UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR/A
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number 811-05775
WM Trust II
(Exact name of registrant as specified in charter)
1201 Third Avenue, WMT 0822, Seattle, WA 98101
(Address of principal executive offices) (Zip code)
Jeffrey L. Lunzer
1201 Third Avenue, WMT 0822, Seattle, WA 98101
(Name and address of agent for service)
Registrant's telephone number, including area code: (206) 913-5800
Date of fiscal year end: October 31, 2006
Date of reporting period: October 31, 2006
ITEM 1. REPORTS TO STOCKHOLDERS
(WM GROUP OF FUNDS LOGO)
Common sense. Uncommon solutions.(R)
Annual Report October 31, 2006 (GRAPHIC)
WM Group of Funds transitions
to Principal Funds.
See article on page 2.
(PRINCIPAL(R) FUNDS LOGO)
WM GROUP OF FUNDS
AT THE WM GROUP OF FUNDS, OUR PASSION IS PIECING INDIVIDUAL INVESTMENTS TOGETHER
INTO COMPREHENSIVE PORTFOLIOS TO MAKE YOUR FINANCIAL PLAN MORE EFFECTIVE.
(GRAPHIC)
Table of Contents
1 Letter from the President
2 WM Group of Funds Transitions to Principal Funds
4 Economy & Financial Markets: Review & Outlook
WM Group of Funds Performance and Investment Strategy:
6 REIT Fund
8 Equity Income Fund
10 Growth & Income Fund
12 West Coast Equity Fund
14 Mid Cap Stock Fund
16 Growth Fund
18 Small Cap Value Fund
20 Small Cap Growth Fund
22 International Growth Fund
24 Short Term Income Fund
26 U.S. Government Securities Fund
28 Income Fund
30 High Yield Fund
32 California Municipal Fund
34 California Insured Intermediate Municipal Fund
36 Glossary
37 Expense Information
39 Financial Statements
119 Notes to Financial Statements
129 Report of Independent Registered Public Accounting Firm
130 Supplemental Information
NOT FDIC INSURED
MAY LOSE VALUE - NOT A DEPOSIT - NO BANK GUARANTEE
NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY
Dear Shareholder;
(PHOTO OF WILLIAM G. PAPESH)
As we enter a new fiscal year, our fund family is moving rapidly to complete
preparations for the acquisition of WM Advisors, Inc. and its subsidiaries by
the Principal Financial Group(R) (The Principal(R)). We are extremely
enthusiastic about the opportunity to join a company where asset management and
accumulation form the core of its business and where the advisory group,
Principal Global Investors, shares our expertise in asset allocation. Just as
the WM Group of Funds is the 4th largest manager of target-risk asset allocation
funds, The Principal is the 4th largest manager of target-date asset allocation
funds.(1) Together, we will rank 4th in the overall management of asset
allocation funds nationally.
On the next few pages, we introduce you to our future parent company and its
world-class investment management group. I'd also like to briefly explain below
how the WM Group of Funds will transition through this process.
EVOLUTION OF A FUND COMPLEX
To summarize, the 22 existing retail WM Funds will become part of Principal
Investors Fund, Inc. (Principal Investors Funds) as follows:
- - 15 funds will continue to be managed by their current portfolio management
teams.
- - 7 funds will be merged into existing Principal Investors Funds and
thereafter will be managed by Principal Global Investors or one of its
premier boutique asset management affiliates.(2)
We arrived at these decisions through careful consideration of many factors, two
of which stand out with respect to their potential impact on shareholders:
- - SHAREHOLDER EXPENSES: Each share class of a surviving fund will have an
expense ratio equal to or lower than that of the corresponding share class
of the current WM Fund. In certain instances, this will be achieved through
an expense cap agreed to by The Principal.(3)
- - PERFORMANCE: With respect to the 7 WM Funds that will merge into existing
Principal Investors Funds, the Principal Investors Funds had better
historical performance than the merged fund for the 1-, 3-, and 5-year
periods ended September 30, 2006, as applicable.(4) Please note that past
performance does not guarantee future results.
After the fund mergers in January 2007, the combined lineup will consist of 48
retail funds spanning a broad array of asset allocation, equity, and
fixed-income investments.
CONTINUITY OF MANAGEMENT AND STEWARDSHIP
The Principal Funds complex also will retain many of the people who have served
you and your investment needs over the previous years:
- - WM ADVISORS: Our investment management group will have a new name--Edge
Asset Management, Inc.--but it will remain in Seattle and employ many of WM
Advisors' portfolio managers.
- - WM FUNDS DISTRIBUTOR, INC. AND WM SHAREHOLDER SERVICES, INC.: These groups
will form the management and staff of Principal Funds Distributor, Inc. and
Principal Shareholder Services, Inc.
- - WM GROUP OF FUNDS BOARD OF TRUSTEES: Four members of our current Board are
proposed for election to the board of Principal Investors Fund, Inc. This
group includes Dick Yancey (our Chairman and a Board member for over 30
years), Dan Pavelich (head of the Audit Committee), Kristi Blake (head of
the Operations and Distribution Committee), and myself. I would also like
to express my deep gratitude to Ed Davis, Carrol McGinnis, Al Osborne, Jay
Rockey, and Anne Farrell for their many years of diligent service on behalf
of our shareholders.
The Principal has embraced our management and staff, and I think you'll find the
combined fund family reflects our best qualities, plus new capabilities and
resources. On behalf of everyone at the WM Group of Funds, thank you for the
support and trust that you and other shareholders have honored us with for over
65 years.
Sincerely,
/s/ William G. Papesh
- ------------------------------------
William G. Papesh
President
(1) Source: FRC. Based on assets as of September 30, 2006.
(2) Principal Global Investors, one of the primary asset management divisions
of Principal Financial Group(R), consists of Principal Global Investors,
LLC; Principal Real Estate Investors, LLC; Spectrum Asset Management, Inc.;
Post Advisory Group, LLC; Columbus Circle Investors; Principal Global
Investors (Europe) Limited; Principal Global Investors (Singapore) Ltd;
Principal Global Investors (Australia) Ltd; and Principal International,
Inc., its subsidiaries and affiliates.
(3) Expense caps are subject to limited time frames.
(4) Excluding the WM Money Market Fund.
WM Group of Funds Transitions to Principal Funds
Earlier this year, we announced that the Principal Financial Group(R) (The
Principal(R)) had agreed to acquire our fund family's operating companies. Now
that the process is nearing completion, we'd like to introduce you to our future
parent company and the mutual fund complex that will manage your investments.
Many of our shareholders will recognize the Principal Financial Group as a name
they associate with their workplace benefits, such as their retirement plan. As
the nation's 401(k) leader,1 The Principal derives over 90% of its assets under
management from retirement operations. In the U.S., it serves 42,000 employers
with 2.7 million plan participants,2 representing a large base of investors who
recognize The Principal as one of "America's Retirement Experts."
To extend its services to individual investors outside of their work-place, The
Principal is acquiring WM Advisors and its affiliates. When the transaction
closes at the end of 2006 (see Milestones chart on the next page), we will
become part of a diverse family of financial services companies -- one where
asset management is central to the company's business.
WM ADVISORS JOINS WORLD-CLASS INVESTMENT MANAGER
The heart of the company's asset management organization is Principal Global
Investors, an investment manager that combines wide-ranging capabilities with a
truly global reach.
Like WM Advisors, Principal Global Investors is a leader within the field of
asset allocation investing. While the WM Group of Funds is the 4th largest
manager of target-risk asset allocation funds, The Principal is the 4th largest
manager of target-date asset allocation funds.(3) The combined fund family will
rank 4th in the overall management of asset allocation funds nationally.
Following the acquisition, WM Advisors will be positioned within a network of
investment managers affiliated with Principal Global Investors. It will join
premier boutique firms such as Columbus Circle Investors and Spectrum Asset
Management, which have expertise in a variety of core asset styles and niche
investments.
PRINCIPAL GLOBAL INVESTORS
PRINCIPAL GLOBAL INVESTORS HAS ATTRACTED A LARGE BASE OF INSTITUTIONAL ASSETS
FROM CLIENTS IN 25 COUNTRIES. IT IS THE:
- - 42nd largest institutional asset manager out of 778 worldwide
- - 23rd largest U.S. institutional tax-exempt manager out of 500
- - 5th largest real estate investment manager out of 101
- - Investment manager for 9 of the 25 largest U.S. pension funds
Source: Pensions & Investments Magazine. Based on assets as of December 31, 2005
or June 30, 2006.
PRINCIPAL GLOBAL INVESTORS HAS INVESTMENT EXPERTISE IN:
- - Target-date asset allocation funds
- - Large-cap, mid-cap, and small-cap equities
- - Real estate securities
- - International equities
- - Taxable fixed-income securities
(MAP)
2
(GRAPHICS)
TOP: The Equitable Building housed the company's offices from 1880 to 1917. It
was the tallest office building in Iowa at the time.
BOTTOM: Present-day headquarters of the Principal Financial Group.
HUMBLE BEGINNINGS GIVE RISE TO GLOBAL OPERATIONS
The Principal Financial Group was founded in 1879 as Bankers Life Association, a
company that provided life insurance to bankers and their employees from its
headquarters in Des Moines, Iowa. From this specialized focus, the firm has
expanded its product offerings to include a broad range of financial products
and services: retirement and investment services, life and health insurance, and
online banking. And its operations are not limited to domestic markets. A member
of the Fortune 500, the Principal Financial Group serves some 16.4 million
customers from its offices in 11 countries throughout Asia, Australia, Europe,
Latin America, and the United States.(2)
JANUARY FUND MERGERS LAUNCH AN EXPANDED FUND FAMILY
The fund mergers scheduled for mid-January 2007 will constitute one of the final
steps in the transition process. The combined fund business groups will be known
as Principal Funds. With 48 mutual funds offered to retail investors, Principal
Funds can provide you with:
- - World-Class Investment Management
- - Comprehensive Asset Allocation Solutions
- - Retirement Investing Expertise
On January 16, 2007, join Principal Funds at our new Web site,
www.principalfunds.com, to take a complete tour of the investment products and
services available to you. In the meantime, if you have any questions about how
this transition affects your account or your investments, please phone our
Customer Service line at 800-222-5852.
WM GROUP OF FUNDS TRANSITIONS TO PRINCIPAL FUNDS: MILESTONES
JULY 25, 2006 AUGUST 11, 2006 DECEMBER 15, 2006 ON OR NEAR DECEMBER 31, 2006 ON OR NEAR JANUARY 12, 2007
- ------------- --------------- ----------------- ---------------------------- ---------------------------
Announcement of Voting by WM Group of Funds Anticipated close of acquisition Anticipated mergers of funds
agreement between WM Group of Funds shareholder meeting
Washington Mutual, Board of Trustees for voting on fund
Inc. and the mergers
Principal Financial
Group
(1) The Principal ranks number one in plans where it provides administrative
and investment services according to a 2006 Spectrem Group analysis of
fully bundled 401(k) providers.
(2) As of September 30, 2006.
(3) Source: FRC. Based on assets as of September 30, 2006.
3
Economy & Financial Markets: Review & Outlook
ECONOMY ENTERS MID-CYCLE SLOWDOWN
We began the fiscal year with the view that U.S. economic growth would be
moderate but weaker than consensus projections. Although corporate profits and
consumer spending looked healthy, a slowdown in the housing market appeared
likely. We thought when this housing pullback took hold, it would curtail
consumers' ability to maintain refinancing-fueled spending. Our 2006 outlook
also recognized that a variety of short-term and long-term forces had aligned to
indicate that growth would slow.
One cyclical measure that attracted widespread headlines during the period was
crude oil prices which, through elevated fuel costs, can act as a tax on
consumers. The U.S. benchmark price of oil began the period at $59.77 per
barrel, reached a high closing price of $77.03 in July, and then retreated to
close at $58.74 on October 31, 2006.
Like crude oil prices, the rate of economic growth climbed and peaked before
ending the period near its starting point. Inflation-adjusted (real) growth
increased 1.8% during the final three months of 2005. With strong consumer and
business spending, it surged 5.6% in early 2006. Evidence of a housing sector
correction became clearer in the following months, and real growth decelerated
to an estimated 2.2%. (See text highlights in chart below.)
Since housing is a lagging indicator, we believe that the full economic effects
of its pullback have yet to play out. However, we expect solid job markets to
mitigate the pain that housing causes consumers. Our 2007 outlook is for real
growth to keep to the lower end of a 2-3% range as the economy works through a
mid-cycle slowdown.
INFLATION GIVES FED PAUSE
For this kind of "soft landing" to occur, we believe that lower interest rates
courtesy of the Federal Reserve (the Fed) will be a requirement. The Fed began
steadily raising short-term interest rates in June 2004. Like many market
participants, we entered 2006 believing that a housing-led slowdown in growth
would soon spur the Fed to halt this monetary tightening campaign.
However, concerns about rising inflation dominated the Fed's mindset during the
year. A price index that measures core personal consumption1 stood at 1.9% for
November 2005, but inflation picked up steam and sent this gauge to 2.5% in
August 2006. Inflation
(1) Source: Bureau of Economic Analysis. Monthly data measures the price index
for personal consumption expenditures excluding food and energy as a
percent change from the same month one year ago.
(2) Indices are unmanaged, and individuals cannot invest directly in an index.
See page 36 for definitions of indices.
A WRAP-UP OF THE YEAR NOVEMBER 1, 2005 - OCTOBER 31, 2006
(FLOW CHART)
Source: Bloomberg L.P. (S&P 500 data).
4
fears eased somewhat as energy prices headed downward and the housing market
cooled. These developments allowed the Fed to leave its target for the federal
funds rate unchanged at 5.25% near the end of the fiscal year.
This rate is slightly restrictive in our view. We expect the lagging effects of
monetary tightening to contain inflation going forward by combining with
significant deflationary forces. We also believe that the economic system has
become somewhat self-regulating in recent years, alleviating the need for a
highly active Fed. However, as fears of inflation continue to subside, we think
the Fed will turn its sights on potential deflation and recession. We don't
regard either of these conditions as likely, but we would welcome Fed actions
that begin cutting interest rates early in 2007.
MARKETS MAKE LATE-PERIOD CLIMB
Uncertainty about inflation and interest rates often determined investor
behavior during the fiscal year. As shown in the chart below, stock markets
achieved muted gains within the early months of 2006 before retreating in May
and June-- a span that was framed by the year's final two Fed rate increases.
The growing likelihood and then arrival of the Fed's pause kindled a rally in
stocks and also benefited bonds, causing yields to fall. The S&P 500 advanced
16.34% for the fiscal year, and the Lehman Brothers Aggregate Bond Index ended
the period with a total return of 5.18%.(2)
The outlook for subdued growth and inflation described above, and the potential
for monetary easing by the Fed, lead us to expect that bond yields will continue
inching lower in 2007. Any incoming data that sparks recession fears could
create some volatility for fixed-income securities. However, we regard corporate
and mortgage issues as reasonably valued and believe that they will perform in
line with this risk.
Lower bond yields are also among the factors that support the prospects for
moderate but positive gains by equities in 2007. Stocks continue to appear
attractive relative to bonds and are likely to be assisted by fair valuations,
the global flow of funds, and the generally healthy state of corporations.
Cyclical economic and valuation indicators also suggest that large-cap stocks
could outperform small caps and growth could outperform value. A less
restrictive stance by the Fed could also accommodate the appreciation of stock
prices.
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.
(FLOW CHART)
5
REIT Fund
ANNUAL TOTAL RETURNS(1)
Class A shares at net asset value(2)
(Calendar Year)
2005 9.14%
2004 31.14%
INVESTMENT STRATEGY
Real estate investment trusts (REITs) have enjoyed enormous market enthusiasm in
recent years, and this positive trend continued during the 2006 fiscal year. The
benchmark REIT index rose strongly over the period and ended with more than
double the total return of the broad stock market. These results were fueled, in
part, by the activity of hedge funds and institutional investors that have
favored REITs as a diversification tool.
Stock selection was the primary source of positive performance for the WM REIT
Fund during the year. The industrial/office sector advanced strongly within the
market, benefiting the Fund. Many leases that these REITs hold reset at higher
levels during the period and boosted earnings. Strong contributors included
Boston Properties, SL Green Realty, and ProLogis. The Fund also benefited from
several specialty REITs. Entertainment Properties, which owns movie theater
property, rose on an improved valuation. Global Signal, a telecommunications
tower REIT, climbed after a buyout announcement. Certain mortgage and
residential holdings also had a positive impact on performance.
Data shown is past performance and does not guarantee future results. Current
performance, including the most recent month-end results, which may be higher or
lower than the data shown, can be obtained by calling 800-222-5852. Your
investment's return and principal value will fluctuate, so it may be worth more
or less upon redemption. A sales charge may apply as follows: Class A shares:
maximum up-front sales charge of 5.5%; Class B shares: contingent deferred sales
charge of 5%, which declines over 5 years (5-5-4-3-2-0%); Class C shares:
contingent deferred sales charge of 1% on redemptions made during the first 12
months. See the prospectus for details. Performance listed with sales charge
reflects the maximum sales charge noted above.
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 OCTOBER 31, 2006
1-Year Since Inception Inception Date
------ --------------- --------------
CLASS A SHARES
Net Asset Value(2) 33.28% 28.40% 3/1/03
With Sales Charge 25.96% 26.45%
CLASS B SHARES
Net Asset Value(2) 32.23% 27.45% 3/1/03
With Sales Charge 27.23% 27.02%
CLASS C SHARES
Net Asset Value(2) 32.32% 27.55% 3/1/03
With Sales Charge 31.32% 27.55%
FTSE NAREIT All REITs Index(3) 35.56% 29.46%
VALUE OF A $10,000 INVESTMENT(1) MARCH 1, 2003 - OCTOBER 31, 2006
(PERFORMANCE GRAPH)
REIT FUND
-------------------------------
FTSE NAREIT -
DATE NAV MOP ALL Index
- ---- ------ ------ -------------
Oct-96
Nov-96
Dec-96
Jan-97
Feb-97
Mar-97
Apr-97
May-97
Jun-97
Jul-97
Aug-97
Sep-97
Oct-97
Nov-97
Dec-97
Jan-98
Feb-98
Mar-98
Apr-98
May-98
Jun-98
Jul-98
Aug-98
Sep-98
Oct-98
Nov-98
Dec-98
Jan-99
Feb-99
Mar-99
Apr-99
May-99
Jun-99
Jul-99
Aug-99
Sep-99
Oct-99
Nov-99
Dec-99
Jan-00
Feb-00
Mar-00
Apr-00
May-00
Jun-00
Jul-00
Aug-00
Sep-00
Oct-00
Nov-00
Dec-00
Jan-01
Feb-01
Mar-01
Apr-01
May-01
Jun-01
Jul-01
Aug-01
Sep-01
Oct-01
Nov-01
Dec-01
Jan-02
Feb-02
Mar-02
Apr-02
May-02
Jun-02
Jul-02
Aug-02
Sep-02
Oct-02
Nov-02
Dec-02
Jan-03
Feb-03 10,000 9,450 10,000
Mar-03 10,070 9,516 10,207
Apr-03 10,460 9,884 10,694
May-03 11,030 10,423 11,348
Jun-03 11,248 10,630 11,643
Jul-03 11,884 11,230 12,254
Aug-03 11,964 11,306 12,306
Sep-03 12,339 11,660 12,694
Oct-03 12,644 11,948 12,967
Nov-03 13,171 12,447 13,553
Dec-03 13,640 12,890 14,018
Jan-04 14,226 13,444 14,620
Feb-04 14,555 13,754 14,941
Mar-04 15,366 14,521 15,777
Apr-04 13,176 12,451 13,370
May-04 13,940 13,174 14,314
Jun-04 14,446 13,652 14,742
Jul-04 14,478 13,682 14,748
Aug-04 15,453 14,603 15,910
Sep-04 15,513 14,660 15,940
Oct-04 16,273 15,378 16,664
Nov-04 16,981 16,047 17,437
Dec-04 17,885 16,901 18,277
Jan-05 16,405 15,503 16,831
Feb-05 16,824 15,898 17,210
Mar-05 16,444 15,539 16,890
Apr-05 17,297 16,346 17,680
May-05 17,999 17,009 18,313
Jun-05 18,701 17,673 19,174
Jul-05 20,014 18,913 20,434
Aug-05 19,256 18,196 19,565
Sep-05 19,334 18,271 19,546
Oct-05 18,789 17,756 19,012
Nov-05 19,574 18,498 19,837
Dec-05 19,520 18,447 19,794
Jan-06 20,916 19,766 21,179
Feb-06 21,141 19,978 21,484
Mar-06 22,174 20,954 22,559
Apr-06 21,519 20,335 21,859
May-06 20,909 19,759 21,252
Jun-06 21,693 20,500 22,312
Jul-06 22,283 21,057 22,984
Aug-06 23,246 21,968 23,770
Sep-06 23,526 22,232 24,240
Oct-06 25,050 23,672 25,772
Performance of other share classes will differ.
See glossary on page 36 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) Net asset value is not adjusted for sales charge.
6
(PHOTO OF DAVID W. SIMPSON) PORTFOLIO MANAGER
David W. Simpson, CFA
WM Advisors, Inc.
However, the Fund's underweighting of the residential sector proved to be
problematic. As the housing sector cooled this year, the "rent vs. buy" decision
increasingly favored rentals. We underweighted the sector, believing that the
housing slowdown would cause fewer speculative condominium sales and leading
these units to eventually re-enter the supply of rentals. We believe that the
market began to price this activity into residential REITs later in the year,
but the Fund missed out on some of the sector's earlier gains.
Changes within allocations during the period were fairly limited. In the
industrial/office sector, several Fund holdings were bought out, and valuations
led us to sell a position and trim others. In the health care sector, we added
two new holdings, Health Care REIT and OMEGA Healthcare Investors, and we built
up other positions. This overweighted sector benefited Fund performance late in
the fiscal year as health care REITs began to participate more fully in REIT
market gains.
Overall, we believe that REIT fundamentals remain strong but valuations also
seem quite rich. Assessments of this market can be somewhat clouded since REIT
fundamentals and stock price appreciation have often diverged in the past. REITs
have outperformed the S&P 500 every year since 1999, and we feel that this
lengthy period of strong gains may be contributing to some market complacency.
As a result, we tend to favor higher quality holdings and anticipate that
investors may not be rewarded for moving down the quality spectrum.
TOP 10 HOLDINGS(4) AS OF OCTOBER 31, 2006
% of Net Assets Total Return(5)
--------------- ---------------
Kimco Realty Corp. 4.17% 55.47%
Simon Property Group Inc. 3.99% 40.70%
Alexandria Real Estate Equities Inc. 3.90% 27.25%
ProLogis 3.86% 51.89%
Developers Diversified Realty Corp. 3.84% 45.75%
Macerich Co. 3.71% 30.03%
Equity Residential Properties 3.60% 44.70%
United Dominion Realty Trust 3.52% 52.93%
Corporate Office Properties Trust 3.52% 41.37%
General Growth Properties Inc. 3.47% 26.50%
FUND CHARACTERISTICS
AS OF OCTOBER 31, 2006
Weighted Average Market Capitalization: $ 7.6 billion
Weighted Average P/E
(based on trailing earnings): 32.8
Beta: 1.24
Fund Standard Deviation: 15.38
S&P 500 Standard Deviation: 8.14
Portfolio Turnover
(for fiscal year): 18%
Number of Securities: 43
Expense Ratio
(Class A shares for fiscal year): 1.30%
Total Net Assets: $496.8 million
PORTFOLIO COMPOSITION(4)
As of 10/31/06
(PIE CHART)
As of As of
Asset Class 10/31/06 10/31/05 Change
- ----------- -------- -------- ------
Retail 25% 26% -1%
Industrial/Office 22% 26% -4%
Residential 11% 11% 0%
Health Care 9% 5% +4%
Lodging/Resorts 8% 6% +2%
Common Stock 6% 6% 0%
Specialty 6% 8% -2%
Diversified 3% 3% 0%
Hybrid 3% 1% +2%
Mortgage/Financial 2% 1% +1%
Self Storage 2% 2% 0%
Cash Equivalents 3% 5% -2%
(3) On 3/6/06, the National Association of Real Estate Investment Trusts
(NAREIT) changed the name of the NAREIT All REITs Index to the FTSE NAREIT
All REITs Index. Returns shown for the index assume reinvestment of all
dividends and distributions, and the since-inception return shown for the
index is calculated from 2/28/03. Indices are unmanaged, and individuals
cannot invest directly in an index.
(4) May not reflect the current portfolio composition.
(5) Performance information provided for individual securities held by the Fund
represents performance for the fiscal year ended 10/31/06. The Fund may not
have held these securities throughout the entire period.
7
Equity Income Fund*
ANNUAL TOTAL RETURNS(1)
Class A shares at net asset value(2)
(Calendar Year)
2005 9.46%
2004 18.72%
2003 29.22%
2002 -12.82%
2001 7.41%
2000 14.64%
1999 4.83%
1998 6.93%
1997 19.89%
1996 13.60%
INVESTMENT STRATEGY
Strong economic growth in early 2006 decelerated as this fiscal year progressed.
Inflationary pressures also rose and then eased. During the first eight months
of the period, the Federal Reserve (the Fed) continued its two-year streak of
increases in short-term interest rates. The Fed's August decision to pause its
monetary tightening campaign, coupled with a decline in energy prices, spurred a
rally in equity markets that continued through the close of the period.
The WM Equity Income Fund began the fiscal year with defensive positioning that
reflected an outlook for slower economic growth and rising inflation and
interest rates. The sectors that we emphasized included consumer staples, health
care, and telecommunications. As the conditions we had forecasted became more
evident, the Fund's sector allocations benefited performance. An underweighting
in financials proved beneficial as these firms struggled to achieve earnings
growth while short-term interest rates increased and the yield curve flattened.
An overweighting in the energy sector also assisted performance, as energy
Data shown is past performance and does not guarantee future results. Current
performance, including the most recent month-end results, which may be higher or
lower than the data shown, can be obtained by calling 800-222-5852.Your
investment's return and principal value will fluctuate, so it may be worth more
or less upon redemption. A sales charge may apply as follows: Class A shares:
maximum up-front sales charge of 5.5%; Class B shares: contingent deferred sales
charge of 5%, which declines over 5 years (5-5-4-3-2-0%); Class C shares:
contingent deferred sales charge of 1% on redemptions made during the first 12
months. See the prospectus for details. Performance listed with sales charge
reflects the maximum sales charge noted above. REIT securities are subject to
risk factors associated with the real estate industry and tax factors of REIT
registration.
* As of 8/1/00, the WM Bond & Stock Fund became the WM Equity Income Fund,
and the Fund's objectives and strategies changed. This information should
be considered when reviewing past performance. Please see the prospectus
for detailed information.
AVERAGE ANNUAL TOTAL RETURNS(1) AS OF OCTOBER 31, 2006
Since Inception
1-Year 5-Year 10-Year Inception Date
------ ------ ------- --------- ---------
CLASS A SHARES
Net Asset Value(2) 17.16% 11.97% 11.08% 9.16% 5/31/39
With Sales Charge 10.70% 10.72% 10.45% 9.07%
CLASS B SHARES
Net Asset Value(2) 16.16% 10.96% 10.32% 11.40% 3/30/94
With Sales Charge 11.16% 10.69% 10.32% 11.40%
CLASS C SHARES
Net Asset Value(2) 16.28% 11.09% 10.21% 10.80% 3/1/02
With Sales Charge 15.28% 11.09% 10.21% 10.80%
S&P 500/Citigroup Value Index(3) 20.54% 9.82% 9.44% --
S&P 500(3) 16.34% 7.25% 8.64% 11.61%
VALUE OF A $10,000 INVESTMENT(1) OCTOBER 31, 1996 - OCTOBER 31, 2006
(PERFORMANCE GRAPH)
EQUITY INCOME FUND
---------------------------------------------
S&P 500/Citigroup
DATE NAV MOP S&P 500 Value Index
---- ------ ------ ------- -----------------
Oct-96 10,000 9,450 10,000 10,000
Nov-96 10,455 9,880 10,759 10,688
Dec-96 10,400 9,828 10,548 10,577
Jan-97 10,656 10,070 11,203 11,036
Feb-97 10,773 10,181 11,294 11,199
Mar-97 10,581 9,999 10,824 10,823
Apr-97 10,773 10,181 11,470 11,257
May-97 11,253 10,634 12,175 11,918
Jun-97 11,591 10,954 12,718 12,434
Jul-97 12,157 11,488 13,727 13,287
Aug-97 11,762 11,116 12,964 12,689
Sep-97 12,238 11,565 13,675 13,432
Oct-97 12,081 11,417 13,218 13,028
Nov-97 12,350 11,671 13,830 13,639
Dec-97 12,469 11,783 14,068 13,947
Jan-98 12,469 11,783 14,224 13,826
Feb-98 12,913 12,203 15,249 14,707
Mar-98 13,174 12,449 16,030 15,558
Apr-98 13,262 12,533 16,192 15,600
May-98 13,050 12,332 15,913 15,441
Jun-98 13,149 12,426 16,560 15,700
Jul-98 12,624 11,930 16,384 15,380
Aug-98 11,316 10,694 14,015 13,372
Sep-98 11,814 11,165 14,913 14,286
Oct-98 12,567 11,876 16,126 15,315
Nov-98 13,168 12,443 17,103 16,009
Dec-98 13,332 12,599 18,088 16,585
Jan-99 13,478 12,736 18,844 16,585
Feb-99 12,952 12,240 18,258 16,261
Mar-99 13,232 12,504 18,988 16,539
Apr-99 13,989 13,219 19,723 17,712
May-99 14,116 13,340 19,258 17,461
Jun-99 14,453 13,658 20,327 18,107
Jul-99 14,095 13,320 19,692 17,536
Aug-99 13,673 12,921 19,594 17,024
Sep-99 13,150 12,426 19,057 16,435
Oct-99 13,492 12,750 20,263 17,296
Nov-99 13,640 12,890 20,675 17,184
Dec-99 13,976 13,207 21,892 17,392
Jan-00 13,465 12,725 20,793 16,639
Feb-00 13,263 12,534 20,400 15,665
Mar-00 14,095 13,320 22,396 17,176
Apr-00 14,065 13,292 21,722 17,052
May-00 14,182 13,402 21,276 17,151
Jun-00 14,096 13,320 21,800 16,631
Jul-00 14,046 13,274 21,460 16,568
Aug-00 14,545 13,745 22,792 17,570
Sep-00 14,801 13,987 21,589 17,333
Oct-00 15,343 14,499 21,498 17,456
Nov-00 15,097 14,267 19,804 16,653
Dec-00 16,021 15,140 19,901 17,301
Jan-01 16,406 15,503 20,608 17,450
Feb-01 16,278 15,382 18,728 16,719
Mar-01 16,091 15,206 17,543 16,030
Apr-01 16,671 15,754 18,906 16,916
May-01 17,016 16,081 19,032 17,190
Jun-01 16,943 16,011 18,570 16,652
Jul-01 17,258 16,309 18,388 16,626
Aug-01 17,150 16,207 17,237 15,977
Sep-01 16,308 15,411 15,844 14,939
Oct-01 16,252 15,358 16,147 14,821
Nov-01 16,941 16,010 17,385 15,608
Dec-01 17,209 16,263 17,538 15,886
Jan-02 17,142 16,199 17,282 15,784
Feb-02 17,075 16,136 16,949 15,956
Mar-02 17,871 16,888 17,586 16,610
Apr-02 17,294 16,342 16,520 16,057
May-02 17,361 16,406 16,398 16,097
Jun-02 16,450 15,545 15,230 15,155
Jul-02 15,222 14,385 14,042 13,722
Aug-02 15,518 14,664 14,135 13,766
Sep-02 14,009 13,239 12,599 12,268
Oct-02 14,570 13,768 13,707 13,078
Nov-02 15,440 14,590 14,515 13,885
Dec-02 15,001 14,176 13,661 13,247
Jan-03 14,643 13,837 13,303 12,887
Feb-03 14,389 13,598 13,104 12,530
Mar-03 14,519 13,720 13,231 12,559
Apr-03 15,586 14,729 14,321 13,633
May-03 16,515 15,606 15,076 14,508
Jun-03 16,802 15,878 15,269 14,680
Jul-03 16,930 15,999 15,537 14,952
Aug-03 17,187 16,242 15,840 15,282
Sep-03 17,356 16,401 15,673 15,058
Oct-03 18,130 17,133 16,560 16,005
Nov-03 18,423 17,410 16,705 16,189
Dec-03 19,387 18,321 17,581 17,267
Jan-04 19,895 18,801 17,904 17,545
Feb-04 20,402 19,280 18,153 17,912
Mar-04 20,432 19,309 17,879 17,699
Apr-04 19,946 18,849 17,598 17,339
May-04 20,148 19,039 17,839 17,542
Jun-04 20,696 19,557 18,185 17,998
Jul-04 20,207 19,096 17,583 17,556
Aug-04 20,458 19,333 17,654 17,729
Sep-04 20,926 19,775 17,844 18,027
Oct-04 21,225 20,057 18,117 18,348
Nov-04 22,299 21,072 18,851 19,242
Dec-04 23,019 21,753 19,492 19,861
Jan-05 22,526 21,287 19,017 19,488
Feb-05 23,317 22,034 19,416 20,065
Mar-05 23,028 21,761 19,072 19,710
Apr-05 22,931 21,670 18,710 19,327
May-05 23,559 22,264 19,305 19,876
Jun-05 23,969 22,651 19,332 20,015
Jul-05 24,707 23,349 20,051 20,796
Aug-05 24,525 23,176 19,869 20,717
Sep-05 24,699 23,340 20,029 20,974
Oct-05 24,419 23,076 19,695 20,688
Nov-05 25,161 23,777 20,439 21,580
Dec-05 25,193 23,808 20,446 21,590
Jan-06 26,139 24,702 20,987 22,234
Feb-06 26,126 24,689 21,044 22,474
Mar-06 26,551 25,091 21,305 22,856
Apr-06 27,183 25,688 21,590 23,494
May-06 26,525 25,066 20,969 22,918
Jun-06 26,559 25,099 20,998 22,996
Jul-06 26,851 25,375 21,128 23,226
Aug-06 27,258 25,759 21,631 23,581
Sep-06 27,818 26,288 22,189 24,209
Oct-06 28,609 27,035 22,913 25,015
Performance of other share classes will differ.
See glossary on page 36 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. For Class C
shares, performance for periods prior to inception is hypothetical, based
on Class A share returns adjusted for the respective expenses of the share
class. Performance does not reflect the impact of federal, state, or
municipal taxes. If it did, performance would be lower.
(2) Net asset value is not adjusted for sales charge.
8
(PHOTO OF JOSEPH T. SUTY) PORTFOLIO MANAGER
Joseph T. Suty, CFA
WM Advisors, Inc.
costs were high for a majority of the period. However, an underweighting in
materials had a negative impact as the Fund missed out on some of the gains this
sector enjoyed during the year.
Performance by individual holdings was a slight net negative to results for the
period, as certain holdings struggled and offset gains by strong performers.
Diversified financial positions, with a fee-based revenue model and less
interest-rate sensitivity, benefited the Fund. Franklin Resources and Morgan
Stanley both advanced through this strategy.
Several technology firms, including Apple Computer, Hewlett-Packard, and
Samsung, also had a positive impact. Real estate investment trusts (REITs), such
as ProLogis, continued their multi-year trend of strong gains, and this
benefited the Fund. However, certain positions within the consumer staples,
health care, and industrials sectors were detrimental to performance.
With a pullback by equity markets during the spring, followed by easing
inflationary pressures and the Fed's pause, we have begun to look at
opportunities in more economically sensitive areas of the market. We believe
that the slowing of economic growth will reach a trough in the near term and
then return to slightly higher, sustainable levels. However, we also feel that
interest-rate cuts by the Fed in 2007 will be necessary to avoid a prolonged
deceleration of growth. In an environment of subdued growth and inflation, we
will be looking for opportunities in cyclicals, transportation, and industrials.
We also continue to look across all sectors for undervalued firms that we
believe demonstrate strong balance sheets, cash flow, and dividend growth
prospects.
TOP 10 HOLDINGS(4) AS OF OCTOBER 31, 2006
% of Net Assets Total Return(5)
--------------- ---------------
McGraw-Hill Companies Inc. 1.76% 32.85%
Microsoft Corp. 1.69% 13.26%
Verizon Communications Inc. 1.56% 23.18%
Franklin Resources Inc. 1.53% 29.61%
ACE Ltd. 1.49% 11.91%
AT&T Inc. 1.46% 50.68%
Wells Fargo & Co. 1.43% 24.54%
Citigroup Inc. 1.37% 14.11%
Goldman Sachs Group Inc. 1.36% 51.45%
JPMorgan Chase & Co. 1.32% 33.70%
FUND CHARACTERISTICS
AS OF OCTOBER 31, 2006
Weighted Average Market Capitalization: $69.8 billion
Weighted Average P/E
(based on estimated earnings): 14.6
Beta: 0.89
Fund Standard Deviation: 6.87
S&P 500 Standard Deviation: 8.14
Portfolio Turnover
(for fiscal year): 81%
Number of Securities: 165
Expense Ratio
(Class A shares for fiscal year): 0.87%
Total Net Assets: $ 3.8 billion
PORTFOLIO COMPOSITION(4)
As of 10/31/06
(PIE CHART)
As of As of
Asset Class 10/31/06 10/31/05 Change
- ----------- -------- -------- ------
Financials 27% 24% +3%
Information Technology 12% 8% +4%
Industrials 11% 11% 0%
Consumer Discretionary 9% 6% +3%
Health Care 9% 7% +2%
Energy 8% 11% -3%
Telecommunication Services 7% 3% +4%
Consumer Staples 6% 6% 0%
REITs 4% 7% -3%
Materials 2% 3% -1%
Utilities 2% 4% -2%
Other 1% 3% -2%
U.S. Treasuries 1% 2% -1%
Cash Equivalents 1% 5% -4%
(3) On 12/16/05, Standard & Poor's changed the name of the S&P 500/BARRA Value
Index to the S&P 500/Citigroup Value Index and changed its calculation
methodology. Returns shown for the indices assume reinvestment of all
dividends and distributions, and the since-inception return shown for the
S&P 500 is calculated from 5/31/39. Indices are unmanaged, and individuals
cannot invest directly in an index.
(4) May not reflect the current portfolio composition.
(5) Performance information provided for individual securities held by the Fund
represents performance for the fiscal year ended 10/31/06. The Fund may not
have held these securities throughout the entire period.
9
Growth & Income Fund
ANNUAL TOTAL RETURNS(1)
Class A shares at net asset value(2)
(Calendar Year)
2005 3.29%
2004 8.63%
2003 26.15%
2002 -20.37%
2001 -3.28%
2000 1.53%
1999 18.26%
1998 14.41%
1997 29.52%
1996 22.28%
INVESTMENT STRATEGY
During the fiscal year, corporations continued to generate strong earnings
growth while economic growth initially accelerated and then slowed. To rein in
inflationary pressures, the Federal Reserve (the Fed) continued its two-year
streak of increases in short-term interest rates. The Fed's August decision to
pause its monetary tightening campaign spurred a rally in equity markets.
Large-cap stocks benefited from this advance, although a decisive market
rotation away from small-and mid-cap stocks had yet to occur as the period
closed.
As economic growth has decelerated, our strategy has been to emphasize holdings
that rely on business spending and to deemphasize those that rely on consumer
spending. Several firms within the industrials sector provided the WM Growth &
Income Fund with gains during the period. Lockheed Martin rose on increased
defense spending. Honeywell International advanced on improvements in the
aviation sector. The Fund's one airline position, AMR, also rose on improved
financial conditions for airlines following an industry-wide reduction in
capacity. The Fund also received positive contributions
Data shown is past performance and does not guarantee future results. Current
performance, including the most recent month-end results, which may be higher or
lower than the data shown, can be obtained by calling 800-222-5852.Your
investment's return and principal value will fluctuate, so it may be worth more
or less upon redemption. A sales charge may apply as follows: Class A shares:
maximum up-front sales charge of 5.5%; Class B shares: contingent deferred sales
charge of 5%, which declines over 5 years (5-5-4-3-2-0%); Class C shares:
contingent deferred sales charge of 1% on redemptions made during the first 12
months. See the prospectus for details. Performance listed with sales charge
reflects the maximum sales charge noted above.
AVERAGE ANNUAL TOTAL RETURNS(1) AS OF OCTOBER 31, 2006
Since Inception
1-Year 5-Year 10-Year Inception Date
------ ------ ------- --------- ---------
CLASS A SHARES
Net Asset Value(2) 12.62% 5.38% 8.37% 10.11% 10/31/49
With Sales Charge 6.44% 4.20% 7.76% 10.00%
CLASS B SHARES
Net Asset Value(2) 11.42% 4.32% 7.61% 10.03% 3/30/94
With Sales Charge 6.41% 3.98% 7.61% 10.03%
CLASS C SHARES
Net Asset Value(2) 11.71% 4.42% 7.42% 4.71% 3/1/02
With Sales Charge 10.71% 4.42% 7.42% 4.71%
S&P 500(3) 16.34% 7.25% 8.64% 12.06%
VALUE OF A $10,000 INVESTMENT(1) OCTOBER 31, 1996 - OCTOBER 31, 2006
(PERFORMANCE GRAPH)
GROWTH & INCOME FUND
-------------------------
DATE NAV MOP S&P 500
---- ------ ------ -------
Oct-96 10,000 9,450 10,000
Nov-96 10,730 10,140 10,759
Dec-96 10,610 10,026 10,548
Jan-97 11,114 10,502 11,203
Feb-97 11,176 10,561 11,294
Mar-97 10,789 10,196 10,824
Apr-97 11,188 10,573 11,470
May-97 11,930 11,274 12,175
Jun-97 12,541 11,851 12,718
Jul-97 13,484 12,742 13,727
Aug-97 12,884 12,175 12,964
Sep-97 13,612 12,863 13,675
Oct-97 13,124 12,402 13,218
Nov-97 13,524 12,781 13,830
Dec-97 13,742 12,986 14,068
Jan-98 13,513 12,770 14,224
Feb-98 14,546 13,746 15,249
Mar-98 15,085 14,255 16,030
Apr-98 15,148 14,315 16,192
May-98 14,754 13,943 15,913
Jun-98 15,160 14,326 16,560
Jul-98 14,554 13,753 16,384
Aug-98 11,989 11,330 14,015
Sep-98 12,958 12,245 14,913
Oct-98 14,093 13,318 16,126
Nov-98 15,009 14,184 17,103
Dec-98 15,722 14,857 18,088
Jan-99 16,329 15,431 18,844
Feb-99 15,991 15,111 18,258
Mar-99 16,456 15,551 18,988
Apr-99 17,537 16,573 19,723
May-99 17,311 16,359 19,258
Jun-99 18,178 17,179 20,327
Jul-99 17,562 16,596 19,692
Aug-99 17,046 16,108 19,594
Sep-99 16,608 15,694 19,057
Oct-99 17,415 16,457 20,263
Nov-99 17,896 16,911 20,675
Dec-99 18,593 17,571 21,892
Jan-00 17,649 16,678 20,793
Feb-00 17,100 16,160 20,400
Mar-00 19,014 17,968 22,396
Apr-00 18,991 17,946 21,722
May-00 19,291 18,230 21,276
Jun-00 19,079 18,029 21,800
Jul-00 18,516 17,497 21,460
Aug-00 19,782 18,694 22,792
Sep-00 19,369 18,304 21,589
Oct-00 19,845 18,754 21,498
Nov-00 18,410 17,398 19,804
Dec-00 18,880 17,842 19,901
Jan-01 20,470 19,344 20,608
Feb-01 19,548 18,473 18,728
Mar-01 18,602 17,579 17,543
Apr-01 19,508 18,435 18,906
May-01 19,976 18,878 19,032
Jun-01 19,567 18,491 18,570
Jul-01 19,543 18,469 18,388
Aug-01 18,490 17,473 17,237
Sep-01 16,970 16,037 15,844
Oct-01 17,186 16,241 16,147
Nov-01 18,124 17,127 17,385
Dec-01 18,258 17,254 17,538
Jan-02 17,648 16,678 17,282
Feb-02 17,258 16,309 16,949
Mar-02 18,149 17,151 17,586
Apr-02 16,922 15,991 16,520
May-02 17,140 16,198 16,398
Jun-02 15,944 15,067 15,230
Jul-02 14,670 13,863 14,042
Aug-02 14,881 14,063 14,135
Sep-02 13,380 12,644 12,599
Oct-02 14,419 13,626 13,707
Nov-02 15,139 14,306 14,515
Dec-02 14,539 13,740 13,661
Jan-03 14,270 13,485 13,303
Feb-03 13,924 13,158 13,104
Mar-03 13,963 13,195 13,231
Apr-03 15,091 14,261 14,321
May-03 15,936 15,059 15,076
Jun-03 16,275 15,380 15,269
Jul-03 16,267 15,372 15,537
Aug-03 16,464 15,558 15,840
Sep-03 16,433 15,529 15,673
Oct-03 17,041 16,103 16,560
Nov-03 17,262 16,313 16,705
Dec-03 18,341 17,332 17,581
Jan-04 18,660 17,634 17,904
Feb-04 18,963 17,920 18,153
Mar-04 18,644 17,619 17,879
Apr-04 18,644 17,619 17,598
May-04 18,780 17,747 17,839
Jun-04 19,186 18,131 18,185
Jul-04 18,413 17,400 17,583
Aug-04 18,587 17,565 17,654
Sep-04 18,651 17,625 17,844
Oct-04 18,651 17,625 18,117
Nov-04 19,335 18,272 18,851
Dec-04 19,921 18,825 19,492
Jan-05 19,646 18,566 19,017
Feb-05 19,976 18,877 19,416
Mar-05 19,662 18,581 19,072
Apr-05 19,405 18,338 18,710
May-05 19,873 18,780 19,305
Jun-05 20,002 18,902 19,332
Jul-05 20,268 19,153 20,051
Aug-05 20,116 19,009 19,869
Sep-05 19,963 18,865 20,029
Oct-05 19,834 18,743 19,695
Nov-05 20,672 19,535 20,439
Dec-05 20,578 19,446 20,446
Jan-06 20,904 19,754 20,987
Feb-06 20,879 19,731 21,044
Mar-06 21,075 19,916 21,305
Apr-06 21,491 20,309 21,590
May-06 20,790 19,646 20,969
Jun-06 20,610 19,477 20,998
Jul-06 20,879 19,731 21,128
Aug-06 21,262 20,093 21,631
Sep-06 21,727 20,532 22,189
Oct-06 22,338 21,109 22,913
Performance of other share classes will differ.
See glossary on page 36 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. For Class C
shares, performance for periods prior to inception is hypothetical, based
on Class A share returns adjusted for the respective expenses of the share
class. Performance does not reflect the impact of federal, state, or
municipal taxes. If it did, performance would be lower.
(2) Net asset value is not adjusted for sales charge.
(3) Returns shown for the index assume reinvestment of all dividends and
distributions, and the since-inception return shown for the index is
calculated from 10/31/49. Indices are unmanaged, and individuals cannot
invest directly in an index.
10
(PHOTO OF STEPHEN Q. SPENCER) PORTFOLIO MANAGER
Stephen Q. Spencer, CFA
WM Advisors, Inc.
from telecommunications holdings like AT&T and Verizon, which have benefited
from the consolidation of wireless and "wireline" companies.
However, the lagging performance of large-cap and mega-cap firms earlier in the
fiscal year was detrimental to the Fund, as were certain problematic health care
holdings. Within this group, Omnicare, a provider of pharmacy services to
nursing facilities, declined in the wake of legal and business headwinds, and we
exited the position. While Teva Pharmaceutical Industries, Medtronic, and
Johnson & Johnson also endured a variety of problems, Medtronic and Johnson &
Johnson have improved in recent months.
Within sector allocations, we reduced consumer discretionaries to an
underweighting due to our outlook for decelerating consumer spending. We also
trimmed utilities, which is a sector that tends to lag in a rising/stable
interest-rate environment. Conversely, we added some new holdings in the energy
sector, and in the latter months of the year, we increased the Fund's technology
exposure.
We believe that the market has begun to acknowledge that economic growth is
likely to continue slowing. We anticipate that this will lead investors to
reduce their risk exposure and gravitate toward large-cap companies that
typically fare better than small firms during a mid-cycle slowdown. Large caps
tend to have greater cash flow, stronger balance sheets, and broader market
exposure, all of which can support them through slower economic conditions.
Should economic growth and inflation remain subdued, we believe stocks of
high-quality large- and mega-cap firms could continue advancing.
TOP 10 HOLDINGS(4) AS OF OCTOBER 31, 2006
% of Net Total
Assets Return(5)
-------- ---------
Exxon Mobil Corp. 2.61% 29.78%
Citigroup Inc. 2.45% 14.11%
JPMorgan Chase & Co. 2.42% 33.70%
Honeywell International Inc. 2.40% 25.93%
General Electric Co. 2.37% 6.61%
Schlumberger Ltd. 2.18% 40.15%
ACE Ltd. 2.17% 11.91%
Procter & Gamble Co. 2.17% 15.58%
Allstate Corp. 2.16% 19.11%
Freddie Mac 2.13% 15.91%
FUND CHARACTERISTICS
AS OF OCTOBER 31, 2006
Weighted Average Market Capitalization: $99.4 billion
Weighted Average P/E
(based on estimated earnings): 14.4
Beta: 0.89
Fund Standard Deviation: 6.97
S&P 500 Standard Deviation: 8.14
Portfolio Turnover
(for fiscal year): 29%
Number of Securities: 72
Expense Ratio
(Class A shares for fiscal year): 0.87%
Total Net Assets: $ 2.3 billion
PORTFOLIO COMPOSITION(4)
As of 10/31/06
(PIE CHART)
As of As of
Asset Class 10/31/06 10/31/05 Change
- ----------- -------- -------- ------
Financials 22% 22% 0%
Information Technology 15% 13% +2%
Industrials 14% 11% +3%
Energy 12% 9% +3%
Consumer Staples 10% 10% 0%
Health Care 10% 11% -1%
Consumer Discretionary 6% 10% -4%
Telecommunication Services 3% 1% +2%
Utilities 3% 5% -2%
Materials 2% 2% 0%
Cash Equivalents 3% 6% -3%
(4) May not reflect the current portfolio composition.
(5) Performance information provided for individual securities held by the Fund
represents performance for the fiscal year ended 10/31/06. The Fund may not
have held these securities throughout the entire period.
11
West Coast Equity Fund
ANNUAL TOTAL RETURNS(1)
Class A shares at net asset value(2)
(Calendar Year)
2005 8.13%
2004 13.23%
2003 41.36%
2002 -22.45%
2001 6.34%
2000 6.65%
1999 42.27%
1998 22.98%
1997 32.88%
1996 22.56%
INVESTMENT STRATEGY
Speculation about interest rates and inflation dominated the financial markets
during much of the fiscal year and helped restrain equity returns. To rein in
inflationary pressures, the Federal Reserve (the Fed) continued its two-year
streak of increases in short-term interest rates before deciding in August to
pause this monetary tightening campaign. Economic growth slowed as the year
progressed, but the Fed's pause and a late-period decline in oil prices spurred
a rally in equity markets that extended through the close of the year.
Challenges endured by certain holdings resulted in some of the WM West Coast
Equity Fund's relative underperformance for the period. Several health care
positions lagged the broader market's gains, due in part to political
uncertainty prior to the mid-term congressional elections. Pixelworks, which
makes chips for the display screens of electronic devices, had a detrimental
impact on the Fund after it posted losses in recent quarters. Several
California-based bank holdings also struggled as short-term interest rates rose
and the yield curve flattened.
Data shown is past performance and does not guarantee future results. Current
performance, including the most recent month-end results, which may be higher or
lower than the data shown, can be obtained by calling 800-222-5852. Your
investment's return and principal value will fluctuate, so it may be worth more
or less upon redemption. A sales charge may apply as follows: Class A shares:
maximum up-front sales charge of 5.5%; Class B shares: contingent deferred sales
charge of 5%, which declines over 5 years (5-5-4-3-2-0%); Class C shares:
contingent deferred sales charge of 1% on redemptions made during the first 12
months. See the prospectus for details. Performance listed with sales charge
reflects the maximum sales charge noted above.
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 OCTOBER 31, 2006
Since Inception
1-Year 5-Year 10-Year Inception Date
------ ------ ------- --------- ---------
CLASS A SHARES
Net Asset Value(2) 13.50% 10.04% 15.42% 14.58% 11/24/86
With Sales Charge 7.26% 8.80% 14.77% 14.25%
CLASS B SHARES
Net Asset Value(2) 12.45% 9.00% 14.59% 14.44% 3/30/94
With Sales Charge 7.45% 8.72% 14.59% 14.44%
CLASS C SHARES
Net Asset Value(2) 12.53% 9.08% 14.42% 8.18% 3/1/02
With Sales Charge 11.53% 9.08% 14.42% 8.18%
Russell 3000(R) Index(3) 16.37% 8.35% 8.89% 11.42%
VALUE OF A $10,000 INVESTMENT(1) OCTOBER 31, 1996 - OCTOBER 31, 2006
(PERFORMANCE GRAPH)
WEST COAST EQUITY FUND
------------------------------
Russell 3000
DATE NAV MOP Index
- ---- ------ ------ ------------
OCT-96 10,000 9,450 10,000
Nov-96 10,691 10,103 10,705
Dec-96 10,952 10,350 10,577
Jan-97 11,638 10,998 11,161
Feb-97 11,610 10,972 11,174
Mar-97 11,153 10,540 10,669
Apr-97 11,543 10,908 11,195
May-97 12,769 12,067 11,959
Jun-97 13,360 12,625 12,457
Jul-97 14,274 13,489 13,433
Aug-97 14,074 13,300 12,888
Sep-97 15,244 14,406 13,619
Oct-97 14,447 13,652 13,161
Nov-97 14,810 13,995 13,665
Dec-97 14,553 13,753 13,938
Jan-98 14,580 13,778 14,011
Feb-98 15,893 15,019 15,013
Mar-98 16,122 15,235 15,757
Apr-98 16,196 15,306 15,912
May-98 15,325 14,482 15,519
Jun-98 15,022 14,195 16,043
Jul-98 14,015 13,244 15,751
Aug-98 11,180 10,565 13,338
Sep-98 12,321 11,644 14,248
Oct-98 13,753 12,997 15,329
Nov-98 15,786 14,918 16,267
Dec-98 17,899 16,915 17,302
Jan-99 18,392 17,380 17,890
Feb-99 17,191 16,245 17,257
Mar-99 17,670 16,698 17,890
Apr-99 18,738 17,707 18,697
May-99 19,635 18,555 18,342
Jun-99 21,410 20,233 19,268
Jul-99 21,241 20,073 18,684
Aug-99 21,309 20,137 18,471
Sep-99 20,533 19,404 17,998
Oct-99 21,634 20,444 19,127
Nov-99 22,491 21,254 19,663
Dec-99 25,464 24,063 20,917
Jan-00 25,281 23,890 20,097
Feb-00 29,093 27,493 20,284
Mar-00 29,861 28,219 21,872
Apr-00 27,771 26,243 21,102
May-00 26,710 25,241 20,509
Jun-00 29,207 27,601 21,116
Jul-00 29,114 27,512 20,743
Aug-00 31,644 29,903 22,282
Sep-00 29,470 27,849 21,272
Oct-00 27,849 26,317 20,970
Nov-00 25,434 24,036 19,037
Dec-00 27,159 25,665 19,357
Jan-01 29,429 27,811 20,019
Feb-01 26,566 25,105 18,189
Mar-01 25,153 23,769 17,003
Apr-01 27,756 26,229 18,367
May-01 29,954 28,307 18,514
Jun-01 32,647 30,851 18,173
Jul-01 30,306 28,639 17,873
Aug-01 29,649 28,018 16,819
Sep-01 24,442 23,098 15,335
Oct-01 26,029 24,597 15,693
Nov-01 28,119 26,572 16,901
Dec-01 28,886 27,298 17,139
Jan-02 28,560 26,989 16,925
Feb-02 27,926 26,390 16,580
Mar-02 29,428 27,810 17,306
Apr-02 28,457 26,892 16,397
May-02 27,413 25,905 16,207
Jun-02 26,155 24,716 15,040
Jul-02 23,403 22,116 13,844
Aug-02 22,563 21,322 13,910
Sep-02 20,799 19,655 12,448
Oct-02 22,142 20,924 13,438
Nov-02 23,869 22,556 14,252
Dec-02 22,404 21,171 13,446
Jan-03 22,050 20,837 13,117
Feb-03 21,807 20,608 12,900
Mar-03 21,517 20,334 13,036
Apr-03 23,114 21,842 14,101
May-03 25,390 23,994 14,953
Jun-03 25,921 24,495 15,154
Jul-03 26,883 25,404 15,502
Aug-03 28,106 26,560 15,846
Sep-03 27,732 26,207 15,673
Oct-03 29,989 28,340 16,621
Nov-03 30,625 28,941 16,851
Dec-03 31,669 29,928 17,621
Jan-04 32,388 30,607 17,989
Feb-04 32,631 30,837 18,232
Mar-04 32,341 30,562 18,015
Apr-04 31,241 29,523 17,642
May-04 31,763 30,016 17,898
Jun-04 32,995 31,181 18,254
Jul-04 31,296 29,575 17,564
Aug-04 31,174 29,460 17,636
Sep-04 32,144 30,376 17,907
Oct-04 32,704 30,905 18,201
Nov-04 34,460 32,565 19,047
Dec-04 35,863 33,890 19,726
Jan-05 34,507 32,609 19,201
Feb-05 35,266 33,326 19,623
Mar-05 34,582 32,680 19,292
Apr-05 33,261 31,432 18,873
May-05 34,854 32,937 19,588
Jun-05 35,377 33,431 19,725
Jul-05 37,227 35,180 20,534
Aug-05 37,238 35,190 20,339
Sep-05 37,477 35,415 20,516
Oct-05 37,002 34,967 20,132
Nov-05 39,129 36,977 20,916
Dec-05 38,780 36,647 20,934
Jan-06 40,369 38,149 21,634
Feb-06 40,437 38,213 21,672
Mar-06 41,470 39,189 22,047
Apr-06 41,353 39,079 22,286
May-06 39,842 37,651 21,572
Jun-06 40,116 37,909 21,611
Jul-06 39,238 37,080 21,592
Aug-06 39,901 37,707 22,121
Sep-06 40,671 38,435 22,616
Oct-06 41,998 39,688 23,430
Performance of other share classes will differ.
See glossary on page 36 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. For Class C
shares, performance for periods prior to inception is hypothetical, based
on Class A share returns adjusted for the respective expenses of the share
class. Performance does not reflect the impact of federal, state, or
municipal taxes. If it did, performance would be lower. The Fund's
performance in 1997 benefited from the agreement of WM Advisors and its
affiliates to limit the Fund's expenses.
(2) Net asset value is not adjusted for sales charge.
(3) Returns shown for the index assume reinvestment of all dividends and
distributions, and the since-inception return shown for the index is
calculated from 11/30/86. Indices are unmanaged, and individuals cannot
invest directly in an index.
12
(PHOTO OF PHILIP M. FOREMAN) PORTFOLIO MANAGER
Philip M. Foreman, CFA
WM Advisors, Inc.
In contrast, the Fund received positive contributions from Oregon Steel, Boeing,
and Cisco Systems. Oregon Steel rose on increased demand for its product for use
in natural gas pipelines. Boeing benefited from recent orders, as well as
troubles at competitor Airbus. Cisco advanced on increased capital spending,
particularly by companies that upgraded their enterprise networks.
Changes in sector allocations during the period were somewhat limited, and this
kept turnover low for the year. Slowing economic growth led us to build up core
positions in consumer staples. However, the Fund remains underweighted in this
sector. A mix of new positions and additions to core holdings built up the
technology weighting. Technology, which was an underperformer in the early
months of the year, was increased to take advantage of later changes in the
economic environment.
The Fund closed the fiscal year with positioning that seeks to benefit from the
recent decline in oil prices and the Fed's pause. We continue to favor large-cap
equities, particularly those that we believe demonstrate good earnings but have
lagged in the year-ending rally. We anticipate that economic growth will
continue to slow while avoiding a recession. However, we also believe that
eventual interest-rate cuts by the Fed will be necessary to achieve sustainable
growth. 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
constructed the Fund to take advantage of these opportunities.
TOP 10 HOLDINGS(4) AS OF OCTOBER 31, 2006
% of Net Total
Assets Return(5)
-------- ---------
Wells Fargo & Co. 3.23% 24.54%
Microsoft Corp. 2.78% 13.26%
Chevron Corp. 2.29% 21.65%
Boeing Co. 2.21% 25.45%
PACCAR Inc. 2.21% 32.34%
Franklin Resources Inc. 2.00% 29.61%
Allergan Inc. 1.85% 29.84%
Starbucks Corp. 1.77% 33.49%
Costco Wholesale Corp. 1.67% 11.41%
Expeditors Intl. of Washington Inc. 1.61% 56.97%
FUND CHARACTERISTICS
AS OF OCTOBER 31, 2006
Weighted Average Market Capitalization: $53.2 billion
Weighted Average P/E
(based on estimated earnings): 16.5
Beta: 1.24
Fund Standard Deviation: 9.78
S&P 500 Standard Deviation: 8.14
Portfolio Turnover
(for fiscal year): 15%
Number of Securities: 159
Expense Ratio
(Class A shares for fiscal year): 0.85%
Total Net Assets: $ 1.9 billion
PORTFOLIO COMPOSITION(4)
As of 10/31/06
(PIE CHART)
As of As of
Asset Class 10/31/06 10/31/05 Change
- ----------- -------- -------- ------
Information Technology 18% 16% +2%
Financials 17% 18% -1%
Health Care 16% 17% -1%
Industrials 15% 15% 0%
Consumer Discretionary 11% 12% -1%
Consumer Staples 7% 5% +2%
Energy 7% 7% 0%
Materials 3% 3% 0%
REITs 3% 3% 0%
Telecommunication Services 1% 1% 0%
Cash Equivalents 2% 3% -1%
(4) May not reflect the current portfolio composition.
(5) Performance information provided for individual securities held by the Fund
represents performance for the fiscal year ended 10/31/06. The Fund may not
have held these securities throughout the entire period.
13
Mid Cap Stock Fund
ANNUAL TOTAL RETURNS(1)
Class A shares at net asset value(2)
(Calendar Year)
2005 12.94%
2004 13.87%
2003 26.78%
2002 -10.48%
2001 10.69%
INVESTMENT STRATEGY
During the fiscal year, economic growth accelerated and then slowed while
inflationary pressures also rose before later easing. An August decision by the
Federal Reserve (the Fed) to pause its monetary tightening campaign, plus a
decline in oil prices, spurred a rally in equity markets. Large-cap stocks
benefited from this advance initially, but mid caps outperformed large caps in
October, casting doubt about whether a decisive market rotation away from small
and mid caps would occur in the near term.
The WM Mid Cap Stock Fund built relative outperformance for the year through a
variety of holdings that demonstrated earnings growth. Airline holdings,
particularly Continental Airlines and AMR, benefited from improving financial
conditions within the industry as airlines trimmed their fleets and reduced
overall capacity. Subsequent fare increases had a more profoundly positive
impact on earnings than the negative effects of high fuel costs. Another
industrial position, Lincoln Electric Holdings, advanced on
greater-than-expected sales and earnings growth. As a manufacturer of
arc-welding products and welding supplies, Lincoln Electric has benefited from
industrial growth
Data shown is past performance and does not guarantee future results. Current
performance, including the most recent month-end results, which may be higher or
lower than the data shown, can be obtained by calling 800-222-5852.Your
investment's return and principal value will fluctuate, so it may be worth more
or less upon redemption. A sales charge may apply as follows: Class A shares:
maximum up-front sales charge of 5.5%; Class B shares: contingent deferred sales
charge of 5%, which declines over 5 years (5-5-4-3-2-0%); Class C shares:
contingent deferred sales charge of 1% on redemptions made during the first 12
months. See the prospectus for details. Performance listed with sales charge
reflects the maximum sales charge noted above.
Small-cap and mid-cap stocks may have additional risks, including greater price
volatility.
AVERAGE ANNUAL TOTAL RETURNS(1) AS OF OCTOBER 31, 2006
1-Year 5-Year Since Inception Inception Date
------ ------ --------------- --------------
CLASS A SHARES
Net Asset Value(2) 17.12% 12.44% 14.26% 3/1/00
With Sales Charge 10.68% 11.17% 13.30%
CLASS B SHARES
Net Asset Value(2) 15.95% 11.33% 13.18% 3/1/00
With Sales Charge 10.95% 11.07% 13.18%
CLASS C SHARES
Net Asset Value(2) 16.09% 11.40% 10.88% 3/1/02
With Sales Charge 15.09% 11.40% 10.88%
S&P MidCap 400(3) 13.43% 13.02% 9.52%
VALUE OF A $10,000 INVESTMENT(1) MARCH 1, 2000 - OCTOBER 31, 2006
(PERFORMANCE GRAPH)
MID CAP STOCK FUND
--------------------------------
DATE NAV MOP S&P MidCap 400
- ---- ------ ------ --------------
OCT-96
Nov-96
Dec-96
Jan-97
Feb-97
Mar-97
Apr-97
May-97
Jun-97
Jul-97
Aug-97
Sep-97
Oct-97
Nov-97
Dec-97
Jan-98
Feb-98
Mar-98
Apr-98
May-98
Jun-98
Jul-98
Aug-98
Sep-98
Oct-98
Nov-98
Dec-98
Jan-99
Feb-99
Mar-99
Apr-99
May-99
Jun-99
Jul-99
Aug-99
Sep-99
Oct-99
Nov-99
Dec-99
Jan-00
Feb-00 10,000 9,450 10,000
Mar-00 11,210 10,593 10,837
Apr-00 11,271 10,651 10,459
May-00 11,681 11,038 10,328
Jun-00 11,420 10,792 10,480
Jul-00 11,650 11,009 10,645
Aug-00 12,450 11,765 11,833
Sep-00 12,351 11,671 11,752
Oct-00 12,580 11,888 11,353
Nov-00 12,221 11,548 10,496
Dec-00 13,460 12,719 11,299
Jan-01 13,892 13,128 11,551
Feb-01 13,842 13,080 10,892
Mar-01 13,339 12,606 10,082
Apr-01 14,072 13,298 11,194
May-01 14,553 13,752 11,455
Jun-01 15,014 14,188 11,409
Jul-01 14,924 14,103 11,239
Aug-01 14,482 13,686 10,872
Sep-01 13,088 12,368 9,519
Oct-01 13,550 12,804 9,940
Nov-01 14,101 13,326 10,680
Dec-01 14,898 14,078 11,232
Jan-02 14,399 13,607 11,174
Feb-02 14,389 13,597 11,187
Mar-02 15,252 14,413 11,987
Apr-02 15,138 14,305 11,930
May-02 15,272 14,432 11,729
Jun-02 14,481 13,685 10,870
Jul-02 13,430 12,691 9,817
Aug-02 13,566 12,819 9,866
Sep-02 12,514 11,826 9,071
Oct-02 12,888 12,180 9,464
Nov-02 13,555 12,809 10,012
Dec-02 13,336 12,603 9,600
Jan-03 13,098 12,377 9,320
Feb-03 12,931 12,220 9,098
Mar-03 12,994 12,279 9,174
Apr-03 13,420 12,682 9,840
May-03 14,429 13,635 10,656
Jun-03 14,502 13,705 10,792
Jul-03 14,742 13,931 11,175
Aug-03 15,116 14,285 11,682
Sep-03 14,929 14,108 11,503
Oct-03 15,959 15,081 12,373
Nov-03 16,396 15,494 12,803
Dec-03 16,909 15,979 13,020
Jan-04 17,117 16,176 13,302
Feb-04 17,598 16,630 13,622
Mar-04 17,410 16,452 13,680
Apr-04 17,243 16,294 13,231
May-04 17,660 16,689 13,505
Jun-04 18,223 17,221 13,813
Jul-04 17,482 16,520 13,168
Aug-04 17,282 16,332 13,134
Sep-04 17,595 16,628 13,523
Oct-04 17,804 16,825 13,739
Nov-04 18,755 17,723 14,558
Dec-04 19,252 18,193 15,168
Jan-05 18,582 17,560 14,781
Feb-05 19,069 18,020 15,278
Mar-05 19,404 18,337 15,108
Apr-05 18,841 17,805 14,520
May-05 19,718 18,633 15,395
Jun-05 20,193 19,082 15,752
Jul-05 21,047 19,889 16,579
Aug-05 21,003 19,848 16,395
Sep-05 21,047 19,889 16,521
Oct-05 20,787 19,644 16,166
Nov-05 21,479 20,298 16,956
Dec-05 21,744 20,548 17,073
Jan-06 22,842 21,585 18,079
Feb-06 22,632 21,387 17,927
Mar-06 23,542 22,247 18,375
Apr-06 23,788 22,479 18,634
May-06 22,959 21,696 17,794
Jun-06 22,994 21,729 17,797
Jul-06 22,632 21,387 17,290
Aug-06 22,947 21,685 17,487
Sep-06 23,309 22,027 17,604
Oct-06 24,348 23,009 18,337
Performance of other share classes will differ.
See glossary on page 36 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. For Class C
shares, performance for periods prior to inception is hypothetical, based
on Class A share returns adjusted for the respective expenses of the share
class. Performance does not reflect the impact of federal, state, or
municipal taxes. If it did, performance would be lower.
(2) Net asset value is not adjusted for sales charge.
(3) Returns shown for the index assume reinvestment of all dividends and
distributions, and the since-inception return shown for the index is
calculated from 2/29/00. Indices are unmanaged, and individuals cannot
invest directly in an index.
14
(PHOTO OF DANIEL R. COLEMAN) PORTFOLIO MANAGER
Daniel R. Coleman
WM Advisors, Inc.
in China, India, and Eastern Europe. Within other sectors, long-term holdings
Mattel (consumer durables) and Covance (health care) also made positive
contributions to Fund performance.
The Fund also benefited from a general lack of problematic positions. We
diligently monitor the portfolio's holdings, seeking to avoid earnings surprises
on the downside, and we were able to do that this year. The Fund's holdings did
not suffer any declines during the period that we would regard as meaningful
(i.e., more than 10%).
During the period, we saw few significant over- or under-valuations in sectors,
so we did not make any dramatic adjustments to weightings. Changes that were
made were confined to trimming or building core positions based on valuations.
For example, the strong performance of energy holdings in the first half of the
fiscal year led us to pare these positions, moving the energy sector to a
moderate underweighting.
Our outlook for mid-cap equities is generally positive, but we anticipate that
economic growth will continue to slow from its strong pace in early 2006.This
anticipated slowdown should produce a benign economic and interest-rate
environment. On the negative side, many companies may find it hard to sustain
strong earnings growth. Therefore, we are redoubling our research efforts to
identify companies that we believe can generate strong sales and earnings growth
without the benefit of a robust economy.
TOP 10 HOLDINGS(4) AS OF OCTOBER 31, 2006
% of Net Assets Total Return(5)
--------------- ---------------
HCC Insurance Holdings Inc. 2.89% 13.45%
Nordstrom Inc. 2.61% 38.15%
AMR Corp. 2.53% 109.77%
Microchip Technology Inc. 2.52% 11.83%
Pinnacle West Capital Corp. 2.41% 19.95%
Continental Airlines Inc. 2.33% 184.79%
General Growth Properties Inc. 2.33% 26.50%
Noble Energy Inc. 2.28% 22.09%
Valspar Corp. 2.22% 23.52%
Tidewater Inc. 2.19% 9.49%
FUND CHARACTERISTICS
AS OF OCTOBER 31, 2006
Weighted Average Market Capitalization: $ 5.5 billion
Weighted Average P/E
(based on estimated earnings): 14.1
Beta: 1.00
Fund Standard Deviation: 8.61
S&P 500 Standard Deviation: 8.14
Portfolio Turnover
(for fiscal year): 22%
Number of Securities: 61
Expense Ratio
(Class A shares for fiscal year): 1.09%
Total Net Assets: $979.5 million
PORTFOLIO COMPOSITION(4)
As of 10/31/06
(PIE CHART)
As of As of
Asset Class 10/31/06 10/31/05 Change
- ----------- -------- -------- ------
Financials 19% 18% +1%
Industrials 17% 15% +2%
Consumer Discretionary 13% 12% +1%
Information Technology 12% 12% 0%
Health Care 11% 12% -1%
Energy 9% 8% +1%
Materials 6% 5% +1%
Utilities 5% 6% -1%
REITs 2% 2% 0%
Consumer Staples 1% 3% -2%
Cash Equivalents 5% 7% -2%
(4) May not reflect the current portfolio composition.
(5) Performance information provided for individual securities held by the Fund
represents performance for the fiscal year ended 10/31/06. The Fund may not
have held these securities throughout the entire period.
15
Growth Fund
ANNUAL TOTAL RETURNS(1)
Class A shares at net asset value(2)
(Calendar Year)
2005 6.81%
2004 7.46%
2003 27.68%
2002 -31.82%
2001 -29.45%
2000 -22.00%
1999 94.42%
1998 57.10%
1997 9.78%
1996 16.92%
INVESTMENT STRATEGY
Salomon Brothers Asset Management, Inc, Janus Capital Management LLC, and
OppenheimerFunds, Inc. share management responsibilities for the WM Growth Fund.
U.S. equity markets generally performed well over the course of the fiscal year,
due in large part to the continued strength of the economy, despite its slowing
rate of growth. Large-cap growth stocks appeared to be out of favor for much of
the period, but strong earnings and weaker oil prices spurred a year-end rally
in which large-cap growth stocks showed improving valuations.
Salomon Brothers reported that an overweighting and good stock selection within
the financials sector, combined with a lack of energy stocks, were factors that
contributed positively to relative performance. Individual contributors included
Merrill Lynch & Co. and Morgan Stanley. Stock selection in the information
technology, consumer discretionary, and health care sectors detracted from
performance. Positions that were problematic included Yahoo!, Juniper Networks,
and Red Hat.
Janus also cited Yahoo! as a detractor from performance, along with select
energy 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. A sales charge may apply as follows: Class A shares:
maximum up-front sales charge of 5.5%; Class B shares: contingent deferred sales
charge of 5%, which declines over 5 years (5-5-4-3-2-0%); Class C shares:
contingent deferred sales charge of 1% on redemptions made during the first 12
months. See the prospectus for details. Performance listed with sales charge
reflects the maximum sales charge noted above.
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 OCTOBER 31, 2006
1-Year 5-Year 10-Year Since Inception Inception Date
------ ------ ------- --------------- --------------
CLASS A SHARES
Net Asset Value(2) 6.60% 2.07% 6.84% 9.73% 4/5/93
With Sales Charge 0.72% 0.91% 6.24% 9.28%
CLASS B SHARES
Net Asset Value(2) 5.53% 1.12% 6.15% 9.59% 7/1/94
With Sales Charge 0.52% 0.73% 6.15% 9.59%
CLASS C SHARES
Net Asset Value(2) 5.75% 1.36% 6.01% 2.48% 3/1/02
With Sales Charge 4.75% 1.36% 6.01% 2.48%
Russell 1000(R) Growth Index(3) 10.84% 4.07% 5.76% 8.39%
VALUE OF A $10,000 INVESTMENT(1) OCTOBER 31, 1996 - OCTOBER 31, 2006
(PERFORMANCE GRAPH)
GROWTH FUND
------------------------------
RUSSELL 1000
DATE NAV MOP GROWTH INDEX
- ---- ------ ------ ------------
Oct-96 10,000 9,450 10,000
Nov-96 10,362 9,792 10,751
Dec-96 10,292 9,726 10,540
Jan-97 10,794 10,200 11,279
Feb-97 10,313 9,746 11,202
Mar-97 9,636 9,106 10,596
Apr-97 9,781 9,243 11,300
May-97 10,451 9,877 12,116
Jun-97 10,852 10,255 12,600
Jul-97 11,776 11,129 13,714
Aug-97 11,143 10,530 12,912
Sep-97 11,798 11,149 13,547
Oct-97 11,470 10,839 13,046
Nov-97 11,419 10,791 13,601
Dec-97 11,297 10,676 13,753
Jan-98 11,647 11,007 14,164
Feb-98 12,738 12,037 15,229
Mar-98 13,350 12,616 15,837
Apr-98 13,852 13,090 16,055
May-98 13,430 12,691 15,599
Jun-98 14,696 13,888 16,554
Jul-98 14,633 13,828 16,445
Aug-98 12,134 11,466 13,977
Sep-98 13,598 12,850 15,050
Oct-98 14,044 13,272 16,260
Nov-98 14,992 14,168 17,497
Dec-98 17,749 16,773 19,076
Jan-99 20,101 18,996 20,195
Feb-99 19,436 18,367 19,272
Mar-99 21,797 20,598 20,288
Apr-99 22,907 21,647 20,314
May-99 21,622 20,432 19,691
Jun-99 23,354 22,069 21,069
Jul-99 22,436 21,202 20,399
Aug-99 23,057 21,789 20,732
Sep-99 24,185 22,855 20,296
Oct-99 25,977 24,548 21,829
Nov-99 28,819 27,234 23,005
Dec-99 34,510 32,612 25,398
Jan-00 34,569 32,668 24,207
Feb-00 38,811 36,676 25,390
Mar-00 39,490 37,318 27,208
Apr-00 35,908 33,933 25,913
May-00 32,709 30,910 24,607
Jun-00 33,634 31,784 26,472
Jul-00 33,103 31,282 25,368
Aug-00 35,562 33,606 27,664
Sep-00 33,791 31,933 25,047
Oct-00 32,264 30,490 23,862
Nov-00 26,999 25,514 20,345
Dec-00 26,915 25,435 19,702
Jan-01 28,177 26,627 21,064
Feb-01 22,812 21,558 17,487
Mar-01 20,424 19,300 15,584
Apr-01 24,100 22,775 17,556
May-01 23,411 22,123 17,298
Jun-01 22,514 21,276 16,897
Jul-01 21,226 20,059 16,474
Aug-01 19,112 18,061 15,127
Sep-01 17,274 16,324 13,617
Oct-01 17,491 16,529 14,332
Nov-01 18,628 17,604 15,709
Dec-01 18,984 17,940 15,679
Jan-02 18,386 17,375 15,402
Feb-02 16,733 15,813 14,763
Mar-02 17,250 16,301 15,273
Apr-02 16,125 15,239 14,027
May-02 15,861 14,989 13,688
Jun-02 14,345 13,556 12,421
Jul-02 13,173 12,448 11,738
Aug-02 13,333 12,600 11,773
Sep-02 12,208 11,537 10,553
Oct-02 13,173 12,448 11,520
Nov-02 13,954 13,186 12,146
Dec-02 12,943 12,232 11,307
Jan-03 12,679 11,982 11,032
Feb-03 12,473 11,787 10,981
Mar-03 12,599 11,906 11,185
Apr-03 13,609 12,861 12,012
May-03 14,356 13,567 12,611
Jun-03 14,437 13,643 12,785
Jul-03 14,805 13,990 13,104
Aug-03 15,253 14,414 13,430
Sep-03 14,944 14,122 13,286
Oct-03 15,748 14,882 14,033
Nov-03 15,932 15,056 14,180
Dec-03 16,529 15,620 14,671
Jan-04 16,840 15,914 14,970
Feb-04 16,886 15,957 15,066
Mar-04 16,713 15,794 14,786
Apr-04 16,345 15,446 14,614
May-04 16,633 15,718 14,886
Jun-04 16,944 16,012 15,072
Jul-04 16,187 15,297 14,221
Aug-04 16,038 15,156 14,151
Sep-04 16,325 15,427 14,285
Oct-04 16,589 15,677 14,508
Nov-04 17,186 16,241 15,007
Dec-04 17,766 16,789 15,596
Jan-05 17,281 16,330 15,076
Feb-05 17,407 16,449 15,236
Mar-05 17,153 16,209 14,959
Apr-05 16,887 15,958 14,675
May-05 17,775 16,797 15,385
Jun-05 17,510 16,547 15,328
Jul-05 18,514 17,495 16,077
Aug-05 18,306 17,299 15,870
Sep-05 18,387 17,375 15,943
Oct-05 18,179 17,179 15,788
Nov-05 19,044 17,997 16,469
Dec-05 18,975 17,931 16,418
Jan-06 19,332 18,269 16,707
Feb-06 19,113 18,062 16,680
Mar-06 19,344 18,280 16,927
Apr-06 19,160 18,106 16,903
May-06 18,249 17,245 16,330
Jun-06 18,191 17,191 16,266
Jul-06 17,707 16,733 15,957
Aug-06 18,456 17,441 16,455
Sep-06 18,975 17,931 16,908
Oct-06 19,378 18,313 17,503
Performance of other share classes will differ.
See glossary on page 36 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. For Class C
shares, performance for periods prior to inception is hypothetical, based
on Class A share returns adjusted for the respective expenses of the share
class. Performance does not reflect the impact of federal, state, or
municipal taxes. If it did, performance would be lower. The Fund's
performance between 1999 and 2000 benefited from the agreement of WM
Advisors and its affiliates to limit the Fund's expenses.
(2) Net asset value is not adjusted for sales charge.
(3) Returns shown for the index assume reinvestment of all dividends and
distributions, and the since-inception return shown for the index is
calculated from 3/31/93. Indices are unmanaged, and individuals cannot
invest directly in an index.
16
PORTFOLIO MANAGERS
Alan Blake E. Marc Pinto, CFA William L. Wilby, CFA &
Salomon Brothers Janus Capital Management LLC Marc L. Baylin, CFA
Asset Management, Inc OppenheimerFunds, Inc.
health care holdings. UnitedHealth Group experienced a variety of headwinds
during the period, but Janus believes that the company's prospects for growing
market share, an attractive stock valuation, and higher earnings growth
potential bode well for the company's long-term potential. A number of
information technology stocks benefited the Fund. Research in Motion, the maker
of BlackBerry devices, contributed positive performance for the period. New
holding Apple Computer also rose strongly.
Like the other subadvisors, Oppenheimer found that individual stock performance
proved to be the primary influence, both positive and negative, on its
portfolio's returns. It listed Cisco, Google, and Monsanto as top gainers, along
with contributions from Cognizant Tech Solutions and Schlumberger. Holdings that
detracted from performance included Yahoo!, XM Satellite Radio, and Medtronic.
Oppenheimer continues to believe in the prospects for Yahoo! and XM Satellite,
but it exited its Medtronic position.
All three subadvisors are generally optimistic about the prospects for large-cap
growth stocks. Oppenheimer notes that recent years have formed the longest
duration and greatest magnitude of growth underperformance in history, and it
anticipates a change in these circumstances due to the slowing economic cycle.
Both Oppenheimer and Salomon believe that a combination of strong fundamentals
and attractive valuations have created a good investment opportunity in the
large-cap growth space. However, Salomon and Janus point to the role of the
Federal Reserve in determining if the economy ultimately experiences a hard or
soft landing.
TOP 10 HOLDINGS(4) AS OF OCTOBER 31, 2006
% of Net Assets Total Return(5)
--------------- ---------------
Amgen Inc. 3.21% 0.38%
Yahoo! Inc. 2.90% -28.75%
Genentech Inc. 2.86% -8.06%
Procter & Gamble Co. 2.61% 15.58%
Merrill Lynch & Co. Inc. 2.58% 36.84%
QUALCOMM Inc. 2.48% -7.57%
General Electric Co. 2.42% 6.61%
Texas Instruments Inc. 2.15% 6.15%
Cisco Systems Inc. 2.06% 38.28%
Amazon.com Inc. 1.83% -4.44%
FUND CHARACTERISTICS
AS OF OCTOBER 31, 2006
Weighted Average Market Capitalization: $73.9 billion
Weighted Average P/E
(based on estimated earnings): 19.6
Beta: 1.11
Fund Standard Deviation: 8.89
S&P 500 Standard Deviation: 8.14
Portfolio Turnover (for fiscal year): 44%
Number of Securities: 141
Expense Ratio
(Class A shares for fiscal year): 1.26%
Total Net Assets: $ 2.4 billion
PORTFOLIO COMPOSITION(4)
As of 10/31/06
(PIE CHART)
As of As of
Asset Class 10/31/06 10/31/05 Change
- ----------- -------- -------- ------
Information Technology 30% 27% +3%
Health Care 20% 21% -1%
Consumer Discretionary 15% 20% -5%
Financials 12% 9% +3%
Consumer Staples 9% 8% +1%
Industrials 6% 6% 0%
Energy 4% 4% 0%
Materials 1% 2% -1%
Telecommunication Services 1% 1% 0%
Cash Equivalents 2% 2% 0%
(4) May not reflect the current portfolio composition.
(5) Performance information provided for individual securities held by the Fund
represents performance for the fiscal year ended 10/31/06. The Fund may not
have held these securities throughout the entire period.
17
Small Cap Value Fund
ANNUAL TOTAL RETURNS(1)
Class A shares at net asset value(2)
(Calendar Year)
2005 4.81%
INVESTMENT STRATEGY
Despite growing evidence that the economy is entering a mid-cycle slowdown--
conditions that typically favor large-cap firms--outperformance by small-cap
stocks continued during the fiscal year. Investors also continued to favor value
over growth across all capitalizations. A late-period stock market rally was
ignited by declining oil prices and a decision by the Federal Reserve (the Fed)
to halt its two-year streak of interest-rate increases. Large caps were the
initial beneficiaries of this advance, but in October, small caps resumed their
outperformance.
Individual stock performance was the primary determinant of results for the WM
Small Cap Value Fund. Certain problematic holdings offset the gains of strong
performers. Negative contributions came primarily from consumer discretionaries.
Movie Gallery, a video rental retailer, enjoyed a brief advance in the spring
before dropping on lower-than- expected earnings. An earnings miss at Rocky
Brands, which makes footwear, caused us to exit the position. Poor results from
holdings in other sectors included Credence Systems, a technology firm whose
product delays and downsizing caused us to trim this position.
Data shown is past performance and does not guarantee future results. Current
performance, including the most recent month-end results, which may be higher or
lower than the data shown, can be obtained by calling 800-222-5852. Your
investment's return and principal value will fluctuate, so it may be worth more
or less upon redemption. A sales charge may apply as follows: Class A shares:
maximum up-front sales charge of 5.5%; Class B shares: contingent deferred sales
charge of 5%, which declines over 5 years (5-5-4-3-2-0%); Class C shares:
contingent deferred sales charge of 1% on redemptions made during the first 12
months. See the prospectus for details. Performance listed with sales charge
reflects the maximum sales charge noted above.
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 OCTOBER 31, 2006
1-Year Since Inception Inception Date
------ --------------- --------------
CLASS A SHARES
Net Asset Value(2) 15.51% 12.22% 3/1/04
With Sales Charge 9.16% 9.88%
CLASS B SHARES
Net Asset Value(2) 14.44% 11.19% 3/1/04
With Sales Charge 9.44% 9.93%
CLASS C SHARES
Net Asset Value(2) 14.76% 11.38% 3/1/04
With Sales Charge 12.76% 11.38%
Russell 2000(R) Value Index(3) 22.90% 14.79%
VALUE OF A $10,000 INVESTMENT(1) MARCH 1, 2004-OCTOBER 31, 2006
(PERFORMANCE GRAPH)
SMALL CAP VALUE FUND
------------------------------
RUSSELL 2000
DATE NAV MOP VALUE INDEX
- ------ ------ ------ ------------
Oct-96
Nov-96
Dec-96
Jan-97
Feb-97
Mar-97
Apr-97
May-97
Jun-97
Jul-97
Aug-97
Sep-97
Oct-97
Nov-97
Dec-97
Jan-98
Feb-98
Mar-98
Apr-98
May-98
Jun-98
Jul-98
Aug-98
Sep-98
Oct-98
Nov-98
Dec-98
Jan-99
Feb-99
Mar-99
Apr-99
May-99
Jun-99
Jul-99
Aug-99
Sep-99
Oct-99
Nov-99
Dec-99
Jan-00
Feb-00
Mar-00
Apr-00
May-00
Jun-00
Jul-00
Aug-00
Sep-00
Oct-00
Nov-00
Dec-00
Jan-01
Feb-01
Mar-01
Apr-01
May-01
Jun-01
Jul-01
Aug-01
Sep-01
Oct-01
Nov-01
Dec-01
Jan-02
Feb-02
Mar-02
Apr-02
May-02
Jun-02
Jul-02
Aug-02
Sep-02
Oct-02
Nov-02
Dec-02
Jan-03
Feb-03
Mar-03
Apr-03
May-03
Jun-03
Jul-03
Aug-03
Sep-03
Oct-03
Nov-03
Dec-03
Jan-04
Feb-04 10,000 9,450 10,000
Mar-04 10,190 9,630 10,138
Apr-04 9,690 9,157 9,614
May-04 9,650 9,119 9,730
Jun-04 10,050 9,498 10,224
Jul-04 9,970 9,422 9,754
Aug-04 10,070 9,516 9,850
Sep-04 10,580 9,998 10,240
Oct-04 10,810 10,216 10,399
Nov-04 11,740 11,094 11,321
Dec-04 11,989 11,329 11,591
Jan-05 11,817 11,167 11,143
Feb-05 12,140 11,472 11,365
Mar-05 12,180 11,510 11,130
Apr-05 11,777 11,129 10,556
May-05 12,120 11,453 11,200
Jun-05 12,402 11,720 11,695
Jul-05 12,976 12,263 12,361
Aug-05 12,714 12,015 12,076
Sep-05 12,422 11,738 12,056
Oct-05 11,787 11,138 11,753
Nov-05 12,301 11,624 12,230
Dec-05 12,565 11,874 12,136
Jan-06 13,111 12,390 13,140
Feb-06 12,865 12,157 13,138
Mar-06 13,325 12,592 13,774
Apr-06 13,111 12,390 13,812
May-06 12,779 12,076 13,240
Jun-06 12,876 12,168 13,403
Jul-06 12,544 11,854 13,216
Aug-06 12,790 12,087 13,612
Sep-06 12,886 12,178 13,745
Oct-06 13,614 12,865 14,445
Performance of other share classes will differ.
See glossary on page 36 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) Net asset value is not adjusted for sales charge.
(3) Returns shown for the index assume reinvestment of all dividends and
distributions, and the since-inception return shown for the index is
calculated from 2/29/04. Indices are unmanaged, and individuals cannot
invest directly in an index.
18
(PHOTO OF DAVID W. SIMPSON) PORTFOLIO MANAGER
David W. Simpson, CFA
WM Advisors, Inc.
Conversely, holdings from the materials sector advanced strongly on the
widespread runup in commodity prices. The standout performer within this sector
was Minara Resources, an Australian nickel miner that benefited from a surge in
nickel prices plus production improvements. Century Aluminum and Randgold
Resources also benefited Fund performance.
Airline holdings, particularly Continental Airlines and AMR, benefited from
improving financial conditions within the industry as airlines trimmed their
fleets and reduced overall capacity. Subsequent fare increases had a more
profoundly positive impact on earnings than the negative effects of fuel costs
that were high for much of the year.
Advances by airline holdings also increased the Fund's overall allocation to the
industrials sector. Additionally, stock selection led us to add several new
holdings that are categorized as industrials despite their very different
business models. Other sector changes during the period included some selective
additions to the Fund's underweighted financials allocation. Rising short-term
interest rates and stationary long-term interest rates have hampered earnings
growth for financial firms this year. However, we recently found a few with
attractive valuations.
Our outlook anticipates that the actions of the Fed, as determined by incoming
growth and inflation data, will help to set the market direction for small-cap
equities. The Fed's pause could prove beneficial for small caps in the short
term, but any mixed economic data that creates uncertainty about the Fed's next
move could provoke some volatility. This possibility, combined with full
valuations, leads us to continue focusing on higher-quality holdings.
TOP 10 HOLDINGS(4) AS OF OCTOBER 31, 2006
% of Net Assets Total Return(5)
--------------- ---------------
Minara Resources Ltd. 4.31% 251.03%
United Fire & Casualty Co. 3.10% -20.29%
USA Mobility Inc. 3.02% 27.02%
New Flyer Industries Inc. 2.48% 25.82%
Vermilion Energy Trust 2.03% 57.98%
Washington Federal Inc. 1.97% 4.67%
Continental Airlines Inc. 1.95% 184.79%
AMR Corp. 1.85% 109.77%
Central Garden & Pet Co. 1.75% 16.56%
Arctic Glacier Income Fund 1.75% 65.03%
FUND CHARACTERISTICS
AS OF OCTOBER 31, 2006
Weighted Average Market Capitalization: $ 1.2 billion
Weighted Average P/E
(based on estimated earnings): 12.9
Portfolio Turnover
(for fiscal year): 38%
Number of Securities: 83
Expense Ratio
(Class A shares for fiscal year): 1.35%
Total Net Assets: $308.9 million
PORTFOLIO COMPOSITION(4)
As of 10/31/06
(PIE CHART)
As of As of
Asset Class 10/31/06 10/31/05 Change
- ----------- -------- -------- ------
Industrials 20% 14% +6%
Financials 17% 13% +4%
Materials 11% 11% 0%
Energy 10% 11% -1%
Information Technology 9% 11% -2%
Consumer Discretionary 7% 11% -4%
Consumer Staples 6% 7% -1%
REITs 6% 4% +2%
Telecommunication Services 6% 3% +3%
Health Care 3% 6% -3%
Utilities 1% 1% 0%
Options 0% 3% -3%
Cash Equivalents 4% 5% -1%
(4) May not reflect the current portfolio composition.
(5) Performance information provided for individual securities held by the Fund
represents performance in U.S. dollars for the fiscal year ended 10/31/06.
The Fund may not have held these securities throughout the entire period.
19
Small Cap Growth Fund
ANNUAL TOTAL RETURNS(1)
Class A shares at net asset value(2)
(Calendar Year)
2005 -2.31%
2004 4.18%
2003 69.47%
2002 -47.41%
2001 -13.15%
2000 -11.53%
1999 71.61%
1998 4.94%
1997 12.63%
1996 8.50%
INVESTMENT STRATEGY
Delaware Management Company and Oberweis Asset Management, Inc. share management
responsibilities for the WM Small Cap Growth Fund.
Equities rose strongly for the fiscal year, with small-cap stocks leading the
way. However, value stocks significantly outperformed growth across all
capitalizations. These results reflected, in part, a retreat in equities during
the spring when fears about inflation and rising interest rates led investors to
flee riskier assets. Growth stocks suffered the most, especially among
smaller-cap stocks. Investor pessimism subsided late in the year, however, as
commodity prices dropped and the Federal Reserve (the Fed) finally paused its
campaign of successive interest-rate hikes. Large-cap stocks benefited
initially, but small-cap growth stocks broke out and generated strong returns in
October.
Delaware noted that its overall sector allocations for the year were modestly
positive, with overweightings in consumer-related sectors adding value. Its
stock selection for the period, however, had a generally negative impact,
particularly in the consumer non-durables, health care, and technology sectors.
Holdings that detracted from performance
Data shown is past performance and does not guarantee future results. Current
performance, including the most recent month-end results, which may be higher or
lower than the data shown, can be obtained by calling 800-222-5852. Your
investment's return and principal value will fluctuate, so it may be worth more
or less upon redemption. A sales charge may apply as follows: Class A shares:
maximum up-front sales charge of 5.5%; Class B shares: contingent deferred sales
charge of 5%, which declines over 5 years (5-5-4-3-2-0%); Class C shares:
contingent deferred sales charge of 1% on redemptions made during the first 12
months. See the prospectus for details. Performance listed with sales charge
reflects the maximum sales charge noted above.
Small-cap and mid-cap stocks may have additional risks, including greater price
volatility.
AVERAGE ANNUAL TOTAL RETURNS(1) AS OF OCTOBER 31, 2006
1-Year 5-Year 10-Year Since Inception Inception Date
------ ------ ------- --------------- --------------
CLASS A SHARES
Net Asset Value(2) 5.39% 2.83% 3.83% 7.72% 7/18/90
With Sales Charge -0.41% 1.67% 3.25% 7.35%
CLASS B SHARES
Net Asset Value(2) 4.12% 1.68% 3.07% 6.35% 7/1/94
With Sales Charge -0.88% 1.31% 3.07% 6.35%
CLASS C SHARES
Net Asset Value(2) 4.55% 2.07% 3.15% 2.42% 3/1/02
With Sales Charge 3.55% 2.07% 3.15% 2.42%
Russell 2000(R) Growth Index(3) 17.07% 9.51% 5.15% 7.94%
VALUE OF A $10,000 INVESTMENT(1) OCTOBER 31, 1996 - OCTOBER 31, 2006
(PERFORMANCE GRAPH)
SMALL CAP GROWTH FUND
------------------------------
RUSSELL 2000
DATE NAV MOP GROWTH INDEX
---- ------ ------ ------------
OCT-96 10,000 9,450 10,000
Nov-96 10,120 9,563 10,278
Dec-96 10,072 9,518 10,478
Jan-97 9,760 9,223 10,740
Feb-97 9,527 9,003 10,092
Mar-97 8,777 8,294 9,379
Apr-97 8,811 8,327 9,270
May-97 9,868 9,325 10,664
Jun-97 10,385 9,814 11,025
Jul-97 10,465 9,889 11,590
Aug-97 10,567 9,986 11,937
Sep-97 11,261 10,641 12,890
Oct-97 11,044 10,437 12,115
Nov-97 11,101 10,490 11,827
Dec-97 11,344 10,720 11,834
Jan-98 11,211 10,595 11,677
Feb-98 12,138 11,471 12,708
Mar-98 12,692 11,994 13,241
Apr-98 12,602 11,909 13,322
May-98 11,681 11,038 12,354
Jun-98 11,728 11,083 12,480
Jul-98 10,838 10,242 11,438
Aug-98 8,365 7,905 8,798
Sep-98 9,117 8,616 9,690
Oct-98 9,779 9,241 10,196
Nov-98 10,808 10,213 10,987
Dec-98 11,904 11,249 11,981
Jan-99 11,825 11,175 12,520
Feb-99 10,716 10,127 11,375
Mar-99 10,639 10,054 11,780
Apr-99 11,123 10,511 12,820
May-99 11,884 11,230 12,840
Jun-99 12,837 12,131 13,517
Jul-99 13,221 12,494 13,099
Aug-99 13,000 12,285 12,610
Sep-99 13,262 12,533 12,853
Oct-99 13,946 13,178 13,182
Nov-99 16,121 15,234 14,575
Dec-99 20,429 19,305 17,143
Jan-00 21,946 20,739 16,984
Feb-00 29,107 27,507 20,936
Mar-00 25,833 24,412 18,736
Apr-00 20,566 19,434 16,843
May-00 18,896 17,856 15,368
Jun-00 23,238 21,960 17,353
Jul-00 22,139 20,921 15,866
Aug-00 24,474 23,128 17,535
Sep-00 22,893 21,634 16,664
Oct-00 21,417 20,239 15,311
Nov-00 17,981 16,992 12,530
Dec-00 18,075 17,081 13,297
Jan-01 20,889 19,740 14,373
Feb-01 16,874 15,946 12,402
Mar-01 14,144 13,366 11,275
Apr-01 16,232 15,339 12,655
May-01 17,293 16,342 12,949
Jun-01 19,232 18,174 13,302
Jul-01 16,120 15,234 12,168
Aug-01 15,001 14,176 11,407
Sep-01 11,293 10,672 9,567
Oct-01 12,672 11,975 10,487
Nov-01 14,507 13,709 11,363
Dec-01 15,699 14,836 12,071
Jan-02 14,112 13,336 11,641
Feb-02 12,584 11,892 10,888
Mar-02 14,211 13,429 11,834
Apr-02 12,216 11,544 11,579
May-02 10,786 10,193 10,901
Jun-02 9,874 9,331 9,977
Jul-02 8,107 7,662 8,443
Aug-02 7,780 7,352 8,439
Sep-02 7,294 6,892 7,830
Oct-02 8,147 7,699 8,226
Nov-02 9,308 8,796 9,041
Dec-02 8,256 7,802 8,417
Jan-03 8,345 7,886 8,189
Feb-03 7,978 7,539 7,970
Mar-03 7,829 7,398 8,090
Apr-03 8,672 8,195 8,856
May-03 10,210 9,648 9,854
Jun-03 10,359 9,789 10,044
Jul-03 11,113 10,502 10,803
Aug-03 11,719 11,074 11,383
Sep-03 11,788 11,139 11,095
Oct-03 13,315 12,583 12,054
Nov-03 13,614 12,865 12,447
Dec-03 13,991 13,221 12,503
Jan-04 15,072 14,243 13,159
Feb-04 15,012 14,186 13,139
Mar-04 14,903 14,083 13,201
Apr-04 13,851 13,089 12,539
May-04 13,751 12,995 12,788
Jun-04 13,989 13,219 13,214
Jul-04 12,114 11,448 12,027
Aug-04 12,025 11,363 11,769
Sep-04 12,650 11,954 12,420
Oct-04 12,898 12,188 12,721
Nov-04 13,722 12,967 13,796
Dec-04 14,576 13,774 14,292
Jan-05 13,890 13,127 13,648
Feb-05 13,622 12,873 13,835
Mar-05 12,710 12,011 13,317
Apr-05 11,688 11,045 12,470
May-05 12,631 11,936 13,349
Jun-05 13,167 12,442 13,780
Jul-05 14,109 13,333 14,743
Aug-05 13,901 13,136 14,535
Sep-05 14,128 13,351 14,650
Oct-05 13,821 13,061 14,108
Nov-05 14,456 13,661 14,907
Dec-05 14,238 13,455 14,884
Jan-06 15,726 14,861 16,321
Feb-06 15,488 14,636 16,234
Mar-06 16,033 15,151 17,023
Apr-06 15,884 15,011 16,974
May-06 14,624 13,820 15,779
Jun-06 14,456 13,661 15,788
Jul-06 13,404 12,667 14,969
Aug-06 13,731 12,976 15,407
Sep-06 13,860 13,098 15,512
Oct-06 14,565 13,764 16,517
Performance of other share classes will differ.
See glossary on page 36 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. For Class C
shares, performance for periods prior to inception is hypothetical, based
on Class A share returns adjusted for the respective expenses of the share
class. Performance does not reflect the impact of federal, state, or
municipal taxes. If it did, performance would be lower. The Fund's
performance between 1998 and 1999 benefited from the agreement of WM
Advisors and its affiliates to limit the Fund's expenses.
(2) Net asset value is not adjusted for sales charge.
(3) Returns shown for the index assume reinvestment of all dividends and
distributions, and the since-inception return shown for the index is
calculated from 7/31/90. Indices are unmanaged, and individuals cannot
invest directly in an index.
20
PORTFOLIO MANAGERS
Emerging Growth Team James W. Oberweis, CFA
Delaware Management Company Oberweis Asset Management, Inc.
came primarily from the technology and health care sectors. Encysive
Pharmaceuticals fell by more than half after a delayed drug approval. Ixia, a
disc-drive-component manufacturer, also declined, and Delaware exited both of
these positions. Positive individual contributors were spread across multiple
sectors and included Akamai Technologies and Gymboree.
Oberweis's portfolio was heavily weighted in health care, technology, and
consumer discretionary names during the year, but holdings in health care and
technology impaired performance. Top detractors included Pharmanet (formerly
known as SFBC), Blue Coat Systems, and Openwave Systems. Positive contributions
came from consumer discretionary and energy holdings. Focus Media Holdings,
which provides television display advertising in China, was a top contributor.
Rackable Systems, which manufactures high-density, rack-mounted servers and
storage systems, also benefited Fund performance. Other positive performers
included Veritas DGC and Dril-Quip.
Declining energy prices and data indicating a slowing-but-healthy economy have
made Delaware increasingly optimistic that a "soft landing" of Fed neutrality
and moderate, sustainable growth could occur. Such an environment could be
beneficial for companies that can sustain superior earnings growth. According to
Oberweis, the recent moderation of energy prices has reduced inflationary
pressures and potentially increased consumers' disposable income. This could
allow stocks with consumer leverage to exceed expectations. Oberweis anticipates
that an economic environment characterized by slower-but-sustainable
growth--permitting the Fed to maintain the status quo--could be positive for
equities in 2007.
TOP 10 HOLDINGS(4) AS OF OCTOBER 31, 2006
% of Net Assets Total Return(5)
--------------- ---------------
Ceradyne Inc. 1.79% 5.23%
Trident Microsystems Inc. 1.73% 39.72%
United Therapeutics Corp. 1.41% -18.97%
Focus Media Holding Ltd. 1.40% 101.41%
Coach Inc. 1.39% 23.18%
aQuantive Inc. 1.30% 25.54%
Dynamic Materials Corp. 1.28% 55.60%
Gymboree Corp. 1.28% 162.78%
Carrizo Oil & Gas Inc. 1.25% 10.10%
Tessera Technologies Inc. 1.24% 25.13%
FUND CHARACTERISTICS
AS OF OCTOBER 31, 2006
Weighted Average Market Capitalization: $ 1.4 billion
Weighted Average P/E
(based on estimated earnings): 21.9
Beta: 2.05
Fund Standard Deviation: 18.15
S&P 500 Standard Deviation: 8.14
Portfolio Turnover
(for fiscal year): 70%
Number of Securities: 160
Expense Ratio
(Class A shares for fiscal year): 1.40%
Total Net Assets: $382.7 million
PORTFOLIO COMPOSITION(4)
As of 10/31/06
(PIE CHART)
As of As of
Asset Class 10/31/06 10/31/05 Change
- ----------- -------- -------- ------
Health Care 22% 28% -6%
Consumer Discretionary 18% 14% +4%
Industrials 13% 11% +2%
Energy 9% 6% +3%
Semiconductors &
Semiconductor Equipment 7% 6% +1%
Communications Equipment 6% 7% -1%
Financials 5% 4% +1%
Internet Software & Services 5% 9% -4%
Software 4% 5% -1%
Computers & Peripherals 2% 1% +1%
IT Services 2% 2% 0%
Consumer Staples 1% 2% -1%
Electronic Equipment &
Instruments 1% 0% +1%
Materials 1% 0% +1%
REITs 1% 1% 0%
Telecommunication Services 0% 1% -1%
Cash Equivalents 3% 3% 0%
(4) May not reflect the current portfolio composition.
(5) Performance information provided for individual securities held by the Fund
represents performance for the fiscal year ended 10/31/06. The Fund may not
have held these securities throughout the entire period.
21
International Growth Fund
ANNUAL TOTAL RETURNS(1)
Class A shares at net asset value(2)
(Calendar Year)
2005 17.47%
2004 12.78%
2003 33.33%
2002 -15.61%
2001 -18.72%
2000 -21.15%
1999 49.91%
1998 4.08%
1997 -2.49%
1996 8.02%
INVESTMENT STRATEGY
International equity markets enjoyed solid gains for the fiscal year despite a
pullback during the spring. Financial stocks led European markets, with
insurance stocks rising on firmer premiums and companies with capital markets
exposure profiting from trading and investment banking. Across developed
markets, industrials and materials stocks continued their cyclical upswing, and
utilities stocks also rose sharply. The telecommunications services sector was
among the weakest sectors. Energy and health care stocks also trailed the
broader market.
Asian stocks led the emerging markets universe whereas emerging markets in Latin
America, Europe, and Africa, which are more reliant on the energy and materials
sectors, lagged. Emerging markets in general were supported by improving
macroeconomic fundamentals.
The WM International Growth Fund's developed markets portfolio benefited from
its stock selection, particularly among consumer discretionary holdings such as
Volkswagen. Telecommunications services positions were also beneficial as
America Movil (Mexico), SOFTBANK (Japan), and KPN (Netherlands)
Data shown is past performance and does not guarantee future results. Current
performance, including the most recent month-end results, which may be higher or
lower than the data shown, can be obtained by calling 800-222-5852. Your
investment's return and principal value will fluctuate, so it may be worth more
or less upon redemption. A sales charge may apply as follows: Class A shares:
maximum up-front sales charge of 5.5%; Class B shares: contingent deferred sales
charge of 5%, which declines over 5 years (5-5-4-3-2-0%); Class C shares:
contingent deferred sales charge of 1% on redemptions made during the first 12
months. See the prospectus for details. Performance listed with sales charge
reflects the maximum sales charge noted above.
International investing, especially in emerging markets, involves increased
risks due to currency fluctuations, political or social instability, and
differences in accounting standards.
AVERAGE ANNUAL TOTAL RETURNS(1) AS OF OCTOBER 31, 2006
1-Year 5-Year 10-Year Since Inception Inception Date
------ ------ ------- --------------- --------------
CLASS A SHARES
Net Asset Value(2) 24.89% 12.74% 5.62% 4.49% 7/18/90
With Sales Charge 17.97% 11.48% 5.03% 4.13%
CLASS B SHARES
Net Asset Value(2) 23.57% 11.53% 4.84% 4.52% 7/1/94
With Sales Charge 18.57% 11.27% 4.84% 4.52%
CLASS C SHARES
Net Asset Value(2) 23.82% 11.77% 4.71% 12.01% 3/1/02
With Sales Charge 22.82% 11.77% 4.71% 12.01%
MSCI All Country World Index ex-USA(3) 28.91% 16.67% 8.15% 7.31%
MSCI EAFE Index(3) 28.04% 15.00% 7.70% 6.93%
VALUE OF A $10,000 INVESTMENT(1) OCTOBER 31, 1996 - OCTOBER 31, 2006
(PERFORMANCE GRAPH)
INTERNATIONAL GROWTH FUND
-------------------------------------------
MSCI ALL
COUNTRY WORLD MSCI EAFE
DATE NAV MOP INDEX EX-USA INDEX
---- ------ ------ ------------- ---------
OCT-96 10,000 9,450 10,000 10,000
Nov-96 10,448 9,873 10,386 10,400
Dec-96 10,434 9,861 10,266 10,269
Jan-97 10,485 9,908 10,077 9,912
Feb-97 10,574 9,992 10,261 10,076
Mar-97 10,494 9,917 10,239 10,115
Apr-97 10,654 10,068 10,326 10,171
May-97 11,321 10,698 10,964 10,835
Jun-97 11,798 11,150 11,569 11,436
Jul-97 12,197 11,526 11,803 11,623
Aug-97 11,162 10,548 10,874 10,757
Sep-97 11,759 11,112 11,462 11,362
Oct-97 10,455 9,880 10,486 10,491
Nov-97 10,226 9,663 10,355 10,386
Dec-97 10,175 9,615 10,475 10,480
Jan-98 10,252 9,688 10,788 10,962
Feb-98 10,906 10,306 11,507 11,668
Mar-98 11,494 10,862 11,905 12,030
Apr-98 11,782 11,134 11,991 12,127
May-98 11,682 11,040 11,774 12,071
Jun-98 11,305 10,683 11,729 12,165
Jul-98 11,427 10,799 11,841 12,292
Aug-98 9,809 9,270 10,171 10,771
Sep-98 9,332 8,819 9,957 10,444
Oct-98 9,820 9,280 10,999 11,535
Nov-98 10,363 9,793 11,590 12,130
Dec-98 10,590 10,008 11,990 12,611
Jan-99 10,706 10,117 11,976 12,577
Feb-99 10,383 9,811 11,708 12,280
Mar-99 10,776 10,183 12,274 12,796
Apr-99 11,157 10,544 12,887 13,317
May-99 10,709 10,120 12,282 12,634
Jun-99 11,415 10,787 12,847 13,129
Jul-99 11,877 11,224 13,148 13,523
Aug-99 12,050 11,388 13,194 13,575
Sep-99 12,305 11,628 13,284 13,715
Oct-99 12,883 12,174 13,778 14,232
Nov-99 13,901 13,136 14,329 14,730
Dec-99 15,880 15,007 15,696 16,055
Jan-00 15,050 14,222 14,844 15,037
Feb-00 15,530 14,676 15,245 15,444
Mar-00 15,927 15,051 15,818 16,047
Apr-00 15,179 14,344 14,936 15,206
May-00 14,477 13,681 14,553 14,838
Jun-00 15,284 14,443 15,173 15,421
Jul-00 14,407 13,614 14,574 14,778
Aug-00 14,676 13,869 14,755 14,909
Sep-00 13,495 12,752 13,936 14,186
Oct-00 12,828 12,122 13,492 13,854
Nov-00 12,302 11,625 12,887 13,338
Dec-00 12,522 11,833 13,327 13,815
Jan-01 12,809 12,104 13,527 13,808
Feb-01 11,700 11,056 12,456 12,774
Mar-01 11,040 10,433 11,575 11,928
Apr-01 12,011 11,351 12,362 12,765
May-01 11,501 10,868 12,021 12,324
Jun-01 10,965 10,362 11,560 11,825
Jul-01 10,616 10,032 11,303 11,611
Aug-01 10,280 9,714 11,023 11,320
Sep-01 9,083 8,584 9,853 10,175
Oct-01 9,495 8,972 10,129 10,436
Nov-01 10,030 9,478 10,592 10,821
Dec-01 10,179 9,619 10,729 10,886
Jan-02 9,701 9,168 10,269 10,308
Feb-02 9,777 9,239 10,343 10,381
Mar-02 10,330 9,762 10,905 10,948
Apr-02 10,318 9,750 10,976 11,026
May-02 10,343 9,774 11,096 11,176
Jun-02 9,877 9,334 10,616 10,736
Jul-02 8,909 8,419 9,581 9,677
Aug-02 8,784 8,300 9,582 9,658
Sep-02 7,881 7,448 8,566 8,624
Oct-02 8,511 8,043 9,026 9,088
Nov-02 9,040 8,543 9,460 9,501
Dec-02 8,590 8,118 9,154 9,183
Jan-03 8,249 7,795 8,833 8,800
Feb-03 8,059 7,616 8,653 8,598
Mar-03 7,793 7,364 8,486 8,436
Apr-03 8,540 8,071 9,304 9,273
May-03 8,996 8,502 9,896 9,843
Jun-03 9,186 8,681 10,170 10,086
Jul-03 9,528 9,004 10,441 10,332
Aug-03 9,794 9,255 10,752 10,583
Sep-03 9,971 9,423 11,053 10,911
Oct-03 10,617 10,033 11,769 11,592
Nov-03 10,756 10,165 12,026 11,852
Dec-03 11,453 10,823 12,944 12,779
Jan-04 11,555 10,920 13,152 12,960
Feb-04 11,734 11,089 13,486 13,262
Mar-04 11,798 11,149 13,570 13,342
Apr-04 11,415 10,787 13,148 13,051
May-04 11,427 10,799 13,190 13,107
Jun-04 11,543 10,908 13,476 13,399
Jul-04 11,159 10,546 13,084 12,967
Aug-04 11,249 10,630 13,188 13,026
Sep-04 11,415 10,787 13,613 13,369
Oct-04 11,773 11,126 14,087 13,826
Nov-04 12,438 11,754 15,064 14,774
Dec-04 12,918 12,208 15,711 15,423
Jan-05 12,647 11,952 15,440 15,141
Feb-05 13,111 12,390 16,202 15,798
Mar-05 12,762 12,061 15,763 15,408
Apr-05 12,440 11,755 15,373 15,063
May-05 12,466 11,780 15,470 15,085
Jun-05 12,608 11,914 15,761 15,292
Jul-05 13,047 12,329 16,342 15,761
Aug-05 13,601 12,853 16,761 16,165
Sep-05 14,117 13,340 17,626 16,887
Oct-05 13,846 13,084 16,984 16,396
Nov-05 14,233 13,450 17,555 16,801
Dec-05 15,174 14,339 18,399 17,584
Jan-06 16,076 15,192 19,682 18,665
Feb-06 15,749 14,883 19,625 18,628
Mar-06 16,181 15,291 20,194 19,250
Apr-06 16,860 15,933 21,236 20,184
May-06 15,971 15,093 20,257 19,425
Jun-06 15,893 15,019 20,236 19,433
Jul-06 15,998 15,118 20,443 19,627
Aug-06 16,520 15,612 21,021 20,172
Sep-06 16,586 15,674 21,034 20,207
Oct-06 17,291 16,340 21,890 20,995
Performance of other share classes will differ.
See glossary on page 36 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. For Class C
shares, performance for periods prior to inception is hypothetical, based
on Class A share returns adjusted for the respective expenses of the share
class. Performance does not reflect the impact of federal, state, or
municipal taxes. If it did, performance would be lower.
(2) Net asset value is not adjusted for sales charge.
22
PORTFOLIO MANAGERS
Non-U.S. Equity Team & Emerging Market
Equity Team
Capital Guardian Trust Company
had strong absolute returns. However, industrial holdings, primarily Japanese
names, had a negative impact.
In March, the Fund expanded its emerging markets exposure. Since that time,
emerging markets have underperformed developed markets. Within the Fund's
emerging markets portfolio, information technology holdings like Infosys
Technologies and Hon Hai Precision were top contributors. Stock selection within
the consumer staples sector was also beneficial, with gains by Wal-Mart de
Mexico and China Mengniu.
However, performance was held back by health care, industrial, and utilities
holdings.
On a geographic basis, the Fund benefited from stock selection in Japan, Canada,
Russia, and Taiwan. It was negatively impacted by stock selection in the United
Kingdom and in Spain, Turkey, and China.
Our outlook for developed markets recognizes that the European economy is
gaining traction, with less reliance on exports now that domestic demand is
improving. Combined with reasonable valuations and low long-term interest rates,
this makes for a positive backdrop for European stocks. Japan's economy also
appears to be returning to normal, although corporations are recovering faster
than consumers.
We believe the outlook for emerging market equities remains positive overall.
Global economic growth appears to be slowing, but it is still solid. Estimates
of domestic demand growth for emerging markets signal underlying strength in
many economies. Consensus earnings growth estimates are higher for emerging
markets companies than for developed market corporations, while valuations are
at a discount.
TOP 10 HOLDINGS (4) AS OF OCTOBER 31, 2006
% of Net Assets Total Return(5)
--------------- ---------------
Sumitomo Mitsui Financial Group Inc. 2.27% 19.08%
Vodafone Group PLC 2.27% -1.79%
Royal Bank of Scotland 1.87% 28.81%
America Movil SA 1.58% 63.31%
SOFTBANK Corp. 1.55% -61.09%
Novartis AG 1.51% 12.95%
Sanofi-Aventis SA 1.47% 6.11%
Samsung Electronics Company Ltd. 1.47% 22.63%
ING Groep NV 1.21% 53.61%
Bouygues SA 1.16% 18.09%
FUND CHARACTERISTICS
AS OF OCTOBER 31, 2006
Weighted Average Market Capitalization: $ 45.4 billion
Weighted Average P/E
(based on trailing earnings): 17.1
Beta: 1.04
Fund Standard Deviation: 10.20
S&P 500 Standard Deviation: 8.14
Portfolio Turnover
(for fiscal year): 38%
Number of Securities: 529
Expense Ratio
(Class A shares for fiscal year): 1.27%
Total Net Assets: $ 1.2 billion
GEOGRAPHIC BREAKDOWN (4)
As of 10/31/06
(PIE CHART)
As of As of
Country 10/31/06 10/31/05 Change
- ------- -------- -------- ------
Japan 23% 29% -6%
United Kingdom 13% 16% -3%
France 9% 9% 0%
Switzerland 7% 8% -1%
Canada 6% 4% +2%
Germany 4% 7% -3%
Netherlands 4% 6% -2%
South Korea 3% 1% +2%
Spain 3% 5% -2%
Taiwan 3% 0% +3%
Other Countries 23% 12% +11%
Cash Equivalents 2% 3% -1%
(3) Effective 3/1/06, the Morgan Stanley Capital International (MSCI) All
Country World Index (ACWI) ex-USA replaced the MSCI EAFE Index because WM
Advisors and the Fund's subadvisor believe the new benchmark more
accurately reflects the Fund's performance characteristics. Returns shown
for the indices assume reinvestment of all dividends and distributions, and
since-inception returns shown for the indices are calculated from 7/31/90.
Indices are unmanaged, and individuals cannot invest directly in an index.
(4) May not reflect the current portfolio composition.
(5) Performance information provided for individual securities held by the Fund
represents performance for the fiscal year ended 10/31/06. The Fund may not
have held these securities throughout the entire period.
23
Short Term Income Fund
ANNUAL TOTAL RETURNS (1)
Class A shares at net asset value(2)
(Calendar Year)
2005 1.82%
2004 1.62%
2003 4.60%
2002 5.63%
2001 7.96%
2000 7.61%
1999 2.92%
1998 6.30%
1997 5.77%
1996 4.09%
INVESTMENT STRATEGY
During the first eight months of the fiscal year, the Federal Reserve (the Fed)
raised the federal funds target rate six times to 5.25%. While these rate
increases accumulated, the yield curve (the difference in yields between 2- and
10-year Treasuries) inverted dramatically. This inversion was particularly sharp
at the front end of the curve. Within this environment, short-term mortgage
securities performed well, as did corporate issues that benefited as spreads
tightened.
The best-performing holdings of the WM Short Term Income Fund were corporate
issues with very short maturities, a feature that left little doubt that the
issuers would pay on these securities when they came due. For example, the
portfolio holds Ford Motor Credit Company notes that are due in January 2007.
These issues were heavily discounted a year ago and benefited Fund performance
as they neared maturity. Several Fund holdings in the financial services and
banking sectors have similar positions on the yield curve, and consequently they
had a positive impact on performance during the fiscal year.
Data shown is past performance and does not guarantee future results. Current
performance, including the most recent month-end results, which may be higher or
lower than the data shown, can be obtained by calling 800-222-5852.Your
investment's return and principal value will fluctuate, so it may be worth more
or less upon redemption. A sales charge may apply as follows: Class A shares:
maximum up-front sales charge of 3.5%; Class B shares: contingent deferred sales
charge of 4%, which declines over 4 years (4-4-3-2-0%); Class C shares:
contingent deferred sales charge of 1% on redemptions made during the first 12
months. See the prospectus for details. Performance listed with sales charge
reflects the maximum sales charge noted above.
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 OCTOBER 31, 2006
1-Year 5-Year 10-Year Since Inception Inception Date
------ ------ ------- --------------- --------------
CLASS A SHARES
Net Asset Value(2) 4.15% 3.17% 4.80% 4.56% 11/1/93
With Sales Charge 0.66% 2.42% 4.45% 4.28%
CLASS B SHARES
Net Asset Value(2) 3.36% 2.40% 4.17% 4.36% 7/1/94
With Sales Charge -0.64% 2.40% 4.17% 4.36%
CLASS C SHARES
Net Asset Value(2) 3.39% 2.40% 3.97% 2.62% 3/1/02
With Sales Charge 2.39% 2.40% 3.97% 2.62%
Citigroup Broad Investment-Grade
Credit 1-3 Years Index(3) 4.84% 3.94% 5.62% 5.72%
VALUE OF A $10,000 INVESTMENT (1) OCTOBER 31, 1996 - OCTOBER 31, 2006
SHORT TERM INCOME FUND
-----------------------------
Citigroup
Broad
Investment
Grade
Credit 1-3
DATE NAV MOP Years Index
- ---- ------ ------ -----------
Oct-96 10,000 9,650 10,000
Nov-96 10,087 9,734 10,079
Dec-96 10,092 9,739 10,081
Jan-97 10,096 9,743 10,137
Feb-97 10,149 9,793 10,161
Mar-97 10,160 9,804 10,159
Apr-97 10,209 9,851 10,241
May-97 10,300 9,940 10,316
Jun-97 10,349 9,987 10,393
Jul-97 10,492 10,124 10,525
Aug-97 10,498 10,130 10,529
Sep-97 10,545 10,176 10,617
Oct-97 10,599 10,228 10,685
Nov-97 10,604 10,233 10,703
Dec-97 10,675 10,302 10,772
Jan-98 10,772 10,395 10,882
Feb-98 10,769 10,392 10,896
Mar-98 10,818 10,439 10,950
Apr-98 10,866 10,486 11,009
May-98 10,914 10,532 11,074
Jun-98 10,962 10,578 11,130
Jul-98 11,011 10,626 11,189
Aug-98 11,157 10,766 11,276
Sep-98 11,302 10,906 11,428
Oct-98 11,304 10,908 11,444
Nov-98 11,302 10,906 11,482
Dec-98 11,349 10,952 11,537
Jan-99 11,399 11,000 11,612
Feb-99 11,346 10,949 11,574
Mar-99 11,440 11,039 11,676
Apr-99 11,487 11,085 11,730
May-99 11,437 11,037 11,715
Jun-99 11,437 11,037 11,751
Jul-99 11,488 11,086 11,769
Aug-99 11,491 11,089 11,799
Sep-99 11,611 11,204 11,889
Oct-99 11,627 11,220 11,928
Nov-99 11,679 11,270 11,968
Dec-99 11,682 11,273 11,999
Jan-00 11,684 11,275 12,007
Feb-00 11,736 11,326 12,096
Mar-00 11,792 11,379 12,158
Apr-00 11,794 11,381 12,155
May-00 11,849 11,435 12,194
Jun-00 12,009 11,589 12,345
Jul-00 12,066 11,644 12,447
Aug-00 12,124 11,699 12,555
Sep-00 12,233 11,805 12,678
Oct-00 12,290 11,860 12,683
Nov-00 12,402 11,968 12,802
Dec-00 12,571 12,131 12,957
Jan-01 12,739 12,293 13,203
Feb-01 12,797 12,349 13,310
Mar-01 12,914 12,462 13,434
Apr-01 12,975 12,521 13,478
May-01 13,037 12,581 13,601
Jun-01 13,099 12,640 13,664
Jul-01 13,272 12,807 13,859
Aug-01 13,388 12,920 13,973
Sep-01 13,503 13,031 14,121
Oct-01 13,679 13,200 14,246
Nov-01 13,493 13,021 14,232
Dec-01 13,552 13,078 14,226
Jan-02 13,611 13,134 14,272
Feb-02 13,665 13,187 14,302
Mar-02 13,552 13,077 14,235
Apr-02 13,725 13,245 14,351
May-02 13,842 13,357 14,476
Jun-02 13,900 13,413 14,527
Jul-02 13,843 13,358 14,610
Aug-02 13,961 13,472 14,730
Sep-02 14,075 13,582 14,878
Oct-02 13,957 13,468 14,840
Nov-02 14,098 13,604 14,949
Dec-02 14,314 13,813 15,178
Jan-03 14,431 13,926 15,240
Feb-03 14,541 14,032 15,368
Mar-03 14,530 14,022 15,421
Apr-03 14,700 14,186 15,561
May-03 14,809 14,291 15,710
Jun-03 14,854 14,334 15,775
Jul-03 14,714 14,199 15,663
Aug-03 14,693 14,179 15,689
Sep-03 14,917 14,395 15,875
Oct-03 14,832 14,313 15,825
Nov-03 14,870 14,350 15,843
Dec-03 14,971 14,447 15,963
Jan-04 15,012 14,486 16,024
Feb-04 15,114 14,585 16,117
Mar-04 15,218 14,686 16,189
Apr-04 15,007 14,482 16,026
May-04 14,984 14,460 16,000
Jun-04 14,962 14,438 16,013
Jul-04 15,068 14,541 16,091
Aug-04 15,175 14,644 16,243
Sep-04 15,152 14,622 16,243
Oct-04 15,259 14,725 16,303
Nov-04 15,172 14,641 16,229
Dec-04 15,214 14,682 16,277
Jan-05 15,192 14,660 16,277
Feb-05 15,167 14,636 16,246
Mar-05 15,146 14,616 16,223
Apr-05 15,275 14,740 16,317
May-05 15,321 14,784 16,395
Jun-05 15,365 14,827 16,454
Jul-05 15,347 14,809 16,431
Aug-05 15,459 14,918 16,543
Sep-05 15,372 14,834 16,500
Oct-05 15,353 14,815 16,493
Nov-05 15,399 14,860 16,540
Dec-05 15,512 14,969 16,606
Jan-06 15,489 14,947 16,659
Feb-06 15,533 14,989 16,682
Mar-06 15,514 14,971 16,709
Apr-06 15,561 15,017 16,771
May-06 15,611 15,064 16,798
Jun-06 15,660 15,112 16,828
Jul-06 15,708 15,158 16,972
Aug-06 15,825 15,271 17,110
Sep-06 15,941 15,383 17,206
Oct-06 15,990 15,430 17,292
Performance of other share classes will differ.
See glossary on page 36 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. For Class C
shares, performance for periods prior to inception is hypothetical, based
on Class A share returns adjusted for the respective expenses of the share
class. Performance does not reflect the impact of federal, state, or
municipal taxes. If it did, performance would be lower. The Fund's
performance between 1995 and 2005 benefited from the agreement of WM
Advisors and its affiliates to limit the Fund's expenses.
(2) Net asset value is not adjusted for sales charge.
24
(PHOTO OF CRAIG V. SOSEY) PORTFOLIO MANAGER
Craig V. Sosey
WM Advisors, Inc.
In contrast, two corporate holdings suffered following leveraged buyout (LBO)
offers. Such takeovers are typically detrimental to holders of existing debt
because the prospect of additional leverage reduces the likelihood that current
debt holders will be paid. Issues of Harrah's, a casino operator, and Univision
Communications, a U.S. Spanish-language broadcaster, detracted from Fund
performance as these companies considered LBO deals. In the case of Univision,
the company was downgraded during the period. Its sale eventually was approved
by its shareholders.
Despite these difficulties, corporate issues also offered some of the more
attractive opportunities during the period. We added to the financial services,
technology, telecommunications, and building products categories, where new
names included General Electric Capital, Cisco, KPN, and Mohawk Industries.
These purchases were partly funded by trimming mortgage- and asset-backed
securities, a strategy that accounted for some of the reduction in holdings
rated Aaa.
Late in the fiscal year, bond markets began to anticipate a near-term cut in
interest rates by the Fed. We considered this speculation to be premature,
believing that an ease in monetary policy was more likely to occur in 2007. In
the interim, there is a good possibility that the front end of the yield curve
will remain inverted, with some volatility if economic data presents mixed
signals. However, as conditions evolve and the market gains confidence that a
Fed rate cut is imminent, we believe the investment environment for short-term
bonds, particularly 2-year and 3-year issues, could be favorable.
PORTFOLIO QUALITY (4)
As of As of
Rating 10/31/06 10/31/05 Change
- ------ -------- -------- ------
Aaa 41% 48% -7%
Aa 13% 9% +4%
A 13% 13% 0%
Baa 28% 28% 0%
Ba 1% 0% +1%
B 2% 0% +2%
Not Rated 2% 2% 0%
FUND CHARACTERISTICS
AS OF OCTOBER 31, 2006
Weighted Average Maturity (years): 2.2
Weighted Average Duration (years): 1.7
Portfolio Turnover (for fiscal year): 14%
Number of Securities: 90
Expense Ratio
(Class A shares for fiscal year): 0.95%
Total Net Assets: $237.4 million
PORTFOLIO COMPOSITION (4)
As of 10/31/06
(PIE CHART)
As of As of
Asset Class 10/31/06 10/31/05 Change
- ----------- -------- -------- ------
Domestic Corporate Bonds 56% 49% +7%
Mortgage-Backed
Bonds/CMOs 16% 18% -2%
U.S. Government Agency 9% 10% -1%
Foreign Corporate
Bonds (U.S. $) 7% 5% +2%
U.S. Treasuries 7% 6% +1%
Asset-Backed Bonds 3% 5% -2%
Cash Equivalents 2% 7% -5%
(3) Returns shown for the index assume reinvestment of all dividends and
distributions, and the since-inception return shown for the index is
calculated from 10/31/93. Indices are unmanaged, and individuals cannot
invest directly in an index.
(4) May not reflect the current portfolio composition.
25
U.S. Government Securities Fund
ANNUAL TOTAL RETURNS(1)
Class A shares at net asset value(2)
(Calendar Year)
2005 2.01%
2004 3.56%
2003 1.83%
2002 8.37%
2001 7.16%
2000 10.27%
1999 0.13%
1998 7.21%
1997 9.92%
1996 2.48%
INVESTMENT STRATEGY
During the first eight months of the fiscal year, the Federal Reserve (the Fed)
raised the federal funds target rate six times to 5.25%. The yield curve (the
difference in yields between 2- and 10-year Treasuries) inverted dramatically,
particularly at the front end, but yields on longer-term bonds barely moved.
Yields on 10-year Treasuries were only 4 basis points higher at the close of the
period compared to where they ended the previous fiscal year. Mortgage-backed
securities (MBS), which comprise the majority of the WM U.S. Government
Securities Fund, tend to do fairly well in a rising-rate environment. This held
true during the period, particularly among issues with lower coupon rates.
The Fund benefited from an overweighting in these types of issues. Holdings
among whole-loan collateralized mortgage obligations (CMOs), which are non-U.S.
agency securities, also had a positive impact. These issues benefited from their
position on the long end of the yield curve and from spread tightening between
these securities and agency issues. The Fund's underweighting in 15-year MBS
also assisted relative
Data shown is past performance and does not guarantee future results. Current
performance, including the most recent month-end results, which may be higher or
lower than the data shown, can be obtained by calling 800-222-5852.Your
investment's return and principal value will fluctuate, so it may be worth more
or less upon redemption. A sales charge may apply as follows: Class A shares:
maximum up-front sales charge of 4.5%; Class B shares: contingent deferred sales
charge of 5%, which declines over 5 years (5-5-4-3-2-0%); Class C shares:
contingent deferred sales charge of 1% on redemptions made during the first 12
months. See the prospectus for details. Performance listed with sales charge
reflects the maximum sales charge noted above.
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 OCTOBER 31, 2006
Since Inception
1-Year 5-Year 10-Year Inception Date
------ ------ ------- --------- ---------
CLASS A SHARES
Net Asset Value(2) 4.74% 3.45% 5.43% 7.47% 5/4/84
With Sales Charge -0.01% 2.50% 4.95% 7.25%
CLASS B SHARES
Net Asset Value(2) 4.06% 2.72% 4.78% 5.27% 3/30/94
With Sales Charge -0.94% 2.36% 4.78% 5.27%
CLASS C SHARES
Net Asset Value(2) 4.00% 2.70% 4.75% 2.91% 3/1/02
With Sales Charge 3.00% 2.70% 4.75% 2.91%
Citigroup Mortgage Index(3) 5.71% 4.46% 6.19% 9.00%
VALUE OF A $10,000 INVESTMENT(1) OCTOBER 31, 1996 - OCTOBER 31, 2006
(PERFORMANCE GRAPH)
U.S. GOVERNMENT SECURITIES FUND
--------------------------------
Citigroup
DATE NAV MOP Mortgage Index
---- ------ ------ --------------
Oct-96 10,000 9,550 10,000
Nov-96 10,223 9,763 10,138
Dec-96 10,083 9,629 10,093
Jan-97 10,104 9,649 10,179
Feb-97 10,115 9,660 10,190
Mar-97 9,971 9,523 10,106
Apr-97 10,149 9,693 10,259
May-97 10,241 9,781 10,355
Jun-97 10,372 9,905 10,474
Jul-97 10,691 10,210 10,668
Aug-97 10,563 10,088 10,648
Sep-97 10,735 10,252 10,775
Oct-97 10,918 10,426 10,892
Nov-97 10,959 10,466 10,929
Dec-97 11,083 10,584 11,028
Jan-98 11,206 10,702 11,131
Feb-98 11,195 10,691 11,164
Mar-98 11,220 10,715 11,208
Apr-98 11,288 10,780 11,270
May-98 11,387 10,875 11,349
Jun-98 11,486 10,969 11,399
Jul-98 11,523 11,004 11,455
Aug-98 11,665 11,140 11,559
Sep-98 11,817 11,286 11,698
Oct-98 11,789 11,259 11,685
Nov-98 11,859 11,325 11,739
Dec-98 11,882 11,348 11,798
Jan-99 11,950 11,412 11,879
Feb-99 11,854 11,321 11,835
Mar-99 11,922 11,386 11,917
Apr-99 11,955 11,417 11,975
May-99 11,879 11,344 11,895
Jun-99 11,800 11,269 11,867
Jul-99 11,744 11,215 11,787
Aug-99 11,733 11,205 11,780
Sep-99 11,906 11,370 11,980
Oct-99 11,953 11,415 12,043
Nov-99 11,953 11,415 12,053
Dec-99 11,898 11,363 12,013
Jan-00 11,832 11,299 11,921
Feb-00 11,962 11,424 12,061
Mar-00 12,080 11,537 12,190
Apr-00 12,084 11,540 12,197
May-00 12,076 11,532 12,206
Jun-00 12,315 11,760 12,470
Jul-00 12,390 11,832 12,550
Aug-00 12,548 11,984 12,736
Sep-00 12,671 12,101 12,872
Oct-00 12,747 12,174 12,967
Nov-00 12,921 12,339 13,159
Dec-00 13,120 12,529 13,370
Jan-01 13,307 12,708 13,577
Feb-01 13,396 12,794 13,651
Mar-01 13,461 12,855 13,740
Apr-01 13,450 12,845 13,755
May-01 13,501 12,894 13,841
Jun-01 13,539 12,930 13,860
Jul-01 13,779 13,158 14,118
Aug-01 13,893 13,268 14,246
Sep-01 14,096 13,461 14,456
Oct-01 14,325 13,681 14,652
Nov-01 14,146 13,510 14,517
Dec-01 14,059 13,426 14,465
Jan-02 14,188 13,550 14,607
Feb-02 14,343 13,697 14,766
Mar-02 14,146 13,510 14,617
Apr-02 14,419 13,770 14,889
May-02 14,523 13,869 14,998
Jun-02 14,641 13,982 15,119
Jul-02 14,810 14,144 15,290
Aug-02 14,941 14,268 15,424
Sep-02 15,071 14,393 15,537
Oct-02 15,095 14,416 15,596
Nov-02 15,063 14,385 15,582
Dec-02 15,235 14,549 15,746
Jan-03 15,258 14,571 15,790
Feb-03 15,374 14,682 15,897
Mar-03 15,352 14,661 15,892
Apr-03 15,412 14,719 15,953
May-03 15,469 14,773 15,961
Jun-03 15,457 14,761 15,994
Jul-03 15,095 14,416 15,705
Aug-03 15,192 14,508 15,807
Sep-03 15,473 14,776 16,077
Oct-03 15,389 14,697 16,022
Nov-03 15,401 14,708 16,069
Dec-03 15,514 14,816 16,226
Jan-04 15,613 14,911 16,330
Feb-04 15,727 15,019 16,472
Mar-04 15,784 15,074 16,545
Apr-04 15,538 14,838 16,254
May-04 15,477 14,781 16,202
Jun-04 15,590 14,888 16,343
Jul-04 15,718 15,010 16,496
Aug-04 15,935 15,218 16,767
Sep-04 15,946 15,228 16,790
Oct-04 16,046 15,324 16,935
Nov-04 15,984 15,264 16,885
Dec-04 16,068 15,345 17,010
Jan-05 16,139 15,413 17,097
Feb-05 16,063 15,340 17,024
Mar-05 16,031 15,310 16,978
Apr-05 16,209 15,480 17,178
May-05 16,313 15,579 17,317
Jun-05 16,355 15,619 17,378
Jul-05 16,262 15,530 17,296
Aug-05 16,411 15,673 17,450
Sep-05 16,318 15,584 17,354
Oct-05 16,209 15,479 17,243
Nov-05 16,254 15,522 17,296
Dec-05 16,392 15,654 17,476
Jan-06 16,422 15,683 17,520
Feb-06 16,484 15,742 17,613
Mar-06 16,343 15,607 17,453
Apr-06 16,342 15,606 17,456
May-06 16,309 15,576 17,409
Jun-06 16,325 15,590 17,456
Jul-06 16,562 15,817 17,716
Aug-06 16,753 16,000 17,973
Sep-06 16,881 16,122 18,092
Oct-06 16,977 16,214 18,227
Performance of other share classes will differ.
See glossary on page 36 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. For Class C
shares, performance for periods prior to inception is hypothetical, based
on Class A share returns adjusted for the respective expenses of the share
class. Performance does not reflect the impact of federal, state, or
municipal taxes. If it did, performance would be lower. The Fund's
performance between 1998 and 2000 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) Net asset value is not adjusted for sales charge.
26
(PHOTO OF CRAIG V. SOSEY) PORTFOLIO MANAGER
Craig V. Sosey
WM Advisors, Inc.
performance, as these issues underperformed longer-term bonds.
In contrast, performance was hurt due to the Fund's lack of hybrid adjustable
rate mortgages (ARMs), a category that did well during the period. We chose not
to invest in this category, believing that the spreads on these securities might
not adequately reflect prepayment conditions. However, we continue to examine
opportunities within hybrid ARMs and may choose to enter the longer-term end of
this market segment next year.
The Fund also was negatively impacted by its slightly shorter duration during
most of the period. (Duration is a measure of price sensitivity to interest rate
changes.) The Fund's shorter duration primarily resulted from its short-term
CMOs, and these issues underperformed other areas of the mortgage market.
Underperformance was also true for the Fund's Treasury and agency issues.
There were a few small changes in Fund allocations during the year. We added to
lower-coupon Fannie Mae and Freddie Mac issues. We also reduced Treasuries and
cash equivalents to manage Fund duration and cash flows.
Looking forward, we believe mortgage securities are likely to be range-bound in
the short term while the Fed delays a change in monetary policy. These
conditions could be somewhat beneficial, since mortgages tend to perform better
when volatility is limited. However, there is also the potential for any mixed
economic data to increase uncertainty about the Fed's next course of action, and
uncertainty can be detrimental to mortgages.
PORTFOLIO QUALITY(4)
As of As of
Rating 10/31/06 10/31/05 Change
- ------ -------- -------- ------
Aaa 99% 99% 0%
Aa 1% 1% 0%
FUND CHARACTERISTICS
AS OF OCTOBER 31, 2006
Weighted Average Maturity (years): 6.2
Weighted Average Duration (years): 4.6
Portfolio Turnover
(for fiscal year): 13%
Number of Securities: 322
Expense Ratio
(Class A shares for fiscal year): 0.91%
Total Net Assets: $1.7 billion
PORTFOLIO COMPOSITION(4)
As of 10/31/06
(PIE CHART)
As of As of
Asset Class 10/31/06 10/31/05 Change
- ----------- -------- -------- ------
FHLMC/FGLMC 36% 33% +3%
FNMA 32% 29% +3%
CMOs 20% 18% +2%
GNMA 5% 7% -2%
U.S. Government Agency 4% 4% 0%
U.S. Treasuries 2% 5% -3%
Cash Equivalents 1% 4% -3%
(3) Returns shown for the index assume reinvestment of all dividends and
distributions, and the since-inception return shown for the index is
calculated from 4/30/84. Indices are unmanaged, and individuals cannot
invest directly in an index.
(4) May not reflect the current portfolio composition.
27
Income Fund
ANNUAL TOTAL RETURNS(1)
Class A shares at net asset value(2)
(Calendar Year)
2005 1.67%
2004 5.14%
2003 8.95%
2002 8.11%
2001 8.09%
2000 9.05%
1999 0.09%
1998 7.15%
1997 10.51%
1996 3.46%
INVESTMENT STRATEGY
Over the course of the fiscal year, corporate earnings remained strong while
economic growth initially accelerated and then slowed. To rein in inflationary
pressures, the Federal Reserve (the Fed) raised the federal funds target rate
six times before pausing at a target rate of 5.25%. The yield curve (the
difference in yields between 2- and 10-year Treasuries) inverted dramatically
during the period. However, yields on longer-term bonds barely moved, and these
bonds outperformed shorter-term issues.
A variety of corporate issues contributed to the WM Income Fund's relative
outperformance for the year. TexCal, a small oil exploration and production
firm, was bought out at a premium following a runup in energy prices. Covanta, a
waste services company, exited bankruptcy and issued warrants to bond holders.
Their sale added to Fund returns. United Air Lines also had a positive impact on
performance as airlines enjoyed improved financial conditions.
Issue selection among mortgage-backed bonds also benefited Fund performance.
Data shown is past performance and does not guarantee future results. Current
performance, including the most recent month-end results, which may be higher or
lower than the data shown, can be obtained by calling 800-222-5852.Your
investment's return and principal value will fluctuate, so it may be worth more
or less upon redemption. A sales charge may apply as follows: Class A shares:
maximum up-front sales charge of 4.5%; Class B shares: contingent deferred sales
charge of 5%, which declines over 5 years (5-5-4-3-2-0%); Class C shares:
contingent deferred sales charge of 1% on redemptions made during the first 12
months. See the prospectus for details. Performance listed with sales charge
reflects the maximum sales charge noted above.
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 OCTOBER 31, 2006
Since Inception
1-Year 5-Year 10-Year Inception Date
------ ------ ------- --------- ---------
CLASS A SHARES
Net Asset Value(2) 6.02% 5.39% 6.38% 8.33% 12/15/75
With Sales Charge 1.21% 4.42% 5.90% 8.17%
CLASS B SHARES
Net Asset Value(2) 5.23% 4.63% 5.76% 6.26% 3/30/94
With Sales Charge 0.23% 4.29% 5.76% 6.26%
CLASS C SHARES
Net Asset Value(2) 5.23% 4.63% 5.70% 4.85% 3/1/02
With Sales Charge 4.23% 4.63% 5.70% 4.85%
Citigroup Broad Investment-Grade
Bond Index(3) 5.24% 4.57% 6.28% --
VALUE OF A $10,000 INVESTMENT(1) OCTOBER 31, 1996 - OCTOBER 31, 2006
(PERFORMANCE GRAPH)
INCOME FUND
----------------------------------------
Citigroup Broad
DATE NAV MOP Investment Grade Index
---- ------ ------ ----------------------
Oct-96 10,000 9,550 10,000
Nov-96 10,230 9,770 10,165
Dec-96 10,111 9,656 10,076
Jan-97 10,143 9,686 10,115
Feb-97 10,160 9,703 10,126
Mar-97 10,027 9,576 10,024
Apr-97 10,172 9,715 10,167
May-97 10,311 9,847 10,263
Jun-97 10,491 10,019 10,385
Jul-97 10,878 10,389 10,666
Aug-97 10,731 10,248 10,574
Sep-97 10,915 10,424 10,730
Oct-97 11,090 10,591 10,884
Nov-97 11,136 10,635 10,936
Dec-97 11,173 10,670 11,047
Jan-98 11,279 10,772 11,190
Feb-98 11,323 10,814 11,182
Mar-98 11,410 10,897 11,225
Apr-98 11,448 10,933 11,284
May-98 11,584 11,063 11,392
Jun-98 11,672 11,147 11,485
Jul-98 11,655 11,130 11,510
Aug-98 11,700 11,174 11,686
Sep-98 11,912 11,376 11,961
Oct-98 11,755 11,226 11,908
Nov-98 11,955 11,417 11,973
Dec-98 11,971 11,433 12,010
Jan-99 12,090 11,546 12,099
Feb-99 11,809 11,278 11,887
Mar-99 11,874 11,340 11,955
Apr-99 12,016 11,475 11,995
May-99 11,916 11,380 11,884
Jun-99 11,841 11,308 11,844
Jul-99 11,835 11,302 11,796
Aug-99 11,831 11,299 11,788
Sep-99 11,944 11,406 11,930
Oct-99 11,989 11,450 11,965
Nov-99 11,993 11,453 11,964
Dec-99 11,984 11,445 11,909
Jan-00 12,001 11,461 11,876
Feb-00 12,121 11,576 12,015
Mar-00 12,273 11,720 12,171
Apr-00 12,204 11,655 12,135
May-00 12,110 11,565 12,124
Jun-00 12,403 11,845 12,377
Jul-00 12,520 11,956 12,490
Aug-00 12,776 12,201 12,668
Sep-00 12,765 12,190 12,754
Oct-00 12,728 12,155 12,836
Nov-00 12,832 12,255 13,044
Dec-00 13,069 12,481 13,290
Jan-01 13,438 12,833 13,510
Feb-01 13,468 12,862 13,630
Mar-01 13,446 12,841 13,701
Apr-01 13,406 12,802 13,636
May-01 13,454 12,849 13,725
Jun-01 13,501 12,894 13,770
Jul-01 13,864 13,240 14,088
Aug-01 14,032 13,401 14,243
Sep-01 13,972 13,343 14,419
Oct-01 14,282 13,639 14,710
Nov-01 14,223 13,583 14,507
Dec-01 14,128 13,492 14,421
Jan-02 14,286 13,643 14,535
Feb-02 14,392 13,744 14,675
Mar-02 14,272 13,630 14,433
Apr-02 14,542 13,888 14,707
May-02 14,611 13,953 14,832
Jun-02 14,581 13,925 14,942
Jul-02 14,472 13,821 15,119
Aug-02 14,717 14,054 15,384
Sep-02 14,880 14,210 15,629
Oct-02 14,800 14,134 15,558
Nov-02 14,961 14,288 15,555
Dec-02 15,274 14,586 15,879
Jan-03 15,370 14,678 15,891
Feb-03 15,628 14,925 16,117
Mar-03 15,678 14,973 16,103
Apr-03 15,976 15,257 16,244
May-03 16,410 15,672 16,545
Jun-03 16,404 15,666 16,515
Jul-03 15,818 15,106 15,957
Aug-03 15,899 15,183 16,067
Sep-03 16,341 15,606 16,488
Oct-03 16,297 15,563 16,336
Nov-03 16,408 15,669 16,384
Dec-03 16,642 15,893 16,547
Jan-04 16,805 16,049 16,685
Feb-04 16,947 16,184 16,863
Mar-04 17,127 16,356 16,991
Apr-04 16,630 15,882 16,550
May-04 16,509 15,766 16,479
Jun-04 16,636 15,888 16,576
Jul-04 16,783 16,027 16,740
Aug-04 17,128 16,358 17,071
Sep-04 17,221 16,446 17,116
Oct-04 17,388 16,605 17,266
Nov-04 17,315 16,536 17,121
Dec-04 17,500 16,713 17,286
Jan-05 17,575 16,784 17,396
Feb-05 17,514 16,726 17,292
Mar-05 17,326 16,547 17,197
Apr-05 17,456 16,671 17,438
May-05 17,666 16,871 17,633
Jun-05 17,798 16,997 17,733
Jul-05 17,686 16,890 17,577
Aug-05 17,918 17,112 17,802
Sep-05 17,669 16,874 17,614
Oct-05 17,516 16,728 17,478
Nov-05 17,593 16,802 17,555
Dec-05 17,790 16,989 17,729
Jan-06 17,850 17,047 17,727
Feb-06 17,944 17,136 17,791
Mar-06 17,809 17,007 17,609
Apr-06 17,809 17,008 17,574
May-06 17,772 16,973 17,553
Jun-06 17,793 16,993 17,592
Jul-06 17,997 17,188 17,838
Aug-06 18,282 17,459 18,114
Sep-06 18,445 17,615 18,268
Oct-06 18,571 17,735 18,394
Performance of other share classes will differ.
See glossary on page 36 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. For Class C
shares, performance for periods prior to inception is hypothetical, based
on Class A share returns adjusted for the respective expenses of the share
class. Performance does not reflect the impact of federal, state, or
municipal taxes. If it did, performance would be lower. The Fund's
performance in 1999 benefited from the agreement of WM Advisors and its
affiliates to limit the Fund's expenses.
(2) Net asset value is not adjusted for sales charge.
28
(PHOTO OF JOHN R. FRIEDL) PORTFOLIO MANAGERS
(PHOTO OF GARY J. POKRZYWINSKI) John R. Friedl, CFA and
Gary J. Pokrzywinski, CFA
WM Advisors, Inc.
The Fund's mortgage holdings generally have a higher duration, and their prices
followed the period's outperformance by longer-dated Treasuries.
However, several corporates slightly detracted from Fund results, particularly
those that were affected by leveraged buyout (LBO) offers. Issues of Harrah's, a
casino operator, and HCA, a hospital operator, declined as these companies
considered LBO deals. Health Management Associates also declined in sympathy
with the HCA announcement.
Allocation changes were generally based on security- or industry-specific
considerations. For example, we sold the last of the Fund's auto positions due
to our negative view of their long-term prospects. In contrast, we added a
high-yield position (Mirant Americas Generation) to the Fund's utilities
holdings, and we continue to favor utilities as a sector that can offer
protection from LBOs.
In the latter half of the year, the economy reached an inflection point when a
pause by the Fed looked imminent. In anticipation of this change, we added to
Treasuries to help slightly extend the Fund's duration. This strategy proved
to be a net positive for the Fund.
Our outlook anticipates that further slowing in the economy and contained
inflation will permit the Fed to begin cutting short-term interest rates early
in 2007. Should the slowing economy edge closer to a recession, we would look to
favor corporates over mortgages. However, we believe that a recession is
unlikely. For the near term, the Fund will continue to hold an overweighted
position in mortgages, a neutral weighting in corporates, and a slightly longer
duration stance.
PORTFOLIO QUALITY(4)
As of As of
Rating 10/31/06 10/31/05 Change
- ------ -------- -------- ------
Aaa 35% 35% 0%
Aa 7% 6% +1%
A 7% 6% +1%
Baa 32% 34% -2%
Ba 6% 5% +1%
B 8% 10% -2%
Caa 4% 1% +3%
Not Rated 1% 2% -1%
Equities 0% 1% -1%
FUND CHARACTERISTICS
AS OF OCTOBER 31, 2006
Weighted Average Maturity (years): 8.0
Weighted Average Duration (years): 5.5
Portfolio Turnover
(for fiscal year): 26%
Number of Securities: 188
Expense Ratio
(Class A shares for fiscal year): 0.89%
Total Net Assets: $1.2 billion
PORTFOLIO COMPOSITION(4)
As of 10/31/06
(PIE CHART)
As of As of
Asset Class 10/31/06 10/31/05 Change
- ----------- -------- -------- ------
Domestic Corporate Bonds 60% 57% +3%
Mortgage-Backed Bonds 24% 23% +1%
U.S. Treasuries 9% 7% +2%
Foreign Corporate Bonds (U.S. $) 6% 6% 0%
Equities 0% 1% -1%
Foreign Government Bonds (U.S. $) 0% 1% -1%
Cash Equivalents 1% 5% -4%
(3) Returns shown for the index assume reinvestment of all dividends and
distributions. Indices are unmanaged, and individuals cannot invest
directly in an index.
(4) May not reflect the current portfolio composition.
29
High Yield Fund
ANNUAL TOTAL RETURNS(1)
Class A shares at net asset value(2)
(Calendar Year)
2005 6.59%
2004 11.43%
2003 28.10%
2002 3.66%
2001 3.14%
2000 -1.53%
1999 12.02%
INVESTMENT STRATEGY
The WM High Yield Fund continued to benefit from the generally positive
environment for riskier assets during the fiscal year. Economic growth
accelerated and then slowed, and these developments provoked rising inflation
fears that later eased. To stay ahead of inflation, the Federal Reserve (the
Fed) continued raising short-term interest rates before finally pausing in the
second half of 2006. Despite the Fed's substantial raising of rates,
intermediate-term Treasuries barely moved. The high-yield segment of the
intermediate-term bond market significantly outperformed Treasuries.
The Fund built relative outperformance through a variety of issues, coupled with
a general lack of problematic holdings. TexCal, a small oil firm, was bought out
at a premium price following a runup in energy prices. Airline holdings
benefited from an improved balance between supply and demand in the industry.
Health care real estate investment trusts (REITs) also contributed positively to
performance. Late in the period, pharmaceutical firm ICOS agreed to a buyout by
Eli Lilly (with which ICOS has a joint venture), and again the premium terms of
this pending deal benefited the Fund's position.
Data shown is past performance and does not guarantee future results. Current
performance, including the most recent month-end results, which may be higher or
lower than the data shown, can be obtained by calling 800-222-5852.Your
investment's return and principal value will fluctuate, so it may be worth more
or less upon redemption. A sales charge may apply as follows: Class A shares:
maximum up-front sales charge of 4.5%; Class B shares: contingent deferred sales
charge of 5%, which declines over 5 years (5-5-4-3-2-0%); Class C shares:
contingent deferred sales charge of 1% on redemptions made during the first 12
months. See the prospectus for details. Performance listed with sales charge
reflects the maximum sales charge noted above.
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. 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 OCTOBER 31, 2006
Since Inception
1-Year 5-Year Inception Date
------ ------ --------- ---------
CLASS A SHARES
Net Asset Value(2) 14.63% 12.36% 7.99% 4/8/98
With Sales Charge 9.45% 11.34% 7.41%
CLASS B SHARES
Net Asset Value(2) 13.72% 11.53% 7.39% 5/5/98
With Sales Charge 8.72% 11.27% 7.39%
CLASS C SHARES
Net Asset Value(2) 13.74% 11.51% 11.29% 3/1/02
With Sales Charge 12.74% 11.51% 11.29%
Citigroup High Yield Market Index(3) 9.95% 10.28% 5.57%
VALUE OF A $10,000 INVESTMENT(1) APRIL 8, 1998 - OCTOBER 31, 2006
(PERFORMANCE GRAPH)
HIGH YIELD FUND
--------------------------------------
Citigroup High Yield
DATE NAV MOP Market Index
---- ------ ------ --------------------
OCT-96
Nov-96
Dec-96
Jan-97
Feb-97
Mar-97
Apr-97
May-97
Jun-97
Jul-97
Aug-97
Sep-97
Oct-97
Nov-97
Dec-97
Jan-98
Feb-98
Mar-98 10,000 9,550 10,000
Apr-98 9,997 9,547 10,054
May-98 9,965 9,517 10,081
Jun-98 9,918 9,471 10,103
Jul-98 9,892 9,447 10,184
Aug-98 9,345 8,925 9,502
Sep-98 9,336 8,916 9,619
Oct-98 9,310 8,891 9,486
Nov-98 9,686 9,250 9,962
Dec-98 9,670 9,235 9,955
Jan-99 9,834 9,391 10,104
Feb-99 9,722 9,284 10,020
Mar-99 9,899 9,453 10,105
Apr-99 10,259 9,798 10,316
May-99 10,269 9,807 10,154
Jun-99 10,366 9,900 10,132
Jul-99 10,499 10,026 10,154
Aug-99 10,397 9,929 10,033
Sep-99 10,456 9,986 9,957
Oct-99 10,451 9,981 9,889
Nov-99 10,628 10,149 10,044
Dec-99 10,832 10,344 10,129
Jan-00 10,897 10,406 10,045
Feb-00 10,981 10,487 10,069
Mar-00 11,051 10,554 9,864
Apr-00 11,144 10,642 9,904
May-00 10,949 10,456 9,766
Jun-00 11,052 10,554 9,986
Jul-00 11,237 10,732 10,095
Aug-00 11,353 10,842 10,170
Sep-00 11,276 10,768 10,061
Oct-00 11,004 10,509 9,763
Nov-00 10,570 10,094 9,364
Dec-00 10,666 10,186 9,555
Jan-01 11,419 10,905 10,199
Feb-01 11,249 10,742 10,320
Mar-01 10,827 10,340 10,132
Apr-01 10,823 10,336 9,983
May-01 10,773 10,288 10,143
Jun-01 10,683 10,202 9,864
Jul-01 10,764 10,280 10,049
Aug-01 10,896 10,405 10,186
Sep-01 10,564 10,089 9,453
Oct-01 10,786 10,301 9,767
Nov-01 11,011 10,515 10,138
Dec-01 11,001 10,506 10,073
Jan-02 11,261 10,755 10,116
Feb-02 11,312 10,803 10,006
Mar-02 11,545 11,026 10,272
Apr-02 11,579 11,058 10,440
May-02 11,513 10,995 10,311
Jun-02 11,066 10,568 9,403
Jul-02 10,707 10,226 8,978
Aug-02 10,752 10,269 9,320
Sep-02 10,527 10,053 9,136
Oct-02 10,735 10,252 9,105
Nov-02 11,284 10,776 9,800
Dec-02 11,405 10,892 9,919
Jan-03 11,643 11,119 10,288
Feb-03 11,775 11,246 10,426
Mar-03 12,070 11,527 10,777
Apr-03 12,649 12,080 11,447
May-03 13,118 12,528 11,522
Jun-03 13,400 12,797 11,881
Jul-03 13,341 12,741 11,705
Aug-03 13,246 12,650 11,825
Sep-03 13,538 12,929 12,175
Oct-03 13,972 13,344 12,459
Nov-03 14,228 13,588 12,632
Dec-03 14,611 13,953 12,957
Jan-04 15,050 14,373 13,181
Feb-04 15,084 14,405 13,109
Mar-04 15,247 14,560 13,191
Apr-04 14,803 14,137 13,146
May-04 14,656 13,997 12,919
Jun-04 14,838 14,170 13,111
Jul-04 14,912 14,241 13,281
Aug-04 15,230 14,544 13,524
Sep-04 15,475 14,779 13,707
Oct-04 15,820 15,109 13,991
Nov-04 16,010 15,290 14,152
Dec-04 16,279 15,547 14,356
Jan-05 16,199 15,471 14,336
Feb-05 16,324 15,590 14,551
Mar-05 15,950 15,233 14,142
Apr-05 15,887 15,172 13,947
May-05 16,181 15,452 14,234
Jun-05 16,454 15,714 14,472
Jul-05 16,772 16,017 14,682
Aug-05 16,971 16,207 14,743
Sep-05 16,885 16,125 14,596
Oct-05 16,858 16,100 14,486
Nov-05 17,052 16,285 14,524
Dec-05 17,353 16,572 14,653
Jan-06 17,656 16,862 14,883
Feb-06 17,931 17,125 14,958
Mar-06 17,947 17,139 15,066
Apr-06 18,246 17,425 15,148
May-06 18,144 17,327 15,138
Jun-06 18,209 17,389 15,073
Jul-06 18,385 17,557 15,235
Aug-06 18,672 17,831 15,490
Sep-06 18,927 18,075 15,705
Oct-06 19,325 18,455 15,930
Performance of other share classes will differ.
See glossary on page 36 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. For Class C
shares, performance for periods prior to inception is hypothetical, based
on Class A share returns adjusted for the respective expenses of the share
class. Performance does not reflect the impact of federal, state, or
municipal taxes. If it did, performance would be lower. The Fund's
performance between 1998 and 1999 benefited from the agreement of WM
Advisors and its affiliates to limit the Fund's expenses.
(2) Net asset value is not adjusted for sales charge.
30
(PHOTO OF GARY J. POKRZYWINSKI) PORTFOLIO MANAGER
Gary J. Pokrzywinski, CFA
WM Advisors, Inc.
Despite strongly positive performance by Fund holdings, a few issues slightly
detracted from results. The notes of HCA, a hospital operator, declined as the
company considered a leveraged buyout. The issues of 155 East Tropicana (Hooters
Casino Hotel) also declined following a slow launch by this start-up casino.
The Fund's lack of auto industry bonds also caused it to miss out on gains
recently built by this sector. We remain pessimistic about the long-term
prospects for specific auto manufacturers, but we have found certain positions
in related industries that could benefit from the sector's improvements.
We made limited changes to overall portfolio composition during the period. We
added to utilities and reduced convertibles. The Caa rating sector increased due
to additional purchases, the downgrade of Tenet Healthcare, and formerly
non-rated HealthSouth entering this credit quality sector.
We continue to regard high-yield valuations as fair to slightly better than
fair. Despite an anticipated economic slowdown, the avoidance of a recession
would support valuations. But the lower quality of new issuance also poses some
concerns, as do ongoing low default rates that we think are adding to market
complacency. We continue to emphasize sectors that we believe offer attractive
opportunities over the long term.
PORTFOLIO QUALITY(4)
As of As of
Rating 10/31/06 10/31/05 Change
- ------ -------- -------- ------
Aaa 2% 1% +1%
Baa 2% 2% 0%
Ba 16% 14% +2%
B 40% 45% -5%
Caa 17% 10% +7%
Not Rated 14% 18% -4%
Equities 9% 10% -1%
FUND CHARACTERISTICS
AS OF OCTOBER 31, 2006
Weighted Average Maturity (years): 7.8
Weighted Average Duration (years): 5.1
Portfolio Turnover
(for fiscal year): 85%
Number of Securities: 80
Expense Ratio
(Class A shares for fiscal year): 0.90%
Total Net Assets: $1.2 billion
PORTFOLIO COMPOSITION(4)
As of 10/31/06
(PIE CHART)
As of As of
Asset Class 10/31/06 10/31/05 Change
- ----------- -------- -------- ------
Domestic Corporate Bonds 81% 81% 0%
Equities 9% 10% -1%
Foreign Corporate Bonds (U.S. $) 3% 4% -1%
Foreign Government Bonds (Non-U.S. $) 3% 1% +2%
Foreign Government Bonds (U.S. $) 1% 2% -1%
Foreign Corporate Bonds (Non-U.S. $) 1% 1% 0%
Cash Equivalents 2% 1% +1%
(3) Returns shown for the index assume reinvestment of all dividends and
distributions, and the since-inception return shown for the index is
calculated from 3/31/98. Indices are unmanaged, and individuals cannot
invest directly in an index.
(4) May not reflect the current portfolio composition.
31
California Municipal Fund
ANNUAL TOTAL RETURNS(1)
Class A shares at net asset value(2)
(Calendar Year)
2005 4.04%
2004 4.76%
2003 3.70%
2002 8.87%
2001 4.05%
2000 12.97%
1999 -4.53%
1998 6.09%
1997 10.30%
1996 4.42%
INVESTMENT STRATEGY
Against a backdrop of strong economic growth, good employment data, and
inflationary pressures, the Federal Reserve (the Fed) continued its tightening
campaign during the first eight months of the fiscal year, raising the federal
funds target rate six times to 5.25% by the end of June. In the months that
followed, however, economic growth moderated while inflation concerns eased,
prompting the Fed to keep its target rate unchanged for the remainder of the
period. Short-term municipal bonds posted the lowest returns within the
municipal bond market as Fed rate increases moved yields in this portion of the
curve higher. Conversely, yields on long-term municipal bonds fell dramatically
in the latter months of the period, causing this segment of the market to earn
the best returns.
Mirroring national trends, California municipal bond issuance declined during
the fiscal year, but the state remained the largest issuer. California's
unemployment rate is slightly higher than the nation's average but has been
improving, and income levels remain
Data shown is past performance and does not guarantee future results. Current
performance, including the most recent month-end results, which may be higher or
lower than the data shown, can be obtained by calling 800-222-5852. Your
investment's return and principal value will fluctuate, so it may be worth more
or less upon redemption. A sales charge may apply as follows: Class A shares:
maximum up-front sales charge of 4.5%; Class B shares: contingent deferred sales
charge of 5%, which declines over 5 years (5-5-4-3-2-0%); Class C shares:
contingent deferred sales charge of 1% on redemptions made during the first 12
months. See the prospectus for details. Performance listed with sales charge
reflects the maximum sales charge noted above.
Fixed-income investments are subject to interest rate risk, and their value will
decline as interest rates rise. A portion of the Fund's income may be subject to
state and/or local taxes, and it may be subject to federal alternative minimum
tax (AMT) for certain investors.
AVERAGE ANNUAL TOTAL RETURNS(1) AS OF OCTOBER 31, 2006
Since Inception
1-Year 5-Year 10-Year Inception Date
------ ------ ------- --------- ---------
CLASS A SHARES
Net Asset Value(2) 6.45% 4.76% 5.55% 6.26% 7/25/89
With Sales Charge 1.66% 3.81% 5.07% 5.98%
CLASS B SHARES
Net Asset Value(2) 5.66% 3.98% 4.93% 5.44% 7/1/94
With Sales Charge 0.66% 3.64% 4.93% 5.44%
CLASS C SHARES
Net Asset Value(2) 5.65% 3.98% 4.82% 4.26% 3/1/02
With Sales Charge 4.65% 3.98% 4.82% 4.26%
Lehman Brothers Municipal Bond Index(3) 5.76% 5.05% 5.85% 6.68%
VALUE OF A $10,000 INVESTMENT(1) OCTOBER 31, 1996 - OCTOBER 31, 2006
(PERFORMANCE GRAPH)
CALIFORNIA MUNICIPAL FUND
----------------------------
Lehman
Brothers
Municipal
DATE NAV MOP Bond Index
- ---- ------ ------ ----------
Oct-96 10,000 9,550 10,000
Nov-96 10,166 9,709 10,183
Dec-96 10,138 9,681 10,140
Jan-97 10,156 9,699 10,159
Feb-97 10,239 9,778 10,253
Mar-97 10,135 9,679 10,117
Apr-97 10,210 9,750 10,202
May-97 10,342 9,877 10,355
Jun-97 10,476 10,004 10,465
Jul-97 10,802 10,315 10,755
Aug-97 10,714 10,232 10,654
Sep-97 10,839 10,352 10,781
Oct-97 10,916 10,425 10,850
Nov-97 11,004 10,509 10,914
Dec-97 11,180 10,677 11,073
Jan-98 11,267 10,760 11,187
Feb-98 11,282 10,774 11,191
Mar-98 11,282 10,774 11,201
Apr-98 11,229 10,723 11,150
May-98 11,407 10,894 11,327
Jun-98 11,444 10,929 11,371
Jul-98 11,452 10,936 11,399
Aug-98 11,622 11,099 11,576
Sep-98 11,791 11,260 11,721
Oct-98 11,766 11,237 11,721
Nov-98 11,821 11,289 11,762
Dec-98 11,858 11,324 11,791
Jan-99 11,993 11,453 11,931
Feb-99 11,946 11,409 11,879
Mar-99 11,967 11,428 11,895
Apr-99 11,974 11,435 11,925
May-99 11,888 11,353 11,856
Jun-99 11,683 11,157 11,685
Jul-99 11,733 11,205 11,727
Aug-99 11,556 11,036 11,634
Sep-99 11,542 11,023 11,638
Oct-99 11,312 10,803 11,513
Nov-99 11,425 10,911 11,635
Dec-99 11,322 10,812 11,547
Jan-00 11,241 10,736 11,498
Feb-00 11,422 10,908 11,631
Mar-00 11,718 11,191 11,886
Apr-00 11,635 11,112 11,816
May-00 11,554 11,034 11,754
Jun-00 11,885 11,350 12,066
Jul-00 12,084 11,540 12,233
Aug-00 12,351 11,795 12,422
Sep-00 12,266 11,714 12,357
Oct-00 12,364 11,807 12,492
Nov-00 12,449 11,889 12,587
Dec-00 12,789 12,213 12,898
Jan-01 12,807 12,230 13,025
Feb-01 12,854 12,276 13,067
Mar-01 12,953 12,370 13,185
Apr-01 12,734 12,161 13,042
May-01 12,879 12,300 13,183
Jun-01 12,942 12,360 13,271
Jul-01 13,150 12,558 13,468
Aug-01 13,510 12,902 13,690
Sep-01 13,465 12,859 13,644
Oct-01 13,601 12,989 13,799
Nov-01 13,472 12,866 13,683
Dec-01 13,309 12,710 13,553
Jan-02 13,494 12,887 13,788
Feb-02 13,638 13,025 13,954
Mar-02 13,337 12,737 13,681
Apr-02 13,594 12,983 13,948
May-02 13,719 13,102 14,033
Jun-02 13,831 13,208 14,182
Jul-02 13,992 13,363 14,364
Aug-02 14,216 13,577 14,537
Sep-02 14,626 13,968 14,855
Oct-02 14,225 13,585 14,609
Nov-02 14,222 13,582 14,547
Dec-02 14,491 13,839 14,854
Jan-03 14,350 13,705 14,817
Feb-03 14,548 13,894 15,025
Mar-03 14,573 13,917 15,034
Apr-03 14,712 14,050 15,133
May-03 15,021 14,345 15,487
Jun-03 14,876 14,207 15,420
Jul-03 14,280 13,637 14,881
Aug-03 14,437 13,787 14,992
Sep-03 14,789 14,124 15,433
Oct-03 14,751 14,087 15,356
Nov-03 14,934 14,262 15,515
Dec-03 15,028 14,351 15,644
Jan-04 15,082 14,403 15,733
Feb-04 15,359 14,668 15,971
Mar-04 15,254 14,568 15,915
Apr-04 14,867 14,198 15,538
May-04 14,828 14,161 15,482
Jun-04 14,908 14,237 15,538
Jul-04 15,113 14,433 15,741
Aug-04 15,425 14,731 16,056
Sep-04 15,507 14,809 16,141
Oct-04 15,673 14,967 16,280
Nov-04 15,494 14,797 16,146
Dec-04 15,743 15,035 16,343
Jan-05 15,924 15,208 16,497
Feb-05 15,864 15,150 16,443
Mar-05 15,753 15,044 16,339
Apr-05 16,019 15,298 16,597
May-05 16,160 15,433 16,715
Jun-05 16,243 15,512 16,819
Jul-05 16,158 15,431 16,743
Aug-05 16,344 15,608 16,912
Sep-05 16,215 15,485 16,799
Oct-05 16,129 15,403 16,696
Nov-05 16,200 15,471 16,776
Dec-05 16,381 15,644 16,921
Jan-06 16,411 15,673 16,966
Feb-06 16,583 15,837 17,080
Mar-06 16,481 15,740 16,962
Apr-06 16,466 15,725 16,957
May-06 16,541 15,796 17,033
Jun-06 16,480 15,738 16,969
Jul-06 16,660 15,910 17,171
Aug-06 16,915 16,153 17,425
Sep-06 17,033 16,267 17,547
Oct-06 17,169 16,397 17,657
Performance of other share classes will differ.
See glossary on page 36 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. For Class C
shares, performance for periods prior to inception is hypothetical, based
on Class A share returns adjusted for the respective expenses of the share
class. Performance does not reflect the impact of federal, state, or
municipal taxes. If it did, performance would be lower. The Fund's
performance between 1995 and 1999 benefited from the agreement of WM
Advisors and its affiliates to limit the Fund's expenses.
(2) Net asset value is not adjusted for sales charge.
32
(PHOTO OF JOSEPH A. PIRARO) PORTFOLIO MANAGER
Joseph A. Piraro
Van Kampen Asset Management
above average. In addition, the state's financial and credit conditions
continued to improve, leading to a credit upgrade in May by both Moody's and
Standard & Poor's to A1 and A+, respectively.
We implemented two general strategies that were the primary drivers of
performance by the WM California Municipal Fund. First, we sought opportunities
to enhance the portfolio's yield while still maintaining a focus on quality
bonds. We added to the Fund's holdings of high-yield securities that, in our
opinion, offered favorable characteristics, and we decreased the Fund's exposure
to higher-quality, lower-yielding bonds. This strategy nearly doubled the Fund's
exposure to securities rated Baa, which proved quite beneficial as strong demand
caused lower-rated bonds to outperform higher-rated bonds.
Second, we emphasized the long end of the yield curve, favoring bonds with
maturities of 25 to 30 years or more. We increased these holdings to 52% as of
the end of the period, up from 35% one year earlier.This yield-curve positioning
served the Fund well as longer-dated issues outperformed shorter-maturity bonds.
In keeping with our focus on higher-yielding securities, we added to the Fund's
holdings in tobacco revenue bonds, which have benefited from both strong market
demand and a favorable litigation environment. Our decision to increase the
Fund's exposure to this sector added to performance as valuations dramatically
improved. We also purchased additional land development issues. The Fund
remained well diversified, however, across the major sectors of the municipal
market.
(GRAPHIC)
FUND CHARACTERISTICS
AS OF OCTOBER 31, 2006
Weighted Average Maturity (years): 6.5
Weighted Average Duration (years): 7.3
Portfolio Turnover
(for fiscal year): 29%
Number of Securities: 164
Expense Ratio
(Class A shares for fiscal year): 0.84%
Total Net Assets: $401.7 million
PORTFOLIO COMPOSITION(4)
As of 10/31/06
(PIE CHART)
As of As of
Rating 10/31/06 10/31/05 Change
- ------ -------- -------- ------
Aaa 49% 65% -16%
Aa 3% 1% +2%
A 11% 11% 0%
Baa 27% 14% +13%
Not Rated 10% 9% +1%
(3) Returns shown for the index assume reinvestment of all dividends and
distributions, and the since-inception return shown for the index is
calculated from 7/31/89. Indices are unmanaged, and individuals cannot
invest directly in an index.
(4) May not reflect the current portfolio composition.
33
California Insured Intermediate Municipal Fund
ANNUAL TOTAL RETURNS(1)
Class A shares at net asset value(2)
(Calendar Year)
2005 1.75%
2004 2.65%
2003 3.58%
2002 9.28%
2001 4.79%
2000 9.46%
1999 -0.83%
1998 5.26%
1997 7.14%
1996 3.91%
INVESTMENT STRATEGY
Against a backdrop of strong economic growth, good employment data, and
inflationary pressures, the Federal Reserve (the Fed) continued its tightening
campaign during the first eight months of the fiscal year, raising the federal
funds target rate six times to 5.25% by the end of June. In the months that
followed, however, economic growth moderated while inflation concerns eased,
prompting the Fed to keep its target rate unchanged for the remainder of the
period. Short-term municipal bonds posted the lowest returns within the
municipal bond market as Fed rate increases moved yields in this portion of the
curve higher. Conversely, yields on long-term municipal bonds fell dramatically
in the latter months of the period, causing this segment of the market to earn
the best returns.
Mirroring national trends, California municipal bond issuance declined during
the fiscal year, but the state remained the largest issuer. California's
unemployment rate is slightly higher than the nation's average but has been
improving, and income levels remain above average. In addition, the state's
finan-
Data shown is past performance and does not guarantee future results. Current
performance, including the most recent month-end results, which may be higher or
lower than the data shown, can be obtained by calling 800-222-5852.Your
investment's return and principal value will fluctuate, so it may be worth more
or less upon redemption. A sales charge may apply as follows: Class A shares:
maximum up-front sales charge of 4.5%; Class B shares: contingent deferred sales
charge of 5%, which declines over 5 years (5-5-4-3-2-0%); Class C shares:
contingent deferred sales charge of 1% on redemptions made during the first 12
months. See the prospectus for details. Performance listed with sales charge
reflects the maximum sales charge noted above.
Fixed-income investments are subject to interest rate risk, and their value will
decline as interest rates rise. A portion of the Fund's income may be subject to
state and/or local taxes, and it may be subject to federal alternative minimum
tax (AMT) for certain investors.
AVERAGE ANNUAL TOTAL RETURNS(1) AS OF OCTOBER 31, 2006
Since Inception
1-Year 5-Year 10-Year Inception Date
------ ------ ------- --------- ---------
CLASS A SHARES
Net Asset Value(2) 4.68% 3.72% 4.73% 5.36% 4/4/94
With Sales Charge -0.02% 2.76% 4.25% 4.98%
CLASS B SHARES
Net Asset Value(2) 3.89% 2.93% 4.10% 4.77% 7/1/94
With Sales Charge -1.11% 2.57% 4.10% 4.77%
CLASS C SHARES
Net Asset Value(2) 3.89% 2.93% 4.03% 2.98% 3/1/02
With Sales Charge 2.89% 2.93% 4.03% 2.98%
Lehman Brothers Municipal Bond Index(3) 5.76% 5.05% 5.85% 6.25%
VALUE OF A $10,000 INVESTMENT(1) OCTOBER 31, 1996 - OCTOBER 31, 2006
(PERFORMANCE GRAPH)
CALIFORNIA INSURED
INTERMEDIATE MUNICIPAL FUND
----------------------------
Lehman
Brothers
Municipal
Date NAV MOP Bond Index
- ---- ------ ------ ----------
Oct-96 10,000 9,550 10,000
Nov-96 10,169 9,711 10,183
Dec-96 10,130 9,674 10,140
Jan-97 10,160 9,703 10,159
Feb-97 10,218 9,758 10,253
Mar-97 10,113 9,658 10,117
Apr-97 10,162 9,705 10,202
May-97 10,288 9,825 10,355
Jun-97 10,395 9,927 10,465
Jul-97 10,638 10,159 10,755
Aug-97 10,562 10,086 10,654
Sep-97 10,660 10,180 10,781
Oct-97 10,700 10,219 10,850
Nov-97 10,741 10,258 10,914
Dec-97 10,854 10,365 11,073
Jan-98 10,945 10,452 11,187
Feb-98 10,962 10,469 11,191
Mar-98 10,924 10,433 11,201
Apr-98 10,874 10,385 11,150
May-98 11,027 10,531 11,327
Jun-98 11,047 10,550 11,371
Jul-98 11,078 10,579 11,399
Aug-98 11,253 10,747 11,576
Sep-98 11,427 10,913 11,721
Oct-98 11,427 10,913 11,721
Nov-98 11,437 10,922 11,762
Dec-98 11,424 10,910 11,791
Jan-99 11,547 11,028 11,931
Feb-99 11,498 10,980 11,879
Mar-99 11,515 10,997 11,895
Apr-99 11,521 11,002 11,925
May-99 11,464 10,948 11,856
Jun-99 11,311 10,802 11,685
Jul-99 11,375 10,863 11,727
Aug-99 11,363 10,851 11,634
Sep-99 11,401 10,888 11,638
Oct-99 11,301 10,792 11,513
Nov-99 11,406 10,893 11,635
Dec-99 11,330 10,820 11,547
Jan-00 11,326 10,816 11,498
Feb-00 11,430 10,916 11,631
Mar-00 11,605 11,083 11,886
Apr-00 11,555 11,035 11,816
May-00 11,530 11,011 11,754
Jun-00 11,796 11,265 12,066
Jul-00 11,940 11,403 12,233
Aug-00 12,118 11,573 12,422
Sep-00 12,056 11,514 12,357
Oct-00 12,133 11,587 12,492
Nov-00 12,188 11,640 12,587
Dec-00 12,400 11,842 12,898
Jan-01 12,572 12,007 13,025
Feb-01 12,578 12,012 13,067
Mar-01 12,633 12,064 13,185
Apr-01 12,465 11,904 13,042
May-01 12,604 12,037 13,183
Jun-01 12,695 12,124 13,271
Jul-01 12,848 12,269 13,468
Aug-01 13,094 12,505 13,690
Sep-01 13,101 12,511 13,644
Oct-01 13,228 12,633 13,799
Nov-01 13,111 12,521 13,683
Dec-01 12,996 12,411 13,553
Jan-02 13,208 12,614 13,788
Feb-02 13,354 12,754 13,954
Mar-02 13,063 12,476 13,681
Apr-02 13,327 12,728 13,948
May-02 13,457 12,851 14,033
Jun-02 13,547 12,937 14,182
Jul-02 13,736 13,118 14,364
Aug-02 13,926 13,299 14,537
Sep-02 14,252 13,610 14,855
Oct-02 13,903 13,277 14,609
Nov-02 13,940 13,313 14,547
Dec-02 14,201 13,562 14,854
Jan-03 14,063 13,430 14,817
Feb-03 14,239 13,598 15,025
Mar-03 14,240 13,599 15,034
Apr-03 14,354 13,708 15,133
May-03 14,648 13,989 15,487
Jun-03 14,517 13,863 15,420
Jul-03 14,090 13,456 14,881
Aug-03 14,232 13,592 14,992
Sep-03 14,541 13,887 15,433
Oct-03 14,502 13,849 15,356
Nov-03 14,642 13,983 15,515
Dec-03 14,711 14,049 15,644
Jan-04 14,748 14,084 15,733
Feb-04 14,968 14,294 15,971
Mar-04 14,832 14,164 15,915
Apr-04 14,495 13,843 15,538
May-04 14,493 13,841 15,482
Jun-04 14,544 13,890 15,538
Jul-04 14,717 14,055 15,741
Aug-04 14,944 14,271 16,056
Sep-04 14,993 14,318 16,141
Oct-04 15,085 14,406 16,280
Nov-04 14,933 14,261 16,146
Dec-04 15,100 14,421 16,343
Jan-05 15,180 14,497 16,497
Feb-05 15,078 14,400 16,443
Mar-05 14,953 14,280 16,339
Apr-05 15,184 14,500 16,597
May-05 15,266 14,579 16,715
Jun-05 15,333 14,643 16,819
Jul-05 15,207 14,523 16,743
Aug-05 15,359 14,668 16,912
Sep-05 15,259 14,573 16,799
Oct-05 15,161 14,479 16,696
Nov-05 15,243 14,557 16,776
Dec-05 15,362 14,671 16,921
Jan-06 15,419 14,725 16,966
Feb-06 15,486 14,789 17,080
Mar-06 15,360 14,669 16,962
Apr-06 15,346 14,655 16,957
May-06 15,433 14,739 17,033
Jun-06 15,348 14,657 16,969
Jul-06 15,521 14,823 17,171
Aug-06 15,724 15,017 17,425
Sep-06 15,811 15,100 17,547
Oct-06 15,871 15,157 17,657
Performance of other share classes will differ.
See glossary on page 36 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. For Class C
shares, performance for periods prior to inception is hypothetical, based
on Class A share returns adjusted for the respective expenses of the share
class. Performance does not reflect the impact of federal, state, or
municipal taxes. If it did, performance would be lower. The Fund's
performance between 1995 and 2003 benefited from the agreement of WM
Advisors and its affiliates to limit the Fund's expenses.
(2) Net asset value is not adjusted for sales charge.
34
(PHOTO OF JOSEPH A. PIRARO) PORTFOLIO MANAGER
Joseph A. Piraro
Van Kampen Asset Management
cial and credit conditions continued to improve, leading to a credit upgrade in
May by both Moody's and Standard & Poor's to A1 and A+, respectively.
We implemented two general strategies that were the primary drivers of
performance by the WM California Insured Intermediate Municipal Fund. First, we
sought opportunities to enhance the portfolio's yield while still maintaining a
focus on quality bonds. While adhering to the Fund's investment guidelines, we
added to holdings of higher-yielding bonds that, in our opinion, offered
favorable characteristics, and we decreased exposure to higher-quality,
lower-yielding bonds. This strategy proved quite beneficial as strong demand
caused lower-rated bonds to outperform higher-rated bonds.
Second, we emphasized the longer end of the yield curve, favoring bonds with
maturities of 12 to 15 years. We increased holdings with maturities of 10 to 15
years to 35% and those with maturities of 8 to 9 years to 29% as of the end of
the period. This yield-curve positioning served the Fund well as longer-dated
issues outperformed shorter-maturity bonds.
In keeping with our focus on higher-yielding securities, we added to the Fund's
holdings in tobacco revenue bonds, which have benefited from both strong market
demand and a favorable litigation environment. Our decision to increase the
Fund's exposure to this sector added to performance as valuations dramatically
improved. We also purchased additional land development bonds. The Fund remained
well diversified, however, across the major sectors of the municipal market.
FUND CHARACTERISTICS
AS OF OCTOBER 31, 2006
Weighted Average Maturity (years): 6.1
Weighted Average Duration (years): 5.3
Portfolio Turnover (for fiscal year): 22%
Number of Securities: 73
Expense Ratio
(Class A shares for fiscal year): 0.86%
Total Net Assets: $109.2 million
PORTFOLIO COMPOSITION(4)
As of 10/31/06
(PIE CHART)
As of As of
Rating 10/31/06 10/31/05 Change
- ------ -------- -------- ------
Aaa 86% 92% -6%
Aa 2% 2% 0%
Baa 9% 5% +4%
Not Rated 3% 1% +2%
(3) Returns shown for the index assume reinvestment of all dividends and
distributions, and the since-inception return shown for the index is
calculated from 3/31/94. Indices are unmanaged, and individuals cannot
invest directly in an index.
(4) May not reflect the current portfolio composition.
35
Glossary
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 HIGH YIELD MARKET INDEX:
Measures the performance of below-investment-grade debt issued by corporations
domiciled in the U.S. or Canada.
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.
FTSE NAREIT ALL REITS INDEX:
Reflects the aggregate performance of all publicly traded REITs that own,
develop, and manage properties.
LEHMAN BROTHERS AGGREGATE BOND INDEX:
A broad-based index intended to represent the U.S. fixed-income market.
LEHMAN BROTHERS MUNICIPAL BOND INDEX:
A total return performance benchmark for the long-term, investment-grade,
tax-exempt bond market.
MORGAN STANLEY CAPITAL INTERNATIONAL (MSCI) ALL COUNTRY WORLD INDEX (ACWI)
EX-USA:
A float-adjusted market-capitalization index that is designed to measure equity
market performance in the global developed and emerging markets, excluding the
United States. The index consists of 47 developed and emerging market country
indices.
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.
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/CITIGROUP VALUE INDEX:
A float-adjusted market-capitalization-weighted index comprised of stocks
representing approximately half the market capitalization of the S&P 500 that
have been identified as being on the value end of the growth-value spectrum.
Until 12/16/05, when Standard & Poor's changed the name of the index and its
calculation methodology, the index was called the S&P 500/BARRA Value Index.
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 A shares for the three-year period ended
10/31/06. 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 10/31/06, and Fund results are for
Class A shares. Sources: Ibbotson Associates and Lipper, Inc.
36
Expense Information
WM GROUP OF FUNDS
As a shareholder of the REIT Fund, Equity Income Fund, Growth & Income Fund,
West Coast Equity Fund, Mid Cap Stock Fund, Growth Fund, Small Cap Value Fund,
Small Cap Growth Fund, International Growth Fund, Short Term Income Fund, U.S.
Government Securities Fund, Income Fund, High Yield Fund, California Municipal
Fund, or California Insured Intermediate Municipal Fund (collectively, the
"Funds"), you incur two types of costs: (1) transaction costs, including sales
charges (loads) on purchase of Class A shares, and, if applicable, contingent
deferred sales charges on redemption of shares and redemption fees and (2)
ongoing costs, including management fees, distribution and/or service fees, and
other Fund expenses. The example below 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.
The example is based on an investment of $1,000 invested at the beginning of the
period and held for the entire period May 1, 2006 to October 31, 2006.
ACTUAL EXPENSES:
The first section of the table below provides information about actual account
values and actual expenses. You may use the information in these columns,
together with the amount you invested, to estimate the expenses that you paid
over the period. Simply divide your account value by $1,000 (for example, an
$8,600 account value divided by $1,000 = $8.60), then multiply the result by the
number in the third column under the heading entitled "Expenses Paid During
Period" to estimate the expenses you paid on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES:
The second section of the table below provides information about hypothetical
account values and hypothetical expenses based on each Fund's actual expense
ratio 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 sales
charges (loads). Therefore, the hypothetical section of the table is useful in
comparing ongoing costs only, and will not help you compare the relative total
costs of owning different mutual funds. In addition, if these transactional
costs were included, the cost shown would have been higher.
HYPOTHETICAL
ACTUAL EXPENSES (5% RETURN BEFORE EXPENSES)
---------------------------------- ----------------------------------
EXPENSES EXPENSES
BEGINNING ENDING PAID DURING BEGINNING ENDING PAID DURING
ACCOUNT ACCOUNT PERIOD* ACCOUNT ACCOUNT PERIOD*
VALUE VALUE 5/1/06- VALUE VALUE 5/1/06- EXPENSE
5/1/06 10/31/06 10/31/06 5/1/06 10/31/06 10/31/06 RATIO
--------- -------- ----------- --------- -------- ----------- -------
REIT Fund
Class A Shares .......... $1,000 $1,164 $ 7.05 $1,000 $1,019 $ 6.57 1.29%
Class B Shares .......... 1,000 1,160 11.27 1,000 1,015 10.52 2.07%
Class C Shares .......... 1,000 1,160 11.01 1,000 1,015 10.28 2.02%
Class I Shares .......... 1,000 1,167 4.68 1,000 1,021 4.37 0.86%
Equity Income Fund
Class A Shares .......... $1,000 $1,052 $ 4.48 $1,000 $1,021 $ 4.41 0.87%
Class B Shares .......... 1,000 1,048 8.89 1,000 1,017 8.75 1.72%
Class C Shares .......... 1,000 1,048 8.48 1,000 1,017 8.35 1.64%
Class I Shares .......... 1,000 1,054 2.80 1,000 1,022 2.76 0.54%
Growth & Income Fund
Class A Shares .......... $1,000 $1,039 $ 4.44 $1,000 $1,021 $ 4.40 0.86%
Class B Shares .......... 1,000 1,034 10.15 1,000 1,015 10.05 1.98%
Class C Shares .......... 1,000 1,035 9.34 1,000 1,016 9.25 1.82%
Class I Shares .......... 1,000 1,041 2.72 1,000 1,023 2.69 0.53%
West Coast Equity Fund
Class A Shares .......... $1,000 $1,016 $ 4.29 $1,000 $1,021 $ 4.30 0.84%
Class B Shares .......... 1,000 1,011 9.02 1,000 1,016 9.05 1.78%
Class C Shares .......... 1,000 1,011 8.57 1,000 1,017 8.59 1.69%
Class I Shares .......... 1,000 1,017 2.61 1,000 1,023 2.62 0.51%
Mid Cap Stock Fund
Class A Shares .......... $1,000 $1,024 $ 5.52 $1,000 $1,020 $ 5.51 1.08%
Class B Shares .......... 1,000 1,018 10.63 1,000 1,015 10.61 2.09%
Class C Shares .......... 1,000 1,019 10.00 1,000 1,015 9.98 1.97%
Class I Shares .......... 1,000 1,025 3.98 1,000 1,021 3.97 0.78%
37
Expense Information (continued)
WM GROUP OF FUNDS
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 5/1/06- VALUE VALUE 5/1/06- EXPENSE
5/1/06 10/31/06 10/31/06 5/1/06 10/31/06 10/31/06 RATIO
--------- -------- ----------- --------- -------- ----------- -------
Growth Fund
Class A Shares ................ $1,000 $1,011 $ 6.40 $1,000 $1,019 $ 6.42 1.26%
Class B Shares ................ 1,000 1,006 11.87 1,000 1,013 11.92 2.35%
Class C Shares ................ 1,000 1,007 10.07 1,000 1,015 10.11 1.99%
Class I Shares ................ 1,000 1,014 3.63 1,000 1,022 3.65 0.72%
Small Cap Value Fund
Class A Shares ................ $1,000 $1,038 $ 7.04 $1,000 $1,018 $ 6.97 1.37%
Class B Shares ................ 1,000 1,033 12.23 1,000 1,013 12.11 2.39%
Class C Shares ................ 1,000 1,035 10.78 1,000 1,015 10.67 2.10%
Class I Shares ................ 1,000 1,041 4.62 1,000 1,021 4.57 0.90%
Small Cap Growth Fund
Class A Shares ................ $1,000 $ 917 $ 6.69 $1,000 $1,018 $ 7.05 1.39%
Class B Shares ................ 1,000 911 12.99 1,000 1,012 13.68 2.70%
Class C Shares ................ 1,000 913 11.16 1,000 1,014 11.75 2.32%
Class I Shares ................ 1,000 919 4.42 1,000 1,021 4.65 0.91%
International Growth Fund
Class A Shares ................ $1,000 $1,026 $ 6.40 $1,000 $1,019 $ 6.38 1.25%
Class B Shares ................ 1,000 1,020 11.56 1,000 1,014 11.52 2.27%
Class C Shares ................ 1,000 1,021 10.59 1,000 1,015 10.56 2.08%
Class I Shares ................ 1,000 1,027 4.56 1,000 1,021 4.55 0.89%
Short Term Income Fund
Class A Shares ................ $1,000 $1,028 $ 4.82 $1,000 $1,020 $ 4.80 0.94%
Class B Shares ................ 1,000 1,024 8.77 1,000 1,017 8.74 1.72%
Class C Shares ................ 1,000 1,024 8.61 1,000 1,017 8.58 1.69%
Class I Shares ................ 1,000 1,030 2.80 1,000 1,022 2.79 0.55%
U.S. Government Securities Fund
Class A Shares ................ $1,000 $1,039 $ 4.73 $1,000 $1,021 $ 4.69 0.92%
Class B Shares ................ 1,000 1,036 8.64 1,000 1,017 8.56 1.68%
Class C Shares ................ 1,000 1,035 8.37 1,000 1,017 8.30 1.63%
Class I Shares ................ 1,000 1,042 2.65 1,000 1,023 2.62 0.51%
Income Fund
Class A Shares ................ $1,000 $1,043 $ 4.60 $1,000 $1,021 $ 4.55 0.89%
Class B Shares ................ 1,000 1,040 8.52 1,000 1,017 8.42 1.66%
Class C Shares ................ 1,000 1,040 8.38 1,000 1,017 8.29 1.63%
Class I Shares ................ 1,000 1,046 2.68 1,000 1,023 2.65 0.52%
High Yield Fund
Class A Shares ................ $1,000 $1,059 $ 4.66 $1,000 $1,021 $ 4.57 0.90%
Class B Shares ................ 1,000 1,055 8.59 1,000 1,017 8.43 1.66%
Class C Shares ................ 1,000 1,055 8.52 1,000 1,017 8.36 1.64%
Class I Shares ................ 1,000 1,061 2.92 1,000 1,022 2.87 0.56%
California Municipal Fund
Class A Shares ................ $1,000 $1,043 $ 4.34 $1,000 $1,021 $ 4.29 0.84%
Class B Shares ................ 1,000 1,039 8.11 1,000 1,017 8.03 1.58%
Class C Shares ................ 1,000 1,039 8.11 1,000 1,017 8.03 1.58%
California Insured
Intermediate Municipal Fund
Class A Shares ................ $1,000 $1,034 $ 4.37 $1,000 $1,021 $ 4.34 0.85%
Class B Shares ................ 1,000 1,030 8.27 1,000 1,017 8.22 1.62%
Class C Shares ................ 1,000 1,030 8.33 1,000 1,017 8.28 1.63%
* 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).
38
Financial Statements:
Portfolio of Investments
REIT FUND
October 31, 2006
VALUE
SHARES (000S)
- ------------ --------------
REAL ESTATE INVESTMENT TRUSTS (REITS) - 89.4%
DIVERSIFIED - 3.0%
122,200 Vornado Realty Trust** ........................ $ 14,572
--------------
HEALTH CARE - 8.8%
394,300 Health Care Property Investors, Inc.** ........ 12,381
68,800 Health Care REIT, Inc.** ...................... 2,840
265,200 Healthcare Realty Trust, Inc.** ............... 10,741
463,100 Nationwide Health Properties, Inc.** .......... 13,309
262,800 OMEGA Healthcare Investors, Inc. .............. 4,436
--------------
Total Health Care ............................. 43,707
--------------
HYBRIDS - 2.5%
270,000 iStar Financial, Inc. ......................... 12,509
--------------
INDUSTRIAL/OFFICE - 22.3%
INDUSTRIAL - 7.5%
204,600 AMB Property Corporation ...................... 11,951
115,600 EastGroup Properties, Inc. .................... 6,153
303,000 ProLogis ...................................... 19,171
--------------
37,275
--------------
MIXED - 1.3%
156,800 Duke Realty Corporation ....................... 6,281
--------------
OFFICE - 13.5%
194,500 Alexandria Real Estate Equities, Inc. ......... 19,392
123,800 Boston Properties, Inc. ....................... 13,225
366,200 Corporate Office Properties Trust** ........... 17,501
141,900 SL Green Realty Corporation** ................. 17,177
--------------
67,295
--------------
Total Industrial/Office ....................... 110,851
--------------
LODGING/RESORTS - 7.6%
559,300 Equity Inns, Inc.** ........................... 9,385
209,700 Hospitality Properties Trust .................. 10,162
565,400 Host Hotels & Resorts Inc. .................... 13,038
435,600 Winston Hotels, Inc. .......................... 5,271
--------------
Total Lodging/Resorts ......................... 37,856
--------------
MORTGAGE/FINANCIAL - 2.3%
207,000 Redwood Trust, Inc.** ......................... 11,379
--------------
RESIDENTIAL - 11.1%
APARTMENTS - 11.1%
101,500 AvalonBay Communities, Inc.** ................. 13,303
327,900 Equity Residential** .......................... 17,907
98,700 Mid-America Apartment Communities, Inc.** ..... 6,282
541,000 United Dominion Realty Trust, Inc.** .......... 17,512
--------------
Total Residential ............................. 55,004
--------------
RETAIL - 24.1%
FREESTANDING - 1.6%
367,800 National Retail Properties, Inc.** ............ 8,265
--------------
VALUE
SHARES (000S)
- ------------ --------------
REGIONAL MALLS - 11.2%
332,500 General Growth Properties, Inc. ............... $ 17,257
229,300 Macerich Company .............................. 18,424
204,000 Simon Property Group, Inc.** .................. 19,808
--------------
55,489
--------------
SHOPPING CENTERS - 11.3%
313,000 Developers Diversified Realty Corporation** ... 19,062
180,000 Equity One, Inc.** ............................ 4,521
466,755 Kimco Realty Corporation** .................... 20,738
252,600 Weingarten Realty Investors** ................. 11,746
--------------
56,067
--------------
Total Retail 119,821
--------------
SELF STORAGE - 1.9%
103,800 Public Storage, Inc. .......................... 9,312
--------------
SPECIALTY - 5.8%
263,200 Entertainment Properties Trust ................ 14,476
124,500 Global Signal, Inc. ........................... 6,761
215,000 Plum Creek Timber Company, Inc. ............... 7,727
--------------
Total Specialty ............................... 28,964
--------------
Total REITs
(Cost $242,396) ............................ 443,975
--------------
COMMON STOCKS - 3.9%
CONSUMER DISCRETIONARY - 0.6%
CONSUMER DURABLES & APPAREL - 0.6%
127,566 D.R. Horton, Inc. ............................. 2,989
--------------
FINANCIALS - 3.3%
BANKS - 1.5%
202,400 Countrywide Financial Corporation ............. 7,715
--------------
INSURANCE - 1.8%
406,747 Fidelity National Title Group, Inc., Class A** 8,953
--------------
Total Financials .............................. 16,668
--------------
Total Common Stocks
(Cost $17,576) ............................. 19,657
--------------
CANADIAN INCOME TRUSTS - 1.6%
ENERGY - 1.6%
98,300 Enerplus Resources Fund (F)** ................. 5,337
87,100 Harvest Energy Trust (F) ...................... 2,556
--------------
Total Canadian Income Trusts
(Cost $6,734) .............................. 7,893
--------------
PREFERRED REAL ESTATE INVESTMENT
TRUST (REIT) - 0.5%
(Cost $2,613)
115,100 Mills Corporation, Series E ................... 2,450
--------------
See Notes to Financial Statements.
39
Portfolio of Investments (continued)
REIT FUND
October 31, 2006
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
- ------------ --------------
REPURCHASE AGREEMENT - 2.5%
(Cost $12,486)
$ 12,486 Agreement with Morgan Stanley, 5.270% dated
10/31/2006, to be repurchased at $12,488,000
on 11/01/2006 (collateralized by U.S.
Treasury Note, 2.000% due 01/15/2016, market
value $12,904,000) ......................... $ 12,486
--------------
SHORT-TERM INVESTMENT - 18.3%
(Cost $90,868)
90,868 Mellon GSL DBT II
Collateral Fund+ ........................... 90,868
--------------
TOTAL INVESTMENTS (Cost $372,673*) ........................... 116.2% 577,329
OTHER ASSETS (LIABILITIES) (NET) ............................. (16.2) (80,527)
----- --------------
NET ASSETS ................................................... 100.0% $ 496,802
===== ==============
- ----------
* Aggregate cost for federal tax purposes is $372,677.
** Some or all of these securities are on loan at October 31, 2006, and have
an aggregate market value of $86,903,000 representing 17.5% of the total
net assets of the Fund (collateral value $90,868,000). (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.
40
Portfolio of Investments
EQUITY INCOME FUND
October 31, 2006
VALUE
SHARES (000S)
- ------------ --------------
COMMON STOCKS - 91.2%
CONSUMER DISCRETIONARY - 8.9%
AUTOMOBILES & COMPONENTS - 0.2%
69,900 Johnson Controls, Inc. ........................ $ 5,700
--------------
CONSUMER DURABLES & APPAREL - 0.9%
100,000 Black & Decker Corporation** .................. 8,388
283,000 NIKE Inc., Class B ............................ 26,002
--------------
34,390
--------------
CONSUMER SERVICES - 1.4%
985,500 Hilton Hotels Corporation. .................... 28,501
612,100 McDonald's Corporation** ...................... 25,659
--------------
54,160
--------------
MEDIA - 3.8%
317,500 CBS Corporation, Class B ...................... 9,189
386,800 Clear Channel Communications, Inc. ............ 13,480
1,038,700 McGraw-Hill Companies, Inc. ................... 66,653
432,600 News Corporation, Class B. .................... 9,405
1,434,100 Time Warner, Inc. ............................. 28,696
524,400 Tribune Company** ............................. 17,478
--------------
144,901
--------------
RETAILING - 2.6%
622,300 Lowe's Companies, Inc. ........................ 18,756
722,000 Nordstrom, Inc.** ............................. 34,187
779,000 Target Corporation ............................ 46,101
--------------
99,044
--------------
Total Consumer Discretionary .................. 338,195
--------------
CONSUMER STAPLES - 5.7%
FOOD & STAPLES RETAILING - 0.7%
759,400 Sysco Corporation ............................. 26,564
--------------
FOOD, BEVERAGE & TOBACCO - 3.6%
544,400 Altria Group, Inc. ............................ 44,276
119,100 Anheuser-Busch Companies, Inc. ................ 5,648
89,900 Cadbury Schweppes PLC, Sponsored ADR .......... 3,649
399,500 Coca-Cola Company ............................. 18,665
396,300 Diageo PLC, Sponsored ADR ..................... 29,512
694,300 SABMiller PLC, Sponsored ADR** ................ 13,427
402,000 Wm. Wrigley Jr. Company ....................... 20,884
--------------
136,061
--------------
HOUSEHOLD & PERSONAL PRODUCTS - 1.4%
653,800 Colgate-Palmolive Company ..................... 41,824
167,400 Kimberly-Clark Corporation** .................. 11,135
--------------
52,959
--------------
Total Consumer Staples ........................ 215,584
--------------
ENERGY - 7.6%
433,000 Baker Hughes Inc.** ........................... 29,899
544,300 Chevron Corporation ........................... 36,577
VALUE
SHARES (000S)
- ------------ --------------
736,700 Devon Energy Corporation ...................... $ 49,241
149,400 Enterprise Products Partners LP** ............. 4,105
566,800 ExxonMobil Corporation** ...................... 40,481
150,000 Hess Corporation .............................. 6,360
237,700 Kinder Morgan Energy Partners LP** ............ 10,601
224,600 Kinder Morgan, Inc. ........................... 23,605
386,400 Marathon Oil Corporation ...................... 33,385
307,700 Schlumberger Ltd.** ........................... 19,410
462,700 Williams Companies, Inc. ...................... 11,304
439,000 XTO Energy, Inc. .............................. 20,484
--------------
Total Energy .................................. 285,452
--------------
FINANCIALS - 27.1%
BANKS - 6.3%
901,096 Bank of America Corporation ................... 48,542
1,024,700 Countrywide Financial Corporation** ........... 39,062
764,300 Mellon Financial Corporation** ................ 29,655
398,000 North Fork Bancorporation, Inc. ............... 11,375
281,900 PNC Financial Services Group, Inc. ............ 19,741
213,400 SunTrust Banks, Inc.** ........................ 16,856
560,000 U.S. Bancorp .................................. 18,950
1,488,000 Wells Fargo & Company** ....................... 54,000
--------------
238,181
--------------
DIVERSIFIED FINANCIALS - 12.2%
147,700 AllianceBernstein Holding LP** ................ 11,476
180,000 Ameriprise Financial, Inc.** .................. 9,270
545,400 Bank of New York Company, Inc.** .............. 18,746
1,035,333 Citigroup, Inc. ............................... 51,932
506,800 Franklin Resources, Inc. ...................... 57,755
310,000 Freddie Mac ................................... 21,387
270,600 Goldman Sachs Group, Inc.** ................... 51,357
717,500 ING Groep N.V., Sponsored ADR ................. 31,807
1,117,100 JPMorgan Chase & Company ...................... 52,995
265,000 Legg Mason, Inc.** ............................ 23,855
407,900 Lehman Brothers Holdings Inc. ................. 31,751
603,200 Morgan Stanley** .............................. 46,103
622,600 T. Rowe Price Group, Inc.** ................... 29,455
395,700 UBS AG ........................................ 23,679
--------------
461,568
--------------
INSURANCE - 8.6%
986,000 ACE Ltd.** .................................... 56,449
280,900 AFLAC, Inc.** ................................. 12,618
505,900 Allstate Corporation .......................... 31,042
370,600 Chubb Corporation ............................. 19,697
750,000 Fidelity National Financial, Inc. ............. 16,725
785,799 Fidelity National Title Group, Inc., Class A .. 17,296
395,100 Hartford Financial Services Group, Inc.** ..... 34,441
444,100 HCC Insurance Holdings, Inc.** ................ 14,948
240,200 Lincoln National Corporation .................. 15,207
506,700 Loews Corporation ............................. 19,721
411,000 Marsh & McLennan Companies, Inc.** ............ 12,100
674,100 MetLife, Inc.** ............................... 38,511
See Notes to Financial Statements.
41
Portfolio of Investments (continued)
EQUITY INCOME FUND
October 31, 2006
VALUE
SHARES (000S)
- ------------ --------------
COMMON STOCKS (CONTINUED)
FINANCIALS (CONTINUED)
INSURANCE (CONTINUED)
330,300 Prudential Financial, Inc.** .................. $ 25,410
590,000 UnumProvident Corporation** ................... 11,670
--------------
325,835
--------------
Total Financials .............................. 1,025,584
--------------
HEALTH CARE - 8.9%
HEALTH CARE EQUIPMENT & SERVICES - 3.0%
375,000 Becton, Dickinson & Company ................... 26,261
202,500 Caremark Rx, Inc. ............................. 9,969
776,300 Medtronic, Inc.** ............................. 37,790
768,100 UnitedHealth Group Inc. ....................... 37,468
--------------
111,488
--------------
PHARMACEUTICALS & BIOTECHNOLOGY - 5.9%
570,600 Abbott Laboratories ........................... 27,109
285,300 Eli Lilly & Company ........................... 15,980
375,600 GlaxoSmithKline PLC, Sponsored ADR ............ 20,001
510,000 Johnson & Johnson ............................. 34,374
1,158,000 Pfizer Inc. ................................... 30,861
253,300 Roche Holding Ltd., Sponsored ADR ............. 22,166
200,900 Sanofi-Aventis, ADR ........................... 8,576
896,700 Schering-Plough Corporation ................... 19,853
866,500 Wyeth+ ........................................ 44,218
--------------
223,138
--------------
Total Health Care ............................. 334,626
--------------
INDUSTRIALS - 10.6%
CAPITAL GOODS - 8.2%
491,800 3M Company** .................................. 38,774
482,600 Boeing Company ................................ 38,541
468,900 Caterpillar, Inc. ............................. 28,467
349,900 Dover Corporation ............................. 16,620
413,600 Emerson Electric Company** .................... 34,908
129,800 General Dynamics Corporation .................. 9,229
966,200 General Electric Company ...................... 33,923
438,400 Honeywell International, Inc. ................. 18,465
793,400 ITT Industries, Inc. .......................... 43,153
323,900 L-3 Communications Holdings, Inc. ............. 26,080
259,600 Siemens AG, Sponsored ADR** ................... 23,315
--------------
311,475
--------------
COMMERCIAL SERVICES & SUPPLIES - 0.6%
555,000 Waste Management, Inc. ....................... 20,801
--------------
TRANSPORTATION - 1.8%
257,400 Burlington Northern Santa Fe Corporation ...... 19,956
258,900 CSX Corporation ............................... 9,235
251,900 FedEx Corporation** ........................... 28,853
210,900 Norfolk Southern Corporation ................. 11,087
--------------
69,131
--------------
Total Industrials ............................ 401,407
--------------
VALUE
SHARES (000S)
- ------------ --------------
INFORMATION TECHNOLOGY - 11.8%
COMMUNICATIONS EQUIPMENT - 1.8%
1,238,900 Cisco Systems, Inc.+ .......................... $ 29,895
1,924,100 Nokia Oyj, Sponsored ADR** .................... 38,251
--------------
68,146
--------------
COMPUTERS & PERIPHERALS - 2.3%
260,000 Apple Computer, Inc.+ ......................... 21,081
805,000 Hewlett-Packard Company ....................... 31,185
373,900 International Business Machines Corporation ... 34,522
--------------
86,788
--------------
INTERNET SOFTWARE & SERVICES - 0.5%
774,100 Yahoo! Inc.+** ................................ 20,390
--------------
IT SERVICES - 1.1%
812,600 Automatic Data Processing, Inc. ............... 40,175
--------------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT - 4.4%
2,311,700 Applied Materials, Inc.** ..................... 40,201
2,008,800 Intel Corporation ............................. 42,868
398,200 Linear Technology Corporation** ............... 12,392
765,000 Microchip Technology, Inc.** .................. 25,191
40,800 Samsung Electronics Company Ltd., GDR++ ....... 13,229
1,050,000 Texas Instruments, Inc.** ..................... 31,689
--------------
165,570
--------------
SOFTWARE - 1.7%
2,229,100 Microsoft Corporation ......................... 63,997
--------------
Total Information Technology .................. 445,066
--------------
MATERIALS - 2.2%
226,000 Allegheny Technologies, Inc. .................. 17,793
441,100 Anglo American PLC, Unsponsored ADR ........... 10,004
424,100 International Paper Company** ................. 14,144
97,900 Phelps Dodge Corporation ...................... 9,827
284,400 Vulcan Materials Company** .................... 23,173
156,900 Weyerhaeuser Company** ........................ 9,977
--------------
Total Materials ............................... 84,918
--------------
TELECOMMUNICATION SERVICES - 6.6%
342,900 Alltel Corporation ............................ 18,280
1,606,800 AT&T Inc.** ................................... 55,033
407,400 BellSouth Corporation** ....................... 18,374
200,100 Deutsche Telekom AG, Sponsored ADR ............ 3,482
153,800 Embarq Corporation ............................ 7,436
239,400 France Telecom SA, Sponsored ADR .............. 6,249
1,211,400 Sprint Nextel Corporation ..................... 22,641
1,596,900 Verizon Communications Inc. ................... 59,085
945,962 Vodafone Group PLC, Sponsored ADR ............. 24,453
2,555,984 Windstream Corporation** ...................... 35,068
--------------
Total Telecommunication Services .............. 250,101
--------------
See Notes to Financial Statements.
42
Portfolio of Investments (continued)
EQUITY INCOME FUND
October 31, 2006
VALUE
SHARES (000S)
- ------------ --------------
COMMON STOCKS (CONTINUED)
UTILITIES - 1.8%
637,900 FPL Group, Inc.** ............................. $ 32,533
403,900 Progress Energy, Inc.** ....................... 18,579
785,000 Xcel Energy, Inc.** ........................... 17,325
--------------
Total Utilities ............................... 68,437
--------------
Total Common Stocks
(Cost $2,897,086) .......................... 3,449,370
--------------
REAL ESTATE INVESTMENT TRUSTS (REITS) - 4.5%
208,100 AMB Property Corporation ...................... 12,155
147,900 Archstone-Smith Trust** ....................... 8,905
110,900 Brookfield Properties Corporation ............. 4,202
123,400 Developers Diversified Realty Corporation ..... 7,515
131,000 Duke Realty Corporation ....................... 5,248
398,000 Equity Residential** .......................... 21,735
119,600 General Growth Properties, Inc.** ............. 6,207
275,400 Health Care Property Investors, Inc.** ........ 8,648
657,500 Host Hotels & Resorts Inc.** .................. 15,162
177,100 Kimco Realty Corporation** .................... 7,868
81,000 Macerich Company .............................. 6,508
285,000 Plum Creek Timber Company, Inc. ............... 10,243
421,300 ProLogis ...................................... 26,656
124,100 Public Storage, Inc. .......................... 11,133
62,800 Simon Property Group, Inc.** .................. 6,098
102,000 Vornado Realty Trust** ........................ 12,163
--------------
Total REITs
(Cost $101,573) ............................ 170,446
--------------
PRINCIPAL
AMOUNT
(000S)
- ------------
CONVERTIBLE BONDS AND NOTES - 0.3%
(Cost $11,509)
$ 11,650 Echostar Communications, Conv. Sub. Note,
5.750% due 05/15/2008 ...................... 11,810
--------------
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
- ------------ --------------
FIXED-INCOME SECURITIES - 1.6%
U.S. TREASURY NOTES - 1.2%
$ 15,000 4.250% due 11/15/2014 ......................... $ 14,657
30,000 3.000% due 12/31/2006 ......................... 29,894
--------------
Total U.S. Treasury Notes
(Cost $44,986) ............................. 44,551
--------------
CORPORATE BONDS AND NOTES - 0.4%
1,250 American Home Products Corporation, Deb.,
7.250% due 03/01/2023 ...................... 1,436
4,000 ERAC USA Finance Company, Note,
7.350% due 06/15/2008++ .................... 4,121
500 Merrill Lynch & Company, Inc., Note,
6.375% due 10/15/2008 ...................... 511
4,000 TELUS Corporation, Note,
8.000% due 06/01/2011 ...................... 4,416
2,000 Texas-New Mexico Power Company, Sr. Note,
6.250% due 01/15/2009 ....................... 2,036
1,000 Westinghouse Electric Corporation, Deb.,
7.875% due 09/01/2023 ...................... 1,107
--------------
Total Corporate Bonds and Notes
(Cost $12,837) ............................. 13,627
--------------
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES - 0.0%
FEDERAL HOME LOAN MORTGAGE CORPORATION (FHLMC) - 0.0%
209 6.500% due 09/01/2030 ......................... 214
93 7.000% due 09/01/2030 ......................... 96
--------------
Total U.S. Government Agency Mortgage-Backed
Securities
(Cost $294) ................................ 310
--------------
COLLATERALIZED MORTGAGE OBLIGATION (CMO) - 0.0%
(Cost $245)
245 Reilly Mortgage FHA, Series 1982, (Partial
default),
7.430% due 08/01/2022 ...................... 245##
--------------
Total Fixed-Income Securities
(Cost $58,362) ............................. 58,733
--------------
SHARES
- ------------
WARRANT - 0.0%
(Cost $0)
4,500 V2 Music Holdings PLC,
Expires 05/07/2008+,++ 0
--------------
See Notes to Financial Statements.
43
Portfolio of Investments (continued)
EQUITY INCOME FUND
October 31, 2006
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
- ------------ --------------
REPURCHASE AGREEMENT - 1.3%
(Cost $50,402)
$ 50,402 Agreement with Morgan Stanley, 5.270% dated
10/31/2006, to be repurchased at $50,409,000
on 11/01/2006 (collateralized by
U.S. Treasury Note, 2.000% due 01/15/2016,
market value $52,087,000) .................. $ 50,402
--------------
SHORT-TERM INVESTMENT - 8.5%
(Cost $320,757)
320,757 Mellon GSL DBT II
Collateral Fund+++ ......................... 320,757
--------------
TOTAL INVESTMENTS (Cost $3,439,689*) ......................... 107.4% 4,061,518
OTHER ASSETS (LIABILITIES) (NET) ............................. (7.4) (278,141)
----- --------------
NET ASSETS ................................................... 100.0% $ 3,783,377
===== ==============
- ----------
* Aggregate cost for federal tax purposes is $3,440,196.
** Some or all of these securities are on loan at October 31, 2006, and have
an aggregate market value of $311,770,000 representing 8.2% of the total
net assets of the Fund (collateral value $320,757,000). (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.
## Represents fair value as determined in good faith under the direction of
the Board of Trustees.
GLOSSARY OF TERMS
ADR -- Depositary Receipt
FHA -- Federal Housing Authority
GDR -- Global Depositary Receipt
See Notes to Financial Statements.
44
Portfolio of Investments
GROWTH & INCOME FUND
October 31, 2006
VALUE
SHARES (000S)
- ------------ --------------
COMMON STOCKS - 97.4%
CONSUMER DISCRETIONARY - 6.4%
CONSUMER SERVICES - 1.8%
882,000 Carnival Corporation** ........................ $ 43,059
--------------
MEDIA - 3.1%
593,500 CBS Corporation, Class B ...................... 17,176
858,999 Comcast Corporation, Class A+** ............... 34,936
514,500 Viacom Inc., Class B+ ......................... 20,024
--------------
72,136
--------------
RETAILING - 1.5%
484,000 Kohl's Corporation+ ........................... 34,170
--------------
Total Consumer Discretionary .................. 149,365
--------------
CONSUMER STAPLES - 9.9%
FOOD & STAPLES RETAILING - 3.5%
512,000 Costco Wholesale Corporation .................. 27,331
758,800 Kroger Company** .............................. 17,065
748,000 Wal-Mart Stores, Inc. ......................... 36,861
--------------
81,257
--------------
FOOD, BEVERAGE & TOBACCO - 4.2%
290,000 Altria Group, Inc. ............................ 23,586
510,100 Hershey Company** ............................. 26,989
753,000 PepsiCo, Inc. ................................. 47,770
--------------
98,345
--------------
HOUSEHOLD & PERSONAL PRODUCTS - 2.2%
796,000 Procter & Gamble Company ...................... 50,459
--------------
Total Consumer Staples ........................ 230,061
--------------
ENERGY - 11.7%
617,000 BP PLC, Sponsored ADR ......................... 41,401
420,000 ENSCO International, Inc.** ................... 20,567
77,000 EOG Resources, Inc. ........................... 5,123
852,000 ExxonMobil Corporation ........................ 60,850
860,000 GlobalSantaFe Corporation ..................... 44,634
216,000 Kinder Morgan, Inc. ........................... 22,702
445,700 National Oilwell Varco, Inc.+** ............... 26,920
806,000 Schlumberger Ltd. ............................. 50,842
--------------
Total Energy .................................. 273,039
--------------
FINANCIALS - 22.2%
BANKS - 5.9%
867,000 Bank of America Corporation ................... 46,705
764,000 Wachovia Corporation** ........................ 42,402
1,322,000 Wells Fargo & Company** ....................... 47,976
--------------
137,083
--------------
DIVERSIFIED FINANCIALS - 7.9%
1,135,000 Citigroup, Inc. ............................... 56,931
719,000 Freddie Mac ................................... 49,604
1,187,000 JPMorgan Chase & Company ...................... 56,311
VALUE
SHARES (000S)
- ------------ --------------
993,000 Western Union Company+ ........................ $ 21,896
--------------
184,742
--------------
INSURANCE - 8.4%
883,800 ACE Ltd. ...................................... 50,597
429,000 AFLAC, Inc.** ................................. 19,271
819,000 Allstate Corporation .......................... 50,254
594,000 American International Group, Inc. ............ 39,899
319,000 Fidelity National Financial, Inc.** ........... 7,114
334,226 Fidelity National Title Group, Inc.,
Class A .................................... 7,356
231,000 Hartford Financial Services Group, Inc. ....... 20,136
--------------
194,627
--------------
Total Financials .............................. 516,452
--------------
HEALTH CARE - 10.2%
HEALTH CARE EQUIPMENT & SERVICES - 5.4%
522,000 Baxter International Inc. ..................... 23,996
172,000 Becton, Dickinson & Company** ................. 12,045
560,000 Cardinal Health, Inc. ......................... 36,652
480,000 Medtronic, Inc.** ............................. 23,367
232,000 UnitedHealth Group Inc. ....................... 11,317
263,000 WellPoint Inc.+** ............................. 20,072
--------------
127,449
--------------
PHARMACEUTICALS & BIOTECHNOLOGY - 4.8%
208,000 Eli Lilly & Company ........................... 11,650
435,000 Johnson & Johnson ............................. 29,319
935,000 Pfizer Inc. ................................... 24,918
1,375,000 Teva Pharmaceutical Industries Ltd.,
Sponsored ADR** ............................ 45,334
--------------
111,221
--------------
Total Health Care ............................. 238,670
--------------
INDUSTRIALS - 13.8%
CAPITAL GOODS - 11.8%
534,000 Boeing Company ................................ 42,645
577,000 Caterpillar, Inc. ............................. 35,030
1,572,000 General Electric Company** .................... 55,193
1,327,000 Honeywell International, Inc.** ............... 55,893
316,000 Lockheed Martin Corporation ................... 27,470
319,900 Rockwell Automation, Inc. ..................... 19,834
1,274,000 Tyco International Ltd. ....................... 37,494
--------------
273,559
--------------
COMMERCIAL SERVICES & SUPPLIES - 0.5%
329,000 Waste Management, Inc. ........................ 12,331
--------------
TRANSPORTATION - 1.5%
1,213,700 AMR Corporation+** ............................ 34,396
--------------
Total Industrials ............................. 320,286
--------------
See Notes to Financial Statements.
45
Portfolio of Investments (continued)
GROWTH & INCOME FUND
October 31, 2006
VALUE
SHARES (000S)
- ------------ --------------
COMMON STOCKS (CONTINUED)
INFORMATION TECHNOLOGY - 15.3%
COMMUNICATIONS EQUIPMENT - 4.6%
713,000 Cisco Systems, Inc.+ .......................... $ 17,205
1,813,000 Motorola, Inc. ................................ 41,808
1,307,000 Nokia Oyj, Sponsored ADR ...................... 25,983
590,000 QUALCOMM, Inc.** .............................. 21,470
--------------
106,466
--------------
COMPUTERS & PERIPHERALS - 4.5%
180,000 Apple Computer, Inc.+ ......................... 14,594
1,268,000 Hewlett-Packard Company ....................... 49,122
429,000 International Business Machines Corporation.... 39,610
--------------
103,326
--------------
IT SERVICES - 1.0%
993,000 First Data Corporation ........................ 24,080
--------------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT - 0.8%
583,100 Microchip Technology, Inc.** .................. 19,202
--------------
SOFTWARE - 4.4%
709,000 Adobe Systems, Inc.+ .......................... 27,119
949,300 Autodesk, Inc.+** ............................. 34,887
1,395,000 Microsoft Corporation ......................... 40,050
--------------
102,056
--------------
Total Information Technology .................. 355,130
--------------
MATERIALS - 2.0%
1,231,000 Alcoa Inc. .................................... 35,588
525,000 Anglo American PLC, Unsponsored ADR ........... 11,907
--------------
Total Materials ............................... 47,495
--------------
TELECOMMUNICATION SERVICES - 2.7%
1,067,000 AT&T Inc.** ................................... 36,545
684,000 Verizon Communications Inc. ................... 25,308
--------------
Total Telecommunication Services .............. 61,853
--------------
UTILITIES - 3.2%
874,000 FPL Group, Inc.** ............................. 44,574
616,000 Pinnacle West Capital Corporation** ........... 29,451
--------------
Total Utilities ............................... 74,025
--------------
Total Common Stocks
(Cost $1,618,027) .......................... 2,266,376
--------------
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
- ------------ --------------
REPURCHASE AGREEMENT - 2.5%
(Cost $57,444)
$ 57,444 Agreement with Morgan Stanley, 5.270% dated
10/31/2006, to be repurchased at $57,452,000
on 11/01/2006 (collateralized by U.S.
Treasury Note, 2.000% due 01/15/2016, market
value $59,365,000) ......................... $ 57,444
--------------
SHORT-TERM INVESTMENT - 5.2%
(Cost $121,798)
121,798 Mellon GSL DBT II
Collateral Fund++ .......................... 121,798
--------------
TOTAL INVESTMENTS (Cost $1,797,269*) ...................... 105.1% 2,445,618
OTHER ASSETS (LIABILITIES) (NET) .......................... (5.1) (117,587)
----- --------------
NET ASSEST ................................................ 100.0% $ 2,328,031
===== ==============
- ----------
* Aggregate cost for federal tax purposes is $1,805,560.
** Some or all of these securities are on loan at October 31, 2006, and have
an aggregate market value of $117,204,000 representing 5.0% of the total
net assets of the Fund (collateral value $121,798,000). (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.
46
Portfolio of Investments
WEST COAST EQUITY FUND
October 31, 2006
VALUE
SHARES (000S)
- ------------ --------------
COMMON STOCKS - 94.4%
CONSUMER DISCRETIONARY - 10.7%
AUTOMOBILES & COMPONENTS - 1.6%
812,000 Monaco Coach Corporation** .................... $ 9,695
183,700 Toyota Motor Corporation,
Sponsored ADR .............................. 21,677
--------------
31,372
--------------
CONSUMER DURABLES & APPAREL - 1.8%
113,350 Columbia Sportswear Company** ................. 6,329
102,800 KB Home** ..................................... 4,620
131,500 Mattel, Inc. .................................. 2,976
213,700 NIKE Inc., Class B** .......................... 19,635
--------------
33,560
--------------
CONSUMER SERVICES - 3.9%
182,415 Ambassadors Group, Inc.** ..................... 4,996
730,500 Hilton Hotels Corporation ..................... 21,126
1,227,885 Red Lion Hotels Corporation+*** ............... 14,673
895,200 Starbucks Corporation+** ...................... 33,794
--------------
74,589
--------------
MEDIA - 2.4%
256,900 Getty Images, Inc.+** ......................... 11,126
241,851 McClatchy Company, Class A** .................. 10,484
117,800 Univision Communications Inc., Class A+** ..... 4,130
650,910 Walt Disney Company ........................... 20,478
--------------
46,218
--------------
RETAILING - 1.0%
154,500 Blue Nile, Inc.+** ............................ 5,903
166,150 Building Materials Holding Corporation** ...... 4,330
198,200 Nordstrom, Inc.** ............................. 9,385
--------------
19,618
--------------
Total Consumer Discretionary .................. 205,357
--------------
CONSUMER STAPLES - 6.5%
FOOD & STAPLES RETAILING - 2.1%
598,340 Costco Wholesale Corporation .................. 31,939
332,800 Kroger Company** .............................. 7,485
--------------
39,424
--------------
FOOD, BEVERAGE & TOBACCO - 1.2%
107,200 Archer Daniels Midland Company ................ 4,127
303,300 PepsiCo, Inc. ................................. 19,242
--------------
23,369
--------------
HOUSEHOLD & PERSONAL PRODUCTS - 3.2%
162,300 Central Garden & Pet Company+ ................. 8,110
306,430 Clorox Company ................................ 19,783
106,000 Colgate-Palmolive Company ..................... 6,781
186,000 Estee Lauder Companies Inc., Class A** ........ 7,513
301,600 Procter & Gamble Company ...................... 19,118
--------------
61,305
--------------
Total Consumer Staples ........................ 124,098
--------------
VALUE
SHARES (000S)
- ------------ --------------
ENERGY - 7.0%
194,000 Apache Corporation** .......................... $ 12,672
417,700 Berry Petroleum Company, Class A** ............ 12,468
48,600 CARBO Ceramics Inc.** ......................... 1,638
637,726 Chevron Corporation ........................... 42,855
172,000 ExxonMobil Corporation ........................ 12,284
890,700 Nabors Industries Ltd. (F)+** ................. 27,505
526,900 Occidental Petroleum Corporation .............. 24,733
--------------
Total Energy .................................. 134,155
--------------
FINANCIALS - 16.9%
BANKS - 10.5%
152,000 Bank of America Corporation ................... 8,188
278,300 Banner Corporation ............................ 12,095
191,100 City National Corporation ..................... 12,720
426,300 Countrywide Financial Corporation** ........... 16,250
518,700 East West Bancorp, Inc. ....................... 18,938
320,000 Greater Bay Bancorp ........................... 8,240
92,833 Pacific Capital Bancorp** ..................... 2,855
733,500 U.S. Bancorp .................................. 24,822
207,000 UCBH Holdings, Inc.** ......................... 3,548
146,000 UnionBanCal Corporation ....................... 8,407
82,140 United PanAm Financial Corporation+ ........... 1,068
932,255 Washington Federal, Inc.** .................... 21,666
1,701,332 Wells Fargo & Company ......................... 61,741
--------------
200,538
--------------
DIVERSIFIED FINANCIALS - 4.9%
1,531,100 Charles Schwab Corporation .................... 27,897
489,700 Citigroup, Inc. ............................... 24,563
335,000 Franklin Resources, Inc. ...................... 38,177
49,132 Piper Jaffray Companies, Inc.+** .............. 3,397
--------------
94,034
--------------
INSURANCE - 1.5%
1,825 eHealth, Inc.+** .............................. 41
63,504 Safeco Corporation ............................ 3,695
542,530 StanCorp Financial Group, Inc. ................ 24,788
--------------
28,524
--------------
Total Financials .............................. 323,096
--------------
HEALTH CARE - 15.6%
HEALTH CARE EQUIPMENT & SERVICES - 7.4%
63,500 Affymetrix, Inc.+** ........................... 1,619
256,900 AMN Healthcare Services, Inc.+** .............. 6,497
244,000 Applera Corporation-Applied Biosystems Group .. 9,101
40,000 C.R. Bard, Inc. ............................... 3,279
175,000 Caremark Rx, Inc. ............................. 8,615
24,000 Cooper Companies, Inc.** ...................... 1,383
247,000 DaVita, Inc.+ ................................. 13,741
82,760 Health Net, Inc.+ ............................. 3,435
14,800 IRIS International Inc.+** .................... 178
213,300 McKesson Corporation .......................... 10,684
See Notes to Financial Statements.
47
Portfolio of Investments (continued)
WEST COAST EQUITY FUND
October 31, 2006
VALUE
SHARES (000S)
- ------------ --------------
COMMON STOCKS (CONTINUED)
HEALTH CARE (CONTINUED)
HEALTH CARE EQUIPMENT & SERVICES (CONTINUED)
81,600 Mentor Corporation ............................ $ 3,819
912,000 OraSure Technologies, Inc.+** ................. 7,077
273,000 ResMed Inc.+** ................................ 12,009
675,963 SonoSite, Inc.+** ............................. 19,265
67,400 Stryker Corporation ........................... 3,524
403,300 Varian Medical Systems, Inc.+ ................. 22,125
322,300 VCA Antech, Inc.+** ........................... 10,433
65,000 Zimmer Holdings, Inc.+** ...................... 4,681
--------------
141,465
--------------
PHARMACEUTICALS & BIOTECHNOLOGY - 8.2%
253,950 Abbott Laboratories ........................... 12,065
305,725 Allergan, Inc.** .............................. 35,311
367,839 Amgen, Inc.+ .................................. 27,923
97,000 Amylin Pharmaceuticals, Inc.+** ............... 4,264
316,037 CV Therapeutics, Inc.+** ...................... 4,093
486,600 Dendreon Corporation+** ....................... 2,452
144,225 Eden Bioscience Corporation+ .................. 130
240,600 Genentech, Inc.+ .............................. 20,042
80,400 Gilead Sciences, Inc.+ ........................ 5,539
292,000 Johnson & Johnson ............................. 19,681
130,000 Martek Biosciences Corporation+ ............... 3,084
520,600 Pfizer Inc. ................................... 13,874
286,000 Watson Pharmaceuticals, Inc.+** ............... 7,696
--------------
156,154
--------------
Total Health Care ............................. 297,619
--------------
INDUSTRIALS - 15.4%
CAPITAL GOODS - 11.0%
529,033 Boeing Company ................................ 42,249
186,000 Cascade Corporation** ......................... 9,523
25,000 Ceradyne, Inc.+** ............................. 1,031
325,680 Dionex Corporation+** ......................... 17,717
310,430 Electro Scientific Industries, Inc.+** ........ 6,193
104,100 General Electric Company ...................... 3,655
23,860 Granite Construction Inc. ..................... 1,243
388,000 Greenbrier Companies, Inc.** .................. 14,550
346,400 Jacobs Engineering Group Inc.+ ................ 26,167
286,000 Northrop Grumman Corporation .................. 18,988
712,130 PACCAR Inc. ................................... 42,165
212,800 Precision Castparts Corporation ............... 14,483
442,000 Simpson Manufacturing Company, Inc.** ......... 12,549
--------------
210,513
--------------
COMMERCIAL SERVICES & SUPPLIES - 1.5%
48,000 Avery Dennison Corporation** .................. 3,031
255,400 Copart, Inc.+** ............................... 7,389
351,000 Robert Half International Inc. ................ 12,829
118,000 Waste Connections, Inc.+** .................... 4,801
--------------
28,050
--------------
VALUE
SHARES (000S)
- ------------ --------------
TRANSPORTATION - 2.9%
437,610 Alaska Air Group, Inc.+** ..................... $ 17,570
725,900 Cathay Pacific Airways Ltd., Sponsored ADR .... 7,921
648,540 Expeditors International of Washington, Inc. .. 30,747
--------------
56,238
--------------
Total Industrials ............................. 294,801
--------------
INFORMATION TECHNOLOGY - 18.0%
COMMUNICATIONS EQUIPMENT - 2.0%
1,203,000 Cisco Systems, Inc.+ .......................... 29,028
131,700 Polycom, Inc.+** .............................. 3,609
153,300 QUALCOMM, Inc. ................................ 5,579
--------------
38,216
--------------
COMPUTERS & PERIPHERALS - 2.0%
81,850 Apple Computer, Inc.+ ......................... 6,636
554,600 Hewlett-Packard Company ....................... 21,485
92,100 InFocus Corporation+ .......................... 260
149,700 Intermec Inc.+** .............................. 3,383
57,700 Network Appliance, Inc.+** .................... 2,106
228,800 QLogic Corporation+ ........................... 4,709
--------------
38,579
--------------
ELECTRONIC EQUIPMENT & INSTRUMENTS - 1.2%
42,700 Itron, Inc.+** ................................ 2,325
469,100 Tektronix, Inc. ............................... 14,246
119,834 Trimble Navigation Ltd.+ ...................... 5,539
--------------
22,110
--------------
INTERNET SOFTWARE & SERVICES - 2.5%
2,512,861 Art Technology Group, Inc.+** ................. 6,282
40,425 Google, Inc., Class A+ ........................ 19,258
222,900 WebEx Communications, Inc.+** ................. 8,571
530,000 Yahoo! Inc.+ .................................. 13,960
--------------
48,071
--------------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT - 3.4%
351,800 Applied Materials, Inc.** ..................... 6,118
69,000 Exar Corporation+ ............................. 895
364,125 FEI Company+** ................................ 8,324
872,300 Intel Corporation ............................. 18,615
67,700 International Rectifier Corporation+** ........ 2,435
124,500 KLA-Tencor Corporation** ...................... 6,122
673,080 Lattice Semiconductor Corporation+ ............ 4,180
450,600 LSI Logic Corporation+ ........................ 4,528
58,000 Maxim Integrated Products, Inc. ............... 1,741
141,900 Novellus Systems, Inc.+** ..................... 3,923
63,300 NVIDIA Corporation+ ........................... 2,207
856,900 Pixelworks, Inc.+ ............................. 1,979
138,000 SiRF Technology Holdings, Inc.+** ............. 3,881
--------------
64,948
--------------
See Notes to Financial Statements.
48
Portfolio of Investments (continued)
WEST COAST EQUITY FUND
October 31, 2006
VALUE
SHARES (000S)
- ------------ --------------
COMMON STOCKS (CONTINUED)
INFORMATION TECHNOLOGY (CONTINUED)
SOFTWARE - 6.9%
821,100 Actuate Corporation+** ........................ $ 4,286
740,000 Adobe Systems, Inc.+ .......................... 28,305
45,000 Autodesk, Inc.+ ............................... 1,654
148,000 Electronic Arts, Inc.+** ...................... 7,828
314,650 Fair Isaac Corporation** ...................... 11,526
94,000 Mentor Graphics Corporation+** ................ 1,586
1,861,478 Microsoft Corporation ......................... 53,443
560,100 Quest Software, Inc.+** ....................... 8,250
283,308 RadiSys Corporation+ .......................... 5,193
244,500 Sybase, Inc.+ ................................. 5,954
194,178 Symantec Corporation+ ......................... 3,852
23,000 Websense, Inc.+ ............................... 629
--------------
132,506
--------------
Total Information Technology .................. 344,430
--------------
MATERIALS - 3.2%
101,300 Cemex SA de CV, Sponsored ADR+ ................ 3,114
190,130 Oregon Steel Mills, Inc.+** . ................. 10,343
9,800 Reliance Steel & Aluminum Company ............. 336
500,540 Schnitzer Steel Industries, Inc., Class A ..... 17,499
157,061 Symyx Technologies, Inc.+ ..................... 3,856
415,000 Weyerhaeuser Company .......................... 26,390
--------------
Total Materials ............................... 61,538
--------------
TELECOMMUNICATION SERVICES - 0.7%
710,000 Sprint Nextel Corporation ..................... 13,270
--------------
UTILITIES - 0.4%
136,300 Sempra Energy ................................. 7,229
--------------
Total Common Stocks
(Cost $1,229,888) .......................... 1,805,593
--------------
REAL ESTATE INVESTMENT TRUSTS (REITS) - 3.4%
332,700 AMB Property Corporation ...................... 19,433
111,700 Essex Property Trust, Inc.** .................. 14,888
391,285 Health Care Property Investors, Inc.** ........ 12,286
78,500 Nationwide Health Properties, Inc.** .......... 2,256
448,300 Plum Creek Timber Company, Inc.** ............. 16,112
--------------
Total REITs
(Cost $45,688) ............................. 64,975
--------------
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
- ------------ --------------
REPURCHASE AGREEMENT - 2.2%
(Cost $ 42,820)
$ 42,820 Agreement with Morgan Stanley, 5.270% dated
10/31/2006, to be repurchased at $42,826,000
on 11/01/2006 (collateralized by U.S.
Treasury Note, 2.000% due 01/15/2016, market
value $44,252,000) ......................... $ 42,820
--------------
SHORT-TERM INVESTMENT - 9.5%
(Cost $ 181,690)
181,690 Mellon GSL DBT II Collateral Fund++ ........... 181,690
--------------
TOTAL INVESTMENTS (Cost $ 1,500,086*) ........................ 109.5% 2,095,078
OTHER ASSETS (LIABILITIES) (NET) ............................. (9.5) (182,351)
----- --------------
NET ASSETS ................................................... 100.0% $ 1,912,727
===== ==============
- ----------
* Aggregate cost for federal tax purposes is $1,501,645.
** Some or all of these securities are on loan at October 31, 2006, and have
an aggregate market value of $174,031,000, representing 9.1% of the total
net assets of the Fund (collateral value $181,690,000). (See Note 7 to
Financial Statements.)
*** Affiliated issuer as defined by the Investment Company Act of 1940 (the
Fund controls 5.0% or more of the outstanding voting shares of the
company). Total cost of such securities is $10,210,000 and the total value
is $14,673,000 or 0.8% of the total net assets of the Fund.
+ Non-income producing security.
++ Represents investment purchased with cash collateral for securities loaned.
GLOSSARY OF TERMS
ADR -- American Depositary Receipt
See Notes to Financial Statements.
49
Portfolio of Investments
MID CAP STOCK FUND
October 31, 2006
VALUE
SHARES (000S)
- ------------ --------------
COMMON STOCKS - 92.5%
CONSUMER DISCRETIONARY - 13.3%
AUTOMOBILES & COMPONENTS - 1.9%
251,700 Magna International Inc., Class A (F) ......... $ 18,827
--------------
CONSUMER DURABLES & APPAREL - 1.4%
599,200 Mattel, Inc. .................................. 13,560
--------------
CONSUMER SERVICES - 2.0%
179,500 Papa John's International, Inc.+** ............ 6,588
224,000 Yum! Brands, Inc. ............................. 13,319
--------------
19,907
--------------
RETAILING - 8.0%
639,800 Aaron Rents, Inc.** ........................... 15,918
540,200 Nordstrom, Inc.** ............................. 25,578
467,300 Tiffany & Company** ........................... 16,692
449,400 Weight Watchers International, Inc. ........... 19,594
--------------
77,782
--------------
Total Consumer Discretionary .................. 130,076
--------------
CONSUMER STAPLES - 1.3%
FOOD, BEVERAGE & TOBACCO - 0.8%
117,350 Dean Foods Company+ ........................... 4,916
73,300 J.M. Smucker Company .......................... 3,592
--------------
8,508
--------------
HOUSEHOLD & PERSONAL PRODUCTS - 0.5%
114,000 Estee Lauder Companies Inc., Class A** ........ 4,604
--------------
Total Consumer Staples ........................ 13,112
--------------
ENERGY - 9.0%
491,400 Cimarex Energy Company** ...................... 17,700
678,000 Nabors Industries Ltd. (F)+** ................. 20,937
459,800 Noble Energy, Inc. ............................ 22,360
86,100 Tesoro Corporation ............................ 5,505
430,100 Tidewater Inc.** .............................. 21,389
--------------
Total Energy .................................. 87,891
--------------
FINANCIALS - 18.7%
BANKS - 4.4%
169,111 North Fork Bancorporation, Inc. ............... 4,833
727,000 TCF Financial Corporation** ................... 18,924
841,750 Washington Federal, Inc.** .................... 19,562
--------------
43,319
--------------
DIVERSIFIED FINANCIALS - 3.8%
354,200 A.G. Edwards, Inc. ............................ 20,207
203,200 Ambac Financial Group, Inc. ................... 16,965
--------------
37,172
--------------
INSURANCE - 10.5%
926,800 Fidelity National Financial, Inc. ............. 20,668
971,038 Fidelity National Title Group, Inc., Class A .. 21,373
VALUE
SHARES (000S)
- ------------ --------------
841,300 HCC Insurance Holdings, Inc. .................. $ 28,318
418,500 Max Re Capital Ltd. (F) ....................... 9,743
234,400 MGIC Investment Corporation** ................. 13,773
215,200 PMI Group, Inc.** ............................. 9,178
--------------
103,053
--------------
Total Financials .............................. 183,544
--------------
HEALTH CARE - 10.6%
HEALTH CARE EQUIPMENT & SERVICES - 9.1%
139,700 AmerisourceBergen Corporation ................. 6,594
316,700 Covance, Inc.+** .............................. 18,527
396,900 Edwards Lifesciences Corporation+ ............. 17,039
152,700 Express Scripts, Inc., Class A+ ............... 9,730
645,682 IMS Health Inc.** ............................. 17,982
358,100 Universal Health Services, Inc., Class B ...... 18,961
--------------
88,833
--------------
PHARMACEUTICALS & BIOTECHNOLOGY - 1.5%
734,625 Mylan Laboratories Inc.** ..................... 15,060
--------------
Total Health Care ............................. 103,893
--------------
INDUSTRIALS - 17.1%
CAPITAL GOODS - 6.4%
634,900 Federal Signal Corporation** .................. 9,689
305,000 Lincoln Electric Holdings, Inc. .............. 18,755
324,850 PACCAR Inc.** ................................. 19,234
235,600 Teleflex Inc. ................................. 14,654
--------------
62,332
--------------
COMMERCIAL SERVICES & SUPPLIES - 4.6%
676,600 Allied Waste Industries, Inc.+** .............. 8,220
420,900 HNI Corporation ............................... 18,928
439,300 Republic Services, Inc. ....................... 18,016
--------------
45,164
--------------
TRANSPORTATION - 6.1%
314,400 Alaska Air Group, Inc.+ ....................... 12,623
872,800 AMR Corporation+** ............................ 24,735
619,400 Continental Airlines, Inc., Class B+** ........ 22,844
--------------
60,202
--------------
Total Industrials ............................. 167,698
--------------
INFORMATION TECHNOLOGY - 11.9%
COMPUTERS & PERIPHERALS - 3.6%
622,300 Electronics for Imaging, Inc.+ ................ 14,711
562,300 Network Appliance, Inc.+** .................... 20,524
--------------
35,235
--------------
ELECTRONIC EQUIPMENT & INSTRUMENTS - 2.3%
354,500 Arrow Electronics, Inc.+** .................... 10,582
275,100 Diebold, Inc.** ............................... 12,016
--------------
22,598
--------------
See Notes to Financial Statements.
50
Portfolio of Investments (continued)
MID CAP STOCK FUND
October 31, 2006
VALUE
SHARES (000S)
- ------------ --------------
COMMON STOCKS (CONTINUED)
INFORMATION TECHNOLOGY (CONTINUED)
IT SERVICES - 1.7%
511,100 Acxiom Corporation** .......................... $ 12,650
163,000 Convergys Corporation+ ........................ 3,457
--------------
16,107
--------------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT - 2.5%
749,400 Microchip Technology, Inc. .................... 24,678
--------------
SOFTWARE - 1.8%
464,000 BMC Software Inc.+ ............................ 14,064
168,500 Synopsys, Inc.+ ............................... 3,793
--------------
17,857
--------------
Total Information Technology .................. 116,475
--------------
MATERIALS - 5.5%
276,500 Cabot Corporation** ........................... 10,935
469,600 Lubrizol Corporation .......................... 21,132
812,200 Valspar Corporation ........................... 21,759
--------------
Total Materials ............................... 53,826
--------------
TELECOMMUNICATION SERVICES - 0.5%
74,500 United States Cellular Corporation+ ........... 4,724
--------------
UTILITIES - 4.6%
915,600 NiSource Inc. ................................. 21,306
494,300 Pinnacle West Capital Corporation ............. 23,633
--------------
Total Utilities ............................... 44,939
--------------
Total Common Stocks
(Cost $643,719) ............................ 906,178
--------------
REAL ESTATE INVESTMENT TRUST (REIT) - 2.4%
(Cost $14,108)
439,900 General Growth Properties, Inc.** ............. 22,831
--------------
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
- ------------ --------------
REPURCHASE AGREEMENT - 5.1%
(Cost $50,004)
$ 50,004 Agreement with Morgan Stanley, 5.270% dated
10/31/2006, to be repurchased at $50,011,000
on 11/01/2006 (collateralized by U.S.
Treasury Note, 2.000% due 01/15/2016, market
value $51,676,000) ......................... $ 50,004
--------------
SHORT-TERM INVESTMENT - 13.4%
(Cost $131,389)
131,389 Mellon GSL DBT II Collateral Fund++ ........... 131,389
--------------
TOTAL INVESTMENTS (Cost $839,220*) ........................... 113.4% 1,110,402
OTHER ASSETS (LIABILITIES) (NET) ............................. (13.4) (130,883)
----- --------------
NET ASSETS ................................................... 100.0% $ 979,519
===== ==============
- ----------
* Aggregate cost for federal tax purposes is $842,274.
** Some or all of these securities are on loan at October 31, 2006, and have
an aggregate market value of $126,107,000, representing 12.9% of the total
net assets of the Fund (collateral value $131,389,000). (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.
51
Portfolio of Investments
GROWTH FUND
October 31, 2006
VALUE
SHARES (000S)
- ------------ --------------
COMMON STOCKS - 98.2%
CONSUMER DISCRETIONARY - 15.0%
CONSUMER DURABLES & APPAREL - 0.5%
47,200 Harman International Industries, Inc. ......... $ 4,831
102,070 Polo Ralph Lauren Corporation ................. 7,247
--------------
12,078
--------------
CONSUMER SERVICES - 2.3%
85,590 Las Vegas Sands Corporation+** ................ 6,522
417,210 MGM Mirage+** ................................. 17,948
46,190 Panera Bread Company, Class A+ ................ 2,855
52,070 Scientific Games Corporation, Class A+ ........ 1,460
674,470 Starbucks Corporation+ ........................ 25,461
--------------
54,246
--------------
MEDIA - 3.1%
582,195 Comcast Corporation, Special Class A+ ......... 23,567
1,234,500 Time Warner, Inc. ............................. 24,702
661,800 Walt Disney Company ........................... 20,820
410,940 XM Satellite Radio Holdings, Inc.,
Class A+** ................................. 4,792
--------------
73,881
--------------
RETAILING - 9.1%
1,141,300 Amazon.com, Inc.+ ............................. 43,472
119,190 Best Buy Company, Inc ......................... 6,585
1,260,280 eBay, Inc.+ ................................... 40,493
730,230 Home Depot, Inc.** ............................ 27,260
1,141,902 IAC/ InterActiveCorp+** ....................... 35,376
83,570 J.C. Penney Company, Inc. (Holding Company) ... 6,287
103,200 Kohl's Corporation+ ........................... 7,286
294,760 Lowe's Companies, Inc.** ...................... 8,884
304,145 Nordstrom, Inc.** ............................. 14,401
730,840 Staples, Inc.** ............................... 18,848
129,400 Target Corporation ............................ 7,658
--------------
216,550
--------------
Total Consumer Discretionary .................. 356,755
--------------
CONSUMER STAPLES - 9.3%
FOOD & STAPLES RETAILING - 1.9%
282,250 CVS Corporation ............................... 8,857
625,735 Sysco Corporation ............................. 21,888
239,520 Whole Foods Market, Inc.** .................... 15,291
--------------
46,036
--------------
FOOD, BEVERAGE & TOBACCO - 4.4%
465,920 Cadbury Schweppes PLC (F) ..................... 4,689
191,795 Cadbury Schweppes PLC, Sponsored ADR .......... 7,785
443,100 Coca-Cola Company ............................. 20,702
32,220 Nestle SA (F) ................................. 11,007
593,320 PepsiCo, Inc. ................................. 37,640
415,000 Wm. Wrigley Jr. Company ....................... 21,559
--------------
103,382
--------------
VALUE
SHARES (000S)
- ------------ --------------
HOUSEHOLD & PERSONAL PRODUCTS - 3.0%
981,692 Procter & Gamble Company ...................... $ 62,230
216,640 Reckitt Benckiser PLC (F) ..................... 9,426
--------------
71,656
--------------
Total Consumer Staples ........................ 221,074
--------------
ENERGY - 4.1%
342,305 EOG Resources, Inc. ........................... 22,774
34,350 ExxonMobil Corporation ........................ 2,453
605,390 Halliburton Company** ......................... 19,584
94,501 Kinder Morgan Management LLC+ ................. 4,100
280,430 Occidental Petroleum Corporation .............. 13,163
200,700 Schlumberger Ltd .............................. 12,660
234,610 Smith International, Inc. ..................... 9,263
248,595 Valero Energy Corporation ..................... 13,009
--------------
Total Energy .................................. 97,006
--------------
FINANCIALS - 12.4%
BANKS - 0.2%
95,440 Bank of America Corporation ................... 5,141
--------------
DIVERSIFIED FINANCIALS - 9.1%
506,705 American Express Company ...................... 29,293
25,030 Chicago Mercantile Exchange Holdings, Inc. .... 12,540
430,615 Fannie Mae .................................... 25,518
42,160 Franklin Resources, Inc. ...................... 4,805
42,180 Goldman Sachs Group, Inc. ..................... 8,005
102,530 Legg Mason, Inc. .............................. 9,230
701,380 Merrill Lynch & Company, Inc. ................. 61,315
283,300 Morgan Stanley ................................ 21,653
177,400 Nomura Holdings, Inc. ......................... 3,132
101,940 Northern Trust Corporation .................... 5,986
372,600 optionsXpress Holdings, Inc.** ................ 11,580
80,350 SLM Corporation ............................... 3,911
220,190 UBS AG ........................................ 13,176
106,342 UBS AG ........................................ 6,351
--------------
216,495
--------------
INSURANCE - 3.1%
492,940 American International Group, Inc. ............ 33,111
265 Berkshire Hathaway, Inc., Class A+ ............ 27,951
57,880 Hartford Financial Services Group, Inc. ....... 5,045
108,200 Prudential Financial, Inc. .................... 8,324
--------------
74,431
--------------
Total Financials .............................. 296,067
--------------
HEALTH CARE - 20.1%
HEALTH CARE EQUIPMENT & SERVICES - 5.6%
59,290 Alcon, Inc. (F) ............................... 6,289
384,640 Caremark Rx, Inc. ............................. 18,936
103,480 Covance, Inc.+** .............................. 6,054
449,960 Coventry Health Care, Inc.+ ................... 21,126
116,030 Fisher Scientific International Inc.+ ......... 9,934
See Notes to Financial Statements.
52
Portfolio of Investments (continued)
GROWTH FUND
October 31, 2006
VALUE
SHARES (000S)
- ------------ --------------
COMMON STOCKS (CONTINUED)
HEALTH CARE (CONTINUED)
HEALTH CARE EQUIPMENT & SERVICES (CONTINUED)
336,300 Medtronic, Inc. ............................... $ 16,371
68,843 Roche Holding AG-Genusschein (F) .............. 12,047
226,380 St. Jude Medical, Inc.+ ....................... 7,776
407,265 UnitedHealth Group Inc. ....................... 19,866
89,900 Varian Medical Systems, Inc.+ ................. 4,932
152,085 Zimmer Holdings, Inc.+** ...................... 10,952
--------------
134,283
--------------
PHARMACEUTICALS & BIOTECHNOLOGY - 14.5%
1,006,435 Amgen, Inc.+ .................................. 76,399
532,540 Biogen Idec Inc.+ ............................. 25,349
366,940 Celgene Corporation+** ........................ 19,609
817,595 Genentech, Inc.+ .............................. 68,106
113,990 Genzyme Corporation+ .......................... 7,696
371,250 Gilead Sciences, Inc.+ ........................ 25,579
518,100 Johnson & Johnson ............................. 34,920
231,744 Novartis AG (F) ............................... 14,064
136,990 PDL BioPharma Inc.+** ......................... 2,895
1,560,990 Pfizer Inc. ................................... 41,600
291,400 Sanofi-Aventis, ADR ........................... 12,440
69,400 Sepracor Inc.+** .............................. 3,592
185,000 Shionogi & Company, Ltd. (F) .................. 3,709
247,962 Teva Pharmaceutical Industries Ltd.,
Sponsored ADR .............................. 8,175
--------------
344,133
--------------
Total Health Care ............................. 478,416
--------------
INDUSTRIALS - 5.5%
CAPITAL GOODS - 4.5%
104,200 Danaher Corporation** ......................... 7,478
168,300 Empresa Brasileira de Aeronautica SA, ADR ..... 7,006
100,800 Fastenal Company** ............................ 4,056
101,200 General Dynamics Corporation .................. 7,195
1,642,803 General Electric Company ...................... 57,679
89,170 Lockheed Martin Corporation ................... 7,752
59,960 Rockwell Collins, Inc. ........................ 3,483
44,630 Textron Inc. .................................. 4,058
136,500 United Technologies Corporation ............... 8,971
--------------
107,678
--------------
COMMERCIAL SERVICES & SUPPLIES - 0.4%
92,620 Corporate Executive Board Company ............. 8,319
--------------
TRANSPORTATION - 0.6%
68,640 Expeditors International of Washington, Inc. .. 3,254
94,690 FedEx Corporation ............................. 10,846
--------------
14,100
--------------
Total Industrials ............................. 130,097
--------------
VALUE
SHARES (000S)
- ------------ --------------
INFORMATION TECHNOLOGY - 29.5%
COMMUNICATIONS EQUIPMENT - 8.3%
2,033,455 Cisco Systems, Inc.+ .......................... $ 49,067
994,860 Corning Inc.+ ................................. 20,325
76,860 F5 Networks, Inc.+ ............................ 5,087
878,100 Juniper Networks, Inc.+ ....................... 15,121
1,547,795 Motorola, Inc. ................................ 35,692
1,620,250 QUALCOMM, Inc. ................................ 58,961
48,020 Research In Motion Ltd.+ ...................... 5,642
219,400 Telefonaktiebolaget LM Ericsson, Sponsored
ADR** ...................................... 8,298
--------------
198,193
--------------
COMPUTERS & PERIPHERALS - 3.2%
361,130 Apple Computer, Inc.+ ......................... 29,280
1,719,400 EMC Corporation+** ............................ 21,063
284,820 Hewlett-Packard Company ....................... 11,034
138,740 Network Appliance, Inc.+ ...................... 5,064
231,195 SanDisk Corporation+** ........................ 11,121
--------------
77,562
--------------
INTERNET SOFTWARE & SERVICES - 5.5%
585,400 Akamai Technologies, Inc.+ .................... 27,432
71,270 Google, Inc., Class A+ ........................ 33,952
2,621,385 Yahoo! Inc.+** ................................ 69,047
--------------
130,431
--------------
IT SERVICES - 1.6%
250,190 Affiliated Computer Services, Inc., Class A+ .. 13,380
58,680 Alliance Data Systems Corporation+** .......... 3,563
200,770 Automatic Data Processing, Inc. ............... 9,926
102,240 Cognizant Technology Solutions Corporation,
Class A+ ................................... 7,697
62,340 Global Payments, Inc. ......................... 2,725
--------------
37,291
--------------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT - 5.8%
879,135 Advanced Micro Devices, Inc.+** ............... 18,699
143,300 ASML Holding NV (F)+ .......................... 3,273
333,680 Broadcom Corporation, Class A+** .............. 10,101
1,062,350 Intel Corporation ............................. 22,671
288,470 Marvell Technology Group Ltd.+** .............. 5,273
189,160 Microchip Technology, Inc. .................... 6,229
61,310 Samsung Electronics Company Ltd., GDR ......... 19,879
1,699,320 Texas Instruments, Inc. ....................... 51,285
--------------
137,410
--------------
SOFTWARE - 5.1%
584,560 Adobe Systems, Inc.+ .......................... 22,359
173,900 Amdocs Ltd. (F)+ .............................. 6,740
153,560 Autodesk, Inc.+** ............................. 5,643
551,990 Electronic Arts, Inc.+** ...................... 29,195
1,143,842 Microsoft Corporation ......................... 32,840
See Notes to Financial Statements.
53
Portfolio of Investments (continued)
GROWTH FUND
October 31, 2006
VALUE
SHARES (000S)
- ------------ --------------
COMMON STOCKS (CONTINUED)
INFORMATION TECHNOLOGY (CONTINUED)
SOFTWARE (CONTINUED)
1,027,200 Red Hat, Inc.+** .............................. $ 16,826
140,735 SAP AG, Sponsored ADR** ....................... 6,986
--------------
120,589
--------------
Total Information Technology .................. 701,476
--------------
MATERIALS - 1.1%
371,340 Monsanto Company .............................. 16,421
167,540 Praxair, Inc.** ............................... 10,094
--------------
Total Materials 26,515
--------------
TELECOMMUNICATION SERVICES - 0.8%
97,700 America Movil SA de CV, ADR ................... 4,188
220,300 American Tower Corporation, Class A+** ........ 7,935
125,480 Crown Castle International Corporation+** ..... 4,222
51,890 NII Holdings, Inc.+** ......................... 3,375
--------------
Total Telecommunication Services .............. 19,720
--------------
UTILITIES - 0.4%
174,205 TXU Corporation ............................... 10,998
--------------
Total Common Stocks
(Cost $2,043,578) .......................... 2,338,124
--------------
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
- ------------ --------------
COMMERCIAL PAPER - 1.0%
(Cost $25,100)
$ 25,100 Prudential Financial LLC, 5.280% due
11/01/2006++ ............................... $ 25,100
--------------
REPURCHASE AGREEMENT - 1.1%
(Cost $25,965)
25,965 Agreement with Morgan Stanley, 5.270% dated
10/31/2006, to be repurchased at $25,969,000
on 11/01/2006 (collateralized by U.S.
Treasury Note, 2.000% due 01/15/2016, market
value $26,833,000) ......................... 25,965
--------------
SHORT-TERM INVESTMENT - 5.4%
(Cost $127,597)
127,597 Mellon GSL DBT II Collateral Fund+++ ......... 127,597
--------------
TOTAL INVESTMENTS (Cost $2,222,240*) ......................... 105.7% 2,516,786
OTHER ASSETS (LIABILITIES) (NET) ............................. (5.7) (136,249)
----- --------------
NET ASSETS ................................................... 100.0% $ 2,380,537
===== ==============
- ----------
* Aggregate cost for federal tax purposes is $2,250,214.
** Some or all of these securities are on loan at October 31, 2006, and have
an aggregate market value of $124,213,000 representing 5.2% of the total
net assets of the Fund (collateral value $127,597,000). (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.
GLOSSARY OF TERMS
ADR -- American Depositary Receipt
(F) -- Foreign Shares
GDR -- Global Depositary Receipt
See Notes to Financial Statements.
54
Portfolio of Investments
SMALL CAP VALUE FUND
October 31, 2006
VALUE
SHARES (000S)
- ------------ --------------
COMMON STOCKS - 81.8%
CONSUMER DISCRETIONARY - 7.0%
AUTOMOBILES & COMPONENTS - 2.7%
387,600 Accuride Corporation+** ....................... $ 4,767
152,900 Tenneco, Inc.+ ................................ 3,471
--------------
8,238
--------------
CONSUMER DURABLES & APPAREL - 1.3%
679,800 Lenox Group, Inc.+ ............................ 4,086
--------------
RETAILING - 3.0%
430,400 Blockbuster Inc., Class A+** .................. 1,687
21,500 Children's Place Retail Stores, Inc.+ ......... 1,509
487,300 Movie Gallery, Inc.+ .......................... 1,082
108,000 RC2 Corporation+** ............................ 4,879
--------------
9,157
--------------
Total Consumer Discretionary .................. 21,481
--------------
CONSUMER STAPLES - 3.2%
FOOD, BEVERAGE & TOBACCO - 1.5%
241,000 B&G Foods Inc., EIS ........................... 4,579
--------------
HOUSEHOLD & PERSONAL PRODUCTS - 1.7%
108,000 Central Garden & Pet Company+** ............... 5,397
--------------
Total Consumer Staples ........................ 9,976
--------------
ENERGY - 5.3%
141,100 Cimarex Energy Company** ...................... 5,082
87,500 Comstock Resources, Inc.+ ..................... 2,441
126,700 Encore Acquisition Company+** ................. 3,173
33,500 Giant Industries, Inc.+ ....................... 2,713
82,100 St. Mary Land & Exploration Company** ......... 3,062
--------------
Total Energy .................................. 16,471
--------------
FINANCIALS - 17.3%
BANKS - 10.0%
47,900 BankUnited Financial Corporation, Class A ..... 1,292
121,500 Capital Corporation of the West ............... 3,675
36,800 Center Financial Corporation .................. 889
103,300 Dime Community Bancshares ..................... 1,441
211,600 F.N.B. Corporation** .......................... 3,582
151,570 FirstMerit Corporation** ...................... 3,520
214,830 Oriental Financial Group, Inc.** .............. 2,569
404,450 TrustCo Bank Corporation NY** ................. 4,469
144,147 U.S.B. Holding Company, Inc. .................. 3,277
261,500 Washington Federal, Inc.** .................... 6,077
--------------
30,791
--------------
INSURANCE - 7.3%
110,300 Navigators Group, Inc.+ ....................... 5,192
47,700 Safety Insurance Group, Inc. .................. 2,386
121,600 State Auto Financial Corporation .............. 3,907
42,900 Stewart Information Services Corporation ...... 1,590
VALUE
SHARES (000S)
- ------------ --------------
270,900 United Fire & Casualty Company ................ $ 9,584
--------------
22,659
--------------
Total Financials .............................. 53,450
--------------
HEALTH CARE - 3.0%
HEALTH CARE EQUIPMENT & SERVICES - 2.2%
173,000 Kindred Healthcare, Inc.+** ................... 4,671
53,600 LifePoint Hospitals, Inc.+ .................... 1,903
--------------
6,574
--------------
PHARMACEUTICALS & BIOTECHNOLOGY - 0.8%
76,800 Lannett Company, Inc.+** ...................... 490
104,400 Par Pharmaceutical Companies, Inc.+ ........... 2,035
--------------
2,525
--------------
Total Health Care ............................. 9,099
--------------
INDUSTRIALS - 18.7%
CAPITAL GOODS - 7.1%
121,900 DRS Technologies, Inc.** ...................... 5,390
92,400 Gardner Denver Inc.+ .......................... 3,141
104,100 Griffon Corporation+** ........................ 2,560
104,300 Ladish Co., Inc.+ ............................. 3,256
770,000 New Flyer Industries Inc., IDS (F)++ .......... 5,965
219,300 New Flyer Industries Inc., IDS (F) ............ 1,699
--------------
22,011
--------------
COMMERCIAL SERVICES & SUPPLIES - 1.7%
192,000 McGrath RentCorp** 5,184
--------------
TRANSPORTATION - 9.9%
97,200 Alaska Air Group, Inc.+ ....................... 3,903
202,000 AMR Corporation+** ............................ 5,725
163,400 Continental Airlines, Inc., Class B+** ........ 6,026
97,600 Dampskibsselskabet TORM A/S, ADR .............. 5,313
530,500 Frontier Airlines Holdings, Inc.+** ........... 4,265
67,400 OMI Corporation** ............................. 1,504
181,700 Ship Finance International Ltd. (F) ........... 3,829
--------------
30,565
--------------
Total Industrials ............................. 57,760
--------------
INFORMATION TECHNOLOGY - 9.4%
COMMUNICATIONS EQUIPMENT - 1.3%
113,300 Bel Fuse Inc., Class B ........................ 4,036
--------------
COMPUTERS & PERIPHERALS - 1.6%
140,200 Electronics for Imaging, Inc.+ ................ 3,314
67,100 Hutchinson Technology, Inc.+** ................ 1,554
--------------
4,868
--------------
ELECTRONIC EQUIPMENT & INSTRUMENTS - 1.4%
348,700 LeCroy Corporation+ ........................... 4,320
--------------
IT SERVICES - 0.8%
387,300 Lionbridge Technologies, Inc.+** .............. 2,622
--------------
See Notes to Financial Statements.
55
Portfolio of Investments (continued)
SMALL CAP VALUE FUND
October 31, 2006
VALUE
SHARES (000S)
- ------------ --------------
COMMON STOCKS (CONTINUED)
INFORMATION TECHNOLOGY (CONTINUED)
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT - 3.4%
676,800 Axcelis Technologies, Inc.+** ................. $ 4,670
551,100 Credence Systems Corporation+** ............... 1,774
331,900 PortalPlayer Inc.+** .......................... 3,993
--------------
10,437
--------------
SOFTWARE - 0.9%
261,300 RealNetworks, Inc.+** ......................... 2,869
--------------
Total Information Technology .................. 29,152
--------------
MATERIALS - 10.8%
93,100 Century Aluminum Company+** ................... 3,624
84,300 Headwaters, Inc.+** ........................... 2,086
1,656,100 Kingsgate Consolidated Ltd. (F)** ............. 5,142
175,100 Metal Management, Inc. ........................ 4,812
3,182,000 Minara Resources Ltd. (F) ..................... 13,305
189,700 Randgold Resources Ltd., ADR+** ............... 4,301
--------------
Total Materials ............................... 33,270
--------------
TELECOMMUNICATION SERVICES - 6.0%
265,800 Asia Satellite Telecommunications Holdings
Ltd., Sponsored ADR ........................ 4,784
139,500 Iowa Telecommunications Services Inc.** ....... 2,782
204,400 Premiere Global Services, Inc.+ ............... 1,701
367,200 USAMobility, Inc.+ ............................ 9,319
--------------
Total Telecommunication Services .............. 18,586
--------------
UTILITIES - 1.1%
93,100 Suburban Propane Partners LP .................. 3,387
--------------
Total Common Stocks
(Cost $206,458) ............................ 252,632
--------------
CANADIAN INCOME TRUSTS - 8.1%
CONSUMER STAPLES - 2.4%
FOOD, BEVERAGE & TOBACCO - 2.4%
442,600 Arctic Glacier Income Fund (F)** .............. 5,392
210,000 Connors Brothers Income Fund (F) .............. 2,057
--------------
Total Consumer Staples ........................ 7,449
--------------
ENERGY - 4.7%
147,700 Daylight Resources Trust (F) .................. 1,789
150,400 Harvest Energy Trust (F)** .................... 4,413
191,200 Vermilion Energy Trust (F) .................... 6,266
67,200 Zargon Energy Trust (F) ....................... 1,973
--------------
Total Energy .................................. 14,441
--------------
INDUSTRIALS - 1.0%
COMMERCIAL SERVICES & SUPPLIES - 1.0%
376,500 Versacold Income Fund (F) ..................... 3,198
--------------
Total Canadian Income Trusts
(Cost $17,728) ............................. 25,088
--------------
VALUE
SHARES (000S)
- ------------ --------------
REAL ESTATE INVESTMENT TRUSTS (REITS) - 6.4%
77,300 Entertainment Properties Trust** .............. $ 4,251
208,100 Equity Inns, Inc. ............................. 3,492
79,600 Nationwide Health Properties, Inc.** .......... 2,288
148,800 OMEGAHealthcare Investors, Inc. ............... 2,512
73,400 Redwood Trust, Inc. ........................... 4,035
269,800 Winston Hotels, Inc. .......................... 3,264
--------------
Total REITs
(Cost $13,901) ............................. 19,842
--------------
CONTRACTS
- ------------
PURCHASED PUT OPTIONS - 0.3%
29,250 iShares Russell 2000 Index,
Expires January 2007 @ $49 ................. 73
3,500 iShares Russell 2000 Index,
Expires January 2007 @ $56 ................. 9
8,000 iShares Russell 2000 Index,
Expires January 2008 @ $55 ................. 740
--------------
Total Purchased Put Options
(Cost $7,135) .............................. 822
--------------
PRINCIPAL
AMOUNT
(000S)
- ------------
REPURCHASE AGREEMENT - 3.6%
(Cost $11,204)
$ 11,204 Agreement with Morgan Stanley, 5.270% dated
10/31/2006, to be repurchased at $11,206,000
on 11/01/2006 (collateralized by
U.S. Treasury Note, 2.000% due 01/15/2016,
market value $11,579,000) .................. 11,204
--------------
SHORT-TERM INVESTMENT - 18.5%
(Cost $56,939)
56,939 Mellon GSLDBT II Collateral Fund+++ ........... 56,939
--------------
TOTAL INVESTMENTS (Cost $313,365*) ........................... 118.7% 366,527
OTHER ASSETS (LIABILITIES) (NET) ............................. (18.7) (57,677)
----- --------------
NET ASSETS ................................................... 100.0% $ 308,850
===== ==============
- ----------
* Aggregate cost for federal tax purposes is $313,620.
** Some or all of these securities are on loan at October 31, 2006, and have
an aggregate market value of $54,609,000, representing 17.7% of the total
net assets of the Fund (collateral value $56,939,000). (See Note 7 to
Financial Statements.)
+ Non-income producing security.
++ Security acquired in a transaction exempt from registration under Rule
144Aof the Securities Act of 1933, as amended.
+++ Represents investment purchased with cash collateral for securities loaned.
GLOSSARY OF TERMS
ADR -- American Depositary Receipt
EIS -- Enhanced Income Security
(F) -- Foreign Shares
IDS -- Income Deposit Security
See Notes to Financial Statements.
56
Portfolio of Investments (continued)
SMALL CAP GROWTH FUND
October 31, 2006
VALUE
SHARES (000S)
- ------------ --------------
COMMON STOCKS - 94.4%
CONSUMER DISCRETIONARY - 18.0%
CONSUMER DURABLES & APPAREL - 6.1%
70,160 Carter's, Inc.+** ............................. $ 1,980
4,760 Charles & Colvard Ltd.** ...................... 42
133,748 Coach, Inc.+** ................................ 5,302
60,569 Desarrolladora Homex SAde CV, ADR+ ............ 2,659
126,000 Iconix Brand Group, Inc.+ ..................... 2,349
42,950 Steven Madden, Ltd.** ......................... 1,853
101,300 Under Armour, Inc., Class A+** ................ 4,695
142,300 Volcom, Inc.+** ............................... 4,662
--------------
23,542
--------------
CONSUMER SERVICES - 4.9%
105,300 BJ's Restaurants Inc.+ ........................ 2,267
55,900 Chipotle Mexican Grill, Inc., Class A+** ...... 3,349
28,824 Ctrip.com International Ltd., ADR ............. 1,412
51,200 LIFE TIME FITNESS, Inc.+** .................... 2,638
40,100 Nutri System, Inc.+** ......................... 2,473
60,100 Shuffle Master, Inc.+ ......................... 1,682
102,169 Sonic Corporation+** .......................... 2,324
69,700 WMS Industries Inc.+** ........................ 2,463
--------------
18,608
--------------
MEDIA - 1.4%
101,400 Focus Media Holding Ltd., ADR+ ................ 5,363
--------------
RETAILING - 5.6%
55,800 Citi Trends Inc.+ ............................. 2,190
159,200 GMARKET Inc., ADR+ ............................ 2,643
68,639 Guitar Center, Inc.+ .......................... 2,977
105,000 Gymboree Corporation+** ....................... 4,878
116,559 Hibbett Sporting Goods, Inc.+ ................. 3,408
37,100 Priceline.com Inc.+** ......................... 1,495
28,589 Tractor Supply Company+** ..................... 1,384
74,000 Zumiez Inc.+** ................................ 2,432
--------------
21,407
--------------
Total Consumer Discretionary .................. 68,920
--------------
CONSUMER STAPLES - 1.0%
FOOD & STAPLES RETAILING - 0.8%
116,850 Central European Distribution Corporation+ .... 2,966
--------------
FOOD, BEVERAGE & TOBACCO - 0.2%
85,000 SunOpta, Inc.+ ................................ 837
--------------
Total Consumer Staples ........................ 3,803
--------------
ENERGY - 8.8%
72,100 Allis-Chalmers Energy Inc.+** ................. 1,087
71,024 ATPOil & Gas Corporation+ ..................... 3,053
114,200 Basic Energy Services, Inc.+ .................. 2,791
119,100 Bronco Drilling Company, Inc.+ ................ 2,029
53,500 CARBO Ceramics Inc.** 1,803
167,061 Carrizo Oil & Gas, Inc.+ 4,771
VALUE
SHARES (000S)
- ------------ --------------
78,000 Dril-Quip, Inc.+ .............................. $ 3,072
66,100 Hercules Offshore, Inc.+ ...................... 2,355
236,400 Input/Output, Inc.+** ......................... 2,650
39,600 Lufkin Industries, Inc.** ..................... 2,389
201,200 Petrohawk Energy Corporation+ ................. 2,280
120,400 Pioneer Drilling Company+** ................... 1,581
54,537 Veritas DGC, Inc.+** .......................... 3,927
--------------
Total Energy .................................. 33,788
--------------
FINANCIALS - 5.2%
BANKS - 1.5%
95,800 Midwest Banc Holdings, Inc.** ................. 2,255
65,900 Signature Bank+ ............................... 1,999
39,800 Sterling Financial Corporation** .............. 1,324
--------------
5,578
--------------
DIVERSIFIED FINANCIALS - 1.5%
179,068 First Cash Financial Services, Inc.+** ........ 3,870
131,900 TradeStation Group, Inc.+ ..................... 2,064
--------------
5,934
--------------
INSURANCE - 2.2%
91,400 American Equity Investment Life Holding
Company .................................... 1,166
155,000 Amerisafe Inc.+ ............................... 1,931
83,209 Delphi Financial Group, Inc., Class A ......... 3,266
60,700 United Fire & Casualty Company** .............. 2,148
--------------
8,511
--------------
Total Financials .............................. 20,023
--------------
HEALTH CARE - 21.5%
HEALTH CARE EQUIPMENT & SERVICES - 11.6%
58,500 Abaxis, Inc.+** ............................... 1,174
49,014 Advisory Board Company+** ..................... 2,707
89,900 Align Technology, Inc.+ ....................... 1,246
118,463 Allscripts Healthcare Solutions, Inc.+** ...... 2,795
76,116 ArthroCare Corporation+** ..................... 3,076
1,980 Aspect Medical Systems, Inc.+** ............... 35
128,232 Conceptus, Inc.+ .............................. 2,542
60,600 Conor Medsystems, Inc.+ ....................... 1,488
46,400 Foxhollow Technologies Inc.+** ................ 1,625
91,900 HealthExtras, Inc.+ ........................... 2,116
128,600 Healthspring, Inc.+** ......................... 2,590
40,422 Healthways, Inc.+** ........................... 1,712
65,400 Home Diagnostics, Inc.+ ....................... 833
73,750 Immucor, Inc.+ ................................ 2,030
85,817 inVentiv Health Inc.+** ....................... 2,454
85,952 Kyphon, Inc.+ ................................. 3,395
35,400 LifeCell Corporation+** ....................... 829
169,500 Micrus Endovascular Corporation+ .............. 2,271
103,200 Natus Medical Inc.+** ......................... 1,714
111,200 Nighthawk Radiology Holdings, Inc.+** ......... 2,263
19,500 Palomar Medical Technologies, Inc.+** ......... 918
97,800 Spectranetics Corporation+** .................. 1,215
See Notes to Financial Statements.
57
Portfolio of Investments (continued)
SMALL CAP GROWTH FUND
October 31, 2006
VALUE
SHARES (000S)
- ------------ --------------
COMMON STOCKS (CONTINUED)
HEALTH CARE (CONTINUED)
HEALTH CARE EQUIPMENT & SERVICES (CONTINUED)
77,900 Syneron Medical Ltd. (F)+** ................... $ 2,004
49,100 Vital Images, Inc.+ ........................... 1,524
--------------
44,556
--------------
PHARMACEUTICALS & BIOTECHNOLOGY - 9.9%
84,700 Adams Respiratory Therapeutics, Inc.+** ....... 3,651
99,998 Aspreva Pharmaceuticals Corporation (F)+** .... 1,819
77,200 Cardiome Pharma Corporation+ .................. 889
60,300 Combinatorx Inc.+** ........................... 463
137,900 CVTherapeutics, Inc.+** ....................... 1,786
58,438 Digene Corporation+ ........................... 2,713
135,200 Keryx Biopharmaceuticals, Inc.+ ............... 1,898
11,329 Kos Pharmaceuticals, Inc.+** .................. 564
109,544 MGI Pharma, Inc.+ ............................. 2,085
221,100 Nastech Pharmaceutical Company Inc.+ .......... 3,889
65,434 Nektar Therapeutics+** ........................ 944
134,857 PDLBioPharma Inc.+** .......................... 2,849
145,847 Rigel Pharmaceuticals, Inc.+ .................. 1,614
148,916 Salix Pharmaceuticals Ltd.+ ................... 1,985
96,335 Sciele Pharma, Inc.+ .......................... 2,101
167,000 Telik, Inc.+** ................................ 3,165
89,890 United Therapeutics Corporation+** ............ 5,380
--------------
37,795
--------------
Total Health Care ............................. 82,351
--------------
INDUSTRIALS - 13.0%
CAPITAL GOODS - 8.6%
39,800 Bucyrus International, Inc. ................... 1,668
165,880 Ceradyne, Inc.+ ............................... 6,842
151,600 Dynamic Materials Corporation ................. 4,888
50,800 ESCO Technologies Inc.+ ....................... 2,206
113,300 Essex Corporation+ ............................ 2,230
78,200 Hexcel Corporation+** ......................... 1,266
61,100 Ladish Co., Inc.+ ............................. 1,907
70,575 Lincoln Electric Holdings, Inc. ............... 4,340
68,200 NCI Building Systems, Inc.+** ................. 4,082
157,421 TurboChef Technologies, Inc.+** ............... 1,952
74,900 Williams Scotsman International Inc.+** ....... 1,762
--------------
33,143
--------------
COMMERCIAL SERVICES & SUPPLIES - 3.4%
65,200 American Ecology Corporation .................. 1,356
35,800 Cowen Group, Inc.+** .......................... 517
41,358 CRAInternational Inc.+ ........................ 2,102
63,800 Exlservice Holdings Inc.+ ..................... 1,327
70,700 Kenexa Corporation+** ......................... 2,272
99,016 LECG Corporation+ ............................. 1,950
66,200 Portfolio Recovery Associates, Inc.+** ........ 3,086
26,600 Stanley Inc.+ 463
--------------
13,073
--------------
VALUE
SHARES (000S)
- ------------ --------------
TRANSPORTATION - 1.0%
133,274 Knight Transportation, Inc.** ................. $ 2,428
48,100 Universal Truckload Services, Inc.+ ........... 1,252
--------------
3,680
--------------
Total Industrials ............................. 49,896
--------------
INFORMATION TECHNOLOGY - 25.8%
COMMUNICATIONS EQUIPMENT - 5.6%
104,200 Acme Packet, Inc.+ ............................ 1,792
163,800 ARRIS Group, Inc.+** .......................... 2,195
569,700 Finisar Corporation+** ........................ 1,983
135,800 Oplink Communinications, Inc.+ ................ 2,689
124,500 Polycom, Inc.+ ................................ 3,411
303,200 Powerwave Technologies, Inc.+** ............... 1,974
199,500 Redback Networks Inc.+** ...................... 3,156
151,800 Sierra Wireless+** ............................ 1,852
257,600 Symmetricom, Inc.+ ............................ 2,182
--------------
21,234
--------------
COMPUTERS & PERIPHERALS - 1.7%
106,200 Emulex Corporation+ ........................... 1,997
151,000 Rackable Systems Inc.+ ........................ 4,682
--------------
6,679
--------------
ELECTRONIC EQUIPMENT & INSTRUMENTS - 0.7%
88,600 Daktronics, Inc.** ............................ 2,101
67,600 Optimal Group Inc., Class A+ .................. 651
--------------
2,752
--------------
INTERNET SOFTWARE & SERVICES - 4.7%
79,800 Akamai Technologies, Inc.+** .................. 3,739
183,543 aQuantive, Inc.+** ............................ 4,989
110,400 DealerTrack Holdings Inc.+** .................. 2,814
120,091 Marchex, Inc., Class B+** ..................... 1,703
49,200 Travelzoo Inc.+** ............................. 1,603
156,172 ValueClick, Inc.+** ........................... 2,936
--------------
17,784
--------------
IT SERVICES - 2.1%
75,700 Euronet Worldwide, Inc.+** .................... 2,250
100,024 RightNow Technologies, Inc.+** ................ 1,652
139,200 VeriFone Holdings, Inc.+ ...................... 4,066
--------------
7,968
--------------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT - 6.8%
103,900 Atheros Communications, Inc.+** ............... 2,258
42,755 Cymer, Inc.+** ................................ 1,981
130,600 Microsemi Corporation+** ...................... 2,560
37,000 PLX Technology, Inc.+ ......................... 459
54,000 Sigma Designs, Inc.+ .......................... 1,134
69,200 SiRF Technology Holdings, Inc.+** ............. 1,946
56,500 Supertex, Inc.+ ............................... 2,509
136,284 Tessera Technologies, Inc.+ ................... 4,757
See Notes to Financial Statements.
58
Portfolio of Investments (continued)
SMALL CAP GROWTH FUND
October 31, 2006
VALUE
SHARES (000S)
- ------------ --------------
COMMON STOCKS (CONTINUED)
INFORMATION TECHNOLOGY (CONTINUED)
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT (CONTINUED)
312,400 Trident Microsystems, Inc.+** ................. $ 6,604
53,300 Varian Semiconductor Equipment Associates,
Inc.+** .................................... 1,945
--------------
26,153
--------------
SOFTWARE - 4.2%
143,700 Concur Technologies, Inc.+ .................... 2,291
61,900 DivX, Inc.+** ................................. 1,414
31,300 FactSet Research Systems Inc. ................. 1,593
131,300 FalconStor Software, Inc.+** .................. 1,032
99,600 Informatica Corporation+ ...................... 1,234
44,500 Interactive Intelligence, Inc.+ ............... 792
150,136 Online Resources Corporation+ ................. 1,571
31,400 Open Solutions Inc.+** ........................ 1,173
263,000 TIBCO Software Inc.+ .......................... 2,433
212,100 VASCO Data Security International, Inc.+** .... 2,458
--------------
15,991
--------------
Total Information Technology .................. 98,561
--------------
MATERIALS - 0.6%
87,800 Zoltek Companies, Inc.+** ..................... 2,201
--------------
TELECOMMUNICATION SERVICES - 0.2%
30,200 Optium Corporation+ ........................... 611
--------------
UTILITIES - 0.3%
147,400 Basin Water, Inc.+** .......................... 1,229
--------------
Total Common Stocks
(Cost $301,293) ............................ 361,383
--------------
REAL ESTATE INVESTMENT TRUSTS (REITS) - 1.4%
91,240 RAIT Investment Trust** ....................... 2,743
124,700 Strategic Hotels & Resorts, Inc. .............. 2,652
--------------
Total REITs
(Cost $4,707) .............................. 5,395
--------------
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
- ------------ --------------
REPURCHASE AGREEMENT - 3.5%
(Cost $13,432)
$ 13,432 Agreement with Morgan Stanley, 5.270% dated
10/31/2006, to be repurchased at $13,434,000
on 11/01/2006 (collateralized by U.S.
Treasury Note, 2.000% due 01/15/2016, market
value $13,881,000) ......................... $ 13,432
--------------
SHORT-TERM INVESTMENT - 17.5%
(Cost $66,921)
66,921 Mellon GSLDBT II
Collateral Fund++ .......................... 66,921
--------------
TOTAL INVESTMENTS (Cost $386,353*) ........................... 116.8% 447,131
OTHER ASSETS (LIABILITIES) (NET) ............................. (16.8) (64,417)
----- --------------
NET ASSETS ................................................... 100.0% $ 382,714
===== ==============
- ----------
* Aggregate cost for federal tax purposes is $388,248.
** Some or all of these securities are on loan at October 31, 2006, and have
an aggregate market value of $64,382,000 representing 16.6% of the total
net assets of the Fund (collateral value $66,921,000). (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.
59
Portfolio of Investments
INTERNATIONAL GROWTH FUND
October 31, 2006
VALUE
SHARES (000S)
- ------------ --------------
COMMON STOCKS - 97.2%
JAPAN - 22.8% ***
83,420 Advantest Corporation ......................... $ 4,215
217,400 AEON Company Ltd. ............................. 5,121
254,000 Bank of Yokohama, Ltd. ........................ 1,963
82,850 Canon Inc. .................................... 4,442
23,000 Daimaru, Inc. ................................. 276
87,000 Daiwa House Industry Company Ltd. ............. 1,569
57,700 DENSO CORPORATION ............................. 2,200
79,400 FANUC Ltd. .................................... 6,891
17,900 Hirose Electric Company Ltd. .................. 2,388
70,800 Hoya Corporation .............................. 2,736
13,200 Idemitsu Kosan Company, Ltd. .................. 1,284
65 INPEX Holdings Inc.+ .......................... 531
751 Japan Tobacco Inc. ............................ 3,275
69,100 Kansai Electric Power Company Inc. ............ 1,631
119,000 Kao Corporation ............................... 3,124
8,400 KEYENCE CORPORATION ........................... 1,860
137,600 Millea Holdings, Inc. ......................... 5,200
338,600 Mitsubishi Corporation ........................ 6,543
323,000 Mitsubishi Estate Company Ltd. ................ 7,733
405,000 Mitsubishi Heavy Industries Ltd. .............. 1,808
444 Mitsubishi UFJ Financial Group, Inc. .......... 5,581
167,000 Mitsui & Company Ltd.** ....................... 2,280
89,000 Mitsui Fudosan Company Ltd. ................... 2,192
156,000 Mitsui Sumitomo Insurance Company Ltd. ........ 1,941
1,639 Mizuho Financial Group, Inc. .................. 12,767
23,000 Murata Manufacturing Company Ltd. ............. 1,609
118,000 NGK Spark Plug Company, Ltd.** ................ 2,487
31,400 Nintendo Company Ltd. ......................... 6,422
219,000 Nippon Electric Glass Company, Ltd. ........... 4,719
432 Nippon Telegraph & Telephone Corporation ...... 2,176
753,600 Nissan Motor Company Ltd. ..................... 9,027
153,300 Nitto Denko Corporation ....................... 8,743
112,000 Nomura Holdings, Inc. ......................... 1,977
134 NTT Urban Development Corporation ............. 1,157
45,630 ORIX Corporation .............................. 12,855
21,100 Rohm Company Ltd. ............................. 1,941
20,200 Shimamura Company Ltd. ........................ 2,185
66,200 Shin-Etsu Chemical Company Ltd. ............... 4,341
53,800 SMC Corporation ............................... 7,351
866,100 SOFTBANK Corporation** ........................ 18,958
241,000 Sompo Japan Insurance Inc. .................... 3,206
37,190 Sony Corporation .............................. 1,542
449,000 Sumitomo Corporation .......................... 5,904
505,000 Sumitomo Metal Industries, Ltd. ............... 1,900
2,538 Sumitomo Mitsui Financial Group, Inc. ......... 27,777
137,000 Sumitomo Realty & Development Company, Ltd. ... 4,545
377,000 Suzuki Motor Corporation ...................... 10,702
24,950 T&D Holdings, Inc. ............................ 1,824
38,600 Takeda Pharmaceutical Company Ltd. ............ 2,479
19,100 TDK Corporation ............................... 1,494
110,900 Tokyo Electric Power Company Inc.** ........... 3,224
90,600 Tokyo Electron Ltd. ........................... 6,770
VALUE
SHARES (000S)
- ------------ --------------
507,000 Tokyo Gas Company Ltd. ........................ $ 2,588
466,000 Tokyu Corporation ............................. 3,156
1,126,000 Toshiba Corporation** ......................... 7,124
25,700 Toyota Motor Corporation (F) .................. 1,523
112,000 Trend Micro Inc.** ............................ 3,591
83,700 USHIO Inc. .................................... 1,743
7,830 Yahoo! Japan Corporation** .................... 3,046
47,000 Yamada Denki Company Ltd. ..................... 4,678
310,500 Yamato Holdings Company, Ltd. ................. 4,848
--------------
279,163
--------------
UNITED KINGDOM - 13.4%
9,600 Anglo American PLC ............................ 437
24,200 Anglo American PLC (F) ........................ 1,091
437,000 ARM Holdings PLC .............................. 982
156,400 AstraZeneca PLC ............................... 9,243
97,000 AstraZeneca PLC (F) ........................... 5,748
365,100 Astro All Asia Networks PLC ................... 498
1,195,800 BAE Systems PLC ............................... 9,569
170,500 Barclays PLC .................................. 2,301
110,084 BHP Billiton PLC .............................. 2,123
137,300 Brambles Industries PLC** ..................... 1,292
174,563 Cadbury Schweppes PLC (F) ..................... 1,756
633,900 HBOS PLC ...................................... 13,144
197,900 HSBC Holdings PLC ............................. 3,752
208,600 Imperial Chemical Industries PLC .............. 1,619
105,600 Johnston Press PLC ............................ 844
10,800 Kazakhmys PLC ................................. 247
470,000 Kingfisher PLC ................................ 2,360
278,400 Lloyds TSB Group PLC .......................... 2,971
12,700 Lonmin PLC .................................... 703
26,800 Nikanor PLC+ .................................. 305
163,400 Pearson PLC ................................... 2,411
761,600 Reed Elsevier PLC ............................. 8,673
62,500 Rio Tinto PLC ................................. 3,448
643,500 Royal Bank of Scotland Group PLC++ ............ 22,930
415,448 Royal Dutch Shell PLC** ....................... 0
334,448 Royal Dutch Shell PLC, A Shares ............... 11,589
121,402 Royal Dutch Shell PLC, B Shares ............... 4,349
180,400 Scottish & Southern Energy PLC ................ 4,522
175,100 Smith & Nephew PLC ............................ 1,711
224,000 Standard Chartered PLC ........................ 6,303
328,900 Tesco PLC ..................................... 2,469
194,000 TI Automotive Ltd., Class A+# ................. 0
10,785,942 Vodafone Group PLC (F) ........................ 27,776
85,066 Xstrata PLC ................................... 3,635
267,000 Yell Group PLC ................................ 3,173
--------------
163,974
--------------
FRANCE - 8.8%
38,895 Accor SA** .................................... 2,701
68,333 AXAGroup** .................................... 2,603
89,660 BNPParibas SA** ............................... 9,859
243,379 Bouygues SA++** ............................... 14,189
30,500 Compagnie Generale des Etablissements Michelin,
Class B** .................................. 2,488
See Notes to Financial Statements.
60
Portfolio of Investments (continued)
INTERNATIONAL GROWTH FUND
October 31, 2006
VALUE
SHARES (000S)
- ------------ --------------
COMMON STOCKS (CONTINUED)
FRANCE (CONTINUED)
24,800 Dassault Systemes SA** ........................ $ 1,354
21,200 Essilor International SA** .................... 2,224
24,300 Groupe Danone** ............................... 3,560
14,747 L'Air Liquide SA** ............................ 3,139
45,300 L'Oreal SA** .................................. 4,406
45,500 Lafarge SA** .................................. 6,115
44,200 Renault SA** .................................. 5,170
56,700 Safran SA** ................................... 1,283
212,400 Sanofi-Aventis Group (F)** .................... 18,054
82,587 Schneider Electric SA** ....................... 8,580
18,795 Societe Generale Group** ...................... 3,123
85,100 Thales SA** ................................... 3,933
101,640 Total SA** .................................... 6,882
74,400 Veolia Environnement SA** ..................... 4,555
88,800 Vivendi SA** .................................. 3,363
--------------
107,581
--------------
SWITZERLAND - 6.9%
31,000 Adecco SA ..................................... 1,915
236,782 Compagnie Financiere Richemont AG,
A Units** .................................. 11,715
99,139 Credit Suisse Group ........................... 5,977
125,739 Holcim Ltd. ................................... 10,825
31,081 Nestle SA (F) ................................. 10,618
304,687 Novartis AG (F) ............................... 18,491
33,331 Roche Holding AG-Genusschein (F) .............. 5,833
145,924 Swiss Reinsurance Company** ................... 11,964
11,589 Swisscom AG ................................... 4,048
10,500 Synthes, Inc. ................................. 1,191
31,570 UBS AG ........................................ 1,885
--------------
84,462
--------------
CANADA - 5.8%
153,900 Abitibi-Consolidated Inc.** ................... 381
224,700 Alcan Inc.** .................................. 10,539
18,800 Banro Corporation+,++ ......................... 237
3,700 Barrick Gold Corporation ...................... 115
244,900 Barrick Gold Corporation (F) .................. 7,592
219,400 Cameco Corporation ............................ 7,717
27,500 Canadian Imperial Bank of Commerce** .......... 2,145
164,700 Canadian Natural Resources Ltd. ............... 8,573
33,000 CIC Energy Corporation+** ..................... 254
34,100 EnCana Corporation ............................ 1,619
54,800 Finning International Inc. .................... 1,940
27,600 Magna International Inc., Class A** ........... 2,066
51,600 Manulife Financial Corporation** .............. 1,677
81,100 Methanex Corporation** ........................ 1,837
21,000 Platmin Ltd.+ ................................. 81
70,700 Potash Corporation of Saskatchewan Inc. ....... 8,856
36,100 Rogers Communications Inc., Class B ........... 2,160
43,700 Royal Bank of Canada** ........................ 1,938
50,700 Shoppers Drug Mart Corporation ................ 2,065
53,800 Suncor Energy Inc. ............................ 4,132
29,500 Teck Cominco Ltd., Class B .................... 2,172
VALUE
SHARES (000S)
- ------------ --------------
51,000 TELUS Corporation** ........................... $ 2,925
--------------
71,021
--------------
GERMANY - 4.1%
30,200 Allianz AG .................................... 5,605
38,700 Bayer AG ...................................... 1,948
28,500 Bayerische Motoren Werke (BMW) AG** ........... 1,637
67,000 Commerzbank AG ................................ 2,378
18,400 Continental AG ................................ 2,058
56,500 DaimlerChrysler AG ............................ 3,223
15,500 Deutsche Bank AG .............................. 1,951
16,137 Deutsche Boerse AG ............................ 2,602
97,600 Deutsche Post AG .............................. 2,703
37,400 SAPAG ......................................... 7,441
94,200 Siemens AG .................................... 8,476
99,300 Volkswagen AG** ............................... 9,797
--------------
49,819
--------------
NETHERLANDS - 3.6%
269,469 ABN AMRO Holding NV ........................... 7,859
190,679 AEGON NV ...................................... 3,507
12,363 Efes Breweries International, GDR+ ............ 377
85,625 Heineken Holding NV ........................... 3,350
97,706 Heineken NV ................................... 4,428
334,814 ING Groep NV .................................. 14,832
482,100 Koninklijke (Royal) KPN NV .................... 6,442
79,400 Reed Elsevier NV .............................. 1,365
75,600 Unilever NV** ................................. 1,864
15,300 X 5 Retail Group NV, GDR+ ..................... 338
--------------
44,362
--------------
SOUTH KOREA - 3.3% ***
100,920 Asiana Airlines+ .............................. 681
590 Cheil Communications Inc. ..................... 130
20,000 Daewoo Securities Company, Ltd. ............... 370
2,600 Doosan Heavy Industries and Construction
Company Ltd. ............................... 99
14,830 Doosan Infracore Company Ltd. ................. 286
12,160 GS Engineering & Construction Corporation ..... 946
79,290 Hankook Tire Company Ltd. ..................... 1,145
16,120 Hyundai Development Company ................... 813
2,340 Hyundai Heavy Industries Company Ltd. ......... 344
980 Hyundai Mipo Dockyard Company Ltd. ............ 130
9,460 Hyundai Mobis ................................. 924
17,870 Hyundai Motor Company ......................... 1,453
2,150 Hyundai Steel Company ......................... 76
4,380 Kia Motors Corporation ........................ 66
72,610 Kookmin Bank .................................. 5,772
8,030 Kookmin Bank, Sponsored ADR ................... 637
8,310 LG Chem Ltd. .................................. 339
5,100 LG.Philips LCD Company Ltd., ADR+** ........... 81
1,560 Lotte Shopping Company Ltd. ................... 591
4,610 LS Cable Ltd. ................................. 194
38,800 Macquarie Korea Infrastructure Fund ........... 264
33,300 Macquarie Korea Infrastructure Fund, GDR++ .... 223
See Notes to Financial Statements.
61
Portfolio of Investments (continued)
INTERNATIONAL GROWTH FUND
October 31, 2006
VALUE
SHARES (000S)
- ------------ --------------
COMMON STOCKS (CONTINUED)
SOUTH KOREA (CONTINUED)
350 Nong Shim Company Ltd. ........................ $ 95
2,760 POSCO ......................................... 766
2,300 POSCO, ADR .................................... 162
13,750 Pusan Bank .................................... 177
2,470 Samsung Electro-Mechanics Company, Ltd.+ ...... 105
27,662 Samsung Electronics Company Ltd. .............. 17,937
19,300 Samsung Engineering Company Ltd. .............. 884
15,330 Samsung Fire & Marine Insurance Company Ltd. .. 2,375
1,210 Samsung Heavy Industries Company, Ltd. ........ 32
3,630 Samsung Securities Company Ltd. ............... 196
25,530 Shinhan Financial Group Company Ltd. .......... 1,177
1,290 Shinsegae Company Ltd. ........................ 743
4,890 SK Corporation ................................ 359
9,300 Sungshin Cement Company Ltd. .................. 137
11,040 Woori Finance Holdings Company Ltd. ........... 236
--------------
40,945
--------------
SPAIN - 3.3%
62,400 Altadis, SA** ................................. 2,987
506,900 Banco Bilbao Vizcaya Argentaria SA ............ 12,240
573,000 Banco Santander Central Hispano SA** .......... 9,917
22,300 Grupo Ferrovial, SA ........................... 2,061
31,200 Iberdrola SA .................................. 1,431
61,300 Industria de Diseno Textil SA (Inditex) ....... 2,931
198,100 Repsol YPF SA** ............................... 6,574
108,874 Telefonica SA** ............................... 2,098
--------------
40,239
--------------
TAIWAN - 2.6% ***
804,000 Advanced Semiconductor Engineering Inc.+ ...... 743
1,195,400 Asia Cement Corporation ....................... 976
176,700 Asustek Computer Inc. ......................... 429
82,500 Asustek Computer Inc., GDR .................... 200
100,872 AU Optronics Corporation, ADR ................. 1,370
138,563 Cathay Financial Holding Company, Ltd. ........ 269
59,302 Cathay Financial Holding Company, Ltd.,
GDR++ ...................................... 1,150
27,080 Chi Mei Optoelectronics Corporation, GDR ...... 280
218,000 China Life Insurance Company, Ltd.+ ........... 107
23,805 China Steel Corporation, Sponsored GDR ........ 421
385,280 Chinatrust Financial Holding Company Ltd. ..... 280
36,844 Chong Hong Construction Company, Ltd. ......... 98
582,000 Cosmos Bank Taiwan+ ........................... 212
561,423 CTCI Corporation .............................. 376
331,800 Delta Electronics Inc. ........................ 938
1,994,000 EVA Airways Corporation ....................... 785
201,000 Fubon Financial Holding Company, Ltd.,
GDR** ...................................... 1,638
20,400 High Tech Computer Corporation ................ 506
58,800 Hon Hai Precision Industry Company, Ltd.++ .... 381
VALUE
SHARES (000S)
- ------------ --------------
460,800 Hon Hai Precision Industry Company, Ltd.,
GDR ........................................ $ 5,971
26,000 Innolux Display Corporation+ .................. 40
125,300 MediaTek Inc. ................................. 1,222
307,000 Mega Financial Holding Company, Ltd. .......... 216
53,000 Phison Electronics Corporation ................ 274
314,000 President Chain Store Corporation ............. 691
104,994 Quanta Computer Inc.++ ........................ 156
77,000 Siliconware Precision Industries Company ...... 98
619,000 SinoPac Financial Holdings Company, Ltd. ...... 313
721,000 Synnex Technology International Corporation ... 659
1,392,385 Taiwan Cement Corporation ..................... 1,099
517,000 Taiwan Semiconductor Manufacturing Company
Ltd. ....................................... 948
836,810 Taiwan Semiconductor Manufacturing Company
Ltd., Sponsored ADR** ...................... 8,117
39,000 Teco Electric & Machinery Company, Ltd. ....... 15
310,427 Test-Rite International Company, Ltd. ......... 161
367,000 Tong Yang Industry Company, Ltd. .............. 266
--------------
31,405
--------------
MEXICO - 2.5%
7,800 Alsea SA de CV ................................ 37
451,400 America Movil SA de CV, ADR ................... 19,352
848,100 Carso Infraestructura y Construccion SA
de CV+ ..................................... 639
8,500 Cemex SA de CV, Sponsored ADR+ ................ 261
188,000 Controladora Comercial Mexicana SA de CV ...... 382
265,500 Empresas ICA SA de CV+ ........................ 910
133,500 Gruma SA, Class B ............................. 433
129,800 Grupo FAMSA SA, Class A+,++ ................... 416
141,529 Grupo Financiero Banorte SA de CV ............. 513
64,600 Grupo Financiero Inbursa SA de CV ............. 117
105,100 Grupo Televisa SA, Sponsored ADR .............. 2,594
123,500 Impulsora del Desarrollo y el Empleo en
America Latina, SA de CV+ .................. 124
154,800 Kimberly-Clark de Mexico, SA de CV ............ 648
1,067,800 Wal-Mart de Mexico SA de CV, Series V ......... 3,713
--------------
30,139
--------------
AUSTRALIA - 2.2% ***
326,300 Amcor Ltd.** .................................. 1,748
202,878 Brambles Industries Ltd.** .................... 1,961
422,000 Foster's Group Ltd. ........................... 2,108
677,209 Insurance Australia Group Ltd. ................ 2,910
59,881 Macquarie Bank Ltd. ........................... 3,457
169,100 Promina Group Ltd. ............................ 890
125,943 QBE Insurance Group Ltd. ...................... 2,409
416,360 Rinker Group Ltd. ............................. 5,981
523,786 Telstra Corporation Ltd.** .................... 1,606
273,281 Woolworths Ltd. ............................... 4,379
--------------
27,449
--------------
See Notes to Financial Statements.
62
Portfolio of Investments (continued)
INTERNATIONAL GROWTH FUND
October 31, 2006
VALUE
SHARES (000S)
- ------------ --------------
COMMON STOCKS (CONTINUED)
HONG KONG - 2.1% ***
817,400 Bank of East Asia, Ltd. ....................... $ 3,905
950,000 BOC Hong Kong (Holdings) Ltd. ................. 2,125
318,000 Clear Media Ltd.+** ........................... 446
559,000 Foxconn International Holdings Ltd.+ .......... 1,858
44,000 FU JI Food & Catering Services ................ 77
124,000 Guangdong Investment Ltd. ..................... 52
850,000 Hang Lung Properties Ltd. ..................... 1,854
911,500 Johnson Electric Holdings Ltd. ................ 718
17,500 Kingboard Chemical Holdings Ltd. .............. 62
1,051,400 Li & Fung Ltd. ................................ 2,751
8,000 Melco International Development Ltd. .......... 20
670,000 Shangri-La Asia Ltd. .......................... 1,454
227,000 Sung Hung Kai Properties Ltd. ................. 2,482
693,000 Swire Pacific Ltd., Class A ................... 7,320
202,000 TPV Technology Ltd. ........................... 168
--------------
25,292
--------------
SOUTH AFRICA - 2.1%
101,500 ABSA Group Ltd. ............................... 1,571
9,900 Anglo Platinum Ltd. ........................... 1,062
6,800 AngloGold Ashanti Ltd. ........................ 289
15,600 AngloGold Ashanti Ltd., Sponsored ADR ......... 664
38,800 Aspen Pharmacare Holdings Ltd. ................ 176
150,800 Aveng Ltd. .................................... 639
16,372 Cashbuild Ltd. ................................ 95
74,200 Edgars Consolidated Stores Ltd. ............... 370
70,500 FirstRand Ltd. ................................ 184
69,200 Gold Fields Ltd. .............................. 1,146
125,700 Harmony Gold Mining Company Ltd.+ ............. 1,906
7,500 Impala Platinum Holdings Ltd. ................. 1,318
89,000 Massmart Holdings Ltd. ........................ 716
9,100 Mittal Steel South Africa Ltd. ................ 109
9,600 Mr. Price Group Ltd. .......................... 27
224,153 Murray & Roberts Holdings Ltd. ................ 1,158
102,258 Mvelaphanda Resources Ltd.+ ................... 448
13,800 Naspers Ltd., N Shares ........................ 250
133,821 Network Healthcare Holdings Ltd. .............. 227
9,400 Sappi Limited, Sponsored ADR .................. 133
42,300 Sappi Ltd. .................................... 603
300,100 Sasol Ltd. .................................... 10,299
121,800 Standard Bank Group Ltd. ...................... 1,430
28,500 Truworths International Ltd. .................. 100
26,088 Wilson Bayly Holmes-Ovcon Ltd. ................ 245
--------------
25,165
--------------
CHINA - 1.5% ***
122,000 Advanced Semiconductor Manufacturing
Corporation, Class H+,++ ................... 18
154,000 Agile Property Holdings Ltd. .................. 136
215,900 Angang New Steel Company Ltd., Class H ........ 221
736,000 Anhui Conch Cement Company Ltd., Class H ...... 1,637
934,000 Beijing Capital International Airport Company
Ltd., Class H** ............................ 599
VALUE
SHARES (000S)
- ------------ --------------
84,000 Beijing Enterprises Holdings Ltd. ............. $ 168
555,000 Bio-Treat Technology Ltd. ..................... 217
486,700 BOE Technology Group Company Ltd., Class B+ ... 82
968,000 China Construction Bank, Class H .............. 436
3,600 China Life Insurance Company Ltd., ADR ........ 304
389,000 China Life Insurance Company Ltd., Class H .... 819
698,000 China Mengniu Dairy Company Ltd. .............. 1,269
189,500 China Netcom Group Corporation Ltd. ........... 337
520,000 China Oilfield Services Ltd., Class H ......... 292
86,000 China Overseas Land & Investment Ltd. ......... 78
166,000 China Paradise Electronics Retail Ltd. ........ 49##
208,000 China Resources Enterprise Ltd. ............... 482
502,000 China Shenhua Energy Company Limited,
Class H .................................... 883
272,140 Chongqing Changan Automobile Company Ltd.,
Class B .................................... 145
8,700 Ctrip.com International Ltd., ADR ............. 426
928,000 Dalian Port (PDA) Company Ltd., Class H+,++ ... 449
3,292,000 Dongfeng Motor Corporation Ltd., Class H+ ..... 1,473
659,000 GOME Electrical Appliances Holdings Ltd.** .... 568##
116,000 Guangzhou Shipyard International Company Ltd.,
Class H+ ................................... 142
1,100 Home Inns & Hotels Management, Inc., ADR+ ..... 27
3,106,000 Industrial & Commercial Bank of China,
Class H+ ................................... 1,390
1,654,000 Lenovo Group Ltd.** ........................... 704
182,000 Li Ning Company Ltd. .......................... 215
187,000 Lianhua Supermarket Holdings Ltd.** ........... 238
746,000 Nine Dragons Paper Holdings Ltd.+ ............. 950
1,174,000 PetroChina Company Ltd., Class H .............. 1,294
314,000 Shanghai Forte Land Company Ltd., Class H ..... 138
712,000 Shanghai Prime Machinery Company Ltd.,
Class H+ ................................... 231
588,000 Tsingtao Brewery Company Ltd., Class H ........ 818
112,000 Weichai Power Company Ltd., Class H ........... 269
60,500 Weiqiao Textile Company Ltd., Class H ......... 83
632,000 Wumart Stores, Inc., Class H .................. 589
76,800 ZTE Corporation, Class H** .................... 284
--------------
18,460
--------------
BRAZIL - 1.2%
29,000 Banco Nossa Caixa SA .......................... 680
78,000 Companhia de Bebidas das Americas, ADR ........ 3,071
51,000 Companhia de Concessoes Rodoviarias ........... 545
60,000 Companhia de Saneamento de Minas Gerais -
Copasa MG .................................. 559
23,000 Companhia Vale do Rio Doce, Sponsored ADR** ... 500
67,000 Empresa Brasileira de Aeronautica SA .......... 695
18,900 Empresa Brasileira de Aeronautica SA, ADR** ... 787
See Notes to Financial Statements.
63
Portfolio of Investments (continued)
INTERNATIONAL GROWTH FUND
October 31, 2006
VALUE
SHARES (000S)
- ------------ --------------
COMMON STOCKS (CONTINUED)
BRAZIL (CONTINUED)
12,500 Gerdau SA, Sponsored ADR (F)** ................ $ 185
11,769,000 Light SA+ ..................................... 101
95,000 Lojas Renner SA ............................... 1,188
5,000 M Dias Branco SA+ ............................. 49
38,000 Medial Saude SA+ .............................. 385
44,000 Natura Cosmeticos SA .......................... 606
15,000 Obrascon Huarte Lain Brasil SA+ ............... 194
56,080 Perdigao SA ................................... 653
11,000 Petroleo Brasiliero SA, ADR ................... 891
12,000 Submarino SA .................................. 245
16,500 Telemig Celular Participacoes SA, ADR** ....... 557
192,001,000 Tim Participacoes SA .......................... 906
589,033 Tim Participacoes SA - Rights ................. 3
26,600 Tim Participacoes SA, ADR** ................... 894
4,000 Unibanco - Uniao de Bancos Brasileiros SA,
GDR ........................................ 315
3,000 Usinas Siderurgicas de Minas Gerais SA ........ 117
--------------
14,126
--------------
INDIA - 1.1%
400,300 Gujarat Ambuja Cements Ltd., Sponsored GDR .... 1,044
171,400 Infosys Technologies Ltd., Sponsored ADR** .... 8,930
97,500 McDowell & Company Ltd., GDR+ ................. 869##
12,700 Reliance Energy Ltd., GDR ..................... 408
30,430 Reliance Industries Ltd., Sponsored GDR ....... 1,657
60,700 Wipro Ltd., ADR** ............................. 884
--------------
13,792
--------------
RUSSIA - 1.0%
9,300 Evraz Group SA, GDR, S Shares ................. 239
25,900 Evraz Group SA, GDR, S Shares (F)++ ........... 671
39,900 Gazprom, Sponsored ADR (F) .................... 1,690
4,500 Mining and Metallurgical Company Norilsk
Nickel, ADR ................................ 637
47,800 Mobile TeleSystems, Sponsored ADR ............. 2,107
48,600 Novolipetsk Steel, GDR++ ...................... 982
62,250 Oao Rosneft Oil Company, GDR+ ................. 533
19,025 OAO TMK, GDR+ ................................. 479
5,350 Polyus Gold, ADR+ ............................. 253
11,300 X 5 Retail Group NV, GDR+,++ .................. 251
40,400 Unified Energy System of Russia, GDR** ........ 3,040
27,400 Vimpel-Communications, Sponsored ADR+ ......... 1,808
--------------
12,690
--------------
FINLAND - 0.9%
50,600 Neste Oil Oyj ................................. 1,593
78,900 Nokia Oyj ..................................... 1,566
112,600 Stora Enso Oyj - R Shares ..................... 1,822
234,200 UPM-Kymmene Oyj ............................... 5,945
--------------
10,926
--------------
VALUE
SHARES (000S)
- ------------ --------------
SINGAPORE - 0.8% ***
381,000 Banyan Tree Holdings Ltd.+,++ ................. $ 230
149,000 DBS Group Holdings Ltd. ....................... 1,952
3,375,041 Singapore Telecommunications Ltd.++ ........... 5,738
122,000 United Overseas Bank Ltd. ..................... 1,387
115,000 Yanlord Land Group Ltd.+,++ ................... 107
--------------
9,414
--------------
SWEDEN - 0.7%
92,100 Assa Abloy AB, B Shares ....................... 1,773
58,500 Atlas Copco AB, Class A ....................... 1,709
28,500 Scania AB, B Shares** ......................... 1,951
927,000 Telefonaktiebolaget LM Ericsson, B Shares ..... 3,517
--------------
8,950
--------------
INDONESIA - 0.7% ***
5,617,500 PT Bank Mandiri ............................... 1,680
1,430,000 PT Bank Rakyat Indonesia ...................... 769
1,003,000 PT Ciputra Surya Tbk .......................... 102
367,500 PT Jaya Real Property Tbk ..................... 30
1,111,000 PT Medco Energi Internasional Tbk ............. 405
1,425,500 PT Ramayana Lestari Sentosa Tbk ............... 131
1,123,800 PT Summarecon Agung Tbk ....................... 146
6,078,500 PT Telekomunikasi Indonesia ................... 5,603
--------------
8,866
--------------
BELGIUM - 0.7%
113,300 Fortis ........................................ 4,753
57,800 SES GLOBAL, FDR ............................... 885
51,400 UCB Group SA .................................. 3,182
--------------
8,820
--------------
IRELAND - 0.6%
141,168 CRH PLC ....................................... 4,989
171,200 Depfa Bank PLC ................................ 2,875
--------------
7,864
--------------
TURKEY - 0.6%
369,137 Akbank TAS .................................... 2,102
33,523 Anadolu Efes Biracilik ve Malt Sanayii AS ..... 920
68,300 Coca-Cola Icecek Uretim AS+ ................... 401
48,342 Dogan Yayin Holding AS+ ....................... 186
14,140 Enka Insaat ve Sanayi AS ...................... 119
81,975 Hurriyet Gazetecilik ve Matbaacilik AS ........ 235
39,214 Migros Turk AS+ ............................... 452
64,827 Selcuk Ecza Deposu Ticaret ve Sanayi AS+ ...... 218
57,559 Tupras-Turkiye Petrol Rafinerileri AS ......... 956
213,000 Turkiye Garanti Bankasi AS .................... 782
187,595 Turkiye Is Bankasi, Class C ................... 1,217
--------------
7,588
--------------
ISRAEL - 0.6%
118,600 Bank Hapoalim BM .............................. 591
101,468 Bank Leumi Le-Israel .......................... 420
See Notes to Financial Statements.
64
Portfolio of Investments (continued)
INTERNATIONAL GROWTH FUND
October 31, 2006
VALUE
SHARES (000S)
- ------------ --------------
COMMON STOCKS (CONTINUED)
ISRAEL (CONTINUED)
321,700 Bezeq Israeli Telecommunication
Corporation Ltd ............................ $ 438
34,032 Israel Chemicals Limited ...................... 194
895 Mizrahi Tefahot Bank Ltd ...................... 6
7,700 Orbotech, Ltd.+ ............................... 186
22,900 Partner Communications Company Ltd. ........... 245
149,200 Supersol Ltd.+ ................................ 559
132,700 Teva Pharmaceutical Industries Ltd.,
Sponsored ADR .............................. 4,375
--------------
7,014
--------------
THAILAND - 0.5% ***
24,800 Advanced Info Service Public Company
Limited (F) ................................ 61
35,900 Advanced Info Service Public Company
Limited, NVDR .............................. 88
476,300 Bank of Ayudhya PCL, NVDR ..................... 243
109,200 Banpu Public Comany Ltd., NVDR ................ 476
241,200 Bumrungrad Hospital Public Company
Ltd. (F) ................................... 242
198,700 Electricity Generating PCL, NVDR .............. 487
313,200 Glow Energy PCL(F) ............................ 262
366,400 Kasikornbank PCL(F) ........................... 719
95,300 Kiatnakin Bank PCL, NVDR ...................... 83
2,281,500 Krung Thai Bank PCL(F) ........................ 808
584,200 Major Cineplex Group PCL(F) ................... 239
125,800 Ratchaburi Electricity Generating Holding
PCL(F) ..................................... 142
56,600 Siam City Cement PCL(F) ....................... 380
148,700 Thai Airways International PCL(F) ............. 195
6,434,000 Thai Beverages PCL++ .......................... 1,199
232,000 Thanachart Capital PCL, NVDR .................. 96
144,900 TISCO Bank PCL(F) ............................. 107
554,600 TISCO Bank PCL, NVDR .......................... 393
--------------
6,220
--------------
MALAYSIA - 0.5% ***
726,900 AirAsia BHD+ .................................. 299
548,100 Bumiputra-Commerce Holdings BHD ............... 1,035
145,000 EON Capital BHD ............................... 228
17,100 Genting BHD ................................... 125
522,400 IJM Corporation BHD ........................... 880
218,300 IOI Corporation BHD ........................... 1,028
7,100 KNM Group Berhad .............................. 13
54,500 Maxis Communications BHD ...................... 134
98,800 MISC BHD (F) .................................. 238
91,800 Naim Cendera Holdings BHD ..................... 75
63,600 Resorts World BHD ............................. 207
109,600 Road Builder (M) Holdings BHD ................. 87
469,200 SPSetia BHD ................................... 504
19,400 Tanjong PLC (F) ............................... 64
105,000 Tenaga Nasional BHD ........................... 288
9,300 Top Glove Corporation BHD ..................... 27
VALUE
SHARES (000S)
- ------------ --------------
146,100 Transmile Group BHD ........................... $ 508
195,100 UMW Holdings BHD .............................. 390
--------------
6,130
--------------
ITALY - 0.5%
322,200 Banca Intesa SpA** ............................ 2,202
70,550 Eni SpA ....................................... 2,128
66,500 SanPaolo IMI SpA** ............................ 1,420
--------------
5,750
--------------
EGYPT - 0.4%
40,450 Commercial International
Bank, GDR++ ................................ 371
38,604 Mobinil (Egyptian Mobile Phone Network) ....... 1,077
36,900 Orascom Construction Industries, GDR++ ........ 3,186
--------------
4,634
--------------
DENMARK - 0.3%
51,800 Novo Nordisk A/S, Class B ..................... 3,912
--------------
AUSTRIA - 0.2%
23,600 Erste Bank der Oesterreichischen
Sparkassen AG .............................. 1,607
11,900 Raiffeisen International Bank Holding AG ...... 1,362
--------------
2,969
--------------
NORWAY - 0.2%
127,700 DnB NOR ASA ................................... 1,672
76,713 Norske Skogindustrier ASA ..................... 1,209
--------------
2,881
--------------
UNITED STATES - 0.2%
17,400 CTC Media, Inc.+ .............................. 422
1,400 Freeport-McMoRan Copper & Gold, Inc.,
Class B .................................... 85
8,400 Net 1 UEPS Technologies, ......................
Inc.+ ...................................... 207
60,197 News Corporation (F), CDI ..................... 1,268
16,400 Transmeridian Exploration Inc.+ ............... 58
--------------
2,040
--------------
GREECE - 0.1%
52,000 Opap SA ....................................... 1,857
--------------
PHILIPPINES - 0.1%
8,800 Ayala Corporation ............................. 86
1,432,200 Ayala Land, Inc................................ 438
900 Philippine Long Distance Telephone
Company .................................... 43
8,300 Philippine Long Distance
Telephone Company, Sponsored ADR** ......... 395
42,700 SM Investments Corporation .................... 240
1,177,800 SM Prime Holdings Inc ......................... 215
--------------
1,417
--------------
LUXEMBOURG - 0.1%
40,000 SES Global, FDR .............................. 613
12,800 Ternium SA, Sponsored ADR+ ................... 312
--------------
925
--------------
See Notes to Financial Statements.
65
Portfolio of Investments (continued)
INTERNATIONAL GROWTH FUND
October 31, 2006
VALUE
SHARES (000S)
- ------------ --------------
COMMON STOCKS (CONTINUED)
POLAND - 0.1%
109,100 Telekomunikacja Polska SA .................... $ 803
--------------
HUNGARY - 0.1%
57,400 Magyar Telekom Telecommunications+ ........... 267
3,700 MOLMagyar Olaj-es Gazipari Rt 368
--------------
635
--------------
UNITED ARAB EMIRATES - 0.0%
37,400 Kingdom Hotels Investments, GDR+ ............. 314
--------------
OMAN - 0.0%
26,950 Bank Muscat SAOG, GDR++ ...................... 309
--------------
CZECH REPUBLIC - 0.0%
10,400 Telefonica 02 Czech Republic AS .............. 219
--------------
CHILE - 0.0%
86,417 Ripley Corporation SA ........................ 88
--------------
Total Common Stocks
(Cost $883,215) ........................... 1,190,629
--------------
WARRANTS - 0.0%
117,100 Citigroup Baoshan Iron & Steel Company Ltd.,
Expires 01/21/2010+,++ .................... 71
68,700 Lehman Baosteel Company Ltd.,
Expires 06/02/2008+,++ .................... 43
22,100 Lehman-CW08 Anhui Conch Cement Company Ltd.,
Expires 06/02/2008+,++ .................... 51
513,700 UBS Beijing Yanjing Brewery,
Expires 06/07/2007+,++ .................... 489
--------------
Total Warrants
(Cost $657) ............................... 654
--------------
PREFERRED STOCKS - 0.5%
BRAZIL - 0.4%
8,000 Bradespar SA++ ............................... 310
16,002,000 Companhia Energetica de Minas Gerais ......... 691
121,833,400 Companhia Energetica de Sao Paolo+ ........... 1,189
36,820 Duratex SA++ ................................. 443
165,036 Itausa - Investimentos Itau SA ............... 749
1,286,000 Lojas Americanas SA .......................... 58
15,300 Suzano Petroquimica SA ....................... 26
26,000 Usinas Siderurgicas de Minas Gerais SA,
Class A ................................... 884
149,000 Weg SA ....................................... 724
--------------
5,074
--------------
CHILE - 0.1%
35,200 Embotelladora Andina SA, Class A, ADR ........ 521
--------------
SOUTH KOREA - 0.0% ***
900 Samsung Electronics Company Ltd ............ 436
--------------
Total Preferred Stocks
(Cost $4,964) ............................. 6,031
--------------
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
- ------------ --------------
FOREIGN BONDS AND NOTES - 0.1%
$ 38 Dominican Republic,
9.500% due 09/27/2011++ .................... $ 42
165 Federal Republic of Brazil, Note,
8.000% due 01/15/2018 ...................... 183
400 Mexican Fixed Rate Bonds,
8.000% due 12/07/2023 ...................... 37
1,255 Republic of Argentina, Note,
5.830% due 12/31/2033 ...................... 522
30 Republic of Peru,
9.875% due 02/06/2015 ...................... 38
40 Republic of Venezuela, Bond,
9.250% due 09/15/2027 ...................... 50
305 Turkey Government Bond,
14.000% due 01/19/2011 ..................... 178
375 Turkey Government Bond,
Zero coupon due 07/16/2008 ................. 184
60 Turkey Government Bond,
20.000% due 10/17/2007 ..................... 41
--------------
Total Foreign Bonds and Notes
(Cost $ 1,269) ............................. 1,275
--------------
REPURCHASE AGREEMENT - 2.3%
(Cost $27,682)
27,682 Agreement with Morgan Stanley,
5.270% dated 10/31/2006, to
be repurchased at $27,686,000
on 11/01/2006 (collateralized by
U.S. Treasury Note, 2.000%
due 01/15/2016, market value
$28,608,000) ............................... 27,682
--------------
SHORT-TERM INVESTMENT - 16.5%
(Cost $202,163)
202,163 Mellon GSLDBT II
Collateral Fund+++ ......................... 202,163
--------------
TOTAL INVESTMENTS (Cost $1,119,950*) ......................... 116.6% 1,428,434
OTHER ASSETS (LIABILITIES) (NET) (16.6) (203,881)
----- --------------
NET ASSETS 100.0% $ 1,224,553
===== ==============
- ----------
* Aggregate cost for federal tax purposes is $1,134,046.
** Some or all of these securities are on loan at October 31, 2006, and have
an aggregate market value of $190,378,000, representing 15.6% of the total
net assets of the Fund (collateral value $202,163,000). (See Note 7 to
Financial Statements.)
*** Investments in the areas of the Pacific Rim at October 31, 2006 are 37.0%
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.
## Represents fair value as determined in good faith under the direction of
the Board of Trustees.
# Security is restricted and illiquid. It was acquired on October 30, 2001,
and has a value of $0.00 per share to the Fund at October 31, 2006.
See Notes to Financial Statements.
66
Portfolio of Investments (continued)
INTERNATIONAL GROWTH FUND
October 31, 2006
SCHEDULE OF FORWARD FOREIGN CURRENCY CONTRACTS
FORWARD FOREIGN CURRENCY CONTRACTS TO
BUY CONTRACTS TO RECEIVE
(000S) NET
------------------------------------- UNREALIZED
IN APPRECIATION/
EXPIRATION LOCAL VALUE IN EXCHANGE (DEPRECIATION)
DATE CURRENCY U.S. $ FOR U.S. $ OF CONTRACTS
- ---------- ------------- -------- ---------- --------------
11/1/2006 BRL 314 147 147 $ --
11/1/2006 EGP 113 19 19 --
11/1/2006 EUR 188 240 239 1
11/1/2006 GBP 10 18 18 --
11/1/2006 HKD 2,619 337 337 --
11/1/2006 ILS 163 38 38 --
11/2/2006 CLP 5,867 11 11 --
11/2/2006 EUR 195 248 248 --
11/2/2006 HKD 2,936 378 378 --
11/2/2006 PHP 1,690 34 34 --
11/2/2006 THB 1,102 30 30 --
11/3/2006 CLP 7,302 14 14 --
11/3/2006 EUR 137 175 175 --
1/11/2007 JPY 355,081 3,067 3,050 17
1/25/2007 AUD 4,916 3,797 3,697 100
----
$118
----
AT OCTOBER 31, 2006, SECTOR DIVERSIFICATION WAS AS FOLLOWS (UNAUDITED):
% OF VALUE
SECTOR DIVERSIFICATION NET ASSETS (000S)
- ---------------------- ---------- -----------
COMMON STOCKS:
Banks ..................................... 18.0% $ 220,878
Materials ................................. 11.3 138,470
Capital Goods ............................. 6.8 83,085
Telecommunication Services ................ 6.1 74,559
Pharmaceuticals & Biotechnology ........... 6.0 73,441
Energy .................................... 5.5 66,848
Automobiles & Components .................. 4.4 54,251
Utilities ................................. 4.2 51,014
Insurance ................................. 3.9 47,726
Food, Beverage & Tobacco .................. 3.7 45,175
Semiconductors & Semiconductor Equipment .. 3.5 43,265
Diversified Financials .................... 3.0 37,340
Media ..................................... 2.4 29,755
Electronic Equipment & Instruments ........ 2.3 27,804
Retailing ................................. 2.2 26,639
Internet Software & Services .............. 2.1 26,266
Real Estate Investment Trusts (REITs) ..... 1.8 21,740
Consumer Durables & Apparel ............... 1.8 21,627
Software .................................. 1.5 18,609
Commercial Services & Supplies ............ 1.3 16,483
Transportation ............................ 1.1 12,905
Other ..................................... 4.3 52,749
----- ----------
TOTAL COMMON STOCKS ....................... 97.2 1,190,629
WARRANTS .................................. 0.0 654
PREFERRED STOCKS .......................... 0.5 6,031
FOREIGN BONDS AND NOTES ................... 0.1 1,275
REPURCHASE AGREEMENT ...................... 2.3 27,682
SHORT-TERM INVESTMENT ..................... 16.5 202,163
----- ----------
TOTALINVESTMENTS .......................... 116.6 1,428,434
OTHER ASSETS (LIABILITIES) (NET) .......... (16.6) (203,881)
----- ----------
NETASSETS ................................. 100.0% $1,224,553
===== ==========
FORWARD FOREIGN CURRENCY CONTRACTS TO
SELL CONTRACTS TO RECEIVE
(000S) NET
------------------------------------- UNREALIZED
IN APPRECIATION/
EXPIRATION LOCAL VALUE IN EXCHANGE (DEPRECIATION)
DATE CURRENCY U.S. $ FOR U.S. $ OF CONTRACTS
- ---------- ------------- -------- ---------- --------------
11/1/2006 IDR 330,655 36 36 $ --
11/1/2006 ILS 107 25 25 --
11/1/2006 JPY 2,464 21 21 --
11/1/2006 MXN 144 13 13 --
11/2/2006 IDR 908,208 100 100 --
11/2/2006 ILS 380 89 89 --
11/2/2006 JPY 1,550 13 13 --
11/6/2006 JPY 16,229 139 139 --
1/11/2007 EUR 2,405 3,081 3,051 (30)
1/25/2007 EUR 2,945 3,776 3,697 (79)
-----
$(109)
-----
Net Unrealized Appreciation of Forward Foreign
Currency Contracts............................. $ 9
=====
GLOSSARY OF TERMS
ADR -- American Depositary Receipt
AUD -- Australian Dollar
BRL -- Brazilian Real Dollar
CDI -- CHESS Depositary Interest
CLP -- Chilean Peso
EGP -- Egyptian Pound
EUR -- Euro
(F) -- Foreign Shares
FDR -- Fiduciary Depositary Receipt
GBP -- Great Britain Pound Sterling
GDR -- Global Depositary Receipt
HKD -- Hong Kong Dollar
IDR -- Indonesia Rupiah
ILS -- Isreal Shekel
JPY -- Japanese Yen
MXN -- Mexican Peso
NVDR -- Non-Voting Depositary Receipt
PHP -- Philippine Peso
THB -- Thailand Baht
See Notes to Financial Statements.
67
Portfolio of Investments
SHORT TERM INCOME FUND
October 31, 2006
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
- ------------ --------------
CORPORATE BONDS AND NOTES - 62.5%
FINANCIAL SERVICES - 13.9%
$ 6,000 Berkshire Hathaway Inc., Note,
3.375% due 10/15/2008 ...................... $ 5,807
1,500 CIT Group, Inc., Sr. Note,
7.375% due 04/02/2007 ...................... 1,513
3,750 Countrywide Home Loans, Inc., Company
Guarantee, Series K,
5.500% due 02/01/2007 ...................... 3,750
5,000 General Electric Capital Corporation, MTN,
5.720% due 08/22/2011 ...................... 5,049
2,500 Goldman Sachs Group, Inc., Note,
4.125% due 01/15/2008 ...................... 2,469
Household Finance Corporation, Note:
3,500 5.750% due 01/30/2007 ...................... 3,503
1,500 7.875% due 03/01/2007 ...................... 1,512
2,000 Nuveen Investments, Inc., Sr. Note,
5.000% due 09/15/2010 ...................... 1,967
3,500 Rollins Truck Leasing Corporation, Deb.,
8.375% due 02/15/2007 ...................... 3,529
4,000 SLM Corporation, MTN,
4.000% due 01/15/2009 ...................... 3,902
--------------
33,001
--------------
BANKS - 8.0%
5,750 Fifth Third Bank, Note,
2.700% due 01/30/2007 ...................... 5,715
3,000 JPMorgan Chase & Company, Note,
5.350% due 03/01/2007 ...................... 2,999
5,000 SB Treasury Company LLC, Bond,
9.400% to 06/30/2008;
10.925% due 12/29/2049** ................... 5,303
5,000 U.S. Bank N.A., Note,
2.850% due 11/15/2006 ...................... 4,996
--------------
19,013
--------------
REAL ESTATE INVESTMENT TRUSTS/PROPERTY - 6.7%
4,000 CPG Partners LP, Note,
3.500% due 03/15/2009 ...................... 3,850
4,250 Developers Diversified Realty Corporation,
Sr. Note,
6.625% due 01/15/2008 ...................... 4,304
4,000 Duke-Weeks Realty Corporation, Note,
7.375% due 08/01/2007 ...................... 4,046
3,750 EOP Operating LP, Note,
7.750% due 11/15/2007 ...................... 3,834
--------------
16,034
--------------
CABLE TV - 4.6%
4,000 AOL Time Warner Inc., Note,
6.150% due 05/01/2007 ...................... 4,015
4,000 Cox Enterprises, Inc., Note,
4.375% due 05/01/2008** .................... 3,929
3,000 Univision Communications Inc., Company
Guarantee,
7.850% due 07/15/2011 ...................... 3,035
--------------
10,979
--------------
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
- ------------ --------------
GAMING/LEISURE - 4.4%
$ 5,750 Carnival Corporation, Company Guarantee,
3.750% due 11/15/2007 ...................... $ 5,648
5,000 Harrah's Operating Company, Inc.,
Company Guarantee,
5.500% due 07/01/2010 ...................... 4,806
--------------
10,454
--------------
TELECOMMUNICATIONS - 4.4%
5,000 Koninklijke (Royal) KPN NV, Sr. Note,
8.000% due 10/01/2010 ...................... 5,426
1,500 TELUS Corporation, Note,
7.500% due 06/01/2007 ...................... 1,517
3,500 Verizon Global Funding Corporation, Note,
4.000% due 01/15/2008 ...................... 3,448
--------------
10,391
--------------
UTILITIES - 4.2%
4,000 Constellation Energy Group, Inc., Note,
6.350% due 04/01/2007 ...................... 4,014
1,650 Pacific Gas & Electric Company,
First Mortgage,
3.600% due 03/01/2009 ...................... 1,593
1,650 Sempra Energy, Note,
4.750% due 05/15/2009 ...................... 1,630
2,750 Texas-New Mexico Power Company, Sr. Note,
6.250% due 01/15/2009 ...................... 2,800
--------------
10,037
--------------
HEALTH CARE - 4.0%
5,500 Amgen Inc., Sr. Note,
4.000% due 11/18/2009 ...................... 5,341
4,000 Cardinal Health, Inc., Note,
6.250% due 07/15/2008 ...................... 4,051
--------------
9,392
--------------
AUTO MANUFACTURING & PARTS - 3.8%
4,000 Ford Motor Credit Company, Note,
6.500% due 01/25/2007 ...................... 3,996
5,000 Toyota Motor Credit Corporation, Note,
5.650% due 01/15/2007 ...................... 5,002
--------------
8,998
--------------
BUILDING PRODUCTS - 2.1%
4,750 Mohawk Industries, Inc., Note, Series D,
7.200% due 04/15/2012 ...................... 4,974
--------------
INFORMATION TECHNOLOGY - 1.8%
4,250 Cisco Systems, Inc., Note,
5.250% due 02/22/2011 ...................... 4,280
--------------
AIRLINES - 1.7%
4,000 Southwest Airlines Company,
Pass-through Certificates,
5.496% due 11/01/2006 ...................... 4,002
--------------
SERVICES - 1.5%
3,500 PHH Corporation, Note,
6.000% due 03/01/2008 ...................... 3,509
--------------
See Notes to Financial Statements.
68
Portfolio of Investments (continued)
SHORT TERM INCOME FUND
October 31, 2006
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
- ------------ --------------
CORPORATE BONDS AND NOTES (CONTINUED)
DIVERSIFIED MANUFACTURING - 0.8%
$ 2,000 United Technologies Corporation, Note,
4.375% due 05/01/2010 ...................... $ 1,958
--------------
FOOD - 0.6%
1,500 CVS Corporation, Note,
4.000% due 09/15/2009 ...................... 1,450
--------------
Total Corporate Bonds and Notes
(Cost $150,182) ............................ 148,472
--------------
COLLATERALIZED MORTGAGE OBLIGATIONS (CMOS) - 14.4%
4,000 Banc of America Mortgage Securities, Inc.,
Pass-through Certificates,
Series 2003-6, Class 1A30,
4.750% due 08/25/2033 ...................... 3,936
3,840 Cendant Mortgage Corporation,
Series 2003-3P, Class A1,
5.500% due 04/25/2020** .................... 3,805
4,309 Chase Mortgage Finance Corporation,
Series 2005-S1, Class 1A8,
5.500% due 05/25/2035 ...................... 4,305
2,087 Credit Suisse First Boston Mortgage Securities
Corporation, Pass-through Certificates,
Series 2003-29, Class 4A1,
6.000% due 12/25/2033 ...................... 2,112
Federal Home Loan Mortgage Corporation:
2,337 Series 2442, Class PG,
6.000% due 06/15/2030 ...................... 2,344
1,791 Series 2552, Class KB,
4.250% due 06/15/2027 ...................... 1,773
1,552 Series 2575, Class LM,
4.500% due 05/15/2032 ...................... 1,519
5,000 Series 2811, Class NU,
4.500% due 05/15/2030 ...................... 4,841
Federal National Mortgage Association:
236 Series 2002-58, Class HB,
5.500% due 11/25/2015 ...................... 235
4,307 Series 2005-100, Class QA,
5.000% due 11/25/2035 ...................... 4,264
2,020 Government National Mortgage Association,
Series 2002-70, Class PA,
4.500% due 08/20/2032 ...................... 1,936
3,178 GSR Mortgage Loan Trust,
Pass-through Certificates,
Series 2005-1F, Class 2A1,
6.000% due 02/25/2035 ...................... 3,197
--------------
Total CMOs
(Cost $34,845) ............................. 34,267
--------------
U.S. GOVERNMENT AGENCY OBLIGATIONS - 9.4%
4,415 Federal Home Loan Bank,
Series 00-0606, Class Y,
5.270% due 12/28/2012 4,414
Federal Home Loan Mortgage
Corporation Note:
1,000 4.125% due 07/12/2010 976
5,000 5.250% due 07/18/2011 5,082
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
- ------------ --------------
Federal National Mortgage Association:
$ 5,000 Sub. Note,
4.000% due 09/02/2008 ...................... $ 4,913
Note:
4,000 4.250% due 07/15/2007 ...................... 3,974
3,000 5.800% due 07/16/2013 ...................... 2,991
--------------
Total U.S. Government Agency Obligations
(Cost $22,490) ............................. 22,350
--------------
ASSET-BACKED SECURITIES (ABSS) - 2.9%
2,123 Atlantic City Electric Transition Funding LLC,
Series 2003-1, Class A1,
2.890% due 07/20/2011 ...................... 2,058
120 Green Tree Financial Corporation,
Series 1995-6, Class B1,
7.700% due 09/15/2026 ...................... 111
4,750 WFS Financial Owner Trust, Series 2004-3,
Class A4,
3.930% due 02/17/2012 ...................... 4,686
--------------
Total ABSs
(Cost $6,988) .............................. 6,855
--------------
U.S. TREASURY NOTES - 6.6%
6,000 2.625% due 03/15/2009 ......................... 5,735
5,000 3.250% due 08/15/2008 ......................... 4,877
5,000 4.875% due 05/15/2009 ......................... 5,030
--------------
Total U.S. Treasury Notes
(Cost $15,687) ............................. 15,642
--------------
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES - 1.3%
ADJUSTABLE RATE MORTGAGE-BACKED SECURITIES (ARMS) - 0.5%
Federal National Mortgage Association (FNMA):
995 4.659% due 11/01/2032+ ..................... 1,000
44 5.589% due 11/01/2035+ ..................... 44
9 5.610% due 04/01/2019+ ..................... 9
24 5.641% due 01/01/2019+ ..................... 25
18 5.875% due 11/01/2021+ ..................... 19
4 7.111% due 11/01/2022+ ..................... 4
57 Federal Home Loan Mortgage
Corporation (FHLMC),
6.419% due 11/01/2021+ ..................... 58
--------------
Total ARMs
(Cost $1,195) .............................. 1,159
--------------
FEDERAL HOME LOAN MORTGAGE CORPORATION (FHLMC) - 0.5%
1,005 6.000% due 04/01/2017--05/01/2017 .......... 1,021
17 9.500% due 08/01/2016 ...................... 18
--------------
Total FHLMC
(Cost $1,037) .............................. 1,039
--------------
See Notes to Financial Statements.
69
Portfolio of Investments (continued)
SHORT TERM INCOME FUND
October 31, 2006
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
- ------------ --------------
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED
SECURITIES (CONTINUED)
FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA) - 0.2%
$ 471 6.500% due 01/01/2012--01/01/2014 .......... $ 481
31 8.500% due 11/01/2017 ...................... 32
18 10.000% due 05/01/2022 ..................... 20
--------------
Total FNMA
(Cost $520) ................................ 533
--------------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (GNMA) - 0.1%
5 8.000% due 03/15/2012 ...................... 5
6 9.000% due 04/20/2025 ...................... 6
92 10.000% due 01/15/2019--02/15/2019 ......... 104
112 11.000% due 02/15/2010--08/15/2020 ......... 123
--------------
Total GNMA
(Cost $229) ................................ 238
--------------
Total U.S. Government Agency
Mortgage-Backed Securities
(Cost $2,981) .............................. 2,969
--------------
COMMERCIAL MORTGAGE-BACKED SECURITIES (CMBS) - 0.3%
(Cost $645)
646 GMAC Commercial Mortgage Securities Inc.,
Series 1999-CTL1, Class A,
7.151% due 12/15/2016** .................... 646
--------------
REPURCHASE AGREEMENT - 1.6%
(Cost $3,786)
3,786 Agreement with Morgan Stanley,
5.270% dated 10/31/2006, to be
repurchased at $3,787,000 on
11/01/2006 (collateralized by
U.S. Treasury Note, 2.000%
due 01/15/2016, market value
$3,913,000) ................................ 3,786
--------------
TOTAL INVESTMENTS++ (Cost $237,604*) ......................... 99.0% 234,987
OTHER ASSETS (LIABILITIES) (NET) ............................. 1.0 2,395
----- --------------
NET ASSETS ................................................... 100.0% $ 237,382
===== ==============
- ----------
* Aggregate cost for federal tax purposes is $237,604.
** 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 October 31, 2006.
++ All securities segregated as collateral for futures contracts.
UNREALIZED
NUMBER OF VALUE DEPRECIATION
CONTRACTS (000S) (000S)
- ------------ ------- ------------
FUTURE CONTRACTS-SHORT POSITION
100 U.S. 5 Year Treasury Note,
December 2006 .............................. $10,556 $(73)
======= ====
GLOSSARY OF TERMS
MTN -- Medium-Term Note
See Notes to Financial Statements.
70
Portfolio of Investments
U.S. GOVERNMENT SECURITIES FUND
October 31, 2006
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
- ------------ --------------
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES - 72.5%
FEDERAL HOME LOAN MORTGAGE CORPORATION (FHLMC) - 36.0%
$ 14,363 4.000% due 08/01/2018 ......................... $ 13,634
78,104 4.500% due 04/01/2018--06/01/2035 ............. 74,577
213,622 5.000% due 04/01/2018--06/01/2036 ............. 206,867
186,511 5.500% due 11/01/2018--10/01/2035 ............. 185,185
74,452 6.000% due 04/01/2017--02/01/2035 ............. 75,153
23,416 6.500% due 02/01/2011--01/01/2032 ............. 24,111
32,835 7.000% due 07/01/2024--07/01/2036 ............. 33,818
2,720 7.500% due 12/01/2006--02/01/2031 ............. 2,789
135 8.000% due 12/01/2030 ......................... 142
289 8.500% due 04/01/2019--07/01/2029 ............. 307
10 8.750% due 01/01/2013 ......................... 10
63 9.000% due 12/01/2008--08/01/2022 ............. 65
33 9.500% due 06/01/2016--04/01/2017 ............. 36
--------------
Total FHLMC
(Cost $628,635) ............................ 616,694
--------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA) - 31.8%
33,987 4.500% due 12/01/2018--11/01/2019 ............. 32,944
125,490 5.000% due 04/01/2018--12/01/2035 ............. 122,556
228,824 5.500% due 02/01/2009--10/01/2035 ............. 226,750
81,776 6.000% due 12/01/2016--10/01/2035 ............. 82,529
70,924 6.500% due 09/01/2024--05/01/2036 ............. 72,495
4,604 7.000% due 06/01/2010--07/01/2032 ............. 4,757
1,332 7.500% due 12/01/2024--02/01/2030 ............. 1,392
153 8.000% due 05/01/2022--01/01/2025 ............. 155
27 8.500% due 02/01/2023--09/01/2025 ............. 28
208 9.000% due 03/01/2017--09/01/2030 ............. 227
--------------
Total FNMA
(Cost $554,327) ............................ 543,833
--------------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (GNMA) - 4.7%
36,973 5.500% due 07/20/2033--03/20/2034 ............. 36,745
28,669 6.000% due 04/20/2026--08/15/2034 ............. 29,089
9,621 6.500% due 03/15/2024--05/20/2034 ............. 9,876
109 6.800% due 04/20/2025 ......................... 112
1,888 7.000% due 07/15/2008--06/20/2031 ............. 1,951
1,782 7.500% due 03/15/2024--11/15/2029 ............. 1,859
88 7.750% due 12/15/2029 ......................... 93
130 8.000% due 04/15/2022 ......................... 137
394 9.000% due 11/15/2021 ......................... 423
787 9.500% due 04/15/2016--08/15/2021 ............. 858
10 13.500% due 09/15/2014--12/15/2014 ............ 11
--------------
Total GNMA
(Cost $82,371) ............................. 81,154
--------------
ADJUSTABLE RATE MORTGAGE-BACKED SECURITIES (ARMS) - 0.0%
(Cost $50)
50 Federal National Mortgage Association,
6.577% due 03/01/2028+ ..................... 51
--------------
Total U.S. Government Agency Mortgage-Backed
Securities
(Cost $1,265,383) .......................... 1,241,732
--------------
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
- ------------ --------------
COLLATERALIZED MORTGAGE OBLIGATIONS (CMOS) - 19.6%
Banc of America Mortgage Securities, Inc.,
Pass-through Certificates:
$ 21,500 Series 2003-6, Class 1A30,
4.750% due 08/25/2033 ...................... $ 21,159
13,501 Series 2004-4, Class 2A1,
5.500% due 05/25/2034 ...................... 13,322
21,000 Chase Mortgage Finance Corporation,
Series 2005-S1, Class 1A15,
6.000% due 05/25/2035 ...................... 21,263
4,660 Countrywide Alternative Loan Trust,
Series 2003-13T1, Class A1,
4.000% due 08/25/2033 ...................... 4,562
Countrywide Home Loans:
17,448 Series 2003-50, Class A1,
5.000% due 11/25/2018 ...................... 17,093
21,500 Series 2004-4, Class A5,
5.250% due 05/25/2034 ...................... 21,174
Credit Suisse First Boston Mortgage Securities
Corporation, Pass-through Certificates:
10,392 Series 2003-11, Class 1A3,
4.500% due 06/25/2033 ...................... 10,230
7,063 Series 2003-29, Class 4A1,
6.000% due 12/25/2033 ...................... 7,148
10,499 Series 2003-8, Class 1A1,
5.750% due 04/25/2033 ...................... 10,428
Federal Home Loan Mortgage Corporation:
156 Series 1049, Class F,
6.275% due 02/15/2021++ .................... 156
694 Series 1981, Class C,
6.500% due 08/15/2027 ...................... 712
6,087 Series 2435, Class GE,
6.500% due 06/15/2031 ...................... 6,163
2,570 Series 2442, Class PG,
6.000% due 06/15/2030 ...................... 2,578
14,057 Series 2449, Class ND,
6.500% due 05/15/2030 ...................... 14,143
12,122 Series 2481, Class VC,
6.000% due 06/15/2017 ...................... 12,281
9,000 Series 2551, Class QK,
5.500% due 01/15/2033 ...................... 8,929
5,276 Series 2575, Class LM,
4.500% due 05/15/2032 ...................... 5,164
23,108 Series 2634, Class IN,
5.000% due 09/15/2027 ...................... 2,303
25,000 Series 2981, Class PC,
5.500% due 10/15/2031 ...................... 24,927
Federal National Mortgage Association:
7,000 Grantor Trust, Series 2000-T5, Class B,
7.300% due 05/25/2010 ...................... 7,541
9,534 Series 2002-16, Class TM,
7.000% due 04/25/2032 ...................... 9,844
21,000 Series 2002-86, Class JC,
5.500% due 02/25/2032 ...................... 20,965
13,543 Series 2003-58, Class PI,
5.000% due 02/25/2027 ...................... 720
442 Trust 259 STRIP,
7.000% due 04/01/2024 ...................... 99
See Notes to Financial Statements.
71
Portfolio of Investments (continued)
U.S. GOVERNMENT SECURITIES FUND
October 31, 2006
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
- ------------ --------------
COLLATERALIZED MORTGAGE OBLIGATIONS (CMOS) (CONTINUED)
Federal National Mortgage Association,
REMIC, Pass-through Certificates:
$ 101 Series 1990-49, Class G,
9.000% due 05/25/2020 ...................... $ 107
11 Series 1993-162, Class E,
6.000% due 08/25/2023 ...................... 11
88 Series 1997-32, Class FA,
5.944% due 04/25/2027++ .................... 89
GSR Mortgage Loan Trust, Pass-through
Certificates:
7,453 Series 2003-4F, Class 2A3,
5.000% due 05/25/2033 ...................... 7,398
13,984 Series 2005-1F, Class 2A1,
6.000% due 02/25/2035 ...................... 14,069
66 L.F. Rothschild Mortgage Trust,
Series 3, Class Z,
9.950% due 09/01/2017 ...................... 70
Prime Mortgage Trust:
19,776 Series 2004-2, Class A2,
4.750% due 11/25/2019 ...................... 19,182
18,540 Series 2005-4, Class 1A1,
4.750% due 10/25/2020 ...................... 18,192
17,000 Residential Funding Mortgage Security,
Series 2003-S20, Class 1A4,
5.500% due 12/25/2033 ...................... 16,669
18,392 Structured Asset Securities Corporation,
Series 2005-6, Class 4A1,
5.000% due 05/25/2035 ...................... 17,685
--------------
Total CMOs
(Cost $340,811) ............................ 336,376
--------------
U.S. GOVERNMENT AGENCY OBLIGATIONS - 3.9%
10,000 Federal Home Loan Mortgage Corporation, Sub.
Note,
5.875% due 03/21/2011 ...................... 10,329
Federal National Mortgage Association:
10,000 Bond,
3.250% due 01/15/2008 ...................... 9,793
Note:
18,000 5.800% due 07/16/2013 ...................... 17,946
7,500 6.000% due 05/15/2008 ...................... 7,619
20,000 6.000% due 02/03/2020 ...................... 19,739
1,250 Deb.,
6.210% due 08/06/2038 ...................... 1,457
--------------
Total U.S. Government Agency Obligations
(Cost $66,225) ............................. 66,883
--------------
U.S. TREASURY NOTES - 2.5%
10,000 4.000% due 02/15/2014 ......................... 9,636
15,000 4.250% due 08/15/2014 ......................... 14,668
8,000 4.500% due 02/15/2036 ......................... 7,724
10,000 4.875% due 08/15/2016 ......................... 10,211
--------------
Total U.S. Treasury Notes
(Cost $42,728) ............................. 42,239
--------------
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
- ------------ --------------
REPURCHASE AGREEMENT - 1.1%
(Cost $18,954)
$ 18,954 Agreement with Morgan Stanley,
5.270% dated 10/31/2006, to be repurchased
at $18,957,000 on 11/01/2006 (collateralized
by U.S. Treasury Note, 2.000% dated
01/15/2016, market value $19,588,000) ...... $ 18,954
--------------
TOTAL INVESTMENTS (Cost $1,734,101*) ......................... 99.6% 1,706,184
OTHER ASSETS (LIABILITIES) (NET) ............................. 0.4 6,981
----- --------------
NET ASSETS ................................................... 100.0% $ 1,713,165
===== ==============
- ----------
* Aggregate cost for federal tax purposes is $1,734,355.
+ Variable rate security. The interest rate shown reflects
the rate in effect at October 31, 2006.
++ Floating rate security whose interest rate is reset
periodically based on an index.
GLOSSARY OF TERMS
REMIC -- Real Estate Mortgage Investment Conduit
STRIP -- Separate trading of registered interest and principal of securities
See Notes to Financial Statements.
72
Portfolio of Investments
INCOME FUND
October 31, 2006
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
- ------------ --------------
CORPORATE BONDS AND NOTES - 65.6%
FINANCIAL SERVICES/BANKS - 12.7%
$ 6,500 American General Finance, Inc.,
MTN, Series I,
4.625% due 05/15/2009 ...................... $ 6,397
400 Banc One Corporation, Sub. Note,
10.000% due 08/15/2010 ..................... 461
5,000 Bank of America Corporation, Sub. Note,
7.800% due 02/15/2010 ...................... 5,396
1,000 BankAmerica Corporation, Sub. Note,
6.625% due 08/01/2007 ...................... 1,008
690 BB&T Corporation, Sub. Note,
7.250% due 06/15/2007 ...................... 698
CIT Group Inc.:
7,000 Bond,
5.400% due 01/30/2016 ...................... 6,906
Sr. Note:
2,000 5.000% due 02/01/2015 ...................... 1,928
3,000 7.750% due 04/02/2012 ...................... 3,330
12,000 Citigroup Inc., Sr. Note,
5.850% due 08/02/2016 ...................... 12,440
6,000 Farmers Insurance Exchange, Note,
6.000% due 08/01/2014** .................... 5,972
995 Fleet Financial Group, Inc., Sub. Deb.,
6.875% due 01/15/2028 ...................... 1,131
Goldman Sachs Group, Inc.:
10,000 Note,
6.600% due 01/15/2012 ...................... 10,594
2,000 Sr. Note,
5.350% due 01/15/2016 ...................... 1,979
Jefferies Group, Inc.:
5,000 Sr. Deb.,
6.250% due 01/15/2036 ...................... 4,872
7,500 Sr. Note,
7.750% due 03/15/2012 ...................... 8,237
12,000 JPMorgan Chase & Company, Sub. Note,
5.125% due 09/15/2014 ...................... 11,806
3,000 Legg Mason, Inc., Sr. Note,
6.750% due 07/02/2008 ...................... 3,072
5,000 MBNA America Bank NA, Sub. Note,
7.125% due 11/15/2012 ...................... 5,478
MBNA Corporation:
3,000 Note,
6.250% due 01/17/2007 ...................... 3,005
2,000 Sr. Note,
7.500% due 03/15/2012 ...................... 2,212
Merrill Lynch & Company Inc., Note:
3,000 5.000% due 01/15/2015 ...................... 2,936
5,000 6.000% due 02/17/2009 ...................... 5,086
2,000 6.500% due 07/15/2018 ...................... 2,174
2,000 6.750% due 06/01/2028 ...................... 2,238
7,000 Morgan Stanley, Sr. Note,
6.250% due 08/09/2026 ...................... 7,353
5,000 Morgan Stanley, Sub. Note,
4.750% due 04/01/2014 ...................... 4,791
670 NationsBank Corporation, Sub. Note,
6.800% due 03/15/2028 ...................... 754
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
- ------------ --------------
$ 500 PNC Institute Capital B, Company Guarantee,
8.315% due 05/15/2027** .................... $ 527
10,000 SB Treasury Company LLC, Bond,
9.400% to 06/30/2008;
10.925% due 12/29/2049** ................... 10,607
U.S. Bank NA, Sub. Note:
6,000 4.950% due 10/30/2014 ...................... 5,870
5,000 6.375% due 08/01/2011 ...................... 5,257
11,000 Wells Fargo & Company, Sub. Note,
4.625% due 04/15/2014 ...................... 10,517
--------------
155,032
--------------
UTILITIES - 10.7%
5,000 Arizona Public Service Company, Note,
6.500% due 03/01/2012 ...................... 5,185
10,000 Dominion Resources, Inc., Sr. Note,
5.000% due 03/15/2013 ...................... 9,732
3,000 Florida Power Corporation, First Mortgage,
5.900% due 03/01/2033 ...................... 3,042
9,000 Illinois Power Company, First Mortgage,
7.500% due 06/15/2009 ...................... 9,388
7,000 Metropolitan Edison Company, Sr. Note,
4.950% due 03/15/2013 ...................... 6,776
13,000 Mirant Americas Generation, LLC, Sr. Note,
8.500% due 10/01/2021 ...................... 12,870
NiSource Finance Corporation:
5,000 Bond,
5.400% due 07/15/2014 ...................... 4,880
5,000 Sr. Note,
6.150% due 03/01/2013 ...................... 5,117
5,000 Ohio Edison Company, Sr. Note,
5.450% due 05/01/2015 ...................... 4,939
5,000 Ohio Power Company, Sr. Note,
5.500% due 02/15/2013 ...................... 5,020
11,000 Oncor Electric Delivery Company,
7.000% due 09/01/2022 ...................... 12,024
1,000 Oncor Electric Delivery Company, Deb.,
5.000% due 09/01/2007 ...................... 996
10,250 Pacific Gas & Electric Company,
First Mortgage,
4.200% due 03/01/2011 ...................... 9,856
PacifiCorp, First Mortgage:
7,500 4.950% due 08/15/2014 ...................... 7,281
3,000 5.250% due 06/15/2035 ...................... 2,804
5,000 PPL Energy Supply LLC, Sr. Note,
6.400% due 11/01/2011 ...................... 5,196
2,000 Public Service Company of New Mexico,
Sr. Note,
4.400% due 09/15/2008 ...................... 1,964
9,000 Sempra Energy, Note,
6.000% due 02/01/2013 ...................... 9,242
6,500 Southwestern Electric Power Company, Note,
5.375% due 04/15/2015 ...................... 6,410
6,845 Texas-New Mexico Power Company, Sr. Note,
6.250% due 01/15/2009 ...................... 6,968
--------------
129,690
--------------
See Notes to Financial Statements.
73
Portfolio of Investments (continued)
INCOME FUND
October 31, 2006
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
- ------------ --------------
CORPORATE BONDS AND NOTES (CONTINUED)
OIL & GAS - 6.1%
$ 7,500 Consolidated Natural Gas Company, Sr. Note,
6.850% due 04/15/2011 ...................... $ 7,912
10,000 El Paso Natural Gas Company, Deb.,
7.500% due 11/15/2026 ...................... 10,617
6,000 Enterprise Products Partners LP,
Company Guarantee,
6.375% due 02/01/2013 ...................... 6,209
4,930 Express Pipeline LP, Sub. Note,
7.390% due 12/31/2017** ..................... 5,276
Hanover Compressor Company:
1,500 Conv. Sr. Note,
4.750% due 03/15/2008 ...................... 1,459
9,000 Sr. Note,
8.625% due 12/15/2010 ...................... 9,405
Petro-Canada:
8,500 Deb., 9.250% due 10/15/2021 ................ 11,057
3,000 Note,
4.000% due 07/15/2013 ...................... 2,737
Southern Natural Gas Company, Sr. Note:
4,000 8.000% due 03/01/2032 ...................... 4,506
1,000 8.875% due 03/15/2010 ...................... 1,056
2,000 Tennessee Gas Pipeline Company, Bond,
8.375% due 06/15/2032 ...................... 2,335
12,000 Tesoro Corporation, Sr. Note,
6.250% due 11/01/2012 ...................... 11,760
--------------
74,329
--------------
REAL ESTATE INVESTMENT TRUSTS (REITS) - 6.0%
Arden Realty LP, Note:
3,000 5.200% due 09/01/2011 ...................... 3,009
7,000 5.250% due 03/01/2015 ...................... 7,003
10,000 Developers Diversified Realty Corporation,
Note,
4.625% due 08/01/2010 ...................... 9,753
3,000 Franchise Finance Corporation,
MTN,
7.070% due 01/15/2008 ...................... 3,056
Health Care Property Investors, Inc.:
1,750 Note,
6.000% due 03/01/2015 ...................... 1,750
Sr. Note:
3,000 6.450% due 06/25/2012 ...................... 3,102
2,250 7.072% due 06/08/2015 ...................... 2,385
Health Care REIT, Inc.:
Sr. Note:
8,000 6.000% due 11/15/2013 ...................... 7,997
3,000 6.200% due 06/01/2016 ...................... 3,031
1,500 7.500% due 08/15/2007 ...................... 1,511
Healthcare Realty Trust, Inc., Sr. Note:
1,000 5.125% due 04/01/2014....................... 957
7,500 8.125% due 05/01/2011....................... 8,200
12,000 Nationwide Health Properties, Note,
6.000% due 05/20/2015 ...................... 11,940
9,000 Shurgard Storage Centers, Inc., Note,
5.875% due 03/15/2013 ...................... 9,251
--------------
72,945
--------------
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
- ------------ --------------
CONSUMER PRODUCTS/SERVICES - 5.3%
Allied Waste North America, Inc., Sr. Note:
$ 9,000 7.250% due 03/15/2015 ...................... $ 9,045
1,000 7.875% due 04/15/2013 ...................... 1,032
10,200 Corn Products International, Inc., Sr. Note,
8.450% due 08/15/2009 ...................... 10,960
1,000 Mattel, Inc., Note,
7.300% due 06/13/2011 ...................... 1,057
10,000 Reed Elsevier Capital Inc., Company Guarantee,
6.750% due 08/01/2011 ...................... 10,544
Royal Caribbean Cruises Ltd.:
2,000 Deb.,
7.250% due 03/15/2018 ...................... 2,001
Sr. Note:
6,000 6.875% due 12/01/2013 ...................... 6,075
4,000 8.750% due 02/02/2011 ...................... 4,387
Sealed Air Corporation:
7,250 Conv. Sr. Note,
3.000% due 06/30/2033** .................... 7,395
4,000 Note,
5.625% due 07/15/2013** .................... 3,940
495 USA Waste Services, Inc., Sr. Note,
7.125% due 10/01/2007 ...................... 501
Waste Management Inc.:
3,450 Company Guarantee,
6.875% due 05/15/2009 ...................... 3,584
3,500 Sr. Note,
7.375% due 08/01/2010 ...................... 3,753
--------------
64,274
--------------
GAMING - 4.6%
5,000 155E Tropicana Hooters LLC, Sr. Note,
8.750% due 04/01/2012 ...................... 4,369
11,000 CCM Merger Inc., Note,
8.000% due 08/01/2013** .................... 10,656
5,000 Circus Circus Enterprise Inc., Deb.,
7.000% due 11/15/2036 ...................... 5,113
6,000 Harrahs Operating Company Inc., Note,
6.500% due 06/01/2016 ...................... 5,290
3,000 Mandalay Resort Group, Sr. Sub. Note, Series B,
10.250% due 08/01/2007 ..................... 3,101
12,000 Old Evangeline Downs LLC / Diamond Jo LLC,
Company Guarantee,
8.750% due 04/15/2012 ...................... 12,045
Park Place Entertainment Corporation, Sr. Note:
1,500 7.500% due 09/01/2009 ...................... 1,557
5,000 8.500% due 11/15/2006 ...................... 5,004
7,900 Riviera Holdings Corporation,
Company Guarantee,
11.000% due 06/15/2010 ..................... 8,374
--------------
55,509
--------------
HEALTH CARE - 4.5%
4,750 Athena Neurosciences Finance LLC,
Company Guarantee,
7.250% due 02/21/2008 ...................... 4,774
10,000 Cardinal Health, Inc., Note,
6.750% due 02/15/2011 ...................... 10,488
See Notes to Financial Statements.
74
Portfolio of Investments (continued)
INCOME FUND
October 31, 2006
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
- ------------ --------------
CORPORATE BONDS AND NOTES (CONTINUED)
HEALTH CARE (CONTINUED)
DVI, Inc., Sr. Note, (in default):
$ 400 9.875% due 02/01/2004+ ..................... $ 40
8,125 9.875% due 02/01/2004+ ..................... 823
6,250 Elan Finance PLC, Company Guarantee,
7.750% due 11/15/2011 ...................... 6,172
HCA Inc.:
3,000 Note,
5.250% due 11/06/2008 ...................... 3,008
5,000 Sr. Note,
6.950% due 05/01/2012 ...................... 4,431
6,000 Health Management Associates, Inc., Sr. Note,
6.125% due 04/15/2016 ...................... 5,775
8,500 HealthSouth Corporation, Sr. Note,
10.750% due 06/15/2016** ................... 8,755
12,000 Tenet Healthcare Corporation, Sr. Note,
6.375% due 12/01/2011 ...................... 10,620
--------------
54,886
--------------
TELECOMMUNICATIONS - 2.7%
5,000 Deutsche Telephone Finance,
Company Guarantee,
8.000% due 06/15/2010 ...................... 5,462
8,000 Qwest Corporation, Note,
8.875% due 03/15/2012 ...................... 8,840
9,000 TELUS Corporation, Note,
8.000% due 06/01/2011 ...................... 9,936
8,000 Vodafone Group PLC, Note,
7.750% due 02/15/2010 ...................... 8,592
--------------
32,830
--------------
MEDIA - 2.6%
Comcast Cable Communications Inc.:
550 Note,
6.200% due 11/15/2008 ...................... 561
7,000 Sr. Note,
7.125% due 06/15/2013 ...................... 7,574
8,000 Cox Communications, Inc., Note,
6.750% due 03/15/2011 ...................... 8,375
2,500 FrontierVision Holdings LP,
Sr. Disc. Note, (in default),
11.875% due 09/15/2007 ..................... 3,187
2,000 FrontierVision Operating Partners LP,
Sr. Sub. Note, (in default),
11.000% due 10/15/2007 ..................... 2,945
2,000 Tele-Communications, Inc., Sr. Deb.,
7.875% due 08/01/2013 ...................... 2,240
5,260 Time Warner Inc., Deb.,
9.150% due 02/01/2023 ...................... 6,556
--------------
31,438
--------------
TRANSPORTATION/AUTO - 2.4%
5,000 Burlington Northern Santa Fe Corporation,
Deb.,
8.125% due 04/15/2020 ...................... 6,136
5,000 Norfolk Southern Corporation,
Sr. Note,
6.200% due 04/15/2009 ...................... 5,109
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
- ------------ --------------
$ 12,000 Trailer Bridge, Inc., Sr. Sec. Note,
9.250% due 11/15/2011 ...................... $ 12,240
5,000 Union Pacific Corporation, Note,
3.875% due 02/15/2009 ...................... 4,858
2,913 United Air Lines Inc.,
Pass-through Certificates, (in default),
9.080% due 10/26/2015 ...................... 970
--------------
29,313
--------------
INFORMATION TECHNOLOGY - 2.3%
11,250 Conexant Systems Inc., Conv. Sub. Note,
4.000% due 02/01/2007 ...................... 11,236
12,000 Corning Inc., Note,
5.900% due 03/15/2014 ...................... 12,289
5,000 Extreme Networks, Inc., Conv. Sub. Note,
3.500% due 12/01/2006 ...................... 5,000
--------------
28,525
--------------
INDUSTRIAL PRODUCTS - 1.7%
5,000 Champion International Corporation, Deb.,
7.200% due 11/01/2026 ...................... 5,407
12,000 Noranda Inc., Note,
6.000% due 10/15/2015 ...................... 12,088
Weyerhaeuser Company:
1,500 Deb.,
7.375% due 03/15/2032 ...................... 1,581
1,500 Note,
6.750% due 03/15/2012 ...................... 1,572
--------------
20,648
--------------
RETAIL - 1.4%
5,000 Fred Meyer Inc., Company Guarantee,
7.450% due 03/01/2008 ...................... 5,126
6,000 Neiman Marcus Group, Inc., Company
Guarantee,
10.375% due 10/15/2015 ..................... 6,593
5,000 Safeway Inc., Note,
7.500% due 09/15/2009 ...................... 5,274
--------------
16,993
--------------
AEROSPACE/DEFENSE - 1.2%
3,000 Lockheed Martin Corporation,
Company Guarantee,
7.750% due 05/01/2026 ...................... 3,708
1,000 Loral Corporation, Deb.,
7.625% due 06/15/2025 ...................... 1,201
9,000 Orbital Sciences Corporation, Sr. Note,
9.000% due 07/15/2011 ...................... 9,596
--------------
14,505
--------------
INDEX PRODUCT - 1.0%
12,000 Dow Jones CDX High Yield Series 7 Trust 1,
Pass-through Certificates,
8.375% due 12/29/2011** .................... 12,195
--------------
See Notes to Financial Statements.
75
Portfolio of Investments (continued)
INCOME FUND
October 31, 2006
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
- ------------ --------------
CORPORATE BONDS AND NOTES (CONTINUED)
FOREIGN GOVERNMENT - 0.4%
Federal Republic of Brazil:
$ 2,750 Bond,
9.250% due 10/22/2010 ...................... $ 3,114
1,500 Note,
8.750% due 02/04/2025 ...................... 1,819
--------------
4,933
--------------
Total Corporate Bonds and Notes
(Cost $792,401) ............................ 798,045
--------------
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES - 23.4%
FEDERAL HOME LOAN MORTGAGE CORPORATION (FHLMC) - 14.6%
39,521 4.500% due 08/01/2033 ......................... 37,219
59,820 5.000% due 04/01/2018--11/01/2035 ............. 58,349
75,664 5.500% due 11/01/2017--04/01/2036 ............. 75,003
2,978 6.000% due 03/01/2031--05/01/2032 ............. 3,008
3,489 6.500% due 01/01/2029--08/01/2029 ............. 3,585
773 7.000% due 01/01/2032 ......................... 798
--------------
Total FHLMC
(Cost $180,372) ............................ 177,962
--------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA) - 8.5%
35,281 4.000% due 09/01/2018--10/01/2018 ............. 33,523
9,702 5.000% due 01/01/2018--10/01/2032 ............. 9,505
45,469 5.500% due 03/01/2033--02/01/2035 ............. 45,043
1,475 6.000% due 04/01/2032 ......................... 1,489
4,341 6.500% due 09/01/2028--05/01/2032 ............. 4,451
72 7.000% due 01/01/2030 ......................... 75
185 7.451% due 06/01/2016 ......................... 199
8,000 7.630% due 02/01/2010 ......................... 8,454
--------------
Total FNMA
(Cost $105,022) ............................ 102,739
--------------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (GNMA) - 0.3%
3,466 6.000% due 05/20/2032 ...................... 3,510
433 7.000% due 06/20/2031 ...................... 446
--------------
Total GNMA
(Cost $3,879) .............................. 3,956
--------------
Total U.S. Government Agency
Mortgage-Backed Securities
(Cost $289,273) ............................ 284,657
--------------
U.S. TREASURY NOTES - 8.6%
23,000 4.250% due 08/15/2014 ...................... 22,491
24,000 4.500% due 02/15/2036 ...................... 23,171
18,000 5.125% due 05/15/2016 ...................... 18,717
37,000 5.375% due 02/15/2031 ...................... 40,183
--------------
Total U.S. Treasury Notes
(Cost $104,603)............................. 104,562
--------------
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
- ------------ --------------
COLLATERALIZED MORTGAGE OBLIGATIONS (CMO) - 0.0%
(Cost $468)
$ 467 Reilly Mortgage FHA, Series 1982,
(Partial default),
7.430% due 08/01/2022 ...................... $ 467##
--------------
REPURCHASE AGREEMENT - 1.1%
(Cost $13,944)
13,944 Agreement with Morgan Stanley, 5.270% dated
10/31/2006, to be repurchased at $13,946,000
on 11/01/2006 (collateralized by U.S.
Treasury Note, 2.000% due 01/15/2016, market
value $14,410,000) ......................... 13,944
--------------
TOTAL INVESTMENTS (Cost $1,200,689*).......................... 98.7% 1,201,675
OTHER ASSETS (LIABILITIES) (NET) ............................. 1.3 15,404
----- --------------
NET ASSETS ................................................... 100.0% $ 1,217,079
===== ==============
- ----------
* Aggregate cost for federal tax purposes is $1,208,341.
** Security acquired in a transaction exempt from registration under Rule
144Aof the Securities Act of 1933, as amended.
+ 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
FHA -- Federal Housing Authority
MTN -- Medium-Term Note
See Notes to Financial Statements.
76
Portfolio of Investments
HIGH YIELD FUND
October 31, 2006
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
- ------------ --------------
CORPORATE BONDS AND NOTES - 87.3%
HEALTH CARE - 18.2%
$ 23,500 Alliance Imagining, Inc., Sr. Sub. Note,
7.250% due 12/15/2012 ...................... $ 22,090
8,750 Athena Neurosciences Finance LLC,
Company Guarantee,
7.250% due 02/21/2008 ...................... 8,794
7,350 Cell Therapeutic, Conv. Sub. Note,
4.000% due 07/01/2010 ...................... 4,640
CV Therapeutics, Inc., Conv. Sr. Sub. Deb.:
18,500 2.000% due 05/16/2023 ...................... 15,632
6,500 3.250% due 08/16/2013 ...................... 5,558
23,500 Davita Inc., Company Guarantee,
6.625% due 03/15/2013 ...................... 23,265
DVI, Inc., Sr. Note, (in default):
8,575 9.875% due 02/01/2004++ .................... 868
6,850 9.875% due 02/01/2004++ .................... 694
12,750 Elan Finance PLC, Company Guarantee,
7.750% due 11/15/2011 ...................... 12,591
26,000 HCA, Inc., Note,
7.500% due 11/06/2033 ...................... 20,410
21,500 HealthSouth Corporation, Sr. Note,
10.750% due 06/15/2016** ................... 22,145
24,500 ICOS Corporation, Conv. Sub. Note,
2.000% due 07/01/2023 ...................... 24,316
5,000 Inhale Therapeutic Systems, Inc., Conv.
Sub. Note,
5.000% due 02/08/2007 ...................... 4,975
Omnicare, Inc., Sr. Sub. Note:
14,350 6.125% due 06/01/2013 ...................... 13,740
9,000 6.875% due 12/15/2015 ...................... 8,865
22,500 Tenet Healthcare Corporation, Sr. Note,
9.250% due 02/01/2015 ...................... 21,459
--------------
210,042
--------------
INDEX PRODUCT - 13.0%
40,740 Dow Jones CDX High Yield Series 5 Trust 1,
Pass-through Certificates,
8.750% due 12/29/2010** .................... 42,496
12,500 Dow Jones CDX High Yield Series 6 Trust 1,
Pass-through Certificates,
8.625% due 06/29/2011** .................... 12,828
47,500 Dow Jones CDX High Yield Series 7 Trust 1,
Pass-through Certificates,
8.375% due 12/29/2011** .................... 48,272
45,570 TRAINS (Targeted Return Index Securities
Trust), Series HY-2006-1, Grantor Trust,
7.548% due 05/01/2016** .................... 46,132
--------------
149,728
--------------
GAMING - 8.0%
16,500 155E Tropicana Hooters LLC, Sr. Note,
8.750% due 04/01/2012 ...................... 14,417
22,000 CCM Merger Inc., Note,
8.000% due 08/01/2013** .................... 21,313
22,500 MGM Grand, Inc., Sr. Note,
6.000% due 10/01/2009 ...................... 22,331
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
- ------------ --------------
$ 19,250 Old Evangeline Downs LLC / Diamond Jo LLC,
Company Guarantee,
8.750% due 04/15/2012 ...................... $ 19,322
14,000 Riviera Holdings Corporation,
Company Guarantee,
11.000% due 06/15/2010 ..................... 14,840
--------------
92,223
--------------
OIL/ENERGY - 6.4%
El Paso Natural Gas:
12,500 Bond,
8.375% due 06/15/2032 ...................... 14,528
2,750 Sr. Note,
7.625% due 08/01/2010 ...................... 2,853
Hanover Compressor Company:
2,000 Company Guarantee,
7.500% due 04/15/2013 ...................... 2,015
7,950 Conv. Sr. Note,
4.750% due 03/15/2008 ...................... 7,731
14,750 Sr. Note,
8.625% due 12/15/2010 ...................... 15,414
7,500 Southern Natural Gas Company, Sr. Note,
8.000% due 03/01/2032 ...................... 8,449
23,500 Tesoro Corporation, Sr. Note, Company
Guarantee,
6.625% due 11/01/2015 ...................... 22,913
--------------
73,903
--------------
UTILITIES - 6.0%
21,000 Dynegy Holdings Inc., Sr. Note,
8.375% due 05/01/2016 ...................... 21,682
22,500 Mirant Americas Generation, LLC, Sr. Note,
8.500% due 10/01/2021 ...................... 22,275
Reliant Energy Inc., Sr. Note:
8,250 6.750% due 12/15/2014 ...................... 7,910
16,000 9.500% due 07/15/2013 ...................... 16,840
--------------
68,707
--------------
INFORMATION TECHNOLOGY - 4.5%
14,000 BEA Systems Inc., Conv. Sub. Note,
4.000% due 12/15/2006 ...................... 14,035
20,500 Conexant Systems Inc., Conv. Sub. Note,
4.000% due 02/01/2007 ...................... 20,474
16,000 SS&C Technologies, Inc., Sr. Note,
Company Guarantee,
11.750% due 12/01/2013 ..................... 17,280
--------------
51,789
--------------
FOREIGN GOVERNMENT - 4.2%
Federal Republic of Brazil:
5,000 Bond,
9.250% due 10/22/2010 ...................... 5,662
33,400 Bond (F),
12.500% due 01/05/2016 ..................... 15,877
6,000 Note,
8.750% due 02/04/2025 ...................... 7,275
203,674 United Mexican States, Bonds (F),
8.000% due 12/19/2013 ...................... 19,082
--------------
47,896
--------------
See Notes to Financial Statements.
77
Portfolio of Investments (continued)
HIGH YIELD FUND
October 31, 2006
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
- ------------ --------------
CORPORATE BONDS AND NOTES (CONTINUED)
LEISURE - 4.1%
$ 27,000 Blockbuster Inc., Sr. Sub. Note,
9.000% due 09/01/2012 ...................... $ 24,435
Royal Caribbean Cruises Ltd.:
7,000 Deb.,
7.250% due 03/15/2018 ...................... 7,003
14,000 Sr. Note,
8.750% due 02/02/2011 ...................... 15,354
--------------
46,792
--------------
MEDIA - 3.8%
21,000 Nielsen Finance LLC, Sr. Note,
10.000% due 08/01/2014** ................... 21,998
22,000 Sirius Satellite Radio Inc., Sr. Note,
9.625% due 08/01/2013 ...................... 21,560
--------------
43,558
--------------
PAPER/CONTAINERS - 3.3%
2,000 Crown Americas LLC, Sr. Note,
7.750% due 11/15/2015 ...................... 2,062
Crown Cork & Seal Company, Inc., Deb.:
10,500 7.375% due 12/15/2026 ...................... 9,739
5,500 8.000% due 04/15/2023 ...................... 5,307
13,500 Graphic Packaging International, Sr. Note,
8.500% due 08/15/2011 ...................... 13,939
7,500 Jefferson Smurfit Corporation, Company
Guarantee,
8.250% due 10/01/2012 ...................... 7,313
--------------
38,360
--------------
TELECOMMUNICATIONS - 3.0%
18,500 Qwest Corporation, Note,
8.875% due 03/15/2012 ...................... 20,443
14,710 TriQuint Semiconductor, Inc., Conv. Sub.
Note,
4.000% due 03/01/2007 ...................... 14,673
--------------
35,116
--------------
TRANSPORTATION - 2.8%
AMR Corporation:
Conv. Sr. Note
2,000 4.500% due 02/15/2024 ...................... 2,932
Deb.:
7,875 9.000% due 08/01/2012 ...................... 8,308
8,300 9.000% due 09/15/2016 ...................... 8,674
1,600 Continental Airlines, Inc., Conv. Sr. Note,
5.000% due 06/15/2023 ...................... 3,258
10,000 New Flyer Industries, Sub. Note (F),
14.000% due 08/19/2020** ................... 9,395
--------------
32,567
--------------
RETAILING - 2.7%
1,000 Asbury Automotive Group, Inc., Sr. Sub. Note,
8.000% due 03/15/2014 ...................... 1,015
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
- ------------ --------------
$ 12,000 Neiman Marcus Group, Inc., Company
Guarantee,
10.375% due 10/15/2015 ..................... $ 13,185
16,500 Southern States Cooperative, Inc., Sr. Note,
10.500% due 11/01/2010** ................... 17,449
--------------
31,649
--------------
AEROSPACE/DEFENSE - 2.7%
18,000 Orbital Sciences Corporation, Sr. Note,
9.000% due 07/15/2011 ...................... 19,193
11,000 Primus International Inc., Sr. Note,
11.500% due 04/15/2009** ................... 11,935
--------------
31,128
--------------
CABLE TV - 2.3%
5,650 Adelphia Communications, Sr. Note,
(in default),
10.250% due 06/15/2011 ..................... 4,590
9,250 FrontierVision Holdings LP,
Sr. Disc. Note, (in default),
11.875% due 09/15/2007 ..................... 11,794
7,250 FrontierVision Operating Partners LP,
Sr. Sub. Note, (in default),
11.000% due 10/15/2007 ..................... 10,676
--------------
27,060
--------------
SERVICES - 2.3%
22,000 Allied Waste North America, Inc., Sr. Note,
7.875% due 04/15/2013 ...................... 22,715
4,000 Great Lakes Dredge & Dock Company,
Sr. Sub. Note,
7.750% due 12/15/2013 ...................... 3,740
--------------
26,455
--------------
Total Corporate Bonds and Notes
(Cost $986,956) ............................ 1,006,973
--------------
SHARES
- ------------
COMMON STOCKS - 6.3%
300,000 B&G Foods Inc., EIS ........................... 5,700
313,800 Health Care Property Investors, Inc. .......... 9,853
260,000 Health Care REIT, Inc. ........................ 10,733
189,757 ICO Global Communications Holdings Ltd.+ ...... 1,063
814,900 Nationwide Health Properties, Inc. ............ 23,420
1,101,400 New Flyer Industries Inc., IDS (F)**** ........ 8,533
769,200 OMEGAHealthcare Investors, Inc. ............... 12,984
--------------
Total Common Stocks
(Cost $45,026) ............................. 72,286
--------------
CONVERTIBLE PREFERRED STOCKS - 2.0%
100,000 Aspen Insurance Holdings Ltd. ................. 5,300
329,000 Crown Castle International Corporation*** 18,218
--------------
Total Convertible Preferred Stocks
(Cost $22,310) ............................. 23,518
--------------
See Notes to Financial Statements.
78
Portfolio of Investments (continued)
HIGH YIELD FUND
October 31, 2006
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
- ------------ --------------
REPURCHASE AGREEMENT - 2.4%
(Cost $27,366)
$ 27,366 Agreement with Morgan Stanley,
5.270% dated 10/31/2006, to be repurchased
at $27,370,000 on 11/01/2006 (collateralized
by U.S. Treasury Note, 2.000% due
01/15/2016, market value $28,281,000) ..... $ 27,366
--------------
TOTAL INVESTMENTS (Cost $1,081,658*) ........................ 98.0% 1,130,143
OTHER ASSETS (LIABILITIES) (NET) ............................ 2.0 23,491
----- --------------
NET ASSETS .................................................. 100.0% $ 1,153,634
===== ==============
- ----------
* Aggregate cost for federal tax purposes is $1,085,409.
** Security acquired in a transaction exempt from registration under Rule
144A of the Securities Act of 1933, as amended.
*** Affiliated issuer as defined by the Investment Company Act of 1940 (the
Fund controls 5.0% or more of the outstanding voting shares of the
company). Total cost of such securities is $17,055,000 and the total value
is $18,218,000 or 1.6% of the total net assets of the Fund.
**** Affiliated issuer as defined by the Investment Company Act of 1940 (the
Fund controls 5.0% or more of the outstanding voting shares of the
company). Total cost of such securities is $8,544,000 and the total value
is $8,533,000 or 0.7% of the total net assets of the Fund.
+ Non-income producing security.
++ Defaulted security is past maturity but continues to be valued in
recognition of future potential worth.
GLOSSARY OF TERMS
EIS -- Enhanced Income Security
(F) -- Foreign Shares
IDS -- Income Deposit Security
See Notes to Financial Statements.
79
Portfolio of Investments
CALIFORNIA MUNICIPAL FUND
October 31, 2006
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
- ------------ --------------
MUNICIPAL BONDS AND NOTES - 98.9%
CALIFORNIA - 98.0%
ABAG Financing Authority for Nonprofit
Corporations, COP:
(O'Connor Woods Obligation Group),
(ACA Insured):
$ 2,280 5.700% due 11/01/2013 ...................... $ 2,400
500 5.400% due 11/01/2009 ...................... 509
340 (Episcopal Homes Foundation),
5.000% due 07/01/2007 ...................... 342
1,240 ABAG Financing Authority for Nonprofit
Corporations, Revenue Bonds, (California
School of Mechanical Arts),
5.250% due 10/01/2026 ...................... 1,304
5,360 Alhambra, Improvement Board Act of 1915,
Special Tax Revenue, (Public Works
Assessment District No. 1),
(MBIA Insured),
6.125% due 09/02/2018 ...................... 5,643
Amador Water Agency, COP, Series A,
(MBIA Insured):
2,730 5.000% due 06/01/2032 ...................... 2,895
3,625 5.000% due 06/01/2036 ...................... 3,839
2,000 Anaheim, Public Financing Authority,
Tax Allocation Revenue, (Inverse Floater),
(MBIA Insured),
9.220% due 12/28/2018+ ..................... 2,202
2,210 Azusa, Community Facilities District No. 1,
Special Tax Revenue, (Mountain Cove),
Series A,
6.000% due 09/01/2026 ...................... 2,332
Baldwin Park, Public Financing Authority,
Lease Revenue, (Community Center Project),
(AMBAC Insured):
2,635 5.000% due 08/01/2027 ...................... 2,774
3,000 5.000% due 08/01/2034 ...................... 3,149
Barstow, Redevelopment Agency, Tax Allocation
Revenue, (Central Redevelopment Project),
Series A, (MBIA Insured):
1,120 ETM,
7.000% due 09/01/2014 ...................... 1,287
585 (Unrefunded Balance),
7.000% due 09/01/2014 ...................... 665
2,000 Bay Area Government Association, Tax
Allocation Revenue, (California
Redevelopment Agency Pool), Series A,
(XLCA Insured),
5.250% due 09/01/2029 ...................... 2,152
3,155 Burbank, Waste Disposal Revenue, Series B,
(FSA Insured),
5.250% due 05/01/2024 ...................... 3,383
California County, Tobacco Securitization
Agency, Tobacco Settlement Asset-Backed
Revenue:
(Sonoma County Securitization Corporation):
2,000 5.125% due 06/01/2038 ...................... 2,056
5,000 5.250% due 06/01/2045 ...................... 5,183
2,000 (Merced County Tobacco Funding
Corporation), Series A,
5.125% due 06/01/2038 ...................... 2,056
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
- ------------ --------------
$ 2,000 (Los Angeles County Securitization
Corporation),
Zero Coupon due 06/01/2028 ................. $ 1,713
2,000 California Department of Veteran Affairs,
Home Purchase Revenue, Series A,
(AMBAC Insured),
5.400% due 12/01/2018 ...................... 2,019
1,000 California Educational Facilities Authority,
College & University Revenue,
(Pooled College & University), Series B,
6.625% due 06/01/2020 ...................... 1,083
1,000 California Educational Facilities Authority,
Student Loan Revenue, (California Loan
Program), Series A, AMT, (MBIA Insured),
5.100% due 03/01/2014 ...................... 1,034
California Health Facilities Financing
Authority,
Health Care Revenue:
(Kaiser Permanente), Series A:
1,000 5.000% due 04/01/2037 ...................... 1,043
700 5.250% due 04/01/2039 ...................... 747
1,000 Rites-PA-1414, (Inverse Floater),
7.224% due 11/15/2034+ ..................... 1,127
1,000 California Infrastructure & Economic
Development Bank, Health Care Revenue,
(The J. David Gladstone Institute Project),
5.500% due 10/01/2015 ...................... 1,075
2,500 California Pollution Control Financing
Authority, PCR, (San Diego Gas and
Electric Company), Series A, AMT,
(AMBAC Insured),
5.850% due 06/01/2021 ...................... 2,509
California Pollution Control Financing
Authority, Solid Waste Disposal Revenue,
(Waste Management Inc. Project), AMT:
2,500 Series C,
5.125% due 11/01/2023 ...................... 2,620
1,500 Series B,
5.000% due 07/01/2027 ...................... 1,547
1,000 California Rural Home Mortgage Finance
Authority, Home Buyers Fund, SFMR,
(Mortgage-Backed Securities Program),
Series 2006-A, (GNMA/FNMA/FHLMC
Collateral),
5.400% due 12/01/2036** .................... 1,074
30 California Rural Home Mortgage Finance
Authority, SFMR, (Mortgage-Backed
Securities Program), Issue A, Series 2, AMT,
(GNMA/FHLMC Collateral),
7.950% due 12/01/2024 ...................... 31
3,000 California State Department of Water Resources,
Power Supply Revenue, Series A,
5.875% due 05/01/2016 ...................... 3,382
1,670 California State Department of Water Resources,
Water Revenue, Series W, (FSA Insured),
(Unrefunded Balance),
5.000% due 12/01/2018 ...................... 1,775
California State Public Works Board, Lease
Revenue:
4,200 (UC M.I.N.D. Institute), Series A,
5.000% due 04/01/2023 ...................... 4,369
See Notes to Financial Statements.
80
Portfolio of Investments (continued)
CALIFORNIA MUNICIPAL FUND
October 31, 2006
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
- ------------ --------------
MUNICIPAL BONDS AND NOTES (CONTINUED)
CALIFORNIA (CONTINUED)
(Department of Mental Health - Coalinga
State Hospital), Series A:
$ 3,000 5.000% due 06/01/2024 ...................... $ 3,163
1,750 5.000% due 06/01/2025 ...................... 1,843
1,980 (Department of Corrections - Kern County
at Delano II State Prison), Series C,
5.500% due 06/01/2023 ...................... 2,180
3,000 (Various California State University
Projects), Series C,
5.400% due 10/01/2022 ...................... 3,092
California State, GO:
2,000 (CIFG-TCRS Insured),
5.000% due 10/01/2022 2,106
4,430 (FGIC-TCRS Insured),
5.500% due 06/01/2025 ...................... 4,700
1,280 (Veterans), Series BJ, AMT,
5.700% due 12/01/2032 ...................... 1,308
6,000 California State, GO, Unlimited,
4.500% due 09/01/2036 ...................... 5,967
1,500 California Statewide Communities Development
Authority, College & University Revenue,
(Thomas Jefferson School of Law), Series A,
4.875% due 10/01/2035 ...................... 1,530
2,315 California Statewide Communities Development
Authority, COP, (Cedars-Sinai Medical
Center), (MBIA-IBC Insured),
6.500% due 08/01/2012 ...................... 2,494
California Statewide Communities Development
Authority, Health Care Revenue:
(Kaiser Permanente), Series B:
2,800 5.000% due 03/01/2041 ...................... 2,913
4,200 5.250% due 03/01/2045 ...................... 4,468
5,085 (Sutter Health), Series A,
5.000% due 11/15/2043 ...................... 5,329
2,000 (Adventist Health System), Series A,
5.000% due 03/01/2035 ...................... 2,074
1,260 (Daughters of Charity Health System
Project), Series A,
5.000% due 07/01/2039 ...................... 1,295
California Statewide Communities Development
Authority, MFHR, (Equity Residential
1,000 Housing): Series B,
5.200% due 12/01/2029 ...................... 1,032
3,300 Series C,
5.200% due 06/15/2009 ...................... 3,405
3,500 California Statewide Communities Development
Authority, Revenue Bond, (The Salk Institute
Biological), (MBIAInsured),
5.250% due 08/01/2031 ...................... 3,749
1,000 Carson, Redevelopment Agency, Tax Allocation
Revenue, (Area No. 1 Project),
(MBIA Insured),
5.500% due 10/01/2016 ...................... 1,145
Cathedral City, Improvement Board Act of 1915,
Special Tax Revenue, (Cove Improvement
District No. 04-02):
990 5.000% due 09/02/2030 ...................... 999
1,335 5.050% due 09/02/2035 ...................... 1,349
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
- ------------ --------------
$ 1,000 Chula Vista, Community Facilities District No.
2001-1, Special Tax Revenue, (Improvement
Area B-San Miguel Ranch Project),
5.450% due 09/01/2036 ...................... $ 1,032
3,000 Chula Vista, COP, (MBIA Insured),
5.000% due 08/01/2027 ...................... 3,150
1,475 Chula Vista, Public Financing Authority,
Special Tax Revenue, (Assessment
Districts Refinancing), Sr. Lien, Series
A, (FSA Insured),
4.700% due 09/02/2014 ...................... 1,570
2,000 Coachella, Redevelopment Agency, Tax
Allocation Revenue, (Area No. 3 Project),
5.875% due 12/01/2028 ...................... 2,067
2,160 Contra Costa County, Public Financing
Authority, Lease Revenue, (Capital
Projects), Series B, (MBIA Insured),
5.250% due 06/01/2027 ...................... 2,259
5,000 Contra Costa, Community College District,
GO, (Election of 2002), (MBIA Insured),
5.000% due 08/01/2029 ...................... 5,294
Contra Costa, Water District Revenue, Series
K, (FSA Insured):
1,445 5.000% due 10/01/2017 ...................... 1,534
1,520 5.000% due 10/01/2018 ...................... 1,613
1,665 Davis, Public Facilities Finance Authority
Local Agency, Special Tax Revenue,
(Mace Ranch Area), Series A,
6.600% due 09/01/2025 ...................... 1,731
1,605 Dinuba Redevelopment Agency, Tax Allocation
Refunding Bonds, (Merged City of Dinuba
Redevelopment Project), (AMBAC Insured),
4.375% due 09/01/2031 ...................... 1,586
1,215 Fairfield, Housing Authority, Mortgage
Revenue, (Creekside Estates Mobile Homes),
5.625% due 09/01/2023 ...................... 1,264
1,000 Fontana, Redevelopment Agency, Tax
Allocation Revenue, (Southwest Industrial
Park Project), (MBIA Insured),
5.200% due 09/01/2030 ...................... 1,031
Foothill Eastern Transportation Corridor
Agency, Toll Road Revenue:
9,000 Zero coupon due 01/15/2026 ................. 8,244
20,000 Zero coupon due 01/15/2030 ................. 5,305
10,000 Zero coupon due 01/15/2032 ................. 2,343
10,000 Zero coupon due 01/15/2033 ................. 2,207
10,000 Zero coupon due 01/15/2034 ................. 2,074
10,000 Zero coupon due 01/15/2036 ................. 1,832
10,000 Zero coupon due 01/15/2037 ................. 1,724
9,000 Zero coupon due 01/15/2038 ................. 1,461
2,000 Fresno, Joint Powers Financing Authority,
Lease Revenue, Series A, (FSA Insured),
5.750% due 06/01/2026 ...................... 2,171
Golden State Tobacco Securitization
Corporation, Tobacco Settlement
Asset-Backed Revenue, Series 2003-A-1:
1,000 6.750% due 06/01/2039 ...................... 1,141
5,000 6.625% due 06/01/2040 ...................... 5,656
3,960 6.250% due 06/01/2033 ...................... 4,391
See Notes to Financial Statements.
81
Portfolio of Investments (continued)
CALIFORNIA MUNICIPAL FUND
October 31, 2006
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
- ------------ --------------
MUNICIPAL BONDS AND NOTES (CONTINUED)
CALIFORNIA (CONTINUED)
$ 1,000 Hi Desert, Members Health Care District,
Health Care Revenue,
5.500% due 10/01/2015 ...................... $ 1,011
3,000 Highland, Redevelopment Agency, Tax
Allocation Revenue, (Highland
Redevelopment Project Area No. 1),
Series A, (AMBAC Insured),
5.000% due 12/01/2028 ...................... 3,162
Huntington Beach, Union High School
District, GO, (Election of 2004),
(FSA Insured):
2,000 5.000% due 08/01/2027 ...................... 2,118
5,000 5.000% due 08/01/2029 ...................... 5,294
2,000 Huntington Park, Public Financing Authority,
Lease Revenue, (Wastewater System Project),
6.200% due 10/01/2025 ...................... 2,063
5,000 Imperial Irrigation District, COP, (Water
System Projects), (AMBAC Insured),
5.500% due 07/01/2029 ...................... 5,407
1,250 Imperial, Water Facilities Revenue, COP,
(FGIC Insured),
5.000% due 10/15/2020 ...................... 1,328
1,765 Independent Cities, Lease Finance Authority,
Mobile Home Park Revenue, (San Juan
Mobile Estates), Series A,
5.000% due 05/15/2031 ...................... 1,798
Irvine, Improvement Board Act of 1915,
Special Tax Revenue:
1,500 (Assessment District No. 03-19), Group 4,
5.000% due 09/02/2029 ...................... 1,518
1,125 (Assessment District No. 03-19), Group 3,
5.000% due 09/02/2025 ...................... 1,133
1,295 (Assessment District No. 00-18), Group 5,
5.000% due 09/02/2026 ...................... 1,304
990 Irvine, Meadows Mobile Home Park,
Mortgage Revenue, Series A,
5.700% due 03/01/2018 ...................... 1,027
Irvine, Public Facilities & Infrastructure
Authority, Assessment Revenue,
(AMBAC Insured):
2,000 Series C,
5.000% due 09/02/2023 ...................... 2,065
Series B:
1,455 5.000% due 09/02/2020 ...................... 1,505
3,630 5.000% due 09/02/2021 ...................... 3,754
2,600 Irvine, Unified School District Financing
Authority, Special Tax Revenue, (Group II),
Series A,
5.000% due 09/01/2026 ...................... 2,619
1,825 La Canada, Unified School District, GO,
(Election of 2004), Series A,
(MBIA Insured),
5.500% due 08/01/2028 ...................... 2,017
La Quinta, Financing Authority, Local Agency
Revenue, Series A, (AMBAC Insured):
1,000 5.250% due 09/01/2024 ...................... 1,085
2,000 5.000% due 09/01/2029 ...................... 2,113
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
- ------------ --------------
$ 1,500 La Verne, Public Financing Authority, Revenue
Bonds, (Capital Improvement Projects),
7.250% due 09/01/2026 ...................... $ 1,544
1,695 Lake Elsinore, Public Financing Authority,
Local Agency Revenue, Series G,
5.800% due 09/02/2015 ...................... 1,765
1,000 Loma Linda, Hospital Revenue, (Loma Linda
University Medical Center), Series A,
5.000% due 12/01/2022 ...................... 1,041
410 Long Beach California, Building Financial
Authority, Tax Allocation, Revenue
Unrefunded Balance - North Long A,
(AMBAC insured),
5.000% due 08/01/2022 ...................... 438
2,000 Long Beach, Community Facilities District
No. 5, Special Tax Revenue, (Towne Center),
6.875% due 10/01/2025 ...................... 2,064
145 Los Angeles, Community Redevelopment
Agency, Housing Revenue, Series C,
(AMBAC Insured),
6.750% due 07/01/2014 ...................... 145
1,000 Los Angeles, Community Redevelopment
Agency, Redevelopment Financing Authority,
Pooled Financing Revenue, Series N,
(MBIA Insured),
5.250% due 09/01/2026 ...................... 1,094
2,500 Los Angeles, Community Redevelopment
Agency, Tax Allocation Revenue, (North
Hollywood Project), Series E, (MBIA Insured),
5.400% due 07/01/2024 ...................... 2,664
1,000 Los Angeles, MFHR, (Ridgecroft Apartments
Project), Series E, AMT, (GNMA Collateral),
6.250% due 09/20/2039 ...................... 1,024
1,445 Los Angeles, Special Assessment Revenue,
(Landscaping & Lighting District No. 96-1
Project), (AMBAC Insured),
5.000% due 03/01/2022 ...................... 1,512
2,000 Los Banos Redevelopment Agency, 2006 Tax
Allocation Revenue, (RADIAN Insured),
5.000% due 09/01/2036 ...................... 2,088
1,000 Modesto City, Community Facilities District
No. 2004-1, Special Tax Revenue,
(Village One #2),
5.150% due 09/01/2036 ...................... 1,020
1,760 Moreno Valley, Unified School District, COP,
(FSA Insured),
5.000% due 03/01/2027 ...................... 1,849
2,785 Needles, Public Utilities Authority, Utilities
Revenue, (Utilities System Acquisition
Project), Series A,
6.500% due 02/01/2022 ...................... 2,857
Northern California, Tobacco Securitization
Authority, Tobacco Settlement Asset-Backed
Revenue, Series A-1:
10,000 5.375% due 06/01/2038 ...................... 10,490
9,080 5.500% due 06/01/2045 ...................... 9,604
1,485 Oceanside, Community Facilities District No.
01-1, Special Tax Revenue, (Morro Hills
Development Project), Series A,
5.500% due 09/01/2029 ...................... 1,548
1,500 Oceanside, COP, Series A, (AMBAC Insured),
5.250% due 04/01/2018 ...................... 1,623
See Notes to Financial Statements.
82
Portfolio of Investments (continued)
CALIFORNIA MUNICIPAL FUND
October 31, 2006
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
- ------------ --------------
MUNICIPAL BONDS AND NOTES (CONTINUED)
CALIFORNIA (CONTINUED)
Oxnard, Harbor District, Revenue Bonds:
$ 1,200 Series A, AMT,
5.750% due 08/01/2020 ...................... $ 1,285
1,000 Series B,
6.000% due 08/01/2024 ...................... 1,127
1,090 Pacifica, Wastewater Revenue,
(AMBAC Insured),
5.000% due 10/01/2024 ...................... 1,158
1,280 Palm Desert, Financing Authority, Tax
Allocation Revenue, (Project Area No. 2),
Series A, (MBIA Insured),
5.000% due 08/01/2022 ...................... 1,362
2,805 Perris, Public Financing Authority, 2006
Tax Allocation Revenue,
5.300% due 10/01/2026 ...................... 2,877
1,995 Pomona, COP, (Mission Promenade Project),
Series AE, (AMBAC Insured),
5.375% due 10/01/2032 ...................... 2,102
5,000 Pomona, Public Financing Authority, Tax
Allocation Revenue, (Merged Redevelopment
Project), Series AD, (MBIA Insured),
5.000% due 02/01/2021 ...................... 5,198
1,000 Pomona, Unified School District, GO,
(MBIA Insured),
6.150% due 08/01/2030 ...................... 1,236
5,000 Port of Oakland, Airport & Marina Revenue,
Series K, AMT, (FGIC Insured),
5.750% due 11/01/2029 ...................... 5,331
1,000 Poway, Redevelopment Agency, Tax Allocation
Revenue, (Paguay Redevelopment Project),
(AMBAC Insured),
5.375% due 06/15/2019 ..................... 1,090
2,540 Redding, Electrical Systems, COP, (Inverse
Floater), (MBIA Insured),
9.156% due 07/01/2022+ ..................... 3,573
1,000 Redondo Beach, Public Financing Authority,
Revenue Bonds, (South Bay Center
Redevelopment Project),
7.125% due 07/01/2026 ...................... 1,022
1,160 Riverside County, COP, (Capital Improvement
& Family Law Court Refunding Projects),
Series A, (FGIC Insured),
5.000% due 11/01/2025 ...................... 1,231
2,100 Riverside County, Public Financing Authority,
COP,
5.800% due 05/15/2029 ...................... 2,180
Rocklin, Unified School District, Capital
Appreciation, GO, (FGIC Insured):
1,030 Zero coupon due 08/01/2014 ................. 701
1,210 Zero coupon due 08/01/2016 ................. 736
1,255 Zero coupon due 08/01/2017 ................. 723
1,360 Zero coupon due 08/01/2019 ................. 702
1,415 Zero coupon due 08/01/2020 ................. 692
1,225 Zero coupon due 08/01/2023 ................. 510
Saddleback Valley, Unified School District,
GO, (Election of 2004), Series A,
(FSA Insured):
3,000 5.000% due 08/01/2027 ...................... 3,177
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
- ------------ --------------
$ 4,000 5.000% due 08/01/2029 ...................... $ 4,235
Salinas Valley, Solid Waste Authority,
Resource Recovery Revenue, AMT,
(AMBAC Insured):
2,475 5.250% due 08/01/2027 ...................... 2,605
2,000 5.250% due 08/01/2031 ...................... 2,100
San Diego, Redevelopment Agency, Auto
Parking Revenue:
1,000 (Centre City Redevelopment Project),
Series A,
6.400% due 09/01/2019 ...................... 1,056
1,030 (Southcrest Redevelopment Project),
6.500% due 10/01/2025 ...................... 1,126
4,000 San Francisco City and County, International
Airports Commission, Airport Revenue,
Second Series, AMT, (MBIA Insured),
Issue 27A,
5.250% due 05/01/2026 ...................... 4,162
9,310 San Jose, Financing Authority, Lease Revenue,
(Convention Center Project), Series F,
(MBIA Insured),
5.000% due 09/01/2018 ...................... 9,860
1,000 San Jose, MFHR, (Sixth & Martha Family
Apartments), AMT, (FNMA Collateral),
5.875% due 03/01/2033 ...................... 1,039
3,780 San Juan, Unified School District, GO,
(Election of 2002), Series A,
(MBIA Insured),
5.000% due 08/01/2027 ...................... 4,002
4,315 Santa Rosa, Mortgage Revenue, (Channate
Lodge), (FHA Insured),
6.700% due 12/01/2024 ...................... 4,322
2,000 Semitropic Improvement District of Semitropic
Water Storage District, Water Banking
Revenue, Series A, (XLCA Insured),
5.125% due 12/01/2035 ...................... 2,126
South Gate, Public Financing Authority,
Tax Allocation Revenue, (South Gate
Redevelopment Project No. 1):
2,090 (AMBAC Insured),
5.250% due 09/01/2022 ...................... 2,249
1,500 (XLCA Insured),
5.000% due 09/01/2016 ...................... 1,618
4,000 Southern California Tobacco Securitization
Authority, Tobacco Settlement Asset-Backed
Revenue, Series A-1,
5.000% due 06/01/2037 ...................... 4,082
8,000 Southern California, Tobacco Securitization
Authority, Tobacco Settlement Asset-Backed
Revenue, Series A-1,
5.125% due 06/01/2046 ...................... 8,202
1,780 Stockton-East, Water District, COP, (1975 &
1990 Projects), Series A, (FGIC Insured),
5.250% due 04/01/2022 ...................... 1,919
3,270 Temecula, Redevelopment Agency, Tax Allocation
Revenue, (Redevelopment Project No.1),
(MBIA Insured),
5.250% due 08/01/2036 ...................... 3,411
1,000 Torrance, Hospital Revenue, (Torrance Memorial
Medical Center), Series A,
6.000% due 06/01/2022 ...................... 1,094
See Notes to Financial Statements.
83
Portfolio of Investments (continued)
CALIFORNIA MUNICIPAL FUND
October 31, 2006
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
- ------------ --------------
MUNICIPAL BONDS AND NOTES (CONTINUED)
CALIFORNIA (CONTINUED)
$ 1,635 Truckee Donner Public Utility District,
Refunding Revenue, COP, Series 2006,
(MBIA Insured),
5.000% due 11/15/2031 ...................... $ 1,742
1,900 Turlock, COP, (Emanuel Medical Center Inc.
Project), Series A,
5.375% due 10/15/2034 ...................... 2,003
1,000 Tustin, Community Facilities District No. 04-1,
Special Tax Revenue, (Tustin Legacy/John
Laing Homes Project),
5.375% due 09/01/2029 ...................... 1,034
4,635 University of California, College & University
Revenue, (Multipurpose Projects), Series M,
(FGIC Insured),
5.125% due 09/01/2018 ...................... 4,862
6,940 Val Verde Unified School District, COP,
(School Construction Project), Series A,
(AMBAC Insured),
5.000% due 02/01/2031 ...................... 7,353
2,305 Walnut, Public Financing Authority, Tax
Allocation Revenue, (Walnut Improvement
Project), (AMBAC Insured),
5.375% due 09/01/2022 ...................... 2,486
--------------
393,532
--------------
PUERTO RICO - 0.6%
2,500 Puerto Rico Commonwealth, Children's
Trust Fund, Tobacco Settlement
Asset-Backed Revenue, Series 2002,
5.625% due 05/15/2043 ...................... 2,635
--------------
VIRGIN ISLANDS - 0.3%
1,000 Virgin Islands, Public Finance Authority,
Revenue Bonds, (Gross Receipts of
Taxes on Loan Notes), Series A,
6.375% due 10/01/2019 ...................... 1,101
--------------
Total Municipal Bonds and Notes
(Cost $376,705) ............................ 397,268
--------------
TOTAL INVESTMENTS++ (Cost $376,705*) ......................... 98.9% 397,268
OTHER ASSETS (LIABILITIES) (NET) ............................. 1.1 4,433
----- --------------
NET ASSETS .................................................... 100.0% $ 401,701
===== ==============
- ----------
* Aggregate cost for federal tax purposes is $376,593.
** Security purchased on a when-issued basis.
+ Variable rate security. The interest rate shown reflects the rate in effect
at October 31, 2006.
++ All securities segregated as collateral for when-issued securities.
The California Municipal Fund had the following industry concentrations greater
than 10.0% at October 31, 2006 (as a percentage of the total net assets of the
Fund) (unaudited):
Tobacco-Master Settlement 14.5%
Special Tax Revenue-Tax
Allocation/Increment 12.4%
The California Municipal Fund had the following insurance concentrations greater
than 10.0% at October 31, 2006 (as a percentage of the total net assets of the
Fund) (unaudited):
MBIA 19.2%
AMBAC 13.9%
GLOSSARY OF TERMS
ACA -- ACA Financial Guaranty Corporation
AMBAC -- American Municipal Bond Assurance Corporation
AMT -- Alternative Minimum Tax
CIFG -- CDC IXIS Financial Guaranty North America, Inc.
COP -- Radian Asset Assurance Inc.
ETM -- Escrowed to Maturity
FGIC -- Federal Guaranty Insurance Corporation
FHA -- Federal Housing Authority
FHLMC -- Federal Home Loan Mortgage Corporation
FNMA -- Federal National Mortgage Association
FSA -- Financial Security Assurance
GNMA -- Government National Mortgage Association
GO -- General Obligation
IBC -- Insured Bond Certificate
MBIA -- Municipal Bond Investors Assurance
MFHR -- Multi-family Housing Revenue
PCR -- Pollution Control Revenue
RADIAN -- Radian Asset Assurance Inc.
SFMR -- Single Family Mortgage Revenue
TCRS -- Transferable Custodial Receipts
XLCA -- XL Capital Assurance Inc.
See Notes to Financial Statements.
84
Portfolio of Investments
CALIFORNIA INSURED INTERMEDIATE MUNICIPAL FUND
October 31, 2006
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
- ------------ --------------
MUNICIPAL BONDS AND NOTES - 98.0%
CALIFORNIA - 97.0%
$ 1,000 ABAG Financing Authority for Nonprofit
Corporations, COP, (Episcopal Homes
Foundation),
6.250% due 08/15/2030 ...................... $ 1,034
700 Alameda County, COP, (Santa Rita Jail Project),
(MBIA Insured),
5.375% due 06/01/2009 ...................... 714
1,000 Alameda County, Public Financing Authority,
Lease Revenue,
5.000% due 09/02/2008 ...................... 1,016
2,000 Anaheim, Public Financing Authority, Lease
Revenue, (Convention Center Project),
Series A, (AMBAC Insured),
5.250% due 08/01/2013 ...................... 2,175
Anaheim, Public Financing Authority,
Power & Light Revenue, (Electric System
Generation Project), Series B,
(FSA Insured):
2,000 5.000% due 10/01/2015 ...................... 2,142
2,000 5.250% due 10/01/2014 ...................... 2,180
1,130 Baldwin Park Public Financing Authority,
Sales Tax & Tax Allocation Revenue,
(Puente Merced Redevelopment Project),
4.625% due 08/01/2016 ...................... 1,167
1,000 California Educational Facilities Authority,
Student Loan Revenue, (California Loan
Program), Series A, AMT, (MBIA Insured),
5.100% due 03/01/2014 ...................... 1,034
125 California Health Facilities Financing
Authority, Health Care Revenue,
(AMBAC Insured),
5.875% due 07/01/2009 ...................... 127
California Housing Finance Agency, Mortgage
Revenue, Series N, AMT, (AMBAC Insured):
1,000 5.000% due 08/01/2008 ...................... 1,020
1,000 5.100% due 02/01/2009 ...................... 1,026
1,155 California Infrastructure and Economic
Development Bank, Lease Revenue,
Series A, (FGIC Insured),
5.000% due 08/15/2018 ...................... 1,259
California State Department of Water Resources,
Power Supply Revenue, Series A:
1,675 (MBIA-IBC Insured),
5.250% due 05/01/2015 ...................... 1,821
4,000 (XLCA Insured),
5.375% due 05/01/2017 ...................... 4,411
3,000 California State Department of Water Resources,
Water System Revenue, (Central Valley
Project), Series Y, (FGIC Insured),
5.250% due 12/01/2014 ...................... 3,296
California State Public Works Board, Lease
Revenue:
2,000 (Department of Corrections Program),
Series A, (AMBAC Insured),
5.250% due 06/01/2012 ...................... 2,177
3,000 (Department of Corrections Program),
Series D, (MBIA Insured),
5.000% due 12/01/2018 ...................... 3,250
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
- ------------ --------------
$ 1,000 (Department of Corrections-Ten
Administrative Segregation Housing
Units), Series A,
(AMBAC Insured),
5.250% due 03/01/2016 ...................... $ 1,078
2,750 (Department of General Services),
(Capitol East End Complex-Blocks
171-174 & 225), Series A, (AMBAC Insured),
5.250% due 12/01/2014 ...................... 2,985
California State, GO:
2,000 (FGIC-TCRS Insured),
7.000% due 10/01/2010 ...................... 2,250
1,000 (FSA Insured),
5.500% due 03/01/2012 ...................... 1,080
2,000 (MBIA-IBC Insured),
6.250% due 09/01/2012 ...................... 2,244
1,000 California Statewide Communities Development
Authority, Student Housing Revenue, (Irvine
LLC, UCI East Campus Apartments, Phase II),
5.000% due 05/15/2020 ...................... 1,066
1,845 California Statewide Communities Development
Authority, Water Revenue, (Pooled Financing
Program), Series C, (FSA Insured),
5.250% due 10/01/2015 ...................... 2,022
1,240 Chino Valley, Unified School District, COP,
Series A, (FSA Insured),
5.250% due 09/01/2013 ...................... 1,335
295 Chula Vista, Public Financing Authority,
Special Tax Revenue, (Assessment Districts
Refinancing), Sr. Lien, Series A,
(FSA Insured),
4.500% due 09/02/2013 ...................... 312
Emeryville, Public Financing Authority,
Revenue Bonds, (Emeryville Redevelopment
Project), Series A, (MBIA Insured):
1,265 5.250% due 09/01/2015 ...................... 1,386
1,400 5.250% due 09/01/2017 ...................... 1,529
2,000 Golden State Tobacco Securitization
Corporation, Tobacco Settlement Asset-Backed
Revenue, Series A, (AMBAC Insured),
5.000% due 06/01/2013 ...................... 2,165
685 Golden West Schools Financing Authority,
Revenue Bonds, Series A, (MBIA Insured),
5.650% due 02/01/2012 ...................... 756
1,000 Gonzales Redevelopment Agency, Tax
Allocation Revenue, (Redevelopment
Project Area Number 1),
4.625% due 08/01/2011 ...................... 1,009
1,415 Independent Cities, Lease Finance Authority,
Mobile Home Park Revenue, (San Juan
Mobile Estates), Series A,
4.750% due 05/15/2019 ...................... 1,439
1,615 Inglewood, Unified School District, GO,
(Election of 1998), Series C, (FSA Insured),
5.250% due 10/01/2017 ...................... 1,770
1,195 Kings Canyon, Joint Unified School District,
GO, (FGIC Insured),
5.375% due 08/01/2015 ...................... 1,299
2,000 Loma Linda, Hospital Revenue,
5.000% due 12/01/2017 ...................... 2,115
See Notes to Financial Statements.
85
Portfolio of Investments (continued)
CALIFORNIA INSURED INTERMEDIATE MUNICIPAL FUND
October 31, 2006
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
- ------------ --------------
MUNICIPAL BONDS AND NOTES (CONTINUED)
CALIFORNIA (CONTINUED)
$ 1,080 Long Beach, Bond Financing Authority,
Lease Revenue, (Public Safety Facilities
Projects), (AMBAC Insured),
5.250% due 11/01/2013 ...................... $ 1,179
1,435 Long Beach, Community College District,
GO, Election 2002, Series B, (FGIC Insured),
5.000% due 05/01/2019 ...................... 1,558
2,000 Los Angeles, Department of Water & Power,
Power System Revenue, Series A-1,
(FSA Insured),
5.000% due 07/01/2017 ...................... 2,193
1,300 Los Angeles, Department of Water & Power,
Power System Revenue, Series A-2,
(MBIA Insured),
5.000% due 07/01/2017 ...................... 1,399
1,045 Los Angeles, Municipal Improvement
Corporation, Lease Revenue, (City of Los
Angeles Central Library Project), Series AT,
(MBIA Insured),
5.500% due 06/01/2017 ...................... 1,145
1,500 Los Angeles, State Building Authority, Lease
Revenue, (State of California Department of
General Services Lease Project), Series A,
(MBIA-IBC Insured),
5.625% due 05/01/2011 ...................... 1,593
2,105 M-S-R Public Power Agency, San Juan Project
Revenue, Series I, (MBIA Insured),
5.000% due 07/01/2015 ...................... 2,231
1,000 Merced, Irrigation District, Revenue Bonds,
Warrants,
4.000% due 07/01/2009 ...................... 1,005
3,000 Monterey Peninsula, Community College
District, GO, (FGIC Insured),
5.000% due 08/01/2020 ...................... 3,253
1,575 Oceanside, COP, Series A, (AMBAC Insured),
5.250% due 04/01/2016 ...................... 1,716
Ontario, Redevelopment Financing Authority,
Lease Revenue:
1,055 (Capital Projects), (AMBAC Insured),
5.500% due 08/01/2016 ...................... 1,152
1,060 (Project No.1, Center City & Cimarron
Projects), (MBIA Insured),
5.250% due 08/01/2016 ...................... 1,144
1,000 Orange County, Public Financing Authority,
Lease Revenue, (Juvenile Justice Center
Facility Project), (AMBAC Insured),
5.375% due 06/01/2016 ...................... 1,099
1,000 Orange County, Water District Revenue,
COP, Series B, (MBIA Insured),
5.000% due 08/15/2018 ...................... 1,081
795 Palm Desert, Financing Authority, Tax
Allocation Revenue, (Project Area No. 2),
Series A, (MBIA Insured),
5.000% due 08/01/2012 ...................... 855
1,590 Redlands, COP, (AMBAC Insured),
5.000% due 09/01/2017 ...................... 1,706
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
- ------------ --------------
Riverside County, COP, (Historic Courthouse
Refunding Project), Series B,
(FGIC Insured):
$ 1,015 5.000% due 11/01/2018 ...................... $ 1,103
1,105 5.000% due 11/01/2019 ...................... 1,195
1,100 Riverside, Special Tax Revenue,
(Community Facilities District No. 90-1-A),
(MBIA Insured),
5.500% due 09/01/2013 ...................... 1,194
1,040 Sacramento, Limited Obligation Bonds,
Reassessment District II No. 2006-1,
(Willow Creek II & North Notomas),
5.000% due 09/02/2020 ...................... 1,063
1,565 San Bernardino, Redevelopment Agency,
Tax Allocation Revenue, (San Sevaine
Redevelopment Project), Series A,
(RADIAN Insured),
5.000% due 09/01/2018 ...................... 1,673
San Diego County, COP, (Burnham Institute
for Medical Research):
1,000 5.000% due 09/01/2016 ...................... 1,053
1,000 5.000% due 09/01/2020 ...................... 1,043
1,840 San Diego County, COP, (Motorola
Refunding Project), (AMBAC Insured),
5.000% due 02/01/2011 ...................... 1,945
3,000 San Francisco, Bay Area Rapid Transit District,
Sales Tax Revenue, Series A, (MBIA Insured),
5.000% due 07/01/2018 ...................... 3,275
1,200 San Jose, Financing Authority, Lease Revenue,
(Convention Center Project), Series F,
(MBIA Insured),
5.000% due 09/01/2016 ...................... 1,272
Santa Maria, Redevelopment Agency, Lease
Revenue, (Town Center & Westside Parking
Facilities Project), (AMBAC Insured):
165 5.000% due 06/01/2013 ...................... 179
1,085 5.250% due 06/01/2015 ...................... 1,184
1,160 Shasta, Joint Powers Financing Authority,
Lease Revenue, (County Administration
Building Project), Series A, (MBIA Insured),
5.250% due 04/01/2017 ...................... 1,257
1,000 South Gate, Public Financing Authority,
Tax Allocation Revenue, (South Gate
Redevelopment Project No. 1),
(XLCA Insured),
5.000% due 09/01/2016 ...................... 1,079
890 Stanton, MFHR, (Continental Gardens
LP Project), AMT, (FNMA Collateral),
(AMBAC-TCRS Insured),
5.625% due 08/01/2029 ...................... 917
Sunnyvale, Solid Waste Revenue, AMT,
(AMBAC Insured):
1,000 5.500% due 10/01/2014 ...................... 1,094
1,000 5.500% due 10/01/2016 ...................... 1,084
1,225 Sweetwater, Union High School District,
COP, (MBIA Insured),
5.000% due 09/01/2020 ...................... 1,319
985 Tracy, Area Public Facilities Financing Agency,
Special Tax Revenue, (Community Facilities
District No. 87-1-H), (MBIA Insured),
5.875% due 10/01/2013 ...................... 1,032
--------------
105,959
--------------
See Notes to Financial Statements.
86
Portfolio of Investments (continued)
CALIFORNIA INSURED INTERMEDIATE MUNICIPAL FUND
October 31, 2006
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
- ------------ --------------
MUNICIPAL BONDS AND NOTES (CONTINUED)
GUAM - 1.0%
$ 1,000 Guam Government, GO, Series A,
(FSA Insured),
5.500% due 12/01/2011 ...................... $ 1,090
--------------
Total Municipal Bonds and Notes
(Cost $104,059) ............................ 107,049
--------------
SHORT-TERM MUNICIPAL BONDS - 1.0%
(Cost $1,100)
1,100 Metropolitan Water District,
Series C-1, Southern California
Waterworks Revenue,
3.500% due 07/01/2036+ ..................... 1,100
--------------
TOTAL INVESTMENTS++ (Cost $105,159*) ......................... 99.0% 108,149
OTHER ASSETS (LIABILITIES) (NET) ............................. 1.0 1,085
----- --------------
NET ASSETS ................................................... 100.0% $ 109,234
===== ==============
- ----------
* Aggregate cost for federal tax purposes is $105,155.
+ Securities with a maturity date of more than 13 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 October 31,
2006. These rates change periodically based on specified market rates or
indices.
++ All securities segregated as collateral for futures contracts.
UNREALIZED
NUMBER VALUE DEPRECIATION
OF CONTRACTS (000S) (000S)
- ------------ ------ --------------
FUTURES CONTRACTS-SHORT POSITION
25 U.S. 5 Year Treasury Note,
December 2006 $2,707 $ (24)
====== ==============
The California Insured Intermediate Municipal Fund had the following industry
concentrations greater than 10.0% at October 31, 2006 (as a percentage of the
total net assets of the Fund) (unaudited):
Public Facilities-Public Buildings 10.7%
Special Tax Revenue-Tax
Allocation/Increment 10.5%
The California Insured Intermediate Municipal Fund had the following insurance
concentrations greater than 10.0% at October 31, 2006 (as a percentage of the
total net assets of the Fund) (unaudited):
MBIA 28.9%
AMBAC 23.8%
FGIC 13.9%
FSA 12.9%
GLOSSARY OF TERMS
AMBAC -- American Municipal Bond Assurance Corporation
AMT -- Alternative Minimum Tax
COP -- Certificates of Participation
FGIC -- Federal Guaranty Insurance Corporation
FNMA -- Federal National Mortgage Association
FSA -- Financial Security Assurance
GO -- General Obligation
IBC -- Insured Bond Certificate
MBIA -- Municipal Bond Investors Assurance
MFHR -- Multi-family Housing Revenue
RADIAN -- Radian Asset Assurance Inc.
TCRS -- Transferable Custodial Receipts
XLCA -- XL Capital Assurance
See Notes to Financial Statements.
87
Statements of Assets and Liabilities
WM GROUP OF FUNDS
October 31, 2006
(In thousands)
EQUITY GROWTH & WEST COAST MID CAP SMALL CAP
REIT INCOME INCOME EQUITY STOCK GROWTH VALUE
FUND FUND FUND FUND FUND FUND FUND
-------- ---------- ---------- ---------- ---------- ---------- ---------
ASSETS:
Investments, at cost ............. $372,673 $3,439,689 $1,797,269 $1,500,086 $ 839,220 $2,222,240 $313,365
======== ========== ========== ========== ========== ========== ========
Investments, at value:
Unaffiliated securities ....... $486,461 $3,740,761 $2,323,820 $1,898,715 $ 979,013 $2,389,189 $309,588
Affiliated securities ......... -- -- -- 14,673 -- -- --
Investments held as collateral
for securities loaned ...... 90,868 320,757 121,798 181,690 131,389 127,597 56,939
-------- ---------- ---------- ---------- ---------- ---------- --------
Total Investments ............. 577,329 4,061,518 2,445,618 2,095,078 1,110,402 2,516,786 366,527
Cash and/or foreign currency at
cost and value ................ -- -- -- 1 1 -- --
Unrealized appreciation of forward
foreign currency contracts .... -- -- -- -- -- -- --
Dividends and/or interest
receivable .................... 594 4,412 1,717 540 829 837 383
Receivable for Fund shares sold .. 686 12,415 526 2,333 1,583 265 15
Receivable for investment
securities sold ............... 9,948 80,591 5,914 12,746 407 7,277 903
Prepaid expenses and other
receivables ................... 3 18 14 11 5 12 2
-------- ---------- ---------- ---------- ---------- ---------- --------
Total Assets .................. 588,560 4,158,954 2,453,789 2,110,709 1,113,227 2,525,177 367,830
-------- ---------- ---------- ---------- ---------- ---------- --------
LIABILITIES:
Payable upon return of securities
loaned ........................ 90,868 320,757 121,798 181,690 131,389 127,597 56,939
Unrealized depreciation of forward
foreign currency contracts .... -- -- -- -- -- -- --
Payable for Fund shares
redeemed ...................... 413 3,471 926 1,230 344 612 85
Payable for when-issued securities
purchased ..................... -- -- -- -- -- -- --
Payable for investment securities
purchased ..................... -- 48,262 1,513 13,494 1,143 11,207 1,667
Investment advisory fee payable .. 332 1,613 1,010 763 617 1,413 219
Shareholder servicing and
distribution fees payable ..... 23 800 179 358 77 98 7
Transfer agent fees payable ...... 3 140 90 73 10 102 7
Variation margin ................. -- -- -- -- -- -- --
Dividends payable ................ -- -- -- -- -- -- --
Due to custodian ................. -- -- -- -- -- 3,328 --
Accrued printing and postage
expenses ...................... 78 349 156 252 74 144 15
Accrued legal and audit fees ..... 33 47 44 40 38 45 36
Accrued expenses and other
payables ...................... 8 138 42 82 16 94 5
-------- ---------- ---------- ---------- ---------- ---------- --------
Total Liabilities ............. 91,758 375,577 125,758 197,982 133,708 144,640 58,980
-------- ---------- ---------- ---------- ---------- ---------- --------
NET ASSETS ....................... $496,802 $3,783,377 $2,328,031 $1,912,727 $ 979,519 $2,380,537 $308,850
======== ========== ========== ========== ========== ========== ========
See Notes to Financial Statements.
88
CALIFORNIA
SMALL SHORT U.S. INSURED
CAP INTERNATIONAL TERM GOVERNMENT HIGH CALIFORNIA INTERMEDIATE
GROWTH GROWTH INCOME SECURITIES INCOME YIELD MUNICIPAL MUNICIPAL
FUND FUND FUND FUND FUND FUND FUND FUND
-------- ------------- -------- ---------- ---------- ---------- ---------- ------------
ASSETS:
Investments, at cost ............. $386,353 $1,119,950 $237,604 $1,734,101 $1,200,689 $1,081,658 $376,705 $105,159
======== ========== ======== ========== ========== ========== ======== ========
Investments, at value:
Unaffiliated securities ....... $380,210 $1,226,271 $234,987 $1,706,184 $1,201,675 $1,103,392 $397,268 $108,149
Affiliated securities ......... -- -- -- -- -- 26,751 -- --
Investments held as collateral
for securities loaned ...... 66,921 202,163 -- -- -- -- -- --
-------- ---------- -------- ---------- ---------- ---------- -------- --------
Total Investments ............. 447,131 1,428,434 234,987 1,706,184 1,201,675 1,130,143 397,268 108,149
Cash and/or foreign currency at
cost and value ................ 18 1,023 -- -- -- 6,921 -- 61
Unrealized appreciation of forward
foreign currency contracts .... -- 119 -- -- -- -- -- --
Dividends and/or interest
receivable .................... 88 1,640 2,706 8,798 15,903 21,222 5,182 1,466
Receivable for Fund shares sold .. 252 683 6 124 491 10,500 183 18
Receivable for investment
securities sold ............... 3,669 1,518 -- -- 2,894 -- 3,894 --
Prepaid expenses and other
receivables ................... 2 6 2 11 1,115 2,705 2 1
-------- ---------- -------- ---------- ---------- ---------- -------- --------
Total Assets .................. 451,160 1,433,423 237,701 1,715,117 1,222,078 1,171,491 406,529 109,695
-------- ---------- -------- ---------- ---------- ---------- -------- --------
LIABILITIES:
Payable upon return of securities
loaned ........................ 66,921 202,163 -- -- -- -- -- --
Unrealized depreciation of forward
foreign currency contracts .... -- 110 -- -- -- -- -- --
Payable for Fund shares
redeemed ...................... 172 390 74 828 711 1,543 2,523 205
Payable for when-issued securities
purchased ..................... -- -- -- -- -- -- 1,066 --
Payable for investment securities
purchased ..................... 900 3,731 -- -- 3,080 14,012 -- --
Investment advisory fee payable .. 273 2,250 100 725 513 495 171 47
Shareholder servicing and
distribution fees payable ..... 29 40 27 101 124 211 173 56
Transfer agent fees payable ...... 33 13 14 45 35 32 21 6
Variation margin ................. -- -- 30 -- -- -- -- 13
Dividends payable ................ -- -- 27 147 380 1,443 493 86
Due to custodian ................. -- -- -- -- 48 -- 311 --
Accrued printing and postage
expenses ...................... 65 59 6 41 46 54 23 10
Accrued legal and audit fees ..... 37 41 36 40 38 39 35 34
Accrued expenses and other
payables ...................... 16 73 5 25 24 28 12 4
-------- ---------- -------- ---------- ---------- ---------- -------- --------
Total Liabilities ............. 68,446 208,870 319 1,952 4,999 17,857 4,828 461
-------- ---------- -------- ---------- ---------- ---------- -------- --------
NET ASSETS ....................... $382,714 $1,224,553 $237,382 $1,713,165 $1,217,079 $1,153,634 $401,701 $109,234
======== ========== ======== ========== ========== ========== ======== ========
See Notes to Financial Statements.
89
Statements of Assets and Liabilities (continued)
WM GROUP OF FUNDS
October 31, 2006
(In thousands)
EQUITY GROWTH & WEST COAST MID CAP SMALL CAP
REIT INCOME INCOME EQUITY STOCK GROWTH VALUE
FUND FUND FUND FUND FUND FUND FUND
-------- ---------- ---------- ---------- -------- ---------- ---------
NET ASSETS CONSIST OF:
Undistributed net investment
income ........................ $ 714 $ 2,302 $ 25,148 $ 4,966 $ 4,739 $ 3,232 $ 4,884
Accumulated net realized
gain/(loss) on investment
transactions .................. 39,321 203,359 (24,567) 42,648 41,796 (313,012) 11,537
Net unrealized appreciation/
(depreciation) of
investments ................... 204,656 621,829 648,349 594,992 271,182 294,543 53,162
Paid-in capital .................. 252,111 2,955,887 1,679,101 1,270,121 661,802 2,395,774 239,267
-------- ---------- ---------- ---------- -------- ---------- --------
Total Net Assets .............. $496,802 $3,783,377 $2,328,031 $1,912,727 $979,519 $2,380,537 $308,850
======== ========== ========== ========== ======== ========== ========
NET ASSETS:
Class A Shares ................... $ 33,638 $1,514,188 $ 576,277 $ 880,755 $215,201 $ 137,129 $ 10,786
======== ========== ========== ========== ======== ========== ========
Class B Shares ................... $ 13,281 $ 330,900 $ 64,452 $ 184,340 $ 30,663 $ 77,728 $ 3,007
======== ========== ========== ========== ======== ========== ========
Class C Shares ................... $ 6,262 $ 251,685 $ 1,859 $ 21,039 $ 8,051 $ 2,730 $ 2,615
======== ========== ========== ========== ======== ========== ========
Class I Shares ................... $443,621 $1,686,604 $1,685,443 $ 826,593 $725,604 $2,162,950 $292,442
======== ========== ========== ========== ======== ========== ========
SHARES OUTSTANDING:
Class A Shares ................... 1,527 67,518 21,025 20,438 10,318 8,158 848
======== ========== ========== ========== ======== ========== ========
Class B Shares ................... 605 14,866 2,449 4,831 1,560 5,217 240
======== ========== ========== ========== ======== ========== ========
Class C Shares ................... 285 11,396 72 549 410 181 208
======== ========== ========== ========== ======== ========== ========
Class I Shares ................... 20,081 75,191 61,207 18,977 34,318 122,977 22,836
======== ========== ========== ========== ======== ========== ========
CLASS A SHARES:**
Net asset value per share of
beneficial interest
outstanding* .................. $ 22.03 $ 22.43 $ 27.41 $ 43.09 $ 20.86 $ 16.81 $ 12.72
======== ========== ========== ========== ======== ========== ========
Maximum sales charge ............. 5.50% 5.50% 5.50% 5.50% 5.50% 5.50% 5.50%
======== ========== ========== ========== ======== ========== ========
Maximum offering price per share
of beneficial interest
outstanding ................... $ 23.31 $ 23.74 $ 29.01 $ 45.60 $ 22.07 $ 17.79 $ 13.46
======== ========== ========== ========== ======== ========== ========
CLASS B SHARES:**
Net asset value and offering price
per share of beneficial
interest outstanding* ......... $ 21.96 $ 22.26 $ 26.32 $ 38.16 $ 19.66 $ 14.90 $ 12.52
======== ========== ========== ========== ======== ========== ========
CLASS C SHARES:**
Net asset value and offering price
per share of beneficial
interest outstanding* ......... $ 21.96 $ 22.08 $ 25.94 $ 38.31 $ 19.66 $ 15.07 $ 12.56
======== ========== ========== ========== ======== ========== ========
CLASS I SHARES:**
Net asset value, offering and
redemption price per share of
beneficial interest
outstanding ................... $ 22.09 $ 22.43 $ 27.54 $ 43.56 $ 21.14 $ 17.59 $ 12.81
======== ========== ========== ========== ======== ========== ========
- ----------
* Redemption price per share is equal to net asset value less any applicable
contingent deferred sales charge and/or applicable redemption fees for the
International Growth Fund.
** Net asset values and maximum offering prices are not shown in thousands.
See Notes to Financial Statements.
90
CALIFORNIA
SMALL SHORT U.S. INSURED
CAP INTERNATIONAL TERM GOVERNMENT HIGH CALIFORNIA INTERMEDIATE
GROWTH GROWTH INCOME SECURITIES INCOME YIELD MUNICIPAL MUNICIPAL
FUND FUND FUND FUND FUND FUND FUND FUND
-------- ------------- -------- ---------- ---------- ---------- ---------- ------------
NET ASSETS CONSIST OF:
Undistributed net investment
income ........................ $ -- $ 7,697 $ 51 $ 483 $ 2,371 $ 3,596 $ 112 $ 55
Accumulated net realized
gain/(loss) on investment
transactions .................. (68,780) 47,441 (4,219) (30,810) (17,171) 21,093 2,583 (178)
Net unrealized appreciation/
(depreciation) of
investments ................... 60,778 308,503 (2,690) (27,917) 986 48,500 20,563 2,966
Paid-in capital .................. 390,716 860,912 244,240 1,771,409 1,230,893 1,080,445 378,443 106,391
-------- ---------- -------- ---------- ---------- ---------- -------- --------
Total Net Assets .............. $382,714 $1,224,553 $237,382 $1,713,165 $1,217,079 $1,153,634 $401,701 $109,234
======== ========== ======== ========== ========== ========== ======== ========
NET ASSETS:
Class A Shares ................... $103,863 $ 119,976 $ 32,081 $ 98,110 $ 143,590 $ 422,747 $264,924 $ 57,665
======== ========== ======== ========== ========== ========== ======== ========
Class B Shares ................... $ 7,763 $ 12,270 $ 16,411 $ 85,761 $ 99,751 $ 83,143 $132,364 $ 45,440
======== ========== ======== ========== ========== ========== ======== ========
Class C Shares ................... $ 922 $ 6,135 $ 6,980 $ 7,964 $ 10,412 $ 76,883 $ 4,413 $ 6,129
======== ========== ======== ========== ========== ========== ======== ========
Class I Shares ................... $270,166 $1,086,172 $181,910 $1,521,330 $ 963,326 $ 570,861
======== ========== ======== ========== ========== ==========
SHARES OUTSTANDING:
Class A Shares ................... 7,074 9,068 13,841 9,304 15,792 48,094 23,411 5,259
======== ========== ======== ========== ========== ========== ======== ========
Class B Shares ................... 614 975 7,080 8,139 10,937 9,414 11,696 4,144
======== ========== ======== ========== ========== ========== ======== ========
Class C Shares ................... 72 494 3,009 757 1,142 8,707 390 559
======== ========== ======== ========== ========== ========== ======== ========
Class I Shares ................... 17,685 81,535 78,470 144,239 105,734 65,039
======== ========== ======== ========== ========== ==========
CLASS A SHARES:**
Net asset value per share of
beneficial interest
outstanding* .................. $ 14.68 $ 13.23 $ 2.32 $ 10.54 $ 9.09 $ 8.79 $ 11.32 $ 10.97
======== ========== ======== ========== ========== ========== ======== ========
Maximum sales charge ............. 5.50% 5.50% 3.50% 4.50% 4.50% 4.50% 4.50% 4.50%
======== ========== ======== ========== ========== ========== ======== ========
Maximum offering price per share
of beneficial interest
outstanding ................... $ 15.53 $ 14.00 $ 2.40 $ 11.04 $ 9.52 $ 9.20 $ 11.85 $ 11.49
======== ========== ======== ========== ========== ========== ======== ========
CLASS B SHARES:**
Net asset value and offering price
per share of beneficial
interest outstanding* ......... $ 12.64 $ 12.58 $ 2.32 $ 10.54 $ 9.12 $ 8.83 $ 11.32 $ 10.97
======== ========== ======== ========== ========== ========== ======== ========
CLASS C SHARES:**
Net asset value and offering price
per share of beneficial
interest outstanding* ......... $ 12.87 $ 12.41 $ 2.32 $ 10.53 $ 9.12 $ 8.83 $ 11.32 $ 10.96
======== ========== ======== ========== ========== ========== ======== ========
CLASS I SHARES:**
Net asset value, offering and
redemption price per share of
beneficial interest
outstanding ................... $ 15.28 $ 13.32 $ 2.32 $ 10.55 $ 9.11 $ 8.78
======== ========== ======== ========== ========== ==========
See Notes to Financial Statements.
91
Statements of Operations
WM GROUP OF FUNDS
For the Year Ended October 31, 2006
(In thousands)
WEST SMALL
EQUITY GROWTH & COAST MID CAP CAP
REIT INCOME INCOME EQUITY STOCK GROWTH VALUE
FUND FUND FUND FUND FUND FUND FUND
-------- -------- -------- -------- -------- -------- -------
INVESTMENT INCOME:
Dividends from unaffiliated
securities ...................... $ 11,937 $ 69,606 $ 46,847 $ 20,311 $ 12,424 $ 19,423 $ 8,532
Dividends from affiliated
securities ...................... -- -- -- -- -- -- --
Interest ........................... 1,049 9,648 2,941 2,560 2,304 2,941 596
Foreign withholding taxes .......... (97) (323) (70) (10) (60) (345) (542)
Securities lending income .......... 379 746 102 503 136 157 419
-------- -------- -------- -------- -------- -------- -------
Total investment income ...... 13,268 79,677 49,820 23,364 14,804 22,176 9,005
-------- -------- -------- -------- -------- -------- -------
EXPENSES:
Investment advisory fee ............ 3,651 16,718 12,169 8,647 6,864 15,631 2,646
Custodian fees ..................... 10 61 54 55 20 145 22
Legal and audit fees ............... 36 83 70 59 47 68 37
Registration and filing fees ....... 64 174 64 137 73 116 65
Printing and postage expenses ...... 127 537 99 347 85 42 11
Other .............................. 34 373 221 256 73 210 20
Shareholder servicing and
distribution fees:
Class A Shares .................. 62 3,029 1,436 2,070 390 335 34
Class B Shares .................. 106 2,808 735 1,820 282 875 31
Class C Shares .................. 56 1,954 20 186 67 26 26
Class R-1 Shares ................ -- 1 -- -- -- -- --
Administration fees:
Class R-1 Shares ................ -- 1 -- -- -- -- --
Transfer agent fees:
Class A Shares .................. 47 897 466 653 90 384 28
Class B Shares .................. 24 510 288 464 82 485 13
Class C Shares .................. 9 191 6 31 12 7 5
-------- -------- -------- -------- -------- -------- -------
Total expenses ............... 4,226 27,337 15,628 14,725 8,085 18,324 2,938
Fees reduced by custodian credits .. (1) (12) (2) (3) (1) (87) (3)
-------- -------- -------- -------- -------- -------- -------
Net expenses ................. 4,225 27,325 15,626 14,722 8,084 18,237 2,935
-------- -------- -------- -------- -------- -------- -------
NET INVESTMENT INCOME/(LOSS) ....... 9,043 52,352 34,194 8,642 6,720 3,939 6,070
-------- -------- -------- -------- -------- -------- -------
NET REALIZED AND UNREALIZED
GAIN/(LOSS) ON INVESTMENTS:
Net realized gain/(loss) on:
Unaffiliated security
transactions ................. 34,864 201,877 28,318 42,494 44,968 6,871 10,658
Affiliated security
transactions ................. -- -- -- (238) -- -- --
Forward foreign currency
contracts and foreign
currency transactions ........ -- -- -- -- -- (158) (103)
Futures contracts ............... -- -- -- -- -- -- --
-------- -------- -------- -------- -------- -------- -------
Net realized gain/(loss) on
investment transactions ...... 34,864 201,877 28,318 42,256 44,968 6,713 10,555
-------- -------- -------- -------- -------- -------- -------
Capital gain distributions
received ........................ 4,466 1,612 -- 1,458 -- -- 64
-------- -------- -------- -------- -------- -------- -------
Net change in unrealized
appreciation/depreciation of:
Securities ...................... 85,333 253,893 232,286 164,163 92,668 117,095 31,592
Forward foreign currency
contracts .................... -- -- -- -- -- 14 --
Foreign currency, futures
contracts and other assets
and liabilities .............. -- -- -- -- -- (12) 4
-------- -------- -------- -------- -------- -------- -------
Net change in unrealized
appreciation/depreciation of
investment transactions ......... 85,333 253,893 232,286 164,163 92,668 117,097 31,596
-------- -------- -------- -------- -------- -------- -------
Net realized and unrealized gain
on investments .................. 124,663 457,382 260,604 207,877 137,636 123,810 42,215
-------- -------- -------- -------- -------- -------- -------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS ....... $133,706 $509,734 $294,798 $216,519 $144,356 $127,749 $48,285
======== ======== ======== ======== ======== ======== =======
See Notes to Financial Statements.
92
CALIFORNIA
SMALL SHORT U.S. INSURED
CAP INTERNATIONAL TERM GOVERNMENT HIGH CALIFORNIA INTERMEDIATE
GROWTH GROWTH INCOME SECURITIES INCOME YIELD MUNICIPAL MUNICIPAL
FUND FUND FUND FUND FUND FUND FUND FUND
------- ------------- ------- ---------- ------- -------- ---------- ------------
INVESTMENT INCOME:
Dividends from unaffiliated
securities ...................... $ 588 $ 24,535 $ -- $ -- $ -- $ 2,507 $ -- $ --
Dividends from affiliated
securities ...................... -- -- -- -- -- 1,845 -- --
Interest ........................... 660 1,549 11,449 91,811 75,937 70,193 20,486 5,085
Foreign withholding taxes .......... -- (2,151) -- -- -- (155) -- --
Securities lending income .......... 1,000 779 -- -- -- -- -- --
------- -------- ------- ------- ------- -------- ------- ------
Total investment income ...... 2,248 24,712 11,449 91,811 75,937 74,390 20,486 5,085
------- -------- ------- ------- ------- -------- ------- ------
EXPENSES:
Investment advisory fee ............ 3,218 8,978 1,247 8,890 6,152 4,846 2,007 605
Custodian fees ..................... 35 606 9 52 29 120 35 10
Legal and audit fees ............... 40 52 37 59 61 57 37 33
Registration and filing fees ....... 67 91 66 66 79 93 25 27
Printing and postage expenses ...... 66 88 6 31 27 58 42 12
Other .............................. 62 66 29 130 109 85 47 16
Shareholder servicing and
distribution fees:
Class A Shares .................. 252 228 85 270 364 522 624 153
Class B Shares .................. 92 90 200 1,021 1,120 756 1,475 531
Class C Shares .................. 11 39 88 75 107 495 43 68
Class R-1 Shares ................ -- -- -- -- -- -- -- --
Administration fees:
Class R-1 Shares ................ -- -- -- -- -- -- -- --
Transfer agent fees:
Class A Shares .................. 226 108 51 154 172 172 110 17
Class B Shares .................. 63 36 33 144 137 72 55 22
Class C Shares .................. 3 7 12 8 13 39 2 3
------- -------- ------- ------- ------- -------- ------- ------
Total expenses ............... 4,135 10,389 1,863 10,900 8,370 7,315 4,502 1,497
Fees reduced by custodian credits .. (4) (9) (1) (2) (18) (114) (4) (3)
------- -------- ------- ------- ------- -------- ------- ------
Net expenses ................. 4,131 10,380 1,862 10,898 8,352 7,201 4,498 1,494
------- -------- ------- ------- ------- -------- ------- ------
NET INVESTMENT INCOME/(LOSS) ....... (1,883) 14,332 9,587 80,913 67,585 67,189 15,988 3,591
------- -------- ------- ------- ------- -------- ------- ------
NET REALIZED AND UNREALIZED
GAIN/(LOSS) ON INVESTMENTS:
Net realized gain/(loss) on:
Unaffiliated security
transactions ................. (2,691) 67,191 (189) (2,472) 3,765 54,076 2,916 (194)
Affiliated security
transactions ................. -- -- -- -- -- -- -- --
Forward foreign currency
contracts and foreign
currency transactions ........ -- 302 -- -- -- (136) -- --
Futures contracts ............... -- -- 237 -- -- -- (379) 29
------- -------- ------- ------- ------- -------- ------- ------
Net realized gain/(loss) on
investment transactions ...... (2,691) 67,493 48 (2,472) 3,765 53,940 2,537 (165)
------- -------- ------- ------- ------- -------- ------- ------
Capital gain distributions
received ........................ 8 -- -- -- -- 28 -- --
------- -------- ------- ------- ------- -------- ------- ------
Net change in unrealized
appreciation/depreciation of:
Securities ...................... 21,563 148,109 816 9,031 2,865 5,366 5,398 1,632
Forward foreign currency
contracts .................... -- (34) -- -- -- -- -- --
Foreign currency, futures
contracts and other assets
and liabilities .............. -- 56 (237) -- -- 35 (63) (42)
------- -------- ------- ------- ------- -------- ------- ------
Net change in unrealized
appreciation/depreciation of
investment transactions ......... 21,563 148,131 579 9,031 2,865 5,401 5,335 1,590
------- -------- ------- ------- ------- -------- ------- ------
Net realized and unrealized gain
on investments .................. 18,880 215,624 627 6,559 6,630 59,369 7,872 1,425
------- -------- ------- ------- ------- -------- ------- ------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS ....... $16,997 $229,956 $10,214 $87,472 $74,215 $126,558 $23,860 $5,016
======= ======== ======= ======= ======= ======== ======= ======
See Notes to Financial Statements.
93
Statements of Changes in Net Assets
WM GROUP OF FUNDS
(In thousands)
GROWTH &
REIT FUND EQUITY INCOME FUND INCOME FUND
---------------------- ---------------------- ----------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
10/31/06 10/31/05 10/31/06 10/31/05 10/31/06 10/31/05
---------- ---------- ---------- ---------- ---------- ----------
Net investment income ............ $ 9,043 $ 11,284 $ 52,352 $ 44,832 $ 34,194 $ 37,167
Net realized gain on investment
transactions .................. 34,864 7,623 201,877 86,726 28,318 45,639
Capital gain distributions
received ...................... 4,466 2,695 1,612 1,209 -- --
Net change in unrealized
appreciation/depreciation of
investments ................... 85,333 34,474 253,893 125,418 232,286 53,674
-------- -------- ---------- ---------- ---------- ----------
Net increase in net assets
resulting from operations ..... 133,706 56,076 509,734 258,185 294,798 136,480
Distributions to shareholders
from:
Net investment income:
Class A Shares ............. (438) (345) (19,788) (12,793) (6,968) (6,506)
Class B Shares ............. (110) (127) (2,272) (2,100) (92) (25)
Class C Shares ............. (64) (79) (1,868) (978) (9) (4)
Class I Shares ............. (9,354) (10,165) (31,086) (25,533) (28,013) (21,264)
Class R-1 Shares ........... -- -- (3) -- -- --
Class R-2 Shares ........... -- -- (2) -- -- --
Net realized gains on
investments:
Class A Shares ............. (443) (240) (29,129) -- -- --
Class B Shares ............. (212) (144) (7,506) -- -- --
Class C Shares ............. (120) (86) (4,471) -- -- --
Class I Shares ............. (9,098) (7,193) (41,428) -- -- --
Net increase/(decrease) in net
assets from Fund share
transactions:
Class A Shares ............. 9,059 7,655 486,234 383,168 (56,958) (41,061)
Class B Shares ............. 1,687 2,109 72,730 62,131 (24,283) (19,614)
Class C Shares ............. (244) 1,002 100,676 88,699 (166) 218
Class I Shares ............. (48,713) 36,671 214,011 261,151 (468,928) 495,612
-------- -------- ---------- ---------- ---------- ----------
Net increase/(decrease) in net
assets ........................ 75,656 85,134 1,245,832 1,011,930 (290,619) 543,836
NET ASSETS:
Beginning of year ................ 421,146 336,012 2,537,545 1,525,615 2,618,650 2,074,814
-------- -------- ---------- ---------- ---------- ----------
End of year ...................... $496,802 $421,146 $3,783,377 $2,537,545 $2,328,031 $2,618,650
======== ======== ========== ========== ========== ==========
Undistributed net investment
income at end of year ......... $ 714 $ 1,637 $ 2,302 $ 4,952 $ 25,148 $ 26,036
======== ======== ========== ========== ========== ==========
TAX CHARACTER OF DISTRIBUTIONS
PAID:
Ordinary income .................. $ 11,597 $ 12,826 $ 55,019 $ 41,404 $ 35,082 $ 27,799
Long-term capital gains .......... 8,242 5,553 82,534 -- -- --
-------- -------- ---------- ---------- ---------- ----------
Total ......................... $ 19,839 $ 18,379 $ 137,553 $ 41,404 $ 35,082 $ 27,799
======== ======== ========== ========== ========== ==========
See Notes to Financial Statements.
94
WEST COAST EQUITY FUND MID CAP STOCK FUND GROWTH FUND SMALL CAP VALUE FUND
---------------------- ---------------------- ---------------------- ----------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
10/31/06 10/31/05 10/31/06 10/31/05 10/31/06 10/31/05 10/31/06 10/31/05
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Net investment income ............ $ 8,642 $ 10,166 $ 6,720 $ 12,829 $ 3,939 $ 8,416 $ 6,070 $ 2,892
Net realized gain on investment
transactions .................. 42,256 37,872 44,968 56,510 6,713 66,759 10,555 18,587
Capital gain distributions
received ...................... 1,458 1,036 -- 2 -- -- 64 1
Net change in unrealized
appreciation/depreciation of
investments ................... 164,163 124,947 92,668 55,365 117,097 82,424 31,596 2,884
---------- ---------- -------- -------- ---------- ---------- -------- --------
Net increase in net assets
resulting from operations ..... 216,519 174,021 144,356 124,706 127,749 157,599 48,285 24,364
Distributions to shareholders
from:
Net investment income:
Class A Shares ............. (2,474) (3,556) (1,417) (100) -- (460) (89) (55)
Class B Shares ............. -- -- (150) -- -- (280) -- (6)
Class C Shares ............. -- (3) (52) -- -- (7) (6) (2)
Class I Shares ............. (4,385) (4,933) (11,820) (2,895) (2,024) (6,132) (2,800) (2,805)
Class R-1 Shares ........... -- -- -- -- -- -- -- --
Class R-2 Shares ........... -- -- -- -- -- -- -- --
Net realized gains on
investments:
Class A Shares ............. (18,343) (7,696) (6,174) (2,119) -- -- (768) --
Class B Shares ............. (4,670) (1,922) (1,651) (732) -- -- (171) --
Class C Shares ............. (403) (126) (307) (69) -- -- (138) --
Class I Shares ............. (15,468) (6,454) (48,230) (21,862) -- -- (17,592) --
Net increase/(decrease) in net
assets from Fund share
transactions:
Class A Shares ............. 65,757 41,184 109,071 25,110 1,447 (8,352) (4,491) 11,566
Class B Shares ............. 873 10,799 4,240 1,870 (23,009) (23,335) (179) 2,358
Class C Shares ............. 5,932 3,521 3,204 2,289 439 (6) (6) 2,082
Class I Shares ............. 131,215 45,817 (99,950) 64,931 543,555 93,923 (52,497) 29,467
---------- ---------- -------- -------- ---------- ---------- -------- --------
Net increase/(decrease) in net
assets ........................ 374,553 250,652 91,120 191,129 648,157 212,950 (30,452) 66,969
NET ASSETS:
Beginning of year ................ 1,538,174 1,287,522 888,399 697,270 1,732,380 1,519,430 339,302 272,333
---------- ---------- -------- -------- ---------- ---------- -------- --------
End of year ...................... $1,912,727 $1,538,174 $979,519 $888,399 $2,380,537 $1,732,380 $308,850 $339,302
========== ========== ======== ======== ========== ========== ======== ========
Undistributed net investment
income at end of year ......... $ 4,966 $ 3,183 $ 4,739 $ 11,458 $ 3,232 $ 1,476 $ 4,884 $ 1,812
========== ========== ======== ======== ========== ========== ======== ========
TAX CHARACTER OF DISTRIBUTIONS
PAID:
Ordinary income .................. $ 6,859 $ 8,492 $ 19,163 $ 4,637 $ 2,024 $ 6,879 $ 15,423 $ 2,868
Long-term capital gains .......... 38,884 16,198 50,638 23,140 -- -- 6,141 --
---------- ---------- -------- -------- ---------- ---------- -------- --------
Total ......................... $ 45,743 $ 24,690 $ 69,801 $ 27,777 $ 2,024 $ 6,879 $ 21,564 $ 2,868
========== ========== ======== ======== ========== ========== ======== ========
See Notes to Financial Statements.
95
Statements of Changes in Net Assets (continued)
WM GROUP OF FUNDS
(In thousands)
SMALL CAP INTERNATIONAL SHORT TERM
GROWTH FUND GROWTH FUND INCOME FUND
---------------------- ---------------------- ----------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
10/31/06 10/31/05 10/31/06 10/31/05 10/31/06 10/31/05
---------- ---------- ---------- ---------- ---------- ----------
Net investment income/(loss) ..... $ (1,883) $ (2,251) $ 14,332 $ 10,174 $ 9,587 $ 9,220
Net realized gain/(loss) on
investment transactions ....... (2,691) (47,989) 67,493 18,824 48 643
Capital gain distributions
received ...................... 8 1 -- -- -- --
Net increase from payment by the
Advisor* ...................... -- 1,321 -- -- -- --
Net change in unrealized
appreciation/depreciation of
investments ................... 21,563 73,015 148,131 87,039 579 (7,518)
-------- -------- ---------- -------- -------- --------
Net increase in net assets
resulting from operations ..... 16,997 24,097 229,956 116,037 10,214 2,345
Distributions to shareholders
from:
Net investment income:
Class A Shares ............. -- -- (881) (364) (1,242) (1,541)
Class B Shares ............. -- -- (33) -- (577) (742)
Class C Shares ............. -- -- (19) (4) (258) (453)
Class I Shares ............. -- -- (14,503) (7,523) (7,755) (6,799)
Class R-1 Shares ........... -- -- -- -- -- --
Net realized gains on
investments:
Class A Shares ............. -- -- -- -- -- --
Class B Shares ............. -- -- -- -- -- --
Class C Shares ............. -- -- -- -- -- --
Class I Shares ............. -- -- -- -- -- --
Net increase/(decrease) in net
assets from Fund share
transactions:
Class AShares .............. 14,170 (12,015) 47,944 9,765 (4,289) (16,583)
Class B Shares ............. (2,503) (2,939) 5,939 579 (7,219) (7,458)
Class C Shares ............. (77) 42 4,412 634 (6,508) (5,044)
Class I Shares ............. 16,754 (15,365) 109,564 140,594 (13,972) 31,452
Redemption fees ............ -- -- 36 10 -- --
-------- -------- ---------- -------- -------- --------
Net increase/(decrease) in net
assets ........................ 45,341 (6,180) 382,415 259,728 (31,606) (4,823)
NET ASSETS:
Beginning of year ................ 337,373 343,553 842,138 582,410 268,988 273,811
-------- -------- ---------- -------- -------- --------
End of year ...................... $382,714 $337,373 $1,224,553 $842,138 $237,382 $268,988
======== ======== ========== ======== ======== ========
Undistributed net investment
income at end of year ......... $ -- $ -- $ 7,697 $ 7,985 $ 51 $ 55
======== ======== ========== ======== ======== ========
TAX CHARACTER OF DISTRIBUTIONS
PAID:
Ordinary income .................. $ -- $ -- $ 15,436 $ 7,891 $ 9,832 $ 9,535
Tax-exempt income ................ -- -- -- -- -- --
Long-term capital gains .......... -- -- -- -- -- --
-------- -------- ---------- -------- -------- --------
Total ......................... $ -- $ -- $ 15,436 $ 7,891 $ 9,832 $ 9,535
======== ======== ========== ======== ======== ========
- ----------
* See Note 3 in Notes to Financial Statements.
See Notes to Financial Statements.
96
U.S. GOVERNMENT
SECURITIES FUND INCOME FUND HIGH YIELD FUND
---------------------- ---------------------- ----------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
10/31/06 10/31/05 10/31/06 10/31/05 10/31/06 10/31/05
---------- ---------- ---------- ---------- ---------- ----------
Net investment income/(loss) ..... $ 80,913 $ 70,544 $ 67,585 $ 59,461 $ 67,189 $ 53,962
Net realized gain/(loss) on
investment transactions ....... (2,472) 2,784 3,765 1,785 53,940 9,623
Capital gain distributions
received ...................... -- -- -- -- 28 --
Net increase from payment by the
Advisor* ...................... -- -- -- -- -- --
Net change in unrealized
appreciation/depreciation of
investments ................... 9,031 (52,278) 2,865 (50,548) 5,401 (13,197)
---------- ---------- ---------- ---------- ---------- --------
Net increase in net assets
resulting from operations ..... 87,472 21,050 74,215 10,698 126,558 50,388
Distributions to shareholders
from:
Net investment income:
Class A Shares ............. (4,914) (5,482) (7,888) (7,648) (14,924) (7,174)
Class B Shares ............. (3,886) (4,948) (5,238) (6,248) (4,812) (4,795)
Class C Shares ............. (288) (222) (501) (504) (3,174) (2,317)
Class I Shares ............. (77,077) (67,624) (55,743) (49,194) (42,589) (41,288)
Class R-1 Shares ........... -- -- -- -- (1) --
Net realized gains on
investments:
Class A Shares ............. -- -- -- -- -- --
Class B Shares ............. -- -- -- -- -- --
Class C Shares ............. -- -- -- -- -- --
Class I Shares ............. -- -- -- -- -- --
Net increase/(decrease) in net
assets from Fund share
transactions:
Class AShares .............. (22,448) (10,238) (4,529) 6,391 296,435 26,776
Class B Shares ............. (36,223) (31,325) (28,642) (17,900) 4,447 (5,927)
Class C Shares ............. 1,176 700 (398) (310) 34,999 5,421
Class I Shares ............. (122,801) 431,064 55,539 108,913 (55,020) 65,992
Redemption fees ............ -- -- -- -- -- --
---------- ---------- ---------- ---------- ---------- --------
Net increase/(decrease) in net
assets ........................ (178,989) 332,975 26,815 44,198 341,919 87,076
NET ASSETS:
Beginning of year ................ 1,892,154 1,559,179 1,190,264 1,146,066 811,715 724,639
---------- ---------- ---------- ---------- ---------- --------
End of year ...................... $1,713,165 $1,892,154 $1,217,079 $1,190,264 $1,153,634 $811,715
========== ========== ========== ========== ========== ========
Undistributed net investment
income at end of year ......... $ 483 $ 583 $ 2,371 $ 77 $ 3,596 $ 868
========== ========== ========== ========== ========== ========
TAX CHARACTER OF DISTRIBUTIONS
PAID:
Ordinary income .................. $ 86,165 $ 78,276 $ 69,370 $ 63,594 $ 65,500 $ 55,574
Tax-exempt income ................ -- -- -- -- -- --
Long-term capital gains .......... -- -- -- -- -- --
---------- ---------- ---------- ---------- ---------- --------
Total ......................... $ 86,165 $ 78,276 $ 69,370 $ 63,594 $ 65,500 $ 55,574
========== ========== ========== ========== ========== ========
See Notes to Financial Statements.
97
Statements of Changes in Net Assets (continued)
WM GROUP OF FUNDS
(In thousands)
CALIFORNIA INSURED
CALIFORNIA INTERMEDIATE
MUNICIPAL FUND MUNICIPAL FUND
---------------------- ----------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
10/31/06 10/31/05 10/31/06 10/31/05
---------- ---------- ---------- ----------
Net investment income .............. $ 15,988 $ 16,236 $ 3,591 $ 3,813
Net realized gain/(loss) on
investment transactions ......... 2,537 5,076 (165) 282
Net change in unrealized
appreciation/depreciation of
investments ..................... 5,335 (10,599) 1,590 (3,874)
-------- -------- -------- --------
Net increase in net assets resulting
from operations ................. 23,860 10,713 5,016 221
Distributions to shareholders from:
Net investment income:
Class A Shares ............... (10,638) (9,845) (2,041) (2,071)
Class B Shares ............... (5,196) (6,202) (1,375) (1,549)
Class C Shares ............... (150) (168) (177) (194)
Net realized gains on
investments:
Class A Shares ............... (3,050) (601) (151) (29)
Class B Shares ............... (2,036) (503) (132) (30)
Class C Shares ............... (57) (14) (17) (3)
Net increase/(decrease) in net
assets from Fund share
transactions:
Class A Shares ............... 21,038 13,478 (8,598) 1,650
Class B Shares ............... (30,863) (30,692) (14,586) (10,250)
Class C Shares ............... (261) (556) (1,410) (1,077)
-------- -------- -------- --------
Net decrease in net assets ......... (7,353) (24,390) (23,471) (13,332)
NET ASSETS:
Beginning of year .................. 409,054 433,444 132,705 146,037
-------- -------- -------- --------
End of year ........................ $401,701 $409,054 $109,234 $132,705
======== ======== ======== ========
Undistributed net investment income
at end of year .................. $ 112 $ 134 $ 55 $ 60
======== ======== ======== ========
TAX CHARACTER OF DISTRIBUTIONS PAID:
Ordinary income .................... $ 242 $ -- $ -- $ --
Tax-exempt income .................. 15,983 16,215 3,593 3,814
Long-term capital gains ............ 4,902 1,118 300 62
-------- -------- -------- --------
Total ........................... $ 21,127 $ 17,333 $ 3,893 $ 3,876
======== ======== ======== ========
See Notes to Financial Statements.
98
Statements of Changes in Net Assets -- Capital Stock Activity
WM GROUP OF FUNDS
(In thousands)
REIT FUND
ISSUED AS
REINVESTMENT NET INCREASE/
SOLD OF DIVIDENDS REDEEMED (DECREASE)
--------------- --------------- ---------------- ----------------
AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES
------- ------ ------- ------ -------- ------ -------- ------
YEAR ENDED 10/31/06:
Class A Shares ..... $14,277 740 $ 764 42 $ (5,982) (313) $ 9,059 469
Class B Shares ..... 3,592 187 267 15 (2,172) (115) 1,687 87
Class C Shares ..... 1,281 67 168 9 (1,693) (88) (244) (12)
Class I Shares ..... 2,972 158 18,452 1,018 (70,137) (3,616) (48,713) (2,440)
Class R-1 Shares ... 2 -- -- -- (2) -- -- --
Class R-2 Shares ... 3 -- -- -- (3) -- -- --
YEAR ENDED 10/31/05:
Class A Shares ..... $12,754 768 $ 508 31 $ (5,607) (341) $ 7,655 458
Class B Shares ..... 4,183 255 224 14 (2,298) (140) 2,109 129
Class C Shares ..... 2,480 150 150 9 (1,628) (98) 1,002 61
Class I Shares ..... 21,378 1,337 17,358 1,056 (2,065) (125) 36,671 2,268
EQUITY INCOME FUND
ISSUED AS
REINVESTMENT
SOLD OF DIVIDENDS REDEEMED NET INCREASE
---------------- --------------- ------------------ ----------------
AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES
-------- ------ ------- ------ --------- ------- -------- ------
YEAR ENDED 10/31/06:
Class A Shares ..... $661,031 31,517 $41,851 2,041 $(216,648) (10,285) $486,234 23,273
Class B Shares ..... 112,888 5,425 8,037 397 (48,195) (2,316) 72,730 3,506
Class C Shares ..... 120,126 5,829 4,997 248 (24,447) (1,176) 100,676 4,901
Class I Shares ..... 248,124 12,122 72,514 3,536 (106,627) (4,986) 214,011 10,672
Class R-1 Shares ... 768 36 3 -- (771) (36) -- --
Class R-2 Shares ... 562 26 2 -- (564) (26) -- --
YEAR ENDED 10/31/05:
Class A Shares ..... $467,759 23,884 $11,158 573 $ (95,749) (4,876) $383,168 19,581
Class B Shares ..... 94,639 4,886 1,809 94 (34,317) (1,776) 62,131 3,204
Class C Shares ..... 96,461 4,973 766 40 (8,528) (440) 88,699 4,573
Class I Shares ..... 237,093 12,184 25,533 1,313 (1,475) (81) 261,151 13,416
GROWTH & INCOME FUND
ISSUED AS
REINVESTMENT NET INCREASE/
SOLD OF DIVIDENDS REDEEMED (DECREASE)
---------------- --------------- ------------------ ------------------
AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES
-------- ------ ------- ------ --------- ------- --------- -------
YEAR ENDED 10/31/06:
Class A Shares ..... $ 36,515 1,414 $ 6,714 264 $(100,187) (3,879) $ (56,958) (2,201)
Class B Shares ..... 3,292 132 88 4 (27,663) (1,110) (24,283) (974)
Class C Shares ..... 648 26 9 -- (823) (33) (166) (7)
Class I Shares ..... 24,513 945 28,013 1,101 (521,454) (20,189) (468,928) (18,143)
YEAR ENDED 10/31/05:
Class A Shares ..... $ 39,189 1,595 $ 6,275 253 $ (86,525) (3,517) $ (41,061) (1,669)
Class B Shares ..... 5,243 220 24 1 (24,881) (1,049) (19,614) (828)
Class C Shares ..... 729 32 4 -- (515) (22) 218 10
Class I Shares ..... 474,848 19,204 21,264 856 (500) (20) 495,612 20,040
See Notes to Financial Statements.
99
Statements of Changes in Net Assets -- Capital Stock Activity (continued)
WM GROUP OF FUNDS
(In thousands)
WEST COAST EQUITY FUND
ISSUED AS
REINVESTMENT
SOLD OF DIVIDENDS REDEEMED NET INCREASE
---------------- --------------- ----------------- ----------------
AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES
-------- ------ ------- ------ --------- ------ -------- ------
YEAR ENDED 10/31/06:
Class A Shares ..... $154,435 3,733 $19,817 486 $(108,495) (2,631) $ 65,757 1,588
Class B Shares ..... 33,517 910 4,311 119 (36,955) (1,007) 873 22
Class C Shares ..... 8,989 243 383 10 (3,440) (94) 5,932 159
Class I Shares ..... 132,311 3,207 19,847 483 (20,943) (504) 131,215 3,186
Class R-1 Shares ... 15 -- -- -- (15) -- -- --
YEAR ENDED 10/31/05:
Class A Shares ..... $111,137 2,980 $10,883 291 $ (80,836) (2,167) $ 41,184 1,104
Class B Shares ..... 29,204 875 1,832 55 (20,237) (605) 10,799 325
Class C Shares ..... 5,584 166 118 4 (2,181) (65) 3,521 105
Class I Shares ..... 36,035 970 11,387 301 (1,605) (43) 45,817 1,228
MID CAP STOCK FUND
ISSUED AS
REINVESTMENT NET INCREASE/
SOLD OF DIVIDENDS REDEEMED (DECREASE)
---------------- --------------- ----------------- ------------------
AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES
-------- ------ ------- ------ --------- ------ -------- ------
YEAR ENDED 10/31/06:
Class A Shares ..... $126,679 6,356 $ 7,091 376 $ (24,699) (1,259) $109,071 5,473
Class B Shares ..... 7,702 414 1,620 91 (5,082) (274) 4,240 231
Class C Shares ..... 4,427 239 315 18 (1,538) (82) 3,204 175
Class I Shares ..... 5,163 256 60,050 3,143 (165,163) (8,467) (99,950) (5,068)
YEAR ENDED 10/31/05:
Class A Shares ..... $ 31,725 1,718 $ 2,131 122 $ (8,746) (482) $ 25,110 1,358
Class B Shares ..... 4,988 285 701 42 (3,819) (220) 1,870 107
Class C Shares ..... 2,699 150 61 4 (471) (27) 2,289 127
Class I Shares ..... 46,690 2,637 24,756 1,394 (6,515) (347) 64,931 3,684
GROWTH FUND
ISSUED AS
REINVESTMENT NET INCREASE/
SOLD OF DIVIDENDS REDEEMED (DECREASE)
---------------- -------------- ----------------- ----------------
AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES
-------- ------ ------ ------ --------- ------ -------- ------
YEAR ENDED 10/31/06:
Class A Shares ..... $ 30,880 1,870 $ -- -- $(29,433) (1,807) $ 1,447 63
Class B Shares ..... 2,686 183 -- -- (25,695) (1,767) (23,009) (1,584)
Class C Shares ..... 1,329 90 -- -- (890) (60) 439 30
Class I Shares ..... 563,458 32,476 2,023 117 (21,926) (1,302) 543,555 31,291
Class R-1 Shares ... 78 5 -- -- (78) (5) -- --
Class R-2 Shares ... 140 9 -- -- (140) (9) -- --
YEAR ENDED 10/31/05:
Class A Shares ..... $ 17,252 1,129 $ 448 29 $(26,052) (1,705) $ (8,352) (547)
Class B Shares ..... 3,252 237 270 19 (26,857) (1,955) (23,335) (1,699)
Class C Shares ..... 1,024 74 6 -- (1,036) (74) (6) --
Class I Shares ..... 100,416 6,423 6,132 383 (12,625) (785) 93,923 6,021
See Notes to Financial Statements.
100
Statements of Changes in Net Assets -- Capital Stock Activity (continued)
WM GROUP OF FUNDS
(In thousands)
SMALL CAP VALUE FUND
ISSUED AS
REINVESTMENT NET INCREASE/
SOLD OF DIVIDENDS REDEEMED (DECREASE)
---------------- ---------------- ----------------- -----------------
AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES
------- ------ ------- ------ -------- ------ -------- ------
YEAR ENDED 10/31/06:
Class A Shares .. $ 4,053 336 $ 643 55 $ (9,187) (767) $ (4,491) (376)
Class B Shares .. 896 75 119 10 (1,194) (101) (179) (16)
Class C Shares .. 894 81 135 12 (1,035) (93) (6) --
Class I Shares .. 3,541 290 20,391 1,729 (76,429) (6,402) (52,497) (4,383)
YEAR ENDED 10/31/05:
Class A Shares .. $16,188 1,333 $ 43 3 $ (4,665) (388) $ 11,566 948
Class B Shares .. 2,833 237 4 -- (479) (40) 2,358 197
Class C Shares .. 2,506 207 2 -- (426) (37) 2,082 170
Class I Shares .. 27,162 2,255 2,805 236 (500) (44) 29,467 2,447
SMALL CAP GROWTH FUND
ISSUED AS
REINVESTMENT NET INCREASE/
SOLD OF DIVIDENDS REDEEMED (DECREASE)
---------------- --------------- ----------------- -----------------
AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES
------- ------ ------ ------ -------- ------ -------- ------
YEAR ENDED 10/31/06:
Class A Shares .. $35,110 2,246 $-- -- $(20,940) (1,435) $ 14,170 811
Class B Shares .. 1,108 85 -- -- (3,611) (283) (2,503) (198)
Class C Shares .. 595 45 -- -- (672) (51) (77) (6)
Class I Shares .. 19,473 1,265 -- -- (2,719) (170) 16,754 1,095
YEAR ENDED 10/31/05:
Class A Shares .. $11,769 873 $-- -- $(23,784) (1,757) $(12,015) (884)
Class B Shares .. 811 68 -- -- (3,750) (319) (2,939) (251)
Class C Shares .. 555 46 -- -- (513) (43) 42 3
Class I Shares .. 35,485 2,536 -- -- (50,850) (3,688) (15,365) (1,152)
INTERNATIONAL GROWTH FUND
ISSUED AS
REINVESTMENT
SOLD OF DIVIDENDS REDEEMED NET INCREASE
----------------- ---------------- ----------------- -----------------
AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES
-------- ------ ------- ------ -------- ------ -------- ------
YEAR ENDED 10/31/06:
Class A Shares .. $ 61,085 4,958 $ 849 73 $(13,990) (1,143) $ 47,944 3,888
Class B Shares .. 8,605 735 28 3 (2,694) (234) 5,939 504
Class C Shares .. 5,286 455 18 2 (892) (78) 4,412 379
Class I Shares .. 145,272 12,079 14,503 1,246 (50,211) (4,007) 109,564 9,318
YEAR ENDED 10/31/05:
Class A Shares .. $ 16,974 1,684 $ 356 36 $ (7,565) (760) $ 9,765 960
Class B Shares .. 1,979 205 -- -- (1,400) (146) 579 59
Class C Shares .. 929 95 3 -- (298) (31) 634 64
Class I Shares .. 133,171 13,246 7,523 749 (100) (9) 140,594 13,986
See Notes to Financial Statements.
101
Statements of Changes in Net Assets -- Capital Stock Activity (continued)
WM GROUP OF FUNDS
(In thousands)
SHORT TERM INCOME FUND
ISSUED AS
REINVESTMENT NET INCREASE/
SOLD OF DIVIDENDS REDEEMED (DECREASE)
---------------- --------------- ------------------ -----------------
AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES
------- ------ ------ ------ -------- ------- -------- ------
YEAR ENDED 10/31/06:
Class A Shares .. $16,297 7,072 $ 958 416 $(21,544) (9,331) $ (4,289) (1,843)
Class B Shares .. 2,714 1,177 447 194 (10,380) (4,498) (7,219) (3,127)
Class C Shares .. 1,249 541 211 91 (7,968) (3,446) (6,508) (2,814)
Class I Shares .. 5,276 2,282 7,755 3,360 (27,003) (11,710) (13,972) (6,068)
YEAR ENDED 10/31/05:
Class A Shares .. $14,092 6,020 $1,042 445 $(31,717) (13,549) $(16,583) (7,084)
Class B Shares .. 2,089 891 592 253 (10,139) (4,327) (7,458) (3,183)
Class C Shares .. 3,121 1,330 389 166 (8,554) (3,655) (5,044) (2,159)
Class I Shares .. 24,653 10,528 6,799 2,909 -- -- 31,452 13,437
U.S. GOVERNMENT SECURITIES FUND
ISSUED AS
REINVESTMENT NET INCREASE/
SOLD OF DIVIDENDS REDEEMED (DECREASE)
----------------- ---------------- ------------------- -------------------
AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES
-------- ------ ------- ------ --------- ------- --------- -------
YEAR ENDED 10/31/06:
Class A Shares .. $ 7,339 702 $ 3,671 351 $ (33,458) (3,202) $ (22,448) (2,149)
Class B Shares .. 1,234 118 3,110 297 (40,567) (3,882) (36,223) (3,467)
Class C Shares .. 2,865 273 222 21 (1,911) (182) 1,176 112
Class I Shares .. 16,533 1,584 77,077 7,366 (216,411) (20,647) (122,801) (11,697)
YEAR ENDED 10/31/05:
Class A Shares .. $ 20,979 1,956 $ 4,035 376 $ (35,252) (3,278) $ (10,238) (946)
Class B Shares .. 4,266 397 3,945 367 (39,536) (3,681) (31,325) (2,917)
Class C Shares .. 3,171 296 175 17 (2,646) (246) 700 67
Class I Shares .. 363,440 33,841 67,624 6,304 -- -- 431,064 40,145
INCOME FUND
ISSUED AS
REINVESTMENT NET INCREASE/
SOLD OF DIVIDENDS REDEEMED (DECREASE)
---------------- ---------------- ----------------- -----------------
AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES
------- ------ ------- ------ -------- ------ -------- ------
YEAR ENDED 10/31/06:
Class A Shares .. $34,612 3,843 $ 5,013 556 $(44,154) (4,909) $ (4,529) (510)
Class B Shares .. 6,778 751 3,224 356 (38,644) (4,279) (28,642) (3,172)
Class C Shares .. 3,978 440 356 39 (4,732) (523) (398) (44)
Class I Shares .. 74,110 8,142 55,740 6,171 (74,311) (8,268) 55,539 6,045
YEAR ENDED 10/31/05:
Class A Shares .. $37,224 4,000 $ 4,859 523 $(35,692) (3,835) $ 6,391 688
Class B Shares .. 11,034 1,180 3,740 401 (32,674) (3,499) (17,900) (1,918)
Class C Shares .. 3,712 397 349 37 (4,371) (469) (310) (35)
Class I Shares .. 69,059 7,342 49,194 5,280 (9,340) (1,005) 108,913 11,617
See Notes to Financial Statements.
102
Statements of Changes in Net Assets -- Capital Stock Activity (continued)
WM GROUP OF FUNDS
(In thousands)
HIGH YIELD FUND
ISSUED AS
REINVESTMENT NET INCREASE/
SOLD OF DIVIDENDS REDEEMED (DECREASE)
----------------- ---------------- ------------------- ------------------
AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES
-------- ------ ------- ------ --------- ------- --------- ------
YEAR ENDED 10/31/06:
Class A Shares .. $363,171 42,425 $ 8,797 1,024 $ (75,533) (8,860) $ 296,435 34,589
Class B Shares .. 17,909 2,083 2,166 252 (15,628) (1,828) 4,447 507
Class C Shares .. 40,488 4,695 1,568 182 (7,057) (823) 34,999 4,054
Class I Shares .. 13,315 1,574 42,589 4,992 (110,924) (13,114) (55,020) (6,548)
Class R-1 Shares 92 11 1 -- (93) (11) -- --
Class R-2 Shares 1 -- -- -- (1) -- -- --
YEAR ENDED 10/31/05:
Class A Shares .. $ 65,936 7,984 $ 3,681 445 $ (42,841) (5,212) $ 26,776 3,217
Class B Shares .. 9,556 1,153 2,103 253 (17,586) (2,120) (5,927) (714)
Class C Shares .. 14,492 1,743 1,133 136 (10,204) (1,232) 5,421 647
Class I Shares .. 35,769 4,296 41,288 5,005 (11,065) (1,345) 65,992 7,956
CALIFORNIA MUNICIPAL FUND
ISSUED AS
REINVESTMENT NET INCREASE/
SOLD OF DIVIDENDS REDEEMED (DECREASE)
---------------- --------------- ----------------- -----------------
AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES
------- ------ ------ ------ -------- ------ -------- ------
YEAR ENDED 10/31/06:
Class A Shares .. $52,280 4,684 $8,953 803 $(40,195) (3,599) $ 21,038 1,888
Class B Shares .. 2,725 245 5,140 461 (38,728) (3,472) (30,863) (2,766)
Class C Shares .. 955 86 149 13 (1,365) (122) (261) (23)
YEAR ENDED 10/31/05:
Class A Shares .. $35,403 3,108 $6,596 580 $(28,521) (2,508) $ 13,478 1,180
Class B Shares .. 3,770 330 4,531 399 (38,993) (3,428) (30,692) (2,699)
Class C Shares .. 801 70 129 11 (1,486) (130) (556) (49)
CALIFORNIA INSURED INTERMEDIATE MUNICIPAL FUND
ISSUED AS
REINVESTMENT NET INCREASE/
SOLD OF DIVIDENDS REDEEMED (DECREASE)
---------------- --------------- ----------------- -----------------
AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES
------- ------ ------ ------ -------- ------ -------- ------
YEAR ENDED 10/31/06:
Class A Shares .. $ 9,038 832 $1,483 137 $(19,119) (1,760) $ (8,598) (791)
Class B Shares .. 178 16 1,143 105 (15,907) (1,465) (14,586) (1,344)
Class C Shares .. 177 16 145 13 (1,732) (159) (1,410) (130)
YEAR ENDED 10/31/05:
Class A Shares .. $13,962 1,264 $1,383 126 $(13,695) (1,244) $ 1,650 146
Class B Shares .. 1,211 109 1,190 108 (12,651) (1,148) (10,250) (931)
Class C Shares .. 785 71 140 13 (2,002) (181) (1,077) (97)
See Notes to Financial Statements.
103
Financial Highlights
REIT FUND
For a Fund share outstanding throughout each period.
INCOME FROM
INVESTMENT OPERATIONS LESS DISTRIBUTIONS
------------------------------------ ----------------------------------------
NET NET REALIZED
ASSET AND DIVIDENDS DISTRIBUTIONS
VALUE NET UNREALIZED TOTAL FROM FROM NET FROM NET
BEGINNING INVESTMENT GAIN ON INVESTMENT INVESTMENT REALIZED TOTAL
OF PERIOD INCOME INVESTMENTS OPERATIONS INCOME CAPITAL GAINS DISTRIBUTIONS
--------- ---------- ------------ ---------- ---------- ------------- -------------
CLASS A SHARES
Year Ended:
10/31/06 $17.23 $0.31(5) $5.24 $5.55 $(0.35) $(0.40) $(0.75)
10/31/05 15.62 0.42(5) 1.95 2.37 (0.42) (0.34) (0.76)
10/31/04 12.46 0.39(5) 3.13 3.52 (0.31) (0.05) (0.36)
10/31/03(3) 10.00 0.28(5) 2.35 2.63 (0.17) -- (0.17)
CLASS B SHARES
Year Ended:
10/31/06 $17.18 $0.16(5) $5.23 $5.39 $(0.21) $(0.40) $(0.61)
10/31/05 15.58 0.29(5) 1.94 2.23 (0.29) (0.34) (0.63)
10/31/04 12.43 0.29(5) 3.12 3.41 (0.21) (0.05) (0.26)
10/31/03(3) 10.00 0.22(5) 2.35 2.57 (0.14) -- (0.14)
CLASS C SHARES
Year Ended:
10/31/06 $17.18 $0.17(5) $5.23 $5.40 $(0.22) $(0.40) $(0.62)
10/31/05 15.58 0.30(5) 1.94 2.24 (0.30) (0.34) (0.64)
10/31/04 12.43 0.31(5) 3.12 3.43 (0.23) (0.05) (0.28)
10/31/03(3) 10.00 0.23(5) 2.35 2.58 (0.15) -- (0.15)
CLASS I SHARES
Year Ended:
10/31/06 $17.27 $0.39(5) $5.26 $5.65 $(0.43) $(0.40) $(0.83)
10/31/05 15.65 0.49(5) 1.96 2.45 (0.49) (0.34) (0.83)
10/31/04 12.47 0.46(5) 3.14 3.60 (0.37) (0.05) (0.42)
10/31/03(3) 10.00 0.34(5) 2.32 2.66 (0.19) -- (0.19)
RATIOS TO AVERAGE
NET ASSETS/SUPPLEMENTAL DATA
------------------------------------------------------------
RATIO OF RATIO OF
EXPENSES EXPENSES
TO AVERAGE TO AVERAGE RATIO OF
NET NET ASSETS NET ASSETS NET
ASSET BEFORE AFTER INVESTMENT
VALUE NET ASSETS REIMBURSE- REIMBURSE- INCOME TO PORTFOLIO
END OF TOTAL END OF PERIOD MENTS/ MENTS/ AVERAGE TURNOVER
PERIOD RETURN(1) (IN 000S) WAIVERS WAIVERS(2) NET ASSETS RATE
------ --------- ------------- ---------- ---------- ---------- ---------
CLASS A SHARES
Year Ended:
10/31/06 $22.03 33.28% $ 33,638 1.30% 1.30% 1.61% 18%
10/31/05 17.23 15.46 18,234 1.31 1.31 2.50 11
10/31/04 15.62 28.71 9,376 1.33 1.33 2.82 5
10/31/03(3) 12.46 26.43 3,159 1.41(6) 1.41(6) 3.60(6) 7
CLASS B SHARES
Year Ended:
10/31/06 $21.96 32.23% $ 13,281 2.09% 2.09% 0.82% 18%
10/31/05 17.18 14.57 8,898 2.09 2.09 1.72 11
10/31/04 15.58 27.76 6,060 2.08 2.08 2.07 5
10/31/03(3) 12.43 25.86 2,808 2.13(6) 2.13(6) 2.88(6) 7
CLASS C SHARES
Year Ended:
10/31/06 $21.96 32.32% $ 6,262 2.01% 2.01% 0.90% 18%
10/31/05 17.18 14.66 5,100 2.00 2.00 1.81 11
10/31/04 15.58 27.95 3,672 1.98 1.98 2.17 5
10/31/03(3) 12.43 25.88 1,322 2.06(6) 2.06(6) 2.95(6) 7
CLASS I SHARES
Year Ended:
10/31/06 $22.09 33.87% $443,621 0.86% 0.86% 2.05% 18%
10/31/05 17.27 15.99 388,914 0.84 0.84 2.97 11
10/31/04 15.65 29.40 316,904 0.86 0.86 3.29 5
10/31/03(3) 12.47 26.76 182,138 0.92(6) 0.92(6) 4.09(6) 7
(1) Total return is not annualized for periods of less than one year and does
not reflect any applicable sales charges.
The total returns 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 through custodian credits.
(3) The REIT Fund commenced operations on March 1, 2003.
See Notes to Financial Statements.
104
Financial Highlights
EQUITY INCOME FUND
For a Fund share outstanding throughout each period.
INCOME/(LOSS) FROM
INVESTMENT OPERATIONS LESS DISTRIBUTIONS
------------------------------------ ----------------------------------------
NET REALIZED
NET AND
ASSET UNREALIZED DIVIDENDS DISTRIBUTIONS
VALUE NET GAIN/(LOSS) TOTAL FROM FROM NET FROM NET
BEGINNING INVESTMENT ON INVESTMENT INVESTMENT REALIZED TOTAL
OF PERIOD INCOME INVESTMENTS OPERATIONS INCOME CAPITAL GAINS DISTRIBUTIONS
--------- ---------- ------------ ---------- ---------- ------------- -------------
CLASS A SHARES
Year Ended:
10/31/06 $20.07 $0.33(5) $ 3.00 $ 3.33 $(0.34) $(0.63) $(0.97)
10/31/05 17.79 0.41(5) 2.25 2.66 (0.38) -- (0.38)
10/31/04 15.46 0.29(5) 2.33 2.62 (0.29) -- (0.29)
10/31/03 12.73 0.33(5) 2.73 3.06 (0.33) -- (0.33)
10/31/02 14.85 0.40(5) (1.85) (1.45) (0.35) (0.32) (0.67)
CLASS B SHARES
Year Ended:
10/31/06 $19.93 $0.15(5) $ 2.98 $ 3.13 $(0.17) $(0.63) $(0.80)
10/31/05 17.67 0.24(5) 2.24 2.48 (0.22) -- (0.22)
10/31/04 15.36 0.14(5) 2.30 2.44 (0.13) -- (0.13)
10/31/03 12.65 0.20(5) 2.71 2.91 (0.20) -- (0.20)
10/31/02 14.78 0.27(5) (1.85) (1.58) (0.23) (0.32) (0.55)
CLASS C SHARES
Year Ended:
10/31/06 $19.79 $0.16(5) $ 2.96 $ 3.12 $(0.20) $(0.63) $(0.83)
10/31/05 17.57 0.26(5) 2.22 2.48 (0.26) -- (0.26)
10/31/04 15.29 0.16(5) 2.30 2.46 (0.18) -- (0.18)
10/31/03 12.62 0.22(5) 2.68 2.90 (0.23) -- (0.23)
10/31/02(4) 15.09 0.18(5) (2.43) (2.25) (0.22) -- (0.22)
CLASS I SHARES
Year Ended:
10/31/06 $20.07 $0.40(5) $ 3.00 $ 3.40 $(0.41) $(0.63) $(1.04)
10/31/05 17.79 0.48(5) 2.24 2.72 (0.44) -- (0.44)
10/31/04 15.45 0.35(5) 2.33 2.68 (0.34) -- (0.34)
10/31/03 12.73 0.38(5) 2.72 3.10 (0.38) -- (0.38)
10/31/02 14.85 0.45(5) (1.85) (1.40) (0.40) (0.32) (0.72)
RATIOS TO AVERAGE
NET ASSETS/SUPPLEMENTAL DATA
------------------------------------------------------------
RATIO OF RATIO OF
EXPENSES EXPENSES
TO AVERAGE TO AVERAGE RATIO OF
NET NET ASSETS NET ASSETS NET
ASSET BEFORE AFTER INVESTMENT
VALUE NET ASSETS REIMBURSE- REIMBURSE- INCOME TO PORTFOLIO
END OF TOTAL END OF PERIOD MENTS/ MENTS/ AVERAGE TURNOVER
PERIOD RETURN(1) (IN 000S) WAIVERS WAIVERS(2) NET ASSETS RATE
------ --------- ------------- ---------- ---------- ---------- ---------
CLASS A SHARES
Year Ended:
10/31/06 $22.43 17.16% $1,514,188 0.87% 0.87% 1.56% 81%(7)
10/31/05 20.07 15.06 887,828 0.90 0.90 2.13 32
10/31/04 17.79 17.06 438,776 0.91 0.91 1.74 20
10/31/03 15.46 24.43 268,489 0.95 0.95 2.43 18
10/31/02 12.73 (10.35) 198,756 0.97 0.97 2.77 16
CLASS B SHARES
Year Ended:
10/31/06 $22.26 16.16% $ 330,900 1.73% 1.73% 0.70% 81%(7)
10/31/05 19.93 14.07 226,390 1.78 1.78 1.25 32
10/31/04 17.67 16.04 144,144 1.81 1.81 0.84 20
10/31/03 15.36 23.19 103,888 1.89 1.89 1.49 18
10/31/02 12.65 (11.20) 82,330 1.88 1.88 1.86 16
CLASS C SHARES
Year Ended:
10/31/06 $22.08 16.28% $ 251,685 1.64% 1.64% 0.79% 81%(7)
10/31/05 19.79 14.16 128,523 1.68 1.68 1.35 32
10/31/04 17.57 16.16 33,770 1.70 1.70 0.95 20
10/31/03 15.29 23.29 5,973 1.78 1.78 1.60 18
10/31/02(4) 12.62 (15.07) 1,780 1.80(6) 1.80(6) 1.94(6) 16
CLASS I SHARES
Year Ended:
10/31/06 $22.43 17.53% $1,686,604 0.55% 0.55% 1.88% 81%(7)
10/31/05 20.07 15.39 1,294,804 0.58 0.58 2.45 32
10/31/04 17.79 17.51 908,925 0.59 0.59 2.06 20
10/31/03 15.45 24.77 529,665 0.61 0.61 2.77 18
10/31/02 12.73 (10.04) 350,185 0.63 0.63 3.11 16
(4) The Equity Income Fund commenced selling Class C shares on March 1, 2002.
(5) Per share numbers have been calculated using the average shares method.
(6) Annualized.
(7) The Equity Income Fund had unusually high portfolio turnover due to a
change in the portfolio manager.
See Notes to Financial Statements.
105
Financial Highlights
GROWTH & INCOME FUND
For a Fund share outstanding throughout each period.
INCOME/(LOSS) FROM
INVESTMENT OPERATIONS LESS DISTRIBUTIONS
--------------------------------------- ----------------------------------------
NET REALIZED
NET AND
ASSET NET UNREALIZED DIVIDENDS DISTRIBUTIONS
VALUE INVESTMENT GAIN/(LOSS) TOTAL FROM FROM NET FROM NET
BEGINNING INCOME/ ON INVESTMENT INVESTMENT REALIZED TOTAL
OF PERIOD (LOSS) INVESTMENTS OPERATIONS INCOME CAPITAL GAINS DISTRIBUTIONS
--------- ---------- ------------ ---------- ---------- ------------- -------------
CLASS A SHARES
Year Ended:
10/31/06 $24.63 $ 0.32(4) $ 2.77 $ 3.09 $(0.31) $ -- $(0.31)
10/31/05 23.41 0.33(4) 1.16 1.49 (0.27) -- (0.27)
10/31/04 21.59 0.22(4) 1.81 2.03 (0.21) -- (0.21)
10/31/03 18.44 0.22(4) 3.11 3.33 (0.18) -- (0.18)
10/31/02 22.34 0.17(4) (3.68) (3.51) (0.03) (0.36) (0.39)
CLASS B SHARES
Year Ended:
10/31/06 $23.65 $ 0.04(4) $ 2.66 $ 2.70 $(0.03) $ -- $(0.03)
10/31/05 22.47 0.08(4) 1.11 1.19 (0.01) -- (0.01)
10/31/04 20.74 (0.01)(4) 1.74 1.73 -- -- --
10/31/03 17.72 0.02(4) 3.00 3.02 -- -- --
10/31/02 21.67 (0.04)(4) (3.55) (3.59) (0.00)(5) (0.36) (0.36)
CLASS C SHARES
Year Ended:
10/31/06 $23.33 $ 0.07(4) $ 2.65 $ 2.72 $(0.11) $ -- $(0.11)
10/31/05 22.22 0.08(4) 1.10 1.18 (0.07) -- (0.07)
10/31/04 20.62 (0.00)(4)(5) 1.73 1.73 (0.13) -- (0.13)
10/31/03 17.73 0.03(4) 2.98 3.01 (0.12) -- (0.12)
10/31/02(3) 21.36 (0.01)(4) (3.62) (3.63) -- -- --
CLASS I SHARES
Year Ended:
10/31/06 $24.75 $ 0.40(4) $ 2.78 $ 3.18 $(0.39) $ -- $(0.39)
10/31/05 23.52 0.41(4) 1.17 1.58 (0.35) -- (0.35)
10/31/04 21.68 0.30(4) 1.82 2.12 (0.28) -- (0.28)
10/31/03 18.52 0.29(4) 3.12 3.41 (0.25) -- (0.25)
10/31/02 22.39 0.24(4) (3.70) (3.46) (0.05) (0.36) (0.41)
RATIOS TO AVERAGE
NET ASSETS/SUPPLEMENTAL DATA
------------------------------------------------------------
RATIO OF RATIO OF
EXPENSES EXPENSES RATIO OF
TO AVERAGE TO AVERAGE NET
NET NET ASSETS NET ASSETS INVESTMENT
ASSET BEFORE AFTER INCOME/
VALUE NET ASSETS REIMBURSE- REIMBURSE- (LOSS) TO PORTFOLIO
END OF TOTAL END OF PERIOD MENTS/ MENTS/ AVERAGE TURNOVER
PERIOD RETURN(1) (IN 000S) WAIVERS WAIVERS(2) NET ASSETS RATE
------ --------- ------------- ---------- ---------- ---------- ---------
CLASS A SHARES
Year Ended:
10/31/06 $27.41 12.62% $ 576,277 0.87% 0.87% 1.23% 29%
10/31/05 24.63 6.34 572,128 0.89 0.89 1.34 15
10/31/04 23.41 9.45 582,866 0.90 0.90 0.94 6
10/31/03 21.59 18.18 541,707 0.93 0.93 1.12 17
10/31/02 18.44 (16.10) 475,010 0.94 0.94 0.79 22
CLASS B SHARES
Year Ended:
10/31/06 $26.32 11.42% $ 64,452 1.93% 1.93% 0.17% 29%
10/31/05 23.65 5.28 80,957 1.92 1.92 0.31 15
10/31/04 22.47 8.39 95,528 1.89 1.89 (0.05) 6
10/31/03 20.74 16.99 115,457 1.96 1.96 0.09 17
10/31/02 17.72 (16.94) 123,423 1.91 1.91 (0.18) 22
CLASS C SHARES
Year Ended:
10/31/06 $25.94 11.71% $ 1,859 1.81% 1.81% 0.29% 29%
10/31/05 23.33 5.30 1,835 1.88 1.88 0.35 15
10/31/04 22.22 8.45 1,537 1.84 1.84 (0.00) 6
10/31/03 20.62 17.08 823 1.89 1.89 0.16 17
10/31/02(3) 17.73 (17.00) 264 1.83(6) 1.83(6) (0.10)(6) 22
CLASS I SHARES
Year Ended:
10/31/06 $27.54 12.98% $1,685,443 0.53% 0.53% 1.57% 29%
10/31/05 24.75 6.70 1,963,730 0.56 0.56 1.67 15
10/31/04 23.52 9.85 1,394,883 0.57 0.57 1.27 6
10/31/03 21.68 18.61 895,547 0.59 0.59 1.46 17
10/31/02 18.52 (15.84) 671,191 0.60 0.60 1.13 22
(1) Total return is not annualized for periods of less than one year and does
not reflect any applicable sales charges.
The total returns 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 through custodian credits.
(3) The Funds commenced selling Class C shares on March 1, 2002.
See Notes to Financial Statements.
106
Financial Highlights
WEST COAST EQUITY FUND
For a Fund share outstanding throughout each period.
INCOME/(LOSS) FROM
INVESTMENT OPERATIONS LESS DISTRIBUTIONS
------------------------------------ ----------------------------------------
NET REALIZED
NET AND
ASSET NET UNREALIZED DIVIDENDS DISTRIBUTIONS
VALUE INVESTMENT GAIN/(LOSS) TOTAL FROM FROM NET FROM NET
BEGINNING INCOME/ ON INVESTMENT INVESTMENT REALIZED TOTAL
OF PERIOD (LOSS) INVESTMENTS OPERATIONS INCOME CAPITAL GAINS DISTRIBUTIONS
--------- ---------- ------------ ---------- ---------- ------------- -------------
CLASS A SHARES
Year Ended:
10/31/06 $38.99 $ 0.18 $ 5.02 $ 5.20 $(0.13) $(0.97) $(1.10)
10/31/05 35.04 0.25 4.33 4.58 (0.20) (0.43) (0.63)
10/31/04 32.14 0.06(4) 2.84 2.90 -- -- --
10/31/03 23.73 0.04(4) 8.37 8.41 -- -- --
10/31/02 28.89 0.02(4) (4.09) (4.07) (0.07) (1.02) (1.09)
CLASS B SHARES
Year Ended:
10/31/06 $34.84 $(0.18) $ 4.47 $ 4.29 $ -- $(0.97) $(0.97)
10/31/05 31.48 (0.09) 3.88 3.79 -- (0.43) (0.43)
10/31/04 29.14 (0.24)(4) 2.58 2.34 -- -- --
10/31/03 21.73 (0.20)(4) 7.61 7.41 -- -- --
10/31/02 26.71 (0.23)(4) (3.73) (3.96) (0.00)(5) (1.02) (1.02)
CLASS C SHARES
Year Ended:
10/31/06 $34.94 $(0.16) $ 4.50 $ 4.34 $ -- $(0.97) $(0.97)
10/31/05 31.56 (0.06) 3.88 3.82 (0.01) (0.43) (0.44)
10/31/04 29.20 (0.21)(4) 2.57 2.36 -- -- --
10/31/03 21.74 (0.18)(4) 7.64 7.46 -- -- --
10/31/02(3) 27.59 (0.14)(4) (5.71) (5.85) -- -- --
CLASS I SHARES
Year Ended:
10/31/06 $39.39 $ 0.32 $ 5.07 $ 5.39 $(0.25) $(0.97) $(1.22)
10/31/05 35.39 0.39 4.37 4.76 (0.33) (0.43) (0.76)
10/31/04 32.39 0.17(4) 2.87 3.04 (0.04) -- (0.04)
10/31/03 23.83 0.13(4) 8.43 8.56 -- -- --
10/31/02 29.00 0.12(4) (4.10) (3.98) (0.17) (1.02) (1.19)
RATIOS TO AVERAGE
NET ASSETS/SUPPLEMENTAL DATA
------------------------------------------------------------
RATIO OF RATIO OF
EXPENSES EXPENSES RATIO OF
TO AVERAGE TO AVERAGE NET
NET NET ASSETS NET ASSETS INVESTMENT
ASSET BEFORE AFTER INCOME/
VALUE NET ASSETS REIMBURSE- REIMBURSE- (LOSS) TO PORTFOLIO
END OF TOTAL END OF PERIOD MENTS/ MENTS/ AVERAGE TURNOVER
PERIOD RETURN(1) (IN 000S) WAIVERS WAIVERS(2) NET ASSETS RATE
------ --------- ------------- ---------- ---------- ---------- ---------
CLASS A SHARES
Year Ended:
10/31/06 $43.09 13.50% $880,755 0.85% 0.85% 0.44% 15%
10/31/05 38.99 13.13 735,037 0.91 0.91 0.68 13
10/31/04 35.04 9.06 621,924 0.94 0.94 0.17 12
10/31/03 32.14 35.44 523,308 1.02 1.02 0.14 14
10/31/02 23.73 (14.94) 375,821 1.05 1.05 0.07 16
CLASS B SHARES
Year Ended:
10/31/06 $38.16 12.45% $184,340 1.78% 1.78% (0.49)% 15%
10/31/05 34.84 12.09 167,531 1.85 1.85 (0.26) 13
10/31/04 31.48 8.03 141,134 1.89 1.89 (0.78) 12
10/31/03 29.14 34.10 122,221 2.01 2.01 (0.85) 14
10/31/02 21.73 (15.73) 102,208 2.00 2.00 (0.88) 16
CLASS C SHARES
Year Ended:
10/31/06 $38.31 12.53% $ 21,039 1.69% 1.69% (0.40)% 15%
10/31/05 34.94 12.18 13,613 1.78 1.78 (0.19) 13
10/31/04 31.56 8.12 9,000 1.80 1.80 (0.69) 12
10/31/03 29.20 34.27 3,593 1.90 1.90 (0.74) 14
10/31/02(3) 21.74 (21.20) 1,341 1.96(6) 1.96(6) (0.84)(6) 16
CLASS I SHARES
Year Ended:
10/31/06 $43.56 13.88% $826,593 0.53% 0.53% 0.76% 15%
10/31/05 39.39 13.55 621,993 0.58 0.58 1.01 13
10/31/04 35.39 9.39 515,464 0.61 0.61 0.50 12
10/31/03 32.39 35.92 349,363 0.67 0.67 0.49 14
10/31/02 23.83 (14.65) 195,029 0.70 0.70 0.42 16
(4) Per share numbers have been calculated using the average shares method.
(5) Amount represents less than $0.01 per share.
(6) Annualized.
See Notes to Financial Statements.
107
Financial Highlights
MID CAP STOCK FUND
For a Fund share outstanding throughout each period.
INCOME/(LOSS) FROM
INVESTMENT OPERATIONS LESS DISTRIBUTIONS
------------------------------------ ----------------------------------------
NET REALIZED
NET AND
ASSET NET UNREALIZED DIVIDENDS DISTRIBUTIONS
VALUE INVESTMENT GAIN/(LOSS) TOTAL FROM FROM NET FROM NET
BEGINNING INCOME/ ON INVESTMENT INVESTMENT REALIZED TOTAL
OF PERIOD (LOSS) INVESTMENTS OPERATIONS INCOME CAPITAL GAINS DISTRIBUTIONS
--------- ---------- ------------ ---------- ---------- ------------- -------------
CLASS A SHARES
Year Ended:
10/31/06 $19.23 $ 0.10(4) $ 3.02 $ 3.12 $(0.26) $(1.23) $(1.49)
10/31/05 17.06 0.24(4) 2.56 2.80 (0.03) (0.60) (0.63)
10/31/04 15.34 0.02(4) 1.75 1.77 (0.01) (0.04) (0.05)
10/31/03 12.39 0.01(4) 2.94 2.95 -- -- --
10/31/02 13.50 (0.01)(4) (0.60) (0.61) -- (0.50) (0.50)
CLASS B SHARES
Year Ended:
10/31/06 $18.23 $(0.09)(4) $ 2.85 $ 2.76 $(0.10) $(1.23) $(1.33)
10/31/05 16.33 0.06(4) 2.44 2.50 -- (0.60) (0.60)
10/31/04 14.82 (0.14)(4) 1.69 1.55 -- (0.04) (0.04)
10/31/03 12.09 (0.13)(4) 2.86 2.73 -- -- --
10/31/02 13.31 (0.15)(4) (0.57) (0.72) -- (0.50) (0.50)
CLASS C SHARES
Year Ended:
10/31/06 $18.28 $(0.06)(4) $ 2.85 $ 2.79 $(0.18) $(1.23) $(1.41)
10/31/05 16.36 0.08(4) 2.44 2.52 -- (0.60) (0.60)
10/31/04 14.83 (0.13)(4) 1.70 1.57 -- (0.04) (0.04)
10/31/03 12.10 (0.12)(4) 2.85 2.73 -- -- --
10/31/02(3) 13.60 (0.10)(4) (1.40) (1.50) -- -- --
CLASS I SHARES
Year Ended:
10/31/06 $19.47 $ 0.17(4) $ 3.04 $ 3.21 $(0.31) $(1.23) $(1.54)
10/31/05 17.26 0.30(4) 2.59 2.89 (0.08) (0.60) (0.68)
10/31/04 15.50 0.08(4) 1.78 1.86 (0.06) (0.04) (0.10)
10/31/03 12.51 0.06(4) 2.97 3.03 (0.04) -- (0.04)
10/31/02 13.59 0.04(4) (0.60) (0.56) (0.02) (0.50) (0.52)
RATIOS TO AVERAGE
NET ASSETS/SUPPLEMENTAL DATA
------------------------------------------------------------
RATIO OF RATIO OF
EXPENSES EXPENSES RATIO OF
TO AVERAGE TO AVERAGE NET
NET NET ASSETS NET ASSETS INVESTMENT
ASSET BEFORE AFTER INCOME/
VALUE NET ASSETS REIMBURSE- REIMBURSE- (LOSS) TO PORTFOLIO
END OF TOTAL END OF PERIOD MENTS/ MENTS/ AVERAGE TURNOVER
PERIOD RETURN(1) (IN 000S) WAIVERS WAIVERS(2) NET ASSETS RATE
------ --------- ------------- ---------- ---------- ---------- ---------
CLASS A SHARES
Year Ended:
10/31/06 $20.86 17.12% $215,201 1.09% 1.09% 0.53% 22%
10/31/05 19.23 16.75 93,180 1.12 1.12 1.32 28
10/31/04 17.06 11.57 59,491 1.14 1.14 0.12 23
10/31/03 15.34 23.81 38,676 1.16 1.16 0.07 28
10/31/02 12.39 (4.86) 28,248 1.25 1.25 (0.10) 27
CLASS B SHARES
Year Ended:
10/31/06 $19.66 15.95% $ 30,663 2.07% 2.07% (0.45)% 22%
10/31/05 18.23 15.63 24,218 2.11 2.11 0.33 28
10/31/04 16.33 10.54 19,958 2.12 2.12 (0.86) 23
10/31/03 14.82 22.50 17,405 2.24 2.24 (1.01) 28
10/31/02 12.09 (5.79) 13,229 2.26 2.26 (1.11) 27
CLASS C SHARES
Year Ended:
10/31/06 $19.66 16.09% $ 8,051 1.95% 1.95% (0.33)% 22%
10/31/05 18.28 15.73 4,303 1.99 1.99 0.45 28
10/31/04 16.36 10.60 1,769 2.04 2.04 (0.79) 23
10/31/03 14.83 22.56 550 2.15 2.15 (0.92) 28
10/31/02(3) 12.10 (11.03) 55 2.24(6) 2.24(6) (1.09)(6) 27
CLASS I SHARES
Year Ended:
10/31/06 $21.14 17.41% $725,604 0.78% 0.78% 0.84% 22%
10/31/05 19.47 17.11 766,698 0.80 0.80 1.64 28
10/31/04 17.26 12.02 616,052 0.80 0.80 0.45 23
10/31/03 15.50 24.27 369,772 0.81 0.81 0.42 28
10/31/02 12.51 (4.44) 231,409 0.83 0.83 0.32 27
(1) Total return is not annualized for periods of less than one year and does
not reflect any applicable sales charges. The total returns 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 through custodian credits.
(3) The Funds commenced selling Class C shares on March 1, 2002.
See Notes to Financial Statements.
108
Financial Highlights
GROWTH FUND
For a Fund share outstanding throughout each period.
INCOME/(LOSS) FROM
INVESTMENT OPERATIONS LESS DISTRIBUTIONS
-------------------------------------- ----------------------------------------
NET REALIZED
NET AND
ASSET NET UNREALIZED DIVIDENDS DISTRIBUTIONS
VALUE INVESTMENT GAIN/(LOSS) TOTAL FROM FROM NET FROM NET
BEGINNING INCOME/ ON INVESTMENT INVESTMENT REALIZED TOTAL
OF PERIOD (LOSS) INVESTMENTS OPERATIONS INCOME CAPITAL GAINS DISTRIBUTIONS
--------- ---------- ------------ ---------- ---------- ------------- -------------
CLASS A SHARES
Year Ended:
10/31/06 $15.77 $(0.04)(4) $ 1.08 $ 1.04 $ -- $-- $ --
10/31/05 14.44 0.01 1.37 1.38 (0.05) -- (0.05)
10/31/04 13.71 (0.06)(4) 0.79 0.73 -- -- --
10/31/03 11.47 (0.08)(4) 2.32 2.24 -- -- --
10/31/02 15.23 (0.10)(4) (3.66) (3.76) -- -- --
CLASS B SHARES
Year Ended:
10/31/06 $14.12 $(0.19)(4) $ 0.97 $ 0.78 $ -- $-- $ --
10/31/05 13.03 (0.14) 1.26 1.12 (0.03) -- (0.03)
10/31/04 12.49 (0.17)(4) 0.71 0.54 -- -- --
10/31/03 10.55 (0.18)(4) 2.12 1.94 -- -- --
10/31/02 14.13 (0.21)(4) (3.37) (3.58) -- -- --
CLASS C SHARES
Year Ended:
10/31/06 $14.25 $(0.15)(4) $ 0.97 $ 0.82 $ -- $-- $ --
10/31/05 13.13 (0.11) 1.27 1.16 (0.04) -- (0.04)
10/31/04 12.55 (0.15)(4) 0.73 0.58 -- -- --
10/31/03 10.56 (0.14)(4) 2.13 1.99 -- -- --
10/31/02(3) 13.48 (0.11)(4) (2.81) (2.92) -- -- --
CLASS I SHARES
Year Ended:
10/31/06 $16.43 $ 0.05(4) $ 1.13 $ 1.18 $(0.02) $-- $(0.02)
10/31/05 14.96 0.10 1.44 1.54 (0.07) -- (0.07)
10/31/04 14.13 0.02(4) 0.81 0.83 -- -- --
10/31/03 11.74 0.00(4))(5) 2.39 2.39 -- -- --
10/31/02 15.48 (0.01)(4) (3.73) (3.74) -- -- --
RATIOS TO AVERAGE
NET ASSETS/SUPPLEMENTAL DATA
------------------------------------------------------------
RATIO OF RATIO OF
EXPENSES EXPENSES RATIO OF
TO AVERAGE TO AVERAGE NET
NET NET ASSETS NET ASSETS INVESTMENT
ASSET BEFORE AFTER INCOME/
VALUE NET ASSETS REIMBURSE- REIMBURSE- (LOSS) TO PORTFOLIO
END OF TOTAL END OF PERIOD MENTS/ MENTS/ AVERAGE TURNOVER
PERIOD RETURN(1) (IN 000S) WAIVERS WAIVERS(2) NET ASSETS RATE
------ --------- ------------- ---------- ---------- ---------- ---------
CLASS A SHARES
Year Ended:
10/31/06 $16.81 6.60% $ 137,129 1.26% 1.26% (0.26)% 44%
10/31/05 15.77 9.59 127,677 1.41 1.41 0.06 78
10/31/04 14.44 5.32 124,755 1.44 1.44 (0.43) 56
10/31/03 13.71 19.53 114,757 1.62 1.62 (0.66) 71
10/31/02 11.47 (24.69) 94,848 1.69 1.69 (0.74) 170(7)
CLASS B SHARES
Year Ended:
10/31/06 $14.90 5.53% $ 77,728 2.28% 2.28% (1.28)% 44%
10/31/05 14.12 8.55 96,044 2.36 2.36 (0.89) 78
10/31/04 13.03 4.40 110,794 2.35 2.35 (1.34) 56
10/31/03 12.49 18.39 129,239 2.54 2.54 (1.58) 71
10/31/02 10.55 (25.34) 128,007 2.54 2.54 (1.59) 170(7)
CLASS C SHARES
Year Ended:
10/31/06 $15.07 5.75% $ 2,730 2.01% 2.01% (1.01)% 44%
10/31/05 14.25 8.85 2,158 2.13 2.13 (0.66) 78
10/31/04 13.13 4.62 1,981 2.14 2.14 (1.13) 56
10/31/03 12.55 18.85 565 2.19 2.19 (1.23) 71
10/31/02(3) 10.56 (21.66) 199 2.38(6) 2.38(6) (1.43)(6) 170(7)
CLASS I SHARES
Year Ended:
10/31/06 $17.59 7.18% $2,162,950 0.73% 0.73% 0.27% 44%
10/31/05 16.43 10.30 1,506,501 0.83 0.83 0.64 78
10/31/04 14.96 5.95 1,281,900 0.86 0.86 0.15 56
10/31/03 14.13 20.27 664,334 0.92 0.92 0.04 71
10/31/02 11.74 (24.16) 357,296 1.03 1.03 (0.08) 170(7)
(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 Growth Fund had unusually high portfolio turnover due to a change in
sub-advisors.
See Notes to Financial Statements.
109
Financial Highlights
SMALL CAP VALUE FUND
For a Fund share outstanding throughout each period.
INCOME FROM
INVESTMENT OPERATIONS LESS DISTRIBUTIONS
-------------------------------------- ----------------------------------------
NET NET REALIZED
ASSET NET AND DIVIDENDS DISTRIBUTIONS
VALUE INVESTMENT UNREALIZED TOTAL FROM FROM NET FROM NET
BEGINNING INCOME/ GAIN ON INVESTMENT INVESTMENT REALIZED TOTAL
OF PERIOD (LOSS) INVESTMENTS OPERATIONS INCOME CAPITAL GAINS DISTRIBUTIONS
--------- ---------- ------------ ---------- ---------- ------------- -------------
CLASS A SHARES
Year Ended:
10/31/06 $11.68 $ 0.19(5) $1.57 $1.76 $(0.07) $(0.65) $(0.72)
10/31/05 10.81 0.06(5) 0.91 0.97 (0.10) -- (0.10)
10/31/04(3) 10.00 0.05(5) 0.76 0.81 -- -- --
CLASS B SHARES
Year Ended:
10/31/06 $11.55 $ 0.07(5) $1.55 $1.62 $ -- $(0.65) $(0.65)
10/31/05 10.74 (0.05)(5) 0.92 0.87 (0.06) -- (0.06)
10/31/04(3) 10.00 (0.01)(5) 0.75 0.74 -- -- --
CLASS C SHARES
Year Ended:
10/31/06 $11.58 $ 0.10(5) $1.55 $1.65 $(0.02) $(0.65) $(0.67)
10/31/05 10.76 (0.03)(5) 0.90 0.87 (0.05) -- (0.05)
10/31/04(3) 10.00 (0.00)(5)(7) 0.76 0.76 -- -- --
CLASS I SHARES
Year Ended:
10/31/06 $11.74 $ 0.24(5) $1.59 $1.83 $(0.11) $(0.65) $(0.76)
10/31/05 10.83 0.11(5) 0.91 1.02 (0.11) -- (0.11)
10/31/04(3) 10.00 0.08(5) 0.75 0.83 -- -- --
RATIOS TO AVERAGE
NET ASSETS/SUPPLEMENTAL DATA
------------------------------------------------------------
RATIO OF RATIO OF
EXPENSES EXPENSES RATIO OF
TO AVERAGE TO AVERAGE NET
NET NET ASSETS NET ASSETS INVESTMENT
ASSET BEFORE AFTER INCOME/
VALUE NET ASSETS REIMBURSE- REIMBURSE- (LOSS) TO PORTFOLIO
END OF TOTAL END OF PERIOD MENTS/ MENTS/ AVERAGE TURNOVER
PERIOD RETURN(1) (IN 000S) WAIVERS WAIVERS(2) NET ASSETS RATE
------ --------- ------------- --------- ---------- ---------- ---------
CLASS A SHARES
Year Ended:
10/31/06 $12.72 15.51% $ 10,786 1.35% 1.35% 1.54% 38%
10/31/05 11.68 9.04 14,302 1.29 1.29 0.52 54
10/31/04(3) 10.81 8.10 2,978 1.33(6) 1.33(6) 0.77(6) 36
CLASS B SHARES
Year Ended:
10/31/06 $12.52 14.44% $ 3,007 2.32% 2.32% 0.57% 38%
10/31/05 11.55 8.08 2,955 2.20 2.20 (0.39) 54
10/31/04(3) 10.74 7.40 631 2.23(6) 2.23(6) (0.13)(6) 36
CLASS C SHARES
Year Ended:
10/31/06 $12.56 14.76% $ 2,615 2.09% 2.09% 0.80% 38%
10/31/05 11.58 8.08 2,414 2.10 2.10 (0.29) 54
10/31/04(3) 10.76 7.60 414 2.13(6) 2.13(6) (0.03)(6) 36
CLASS I SHARES
Year Ended:
10/31/06 $12.81 16.14% $292,442 0.90% 0.90% 1.99% 38%
10/31/05 11.74 9.42 319,631 0.90 0.90 0.91 54
10/31/04(3) 10.83 8.30 268,310 0.95(6) 0.95(6) 1.15(6) 36
(1) Total return is not annualized for periods of less than one year and does
not reflect any applicable sales charges.
The total returns 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 through custodian credits.
(3) The Small Cap Value Fund commenced operations on March 1, 2004.
See Notes to Financial Statements.
110
Financial Highlights
SMALL CAP GROWTH FUND
For a Fund share outstanding throughout each period.
INCOME/(LOSS) FROM
INVESTMENT OPERATIONS LESS DISTRIBUTIONS
------------------------------------ ----------------------------------------
NET REALIZED
NET AND
ASSET UNREALIZED DIVIDENDS DISTRIBUTIONS
VALUE NET GAIN/(LOSS) TOTAL FROM FROM NET FROM NET
BEGINNING INVESTMENT ON INVESTMENT INVESTMENT REALIZED TOTAL
OF PERIOD LOSS INVESTMENTS OPERATIONS INCOME CAPITAL GAINS DISTRIBUTIONS
--------- ---------- ------------ ---------- ---------- ------------- -------------
CLASS A SHARES
Year Ended:
10/31/06 $13.93 $(0.11)(5) $ 0.86 $ 0.75 $-- $ -- $ --
10/31/05 13.00 (0.13)(5) 1.06 0.93 -- -- --
10/31/04 13.42 (0.14)(5) (0.28) (0.42) -- -- --
10/31/03 8.21 (0.09)(5) 5.30 5.21 -- -- --
10/31/02 13.60 (0.14)(5) (4.28) (4.42) -- (0.97) (0.97)
CLASS B SHARES
Year Ended:
10/31/06 $12.14 $(0.26)(5) $ 0.76 $ 0.50 $-- $ -- $ --
10/31/05 11.46 (0.25)(5) 0.93 0.68 -- -- --
10/31/04 11.96 (0.26)(5) (0.24) (0.50) -- -- --
10/31/03 7.40 (0.18)(5) 4.74 4.56 -- -- --
10/31/02 12.46 (0.23)(5) (3.86) (4.09) -- (0.97) (0.97)
CLASS C SHARES
Year Ended:
10/31/06 $12.31 $(0.21)(5) $ 0.77 $ 0.56 $-- $ -- $ --
10/31/05 11.59 (0.22)(5) 0.94 0.72 -- -- --
10/31/04 12.06 (0.23)(5) (0.24) (0.47) -- -- --
10/31/03 7.42 (0.14)(5) 4.78 4.64 -- -- --
10/31/02(4) 11.51 (0.10)(5) (3.99) (4.09) -- -- --
CLASS I SHARES
Year Ended:
10/31/06 $14.43 $(0.05)(5) $ 0.90 $ 0.85 $-- $ -- $ --
10/31/05 13.39 (0.07)(5) 1.11 1.04 -- -- --
10/31/04 13.76 (0.07)(5) (0.30) (0.37) -- -- --
10/31/03 8.35 (0.02)(5) 5.43 5.41 -- -- --
10/31/02 13.74 (0.06)(5) (4.36) (4.42) -- (0.97) (0.97)
RATIOS TO AVERAGE
NET ASSETS/SUPPLEMENTAL DATA
------------------------------------------------------------
RATIO OF RATIO OF
EXPENSES EXPENSES
TO AVERAGE TO AVERAGE RATIO OF
NET NET ASSETS NET ASSETS NET
ASSET BEFORE AFTER INVESTMENT
VALUE NET ASSETS REIMBURSE- REIMBURSE- LOSS TO PORTFOLIO
END OF TOTAL END OF PERIOD MENTS/ MENTS/ AVERAGE TURNOVER
PERIOD RETURN(1) (IN 000S) WAIVERS WAIVERS(2) NET ASSETS RATE
------ --------- ------------- --------- ---------- ---------- ---------
CLASS A SHARES
Year Ended:
10/31/06 $14.68 5.39% $103,863 1.40% 1.40% (0.80)% 70%
10/31/05 13.93 7.15 87,252 1.51 1.51 (1.00) 251(8)
10/31/04 13.00 (3.13) 92,919 1.46 1.46 (1.01) 53
10/31/03 13.42 63.46 81,234 1.64 1.64 (0.86) 40
10/31/02 8.21 (35.71) 42,984 1.68 1.68 (1.20) 21
CLASS B SHARES
Year Ended:
10/31/06 $12.64 4.12% $ 7,763 2.61% 2.61% (2.01)% 70%
10/31/05 12.14 5.93 9,859 2.65 2.65 (2.14) 251(8)
10/31/04 11.46 (4.18) 12,181 2.54 2.54 (2.09) 53
10/31/03 11.96 61.62 18,037 2.81 2.81 (2.03) 40
10/31/02 7.40 (36.36) 14,238 2.64 2.64 (2.16) 21
CLASS C SHARES
Year Ended:
10/31/06 $12.87 4.55% $ 922 2.23% 2.23% (1.63)% 70%
10/31/05 12.31 6.21 954 2.33 2.33 (1.82) 251(8)
10/31/04 11.59 (3.90) 871 2.28 2.28 (1.83) 53
10/31/03 12.06 62.53 404 2.28 2.28 (1.50) 40
10/31/02(4) 7.42 (35.53) 69 2.25(6) 2.25(6) (1.77)(6) 21
CLASS I SHARES
Year Ended:
10/31/06 $15.28 5.89% $270,166 0.92% 0.92% (0.32)% 70%
10/31/05 14.43 7.77 239,308 0.98 0.98 (0.47) 251(8)
10/31/04 13.39 (2.62) 237,582 0.95 0.95 (0.50) 53
10/31/03 13.76 64.67 337,271 0.96 0.96 (0.18) 40
10/31/02 8.35 (35.32) 123,620 1.00 1.00 (0.52) 21
(4) The Small Cap Growth Fund commenced selling Class C shares on March 1,
2002.
(5) Per share numbers have been calculated using the average shares method.
(6) Annualized.
(7) Amount represents less than $0.01 per share.
(8) The Small Cap Growth Fund had unusually high portfolio turnover due to a
change in sub-advisors.
See Notes to Financial Statements.
111
Financial Highlights
INTERNATIONAL GROWTH FUND
For a Fund share outstanding throughout each period.
INCOME/(LOSS) FROM
INVESTMENT OPERATIONS LESS DISTRIBUTIONS
------------------------------------ ----------------------------------------
NET REALIZED
NET AND
ASSET NET UNREALIZED DIVIDENDS DISTRIBUTIONS
VALUE INVESTMENT GAIN/(LOSS) TOTAL FROM FROM NET FROM NET
BEGINNING INCOME/ ON INVESTMENT INVESTMENT REALIZED TOTAL
OF PERIOD (LOSS) INVESTMENTS OPERATIONS INCOME CAPITAL GAINS DISTRIBUTIONS
--------- ---------- ------------ ---------- ---------- ------------- -------------
CLASS A SHARES
Year Ended:
10/31/06 $10.74 $ 0.12(4) $ 2.53 $ 2.65 $(0.16) $-- $(0.16)
10/31/05 9.21 0.10(4) 1.52 1.62 (0.09) -- (0.09)
10/31/04 8.38 0.06(4) 0.85 0.91 (0.08) -- (0.08)
10/31/03 6.76 0.03(4) 1.63 1.66 (0.04) -- (0.04)
10/31/02 7.61 (0.02)(4) (0.75) (0.77) (0.08) -- (0.08)
CLASS B SHARES
Year Ended:
10/31/06 $10.24 $(0.00)(4) $ 2.41 $ 2.41 $(0.07) $-- $(0.07)
10/31/05 8.80 (0.01)(4) 1.45 1.44 -- -- --
10/31/04 8.03 (0.04)(4) 0.81 0.77 -- -- --
10/31/03 6.51 (0.05)(4) 1.57 1.52 -- -- --
10/31/02 7.35 (0.09)(4) (0.73) (0.82) (0.02) -- (0.02)
CLASS C SHARES
Year Ended:
10/31/06 $10.14 $ 0.02(4) $ 2.38 $ 2.40 $(0.13) $-- $(0.13)
10/31/05 8.75 0.01(4) 1.44 1.45 (0.06) -- (0.06)
10/31/04 8.02 (0.02)(4) 0.81 0.79 (0.06) -- (0.06)
10/31/03 6.53 (0.03)(4) 1.56 1.53 (0.04) -- (0.04)
10/31/02(3) 7.55 (0.05)(4) (0.96) (1.01) (0.01) -- (0.01)
CLASS I SHARES
Year Ended:
10/31/06 $10.81 $ 0.17(4) $ 2.54 $ 2.71 $(0.20) $-- $(0.20)
10/31/05 9.26 0.15(4) 1.53 1.68 (0.13) -- (0.13)
10/31/04 8.43 0.11(4) 0.84 0.95 (0.12) -- (0.12)
10/31/03 6.80 0.08(4) 1.64 1.72 (0.09) -- (0.09)
10/31/02 7.69 0.04(4) (0.75) (0.71) (0.18) -- (0.18)
RATIOS TO AVERAGE
NET ASSETS/SUPPLEMENTAL DATA
------------------------------------------------------------
RATIO OF RATIO OF
EXPENSES EXPENSES RATIO OF
TO AVERAGE TO AVERAGE NET
NET NET ASSETS NET ASSETS INVESTMENT
ASSET BEFORE AFTER INCOME/
VALUE NET ASSETS REIMBURSE- REIMBURSE- (LOSS) TO PORTFOLIO
END OF TOTAL END OF PERIOD MENTS/ MENTS/ AVERAGE TURNOVER
PERIOD RETURN(1) (IN 000S) WAIVERS WAIVERS(2) NET ASSETS RATE
------ --------- ------------- --------- ---------- ---------- ---------
CLASS A SHARES
Year Ended:
10/31/06 $13.23 24.89% $ 119,976 1.27% 1.27% 0.99% 38%
10/31/05 10.74 17.60 55,628 1.39 1.39 1.02 24
10/31/04 9.21 10.89 38,864 1.49 1.49 0.68 20
10/31/03 8.38 24.75 26,429 1.70 1.70 0.47 19
10/31/02 6.76 (10.36) 21,317 1.93 1.93 (0.20) 25
CLASS B SHARES
Year Ended:
10/31/06 $12.58 23.57% $ 12,270 2.30% 2.30% (0.04)% 38%
10/31/05 10.24 16.36 4,822 2.51 2.51 (0.10) 24
10/31/04 8.80 9.59 3,630 2.62 2.62 (0.45) 20
10/31/03 8.03 23.35 4,020 2.91 2.91 (0.74) 19
10/31/02 6.51 (11.23) 4,732 2.91 2.91 (1.18) 25
CLASS C SHARES
Year Ended:
10/31/06 $12.41 23.82% $ 6,135 2.08% 2.08% 0.18% 38%
10/31/05 10.14 16.60 1,169 2.29 2.29 0.12 24
10/31/04 8.75 9.87 445 2.36 2.36 (0.19) 20
10/31/03 8.02 23.57 91 2.64 2.64 (0.47) 19
10/31/02(3) 6.53 (13.34) 53 2.67(5) 2.67(5) (0.94)(5) 25
CLASS I SHARES
Year Ended:
10/31/06 $13.32 25.32% $1,086,172 0.90% 0.90% 1.36% 38%
10/31/05 10.81 18.19 780,519 0.95 0.95 1.46 24
10/31/04 9.26 11.38 539,471 0.99 0.99 1.18 20
10/31/03 8.43 25.56 317,493 1.07 1.07 1.10 19
10/31/02 6.80 (9.61) 185,137 1.19 1.19 0.54 25
(1) Total return is not annualized for periods of less than one year and does
not reflect any applicable sales charges.
The total returns 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 through custodian credits.
(3) The Funds commenced selling Class C shares on March 1, 2002.
See Notes to Financial Statements.
112
Financial Highlights
SHORT TERM INCOME FUND
For a Fund share outstanding throughout each period.
INCOME/(LOSS) FROM
INVESTMENT OPERATIONS LESS DISTRIBUTIONS
------------------------------------ ----------------------------------------
NET REALIZED
NET AND
ASSET UNREALIZED DIVIDENDS DISTRIBUTIONS
VALUE NET GAIN/(LOSS) TOTAL FROM FROM NET FROM NET
BEGINNING INVESTMENT ON INVESTMENT INVESTMENT REALIZED TOTAL
OF PERIOD INCOME INVESTMENTS OPERATIONS INCOME CAPITAL GAINS DISTRIBUTIONS
--------- ---------- ------------ ---------- ---------- ------------- -------------
CLASS A SHARES
Year Ended:
10/31/06 $2.31 $0.08 $ 0.01 $ 0.09 $(0.08) $-- $(0.08)
10/31/05 2.38 0.08 (0.07) 0.01 (0.08) -- (0.08)
10/31/04 2.39 0.08 (0.01) 0.07 (0.08) -- (0.08)
10/31/03 2.34 0.09 0.06 0.15 (0.10) -- (0.10)
10/31/02 2.41 0.12 (0.07) 0.05 (0.12) -- (0.12)
CLASS B SHARES
Year Ended:
10/31/06 $2.31 $0.07 $ 0.01 $ 0.08 $(0.07) $-- $(0.07)
10/31/05 2.38 0.06 (0.07) (0.01) (0.06) -- (0.06)
10/31/04 2.39 0.06 (0.01) 0.05 (0.06) -- (0.06)
10/31/03 2.34 0.07 0.06 0.13 (0.08) -- (0.08)
10/31/02 2.41 0.10 (0.07) 0.03 (0.10) -- (0.10)
CLASS C SHARES
Year Ended:
10/31/06 $2.31 $0.07 $ 0.01 $ 0.08 $(0.07) $-- $(0.07)
10/31/05 2.38 0.06 (0.07) (0.01) (0.06) -- (0.06)
10/31/04 2.39 0.06 (0.01) 0.05 (0.06) -- (0.06)
10/31/03 2.34 0.07 0.06 0.13 (0.08) -- (0.08)
10/31/02(3) 2.37 0.07 (0.03) 0.04 (0.07) -- (0.07)
CLASS I SHARES
Year Ended:
10/31/06 $2.31 $0.09 $ 0.01 $ 0.10 $(0.09) $-- $(0.09)
10/31/05 2.38 0.09 (0.07) 0.02 (0.09) -- (0.09)
10/31/04 2.39 0.08 (0.01) 0.07 (0.08) -- (0.08)
10/31/03 2.34 0.09 0.06 0.15 (0.10) -- (0.10)
10/31/02 2.41 0.13 (0.07) 0.06 (0.13) -- (0.13)
RATIOS TO AVERAGE
NET ASSETS/SUPPLEMENTAL DATA
------------------------------------------------------------
RATIO OF RATIO OF
EXPENSES EXPENSES
TO AVERAGE TO AVERAGE RATIO OF
NET NET ASSETS NET ASSETS NET
ASSET BEFORE AFTER INVESTMENT
VALUE NET ASSETS REIMBURSE- REIMBURSE- INCOME TO PORTFOLIO
END OF TOTAL END OF PERIOD MENTS/ MENTS/ AVERAGE TURNOVER
PERIOD RETURN(1) (IN 000S) WAIVERS WAIVERS(2) NET ASSETS RATE
------ --------- ------------- ---------- ---------- ---------- ---------
CLASS A SHARES
Year Ended:
10/31/06 $2.32 4.15% $ 32,081 0.95% 0.95% 3.54% 14%
10/31/05 2.31 0.49 36,287 0.93 0.81 3.36 13
10/31/04 2.38 2.87 54,082 0.92 0.83 3.23 14
10/31/03 2.39 6.28 71,920 0.97 0.84 3.58 33
10/31/02 2.34 2.18 28,106 1.09 0.96 5.03 28
CLASS B SHARES
Year Ended:
10/31/06 $2.32 3.36% $ 16,411 1.71% 1.71% 2.78% 14%
10/31/05 2.31 (0.26) 23,617 1.70 1.56 2.61 13
10/31/04 2.38 2.11 31,812 1.70 1.58 2.48 14
10/31/03 2.39 5.49 44,310 1.70 1.59 2.83 33
10/31/02 2.34 1.41 24,621 1.77 1.71 4.28 28
CLASS C SHARES
Year Ended:
10/31/06 $2.32 3.39% $ 6,980 1.68% 1.68% 2.81% 14%
10/31/05 2.31 (0.26) 13,477 1.65 1.56 2.61 13
10/31/04 2.38 2.10 18,970 1.66 1.58 2.48 14
10/31/03 2.39 5.48 17,843 1.65 1.59 2.83 33
10/31/02(3) 2.34 1.61 5,743 1.68(5) 1.68(5) 4.31(5) 28
CLASS I SHARES
Year Ended:
10/31/06 $2.32 4.57% $181,910 0.55% 0.55% 3.94% 14%
10/31/05 2.31 0.74 195,607 0.56 0.56 3.61 13
10/31/04 2.38 3.13 168,947 0.58 0.58 3.48 14
10/31/03 2.39 6.55 129,443 0.59 0.59 3.83 33
10/31/02 2.34 2.53 89,210 0.61 0.61 5.38 28
(4) Per share numbers have been calculated using the average shares method.
(5) Annualized.
See Notes to Financial Statements.
113
Financial Highlights
U.S. GOVERNMENT SECURITIES FUND
For a Fund share outstanding throughout each period.
INCOME FROM
INVESTMENT OPERATIONS LESS DISTRIBUTIONS
------------------------------------ ----------------------------------------
NET REALIZED
NET AND
ASSET UNREALIZED DIVIDENDS DISTRIBUTIONS
VALUE NET GAIN/(LOSS) TOTAL FROM FROM NET FROM NET
BEGINNING INVESTMENT ON INVESTMENT INVESTMENT REALIZED TOTAL
OF PERIOD INCOME INVESTMENTS OPERATIONS INCOME CAPITAL GAINS DISTRIBUTIONS
--------- ---------- ------------ ---------- ---------- ------------- -------------
CLASS A SHARES
Year Ended:
10/31/06 $10.53 $0.44 $ 0.04 $0.48 $(0.47) $-- $(0.47)
10/31/05 10.88 0.41(4) (0.30) 0.11 (0.46) -- (0.46)
10/31/04 10.89 0.40(4) 0.05 0.45 (0.46) -- (0.46)
10/31/03 11.19 0.40(4) (0.19) 0.21 (0.51) -- (0.51)
10/31/02 11.20 0.54 0.04 0.58 (0.59) -- (0.59)
CLASS B SHARES
Year Ended:
10/31/06 $10.52 $0.37 $ 0.05 $0.42 $(0.40) $-- $(0.40)
10/31/05 10.87 0.33(4) (0.30) 0.03 (0.38) -- (0.38)
10/31/04 10.88 0.32(4) 0.05 0.37 (0.38) -- (0.38)
10/31/03 11.18 0.32(4) (0.19) 0.13 (0.43) -- (0.43)
10/31/02 11.19 0.46 0.04 0.50 (0.51) -- (0.51)
CLASS C SHARES
Year Ended:
10/31/06 $10.51 $0.37 $ 0.05 $0.42 $(0.40) $-- $(0.40)
10/31/05 10.86 0.33(4) (0.30) 0.03 (0.38) -- (0.38)
10/31/04 10.87 0.32(4) 0.05 0.37 (0.38) -- (0.38)
10/31/03 11.18 0.32(4) (0.20) 0.12 (0.43) -- (0.43)
10/31/02(3) 11.00 0.33 0.18 0.51 (0.33) -- (0.33)
CLASS I SHARES
Year Ended:
10/31/06 $10.53 $0.49 $ 0.05 $0.54 $(0.52) $-- $(0.52)
10/31/05 10.88 0.45(4) (0.30) 0.15 (0.50) -- (0.50)
10/31/04 10.89 0.44(4) 0.05 0.49 (0.50) -- (0.50)
10/31/03 11.19 0.44(4) (0.19) 0.25 (0.55) -- (0.55)
10/31/02 11.20 0.58 0.04 0.62 (0.63) -- (0.63)
RATIOS TO AVERAGE
NET ASSETS/SUPPLEMENTAL DATA
------------------------------------------------------------
RATIO OF RATIO OF
EXPENSES EXPENSES
TO AVERAGE TO AVERAGE RATIO OF
NET NET ASSETS NET ASSETS NET
ASSET BEFORE AFTER INVESTMENT
VALUE NET ASSETS REIMBURSE- REIMBURSE- INCOME TO PORTFOLIO
END OF TOTAL END OF PERIOD MENTS/ MENTS/ AVERAGE TURNOVER
PERIOD RETURN(1) (IN 000S) WAIVERS WAIVERS(2) NET ASSETS RATE
------ --------- ------------- ---------- ---------- ---------- ---------
CLASS A SHARES
Year Ended:
10/31/06 $10.54 4.74% $ 98,110 0.91% 0.91% 4.25% 13%
10/31/05 10.53 1.02 120,615 0.92 0.92 3.84 34
10/31/04 10.88 4.26 134,896 0.93 0.93 3.64 30
10/31/03 10.89 1.94 176,859 0.93 0.93 3.59 62
10/31/02 11.19 5.37 196,222 0.96 0.96 4.91 48
CLASS B SHARES
Year Ended:
10/31/06 $10.54 4.06% $ 85,761 1.66% 1.66% 3.50% 13%
10/31/05 10.52 0.28 122,147 1.65 1.65 3.11 34
10/31/04 10.87 3.50 157,900 1.65 1.65 2.92 30
10/31/03 10.88 1.20 251,153 1.66 1.66 2.86 62
10/31/02 11.18 4.62 271,440 1.68 1.68 4.19 48
CLASS C SHARES
Year Ended:
10/31/06 $10.53 4.00% $ 7,964 1.63% 1.63% 3.53% 13%
10/31/05 10.51 0.29 6,775 1.64 1.64 3.12 34
10/31/04 10.86 3.53 6,279 1.64 1.64 2.93 30
10/31/03 10.87 1.12 13,354 1.64 1.64 2.88 62
10/31/02(3) 11.18 4.74 11,634 1.63(5) 1.63(5) 4.24(5) 48
CLASS I SHARES
Year Ended:
10/31/06 $10.55 5.25% $1,521,330 0.52% 0.52% 4.64% 13%
10/31/05 10.53 1.41 1,642,617 0.54 0.54 4.22 34
10/31/04 10.88 4.65 1,260,104 0.55 0.55 4.02 30
10/31/03 10.89 2.32 658,676 0.57 0.57 3.95 62
10/31/02 11.19 5.77 365,912 0.58 0.58 5.29 48
(1) Total return is not annualized for periods of less than one year and does
not reflect any applicable sales charges.
The total returns 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 through custodian credits.
(3) The Funds commenced selling Class C shares on March 1, 2002.
See Notes to Financial Statements.
114
Financial Highlights
INCOME FUND
For a Fund share outstanding throughout each period.
INCOME FROM
INVESTMENT OPERATIONS LESS DISTRIBUTIONS
------------------------------------ ----------------------------------------
NET REALIZED
NET AND
ASSET UNREALIZED DIVIDENDS DISTRIBUTIONS
VALUE NET GAIN/(LOSS) TOTAL FROM FROM NET FROM NET
BEGINNING INVESTMENT ON INVESTMENT INVESTMENT REALIZED TOTAL
OF PERIOD INCOME INVESTMENTS OPERATIONS INCOME CAPITAL GAINS DISTRIBUTIONS
--------- ---------- ------------ ---------- ---------- ------------- -------------
CLASS A SHARES
Year Ended:
10/31/06 $9.05 $0.48 $ 0.05 $0.53 $(0.49) $-- $(0.49)
10/31/05 9.46 0.45 (0.38) 0.07 (0.48) -- (0.48)
10/31/04 9.35 0.46 0.15 0.61 (0.50) -- (0.50)
10/31/03 9.02 0.51 0.38 0.89 (0.56) -- (0.56)
10/31/02 9.32 0.60 (0.28) 0.32 (0.62) -- (0.62)
CLASS B SHARES
Year Ended:
10/31/06 $9.08 $0.41 $ 0.05 $0.46 $(0.42) $-- $(0.42)
10/31/05 9.49 0.38 (0.38) 0.00 (0.41) -- (0.41)
10/31/04 9.37 0.39 0.16 0.55 (0.43) -- (0.43)
10/31/03 9.04 0.44 0.38 0.82 (0.49) -- (0.49)
10/31/02 9.35 0.54 (0.29) 0.25 (0.56) -- (0.56)
CLASS C SHARES
Year Ended:
10/31/06 $9.08 $0.41 $ 0.05 $0.46 $(0.42) $-- $(0.42)
10/31/05 9.49 0.38 (0.38) 0.00 (0.41) -- (0.41)
10/31/04 9.37 0.39 0.16 0.55 (0.43) -- (0.43)
10/31/03 9.04 0.45 0.38 0.83 (0.50) -- (0.50)
10/31/02(3) 9.21 0.37 (0.17) 0.20 (0.37) -- (0.37)
CLASS I SHARES
Year Ended:
10/31/06 $9.07 $0.51 $ 0.05 $0.56 $(0.52) $-- $(0.52)
10/31/05 9.48 0.49 (0.38) 0.11 (0.52) -- (0.52)
10/31/04 9.36 0.50 0.16 0.66 (0.54) -- (0.54)
10/31/03 9.03 0.55 0.38 0.93 (0.60) -- (0.60)
10/31/02 9.34 0.64 (0.29) 0.35 (0.66) -- (0.66)
RATIOS TO AVERAGE
NET ASSETS/SUPPLEMENTAL DATA
------------------------------------------------------------
RATIO OF RATIO OF
EXPENSES EXPENSES
TO AVERAGE TO AVERAGE RATIO OF
NET NET ASSETS NET ASSETS NET
ASSET BEFORE AFTER INVESTMENT
VALUE NET ASSETS REIMBURSE- REIMBURSE- INCOME TO PORTFOLIO
END OF TOTAL END OF PERIOD MENTS/ MENTS/ AVERAGE TURNOVER
PERIOD RETURN(1) (IN 000S) WAIVERS WAIVERS(2) NET ASSETS RATE
------ --------- ------------- ---------- ---------- ---------- ---------
CLASS A SHARES
Year Ended:
10/31/06 $9.09 6.02% $143,590 0.89% 0.89% 5.27% 26%
10/31/05 9.05 0.75 147,521 0.91 0.91 4.83 20
10/31/04 9.46 6.68 147,695 0.92 0.92 4.90 24
10/31/03 9.35 10.10 153,654 0.94 0.94 5.42 33
10/31/02 9.02 3.63 130,512 0.97 0.97 6.61 20
CLASS B SHARES
Year Ended:
10/31/06 $9.12 5.23% $ 99,751 1.65% 1.65% 4.51% 26%
10/31/05 9.08 0.02 128,067 1.65 1.65 4.09 20
10/31/04 9.49 6.03 152,065 1.65 1.65 4.17 24
10/31/03 9.37 9.31 194,396 1.65 1.65 4.71 33
10/31/02 9.04 2.79 142,186 1.68 1.68 5.90 20
CLASS C SHARES
Year Ended:
10/31/06 $9.12 5.23% $ 10,412 1.64% 1.64% 4.52% 26%
10/31/05 9.08 0.01 10,761 1.66 1.66 4.08 20
10/31/04 9.49 6.02 11,580 1.65 1.65 4.17 24
10/31/03 9.37 9.33 15,274 1.63 1.63 4.73 33
10/31/02(3) 9.04 2.25 7,710 1.62(5) 1.62(5) 5.96(5) 20
CLASS I SHARES
Year Ended:
10/31/06 $9.11 6.41% $963,326 0.52% 0.52% 5.64% 26%
10/31/05 9.07 1.13 903,915 0.54 0.54 5.20 20
10/31/04 9.48 7.18 834,726 0.55 0.55 5.27 24
10/31/03 9.36 10.51 679,139 0.56 0.56 5.80 33
10/31/02 9.03 3.94 487,376 0.56 0.56 7.02 20
(4) Per share numbers have been calculated using the average shares method.
(5) Annualized.
See Notes to Financial Statements.
115
Financial Highlights
HIGH YIELD FUND
For a Fund share outstanding throughout each period.
INCOME/(LOSS) FROM
INVESTMENT OPERATIONS LESS DISTRIBUTIONS
------------------------------------ ----------------------------------------
NET REALIZED
NET AND
ASSET UNREALIZED DIVIDENDS DISTRIBUTIONS
VALUE NET GAIN/(LOSS) TOTAL FROM FROM NET FROM NET
BEGINNING INVESTMENT ON INVESTMENT INVESTMENT REALIZED TOTAL
OF PERIOD INCOME INVESTMENTS OPERATIONS INCOME CAPITAL GAINS DISTRIBUTIONS
--------- ---------- ------------ ---------- ---------- ------------- -------------
CLASS A SHARES
Year Ended:
10/31/06 $8.23 $0.61 $ 0.55 $ 1.16 $(0.60) $-- $(0.60)
10/31/05 8.28 0.56 (0.03) 0.53 (0.58) -- (0.58)
10/31/04 7.88 0.58 0.43 1.01 (0.61) -- (0.61)
10/31/03 6.63 0.61(4) 1.31 1.92 (0.67) -- (0.67)
10/31/02 7.44 0.71 (0.72) (0.01) (0.80) -- (0.80)
CLASS B SHARES
Year Ended:
10/31/06 $8.27 $0.55 $ 0.55 $ 1.10 $(0.54) $-- $(0.54)
10/31/05 8.32 0.50 (0.03) 0.47 (0.52) -- (0.52)
10/31/04 7.91 0.52 0.44 0.96 (0.55) -- (0.55)
10/31/03 6.66 0.56(4) 1.31 1.87 (0.62) -- (0.62)
10/31/02 7.47 0.66 (0.72) (0.06) (0.75) -- (0.75)
CLASS C SHARES
Year Ended:
10/31/06 $8.27 $0.55 $ 0.55 $ 1.10 $(0.54) $-- $(0.54)
10/31/05 8.32 0.50 (0.03) 0.47 (0.52) -- (0.52)
10/31/04 7.91 0.52 0.44 0.96 (0.55) -- (0.55)
10/31/03 6.67 0.56(4) 1.30 1.86 (0.62) -- (0.62)
10/31/02(3) 7.55 0.46 (0.86) (0.40) (0.48) -- (0.48)
CLASS I SHARES
Year Ended:
10/31/06 $8.22 $0.64 $ 0.55 $ 1.19 $(0.63) $-- $(0.63)
10/31/05 8.27 0.58 (0.03) 0.55 (0.60) -- (0.60)
10/31/04 7.86 0.60 0.44 1.04 (0.63) -- (0.63)
10/31/03 6.62 0.63(4) 1.30 1.93 (0.69) -- (0.69)
10/31/02 7.43 0.73 (0.72) 0.01 (0.82) -- (0.82)
RATIOS TO AVERAGE
NET ASSETS/SUPPLEMENTAL DATA
------------------------------------------------------------
RATIO OF RATIO OF
EXPENSES EXPENSES
TO AVERAGE TO AVERAGE RATIO OF
NET NET ASSETS NET ASSETS NET
ASSET BEFORE AFTER INVESTMENT
VALUE NET ASSETS REIMBURSE- REIMBURSE- INCOME TO PORTFOLIO
END OF TOTAL END OF PERIOD MENTS/ MENTS/ AVERAGE TURNOVER
PERIOD RETURN(1) (IN 000S) WAIVERS WAIVERS(2) NET ASSETS RATE
------ --------- ------------- ---------- ---------- ---------- ---------
CLASS A SHARE
Year Ended:
10/31/06 $8.79 14.63% $ 422,747 0.90% 0.90% 7.31% 85%
10/31/05 8.23 6.56 111,164 0.92 0.92 6.76 94
10/31/04 8.28 13.23 85,190 0.93 0.93 7.11 82
10/31/03 7.88 30.13 48,618 0.97 0.97 8.24 61
10/31/02 6.63 (0.48) 13,563 1.03 1.03 9.72 60
CLASS B SHARE
Year Ended:
10/31/06 $8.83 13.72% $ 83,143 1.66% 1.66% 6.55% 85%
10/31/05 8.27 5.75 73,667 1.68 1.68 6.00 94
10/31/04 8.32 12.50 80,036 1.69 1.69 6.35 82
10/31/03 7.91 29.08 83,665 1.73 1.73 7.48 61
10/31/02 6.66 (1.17) 44,004 1.78 1.78 8.97 60
CLASS C SHARE
Year Ended:
10/31/06 $8.83 13.74% $ 76,883 1.65% 1.65% 6.56% 85%
10/31/05 8.27 5.77 38,475 1.66 1.66 6.02 94
10/31/04 8.32 12.51 33,318 1.68 1.68 6.36 82
10/31/03 7.91 29.08 24,540 1.71 1.71 7.50 61
10/31/02(3) 6.67 (5.66) 2,556 1.78(5) 1.78(5) 8.97(5) 60
CLASS I SHARE
Year Ended:
10/31/06 $8.78 15.01% $ 570,861 0.57% 0.57% 7.64% 85%
10/31/05 8.22 6.91 588,409 0.59 0.59 7.09 94
10/31/04 8.27 13.75 526,095 0.61 0.61 7.43 82
10/31/03 7.86 30.44 424,781 0.64 0.64 8.57 61
10/31/02 6.62 (0.15) 244,937 0.68 0.68 10.07 60
(1) Total return is not anualized for periods of less than year and does
not reflect any applicable sales charges.
The total returns 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 through custodian credits.
(3) The Funds commenced selling Class C shares on March 1, 2002.
See Notes to Financial Statements.
116
Financial Highlights
CALIFORNIA MUNICIPAL FUND
For a Fund share outstanding throughout each period.
INCOME/(LOSS) FROM
INVESTMENT OPERATIONS LESS DISTRIBUTIONS
------------------------------------ ----------------------------------------
NET REALIZED
NET AND
ASSET UNREALIZED DIVIDENDS DISTRIBUTIONS
VALUE NET GAIN/(LOSS) TOTAL FROM FROM NET FROM NET
BEGINNING INVESTMENT ON INVESTMENT INVESTMENT REALIZED TOTAL
OF PERIOD INCOME INVESTMENTS OPERATIONS INCOME CAPITAL GAINS DISTRIBUTIONS
--------- ---------- ------------ ---------- ---------- ------------- -------------
CLASS A SHARES
Year Ended:
10/31/06 $11.24 $0.48 $ 0.22 $0.70 $(0.48) $(0.14) $(0.62)
10/31/05 11.42 0.48 (0.15) 0.33 (0.48) (0.03) (0.51)
10/31/04 11.22 0.49 0.20 0.69 (0.49) -- (0.49)
10/31/03 11.35 0.47 (0.06) 0.41 (0.47) (0.07) (0.54)
10/31/02 11.34 0.50 0.00(6) 0.50 (0.49) -- (0.49)
CLASS B SHARES
Year Ended:
10/31/06 $11.24 $0.39 $ 0.22 $0.61 $(0.39) $(0.14) $(0.53)
10/31/05 11.42 0.39 (0.15) 0.24 (0.39) (0.03) (0.42)
10/31/04 11.22 0.40 0.20 0.60 (0.40) -- (0.40)
10/31/03 11.35 0.38 (0.06) 0.32 (0.38) (0.07) (0.45)
10/31/02 11.34 0.42 0.00(6) 0.42 (0.41) -- (0.41)
CLASS C SHARES
Year Ended:
10/31/06 $11.24 $0.39 $ 0.22 $0.61 $(0.39) $(0.14) $(0.53)
10/31/05 11.42 0.39 (0.15) 0.24 (0.39) (0.03) (0.42)
10/31/04 11.22 0.40 0.20 0.60 (0.40) -- (0.40)
10/31/03 11.35 0.38 (0.06) 0.32 (0.38) (0.07) (0.45)
10/31/02(3) 11.20 0.28 0.14 0.42 (0.27) -- (0.27)
RATIOS TO AVERAGE
NET ASSETS/SUPPLEMENTAL DATA
------------------------------------------------------------
RATIO OF RATIO OF
EXPENSES EXPENSES
TO AVERAGE TO AVERAGE RATIO OF
NET NET ASSETS NET ASSETS NET
ASSET BEFORE AFTER INVESTMENT
VALUE NET ASSETS REIMBURSE- REIMBURSE- INCOME TO PORTFOLIO
END OF TOTAL END OF PERIOD MENTS/ MENTS/ AVERAGE TURNOVER
PERIOD RETURN(1) (IN 000S) WAIVERS WAIVERS(2) NET ASSETS RATE
------ --------- ------------- ---------- ---------- ---------- ---------
CLASS A SHARE
Year Ended: $11.32 6.45% $264,924 0.84% 0.84% 4.26% 29%
10/31/06 11.24 2.90 241,879 0.84 0.84 4.19 26
10/31/05 11.42 6.25 232,239 0.85 0.85 4.32 27
10/31/04 11.22 3.69 252,511 0.85 0.85 4.14 34
10/31/03 11.35 4.57 286,095 0.86 0.86 4.39 48
10/31/02
CLASS B SHARES
Year Ended: $11.32 5.66% $132,364 1.58% 1.58% 3.52% 29%
10/31/06 11.24 2.13 162,534 1.59 1.59 3.44 26
10/31/05 11.42 5.47 195,930 1.59 1.59 3.58 27
10/31/04 11.22 2.92 255,445 1.59 1.59 3.40 34
10/31/03 11.35 3.79 295,662 1.60 1.60 3.65 48
10/31/02
CLASS C SHARES
Year Ended: $11.32 5.65% $ 4,413 1.59% 1.59% 3.52% 29%
10/31/06 11.24 2.13 4,641 1.59 1.59 3.44 26
10/31/05 11.42 5.46 5,275 1.60 1.60 3.57 27
10/31/04 11.22 2.92 8,193 1.59 1.59 3.40 34
10/31/03 11.35 3.77 6,665 1.58(5) 1.58(5) 3.67(5) 48
10/31/02(3)
(4) Per share numbers have been calculated using the average share method.
(5) Annualized.
(6) Amount represents less than $0.01 per share.
See Notes to Financial Statements.
117
Financial Highlights
CALIFORNIA INSURED INTERMEDIATE MUNICIPAL FUND
For a Fund share outstanding throughout each period.
INCOME/(LOSS) FROM
INVESTMENT OPERATIONS LESS DISTRIBUTIONS
------------------------------------ ----------------------------------------
NET REALIZED
NET AND
ASSET UNREALIZED DIVIDENDS DISTRIBUTIONS
VALUE NET GAIN/(LOSS) TOTAL FROM FROM NET FROM NET
BEGINNING INVESTMENT ON INVESTMENT INVESTMENT REALIZED TOTAL
OF PERIOD INCOME INVESTMENTS OPERATIONS INCOME CAPITAL GAINS DISTRIBUTIONS
--------- ---------- ------------ ---------- ---------- ------------- -------------
CLASS A SHARES
Year Ended:
10/31/06 $10.85 $0.36 $ 0.14 $ 0.50 $(0.36) $(0.02) $(0.38)
10/31/05 11.14 0.34 (0.29) 0.05 (0.34) (0.00)(4) (0.34)
10/31/04 11.14 0.33 0.10 0.43 (0.33) (0.10) (0.43)
10/31/03 11.08 0.35 0.12 0.47 (0.35) (0.06) (0.41)
10/31/02 10.98 0.39 0.15 0.54 (0.39) (0.05) (0.44)
CLASS B SHARES
Year Ended:
10/31/06 $10.85 $0.28 $ 0.14 $ 0.42 $(0.28) $(0.02) $(0.30)
10/31/05 11.14 0.26 (0.29) (0.03) (0.26) (0.00)(4) (0.26)
10/31/04 11.14 0.25 0.10 0.35 (0.25) (0.10) (0.35)
10/31/03 11.08 0.27 0.12 0.39 (0.27) (0.06) (0.33)
10/31/02 10.98 0.31 0.15 0.46 (0.31) (0.05) (0.36)
CLASS C SHARES
Year Ended:
10/31/06 $10.85 $0.28 $ 0.13 $ 0.41 $(0.28) $(0.02) $(0.30)
10/31/05 11.14 0.26 (0.29) (0.03) (0.26) (0.00)(4) (0.26)
10/31/04 11.14 0.25 0.10 0.35 (0.25) (0.10) (0.35)
10/31/03 11.08 0.27 0.12 0.39 (0.27) (0.06) (0.33)
10/31/02(3) 10.90 0.21 0.18 0.39 (0.21) -- (0.21)
RATIOS TO AVERAGE
NET ASSETS/SUPPLEMENTAL DATA
------------------------------------------------------------
RATIO OF RATIO OF
EXPENSES EXPENSES
TO AVERAGE TO AVERAGE RATIO OF
NET NET ASSETS NET ASSETS NET
ASSET BEFORE AFTER INVESTMENT
VALUE NET ASSETS REIMBURSE- REIMBURSE- INCOME TO PORTFOLIO
END OF TOTAL END OF PERIOD MENTS/ MENTS/ AVERAGE TURNOVER
PERIOD RETURN(1) (IN 000S) WAIVERS WAIVERS(2) NET ASSETS RATE
------ --------- ------------- ---------- ---------- ---------- ---------
CLASS A SHARE
Year Ended:
10/31/06 $10.97 4.68% $57,665 0.86% 0.86% 3.35% 22%
10/31/05 10.85 0.52 65,667 0.87 0.87 3.11 27
10/31/04 11.14 4.02 65,772 0.86 0.85 3.02 37
10/31/03 11.14 4.29 75,231 0.86 0.77 3.15 65
10/31/02 11.08 5.12 57,102 0.89 0.70 3.59 28
CLASS B SHARES
Year Ended:
10/31/06 $10.97 3.89% $45,440 1.62% 1.62% 2.59% 22%
10/31/05 10.85 (0.24) 59,562 1.63 1.63 2.35 27
10/31/04 11.14 3.24 71,502 1.62 1.61 2.26 37
10/31/03 11.14 3.51 93,448 1.62 1.53 2.39 65
10/31/02 11.08 4.32 89,240 1.65 1.46 2.83 28
CLASS C SHARES
Year Ended:
10/31/06 $10.96 3.89% $ 6,129 1.62% 1.62% 2.59% 22%
10/31/05 10.85 (0.24) 7,476 1.63 1.63 2.35 27
10/31/04 11.14 3.24 8,763 1.62 1.61 2.26 37
10/31/03 11.14 3.50 10,317 1.62 1.53 2.39 65
10/31/02(3) 11.08 3.58 7,953 1.64(5) 1.45(5) 2.84(5) 28
(1) Total return is not annualized for periods of less than one year and does
not reflect any applicable sales charges.
The total returns 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 through custodian credits.
(3) The Fund commenced selling Class C shares on March 1, 2002.
(4) Amount represents less than $0.01 per share.
(5) Annualized.
See Notes to Financial Statements.
118
Notes to Financial Statements
WM GROUP OF FUNDS
1. ORGANIZATION AND BUSINESS
WM Trust I ("Trust I") and WM Trust II ("Trust II") (collectively, the "Trusts")
were organized as Massachusetts business trusts on September 19, 1997 and
February 22, 1989, respectively. The Trusts are each registered under the
Investment Company Act of 1940, as amended ("1940 Act"), as open-end management
investment companies. The Trusts consist of 17 funds, 15 of which (each a "Fund"
and collectively, the "Funds") are presented in this report and are as follows:
TRUST I TRUST II
EQUITY FUNDS EQUITY FUNDS
REIT Fund Growth Fund
Equity Income Fund Small Cap Growth Fund
Growth & Income Fund International Growth Fund
West Coast Equity Fund
Mid Cap Stock Fund
Small Cap Value Fund
FIXED-INCOME FUNDS FIXED-INCOME FUND
U.S. Government Securities Fund Short Term Income Fund
Income Fund
High Yield Fund
MUNICIPAL FUNDS
California Municipal Fund
California Insured Intermediate Municipal Fund
WM Advisors, Inc. (the "Advisor") serves as investment advisor to the Trusts.
The Advisor is a wholly owned subsidiary of Washington Mutual, Inc. ("Washington
Mutual"), a publicly owned financial services company.
The Trusts are authorized to issue an unlimited number of shares of beneficial
interest, each without par value. Each of the Fixed-Income Funds and the Equity
Funds offers four classes of shares: Class A, Class B, Class C and Class I. Each
of the Municipal Funds currently offers Class A shares, Class B shares and Class
C shares. Class A shares of the Funds are generally subject to an initial sales
charge at the time of purchase. Certain Class A shares purchased without an
initial sales charge may be subject to a contingent deferred sales charge
("CDSC") if redeemed within eighteen months from the date of purchase. Class B
shares are not subject to an initial sales charge although they are generally
subject to a CDSC if redeemed within five years from the date of purchase. Class
C shares are not subject to an initial sales charge although they are subject to
a CDSC if redeemed within one year from the date of purchase. In addition,
redemptions from the International Growth Fund, including exchange redemptions,
within 90 days of purchase are subject to a redemption fee equal to 2.00% of the
redemption proceeds, which are retained by the Fund. Class I shares are sold
exclusively to the various investment portfolios of the WM Strategic Asset
Management Portfolios, LLC (the "Portfolios"), an affiliated open-end management
investment company, and affiliates of Washington Mutual and are not available
for direct purchase by investors. Class I shares are not subject to an initial
sales charge, CDSC or redemption fee.
Effective on October 1, 2006, (i) the Rule 12b-1 plans applicable to Class R-1
and Class R-2 shares of each Fund were amended to reduce the amounts payable for
distribution thereunder to the annual rate of 0.25% of the net assets
attributable to such shares, (ii) the plan recordkeeping/administrative services
agreement applicable to such shares was replaced with a transfer agency
agreement identical to the transfer agency agreement applicable to Class A
shares, (iii) the number of Class R-1 and Class R-2 shares was increased or
decreased proportionately so that the net asset value of each Class R-1 and
Class R-2 share was equal to the net asset value of each Class A share of the
Fund, and (iv) since the economic attributes of Class R-1 and Class R-2 shares
would thereafter be identical to those of Class A shares of such Fund, they were
re-designated as Class A shares of the Fund.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies, in conformity
with accounting principles generally accepted in the United States of America
("generally accepted accounting principles"), which are consistently followed by
the Funds in the preparation of their financial statements.
119
Notes to Financial Statements (continued)
WM GROUP OF FUNDS
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 from 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 Trusts. 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.
REPURCHASE AGREEMENTS:
Each Fund may enter into repurchase agreement transactions. A repurchase
agreement is a purchase of an underlying debt obligation subject to an agreement
by the seller to repurchase the obligation at an agreed upon price and time. It
is each Fund's policy that its custodian take possession of the underlying
collateral securities. The fair value of the collateral is at all times at least
equal to the total amount of the repurchase obligation. In the event of
counterparty default, the Fund would seek to use the collateral to offset losses
incurred. There is potential loss to the Fund in the event the Fund is delayed
or prevented from exercising its right to dispose of the collateral securities,
including the risk of a possible decline in the value of the underlying
securities during the period while the Fund seeks to assert its rights. The
Advisor, acting under the supervision of the Board of Trustees of the Trusts,
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
120
Notes to Financial Statements (continued)
WM GROUP OF FUNDS
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."
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 each Fund has valued the investments. This may have an adverse effect on
each 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 per share
of the Fund. The Funds may also purchase securities that are not registered
under the Securities Act of 1933, as amended (the "Act"), but that can be sold
to qualified institutional buyers in accordance with Rule 144A under the Act
("Rule 144A Securities"). Rule 144A Securities generally must be sold only to
other qualified institutional buyers. If a particular investment in Rule 144A
Securities is not determined to be liquid under the guidelines established by
the Board of Trustees, the investment will be subject to a Fund's limitation on
investment in illiquid securities as indicated above.
SECURITIES TRANSACTIONS AND INVESTMENT INCOME:
Securities transactions are recorded on a trade date basis. Realized gains and
losses from securities sold are recorded on the identified cost basis.
Securities purchased or sold on a when-issued or delayed-delivery basis may be
settled a month or more after the trade date; interest income is not accrued
until settlement date. Each Fund instructs the custodian to segregate assets of
the Fund with a current value at least equal to the amount of its when-issued
purchase commitments.
Interest income on debt securities is accrued daily. Premiums and discounts are
amortized using the interest method. Paydown gains and losses on mortgage-backed
and asset-backed securities are presented as an adjustment to interest income.
Dividend income is recorded on the ex-dividend date, except certain dividends
from foreign securities are recorded as soon as the information is available to
the Funds if informed after the ex-dividend date. The Funds estimate components
of distributions
121
Notes to Financial Statements (continued)
WM GROUP OF FUNDS
from real estate investment trusts ("REITs"). Distributions received in excess
of income are recorded as a reduction of the cost of the related investments.
Each Fund's investment income and realized and unrealized gains and losses are
allocated among the classes of that Fund based upon the relative average net
assets of each class.
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS:
Dividends from net investment income of the Fixed-Income Funds and the Municipal
Funds will normally be declared daily and paid monthly. Dividends from net
investment income of the REIT and Equity Income Funds are declared and paid
quarterly. Dividends from any net investment income of the Growth & Income, West
Coast Equity, Mid Cap Stock, Growth, Small Cap Value, Small Cap Growth, and
International Growth Funds are declared and paid annually. Distributions of any
net capital gains earned by a Fund are distributed no less frequently than
annually at the discretion of the Board of Trustees. Additional distributions of
net investment income and capital gains for each Fund may be made at the
discretion of the Board of Trustees of the Trusts in accordance with federal
income tax regulations.
Distributions from income and capital gains are determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles. These differences are primarily due to differing treatments of
income and gains on various investment securities held by the Funds, dividends
payable, redesignated distributions and differing characterization of
distributions made by each Fund.At October 31, 2006, 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)
INCREASE/ UNDISTRIBUTED ACCUMULATED
(DECREASE) NET INVESTMENT NET REALIZED
PAID-IN CAPITAL INCOME/(LOSS) GAIN/(LOSS)
(000S) (000S) (000S)
--------------- -------------- ------------
Equity Income Fund ................ $ -- $ 17 $ (17)
Growth Fund ....................... -- (159) 159
Small Cap Value Fund .............. -- (103) 103
Small Cap Growth Fund ............. (1,883) 1,883 --
International Growth Fund ......... (199) 816 (617)
Short Term Income Fund ............ (75) 241 (166)
U.S. Government Securities Fund ... -- 5,152 (5,152)
Income Fund ....................... -- 4,079 (4,079)
High Yield Fund ................... -- 1,039 (1,039)
California Municipal Fund ......... -- (26) 26
California Insured Intermediate
Municipal Fund ................. -- (3) 3
The above adjustments are not reflected in the calculation of net investment
income per share in the Financial Highlights.
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.
EXPENSES:
General expenses of the Trusts are allocated to all the Funds of the Trusts
based upon the relative average net assets of each Fund except printing and
postage expenses, which are allocated to all the Funds based upon the relative
number of shareholder accounts of each Fund. 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.
122
Notes to Financial Statements (continued)
WM GROUP OF FUNDS
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 $125 FROM $200 FROM $250 FROM $1 FROM $2
FROM $0 MILLION MILLION MILLION FROM $500 BILLION BILLION
TO $125 TO $200 TO $250 TO $500 MILLION TO TO $2 TO $3 OVER
NAME OF FUND MILLION MILLION MILLION MILLION $1 BILLION BILLION BILLION $3 BILLION
- ------------ ------- --------- --------- --------- ---------- ------- ------- ----------
REIT Fund ......................... 0.800% 0.800% 0.800% 0.800% 0.750% 0.750% 0.700% 0.650%
Equity Income Fund ................ 0.625% 0.625% 0.625% 0.500% 0.500% 0.500% 0.500% 0.500%
Growth & Income Fund .............. 0.625% 0.625% 0.625% 0.500% 0.500% 0.500% 0.500% 0.500%
West Coast Equity Fund ............ 0.625% 0.625% 0.625% 0.625% 0.500% 0.375% 0.375% 0.375%
Mid Cap Stock Fund ................ 0.750% 0.750% 0.750% 0.750% 0.750% 0.700% 0.650% 0.600%
Growth Fund ....................... 0.750% 0.750% 0.750% 0.750% 0.700% 0.700% 0.650% 0.600%
Small Cap Value Fund .............. 0.850% 0.850% 0.850% 0.850% 0.750% 0.750% 0.750% 0.700%
Small Cap Growth Fund ............. 0.850% 0.850% 0.850% 0.850% 0.750% 0.750% 0.750% 0.700%
International Growth Fund ......... 1.000% 0.800% 0.800% 0.800% 0.800% 0.750% 0.750% 0.700%
Short Term Income Fund ............ 0.500% 0.500% 0.450% 0.450% 0.400% 0.400% 0.400% 0.400%
U.S. Government Securities Fund ... 0.500% 0.500% 0.500% 0.500% 0.500% 0.500% 0.450% 0.450%
Income Fund ....................... 0.500% 0.500% 0.500% 0.500% 0.500% 0.500% 0.450% 0.450%
High Yield Fund ................... 0.625% 0.625% 0.625% 0.500% 0.500% 0.500% 0.500% 0.500%
California Municipal Fund ......... 0.500% 0.500% 0.500% 0.500% 0.500% 0.450% 0.450% 0.450%
California Insured Intermediate
Municipal Fund ................. 0.500% 0.500% 0.500% 0.500% 0.500% 0.450% 0.450% 0.450%
WM Shareholder Services, Inc. (the "Transfer Agent"), a wholly owned subsidiary
of Washington Mutual, serves as the transfer agent of the Funds. Fees are paid
to the Transfer Agent for services related to the issuance and transfer of
shares, maintaining shareholder lists, and issuing and mailing distributions and
reports. For such services, the Transfer Agent receives a fee per open and
closed account, in addition to reimbursement for certain out-of-pocket expenses.
The Transfer Agent is entitled to a monthly fee based upon an annual rate of
$20.00 per open account for all Class A, Class B and Class C shareholder
accounts. Class I shares are not subject to shareholder servicing fees.
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 October 31, 2006, are shown separately in the
"Statements of Operations."
4. TRUSTEES' FEES
No officer or employee of Washington Mutual or its subsidiaries receives any
compensation from the Trusts for serving as an officer or Trustee of the Trusts.
The Trusts, together with other mutual funds advised by the Advisor, pay each
Trustee who is not an officer or employee of Washington Mutual or its
subsidiaries a per annum retainer plus attendance fees for each meeting at which
they are present. The Chairman, Committee Chairs and Committee Members receive
additional remuneration for these services to the Trusts. 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
WM Funds Distributor, Inc. (the "Distributor"), a registered broker/dealer and a
wholly owned subsidiary of Washington Mutual, serves as distributor for the
Funds. For the year ended October 31, 2006, the Distributor received $17,245,270
representing commissions (front-end sales charges) on Class A shares and
$2,507,219 representing CDSCs from Class A, Class B, and Class C shares.
Each of the Funds has adopted distribution plans, pursuant to Rule 12b-1 under
the 1940 Act, applicable to Class A, Class B and Class C shares of each Fund
(each, a "Rule 12b-1 Plan"), respectively. There are no 12b-1 Plans applicable
to Class I shares of the Funds. Under the applicable Rule 12b-1 Plans, the
Distributor may receive a service fee at an annual rate of 0.25% of the average
daily net assets of each class. In addition, the Distributor is paid a fee as
compensation in connection with the offering and sale of Class B and Class C
shares. These fees may be used to cover the expenses of the Distributor
primarily intended to result in the sale of such shares, including payments to
the Distributor's representatives or others for selling shares. The service
123
Notes to Financial Statements (continued)
WM GROUP OF FUNDS
fee is paid by the Fund to the Distributor, which in turn pays service fees to
broker/dealers that provide services, such as accepting telephone inquiries,
transaction requests, processing correspondence, new account applications and
subsequent purchases for the shareholders. Under their terms, each Rule 12b-1
Plan shall remain in effect from year to year, provided such continuance is
approved annually by vote of the Board of Trustees, including a majority of
those Trustees who are not "interested persons" of the Trusts, as defined in the
1940 Act, and who have no direct or indirect financial interest in the operation
of such distribution plans, or any agreements related to such plans,
respectively.
6. PURCHASES AND SALES OF SECURITIES
The aggregate cost of purchases and proceeds from sales of securities, excluding
U.S. government and short-term investments, for the year ended October 31, 2006,
are as follows:
PURCHASES SALES
NAME OF FUND (000S) (000S)
- ------------ ---------- ----------
REIT Fund ......................... $ 79,881 $ 128,323
Equity Income Fund ................ 3,358,064 2,548,232
Growth & Income Fund .............. 663,020 1,124,904
West Coast Equity Fund ............ 442,028 261,314
Mid Cap Stock Fund ................ 190,516 225,504
Growth Fund ....................... 1,458,257 948,160
Small Cap Value Fund .............. 115,588 181,284
Small Cap Growth Fund ............. 282,368 262,124
International Growth Fund ......... 569,569 403,990
Short Term Income Fund ............ 19,568 22,444
U.S. Government Securities Fund ... 43,936 22,147
Income Fund ....................... 254,079 226,873
High Yield Fund ................... 994,383 751,780
California Municipal Fund ......... 114,568 135,928
California Insured Intermediate
Municipal Fund ................. 25,895 39,681
The aggregate cost of purchases and proceeds from sales of U.S. government
securities, excluding short-term investments, for the year ended October 31,
2006, are as follows:
PURCHASES SALES
NAME OF FUND (000S) (000S)
- ------------ --------- -----------
Equity Income Fund ................ $ -- $ 49
Short Term Income Fund ............ 15,012 28,782
U.S. Government Securities Fund ... 176,176 317,076
Income Fund ....................... 111,850 81,310
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 collateral 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 October 31, 2006, 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.
124
Notes to Financial Statements (continued)
WM GROUP OF FUNDS
8. PORTFOLIO OWNERSHIP AND OTHER FACTORS
At October 31, 2006, the WM Strategic Asset Management 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
-----------------------------------------------------------------------
FLEXIBLE CONSERVATIVE CONSERVATIVE STRATEGIC
INCOME BALANCED BALANCED GROWTH GROWTH
NAME OF FUND PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO TOTAL
- ------------ --------- ------------ --------- ------------ --------- -----
REIT Fund ........................ 1.9% 2.9% 30.9% 33.3% 20.3% 89.3%
Equity Income Fund ............... 1.1% 1.6% 15.1% 16.3% 10.5% 44.6%
Growth & Income Fund ............. 2.3% 2.2% 24.3% 26.3% 17.1% 72.2%
West Coast Equity Fund ........... 0.6% 1.3% 14.4% 15.4% 10.7% 42.4%
Mid Cap Stock Fund ............... 2.5% 2.3% 24.3% 25.5% 19.1% 73.7%
Growth Fund ...................... 2.7% 2.7% 31.0% 31.3% 22.4% 90.1%
Small Cap Value Fund ............. 3.2% 2.6% 31.0% 34.9% 22.9% 94.6%
Small Cap Growth Fund ............ 2.4% 1.9% 22.6% 25.7% 16.9% 69.5%
International Growth Fund ........ -- 2.8% 31.5% 31.8% 22.3% 88.4%
Short Term Income Fund ........... 42.9% 15.2% 18.6% -- -- 76.7%
U.S. Government Securities Fund .. 15.8% 9.9% 46.8% 16.4% -- 88.9%
Income Fund ...................... 17.7% 9.5% 39.7% 12.2% -- 79.1%
High Yield Fund .................. 5.0% 3.3% 18.7% 8.4% 8.3% 43.7%
From time to time, one or more of the Funds used for investment by a Portfolio
may experience relatively large investments or redemptions due to reallocations
or rebalancings of the Portfolios 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. 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
to the Portfolios and the Funds. The Advisor will, at all times, monitor the
impact on the Funds of transactions by the Portfolios.
9. CAPITAL LOSS CARRYFORWARDS
At October 31, 2006, 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 2007 IN 2008 IN 2009 IN 2010 IN 2011 IN 2012 IN 2013 IN 2014
- ------------ -------- -------- -------- -------- -------- -------- -------- --------
Growth & Income Fund ............. $ -- $ -- $ -- $ -- $ -- $16,275 $ -- $ --
Growth Fund ...................... -- -- 109,439 151,706 23,894 -- -- --
Small Cap Growth Fund ............ -- -- -- -- 10,372 -- 54,274 2,239
Short Term Income Fund ........... 313 1,103 381 1,139 684 241 -- 431
U.S. Government Securities Fund .. 254 1,967 -- 852 6,859 7,815 5,054 7,755
Income Fund ...................... -- -- -- 3,959 2,668 892 -- 2,000
California Insured Intermediate
Municipal Fund ............... -- -- -- -- -- -- -- 207
125
Notes to Financial Statements (continued)
WM GROUP OF FUNDS
10. COMPONENTS OF DISTRIBUTABLE EARNINGS
At October 31, 2006, the aggregate gross unrealized appreciation and
depreciation on a tax basis are as follows:
(IN THOUSANDS)
----------------------------------------------------------------------------------
EQUITY GROWTH & WEST COAST MID CAP SMALL CAP SMALL CAP
REIT INCOME INCOME EQUITY STOCK GROWTH VALUE GROWTH
FUND FUND FUND FUND FUND FUND FUND FUND
-------- -------- -------- ---------- -------- -------- --------- ---------
Gross tax unrealized appreciation .. $204,865 $632,993 $655,863 $639,415 $269,573 $318,880 $ 66,831 $ 72,035
Gross tax unrealized depreciation .. (213) (11,671) (15,805) (45,982) (1,445) (52,308) (13,924) (13,152)
-------- -------- -------- -------- -------- -------- -------- --------
Net tax unrealized appreciation .... $204,652 $621,322 $640,058 $593,433 $268,128 $266,572 $ 52,907 $ 58,883
======== ======== ======== ======== ======== ======== ======== ========
Undistributed ordinary income ...... $ 3,907 $ 9,831 $ 25,148 $ 6,598 $ 7,620 $ 3,232 $ 4,884 $ --
Undistributed accumulated gains .... $ 36,132 $196,338 $ -- $ 42,575 $ 41,968 $ -- $ 5,480 $ --
Net unrealized appreciation* ....... $204,652 $621,322 $640,058 $593,433 $268,128 $266,572 $ 52,907 $ 58,883
CALIFORNIA
U.S. INSURED
INTERNATIONAL SHORT TERM GOVERNMENT HIGH CALIFORNIA INTERMEDIATE
GROWTH INCOME SECURITIES INCOME YIELD MUNICIPAL MUNICIPAL
FUND FUND FUND FUND FUND FUND FUND
------------- ---------- ---------- -------- -------- ---------- ------------
Gross tax unrealized appreciation .. $307,934 $ 615 $ 5,589 $ 18,193 $ 65,267 $20,707 $3,027
Gross tax unrealized depreciation .. (13,546) (3,232) (33,760) (24,859) (20,533) (32) (33)
-------- ------- -------- -------- -------- ------- ------
Net tax unrealized appreciation/
(depreciation) .................. $294,388 $(2,617) $(28,171) $ (6,666) $ 44,734 $20,675 $2,994
======== ======= ======== ======== ======== ======= ======
Undistributed ordinary income ...... $ 21,463 $ 78 $ 630 $ 2,946 $ 6,286 $ -- $ --
Undistributed tax-exempt income .... $ -- $ -- $ -- $ -- $ -- $ 605 $ 142
Undistributed accumulated gains .... $ 47,781 $ -- $ -- $ -- $ 24,844 $ 2,471 $ --
Net unrealized appreciation/
(depreciation)* ................. $287,776 $(2,617) $(28,171) $ (6,666) $ 44,748 $20,675 $2,994
- ----------
* Net unrealized appreciation/(depreciation) may not agree due to foreign
currency.
11. 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 REIT Fund concentrates its investments in real estate investment trust
("REIT") securities or debt securities of issuers that are principally engaged
in the U.S. real estate or related industries. The REIT Fund could be adversely
impacted by economic trends within this industry.
The West Coast Equity Fund concentrates its investments in companies located or
doing business in Alaska, California, Oregon, and Washington. The West Coast
Equity Fund could be adversely impacted by economic trends within this region.
The International Growth Fund concentrates its investments in foreign securities
in both developed and emerging market countries. Additional risks may involve
foreign currency exchange rate fluctuations, adverse political and economic
developments, and the possible prevention of currency exchange or other foreign
governmental laws or restrictions. Investments in emerging markets are subject
to additional risk as less developed countries are more likely to experience
high levels of inflation, deflation, or currency devaluation, which could harm
their economies and securities markets.
The High Yield Fund concentrates its investments in lower rated debt securities,
which may be more susceptible to adverse economic conditions than investment
grade holdings. These securities are often subordinated to the prior claims of
other senior lenders, and uncertainties may exist as to an issuer's ability to
meet principal and interest payments.
The California Municipal and California Insured Intermediate Municipal Funds are
more susceptible to factors adversely affecting issuers of California municipal
securities than is a municipal bond fund that is not concentrated in these
issuers. Uncertain economic conditions or governmental developments may affect
the ability of California municipal securities issuers to meet their financial
obligations.
126
Notes to Financial Statements (continued)
WM GROUP OF FUNDS
Certain Funds may invest a portion of their assets in foreign securities of
developing or emerging market countries; enter into forward foreign currency
transactions; lend their portfolio securities; enter into stock index, interest
rate and currency futures contracts, and options on such contracts; enter into
interest rate swaps or purchase or sell interest rate caps or floors; enter into
other types of options transactions; make short sales; purchase zero coupon and
payment-in-kind bonds; enter into repurchase or reverse repurchase agreements;
purchase and sell "when-issued" securities and engage in "delayed-delivery"
transactions; and enter into various other investment practices, each with
inherent risks. The risks involved in investing in a high concentration of a
single sector include those resulting from future adverse political and economic
developments or regulatory occurrences and the potential for adverse effects to
the financial conditions of the industries within the sector due to market
fluctuations.
12. INVESTMENTS IN AFFILIATED SECURITIES
The companies listed below are affiliates of the Fund because the Fund owned at
least 5.0% of the company's voting securities during the year ended Ocotober 31,
2006.
MARKET VALUE
SHARES SHARES OF INVESTMENTS
AT BEGINNING AT END IN AFFILIATES AT
(IN THOUSANDS) OF PERIOD ADDITIONS REDUCTIONS OF PERIOD DIVIDENDS LOSS OCTOBER 31, 2006
------------ --------- ---------- --------- --------- ----- ----------------
West Coast Equity Fund
Red Lion Hotels Corporation ..... 1,267 18 (57) 1,228 $ -- $(238) $14,673
High Yield Fund
Crown Castle International
Corporation ..................... 150 179 -- 329 1,028 -- 18,218
New Flyer Industries Inc., IDS ..... 801 300 -- 1,101 817 -- 8,533
------ ----- -------
$1,845 $(238) $41,424
====== ===== =======
13. NEW ACCOUNTING PRONOUNCEMENTS
In July 2006, the Financial Accounting Standards Board (FASB) issued FASB
Interpretation No. 48 (FIN 48), "Accounting for Uncertainty in Income Taxes."
This pronouncement provides guidance on the recognition, measurement,
classification, and disclosures related to uncertain tax positions, along with
any related interest and penalties. FIN 48 is effective for fiscal years
beginning after December 15, 2006. The impact from the adoption of FIN 48 is
being evaluated, but is not anticipated to have a material effect on the
financial statements.
In addition, in September 2006, Statement of Financial Accounting Standards No.
157 Fair Value Measurements ("SFAS 157") was issued and is effective for fiscal
years beginning after November 15, 2007. SFAS 157 defines fair value,
establishes a framework for measuring fair value and expands disclosures about
fair value measurements. Management is currently evaluating the impact that the
adoption of SFAS 157 will have on the Funds' financial statement disclosures.
14. REORGANIZATION
On July 25, 2006, the Principal Financial Group, Inc. ("PFG") and its
subsidiary, Principal Management Corporation ("PMC") entered into an agreement
with Washington Mutual, Inc. to acquire all of the outstanding stock of certain
of its subsidiaries, WM Advisors, the Advisor of the Funds, WM Shareholder
Services, Inc., the Transfer Agent of the Funds, and WM Funds Distributor, Inc.,
the Distributor (the "Transaction"). On August 11, 2006, the Board of Trustees
approved proposed reorganizations (the "Reorganizations") pursuant to which each
of the following Funds (each, an "Acquired Fund") will combine with and into the
following corresponding separate series (each, an "Acquiring Fund") of Principal
Investors Fund, Inc. ("PIF"), subject to various conditions including the
approval of shareholders of each Acquired Fund. A special meeting of
shareholders will be held on December 15, 2006. Under the Reorganizations (i)
all the assets and the stated liabilities of each Acquired Fund will be
transferred to its corresponding Acquiring Fund in exchange for Class A, Class
B, Class C and Class I shares of the Acquiring Fund; (ii) holders of Class A,
Class B, Class C and Class I shares of the Acquired Fund will receive,
respectively, that number of Class A, Class B, Class C and Class I shares of the
corresponding Acquiring Fund equal in value at the time of the exchange to the
value of the holder's Acquired Fund shares at such time; and (iii) the Acquired
Fund will be liquidated and dissolved. The Transaction is expected to close in
December 2006, and the Reorganizations will occur shortly thereafter.
127
Notes to Financial Statements (continued)
WM GROUP OF FUNDS
As a result of the Reorganization, shareholders of the Acquired Funds will
become shareholders of the Acquiring Funds as follows:
WM ACQUIRED FUND: PIF ACQUIRING FUND:
REIT Fund Real Estate Securities Fund
Equity Income Fund Equity Income Fund I*
Growth & Income Fund Disciplined LargeCap Blend Fund
West Coast Equity Fund West Coast Equity Fund*
Mid Cap Stock Fund MidCap Stock Fund*
Growth Fund LargeCap Growth Fund
Small Cap Value Fund SmallCap Value Fund
Small Cap Growth Fund SmallCap Growth Fund
International Growth Fund Diversified International Fund
Short Term Income Fund Short-Term Income Fund*
U.S. Government Securities Fund Mortgage Securities Fund*
Income Fund Income Fund*
High Yield Fund High Yield Fund I*
Tax-Exempt Bond Fund Tax-Exempt Bond Fund I*
California Municipal Fund California Municipal Fund*
California Insured Intermediate
Municipal Fund California Insured Intermediate Municipal Fund*
Money Market Fund Money Market Fund
Flexible Income Portfolio SAM Flexible Income Portfolio*
Conservative Balanced Portfolio SAM Conservative Balanced Portfolio*
Balanced Portfolio SAM Balanced Portfolio*
Conservative Growth Portfolio SAM Conservative Growth Portfolio*
Strategic Growth Portfolio SAM Strategic Growth Portfolio*
* These Acquiring Funds are newly-organized funds that will commence
operations in connection with the Reorganization and the Acquired Fund will
be the survivor for accounting and performance reporting purposes. The
other Acquiring Funds are existing PIF Funds into which the relevant WM
Fund will be merged and the Acquiring Fund will be the survivor for
accounting and performance reporting purposes.
128
Report of Independent Registered Public Accounting Firm
TO THE TRUSTEES AND SHAREHOLDERS OF WM TRUST I AND WM TRUST II:
We have audited the accompanying statements of assets and liabilities, including
the portfolios of investments, of WM Equity Income Fund, WM Growth & Income
Fund, WM High Yield Fund, WM Income Fund, WM Mid Cap Stock Fund, WM REIT Fund,
WM Small Cap Value Fund, WM U.S. Government Securities Fund, and WM West Coast
Equity Fund (all funds of WM Trust I) and WM California Insured Intermediate
Municipal Fund, WM California Municipal Fund, WM Growth Fund, WM International
Growth Fund, WM Short Term Income Fund, and WM Small Cap Growth Fund (all funds
of WM Trust II) (collectively the "Funds") as of October 31, 2006, 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 periods presented. 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 October 31, 2006, 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 October 31, 2006, 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
December 18, 2006
129
Supplemental Information (unaudited)
WM GROUP OF FUNDS
CONSIDERATION BY THE BOARD OF TRUSTEES OF ADVISORY AND SUB-ADVISORY AGREEMENTS
The Funds' investment advisory agreements with the Advisor and sub-advisory
agreements (each an "Agreement" and together the "Agreements") with Salomon
Brothers Asset Management, Inc., Janus Capital Management LLC, OppenheimerFunds,
Inc., Delaware Management Company, Oberweis Asset Management, Inc., Capital
Guardian Trust Company, and Van Kampen Asset Management (each a "Sub-Advisor"
and collectively the "Sub-Advisors") were approved in May and August, 2006. In
connection with their approval in August 2006 of investment advisory agreements
for the Funds substantially identical to the Funds' current Agreements, except
with respect to dates and in contemplation of the acquisition of the Advisor by
the Principal Financial Group, the Board of Trustees, Independent Trustees and
the Investment Committee of the Board (the "Committee") relied on the
information provided in connection with the approval of the corresponding
Agreements in May 2006, as supplemented by expense and performance information
provided by Lipper Inc., a third-party data provider ("Lipper"), for periods
ended June 30, 2006. The material factors and conclusions that formed the basis
for the Committee's recommendation and the subsequent approval by the Board and
the Independent Trustees in August 2006 were the same as those in May 2006,
which are discussed below, except that the Board, the Independent Trustees and
the Committee also considered the supplemental expense and performance
information for periods ended June 30, 2006; representations by the Principal
Financial Group (see Note 14 in the Notes to Financial Statements) that,
subsequent to its acquisition of the Advisor in the Transaction, there is not
expected to be any reduction in the nature, quality and extent of services
provided to the Funds by the Advisor; the fact that the substantive terms of the
Agreements, including the advisory and sub-advisory fees payable thereunder,
were not changing; and representations by the Principal Financial Group that,
except as discussed with the Board of Trustees, no changes were expected in
either the Advisor's investment professionals who would be providing services to
the Funds or the amount of time and attention that would be devoted by such
investment professionals to the Funds.
BOARD APPROVAL OF INVESTMENT ADVISORY AGREEMENTS:
Each year, the Board, including a majority of the Independent Trustees, is
required to determine whether to continue the Agreements. The 1940 Act requires
that the Board request and evaluate, and that the investment advisor furnish,
such information as may reasonably be necessary to evaluate the terms of the
Agreements. In May 2006, the Board and the Independent Trustees approved the
continuation of the Agreements with, respectively, the Advisor and each of the
Sub-Advisors, in each case following the recommendation of 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 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 Funds and the Independent
Trustees. The Independent Trustees discussed the continuation of the Agreements
with representatives of the Advisor and in private session with independent
legal counsel at which no representatives of the Advisor were present. The
Committee, in deciding to recommend continuation of the Agreements, and the
Board and the Independent Trustees, in approving such continuation, did not
identify any particular information that was all-important or controlling, and
each Trustee attributed different weights to the various factors. The Trustees
evaluated all information available to them on a Fund-by-Fund basis, and their
deliberations were made separately in respect of each Fund. This summary
describes the most important, but not all, of the factors considered by the
Board, the Independent Trustees and the Committee. The Board, the Independent
Trustees and the Committee considered the fact that many of the Funds are
managed in a style substantially identical to that of a corresponding series of
WM Variable Trust (each, a "VT Fund") and reviewed the Funds simultaneously with
their review of the corresponding VT Funds.
MATERIALS REVIEWED:
During the course of each year, the Board receives a wide variety of materials
relating to the services provided by the Advisor and its affiliates, including
reports on: each Fund's investment results; portfolio construction; portfolio
composition; performance attribution; shareholder services; the Advisor's views
on the economy and capital markets; and other information relating to the
nature, extent and quality of services provided by the Advisor and its
affiliates to the 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, performance and expense
information for other investment companies derived from data compiled by Lipper,
data on pre- and post-marketing profit margins for investment advisory
subsidiaries of publicly traded companies prepared by Lipper, as well as
additional information prepared by the Advisor, including financial and
profitability information regarding the Advisor and its affiliates, descriptions
of various functions undertaken by the Advisor, such as compliance monitoring
practices, and information about the personnel providing investment management
to the Funds. The Board, the Independent Trustees and the Committee also
considered information regarding "revenue sharing" arrangements that the Advisor
and its affiliates have
130
Supplemental Information (unaudited) (continued)
WM GROUP OF FUNDS
entered into with various intermediaries that sell shares of the Funds. The
Board also requested and reviewed information relating to other services
provided to the Funds by the Advisor and its affiliates under other agreements,
including information regarding so-called "fall-out" benefits to the Advisor and
its affiliates due to their other relationships with the Funds, such as the
administrative services contract with the Advisor described below. The Board and
the Committee also received and reviewed comparative performance information
regarding the Funds at each of the quarterly Board and Committee meetings.
NATURE, EXTENT AND QUALITY OF SERVICES:
Nature and Extent of Services -- In considering the continuation of the
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 consistency, style and quality of the investment services provided
to the Fund; evaluates the risk/return characteristics of the Fund by reference
to the specific security holdings of the Fund; monitors the Fund's investment
performance; and reports to the Board and the Committee. The Board, the
Independent Trustees and the Committee considered information concerning the
investment philosophy and investment process used by the Advisor and the
Sub-Advisors in managing the Funds. 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 resources 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. 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
typically found in mutual fund investment advisory agreements, and considered
the record of the Advisor in resolving potential disputes arising under its
investment advisory agreements with the WM Group of Funds in the best interests
of shareholders.
Quality of Services -- The Board, the Independent Trustees and the Committee
considered the quality of the services provided by the Advisor and the
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. In evaluating the
scope and quality of the services provided by the Advisor to the Funds, the
Board, the Independent Trustees and the Committee members also drew on their
experiences as directors or Trustees of the VT Funds and, for certain Trustees,
other funds. The Board, the Independent Trustees and the Committee also received
and reviewed information regarding the quality of non-investment advisory
services provided to the Funds by the Advisor and its affiliates under other
agreements.
The Board, the Independent Trustees and the Committee concluded that the
services provided by the Advisor and the Sub-Advisors have benefited and should
continue to benefit the Funds and their shareholders. The Board, the Independent
Trustees and the Committee concluded that the investment philosophies,
processes, and research capabilities of the Advisor and the Sub-Advisors were
well suited to the Funds, given their investment objectives and policies. The
Board, the Independent Trustees and the Committee concluded that the scope of
the services provided to the Funds by the Advisor and the Sub-Advisors under the
Agreements was consistent with the Funds' operational requirements, including,
in addition to their investment objectives, compliance with the Funds'
investment restrictions, tax and reporting requirements and related shareholder
services. The Board, the Independent Trustees and the Committee concluded that
the nature, scope and quality of the services provided by the Advisor and the
Sub-Advisors were sufficient, in light of the resources dedicated by the Advisor
and the Sub-Advisors and their integrity, personnel, systems and financial
resources, to merit approval of the continuation of the Agreements.
PORTFOLIO MANAGEMENT SERVICES AND PERFORMANCE:
In their evaluation of the quality of the portfolio management services provided
by the Advisor and the Sub-Advisors, the Board, the Independent Trustees and the
Committee considered the professional credentials and investment experience of
the Funds' portfolio managers. The Board, the Independent Trustees and the
Committee considered the Funds' 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 or blends of market indices for the 1-, 3- and 5-year (or since
inception) periods ended March 31, 2006, and to average performance information
for peer groups, prepared by Lipper based on the performance of other investment
companies with similar investment objectives over the 1-, 3-, 5-, and 10-year
periods (to the extent applicable) ended December 31, 2005. In the case of each
Fund that had performance that lagged that of a relevant peer group for certain
131
Supplemental Information (unaudited) (continued)
WM GROUP OF FUNDS
(although not necessarily all) periods, the Board, the Independent Trustees and
the Committee concluded that other factors relevant to performance were
sufficient, in light of other considerations, to warrant continuation of the
Agreements. Those factors varied from Fund to Fund, but included one or more of
the following: (i) that the Fund's performance, although lagging in certain
recent periods, was stronger over the longer term; (ii) that the
underperformance was attributable, to a significant extent, to investment
decisions that were reasonable and consistent with the Fund's investment
strategy and policies and that the Fund was performing as expected, given market
conditions and the Fund's investment strategy; (iii) that the Fund's performance
was competitive when compared to other relevant performance benchmarks or peer
groups; and (iv) that the Advisor had taken or was taking steps designed to
improve the Fund's investment performance. After reviewing the foregoing
factors, the Board, the Independent Trustees and the Committee concluded that
the Advisor's and Sub-Advisors' performance records and investment processes
used in managing the Funds were sufficient to merit approval of the continuation
of the Agreements.
MANAGEMENT FEES AND EXPENSES:
The Board, the Independent Trustees and the Committee reviewed information,
including comparative information provided by Lipper, regarding the advisory,
administrative, 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. They discussed trends in total expense ratios for the Funds. The
Board, the Independent Trustees and the Committee reviewed the transfer agency
fees paid by the Funds to the Transfer Agent and the distribution (12b-1) fees
paid to the Distributor. The Board, the Independent Trustees and the Committee
considered the Funds' management fees relative to those of their respective peer
groups as determined by Lipper. 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 their relationships 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 services to the Funds
(and in connection therewith, reviewed information regarding the structure of
compensation of the Advisor's investment professionals) and that maintaining the
financial viability of the Advisor is important in order for it to continue to
provide significant services to the Funds and their shareholders. In addition,
the Board, the Independent Trustees and the Committee considered information
regarding the direct and indirect benefits the Advisor receives as a result of
its relationship with the Funds, including compensation paid to the Advisor and
its affiliates under other agreements, such as transfer agency fees to the
Transfer Agent, and 12b-1 fees and sales charges to the Distributor, as well as
research provided to the Advisor in connection with portfolio transactions
effected on behalf of the Funds (soft dollar arrangements) and reputational
benefits. The Trustees did not evaluate the profitability to the Sub-Advisors of
their relationships with the Funds because the structure of the Agreements is
such that the fees payable to the Advisor are reduced by any fees payable to the
Sub-Advisors and 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 Fund assets in
relation to the breakpoints in the Funds' advisory fees. The Board, the
Independent Trustees and the Committee considered the extent to which economies
of scale might be realized (if at all) by the Advisor across a variety of
products and services included within the WM Group of Funds.
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 their shareholders.
ADDITIONAL CONSIDERATIONS:
The Board, the Independent Trustees and the Committee also considered possible
conflicts of interest associated with the provision of investment advisory
services by the Advisor to other clients. The Trustees considered the procedures
of the Advisor designed to fulfill its fiduciary duties to its advisory clients
with respect to possible conflicts of interest, including the codes of ethics,
the integrity of the systems in place to ensure compliance with the foregoing,
and the record of the Advisor in these matters.
132
Supplemental Information (unaudited) (continued)
WM GROUP OF FUNDS
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 and the fees payable to the Advisor and the
Sub-Advisors are fair and reasonable to the Funds and their shareholders, given
the scope and quality of the services provided to the Funds and such other
considerations as the Trustees considered relevant in the exercise of their
reasonable business judgment, and that the continuation of the Agreements was in
the best interests of the Funds and their shareholders. The Board and the
Independent Trustees unanimously approved the continuation of the Agreements.
OTHER FUND INFORMATION
TAX INFORMATION:
The following tax information for the fiscal year ended October 31, 2006, is
provided pursuant to the provisions of the Internal Revenue Code.
The amounts of long-term capital gains designated are as follows (in thousands):
NAME OF FUND
- ------------
REIT Fund ........................................................... $ 49,650
Equity Income Fund .................................................. 200,837
West Coast Equity Fund .............................................. 43,461
Mid Cap Stock Fund .................................................. 42,637
Small Cap Value Fund ................................................ 5,485
International Growth Fund ........................................... 47,781
High Yield Fund ..................................................... 27,280
California Municipal Fund ........................................... 4,902
California Insured Intermediate Municipal Fund ...................... 300
Of the distributions made from investment income, the following percentages are
tax exempt for regular federal income tax purposes.
NAME OF FUND
- ------------
California Municipal Fund ............................................ 100.00%
California Insured Intermediate Municipal Fund ....................... 100.00%
Of the distributions made by the following Funds, the corresponding percentages
represent the amount of each distribution that may qualify for the dividends
received deduction available to corporate shareholders.
NAME OF FUND
- ------------
REIT Fund ............................................................ 5.48%
Equity Income Fund ................................................... 100.00%
Growth & Income Fund ................................................. 100.00%
West Coast Equity Fund ............................................... 100.00%
Mid Cap Stock Fund ................................................... 62.40%
Growth Fund .......................................................... 100.00%
Small Cap Value Fund ................................................. 24.42%
International Growth Fund ............................................ 2.67%
High Yield Fund ...................................................... 2.41%
133
Supplemental Information (unaudited) (continued)
WM GROUP OF FUNDS
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 International Growth Fund from sources
within foreign countries and possessions of the United States is $0.2620 per
share (representing a total of $24,124,051). The total amount of taxes paid to
such countries is $0.0234 per share (representing a total of $2,151,000).
The following tax information represents fiscal year end percentages and may
differ from those provided to shareholders at calendar year end.
Of the distributions made by the following Funds, the corresponding percentages
represent the amount of each distribution that will qualify for the 15% dividend
income tax rate.
NAME OF FUND
- ------------
REIT Fund ............................................................ 5.84%
Equity Income Fund ................................................... 100.00%
Growth & Income Fund ................................................. 100.00%
West Coast Equity Fund ............................................... 100.00%
Mid Cap Stock Fund ................................................... 100.00%
Growth Fund .......................................................... 100.00%
Small Cap Value Fund ................................................. 86.55%
International Growth Fund ............................................ 58.99%
High Yield Fund ...................................................... 3.99%
The above figures may differ from those cited elsewhere in this report due to
differences in the calculation of income and capital gains for generally
accepted accounting principles (book) purposes and federal income tax (tax)
purposes.
SCHEDULES OF INVESTMENTS:
The Trusts file their 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 Trusts' Forms N-Q are 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 Trusts use to determine how to vote proxies
relating to portfolio securities held by the Funds are included in the Trusts'
Statement of Additional Information which is available, without charge and upon
request, by calling 800-222-5852. Information regarding how the Funds 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.
134
Supplemental Information (unaudited) (continued)
WM GROUP OF FUNDS
TRUSTEES AND OFFICERS INFORMATION
NAME, AGE, AND ADDRESS(1) PRINCIPAL OCCUPATION(S) OTHER
OF NON-INTERESTED TRUSTEE(4) LENGTH OF TIME SERVED(2) DURING PAST 5 YEARS DIRECTORSHIPS HELD BY TRUSTEE
- ---------------------------- ------------------------- ------------------------------------ ---------------------------------
Kristianne Blake Composite Funds-3 years CPA specializing in personal Avista Corporation; Frank Russell
Age 52 WM Group of Funds-8 years financial and tax planning. Investment Company; Russell
Investment Funds; University of
Washington.
Edmond R. Davis, Esq. Sierra Funds-8 years Partner at the law firm of Davis & Braille Institute of America,
Age 78 WM Group of Funds-8 years Whalen LLP. Prior thereto, partner Inc; Children's Bureau of
at the law firm of Brobeck, Phlegar Southern California, Children's
& Harrison, LLP. Bureau Foundation; Fifield
Manors, Inc.
Carrol R. McGinnis Griffin Funds-3 years Private investor since 1994. Prior Baptist Foundation of Texas;
Age 63 WM Group of Funds-7 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 K2, Inc.; First Pacific Advisors'
Age 62 WM Group of Funds-8 years California at Los Angeles Anderson Funds; EMAK Worldwide, Inc.;
Graduate School of Management, and Investment Company Institute;
Faculty Director of the Harold Price Independent Directors Council
Center for Entrepreneurial Studies,
University of California at Los
Angeles.
Daniel L. Pavelich Composite Funds-1 year Retired Chairman and CEO of BDO Catalytic, Inc.; Vaagen Bros.
Age 62 WM Group of Funds-8 years Seidman. Lumber, Inc.
Jay Rockey Composite Funds-3 years Founder and Senior Counsel of The
Age 78 WM Group of Funds-8 years Rockey Company, now Rockey, Hill &
Knowlton.
Richard C. Yancey Composite Funds-23 years Retired Managing Director of Dillon AdMedia Partners Inc.; Czech and
(Chairman) WM Group of Funds-8 years Read & Co., an investment bank now Slovak American Enterprise Fund
Age 80 part of UBS.
NAME, AGE, AND ADDRESS(1) PRINCIPAL OCCUPATION(S) OTHER
OF INTERESTED TRUSTEE(3)(4) LENGTH OF TIME SERVED(2) DURING PAST 5 YEARS DIRECTORSHIPS HELD BY TRUSTEE
- --------------------------- ------------------------- ------------------------------------ ---------------------------------
Anne V. Farrell Composite Funds-4 years President Emeritus of the Seattle Washington Mutual, Inc.;
Age 71 WM Group of Funds-8 years Foundation. Recreational Equipment, Inc.
William G. Papesh Composite Funds-9 years President and Director of the Member of Investment Company
(President and CEO) WM Group of Funds-8 years Advisor; Sr. Vice President and Institute Board of Governors.
Age 63 Director of the Transfer Agent and
Distributor.
NAME, AGE, AND ADDRESS(1) POSITION(S) HELD WITH REGISTRANT &
OF OFFICER(4) LENGTH OF TIME SERVED PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS
- ------------------------- ---------------------------------------------- --------------------------------------------------
Wendi B. Bernard Vice President and Assistant Secretary since Assistant Vice President of the Advisor.
Age 38 2006. Prior to 2006, various other officer
positions since 2003.
Jeffrey L. Lunzer, CPA First Vice President, Chief Financial Officer First Vice President of the Advisor, Transfer
Age 46 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. Prior to 1987, President and Director of the Advisor; Sr. Vice
Age 63 other officer positions since 1972. President and Director of the Transfer Agent and
Distributor.
Gary Pokrzywinski Senior Vice President since 2004. First Vice Senior Vice President and Director of the Advisor,
Age 45 President since 2001. Prior to 2001, Vice Transfer Agent and Distributor.
President since 1999.
Debra Ramsey Senior Vice President since 2004. President and Director of the Transfer Agent and
Age 53 Distributor; Sr. Vice President and Director of
the Advisor.
John T. West First Vice President, Secretary, Chief First Vice President of the Advisor, Transfer
Age 51 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. Prior to Senior Vice President and Chief Investment
Age 47 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, 8th 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., WM Advisors, Inc., WM Funds Distributor, Inc. and WM
Shareholder Services, 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.
135
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(GRAPHIC)
(WM GROUP OF FUNDS LOGO)
A mutual fund's share price and investment return will vary with market
conditions, and the principal value of an investment when you sell your shares
may be more or less than the original cost.
This annual report is published as general information for the shareholders of
the WM Group of Funds. This material is not authorized for distribution unless
preceded or accompanied by a current prospectus that includes more information
regarding the risk factors, expenses, policies, and objectives of the funds.
Investors should read the prospectus carefully before investing. To obtain an
additional prospectus, please contact your Investment Representative or call
800-222-5852.
The WM Group of mutual funds is advised by WM Advisors, Inc., distributed by WM
Funds Distributor, Inc., and sold through WM Financial Services, Inc. (all
affiliates of Washington Mutual, Inc.) and independent broker/dealers.
Distributed by:
WM Funds Distributor, Inc.
Member NASD
(WM GROUP OF FUNDS LOGO)
P.O. Box 8024
Boston, MA 02266-8024
PRESORT
STANDARD
U.S. POSTAGE
PAID
DST OUTPUT
8974 WMGAR (12/27/06)
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
2005 2006
---- ----
$200,700 $180,500
(b) Audit-Related Fees
2005 2006
- ---- ----
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
2005 2006
---- ----
$16,688 $15,600
The tax fees consist of fees billed in connection with reviewing the federal
regulated investment company income tax returns for WM Trust II for the tax
years ended October 31, 2004 and October 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 October 31, 2006, the registrant's principal
accountant billed aggregate non-audit fees in the amount of $112,000 for
services rendered to the registrant, WM Advisors, Inc., WM Funds Distributor,
Inc., WM Shareholder Services, Inc. and WM Financial Services, Inc. For the
fiscal year ended October 31, 2005, the registrant's principal accountant billed
aggregate non-audit fees in the amount of $0 for services rendered to the
registrant, WM Advisors, Inc., WM Funds Distributor, Inc., WM Shareholder
Services, Inc. and WM Financial Services, Inc.
(h) The Audit Committee has considered whether the provision of non-audit
services that were rendered to the registrant's investment advisor (not
including any subadvisor whose role is primarily portfolio management and is
subcontracted with or overseen by another investment advisor), and any entity
controlling, controlled by, or under common control with the investment advisor
that provides ongoing services to the registrant that were not pre-approved
pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible
with maintaining the principal accountant's independence.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS
Not Applicable.
ITEM 6. SCHEDULE OF INVESTMENTS
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 Trust II
By: /s/ William G. Papesh
William G. Papesh
President and Chief Executive Officer
Date: January 11, 2007
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: January 11, 2007
By: /s/ William G. Papesh
William G. Papesh
President and Chief Executive Officer
Date: January 11, 2007