UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number 811-07577
WM Strategic Asset Management Portfolios, LLC
(Exact name of registrant as specified in charter)
1201 Third Avenue, 22nd Floor, Seattle, WA 98101
(Address of principal executive offices) (Zip code)
Jeffrey L. Lunzer
1201 Third Avenue, 22nd Floor, Seattle, WA 98101
(Name and address of agent for service)
Registrant's telephone number, including area code: (206) 461-3800
Date of fiscal year end: October 31, 2003
Date of reporting period: October 31, 2003
ITEM 1. REPORTS TO STOCKHOLDERS
LOGO: WM GROUP OF FUNDS
STRATEGIC
ASSET
MANAGEMENT
PORTFOLIOS
Common sense. Uncommon solutions.
1st Photo: Hot Air Balloons
Annual Report
for the year ended
October 31, 2003
WM Strategic Asset Management Portfolios
Flexible Income Portfolio
Conservative Balanced Portfolio
Balanced Portfolio
Conservative Growth Portfolio
Strategic Growth Portfolio
Table of Contents
Message from the President.............................. 1
Individual Portfolio Reviews............................ 2
Portfolio of Investments................................ 14
Statements of Assets and Liabilities.................... 19
Statements of Operations................................ 21
Statements of Changes in Net Assets..................... 22
Statements of Changes in Net
Assets - Capital Stock Activity......................... 24
Financial Highlights.................................... 26
Notes to Financial Statements........................... 32
Independent Auditors' Report............................ 37
Other Information (unaudited)........................... 38
NOT FDIC INSURED
o May Lose Value
o No Bank Guarantee
[PHOTO] Dear Shareholder,
During this fiscal year, equity investments rebounded from three years
of down markets while bonds also closed the period with positive
performance.(1) We believe these past few years have demonstrated the
benefits provided by our fund family's emphasis on diversification and
asset allocation. At this strategy's most basic level, a mix of
carefully selected stocks and bonds offered not only the ability to help
manage risk and limit losses during the recent equity market downturn,
but also the potential for performance gains as markets turned the tide.
This year's performance also underscored the importance of
diversification and allocation at the asset class level. During the
twelve-month period ended October 31, 2003, the forefront of the market
rebound included asset classes such as high-yield bonds, small-cap
stocks, real estate holdings, and foreign equities. Over the last
several years, we have made each of these asset classes available
through individual funds and as components of the WM Strategic Asset
Management Portfolios. Like many of our investment options, these WM
Funds and Portfolios offer the potential to build wealth while managing
and moderating risk levels--the crux of our investment philosophy at the
WM Group of Funds.
We introduced the WM REIT Fund in March 2003 and have been very pleased
with its results. The Fund, which invests in real estate securities,
provides another tool for building diversification. As both an
individual fund option and an investment available within our asset
allocation portfolios, the WM REIT Fund exemplifies our dedication to
improving diversification and thereby better managing risk.
Although this year attested to the benefits of active asset allocation
in advancing markets, this strategy can actually assist investors during
all phases of the market cycle. Active asset allocation can keep
portfolios balanced during an equity market run-up, limit the impact of
a subsequent downturn, and provide the discipline to stay invested so
that an ensuing rebound is not missed. A well-diversified and allocated
portfolio can mitigate the effects of short-term market movements and
keep investors on track to meet their long-term goals.
As always, we encourage you to meet regularly with your Investment
Representative to ensure that your investment portfolio remains in line
with your long-term goals. Economies and markets are in constant flux
and your needs can change over time, so it is prudent to periodically
examine your entire financial portfolio. The guidance of an investment
professional can assist this process.
Our enthusiasm for this year's equity market rebound has been tempered
by concerns raised by investigations within the mutual fund industry.
Two trading activities, market timing and late trading, have received
widespread media coverage in recent months. I would like to take this
opportunity to comment on how the WM Group of Funds views these issues.
Market timing, which involves the short-term buying and selling of
shares, is a practice that the WM Group of Funds opposes. We believe
that this type of activity can be detrimental to the long-term interests
of shareholders. Late trading is the practice of placing a trade for
mutual fund shares after 4 p.m. EST at that day's net asset value. The
securities industry strictly prohibits this practice, and the WM Group
of Funds endorses and abides by this rule.
To ensure that we are effectively addressing these issues, we will
continue to review our existing practices and to support appropriate
regulations. Although it is impossible to prevent all market timing, the
WM Group of Funds utilizes a number of procedures designed to combat
this activity. Our redemption fee policy regarding short-term trades in
our WM International Growth Fund is one example of these procedures. We
also reserve the right to reject any purchase that we suspect involves
market timing or other excessive trading activity, and have done so when
necessary in the past.
As an officer with the company for more than half of its 64-year
history, I have been part of our diligent efforts to build a specific
company culture and industry reputation. We stress two basic values at
the WM Group of Funds: risk-adjusted asset management and customer
service. This past year has been a gratifying one in terms of both of
these core values. We are pleased with the performance of the Portfolios
and Funds, and we have garnered strong industry recognition for these
results. By providing a unique structure and mix of investment
opportunities, we have been able to grow when some in the industry have
struggled. In addition, customer service was the basis for many of this
year's initiatives. We worked hard to enhance aspects of it that you see
regularly, such as shareholder statements and Web site features, as well
as those that are behind the scenes, such as processes and personnel. In
each case, our goal has been to streamline and improve operations for
both you and your Investment Representative.
Thank you for the confidence and trust you have placed in the WM Group
of Funds. We look forward to continuing to serve your investment needs.
Sincerely,
/s/ William G. Papesh
William G. Papesh
President
<FN>
(1) As measured by the S&P 500 Index and the Lehman Brothers Aggregate
Bond Index for the one-year period ended October 31, 2003. Indices are
unmanaged, and individuals cannot invest directly in an index.
1
[PHOTO] Individual Portfolio Reviews
To Our Asset Allocation Clients
WELCOME TO THE STRATEGIC ASSET
MANAGEMENT PORTFOLIOS.
We are pleased to provide you with an overview of our asset allocation
portfolios, each designed to help you meet specific long-term investment
objectives. This report includes performance reviews and highlights of
the investment strategies for each of our five Portfolios during the
twelve-month period ended October 31, 2003.
[wm Group of Funds logo]
Understanding the Enclosed Charts
and Performance
In order to help you understand the Strategic Asset Management (SAM)
Portfolios' investment performance, we have included portfolio
commentary along with graphs that compare the Portfolios' performance
with certain capital market benchmarks. The benchmarks are
a blended mix of capital market indices intended to help you assess for
Portfolio performance.
Descriptions of the indices used are as follows:
o Inflation is a measurement of the change in domestic prices and is
measured by the CONSUMER PRICE INDEX for all urban consumers.
o The LEHMAN BROTHERS AGGREGATE BOND INDEX is a broad-based bond
index which contains all investment-grade, government, corporate,
mortgage and asset-backed securities.
o The S&P 500 INDEX is an index of 500 industrial, transportation,
utility and financial companies widely regarded by investors as
representative of the U.S. stock market.
Generally, an index represents the market value of an unmanaged group of
securities regarded by investors as representative of a particular
market. An index does not reflect any asset-based charges for investment
management or other expenses, and individuals cannot invest directly in
an index. Index results on the following pages include changes in value
and the reinvestment of dividends. Total return is used to measure a
Portfolio's performance and reflects both changes in the value of the
Portfolio's shares as well as any income dividend and/or capital gain
distributions made by the Portfolio during the period. Past performance
is not a guarantee of future results. 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.
2
WM Advisors' Asset Allocation Team
RANDALL L. YOAKUM, CFA
[photo] Senior Portfolio Manager
Chief Investment Officer
WM Advisors, Inc.
RANDALL L. YOAKUM, Co-Portfolio Manager of the SAM Portfolios, has
investment management experience dating back to 1984. He currently
serves as chairman of the Investment Policy Committee and the Asset
Allocation Team. Mr. Yoakum was instrumental in developing the
investment policies at WM Advisors from 1987 to 1994, as well as after
rejoining the company in 1999. He holds the Chartered Financial Analyst
designation and has a B.B.A. from Pacific Lutheran University and an
M.B.A. from Arizona State University.
GARY J. POKRZYWINSKI, CFA
[photo] Senior Portfolio Manager
Head of the Fixed-Income
Investment Team
WM Advisors, Inc.
GARY J. POKRZYWINSKI, Senior Portfolio Manager of WM Advisors, Inc., is
responsible for helping to develop the outlook and policy for the fixed-
income assets within the Portfolios. He joined WM Advisors in 1992 and
currently manages the WM INCOME FUND and WM HIGH YIELD FUND. Mr.
Pokrzywinski holds the Chartered Financial Analyst designation and has a
B.B.A. from the University of Wisconsin.
MICHAEL D. MEIGHAN, CFA
[photo] Portfolio Manager
Vice President
WM Advisors, Inc.
MICHAEL D. MEIGHAN is the Co-Portfolio Manager of the SAM Portfolios. Mr.
Meighan joined WM Advisors in 1999. He holds the Chartered Financial Analyst
designation and has a B.S. from Santa Clara University and an M.B.A. from
Gonzaga University.
CHARLES D. AVERILL, CFA
[photo] Senior Quantitative Analyst
Assistant Vice President
WM Advisors, Inc.
CHARLES D. AVERILL is responsible for ongoing analysis of both the
current and potential Portfolio holdings, as well as the structural
model underlying the asset allocation process. He also develops and
maintains performance attribution procedures used in evaluating
performance of the Portfolios' holdings. Mr. Averill holds the Chartered
Financial Analyst designation, and he has been with WM Advisors since
1990. He has a B.A. in Economics from Reed College and an M.A. in
Economics from Princeton University.
3
[PHOTO] Flexible Income Portfolio
Value of a $10,000 Investment (Class A shares)(1), (2)
[graph]
Capital
Market
Benchmark
NAV Sales(3) Index(4) Inflation(5) LB Agg(4)
07/25/96 $10,000 $9,450
$10,018 $9,567 $10,000 $10,000 $10,000
$10,046 $9,594 $10,029 $10,019 $9,983
$10,266 $9,804 $10,281 $10,051 $10,157
Oct-96 $10,446 $9,976 $10,520 $10,083 $10,382
$10,748 $10,264 $10,824 $10,102 $10,560
$10,690 $10,209 $10,701 $10,102 $10,462
$10,836 $10,348 $10,860 $10,135 $10,494
$10,866 $10,377 $10,899 $10,166 $10,520
$10,711 $10,229 $10,712 $10,192 $10,403
$10,857 $10,369 $10,968 $10,204 $10,559
$11,035 $10,539 $11,186 $10,198 $10,660
$11,161 $10,659 $11,393 $10,210 $10,787
$11,529 $11,011 $11,820 $10,222 $11,078
$11,399 $10,886 $11,608 $10,242 $10,984
$11,598 $11,076 $11,873 $10,267 $11,146
Oct-97 $11,606 $11,083 $11,931 $10,293 $11,308
$11,667 $11,142 $12,085 $10,287 $11,360
$11,790 $11,259 $12,225 $10,274 $11,475
$11,896 $11,360 $12,377 $10,294 $11,622
$12,067 $11,524 $12,547 $10,313 $11,612
$12,211 $11,661 $12,710 $10,333 $11,652
$12,272 $11,719 $12,788 $10,352 $11,712
$12,266 $11,714 $12,842 $10,370 $11,824
$12,397 $11,839 $13,033 $10,383 $11,924
$12,322 $11,768 $13,027 $10,395 $11,949
$11,853 $11,320 $12,820 $10,408 $12,144
$12,169 $11,622 $13,225 $10,420 $12,428
Oct-98 $12,365 $11,809 $13,384 $10,445 $12,362
$12,635 $12,066 $13,607 $10,445 $12,433
$12,891 $12,311 $13,796 $10,439 $12,470
$13,136 $12,545 $13,990 $10,464 $12,558
$12,948 $12,366 $13,707 $10,476 $12,339
$13,169 $12,576 $13,877 $10,508 $12,407
$13,439 $12,834 $14,020 $10,585 $12,446
$13,331 $12,731 $13,855 $10,585 $12,337
$13,470 $12,864 $13,974 $10,585 $12,297
$13,359 $12,758 $13,840 $10,616 $12,246
$13,280 $12,683 $13,820 $10,642 $12,239
$13,335 $12,735 $13,873 $10,693 $12,381
Oct-99 $13,527 $12,918 $14,090 $10,712 $12,427
$13,708 $13,091 $14,146 $10,719 $12,426
$13,992 $13,362 $14,258 $10,719 $12,366
$13,834 $13,211 $14,077 $10,744 $12,326
$13,985 $13,355 $14,160 $10,808 $12,475
$14,343 $13,697 $14,587 $10,896 $12,639
$14,214 $13,574 $14,465 $10,903 $12,603
$14,134 $13,498 $14,400 $10,909 $12,596
$14,367 $13,721 $14,711 $10,973 $12,858
$14,382 $13,734 $14,772 $10,991 $12,975
$14,780 $14,115 $15,126 $11,004 $13,164
$14,699 $14,037 $15,043 $11,062 $13,246
Oct-00 $14,685 $14,025 $15,110 $11,081 $13,334
$14,436 $13,786 $15,070 $11,087 $13,553
$14,706 $14,044 $15,309 $11,081 $13,805
$15,226 $14,541 $15,617 $11,150 $14,030
$14,978 $14,304 $15,441 $11,195 $14,152
$14,758 $14,094 $15,307 $11,221 $14,223
$14,951 $14,278 $15,493 $11,266 $14,163
$15,077 $14,398 $15,588 $11,316 $14,248
$15,102 $14,423 $15,560 $11,335 $14,302
$15,255 $14,568 $15,808 $11,304 $14,622
$15,228 $14,542 $15,756 $11,304 $14,790
$14,943 $14,270 $15,647 $11,355 $14,962
Oct-01 $15,225 $14,540 $15,969 $11,316 $15,275
$15,318 $14,629 $16,037 $11,297 $15,064
$15,338 $14,648 $15,983 $11,253 $14,967
$15,349 $14,658 $16,040 $11,279 $15,089
$15,358 $14,667 $16,103 $11,324 $15,235
$15,427 $14,733 $16,010 $11,387 $14,982
$15,441 $14,746 $16,064 $11,451 $15,273
$15,484 $14,787 $16,150 $11,451 $15,403
$15,263 $14,576 $16,032 $11,458 $15,537
$14,982 $14,308 $15,937 $11,470 $15,725
$15,144 $14,462 $16,174 $11,508 $15,990
$14,956 $14,283 $16,032 $11,534 $16,249
Oct-02 $15,165 $14,483 $16,255 $11,553 $16,175
$15,478 $14,781 $16,442 $11,553 $16,170
$15,496 $14,799 $16,521 $11,527 $16,505
$15,512 $14,814 $16,447 $11,578 $16,519
$15,572 $14,871 $16,579 $11,667 $16,747
$15,617 $14,915 $16,600 $11,737 $16,734
$16,044 $15,322 $16,984 $11,712 $16,873
$16,501 $15,758 $17,416 $11,693 $17,187
$16,575 $15,829 $17,433 $11,706 $17,152
$16,345 $15,609 $17,025 $11,718 $16,576
$16,467 $15,726 $17,182 $11,763 $16,685
$16,705 $15,953 $17,509 $11,801 $17,128
Oct-03 $16,905 $16,144 $17,577 $11,843 $16,968
Average Annual Total Returns as of 10/31/03(1)
CLASS A SHARES 1 Year 5 Year Since Inception
(July 25, 1996)
Fund (not adjusted for sales charge) 11.49% 6.46% 7.49%
Fund (adjusted for maximum sales charge)(3) 6.47% 5.49% 6.81%
Capital Market Benchmark(4) 8.14% 5.60% 8.09%
CLASS B SHARES 1 Year 5 Year Since Inception
(July 25, 1996)
Fund (not adjusted for sales charge) 10.60% 5.67% 6.69%
Fund (adjusted for maximum sales charge)(3) 5.60% 5.35% 6.69%
Capital Market Benchmark(4) 8.14% 5.60% 8.09%
CLASS C SHARES 1 Year 5 Year Since Inception
(March 1, 2002)
Fund (not adjusted for sales charge) 10.63% N/A 5.10%
Fund (adjusted for maximum sales charge)(3) 8.55% N/A 4.45%
Capital Market Benchmark(4) 8.14% N/A 5.40%
<FN>
(1) The Portfolio's performance through October 31, 1999 benefited from the
agreement of WM Advisors and its affiliates to limit the Portfolio's
expenses. Performance results assume reinvestment of all capital gains,
dividends and other earnings.
(2) The performance of Class B and Class C shares was different than what
is shown on the graph above for Class A shares, based on the
differences in sales loads and fees paid by Class B and Class C
shareholders.
(3) Accounts for maximum sales charge of 4.5% for Class A shares and
maximum contingent deferred sales charge (CDSC) for Class B shares.
CDSC represents a declining charge over 5 years as follows:
5-5-4-3-2-0%. Performance for Class C shares includes a 1% upfront
sales charge and a 1% CDSC, which applies to redemptions within the
first 12 months.
(4) The Flexible Income Portfolio's benchmark is a capital market index
that is intended to represent a relevant proxy for market and Portfolio
performance. The benchmark allocation is: 20% S&P 500 Index and 80%
Lehman Brothers Aggregate Bond Index. For comparative purposes, the
benchmark's performance is shown for the ten-year period or from the
inception of the particular Portfolio's class of shares. The S&P 500
Index is a broad-based index and is intended to represent the U.S.
equity market. The Lehman Brothers Aggregate Bond Index is a
broad-based index intended to represent the fixed-income market as a
whole. The returns shown for the indices assume reinvestment of all
dividends and distributions. Indices are unmanaged, and individuals
cannot invest directly in an index.
(5) Inflation is measured by the Consumer Price Index for all urban
consumers.
Note: Past performance is not a guarantee of future results. A mutual
fund's share price and investment return will vary with market
conditions, and the principal value when you sell your shares may be
more or less than your original cost.
Performance Review
THE SAM FLEXIBLE INCOME PORTFOLIO returned 11.49% for the one-year period
ended October 31, 2003. Both equity and bond markets rallied for much of
the fiscal year, and the Portfolio posted solid results, outpacing its
benchmark index, which returned 8.14%.(4) Longer-term results have also
been favorable. The Portfolio outperformed its benchmark index by an
average annual rate of 0.86% for the five-year period ended October 31,
2003. (All Portfolio performance described above is for Class A shares not
adjusted for sales charge.)
Economic/Market Review
Equity markets began and ended the fiscal year with separate rallies,
but geopolitical conflicts inhibited performance along the way. The
period's early rally stalled in December and failed to reignite during
the first few months of 2003. This interval was mired in uncertainty and
instability as the threat of war took a toll on business and consumer
confidence. Once the war in Iraq began, equity markets moved in lock
step with perceptions of its progress, duration, and magnitude. As
equity markets receded, bond markets benefited, providing a safer haven
in the flight to quality. This asset flow helped push interest rates
lower.
Bond markets rallied for much of the year in response to these declining
rates. However, longer-term U.S. Treasury securities suffered in June
and July as interest rates reacted to stronger-than-expected economic
growth by spiking higher. Corporate bond issues benefited from improving
balance sheets, and lower-rated, higher-yielding bonds led the fixed-
income market by a wide margin. Mortgage rates also edged higher during
the period. Both Treasuries and mortgage-backed securities
underperformed corporate bonds for the year ended October 31, 2003.
4
Global equity markets rebounded in the second quarter of 2003 after
geopolitical tensions eased and central banks injected significant
stimulus into world economies. In June, the Federal Reserve trimmed the
federal funds rate to a 45-year low of 1%. It has since released several
statements reaffirming plans to keep interest rates low for as long as
it takes to stimulate the economy. As a result, short-term rates have
remained low, but longer-term bond yields were quite volatile during the
period. The Fed's monetary stimulus was coupled with a robust tax
reduction package and rampant mortgage refinancing cash-outs, which
lined the pockets of consumers and provided significant liquidity.
Throughout the summer, record stimulus helped the economic backdrop
improve, and equity markets continued to advance. A cyclical rebound now
seems to be underway. In fact, third quarter domestic growth levels
topped 8%, the largest quarterly economic growth rate in nearly two
decades. Despite this liquidity-driven economic growth, several factors
continue to impede business confidence levels. Excess capacity built up
during the 1990s continues to curtail current business investment. Firms
have begun to slowly increase spending on capital equipment, but they
remain reluctant to hire new employees. Consumer spending, which has
been buoyed by the very strong housing market, could eventually be
affected by the absence of job growth.
Despite these longer-term secular economic headwinds, the cyclical
recovery has built stronger profits and helped to push equity markets
higher. Corporate balance sheets continue to be cleansed through
productivity and cost-cutting measures, and earnings leverage has
certainly improved. Investors' appetite for risk has also reemerged. The
sectors and asset classes that suffered the most during the downturn
rebounded significantly during the past twelve months.
The effects of economic growth were also felt in the fixed-income
markets. After rising sharply in early summer, interest rates have
settled back a little, but the yield on 10-year Treasury bonds closed
the period more than 100 basis points (1%) above its June low. It could
move higher at the first sign of inflation.
Investment Strategy
The FLEXIBLE INCOME PORTFOLIO is diversified among eleven funds,
representing eight major asset classes.(6) A combination of asset classes
facilitates our ability to manage risk over a long-term investment horizon.
Diversification also fueled relative performance with strong results from
some nontraditional investment categories during the period.
The overall investment strategy for the period was to:
o Maintain overweighted positions in corporate and mortgage bonds to
generate yield
o Take advantage of the higher-yielding segments of the corporate bond
market
o Take some profits in investment-grade corporate bonds and shift assets
to mortgages near the end of the period
o Add to equity positions to take advantage of the broad-based market rally
Review of Portfolio Allocations
During the past twelve months, we shifted the Portfolio's equity
weighting from 22% to 24%. Opportunities in stock valuations motivated
this move, and the Portfolio benefited from the strong results of its
equity allocations. Portfolio performance was also bolstered by its
position in the WM SMALL CAP STOCK FUND, which was the best-performing
WM Fund during the period.
Fixed-income positions were led by the strong results of the WM HIGH
YIELD FUND. We have overweighted high-yield corporate bonds since the
summer of 2002, and although we may have been a little early, this
allocation significantly boosted Portfolio performance this year.
The WM INCOME FUND also provided strong results, spurred by falling
corporate yield differentials relative to Treasuries, which drove the
relative performance of corporate bonds. Mortgage-backed issues suffered
through a period of record refinancing and prepayment, causing the WM U.S.
GOVERNMENT SECURITIES FUND to underperform. However, we now favor these
issues and ended the period by taking some profits in investment-grade
corporates in favor of mortgages. The WM SHORT TERM INCOME FUND also
provided stable, positive results and has less sensitivity should interest
rates increase.
In March, we introduced a position in the WM REIT FUND, which invests
primarily in real estate investment trust (REIT) securities. These
holdings provided diversification benefits as well as additional
performance strength throughout the second half of the period. Because
REITs are typically more value-oriented positions, we reduced
allocations in the WM GROWTH & INCOME FUND and WM EQUITY INCOME FUND.
Overall, performance was very strong for many asset classes during the
fiscal year, and the wide-reaching diversification of the FLEXIBLE
INCOME PORTFOLIO enhanced results. Certain nontraditional asset types
led the market during the period, ultimately to the Portfolio's benefit.
High-yield bonds, small-cap growth stocks, and real estate securities
all contributed significantly to the Portfolio's performance. We believe
these results underscore the benefits of active asset allocation, which
has the potential not only to manage risk, but also to provide tactical
opportunities for building wealth over the long term.
Outlook
The economy's surging growth is lifting corporate profits up along with
it, but this growth also has the potential to put upward pressure on
interest rates. We remain vigilant concerning longer-term secular
headwinds that could limit the magnitude of the economic rebound,
thereby helping to keep inflation in check. We are seeking prudent
opportunities to marginally shift assets into more attractively priced
market segments. Our long-term discipline, with asset allocation and
diversification at its core, remains our investment strategy regardless
of short-term market cycles.
Portfolio Allocation Asset Class Diversification
as of October 31, 2003(6) as of October 31, 2003(6)
[pie chart] [pie chart]
Income Fund 28% Mortgage-Backed 32%
U.S. Govt. Securities Fund 27% Corporate Bonds 28%
Short Term Income Fund 13% U.S. Equity Large Cap 12%
High Yield Fund 8% U.S. Equity Mid Cap 7%
Growth & Income Fund 8% Cash Equivalents 6%
Growth Fund 4% U.S. Treasuries 6%
Equity Income Fund 3% Convertible Bonds 4%
Mid Cap Stock Fund 3% U.S. Equity Small Cap 3%
Small Cap Stock Fund 3% Foreign Equity 2%
West Coast Equity Fund 2%
REIT Fund 1%
<FN>
(6) As of October 31, 2003 and may not reflect current allocations.
5
[PHOTO] Conservative Balanced Portfolio*
Value of a $10,000 Investment (Class A shares)(1), (2)
[graph]
Capital
Market
Benchmark
NAV Sales(3) Index(4) Inflation(5) S&P 500(4) LB Agg(4)
07/25/96 $10,000 $9,450
$10,041 $9,489 $10,000 $10,000 $10,000 $10,000
$9,994 $9,445 $10,075 $10,019 $10,212 $9,983
$10,144 $9,586 $10,406 $10,051 $10,786 $10,157
Oct-96 $10,368 $9,798 $10,659 $10,083 $11,081 $10,382
$10,529 $9,950 $11,092 $10,102 $11,923 $10,560
$10,462 $9,886 $10,943 $10,102 $11,689 $10,462
$10,467 $9,891 $11,235 $10,135 $12,415 $10,494
$10,519 $9,941 $11,288 $10,166 $12,515 $10,520
$10,407 $9,834 $11,025 $10,192 $11,995 $10,403
$10,522 $9,944 $11,388 $10,204 $12,711 $10,559
$10,617 $10,033 $11,733 $10,198 $13,491 $10,660
$10,733 $10,142 $12,026 $10,210 $14,093 $10,787
$11,009 $10,403 $12,602 $10,222 $15,212 $11,078
$10,913 $10,313 $12,258 $10,242 $14,366 $10,984
$11,051 $10,444 $12,635 $10,267 $15,153 $11,146
Oct-97 $11,192 $10,576 $12,576 $10,293 $14,647 $11,308
$11,224 $10,607 $12,844 $10,287 $15,325 $11,360
$11,324 $10,701 $13,010 $10,274 $15,589 $11,475
$11,442 $10,813 $13,168 $10,294 $15,762 $11,622
$11,434 $10,805 $13,541 $10,313 $16,898 $11,612
$11,461 $10,831 $13,846 $10,333 $17,764 $11,652
$11,511 $10,878 $13,945 $10,352 $17,942 $11,712
$11,595 $10,957 $13,929 $10,370 $17,634 $11,824
$11,668 $11,026 $14,226 $10,383 $18,350 $11,924
$11,685 $11,043 $14,184 $10,395 $18,155 $11,949
$11,718 $11,073 $13,502 $10,408 $15,530 $12,144
$11,850 $11,199 $14,037 $10,420 $16,525 $12,428
Oct-98 $11,779 $11,131 $14,450 $10,445 $17,869 $12,362
$11,915 $11,259 $14,849 $10,445 $18,952 $12,433
$11,922 $11,266 $15,218 $10,439 $20,044 $12,470
$12,014 $11,353 $15,538 $10,464 $20,882 $12,558
$11,883 $11,229 $15,181 $10,476 $20,233 $12,339
$11,962 $11,304 $15,474 $10,508 $21,043 $12,407
$12,075 $11,411 $15,744 $10,585 $21,858 $12,446
$12,024 $11,363 $15,512 $10,585 $21,342 $12,337
$12,008 $11,348 $15,827 $10,585 $22,526 $12,297
$11,995 $11,335 $15,589 $10,616 $21,823 $12,246
$11,986 $11,326 $15,554 $10,642 $21,715 $12,239
$12,102 $11,436 $15,491 $10,693 $21,120 $12,381
Oct-99 $12,121 $11,455 $15,918 $10,712 $22,456 $12,427
$12,155 $11,487 $16,046 $10,719 $22,913 $12,426
$12,159 $11,490 $16,378 $10,719 $24,262 $12,366
$12,145 $11,477 $16,017 $10,744 $23,043 $12,326
$12,241 $11,568 $16,012 $10,808 $22,607 $12,475
$12,350 $11,671 $16,765 $10,896 $24,819 $12,639
$12,331 $11,652 $16,534 $10,903 $24,072 $12,603
$12,286 $11,610 $16,393 $10,909 $23,578 $12,596
$12,496 $11,809 $16,759 $10,973 $24,159 $12,858
$12,582 $11,890 $16,746 $10,991 $23,782 $12,975
$13,013 $12,297 $17,308 $11,004 $25,259 $13,164
$12,851 $12,145 $17,008 $11,062 $23,925 $13,246
Oct-00 $12,792 $12,089 $17,046 $11,081 $23,824 $13,334
$12,389 $11,708 $16,676 $11,087 $21,946 $13,553
$12,643 $11,948 $16,895 $11,081 $22,053 $13,805
$13,160 $12,437 $17,300 $11,150 $22,835 $14,030
$12,776 $12,074 $16,760 $11,195 $20,753 $14,152
$12,498 $11,810 $16,385 $11,221 $19,439 $14,223
$12,796 $12,093 $16,853 $11,266 $20,949 $14,163
$12,924 $12,213 $16,959 $11,316 $21,090 $14,248
$12,932 $12,221 $16,832 $11,335 $20,576 $14,302
$12,981 $12,267 $16,992 $11,304 $20,374 $14,622
$12,859 $12,152 $16,684 $11,304 $19,098 $14,790
$12,414 $11,731 $16,261 $11,355 $17,556 $14,962
Oct-01 $12,666 $11,970 $16,589 $11,316 $17,891 $15,275
$12,874 $12,166 $16,961 $11,297 $19,263 $15,064
$12,920 $12,210 $16,955 $11,253 $19,432 $14,967
$12,861 $12,154 $16,939 $11,279 $19,149 $15,089
$12,815 $12,110 $16,907 $11,324 $18,779 $15,235
$12,980 $12,266 $16,992 $11,387 $19,486 $14,982
$12,884 $12,175 $16,778 $11,451 $18,304 $15,273
$12,898 $12,189 $16,814 $11,451 $18,169 $15,403
$12,594 $11,901 $16,423 $11,458 $16,875 $15,537
$12,221 $11,549 $16,030 $11,470 $15,560 $15,725
$12,331 $11,653 $16,235 $11,508 $15,662 $15,990
$11,984 $11,325 $15,687 $11,534 $13,960 $16,249
Oct-02 $12,277 $11,602 $16,196 $11,553 $15,188 $16,175
$12,638 $11,943 $16,574 $11,553 $16,082 $16,170
$12,534 $11,845 $16,390 $11,527 $15,137 $16,505
$12,507 $11,819 $16,227 $11,578 $14,740 $16,519
$12,507 $11,819 $16,264 $11,667 $14,519 $16,747
$12,543 $11,853 $16,320 $11,737 $14,660 $16,734
$12,982 $12,268 $16,939 $11,712 $15,868 $16,873
$13,462 $12,722 $17,485 $11,693 $16,704 $17,187
$13,546 $12,801 $17,553 $11,706 $16,918 $17,152
$13,445 $12,706 $17,323 $11,718 $17,216 $16,576
$13,588 $12,841 $17,527 $11,763 $17,551 $16,685
$13,755 $12,998 $17,731 $11,801 $17,365 $17,128
Oct-03 $14,041 $13,269 $18,034 $11,843 $18,348 $16,968
Average Annual Total Returns as of 10/31/03(1)
CLASS A SHARES 1 Year 5 Year Since Inception
(July 25, 1996)
Fund (not adjusted for sales charge) 14.38% 3.57% 4.78%
Fund (adjusted for maximum sales charge)(3) 8.14% 2.40% 3.97%
Capital Market Benchmark(4) 11.35% 4.53% 8.47%
CLASS B SHARES 1 Year 5 Year Since Inception
(July 25, 1996)
Fund (not adjusted for sales charge) 13.46% 2.79% 3.99%
Fund (adjusted for maximum sales charge)(3) 8.46% 2.43% 3.99%
Capital Market Benchmark(4) 11.35% 4.53% 8.47%
CLASS C SHARES 1 Year 5 Year Since Inception
(March 1, 2002)
Fund (not adjusted for sales charge) 13.53% N/A 4.83%
Fund (adjusted for maximum sales charge)(3) 11.39% N/A 4.23%
Capital Market Benchmark(4) 11.35% N/A 3.95%
<FN>
* AS OF 8/1/00, THE INCOME PORTFOLIO BECAME THE CONSERVATIVE BALANCED
PORTFOLIO, AND THE PORTFOLIO'S OBJECTIVES AND STRATEGIES CHANGED. THIS
INFORMATION SHOULD BE TAKEN INTO CONSIDERATION WHEN REVIEWING PAST
PERFORMANCE.
(1) The Portfolio's performance through October 31, 2003 benefited from the
agreement of WM Advisors and its affiliates to limit the Portfolio's
expenses. Performance results assume reinvestment of all capital gains,
dividends and other earnings.
(2) The performance of Class B and Class C shares was different than what
is shown on the graph above for Class A shares, based on the
differences in sales loads and fees paid by Class B and Class C
shareholders.
(3) Accounts for maximum sales charge of 5.5% for Class A shares and
maximum contingent deferred sales charge (CDSC) for Class B shares.
CDSC represents a declining charge over 5 years as follows:
5-5-4-3-2-0%. Performance for Class C shares includes a 1% upfront
sales charge and a 1% CDSC, which applies to redemptions within the
first 12 months.
(4) The Conservative Balanced Portfolio's benchmark is a capital market
index that is intended to represent a relevant proxy for market and
Portfolio performance. The benchmark allocation is: 40% S&P 500 Index
and 60% Lehman Brothers Aggregate Bond Index. For comparative purposes,
the benchmark's performance is shown for the ten-year period or from
the inception of the particular Portfolio's class of shares. The S&P
500 Index is a broad-based index and is intended to represent the U.S.
equity market. The Lehman Brothers Aggregate Bond Index is a broad-
based index intended to represent the fixed-income market as a whole.
The returns shown for the indices assume reinvestment of all dividends
and distributions. Indices are unmanaged, and individuals cannot invest
directly in an index.
(5) Inflation is measured by the Consumer Price Index for all urban
consumers.
Note: Past performance is not a guarantee of future results. A mutual
fund's share price and investment return will vary with market
conditions, and the principal value when you sell your shares may be
more or less than your original cost.
Performance Review
The SAM CONSERVATIVE BALANCED PORTFOLIO returned 14.38% for the one-year
period ended October 31, 2003. Both equity and bond markets rallied for much
of the fiscal year, and the Portfolio posted solid results, outpacing its
benchmark index, which returned 11.35%.(4) Please note that due to a
significant shift in the Portfolio's investment objective in 2000, long-term
performance comparisons may not be relevant. (All Portfolio performance
described above is for Class A shares not adjusted for sales charge.)
Economic/Market Review
Equity markets began and ended the fiscal year with separate rallies,
but geopolitical conflicts inhibited performance along the way. The
period's early rally stalled in December and failed to reignite during
the first few months of 2003. This interval was mired in uncertainty and
instability as the threat of war took a toll on business and consumer
confidence. Once the war in Iraq began, equity markets moved in lock
step with perceptions of its progress, duration, and magnitude. As
equity markets receded, bond markets benefited, providing a safer haven
in the flight to quality. This asset flow helped push interest rates
lower.
Bond markets rallied for much of the year in response to these declining
rates. However, longer-term U.S. Treasury securities suffered in June
and July as interest rates reacted to stronger-than-expected economic
growth by spiking higher. Corporate bond issues benefited from improving
balance sheets, and lower-rated, higher-yielding bonds led the fixed-
income market by a wide margin. Mortgage rates also edged higher during
the period. Both Treasuries and mortgage-backed securities
underperformed corporate bonds for the year ended October 31, 2003.
6
Global equity markets rebounded in the second quarter of 2003 after
geopolitical tensions eased and central banks injected significant
stimulus into world economies. In June, the Federal Reserve trimmed the
federal funds rate to a 45-year low of 1%. It has since released several
statements reaffirming plans to keep interest rates low for as long as
it takes to stimulate the economy. This monetary stimulus was coupled
with a robust tax reduction package and rampant mortgage refinancing
cash-outs, which lined the pockets of consumers and provided significant
liquidity.
Throughout the summer, record stimulus helped the economic backdrop
improve, and equity markets continued to advance. A cyclical rebound now
seems to be underway. In fact, third quarter domestic growth levels
topped 8%, the largest quarterly economic growth rate in nearly two
decades. Despite this liquidity-driven economic growth, several factors
continue to impede business confidence levels. Excess capacity built up
during the 1990s continues to curtail current business investment. Firms
have begun to slowly increase spending on capital equipment, but they
remain reluctant to hire new employees. Consumer spending, which has
been buoyed by the very strong housing market, could eventually be
affected by the absence of job growth.
Despite these longer-term secular economic headwinds, the cyclical
recovery has built stronger profits and helped to push equity markets
higher. Corporate balance sheets continue to be cleansed through
productivity and cost-cutting measures, and earnings leverage has
certainly improved. Investors' appetite for risk has also reemerged. The
sectors and asset classes that suffered the most during the downturn
rebounded significantly during the past twelve months. Small-cap and
foreign equities, as well as the technology sector, returned to favor in
2003 and led the broad-based rally with very strong results. All major
market segments reported positive results, with the S&P 500 closing the
period up more than 20%.
Investment Strategy
The CONSERVATIVE BALANCED PORTFOLIO is diversified among twelve funds,
representing eight major asset classes.(6) A combination of asset classes
facilitates our ability to manage risk over a long-term investment horizon.
Diversification also fueled relative performance with strong results from
some nontraditional investment categories during the period.
The overall investment strategy for the period was to:
o Add to equity positions to take advantage of the broad-based market
rally
o Heavily weight corporate bonds and take advantage of higher-yielding
segments of this market
o Broaden equity positions, increasing holdings in smaller-cap stocks,
which led the market throughout the recovery, and introducing a
position in real estate securities
o Take some profits in investment-grade corporate bonds and add to
mortgages near the end of the period
Review of Portfolio Allocations
During the past twelve months, we shifted the Portfolio's equity
weighting from 35% to 37%. Opportunities in stock valuations motivated
this move, and the Portfolio benefited from the strong results of its
equity allocations. Portfolio performance was also bolstered by its
position in the WM SMALL CAP STOCK FUND, which was the best-performing
WM Fund during the period.
Fixed-income positions were led by the strong results of the WM HIGH
YIELD FUND. We have overweighted high-yield corporate bonds since the
summer of 2002, and although we may have been a little early, this
allocation significantly boosted Portfolio performance this year. The WM
INCOME FUND also provided strong results, spurred by falling corporate
yield differentials relative to Treasuries, which drove the relative
performance of corporate bonds. Mortgage-backed issues suffered through
a period of record refinancing and prepayment, causing the WM U.S.
GOVERNMENT SECURITIES FUND to underperform. However, we now favor these
issues and ended the period by taking some profits in investment-grade
corporates in favor of mortgages. The WM SHORT TERM INCOME FUND also
provided stable, positive results and has less sensitivity should
interest rates increase.
In March, we introduced a position in the WM REIT FUND, which invests
primarily in real estate investment trust (REIT) securities. These
holdings provided diversification benefits as well as additional
performance strength throughout the second half of the period. Because
REITs are typically more value-oriented positions, we reduced
allocations in the WM GROWTH & INCOME FUND and WM EQUITY INCOME FUND.
Foreign holdings also contributed to the Portfolio's performance as the
economic recovery spread globally.
Overall, performance was very strong for many asset classes during the
fiscal year, and the wide-reaching diversification of the CONSERVATIVE
BALANCED PORTFOLIO enhanced results. Certain nontraditional asset types
led the market during the period, ultimately to the Portfolio's benefit.
High-yield bonds, small-cap growth stocks, international equities, and
real estate securities all contributed significantly to the Portfolio's
performance. We believe these results underscore the benefits of active
asset allocation, which has the potential not only to manage risk, but
also to provide tactical opportunities for building wealth over the long
term.
Outlook
We are encouraged by the cyclical, stimulus-driven economic recovery and
the subsequent rally in equity markets. Markets have reacted to economic
improvements and positive earnings growth. Yet, we remain vigilant
concerning longer-term secular headwinds that could limit the magnitude
of the economic rebound. This economic growth also has the potential to
put upward pressure on interest rates. We are seeking prudent
opportunities to marginally shift assets into more attractively priced
market segments. Our long-term discipline, with asset allocation and
diversification at its core, remains our investment strategy regardless
of short-term market cycles.
Portfolio Allocation Asset Class Diversification
as of October 31, 2003(6) as of October 31, 2003(6)
[pie chart] [pie chart]
U.S. Govt. Securities Fund 23% Mortgage-Backed 27%
Income Fund 23% Corporate Bonds 22%
Growth & Income Fund 10% U.S. Equity Large Cap 17%
High Yield Fund 8% U.S. Equity Mid Cap 10%
Short Term Income Fund 7% Cash Equivalents 6%
Growth Fund 7% Foreign Equity 6%
Equity Income Fund 6% U.S. Treasuries 5%
West Coast Equity Fund 4% U.S. Equity Small Cap 4%
Mid Cap Stock Fund 4% Convertible Bonds 3%
Small Cap Stock Fund 3%
International Growth Fund 3%
REIT Fund 2%
<FN>
(6) As of October 31, 2003 and may not reflect current allocations.
7
[PHOTO] Balanced Portfolio
Value of a $10,000 Investment (Class A shares)(1), (2)
[graph]
Capital
Market
Benchmark
NAV Sales(3) Index(4) Inflation(5) S&P 500(4) LB Agg(4)
07/25/96 $10,000 $9,450
$10,074 $9,520 $10,000 $10,000 $10,000 $10,000
$10,162 $9,604 $10,120 $10,019 $10,212 $9,983
$10,432 $9,858 $10,532 $10,051 $10,786 $10,157
Oct-96 $10,462 $9,886 $10,799 $10,083 $11,081 $10,382
$10,813 $10,218 $11,364 $10,102 $11,923 $10,560
$10,740 $10,150 $11,188 $10,102 $11,689 $10,462
$10,912 $10,312 $11,619 $10,135 $12,415 $10,494
$10,868 $10,271 $11,687 $10,166 $12,515 $10,520
$10,585 $10,003 $11,344 $10,192 $11,995 $10,403
$10,792 $10,199 $11,818 $10,204 $12,711 $10,559
$11,245 $10,627 $12,298 $10,198 $13,491 $10,660
$11,501 $10,868 $12,686 $10,210 $14,093 $10,787
$12,082 $11,417 $13,427 $10,222 $15,212 $11,078
$11,696 $11,053 $12,934 $10,242 $14,366 $10,984
$12,089 $11,424 $13,435 $10,267 $15,153 $11,146
Oct-97 $11,735 $11,090 $13,244 $10,293 $14,647 $11,308
$11,750 $11,104 $13,636 $10,287 $15,325 $11,360
$11,831 $11,181 $13,832 $10,274 $15,589 $11,475
$11,979 $11,320 $13,995 $10,294 $15,762 $11,622
$12,542 $11,852 $14,596 $10,313 $16,898 $11,612
$12,942 $12,230 $15,065 $10,333 $17,764 $11,652
$13,089 $12,369 $15,187 $10,352 $17,942 $11,712
$12,920 $12,209 $15,088 $10,370 $17,634 $11,824
$13,146 $12,423 $15,507 $10,383 $18,350 $11,924
$13,010 $12,295 $15,421 $10,395 $18,155 $11,949
$11,653 $11,012 $14,184 $10,408 $15,530 $12,144
$12,033 $11,371 $14,862 $10,420 $16,525 $12,428
Oct-98 $12,510 $11,822 $15,556 $10,445 $17,869 $12,362
$13,040 $12,323 $16,157 $10,445 $18,952 $12,433
$13,757 $13,001 $16,735 $10,439 $20,044 $12,470
$14,260 $13,475 $17,202 $10,464 $20,882 $12,558
$13,930 $13,164 $16,761 $10,476 $20,233 $12,339
$14,496 $13,698 $17,200 $10,508 $21,043 $12,407
$15,019 $14,193 $17,622 $10,585 $21,858 $12,446
$14,659 $13,852 $17,310 $10,585 $21,342 $12,337
$15,245 $14,406 $17,864 $10,585 $22,526 $12,297
$15,039 $14,212 $17,500 $10,616 $21,823 $12,246
$15,008 $14,182 $17,444 $10,642 $21,715 $12,239
$15,140 $14,307 $17,238 $10,693 $21,120 $12,381
Oct-99 $15,657 $14,796 $17,918 $10,712 $22,456 $12,427
$16,292 $15,395 $18,136 $10,719 $22,913 $12,426
$17,468 $16,507 $18,742 $10,719 $24,262 $12,366
$17,096 $16,155 $18,153 $10,744 $23,043 $12,326
$17,697 $16,724 $18,034 $10,808 $22,607 $12,475
$18,366 $17,356 $19,188 $10,896 $24,819 $12,639
$17,852 $16,870 $18,820 $10,903 $24,072 $12,603
$17,563 $16,597 $18,584 $10,909 $23,578 $12,596
$17,934 $16,947 $19,014 $10,973 $24,159 $12,858
$17,738 $16,762 $18,905 $10,991 $23,782 $12,975
$18,552 $17,532 $19,719 $11,004 $25,259 $13,164
$18,140 $17,143 $19,144 $11,062 $23,925 $13,246
Oct-00 $18,024 $17,033 $19,146 $11,081 $23,824 $13,334
$17,098 $16,157 $18,366 $11,087 $21,946 $13,553
$17,491 $16,529 $18,556 $11,081 $22,053 $13,805
$18,369 $17,359 $19,072 $11,150 $22,835 $14,030
$17,482 $16,520 $18,095 $11,195 $20,753 $14,152
$16,863 $15,936 $17,444 $11,221 $19,439 $14,223
$17,504 $16,541 $18,228 $11,266 $20,949 $14,163
$17,735 $16,759 $18,345 $11,316 $21,090 $14,248
$17,765 $16,788 $18,105 $11,335 $20,576 $14,302
$17,653 $16,682 $18,160 $11,304 $20,374 $14,622
$17,284 $16,334 $17,562 $11,304 $19,098 $14,790
$16,354 $15,455 $16,792 $11,355 $17,556 $14,962
Oct-01 $16,714 $15,795 $17,125 $11,316 $17,891 $15,275
$17,216 $16,269 $17,819 $11,297 $19,263 $15,064
$17,403 $16,446 $17,867 $11,253 $19,432 $14,967
$17,149 $16,206 $17,768 $11,279 $19,149 $15,089
$16,942 $16,010 $17,632 $11,324 $18,779 $15,235
$17,387 $16,431 $17,912 $11,387 $19,486 $14,982
$17,013 $16,078 $17,400 $11,451 $18,304 $15,273
$16,969 $16,036 $17,382 $11,451 $18,169 $15,403
$16,351 $15,452 $16,700 $11,458 $16,875 $15,537
$15,555 $14,700 $15,999 $11,470 $15,560 $15,725
$15,675 $14,813 $16,171 $11,508 $15,662 $15,990
$14,915 $14,094 $15,221 $11,534 $13,960 $16,249
Oct-02 $15,489 $14,637 $15,997 $11,553 $15,188 $16,175
$16,108 $15,222 $16,560 $11,553 $16,082 $16,170
$15,764 $14,897 $16,113 $11,527 $15,137 $16,505
$15,626 $14,767 $15,865 $11,578 $14,740 $16,519
$15,535 $14,680 $15,810 $11,667 $14,519 $16,747
$15,554 $14,698 $15,897 $11,737 $14,660 $16,734
$16,305 $15,408 $16,736 $11,712 $15,868 $16,873
$17,086 $16,146 $17,389 $11,693 $16,704 $17,187
$17,250 $16,301 $17,509 $11,706 $16,918 $17,152
$17,297 $16,345 $17,459 $11,718 $17,216 $16,576
$17,574 $16,607 $17,709 $11,763 $17,551 $16,685
$17,700 $16,727 $17,784 $11,801 $17,365 $17,128
Oct-03 $18,288 $17,282 $18,322 $11,843 $18,348 $16,968
Average Annual Total Returns as of 10/31/03(1)
CLASS A SHARES 1 Year 5 Year Since Inception
(July 25, 1996)
Fund (not adjusted for sales charge) 18.07% 7.89% 8.66%
Fund (adjusted for maximum sales charge)(3) 11.53% 6.68% 7.82%
Capital Market Benchmark(4) 14.53% 3.33% 8.71%
CLASS B SHARES 1 Year 5 Year Since Inception
(July 25, 1996)
Fund (not adjusted for sales charge) 17.25% 7.09% 7.85%
Fund (adjusted for maximum sales charge)(3) 12.25% 6.78% 7.85%
Capital Market Benchmark(4) 14.53% 3.33% 8.71%
CLASS C SHARES 1 Year 5 Year Since Inception
(March 1, 2002)
Fund (not adjusted for sales charge) 17.15% N/A 3.90%
Fund (adjusted for maximum sales charge)(3) 15.01% N/A 3.31%
Capital Market Benchmark(4) 14.53% N/A 2.33%
<FN>
(1) The Portfolio's performance through October 31, 1998 benefited from the
agreement of WM Advisors and its affiliates to limit the Portfolio's
expenses. Performance results assume reinvestment of all capital gains,
dividends and other earnings.
(2) The performance of Class B and Class C shares was different than what
is shown on the graph above for Class A shares, based on the
differences in sales loads and fees paid by Class B and Class C
shareholders.
(3) Accounts for maximum sales charge of 5.5% for Class A shares and
maximum contingent deferred sales charge (CDSC) for Class B shares.
CDSC represents a declining charge over 5 years as follows:
5-5-4-3-2-0%. Performance for Class C shares includes a 1% upfront
sales charge and a 1% CDSC, which applies to redemptions within the
first 12 months.
(4) The Balanced Portfolio's benchmark is a capital market index that is
intended to represent a relevant proxy for market and Portfolio
performance. The benchmark allocation is: 60% S&P 500 Index and 40%
Lehman Brothers Aggregate Bond Index. For comparative purposes, the
benchmark's performance is shown for the ten-year period or from the
inception of the particular Portfolio's class of shares. The S&P 500
Index is a broad-based index and is intended to represent the U.S.
equity market. The Lehman Brothers Aggregate Bond Index is a
broad-based index intended to represent the fixed-income market as a
whole. The returns shown for the indices assume reinvestment of all
dividends and distributions. Indices are unmanaged, and individuals
cannot invest directly in an index.
(5) Inflation is measured by the Consumer Price Index for all urban
consumers.
Note: Past performance is not a guarantee of future results. A mutual
fund's share price and investment return will vary with market
conditions, and the principal value when you sell your shares may be
more or less than your original cost.
Performance Review
The SAM BALANCED PORTFOLIO returned 18.07% for the one-year period ended
October 31, 2003. Both equity and bond markets rallied for much of the
fiscal year, and the Portfolio posted solid results, outpacing its benchmark
index, which returned 14.53%.(4) Longer-term results have also been favorable.
The Portfolio outperformed its benchmark index by an average annual rate of
4.56% for the five-year period ended October 31, 2003. (All Portfolio
performance described above is for Class A shares not adjusted for sales
charge.)
Economic/Market Review
Equity markets began and ended the fiscal year with separate rallies,
but geopolitical conflicts inhibited performance along the way. The
period's early rally stalled in December and failed to reignite during
the first few months of 2003. This interval was mired in uncertainty and
instability as the threat of war took a toll on business and consumer
confidence. Once the war in Iraq began, markets moved in lock step with
perceptions of its progress, duration, and magnitude.
Global equity markets rebounded in the second quarter of 2003 after
geopolitical tensions eased and central banks injected significant
stimulus into world economies. In June, the Federal Reserve trimmed the
federal funds rate to a 45-year low of 1%. It has since released several
statements reaffirming plans to keep interest rates low for as long as
it takes to stimulate the economy. This monetary stimulus was coupled
with a robust tax reduction package and rampant mortgage refinancing
cash-outs, which lined the pockets of consumers and provided significant
liquidity.
Throughout the summer, record stimulus helped the economic backdrop
improve, and equity markets continued to advance. A cyclical rebound
8
now seems to be underway. In fact, third quarter domestic growth levels
topped 8%, the largest quarterly economic growth rate in nearly two
decades. Despite this liquidity-driven economic growth, several factors
continue to impede business confidence levels. Excess capacity built up
during the 1990s continues to curtail current business investment. Firms
have begun to slowly increase spending on capital equipment, but they
remain reluctant to hire new employees. Consumer spending, which has
been buoyed by the very strong housing market, could eventually be
affected by the absence of job growth.
Despite these longer-term secular economic headwinds, the cyclical
recovery has built stronger profits and helped to push equity markets
higher. Corporate balance sheets continue to be cleansed through
productivity and cost-cutting measures, and earnings leverage has
certainly improved. Investors' appetite for risk has also reemerged. The
sectors and asset classes that suffered the most during the downturn
rebounded significantly during the past twelve months. Small-cap and
foreign equities, as well as the technology sector, returned to favor in
2003 and led the broad-based rally with very strong results. All major
market segments reported positive results, with the S&P 500 closing the
period up more than 20%.
Bond markets rallied for much of the year in response to declining
interest rates. However, longer-term U.S. Treasury securities suffered
in June and July as interest rates reacted to stronger-than-expected
economic growth by spiking higher. Corporate bond issues benefited from
improving balance sheets, and lower-rated, higher-yielding bonds led the
fixed-income market by a wide margin. Mortgage rates also edged higher
during the period. Both Treasuries and mortgage-backed securities
underperformed corporate bonds for the year ended October 31, 2003.
Investment Strategy
The BALANCED PORTFOLIO is diversified among twelve funds, representing eight
major asset classes.(6) A combination of asset classes facilitates our ability
to manage risk over a long-term investment horizon. Diversification also
fueled relative performance with strong results from some nontraditional
investment categories during the period.
The overall investment strategy for the period was to:
o Add to equity positions to take advantage of the broad-based market
rally
o Increase positions in smaller-cap stocks, which led the market
throughout the recovery
o Maintain a balance in growth and value positions, but add slightly to
cyclically sensitive growth holdings and sectors
o Heavily weight corporate bonds and take advantage of higher-yielding
segments of this market
Review of Portfolio Allocations
During the past twelve months, we shifted the Portfolio's equity weighting
from 53% to 57%. Opportunities in stock valuations motivated this move, and
the Portfolio benefited from the strong results of its equity allocations.
Portfolio performance was also bolstered by its position in the WM SMALL CAP
STOCK FUND, which was the best-performing WM Fund during the period.
Although we maintained relatively balanced allocations in both growth and
value positions, we slightly increased exposure to the WM GROWTH FUND to
benefit from the strength in cyclically sensitive sectors.
In March, we introduced a position in the WM REIT FUND, which invests
primarily in real estate investment trust (REIT) securities. These holdings
provided diversification benefits as well as additional performance strength
throughout the second half of the period. Because REITs are typically more
value-oriented positions, we reduced allocations in the WM GROWTH & INCOME
FUND and WM EQUITY INCOME FUND. Foreign holdings also contributed to the
Portfolio's performance as the economic recovery spread globally.
Fixed-income positions were led by the strong results of the WM HIGH YIELD
FUND. We have overweighted high-yield corporate bonds since the summer of
2002, and although we may have been a little early, this allocation
significantly boosted Portfolio performance this year. The WM INCOME FUND
also provided strong results, spurred by falling corporate yield
differentials relative to Treasuries, which drove the relative performance
of corporate bonds. Mortgage-backed issues suffered through a period of
record refinancing and prepayment, causing the WM U.S. GOVERNMENT SECURITIES
FUND to underperform. However, we now favor these issues and ended the
period by taking some profits in investment-grade corporates in favor of
mortgages.
Overall, performance was very strong for many asset classes during the
fiscal year, and the wide-reaching diversification of the BALANCED PORTFOLIO
enhanced results. Certain nontraditional asset types led the market during
the period, ultimately to the Portfolio's benefit. Small-cap growth stocks,
high-yield bonds, international equities, and real estate securities all
contributed significantly to the Portfolio's performance. We believe these
results underscore the benefits of active asset allocation, which has the
potential not only to manage risk, but also to provide tactical
opportunities for building wealth over the long term.
Outlook
We are encouraged by the cyclical, stimulus-driven economic recovery and
the subsequent rally in equity markets. Markets have reacted to economic
improvements and positive earnings growth. Yet, we remain vigilant
concerning longer-term secular headwinds that could limit the rebound's
magnitude. We are seeking prudent opportunities to marginally shift
assets into more attractively priced market segments. Our long-term
discipline, with asset allocation and diversification at its core,
remains our investment strategy regardless of short-term market cycles.
Portfolio Allocation Asset Class Diversification
as of October 31, 2003(6) as of October 31, 2003(6)
[pie chart] [pie chart]
Income Fund 15% U.S. Equity Large Cap 26%
U.S. Govt. Securities Fund 15% Mortgage-Backed 16%
Growth & Income Fund 14% U.S. Equity Mid Cap 15%
Growth Fund 11% Corporate Bonds 14%
Equity Income Fund 9% Foreign Equity 10%
High Yield Fund 7% Cash Equivalents 8%
West Coast Equity Fund 6% U.S. Equity Small Cap 6%
Mid Cap Stock Fund 6% Convertible Bonds 3%
International Growth Fund 5% U.S. Treasuries 2%
Small Cap Stock Fund 5%
Cash Equivalents(7) 3%
REIT Fund 3%
Short Term Income Fund 1%
<FN>
(6) As of October 31, 2003 and may not reflect current allocations.
(7) Represents cash holdings outside of the WM Funds approved for use in
the Balanced Portfolio.
9
[PHOTO] Conservative Growth Portfolio
Value of a $10,000 Investment (Class A shares)(1), (2)
[graph]
Capital
Market
Benchmark
NAV Sales(3) Index(4) Inflation(5) S&P 500(4)
07/25/96 $10,000 $9,450
$10,130 $9,573 $10,000 $10,000 $10,000
$10,281 $9,715 $10,166 $10,019 $10,212
$10,592 $10,009 $10,659 $10,051 $10,786
Oct-96 $10,462 $9,886 $10,940 $10,083 $11,081
$10,782 $10,189 $11,641 $10,102 $11,923
$10,725 $10,135 $11,437 $10,102 $11,689
$10,849 $10,252 $12,012 $10,135 $12,415
$10,690 $10,102 $12,096 $10,166 $12,515
$10,258 $9,694 $11,667 $10,192 $11,995
$10,427 $9,853 $12,259 $10,204 $12,711
$11,079 $10,470 $12,884 $10,198 $13,491
$11,437 $10,808 $13,375 $10,210 $14,093
$12,016 $11,355 $14,297 $10,222 $15,212
$11,563 $10,927 $13,636 $10,242 $14,366
$12,099 $11,434 $14,274 $10,267 $15,153
Oct-97 $11,615 $10,977 $13,934 $10,293 $14,647
$11,605 $10,967 $14,463 $10,287 $15,325
$11,648 $11,007 $14,692 $10,274 $15,589
$11,782 $11,134 $14,860 $10,294 $15,762
$12,528 $11,839 $15,715 $10,313 $16,898
$13,040 $12,323 $16,369 $10,333 $17,764
$13,207 $12,481 $16,518 $10,352 $17,942
$12,885 $12,176 $16,322 $10,370 $17,634
$13,175 $12,450 $16,880 $10,383 $18,350
$12,919 $12,208 $16,744 $10,395 $18,155
$11,050 $10,442 $14,862 $10,408 $15,530
$11,594 $10,957 $15,693 $10,420 $16,525
Oct-98 $12,207 $11,535 $16,697 $10,445 $17,869
$12,907 $12,197 $17,526 $10,445 $18,952
$13,843 $13,082 $18,345 $10,439 $20,044
$14,543 $13,744 $18,984 $10,464 $20,882
$14,162 $13,383 $18,446 $10,476 $20,233
$15,009 $14,184 $19,057 $10,508 $21,043
$15,722 $14,858 $19,659 $10,585 $21,858
$15,255 $14,416 $19,253 $10,585 $21,342
$16,078 $15,193 $20,096 $10,585 $22,526
$15,785 $14,917 $19,577 $10,616 $21,823
$15,747 $14,881 $19,498 $10,642 $21,715
$15,897 $15,022 $19,115 $10,693 $21,120
Oct-99 $16,666 $15,749 $20,097 $10,712 $22,456
$17,609 $16,641 $20,423 $10,719 $22,913
$19,420 $18,352 $21,366 $10,719 $24,262
$18,959 $17,917 $20,493 $10,744 $23,043
$19,904 $18,809 $20,233 $10,808 $22,607
$20,809 $19,665 $21,869 $10,896 $24,819
$19,941 $18,845 $21,330 $10,903 $24,072
$19,431 $18,362 $20,978 $10,909 $23,578
$19,891 $18,797 $21,479 $10,973 $24,159
$19,559 $18,483 $21,249 $10,991 $23,782
$20,670 $19,533 $22,367 $11,004 $25,259
$20,031 $18,930 $21,451 $11,062 $23,925
Oct-00 $19,815 $18,725 $21,406 $11,081 $23,824
$18,359 $17,349 $20,127 $11,087 $21,946
$18,843 $17,807 $20,280 $11,081 $22,053
$19,961 $18,863 $20,922 $11,150 $22,835
$18,597 $17,575 $19,432 $11,195 $20,753
$17,643 $16,673 $18,467 $11,221 $19,439
$18,693 $17,665 $19,599 $11,266 $20,949
$18,966 $17,923 $19,728 $11,316 $21,090
$18,974 $17,930 $19,359 $11,335 $20,576
$18,645 $17,620 $19,293 $11,304 $20,374
$17,987 $16,998 $18,371 $11,304 $19,098
$16,566 $15,655 $17,227 $11,355 $17,556
Oct-01 $16,979 $16,045 $17,562 $11,316 $17,891
$17,777 $16,799 $18,591 $11,297 $19,263
$18,052 $17,059 $18,698 $11,253 $19,432
$17,637 $16,667 $18,510 $11,279 $19,149
$17,265 $16,315 $18,260 $11,324 $18,779
$17,950 $16,963 $18,749 $11,387 $19,486
$17,290 $16,339 $17,913 $11,451 $18,304
$17,203 $16,257 $17,837 $11,451 $18,169
$16,307 $15,410 $16,852 $11,458 $16,875
$15,198 $14,362 $15,842 $11,470 $15,560
$15,285 $14,444 $15,979 $11,508 $15,662
$14,238 $13,455 $14,641 $11,534 $13,960
Oct-02 $14,990 $14,165 $15,659 $11,553 $15,188
$15,756 $14,889 $16,395 $11,553 $16,082
$15,218 $14,381 $15,692 $11,527 $15,137
$15,014 $14,189 $15,366 $11,578 $14,740
$14,824 $14,008 $15,224 $11,667 $14,519
$14,840 $14,024 $15,340 $11,737 $14,660
$15,762 $14,895 $16,376 $11,712 $15,868
$16,698 $15,779 $17,128 $11,693 $16,704
$16,908 $15,978 $17,296 $11,706 $16,918
$17,113 $16,172 $17,423 $11,718 $17,216
$17,450 $16,490 $17,718 $11,763 $17,551
$17,509 $16,546 $17,662 $11,801 $17,365
Oct-03 $18,302 $17,296 $18,429 $11,843 $18,348
Average Annual Total Returns as of 10/31/03(1)
CLASS A SHARES 1 Year 5 Year Since Inception
(July 25, 1996)
Fund (not adjusted for sales charge) 22.12% 8.44% 8.67%
Fund (adjusted for maximum sales charge)(3) 15.44% 7.22% 7.83%
Capital Market Benchmark(4) 17.69% 1.99% 8.80%
CLASS B SHARES 1 Year 5 Year Since Inception
(July 25, 1996)
Fund (not adjusted for sales charge) 21.24% 7.55% 7.82%
Fund (adjusted for maximum sales charge)(3) 16.24% 7.25% 7.82%
Capital Market Benchmark(4) 17.69% 1.99% 8.80%
CLASS C SHARES 1 Year 5 Year Since Inception
(March 1, 2002)
Fund (not adjusted for sales charge) 21.41% N/A 2.82%
Fund (adjusted for maximum sales charge)(3) 19.22% N/A 2.20%
Capital Market Benchmark(4) 17.69% N/A 0.55%
<FN>
(1) The Portfolio's performance through October 31, 1998 benefited from the
agreement of WM Advisors and its affiliates to limit the Portfolio's
expenses. Performance results assume reinvestment of all capital gains,
dividends and other earnings.
(2) The performance of Class B and Class C shares was different than what
is shown on the graph above for Class A shares, based on the
differences in sales loads and fees paid by Class B and Class C
shareholders.
(3) Accounts for maximum sales charge of 5.5% for Class A shares and
maximum contingent deferred sales charge (CDSC) for Class B shares.
CDSC represents a declining charge over 5 years as follows:
5-5-4-3-2-0%. Performance for Class C shares includes a 1% upfront
sales charge and a 1% CDSC, which applies to redemptions within the
first 12 months.
(4) The Conservative Growth Portfolio's benchmark is a capital market index
that is intended to represent a relevant proxy for market and Portfolio
performance. The benchmark allocation is: 80% S&P 500 Index and 20%
Lehman Brothers Aggregate Bond Index. For comparative purposes, the
benchmark's performance is shown for the ten-year period or from the
inception of the particular Portfolio's class of shares. The S&P 500
Index is a broad-based index and is intended to represent the U.S.
equity market. The Lehman Brothers Aggregate Bond Index is a
broad-based index intended to represent the fixed-income market as a
whole. The returns shown for the indices assume reinvestment of all
dividends and distributions. Indices are unmanaged, and individuals
cannot invest directly in an index.
(5) Inflation is measured by the Consumer Price Index for all urban
consumers.
Note: Past performance is not a guarantee of future results. A mutual
fund's share price and investment return will vary with market
conditions, and the principal value when you sell your shares may be
more or less than your original cost.
Performance Review
The SAM CONSERVATIVE GROWTH PORTFOLIO returned 22.12% for the one-year
period ended October 31, 2003. Both equity and bond markets rallied for
much of the fiscal year, and the Portfolio posted solid results,
outpacing its benchmark index, which returned 17.69%.(4) In fact,
the Portfolio outpaced the S&P 500 Index (20.80% return) despite having
more than 20% in fixed-income investments. Longer-term results have also
been favorable. The Portfolio outperformed its benchmark index by an
average annual rate of 6.45% for the five-year period ended October 31,
2003. (All Portfolio performance described above is for Class A shares
not adjusted for sales charge.)
Economic/Market Review
Equity markets began and ended the fiscal year with separate rallies,
but geopolitical conflicts inhibited performance along the way. The
period's early rally stalled in December and failed to reignite during
the first few months of 2003. This interval was mired in uncertainty and
instability as the threat of war took a toll on business and consumer
confidence. Once the war in Iraq began, markets moved in lock step with
perceptions of its progress, duration, and magnitude.
Global equity markets rebounded in the second quarter of 2003 after
geopolitical tensions eased and central banks injected significant
stimulus into world economies. In June, the Federal Reserve trimmed the
federal funds rate to a 45-year low of 1%. It has since released several
statements reaffirming plans to keep interest rates low for as long as
it takes to stimulate the economy. This monetary stimulus was coupled
with a robust tax reduction package and rampant mortgage refinancing
cash-outs, which lined the pockets of consumers and provided significant
liquidity.
10
Throughout the summer, record stimulus helped the economic backdrop
improve, and equity markets continued to advance. A cyclical rebound now
seems to be underway. In fact, third quarter domestic growth levels
topped 8%, the largest quarterly economic growth rate in nearly two
decades. Despite this liquidity-driven economic growth, several factors
continue to impede business confidence levels. Excess capacity built up
during the 1990s continues to curtail current business investment. Firms
have begun to slowly increase spending on capital equipment, but they
remain reluctant to hire new employees. Consumer spending, which has
been buoyed by the very strong housing market, could eventually be
affected by the absence of job growth.
Despite these longer-term secular economic headwinds, the cyclical
recovery has built stronger profits and helped to push equity markets
higher. Corporate balance sheets continue to be cleansed through
productivity and cost-cutting measures, and earnings leverage has
certainly improved. Investors' appetite for risk has also reemerged. The
sectors and asset classes that suffered the most during the downturn
rebounded significantly during the past twelve months. Small-cap and
foreign equities, as well as the technology sector, returned to favor in
2003 and led the broad-based rally with very strong results. All major
market segments reported positive results, with the S&P 500 closing the
period up more than 20%.
Bond markets rallied for much of the year in response to declining
interest rates. However, longer-term U.S. Treasury securities suffered
in June and July as interest rates reacted to stronger-than-expected
economic growth by spiking higher. Corporate bond issues benefited from
improving balance sheets, and lower-rated, higher-yielding bonds led the
fixed-income market by a wide margin.
Investment Strategy
The CONSERVATIVE GROWTH PORTFOLIO is diversified among eleven funds,
representing eight major asset classes.(6) A combination of asset classes
facilitates our ability to manage risk over a long-term investment
horizon. Diversification also fueled relative performance with strong
results from some nontraditional investment categories during the
period.
The overall investment strategy for the period was to:
o Add to equity positions to take advantage of the broad-based market
rally
o Increase positions in both small- and mid-cap stocks, which led the
market throughout the recovery
o Maintain a balance in growth and value positions, but add slightly to
cyclically sensitive growth holdings and sectors
o Build corporate bond positions and take advantage of higher-yielding
segments of this market
Review of Portfolio Allocations
During the past twelve months, we shifted the Portfolio's equity
weighting from 73% to 75%. Opportunities in stock valuations motivated
this move, and the Portfolio benefited from the strong results of its
equity allocations. Portfolio performance was also bolstered by its
position in the WM SMALL CAP STOCK FUND, which was the best-performing
WM Fund during the period. Although we maintained relatively balanced
allocations in both growth and value positions, we slightly increased
exposure to the WM GROWTH FUND to benefit from the strength in
cyclically sensitive sectors.
In March, we introduced a position in the WM REIT FUND, which invests
primarily in real estate investment trust (REIT) securities. These
holdings provided diversification benefits as well as additional
performance strength throughout the second half of the period. Because
REITs are typically more value-oriented positions, we reduced
allocations in the WM GROWTH & INCOME FUND and WM EQUITY INCOME FUND.
Foreign holdings also contributed to the Portfolio's performance as the
economic recovery spread globally. The WM INTERNATIONAL GROWTH FUND and
the WM WEST COAST EQUITY FUND also added to the year's outcome.
Fixed-income positions were led by the strong results of the WM HIGH
YIELD FUND. We have overweighted high-yield corporate bonds since the
summer of 2002, and although we may have been a little early, this
allocation significantly boosted Portfolio performance this year. The WM
INCOME FUND also provided strong results, spurred by falling corporate
yield differentials relative to Treasuries, which drove the relative
performance of corporate bonds. Mortgage-backed issues suffered through
a period of record refinancing and prepayment, causing the WM U.S.
GOVERNMENT SECURITIES FUND to underperform. However, we now favor these
issues and ended the period by taking some profits in investment-grade
corporates in favor of mortgages.
Overall, performance was very strong for many asset classes during the
fiscal year, and the wide-reaching diversification of the CONSERVATIVE
GROWTH PORTFOLIO enhanced results. Certain nontraditional asset types
led the market during the period, ultimately to the Portfolio's benefit.
Small-cap growth stocks, high-yield bonds, international equities, and
real estate securities all contributed significantly to the Portfolio's
performance. We believe these results underscore the benefits of active
asset allocation, which has the potential not only to manage risk, but
also to provide tactical opportunities for building wealth over the long
term.
Outlook
We are encouraged by the cyclical, stimulus-driven economic recovery and
the subsequent rally in equity markets. Markets have reacted to economic
improvements and positive earnings growth. Yet, we remain vigilant
concerning longer-term secular headwinds that could limit the rebound's
magnitude. We are seeking prudent opportunities to marginally shift
assets into more attractively priced market segments. Our long-term
discipline, with asset allocation and diversification at its core,
remains our investment strategy regardless of short-term market cycles.
Portfolio Allocation Asset Class Diversification
as of October 31, 2003(6) as of October 31, 2003(6)
[pie chart] [pie chart]
Growth & Income Fund 19% U.S. Equity Large Cap 34%
Growth Fund 15% U.S. Equity Mid Cap 20%
Equity Income Fund 12% Foreign Equity 13%
Income Fund 8% Corporate Bonds 9%
West Coast Equity Fund 8% Mortgage-Backed 8%
U.S. Govt. Securities Fund 7% U.S. Equity Small Cap 8%
Mid Cap Stock Fund 7% Cash Equivalents 5%
Small Cap Stock Fund 7% Convertible Bonds 2%
International Growth Fund 7% U.S. Treasuries 1%
High Yield Fund 6%
REIT Fund 4%
<FN>
(6) As of October 31, 2003 and may not reflect current allocations.
11
[PHOTO] Strategic Growth Portfolio
Value of a $10,000 Investment (Class A shares)(1), (2)
[graph]
NAV Sales(3) S&P 500(4) Inflation(5)
07/25/96 $10,000 $9,450
$10,110 $9,554 $10,000 $10,000
$10,300 $9,734 $10,212 $10,019
$10,690 $10,102 $10,786 $10,051
Oct-96 $10,560 $9,979 $11,081 $10,083
$11,080 $10,471 $11,923 $10,102
$11,001 $10,396 $11,689 $10,102
$11,308 $10,686 $12,415 $10,135
$11,148 $10,535 $12,515 $10,166
$10,640 $10,055 $11,995 $10,192
$10,852 $10,255 $12,711 $10,204
$11,561 $10,925 $13,491 $10,198
$11,932 $11,276 $14,093 $10,210
$12,716 $12,017 $15,212 $10,222
$12,240 $11,566 $14,366 $10,242
$12,822 $12,117 $15,153 $10,267
Oct-97 $12,282 $11,607 $14,647 $10,293
$12,325 $11,647 $15,325 $10,287
$12,362 $11,682 $15,589 $10,274
$12,509 $11,821 $15,762 $10,294
$13,471 $12,730 $16,898 $10,313
$14,106 $13,330 $17,764 $10,333
$14,298 $13,511 $17,942 $10,352
$13,879 $13,115 $17,634 $10,370
$14,331 $13,543 $18,350 $10,383
$13,992 $13,222 $18,155 $10,395
$11,773 $11,125 $15,530 $10,408
$12,508 $11,820 $16,525 $10,420
Oct-98 $13,210 $12,483 $17,869 $10,445
$13,980 $13,211 $18,952 $10,445
$15,159 $14,325 $20,044 $10,439
$16,068 $15,184 $20,882 $10,464
$15,594 $14,737 $20,233 $10,476
$16,530 $15,621 $21,043 $10,508
$17,365 $16,410 $21,858 $10,585
$16,792 $15,868 $21,342 $10,585
$17,789 $16,811 $22,526 $10,585
$17,337 $16,384 $21,823 $10,616
$17,325 $16,372 $21,715 $10,642
$17,490 $16,528 $21,120 $10,693
Oct-99 $18,436 $17,422 $22,456 $10,712
$19,621 $18,542 $22,913 $10,719
$21,901 $20,697 $24,262 $10,719
$21,446 $20,266 $23,043 $10,744
$22,799 $21,545 $22,607 $10,808
$23,802 $22,493 $24,819 $10,896
$22,552 $21,312 $24,072 $10,903
$21,901 $20,696 $23,578 $10,909
$22,551 $21,311 $24,159 $10,973
$22,057 $20,844 $23,782 $10,991
$23,502 $22,209 $25,259 $11,004
$22,604 $21,361 $23,925 $11,062
Oct-00 $22,279 $21,053 $23,824 $11,081
$20,325 $19,207 $21,946 $11,087
$20,931 $19,779 $22,053 $11,081
$22,320 $21,093 $22,835 $11,150
$20,448 $19,323 $20,753 $11,195
$19,180 $18,125 $19,439 $11,221
$20,666 $19,530 $20,949 $11,266
$21,011 $19,856 $21,090 $11,316
$21,066 $19,907 $20,576 $11,335
$20,459 $19,334 $20,374 $11,304
$19,537 $18,462 $19,098 $11,304
$17,540 $16,575 $17,556 $11,355
Oct-01 $18,036 $17,044 $17,891 $11,316
$19,097 $18,047 $19,263 $11,297
$19,527 $18,453 $19,432 $11,253
$18,908 $17,868 $19,149 $11,279
$18,374 $17,364 $18,779 $11,324
$19,339 $18,275 $19,486 $11,387
$18,432 $17,418 $18,304 $11,451
$18,274 $17,269 $18,169 $11,451
$17,108 $16,167 $16,875 $11,458
$15,638 $14,778 $15,560 $11,470
$15,696 $14,833 $15,662 $11,508
$14,327 $13,539 $13,960 $11,534
Oct-02 $15,249 $14,410 $15,188 $11,553
$16,185 $15,295 $16,082 $11,553
$15,455 $14,605 $15,137 $11,527
$15,180 $14,345 $14,740 $11,578
$14,890 $14,071 $14,519 $11,667
$14,905 $14,085 $14,660 $11,737
$15,965 $15,086 $15,868 $11,712
$17,068 $16,129 $16,704 $11,693
$17,329 $16,376 $16,918 $11,706
$17,691 $16,718 $17,216 $11,718
$18,098 $17,102 $17,551 $11,763
$18,083 $17,089 $17,365 $11,801
Oct-03 $19,100 $18,049 $18,348 $11,843
Average Annual Total Returns as of 10/31/03(1)
CLASS A SHARES 1 Year 5 Year Since Inception
(July 25, 1996)
Fund (not adjusted for sales charge) 25.24% 7.65% 9.31%
Fund (adjusted for maximum sales charge)(3) 18.32% 6.44% 8.47%
S&P 500 Index(4) 20.80% 0.53% 8.73%
CLASS B SHARES 1 Year 5 Year Since Inception
(July 25, 1996)
Fund (not adjusted for sales charge) 24.35% 6.87% 8.51%
Fund (adjusted for maximum sales charge)(3) 19.34% 6.56% 8.51%
S&P 500 Index(4) 20.80% 0.53% 8.73%
CLASS C SHARES 1 Year 5 Year Since Inception
(March 1, 2002)
Fund (not adjusted for sales charge) 24.44% N/A 1.63%
Fund (adjusted for maximum sales charge)(3) 22.25% N/A 1.00%
S&P 500 Index(4) 20.80% N/A -1.38%
<FN>
(1) The Portfolio's performance through October 31, 1998 benefited from the
agreement of WM Advisors and its affiliates to limit the Portfolio's
expenses. Performance results assume reinvestment of all capital gains,
dividends and other earnings.
(2) The performance of Class B and Class C shares was different than what
is shown on the graph above for Class A shares, based on the
differences in sales loads and fees paid by Class B and Class C
shareholders.
(3) Accounts for maximum sales charge of 5.5% for Class A shares and
maximum contingent deferred sales charge (CDSC) for Class B shares.
CDSC represents a declining charge over 5 years as follows:
5-5-4-3-2-0%. Performance for Class C shares includes a 1% upfront
sales charge and a 1% CDSC, which applies to redemptions within the
first 12 months.
(4) The S&P 500 Index is a broad-based index and is intended to represent
the U.S. equity market. For comparative purposes, the benchmark's
performance is shown from the inception of the particular Portfolio's
class of shares. The returns shown for the index assume reinvestment of
all dividends and distributions. Indices are unmanaged, and individuals
cannot invest directly in an index.
(5) Inflation is measured by the Consumer Price Index for all urban
consumers.
Note: Past performance is not a guarantee of future results. A mutual fund's
share price and investment return will vary with market conditions, and the
principal value when you sell your shares may be more or less than your
original cost.
Performance Review
The SAM STRATEGIC GROWTH PORTFOLIO returned 25.24% for the one-year
period ended October 31, 2003. Equity markets rallied for much of the
fiscal year, and the Portfolio posted solid results. It outpaced the S&P
500, which returned 20.80%.(4) Longer-term results have also been
favorable. The Portfolio outperformed the S&P 500 by an average annual
rate of 7.12% for the five-year period ended October 31, 2003. (All
Portfolio performance described above is for Class A shares not adjusted
for sales charge.)
Economic/Market Review
Equity markets began and ended the fiscal year with separate rallies, but
geopolitical conflicts inhibited performance along the way. The period's
early rally stalled in December and failed to reignite during the first few
months of 2003. This interval was mired in uncertainty and instability as
the threat of war took a toll on business and consumer confidence. Once the
war in Iraq began, markets moved in lock step with perceptions of its
progress, duration, and magnitude.
Global equity markets rebounded in the second quarter of 2003 after
geopolitical tensions eased and central banks injected significant
stimulus into world economies. In June, the Federal Reserve trimmed the
federal funds rate to a 45-year low of 1%. It has since released several
statements reaffirming plans to keep interest rates low for as long as
it takes to stimulate the economy. This monetary stimulus was coupled
with a robust tax reduction package and rampant mortgage refinancing
cash-outs, which lined the pockets of consumers and provided significant
liquidity.
12
Throughout the summer, record stimulus helped the economic backdrop
improve, and equity markets continued to advance. A cyclical rebound now
seems to be underway. In fact, third quarter domestic growth levels
topped 8%, the largest quarterly economic growth rate in nearly two
decades. Despite this liquidity-driven economic growth, several factors
continue to impede business confidence levels. Excess capacity built up
during the 1990s continues to curtail current business investment. Firms
have begun to slowly increase spending on capital equipment, but they
remain reluctant to hire new employees. Consumer spending, which has
been buoyed by the very strong housing market, could eventually be
affected by the absence of job growth.
Despite these longer-term secular economic headwinds, the cyclical
recovery has built stronger profits and helped to push equity markets
higher. Corporate balance sheets continue to be cleansed through
productivity and cost-cutting measures, and earnings leverage has
certainly improved. Investors' appetite for risk has also reemerged. The
sectors and asset classes that suffered the most during the downturn
rebounded significantly during the past twelve months. Small-cap and
foreign equities, as well as the technology sector, returned to favor in
2003 and led the broad-based rally with very strong results. All major
market segments reported positive results, with the S&P 500 closing the
period up more than 20%. Corporate bond issues also benefited from
improving balance sheets, and lower-rated, higher-yielding bonds led the
fixed-income market by a wide margin.
Investment Strategy
The STRATEGIC GROWTH PORTFOLIO is diversified among nine funds,
representing six major asset classes.(6) A combination of asset classes
facilitates our ability to manage risk over a long-term investment
horizon. Diversification also fueled relative performance with strong
results from some nontraditional investment categories during the
period.
The overall investment strategy for the period was to:
o Broaden diversification levels by spreading equity assets across
multiple classes and introducing an investment in real estate
securities
o Increase positions in both small- and mid-cap stocks, which led the
market throughout the recovery
o Maintain a balance in growth and value positions, but add slightly to
cyclically sensitive growth holdings and sectors
o Take advantage of the strong performance of higher-yielding corporate
bonds
Review of Portfolio Allocations
During the past twelve months, we broadened overall equity diversification
levels. We added to small-cap stocks throughout the year, and Portfolio
performance was bolstered by its position in the WM SMALL CAP STOCK FUND,
which was the best-performing WM Fund during the period. Although we
maintained relatively balanced allocations in both growth and value
positions, we slightly increased exposure to the WM GROWTH FUND to benefit
from the strength in cyclically sensitive sectors.
In March, we introduced a position in the WM REIT FUND, which invests
primarily in real estate investment trust (REIT) securities. These
holdings provided diversification benefits as well as additional
performance strength throughout the second half of the period. Because
REITs are typically more value-oriented positions, we reduced
allocations in the WM GROWTH & INCOME FUND and WM EQUITY INCOME FUND.
Foreign holdings also contributed to the Portfolio's performance as the
economic recovery spread globally. The WM INTERNATIONAL GROWTH FUND and
the WM WEST COAST EQUITY FUND also added to the year's outcome. Fixed-
income positions were led by the strong results of the WM HIGH YIELD
FUND, and this allocation significantly boosted Portfolio performance.
Overall, performance was very strong for many asset classes during the
fiscal year, and the wide-reaching equity diversification of the
STRATEGIC GROWTH PORTFOLIO enhanced results. Certain nontraditional
asset types led the market during the period, ultimately to the
Portfolio's benefit. Small-cap growth stocks, high-yield bonds,
international equities, and real estate securities all contributed
significantly to the Portfolio's performance. We believe these results
underscore the benefits of active asset allocation, which has the
potential not only to manage risk, but also to provide tactical
opportunities for building wealth over the long term.
Outlook
We are encouraged by the cyclical, stimulus-driven economic recovery and
the subsequent rally in equity markets. Markets have reacted to economic
improvements and positive earnings growth. Yet, we remain vigilant
concerning longer-term secular headwinds that could limit the rebound's
magnitude. We are seeking prudent opportunities to marginally shift
assets into more attractively priced market segments. Our long-term
discipline, with asset allocation and diversification at its core,
remains our investment strategy regardless of short-term market cycles.
Portfolio Allocation Asset Class Diversification
as of October 31, 2003(6) as of October 31, 2003(6)
[pie chart] [pie chart]
Growth & Income Fund 23% U.S. Equity Large Cap 40%
Growth Fund 16% U.S. Equity Mid Cap 24%
Equity Income Fund 12% Foreign Equity 15%
Mid Cap Stock Fund 11% U.S. Equity Small Cap 10%
West Coast Equity Fund 10% Cash Equivalents 5%
Small Cap Stock Fund 9% Corporate Bonds 4%
International Growth Fund 9% Convertible Bonds 2%
High Yield Fund 6%
REIT Fund 4%
<FN>
(6) As of October 31, 2003 and may not reflect current allocations.
13
PORTFOLIO OF INVESTMENTS
FLEXIBLE INCOME PORTFOLIO
OCTOBER 31, 2003
VALUE
SHARES (000S)
------ ------
INVESTMENT COMPANY SECURITIES -- 99.3%
1,477,166 WM Equity Income Fund $ 22,822
2,510,703 WM Growth & Income Fund 54,432
2,033,525 WM Growth Fund 28,734
6,595,814 WM High Yield Fund 51,843
19,665,691 WM Income Fund 184,071
1,175,749 WM Mid Cap Stock Fund 18,224
624,131 WM REIT Fund 7,783
34,952,464 WM Short Term Income Fund 83,537
1,232,164 WM Small Cap Stock Fund 16,954
16,493,572 WM U.S. Government Securities Fund 179,615
364,281 WM West Coast Equity Fund 11,799
--------
Total Investment Company Securities
(Cost $630,898) 659,814
--------
PRINCIPAL
AMOUNT
(000s)
---------
REPURCHASE AGREEMENT -- 0.4%
(Cost $2,512)
$2,512 Agreement with Goldman Sachs Group, Inc.,
0.960% dated 10/31/2003, to be
repurchased at $2,512 on 11/03/2003
(Collateralized by $2,132 U.S. Treasury
Bonds, having various interest rates and
maturities, Market Value $2,557) 2,512
--------
TOTAL INVESTMENTS (Cost $633,410*) 99.7% 662,326
OTHER ASSETS AND LIABILITIES (NET) 0.3 2,251
----- --------
NET ASSETS 100.0% $664,577
===== ========
<FN>
- --------
* Aggregate cost for federal tax purposes is $635,297.
See Notes to Financial Statements.
14
PORTFOLIO OF INVESTMENTS
CONSERVATIVE BALANCED PORTFOLIO
OCTOBER 31, 2003
VALUE
SHARES (000S)
------ ------
INVESTMENT COMPANY SECURITIES -- 99.2%
1,003,655 WM Equity Income Fund $ 15,506
1,181,061 WM Growth & Income Fund 25,605
1,354,390 WM Growth Fund 19,137
2,584,496 WM High Yield Fund 20,314
6,453,762 WM Income Fund 60,407
937,007 WM International Growth Fund 7,899
633,258 WM Mid Cap Stock Fund 9,816
457,179 WM REIT Fund 5,701
7,610,745 WM Short Term Income Fund 18,190
595,028 WM Small Cap Stock Fund 8,188
5,504,789 WM U.S. Government Securities Fund 59,947
285,238 WM West Coast Equity Fund 9,239
--------
Total Investment Company Securities
(Cost $245,619) 259,949
--------
PRINCIPAL
AMOUNT
(000s)
---------
REPURCHASE AGREEMENT -- 0.3%
(Cost $714)
$ 714 Agreement with Goldman Sachs Group, Inc.,
0.960% dated 10/31/2003, to be
repurchased at $714 on 11/03/2003
(Collateralized by $606 U.S. Treasury
Bonds, having various interest rates and
maturities, Market Value $727) 714
--------
TOTAL INVESTMENTS (Cost $246,333*) 99.5% 260,663
OTHER ASSETS AND LIABILITIES (NET) 0.5 1,368
----- --------
NET ASSETS 100.0% $262,031
===== ========
<FN>
- --------
* Aggregate cost for federal tax purposes is $249,190.
See Notes to Financial Statements.
15
PORTFOLIO OF INVESTMENTS
BALANCED PORTFOLIO
OCTOBER 31, 2003
VALUE
SHARES (000S)
------ ------
INVESTMENT COMPANY SECURITIES -- 96.8%
12,779,232 WM Equity Income Fund $ 197,439
13,719,549 WM Growth & Income Fund 297,440
16,420,036 WM Growth Fund 232,015
17,344,147 WM High Yield Fund 136,325
32,959,482 WM Income Fund 308,501
13,544,869 WM International Growth Fund 114,183
7,712,800 WM Mid Cap Stock Fund 119,548
5,341,637 WM REIT Fund 66,610
11,541,255 WM Short Term Income Fund 27,584
8,092,677 WM Small Cap Stock Fund 111,355
27,902,425 WM U.S. Government Securities Fund 303,858
3,663,912 WM West Coast Equity Fund 118,674
----------
Total Investment Company Securities
(Cost $1,943,256) 2,033,532
----------
PRINCIPAL
AMOUNT
(000s)
---------
REPURCHASE AGREEMENT -- 2.9%
(Cost $61,912)
$ 61,912 Agreement with Goldman Sachs Group, Inc.,
0.960% dated 10/31/2003, to be
repurchased at $61,917 on 11/03/2003
(Collateralized by $52,537 U.S. Treasury
Bonds, having various interest rates and
maturities, Market Value $63,025) 61,912
----------
TOTAL INVESTMENTS (Cost $2,005,168*) 99.7% 2,095,444
OTHER ASSETS AND LIABILITIES (NET) 0.3 5,980
----- ----------
NET ASSETS 100.0% $2,101,424
===== ==========
<FN>
- --------
* Aggregate cost for federal tax purposes is $2,023,294.
See Notes to Financial Statements.
16
PORTFOLIO OF INVESTMENTS
CONSERVATIVE GROWTH PORTFOLIO
OCTOBER 31, 2003
VALUE
SHARES (000S)
------ ------
INVESTMENT COMPANY SECURITIES -- 99.5%
12,287,180 WM Equity Income Fund $ 189,837
14,376,833 WM Growth & Income Fund 311,690
17,036,526 WM Growth Fund 240,726
12,165,693 WM High Yield Fund 95,622
13,442,607 WM Income Fund 125,823
13,785,370 WM International Growth Fund 116,211
7,903,923 WM Mid Cap Stock Fund 122,511
5,360,930 WM REIT Fund 66,851
8,721,008 WM Small Cap Stock Fund 120,001
10,589,587 WM U.S. Government Securities Fund 115,321
3,845,311 WM West Coast Equity Fund 124,549
----------
Total Investment Company Securities
(Cost $1,594,673) 1,629,142
----------
PRINCIPAL
AMOUNT
(000s)
---------
REPURCHASE AGREEMENT -- 0.2%
(Cost $3,597)
$ 3,597 Agreement with Goldman Sachs Group, Inc.,
0.960% dated 10/31/2003, to be
repurchased at $3,597 on 11/03/2003
(Collateralized by $3,052 U.S. Treasury
Bonds, having various interest rates and
maturities, Market Value $3,662) 3,597
----------
TOTAL INVESTMENTS (Cost $1,598,270*) 99.7% 1,632,739
OTHER ASSETS AND LIABILITIES (NET) 0.3 5,630
----- ----------
NET ASSETS 100.0% $1,638,369
===== ==========
<FN>
- --------
* Aggregate cost for federal tax purposes is $1,613,484.
See Notes to Financial Statements.
17
PORTFOLIO OF INVESTMENTS
STRATEGIC GROWTH PORTFOLIO
OCTOBER 31, 2003
VALUE
SHARES (000S)
------ ------
INVESTMENT COMPANY SECURITIES -- 99.2%
6,724,508 WM Equity Income Fund $103,894
9,511,478 WM Growth & Income Fund 206,209
10,187,061 WM Growth Fund 143,943
6,395,824 WM High Yield Fund 50,271
9,375,379 WM International Growth Fund 79,034
6,428,224 WM Mid Cap Stock Fund 99,637
2,818,964 WM REIT Fund 35,152
5,877,994 WM Small Cap Stock Fund 80,882
2,626,387 WM West Coast Equity Fund 85,069
--------
Total Investment Company Securities
(Cost $908,055) 884,091
--------
PRINCIPAL
AMOUNT
(000s)
---------
REPURCHASE AGREEMENT -- 0.3%
(Cost $2,905)
$ 2,905 Agreement with Goldman Sachs Group, Inc.,
0.960% dated 10/31/2003, to be
repurchased at $2,905 on 11/03/2003
(Collateralized by $2,465 U.S. Treasury
Bonds, having various interest rates and
maturities, Market Value $2,957) 2,905
--------
TOTAL INVESTMENTS (Cost $910,960*) 99.5% 886,996
OTHER ASSETS AND LIABILITIES (NET) 0.5 4,338
----- --------
NET ASSETS 100.0% $891,334
===== ========
<FN>
- --------
* Aggregate cost for federal tax purposes is $927,078.
See Notes to Financial Statements.
18
STATEMENTS OF ASSETS AND LIABILITIES
WM STRATEGIC ASSET MANAGEMENT PORTFOLIOS
OCTOBER 31, 2003
(IN THOUSANDS)
FLEXIBLE CONSERVATIVE CONSERVATIVE STRATEGIC
INCOME BALANCED BALANCED GROWTH GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
--------- ------------ ------------ ---------- ---------
ASSETS:
Investments, at value (a) $662,326 $260,663 $2,095,444 $1,632,739 $886,996
Receivable for Portfolio shares sold 5,422 2,162 14,996 11,170 8,011
Prepaid expenses and other assets 3 1 8 8 5
-------- -------- ---------- ---------- --------
Total Assets 667,751 262,826 2,110,448 1,643,917 895,012
-------- -------- ---------- ---------- --------
LIABILITIES:
Payable for Portfolio shares redeemed 1,733 436 2,371 1,281 699
Payable for investment securities purchased 512 -- 3,912 2,097 1,705
Investment advisory fee payable 361 129 1,078 849 473
Shareholder servicing and distribution
fees payable 416 157 1,244 967 547
Transfer agent fees payable 36 14 111 101 78
Accrued expenses and other payables 116 59 308 253 176
-------- -------- ---------- ---------- --------
Total Liabilities 3,174 795 9,024 5,548 3,678
-------- -------- ---------- ---------- --------
NET ASSETS $664,577 $262,031 $2,101,424 $1,638,369 $891,334
======== ======== ========== ========== ========
(a) Investments, at cost $633,410 $246,333 $2,005,168 $1,598,270 $910,960
======== ======== ========== ========== ========
NET ASSETS CONSIST OF:
Undistributed net investment income/
(accumulated net investment loss) $ 1,974 $ 556 $ 1,815 $ (331) $ (4,099)
Accumulated net realized loss on
investment transactions (6,566) (2,913) (48,508) (48,877) (40,809)
Net unrealized appreciation/(depreciation)
of investments 28,916 14,331 90,276 34,468 (23,964)
Paid-in capital 640,253 250,057 2,057,841 1,653,109 960,206
-------- -------- ---------- ---------- --------
Total Net Assets $664,577 $262,031 $2,101,424 $1,638,369 $891,334
======== ======== ========== ========== ========
See Notes to Financial Statements.
19
STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED)
WM STRATEGIC ASSET MANAGEMENT PORTFOLIOS
OCTOBER 31, 2003
(IN THOUSANDS)
FLEXIBLE CONSERVATIVE CONSERVATIVE STRATEGIC
INCOME BALANCED BALANCED GROWTH GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
--------- ------------ ------------ ---------- ---------
NET ASSETS:
Class A Shares $224,192 $ 94,005 $ 792,423 $ 615,501 $298,852
======== ======== ========== ========== ========
Class B Shares $371,639 $116,742 $1,074,925 $ 827,312 $484,656
======== ======== ========== ========== ========
Class C Shares $ 68,746 $ 51,284 $ 234,076 $ 195,556 $107,826
======== ======== ========== ========== ========
SHARES OUTSTANDING:
Class A Shares 20,530 9,584 66,896 49,374 22,701
======== ======== ========== ========== ========
Class B Shares 34,092 11,923 90,961 67,898 38,071
======== ======== ========== ========== ========
Class C Shares 6,328 5,253 19,878 16,125 8,464
======== ======== ========== ========== ========
CLASS A SHARES:**
Net asset value per share of beneficial interest
outstanding * $ 10.92 $ 9.81 $ 11.85 $ 12.47 $ 13.16
======== ======== ========== ========== ========
Maximum sales charge 4.50% 5.50% 5.50% 5.50% 5.50%
======== ======== ========== ========== ========
Maximum offering price per share of beneficial
interest outstanding $ 11.43 $ 10.38 $ 12.54 $ 13.20 $ 13.93
======== ======== ========== ========== ========
CLASS B SHARES:**
Net asset value and offering price per share of
beneficial interest outstanding * $ 10.90 $ 9.79 $ 11.82 $ 12.18 $ 12.73
======== ======== ========== ========== ========
CLASS C SHARES:**
Net asset value per share of beneficial
interest outstanding * $ 10.86 $ 9.76 $ 11.78 $ 12.13 $ 12.74
======== ======== ========== ========== ========
Maximum sales charge 1.00% 1.00% 1.00% 1.00% 1.00%
======== ======== ========== ========== ========
Maximum offering price per share of beneficial
interest outstanding $ 10.97 $ 9.86 $ 11.90 $ 12.25 $ 12.87
======== ======== ========== ========== ========
<FN>
* Redemption price per share is equal to net asset value per
share less any applicable contingent deferred sales charge.
** Net asset value and maximum offering price are not shown in
thousands.
See Notes to Financial Statements.
20
STATEMENTS OF OPERATIONS
WM STRATEGIC ASSET MANAGEMENT PORTFOLIOS
FOR THE YEAR ENDED OCTOBER 31, 2003
(IN THOUSANDS)
FLEXIBLE CONSERVATIVE CONSERVATIVE STRATEGIC
INCOME BALANCED BALANCED GROWTH GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
--------- ------------ ------------ ---------- ---------
INVESTMENT INCOME:
Dividends from investment company securities $25,303 $ 6,697 $ 46,428 $ 27,901 $ 9,284
Interest 22 12 543 32 22
------- ------- -------- -------- --------
Total investment income 25,325 6,709 46,971 27,933 9,306
------- ------- -------- -------- --------
EXPENSES:
Investment advisory fee 3,521 1,080 9,728 7,825 4,226
Custodian fees 3 3 3 3 3
Legal and audit fees 37 26 65 56 40
Registration and filing fees 97 82 201 165 114
Other 260 89 761 655 445
Shareholder servicing and distribution fees:
Class A Shares 451 136 1,370 1,087 513
Class B Shares 3,155 838 8,682 6,874 3,919
Class C Shares 457 281 1,219 987 529
Transfer agent fees:
Class A Shares 112 39 380 377 288
Class B Shares 223 76 724 695 552
Class C Shares 30 19 79 77 52
------- ------- -------- -------- --------
Total expenses 8,346 2,669 23,212 18,801 10,681
Fees waived by the investment advisor -- (74) -- -- --
Fees reduced by custodian credits --* --* --* --* --*
------- ------- -------- -------- --------
Net expenses 8,346 2,595 23,212 18,801 10,681
------- ------- -------- -------- --------
NET INVESTMENT INCOME/(LOSS) 16,979 4,114 23,759 9,132 (1,375)
------- ------- -------- -------- --------
NET REALIZED AND UNREALIZED GAIN
ON INVESTMENTS:
Net realized loss on investment transactions (4,679) (1,915) (23,365) (27,792) (18,516)
Net change in unrealized appreciation/depreciation of
investments 43,834 19,838 258,639 267,163 170,878
------- ------- -------- -------- --------
Net realized and unrealized gain on investments 39,155 17,923 235,274 239,371 152,362
------- ------- -------- -------- --------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $56,134 $22,037 $259,033 $248,503 $150,987
======= ======= ======== ======== ========
<FN>
* Amount represents less than $500.
See Notes to Financial Statements.
21
STATEMENTS OF CHANGES IN NET ASSETS
WM STRATEGIC ASSET MANAGEMENT PORTFOLIOS
FOR THE YEAR ENDED OCTOBER 31, 2003
(IN THOUSANDS)
FLEXIBLE CONSERVATIVE CONSERVATIVE STRATEGIC
INCOME BALANCED BALANCED GROWTH GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
--------- ------------ ------------ ---------- ---------
Net investment income/(loss) $ 16,979 $ 4,114 $ 23,759 $ 9,132 $ (1,375)
Net realized loss on investment transactions (4,679) (1,915) (23,365) (27,792) (18,516)
Net change in unrealized appreciation/depreciation of
investments 43,834 19,838 258,639 267,163 170,878
-------- -------- ---------- ---------- --------
Net increase in net assets
resulting from operations 56,134 22,037 259,033 248,503 150,987
Distributions to shareholders from:
Net investment income:
Class A Shares (6,392) (1,486) (10,917) (5,264) --
Class B Shares (8,956) (1,756) (11,375) (3,864) --
Class C Shares (1,284) (605) (1,556) (519) --
Net realized gains on investments:
Class A Shares (226) -- -- (1,176) (1,363)
Class B Shares (389) -- -- (2,123) (2,912)
Class C Shares (37) -- -- (182) (240)
Net increase in net assets from
Portfolio share transactions:
Class A Shares 66,490 56,926 284,390 182,874 84,392
Class B Shares 104,021 49,644 200,435 74,140 48,369
Class C Shares 44,830 37,641 159,237 126,407 68,120
-------- -------- ---------- ---------- --------
Net increase in net assets 254,191 162,401 879,247 618,796 347,353
NET ASSETS:
Beginning of year 410,386 99,630 1,222,177 1,019,573 543,981
-------- -------- ---------- ---------- --------
End of year $664,577 $262,031 $2,101,424 $1,638,369 $891,334
======== ======== ========== ========== ========
Undistributed net investment income/
(accumulated net investment loss) at end of year $ 1,974 $ 556 $ 1,815 $ (331) $ (4,099)
======== ======== ========== ========== ========
See Notes to Financial Statements.
22
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
WM STRATEGIC ASSET MANAGEMENT PORTFOLIOS
FOR THE YEAR ENDED OCTOBER 31, 2002
(IN THOUSANDS)
FLEXIBLE CONSERVATIVE CONSERVATIVE STRATEGIC
INCOME BALANCED BALANCED GROWTH GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
--------- ------------ ------------ ---------- ---------
Net investment income/(loss) $ 12,423 $ 1,990 $ 24,563 $ 9,709 $ (1,763)
Net realized loss on investment transactions (2,592) (497) (26,956) (22,355) (19,276)
Capital gain distributions received 1,289 324 13,164 16,147 11,335
Net change in unrealized appreciation/depreciation of
investments (13,461) (4,350) (118,704) (157,997) (102,508)
-------- -------- ---------- ---------- --------
Net decrease in net assets
resulting from operations (2,341) (2,533) (107,933) (154,496) (112,212)
Distributions to shareholders from:
Net investment income:
Class A Shares (4,942) (584) (12,177) (6,667) (1,748)
Class B Shares (6,338) (1,185) (16,953) (7,958) (1,410)
Class C Shares (194) (86) (351) (167) --
Net realized gains on investments:
Class A Shares (821) -- (8,666) (10,695) (5,806)
Class B Shares (1,134) -- (15,401) (21,728) (14,697)
Net increase in net assets from
Portfolio share transactions:
Class A Shares 40,129 19,944 98,182 95,095 52,002
Class B Shares 107,929 30,513 177,184 117,500 58,618
Class C Shares 20,862 10,751 57,293 52,961 30,811
-------- -------- ---------- ---------- --------
Net increase in net assets 153,150 56,820 171,178 63,845 5,558
NET ASSETS:
Beginning of year 257,236 42,810 1,050,999 955,728 538,423
-------- -------- ---------- ---------- --------
End of year $410,386 $ 99,630 $1,222,177 $1,019,573 $543,981
======== ======== ========== ========== ========
Undistributed net investment income/
(accumulated net investment loss) at end of year $ 1,627 $ 289 $ 1,904 $ 152 $ (3,184)
======== ======== ========== ========== ========
See Notes to Financial Statements.
23
STATEMENTS OF CHANGES IN NET ASSETS -- CAPITAL STOCK ACTIVITY
WM STRATEGIC ASSET MANAGEMENT PORTFOLIOS
(IN THOUSANDS)
CONSERVATIVE
FLEXIBLE INCOME PORTFOLIO BALANCED PORTFOLIO BALANCED PORTFOLIO
------------------------- ---------------------- ------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
10/31/03 10/31/02 10/31/03 10/31/02 10/31/03 10/31/02
---------- ---------- ---------- ---------- ---------- ----------
AMOUNT
CLASS A:
Sold $132,626 $ 84,412 $ 77,203 $ 26,562 $ 388,253 $ 208,701
Issued as reinvestment of dividends 6,038 5,430 1,400 545 10,557 20,362
Redeemed (72,174) (49,713) (21,677) (7,163) (114,420) (130,881)
-------- -------- -------- -------- --------- ---------
Net increase $ 66,490 $ 40,129 $ 56,926 $ 19,944 $ 284,390 $ 98,182
======== ======== ======== ======== ========= =========
CLASS B:
Sold $188,101 $167,150 $ 77,595 $ 47,338 $ 363,002 $ 364,029
Issued as reinvestment of dividends 8,565 6,884 1,659 1,121 11,004 31,579
Redeemed (92,645) (66,105) (29,610) (17,946) (173,571) (218,424)
-------- -------- -------- -------- --------- ---------
Net increase $104,021 $107,929 $ 49,644 $ 30,513 $ 200,435 $ 177,184
======== ======== ======== ======== ========= =========
CLASS C:
Sold $ 66,013 $ 24,293 $ 48,833 $ 13,028 $ 178,337 $ 61,849
Issued as reinvestment of dividends 1,207 187 574 82 1,494 340
Redeemed (22,390) (3,618) (11,766) (2,359) (20,594) (4,896)
-------- -------- -------- -------- --------- ---------
Net increase $ 44,830 $ 20,862 $ 37,641 $ 10,751 $ 159,237 $ 57,293
======== ======== ======== ======== ========= =========
SHARES
CLASS A:
Sold 12,528 8,155 8,237 2,942 35,203 18,914
Issued as reinvestment of dividends 574 520 150 59 977 1,790
Redeemed (6,804) (4,779) (2,322) (782) (10,622) (12,104)
-------- -------- -------- -------- --------- ---------
Net increase 6,298 3,896 6,065 2,219 25,558 8,600
======== ======== ======== ======== ========= =========
CLASS B:
Sold 17,920 16,179 8,360 5,217 33,351 32,803
Issued as reinvestment of dividends 816 661 179 122 1,031 2,763
Redeemed (8,770) (6,399) (3,199) (1,995) (16,183) (20,506)
-------- -------- -------- -------- --------- ---------
Net increase 9,966 10,441 5,340 3,344 18,199 15,060
======== ======== ======== ======== ========= =========
CLASS C:
Sold 6,291 2,381 5,256 1,454 16,269 5,812
Issued as reinvestment of dividends 115 19 62 9 138 33
Redeemed (2,120) (358) (1,258) (270) (1,895) (478)
-------- -------- -------- -------- --------- ---------
Net increase 4,286 2,042 4,060 1,193 14,512 5,367
======== ======== ======== ======== ========= =========
See Notes to Financial Statements.
24
CONSERVATIVE GROWTH STRATEGIC
PORTFOLIO GROWTH PORTFOLIO
---------------------- ------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
10/31/03 10/31/02 10/31/03 10/31/02
---------- ---------- ---------- ----------
AMOUNT
CLASS A:
Sold $ 255,874 $ 176,719 $ 125,879 $ 88,781
Issued as reinvestment of dividends 6,302 17,035 1,345 7,459
Redeemed (79,302) (98,659) (42,832) (44,238)
--------- --------- --------- ---------
Net increase $ 182,874 $ 95,095 $ 84,392 $ 52,002
========= ========= ========= =========
CLASS B:
Sold $ 209,247 $ 270,723 $ 109,265 $ 153,986
Issued as reinvestment of dividends 5,859 29,090 2,863 15,823
Redeemed (140,966) (182,313) (63,759) (111,191)
--------- --------- --------- ---------
Net increase $ 74,140 $ 117,500 $ 48,369 $ 58,618
========= ========= ========= =========
CLASS C:
Sold $ 141,969 $ 57,059 $ 75,726 $ 32,858
Issued as reinvestment of dividends 678 163 236 --
Redeemed (16,240) (4,261) (7,842) (2,047)
--------- --------- --------- ---------
Net increase $ 126,407 $ 52,961 $ 68,120 $ 30,811
========= ========= ========= =========
SHARES
CLASS A:
Sold 22,560 15,126 10,682 7,241
Issued as reinvestment of dividends 581 1,389 124 554
Redeemed (7,272) (8,886) (3,815) (3,833)
--------- --------- --------- ---------
Net increase 15,869 7,629 6,991 3,962
========= ========= ========= =========
CLASS B:
Sold 19,061 23,374 9,686 12,525
Issued as reinvestment of dividends 570 2,392 271 1,203
Redeemed (13,258) (16,829) (5,899) (9,807)
--------- --------- --------- ---------
Net increase 6,373 8,937 4,058 3,921
========= ========= ========= =========
CLASS C:
Sold 12,791 5,199 6,566 2,779
Issued as reinvestment of dividends 65 15 22 --
Redeemed (1,524) (422) (706) (197)
--------- --------- --------- ---------
Net increase 11,332 4,792 5,882 2,582
========= ========= ========= =========
See Notes to Financial Statements.
25
FINANCIAL HIGHLIGHTS
FOR A PORTFOLIO SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
INCOME FROM INVESTMENT OPERATIONS LESS DISTRIBUTIONS
------------------------------------- ---------------------------------------
NET REALIZED
NET ASSET AND DIVIDENDS DISTRIBUTIONS NET ASSET
VALUE, NET UNREALIZED TOTAL FROM FROM NET FROM VALUE,
BEGINNING INVESTMENT GAIN/(LOSS) ON INVESTMENT INVESTMENT NET REALIZED TOTAL END OF
OF PERIOD INCOME INVESTMENTS OPERATIONS INCOME(1) CAPITAL GAINS DISTRIBUTIONS PERIOD
--------- ---------- -------------- ---------- ---------- ------------- ------------- ---------
FLEXIBLE INCOME PORTFOLIO
CLASS A
10/31/03 $10.17 $0.38(6) $ 0.77 $ 1.15 $(0.38) $ (0.02) $(0.40) $10.92
10/31/02 10.71 0.45(6) (0.48) (0.03) (0.43) (0.08) (0.51) 10.17
10/31/01 11.06 0.50(6) (0.04) 0.46 (0.61) (0.20) (0.81) 10.71
10/31/00 10.75 0.47(6) 0.42 0.89 (0.55) (0.03) (0.58) 11.06
10/31/99 10.63 0.40(6) 0.57(7) 0.97 (0.48) (0.37) (0.85) 10.75
CLASS B
10/31/03 10.15 0.30(6) 0.77 1.07 (0.30) (0.02) (0.32) 10.90
10/31/02 10.71 0.38(6) (0.50) (0.12) (0.36) (0.08) (0.44) 10.15
10/31/01 11.06 0.42(6) (0.04) 0.38 (0.53) (0.20) (0.73) 10.71
10/31/00 10.75 0.39(6) 0.42 0.81 (0.47) (0.03) (0.50) 11.06
10/31/99 10.63 0.33(6) 0.56(7) 0.89 (0.40) (0.37) (0.77) 10.75
CLASS C
10/31/03 10.13 0.30(6) 0.76 1.06 (0.31) (0.02) (0.33) 10.86
10/31/02(5) 10.54 0.24(6) (0.43) (0.19) (0.22) -- (0.22) 10.13
CONSERVATIVE BALANCED PORTFOLIO
CLASS A
10/31/03 $ 8.83 $0.28(6) $ 0.97 $ 1.25 $(0.27) $ -- $(0.27) $ 9.81
10/31/02 9.43 0.33 (0.61) (0.28) (0.32) -- (0.32) 8.83
10/31/01 9.96 0.34(6) (0.44) (0.10) (0.43) -- (0.43) 9.43
10/31/00 9.94 0.51(6) 0.02(7) 0.53 (0.50) (0.01) (0.51) 9.96
10/31/99 10.25 0.56 (0.27) 0.29 (0.58) (0.02) (0.60) 9.94
CLASS B
10/31/03 8.82 0.21(6) 0.96 1.17 (0.20) -- (0.20) 9.79
10/31/02 9.43 0.27 (0.62) (0.35) (0.26) -- (0.26) 8.82
10/31/01 9.96 0.27(6) (0.44) (0.17) (0.36) -- (0.36) 9.43
10/31/00 9.94 0.44(6) 0.02(7) 0.46 (0.43) (0.01) (0.44) 9.96
10/31/99 10.25 0.50 (0.29) 0.21 (0.50) (0.02) (0.52) 9.94
CLASS C
10/31/03 8.80 0.21(6) 0.97 1.18 (0.22) -- (0.22) 9.76
10/31/02(5) 9.39 0.16 (0.60) (0.44) (0.15) -- (0.15) 8.80
See Notes to Financial Statements.
26
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA
----------------------------------------------------------------------------------
RATIO OF OPERATING
EXPENSES TO AVERAGE
NET ASSETS WITHOUT FEE
RATIO OF RATIO OF WAIVERS, EXPENSES REIMBURSED
OPERATING NET INVESTMENT AND/OR FEES
NET ASSETS, EXPENSES TO INCOME TO PORTFOLIO REDUCED BY CREDITS
END OF PERIOD AVERAGE NET AVERAGE NET TURNOVER ALLOWED BY THE
TOTAL RETURN(2) (IN 000'S) ASSETS(3) ASSETS RATE CUSTODIAN(3)(4)
--------------- ------------- ----------- -------------- --------- ----------------------------
FLEXIBLE INCOME PORTFOLIO
CLASS A
10/31/03 11.49% $224,192 1.04% 3.64% 3% 1.04%
10/31/02 (0.37)% 144,710 1.06% 4.41% 9% 1.06%
10/31/01 3.67% 110,680 1.06% 4.61% 7% 1.06%
10/31/00 8.56% 129,386 1.06% 4.28% 27% 1.06%
10/31/99 9.39% 194,404 1.00% 3.86% 31% 1.06%
CLASS B
10/31/03 10.60% 371,639 1.79% 2.89% 3% 1.79%
10/31/02 (1.08)% 244,999 1.81% 3.66% 9% 1.81%
10/31/01 2.92% 146,555 1.79% 3.88% 7% 1.79%
10/31/00 7.76% 77,238 1.80% 3.54% 27% 1.80%
10/31/99 8.60% 46,821 1.75% 3.11% 31% 1.81%
CLASS C
10/31/03 10.63% 68,746 1.79% 2.89% 3% 1.79%
10/31/02(5) (1.78)% 20,677 1.81%(8) 3.66%(8) 9% 1.81%(8)
CONSERVATIVE BALANCED PORTFOLIO
CLASS A
10/31/03 14.38% $ 94,005 1.05% 2.99% 4% 1.09%
10/31/02 (3.06)% 31,070 1.05% 3.67% 9% 1.17%
10/31/01 (0.99)% 12,257 1.16% 3.65% 18% 1.30%
10/31/00 5.52% 4,557 1.32% 5.16% 59% 1.32%
10/31/99 2.89% 7,297 1.00% 5.57% 51% 1.24%
CLASS B
10/31/03 13.46% 116,742 1.82% 2.22% 4% 1.86%
10/31/02 (3.77)% 58,054 1.80% 2.92% 9% 1.92%
10/31/01 (1.71)% 30,554 1.89% 2.92% 18% 2.03%
10/31/00 4.76% 10,947 2.04% 4.44% 59% 2.04%
10/31/99 2.05% 13,443 1.74% 4.83% 51% 1.98%
CLASS C
10/31/03 13.53% 51,284 1.80% 2.24% 4% 1.84%
10/31/02(5) (4.70)% 10,505 1.78%(8) 2.94%(8) 9% 1.90%(8)
See Notes to Financial Statements.
27
FINANCIAL HIGHLIGHTS
FOR A PORTFOLIO SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
INCOME FROM INVESTMENT OPERATIONS LESS DISTRIBUTIONS
------------------------------------- ---------------------------------------
NET REALIZED
NET ASSET AND DIVIDENDS DISTRIBUTIONS NET ASSET
VALUE, NET UNREALIZED TOTAL FROM FROM NET FROM VALUE,
BEGINNING INVESTMENT GAIN/(LOSS) ON INVESTMENT INVESTMENT NET REALIZED TOTAL END OF
OF PERIOD INCOME/(LOSS) INVESTMENTS OPERATIONS INCOME(1) CAPITAL GAINS DISTRIBUTIONS PERIOD
--------- ------------- -------------- ---------- ---------- ------------- ------------- ---------
BALANCED PORTFOLIO
CLASS A
10/31/03 $10.24 $0.22 $ 1.62 $ 1.84 $(0.23) $ -- $(0.23) $11.85
10/31/02 11.63 0.28 (1.08) (0.80) (0.33) (0.26) (0.59) 10.24
10/31/01 13.55 0.33(6) (1.27) (0.94) (0.51) (0.47) (0.98) 11.63
10/31/00 12.22 0.28(6) 1.53 1.81 (0.48) -- (0.48) 13.55
10/31/99 11.02 0.19(6) 2.39 2.58 (0.44) (0.94) (1.38) 12.22
CLASS B
10/31/03 10.22 0.14 1.61 1.75 (0.15) -- (0.15) 11.82
10/31/02 11.62 0.20 (1.09) (0.89) (0.25) (0.26) (0.51) 10.22
10/31/01 13.54 0.23(6) (1.27) (1.04) (0.41) (0.47) (0.88) 11.62
10/31/00 12.21 0.18(6) 1.55 1.73 (0.40) -- (0.40) 13.54
10/31/99 11.02 0.11(6) 2.38 2.49 (0.36) (0.94) (1.30) 12.21
CLASS C
10/31/03 10.20 0.14 1.60 1.74 (0.16) -- (0.16) 11.78
10/31/02(5) 11.35 0.13 (1.15) (1.02) (0.13) -- (0.13) 10.20
CONSERVATIVE GROWTH PORTFOLIO
CLASS A
10/31/03 $10.37 $0.14(6) $ 2.14 $ 2.28 $(0.14) $(0.04) $(0.18) $12.47
10/31/02 12.35 0.16(6) (1.52) (1.36) (0.22) (0.40) (0.62) 10.37
10/31/01 15.52 0.20(6) (2.34) (2.14) (0.58) (0.45) (1.03) 12.35
10/31/00 13.43 0.12(6) 2.40 2.52 (0.43) -- (0.43) 15.52
10/31/99 10.97 0.06(6) 3.70 3.76 (0.42) (0.88) (1.30) 13.43
CLASS B
10/31/03 10.14 0.05(6) 2.09 2.14 (0.06) (0.04) (0.10) 12.18
10/31/02 12.10 0.08(6) (1.50) (1.42) (0.14) (0.40) (0.54) 10.14
10/31/01 15.17 0.09(6) (2.28) (2.19) (0.43) (0.45) (0.88) 12.10
10/31/00 13.21 0.00(6)(9) 2.37 2.37 (0.41) -- (0.41) 15.17
10/31/99 10.85 (0.03)(6) 3.61 3.58 (0.34) (0.88) (1.22) 13.21
CLASS C
10/31/03 10.10 0.06(6) 2.08 2.14 (0.07) (0.04) (0.11) 12.13
10/31/02(5) 11.79 0.05(6) (1.66) (1.61) (0.08) -- (0.08) 10.10
See Notes to Financial Statements.
28
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA
----------------------------------------------------------------------------------
RATIO OF OPERATING
EXPENSES TO AVERAGE
NET ASSETS WITHOUT FEE
RATIO OF RATIO OF WAIVERS, EXPENSES REIMBURSED
OPERATING NET INVESTMENT AND/OR FEES
NET ASSETS, EXPENSES TO INCOME TO PORTFOLIO REDUCED BY CREDITS
END OF PERIOD AVERAGE NET AVERAGE NET TURNOVER ALLOWED BY THE
TOTAL RETURN(2) (IN 000'S) ASSETS(3) ASSETS RATE CUSTODIAN(3)(4)
--------------- ------------- ----------- -------------- --------- ----------------------------
BALANCED PORTFOLIO
CLASS A
10/31/03 18.07% $ 792,423 1.02% 2.03% 5% 1.02%
10/31/02 (7.32)% 423,478 1.04% 2.55% 19% 1.04%
10/31/01 (7.28)% 380,681 1.02% 2.63% 6% 1.02%
10/31/00 15.11% 391,655 1.03% 2.05% 22% 1.03%
10/31/99 25.16% 333,639 1.03% 1.66% 39% 1.04%
CLASS B
10/31/03 17.25% 1,074,925 1.78% 1.27% 5% 1.78%
10/31/02 (8.03)% 743,953 1.80% 1.79% 19% 1.80%
10/31/01 (7.98)% 670,318 1.78% 1.87% 6% 1.78%
10/31/00 14.26% 549,849 1.77% 1.31% 22% 1.77%
10/31/99 24.22% 237,438 1.77% 0.92% 39% 1.78%
CLASS C
10/31/03 17.15% 234,076 1.76% 1.29% 5% 1.76%
10/31/02(5) (9.00)% 54,745 1.80%(8) 1.79%(8) 19% 1.80%(8)
CONSERVATIVE GROWTH PORTFOLIO
CLASS A
10/31/03 22.12% $ 615,501 1.05% 1.24% 7% 1.05%
10/31/02 (11.72)% 347,297 1.06% 1.41% 14% 1.06%
10/31/01 (14.31)% 319,583 1.03% 1.45% 5% 1.03%
10/31/00 18.89% 341,685 1.02% 0.76% 17% 1.02%
10/31/99 36.54% 249,650 1.02% 0.48% 16% 1.03%
CLASS B
10/31/03 21.24% 827,312 1.81% 0.48% 7% 1.81%
10/31/02 (12.46)% 623,852 1.82% 0.65% 14% 1.82%
10/31/01 (14.93)% 636,145 1.79% 0.69% 5% 1.79%
10/31/00 18.07% 604,460 1.77% 0.01% 17% 1.77%
10/31/99 34.98% 263,911 1.77% (0.27)% 16% 1.78%
CLASS C
10/31/03 21.41% 195,556 1.79% 0.50% 7% 1.79%
10/31/02(5) (13.72)% 48,424 1.82%(8) 0.65%(8) 14% 1.82%(8)
See Notes to Financial Statements.
29
FINANCIAL HIGHLIGHTS
FOR A PORTFOLIO SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
INCOME FROM INVESTMENT OPERATIONS LESS DISTRIBUTIONS
------------------------------------- ---------------------------------------
NET REALIZED
NET ASSET AND DIVIDENDS DISTRIBUTIONS NET ASSET
VALUE, NET UNREALIZED TOTAL FROM FROM NET FROM VALUE,
BEGINNING INVESTMENT GAIN/(LOSS) ON INVESTMENT INVESTMENT NET REALIZED TOTAL END OF
OF PERIOD INCOME/(LOSS) INVESTMENTS OPERATIONS INCOME(1) CAPITAL GAINS DISTRIBUTIONS PERIOD
--------- ------------- -------------- ---------- ---------- ------------- ------------- ---------
STRATEGIC GROWTH PORTFOLIO
CLASS A
10/31/03 $10.59 $0.03(6) $2.63 $ 2.66 $ -- $(0.09) $(0.09) $13.16
10/31/02 13.10 0.03(6) (1.92) (1.89) (0.14) (0.48) (0.62) 10.59
10/31/01 17.11 0.05(6) (3.21) (3.16) (0.47) (0.38) (0.85) 13.10
10/31/00 14.61 (0.04)(6) 3.07 3.03 (0.53) -- (0.53) 17.11
10/31/99 11.67 (0.03)(6) 4.36 4.33 (0.41) (0.98) (1.39) 14.61
CLASS B
10/31/03 10.32 (0.05)(6) 2.55 2.50 -- (0.09) (0.09) 12.73
10/31/02 12.78 (0.06)(6) (1.88) (1.94) (0.04) (0.48) (0.52) 10.32
10/31/01 16.75 (0.06)(6) (3.14) (3.20) (0.39) (0.38) (0.77) 12.78
10/31/00 14.40 (0.16)(6) 3.02 2.86 (0.51) -- (0.51) 16.75
10/31/99 11.52 (0.13)(6) 4.31 4.18 (0.32) (0.98) (1.30) 14.40
CLASS C
10/31/03 10.32 (0.05)(6) 2.56 2.51 -- (0.09) (0.09) 12.74
10/31/02(5) 12.50 (0.04)(6) (2.14) (2.18) -- -- -- 10.32
<FN>
- --------
(1) Includes dividends paid from the short-term portion of capital gain
distributions received from the Underlying Funds.
(2) Total return is not annualized for periods less than one year and does
not reflect any applicable sales charges. The total return would have
been lower if certain fees had not been waived and/or expenses
reimbursed by the investment advisor or if fees had not been reduced by
credits allowed by the custodian.
(3) The Portfolio also will indirectly bear its prorated share of expenses
of the Underlying Funds.
(4) Ratio of operating expenses to average net assets includes expenses
paid indirectly.
(5) The Portfolios commenced selling Class C shares on March 1, 2002.
(6) Per share numbers have been calculated using the average shares method.
(7) The amount shown may not agree with the change in the aggregate gains
and losses of portfolio securities due to the timing of sales and
redemptions of Portfolio shares.
(8) Annualized.
(9) Amount represents less than $0.01 per share.
See Notes to Financial Statements.
30
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA
----------------------------------------------------------------------------------
RATIO OF OPERATING
EXPENSES TO AVERAGE
NET ASSETS WITHOUT FEE
RATIO OF RATIO OF WAIVERS, EXPENSES REIMBURSED
OPERATING NET INVESTMENT AND/OR FEES
NET ASSETS, EXPENSES TO INCOME TO PORTFOLIO REDUCED BY CREDITS
END OF PERIOD AVERAGE NET AVERAGE NET TURNOVER ALLOWED BY THE
TOTAL RETURN(2) (IN 000'S) ASSETS(3) ASSETS RATE CUSTODIAN(3)(4)
--------------- ------------- ----------- -------------- --------- ----------------------------
STRATEGIC GROWTH PORTFOLIO
CLASS A
10/31/03 25.24% $298,852 1.13% 0.30% 7% 1.13%
10/31/02 (15.45)% 166,354 1.13% 0.23% 10% 1.13%
10/31/01 (19.03)% 153,857 1.08% 0.34% 2% 1.08%
10/31/00 20.84% 142,241 1.06% (0.21)% 15% 1.06%
10/31/99 39.55% 74,678 1.07% (0.21)% 20% 1.09%
CLASS B
10/31/03 24.35% 484,656 1.88% (0.45)% 7% 1.88%
10/31/02 (16.04)% 350,982 1.87% (0.51)% 10% 1.87%
10/31/01 (19.70)% 384,566 1.84% (0.42)% 2% 1.84%
10/31/00 19.95% 363,910 1.81% (0.96)% 15% 1.81%
10/31/99 38.60% 130,522 1.83% (0.97)% 20% 1.85%
CLASS C
10/31/03 24.44% 107,826 1.84% (0.41)% 7% 1.84%
10/31/02(5) (17.44)% 26,645 1.85%(8) (0.49)%(8) 10% 1.85%(8)
See Notes to Financial Statements.
31
NOTES TO FINANCIAL STATEMENTS
WM STRATEGIC ASSET MANAGEMENT PORTFOLIOS
1. ORGANIZATION AND BUSINESS
WM Strategic Asset Management Portfolios, LLC (the "LLC") was organized
under the laws of the Commonwealth of Massachusetts on March 12, 1999 as a
limited liability company. The LLC is registered under the Investment
Company Act of 1940, as amended (the "1940 Act"), as an open-end management
investment company. The LLC offers five portfolios: Flexible Income,
Conservative Balanced, Balanced, Conservative Growth and Strategic Growth
Portfolios (each a "Portfolio" and collectively, the "Portfolios").
The LLC is authorized to issue an unlimited number of shares of beneficial
interest, each without par value. Each Portfolio offers three classes of
shares: Class A shares, Class B shares and Class C shares. Class A shares
are generally subject to an initial sales charge at the time of purchase.
Certain Class A shares purchased without an initial sales charge may be
subject to a contingent deferred sales charge ("CDSC") if redeemed within
eighteen months from the date of purchase. Class B shares are not subject to
an initial sales charge although they are generally subject to a CDSC if
redeemed within five years from the date of purchase. Class C shares are
subject to an initial sales charge at the time of purchase and are subject
to a CDSC if redeemed within one year from the date of purchase.
Each of the Portfolios invests, within certain percentage ranges, in Class I
shares of various funds in the WM Group of Funds (collectively, the
"Underlying Funds"). WM Advisors, Inc. (the "Advisor" or "WM Advisors"), a
wholly-owned subsidiary of Washington Mutual, Inc. ("Washington Mutual"), a
publicly owned financial services company, serves as investment advisor to
the Portfolios. The Advisor may alter these percentage ranges when it deems
appropriate. The assets of each Portfolio will be allocated among the
Underlying Funds in accordance with its investment objective based on the
Advisor's outlook for the economy, the financial markets and the relative
market valuations of the Underlying Funds. In addition, in order to meet
liquidity needs or for temporary defensive purposes, each Portfolio may
invest its assets directly in cash, stock or bond index futures, options,
money market securities and certain short- term debt instruments, including
repurchase agreements.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies, in conformity
with accounting principles generally accepted in the United States of
America ("generally accepted accounting principles"), which are consistently
followed by the Portfolios in the preparation of their financial statements.
PORTFOLIO VALUATION:
Investments in the Underlying Funds are valued at net asset value per Class
I share of the respective Underlying Funds determined as of the close of the
New York Stock Exchange on each valuation date. Short-term debt securities
that mature in 60 days or less are valued at amortized cost which
approximates market value.
REPURCHASE AGREEMENTS:
Each Portfolio may enter into repurchase agreement transactions. A
repurchase agreement is a purchase of an underlying debt obligation subject
to an agreement by the seller to repurchase the obligation at an agreed upon
price and time. The value of the collateral is at all times at least equal
to the total amount of the repurchase obligation. In the event of
counterparty default, the Portfolio would seek to use the collateral to
offset losses incurred. There is potential loss to the Portfolio in the
event the Portfolio is delayed or prevented from exercising its right to
dispose of the collateral securities, including the risk of a possible
decline in the value of the underlying securities during the period while
the Portfolio seeks to assert its rights. WM Advisors, acting under the
supervision of the Board of Trustees, reviews the value of the collateral
and the creditworthiness of those banks and broker-dealers with whom each
Portfolio enters into repurchase agreements.
SECURITIES TRANSACTIONS AND INVESTMENT INCOME:
Securities transactions are recorded on a trade date basis. Realized gains
and losses from securities sold are recorded on the identified cost basis.
32
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
WM STRATEGIC ASSET MANAGEMENT PORTFOLIOS
Interest income on debt securities is accrued daily. Dividend income is
recorded on the ex-dividend date. Each Portfolio's investment income and
realized and unrealized gains and losses are allocated among the classes of
that Portfolio based upon the relative average net assets of each class.
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS:
Dividends from net investment income of the Flexible Income, Conservative
Balanced, Balanced and Conservative Growth Portfolios are declared and paid
quarterly. Dividends from any net investment income of the Strategic Growth
Portfolio are declared and paid annually. Distributions of any net capital
gains earned by a Portfolio are distributed no less frequently than annually
at the discretion of the Board of Trustees. Additional distributions of net
investment income and capital gains for each Portfolio may be made at the
discretion of the Board of Trustees in accordance with federal income tax
regulations.
Distributions from income and capital gains are determined in accordance
with income tax regulations, which may differ from generally accepted
accounting principles. These differences are primarily due to differing
treatments of income and gains on various investments held by the
Portfolios, redesignated distributions and differing characterization of
distributions made by each Portfolio. At October 31, 2003, 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:
DECREASE DECREASE
UNDISTRIBUTED ACCUMULATED
DECREASE NET INVESTMENT NET REALIZED
PAID-IN CAPITAL LOSS LOSS
(000S) (000S) (000S)
--------------- -------------- ------------
Flexible Income Portfolio $(1,678) $ -- $ 1,678
Balanced Portfolio (8,559) -- 8,559
Conservative Growth Portfolio (6,070) 31 6,039
Strategic Growth Portfolio (2,231) 461 1,770
The above adjustments are not reflected in the calculation of net investment
income per share presented in the Financial Highlights.
FEDERAL INCOME TAXES:
It is each Portfolio's policy to qualify as a regulated investment company
by complying with the requirements of the Internal Revenue Code of 1986, as
amended, applicable to regulated investment companies and by distributing
substantially all of its earnings to its shareholders. Therefore, no federal
income or excise tax provision is required.
EXPENSES:
General expenses of the LLC are allocated to all the Portfolios based upon
the relative average net assets of each Portfolio except printing and
postage expenses, which are allocated to all the Portfolios based upon the
relative number of shareholder accounts of each Portfolio. In addition, the
Portfolios will indirectly bear their prorated share of expenses of the
Underlying Funds. Operating expenses directly attributable to a class of
shares are charged to the operations of that class of shares. Expenses of
each Portfolio not directly attributable to the operations of any class of
shares are prorated among the classes to which the expenses relate based on
the relative average net assets of each class of shares.
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.
33
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
WM STRATEGIC ASSET MANAGEMENT PORTFOLIOS
3. INVESTMENT ADVISORY AND OTHER TRANSACTIONS
WM Advisors serves as investment advisor to the LLC. As such, WM Advisors
provides its proprietary asset allocation services to the Portfolios,
formulates the Portfolios' investment policies, analyzes economic and market
trends, exercises investment discretion over the assets of the Portfolios
and monitors the allocation of each Portfolio's assets and each Portfolio's
performance. For its investment advisory services to the Portfolios, WM
Advisors is entitled to a monthly fee at an annual rate of 0.65% of each
Portfolio's average daily net assets up to $1 billion, 0.60% of the next $2
billion of each Portfolio's average daily net assets and 0.55% of each
Portfolio's average daily net assets over $3 billion. The Advisor has
voluntarily waived $73,786 of its advisory fees for the Conservative
Balanced Portfolio for the year ended October 31, 2003.
WM Shareholder Services, Inc. (the "Transfer Agent"), a wholly-owned
subsidiary of Washington Mutual, serves as the transfer agent of the
Portfolios. Fees were 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. The authorized annual shareholder
servicing fee is $19.68 for Class A, Class B and Class C shareholder
accounts, with the exception of the Flexible Income Portfolio, for which the
fee is $20.21. Prior to December 1, 2002, the authorized annual shareholder
servicing fee was $20.52 for Class A, Class B and Class C shareholder
accounts, with the exception of the Flexible Income Portfolio, for which the
fee was $22.70.
Custodian fees for certain Portfolios have been reduced by credits allowed
by the custodian for uninvested cash balances. The Portfolios could have
invested this cash in income producing investments. Fees reduced by credits
allowed by the custodian for the year ended October 31, 2003 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 LLC for serving as an officer or Trustee of the LLC.
The LLC, together with other mutual funds advised by WM Advisors, pays each
Trustee who is not an officer or employee of Washington Mutual or its
subsidiaries, a per annum retainer plus attendance fees for each meeting at
which they are present. The Lead Trustee, Committee Chairs and Committee
Members receive additional remuneration for these services to the LLC.
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 Class A, Class B and Class C shares of the Portfolios. For the year
ended October 31, 2003, the Distributor has received $2,904,612 representing
commissions (front end sales charges) on Class A and Class C shares and
$5,224,345 representing CDSCs on Class A, Class B and Class C shares.
Each of the Portfolios has adopted three distribution plans, pursuant to
Rule 12b-1 under the 1940 Act, applicable to Class A, Class B and Class C
shares of the Portfolio (each, a "Rule 12b-1 Plan"), respectively. Under the
applicable Rule 12b-1 Plans, the Distributor may receive a service fee at an
annual rate of 0.25% of the average daily net assets of each class. In
addition, the Distributor is paid a fee as compensation in connection with
the offering and sale of Class B and Class C shares at an annual rate of
0.75% of the average daily net assets of each class. These fees may be used
to cover the expenses of the Distributor primarily intended to result in the
sale of such shares, including payments to the Distributor's representatives
or others for selling shares. The service fee is paid by the Portfolio to
the Distributor, which in turn, pays a portion of the service fee to
broker/dealers that provide services, such as accepting telephone inquiries
and transaction requests and processing correspondences, new account
applications and subsequent purchases for the shareholders. Under their
terms, each Rule 12b-1 plan shall remain in effect from year to year,
provided such continuance is approved annually by vote of the Board of
Trustees, including a majority of those Trustees who are not "interested
persons" of the LLC, as defined in the 1940 Act, and who have no direct or
indirect financial interest in the operation of such distribution plans, or
any agreements related to such plans, respectively.
34
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
WM STRATEGIC ASSET MANAGEMENT PORTFOLIOS
6. PURCHASES AND SALES OF INVESTMENTS
The aggregate cost of purchases and proceeds from sales of Underlying Funds
for the year ended October 31, 2003, are as follows:
PURCHASES SALES
NAME OF PORTFOLIO (000S) (000S)
----------------- --------- ------
Flexible Income Portfolio $225,669 $ 13,780
Conservative Balanced Portfolio 149,776 6,050
Balanced Portfolio 685,928 71,072
Conservative Growth Portfolio 456,694 85,379
Strategic Growth Portfolio 232,932 43,569
7. CAPITAL LOSS CARRYFORWARDS
At October 31, 2003, the following Portfolios have available for federal
income tax purposes unused capital losses as follows:
(IN THOUSANDS)
--------------------------------------
EXPIRING EXPIRING EXPIRING EXPIRING
IN 2008 IN 2009 IN 2010 IN 2011
-------- -------- -------- -------
Conservative Balanced Portfolio $11 $ -- $ -- $45
Balanced Portfolio -- 4,005 2,892 --
Conservative Growth Portfolio -- -- 6,370 --
Strategic Growth Portfolio -- -- 8,026 --
8. COMPONENTS OF DISTRIBUTABLE EARNINGS
At October 31, 2003, the components of distributable earnings on a tax basis
are as follows:
(IN THOUSANDS)
------------------------------------------------------------------------------
FLEXIBLE CONSERVATIVE CONSERVATIVE STRATEGIC
INCOME BALANCED BALANCED GROWTH GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
---------- ---------- ---------- ---------- ----------
Gross tax unrealized appreciation $ 27,124 $ 12,102 $ 75,775 $ 49,550 $ 36,446
Gross tax unrealized depreciation (95) (629) (3,625) (30,295) (76,528)
---------- ---------- ---------- ---------- ----------
Net tax unrealized appreciation/
(depreciation) $ 27,029 $ 11,473 $ 72,150 $ 19,255 $ (40,082)
========== ========== ========== ========== ==========
Undistributed ordinary income $ 1,974 $ 556 $ 1,815 $ -- $ --
Undistributed accumulated gains $ -- $ -- $ -- $ -- $ --
Tax Composition of Distributions:
Ordinary income $ 16,632 $ 3,847 $ 23,848 $ 9,647 $ --
Long-term capital gain $ 652 $ -- $ -- $ 3,481 $ 4,516
35
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
WM STRATEGIC ASSET MANAGEMENT PORTFOLIOS
9. RISK FACTORS OF THE PORTFOLIOS
Investing in the Underlying Funds through the Portfolios involves certain
additional expenses and tax results that would not be present in a direct
investment in the Underlying Funds. For example, under certain
circumstances, an Underlying Fund may determine to make payment of a
redemption request by a Portfolio wholly or partly by a distribution in kind
of securities from its portfolio, instead of cash, in accordance with the
rules of the Securities and Exchange Commission. In such cases, the
Portfolios may hold securities distributed by an Underlying Fund until the
Advisor determines that it is appropriate to dispose of such securities.
Certain Underlying Funds may invest a portion of their assets in foreign
securities; enter into forward foreign currency transactions; lend their
portfolio securities; enter into stock index, interest rate and currency
futures contracts, and options on such contracts; enter into interest rate
swaps or purchase or sell interest rate caps or floors; enter into other
types of options transactions; make short sales; purchase zero coupon and
payment-in-kind bonds; enter into repurchase or reverse repurchase
agreements; purchase and sell "when-issued" securities and enter into
"delayed-delivery" transactions; and enter into various other investment
practices, each with inherent risks. In addition, the REIT Fund could be
adversely impacted by economic trends in the real estate industry; the West
Coast Equity Fund by economic trends in the West Coast region; and the High
Yield Fund by conditions affecting issuers of lower rated debt securities.
The officers and Trustees, the Advisor, the Distributor and Transfer Agent
of the Portfolios serve in the same capacity for the Underlying Funds.
Conflicts may arise as these persons and companies seek to fulfill their
fiduciary responsibilities to both the Portfolios and the Underlying Funds.
From time to time, one or more of the Underlying Funds used for investment
by a Portfolio may experience relatively large investments or redemptions
due to reallocations or rebalancings by the Portfolios. These transactions
will affect the Underlying Funds, since the Underlying Funds that experience
redemptions as a result of the reallocations or rebalancings may have to
sell portfolio securities and the Underlying Funds that receive additional
cash will have to invest such cash. While it is impossible to predict the
overall impact of these transactions over time, there could be adverse
effects on portfolio management to the extent that the Underlying Funds may
be required to sell securities or invest cash at times when they would not
otherwise do so. These transactions could also have tax consequences if
sales of securities resulted in gains and could also increase transaction
costs. The Advisor is committed to minimizing such impact on the Underlying
Funds to the extent it is consistent with pursuing the investment objectives
of the Portfolios. The Advisor may nevertheless face conflicts in fulfilling
its responsibilities. The Advisor will, at all times, monitor the impact on
the Underlying Funds of transactions by the Portfolios.
36
INDEPENDENT AUDITORS' REPORT
To the Trustees and Shareholders of
WM Strategic Asset Management Portfolios LLC
We have audited the accompanying statements of assets and liabilities,
including the portfolios of investments, of WM Strategic Growth Portfolio,
WM Conservative Growth Portfolio, WM Balanced Portfolio, WM Conservative
Balanced Portfolio and WM Flexible Income Portfolio (collectively, the
"Portfolios") as of October 31, 2003, 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 the periods presented. These financial statements and
financial highlights are the responsibility of the Portfolios' management.
Our responsibility is to express an opinion on these financial statements
and financial highlights based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements and financial highlights are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of securities owned at October 31, 2003, by
correspondence with the custodian and transfer agent. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
the aforementioned Portfolios as of October 31, 2003, 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 the respective stated periods, in conformity with accounting principles
generally accepted in the United States of America.
Deloitte & Touche LLP
Boston, Massachusetts
December 12, 2003
37
OTHER INFORMATION (UNAUDITED)
WM STRATEGIC ASSET MANAGEMENT PORTFOLIOS
YEAR ENDED OCTOBER 31, 2003
1. TAX INFORMATION
The following tax information represents fiscal year end disclosures of
various tax benefits passed through to shareholders at calendar year end.
Of the distributions made by the Conservative Balanced Portfolio, 9.93%
represents the amount of each distribution which may qualify for the
dividends received deduction available to corporate shareholders.
The following tax information represents fiscal year end percentages and may
differ from those provided to shareholders at calendar year end, as dividend
income earned by the Portfolios prior to January 1, 2003 does not qualify
for the reduced tax rate.
Of the distributions made by the following Portfolios, the corresponding
percentages represent the amount of each distribution which qualifies for
the 15% dividend income tax rate available as of January 1, 2003.
NAME OF FUND
------------
Flexible Income Portfolio 1.76%
Conservative Balanced Portfolio 3.64%
Balanced Portfolio 8.42%
Conservative Growth Portfolio 21.07%
The above percentage 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.
2. TRUSTEES AND OFFICERS INFORMATION
TRUSTEES AND OFFICERS:
NAME, AGE, AND ADDRESS(1) LENGTH OF PRINCIPAL OCCUPATION(S) DURING OTHER DIRECTORSHIPS
OF NON-INTERESTED TRUSTEE TIME SERVED(2) PAST 5 YEARS HELD BY TRUSTEE
===================================================================================================================================
David E. Anderson Sierra Funds-8 years Retired President and CEO of GTE Children's Bureau Foundation; Upward
Age 76 WM Group of California, Inc. Bound House of Santa Monica
Funds-5 years
(Retired May 2003)
- -----------------------------------------------------------------------------------------------------------------------------------
Wayne L. Attwood, M.D. Composite Funds-11 years Retired doctor of internal
Age 74 WM Group of medicine and gastroenterology.
Funds-5 years
- -----------------------------------------------------------------------------------------------------------------------------------
Kristianne Blake Composite Funds-3 years CPA specializing in personal Frank Russell Investment Company;
Age 49 WM Group of financial and tax planning. Russell Insurance Funds; Avista
Funds-5 years Corporation; St. George's School
- -----------------------------------------------------------------------------------------------------------------------------------
Edmond R. Davis, Esq. Sierra Funds-8 years Partner at the law firm of Davis Braille Institute of America, Inc;
Age 75 WM Group of & Whalen LLP. Children's Bureau of Southern
Funds-5 years California, Children's Bureau
Foundation; Fifield Manors, Inc.
- -----------------------------------------------------------------------------------------------------------------------------------
Carrol R. McGinnis Griffin Funds-5 years Founder of McGinnis Investments. Baptist Foundation of Texas; Concord
Age 60 WM Group of Prior to 1994, President and Chief Trust Company
Funds-5 years Operating Officer of Transamerica
Fund Management Company.
- -----------------------------------------------------------------------------------------------------------------------------------
Alfred E. Osborne, Jr., Ph.D. Sierra Funds-7 years Senior Associate Dean of the Nordstrom Inc.; K2, Inc.; First
Age 58 WM Group of Anderson Graduate School of Pacific Advisors' Capital, Crescent
Funds-5 years Management at the University and New Income Funds; Equity
of California Los Angeles. Marketing Inc.; Member of Investment
Company Institute National Board of
Governors.
- -----------------------------------------------------------------------------------------------------------------------------------
Daniel L. Pavelich Composite Funds-1 year Retired Chairman and CEO of BDO Wildseed Ltd.; Catalytic, Inc.;
Age 59 WM Group of Seidman, LLP. Vaagen Bros. Lumber, Inc.
Funds-5 years
- -----------------------------------------------------------------------------------------------------------------------------------
Jay Rockey Composite Funds-3 years Founder and Chairman of The Rockey Downtown Seattle Association; The
Age 75 WM Group of Company, now Rockey, Hill & Rainier Club; WSU Foundation
Funds-5 years Knowlton.
- -----------------------------------------------------------------------------------------------------------------------------------
Morton O. Schapiro Griffin Funds-5 years President of Williams College Marsh & McLennan Companies
Age 50 WM Group of since 2000. Prior thereto, Dean of
Funds-5 years the College of Letters, Arts and
(Retired February 2003) Sciences; Professor of Economics
and Vice President of Planning,
University of Southern California.
- -----------------------------------------------------------------------------------------------------------------------------------
38
OTHER INFORMATION (UNAUDITED) (CONTINUED)
WM STRATEGIC ASSET MANAGEMENT PORTFOLIOS
YEAR ENDED OCTOBER 31, 2003
NAME, AGE, AND ADDRESS(1) LENGTH OF PRINCIPAL OCCUPATION(S) DURING OTHER DIRECTORSHIPS
OF NON-INTERESTED TRUSTEE TIME SERVED(2) PAST 5 YEARS HELD BY TRUSTEE
===================================================================================================================================
Richard C. Yancey Composite Funds-23 years Retired Managing Director of AdMedia Partners Inc.; Czech and
(Lead Trustee) WM Group of Dillon, Read & Co., an Investment Slovak American Enterprise Fund
Age 77 Funds-5 years Bank now part of UBS.
- -----------------------------------------------------------------------------------------------------------------------------------
NAME, AGE, AND ADDRESS(1) LENGTH OF PRINCIPAL OCCUPATION(S) DURING OTHER DIRECTORSHIPS
OF INTERESTED TRUSTEE TIME SERVED(2) PAST 5 YEARS HELD BY TRUSTEE
===================================================================================================================================
Anne V. Farrell Composite Funds-4 years President of the Seattle Washington Mutual, Inc.; REI
Age 68 WM Group of Foundation.
Funds-5 years
- -----------------------------------------------------------------------------------------------------------------------------------
Michael K. Murphy Composite Funds-3 years Chairman of CPM Development Washington Mutual, Inc.
Age 66 WM Group of Corporation.
Funds-5 years
- -----------------------------------------------------------------------------------------------------------------------------------
William G. Papesh, Composite Funds-9 years President, CEO and Director of the
President and CEO WM Group of Advisor, Distributor and Transfer
Age 60 Funds-5 years Agent.
- -----------------------------------------------------------------------------------------------------------------------------------
POSITION(S) HELD WITH REGISTRANT
NAME, AGE, AND ADDRESS(1) & PRINCIPAL OCCUPATION(S) DURING
OF OFFICER LENGTH OF TIME SERVED PAST 5 YEARS
===================================================================================================================================
Wendi B. Bernard Assistant Vice President Assistant Vice President of the Transfer
Age 35 and Assistant Secretary since 2003. Agent.
- -----------------------------------------------------------------------------------------------------------------------------------
Monte D. Calvin, CPA First Vice President of the Funds since 2002. First Vice President and Director of the
Age 59 Prior to 2002, First Vice President, Chief Financial Officer Transfer Agent, Advisor and Distributor.
and Treasurer since 2001. Prior to 2001, First Vice
President and Chief Financial Officer. Prior to 1998,
Vice President and Treasurer since 1988.
- -----------------------------------------------------------------------------------------------------------------------------------
Sandy Cavanaugh Senior Vice President since 2000. Senior Vice President and Director of the
Age 49 Prior to 2000, First Vice President since 1997. Distributor and Transfer Agent.
- -----------------------------------------------------------------------------------------------------------------------------------
Alex Ghazanfari Vice President and Assistant Vice President and Chief Compliance Officer
Age 27 Compliance Officer since 2003. of the Distributor. Prior to 2003, senior
level positions with the Distributor and
WM Financial Services.
- -----------------------------------------------------------------------------------------------------------------------------------
Sharon L. Howells First Vice President since 2000. First Vice President, Secretary and Director
Age 53 of the Advisor, Distributor, and Transfer
Agent.
- -----------------------------------------------------------------------------------------------------------------------------------
Jeffrey L. Lunzer, CPA Vice President, Chief Financial Vice President of the Transfer Agent. Prior
Age 42 Officer and Treasurer since 2003. to 2003, senior level positions at the
Columbia Funds and Columbia Management Co.
- -----------------------------------------------------------------------------------------------------------------------------------
Gary Pokrzywinski First Vice President since 2001. First Vice President of the Advisor.
Age 42 Prior to 2001, Vice President since 1999.
- -----------------------------------------------------------------------------------------------------------------------------------
Stephen Q. Spencer First Vice President since 2001. First Vice President of the Advisor. Prior
Age 45 thereto, senior level positions with Smoot,
Miller, Cheney & Co.
- -----------------------------------------------------------------------------------------------------------------------------------
John T. West First Vice President, Secretary and Compliance First Vice President of the Transfer Agent,
Age 48 Officer since 2003. Prior to 2003, First Vice President, Advisor and Distributor.
Secretary, Compliance Officer, Chief Financial Officer
and Treasurer. Prior to 2002, First Vice President,
Secretary and Compliance Officer. Prior to 2001,
Vice President, Secretary and Compliance Officer.
Prior to 1998, Secretary since 1993.
- -----------------------------------------------------------------------------------------------------------------------------------
Randall L. Yoakum Senior Vice President since 2001. Senior Vice President, Director and Chief
Age 43 Prior to 2001, First Vice President since 1999. Investment Officer of the Advisor and
Director of the Distributor and Transfer
Agent. Prior to 1999, senior positions at
D.A. Davidson and Boatmen's Trust.
- -----------------------------------------------------------------------------------------------------------------------------------
<FN>
- ------------------
Note: The Statement of Additional Information includes additional information
about Fund Trustees and Officers and is available, without charge, upon request
by calling 1-800-222-5852.
(1) The address for all Trustees and Officers is 1201 Third Avenue, 22nd Floor,
Seattle, WA, 98101.
(2) The Sierra Funds merged with the Composite Funds on March 23, 1998 to form
the WM Group of Funds. The Griffin Funds merged with the WM Group of Funds
on March 5, 1999.
(3) Trustees are considered interested due to their affiliation with
Washington Mutual, Inc. or the Funds.
39
[THIS PAGE INTENTIONALLY LEFT BLANK]
This Annual Report is published for the general information of the
shareholders of the WM Group of Funds. It is authorized for distribution to
prospective investors only when preceded or accompanied by a current WM
Group of Funds prospectus. 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.
The WM Group of Funds are not insured by the FDIC. They are not deposits or
obligations of, nor are they guaranteed by any bank. These securities are
subject to investment risk; including possible loss of principal amount
invested.
Distributed by:
WM Funds Distributor, Inc.
Member NASD
ITEM 2. CODE OF ETHICS
The registrant has adopted a code of ethics that applies to the
registrant's principal executive and senior financial officers, 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
Not Applicable
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS
Not Applicable
ITEM 6. [RESERVED]
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES
Not Applicable
ITEM 8. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT
INVESTMENT COMPANIES AND AFFILIATED PURCHASERS
Not Applicable.
Item 9. 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.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized.
WM Strategic Asset Management Portfolios, LLC
By: /s/William G. Papesh
President and Chief Executive Officer
January 8, 2004
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on
the dates indicated.
/s/Jeffrey L. Lunzer
Treasurer and Chief Financial Officer
January 8, 2004
/s/William G. Papesh
President and Chief Executive Officer
January 8, 2004