)
(In thousands)
CONSERVATIVE GROWTH PORTFOLIO
ISSUED AS
REINVESTMENT NET INCREASE/
SOLD OF DIVIDENDS REDEEMED (DECREASE)
---------------- --------------- ------------------ -----------------
AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES
-------- ------ ------- ------ --------- ------- --------- ------
SIX MONTHS ENDED 4/30/06 (UNAUDITED):
Class A Shares .... $248,538 16,066 $14,085 927 $(145,265) (9,387) $ 117,358 7,606
Class B Shares .... 66,074 4,409 8,510 576 (85,001) (5,657) (10,417) (672)
Class C Shares .... 155,084 10,407 5,939 406 (64,213) (4,302) 96,810 6,511
Class R-1 Shares .. 176 11 -- -- (16) (1) 160 10
Class R-2 Shares .. -- -- -- -- -- -- -- --
YEAR ENDED 10/31/05:
Class A Shares .... $511,183 35,691 $11,340 790 $(221,805) (15,434) $ 300,718 21,047
Class B Shares .... 157,022 11,277 2,100 150 (181,955) (13,063) (22,833) (1,636)
Class C Shares .... 295,161 21,286 2,203 158 (94,337) (6,788) 203,027 14,656
STRATEGIC GROWTH PORTFOLIO
ISSUED AS
REINVESTMENT NET INCREASE/
SOLD OF DIVIDENDS REDEEMED (DECREASE)
---------------- -------------- ----------------- ----------------
AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES
-------- ------ ------ ------ --------- ------ -------- ------
SIX MONTHS ENDED 4/30/06 (UNAUDITED):
Class A Shares .... $160,170 9,417 $4,857 291 $ (86,771) (5,096) $ 78,256 4,612
Class B Shares .... 50,273 3,100 3,046 191 (54,853) (3,375) (1,534) (84)
Class C Shares .... 105,012 6,463 1,891 118 (39,475) (2,425) 67,428 4,156
Class R-1 Shares .. 6 1 -- -- -- (1) 6 --
Class R-2 Shares .. -- -- -- -- -- -- -- --
YEAR ENDED 10/31/05:
Class A Shares .... $337,997 21,789 $1,537 99 $(133,265) (8,553) $206,269 13,335
Class B Shares .... 112,864 7,597 -- -- (112,329) (7,568) 535 29
Class C Shares .... 167,135 11,236 -- -- (56,663) (3,794) 110,472 7,442
See Notes to Financial Statements. 19
Financial Highlights
FLEXIBLE INCOME PORTFOLIO
For a Portfolio share outstanding throughout each period.
INCOME/(LOSS) FROM
INVESTMENT OPERATIONS LESS DISTRIBUTIONS
----------------------------------- ----------------------------------------
NET
REALIZED
NET AND NET
ASSET UNREALIZED DIVIDENDS DISTRIBUTIONS ASSET
VALUE NET GAIN/(LOSS) TOTAL FROM FROM NET FROM NET VALUE
BEGINNING INVESTMENT ON INVESTMENT INVESTMENT REALIZED TOTAL END OF TOTAL
OF PERIOD INCOME INVESTMENTS OPERATIONS INCOME(1) CAPITAL GAINS DISTRIBUTIONS PERIOD RETURN(2)
--------- ---------- ----------- ---------- ---------- ------------- ------------- ------ ---------
CLASS A SHARES
Six Months Ended (unaudited):
4/30/06 $11.19 $0.21(6) $ 0.18 $ 0.39 $(0.22) $(0.03) $(0.25) $11.33 3.47%
Year Ended:
10/31/05 $11.26 $0.35 $(0.03) $ 0.32 $(0.35) $(0.04) $(0.39) $11.19 2.79%
10/31/04 10.92 0.34(6) 0.35 0.69 (0.35) -- (0.35) 11.26 6.38
10/31/03 10.17 0.38(6) 0.77 1.15 (0.38) (0.02) (0.40) 10.92 11.49
10/31/02 10.71 0.45(6) (0.48) (0.03) (0.43) (0.08) (0.51) 10.17 (0.37)
10/31/01 11.06 0.50(6) (0.04) 0.46 (0.61) (0.20) (0.81) 10.71 3.67
CLASS B SHARES
Six Months Ended (unaudited):
4/30/06 $11.17 $0.17(6) $ 0.17 $ 0.34 $(0.17) $(0.03) $(0.20) $11.31 3.07%
Year Ended:
10/31/05 $11.24 $0.26 $(0.03) $ 0.23 $(0.26) $(0.04) $(0.30) $11.17 1.99%
10/31/04 10.90 0.26(6) 0.34 0.60 (0.26) -- (0.26) 11.24 5.56
10/31/03 10.15 0.30(6) 0.77 1.07 (0.30) (0.02) (0.32) 10.90 10.60
10/31/02 10.71 0.38(6) (0.50) (0.12) (0.36) (0.08) (0.44) 10.15 (1.08)
10/31/01 11.06 0.42(6) (0.04) 0.38 (0.53) (0.20) (0.73) 10.71 2.92
CLASS C SHARES
Six Months Ended (unaudited):
4/30/06 $11.12 $0.17(6) $ 0.17 $ 0.34 $(0.17) $(0.03) $(0.20) $11.26 3.09%
Year Ended:
10/31/05 $11.19 $0.26 $(0.03) $ 0.23 $(0.26) $(0.04) $(0.30) $11.12 2.06%
10/31/04 10.86 0.26(6) 0.34 0.60 (0.27) -- (0.27) 11.19 5.57
10/31/03 10.13 0.30(6) 0.76 1.06 (0.31) (0.02) (0.33) 10.86 10.63
10/31/02(5) 10.54 0.24(6) (0.43) (0.19) (0.22) -- (0.22) 10.13 (1.78)
CLASS R-1 SHARES
Period Ended (unaudited):
4/30/06(8) $11.40 $0.08(6) $(0.06)(9) $ 0.02 $(0.10) $ -- $(0.10) $11.32 0.20%
CLASS R-2 SHARES
Period Ended (unaudited):
4/30/06(8) $11.40 $0.08(6) $(0.06)(9) $ 0.02 $(0.10) $ -- $(0.10) $11.32 0.20%x
RATIOS TO AVERAGE
NET ASSETS/SUPPLEMENTAL DATA
-------------------------------------------------------------
RATIO OF RATIO OF
EXPENSES EXPENSES
TO AVERAGE TO AVERAGE RATIO OF
NET NET ASSETS NET ASSETS NET
ASSETS BEFORE AFTER INVESTMENT
END OF REIMBURSE- REIMBURSE- INCOME TO PORTFOLIO
PERIOD MENTS/ MENTS/ AVERAGE TURNOVER
(IN 000S) WAIVERS(3) WAIVERS(3)(4) NET ASSETS RATE
--------- ---------- ------------- ---------- ---------
CLASS A SHARES
Six Months Ended (unaudited):
4/30/06 $436,956 0.67%(7) 0.67%(7) 3.72%(7) 6%
Year Ended:
10/31/05 $443,361 1.00% 1.00% 3.10% 3%
10/31/04 357,735 1.02 1.02 3.07 3
10/31/03 224,192 1.04 1.04 3.64 3
10/31/02 144,710 1.06 1.06 4.41 9
10/31/01 110,680 1.06 1.06 4.61 7
CLASS B SHARES
Six Months Ended (unaudited):
4/30/06 $350,457 1.44%(7) 1.44%(7) 2.95%(7) 6%
Year Ended:
10/31/05 $384,036 1.77% 1.77% 2.33% 3%
10/31/04 418,994 1.79 1.79 2.30 3
10/31/03 371,639 1.79 1.79 2.89 3
10/31/02 244,999 1.81 1.81 3.66 9
10/31/01 146,555 1.79 1.79 3.88 7
CLASS C SHARES
Six Months Ended (unaudited):
4/30/06 $155,152 1.43%(7) 1.43%(7) 2.96%(7) 6%
Year Ended:
10/31/05 $162,140 1.76% 1.76% 2.34% 3%
10/31/04 127,771 1.78 1.78 2.31 3
10/31/03 68,746 1.79 1.79 2.89 3
10/31/02(5) 20,677 1.81(7) 1.81(7) 3.66(7) 9
CLASS R-1 SHARES
Period Ended (unaudited):
4/30/06(8) $ -- 1.42%(7)(10) 1.42%(7)(10) 2.97%(7)(10) 6%
CLASS R-2 SHARES
Period Ended (unaudited):
4/30/06(8) $ -- 1.17%(7)(10) 1.17%(7)(10) 3.22%(7)(10) 6%
(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 and does
not reflect any applicable sales charges. 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 also 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 C shares on March 1, 2002.
(6) Per share numbers have been calculated using the average shares method.
(7) Annualized.
(8) The Portfolio commenced selling Class R-1 and R-2 shares on March 1, 2006.
(9) The amount shown may not accord with the change in aggregate gains and
losses of portfolio securities due to the timing of sales and redemptions
of Portfolio shares.
(10) Ratios of expenses and net investment income to average net assets are
hypothetical, based on Class A share ratios adjusted for the respective
expenses of the share class.
20 See Notes to Financial Statements.
FINANCIAL HIGHLIGHTS
CONSERVATIVE BALANCED PORTFOLIO
For a Portfolio share outstanding throughout each period.
INCOME/(LOSS) FROM
INVESTMENT OPERATIONS
-----------------------------------
NET LESS DISTRIBUTIONS
REALIZED ----------------------------------------
NET AND NET
ASSET UNREALIZED TOTAL DIVIDENDS DISTRIBUTIONS ASSET
VALUE NET GAIN/(LOSS) FROM FROM NET FROM NET VALUE
BEGINNING INVESTMENT ON INVESTMENT INVESTMENT REALIZED TOTAL END OF TOTAL
OF PERIOD INCOME INVESTMENTS OPERATIONS INCOME(1) CAPITAL GAINS DISTRIBUTIONS PERIOD RETURN(2)
--------- ---------- ----------- ---------- ---------- ------------- ------------- ------ ---------
CLASS A SHARES
Six Months Ended (unaudited):
4/30/06 $10.49 $0.17(6) $ 0.40 $ 0.57 $(0.17) $(0.02) $(0.19) $10.87 5.47%
Year Ended:
10/31/05 $10.27 $0.26(6) $ 0.23 $ 0.49 $(0.26) $(0.01) $(0.27) $10.49 4.82%
10/31/04 9.81 0.24 0.47 0.71 (0.25) -- (0.25) 10.27 7.29
10/31/03 8.83 0.28(6) 0.97 1.25 (0.27) -- (0.27) 9.81 14.38
10/31/02 9.43 0.33 (0.61) (0.28) (0.32) -- (0.32) 8.83 (3.06)
10/31/01 9.96 0.34(6) (0.44) (0.10) (0.43) -- (0.43) 9.43 (0.99)
CLASS B SHARES
Six Months Ended (unaudited):
4/30/06 $10.47 $0.13(6) $ 0.40 $ 0.53 $(0.13) $(0.02) $(0.15) $10.85 5.08%
Year Ended:
10/31/05 $10.25 $0.18(6) $ 0.23 $ 0.41 $(0.18) $(0.01) $(0.19) $10.47 4.02%
10/31/04 9.79 0.17 0.46 0.63 (0.17) -- (0.17) 10.25 6.47
10/31/03 8.82 0.21(6) 0.96 1.17 (0.20) -- (0.20) 9.79 13.46
10/31/02 9.43 0.27 (0.62) (0.35) (0.26) -- (0.26) 8.82 (3.77)
10/31/01 9.96 0.27(6) (0.44) (0.17) (0.36) -- (0.36) 9.43 (1.71)
CLASS C SHARES
Six Months Ended (unaudited):
4/30/06 $10.43 $0.13(6) $ 0.40 $ 0.53 $(0.13) $(0.02) $(0.15) $10.81 5.12%
Year Ended:
10/31/05 $10.22 $0.18(6) $ 0.22 $ 0.40 $(0.18) $(0.01) $(0.19) $10.43 4.00%
10/31/04 9.76 0.16 0.48 0.64 (0.18) -- (0.18) 10.22 6.55
10/31/03 8.80 0.21(6) 0.97 1.18 (0.22) -- (0.22) 9.76 13.53
10/31/02(5) 9.39 0.16 (0.60) (0.44) (0.15) -- (0.15) 8.80 (4.70)
CLASS R-1 SHARES
Period Ended (unaudited):
4/30/06(8) $10.83 $0.06(6) $ 0.04 $ 0.10 $(0.07) $ -- $(0.07) $10.86 0.96%
CLASS R-2 SHARES
Period Ended (unaudited):
4/30/06(8) $10.83 $0.06(6) $ 0.04 $ 0.10 $(0.07) $ -- $(0.07) $10.86 0.96%
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA
-------------------------------------------------------------
RATIO OF
EXPENSES RATIO OF
TO AVERAGE EXPENSES TO
NET NET ASSETS AVERAGE NET RATIO OF NET
ASSETS BEFORE ASSETS AFTER INVESTMENT
END OF REIMBURSE- REIMBURSE- INCOME TO PORTFOLIO
PERIOD MENTS/ MENTS/ AVERAGE NET TURNOVER
(IN 000S) WAIVERS(3) WAIVERS(3)(4) ASSETS RATE
--------- ---------- ------------- ------------ ---------
CLASS A SHARES
Six Months Ended (unaudited):
4/30/06 $314,467 0.68%(7) 0.68%(7) 3.17%(7) 7%
Year Ended:
10/31/05 $291,796 1.00% 1.00% 2.47% 2%
10/31/04 207,816 1.04 1.04 2.42 2
10/31/03 94,005 1.09 1.05 2.99 4
10/31/02 31,070 1.17 1.05 3.67 9
10/31/01 12,257 1.30 1.16 3.65 18
CLASS B SHARES
Six Months Ended (unaudited):
4/30/06 $173,052 1.45%(7) 1.45%(7) 2.40%(7) 7%
Year Ended:
10/31/05 $169,869 1.78% 1.78% 1.69% 2%
10/31/04 161,623 1.81 1.81 1.65 2
10/31/03 116,742 1.86 1.82 2.22 4
10/31/02 58,054 1.92 1.80 2.92 9
10/31/01 30,554 2.03 1.89 2.92 18
CLASS C SHARES
Six Months Ended (unaudited):
4/30/06 $170,822 1.43%(7) 1.43%(7) 2.42%(7) 7%
Year Ended:
10/31/05 $152,208 1.76% 1.76% 1.71% 2%
10/31/04 97,315 1.79 1.79 1.67 2
10/31/03 51,284 1.84 1.80 2.24 4
10/31/02(5) 10,505 1.90(7) 1.78(7) 2.94(7) 9
CLASS R-1 SHARES
Period Ended (unaudited):
4/30/06(8) $ -- 1.42%(7)(9) 1.42%(7)(9) 2.43%(7)(9) 7%
CLASS R-2 SHARES
Period Ended (unaudited):
4/30/06(8) $ -- 1.17%(7)(9) 1.17%(7)(9) 2.68%(7)(9) 7%
(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 and does
not reflect any applicable sales charges. 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 also 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 C shares on March 1, 2002.
(6) Per share numbers have been calculated using the average shares method.
(7) Annualized.
(8) The Portfolio commenced selling Class R-1 and R-2 shares on March 1, 2006.
(9) Ratios of expenses and net investment income to average net assets are
hypothetical, based on Class A share ratios adjusted for the respective
expenses of the share class.
See Notes to Financial Statements. 21
FINANCIAL HIGHLIGHTS
BALANCED PORTFOLIO
For a Portfolio share outstanding throughout each period.
INCOME/(LOSS) FROM
INVESTMENT OPERATIONS
-----------------------------------
NET LESS DISTRIBUTIONS
REALIZED ----------------------------------------
NET AND NET
ASSET UNREALIZED TOTAL DIVIDENDS DISTRIBUTIONS ASSET
VALUE NET GAIN/(LOSS) FROM FROM NET FROM NET VALUE
BEGINNING INVESTMENT ON INVESTMENT INVESTMENT REALIZED TOTAL END OF TOTAL
OF PERIOD INCOME INVESTMENTS OPERATIONS INCOME(1) CAPITAL GAINS DISTRIBUTIONS PERIOD RETURN(2)
--------- ---------- ----------- ---------- ---------- ------------- ------------- ------ ---------
CLASS A SHARES
Six Months Ended (unaudited):
4/30/06 $13.32 $0.17 $ 0.83 $ 1.00 $(0.19) $ -- $(0.19) $14.13 7.52%
Year Ended:
10/31/05 $12.64 $0.23 $ 0.68 $ 0.91 $(0.23) $ -- $(0.23) $13.32 7.20%
10/31/04 11.85 0.20 0.79 0.99 (0.20) -- (0.20) 12.64 8.51
10/31/03 10.24 0.22 1.62 1.84 (0.23) -- (0.23) 11.85 18.07
10/31/02 11.63 0.28 (1.08) (0.80) (0.33) (0.26) (0.59) 10.24 (7.32)
10/31/01 13.55 0.33(6) (1.27) (0.94) (0.51) (0.47) (0.98) 11.63 (7.28)
CLASS B SHARES
Six Months Ended (unaudited):
4/30/06 $13.28 $0.12 $ 0.83 $ 0.95 $(0.13) $ -- $(0.13) $14.10 7.21%
Year Ended:
10/31/05 $12.61 $0.12 $ 0.67 $ 0.79 $(0.12) $ -- $(0.12) $13.28 6.32%
10/31/04 11.82 0.10 0.79 0.89 (0.10) -- (0.10) 12.61 7.59
10/31/03 10.22 0.14 1.61 1.75 (0.15) -- (0.15) 11.82 17.25
10/31/02 11.62 0.20 (1.09) (0.89) (0.25) (0.26) (0.51) 10.22 (8.03)
10/31/01 13.54 0.23(6) (1.27) (1.04) (0.41) (0.47) (0.88) 11.62 (7.98)
CLASS C SHARES
Six Months Ended (unaudited):
4/30/06 $13.22 $0.12 $ 0.82 $ 0.94 $(0.14) $ -- $(0.14) $14.02 7.12%
Year Ended:
10/31/05 $12.55 $0.13 $ 0.67 $ 0.80 $(0.13) $ -- $(0.13) $13.22 6.41%
10/31/04 11.78 0.10 0.78 0.88 (0.11) -- (0.11) 12.55 7.64
10/31/03 10.20 0.14 1.60 1.74 (0.16) -- (0.16) 11.78 17.15
10/31/02(5) 11.35 0.13 (1.15) (1.02) (0.13) -- (0.13) 10.20 (9.00)
CLASS R-1 SHARES
Period Ended (unaudited):
4/30/06(8) $13.93 $0.06 $ 0.19 $ 0.25 $(0.06) $ -- $(0.06) $14.12 1.80%
CLASS R-2 SHARES
Period Ended (unaudited):
4/30/06(8) $13.93 $0.06 $ 0.19 $ 0.25 $(0.06) $ -- $(0.06) $14.12 1.80%
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA
-------------------------------------------------------------
RATIO OF
EXPENSES RATIO OF
TO AVERAGE EXPENSES TO
NET NET ASSETS AVERAGE NET RATIO OF NET
ASSETS BEFORE ASSETS AFTER INVESTMENT
END OF REIMBURSE- REIMBURSE- INCOME TO PORTFOLIO
PERIOD MENTS/ MENTS/ AVERAGE NET TURNOVER
(IN 000S) WAIVERS(3) WAIVERS(3)(4) ASSETS RATE
---------- ---------- ------------- ------------ ---------
CLASS A SHARES
Six Months Ended (unaudited):
4/30/06 $2,383,520 0.66%(7) 0.66%(7) 2.48%(7) 6%
Year Ended:
10/31/05 $2,125,167 0.94% 0.94% 1.69% 0%
10/31/04 1,524,988 0.98 0.98 1.56 2
10/31/03 792,423 1.02 1.02 2.03 5
10/31/02 423,478 1.04 1.04 2.55 19
10/31/01 380,681 1.02 1.02 2.63 6
CLASS B SHARES
Six Months Ended (unaudited):
4/30/06 $1,475,448 1.43%(7) 1.43%(7) 1.71%(7) 6%
Year Ended:
10/31/05 $1,419,870 1.72% 1.72% 0.91% 0%
10/31/04 1,354,528 1.75 1.75 0.79 2
10/31/03 1,074,925 1.78 1.78 1.27 5
10/31/02 743,953 1.80 1.80 1.79 19
10/31/01 670,318 1.78 1.78 1.87 6
CLASS C SHARES
Six Months Ended (unaudited):
4/30/06 $ 868,564 1.42%(7) 1.42%(7) 1.72%(7) 6%
Year Ended:
10/31/05 $ 734,801 1.70% 1.70% 0.93% 0%
10/31/04 482,799 1.74 1.74 0.80 2
10/31/03 234,076 1.76 1.76 1.29 5
10/31/02(5) 54,745 1.80(7) 1.80(7) 1.79(7) 19
CLASS R-1 SHARES
Period Ended (unaudited):
4/30/06(8) $ 24 1.40%(7) 1.40%(7) 1.74%(7) 6%
CLASS R-2 SHARES
Period Ended (unaudited):
4/30/06(8) $ -- 1.15%(7)(9) 1.15%(7)(9) 1.99%(7)(9) 6%
(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 and does
not reflect any applicable sales charges. 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 also 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 C shares on March 1, 2002.
(6) Per share numbers have been calculated using the average shares method.
(7) Annualized.
(8) The Portfolio commenced selling Class R-1 and R-2 shares on March 1, 2006.
(9) Ratios of expenses and net investment income to average net assets are
hypothetical, based on Class A share ratios adjusted for the respective
expenses of the share class.
22 See Notes to Financial Statements.
Financial Highlights
CONSERVATIVE GROWTH PORTFOLIO
For a Portfolio share outstanding throughout each period.
INCOME/(LOSS) FROM
INVESTMENT OPERATIONS LESS DISTRIBUTIONS
---------------------------------------- ----------------------------------------
NET NET NET
ASSET NET REALIZED AND DIVIDENDS DISTRIBUTIONS ASSET
VALUE INVESTMENT UNREALIZED TOTAL FROM FROM NET FROM NET VALUE
BEGINNING INCOME/ GAIN/(LOSS) INVESTMENT INVESTMENT REALIZED TOTAL END OF TOTAL
OF PERIOD (LOSS) ON INVESTMENTS OPERATIONS INCOME(1) CAPITAL GAINS DISTRIBUTIONS PERIOD RETURN(2)
--------- ------------ -------------- ---------- ---------- ------------- ------------- ------ ---------
CLASS A SHARES
Six Months Ended (unaudited):
4/30/06 $14.67 $ 0.14(6) $ 1.25 $ 1.39 $(0.14) $ -- $(0.14) $15.92 9.50%
Year Ended:
10/31/05 $13.56 $ 0.13(6) $ 1.11 $ 1.24 $(0.13) $ -- $(0.13) $14.67 9.19%
10/31/04 12.47 0.10(6) 1.06 1.16 (0.07) -- (0.07) 13.56 9.44
10/31/03 10.37 0.14(6) 2.14 2.28 (0.14) (0.04) (0.18) 12.47 22.12
10/31/02 12.35 0.16(6) (1.52) (1.36) (0.22) (0.40) (0.62) 10.37 (11.72)
10/31/01 15.52 0.20(6) (2.34) (2.14) (0.58) (0.45) (1.03) 12.35 (14.31)
CLASS B SHARES
Six Months Ended (unaudited):
4/30/06 $14.25 $ 0.08(6) $ 1.21 $ 1.29 $(0.12) $ -- $(0.12) $15.42 9.08%
Year Ended:
10/31/05 $13.17 $ 0.02(6) $ 1.09 $ 1.11 $(0.03) $ -- $(0.03) $14.25 8.42%
10/31/04 12.18 (0.00)(6)(9) 1.04 1.04 (0.05) -- (0.05) 13.17 8.53
10/31/03 10.14 0.05(6) 2.09 2.14 (0.06) (0.04) (0.10) 12.18 21.24
10/31/02 12.10 0.08(6) (1.50) (1.42) (0.14) (0.40) (0.54) 10.14 (12.46)
10/31/01 15.17 0.09(6) (2.28) (2.19) (0.43) (0.45) (0.88) 12.10 (14.93)
CLASS C SHARES
Six Months Ended (unaudited):
4/30/06 $14.15 $ 0.08(6) $ 1.20 $ 1.28 $(0.12) $ -- $(0.12) $15.31 9.08%
Year Ended:
10/31/05 $13.11 $ 0.02(6) $ 1.08 $ 1.10 $(0.06) $ -- $(0.06) $14.15 8.40%
10/31/04 12.13 (0.00)(6)(9) 1.03 1.03 (0.05) -- (0.05) 13.11 8.53
10/31/03 10.10 0.06(6) 2.08 2.14 (0.07) (0.04) (0.11) 12.13 21.41
10/31/02(5) 11.79 0.05(6) (1.66) (1.61) (0.08) -- (0.08) 10.10 (13.72)
CLASS R-1 SHARES
Period Ended (unaudited):
4/30/06(8) $15.53 $ 0.02(6) $ 0.37 $ 0.39 $ -- $ -- $ -- $15.92 2.51%
CLASS R-2 SHARES
Period Ended (unaudited):
4/30/06(8) $15.53 $ 0.06(6) $ 0.33 $ 0.39 $ -- $ -- $ -- $15.92 2.51%
RATIOS TO AVERAGE
NET ASSETS/SUPPLEMENTAL DATA
--------------------------------------------------------------
RATIO OF RATIO OF
EXPENSES EXPENSES RATIO OF
TO AVERAGE TO AVERAGE NET
NET NET ASSETS NET ASSETS INVESTMENT
ASSETS BEFORE AFTER INCOME/
END OF REIMBURSE- REIMBURSE- (LOSS) TO PORTFOLIO
PERIOD MENTS/ MENTS/ AVERAGE TURNOVER
(IN 000S) WAIVERS(3) WAIVERS(3)(4) NET ASSETS RATE
---------- ----------- ------------- ----------- ---------
CLASS A SHARES
Six Months Ended (unaudited):
4/30/06 $1,814,922 0.68%(7) 0.68%(7) 1.81%(7) 7%
Year Ended:
10/31/05 $1,561,310 0.97% 0.97% 0.89% 1%
10/31/04 1,157,038 1.01 1.01 0.74 5
10/31/03 615,501 1.05 1.05 1.24 7
10/31/02 347,297 1.06 1.06 1.41 14
10/31/01 319,583 1.03 1.03 1.45 5
CLASS B SHARES
Six Months Ended (unaudited):
4/30/06 $1,136,051 1.45%(7) 1.45%(7) 1.04%(7) 7%
Year Ended:
10/31/05 $1,059,655 1.75% 1.75% 0.11% 1%
10/31/04 1,001,081 1.78 1.78 (0.03) 5
10/31/03 827,312 1.81 1.81 0.48 7
10/31/02 623,852 1.82 1.82 0.65 14
10/31/01 636,145 1.79 1.79 0.69 5
CLASS C SHARES
Six Months Ended (unaudited):
4/30/06 $ 887,057 1.43%(7) 1.43%(7) 1.06%(7) 7%
Year Ended:
10/31/05 $ 727,829 1.73% 1.73% 0.13% 1%
10/31/04 482,019 1.76 1.76 (0.01) 5
10/31/03 195,556 1.79 1.79 0.50 7
10/31/02(5) 48,424 1.82(7) 1.82(7) 0.65(7) 14
CLASS R-1 SHARES
Period Ended (unaudited):
4/30/06(8) $ 162 1.41%(7) 1.41%(7) 1.08%(7) 7%
CLASS R-2 SHARES
Period Ended (unaudited):
4/30/06(8) $ -- 1.16%(7)(10) 1.16%(7)(10) 1.33%(7)(10) 7%
(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 and does
not reflect any applicable sales charges. 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 also 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 C shares on March 1, 2002.
(6) Per share numbers have been calculated using the average shares method.
(7) Annualized.
(8) The Portfolio commenced selling Class R-1 and R-2 shares on March 1, 2006.
(9) Amount represents less than $0.01 per share.
(10) Ratios of expenses and net investment income to average net assets are
hypothetical, based on Class A share ratios adjusted for the respective
expenses of the share class.
See Notes to Financial Statements. 23
Financial Highlights
STRATEGIC GROWTH PORTFOLIO
For a Portfolio share outstanding throughout each period.
INCOME/(LOSS) FROM
INVESTMENT OPERATIONS LESS DISTRIBUTIONS
---------------------------------------- ----------------------------------------
NET NET NET
ASSET NET REALIZED AND DIVIDENDS DISTRIBUTIONS ASSET
VALUE INVESTMENT UNREALIZED TOTAL FROM FROM NET FROM NET VALUE
BEGINNING INCOME/ GAIN/(LOSS) INVESTMENT INVESTMENT REALIZED TOTAL END OF TOTAL
OF PERIOD (LOSS) ON INVESTMENTS OPERATIONS INCOME(1) CAPITAL GAINS DISTRIBUTIONS PERIOD RETURN(2)
--------- ------------ -------------- ---------- ---------- ------------- ------------- ------ ---------
CLASS A SHARES
Six Months Ended (unaudited):
4/30/06 $15.99 $ 0.13 $ 1.56 $ 1.69 $(0.09) $ -- $(0.09) $17.59 10.60%
Year Ended:
10/31/05 $14.49 $0.06(6) $ 1.48 $ 1.54 $(0.04) $ -- $(0.04) $15.99 10.61%
10/31/04 13.16 0.01(6) 1.32 1.33 -- -- -- 14.49 10.11
10/31/03 10.59 0.03(6) 2.63 2.66 -- (0.09) (0.09) 13.16 25.24
10/31/02 13.10 0.03(6) (1.92) (1.89) (0.14) (0.48) (0.62) 10.59 (15.45)
10/31/01 17.11 0.05(6) (3.21) (3.16) (0.47) (0.38) (0.85) 13.10 (19.03)
CLASS B SHARES
Six Months Ended (unaudited):
4/30/06 $15.25 $0.06 $ 1.49 $ 1.55 $(0.07) $ -- $(0.07) $16.73 10.26%
Year Ended:
10/31/05 $13.90 $(0.06)(6) $ 1.41 $ 1.35 $ -- $ -- $ -- $15.25 9.71%
10/31/04 12.73 (0.09)(6) 1.26 1.17 -- -- -- 13.90 9.19
10/31/03 10.32 (0.05)(6) 2.55 2.50 -- (0.09) (0.09) 12.73 24.35
10/31/02 12.78 (0.06)(6) (1.88) (1.94) (0.04) (0.48) (0.52) 10.32 (16.04)
10/31/01 16.75 (0.06)(6) (3.14) (3.20) (0.39) (0.38) (0.77) 12.78 (19.70)
CLASS C SHARES
Six Months Ended (unaudited):
4/30/06 $15.29 $0.06 $ 1.50 $ 1.56 $(0.07) $ -- $(0.07) $16.78 10.23%
Year Ended:
10/31/05 $13.93 $(0.06)(6) $ 1.42 $ 1.36 $ -- $ -- $ -- $15.29 9.76%
10/31/04 12.74 (0.09)(6) 1.28 1.19 -- -- -- 13.93 9.34
10/31/03 10.32 (0.05)(6) 2.56 2.51 -- (0.09) (0.09) 12.74 24.44
10/31/02(5) 12.50 (0.04)(6) (2.14) (2.18) -- -- -- 10.32 (17.44)
CLASS R-1 SHARES
Period Ended (unaudited):
4/30/06(8) $17.10 $ 0.01 $ 0.48 $ 0.49 $ -- $ -- $ -- $17.59 2.87%
CLASS R-2 SHARES
Period Ended (unaudited):
4/30/06(8) $17.10 $ 0.05 $ 0.44 $ 0.49 $ -- $ -- $ -- $17.59 2.87%
RATIOS TO AVERAGE
NET ASSETS/SUPPLEMENTAL DATA
--------------------------------------------------------------
RATIO OF RATIO OF
EXPENSES EXPENSES RATIO OF
TO AVERAGE TO AVERAGE NET
NET NET ASSETS NET ASSETS INVESTMENT
ASSETS BEFORE AFTER INCOME/
END OF REIMBURSE- REIMBURSE- (LOSS) TO PORTFOLIO
PERIOD MENTS/ MENTS/ AVERAGE TURNOVER
(IN 000S) WAIVERS(3) WAIVERS(3)(4) NET ASSETS RATE
---------- ----------- ------------- ----------- ---------
CLASS A SHARES
Six Months Ended (unaudited):
4/30/06 $1,055,180 0.71%(7) 0.71%(7) 1.49%(7) 10%
Year Ended:
10/31/05 $ 885,165 1.02% 1.02% 0.38% 1%
10/31/04 609,250 1.07 1.07 0.07 3
10/31/03 298,852 1.13 1.13 0.30 7
10/31/02 166,354 1.13 1.13 0.23 10
10/31/01 153,857 1.08 1.08 0.34 2
CLASS B SHARES
Six Months Ended (unaudited):
4/30/06 $ 736,887 1.46%(7) 1.46%(7) 0.74%(7) 10%
Year Ended:
10/31/05 $ 672,826 1.79% 1.79% (0.39)% 1%
10/31/04 612,914 1.83 1.83 (0.69) 3
10/31/03 484,656 1.88 1.88 (0.45) 7
10/31/02 350,982 1.87 1.87 (0.51) 10
10/31/01 384,566 1.84 1.84 (0.42) 2
CLASS C SHARES
Six Months Ended (unaudited):
4/30/06 $ 528,238 1.46%(7) 1.46%(7) 0.74%(7) 10%
Year Ended:
10/31/05 $ 417,865 1.77% 1.77% (0.37)% 1%
10/31/04 277,136 1.81 1.81 (0.67) 3
10/31/03 107,826 1.84 1.84 (0.41) 7
10/31/02(5) 26,645 1.85(7) 1.85(7) (0.49)(7) 10
CLASS R-1 SHARES
Period Ended (unaudited):
4/30/06(8) $ 6 1.43%(7) 1.43%(7) 0.77%(7) 10%
CLASS R-2 SHARES
Period Ended (unaudited):
4/30/06(8) $ -- 1.18%(7)(9) 1.18%(7)(9) 1.02%(7)(9) 10%
(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 and does
not reflect any applicable sales charges. The total return would have been
lower if certain fees had not been waived and/or expenses reimbursed by the
investment advisor and/or distributor or if fees had not been reduced by
credits allowed by the custodian.
(3) The Portfolio also 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 C shares on March 1, 2002.
(6) Per share numbers have been calculated using the average shares method.
(7) Annualized.
(8) The Portfolio commenced selling Class R-1 and R-2 shares on March 1, 2006.
(9) Ratios of expenses and net investment income to average net assets are
hypothetical, based on Class A share ratios adjusted for the respective
expenses of the share class.
24 See Notes to Financial Statements.
Notes to Financial Statements (unaudited)
1. ORGANIZATION AND BUSINESS
WM Strategic Asset Management Portfolios, LLC (the "LLC") was organized under
the laws of the Commonwealth of Massachusetts on March 12, 1999 as a limited
liability company. The LLC is registered under the Investment Company Act of
1940, as amended (the "1940 Act"), as an open-end management investment company.
The LLC offers five portfolios: Flexible Income, Conservative Balanced,
Balanced, Conservative Growth and Strategic Growth Portfolios (each a
"Portfolio" and collectively, the "Portfolios").
The LLC is authorized to issue an unlimited number of shares of beneficial
interest, each without par value. Each Portfolio offers five classes of shares:
Class A, Class B, Class C, Class R-1 and Class R-2 shares. Class A shares are
generally subject to an initial sales charge at the time of purchase. Certain
Class A shares purchased without an initial sales charge may be subject to a
contingent deferred sales charge ("CDSC") if redeemed within eighteen months
from the date of purchase. Class B shares are not subject to an initial sales
charge although they are generally subject to a CDSC if redeemed within five
years from the date of purchase. Class C shares are not subject to an initial
sales charge although they are subject to a CDSC if redeemed within one year
from the date of purchase. Class R-1 and Class R-2 shares are only offered
through retirement plans, are not available for direct purchase by investors and
are not subject to an initial sales charge or CDSC.
Each of the Portfolios invests, within certain percentage ranges, in Class I
shares of various funds in the WM Group of Funds (collectively, the "Underlying
Funds"). WM Advisors, Inc. (the "Advisor"), a wholly owned subsidiary of
Washington Mutual, Inc. ("Washington Mutual"), a publicly owned financial
services company, 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 and Underlying Funds in the preparation of their financial
statements.
PORTFOLIO VALUATION:
Investments in the Underlying Funds are valued at net asset value per 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
of the LLC, 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.
25
Notes to Financial Statements (unaudited) (continued)
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS:
Dividends from net investment income of the Flexible Income, Conservative
Balanced, Balanced and Conservative Growth Portfolios are declared and paid
quarterly. Dividends from any net investment income of the Strategic Growth
Portfolio are declared and paid annually. Distributions of any net capital gains
earned by a Portfolio are distributed no less frequently than annually at the
discretion of the Board of Trustees. Additional distributions of net investment
income and capital gains for each Portfolio may be made at the discretion of the
Board of Trustees in accordance with federal income tax regulations.
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, 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.
EXPENSES:
General expenses of the LLC are allocated to all the Portfolios based upon the
relative average net assets of each Portfolio except printing and postage
expenses, which are allocated to all the Portfolios based upon the relative
number of shareholder accounts of each Portfolio. In addition, the Portfolios
will indirectly bear their prorated share of 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.
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 April 30, 2006, are shown
separately in the "Statements of Operations".
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 based upon aggregate
average daily net assets ("aggregate net assets") of the LLC of 0.55% of
aggregate net assets up to $500 million, 0.50% of the next $500 million of
aggregate net assets, 0.45% of the next $1 billion of aggregate net assets,
0.40% of the next $1 billion of aggregate net assets, 0.35% of the next $1
billion of aggregate net assets, 0.30% of the next $1 billion of aggregate net
assets and 0.25% of aggregate net assets over $5 billion.
WM Shareholder Services, Inc. (the "Transfer Agent"), a wholly owned subsidiary
of Washington Mutual, serves as the transfer agent of the Portfolios. Fees are
paid to the Transfer Agent for services related to the issuance and transfer of
shares, maintaining shareholder lists, and issuing and mailing distributions and
reports. For such services, the Transfer Agent receives a fee per open and
closed account, in addition to reimbursement for certain out-of-pocket expenses.
The Transfer Agent is entitled to a monthly fee based upon an annual rate of
$20.00 per open account for all Class A, Class B and Class C shareholder
accounts. Class R-1 and Class R-2 shares are not subject to shareholder
servicing fees.
The Transfer Agent also provides services to retirement plans investing in Class
R-1 and R-2 shares and their participants. For such services, the Transfer Agent
is entitled to a monthly fee at an annual rate of 0.25% of the average daily net
assets of each Class R-1 and Class R-2 shares.
4. TRUSTEES' FEES
No officer or employee of Washington Mutual or its subsidiaries receives any
compensation from the LLC for serving as an officer or Trustee of the LLC. The
LLC, 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 Chairman, Committee Chairs and Committee Members receive additional
remuneration for these services to the LLC and Trust. Trustees are also
reimbursed for travel and out-of-pocket expenses. Each Trustee serves in the
same capacity for all 40 funds within the WM Group of Funds.
26
Notes to Financial Statements (unaudited) (continued)
5. DISTRIBUTION PLANS
WM Funds Distributor, Inc. (the "Distributor"), a registered broker/dealer and a
wholly owned subsidiary of Washington Mutual, serves as distributor for the
Portfolios. For the six months ended April 30, 2006, the Distributor has
received $16,189,333 representing commissions (front-end sales charges) on Class
A and Class C shares and $3,548,736 representing CDSCs from Class A, Class B and
Class C shares.
Each of the Portfolios has adopted distribution plans, pursuant to Rule 12b-1
under the 1940 Act, applicable to Class A, Class B, Class C, Class R-1 and Class
R-2 shares of each Portfolio (each, a "Rule 12b-1 Plan"), respectively. Under
the applicable Rule 12b-1 Plans, the Distributor may receive a service fee at an
annual rate of 0.25% of the average daily net assets of each class. In addition,
the Distributor is paid a fee as compensation in connection with the offering
and sale of Class B, Class C, Class R-1 and Class R-2 shares. The distribution
fees for Class B and Class C shares are paid to the Distributor at an annual
rate of 0.75% of the average daily net assets of such shares. The distribution
fees for Class R-1 and Class R-2 shares are paid to the Distributor at annual
rates of 0.55% and 0.30%, respectively, of the average daily net assets of such
shares. These fees 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 service fee
is paid by the Portfolio to the Distributor, which in turn, pays service fees to
broker/dealers that provide services, such as accepting telephone inquiries and
transaction requests and processing correspondence, new account applications and
subsequent purchases for the shareholders. Under their terms, each 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 LLC, as defined in the
1940 Act, and who have no direct or indirect financial interest in the operation
of such distribution plans, or any agreements related to such plans,
respectively.
6. PURCHASES AND SALES OF INVESTMENTS
The aggregate cost of purchases and proceeds from sales of Underlying Funds for
the six months ended April 30, 2006, are as follows:
PURCHASES SALES
NAME OF PORTFOLIO (000S) (000S)
- ----------------- --------- --------
Flexible Income Portfolio............................... $ 53,932 $112,485
Conservative Balanced Portfolio......................... 70,768 44,095
Balanced Portfolio...................................... 514,506 249,390
Conservative Growth Portfolio........................... 509,085 263,000
Strategic Growth Portfolio.............................. 386,212 209,190
7. UNREALIZED APPRECIATION/(DEPRECIATION)
At April 30, 2006, the aggregate gross unrealized appreciation and depreciation
on a tax basis are as follows:
(IN THOUSANDS)
---------------------------------------------------------------
FLEXIBLE CONSERVATIVE CONSERVATIVE STRATEGIC
INCOME BALANCED BALANCED GROWTH GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
--------- ------------ --------- ------------ ---------
Gross tax unrealized appreciation...... $ 76,664 $ 70,391 $714,637 $696,131 $419,191
Gross tax unrealized depreciation...... (20,349) (12,345) (41,034) (10,513) --
-------- -------- -------- -------- --------
Net tax unrealized appreciation........ $ 56,315 $ 58,046 $673,603 $685,618 $419,191
======== ======== ======== ======== ========
27
Notes to Financial Statements (unaudited) (continued)
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 REIT Fund Seeks to provide a high level of current income and intermediate to long-term
capital appreciation.
WM Equity Income Fund Seeks to provide a relatively high level of current income and long-term growth
of income and capital.
WM Growth & Income Fund Seeks to provide long-term capital growth. Current income is a secondary
consideration.
WM West Coast Equity Fund Seeks to provide long-term growth of capital.
WM Mid Cap Stock Fund Seeks to provide long-term capital appreciation.
WM Growth Fund Seeks to provide long-term capital appreciation.
WM Small Cap Value Fund Seeks to provide long-term capital appreciation.
WM Small Cap Growth Fund Seeks to provide long-term capital appreciation.
WM International Growth Fund Seeks to provide long-term capital appreciation.
WM 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 U.S. Government Securities Fund Seeks to provide a high level of current income consistent with safety and
liquidity.
WM 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 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 REIT Fund could be adversely
impacted by economic trends within this industry.
The West Coast Equity Fund concentrates its investments in companies located or
doing business in Alaska, California, Oregon, and Washington. The West Coast
Equity Fund could be adversely impacted by economic trends within this region.
The International Growth Fund concentrates its investments in foreign securities
in both developed and emerging market countries. Additional risks may involve
foreign currency exchange rate fluctuations, adverse political and economic
developments, and the possible prevention of currency exchange or other foreign
governmental laws or restrictions. Investments in emerging markets are subject
to additional risk as less developed countries are more likely to experience
high levels of inflation, deflation, or currency devaluation, which could harm
their economies and securities markets.
The 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 may 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 market 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 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.
28
Notes to Financial Statements (unaudited) (continued)
PORTFOLIO OWNERSHIP IN THE UNDERLYING FUNDS:
At April 30, 2006, the LLC holds 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
-----------------------------------------------------------------------
FLEXIBLE CONSERVATIVE CONSERVATIVE STRATEGIC
INCOME BALANCED BALANCED GROWTH GROWTH
NAME OF UNDERLYING FUND PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO TOTAL
- ----------------------- --------- ------------ --------- ------------ --------- -----
REIT Fund ......................... 2.1% 2.9% 31.5% 34.1% 20.4% 91.0%
Equity Income Fund ................ 1.2% 1.7% 16.7% 17.9% 11.4% 48.9%
Growth & Income Fund .............. 2.4% 2.3% 24.1% 26.0% 16.7% 71.5%
West Coast Equity Fund ............ 0.6% 1.4% 14.6% 15.5% 10.6% 42.7%
Mid Cap Stock Fund ................ 2.8% 2.3% 25.3% 26.4% 19.4% 76.2%
Growth Fund ....................... 2.8% 2.7% 30.7% 31.0% 22.1% 89.3%
Small Cap Value Fund .............. 3.3% 2.6% 30.7% 34.6% 22.3% 93.5%
Small Cap Growth Fund ............. 2.4% 1.8% 22.1% 25.1% 16.5% 67.9%
International Growth Fund ......... -- 3.0% 32.3% 32.5% 22.3% 90.1%
Short Term Income Fund ............ 44.3% 14.6% 17.5% -- -- 76.4%
U.S. Government Securities Fund ... 16.7% 9.7% 45.6% 15.8% -- 87.8%
Income Fund ....................... 18.7% 9.3% 38.6% 11.9% -- 78.5%
High Yield Fund* .................. 7.0% 4.3% 24.7% 11.1% 10.6% 57.7%
- ----------
* Does not include approximately 8.0% of the High Yield Fund held by the WM
Variable Trust Portfolios, which are 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 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 a Portfolio's Underlying Funds used for
investment may experience relatively large investments or redemptions due to
reallocations or rebalancings by the Portfolios as recommended by the Advisor.
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. At the same time, the Underlying Funds that
receive additional cash will have to invest such cash. This may be particularly
important when one or more Portfolios owns a substantial portion of any
Underlying Fund. While it is impossible to predict the overall impact of these
transactions over time, there could be adverse effects on Underlying Fund
performance 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 accelerate the realization of taxable income if sales of
securities resulted in gains and could also increase transaction costs. Because
the Portfolios own substantial portions of some Underlying Funds, redemptions
and reallocations by the Portfolios away from an Underlying Fund could cause the
Underlying Fund's expenses to increase and may result in an Underlying Fund
becoming too small to be economically viable. 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 dual responsibilities to the
Portfolios and the Underlying Funds. The Advisor will, at all times, monitor the
impact on the Underlying Funds of transactions by the Portfolios.
29
SUPPLEMENTAL INFORMATION (UNAUDITED)
BOARD APPROVAL OF INVESTMENT ADVISORY AGREEMENT
Each year, the Board of Trustees of the LLC (the "Board"), including a majority
of the Trustees who are not interested persons of the LLC (the "Independent
Trustees"), is required to determine whether to continue the LLC's advisory
agreement. 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 LLC's
advisory agreement. In May 2005, the Board and the Independent Trustees approved
the continuation of the LLC's investment advisory agreement with the Advisor
(the "Agreement"), and in November 2005, the Board and the Independent Trustees
approved an amendment of the Agreement to reduce the fees payable thereunder, 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. In connection with
the November 2005 approval of the amendment reducing the fees payable under the
Agreement, the Board, the Independent Trustees and the Committee relied on the
information provided in connection with the May 2005 approval (as supplemented
by performance information for periods ended September 30, 2005). 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 in
November 2005 were the same as those in May 2005, which are discussed below,
except that the Board, the Independent Trustees and the Committee also
considered representations by the Advisor that the scope and quality of the
services provided to the LLC would not be adversely affected, that the fee
reductions would reduce the Advisor's profitability, and that the only effect of
the amendment was to reduce the fees payable under the Agreement.
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 LLC 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.
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 LLC'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.
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; evaluates the
risk/return characteristics of each of the Underlying Funds by reference to the
specific security holdings of each Underlying Fund;
30
Supplemental Information (unaudited) (continued)
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 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 to be 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 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.
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 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 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 shorter-term 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.
31
Supplemental Information (unaudited) (continued)
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 and transfer agency fees paid by the Portfolios to
the Administrator, as well as the distribution (12b-1) fees paid to the
Distributor. 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.
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 predistribution
margins for the Advisor, over a four-year period in which 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, transfer agency
fees to the Administrator, and 12b-1 fees and sales charges 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.
32
Supplemental Information (unaudited) (continued)
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 Asset Management and
Transamerica Life Insurance Company (representing approximately $5.5 billion and
$2.5 million in assets under management as of October 31, 2005, respectively).
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.
33
Supplemental Information (unaudited) (continued)
U.S. Government Securities Fund
PORTFOLIO MANAGER
Craig V. Sosey
WM Advisors, Inc.
Note: Pages 34 and 35 provide information about certain WM Funds in which the
SAM Portfolios invest a significant portion of their assets. For additional
information about these and other WM Funds, please see the WM Group of Funds
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. Your
investment's return and principal value will fluctuate, so it may be worth more
or less upon redemption. A sales charge may apply as follows: Class A shares:
maximum up-front sales charge of 4.5%; Class B shares: contingent deferred sales
charge of 5%, which declines over 5 years
AVERAGE ANNUAL TOTAL RETURNS(1, 2) AS OF APRIL 30, 2006
6-Month 1-Year 5-Year 10-Year Since Inception Inception Date
------- ------ ------ ------- --------------- --------------
CLASS A SHARES Net Asset Value(3) 0.82% 0.82% 3.97% 5.57% 7.46% 5/4/84
With Sales Charge -3.75% -3.74% 3.02% 5.08% 7.24%
CLASS B SHARES Net Asset Value(3) 0.45% 0.09% 3.22% 4.91% 5.16% 3/30/94
With Sales Charge -4.55% -4.91% 2.86% 4.91% 5.16%
CLASS C SHARES Net Asset Value(3) 0.46% 0.18% 3.22% 4.89% 2.42% 3/1/02
With Sales Charge -0.54% -0.82% 3.22% 4.89% 2.42%
CLASS R-1 SHARES Net Asset Value(3) -0.16% -0.48% 3.18% 4.89% -1.61% 3/1/06
CLASS R-2 SHARES Net Asset Value(3) -0.07% -0.28% 3.43% 5.15% -1.61% 3/1/06
Citigroup Mortgage
Index(4) 1.23% 1.60% 4.88% 6.27% 9.00%
Average annual total returns(1, 2) (with sales charge for Class A, B, and C
shares) as of 3/31/06:
Class A Shares: -2.61% (1-year), 3.00% (5-year), 5.01% (10-year), 7.27% (since
inception)
Class B Shares: -3.80% (1-year), 2.85% (5-year), 4.84% (10-year), 5.19% (since
inception)
Class C Shares: 0.20% (1-year), 3.20% (5-year), 4.82% (10-year), 2.48% (since
inception)
Class R-1 Shares: 0.96% (1-year), 3.23% (5-year), 4.86% (10-year), -1.23% (since
inception)
Class R-2 Shares: 1.19% (1-year), 3.48% (5-year), 5.11% (10-year), -1.23% (since
inception)
PORTFOLIO COMPOSITION(5)
As of
4/30/06
(PIE CHART)
As of As of
Asset Class 4/30/06 10/31/05 Change
- ----------- ------- -------- ------
FHLMC/FGLMC 34% 33% +1%
FNMA 30% 29% +1%
CMOs 20% 18% +2%
GNMA 5% 7% -2%
U.S. Government Agency 4% 4% 0%
U.S. Treasuries 4% 5% -1%
Cash Equivalents 3% 4% -1%
(1) Performance reflects ongoing fund expenses, which may have been waived, and
assumes reinvestment of all dividends and capital gains. For Class C,
R-1, and R-2 shares, performance for periods prior to inception is
hypothetical, based on Class A share returns adjusted for the respective
expenses of the share class. Performance does not reflect the impact of
federal, state, or municipal taxes. If it did, performance would be lower.
The U.S. Government Securities Fund's performance between 1998 and 2000 and
the Income Fund's performance in 1999 benefited from the agreement of WM
Advisors and its affiliates to limit the Funds' expenses. On 3/1/04, the
investment policies of the U.S. Government Securities 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
John R. Friedl, CFA and INCOME FUND
Gary J. Pokrzywinski, CFA
WM Advisors, Inc.
(5-5-4-3-2-0%); Class C shares: contingent deferred sales charge of 1% on
redemptions made during the first 12 months. See the prospectus for details.
Performance listed with sales charge reflects the maximum sales charge.
Fixed-income investments are subject to interest rate risk, and their value will
decline as interest rates rise. U.S. Government Securities Fund: Neither the
principal of government bond funds nor their yields are guaranteed by the
U.S. government.
Income Fund: Lower-rated securities are subject to additional credit and default
risks.
AVERAGE ANNUAL TOTAL RETURNS(1, 2) AS OF APRIL 30, 2006
6-Month 1-Year 5-Year 10-Year Since Inception Inception Date
------- ------ ------ ------- --------------- --------------
CLASS A SHARES Net Asset Value(3) 1.68% 2.02% 5.84% 6.56% 8.32% 12/15/75
With Sales Charge -2.94% -2.60% 4.86% 6.07% 8.16%
CLASS B SHARES Net Asset Value(3) 1.19% 1.18% 5.08% 5.93% 6.16% 3/30/94
With Sales Charge -3.81% -3.82% 4.75% 5.93% 6.16%
CLASS C SHARES Net Asset Value(3) 1.18% 1.15% 5.07% 5.88% 4.46% 3/1/02
With Sales Charge 0.18% 0.15% 5.07% 5.88% 4.46%
CLASS R-1 SHARES Net Asset Value(3) 0.53% 0.54% 5.00% 5.86% -1.65% 3/1/06
CLASS R-2 SHARES Net Asset Value(3) 0.61% 0.75% 5.26% 6.12% -1.65% 3/1/06
Citigroup Broad
Investment-Grade
Bond Index(4) 0.55% 0.78% 5.21% 6.36% --
Average annual total returns(1, 2) (with sales charge for Class A, B, and C
shares) as of 3/31/06:
Class A Shares: -1.78% (1-year), 4.81% (5-year), 5.99% (10-year), 8.18% (since
inception)
Class B Shares: -3.07% (1-year), 4.66% (5-year), 5.86% (10-year), 6.20% (since
inception)
Class C Shares: 0.90% (1-year), 5.01% (5-year), 5.80% (10-year), 4.57% (since
inception)
Class R-1 Shares: 1.70% (1-year), 5.03% (5-year), 5.83% (10-year), -1.21% (since
inception)
Class R-2 Shares: 1.93% (1-year), 5.28% (5-year), 6.09% (10-year), -1.21% (since
inception)
PORTFOLIO COMPOSITION(5)
As of
4/30/06
(PIE CHART)
As of As of
Asset Class 4/30/06 10/31/05 Change
- ----------- ------- -------- ------
Domestic Corporate Bonds 58% 57% +1%
Mortgage-Backed Bonds 24% 23% +1%
U.S. Treasuries 7% 7% 0%
Foreign Corporate Bonds (U.S.$) 6% 6% 0%
Foreign Government Bonds (U.S.$) 1% 1% 0%
Equities 0% 1% -1%
Cash Equivalents 4% 5% -1%
(3) Net asset value is not adjusted for sales charge.
(4) See page 7 for definitions of indices. Returns shown for the indices assume
reinvestment of all dividends and distributions. The since-inception return
shown for the Citigroup Mortgage Index is calculated from 4/30/84. Indices
are unmanaged, and individuals cannot invest directly in an index.
(5) May not reflect the current portfolio composition.
35
Supplemental Information (unaudited) (continued)
OTHER PORTFOLIO INFORMATION
SCHEDULES OF INVESTMENTS:
The LLC 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 LLC's Form N-Q is available at http://www.sec.gov and also
may be reviewed and copied at the SEC's Public Reference Room ("PRR") in
Washington, DC. Information regarding the operation of the PRR may be obtained
by calling 800-SEC-0330.
PROXY VOTING INFORMATION:
The policies and procedures that the LLC uses to determine how to vote proxies
relating to portfolio securities held by the Portfolio are included in the LLC's
Statement of Additional Information which is available, without charge and upon
request, by calling 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.
36
(GRAPHIC)
(WM GROUP OF FUNDS LOGO)
A mutual fund's share price and investment return will vary with market
conditions, and the principal value of an investment when you sell your shares
may be more or less than the original cost.
This semiannual report is published as general information for the shareholders
of the WM Group of Funds. 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 funds. Investors should read the prospectus carefully before investing. To
obtain an additional prospectus, please contact your Investment Representative
or call 800-222-5852.
The WM Group of mutual funds is advised by WM Advisors, Inc., distributed by WM
Funds Distributor, Inc., and sold through WM Financial Services, Inc. (all
affiliates of Washington Mutual, Inc.) and independent broker/dealers.
Distributed by:
WM Funds Distributor, Inc.
Member NASD
(E-DELIVERY LOGO)
SAVE TIME AND PAPER. ENROLL TODAY.
Choose e-delivery and we'll e-mail you when statements, prospectuses, and
shareholder reports are updated. You can select which items to receive
electronically when you sign up at wmgroupoffunds.com.
(WM GROUP OF FUNDS LOGO)
P.O. Box 8024
Boston, MA 02266-8024
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
None.
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.
SIGNATURES
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 Strategic Asset Management Portfolios, LLC
By: /s/ William G. Papesh
William G. Papesh
President and Chief Executive Officer
Date: June 29, 2006
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.
By: /s/ Jeffrey L. Lunzer
Jeffrey L. Lunzer
Treasurer and Chief Financial Officer
Date: June 29, 2006
By: /s/ William G. Papesh
William G. Papesh
President and Chief Executive Officer
Date: June 29, 2006