SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-07462
WM Variable Trust
(Exact name of registrant as specified in charter)
1201 Third Avenue, 22nd Floor, Seattle, WA
98101 (Address of principal executive offices)
(Zip code)
Jeffrey L. Lunzer
1201 Third Avenue, 22nd Floor, Seattle, WA 98101
(Name and address of agent for service)
Registrant's telephone number, including area code: (206) 461-3800
Date of fiscal year end: December 31, 2005
Date of reporting period: December 31, 2005
ITEM 1. REPORTS TO STOCKHOLDERS
(WM VARIABLE TRUST LOGO)
WM VARIABLE TRUST
(ANNUAL REPORT COVER GRAPHIC)
Annual Report
December 31, 2005
WM VARIABLE TRUST
AT THE WM GROUP OF FUNDS, OUR PASSION IS PIECING INDIVIDUAL INVESTMENTS TOGETHER
INTO COMPREHENSIVE PORTFOLIOS TO MAKE YOUR FINANCIAL PLAN MORE EFFECTIVE.
(ANNUAL REPORT GRAPHIC)
Table of Contents
1 Letter from the President
2 Economy & Financial Markets:
Review & Outlook
4 Asset Allocation: A Key to Successful Investing
WM Variable Trust Performance and Investment Strategy:
6 VT REIT Fund
8 VT Equity Income Fund
10 VT Growth & Income Fund
12 VT West Coast Equity Fund
14 VT Mid Cap Stock Fund
16 VT Growth Fund
18 VT Small Cap Value Fund
20 VT Small Cap Growth Fund
22 VT International Growth Fund
24 VT Short Term Income Fund
26 VT U. S. Government Securities Fund
28 VT Income Fund
30 VT Money Market Fund
31 Glossary
32 Expense Information
34 Financial Statements
96 Notes to Financial Statements
103 Report of Independent Registered Public Accounting Firm
104 Supplemental Information
The WM Variable Trust (VT) Funds may not be purchased directly, but are
currently available through the WM Strategic Asset Manager and the WM Advantage
variable annuities issued by American General Life. They are also available
through the WM Diversified Strategies and WM Diversified Strategies(III)
variable annuities issued by AIG SunAmerica Life Assurance Company, the WM
Diversified Strategies(III) (New York) variable annuity issued by First
SunAmerica Life Insurance Company, and the WM Life Accumulator variable
universal life insurance policy issued by Farmers New World Life Insurance
Company. They may also be available through other select variable insurance
products and retirement plans. The VT Funds may not have been available for sale
for all products for the time periods shown on pages 6-30.
Withdrawals made prior to age 59 1/2 may be subject to a 10% IRS tax penalty.
NOT FDIC OR NCUA/NCUSIF INSURED
MAY LOSE VALUE - NOT A DEPOSIT - NO BANK OR CREDIT UNION GUARANTEE - NOT INSURED
BY ANY FEDERAL GOVERNMENT AGENCY
Dear Investor,
(PHOTO OF WILLIAM G. PAPESH)
During the past fiscal year, our nation and the world endured much
uncertainty--and unfortunately, much tragedy. From the aftermath of the Asian
tsunami to Hurricane Katrina and the threat of the avian flu virus, Mother
Nature has once again proven that her fury can rise at any time, and with deadly
effect. Meanwhile, the ongoing wars in Iraq and Afghanistan offer us a sobering
reminder of the sacrifices made by our men and women in uniform. Still, our
nation and financial markets remain strong--testaments to the American
character, and to the character of folks like you.
Despite recent adversities, both the equity and fixed-income markets provided
positive returns for the year ended December 31, 2005, with the S&P 500 rising
4.91% and the Lehman Brothers Aggregate Bond Index adding 2.43%.(1) We are
proud to note that against this backdrop, the WM Group of Funds continues to
grow. Over the last five years, our assets under management have increased by
138%, while industry assets have increased by 28%.(2) During this same period,
the stock market (as measured by the S&P 500) rose only 2.75%.
THE VALUE OF STAYING ACTIVE
In today's uncertain markets, some investors may try to limit their risk by
taking a passive investment approach--that is, building a portfolio based on
funds that track the performance of various indices. While passive investing may
be beneficial in some cases, we continue to believe strongly in the value of
active management. In our view, the power of active security selection can never
be replaced by indexing, pure and simple. We believe active investing also
offers several other potential advantages, such as superior risk management and
more flexible portfolio construction. At the end of the day, we firmly believe
that the combined talents of our portfolio managers and analysts--along with our
disciplined investment philosophy and processes--can add value to an investor's
portfolio.
A PROUD HERITAGE
At the WM Group of Funds, we continue to take pride in our firm's core values of
honesty, trust, and integrity. We're proud that for 66 years, we've served our
shareholders with the principles that we believe have made the WM Group of Funds
as successful as it is today. Now more than ever, we remain committed to
bringing you the utmost in value and quality of service. And as always, we thank
you for your support.
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) Source: WM Group of Funds, ICI, and Ibbotson Associates. Figures are for
the five-year period ended 12/31/05 and reflect both net shareholder
purchases and fund performance. They are based on long-term assets only and
do not include money market funds.
(GRAPHIC) ECONOMY & FINANCIAL MARKETS: REVIEW & OUTLOOK
ECONOMIC EXPANSION CONTINUES
The U.S. economy remained relatively strong during 2005 as low interest rates
and improving corporate profits helped maintain positive economic momentum. Real
estate activity, including construction and home sales, was especially robust
with low mortgage and refinancing rates continuing to spur demand.
Consumer confidence was relatively stable for much of the year, but it plummeted
in September and October due to the combined shocks of Hurricane Katrina,
soaring oil prices, and a weakening labor market. Consumer spending fell in
tandem as low approval ratings for the Bush administration and the ongoing wars
in Iraq and Afghanistan took their toll on the American psyche. Still, consumer
spending generally improved during the year, adding fuel to the growing economy.
As the economic expansion continued and oil prices rose sharply, consumer prices
(as measured by the Consumer Price Index) crept up, gaining 3.4% on a
year-over-year basis.
In an effort to contain inflation, the Federal Reserve (the Fed) raised the
federal funds target rate to 4.25% during the period, an increase of two full
percentage points from the close of 2004. Against this backdrop, short-term
interest rates rose dramatically, while long-term rates rose more modestly. As a
result, the yield curve (the difference in yields between 2- and 10-year U.S.
Treasury issues) flattened substantially--often an indication that economic
activity may slow in the near- to mid-term.
BONDS GAIN MODESTLY
Within this environment, the bond market (as measured by the Lehman Brothers
Aggregate Bond Index) gained modestly, rising 2.43% for the period. * Yields on
10-year Treasury notes were fairly volatile, trading below 4.00% in February to
above 4.60% in November before closing the year at 4.39%. Generally, Treasuries
outperformed investment-grade corporate issues. High-yield issues gained 2.74%
(as measured by the Lehman Brothers High Yield Index). * Despite the increase in
short-term rates, many investors were willing to take on additional credit risk
given the strength of corporate balance sheets and the general economic
recovery.
This economic and financial market analysis represents the opinions of WM
Advisors. It should not be considered as investment advice. No forecast based on
the opinions expressed can be guaranteed, and they may be subject to change
without notice.
* Indices are unmanaged, and individuals cannot invest directly in an index.
MAJOR MARKET EVENTS JANUARY 1, 2005 - DECEMBER 31, 2005
Closing Value of the S&P 500*
(PERFORMANCE GRAPH)
Source: Bloomberg L.P. (S&P 500 data).
2
(GRAPHIC)
STOCKS RISE DESPITE FED TIGHTENING, OIL PRICES
In spite of the twin headwinds of rising short-term interest rates and high
energy costs, stocks gained nicely for the year, with the S&P 500 rising 4.91%.
* Stocks began the year fueled by optimism that Republican-backed tax cuts and
generous government spending would continue to spark the economy. However, the
S&P 500 declined during the spring before rebounding late in the year (see chart
below). Within S&P 500 sectors, energy and utilities were the clear winners,
advancing 31.37% and 16.84%, respectively, on the back of high oil and natural
gas prices. Lagging sectors included consumer discretionaries (-6.36%) and
telecommunication services (-5.63%).
INVESTMENT OUTLOOK
Looking forward, we anticipate moderate, weaker-than-consensus economic growth
and subdued, lower-than-consensus inflation over the next fiscal year. The
housing market appears set for a slowdown, and consumer spending may be
adversely affected by higher rates for home equity loans. We believe that
long-term interest rates will fall to the 3%-4% range, while the Fed will likely
stop its monetary tightening campaign relatively early in 2006. In this
scenario, we would expect mortgage-backed securities to offer a better relative
value than corporate bonds, and that high-yield issues will continue to
outperform. Equities appear fairly valued, with international stocks more
attractive than U.S. holdings. We expect large-cap equities to outperform
small-cap equities and growth to outperform value.
Importantly, we anticipate an alignment between cyclical (short-term) and
secular (long-term) economic trends over the coming fiscal year. On the cyclical
side, we believe that Fed policy will put pressure on consumer and business
confidence, and that energy prices will remain high. On the secular side, we
believe that the aging of U.S., European, and Japanese populations will continue
to temper global demand, while excess supply will limit pricing power. While we
expect that these forces will combine to produce slower economic growth, we
believe that the likely halt in Fed tightening will ultimately offer investors
reasonably strong buying opportunities, particularly in the equity space.
(PERFORMANCE GRAPH)
3
WM GROUP OF FUNDS
S&P 500 DAILY PRICES (PRICE APPRECIATION INDEX, REINVESTED
DIVIDENDS ARE EXCLUDED)
SOURCE: BLOOMBERG (ADVISORS IN SEATTLE)
1/1/2005 -- 12/31/2005
SPX INDEX
DATE PX LAST
- --------- -------
1/3/2005 1202.08
1/4/2005 1188.05
1/5/2005 1183.74
1/6/2005 1187.89
1/7/2005 1186.19
1/10/2005 1190.25
1/11/2005 1182.99
1/12/2005 1187.7
1/13/2005 1177.45
1/14/2005 1184.52
1/18/2005 1195.98
1/19/2005 1184.63
1/20/2005 1175.41
1/21/2005 1167.87
1/24/2005 1163.75
1/25/2005 1168.41
1/26/2005 1174.07
1/27/2005 1174.55
1/28/2005 1171.36 Advance estimates of real GDP show rise of 3. 1%
(annualized) for 4th quarter'04. Later revised to 3.8%.
1/31/2005 1181.27
2/1/2005 1189.41
2/2/2005 1193.19 Fed raises rates by 1/4 point to 2.50%.
2/3/2005 1189.89
2/4/2005 1203.03
2/7/2005 1201.72
2/8/2005 1202.3
2/9/2005 1191.99
2/10/2005 1197.01
2/11/2005 1205.3
2/14/2005 1206.14
2/15/2005 1210.12
2/16/2005 1210.34
2/17/2005 1200.75
2/18/2005 1201.59
2/22/2005 1184.16 Oil prices close above $50 per barrel for first time since
Nov. '04.
2/23/2005 1190.8
2/24/2005 1200.2
2/25/2005 1211.37
2/28/2005 1203.6
3/1/2005 1210.41
3/2/2005 1210.08
3/3/2005 1210.47 Labor Dept. revises '04 worker productivity data to show
rise of 4.0% for the year. This sets the average gain for
the 3-year period at 4.3%, the strongest 3-year result on
record.
3/4/2005 1222.12
3/7/2005 1225.31
3/8/2005 1219.43
3/9/2005 1207.01
3/10/2005 1209.25
3/11/2005 1200.08
3/14/2005 1206.83
3/15/2005 1197.75
3/16/2005 1188.07 Commerce Dept. reports U.S. trade deficit climbed to
3/17/2005 1190.21 record $665.9 billion in '04.
3/18/2005 1189.65
3/21/2005 1183.78
3/22/2005 1171.71 Fed raises rates by 1/4 point to 2.75%.
3/23/2005 1172.53
3/24/2005 1171.42
3/28/2005 1174.28
3/29/2005 1165.36
3/30/2005 1181.41
3/31/2005 1180.59
4/1/2005 1172.92
4/4/2005 1176.12
4/5/2005 1181.39
4/6/2005 1184.07
4/7/2005 1191.14
4/8/2005 1181.2
4/11/2005 1181.21
4/12/2005 1187.76
4/13/2005 1173.79
4/14/2005 1162.05
4/15/2005 1142.62
4/18/2005 1145.98
4/19/2005 1152.78
4/20/2005 1137.5
4/21/2005 1159.95
4/22/2005 1152.12
4/25/2005 1162.1
4/26/2005 1151.74
4/27/2005 1156.38
4/28/2005 1143.22 Advance estimates of real GDP show rise of 3.1%
(annualized) for 1st quarter '05. Later revised to 3.8%.
4/29/2005 1156.85
5/2/2005 1162.16
5/3/2005 1161.17 Fed raises rates by 1/4 point to 3.00%.
5/4/2005 1175.65
5/5/2005 1172.63
5/6/2005 1171.35
5/9/2005 1178.84
5/10/2005 1166.22
5/11/2005 1171.11
5/12/2005 1159.36
5/13/2005 1154.05
5/16/2005 1165.69
5/17/2005 1173.8
5/18/2005 1185.56
5/19/2005 1191.08
5/20/2005 1189.28
5/23/2005 1193.86
5/24/2005 1194.07
5/25/2005 1190.01
5/26/2005 1197.62
5/27/2005 1198.78
5/31/2005 1191.5 The euro weakens against the
U.S. dollar after French and Dutch voters
6/1/2005 1202.22 reject proposed EU constitution.
6/2/2005 1204.29
6/3/2005 1196.02
6/6/2005 1197.51
6/7/2005 1197.26
6/8/2005 1194.67
6/9/2005 1200.93
6/10/2005 1198.11
6/13/2005 1200.82
6/14/2005 1203.91
6/15/2005 1206.58
6/16/2005 1210.96
6/17/2005 1216.96
6/20/2005 1216.1
6/21/2005 1213.61
6/22/2005 1213.88
6/23/2005 1200.73
6/24/2005 1191.57
6/27/2005 1190.69 Oil prices close above nominal record of $60 per barrel.
6/28/2005 1201.57
6/29/2005 1199.85
6/30/2005 1191.33 Fed raises rates by 1/4 point to 3.25%.
7/1/2005 1194.44
7/5/2005 1204.99
7/6/2005 1194.94
7/7/2005 1197.87 Four suicide bombers attack London subway and bus targets
during morning rush hour.
7/8/2005 1211.86
7/11/2005 1219.44
7/12/2005 1222.21
7/13/2005 1223.29
7/14/2005 1226.5
7/15/2005 1227.92
7/18/2005 1221.13
7/19/2005 1229.35
7/20/2005 1235.2
7/21/2005 1227.04 China revalues its currency by removing decade-old peg to
the U. S. dollar.
7/22/2005 1233.68
7/25/2005 1229.03
7/26/2005 1231.16
7/27/2005 1236.79
7/28/2005 1243.72
7/29/2005 1234.18 Advance estimates of real GDP show rise of 3.4%
(annualized) for 2nd quarter '05. Later revised to 3.3%.
8/1/2005 1235.35
8/2/2005 1244.12
8/3/2005 1245.04 U.S. Treasury announces that it will resume selling
30-year bonds in early '06.
8/4/2005 1235.86
8/5/2005 1226.42
8/8/2005 1223.13
8/9/2005 1231.38 Fed raises rates by 1/4 point to 3.50%.
8/10/2005 1229.13
8/11/2005 1237.81
8/12/2005 1230.39
8/15/2005 1233.87
8/16/2005 1219.34
8/17/2005 1220.24
8/18/2005 1219.02
8/19/2005 1219.71
8/22/2005 1221.73
8/23/2005 1217.57
8/24/2005 1209.59
8/25/2005 1212.39
8/26/2005 1205.1
8/29/2005 1212.28 Hurricane Katrina hits U.S. Gulf Coast. New Orleans
sustains catastrophic flood damage after levees break.
8/30/2005 1208.41
8/31/2005 1220.33
9/1/2005 1221.59 Hurricane damage to Gulf region refineries and pipelines
causes spike in gas prices.
9/2/2005 1218.02
9/6/2005 1233.39
9/7/2005 1236.36
9/8/2005 1231.67
9/9/2005 1241.48
9/12/2005 1240.56
9/13/2005 1231.2
9/14/2005 1227.16
9/15/2005 1227.73
9/16/2005 1237.91
9/19/2005 1231.02
9/20/2005 1221.34 Fed raises rates by 1/4 point to 3.75%.
9/21/2005 1210.2
9/22/2005 1214.62
9/23/2005 1215.29
9/26/2005 1215.63
9/27/2005 1215.66
9/28/2005 1216.89
9/29/2005 1227.68
9/30/2005 1228.81
10/3/2005 1226.7
10/4/2005 1214.47
10/5/2005 1196.39
10/6/2005 1191.49
10/7/2005 1195.9
10/10/2005 1187.33
10/11/2005 1184.87
10/12/2005 1177.68
10/13/2005 1176.84
10/14/2005 1186.57
10/17/2005 1190.1
10/18/2005 1178.14
10/19/2005 1195.76
10/20/2005 1177.8
10/21/2005 1179.59
10/24/2005 1199.38 Ben Bernanke is nominated to succeed Alan Greenspan as
chairman of the Federal Reserve.
10/25/2005 1196.54
10/26/2005 1191.38
10/27/2005 1178.9
10/28/2005 1198.41 Advance estimates of real GDP show rise of 3.8%
(annualized) for 3rd quarter '05. Later revised to 4.1%.
10/31/2005 1207.01
11/1/2005 1202.76 Fed raises rates by 1/4 point to 4.00%.
11/2/2005 1214.76
11/3/2005 1219.94
11/4/2005 1220.14
11/7/2005 1222.81
11/8/2005 1218.59
11/9/2005 1220.65
11/10/2005 1230.96
11/11/2005 1234.72
11/14/2005 1233.76
11/15/2005 1229.01
11/16/2005 1231.21
11/17/2005 1242.8
11/18/2005 1248.27
11/21/2005 1254.85
11/22/2005 1261.23
11/23/2005 1265.61
11/25/2005 1268.25
11/28/2005 1257.46
11/29/2005 1257.48
11/30/2005 1249.48
12/1/2005 1264.67
12/2/2005 1265.08
12/5/2005 1262.09
12/6/2005 1263.7
12/7/2005 1257.37
12/8/2005 1255.84
12/9/2005 1259.37
12/12/2005 1260.43
12/13/2005 1267.43 Fed raises rates by 1/4 point to 4.25%.
12/14/2005 1272.74
12/15/2005 1270.94
12/16/2005 1267.32
12/19/2005 1259.92
12/20/2005 1259.62
12/21/2005 1262.79
12/22/2005 1268.12
12/23/2005 1268.66
12/27/2005 1256.54
12/28/2005 1258.17
12/29/2005 1254.42
12/30/2005 1248.29 S&P 500 closes the year at 1248.29.
(GRAPHIC) Asset Allocation: A Key to Successful Investing
Asset allocation is widely recognized as being a critical element in the
financial planning process. Investment representatives generally use asset
allocation to help cushion client portfolios from market volatility and reduce
overall risk levels. Studies have also shown that historically, asset allocation
has been responsible for more than 90% of the variability of a portfolio's
return. * In other words, the asset class you choose--for example, stocks,
bonds, or cash--can be more important than the individual securities you select.
WHAT IS ASSET ALLOCATION?
When many people hear the term "asset allocation, "they think of an efficient
frontier diagram and the work of a pioneering economist, Harry Markowitz. As a
25-year-old student at the University of Chicago in the early 1950s, Markowitz
needed a thesis topic. In a chance meeting, a stock broker suggested that he
investigate the stock market. Conventional wisdom at that time suggested that
investors should select stocks with the highest expected return without taking
risk into account.
Markowitz recognized that this approach neglected a key part of the investment
equation. The concept of risk was identified as early as 1654 in the work of
French mathematician Blaise Pascal, who worked on a system to determine
probabilities related to gambling. The concept of risk probability was then
studied by British astronomer Edmund Halley, who in 1690 applied it to mortality
tables. Halley's work was later used to help sell annuities and insure sailing
vessels and their cargoes, which eventually led to the founding of Lloyd's of
London.
But it was Markowitz who first rigorously applied the concept of risk to stock
portfolios in his 1952 essay "Portfolio Selection. "His research found that
diversification is measurably beneficial, and that pairing risky and less risky
assets can actually lower portfolio volatility while simultaneously enhancing
potential returns. Markowitz's early work laid the foundation for more
sophisticated statistical concepts such as mean variance optimization, which
became integral to modern portfolio theory.
THE ALLOCATION PROCESS
While the term "asset allocation" is widely used to describe an investment
strategy, we believe it is actually a process. Most investment representatives
today use asset allocation as part of an overall approach that involves
identifying
A HISTORICAL PERSPECTIVE ON ASSET ALLOCATION
(PERFORMANCE GRAPH)
1600s
1607 British colony established at Jamestown, Virginia.
1625 Dutch West India Company founds New Amsterdam, which eventually
becomes New York City.
1654 Blaise Pascal and Chevalier de Mere develop formulas on risk
management to settle gambling winnings.
1690 Edmund Halley, astronomer, develops probability tables to determine
life expectancy. This work eventually leads to the creation of
Lloyd's of London.
1700s
1713 The first major treatise on probability, written by Jakob Bernoulli,
is published posthumously.
1733 Abraham de Moivre discovers the concept of the bell-shaped curve to
determine probability distribution.
1754-1763 French and Indian War
1775-1783 American Revolutionary War
1790 First U.S. stock exchange established in Philadelphia.
1800s
1812 First U.S. Treasury notes issued.
1830 Prudent Man Rule rendered by Judge Samuel Putnam.
1846-1848 Mexican-American War
1861-1865 American Civil War
1877 Sir Francis Galton, cousin of Charles Darwin, proposes "Theory of
Regression to the Mean."
1890 Sherman Antitrust Act passed.
4
(GRAPHIC)
a client's current investments, risk tolerance, portfolio construction, and
asset selection, as well as measuring performance.
IN PRACTICE, ASSET ALLOCATION IS OFTEN A MULTISTEP PROCESS:
- - Classifying an investor's current investments into their respective asset
classes.
- - Creating forecasts for each asset class and building a set of model
portfolios arranged along a spectrum of risk, often from conservative to
aggressive.
- - Determining important specific information about the client including their
risk tolerance, time horizon, and tax situation.
- - Recommending the actual asset class allocation to the client, primarily
based on their risk tolerance.
LOOKING AHEAD
The most time-consuming and analytical element of this process centers on asset
allocation modeling. This process involves analyzing hundreds of variables, such
as long- and short-term economic forecasts; expected returns for different
equity styles, sectors, and capitalizations; standard deviations; as well as
bond ratings and maturity structures. Each portfolio combination is then tested
for risk and return characteristics. But that is not the end of the process.
These multi-asset portfolios are then monitored and adjusted in response to
market conditions. Some asset allocation programs make adjustments at specific
intervals (monthly or quarterly) back to a predetermined static allocation. At
WM Advisors, we reevaluate asset allocations and reallocate assets daily using a
forward-looking process based on a longer-term allocation target. WM uses this
strategy to construct and monitor its VT Strategic Asset Management (SAM)
Portfolios for investors on a daily basis.
Whether you use one of our asset allocation investments or select other funds to
apply this discipline, one thing remains clear: asset allocation will continue
to be the foundation for many successful investment portfolios.
Note: Asset allocation does not guarantee a profit or protect against a loss.
* Gary P. Brinson, Brian D. Singer, and Gilbert L. Beebower, "Determinants of
Portfolio Performance II: An Update," Financial Analysts Journal,
May/June, 1991. See also Gary P. Brinson, L. Randolph Hood, and Gilbert L.
Beebower, "Determinants of Portfolio Performance," Financial Analysts
Journal, July/August, 1986.
(PERFORMANCE GRAPH)
1900s
1913 Federal Reserve Act passed.
1914-1918 World War I
1919 Richard von Mises publishes paper on probability theory as
applied to mass phenomena.
1929 Black Tuesday crash of New York Stock Exchange
1933 Glass-Steagall Act passed.
1934 Securities Exchange Act passed.
1934 Benjamin Graham and David Dodd publish "Security Analysis."
1935 Social Security Act passed.
1938 First stock market index created by Alfred Cowles. This index
later becomes the S&P 500.
1939-1945 World War II
1940 Investment Company Act passed.
1950-1953 Korean War
1952 Harry Markowitz publishes "Portfolio Selection," which
describes the efficient frontier concept. This essay is
considered the basis for modern portfolio theory.
1962 Cuban Missile Crisis
1964-1973 Vietnam War (U.S. involvement)
1976 Roger Ibbotson and Rex Sinquefield publish "Stocks, Bonds, Bills,
and Inflation"
1979-1981 Iran Hostage Crisis
1986 Gary Brinson, L. R. Hood, and Gilbert Beebower publish
"Determinants of Portfolio Performance," which studies the
importance of various return components.
1987 Black Monday plunge in Dow Jones Industrial Average
1990 WM Strategic Asset Management (SAM) Portfolios launched as
separately managed accounts.
1991 Operation Desert Storm
1996 WM SAM Portfolios become registered mutual funds.
2000s
2001 Attacks on World Trade Center and Pentagon
2003-PRESENT Operation Iraqi Freedom
2005 WM SAM Portfolios have $11. 8 billion in retail assets under
management.**
5
(GRAPHIC) VT REIT Fund
ANNUAL TOTAL RETURNS(1)
Class 1 shares
(Calendar Year)
2005 9.40%
2004 33.08%
INVESTMENT STRATEGY
The WM VT REIT Fund performed strongly during 2005, propelled by strength in the
housing market and relatively low mortgage rates. Yields on 5- and 10-year
Treasury notes remained low on a historical basis during the period.
Consequently, mortgage rates remained low as well, fueling the ongoing boom in
housing and allowing many consumers to utilize low-interest home equity loans.
Broadly speaking, these factors resulted in increased demand for real estate
investment trust (REIT) securities, which rose along with the broader equity
market.
During the period, the Fund benefited from its security selection in
industrial/office, retail, and residential REITs. Specific securities that
enhanced performance included AvalonBay Communities, Simon Property Group, and
Corporate Office Properties Trust. AvalonBay is a residential REIT; Simon
Property Group develops regional malls and community shopping centers; and
Corporate Office Properties Trust is an office REIT with particular expertise in
high security government buildings. The mortgage REIT sector was the
worst-performing sector in the REIT universe,
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. Performance shown below does not account for fees,
expenses, and charges of any variable insurance contract or retirement plan. If
these fees were reflected, performance would be lower.
REIT securities are subject to risk factors associated with the real estate
industry and tax factors of REIT registration.
AVERAGE ANNUAL TOTAL RETURNS(1) AS OF DECEMBER 31, 2005
1-Year Since Inception Inception Date
------ --------------- --------------
CLASS 1 SHARES 9.40% 27.12% 5/1/03
CLASS 2 SHARES 9.10% 24.18% 8/5/03
NAREIT All REIT Index(2) 8.29% 25.98%
VALUE OF A $10,000 INVESTMENT(1) MAY 1, 20003 - DECEMBER 31, 2005
(PERFORMANCE GRAPH)
See Glossary on page 31 for definitions of indices and terms.
(1) Performance reflects ongoing fund expenses, which may have been waived, and
assumes reinvestment of all dividends and capital gains. Performance does
not reflect the impact of federal, state, or municipal taxes. If it did,
performance would be lower.
(2) Returns shown for the index assume reinvestment of all dividends and
distributions, and the since-inception return shown for the index is
calculated from 4/30/03. Indices are unmanaged, and individuals cannot
invest directly in an index.
6
WM GROUP OF FUNDS
VT ANNUAL REPORT UPDATE MATERIAL
PERFORMANCE NAV -- MOUNTAIN CHARTS (VALUE OF $10,000 INVESTMENT OVER 10-YEARS)
DATA AS OF 12/31/2005
CLASS 1 SHARES
10,000
VT REIT
DATE FUND NAREIT ALL
- ------ ------- ----------
Apr-03 10,000 10,000
May-03 10,510 10,612
Jun-03 10,730 10,888
Jul-03 11,340 11,458
Aug-03 11,421 11,508
Sep-03 11,791 11,870
Oct-03 12,061 12,125
Nov-03 12,571 12,673
Dec-03 13,041 13,108
Jan-04 13,631 13,672
Feb-04 13,951 13,971
WM GROUP OF FUNDS
VT ANNUAL REPORT UPDATE MATERIAL
PERFORMANCE NAV -- MOUNTAIN CHARTS (VALUE OF $10,000 INVESTMENT OVER 10-YEARS)
DATA AS OF 12/31/2005
CLASS 1 SHARES
10,000
DATE VT REIT Fund NAREIT All
- ---- --------------- ----------
Mar-04 14,740 14,754
Apr-04 12,640 12,502
May-04 13,420 13,385
Jun-04 13,915 13,785
Jul-04 13,946 13,791
Aug-04 14,927 14,877
Sep-04 14,989 14,906
Oct-04 15,756 15,584
Nov-04 16,462 16,307
Dec-04 17,352 17,093
Jan-05 15,890 15,741
Feb-05 16,309 16,095
Mar-05 15,931 15,796
Apr-05 16,770 16,535
May-05 17,466 17,127
Jun-05 18,160 17,932
Jul-05 19,462 19,110
Aug-05 18,724 18,298
Sep-05 18,801 18,279
Oct-05 18,269 17,780
Nov-05 19,040 18,552
Dec-05 18,986 18,511
Since Inception Cumulative
Enter Returns 89.84 85.11
Check 18,984 18,511
Difference -0.01% 0.00%
Must be within+/-0.20% OK OK
(PHOTO) PORTFOLIO MANAGER (GRAPHIC)
David W. Simpson, CFA
WM Advisors, Inc.
and both of the Fund's holdings in this sector (Annaly Mortgage Management and
Redwood Trust) were a drag on performance. These REITs hold mortgages in a
leveraged portfolio and their performance typically suffers in a flat yield
curve environment.
Changes in sector allocations were relatively modest during the period. The Fund
added to its holdings in health care REITs as demographic changes--most notably
the aging of the Baby Boom generation--could be supportive of activity in health
care facilities.
In contrast, the Fund reduced its holdings in residential REITs on potential
weakness in the rental market. The Fund also reduced its position in mortgage
REITs against the backdrop of an unfavorable interest rate environment.
Looking ahead, we remain encouraged by the prospects for REIT securities. The
sector has experienced tremendous appreciation since the Fund's inception. We
believe that continued low long-term interest rates and the ongoing availability
of low-interest home equity loans may remain supportive of REIT valuations.
However, in our view there is the risk that higher interest rates or a weaker
economy may cause a lessening of overall demand for real estate investments.
TOP 10 HOLDINGS(3) AS OF DECEMBER 31, 2005
% of Net Assets Total Return(4)
--------------- ---------------
Simon Property Group Inc. 4.35% 23.38%
Equity Residential 4.30% 13.41%
AvalonBay Communities Inc. 4.07% 22.91%
Corporate Office Properties Trust 4.06% 25.44%
Macerich Company 3.91% 11.50%
Alexandria Real Estate Equities Inc. 3.84% 12.20%
General Growth Properties Inc. 3.80% 35.26%
Kimco Realty Corp. 3.44% 15.46%
Developers Diversified Realty Corp. 3.40% 11.11%
SL Green Realty Corp. 3.33% 30.64%
FUND CHARACTERISTICS
AS OF DECEMBER 31, 2005
Weighted Average Market
Capitalization: $6.0 billion
Weighted Average P/E
(based on trailing earnings): 29.5
Portfolio Turnover
(for fiscal year): 25%
Number of Securities: 42
Expense Ratio
(Class 1 shares for fiscal year): 0.89%
Total Net Assets: $52.8 million
PORTFOLIO COMPOSITION(3)
As of As of
Asset Class 12/31/05 12/31/04 Change
----------- -------- -------- ------
Retail 27% 26% +1%
Industrial/Office 24% 26% -2%
Residential 11% 13% -2%
Common Stocks 7% 7% 0%
(PIE CHART) Health Care 6% 4% +2%
Lodging/Resorts 6% 5% +1%
Specialty 5% 6% -1%
Diversified 4% 4% 0%
Self Storage 2% 3% -1%
Mortgage/Financial 1% 3% -2%
Cash Equivalents 7% 3% +4%
(3) May not reflect the current portfolio composition.
(4) Performance information provided for individual securities held by the Fund
represents performance for the fiscal year ended 12/31/05. The Fund may not
have held these securities throughout the entire period.
7
(GRAPHIC) VT Equity Income Fund*
ANNUAL TOTAL RETURNS (1)
Class 1 shares
(Calendar Year)
2005 10.27%
2004 19.12%
2003 30.10%
2002 -12.51%
2001 7.92%
2000 17.19%
1999 2.49%
* As of 8/1/00, the WM VT Bond & Stock Fund became the WM VT Equity Income
Fund, and the Fund's objectives and strategies changed. This information
should be considered when reviewing past performance. Please see the
prospectus for detailed information.
INVESTMENT STRATEGY
The WM VT Equity Income Fund performed very strongly during 2005, aided
primarily by positions in energy, consumer discretionaries, and materials. While
the U. S. economy continued its expansion during the period, higher oil prices
and increases in short-term interest rates put a damper on market sentiment.
Continuing with the course it began in June 2004, the Federal Reserve (the Fed)
raised the federal funds target rate eight times during the period, bringing the
rate to 4.25% by the end of the year. This led some market participants to fear
a slowing economy for much of the period, and as a result, price-to-earnings
ratios for the broad market did not expand significantly. Still, positive
economic sentiment eventually trumped fears of inflation, leading to reasonable
gains for the equity markets.
The energy sector was the most significant contributor to Fund performance
during the period, due to such holdings as Valero Energy and ConocoPhillips. The
consumer discretionary sector also aided returns through positions such as May
Department Stores,
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. Performance shown below does not account for fees,
expenses, and charges of any variable insurance contract or retirement plan. If
these fees were reflected, performance would be lower.
REIT securities are subject to risk factors associated with the real estate
industry and tax factors of REIT registration.
AVERAGE ANNUAL TOTAL RETURNS (1) AS OF DECEMBER 31, 2005
1-Year 5-Year Since Inception Inception Date
------ ------ --------------- --------------
CLASS 1 SHARES 10.27% 10.04% 9.42% 4/28/98
CLASS 2 SHARES 9.97% -- 9.54% 5/1/01
S&P 500/Barra Value Index(2) 6.33% 2.53% 4.26%
S&P 500(2) 4.91% 0.54% 3.09%
VALUE OF A $10,000 INVESTMENT (1) APRIL 28, 1998 - DECEMBER 31, 2005
(PERFORMANCE GRAPH)
See Glossary on page 31 for definitions of indices and terms.
(1) Performance reflects ongoing fund expenses, which may have been waived, and
assumes reinvestment of all dividends and capital gains. Performance does
not reflect the impact of federal, state, or municipal taxes. If it did,
performance would be lower. The Fund's performance in 1998 benefited from
the agreement of WM Advisors and its affiliates to limit the Fund's
expenses.
(2) Returns shown for the indices assume reinvestment of all dividends and
distributions, and since-inception returns shown for the indices are 8
calculated from 4/30/98. Indices are unmanaged, and individuals cannot
invest directly in an index.
8
WM GROUP OF FUNDS
VT ANNUAL REPORT UPDATE MATERIAL
PERFORMANCE NAV -- MOUNTAIN CHARTS (VALUE OF $10,000 INVESTMENT OVER 10-YEARS)
DATA AS OF 12/31/2005
CLASS 1 SHARES
10,000
VT EQUITY S&P 500/BARRA
DATE INCOME FUND VALUE INDEX S&P 500
- ---- ----------- ------------- -------
Apr-98 10,000 10,000 10,000
May-98 9,800 9,859 9,828
Jun-98 9,821 9,934 10,227
Jul-98 9,550 9,718 10,119
Aug-98 8,777 8,156 8,655
WM GROUP OF FUNDS
VT ANNUAL REPORT UPDATE MATERIAL
PERFORMANCE NAV -- MOUNTAIN CHARTS (VALUE OF $10,000 INVESTMENT OVER 10-YEARS)
DATA AS OF 12/31/2005
CLASS 1 SHARES
10,000
VT EQUITY S&P 500/BARRA
DATE INCOME FUND VALUE INDEX S&P 500
---- ----------- ------------- -------
Sep-98 9,248 8,652 9,210
Oct-98 9,850 9,329 9,959
Nov-98 10,222 9,815 10,563
Dec-98 10,302 10,159 11,171
Jan-99 10,433 10,365 11,638
Feb-99 10,172 10,142 11,276
Mar-99 10,263 10,449 11,727
Apr-99 10,554 11,350 12,181
May-99 10,605 11,149 11,893
Jun-99 10,732 11,577 12,553
Jul-99 10,571 11,221 12,162
Aug-99 10,330 10,937 12,101
Sep-99 10,099 10,509 11,769
Oct-99 10,230 11,102 12,514
Nov-99 10,422 11,036 12,768
Dec-99 10,562 11,451 13,521
Jan-00 10,240 11,087 12,842
Feb-00 10,180 10,394 12,599
Mar-00 10,804 11,478 13,831
Apr-00 10,773 11,401 13,415
May-00 10,924 11,437 13,140
Jun-00 10,824 10,985 13,463
Jul-00 10,803 11,205 13,253
Aug-00 11,079 11,956 14,076
Sep-00 11,396 11,954 13,333
Oct-00 11,856 12,178 13,277
Nov-00 11,682 11,554 12,231
Dec-00 12,377 12,149 12,291
Jan-01 12,653 12,662 12,727
Feb-01 12,581 11,822 11,566
Mar-01 12,447 11,355 10,834
Apr-01 12,918 12,125 11,676
May-01 13,205 12,253 11,754
WM GROUP OF FUNDS
VT ANNUAL REPORT UPDATE MATERIAL
PERFORMANCE NAV -- MOUNTAIN CHARTS (VALUE OF $10,000 INVESTMENT OVER 10-YEARS)
DATA AS OF 12/31/2005
CLASS 1 SHARES
10,000
VT EQUITY S&P 500/BARRA
DATE INCOME FUND VALUE INDEX S&P 500
---- ----------- ------------- -------
Jun-01 13,149 11,856 11,469
Jul-01 13,408 11,650 11,356
Aug-01 13,305 10,977 10,645
Sep-01 12,672 9,934 9,785
Oct-01 12,630 9,934 9,972
Nov-01 13,159 10,565 10,737
Dec-01 13,356 10,726 10,831
Jan-02 13,304 10,432 10,673
Feb-02 13,242 10,338 10,467
Mar-02 13,853 10,867 10,861
Apr-02 13,407 10,323 10,203
May-02 13,449 10,364 10,127
Jun-02 12,736 9,710 9,406
Jul-02 11,791 8,660 8,672
Aug-02 12,025 8,720 8,730
Sep-02 10,868 7,723 7,781
Oct-02 11,345 8,365 8,465
Nov-02 12,035 8,953 8,964
Dec-02 11,684 8,488 8,437
Jan-03 11,409 8,255 8,216
Feb-03 11,207 8,031 8,093
Mar-03 11,335 8,020 8,171
Apr-03 12,130 8,813 8,845
May-03 12,873 9,462 9,311
Jun-03 13,112 9,531 9,430
Jul-03 13,233 9,743 9,596
Aug-03 13,430 9,953 9,783
Sep-03 13,551 9,773 9,679
Oct-03 14,163 10,442 10,227
Nov-03 14,415 10,536 10,317
Dec-03 15,202 11,187 10,858
Jan-04 15,585 11,385 11,057
Feb-04 15,991 11,642 11,211
WM GROUP OF FUNDS
VT ANNUAL REPORT UPDATE MATERIAL
PERFORMANCE NAV -- MOUNTAIN CHARTS (VALUE OF $10,000 INVESTMENT OVER 10-YEARS)
DATA AS OF 12/31/2005
CLASS 1 SHARES
10,000
VT EQUITY S&P 500/BARRA
DATE INCOME FUND VALUE INDEX S&P 500
---- --------------- ------------- ----------
Mar-04 16,024 11,562 11,042
Apr-04 15,619 11,276 10,868
May-04 15,761 11,406 11,017
Jun-04 16,216 11,653 11,231
Jul-04 15,837 11,432 10,859
Aug-04 16,049 11,555 10,903
Sep-04 16,428 11,775 11,021
Oct-04 16,673 11,953 11,189
Nov-04 17,520 12,536 11,642
Dec-04 18,110 12,945 12,038
Jan-05 17,710 12,630 11,744
Feb-05 18,378 12,859 11,991
Mar-05 18,133 12,630 11,779
Apr-05 18,055 12,372 11,555
May-05 18,590 12,763 11,922
Jun-05 18,928 12,956 11,939
Jul-05 19,551 13,364 12,383
Aug-05 19,404 13,264 12,271
Sep-05 19,552 13,402 12,370
Oct-05 19,325 13,167 12,163
Nov-05 19,924 13,659 12,623
Dec-05 19,970 13,763 12,627
Since Inception Cumulative Cumulative
ENTER RETURNS 99.64 37.66 26.29
(PHOTO) PORTFOLIO MANAGER (GRAPHIC)
Joseph T. Suty, CFA
WM Advisors, Inc.
which was ultimately taken over by Federated Department Stores. In the aftermath
of Hurricane Katrina, materials providers such as Cemex also gained as demand
for building materials spiked. In the health care sector, holdings such as Smith
& Nephew and Pfizer fell on profitability concerns.
During the period, the Fund made several meaningful changes to its composition.
The most notable was a substantial decrease in the Fund's allocation to the
consumer discretionary sector. This came as a result of our belief that if
consumer spending should slow in the near term, the sector will likely
under-perform. The Fund also modestly decreased its holdings in consumer staples
and materials. In contrast, the Fund significantly added to its positions in
energy, while also adding to its positions in health care and information
technology.
While we retain a positive long-term outlook for the equity markets, we believe
that their upside will be limited until the Fed stops raising short-term
interest rates or oil prices decline meaningfully. With regard to the Fund's
positioning, we have begun to shift the Fund to a higher-quality,
larger-capitalization bias. This comes as a result of our belief that these
holdings will likely outperform smaller, less liquid securities over the course
of 2006. We have also begun to trim our holdings in convertible bonds and REITs.
Looking forward, our outlook remains especially positive with regard to the
energy, technology, and industrial sectors.
TOP 10 HOLDINGS (3) AS OF DECEMBER 31, 2005
% of Net Assets Total Return(4)
--------------- ---------------
Valero Energy Corp. 1.88% 128.98%
Johnson & Johnson 1.82% -3.37%
ACE Ltd. 1.79% 27.54%
Wells Fargo & Co. 1.75% 4.49%
AFLAC Inc. 1.74% 17.78%
GlobalSantaFe Corp. 1.71% 47.59%
HCA Inc. 1.70% 27.96%
Citigroup Inc. 1.68% 4.64%
Baker Hughes Inc. 1.67% 43.92%
Schlumberger Ltd. 1.63% 46.78%
FUND CHARACTERISTICS
AS OF DECEMBER 31, 2005
Weighted Average Market
Capitalization: $68.9 billion
Weighted Average P/E
(based on estimated earnings): 14.6
Beta: 0.88
Fund Standard Deviation: 8.38
S&P 500 Standard Deviation: 10.43
Portfolio Turnover
(for fiscal year): 46%
Number of Securities: 138
Expense Ratio
(Class 1 shares for fiscal year): 0.66%
Total Net Assets: $279.5 million
PORTFOLIO COMPOSITION (3)
As of As of
Asset Class 12/31/05 12/31/04 Change
----------- -------- -------- ------
Financials 25% 25% 0%
Energy 12% 8% +4%
Health Care 9% 6% +3%
Industrials 9% 8% +1%
Information Technology 9% 6% +3%
Consumer Discretionary 6% 14% -8%
(PIE CHART) Consumer Staples 6% 7% -1%
REITs 6% 8% -2%
Materials 4% 5% -1%
Telecommunication Services 4% 2% +2%
Utilities 3% 4% -1%
Convertible Securities 1% 1% 0%
Corporate Bonds 1% 2% -1%
Cash Equivalents 5% 4% +1%
(3) May not reflect the current portfolio composition.
(4) Performance information provided for individual securities held by the Fund
represents performance for the fiscal year ended 12/31/05. The Fund may not
have held these securities throughout the entire period.
9
(GRAPHIC) VT Growth & Income Fund
ANNUAL TOTAL RETURNS (1)
Class 1 shares
(Calendar Year)
2005 3.30%
2004 9.08%
2003 26.80%
2002 -21.16%
2001 -3.51%
2000 2.36%
1999 18.11%
1998 18.98%
1997 28.50%
1996 21.81%
INVESTMENT STRATEGY
The WM VT Growth & Income Fund performed well during 2005, aided primarily by
positions in energy and utilities. While the U.S. economy continued its
expansion during the period, higher oil prices and rising short-term interest
rates put a damper on market sentiment. Continuing with the course it began in
June 2004, the Federal Reserve (the Fed) raised the federal funds target rate
eight times during the period, bringing the rate to 4.25% by the end of the
year. This led some market participants to fear a slowing economy for much of
the period, and as a result, price-to-earnings ratios for the broad market did
not expand significantly. Still, positive economic sentiment eventually trumped
fears of inflation, leading to reasonable gains for the equity markets.
Generally speaking, sector allocation benefited Fund returns while stock
selection detracted from returns during the period. Positions that hurt
performance included cosmetics maker Avon, manufacturer and service provider
Tyco, and adult education leader Apollo Group. Avon lost market share in its key
North American segment, while
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. Performance shown below does not account for fees,
expenses, and charges of any variable insurance contract or retirement plan. If
these fees were reflected, performance would be lower.
AVERAGE ANNUAL TOTAL RETURNS(1) AS OF DECEMBER 31, 2005
1-Year 5-Year 10-Year Since Inception Inception Date
------ ------ ------- --------------- --------------
CLASS 1 SHARES 3.30% 1.68% 9.36% 10.17% 1/12/94
CLASS 2 SHARES 2.97% -- -- 3.51% 11/6/01
S&P 500(2) 4.91% 0.54% 9.08% 10.52%
VALUE OF A $10,000 INVESTMENT(1) DECEMBER 31, 1995 - DECEMBER 31, 2005
(PERFORMANCE GRAPH)
See Glossary on page 31 for definitions of indices and terms.
(1) Performance reflects ongoing fund expenses, which may have been waived, and
assumes reinvestment of all dividends and capital gains. Performance does
not reflect the impact of federal, state, or municipal taxes. If it did,
performance would be lower. The Fund's performance in 1995 benefited from
the agreement of WM Advisors and its affiliates to limit the Fund's
expenses.
(2) Returns shown for the index assume reinvestment of all dividends and
distributions, and the since-inception return shown for the index is
calculated 10 from 12/31/93. Indices are unmanaged, and individuals cannot
invest directly in an index.
10
WM GROUP OF FUNDS
VT ANNUAL REPORT UPDATE MATERIAL
PERFORMANCE NAV -- MOUNTAIN CHARTS (VALUE OF $10,000 INVESTMENT OVER 10-YEARS)
DATA AS OF 12/31/2005
CLASS 1 SHARES
10,000
VT GROWTH &
DATE INCOME FUND S&P 500
- ------ ----------- -------
DEC-95 10,000 10,000
Jan-96 10,327 10,344
Feb-96 10,545 10,443
Mar-96 10,717 10,544
Apr-96 10,950 10,699
May-96 11,075 10,975
Jun-96 10,919 11,020
Jul-96 10,348 10,529
Aug-96 10,698 10,752
Sep-96 11,183 11,357
Oct-96 11,320 11,668
Nov-96 12,249 12,553
Dec-96 12,181 12,307
Jan-97 12,965 13,072
Feb-97 13,008 13,178
Mar-97 12,598 12,629
Apr-97 13,076 13,383
May-97 13,962 14,205
Jun-97 14,321 14,839
Jul-97 15,663 16,017
Aug-97 15,182 15,126
Sep-97 15,876 15,955
Oct-97 15,146 15,422
Nov-97 15,423 16,136
Dec-97 15,654 16,414
Jan-98 15,728 16,596
Feb-98 16,950 17,793
Mar-98 17,589 18,704
Apr-98 17,736 18,893
May-98 17,236 18,568
Jun-98 17,736 19,321
Jul-98 17,000 19,117
Aug-98 14,103 16,352
WM GROUP OF FUNDS
VT ANNUAL REPORT UPDATE MATERIAL
PERFORMANCE NAV -- MOUNTAIN CHARTS (VALUE OF $10,000 INVESTMENT OVER 10-YEARS)
DATA AS OF 12/31/2005
CLASS 1 SHARES
10,000
VT GROWTH &
DATE INCOME FUND S&P 500
- ------ ----------- -------
Sep-98 15,299 17,401
Oct-98 16,704 18,815
Nov-98 17,791 19,955
Dec-98 18,625 21,105
Jan-99 19,197 21,987
Feb-99 18,781 21,303
Mar-99 19,395 22,155
Apr-99 20,690 23,013
May-99 20,459 22,470
Jun-99 21,490 23,717
Jul-99 20,802 22,977
Aug-99 20,245 22,862
Sep-99 19,736 22,236
Oct-99 20,613 23,643
Nov-99 21,182 24,123
Dec-99 21,999 25,544
Jan-00 20,945 24,262
Feb-00 20,258 23,803
Mar-00 22,414 26,131
Apr-00 22,486 25,344
May-00 22,841 24,825
Jun-00 22,555 25,436
Jul-00 21,838 25,039
Aug-00 23,308 26,594
Sep-00 22,900 25,190
Oct-00 23,541 25,084
Nov-00 21,947 23,107
Dec-00 22,516 23,220
Jan-01 24,418 24,045
Feb-01 23,332 21,852
Mar-01 22,170 20,469
Apr-01 23,281 22,059
May-01 23,849 22,207
WM GROUP OF FUNDS
VT ANNUAL REPORT UPDATE MATERIAL
PERFORMANCE NAV -- MOUNTAIN CHARTS (VALUE OF $10,000 INVESTMENT OVER 10-YEARS)
DATA AS OF 12/31/2005
CLASS 1 SHARES
10,000
VT GROWTH &
DATE INCOME FUND S&P 500
- ------ ----------- -------
Jun-01 23,331 21,667
Jul-01 23,294 21,455
Aug-01 22,017 20,112
Sep-01 20,197 18,487
Oct-01 20,437 18,840
Nov-01 21,551 20,285
Dec-01 21,727 20,463
Jan-02 20,980 20,165
Feb-02 20,512 19,775
Mar-02 21,587 20,519
Apr-02 20,082 19,275
May-02 20,347 19,133
Jun-02 18,937 17,771
Jul-02 17,383 16,384
Aug-02 17,650 16,493
Sep-02 15,804 14,700
Oct-02 16,988 15,993
Nov-02 17,854 16,935
Dec-02 17,127 15,940
Jan-03 16,809 15,522
Feb-03 16,414 15,289
Mar-03 16,465 15,438
Apr-03 17,802 16,710
May-03 18,820 17,590
Jun-03 19,228 17,815
Jul-03 19,215 18,129
Aug-03 19,459 18,482
Sep-03 19,445 18,286
Oct-03 20,180 19,321
Nov-03 20,439 19,492
Dec-03 21,714 20,513
Jan-04 22,101 20,890
Feb-04 22,448 21,181
WM GROUP OF FUNDS
VT ANNUAL REPORT UPDATE MATERIAL
PERFORMANCE NAV -- MOUNTAIN CHARTS (VALUE OF $10,000 INVESTMENT OVER 10-YEARS)
DATA AS OF 12/31/2005
CLASS 1 SHARES
10,000
VT GROWTH &
DATE INCOME FUND S&P 500
---- ----------- ----------
Mar-04 22,073 20,861
Apr-04 22,073 20,533
May-04 22,227 20,815
Jun-04 22,734 21,218
Jul-04 21,809 20,516
Aug-04 22,029 20,598
Sep-04 22,095 20,821
Oct-04 22,108 21,139
Nov-04 22,942 21,995
Dec-04 23,685 22,743
Jan-05 23,332 22,188
Feb-05 23,724 22,654
Mar-05 23,373 22,253
Apr-05 23,034 21,830
May-05 23,594 22,525
Jun-05 23,754 22,556
Jul-05 24,096 23,395
Aug-05 23,911 23,182
Sep-05 23,712 23,370
Oct-05 23,568 22,980
Nov-05 24,555 23,848
Dec-05 24,462 23,856
Avg Annual
10-Yr Cumulative
Enter Returns 9.36% 138.58
10,000
Check 24,467 23,858
Difference 0.02% 0.01%
Must be within
+/-0.20% OK OK
(PHOTO) PORTFOLIO MANAGER (GRAPH)
Stephen Q. Spencer, CFA
WM Advisors, Inc.
Tyco lagged on higher-than-expected raw materials costs. Meanwhile, Apollo Group
suffered from slower growth in its older students segment. On the upside, stocks
such as Motorola and Hewlett-Packard added to returns as results were generally
positive in the large-cap technology area. In the health care sector, generic
drug maker Teva Pharmaceutical added significantly to performance.
Changes to sector allocations were relatively modest for the period. The Fund
added to its holdings in energy and utilities as oil and gas prices spiked. The
Fund also added to its exposure in materials as this sector experienced strong
demand in the aftermath of Hurricane Katrina and ongoing demand from China. In
contrast, the Fund decreased its holdings in financials as the rise in
short-term interest rates made it harder for financial institutions to maintain
profit margins. The Fund also decreased its exposure to the consumer
discretionary sector as the rise in oil prices and short-term interest rates
seemed to threaten consumer demand.
While we retain a positive long-term outlook for the equity markets, we believe
that upside potential will be limited until the markets perceive that the Fed is
nearly done raising short-term interest rates or oil prices decline
meaningfully. We believe it is likely that the economy will experience slower
growth in 2006, and that consumers may become cautious in discretionary areas.
Against this backdrop, we believe we have positioned the Fund to take advantage
of businesses that can demonstrate long-term, organic growth.
TOP 10 HOLDINGS(3) AS OF DECEMBER 31, 2005
% of Net Assets Total Return(4)
--------------- ---------------
Carnival Corp. 3.19% -5.81%
Bank of America Corp. 3.13% 2.40%
Allstate Corporation 2.84% 6.95%
General Electric Co. 2.83% -1.44%
Tyco International Ltd. 2.67% -18.21%
JPMorgan Chase & Co. 2.65% 5.76%
Teva Pharmaceutical Industries Ltd. 2.61% 45.39%
Honeywell International Inc. 2.47% 7.54%
GlobalSantaFe Corp. 2.44% 47.59%
Citigroup Inc. 2.26% 4.64%
FUND CHARACTERISTICS AS OF DECEMBER 31, 2005
Weighted Average Market
Capitalization: $93.6 billion
Weighted Average P/E
(based on estimated earnings): 15.5
Beta: 0.89
Fund Standard Deviation: 8.65
S&P 500 Standard Deviation: 10.43
Portfolio Turnover
(for fiscal year): 24%
Number of Securities: 66
Expense Ratio
(Class 1 shares for fiscal year): 0.77%
Total Net Assets: $268.5 million
PORTFOLIO COMPOSITION(3)
As of As of
Asset Class 12/31/05 12/31/04 Change
----------- -------- -------- ------
Financials 22% 23% -1%
Health Care 13% 11% +2%
Information Technology 13% 14% -1%
Industrials 12% 12% 0%
Consumer Discretionary 10% 13% -3%
(PIE CHART) Energy 10% 8% +2%
Consumer Staples 9% 10% -1%
Utilities 5% 4% +1%
Materials 2% 1% +1%
Telecommunication Services 1% 1% 0%
Cash Equivalents 3% 3% 0%
(3) May not reflect the current portfolio composition.
(4) Performance information provided for individual securities held by the Fund
represents performance for the fiscal year ended 12/31/05. The Fund may not
have held these securities throughout the entire period.
11
(GRAPH) VT West Coast Equity Fund
ANNUAL TOTAL RETURNS(1)
Class 1 shares
(Calendar Year)
2005 8.57%
2004 13.03%
2003 43.35%
2002 -22.55%
2001 6.88%
2000 6.30%
1999 40.37%
INVESTMENT STRATEGY
During 2005, the WM VT West Coast Equity Fund was primarily impacted by positive
trends in technology, health care, and the housing market. While the U.S.
economy continued its expansion during the period, higher oil prices and
increases in short-term interest rates put a damper on market sentiment.
Continuing with the course it began in June 2004, the Federal Reserve (the Fed)
raised the federal funds target rate eight times during the period, bringing the
rate to 4.25% by the end of the year. This led some market participants to fear
a slowing economy for much of the period, and as a result, price-to-earnings
ratios for the broad market did not expand significantly. Still, positive
economic sentiment eventually trumped fears of inflation, leading to reasonable
gains for the equity markets.
As the housing market continued its historic surge during the period, the Fund
benefited substantially from its holdings in building materials, particularly
lumber. In the health care sector, the Fund benefited from holdings such as
Health Net, a health insurance
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. Performance shown below does not account for fees,
expenses, and charges of any variable insurance contract or retirement plan. If
these fees were reflected, performance would be lower.
Small-cap and mid-cap stocks may have additional risks, including greater price
volatility. There may be additional investment risks due to the Fund's
concentration in West Coast companies.
AVERAGE ANNUAL TOTAL RETURNS (1) AS OF DECEMBER 31, 2005
1-Year 5-Year Since Inception Inception Date
------ ------ --------------- --------------
CLASS 1 SHARES 8.57% 7.81% 11.94% 4/28/98
CLASS 2 SHARES 8.30% -- 9.39% 11/6/01
Russell 3000(R) Index(2) 6.12% 1.58% 3.65%
VALUE OF A $10,000 INVESTMENT (1) APRIL 28, 1998 - DECEMBER 31, 2005
(PERFORMANCE GRAPH)
See Glossary on page 31 for definitions of indices and terms.
(1) Performance reflects ongoing fund expenses, which may have been waived, and
assumes reinvestment of all dividends and capital gains. Performance does
not reflect the impact of federal, state, or municipal taxes. If it did,
performance would be lower. The Fund's performance in 1998 benefited from
the agreement of WM Advisors and its affiliates to limit the Fund's
expenses.
(2) Returns shown for the index assume reinvestment of all dividends and
distributions, and the since-inception return shown for the index is
calculated from 4/30/98. Indices are unmanaged, and individuals cannot
invest directly in an index.
12
WM GROUP OF FUNDS
VT ANNUAL REPORT UPDATE MATERIAL
PERFORMANCE NAV -- MOUNTAIN CHARTS (VALUE OF $10,000 INVESTMENT OVER 10-YEARS)
DATA AS OF 12/31/2005
CLASS 1 SHARES
10,000
VT WEST COAST RUSSELL 3000
DATE EQUITY FUND INDEX
- ------ ------------- ------------
Apr-98 10,000 10,000
May-98 9,470 9,753
Jun-98 9,290 10,083
Jul-98 8,720 9,899
Aug-98 7,019 8,383
WM GROUP OF FUNDS
VT ANNUAL REPORT UPDATE MATERIAL
PERFORMANCE NAV -- MOUNTAIN CHARTS (VALUE OF $10,000 INVESTMENT OVER 10-YEARS)
DATA AS OF 12/31/2005
CLASS 1 SHARES
10,000
VT WEST COAST RUSSELL 3000
Date EQUITY FUND INDEX
- ---- ------------- ------------
Sep-98 7,689 8,954
Oct-98 8,499 9,634
Nov-98 9,699 10,224
Dec-98 10,938 10,874
Jan-99 11,228 11,243
Feb-99 10,539 10,845
Mar-99 10,859 11,243
Apr-99 11,469 11,751
May-99 11,989 11,527
Jun-99 12,852 12,109
Jul-99 12,902 11,742
Aug-99 12,952 11,609
Sep-99 12,496 11,311
Oct-99 13,125 12,021
Nov-99 13,621 12,357
Dec-99 15,354 13,146
Jan-00 15,232 12,630
Feb-00 17,473 12,748
Mar-00 17,961 13,746
Apr-00 16,734 13,262
May-00 16,115 12,889
Jun-00 17,576 13,271
Jul-00 17,504 13,036
Aug-00 18,992 14,003
Sep-00 17,697 13,369
Oct-00 16,748 13,179
Nov-00 15,311 11,964
Dec-00 16,320 12,165
Jan-01 17,686 12,581
Feb-01 15,983 11,431
Mar-01 15,138 10,686
Apr-01 16,708 11,543
May-01 18,064 11,635
WM GROUP OF FUNDS
VT ANNUAL REPORT UPDATE MATERIAL
PERFORMANCE NAV -- MOUNTAIN CHARTS (VALUE OF $10,000 INVESTMENT OVER 10-YEARS)
DATA AS OF 12/31/2005
CLASS 1 SHARES
10,000
VT WEST COAST RUSSELL 3000
Date EQUITY FUND INDEX
- ---- ------------- ------------
Jun-01 19,731 11,421
Jul-01 18,279 11,233
Aug-01 17,872 10,570
Sep-01 14,612 9,638
Oct-01 15,624 9,862
Nov-01 16,931 10,622
Dec-01 17,442 10,771
Jan-02 17,254 10,637
Feb-02 16,877 10,420
Mar-02 17,870 10,876
Apr-02 17,243 10,305
May-02 16,594 10,186
Jun-02 15,784 9,452
Jul-02 14,092 8,701
Aug-02 13,581 8,742
Sep-02 12,538 7,823
Oct-02 13,347 8,446
Nov-02 14,401 8,957
Dec-02 13,507 8,451
Jan-03 13,304 8,243
Feb-03 13,176 8,107
Mar-03 12,996 8,193
Apr-03 13,976 8,862
May-03 15,380 9,397
Jun-03 15,712 9,524
Jul-03 16,300 9,742
Aug-03 17,047 9,958
Sep-03 16,834 9,850
Oct-03 18,254 10,446
Nov-03 18,681 10,590
Dec-03 19,365 11,074
Jan-04 19,803 11,305
Feb-04 19,941 11,458
WM GROUP OF FUNDS
VT ANNUAL REPORT UPDATE MATERIAL
PERFORMANCE NAV -- MOUNTAIN CHARTS (VALUE OF $10,000 INVESTMENT OVER 10-YEARS)
DATA AS OF 12/31/2005
CLASS 1 SHARES
10,000
VT WEST COAST RUSSELL 3000
Date EQUITY FUND INDEX
- ---- --------------- ------------
Mar-04 19,760 11,322
Apr-04 19,066 11,087
May-04 19,387 11,248
Jun-04 20,133 11,472
Jul-04 19,084 11,038
Aug-04 19,019 11,084
Sep-04 19,630 11,254
Oct-04 19,962 11,439
Nov-04 21,043 11,971
Dec-04 21,889 12,397
Jan-05 21,044 12,067
Feb-05 21,505 12,333
Mar-05 21,088 12,124
Apr-05 20,264 11,861
May-05 21,259 12,311
Jun-05 21,599 12,397
Jul-05 22,741 12,905
Aug-05 22,741 12,782
Sep-05 22,891 12,894
Oct-05 22,644 12,652
Nov-05 23,948 13,145
Dec-05 23,764 13,157
Since Inception Cumulative
ENTER RETURNS 137.71 31.59
CHECK 23,771 13,159
Difference 0.03% 0.02%
Must be within +/-0.20% OK OK
(PHOTO) PORTFOLIO MANAGER (GRAPHIC)
Philip M. Foreman, CFA
WM Advisors, Inc.
provider, and Genentech, a biotechnology research company. In contrast,
information technology stocks such as Pixelworks, a maker of chips for
flat-panel TVs, were particularly harmful to performance.
With regard to sector allocations, the Fund significantly increased its
weighting in the health care sector during the period. This resulted from our
belief that changes in national health care policy and demographic trends will
continue to benefit health care companies. The Fund also increased its
allocation to consumer staples on the belief that a slowing economy may result
in increased demand for non-discretionary items. In contrast, the Fund
substantially reduced its exposure to consumer discretionaries as we believe
that a decline in consumer spending may mute demand for the sector going
forward.
While we retain a positive long-term outlook for the equity markets, we believe
that their upside will be limited until the Fed stops raising short-term
interest rates or oil prices decline meaningfully. With regard to the Fund's
positioning, we continue to favor companies that benefit from trade with China
and Latin America, as well as those that benefit from the growth in the Asian
and Hispanic populations on the West Coast. Over the long term, we continue to
view the West Coast as the premier hub for U.S. technology and biotech
development. Accordingly, we believe we have positioned the Fund to exploit
these opportunities.
TOP 10 HOLDINGS(3) AS OF DECEMBER 31, 2005
% of Net Assets Total Return(4)
--------------- ---------------
Wells Fargo & Co. 3.05% 4.49%
Microsoft Corp. 2.71% -0.95%
Chevron Corp. 2.15% 11.54%
Boeing Company 2.11% 38.04%
PACCAR Inc. 2.08% -10.45%
Nabors Industries Ltd. 1.97% 47.85%
Franklin Resources Inc 1.71% 39.87%
Amgen Inc. 1.70% 23.00%
U.S.Bancorp 1.65% -0.46%
Costco Wholesale Corp. 1.61% -11.42%
FUND CHARACTERISTICS
AS OF DECEMBER 31, 2005
Weighted Average Market
Capitalization: $44.9 billion
Weighted Average P/E
(based on estimated earnings): 17.5
Beta: 1.24
Fund Standard Deviation: 12.22
S&P 500 Standard Deviation: 10.43
Portfolio Turnover
(for fiscal year): 18%
Number of Securities: 154
Expense Ratio
(Class 1 shares for fiscal year): 0.68%
Total Net Assets: $140.9 million
PORTFOLIO COMPOSITION (3)
As of As of
Asset Class 12/31/05 12/31/04 Change
----------- -------- -------- ------
Financials 17% 19% -2%
Health Care 17% 13% +4%
Information Technology 16% 17% -1%
Industrials 15% 16% -1%
Consumer Discretionary 13% 17% -4%
(PIE CHART) Energy 7% 6% +1%
Consumer Staples 5% 3% +2%
Materials 3% 4% -1%
REITs 3% 2% +1%
Telecommunication Services 1% 1% 0%
Cash Equivalents 3% 2% +1%
(3) May not reflect the current portfolio composition.
(4) Performance information provided for individual securities held by the Fund
represents performance for the fiscal year ended 12/31/05.The Fund may not
have held these securities throughout the entire period.
13
(GRAPHIC) VT Mid Cap Stock Fund
ANNUAL TOTAL RETURNS(1)
Class 1 shares
(Calendar Year)
2005 13.39%
2004 14.59%
2003 27.73%
2002 -10.35%
2001 11.99%
INVESTMENT STRATEGY
The WM VT Mid Cap Stock Fund performed well during 2005, benefiting most from
its positions in energy, technology, and consumer discretionaries. While the
U.S. economy continued to grow modestly during the period, increasing short-term
interest rates and skyrocketing oil and gas prices put a drag on consumer
sentiment. Combined with rising inflation, these factors held the broader
markets to small gains in 2005. In the fourth quarter, as the Federal Reserve
(the Fed) appeared to get closer to ending its monetary tightening campaign, the
equity markets turned positive and posted solid returns. Performance in the
mid-cap segment was particularly strong as buyers moved up the capitalization
range toward mid- and large-cap holdings.
Individual securities that were particularly helpful to the Fund during the
period included Express Scripts, a pharmacy benefits manager; Tesoro, an oil and
gas refinery; and AMR, the parent company of American Airlines. Express Scripts
rose on increased consumer use of generic drugs and mail-order
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. Performance shown below does not account for fees,
expenses, and charges of any variable insurance contract or retirement plan. If
these fees were reflected, performance would be lower.
Small-cap and mid-cap stocks may have additional risks, including greater price
volatility.
AVERAGE ANNUAL TOTAL RETURNS(1) AS OF DECEMBER 31, 2005
1-Year 5-Year Since Inception Inception Date
------ ------ --------------- --------------
CLASS 1 SHARES 13.39% 10.75% 12.57% 5/1/00
CLASS 2 SHARES 13.12% -- 10.11% 5/1/01
S&P MidCap 400(2) 12.55% 8.60% 9.03%
VALUE OF A $10,000 INVESTMENT(1) MAY 1, 2000 - DECEMBER 31, 2005
(PERFORMANCE GRAPH)
See Glossary on page 31 for definitions of indices and terms.
(1) Performance reflects ongoing fund expenses, which may have been waived, and
assumes reinvestment of all dividends and capital gains. Performance does
not reflect the impact of federal, state, or municipal taxes. If it did,
performance would be lower.
(2) Returns shown for the index assume reinvestment of all dividends and
distributions, and the since-inception return shown for the index is
calculated 14 from 4/30/00. Indices are unmanaged, and individuals cannot
invest directly in an index.
14
WM GROUP OF FUNDS
VT ANNUAL REPORT UPDATE MATERIAL
PERFORMANCE NAV -- MOUNTAIN CHARTS (VALUE OF $10,000 INVESTMENT OVER 10-YEARS)
DATA AS OF 12/31/2005
CLASS 1 SHARES
10,000
VT MID CAP S&P MIDCAP
DATE STOCK FUND 400
---- ---------- ----------
Apr-00 10,000 10,000
May-00 10,210 9,875
Jun-00 9,980 10,020
Jul-00 10,150 10,178
Aug-00 10,860 11,314
Sep-00 10,751 11,236
Oct-00 10,951 10,855
Nov-00 10,651 10,036
Dec-00 11,741 10,804
Jan-01 12,171 11,044
Feb-01 12,141 10,414
Mar-01 11,700 9,640
Apr-01 12,350 10,703
May-01 12,780 10,953
WM GROUP OF FUNDS
VT ANNUAL REPORT UPDATE MATERIAL
PERFORMANCE NAV -- MOUNTAIN CHARTS (VALUE OF $10,000 INVESTMENT OVER 10-YEARS)
DATA AS OF 12/31/2005
CLASS 1 SHARES
10,000
VT MID CAP S&P MIDCAP
DATE STOCK FUND 400
- ------ ---------- ----------
Jun-01 13,188 10,909
Jul-01 13,127 10,746
Aug-01 12,737 10,395
Sep-01 11,487 9,102
Oct-01 11,897 9,504
Nov-01 12,407 10,211
Dec-01 13,148 10,739
Jan-02 12,698 10,683
Feb-02 12,698 10,696
Mar-02 13,469 11,461
Apr-02 13,379 11,407
May-02 13,508 11,214
Jun-02 12,803 10,393
Jul-02 11,870 9,386
Aug-02 11,993 9,433
Sep-02 11,070 8,673
Oct-02 11,387 9,048
Nov-02 11,983 9,572
Dec-02 11,788 9,179
Jan-03 11,583 8,911
Feb-03 11,429 8,699
Mar-03 11,480 8,772
Apr-03 11,881 9,409
May-03 12,794 10,189
Jun-03 12,866 10,318
Jul-03 13,092 10,684
Aug-03 13,431 11,170
Sep-03 13,266 10,999
Oct-03 14,192 11,830
Nov-03 14,594 12,242
Dec-03 15,057 12,449
Jan-04 15,263 12,719
Feb-04 15,695 13,024
WM GROUP OF FUNDS
VT ANNUAL REPORT UPDATE MATERIAL
PERFORMANCE NAV -- MOUNTAIN CHARTS (VALUE OF $10,000 INVESTMENT OVER 10-YEARS)
DATA AS OF 12/31/2005
CLASS 1 SHARES
10,000
VT MID CAP S&P MIDCAP
DATE STOCK FUND 400
- ------ ---------- ----------
Mar-04 15,541 13,080
Apr-04 15,396 12,651
May-04 15,777 12,913
Jun-04 16,299 13,207
Jul-04 15,627 12,591
Aug-04 15,459 12,558
Sep-04 15,741 12,930
Oct-04 15,941 13,136
Nov-04 16,791 13,919
Dec-04 17,253 14,503
Jan-05 16,644 14,133
Feb-05 17,085 14,608
Mar-05 17,399 14,445
Apr-05 16,896 13,884
May-05 17,694 14,719
Jun-05 18,131 15,061
Jul-05 18,909 15,852
Aug-05 18,875 15,676
Sep-05 18,909 15,796
Oct-05 18,684 15,457
Nov-05 19,304 16,212
Dec-05 19,563 16,324
Since Inception Cumulative
ENTER RETURNS 95.63 63.24
CHECK 19,563 16,324
Difference 0.00% 0.00%
Must be within +/-0.20% OK OK
(PHOTO) PORTFOLIO MANAGER (GRAPHIC)
Daniel R. Coleman
WM Advisors, Inc.
prescriptions, while Tesoro advanced on the back of higher oil and gas prices.
Despite recent troubles in the airline industry, AMR gained on optimism that
restructuring efforts would improve its financial outlook. On the downside,
Superior Industries, a maker of aluminum wheels, declined due to the general
malaise in the U.S. auto industry and manufacturing troubles, and Estee Lauder,
a leading cosmetics company, fell after it missed its earnings expectations for
two consecutive quarters.
Key additions to the Fund during the fiscal year included Edwards Lifesciences,
a maker of heart valves and an innovator in non-invasive surgical
procedures;Noble Energy, a leading energy exploration and production company;
Network Appliance, a high-end provider of data storage, software, and
equipment;and Max Re Capital, a company that provides multiline reinsurance and
insurance products.
While our long-term outlook for the equity markets remains positive, we believe
that broad upside potential will be limited until the Fed stops raising
short-term interest rates and oil prices hold steady or decline. Nevertheless,
we continue to view prospects in the mid-cap sector as favorable. In this
environment, we believe that security selection will be paramount, and we have
therefore redoubled our efforts to find what we believe are good companies in
each sector through insightful, bottom-up research. As always, discipline and
consistency remain central aspects of our investment process.
TOP 10 HOLDINGS (3) AS OF DECEMBER 31, 2005
% of Net Assets Total Return(4)
--------------- ---------------
HCC Insurance Holdings Inc. 3.02% 35.95%
Microchip Technology Inc. 2.78% 22.87%
Fidelity National Financial Inc. 2.44% 20.26%
HNI Corp. 2.41% 29.29%
Lincoln Electric Holdings Inc. 2.40% 17.31%
Covance Inc. 2.34% 25.37%
Universal Health Services Inc. 2.33% 5.71%
Valspar Corporation 2.29% 0.39%
North Fork Bancorporation Inc. 2.23% -2.03%
Magna International Inc. 2.23% -10.93%
FUND CHARACTERISTICS
AS OF DECEMBER 31, 2005
Weighted Average Market
Capitalization: $5.2 billion
Weighted Average P/E
(based on estimated earnings): 15.0
Beta: 0.88
Fund Standard Deviation: 9.29
S&P 500 Standard Deviation: 10.43
Portfolio Turnover
(for fiscal year): 27%
Number of Securities: 64
Expense Ratio
(Class 1 shares for fiscal year): 0.81%
Total Net Assets: $111.2 million
PORTFOLIO COMPOSITION (3)
As of As of
Asset Class 12/31/05 12/31/04 Change
----------- -------- -------- ------
Financials 20% 18% +2%
Industrials 17% 13% +4%
Consumer Discretionary 13% 17% -4%
Health Care 12% 9% +3%
Information Technology 11% 12% -1%
(PIE CHART) Energy 8% 8% 0%
Materials 5% 5% 0%
Utilities 5% 6% -1%
Consumer Staples 2% 3% -1%
REITs 2% 2% 0%
Telecommunication Services 1% 0% +1%
Cash Equivalents 4% 7% -3%
(3) May not reflect the current portfolio composition.
(4) Performance information provided for individual securities held by the Fund
represents performance for the fiscal year ended 12/31/05. The Fund may not
have held these securities throughout the entire period.
15
(GRAPHIC) VT Growth Fund
ANNUAL TOTAL RETURNS (1)
Class 1 shares
(Calendar Year)
2005 7.41%
2004 8.22%
2003 29.18%
2002 -31.01%
2001 -29.05%
2000 -22.04%
1999 97.09%
1998 59.04%
1997 11.24%
1996 16.15%
INVESTMENT STRATEGY
Salomon Brothers Asset Management Inc, Janus Capital Management, LLC, and
OppenheimerFunds, Inc. share management responsibilities for the WM VT Growth
Fund.
During 2005, attractive stock valuations and reasonable corporate earnings
growth overcame concerns about interest rates, energy prices, and the potential
for inflation. While both large-cap and mid-cap equities performed well during
the period, mid caps substantially outperformed. Within the mid-cap sector,
growth trailed value by a slight margin.
Salomon Brothers reported that the Fund's outperformance was driven by stock
selec-tion, while sector allocations detracted from performance relative to the
benchmark. Stock selection in the health care and information technology sectors
was particularly helpful, with select holdings in the consumer discretionary and
consumer staples sectors also adding to returns. Stock selection in the
financial sector had a negative effect.
Janus cited strong stock selection in the health care sector as the primary
source of the Fund's performance during the period.
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. Performance shown below does not account for fees,
expenses, and charges of any variable insurance contract or retirement plan. If
these fees were reflected, performance would be lower.
International investing involves increased risks due to currency fluctuations,
political or social instability, and differences in accounting standards.
AVERAGE ANNUAL TOTAL RETURNS(1) AS OF DECEMBER 31, 2005
1-Year 5-Year 10-Year Since Inception Inception Date
------ ------ ------- --------------- --------------
CLASS 1 SHARES 7.41% -5.97% 8.78% 10.81% 5/7/93
CLASS 2 SHARES 7.17% -- -- 1.93% 11/6/01
Russell 1000(R) Growth Index(2) 5.26% -3.58% 6.73% 8.83%
VALUE OF A $10,000 INVESTMENT 1 DECEMBER 31, 1995 - DECEMBER 31, 2005
(PERFORMANCE GRAPH)
See Glossary on page 31 for definitions of indices and terms.
(1) Performance reflects ongoing fund expenses, which may have been waived, and
assumes reinvestment of all dividends and capital gains. Performance does
not reflect the impact of federal, state, or municipal taxes. If it did,
performance would be lower.
(2) Returns shown for the index assume reinvestment of all dividends and
distributions, and the since-inception return shown for the index is
calculated 16 from 4/30/93. Indices are unmanaged, and individuals cannot
invest directly in an index.
16
WM GROUP OF FUNDS
VT ANNUAL REPORT UPDATE MATERIAL
PERFORMANCE NAV -- MOUNTAIN CHARTS (VALUE OF $10,000 INVESTMENT OVER 10-YEARS)
DATA AS OF 12/31/2005
CLASS 1 SHARES
10,000 RUSSELL 1000
DATE VT GROWTH FUND GROWTH INDEX
---- -------------- ------------
DEC-95 10,000 10,000
Jan-96 10,191 10,335
Feb-96 10,668 10,524
Mar-96 10,745 10,538
Apr-96 11,285 10,815
May-96 11,508 11,192
Jun-96 11,020 11,208
Jul-96 10,214 10,551
Aug-96 10,904 10,823
Sep-96 11,650 11,611
Oct-96 11,259 11,681
Nov-96 11,615 12,558
Dec-96 11,615 12,312
Jan-97 12,180 13,175
Feb-97 11,629 13,086
Mar-97 10,852 12,378
Apr-97 11,041 13,200
May-97 11,817 14,153
Jun-97 12,282 14,719
Jul-97 13,321 16,020
Aug-97 12,626 15,083
Sep-97 13,363 15,825
Oct-97 13,003 15,239
Nov-97 12,952 15,887
Dec-97 12,918 16,065
Jan-98 13,346 16,545
Feb-98 14,587 17,789
Mar-98 15,283 18,499
Apr-98 15,879 18,755
May-98 15,409 18,222
Jun-98 16,871 19,337
Jul-98 16,815 19,209
Aug-98 13,975 16,326
WM GROUP OF FUNDS
VT ANNUAL REPORT UPDATE MATERIAL
PERFORMANCE NAV -- MOUNTAIN CHARTS (VALUE OF $10,000 INVESTMENT OVER 10-YEARS)
DATA AS OF 12/31/2005
CLASS 1 SHARES
10,000 RUSSELL 1000
DATE VT GROWTH FUND GROWTH INDEX
---- -------------- ------------
Sep-98 15,685 17,580
Oct-98 16,227 18,993
Nov-98 17,339 20,439
Dec-98 20,546 22,282
Jan-99 23,275 23,590
Feb-99 22,521 22,512
Mar-99 25,397 23,699
Apr-99 26,710 23,730
May-99 25,241 23,001
Jun-99 27,265 24,611
Jul-99 26,194 23,828
Aug-99 26,898 24,217
Sep-99 28,232 23,708
Oct-99 30,355 25,498
Nov-99 33,749 26,873
Dec-99 40,496 29,667
Jan-00 40,581 28,276
Feb-00 45,560 29,659
Mar-00 46,252 31,782
Apr-00 42,062 30,269
May-00 38,281 28,744
Jun-00 39,402 30,923
Jul-00 38,701 29,633
Aug-00 41,669 32,315
Sep-00 39,594 29,258
Oct-00 37,820 27,874
Nov-00 31,656 23,765
Dec-00 31,573 23,014
Jan-01 33,057 24,605
Feb-01 26,740 20,427
Mar-01 23,911 18,204
Apr-01 28,279 20,507
May-01 27,510 20,206
WM GROUP OF FUNDS
VT ANNUAL REPORT UPDATE MATERIAL
PERFORMANCE NAV -- MOUNTAIN CHARTS (VALUE OF $10,000 INVESTMENT OVER 10-YEARS)
DATA AS OF 12/31/2005
CLASS 1 SHARES
10,000
VT GROWTH RUSSELL 1000
DATE FUND GROWTH INDEX
---- --------- ------------
Jun-01 26,451 19,737
Jul-01 24,959 19,244
Aug-01 22,471 17,669
Sep-01 20,316 15,906
Oct-01 20,614 16,741
Nov-01 21,975 18,350
Dec-01 22,406 18,315
Jan-02 21,709 17,991
Feb-02 19,768 17,244
Mar-02 20,381 17,841
Apr-02 19,038 16,385
May-02 18,739 15,989
Jun-02 16,916 14,510
Jul-02 15,522 13,712
Aug-02 15,738 13,753
Sep-02 14,394 12,327
Oct-02 15,721 13,457
Nov-02 16,683 14,188
Dec-02 15,455 13,207
Jan-03 15,123 12,886
Feb-03 14,873 12,827
Mar-03 15,056 13,066
Apr-03 16,316 14,031
May-03 17,228 14,731
Jun-03 17,344 14,935
Jul-03 17,809 15,307
Aug-03 18,355 15,688
Sep-03 17,973 15,520
Oct-03 18,969 16,392
Nov-03 19,201 16,564
Dec-03 19,963 17,137
Jan-04 20,360 17,487
Feb-04 20,427 17,599
WM GROUP OF FUNDS
VT ANNUAL REPORT UPDATE MATERIAL
PERFORMANCE NAV -- MOUNTAIN CHARTS (VALUE OF $10,000 INVESTMENT OVER 10-YEARS)
DATA AS OF 12/31/2005
CLASS 1 SHARES
10,000 RUSSELL 1000
DATE VT GROWTH FUND GROWTH INDEX
---- ---------------- ------------
Mar-04 20,246 17,271
Apr-04 19,798 17,071
May-04 20,147 17,389
Jun-04 20,527 17,606
Jul-04 19,616 16,611
Aug-04 19,449 16,530
Sep-04 19,797 16,687
Oct-04 20,130 16,947
Nov-04 20,877 17,530
Dec-04 21,607 18,217
Jan-05 21,026 17,611
Feb-05 21,192 17,797
Mar-05 20,893 17,473
Apr-05 20,578 17,141
May-05 21,673 17,971
Jun-05 21,356 17,905
Jul-05 22,591 18,780
Aug-05 22,358 18,538
Sep-05 22,459 18,623
Oct-05 22,225 18,443
Nov-05 23,292 19,237
Dec-05 23,208 19,178
Avg Annual 10-Yr Cumulative
ENTER RETURNS 8.78% 91.79
10,000
CHECK 23,200 19,179
Difference -0.03% 0.01%
Must be within
+/-0.20% OK OK
PORTFOLIO MANAGERS
Alan Blake, CFA E.Marc Pinto, CFA William L.Wilby, CFA & (GRAPHIC)
Salomon Brothers Asset Janus Capital Marc L.Baylin, CFA
Management Inc Management, LLC OppenheimerFunds, Inc.
Meanwhile, the Fund's holdings in industrials, technology, and consumer
discretionaries dragged on returns. Among the top individual contributors to
performance were Motorola and Texas Instruments. Diversified electronics
manufacturer Motorola continued to enjoy strong growth in its resurgent cellular
handset business, while Texas Instruments, a key supplier of semiconductor chips
to Motorola and other handset industry leaders, also benefited from healthy
end-market demand.
Oppenheimer noted that holdings in the health care and energy sectors were
particularly helpful to returns. In health care, Genentech and Amgen were top
gainers. Top contributors in the energy sector included major integrated oil and
gas companies such as ExxonMobil, and oil service providers such as
Schlumberger. On the downside, performance suffered from the Fund's failure to
hold some of the market's better-performing consumer staples stocks, an area in
which Oppenheimer found few attractive growth-oriented investment opportunities.
While both Oppenheimer and Salomon Brothers are optimistic about prospects for
the equity markets in 2006, Janus is not so sanguine. Oppenheimer and Salomon
Brothers both point to positive economic data and strong corporate balance
sheets as evidence that equity markets may rise significantly going forward. In
contrast, Janus has taken a more subdued outlook, choosing to concentrate on
stock selection in a slower-growth environment. Each firm remains committed to
its core investment discipline and philosophy.
TOP 10 HOLDINGS (3) AS OF DECEMBER 31, 2005
% of Net Assets Total Return(4)
--------------- ---------------
General Electric Co. 3.31% -1.44%
Amgen Inc. 3.08% 23.00%
Genentech Inc. 2.74% 70.16%
Yahoo! Inc. 2.72% 3.99%
Home Depot Inc. 2.71% -4.36%
Microsoft Corp. 2.66% -0.95%
Procter & Gamble Co. 2.57% 7.20%
Motorola Inc. 2.38% 32.53%
Texas Instruments Inc. 2.29% 30.88%
Medtronic Inc. 2.23% 16.77%
FUND CHARACTERISTICS
AS OF DECEMBER 31, 2005
Weighted Average Market
Capitalization: $82.9 billion
Weighted Average P/E
(based on estimated earnings): 20.0
Beta: 1.06
Fund Standard Deviation: 10.00
S&P 500 Standard Deviation: 10.43
Portfolio Turnover
(for fiscal year): 81%
Number of Securities: 141
Expense Ratio
(Class 1 shares for fiscal year): 0.87%
Total Net Assets: $272.8 million
PORTFOLIO COMPOSITION(3)
As of As of
Asset Class 12/31/05 12/31/04 Change
----------- -------- -------- ------
Information Technology 28% 24% +4%
Health Care 19% 18% +1%
Consumer Discretionary 18% 18% 0%
Financials 10% 10% 0%
(PIE CHART) Consumer Staples 8% 7% +1%
Industrials 5% 12% -7%
Energy 4% 4% 0%
Materials 2% 2% 0%
Telecommunication Services 1% 1% 0%
Cash Equivalents 5% 4% +1%
(3) May not reflect the current portfolio composition.
(4) Performance information provided for individual securities held by the Fund
represents performance for the fiscal year ended 12/31/05. The Fund may not
have held these securities throughout the entire period.
17
(GRAPHIC) VT Small Cap Value Fund
(GRAPHIC)
INVESTMENT STRATEGY
During 2005, the WM VT Small Cap Value Fund was impacted primarily by rising oil
prices, increases in short-term interest rates, and investors'willingness to
take on greater risk in the equity markets. The economy grew at a solid pace
during the period, with reasonable gains in employment and sustained strength in
consumer spending. Although oil prices soared, core inflation (which excludes
food and energy) remained relatively benign. Continuing with the course it began
in June 2004, the Federal Reserve (the Fed) raised the federal funds target rate
eight times during the period, bringing the rate to 4.25% by the end of the
year. Broadly speaking, these forces combined to create reasonably strong
returns in the equity markets, including the small-cap value space.
On a sector basis, the Fund benefited substantially from its holdings in energy,
which rose on the back of high oil and gas prices. The Fund also gained from its
exposure to the materials sector, which continued to experience strong demand
from China. On
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. Performance shown below does not account for fees,
expenses, and charges of any variable insurance contract or retirement plan. If
these fees were reflected, performance would be lower.
Small-cap and mid-cap stocks may have additional risks, including greater price
volatility. International investing involves increased risks due to currency
fluctuations, political or social instability, and differences in accounting
standards.
AVERAGE ANNUAL TOTAL RETURNS(1) AS OF DECEMBER 31, 2005
1-Year Since Inception Inception Date
------ --------------- --------------
CLASS 1 SHARES 4.97% 16.35% 5/3/04
CLASS 2 SHARES -- 1.14% 7/1/05
Russell 2000(R) Value Index(2) 4.71% 15.01%
VALUE OF A $10,000 INVESTMENT(1) MAY 3, 2004 - DECEMBER 31, 2005
(PERFORMANCE GRAPH)
See Glossary on page 31 for definitions of indices and terms.
(1) Performance reflects ongoing fund expenses, which may have been waived, and
assumes reinvestment of all dividends and capital gains. Performance does
not reflect the impact of federal, state, or municipal taxes. If it did,
performance would be lower.
(2) Returns shown for the index assume reinvestment of all dividends and
distributions, and the since-inception return shown for the index is
calculated 18 from 4/30/04. Indices are unmanaged, and individuals cannot
invest directly in an index.
18
WM GROUP OF FUNDS
VT ANNUAL REPORT UPDATE MATERIAL
PERFORMANCE NAV -- MOUNTAIN CHARTS (VALUE OF $10,000 INVESTMENT OVER 10-YEARS)
DATA AS OF 12/31/2005
CLASS 1 SHARES
10,000
VT SMALL CAP RUSSELL 2000
DATE VALUE FUND VALUE INDEX
- ---- ------------ ------------
Mar-04
Apr-04 10,000 10,000
May-04 9,840 10,121
Jun-04 10,260 10,635
Jul-04 10,180 10,146
Aug-04 10,280 10,245
Sep-04 10,820 10,651
Oct-04 11,050 10,816
Nov-04 12,020 11,776
Dec-04 12,270 12,057
Jan-05 12,090 11,590
Feb-05 12,430 11,821
Mar-05 12,489 11,578
Apr-05 12,070 10,980
May-05 12,420 11,650
Jun-05 12,724 12,165
Jul-05 13,314 12,857
Aug-05 13,045 12,561
Sep-05 12,735 12,540
Oct-05 12,071 12,225
Nov-05 12,610 12,722
Dec-05 12,880 12,624
Since
Inception Cumulative
ENTER RETURNS 28.80 26.25
CHECK 12,880 12,625
Difference 0.00% 0.01%
Must be within
+/-0.20% OK OK
(PHOTO) PORTFOLIO MANAGER (GRAPHIC)
David W.Simpson, CFA
WM Advisors, Inc.
the downside, the Fund's exposure to the consumer discretionary sector detracted
from returns, as did its exposure to some airlines, although other airline
holdings performed well. Several of the Fund's consumer discretionary holdings
fell on slowing consumer demand.
During the period, the Fund significantly increased its exposure to consumer
discretionary holdings on the belief that valuations in the sector appeared
attractive. While the Fund trimmed its exposure to the energy sector, it
remained overweighted versus its benchmark. Meanwhile, the Fund retained its
underweighting in the financial sector, as the flattening yield curve appeared
to make it more difficult for financial firms to sustain growth.
Looking forward, we are somewhat concerned that rising short-term interest rates
and increased energy prices will challenge the U.S. consumer during 2006. For
the past few years, consumers have enjoyed historically low interest rates, and
many have been able to refinance their mortgages and draw on home equity lines
of credit. If these dynamics were to change for the worse, consumer spending
could be impacted significantly. This in turn could lead to a slowdown in the
economy, given that consumer spending currently constitutes about two-thirds of
gross domestic product. In this scenario, small-cap value equities would likely
experience slower growth than in 2005.
TOP 10 HOLDINGS(3) AS OF DECEMBER 31, 2005
% of Net Assets Total Return(4)
--------------- ---------------
Kingsgate Consolidated Ltd. 2.70% 92.94%
New Flyer Industries Inc. 2.58% -1.57%
AMR Corp. 2.31% 103.41%
Movie Gallery Inc. 2.14% -70.57%
Metal Management Inc. 2.12% -12.37%
Cimarex Energy Co. 2.09% 31.45%
Randgold Resources Ltd. 2.00% 41.38%
Minara Resources Ltd. 1.93% 8.21%
Continental Airlines Inc. 1.88% 57.51%
Tenneco Inc. 1.88% 13.79%
FUND CHARACTERISTICS AS OF DECEMBER 31, 2005
Weighted Average Market
Capitalization: $1.0 billion
Weighted Average P/E
(based on estimated earnings): 13.0
Portfolio Turnover
(for fiscal year): 59%
Number of Securities: 79
Expense Ratio
(Class 1 shares for fiscal 0.97%
year):
Total Net Assets: $38.4 million
PORTFOLIO COMPOSITION(3)
As of As of
Asset Class 12/31/05 12/31/04 Change
----------- -------- -------- ------
Industrials 15% 13% +2%
Consumer Discretionary 13% 7% +6%
Financials 13% 10% +3%
Materials 12% 10% +2%
(PIE CHART) Information Technology 10% 11% -1%
Energy 9% 12% -3%
Consumer Staples 8% 8% 0%
Health Care 5% 7% -2%
REITs 5% 6% -1%
Options 3% 3% 0%
Telecommunication Services 3% 3% 0%
Utilities 1% 1% 0%
Cash Equivalents 3% 9% -6%
(3) May not reflect the current portfolio composition.
(4) Performance information provided for individual securities held by the Fund
represents performance for the fiscal year ended 12/31/05. The Fund may not
have held these securities throughout the entire period.
19
(GRAPHIC) VT Small Cap Growth Fund
ANNUAL TOTAL RETURNS (1)
Class 1 shares
(Calendar Year)
2005 -1.73%
2004 4.68%
2003 71.40%
2002 -47.15%
2001 -12.73%
2000 -10.58%
1999 71.09%
1998 8.09%
1997 12.59%
1996 10.04%
INVESTMENT STRATEGY
Delaware Management Company and Oberweis Asset Management, Inc. share management
responsibilities for the WM VT Small Cap Growth Fund.
During 2005, attractive stock valuations and reasonable corporate earnings
growth overcame concerns about interest rates, energy prices, and the potential
for inflation. While both large-cap and small-cap equities performed well during
the period, small caps outperformed. Within the small-cap sector, growth
slightly trailed value.
Oberweis cited stock selection in the health care and consumer discretionary
sectors as the primary contributors to Fund performance during the period. On an
individual security basis, top performers included aQuantive, Ceradyne, and
LCA-Vision. Online advertising agency aQuantive rose on increasing revenues in
the online ad space. Ceradyne, which develops products using advanced technical
ceramics, gained on increasing orders from the U.S. Army for items such as
lightweight body armor. LCA-Vision rose due to increasing volumes of laser
refractive eye surgeries in the U.S. and Canada. Top detractors included Tessera
Technologies
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. Performance shown below does not account for fees,
expenses, and charges of any variable insurance contract or retirement plan. If
these fees were reflected, performance would be lower.
Small-cap and mid-cap stocks may have additional risks, including greater price
volatility.
AVERAGE ANNUAL TOTAL RETURNS(1) AS OF DECEMBER 31, 2005
1-Year 5-Year 10-Year Since Inception Inception Date
------ ------ ------- --------------- --------------
CLASS 1 SHARES -1.73% -4.05% 5.22% 7.19% 1/12/94
CLASS 2 SHARES -2.05% -- -- -2.35% 5/1/01
Russell 2000(R) Growth Index(2) 4.15% 2.28% 4.69% 6.04%
VALUE OF A $10,000 INVESTMENT(1) DECEMBER 31, 1995 - DECEMBER 31, 2005
(PERFORMANCE GRAPH)
See Glossary on page 31 for definitions of indices and terms.
(1) Performance reflects ongoing fund expenses, which may have been waived, and
assumes reinvestment of all dividends and capital gains. Performance does
not reflect the impact of federal, state, or municipal taxes. If it did,
performance would be lower. The Fund's performance in 1995 benefited from
the agreement of WM Advisors and its affiliates to limit the Fund's
expenses.
(2) Returns shown for the index assume reinvestment of all dividends and
distributions, and the since-inception return shown for the index is
calculated 20 from 12/31/93. Indices are unmanaged, and individuals cannot
invest directly in an index.
20
WM GROUP OF FUNDS
VT ANNUAL REPORT UPDATE MATERIAL
PERFORMANCE NAV -- MOUNTAIN CHARTS (VALUE OF $10,000 INVESTMENT OVER 10-YEARS)
DATA AS OF 12/31/2005
CLASS 1 SHARES
10,000
VT SMALL CAP RUSSELL 2000
DATE GROWTH FUND GROWTH INDEX
---- ------------ ------------
DEC-95 10,000 10,000
Jan-96 9,854 9,917
Feb-96 10,422 10,369
Mar-96 11,105 10,575
Apr-96 11,433 11,387
May-96 11,906 11,971
Jun-96 11,460 11,193
Jul-96 10,030 9,826
Aug-96 10,838 10,553
Sep-96 11,265 11,097
Oct-96 10,943 10,618
Nov-96 11,048 10,914
Dec-96 11,002 11,126
Jan-97 10,636 11,405
Feb-97 10,374 10,716
Mar-97 9,648 9,959
Apr-97 9,700 9,844
May-97 10,816 11,323
Jun-97 11,365 11,707
Jul-97 11,429 12,306
Aug-97 11,548 12,676
Sep-97 12,317 13,687
Oct-97 12,111 12,865
Nov-97 12,223 12,558
Dec-97 12,389 12,566
Jan-98 12,254 12,399
Feb-98 13,324 13,494
Mar-98 13,894 14,060
Apr-98 13,806 14,146
May-98 12,808 13,118
Jun-98 12,847 13,251
Jul-98 11,920 12,145
Aug-98 9,379 9,342
WM GROUP OF FUNDS
VT ANNUAL REPORT UPDATE MATERIAL
PERFORMANCE NAV -- MOUNTAIN CHARTS (VALUE OF $10,000 INVESTMENT OVER 10-YEARS)
DATA AS OF 12/31/2005
CLASS 1 SHARES
10,000
VT SMALL CAP RUSSELL 2000
DATE GROWTH FUND GROWTH INDEX
- ------ ------------ ------------
Sep-98 10,196 10,289
Oct-98 10,967 10,826
Nov-98 12,141 11,666
Dec-98 13,371 12,722
Jan-99 13,224 13,295
Feb-99 11,985 12,078
Mar-99 11,920 12,508
Apr-99 12,453 13,613
May-99 13,333 13,634
Jun-99 14,397 14,353
Jul-99 14,816 13,910
Aug-99 14,564 13,389
Sep-99 14,851 13,648
Oct-99 15,604 13,997
Nov-99 18,068 15,477
Dec-99 22,874 18,204
Jan-00 24,620 18,034
Feb-00 32,870 22,231
Mar-00 29,188 19,894
Apr-00 23,304 17,885
May-00 21,402 16,318
Jun-00 26,248 18,427
Jul-00 25,035 16,847
Aug-00 27,652 18,620
Sep-00 25,890 17,694
Oct-00 24,205 16,258
Nov-00 20,351 13,305
Dec-00 20,453 14,120
Jan-01 23,644 15,262
Feb-01 19,102 13,169
Mar-01 16,013 11,972
Apr-01 18,386 13,438
May-01 19,598 13,749
WM GROUP OF FUNDS
VT ANNUAL REPORT UPDATE MATERIAL
PERFORMANCE NAV -- MOUNTAIN CHARTS (VALUE OF $10,000 INVESTMENT OVER 10-YEARS)
DATA AS OF 12/31/2005
CLASS 1 SHARES
10,000
VT SMALL CAP RUSSELL 2000
DATE GROWTH FUND GROWTH INDEX
- ------ ------------ ------------
Jun-01 21,838 14,125
Jul-01 18,289 12,920
Aug-01 17,033 12,112
Sep-01 12,793 10,159
Oct-01 14,363 11,136
Nov-01 16,467 12,066
Dec-01 17,849 12,818
Jan-02 16,044 12,361
Feb-02 14,302 11,562
Mar-02 16,170 12,566
Apr-02 13,893 12,295
May-02 12,276 11,576
Jun-02 11,237 10,594
Jul-02 9,244 8,966
Aug-02 8,866 8,961
Sep-02 8,316 8,314
Oct-02 9,296 8,735
Nov-02 10,636 9,600
Dec-02 9,433 8,938
Jan-03 9,554 8,695
Feb-03 9,124 8,463
Mar-03 8,969 8,591
Apr-03 9,948 9,403
May-03 11,735 10,463
Jun-03 11,924 10,665
Jul-03 12,817 11,471
Aug-03 13,522 12,087
Sep-03 13,609 11,781
Oct-03 15,395 12,799
Nov-03 15,739 13,217
Dec-03 16,168 13,276
Jan-04 17,439 13,973
Feb-04 17,371 13,952
WM GROUP OF FUNDS
VT ANNUAL REPORT UPDATE MATERIAL
PERFORMANCE NAV -- MOUNTAIN CHARTS (VALUE OF $10,000 INVESTMENT OVER 10-YEARS)
DATA AS OF 12/31/2005
CLASS 1 SHARES
10,000
VT SMALL CAP RUSSELL 2000
DATE GROWTH FUND GROWTH INDEX
---- ---------------- ------------
Mar-04 17,251 14,018
Apr-04 16,049 13,314
May-04 15,946 13,579
Jun-04 16,220 14,031
Jul-04 14,021 12,771
Aug-04 13,935 12,496
Sep-04 14,657 13,188
Oct-04 14,967 13,508
Nov-04 15,929 14,649
Dec-04 16,926 15,175
Jan-05 16,152 14,492
Feb-05 15,826 14,691
Mar-05 14,779 14,140
Apr-05 13,593 13,241
May-05 14,693 14,174
Jun-05 15,312 14,632
Jul-05 16,446 15,655
Aug-05 16,222 15,434
Sep-05 16,498 15,556
Oct-05 16,155 14,980
Nov-05 16,911 15,828
Dec-05 16,635 15,805
Avg Annual 10-Yr Cumulative
5.22% 58.07
ENTER RETURNS 10,000 15,807
CHECK 16,633
Difference -0.01% 0.01%
Must be within +/-0.20% OK OK
PORTFOLIO MANAGERS
Emerging Growth Team James W. Oberweis, CFA
Delaware Management Company Oberweis Asset Management, Inc. (GRAPHIC)
and Able Laboratories. Tessera was hurt by weakness in semiconductor
manufacturing, while Able Laboratories plunged as it was forced to recall all of
its manufactured drugs in the U.S.
Delaware cited strong stock selection in the health care, technology, and
consumer discretionary sectors as particularly helpful to performance. Top
gainers included Amylin Pharmaceuticals, Animas, SiRF Technology Holdings, and
Hibbett Sporting Goods. In contrast, sector allocation generally detracted from
returns. Specifically, the Fund's under-weighting in the energy sector was
problematic.
Looking forward, Oberweis expects global growth to be positive in 2006 and
believes that corporate earnings will grow at an above-average rate. However,
they anticipate that international equities may outperform U.S. equities, and
they expect the dollar to decline against the euro and yen. In their view,
large-cap stocks are more attractively valued than small-cap stocks. Growth
appears significantly undervalued relative to value at all market capitalization
ranges.
Delaware enters 2006 fairly optimistic about the overall economy and the
potential for positive stock performance. In their view, an end to Federal
Reserve interest rate increases and a leveling in energy prices could establish
a solid operating environment for many businesses, leading to continued sales
and profit growth. The firm is comfortable with its current Fund weightings and
believes that the Fund will be able to participate in a strong market
environment. Changes in Fund positioning throughout the past year have reduced
its sensitivity to the over- or underperformance of any particular sector.
TOP 10 HOLDINGS(3) AS OF DECEMBER 31, 2005
% of Net Assets Total Return(4)
--------------- ---------------
Euronet Worldwide Inc. 1.94% 6.86%
Ceradyne Inc. 1.82% 14.88%
Coach Inc. 1.77% 18.28%
United Therapeutics Corp. 1.71% 53.27%
Focus Media Holding Ltd. 1.55% 98.65%
Hibbett Sporting Goods Inc. 1.45% 60.75%
Kos Pharmaceuticals Inc. 1.34% 37.55%
aQuantive Inc. 1.29% 183.13%
Urban Outfitters Inc. 1.25% 14.05%
Carrizo Oil & Gas Inc. 1.21% 119.05%
FUND CHARACTERISTICS
AS OF DECEMBER 31, 2005
Weighted Average Market
Capitalization: $1.3 billion
Weighted Average P/E
(based on estimated earnings): 24.0
Beta: 1.91
Fund Standard Deviation: 21.16
S&P 500 Standard Deviation: 10.43
Portfolio Turnover
(for fiscal year): 172%
Number of Securities: 163
Expense Ratio
(Class 1 shares for fiscal year): 1.11%
Total Net Assets: $46.4 million
PORTFOLIO COMPOSITION(3)
As of As of
Asset Class 12/31/05 12/31/04 Change
----------- -------- -------- ------
Health Care 25% 21% +4%
Consumer Discretionary 14% 16% -2%
Industrials 13% 12% +1%
Communications Equipment 7% 4% +3%
Energy 7% 3% +4%
Internet Software & Services 7% 8% -1%
Semiconductors &
(PIE CHART) Semiconductor Equipment 6% 2% +4%
Financials 5% 8% -3%
Software 5% 11% -6%
IT Services 3% 2% +1%
Computers & Peripherals 2% 1% +1%
Consumer Staples 2% 4% -2%
REITs 1% 0% +1%
Telecommunication Services 1% 1% 0%
Electronic Equipment &
Instruments 0% 4% -4%
Materials 0% 2% -2%
Cash Equivalents 2% 1% +1%
(3) May not reflect the current portfolio composition.
(4) Performance information provided for individual securities held by the Fund
represents performance for the fiscal year ended 12/31/05. The Fund may not
have held these securities throughout the entire period.
21
(GRAPHIC) VT International Growth Fund
ANNUAL TOTAL RETURNS (1)
Class 1 shares
(Calendar Year)
2005 17.87%
2004 13.60%
2003 35.51%
2002 -15.71%
2001 -17.78%
2000 -19.84%
1999 51.96%
1998 5.20%
1997 -2.64%
1996 9.04%
INVESTMENT STRATEGY
Non-U.S. stocks rallied in the fourth quarter of 2005, capping off a strong
year. Markets in Europe and Japan showed improvement, while growth remained
healthy in the U.S. and in many emerging markets. The Eurozone economy advanced
against a political backdrop of social unrest in France and the formation of a
tenuous coalition government in Germany. Meanwhile, Japan's Nikkei 225 Index
closed the year at its highest level since September 2000 as optimism about an
economic resurgence in Japan continued to build. Sentiment toward technology
shares improved with better-than-expected earnings, weakness in the yen, and
buoyant U.S. consumer spending.
The WM VT International Growth Fund outperformed the MSCI EAFE Index during the
year, primarily due to strong stock selection in the information technology,
financial, consumer discretionary, and energy sectors. Japan was by far the
dominant market in 2005, and the Fund benefited from both an overweighting to
Japan and strong stock selection. Within technology, we emphasized companies
gaining market share such as SOFTBANK and semiconductor equipment
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. Performance shown below does not account for fees,
expenses, and charges of any variable insurance contract or retirement plan. If
these fees were reflected, performance would be lower.
International investing involves increased risks due to currency fluctuations,
political or social instability, and differences in accounting standards.
AVERAGE ANNUAL TOTAL RETURNS(1) AS OF DECEMBER 31, 2005
1-Year 5-Year 10-Year Since Inception Inception Date
------ ------ ------- --------------- --------------
CLASS 1 SHARES 17.87% 4.69% 5.52% 6.05% 5/7/93
CLASS 2 SHARES 17.59% -- -- 11.65% 11/6/01
Morgan Stanley Capital
International EAFE Index(2) 14.02% 4.94% 6.18% 7.08%
VALUE OF A $10,000 INVESTMENT(1) DECEMBER 31, 1995 - DECEMBER 31, 2005
(PERFORMANCE GRAPH)
See Glossary on page 31 for definitions of indices and terms.
(1) Performance reflects ongoing fund expenses, which may have been waived, and
assumes reinvestment of all dividends and capital gains. Performance does
not reflect the impact of federal, state, or municipal taxes. If it did,
performance would be lower. The Fund's performance in 1998 benefited from
the agreement of WM Advisors and its affiliates to limit the Fund's
expenses.
(2) Returns shown for the index assume reinvestment of all dividends and
distributions, and the since-inception return shown for the index is
calculated 22 from 4/30/93. Indices are unmanaged, and individuals cannot
invest directly in an index.
22
WM GROUP OF FUNDS
VT ANNUAL REPORT UPDATE MATERIAL
PERFORMANCE NAV -- MOUNTAIN CHARTS (VALUE OF $10,000 INVESTMENT OVER 10-YEARS)
DATA AS OF 12/31/2005
CLASS 1 SHARES
MORGAN STANLEY
10,000 CAPITAL
VT INTERNATIONAL INTERNATIONAL
DATE GROWTH FUND EAFE INDEX
- ------ ---------------- --------------
DEC-95 10,000 10,000
Jan-96 10,322 10,043
Feb-96 10,289 10,079
Mar-96 10,396 10,296
Apr-96 10,545 10,598
May-96 10,528 10,405
Jun-96 10,618 10,466
Jul-96 10,142 10,163
Aug-96 10,259 10,187
Sep-96 10,511 10,460
Oct-96 10,426 10,355
Nov-96 10,921 10,770
Dec-96 10,904 10,634
Jan-97 10,954 10,264
Feb-97 11,021 10,434
Mar-97 10,929 10,475
Apr-97 11,155 10,532
May-97 11,833 11,220
Jun-97 12,349 11,842
Jul-97 12,731 12,036
Aug-97 11,631 11,139
Sep-97 12,254 11,765
Oct-97 10,947 10,864
Nov-97 10,601 10,756
Dec-97 10,618 10,852
Jan-98 10,730 11,352
Feb-98 11,441 12,083
Mar-98 12,064 12,457
Apr-98 12,367 12,558
May-98 12,272 12,500
Jun-98 11,881 12,598
Jul-98 11,940 12,729
Aug-98 10,352 11,154
WM GROUP OF FUNDS
VT ANNUAL REPORT UPDATE MATERIAL
PERFORMANCE NAV -- MOUNTAIN CHARTS (VALUE OF $10,000 INVESTMENT OVER 10-YEARS)
DATA AS OF 12/31/2005
CLASS 1 SHARES
MORGAN STANLEY
10,000 CAPITAL
VT INTERNATIONAL INTERNATIONAL
DATE GROWTH FUND EAFE INDEX
- ---- ---------------- --------------
Sep-98 9,823 10,815
Oct-98 10,332 11,945
Nov-98 10,910 12,561
Dec-98 11,170 13,059
Jan-99 11,314 13,024
Feb-99 10,968 12,717
Mar-99 11,419 13,251
Apr-99 11,852 13,790
May-99 11,371 13,083
Jun-99 12,149 13,595
Jul-99 12,688 14,003
Aug-99 12,881 14,058
Sep-99 13,170 14,203
Oct-99 13,777 14,738
Nov-99 14,846 15,254
Dec-99 16,973 16,625
Jan-00 16,106 15,571
Feb-00 16,694 15,993
Mar-00 17,098 16,617
Apr-00 16,299 15,746
May-00 15,491 15,365
Jun-00 16,397 15,969
Jul-00 15,520 15,303
Aug-00 15,840 15,439
Sep-00 14,593 14,690
Oct-00 13,935 14,347
Nov-00 13,376 13,812
Dec-00 13,605 14,306
Jan-01 13,934 14,299
Feb-01 12,718 13,228
Mar-01 12,070 12,352
Apr-01 13,187 13,218
May-01 12,629 12,762
WM GROUP OF FUNDS
VT ANNUAL REPORT UPDATE MATERIAL
PERFORMANCE NAV -- MOUNTAIN CHARTS (VALUE OF $10,000 INVESTMENT OVER 10-YEARS)
DATA AS OF 12/31/2005
CLASS 1 SHARES
MORGAN STANLEY
10,000 CAPITAL
VT INTERNATIONAL INTERNATIONAL
DATE GROWTH FUND EAFE INDEX
- ---- ---------------- --------------
Jun-01 12,042 12,245
Jul-01 11,670 12,024
Aug-01 11,297 11,722
Sep-01 9,894 10,537
Oct-01 10,376 10,806
Nov-01 11,012 11,205
Dec-01 11,187 11,272
Jan-02 10,673 10,674
Feb-02 10,771 10,750
Mar-02 11,428 11,337
Apr-02 11,416 11,418
May-02 11,460 11,573
Jun-02 10,891 11,117
Jul-02 9,805 10,021
Aug-02 9,661 10,001
Sep-02 8,642 8,930
Oct-02 9,340 9,411
Nov-02 9,928 9,839
Dec-02 9,429 9,509
Jan-03 9,052 9,113
Feb-03 8,841 8,904
Mar-03 8,553 8,736
Apr-03 9,396 9,602
May-03 9,927 10,193
Jun-03 10,161 10,445
Jul-03 10,554 10,699
Aug-03 10,868 10,959
Sep-03 11,060 11,299
Oct-03 11,823 12,004
Nov-03 11,980 12,273
Dec-03 12,777 13,233
Jan-04 12,911 13,421
Feb-04 13,136 13,733
WM GROUP OF FUNDS
VT ANNUAL REPORT UPDATE MATERIAL
PERFORMANCE NAV -- MOUNTAIN CHARTS (VALUE OF $10,000 INVESTMENT OVER 10-YEARS)
DATA AS OF 12/31/2005
CLASS 1 SHARES
MORGAN STANLEY
10,000 CAPITAL
VT INTERNATIONAL INTERNATIONAL
DATE GROWTH FUND EAFE INDEX
---- ---------------- --------------
Mar-04 13,214 13,816
Apr-04 12,788 13,515
May-04 12,799 13,573
Jun-04 12,935 13,875
Jul-04 12,503 13,427
Aug-04 12,617 13,489
Sep-04 12,810 13,844
Oct-04 13,208 14,317
Nov-04 13,958 15,299
Dec-04 14,515 15,971
Jan-05 14,197 15,679
Feb-05 14,742 16,359
Mar-05 14,356 15,955
Apr-05 13,981 15,598
May-05 14,015 15,621
Jun-05 14,183 15,835
Jul-05 14,681 16,321
Aug-05 15,317 16,739
Sep-05 15,894 17,487
Oct-05 15,583 16,978
Nov-05 16,022 17,398
Dec-05 17,108 18,209
Avg Annual 10-Yr Cumulative
ENTER RETURNS 5.52% 82.09
10,000
CHECK 17,114 18,209
Difference 0.03% 0.00%
Must be within +/-0.20% OK OK
PORTFOLIO MANAGER (GRAPHIC)
International Equity Team
Capital Guardian Trust Company
companies like Samsung Electronics and Taiwan Semiconductor. Within the
financial sector, the Fund's many Japanese holdings such as Sumitomo Mitsui,
Mitsubishi Estate, and Orix Corporation were among the top overall contributors
for the year. The biggest detractors came from the telecommunication services
sector (Vodafone) as well as the materials sector. From a country standpoint,
stock selection in Switzerland was the largest detractor (Swisscom AG).
The Fund increased its exposure to the information technology sector during the
year to finish the period with a weighting slightly double that of the MSCI EAFE
Index. The Fund was also overweighted in the telecommunication services sector,
though that overweighting shrank when compared to a year ago. Most of the other
major sectors were underweighted relative to the index, with the sole exception
of the financial sector (the largest component of the index), where the Fund was
just below index weight.
We expect that the recovery in the Eurozone will continue into 2006 and that
slightly higher short-term interest rates will not be an impediment to economic
growth. Any additional tightening by the European Central Bank is expected to be
limited, as economic growth is unlikely to be very strong and globalization will
continue to constrain inflation by keeping labor costs and consumer goods prices
in check. In Japan, the fundamentals for consumer-oriented companies are
improving and the weak yen is helping exporters. Japanese financials have spent
years cleaning up bad loans and restructuring, and they are now benefiting from
the view that deflation will end, interest rates will normalize, and loan
activity will pick up.
TOP 10 HOLDINGS(3) AS OF DECEMBER 31, 2005
% of Net Assets Total Return(4)
--------------- ---------------
SOFTBANK Corp. 2.80% 160.33%
Sumitomo Mitsui Financial Group Inc. 2.55% 46.26%
Mitsubishi UFJ Financial Group Inc. 2.50% 34.73%
Vodafone Group PLC 2.45% -17.90%
Royal Bank of Scotland Group PLC 2.04% -7.19%
Mitsubishi Estate Co.Ltd. 1.90% 78.39%
Royal Dutch Shell PLC (A shares) 1.85% 18.03%
BNP Paribas SA 1.67% 15.37%
AstraZeneca PLC 1.60% 37.22%
Novartis AG 1.58% 5.86%
FUND CHARACTERISTICS
AS OF DECEMBER 31, 2005
Weighted Average Market
Capitalization: $ 46.2 billion
Weighted Average P/E
(based on trailing earnings): 19.4
Beta: 1.03
Fund Standard Deviation: 11.64
S&P 500 Standard Deviation: 10.43
Portfolio Turnover
(for fiscal year): 32%
Number of Securities: 240
Expense Ratio
(Class 1 shares for fiscal year): 1.11%
Total Net Assets: $110.1 million
GEOGRAPHIC BREAKDOWN(3)
As of As of
Country 12/31/05 12/31/04 Change
------- -------- -------- ------
Japan 33% 23% +10%
United Kingdom 16% 17% -1%
France 8% 10% -2%
Switzerland 8% 10% -2%
Germany 6% 6% 0%
(PIE CHART) Netherlands 5% 10% -5%
Canada 4% 4% 0%
Spain 4% 4% 0%
Australia 2% 3% -1%
South Korea 2% 1% +1%
Other Countries 10% 10% 0%
Cash Equivalents 2% 2% 0%
(3) May not reflect the current portfolio composition.
(4) Performance information provided for individual securities held by the Fund
represents performance for the fiscal year ended 12/31/05. The Fund may not
have held these securities throughout the entire period.
23
(GRAPHIC) VT Short Term Income Fund
ANNUAL TOTAL RETURNS(1)
Class 1 shares
(Calendar Year)
2005 1.64%
2004 2.07%
2003 5.52%
2002 6.26%
2001 8.15%
2000 8.23%
1999 2.89%
1998 5.28%
1997 5.90%
1996 3.74%
INVESTMENT STRATEGY
During 2005, the WM VT Short Term Income Fund's performance was most influenced
by the actions of the Federal Reserve (the Fed). Continuing with the course it
began in June 2004, the Fed raised the federal funds target rate eight times
during the period, bringing the rate to 4.25% by the end of the year. In the
balance of its policy statements, the Fed acknowledged the inflationary risks
posed by short-term price spikes in energy and other consumer goods, but
remained confident that long-term inflation would be muted. Short- and
intermediate-term bond yields moved upward in conjunction with the Fed's
actions.
On a broad basis, the rise in short-term interest rates hurt Fund performance
during the period. Helping offset this, the Fund gained from its positions in
health care, REITs, and mortgage-backed securities (MBS), including
collateralized mortgage obligations (CMOs). Individual securities that were
particularly helpful to performance included Nationwide Health Properties
(REITs), Cardinal Health (health care), and
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. Performance shown below does not account for fees,
expenses, and charges of any variable insurance contract or retirement plan. If
these fees were reflected, performance would be lower.
Fixed-income investments are subject to interest rate risk, and their value will
decline as interest rates rise. There may be additional credit and default risks
associated with lower-rated securities. REIT securities are subject to risk
factors associated with the real estate industry and tax factors of REIT
registration.
AVERAGE ANNUAL TOTAL RETURNS(1) AS OF DECEMBER 31, 2005
1-Year 5-Year 10-Year Since Inception Inception Date
------ ------ ------- --------------- --------------
CLASS 1 SHARES 1.64% 4.70% 4.95% 4.75% 1/12/94
CLASS 2 SHARES 1.76% -- -- 3.52% 11/6/01
Citigroup Broad Investment-Grade
Credit 1-3 Years Index(2) 2.03% 5.08% 5.68% 5.80%
VALUE OF A $10,000 INVESTMENT(1) DECEMBER 31, 1995 - DECEMBER 31, 2005
(PERFORMANCE GRAPH)
See Glossary on page 31 for definitions of indices and terms.
(1) Performance reflects ongoing fund expenses, which may have been waived, and
assumes reinvestment of all dividends and capital gains. Performance does
not reflect the impact of federal, state, or municipal taxes. If it did,
performance would be lower. The Fund's performance between 1995 and 1998
benefited from the agreement of WM Advisors and its affiliates to limit the
Fund's expenses.
(2) Returns shown for the index assume reinvestment of all dividends and
distributions, and the since-inception return shown for the index is
calculated from 12/31/93. Indices are unmanaged, and individuals cannot
invest directly in an index.
24
WM GROUP OF FUNDS
VT ANNUAL REPORT UPDATE MATERIAL
PERFORMANCE NAV -- MOUNTAIN CHARTS (VALUE OF $10,000 INVESTMENT OVER 10-YEARS)
DATA AS OF 12/31/2005
CLASS 1 SHARES
CITIGROUP
BROAD
10,000 INVESTMENT
VT SHORT TERM GRADE CREDIT
DATE INCOME FUND 1-3 YR INDEX
- ------ ------------- ------------
DEC-95 10,000 10,000
Jan-96 10,080 10,090
Feb-96 9,999 10,056
Mar-96 9,959 10,054
Apr-96 9,959 10,062
May-96 9,959 10,093
Jun-96 10,041 10,168
Jul-96 10,082 10,208
Aug-96 10,124 10,247
Sep-96 10,207 10,346
Oct-96 10,290 10,472
Nov-96 10,375 10,554
Dec-96 10,375 10,556
Jan-97 10,417 10,616
Feb-97 10,460 10,640
Mar-97 10,460 10,638
Apr-97 10,503 10,724
May-97 10,589 10,802
Jun-97 10,632 10,883
Jul-97 10,764 11,022
Aug-97 10,764 11,026
Sep-97 10,852 11,118
Oct-97 10,897 11,189
Nov-97 10,942 11,208
Dec-97 10,986 11,281
Jan-98 11,031 11,396
Feb-98 11,077 11,410
Mar-98 11,104 11,466
Apr-98 11,150 11,528
May-98 11,196 11,596
Jun-98 11,242 11,655
Jul-98 11,288 11,717
Aug-98 11,380 11,807
WM GROUP OF FUNDS
VT ANNUAL REPORT UPDATE MATERIAL
PERFORMANCE NAV -- MOUNTAIN CHARTS (VALUE OF $10,000 INVESTMENT OVER 10-YEARS)
DATA AS OF 12/31/2005
CLASS 1 SHARES
CITIGROUP
BROAD
10,000 INVESTMENT
VT SHORT TERM GRADE CREDIT 1-
DATE INCOME FUND 3 YR INDEX
---- ------------- ---------------
Sep-98 11,519 11,967
Oct-98 11,566 11,984
Nov-98 11,566 12,023
Dec-98 11,567 12,081
Jan-99 11,615 12,159
Feb-99 11,567 12,120
Mar-99 11,663 12,227
Apr-99 11,711 12,283
May-99 11,663 12,267
Jun-99 11,707 12,305
Jul-99 11,707 12,324
Aug-99 11,757 12,356
Sep-99 11,849 12,450
Oct-99 11,849 12,491
Nov-99 11,899 12,532
Dec-99 11,904 12,565
Jan-00 11,904 12,573
Feb-00 12,004 12,667
Mar-00 12,024 12,731
Apr-00 12,075 12,729
May-00 12,075 12,769
Jun-00 12,202 12,928
Jul-00 12,304 13,034
Aug-00 12,406 13,147
Sep-00 12,493 13,276
Oct-00 12,546 13,281
Nov-00 12,702 13,406
Dec-00 12,885 13,568
Jan-01 13,044 13,826
Feb-01 13,097 13,938
Mar-01 13,240 14,068
Apr-01 13,294 14,114
May-01 13,347 14,243
WM GROUP OF FUNDS
VT ANNUAL REPORT UPDATE MATERIAL
PERFORMANCE NAV -- MOUNTAIN CHARTS (VALUE OF $10,000 INVESTMENT OVER 10-YEARS)
DATA AS OF 12/31/2005
CLASS 1 SHARES
CITIGROUP
BROAD
10,000 INVESTMENT
VT SHORT TERM GRADE CREDIT 1-
DATE INCOME FUND 3 YR INDEX
---- ------------- ---------------
Jun-01 13,401 14,308
Jul-01 13,562 14,513
Aug-01 13,669 14,632
Sep-01 13,830 14,787
Oct-01 13,938 14,918
Nov-01 13,884 14,903
Dec-01 13,938 14,897
Jan-02 13,992 14,945
Feb-02 14,045 14,977
Mar-02 13,939 14,906
Apr-02 14,153 15,028
May-02 14,261 15,159
Jun-02 14,309 15,212
Jul-02 14,309 15,299
Aug-02 14,421 15,424
Sep-02 14,588 15,580
Oct-02 14,476 15,540
Nov-02 14,587 15,655
Dec-02 14,810 15,894
Jan-03 14,923 15,959
Feb-03 15,035 16,093
Mar-03 15,091 16,148
Apr-03 15,258 16,295
May-03 15,426 16,451
Jun-03 15,451 16,519
Jul-03 15,332 16,402
Aug-03 15,332 16,429
Sep-03 15,569 16,623
Oct-03 15,510 16,572
Nov-03 15,510 16,590
Dec-03 15,630 16,716
Jan-04 15,689 16,780
Feb-04 15,749 16,877
WM GROUP OF FUNDS
VT ANNUAL REPORT UPDATE MATERIAL
PERFORMANCE NAV -- MOUNTAIN CHARTS (VALUE OF $10,000 INVESTMENT OVER 10-YEARS)
DATA AS OF 12/31/2005
CLASS 1 SHARES
CITIGROUP
BROAD
10,000 INVESTMENT
VT SHORT TERM GRADE CREDIT
DATE INCOME FUND 1-3 YR INDEX
---- ---------------- ------------
Mar-04 15,868 16,953
Apr-04 15,691 16,782
May-04 15,631 16,755
Jun-04 15,645 16,768
Jul-04 15,708 16,850
Aug-04 15,832 17,009
Sep-04 15,893 17,009
Oct-04 15,955 17,072
Nov-04 15,893 16,995
Dec-04 15,955 17,044
Jan-05 15,955 17,044
Feb-05 15,893 17,012
Mar-05 15,893 16,988
Apr-05 15,955 17,087
May-05 16,017 17,169
Jun-05 16,088 17,230
Jul-05 16,088 17,206
Aug-05 16,152 17,323
Sep-05 16,152 17,278
Oct-05 16,087 17,271
Nov-05 16,152 17,320
Dec-05 16,216 17,389
Avg Annual 10-Yr Cumulative
ENTER RETURNS 4.95% 73.74
10,000
CHECK 16,212 17,374
Difference -0.03% -0.09%
Must be within +/-0.20% OK OK
(PHOTO) PORTFOLIO MANAGER (GRAPHIC)
Craig V.Sosey
WM Advisors, Inc.
Weyerhaeuser (materials). On the downside, the convertible securities of Sealed
Air (services) detracted from performance, as convertible securities in general
performed poorly over the period. Corporate spreads were generally very tight
versus Treasuries for the year, thus putting a damper on excess returns.
During the period, the Fund significantly increased its holdings in
mortgage-backed securities/collateralized mortgage obligations (MBS/CMOs) from
8% of Fund assets at the beginning of the year to 17% at the close. This
increase resulted from our belief that these holdings would outperform other
market sectors going forward. In contrast, the Fund reduced its holdings in
domestic corporate bonds.
Looking forward, we anticipate that the Federal Reserve will continue its
monetary tightening campaign for a few months into 2006. If this happens, we
believe corporate spreads are likely to remain tight versus Treasuries, making
the front end of the yield curve a difficult place to add value. We would expect
that CMOs will continue to outperform, and we will look to find value in
out-of-favor corporates. In our view, economic growth in 2006 will be weaker
than current consensus projections. We also believe that inflation will be more
muted than expected, leaving the Fed room to halt its tightening campaign
relatively early in the year.
PORTFOLIO QUALITY(3)
As of As of
Rating 12/31/05 12/31/04 Change
- ------ -------- -------- ------
Aaa 42% 35% +7%
Aa 12% 10% +2%
A 13% 18% -5%
Baa 31% 35% -4%
Ba 0% 2% -2%
Not Rated 2% 0% +2%
FUND CHARACTERISTICS
AS OF DECEMBER 31, 2005
Weighted Average Maturity (years): 3.1
Weighted Average Duration (years): 1.7
Portfolio Turnover (for fiscal year): 22%
Number of Securities: 90
Expense Ratio
(Class 1 shares for fiscal year): 0.60%
Total Net Assets: $52.4 million
PORTFOLIO COMPOSITION(3)
As of As of
Asset Class 12/31/05 12/31/04 Change
----------- -------- -------- ------
Domestic Corporate Bonds 58% 67% -9%
Mortgage-Backed
Bonds/CMOs 17% 8% +9%
U.S.Government Agency 7% 2% +5%
(PIE CHART) Asset-Backed Bonds 5% 5% 0%
Foreign Corporate
Bonds (U.S.$) 5% 4% +1%
U.S.Treasuries 4% 2% +2%
Cash Equivalents 4% 12% -8%
(3) May not reflect the current portfolio composition.
25
(GRAPHIC) VT U.S. Government Securities Fund
ANNUAL TOTAL RETURNS (1)
Class 1 shares
(Calendar Year)
2005 2.27%
2004 3.78%
2003 2.14%
2002 8.87%
2001 7.79%
2000 9.73%
1999 0.51%
1998 7.03%
1997 9.42%
1996 3.69%
INVESTMENT STRATEGY
Continuing with the course it began in June 2004, the Federal Reserve (the Fed)
raised the federal funds target rate eight times during the period, bringing the
rate to 4.25% by the end of 2005. While short- and intermediate-term bond yields
moved upward in conjunction with the Fed's actions, long-term bond yields ended
the period only slightly higher. As a result, the yield curve (the difference in
yields between 2- and 10-year Treasuries) flattened significantly. During the
period, the 10-year Treasury traded within a relatively tight range as investors
tried to discount future economic growth and Fed actions. Activity in the
mortgage market was more volatile, but excess returns were limited as spreads
were compressed across a range of fixed-income instruments.
As long-term interest rates rose on balance during the first four months of the
period, prepayments on mortgage-backed securities (MBS) slowed. This in turn
caused the durations on these securities to extend, which led to further price
declines. Interest rates were volatile through much of the rest of the period
leading to slight underperformance of
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. Performance shown below does not account for fees,
expenses, and charges of any variable insurance contract or retirement plan. If
these fees were reflected, performance would be lower.
Fixed-income investments are subject to interest rate risk, and their value will
decline as interest rates rise. Neither the principal of government bond funds
nor their yields are guaranteed by the U.S. government.
AVERAGE ANNUAL TOTAL RETURNS(1) AS OF DECEMBER 31, 2005
1-Year 5-Year 10-Year Since Inception Inception Date
------ ------ ------- --------------- --------------
CLASS 1 SHARES 2.27% 4.93% 5.47% 5.44% 5/6/93
CLASS 2 SHARES 2.02% -- -- 3.47% 11/6/01
Citigroup Mortgage Index(2) 2.72% 5.50% 6.20% 6.30%
VALUE OF A $10,000 INVESTMENT (1) DECEMBER 31, 1995 - DECEMBER 31, 2005
(PERFORMANCE GRAPH)
See Glossary on page 31 for definitions of indices and terms.
(1) Performance reflects ongoing fund expenses, which may have been waived, and
assumes reinvestment of all dividends and capital gains. Performance does
not reflect the impact of federal, state, or municipal taxes. If it did,
performance would be lower. The Fund's performance in 1995 and 1998
benefited from the agreement of WM Advisors and its affiliates to limit the
Fund's expenses. On 3/1/04, the investment policies of the Fund were
modified. As a result, the Fund's performance for periods prior to that
date may not be representative of the performance it would have achieved
had its current investment policies been in place.
(2) Returns shown for the index assume reinvestment of all dividends and
distributions, and the since-inception return shown for the index is
calculated from 4/30/93. Indices are unmanaged, and individuals cannot
invest directly in an index.
26
WM GROUP OF FUNDS
VT ANNUAL REPORT UPDATE MATERIAL
PERFORMANCE NAV -- MOUNTAIN CHARTS (VALUE OF $10,000 INVESTMENT OVER 10-YEARS)
DATA AS OF 12/31/2005
CLASS 1 SHARES
10,000
VT U.S. GOVERNMENT CITIGROUP
DATE SECURITIES FUND MORTGAGE INDEX
---- ------------------ --------------
DEC-95 10,000 10,000
Jan-96 10,090 10,077
Feb-96 9,919 9,997
Mar-96 9,880 9,963
Apr-96 9,819 9,918
May-96 9,758 9,905
Jun-96 9,870 10,031
Jul-96 9,849 10,072
Aug-96 9,849 10,074
Sep-96 10,014 10,243
Oct-96 10,244 10,442
Nov-96 10,422 10,586
Dec-96 10,370 10,539
Jan-97 10,402 10,629
Feb-97 10,445 10,640
Mar-97 10,317 10,552
Apr-97 10,446 10,712
May-97 10,554 10,812
Jun-97 10,672 10,936
Jul-97 10,947 11,139
Aug-97 10,848 11,119
Sep-97 11,013 11,251
Oct-97 11,213 11,372
Nov-97 11,225 11,411
Dec-97 11,347 11,515
Jan-98 11,494 11,622
Feb-98 11,460 11,657
Mar-98 11,470 11,702
Apr-98 11,539 11,768
May-98 11,665 11,850
Jun-98 11,769 11,902
Jul-98 11,816 11,961
Aug-98 12,026 12,070
WM GROUP OF FUNDS
VT ANNUAL REPORT UPDATE MATERIAL
PERFORMANCE NAV -- MOUNTAIN CHARTS (VALUE OF $10,000 INVESTMENT OVER 10-YEARS)
DATA AS OF 12/31/2005
CLASS 1 SHARES
10,000
VT U.S.
GOVERNMENT CITIGROUP MORTGAGE
DATE SECURITIES FUND INDEX
- ------ --------------- ------------------
Sep-98 12,144 12,214
Oct-98 12,203 12,201
Nov-98 12,097 12,257
Dec-98 12,146 12,318
Jan-99 12,206 12,403
Feb-99 12,087 12,358
Mar-99 12,179 12,443
Apr-99 12,227 12,504
May-99 12,129 12,420
Jun-99 12,065 12,391
Jul-99 12,028 12,307
Aug-99 11,990 12,300
Sep-99 12,190 12,509
Oct-99 12,227 12,575
Nov-99 12,252 12,585
Dec-99 12,206 12,544
Jan-00 12,131 12,447
Feb-00 12,258 12,594
Mar-00 12,375 12,729
Apr-00 12,375 12,735
May-00 12,375 12,745
Jun-00 12,610 13,021
Jul-00 12,663 13,104
Aug-00 12,834 13,298
Sep-00 12,953 13,440
Oct-00 13,033 13,540
Nov-00 13,207 13,740
Dec-00 13,399 13,960
Jan-01 13,575 14,176
Feb-01 13,684 14,254
Mar-01 13,774 14,347
Apr-01 13,760 14,363
May-01 13,815 14,452
WM GROUP OF FUNDS
VT ANNUAL REPORT UPDATE MATERIAL
PERFORMANCE NAV -- MOUNTAIN CHARTS (VALUE OF $10,000 INVESTMENT OVER 10-YEARS)
DATA AS OF 12/31/2005
CLASS 1 SHARES
10,000
VT U.S.
GOVERNMENT CITIGROUP MORTGAGE
DATE SECURITIES FUND INDEX
- ------ --------------- ------------------
Jun-01 13,870 14,472
Jul-01 14,117 14,741
Aug-01 14,254 14,875
Sep-01 14,458 15,094
Oct-01 14,677 15,299
Nov-01 14,513 15,158
Dec-01 14,445 15,104
Jan-02 14,554 15,252
Feb-02 14,704 15,418
Mar-02 14,526 15,262
Apr-02 14,786 15,546
May-02 14,909 15,660
Jun-02 15,027 15,787
Jul-02 15,227 15,965
Aug-02 15,383 16,105
Sep-02 15,554 16,223
Oct-02 15,568 16,285
Nov-02 15,526 16,270
Dec-02 15,725 16,441
Jan-03 15,739 16,487
Feb-03 15,852 16,599
Mar-03 15,838 16,594
Apr-03 15,895 16,657
May-03 15,995 16,665
Jun-03 15,986 16,700
Jul-03 15,612 16,398
Aug-03 15,716 16,505
Sep-03 16,000 16,787
Oct-03 15,925 16,730
Nov-03 15,939 16,778
Dec-03 16,059 16,943
Jan-04 16,149 17,051
Feb-04 16,268 17,200
WM GROUP OF FUNDS
VT ANNUAL REPORT UPDATE MATERIAL
PERFORMANCE NAV -- MOUNTAIN CHARTS (VALUE OF $10,000 INVESTMENT OVER 10-YEARS)
DATA AS OF 12/31/2005
CLASS 1 SHARES
10,000
VT U.S.
GOVERNMENT CITIGROUP
DATE SECURITIES FUND MORTGAGE INDEX
---- ---------------- --------------
Mar-04 16,343 17,275
Apr-04 16,073 16,971
May-04 16,014 16,917
Jun-04 16,137 17,064
Jul-04 16,261 17,225
Aug-04 16,495 17,507
Sep-04 16,512 17,531
Oct-04 16,621 17,682
Nov-04 16,559 17,631
Dec-04 16,669 17,761
Jan-05 16,730 17,852
Feb-05 16,669 17,775
Mar-05 16,622 17,727
Apr-05 16,825 17,936
May-05 16,934 18,082
Jun-05 16,983 18,145
Jul-05 16,902 18,060
Aug-05 17,049 18,220
Sep-05 16,951 18,120
Oct-05 16,853 18,004
Nov-05 16,902 18,060
Dec-05 17,049 18,248
Avg Annual 10-Yr Cumulative
ENTER RETURNS 5.47% 82.47
10,000
Check 17,033 18,247
Difference -0.09% -0.01%
Must be within
+/-0.20% OK OK
(PHOTO) PORTFOLIO MANAGER (GRAPHIC)
Craig V.Sosey
WM Advisors,Inc.
MBS. The WM VT U.S. Government Securities Fund's overweighted position in this
area thus detracted from performance. The Fund's best-performing sector was
non-agency collateralized mortgage obligations (CMOs). Due to their unique debt
structure, the durations on these securities did not extend significantly as
overall prepayment activity slowed. Consequently,their prices were more stable
than those of MBS.
During the period,the Fund added to its positions in non-agency CMOs on the
belief that they would outperform versus other mortgage-backed securities. On
the other hand,the Fund decreased its position in 15-year MBS on the belief that
a flattening yield curve would make these issues less attractive. The Fund's
allocation to Ginnie Mae (GNMA) securities dropped as they became somewhat
overvalued,making it difficult to invest new money.
Looking forward,we anticipate that the Federal Reserve will continue its
monetary tightening campaign for a few months into 2006. If this happens,we
believe that MBS spreads are likely to remain tight. Still, we would expect that
MBS will outperform versus other securities,and we will look to find value in
agency securities. In our view, economic growth in the upcoming fiscal year will
be weaker than current consensus projections. We also believe that inflation
will be more muted than expected,leaving the Fed room to halt its monetary
tightening campaign relatively early in the year.
PORTFOLIO QUALITY(3)
As of As of
Rating 12/31/05 12/31/04 Change
- ------ -------- -------- ------
Aaa 100% 100% 0%
FUND CHARACTERISTICS
AS OF DECEMBER 31, 2005
Weighted Average Maturity (years): 5.8
Weighted Average Duration (years): 4.4
Portfolio Turnover (for fiscal year): 33%
Number of Securities: 206
Expense Ratio
(Class 1 shares for fiscal year): 0.54%
Total Net Assets: $275.6 million
PORTFOLIO COMPOSITION(3)
As of As of
Asset Class 12/31/05 12/31/04 Change
----------- -------- -------- ------
FHLMC/FGLMC 34% 32% +2%
FNMA 24% 24% 0%
CMOs 22% 19% +3%
(PIE CHART) GNMA 6% 10% -4%
U.S.Government Agency 6% 4% +2%
U.S.Treasuries 5% 8% -3%
Cash Equivalents 3% 3% 0%
(3) May not reflect the current portfolio composition.
27
(GRAPHIC) VT Income Fund
ANNUAL TOTAL RETURNS (1)
Class 1 shares
(Calendar Year)
2005 2.40%
2004 5.56%
2003 9.78%
2002 9.61%
2001 8.08%
2000 10.45%
1999 -2.16%
1998 7.45%
1997 11.35%
1996 0.43%
INVESTMENT STRATEGY
During 2005, the U.S. economy grew at a solid pace, with reasonable gains in
employment and sustained strength in consumer spend-ing. Continuing with the
course it began in June 2004, the Federal Reserve (the Fed) raised the federal
funds target rate eight times during the period, bringing the rate to 4.25% by
the end of the year. While short-and intermediate-term bond yields moved upward
in conjunction with the Fed's actions, yields on 10-year Treasury notes ended
the period only a bit higher.
During the period, a slightly more aggressive stance in credit quality helped
the WM VT Income Fund as high-yield securities benefited from investors'
increasing appetite for risk. However, the Fund's weightings within the
investment-grade corporate sector detracted from performance, as Baa-rated bonds
underperformed A-rated or higher securities. Corporate bonds rated Baa were hurt
due to an increasing number of companies taking on more debt to finance stock
repurchases and/or higher dividends. An overweighting in mortgage-backed
securities
Data shown is past performance and does not guarantee future results. Current
performance, including the most recent month-end results, which may be higher or
lower than the data shown, can be obtained by calling 800-222-5852. Your
investment's return and principal value will fluctuate, so it may be worth more
or less upon redemption. Performance shown below does not account for
fees, expenses, and charges of any variable insurance contract or retirement
plan. If these fees were reflected, performance would be lower.
Fixed-income investments are subject to interest rate risk, and their value will
decline as interest rates rise. Lower-rated securities are subject to additional
credit and default risks. International investing involves increased risks due
to currency fluctuations, political or social instability, and differences in
accounting standards.
AVERAGE ANNUAL TOTAL RETURNS (1) AS OF DECEMBER 31, 2005
1-Year 5-Year 10-Year Since Inception Inception Date
------ ------ ------- --------------- --------------
CLASS 1 SHARES 2.40% 7.05% 6.20% 6.49% 5/7/93
CLASS 2 SHARES 2.06% -- -- 5.92% 11/6/01
Citigroup Broad Investment-Grade
Bond Index(2) 2.57% 5.93% 6.19% 6.42%
VALUE OF A $10,000 INVESTMENT (1) DECEMBER 31, 1995 - DECEMBER 31, 2005
(PERFORMANCE GRAPH)
See Glossary on page 31 for definitions of indices and terms.
(1) Performance reflects ongoing fund expenses, which may have been waived, and
assumes reinvestment of all dividends and capital gains. Performance does
not reflect the impact of federal, state, or municipal taxes. If it
did, performance would be lower.
(2) Returns shown for the index assume reinvestment of all dividends and
distributions, and the since-inception return shown for the index is
calculated from 4/30/93. Indices are unmanaged, and individuals cannot
invest directly in an index.
28
WM GROUP OF FUNDS
VT ANNUAL REPORT UPDATE MATERIAL
PERFORMANCE NAV -- MOUNTAIN CHARTS (VALUE OF $10,000 INVESTMENT OVER 10-YEARS)
DATA AS OF 12/31/2005
CLASS 1 SHARES
CITIGROUP
BROAD
INVESTMENT
10,000 GRADE BOND
DATE VT INCOME FUND INDEX
- ------ -------------- ----------
DEC-95 10,000 10,000
Jan-96 9,990 10,068
Feb-96 9,627 9,897
Mar-96 9,522 9,826
Apr-96 9,406 9,753
May-96 9,386 9,747
Jun-96 9,523 9,873
Jul-96 9,543 9,899
Aug-96 9,463 9,886
Sep-96 9,671 10,058
Oct-96 9,962 10,284
Nov-96 10,153 10,454
Dec-96 10,042 10,362
Jan-97 10,022 10,402
Feb-97 10,063 10,413
Mar-97 9,899 10,308
Apr-97 10,066 10,456
May-97 10,159 10,554
Jun-97 10,315 10,680
Jul-97 10,760 10,969
Aug-97 10,569 10,875
Sep-97 10,771 11,034
Oct-97 10,975 11,193
Nov-97 11,040 11,246
Dec-97 11,180 11,361
Jan-98 11,323 11,507
Feb-98 11,290 11,499
Mar-98 11,323 11,544
Apr-98 11,367 11,604
May-98 11,534 11,715
Jun-98 11,658 11,812
Jul-98 11,635 11,836
Aug-98 11,771 12,017
WM GROUP OF FUNDS
VT ANNUAL REPORT UPDATE MATERIAL
PERFORMANCE NAV -- MOUNTAIN CHARTS (VALUE OF $10,000 INVESTMENT OVER 10-YEARS)
DATA AS OF 12/31/2005
CLASS 1 SHARES
CITIGROUP
BROAD
10,000 INVESTMENT
VT INCOME GRADE BOND
DATE FUND INDEX
---- --------- ----------
Sep-98 12,113 12,301
Oct-98 11,848 12,246
Nov-98 11,998 12,313
Dec-98 12,012 12,351
Jan-99 12,129 12,443
Feb-99 11,801 12,225
Mar-99 11,914 12,295
Apr-99 11,973 12,335
May-99 11,806 12,222
Jun-99 11,707 12,180
Jul-99 11,682 12,131
Aug-99 11,658 12,123
Sep-99 11,774 12,268
Oct-99 11,824 12,305
Nov-99 11,787 12,304
Dec-99 11,753 12,247
Jan-00 11,715 12,213
Feb-00 11,829 12,356
Mar-00 12,016 12,517
Apr-00 11,927 12,479
May-00 11,862 12,468
Jun-00 12,146 12,728
Jul-00 12,262 12,844
Aug-00 12,444 13,028
Sep-00 12,504 13,116
Oct-00 12,544 13,200
Nov-00 12,728 13,414
Dec-00 12,981 13,668
Jan-01 13,263 13,893
Feb-01 13,316 14,017
Mar-01 13,364 14,090
Apr-01 13,241 14,024
May-01 13,309 14,115
WM GROUP OF FUNDS
VT ANNUAL REPORT UPDATE MATERIAL
PERFORMANCE NAV -- MOUNTAIN CHARTS (VALUE OF $10,000 INVESTMENT OVER 10-YEARS)
DATA AS OF 12/31/2005
CLASS 1 SHARES
CITIGROUP
BROAD
10,000 INVESTMENT
VT INCOME GRADE BOND
DATE FUND INDEX
---- --------- ----------
Jun-01 13,350 14,161
Jul-01 13,717 14,488
Aug-01 13,908 14,648
Sep-01 13,867 14,828
Oct-01 14,207 15,127
Nov-01 14,098 14,919
Dec-01 14,030 14,831
Jan-02 14,166 14,948
Feb-02 14,302 15,091
Mar-02 14,098 14,842
Apr-02 14,370 15,124
May-02 14,465 15,253
Jun-02 14,437 15,366
Jul-02 14,408 15,549
Aug-02 14,722 15,821
Sep-02 14,908 16,072
Oct-02 14,879 16,000
Nov-02 14,979 15,997
Dec-02 15,378 16,329
Jan-03 15,521 16,343
Feb-03 15,791 16,575
Mar-03 15,833 16,560
Apr-03 16,118 16,705
May-03 16,616 17,014
Jun-03 16,625 16,984
Jul-03 16,021 16,410
Aug-03 16,096 16,523
Sep-03 16,595 16,956
Oct-03 16,536 16,800
Nov-03 16,642 16,849
Dec-03 16,883 17,017
Jan-04 17,063 17,158
Feb-04 17,215 17,342
WM GROUP OF FUNDS
VT ANNUAL REPORT UPDATE MATERIAL
PERFORMANCE NAV -- MOUNTAIN CHARTS (VALUE OF $10,000 INVESTMENT OVER 10-YEARS)
DATA AS OF 12/31/2005
CLASS 1 SHARES
CITIGROUP
BROAD
10,000 INVESTMENT
VT INCOME GRADE BOND
DATE FUND INDEX
---- ---------------- ----------
Mar-04 17,367 17,474
Apr-04 16,884 17,019
May-04 16,747 16,946
Jun-04 16,905 17,046
Jul-04 17,082 17,215
Aug-04 17,436 17,556
Sep-04 17,532 17,602
Oct-04 17,709 17,756
Nov-04 17,613 17,607
Dec-04 17,823 17,776
Jan-05 17,903 17,890
Feb-05 17,838 17,783
Mar-05 17,662 17,685
Apr-05 17,854 17,933
May-05 18,063 18,133
Jun-05 18,199 18,237
Jul-05 18,079 18,076
Aug-05 18,317 18,308
Sep-05 18,129 18,114
Oct-05 17,958 17,974
Nov-05 18,061 18,053
Dec-05 18,248 18,232
Avg Annual 10-Yr Cumulative
ENTER RETURNS 6.20% 82.33
10,000
CHECK 18,249 18,233
Difference 0.00% 0.01%
Must be within +/-0.20% OK OK
(PHOTOS) PORTFOLIO MANAGERS (GRAPHIC)
John R.Friedl, CFA and Gary
J.Pokrzywinski, CFA
WM Advisors, Inc.
also hurt performance due to the volatility in long-term interest rates.
Securities that added to performance included Petrobras, which gained on the
back of higher oil prices; Conexant Systems (information technology), which rose
on an increase in technology spending; and United Airlines, which benefited from
its impending emergence from bankruptcy. DVI detracted from performance due to a
deterioration of asset value. Absolute performance was also hurt by General
Motors and Ford experiencing both slower sales in key market segments and
increased pension obligations. The Fund was generally market-weighted in the
auto sector, so these two names detracted only slightly from relative
performance.
Looking forward, we anticipate that the Federal Reserve will halt its monetary
tightening campaign relatively early in 2006. It is our view that in the
upcoming year the economy will stabilize at a weaker-than-expected growth rate,
and that inflation will be more muted than consensus expectations. Given this
environment, we expect mortgage-backed securities to outperform, and therefore
we maintain an overweighting in the sector. Although corporate spreads are
tight, we still believe the sector offers good value, especially in out-of-favor
securities. Therefore, we will seek to keep the sector market-weighted but will
strive to continue holding out-of-favor corporate bonds that provide a higher
yield or are slightly more aggressive in credit quality. We will also strive to
continue overweighting certain sectors of the corporate bond market that we
favor long term, including health care, utilities, REITs, and gaming.
PORTFOLIO QUALITY(3)
As of As of
Rating 12/31/05 12/31/04 Change
- ------ -------- -------- ------
Aaa 31% 30% +1%
Aa 7% 7% 0%
A 12% 10% +2%
Baa 34% 37% -3%
Ba 4% 5% -1%
B 9% 7% +2%
Caa 1% 2% -1%
Equities 1% 0% +1%
Not Rated 1% 2% -1%
FUND CHARACTERISTICS
AS OF DECEMBER 31, 2005
Weighted Average Maturity (years): 7.3
Weighted Average Duration (years): 5.1
Portfolio Turnover (for fiscal year): 13%
Number of Securities: 134
Expense Ratio
(Class 1 shares for fiscal year): 0.54%
Total Net Assets: $205.5 million
PORTFOLIO COMPOSITION(3)
As of As of
Asset Class 12/31/05 12/31/04 Change
----------- -------- -------- ------
Domestic Corporate Bonds 58% 59% -1%
Mortgage-Backed Bonds 22% 21% +1%
Foreign Corporate
Bonds (U.S.$) 8% 10% -2%
(PIE CHART) U.S.Treasuries 7% 6% +1%
Equities 1% 0% +1%
Foreign Government
Bonds (U.S.$) 1% 1% 0%
Cash Equivalents 3% 3% 0%
(3) May not reflect the current portfolio composition.
29
(GRAPHIC) VT Money Market Fund (PHOTO) PORTFOLIO MANAGER
Scott J.Peterson, CFA
WM Advisors,Inc.
(GRAPHIC)
INVESTMENT STRATEGY
Because money market investments are closely tied to the federal funds target
rate, the actions of the Federal Reserve (the Fed) have a substantial impact on
WM VT Money Market Fund performance. The Fed continued its monetary tightening
policy in 2005, raising the federal funds target rate eight times during the
period by a total of two full percentage points. At the close of the period, the
target rate stood at 4.25%. For the majority of the year, the Fed reiterated
language in its monetary policy statements implying that rate increases would
continue at a "measured"pace. In its final policy statement of the year,
however, the Fed meaningfully altered its language to indicate that it may be
near the end of its tightening regime. Many market participants now anticipate
that the Fed will halt its campaign sometime in 2006.
The Fund's 7-day simple yield (annualized) increased from 1.70% on December 31,
2004, to 3.52% on December 31, 2005. Most of the difference between the Fund's
yield and the Fed's target rate was due to Fund expenses. The Fund's assets
decreased from $20 million on December 31, 2004, to $16.4 million on December
31, 2005.
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. Performance shown below does not account for fees,
expenses, and charges of any variable insurance contract or retirement plan. If
these fees were reflected, performance would be lower.
An investment in the Fund is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency. Although the Fund seeks to
preserve the value of your investment at $1.00 per share, it is possible to lose
money by investing in the Fund.
The 7-day simple yield more closely reflects current Fund earnings than the
total return data.
AVERAGE ANNUAL TOTAL RETURNS (1) AS OF DECEMBER 31, 2005
1-Year 5-Year 10-Year Since Inception Inception Date
------ ------ ------- --------------- --------------
CLASS 1 SHARES 2.59% 1.82% 3.43% 3.56% 5/10/93
CLASS 2 SHARES 2.33% -- -- 1.12% 11/6/01
FUND YIELDS AND AVERAGE MATURITY(2)
AS OF DECEMBER 31, 2005
7-Day 7-Day Weighted
Simple Yield Effective Yield Average Maturity
(Class 1 Shares) (Class 1 Shares) (Days)
---------------- ---------------- ----------------
VT MONEY
MARKET FUND 3.52% 3.59% 42
PORTFOLIO COMPOSITION(3)
AS OF DECEMBER 31, 2005
Corporate Bonds and Notes 38%
Taxable Municipal Bonds 34%
Repurchase Agreement 9%
Commercial Paper (Yankee) 8%
Funding Agreement 3%
Certificates of Deposit (Domestic and Yankee) 8%
(1) Performance reflects ongoing fund expenses, which may have been waived, and
assumes reinvestment of all dividends and capital gains. Performance does
not reflect the impact of federal, state, or municipal taxes. If it
did,performance would be lower. The Fund's performance between 1995 and
1999 benefited from the agreement of WM Advisors and its affiliates to
limit the Fund's expenses.
(2) The 7-day simple yield is calculated based on the income generated by an
investment in the Fund over a 7-day period and is expressed as an annual
percentage rate. The 7-day effective yield is calculated similarly to the
7-day simple yield but assumes that income earned from the Fund's
investments is reinvested and compounded.
(3) May not reflect the current portfolio composition.
30
Glossary (GRAPHIC)
DEFINITIONS OF INDICES
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 BROAD INVESTMENT-GRADE CREDIT 1-3 YEARS INDEX:
Measures the performance of bonds, including U.S.and non-U.S.corporate
securities and non-U.S. sovereign and provincial securities, with maturities
between one and three years.
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.
MORGAN STANLEY CAPITAL INTERNATIONAL (MSCI) EAFE INDEX:
A broad-based, capitalization-weighted index of equity markets representing 21
countries in Europe, Australasia, and the Far East.
NATIONAL ASSOCIATION OF REAL ESTATE INVESTMENT TRUST (NAREIT) ALL REIT INDEX:
Reflects the aggregate performance of all publicly traded REITs that
own, develop, and manage properties.
RUSSELL 1000(R) GROWTH INDEX:
Measures the performance of those Russell 1000(R) Index securities with higher
price-to-book ratios and higher forecasted growth values.
RUSSELL 2000(R) GROWTH INDEX:
Measures the performance of those Russell 2000(R) Index securities with higher
price-to-book ratios and higher forecasted growth values.
RUSSELL 2000(R) VALUE INDEX:
Measures the performance of those Russell 2000(R) Index securities with lower
price-to-book ratios and lower forecasted growth values.
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.
S&P 500/BARRA VALUE INDEX:
An index constructed by ranking the securities in the S&P 500 by price-to-book
ratio and including the securities with the lowest price-to-book ratios that
represent approximately half of the market capitalization of the S&P 500.
S&P MIDCAP 400:
A weighted index of the common stocks of 400 mid-size companies.
DEFINITIONS OF TERMS
BETA:
A quantitative measure of a Fund's historical volatility relative to the overall
market (S&P 500). A beta above 1 indicates more volatility than the market, and
a beta below 1 indicates less volatility. Results are calculated using
three-month rolling returns for Class 1 shares for the three-year period ended
12/31/05. Source:Lipper, Inc.
BOND RATINGS:
Provided by Moody's Investors Service (Moody's). If an issue is not rated by
Moody's, its Standard & Poor's rating or Fitch rating is converted to the
equivalent Moody's rating and incorporated (non-rated issues are not classified
by these rating services). The ratings represent the company's opinion of the
credit quality of securities and are intended to reflect the issuer's ability to
pay back principal and interest.
STANDARD DEVIATION:
Measures the historical fluctuation of returns around the arithmetic average
return of the investment. The higher the standard deviation (as one measure of
risk), the greater the variability of the investment returns. Results are
calculated for the three-year period ended 12/31/05, and Fund results are for
Class 1 shares. Sources:Ibbotson Associates and Lipper, Inc.
31
Expense Information
WM VARIABLE TRUST
As a shareholder of the VT REIT Fund, VT Equity Income Fund, VT Growth & Income
Fund, VT West Coast Equity Fund, VT Mid Cap Stock Fund, VT Growth Fund, VT Small
Cap Value Fund, VT Small Cap Growth Fund, VT International Growth Fund, VT Short
Term Income Fund, VT U.S. Government Securities Fund, VT Income Fund or VT Money
Market Fund, (collectively, the "Funds"), you incur ongoing costs, including
management fees, distribution and/or service fees, and other Fund expenses. This
example is intended to help you understand your ongoing costs (in dollars) of
investing in the Funds and to compare these costs with the ongoing costs of
investing in other mutual funds. Expenses shown below and on the following page
do not account for fees, expenses and charges of any variable insurance contract
or retirement plan. If these fees had been reflected, expenses would have been
higher.
The example is based on an investment of $1,000 invested at the beginning of the
period and held for the entire period July 1, 2005 to December 31, 2005.
ACTUAL EXPENSES:
The first section of the table below provides information about actual account
values and actual expenses. You may use the information in these columns,
together with the amount you invested, to estimate the expenses that you paid
over the period. Simply divide your account value by $1,000 (for example, an
$8,600 account value divided by $1,000 = $8.6), then multiply the result by the
number in the third column under the heading entitled "Expenses Paid During
Period" to estimate the expenses you paid on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES:
The second section of the table below provides information about hypothetical
account values and hypothetical expenses based on each Fund's actual expense
ratios and an assumed rate of return of 5% per year before expenses (rather than
each Fund's actual rate of return). The hypothetical account values and expenses
may not be used to estimate the actual ending balance or expenses you paid for
the period. You may use this information to compare the ongoing costs of
investing in the Funds and other 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 separate
account expenses. Therefore, the hypothetical section of the table is useful in
comparing ongoing costs only, and will not help you compare the relative total
costs of owning different 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 7/1/05- VALUE VALUE 7/1/05- EXPENSE
7/1/05 12/31/05 12/31/05 7/1/05 12/31/05 12/31/05 RATIO
--------- -------- ----------- --------- -------- ----------- -------
VT REIT Fund
Class 1 ................... $1,000 $1,045 $4.64 $1,000 $1,021 $4.58 0.90%
Class 2 ................... 1,000 1,044 5.92 1,000 1,019 5.85 1.15%
VT Equity Income Fund
Class 1 ................... $1,000 $1,055 $3.42 $1,000 $1,022 $3.36 0.66%
Class 2 ................... 1,000 1,054 4.71 1,000 1,021 4.63 0.91%
VT Growth & Income Fund
Class 1 ................... $1,000 $1,030 $3.94 $1,000 $1,021 $3.92 0.77%
Class 2 ................... 1,000 1,028 5.22 1,000 1,020 5.19 1.02%
VTWest Coast Equity Fund
Class 1 ................... $1,000 $1,100 $3.60 $1,000 $1,022 $3.47 0.68%
Class 2 ................... 1,000 1,099 4.92 1,000 1,021 4.74 0.93%
VT Mid Cap Stock Fund
Class 1 ................... $1,000 $1,079 $4.30 $1,000 $1,021 $4.18 0.82%
Class 2 ................... 1,000 1,078 5.60 1,000 1,020 5.45 1.07%
VT Growth Fund
Class 1 ................... $1,000 $1,087 $4.47 $1,000 $1,021 $4.33 0.85%
Class 2 ................... 1,000 1,086 5.78 1,000 1,020 5.60 1.10%
VT Small Cap Value Fund
Class 1 ................... $1,000 $1,012 $4.97 $1,000 $1,020 $4.99 0.98%
Class 2 ................... 1,000 1,011 6.24 1,000 1,019 6.26 1.23%
VT Small Cap Growth Fund
Class 1 ................... $1,000 $1,086 $5.52 $1,000 $1,020 $5.35 1.05%
Class 2 ................... 1,000 1,085 6.83 1,000 1,019 6.61 1.30%
32
Expense Information (continued)
WM VARIABLE TRUST
HYPOTHETICAL
ACTUAL EXPENSES (5% RETURN BEFORE EXPENSES)
---------------------------------- ----------------------------------
EXPENSES EXPENSES
BEGINNING ENDING PAID DURING BEGINNING ENDING PAID DURING
ACCOUNT ACCOUNT PERIOD* ACCOUNT ACCOUNT PERIOD*
VALUE VALUE 7/1/05- VALUE VALUE 7/1/05- EXPENSE
7/1/05 12/31/05 12/31/05 7/1/05 12/31/05 12/31/05 RATIO
--------- -------- ----------- --------- -------- ----------- -------
VT International Growth Fund
Class 1 ............................. $1,000 $1,206 $6.01 $1,000 $1,020 $5.50 1.08%
Class 2 ............................. 1,000 1,205 7.39 1,000 1,019 6.77 1.33%
VT Short Term Income Fund
Class 1 ............................. $1,000 $1,008 $3.04 $1,000 $1,022 $3.06 0.60%
Class 2 ............................. 1,000 1,008 4.30 1,000 1,021 4.33 0.85%
VT U.S. Government Securities Fund
Class 1 ............................. $1,000 $1,004 $2.73 $1,000 $1,022 $2.75 0.54%
Class 2 ............................. 1,000 1,003 3.99 1,000 1,021 4.02 0.79%
VT Income Fund
Class 1 ............................. $1,000 $1,003 $2.68 $1,000 $1,023 $2.70 0.53%
Class 2 ............................. 1,000 1,001 3.93 1,000 1,021 3.97 0.78%
VT Money Market Fund
Class 1 ............................. $1,000 $1,015 $3.71 $1,000 $1,022 $3.72 0.73%
Class 2 ............................. 1,000 1,014 4.98 1,000 1,020 4.99 0.98%
* Expenses are equal to each Fund's annualized expense ratio, multiplied by
the average account value over the period, multiplied by the 184 days in
the most recent fiscal half-year, divided by 365 days in the year (to
reflect the one-half year period).
33
Financial Statements:
Portfolio of Investments
VT REIT FUND
December 31, 2005
VALUE
SHARES (000S)
- ------ -------
REAL ESTATE INVESTMENT TRUSTS (REITS) - 86.1%
DIVERSIFIED - 3.8%
19,800 iStar Financial, Inc ..................................... $ 706
15,400 Vornado Realty Trust ..................................... 1,285
-------
Total Diversified ........................................ 1,991
-------
HEALTH CARE - 6.2%
48,000 Health Care Property Investors, Inc. ..................... 1,227
31,300 Healthcare Realty Trust, Inc. ............................ 1,041
46,500 Nationwide Health Properties, Inc. ....................... 995
-------
Total Health Care ........................................ 3,263
-------
INDUSTRIAL/OFFICE - 24.1%
INDUSTRIAL - 6.6%
22,300 AMB Property Corporation ................................. 1,097
14,600 EastGroup Properties, Inc. ............................... 659
36,900 ProLogis ................................................. 1,724
-------
3,480
-------
MIXED - 1.9%
30,900 Duke Realty Corporation** ................................ 1,032
-------
OFFICE - 15.6%
25,200 Alexandria Real Estate Equities, Inc. .................... 2,029
18,000 Boston Properties, Inc. .................................. 1,334
27,700 CarrAmerica Realty Corporation ........................... 959
60,300 Corporate Office Properties Trust ........................ 2,143
23,000 SL Green Realty Corporation** ............................ 1,757
-------
8,222
-------
Total Industrial/Office .................................. 12,734
-------
LODGING/RESORTS - 5.8%
76,600 Equity Inns, Inc. ........................................ 1,038
25,900 Hospitality Properties Trust ............................. 1,038
50,800 Host Marriott Corporation ................................ 963
-------
Total Lodging/Resorts .................................... 3,039
-------
MORTGAGE/FINANCIAL - 1.4%
18,200 Redwood Trust, Inc.** .................................... 751
-------
RESIDENTIAL - 11.3%
APARTMENTS - 11.3%
24,100 AvalonBay Communities, Inc. .............................. 2,151
58,100 Equity Residential ....................................... 2,273
65,400 United Dominion Realty Trust, Inc. ....................... 1,533
-------
Total Residential ........................................ 5,957
-------
RETAIL - 26.7%
FREESTANDING - 1.7%
45,400 Commercial Net Lease Realty .............................. 925
-------
REGIONAL MALLS - 12.1%
42,700 General Growth Properties, Inc. .......................... $ 2,006
30,800 Macerich Company ......................................... 2,068
30,000 Simon Property Group, Inc. ............................... 2,299
-------
6,373
-------
SHOPPING CENTERS - 12.9%
38,200 Developers Diversified Realty Corporation ................ 1,796
21,900 Equity One, Inc. ......................................... 506
56,700 Kimco Realty Corporation ................................. 1,819
22,800 Pan Pacific Retail Properties, Inc. ...................... 1,525
31,100 Weingarten Realty Investors .............................. 1,176
-------
6,822
-------
Total Retail ............................................. 14,120
-------
SELF STORAGE - 2.1%
16,400 Public Storage, Inc. ..................................... 1,111
-------
SPECIALTY - 4.7%
22,300 Entertainment Properties Trust ........................... 909
15,100 Global Signal, Inc. ...................................... 652
26,200 Plum Creek Timber Company, Inc. .......................... 944
-------
Total Specialty .......................................... 2,505
-------
Total REITs
(Cost $29,858) ........................................ 45,471
-------
COMMON STOCKS - 6.5%
CONSUMER DISCRETIONARY - 2.1%
CONSUMER DURABLES & APPAREL - 1.1%
15,567 D.R. Horton, Inc. ........................................ 556
-------
CONSUMER SERVICES - 1.0%
7,800 Harrah's Entertainment, Inc. ............................. 556
-------
Total Consumer Discretionary ............................. 1,112
-------
FINANCIALS - 4.4%
DIVERSIFIED FINANCIALS - 2.3%
22,200 Countrywide Financial Corporation ........................ 759
7,000 St. Joe Company .......................................... 471
-------
1,230
-------
INSURANCE - 2.1%
19,900 Fidelity National Financial, Inc. ........................ 732
15,315 Fidelity National Title Group, Inc.,
Class A ............................................... 373
-------
1,105
-------
Total Financials ......................................... 2,335
-------
Total Common Stocks
(Cost $2,710) ......................................... 3,447
-------
CANADIAN INCOME TRUST - 1.0%
(Cost $479)
ENERGY - 1.0%
11,300 Enerplus Resources Fund (F)** ............................ 542
-------
See Notes to Financial Statements.
34
Portfolio of Investments (continued)
VT REIT FUND
December 31, 2005
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
- --------- -------
REPURCHASE AGREEMENT - 6.7%
(Cost $3,521)
$3,521 Agreement with Morgan Stanley, 2.920% dated
12/30/2005, to be repurchased at $3,522,000
on 01/03/2006 (Collateralized by U.S.
Treasury Notes, having various interest
rates and maturities, market value
$3,633,000) ................................... $ 3,521
-------
SHORT-TERM INVESTMENT - 6.3%
(Cost $3,320)
3,320 Mellon GSL DBT II
Collateral Fund++ ................................ 3,320
-------
TOTAL INVESTMENTS (Cost $39,888*) ............................ 106.6% 56,301
OTHER ASSETS (LIABILITIES) (NET) ............................. (6.6) (3,477)
----- -------
NET ASSETS ................................................... 100.0% $52,824
===== =======
- ----------
* Aggregate cost for federal tax purposes is $39,888.
** Some or all of these securities are on loan at December 31, 2005, and have
an aggregate market value of $3,239,000, representing 6.1% of the total net
assets of the Fund (Collateral Value $3,320,000) (See Note 7 to Financial
Statements).
++ Represents investment purchased with cash collateral for securities loaned.
GLOSSARY OF TERMS
(F) -- Foreign Shares
See Notes to Financial Statements.
35
Portfolio of Investments
VT EQUITY INCOME FUND
December 31, 2005
VALUE
SHARES (000S)
- ------ -------
COMMON STOCKS - 87.4%
CONSUMER DISCRETIONARY - 6.2%
AUTOMOBILES & COMPONENTS - 1.0%
39,900 Johnson Controls, Inc. .................................. $ 2,909
-------
CONSUMER DURABLES & APPAREL - 1.2%
18,800 D.R. Horton, Inc. ....................................... 672
30,000 NIKE Inc., Class B ...................................... 2,603
-------
3,275
-------
CONSUMER SERVICES - 1.8%
32,500 Carnival Corporation .................................... 1,738
96,000 McDonald's Corporation .................................. 3,237
-------
4,975
-------
MEDIA - 1.4%
22,700 Clear Channel Communications, Inc. ...................... 714
20,000 Gannett Company, Inc. ................................... 1,212
115,500 Time Warner Inc.** ...................................... 2,014
-------
3,940
-------
RETAILING - 0.8%
19,936 Federated Department Stores, Inc ........................ 1,322
24,700 Tiffany & Company** ..................................... 946
-------
2,268
-------
Total Consumer Discretionary ............................ 17,367
-------
CONSUMER STAPLES - 6.4%
FOOD & STAPLES RETAILING - 1.4%
80,700 Wal-Mart Stores, Inc. ................................... 3,776
-------
FOOD, BEVERAGE & TOBACCO - 2.8%
33,200 Altria Group, Inc ....................................... 2,481
69,600 Anheuser-Busch Companies, Inc. .......................... 2,990
41,700 Diageo PLC, Sponsored ADR** ............................. 2,431
-------
7,902
-------
HOUSEHOLD & PERSONAL PRODUCTS - 2.2%
12,200 Clorox Company .......................................... 694
42,900 Colgate-Palmolive Company ............................... 2,353
52,000 Procter & Gamble Company** .............................. 3,010
-------
6,057
-------
Total Consumer Staples .................................. 17,735
-------
ENERGY - 12.1%
77,000 Baker Hughes Inc.** ..................................... 4,680
37,500 BPPLC, Sponsored ADR .................................... 2,408
35,484 Chevron Corporation ..................................... 2,015
32,760 ConocoPhillips Company .................................. 1,906
8,900 Enbridge Inc. (F) ....................................... $ 278
28,100 EnCana Corporation ...................................... 1,269
14,800 Enterprise Products Partners LP ......................... 355
99,100 GlobalSantaFe Corporation ............................... 4,772
9,300 Kinder Morgan Energy Partners LP ........................ 445
22,300 Marathon Oil Corporation ................................ 1,360
50,600 Murphy Oil Corporation .................................. 2,732
21,200 Peabody Energy Corporation .............................. 1,747
47,000 Schlumberger Ltd.** ..................................... 4,566
101,788 Valero Energy Corporation ............................... 5,252
-------
Total Energy ............................................ 33,785
-------
FINANCIALS - 25.5%
BANKS - 7.3%
92,602 Bank of America Corporation ............................. 4,274
31,600 Fifth Third Bancorp ..................................... 1,192
41,000 Mellon Financial Corporation ............................ 1,404
129,000 North Fork Bancorporation, Inc. ......................... 3,529
20,300 PNC Financial Services Group, Inc. ...................... 1,255
8,700 SunTrust Banks, Inc ..................................... 633
42,000 TCF Financial Corporation ............................... 1,140
72,000 U.S. Bancorp ............................................ 2,152
78,000 Wells Fargo & Company ................................... 4,901
-------
20,480
-------
DIVERSIFIED FINANCIALS - 8.7%
57,000 Allied Capital Corporation** ............................ 1,674
25,000 Capital One Financial Corporation ....................... 2,160
96,500 Citigroup Inc. .......................................... 4,683
26,000 Franklin Resources, Inc. ................................ 2,445
37,000 Freddie Mac ............................................. 2,418
20,700 Goldman Sachs Group, Inc. ............................... 2,644
102,800 JPMorgan Chase & Company ................................ 4,080
39,500 Morgan Stanley .......................................... 2,241
25,600 T. Rowe Price Group, Inc. ............................... 1,844
-------
24,189
-------
INSURANCE - 9.5%
93,400 ACE Ltd ................................................. 4,991
104,500 AFLAC Inc. .............................................. 4,851
70,000 Allstate Corporation .................................... 3,785
58,800 American International Group, Inc. ...................... 4,012
81,000 Fidelity National Financial, Inc. ....................... 2,980
14,175 Fidelity National Title Group, Inc., Class A ............ 345
43,050 HCC Insurance Holdings, Inc. ............................ 1,278
15,700 Lincoln National Corporation ............................ 833
50,700 Marsh & McLennan Companies, Inc. ........................ 1,610
24,600 MetLife, Inc. ........................................... 1,205
9,400 Prudential Financial, Inc. .............................. 688
-------
26,578
-------
Total Financials ........................................ 71,247
-------
See Notes to Financial Statements.
36
Portfolio of Investments (continued)
VT EQUITY INCOME FUND
December 31, 2005
VALUE
SHARES (000S)
- ------ --------
COMMON STOCKS (CONTINUED)
HEALTH CARE - 8.9%
HEALTH CARE EQUIPMENT & SERVICES - 4.3%
40,000 Becton, Dickinson & Company ............................ $ 2,403
28,600 Cardinal Health, Inc. .................................. 1,966
94,000 HCA, Inc. .............................................. 4,747
16,200 Roche Holding Ltd., Sponsored ADR ...................... 1,213
35,600 Wyeth .................................................. 1,640
--------
11,969
--------
PHARMACEUTICALS & BIOTECHNOLOGY - 4.6%
23,900 Abbott Laboratories .................................... 942
30,000 AstraZeneca PLC, Sponsored ADR ......................... 1,458
21,300 Eli Lilly & Company .................................... 1,205
26,500 GlaxoSmithKline PLC, Sponsored ADR ..................... 1,338
84,800 Johnson & Johnson ...................................... 5,097
127,800 Pfizer Inc. ............................................ 2,980
--------
13,020
--------
Total Health Care ...................................... 24,989
--------
INDUSTRIALS - 9.4%
CAPITAL GOODS - 6.8%
39,700 3M Company ............................................. 3,077
29,500 Boeing Company ......................................... 2,072
46,000 Dover Corporation ...................................... 1,862
5,900 General Dynamics Corporation ........................... 673
111,700 General Electric Company ............................... 3,915
33,600 Honeywell International Inc. ........................... 1,252
32,100 Northrop Grumman Corporation ........................... 1,929
43,000 PACCAR Inc. ............................................ 2,977
19,000 Rockwell Automation, Inc. .............................. 1,124
--------
18,881
--------
COMMERCIAL SERVICES & SUPPLIES - 0.6%
56,500 Waste Management Inc. .................................. 1,715
--------
TRANSPORTATION - 2.0%
35,500 Union Pacific Corporation .............................. 2,858
36,400 United Parcel Service, Inc., Class B ................... 2,736
--------
5,594
--------
Total Industrials ...................................... 26,190
--------
INFORMATION TECHNOLOGY - 8.6%
COMMUNICATIONS EQUIPMENT - 2.3%
85,000 Harris Corporation** ................................... 3,656
153,000 Nokia Oyj, Sponsored ADR** ............................. 2,800
--------
6,456
--------
COMPUTERS & PERIPHERALS - 1.7%
92,300 Hewlett-Packard Company ................................ 2,643
27,300 International Business Machines Corporation ............ 2,244
--------
4,887
--------
IT SERVICES - 1.0%
32,600 Automatic Data Processing, Inc. ........................ $ 1,496
28,600 First Data Corporation ................................. 1,230
--------
2,726
--------
SEMICONDUCTORS & SEMICONDUCTOR
EQUIPMENT - 2.1%
61,000 Intel Corporation ...................................... 1,523
90,000 Microchip Technology Inc. .............................. 2,893
4,100 Samsung Electronics Company Ltd., GDR++ ................ 1,336
--------
5,752
--------
SOFTWARE - 1.5%
163,500 Microsoft Corporation .................................. 4,276
--------
Total Information Technology ........................... 24,097
--------
MATERIALS - 3.7%
27,800 Alcan Inc. (F) ......................................... 1,138
61,000 Cemex SA de CV, Sponsored ADR .......................... 3,619
45,000 Dow Chemical Company ................................... 1,972
12,100 E.I. du Pont de Nemours & Company** .................... 514
19,700 Temple-Inland Inc. ..................................... 884
25,000 United States Steel Corporation ........................ 1,202
16,100 Weyerhaeuser Company ................................... 1,068
--------
Total Materials ........................................ 10,397
--------
TELECOMMUNICATION SERVICES - 3.7%
35,900 Alltel Corporation ..................................... 2,265
155,800 AT&T Inc. .............................................. 3,816
109,300 BellSouth Corporation .................................. 2,962
39,300 Verizon Communications Inc. ............................ 1,184
--------
Total Telecommunication Services ....................... 10,227
--------
UTILITIES - 2.9%
23,000 Constellation Energy Group ............................. 1,325
8,400 Dominion Resource Inc. ................................. 648
62,400 FPL Group, Inc. ........................................ 2,593
105,000 Southern Company ....................................... 3,626
--------
Total Utilities ........................................ 8,192
--------
Total Common Stocks
(Cost $199,676) ..................................... 244,226
--------
REAL ESTATE INVESTMENT TRUSTS (REITS) - 5.7%
27,800 AMB Property Corporation ............................... 1,367
6,500 AvalonBay Communities, Inc. ............................ 580
16,500 Developers Diversified Realty Corporation .............. 776
12,200 Duke Realty Corporation ................................ 407
29,500 Equity Residential ..................................... 1,154
21,000 General Growth Properties, Inc. ........................ 987
32,200 Health Care Property Investors, Inc. ................... 823
90,300 Host Marriott Corporation .............................. 1,711
21,000 Kimco Realty Corporation** ............................. 674
11,000 Macerich Company ....................................... 739
24,000 Plum Creek Timber Company, Inc. ........................ 865
See Notes to Financial Statements.
37
Portfolio of Investments (Continued)
VT EQUITY INCOME FUND
December 31, 2005
VALUE
SHARES (000S)
------ -------
REAL ESTATE INVESTMENT TRUSTS (REITS) (CONTINUED)
42,000 ProLogis ................................................. $ 1,962
18,800 Public Storage, Inc. ..................................... 1,273
19,000 Simon Property Group, Inc. ............................... 1,456
14,400 Vornado Realty Trust ..................................... 1,202
-------
Total REITs
(Cost $10,748) ........................................ 15,976
-------
PRINCIPAL
AMOUNT
(000S)
- ---------
CONVERTIBLE SECURITIES - 1.1%
CONVERTIBLE BONDS AND NOTES - 1.1%
$ 600 CV Therapeutics, Inc., Conv. Sr. Sub. Deb.,
2.000% due 05/16/2023 ............................... 510
375 deCODE genetics, Inc., Conv. Sr. Note,
3.500% due 04/15/2011 ............................... 310
600 Echostar Communications, Conv. Sub. Note,
5.750% due 05/15/2008 ............................... 588
1,750 TriQuint Semiconductor, Inc., Conv. Sub. Note,
4.000% due 03/01/2007 ............................... 1,717
--------
Total Convertible Securities
(Cost $3,013) ....................................... 3,125
--------
FIXED INCOME SECURITIES - 1.1%
CORPORATE BONDS AND NOTES - 1.1%
100 Aetna Inc., Company Guarantee,
7.125% due 08/15/2006 ............................... 102
500 Aetna Inc., Sr. Note,
7.875% due 03/01/2011 ............................... 561
45 Baxter International Inc., Note,
7.125% due 02/01/2007 ............................... 46
1,000 ERAC USA Finance Company, Note,
7.350% due 06/15/2008++ ............................. 1,050
59 Raytheon Company, Sr. Note,
6.150% due 11/01/2008 ............................... 61
1,000 TELUS Corporation, Note,
8.000% due 06/01/2011 ............................... 1,122
100 Texas-New Mexico Power Company, Sr. Note,
6.250% due 01/15/2009 ............................... 103
--------
Total Corporate Bonds and Notes
(Cost $2,834) ....................................... 3,045
--------
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES - 0.0%
FEDERAL HOME LOAN MORTGAGE CORPORATION (FHLMC) - 0.0%
38 6.500% due 09/01/2030 .................................. 39
23 7.000% due 09/01/2030 .................................. 24
--------
Total U.S. Government Agency
Mortgage-Backed Securities
(Cost $60) .......................................... 63
--------
Total Fixed Income Securities
(Cost $2,894) ....................................... 3,108
--------
SHARES
------
WARRANTS - 0.0% $
(Cost $0)
250 V2 Music Holdings PLC+,++ ................................ $ 0
-------
PRINCIPAL
AMOUNT
(000S)
- ---------
REPURCHASE AGREEMENT - 4.9%
(Cost $13,618)
$13,618 Agreement with Morgan Stanley, 2.920%
dated 12/30/2005, to be repurchased at
$13,622,000 on 01/03/2006
(Collateralized by U.S. Treasury Notes, having
various interest rates and maturities, market
value $14,053,000) ..................................... 13,618
--------
SHORT-TERM INVESTMENT - 8.3%
(Cost $23,119)
23,119 Mellon GSL DBT II
Collateral Fund+++ .......................... 23,119
--------
TOTAL INVESTMENTS (Cost $253,068*) ......................... 108.5% 303,172
OTHER ASSETS (LIABILITIES) (NET) ........................... (8.5) (23,714)
----- --------
NET ASSETS ................................................. 100.0% $279,458
===== ========
- ----------
* Aggregate cost for federal tax purposes is $253,192.
** Some or all of these securities are on loan at December 31, 2005, and have
an aggregate market value of $22,434,000, representing 8.0% of the total
net assets of the Fund (Collateral Value $23,119,000) (See Note 7 to
Financial Statements).
+ Non-income producing security.
++ Security acquired in a transaction exempt from registration under Rule
144A of the Securities Act of 1933, as amended.
+++ Represents investment purchased with cash collateral for securities loaned.
GLOSSARY OF TERMS
ADR -- American Depositary Receipt
(F) -- Foreign Shares
GDR -- Global Depositary Receipt
See Notes to Financial Statements.
38
Portfolio Of Investments
VT GROWTH & INCOME FUND
December 31, 2005
VALUE
SHARES (000S)
------ -------
COMMON STOCKS - 97.5%
CONSUMER DISCRETIONARY - 10.1%
CONSUMER DURABLES & APPAREL - 0.5%
88,200 Mattel, Inc.** .......................................... $ 1,395
-------
CONSUMER SERVICES - 4.4%
53,000 Apollo Group, Inc., Class A+ ............................ 3,205
160,000 Carnival Corporation** .................................. 8,555
-------
11,760
-------
MEDIA - 3.7%
123,000 Comcast Corporation, Class A+ ........................... 3,193
99,000 Comcast Corporation, Special Class A+ ................... 2,543
124,000 Viacom Inc., Class B+ ................................... 4,043
-------
9,779
-------
RETAILING - 1.5%
79,000 Gap, Inc. ............................................... 1,393
55,000 Kohl's Corporation+ ..................................... 2,673
-------
4,066
-------
Total Consumer Discretionary ............................ 27,000
-------
CONSUMER STAPLES - 9.3%
FOOD & STAPLES RETAILING - 4.2%
72,000 Costco Wholesale Corporation ............................ 3,562
207,500 Kroger Company+ ......................................... 3,918
80,000 Wal-Mart Stores, Inc. ................................... 3,744
-------
11,224
-------
FOOD, BEVERAGE & TOBACCO - 2.3%
20,000 Hershey Company ......................................... 1,105
88,000 PepsiCo, Inc. ........................................... 5,199
-------
6,304
-------
HOUSEHOLD & PERSONAL PRODUCTS - 2.8%
51,000 Kimberly-Clark Corporation .............................. 3,042
77,000 Procter & Gamble Company ................................ 4,457
-------
7,499
-------
Total Consumer Staples .................................. 25,027
-------
ENERGY - 10.1%
87,000 BP PLC, Sponsored ADR ................................... 5,587
28,291 Chevron Corporation ..................................... 1,606
67,400 ENSCO International Inc. ................................ 2,989
84,000 ExxonMobil Corporation .................................. 4,718
136,000 GlobalSantaFe Corporation** ............................. 6,549
22,000 National-Oilwell Varco Inc.+ ............................ 1,379
45,000 Schlumberger Ltd. ....................................... 4,372
-------
Total Energy ............................................ 27,200
-------
FINANCIALS - 21.8%
BANKS - 7.8%
182,000 Bank of America Corporation ............................. $ 8,399
76,000 North Fork Bancorporation, Inc. ......................... 2,080
98,000 Wachovia Corporation .................................... 5,180
82,000 Wells Fargo & Company ................................... 5,152
-------
20,811
-------
DIVERSIFIED FINANCIALS - 7.0%
125,000 Citigroup Inc. .......................................... 6,066
87,000 Freddie Mac ............................................. 5,685
179,000 JPMorgan Chase & Company ................................ 7,105
-------
18,856
-------
INSURANCE - 7.0%
110,000 ACE Ltd. ................................................ 5,878
141,000 Allstate Corporation .................................... 7,624
68,000 American International Group, Inc. ...................... 4,640
19,900 Fidelity National Financial, Inc. ....................... 732
-------
18,874
-------
Total Financials ........................................ 58,541
-------
HEALTH CARE - 12.7%
HEALTH CARE EQUIPMENT & SERVICES - 6.4%
68,000 Baxter International Inc. ............................... 2,560
20,000 Becton, Dickinson & Company ............................. 1,202
67,000 Cardinal Health, Inc. ................................... 4,606
99,000 Medtronic, Inc. ......................................... 5,700
31,900 Omnicare, Inc. .......................................... 1,825
18,000 WellPoint Inc.+ ......................................... 1,436
-------
17,329
-------
PHARMACEUTICALS & BIOTECHNOLOGY - 6.3%
61,900 Bristol-Myers Squibb Company ............................ 1,422
83,000 Johnson & Johnson ....................................... 4,988
149,000 Pfizer Inc. ............................................. 3,475
163,000 Teva Pharmaceutical Industries Ltd., Sponsored ADR** .... 7,011
-------
16,896
-------
Total Health Care ....................................... 34,225
-------
INDUSTRIALS - 12.4%
CAPITAL GOODS - 12.4%
62,000 Boeing Company .......................................... 4,355
38,000 Caterpillar Inc. ........................................ 2,195
217,000 General Electric Company ................................ 7,606
178,000 Honeywell International Inc. ............................ 6,631
60,000 Lockheed Martin Corporation ............................. 3,818
26,000 Rockwell Automation, Inc. ............................... 1,538
248,000 Tyco International Ltd. ................................. 7,157
-------
Total Industrials ....................................... 33,300
-------
See Notes to Financial Statements.
39
Portfolio of Investments (continued)
VT GROWTH & INCOME FUND
December 31, 2005
VALUE
SHARES (000S)
- ------- --------
COMMON STOCKS (CONTINUED)
INFORMATION TECHNOLOGY - 13.1%
COMMUNICATIONS EQUIPMENT - 2.0%
232,000 Motorola, Inc........................................... $ 5,241
--------
COMPUTERS & PERIPHERALS - 3.5%
166,000 Hewlett-Packard Company................................. 4,752
58,000 International Business Machines Corporation............. 4,768
--------
9,520
--------
IT SERVICES - 2.1%
132,000 First Data Corporation.................................. 5,677
--------
SEMICONDUCTORS & SEMICONDUCTOR
EQUIPMENT - 2.0%
29,351 Freescale Semiconductor Inc., Class B+.................. 739
182,000 Intel Corporation....................................... 4,543
--------
5,282
--------
SOFTWARE - 3.5%
138,304 Computer Associates International, Inc.**............... 3,899
207,000 Microsoft Corporation................................... 5,413
--------
9,312
--------
Total Information Technology............................ 35,032
--------
MATERIALS - 2.3%
141,000 Alcoa Inc............................................... 4,169
45,000 E.I. du Pont de Nemours & Company**..................... 1,913
--------
Total Materials......................................... 6,082
--------
TELECOMMUNICATION SERVICES - 1.2%
135,000 AT&T Inc................................................ 3,306
--------
UTILITIES - 4.5%
102,000 FPL Group, Inc.**....................................... 4,239
74,000 NiSource Inc............................................ 1,544
72,000 Pinnacle West Capital Corporation....................... 2,977
98,000 Southern Company........................................ 3,384
--------
Total Utilities......................................... 12,144
--------
Total Common Stocks
(Cost $203,483)...................................... 261,857
--------
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
- --------- --------
REPURCHASE AGREEMENT - 1.2%
(Cost $3,302)
$ 3,302 Agreement with Morgan Stanley, 2.920%
dated 12/30/2005, to be repurchased at
$3,303,000 on 01/03/2006
(Collateralized by U.S. Treasury Notes,
having various interest rates and
maturities, market value $3,407,000)............. $ 3,302
--------
SHORT-TERM INVESTMENT - 9.0%
(Cost $24,160)
24,160 Mellon GSL DBT II
Collateral Fund++................................ 24,160
--------
TOTAL INVESTMENTS (Cost $230,945*)........................... 107.7% 289,319
OTHER ASSETS (LIABILITIES) (NET)............................. (7.7) (20,777)
----- --------
NET ASSETS................................................... 100.0% $268,542
===== ========
- ----------
* Aggregate cost for federal tax purposes is $233,802.
** Some or all of these securities are on loan at December 31, 2005, and have
an aggregate market value of $23,360,000, representing 8.7% of the total
net assets of the Fund (Collateral Value $24,160,000) (See Note 7 to
Financial Statements).
+ Non-income producing security.
++ Represents investment purchased with cash collateral for securities loaned.
GLOSSARY OF TERMS
ADR -- American Depositary Receipt
See Notes to Financial Statements.
40
Portfolio of Investments
VT WEST COAST EQUITY FUND
DECEMBER 31, 2005
VALUE
SHARES (000S)
- ------ -------
COMMON STOCKS - 93.9%
CONSUMER DISCRETIONARY - 12.5%
AUTOMOBILES & COMPONENTS - 1.5%
70,300 Monaco Coach Corporation.................................. $ 935
10,800 Toyota Motor Corporation, Sponsored ADR................... 1,130
-------
2,065
-------
CONSUMER DURABLES & APPAREL - 2.3%
13,424 Columbia Sportswear Company+.............................. 641
9,700 KB Home................................................... 705
29,300 Mattel, Inc............................................... 463
17,325 NIKE Inc., Class B........................................ 1,504
-------
3,313
-------
CONSUMER SERVICES - 3.5%
7,800 Ambassadors Group, Inc.................................... 179
59,000 Hilton Hotels Corporation................................. 1,422
123,660 Red Lion Hotels Corporation+.............................. 1,107
75,340 Starbucks Corporation+.................................... 2,261
-------
4,969
-------
MEDIA - 4.6%
22,300 Getty Images, Inc.+**..................................... 1,991
19,000 Knight-Ridder, Inc........................................ 1,203
6,300 McClatchy Company, Class A................................ 372
57,000 Univision Communications Inc., Class A+**................. 1,675
51,000 Walt Disney Company....................................... 1,222
-------
6,463
-------
RETAILING - 0.6%
7,600 Blue Nile, Inc.+**........................................ 306
7,585 Building Materials Holding Corporation.................... 518
400 Nordstrom, Inc............................................ 15
5,500 Restoration Hardware, Inc.+............................... 33
-------
872
-------
Total Consumer Discretionary.............................. 17,682
-------
CONSUMER STAPLES - 4.5%
FOOD & STAPLES RETAILING - 1.9%
45,720 Costco Wholesale Corporation.............................. 2,262
24,790 Kroger Company+........................................... 468
-------
2,730
-------
FOOD, BEVERAGE & TOBACCO - 0.6%
800 Central Garden & Pet Company+............................. 37
13,400 PepsiCo, Inc.............................................. 791
-------
828
-------
HOUSEHOLD & PERSONAL PRODUCTS - 2.0%
23,670 Clorox Company............................................ 1,347
4,700 Colgate-Palmolive Company................................. 258
20,700 Estee Lauder Companies Inc., Class A...................... 693
9,700 Procter & Gamble Company.................................. 561
-------
2,859
-------
Total Consumer Staples.................................... 6,417
-------
ENERGY - 7.1%
21,700 Apache Corporation........................................ $ 1,487
5,100 Berry Petroleum Company, Class A.......................... 292
4,700 CARBO Ceramics Inc........................................ 266
53,388 Chevron Corporation....................................... 3,031
9,100 ExxonMobil Corporation.................................... 511
36,600 Nabors Industries Ltd. (F)................................ 2,772
20,200 Occidental Petroleum Corporation.......................... 1,613
-------
Total Energy.............................................. 9,972
-------
FINANCIALS - 17.0%
BANKS - 10.6%
42,600 Bank of America Corporation............................... 1,966
21,900 Banner Corporation........................................ 683
14,000 City National Corporation................................. 1,014
37,000 East West Bancorp, Inc.................................... 1,350
27,100 Greater Bay Bancorp....................................... 694
8,400 Pacific Capital Bancorp................................... 299
77,900 U.S. Bancorp.............................................. 2,329
17,400 UCBH Holdings, Inc........................................ 311
5,400 United PanAm Financial Corporation+....................... 140
84,697 Washington Federal, Inc................................... 1,947
68,423 Wells Fargo & Company..................................... 4,299
-------
15,032
-------
DIVERSIFIED FINANCIALS - 4.6%
118,400 Charles Schwab Corporation................................ 1,737
37,700 Citigroup Inc............................................. 1,829
9,600 Countrywide Financial Corporation......................... 328
25,600 Franklin Resources, Inc.................................. 2,407
3,655 Piper Jaffray Companies, Inc.+............................ 148
-------
6,449
-------
INSURANCE - 1.8%
5,600 Safeco Corporation........................................ 316
44,000 StanCorp Financial Group, Inc............................. 2,198
-------
2,514
-------
Total Financials.......................................... 23,995
-------
HEALTH CARE - 16.7%
HEALTH CARE EQUIPMENT & SERVICES - 7.5%
5,200 Affymetrix, Inc.+......................................... 248
8,800 AMN Healthcare Services, Inc.+............................ 174
18,000 Applera Corporation-Applied Biosystems Group.............. 478
13,400 Caremark Rx, Inc.+........................................ 694
1,000 Cooper Companies, Inc..................................... 51
14,500 DaVita, Inc.+............................................. 734
6,080 Health Net, Inc.+......................................... 314
4,000 INAMED Corporation+....................................... 351
9,500 McKesson Corporation...................................... 490
2,300 Mentor Corporation........................................ 106
88,000 OraSure Technologies, Inc.+............................... 776
24,000 ResMed Inc.+.............................................. 920
See Notes to Financial Statements.
41
Portfolio of Investments (continued)
VT WEST COAST EQUITY FUND
December 31, 2005
VALUE
SHARES (000S)
- ------ -------
COMMON STOCKS (CONTINUED)
HEALTH CARE (CONTINUED)
HEALTH CARE EQUIPMENT & SERVICES (CONTINUED)
56,325 SonoSite, Inc.+ ......................................... $ 1,972
2,100 Stryker Corporation ..................................... 93
7,100 Sybron Dental Specialties, Inc.+ ........................ 283
33,000 Varian Medical Systems, Inc.+ ........................... 1,661
25,900 VCA Antech, Inc.+ ....................................... 730
8,700 Zimmer Holdings, Inc.+ .................................. 587
-------
10,662
-------
PHARMACEUTICALS & BIOTECHNOLOGY - 9.2%
25,300 Abbott Laboratories ..................................... 997
17,300 Allergan, Inc. .......................................... 1,868
30,307 Amgen, Inc.+ ............................................ 2,390
9,300 Amylin Pharmaceuticals, Inc.+ ........................... 371
13,100 CV Therapeutics, Inc.+** ................................ 324
37,600 Dendreon Corporation+ ................................... 204
43,325 EDEN Bioscience Corporation+ ............................ 25
19,600 Genentech, Inc.+ ........................................ 1,813
22,355 ICOS Corporation+** ..................................... 618
23,600 Johnson & Johnson ....................................... 1,418
6,700 Martek Biosciences Corporation+** ....................... 165
8,900 Neurocrine Biosciences, Inc.+ ........................... 558
47,200 Pfizer Inc. ............................................. 1,101
33,300 Watson Pharmaceuticals, Inc.+ ........................... 1,083
-------
12,935
-------
Total Health Care ....................................... 23,597
-------
INDUSTRIALS - 15.0%
CAPITAL GOODS - 11.0%
42,411 Boeing Company .......................................... 2,979
15,000 Cascade Corporation ..................................... 704
24,500 Dionex Corporation+ ..................................... 1,203
29,703 Electro Scientific Industries, Inc.+ .................... 717
4,500 Granite Construction Inc. ............................... 162
40,000 Greenbrier Companies, Inc. .............................. 1,136
25,200 Jacobs Engineering Group Inc.+ .......................... 1,710
26,000 Northrop Grumman Corporation** .......................... 1,563
42,400 PACCAR Inc. ............................................. 2,935
19,000 Precision Castparts Corporation ......................... 984
38,900 Simpson Manufacturing Company, Inc. ..................... 1,414
-------
15,507
-------
COMMERCIAL SERVICES & SUPPLIES - 1.4%
3,200 Avery Dennison Corporation .............................. 177
16,800 Copart, Inc.+ ........................................... 387
36,000 Robert Half International Inc. .......................... 1,364
-------
1,928
-------
TRANSPORTATION - 2.6%
35,360 Alaska Air Group, Inc.+ ................................. $ 1,263
18,000 Cathay Pacific Airways Ltd., Sponsored ADR .............. 157
33,200 Expeditors International of Washington, Inc.** .......... 2,242
-------
3,662
-------
Total Industrials ....................................... 21,097
-------
INFORMATION TECHNOLOGY - 16.2%
COMMUNICATIONS EQUIPMENT - 1.1%
85,000 Cisco Systems, Inc.+ .................................... 1,455
4,200 Polycom, Inc.+ .......................................... 65
-------
1,520
-------
COMPUTERS & PERIPHERALS - 2.0%
97,500 Advanced Digital Information Corporation+ ............... 954
900 Apple Computer, Inc.+ ................................... 65
50,500 Hewlett-Packard Company ................................. 1,446
5,700 InFocus Corporation+ .................................... 23
800 Network Appliance, Inc.+ ................................ 21
3,900 QLogic Corporation+ ..................................... 127
4,500 UNOVA, Inc.+ ............................................ 152
-------
2,788
-------
ELECTRONIC EQUIPMENT & INSTRUMENTS - 1.0%
41,020 Tektronix, Inc. ......................................... 1,157
6,200 Trimble Navigation Ltd.+ ................................ 220
-------
1,377
-------
INTERNET SOFTWARE & SERVICES - 1.3%
380,240 Art Technology Group, Inc.+ ............................. 745
875 Google Inc., Class A+ ................................... 363
78,400 WatchGuard Technologies, Inc.+ .......................... 290
6,700 WebEx Communications, Inc.+ ............................. 145
9,100 Yahoo! Inc.+ ............................................ 357
-------
1,900
-------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT - 3.6%
26,125 Applied Materials, Inc. ................................. 469
22,500 Credence Systems Corporation+ ........................... 156
29,790 FEI Company+** .......................................... 571
75,830 Intel Corporation ....................................... 1,893
8,800 KLA-Tencor Corporation .................................. 434
74,780 Lattice Semiconductor Corporation+ ...................... 323
41,000 LSI Logic Corporation+ .................................. 328
1,400 Maxim Integrated Products, Inc. ......................... 51
6,500 Novellus Systems, Inc.+ ................................. 157
2,300 NVIDIA Corporation+ ..................................... 84
82,900 Pixelworks, Inc.+ ....................................... 421
45,600 TriQuint Semiconductor, Inc.+ ........................... 203
-------
5,090
-------
See Notes to Financial Statements.
42
Portfolio of Investments (continued)
VT WEST COAST EQUITY FUND
December 31, 2005
VALUE
SHARES (000S)
------ --------
COMMON STOCKS (CONTINUED)
INFORMATION TECHNOLOGY (CONTINUED)
SOFTWARE - 7.2%
56,800 Actuate Corporation+ ................................... $ 178
53,340 Adobe Systems Inc. ..................................... 1,971
10,400 Electronic Arts Inc.+ .................................. 544
30,500 Fair Isaac Corporation ................................. 1,347
3,000 Mentor Graphics Corporation+ ........................... 31
146,030 Microsoft Corporation .................................. 3,819
43,900 Quest Software, Inc.+ .................................. 641
36,790 RadiSys Corporation+ ................................... 638
26,000 Siebel Systems, Inc. ................................... 275
11,500 SupportSoft, Inc.+ ..................................... 49
19,000 Sybase, Inc.+ .......................................... 415
13,500 Symantec Corporation+ .................................. 236
--------
10,144
--------
Total Information Technology ........................... 22,819
--------
MATERIALS - 3.5%
3,000 Cemex SA de CV, Sponsored ADR .......................... 178
40,400 Oregon Steel Mills, Inc.+ .............................. 1,188
47,230 Schnitzer Steel Industries, Inc., Class A .............. 1,445
6,900 Symyx Technologies, Inc.+ .............................. 188
28,335 Weyerhaeuser Company ................................... 1,880
--------
Total Materials ........................................ 4,879
--------
TELECOMMUNICATION SERVICES - 1.2%
59,300 Nextel Partners, Inc., Class A+** ...................... 1,657
--------
UTILITIES - 0.2%
4,900 Sempra Energy .......................................... 220
--------
Total Common Stocks
(Cost $96,657) ...................................... 132,335
--------
REAL ESTATE INVESTMENT TRUSTS (REITS) - 2.9%
30,000 AMB Property Corporation ............................... 1,475
5,500 Essex Property Trust, Inc. ............................. 507
20,700 Health Care Property Investors, Inc. ................... 529
800 Nationwide Health Properties, Inc. ..................... 17
44,100 Plum Creek Timber Company, Inc. ........................ 1,590
--------
Total REITs
(Cost $3,222) ....................................... 4,118
--------
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
- --------- ---------
REPURCHASE AGREEMENT - 3.0%
(Cost $4,162)
$4,162 Agreement with Morgan Stanley, 2.920%
dated 12/30/2005, to be repurchased at $4,163,000
on 01/03/2006 (Collateralized by U.S. Treasury
Notes, having various interest rates and
maturities, market value $4,295,000) ...................... $ 4,162
---------
SHORT-TERM INVESTMENT - 6.1%
(Cost $8,563)
8,563 Mellon GSL DBT II
Collateral Fund++ ................................ 8,563
---------
TOTAL INVESTMENTS (Cost $112,604*) ........................... 105.9% 149,178
OTHER ASSETS (LIABILITIES) (NET) ............................. (5.9) (8,284)
----- ---------
NET ASSETS ................................................... 100.0% $140,894
===== ========
- ----------
* Aggregate cost for federal tax purposes is $112,909.
** Some or all of these securities are on loan at December 31, 2005, and have
an aggregate market value of $8,179,000, representing 5.8% of the total net
assets of the Fund (Collateral Value $8,563,000) (See Note 7 to Financial
Statements).
+ Non-income producing security.
++ Represents investment purchased with cash collateral for securities loaned.
GLOSSARY OF TERMS
ADR -- American Depositary Receipt
(F) -- Foreign Shares
See Notes to Financial Statements.
43
Portfolio of Investments
VT MID CAP STOCK FUND
December 31, 2005
VALUE
SHARES (000S)
- ------ -------
COMMON STOCKS - 93.7%
CONSUMER DISCRETIONARY - 13.0%
AUTOMOBILES & COMPONENTS - 2.2%
34,400 Magna International Inc., Class A(F) .................... $ 2,476
-------
CONSUMER DURABLES & APPAREL - 3.1%
55,300 Jones Apparel Group, Inc. ............................... 1,699
112,000 Mattel, Inc.** .......................................... 1,772
-------
3,471
-------
CONSUMER SERVICES - 2.2%
13,400 Papa John's International, Inc.+ ........................ 794
35,300 Yum! Brands, Inc. ....................................... 1,655
-------
2,449
-------
RETAILING - 5.5%
33,900 Aaron Rents, Inc. ....................................... 715
47,400 Nordstrom, Inc. ......................................... 1,773
57,300 Tiffany & Company** ..................................... 2,194
29,200 Weight Watchers International, Inc.+ .................... 1,443
-------
6,125
-------
Total Consumer Discretionary ............................ 14,521
-------
CONSUMER STAPLES - 2.5%
FOOD, BEVERAGE & TOBACCO - 1.5%
11,300 Dean Foods Company+ ..................................... 425
26,700 J.M. Smucker Company .................................... 1,175
-------
1,600
-------
HOUSEHOLD & PERSONAL PRODUCTS - 1.0%
33,800 Estee Lauder Companies Inc., Class A .................... 1,132
-------
Total Consumer Staples .................................. 2,732
-------
ENERGY - 8.0%
26,200 Cimarex Energy Company+ ................................. 1,127
30,400 Nabors Industries Ltd. (F)+ ............................. 2,303
57,900 Noble Energy, Inc. ...................................... 2,333
14,400 Tesoro Corporation** .................................... 886
50,400 Tidewater Inc.** ........................................ 2,241
-------
Total Energy ............................................ 8,890
-------
FINANCIALS - 19.6%
BANKS - 6.5%
90,726 North Fork Bancorporation, Inc. ......................... 2,482
91,100 TCF Financial Corporation ............................... 2,473
99,050 Washington Federal, Inc. ................................ 2,277
-------
7,232
-------
DIVERSIFIED FINANCIALS - 3.6%
47,600 A.G. Edwards, Inc. ...................................... 2,230
22,900 Ambac Financial Group, Inc. ............................. 1,765
-------
3,995
-------
INSURANCE - 9.5%
73,887 Fidelity National Financial, Inc. ....................... $ 2,718
13,350 Fidelity National Title Group, Inc., Class A ............ 325
113,200 HCC Insurance Holdings, Inc. ............................ 3,360
43,100 Max Re Capital Ltd. (F) ................................. 1,119
30,700 MGIC Investment Corporation** ........................... 2,021
26,391 PMI Group, Inc. ......................................... 1,084
-------
10,627
-------
Total Financials 21,854
-------
HEALTH CARE - 12.0%
HEALTH CARE EQUIPMENT & SERVICES - 10.4%
21,600 AmerisourceBergen Corporation** ......................... 894
53,700 Covance Inc.+ ........................................... 2,607
50,300 Edwards Lifesciences Corporation+ ....................... 2,093
18,900 Express Scripts, Inc., Class A+** ....................... 1,584
72,002 IMS Health Inc. ......................................... 1,794
55,400 Universal Health Services, Inc., Class B** .............. 2,590
-------
11,562
-------
PHARMACEUTICALS & BIOTECHNOLOGY - 1.6%
16,900 Andrx Corporation+ ...................................... 278
75,225 Mylan Laboratories Inc. ................................. 1,502
-------
1,780
-------
Total Health Care ....................................... 13,342
-------
INDUSTRIALS - 16.6%
CAPITAL GOODS - 6.6%
69,700 Federal Signal Corporation .............................. 1,046
67,300 Lincoln Electric Holdings, Inc. ........................ 2,669
27,900 PACCAR Inc. ............................................. 1,932
25,400 Teleflex Inc. ........................................... 1,650
-------
7,297
-------
COMMERCIAL SERVICES & SUPPLIES - 5.2%
99,100 Allied Waste Industries, Inc.+** ........................ 866
48,800 HNI Corporation ......................................... 2,681
60,300 Republic Services, Inc. ................................. 2,264
-------
5,811
-------
TRANSPORTATION - 4.8%
39,300 Alaska Air Group, Inc.+ ................................. 1,404
106,500 AMR Corporation+** ...................................... 2,368
75,700 Continental Airlines, Inc., Class B+** .................. 1,612
-------
5,384
-------
Total Industrials ....................................... 18,492
-------
INFORMATION TECHNOLOGY - 11.4%
COMPUTERS & PERIPHERALS - 3.1%
64,000 Electronics for Imaging, Inc.+ .......................... 1,703
64,300 Network Appliance, Inc.+ ................................ 1,736
-------
3,439
-------
See Notes to Financial Statements.
44
Portfolio of Investments (continued)
VT MID CAP STOCK FUND
December 31, 2005
VALUE
SHARES (000S)
- ------ --------
COMMON STOCKS (CONTINUED)
INFORMATION TECHNOLOGY (CONTINUED)
ELECTRONIC EQUIPMENT & INSTRUMENTS - 2.2%
40,700 Arrow Electronics, Inc.+ ................................ $ 1,304
30,500 Diebold, Inc. ........................................... 1,159
--------
2,463
--------
IT SERVICES - 1.5%
57,400 Acxiom Corporation ...................................... 1,320
17,700 Convergys Corporation+ .................................. 281
--------
1,601
--------
SEMICONDUCTORS & SEMICONDUCTOR
EQUIPMENT - 2.8%
96,250 Microchip Technology Inc. ............................... 3,094
--------
SOFTWARE - 1.8%
77,300 BMC Software Inc.+ ...................................... 1,584
22,700 Synopsys, Inc.+ ......................................... 455
--------
2,039
--------
Total Information Technology ............................ 12,636
--------
MATERIALS - 5.4%
32,700 Cabot Corporation ....................................... 1,170
52,700 Lubrizol Corporation .................................... 2,289
103,400 Valspar Corporation ..................................... 2,551
--------
Total Materials 6,010
--------
TELECOMMUNICATION SERVICES - 0.5%
12,300 United States Cellular Corporation+ ..................... 608
--------
UTILITIES - 4.7%
18,200 FPL Group, Inc. ......................................... 757
98,900 NiSource Inc. ........................................... 2,063
57,200 Pinnacle West Capital Corporation ....................... 2,365
--------
Total Utilities ......................................... 5,185
--------
Total Common Stocks
(Cost $75,645) ....................................... 104,270
--------
REAL ESTATE INVESTMENT TRUST (REIT) - 1.7%
(Cost $1,045)
39,700 General Growth Properties, Inc. ......................... 1,866
--------
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
- --------- --------
REPURCHASE AGREEMENT - 2.7%
(Cost $2,986)
$ 2,986 Agreement with Morgan Stanley, 2.920%
dated 12/30/2005, to be repurchased at
$2,987,000 on 01/03/2006
(Collateralized by U.S. Treasury Notes,
having various interest rates and
maturities, market value $3,081,000) ................... $ 2,986
--------
SHORT-TERM INVESTMENT - 13.1%
(Cost $14,576)
14,576 Mellon GSL DBT II
Collateral Fund++ ...................................... 14,576
--------
TOTAL INVESTMENTS (Cost $94,252*) ........................... 111.2% 123,698
OTHER ASSETS (LIABILITIES) (NET) ............................ (11.2) (12,463)
----- --------
NET ASSETS .................................................. 100.0% $111,235
===== ========
- ----------
* Aggregate cost for federal tax purposes is $94,764.
** Some or all of these securities are on loan at December 31, 2005, and have
an aggregate market value of $13,453,000, representing 12.1% of the total
net assets of the Fund (Collateral Value $14,576,000) (See Note 7 to
Financial Statements).
+ Non-income producing security.
++ Represents investment purchased with cash collateral for securities loaned.
GLOSSARY OF TERMS
(F) -- Foreign Shares
See Notes to Financial Statements.
45
Portfolio of Investments
VT GROWTH FUND
December 31, 2005
VALUE
SHARES (000S)
- ------ -------
COMMON STOCKS - 94.6%
CONSUMER DISCRETIONARY - 18.1%
AUTOMOBILES & COMPONENTS - 0.7%
30,000 Harley-Davidson, Inc.** ................................. $ 1,545
8,100 Toyota Motor Corporation (F) ............................ 423
-------
1,968
-------
CONSUMER DURABLES & APPAREL - 1.1%
8,300 Coach, Inc.+ ............................................ 277
25,540 NIKE Inc., Class B ...................................... 2,217
17,500 Toll Brothers, Inc.+ .................................... 606
-------
3,100
-------
CONSUMER SERVICES - 2.1%
34,745 Apollo Group, Inc., Class A+ ............................ 2,101
24,670 Carnival Corporation** .................................. 1,319
81,275 Starbucks Corporation+ .................................. 2,439
-------
5,859
-------
MEDIA - 3.2%
42,900 Comcast Corporation, Special Class A+ ................... 1,102
218,428 Time Warner Inc. ........................................ 3,809
106,550 Walt Disney Company ..................................... 2,554
42,335 XM Satellite Radio Holdings Inc., Class A+** ............ 1,155
-------
8,620
-------
RETAILING - 11.0%
116,200 Amazon.com Inc.+ ........................................ 5,479
28,600 Bed Bath & Beyond Inc.+ ................................. 1,034
16,220 Best Buy Company, Inc. .................................. 705
93,780 eBay Inc.+ .............................................. 4,056
94,567 Expedia, Inc.+** ........................................ 2,266
182,325 Home Depot, Inc. ........................................ 7,380
111,102 IAC/InterActiveCorp+** .................................. 3,145
9,130 J.C. Penney Company, Inc. (Holding Company) ............. 508
14,600 Kohl's Corporation+ ..................................... 710
16,210 Lowe's Companies, Inc. .................................. 1,081
13,400 Michaels Stores, Inc. ................................... 474
99,890 Staples, Inc. ........................................... 2,268
8,170 Target Corporation ...................................... 449
8,050 Williams-Sonoma, Inc.+** ................................ 347
-------
29,902
-------
Total Consumer Discretionary ............................ 49,449
-------
CONSUMER STAPLES - 8.0%
FOOD & STAPLES RETAILING - 0.9%
7,780 Costco Wholesale Corporation ............................ 385
31,400 CVS Corporation ......................................... 829
17,900 Sysco Corporation ....................................... 556
15,830 Wal-Mart Stores, Inc. ................................... 741
-------
2,511
-------
FOOD, BEVERAGE & TOBACCO - 4.2%
79,460 Cadbury Schweppes PLC (F) ............................... $ 751
50,100 Coca-Cola Company ....................................... 2,019
3,399 Nestle SA(F) ............................................ 1,015
95,365 PepsiCo, Inc. ........................................... 5,634
29,100 Wm. Wrigley Jr. Company ................................. 1,935
-------
11,354
-------
HOUSEHOLD & PERSONAL PRODUCTS - 2.9%
121,327 Procter & Gamble Company ................................ 7,022
24,790 Reckitt Benckiser PLC (F) ............................... 818
-------
7,840
-------
Total Consumer Staples .................................. 21,705
-------
ENERGY - 4.2%
6,900 Apache Corporation ...................................... 473
8,400 EOG Resources, Inc. ..................................... 616
33,890 ExxonMobil Corporation .................................. 1,904
28,720 Halliburton Company ..................................... 1,779
10,735 Kinder Morgan Management LLC+ ........................... 488
42,100 Occidental Petroleum Corporation ........................ 3,363
10,980 Schlumberger Ltd.** ..................................... 1,067
27,000 Smith International, Inc. ............................... 1,002
13,100 Transocean Inc.+ ........................................ 913
-------
Total Energy ............................................ 11,605
-------
FINANCIALS - 9.5%
BANKS - 0.2%
8,700 Bank of America Corporation ............................. 401
-------
DIVERSIFIED FINANCIALS - 6.4%
73,915 American Express Company ................................ 3,804
2,000 Chicago Mercantile Exchange Holdings Inc. ............... 735
11,410 Citigroup Inc. .......................................... 554
43,520 Fannie Mae .............................................. 2,124
5,800 Franklin Resources, Inc. ................................ 545
7,630 Goldman Sachs Group, Inc. ............................... 975
5,200 Legg Mason, Inc. ........................................ 622
2,500 Lehman Brothers Holdings Inc. ........................... 320
53,750 Merrill Lynch & Company, Inc. ........................... 3,641
62,215 Morgan Stanley .......................................... 3,530
20,800 Nomura Holdings, Inc. (F) ............................... 400
2,700 T. Rowe Price Group, Inc. ............................... 195
-------
17,445
-------
INSURANCE - 2.9%
59,440 American International Group, Inc. ...................... 4,056
28 Berkshire Hathaway, Inc., Class A+ ...................... 2,481
6,700 Hartford Financial Services Group, Inc. ................. 575
11,720 Prudential Financial, Inc. .............................. 858
-------
7,970
-------
Total Financials ........................................ 25,816
-------
See Notes to Financial Statements.
46
Portfolio of Investments (continued)
VT GROWTH FUND
December 31, 2005
VALUE
SHARES (000S)
- ------ -------
COMMON STOCKS (CONTINUED)
HEALTH CARE - 19.1%
HEALTH CARE EQUIPMENT & SERVICES - 6.7%
6,600 Aetna Inc. .............................................. $ 623
30,135 Biomet, Inc.** .......................................... 1,102
36,775 Caremark Rx, Inc.+ ...................................... 1,905
9,700 Fisher Scientific International Inc.+** ................. 600
7,800 Medco Health Solutions, Inc.+ ........................... 435
105,855 Medtronic, Inc. ......................................... 6,094
6,800 Patterson Companies Inc.+** ............................. 227
8,300 Quest Diagnostics Inc. .................................. 427
6,852 Roche Holding AG-Genusschein (F) ........................ 1,027
7,640 Stryker Corporation ..................................... 339
78,525 UnitedHealth Group Inc. ................................. 4,880
9,790 Varian Medical Systems, Inc.+ ........................... 493
-------
18,152
-------
PHARMACEUTICALS & BIOTECHNOLOGY - 12.4%
106,590 Amgen, Inc.+ ............................................ 8,406
57,290 Biogen Idec Inc.+ ....................................... 2,597
70,300 Eli Lilly & Company ..................................... 3,978
80,815 Genentech, Inc.+ ........................................ 7,476
10,600 Genzyme Corporation+ .................................... 750
6,100 Gilead Sciences, Inc.+ .................................. 321
31,210 Johnson & Johnson ....................................... 1,876
15,800 MedImmune, Inc.+ ........................................ 553
25,047 Novartis AG (F) ......................................... 1,314
108,940 Pfizer Inc. ............................................. 2,541
8,170 Sanofi-Aventis Group (F) ................................ 715
54,105 Sanofi-Aventis, ADR ..................................... 2,375
24,582 Teva Pharmaceutical Industries Ltd., Sponsored ADR ...... 1,057
-------
33,959
-------
Total Health Care ....................................... 52,111
-------
INDUSTRIALS - 5.4%
CAPITAL GOODS - 4.8%
14,800 Danaher Corporation** ................................... 826
20,780 Empresa Brasileira de Aeronautica SA, ADR ............... 812
6,700 General Dynamics Corporation ............................ 764
257,728 General Electric Company ................................ 9,033
12,160 Lockheed Martin Corporation ............................. 774
14,680 United Technologies Corporation ......................... 821
-------
13,030
-------
COMMERCIAL SERVICES & SUPPLIES - 0.1%
2,900 Corporate Executive Board Company ....................... 260
-------
TRANSPORTATION - 0.5%
6,190 Expeditors International of Washington, Inc. ............ 418
10,920 FedEx Corporation ....................................... 1,129
-------
1,547
-------
Total Industrials ....................................... 14,837
-------
INFORMATION TECHNOLOGY - 27.5%
COMMUNICATIONS EQUIPMENT - 8.3%
325,185 Cisco Systems, Inc.+ .................................... $ 5,567
29,600 Corning Inc.+ ........................................... 582
78,100 Juniper Networks, Inc.+ ................................. 1,742
287,665 Motorola, Inc. .......................................... 6,498
25,100 Nokia Oyj, Sponsored ADR ................................ 459
93,410 QUALCOMM Inc. ........................................... 4,024
50,535 Research In Motion Ltd.+ ................................ 3,336
14,900 Telefonaktiebolaget LM Ericsson, Sponsored ADR .......... 513
-------
22,721
-------
COMPUTERS & PERIPHERALS - 2.0%
7,900 Apple Computer, Inc.+ ................................... 568
123,765 Dell Inc.+ .............................................. 3,712
44,630 EMC Corporation+ ........................................ 608
17,300 Network Appliance, Inc.+ ................................ 467
-------
5,355
-------
ELECTRONIC EQUIPMENT & INSTRUMENTS - 0.2%
21,520 PerkinElmer, Inc. ....................................... 507
-------
INTERNET SOFTWARE & SERVICES - 3.9%
64,400 Akamai Technologies, Inc.+ .............................. 1,283
3,400 Google Inc., Class A+ ................................... 1,411
20,400 VeriSign Inc.+** ........................................ 447
189,385 Yahoo! Inc.+** .......................................... 7,420
-------
10,561
-------
IT SERVICES - 0.9%
26,600 Automatic Data Processing, Inc. ......................... 1,220
14,300 Cognizant Technology Solutions Corporation, Class A+ .... 720
10,900 First Data Corporation .................................. 469
-------
2,409
-------
SEMICONDUCTORS & SEMICONDUCTOR
EQUIPMENT - 6.4%
80,965 Advanced Micro Devices, Inc.+** ......................... 2,477
23,800 Broadcom Corporation, Class A+ .......................... 1,122
86,280 Intel Corporation ....................................... 2,154
9,600 International Rectifier Corporation+ .................... 306
24,600 Linear Technology Corporation ........................... 887
7,500 Marvell Technology Group Ltd.+ .......................... 421
15,300 Microchip Technology Inc. ............................... 492
7,371 Samsung Electronics Company Ltd., GDR ................... 2,403
195,178 Texas Instruments Inc. .................................. 6,259
41,809 Xilinx, Inc. ............................................ 1,054
-------
17,575
-------
SOFTWARE - 5.8%
26,760 Adobe Systems Inc. ...................................... 989
13,000 Amdocs Ltd. (F)+ ........................................ 358
12,400 Autodesk, Inc. .......................................... 533
See Notes to Financial Statements.
47
Portfolio of Investments (continued)
VT GROWTH FUND
December 31, 2005
VALUE
SHARES (000S)
- ------ --------
COMMON STOCKS (CONTINUED)
SOFTWARE (CONTINUED)
44,100 Electronic Arts Inc.+ .................................. $ 2,307
277,943 Microsoft Corporation .................................. 7,268
72,700 Red Hat, Inc.+ ......................................... 1,980
52,940 SAP AG, Sponsored ADR .................................. 2,386
--------
15,821
--------
Total Information Technology ........................... 74,949
--------
MATERIALS - 1.7%
18,400 Monsanto Company ....................................... 1,427
24,530 Praxair, Inc. .......................................... 1,299
11,140 Rio Tinto PLC, Sponsored ADR ........................... 2,036
--------
Total Materials ........................................ 4,762
--------
TELECOMMUNICATION SERVICES - 1.1%
23,600 American Tower Corporation, Class A+ ................... 640
55,360 China Mobile (Hong Kong) Ltd. .......................... 1,331
40,670 Sprint Nextel Corporation .............................. 950
--------
Total Telecommunication Services ....................... 2,921
--------
Total Common Stocks
(Cost $222,758) ..................................... 258,155
--------
PRINCIPAL
AMOUNT
(000S)
- ---------
COMMERCIAL PAPER - 1.7%
(Cost $4,499)
$4,500 Prudential Funding LLC,
4.100% due 01/03/2006++ ................................. 4,499
-----
U.S. GOVERNMENT AGENCY DISCOUNT NOTE - 1.2%
(Cost $3,199)
FEDERAL HOME LOAN BANK (FHLB) - 1.2%
3,200 3.400% due 01/03/2006++ .................................... 3,199
-----
REPURCHASE AGREEMENT - 3.3%
(Cost $9,012)
$ 9,012 Agreement with Morgan Stanley, 2.920% dated
12/30/2005, to be repurchased at $9,015,000
on 01/03/2006 (Collateralized by U.S.
Treasury Notes, having various interest
rates and maturities, market value
$9,300,000) .................................. $ 9,012
--------
SHORT-TERM INVESTMENT - 4.5%
(Cost $12,342)
12,342 Mellon GSL DBT II
Collateral Fund+++ ........................... 12,342
--------
TOTAL INVESTMENTS (Cost $251,810*) .......................... 105.3% 287,207
OTHER ASSETS (LIABILITIES) (NET) ............................ (5.3) (14,428)
----- --------
NET ASSETS .................................................. 100.0% $272,779
===== ========
- ----------
* Aggregate cost for federal tax purposes is $254,392.
** Some or all of these securities are on loan at December 31, 2005, and have
an aggregate market value of $11,855,000, representing 4.3% of the total
net assets of the Fund (Collateral Value $12,342,000) (See Note 7 to
Financial Statements).
+ Non-income producing security.
++ Rate represents annualized yield at date of purchase.
+++ Represents investment purchased with cash collateral for securities loaned.
SCHEDULE OF FORWARD FOREIGN CURRENCY CONTRACTS
FORWARD FOREIGN CURRENCY CONTRACTS TO BUY
CONTRACTS TO RECEIVE
(000S)
NET
UNREALIZED
EXPIRATION LOCAL VALUE IN IN EXCHANGE DEPRECIATION
DATE CURRENCY U.S. $ FOR U.S. $ OF CONTRACTS
- ---------- ----------- -------- ----------- ------------
01/03/2006 CHF 109 83 83 $--
01/03/2006 GBP 14 25 25 --
01/04/2006 JPY 2,573 22 22 --
---
$--
===
GLOSSARY OF TERMS
ADR -- American Depositary Receipt
CHF -- Swiss Franc
(F) -- Foreign Shares
GBP -- Great Britain Pound Sterling
GDR -- Global Depositary Receipt
JPY -- Japanese Yen
See Notes to Financial Statements.
48
Portfolio of Investments
VT SMALL CAP VALUE FUND
December 31, 2005
VALUE
SHARES (000S)
- ------ ------
COMMON STOCKS - 80.2%
CONSUMER DISCRETIONARY - 13.2%
AUTOMOBILES & COMPONENTS - 3.1%
35,400 Accuride Corporation+ .................................... $ 456
36,700 Tenneco, Inc.+ ........................................... 720
------
1,176
------
CONSUMER DURABLES & APPAREL - 3.0%
52,200 Lenox Group, Inc.+ ....................................... 691
19,500 Rocky Shoes & Boots, Inc.+ ............................... 475
------
1,166
------
MEDIA - 1.9%
8,300 Carmike Cinemas, Inc. .................................... 210
34,800 Reader's Digest Association, Inc. ........................ 530
------
740
------
RETAILING - 5.2%
53,300 Blockbuster Inc., Class A** .............................. 200
10,500 Children's Place Retail Stores, Inc.+ .................... 519
146,500 Movie Gallery, Inc. ...................................... 822
12,700 RC2 Corporation+ ......................................... 451
------
1,992
------
Total Consumer Discretionary ............................. 5,074
------
CONSUMER STAPLES - 5.0%
FOOD & STAPLES RETAILING - 1.5%
25,400 Fresh Del Monte Produce, Inc. ............................ 578
------
FOOD, BEVERAGE & TOBACCO - 1.1%
28,300 B&G Foods Inc., EIS. ..................................... 411
------
HOUSEHOLD & PERSONAL PRODUCTS - 2.4%
8,700 Central Garden & Pet Company+ ............................ 400
17,549 Jarden Corporation+** .................................... 529
------
929
------
Total Consumer Staples ................................... 1,918
------
ENERGY - 5.7%
18,600 Cimarex Energy Company+ .................................. 800
14,300 Comstock Resources, Inc.+ ................................ 436
11,000 Encore Acquisition Company+ .............................. 352
3,900 Giant Industries, Inc.+ .................................. 203
10,200 St. Mary Land & Exploration Company ...................... 376
------
Total Energy ............................................. 2,167
------
FINANCIALS - 12.8%
BANKS - 5.7%
14,280 Capital Corporation of the West .......................... 464
27,900 Dime Community Bancshares ................................ 408
43,040 Oriental Financial Group, Inc. ........................... 532
16,820 U.S.B. Holding Company, Inc. ............................. 364
18,500 Washington Federal, Inc. ................................. 425
------
2,193
------
INSURANCE - 7.1%
14,000 Navigators Group, Inc.+ .................................. $ 611
11,400 Safety Insurance Group, Inc. ............................. 460
12,700 State Auto Financial Corporation ......................... 463
12,600 Stewart Information Services Corporation ................. 613
14,300 United Fire & Casualty Company ........................... 578
------
2,725
------
Total Financials ......................................... 4,918
------
HEALTH CARE - 5.0%
HEALTH CARE EQUIPMENT & SERVICES - 2.9%
64,400 Gene Logic, Inc.+ ........................................ 216
22,200 Kindred Healthcare, Inc.+ ................................ 572
11,800 Molina Healthcare Inc.+ .................................. 314
------
1,102
------
PHARMACEUTICALS & BIOTECHNOLOGY - 2.1%
56,300 Bradley Pharmaceuticals, Inc.+** ......................... 535
39,800 Lannett Company, Inc.+** ................................. 293
------
828
------
Total Health Care. ....................................... 1,930
------
INDUSTRIALS - 12.8%
CAPITAL GOODS - 3.8%
24,000 Cubic Corporation ........................................ 479
11,200 DRS Technologies, Inc. ................................... 576
17,300 Griffon Corporation+** ................................... 412
------
1,467
------
TRANSPORTATION - 9.0%
13,200 Alaska Air Group, Inc.+ .................................. 471
39,800 AMR Corporation+** ....................................... 885
33,800 Continental Airlines, Inc., Class B+ ..................... 720
11,500 Dampskibsselskabet TORM A/S, ADR ......................... 556
12,700 Genesee & Wyoming Inc., Class A+ ......................... 477
18,900 OMI Corporation .......................................... 343
------
3,452
------
Total Industrials ........................................ 4,919
------
INFORMATION TECHNOLOGY - 9.7%
COMMUNICATIONS EQUIPMENT - 1.1%
13,300 Bel Fuse Inc., Class B ................................... 423
------
COMPUTERS & PERIPHERALS - 1.7%
23,700 Hutchinson Technology, Inc.+** ........................... 674
------
ELECTRONIC EQUIPMENT & INSTRUMENTS - 1.4%
34,700 LeCroy Corporation+ ...................................... 531
------
SEMICONDUCTORS & SEMICONDUCTOR
EQUIPMENT - 3.6%
99,300 Axcelis Technologies, Inc.+ .............................. 474
64,800 Credence Systems Corporation+ ............................ 451
2,900 OmniVision Technologies, Inc.+** ......................... 58
13,500 PortalPlayer Inc.+ ....................................... 382
------
1,365
------
See Notes to Financial Statements.
49
Portfolio of Investments (continued)
VT SMALL CAP VALUE FUND
December 31, 2005
VALUE
SHARES (000S)
- ------ -------
COMMON STOCKS (CONTINUED)
INFORMATION TECHNOLOGY (CONTINUED)
SOFTWARE - 1.9%
22,150 Geac Computer Corporation Ltd. (F)+ ..................... $ 242
61,000 RealNetworks, Inc.+ ..................................... 473
-------
715
-------
Total Information Technology ............................ 3,708
-------
MATERIALS - 12.1%
22,200 Century Aluminum Company+ ............................... 582
7,500 Headwaters, Inc.+ ....................................... 266
16,900 Inmet Mining Corporation (F) ............................ 429
309,000 Kingsgate Consolidated Ltd. (F) ........................ 1,037
35,000 Metal Management, Inc. .................................. 814
535,400 Minara Resources Ltd.(F) ................................ 742
47,600 Randgold Resources Ltd., ADR+ ........................... 767
-------
Total Materials ......................................... 4,637
-------
TELECOMMUNICATION SERVICES - 3.2%
31,800 Asia Satellite Telecommunications
Holdings Ltd., Sponsored ADR ......................... 539
25,500 USAMobility, Inc. ....................................... 707
-------
Total Telecommunication Services ........................ 1,246
-------
UTILITIES - 0.7%
9,600 Suburban Propane Partners LP ............................ 252
-------
Total Common Stocks
(Cost $27,015) ....................................... 30,769
-------
CANADIAN INCOME TRUSTS - 6.5%
CONSUMER STAPLES - 2.8%
FOOD, BEVERAGE & TOBACCO - 2.8%
45,900 Arctic Glacier Income Fund (F) .......................... 426
69,900 Connors Brothers Income Fund (F) ........................ 646
-------
Total Consumer Staples .................................. 1,072
-------
ENERGY - 3.7%
17,700 Harvest Energy Trust (F)** .............................. 566
25,600 Vermilion Energy Trust (F) .............................. 655
7,900 Zargon Energy Trust (F) ................................. 216
-------
Total Energy ............................................ 1,437
-------
Total Canadian Income Trusts
(Cost $2,036) ........................................ 2,509
-------
REAL ESTATE INVESTMENT TRUSTS (REITS) - 5.4%
2,600 Alexandria Real Estate Equities, Inc. ................... $ 209
12,500 Entertainment Properties Trust .......................... 509
34,200 Equity Inns, Inc. ....................................... 464
8,400 Redwood Trust, Inc. ..................................... 347
5,900 Sovran Self Storage, Inc. ............................... 277
26,700 Winston Hotels, Inc. .................................... 264
-------
Total REITs
(Cost $1,659) ........................................ 2,070
-------
INCOME DEPOSIT SECURITIES - 2.6%
INDUSTRIALS - 2.6%
CAPITAL GOODS - 2.6%
23,800 New Flyer Industries Inc. (F) ........................... 192
98,500 New Flyer Industries Inc. (F)+++ ........................ 797
-------
989
-------
Total Income Deposit Securities
(Cost $991) .......................................... 989
-------
CONTRACTS
- ---------
PURCHASED PUT OPTIONS - 2.6%
1,410 iShares Russell 2000 Index,
Expires January 2007 @ $56 ........................... 233
3,950 iShares Russell 2000 Index,
Expires January 2007 @ $49 ........................... 286
1,400 iShares Russell 2000 Index,
Expires January 2008 @ $55 ........................... 381
3,100 NASDAQ-100 Index,
Expires January 2007 @ $30 ........................... 101
-------
Total Purchased Put Options
(Cost $1,480) ........................................ 1,001
-------
See Notes to Financial Statements.
50
Portfolio of Investments (continued)
VT SMALL CAP VALUE FUND
December 31, 2005
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
- --------- -------
REPURCHASE AGREEMENT - 2.0%
(Cost $756)
$ 756 Agreement with Morgan Stanley, 2.920% dated 12/30/2005,
to be repurchased at $756,000 on 01/03/2006
(Collateralized by U.S. Treasury Notes, having
various interest rates and maturities, market
value $780,000) ........................................ $ 756
-------
SHORT-TERM INVESTMENT - 5.8%
(Cost $2,221)
2,221 Mellon GSL DBT II Collateral Fund++ ....................... 2,221
-------
TOTAL INVESTMENTS (Cost $36,158*) .............................. 105.1% 40,315
OTHER ASSETS (LIABILITIES) (NET) (5.1) (1,954)
----- -------
NET ASSETS ..................................................... 100.0% $38,361
===== =======
- ----------
* Aggregate cost for federal tax purposes is $35,696.
** Some or all of these securities are on loan at December 31, 2005, and have
an aggregate market value of $2,116,000, representing 5.5% of the total net
assets of the Fund (Collateral Value $2,221,000) (See Note 7 to Financial
Statements).
+ Non-income producing security.
++ Represents investment purchased with cash collateral for securities loaned.
+++ Security acquired in a transaction exempt from registration under Rule
144A of the Securities Act of 1933, as amended.
GLOSSARY OF TERMS
ADR -- American Depositary Receipt
AUD -- Australian Dollar
EIS -- Enhanced Income Security
(F) -- Foreign Shares
SCHEDULE OF FORWARD FOREIGN CURRENCY CONTRACTS
FORWARD FOREIGN CURRENCY CONTRACTS TO SELL
CONTRACTS TO DELIVER
(000S)
NET
UNREALIZED
EXPIRATION LOCAL VALUE IN IN EXCHANGE DEPRECIATION
DATE CURRENCY U.S. $ FOR U.S. $ OF CONTRACTS
- ---------- -------- -------- ----------- ------------
01/04/2006 AUD 76 56 56 $--
===
See Notes to Financial Statements.
51
Portfolio of Investments
VT SMALL CAP GROWTH FUND
December 31, 2005
VALUE
SHARES (000S)
- ------ ------
COMMON STOCKS - 96.7%
CONSUMER DISCRETIONARY - 13.9%
CONSUMER DURABLES & APPAREL - 4.7%
6,800 Carter's, Inc.+ ........................................... $ 400
7,637 Charles & Colvard Ltd.** .................................. 154
24,600 Coach, Inc.+ .............................................. 820
7,512 Desarrolladora Homex SA de CV, ADR+** ..................... 231
7,800 Volcom, Inc.+ ............................................. 265
11,888 Warnaco Group, Inc.+ ...................................... 318
------
2,188
------
CONSUMER SERVICES - 2.2%
9,300 BJ's Restaurants Inc.+ .................................... 213
8,756 Cheesecake Factory, Inc.+ ................................. 327
3,150 Ctrip.com International Ltd., ADR+ ........................ 182
10,669 Sonic Corporation+ ........................................ 315
------
1,037
------
MEDIA - 1.6%
21,300 Focus Media Holding Ltd., ADR+ ............................ 719
------
RETAILING - 5.4%
5,186 America's Car-Mart, Inc.+ ................................. 86
6,498 Blue Nile, Inc.+** ........................................ 262
8,483 Guitar Center, Inc.+ ...................................... 424
23,722 Hibbett Sporting Goods, Inc.+ ............................. 676
10,767 Stamps.com, Inc.+ ......................................... 247
4,403 Tractor Supply Company+ ................................... 233
22,876 Urban Outfitters, Inc.+ ................................... 579
------
2,507
------
Total Consumer Discretionary .............................. 6,451
------
CONSUMER STAPLES - 1.6%
FOOD & STAPLES RETAILING - 0.8%
9,900 Central European Distribution Corporation+ ................ 397
------
HOUSEHOLD & PERSONAL PRODUCTS - 0.8%
5,714 Parlux Fragrances, Inc.+ .................................. 175
4,695 USANA Health Sciences, Inc.+** ............................ 180
------
355
------
Total Consumer Staples .................................... 752
------
ENERGY - 7.3%
10,500 ATP Oil & Gas Corporation+ ................................ 389
11,500 Basic Energy Services, Inc.+ .............................. 230
15,300 Bronco Drilling Company, Inc.+ ............................ 352
22,800 Carrizo Oil & Gas, Inc.+ .................................. 563
5,600 Dril-Quip, Inc.+ .......................................... 264
31,100 Input/Output, Inc.+ ....................................... 219
5,400 Lufkin Industries, Inc. ................................... 269
9,000 Petrohawk Energy Corporation+ ............................. 119
6,600 Pioneer Drilling Company+ ................................. 118
3,700 SEACOR Holdings Inc.+ ..................................... 252
6,256 Veritas DGC, Inc.+ ........................................ 222
5,800 W-H Energy Services, Inc.+ ................................ $ 192
4,659 Whiting Petroleum Corporation+ ............................ 186
------
Total Energy .............................................. 3,375
------
FINANCIALS - 4.9%
BANKS - 1.7%
11,242 Brookline Bancorp, Inc. ................................... 159
2,415 Mercantile Bank Corporation ............................... 93
9,500 Midwest Banc Holdings, Inc. ............................... 211
11,200 Signature Bank+ ........................................... 315
------
778
------
DIVERSIFIED FINANCIALS - 1.3%
11,600 First Cash Financial Services, Inc.+ ...................... 338
22,600 TradeStation Group, Inc.+ ................................. 280
------
618
------
INSURANCE - 1.9%
20,500 American Equity Investment Life Holding Company ........... 268
14,400 Amerisafe Inc.+ ........................................... 145
10,324 Delphi Financial Group, Inc., Class A ..................... 475
------
888
------
Total Financials .......................................... 2,284
------
HEALTH CARE - 25.2%
HEALTH CARE EQUIPMENT & SERVICES - 12.1%
15,879 Adeza Biomedical Corporation+ ............................. 334
7,000 Advisory Board Company+ ................................... 334
26,194 Align Technology, Inc.+** ................................. 169
4,978 American Healthways, Inc.+ ................................ 225
9,588 ArthroCare Corporation+ ................................... 404
7,527 Aspect Medical Systems, Inc.+ ............................. 258
4,714 Centene Corporation+ ...................................... 124
16,754 Conceptus, Inc.+ .......................................... 211
7,696 Conor Medsystems, Inc.+ ................................... 149
11,500 HealthExtras, Inc.+ ....................................... 289
7,900 ICU Medical, Inc.+ ........................................ 310
9,600 Immucor, Inc.+ ............................................ 224
8,098 IntraLase Corporation+** .................................. 144
10,748 Kyphon, Inc.+ ............................................. 439
4,150 Laserscope+ ............................................... 93
9,339 LCA-Vision, Inc. .......................................... 444
6,914 LHC Group, Inc.+ .......................................... 120
11,850 Merge Technologies, Inc.+ ................................. 297
15,700 Micrus Endovascular Corporation+ .......................... 137
7,100 Palomar Medical Technologies, Inc.+ ....................... 249
9,500 Quidel Corporation+ ....................................... 102
8,301 Syneron Medical Ltd. (F)+** ............................... 264
10,666 Ventiv Health, Inc.+ ...................................... 252
6,900 VNUS Medical Technologies, Inc.+ .......................... 58
------
5,630
------
See Notes to Financial Statements.
52
Portfolio of Investments (continued)
VT SMALL CAP GROWTH FUND
December 31, 2005
VALUE
SHARES (000S)
- ------ -------
COMMON STOCKS (CONTINUED)
HEALTH CARE (CONTINUED)
PHARMACEUTICALS & BIOTECHNOLOGY - 13.1%
10,500 Adams Respiratory Therapeutics, Inc.+ .................... $ 427
6,200 Amylin Pharmaceuticals, Inc.+ ............................ 248
3,500 Anika Therapeutics, Inc.+ ................................ 41
11,200 Aspreva Pharmaceuticals Corporation (F)+ ................. 176
7,800 Combinatorx Inc.+ ........................................ 64
16,266 CV Therapeutics, Inc.+ ................................... 402
7,500 Digene Corporation+ ...................................... 219
23,100 Encysive Pharmaceuticals, Inc.+ .......................... 182
10,446 First Horizon Pharmaceutical Corporation+ ................ 180
16,500 Keryx Biopharmaceuticals, Inc.+ .......................... 242
12,050 Kos Pharmaceuticals, Inc.+ ............................... 623
26,804 LifeCell Corporation+ .................................... 511
19,638 MGI Pharma, Inc.+ ........................................ 337
19,400 Nastech Pharmaceutical Company Inc.+ ..................... 286
17,369 Nektar Therapeutics+ ..................................... 286
12,402 Protein Design Labs, Inc.+ ............................... 352
18,000 Rigel Pharmaceuticals, Inc.+ ............................. 150
12,937 Salix Pharmaceuticals Ltd.+ .............................. 227
9,700 SeraCare Life Sciences, Inc.+ ............................ 88
15,000 Telik, Inc.+ ............................................. 255
11,483 United Therapeutics Corporation+ ......................... 794
-------
6,090
-------
Total Health Care ........................................ 11,720
-------
INDUSTRIALS - 13.1%
CAPITAL GOODS - 8.1%
20,726 A.S.V., Inc.+** .......................................... 518
4,348 American Science & Engineering, Inc.+ .................... 271
5,800 Bucyrus International, Inc. .............................. 306
19,314 Ceradyne, Inc.+ .......................................... 846
6,800 ESCO Technologies Inc.+ .................................. 302
9,000 Essex Corporation+ ....................................... 153
14,000 iRobot Corporation+** .................................... 467
7,833 Lincoln Electric Holdings, Inc. .......................... 311
7,600 NCI Building Systems, Inc.+ .............................. 323
19,601 TurboChef Technologies, Inc.+** .......................... 281
-------
3,778
-------
COMMERCIAL SERVICES & SUPPLIES - 3.2%
4,926 CRA International Inc.+ .................................. 235
14,303 LECG Corporation+ ........................................ 248
5,900 Mine Safety Appliances Company ........................... 214
8,800 Portfolio Recovery Associates, Inc.+ ..................... 409
14,248 Resources Connection, Inc.+ .............................. 371
-------
1,477
-------
TRANSPORTATION - 1.8%
13,200 Knight Transportation, Inc. .............................. $ 274
9,901 Old Dominion Freight Line, Inc.+ ......................... 267
13,505 Universal Truckload Services, Inc.+ ...................... 311
-------
852
-------
Total Industrials ........................................ 6,107
-------
INFORMATION TECHNOLOGY - 29.9%
COMMUNICATIONS EQUIPMENT - 7.6%
22,885 AudioCodes Ltd. (F)+** ................................... 254
7,177 Blue Coat Systems, Inc.+ ................................. 328
5,816 Comtech Telecommunications Corporation+ .................. 178
53,665 Glenayre Technologies, Inc.+ ............................. 175
29,167 Ixia+ .................................................... 431
18,800 NMS Communications Corporation+ .......................... 66
18,321 Openwave Systems Inc.+** ................................. 320
11,417 Orckit Communications Ltd. (F)+** ........................ 278
18,800 Polycom, Inc.+ ........................................... 288
23,200 Redback Networks Inc.+ ................................... 326
10,716 SafeNet, Inc.+ ........................................... 345
24,700 Symmetricom, Inc.+ ....................................... 209
22,100 Tekelec+ ................................................. 307
-------
3,505
-------
COMPUTERS & PERIPHERALS - 1.7%
4,800 Hutchinson Technology, Inc.+ ............................. 136
7,495 M-Systems Flash Disk Pioneers Ltd. (F)+ .................. 248
14,100 Rackable Systems Inc.+ ................................... 402
-------
786
-------
INTERNET SOFTWARE & SERVICES - 7.0%
14,526 Akamai Technologies, Inc.+ ............................... 289
23,689 aQuantive, Inc.+ ......................................... 598
5,300 F5 Networks, Inc.+ ....................................... 303
15,700 HouseValues, Inc.+** ..................................... 205
13,600 iVillage, Inc.+ .......................................... 109
12,500 Jupitermedia Corporation+ ................................ 185
10,036 Marchex, Inc., Class B+** ................................ 226
19,400 Secure Computing Corporation+ ............................ 238
23,103 ValueClick, Inc.+ ........................................ 418
6,700 Websense, Inc.+ .......................................... 440
12,800 WebSideStory, Inc.+ ...................................... 232
-------
3,243
-------
IT SERVICES - 2.5%
32,485 Euronet Worldwide, Inc.+ ................................. 903
15,150 RightNow Technologies, Inc.+ ............................. 280
-------
1,183
-------
See Notes to Financial Statements.
53
Portfolio of Investments (continued)
VT SMALL CAP GROWTH FUND
December 31, 2005
VALUE
SHARES (000S)
- ------ -------
COMMON STOCKS (CONTINUED)
INFORMATION TECHNOLOGY (CONTINUED)
SEMICONDUCTORS & SEMICONDUCTOR
EQUIPMENT - 6.5%
5,800 Cymer, Inc.+ .......................................... $ 206
2,200 FormFactor Inc.+ ...................................... 54
8,500 Ikanos Communications+ ................................ 125
9,400 Microsemi Corporation+ ................................ 260
27,163 O2Micro International Limited (F)+ .................... 277
8,700 Saifun Semiconductors Ltd. (F)+** ..................... 274
14,500 Semtech Corporation+ .................................. 265
18,200 Silicon Motion Technology Corporation, ADR+** ......... 218
8,300 SiRF Technology Holdings, Inc.+ ....................... 247
3,100 Supertex, Inc.+ ....................................... 137
13,725 Tessera Technologies, Inc.+ ........................... 355
26,498 Trident Microsystems, Inc.+ ........................... 477
7,700 Zoran Corporation+ .................................... 125
-------
3,020
-------
SOFTWARE - 4.6%
18,000 Concur Technologies, Inc.+ ............................ 232
21,400 Informatica Corporation+ .............................. 257
17,900 Micromuse Inc.+ ....................................... 177
25,936 Online Resources Corporation+ ......................... 286
15,103 PDF Solutions, Inc.+ .................................. 245
4,900 Retailix Ltd. (F)+ .................................... 120
5,615 TALX Corporation ...................................... 257
32,500 TIBCO Software Inc.+ .................................. 243
21,600 VASCO Data Security International, Inc.+ .............. 213
5,300 Witness Systems, Inc.+ ................................ 104
-------
2,134
-------
Total Information Technology .......................... 13,871
-------
TELECOMMUNICATION SERVICES - 0.8%
4,486 InPhonic, Inc.+** ..................................... 39
12,060 JAMDAT Mobile Inc.+ ................................... 320
-------
Total Telecommunication Services ...................... 359
-------
Total Common Stocks (Cost $38,598) .................... 44,919
-------
REAL ESTATE INVESTMENT TRUSTS (REITS) - 1.0%
7,250 RAIT Investment Trust ................................. 187
13,800 Strategic Hotel Capital, Inc. ......................... 284
-------
Total REITs (Cost $447) ............................... 471
-------
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
- --------- -------
REPURCHASE AGREEMENT - 2.8%
(Cost $1,286)
$1,286 Agreement with Morgan Stanley, 2.920%
dated 12/30/2005, to be repurchased at
$1,286,000 on 01/03/2006
(Collateralized by U.S. Treasury Notes,
having various interest rates and
maturities,
market value $1,327,000) .............................. $1,286
SHORT-TERM INVESTMENT - 7.7%
(Cost $3,570)
3,570 Mellon GSL DBT II Collateral Fund++ ...................... 3,570
TOTAL INVESTMENTS (Cost $43,901*) ............................ 108.2% 50,246
OTHER ASSETS (LIABILITIES) (NET) ............................. (8.2) (3,805)
----- -------
NET ASSETS ................................................... 100.0% $46,441
===== =======
- ----------
* Aggregate cost for federal tax purposes is $44,077.
** Some or all of these securities are on loan at December 31, 2005, and have
an aggregate market value of $3,366,000, representing 7.2% of the total net
assets of the Fund (Collateral Value $3,570,000) (See Note 7 to Financial
Statements).
+ Non-income producing security.
++ Represents investment purchased with cash collateral for securities loaned.
GLOSSARY OF TERMS
ADR -- American Depositary Receipt
(F) -- Foreign Shares
See Notes to Financial Statements.
54
Portfolio of Investments
VT INTERNATIONAL GROWTH FUND
December 31, 2005
VALUE
SHARES (000S)
- ------ -------
COMMON STOCKS - 98.5%
JAPAN - 32.7% ***
4,100 Advantest Corporation** ............................... $ 414
38,000 AEON Company Ltd. ..................................... 970
1,845 Aiful Corporation ..................................... 154
7,400 Astellas Pharma Inc. .................................. 289
6,900 Canon Inc.** .......................................... 405
5,800 Chubu Electric Power Company Inc.** ................... 138
22,600 Daiichi Sankyo Company Ltd.+ .......................... 436
13,000 Daimaru, Inc. ......................................... 187
15,000 Daiwa House Industry Company Ltd. ..................... 234
9,100 FANUC Ltd. ............................................ 773
2,900 Hirose Electric Company Ltd.** ........................ 386
8,400 Hoya Corporation** .................................... 302
22,400 Kansai Electric Power Company Inc. .................... 481
14,000 Kao Corporation ....................................... 375
43 Millea Holdings, Inc. ................................. 742
34,700 Mitsubishi Corporation ................................ 766
101,000 Mitsubishi Estate Company Ltd.** ...................... 2,091
48,000 Mitsubishi Heavy Industries Ltd. ...................... 212
202 Mitsubishi UFJ Financial Group, Inc. .................. 2,756
23,000 Mitsui & Company Ltd. ................................. 296
11,000 Mitsui Fudosan Company Ltd.** ......................... 223
24,000 Mitsui Sumitomo Insurance Company Ltd. ................ 294
79 Mizuho Financial Group, Inc. .......................... 627
3,300 Murata Manufacturing Company Ltd. ..................... 212
15,000 NGK Spark Plug Company Ltd. ........................... 325
3,200 Nidec Corporation ..................................... 272
4,800 Nintendo Company Ltd. ................................. 581
25,000 Nippon Electric Glass Company Ltd. .................... 548
62,000 Nippon Steel Corporation .............................. 220
65 Nippon Telegraph & Telephone Corporation .............. 295
57,100 Nissan Motor Company Ltd. ............................. 582
12,400 Nitto Denko Corporation ............................... 966
24,000 Obayashi Corporation .................................. 176
7,000 OMRON Corporation ..................................... 162
4,800 ORIX Corporation ...................................... 1,222
17,000 Ricoh Company Ltd. .................................... 298
5,300 Rohm Company Ltd. ..................................... 579
4,500 SECOM Company Ltd. .................................... 236
8,000 Sekisui House Ltd.** .................................. 100
1,600 Shimamura Company Ltd. ................................ 221
7,000 Shin-Etsu Chemical Company Ltd. ....................... 373
5,900 SMC Corporation ....................................... 843
72,900 SOFTBANK Corporation** ................................ 3,079
32,000 Sompo Japan Insurance Inc. ............................ 433
4,442 Sony Corporation ...................................... 181
67,000 Sumitomo Corporation .................................. 867
266 Sumitomo Mitsui Financial Group, Inc. ................. 2,810
10,000 Sumitomo Realty & Development Company, Ltd. ........... 217
54,500 Suzuki Motor Corporation .............................. 1,013
3,200 T&D Holdings, Inc. .................................... 212
9,100 Takeda Pharmaceutical Company Ltd. .................... 493
2,300 TDK Corporation ....................................... $ 163
7,800 Tokyo Electric Power Company Inc. ..................... 190
14,500 Tokyo Electron Ltd. ................................... 911
48,000 Tokyo Gas Company Ltd.** .............................. 214
53,000 Tokyu Corporation ..................................... 375
4,900 Toyota Motor Corporation (F) .......................... 256
9,500 Trend Micro Inc.** .................................... 361
3,400 Unicharm Corporation .................................. 153
10,100 USHIO Inc. ............................................ 236
457 Yahoo! Japan Corporation .............................. 693
5,900 Yamada Denki Company Ltd.** ........................... 738
37,200 Yamato Transport Company Ltd. ......................... 619
-------
35,976
-------
UNITED KINGDOM - 15.7%
7,400 Anglo American PLC .................................... 252
31,000 ARM Holdings PLC ...................................... 64
36,200 AstraZeneca PLC ....................................... 1,759
14,637 BHP Billiton PLC ...................................... 240
22,800 Brambles Industries PLC ............................... 164
12,000 British Land Company PLC .............................. 220
21,143 Cadbury Schweppes PLC (F) ............................. 200
3,900 Carnival PLC .......................................... 222
13,800 Diageo PLC 199
72,800 HBOS PLC .............................................. 1,242
31,800 HSBC Holdings PLC ..................................... 510
15,600 Johnston Press PLC .................................... 125
55,500 Kingfisher PLC ........................................ 226
37,200 Lloyds TSB Group PLC .................................. 311
12,000 Northern Rock PLC ..................................... 195
33,800 Pearson PLC ........................................... 400
77,800 Reed Elsevier PLC ..................................... 730
5,100 Rio Tinto PLC ......................................... 233
27,700 Rolls-Royce Group PLC ................................. 204
925,180 Rolls-Royce Group PLC, B Shares (Redeemable) .......... 2
74,500 Royal Bank of Scotland Group PLC++ .................... 2,248
66,551 Royal Dutch Shell PLC, A Shares ....................... 2,035
9,856 Royal Dutch Shell PLC, B Shares ....................... 316
2,900 Royal Dutch Shell PLC, Class A, ADR ................... 178
19,600 Scottish & Southern Energy PLC ........................ 342
31,000 Standard Chartered PLC ................................ 690
31,000 Tesco PLC ............................................. 177
63,000 TI Automotive Ltd., Class A+# ......................... 0
52,700 Unilever PLC .......................................... 524
1,251,498 Vodafone Group PLC (F) ................................ 2,693
10,600 Wolseley PLC .......................................... 223
9,400 Xstrata PLC ........................................... 220
18,500 Yell Group PLC ........................................ 170
-------
17,314
-------
FRANCE - 8.5%
6,900 Accor SA .............................................. 380
8,200 AXA Group ............................................. 265
See Notes to Financial Statements.
55
Portfolio of Investments (continued)
VT INTERNATIONAL GROWTH FUND
December 31, 2005
VALUE
SHARES (000S)
------ ------
COMMON STOCKS (CONTINUED)
FRANCE (CONTINUED)
22,800 BNP Paribas SA ........................................... $1,842
30,300 Bouygues SA++ ............................................ 1,481
3,500 Carrefour SA ............................................. 164
3,500 Dassault Systemes SA** ................................... 197
2,000 Essilor International SA ................................. 161
3,900 Groupe Danone** .......................................... 409
1,640 L'Air Liquide SA ......................................... 315
3,900 L'Oreal SA ............................................... 290
5,400 Lafarge SA ............................................... 486
17,800 Sanofi-Aventis Group (F) ................................. 1,558
9,800 Schneider Electric SA .................................... 874
2,500 Societe Generale Group** ................................. 307
800 Total SA ................................................. 202
6,200 Veolia Environnement SA .................................. 280
5,900 Vivendi Universal SA ..................................... 185
------
9,396
------
SWITZERLAND - 8.3%
3,800 Adecco SA ................................................ 175
28,783 Compagnie Financiere Richemont AG,
A Units ............................................... 1,253
14,326 Credit Suisse Group ...................................... 730
17,812 Holcim Ltd. .............................................. 1,213
2,921 Nestle SA(F) ............................................. 872
33,065 Novartis AG (F) .......................................... 1,734
6,979 Roche Holding AG-Genusschein (F) ......................... 1,046
14,339 Swiss Reinsurance Company ................................ 1,048
1,490 Swisscom AG .............................................. 470
1,700 Synthes, Inc. ............................................ 191
4,753 UBS AG ................................................... 452
------
9,184
------
GERMANY - 6.0%
5,700 Allianz AG ............................................... 862
3,900 Altana AG ................................................ 212
19,000 Bayer AG ................................................. 793
4,100 Bayerische Motoren Werke (BMW) AG ........................ 179
7,700 DaimlerChrysler AG** ..................................... 392
3,400 Deutsche Bank AG ......................................... 329
1,989 Deutsche Boerse AG ....................................... 203
11,400 Deutsche Post AG ......................................... 276
7,200 E.ON AG .................................................. 745
24,600 Infineon Technologies AG+ ................................ 224
4,100 SAP AG ................................................... 739
3,100 SAP AG, Sponsored ADR .................................... 140
13,000 Siemens AG ............................................... 1,113
7,900 Volkswagen AG** .......................................... 418
------
6,625
------
NETHERLANDS - 5.4%
33,830 ABN AMRO Holding NV ...................................... 883
43,437 AEGON NV ................................................. 710
6,250 Heineken Holding NV ...................................... $ 184
22,400 Heineken NV .............................................. 710
26,331 ING Groep NV ............................................. 913
138,400 Koninklijke (Royal) KPN NV ............................... 1,388
5,300 Koninklijke (Royal) Numico NV+ ........................... 220
18,000 Reed Elsevier NV ......................................... 251
6,500 TNT NV ................................................... 203
4,500 Unilever NV .............................................. 308
6,526 VNU NV ................................................... 216
------
5,986
------
CANADA - 4.4%
21,600 Abitibi-Consolidated Inc.** .............................. 87
26,300 Alcan Inc.** ............................................. 1,081
9,000 Cameco Corporation ....................................... 571
8,500 Canadian Natural Resources Ltd.** ........................ 421
8,700 Falconbridge Ltd.** ...................................... 258
11,900 Inco Ltd. (F) ............................................ 519
1,900 Magna International Inc., Class A ........................ 137
2,800 Manulife Financial Corporation** ......................... 164
9,800 Methanex Corporation ..................................... 184
4,200 National Bank of Canada** ................................ 218
7,900 Potash Corporation of Saskatchewan Inc. .................. 633
2,900 Suncor Energy Inc.** ..................................... 183
10,100 TELUS Corporation** ...................................... 406
------
4,862
------
SPAIN - 4.2%
5,300 Altadis, SA** ............................................ 240
58,700 Banco Bilbao Vizcaya Argentaria SA ....................... 1,048
70,700 Banco Santander Central Hispano SA ....................... 932
11,500 Iberdrola SA** ........................................... 315
7,500 Industria de Diseno Textil SA(Inditex) ................... 245
39,600 Repsol YPF SA ............................................ 1,159
43,369 Telefonica SA ............................................ 652
------
4,591
------
AUSTRALIA - 1.7% ***
32,366 Amcor Ltd. ............................................... 176
15,876 Brambles Industries Ltd.** ............................... 118
37,212 Foster's Group Ltd. ...................................... 152
27,300 Insurance Australia Group Ltd. ........................... 108
3,200 Macquarie Bank Limited ................................... 159
28,800 Promina Group Ltd. ....................................... 102
39,128 Rinker Group Ltd. ........................................ 468
7,300 Wesfarmers Ltd. .......................................... 197
11,800 Westpac Banking Corporation** ............................ 196
16,731 Woolworths Ltd. .......................................... 206
------
1,882
------
SOUTH KOREA - 1.5% ***
2,485 Samsung Electronics Company Ltd. ........................ 1,599
------
See Notes to Financial Statements.
56
Portfolio of Investments (continued)
VT INTERNATIONAL GROWTH FUND
December 31, 2005
VALUE
SHARES (000S)
------ --------
COMMON STOCKS (CONTINUED)
SWEDEN - 1.5%
12,900 Assa Abloy AB, B Shares ................................ $ 203
11,700 Atlas Copco AB, Class A ................................ 260
4,600 Sandvik AB ............................................. 214
217,000 Telefonaktiebolaget LM Ericsson, B Shares .............. 748
5,000 Telefonaktiebolaget LM Ericsson,
Sponsored ADR** ..................................... 172
--------
1,597
--------
HONG KONG - 1.3% ***
312,000 CNOOC Ltd. ............................................. 212
62,000 Hang Lung Group Ltd. ................................... 132
113,500 Hang Lung Properties Ltd. .............................. 177
144,000 Johnson Electric Holdings Ltd. ......................... 136
170,000 Li & Fung Ltd. ......................................... 327
316,000 PCCW Ltd.** ............................................ 194
23,000 Sung Hung Kai Properties Ltd. .......................... 223
--------
1,401
--------
MEXICO - 1.2%
43,500 America Movil SA de CV, Series L, ADR .................. 1,273
--------
SINGAPORE - 1.1% ***
20,000 DBS Group Holdings Ltd. ................................ 198
544,215 Singapore Telecommunications Ltd.++ .................... 855
21,000 United Overseas Bank Ltd. .............................. 184
--------
1,237
--------
SOUTH AFRICA - 1.1%
33,100 Sasol Ltd. ............................................. 1,192
--------
BELGIUM - 0.6%
4,100 Fortis ................................................. 130
13,600 SES GLOBAL, FDR ........................................ 234
6,300 UCB Group SA ........................................... 296
--------
660
--------
AUSTRIA - 0.4%
4,000 Erste Bank der oesterreichischen
Sparkassen AG ....................................... 222
1,000 Raiffeisen International Bank
Holding AG+ ......................................... 66
7,583 Telekom Austria AG ..................................... 170
--------
458
--------
IRELAND - 0.4%
15,185 CRH PLC ................................................ 447
--------
ITALY - 0.4%
28,293 Banca Intesa SpA ....................................... $ 150
10,250 Eni SpA ................................................ 286
--------
436
--------
TAIWAN - 0.4% ***
40,310 Taiwan Semiconductor Manufacturing
Company Ltd., Sponsored ADR ......................... 400
--------
DENMARK - 0.3%
6,300 Novo Nordisk A/S, Class B .............................. 354
--------
NORWAY - 0.3%
20,700 DnB NOR ASA ............................................ 220
7,285 Norske Skogindustrier ASA .............................. 116
--------
336
--------
BRAZIL - 0.2%
7,000 Companhia Vale do Rio Doce,
Sponsored ADR ....................................... 254
--------
ISRAEL - 0.2%
5,100 Teva Pharmaceutical Industries Ltd.,
Sponsored ADR ....................................... 219
--------
GREECE - 0.2%
6,300 Opap SA ................................................ 217
--------
FINLAND - 0.2%
13,100 Stora Enso Oyj - R Shares .............................. 177
--------
INDIA - 0.1%
1,900 Infosys Technologies Ltd., Sponsored ADR ............... 154
--------
UNITED STATES - 0.1%
7,932 News Corporation (F), CDI .............................. 125
--------
PORTUGAL - 0.1%
11,000 Portugal Telecom, SGPS, SA ............................. 111
--------
Total Common Stocks
(Cost $76,211) ...................................... 108,463
--------
PREFERRED STOCK - 0.1%
(Cost $12)
SOUTH KOREA - 0.1% ***
210 Samsung Electronics Company Ltd. ....................... 101
--------
See Notes to Financial Statements.
57
Portfolio of Investments (continued)
VT INTERNATIONAL GROWTH FUND
December 31, 2005
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
- --------- --------
REPURCHASE AGREEMENT - 1.6%
(Cost $1,752)
$ 1,752 Agreement with Morgan Stanley, 2.920%
dated 12/30/2005, to be repurchased at
$1,753,000 on 01/03/2006
(Collateralized by U.S. Treasury Notes,
having various interest rates and maturities,
market value $1,808,000)..................... $ 1,752
--------
SHORT-TERM INVESTMENT - 9.5%
(Cost $10,445)
10,445 Mellon GSL DBT II
Collateral Fund+++.............................. 10,445
--------
TOTAL INVESTMENTS (Cost $88,420*).................. 109.7% 120,761
OTHER ASSETS (LIABILITIES) (NET)................... (9.7) (10,644)
----- --------
NET ASSETS......................................... 100.0% $110,117
===== ========
- ----------
* Aggregate cost for federal tax purposes is $89,948.
** Some or all of these securities are on loan at December 31, 2005, and have
an aggregate market value of $9,431,000, representing 8.6% of the total net
assets of the Fund (Collateral Value $10,445,000) (See Note 7 to Financial
Statements).
*** Investments in the areas of the Pacific Rim at December 31, 2005 are 38.7%
of the total net assets of the Fund.
+ Non-income producing security.
++ Security acquired in a transaction exempt from registration under Rule
144A of the Securities Act of 1933, as amended.
+++ Represents investment purchased with cash collateral for securities loaned.
# Security is restricted and illiquid. It was acquired on October 30, 2001,
and has a value of $0.00 per Fund share at December 31, 2005.
See Notes to Financial Statements.
58
Portfolio of Investments (continued)
VT INTERNATIONAL GROWTH FUND
December 31, 2005
SCHEDULE OF FORWARD FOREIGN CURRENCY CONTRACTS
FORWARD FOREIGN CURRENCY CONTRACTS TO BUY
CONTRACTS TO RECEIVE
(000S) NET
----------------------------------------- UNREALIZED
EXPIRATION LOCAL VALUE IN IN EXCHANGE (DEPRECIATION)
DATE CURRENCY U.S. $ FOR U.S. $ OF CONTRACTS
- ---------- ------------ -------- ----------- --------------
01/03/06 EUR 36 43 43 $ --
01/04/06 EUR 26 30 30 --
01/04/06 JPY 2,309 20 20 --
01/05/06 JPY 6,341 54 54 --
01/10/06 JPY 54,038 459 500 (41)
01/12/06 GBP 98 168 171 (3)
01/24/06 GBP 346 595 611 (16)
03/14/06 GBP 250 430 437 (7)
04/07/06 EUR 389 463 468 (5)
06/14/06 GBP 250 430 434 (4)
----
$(76)
====
AT DECEMBER 31, 2005, SECTOR DIVERSIFICATION IS AS FOLLOWS:
% OF VALUE
SECTOR DIVERSIFICATION NET ASSETS (000S)
---------------------- ---------- --------
COMMON STOCKS:
Banks..................................... 17.8% $ 19,655
Materials................................. 9.3 10,234
Telecommunication Services................ 9.1 9,988
Pharmaceuticals & Biotechnology........... 8.3 9,189
Capital Goods............................. 5.7 6,308
Energy.................................... 5.6 6,184
Insurance................................. 4.6 4,940
Semiconductors & Semiconductor Equipment.. 4.0 4,353
Internet Software & Services.............. 3.9 4,287
Food, Beverage & Tobacco.................. 3.6 4,018
Automobiles & Components.................. 3.0 3,302
Real Estate Investment Trusts (REITs)..... 3.1 3,283
Retailing................................. 2.6 2,911
Utilities................................. 2.5 2,705
Consumer Durables & Apparel............... 2.3 2,575
Diversified Financials.................... 2.3 2,492
Media..................................... 2.2 2,436
Commercial Services & Supplies............ 1.8 2,027
Electronic Equipment & Instruments........ 1.4 1,571
Transportation............................ 1.3 1,473
Other..................................... 4.1 4,532
----- --------
TOTAL COMMON STOCKS....................... 98.5 108,463
PREFERRED STOCK........................... 0.1 101
REPURCHASE AGREEMENT...................... 1.6 1,752
SHORT-TERM INVESTMENT..................... 9.5 10,445
----- --------
TOTAL INVESTMENTS......................... 109.7 120,761
OTHER ASSETS (LIABILITIES) (NET).......... (9.7) (10,644)
----- --------
NET ASSETS................................ 100.0% $110,117
===== ========
FORWARD FOREIGN CURRENCY CONTRACTS TO SELL
CONTRACTS TO DELIVER NET
(000S) UNREALIZED
------------------------------------------ APPRECIATION/
EXPIRATION LOCAL VALUE IN IN EXCHANGE (DEPRECIATION)
DATE CURRENCY U.S. $ FOR U.S. $ OF CONTRACTS
- ---------- ------------ -------- ----------- --------------
01/10/06 JPY 54,038 459 493 $ 34
01/12/06 CHF 218 166 170 4
01/24/06 CAD 724 623 611 (12)
03/14/06 CHF 564 432 437 5
04/07/06 EUR 389 463 470 7
06/14/06 CHF 559 433 434 1
----
$ 39
====
Net Unrealized Depreciation of Forward Foreign
Currency Contracts..................................... $(37)
====
GLOSSARY OF TERMS
ADR -- American Depositary Receipt
CAD -- Canadian Dollar
CDI -- CHESS Depositary Interest
CHF -- Swiss Franc
EUR -- EURO
(F) -- Foreign Shares
FDR -- Fiduciary Depositary Receipt
GBP -- Great Britain Pound Sterling
JPY -- Japanese Yen
See Notes to Financial Statements.
59
Portfolio of Investments
VT SHORT TERM INCOME FUND
December 31, 2005
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
- --------- ------
CORPORATE BONDS AND NOTES - 62.1%
FINANCIAL SERVICES - 12.0%
$1,000 Berkshire Hathaway Inc., Note,
3.375% due 10/15/2008 .................................. $ 964
1,000 CIT Group Inc., Sr. Note,
7.375% due 04/02/2007 .................................. 1,029
500 Goldman Sachs Group, Inc., Note,
4.125% due 01/15/2008 .................................. 493
Household Finance Corporation, Note:
1,500 5.750% due 01/30/2007 .................................. 1,513
250 7.875% due 03/01/2007 .................................. 258
500 Nuveen Investments, Sr. Note,
5.000% due 09/15/2010 .................................. 493
1,500 Rollins Truck Leasing Corporation, Deb.,
8.375% due 02/15/2007 .................................. 1,552
------
6,302
------
BANKS - 10.6%
1,000 Fifth Third Bank, Note,
2.700% due 01/30/2007 .................................. 975
1,000 JPMorgan Chase & Company, Note,
5.350% due 03/01/2007 .................................. 1,004
1,500 MBNA America Bank N.A., Note,
6.500% due 06/20/2006 .................................. 1,512
1,000 SB Treasury Company LLC, Bond,
9.400% to 06/30/2008;
10.925% due 12/29/2049** ............................... 1,096
1,000 U.S. Bank N.A., Note,
2.850% due 11/15/2006 .................................. 984
------
5,571
------
REAL ESTATE INVESTMENT TRUSTS/PROPERTY - 6.1%
1,000 CPG Partners LP, Note,
3.500% due 03/15/2009 .................................. 956
750 Developers Diversified Realty
Corporation, Sr. Note,
6.625% due 01/15/2008 .................................. 770
800 Duke-Weeks Realty Corporation, Note,
7.375% due 08/01/2007 .................................. 830
600 EOP Operating LP, Note,
7.750% due 11/15/2007 .................................. 629
------
3,185
------
CABLE TV - 5.3%
1,250 AOL Time Warner Inc., Note,
6.150% due 05/01/2007 .................................. 1,266
1,000 Cox Enterprises, Inc., Note,
4.375% due 05/01/2008** ................................ 977
500 Univision Communications Inc.,
Company Guarantee,
7.850% due 07/15/2011 .................................. 551
------
2,794
------
HEALTH CARE - 4.8%
$1,500 Amgen Inc., Sr. Note,
4.000% due 11/18/2009 .................................. $1,456
1,000 Cardinal Health, Inc., Note,
6.250% due 07/15/2008 .................................. 1,024
------
2,480
------
UTILITIES - 4.7%
1,000 Constellation Energy Group, Inc., Note,
6.350% due 04/01/2007 .................................. 1,016
350 Pacific Gas & Electric Company, First Mortgage,
3.600% due 03/01/2009 .................................. 336
350 Sempra Energy, Note,
4.750% due 05/15/2009 .................................. 346
750 Texas-New Mexico Power Company, Sr. Note,
6.250% due 01/15/2009 .................................. 770
------
2,468
------
GAMING/LEISURE - 3.8%
1,000 Carnival Corporation, Company Guarantee,
3.750% due 11/15/2007 .................................. 978
1,000 Harrah's Operating Company, Inc., Company Guarantee,
5.500% due 07/01/2010 .................................. 1,000
------
1,978
------
AUTO MANUFACTURING & PARTS - 3.8%
1,000 Ford Motor Credit Company, Note,
6.500% due 01/25/2007 .................................. 968
1,000 Toyota Motor Credit Corporation, Note,
5.650% due 01/15/2007 .................................. 1,004
------
1,972
------
SERVICES - 2.9%
1,000 PHH Corporation, Note,
6.000% due 03/01/2008 .................................. 1,015
500 Sealed Air Corporation, Conv. Sr. Note,
3.000% due 06/30/2033** ................................ 501
------
1,516
------
TELECOMMUNICATIONS - 2.9%
500 TELUS Corporation, Note,
7.500% due 06/01/2007 .................................. 517
1,000 Verizon Global Funding Corporation, Note,
4.000% due 01/15/2008 .................................. 981
------
1,498
------
FOOD - 2.8%
500 CVS Corporation, Note,
4.000% due 09/15/2009 .................................. 481
1,000 Safeway Inc., Sr. Note,
6.150% due 03/01/2006 .................................. 1,001
------
1,482
------
See Notes to Financial Statements.
60
Portfolio of Investments (continued)
VT SHORT TERM INCOME FUND
December 31, 2005
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
- --------- -------
CORPORATE BONDS AND NOTES (CONTINUED)
AIRLINES - 1.9%
$1,000 Southwest Airlines Company, Pass-through Certificates,
5.496% due 11/01/2006 ................................. $ 1,005
-------
AEROSPACE/DEFENSE - 0.5%
250 Boeing Capital Corporation, Sr. Note,
5.650% due 05/15/2006 ................................. 251
-------
Total Corporate Bonds and Notes (Cost $32,752) ........... 32,502
-------
COLLATERALIZED MORTGAGE OBLIGATIONS (CMOS) - 14.1%
1,000 Banc of America Mortgage Securities, Inc.,
Pass-through Certificates,
Series 2003-6, Class 1A30,
4.750% due 08/25/2033 ................................. 981
971 Cendant Mortgage Corporation,
Series 2003-3P, Class A1,
5.500% due 04/25/2020** ............................... 968
954 Chase Mortgage Finance Corporation,
Series 2005-S1, Class 1A8,
5.500% due 05/25/2035 ................................. 955
622 Credit Suisse First Boston Mortgage
Securities Corporation,
Pass-through Certificates,
Series 2003-29, Class 4A1,
6.000% due 12/25/2033 ................................. 629
Federal Home Loan Mortgage Corporation:
540 Series 2552, Class KB,
4.250% due 06/15/2027 ................................. 536
1,000 Series 2811, Class NU,
4.500% due 05/15/2030 ................................. 967
964 Federal National Mortgage Association,
Series 2005-100, Class QA,
5.000% due 11/25/2035 ................................. 958
682 Government National Mortgage Association,
Series 2002-70, Class PA,
4.500% due 08/20/2032 ................................. 660
742 GSR Mortgage Loan Trust,
Pass-through Certificates,
Series 2005-1F, Class 2A1,
6.000% due 02/25/2035 ................................. 747
-------
Total CMOs (Cost $7,506) ................................. 7,401
-------
U.S. GOVERNMENT AGENCY OBLIGATIONS - 6.6%
1,000 Federal Home Loan Bank,
Series 00-0606, Class Y,
5.270% due 12/28/2012 ................................. 1,001
Federal Home Loan Mortgage Corporation:
1,000 Bond,
3.250% due 02/25/2008 ................................. 969
1,000 Note,
4.125% due 07/12/2010 ................................. 976
$ 500 Federal National Mortgage Association, Note,
3.000% to 07/16/2006;
5.800% due 07/16/2013 ................................. $ 493
-------
Total U.S. Government Agency Obligations (Cost $3,490) ... 3,439
-------
ASSET-BACKED SECURITIES (ABSS) - 5.1%
510 Atlantic City Electric Transition
Funding LLC, Series 2003-1, Class A1,
2.890% due 07/20/2011 ................................. 494
1,000 Capital One Multi-Asset Execution Trust,
Series 2003-A6, Class A6,
2.950% due 08/17/2009 ................................. 986
80 Green Tree Financial Corporation,
Series 1995-6, Class B1,
7.700% due 09/15/2026 ................................. 74
47 Green Tree Home Improvement,
Series 1995-D, Class B2,
7.450% due 09/15/2025 ................................. 47
107 Mid-State Trust, Series 4, Class A,
8.330% due 04/01/2030 ................................. 113
1,000 WFS Financial Owner Trust,
Series 2004-3, Class A4,
3.930% due 02/17/2012 ................................. 979
-------
Total ABSs (Cost $2,744) ................................. 2,693
-------
U.S. TREASURY NOTES - 3.8%
1,000 2.000% due 05/15/2006 .................................... 992
1,000 3.250% due 08/15/2008 .................................... 973
-------
Total U.S. Treasury Note (Cost $1,979) ................... 1,965
-------
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES - 2.3%
FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA) - 0.8%
190 6.500% due 01/01/2014 .................................... 194
167 8.000% due 05/01/2027 .................................... 179
21 8.500% due 11/01/2017 .................................... 23
-------
Total FNMA (Cost $379) 396
-------
ADJUSTABLE RATE MORTGAGE-BACKED SECURITIES (ARMS) - 0.6%
21 Federal Home Loan Mortgage Corporation (FHLMC),
5.261% due 11/01/2021+ ................................ 22
Federal National Mortgage Association (FNMA):
252 4.648% due 11/01/2032+ ................................... 252
8 4.807% due 01/01/2019+ ................................... 8
17 5.001% due 11/01/2035+ ................................... 17
2 5.539% due 11/01/2022+ ................................... 2
5 5.610% due 04/01/2019+ ................................... 5
9 5.875% due 11/01/2021+ ................................... 9
-------
Total ARMs (Cost $327) ................................... 315
-------
See Notes to Financial Statements.
61
Portfolio of Investments (continued)
VT SHORT TERM INCOME FUND
December 31, 2005
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
- --------- -------
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED
SECURITIES (CONTINUED)
FEDERAL HOME LOAN MORTGAGE CORPORATION (FHLMC) - 0.5%
$250 6.000% due 05/01/2017 .................................. $ 255
15 9.500% due 08/01/2016 .................................. 16
-------
Total FHLMC (Cost $267) ................................ 271
-------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (GNMA) - 0.4%
24 8.000% due 06/15/2009-08/15/2012 ....................... 25
20 9.000% due 12/15/2020-04/20/2025 ....................... 22
150 10.000% due 02/15/2018-04/15/2025 ...................... 168
13 11.000% due 12/15/2015 ................................. 14
-------
Total GNMA (Cost $219) ................................. 229
-------
Total U.S. Government Agency Mortgage-Backed Securities
(Cost $1,192) ....................................... 1,211
-------
COMMERCIAL MORTGAGE-BACKED SECURITIES (CMBS) - 0.5%
(Cost $273)
274 GMAC Commercial Mortgage Securities Inc., Series
1999-CTL1, Class A, 7.151% due 02/15/2008** ......... 280
-------
REPURCHASE AGREEMENT - 4.3%
(Cost $2,274)
2,274 Agreement with Morgan Stanley, 2.920% dated 12/30/2005,
to be repurchased at $2,275,000 on 01/03/2006
(Collateralized by U.S. Treasury Notes, having
various interest rates and maturities, market value
$2,347,000) ......................................... 2,274
-------
TOTAL INVESTMENTS++ (Cost $52,210*) ......................... 98.8% 51,765
OTHER ASSETS (LIABILITIES) (NET) ............................ 1.2 612
----- -------
NET ASSETS .................................................. 100.0% $52,377
===== =======
- ----------
* Aggregate cost for federal tax purposes is $52,210.
** Security acquired in a transaction exempt from registration under Rule
144A of the Securities Act of 1933, as amended.
+ Variable rate security. The interest rate shown reflects the rate in effect
at December 31, 2005.
++ All securities segregated as collateral for futures contracts.
UNREALIZED
NUMBER OF VALUE DEPRECIATION
CONTRACTS (000S) (000S)
- --------- ------ ------------
FUTURES CONTRACTS-SHORT POSITION
35 U.S. 5 Year Treasury Note, March 2006....... $3,722 $(12)
====
See Notes to Financial Statements.
62
Portfolio of Investments
VT U.S. GOVERNMENT SECURITIES FUND
December 31, 2005
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
- ---------- --------
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED
SECURITIES - 63.8%
FEDERAL HOME LOAN MORTGAGE CORPORATION (FHLMC) - 34.1%
$ 3,063 4.000% due 08/01/2018 .................................. $ 2,926
14,019 4.500% due 04/01/2018-06/01/2035 ....................... 13,468
30,005 5.000% due 04/01/2018-10/01/2035 ....................... 29,150
29,422 5.500% due 12/01/2008-09/01/2035 ....................... 29,282
12,685 6.000% due 01/01/2013-05/01/2034 ....................... 12,856
3,918 6.500% due 11/01/2016-01/01/2032 ....................... 4,047
1,730 7.000% due 04/01/2008-04/01/2032 ....................... 1,804
101 7.500% due 02/01/2031 .................................. 106
88 8.000% due 07/01/2007-12/01/2030 ....................... 91
88 8.500% due 07/01/2029 .................................. 95
29 8.750% due 01/01/2013 .................................. 30
--------
Total FHLMC (Cost $95,751) ............................. 93,855
--------
FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA) - 24.0%
5,012 4.500% due 12/01/2018-11/01/2019 ....................... 4,889
17,869 5.000% due 04/01/2018-06/01/2035 ....................... 17,579
22,102 5.500% due 01/01/2017-09/01/2034 ....................... 21,962
10,070 6.000% due 12/01/2016-10/01/2035 ....................... 10,202
9,148 6.500% due 09/01/2024-07/01/2034 ....................... 9,452
1,010 7.000% due 08/01/2028-11/01/2031 ....................... 1,057
121 7.500% due 11/01/2029 .................................. 128
397 8.000% due 05/01/2022-09/01/2027 ....................... 422
216 8.500% due 02/01/2023-10/01/2027 ....................... 233
111 9.000% due 09/01/2030 .................................. 123
--------
Total FNMA (Cost $67,272) .............................. 66,047
--------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (GNMA) - 5.7%
7,456 5.500% due 07/20/2033-03/20/2034 ....................... 7,493
5,747 6.000% due 02/20/2029-08/15/2034 ....................... 5,888
1,430 6.500% due 03/20/2031-04/20/2034 ....................... 1,488
366 7.000% due 01/15/2028-06/20/2031 ....................... 383
495 7.500% due 01/15/2023-11/15/2023 ....................... 525
33 7.750% due 12/15/2029 .................................. 36
30 8.000% due 07/15/2026-06/15/2027 ....................... 33
--------
Total GNMA (Cost $15,913) .............................. 15,846
--------
Total U.S. Government Agency Mortgage- Backed Securities
(Cost $178,936) ..................................... 175,748
--------
COLLATERALIZED MORTGAGE OBLIGATIONS (CMOS) - 21.8%
Banc of America Mortgage Securities, Inc., Pass-through
Certificates:
3,500 Series 2003-6, Class 1A30, 4.750% due 08/25/2033 ....... 3,432
1,392 Series 2004-4, Class 2A1, 5.500% due 05/25/2034 ........ 1,380
2,365 Chase Mortgage Finance Corporation, Series 2005-S1,
Class 1A15, 6.000% due 05/25/2035 ................... 2,383
1,200 Countrywide Alternative Loan Trust, Series 2003-13T1,
Class A1, 4.000% due 08/25/2033 ..................... $ 1,175
Countrywide Home Loans:
2,921 Series 2003-50, Class A1, 5.000% due 11/25/2018 ........ 2,875
4,000 Series 2004-4, Class A5, 5.250% due 05/25/2034 ......... 3,934
Credit Suisse First Boston Mortgage Securities
Corporation, Pass-through Certificates:
2,732 Series 2003-11, Class 1A3, 4.500% due 06/25/2033 ....... 2,709
2,251 Series 2003-8, Class 1A1, 5.750% due 04/25/2033 ........ 2,240
Federal Home Loan Mortgage Corporation:
4,460 Series 2449, Class ND, 6.500% due 05/15/2030 ........... 4,521
1,382 Series 2551, Class QK, 5.500% due 01/15/2033 ........... 1,379
1,512 Series 2575, Class LM, 4.500% due 05/15/2032 ........... 1,487
2,000 Series 2981, Class PC, 5.500% due 10/15/2031 ........... 1,995
Federal National Mortgage Association:
3,000 Grantor Trust, Series 2000-T5, Class B, 7.300% due
05/25/2010 .......................................... 3,285
2,117 Series 2002-16, Class TM, 7.000% due 04/25/2032 ........ 2,213
2,635 Series 2002-86, Class JC, 5.500% due 02/25/2032 ........ 2,626
5,613 Series 2003-58, Class PI, 5.000% due 02/25/2027 ........ 385
Federal National Mortgage Association, REMIC,
Pass-through Certificates:
39 Series 1989-90, Class E, 8.700% due 12/25/2019 ......... 42
715 Series 1992-55, Class DZ, 8.000% due 04/25/2022 ........ 743
GSR Mortgage Loan Trust, Pass-through Certificates:
2,136 Series 2003-4F, Class 2A3, 5.000% due 05/25/2033 ....... 2,130
2,968 Series 2005-1F, Class 2A1, 6.000% due 02/25/2035 ....... 2,986
Prime Mortgage Trust:
2,811 Series 2004-2, Class A2, 4.750% due 11/25/2019 ......... 2,755
2,904 Series 2005-4, Class 1A1, 4.750% due 10/25/2020 ........ 2,838
3,000 Residential Funding Mortgage Security, Series 2003-S20,
Class 1A4, 5.500% due 12/25/2033 .................... 2,944
2,655 Structured Asset Securities Corporation, Series 2005-6,
Class 4A1, 5.000% due 05/25/2035 .................... 2,562
See Notes to Financial Statements.
63
Portfolio of Investments (continued)
VT U.S. GOVERNMENT SECURITIES FUND
December 31, 2005
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
- --------- --------
COLLATERALIZED MORTGAGE
OBLIGATIONS (CMOS) (CONTINUED)
$5,000 Vendee Mortgage Trust,
Series 2000-3, Class 2H,
7.500% due 11/15/2014 ................................ $ 5,070
--------
Total CMOs
(Cost $61,023) ....................................... 60,089
--------
U.S. GOVERNMENT AGENCY OBLIGATIONS - 5.9%
Federal Home Loan Bank, Bond:
2,000 4.500% due 09/16/2013 ................................ 1,964
2,000 5.125% due 03/06/2006 ................................ 2,002
2,500 6.500% due 08/14/2009 ................................ 2,647
3,000 7.375% due 02/12/2010 ................................ 3,292
Federal National Mortgage Association:
Note:
2,000 6.000% due 02/03/2020 ................................ 1,979
2,500 3.000% to 07/16/2006;
5.800% due 07/16/2013 ................................ 2,465
2,000 Housing Urban Development,
Government Guarantee, Series 99-A,
6.160% due 08/01/2011 ................................ 2,058
--------
Total U.S. Government Agency Obligations
(Cost $16,150) ....................................... 16,407
--------
U.S. TREASURY NOTES - 4.9%
1,000 3.500% due 12/15/2009 ................................... 969
3,000 4.000% due 02/15/2014 ................................... 2,920
2,000 4.250% due 11/15/2013 ................................... 1,982
5,000 4.750% due 05/15/2014 ................................... 5,123
2,000 5.750% due 08/15/2010 ................................... 2,116
350 6.250% due 02/15/2007 ................................... 357
--------
Total U.S. Treasury Notes
(Cost $13,478) ....................................... 13,467
--------
REPURCHASE AGREEMENT - 3.1%
(Cost $8,539)
8,539 Agreement with Morgan Stanley, 2.920%
dated 12/30/2005, to be repurchased at
$8,542,000 on 01/03/2006
(Collateralized by U.S. Treasury
Notes, having various interest rates and
maturities, market value $8,812,000) ................. 8,539
--------
TOTAL INVESTMENTS (Cost $278,126*). ......................... 99.5% 274,250
OTHER ASSETS (LIABILITIES) (NET) ............................ 0.5 1,394
----- --------
NET ASSETS .................................................. 100.0% $275,644
===== ========
- ----------
* Aggregate cost for federal tax purposes is $278,387.
GLOSSARY OF TERMS
REMIC -- Real Estate Mortgage Investment Conduit
See Notes to Financial Statements.
64
Portfolio of Investments
VT INCOME FUND
December 31, 2005
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
- --------- -------
CORPORATE BONDS AND NOTES - 67.4%
FINANCIAL SERVICES/BANKS - 11.5%
$ 500 American General Corporation, Note,
7.500% due 07/15/2025 ................................. $ 614
1,000 American General Finance, Inc.,
MTN, Series I,
4.625% due 05/15/2009 ................................. 991
400 Banc One Corporation, Sub. Note,
10.000% due 08/15/2010 ................................ 477
1,000 Bank of America Corporation, Sub. Note,
7.800% due 02/15/2010 ................................. 1,105
500 CIT Group Inc., Sr. Note,
7.750% due 04/02/2012 ................................. 568
3,000 Citigroup Inc., Note,
6.500% due 01/18/2011 ................................. 3,200
1,000 Farmers Insurance Exchange,
Note,
6.000% due 08/01/2014** ............................... 1,017
2,500 Goldman Sachs Group, Inc., Bond,
6.875% due 01/15/2011 ................................. 2,696
1,000 Hartford Life Insurance Company, Deb.,
7.650% due 06/15/2027 ................................. 1,241
1,500 Jefferies Group, Inc., Sr. Note,
7.750% due 03/15/2012 ................................. 1,670
1,000 JPMorgan Chase & Company, Sub. Note,
5.125% due 09/15/2014 ................................. 992
1,000 Legg Mason, Inc., Sr. Note,
6.750% due 07/02/2008 ................................. 1,042
2,000 Merrill Lynch & Company Inc., Note,
6.000% due 02/17/2009 ................................. 2,064
1,500 Morgan Stanley Dean Witter & Company,
Note, 6.750% due 04/15/2011 ........................... 1,616
1,000 Morgan Stanley, Sub. Note,
4.750% due 04/01/2014 ................................. 961
1,100 NCNB Corporation, Sub. Note,
9.375% due 09/15/2009 ................................. 1,261
2,250 Wells Fargo & Company, Sub. Note,
4.625% due 04/15/2014 ................................. 2,189
-------
23,704
-------
OIL & GAS - 8.0%
1,200 ANR Pipeline Company, Deb.,
9.625% due 11/01/2021 ................................. 1,472
1,750 Consolidated Natural Gas Company, Sr.
Note,
6.850% due 04/15/2011 ................................. 1,880
2,500 El Paso Natural Gas Company, Deb.,
7.500% due 11/15/2026 ................................. 2,594
1,000 Enterprise Products Partners LP,
Company Guarantee,
6.375% due 02/01/2013 ................................. 1,048
1,365 Express Pipeline LP, Sub. Note,
7.390% due 12/31/2017** ............................... 1,460
775 Hanover Compressor Company,
Sr. Note,
8.625% due 12/15/2010 ................................. 823
Petro-Canada:
500 Deb.,
9.250% due 10/15/2021 ................................. 679
1,000 Note,
4.000% due 07/15/2013 ................................. 927
$2,500 Petrobras International Finance
Company, Sr. Note,
9.750% due 07/06/2011 ................................. $ 2,950
1,000 Southern Natural Gas Company, Sr. Note,
8.000% due 03/01/2032 ................................. 1,102
1,500 XTO Energy Inc., Sr. Note,
6.250% due 04/15/2013 ................................. 1,592
-------
16,527
-------
CONSUMER PRODUCTS/SERVICES - 7.2%
2,000 Allied Waste North America, Sr. Note,
7.250% due 03/15/2015** ............................... 2,030
1,750 Carnival Corporation, Deb.,
7.200% due 10/01/2023 ................................. 2,035
1,000 Cendant Corporation, Note,
6.875% due 08/15/2006 ................................. 1,010
2,500 ConAgra, Inc., Sr. Note,
7.125% due 10/01/2026 ................................. 2,767
1,000 Mattel, Inc., Note,
7.300% due 06/13/2011 ................................. 1,081
1,500 Reed Elsevier Capital Inc.,
Company Guarantee,
6.750% due 08/01/2011 ................................. 1,623
1,000 Royal Caribbean Cruises Ltd.,
Sr. Note,
8.000% due 05/15/2010 ................................. 1,091
1,500 Sealed Air Corporation,
Conv. Sr. Note,
3.000% due 06/30/2033** ............................... 1,504
1,500 Waste Management Inc.,
Sr. Note,
7.375% due 08/01/2010 ................................. 1,634
-------
14,775
-------
TRANSPORTATION/AUTO - 7.2%
2,000 Burlington Northern Santa Fe Corporation,
Deb.,
8.125% due 04/15/2020 ................................. 2,520
172 Continental Airlines Inc., Pass-through
Certificates, Series 1997-4C,
6.800% due 07/02/2007 ................................. 164
420 CSX Transportation, Inc., Deb.,
9.750% due 06/15/2020 ................................. 575
400 Ford Holdings Inc., Company Guarantee,
9.300% due 03/01/2030 ................................. 300
250 Ford Motor Company, Deb.,
8.900% due 01/15/2032 ................................. 184
2,000 Ford Motor Credit Company, Note,
7.375% due 10/28/2009 ................................. 1,775
1,000 General Motors Corporation, Deb.,
9.400% due 07/15/2021 ................................. 670
Norfolk Southern Corporation:
Bond:
963 5.640% due 05/17/2029 ................................. 970
37 7.800% due 05/15/2027 ................................. 47
580 Deb.,
9.750% due 06/15/2020 ................................. 814
2,500 Sr. Note,
6.200% due 04/15/2009 ................................. 2,601
See Notes to Financial Statements.
65
Portfolio of Investments (continued)
VT INCOME FUND
December 31, 2005
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
- --------- -------
CORPORATE BONDS AND NOTES (CONTINUED)
TRANSPORTATION/AUTO (CONTINUED)
$2,000 Southwest Airlines Company,
Pass-through Certificates, Series A-4,
9.150% due 07/01/2016 ................................. $ 2,401
1,000 Trailer Bridge, Inc.,
Sr. Sec. Note,
9.250% due 11/15/2011 ................................. 1,034
1,136 United Air Lines Inc.,
Pass-through Certificates, (in default),
9.560% due 10/19/2018 .............................. 719
-------
14,774
-------
UTILITIES - 6.2%
1,500 Arizona Public Service Company, Note,
6.500% due 03/01/2012 ................................. 1,604
1,850 Illinois Power Company, First Mortgage,
7.500% due 06/15/2009 ................................. 1,978
1,000 Metropolitan Edison Company, Sr. Note,
4.950% due 03/15/2013 ................................. 987
2,250 Pacific Gas & Electric Company,
First Mortgage,
4.200% due 03/01/2011 ................................. 2,160
PacifiCorp, First Mortgage:
1,500 4.950% due 08/15/2014 .................................... 1,482
1,000 5.250% due 06/15/2035 .................................... 948
500 Public Service Company of
New Mexico, Sr. Note,
4.400% due 09/15/2008 ................................. 490
1,500 Southwestern Electric Power Company, Note,
5.375% due 04/15/2015 ................................. 1,500
1,500 Texas-New Mexico Power
Company, Sr. Note,
6.250% due 01/15/2009 ................................. 1,540
-------
12,689
-------
TELECOMMUNICATIONS - 5.8%
4,000 Deutsche Telephone Finance, Bond,
8.500% due 06/15/2010 ................................. 4,539
1,700 Northern Telecom Capital Inc.,
Company Guarantee,
7.400% due 06/15/2006 ................................. 1,709
2,000 Qwest Corporation, Note,
8.875% due 03/15/2012 ................................. 2,265
1,000 TELUS Corporation, Note,
8.000% due 06/01/2011 ................................. 1,122
2,000 Vodafone Group PLC, Note,
7.750% due 02/15/2010 ................................. 2,193
-------
11,828
-------
HEALTH CARE - 4.6%
1,500 Aetna Inc., Sr. Note,
7.375% due 03/01/2006 ................................. 1,506
2,000 Cardinal Health, Inc., Note,
6.750% due 02/15/2011 ................................. 2,134
DVI, Inc., Sr. Note, (in default):
400 9.875% due 02/01/2004++ ............................... 40
900 9.875% due 02/01/2004++ ............................... 90
$2,000 HCAInc., Sr. Note,
8.750% due 09/01/2010 ................................. $ 2,222
750 IVAX Corporation, Conv. Sr. Sub. Note,
4.500% due 05/15/2008 ................................. 759
3,000 Tenet Healthcare Corporation, Sr. Note,
6.375% due 12/01/2011 ................................. 2,753
-------
9,504
-------
REAL ESTATE INVESTMENT TRUSTS (REITS) - 3.8%
Arden Realty LP, Note:
1,000 5.200% due 09/01/2011 ................................. 1,014
1,000 5.250% due 03/01/2015 ................................. 1,012
1,000 Developers Diversified Realty
Corporation, Note,
4.625% due 08/01/2010 .................................... 970
2,000 Health Care Property Investors, Inc.,
Note, 6.000% due 03/01/2015 ........................... 2,033
2,500 Healthcare Realty Trust, Inc., Sr. Note,
8.125% due 05/01/2011 ................................. 2,772
-------
7,801
-------
MEDIA - 3.2%
1,500 Comcast Cable Communications Inc.,
Sr. Note,
7.125% due 06/15/2013 ................................. 1,633
2,500 Cox Communications, Inc., Note,
7.875% due 08/15/2009 ................................. 2,688
1,200 News America Holdings Inc., Sr. Deb.,
8.000% due 10/17/2016 ................................. 1,417
500 Tele-Communications, Inc., Sr. Deb.,
7.875% due 08/01/2013 ................................. 566
300 Time Warner Inc., Deb.,
9.150% due 02/01/2023 ................................. 370
-------
6,674
-------
GAMING - 3.0%
500 Harrah's Operating Company Inc.,
Company Guarantee,
8.000% due 02/01/2011 ................................. 553
1,350 Old Evangeline Downs LLC / Diamond
Jo LLC, Company Guarantee,
8.750% due 04/15/2012 ................................. 1,323
2,000 Park Place Entertainment Corporation,
Sr. Note,
7.500% due 09/01/2009 ................................. 2,132
2,000 Riviera Holdings Corporation,
Company Guarantee,
11.000% due 06/15/2010 ................................ 2,162
-------
6,170
-------
RETAIL - 1.8%
1,000 Fred Meyer Inc., Company Guarantee,
7.450% due 03/01/2008 ................................. 1,043
2,500 Safeway Inc., Note,
7.500% due 09/15/2009 ................................. 2,672
-------
3,715
-------
See Notes to Financial Statements.
66
Portfolio of Investments (continued)
VT INCOME FUND
December 31, 2005
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
- ---------- -------
CORPORATE BONDS AND NOTES (CONTINUED)
INFORMATION TECHNOLOGY - 1.7%
$ 2,500 Conexant Systems Inc., Conv. Sub. Note,
4.000% due 02/01/2007 ................................ $ 2,416
1,000 Extreme Networks, Inc., Conv. Sub. Note,
3.500% due 12/01/2006 ................................ 985
-------
3,401
-------
INDUSTRIAL PRODUCTS - 1.5%
2,000 Noranda Inc., Note,
6.000% due 10/15/2015 ................................ 2,023
Weyerhaeuser Company:
500 Deb.,
7.375% due 03/15/2032 ................................ 558
500 Note,
6.750% due 03/15/2012 ................................ 531
-------
3,112
-------
FOREIGN GOVERNMENT - 1.2%
Federal Republic of Brazil:
750 Bond,
9.250% due 10/22/2010 ................................ 841
500 Note,
8.750% due 02/04/2025 ................................ 554
1,000 United Mexican States, Bond,
9.875% due 02/01/2010 ................................... 1,175
-------
2,570
-------
AEROSPACE/DEFENSE - 0.7%
1,000 Boeing Company, Deb.,
8.750% due 08/15/2021 ................................ 1,365
-------
Total Corporate Bonds and Notes
(Cost $132,350) ...................................... 138,609
-------
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES - 21.6%
FEDERAL HOME LOAN MORTGAGE CORPORATION (FHLMC) - 10.8%
3,082 4.500% due 08/01/2033 ................................... 2,912
12,948 5.000% due 04/01/2018-11/01/2035 ........................ 12,674
4,893 5.500% due 11/01/2017-06/01/2035 ........................ 4,877
1,023 6.000% due 03/01/2031-05/01/2032 ........................ 1,036
438 6.500% due 06/01/2029-08/01/2029 ........................ 451
249 7.000% due 01/01/2032 ................................... 260
19 9.000% due 01/01/2025 ................................... 21
-------
Total FHLMC
(Cost $22,613) ....................................... 22,231
-------
FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA) - 10.3%
$ 6,941 4.000% due 09/01/2018-10/01/2018 ........................ $ 6,643
1,610 5.000% due 01/01/2018 ................................... 1,596
8,605 5.500% due 03/01/2033-02/01/2035 ........................ 8,540
857 6.000% due 04/01/2032 ................................... 867
1,280 6.500% due 05/01/2031-05/01/2032 ........................ 1,316
47 7.000% due 01/01/2030 ................................... 49
2,000 7.630% due 02/01/2010 ................................... 2,160
-------
Total FNMA
(Cost $21,436) ....................................... 21,171
-------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (GNMA) - 0.5%
534 6.000% due 05/20/2032 ................................... 546
366 7.000% due 06/20/2031 ................................... 381
27 9.000% due 02/15/2025 ................................... 30
-------
Total GNMA
(Cost $927) .......................................... 957
-------
Total U.S. Government Agency
Mortgage-Backed Securities
(Cost $44,976) ....................................... 44,359
-------
U.S. TREASURY OBLIGATIONS - 7.1%
U.S. TREASURY NOTES - 4.9%
2,000 3.375% due 11/15/2008 ................................... 1,947
7,250 3.375% due 12/15/2008 ................................... 7,053
1,000 4.500% due 11/15/2015 ................................... 1,008
-------
10,008
-------
U.S. TREASURY BOND - 2.2%
4,000 5.375% due 02/15/2031 ................................... 4,495
-------
Total U.S. Treasury Obligations
(Cost $14,794) ....................................... 14,503
-------
UNITS
-----
LIMITED PARTNERSHIP - 0.8%
(Cost $1,600)
500 TexCal, Series A, Common Units .......................... 1,600
-------
SHARES
------
RIGHTS - 0.0%
(Cost $18)
5,250 Danielson Holding Corporation, Rights+ .................. 76@
-------
See Notes to Financial Statements.
67
Portfolio of Investments (continued)
VT INCOME FUND
December 31, 2005
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
- --------- -------
REPURCHASE AGREEMENT - 2.6%
(Cost $5,314)
$ 5,314 Agreement with Morgan Stanley, 2.920% dated
12/30/2005, to be repurchased at $5,316,000 on
01/03/2006 (Collateralized by U.S. Treasury
Notes, having various interest rates and
maturities, market value $5,484,000) ................. $ 5,314
--------
TOTAL INVESTMENTS (Cost $199,052*) ........................ 99.5% 204,461
OTHER ASSETS (LIABILITIES) (NET) .......................... 0.5 1,053
----- --------
NET ASSETS ................................................ 100.0% $205,514
===== ========
- ----------
* Aggregate cost for federal tax purposes is $199,741.
** Security acquired in a transaction exempt from
registration under Rule 144A of the Securities Act of
1933, as amended.
+ Non-income producing security.
++ Defaulted security is past maturity but continues to be
valued in recognition of future potential worth.
@ Represents fair value as determined in good faith under
the direction of the Board of Trustees.
GLOSSARY OF TERMS
MTN -- Medium-Term Note
See Notes to Financial Statements.
68
Portfolio of Investments
VT MONEY MARKET FUND
December 31, 2005
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
- --------- -------
COMMERCIAL PAPER (YANKEE) - 8.2%
$ 800 Landesbank Badenwurttemberg,
3.900% due 02/27/2006+++ ............................... $ 795
550 Societe Generale North America,
4.265% due 02/21/2006+++ ............................... 547
-------
Total Commercial Paper (Yankee)
(Cost $1,342) .......................................... 1342
-------
CERTIFICATE OF DEPOSIT (DOMESTIC) - 3.6%
(Cost $598)
600 Wells Fargo Bank N.A., Note,
4.010% due 07/24/2006 .................................. 598
-------
CERTIFICATES OF DEPOSIT (YANKEE) - 4.3%
(Cost $700)
700 Royal Bank of Canada, NY,
4.300% due 06/20/2006++ ................................ 700
-------
CORPORATE BONDS AND NOTES - 38.4%
800 ACF Parking Ltd., Note,
(LOC: Fifth Third Bank),
4.380% due 05/01/2022+ ................................. 800
800 Bank One Corporation, Sr. Note, Series C,
4.590% due 02/27/2006++ ................................ 800
700 Citigroup, Inc., Note,
5.750% due 05/10/2006 .................................. 705
754 Everett Clinic, P.S., Bond,
(LOC: Bank of America),
4.350% due 05/01/2022+ ................................. 754
494 Gutwein Properties & Company,
Note, (LOC: Fifth Third Bank),
4.380% due 12/01/2024+ ................................. 494
855 Lauren Company LLC, Bond,
(LOC: Wells Fargo Bank),
4.420% due 07/01/2033+** ............................... 855
800 National City Bank, Note,
2.500% due 04/17/2006 .................................. 797
620 Suntrust Bank, Note,
2.125% due 01/30/2006 .................................. 619
500 U.S. Bank N.A., Note,
2.850% due 11/15/2006 .................................. 492
-------
Total Corporate Bonds and Notes
(Cost $6,316) .......................................... 6316
-------
TAXABLE MUNICIPAL BONDS - 33.9%
750 California Statewide Communities
Development Authority, MFHR,
(Hallmark House Apartments),
Series ZZ-T, (FNMACollateral),
4.490% due 12/15/2036+ ................................. 750
855 Illinois Health Facilities Authority,
Health Care Revenue, (Loyola University
Health System), Series C, (MBIA Insured),
4.480% due 07/01/2024+ ................................. 855
645 Michigan State Housing Development
Authority, SFMR, Series D,
(FSA Insured),
4.430% due 06/01/2034+ ................................. 645
720 New York State Housing Finance Agency,
Housing Revenue, (West 20th Street
Project), Series B, (FNMA Collateral),
4.450% due 05/15/2033+ ................................. 720
$ 700 Oakland-Alameda County, California,
Coliseum Authority, Lease Revenue,
(Coliseum Project), Series D,
(LOC: Wachovia Bank),
4.450% due 02/01/2011+ ................................. $ 700
705 Sacramento County, Pension Funding,
Revenue Bonds, Seies C,
(LOC: Bayerische Landesbank),
4.450% due 07/01/2022+ ................................. 705
490 Washington State Housing Finance
Commission, MFHR, (Bremerton Project),
Series B, (FNMA Collateral),
4.440% due 05/15/2033+ ................................. 490
715 Washington State Housing Finance
Commission, Nonprofit Community
College Foundation Revenue, Series B,
(Community College Spokane Foundation),
(LOC: Bank of America),
4.330% due 07/01/2030+ ................................. 715
-------
Total Taxable Municipal Bonds
(Cost $5,580) .......................................... 5580
-------
FUNDING AGREEMENT - 3.0%
(Cost $500)
500 New York Life Insurance,
4.291% due 08/02/2006++*** ............................. 500@
-------
REPURCHASE AGREEMENT - 8.6%
(Cost $1,415)
1415 Agreement with Morgan Stanley, 2.920%
dated 12/30/2005, to be repurchased at
$1,415,000 on 01/03/2006
(Collateralized by U.S. Treasury Notes,
having various interest rates and
maturities, market value $1,460,000) ................... 1415
-------
TOTAL INVESTMENTS (Cost $16,451*) ........................... 100.0% 16451
OTHER ASSETS (LIABILITIES) (Net) ............................ 0.0 (4)
------ -------
NET ASSETS .................................................. 100.0% $16,447
====== =======
- ----------
* Aggregate cost for federal tax purposes is $16,451.
** Security acquired in a transaction exempt from registration under Rule
144A of the Securities Act of 1933, as amended.
*** Security is restricted and illiquid. It was acquired on August 3, 2005, and
has a value of $0.03 per Fund share at December 31, 2005.
+ Securities with a maturity date of more than thirteen months have variable
rates and/or demand features which qualify them as short-term securities.
Securities are secured by bank letters of credit or guarantees by certain
corporations. The interest rates shown are those in effect at December 31,
2005. These rates change periodically based on specified market rates or
indicies.
++ Floating rate security whose interest rate is reset periodically based on
an index.
+++ Rate represents discount rate on purchase date.
@ Represents fair value as determined in good faith under the direction of
the Board of Trustees.
GLOSSARY OF TERMS
FNMA -- Federal National Mortgage Association
FSA -- Financial Security Assurance
LOC -- Letter of Credit
MBIA -- Municipal Bond Investors Assurance
MFHR -- Multi-family Housing Revenue
SFMR -- Single Family Mortgage Revenue
See Notes to Financial Statements.
69
Statements of Assets and Liabilities
WM VARIABLE TRUST
December 31, 2005
(In thousands)
VT EQUITY VT GROWTH VT WEST COAST VT MID CAP
VT REIT INCOME & INCOME EQUITY STOCK VT GROWTH
FUND FUND FUND FUND FUND FUND
------- --------- --------- ------------- ---------- ---------
ASSETS:
Investments, at cost ......................... $39,888 $253,068 $230,945 $112,604 $ 94,252 $251,810
======= ======== ======== ======== ======== ========
Investments, at value:
Securities ................................ $52,981 $280,053 $265,159 $140,615 $109,122 $274,865
Investments held as collateral for
securities loaned ...................... 3,320 23,119 24,160 8,563 14,576 12,342
------- -------- -------- -------- -------- --------
Total Investments ......................... 56,301 303,172 289,319 149,178 123,698 287,207
Cash ......................................... -- 4 -- -- -- 68
Unrealized appreciation of forward
foreign currency contracts ................ -- -- -- -- -- --
Dividends and/or interest receivable ......... 206 500 356 197 152 186
Receivable for Fund shares sold .............. 17 248 25 33 5 7
Variation margin ............................. -- -- -- -- -- --
Receivable for investment securities sold .... -- 35 3,366 300 2,094 --
Prepaid expenses ............................. -- 1 1 1 -- 1
------- -------- -------- -------- -------- --------
Total Assets .............................. 56,524 303,960 293,067 149,709 125,949 287,469
------- -------- -------- -------- -------- --------
LIABILITIES:
Payable upon return of securities loaned ..... 3,320 23,119 24,160 8,563 14,576 12,342
Unrealized depreciation of forward
foreign currency contracts ................ -- -- -- -- -- --
Payable for Fund shares redeemed ............. -- -- 126 39 11 51
Payable for investment securities purchased .. 306 1,172 -- 86 -- 2,056
Investment advisory fee payable .............. 38 144 175 75 76 178
Distribution fees payable .................... -- 9 1 2 2 --
Due to custodian ............................. -- -- -- -- -- --
Accrued legal and audit fees ................. 31 35 35 33 28 35
Accrued printing and postage expenses ........ 5 22 27 15 20 24
Accrued expenses and other payables .......... -- 1 1 2 1 4
------- -------- -------- -------- -------- --------
Total Liabilities ......................... 3,700 24,502 24,525 8,815 14,714 14,690
------- -------- -------- -------- -------- --------
NET ASSETS ................................... $52,824 $279,458 $268,542 $140,894 $111,235 $272,779
======= ======== ======== ======== ======== ========
See Notes to Financial Statements.
70
VT VT VT U.S.
VT SMALL CAP VT SMALL CAP INTERNATIONAL SHORT TERM GOVERNMENT VT MONEY
VALUE GROWTH GROWTH INCOME SECURITIES VT INCOME MARKET
FUND FUND FUND FUND FUND FUND FUND
- ------------ ------------ ------------- ---------- ---------- --------- --------
$36,158 $43,901 $ 88,420 $52,210 $278,126 $199,052 $16,451
======= ======= ======== ======= ======== ======== =======
$38,094 $46,676 $110,316 $51,765 $274,250 $204,461 $16,451
2,221 3,570 10,445 -- -- -- --
------- ------- -------- ------- -------- -------- -------
40,315 50,246 120,761 51,765 274,250 204,461 16,451
-- -- 61 -- 1 -- --
-- -- 51 -- -- -- --
91 18 121 654 1,589 2,802 64
1 16 11 23 8 33 --
-- -- -- 2 -- -- --
247 347 165 -- -- 20 --
-- -- -- -- 1 -- --
------- ------- -------- ------- -------- -------- -------
40,654 50,627 121,170 52,444 275,849 207,316 16,515
------- ------- -------- ------- -------- -------- -------
2,221 3,570 10,445 -- -- -- --
-- -- 88 -- -- -- --
-- 18 12 6 21 55 25
-- 465 218 -- -- 1,600 --
30 34 229 22 117 87 6
-- 1 -- 1 2 4 1
-- 55 -- -- -- -- --
34 34 36 33 34 34 31
7 6 14 4 29 21 4
1 3 11 1 2 1 1
------- ------- -------- ------- -------- -------- -------
2,293 4,186 11,053 67 205 1,802 68
------- ------- -------- ------- -------- -------- -------
$38,361 $46,441 $110,117 $52,377 $275,644 $205,514 $16,447
======= ======= ======== ======= ======== ======== =======
See Notes to Financial Statements.
71
Statements of Assets and Liabilities (continued)
WM VARIABLE TRUST
December 31, 2005
(In thousands)
VT EQUITY VT GROWTH VT WEST COAST VT MID CAP
VT REIT INCOME & INCOME EQUITY STOCK VT GROWTH
FUND FUND FUND FUND FUND FUND
------- --------- --------- ------------- ---------- ---------
NET ASSETS CONSIST OF:
Undistributed net investment income ....... $ 1,653 $ 5,619 $ 3,645 $ 791 $ 1,871 $ 333
Accumulated net realized gain/(loss)
on investment transactions ............. 4,255 16,370 (24,984) 2,763 10,850 (93,443)
Net unrealized appreciation/
(depreciation) of investments .......... 16,413 50,104 58,374 36,574 29,446 35,397
Paid-in capital ........................... 30,503 207,365 231,507 100,766 69,068 330,492
------- -------- -------- -------- -------- --------
Total Net Assets ....................... $52,824 $279,458 $268,542 $140,894 $111,235 $272,779
======= ======== ======== ======== ======== ========
NET ASSETS:
Class 1 Shares ............................ $51,570 $237,482 $265,115 $130,071 $103,543 $271,508
======= ======== ======== ======== ======== ========
Class 2 Shares ............................ $ 1,254 $ 41,976 $ 3,427 $ 10,823 $ 7,692 $ 1,271
======= ======== ======== ======== ======== ========
SHARES OUTSTANDING:
Class 1 Shares ............................ 2,949 13,464 14,286 5,902 5,972 19,499
======= ======== ======== ======== ======== ========
Class 2 Shares ............................ 72 2,395 186 494 446 92
======= ======== ======== ======== ======== ========
CLASS 1 SHARES:*
Net asset value, offering and redemption
price per share of beneficial interest
outstanding ............................ $ 17.49 $ 17.64 $ 18.56 $ 22.04 $ 17.34 $ 13.92
======= ======== ======== ======== ======== ========
CLASS 2 SHARES:*
Net asset value, offering and redemption
price per share of beneficial interest
outstanding ............................ $ 17.38 $ 17.53 $ 18.46 $ 21.92 $ 17.24 $ 13.83
======= ======== ======== ======== ======== ========
- ----------
* Net asset values are not shown in thousands.
See Notes to Financial Statements.
72
VT U.S.
VT SMALL CAP VT SMALL CAP VT INTERNATIONAL VT SHORT TERM GOVERNMENT VT MONEY
VALUE GROWTH GROWTH INCOME SECURITIES VT INCOME MARKET
FUND FUND FUND FUND FUND FUND FUND
- ------------ ------------ ---------------- ------------- ---------- --------- --------
$ 397 $ -- $ 575 $ 2,196 $ 13,350 $ 11,752 $ --
3,936 (22,732) (9,315) (491) (4,170) (1,142) --
4,157 6,345 32,302 (457) (3,876) 5,409 --
29,871 62,828 86,555 51,129 270,340 189,495 16,447
------- -------- -------- ------- -------- -------- -------
$38,361 $ 46,441 $110,117 $52,377 $275,644 $205,514 $16,447
======= ======== ======== ======= ======== ======== =======
$38,346 $ 42,679 $109,029 $47,221 $266,902 $185,140 $13,132
======= ======== ======== ======= ======== ======== =======
$ 15 $ 3,762 $ 1,088 $ 5,156 $ 8,742 $ 20,374 $ 3,315
======= ======== ======== ======= ======== ======== =======
3,085 4,407 7,366 18,726 25,498 17,325 13,147
======= ======== ======== ======= ======== ======== =======
1 393 74 2,056 838 1,918 3,317
======= ======== ======== ======= ======== ======== =======
$ 12.43 $ 9.68 $ 14.80 $ 2.52 $ 10.47 $ 10.69 $ 1.00
======= ======== ======== ======= ======== ======== =======
$ 12.41 $ 9.57 $ 14.71 $ 2.51 $ 10.43 $ 10.62 $ 1.00
======= ======== ======== ======= ======== ======== =======
See Notes to Financial Statements.
73
Statement of Operations
WM VARIABLE TRUST
For the Year Ended December 31, 2005
(In thousands)
VT EQUITY VT GROWTH & VT WEST COAST VT MID CAP
VT REIT INCOME INCOME EQUITY STOCK VT GROWTH
FUND FUND FUND FUND FUND FUND
------- --------- ----------- ------------- ---------- ---------
INVESTMENT INCOME:
Dividends .................................... $1,898 $ 6,181 $ 5,568 $ 1,506 $ 2,598 $ 2,316
Interest ..................................... 77 941 244 138 228 158
Foreign withholding taxes .................... (2) (32) (37) (1) (8) (24)
Securities lending income .................... 14 111 14 24 32 12
------ ------- ------- ------- ------- -------
Total investment income ................... 1,987 7,201 5,789 1,667 2,850 2,462
------ ------- ------- ------- ------- -------
EXPENSES:
Investment advisory fee ...................... 429 1,468 2,041 800 881 1,930
Class 2 Shares distribution fees ............. 2 79 8 22 16 3
Custodian fees ............................... 4 10 11 10 7 57
Legal and audit fees ......................... 29 36 37 33 27 36
Trustees' fees ............................... 1 5 6 3 2 5
Other ........................................ 16 42 41 25 34 69
------ ------- ------- ------- ------- -------
Total expenses ............................ 481 1,640 2,144 893 967 2,100
Fees reduced by custodian credits ............ --* (2) --* --* --* (3)
------ ------- ------- ------- ------- -------
Net expenses .............................. 481 1,638 2,144 893 967 2,097
------ ------- ------- ------- ------- -------
NET INVESTMENT INCOME/(LOSS) ................. 1,506 5,563 3,645 774 1,883 365
------ ------- ------- ------- ------- -------
NET REALIZED AND UNREALIZED
GAIN/(LOSS) ON INVESTMENTS:
Net realized gain/(loss) on:
Security transactions ..................... 4,000 17,515 7,943 5,774 11,521 12,249
Forward foreign currency contracts
and foreign currency transactions ...... -- -- -- -- -- (28)
Futures contracts ......................... -- -- -- -- --
------ ------- ------- ------- ------- -------
Net realized gain on investment
transactions .............................. 4,000 17,515 7,943 5,774 11,521 12,221
------ ------- ------- ------- ------- -------
Capital gain distributions received .......... 414 165 -- 92 -- --
------ ------- ------- ------- ------- -------
Net increase from payment by the Advisor** ... -- -- -- -- -- --
------ ------- ------- ------- ------- -------
Net change in unrealized appreciation/
depreciation of:
Securities ................................ (917) (306) (2,342) 4,125 1,652 4,119
Forward foreign currency contracts ........ -- -- -- -- -- 24
Foreign currency, futures contracts and
other assets and liabilities ........... -- -- -- -- -- --
------ ------- ------- ------- ------- -------
Net change in unrealized appreciation/
depreciation of investment transactions ... (917) (306) (2,342) 4,125 1,652 4,143
------ ------- ------- ------- ------- -------
Net realized and unrealized gain/(loss) on
investments ............................... 3,497 17,374 5,601 9,991 13,173 16,364
------ ------- ------- ------- ------- -------
NET INCREASE/(DECREASE) IN NET
ASSETS RESULTING FROM OPERATIONS .......... $5,003 $22,937 $ 9,246 $10,765 $15,056 $16,729
====== ======= ======= ======= ======= =======
- ----------
* Amount represents less than $500.
** See Note 3 in Notes to Financial Statements.
See Notes to Financial Statements.
74
VT U.S.
VT SMALL CAP VT SMALL CAP VT INTERNATIONAL VT SHORT TERM GOVERNMENT VT MONEY
VALUE GROWTH GROWTH INCOME SECURITIES VT INCOME MARKET
FUND FUND FUND FUND FUND FUND FUND
- ------------ ------------ ---------------- ------------- ---------- --------- --------
$ 748 $ 100 $ 2,358 $ -- $ -- $ -- $ --
64 40 68 2,488 13,681 12,532 577
(54) (1) (211) -- -- -- --
64 92 57 -- -- -- --
------- ------- ------- ------- ------- ------- ----
822 231 2,272 2,488 13,681 12,532 577
------- ------- ------- ------- ------- ------- ----
369 395 863 270 1,387 1,038 81
-- 9 2 15 27 56 11
11 27 125 7 19 9 2
32 37 34 31 36 35 33
1 1 2 1 6 4 --
8 56 35 16 55 32 9
------- ------- ------- ------- ------- ------- ----
421 525 1,061 340 1,530 1,174 136
--* --* --* (1) --* --* --*
------- ------- ------- ------- ------- ------- ----
421 525 1,061 339 1,530 1,174 136
------- ------- ------- ------- ------- ------- ----
401 (294) 1,211 2,149 12,151 11,358 441
------- ------- ------- ------- ------- ------- ----
3,777 756 3,766 68 496 893 --
(5) -- 278 -- -- -- --
-- -- -- 46 -- -- --
------- ------- ------- ------- ------- ------- ----
3,772 756 4,044 114 496 893 --
------- ------- ------- ------- ------- ------- ----
1 -- -- -- -- -- --
------- ------- ------- ------- ------- ------- ----
-- 189 -- -- -- -- --
------- ------- ------- ------- ------- ------- ----
(2,091) (2,232) 11,430 (1,331) (6,425) (7,462) --
-- -- 11 -- -- -- --
-- -- (7) 21 -- -- --
------- ------- ------- ------- ------- ------- ----
(2,091) (2,232) 11,434 (1,310) (6,425) (7,462) --
------- ------- ------- ------- ------- ------- ----
1,682 (1,287) 15,478 (1,196) (5,929) (6,569) --
------- ------- ------- ------- ------- ------- ----
$ 2,083 $(1,581) $16,689 $ 953 $ 6,222 $ 4,789 $441
======= ======= ======= ======= ======= ======= ====
See Notes to Financial Statements.
75
Statement of Changes in Net Assets
WM VARIABLE TRUST
(In thousands)
VT GROWTH &
VT REIT FUND VT EQUITY INCOME FUND INCOME FUND
----------------------- ----------------------- -----------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
12/31/05 12/31/04 12/31/05 12/31/04 12/31/05 12/31/04
---------- ---------- ---------- ---------- ---------- ----------
OPERATIONS:
Net investment income ....................... $ 1,506 $ 1,504 $ 5,563 $ 3,914 $ 3,645 $ 3,430
Net realized gain on investment
transactions ............................. 4,000 1,619 17,515 5,976 7,943 3,952
Capital gain distributions received ......... 414 3 165 -- -- --
Net change in unrealized appreciation/
depreciation of investments .............. (917) 9,865 (306) 23,367 (2,342) 15,399
------- ------- -------- -------- -------- --------
Net increase in net assets
resulting from operations ................ 5,003 12,991 22,937 33,257 9,246 22,781
DISTRIBUTIONS TO SHAREHOLDERS
FROM:
Net investment income:
Class 1 Shares ........................... (1,095) (624) (3,268) (2,972) (3,393) (2,661)
Class 2 Shares ........................... (22) (1) (459) (274) (33) (29)
Net realized gains on investments:
Class 1 Shares ........................... (2,005) (322) -- -- -- --
Class 2 Shares ........................... (41) (1) -- -- -- --
Net increase/(decrease) in net assets from
Fund share transactions:
Class 1 Shares ........................... (1,847) 1,027 31,403 12,872 (11,414) 5,101
Class 2 Shares ........................... 861 306 15,234 8,506 (64) 476
------- ------- -------- -------- -------- --------
Net increase/(decrease) in net assets ....... 854 13,376 65,847 51,389 (5,658) 25,668
NET ASSETS:
Beginning of year ........................... 51,970 38,594 213,611 162,222 274,200 248,532
------- ------- -------- -------- -------- --------
End of year ................................. $52,824 $51,970 $279,458 $213,611 $268,542 $274,200
======= ======= ======== ======== ======== ========
Undistributed net investment income
at end of year ........................... $ 1,653 $ 1,264 $ 5,619 $ 3,778 $ 3,645 $ 3,426
======= ======= ======== ======== ======== ========
TAX CHARACTER OF DISTRIBUTIONS PAID:
Ordinary income ............................. $ 1,622 $ 699 $ 3,727 $ 3,246 $ 3,426 $ 2,690
Long-term capital gains ..................... 1,541 249 -- -- -- --
------- ------- -------- -------- -------- --------
Total .................................... $ 3,163 $ 948 $ 3,727 $ 3,246 $ 3,426 $ 2,690
======= ======= ======== ======== ======== ========
- ----------
+ The VT Small Cap Value Fund commenced operations on May 3, 2004.
See Notes to Financial Statements.
76
VT WEST COAST EQUITY FUND VT MID CAP STOCK FUND VT GROWTH FUND VT SMALL CAP VALUE FUND+
- ------------------------- ----------------------- ----------------------- -------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED PERIOD ENDED
12/31/05 12/31/04 12/31/05 12/31/04 12/31/05 12/31/04 12/31/05 12/31/04
---------- ---------- ---------- ---------- ---------- ---------- ---------- ------------
$ 774 $ 988 $ 1,883 $ 529 $ 365 $ 1,288 $ 401 $ 202
5,774 3,511 11,521 7,731 12,221 10,807 3,772 1,509
92 -- -- -- -- -- 1 --
4,125 9,975 1,652 5,864 4,143 5,842 (2,091) 6,248
-------- -------- -------- -------- -------- -------- ------- -------
10,765 14,474 15,056 14,124 16,729 17,937 2,083 7,959
(864) (277) (519) (318) (1,293) -- (202) --
(46) (10) (18) (9) (3) -- -- --
-- -- (7,313) (1,560) -- -- (1,350) --
-- -- (431) (76) -- -- -- --
1,547 886 (11,193) 12,385 10,517 37,965 (4,853) 34,709
1,851 2,206 1,226 1,748 (163) (21) 15 --
-------- -------- -------- -------- -------- -------- ------- -------
13,253 17,279 (3,192) 26,294 25,787 55,881 (4,307) 42,668
127,641 110,362 114,427 88,133 246,992 191,111 42,668 --
-------- -------- -------- -------- -------- -------- ------- -------
$140,894 $127,641 $111,235 $114,427 $272,779 $246,992 $38,361 $42,668
======== ======== ======== ======== ======== ======== ======= =======
$ 791 $ 927 $ 1,871 $ 525 $ 333 $ 1,292 $ 397 $ 203
======== ======== ======== ======== ======== ======== ======= =======
$ 910 $ 287 $ 1,258 $ 327 $ 1,296 $ -- $ 1,552 $ --
-- -- 7,023 1,636 -- -- -- --
-------- -------- -------- -------- -------- -------- ------- -------
$ 910 $ 287 $ 8,281 $ 1,963 $ 1,296 $ -- $ 1,552 $ --
======== ======== ======== ======== ======== ======== ======= =======
See Notes to Financial Statements.
77
Statement of Changes in Net Assets (continued)
WM VARIABLE TRUST
(In thousands)
VT SMALL CAP VT INTERNATIONAL VT SHORT TERM
GROWTH FUND GROWTH FUND INCOME FUND
----------------------- ----------------------- -----------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
12/31/05 12/31/04 12/31/05 12/31/04 12/31/05 12/31/04
---------- ---------- ---------- ---------- ---------- ----------
OPERATIONS:
Net investment income/(loss) ................ $ (294) $ (316) $ 1,211 $ 800 $ 2,149 $ 2,051
Net realized gain/(loss) on investment
transactions ............................. 756 9,800 4,044 928 114 (96)
Net increase from payment by the Advisor* ... 189 -- -- -- -- --
Net change in unrealized appreciation/
depreciation of investments .............. (2,232) (5,156) 11,434 9,202 (1,310) (818)
-------- -------- -------- ------- ------- -------
Net increase/(decrease) in net assets
resulting from operations ................ (1,581) 4,328 16,689 10,930 953 1,137
DISTRIBUTIONS TO SHAREHOLDERS
FROM:
Net investment income:
Class 1 Shares ........................... -- -- (1,503) (969) (1,866) (1,841)
Class 2 Shares ........................... -- -- (9) (2) (227) (296)
Net realized gains on investments:
Class 1 Shares ........................... -- -- -- -- -- --
Class 2 Shares ........................... -- -- -- -- -- --
Net increase/(decrease) in net assets from
Fund share transactions:
Class 1 Shares ........................... (8,823) (21,914) 2,110 7,807 (351) 2,787
Class 2 Shares ........................... 170 745 645 99 (1,802) 1,098
-------- -------- -------- ------- ------- -------
Net increase/(decrease) in net assets ....... (10,234) (16,841) 17,932 17,865 (3,293) 2,885
NET ASSETS:
Beginning of year ........................... 56,675 73,516 92,185 74,320 55,670 52,785
-------- -------- -------- ------- ------- -------
End of year ................................. $ 46,441 $ 56,675 $110,117 $92,185 $52,377 $55,670
======== ======== ======== ======= ======= =======
Undistributed net investment income
at end of year ........................... $ -- $ -- $ 575 $ 474 $ 2,196 $ 2,091
======== ======== ======== ======= ======= =======
TAX CHARACTER OF DISTRIBUTIONS PAID:
Ordinary income ............................. $ -- $ -- $ 1,512 $ 971 $ 2,093 $ 2,137
Long-term capital gains ..................... -- -- -- -- -- --
-------- -------- -------- ------- ------- -------
Total .................................... $ -- $ -- $ 1,512 $ 971 $ 2,093 $ 2,137
======== ======== ======== ======= ======= =======
- ----------
* See Note 3 in Notes to Financial Statements.
See Notes to Financial Statements.
78
VT U.S. GOVERNMENT
SECURITIES FUND VT INCOME FUND VT MONEY MARKET FUND
- ----------------------- ----------------------- -----------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
12/31/05 12/31/04 12/31/05 12/31/04 12/31/05 12/31/04
- ---------- ---------- ---------- ---------- ---------- ----------
$ 12,151 $ 10,842 $ 11,358 $ 11,571 $ 441 $ 162
496 211 893 518 -- 1
-- -- -- -- -- --
(6,425) (1,147) (7,462) (1,287) -- --
------- ------- ------- ------- ------- -------
6,222 9,906 4,789 10,802 441 163
(11,782) (9,806) (10,718) (11,009) (339) (138)
(436) (519) (1,267) (1,314) (102) (24)
-- -- -- -- -- --
-- -- -- -- -- --
8,857 59,999 5,960 (7,019) (1,528) (5,538)
(3,790) (3,523) (2,178) 2,327 (2,089) 2,335
-------- -------- -------- -------- ------- -------
(929) 56,057 (3,414) (6,213) (3,617) (3,202)
276,573 220,516 208,928 215,141 20,064 23,266
-------- -------- -------- -------- ------- -------
$275,644 $276,573 $205,514 $208,928 $16,447 $20,064
======== ======== ======== ======== ======= =======
$ 13,350 $ 12,193 $ 11,752 $ 11,974 $ -- $ --
======== ======== ======== ======== ======= =======
$ 12,218 $ 10,325 $ 11,985 $ 12,323 $ 441 $ 162
-- -- -- -- -- --
-------- -------- -------- -------- ------- -------
$ 12,218 $ 10,325 $ 11,985 $ 12,323 $ 441 $ 162
======== ======== ======== ======== ======= =======
See Notes to Financial Statements.
79
Statement of Changes in Net Assets -- Capital Stock Activity
WM VARIABLE TRUST
(In thousands)
VT REIT FUND VT EQUITY INCOME FUND VT GROWTH & INCOME FUND
----------------------- ----------------------- -----------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
12/31/05 12/31/04 12/31/05 12/31/04 12/31/05 12/31/04
---------- ---------- ---------- ---------- ---------- ----------
AMOUNT
CLASS 1:
Sold ................................. $ 819 $ 3,161 $34,607 $17,076 $ 13,104 $ 17,117
Issued as reinvestment of dividends .. 3,100 946 3,268 2,972 3,393 2,661
Redeemed ............................. (5,766) (3,080) (6,472) (7,176) (27,911) (14,677)
------- ------- ------- ------- -------- --------
Net increase/(decrease) .............. $(1,847) $ 1,027 $31,403 $12,872 $(11,414) $ 5,101
======= ======= ======= ======= ======== ========
CLASS 2:
Sold ................................. $ 1,393 $ 361 $19,058 $ 9,694 $ 861 $ 964
Issued as reinvestment of dividends .. 63 2 459 274 33 29
Redeemed ............................. (595) (57) (4,283) (1,462) (958) (517)
------- ------- ------- ------- -------- --------
Net increase/(decrease) .............. $ 861 $ 306 $15,234 $ 8,506 $ (64) $ 476
======= ======= ======= ======= ======== ========
SHARES
CLASS 1:
Sold ................................. 49 230 2,002 1,175 724 999
Issued as reinvestment of dividends .. 186 71 194 206 187 153
Redeemed ............................. (330) (216) (386) (490) (1,510) (853)
------- ------- ------- ------- -------- --------
Net increase/(decrease) .............. (95) 85 1,810 891 (599) 299
======= ======= ======= ======= ======== ========
CLASS 2:
Sold ................................. 84 24 1,134 660 48 56
Issued as reinvestment of dividends .. 4 -- 28 19 2 1
Redeemed ............................. (36) (4) (256) (101) (53) (30)
------- ------- ------- ------- -------- --------
Net increase/(decrease) .............. 52 20 906 578 (3) 27
======= ======= ======= ======= ======== ========
VT SMALL CAP GROWTH FUND VT INTERNATIONAL GROWTH FUND VT SHORT TERM INCOME FUND
------------------------ ---------------------------- -------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
12/31/05 12/31/04 12/31/05 12/31/04 12/31/05 12/31/04
---------- ---------- ---------- ---------- ---------- ----------
AMOUNT
CLASS 1:
Sold ................................. $ 1,315 $ 4,692 $ 2,995 $ 8,357 $ 1,650 $ 4,963
Issued as reinvestment of dividends .. -- -- 1,503 969 1,866 1,841
Redeemed ............................. (10,138) (26,606) (2,388) (1,519) (3,867) (4,017)
-------- -------- ------- ------- ------- -------
Net increase/(decrease) .............. $ (8,823) $(21,914) $ 2,110 $ 7,807 $ (351) $ 2,787
======== ======== ======= ======= ======= =======
CLASS 2:
Sold ................................. $ 835 $ 1,547 $ 694 $ 112 $ 782 $ 3,276
Issued as reinvestment of dividends .. -- -- 9 2 227 296
Redeemed ............................. (665) (802) (58) (15) (2,811) (2,474)
-------- -------- ------- ------- ------- -------
Net increase/(decrease) .............. $ 170 $ 745 $ 645 $ 99 $(1,802) $ 1,098
======== ======== ======= ======= ======= =======
SHARES
CLASS 1:
Sold ................................. 145 519 228 726 651 1,902
Issued as reinvestment of dividends .. -- -- 123 86 750 731
Redeemed ............................. (1,122) (2,658) (182) (132) (1,525) (1,542)
-------- -------- ------- ------- ------- -------
Net increase/(decrease) .............. (977) (2,139) 169 680 (124) 1,091
======== ======== ======= ======= ======= =======
CLASS 2:
Sold ................................. 96 170 53 9 308 1,257
Issued as reinvestment of dividends .. -- -- 1 -- 91 118
Redeemed ............................. (74) (89) (4) (1) (1,112) (960)
-------- -------- ------- ------- ------- -------
Net increase/(decrease) .............. 22 81 50 8 (713) 415
======== ======== ======= ======= ======= =======
- ----------
+ The VT Small Cap Value Fund commenced operations on May 3, 2004.
See Notes to Financial Statements.
80
VT WEST COAST EQUITY FUND VT MID CAP STOCK FUND VT GROWTH FUND VT SMALL CAP VALUE FUND+
- ------------------------- ----------------------- ----------------------- -------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED PERIOD ENDED
12/31/05 12/31/04 12/31/05 12/31/04 12/31/05 12/31/04 12/31/05 12/31/04
---------- ---------- ---------- ---------- ---------- ---------- ---------- ------------
$ 8,492 $ 9,806 $ 1,809 $12,260 $ 30,450 $ 48,627 $ 310 $36,284
864 277 7,832 1,878 1,293 -- 1,552 --
(7,809) (9,197) (20,834) (1,753) (21,226) (10,662) (6,715) (1,575)
------- ------- -------- ------- -------- -------- ------- -------
$ 1,547 $ 886 $(11,193) $12,385 $ 10,517 $ 37,965 $(4,853) $34,709
======= ======= ======== ======= ======== ======== ======= =======
$ 3,299 $ 3,190 $ 1,747 $ 1,995 $ 172 $ 543 $ 15
46 10 449 85 3 -- --
(1,494) (994) (970) (332) (338) (564) --
------- ------- -------- ------- -------- -------- -------
$ 1,851 $ 2,206 $ 1,226 $ 1,748 $ (163) $ (21) $ 15
======= ======= ======== ======= ======== ======== =======
400 529 110 812 2,171 3,961 26 3,631
43 15 487 123 99 -- 126 --
(378) (504) (1,214) (115) (1,628) (876) (544) (154)
------- ------- -------- ------- -------- -------- ------- -------
65 40 (617) 820 642 3,085 (392) 3,477
======= ======= ======== ======= ======== ======== ======= =======
159 172 105 132 13 45 1
2 1 28 6 -- -- --
(73) (55) (59) (22) (26) (46) --
------- ------- -------- ------- -------- -------- -------
88 118 74 116 (13) (1) 1
======= ======= ======== ======= ======== ======== =======
VT U.S. GOVERNMENT
SECURITIES FUND VT INCOME FUND VT MONEY MARKET FUND
- ----------------------- ----------------------- -----------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
12/31/05 12/31/04 12/31/05 12/31/04 12/31/05 12/31/04
- ---------- ---------- ---------- ---------- ---------- ----------
$ 12,473 $ 70,555 $ 7,235 $ 10,152 $ 10,489 $ 7,321
11,782 9,806 10,718 11,009 339 138
(15,398) (20,362) (11,993) (28,180) (12,356) (12,997)
-------- -------- -------- -------- -------- --------
$ 8,857 $ 59,999 $ 5,960 $ (7,019) $ (1,528) $ (5,538)
======== ======== ======== ======== ======== ========
$ 645 $ 1,227 $ 3,002 $ 6,098 $ 6,537 $ 5,866
436 519 1,267 1,314 102 24
(4,871) (5,269) (6,447) (5,085) (8,728) (3,555)
-------- -------- -------- -------- -------- --------
$ (3,790) $ (3,523) $ (2,178) $ 2,327 $ (2,089) $ 2,335
======== ======== ======== ======== ======== ========
1,188 6,590 674 928 10,489 7,321
1,135 953 1,015 1,057 339 138
(1,468) (1,903) (1,113) (2,588) (12,356) (12,997)
-------- -------- -------- -------- -------- --------
855 5,640 576 (603) (1,528) (5,538)
======== ======== ======== ======== ======== ========
62 114 279 555 6,537 5,866
42 51 120 127 102 24
(462) (495) (602) (466) (8,728) (3,555)
-------- -------- -------- -------- -------- --------
(358) (330) (203) 216 (2,089) 2,335
======== ======== ======== ======== ======== ========
See Notes to Financial Statements.
81
Financial Highlights
For a Fund share outstanding throughout each period.
VT REIT FUND CLASS 1
- ------------ -------------------------------
YEARS ENDED DECEMBER 31 2005 2004 2003(3)
------- ------- -------
NET ASSET VALUE, BEGINNING OF PERIOD .......................... $ 16.96 $ 13.04 $ 10.00
------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ................................... 0.47(5) 0.49(5) 0.36(5)
Net realized and unrealized gain on investments ......... 1.08 3.74 2.68
------- ------- -------
Total from investment operations ........................ 1.55 4.23 3.04
------- ------- -------
LESS DISTRIBUTIONS:
Dividends from net investment income .................... (0.36) (0.20) --
Dividends from net realized capital gains ............... (0.66) (0.11) --
------- ------- -------
Total distributions ..................................... (1.02) (0.31) --
------- ------- -------
NET ASSET VALUE, END OF PERIOD ................................ $ 17.49 $ 16.96 $ 13.04
======= ======= =======
TOTAL RETURN(1) ............................................... 9.40% 33.08% 30.40%
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000s) ..................... $51,570 $51,632 $38,593
Ratio of operating expenses to average net assets ....... 0.89% 0.88% 1.00%(7)
Ratio of net investment income to average net assets .... 2.82% 3.43% 4.21%(7)
Portfolio turnover rate ................................. 25% 13% 3%
Ratio of operating expenses to average net assets
without fee waivers, expenses reimbursed and/or
fees reduced by credits allowed by the custodian(2) .. 0.89% 0.88% 1.00%(7)
VT EQUITY INCOME FUND CLASS 1
- --------------------- -----------------------------------------------------------
YEARS ENDED DECEMBER 31 2005 2004 2003 2002 2001
-------- -------- -------- -------- -------
NET ASSET VALUE, BEGINNING OF PERIOD .......................... $ 16.26 $ 13.90 $ 11.01 $ 12.87 $ 12.11
-------- -------- -------- -------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ................................... 0.40(5) 0.32(5) 0.31(5) 0.36(5) 0.42(5)
Net realized and unrealized gain/(loss) on investments .. 1.26 2.30 2.95 (1.95) 0.54
-------- -------- -------- -------- -------
Total from investment operations ........................ 1.66 2.62 3.26 (1.59) 0.96
-------- -------- -------- -------- -------
LESS DISTRIBUTIONS:
Dividends from net investment income .................... (0.28) (0.26) (0.31) (0.25) (0.12)
Dividends from net realized capital gains ............... -- -- (0.06) (0.02) (0.08)
-------- -------- -------- -------- -------
Total distributions ..................................... (0.28) (0.26) (0.37) (0.27) (0.20)
-------- -------- -------- -------- -------
NET ASSET VALUE, END OF PERIOD ................................ $ 17.64 $ 16.26 $ 13.90 $ 11.01 $ 12.87
======== ======== ======== ======== =======
TOTAL RETURN(1) ............................................... 10.27% 19.12% 30.10% (12.51)% 7.92%
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000s) ..................... $237,482 $189,517 $149,603 $112,304 $97,982
Ratio of operating expenses to average net assets ....... 0.66% 0.67% 0.70% 0.70% 0.70%
Ratio of net investment income to average net assets .... 2.40% 2.15% 2.63% 3.04% 3.29%
Portfolio turnover rate ................................. 46% 26% 23% 16% 15%
Ratio of operating expenses to average net assets
without fee waivers, expenses reimbursed and/or
fees reduced by credits allowed by the custodian(2) .. 0.66% 0.67% 0.70% 0.70% 0.70%
- ----------
(1) Total return is not annualized for periods of less than one year. The total
return would have been lower if certain fees had not been waived and/or
expenses reimbursed by the investment advisor or if fees had not been
reduced by credits allowed by the custodian.
(2) Ratio of operating expenses to average net assets includes expenses paid
indirectly.
(3) The VT REIT Fund commenced operations on May 1, 2003.
(4) The VT REIT Fund commenced selling Class 2 shares on August 5, 2003.
(5) Per share numbers have been calculated using the average shares method.
(6) The VT Equity Income Fund commenced selling Class 2 shares on May 1, 2001.
(7) Annualized.
See Notes to Financial Statements.
82
CLASS 2
- ---------------------------
2005 2004 2003(4)
- ------ ------ -------
$16.90 13.03 $11.20
- ------ ----- ------
0.44(5) 0.45(5) 0.28(5)
1.05 3.73 1.55
- ------ ----- ------
1.49 4.18 1.83
- ------ ----- ------
(0.35) (0.20) --
(0.66) (0.11) --
- ------ ----- ------
(1.01) (0.31) --
- ------ ----- ------
$17.38 $16.90 $13.03
====== ====== ======
9.10% 32.72% 16.34%
$1,254 $ 338 $ 1
1.14% 1.13% 1.25%(7)
2.57% 3.18% 3.96%(7)
25% 13% 3%
1.14% 1.13% 1.25%(7)
CLASS 2
- ---------------------------------------------------
2005 2004 2003 2002 2001(6)
- ------- ------- ------- ------- -------
$ 16.18 $ 13.85 $ 10.99 $ 12.87 $12.64
- ------- ------- ------- ------- ------
0.36(5) 0.28(5) 0.29(5) 0.32(5) 0.22(5)
1.24 2.30 2.93 (1.93) 0.21
- ------- ------- ------- ------- ------
1.60 2.58 3.22 (1.61) 0.43
- ------- ------- ------- ------- ------
(0.25) (0.25) (0.30) (0.25) (0.12)
-- -- (0.06) (0.02) (0.08)
- ------- ------- ------- ------- ------
(0.25) (0.25) (0.36) (0.27) (0.20)
- ------- ------- ------- ------- ------
$ 17.53 $ 16.18 $ 13.85 $ 10.99 $12.87
======= ======= ======= ======= ======
9.97% 18.82% 29.73% (12.67)% 3.40%
$41,976 $24,094 $12,619 $ 6,460 $ 658
0.91% 0.92% 0.95% 0.95% 0.94%(7)
2.15% 1.90% 2.38% 2.79% 3.05%(7)
46% 26% 23% 16% 15%
0.91% 0.92% 0.95% 0.95% 0.94%(7)
See Notes to Financial Statements.
83
Financial Highlights
For a Fund share outstanding throughout each period.
CLASS 1
VT GROWTH & INCOME FUND ----------------------------------------------------------
- -----------------------
YEARS ENDED DECEMBER 31 2005 2004 2003 2002 2001
-------- -------- -------- -------- --------
NET ASSET VALUE, BEGINNING OF PERIOD .......................... $ 18.19 $ 16.85 $ 13.45 $ 17.18 $ 18.23
-------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ................................... 0.25 0.23(4) 0.19(4) 0.15(4) 0.09
Net realized and unrealized gain/(loss) on investments .. 0.35 1.29 3.39 (3.77) (0.70)
-------- -------- -------- -------- --------
Total from investment operations ........................ 0.60 1.52 3.58 (3.62) (0.61)
-------- -------- -------- -------- --------
LESS DISTRIBUTIONS:
Dividends from net investment income .................... (0.23) (0.18) (0.18) (0.11) (0.06)
Dividends from net realized capital gains ............... -- -- -- -- (0.38)
-------- -------- -------- -------- --------
Total distributions ..................................... (0.23) (0.18) (0.18) (0.11) (0.44)
-------- -------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD ................................ $ 18.56 $ 18.19 $ 16.85 $ 13.45 $ 17.18
======== ======== ======== ======== ========
TOTAL RETURN(1) ............................................... 3.30% 9.08% 26.80% (21.16)% (3.51)%
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000s) ..................... $265,115 $270,775 $245,820 $209,337 $319,171
Ratio of operating expenses to average net assets ....... 0.77% 0.79% 0.83% 0.81% 0.78%
Ratio of net investment income to average net assets .... 1.32% 1.33% 1.28% 1.01% 0.54%
Portfolio turnover rate ................................. 24% 11% 16% 20% 25%
Ratio of operating expenses to average net assets
without fee waivers, expenses reimbursed and/or
fees reduced by credits allowed by the custodian(2) .. 0.77% 0.79% 0.83% 0.81% 0.78%
CLASS 1
VT WEST COAST EQUITY FUND ----------------------------------------------------------
- -------------------------
YEARS ENDED DECEMBER 31 2005 2004 2003 2002 2001
-------- -------- -------- ------- -------
NET ASSET VALUE, BEGINNING OF PERIOD .......................... $ 20.45 $ 18.14 $ 12.69 $ 16.70 $ 16.01
-------- -------- -------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ................................... 0.13(4) 0.16(4) 0.06(4) 0.06(4) 0.10(4)
Net realized and unrealized gain/(loss) on investment ... 1.61 2.20 5.43 (3.79) 1.03
-------- -------- -------- ------- -------
Total from investment operations ........................ 1.74 2.36 5.49 (3.73) 1.13
-------- -------- -------- ------- -------
LESS DISTRIBUTIONS:
Dividends from net investment income ................... (0.15) (0.05) (0.04) (0.08) (0.09)
Dividends from net realized capital gains ............... -- -- -- (0.20) (0.35)
-------- -------- -------- ------- -------
Total distributions ..................................... (0.15) (0.05) (0.04) (0.28) (0.44)
-------- -------- -------- ------- -------
NET ASSET VALUE, END OF PERIOD ................................ $ 22.04 $ 20.45 $ 18.14 $ 12.69 $ 16.70
======== ======== ======== ======= =======
TOTAL RETURN(1) ............................................... 8.57% 13.03% 43.35% (22.55)% 6.88%
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000s) ..................... $130,071 $119,371 $105,160 $68,227 $83,835
Ratio of operating expenses to average net assets ....... 0.68% 0.69% 0.71% 0.71% 0.70%
Ratio of net investment income to average net assets .... 0.62% 0.87% 0.42% 0.42% 0.59%
Portfolio turnover rate ................................. 18% 17% 16% 20% 19%
Ratio of operating expenses to average net assets
without fee waivers, expenses reimbursed and/or
fees reduced by credits allowed by the custodian(2) .. 0.68% 0.69% 0.71% 0.71% 0.70%
- ----------
(1) Total return is not annualized for periods of less than one year. The total
return would have been lower if certain fees had not been waived and/or
expenses reimbursed by the investment advisor or if fees had not been
reduced by credits allowed by the custodian.
(2) Ratio of operating expenses to average net assets includes expenses paid
indirectly.
(3) The Fund commenced selling Class 2 shares on November 6, 2001.
(4) Per share numbers have been calculated using the average shares method.
(5) Amount represents less than $0.01 per share.
(6) The amount shown may not agree with the change in the aggregate gains and
losses of portfolio securities due to the timing of sales and redemptions
of Fund shares.
(7) Annualized.
See Notes to Financial Statements.
84
CLASS 2
- ---------------------------------------------------
2005 2004 2003 2002 2001(3)
- ------ ------ ------ ------- -------
$18.10 $16.79 $13.42 $ 17.18 $16.59
- ------ ------ ------ ------- ------
0.20 0.19(4) 0.15(4) 0.11(4) 0.00(5)
0.34 1.28 3.39 (3.76) 0.59(6)
- ------ ------ ------ ------- ------
0.54 1.47 3.54 (3.65) 0.59
- ------ ------ ------ ------- ------
(0.18) (0.16) (0.17) (0.11) --
-- -- -- -- --
- ------ ------ ------ ------- ------
(0.18) (0.16) (0.17) (0.11) --
- ------ ------ ------ ------- ------
$18.46 $18.10 $16.79 $ 13.42 $17.18
====== ====== ====== ======= ======
2.97% 8.78% 26.49% (21.33)% 3.56%
$3,427 $3,425 $2,712 $ 1,301 $ 112
1.02% 1.04% 1.08% 1.06% 1.03%(7)
1.07% 1.08% 1.03% 0.76% 0.29%(7)
24% 11% 16% 20% 25%
1.02% 1.04% 1.08% 1.06% 1.03%(7)
CLASS 2
- -----------------------------------------------------
2005 2004 2003 2002 2001(3)
- ------- ------ ------ ------- -------
$ 20.35 $18.08 $12.67 $ 16.70 $15.52
- ------- ------ ------ ------- ------
0.08(4) 0.11(4) 0.02(4) 0.02(4) 0.01(4)
1.60 2.19 5.41 (3.77) 1.17
- ------- ------ ------ ------- ------
1.68 2.30 5.43 (3.75) 1.18
- ------- ------ ------ ------- ------
(0.11) (0.03) (0.02) (0.08) --
-- -- -- (0.20) --
- ------- ------ ------ ------- ------
(0.11) (0.03) (0.02) (0.28) --
- ------- ------ ------ ------- ------
$ 21.92 $20.35 $18.08 $ 12.67 $16.70
======= ====== ====== ======= ======
8.30% 12.72% 42.93% (22.67)% 7.60%
$10,823 $8,270 $5,202 $ 2,313 $ 58
0.93% 0.94% 0.96% 0.96% 0.95%(7)
0.37% 0.62% 0.17% 0.17% 0.34%(7)
18% 17% 16% 20% 19%
0.93% 0.94% 0.96% 0.96% 0.95%(7)
See Notes to Financial Statements.
85
Financial Highlights
For a Fund share outstanding throughout each period.
VT MID CAP STOCK FUND CLASS 1
- --------------------- -----------------------------------------------------
YEARS ENDED DECEMBER 31 2005 2004 2003 2002 2001
-------- -------- ------- ------- -------
NET ASSET VALUE, BEGINNING OF PERIOD ..................... $ 16.44 $ 14.63 $ 11.49 $ 13.14 $ 11.74
-------- -------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income/(loss) ....................... 0.27(4) 0.08(4) 0.06(4) 0.04(4) 0.03(4)
Net realized and unrealized gain/(loss) on
investments ..................................... 1.84 2.03 3.12 (1.36) 1.38
-------- -------- ------- ------- -------
Total from investment operations ................... 2.11 2.11 3.18 (1.32) 1.41
-------- -------- ------- ------- -------
LESS DISTRIBUTIONS:
Dividends from net investment income ............... (0.08) (0.05) (0.04) (0.03) (0.01)
Dividends from net realized capital gains .......... (1.13) (0.25) -- (0.30) --
-------- -------- ------- ------- -------
Total distributions ................................ (1.21) (0.30) (0.04) (0.33) (0.01)
-------- -------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD ........................... $ 17.34 $ 16.44 $ 14.63 $ 11.49 $ 13.14
======== ======== ======= ======= =======
TOTAL RETURN(1) .......................................... 13.39% 14.59% 27.73% (10.35)% 11.99%
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000s) ................ $103,543 $108,347 $84,408 $63,119 $71,988
Ratio of operating expenses to average net assets .. 0.81% 0.81% 0.83% 0.84% 0.82%
Ratio of net investment income/(loss) to average net
assets .......................................... 1.62% 0.54% 0.47% 0.32% 0.21%
Portfolio turnover rate ............................ 27% 32% 37% 28% 30%
Ratio of operating expenses to average net assets
without fee waivers, expenses reimbursed and/or
fees reduced by credits allowed by the
custodian(2) .................................... 0.81% 0.81% 0.83% 0.84% 0.82%
VT GROWTH FUND CLASS 1
- -------------- ----------------------------------------------------------
YEARS ENDED DECEMBER 31 2005 2004 2003 2002 2001
-------- -------- -------- -------- --------
NET ASSET VALUE, BEGINNING OF PERIOD ..................... $ 13.03 $ 12.04 $ 9.32 $ 13.51 $ 22.99
-------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income/(loss) ....................... 0.02 0.07 (0.00)(5) (0.01)(4) 0.02(4)
Net realized and unrealized gain/(loss) on
investments ..................................... 0.94 0.92 2.72 (4.18) (6.24)
-------- -------- -------- -------- --------
Total from investment operations ................... 0.96 0.99 2.72 (4.19) (6.22)
-------- -------- -------- -------- --------
LESS DISTRIBUTIONS:
Dividends from net investment income ............... (0.07) -- -- -- (0.37)
Dividends from net realized capital gains .......... -- -- -- -- (2.89)
-------- -------- -------- -------- --------
Total distributions ................................ (0.07) -- -- -- (3.26)
-------- -------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD ........................... $ 13.92 $ 13.03 $ 12.04 $ 9.32 $ 13.51
======== ======== ======== ======== ========
TOTAL RETURN(1) .......................................... 7.41% 8.22% 29.18% (31.01)% (29.05)%
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000s) ................ $271,508 $245,637 $189,837 $135,422 $167,483
Ratio of operating expenses to average net assets .. 0.87% 0.94% 0.98% 1.00% 0.94%
Ratio of net investment income/(loss) to average net
assets .......................................... 0.15% 0.58% (0.04)% (0.05)% 0.11%
Portfolio turnover rate ............................ 81% 66% 75% 171% 92%
Ratio of operating expenses to average net assets
without fee waivers, expenses reimbursed and/or
fees reduced by credits allowed by the
custodian(2) .................................... 0.87% 0.95% 0.98% 1.00% 0.94%
- ----------
(1) Total return is not annualized for periods of less than one year. The total
return would have been lower if certain fees had not been waived and/or
expenses reimbursed by the investment advisor or if fees had not been
reduced by credits allowed by the custodian.
(2) Ratio of operating expenses to average net assets includes expenses paid
indirectly.
(3) The VT Mid Cap Stock Fund commenced selling Class 2 shares on May 1, 2001.
(4) Per share numbers have been calculated using the average shares method.
(5) Amount represents less than $0.01 per share.
(6) Annualized.
(7) The VT Growth Fund commenced selling Class 2 shares on November 6, 2001.
(8) The amount shown may not agree with the change in the aggregate gains and
losses of portfolio securities due to the timing of sales and redemptions
of Fund shares.
See Notes to Financial Statements.
86
CLASS 2
- ------------------------------------------------
2005 2004 2003 2002 2001(3)
- ------ ------ ------ ------- -------
$16.36 $14.58 $11.46 $ 13.13 $12.35
- ------ ------ ------ ------- -------
0.22(4) 0.04(4) 0.03(4) 0.01(4) (0.00)(4)(5)
1.84 2.02 3.11 (1.36) 0.79
- ------ ------ ------ ------- -------
2.06 2.06 3.14 (1.35) 0.79
- ------ ------ ------ ------- -------
(0.05) (0.03) (0.02) (0.02) (0.01)
(1.13) (0.25) -- (0.30) --
- ------ ------ ------ ------- -------
(1.18) (0.28) (0.02) (0.32) (0.01)
- ------ ------ ------ ------- -------
$17.24 $16.36 $14.58 $ 11.46 $13.13
====== ====== ====== ======= =======
13.12% 14.28% 27.45% (10.54)% 6.38%
$7,692 $6,080 $3,725 $ 1,962 $ 668
1.06% 1.06% 1.08% 1.09% 1.07%(6)
1.37% 0.29% 0.22% 0.07% (0.04)%(6)
27% 32% 37% 28% 30%
1.06% 1.06% 1.08% 1.09% 1.07%(6)
CLASS 2
- ----------------------------------------------
2005 2004 2003 2002 2001(7)
- ------ ------ ------ ------- -------
$12.94 $11.98 $ 9.30 $ 13.51 $12.81
- ------ ------ ------ ------- ------
(0.01) 0.04 (0.03) (0.03)(4) (0.00)(4)(5)
0.94 0.92 2.71 (4.18) 0.70(8)
- ------ ------ ------ ------- ------
0.93 0.96 2.68 (4.21) 0.70
- ------ ------ ------ ------- ------
(0.04) -- -- -- --
-- -- -- -- --
- ------ ------ ------ ------- ------
(0.04) -- -- -- --
- ------ ------ ------ ------- ------
$13.83 $12.94 $11.98 $ 9.30 $13.51
====== ====== ====== ======= ======
7.17% 8.01% 28.82% (31.16)% 5.46%
$1,271 $1,355 $1,274 $ 622 $ 31
1.12% 1.19% 1.23% 1.25% 1.19%(6)
(0.10)% 0.33% (0.29)% (0.30)% (0.14)%(6)
81% 66% 75% 171% 92%
1.12% 1.20% 1.23% 1.25% 1.19%(6)
See Notes to Financial Statements.
87
Financial Highlights
For a Fund share outstanding throughout each period.
VT SMALL CAP VALUE FUND CLASS 1
- ----------------------- -------------------
YEARS ENDED DECEMBER 31 2005 2004(3)
------- -------
NET ASSET VALUE, BEGINNING OF PERIOD .......................... $ 12.27 $ 10.00
------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ................................... 0.11(5) 0.06
Net realized and unrealized gain on investments ......... 0.50 2.21
------- -------
Total from investment operations ........................ 0.61 2.27
------- -------
LESS DISTRIBUTIONS:
Dividends from net investment income .................... (0.06) --
Dividends from net realized capital gains ............... (0.39) --
------- -------
Total distributions ..................................... (0.45) --
------- -------
NET ASSET VALUE, END OF PERIOD ................................ $ 12.43 $ 12.27
======= =======
TOTAL RETURN(1) ............................................... 4.97% 22.70%
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000s) ..................... $38,346 $42,668
Ratio of operating expenses to average net assets ....... 0.97% 1.08%(6)
Ratio of net investment income to average net assets .... 0.93% 0.83%(6)
Portfolio turnover rate ................................. 59% 50%
Ratio of operating expenses to average net assets
without fee waivers, expenses reimbursed and/or
fees reduced by credits allowed by the custodian(2) .. 0.97% 1.08%(6)
VT SMALL CAP GROWTH FUND CLASS 1
- ------------------------ ------------------------------------------------------
YEARS ENDED DECEMBER 31 2005 2004 2003 2002 2001
------- ------- ------- ------- -------
NET ASSET VALUE, BEGINNING OF PERIOD .......................... $ 9.85 $ 9.41 $ 5.49 $ 11.37 $ 16.03
------- ------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment loss ..................................... (0.06) (0.05) (0.02)(5) (0.02)(5) (0.06)(5)
Net realized and unrealized gain/(loss) on investments .. (0.11) 0.49 3.94 (5.27) (1.69)
------- ------- ------- ------- -------
Total from investment operations ........................ (0.17) 0.44 3.92 (5.29) (1.75)
------- ------- ------- ------- -------
LESS DISTRIBUTIONS:
Dividends from net investment income .................... -- -- -- -- --
Dividends from net realized capital gains ............... -- -- -- (0.59) (2.91)
------- ------- ------- ------- -------
Total distributions ..................................... -- -- -- (0.59) (2.91)
------- ------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD ................................ $ 9.68 $ 9.85 $ 9.41 $ 5.49 $ 11.37
======= ======= ======= ======= =======
TOTAL RETURN(1) ............................................... (1.73)% 4.68% 71.40% (47.15)% (12.73)%
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000s) ..................... $42,679 $53,049 $70,806 $39,476 $73,367
Ratio of operating expenses to average net assets ....... 1.11% 0.98% 1.00% 1.00% 0.95%
Ratio of net investment loss to average net assets ...... (0.61)% (0.56) (0.31)% (0.31)% (0.44)%
Portfolio turnover rate ................................. 172%(8) 41% 67% 29% 46%
Ratio of operating expenses to average net assets
without fee waivers, expenses reimbursed and/or
fees reduced by credits allowed by the custodian(2) .. 1.11% 0.98% 1.00% 1.00% 0.95%
- ----------
(1) Total return is not annualized for periods of less than one year. The total
return would have been lower if certain fees had not been waived and/or
expenses reimbursed by the investment advisor or if fees had not been
reduced by credits allowed by the custodian.
(2) Ratio of operating expenses to average net assets includes expenses paid
indirectly.
(3) The VT Small Cap Value Fund commenced operations on May 3, 2004.
(4) The VT Small Cap Value Fund commenced selling Class 2 shares on July 1,
2005.
(5) Per share numbers have been calculated using the average shares method.
(6) Annualized.
(7) The VT Small Cap Growth Fund commenced selling Class 2 shares on May 1,
2001.
(8) The VT Small Cap Growth Fund had unusually high portfolio turnover due to a
change in sub-advisors.
See Notes to Financial Statements.
88
CLASS 2
- -------
2005(4)
- -------
$12.28
- ------
0.08(5)
0.05
- ------
0.13
- ------
--
--
- ------
--
- ------
$12.41
======
1.14%
$ 15
1.22%(6)
0.68%(6)
59%
1.22%(6)
CLASS 2
- ------------------------------------------------------
2005 2004 2003 2002 2001(7)
- ------ ------ ------ ------- -------
$ 9.77 $ 9.35 $ 5.47 $ 11.36 $14.41
- ------ ------ ------ ------- ------
(0.08) (0.07) (0.04)(5) (0.03)(5) (0.05)(5)
(0.12) 0.49 3.92 (5.27) (0.09)
- ------ ------ ------ ------- ------
(0.20) 0.42 3.88 (5.30) (0.14)
- ------ ------ ------ ------- ------
-- -- -- -- --
-- -- -- (0.59) (2.91)
- ------ ------ ------ ------- ------
-- -- -- (0.59) (2.91)
- ------ ------ ------ ------- ------
$ 9.57 $ 9.77 $ 9.35 $ 5.47 $11.36
====== ====== ====== ======= ======
(2.05)% 4.49% 70.93% (47.28)% (3.00)%
$3,762 $3,626 $2,710 $ 1,068 $ 440
1.36% 1.23% 1.25% 1.25% 1.20%(6)
(0.86)% (0.81)% (0.56)% (0.56)% (0.69)%(6)
172%(8) 41% 67% 29% 46%
1.36% 1.23% 1.25% 1.25% 1.20%(6)
See Notes to Financial Statements.
89
Financial Highlights
For a Fund share outstanding throughout each period.
VT INTERNATIONAL GROWTH FUND CLASS 1
- ---------------------------- --------------------------------------------------------
YEARS ENDED DECEMBER 31 2005 2004 2003 2002 2001
-------- ------- ------- ------- -------
NET ASSET VALUE, BEGINNING OF PERIOD .......................... $ 12.77 $ 11.38 $ 8.51 $ 10.21 $ 13.65
-------- ------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ................................... 0.17(4) 0.12(4) 0.09(4) 0.04(4) 0.04
Net realized and unrealized gain/(loss) on investments .. 2.07 1.41 2.91 (1.63) (2.39)
-------- ------- ------- ------- -------
Total from investment operations ........................ 2.24 1.53 3.00 (1.59) (2.35)
-------- ------- ------- ------- -------
LESS DISTRIBUTIONS:
Dividends from net investment income .................... (0.21) (0.14) (0.13) (0.11) (0.09)
Dividends from net realized capital gains ............... -- -- -- -- (1.00)
-------- ------- ------- ------- -------
Total distributions ..................................... (0.21) (0.14) (0.13) (0.11) (1.09)
-------- ------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD ................................ $ 14.80 $ 12.77 $ 11.38 $ 8.51 $ 10.21
======== ======= ======= ======= =======
TOTAL RETURN(1) ............................................... 17.87% 13.60% 35.51% (15.71)% (17.78)%
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000s) ..................... $109,029 $91,875 $74,138 $50,625 $49,178
Ratio of operating expenses to average net assets ....... 1.11% 1.16% 1.21% 1.26% 1.19%
Ratio of net investment income to average net assets .... 1.27% 0.99% 0.94% 0.49% 0.33%
Portfolio turnover rate ................................. 32% 23% 22% 30% 34%
Ratio of operating expenses to average net assets
without fee waivers, expenses reimbursed and/or
fees reduced by credits allowed by the custodian(2) .. 1.11% 1.16% 1.21% 1.26% 1.19%
VT SHORT TERM INCOME FUND CLASS 1
- ------------------------- -------------------------------------------------------
YEARS ENDED DECEMBER 31 2005 2004 2003 2002 2001
------- ------- ------- ------- -------
NET ASSET VALUE, BEGINNING OF PERIOD .......................... $ 2.58 $ 2.63 $ 2.65 $ 2.60 $ 2.44
------- ------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ................................... 0.10(4) 0.10(4) 0.11(4) 0.14(4) 0.15(4)
Net realized and unrealized gain/(loss) on investments .. (0.06) (0.05) 0.04 0.02 0.05
------- ------- ------- ------- -------
Total from investment operations ........................ 0.04 0.05 0.15 0.16 0.20
------- ------- ------- ------- -------
LESS DISTRIBUTIONS:
Dividends from net investment income .................... (0.10) (0.10) (0.17) (0.11) (0.04)
Dividends from net realized capital gains ............... -- -- -- -- --
------- ------- ------- ------- -------
Total distributions ..................................... (0.10) (0.10) (0.17) (0.11) (0.04)
------- ------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD ................................ $ 2.52 $ 2.58 $ 2.63 $ 2.65 $ 2.60
======= ======= ======= ======= =======
TOTAL RETURN(1) ............................................... 1.64% 2.07% 5.52% 6.26% 8.15%
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000s) ..................... $47,221 $48,574 $46,628 $41,592 $50,343
Ratio of operating expenses to average net assets ....... 0.60% 0.61% 0.63% 0.62% 0.60%
Ratio of net investment income to average net assets .... 4.01% 3.74% 4.31% 5.42% 5.77%
Portfolio turnover rate ................................. 22% 17% 38% 41% 44%
Ratio of operating expenses to average net assets
without fee waivers, expenses reimbursed and/or
fees reduced by credits allowed by the custodian(2) .. 0.60% 0.61% 0.63% 0.62% 0.60%
- ----------
(1) Total return is not annualized for periods of less than one year. The total
return would have been lower if certain fees had not been waived and/or
expenses reimbursed by the investment advisor or if fees had not been
reduced by credits allowed by the custodian.
(2) Ratio of operating expenses to average net assets includes expenses paid
indirectly.
(3) The Fund commenced selling Class 2 shares on November 6, 2001.
(4) Per share numbers have been calculated using the average shares method.
(5) Amount represents less than $0.01 per share.
(6) The amount shown may not agree with the change in the aggregate gains and
losses of portfolio securities due to the timing of sales and redemptions
of Fund shares.
(7) Annualized.
See Notes to Financial Statements.
90
CLASS 2
- -----------------------------------------------------
2005 2004 2003 2002 2001(3)
- ------ ------ ------ -------- -------
$12.71 $11.34 $ 8.49 $ 10.21 $ 9.78
- ------ ------ ------ -------- ------
0.13(4) 0.09(4) 0.06(4) 0.02(4) 0.00(5)
2.07 1.41 2.90 (1.63) 0.43(6)
- ------ ------ ------ -------- ------
2.20 1.50 2.96 (1.61) 0.43
- ------ ------ ------ -------- ------
(0.20) (0.13) (0.11) (0.11) --
-- -- -- -- --
- ------ ------ ------ -------- ------
(0.20) (0.13) (0.11) (0.11) --
- ------ ------ ------ -------- ------
$14.71 $12.71 $11.34 $ 8.49 $10.21
====== ====== ====== ======== ======
17.59% 13.33% 35.10% (15.91)% 4.40%
$1,088 $ 310 $ 182 $ 93 $ 0
1.36% 1.41% 1.46% 1.51% 1.40%(7)
1.02% 0.74% 0.69% 0.24% 0.12%(7)
32% 23% 22% 30% 34%
1.36% 1.41% 1.46% 1.51% 1.40%(7)
CLASS 2
- -----------------------------------------------------
2005 2004 2003 2002 2001(3)
- ------ ------ ------ -------- -------
$ 2.56 $ 2.62 $ 2.64 $ 2.60 $ 2.60
- ------ ------ ------ ------ ------
0.09(4) 0.09(4) 0.10(4) 0.13(4) 0.02(4)
(0.05) (0.05) 0.04 0.02 (0.02)(6)
- ------ ------ ------ ------ ------
0.04 0.04 0.14 0.15 0.00(5)
- ------ ------ ------ ------ ------
(0.09) (0.10) (0.16) (0.11) --
-- -- -- -- --
- ------ ------ ------ ------ ------
(0.09) (0.10) (0.16) (0.11) --
- ------ ------ ------ ------ ------
$ 2.51 $ 2.56 $ 2.62 $ 2.64 $ 2.60
====== ====== ====== ====== ======
1.76% 1.60% 5.46% 5.86% 0.00%
$5,156 $7,096 $6,157 $1,188 $ 20
0.85% 0.86% 0.88% 0.87% 0.85%(7)
3.76% 3.49% 4.06% 5.17% 5.52%(7)
22% 17% 38% 41% 44%
0.85% 0.86% 0.88% 0.87% 0.85%(7)
See Notes to Financial Statements.
91
Financial Highlights
For a Fund share outstanding throughout each period.
VT U.S. GOVERNMENT SECURITIES FUND CLASS 1
- ---------------------------------- ------------------------------------------------------------
YEARS ENDED DECEMBER 31 2005 2004 2003 2002 2001
-------- -------- -------- -------- --------
NET ASSET VALUE, BEGINNING OF PERIOD ........................... $ 10.71 $ 10.75 $ 11.05 $ 10.55 $ 9.93
-------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income .................................... 0.46(4) 0.45(4) 0.46(4) 0.59(4) 0.61(4)
Net realized and unrealized gain/(loss) on
investments ........................................... (0.22) (0.06) (0.23) 0.33 0.16
-------- -------- -------- -------- --------
Total from investment operations ......................... 0.24 0.39 0.23 0.92 0.77
-------- -------- -------- -------- --------
LESS DISTRIBUTIONS:
Dividends from net investment income ..................... (0.48) (0.43) (0.53) (0.42) (0.15)
Dividends from net realized capital gains ................ -- -- -- -- --
-------- -------- -------- -------- --------
Total distributions ...................................... (0.48) (0.43) (0.53) (0.42) (0.15)
-------- -------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD ................................. $ 10.47 $ 10.71 $ 10.75 $ 11.05 $ 10.55
======== ======== ======== ======== ========
TOTAL RETURN(1) ................................................ 2.27% 3.78% 2.14% 8.87% 7.79%
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000s) ...................... $266,902 $263,816 $204,193 $173,770 $136,904
Ratio of operating expenses to average net assets ........ 0.54% 0.54% 0.56% 0.56% 0.56%
Ratio of net investment income to average net assets ..... 4.39% 4.21% 4.26% 5.45% 5.89%
Portfolio turnover rate ................................. 33% 28% 46% 41% 31%
Ratio of operating expenses to average net assets
without fee waivers, expenses reimbursed and/or
fees reduced by credits allowed by the custodian(2) ... 0.54% 0.54% 0.56% 0.56% 0.56%
VT INCOME FUND CLASS 1
- -------------- ------------------------------------------------------------
YEARS ENDED DECEMBER 31 2005 2004 2003 2002 2001
-------- -------- -------- -------- --------
NET ASSET VALUE, BEGINNING OF PERIOD ........................... $ 11.08 $ 11.18 $ 10.79 $ 10.31 $ 9.70
-------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income .................................... 0.60(4) 0.61(4) 0.63(4) 0.69(4) 0.67(4)
Net realized and unrealized gain/(loss) on
investments ........................................... (0.34) (0.03) 0.42 0.27 0.11
-------- -------- -------- -------- --------
Total from investment operations ......................... 0.26 0.58 1.05 0.96 0.78
-------- -------- -------- -------- --------
LESS DISTRIBUTIONS:
Dividends from net investment income ..................... (0.65) (0.68) (0.66) (0.48) (0.17)
Dividends from net realized capital gains ................ -- -- -- -- --
-------- -------- -------- -------- --------
Total distributions ...................................... (0.65) (0.68) (0.66) (0.48) (0.17)
-------- -------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD ................................. $ 10.69 $ 11.08 $ 11.18 $ 10.79 $ 10.31
======== ======== ======== ======== ========
TOTAL RETURN(1) ................................................ 2.40% 5.56% 9.78% 9.61% 8.08%
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000s) ...................... $185,140 $185,570 $193,953 $179,844 $154,826
Ratio of operating expenses to average net assets ........ 0.54% 0.55% 0.56% 0.56% 0.55%
Ratio of net investment income to average net assets ..... 5.50% 5.53% 5.74% 6.64% 6.69%
Portfolio turnover rate .................................. 13% 20% 24% 21% 33%
Ratio of operating expenses to average net assets
without fee waivers, expenses reimbursed and/or
fees reduced by credits allowed by the custodian (2) .. 0.54% 0.55% 0.56% 0.56% 0.55%
- ----------
(1) Total return is not annualized for periods of less than one year. The total
return would have been lower if certain fees had not been waived and/or
expenses reimbursed by the investment advisor or if fees had not been
reduced by credits allowed by the custodian.
(2) Ratio of operating expenses to average net assets includes expenses paid
indirectly.
(3) The Fund commenced selling Class 2 shares on November 6, 2001.
(4) Per share numbers have been calculated using the average shares method.
(5) The amount shown may not agree with the change in the aggregate gains and
losses of portfolio securities due to the timing of sales and redemptions
of Fund shares.
(6) Annualized.
See Notes to Financial Statements.
92
CLASS 2
- -------------------------------------------------------
2005 2004 2003 2002 2001(3)
- ------- ------- ------- ------- -------
$ 10.66 $ 10.70 $ 11.02 $ 10.55 $10.70
- ------- ------- ------- ------- ------
0.43(4) 0.42(4) 0.44(4) 0.56(4) 0.09(4)
(0.22) (0.06) (0.23) 0.33 (0.24)(5)
- ------- ------- ------- ------- ------
0.21 0.36 0.21 0.89 (0.15)
- ------- ------- ------- ------- ------
(0.44) (0.40) (0.53) (0.42) --
-- -- -- -- --
- ------- ------- ------- ------- ------
(0.44) (0.40) (0.53) (0.42) --
- ------- ------- ------- ------- ------
$ 10.43 $ 10.66 $ 10.70 $ 11.02 $10.55
======= ======= ======= ======= ======
2.02% 3.59% 1.87% 8.57% (1.40)%
$ 8,742 $12,757 $16,323 $12,264 $ 753
0.79% 0.79% 0.81% 0.81% 0.81%(6)
4.14% 3.96% 4.01% 5.20% 5.64%(6)
33% 28% 46% 41% 31%
0.79% 0.79% 0.81% 0.81% 0.81%(6)
CLASS 2
- ------------------------------------------------------
2005 2004 2003 2002 2001(3)
- ------- ------- ------- ------- -------
$ 11.01 $ 11.12 $ 10.77 $10.31 $10.45
- ------- ------- ------- ------ ------
0.57(4) 0.58(4) 0.60(4) 0.65(4) 0.10(4)
(0.34) (0.03) 0.41 0.29 (0.24)(5)
- ------- ------- ------- ------ ------
0.23 0.55 1.01 0.94 (0.14)
- ------- ------- ------- ------ ------
(0.62) (0.66) (0.66) (0.48) --
-- -- -- -- --
- ------- ------- ------- ------ ------
(0.62) (0.66) (0.66) (0.48) --
- ------- ------- ------- ------ ------
$ 10.62 $ 11.01 $ 11.12 $10.77 $10.31
======= ======= ======= ====== ======
2.06% 5.31% 9.47% 9.40% (1.34)%
$20,374 $23,358 $21,188 $8,186 $ 362
0.79% 0.80% 0.81% 0.81% 0.80%(6)
5.25% 5.28% 5.49% 6.39% 6.44%(6)
13% 20% 24% 21% 33%
0.79% 0.80% 0.81% 0.81% 0.80%(6)
See Notes to Financial Statements.
93
Financial Highlights
For a Fund share outstanding throughout each period.
VT MONEY MARKET FUND CLASS 1
- -------------------- -------------------------------------------------
YEARS ENDED DECEMBER 31 2005 2004 2003 2002 2001
------- ------- ------- --------- -------
NET ASSET VALUE, BEGINNING OF PERIOD .......................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ................................... 0.026 0.008 0.006 0.014(4) 0.036
Net realized and unrealized loss on investments ......... -- -- -- -- (0.000)(5)
------- ------- ------- ------- -------
Total from investment operations ........................ 0.026 0.008 0.006 0.014 0.036
------- ------- ------- ------- -------
LESS DISTRIBUTIONS:
Dividends from net investment income .................... (0.026) (0.008) (0.006) (0.014) (0.036)
Dividends from net realized capital gains ............... -- -- -- -- --
------- ------- ------- ------- -------
Total distributions ..................................... (0.026) (0.008) (0.006) (0.014) (0.036)
------- ------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD ................................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======= ======= ======= =======
TOTAL RETURN(1) ............................................... 2.59% 0.85% 0.65% 1.39% 3.68%
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000s) ..................... $13,132 $14,660 $20,198 $33,766 $28,563
Ratio of operating expenses to average net assets ....... 0.70% 0.63% 0.60% 0.57% 0.62%
Ratio of net investment income to average net assets .... 2.53% 0.84% 0.67% 1.32% 3.41%
Ratio of operating expenses to average net assets
without fee waivers, expenses reimbursed and/or
fees reduced by credits allowed by the custodian(2) .. 0.70% 0.63% 0.60% 0.57% 0.62%
- ----------
(1) Total return is not annualized for periods of less than one year. The total
return would have been lower if certain fees had not been waived and/or
expenses reimbursed by the investment advisor or if fees had not been
reduced by credits allowed by the custodian.
(2) Ratio of operating expenses to average net assets includes expenses paid
indirectly.
(3) The Fund commenced selling Class 2 shares on November 6, 2001.
(4) Per share numbers have been calculated using the average shares method.
(5) Amount represents less than $0.001 per share.
(6) Annualized.
See Notes to Financial Statements.
94
CLASS 2
- ----------------------------------------------------
2005 2004 2003 2002 2001(3)
- ------- ------- ------- --------- ----------
$ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- ------- ------- ------- ------- -------
0.023 0.006 0.004 0.011(4) 0.002
-- -- -- -- (0.000)(5)
- ------- ------- ------- ------- -------
0.023 0.006 0.004 0.011 0.002
- ------- ------- ------- ------- -------
(0.023) (0.006) (0.004) (0.011) (0.002)
-- -- -- -- --
- ------- ------- ------- ------- -------
(0.023) (0.006) (0.004) (0.011) (0.002)
- ------- ------- ------- ------- -------
$ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======= ======= ======= =======
2.33% 0.59% 0.40% 1.13% 0.22%
$ 3,315 $ 5,404 $ 3,068 $ 4,679 $ 189
0.95% 0.88% 0.85% 0.82% 0.87%(6)
2.28% 0.59% 0.42% 1.07% 3.16%(6)
0.95% 0.88% 0.85% 0.82% 0.87%(6)
See Notes to Financial Statements.
95
Notes to Financial Statements
WM VARIABLE TRUST
1. ORGANIZATION AND BUSINESS
WM Variable Trust (the "Trust") was organized as a Massachusetts business trust
on January 29, 1993. The Trust is registered under the Investment Company Act of
1940, as amended (the "1940 Act"), as an open-end management investment company.
The Trust consists of 13 funds (each a "Fund" and collectively, the "Funds") and
5 portfolios ("Portfolios"). The VT REIT, VT Equity Income, VT Growth & Income,
VT West Coast Equity, VT Mid Cap Stock, VT Growth, VT Small Cap Value, VT Small
Cap Growth, VT International Growth, VT Short Term Income, VT U.S. Government
Securities, VT Income and VT Money Market Funds are included in this report.
WM Advisors, Inc. (the "Advisor") serves as investment advisor to the Trust. The
Advisor is a wholly owned subsidiary of Washington Mutual, Inc. ("Washington
Mutual"), a publicly owned financial services company.
The Trust is authorized to issue an unlimited number of shares of beneficial
interest, each without par value. Each Fund offers two classes of shares: Class
1 shares and Class 2 shares. These shares are issued and redeemed only in
connection with investments in, and payments under, variable annuity and
variable life insurance contracts (collectively "Variable Insurance Contracts"),
as well as certain qualified retirement plans. The VT Small Cap Value Fund
commenced offering Class 2 shares on July 1, 2005.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies, in conformity
with accounting principles generally accepted in the United States of America
("generally accepted accounting principles"), which are consistently followed by
the Portfolios and Funds in the preparation of their financial statements.
PORTFOLIO VALUATION:
Securities that are primarily traded on a U.S. exchange (excluding securities
traded through the NASDAQ National Market System, which are valued at the NASDAQ
official closing price) are valued at the last reported sales price on that
exchange or, if there were no sales during the day (and no official closing
price on such day), at the mean of the current day's bid and asked prices.
Securities traded only on over-the-counter markets (other than the NASDAQ
National Market System and the U.S. Government Securities System) are valued at
the mean of the current day's bid and asked prices.
The value of a foreign security is determined in its functional currency as of
the close of trading on the foreign exchange on which it is traded or at the
close of the New York Stock Exchange, if that is earlier, or if there has been
movement in the U.S. market and/or other economic indicators that exceed a
specified threshold, the foreign security is fair valued. The value is then
converted into its U.S. dollar equivalent using prevailing exchange rates on the
day the value of the foreign security is determined.
Options are generally valued at the last sale price or, in the absence of a last
sale price, at the mean of the current day's bid and asked prices. The value of
a futures contract equals the unrealized gain or loss on the contract, which is
determined by marking the contract to the current settlement price for a like
contract acquired on the day on which the futures contract is being valued.
Debt securities of U.S. issuers (other than short-term investments), including
municipal securities, are valued by one or more independent pricing services
retained by the Trust. When, in the judgment of a pricing service, market
quotations for these securities are readily available, they are valued at the
mean between the quoted bid and asked prices. Short-term debt securities that
mature in 60 days or less are valued at amortized cost, which approximates
market value.
Securities for which market quotations are not readily available are valued at
fair value as determined by, or under the direction of, the Funds'Board of
Trustees which may rely on the assistance of one or more pricing services.
The investments of the Money Market Fund are valued on the basis of amortized
cost in accordance with Rule 2a-7 of the 1940 Act, which approximates market
value and does not take into account unrealized capital gains or losses.
Amortized cost valuation involves initially valuing an instrument at its cost
and thereafter assuming a constant amortization to maturity of any discount or
premium, as long as the amortized cost fairly reflects the market-based net
asset value per share. Certain other assets may be valued by the Advisor under
the supervision of the Fund's Board of Trustees.
REPURCHASE AGREEMENTS:
Each Fund may enter into repurchase agreement transactions. A repurchase
agreement is a purchase of an underlying debt obligation subject to an agreement
by the seller to repurchase the obligation at an agreed upon price and time. It
is each Fund's policy that its custodian take possession of the underlying
collateral securities. The fair value of the collateral is at all times at least
equal to the total amount of the repurchase obligation. In the event of
counterparty default, the Fund would seek to use the collateral to offset losses
incurred. There is potential loss to the Fund in the event the Fund is delayed
or prevented from exercising its right to dispose of the collateral securities,
including the risk of a possible decline in the value of the underlying
96
Notes to Financial Statements (continued)
WM VARIABLE TRUST
securities during the period while the Fund seeks to assert its rights. The
Advisor, acting under the supervision of the Board of Trustees of the Trust,
reviews the value of the collateral and the creditworthiness of those banks and
broker/dealers with whom each Fund enters into repurchase agreements.
FUTURES CONTRACTS:
Certain Funds may enter into futures transactions. The underlying value of a
futures contract is incorporated within the unrealized
appreciation/(depreciation) shown in the Portfolio of Investments under the
caption "Futures Contracts."
Upon entering into a futures contract, the Fund is required to deposit with the
broker an amount of cash or cash equivalents equal to a certain percentage of
the contract amount (known as an initial margin deposit). Subsequent payments
(known as variation margins) are made or received by the Fund each day,
depending on the daily fluctuation of the value of the contract. The daily
changes in contract value are recorded as unrealized gains or losses and the
Fund recognizes a realized gain or loss when the contract is closed. Should
market conditions change unexpectedly, the Funds may not achieve the anticipated
benefits of the futures contracts and may realize a loss. The use of futures
transactions involves the risk of imperfect correlation in movements in the
price of futures contracts, interest rates and the underlying hedged assets.
PURCHASED OPTION CONTRACTS:
Certain Funds may enter into put and call option contracts. These Funds may use
option contracts to manage their exposure to the stock and bond markets and to
fluctuations in interest rates and currency values. Upon entering into a put or
call option, the premium paid is recorded as an investment. The daily changes in
contract value are recorded as unrealized gains or losses. When a purchased
option expires, the Fund will realize a loss in the amount of the cost of the
option. When the Fund enters into a closing sale transaction, the Fund will
realize a gain or loss depending on whether the sales proceeds from the closing
sale transaction are greater or less than the cost of the option plus related
transaction costs. When the Fund exercises a put option, the Fund will realize a
gain or loss from the sale of the underlying security and the proceeds from such
sale will be decreased by the premium originally paid. When the Fund exercises a
call option, the cost of the security, which the Fund purchases upon exercise,
will be increased by the premium originally paid. The risk associated with
purchasing options is limited to the premium originally paid.
FOREIGN CURRENCY:
The books and records of the Funds are maintained in U.S. dollars. Foreign
currencies, investments and other assets and liabilities are translated into
U.S. dollars on a daily basis using prevailing exchange rates. Purchases and
sales of investment securities, income and expenses are translated on the
respective dates of such transactions.
Unrealized gains and losses, not relating to securities, which result from
changes in foreign currency exchange rates have been included in unrealized
appreciation/(depreciation) of investments. Unrealized gains and losses of
securities, which result from changes in foreign currency exchange rates as well
as changes in market prices of securities, have been included in unrealized
appreciation/(depreciation) of investments. Net realized foreign currency gains
and losses, which result from changes in exchange rates between trade date and
settlement date on investment transactions as well as the difference between the
amounts of interest and dividends recorded on the books of the Funds and the
amount actually received, have been included in realized gains/(losses) on
investment transactions. Foreign currency gains and losses, which result from
fluctuations in exchange rates between the initial purchase trade date and
subsequent sale trade date, have been included in realized gains/(losses) on
investment transactions.
FORWARD FOREIGN CURRENCY CONTRACTS:
Certain Funds may enter into forward foreign currency contracts. Forward foreign
currency contracts are agreements to exchange one currency for another at a
future date and at a specified price. These Funds may use forward foreign
currency contracts to facilitate transactions in foreign securities and to
manage the Funds'foreign currency exposure. These contracts are valued daily,
and a Fund's net equity therein, representing unrealized gain or loss on the
contracts as measured by the difference between the forward foreign exchange
rates at the dates of entry into the contracts and the forward rates at the
reporting date, is included in the "Statements of Assets and Liabilities".
Realized and unrealized gains and losses are included in the "Statements of
Operations". Due to the risks, the Funds could incur losses up to the entire
contract amount, which may exceed the net unrealized value shown in the
"Statements of Assets and Liabilities".
97
Notes to Financial Statements (continued)
WM VARIABLE TRUST
ILLIQUID INVESTMENTS:
Each Fund may invest a portion of its net assets in securities that are not
readily marketable, including: (1) repurchase agreements with maturities greater
than seven calendar days; (2) time deposits maturing in more than seven calendar
days; (3) certain futures contracts and options; (4) certain variable rate
demand notes having a demand period of more than seven calendar days; (5)
securities, the disposition of which are restricted under Federal securities
laws, excluding certain Rule 144A securities, as defined in the following
paragraph; and (6) certain over-the-counter options.
Illiquid securities generally cannot be sold or disposed of in the ordinary
course of business (within seven calendar days) at approximately the value at
which the Funds have valued the investments. This may have an adverse effect on
the Fund's ability to dispose of particular illiquid securities at fair market
value and may limit the Fund's ability to obtain accurate market quotations for
purposes of valuing the securities and calculating the net asset value of shares
of the Fund. The Funds may also purchase securities that are not registered
under the Securities Act of 1933, as amended (the "Act"), but that can be sold
to qualified institutional buyers in accordance with Rule 144A under the Act
("Rule 144A Securities"). Rule 144A Securities generally must be sold only to
other qualified institutional buyers. If a particular investment in Rule
144A Securities is not determined to be liquid under the guidelines established
by the Board of Trustees, the investment will be subject to a Fund's limitation
on investment in illiquid securities as indicated above.
SECURITIES TRANSACTIONS AND INVESTMENT INCOME:
Securities transactions are recorded on a trade date basis. Realized gains and
losses from securities sold are recorded on the identified cost basis.
Securities purchased or sold on a "when-issued" or "delayed-delivery" basis may
be settled a month or more after the trade date; interest income is not accrued
until settlement date. Each Fund instructs the custodian to segregate assets of
the Fund with a current value at least equal to the amount of its when-issued
purchase commitments.
Interest income on debt securities is accrued daily. Premiums and discounts are
amortized using the interest method. Securities which are in default do not
accrue interest income. Paydown gains and losses on mortgage-backed and
asset-backed securities are presented as an adjustment to interest income.
Dividend income is recorded on the ex-dividend date, except certain dividends
from foreign securities are recorded as soon as the information is available to
the Funds if informed after the ex-dividend date. The Funds estimate components
of distributions from Real Estate Investment Trusts (REITs). Distributions
received in excess of income are recorded as a reduction of the cost of the
related investments. Distributions received from capital gains are presented as
an adjustment to dividend income and recorded as capital gain distributions
received. Each Fund's investment income and realized and unrealized gains and
losses are allocated among the classes of that Fund based upon the relative
average net assets of each class.
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS:
Dividends from net investment income and distributions of any net capital gains
earned by a Fund are declared and paid annually, with the exception of the VT
Money Market Fund from which dividends from net investment income are declared
daily and paid monthly.
Distributions from income and capital gains are determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles. These differences are primarily due to differing treatments of
income and gains on various investment securities held by the Funds,
redesignated distributions and differing characterization of distributions made
by each Fund. At December 31, 2005, the following adjustments have been
reflected in the components of net assets on the "Statements of Assets and
Liabilities" to present these balances on an income tax basis, excluding certain
temporary differences:
INCREASE/ INCREASE/
(DECREASE) (DECREASE)
UNDISTRIBUTED ACCUMULATED
DECREASE NET INVESTMENT NET REALIZED
PAID-IN CAPITAL INCOME/(LOSS) GAIN/(LOSS)
NAME OF FUND (000S) (000S) (000S)
- ------------ --------------- -------------- ------------
VT Equity Income Fund............... $ -- $ 5 $ (5)
VT Growth Fund...................... -- (28) 28
VT Small Cap Value Fund............. -- (5) 5
VT Small Cap Growth Fund ........... (294) 294 --
VT International Growth Fund........ -- 402 (402)
VT Short Term Income Fund........... (9) 49 (40)
VT U.S. Government Securities Fund.. (161) 1,224 (1,063)
VT Income Fund...................... -- 405 (405)
The above adjustments are not reflected in the calculation of net investment
income per share presented in the Financial Highlights.
98
Notes to Financial Statements (continued)
WM VARIABLE TRUST
FEDERAL INCOME TAXES:
It is each Fund's policy to qualify as a regulated investment company by
complying with the requirements of the Internal Revenue Code of 1986, as amended
(the "Code"), applicable to regulated investment companies and by distributing
substantially all of its earnings to its shareholders. Therefore, no federal
income or excise tax provision is required.
It is each Fund's policy to meet the diversification requirements of the Code so
that variable annuity and variable life contracts funded by the Trust will not
fail to qualify as annuities and life insurance contracts for tax purposes.
EXPENSES:
General expenses of the Trust are allocated to all the Funds and Portfolios of
the Trust based upon the relative average net assets of each Fund and Portfolio.
Operating expenses directly attributable to a class of shares are charged to the
operations of that class of shares. Expenses of each Fund not directly
attributable to the operations of any class of shares are prorated among the
classes to which the expenses relate based on the relative average net assets of
each class of shares.
USE OF ESTIMATES:
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts and disclosures in the financial statements. Actual
results could differ from those estimates.
3. INVESTMENT ADVISORY AND OTHER TRANSACTIONS
The Advisor is entitled to a monthly fee at an annual rate based upon a
percentage of the average daily net assets of each Fund at the following rates:
FROM $0 FROM $50 FROM $100 FROM $125 FROM $200 FROM $250 FROM $400 FROM $500 FROM $1 FROM $2
TO $50 TO $100 TO $125 TO $200 TO $250 TO $400 TO $500 MILLION TO TO $2 TO $3 OVER $3
NAME OF FUND MILLION MILLION MILLION MILLION MILLION MILLION MILLION $1 BILLION BILLION BILLION BILLION
- ------------ ------- -------- --------- --------- --------- --------- --------- ---------- ------- ------- -------
VT REIT Fund ...... 0.800% 0.800% 0.800% 0.800% 0.800% 0.800% 0.800% 0.750% 0.750% 0.700% 0.650%
VT Equity Income
Fund ........... 0.625% 0.625% 0.625% 0.625% 0.625% 0.625% 0.625% 0.500% 0.500% 0.500% 0.500%
VT Growth &
Income Fund .... 0.750% 0.750% 0.750% 0.750% 0.700% 0.700% 0.650% 0.575% 0.575% 0.575% 0.575%
VT West Coast
Equity Fund .... 0.625% 0.625% 0.625% 0.625% 0.625% 0.625% 0.625% 0.500% 0.500% 0.500% 0.500%
VT Mid Cap Stock
Fund ........... 0.750% 0.750% 0.750% 0.750% 0.750% 0.750% 0.750% 0.750% 0.700% 0.650% 0.600%
VT Growth Fund .... 0.800% 0.800% 0.800% 0.800% 0.800% 0.800% 0.800% 0.750% 0.750% 0.700% 0.650%
VT Small Cap
Value Fund ..... 0.850% 0.850% 0.850% 0.850% 0.850% 0.850% 0.850% 0.750% 0.750% 0.750% 0.700%
VT Small Cap
Growth Fund .... 0.850% 0.850% 0.850% 0.850% 0.850% 0.850% 0.850% 0.750% 0.750% 0.750% 0.700%
VT International
Growth Fund .... 0.950% 0.850% 0.850% 0.750% 0.750% 0.750% 0.750% 0.750% 0.750% 0.750% 0.700%
VT Short Term
Income Fund .... 0.500% 0.500% 0.500% 0.500% 0.450% 0.450% 0.450% 0.400% 0.400% 0.400% 0.400%
VT U.S.
Government
Securities
Fund ........... 0.500% 0.500% 0.500% 0.500% 0.500% 0.500% 0.500% 0.500% 0.500% 0.450% 0.450%
VT Income Fund .... 0.500% 0.500% 0.500% 0.500% 0.500% 0.500% 0.500% 0.500% 0.500% 0.450% 0.450%
VT Money Market
Fund ........... 0.450% 0.450% 0.450% 0.450% 0.450% 0.450% 0.450% 0.450% 0.400% 0.400% 0.400%
During the period, the VT Small Cap Growth Fund received payments from the
Advisor totaling $188,888 in connection with a trading error. This error
occurred during the transition to new sub-advisors in April 2005.
Effective January 1, 2006, the Advisor will change its monthly fee based upon
average daily net assets for the VT Growth Fund to 0.750% of the first $500
million of average daily net assets, 0.700% of the next $1.5 billion of average
daily net assets, 0.650% of the next $1 billion of average daily net assets and
0.600% of average daily net assets over $3 billion.
Custodian fees for certain Funds have been reduced by credits allowed by the
Funds' custodian for uninvested cash balances. The Funds could have invested
this cash in income producing securities. Fees reduced by credits allowed by the
custodian for the year ended December 31, 2005 are shown separately in the
"Statements of Operations".
99
Notes to Financial Statements (continued)
WM VARIABLE TRUST
4. TRUSTEES' FEES
No officer or employee of Washington Mutual or its subsidiaries receives any
compensation from the Trust for serving as an officer or Trustee of the Trust.
The Trust, together with other mutual funds advised by WM Advisors, pay each
Trustee who is not an officer or employee of Washington Mutual or its
subsidiaries, a per annum retainer plus attendance fees for each meeting at
which they are present. The Lead Trustee, Committee Chairs and Committee Members
receive additional remuneration for these services to the Trust. Trustees are
also reimbursed for travel and out-of-pocket expenses. Each Trustee serves in
the same capacity for all 40 funds within the WM Group of Funds.
5. DISTRIBUTION PLANS
Each of the Funds has adopted a distribution plan, pursuant to Rule 12b-1 under
the 1940 Act, applicable to Class 2 shares of the Funds (a "Rule 12b-1 Plan").
Under the Rule 12b-1 Plan, WM Funds Distributor, Inc. (the "Distributor"), a
registered broker/dealer and a wholly owned subsidiary of Washington Mutual, may
receive a fee at an annual rate of 0.25% of the average daily net assets
attributable to Class 2 shares. This fee may be used to cover the expenses of
the Distributor primarily intended to result in the sale of such shares,
including payments to the Distributor's representatives or others for selling
shares. The Rule 12b-1 Plan shall remain in effect from year to year, provided
such continuance is approved annually by vote of the Board of Trustees,
including a majority of those Trustees who are not "interested persons" of the
Trust, as defined in the 1940 Act, and who have no direct or indirect financial
interest in the operation of the distribution plan or any agreements related to
the plan.
6. PURCHASES AND SALES OF SECURITIES
The aggregate cost of purchases and proceeds from sales of securities, excluding
U.S. Government and short-term investments, for the year ended December 31,
2005, are as follows:
PURCHASES SALES
NAME OF FUND (000S) (000S)
- ------------ --------- --------
VT REIT Fund ......................... $ 13,032 $ 17,093
VT Equity Income Fund ................ 147,899 105,018
VT Growth & Income Fund .............. 63,850 72,743
VT West Coast Equity Fund ............ 23,371 21,862
VT Mid Cap Stock Fund ................ 29,895 43,712
VT Growth Fund ....................... 199,608 191,302
VT Small Cap Value Fund .............. 26,103 29,469
VT Small Cap Growth Fund ............. 79,393 88,702
VT International Growth Fund ......... 33,196 30,166
VT Short Term Income Fund ............ 7,882 9,520
VT U.S. Government Securities Fund ... 22,624 15,571
VT Income Fund ....................... 12,196 10,740
The aggregate cost of purchases and proceeds from sales of U.S. Government
securities, excluding short-term investments, for the year ended December 31,
2005, are as follows:
PURCHASES SALES
NAME OF FUND (000S) (000S)
- ------------ --------- --------
VT Equity Income Fund ................ $ -- $ 27
VT Short Term Income Fund. ........... 5,413 1,435
VT U.S. Government Securities Fund ... 70,245 73,569
VT Income Fund ....................... 18,730 14,272
7. LENDING OF SECURITIES
Certain Funds may lend securities to brokers, dealers and other financial
organizations to earn additional income. The Funds also continue to receive
interest or dividends on the securities loaned. Each security loan is
collateralized with assets in an amount equal to or greater than the current
market value of the loaned securities. There is a risk of delay in receiving
collateral, that the collateral could lose value or become valueless, or in
recovering the securities loaned or even a loss of rights in collateral should
the borrower fail financially.
At December 31, 2005, each of the Funds with outstanding loans of securities to
certain brokers, dealers or other financial institutions has segregated cash
and/or securities at least equal to the market value of securities loaned with
the Funds' custodian. The Funds currently invest the segregated cash in Mellon
GSL DBT II which is a common collective trust that invests in high grade short
term investments.
100
Notes to Financial Statements (continued)
WM VARIABLE TRUST
8. PORTFOLIO OWNERSHIP AND OTHER FACTORS
At December 31, 2005, the WM Variable Trust Portfolios hold investments in a
number of the Funds. The figures presented below represent the percentage of
shares outstanding of each Fund owned by the Portfolios:
PORTFOLIOS
------------------------------------------------------------------------------------
VT FLEXIBLE VT CONSERVATIVE VT CONSERVATIVE VT STRATEGIC
INCOME BALANCED VT BALANCED GROWTH GROWTH
NAME OF FUND PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO TOTAL
- ------------ ----------- --------------- ----------- --------------- ------------ -----
VT REIT Fund ................... 4.7% 2.9% 42.8% 30.8% 14.6% 95.8%
VT Equity Income Fund .......... 3.4% 2.3% 27.2% 20.9% 10.4% 64.2%
VT Growth & Income Fund ........ 5.3% 2.5% 33.8% 25.8% 13.8% 81.2%
VTWest Coast Equity Fund ....... 1.9% 1.9% 26.9% 21.0% 11.7% 63.4%
VT Mid Cap Stock Fund .......... 5.9% 2.3% 33.9% 24.8% 14.9% 81.8%
VT Growth Fund ................. 5.3% 2.5% 35.8% 26.3% 14.3% 84.2%
VT Small Cap Value Fund ........ 6.8% 2.8% 41.2% 32.5% 16.5% 99.8%
VT Small Cap Growth Fund ....... 4.9% 1.7% 26.5% 22.0% 12.1% 67.2%
VT International Growth Fund ... -- 3.1% 38.1% 31.7% 17.2% 90.1%
VT Short Term Income Fund ...... 50.2% 7.9% 13.3% -- -- 71.4%
VT U.S. Government Securities
Fund ........................ 25.7% 7.2% 41.5% 10.8% -- 85.2%
VT Income Fund ................. 26.8% 6.4% 34.7% 7.6% -- 75.5%
From time to time, one or more of the Funds used for investment by a Portfolio
may experience relatively large investments or redemptions due to reallocations
or rebalancings by the Portfolios as recommended by the Advisor. These
transactions will affect the Funds, since the Funds that experience redemptions
as a result of the reallocations or rebalancings may have to sell portfolio
securities and since the 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 portfolio management to the extent that the Funds may be required to
sell securities or invest cash at times when they would not otherwise do so.
These transactions could also have tax consequences if sales of securities
resulted in gains and could also increase transaction costs. The Advisor is
committed to minimizing such impact on the Funds to the extent it is consistent
with pursuing the investment objectives of the Portfolios. The Advisor may
nevertheless face conflicts in fulfilling its dual responsibilities of the
Portfolios and Funds. The Advisor will, at all times, monitor the impact on the
Funds of transactions by the Portfolios.
9. CAPITAL LOSS CARRYFORWARDS
At December 31, 2005, the following Funds have available for federal income tax
purposes unused capital losses as follows:
(IN THOUSANDS)
-------------------------------------------------------------------------------------
EXPIRING EXPIRING EXPIRING EXPIRING EXPIRING EXPIRING EXPIRING EXPIRING
NAME OF FUND IN 2006 IN 2007 IN 2008 IN 2009 IN 2010 IN 2011 IN 2012 IN 2013
- ------------ -------- -------- -------- -------- -------- -------- -------- --------
VT Growth & Income Fund .............. $-- $ -- $-- $ 4,166 $ 8,844 $ 9,117 $ -- $ --
VT Growth Fund. ...................... -- -- -- 47,296 37,621 5,944 -- --
VT Small Cap Growth Fund ............. -- -- -- -- 1,961 13,089 -- 7,506
VT International Growth Fund ......... -- -- -- -- 5,083 4,184 -- --
VT Short Term Income Fund ............ 52 115 76 35 -- 112 85 --
VT U.S. Government Securities Fund ... -- -- 17 -- -- 1,673 1,119 782
10. POST OCTOBER LOSS
Under the current tax law, capital and currency losses realized after October
31, may be deferred and treated as occurring on the first day of the following
fiscal year. For the year ended December 31, 2005, the following Funds have
elected to defer capital losses occurring between November 1, 2005 and December
31, 2005 as follows:
CAPITAL LOSSES CURRENCY LOSSES
NAME OF FUND (000S) (000S)
- ------------ -------------- ---------------
VT Growth Fund ....................... $ -- $ 9
VT International Growth Fund ......... -- 37
VT Short Term Income Fund ............ 28 --
VT U.S. Government Securities Fund ... 318 --
VT Income Fund ....................... 8 --
Such losses will be treated as arising on the first day of the year ended
December 31, 2006.
101
Notes to Financial Statements (continued)
WM VARIABLE TRUST
11. COMPONENTS OF DISTRIBUTABLE EARNINGS
At December 31, 2005, the components of distributable earnings on a tax basis
are as follows:
(IN THOUSANDS)
------------------------------------------------------------------------
VT VT VT VT VT
VT Equity Growth & West Coast Mid Cap VT Small Cap
REIT Income Income Equity Stock Growth Value
Fund Fund Fund Fund Fund Fund Fund
------- ------- -------- ---------- ------- ------- -------
Gross tax unrealized appreciation ............ $17,032 $51,446 $62,973 $42,788 $29,385 $35,526 $ 7,477
Gross tax unrealized depreciation ............ (619) (1,466) (7,456) (6,519) (451) (2,711) (2,858)
------- ------- ------- ------- ------- ------- -------
Net unrealized appreciation .................. $16,413 $49,980 $55,517 $36,269 $28,934 $32,815 $ 4,619
======= ======= ======= ======= ======= ======= =======
Undistributed ordinary income ................ $ 2,138 $ 6,057 $ 3,645 $ 847 $ 2,625 $ 342 $ 1,459
Undistributed long-term gains ................ $ 3,769 $16,056 $ -- $ 3,012 $10,609 $ -- $ 2,412
VT VT VT VT U.S. VT
Small Cap International Short Term Government VT Money
Growth Growth Income Securities Income Market
Fund Fund Fund Fund Fund Fund
--------- ------------- ---------- ---------- ------- ------
Gross tax unrealized appreciation ............ $ 7,508 $31,547 $ 252 $ 1,312 $ 8,957 $--
Gross tax unrealized depreciation ............ (1,339) (734) (697) (5,449) (4,237) --
------- ------- ------ ------- ------- ---
Net unrealized appreciation/ (depreciation) .. $ 6,169 $30,813* $ (445) $(4,137) $ 4,720 $--
======= ======= ====== ======= ======= ===
Undistributed ordinary income ................ $ -- $ 2,054 $2,196 $13,350 $11,752 $--
Undistributed long-term gains ................ $ -- $ -- $ -- $ -- $ 111 $--
* The net appreciation including foreign currency for the VT International
Growth Fund in $30,811.
12. INDUSTRY AND GEOGRAPHIC CONCENTRATION AND OTHER RISK FACTORS
While no individual fund is intended as a complete investment program, this is
especially true for funds that concentrate their investments such as those
investing in particular industries or regions.
The VT REIT Fund concentrates its investments in real estate investment trust
("REIT") securities or debt securities of issuers that are principally engaged
in the U.S. real estate or related industries. The VT REIT Fund could be
adversely impacted by economic trends within this industry.
The VT West Coast Equity Fund, which invests significant portions of its assets
in Alaska, California, Oregon and Washington, generally has more exposure to
regional economic risks than a fund making investments more broadly.
The WM High Yield Fund concentrates its investments in lower rated debt
securities, which may be more susceptible to adverse economic conditions than
investment grade holdings. These securities are often subordinated to the prior
claims of other senior lenders, and uncertainties exist as to an issuer's
ability to meet principal and interest payments.
Certain Funds may invest a portion of their assets in foreign securities of
developing or emerging markets countries; enter into forward foreign currency
transactions; lend their portfolio securities; enter into a stock index,
interest rate and currency futures contracts, and options on such contracts;
enter into interest rate swaps or purchase or sell interest rate caps or floors;
enter into other types of options transactions; make short sales; purchase zero
coupon and payment-in-kind bonds; enter into repurchase or reverse repurchase
agreements; purchase and sell "when-issued" securities and engage in
"delayed-delivery" transactions; and enter into various other investment
practices, each with inherent risks. The risks involved in investing in foreign
securities include those resulting from future adverse political and economic
developments and the possible imposition of currency exchange restrictions or
other foreign laws or restrictions. The risks involved in investing in a high
concentration of a single sector include those resulting from future adverse
political and economic developments or regulatory occurrences and the potential
for adverse effects to the financial conditions of the industries within the
sector due to market fluctuations.
102
Report of Independent Registered Public Accounting Firm
TO THE TRUSTEES AND SHAREHOLDERS OF WMVARIABLE TRUST:
We have audited the accompanying statements of assets and liabilities, including
the portfolios of investments, of WM Variable Trust REIT Fund, WM Variable Trust
Equity Income Fund, WM Variable Trust Growth & Income Fund, WM Variable Trust
Growth Fund, WM Variable Trust Income Fund, WM Variable Trust Money Market Fund,
WM Variable Trust Mid Cap Stock Fund, WM Variable Trust Small Cap Value Fund, WM
Variable Trust Small Cap Growth Fund, WM Variable Trust International Growth
Fund, WM Variable Trust Short Term Income Fund, WM Variable Trust U.S.
Government Securities Fund and WM Variable Trust West Coast Equity Fund (all
funds of WM Variable Trust) (collectively, the "Funds") as of December 31, 2005,
and the related statements of operations for the year then ended, the statements
of changes in net assets for each of the two years in the period then ended, and
the financial highlights for each of the five years in the period then ended.
These financial statements and financial highlights are the responsibility of
the Funds'management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. The Funds
are not required to have, nor were we engaged to perform, an audit of their
internal control over financial reporting. Our audits included consideration of
internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Funds'internal control over
financial reporting. Accordingly, we express no such opinion. An audit also
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. Our procedures included confirmation
of securities owned as of December 31, 2005, by correspondence with the
custodian and brokers; where replies were not received from brokers, we
performed other auditing procedures. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Funds as of December 31, 2005, the results of their operations for the year then
ended, the changes in their net assets for each of the two years in the period
then ended, and the financial highlights for each of the five years in the
period then ended, in conformity with accounting principles generally accepted
in the United States of America.
Deloitte & Touche LLP
Boston, Massachusetts
February 17, 2006
103
Supplemental Information (unaudited)
WM VARIABLE TRUST
BOARD APPROVAL OF INVESTMENT ADVISORY AGREEMENTS
Each year, the Board of Trustees of the Trust (the "Board"), including a
majority of the Trustees who are not interested persons of the Trust (the
"Independent Trustees"), is required to determine whether to continue the
Trust's advisory agreements. The Investment Company Act of 1940, as amended,
requires that the Board request and evaluate, and that the investment manager
furnish, such information as may reasonably be necessary to evaluate the terms
of the Trust's advisory agreements. In August 2005, the Board and the
Independent Trustees approved a new Sub-Advisory Agreement with Salomon Brothers
Asset Management, Inc. ("Salomon") in connection with its sale to Legg Mason,
Inc. (the "Salomon Agreement"), and in November 2005, the Board and the
Independent Trustees approved the amendment of the Trust's Investment
Sub-Advisory Agreement with Capital Guardian Trust Company ("Capital Guardian")
(together with the Salomon Agreement, the "Agreements"), in each case following
the recommendation of the Investment Committee (the "Committee"), a majority of
the members of which are Independent Trustees, and the recommendations of the
Independent Trustees as a whole. The material factors and conclusions that
formed the basis for the Committee's recommendation and the subsequent approval
by the Board and the Independent Trustees are required to be in this report and
are discussed below.
REVIEW PROCESS:
The Independent Trustees received assistance and advice, including a written
memorandum, regarding the legal standards applicable to the consideration of
advisory arrangements from independent counsel to the Trusts and the Independent
Trustees. The Independent Trustees discussed the continuation of the Agreements
with representatives of the Advisor and in private session with independent
legal counsel at which no representatives of the Advisor were present. The
Committee, in deciding to recommend approval of the Agreements, and the Board
and the Independent Trustees, in approving such Agreements, did not identify any
particular information that was all-important or controlling, and each Trustee
attributed different weights to the various factors. The Trustees evaluated all
information available to them on a Fund-by-Fund basis, and their deliberations
were made separately in respect of each Fund. This summary describes the most
important, but not all, of the factors considered by the Board, the Independent
Trustees and the Committee.
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 Fund's investment results; portfolio construction; portfolio
composition; portfolio trading practices; performance attribution; shareholder
services; the Advisor's views on the economy and capital markets; and other
information relating to the nature, extent and quality of services provided by
the Advisor and its affiliates to the Funds. In addition, in connection with its
annual consideration of the Agreements, the Board requests and reviews
supplementary information regarding the terms of the Agreements, the
Funds'investment results, advisory fee and total expense comparisons, financial
and profitability information regarding the Advisor and its affiliates,
descriptions of various functions undertaken by the Advisor, such as compliance
monitoring, and information about the personnel providing investment management
and administrative services to the Funds. The Board requested and evaluated
performance and expense information for other investment companies compiled by
Lipper Inc., a third-party data provider ("Lipper"). The Board, the Independent
Trustees and the Committee also considered information regarding "revenue
sharing" arrangements that the Advisor and its affiliates have entered into with
various intermediaries that sell shares of the Funds. The Board also requested
and reviewed information relating to other services provided to the Fund by the
Advisor and its affiliates under other agreements, including information
regarding so-called "fall-out" benefits to the Advisor and its affiliates due to
their other relationships with the Funds. The Board, the Independent Trustees
and the Committee also received and reviewed comparative performance information
regarding the Funds at each of the quarterly Board and Committee meetings.
NATURE, EXTENT AND QUALITY OF SERVICES:
Nature and Extent of Services -- In considering the approval of the Agreements,
the Board, the Independent Trustees and the Committee evaluated the nature and
extent of the services provided by the Advisor, its affiliates and the
sub-advisors. For each Fund, the Advisor or the relevant sub-advisor, as
applicable, formulates the Fund's investment policies (subject to the terms of
the prospectus), analyzes economic trends and capital market developments,
evaluates the risk/return characteristics of the Fund, constructs the Fund's
portfolio, monitors the Fund's investment performance, and reports to the Board,
the Independent Trustees and the Committee. Capital Guardian provides
sub-advisory services to the VT International Growth Fund. Salomon provides
sub-advisory services to the VT Growth Fund. The Board, the Independent Trustees
and the Committee considered information concerning the investment philosophy
and investment process used by the Advisor and the sub-advisors in managing the
Funds. In this context, the Board, the Independent Trustees and the Committee
considered the in-house research capabilities of the Advisor and the
sub-advisors as well as other sources available to the Advisor and the
sub-advisors, including research services available to the Advisor and the
sub-advisors as a result of securities transactions effected for the Funds and
other investment advisory clients
104
Supplemental Information (unaudited) (continued)
WM VARIABLE TRUST
of the Advisor and the sub-advisors. The Board, the Independent Trustees and the
Committee considered the managerial and financial resources available to the
Advisor and the sub-advisors and concluded that they would be sufficient to meet
any reasonably foreseeable obligations under the Agreements. The Board, the
Independent Trustees and the Committee noted that the standard of care under the
Agreements was comparable to that found in many investment advisory agreements,
and considered the record of the Advisor in resolving potential disputes arising
under its investment advisory agreement with the WM Group of Funds in the best
interests of shareholders.
Quality of Services -- The Board, the Independent Trustees and the Committee
considered the quality of the services provided by the Advisor and the
sub-advisors and the quality of their resources that are available to the Funds.
The Board, the Independent Trustees and the Committee considered the investment
experience and professional qualifications of the personnel of the Advisor, its
affiliates and the sub-advisors, and the size and functions of their staffs as
well as the reputation of the Advisor and the sub-advisors. The Board, the
Independent Trustees and the Committee considered the complexity of managing the
Funds relative to other types of funds. The Board, the Independent Trustees and
the Committee also received and reviewed information regarding the quality of
non-investment advisory services provided to the Funds by the Advisor and its
affiliates under other agreements.
The Board, the Independent Trustees and the Committee concluded that the
services provided by the Advisor and the sub-advisors have benefited and should
continue to benefit the Funds and its shareholders. The Board, the Independent
Trustees and the Committee concluded that the investment philosophies,
processes, and research capabilities of the Advisor and the sub-advisors were
well-suited to the Funds, given their investment objectives and policies. The
Board, the Independent Trustees and the Committee concluded that the scope of
the services provided to the Funds by the Advisor, its affiliates and the
sub-advisors were consistent with the Funds'operational requirements, including,
in addition to its investment objectives, compliance with the Funds'investment
restrictions, tax and reporting requirements and related shareholder services.
The Board, the Independent Trustees and the Committee concluded that the nature,
scope and quality of the services provided by the Advisor, its affiliates and
the sub-advisors were sufficient, in light of the resources dedicated by the
Advisor and the sub-advisors and their integrity, personnel, systems and
financial resources, to merit approval of the Agreements.
PORTFOLIO MANAGEMENT SERVICES AND PERFORMANCE:
In their evaluation of the quality of the portfolio management services provided
by the Advisor and the sub-advisors, the Board, the Independent Trustees and the
Committee considered the professional credentials and investment experience of
the Funds' portfolio managers. The Board and the Independent Trustees considered
whether the Funds operated within their investment objectives and their record
of compliance with investment restrictions. The Board, the Independent Trustees
and the Committee reviewed information comparing the Funds'historical
performance to relevant market indices for the 1-, 3- and 5-year periods ended
June 30, 2005, with respect to Salomon, and September 30, 2005, with respect to
Capital Guardian, and to performance information for other investment companies
with similar investment objectives over the 1-, 3-, 5-, 10-year and since
inception periods, derived from data compiled by Lipper. The Board, the
Independent Trustees and the Committee concluded that the Advisor's and the
sub-advisors'performance record and investment processes used in managing the
Funds were sufficient to merit approval of the Agreements.
MANAGEMENT FEES AND EXPENSES:
The Board, the Independent Trustees and the Committee reviewed information,
including comparative information provided by Lipper, regarding the advisory,
transfer agent, and service and distribution fees paid to the Advisor, its
affiliates and the sub-advisors, and the total expenses borne by the Funds. The
Board, the Independent Trustees and the Committee reviewed the transfer agency
fees paid by the Funds to WM Shareholder Services, Inc. (the "Transfer Agent"),
an affiliate of the Advisor, as well as the distribution (12b-1) fees paid to
the Distributor. They considered the Funds'management fees relative to their
respective peer group as determined by Lipper. The Board, the Independent
Trustees and the Investment Committee considered the fees paid to the Advisor by
other clients, and the services provided to such clients relative to the fees
paid by, and services provided to, the Funds. The Board, the Independent
Trustees and the Committee concluded that the fees to be charged under the
Agreements bore a reasonable relationship to the scope and quality of the
services provided.
PROFITABILITY AND ECONOMIES OF SCALE:
Profitability -- The Board, the Independent Trustees and the Committee reviewed
information regarding the cost of services provided by the Advisor and its
affiliates and the profitability (before and after distribution expenses and
prior to taxes) of the Advisor's relationship with the Funds. 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
105
Supplemental Information (unaudited) (continued)
WM VARIABLE TRUST
services to the Funds (and in connection therewith reviewed and considered
changes in the structure of compensation of the investment professionals of the
Advisor including a change in the performance-based component of the
compensation and the introduction of options and restricted stock rather than
vesting periods for cash bonuses) and that maintaining the financial viability
of the Advisor is important in order for it to continue to provide significant
services to the Funds and its shareholders. The Board, the Independent Trustees
and the Committee considered the impact of previously-negotiated fee reductions
on the profitability of the Advisor and the year-to-year trends in
pre-distribution margins for the Advisor over a four-year period in which
complex-wide assets more than doubled. The Board, the Independent Trustees and
the Committee considered various breakpoint schedules and reviewed a graph
showing the effective fees for the Advisor at different 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 relationships with the Funds, including compensation paid to the
Advisor and its affiliates, including transfer agency fees to the Transfer Agent
and 12b-1 fees to the Distributor as well as research provided to the Advisor in
connection with portfolio transactions effected on behalf of the Funds (soft
dollar arrangements), and reputational benefits. The Trustees considered the
fact that the structure of breakpoints for the Advisor's fees and the fees of
the sub-advisors for Funds with multiple sub-advisors was such that, assuming
relatively equal allocation of Fund assets among all sub-advisors, the Advisor's
fee would be reduced by breakpoints at lower asset levels than those at which
the Advisor might benefit from breakpoints in the fees of the sub-advisors. The
Trustees did not evaluate the profitability to the sub-advisors of their
relationships with the Fund because they concluded that negotiations between the
Advisor and the sub-advisors had been entirely at arm's-length.
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 Funds and the current level of Funds assets in
relation to the breakpoints in the Funds'advisory fees. 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, and not only in respect of a single Fund. The Board,
the Independent Trustees and the Committee considered the savings for the Funds
that had been achieved due to breakpoints previously implemented as a result of
negotiations between the Advisor and the Board.
The Board, the Independent Trustees and the Committee concluded that the Funds'
cost structure was reasonable given the scope and quality of the services
provided to the Funds and that the Advisor was sharing any economies of scale
with the Funds and its shareholders.
ADDITIONAL CONSIDERATIONS:
The Board, the Independent Trustees and the Committee also considered possible
conflicts of interest associated with the provision of investment advisory
services by the Advisor to other clients and the fact that such clients of the
Advisor were then limited to those affiliated with AIG Asset Management and
Transamerica Life Insurance Company (representing approximately $5.5 billion and
$2.5 million in assets under management as of December 31, 2005, respectively).
The Trustees considered the procedures of the Advisor designed to fulfill its
fiduciary duties to advisory clients with respect to possible conflicts of
interest, including the codes of ethics, the integrity of the systems in place
to ensure compliance with the foregoing, and the record of the Advisor in these
matters. The Board, the Independent Trustees and the Committee also received and
considered information concerning procedures of the Advisor with respect to the
execution of portfolio transactions. In reviewing the Salomon Agreement, the
Trustees considered, among other things, representations by Salomon that,
subsequent to its acquisition by Legg Mason, Inc. there is not expected to be
any reduction in the nature, quality and extent of services provided to the VT
Growth Fund by Salomon; the fact that the substantive terms of the Salomon
Agreement, including the sub-advisory fees paid to Salomon, were not changing as
a result of the acquisition; and representations by Salomon that no changes were
expected in either the composition of the Salomon investment professionals who
would be providing services to the VT Growth Fund or the amount of time and
attention that would be devoted by such investment professionals to the VT
Growth Fund.
CONCLUSIONS:
Based on their review, including their consideration of each of the factors
referred to above, the Board, the Independent Trustees and the Committee
concluded that the Agreements, including the fees payable to the Advisor and the
sub-advisors, are fair and reasonable to the Funds and their shareholders given
the scope and quality of the services provided to the Funds and such other
considerations as the Trustees considered relevant in the exercise of their
reasonable business judgment and that approval of the Agreements was in the best
interests of the Funds and their shareholders. The Board and Independent
Trustees unanimously approved the Agreements.
106
Supplemental Information (unaudited) (continued)
WM VARIABLE TRUST
OTHER FUND INFORMATION
SPECIAL MEETING OF SHAREHOLDERS:
A special meeting of shareholders of the VT Growth Fund of the WM Variable Trust
was convened on October 27, 2005, at which shareholders approved the following:
A sub-advisory agreement for the Fund among the Fund, the Advisor and Salomon
Brothers Asset Management, Inc.
AFFIRMATIVE AGAINST ABSTAIN TOTAL
-------------- ------------- ------------- --------------
Voted Shares ............. 15,503,479.316 1,115,967.511 1,118,972.126 17,738,418.953
% of Outstanding Shares .. 86.953% 6.259% 6.277% 99.489%
% of Shares Voted ........ 87.401% 6.291% 6.308% 100.00%
To approve a policy allowing the Board of Trustees and the Advisor to appoint
sub-advisors and to approve amendments to sub-advisory agreements without
shareholder approval.
AFFIRMATIVE AGAINST ABSTAIN TOTAL
-------------- ------------- ----------- --------------
Voted Shares ............. 14,607,776.888 2,138,246.275 992,395.790 17,738,418.953
% of Outstanding Shares .. 81.930% 11.993% 5.566% 99.489%
% of Shares Voted ........ 82.351% 12.054% 5.595% 100.000%
TAX INFORMATION:
The following tax information for the fiscal year ended December 31, 2005 is
provided pursuant to the provisions of the Code.
The amounts of long term capital gains designated are as follows (in thousands):
NAME OF FUND
- ------------
VT REIT Fund. .............. $ 5,600
VT Equity Income Fund ...... 16,600
VT West Coast Equity Fund .. 3,200
VT Mid Cap Stock Fund ...... 10,775
VT Small Cap Value Fund .... 2,520
VT Income Fund ............. 112
Of each distribution made by the following Funds, these are the amounts which
may qualify for the dividends received deduction available to corporate
shareholders.
NAME OF FUND
- ------------
VT REIT Fund ............... 24.55%
VT Equity Income Fund ...... 100.00%
VT Growth & Income Fund .... 100.00%
VT West Coast Equity Fund .. 100.00%
VT Mid Cap Stock Fund ...... 100.00%
VT Growth Fund ............. 100.00%
VT Small Cap Value Fund .... 22.32%
If the Fund meets the requirements of Section 853 of the Code, the Fund may
elect to pass through to its shareholders credits for foreign taxes paid. The
total amount of income received by the VT International Growth Fund from sources
within foreign countries and possessions of the United States was $0.3170 per
share (representing a total of $2,358,025). The total amount of taxes paid to
such countries was $0.0283 per share (representing a total of $210,865).
SCHEDULES OF INVESTMENTS:
The Trust files its complete schedules of portfolio holdings with the Securities
and Exchange Commission ("SEC") for the first and third quarters of each fiscal
year on Form N-Q. The Trust's Form N-Q is available at http://www.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.
107
Supplemental Information (unaudited) (continued)
WM VARIABLE TRUST
PROXY VOTING INFORMATION:
The policies and procedures that the Trust uses to determine how to vote proxies
relating to portfolio securities held by the Fund are included in the Trust's
Statement of Additional Information which is available, without charge and upon
request, by calling 800-222-5852. Information regarding how the Fund voted
proxies relating to portfolio securities during the most recent twelve- month
period ended June 30 is available at http://www.wmgroupoffunds.com. This
information is also available at http://www.sec.gov.
TRUSTEES AND OFFICERS INFORMATION
NAME, AGE, AND ADDRESS(1) LENGTH OF PRINCIPAL OCCUPATION(S) OTHER DIRECTORSHIPS
OF NON-INTERESTED TRUSTEE(4) TIME SERVED(2) DURING PAST 5 YEARS HELD BY TRUSTEE
- ---------------------------- ------------------------- -------------------------------- --------------------------------------
Wayne L. Attwood, M.D. Composite Funds-11 years Retired doctor of internal None.
Age 76 WM Group of Funds-7 years medicine and gastroenterology.
(Retired February 2005)
Kristianne Blake Composite Funds-3 years CPAspecializing in personal Avista Corporation; Frank Russell
Age 51 WM Group of Funds-7 years financial and tax planning. Investment Company; Russell Investment
Funds.
Edmond R. Davis, Esq. Sierra Funds-8 years Partner at the law firm of Davis Braille Institute of America, Inc;
Age 77 WM Group of Funds-7 years & Whalen LLP. Prior thereto, Children's Bureau of Southern
partner at the law firm of California, Children's Bureau
Brobeck, Phlegar & Harrison, LLP. Foundation; Fifield Manors, Inc.
Carrol R. McGinnis Griffin Funds-3 years Private investor since 1994. Baptist Foundation of Texas; Concord
Age 62 WM Group of Funds-6 years Prior thereto, President and Trust Company.
Chief Operating Officer of
Transamerica Fund Management
Company.
Alfred E. Osborne, Jr., Ph.D. Sierra Funds-7 years Senior Associate Dean, University Nordstrom Inc.; K2, Inc.; First
Age 61 WM Group of Funds-7 years of California at Los Angeles Pacific Advisors'Funds, EMAK
Anderson Graduate School of Worldwide, Inc.; Member of Investment
Management, and Faculty Director Company Institute National Board of
of the Harold Price Center for Directors; Director of Independent
Entrepreneurial Studies, Directors Council and Member of
University of California at Los Communication & Education Committees.
Angeles.
Daniel L. Pavelich Composite Funds-1 year Retired Chairman and CEO of BDO Catalytic, Inc.; Vaagen Bros. Lumber,
Age 61 WM Group of Funds-7 years Seidman. Inc.
Jay Rockey Composite Funds-3 years Founder and Senior Counsel of The Downtown Seattle Association; WSU
Age 77 WM Group of Funds-7 years Rockey Company, now Rockey, Hill Foundation
& Knowlton.
Richard C. Yancey Composite Funds-23 years Retired Managing Director of AdMedia Partners Inc.; Czech and
(Lead Trustee) WM Group of Funds-7 years Dillon Reed & Co., an investment Slovak American Enterprise Fund
Age 79 bank now part of UBS.
NAME, AGE, AND ADDRESS(1) LENGTH OF PRINCIPAL OCCUPATION(S) OTHER DIRECTORSHIPS
OF INTERESTED TRUSTEE(3)(4) TIME SERVED(2) DURING PAST 5 YEARS HELD BY TRUSTEE
- --------------------------- -------------- ------------------- ---------------
Anne V. Farrell Composite Funds-4 years President Emeritus of the Seattle Washington Mutual, Inc.; Recreational
Age 70 WM Group of Funds-7 years Foundation. Equipment Inc.
Michael K. Murphy Composite Funds-3 years Chairman of CPM Development Washington Mutual, Inc.
Age 68 WM Group of Funds-7 years Corporation.
(Retired November 2005)
William G. Papesh, Composite Funds-9 years President and Director of the Member of Investment Company
(President and CEO) WM Group of Funds-7 years Advisor, Transfer Agent and Institute Board of Governors.
Age 62 Distributor.
108
Supplemental Information (unaudited) (continued)
WM VARIABLE TRUST
NAME, AGE, AND ADDRESS(1) POSITION(S) HELD WITH REGISTRANT & PRINCIPAL OCCUPATION(S)
OF OFFICER(4) LENGTH OF TIME SERVED DURING PAST 5 YEARS
- ------------------------- ----------------------------------- --------------------------------------------------------
Wendi B. Bernard Assistant Vice President and Assistant Vice President of the Advisor
Age 37 Secretary since 2003.
Jeffrey L. Lunzer, CPA First Vice President, Chief Financial First Vice President of the Advisor, Transfer Agent and
Age 44 Officer and Treasurer since 2003. Distributor. Prior to 2003, senior level positions at the
Columbia Funds and Columbia Management Company.
William G. Papesh President and CEO since 1987. Prior to President and Director of the Advisor. Senior Vice
Age 62 1987, other officer positions since 1972. President and Director of the Transfer Agent and
Distributor.
Gary J. Pokrzywinski Senior Vice President since 2004. First Senior Vice President and Director of the Advisor,
Age 44 Vice President since 2001. Prior to 2001, Transfer Agent and Distributor. Chief Investment Officer
Vice President since 1999. of the Advisor.
Debra Ramsey Senior Vice President since 2004. Senior Vice President and Director of the Advisor.
Age 52 President and Director of the Transfer Agent and
Distributor.
John T. West First Vice President, Secretary, Chief First Vice President of the Advisor, Transfer Agent and
Age 50 Compliance Officer and Anti-Money Distributor.
Laundering Compliance Officer since 2004.
Prior to 2004, various other officer
positions since 1993.
Randall L. Yoakum Senior Vice President since 2001. Prior to Senior Vice President and Chief Investment Strategist of
Age 46 2001, First Vice President since 1999. the Advisor.
Note: The Statement of Additional Information includes additional information
about Fund Trustees and Officers and is available, without charge, upon request
by calling 800-222-5852.
(1) The address for all Trustees and Officers is 1201 Third Avenue, 22nd Floor,
Seattle, WA, 98101.
(2) The Sierra Funds merged with the Composite Funds on March 23, 1998 to form
the WM Group of Funds. The Griffin Funds merged with the WM Group of Funds
on March 5, 1999.
(3) Trustees are considered interested due to their affiliation with Washington
Mutual, Inc.
(4) The Trustees and Officers serve in these capacities for the 40 Portfolios
and Funds in the Fund Complex. Each Trustee and officer shall hold the
indicated positions until his or her resignation, retirement or removal.
109
(WM VARIABALE TRUST LOGO)
Investment returns and unit value of an investment will fluctuate, and an
investor's units when redeemed may be worth more or less than their original
cost.
This annual report is published as general information for the shareholders of
the WM Variable Trust. This material is not authorized for distribution unless
preceded or accompanied by a current prospectus that includes more information
regarding the risk factors, expenses, policies, and objectives of the contract.
Investors should read the prospectus carefully before investing. To obtain an
additional prospectus, please call 800-222-5852.
The WM Variable Trust Funds are advised by WM Advisors, Inc. (WMAI). They are
available through variable insurance products distributed by WM Funds
Distributor, Inc. (WMFD) and sold through WM Financial Services, Inc. (WMFS) and
independent broker/ dealers. WMAI, WMFD, and WMFS are affiliates of Washington
Mutual, Inc.
Distributed by:
WM Funds Distributor, Inc.
Member NASD
(WM VARIABALE TRUST LOGO)
WM Funds Distributor, Inc.
1100 Investment Blvd., Suite 200
El Dorado Hills, CA 95762
PRSRT STD U.S. Postage PAID Permit 2310 Sacramento, CA
(WM VARIABLE TRUST LOGO)
WM VT STRATEGIC ASSET MANAGEMENT PORTFOLIOS
(ANNUAL REPORT COVER GRAPHIC)
ANNUAL REPORT
DECEMBER 31, 2005
WM VT 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.
(ANNUAL REPORT GRAPHIC)
Table of Contents
1 Letter from the President
2 Economy & Financial Markets: Review & Outlook
4 Asset Allocation: A Key to Successful Investing
6 Our SAM Process and Asset Allocation Team
WM VT SAM Portfolio Performance
and Investment Strategy:
8 VT Flexible Income Portfolio
10 VT Conservative Balanced Portfolio
12 VT Balanced Portfolio
14 VT Conservative Growth Portfolio
16 VT Strategic Growth Portfolio
18 Glossary
19 Expense Information
21 Financial Statements
36 Notes to Financial Statements
41 Report of Independent Registered Public Accounting Firm
42 Supplemental Information
The WM Variable Trust (VT) Funds may not be purchased directly, but are
currently available through the WM Strategic Asset Manager and the WM Advantage
variable annuities issued by American General Life. They are also available
through the WM Diversified Strategies and WM Diversified Strategies(III)
variable annuities issued by AIG SunAmerica Life Assurance Company, the WM
Diversified Strategies(III) (New York) variable annuity issued by First
SunAmerica Life Insurance Company, and the WM Life Accumulator variable
universal life insurance policy issued by Farmers New World Life Insurance
Company. They may also be available through other select variable insurance
products and retirement plans. The VT SAM Portfolios may not have been available
for sale for all products for the time periods shown on pages 8-17.
Withdrawals made prior to age 59 1/2 may be subject to a 10% IRS tax penalty.
NOT FDIC OR NCUA/NCUSIF INSURED
MAY LOSE VALUE - NOT A DEPOSIT - NO BANK OR CREDIT UNION GUARANTEE - NOT INSURED
BY ANY FEDERAL GOVERNMENT AGENCY
Dear Investor,
(PHOTO OF WILLIAM G. PAPESH)
During the past fiscal year, our nation and the world endured much
uncertainty--and unfortunately, much tragedy. From the aftermath of the Asian
tsunami to Hurricane Katrina and the threat of the avian flu virus, Mother
Nature has once again proven that her fury can rise at any time, and with deadly
effect. Meanwhile, the ongoing wars in Iraq and Afghanistan offer us a sobering
reminder of the sacrifices made by our men and women in uniform. Still, our
nation and financial markets remain strong--testaments to the American
character, and to the character of folks like you.
Despite recent adversities, both the equity and fixed-income markets provided
positive returns for the year ended December 31, 2005, with the S&P 500 rising
4.91% and the Lehman Brothers Aggregate Bond Index adding 2.43%.(1) We are
proud to note that against this backdrop, the WM Group of Funds continues to
grow. Over the last five years, our assets under management have increased by
138%, while industry assets have increased by 28%.(2) During this same period,
the stock market (as measured by the S&P 500) rose only 2.75%.
THE VALUE OF STAYING ACTIVE
In today's uncertain markets, some investors may try to limit their risk by
taking a passive investment approach--that is, building a portfolio based on
funds that track the performance of various indices. While passive investing may
be beneficial in some cases, we continue to believe strongly in the value of
active management in our WM VT Strategic Asset Management (SAM) Portfolios. In
our view, the power of active security selection can never be replaced by
indexing, pure and simple. Our VT SAM Portfolios also utilize tactical
reallocation, rather than quarterly rebalancing, because to us, reallocating
based on changing market conditions makes more sense than rebalancing to static
allocation targets. We believe active investing also offers several other
potential advantages, such as superior risk management and more flexible
portfolio construction. At the end of the day, we firmly believe that the
combined talents of our portfolio managers and analysts--along with our
disciplined investment philosophy and processes--can add value to an investor's
portfolio.
A PROUD HERITAGE
At the WM Group of Funds, we continue to take pride in our firm's core values of
honesty, trust, and integrity. We're proud that for 66 years, we've served our
shareholders with the principles that we believe have made the WM Group of Funds
as successful as it is today. Now more than ever, we remain committed to
bringing you the utmost in value and quality of service. And as always, we thank
you for your support.
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) Source: WM Group of Funds, ICI, and Ibbotson Associates. Figures are for
the five-year period ended 12/31/05 and reflect both net shareholder
purchases and fund performance. They are based on long-term assets only and
do not include money market funds.
(GRAPHIC) Economy & Financial Markets: Review & Outlook
ECONOMIC EXPANSION CONTINUES
The U.S. economy remained relatively strong during 2005 as low interest rates
and improving corporate profits helped maintain positive economic momentum. Real
estate activity, including construction and home sales, was especially robust
with low mortgage and refinancing rates continuing to spur demand.
Consumer confidence was relatively stable for much of the year, but it plummeted
in September and October due to the combined shocks of Hurricane Katrina,
soaring oil prices, and a weakening labor market. Consumer spending fell in
tandem as low approval ratings for the Bush administration and the ongoing wars
in Iraq and Afghanistan took their toll on the American psyche. Still, consumer
spending generally improved during the year, adding fuel to the growing economy.
As the economic expansion continued and oil prices rose sharply, consumer prices
(as measured by the Consumer Price Index) crept up, gaining 3.4% on a
year-over-year basis.
In an effort to contain inflation, the Federal Reserve (the Fed) raised the
federal funds target rate to 4.25% during the period, an increase of two full
percentage points from the close of 2004. Against this backdrop, short-term
interest rates rose dramatically, while long-term rates rose more modestly. As a
result, the yield curve (the difference in yields between 2- and 10-year U.S.
Treasury issues) flattened substantially--often an indication that economic
activity may slow in the near- to mid-term.
BONDS GAIN MODESTLY
Within this environment, the bond market (as measured by the Lehman Brothers
Aggregate Bond Index) gained modestly, rising 2.43% for the period. * Yields on
10-year Treasury notes were fairly volatile, trading below 4.00% in February to
above 4.6% in November before closing the year at 4.39%. Generally, Treasuries
outperformed investment-grade corporate issues. High-yield issues gained 2.74%
(as measured by the Lehman Brothers High Yield Index). * Despite the increase in
short-term rates, many investors were willing to take on additional credit risk
given the strength of corporate balance sheets and the general economic
recovery.
This economic and financial market analysis represents the opinions of WM
Advisors. It should not be considered as investment advice. No forecast based on
the opinions expressed can be guaranteed, and they may be subject to change
without notice.
* Indices are unmanaged, and individuals cannot invest directly in an index.
MAJOR MARKET EVENTS JANUARY 1, 2005 - DECEMBER 31, 2005
(PERFORMANCE GRAPH)
Source: Bloomberg L.P. (S&P 500 data).
2
STOCKS RISE DESPITE FED TIGHTENING, OIL PRICES
In spite of the twin headwinds of rising short-term interest rates and high
energy costs, stocks gained nicely for the year, with the S&P 500 rising 4.91%.
* Stocks began the year fueled by optimism that Republican-backed tax cuts and
generous government spending would continue to spark the economy. However, the
S&P 500 declined during the spring before rebounding late in the year (see chart
below). Within S&P 500 sectors, energy and utilities were the clear winners,
advancing 31.37% and 16.84%, respectively, on the back of high oil and natural
gas prices. Lagging sectors included consumer discretionaries (-6.36%) and
telecommunication services (-5.63%).
INVESTMENT OUTLOOK
Looking forward, we anticipate moderate, weaker-than-consensus economic growth
and subdued, lower-than-consensus inflation over the next fiscal year. The
housing market appears set for a slowdown, and consumer spending may be
adversely affected by higher rates for home equity loans. We believe that
long-term interest rates will fall to the 3%-4% range, while the Fed will likely
stop its monetary tightening campaign relatively early in 2006. In this
scenario, we would expect mortgage-backed securities to offer a better relative
value than corporate bonds, and that high-yield issues will continue to
outperform. Equities appear fairly valued, with international stocks more
attractive than U.S. holdings. We expect large-cap equities to outperform
small-cap equities and growth to outperform value.
Importantly, we anticipate an alignment between cyclical (short-term) and
secular (long-term) economic trends over the coming fiscal year. On the cyclical
side, we believe that Fed policy will put pressure on consumer and business
confidence, and that energy prices will remain high. On the secular side, we
believe that the aging of U.S., European, and Japanese populations will
continue to temper global demand, while excess supply will limit pricing power.
While we expect that these forces will combine to produce slower economic
growth, we believe that the likely halt in Fed tightening will ultimately offer
investors reasonably strong buying opportunities, particularly in the equity
space.
(PERFORMANCE GRAPH)
3
WM GROUP OF FUNDS
S&P 500 DAILY PRICES (PRICE APPRECIATION INDEX, REINVESTED DIVIDENDS ARE
EXCLUDED)
SOURCE: BLOOMBERG (ADVISORS IN SEATTLE)
1/1/2005 -- 12/31/2005
SPX INDEX
DATE PX LAST
---- -------
1/3/2005 1202.08
1/4/2005 1188.05
1/5/2005 1183.74
1/6/2005 1187.89
1/7/2005 1186.19
1/10/2005 1190.25
1/11/2005 1182.99
1/12/2005 1187.7
1/13/2005 1177.45
1/14/2005 1184.52
1/18/2005 1195.98
1/19/2005 1184.63
1/20/2005 1175.41
1/21/2005 1167.87
1/24/2005 1163.75
1/25/2005 1168.41
1/26/2005 1174.07
1/27/2005 1174.55
1/28/2005 1171.36 Advance estimates of real GDP show rise of 3.1%
(annualized) for 4th quarter '04. Later revised to 3.8%.
1/31/2005 1181.27
2/1/2005 1189.41
2/2/2005 1193.19 Fed raises rates by 1/4 point to 2.50%.
2/3/2005 1189.89
2/4/2005 1203.03
2/7/2005 1201.72
2/8/2005 1202.3
2/9/2005 1191.99
2/10/2005 1197.01
2/11/2005 1205.3
2/14/2005 1206.14
2/15/2005 1210.12
2/16/2005 1210.34
2/17/2005 1200.75
2/18/2005 1201.59
2/22/2005 1184.16 Oil prices close above $50 per barrel for first time since
2/23/2005 1190.8 Nov. '04.
2/24/2005 1200.2
2/25/2005 1211.37
2/28/2005 1203.6
3/1/2005 1210.41
3/2/2005 1210.08
3/3/2005 1210.47 Labor Dept. revises '04 worker productivity data to show
rise of 4.0% for the year. This sets the average gain for
the 3-year period at 4.3%, the strongest 3-year result on
record.
3/4/2005 1222.12
3/7/2005 1225.31
3/8/2005 1219.43
3/9/2005 1207.01
3/10/2005 1209.25
3/11/2005 1200.08
3/14/2005 1206.83
3/15/2005 1197.75
3/16/2005 1188.07 Commerce Dept. reports U.S. trade deficit climbed to
record $665.9 billion in '04.
3/17/2005 1190.21
VTAnnualRptSP500DailyValues(2005-12)
3/18/2005 1189.65
3/21/2005 1183.78
3/22/2005 1171.71 Fed raises rates by 1/4 point to 2.75%.
3/23/2005 1172.53
3/24/2005 1171.42
3/28/2005 1174.28
3/29/2005 1165.36
3/30/2005 1181.41
3/31/2005 1180.59
4/1/2005 1172.92
4/4/2005 1176.12
4/5/2005 1181.39
4/6/2005 1184.07
4/7/2005 1191.14
4/8/2005 1181.2
4/11/2005 1181.21
4/12/2005 1187.76
4/13/2005 1173.79
4/14/2005 1162.05
4/15/2005 1142.62
4/18/2005 1145.98
4/19/2005 1152.78
4/20/2005 1137.5
4/21/2005 1159.95
4/22/2005 1152.12
4/25/2005 1162.1
4/26/2005 1151.74
4/27/2005 1156.38
4/28/2005 1143.22 Advance estimates of real GDP show rise of 3.1%
(annualized) for 1st quarter '05. Later revised to 3.8%.
4/29/2005 1156.85
5/2/2005 1162.16
5/3/2005 1161.17 Fed raises rates by 1/4 point to 3.00%.
5/4/2005 1175.65
5/5/2005 1172.63
5/6/2005 1171.35
5/9/2005 1178.84
5/10/2005 1166.22
5/11/2005 1171.11
5/12/2005 1159.36
5/13/2005 1154.05
5/16/2005 1165.69
5/17/2005 1173.8
5/18/2005 1185.56
5/19/2005 1191.08
5/20/2005 1189.28
5/23/2005 1193.86
5/24/2005 1194.07
5/25/2005 1190.01
5/26/2005 1197.62
5/27/2005 1198.78
5/31/2005 1191.5 The euro weakens against the U. S. dollar after French and
6/1/2005 1202.22 Dutch voters reject proposed EU constitution.
6/2/2005 1204.29
6/3/2005 1196.02
6/6/2005 1197.51
6/7/2005 1197.26
6/8/2005 1194.67
6/9/2005 1200.93
6/10/2005 1198.11
VTAnnualRptSP500DailyValues(2005-12)
6/13/2005 1200.82
6/14/2005 1203.91
6/15/2005 1206.58
6/16/2005 1210.96
6/17/2005 1216.96
6/20/2005 1216.1
6/21/2005 1213.61
6/22/2005 1213.88
6/23/2005 1200.73
6/24/2005 1191.57
6/27/2005 1190.69 Oil prices close above nominal record of $60 per barrel.
6/28/2005 1201.57
6/29/2005 1199.85
6/30/2005 1191.33 Fed raises rates by 1/4 point to 3.25%.
7/1/2005 1194.44
7/5/2005 1204.99
7/6/2005 1194.94
7/7/2005 1197.87 Four suicide bombers attack London subway and bus targets
during morning rush hour.
7/8/2005 1211.86
7/11/2005 1219.44
7/12/2005 1222.21
7/13/2005 1223.29
7/14/2005 1226.5
7/15/2005 1227.92
7/18/2005 1221.13
7/19/2005 1229.35
7/20/2005 1235.2
7/21/2005 1227.04 China revalues its currency by removing decade- old peg to
the U.S. dollar.
7/22/2005 1233.68
7/25/2005 1229.03
7/26/2005 1231.16
7/27/2005 1236.79
7/28/2005 1243.72
7/29/2005 1234.18 Advance estimates of real GDP show rise of 3.4%
(annualized) for 2nd quarter '05. Later revised to 3.3%.
8/1/2005 1235.35
8/2/2005 1244.12
8/3/2005 1245.04 U.S. Treasury announces that it will resume selling
30-year bonds in early '06.
8/4/2005 1235.86
8/5/2005 1226.42
8/8/2005 1223.13
8/9/2005 1231.38 Fed raises rates by 1/4 point to 3.50%.
8/10/2005 1229.13
8/11/2005 1237.81
8/12/2005 1230.39
8/15/2005 1233.87
8/16/2005 1219.34
8/17/2005 1220.24
8/18/2005 1219.02
8/19/2005 1219.71
8/22/2005 1221.73
8/23/2005 1217.57
8/24/2005 1209.59
8/25/2005 1212.39
8/26/2005 1205.1
8/29/2005 1212.28 Hurricane Katrina hits U.S. Gulf Coast. New Orleans
sustains catastrophic flood damage after levees break.
8/30/2005 1208.41
8/31/2005 1220.33
9/1/2005 1221.59 Hurricane damage to Gulf region refineries and pipelines
causes spike in gas prices.
9/2/2005 1218.02
VTAnnualRptSP500DailyValues(2005-12)
9/6/2005 1233.39
9/7/2005 1236.36
9/8/2005 1231.67
9/9/2005 1241.48
9/12/2005 1240.56
9/13/2005 1231.2
9/14/2005 1227.16
9/15/2005 1227.73
9/16/2005 1237.91
9/19/2005 1231.02
9/20/2005 1221.34 Fed raises rates by 1/4 point to 3.75%.
9/21/2005 1210.2
9/22/2005 1214.62
9/23/2005 1215.29
9/26/2005 1215.63
9/27/2005 1215.66
9/28/2005 1216.89
9/29/2005 1227.68
9/30/2005 1228.81
10/3/2005 1226.7
10/4/2005 1214.47
10/5/2005 1196.39
10/6/2005 1191.49
10/7/2005 1195.9
10/10/2005 1187.33
10/11/2005 1184.87
10/12/2005 1177.68
10/13/2005 1176.84
10/14/2005 1186.57
10/17/2005 1190.1
10/18/2005 1178.14
10/19/2005 1195.76
10/20/2005 1177.8
10/21/2005 1179.59
10/24/2005 1199.38 Ben Bernanke is nominated to succeed Alan Greenspan as
chairman of the Federal Reserve.
10/25/2005 1196.54
10/26/2005 1191.38
10/27/2005 1178.9
10/28/2005 1198.41 Advance estimates of real GDP show rise of 3.8%
(annualized) for 3rd quarter '05. Later revised to 4.1%.
10/31/2005 1207.01
11/1/2005 1202.76 Fed raises rates by 1/4 point to 4.00%.
11/2/2005 1214.76
11/3/2005 1219.94
11/4/2005 1220.14
11/7/2005 1222.81
11/8/2005 1218.59
11/9/2005 1220.65
11/10/2005 1230.96
11/11/2005 1234.72
11/14/2005 1233.76
11/15/2005 1229.01
11/16/2005 1231.21
11/17/2005 1242.8
11/18/2005 1248.27
11/21/2005 1254.85
11/22/2005 1261.23
11/23/2005 1265.61
11/25/2005 1268.25
11/28/2005 1257.46
VTAnnualRptSP500DailyValues(2005-12)
11/29/2005 1257.48
11/30/2005 1249.48
12/1/2005 1264.67
12/2/2005 1265.08
12/5/2005 1262.09
12/6/2005 1263.7
12/7/2005 1257.37
12/8/2005 1255.84
12/9/2005 1259.37
12/12/2005 1260.43
12/13/2005 1267.43 Fed raises rates by 1/4 point to 4.25%.
12/14/2005 1272.74
12/15/2005 1270.94
12/16/2005 1267.32
12/19/2005 1259.92
12/20/2005 1259.62
12/21/2005 1262.79
12/22/2005 1268.12
12/23/2005 1268.66
12/27/2005 1256.54
12/28/2005 1258.17
12/29/2005 1254.42
12/30/2005 1248.29 S&P 500 closes the year at 1248.29.
VTAnnualRptSP500DailyValues(2005-12)
(GRAPHIC) Asset Allocation: A Key to Successful Investing
Asset allocation is widely recognized as being a critical element in the
financial planning process. Investment representatives generally use asset
allocation to help cushion client portfolios from market volatility and reduce
overall risk levels. Studies have also shown that historically, asset allocation
has been responsible for more than 90% of the variability of a portfolio's
return. * In other words, the asset class you choose--for example, stocks,
bonds, or cash--can be more important than the individual securities you select.
WHAT IS ASSET ALLOCATION?
When many people hear the term "asset allocation," they think of an efficient
frontier diagram and the work of a pioneering economist, Harry Markowitz. As a
25-year-old student at the University of Chicago in the early 1950s, Markowitz
needed a thesis topic. In a chance meeting, a stock broker suggested that he
investigate the stock market. Conventional wisdom at that time suggested that
investors should select stocks with the highest expected return without taking
risk into account.
Markowitz recognized that this approach neglected a key part of the investment
equation. The concept of risk was identified as early as 1654 in the work of
French mathematician Blaise Pascal, who worked on a system to determine
probabilities related to gambling. The concept of risk probability was then
studied by British astronomer Edmund Halley, who in 1690 applied it to mortality
tables. Halley's work was later used to help sell annuities and insure sailing
vessels and their cargoes, which eventually led to the founding of Lloyd's of
London.
But it was Markowitz who first rigorously applied the concept of risk to stock
portfolios in his 1952 essay "Portfolio Selection. "His research found that
diversification is measurably beneficial, and that pairing risky and less risky
assets can actually lower portfolio volatility while simultaneously enhancing
potential returns. Markowitz's early work laid the foundation for more
sophisticated statistical concepts such as mean variance optimization, which
became integral to modern portfolio theory.
THE ALLOCATION PROCESS
While the term "asset allocation" is widely used to describe an investment
strategy, we believe it is actually a process. Most investment representatives
today use asset allocation as part of an overall approach that involves
identifying
(PERFORMANCE GRAPH)
A HISTORICAL PERSPECTIVE ON ASSET ALLOCATION
1600s
1607 British colony established at Jamestown, Virginia.
1625 Dutch West India Company founds New Amsterdam, which eventually
becomes New York City. "
1654 Blaise Pascal and Chevalier de Mere develop formulas on risk
management to settle gambling winnings.
1690 Edmund Halley, astronomer, develops probability tables to determine
life expectancy. This work eventually leads to the creation of
Lloyd's of London.
1700s
1713 The first major treatise on probability, written by Jakob Bernoulli,
is published posthumously.
1733 Abraham de Moivre discovers the concept of the bell-shaped curve to
determine probability distribution.
1754-1763 French and Indian War
1775-1783 American Revolutionary War
1790 First U.S. stock exchange established in Philadelphia.
1800s
1812 First U.S. Treasury notes issued.
1830 Prudent Man Rule rendered by Judge Samuel Putnam.
1846-1848 Mexican-American War
1861-1865 American Civil War
1877 Sir Francis Galton, cousin of Charles Darwin, proposes "Theory of
Regression to the Mean.
1890 Sherman Antitrust Act passed.
4
a client's current investments, risk tolerance, portfolio construction, and
asset selection, as well as measuring performance.
IN PRACTICE, ASSET ALLOCATION IS OFTEN A MULTISTEP PROCESS:
- - Classifying an investor's current investments into their respective asset
classes.
- - Creating forecasts for each asset class and building a set of model
portfolios arranged along a spectrum of risk, often from conservative to
aggressive.
- - Determining important specific information about the client including their
risk tolerance, time horizon, and tax situation.
- - Recommending the actual asset class allocation to the client, primarily
based on their risk tolerance.
LOOKING AHEAD
The most time-consuming and analytical element of this process centers on asset
allocation modeling. This process involves analyzing hundreds of variables, such
as long- and short-term economic forecasts; expected returns for different
equity styles, sectors, and capitalizations; standard deviations; as well as
bond ratings and maturity structures. Each portfolio combination is then tested
for risk and return characteristics. But that is not the end of the process.
These multi-asset portfolios are then monitored and adjusted in response to
market conditions. Some asset allocation programs make adjustments at specific
intervals (monthly or quarterly) back to a predetermined static allocation. At
WM Advisors, we reevaluate asset allocations and reallocate assets daily using a
forward-looking process based on a longer-term allocation target. WM uses this
strategy to construct and monitor its VT Strategic Asset Management (SAM)
Portfolios for investors on a daily basis.
Yet even as this new work continues, one thing remains clear:asset allocation
will continue to be the foundation for many successful investment portfolios.
Note: Asset allocation does not guarantee a profit or protect against a loss.
* Gary P. Brinson, Brian D. Singer, and Gilbert L. Beebower, "Determinants of
Portfolio Performance II: An Update," Financial Analysts Journal,
May/June, 1991. See also Gary P. Brinson, L. Randolph Hood, and Gilbert L.
Beebower, "Determinants of Portfolio Performance, " Financial Analysts
Journal, July/August, 1986.
(PERFORMANCE GRAPH)
1900s
1913 Federal Reserve Act passed.
1914-1918 World War I
1919 Richard von Mises publishes paper on probability theory as applied
to mass phenomena.
1929 Black Tuesday crash of New York Stock Exchange
1933 Glass-Steagall Act passed.
1934 Benjamin Graham and modern portfolio theory. David Dodd publish
"Security Analysis."
1934 Securities Exchange Act passed.
1935 Social Security Act passed.
1938 First stock market index created by Alfred Cowles. This index later
becomes the S&P 500.
1939-1945 World War II
1940 Investment Company Act passed.
1950-1953 Korean War
1952 Harry Markowitz publishes "Portfolio Selection, " which describes
the efficient frontier concept. This essay is considered the basis
for modern portfolio theory.
1962 Cuban Missile Crisis
1964-1973 Vietnam War (U.S. involvement)
1976 Roger Ibbotson and Rex Sinquefield publish "Stocks, Bonds, Bills,
and Inflation.
1979-1981 Iran Hostage Crisis
1986 Gary Brinson, L. R. Hood, and Gilbert Beebower publish "Determinants
of Portfolio Performance," which studies the importance of various
return components.
1987 Black Monday plunge in Dow Jones Industrial Average.
1990 WM Strategic Asset Management (SAM) Portfolios launched as
separately managed accounts.
1991 Operation Desert Storm
1996 WM SAM Portfolios become registered mutual funds.
2000s
2001 Attacks on World Trade Center and Pentagon.
2003-
PRESENT Operation Iraqi Freedom
2005 WM SAM Portfolios have $11.8 billion in retail assets under
management.**
**As of 12/31/05.
5
(GRAPHIC) Our SAM Process and Asset Allocation Team
OUR 3-STEP PROCESS FOR ACTIVE ASSET ALLOCATION
THE WM VT STRATEGIC ASSET MANAGEMENT (SAM) PORTFOLIOS ARE FUND-OF-FUNDS
INVESTMENTS--MUTUAL FUNDS THAT INVEST IN OTHER MUTUAL FUNDS WITHIN THE WM GROUP
OF FUNDS FAMILY. THE PORTFOLIOS ARE CONSTRUCTED AND MANAGED ACCORDING TO A
HIGHLY DISCIPLINED AND DYNAMIC PROCESS:
STEP 1:
SETTING LONG-TERM ASSET ALLOCATION TARGETS FOR EACH PORTFOLIO.
Extensive research into risk and asset classes forms the basis for strategic
decisions about each Portfolio's long-term asset allocation policies. This
research involves analyzing historical and projected risk, return, and
correlation between asset classes. The results help position the Portfolios to
maximize the potential for returns at their assigned risk level.
WM ADVISORS
Asset Allocation Team
(PHOTO OF RANDALL L. YOAKUM)
RANDALL L. YOAKUM, CFA
Chief Investment Strategist and Senior
Co-Portfolio Manager of the VT SAM Portfolios
Randy currently serves as chairman of the Asset Allocation Team and works
closely with Mike Meighan and Gary Pokrzywinski to establish economic strategy.
He was instrumental in developing the investment policies at WM Advisors from
1987 to 1994, as well as after rejoining the company in 1999. His investment
management experience dates back to 1984. He holds the Chartered Financial
Analyst designation and has a B.B.A. from Pacific Lutheran University and an
M.B.A. from Arizona State University.
(PHOTO OF MICHAEL D. MEIGHAN)
MICHAEL D. MEIGHAN, CFA
Senior Co-Portfolio Manager of the
VT SAM Portfolios
Mike oversees the Team analysts and works collaboratively with Randy and Gary to
develop the asset allocation and investment outlook for the Portfolios as well
as to formulate economic strategy. Mike has been instrumental in developing the
current investment policies for the Portfolios since joining WM Advisors in
1999. His investment management experience dates back to 1993. He holds the
Chartered Financial Analyst designation and has a B.S. from Santa Clara
University and an M.B.A. from Gonzaga University.
(PHOTO OF GARY J. POKRZYWINSKI)
GARY J. POKRZYWINSKI, CFA
Chief Investment Officer and
Senior Portfolio Manager
Gary helps develop the outlook and policy for the fixed-income assets within the
Portfolios. He is also instrumental in developing economic strategy with Randy
and Mike. Gary joined WM Advisors in 1992 and currently manages the WM High
Yield Fund and co-manages the WM VT Income Fund. He holds the Chartered
Financial Analyst designation and has a B.B.A. from the University of Wisconsin,
Milwaukee.
6
(GRAPHIC)
STEP 2:
DEVELOPING A NEAR-TERM INVESTMENT OUTLOOK THAT DETERMINES HOW MUCH RISK EACH
PORTFOLIO SHOULD TAKE.
Research into dozens of global and domestic market forces shapes the Asset
Allocation Team's outlook for the economy and capital markets. This view of
investment conditions determines the Team's tactical decisions about each
Portfolio's exact equity and fixed-income allocations. Here are just some of the
criteria tracked for this step:
Federal Reserve monetary policy
Consumer debt
Corporate profits
Elections
Employment trends
Consumer spending
Currency flows
Commodity prices
Yield spreads
Stock market volume
Capital goods expenditures
Historical asset class returns
Cyclical and secular economic trends
Volatility analysis
Consumer confidence
Government budget deficits
Tax policy
Demographic trends
Mortgage demand
Business spending
Inflationary pressures
Housing trends
GDP growth
Historical financial market returns
Inventories
Investor psychology
Technology trends
Risk/return characteristics
Stock valuations
State and federal fiscal policy
Trade pacts
Interest rate changes
Business confidence
Geopolitical risks
Wage and payroll trends
Investment flows
Import prices
Factory capacity utilization
Market capitalization relative values
Productivity growth
Asset class correlations
Business activity
Performance attribution by allocation and sector
STEP 3:
CONSTRUCTING EACH PORTFOLIO'S SPECIFIC MIX OF ASSET CLASSES.
The Team refines its tactical decisions by examining hundreds of possible
Portfolio compositions. Combinations of equity styles, sectors, and
capitalizations, as well as bond ratings and maturity structures, are analyzed
before each Portfolio is built.
CONTINUOUS ACTIVE MANAGEMENT
Once the Portfolios are constructed, the Team continually monitors and
reallocates them to take advantage of changing investment conditions--unlike
many funds of funds that are only periodically rebalanced to static models. We
also repeatedly test the Portfolios' structure by assessing how fund allocations
and holdings affect performance. This dynamic process works toward optimizing
the Portfolios for building long-term investment value.
(PHOTO OF CHARLES D. AVERILL)
CHARLES D. AVERILL, CFA
Senior Quantitative Analyst
Charlie is dedicated to the Asset Allocation Team as a Senior Quantitative
Analyst. His responsibilities include the ongoing analysis of both the current
and potential fund holdings, as well as the structural model underlying the
asset allocation process. To help examine the performance of the VT SAM
Portfolios' holdings, he also develops performance attribution procedures.
Charlie holds the Chartered Financial Analyst designation and has been with WM
Advisors since 1990. Before joining the firm, he taught economics at Gonzaga
University and worked as a newspaper editor. He holds a B.A. in Economics from
Reed College and an M.A. in Economics from Princeton University.
(PHOTO OF NICOLE VERBRUGGHE)
NICOLE VERBRUGGHE, CFA
Quantitative Analyst
Nicole works with the Asset Allocation Team as a Quantitative Analyst. She
gathers and analyzes economic data in order to track indicators that
specifically affect the VT SAM Portfolios. She continually reviews holdings and
performance characteristics of the underlying funds and assesses how the
weighting of each fund influences the Portfolios' investment policies and goals.
Nicole joined WM Advisors in 2001 and holds the Chartered Financial Analyst
designation. Before joining the Asset Allocation Team, Nicole worked for 12
years in financial accounting and analysis. She holds a B.A. in Mathematics from
Whitman College.
(PHOTO OF BRAD N. STEWART)
BRAD N. STEWART
Quantitative Analyst
As a Quantitative Analyst with the Asset Allocation Team, Brad is responsible
for gathering and analyzing economic data. He focuses on tracking indicators
that specifically affect the VT SAM Portfolios. Brad joined WM Advisors in 2005
and began his investment management career in 2002. He is a Level III Candidate
for the Chartered Financial Analyst designation. He holds a B.B.A. in Finance
from the University of Portland.
7
(GRAPHIC) VT Flexible Income Portfolio
ANNUAL TOTAL RETURNS (1)
Class 1 shares
(Calendar Year)
2005 3.41%
2004 6.47%
2003 13.30%
2002 2.14%
2001 4.84%
2000 5.79%
1999 8.58%
1998 11.75%
INVESTMENT STRATEGY
As of December 31, 2005, the WM VT Strategic Asset Management (SAM) Flexible
Income Portfolio was diversified among 12 funds representing 13 major asset
classes. The Portfolio held a 26%/74% equity-to-fixed-income ratio at the end of
the year.
Among all underlying WM VT fixed-income funds, the Portfolio benefited primarily
from the contribution of the WM VT U.S. Government Securities Fund, which
advanced mainly due to its holdings in mortgage agency bonds. The Portfolio also
gained from the contribution of the WM High Yield Fund. The Fund's holdings in
domestic corporate bonds and real estate investment trusts (REITs) were the
primary drivers of performance. The WM VT Income Fund also contributed
positively to Portfolio returns, as its holdings in domestic corporate bonds and
mortgage-backed securities gained for the period.
On the equity side, the Portfolio benefited primarily from the WM VT Growth
Fund. The Fund advanced due to its holdings in
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. Performance shown below does not account for fees,
expenses, and charges of any variable insurance contract or retirement plan. If
these fees were reflected, performance would be lower.
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) AS OF DECEMBER 31, 2005
1-Year 5-Year Since Inception Inception Date
------ ------ --------------- --------------
CLASS 1 SHARES 3.41% 5.96% 7.00% 9/9/97
CLASS 2 SHARES 3.09% -- 5.85% 11/6/01
Lehman Brothers Aggregate Bond Index(2) 2.43% 5.87% 6.36%
S&P 500(2) 4.91% 0.54% 5.62%
Capital Market Benchmark(2) 2.98% 5.02% 6.46%
VALUE OF A $10,000 INVESTMENT (1) SEPTEMBER 9, 1997 - DECEMBER 31, 2005
(PERFORMANCE GRAPH)
See Glossary on page 18 for definitions of indices and terms.
(1) Performance reflects ongoing expenses and assumes reinvestment of all
dividends and capital gains. It also reflects ongoing fund expenses paid by
the Portfolio's applicable Funds, which include the effects of expense
reimbursement. Performance does not reflect the impact of federal, state,
or municipal taxes. If it did, performance would be lower. The Portfolio's
performance between 1997 and 1999 benefited from the agreement of WM
Advisors and its affiliates to limit the Portfolio's expenses.
(2) Returns shown for the indices assume reinvestment of all dividends and
distributions, and since-inception returns shown for the indices are
calculated from 8/31/97. Indices are unmanaged, and individuals cannot
invest directly in an index.
8
WM GROUP OF FUNDS
VT ANNUAL REPORT UPDATE MATERIAL
PERFORMANCE NAV -- MOUNTAIN CHARTS (VALUE OF $10,000 INVESTMENT OVER 10-YEARS)
DATA AS OF 12/31/2005
CLASS 1 SHARES
10,000
VT FLEXIBLE
INCOME
DATE PORTFOLIO
---- -----------
Aug-97 10,000
Sep-97 10,110
Oct-97 10,110
Nov-97 10,140
Dec-97 10,231
Jan-98 10,350
Feb-98 10,541
Mar-98 10,650
Apr-98 10,721
May-98 10,741
Jun-98 10,872
Jul-98 10,832
Aug-98 10,471
WM GROUP OF FUNDS
VT ANNUAL REPORT UPDATE MATERIAL
PERFORMANCE NAV -- MOUNTAIN CHARTS (VALUE OF $10,000 INVESTMENT OVER 10-YEARS)
DATA AS OF 12/31/2005
CLASS 1 SHARES
10,000
VT FLEXIBLE
INCOME
DATE PORTFOLIO
---- -----------
Sep-98 10,772
Oct-98 10,962
Nov-98 11,173
Dec-98 11,433
Jan-99 11,624
Feb-99 11,453
Mar-99 11,681
Apr-99 11,925
May-99 11,804
Jun-99 11,951
Jul-99 11,848
Aug-99 11,797
Sep-99 11,854
Oct-99 12,020
Nov-99 12,175
Dec-99 12,416
Jan-00 12,280
Feb-00 12,437
Mar-00 12,720
Apr-00 12,603
May-00 12,529
Jun-00 12,737
Jul-00 12,737
Aug-00 13,082
Sep-00 13,041
Oct-00 13,064
Nov-00 12,878
Dec-00 13,134
Jan-01 13,565
Feb-01 13,366
Mar-01 13,205
Apr-01 13,361
May-01 13,484
WM GROUP OF FUNDS
VT ANNUAL REPORT UPDATE MATERIAL
PERFORMANCE NAV -- MOUNTAIN CHARTS (VALUE OF $10,000 INVESTMENT OVER 10-YEARS)
DATA AS OF 12/31/2005
CLASS 1 SHARES
10,000
VT FLEXIBLE
INCOME
DATE PORTFOLIO
---- -----------
Jun-01 13,510
Jul-01 13,656
Aug-01 13,622
Sep-01 13,374
Oct-01 13,633
Nov-01 13,734
Dec-01 13,768
Jan-02 13,768
Feb-02 13,779
Mar-02 13,836
Apr-02 13,847
May-02 13,904
Jun-02 13,701
Jul-02 13,486
Aug-02 13,655
Sep-02 13,531
Oct-02 13,746
Nov-02 14,008
Dec-02 14,064
Jan-03 14,086
Feb-03 14,154
Mar-03 14,210
Apr-03 14,595
May-03 15,049
Jun-03 15,132
Jul-03 14,923
Aug-03 15,052
Sep-03 15,295
Oct-03 15,493
Nov-03 15,609
Dec-03 15,935
Jan-04 16,157
Feb-04 16,284
WM GROUP OF FUNDS
VT ANNUAL REPORT UPDATE MATERIAL
PERFORMANCE NAV -- MOUNTAIN CHARTS (VALUE OF $10,000 INVESTMENT OVER 10-YEARS)
DATA AS OF 12/31/2005
CLASS 1 SHARES
10,000
VT FLEXIBLE
INCOME
DATE PORTFOLIO
---- -----------
Mar-04 16,343
Apr-04 15,995
May-04 15,971
Jun-04 16,159
Jul-04 16,100
Aug-04 16,317
Sep-04 16,438
Oct-04 16,582
Nov-04 16,727
Dec-04 16,967
Jan-05 16,883
Feb-05 16,918
Mar-05 16,786
Apr-05 16,835
May-05 17,099
Jun-05 17,208
Jul-05 17,332
Aug-05 17,419
Sep-05 17,332
Oct-05 17,195
Nov-05 17,420
Dec-05 17,546
PORTFOLIO MANAGER (GRAPHIC)
Asset Allocation Team
WM Advisors, Inc.
technology and materials, while its holdings in consumer discretionaries
detracted from returns. The WM VT Mid Cap Stock Fund also contributed strongly
to the Portfolio's performance during the period. The Fund gained from its
holdings in financials, energy, and utilities, while its holdings in consumer
discretionaries and materials lagged on a relative basis.
During the year, the Portfolio increased its allocation to U.S. mid-cap growth
stocks in anticipation that they may outperform over the next market cycle. The
Portfolio also increased its allocation to mortgage- and asset-backed bonds,
while it reduced its exposure to investment-grade corporate bonds.
Looking forward, we anticipate that economic growth for 2006 will be weaker than
current consensus projections. We also believe that inflation will be more muted
than expected. The housing market appears to be slowing, which may make it more
difficult for consumers to secure low-interest home equity loans. This in turn
may negatively impact consumer spending. Given this combination of factors, we
believe the Federal Reserve will likely halt its monetary tightening campaign
relatively early in 2006. In this scenario, we believe that long-term interest
rates will fall to the 3%-4% range, but then stabilize. If long-term rates
stabilize, we would expect mortgage-backed securities to offer a better relative
value than corporate bonds and high-yield issues to continue to outperform.
Equities appear fairly valued, with growth stocks more attractive than value
holdings.
PORTFOLIO CHARACTERISTICS AS OF DECEMBER 31, 2005
Equity/Fixed-Income Allocation:(3) 26% Equity/74% Fixed-Income
Weighted Average Market Capitalization (equities): $61.3 billion
Weighted Average P/E (equities):(4) 16.9
Beta: 0.27
Portfolio Standard Deviation: 3.57
S&P 500 Standard Deviation: 10.43
Portfolio Turnover (for fiscal year):(5) 5%
Aggregate Portfolio Turnover (for fiscal year):(6) 39%
Number of Securities:(7) 1,350
Total Net Assets: $222.9 million
PORTFOLIO COMPOSITION(3)
As of As of
Asset Class 12/31/05 12/31/04 Change
- ----------- -------- -------- ------
Mortgage- & Asset-Backed Bonds 36% 34% +2%
Investment-Grade Corporate Bonds 21% 22% -1%
High-Yield Corporate Bonds 8% 8% 0%
U.S. Government Securities 6% 6% 0%
U.S. Large-Cap Growth Stocks 7% 7% 0%
U.S. Large-Cap Value Stocks 7% 7% 0%
U.S. Mid-Cap Growth Stocks 3% 2% +1%
Convertible Securities 2% 2% 0%
REITs 2% 2% 0%
U.S. Mid-Cap Value Stocks 2% 4% -2%
U.S. Small-Cap Growth Stocks 2% 1% +1%
U.S. Small-Cap Value Stocks 1% 1% 0%
Cash Equivalents 3% 4% -1%
(3) May not reflect the current portfolio composition.
(4) Based on estimated earnings.
(5) Does not reflect portfolio turnover of the underlying WM Funds.
(6) Aggregate portfolio turnover of the Portfolio and its underlying WM Funds
assumes a constant allocation by the Portfolio of its assets among the
underlying Funds identical to the actual allocation of the Portfolio on
12/31/05. The Portfolio's actual aggregate portfolio turnover may be
different as a result of changes in the allocation of its assets among the
underlying Funds, the portfolio turnover of the underlying Funds, and/or
the Portfolio's own portfolio turnover.
(7) Represents the sum of securities held by the underlying WM Funds. Some
securities may be held by more than one WM Fund.
Note: Pages 44 and 45 provide information about those WM Funds in which the VT
Flexible Income Portfolio invests a significant portion of its assets. For
additional information about these and other WM Funds, please see the WM
Variable Trust annual report, which is available online at wmgroupoffunds.com or
by calling 800-222-5852.
9
(GRAPHIC) VT Conservative Balanced Portfolio*
ANNUAL TOTAL RETURNS (1)
Class 1 shares
(Calendar Year)
2005 4.59%
2004 8.21%
2003 17.09%
2002 -2.26%
2001 2.40%
2000 5.03%
1999 1.88%
* As of 8/1/00, the VT Income Portfolio became the VT Conservative Balanced
Portfolio, and the Portfolio's objectives and strategies changed. This
information should be considered when reviewing past performance. Please
see the prospectus for detailed information.
INVESTMENT STRATEGY
As of December 31, 2005, the WM VT Strategic Asset Management (SAM) Conservative
Balanced Portfolio was diversified among 13 funds representing 14 major asset
classes. The Portfolio held a 44%/56% equity-to-fixed-income ratio at the end of
the year.
Among the underlying WM VT equity funds, the WM VT International Growth Fund
made a strong overall contribution to Portfolio performance for the period. The
Fund's holdings in Japanese equities and emerging market equities were the
primary drivers of performance. On the downside, the Fund's underweighting in
the energy sector detracted from returns. The Portfolio also benefited from the
contribution of the WM VT Equity Income Fund. The Fund's holdings in the energy,
financial, and health care sectors were particularly helpful. In contrast, the
Fund's holdings in the telecommunication services and consumer discretionary
sectors detracted from returns.
On the fixed-income side, the Portfolio benefited primarily from the
contribution of the
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. Performance shown below does not account for fees,
expenses, and charges of any variable insurance contract or retirement plan. If
these fees were reflected, performance would be lower.
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) AS OF DECEMBER 31, 2005
Since Inception
1-Year 5-Year Inception Date
------ ------ --------- ---------
CLASS 1 SHARES 4.59% 5.81% 5.22% 4/23/98
CLASS 2 SHARES 4.37% -- 6.49% 11/6/01
Lehman Brothers Aggregate Bond Index(2) 2.43% 5.87% 6.04%
S&P 500(2) 4.91% 0.54% 3.09%
Capital Market Benchmark(2) 3.51% 4.06% 5.23%
VALUE OF A $10,000 INVESTMENT (1) APRIL 23, 1998 - DECEMBER 31, 2005
(PERFORMANCE GRAPH)
See Glossary on page 18 for definitions of indices and terms.
(1) Performance reflects ongoing expenses and assumes reinvestment of all
dividends and capital gains. It also reflects ongoing fund expenses paid by
the Portfolio's applicable Funds, which include the effects of expense
reimbursement. Performance does not reflect the impact of federal, state,
or municipal taxes. If it did, performance would be lower. The Portfolio's
performance between 1998 and 2003 benefited from the agreement of WM
Advisors and its affiliates to limit the Portfolio's expenses.
(2) Returns shown for the indices assume reinvestment of all dividends and
distributions, and since-inception returns shown for the indices are
calculated from 4/30/98. Indices are unmanaged, and individuals cannot
invest directly in an index.
10
WM GROUP OF FUNDS
VT ANNUAL REPORT UPDATE MATERIAL
PERFORMANCE NAV -- MOUNTAIN CHARTS (VALUE OF $10,000 INVESTMENT OVER 10-YEARS)
DATA AS OF 12/31/2005
CLASS 1 SHARES
10,000
VT CONSERVATIVE
BALANCED
DATE PORTFOLIO
- ------ ---------------
Mar-98 10,000
Apr-98 10,000
May-98 10,090
Jun-98 10,163
Jul-98 10,183
Aug-98 10,233
WM GROUP OF FUNDS
VT ANNUAL REPORT UPDATE MATERIAL
PERFORMANCE NAV -- MOUNTAIN CHARTS (VALUE OF $10,000 INVESTMENT OVER 10-YEARS)
DATA AS OF 12/31/2005
CLASS 1 SHARES
10,000
VT CONSERVATIVE
BALANCED
DATE PORTFOLIO
- ------ ---------------
Sep-98 10,383
Oct-98 10,323
Nov-98 10,404
Dec-98 10,423
Jan-99 10,493
Feb-99 10,363
Mar-99 10,446
Apr-99 10,538
May-99 10,497
Jun-99 10,472
Jul-99 10,482
Aug-99 10,461
Sep-99 10,568
Oct-99 10,600
Nov-99 10,621
Dec-99 10,619
Jan-00 10,597
Feb-00 10,694
Mar-00 10,787
Apr-00 10,787
May-00 10,744
Jun-00 10,918
Jul-00 10,995
Aug-00 11,360
Sep-00 11,251
Oct-00 11,217
Nov-00 10,905
Dec-00 11,153
Jan-01 11,581
Feb-01 11,255
Mar-01 11,012
Apr-01 11,285
May-01 11,399
WM GROUP OF FUNDS
VT ANNUAL REPORT UPDATE MATERIAL
PERFORMANCE NAV -- MOUNTAIN CHARTS (VALUE OF $10,000 INVESTMENT OVER 10-YEARS)
DATA AS OF 12/31/2005
CLASS 1 SHARES
10,000
VT CONSERVATIVE
BALANCED
DATE PORTFOLIO
- ------ ---------------
Jul-01 11,456
Aug-01 11,342
Sep-01 10,956
Oct-01 11,171
Nov-01 11,365
Dec-01 11,422
Jan-02 11,364
Feb-02 11,319
Mar-02 11,456
Apr-02 11,376
May-02 11,399
Jun-02 11,128
Jul-02 10,819
Aug-02 10,934
Sep-02 10,635
Oct-02 10,922
Nov-02 11,233
Dec-02 11,164
Jan-03 11,153
Feb-03 11,164
Mar-03 11,199
Apr-03 11,601
May-03 12,048
Jun-03 12,135
Jul-03 12,053
Aug-03 12,194
Sep-03 12,358
Oct-03 12,628
Nov-03 12,745
Dec-03 13,074
Jan-04 13,284
Feb-04 13,413
WM GROUP OF FUNDS
VT ANNUAL REPORT UPDATE MATERIAL
PERFORMANCE NAV -- MOUNTAIN CHARTS (VALUE OF $10,000 INVESTMENT OVER 10-YEARS)
DATA AS OF 12/31/2005
CLASS 1 SHARES
10,000
VT CONSERVATIVE
BALANCED
DATE PORTFOLIO
- ------ ---------------
Mar-04 13,448
Apr-04 13,132
May-04 13,156
Jun-04 13,345
Jul-04 13,201
Aug-04 13,357
Sep-04 13,489
Oct-04 13,644
Nov-04 13,872
Dec-04 14,147
Jan-05 14,002
Feb-05 14,098
Mar-05 13,954
Apr-05 13,941
May-05 14,205
Jun-05 14,317
Jul-05 14,513
Aug-05 14,574
Sep-05 14,538
Oct-05 14,403
Nov-05 14,672
Dec-05 14,795
PORTFOLIO MANAGER (GRAPHIC)
Asset Allocation Team
WM Advisors, Inc.
WM VT U.S. Government Securities Fund, which advanced mainly due to its holdings
in mortgage agency bonds. The Portfolio also gained from the contribution of the
WM High Yield Fund. The Fund's holdings in domestic corporate bonds and real
estate investment trusts (REITs) were the primary drivers of performance. The WM
VT Income Fund also contributed positively to Portfolio returns.
During the year, the Portfolio increased its allocations to U.S. mid- and
large-cap growth stocks in anticipation that these asset classes may outperform
over the next market cycle. In contrast, the Portfolio reduced its exposure to
corporate bonds.
Looking forward, we anticipate that economic growth for 2006 will be weaker than
current consensus projections. We also believe that inflation will be more muted
than expected. The housing market appears to be slowing, which may make it more
difficult for consumers to secure low-interest home equity loans. This in turn
may negatively impact consumer spending. Given this combination of factors, we
believe the Federal Reserve will likely halt its monetary tightening campaign
relatively early in 2006. In this scenario, we believe that long-term interest
rates will fall to the 3%-4% range, but then stabilize. If long-term rates
stabilize, we would expect mortgage-backed securities to offer a better relative
value than corporate bonds and high-yield issues to continue to outperform.
Equities appear fairly valued, with international stocks more attractive than U.
S. holdings.
PORTFOLIO CHARACTERISTICS AS OF DECEMBER 31, 2005
Equity/Fixed-Income Allocation:(3) 44% Equity/56% Fixed-Income
Weighted Average Market Capitalization (equities): $62.4 billion
Weighted Average P/E (equities):(4) 16.8
Beta: 0.41
Portfolio Standard Deviation: 4.41
S&P 500 Standard Deviation: 10.43
Portfolio Turnover (for fiscal year):(5) 4%
Aggregate Portfolio Turnover (for fiscal year):(6) 41%
Number of Securities:(7) 1,590
Total Net Assets: $73.8 million
PORTFOLIO COMPOSITION (3)
As of As of
Asset Class 12/31/05 12/31/04 Change
- ----------- -------- -------- ------
Mortgage- & Asset-Backed Bonds 28% 27% +1%
Investment-Grade Corporate Bonds 13% 15% -2%
High-Yield Corporate Bonds 6% 7% -1%
U.S. Government Securities 5% 5% 0%
U.S. Large-Cap Value Stocks 12% 11% +1%
U.S. Large-Cap Growth Stocks 11% 9% +2%
Foreign Stocks 5% 4% +1%
U.S. Mid-Cap Growth Stocks 5% 4% +1%
REITs 3% 3% 0%
U.S. Mid-Cap Value Stocks 3% 5% -2%
Convertible Securities 2% 2% 0%
U.S. Small-Cap Growth Stocks 2% 2% 0%
U.S. Small-Cap Value Stocks 2% 2% 0%
Cash Equivalents 3% 4% -1%
(3) May not reflect the current portfolio composition.
(4) Based on estimated earnings.
(5) Does not reflect portfolio turnover of the underlying WM Funds.
(6) Aggregate portfolio turnover of the Portfolio and its underlying WM Funds
assumes a constant allocation by the Portfolio of its assets among the
underlying Funds identical to the actual allocation of the Portfolio on
12/31/05. The Portfolio's actual aggregate portfolio turnover may be
different as a result of changes in the allocation of its assets among the
underlying Funds, the portfolio turnover of the underlying Funds, and/or
the Portfolio's own portfolio turnover.
(7) Represents the sum of securities held by the underlying WM Funds. Some
securities may be held by more than one WM Fund.
Note: Page 44 provides information about a WM Fund in which the VT Conservative
Balanced Portfolio invests a significant portion of its assets. For additional
information about this and other WM Funds, please see the WM Variable Trust
annual report, which is available online at wmgroupoffunds.com or by calling
800-222-5852.
11
(GRAPHIC) VT Balanced Portfolio
ANNUAL TOTAL RETURNS (1)
Class 1 shares
(Calendar Year)
2005 6.01%
2004 10.12%
2003 22.74%
2002 -8.78%
2001 0.13%
2000 0.49%
1999 27.71%
1998 17.18%
INVESTMENT STRATEGY
As of December 31, 2005, the WM VT Strategic Asset Management (SAM) Balanced
Portfolio was diversified among 13 funds representing 14 major asset classes.
The Portfolio held a 65%/35% equity-to-fixed-income ratio at the end of the
year.
Among the underlying WM VT equity funds, the WM VT International Growth Fund
made a strong overall contribution to Portfolio performance for the period. The
Fund's holdings in Japanese equities and emerging market equities were the
primary drivers of performance. On the downside, the Fund's underweighting in
the energy sector detracted from returns. The Portfolio also benefited from the
contribution of the WM VT Equity Income Fund. The Fund's holdings in the energy,
financial, and health care sectors were particularly helpful. In contrast, the
Fund's holdings in the telecommunication services and consumer discretionary
sectors detracted from returns.
On the fixed-income side, the Portfolio benefited primarily from the
contribution of the
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. Performance shown below does not account for fees,
expenses, and charges of any variable insurance contract or retirement plan. If
these fees were reflected, performance would be lower.
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) AS OF DECEMBER 31, 2005
Since Inception
1-Year 5-Year Inception Date
------ ------ --------- ---------
CLASS 1 SHARES 6.01% 5.53% 8.79% 6/3/97
CLASS 2 SHARES 5.72% -- 7.13% 11/6/01
S&P 500(2) 4.91% 0.54% 6.23%
Lehman Brothers Aggregate Bond Index(2) 2.43% 5.87% 6.54%
Capital Market Benchmark(2) 4.00% 2.99% 6.73%
VALUE OF A $10,000 INVESTMENT(1) JUNE 3, 1997 - DECEMBER 31, 2005
(PERFORMANCE GRAPH)
See Glossary on page 18 for definitions of indices and terms.
(1) Performance reflects ongoing expenses and assumes reinvestment of all
dividends and capital gains. It also reflects ongoing fund expenses paid by
the Portfolio's applicable Funds, which include the effects of expense
reimbursement. Performance does not reflect the impact of federal, state,
or municipal taxes. If it did, performance would be lower. The Portfolio's
performance between 1997 and 1998 benefited from the agreement of WM
Advisors and its affiliates to limit the Portfolio's expenses.
(2) Returns shown for the indices assume reinvestment of all dividends and
distributions, and since-inception returns shown for the indices are
calculated from 5/31/97. Indices are unmanaged, and individuals cannot
invest directly in an index.
12
WM GROUP OF FUNDS
VT ANNUAL REPORT UPDATE MATERIAL
PERFORMANCE NAV -- MOUNTAIN CHARTS (VALUE OF $10,000 INVESTMENT OVER 10-YEARS)
DATA AS OF 12/31/2005
CLASS 1 SHARES
10,000
VT
BALANCED
DATE PORTFOLIO
- ------ ---------
May-97 10,000
Jun-97 10,190
Jul-97 10,680
Aug-97 10,350
Sep-97 10,700
Oct-97 10,390
Nov-97 10,390
Dec-97 10,470
Jan-98 10,599
Feb-98 11,109
Mar-98 11,409
Apr-98 11,579
May-98 11,439
Jun-98 11,654
Jul-98 11,533
Aug-98 10,376
WM GROUP OF FUNDS
VT Annual Report Update Material
Performance NAV -- Mountain Charts (Value of $10,000 Investment over 10-Years)
Data as of 12/31/2005
Class 1 Shares
10,000
VT
BALANCED
DATE PORTFOLIO
- ------ ---------
Sep-98 10,718
Oct-98 11,181
Nov-98 11,654
Dec-98 12,267
Jan-99 12,689
Feb-99 12,397
Mar-99 12,927
Apr-99 13,409
May-99 13,101
Jun-99 13,625
Jul-99 13,459
Aug-99 13,448
Sep-99 13,577
Oct-99 14,027
Nov-99 14,611
Dec-99 15,664
Jan-00 15,349
Feb-00 15,915
Mar-00 16,432
Apr-00 15,956
May-00 15,691
Jun-00 16,027
Jul-00 15,844
Aug-00 16,562
Sep-00 16,244
Oct-00 16,158
Nov-00 15,371
Dec-00 15,738
Jan-01 16,509
Feb-01 15,728
Mar-01 15,186
Apr-01 15,776
May-01 15,996
WM GROUP OF FUNDS
VT Annual Report Update Material
Performance NAV -- Mountain Charts (Value of $10,000 Investment over 10-Years)
Data as of 12/31/2005
Class 1 Shares
10,000
VT
BALANCED
DATE PORTFOLIO
- ------ ---------
Jun-01 16,033
Jul-01 15,930
Aug-01 15,613
Sep-01 14,751
Oct-01 15,090
Nov-01 15,566
Dec-01 15,759
Jan-02 15,521
Feb-02 15,339
Mar-02 15,736
Apr-02 15,397
May-02 15,363
Jun-02 14,804
Jul-02 14,097
Aug-02 14,224
Sep-02 13,553
Oct-02 14,109
Nov-02 14,676
Dec-02 14,375
Jan-03 14,258
Feb-03 14,177
Mar-03 14,200
Apr-03 14,917
May-03 15,658
Jun-03 15,829
Jul-03 15,888
Aug-03 16,148
Sep-03 16,266
Oct-03 16,847
Nov-03 17,072
Dec-03 17,641
Jan-04 17,985
Feb-04 18,186
WM GROUP OF FUNDS
VT ANNUAL REPORT UPDATE MATERIAL
PERFORMANCE NAV -- MOUNTAIN CHARTS (VALUE OF $10,000 INVESTMENT OVER 10-YEARS)
DATA AS OF 12/31/2005
CLASS 1 SHARES
10,000
VT
BALANCED
DATE PORTFOLIO
- ---- ---------
Mar-04 18,186
Apr-04 17,735
May-04 17,831
Jun-04 18,157
Jul-04 17,771
Aug-04 17,939
Sep-04 18,169
Oct-04 18,411
Nov-04 18,930
Dec-04 19,426
Jan-05 19,088
Feb-05 19,330
Mar-05 19,100
Apr-05 18,955
May-05 19,450
Jun-05 19,619
Jul-05 20,111
Aug-05 20,111
Sep-05 20,124
Oct-05 19,890
Nov-05 20,445
Dec-05 20,592
PORTFOLIO MANAGER (GRAPHIC)
Asset Allocation Team
WM Advisors, Inc.
WM VT U.S. Government Securities Fund, which advanced mainly due to its
holdings in mortgage agency bonds. The Portfolio also gained from the
contribution of the WM High Yield Fund. The Fund's holdings in domestic
corporate bonds and real estate investment trusts (REITs) were the primary
drivers of performance. The WM VT Income Fund also contributed modestly to
Portfolio returns.
During the year, the Portfolio significantly increased its allocations to U.S.
mid- and large-cap growth stocks in anticipation that these asset classes may
outperform over the next market cycle. The Portfolio also raised its exposure to
U. S. large-cap value stocks.
Looking forward, we anticipate that economic growth for 2006 will be weaker than
current consensus projections. We also believe that inflation will be more muted
than expected. The housing market appears to be slowing, which may make it more
difficult for consumers to secure low-interest home equity loans. This in turn
may negatively impact consumer spending. Given this combination of factors, we
believe the Federal Reserve will likely halt its monetary tightening campaign
relatively early in 2006. In this scenario, we believe that long-term interest
rates will fall to the 3%-4% range, but then stabilize. If long-term rates
stabilize, we would expect mortgage-backed securities to offer a better relative
value than corporate bonds and high-yield issues to continue to outperform.
Equities appear fairly valued, with international stocks more attractive than
U.S. holdings.
PORTFOLIO CHARACTERISTICS AS OF DECEMBER 31, 2005
Equity/Fixed-Income Allocation:(3) 65% Equity/35% Fixed-Income
Weighted Average Market Capitalization (equities): $61.1 billion
Weighted Average P/E (equities):(4) 16.9
Beta: 0.64
Portfolio Standard Deviation: 6.13
S&P 500 Standard Deviation: 10.43
Portfolio Turnover (for fiscal year):(5) 4%
Aggregate Portfolio Turnover (for fiscal year):(6) 45%
Number of Securities:(7) 1,590
Total Net Assets: $660.7 million
PORTFOLIO COMPOSITION (3)
As of As of
Asset Class 12/31/05 12/31/04 Change
- ----------- -------- -------- ------
U.S. Large-Cap Value Stocks 18% 16% +2%
U.S. Large-Cap Growth Stocks 17% 14% +3%
U.S. Mid-Cap Growth Stocks 8% 6% +2%
Foreign Stocks 6% 6% 0%
U.S. Mid-Cap Value Stocks 5% 8% -3%
REITs 4% 5% -1%
U.S. Small-Cap Growth Stocks 3% 3% 0%
U.S. Small-Cap Value Stocks 2% 3% -1%
Convertible Securities 1% 1% 0%
Mortgage- & Asset-Backed Bonds 17% 17% 0%
Investment-Grade Corporate Bonds 7% 7% 0%
High-Yield Corporate Bonds 5% 5% 0%
U.S. Government Securities 3% 3% 0%
Cash Equivalents 4% 6% -2%
(3) May not reflect the current portfolio composition.
(4) Based on estimated earnings.
(5) Does not reflect portfolio turnover of the underlying WM Funds.
(6) Aggregate portfolio turnover of the Portfolio and its underlying WM Funds
assumes a constant allocation by the Portfolio of its assets among the
underlying Funds identical to the actual allocation of the Portfolio on
12/31/05. The Portfolio's actual aggregate portfolio turnover may be
different as a result of changes in the allocation of its assets among the
underlying Funds, the portfolio turnover of the underlying Funds, and/or
the Portfolio's own portfolio turnover.
(7) Represents the sum of securities held by the underlying WM Funds. Some
securities may be held by more than one WM Fund.
Note: For information about the underlying WM Funds of the VT SAM Portfolios,
please see the WM Variable Trust annual report, which is available online at
wmgroupoffunds.com or by calling 800-222-5852.
13
(GRAPHIC) VT Conservative Growth Portfolio
ANNUAL TOTAL RETURNS (1)
Class 1 shares
(Calendar Year)
2005 7.04%
2004 11.78%
2003 28.74%
2002 -15.52%
2001 -3.56%
2000 -2.49%
1999 39.36%
1998 19.91%
INVESTMENT STRATEGY
As of December 31, 2005, the WM VT Strategic Asset Management (SAM) Conservative
Growth Portfolio was diversified among 12 funds representing 14 major asset
classes. The Portfolio held an 83%/17% equity-to-fixed-income ratio at the end
of the year.
Among all underlying WM VT equity funds, the WM VT International Growth Fund
made the greatest overall contribution to Portfolio performance for the period.
The Fund's holdings in Japanese equities and emerging market equities were the
primary drivers of performance. On the downside, the Fund's underweighting in
the energy sector detracted from returns. The Portfolio also benefited from the
contribution of the WM VT Equity Income Fund. The Fund's holdings in the energy,
financial, and health care sectors were particularly helpful. In contrast, the
Fund's holdings in the telecommunication services and consumer discretionary
sectors detracted from returns.
On the fixed-income side, the Portfolio benefited primarily from the WM High
Yield Fund,
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. Performance shown below does not account for fees,
expenses, and charges of any variable insurance contract or retirement plan. If
these fees were reflected, performance would be lower.
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) AS OF DECEMBER 31, 2005
1-Year 5-Year Since Inception Inception Date
------ ------ --------------- --------------
CLASS 1 SHARES 7.04% 4.65% 9.30% 6/3/97
CLASS 2 SHARES 6.71% -- 7.40% 11/6/01
S&P 500(2) 4.91% 0.54% 6.23%
Lehman Brothers Aggregate Bond Index(2) 2.43% 5.87% 6.54%
Capital Market Benchmark(2) 4.47% 1.82% 6.54%
VALUE OF A $10,000 INVESTMENT(1) JUNE 3, 1997 - DECEMBER 31, 2005
(PERFORMANCE GRAPH)
See Glossary on page 18 for definitions of indices and terms.
(1) Performance reflects ongoing expenses and assumes reinvestment of all
dividends and capital gains. It also reflects ongoing fund expenses paid by
the Portfolio's applicable Funds, which include the effects of expense
reimbursement. Performance does not reflect the impact of federal, state,
or municipal taxes. If it did, performance would be lower. The Portfolio's
performance between 1997 and 1998 benefited from the agreement of WM
Advisors and its affiliates to limit the Portfolio's expenses.
(2) Returns shown for the indices assume reinvestment of all dividends and
distributions, and since-inception returns shown for the indices are
calculated from 5/31/97. Indices are unmanaged, and individuals cannot
invest directly in an index.
14
WM GROUP OF FUNDS
VT ANNUAL REPORT UPDATE MATERIAL
PERFORMANCE NAV -- MOUNTAIN CHARTS (VALUE OF $10,000 INVESTMENT OVER 10-YEARS)
DATA AS OF 12/31/2005
CLASS 1 SHARES
10,000
VT
CONSERVATIVE
GROWTH
DATE PORTFOLIO
- ------ ------------
May-97 10,000
Jun-97 10,300
Jul-97 10,860
Aug-97 10,420
Sep-97 10,851
Oct-97 10,421
Nov-97 10,401
Dec-97 10,492
Jan-98 10,622
Feb-98 11,312
Mar-98 11,713
Apr-98 11,883
May-98 11,593
Jun-98 11,859
Jul-98 11,619
Aug-98 10,034
WM GROUP OF FUNDS
VT ANNUAL REPORT UPDATE MATERIAL
PERFORMANCE NAV -- MOUNTAIN CHARTS (VALUE OF $10,000 INVESTMENT OVER 10-YEARS)
DATA AS OF 12/31/2005
CLASS 1 SHARES
10,000
VT
CONSERVATIVE
GROWTH
DATE PORTFOLIO
- ------ ------------
Sep-98 10,525
Oct-98 11,097
Nov-98 11,750
Dec-98 12,583
Jan-99 13,155
Feb-99 12,774
Mar-99 13,466
Apr-99 14,128
May-99 13,818
Jun-99 14,572
Jul-99 14,326
Aug-99 14,316
Sep-99 14,429
Oct-99 15,085
Nov-99 15,936
Dec-99 17,536
Jan-00 17,168
Feb-00 17,999
Mar-00 18,706
Apr-00 17,937
May-00 17,485
Jun-00 17,900
Jul-00 17,588
Aug-00 18,596
Sep-00 18,066
Oct-00 17,911
Nov-00 16,643
Dec-00 17,100
Jan-01 18,118
Feb-01 16,891
Mar-01 16,050
Apr-01 17,007
May-01 17,277
WM GROUP OF FUNDS
VT ANNUAL REPORT UPDATE MATERIAL
PERFORMANCE NAV -- MOUNTAIN CHARTS (VALUE OF $10,000 INVESTMENT OVER 10-YEARS)
DATA AS OF 12/31/2005
CLASS 1 SHARES
10,000
VT
CONSERVATIVE
GROWTH
DATE PORTFOLIO
- ------ ------------
Jun-01 17,291
Jul-01 16,992
Aug-01 16,404
Sep-01 15,073
Oct-01 15,473
Nov-01 16,205
Dec-01 16,493
Jan-02 16,094
Feb-02 15,750
Mar-02 16,405
Apr-02 15,795
May-02 15,706
Jun-02 14,885
Jul-02 13,876
Aug-02 13,967
Sep-02 13,005
Oct-02 13,715
Nov-02 14,425
Dec-02 13,932
Jan-03 13,748
Feb-03 13,587
Mar-03 13,610
Apr-03 14,492
May-03 15,375
Jun-03 15,593
Jul-03 15,804
Aug-03 16,120
Sep-03 16,178
Oct-03 16,962
Nov-03 17,232
Dec-03 17,935
Jan-04 18,333
Feb-04 18,568
WM GROUP OF FUNDS
VT ANNUAL REPORT UPDATE MATERIAL
PERFORMANCE NAV -- MOUNTAIN CHARTS (VALUE OF $10,000 INVESTMENT OVER 10-YEARS)
DATA AS OF 12/31/2005
CLASS 1 SHARES
10,000
VT
CONSERVATIVE
GROWTH
DATE PORTFOLIO
- ------ ------------
Mar-04 18,533
Apr-04 18,042
May-04 18,206
Jun-04 18,601
Jul-04 18,007
Aug-04 18,150
Sep-04 18,435
Oct-04 18,707
Nov-04 19,443
Dec-04 20,047
Jan-05 19,584
Feb-05 19,917
Mar-05 19,644
Apr-05 19,383
May-05 19,988
Jun-05 20,196
Jul-05 20,868
Aug-05 20,820
Sep-05 20,856
Oct-05 20,591
Nov-05 21,311
Dec-05 21,456
PORTFOLIO MANAGER (GRAPHIC)
Asset Allocation Team
WM Advisors, Inc.
which dramatically outperformed all other WM fixed-income funds. The Fund's
holdings in domestic corporate bonds and real estate investment trusts (REITs)
were the primary drivers of performance. The Portfolio also benefited from the
contribution of the WM VT U.S. Government Securities Fund, which advanced mainly
due to its holdings in mortgage agency bonds.
During the year, the Portfolio significantly increased its allocations to U.S.
mid- and large-cap growth stocks in anticipation that these asset classes may
outperform U.S. small- and mid-cap value stocks over the next market cycle. In
contrast, the Portfolio slightly reduced its allocation to REITs.
Looking forward, we anticipate that economic growth for 2006 will be weaker than
current consensus projections. We also believe that inflation will be more muted
than expected. The housing market appears to be slowing, which may make it more
difficult for consumers to secure low-interest home equity loans. This in turn
may negatively impact consumer spending. Given this combination of factors, we
believe the Federal Reserve will likely halt its monetary tightening campaign
relatively early in 2006. In this scenario, we believe that long-term interest
rates will fall to the 3%-4% range, but then stabilize. If long-term rates
stabilize, we would expect mortgage-backed securities to offer a better relative
value than corporate bonds and high-yield issues to continue to outperform.
Equities appear fairly valued, with international stocks more attractive than
U.S. holdings.
PORTFOLIO CHARACTERISTICS AS OF DECEMBER 31, 2005
Equity/Fixed-Income Allocation:(3) 83% Equity/17% Fixed-Income
Weighted Average Market Capitalization (equities): $61.1 billion
Weighted Average P/E (equities):(4) 16.9
Beta: 0.85
Portfolio Standard Deviation: 7.88
S&P 500 Standard Deviation: 10.43
Portfolio Turnover (for fiscal year):(5) 9%
Aggregate Portfolio Turnover (for fiscal year):(6) 54%
Number of Securities:(7) 1,500
Total Net Assets: $388.0 million
PORTFOLIO COMPOSITION(3)
As of As of
Asset Class 12/31/05 12/31/04 Change
- ----------- -------- -------- ------
U.S. Large-Cap Value Stocks 23% 22% +1%
U.S. Large-Cap Growth Stocks 21% 19% +2%
U.S. Mid-Cap Growth Stocks 10% 7% +3%
Foreign Stocks 9% 8% +1%
U.S. Mid-Cap Value Stocks 7% 11% -4%
REITs 5% 6% -1%
U.S. Small-Cap Growth Stocks 4% 4% 0%
U.S. Small-Cap Value Stocks 3% 4% -1%
Convertible Securities 1% 1% 0%
Mortgage- & Asset-Backed Bonds 7% 8% -1%
High-Yield Corporate Bonds 3% 3% 0%
Investment-Grade Corporate Bonds 2% 2% 0%
U.S. Government Securities 1% 1% 0%
Cash Equivalents 4% 4% 0%
(3) May not reflect the current portfolio composition.
(4) Based on estimated earnings.
(5) Does not reflect portfolio turnover of the underlying WM Funds.
(6) Aggregate portfolio turnover of the Portfolio and its underlying WM Funds
assumes a constant allocation by the Portfolio of its assets among the
underlying Funds identical to the actual allocation of the Portfolio on
12/31/05. The Portfolio's actual aggregate portfolio turnover may be
different as a result of changes in the allocation of its assets among the
underlying Funds, the portfolio turnover of the underlying Funds, and/or
the Portfolio's own portfolio turnover.
(7) Represents the sum of securities held by the underlying WM Funds. Some
securities may be held by more than one WM Fund.
Note: For information about the underlying WM Funds of the VT SAM Portfolios,
please see the WM Variable Trust annual report, which is available online at
wmgroupoffunds.com or by calling 800-222-5852.
15
(GRAPHIC) VT Strategic Growth Portfolio
ANNUAL TOTAL RETURNS (1)
Class 1 shares
(Calendar Year)
2005 7.71%
2004 12.83%
2003 33.07%
2002 -20.53%
2001 -6.25%
2000 -3.73%
1999 47.95%
1998 26.19%
INVESTMENT STRATEGY
As of December 31, 2005, the WM VT Strategic Asset Management (SAM) Strategic
Growth Portfolio was diversified among 10 funds representing 11 major asset
classes. The Portfolio held a 93%/7% equity-to-fixed-income ratio at the end of
the year.
Among all underlying WM VT equity funds, the WM VT International Growth Fund
made the greatest overall contribution to Portfolio performance for the period.
The Fund's holdings in Japanese equities and emerging market equities were the
primary drivers of performance. On the downside, the Fund's underweighting in
the energy sector detracted from returns. The Portfolio also benefited from the
contribution of the WM VT Equity Income Fund. The Fund's holdings in the energy,
financial, and health care sectors were particularly helpful. In contrast, the
Fund's holdings in the telecommunication services and consumer discretionary
sectors detracted from returns.
Data shown is past performance and does not guarantee future results. Current
performance, including the most recent month-end results, which may be higher or
lower than the data shown, can be obtained by calling 800-222-5852. Your
investment's return and principal value will fluctuate, so it may be worth more
or less upon redemption. Performance shown below does not account for fees,
expenses, and charges of any variable insurance contract or retirement plan. If
these fees were reflected, performance would be lower.
Equity investments involve greater risk, including heightened volatility, than
fixed-income investments.
AVERAGE ANNUAL TOTAL RETURNS (1) AS OF DECEMBER 31, 2005
1-Year 5-Year Since Inception Inception Date
------ ------ --------------- --------------
CLASS 1 SHARES 7.71% 3.80% 10.29% 6/3/97
CLASS 2 SHARES 7.47% -- 7.49% 11/6/01
S&P 500(2) 4.91% 0.54% 6.23%
Russell 3000(R) Index(2) 6.12% 1.58% 6.74%
VALUE OF A $10,000 INVESTMENT (1) JUNE 3, 1997 - DECEMBER 31, 2005
(PERFORMANCE GRAPH)
See Glossary on page 18 for definitions of indices and terms.
(1) Performance reflects ongoing expenses and assumes reinvestment of all
dividends and capital gains. It also reflects ongoing fund expenses paid by
the Portfolio's applicable Funds, which include the effects of expense
reimbursement. Performance does not reflect the impact of federal, state,
or municipal taxes. If it did, performance would be lower. The Portfolio's
performance between 1997 and 1999 benefited from the agreement of WM
Advisors and its affiliates to limit the Portfolio's expenses.
(2) Returns shown for the indices assume reinvestment of all dividends and
distributions, and since-inception returns shown for the indices are
calculated from 5/31/97. Indices are unmanaged, and individuals cannot
invest directly in an index.
16
WM GROUP OF FUNDS
VT ANNUAL REPORT UPDATE MATERIAL
PERFORMANCE NAV -- MOUNTAIN CHARTS (VALUE OF $10,000 INVESTMENT OVER 10-YEARS)
DATA AS OF 12/31/2005
CLASS 1 SHARES
10,000
VT STRATEGIC
GROWTH
DATE PORTFOLIO
---- ------------
May-97 10,000
Jun-97 10,320
Jul-97 10,970
Aug-97 10,550
Sep-97 11,041
Oct-97 10,610
Nov-97 10,630
Dec-97 10,700
Jan-98 10,861
Feb-98 11,711
Mar-98 12,171
Apr-98 12,361
May-98 12,061
Jun-98 12,411
Jul-98 12,170
Aug-98 10,424
WM GROUP OF FUNDS
VT ANNUAL REPORT UPDATE MATERIAL
PERFORMANCE NAV -- MOUNTAIN CHARTS (VALUE OF $10,000 INVESTMENT OVER 10-YEARS)
DATA AS OF 12/31/2005
CLASS 1 SHARES
10,000
VT STRATEGIC
GROWTH
DATE PORTFOLIO
---- ------------
Sep-98 11,005
Oct-98 11,637
Nov-98 12,390
Dec-98 13,504
Jan-99 14,256
Feb-99 13,794
Mar-99 14,646
Apr-99 15,429
May-99 15,137
Jun-99 16,039
Jul-99 15,744
Aug-99 15,755
Sep-99 15,878
Oct-99 16,704
Nov-99 17,804
Dec-99 19,976
Jan-00 19,639
Feb-00 20,923
Mar-00 21,697
Apr-00 20,617
May-00 20,015
Jun-00 20,595
Jul-00 20,130
Aug-00 21,442
Sep-00 20,677
Oct-00 20,408
Nov-00 18,661
Dec-00 19,230
Jan-01 20,522
Feb-01 18,827
Mar-01 17,649
Apr-01 19,054
May-01 19,395
WM GROUP OF FUNDS
VT ANNUAL REPORT UPDATE MATERIAL
PERFORMANCE NAV -- MOUNTAIN CHARTS (VALUE OF $10,000 INVESTMENT OVER 10-YEARS)
DATA AS OF 12/31/2005
CLASS 1 SHARES
10,000
VT STRATEGIC
GROWTH
DATE PORTFOLIO
---- ------------
Jun-01 19,453
Jul-01 18,871
Aug-01 18,016
Sep-01 16,132
Oct-01 16,592
Nov-01 17,600
Dec-01 18,028
Jan-02 17,458
Feb-02 16,966
Mar-02 17,897
Apr-02 17,031
May-02 16,900
Jun-02 15,824
Jul-02 14,464
Aug-02 14,522
Sep-02 13,254
Oct-02 14,123
Nov-02 15,014
Dec-02 14,329
Jan-03 14,078
Feb-03 13,828
Mar-03 13,851
Apr-03 14,879
May-03 15,929
Jun-03 16,186
Jul-03 16,534
Aug-03 16,939
Sep-03 16,915
Oct-03 17,912
Nov-03 18,236
Dec-03 19,069
Jan-04 19,532
Feb-04 19,798
WM GROUP OF FUNDS
VT ANNUAL REPORT UPDATE MATERIAL
PERFORMANCE NAV -- MOUNTAIN CHARTS (VALUE OF $10,000 INVESTMENT OVER 10-YEARS)
DATA AS OF 12/31/2005
CLASS 1 SHARES
10,000
VT STRATEGIC
GROWTH
DATE PORTFOLIO
---- ------------
Mar-04 19,693
Apr-04 19,207
May-04 19,416
Jun-04 19,894
Jul-04 19,136
Aug-04 19,241
Sep-04 19,580
Oct-04 19,883
Nov-04 20,804
Dec-04 21,515
Jan-05 20,932
Feb-05 21,353
Mar-05 21,050
Apr-05 20,677
May-05 21,388
Jun-05 21,626
Jul-05 22,471
Aug-05 22,388
Sep-05 22,458
Oct-05 22,163
Nov-05 23,021
Dec-05 23,173
PORTFOLIO MANAGER (GRAPHIC)
Asset Allocation Team
WM Advisors, Inc.
The Portfolio also benefited from its allocation to the WM High Yield Fund,
which dramatically outperformed all other WM fixed-income funds. The Fund's
holdings in domestic corporate bonds and real estate investment trusts (REITs)
were the primary drivers of performance.
During the year, the Portfolio significantly increased its allocations to U.S.
mid- and large-cap growth stocks in anticipation that these asset classes may
outperform U.S. small- and mid-cap value stocks over the next market cycle. The
Portfolio also slightly increased its allocation to foreign stocks, while its
exposures to high-yield bonds and convertible securities were unchanged.
Looking forward, we anticipate that economic growth for 2006 will be weaker than
current consensus projections. We also believe that inflation will be more muted
than expected. The housing market appears to be slowing, which may make it more
difficult for consumers to secure low-interest home equity loans. This in turn
may negatively impact consumer spending. Given this combination of factors, we
believe the Federal Reserve will likely halt its monetary tightening campaign
relatively early in 2006. In this scenario, we believe that long-term interest
rates will fall to the 3%-4% range, but then stabilize. If long-term rates
stabilize, we would expect high-yield issues to continue to outperform. Equities
appear fairly valued, with international stocks more attractive than U.S.
holdings.
PORTFOLIO CHARACTERISTICS AS OF DECEMBER 31, 2005
Equity/Fixed-Income Allocation:(3) 93% Equity/7% Fixed-Income
Weighted Average Market Capitalization (equities): $60.7 billion
Weighted Average P/E (equities):(4) 17.0
Beta: 0.99
Portfolio Standard Deviation: 9.16
S&P 500 Standard Deviation: 10.43
Portfolio Turnover (for fiscal year):(5) 9%
Aggregate Portfolio Turnover (for fiscal year):(6) 57%
Number of Securities:(7) 1,160
Total Net Assets: $185.4 million
PORTFOLIO COMPOSITION (3)
As of As of
Asset Class 12/31/05 12/31/04 Change
- ----------- -------- -------- ------
U.S. Large-Cap Value Stocks 25% 24% +1%
U.S. Large-Cap Growth Stocks 24% 21% +3%
U.S. Mid-Cap Growth Stocks 11% 9% +2%
Foreign Stocks 10% 9% +1%
U.S. Mid-Cap Value Stocks 8% 13% -5%
REITs 5% 6% -1%
U.S. Small-Cap Growth Stocks 5% 5% 0%
U.S. Small-Cap Value Stocks 4% 5% -1%
Convertible Securities 1% 1% 0%
High-Yield Corporate Bonds 3% 3% 0%
Cash Equivalents 4% 4% 0%
(3) May not reflect the current portfolio composition.
(4) Based on estimated earnings.
(5) Does not reflect portfolio turnover of the underlying WM Funds.
(6) Aggregate portfolio turnover of the Portfolio and its underlying WM Funds
assumes a constant allocation by the Portfolio of its assets among the
underlying Funds identical to the actual allocation of the Portfolio on
12/31/05. The Portfolio's actual aggregate portfolio turnover may be
different as a result of changes in the allocation of its assets among the
underlying Funds, the portfolio turnover of the underlying Funds, and/or
the Portfolio's own portfolio turnover.
(7) Represents the sum of securities held by the underlying WM Funds. Some
securities may be held by more than one WM Fund.
Note: For information about the underlying WM Funds of the VT SAM Portfolios,
please see the WM Variable Trust annual report, which is available online at
wmgroupoffunds.com or by calling 800-222-5852.
17
(GRAPHIC) Glossary
DEFINITIONS OF INDICES
CAPITAL MARKET BENCHMARK:
A benchmark intended to represent a relevant proxy for market and Portfolio
performance. It is allocated as follows: VT Flexible Income Portfolio:20% S&P
500 and 80% Lehman Brothers Aggregate Bond Index; VT Conservative Balanced
Portfolio:40% S&P 500 and 60% Lehman Brothers Aggregate Bond Index; VT Balanced
Portfolio:60% S&P 500 and 40% Lehman Brothers Aggregate Bond Index; and VT
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.
DEFINITIONS OF TERMS
BETA:
A quantitative measure of a Portfolio's historical volatility relative to the
overall market (S&P 500). A beta above 1 indicates more volatility than the
market, and a beta below 1 indicates less volatility. Results are calculated
using three-month rolling returns for Class 1 shares for the three-year period
ended 12/31/05. Source: Lipper, Inc.
STANDARD DEVIATION:
Measures the historical fluctuation of returns around the arithmetic average
return of the investment. The higher the standard deviation (as one measure of
risk), the greater the variability of the investment returns. Results are
calculated for the three-year period ended 12/31/05, and Portfolio results are
for Class 1 shares. Sources: Ibbotson Associates and Lipper, Inc.
18
Expense Information
WM VARIABLE TRUST STRATEGIC ASSET MANAGEMENT PORTFOLIOS
As a shareholder of the VT Flexible Income Portfolio, VT Conservative Balanced
Portfolio, VT Balanced Portfolio, VT Conservative Growth Portfolio or VT
Strategic Growth Portfolio (collectively, the "Portfolios"), you incur ongoing
costs, including management fees, distribution and/or service fees, and other
Portfolio expenses. This example is intended to help you understand your ongoing
costs (in dollars) of investing in the Portfolios and to compare these costs
with the ongoing costs of investing in other mutual funds. This example does not
include expenses of Class 1 shares of various funds in the WM Group of Funds and
Class I shares of the WM High Yield Fund (collectively, the "Underlying Funds")
(see Notes to Financial Statements - note 1). An example including expenses of
the Underlying Funds appears on the following page. Also note expenses shown
below and on the following page do not account for fees, expenses, and charges
of any variable insurance contract or retirement plan. If these fees had been
reflected, expenses would have been higher.
The example is based on an investment of $1,000 invested at the beginning of
the period and held for the entire period July 1, 2005 to December 31, 2005.
ACTUAL EXPENSES:
The first section of the table below provides information about actual account
values and actual expenses. You may use the information in these columns,
together with the amount you invested, to estimate the expenses that you paid
over the period. Simply divide your account value by $1,000 (for example, an
$8,600 account value divided by $1,000 = $8.6), then multiply the result by
the number in the third column under the heading entitled "Expenses Paid During
Period" to estimate the expenses you paid on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES:
The second section of the table below provides information about hypothetical
account values and hypothetical expenses based on each Portfolio's actual
expense ratios and an assumed rate of return of 5% per year before expenses
(rather than each Portfolio's actual rate of return). The hypothetical account
values and expenses may not be used to estimate the actual ending balance or
expenses you paid for the period. You may use this information to compare the
ongoing costs of investing in the Portfolios and other 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 separate
account expenses. Therefore, the hypothetical section of the table is useful in
comparing ongoing costs only, and will not help you compare the relative total
costs of owning different 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 7/1/05 - VALUE VALUE 7/1/05 - EXPENSE
7/1/05 12/31/05 12/31/05 7/1/05 12/31/05 12/31/05 RATIO
--------- -------- ----------- --------- -------- ----------- -------
VT Flexible Income Portfolio
Class 1 .......................... $1,000 $1,020 $1.58 $1,000 $1,024 $1.58 0.31%
Class 2 .......................... 1,000 1,017 2.85 1,000 1,022 2.85 0.56%
VT Conservative Balanced Portfolio
Class 1 .......................... $1,000 $1,033 $2.10 $1,000 $1,023 $2.09 0.41%
Class 2 .......................... 1,000 1,033 3.38 1,000 1,022 3.36 0.66%
VT Balanced Portfolio
Class 1 .......................... $1,000 $1,050 $1.50 $1,000 $1,024 $1.48 0.29%
Class 2 .......................... 1,000 1,048 2.79 1,000 1,022 2.75 0.54%
VT Conservative Growth Portfolio
Class 1 .......................... $1,000 $1,063 $1.51 $1,000 $1,024 $1.48 0.29%
Class 2 .......................... 1,000 1,061 2.81 1,000 1,022 2.75 0.54%
VT Strategic Growth Portfolio
Class 1 .......................... $1,000 $1,072 $1.67 $1,000 $1,024 $1.63 0.32%
Class 2 .......................... 1,000 1,070 2.97 1,000 1,022 2.91 0.57%
* Expenses are equal to each Portfolio's annualized expense ratio, multiplied
by the average account value over the period, multiplied by the 184 days in
the most recent fiscal half-year, divided by 365 days in the year (to
reflect the one-half year period).
19
Expense Information (continued)
WM VARIABLE TRUST STRATEGIC ASSET MANAGEMENT PORTFOLIOS
The following table sets forth the estimated ongoing aggregate expenses of the
Portfolios, including expenses of the Underlying Funds, based upon expenses
shown in the table above for each Portfolio and corresponding expenses for each
Underlying Fund's Class 1 shares or 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 December 31, 2005. A
Portfolio's actual expenses may be higher as a result of changes in the
allocation of the Portfolio's assets among the Underlying Funds, the expenses of
the Underlying Funds and/or the Portfolio's own expenses.
HYPOTHETICAL
ACTUAL EXPENSES (5% RETURN BEFORE EXPENSES)
---------------------------------- ----------------------------------
ESTIMATED ESTIMATED
AGGREGATE AGGREGATE
EXPENSES EXPENSES
BEGINNING ENDING PAID DURING BEGINNING ENDING PAID DURING
ACCOUNT ACCOUNT PERIOD* ACCOUNT ACCOUNT PERIOD*
VALUE VALUE 7/1/05 - VALUE VALUE 7/1/05 - EXPENSE
7/1/05 12/31/05 12/31/05 7/1/05 12/31/05 12/31/05 RATIO
--------- -------- ----------- --------- -------- ----------- -------
VT Flexible Income Portfolio
Class 1 .......................... $1,000 $1,020 $4.58 $1,000 $1,021 $4.58 0.90%
Class 2 .......................... 1,000 1,017 5.85 1,000 1,019 5.85 1.15%
VT Conservative Balanced Portfolio
Class 1 .......................... $1,000 $1,033 $5.38 $1,000 $1,020 $5.35 1.05%
Class 2 .......................... 1,000 1,033 6.66 1,000 1,019 6.61 1.30%
VT Balanced Portfolio
Class 1 .......................... $1,000 $1,050 $5.06 $1,000 $1,020 $4.99 0.98%
Class 2 .......................... 1,000 1,048 6.35 1,000 1,019 6.26 1.23%
VT Conservative Growth Portfolio
Class 1 .......................... $1,000 $1,063 $5.51 $1,000 $1,020 $5.40 1.06%
Class 2 .......................... 1,000 1,061 6.81 1,000 1,019 6.67 1.31%
VT Strategic Growth Portfolio
Class 1 .......................... $1,000 $1,072 $5.90 $1,000 $1,020 $5.75 1.13%
Class 2 .......................... 1,000 1,070 7.20 1,000 1,018 7.02 1.38%
* Expenses are equal to each Portfolio's estimated aggregate annualized
expense ratio, multiplied by the average account value over the period,
multiplied by the 184 days in the most recent fiscal half-year, divided by
365 days in the year (to reflect the one-half year period).
20
Financial Statements:
Portfolios of Investments
VT FLEXIBLE INCOME PORTFOLIO
December 31, 2005
VALUE
SHARES (000S)
- ---------- --------
INVESTMENT COMPANY SECURITIES -- 99.7%
EQUITY FUNDS -- 24.6%
547,034 WM VT Equity Income Fund ................................. $ 9,650
760,594 WM VT Growth & Income Fund ............................... 14,116
1,036,478 WM VT Growth Fund ........................................ 14,428
377,469 WM VT Mid Cap Stock Fund ................................. 6,545
141,032 WM VT REIT Fund .......................................... 2,467
236,325 WM VT Small Cap Growth Fund+ ............................. 2,288
208,864 WM VT Small Cap Value Fund ............................... 2,596
119,776 WM VT West Coast Equity Fund ............................. 2,640
--------
Total Equity Funds
(Cost $39,757) ........................................ 54,730
--------
FIXED-INCOME FUNDS -- 75.1%
1,805,863 WM High Yield Fund ....................................... 15,115
5,155,428 WM VT Income Fund ........................................ 55,111
10,430,495 WM VT Short Term Income Fund ............................. 26,285
6,774,786 WM VT U.S. Government Securities Fund .................... 70,932
--------
Total Fixed-Income Funds
(Cost $163,399) ....................................... 167,443
--------
Total Investment Company Securities
(Cost $203,156) ....................................... 222,173
--------
PRINCIPAL
AMOUNT
(000S)
- ---------
REPURCHASE AGREEMENT -- 0.2%
(Cost $510)
$510 Agreement with Morgan Stanley, 2.920%
dated 12/30/2005, to be repurchased at
$510,000 on 01/03/2006 (Collateralized by U.S.
Treasury Notes, having various interest rates
and maturities, market value $526,000) ......... 510
--------
TOTAL INVESTMENTS (Cost $203,666*) .......................... 99.9% 222,683
OTHER ASSETS (LIABILITIES) (NET) ............................ 0.1 171
----- --------
NET ASSETS .................................................. 100.0% $222,854
===== ========
- ----------
* Aggregate cost for federal tax purposes is $204,610.
+ Non-income producing security.
VT CONSERVATIVE BALANCED PORTFOLIO
December 31, 2005
VALUE
SHARES (000S)
- --------- -------
INVESTMENT COMPANY SECURITIES -- 99.6%
EQUITY FUNDS -- 43.5%
362,859 WM VT Equity Income Fund ................................... $ 6,401
359,940 WM VT Growth & Income Fund ................................. 6,680
497,878 WM VT Growth Fund .......................................... 6,930
232,848 WM VT International Growth Fund ............................ 3,446
145,531 WM VT Mid Cap Stock Fund ................................... 2,523
89,070 WM VT REIT Fund ............................................ 1,558
80,173 WM VT Small Cap Growth Fund+ ............................... 776
85,729 WM VT Small Cap Value Fund ................................. 1,066
124,137 WM VT West Coast Equity Fund ............................... 2,736
-------
Total Equity Funds
(Cost $25,400) .......................................... 32,116
-------
FIXED-INCOME FUNDS -- 56.1%
505,053 WM High Yield Fund ......................................... 4,227
1,235,213 WM VT Income Fund .......................................... 13,205
1,649,577 WM VT Short Term Income Fund ............................... 4,157
1,888,452 WM VT U. S. Government Securities Fund ..................... 19,772
-------
Total Fixed-Income Funds
(Cost $40,892) .......................................... 41,361
-------
Total Investment Company Securities
(Cost $66,292) .......................................... 73,477
-------
PRINCIPAL
AMOUNT
(000S)
- ---------
REPURCHASE AGREEMENT -- 0.3%
(Cost $251)
$251 Agreement with Morgan Stanley, 2.920%
dated 12/30/2005, to be repurchased at $251,000
on 01/03/2006 (Collateralized by U.S.
Treasury Notes, having various interest rates
and maturities, market value $259,000) ......... 251
-------
TOTAL INVESTMENTS (Cost $66,543*) ........................... 99.9% 73,728
OTHER ASSETS (LIABILITIES) (NET) ............................ 0.1 74
----- -------
NET ASSETS .................................................. 100.0% $73,802
===== =======
- ----------
* Aggregate cost for federal tax purposes is $67,352.
+ Non-income producing security.
See Notes to Financial Statements.
21
Portfolios of Investments
VT BALANCED PORTFOLIO
December 31, 2005
VALUE
SHARES (000S)
- ---------- --------
INVESTMENT COMPANY SECURITIES -- 99.3%
EQUITY FUNDS -- 65.5%
4,306,908 WM VT Equity Income Fund ................................. $ 75,974
4,889,128 WM VT Growth & Income Fund ............................... 90,742
7,007,779 WM VT Growth Fund ........................................ 97,548
2,833,608 WM VT International Growth Fund .......................... 41,937
2,178,619 WM VT Mid Cap Stock Fund ................................. 37,777
1,291,701 WM VT REIT Fund .......................................... 22,592
1,272,774 WM VT Small Cap Growth Fund+ ............................. 12,321
1,273,250 WM VT Small Cap Value Fund ............................... 15,827
1,719,227 WM VT West Coast Equity Fund ............................. 37,892
--------
Total Equity Funds
(Cost $335,279) ....................................... 432,610
--------
FIXED-INCOME FUNDS -- 33.8%
3,703,837 WM High Yield Fund ....................................... 31,001
6,675,505 WM VT Income Fund ........................................ 71,361
2,766,994 WM VT Short Term Income Fund ............................. 6,973
10,918,628 WM VT U.S. Government Securities Fund .................... 114,318
--------
Total Fixed-Income Funds
(Cost $211,564) ....................................... 223,653
--------
Total Investment Company Securities
(Cost $546,843) ....................................... 656,263
--------
PRINCIPAL
AMOUNT
(000S)
- ---------
REPURCHASE AGREEMENT -- 0.7%
(Cost $4,757)
$4,757 Agreement with Morgan Stanley, 2.920%
dated 12/30/2005, to be repurchased at
$4,759,000 on 01/03/2006 (Collateralized by
U.S. Treasury Notes, having various interest
rates and maturities, market value
$4,909,000) .................................... 4,757
--------
TOTAL INVESTMENTS (Cost $551,600*) .......................... 100.0% 661,020
OTHER ASSETS (LIABILITIES) (NET) ............................ 0.0 (302)
----- --------
NET ASSETS .................................................. 100.0% $660,718
===== ========
- ----------
* Aggregate cost for federal tax purposes is $563,176.
+ Non-income producing security.
VT CONSERVATIVE GROWTH PORTFOLIO
December 31, 2005
VALUE
SHARES (000S)
- --------- --------
INVESTMENT COMPANY SECURITIES -- 99.7%
EQUITY FUNDS -- 85.2%
3,315,857 WM VT Equity Income Fund .................................. $ 58,492
3,730,874 WM VT Growth & Income Fund ................................ 69,245
5,159,481 WM VT Growth Fund ......................................... 71,820
2,357,248 WM VT International Growth Fund ........................... 34,887
1,588,644 WM VT Mid Cap Stock Fund .................................. 27,547
930,580 WM VT REIT Fund ........................................... 16,276
1,055,695 WM VT Small Cap Growth Fund+ .............................. 10,219
1,003,307 WM VT Small Cap Value Fund ................................ 12,471
1,344,301 WM VT West Coast Equity Fund .............................. 29,628
--------
Total Equity Funds
(Cost $269,827) ........................................ 330,585
--------
FIXED-INCOME FUNDS -- 14.5%
1,333,843 WM High Yield Fund ........................................ 11,164
1,457,818 WM VT Income Fund ......................................... 15,584
2,834,152 WM VT U.S. Government Securities Fund ..................... 29,674
--------
Total-Fixed Income Funds
(Cost $52,626) ......................................... 56,422
--------
Total Investment Company Securities
(Cost $322,453) ........................................ 387,007
--------
PRINCIPAL
AMOUNT
(000S)
- ---------
REPURCHASE AGREEMENT -- 0.3%
(Cost $1,088)
$1,088 Agreement with Morgan Stanley, 2.920% dated
12/30/2005, to be repurchased at $1,088,000 on
01/03/2006 (Collateralized by U.S. Treasury
Notes, having various interest rates and
maturities, market value $1,123,000) ........... 1,088
--------
TOTAL INVESTMENTS (Cost $323,541*) .......................... 100.0% 388,095
OTHER ASSETS (LIABILITIES) (NET) ............................ 0.0 (55)
----- --------
NET ASSETS .................................................. 100.0% $388,040
===== ========
- ----------
* Aggregate cost for federal tax purposes is $332,933.
+ Non-income producing security.
See Notes to Financial Statements.
22
Portfolio of Investments
VT STRATEGIC GROWTH PORTFOLIO
December 31, 2005
VALUE
SHARES (000S)
------ --------
INVESTMENT COMPANY SECURITIES -- 99.7%
EQUITY FUNDS -- 95.3%
1,646,190 WM VT Equity Income Fund .................................. $ 29,039
1,992,668 WM VT Growth & Income Fund ................................ 36,984
2,805,555 WM VT Growth Fund ......................................... 39,053
1,276,637 WM VT International Growth Fund ........................... 18,894
953,902 WM VT Mid Cap Stock Fund .................................. 16,541
442,216 WM VT REIT Fund ........................................... 7,734
579,942 WM VT Small Cap Growth Fund+ .............................. 5,614
509,152 WM VT Small Cap Value Fund ................................ 6,329
748,713 WM VT West Coast Equity Fund .............................. 16,501
--------
Total Equity Funds
(Cost $146,787) ........................................ 176,689
--------
FIXED-INCOME FUND -- 4.4%
(Cost $7,619)
964,366 WM High Yield Fund ........................................ 8,072
--------
Total Investment Company Securities
(Cost $154, 406) ..................................... 184,761
--------
PRINCIPAL
AMOUNT
(000S)
- ---------
REPURCHASE AGREEMENT -- 0.1%
(Cost $298)
$298 Agreement with Morgan Stanley,
2.920% dated 12/30/2005, to be
repurchased at $298,000 on
01/03/2006 (Collateralized by U.S.
Treasury Notes, having various
interest rates and maturities,
market value $308,000) ............................ 298
--------
TOTAL INVESTMENTS (Cost $154,704*) .......................... 99.8% 185,059
OTHER ASSETS (LIABILITIES) (NET) ............................ 0.2 320
----- --------
NET ASSETS .................................................. 100.0% $185,379
===== ========
- ----------
* Aggregate cost for federal tax purposes is $159,157.
+ Non-income producing security.
See Notes to Financial Statements.
23
Statements of Assets and Liabilities
WM VARIABLE TRUST STRATEGIC ASSET MANAGEMENT PORTFOLIOS
December 31, 2005
(In thousands)
VT VT VT
VT FLEXIBLE CONSERVATIVE CONSERVATIVE STRATEGIC
INCOME BALANCED VT BALANCED GROWTH GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
----------- ------------ ----------- ------------ ---------
ASSETS:
Investments, at cost ............................... $203,666 $66,543 $551,600 $323,541 $154,704
======== ======= ======== ======== ========
Investments, at value .............................. $222,683 $73,728 $661,020 $388,095 $185,059
Receivable for Portfolio shares sold ............... 306 133 469 377 450
Prepaid expenses and other assets .................. 2 1 3 3 1
-------- ------- -------- -------- --------
Total Assets .................................... 222,991 73,862 661,492 388,475 185,510
-------- ------- -------- -------- --------
LIABILITIES:
Payable for Portfolio shares redeemed .............. 21 3 486 259 33
Investment advisory fee payable .................... 19 6 56 33 16
Administration fee payable ......................... 28 9 84 50 24
Distribution fees payable .......................... 17 6 42 19 10
Accrued legal and audit fees ....................... 25 25 27 26 25
Accrued printing and postage expenses .............. 26 10 78 47 22
Accrued expenses and other payables ................ 1 1 1 1 1
-------- ------- -------- -------- --------
Total Liabilities ............................... 137 60 774 435 131
-------- ------- -------- -------- --------
NET ASSETS. ........................................ $222,854 $73,802 $660,718 $388,040 $185,379
======== ======= ======== ======== ========
NET ASSETS CONSIST OF:
Undistributed net investment income ................ $ 8,185 $ 1,989 $ 14,964 $ 6,081 2,044
Accumulated net realized loss
on investment transactions ...................... (841) (650) (25,981) (37,252) (14,391)
Net unrealized appreciation of investments ......... 19,017 7,185 109,420 64,554 30,355
Paid-in capital .................................... 196,493 65,278 562,315 354,657 167,371
-------- ------- -------- -------- --------
Total Net Assets ................................ $222,854 $73,802 $660,718 $388,040 $185,379
======== ======= ======== ======== ========
NET ASSETS:
Class 1 Shares ..................................... $143,367 $43,818 $462,438 $293,378 $136,966
======== ======= ======== ======== ========
Class 2 Shares ..................................... $ 79,487 $29,984 $198,280 $ 94,662 $ 48,413
======== ======= ======== ======== ========
SHARES OUTSTANDING:
Class 1 Shares ..................................... 10,185 3,631 27,658 16,440 6,939
======== ======= ======== ======== ========
Class 2 Shares ..................................... 5,685 2,502 11,935 5,339 2,465
======== ======= ======== ======== ========
CLASS 1 SHARES:*
Net asset value, offering and redemption price per
share of beneficial interest outstanding ........ $ 14.08 $ 12.07 $ 16.72 $ 17.85 $ 19.74
======== ======= ======== ======== ========
CLASS 2 SHARES:*
Net asset value, offering and redemption price per
share of beneficial interest outstanding ........ $ 13.98 $ 11.98 $ 16.61 $ 17.73 $ 19.64
======== ======= ======== ======== ========
- ----------
* Net asset values are not shown in thousands
See Notes to Financial Statements.
24
Statements of Operations
WM VARIABLE TRUST STRATEGIC ASSET MANAGEMENT PORTFOLIOS
For the Year Ended December 31, 2005
(In thousands)
VT FLEXIBLE VT CONSERVATIVE VT CONSERVATIVE VT STRATEGIC
INCOME BALANCED VT BALANCED GROWTH GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
----------- --------------- ----------- --------------- ------------
INVESTMENT INCOME:
Dividends from investment company securities .. $ 8,881 $2,227 $15,987 $ 6,575 $ 2,247
Interest ...................................... 14 12 218 11 20
------- ------ ------- ------- -------
Total investment income .................... 8,895 2,239 16,205 6,586 2,267
------- ------ ------- ------- -------
EXPENSES:
Investment advisory fee ....................... 220 66 636 375 172
Administration fee ............................ 330 100 955 563 257
Class 2 Shares distribution fees .............. 184 61 449 207 102
Custodian fees ................................ 3 3 3 3 2
Legal and audit fees .......................... 27 23 36 31 26
Registration and filing fees .................. 29 29 30 30 31
Trustees' fees ................................ 4 1 13 8 3
Printing and postage expenses ................. 40 23 103 58 35
Other ......................................... 8 4 20 13 6
------- ------ ------- ------- -------
Total expenses ............................. 845 310 2,245 1,288 634
Fees reduced by custodian credits ............. --* --* --* --* --*
------- ------ ------- ------- -------
Net expenses ............................... 845 310 2,245 1,288 634
------- ------ ------- ------- -------
NET INVESTMENT INCOME ......................... 8,050 1,929 13,960 5,298 1,633
------- ------ ------- ------- -------
NET REALIZED AND UNREALIZED
GAIN/(LOSS) ON INVESTMENTS:
Net realized gain/(loss) on investment
transactions ............................... (438) (107) 1,400 (9,831) (1,690)
Capital gain distributions received ........... 639 259 4,091 3,091 1,761
Net change in unrealized appreciation/
depreciation of investments ................ (1,105) 926 17,751 26,819 11,390
------- ------ ------- ------- -------
Net realized and unrealized gain/(loss) on
investments ................................ (904) 1,078 23,242 20,079 11,461
------- ------ ------- ------- -------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS .................. $ 7,146 $3,007 $37,202 $25,377 $13,094
======= ====== ======= ======= =======
- ----------
* Amount represents less than $500.
See Notes to Financial Statements.
25
Statements of Changes in Net Assets
WM VARIABLE TRUST STRATEGIC ASSET MANAGEMENT PORTFOLIOS
(In thousands)
VT FLEXIBLE VT CONSERVATIVE
INCOME PORTFOLIO BALANCED PORTFOLIO VT BALANCED PORTFOLIO
----------------------- ----------------------- -----------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
12/31/05 12/31/04 12/31/05 12/31/04 12/31/05 12/31/04
---------- ---------- ---------- ---------- ---------- ----------
OPERATIONS:
Net investment income .................... $ 8,050 $ 7,170 $ 1,929 $ 1,513 $ 13,960 $ 11,820
Net realized gain/(loss) on investment
transactions .......................... (438) 1,040 (107) 100 1,400 (1,817)
Capital gain distributions received ...... 639 113 259 42 4,091 693
Net change in unrealized appreciation/
depreciation of investments ........... (1,105) 4,230 926 2,632 17,751 45,389
-------- -------- ------- ------- -------- --------
Net increase in net assets resulting
from operations ....................... 7,146 12,553 3,007 4,287 37,202 56,085
DISTRIBUTIONS TO SHAREHOLDERS
FROM:
Net investment income:
Class 1 Shares ..................... (4,878) (4,929) (980) (737) (8,714) (8,194)
Class 2 Shares ..................... (2,294) (1,693) (534) (297) (3,132) (2,224)
Net realized gains on investments:
Class 1 Shares ..................... (186) -- -- -- -- --
Class 2 Shares ..................... (93) -- -- -- -- --
Net increase/(decrease) in net assets from
Portfolio share transactions:
Class 1 Shares ..................... (5,428) 1,532 2,467 6,646 (22,572) 13,188
Class 2 Shares ..................... 11,780 31,560 8,539 10,676 26,056 62,119
-------- -------- ------- ------- -------- --------
Net increase in net assets ............... 6,047 39,023 12,499 20,575 28,840 120,974
NET ASSETS:
Beginning of year ........................ 216,807 177,784 61,303 40,728 631,878 510,904
-------- -------- ------- ------- -------- --------
End of year .............................. $222,854 $216,807 $73,802 $61,303 $660,718 $631,878
======== ======== ======= ======= ======== ========
Undistributed net investment income
at end of year ........................ $ 8,185 $ 7,162 $ 1,989 $ 1,512 $ 14,964 $ 11,823
======== ======== ======= ======= ======== ========
TAX CHARACTER OF DISTRIBUTIONS PAID:
Ordinary income .......................... $ 7,173 $ 6,622 $ 1,514 $ 1,034 $ 11,846 $ 10,418
Long-term capital gains .................. 278 -- -- -- -- --
-------- -------- ------- ------- -------- --------
Total .................................... $ 7,451 $ 6,622 $ 1,514 $ 1,034 $ 11,846 $ 10,418
======== ======== ======= ======= ======== ========
See Notes to Financial Statements.
26
VT CONSERVATIVE VT STRATEGIC
GROWTH PORTFOLIO GROWTH PORTFOLIO
- ----------------------- -----------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
12/31/05 12/31/04 12/31/05 12/31/04
- ---------- ---------- ---------- ----------
$ 5,298 $ 4,581 $ 1,633 $ 1,061
(9,831) (3,295) (1,690) (3,320)
3,091 564 1,761 294
26,819 37,392 11,390 19,805
-------- -------- -------- --------
25,377 39,242 13,094 17,840
(3,689) (3,986) (868) (773)
(914) (737) (207) (137)
-- -- -- --
-- -- -- --
(26,037) (8,954) (2,087) 11,273
15,889 27,108 11,249 16,152
-------- -------- -------- --------
10,626 52,673 21,181 44,355
377,414 324,741 164,198 119,843
-------- -------- -------- --------
$388,040 $377,414 $185,379 $164,198
======== ======== ======== ========
$ 6,081 $ 4,594 $ 2,044 $ 1,070
======== ======== ======== ========
$ 4,603 $ 4,723 $ 1,075 $ 910
-- -- -- --
-------- -------- -------- --------
$ 4,603 $ 4,723 $ 1,075 $ 910
======== ======== ======== ========
See Notes to Financial Statements.
27
Statements of Changes in Net Assets -- Capital Stock Activity
WM VARIABLE TRUST STRATEGIC ASSET MANAGEMENT PORTFOLIOS
(In thousands)
VT FLEXIBLE VT CONSERVATIVE
INCOME PORTFOLIO BALANCED PORTFOLIO VT BALANCED PORTFOLIO
----------------------- ----------------------- -----------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
12/31/05 12/31/04 12/31/05 12/31/04 12/31/05 12/31/04
---------- ---------- ---------- ---------- ---------- ----------
AMOUNT
CLASS 1:
Sold ................................. $ 12,734 $ 22,582 $ 9,437 $12,881 $ 29,514 $ 54,025
Issued as reinvestment of dividends .. 5,064 4,929 980 737 8,714 8,194
Redeemed ............................. (23,226) (25,979) (7,950) (6,972) (60,800) (49,031)
-------- -------- ------- ------- -------- --------
Net increase/(decrease) .............. $ (5,428) $ 1,532 $ 2,467 $ 6,646 $(22,572) $ 13,188
======== ======== ======= ======= ======== ========
CLASS 2:
Sold ................................. $ 17,886 $ 31,697 $11,296 $12,072 $ 39,460 $ 64,500
Issued as reinvestment of dividends .. 2,387 1,693 534 297 3,132 2,224
Redeemed ............................. (8,493) (1,830) (3,291) (1,693) (16,536) (4,605)
-------- -------- ------- ------- -------- --------
Net increase ......................... $ 11,780 $ 31,560 $ 8,539 $10,676 $ 26,056 $ 62,119
======== ======== ======= ======= ======== ========
SHARES
CLASS 1:
Sold ................................. 911 1,639 799 1,140 1,831 3,563
Issued as reinvestment of dividends .. 367 370 84 67 546 551
Redeemed ............................. (1,664) (1,892) (674) (618) (3,774) (3,234)
-------- -------- ------- ------- -------- --------
Net increase/(decrease) .............. (386) 117 209 589 (1,397) 880
======== ======== ======= ======= ======== ========
CLASS 2:
Sold ................................. 1,289 2,312 963 1,074 2,461 4,281
Issued as reinvestment of dividends .. 174 127 46 27 197 150
Redeemed ............................. (611) (134) (280) (150) (1,032) (305)
-------- -------- ------- ------- -------- --------
Net increase ......................... 852 2,305 729 951 1,626 4,126
======== ======== ======= ======= ======== ========
VT CONSERVATIVE VT STRATEGIC
GROWTH PORTFOLIO GROWTH PORTFOLIO
----------------------- -----------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
12/31/05 12/31/04 12/31/05 12/31/04
---------- ---------- ---------- ----------
AMOUNT
CLASS 1:
Sold .................................. $ 16,106 $ 28,188 $ 18,421 $ 27,082
Issued as reinvestment of dividends ... 3,689 3,986 868 773
Redeemed .............................. (45,832) (41,128) (21,376) (16,582)
-------- -------- -------- --------
Net increase/(decrease) ............... $(26,037) $ (8,954) $ (2,087) $ 11,273
======== ======== ======== ========
CLASS 2:
Sold .................................. $ 23,764 $ 30,924 $ 16,216 $ 18,524
Issued as reinvestment of dividends ... 914 737 207 137
Redeemed .............................. (8,789) (4,553) (5,174) (2,509)
-------- -------- -------- --------
Net increase .......................... $ 15,889 $ 27,108 $ 11,249 $ 16,152
======== ======== ======== ========
SHARES
CLASS 1:
Sold .................................. 947 1,792 989 1,598
Issued as reinvestment of dividends ... 219 257 47 46
Redeemed .............................. (2,698) (2,628) (1,147) (979)
-------- -------- -------- --------
Net increase/(decrease) ............... (1,532) (579) (111) 665
======== ======== ======== ========
CLASS 2:
Sold .................................. 1,410 1,980 876 1,100
Issued as reinvestment of dividends ... 54 48 11 8
Redeemed .............................. (521) (292) (279) (150)
-------- -------- -------- --------
Net increase .......................... 943 1,736 608 958
======== ======== ======== ========
See Notes to Financial Statements.
28
This Page Intentionally Left Blank.
29
Financial Highlights
For a Portfolio share outstanding throughout each period.
VT FLEXIBLE INCOME PORTFOLIO CLASS 1
- ---------------------------- -----------------------------------------------------------
YEARS ENDED DECEMBER 31 2005 2004 2003 2002 2001
-------- -------- -------- -------- -------
NET ASSET VALUE, BEGINNING OF PERIOD .......................... $ 14.10 $ 13.71 $ 12.41 $ 12.23 $ 11.90
-------- -------- -------- -------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ................................... 0.52(6) 0.51(6) 0.56(6) 0.41(6) 0.17(6)
Net realized and unrealized gain/(loss) on investments .. (0.05) 0.35 1.08 (0.15) 0.40
-------- -------- -------- -------- -------
Total from investment operations ........................ 0.47 0.86 1.64 0.26 0.57
-------- -------- -------- -------- -------
LESS DISTRIBUTIONS:
Dividends from net investment income(1) ................. (0.47) (0.47) (0.34) (0.08) (0.15)
Dividends from net realized capital gains ............... (0.02) -- -- -- (0.09)
-------- -------- -------- -------- -------
Total distributions ..................................... (0.49) (0.47) (0.34) (0.08) (0.24)
-------- -------- -------- -------- -------
NET ASSET VALUE, END OF PERIOD ................................ $ 14.08 $ 14.10 $ 13.71 $ 12.41 $ 12.23
======== ======== ======== ======== =======
TOTAL RETURN(2) ............................................... 3.41% 6.47% 13.30% 2.14% 4.84%
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000s) ..................... $143,367 $149,055 $143,283 $125,992 $90,860
Ratio of operating expenses to average net assets(3) .... 0.30% 0.28% 0.30% 0.30% 0.33%
Ratio of net investment income to average net assets .... 3.74% 3.67% 4.33% 3.37% 1.43%
Portfolio turnover rate ................................. 5% 5% 4% 9% 1%
Ratio of operating expenses to average net assets without
fee waivers, expenses reimbursed and/or fees reduced
by credits allowed by the custodian(3)(4) ............ 0.30% 0.28% 0.30% 0.30% 0.33%
VT CONSERVATIVE BALANCED PORTFOLIO CLASS 1
- ---------------------------------- -------------------------------------------------------
YEARS ENDED DECEMBER 31 2005 2004 2003 2002 2001
------- ------- ------- ------- -------
NET ASSET VALUE, BEGINNING OF PERIOD .......................... $ 11.82 $ 11.15 $ 9.73 $ 10.04 $ 9.90
------- ------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ................................... 0.35(6) 0.34(6) 0.36(6) 0.31(6) 0.13
Net realized and unrealized gain/(loss) on investments .. 0.18 0.56 1.29 (0.54) 0.10
------- ------- ------- ------- -------
Total from investment operations ........................ 0.53 0.90 1.65 (0.23) 0.23
------- ------- ------- ------- -------
LESS DISTRIBUTIONS:
Dividends from net investment income(1) ................. (0.28) (0.23) (0.23) (0.07) (0.09)
Dividends from net realized capital gains ............... -- -- -- (0.01) --
------- ------- ------- ------- -------
Total distributions ..................................... (0.28) (0.23) (0.23) (0.08) (0.09)
------- ------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD ................................ $ 12.07 $ 11.82 $ 11.15 $ 9.73 $ 10.04
======= ======= ======= ======= =======
TOTAL RETURN(2) ............................................... 4.59% 8.21% 17.09% (2.26)% 2.40%
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000s) ..................... $43,818 $40,458 $31,600 $20,759 $14,221
Ratio of operating expenses to average net assets(3) .... 0.38% 0.33% 0.31% 0.30% 0.41%
Ratio of net investment income to average net assets .... 3.00% 3.02% 3.48% 3.20% 1.36%
Portfolio turnover rate ................................. 4% 1% 6% 9% 2%
Ratio of operating expenses to average net assets without
fee waivers, expenses reimbursed and/or fees reduced
by credits allowed by the custodian(3)(4) ............ 0.38% 0.33% 0.36% 0.41% 0.53%
- ----------
(1) Includes dividends paid from the short-term portion of capital gain
distributions received from the Underlying Funds.
(2) Total return is not annualized for periods of less than one year. The total
return would have been lower if certain fees had not been waived and/or
expenses reimbursed by the investment advisor or if fees had not been
reduced by credits allowed by the custodian.
(3) The Portfolio will indirectly bear its prorated share of expenses of the
Underlying Funds.
(4) Ratio of operating expenses to average net assets includes expenses paid
indirectly.
(5) The Portfolio commenced selling Class 2 shares on November 6, 2001.
(6) Per share numbers have been calculated using the average shares method.
(7) Annualized.
See Notes to Financial Statements.
30
CLASS 2
- ------------------------------------------------------
2005 2004 2003 2002 2001(5)
- ------- ------- ------- ------ -------
$ 14.02 $ 13.65 $ 12.38 $12.23 $12.18
- ------- ------- ------- ------ ------
0.49(6) 0.47(6) 0.53(6) 0.38(6) 0.02(6)
(0.07) 0.36 1.07 (0.15) 0.03
- ------- ------- ------- ------ ------
0.42 0.83 1.60 0.23 0.05
- ------- ------- ------- ------ ------
(0.44) (0.46) (0.33) (0.08) --
(0.02) -- -- -- --
- ------- ------- ------- ------ ------
(0.46) (0.46) (0.33) (0.08) --
- ------- ------- ------- ------ ------
$ 13.98 $ 14.02 $ 13.65 $12.38 $12.23
======= ======= ======= ====== ======
3.09% 6.24% 13.02% 1.89% 0.41%
$79,487 $67,752 $34,501 $9,416 $ 182
0.55% 0.53% 0.55% 0.55% 0.58%(7)
3.49% 3.42% 4.08% 3.12% 1.18%(7)
5% 5% 4% 9% 1%
0.55% 0.53% 0.55% 0.55% 0.58%(7)
CLASS 2
- ------------------------------------------------------
2005 2004 2003 2002 2001(5)
- ------- ------- ------ ------ -------
$ 11.75 $ 11.11 $ 9.71 $10.04 $ 9.92
- ------- ------- ------ ------ ------
0.32(6) 0.31(6) 0.33(6) 0.29(6) 0.01
0.17 0.55 1.29 (0.54) 0.11
- ------- ------- ------ ------ ------
0.49 0.86 1.62 (0.25) 0.12
- ------- ------- ------ ------ ------
(0.26) (0.22) (0.22) (0.07) --
-- -- -- (0.01) --
- ------- ------- ------ ------ ------
(0.26) (0.22) (0.22) (0.08) --
- ------- ------- ------ ------ ------
$ 11.98 $ 11.75 $11.11 $ 9.71 $10.04
======= ======= ====== ====== ======
4.37% 7.88% 16.83% (2.47)% 1.21%
$29,984 $20,845 $9,128 $2,244 $ 205
0.63% 0.58% 0.56% 0.55% 0.66%(7)
2.75% 2.77% 3.23% 2.95% 1.11%(7)
4% 1% 6% 9% 2%
0.63% 0.58% 0.61% 0.66% 0.78%(7)
See Notes to Financial Statements.
31
Financial Highlights
For a Portfolio share outstanding throughout each period.
VT BALANCED PORTFOLIO CLASS 1
- --------------------- ------------------------------------------------------------
YEARS ENDED DECEMBER 31 2005 2004 2003 2002 2001
-------- -------- -------- -------- --------
NET ASSET VALUE, BEGINNING OF PERIOD .......................... $ 16.08 $ 14.88 $ 12.42 $ 13.91 $ 14.50
-------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ................................... 0.36(6) 0.32(6) 0.33(6) 0.32(6) 0.17(6)
Net realized and unrealized gain/(loss) on investments .. 0.59 1.16 2.46 (1.53) (0.15)
-------- -------- -------- -------- --------
Total from investment operations ........................ 0.95 1.48 2.79 (1.21) 0.02
-------- -------- -------- -------- --------
LESS DISTRIBUTIONS:
Dividends from net investment income(1) ................. (0.31) (0.28) (0.33) (0.28) (0.25)
Dividends from net realized capital gains ............... -- -- -- -- (0.36)
-------- -------- -------- -------- --------
Total distributions ..................................... (0.31) (0.28) (0.33) (0.28) (0.61)
-------- -------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD ................................ $ 16.72 $ 16.08 $ 14.88 $ 12.42 $ 13.91
======== ======== ======== ======== ========
TOTAL RETURN(2) ............................................... 6.01% 10.12% 22.74% (8.78)% 0.13%
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000s) ..................... $462,438 $467,076 $419,273 $334,605 $354,082
Ratio of operating expenses to average net assets(3) .... 0.28% 0.28% 0.29% 0.29% 0.28%
Ratio of net investment income to average net assets .... 2.26% 2.13% 2.50% 2.52% 1.22%
Portfolio turnover rate ................................. 4% 4% 7% 22% 8%
Ratio of operating expenses to average net assets without
fee waivers, expenses reimbursed and/or fees reduced
by credits allowed by the custodian(3)(4) ............ 0.28% 0.28% 0.29% 0.29% 0.28%
VT CONSERVATIVE GROWTH PORTFOLIO CLASS 1
- -------------------------------- ------------------------------------------------------------
YEARS ENDED DECEMBER 31 2005 2004 2003 2002 2001
-------- -------- -------- -------- --------
NET ASSET VALUE, BEGINNING OF PERIOD .......................... $ 16.89 $ 15.32 $ 12.16 $ 14.87 $ 16.46
-------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ................................... 0.25(6) 0.21(6) 0.23(6) 0.23(6) 0.17(6)
Net realized and unrealized gain/(loss) on investments .. 0.93 1.58 3.23 (2.51) (0.72)
-------- -------- -------- -------- --------
Total from investment operations ......................... 1.18 1.79 3.46 (2.28) (0.55)
-------- -------- -------- -------- --------
LESS DISTRIBUTIONS:
Dividends from net investment income(1) ................. (0.22) (0.22) (0.30) (0.41) (0.61)
Dividends from net realized capital gains ............... -- -- -- (0.02) (0.43)
-------- -------- -------- -------- --------
Total distributions ..................................... (0.22) (0.22) (0.30) (0.43) (1.04)
-------- -------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD ................................ $ 17.85 $ 16.89 $ 15.32 $ 12.16 $ 14.87
======== ======== ======== ======== ========
TOTAL RETURN(2) ............................................... 7.04% 11.78% 28.74% (15.52)% (3.56)%
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000s) ..................... $293,378 $303,584 $284,165 $229,564 $309,608
Ratio of operating expenses to average net assets(3) .... 0.29% 0.28% 0.30% 0.29% 0.28%
Ratio of net investment income to average net assets .... 1.47% 1.36% 1.75% 1.77% 1.11%
Portfolio turnover rate ................................. 9% 10% 11% 19% 7%
Ratio of operating expenses to average net assets without
fee waivers, expenses reimbursed and/or fees reduced
by credits allowed by the custodian(3)(4) ............ 0.29% 0.28% 0.30% 0.29% 0.28%
- ----------
(1) Includes dividends paid from the short-term portion of capital gain
distributions received from the Underlying Funds.
(2) Total return is not annualized for periods of less than one year. The total
return would have been lower if certain fees had not been waived and/or
expenses reimbursed by the investment advisor or if fees had not been
reduced by credits allowed by the custodian.
(3) The Portfolio will indirectly bear its prorated share of expenses of the
Underlying Funds.
(4) Ratio of operating expenses to average net assets includes expenses paid
indirectly.
(5) The Portfolio commenced selling Class 2 shares on November 6, 2001.
(6) Per share numbers have been calculated using the average shares method.
(7) The amount shown may not agree with the change in the aggregate gains and
losses of portfolio securities due to the timing of sales and redemptions
of Portfolio shares.
(8) Annualized.
See Notes to Financial Statements.
32
CLASS 2
- ---------------------------------------------------------
2005 2004 2003 2002 2001(5)
- -------- -------- ------- ------- -------
$ 15.99 $ 14.82 $ 12.39 $ 13.91 $13.52
- -------- -------- ------- ------- ------
0.32(6) 0.28(6) 0.30(6) 0.29(6) 0.02(6)
0.58 1.16 2.45 (1.53) 0.37(7)
- -------- -------- ------- ------- ------
0.90 1.44 2.75 (1.24) 0.39
- -------- -------- ------- ------- -----
(0.28) (0.27) (0.32) (0.28) --
-- -- -- -- --
- -------- -------- ------- ------- -----
(0.28) (0.27) (0.32) (0.28) --
- -------- -------- ------- ------- ------
$ 16.61 $ 15.99 $ 14.82 $ 12.39 $13.91
======== ======== ======= ======= ======
5.72% 9.83% 22.46% (9.00)% 2.88%
$198,280 $164,802 $91,631 $31,335 $1,452
0.53% 0.53% 0.54% 0.54% 0.53%(8)
2.01% 1.88% 2.25% 2.27% 0.97%(8)
4% 4% 7% 22% 8%
0.53% 0.53% 0.54% 0.54% 0.53%(8)
CLASS 2
- -------------------------------------------------------
2005 2004 2003 2002 2001(5)
- ------- ------- ------- ------- -------
$ 16.80 $ 15.25 $ 12.13 $ 14.87 $ 14.24
- ------- ------- ------- ------- -------
0.21(6) 0.17(6) 0.20(6) 0.19(6) 0.01(6)
0.91 1.58 3.20 (2.50) 0.62(7)
- ------- ------- ------- ------- -------
1.12 1.75 3.40 (2.31) 0.63
- ------- ------- ------- ------- -------
(0.19) (0.20) (0.28) (0.41) --
-- -- -- (0.02) --
- ------- ------- ------- ------- -------
(0.19) (0.20) (0.28) (0.43) --
- ------- ------- ------- ------- -------
$ 17.73 $ 16.80 $ 15.25 $ 12.13 $ 14.87
======= ======= ======= ======= =======
6.71% 11.58% 28.36% (15.72)% 4.42%
$94,662 $73,830 $40,576 $14,610 $ 1,127
0.54% 0.53% 0.55% 0.54% 0.53%(8)
1.22% 1.11% 1.50% 1.52% 0.86%(8)
9% 10% 11% 19% 7%
0.54% 0.53% 0.55% 0.54% 0.53%(8)
See Notes to Financial Statements.
33
Financial Highlights
For a Portfolio share outstanding throughout each period.
VT STRATEGIC GROWTH PORTFOLIO CLASS 1
----------------------------------------------------------
YEARS ENDED DECEMBER 31 2005 2004 2003 2002 2001
-------- -------- -------- ------- -------
NET ASSET VALUE, BEGINNING OF PERIOD .......................... $ 18.45 $ 16.46 $ 12.55 $ 16.45 $ 18.61
-------- -------- -------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ................................... 0.19(6) 0.14(6) 0.14(6) 0.15(6) 0.16(6)
Net realized and unrealized gain/(loss) on investments .. 1.22 1.96 3.98 (3.47) (1.27)
-------- -------- -------- ------- -------
Total from investment operations ........................ 1.41 2.10 4.12 (3.32) (1.11)
-------- -------- -------- ------- -------
LESS DISTRIBUTIONS:
Dividends from net investment income(1) ................. (0.12) (0.11) (0.21) (0.54) (0.57)
Dividends from net realized capital gains ............... -- -- -- (0.04) (0.48)
-------- -------- -------- ------- -------
Total distributions ..................................... (0.12) (0.11) (0.21) (0.58) (1.05)
-------- -------- -------- ------- -------
NET ASSET VALUE, END OF PERIOD ................................ $ 19.74 $ 18.45 $ 16.46 $ 12.55 $ 16.45
======== ======== ======== ======= =======
TOTAL RETURN(2) ............................................... 7.71% 12.83% 33.07% (20.53)% (6.25)%
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000s) ..................... $136,966 $130,069 $105,077 $73,936 $97,401
Ratio of operating expenses to average net assets(3) .... 0.31% 0.29% 0.31% 0.32% 0.31%
Ratio of net investment income to average net assets .... 1.01% 0.80% 0.99% 1.06% 0.95%
Portfolio turnover rate ................................. 9% 4% 9% 16% 5%
Ratio of operating expenses to average net assets without
fee waivers, expenses reimbursed and/or fees reduced
by credits allowed by the custodian(3)(4) ............ 0.31% 0.29% 0.31% 0.32% 0.31%
- ----------
(1) Includes dividends paid from the short-term portion of capital gain
distributions received from the Underlying Funds.
(2) Total return is not annualized for periods of less than one year. The total
return would have been lower if certain fees had not been waived and/or
expenses reimbursed by the investment advisor or if fees had not been
reduced by credits allowed by the custodian.
(3) The Portfolio will indirectly bear its prorated share of expenses of the
Underlying Funds.
(4) Ratio of operating expenses to average net assets includes expenses paid
indirectly.
(5) The Portfolio commenced selling Class 2 shares on November 6, 2001.
(6) Per share numbers have been calculated using the average shares method.
(7) The amount shown may not agree with the change in the aggregate gains and
losses of portfolio securities due to the timing of sales and redemptions
of Portfolio shares.
(8) Annualized.
See Notes to Financial Statements.
34
CLASS 2
- -------------------------------------------------------
2005 2004 2003 2002 2001(5)
- ------- ------- ------- ------- -------
$ 18.38 $ 16.42 $ 12.54 $ 16.45 $15.54
- ------- ------- ------- ------- ------
0.14(6) 0.09(6) 0.10(6) 0.11(6) 0.01(6)
1.22 1.97 3.98 (3.44) 0.90(7)
- ------- ------- ------- ------- ------
1.36 2.06 4.08 (3.33) 0.91
- ------- ------- ------- ------- ------
(0.10) (0.10) (0.20) (0.54) --
-- -- -- (0.04) --
- ------- ------- ------- ------- ------
(0.10) (0.10) (0.20) (0.58) --
- ------- ------- ------- ------- ------
$ 19.64 $ 18.38 $ 16.42 $ 12.54 $16.45
======= ======= ======= ======= ======
7.47% 12.54% 32.76% (20.59)% 5.86%
$48,413 $34,129 $14,766 $ 2,676 $ 319
0.56% 0.54% 0.56% 0.57% 0.56%(8)
0.76% 0.55% 0.74% 0.81% 0.70%(8)
9% 4% 9% 16% 5%
0.56% 0.54% 0.56% 0.57% 0.56%(8)
See Notes to Financial Statements.
35
Notes to Financial Statements
WM VARIABLE TRUST STRATEGIC ASSET MANAGEMENT PORTFOLIOS
1. ORGANIZATION AND BUSINESS
WM Variable Trust (the "Trust") was organized as a Massachusetts business trust
on January 29, 1993. The Trust is registered under the Investment Company Act of
1940, as amended (the "1940 Act"), as an open-end management investment company.
The Trust consists of 13 funds (each a "Fund" and collectively, the "Funds") and
5 portfolios (each a "Portfolio" and collectively, the "Portfolios"). The VT
Flexible Income, VT Conservative Balanced, VT Balanced, VT Conservative Growth
and VT Strategic Growth Portfolios are included in this report.
The Trust is autthorized to issue an unlimited number of shares of beneficial
interest, each without par value. Each Portfolio offers two classes of shares:
Class 1 shares and Class 2 shares. These shares are issued and redeemed only in
connection with investments in, and payments under, variable annuity and
variable life insurance contracts (collectively "Variable Insurance Contracts"),
as well as certain qualified retirement plans including affiliated plans of
Washington Mutual, Inc. ("Washington Mutual"), a publicly owned financial
services company. At December 31, 2005, "The Washington Mutual Savings Plan"
held approximately 27%, 18%, 8%, 11%, and 32% of the outstanding shares in the
VT Flexible Income, VT Conservative Balanced, VT Balanced, VT Conservative
Growth and VT Strategic Growth Portfolios, respectively.
Each of the Portfolios invests, within certain percentage ranges, in Class 1
Shares of various funds in the Trust and Class I shares of WM High Yield Fund
(Collectively, the "Underlying Funds"). WM Advisors, Inc. (the "Advisor"), a
wholly owned subsidiary of Washington Mutual, serves as investment advisor to
the Portfolios and the Underlying Funds. The Advisor may alter these percentage
ranges when it deems appropriate. The assets of each Portfolio will be allocated
among the Underlying Funds in accordance with its investment objective based on
the Advisor's outlook for the economy, the financial markets and the relative
market valuations of the Underlying Funds. In addition, in order to meet
liquidity needs or for temporary defensive purposes, each Portfolio may invest
its assets directly in cash, stock or bond index futures, options, money market
securities and certain short-term debt instruments, including repurchase
agreements.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies, in conformity
with accounting principles generally accepted in the United States of America
("generally accepted accounting principles"), which are consistently followed by
the Portfolios and the Underlying Funds in the preparation of their financial
statements.
PORTFOLIO VALUATION:
Investments in the Underlying Funds are valued at net asset value per Class 1
share or Class I share of the respective Underlying Funds determined as of the
close of the New York Stock Exchange on each valuation date. Short-term debt
securities that mature in 60 days or less are valued at amortized cost, which
approximates market value.
REPURCHASE AGREEMENTS:
Each Portfolio may enter into repurchase agreement transactions. A repurchase
agreement is a purchase of an underlying debt obligation subject to an agreement
by the seller to repurchase the obligation at an agreed upon price and time. It
is each Portfolio's policy that its custodian take possession of the underlying
collateral securities. The fair value of the collateral is at all times at least
equal to the total amount of the repurchase obligation. In the event of
counterparty default, the Portfolio would seek to use the collateral to offset
losses incurred. There is potential loss to the Portfolio in the event the
Portfolio is delayed or prevented from exercising its right to dispose of the
collateral securities, including the risk of a possible decline in the value of
the underlying securities during the period while the Portfolio seeks to assert
its rights. The Advisor, acting under the supervision of the Portfolios' Board
of Trustees, reviews the value of the collateral and the creditworthiness of
those banks and broker/dealers with whom each Portfolio enters into repurchase
agreements.
SECURITIES TRANSACTIONS AND INVESTMENT INCOME:
Securities transactions are recorded on a trade date basis. Realized gains and
losses from securities sold are recorded on the identified cost basis.
Interest income on debt securities is accrued daily. Dividend income and capital
gain distributions received from the Underlying Funds are 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.
36
Notes to Financial Statements (continued)
WM VARIABLE TRUST STRATEGIC ASSET MANAGEMENT PORTFOLIOS
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS:
Dividends from net investment income and distributions of any net capital gains
earned by a Portfolio are declared and paid annually.
Distributions from income and capital gains are determined in accordance with
federal income tax regulations, which may differ from generally accepted
accounting principles. These differences are primarily due to differing
treatments of income and gains on various investments held by the Portfolios,
redesignated distributions and differing characterization of distributions made
by each Portfolio. At December 31, 2005, the following reclassifications have
been reflected in the components of net assets on the "Statements of Assets and
Liabilities" to present these balances on an income tax basis, excluding certain
temporary differences:
INCREASE DECREASE
UNDISTRIBUTED ACCUMULATED
NET INVESTMENT NET REALIZED
INCOME/(LOSS) GAIN/(LOSS)
NAME OF PORTFOLIO (000S) (000S)
- ----------------- -------------- ------------
VT Flexible Income Portfolio........ $ 145 $ (145)
VT Conservative Balanced Portfolio.. 62 (62)
VT Balanced Portfolio............... 1,027 (1,027)
VT Conservative Growth Portfolio.... 792 (792)
VT Strategic Growth Portfolio....... 416 (416)
The above reclassifications did not impact net assets and are not reflected in
the calculation of net investment income per share presented in the Financial
Highlights.
FEDERAL INCOME TAXES:
It is each Portfolio's policy to qualify as a regulated investment company by
complying with the requirements of the Internal Revenue Code of 1986, as amended
(the "Code"), applicable to regulated investment companies and by distributing
substantially all of its earnings to its shareholders. Therefore, no federal
income or excise tax provision is required.
It is each Portfolio's policy to meet the diversification requirements of the
Code so that variable annuity and variable life contracts funded by the Trust
will not fail to qualify as annuities and life insurance contracts for tax
purposes.
EXPENSES:
General expenses of the Trust are allocated to all the Portfolios based upon the
relative average net assets of each Portfolio. In addition, the Portfolios will
indirectly bear their prorated share of the expenses of the Underlying Funds.
Operating expenses directly attributable to a class of shares are charged to the
operations of that class of shares. Expenses of each Portfolio not directly
attributable to the operations of any class of shares are prorated among the
classes to which the expenses relate based on the relative average net assets of
each class of shares.
USE OF ESTIMATES:
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts and disclosures in the financial statements. Actual
results could differ from those estimates.
3. INVESTMENT ADVISORY AND OTHER TRANSACTIONS
The Advisor provides its proprietary asset allocation services to the
Portfolios, formulates the Portfolios' investment policies, analyzes economic
and market trends, exercises investment discretion over the assets of the
Portfolios and monitors the allocation of each Portfolio's assets and each
Portfolio's performance. For its investment advisory services to the Portfolios,
the Advisor is entitled to a monthly fee at an annual rate of 0.100% of each
Portfolio's average daily net assets up to $1 billion and 0.075% of each
Portfolio's average daily net assets over $1 billion.
WM Shareholder Services, Inc. (the "Transfer Agent"), a wholly owned subsidiary
of Washington Mutual, serves as administrator to the Portfolios. For its
administrative services to the Portfolios, the Transfer Agent is entitled to a
monthly fee at an annual rate of 0.150% of each Portfolio's average daily net
assets up to $1 billion and 0.125% of each Portfolio's average daily net assets
over $1 billion.
Custodian fees for certain Portfolios have been reduced by credits allowed by
the Portfolio's custodian for uninvested cash balances. The Portfolios could
have invested this cash in income producing investments. Fees reduced by credits
allowed by the custodian for the year ended December 31, 2005, are shown
separately in the "Statements of Operations".
37
Notes to Financial Statements (continued)
WM VARIABLE TRUST STRATEGIC ASSET MANAGEMENT PORTFOLIOS
4. TRUSTEES' FEES
No officer or employee of Washington Mutual or its subsidiaries receives any
compensation from the Trust for serving as an officer or Trustee of the Trust.
The Trust, together with other mutual funds advised by the Advisor, pays each
Trustee a per annum retainer plus attendance fees for each meeting at which they
are present. The Lead Trustee, Committee Chairs and Committee Members receive
additional remuneration for these services to the Trust. Trustees are also
reimbursed for travel and out-of-pocket expenses. Each Trustee serves in the
same capacity for all 40 funds within the WM Group of Funds.
5. DISTRIBUTION PLANS
Each of the Portfolios has adopted a distribution plan, pursuant to Rule 12b-1
under the 1940 Act, applicable to Class 2 shares of the Portfolios (a "Rule
12b-1 Plan"). Under the Rule 12b-1 Plan, WM Funds Distributor, Inc. (the
"Distributor"), a registered broker/dealer and a wholly owned subsidiary of
Washington Mutual, may receive a fee at an annual rate of 0.25% of the average
daily net assets attributable to Class 2 shares. This fee may be used to cover
the expenses of the Distributor primarily intended to result in the sale of such
shares, including payments to the Distributor's representatives or others for
selling shares. The Rule 12b-1 Plan shall remain in effect from year to year,
provided such continuance is approved annually by vote of the Board of Trustees,
including a majority of those Trustees who are not "interested persons" of the
Trust, as defined in the 1940 Act, and who have no direct or indirect financial
interest in the operation of the distribution plan, or any agreements related to
the plan, respectively.
6. PURCHASES AND SALES OF INVESTMENTS
The aggregate cost of purchases and proceeds from sales of Underlying Funds for
the year ended December 31, 2005, are as follows:
PURCHASES SALES
NAME OF PORTFOLIO (000S) (000S)
- ----------------- --------- --------
VT Flexible Income Portfolio........ $18,225 $10,450
VT Conservative Balanced Portfolio.. 14,628 2,675
VT Balanced Portfolio............... 41,448 24,370
VT Conservative Growth Portfolio.... 32,212 39,270
VT Strategic Growth Portfolio....... 27,279 15,250
7. CAPITAL LOSS CARRYFORWARDS
At December 31, 2005, the following Portfolios have available for federal income
tax purposes unused capital losses as follows:
(IN THOUSANDS)
-----------------------------------------
EXPIRING EXPIRING EXPIRING EXPIRING
NAME OF PORTFOLIO IN 2010 IN 2011 IN 2012 IN 2013
- ----------------- -------- -------- -------- --------
VT Balanced Portfolio............. $3,589 $3,460 $7,358 $ --
VT Conservative Growth Portfolio.. 5,709 6,564 8,756 6,832
VT Strategic Growth Portfolio..... 3,815 1,560 4,447 116
8. POST OCTOBER LOSS
Under the current tax law, capital and currency losses realized after October
31, may be deferred and treated as occurring on the first day of the following
fiscal year. For the year ended December 31, 2005, the following Portfolios have
elected to defer capital losses occurring between November 1, 2005 and December
31, 2005 as follows:
CAPITAL LOSSES
NAME OF PORTFOLIO (000S)
- ----------------- --------------
VT Conservative Balanced Portfolio.. $43
Such losses will be treated as arising on the first day of the year ended
December 31, 2006.
38
Notes to Financial Statements (continued)
WM VARIABLE TRUST STRATEGIC ASSET MANAGEMENT PORTFOLIOS
9. COMPONENTS OF DISTRIBUTABLE EARNINGS
At December 31, 2005, the components of distributable earnings on a tax basis
are as follows:
(IN THOUSANDS)
-----------------------------------------------------------------------------
VT FLEXIBLE VT CONSERVATIVE VT CONSERVATIVE VT STRATEGIC
INCOME BALANCED VT BALANCED GROWTH GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
----------- --------------- ----------- --------------- ------------
Gross tax unrealized appreciation.. $18,466 $6,540 $97,844 $58,187 $26,449
Gross tax unrealized depreciation.. (393) (164) -- (3,025) (547)
------- ------ ------- ------- -------
Net tax unrealized appreciation.... $18,073 $6,376 $97,844 $55,162 $25,902
======= ====== ======= ======= =======
Undistributed ordinary income...... $ 8,241 $2,008 $14,964 $ 6,081 $ 2,044
Undistributed long-term gains...... $ 46 $ 183 $ -- $ -- $ --
10. 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 annual report, which is available online at wmgroupoffunds.com or by
calling 800-222-5852, contains more information regarding the Underlying Funds.
INVESTMENT OBJECTIVES OF UNDERLYING FUNDS:
The investment objectives of the Underlying Funds are as follows:
WM VT REIT Fund Seeks to provide a high level of
current income and intermediate to
long-term capital appreciation.
WM VT Equity Income Fund Seeks to provide a relatively high
level of current income and long-term
growth of income and capital.
WM VT Growth & Income Fund Seeks to provide long-term capital
growth. Current income is a secondary
consideration.
WM VT West Coast Equity Fund Seeks to provide long-term growth of
capital.
WM VT Mid Cap Stock Fund Seeks to provide long-term capital
appreciation.
WM VT Growth Fund Seeks to provide long-term capital
appreciation.
WM VT Small Cap Value Fund Seeks to provide long-term capital
appreciation.
WM VT Small Cap Growth Fund Seeks to provide long-term capital
appreciation.
WM VT International Growth Fund Seeks to provide long-term capital
appreciation.
WM VT Short Term Income Fund Seeks to provide as high a level of
current income as is consistent with
prudent investment management and
stability of principal.
WM VT U.S. Government Securities Fund Seeks to provide a high level of
current income consistent with safety
and liquidity.
WM VT Income Fund Seeks to provide a high level of
current income consistent with
preservation of capital.
WM High Yield Fund Seeks to provide a high level of
current income.
RISK FACTORS OF UNDERLYING FUNDS:
While no individual fund is intended as a complete investment program, this is
especially true for funds that concentrate their investments such as those
investing in particular industries or regions.
The VT REIT Fund concentrates its investments in real estate investment trust
("REIT") securities or debt securities of issuers that are principally engaged
in the U. S. real estate or related industries. The VT REIT Fund could be
adversely impacted by economic trends within this industry.
The VTWest Coast Equity Fund, which invests significant portions of its assets
in Alaska, California, Oregon and Washington, generally has more exposure to
regional economic risks than a fund making investments more broadly.
The WM High Yield Fund concentrates its investments in lower rated debt
securities, which may be more susceptible to adverse economic conditions than
investment grade holdings. These securities are often subordinated to the prior
claims of other senior lenders, and uncertainties exist as to an issuer's
ability to meet principal and interest payments.
39
Notes to Financial Statements (continued)
WM VARIABLE TRUST STRATEGIC ASSET MANAGEMENT PORTFOLIOS
Certain Underlying Funds may invest a portion of their assets in foreign
securities of developing or emerging markets countries; enter into forward
foreign currency transactions; lend their portfolio securities; enter into a
stock index, interest rate and currency futures contracts, and options on such
contracts; enter into interest rate swaps or purchase or sell interest rate caps
or floors; enter into other types of options transactions; make short sales;
purchase zero coupon and payment-in-kind bonds; enter into repurchase or reverse
repurchase agreements; purchase and sell "when-issued" securities and engage in
"delayed-delivery" transactions; and enter into various other investment
practices, each with inherent risks. The risks involved in investing in foreign
securities include those resulting from future adverse political and economic
developments and the possible imposition of currency exchange restrictions or
other foreign laws or restrictions. The risks involved in investing in a high
concentration of a single sector include those resulting from future adverse
political and economic developments or regulatory occurrences and the potential
for adverse effects to the financial conditions of the industries within the
sector due to market fluctuations.
PORTFOLIO OWNERSHIP IN THE UNDERLYING FUNDS:
At December 31, 2005, the Portfolios hold investments in a number of the
Underlying Funds. The figures presented below represent the percentage of shares
outstanding of each Fund owned by the Portfolios:
PORTFOLIOS
------------------------------------------------------------------------------------
VT FLEXIBLE VT CONSERVATIVE VT CONSERVATIVE VT STRATEGIC
INCOME BALANCED VT BALANCED GROWTH GROWTH
NAME OF FUND PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO TOTAL
- ------------ ----------- --------------- ----------- --------------- ------------ -----
VT REIT Fund ......................... 4.7% 2.9% 42.8% 30.8% 14.6% 95.8%
VT Equity Income Fund................. 3.4% 2.3% 27.2% 20.9% 10.4% 64.2%
VT Growth & Income Fund............... 5.3% 2.5% 33.8% 25.8% 13.8% 81.2%
VT West Coast Equity Fund............. 1.9% 1.9% 26.9% 21.0% 11.7% 63.4%
VT Mid Cap Stock Fund................. 5.9% 2.3% 33.9% 24.8% 14.9% 81.8%
VT Growth Fund........................ 5.3% 2.5% 35.8% 26.3% 14.3% 84.2%
VT Small Cap Value Fund............... 6.8% 2.8% 41.2% 32.5% 16.5% 99.8%
VT Small Cap Growth Fund.............. 4.9% 1.7% 26.5% 22.0% 12.1% 67.2%
VT International Growth Fund.......... -- 3.1% 38.1% 31.7% 17.2% 90.1%
VT Short Term Income Fund............. 50.2% 7.9% 13.3% -- -- 71.4%
VT U.S. Government Securities Fund.... 25.7% 7.2% 41.5% 10.8% -- 85.2%
VT Income Fund........................ 26.8% 6.4% 34.7% 7.6% -- 75.5%
High Yield Fund*...................... 1.8% 0.5% 3.7% 1.3% 1.0% 8.3%
- ----------
* Does not include approximately 60.3% of the High Yield Fund held by WM
Strategic Asset Management Portfolios, LLC, which is managed in a style
substantially identical to that of the Portfolios.
OTHER FACTORS:
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 the Underlying Funds used for investment by a
Portfolio 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 and since the Underlying Funds that receive
additional cash will have to invest such cash. While it is impossible to predict
the overall impact of these transactions over time, there could be adverse
effects on portfolio management to the extent that the Underlying Funds may be
required to sell securities or invest cash at times when they would not
otherwise do so. These transactions could also have tax consequences if sales of
securities resulted in gains and could also increase transaction costs. The
Advisor is committed to minimizing such impact on the Underlying Funds to the
extent it is consistent with pursuing the investment objectives of the
Portfolios. The Advisor may nevertheless face conflicts in fulfilling its dual
responsibilities of the Portfolios and the the Underlying Funds. The Advisor
will, at all times, monitor the impact on the Underlying Funds of transactions
by the Portfolios.
40
Report of Independent Registered Public Accounting Firm
TO THE TRUSTEES AND SHAREHOLDERS OF WM VARIABLE TRUST:
We have audited the accompanying statements of assets and liabilities, including
the portfolios of investments, of WM Variable Trust Strategic Growth Portfolio,
WM Variable Trust Conservative Growth Portfolio, WM Variable Trust Balanced
Portfolio, WM Variable Trust Conservative Balanced Portfolio and WM Variable
Trust Flexible Income Portfolio (collectively, the "Portfolios") as of December
31, 2005, and the related statements of operations for the year then ended, the
statements of changes in net assets for each of the two years in the period then
ended, and the financial highlights for each of the five years in the period
then ended. These financial statements and financial highlights are the
responsibility of the Portfolios' management. Our responsibility is to express
an opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. The
Portfolios are not required to have, nor were we engaged to perform, an audit of
their internal control over financial reporting. Our audits included
consideration of internal control over financial reporting as a basis for
designing audit procedures that are appropriate in the circumstances, but not
for the purpose of expressing an opinion on the effectiveness of the Portfolios'
internal control over financial reporting. Accordingly, we express no such
opinion. An audit also includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. Our procedures
included confirmation of securities owned as of December 31, 2005, by
correspondence with the custodian and transfer agents. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Portfolios as of December 31, 2005, the results of their operations for the year
then ended, the changes in their net assets for each of the two years in the
period then ended, and their financial highlights for each of the five years in
the period then ended, in conformity with accounting principles generally
accepted in the United States of America.
Deloitte & Touche LLP
Boston, Massachusetts
February 17, 2006
41
Supplemental Information (unaudited)
OTHER PORTFOLIO INFORMATION
TAX INFORMATION:
The following tax information for the fiscal year ended December 31, 2005 is
provided pursuant to provisions of the Code.
The amounts of long term capital gains designated are as follows (in thousands):
NAME OF PORTFOLIO
- -----------------
VT Flexible Income Portfolio ......... $279
VT Conservative Balanced Portfolio ... 183
Of the distributions made by the following Portfolios, the corresponding
percentages represent the amount of each distribution which may qualify for the
dividends received deduction available to corporate shareholders.
NAME OF PORTFOLIO
- -----------------
VT Flexible Income Portfolio ......... 7.47%
VT Conservative Balanced Portfolio ... 16.15%
VT Balanced Portfolio ................ 31.03%
VT Conservative Growth Portfolio ..... 61.15%
VT Strategic Growth Portfolio ........ 100.00%
SCHEDULES OF INVESTMENTS:
The Trust files its complete schedule of portfolio holdings with the Securities
and Exchange Commission ("SEC") for the first and third quarters of each fiscal
year on Form N-Q. The Trust's Form N-Q is available at http://www. sec. gov and
also may be reviewed and copied at the SEC's Public Reference Room ("PRR") in
Washington, DC. Information regarding the operation of the PRR may be obtained
by calling 800-SEC-0330.
PROXY VOTING INFORMATION:
The policies and procedures that the Trust uses to determine how to vote proxies
relating to portfolio securities held by the Fund are included in the Trust's
Statement of Additional Information which is available, without charge and upon
request, by calling 800-222-5852. Information regarding how the Fund voted
proxies relating to portfolio securities during the most recent twelve-month
period ended June 30 is available at http://www. wmgroupoffunds.com. This
information is also available at http://www.sec.gov.
TRUSTEES AND OFFICERS INFORMATION
NAME, AGE, AND ADDRESS(1) PRINCIPAL OCCUPATION(S) OTHER DIRECTORSHIPS
OF NON-INTERESTED TRUSTEE(4) LENGTH OF TIME SERVED(2) DURING PAST 5 YEARS HELD BY TRUSTEE
- ---------------------------- ------------------------- ------------------------------------- ----------------------------------
Wayne L. Attwood, M.D. Composite Funds-11 years Retired doctor of internal medicine None.
Age 76 WM Group of Funds-7 years and gastroenterology.
(Retired February 2005)
Kristianne Blake Composite Funds-3 years CPA specializing in personal Avista Corporation; Frank Russell
Age 51 WM Group of Funds-7 years financial and tax planning. Investment Company; Russell
Investment Funds.
Edmond R. Davis, Esq. Sierra Funds-8 years Partner at the law firm of Davis & Braille Institute of America, Inc;
Age 77 WM Group of Funds-7 years Whalen LLP. Prior thereto, partner at Children's Bureau of Southern
the law firm of Brobeck, Phlegar & California, Children's Bureau
Harrison, LLP. Foundation; Fifield Manors, Inc.
Carrol R. McGinnis Griffin Funds-3 years Private investor since 1994. Prior Baptist Foundation of Texas;
Age 62 WM Group of Funds-6 years thereto, President and Chief Concord Trust Company.
Operating Officer of Transamerica
Fund Management Company.
Alfred E. Osborne, Jr., Ph.D. Sierra Funds-7 years Senior Associate Dean, University of Nordstrom Inc.; K2, Inc.; First
Age 61 WM Group of Funds-7 years California at Los Angeles Anderson Pacific Advisors' Funds, EMAK
Graduate School of Management, and Worldwide, Inc.; Member of
Faculty Director of the Harold Price Investment Company Institute
Center for Entrepreneurial Studies, National Board of Directors;
University of California at Los Director of Independent Directors
Angeles. Council and Member of
Communication & Education
Committees.
Daniel L. Pavelich Composite Funds-1 year Retired Chairman and CEO of BDO Catalytic, Inc.; Vaagen Bros.
Age 61 WM Group of Funds-7 years Seidman. Lumber, Inc.
42
Supplemental Information (unaudited) (continued)
NAME, AGE, AND ADDRESS(1) PRINCIPAL OCCUPATION(S) OTHER DIRECTORSHIPS
OF NON-INTERESTED TRUSTEE(4) LENGTH OF TIME SERVED(2) DURING PAST 5 YEARS HELD BY TRUSTEE
- ---------------------------- ------------------------- ------------------------------------- ----------------------------------
Jay Rockey Composite Funds-3 years Founder and Senior Counsel of The Downtown Seattle Association;
Rockey
Age 77 WM Group of Funds-7 years Company, now Rockey, Hill & Knowlton. WSU Foundation
Richard C. Yancey Composite Funds-23 years Retired Managing Director of Dillon AdMedia Partners Inc.; Czech and
(Lead Trustee) WM Group of Funds-7 years Reed & Co., an investment bank now Slovak American Enterprise Fund
Age 79 part of UBS.
NAME, AGE, AND ADDRESS(1) PRINCIPAL OCCUPATION(S) OTHER DIRECTORSHIPS
OF NON-INTERESTED TRUSTEE(4) LENGTH OF TIME SERVED(2) DURING PAST 5 YEARS HELD BY TRUSTEE
- ---------------------------- ------------------------- ------------------------------------- ----------------------------------
Anne V. Farrell Composite Funds-4 years President Emeritus of the Seattle Washington Mutual, Inc.;
Age 70 WM Group of Funds-7 years Foundation. Recreational
Equipment Inc.
Michael K. Murphy Composite Funds-3 years Chairman of CPM Development Washington Mutual, Inc.
Age 68 WM Group of Funds-7 years Corporation.
(Retired November 2005)
William G. Papesh Composite Funds-9 years President and Director of the Member of Investment Company
(President and CEO) WM Group of Funds-7 years Advisor, Transfer Agent and Institute Board of Governors.
Age 62 Distributor.
NAME, AGE, AND ADDRESS(1) POSITION(S) HELD WITH REGISTRANT & PRINCIPAL OCCUPATION(S)
OF OFFICER(4) LENGTH OF TIME SERVED DURING PAST 5 YEARS
- ------------------------- ------------------------------------------------ ---------------------------------------------
Wendi B. Bernard Assistant Vice President and Assistant Secretary Vice President of the Advisor.
Age 37 since 2003.
Jeffrey L. Lunzer, CPA First Vice President, Chief Financial Officer First Vice President of the Advisor, Transfer
Age 44 and Treasurer since 2003. Agent and Distributor. Prior to 2003, senior
level positions at the Columbia Funds and
Columbia Management Company.
William G. Papesh President and CEO since 1987. President and Director of the Advisor. Senior
Age 62 Prior to 1987, other officer positions since Vice President and Director of the Transfer
1972. Agent and Distributor.
Gary J. Pokrzywinski Senior Vice President since 2004. First Vice Senior Vice President and Director of the
Age 44 President since 2001. Prior to 2001, Vice Advisor, Transfer Agent and Distributor.
President since 1999. Chief Investment Officer of the Advisor.
Debra Ramsey Senior Vice President since 2004. Senior Vice President and Director of the
Age 52 Advisor. President and Director of the
Transfer Agent and Distributor.
John T. West First Vice President, Secretary, Chief First Vice President of the Advisor, Transfer
Age 50 Compliance Officer and Anti-Money Laundering Agent and Distributor.
Compliance Officer since 2004. Prior to 2004,
various other officer positions since 1993.
Randall L. Yoakum Senior Vice President since 2001. Senior Vice President and Chief Investment
Age 46 Prior to 2001, First Vice President since 1999. Strategist of the Advisor.
Note: The Statement of Additional Information includes additional information
about Fund Trustees and Officers and is available, without charge, upon request
by calling 800-222-5852.
(1) The address for all Trustees and Officers is 1201 Third Avenue, 22nd Floor,
Seattle, WA, 98101.
(2) The Sierra Funds merged with the Composite Funds on March 23, 1998, to form
the WM Group of Funds. The Griffin Funds merged with the WM Group of Funds
on March 5, 1999.
(3) Trustees are considered interested due to their affiliation with Washington
Mutual, Inc.
(4) The Trustees and Officers serve in these capacities for the 40 Portfolios
and Funds in the Fund Complex. Each Trustee and officer shall hold the
indicated positions until his or her resignation, retirement or removal.
43
Supplemental Information (unaudited) (continued)
PORTFOLIO MANAGER
Craig V. Sosey
VT U.S. Government Securities Fund WM Advisors, Inc.
Note: Pages 44 and 45 provide information about certain WM Funds in which the VT
SAM Portfolios invest a significant portion of their assets. For additional
information about these and other WM Funds, please see the WM Variable Trust
annual 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. Performance shown below does not account for fees,
expenses,
AVERAGE ANNUAL TOTAL RETURNS(1) AS OF DECEMBER 31, 2005
1-Year 5-Year 10-Year Since Inception Inception Date
------ ------ ------- --------------- --------------
CLASS 1 SHARES 2.27% 4.93% 5.47% 5.44% 5/6/93
CLASS 2 SHARES 2.02% -- -- 3.47% 11/6/01
Citigroup Mortgage Index(2) 2.72% 5.50% 6.20% 6.30%
PORTFOLIO COMPOSITION (3)
(PIE CHART)
As of As of
Asset Class 12/31/05 12/31/04 Change
- ----------- -------- -------- ------
FHLMC/FGLMC 34% 32% +2%
FNMA 24% 24% 0%
CMOs 22% 19% +3%
GNMA 6% 10% -4%
U.S. Government Agency 6% 4% +2%
U.S. Treasuries 5% 8% -3%
Cash Equivalents 3% 3% 0%
(1) Performance reflects ongoing fund expenses, which may have been waived, and
assumes reinvestment of all dividends and capital gains. Performance does
not reflect the impact of federal, state, or municipal taxes. If it did,
performance would be lower. The VT U.S. Government Securities Fund's
performance in 1995 and 1998 benefited from the agreement of WM Advisors
and its affiliates to limit the Fund's expenses. On 3/1/04, the investment
policies of the Fund were modified. As a result, the Fund's performance for
periods prior to that date may not be representative of the performance it
would have achieved had its current investment policies been in place.
44
PORTFOLIO MANAGERS
John R. Friedl, CFA and
Gary J. Pokrzywinski, CFA
WM Advisors, Inc. VT Income Fund
and charges of any variable insurance contract or retirement plan. If these
fees were reflected, performance would be lower.
Fixed-income investments are subject to interest rate risk, and their value will
decline as interest rates rise. VT U.S. Government Securities Fund: Neither the
principal of government bond funds nor their yields are guaranteed by the U.S.
government.
VT Income Fund: Lower-rated securities are subject to additional credit and
default risks.
AVERAGE ANNUAL TOTAL RETURNS(1) AS OF DECEMBER 31, 2005
1-Year 5-Year 10-Year Since Inception Inception Date
------ ------ ------- --------------- --------------
CLASS 1 SHARES 2.40% 7.05% 6.20% 6.49% 5/7/93
CLASS 2 SHARES 2.06% -- -- 5.92% 11/6/01
Citigroup Broad Investment-Grade
Bond Index(2) 2.57% 5.93% 6.19% 6.42%
PORTFOLIO COMPOSITION (3)
(PIE CHART)
As of As of
Asset Class 12/31/05 12/31/04 Change
- ----------- -------- -------- ------
Domestic Corporate Bonds 58% 59% -1%
Mortgage-Backed Bonds 22% 21% +1%
Foreign Corporate
Bonds (U.S.$) 8% 10% -2%
U.S. Treasuries 7% 6% +1%
Equities 1% 0% +1%
Foreign Government
Bonds (U.S.$) 1% 1% 0%
Cash Equivalents 3% 3% 0%
(2) See page 18 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 4/30/93. Indices are
unmanaged, and individuals cannot invest directly in an index.
(3) May not reflect the current portfolio composition.
45
(WM VARIABLE TRUST LOGO)
Investment returns and unit value of an investment will fluctuate, and an
investor's units when redeemed may be worth more or less than their original
cost.
This annual report is published as general information for the shareholders of
the WM Variable Trust. This material is not authorized for distribution unless
preceded or accompanied by a current prospectus that includes more information
regarding the risk factors, expenses, policies, and objectives of the contract.
Investors should read the prospectus carefully before investing. To obtain an
additional prospectus, please contact your Investment Representative or call
800-222-5852.
The WM Variable Trust Funds are advised by WM Advisors, Inc. (WMAI). They are
available through variable insurance products distributed by WM Funds
Distributor, Inc. (WMFD) and sold through WM Financial Services, Inc. (WMFS) and
independent broker/ dealers. WMAI, WMFD, and WMFS are affiliates of Washington
Mutual, Inc.
Distributed by:
WM Funds Distributor, Inc.
Member NASD
(WM VARIABLE TRUST LOGO)
WM Funds Distributor, Inc.
1100 Investment Blvd., Suite 200
El Dorado Hills, CA 95762
PRSRT STD
U.S Postage
PAID
Permit 2310
Sacramento, CA
ITEM 2. CODE OF ETHICS
The registrant has adopted a code of ethics that applies to the registrant's
principal executive officer, principal financial officer and principal
accounting officer, a copy of which is attached hereto.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT
The Board of Trustees of the registrant has determined that there is at least
one Trustee who is an audit committee financial expert serving on its Audit
Committee and has designated Daniel L. Pavelich as an "audit committee financial
expert." Mr. Pavelich is "independent," as such term has been defined by the
Securities and Exchange Commission (the "SEC") for purposes of implementing
Section 407 of the Sarbanes Oxley Act of 2002. The SEC has stated that the
designation or identification of a person as an audit committee financial expert
pursuant to this Item 3 of Form N-CSR does not impose on such person any duties,
obligations or liability that are greater than the duties, obligations and
liability imposed on such person as a member of the Audit Committee and the
Board of Trustees in the absence of such designation or identification.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES
(a) Audit Fees
2004 2005
- ---- ----
$456,700 $472,800
(b) Audit-Related Fees
2004 2005
- ---- ----
None None
For the last two fiscal years, no audit-related fees were required to be
approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X.
(c) Tax Fees
2004 2005
- ---- ----
$39,295 $42,912
The tax fees consist of fees billed in connection with reviewing the federal
regulated investment company income tax returns for WM Variable Trust for the
tax years ended December 31, 2004 and December 31, 2005.
(d) All Other Fees
For the last two fiscal years, no other fees were required to be approved
pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X.
(e) (1) Pre-approval Policies and Procedures
Pursuant to the Audit Committee charter, the Audit Committee of the registrant
will review and pre-approve or disapprove its principal accountant's engagement
for all services with the registrant and its principal accountant's engagement
for non-audit services with the registrant's investment advisor (not including a
sub-advisor whose role is primarily portfolio management and is sub-contracted
or overseen by another investment advisor) and any entity controlling,
controlled by or under common control with the investment advisor that provides
ongoing services to the funds in accordance with paragraph (c)(7)(i) of Rule
2-01 of Regulation S-X, if the engagement relates directly to the operations and
financial reporting of the registrant.
(2) None of the services described in paragraphs (b) through (d) of this Item 4
were approved by the Audit Committee pursuant to paragraph (c)(7)(i)(C) of Rule
2-01 of Regulation S-X.
(f) Not applicable.
(g) For the fiscal year ended December 31, 2005, the registrant's principal
accountant billed aggregate non-audit fees in the amount of $42,912 for services
rendered to the registrant, WM Advisors, Inc., WM Funds Distributor, Inc., WM
Shareholder Services, Inc. and WM Financial Services, Inc. For the fiscal year
ended December 31, 2004, the registrant's principal accountant billed aggregate
non-audit fees in the amount of $78,295 for services rendered to the registrant,
WM Advisors, Inc., WM Funds Distributor, Inc., WM Shareholder Services, Inc. and
WM Financial Services, Inc.
(h) The Audit Committee has considered whether the provision of non-audit
services that were rendered to the registrant's investment advisor (not
including any sub-advisor whose role is primarily portfolio management and is
subcontracted with or overseen by another investment advisor), and any entity
controlling, controlled by, or under common control with the investment advisor
that provides ongoing services to the registrant that were not pre-approved
pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible
with maintaining the principal accountant's independence.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS
Not Applicable.
ITEM 6. SCHEDULE OF INVESTMENTS
Schedule is included as part of the report to shareholders filed under Item 1 of
this Form.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES
Not Applicable.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES
Not Applicable.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANIES AND AFFILIATED PURCHASERS
Not Applicable.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable.
ITEM 11. CONTROLS AND PROCEDURES:
(a) The registrant's principal executive officer and principal financial officer
have concluded, based on their evaluation of the effectiveness of the design and
operation of the registrant's disclosure controls and procedures as of a date
within 90 days of the filing date of this report on Form N-CSR, that the design
and operation of such procedures are effective to provide reasonable assurance
that information required to be disclosed by the registrant in the reports that
it files or submits on Form N-CSR is recorded, processed, summarized, and
reported within the time periods specified in the SEC's rules and forms.
(b) There have been no changes in the registrant's internal control over
financial reporting (as defined in Rule 30a-3(d) under the Investment Company
Act of 1940, as amended) that occurred during the registrant's second fiscal
half-year that have materially affected, or are reasonably likely to materially
affect, the registrant's internal control over financial reporting.
ITEM 12. EXHIBITS
(a) Registrant's Code of Ethics. The registrant's code of ethics required to
be disclosed under Item 2 of Form N-CSR attached hereto at Exhibit 99.CODE ETH.
(b) A separate certification for each principal executive officer and principal
financial officer of the registrant as required by Rule 30a-2 of the Investment
Company Act of 1940 attached hereto as Exhibit 99.CERT.
(c) Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
attached hereto as Exhibit 99.906 CERT.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
WM Variable Trust
By: /s/William G. Papesh
William G. Papesh
President and Chief Executive Officer
Date: March 3, 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 an on the
dates indicated.
By: /s/Jeffrey L. Lunzer
Jeffrey L. Lunzer
Treasurer and Chief Financial Officer
Date: March 3, 2006
By: /s/William G. Papesh
William G. Papesh
President and Chief Executive Officer
Date: March 3, 2006