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 811-05755
WM Trust II
(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
WM GROUP
OF FUNDS
Common sense. Uncommon solutions.
Photo: Mountains
ANNUAL REPORT
for the year ended
October 31, 2003
EQUITY FUNDS
REIT Fund
Equity Income Fund
Growth & Income Fund
West Coast Equity Fund
Mid Cap Stock Fund
Growth Fund
Small Cap Stock Fund
International Growth Fund
FIXED-INCOME FUNDS
Short Term Income Fund
U.S. Government Securities Fund
Income Fund
High Yield Fund
MUNICIPAL FUNDS
Tax-Exempt Bond Fund
California Municipal Fund
California Insured
Intermediate Municipal Fund
NOT FDIC INSURED
o May Lose Value
o No Bank Guarantee
Table of Contents
Message from the President.............................. 1
Individual Portfolio Reviews............................ 2
Portfolio of Investments................................ 32
Statements of Assets and Liabilities.................... 82
Statements of Operations................................ 86
Statements of Changes in Net Assets..................... 88
Statements of Changes in Net
Assets - Capital Stock Activity......................... 92
Financial Highlights.................................... 96
Notes to Financial Statements........................... 113
Independent Auditors' Report............................ 121
Other Information (unaudited)........................... 122
[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
(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
REIT Fund
Value of a $10,000 Investment (Class A shares)(1)
[GRAPH]
NAREIT
NAV Sales Inflation Index
FEB-03 $10,000 $9,450 $10,000 $10,000
MAR-03 $10,070 $9,516 $10,077 $10,200
APR-03 $10,460 $9,884 $10,138 $10,649
MAY-03 $11,030 $10,423 $10,116 $11,292
JUN-03 $11,248 $10,630 $10,099 $11,538
JUL-03 $11,884 $11,230 $10,110 $12,155
AUG-03 $11,964 $11,306 $10,121 $12,221
SEP-03 $12,339 $11,660 $10,160 $12,630
OCT-03 $12,644 $11,948 $10,193 $12,967
Total Returns as of 10/31/03
CLASS A SHARES Since Inception(4)
(March 1, 2003)
Fund (not adjusted for sales charge)(2) 26.43%
Fund (adjusted for maximum sales charge)(2) 19.50%
NAREIT All REIT Index(3) 29.67%
CLASS B SHARES Since Inception(4)
(March 1, 2003)
Fund (not adjusted for sales charge)(2) 25.86%
Fund (adjusted for maximum sales charge)(2) 20.85%
NAREIT All REIT Index(3) 29.67%
CLASS C SHARES Since Inception(4)
(March 1, 2003)
Fund (not adjusted for sales charge)(2) 25.88%
Fund (adjusted for maximum sales charge)(2) 23.63%
NAREIT All REIT Index(3) 29.67%
<FN>
(1) The performance of Class B shares 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.
(2) Accounts for maximum sales charge of 5.5% for Class A shares
and maximum CDSC (contingent deferred sales charge) 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. The returns shown for
the Fund assume reinvestment of all dividends and
distributions. The Fund's performance would have been lower had
the Fund's custodian not allowed its fees to be reduced by
credits.
(3) The National Association of Real Estate Investment Trust
(NAREIT) All REIT Index is an unmanaged index that reflects the
aggregate performance of all publicly traded REITs that own,
develop, and manage properties. It assumes reinvestment of all
dividends and distributions, but it does not reflect any asset-
based charges for investment management or other expenses.
Inflation is measured by the Consumer Price Index for all urban
consumers. Individuals cannot invest directly in an index. For
comparative purposes, the benchmark's performance is shown as
of the Fund's inception date, not from the inception date of
the benchmark.
(4) Not annualized.
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.
PORTFOLIO MANAGER:
RICHARD E. HELM
WM ADVISORS, INC.
The Fund is managed by an equity team led by Richard E. Helm, Senior
Portfolio Manager of WM Advisors, Inc. Mr. Helm, CFA, joined WM
Advisors in 2001, and he has investment management experience dating
back to 1986. He holds a B.S. from the University of Colorado at
Boulder and an M.B.A. from the University of Denver.
PERFORMANCE REVIEW
The WM REIT FUND posted a total return of 26.43% from its inception
on March 1, 2003 through October 31, 2003. Real estate investments
performed very well for much of this period. The Fund took advantage
of these strong results and performed in line with its benchmark
index. However, we believe that market conditions are such that it
would not be reasonable to expect Fund performance in the upcoming
fiscal year to match that of the year just completed. (All Fund
performance described above is for Class A shares not adjusted for
sales charge.)
WHAT WERE THE MOST SIGNIFICANT FACTORS CONTRIBUTING TO THE FUND'S
PERFORMANCE OVER THE 8-MONTH PERIOD FROM ITS INCEPTION THROUGH
OCTOBER 31, 2003?
The Fund's launch in March of 2003 occurred just prior to an equity
market rally, and real estate holdings performed very well throughout
the period. In its early months, the Fund's performance trailed
slightly behind the index while we were in the process of investing
the Fund's cash. However, over the summer and fall, the Fund's
results were roughly in line with the benchmark's results. Fund
performance can be credited to both stock selection and sector
weightings.
2
The Fund's objective is to provide a high level of current income as
well as the potential for intermediate- to long-term capital
appreciation. The Fund will generally invest at least 80% of its
assets in real estate investment trust (REIT) securities or fixed-
income securities of issuers that are principally engaged in U.S.
real estate or related industries. Although REITs are unavoidably
tied to conditions in the real estate industry, we diversify the Fund
across a variety of property types to spread risk. These include
residential, office, industrial, retail, and health care properties.
Over the last few years, a very strong housing market has funded
consumer spending. Rising home values, historically low mortgage
rates, and a record boom in refinancing activity have all added to
the consumer's bottom line. As a result, certain housing-related
REITs among the Fund's holdings did well during the period. For
example, D.R. Horton, a national builder of single-family homes,
benefited from the housing boom. However, mortgage and realty REITs
struggled a bit during the summer as mortgage rates spiked higher.
Annaly Mortgage Management, which owns and manages a portfolio of
mortgages on commercial and residential loans, saw its stock price
decline after rates increased. In contrast, Equity Office Property,
the largest REIT in the marketplace, generated positive results for
the Fund even though it trailed the overall market.
Individual holdings that benefited the Fund also included a position
in Freidman, Billings, Ramsey Group. It provided not only strong
results, but also additional diversification. This holding is unique
in that it is a REIT but it generates much of its cash flow through
investment banking and brokerage operations. Our position in Capital
Automotive also appreciated during the period. The firm buys auto
dealer lots and then leases the land back to dealers.
WHICH OF THE FUND'S HOLDINGS OR SECTOR ALLOCATIONS HAD A SIGNIFICANT
IMPACT ON PERFORMANCE?
We look at a variety of sectors within the real estate industry to
find high-quality REITs at attractive valuations. The three largest
segments of the REIT market are industrial/office space, retail, and
residential sectors. We held significant positions in all three
sectors, but we were a bit underweighted in each relative to the
benchmark index.
We found what we deemed to be more attractive valuations in other
sectors, such as lodging. Until 2003, this segment of the market had
not fully recovered from the effects of 9/11, but its subsequent
rebound was quite sharp. We began with a weighting of approximately
8% of Fund assets (twice that of the index) in this sector and were
rewarded with strong performance as the entire sector rallied
significantly. Investments in Felcor Lodging Trust, Host Marriott,
and Hospitality Property Trust all added to Fund performance.
Another overweighted sector was that of health care REITs. For
example, our position in Health Care Property Investors, Inc. was a
very strong performer for the period. The firm invests in health
care-related real estate located throughout the United States.
We slightly underweighted the retail sector but found some attractive
investments that added value to the Fund.
The retail market has been so strong that it may be difficult for some
firms to sustain current growth rates.
WHAT IS THE OUTLOOK FOR BOTH THE FUND AND THE OVERALL ECONOMY?
We build the portfolio from the bottom up, but we also examine trends
within sectors to assess the relative valuations of individual REIT
securities. Currently, we see some value in the residential sector.
We believe these securities have strong yield characteristics as well
as the potential for relative upside growth. Low mortgage rates have
enabled home renters to buy homes while enabling speculators to build
new apartment complexes, so supply exceeds demand. However, the
housing market could shift if interest rates rise in response to
improving economic conditions. We are closely watching the valuations
of those sectors that are particularly interest-rate sensitive.
Overall, we see improvements in cyclical economic conditions, but we
feel that the magnitude of the recovery could be muted by generally
weak employment conditions and ongoing excess capacity.
<FN>
(5) Allocation percentages are based on total investment value of
the portfolio as of 10/31/03. Differences from financial
statements are a result of a consolidation of industries
or sectors.
Note: Performance information provided for individual securities held
within the Fund represents performance for the fiscal year ended
10/31/03. The Fund may not have held these securities throughout the
entire period. The economic and financial market analysis represents
the opinions of the Portfolio Manager and/or WM Advisors Inc., and it
should not be considered investment advice. No forecast based on the
opinions expressed can be guaranteed, and they may be subject to
change without notice.
Portfolio Composition as of October 31, 2003(5)
[pie chart]
Mortgage 3%
Self Storage 3%
Cash Equivalents 5%
Health Care 5%
Diversified 5%
Common Stocks 6%
Lodging/Resorts 6%
Specialty 6%
Residential 13%
Retail 23%
Industrial/Office 25%
3
Equity Income Fund*
Value of a $10,000 Investment (Class A shares)(1)
[GRAPH]
EQUITY INCOME FUND*
GROWTH OF A $10,000 INVESTMENT (CLASS A SHARES)(1)
S&P Barra
NAV Sales 500 Value S&P500 Inflation
OCT-93 $10,000 $9,450 $10,000 $10,000 $10,000
$9,861 $9,319 $9,821 $9,906 $10,007
$10,017 $9,466 $9,988 $10,028 $10,007
$10,301 $9,734 $10,453 $10,364 $10,034
$10,059 $9,505 $10,075 $10,084 $10,068
$9,663 $9,131 $9,661 $9,645 $10,102
$9,722 $9,187 $9,865 $9,771 $10,117
$9,772 $9,235 $10,028 $9,930 $10,124
$9,586 $9,059 $9,750 $9,685 $10,158
$9,833 $9,293 $10,079 $10,005 $10,185
$10,080 $9,526 $10,365 $10,412 $10,226
$9,867 $9,325 $10,000 $10,162 $10,254
OCT-94 $9,910 $9,365 $10,218 $10,394 $10,261
$9,695 $9,162 $9,804 $10,013 $10,274
$9,803 $9,264 $9,924 $10,159 $10,274
$9,970 $9,422 $10,193 $10,423 $10,315
$10,268 $9,703 $10,589 $10,827 $10,357
$10,518 $9,939 $10,881 $11,148 $10,391
$10,783 $10,190 $11,239 $11,472 $10,425
$11,155 $10,541 $11,739 $11,926 $10,446
$11,381 $10,755 $11,829 $12,206 $10,467
$11,613 $10,974 $12,237 $12,612 $10,467
$11,729 $11,084 $12,341 $12,646 $10,494
$12,100 $11,435 $12,770 $13,176 $10,515
OCT-95 $12,145 $11,477 $12,571 $13,130 $10,550
$12,515 $11,826 $13,230 $13,708 $10,542
$12,860 $12,153 $13,596 $13,961 $10,535
$13,223 $12,496 $14,003 $14,442 $10,597
$13,167 $12,443 $14,134 $14,580 $10,631
$13,190 $12,464 $14,465 $14,720 $10,686
$13,274 $12,544 $14,612 $14,937 $10,728
$13,472 $12,731 $14,833 $15,322 $10,748
$13,552 $12,807 $14,762 $15,385 $10,755
$13,202 $12,475 $14,139 $14,700 $10,775
$13,381 $12,645 $14,529 $15,012 $10,796
$13,856 $13,094 $15,151 $15,856 $10,830
OCT-96 $14,047 $13,274 $15,665 $16,290 $10,865
$14,687 $13,879 $16,863 $17,526 $10,886
$14,609 $13,805 $16,586 $17,183 $10,886
$14,969 $14,145 $17,351 $18,250 $10,920
$15,133 $14,301 $17,478 $18,398 $10,954
$14,863 $14,046 $16,880 $17,632 $10,982
$15,133 $14,300 $17,513 $18,685 $10,995
$15,806 $14,937 $18,611 $19,832 $10,988
$16,282 $15,387 $19,322 $20,717 $11,001
$17,076 $16,137 $20,868 $22,362 $11,015
$16,523 $15,614 $19,925 $21,118 $11,036
$17,191 $16,245 $21,092 $22,276 $11,063
OCT-97 $16,970 $16,037 $20,318 $21,532 $11,091
$17,348 $16,394 $21,092 $22,529 $11,084
$17,515 $16,552 $21,560 $22,916 $11,071
$17,515 $16,552 $21,295 $23,170 $11,092
$18,139 $17,141 $22,892 $24,841 $11,113
$18,505 $17,487 $24,053 $26,113 $11,134
$18,629 $17,604 $24,337 $26,377 $11,154
$18,331 $17,323 $23,994 $25,923 $11,174
$18,470 $17,454 $24,176 $26,975 $11,188
$17,733 $16,758 $23,651 $26,690 $11,201
$15,896 $15,022 $19,848 $22,830 $11,215
$16,595 $15,683 $21,055 $24,294 $11,228
OCT-98 $17,653 $16,682 $22,704 $26,269 $11,255
$18,496 $17,479 $23,887 $27,861 $11,255
$18,728 $17,698 $24,725 $29,465 $11,248
$18,932 $17,890 $25,224 $30,697 $11,275
$18,193 $17,193 $24,682 $29,742 $11,289
$18,586 $17,564 $25,430 $30,932 $11,323
$19,649 $18,569 $27,622 $32,129 $11,405
$19,828 $18,738 $27,133 $31,371 $11,405
$20,302 $19,186 $28,175 $33,112 $11,405
$19,799 $18,710 $27,307 $32,079 $11,439
$19,207 $18,150 $26,616 $31,918 $11,467
$18,471 $17,455 $25,576 $31,044 $11,522
OCT-99 $18,951 $17,909 $27,018 $33,009 $11,543
$19,160 $18,106 $26,859 $33,679 $11,550
$19,631 $18,551 $27,869 $35,663 $11,550
$18,915 $17,874 $26,982 $33,872 $11,577
$18,631 $17,606 $25,296 $33,232 $11,646
$19,799 $18,710 $27,934 $36,482 $11,741
$19,757 $18,671 $27,747 $35,384 $11,748
$19,921 $18,826 $27,833 $34,659 $11,755
$19,800 $18,711 $26,734 $35,512 $11,823
$19,731 $18,645 $27,268 $34,958 $11,843
$20,431 $19,307 $29,098 $37,128 $11,858
$20,791 $19,647 $29,092 $35,168 $11,919
OCT-00 $21,552 $20,366 $29,636 $35,020 $11,940
$21,207 $20,040 $28,119 $32,261 $11,947
$22,505 $21,267 $29,567 $32,419 $11,940
$23,045 $21,777 $30,815 $33,570 $12,015
$22,865 $21,607 $28,772 $30,508 $12,063
$22,602 $21,359 $27,635 $28,577 $12,091
$23,418 $22,130 $29,509 $30,797 $12,139
$23,903 $22,588 $29,819 $31,004 $12,194
$23,800 $22,491 $28,853 $30,250 $12,214
$24,243 $22,909 $28,354 $29,954 $12,180
$24,090 $22,765 $26,715 $28,079 $12,180
$22,907 $21,647 $24,177 $25,810 $12,235
OCT-01 $22,829 $21,574 $24,177 $26,303 $12,193
$23,797 $22,488 $25,712 $28,320 $12,173
$24,173 $22,844 $26,103 $28,570 $12,125
$24,079 $22,755 $25,388 $28,153 $12,153
$23,985 $22,666 $25,159 $27,609 $12,202
$25,103 $23,722 $26,447 $28,647 $12,270
$24,292 $22,956 $25,122 $26,911 $12,339
$24,387 $23,045 $25,223 $26,712 $12,339
$23,106 $21,835 $23,631 $24,810 $12,346
$21,383 $20,207 $21,077 $22,875 $12,360
$21,797 $20,599 $21,222 $23,026 $12,400
$19,679 $18,596 $18,796 $20,523 $12,428
OCT-02 $20,466 $19,340 $20,359 $22,329 $12,448
$21,688 $20,495 $21,789 $23,644 $12,448
$21,072 $19,913 $20,657 $22,254 $12,421
$20,568 $19,437 $20,091 $21,671 $12,476
$20,212 $19,101 $19,544 $21,345 $12,572
$20,394 $19,273 $19,519 $21,553 $12,648
$21,893 $20,689 $21,449 $23,328 $12,620
$23,198 $21,922 $23,028 $24,558 $12,599
$23,602 $22,304 $23,196 $24,872 $12,613
$23,781 $22,473 $23,711 $25,310 $12,627
$24,142 $22,815 $24,224 $25,803 $12,675
$24,379 $23,038 $23,786 $25,530 $12,716
OCT-03 $25,466 $24,066 $25,412 $26,975 $12,761
Average Annual Total Returns as of 10/31/03*
CLASS A SHARES 1 Year 5 Year 10 Year
Fund (not adjusted for sales charge)(2) 24.43% 7.61% 9.80%
Fund (adjusted for maximum sales charge)(2) 17.59% 6.39% 9.18%
S&P 500/Barra Value Index(3) 24.82% 2.28% 9.78%
S&P 500 Index(3) 20.80% 0.53% 10.43%
CLASS B SHARES 1 Year 5 Year Since Inception
(March 30, 1994)
Fund (not adjusted for sales charge)(2) 23.19% 6.67% 9.69%
Fund (adjusted for maximum sales charge)(2) 18.18% 6.36% 9.69%
S&P 500/Barra Value Index(3) 24.82% 2.28% 10.62%
S&P 500 Index(3) 20.80% 0.53% 11.33%
CLASS C SHARES 1 Year 5 Year Since Inception
(March 1, 2002)
Fund (not adjusted for sales charge)(2) 23.29% N/A 2.80%
Fund (adjusted for maximum sales charge)(2) 21.03% N/A 2.19%
S&P 500/Barra Value Index(3) 24.82% N/A 0.61%
S&P 500 Index(3) 20.80% N/A -1.38%
<FN>
* AS OF 08/01/00, THE WM BOND & STOCK FUND BECAME THE WM EQUITY
INCOME FUND, AND THE FUND'S OBJECTIVES AND STRATEGIES CHANGED.
THIS INFORMATION SHOULD BE CONSIDERED WHEN REVIEWING PAST
PERFORMANCE. PLEASE REVIEW THE PROSPECTUS FOR DETAILED
INFORMATION.
(1) The performance of Class B shares 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.
(2) Class A shares have a maximum sales charge of 5.5%. Class B
shares have a contingent deferred sales charge (CDSC) that
declines over five years as follows: 5-5-4-3-2-0%. Class C
shares have a 1% upfront sales charge and a 1% CDSC, which
applies to redemptions within the first 12 months. The returns
shown for the Fund assume reinvestment of all dividends and
distributions. The Fund's performance would have been lower had
the Fund's custodian not allowed its fees to be reduced by
credits.
(3) The S&P 500 Index represents an unmanaged weighted index of 500
companies. The S&P 500/Barra Value Index is constructed by
ranking the securities in the S&P 500 Index by price-to-book
ratio and including the securities with the lowest price-to-
book ratios that represent approximately half of the market
capitalization of the S&P 500 Index. Effective March 1, 2003,
WM Advisors included the S&P 500/Barra Value Index because it
believes the new benchmark more accurately reflects the Fund's
performance characteristics. Indices are unmanaged and assume
reinvestment of all dividends and distributions, but do not
reflect any asset-based charges for investment management or
other expenses. Inflation is measured by the Consumer Price
Index for all urban consumers. Individuals cannot invest
directly in an index. For comparative purposes, the benchmark's
performance is shown as of the Fund's inception date, not from
the inception date of the benchmark.
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.
PORTFOLIO MANAGER:
RICHARD E. HELM
WM ADVISORS, INC.
The Fund is managed by an equity team led by Richard E. Helm, Senior
Portfolio Manager of WM Advisors, Inc. Mr. Helm, CFA, joined WM
Advisors in 2001, and he has investment management experience dating
back to 1986. He holds a B.S. from the University of Colorado at
Boulder and an M.B.A. from the University of Denver.
PERFORMANCE REVIEW
The WM EQUITY INCOME FUND posted a total return of 24.43% for the 12-
month period ended October 31, 2003. This performance outpaced the
20.80% return of the S&P 500 Index and was in line with the S&P
500/Barra Value Index results of 24.82%.3 The Fund posted an average
annual total return of 9.80% for the ten-year period ended October
31, 2003. Please note that due to a significant shift in the Fund's
investment objective in 2000, long-term performance comparisons may
not be relevant. (All Fund performance described above is for Class A
shares not adjusted for sales charge.)
WHAT WERE THE MOST SIGNIFICANT FACTORS CONTRIBUTING TO THE FUND'S
PERFORMANCE OVER THE 12-MONTH PERIOD ENDED OCTOBER 31, 2003?
Equities launched a rally in October of 2002, and after stalling in
early 2003, the market resumed its upward climb for much of the
period's remainder. Significant monetary and fiscal stimulus,
improving economic conditions, and an easing of mid-period
geopolitical tensions all fed the advance. When the rally faded in
the first few months of 2003, the Fund's bond positions provided
solid gains. Subsequently, a well-timed increase in equity positions,
along with sector
4
allocations and stock selection, supported the Fund's strong relative
results. By the close of the period, we had extended the Fund's
equity investment weighting from 81% to over 90%. This strategy
allowed the Fund to increase its participation in the resurgent
rally.
The improving economic landscape benefited Fund performance within a
variety of sectors. The materials, technology, and industrial sectors
all augmented Fund performance. For example, Diebold (+60%), a
manufacturer of self-service transaction systems and one of the
Fund's largest positions, provided very strong results. Key positions
in the financial sector also boosted overall performance. J.P. Morgan
(+73%) took advantage of improvements in financial and economic
conditions and generated significant gains for the Fund.
Although our technology positions performed very well as a group,
they slightly underperformed the overall market segment. Software
producer Computer Associates (+58%) generated very strong results,
but telecommunications assets underperformed. We maintained an
underweighting in this subsector, but the performance of holdings
such as SBC Communications (-7%) hampered overall results.
Health care provided somewhat mixed results for the period. Our
overweighting was vulnerable to the sector's general underperformance,
but some Fund holdings posted very strong results. One such example is
Mylan Laboratories (+70%), a developer and distributor of generic
drugs. Conversely, firms such as Schering- Plough (-28%) and Merck
(-18%) suffered because of weak product pipelines and the expiration
of patents. We believe these firms have the potential to rebound
because they continue to fund research and development and have the
cash flows to grow through mergers and acquisitions. However, politics
tend to play a role in health care, especially during an election
year. There is some headline risk associated with potential regulation
in the industry, but we continue to favor several of these firms due
to their attractive yields and growth potential.
WERE THERE ANY SHIFTS IN THE FUND'S PORTFOLIO HOLDINGS/SECTORS THAT
HAVE HAD A SIGNIFICANT IMPACT ON PERFORMANCE?
At the end of February, we reduced exposure to fixed-income
investments in favor of equities. This shift proved highly beneficial
for the Fund after the equity market reignited a rally that lasted
well into the summer. We found several stocks at attractive prices
that also offered growing dividends and yields greater than the
market average. We also sought firms that announced plans to begin
paying dividends. One such example is Mandalay Resort Group, a hotel
and casino gaming firm that announced its first dividend during the
period and closed with very strong performance. Another purchase was
D.R. Horton, a homebuilder with a solid business model and dividend
growth potential. This firm also performed very well for the Fund.
We built on consumer discretionary and financial positions while
reducing bond holdings. This move enhanced the Fund's absolute and
relative performance. For example, our purchase of Countrywide
Financial generated strong results as the firm benefited from a boom
in mortgage refinancing and servicing. Beneficial real estate
holdings included General Growth Properties (+59%), a firm that owns
and operates malls and shopping centers. Despite advances by real
estate stocks that elevated valuations, strong cash flows into the
Fund permitted us to reduce the overall concentration without selling
holdings. We directed new cash flows into other more attractively
valued areas of the markets. Within consumer stocks, we added blue-
chip companies that had been sold off by the market and were poised
for a rebound. For example, we purchased McDonald's and Sears, and
both performed well over the period.
WHAT IS THE OUTLOOK FOR BOTH THE FUND AND THE OVERALL ECONOMY?
Equity markets now seem to have priced in the economic recovery, and
valuations have advanced. These developments create an environment
that hinges on strong stock selection. We look for opportunities in
firms that are priced attractively relative to the rest of the
market, and we trim positions as they become more richly valued. We
believe that market interest in dividend yield has not been fully
factored into the prices of many firms, and we continue to see
opportunities in dividend-producing stocks. Overall, we are pleased
with the rebound in both the economy and equity markets and feel that
the recovery will continue to take hold. However, ongoing conditions
of corporate overcapacity and weak employment could limit the
magnitude of the advance.
<FN>
(4) Allocation percentages are based on total investment value of
the portfolio as of 10/31/03. Differences from financial
statements are a result of a consolidation of industries or
sectors.
Note: Performance information provided for individual securities held
within the Fund represents performance for the fiscal year ended
10/31/03. The Fund may not have held these securities throughout the
entire period. The economic and financial market analysis represents
the opinions of the Portfolio Manager and/or WM Advisors Inc., and it
should not be considered investment advice. No forecast based on the
opinions expressed can be guaranteed, and they may be subject to
change without notice.
Portfolio Composition as of October 31, 2003(4)
[pie chart]
Corporate Bonds 2%
Telecommunication Services 3%
Materials 3%
Convertible Bonds 3%
Cash Equivalents 4%
Utilities 5%
REITs 7%
Information Technology 7%
Health Care 7%
Energy 7%
Consumer Staples 7%
Industrials 8%
Consumer Discretionary 14%
Financials 23%
5
Growth & Income Fund
Value of a $10,000 Investment (Class A shares)(1)
[GRAPH]
NAV Sales S&P500 Inflation
OCT-93 $10,000 $9,450 $10,000 $10,000
$9,938 $9,391 $9,906 $10,007
$10,307 $9,740 $10,028 $10,007
$10,772 $10,179 $10,364 $10,034
$10,603 $10,020 $10,084 $10,068
$10,183 $9,623 $9,645 $10,102
$10,302 $9,735 $9,771 $10,117
$10,437 $9,863 $9,930 $10,124
$10,221 $9,659 $9,685 $10,158
$10,553 $9,973 $10,005 $10,185
$10,978 $10,375 $10,412 $10,226
$10,736 $10,145 $10,162 $10,254
OCT-94 $10,855 $10,258 $10,394 $10,261
$10,539 $9,960 $10,013 $10,274
$10,572 $9,990 $10,159 $10,274
$10,740 $10,149 $10,423 $10,315
$11,104 $10,493 $10,827 $10,357
$11,427 $10,799 $11,148 $10,391
$11,703 $11,059 $11,472 $10,425
$11,997 $11,337 $11,926 $10,446
$12,233 $11,560 $12,206 $10,467
$12,670 $11,973 $12,612 $10,467
$12,768 $12,066 $12,646 $10,494
$13,202 $12,476 $13,176 $10,515
OCT-95 $13,121 $12,399 $13,130 $10,550
$13,658 $12,907 $13,708 $10,542
$14,073 $13,299 $13,961 $10,535
$14,474 $13,678 $14,442 $10,597
$14,670 $13,863 $14,580 $10,631
$14,809 $13,995 $14,720 $10,686
$15,155 $14,322 $14,937 $10,728
$15,483 $14,631 $15,322 $10,748
$15,501 $14,649 $15,385 $10,755
$14,724 $13,914 $14,700 $10,775
$15,164 $14,330 $15,012 $10,796
$16,041 $15,158 $15,856 $10,830
OCT-96 $16,219 $15,327 $16,290 $10,865
$17,403 $16,446 $17,526 $10,886
$17,208 $16,262 $17,183 $10,886
$18,025 $17,034 $18,250 $10,920
$18,126 $17,129 $18,398 $10,954
$17,499 $16,537 $17,632 $10,982
$18,146 $17,148 $18,685 $10,995
$19,349 $18,285 $19,832 $10,988
$20,340 $19,221 $20,717 $11,001
$21,869 $20,667 $22,362 $11,015
$20,897 $19,748 $21,118 $11,036
$22,077 $20,863 $22,276 $11,063
OCT-97 $21,286 $20,116 $21,532 $11,091
$21,936 $20,729 $22,529 $11,084
$22,289 $21,063 $22,916 $11,071
$21,917 $20,711 $23,170 $11,092
$23,593 $22,296 $24,841 $11,113
$24,466 $23,120 $26,113 $11,134
$24,569 $23,218 $26,377 $11,154
$23,930 $22,614 $25,923 $11,174
$24,588 $23,236 $26,975 $11,188
$23,605 $22,306 $26,690 $11,201
$19,445 $18,376 $22,830 $11,215
$21,017 $19,861 $24,294 $11,228
OCT-98 $22,858 $21,601 $26,269 $11,255
$24,343 $23,005 $27,861 $11,255
$25,500 $24,097 $29,465 $11,248
$26,484 $25,027 $30,697 $11,275
$25,936 $24,509 $29,742 $11,289
$26,691 $25,223 $30,932 $11,323
$28,444 $26,880 $32,129 $11,405
$28,077 $26,533 $31,371 $11,405
$29,484 $27,862 $33,112 $11,405
$28,484 $26,918 $32,079 $11,439
$27,647 $26,126 $31,918 $11,467
$26,936 $25,455 $31,044 $11,522
OCT-99 $28,246 $26,692 $33,009 $11,543
$29,025 $27,429 $33,679 $11,550
$30,157 $28,498 $35,663 $11,550
$28,625 $27,051 $33,872 $11,577
$27,735 $26,209 $33,232 $11,646
$30,838 $29,142 $36,482 $11,741
$30,801 $29,107 $35,384 $11,748
$31,288 $29,567 $34,659 $11,755
$30,944 $29,242 $35,512 $11,823
$30,031 $28,379 $34,958 $11,843
$32,085 $30,320 $37,128 $11,858
$31,415 $29,687 $35,168 $11,919
OCT-00 $32,187 $30,417 $35,020 $11,940
$29,860 $28,218 $32,261 $11,947
$30,622 $28,937 $32,419 $11,940
$33,200 $31,374 $33,570 $12,015
$31,706 $29,962 $30,508 $12,063
$30,171 $28,512 $28,577 $12,091
$31,641 $29,901 $30,797 $12,139
$32,400 $30,618 $31,004 $12,194
$31,736 $29,990 $30,250 $12,214
$31,698 $29,955 $29,954 $12,180
$29,989 $28,340 $28,079 $12,180
$27,524 $26,010 $25,810 $12,235
OCT-01 $27,874 $26,341 $26,303 $12,193
$29,396 $27,779 $28,320 $12,173
$29,613 $27,985 $28,570 $12,125
$28,624 $27,050 $28,153 $12,153
$27,992 $26,452 $27,609 $12,202
$29,436 $27,817 $28,647 $12,270
$27,446 $25,937 $26,911 $12,339
$27,800 $26,271 $26,712 $12,339
$25,860 $24,437 $24,810 $12,346
$23,793 $22,485 $22,875 $12,360
$24,136 $22,809 $23,026 $12,400
$21,701 $20,507 $20,523 $12,428
OCT-02 $23,387 $22,101 $22,329 $12,448
$24,554 $23,203 $23,644 $12,448
$23,582 $22,285 $22,254 $12,421
$23,145 $21,872 $21,671 $12,476
$22,583 $21,341 $21,345 $12,572
$22,646 $21,401 $21,553 $12,648
$24,476 $23,130 $23,328 $12,620
$25,847 $24,425 $24,558 $12,599
$26,397 $24,945 $24,872 $12,613
$26,384 $24,933 $25,310 $12,627
$26,703 $25,235 $25,803 $12,675
$26,652 $25,187 $25,530 $12,716
OCT-03 $27,639 $26,118 $26,975 $12,761
Average Annual Total Returns as of 10/31/03
CLASS A SHARES 1 Year 5 Year 10 Year
Fund (not adjusted for sales charge)(2) 18.18% 3.87% 10.70%
Fund (adjusted for maximum sales charge)(2) 11.70% 2.71% 10.07%
S&P 500 Index(3) 20.80% 0.53% 10.43%
CLASS B SHARES 1 Year 5 Year Since Inception
(March 30, 1994)
Fund (not adjusted for sales charge)(2) 16.99% 2.93% 10.03%
Fund (adjusted for maximum sales charge)(2) 11.99% 2.57% 10.03%
S&P 500 Index(3) 20.80% 0.53% 11.33%
CLASS C SHARES 1 Year 5 Year Since Inception
(March 1, 2002)
Fund (not adjusted for sales charge)(2) 17.08% N/A -1.69%
Fund (adjusted for maximum sales charge)(2) 14.91% N/A -2.29%
S&P 500 Index(3) 20.80% N/A -1.38%
<FN>
(1) The performance of Class B shares 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.
(2) Class A shares have a maximum sales charge of 5.5%. Class B
shares have a contingent deferred sales charge (CDSC) that
declines over five years as follows: 5-5-4-3-2-0%. Class C
shares have a 1% upfront sales charge and a 1% CDSC, which
applies to redemptions within the first 12 months. The returns
shown for the Fund assume reinvestment of all dividends and
distributions. The Fund's performance would have been lower had
the Distributor not waived a portion of its fees and the Fund's
custodian not allowed its fees to be reduced by credits.
(3) The S&P 500 Index represents an unmanaged weighted index of 500
companies. It assumes reinvestment of all dividends and
distributions, but it does not reflect any asset-based charges
for investment management or other expenses. Inflation is
measured by the Consumer Price Index for all urban consumers.
Individuals cannot invest directly in an index. For comparative
purposes, the benchmark's performance is shown as of the Fund's
inception date, not from the inception date of the benchmark.
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.
PORTFOLIO MANAGER:
STEPHEN Q. SPENCER
WM ADVISORS, INC.
The Fund is managed by an equity team led by Stephen Q. Spencer,
Senior Portfolio Manager of WM Advisors, Inc. and head of its Equity
Investment Team. Mr. Spencer, CFA, joined WM Advisors in 1999, and he
has experience in investment and financial analysis dating back to
1984. He holds both a B.S. and an M.B.A. in Finance/Capital Markets
from Brigham Young University.
PERFORMANCE REVIEW
For the 12-month period ended October 31, 2003, the WM GROWTH &
INCOME FUND posted a total return of 18.18%. The Fund under-performed
its benchmark, the S&P 500 Index, for the period.3 Long-term results
have been favorable, with the Fund outpacing its benchmark and
posting an average annual total return of 10.70% for the past ten
years. (All Fund performance described above is for Class A shares
not adjusted for sales charge.)
WHAT WERE THE MOST SIGNIFICANT FACTORS CONTRIBUTING TO THE FUND'S
PERFORMANCE OVER THE 12-MONTH PERIOD ENDED OCTOBER 31, 2003?
The period was marked by very accommodative fiscal and monetary
policies that injected huge amounts of stimulus into the economy and
financial markets. Resulting improvements in economic growth helped
fuel a broad-based rally in global equity markets. Although some
stagnant performance occurred early in 2003, every major market
segment and sector closed this fiscal year with positive performance.
After geopolitical tensions eased in the spring, equity markets
responded and investors' appetite for risk returned.
6
There has been a dramatic shift in market sentiment compared to this
time last year. The economic backdrop has improved, and the
subsequent cyclical upturn has been stronger than many had previously
expected. Assets with the most perceived risk led the market--a
distinct contrast to asset performance in 2002. For example,
technology, which had lagged significantly since early 2000, was the
period's best-performing large-cap sector. Growth stocks,
particularly firms with higher price-to-earnings ratios, led
traditional value market segments in the late-period rally.
Historically, these types of reversals often characterize market
rebounds. When markets reach an inflection point and begin to
rebound, they can shift quickly to favor the segments that had
suffered the most through the downturn.
The Fund benefited from strong stock selection in certain market
segments. Within consumer staples, Avon (+40%) was one of the
strongest performers. Assisted by growing sales of its beauty
products, the firm rallied on news of strong earnings growth. The
industrials sector also performed well for the Fund. Tyco (+44%),
Boeing (+29%), and Honeywell (+28%) all outpaced the overall market.
Within health care stocks, the Fund benefited from the strong
performance of firms like Mylan Laboratories (+73%), a developer and
distributor of generic drugs, and Guidant (+73%), a manufacturer of
devices for pacemakers.
Other positions provided disappointing results during the period. For
example, Schering-Plough (-29%) suffered through a period of
management change, as well as patent expiration for some of its
pharmaceuticals. As a result, we lowered our weighting in the firm.
AT&T (-72%) also cut into Fund performance. Having sold its cable
operations, it entered into a telecommunications price war with MCI
and profits suffered. We sold our position before the stock plunged,
but the firm still affected the Fund's results. Freddie Mac (-9%)
struggled through a management overhaul and scrutiny of its
accounting practices. It has also endured political pressure to
remove the government-backed status of its mortgage-backed
securities, but we do not feel that this outcome is likely. As a
result, we added to our position during the downturn and believe that
the firm could benefit once political pressure subsides.
WERE THERE ANY SHIFTS IN THE FUND'S PORTFOLIO HOLDINGS/SECTORS THAT
HAVE HAD A SIGNIFICANT IMPACT ON PERFORMANCE?
We typically maintain a core portfolio of positions in firms that we
feel are attractively valued and hold them for the long term. We
build or trim positions based on valuation as well as our analysis of
company fundamentals. This strategy encompasses a long-term
investment horizon and helps to limit portfolio turnover. During the
period, we maintained relatively consistent sector weightings by
adhering to our core investment philosophy and not chasing market
movements.
Such market moves included those within the technology sector. These
assets rallied considerably, as demonstrated by the S&P 500
Information Technology Sector Index, which advanced more than 40%.
However, we chose not to increase our positions in the sector after
valuations advanced farther and faster than our comfort level could
tolerate. Accordingly, we looked elsewhere for quality firms with
more attractive valuations. The under-weighting in this sector caused
the majority of the Fund's underperformance, but certain technology
stocks generated strong results for the Fund. Firms such as Motorola
(+48%) and Computer Associates (+58%) both added to its results. The
technology sector remained a significant underweighting at the close
of the period.
Within other sectors, we added a few select holdings to the
portfolio. One of these was Ace Limited, a firm that provides a broad
range of insurance and reinsurance products. It has rallied
considerably since hitting a low point in March. We also added Alcoa,
an aluminum producer, and were rewarded by strong results. We
continue to carry an overweighting in both the health care and
financial sectors.
WHAT IS THE OUTLOOK FOR BOTH THE FUND AND THE OVERALL ECONOMY?
While, we are pleased with the cyclical economic rebound and the
ensuing rally in equity markets, we are carefully watching secular
headwinds that could limit the advance. For example, job growth
remains elusive, and this could eventually constrain consumer
spending. Business investment has shown signs of life, but firms may
wait to increase spending and hiring until they feel more secure in
the sustainability of profit and revenue growth.
We believe this environment provides solid investment opportunities.
Markets rebounded quickly during the period, led by many firms that
have yet to post earnings growth. A number of quality firms with
solid earnings growth did not participate in the rally's full
magnitude, and we feel these firms could be poised for relative
strength. We continue to scour markets for quality firms that have
attractive valuations and long-term growth prospects.
<FN>
(4) Allocation percentages are based on total investment value of
the portfolio as of 10/31/03. Differences from financial
statements are a result of a consolidation of industries or
sectors.
Note: Performance information provided for individual securities
held within the Fund represents performance for the fiscal year ended
10/31/03. The Fund may not have held these securities throughout the
entire period. The economic and financial market analysis represents
the opinions of the Portfolio Manager and/or WM Advisors Inc., and it
should not be considered investment advice. No forecast based on the
opinions expressed can be guaranteed, and they may be subject to
change without notice.
Portfolio Composition as of October 31, 2003(4)
[pie chart]
Materials 1%
Telecommunication Services 1%
Cash Equivalents 5%
Utilities 5%
Energy 7%
Industrials 9%
Consumer Staples 10%
Consumer Discretionary 10%
Information Technology 11%
Health Care 16%
Financials 25%
7
West Coast Equity Fund
Value of a $10,000 Investment (Class A shares)(1)
[GRAPH]
NAV Sales S&P500 Inflation Russell 3000
OCT-93 $10,000 $9,450 $10,000 $10,000 $10,000
$10,200 $9,639 $9,906 $10,007 $9,846
$10,329 $9,761 $10,028 $10,007 $10,039
$10,645 $10,060 $10,364 $10,034 $10,346
$10,789 $10,196 $10,084 $10,068 $10,096
$10,397 $9,825 $9,645 $10,102 $9,655
$10,354 $9,785 $9,771 $10,117 $9,765
$10,505 $9,927 $9,930 $10,124 $9,872
$10,178 $9,618 $9,685 $10,158 $9,602
$10,243 $9,679 $10,005 $10,185 $9,899
$10,811 $10,216 $10,412 $10,226 $10,331
$10,390 $9,819 $10,162 $10,254 $10,111
OCT-94 $10,297 $9,730 $10,394 $10,261 $10,278
$10,124 $9,567 $10,013 $10,274 $9,902
$10,183 $9,623 $10,159 $10,274 $10,056
$10,133 $9,575 $10,423 $10,315 $10,276
$10,493 $9,916 $10,827 $10,357 $10,695
$10,848 $10,252 $11,148 $10,391 $10,962
$11,159 $10,545 $11,472 $10,425 $11,248
$11,166 $10,552 $11,926 $10,446 $11,656
$11,819 $11,169 $12,206 $10,467 $11,993
$12,238 $11,565 $12,612 $10,467 $12,475
$12,419 $11,736 $12,646 $10,494 $12,586
$12,876 $12,168 $13,176 $10,515 $13,075
OCT-95 $12,587 $11,895 $13,130 $10,550 $12,962
$12,761 $12,059 $13,708 $10,542 $13,538
$12,883 $12,175 $13,961 $10,535 $13,758
$12,825 $12,119 $14,442 $10,597 $14,157
$13,125 $12,403 $14,580 $10,631 $14,365
$13,429 $12,690 $14,720 $10,686 $14,509
$14,410 $13,617 $14,937 $10,728 $14,785
$14,798 $13,984 $15,322 $10,748 $15,163
$14,176 $13,396 $15,385 $10,755 $15,115
$13,216 $12,489 $14,700 $10,775 $14,323
$14,044 $13,271 $15,012 $10,796 $14,757
$14,446 $13,652 $15,856 $10,830 $15,559
OCT-96 $14,417 $13,624 $16,290 $10,865 $15,844
$15,413 $14,565 $17,526 $10,886 $16,961
$15,790 $14,922 $17,183 $10,886 $16,758
$16,779 $15,856 $18,250 $10,920 $17,684
$16,738 $15,818 $18,398 $10,954 $17,704
$16,080 $15,195 $17,632 $10,982 $16,904
$16,642 $15,727 $18,685 $10,995 $17,737
$18,410 $17,397 $19,832 $10,988 $18,948
$19,262 $18,202 $20,717 $11,001 $19,737
$20,580 $19,448 $22,362 $11,015 $21,284
$20,290 $19,174 $21,118 $11,036 $20,420
$21,978 $20,769 $22,276 $11,063 $21,578
OCT-97 $20,829 $19,683 $21,532 $11,091 $20,853
$21,351 $20,177 $22,529 $11,084 $21,651
$20,982 $19,828 $22,916 $11,071 $22,084
$21,020 $19,864 $23,170 $11,092 $22,199
$22,914 $21,653 $24,841 $11,113 $23,786
$23,244 $21,965 $26,113 $11,134 $24,966
$23,351 $22,066 $26,377 $11,154 $25,211
$22,094 $20,879 $25,923 $11,174 $24,588
$21,657 $20,466 $26,975 $11,188 $25,419
$20,206 $19,095 $26,690 $11,201 $24,957
$16,118 $15,232 $22,830 $11,215 $21,133
$17,764 $16,787 $24,294 $11,228 $22,575
OCT-98 $19,828 $18,737 $26,269 $11,255 $24,288
$22,759 $21,507 $27,861 $11,255 $25,774
$25,806 $24,387 $29,465 $11,248 $27,414
$26,516 $25,057 $30,697 $11,275 $28,346
$24,784 $23,421 $29,742 $11,289 $27,342
$25,476 $24,075 $30,932 $11,323 $28,346
$27,014 $25,529 $32,129 $11,405 $29,624
$28,308 $26,751 $31,371 $11,405 $29,061
$30,867 $29,170 $33,112 $11,405 $30,529
$30,624 $28,939 $32,079 $11,439 $29,604
$30,722 $29,032 $31,918 $11,467 $29,266
$29,603 $27,975 $31,044 $11,522 $28,517
OCT-99 $31,190 $29,475 $33,009 $11,543 $30,305
$32,425 $30,642 $33,679 $11,550 $31,154
$36,712 $34,693 $35,663 $11,550 $33,141
$36,447 $34,443 $33,872 $11,577 $31,842
$41,944 $39,637 $33,232 $11,646 $32,138
$43,051 $40,683 $36,482 $11,741 $34,655
$40,038 $37,835 $35,384 $11,748 $33,435
$38,508 $36,390 $34,659 $11,755 $32,495
$42,109 $39,793 $35,512 $11,823 $33,457
$41,974 $39,665 $34,958 $11,843 $32,865
$45,621 $43,112 $37,128 $11,858 $35,304
$42,487 $40,150 $35,168 $11,919 $33,704
OCT-00 $40,150 $37,942 $35,020 $11,940 $33,226
$36,669 $34,653 $32,261 $11,947 $30,162
$39,156 $37,002 $32,419 $11,940 $30,669
$42,429 $40,095 $33,570 $12,015 $31,718
$38,301 $36,194 $30,508 $12,063 $28,819
$36,263 $34,269 $28,577 $12,091 $26,940
$40,016 $37,815 $30,797 $12,139 $29,100
$43,186 $40,810 $31,004 $12,194 $29,333
$47,068 $44,479 $30,250 $12,214 $28,794
$43,693 $41,290 $29,954 $12,180 $28,318
$42,745 $40,394 $28,079 $12,180 $26,648
$35,239 $33,301 $25,810 $12,235 $24,297
OCT-01 $37,526 $35,462 $26,303 $12,193 $24,863
$40,539 $38,310 $28,320 $12,173 $26,778
$41,646 $39,355 $28,570 $12,125 $27,156
$41,175 $38,911 $28,153 $12,153 $26,816
$40,261 $38,047 $27,609 $12,202 $26,269
$42,427 $40,094 $28,647 $12,270 $27,420
$41,027 $38,771 $26,911 $12,339 $25,980
$39,522 $37,348 $26,712 $12,339 $25,679
$37,708 $35,634 $24,810 $12,346 $23,830
$33,741 $31,885 $22,875 $12,360 $21,935
$32,529 $30,740 $23,026 $12,400 $22,038
$29,986 $28,336 $20,523 $12,428 $19,722
OCT-02 $31,923 $30,167 $22,329 $12,448 $21,293
$34,413 $32,520 $23,644 $12,448 $22,581
$32,300 $30,523 $22,254 $12,421 $21,304
$31,789 $30,041 $21,671 $12,476 $20,783
$31,440 $29,711 $21,345 $12,572 $20,441
$31,022 $29,315 $21,553 $12,648 $20,656
$33,323 $31,491 $23,328 $12,620 $22,343
$36,606 $34,592 $24,558 $12,599 $23,692
$37,371 $35,315 $24,872 $12,613 $24,011
$38,757 $36,626 $25,310 $12,627 $24,562
$40,521 $38,292 $25,803 $12,675 $25,107
$39,982 $37,783 $25,530 $12,716 $24,834
OCT-03 $43,236 $40,858 $26,975 $12,761 $26,337
Average Annual Total Returns as of 10/31/03
CLASS A SHARES 1 Year 5 Year 10 Year
Fund (not adjusted for sales charge)(2) 35.44% 16.87% 15.76%
Fund (adjusted for maximum sales charge)(2) 28.00% 15.55% 15.11%
Russell 3000 Index(3) 23.69% 1.63% 10.17%
S&P 500 Index(3) 20.80% 0.53% 10.43%
CLASS B SHARES 1 Year 5 Year Since Inception
(March 30, 1994)
Fund (not adjusted for sales charge)(2) 34.10% 15.81% 15.06%
Fund (adjusted for maximum sales charge)(2) 29.10% 15.59% 15.06%
Russell 3000 Index(3) 23.69% 1.63% 11.04%
S&P 500 Index(3) 20.80% 0.53% 11.33%
CLASS C SHARES 1 Year 5 Year Since Inception
(March 1, 2002)
Fund (not adjusted for sales charge)(2) 34.27% N/A 3.43%
Fund (adjusted for maximum sales charge)(2) 31.92% N/A 2.81%
Russell 3000 Index(3) 23.69% N/A 0.17%
S&P 500 Index(3) 20.80% N/A -1.38%
<FN>
(1) The performance of Class B shares 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.
(2) Class A shares have a maximum sales charge of 5.5%. Class B
shares have a contingent deferred sales charge (CDSC) that
declines over five years as follows: 5-5-4-3-2-0%. Class C
shares have a 1% upfront sales charge and a 1% CDSC, which
applies to redemptions within the first 12 months. The returns
shown for the Fund assume reinvestment of all dividends and
distributions. The Fund's performance would have been lower had
the Fund's custodian not allowed its fees to be reduced by
credits.
(3) The S&P 500 Index represents an unmanaged weighted index of 500
companies. The Russell 3000 Index measures the performance of
the 3,000 largest U.S. companies based on total market
capitalization, representing approximately 98% of the
investable U.S. equity market. Effective March 1, 2003, the
Russell 3000 Index replaced the S&P 500 Index because WM
Advisors believes the new benchmark more accurately reflects
the Fund's performance characteristics. Indices are unmanaged
and assume reinvestment of all dividends and distributions, but
do not reflect any asset-based charges for investment
management or other expenses. Inflation is measured by the
Consumer Price Index for all urban consumers. Individuals
cannot invest directly in an index. For comparative purposes,
the benchmark's performance is shown as of the Fund's inception
date, not from the inception date of the benchmark.
Note: There may be additional investment risks due to the Fund's
concentration in the West Coast region of the United States. 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.
PORTFOLIO MANAGER:
PHILIP M. FOREMAN
WM ADVISORS, INC.
The Fund is managed by an equity team led by Philip M. Foreman,
Senior Portfolio Manager of WM Advisors, Inc. Mr. Foreman, CFA, was
employed by WM Advisors from 1991 to 1999, and he rejoined the firm
in 2002. He has investment management experience dating back to 1984.
He holds a B.S. in Economics from the University of Washington and an
M.B.A. in Finance from the University of Puget Sound.
PERFORMANCE REVIEW
For the 12-month period ended October 31, 2003, the WM WEST COAST
EQUITY FUND posted a total return of 35.44%, which outpaced the
23.69% return of the Russell 3000 Index.3 Long-term results have also
been very favorable. The Fund had an average annual total return of
16.87% for the five-year period ended October 31, 2003, and this
performance surpassed the Russell 3000 Index by an average annual
rate of more than 15 percentage points. (All Fund performance
described above is for Class A shares not adjusted for sales charge.)
WHAT WERE THE MOST SIGNIFICANT FACTORS CONTRIBUTING TO THE FUND'S
PERFORMANCE OVER THE 12-MONTH PERIOD ENDED OCTOBER 31, 2003?
Improving economic conditions and stronger earnings reports sustained
the period's rebounding equities market. Small-cap stocks led the
market advance as three years of investor aversion to risk ended.
Technology was a top performing sector. Many of the firms rewarded by
the market this period were those that had struggled the most through
the market downturn.
8
The Fund generated strong performance on both a relative and an
absolute basis, outpacing the Fund's benchmarks. It gained value from
its small-cap stock weighting, its sector concentrations, and its
stock selection. Smaller-sized companies, particularly those that
could turn profits while exiting the down cycle, provided impressive
results. Markets jumped at signs of profitability as the recession
filtered out weaker firms. For example, Advanced Digital Imaging
(+130%), a digital tape storage firm, held on to market share during
the downturn in the technology sector. When markets began to rebound,
its stock appreciated quickly, more than doubling in price during the
period. Another firm, Schnitzer Steel (+309%), realized both pricing
and volume benefits from the boom in Chinese construction. The firm
has become a key exporter of scrap steel to China. Both these firms
were strong contributors to the Fund's overall results for the
period.
Improving economic conditions also led to performance gains within
the Fund's overweightings in industrials and cyclical firms. The
materials sector provided powerful results from firms such as
Louisiana Pacific (+182%). Strong pricing power served the lumber
firm well, and its stock nearly tripled over the period. In fact,
advances in this industry have been so substantial that we believe
much of it has become richly valued, so we are now planning to trim
lumber positions. A materials company that did not fare too well this
year was Oregon Steel Mills (-15%). The firm struggled with balance
sheet issues and weak demand for steel piping in gas systems. In
contrast, the financial sector performed relatively well, and our
stock selection contributed to Fund results. Holdings such as East
West Bancorp (+42%) and Greater Bay Bancorp (+77%) advanced amid the
improving financial backdrop and favorable market conditions.
The Fund also benefited from its technology holdings, which supplied
some of the period's strongest results. Among the Fund's better
performers was Pixelworks (+112%), a developer of chip sets for flat
panel screens. Large-cap technology positions, such as Hewlett-
Packard (+41%), also provided positive results. The firm reported
stronger earnings, and investors reaped the benefits. Although
technology stocks advanced rapidly, not all firms participated in the
gains. Microsoft (-2%) has been a core Fund holding for many years,
but during the past 12 months the firm languished while the majority
of the sector flourished. We maintained our heavy weighting in it
because we believe it could benefit from continued improvements in
capital spending. In addition, some of this sector's small-cap firms
have continued to experience difficulties after struggling to
maintain profitability during the downturn. The stock of InFocus
(+12%), a producer of projectors for business presentations,
appreciated, but it significantly trailed the overall sector.
WERE THERE ANY SHIFTS IN THE FUND'S PORTFOLIO HOLDINGS/SECTORS THAT
HAVE HAD A SIGNIFICANT IMPACT ON PERFORMANCE?
We maintained relatively equal weightings in small-, mid-, and large-
cap stocks and benefited from the broad market advance. The Fund took
advantage of the strength offered by smaller-sized firms, but we will
continue to seek opportunities across the entire capitalization
spectrum.
As the prospects for an improving business environment brightened, we
added to firms that stand to gain from increased business investment.
We purchased Hilton since we feel that business travel should improve
alongside underlying economic conditions. We also favored firms that
can capitalize on the long-term growth prospects in China. In
addition to Schnitzer Steel, we increased our holdings in Nike (+35%)
and Intel (+90%), both of which have made inroads into the Chinese
market. We also added to the Fund's positions in media-related firms,
such as Univision (+31%) and Knight-Ridder (+22%). This market
segment could be poised for continued strength because advertising
budgets are generally tied to economic conditions and can get a boost
during an election year.
WHAT IS THE OUTLOOK FOR BOTH THE FUND AND THE OVERALL ECONOMY?
We are very pleased with the strong performance generated in the past
year, but we do not expect the market's advance to continue at its
current pace. The first year of a recovery often coincides with a
powerful market upswing--especially in small-cap equities. We plan to
keep the Fund cyclically oriented, taking advantage of improving
economic fundamentals and prospects for continued growth in capital
spending. However, we are closely watching valuations and the Federal
Reserve's stance toward short-term interest rates. We continue to
seek small-, mid-, and large-size firms that have good business
prospects and that are reasonably priced.
<FN>
(4) Allocation percentages are based on total investment value of
the portfolio as of 10/31/03. Differences from financial
statements are a result of a consolidation of industries or
sectors.
Note: Performance information provided for individual securities held
within the Fund represents performance for the fiscal year ended
10/31/03. The Fund may not have held these securities throughout the
entire period. The economic and financial market analysis represents
the opinions of the Portfolio Manager and/or WM Advisors Inc., and it
should not be considered investment advice. No forecast based on the
opinions expressed can be guaranteed, and they may be subject to
change without notice.
Portfolio Composition as of October 31, 2003(4)
[pie chart]
Telecommunication Services 1%
REITs 2%
Consumer Staples 3%
Cash Equivalents 4%
Energy 4%
Materials 5%
Health Care 11%
Industrials 13%
Consumer Discretionary 17%
Financials 19%
Information Technology 21%
9
Mid Cap Stock Fund
Value of a $10,000 Investment (Class A shares)(1)
[GRAPH]
NAV Sales Inflation S&P midcap
INCEPTION 3/1/00 $10,000 $9,450 $10,000 $10,000
$11,210 $10,593 $10,082 $10,837
APR-00 $11,271 $10,651 $10,088 $10,459
$11,681 $11,038 $10,094 $10,328
$11,420 $10,792 $10,153 $10,480
$11,650 $11,009 $10,170 $10,645
$12,450 $11,765 $10,182 $11,833
$12,351 $11,671 $10,235 $11,752
OCT-00 $12,580 $11,888 $10,252 $11,353
$12,221 $11,548 $10,259 $10,496
$13,460 $12,719 $10,252 $11,299
$13,892 $13,128 $10,317 $11,551
$13,842 $13,080 $10,358 $10,892
$13,339 $12,606 $10,382 $10,082
APR-01 $14,072 $13,298 $10,424 $11,194
$14,553 $13,752 $10,471 $11,455
$15,014 $14,188 $10,488 $11,409
$14,924 $14,103 $10,459 $11,239
$14,482 $13,686 $10,459 $10,872
$13,088 $12,368 $10,506 $9,519
OCT-01 $13,550 $12,804 $10,470 $9,940
$14,101 $13,326 $10,453 $10,680
$14,898 $14,078 $10,412 $11,232
$14,399 $13,607 $10,436 $11,174
$14,389 $13,597 $10,477 $11,187
$15,252 $14,413 $10,536 $11,987
APR-02 $15,138 $14,305 $10,595 $11,930
$15,272 $14,432 $10,595 $11,729
$14,481 $13,685 $10,602 $10,870
$13,430 $12,691 $10,613 $9,817
$13,566 $12,819 $10,648 $9,866
$12,514 $11,826 $10,672 $9,071
OCT-02 $12,888 $12,180 $10,689 $9,464
$13,555 $12,809 $10,689 $10,011
$13,336 $12,603 $10,666 $9,600
$13,098 $12,377 $10,713 $9,320
$12,931 $12,220 $10,795 $9,098
$12,994 $12,279 $10,860 $9,174
APR-03 $13,420 $12,682 $10,837 $9,840
$14,429 $13,635 $10,819 $10,656
$14,502 $13,705 $10,831 $10,791
$14,742 $13,931 $10,843 $11,174
$15,116 $14,285 $10,884 $11,681
$14,929 $14,108 $10,919 $11,502
OCT-03 $15,959 $15,081 $10,958 $12,372
Average Annual Total Returns as of 10/31/03
CLASS A SHARES 1 Year Since Inception
(March 1, 2000)
Fund (not adjusted for sales charge)(2) 23.81% 13.57%
Fund (adjusted for maximum sales charge)(2) 17.01% 11.84%
S&P MidCap 400 Index(3) 30.73% 5.98%
CLASS B SHARES 1 Year Since Inception
(March 1, 2000)
Fund (not adjusted for sales charge)(2) 22.50% 12.50%
Fund (adjusted for maximum sales charge)(2) 17.50% 11.90%
S&P MidCap 400 Index(3) 30.73% 5.98%
CLASS C SHARES 1 Year Since Inception
(March 1, 2002)
Fund (not adjusted for sales charge)(2) 22.56% 5.32%
Fund (adjusted for maximum sales charge)(2) 20.36% 4.67%
S&P MidCap 400 Index(3) 30.73% 6.24%
<FN>
(1) The performance of Class B shares 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.
(2) Class A shares have a maximum sales charge of 5.5%. Class B
shares have a contingent deferred sales charge (CDSC) that
declines over five years as follows: 5-5-4-3-2-0%. Class C
shares have a 1% upfront sales charge and a 1% CDSC, which
applies to redemptions within the first 12 months. The returns
shown for the Fund assume reinvestment of all dividends and
distributions. The Fund's performance would have been lower had
the Fund's custodian not allowed its fees to be reduced by
credits.
(3) The S&P MidCap 400 Index represents an unmanaged weighted index
of 400 mid-size companies. It assumes reinvestment of all
dividends and distributions, but it does not reflect any asset-
based charges for investment management or other expenses.
Inflation is measured by the Consumer Price Index for all urban
consumers. Individuals cannot invest directly in an index. For
comparative purposes, the benchmark's performance is shown as
of the Fund's inception date, not from the inception date of
the benchmark.
Note: International investing involves increased risks due to
currency fluctuations, political or social instability, and
differences in accounting standards. 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.
PORTFOLIO MANAGER:
DANIEL R. COLEMAN
WM ADVISORS, INC.
The Fund is managed by an equity team led by Daniel R. Coleman,
Senior Portfolio Manager of WM Advisors, Inc. Mr. Coleman joined WM
Advisors in 2001, and he has investment experience dating back to
1979. He holds a B.A. in Finance from the University of Washington
and an M.B.A. from New York University.
PERFORMANCE REVIEW
For the 12-month period ended October 31, 2003, the WM MID CAP STOCK
FUND returned 23.81%. The Fund underperformed its benchmark, the S&P
MidCap 400 Index, which advanced 30.73%.3 However, the Fund has
posted an average annual total return of 13.57% since its inception,
more than double the 5.98% return of its benchmark for the same
period. (All Fund performance described above is for Class A shares
not adjusted for sales charge.)
WHAT WERE THE MOST SIGNIFICANT FACTORS CONTRIBUTING TO THE FUND'S
PERFORMANCE OVER THE 12-MONTH PERIOD ENDED OCTOBER 31, 2003?
The Fund benefited from strong cyclical market performance as
significant fiscal and monetary stimulus contributed to a recovery in
economies and equity markets. Earnings climbed above their lows, and
the asset types that had suffered the most through the downturn led
the market recovery. As geopolitical uncertainty receded in April,
markets responded quickly and rallied for the rest of the period,
driving the Fund's results.
There were several very strong performers during the period. Among
them was Country-wide Financial (+109%), which benefited from low
10
mortgage rates and a booming refinancing business. Luxury retailer
Tiffany & Co. (+81%), which we had added near the end of the previous
fiscal year, also helped boost Fund performance.
Health care stocks provided mixed results, but they remain a core
overweighting in the portfolio. Our position in HEALTHSOUTH hampered
the Fund's results for the period. We sold a portion of this position
before its price underwent a major decline, and we eliminated it when
company officers received indictments, but the damage had already
been done. Another health care holding that suffered during the
period was AmerisourceBergen (-20%), which has been a core Fund
holding. The drug distributor was a strong performer during the
downturn, but it lagged the market this year. We added to our
position on the stock's weakness, but it has not rebounded as much as
the overall market. Better results within the health care segment
came from Guidant (+73%), a manufacturer of medical devices, and
Mylan Laboratories (+73%), a producer and distributor of generic
pharmaceuticals.
Our investment style favors quality firms that we believe are priced
attractively and have the potential for strong long-term investment
performance. The period's broad-based rally benefited such firms, but
it was led by riskier assets. As a result, we missed out on some
relative results. For example, toy-maker Mattel lagged behind the
market for the second half of the period. Yet, this firm has been a
core Fund holding for the past three years and a very strong
performance contributor for most of the Fund's history. We feel that
the markets will eventually reward these types of high-quality firms
that can generate consistent earnings over longer-term time horizons.
The market's preference for aggressive mid-cap names, plus the Fund's
specific stock selection, yielded somewhat disappointing results
within industrials and technology. Firms such as Lockheed Martin
(-20%) did not perform as well as the overall group. We sold off a
portion of the Lockheed position late in 2002, but the firm continued
to experience choppy performance as prospects for additional defense
contracts diminished.
WERE THERE ANY SHIFTS IN THE FUND'S PORTFOLIO HOLDINGS/SECTORS THAT
HAVE HAD A SIGNIFICANT IMPACT ON PERFORMANCE?
Because of their strong historical results, many firms within the
portfolio have appreciated to levels near the top of mid-cap
parameters, and we have begun to slowly shift assets into smaller
mid-cap firms that we believe have room to grow. This does not
represent a wholesale shift in style, just a trimming of positions
that have done very well for the Fund. Firms such as Nike, Guidant,
Lockheed Martin, Conoco, and Avon have grown to the top of the mid-
cap range. The process to lower the Fund's overall capitalization
levels will be slow and valuation-based. It has already begun with
additions to, or new positions in, firms with lower capitalizations,
such as Adobe, Tiffany & Co., Neiman Marcus, and Mandalay Resort
Group, which all performed well during the period.
We remained relatively sector neutral during the period, looking for
investment opportunities stock by stock. Although the technology
sector rallied considerably, we were a bit underweighted and did not
attempt to chase trailing performance. In contrast, our bottom-up
stock selection has created overweightings in both the financial and
energy sectors.
We also employ a core buy-and-hold strategy, but trim and add to
positions in response to valuation shifts. For example, the stock of
Hershey advanced on talks of a potential takeover, and we took some
profits when it became richly valued. After the takeover fell through
and the stock declined, we rebuilt the position. The stock has since
rallied.
WHAT IS THE OUTLOOK FOR BOTH THE FUND AND THE OVERALL ECONOMY?
We were pleased with the period's equity rebound, which benefited
Fund performance. Although the more aggressive stocks led the
summer's sharp market advance, we are watching valuations closely to
find quality firms that have sustainable earnings leverage. We are
also attempting to reduce the Fund's overall capitalization levels,
adding to firms that in our opinion are not only priced attractively,
but also have growth opportunity within the mid-cap arena. We seek
firms that have strong balance sheets, good cash flows, and
valuations priced below that of the overall market.
<FN>
(4) Allocation percentages are based on total investment value of
the portfolio as of 10/31/03. Differences from financial
statements are a result of a consolidation of industries or
sectors.
Note: Performance information provided for individual securities held
within the Fund represents performance for the fiscal year ended
10/31/03. The Fund may not have held these securities throughout the
entire period. The economic and financial market analysis represents
the opinions of the Portfolio Manager and/or WM Advisors Inc., and it
should not be considered investment advice. No forecast based on the
opinions expressed can be guaranteed, and they may be subject to
change without notice.
Portfolio Composition as of October 31, 2003(4)
[pie chart]
Telecommunication Services 1%
Materials 3%
Utilities 5%
Consumer Staples 5%
Cash Equivalents 8%
Energy 8%
Industrials 9%
Health Care 12%
Information Technology 14%
Consumer Discretionary 16%
Financials 19%
11
Growth Fund
Value of a $10,000 Investment (Class A shares)(1)
[GRAPH]
NAV Sales Inflation S&P500 Russell 1000
Growth
OCT-93 $10,000 $9,450 $10,000 $10,000 $10,000
$9,826 $9,286 $10,007 $9,906 $9,934
$10,157 $9,598 $10,007 $10,028 $10,106
$10,574 $9,992 $10,034 $10,364 $10,339
$10,470 $9,894 $10,068 $10,084 $10,151
$10,209 $9,647 $10,102 $9,645 $9,661
$10,113 $9,557 $10,117 $9,771 $9,706
$9,730 $9,195 $10,124 $9,930 $9,853
$9,330 $8,817 $10,158 $9,685 $9,562
$9,696 $9,162 $10,185 $10,005 $9,889
$10,287 $9,721 $10,226 $10,412 $10,440
$10,322 $9,754 $10,254 $10,162 $10,297
OCT-94 $10,609 $10,025 $10,261 $10,394 $10,540
$10,217 $9,655 $10,274 $10,013 $10,203
$10,223 $9,660 $10,274 $10,159 $10,374
$10,336 $9,767 $10,315 $10,423 $10,595
$10,658 $10,072 $10,357 $10,827 $11,039
$10,876 $10,278 $10,391 $11,148 $11,362
$11,250 $10,631 $10,425 $11,472 $11,611
$11,677 $11,035 $10,446 $11,926 $12,016
$12,347 $11,668 $10,467 $12,206 $12,479
$13,148 $12,425 $10,467 $12,612 $12,998
$13,244 $12,516 $10,494 $12,646 $13,012
$13,636 $12,886 $10,515 $13,176 $13,612
OCT-95 $13,270 $12,540 $10,550 $13,130 $13,621
$13,862 $13,100 $10,542 $13,708 $14,151
$13,929 $13,163 $10,535 $13,961 $14,232
$14,255 $13,471 $10,597 $14,442 $14,708
$14,946 $14,124 $10,631 $14,580 $14,977
$15,054 $14,226 $10,686 $14,720 $14,996
$15,864 $14,991 $10,728 $14,937 $15,391
$16,180 $15,290 $10,748 $15,322 $15,928
$15,488 $14,637 $10,755 $15,385 $15,950
$14,403 $13,610 $10,775 $14,700 $15,016
$15,360 $14,515 $10,796 $15,012 $15,403
$16,367 $15,467 $10,830 $15,856 $16,525
OCT-96 $15,824 $14,953 $10,865 $16,290 $16,624
$16,396 $15,495 $10,886 $17,526 $17,873
$16,285 $15,389 $10,886 $17,183 $17,523
$17,080 $16,140 $10,920 $18,250 $18,752
$16,320 $15,422 $10,954 $18,398 $18,625
$15,247 $14,409 $10,982 $17,632 $17,617
$15,478 $14,626 $10,995 $18,685 $18,787
$16,538 $15,628 $10,988 $19,832 $20,142
$17,171 $16,227 $11,001 $20,717 $20,949
$18,634 $17,609 $11,015 $22,362 $22,801
$17,632 $16,662 $11,036 $21,118 $21,467
$18,669 $17,642 $11,063 $22,276 $22,523
OCT-97 $18,150 $17,151 $11,091 $21,532 $21,691
$18,070 $17,076 $11,084 $22,529 $22,612
$17,876 $16,893 $11,071 $22,916 $22,865
$18,431 $17,417 $11,092 $23,170 $23,549
$20,156 $19,047 $11,113 $24,841 $25,320
$21,125 $19,963 $11,134 $26,113 $26,329
$21,919 $20,714 $11,154 $26,377 $26,694
$21,251 $20,082 $11,174 $25,923 $25,936
$23,255 $21,976 $11,188 $26,975 $27,525
$23,155 $21,881 $11,201 $26,690 $27,342
$19,200 $18,144 $11,215 $22,830 $23,239
$21,517 $20,334 $11,228 $24,294 $25,024
OCT-98 $22,223 $21,001 $11,255 $26,269 $27,035
$23,723 $22,418 $11,255 $27,861 $29,092
$28,086 $26,541 $11,248 $29,465 $31,715
$31,807 $30,058 $11,275 $30,697 $33,577
$30,755 $29,063 $11,289 $29,742 $32,044
$34,491 $32,594 $11,323 $30,932 $33,731
$36,247 $34,253 $11,405 $32,129 $33,775
$34,213 $32,332 $11,405 $31,371 $32,737
$36,954 $34,921 $11,405 $33,112 $35,030
$35,502 $33,549 $11,439 $32,079 $33,916
$36,485 $34,478 $11,467 $31,918 $34,470
$38,269 $36,164 $11,522 $31,044 $33,746
OCT-99 $41,105 $38,844 $11,543 $33,009 $36,295
$45,602 $43,094 $11,550 $33,679 $38,253
$54,608 $51,605 $11,550 $35,663 $42,232
$54,701 $51,692 $11,577 $33,872 $40,251
$61,413 $58,035 $11,646 $33,232 $42,219
$62,487 $59,051 $11,741 $36,482 $45,241
$56,820 $53,695 $11,748 $35,384 $43,089
$51,757 $48,910 $11,755 $34,659 $40,919
$53,222 $50,295 $11,823 $35,512 $44,020
$52,381 $49,500 $11,843 $34,958 $42,185
$56,273 $53,178 $11,858 $37,128 $46,004
$53,470 $50,530 $11,919 $35,168 $41,653
OCT-00 $51,054 $48,246 $11,940 $35,020 $39,682
$42,722 $40,372 $11,947 $32,261 $33,832
$42,589 $40,247 $11,940 $32,419 $32,762
$44,587 $42,134 $12,015 $33,570 $35,025
$36,097 $34,112 $12,063 $30,508 $29,079
$32,318 $30,540 $12,091 $28,577 $25,915
$38,135 $36,038 $12,139 $30,797 $29,192
$37,044 $35,007 $12,194 $31,004 $28,762
$35,626 $33,666 $12,214 $30,250 $28,096
$33,588 $31,741 $12,180 $29,954 $27,394
$30,243 $28,579 $12,180 $28,079 $25,154
$27,333 $25,830 $12,235 $25,810 $22,643
OCT-01 $27,678 $26,155 $12,193 $26,303 $23,831
$29,477 $27,855 $12,173 $28,320 $26,120
$30,040 $28,387 $12,125 $28,570 $26,071
$29,093 $27,493 $12,153 $28,153 $25,610
$26,478 $25,022 $12,202 $27,609 $24,547
$27,296 $25,795 $12,270 $28,647 $25,396
$25,516 $24,113 $12,339 $26,911 $23,324
$25,098 $23,718 $12,339 $26,712 $22,759
$22,699 $21,450 $12,346 $24,810 $20,654
$20,844 $19,698 $12,360 $22,875 $19,519
$21,098 $19,938 $12,400 $23,026 $19,577
$19,318 $18,255 $12,428 $20,523 $17,546
OCT-02 $20,844 $19,697 $12,448 $22,329 $19,156
$22,080 $20,865 $12,448 $23,644 $20,196
$20,481 $19,355 $12,421 $22,254 $18,801
$20,063 $18,960 $12,476 $21,671 $18,345
$19,736 $18,651 $12,572 $21,345 $18,260
$19,936 $18,839 $12,648 $21,553 $18,600
$21,535 $20,350 $12,620 $23,328 $19,976
$22,717 $21,467 $12,599 $24,558 $20,973
$22,844 $21,588 $12,613 $24,872 $21,261
$23,427 $22,138 $12,627 $25,310 $21,790
$24,136 $22,809 $12,675 $25,803 $22,332
$23,646 $22,346 $12,716 $25,530 $22,093
OCT-03 $24,919 $23,548 $12,761 $26,975 $23,334
Average Annual Total Returns as of 10/31/03
CLASS A SHARES 1 Year 5 Year 10 Year
Fund (not adjusted for sales charge)(2) 19.53% 2.32% 9.56%
Fund (adjusted for maximum sales charge)(2) 12.93% 1.16% 8.94%
Russell 1000 Growth Index(3) 21.81% -2.90% 8.84%
S&P 500 Index(3) 20.80% 0.53% 10.43%
CLASS B SHARES 1 Year 5 Year Since Inception
(July 1, 1994)
Fund (not adjusted for sales charge)(2) 18.39% 1.48% 10.24%
Fund (adjusted for maximum sales charge)(2) 13.39% 1.10% 10.24%
Russell 1000 Growth Index(3) 21.81% -2.90% 10.03%
S&P 500 Index(3) 20.80% 0.53% 11.60%
CLASS C SHARES 1 Year 5 Year Since Inception
(March 1, 2002)
Fund (not adjusted for sales charge)(2) 18.85% N/A -4.19%
Fund (adjusted for maximum sales charge)(2) 16.62% N/A -4.78%
Russell 1000 Growth Index(3) 21.81% N/A -2.99%
S&P 500 Index(3) 20.80% N/A -1.38%
<FN>
(1) The performance of Class B shares 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.
(2) Class A shares have a maximum sales charge of 5.5%. Class B
shares have a contingent deferred sales charge (CDSC) that
declines over five years as follows: 5-5-4-3-2-0%. Class C
shares have a 1% upfront sales charge and a 1% CDSC, which
applies to redemptions within the first 12 months. The returns
shown for the Fund assume reinvestment of all dividends and
distributions. The Fund's performance would have been lower had
the Advisor and Distributor not waived a portion of their fees
and the Fund's custodian not allowed its fees to be reduced by
credits.
(3) The S&P 500 Index represents an unmanaged weighted index of 500
companies. The Russell 1000 Growth Index represents the
performance of those companies in the Russell 1000 Index (the
1,000 largest companies included in the Russell 3000 Index)
with higher price-to-book ratios and higher forecasted growth
values. Effective March 1, 2003, the Russell 1000 Growth Index
replaced the S&P 500 Index because WM Advisors believes the new
benchmark more accurately reflects the Fund's performance
characteristics. Indices are unmanaged and assume reinvestment
of all dividends and distributions, but do not reflect any
asset-based charges for investment management or other
expenses. Inflation is measured by the Consumer Price Index for
all urban consumers. Individuals cannot invest directly in an
index. For comparative purposes, the benchmark's performance is
shown as of the Fund's inception date, not from the inception
date of the benchmark.
Note: International investing involves increased risks due to
currency fluctuations, political or social instability, and
differences in accounting standards. 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.
PORTFOLIO MANAGERS:
OPPENHEIMERFUNDS, JANUS CAPITAL MANAGEMENT, AND COLUMBIA MANAGEMENT
ADVISORS
The Fund combines the expertise of three large-cap growth fund
managers: OppenheimerFunds, Janus Capital Management, and Columbia
Management Advisors. WM Advisors sets the Fund's general investment
process and determines the asset proportions to be guided by each
subadvisor. The three subadvisors in turn provide additional
expertise and complementary styles of large-cap growth investment
management. As of October 31, 2003, the subadvisors managed the
following percentages of the Fund's assets: OppenheimerFunds - 61%;
Janus - 20%; and Columbia - 19%.
PERFORMANCE REVIEW
The WM Growth Fund took advantage of a broad-based equity market
rally and posted a total return of 19.53% for the 12-month period
ended October 31, 2003. Long-term results have also been favorable.
The Fund generated an average annual total return of 9.56% for the
ten-year period ended October 31, 2003. (All Fund performance
described above is for Class A shares not adjusted for sales charge.)
WHAT WERE THE MOST SIGNIFICANT FACTORS CONTRIBUTING TO THE FUND'S
PERFORMANCE OVER THE 12-MONTH PERIOD ENDED OCTOBER 31, 2003?
Oppenheimer cites its concentration in cyclical stocks from sectors
such as consumer discretionary and technology as the period's key
performance driver. Positions in these overweighted sectors benefited
from an improving economy. Holdings in semi-conductor manufacturers,
such as Intel Corp. (+90%), Cypress Semiconductor Corp. (+282%) and
National Semiconductor Corp. (+206%), all benefited from strong
operating leverage and increasing demand that yielded better-than-
expected sales. Within the consumer
12
discretionary sector, the Fund's long-time holdings among cruise ship
operators, such as Royal Caribbean Cruises Ltd. (+62%) and Carnival
Corp. (+34%), appreciated in response to stronger demand and steady
growth.
The biggest contributor to Janus' portion of the portfolio was
Internet giant Yahoo! (+189%). This firm's share price rebounded
tremendously over the past 12 months. Other strong performers within
information technology included Cisco Systems (+87%), which dominates
the networking and communications equipment industries, and Computer
Associates, a position that was added during the period. This firm
develops software for business applications including enterprise
management, data storage, and data security. Two stocks in the
broadcasting and cable television arena also contributed
significantly to Fund results. Cablevision Systems (+111%), an owner
of cable programming networks, entertainment businesses, and
telecommunications companies, performed very well. So did Liberty
Media (+22%), which owns diverse interests in cable networks, media,
and broad-band distribution. Janus' biggest source of disappointing
performance was AmerisourceBergen (-20%), a wholesale distributor of
pharmaceutical products and related health care services. Another
health care service provider, Cardinal Health (-14%), also hampered
Fund performance. Their poor results led Janus to sell both of these
positions during the period.
Columbia attributes its stock selection in the information technology
sector as the primary reason for relative performance results. Sector
weightings in consumer discretionary, consumer staples, and health
care contributed positively, but they were not sufficient to make up
for weakness in certain holdings.
WERE THERE ANY SHIFTS IN THE FUND'S PORTFOLIO HOLDINGS/SECTORS THAT
HAVE HAD A SIGNIFICANT IMPACT ON PERFORMANCE?
By the end of the period, Oppenheimer had nearly doubled its
allocation to the health care sector. It sold some holdings within
the sector after prices rose above levels justified by company
fundamentals, but it replaced those positions with what they believed
to be other, more reasonably priced biotechnology, medical device,
and generic drug stocks. Oppenheimer also trimmed the Fund's
weighting in financials, especially among housing and mortgage-
related stocks. These assets included Countrywide Financial Corp. and
Freddie Mac, which enjoyed sizeable gains within the favorable
interest rate environment. Additionally, Oppenheimer built on
positions in the industrial/capital goods sector. It believes that
there are significant opportunities within this sector following
three years of a capital-spending drought. It also feels that recent
weakness in the advertising, media, and leisure industries is related
to profit taking after strong year-to-date performance. Overall,
given the sharp appreciation in many holdings and Oppenheimer's
valuation-sensitive discipline, this subadvisor continues to trade up
and round out existing positions while seeking new opportunities.
Individual stock selection remains the primary focus of the Janus
investment team, but a variety of sectors affected performance during
the period. The information technology sector, which remains a slight
over-weighting versus the benchmark, was Janus' strongest source of
absolute performance. The consumer discretionary sector also posted
very positive returns. Consumer staples and industrials had the least
positive impact on this subadvisor's portion of the
portfolio.
Columbia tactically over-weighted and underweighted consumer
discretionary and other cyclical issues during the period. It based
these decisions on the economic recovery, which has been bolstered by
low interest rates and fiscal stimulus. Its overweighting in the
consumer discretionary sector is due to the potential for improved
economic conditions that would support a 2004 rebound in retail and
advertising. Columbia also increased the technology weighting, but due
to stock selection, this shift has not yet realized benefits from
increased business spending or the equipment replacement cycle.
Industrials and materials have been underweighted but going forward we
expect to increase holdings in these sectors as these companies should
benefit from a global economic expansion.
WHAT IS THE OUTLOOK FOR BOTH THE FUND AND THE OVERALL ECONOMY?
Oppenheimer sees favorable prospects for the U.S. economy based on
factors that include improvements in industrial production and
increases in manufacturing activity. Inflation and interest rates
near historical lows have also set the stage for further business
growth. Within this environment, Oppenheimer's investment style
remains focused on a company-by-company approach. It allocates assets
among a broadly based portfolio of stocks that it believes offer good
prospects for growth at a reasonable price.
Janus feels that the upcoming earnings season will be telling in
terms of whether recent market gains are justified by a meaningful
rise in earnings. Growth in earnings could also support the premise
that an economic recovery is indeed underway. Janus is also paying
close attention to the possible effects on business fundamentals from
energy prices, the 2004 election, and the weak U.S. dollar. Janus
stresses its focus on the big picture, but credits its detailed
financial modeling and creative research as the sources of its edge
in selecting individual companies.
In Columbia's view, economic growth continues to strengthen,
corporate earnings are recovering, and labor market trends appear to
have stabilized. However, Columbia remains concerned about
potentially rising interest rates and exogenous terrorist shocks that
could erode business and consumer confidence.
<FN>
(4) Allocation percentages are based on total investment value of
the portfolio as of 10/31/03. Differences from financial
statements are a result of a consolidation of industries or
sectors.
Note: Performance information provided for individual securities held
within the Fund represents performance for the fiscal year ended
10/31/03. The Fund may not have held these securities throughout the
entire period. The economic and financial market analysis represents
the opinions of the Portfolio Manager and/or WM Advisors Inc., and it
should not be considered investment advice. No forecast based on the
opinions expressed can be guaranteed, and they may be subject to
change without notice.
Portfolio Composition as of October 31, 2003(4)
[pie chart]
Telecommunication Services 1%
Materials 1%
Energy 5%
Consumer Staples 6%
Cash Equivalents 7%
Industrials 7%
Financials 11%
Health Care 16%
Consumer Discretionary 19%
Information Technology 27%
13
Small Cap Stock Fund
Value of a $10,000 Investment (Class A shares)(1)
[GRAPH]
NAV Sales Russell 2000 Inflation Russell 2000
Growth
OCT-93 $10,000 $9,450 $10,000 $10,000 $10,000
$9,693 $9,160 $9,674 $10,007 $9,596
$10,476 $9,899 $10,005 $10,007 $9,975
$10,549 $9,968 $10,318 $10,034 $10,240
$10,527 $9,948 $10,281 $10,068 $10,195
$10,089 $9,534 $9,739 $10,102 $9,569
$9,849 $9,307 $9,797 $10,117 $9,584
$9,834 $9,293 $9,687 $10,124 $9,369
$9,492 $8,969 $9,360 $10,158 $8,969
$9,922 $9,376 $9,514 $10,185 $9,097
$10,352 $9,782 $10,044 $10,226 $9,765
$10,417 $9,844 $10,010 $10,254 $9,806
OCT-94 $11,001 $10,395 $9,970 $10,261 $9,910
$10,235 $9,672 $9,567 $10,274 $9,509
$10,440 $9,866 $9,823 $10,274 $9,733
$10,500 $9,922 $9,699 $10,315 $9,534
$10,738 $10,148 $10,103 $10,357 $9,975
$10,723 $10,134 $10,276 $10,391 $10,266
$10,626 $10,042 $10,504 $10,425 $10,420
$10,641 $10,056 $10,684 $10,446 $10,557
$11,536 $10,902 $11,239 $10,467 $11,284
$12,379 $11,698 $11,886 $10,467 $12,163
$12,767 $12,064 $12,132 $10,494 $12,313
$13,341 $12,607 $12,350 $10,515 $12,566
OCT-95 $12,804 $12,100 $11,798 $10,550 $11,948
$12,998 $12,283 $12,293 $10,542 $12,475
$13,807 $13,048 $12,618 $10,535 $12,752
$13,605 $12,857 $12,604 $10,597 $12,646
$14,328 $13,540 $12,997 $10,631 $13,223
$15,254 $14,415 $13,262 $10,686 $13,484
$15,689 $14,826 $13,972 $10,728 $14,520
$16,295 $15,399 $14,522 $10,748 $15,265
$15,681 $14,819 $13,925 $10,755 $14,273
$13,769 $13,011 $12,710 $10,775 $12,530
$14,865 $14,047 $13,448 $10,796 $13,457
$15,378 $14,532 $13,974 $10,830 $14,150
OCT-96 $14,872 $14,054 $13,759 $10,865 $13,540
$15,050 $14,223 $14,325 $10,886 $13,917
$14,980 $14,156 $14,701 $10,886 $14,188
$14,515 $13,717 $14,995 $10,920 $14,543
$14,168 $13,389 $14,630 $10,954 $13,665
$13,053 $12,335 $13,940 $10,982 $12,700
$13,104 $12,384 $13,979 $10,995 $12,553
$14,675 $13,868 $15,533 $10,988 $14,439
$15,444 $14,595 $16,200 $11,001 $14,929
$15,563 $14,707 $16,953 $11,015 $15,693
$15,716 $14,852 $17,341 $11,036 $16,164
$16,747 $15,826 $18,611 $11,063 $17,454
OCT-97 $16,425 $15,522 $17,794 $11,091 $16,405
$16,509 $15,601 $17,678 $11,084 $16,014
$16,871 $15,943 $17,987 $11,071 $16,024
$16,673 $15,756 $17,703 $11,092 $15,811
$18,052 $17,059 $19,011 $11,113 $17,207
$18,875 $17,837 $19,795 $11,134 $17,930
$18,741 $17,711 $19,904 $11,154 $18,039
$17,371 $16,416 $18,831 $11,174 $16,727
$17,443 $16,483 $18,870 $11,188 $16,898
$16,119 $15,232 $17,344 $11,201 $15,487
$12,440 $11,756 $13,976 $11,215 $11,913
$13,559 $12,813 $15,070 $11,228 $13,121
OCT-98 $14,544 $13,744 $15,685 $11,255 $13,806
$16,073 $15,189 $16,507 $11,255 $14,877
$17,703 $16,730 $17,528 $11,248 $16,223
$17,587 $16,619 $17,761 $11,275 $16,953
$15,937 $15,060 $16,323 $11,289 $15,402
$15,822 $14,952 $16,577 $11,323 $15,950
$16,542 $15,632 $18,063 $11,405 $17,359
$17,674 $16,701 $18,326 $11,405 $17,387
$19,091 $18,041 $19,155 $11,405 $18,303
$19,662 $18,580 $18,630 $11,439 $17,737
$19,333 $18,270 $17,941 $11,467 $17,074
$19,724 $18,639 $17,944 $11,522 $17,403
OCT-99 $20,740 $19,599 $18,016 $11,543 $17,849
$23,975 $22,657 $19,092 $11,550 $19,736
$30,381 $28,710 $21,253 $11,550 $23,213
$32,639 $30,843 $20,911 $11,577 $22,997
$43,289 $40,908 $24,363 $11,646 $28,348
$38,419 $36,306 $22,757 $11,741 $25,369
$30,585 $28,903 $21,387 $11,748 $22,807
$28,102 $26,556 $20,141 $11,755 $20,809
$34,559 $32,659 $21,897 $11,823 $23,497
$32,925 $31,114 $21,192 $11,843 $21,484
$36,398 $34,396 $22,809 $11,858 $23,744
$34,047 $32,174 $22,138 $11,919 $22,564
OCT-00 $31,851 $30,099 $21,151 $11,940 $20,732
$26,742 $25,271 $18,979 $11,947 $16,967
$26,881 $25,403 $20,609 $11,940 $18,005
$31,066 $29,358 $21,682 $12,015 $19,462
$25,095 $23,715 $20,260 $12,063 $16,793
$21,035 $19,878 $19,269 $12,091 $15,267
$24,140 $22,812 $20,776 $12,139 $17,136
$25,719 $24,304 $21,287 $12,194 $17,533
$28,602 $27,028 $22,022 $12,214 $18,012
$23,974 $22,655 $20,830 $12,180 $16,475
$22,310 $21,083 $20,158 $12,180 $15,446
$16,795 $15,871 $17,444 $12,235 $12,954
OCT-01 $18,846 $17,809 $18,465 $12,193 $14,200
$21,575 $20,388 $19,894 $12,173 $15,386
$23,348 $22,064 $21,121 $12,125 $16,345
$20,987 $19,833 $20,902 $12,153 $15,763
$18,715 $17,685 $20,329 $12,202 $14,743
$21,134 $19,972 $21,964 $12,270 $16,024
$18,167 $17,168 $22,163 $12,339 $15,678
$16,042 $15,159 $21,179 $12,339 $14,761
$14,684 $13,877 $20,129 $12,346 $13,509
$12,057 $11,394 $17,089 $12,360 $11,433
$11,570 $10,934 $17,045 $12,400 $11,427
$10,847 $10,251 $15,821 $12,428 $10,602
OCT-02 $12,116 $11,450 $16,328 $12,448 $11,138
$13,843 $13,081 $17,786 $12,448 $12,243
$12,279 $11,603 $16,795 $12,421 $11,398
$12,411 $11,729 $16,330 $12,476 $11,089
$11,865 $11,212 $15,837 $12,572 $10,793
$11,643 $11,003 $16,041 $12,648 $10,956
$12,897 $12,188 $17,562 $12,620 $11,993
$15,184 $14,349 $19,446 $12,599 $13,345
$15,406 $14,558 $19,798 $12,613 $13,602
$16,527 $15,618 $21,037 $12,627 $14,630
$17,428 $16,469 $22,002 $12,675 $15,416
$17,531 $16,566 $21,596 $12,716 $15,026
OCT-03 $19,803 $18,713 $23,409 $12,761 $16,324
Average Annual Total Returns as of 10/31/03
CLASS A SHARES 1 Year 5 Year 10 Year
Fund (not adjusted for sales charge)(2) 63.46% 6.37% 7.07%
Fund (adjusted for maximum sales charge)(2) 54.43% 5.17% 6.47%
Russell 2000 Growth Index(3) 46.56% 3.41% 5.02%
Russell 2000 Index(3) 43.36% 8.34% 8.88%
CLASS B SHARES 1 Year 5 Year Since Inception
(July 1, 1994)
Fund (not adjusted for sales charge)(2) 61.62% 5.37% 7.27%
Fund (adjusted for maximum sales charge)(2) 56.62% 5.04% 7.27%
Russell 2000 Growth Index(3) 46.56% 3.41% 6.63%
Russell 2000 Index(3) 43.36% 8.34% 10.32%
CLASS C SHARES 1 Year 5 Year Since Inception
(March 1, 2002)
Fund (not adjusted for sales charge)(2) 62.53% N/A 2.83%
Fund (adjusted for maximum sales charge)(2) 60.01% N/A 2.20%
Russell 2000 Growth Index(3) 46.56% N/A 6.30%
Russell 2000 Index(3) 43.36% N/A 8.83%
<FN>
(1) The performance of Class B shares 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.
(2) Class A shares have a maximum sales charge of 5.5%. Class B
shares have a contingent deferred sales charge (CDSC) that
declines over five years as follows: 5-5-4-3-2-0%. Class C
shares have a 1% upfront sales charge and a 1% CDSC, which
applies to redemptions within the first 12 months. The returns
shown for the Fund assume reinvestment of all dividends and
distributions. The Fund's performance would have been lower had
the Advisor not waived a portion of its fees and the Fund's
custodian not allowed its fees to be reduced by credits.
(3) The Russell 2000 Index represents the 2,000 smallest companies
included in the Russell 3000 Index and is used to measure the
small-cap market. The Russell 2000 Growth Index measures the
performance of those companies in the Russell 2000 Index with
higher price-to-book ratios and higher forecasted growth
values. Effective March 1, 2003, the Russell 2000 Growth Index
replaced the Russell 2000 Index because WM Advisors believes
the new benchmark more accurately reflects the Fund's
performance characteristics. Indices are unmanaged and assume
reinvestment of all dividends and distributions, but do not
reflect any asset-based charges for investment management or
other expenses. Inflation is measured by the Consumer Price
Index for all urban consumers. Individuals cannot invest
directly in an index. For comparative purposes, the benchmark's
performance is shown as of the Fund's inception date, not from
the inception date of the benchmark.
Note: International investing involves increased risks due to
currency fluctuations, political or social instability, and
differences in accounting standards. There may be additional risks
associated with emerging markets. 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.
PORTFOLIO MANAGER:
LINDA C. OLSON
WM ADVISORS, INC.
The Fund is managed by an equity team led by Linda C. Olson, Senior
Portfolio Manager of WM Advisors, Inc. Ms. Olson holds the Chartered
Financial Analyst designation, and she is a Certified Financial
Planner. She joined WM Advisors in 1997 and has investment experience
dating back to 1983. Ms. Olson graduated magna cum laude from the
University of Washington and has participated in the Wharton
Executive Education program.
PERFORMANCE REVIEW
For the 12-month period ended October 31, 2003, the WM SMALL CAP
STOCK FUND posted very strong results on both an absolute and a
relative basis. For the period, the Fund generated a total return of
63.46%. These results significantly outpaced those of its benchmark,
the Russell 2000 Growth Index, which advanced 46.56%.3 (All Fund
performance described above is for Class A shares not adjusted for
sales charge.)
WHAT WERE THE MOST SIGNIFICANT FACTORS CONTRIBUTING TO THE FUND'S
PERFORMANCE OVER THE 12-MONTH PERIOD ENDED OCTOBER 31, 2003?
A sharp turnaround in the technology sector characterized the period,
and the Fund benefited from its large overweighting in small-cap
technology positions. Market sentiment experienced a turnaround over
the course of the past year as well. Throughout most of 2002,
investors were extremely risk averse and assets with higher degrees
of perceived risk struggled considerably. This trend reversed in
October of that year. Investors' appetite for risk increased quickly,
and the asset classes that had suffered the most through the downturn
began to lead the recovery. This was definitely
14
the case for small-cap growth stocks, and it was particularly true in
the technology sector. Although geopolitical uncertainty derailed the
rally in early 2003, small-cap stocks recovered to post very strong
results over the remainder of the period.
Just as investors overzealously invested in emerging companies during
the late-1990s boom, they quickly dumped these firms during the down-
turn that followed from 2000 through 2002. Many of these emerging
companies went out of business, but the ones that were able to
continue operations and grow to profitability were amply rewarded
during the period in 2003. The overall market advance was supported
by a global economic recovery on the heels of significant worldwide
monetary stimulus. Technology spending reemerged, and capital
expenditures climbed above the significant lows of the past few
years. However, they have yet to return to levels reached in the late
1990s. Prevailing overcapacity issues may need to be worked through
before firms will make strong spending and hiring commitments. Yet,
the period's bump in spending certainly helped small-cap technology
firms.
The Fund benefited from both strong stock selection and favorable
sector allocations. Its large overweighting in the technology sector
and very strong performance from, accounted for a large portion of
the Fund's advance over its benchmark. The Fund's holdings within the
sector outpaced the market as well. For example, Primus Knowledge
Solutions (+678%) skyrocketed after suffering alongside its entire
industry during the past few years. The firm provides software
applications to improve customer service. Once it reached
profitability, investors bid its stock price up quickly. Corillian
(+337%) is a technology solutions provider for financial services
firms and was one of the strongest contributors to Fund results.
Lionbridge Technologies (+273%) benefited from weakening competition
and a well-executed plan. It specializes in software testing and
localization, as well as translation of software and Internet
applications. Another strong performer was Click2Learn (+167%), which
focuses on on-line learning and training. These products were not a
priority for firms during the cost-cutting of recent years. As many
of its competitors struggled and went out of business, Click2Learn
merged with one of its competitors and is now emerging as a leader in
its industry.
Biotechnology positions also contributed to overall results. The
sector benefited from the shift in market preferences back to riskier
assets, as well as the appointment of a new commissioner of the Food
and Drug Administration (FDA). The new FDA regime has been somewhat
more prone to approval of new products than the prior administration
and pharmaceutical firms have benefited. Dendreon (+149%) was one of
the strongest contributors to overall performance. It is currently
developing a vaccine for prostate cancer.
Despite the very strong overall performance, not all Fund holdings
advanced during the period. Onyx Software (-44%) was impacted by an
over-extension in real estate spending as the firm struggled to match
capacity and growth during the boom and subsequent downturn. We still
believe in their product and continue to hold the stock in the
portfolio. In addition, Corixa (-30%) suffered as lackluster sales of
a competitor's drug helped to push its market segment lower. First
Consulting Group (+1%) which has been a Fund holding for quite some
time, struggled this year despite the sharp rally in small-cap
stocks.
WERE THERE ANY SHIFTS IN THE FUND'S PORTFOLIO HOLDINGS/SECTORS THAT
HAVE HAD A SIGNIFICANT IMPACT ON PERFORMANCE?
A major initiative during the year was the process of trimming
positions that had done very well and become richly valued. Some
firms also advanced so quickly that they represented too large a
relative position in the Fund's portfolio. Such gains led us to lock
in profits and take advantage of other opportunities in the market.
Currently, we are slowly reducing the large overweighting in
technology-based sectors relative to the Russell 2000 Growth Index,
which is comprised of 30% technology stocks. This process funded the
addition of some consumer stocks, such as retailer AnnTaylor Stores,
which has done well so far in 2003. We will continue to methodically
trim technology positions that have become fairly valued and use the
profits to spread out overall sector allocations.
WHAT IS THE OUTLOOK FOR BOTH THE FUND AND THE OVERALL ECONOMY?
Equity market conditions have dramatically improved over the past 12
months. There continues to be positive news in the small-cap arena,
but we are carefully watching valuations and market sentiment. With
memories of difficult market performance fresh in investors' minds,
sentiment can change abruptly if fundamentals fail to support the
quick market advance. We do not believe that the hyper-rebound in the
small-cap arena can continue at its current pace. Market scrutiny may
now focus on whether or not firms can continue to increase capital
investment or build sustainable profits and earnings. We will
continue to scour the small-cap market for emerging companies that
possess good business models and strong growth potential.
<FN>
(4) Allocation percentages are based on total investment value of
the portfolio as of 10/31/03. Differences from financial
statements are a result of a consolidation of industries or
sectors.
(5) Represents an industry within the Information Technology sector
which represented 40% of the Fund's total net assets as of
10/31/03.
Note: Performance information provided for individual securities held
within the Fund represents performance for the fiscal year ended
10/31/03. The Fund may not have held these securities throughout the
entire period. The economic and financial market analysis represents
the opinions of the Portfolio Manager and/or WM Advisors Inc., and it
should not be considered investment advice. No forecast based on the
opinions expressed can be guaranteed, and they may be subject to
change without notice.
Portfolio Composition as of October 31, 2003(4)
[pie chart]
Computers & Peripherals(5) 1%
Materials 1%
Telecommunication Services 1%
Communications Equipment(5) 2%
Consumer Staples 4%
Energy 4%
Industrials 6%
IT Services(5) 6%
Semiconductors(5) 6%
Financials 9%
Internet Software & Services(5) 11%
Software(5) 14%
Consumer Discretionary 15%
Health Care 20%
15
International Growth Fund
Value of a $10,000 Investment (Class A shares)(1)
[GRAPH]
MS
International
EAFE
NAV Sales Inflation Index
OCT-93 $10,000 $9,450 $10,000 $10,000
$9,434 $8,915 $10,007 $9,128
$9,974 $9,426 $10,007 $9,789
$10,676 $10,089 $10,034 $10,619
$10,396 $9,824 $10,068 $10,591
$9,881 $9,337 $10,102 $10,137
$10,180 $9,620 $10,117 $10,570
$10,208 $9,647 $10,124 $10,512
$10,049 $9,497 $10,158 $10,663
$10,330 $9,762 $10,185 $10,768
$10,555 $9,974 $10,226 $11,025
$10,208 $9,647 $10,254 $10,680
OCT-94 $10,405 $9,833 $10,261 $11,038
$9,965 $9,417 $10,274 $10,510
$9,843 $9,302 $10,274 $10,578
$9,331 $8,817 $10,315 $10,174
$9,202 $8,696 $10,357 $10,148
$9,370 $8,855 $10,391 $10,784
$9,666 $9,134 $10,425 $11,193
$9,755 $9,218 $10,446 $11,062
$9,646 $9,116 $10,467 $10,870
$10,070 $9,516 $10,467 $11,550
$9,942 $9,395 $10,494 $11,112
$10,021 $9,470 $10,515 $11,332
OCT-95 $9,814 $9,274 $10,550 $11,031
$9,912 $9,367 $10,542 $11,341
$10,323 $9,755 $10,535 $11,800
$10,687 $10,099 $10,597 $11,851
$10,604 $10,020 $10,631 $11,893
$10,697 $10,109 $10,686 $12,149
$10,853 $10,256 $10,728 $12,505
$10,812 $10,217 $10,748 $12,277
$10,916 $10,315 $10,755 $12,350
$10,396 $9,824 $10,775 $11,992
$10,520 $9,942 $10,796 $12,020
$10,760 $10,168 $10,830 $12,343
OCT-96 $10,687 $10,099 $10,865 $12,219
$11,165 $10,551 $10,886 $12,708
$11,151 $10,538 $10,886 $12,548
$11,204 $10,588 $10,920 $12,111
$11,300 $10,678 $10,954 $12,312
$11,215 $10,598 $10,982 $12,360
$11,385 $10,759 $10,995 $12,428
$12,098 $11,433 $10,988 $13,240
$12,609 $11,915 $11,001 $13,973
$13,035 $12,318 $11,015 $14,202
$11,928 $11,272 $11,036 $13,144
$12,566 $11,875 $11,063 $13,883
OCT-97 $11,173 $10,558 $11,091 $12,820
$10,928 $10,327 $11,084 $12,691
$10,873 $10,275 $11,071 $12,806
$10,956 $10,353 $11,092 $13,395
$11,655 $11,014 $11,113 $14,257
$12,283 $11,608 $11,134 $14,699
$12,591 $11,899 $11,154 $14,818
$12,484 $11,798 $11,174 $14,750
$12,081 $11,417 $11,188 $14,865
$12,212 $11,540 $11,201 $15,020
$10,482 $9,906 $11,215 $13,162
$9,973 $9,425 $11,228 $12,762
OCT-98 $10,495 $9,917 $11,255 $14,095
$11,075 $10,466 $11,255 $14,821
$11,318 $10,695 $11,248 $15,410
$11,441 $10,812 $11,275 $15,368
$11,095 $10,485 $11,289 $15,005
$11,516 $10,883 $11,323 $15,636
$11,924 $11,268 $11,405 $16,272
$11,444 $10,815 $11,405 $15,437
$12,198 $11,527 $11,405 $16,042
$12,692 $11,994 $11,439 $16,524
$12,878 $12,169 $11,467 $16,588
$13,149 $12,426 $11,522 $16,759
OCT-99 $13,767 $13,010 $11,543 $17,391
$14,855 $14,038 $11,550 $17,999
$16,970 $16,037 $11,550 $19,618
$16,083 $15,198 $11,577 $18,374
$16,596 $15,683 $11,646 $18,872
$17,021 $16,085 $11,741 $19,608
$16,221 $15,329 $11,748 $18,580
$15,471 $14,621 $11,755 $18,131
$16,333 $15,435 $11,823 $18,843
$15,396 $14,549 $11,843 $18,057
$15,684 $14,821 $11,858 $18,218
$14,421 $13,628 $11,919 $17,335
OCT-00 $13,709 $12,955 $11,940 $16,929
$13,147 $12,424 $11,947 $16,298
$13,382 $12,646 $11,940 $16,881
$13,688 $12,936 $12,015 $16,873
$12,503 $11,815 $12,063 $15,609
$11,798 $11,149 $12,091 $14,575
$12,836 $12,130 $12,139 $15,597
$12,290 $11,614 $12,194 $15,059
$11,718 $11,073 $12,214 $14,449
$11,345 $10,721 $12,180 $14,188
$10,985 $10,381 $12,180 $13,832
$9,707 $9,173 $12,235 $12,433
OCT-01 $10,146 $9,588 $12,193 $12,752
$10,719 $10,129 $12,173 $13,222
$10,877 $10,279 $12,125 $13,301
$10,367 $9,797 $12,153 $12,595
$10,448 $9,873 $12,202 $12,684
$11,039 $10,432 $12,270 $13,377
$11,026 $10,420 $12,339 $13,473
$11,053 $10,445 $12,339 $13,657
$10,555 $9,975 $12,346 $13,119
$9,521 $8,997 $12,360 $11,825
$9,387 $8,870 $12,400 $11,801
$8,423 $7,959 $12,428 $10,537
OCT-02 $9,096 $8,595 $12,448 $11,105
$9,660 $9,129 $12,448 $11,610
$9,180 $8,675 $12,421 $11,220
$8,815 $8,330 $12,476 $10,753
$8,612 $8,139 $12,572 $10,507
$8,328 $7,870 $12,648 $10,309
$9,127 $8,625 $12,620 $11,331
$9,614 $9,085 $12,599 $12,028
$9,817 $9,277 $12,613 $12,325
$10,182 $9,622 $12,627 $12,626
$10,466 $9,890 $12,675 $12,933
$10,656 $10,070 $12,716 $13,334
OCT-03 $11,346 $10,722 $12,761 $14,166
Average Annual Total Returns as of 10/31/03
CLASS A SHARES 1 Year 5 Year 10 Year
Fund (not adjusted for sales charge)(2) 24.75% 1.57% 1.27%
Fund (adjusted for maximum sales charge)(2) 17.94% 0.41% 0.69%
Morgan Stanley Capital International EAFE Index(3) 27.57% 0.09% 3.54%
CLASS B SHARES 1 Year 5 Year Since Inception
(July 1, 1994)
Fund (not adjusted for sales charge)(2) 23.35% 0.63% 0.46%
Fund (adjusted for maximum sales charge)(2) 18.35% 0.24% 0.46%
Morgan Stanley Capital International EAFE Index(3) 27.57% 0.09% 3.09%
CLASS C SHARES 1 Year 5 Year Since Inception
(March 1, 2002)
Fund (not adjusted for sales charge)(2) 23.57% N/A 4.18%
Fund (adjusted for maximum sales charge)(2) 21.26% N/A 3.53%
Morgan Stanley Capital International EAFE Index(3) 27.57% N/A 6.84%
<FN>
(1) The performance of Class B shares 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.
(2) Class A shares have a maximum sales charge of 5.5%. Class B
shares have a contingent deferred sales charge (CDSC) that
declines over five years as follows: 5-5-4-3-2-0%. Class C
shares have a 1% upfront sales charge and a 1% CDSC, which
applies to redemptions within the first 12 months. The returns
shown for the Fund assume reinvestment of all dividends and
distributions. The Fund's performance would have been lower had
the Fund's custodian not allowed its fees to be reduced by
credits.
(3) The Morgan Stanley Capital International (MSCI) EAFE Index is a
broad-based unmanaged index of equity markets representing 21
countries. It includes the stock markets of Europe,
Australasia, and the Far East weighted by capitalization. It
assumes reinvestment of all dividends and distributions, but it
does not reflect any asset-based charges for investment
management or other expenses. Inflation is measured by the
Consumer Price Index for all urban consumers. Individuals
cannot invest directly in an index. For comparative purposes,
the benchmark's performance is shown as of the Fund's inception
date, not from the inception date of the benchmark.
Note: International investing involves increased risks due to
currency fluctuations, political or social instability, and
differences in accounting standards. 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.
PORTFOLIO MANAGER:
CAPITAL GUARDIAN TRUST COMPANY
The Fund is managed by an international equity team at Capital
Guardian Trust Company. Nine portfolio managers and 30 analysts share
the management responsibilities for the Fund. The managers average
over 24 years of investment experience and have been with the firm
for an average of 21 years. The firm has managed the Fund since June
1999.
PERFORMANCE REVIEW
For the 12-month period ending October 31, 2003, the WM INTERNATIONAL
GROWTH FUND posted a total return of 24.75%. The Fund underperformed
its benchmark, the MSCI EAFE Index, which returned 27.57%.(3) Global
markets advanced for much of the period and closed it with results
that outpaced domestic markets. (All Fund performance described above
is for Class A shares not adjusted for sales charge.)
WHAT WERE THE MOST SIGNIFICANT FACTORS CONTRIBUTING TO THE FUND'S
PERFORMANCE OVER THE 12-MONTH PERIOD ENDED OCTOBER 31, 2003?
International equity markets surged toward the end of the year,
building on fresh evidence of improving global economies and
corporate profits. For the first time in several years, Pacific
markets outperformed the larger European markets by a wide margin.
Currency movements played a significant role in Fund performance,
particularly after a recent call by G-7 leaders for greater exchange
rate flexibility. The Fund's underweighted positions in the yen,
euro, and British pound were the year's main
16
performance detractors as the U.S. dollar weakened against all three
currencies.
Technology stocks, especially those in the semiconductor production
equipment sector, boosted portfolio returns, and the Fund took this
opportunity to take profits in several of these holdings. The Fund's
slight over-weighting in materials stocks, such as BHP Billiton and
Nitto Denko, also added to performance results.
Conversely, significant positions in insurance and reinsurance
companies detracted from the Fund's performance. In 2003, these
companies engaged in forced selling of securities to meet solvency
requirements, which, in turn, perpetuated a vicious cycle of losses
and more forced selling. Swiss Reinsurance, DBS Group, and AEGON were
three of the top detractors during the year.
The Fund's telecommunications holdings also hampered performance. The
market had already discounted the debt reduction efforts of many
European diversified operators, so their stock prices remained flat
following earlier gains. European wireless and equipment holdings
were also weaker due to market concerns about future growth. Media
holdings underperformed as well after the improved industry
environment Capital Guardian had expected took longer to materialize.
WERE THERE ANY SHIFTS IN THE FUND'S PORTFOLIO HOLDINGS/SECTORS THAT
HAVE HAD A SIGNIFICANT IMPACT ON PERFORMANCE?
There were no major shifts in portfolio strategy during the period.
Capital Guardian constructs the Fund's portfolio from the bottom up.
As a result, it does not make sector or country shifts, other than
those that may arise from adjustments in individual holdings. Major
shifts in these were few, leading the Fund to experience only 19%
turnover this fiscal year.
Although the portfolio maintained its overall appearance in terms of
over- and underweighted positions, Capital Guardian added to several
individual holdings. One of these was Royal Dutch Petroleum, which
ended the period where it began--as the Fund's fourth largest
position. Underperformance during the period masked the fact that the
subadvisor added to this position. It did so because it believes the
firm, one of the world's largest fully integrated oil companies, is
also one of the most undervalued of the major oil concerns. The
company's new management is restructuring and cutting costs while
extending its capital base through the acquisitions of Penzoil and
Enterprise Oil. Improving this expanded capital base remains the
firm's focus going forward, and the subadvisor believes this stock
offers an attractive dividend yield.
Capital Guardian also added to the Fund's position in Sanofi-
Synthelabo, which closed the period as the third largest portfolio
holding. This French pharmaceutical manufacturer received a share
price bounce despite market concerns about challenges from generic
drugs. Sanofi's drugs Avapro/Aprovel (for hypertension),
Stilnox/Ambien (for insomnia), and Plavix (for blood-thinning) have
been selling well, and Capital Guardian believes these companies have
good internal growth potential. Its attractive earnings profile
features a strong product pipeline, good management, and the ability
to exceed consensus earnings estimates despite currency risk.
Firms that were trimmed include Nokia, NTT DoCoMo, AstraZeneca,
Nissan Motor Co., and Vodafone. There were no major holdings
eliminated from the portfolio during the period.
WHAT IS THE OUTLOOK FOR BOTH THE FUND AND THE OVERALL ECONOMY?
Capital Guardian continues to find compelling value and dividend
yields in international markets. Price-to-book values of foreign
companies within a variety of industries look attractive relative to
historical comparisons. Falling debt burdens and improving cash flows
are also leading to rising dividend payout ratios. Telecommunications
operators, for example, are enjoying attributes similar to the
investment benefits typical of utilities: high free cash flows, the
payment of dividends, and the potential for higher dividends. The
markets largely overlooked these attributes during this past quarter,
and as a long-term investor, Capital Guardian finds them an
attractive opportunity. In contrast, it believes the recent domestic
equity market rebound rewarded a number of companies lacking the
long-term fundamentals to support current valuations.
<FN>
(4) Allocation percentages are based on total investment value of
the portfolio as of 10/31/03.
Note: Performance information provided for individual securities held
within the Fund represents performance for the fiscal year ended
10/31/03. The Fund may not have held these securities throughout the
entire period. The economic and financial market analysis represents
the opinions of the Portfolio Manager and/or WM Advisors Inc., and it
should not be considered investment advice. No forecast based on the
opinions expressed can be guaranteed, and they may be subject to
change without notice.
Portfolio Composition as of October 31, 2003(4)
[pie chart]
Australia 2%
Norway 2%
Singapore 2%
Hong Kong 3%
Spain 3%
Canada 4%
Cash Equivalents 5%
Germany 5%
Other 7%
Switzerland 8%
Netherlands 10%
France 11%
United Kingdom 17%
Japan 21%
17
Short Term Income Fund
Value of a $10,000 Investment (Class A shares)(1)
[GRAPH]
ML Citigroup Broad
(1-3 yrs.) Investment-Grade
Corporate Credit 1-3 Years
NAV Sales Inflation Index Index
OCT-93 $10,000 $9,650 $10,000 $10,000 $10,000
$10,005 $9,655 $10,007 $10,000 $10,015
$10,052 $9,700 $10,007 $10,052 $10,063
$10,098 $9,745 $10,034 $10,137 $10,139
$10,063 $9,711 $10,068 $10,072 $10,092
$9,947 $9,599 $10,102 $10,022 $10,040
$9,908 $9,561 $10,117 $9,984 $10,006
$9,915 $9,568 $10,124 $9,998 $10,019
$9,927 $9,580 $10,158 $10,036 $10,056
$9,981 $9,632 $10,185 $10,138 $10,150
$9,989 $9,639 $10,226 $10,179 $10,193
$9,993 $9,644 $10,254 $10,162 $10,175
OCT-94 $9,997 $9,647 $10,261 $10,188 $10,201
$10,002 $9,652 $10,274 $10,147 $10,158
$9,842 $9,497 $10,274 $10,171 $10,181
$9,851 $9,507 $10,315 $10,313 $10,327
$9,942 $9,594 $10,357 $10,461 $10,480
$10,037 $9,685 $10,391 $10,541 $10,549
$10,130 $9,776 $10,425 $10,641 $10,652
$10,357 $9,995 $10,446 $10,846 $10,854
$10,366 $10,003 $10,467 $10,913 $10,917
$10,375 $10,012 $10,467 $10,961 $10,972
$10,472 $10,105 $10,494 $11,000 $11,045
$10,524 $10,156 $10,515 $11,060 $11,102
OCT-95 $10,625 $10,253 $10,550 $11,161 $11,199
$10,726 $10,351 $10,542 $11,265 $11,300
$10,829 $10,450 $10,535 $11,361 $11,393
$10,933 $10,550 $10,597 $11,458 $11,495
$10,852 $10,472 $10,631 $11,420 $11,456
$10,815 $10,437 $10,686 $11,422 $11,453
$10,776 $10,399 $10,728 $11,436 $11,462
$10,786 $10,408 $10,748 $11,464 $11,497
$10,890 $10,509 $10,755 $11,556 $11,582
$10,950 $10,567 $10,775 $11,608 $11,629
$10,963 $10,579 $10,796 $11,651 $11,674
$11,069 $10,682 $10,830 $11,763 $11,787
OCT-96 $11,171 $10,780 $10,865 $11,906 $11,929
$11,268 $10,874 $10,886 $12,008 $12,023
$11,274 $10,879 $10,886 $12,009 $12,026
$11,278 $10,883 $10,920 $12,069 $12,093
$11,337 $10,940 $10,954 $12,104 $12,121
$11,349 $10,952 $10,982 $12,117 $12,119
$11,404 $11,005 $10,995 $12,226 $12,217
$11,506 $11,104 $10,988 $12,315 $12,306
$11,560 $11,156 $11,001 $12,408 $12,398
$11,720 $11,310 $11,015 $12,563 $12,555
$11,727 $11,317 $11,036 $12,573 $12,560
$11,780 $11,368 $11,063 $12,675 $12,664
OCT-97 $11,840 $11,425 $11,091 $12,762 $12,745
$11,846 $11,431 $11,084 $12,784 $12,767
$11,925 $11,508 $11,071 $12,867 $12,849
$12,034 $11,613 $11,092 $13,001 $12,980
$12,030 $11,609 $11,113 $13,014 $12,997
$12,084 $11,661 $11,134 $13,080 $13,060
$12,139 $11,714 $11,154 $13,148 $13,130
$12,192 $11,765 $11,174 $13,228 $13,207
$12,246 $11,817 $11,188 $13,299 $13,275
$12,301 $11,870 $11,201 $13,368 $13,345
$12,463 $12,027 $11,215 $13,479 $13,448
$12,625 $12,183 $11,228 $13,658 $13,630
OCT-98 $12,628 $12,186 $11,255 $13,685 $13,649
$12,625 $12,183 $11,255 $13,732 $13,694
$12,678 $12,234 $11,248 $13,795 $13,760
$12,734 $12,288 $11,275 $13,867 $13,849
$12,674 $12,231 $11,289 $13,826 $13,805
$12,779 $12,332 $11,323 $13,955 $13,926
$12,832 $12,383 $11,405 $14,014 $13,990
$12,777 $12,329 $11,405 $13,998 $13,972
$12,775 $12,328 $11,405 $14,039 $14,015
$12,831 $12,382 $11,439 $14,073 $14,036
$12,835 $12,386 $11,467 $14,088 $14,072
$12,969 $12,515 $11,522 $14,204 $14,178
OCT-99 $12,987 $12,532 $11,543 $14,253 $14,225
$13,045 $12,589 $11,550 $14,292 $14,272
$13,048 $12,591 $11,550 $14,333 $14,308
$13,051 $12,594 $11,577 $14,332 $14,318
$13,109 $12,651 $11,646 $14,436 $14,424
$13,171 $12,710 $11,741 $14,522 $14,497
$13,174 $12,713 $11,748 $14,517 $14,494
$13,235 $12,772 $11,755 $14,558 $14,541
$13,414 $12,945 $11,823 $14,731 $14,722
$13,477 $13,006 $11,843 $14,856 $14,842
$13,542 $13,068 $11,858 $14,972 $14,970
$13,664 $13,186 $11,919 $15,114 $15,118
OCT-00 $13,728 $13,248 $11,940 $15,111 $15,124
$13,853 $13,368 $11,947 $15,259 $15,266
$14,041 $13,550 $11,940 $15,423 $15,450
$14,229 $13,731 $12,015 $15,668 $15,743
$14,294 $13,793 $12,063 $15,784 $15,871
$14,425 $13,920 $12,091 $15,950 $16,018
$14,493 $13,986 $12,139 $15,991 $16,070
$14,562 $14,053 $12,194 $16,124 $16,217
$14,631 $14,119 $12,214 $16,195 $16,292
$14,824 $14,305 $12,180 $16,433 $16,526
$14,954 $14,431 $12,180 $16,554 $16,662
$15,083 $14,555 $12,235 $16,766 $16,839
OCT-01 $15,279 $14,744 $12,193 $16,922 $16,989
$15,091 $14,563 $12,173 $16,885 $16,972
$15,158 $14,627 $12,125 $16,900 $16,965
$15,223 $14,690 $12,153 $16,921 $17,019
$15,285 $14,750 $12,202 $16,951 $17,055
$15,158 $14,628 $12,270 $16,887 $16,974
$15,352 $14,815 $12,339 $17,022 $17,113
$15,483 $14,941 $12,339 $17,158 $17,262
$15,548 $15,004 $12,346 $17,249 $17,322
$15,484 $14,942 $12,360 $17,325 $17,421
$15,616 $15,069 $12,400 $17,453 $17,564
$15,744 $15,193 $12,428 $17,627 $17,741
OCT-02 $15,611 $15,065 $12,448 $17,601 $17,694
$15,746 $15,195 $12,448 $17,751 $17,825
$16,012 $15,451 $12,421 $18,003 $18,097
$16,143 $15,578 $12,476 $18,099 $18,172
$16,266 $15,697 $12,572 $18,260 $18,324
$16,254 $15,686 $12,648 $18,315 $18,386
$16,445 $15,869 $12,620 $18,472 $18,554
$16,566 $15,987 $12,599 $18,643 $18,733
$16,616 $16,034 $12,613 $18,716 $18,809
$16,458 $15,882 $12,627 $18,609 $18,676
$16,435 $15,860 $12,675 $18,631 $18,707
$16,685 $16,101 $12,716 $18,869 $18,927
OCT-03 $16,590 $16,009 $12,761 $18,805 $18,868
Average Annual Total Returns as of 10/31/03
CLASS A SHARES 1 Year 5 Year Since Inception
(November 1, 1993)
Fund (not adjusted for sales charge)(2) 6.28% 5.61% 5.19%
Fund (adjusted for maximum sales charge)(2) 2.77% 4.82% 4.82%
Citigroup Broad Investment-Grade Credit 1-3 Years Index(3) 6.63% 6.69% 6.56%
Merrill Lynch (1-3 yrs.) Corporate Bond Index(3) 6.84% 6.56% 6.52%
CLASS B SHARES 1 Year 5 Year Since Inception
(July 1, 1994)
Fund (not adjusted for sales charge)(2) 5.49% 4.82% 4.86%
Fund (adjusted for maximum sales charge)(2) 1.49% 4.82% 4.86%
Citigroup Broad Investment-Grade Credit 1-3 Years Index(3) 6.63% 6.69% 6.98%
Merrill Lynch (1-3 yrs.) Corporate Bond Index(3) 6.84% 6.56% 6.96%
CLASS C SHARES 1 Year 5 Year Since Inception
(March 1, 2002)
Fund (not adjusted for sales charge)(2) 5.48% N/A 4.23%
Fund (adjusted for maximum sales charge)(2) 3.59% N/A 3.71%
Citigroup Broad Investment-Grade Credit 1-3 Years Index(3) 6.63% N/A 6.25%
Merrill Lynch (1-3 yrs.) Corporate Bond Index(3) 6.84% N/A 6.43%
<FN>
(1) The performance of Class B shares 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.
(2) Class A shares have a maximum sales charge of 3.5%. Class B
shares have a contingent deferred sales charge (CDSC) that
declines over four years as follows: 4-4-3-2-0%. Class C shares
have a 1% upfront sales charge and a 1% CDSC, which applies to
redemptions within the first 12 months. The returns shown for
the Fund assume reinvestment of all dividends and
distributions. The Fund's performance would have been lower had
the Advisor not waived a portion of its fees or reimbursed
certain other expenses and the Fund's custodian not allowed its
fees to be reduced by credits.
(3) The Merrill Lynch (1-3 years) Corporate Bond Index is unmanaged
and includes all investment-grade corporate debt securities
with maturities of one to three years. The Citigroup Broad
Investment-Grade Credit 1-3 Years Index measures the
performance of bonds including U.S. and non-U.S. corporate
securities and non-U.S. sovereign and provincial securities
with maturities between one and three years. Effective March 1,
2003, the Citigroup Broad Investment-Grade Credit 1-3 Years
Index replaced the Merrill Lynch (1-3 Years) Corporate Bond
Index because WM Advisors believes the new benchmark more
accurately reflects the Fund's performance characteristics.
Indices assume reinvestment of all dividends and distributions,
but do not reflect any asset-based charges for investment
management or other expenses. Inflation is measured by the
Consumer Price Index for all urban consumers. Individuals
cannot invest directly in an index. For comparative purposes,
the benchmark's performance is shown as of the Fund's inception
date, not from the inception date of the benchmark.
Note: There may be additional credit and default risks associated
with lower-rated securities. 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.
PORTFOLIO MANAGER:
CRAIG V. SOSEY
WM ADVISORS, INC.
The Fund is managed by a fixed-income team led by Craig V. Sosey,
Senior Portfolio Manager of WM Advisors, Inc. Mr. Sosey joined WM
Advisors in 1998, and he has banking and financial analysis
experience dating back to 1983. He holds a B.S. in Finance from the
University of the Pacific and an M.B.A. from the University of
California, Berkeley.
PERFORMANCE REVIEW
The WM SHORT TERM INCOME FUND posted a total return of 6.28% (Class A
shares not adjusted for sales charge) for the 12-month period ended
October 31, 2003. The Fund benefited from both a concentration in
corporate issues and falling short-term interest rates. Although
declining short-term rates can boost overall performance, lower rates
also affect the Fund's yield. At the close of the period, the Fund's
30-day SEC yield was 2.15% for Class A shares, 1.48% for Class B
shares, and 1.46% for Class C shares.
WHAT WERE THE MOST SIGNIFICANT FACTORS CONTRIBUTING TO THE FUND'S
PERFORMANCE OVER THE 12-MONTH PERIOD ENDED OCTOBER 31, 2003?
Interest rates sank to historical lows as the Federal Reserve
utilized a highly accommodative monetary policy. Attempting to spur
economic growth and avoid potential deflation, the Fed cut the
federal funds rate twice during the last 12 months. Its last cut in
June dropped this rate to 1%. Subsequently, interest rates spiked
higher in response to stronger economic growth. The yield of the two-
year Treasury actually ended the fiscal year slightly higher than
18
where it began. Corporate bonds led the fixed-income market
throughout the period, outpacing both Treasury bonds and mortgage-
backed issues.
The Fund was overweighted in corporate bond positions. These holdings
performed well all year as yield spreads between corporate and
Treasury bonds declined in response to improving balance sheets and
better economic conditions. We were a little early when we moved into
corporate bonds during 2002, but it rewarded the Fund during the
recent period.
The Fund also benefited from our discerning credit research, which
helped us avoid any major corporate bond defaults. It also helped us
find attractive values that may have been overlooked by the market.
For example, our analysis of Canadian phone company TELUS led us to
retain the holding after its debt was downgraded to below investment-
grade. The Fund was rewarded after the firm returned to investment-
grade status and generated a strong return for its bondholders. We
tried to take advantage of similar situations where our credit
research uncovered opportunities missed by much of the fixed-income
market. Sealed Air, a manufacturer of materials and systems for fresh
food packaging, was constrained by an acquisition's asbestos
problems, and its bond prices suffered. We were encouraged by the
company's fundamentals and were rewarded as the firm largely worked
through these issues.
We also tried to capitalize on firms that suffered alongside their
parent corporation but, in our opinion, retained intrinsic value. We
purchased bonds of El Paso Natural Gas that rallied off of lows after
it became apparent that they had been oversold in response to the
parent company's problems.
We took a small loss on the sale of bonds of Philip Morris, which was
hampered by legal problems.
WERE THERE ANY SHIFTS IN THE FUND'S PORTFOLIO HOLDINGS/SECTORS THAT
HAVE HAD A SIGNIFICANT IMPACT ON PERFORMANCE?
The yield advantage of corporate issues narrowed dramatically during
the year, driving strong performance, especially for lower-rated
issues. Currently, the yield differential between short-term AA rated
and BBB rated bonds is small. This led us toward higher-rated issues
that we believe carry less risk but nearly the same yield. For
example, we purchased bonds of Berkshire Hathaway and Toyota Motor
Credit, which offered AAA ratings and very competitive yield
characteristics.
Late in the period, we began to take some profits in our corporate
bond positions and shift some of these assets into mortgage-backed
securities. We believe these issues may have already seen the bulk of
refinancing and prepayment activities. We added holdings in real
estate investment trusts due to their strong yields, as well as debt
restrictions and interest coverage requirements not offered by
corporate bonds.
The Fund closed the fiscal year with over 96% of assets in
investment-grade securities and an average rating of Aa3.(4) The Fund's
securities have a weighted average maturity of just 2.4 years and a
weighted average duration (a measurement of price sensitivity to
interest rate changes) of only 2.0 years, factors that could limit
the risk associated with potentially rising interest rates.
WHAT IS THE OUTLOOK FOR BOTH THE FUND AND THE OVERALL ECONOMY?
We plan to hold the Fund's duration near the two-year range because
of the increased likelihood that short-term rates could move higher
in the wake of economic growth. Part of this strategy will rely on
balancing very short-term positions with holdings in the five-year
maturity range. The short end of the yield curve is typically the
most affected by rising interest rates. We will be watching for signs
of a flattening yield curve.
(4) Ratings are for portfolio holdings and are provided by Moody's
Investors Service (Moody's). The ratings represent the
company's opinion of the credit quality of securities and are
intended to reflect the issuer's ability to pay back principal
and interest. Allocation percentages are based on total
investment value of the portfolio as of 10/31/03. Differences
from financial statements are a result of a consolidation of
industries or sectors.
Note: Performance information provided for individual securities held
within the Fund represents performance for the fiscal year ended
10/31/03. The Fund may not have held these securities throughout the
entire period. The economic and financial market analysis represents
the opinions of the Portfolio Manager and/or WM Advisors Inc., and it
should not be considered investment advice. No forecast based on the
opinions expressed can be guaranteed, and they may be subject to
change without notice.
Portfolio Composition as of October 31, 2003(4)
[pie chart]
U.S. Treasuries 3%
U.S. $ Foreign Corporate Bonds 4%
Asset-Backed Securities 5%
Government Agency 13%
Mortgage-Backed Securities 13%
Cash Equivalents 15%
Domestic Corporate Bonds 47%
19
U.S. Government Securities Fund
Value of a $10,000 Investment (Class A shares)(1)
[GRAPH]
Lehman
Brothers
Government Citgroup
Bond Mortgage
NAV Sales Index Inflation Index
OCT-93 $10,000 $9,550 $10,000 $10,000 $10,000
$9,894 $9,449 $9,890 $10,007 $9,982
$9,954 $9,506 $9,929 $10,007 $10,057
$10,076 $9,623 $10,065 $10,034 $10,158
$9,873 $9,429 $9,851 $10,068 $10,095
$9,587 $9,156 $9,630 $10,102 $9,846
$9,476 $9,050 $9,553 $10,117 $9,784
$9,487 $9,060 $9,541 $10,124 $9,817
$9,432 $9,008 $9,519 $10,158 $9,793
$9,624 $9,191 $9,694 $10,185 $9,984
$9,626 $9,192 $9,696 $10,226 $10,005
$9,435 $9,011 $9,560 $10,254 $9,871
OCT-94 $9,390 $8,967 $9,553 $10,261 $9,868
$9,374 $8,952 $9,536 $10,274 $9,832
$9,465 $9,039 $9,594 $10,274 $9,914
$9,684 $9,248 $9,772 $10,315 $10,136
$9,933 $9,486 $9,982 $10,357 $10,394
$10,006 $9,556 $10,045 $10,391 $10,437
$10,148 $9,691 $10,177 $10,425 $10,577
$10,592 $10,115 $10,587 $10,446 $10,919
$10,654 $10,175 $10,668 $10,467 $10,977
$10,595 $10,118 $10,629 $10,467 $10,999
$10,730 $10,247 $10,753 $10,494 $11,100
$10,833 $10,346 $10,857 $10,515 $11,199
OCT-95 $10,990 $10,495 $11,022 $10,550 $11,302
$11,147 $10,645 $11,194 $10,542 $11,435
$11,305 $10,797 $11,352 $10,535 $11,576
$11,370 $10,858 $11,422 $10,597 $11,665
$11,110 $10,610 $11,189 $10,631 $11,573
$10,997 $10,502 $11,096 $10,686 $11,534
$10,924 $10,433 $11,025 $10,728 $11,481
$10,894 $10,404 $11,006 $10,748 $11,466
$11,035 $10,538 $11,148 $10,755 $11,612
$11,058 $10,560 $11,176 $10,775 $11,658
$11,017 $10,521 $11,151 $10,796 $11,660
$11,215 $10,710 $11,336 $10,830 $11,856
OCT-96 $11,491 $10,974 $11,586 $10,865 $12,087
$11,747 $11,218 $11,787 $10,886 $12,253
$11,586 $11,065 $11,667 $10,886 $12,199
$11,610 $11,088 $11,680 $10,920 $12,302
$11,623 $11,100 $11,696 $10,954 $12,316
$11,458 $10,942 $11,572 $10,982 $12,214
$11,663 $11,138 $11,739 $10,995 $12,399
$11,768 $11,239 $11,840 $10,988 $12,515
$11,918 $11,382 $11,973 $11,001 $12,659
$12,285 $11,732 $12,313 $11,015 $12,894
$12,138 $11,592 $12,191 $11,036 $12,870
$12,335 $11,780 $12,374 $11,063 $13,024
OCT-97 $12,545 $11,981 $12,588 $11,091 $13,164
$12,593 $12,026 $12,652 $11,084 $13,209
$12,735 $12,162 $12,785 $11,071 $13,329
$12,877 $12,297 $12,977 $11,092 $13,453
$12,864 $12,285 $12,941 $11,113 $13,494
$12,893 $12,313 $12,978 $11,134 $13,547
$12,971 $12,387 $13,036 $11,154 $13,623
$13,085 $12,496 $13,170 $11,174 $13,719
$13,199 $12,605 $13,321 $11,188 $13,779
$13,241 $12,645 $13,341 $11,201 $13,847
$13,404 $12,801 $13,687 $11,215 $13,973
$13,579 $12,968 $14,057 $11,228 $14,140
OCT-98 $13,547 $12,937 $14,009 $11,255 $14,124
$13,627 $13,014 $14,013 $11,255 $14,190
$13,654 $13,040 $14,044 $11,248 $14,261
$13,732 $13,114 $14,126 $11,275 $14,359
$13,622 $13,009 $13,789 $11,289 $14,306
$13,700 $13,083 $13,843 $11,323 $14,404
$13,738 $13,120 $13,875 $11,405 $14,475
$13,650 $13,036 $13,753 $11,405 $14,378
$13,560 $12,950 $13,725 $11,405 $14,345
$13,495 $12,888 $13,705 $11,439 $14,247
$13,483 $12,876 $13,705 $11,467 $14,238
$13,681 $13,065 $13,816 $11,522 $14,481
OCT-99 $13,736 $13,118 $13,838 $11,543 $14,558
$13,736 $13,118 $13,819 $11,550 $14,570
$13,673 $13,057 $13,729 $11,550 $14,522
$13,596 $12,984 $13,748 $11,577 $14,411
$13,746 $13,127 $13,943 $11,646 $14,581
$13,882 $13,257 $14,189 $11,741 $14,737
$13,886 $13,261 $14,149 $11,748 $14,744
$13,876 $13,252 $14,157 $11,755 $14,756
$14,151 $13,514 $14,409 $11,823 $15,075
$14,237 $13,596 $14,549 $11,843 $15,171
$14,419 $13,770 $14,764 $11,858 $15,395
$14,561 $13,905 $14,806 $11,919 $15,559
OCT-00 $14,648 $13,989 $14,948 $11,940 $15,675
$14,847 $14,179 $15,242 $11,947 $15,907
$15,076 $14,397 $15,546 $11,940 $16,162
$15,291 $14,603 $15,703 $12,015 $16,413
$15,394 $14,701 $15,882 $12,063 $16,504
$15,468 $14,772 $15,937 $12,091 $16,611
$15,455 $14,760 $15,775 $12,139 $16,628
$15,514 $14,816 $15,827 $12,194 $16,731
$15,558 $14,858 $15,900 $12,214 $16,754
$15,833 $15,120 $16,281 $12,180 $17,066
$15,964 $15,246 $16,483 $12,180 $17,222
$16,197 $15,469 $16,770 $12,235 $17,475
OCT-01 $16,461 $15,721 $17,203 $12,193 $17,713
$16,256 $15,524 $16,817 $12,173 $17,550
$16,155 $15,428 $16,671 $12,125 $17,487
$16,304 $15,570 $16,779 $12,153 $17,659
$16,481 $15,740 $16,934 $12,202 $17,851
$16,255 $15,524 $16,566 $12,270 $17,671
$16,569 $15,824 $16,961 $12,339 $18,001
$16,688 $15,938 $17,062 $12,339 $18,133
$16,824 $16,067 $17,301 $12,346 $18,279
$17,019 $16,253 $17,682 $12,360 $18,486
$17,169 $16,396 $18,032 $12,400 $18,648
$17,318 $16,539 $18,454 $12,428 $18,784
OCT-02 $17,346 $16,565 $18,306 $12,448 $18,855
$17,309 $16,530 $18,149 $12,448 $18,837
$17,507 $16,719 $18,588 $12,421 $19,036
$17,533 $16,744 $18,541 $12,476 $19,090
$17,666 $16,871 $18,840 $12,572 $19,221
$17,641 $16,847 $18,785 $12,648 $19,214
$17,710 $16,913 $18,872 $12,620 $19,287
$17,776 $16,976 $19,362 $12,599 $19,297
$17,761 $16,962 $19,262 $12,613 $19,338
$17,346 $16,565 $18,466 $12,627 $18,989
$17,457 $16,671 $18,570 $12,675 $19,113
$17,780 $16,980 $19,110 $12,716 $19,440
OCT-03 $17,684 $16,888 $18,839 $12,761 $19,374
Average Annual Total Returns as of 10/31/03
CLASS A SHARES 1 Year 5 Year 10 Year
Fund (not adjusted for sales charge)(2) 1.94% 5.47% 5.87%
Fund (adjusted for maximum sales charge)(2) -2.67% 4.50% 5.38%
Citigroup Mortgage Index(3) 2.75% 6.52% 6.84%
Lehman Brothers Government Bond Index(3) 2.91% 6.10% 6.54%
CLASS B SHARES 1 Year 5 Year Since Inception
(March 30, 1994)
Fund (not adjusted for sales charge)(2) 1.20% 4.70% 5.75%
Fund (adjusted for maximum sales charge)(2) -3.80% 4.36% 5.75%
Citigroup Mortgage Index(3) 2.75% 6.52% 7.32%
Lehman Brothers Government Bond Index(3) 2.91% 6.10% 7.25%
CLASS C SHARES 1 Year 5 Year Since Inception
(March 1, 2002)
Fund (not adjusted for sales charge)(2) 1.12% N/A 3.50%
Fund (adjusted for maximum sales charge)(2) -0.86% N/A 2.89%
Citigroup Mortgage Index(3) 2.75% N/A 5.03%
Lehman Brothers Government Bond Index(3) 2.91% N/A 6.61%
<FN>
(1) The performance of Class B shares 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.
(2) Class A shares have a maximum sales charge of 4.5%. Class B
shares have a contingent deferred sales charge (CDSC) that
declines over five years as follows: 5-5-4-3-2-0%. Class C
shares have a 1% upfront sales charge and a 1% CDSC, which
applies to redemptions within the first 12 months. The returns
shown for the Fund assume reinvestment of all dividends and
distributions. The Fund's performance would have been lower had
the Advisor not waived a portion of its fees and the Fund's
custodian not allowed its fees to be reduced by credits.
(3) The Lehman Brothers Government Bond Index is an unmanaged index
of all U.S. government bonds. The Citigroup Mortgage Index
represents the mortgage-backed securities component of
Citigroup's Broad Investment-Grade Bond Index, and consists of
30- and 15-year agency issued (GNMA, FNMA, and FHLMC) pass-
through securities as well as FNMA and FHLMC balloon mortgages.
Effective March 1, 2003, the Citigroup Mortgage Index replaced
the Lehman Brothers Government Bond Index because WM Advisors
believes the new benchmark more accurately reflects the Fund's
performance characteristics. Indices assume reinvestment of all
dividends and distributions, but do not reflect any asset-based
charges for investment management or other expenses. Inflation
is measured by the Consumer Price Index for all urban
consumers. Individuals cannot invest directly in an index. For
comparative purposes, the benchmark's performance is shown as
of the Fund's inception date, not from the inception date of
the benchmark.
Note: Neither the principal of government bond funds nor their yields
are guaranteed by the U.S. government. 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.
PORTFOLIO MANAGER:
CRAIG V. SOSEY
WM ADVISORS, INC.
The Fund is managed by a fixed-income team led by Craig V. Sosey,
Senior Portfolio Manager of WM Advisors, Inc. Mr. Sosey joined WM
Advisors in 1998, and he has banking and financial analysis
experience dating back to 1983. He holds a B.S. in Finance from the
University of the Pacific and an M.B.A. from the University of
California, Berkeley.
PERFORMANCE REVIEW
The WM U.S. GOVERNMENT SECURITIES FUND posted a total return of 1.94%
for the 12-month period ended October 31, 2003. (Fund performance
described above is for Class A shares not adjusted for sales charge.)
As of the close of the period, the Fund's 30-day SEC yield was 3.02%
for Class A shares, 2.44% for Class B shares, and 2.43% for Class C
shares.
WHAT WERE THE MOST SIGNIFICANT FACTORS CONTRIBUTING TO THE FUND'S
PERFORMANCE OVER THE 12-MONTH PERIOD ENDED OCTOBER 31, 2003?
The period's key performance drivers were the rapid changes in
interest rates and the relative underperformance of mortgage-backed
holdings. A spike in Treasury and mortgage rates in late June and
July erased much of the gains generated by the Fund in prior months.
Mortgages, which represent the majority of Fund holdings, suffered
from record refinancing activity that pushed prepayments higher
throughout the year. In general, falling mortgage rates, like those
of this period, provide mortgage holders with greater incentive to
refinance and lead them to prepay their existing mortgages. These
assets must then be invested at
20
lower interest rates. Under these types of market conditions,
mortgage securities do not get as much of a price benefit from
falling rates, but they are just as susceptible to a downswing in
prices as interest rates rise.
After falling to historical lows early in the period, interest rates
reacted to improving economic conditions and changing market views of
the Federal Reserve's actions. When the Fed announced a June rate cut
of 25 basis points (0.25%), the market had been expecting more
drastic stimulus measures, and long-term rates quickly moved higher.
In fact, the yield on the 10-year Treasury bond jumped from a low of
3.13% in mid-June to 4.58% in just two months.(4) Mortgage rates
moved just as rapidly, and even though both rate measures settled
lower in October, the damage had been done. A slightly longer
maturity structure compared to the overall market helped the Fund
during the decline in interest rates. However, the Fund gave back
some of those gains when rates moved higher.
WERE THERE ANY SHIFTS IN THE FUND'S PORTFOLIO HOLDINGS/SECTORS THAT
HAVE HAD A SIGNIFICANT IMPACT ON PERFORMANCE?
In general, we keep about 75% of the portfolio in core holdings
designed to track the overall mortgage market. We use the other 25%
to gain the yield, stability, or liquidity offered by securities such
as Treasuries, agency issues, or collateralized mortgage obligations.
These securities help our strategy of seeking relative performance
strength in the mortgage/government-backed market.
We also typically keep duration (a measure of price sensitivity to
interest rate changes) relatively close to that of the overall
market, attempting to limit interest rate risk while taking advantage
of longer-term secular trends in rates. During the period, the
duration of both the Fund and the overall mortgage market shortened
considerably as a result of the rapid rise in mortgage prepayments.
Duration moved higher after rates increased and prepayments began to
slow. At the end of the period, the Fund's securities had a weighted
average maturity of 4.3 years and a weighted average duration of 3.4
years.
To maintain yield and duration, we tried to avoid lower coupon
mortgages and instead favored Treasury and agency bonds. These
positions also suffered during the early summer and underperformed
the overall fixed-income market. We looked for mortgage securities
with prepayment protection and also used collateralized mortgage
obligations to reduce the impact of prepayments.
WHAT IS THE OUTLOOK FOR BOTH THE FUND AND THE OVERALL ECONOMY?
In response to a stronger economic environment, we moved the Fund to
a more defensive stance in the last few months of the period. We
believe there is increased potential for interest rates to rise above
their current levels, especially if employment conditions improve.
Job growth, an important determinant of future consumption, has
lagged the rest of the economy during the recovery period.
For the near term, we plan to hold the Fund to a slightly short-to-
neutral duration to limit interest rate risk. We are also looking for
higher-coupon mortgages to generate yield since we are less concerned
with prepayment risk than we were during the past 12 months. Although
mortgage-backed securities struggled during this period, they can
provide yield advantages relative to other areas of the fixed-income
market and can perform relatively well in a stable interest rate
environment.
(4) Source: The Federal Reserve Board. Represents rates from June
13, 2003 to August 13, 2003.
(5) Allocation percentages are based on total investment value of
the portfolio as of 10/31/03. Differences from financial
statements are a result of a consolidation of industries or
sectors.
Note: Performance information provided for individual securities held
within the Fund represents performance for the fiscal year ended
10/31/03. The Fund may not have held these securities throughout the
entire period. The economic and financial market analysis represents
the opinions of the Portfolio Manager and/or WM Advisors Inc., and it
should not be considered investment advice. No forecast based on the
opinions expressed can be guaranteed, and they may be subject to
change without notice.
Portfolio Composition as of October 31, 2003(5)
[pie chart]
U.S. Treasuries 4%
Government Agency 5%
Cash Equivalents 7%
GNMA 9%
CMOs 11%
FHLMC/FGLMC 29%
FNMA 35%
21
Income Fund
Value of a $10,000 Investment (Class A shares)(1)
[GRAPH]
Lehman
Brothers
Aggregate Citigroup Broad
Bond Investment-Grade
NAV Sales Index Inflation Index
OCT-93 $10,000 $9,550 $10,000 $10,000 $10,000
$9,853 $9,410 $9,915 $10,007 $9,916
$9,909 $9,463 $9,969 $10,007 $9,972
$10,077 $9,624 $10,103 $10,034 $10,106
$9,826 $9,384 $9,927 $10,068 $9,938
$9,517 $9,089 $9,682 $10,102 $9,692
$9,428 $9,004 $9,605 $10,117 $9,619
$9,395 $8,972 $9,604 $10,124 $9,618
$9,382 $8,960 $9,583 $10,158 $9,598
$9,558 $9,128 $9,773 $10,185 $9,780
$9,570 $9,139 $9,785 $10,226 $9,791
$9,404 $8,981 $9,641 $10,254 $9,650
OCT-94 $9,370 $8,949 $9,632 $10,261 $9,641
$9,359 $8,938 $9,611 $10,274 $9,615
$9,430 $9,006 $9,678 $10,274 $9,688
$9,601 $9,169 $9,869 $10,315 $9,888
$9,837 $9,395 $10,104 $10,357 $10,119
$9,919 $9,472 $10,166 $10,391 $10,178
$10,090 $9,636 $10,308 $10,425 $10,318
$10,626 $10,148 $10,707 $10,446 $10,727
$10,716 $10,234 $10,785 $10,467 $10,802
$10,643 $10,164 $10,761 $10,467 $10,781
$10,796 $10,311 $10,892 $10,494 $10,905
$10,937 $10,444 $10,997 $10,515 $11,007
OCT-95 $11,080 $10,581 $11,140 $10,550 $11,155
$11,260 $10,753 $11,307 $10,542 $11,329
$11,465 $10,949 $11,466 $10,535 $11,485
$11,548 $11,029 $11,541 $10,597 $11,563
$11,240 $10,735 $11,341 $10,631 $11,367
$11,143 $10,642 $11,261 $10,686 $11,284
$11,067 $10,569 $11,198 $10,728 $11,201
$11,054 $10,556 $11,176 $10,748 $11,195
$11,188 $10,685 $11,325 $10,755 $11,340
$11,211 $10,707 $11,356 $10,775 $11,370
$11,211 $10,706 $11,337 $10,796 $11,354
$11,426 $10,912 $11,534 $10,830 $11,552
OCT-96 $11,733 $11,205 $11,790 $10,865 $11,811
$12,002 $11,462 $11,992 $10,886 $12,006
$11,862 $11,328 $11,880 $10,886 $11,900
$11,900 $11,364 $11,917 $10,920 $11,946
$11,921 $11,384 $11,947 $10,954 $11,959
$11,765 $11,235 $11,814 $10,982 $11,839
$11,935 $11,398 $11,991 $10,995 $12,008
$12,097 $11,553 $12,105 $10,988 $12,121
$12,308 $11,754 $12,249 $11,001 $12,265
$12,763 $12,189 $12,580 $11,015 $12,598
$12,590 $12,024 $12,473 $11,036 $12,490
$12,806 $12,230 $12,658 $11,063 $12,673
OCT-97 $13,011 $12,426 $12,841 $11,091 $12,855
$13,066 $12,478 $12,900 $11,084 $12,915
$13,109 $12,519 $13,031 $11,071 $13,047
$13,233 $12,638 $13,197 $11,092 $13,215
$13,285 $12,687 $13,187 $11,113 $13,205
$13,387 $12,785 $13,232 $11,134 $13,257
$13,431 $12,827 $13,300 $11,154 $13,326
$13,591 $12,980 $13,427 $11,174 $13,453
$13,695 $13,078 $13,541 $11,188 $13,564
$13,674 $13,059 $13,569 $11,201 $13,592
$13,727 $13,110 $13,791 $11,215 $13,801
$13,976 $13,347 $14,113 $11,228 $14,126
OCT-98 $13,791 $13,171 $14,038 $11,255 $14,062
$14,026 $13,395 $14,118 $11,255 $14,140
$14,045 $13,413 $14,161 $11,248 $14,184
$14,184 $13,546 $14,261 $11,275 $14,289
$13,855 $13,232 $14,012 $11,289 $14,038
$13,932 $13,305 $14,089 $11,323 $14,119
$14,097 $13,463 $14,134 $11,405 $14,166
$13,980 $13,351 $14,010 $11,405 $14,036
$13,892 $13,267 $13,965 $11,405 $13,987
$13,885 $13,261 $13,906 $11,439 $13,932
$13,881 $13,257 $13,899 $11,467 $13,922
$14,013 $13,382 $14,060 $11,522 $14,089
OCT-99 $14,066 $13,433 $14,112 $11,543 $14,131
$14,071 $13,437 $14,111 $11,550 $14,130
$14,061 $13,428 $14,043 $11,550 $14,066
$14,080 $13,447 $13,997 $11,577 $14,026
$14,221 $13,581 $14,166 $11,646 $14,190
$14,399 $13,751 $14,353 $11,741 $14,374
$14,318 $13,674 $14,312 $11,748 $14,331
$14,208 $13,569 $14,304 $11,755 $14,319
$14,552 $13,897 $14,602 $11,823 $14,618
$14,689 $14,028 $14,735 $11,843 $14,752
$14,990 $14,315 $14,949 $11,858 $14,962
$14,976 $14,302 $15,043 $11,919 $15,064
OCT-00 $14,933 $14,261 $15,142 $11,940 $15,160
$15,055 $14,378 $15,390 $11,947 $15,405
$15,334 $14,644 $15,677 $11,940 $15,697
$15,766 $15,057 $15,932 $12,015 $15,955
$15,801 $15,090 $16,071 $12,063 $16,097
$15,776 $15,066 $16,151 $12,091 $16,181
$15,728 $15,021 $16,083 $12,139 $16,105
$15,785 $15,075 $16,180 $12,194 $16,211
$15,840 $15,127 $16,241 $12,214 $16,264
$16,266 $15,534 $16,605 $12,180 $16,640
$16,463 $15,722 $16,796 $12,180 $16,823
$16,392 $15,655 $16,991 $12,235 $17,031
OCT-01 $16,756 $16,002 $17,346 $12,193 $17,375
$16,688 $15,937 $17,107 $12,173 $17,134
$16,576 $15,830 $16,997 $12,125 $17,034
$16,761 $16,007 $17,135 $12,153 $17,168
$16,885 $16,126 $17,301 $12,202 $17,332
$16,745 $15,992 $17,014 $12,270 $17,045
$17,062 $16,294 $17,344 $12,339 $17,369
$17,142 $16,371 $17,491 $12,339 $17,516
$17,108 $16,338 $17,643 $12,346 $17,645
$16,979 $16,215 $17,857 $12,360 $17,855
$17,266 $16,489 $18,159 $12,400 $18,168
$17,458 $16,672 $18,453 $12,428 $18,457
OCT-02 $17,364 $16,582 $18,368 $12,448 $18,374
$17,553 $16,763 $18,362 $12,448 $18,371
$17,920 $17,113 $18,743 $12,421 $18,752
$18,033 $17,221 $18,759 $12,476 $18,766
$18,336 $17,511 $19,018 $12,572 $19,033
$18,394 $17,567 $19,003 $12,648 $19,015
$18,744 $17,900 $19,161 $12,620 $19,183
$19,254 $18,387 $19,517 $12,599 $19,537
$19,246 $18,380 $19,478 $12,613 $19,503
$18,559 $17,724 $18,824 $12,627 $18,843
$18,654 $17,814 $18,948 $12,675 $18,972
$19,172 $18,309 $19,450 $12,716 $19,470
OCT-03 $19,120 $18,260 $19,269 $12,761 $19,290
Average Annual Total Returns as of 10/31/03
CLASS A SHARES 1 Year 5 Year 10 Year
Fund (not adjusted for sales charge)(2) 10.10% 6.74% 6.69%
Fund (adjusted for maximum sales charge)(2) 5.09% 5.78% 6.20%
Citigroup Broad Investment-Grade Index(3) 4.99% 6.53% 6.79%
Lehman Brothers Aggregate Bond Index(3) 4.91% 6.54% 6.78%
CLASS B SHARES 1 Year 5 Year Since Inception
(March 30, 1994)
Fund (not adjusted for sales charge)(2) 9.31% 5.98% 6.71%
Fund (adjusted for maximum sales charge)(2) 4.31% 5.66% 6.71%
Citigroup Broad Investment-Grade Index(3) 4.99% 6.53% 7.45%
Lehman Brothers Aggregate Bond Index(3) 4.91% 6.54% 7.45%
CLASS C SHARES 1 Year 5 Year Since Inception
(March 1, 2002)
Fund (not adjusted for sales charge)(2) 9.33% N/A 6.90%
Fund (adjusted for maximum sales charge)(2) 7.25% N/A 6.28%
Citigroup Broad Investment-Grade Index(3) 4.99% N/A 6.63%
Lehman Brothers Aggregate Bond Index(3) 4.91% N/A 6.68%
<FN>
(1) The performance of Class B shares 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.
(2) Class A shares have a maximum sales charge of 4.5%. Class B
shares have a contingent deferred sales charge (CDSC) that
declines over five years as follows: 5-5-4-3-2-0%. Class C
shares have a 1% upfront sales charge and a 1% CDSC, which
applies to redemptions within the first 12 months. The returns
shown for the Fund assume reinvestment of all dividends and
distributions. The Fund's performance would have been lower had
the Advisor and Distributor not waived a portion of their fees
and the Fund's custodian not allowed its fees to be reduced by
credits.
(3) The Lehman Brothers Aggregate Bond Index is unmanaged and
represents all investment-grade, government, corporate,
mortgage, and asset-backed securities. The Citigroup Broad
Investment-Grade Index measures the performance of bonds
including U.S. and non-U.S. corporate securities and non-U.S.
sovereign and provincial securities. It includes
institutionally traded U.S. Treasury, government-sponsored,
mortgage, asset-backed and investment-grade securities.
Effective March 1, 2003, the Citigroup Broad Investment-Grade
Index replaced the Lehman Brothers Aggregate Bond Index because
WM Advisors believes the new benchmark more accurately reflects
the Fund's performance characteristics. Indices assume
reinvestment of all dividends and distributions, but do not
reflect any asset-based charges for investment management or
other expenses. Inflation is measured by the Consumer Price
Index for all urban consumers. Individuals cannot invest
directly in an index. For comparative purposes, the benchmark's
performance is shown as of the Fund's inception date, not from
the inception date of the benchmark.
Note: There may be additional credit and default risks associated
with lower-rated securities. 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.
PORTFOLIO MANAGER:
GARY J. POKRZYWINSKI
WM ADVISORS, INC.
The Fund is managed by a fixed-income team led by Gary J.
Pokrzywinski, Senior Portfolio Manager of WM Advisors, Inc. and head
of its Fixed-Income Investment Team. Mr. Pokrzywinski, CFA, joined WM
Advisors in 1992, and he has investment experience that dates back to
1984. He holds a Business Degree from the University of Wisconsin,
Milwaukee.
PERFORMANCE REVIEW
For the 12-month period ended October 31, 2003, the WM INCOME FUND
posted a total return of 10.10%, more than double the results of its
benchmark, which returned 4.99% over the same period.3 (Fund
performance described above is for Class A shares not adjusted for
sales charge.) In today's low interest rate environment, the yield of
the Fund remains attractive and can provide an income stream. As of
the close of the period, the Fund's 30-day SEC yield was 4.16% for
Class A shares, 3.61% for Class B shares, and 3.56% for Class C
shares.
WHAT WERE THE MOST SIGNIFICANT FACTORS CONTRIBUTING TO THE FUND'S
PERFORMANCE OVER THE 12-MONTH PERIOD ENDED OCTOBER 31, 2003?
Corporate bond issues benefited as appetite for risk returned to the
fixed-income market. In fact, as risky assets returned to favor,
corporate bond performance aligned inversely with credit ratings so
that lower-rated issues provided the market's strongest results.
As a result, the Fund's performance for the period benefited from its
overweighting in corporate bonds. This was especially true within
lower-rated, higher-
22
yielding sectors of the corporate bond market. Investment-grade
corporate bonds also performed very well, just not to the magnitude
of the results reported by high-yield issues. Although we were a
little early to build up positions in corporates, this strategy
ultimately assisted the Fund over the past 12 months and helped to
drive strong relative performance.
The period was also marked by historical lows in mortgage rates,
which spurred record levels of refinancing. The resulting prepayments
adversely affected the performance of mortgage-backed bonds, and
mortgage positions were neutral to the Fund's overall performance.
However, we believe that market conditions for these securities have
improved and that they could provide strong yield characteristics in
a more stable to slightly rising interest rate environment.
Currently, we are looking to add to the Fund's mortgage holdings.
Within sectors, we underweighted many of the financial services
firms that we believed were richly valued. We steered clear of
problems in the utilities sector, but took advantage of a subsector
within utilities that performed very well. This group included the
bonds of regulated companies that were also subsidiaries of a
nonregulated, troubled parent company. These firms tended to trade
down alongside the parent. However, the regulated subsidiaries were
able to maintain revenue streams and their bonds traded much higher
during the period. One such example is Illinois Power, a subsidiary
of Dynegy, which had problems in 2002. We purchased Illinois Power at
a significant discount, and these bonds rallied considerably during
the period. The Fund also benefited from its purchase of Qwest, a
subsidiary of struggling U.S. West. The position in Qwest rebounded
nicely during the period, adding value to the Fund.
Lack of exposure to 2002's major corporate bond defaults benefited
the Fund, but one position did adversely affect Fund performance
during the past 12 months. DVI, a health care equipment-financing
firm, defaulted after growing pains and questionable accounting
practices led to bankruptcy. Despite this outcome, the Fund has
avoided much of the large-scale negative impact from the escalating
default rates of recent years.
WERE THERE ANY SHIFTS IN THE FUND'S PORTFOLIO HOLDINGS/SECTORS THAT
HAVE HAD A SIGNIFICANT IMPACT ON PERFORMANCE?
We typically maintain the portfolio's core corporate bond positions
and look for opportunities in other areas of the fixed-income market.
Throughout this period, we kept positions in higher-yielding bonds
within a 15%-20% range, but we still see some opportunities available
in this area of the market. These issues benefited from the cleansing
of corporate balance sheets and improving economic conditions because
their performance is much more closely tied to economic fundamentals
than interest rate changes. Yield spreads for corporate bonds
relative to Treasuries plunged during the period, but room for
additional movements in the market's lower-rated end may remain.
With regard to other portfolio shifts, we added to mortgages near the
end of the period after prepayment risk subsided. We view mortgages
as having as good a risk/reward profile as investment-grade corporate
bonds. Looking toward the upcoming fiscal year, we plan to keep our
weighting in Treasury bonds relatively low. This is because of the
possibility that interest rates could rise on the heels of improving
economic conditions, and therefore, other types of bonds could
provide better performance.
At the close of the period, the Fund's securities had a weighted
average maturity of 8.1 years and a weighted average duration (a
measurement of price sensitivity to interest rate changes) of 5.4
years. This intermediate-term maturity structure will limit interest
rate risk relative to longer-term holdings if yields begin to rise.
Although the Fund has taken advantage of higher-yielding issues, it
remains concentrated in highly rated bonds, with 80% of assets in
investment-grade securities and an average rating of A3.(4)
WHAT IS THE OUTLOOK FOR BOTH THE FUND AND THE OVERALL ECONOMY?
We believe that the possibility that interest rates will climb off
their current lows looks increasingly likely, but the fixed-income
market has already anticipated this and priced it into the current
yield curve. (The yield curve is defined as the distribution of
yields relative to maturities.) The yield curve became a little
steeper in late June and July after stronger economic conditions
caused long-term rates to spike higher but did not affect short-term
rates. If short-term rates should rise quickly, longer-term rates
will likely not move to the same magnitude, and the yield curve will
flatten. Yet, the Federal Reserve may wait until it sees clear signs
of job growth before beginning to raise short-term rates. Because of
the potential for quick interest rate shifts, we may hold the Fund's
maturity and duration relatively neutral and look for incremental
value in mortgages and higher-yielding bonds.
(4) Ratings are for portfolio holdings and are provided by Moody's
Investors Service (Moody's). The ratings represent the
company's opinion of the credit quality of securities and are
intended to reflect the issuer's ability to pay back principal
and interest.
(5) Allocation percentages are based on total investment value of
the portfolio as of 10/31/03. Differences from financial
statements are a result of a consolidation of industries or
sectors.
Note: Performance information provided for individual securities held
within the Fund represents performance for the fiscal year ended
10/31/03. The Fund may not have held these securities throughout the
entire period. The economic and financial market analysis represents
the opinions of the Portfolio Manager and/or WM Advisors Inc., and it
should not be considered investment advice. No forecast based on the
opinions expressed can be guaranteed, and they may be subject to
change without notice.
Portfolio Composition as of October 31, 2003(5)
[pie chart]
U.S. $ Foreign Government Bonds 1%
U.S. Treasuries 5%
U.S. $ Foreign Corporate Bonds 7%
Cash & Other 7%
Mortgage-Backed 25%
Domestic Corporate Bonds 55%
23
High Yield Fund
Value of a $10,000 Investment (Class A shares)(1)
[GRAPH]
Lehman Citigroup
Brothers High Yield
High Yield Market
NAV Sales Inflation Index Index
INCEPTION 4/8/98 $10,000 $9,550
APR-98 $9,997 $9,547 $10,000 $10,000 $10,000
$9,965 $9,517 $10,018 $10,035 $10,027
$9,918 $9,471 $10,030 $10,071 $10,049
$9,892 $9,447 $10,042 $10,129 $10,129
$9,345 $8,925 $10,054 $9,569 $9,450
$9,336 $8,916 $10,066 $9,612 $9,567
OCT-98 $9,310 $8,891 $10,090 $9,415 $9,436
$9,686 $9,250 $10,090 $9,806 $9,909
$9,670 $9,235 $10,084 $9,817 $9,902
$9,834 $9,391 $10,108 $9,962 $10,050
$9,722 $9,284 $10,121 $9,903 $9,966
$9,899 $9,453 $10,151 $9,998 $10,050
APR-99 $10,259 $9,798 $10,225 $10,192 $10,260
$10,269 $9,807 $10,225 $10,054 $10,099
$10,366 $9,900 $10,225 $10,033 $10,077
$10,499 $10,026 $10,256 $10,073 $10,099
$10,397 $9,929 $10,280 $9,961 $9,978
$10,456 $9,986 $10,330 $9,889 $9,903
OCT-99 $10,451 $9,981 $10,348 $9,824 $9,835
$10,628 $10,149 $10,355 $9,940 $9,989
$10,832 $10,344 $10,355 $10,051 $10,073
$10,897 $10,406 $10,379 $10,008 $9,990
$10,981 $10,487 $10,441 $10,027 $10,014
$11,051 $10,554 $10,526 $9,817 $9,810
APR-00 $11,144 $10,642 $10,533 $9,832 $9,849
$10,949 $10,456 $10,539 $9,731 $9,712
$11,052 $10,554 $10,600 $9,930 $9,930
$11,237 $10,732 $10,618 $10,005 $10,038
$11,353 $10,842 $10,631 $10,073 $10,113
$11,276 $10,768 $10,686 $9,985 $10,004
OCT-00 $11,004 $10,509 $10,704 $9,666 $9,708
$10,570 $10,094 $10,711 $9,283 $9,311
$10,666 $10,186 $10,704 $9,462 $9,502
$11,419 $10,905 $10,772 $10,171 $10,142
$11,249 $10,742 $10,815 $10,306 $10,263
$10,827 $10,340 $10,840 $10,063 $10,076
APR-01 $10,823 $10,336 $10,883 $9,938 $9,928
$10,773 $10,288 $10,932 $10,117 $10,087
$10,683 $10,202 $10,950 $9,834 $9,810
$10,764 $10,280 $10,920 $9,978 $9,995
$10,896 $10,405 $10,920 $10,096 $10,131
$10,564 $10,089 $10,969 $9,418 $9,402
OCT-01 $10,786 $10,301 $10,932 $9,650 $9,714
$11,011 $10,515 $10,913 $10,003 $10,083
$11,001 $10,506 $10,871 $9,962 $10,018
$11,261 $10,755 $10,896 $10,031 $10,061
$11,312 $10,803 $10,939 $9,891 $9,952
$11,545 $11,026 $11,000 $10,129 $10,217
APR-02 $11,579 $11,058 $11,062 $10,291 $10,384
$11,513 $10,995 $11,062 $10,238 $10,255
$11,066 $10,568 $11,069 $9,483 $9,352
$10,707 $10,226 $11,081 $9,069 $8,929
$10,752 $10,269 $11,117 $9,327 $9,269
$10,527 $10,053 $11,142 $9,205 $9,087
OCT-02 $10,735 $10,252 $11,160 $9,125 $9,056
$11,284 $10,776 $11,160 $9,690 $9,747
$11,405 $10,892 $11,136 $9,826 $9,865
$11,643 $11,119 $11,185 $10,153 $10,233
$11,775 $11,246 $11,271 $10,278 $10,370
$12,070 $11,527 $11,339 $10,574 $10,719
APR-03 $12,649 $12,080 $11,314 $11,201 $11,385
$13,118 $12,528 $11,296 $11,316 $11,461
$13,400 $12,797 $11,308 $11,642 $11,817
$13,341 $12,741 $11,320 $11,514 $11,642
$13,246 $12,650 $11,364 $11,646 $11,762
$13,538 $12,929 $11,400 $11,964 $12,110
OCT-03 $13,972 $13,344 $11,441 $12,206 $12,392
Average Annual Total Returns as of 10/31/03
CLASS A SHARES 1 Year 5 Year Since Inception
(April 8, 1998)
Fund (not adjusted for sales charge)(2) 30.13% 8.45% 6.19%
Fund (adjusted for maximum sales charge)(2) 24.32% 7.45% 5.32%
Citigroup High Yield Market Index(3) 36.84% 5.60% 3.98%
Lehman Brothers High Yield Index(3) 33.76% 5.33% 3.69%
CLASS B SHARES 1 Year 5 Year Since Inception
(May 5, 1998)
Fund (not adjusted for sales charge)(2) 29.08% 7.63% 5.59%
Fund (adjusted for maximum sales charge)(2) 24.07% 7.33% 5.59%
Citigroup High Yield Market Index(3) 36.84% 5.60% 3.99%
Lehman Brothers High Yield Index(3) 33.76% 5.33% 3.68%
CLASS C SHARES 1 Year 5 Year Since Inception
(March 1, 2002)
Fund (not adjusted for sales charge)(2) 29.08% N/A 12.51%
Fund (adjusted for maximum sales charge)(2) 26.73% N/A 11.80%
Citigroup High Yield Market Index(3) 36.84% N/A 14.06%
Lehman Brothers High Yield Index(3) 33.76% N/A 13.45%
<FN>
(1) The performance of Class B shares 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.
(2) Class A shares have a maximum sales charge of 4.5%. Class B
shares have a contingent deferred sales charge (CDSC) that
declines over five years as follows: 5-5-4-3-2-0%. Class C
shares have a 1% upfront sales charge and a 1% CDSC, which
applies to redemptions within the first 12 months. The returns
shown for the Fund assume reinvestment of all dividends and
distributions. The Fund's performance would have been lower had
the Advisor not waived a portion of its fees and the Fund's
custodian not allowed its fees to be reduced by credits.
(3) The Lehman Brothers High Yield Index is unmanaged and generally
represents below-investment-grade corporate debt securities.
The Citigroup High Yield Market Index measures the performance
of below-investment grade debt issued by corporations domiciled
in the U.S. or Canada. Effective March 1, 2003, the Citigroup
High Yield Market Index replaced the Lehman Brothers High Yield
Index because WM Advisors believes the new benchmark more
accurately reflects the Fund's performance characteristics.
Indices assume reinvestment of all dividends and distributions,
but do not reflect any asset-based charges for investment
management or other expenses. Inflation is measured by the
Consumer Price Index for all urban consumers. Individuals
cannot invest directly in an index. For comparative purposes,
the benchmark's performance is shown as of the Fund's inception
date, not from the inception date of the benchmark. However,
the benchmark's performance for Class A shares is calculated as
of 4/30/98 and its performance for Class B shares is calculated
as of 5/31/98.
(4) The effective yield shown is uncharacteristically high due to
the timing of dividend payments.
Note: International investing involves increased risks due to
currency fluctuations, political or social instability, and
differences in accounting standards. There may be additional credit
and default risks associated with lower-rated securities. 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.
PORTFOLIO MANAGER:
GARY J. POKRZYWINSKI
WM ADVISORS, INC.
The Fund is managed by a fixed-income team led by Gary J.
Pokrzywinski, Senior Portfolio Manager of WM Advisors, Inc. and head
of its Fixed-Income Investment Team. Mr. Pokrzywinski, CFA, joined WM
Advisors in 1992, and he has investment experience that dates back to
1984. He holds a Business Degree from the University of Wisconsin,
Milwaukee.
PERFORMANCE REVIEW
The WM HIGH YIELD FUND posted a total return of 30.13% (Class A
shares not adjusted for sales charge) for the 12-month period ended
October 31, 2003. Lower-rated bonds performed very well in response
to improving balance sheets and stronger economic conditions. In the
currently low interest rate environment, the yield of the Fund also
remains attractive. At the end of the period, the Fund's 30-day SEC
yield was 6.39% for Class A shares, 5.92% for Class B shares, and
5.86% for Class C shares.
WHAT WERE THE MOST SIGNIFICANT FACTORS CONTRIBUTING TO THE FUND'S
PERFORMANCE OVER THE 12-MONTH PERIOD ENDED OCTOBER 31, 2003?
The performance of high-yield bonds led that of all other fixed-
income asset classes for the fiscal year. Fixed-income investors
overcame their aversion to higher-risk assets and sustained a rally
in high-yield bonds that actually began before the one in equities.
Yield spreads of lower-rated bonds relative to Treasuries were at
historical highs last summer and then began to quickly fall, driving
the powerful performance within the high-yield sector. High-yield
bonds tend to be more closely tied to economic
24
conditions and less sensitive to changes in interest rates than the
rest of the fixed-income market. The period's performance from these
issues was supported by significant cost-cutting measures and
increased productivity that helped firms cleanse their balance sheets
and improve their financial positions.
Our holdings in convertible bonds performed well during the period.
Many of these positions were within the technology sector, where
issues responded quickly to the shift in the market cycle. These
firms had suffered through two previous years of weak technology
spending. As market sentiment shifted, they saw their bonds rewarded
for the operating leverage they had built once they returned to
profitability. One of the Fund's best-performing issues was Conexant,
a convertible bond that more than doubled in price during the period.
Several other holdings added significant value to the Fund's overall
results. We purchased a position in Brazilian government bonds during
the period, and these issues appreciated in line with the global
economic recovery and the return to favor of emerging markets. Our
position in TELUS, a Canadian telephone company, also contributed to
Fund performance. We tried to avoid problems in the utilities sector,
but we took advantage of a subsector within utilities that performed
well. This group included the bonds of regulated companies that were
also subsidiaries of a nonregulated, troubled parent company. These
firms tended to trade down alongside their parent. However, the
regulated subsidiaries were able to maintain revenue streams, and
their bonds traded much higher during the period. Such positions in
Illinois Power and El Paso Natural Gas added to Fund performance.
The health care sector also provided positive performance
contributions, as well as one notable default. We purchased
HEALTHSOUTH after a management scandal, and the Fund benefited as the
position rebounded. Our health care real estate positions provided
strong results during the period as clarity over government funding
became apparent. Their strong yields and opportunities for growth
make their risk-to-reward characteristics look attractive. In
contrast, the default of DVI Inc., which represented approximately 2%
of Fund assets, adversely affected performance. DVI is a health care
equipment-financing firm that defaulted after growing pains and
questionable accounting practices led to bankruptcy.
WERE THERE ANY SHIFTS IN THE FUND'S PORTFOLIO HOLDINGS/SECTORS THAT
HAVE HAD A SIGNIFICANT IMPACT ON PERFORMANCE?
Overall, we have been very pleased with Fund performance during the
market upturn of the past 12 months, as well as during the downturn
of the two prior fiscal years. We started to get more aggressive near
the end of last period, and although we were a little early in making
this shift, the Fund greatly benefited this fiscal year. We reduced
cash positions and began to build on assets in the lower end of the
Fund's credit range. This strategy helped the Fund as corporate bond
performance aligned inversely with credit ratings--the lowest-rated
segments led the fixed-income market throughout the period.
We also sought investments that the rest of the market may have
ignored. For example, we purchased bonds of Northwest Airlines that
are equipment trust issues backed by the firm's fleet of planes. We
also bought the bonds of satellite radio provider XM Satellite.
Another firm, Royal Caribbean, suffered through a period of weakness,
and we purchased its bonds at a discount only to benefit as they
rallied during the period.
WHAT IS THE OUTLOOK FOR BOTH THE FUND AND THE OVERALL ECONOMY?
The past year was very strong for high-yield bonds, and we believe
that this market may still have the potential for additional
narrowing in yield differentials relative to Treasuries. Therefore,
high-yield bonds should not be as sensitive to the impact of rising
interest rates, which the market now anticipates. However, we also
believe that market conditions are such that it would not be
reasonable to expect Fund performance in the upcoming fiscal year to
match that of the year just completed.
There is potential for short-term rates to rise, but longer-term
rates could hold somewhat steadier, leading to a flattening of the
distribution of yields relative to maturities. This scenario would be
fueled by Federal Reserve intervention on signs of employment growth.
We are gradually moving to a slightly less aggressive stance because
the lowest-rated bonds rallied considerably during the period. Many
issues in the high-yield arena have already appreciated, and we are
not finding as many opportunities as were available this time last
year. However, improving economic fundamentals will help corporate
balance sheets, and high-yield bonds continue to offer strong yield
advantages.
(5) Allocation percentages are based on total investment value of
the portfolio as of 10/31/03. Differences from financial
statements are a result of a consolidation of industries or
sectors.
Note: Performance information provided for individual securities held
within the Fund represents performance for the fiscal year ended
10/31/03. The Fund may not have held these securities throughout the
entire period. The economic and financial market analysis represents
the opinions of the Portfolio Manager and/or WM Advisors Inc., and it
should not be considered investment advice. No forecast based on the
opinions expressed can be guaranteed, and they may be subject to
change without notice.
Portfolio Composition as of October 31, 2003(5)
[pie chart]
Cash Equivalents 1%
U.S. $ Foreign Government Bonds 5%
Equities 8%
U.S. $ Foreign Corporate Bonds 11%
Domestic Corporate Bonds 75%
25
Tax-Exempt Bond Fund
Value of a $10,000 Investment (Class A shares)(1)
[GRAPH]
Lehman
Brothers
Municipal
Bond
NAV Sales Index Inflation
OCT-93 $10,000 $9,550 $10,000 $10,000
$9,842 $9,399 $9,912 $10,007
$10,062 $9,610 $10,121 $10,007
$10,178 $9,720 $10,237 $10,034
$9,876 $9,432 $9,971 $10,068
$9,426 $9,002 $9,566 $10,102
$9,466 $9,040 $9,647 $10,117
$9,559 $9,129 $9,731 $10,124
$9,485 $9,058 $9,671 $10,158
$9,669 $9,234 $9,848 $10,185
$9,686 $9,250 $9,883 $10,226
$9,507 $9,080 $9,738 $10,254
OCT-94 $9,329 $8,910 $9,564 $10,261
$9,137 $8,726 $9,391 $10,274
$9,405 $8,982 $9,598 $10,274
$9,700 $9,264 $9,872 $10,315
$10,019 $9,568 $10,160 $10,357
$10,090 $9,636 $10,276 $10,391
$10,093 $9,639 $10,289 $10,425
$10,445 $9,975 $10,617 $10,446
$10,339 $9,874 $10,525 $10,467
$10,423 $9,954 $10,625 $10,467
$10,521 $10,047 $10,759 $10,494
$10,577 $10,101 $10,827 $10,515
OCT-95 $10,758 $10,274 $10,984 $10,550
$10,980 $10,486 $11,167 $10,542
$11,122 $10,621 $11,274 $10,535
$11,180 $10,677 $11,359 $10,597
$11,069 $10,571 $11,282 $10,631
$10,891 $10,401 $11,138 $10,686
$10,823 $10,336 $11,107 $10,728
$10,825 $10,338 $11,102 $10,748
$10,925 $10,433 $11,223 $10,755
$11,026 $10,530 $11,325 $10,775
$11,028 $10,532 $11,323 $10,796
$11,159 $10,657 $11,482 $10,830
OCT-96 $11,264 $10,757 $11,611 $10,865
$11,454 $10,939 $11,823 $10,886
$11,402 $10,889 $11,773 $10,886
$11,407 $10,893 $11,795 $10,920
$11,509 $10,991 $11,903 $10,954
$11,351 $10,840 $11,745 $10,982
$11,428 $10,913 $11,844 $10,995
$11,595 $11,073 $12,021 $10,988
$11,701 $11,175 $12,149 $11,001
$12,063 $11,520 $12,486 $11,015
$11,900 $11,364 $12,369 $11,036
$12,020 $11,479 $12,516 $11,063
OCT-97 $12,098 $11,554 $12,596 $11,091
$12,161 $11,614 $12,670 $11,084
$12,383 $11,825 $12,855 $11,071
$12,494 $11,932 $12,988 $11,092
$12,463 $11,902 $12,992 $11,113
$12,470 $11,909 $13,003 $11,134
$12,384 $11,827 $12,945 $11,154
$12,564 $11,998 $13,149 $11,174
$12,618 $12,050 $13,200 $11,188
$12,627 $12,058 $13,233 $11,201
$12,840 $12,262 $13,439 $11,215
$12,974 $12,390 $13,607 $11,228
OCT-98 $12,949 $12,366 $13,607 $11,255
$12,971 $12,387 $13,654 $11,255
$13,011 $12,426 $13,688 $11,248
$13,163 $12,571 $13,851 $11,275
$13,103 $12,513 $13,790 $11,289
$13,095 $12,506 $13,810 $11,323
$13,134 $12,543 $13,844 $11,405
$13,028 $12,442 $13,764 $11,405
$12,786 $12,210 $13,566 $11,405
$12,809 $12,232 $13,614 $11,439
$12,666 $12,096 $13,506 $11,467
$12,622 $12,054 $13,511 $11,522
OCT-99 $12,462 $11,901 $13,365 $11,543
$12,534 $11,970 $13,507 $11,550
$12,439 $11,879 $13,405 $11,550
$12,344 $11,789 $13,348 $11,577
$12,553 $11,988 $13,503 $11,646
$12,817 $12,240 $13,798 $11,741
$12,719 $12,147 $13,717 $11,748
$12,640 $12,071 $13,646 $11,755
$12,974 $12,390 $14,007 $11,823
$13,154 $12,562 $14,202 $11,843
$13,370 $12,768 $14,421 $11,858
$13,251 $12,655 $14,346 $11,919
OCT-00 $13,398 $12,795 $14,502 $11,940
$13,507 $12,899 $14,612 $11,947
$13,866 $13,242 $14,973 $11,940
$13,975 $13,347 $15,121 $12,015
$14,027 $13,396 $15,170 $12,063
$14,138 $13,502 $15,306 $12,091
$13,922 $13,295 $15,141 $12,139
$14,087 $13,453 $15,304 $12,194
$14,197 $13,558 $15,407 $12,214
$14,420 $13,771 $15,635 $12,180
$14,698 $14,037 $15,893 $12,180
$14,606 $13,949 $15,839 $12,235
OCT-01 $14,756 $14,092 $16,020 $12,193
$14,570 $13,915 $15,885 $12,173
$14,407 $13,759 $15,734 $12,125
$14,616 $13,958 $16,006 $12,153
$14,821 $14,154 $16,200 $12,202
$14,499 $13,847 $15,882 $12,270
$14,801 $14,135 $16,192 $12,339
$14,894 $14,224 $16,291 $12,339
$15,044 $14,367 $16,464 $12,346
$15,255 $14,568 $16,676 $12,360
$15,447 $14,752 $16,876 $12,400
$15,832 $15,119 $17,246 $12,428
OCT-02 $15,499 $14,802 $16,959 $12,448
$15,456 $14,760 $16,888 $12,448
$15,822 $15,110 $17,245 $12,421
$15,700 $14,994 $17,201 $12,476
$15,970 $15,252 $17,442 $12,572
$15,967 $15,249 $17,453 $12,648
$16,122 $15,397 $17,568 $12,620
$16,501 $15,758 $17,979 $12,599
$16,374 $15,637 $17,902 $12,613
$15,744 $15,035 $17,275 $12,627
$15,921 $15,205 $17,405 $12,675
$16,426 $15,687 $17,916 $12,716
OCT-03 $16,321 $15,587 $17,830 $12,761
Average Annual Total Returns as of 10/31/03
CLASS A SHARES 1 Year 5 Year 10 Year
Fund (not adjusted for sales charge)(2) 5.31% 4.74% 5.02%
Fund (adjusted for maximum sales charge)(2) 0.63% 3.78% 4.54%
Lehman Brothers Municipal Bond Index(3) 5.11% 5.55% 5.95%
CLASS B SHARES 1 Year 5 Year Since Inception
(March 30, 1994)
Fund (not adjusted for sales charge)(2) 4.53% 3.96% 5.00%
Fund (adjusted for maximum sales charge)(2) -0.47% 3.62% 5.00%
Lehman Brothers Municipal Bond Index(3) 5.11% 5.55% 6.71%
CLASS C SHARES 1 Year 5 Year Since Inception
(March 1, 2002)
Fund (not adjusted for sales charge)(2) 4.54% N/A 5.17%
Fund (adjusted for maximum sales charge)(2) 2.50% N/A 4.53%
Lehman Brothers Municipal Bond Index(3) 5.11% N/A 5.91%
<FN>
(1) The performance of Class B shares 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.
(2) Class A shares have a maximum sales charge of 4.5%. Class B
shares have a contingent deferred sales charge (CDSC) that
declines over five years as follows: 5-5-4-3-2-0%. Class C
shares have a 1% upfront sales charge and a 1% CDSC, which
applies to redemptions within the first 12 months. The returns
shown for the Fund assume reinvestment of all dividends and
distributions. The Fund's performance would have been lower had
the Fund's custodian not allowed its fees to be reduced by
credits.
(3) The Lehman Brothers Municipal Bond Index is a total return
performance benchmark for the long-term, investment-grade, tax-
exempt bond market. It is unmanaged and assumes reinvestment of
all dividends and distributions, but it does not reflect any
asset-based charges for investment management or other
expenses. Inflation is measured by the Consumer Price Index for
all urban consumers. Individuals cannot invest directly in an
index. For comparative purposes, the benchmark's performance is
shown as of the Fund's inception date, not from the inception
date of the benchmark.
(4) A portion of the Fund's income may be subject to some state
and/or local taxes and it may be subject to federal alternative
minimum tax (AMT) for certain investors. Tax-equivalent SEC
yield is based on a 35% federal tax bracket.
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.
PORTFOLIO MANAGER:
THOMAS M. BYRON
VAN KAMPEN INVESTMENT ADVISORY CORP.
The Fund is managed by Thomas M. Byron of Van Kampen Investment
Advisory Corp., which has had management responsibilities for the
Fund since January 1999. Mr. Byron has been with Van Kampen since
1981 and currently serves as Vice President. He received a B.S. in
Finance from Marquette University and an M.B.A. from DePaul
University.
PERFORMANCE REVIEW
The WM TAX-EXEMPT BOND FUND returned 5.31% (Class A shares not
adjusted for sales charge) for the 12-month period ended October 31,
2003. This outpaced the performance of its benchmark index, which was
5.11% for the same period.(3) As of October 31, 2003, the Fund's 30-day
SEC yield was 3.88% for Class A shares, 3.31% for Class B shares, and
3.28% for Class C shares. On a tax-equivalent basis, the yield was
5.96% for Class A shares, 5.09% for Class B shares, and 5.05% for
Class C shares.(4)
WHAT WERE THE MOST SIGNIFICANT FACTORS CONTRIBUTING TO THE FUND'S
PERFORMANCE OVER THE 12-MONTH PERIOD ENDED OCTOBER 31, 2003?
The economy's surging growth near the fiscal year's end contrasted
with its persistent weakness during earlier quarters. One of the most
widely watched economic indicators, employment strength, was in
negative territory for much of the period. Repeated comments from
government officials and Wall Street commentators suggested that the
economy might be entering a deflationary period, and this seemed to
weigh heavily on the minds of investors over the course of the year.
The Federal Reserve
26
attempted to allay these fears and keep the economy moving in the
right direction by cutting the federal funds target rate twice during
the period for a total reduction of 0.75%.
The uncertain climate had a definite effect on the municipal bond
market. Although yields on intermediate- and long-term bonds ended
the period approximately where they began, the road between these two
points was decidedly bumpy. The 12-month period can be divided into
two distinct market environments. The first of these, which lasted
from October 2002 to mid-June 2003, saw municipal yields drop by
roughly 80 basis points (0.80%) to levels not seen since the late
1960s. These plummeting yields led to a surge in issuance as
municipalities moved to lock in low financing, and, in the case of
older bonds, low refinancing costs. These record levels of supply met
with substantial demand as investors in search of relative stability
poured cash into municipal bond funds. The municipal market reversed
abruptly in mid-June, when yields began to climb from historical
lows. During this interval, investors shifted their attention to the
advancing equity market, which reduced demand. Issuance remained
strong, but it abated somewhat during the period's last three months.
These forces combined to lift municipal bond yields from their lows
so that they ended the period close to where they began.
At the same time, ongoing budgetary and fiscal difficulties at the
state and local level contributed to ratings downgrades. In July,
Standard & Poor's downgraded California three notches to BBB from A.
Moody's also downgraded the state, shifting it to A3 from A2, but
California continued to issue debt at record levels to address its
cash and budget problems. Valuations in its municipal bond market
declined to extremely low levels during the period. This drew
interest from many national investors seeking to benefit from the
relatively attractive yields available in the state's market. Van
Kampen attempted to take advantage of this situation by increasing
the Fund's California holdings to 10.5% of total assets.
Throughout the year, Van Kampen monitored the portfolio composition
in terms of maturity and coupon structures so that it could keep the
Fund's duration (a measure of sensitivity to interest rate changes)
slightly shorter than that of its benchmark. This strategy resulted
from the historical steepness of the yield curve, which plots the
difference in yields between shorter- and longer-term bonds. A
majority of the securities purchased were premium coupons in the 15-
to 20-year maturity range. Van Kampen believes these bonds offer an
attractive income stream, as well as strong relative return potential
if the yield curve eventually begins to flatten.
WERE THERE ANY SHIFTS IN THE FUND'S PORTFOLIO HOLDINGS/SECTORS THAT
HAVE HAD A SIGNIFICANT IMPACT ON PERFORMANCE?
The high credit quality portfolio, which remained basically unchanged
during the period, positively impacted the Fund's performance.
Securities rated Aa and higher increased just slightly to 93% of Fund
net assets.(5) However, individual rating categories changed as
insured bonds were increased by 4% and Aa positions were reduced.
Adjustments to sector concentrations included increases in water and
sewer, power, and education positions. Holdings were reduced in the
general obligation, hospital, and industrial development sectors.
WHAT IS THE OUTLOOK FOR BOTH THE FUND AND THE OVERALL ECONOMY?
Van Kampen believes the economy has shown some signs of improvement,
though the employment picture remains soft. It continues to expect
gains in economic growth into the first half of 2004, although the
likelihood of a sustained rebound is uncertain. The Fed is on hold
for the foreseeable future but could begin tightening when it
believes sustained growth has arrived. When the market perceives this
tightening, the yield curve should begin to flatten as short-term
rates rise faster than long-term rates.
Market and investor perceptions of the equity market could play a
major role in the amount of cash allocated to municipal bonds and
bond funds. If equities continue to improve, it may put more upward
pressure on rates, which will then have a bearing on interest rate
spreads in the municipal market.
Van Kampen's current strategy is to maintain the Fund's high credit
quality and liquidity. It also plans to keep duration slightly shorter
than that of the benchmark until the Fed begins to raise short-term
interest rates. It will try to take advantage of California's present
circumstances and add securities from this market when it believes the
levels are attractive. Van Kampen will also continue to seek premium
securities priced to a call in the 15- to 20-year maturity range and
to monitor the market for compelling opportunities, as well as signs
of risk.
(5) Ratings are for portfolio holdings and are provided by Moody's
Investors Service (Moody's). If issues are not rated by
Moody's, the equivalent Standard & Poor's rating is converted
and incorporated (non-rated issues are not classified by either
service). Allocation percentages are based on total investment
value of the portfolio as of 10/31/03.
Note: Performance information provided for individual securities
held within the Fund represents performance for the fiscal year ended
10/31/03. The Fund may not have held these securities throughout the
entire period. The economic and financial market analysis represents
the opinions of the Portfolio Manager and/or WM Advisors Inc., and it
should not be considered investment advice. No forecast based on the
opinions expressed can be guaranteed, and they may be subject to
change without notice.
Portfolio Composition as of October 31, 2003(5)
[pie chart]
Non-Rated/Other 1%
Baa 3%
A 3%
Aa 23%
Aaa 70%
27
California Municipal Fund
Value of a $10,000 Investment (Class A shares)(1)
[GRAPH]
Lehman
Brothers
Municipal
Bond
NAV Sales Index Inflation
OCT-93 $10,000 $9,550 $10,000 $10,000
$9,852 $9,409 $9,912 $10,007
$10,073 $9,619 $10,121 $10,007
$10,179 $9,721 $10,237 $10,034
$9,913 $9,467 $9,971 $10,068
$9,407 $8,983 $9,566 $10,102
$9,416 $8,992 $9,647 $10,117
$9,488 $9,061 $9,731 $10,124
$9,417 $8,993 $9,671 $10,158
$9,570 $9,140 $9,848 $10,185
$9,607 $9,175 $9,883 $10,226
$9,479 $9,053 $9,738 $10,254
OCT-94 $9,287 $8,869 $9,564 $10,261
$9,056 $8,648 $9,391 $10,274
$9,205 $8,791 $9,598 $10,274
$9,514 $9,086 $9,872 $10,315
$9,805 $9,364 $10,160 $10,357
$9,919 $9,473 $10,276 $10,391
$9,939 $9,491 $10,289 $10,425
$10,254 $9,792 $10,617 $10,446
$10,130 $9,674 $10,525 $10,467
$10,178 $9,720 $10,625 $10,467
$10,304 $9,841 $10,759 $10,494
$10,382 $9,914 $10,827 $10,515
OCT-95 $10,547 $10,072 $10,984 $10,550
$10,742 $10,259 $11,167 $10,542
$10,870 $10,381 $11,274 $10,535
$10,919 $10,428 $11,359 $10,597
$10,859 $10,370 $11,282 $10,631
$10,699 $10,217 $11,138 $10,686
$10,688 $10,207 $11,107 $10,728
$10,688 $10,207 $11,102 $10,748
$10,778 $10,293 $11,223 $10,755
$10,890 $10,400 $11,325 $10,775
$10,930 $10,438 $11,323 $10,796
$11,073 $10,575 $11,482 $10,830
OCT-96 $11,196 $10,692 $11,611 $10,865
$11,382 $10,870 $11,824 $10,886
$11,350 $10,839 $11,774 $10,886
$11,370 $10,859 $11,797 $10,920
$11,464 $10,948 $11,905 $10,954
$11,347 $10,836 $11,747 $10,982
$11,431 $10,916 $11,845 $10,995
$11,579 $11,058 $12,023 $10,988
$11,729 $11,201 $12,152 $11,001
$12,093 $11,549 $12,488 $11,015
$11,995 $11,456 $12,371 $11,036
$12,136 $11,590 $12,518 $11,063
OCT-97 $12,222 $11,672 $12,598 $11,091
$12,320 $11,765 $12,673 $11,084
$12,517 $11,954 $12,858 $11,071
$12,614 $12,047 $12,990 $11,092
$12,631 $12,062 $12,994 $11,113
$12,631 $12,062 $13,006 $11,134
$12,571 $12,006 $12,947 $11,154
$12,771 $12,197 $13,152 $11,174
$12,812 $12,236 $13,203 $11,188
$12,821 $12,244 $13,236 $11,201
$13,012 $12,427 $13,441 $11,215
$13,201 $12,607 $13,609 $11,228
OCT-98 $13,173 $12,580 $13,609 $11,255
$13,235 $12,640 $13,657 $11,255
$13,276 $12,679 $13,691 $11,248
$13,427 $12,823 $13,854 $11,275
$13,375 $12,773 $13,793 $11,289
$13,398 $12,795 $13,812 $11,323
$13,406 $12,803 $13,847 $11,405
$13,309 $12,710 $13,766 $11,405
$13,080 $12,492 $13,568 $11,405
$13,137 $12,546 $13,617 $11,439
$12,938 $12,356 $13,508 $11,467
$12,923 $12,341 $13,514 $11,522
OCT-99 $12,664 $12,094 $13,368 $11,543
$12,791 $12,215 $13,509 $11,550
$12,676 $12,105 $13,408 $11,550
$12,586 $12,020 $13,350 $11,577
$12,789 $12,213 $13,505 $11,646
$13,120 $12,529 $13,801 $11,741
$13,027 $12,440 $13,719 $11,748
$12,935 $12,353 $13,648 $11,755
$13,307 $12,708 $14,010 $11,823
$13,529 $12,920 $14,205 $11,843
$13,828 $13,206 $14,423 $11,858
$13,732 $13,114 $14,348 $11,919
OCT-00 $13,842 $13,219 $14,505 $11,940
$13,938 $13,311 $14,615 $11,947
$14,318 $13,674 $14,976 $11,940
$14,338 $13,693 $15,124 $12,015
$14,391 $13,744 $15,173 $12,063
$14,502 $13,850 $15,309 $12,091
$14,257 $13,616 $15,144 $12,139
$14,420 $13,771 $15,307 $12,194
$14,490 $13,838 $15,410 $12,214
$14,722 $14,060 $15,638 $12,180
$15,126 $14,445 $15,896 $12,180
$15,076 $14,397 $15,842 $12,235
OCT-01 $15,228 $14,543 $16,023 $12,193
$15,083 $14,405 $15,888 $12,173
$14,901 $14,230 $15,737 $12,125
$15,108 $14,428 $16,009 $12,153
$15,270 $14,582 $16,203 $12,202
$14,932 $14,260 $15,885 $12,270
$15,220 $14,535 $16,195 $12,339
$15,360 $14,669 $16,294 $12,339
$15,485 $14,788 $16,467 $12,346
$15,666 $14,961 $16,679 $12,360
$15,917 $15,200 $16,879 $12,400
$16,375 $15,638 $17,249 $12,428
OCT-02 $15,926 $15,210 $16,963 $12,448
$15,923 $15,207 $16,891 $12,448
$16,224 $15,494 $17,248 $12,421
$16,067 $15,344 $17,205 $12,476
$16,288 $15,555 $17,445 $12,572
$16,316 $15,582 $17,456 $12,648
$16,471 $15,730 $17,571 $12,620
$16,817 $16,060 $17,982 $12,599
$16,655 $15,906 $17,905 $12,613
$15,988 $15,268 $17,278 $12,627
$16,163 $15,436 $17,408 $12,675
$16,558 $15,813 $17,920 $12,716
OCT-03 $16,515 $15,772 $17,830 $12,761
Average Annual Total Returns as of 10/31/03
CLASS A SHARES 1 Year 5 Year 10 Year
Fund (not adjusted for sales charge)(2) 3.69% 4.62% 5.15%
Fund (adjusted for maximum sales charge)(2) -0.93% 3.66% 4.66%
Lehman Brothers Municipal Bond Index(3) 5.11% 5.55% 5.95%
CLASS B SHARES 1 Year 5 Year Since Inception
(July 1, 1994)
Fund (not adjusted for sales charge)(2) 2.92% 3.84% 5.41%
Fund (adjusted for maximum sales charge)(2) -2.08% 3.50% 5.41%
Lehman Brothers Municipal Bond Index(3) 5.11% 5.55% 6.77%
CLASS C SHARES 1 Year 5 Year Since Inception
(March 1, 2002)
Fund (not adjusted for sales charge)(2) 2.92% N/A 4.01%
Fund (adjusted for maximum sales charge)(2) 0.93% N/A 3.41%
Lehman Brothers Municipal Bond Index(3) 5.11% N/A 5.91%
<FN>
(1) The performance of Class B shares 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.
(2) Class A shares have a maximum sales charge of 4.5%. Class B
shares have a contingent deferred sales charge (CDSC) that
declines over five years as follows: 5-5-4-3-2-0%. Class C
shares have a 1% upfront sales charge and a 1% CDSC, which
applies to redemptions within the first 12 months. The returns
shown for the Fund assume reinvestment of all dividends and
distributions. The Fund's performance would have been lower had
the Advisor not waived a portion of its fees and the Fund's
custodian not allowed its fees to be reduced by credits.
(3) The Lehman Brothers Municipal Bond Index is a total return
performance benchmark for the long-term, investment-grade, tax-
exempt bond market. It is unmanaged and assumes reinvestment of
all dividends and distributions, but it does not reflect any
asset-based charges for investment management or other
expenses. Inflation is measured by the Consumer Price Index for
all urban consumers. Individuals cannot invest directly in an
index. For comparative purposes, the benchmark's performance is
shown as of the Fund's inception date, not from the inception
date of the benchmark.
(4) A portion of the Fund's income may be subject to some state
and/or local taxes, and it may be subject to federal
alternative minimum tax (AMT) for certain investors. Tax-
equivalent SEC yield is based on a 35% federal tax bracket,
9.3% state tax bracket, and federal deduction of state taxes
paid.
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.
PORTFOLIO MANAGER:
JOSEPH A. PIRARO
VAN KAMPEN INVESTMENT ADVISORY CORP.
Mr. Piraro has had primary portfolio management responsibility for
the Fund since May 1992. He joined Van Kampen in 1992 and serves as
Vice President. Mr. Piraro has investment experience dating back to
1971. He received his B.S. in Marketing and Finance from DePaul
University.
PERFORMANCE REVIEW
The WM CALIFORNIA MUNICIPAL FUND generated a total return of 3.69%
for the 12-month period ended October 31, 2003. (Fund performance
described above is for Class A shares not adjusted for sales charge.)
As of October 31, 2003, the Fund's 30-day SEC yield was 4.11% for
Class A shares, 3.57% for Class B shares, and 3.52% for Class C
shares. On a tax-equivalent basis, the yield was 6.97% for Class A
shares, 6.05% for Class B shares, and 5.97% for Class C shares.(4)
WHAT WERE THE MOST SIGNIFICANT FACTORS CONTRIBUTING TO THE FUND'S
PERFORMANCE OVER THE 12-MONTH PERIOD ENDED OCTOBER 31, 2003?
The economy's surging growth near the fiscal year's end contrasted
with its persistent weakness during earlier quarters. One of the most
widely watched economic indicators, employment strength, was in
negative territory for much of the period. Repeated comments from
government officials and Wall Street commentators suggested that the
economy might be entering a deflationary period, and this seemed to
weigh heavily on the minds of investors over the course of the year.
The Federal Reserve
28
attempted to allay these fears and keep the economy moving in the
right direction by cutting the federal funds target rate twice during
the period for a total reduction of 0.75%.
The uncertain climate had a definite effect on the municipal bond
market. Although yields on intermediate- and long-term bonds ended
the period approximately where they began, the road between these two
points was decidedly bumpy. From October of 2002 to June 13, 2003,
municipal yields dropped by roughly 80 basis points (0.80%). The
municipal market reversed abruptly in mid-June, when yields began to
climb from their lows. During this interval, investors shifted their
attention to the advancing equity market, which reduced demand.
At the same time, ongoing budgetary and fiscal difficulties at the
state and local level contributed to ratings downgrades. California
was no exception. In July, Standard & Poor's downgraded the state
three notches from A to BBB and revised the outlook to stable.
Moody's downgraded the state from A2 to A3 in August, but revised its
outlook on the state to negative.
On October 7, 2003, a gubernatorial recall election took place and
55% of voters backed the removal of Governor Gray Davis from office.
Arnold Schwarzenegger won a decisive victory by capturing 48.2% of
the vote for replacement candidates. The newly-elected governor has
inherited a $34.8 billion budget deficit, and he must act quickly
since the fiscal 2004-2005 budget is due to the legislature in
January 2004.
In mid-October, California faced the most damaging wildfires the
state has ever seen. Standard & Poor's issued a bulletin later that
month that assessed the impact of the wildfires on the state. It
noted that the agency believes the wildfires are unlikely to affect
the ratings of the state's general obligation bonds. Overall, due to
fiscal and credit concerns, valuations in the state's municipal bond
market declined to extremely low levels during the period. This drew
interest from many national investors seeking to benefit from
relatively attractive yields in the California market.
WERE THERE ANY SHIFTS IN THE FUND'S PORTFOLIO HOLDINGS/SECTORS THAT
HAVE HAD A SIGNIFICANT IMPACT ON PERFORMANCE?
Van Kampen purchased only insured California securities during this
period in an effort to provide shareholders with the highest quality
available. It continued to purchase securities in the 18- to 22-year
maturity range of the municipal yield curve, which plots the
difference in yields between shorter-term and longer-term bonds. It
believes securities in this maturity range provided the potential and
opportunity for strong relative results. With a large amount of
California issuance during this period, Van Kampen tended to
concentrate purchases in the essential services area.
Through October 2003, approximately 64% of new issues in the state
entered the market as insured. Over 70% of the Fund's assets are
rated Aaa, and Van Kampen reduced issues rated Aa during the
period.(5) As for sector shifts, insured general obligations declined
and Van Kampen increased the allocation to insured transportation
bonds. It also increased insured power holdings, non-insured power
bonds, and insured general purpose bonds.
WHAT IS THE OUTLOOK FOR BOTH THE FUND AND THE OVERALL ECONOMY?
Van Kampen will continue to maintain, and increase when possible,
essential services exposure, which includes areas such as power and
education. It will look to reduce zero coupon bond holdings as market
conditions warrant. It will also continue to seek premium coupon
holdings in the 18- to 22-year area of the municipal curve. It may
not add any California general obligation bonds to the Fund in the
near term and may seek prudent opportunities to reduce current
holdings.
Van Kampen continues to expect a slowly improving economy, but
remains uncertain about a rebound's sustainability. The Fed is on
hold for the foreseeable future but could begin tightening when it
believes sustained growth has arrived. It will tend to err on the
side of growth and at the expense of inflation. When the market
perceives this tightening, the yield curve could flatten as short-
term rates rise faster than long-term rates. Market and investor
perceptions of the equity market could play a major role in the
amount of cash allocated to municipal bonds and bond funds. If
equities continue to improve, it may put more upward pressure on
interest rates.
(5) Ratings are for portfolio holdings and are provided by Moody's
Investors Service (Moody's). If issues are not rated by
Moody's, the equivalent Standard & Poor's rating is converted
and incorporated (non-rated issues are not classified by either
service). Allocation percentages are based on total investment
value of the portfolio as of 10/31/03.
Note: Performance information provided for individual securities held
within the Fund represents performance for the fiscal year ended
10/31/03. The Fund may not have held these securities throughout the
entire period. The economic and financial market analysis represents
the opinions of the Portfolio Manager and/or WM Advisors Inc., and it
should not be considered investment advice. No forecast based on the
opinions expressed can be guaranteed, and they may be subject to
change without notice.
Portfolio Composition as of October 31, 2003(5)
[pie chart]
Ba 1%
Aa 3%
A 7%
Non-Rated/Other 8%
Baa 10%
Aaa 71%
29
California Insured
Intermediate Municipal Fund
Value of a $10,000 Investment (Class A shares)(1)
[GRAPH]
Lehman
Brothers
Municipal
Bond
NAV Sales Inflation Index
INCEPTION 4/4/94 $10,000 $9,550
APR-94 $10,172 $9,714 $10,000 $10,000
$10,264 $9,802 $10,007 $10,087
$10,226 $9,766 $10,041 $10,025
$10,410 $9,942 $10,068 $10,209
$10,443 $9,973 $10,108 $10,245
$10,333 $9,868 $10,136 $10,094
OCT-94 $10,181 $9,723 $10,143 $9,914
$10,039 $9,587 $10,156 $9,735
$10,175 $9,717 $10,156 $9,949
$10,468 $9,997 $10,197 $10,234
$10,793 $10,308 $10,237 $10,531
$10,911 $10,420 $10,271 $10,653
$10,913 $10,422 $10,305 $10,665
$11,253 $10,746 $10,326 $11,006
$11,117 $10,617 $10,346 $10,910
$11,257 $10,751 $10,346 $11,013
$11,430 $10,916 $10,373 $11,153
$11,507 $10,989 $10,394 $11,224
OCT-95 $11,648 $11,123 $10,428 $11,386
$11,800 $11,269 $10,421 $11,575
$11,849 $11,316 $10,414 $11,686
$11,960 $11,421 $10,475 $11,775
$11,939 $11,402 $10,509 $11,695
$11,775 $11,245 $10,563 $11,546
$11,754 $11,225 $10,604 $11,513
$11,733 $11,205 $10,625 $11,509
$11,812 $11,280 $10,631 $11,634
$11,925 $11,388 $10,651 $11,740
$11,937 $11,400 $10,671 $11,738
$12,028 $11,487 $10,706 $11,902
OCT-96 $12,153 $11,607 $10,740 $12,036
$12,359 $11,803 $10,760 $12,257
$12,312 $11,758 $10,760 $12,205
$12,348 $11,792 $10,795 $12,228
$12,418 $11,859 $10,828 $12,341
$12,291 $11,738 $10,855 $12,177
$12,350 $11,795 $10,868 $12,279
$12,503 $11,941 $10,862 $12,463
$12,634 $12,065 $10,875 $12,597
$12,929 $12,347 $10,888 $12,945
$12,836 $12,258 $10,909 $12,824
$12,955 $12,372 $10,936 $12,976
OCT-97 $13,005 $12,419 $10,963 $13,059
$13,054 $12,467 $10,957 $13,136
$13,191 $12,598 $10,943 $13,328
$13,302 $12,703 $10,964 $13,466
$13,323 $12,724 $10,985 $13,470
$13,277 $12,679 $11,006 $13,482
$13,216 $12,621 $11,026 $13,421
$13,402 $12,799 $11,046 $13,633
$13,426 $12,822 $11,059 $13,686
$13,464 $12,858 $11,072 $13,721
$13,676 $13,061 $11,085 $13,933
$13,888 $13,263 $11,099 $14,107
OCT-98 $13,888 $13,263 $11,125 $14,107
$13,899 $13,274 $11,125 $14,157
$13,884 $13,259 $11,119 $14,192
$14,034 $13,403 $11,145 $14,361
$13,974 $13,345 $11,159 $14,298
$13,995 $13,365 $11,192 $14,318
$14,002 $13,372 $11,274 $14,354
$13,933 $13,306 $11,274 $14,270
$13,746 $13,128 $11,274 $14,065
$13,825 $13,203 $11,308 $14,116
$13,809 $13,188 $11,335 $14,003
$13,856 $13,233 $11,389 $14,008
OCT-99 $13,735 $13,116 $11,410 $13,857
$13,862 $13,238 $11,417 $14,004
$13,769 $13,150 $11,417 $13,899
$13,765 $13,146 $11,444 $13,839
$13,892 $13,267 $11,511 $14,000
$14,104 $13,470 $11,606 $14,306
$14,044 $13,412 $11,613 $14,222
$14,013 $13,382 $11,620 $14,148
$14,337 $13,691 $11,687 $14,523
$14,511 $13,858 $11,707 $14,725
$14,728 $14,065 $11,721 $14,951
$14,653 $13,993 $11,782 $14,874
OCT-00 $14,746 $14,083 $11,802 $15,036
$14,813 $14,146 $11,809 $15,150
$15,070 $14,392 $11,802 $15,524
$15,280 $14,592 $11,876 $15,678
$15,286 $14,598 $11,924 $15,728
$15,353 $14,662 $11,951 $15,870
$15,149 $14,467 $11,999 $15,698
$15,319 $14,629 $12,053 $15,868
$15,429 $14,735 $12,074 $15,974
$15,614 $14,912 $12,040 $16,210
$15,914 $15,198 $12,040 $16,478
$15,922 $15,205 $12,094 $16,422
OCT-01 $16,076 $15,353 $12,053 $16,609
$15,935 $15,218 $12,032 $16,470
$15,795 $15,084 $11,986 $16,313
$16,052 $15,330 $12,013 $16,595
$16,230 $15,500 $12,061 $16,796
$15,877 $15,162 $12,129 $16,467
$16,197 $15,468 $12,197 $16,788
$16,354 $15,618 $12,197 $16,890
$16,464 $15,723 $12,204 $17,069
$16,694 $15,943 $12,217 $17,290
$16,925 $16,163 $12,258 $17,497
$17,321 $16,541 $12,285 $17,880
OCT-02 $16,896 $16,136 $12,305 $17,584
$16,942 $16,180 $12,305 $17,510
$17,259 $16,482 $12,278 $17,879
$17,092 $16,322 $12,332 $17,834
$17,305 $16,526 $12,427 $18,084
$17,307 $16,528 $12,502 $18,095
$17,445 $16,660 $12,475 $18,214
$17,803 $17,002 $12,454 $18,641
$17,643 $16,849 $12,468 $18,560
$17,124 $16,353 $12,482 $17,911
$17,297 $16,519 $12,529 $18,045
$17,672 $16,877 $12,570 $18,576
OCT-03 $17,625 $16,832 $12,614 $18,483
Average Annual Total Returns as of 10/31/03
CLASS A SHARES 1 Year 5 Year Since Inception
(April 4, 1994)
Fund (not adjusted for sales charge)(2) 4.29% 4.88% 6.10%
Fund (adjusted for maximum sales charge)(2) -0.38% 3.92% 5.59%
Lehman Brothers Municipal Bond Index(3) 5.11% 5.55% 6.68%
CLASS B SHARES 1 Year 5 Year Since Inception
(July 1, 1994)
Fund (not adjusted for sales charge)(2) 3.51% 4.08% 5.21%
Fund (adjusted for maximum sales charge)(2) -1.50% 3.74% 5.21%
Lehman Brothers Municipal Bond Index(3) 5.11% 5.55% 6.77%
CLASS C SHARES 1 Year 5 Year Since Inception
(March 1, 2002)
Fund (not adjusted for sales charge)(2) 3.50% N/A 4.25%
Fund (adjusted for maximum sales charge)(2) 1.48% N/A 3.62%
Lehman Brothers Municipal Bond Index(3) 5.11% N/A 5.91%
<FN>
(1) The performance of Class B shares 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.
(2) Class A shares have a maximum sales charge of 4.5%. Class B
shares have a contingent deferred sales charge (CDSC) that
declines over five years as follows: 5-5-4-3-2-0%. Class C
shares have a 1% upfront sales charge and a 1% CDSC, which
applies to redemptions within the first 12 months. The returns
shown for the Fund assume reinvestment of all dividends and
distributions. The Fund's performance would have been lower had
the Advisor not waived a portion of its fees or reimbursed
certain other expenses and the Fund's custodian not allowed its
fees to be reduced by credits.
(3) The Lehman Brothers Municipal Bond Index is a total return
performance benchmark for the long-term, investment-grade, tax-
exempt bond market. It is unmanaged and assumes reinvestment of
all dividends and distributions, but it does not reflect any
asset-based charges for investment management or other
expenses. Inflation is measured by the Consumer Price Index for
all urban consumers. Individuals cannot invest directly in an
index. For comparative purposes, the benchmark's performance is
shown as of the Fund's inception date, not from the inception
date of the benchmark. However, the benchmark's performance for
Class A shares is calculated as of 4/30/94.
(4) A portion of the Fund's income may be subject to some state
and/or local taxes, and it may be subject to federal
alternative minimum tax (AMT) for certain investors. Tax-
equivalent SEC yield is based on a 35% federal tax bracket,
9.3% state tax bracket, and federal deduction of state taxes
paid.
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.
PORTFOLIO MANAGER:
JOSEPH A. PIRARO
VAN KAMPEN INVESTMENT ADVISORY CORP.
Mr. Piraro has had primary portfolio management responsibility for
the Fund since its inception in 1994. He joined Van Kampen in 1992
and serves as Vice President. Mr. Piraro has investment experience
dating back to 1971. He received his B.S. in Marketing and Finance
from DePaul University.
PERFORMANCE REVIEW
The WM CALIFORNIA INSURED INTERMEDIATE MUNICIPAL FUND posted a total
return of 4.29% for the 12-month period ended October 31, 2003.
(Fund performance described above is for Class A shares not adjusted
for sales charge.) As of October 31, 2003, the Fund's 30-day SEC
yield was 2.89% for Class A shares, 2.27% for Class B shares, and
2.25% for Class C shares. On a tax-equivalent basis, the yield was
4.91% for Class A shares, 3.86% for Class B shares, and 3.81% for
Class C shares.(4)
WHAT WERE THE MOST SIGNIFICANT FACTORS CONTRIBUTING TO THE FUND'S
PERFORMANCE OVER THE 12-MONTH PERIOD ENDED OCTOBER 31, 2003?
The economy's surging growth near the fiscal year's end contrasted
with its persistent weakness during earlier quarters. One of the most
widely watched economic indicators, employment strength, was in
negative territory for much of the period. Repeated comments from
government officials and Wall Street commentators suggested that the
economy might be entering a deflationary period, and this seemed to
weigh heavily on the minds of investors over the course of the year.
The Federal
30
Reserve attempted to allay these fears and keep the economy moving in
the right direction by cutting the federal funds target rate twice
during the period for a total reduction of 0.75%.
The uncertain climate had a definite effect on the municipal bond
market. Although yields on intermediate- and long-term bonds ended
the period approximately where they began, the road between these two
points was decidedly bumpy. From October of 2002 to June 13, 2003,
municipal yields dropped by roughly 80 basis points (0.80%). The
municipal market reversed abruptly in mid-June, when yields began to
climb from their lows. During this interval, investors shifted their
attention to the advancing equity market, which reduced demand for
municipal bonds.
At the same time, ongoing budgetary and fiscal difficulties at the
state and local level contributed to ratings downgrades. California
was no exception. In July, Standard & Poor's downgraded the state
three notches from A to BBB and revised the outlook to stable.
Moody's downgraded the state from A2 to A3 in August, but revised its
outlook on the state to negative.
On October 7, 2003, a gubernatorial recall election took place and
55% of voters backed the removal of Governor Gray Davis from office.
Arnold Schwarzenegger won a decisive victory by capturing 48.2% of
the vote for replacement candidates. The newly-elected governor has
inherited a $34.8 billion budget deficit, and he must act quickly
since the fiscal 2004-2005 budget is due to the legislature in
January 2004.
In mid-October, California faced the most damaging wildfires the
state has ever seen. Standard & Poor's issued a bulletin later that
month that assessed the impact of the wildfires on the state. It
noted that the agency believes the wildfires are unlikely to affect
the ratings of the state's general obligation bonds. Overall, due to
the fiscal and credit concerns, valuations in the state's municipal
bond market declined to extremely low levels during the period. This
drew interest from many national investors seeking to benefit from
relatively attractive yields in the California market.
WERE THERE ANY SHIFTS IN THE FUND'S PORTFOLIO HOLDINGS/SECTORS THAT
HAVE HAD A SIGNIFICANT IMPACT ON PERFORMANCE?
Van Kampen purchased only insured California securities during this
period in an effort to provide shareholders with the highest quality
available. It continued to purchase securities in the 10- to 15-year
maturity range of the municipal yield curve, which plots the
difference in yields between shorter-term and longer-term holdings.
It believes securities in this maturity range provided the Fund with
the best relative return potential. With a large amount of California
issuance during this period, Van Kampen tended to concentrate
purchases in the essential services area.
Through October 2003, approximately 64% of new issues in the state
entered the market as insured. Van Kampen increased holdings rated
Aaa to 96% during the period.(5) In terms of sectors, it increased
positions in both insured power and insured water and sewer, and it
lowered the Fund's concentration in insured holdings from the
transportation, housing, and education sectors.
WHAT IS THE OUTLOOK FOR BOTH THE FUND AND THE OVERALL ECONOMY?
Although the Fund must put at least 80% of its assets in insured
California securities, Van Kampen typically maintains a much higher
portion--90%--in insured California paper.(6) It will continue to
maintain, and increase when possible, essential services exposure,
which includes areas such as power and education. Van Kampen will
look to reduce zero coupon bond holdings as market conditions
warrant. It will also continue to seek premium coupon holdings in the
10- to 15-year area of the municipal curve. It may not add any
California general obligation bonds to the Fund in the near term and
may seek prudent opportunities to reduce current holdings.
Van Kampen continues to expect a slowly improving economy, but
remains uncertain about a rebound's sustainability. The Fed is on
hold for the foreseeable future but could begin tightening when it
believes sustained growth has arrived. It will tend to err on the
side of growth and at the expense of inflation. When the market
perceives this tightening, the yield curve could flatten as short-
term rates rise faster than long-term rates. Market and investor
perceptions of the equity market could play a major role in the
amount of cash allocated to municipal bonds and bond funds. If
equities continue to improve, it may put more upward pressure on
interest rates.
(5) Ratings are for portfolio holdings and are provided by Moody's
Investors Service (Moody's). If issues are not rated by
Moody's, the equivalent Standard & Poor's rating is converted
and incorporated (non-rated issues are not classified by either
service). Allocation percentages are based on total investment
value of the portfolio as of 10/31/03.
(6) Insurance applies only to the timely repayment of principal and
interest of the underlying securities and does not protect the
market value of the Fund.
Note: Performance information provided for individual securities
held within the Fund represents performance for the fiscal year ended
10/31/03. The Fund may not have held these securities throughout the
entire period. The economic and financial market analysis represents
the opinions of the Portfolio Manager and/or WM Advisors Inc., and it
should not be considered investment advice. No forecast based on the
opinions expressed can be guaranteed, and they may be subject to
change without notice.
Portfolio Composition as of October 31, 2003(5)
[pie chart]
Non-Rated 1%
Aa 1%
Baa 2%
Aaa 96%
31
PORTFOLIO OF INVESTMENTS
REIT FUND
OCTOBER 31, 2003
VALUE
SHARES (000S)
------ ------
REAL ESTATE INVESTMENT TRUSTS - 88.3%
DIVERSIFIED - 5.2%
130,000 iStar Financial Inc. $ 4,948
96,500 Vornado Realty Trust 4,878
----------
Total Diversified 9,826
----------
HEALTH CARE - 4.6%
106,600 Health Care Property Investors, Inc. 4,971
110,000 Healthcare Realty Trust, Inc. 3,712
----------
Total Health Care 8,683
----------
INDUSTRIAL/OFFICE - 24.5%
INDUSTRIAL - 6.4%
123,200 AMB Property Corporation 3,695
42,100 CenterPoint Properties Trust 2,861
188,000 ProLogis 5,553
----------
12,109
----------
MIXED - 2.3%
147,800 Duke Realty Corporation 4,328
----------
OFFICE - 15.8%
109,100 Arden Realty, Inc. 3,052
101,000 Boston Properties, Inc. 4,469
145,000 CarrAmerica Realty Corporation 4,360
320,000 Corporate Office Properties Trust 6,189
300,000 Equity Office Properties Trust 8,403
97,800 SL Green Realty Corporation 3,535
----------
30,008
----------
Total Industrial/Office 46,445
----------
LODGING/RESORTS - 5.4%
176,500 FelCor Lodging Trust, Inc. 1,799
160,000 Hospitality Properties Trust 5,867
251,400 Host Marriott Corporation+ 2,627
----------
Total Lodging/Resorts 10,293
----------
MORTGAGE - 2.9%
215,300 Annaly Mortgage Management, Inc. 3,518
100,000 Friedman, Billings, Ramsey Group, Inc.,
Class A 1,992
----------
Total Mortgage 5,510
----------
RESIDENTIAL - 13.2%
APARTMENTS - 13.2%
158,000 Apartment Investment & Management
Company, Class A 6,462
122,000 AvalonBay Communities, Inc. 5,572
288,000 Equity Residential 8,424
263,000 United Dominion Realty Trust, Inc. 4,589
----------
Total Residential 25,047
----------
RETAIL - 23.3%
REGIONAL MALLS - 16.8%
112,500 General Growth Properties, Inc. 8,606
217,000 Macerich Company 8,724
VALUE
SHARES (000S)
------ ------
160,000 Mills Corporation $ 6,528
177,000 Simon Property Group, Inc. 7,979
----------
31,837
----------
SHOPPING CENTERS - 6.5%
181,000 Developers Diversified Realty Corporation 5,231
170,000 Kimco Realty Corporation 7,082
----------
12,313
----------
Total Retail 44,150
----------
SELF STORAGE - 3.2%
90,000 Public Storage, Inc. 3,600
65,000 Shurgard Storage Centers, Inc., Class A 2,353
----------
Total Self Storage 5,953
----------
SPECIALTY - 6.0%
185,000 Capital Automotive REIT 5,756
215,000 Plum Creek Timber Company, Inc. 5,665
----------
Total Specialty 11,421
----------
Total Real Estate Investment Trusts
(Cost $139,777) 167,328
----------
COMMON STOCKS - 6.4%
CONSUMER DISCRETIONARY - 4.9%
CONSUMER DURABLES & APPAREL - 2.4%
111,000 D.R. Horton, Inc. 4,418
----------
HOTELS, RESTAURANTS & LEISURE - 2.5%
122,000 Mandalay Resort Group 4,788
----------
Total Consumer Discretionary 9,206
----------
FINANCIALS - 1.5%
INSURANCE - 1.5%
92,000 Fidelity National Financial, Inc. 2,845
----------
Total Common Stocks
(Cost $10,037) 12,051
----------
32
See Notes to Financial Statements.
PORTFOLIO OF INVESTMENTS (CONTINUED)
REIT FUND
OCTOBER 31, 2003
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
------ ------
REPURCHASE AGREEMENT - 5.4%
(Cost $10,288)
$ 10,288 Agreement with Goldman Sachs Group,
Inc., 0.960% dated 10/31/2003, to be
repurchased at $10,289 on 11/03/2003
(Collateralized by $8,730 U.S.
Treasury Bonds, having various
interest rates and maturities
Market Value $10,473) $ 10,288
----------
TOTAL INVESTMENTS (Cost $160,102*) 100.1% 189,667
OTHER ASSETS AND LIABILITIES (NET) (0.1) (240)
----- ----------
NET ASSETS 100.0% $ 189,427
===== ==========
<FN>
- --------
* Aggregate cost for federal tax purposes is $160,106.
+ Non-income producing security.
33
See Notes to Financial Statements.
PORTFOLIO OF INVESTMENTS
EQUITY INCOME FUND
OCTOBER 31, 2003
VALUE
SHARES (000S)
------ ------
COMMON STOCKS - 82.9%
CONSUMER DISCRETIONARY - 13.9%
AUTOMOBILES & COMPONENTS - 4.5%
255,200 General Motors Corporation $ 10,890
260,000 Genuine Parts Company 8,273
240,000 Magna International Inc., Class A 19,255
100,000 MI Developments, Inc., Class A+ 2,532
----------
40,950
----------
CONSUMER DURABLES & APPAREL - 3.7%
270,000 D.R. Horton, Inc. 10,746
578,000 Mattel, Inc. 11,190
180,000 Nike Inc., Class B** 11,502
----------
33,438
----------
HOTELS, RESTAURANTS & LEISURE - 4.0%
310,000 Carnival Corporation 10,822
360,000 Mandalay Resort Group 14,130
475,000 McDonald's Corporation 11,880
----------
36,832
----------
RETAILING - 1.7%
262,000 May Department Stores Company** 7,326
150,000 Sears, Roebuck & Company 7,894
----------
15,220
----------
Total Consumer Discretionary 126,440
----------
CONSUMER STAPLES - 6.7%
FOOD & STAPLES RETAILING - 2.7%
360,000 Supervalu Inc. 9,079
563,000 Wal-Mart de Mexico SA de CV, ADR 15,525
----------
24,604
----------
FOOD, BEVERAGE & TOBACCO - 3.3%
203,000 Altria Group, Inc. 9,440
392,000 ConAgra Foods, Inc. 9,345
77,000 Diageo PLC, Sponsored ADR 3,681
99,000 Hershey Foods Corporation 7,633
----------
30,099
----------
HOUSEHOLD & PERSONAL PRODUCTS - 0.7%
60,000 Procter & Gamble Company 5,897
----------
Total Consumer Staples 60,600
----------
ENERGY - 6.8%
330,000 Baker Hughes Inc. 9,326
226,000 BP PLC, Sponsored ADR 9,578
136,600 ChevronTexaco Corporation 10,149
172,000 ConocoPhillips Company 9,830
165,000 Royal Dutch Petroleum Company (F) 7,323
121,000 Schlumberger Ltd. 5,683
235,117 Valero Energy Corporation 10,040
----------
Total Energy 61,929
----------
VALUE
SHARES (000S)
------ ------
FINANCIALS - 23.6%
BANKS - 8.9%
250,000 Bank of America Corporation $ 18,932
125,000 Countrywide Financial Corporation 13,140
245,000 FleetBoston Financial Corporation 9,896
148,000 PNC Financial Services Group, Inc. 7,928
206,200 TCF Financial Corporation 10,760
240,000 U.S. Bancorp 6,533
240,000 Wells Fargo & Company 13,517
----------
80,706
----------
DIVERSIFIED FINANCIALS - 8.2%
404,333 Citigroup Inc. 19,165
238,500 Fannie Mae 17,098
177,000 Franklin Resources, Inc. 8,393
344,000 J.P. Morgan Chase & Company 12,350
195,000 Morgan Stanley Dean Witter & Company 10,700
155,000 T. Rowe Price Group, Inc. 6,378
----------
74,084
----------
INSURANCE - 6.5%
535,000 ACE Ltd. 19,260
300,000 AFLAC Inc. 10,944
267,000 Allstate Corporation 10,546
270,000 XL Capital Ltd., Class A 18,765
----------
59,515
----------
Total Financials 214,305
----------
HEALTH CARE - 6.9%
HEALTH CARE EQUIPMENT & SERVICES - 1.0%
240,000 Becton Dickinson & Company 8,774
----------
PHARMACEUTICALS & BIOTECHNOLOGY - 5.9%
202,300 Abbott Laboratories 8,622
395,000 Bristol-Myers Squibb Company 10,021
182,500 Johnson & Johnson 9,185
172,000 Merck & Company, Inc. 7,611
550,500 Mylan Laboratories Inc. 13,295
328,000 Schering-Plough Corporation 5,009
----------
53,743
----------
Total Health Care 62,517
----------
INDUSTRIALS - 8.1%
CAPITAL GOODS - 8.1%
306,000 Boeing Company 11,778
112,500 Emerson Electric Company 6,384
180,000 General Dynamics Corporation 15,066
379,000 General Electric Company 10,995
244,000 Honeywell International Inc. 7,469
84,000 Northrop Grumman Corporation 7,510
675,000 Tyco International Ltd. 14,094
----------
Total Industrials 73,296
----------
34
See Notes to Financial Statements
PORTFOLIO OF INVESTMENTS (CONTINUED)
EQUITY INCOME FUND
OCTOBER 31, 2003
VALUE
SHARES (000S)
------ ------
COMMON STOCKS - (CONTINUED)
INFORMATION TECHNOLOGY - 6.7%
COMMUNICATIONS EQUIPMENT - 1.3%
310,000 Harris Corporation $ 11,538
----------
COMPUTERS & PERIPHERALS - 1.9%
385,000 Hewlett-Packard Company 8,589
94,000 International Business Machines
Corporation 8,411
----------
17,000
----------
ELECTRONIC EQUIPMENT & INSTRUMENTS - 2.0%
321,000 Diebold, Inc. 18,316
----------
IT SERVICES - 0.5%
230,000 Electronic Data Systems Corporation 4,934
----------
SOFTWARE - 1.0%
386,000 Computer Associates International, Inc. 9,079
----------
Total Information Technology 60,867
----------
MATERIALS - 2.8%
190,000 Alcoa Inc. 5,998
144,000 Dow Chemical Company 5,427
68,000 E.I. Du Pont de Nemours & Company 2,747
310,000 Monsanto Company 7,766
55,000 PPG Industries, Inc. 3,171
----------
Total Materials 25,109
----------
TELECOMMUNICATION SERVICES - 2.8%
265,000 Alltel Corporation 12,526
80,000 Metromedia Fiber Network, Inc., Class A+ 0***
115,000 SBC Communications Inc. 2,758
301,000 Verizon Communications Inc. 10,114
----------
Total Telecommunication Services 25,398
----------
UTILITIES - 4.6%
484,000 Duke Energy Corporation 8,784
476,500 El Paso Corporation 3,497
220,000 FPL Group, Inc. 14,023
205,000 Pinnacle West Capital Corporation 7,495
282,000 Southern Company 8,404
----------
Total Utilities 42,203
----------
Total Common Stocks
(Cost $693,598) 752,664
----------
REAL ESTATE INVESTMENT TRUSTS - 7.5%
170,000 AMB Property Corporation 5,098
94,500 Apartment Investment & Management
Company, Class A 3,865
74,000 Arden Realty, Inc. 2,070
45,000 CarrAmerica Realty Corporation 1,353
100,000 Corporate Office Properties Trust 1,934
47,000 Developers Diversified Realty Corporation 1,358
VALUE
SHARES (000S)
------ ------
81,000 Duke Realty Corporation $ 2,372
208,000 Equity Office Properties Trust 5,826
228,000 Equity Residential 6,669
97,000 General Growth Properties, Inc. 7,421
97,000 Health Care Property Investors, Inc. 4,523
97,000 Hospitality Properties Trust 3,557
35,000 Kimco Realty Corporation 1,458
80,000 Macerich Company 3,216
161,000 Plum Creek Timber Company, Inc. 4,242
87,500 ProLogis 2,585
103,000 Shurgard Storage Centers, Inc., Class A 3,729
147,000 Simon Property Group, Inc. 6,627
----------
Total Real Estate Investment Trust
(Cost $52,714) 67,903
----------
PRINCIPAL
AMOUNT
(000S)
------
CONVERTIBLE SECURITIES - 2.7%
CONVERTIBLE BONDS AND NOTES - 2.7%
$ 6,000 LSI Logic Corporation, Conv. Sub. Note,
4.000% due 02/15/2005 6,000
5,500 RadiSys Corporation, Conv. Sub. Note,
5.500% due 08/15/2007 5,417
8,000 TriQuint Semiconductor, Inc., Conv.
Sub. Note, 4.000% due 03/01/2007 7,340
6,500 Vitesse Semiconductor Corporation, Conv.
Sub. Deb., 4.000% due 03/15/2005 6,346
----------
Total Convertible Bonds and Notes
(Cost $21,957) 25,103
----------
SHARES
------
CONVERTIBLE PREFERRED STOCK - 0.0%+++
(Cost $1,500)
6,000 Global Crossing Ltd., Conv. Pfd.,
(in arrears), 7.000% due 12/31/2049 0***
----------
Total Convertible Securities
(Cost $23,457) 25,103
----------
PRINCIPAL
AMOUNT
(000S)
------
FIXED INCOME SECURITIES - 2.4%
CORPORATE BONDS AND NOTES - 2.2%
$ 1,500 Aetna Inc., Company Guarantee,
7.625% due 08/15/2026 1,704
1,250 American Home Products Corporation, Deb.,
7.250% due 03/01/2023 1,408
4,000 ERAC USA Finance Company, Note,
7.350% due 06/15/2008++ 4,569
1,000 Medpartners Inc., Sr. Note,
7.375% due 10/01/2006 1,077
500 Merrill Lynch & Company, Inc., Note,
6.375% due 10/15/2008 560
See Notes to Financial Statements.
35
PORTFOLIO OF INVESTMENTS (CONTINUED)
EQUITY INCOME FUND
OCTOBER 31, 2003
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
------ ------
FIXED INCOME SECURITIES - (CONTINUED)
CORPORATE BONDS AND NOTES - (CONTINUED)
$ 4,000 TELUS Corporation, Note,
8.000% due 06/01/2011 $ 4,607
2,000 Texas-New Mexico Power Company, Sr. Note,
6.250% due 01/15/2009 2,034
2,000 Time Warner Inc., Deb.,
9.150% due 02/01/2023 2,503
1,000 Westinghouse Electric Corporation, Deb.,
7.875% due 09/01/2023 1,189
----------
Total Corporate Bonds and Notes
(Cost $17,442) 19,651
----------
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED
SECURITIES - 0.1%
FEDERAL HOME LOAN MORTGAGE CORPORATION
(FHLMC) - 0.1%
711 6.500% due 09/01/2030 741
360 7.000% due 09/01/2030 379
----------
Total U.S. Government Agency
Mortgage-Backed Securities
(Cost $1,039) 1,120
----------
COLLATERALIZED MORTGAGE OBLIGATIONS (CMO) - 0.1%
(Cost $807)
806 Reilly Mortgage FHA, Series 1982,
7.430% due 08/01/2022 860
----------
Total Fixed Income Securities
(Cost $19,288) 21,631
----------
SHARES
------
WARRANTS - 0.0%+++
(Cost $0)
4,500 V2 Music Holdings PLC,
Expires 05/07/2008+,++ 0***
----------
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
------ ------
REPURCHASE AGREEMENT - 4.1%
(Cost $37,417)
$ 37,417 Agreement with Goldman Sachs Group,
Inc., 0.960% dated 10/31/2003, to be
repurchased at $37,420 on 11/03/2003
(Collateralized by $31,751 U.S.
Treasury Bonds, having various
interest rates and maturities
Market Value $38,090) $ 37,417
----------
TOTAL INVESTMENTS (Cost $826,474*) 99.6% 904,718
OTHER ASSETS AND LIABILITIES (NET) 0.4 3,297
----- ----------
NET ASSETS 100.0% $ 908,015
===== ==========
- --------
* Aggregate cost for federal tax purposes is $826,558.
** Some or all of these securities are on loan at October 31, 2003, and
have an aggregate market value of $6,775, representing 0.7% of the
total net assets of the Fund (Collateral Value $6,983).
*** Value of security is less than $500.
+ Non-income producing security.
++ Security acquired in a transaction exempt from registration under Rule
144A of the Securities Act of 1933.
+++ Amount represents less than 0.1% of total net assets.
- ------------------------------------------------------------------------------
GLOSSARY OF TERMS
ADR -- American Depository Receipt
(F) -- Foreign Shares
FHA -- Federal Housing Authority
- ------------------------------------------------------------------------------
36
See Notes to Financial Statements.
PORTFOLIO OF INVESTMENTS
GROWTH & INCOME FUND
OCTOBER 31, 2003
VALUE
SHARES (000S)
------ ------
COMMON STOCKS - 94.8%
CONSUMER DISCRETIONARY - 10.4%
CONSUMER DURABLES & APPAREL - 1.8%
1,419,000 Mattel, Inc. $ 27,472
----------
HOTELS, RESTAURANTS & Leisure - 3.3%
1,453,000 Carnival Corporation** 50,724
----------
MEDIA - 5.3%
512,999 Comcast Corporation, Class A+** 17,401
698,000 Comcast Corporation, Special Class A+** 22,769
1,910,000 Liberty Media Corporation, Class A+ 19,272
590,000 Viacom Inc., Class B 23,523
----------
82,965
----------
Total Consumer Discretionary 161,161
----------
CONSUMER STAPLES - 10.2%
FOOD & STAPLES RETAILING - 3.6%
474,000 Costco Wholesale Corporation+ 16,765
2,206,000 Kroger Company+ 38,583
----------
55,348
----------
FOOD, BEVERAGE & TOBACCO - 1.7%
565,000 PepsiCo Inc. 27,018
----------
HOUSEHOLD & PERSONAL PRODUCTS - 4.9%
531,000 Avon Products, Inc. 36,087
442,000 Kimberly-Clark Corporation 23,342
175,000 Procter & Gamble Company 17,201
----------
76,630
----------
Total Consumer Staples 158,996
----------
ENERGY - 6.8%
636,000 BP PLC, Sponsored ADR 26,954
585,000 Exxon Mobil Corporation 21,399
535,000 Royal Dutch Petroleum Company (F) 23,743
321,000 Schlumberger Ltd. 15,078
594,000 Unocal Corporation 18,818
----------
Total Energy 105,992
----------
FINANCIALS - 24.6%
BANKS - 10.8%
469,000 Bank of America Corporation 35,517
688,000 FleetBoston Financial Corporation 27,788
602,000 PNC Financial Services Group, Inc. 32,249
695,000 Wachovia Corporation 31,880
709,000 Wells Fargo & Company 39,931
----------
167,365
----------
DIVERSIFIED FINANCIALS - 8.1%
804,000 Citigroup Inc. 38,110
739,000 Freddie Mac 41,480
1,271,000 J.P. Morgan Chase & Company 45,629
----------
125,219
----------
VALUE
SHARES (000S)
------ ------
INSURANCE - 5.7%
453,000 ACE Ltd. $16,308
1,044,000 Allstate Corporation 41,238
523,000 American International Group Inc. 31,814
----------
89,360
----------
Total Financials 381,944
----------
HEALTH CARE - 16.0%
HEALTH CARE EQUIPMENT & SERVICES - 5.1%
533,000 Baxter International Inc. 14,167
646,000 Cardinal Health Inc.** 38,334
539,000 Guidant Corporation 27,494
----------
79,995
----------
PHARMACEUTICALS & BIOTECHNOLOGY - 10.9%
842,000 Bristol-Myers Squibb Company 21,362
516,000 Johnson & Johnson 25,970
367,000 Merck & Company, Inc. 16,240
2,184,500 Mylan Laboratories Inc. 52,756
1,194,000 Pfizer Inc. 37,730
978,000 Schering-Plough Corporation 14,934
----------
168,992
----------
Total Health Care 248,987
----------
INDUSTRIALS - 8.5%
CAPITAL GOODS - 8.5%
865,000 Boeing Company 33,294
711,000 General Electric Company 20,626
1,253,000 Honeywell International Inc. 38,354
1,921,000 Tyco International Ltd.** 40,111
----------
Total Industrials 132,385
----------
INFORMATION TECHNOLOGY - 11.3%
COMMUNICATIONS EQUIPMENT - 1.8%
2,045,000 Motorola, Inc.** 27,669
----------
COMPUTERS & PERIPHERALS - 3.8%
947,000 Hewlett-Packard Company 21,127
419,000 International Business Machines
Corporation 37,492
----------
58,619
----------
IT SERVICES - 1.9%
820,000 First Data Corporation 29,274
----------
SOFTWARE - 3.8%
1,239,000 Computer Associates International, Inc. 29,141
1,150,000 Microsoft Corporation 30,073
----------
59,214
----------
Total Information Technology 174,776
----------
MATERIALS - 0.5%
247,000 Alcoa Inc. 7,798
----------
See Notes to Fianncial Statements.
37
PORTFOLIO OF INVESTMENTS (CONTINUED)
GROWTH & INCOME FUND
OCTOBER 31, 2003
VALUE
SHARES (000S)
------ ------
COMMON STOCKS - (CONTINUED)
TELECOMMUNICATION SERVICES - 1.4%
887,000 SBC Communications Inc. $ 21,270
----------
UTILITIES - 5.1%
1,046,000 Duke Energy Corporation** 18,985
411,000 FPL Group, Inc. 26,197
771,000 NiSource Inc. 15,967
501,000 Pinnacle West Capital Corporation 18,317
----------
Total Utilities 79,466
----------
Total Common Stocks
(Cost $1,263,808) 1,472,775
----------
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
------ ------
REPURCHASE AGREEMENT - 4.6%
(Cost $72,048)
$ 72,048 Agreement with Goldman Sachs Group,
Inc., 0.960% dated 10/31/2003, to
be repurchased at $72,054 on
11/03/2003 (Collateralized by
$61,138 U.S. Treasury Bonds,
having various interest rates
and maturities Market
Value $73,344) $ 72,048
----------
TOTAL INVESTMENTS (Cost $1,335,856*) 99.4% 1,544,823
OTHER ASSETS AND LIABILITIES (NET) 0.6 8,711
----- ----------
NET ASSETS 100.0% $1,553,534
===== ==========
<FN>
- --------
* Aggregate cost for federal tax purposes is $1,347,272.
** Some or all of these securities are on loan at October 31, 2003, and
have an aggregate market value of $52,821, representing 3.4% of the
total net assets of the Fund (Collateral Value $56,594).
+ Non-income producing security.
- ------------------------------------------------------------------------------
GLOSSARY OF TERMS
ADR -- American Depository Receipt
(F) -- Foreign Shares
- ------------------------------------------------------------------------------
38
See Notes to Financial Statements.
PORTFOLIO OF INVESTMENTS
WEST COAST EQUITY FUND
OCTOBER 31, 2003
VALUE
SHARES (000S)
------ ------
COMMON STOCKS - 94.0%
CONSUMER DISCRETIONARY - 17.2%
AUTOMOBILES & COMPONENTS - 3.2%
1,063,300 Monaco Coach Corporation+ $ 25,615
151,700 Superior Industries International, Inc. 6,447
----------
32,062
----------
CONSUMER DURABLES & APPAREL - 4.3%
166,700 Columbia Sportswear Company+ 9,709
155,300 KB Home 10,636
469,900 Mattel, Inc. 9,097
214,900 Nike Inc., Class B** 13,732
----------
43,174
----------
HOTELS, RESTAURANTS & LEISURE - 2.5%
355,500 Hilton Hotels Corporation 5,631
117,000 Jack in the Box Inc.+ 2,128
358,000 Starbucks Corporation+ 11,313
1,239,585 WestCoast Hospitality Corporation+ 5,963
----------
25,035
----------
MEDIA - 4.2%
336,200 Getty Images, Inc.+ 15,028
217,200 Knight-Ridder, Inc. 15,925
324,800 Univision Communications Inc.,
Class A+** 11,027
----------
41,980
----------
RETAILING - 3.0%
1,025,325 Building Materials Holding Corporation 14,498
929,600 Hollywood Entertainment Corporation 14,130
118,400 Restoration Hardware, Inc.+ 943
----------
29,571
----------
Total Consumer Discretionary 171,822
----------
CONSUMER STAPLES - 3.3%
FOOD & STAPLES RETAILING - 3.3%
471,840 Costco Wholesale Corporation+ 16,689
922,400 Kroger Company+ 16,133
----------
Total Consumer Staples 32,822
----------
ENERGY - 3.7%
108,900 Apache Corporation 7,593
229,300 ChevronTexaco Corporation 17,037
320,800 Nabors Industries Ltd.+ 12,126
----------
Total Energy 36,756
----------
FINANCIALS - 19.1%
BANKS - 14.6%
284,350 Bank of America Corporation 21,534
343,900 Banner Corporation 8,168
87,700 City National Corporation 5,280
183,800 East West Bancorp, Inc. 9,023
322,200 Greater Bay Bancorp 8,686
VALUE
SHARES (000S)
------ ------
111,200 KeyCorp $ 3,141
563,125 Pacific Northwest Bancorp 21,872
943,200 U.S. Bancorp 25,674
785,686 Washington Federal, Inc. 20,695
375,500 Wells Fargo & Company 21,148
----------
145,221
----------
DIVERSIFIED FINANCIALS - 1.9%
919,800 Charles Schwab Corporation 12,473
144,800 Franklin Resources, Inc. 6,866
----------
19,339
----------
INSURANCE - 2.6%
167,900 RenaissanceRe Holdings Ltd. 7,552
291,515 StanCorp Financial Group, Inc. 18,380
----------
25,932
----------
Total Financials 190,492
----------
HEALTH CARE - 10.8%
HEALTH CARE EQUIPMENT & SERVICES - 3.8%
159,300 Applera Corporation-Applied
Biosystems Group 3,677
54,800 Caremark Rx, Inc.+ 1,373
103,060 Health Net, Inc.+ 3,256
1,728,700 OraSure Technologies, Inc.+ 14,538
747,463 SonoSite, Inc.+ 14,762
----------
37,606
----------
PHARMACEUTICALS & BIOTECHNOLOGY - 7.0%
184,000 Allergan, Inc.** 13,914
129,439 Amgen, Inc.+ 7,994
1,311,800 Corixa Corporation+** 7,831
351,500 Dendreon Corporation+ 2,960
478,375 EDEN Bioscience Corporation+** 713
109,000 Genentech, Inc.+ 8,935
225,320 ICOS Corporation+ 10,527
63,500 Neurocrine Biosciences, Inc.+ 2,974
303,900 Pfizer Inc. 9,603
125,700 Watson Pharmaceuticals, Inc.+ 4,936
----------
70,387
----------
Total Health Care 107,993
----------
INDUSTRIALS - 13.0%
CAPITAL GOODS - 9.5%
541,133 Boeing Company 20,828
75,400 Cascade Corporation 1,806
511,930 Electro Scientific Industries, Inc.+ 12,573
899,200 Greenbrier Companies, Inc.+ 11,366
109,400 Northrop Grumman Corporation 9,781
307,525 PACCAR Inc. 24,282
214,450 Precision Castparts Corporation 8,820
125,500 Simpson Manufacturing Company, Inc.+ 5,616
----------
95,072
----------
39
See Notes to Financial Statements.
PORTFOLIO OF INVESTMENTS (CONTINUED)
WEST COAST EQUITY FUND
OCTOBER 31, 2003
VALUE
SHARES (000S)
------ ------
COMMON STOCKS - (CONTINUED)
INDUSTRIALS - (CONTINUED)
COMMERCIAL SERVICES & SUPPLIES - 1.0%
413,700 Robert Half International Inc.+** $ 9,767
----------
TRANSPORTATION - 2.5%
309,310 Alaska Air Group, Inc.+ 8,905
416,820 Expeditors International of
Washington, Inc. 15,648
----------
24,553
----------
Total Industrials 129,392
----------
INFORMATION TECHNOLOGY - 20.5%
COMPUTERS & PERIPHERALS - 3.2%
1,116,100 Advanced Digital Information Corporation+ 18,137
444,700 Hewlett-Packard Company 9,921
565,400 InFocus Corporation+ 3,726
----------
31,784
----------
ELECTRONIC EQUIPMENT & INSTRUMENTS - 2.4%
507,335 Microvision, Inc.+** 3,551
404,608 RadiSys Corporation+ 7,910
494,000 Tektronix, Inc. 12,681
----------
24,142
----------
INTERNET SOFTWARE & SERVICES - 0.5%
1,770,000 Primus Knowledge Solutions, Inc.+ 4,956
----------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT - 7.6%
201,800 Applied Materials, Inc.+ 4,716
125,100 Atmel Corporation+ 706
517,800 Credence Systems Corporation+** 8,445
326,825 FEI Company+ 7,762
684,800 Intel Corporation 22,633
90,400 KLA-Tencor Corporation+ 5,183
752,480 Lattice Semiconductor Corporation+ 5,869
451,100 LSI Logic Corporation+ 4,168
1,157,800 Pixelworks, Inc.+** 13,986
356,940 TriQuint Semiconductor, Inc.+ 2,559
----------
76,027
----------
SOFTWARE - 6.8%
307,500 Actuate Corporation+ 1,095
240,100 Adobe Systems Inc. 10,526
109,400 Fair Isaac Corporation 6,978
1,103,178 Microsoft Corporation 28,848
479,000 ONYX Software Corporation+ 2,151
199,000 Quest Software, Inc.+** 2,965
281,100 Siebel Systems, Inc.+ 3,539
250,800 Sybase, Inc.+ 4,489
1,264,000 WatchGuard Technologies, Inc.+ 7,268
----------
67,859
----------
Total Information Technology 204,768
----------
VALUE
SHARES (000S)
------ ------
MATERIALS - 5.2%
814,000 Louisiana-Pacific Corporation+ $ 15,482
1,212,630 Oregon Steel Mills, Inc.+ 4,305
489,360 Schnitzer Steel Industries, Inc., Class A 18,439
230,100 Weyerhaeuser Company 13,859
----------
Total Materials 52,085
----------
TELECOMMUNICATION SERVICES - 1.2%
1,676,800 AT&T Wireless Services, Inc.+ 12,157
----------
Total Common Stocks
(Cost $699,352) 938,287
----------
REAL ESTATE INVESTMENT TRUSTS - 2.2%
47,100 AMB Property Corporation 1,412
536,000 Plum Creek Timber Company, Inc. 14,124
168,900 Shurgard Storage Centers, Inc., Class A 6,114
----------
Total Real Estate Investment Trust
(Cost $20,221) 21,650
----------
PRINCIPAL
AMOUNT
(000S)
-----
REPURCHASE AGREEMENT - 4.0%
(Cost $40,152)
$ 40,152 Agreement with Goldman Sachs Group,
Inc., 0.960% dated 10/31/2003, to be
repurchased at $40,155 on 11/03/2003
(Collateralized by $34,072 U.S.
Treasury Bonds, having various
interest rates and maturities
Market Value $40,874) 40,152
TOTAL INVESTMENTS (Cost $59,725*) 100.2% 1,000,089
OTHER ASSETS AND LIABILITIES (NET) (0.2) (1,604)
----- ----------
NET ASSETS 100.0% $ 98,485
===== ==========
<FN>
- --------
* Aggregate cost for federal tax purposes is $760,627.
** Some or all of these securities are on loan at October 31, 2003, and
have an aggregate market value of $42,267, representing 4.2% of the
total net assets of the Fund (Collateral Value $46,275).
+ Non-income producing security.
40
See Notes to Financial Statements.
PORTFOLIO OF INVESTMENTS
MID CAP STOCK FUND
OCTOBER 31, 2003
VALUE
SHARES (000S)
------ ------
COMMON STOCKS - 92.0%
CONSUMER DISCRETIONARY - 15.6%
AUTOMOBILES & COMPONENTS - 0.5%
49,100 Superior Industries International, Inc. $ 2,087
----------
CONSUMER DURABLES & APPAREL - 6.3%
330,100 Jones Apparel Group, Inc. 11,388
482,000 Mattel, Inc. 9,332
94,600 Nike Inc., Class B** 6,045
----------
26,765
----------
HOTELS, RESTAURANTS & LEISURE - 4.2%
112,200 Mandalay Resort Group 4,404
138,000 Papa John's International, Inc.+ 3,631
290,600 Yum! Brands, Inc.+ 9,921
----------
17,956
----------
RETAILING - 4.6%
41,800 J.C. Penney Company, Inc.
(Holding Company) 988
191,100 Neiman Marcus Group Inc., Class A+ 9,087
200,700 Tiffany & Company 9,523
----------
19,598
----------
Total Consumer Discretionary 66,406
----------
CONSUMER STAPLES - 5.2%
FOOD, BEVERAGE & TOBACCO - 2.7%
159,850 Dean Foods Company+ 4,836
87,900 Hershey Foods Corporation 6,777
----------
11,613
----------
HOUSEHOLD & PERSONAL PRODUCTS - 2.5%
61,000 Avon Products, Inc. 4,145
167,500 Estee Lauder Companies Inc., Class A 6,263
----------
10,408
----------
Total Consumer Staples 22,021
----------
ENERGY - 7.8%
274,300 Baker Hughes Inc. 7,752
178,500 Devon Energy Corporation 8,657
243,500 Nabors Industries Ltd.+ 9,204
159,800 Tidewater Inc. 4,380
106,500 Unocal Corporation 3,374
----------
Total Energy 33,367
----------
FINANCIALS - 19.4%
BANKS - 6.8%
237,450 Charter One Financial, Inc. 7,589
379,550 GreenPoint Financial Corporation 11,823
181,200 TCF Financial Corporation 9,455
----------
28,867
----------
VALUE
SHARES (000S)
------ ------
DIVERSIFIED FINANCIALS - 5.9%
201,700 A.G. Edwards, Inc. $ 8,169
119,500 Ambac Financial Group, Inc. 8,453
80,200 Countrywide Financial Corporation 8,431
----------
25,053
----------
INSURANCE - 6.7%
375,900 Fidelity National Financial, Inc. 11,623
291,700 HCC Insurance Holdings, Inc. 8,500
78,600 MGIC Investment Corporation 4,033
122,100 PMI Group, Inc. 4,668
----------
28,824
----------
Total Financials 82,744
----------
HEALTH CARE - 12.7%
HEALTH CARE EQUIPMENT & SERVICES - 10.7%
191,600 AmerisourceBergen Corporation 10,877
380,500 Covance Inc.+ 9,905
139,300 Express Scripts, Inc., Class A+** 7,650
110,700 Guidant Corporation 5,647
374,382 IMS Health Inc. 8,809
31,200 WellPoint Health Networks, Inc.+ 2,774
----------
45,662
----------
PHARMACEUTICALS & BIOTECHNOLOGY - 2.0%
343,825 Mylan Laboratories Inc. 8,303
----------
Total Health Care 53,965
----------
INDUSTRIALS - 8.7%
CAPITAL GOODS - 6.7%
387,700 Federal Signal Corporation 5,734
331,800 Lincoln Electric Holdings, Inc. 8,093
86,000 Lockheed Martin Corporation 3,987
27,000 PACCAR Inc. 2,132
186,600 Teleflex Inc. 8,585
----------
28,531
----------
COMMERCIAL SERVICES & SUPPLIES - 2.0%
370,500 Republic Services, Inc. 8,614
----------
Total Industrials 37,145
----------
INFORMATION TECHNOLOGY - 13.7%
COMPUTERS & PERIPHERALS - 1.6%
250,500 Electronics for Imaging, Inc.+ 6,789
----------
ELECTRONIC EQUIPMENT & INSTRUMENTS - 1.8%
106,000 Arrow Electronics, Inc.+ 2,263
97,300 Diebold, Inc. 5,552
----------
7,815
----------
41
See Notes to Financial Statements.
PORTFOLIO OF INVESTMENTS (CONTINUED)
MID CAP STOCK FUND
OCTOBER 31, 2003
VALUE
SHARES (000S)
------ ------
COMMON STOCKS - (CONTINUED)
INFORMATION TECHNOLOGY - (CONTINUED)
IT SERVICES - 2.3%
474,200 Acxiom Corporation+ $ 7,540
142,000 Convergys Corporation+ 2,280
----------
9,820
----------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT - 2.4%
319,200 Microchip Technology Inc. 10,441
----------
SOFTWARE - 5.6%
96,400 Adobe Systems Inc. 4,226
516,300 BMC Software Inc.+ 8,973
186,000 PeopleSoft Inc.+ 3,862
208,700 Synopsys, Inc.+ 6,620
----------
23,681
----------
Total Information Technology 58,546
----------
MATERIALS - 3.2%
262,000 Cabot Corporation 7,310
133,200 Valspar Corporation 6,353
----------
Total Materials 13,663
----------
TELECOMMUNICATION SERVICES - 0.7%
86,300 United States Cellular Corporation+ 2,922
----------
UTILITIES - 5.0%
122,400 FPL Group, Inc. 7,802
270,900 NiSource Inc. 5,610
221,900 Pinnacle West Capital Corporation 8,113
----------
Total Utilities 21,525
----------
Total Common Stocks
(Cost $301,478) 392,304
----------
REPURCHASE AGREEMENT - 8.5%
(Cost $36,343)
$ 36,343 Agreement with Goldman Sachs Group,
Inc., 0.960% dated 10/31/2003, to be
repurchased at $36,346 on 11/03/2003
(Collateralized by $30,840 U.S.
Treasury Bonds, having various
interest rates and maturities
Market Value $36,997) $ 36,343
TOTAL INVESTMENTS (Cost $337,821*) 100.5% 428,647
OTHER ASSETS AND LIABILITIES (NET) (0.5) (2,244)
----- ----------
NET ASSETS 100.0% $ 426,403
===== ==========
<FN>
- --------
* Aggregate cost for federal tax purposes is $340,433.
** Some or all of these securities are on loan at October 31, 2003, and
have an aggregate market value of $6,346, representing 1.5% of the
total net assets of the Fund (Collateral Value $6,649).
+ Non-income producing security.
42
See Notes to Financial Statements.
PORTFOLIO OF INVESTMENTS
GROWTH FUND
OCTOBER 31, 2003
VALUE
SHARES (000S)
------ ------
COMMON STOCKS - 92.9%
CONSUMER DISCRETIONARY - 18.5%
CONSUMER DURABLES & APPAREL - 0.5%
28,800 Coach, Inc.+ $ 1,021
59,100 Ethan Allen Interiors Inc. 2,175
31,600 Matsushita Electric Industrial
Company Ltd. 415
18,900 Nike Inc., Class B** 1,208
----------
4,819
----------
HOTELS, RESTAURANTS & LEISURE - 3.8%
104,000 Brinker International, Inc.+ 3,310
264,800 Carnival Corporation 9,244
232,015 Hilton Hotels Corporation 3,675
129,500 International Game Technology 4,241
291,100 Royal Caribbean Cruises Ltd.** 8,648
35,300 Starwood Hotels & Resorts Worldwide Inc. 1,191
37,400 Wendy's International, Inc. 1,386
82,270 Yum! Brands, Inc.+ 2,809
----------
34,504
----------
MEDIA - 10.2%
132,794 Cablevision Systems Corporation-New York
Group, Class A+ 2,683
177,100 Clear Channel Communications, Inc. 7,229
658,300 Comcast Corporation, Special Class A+** 21,474
48,500 Cox Communications Inc., Class A+** 1,652
744,863 Liberty Media Corporation, Class A+ 7,516
21,200 McGraw-Hill Companies, Inc. 1,419
61,800 New York Times Company, Class A 2,937
189,700 News Corporation Ltd., Sponsored ADR** 6,763
32,300 Omnicom Group Inc. 2,578
901,745 Time Warner Inc.+ 13,788
132,435 Univision Communications Inc., Class A+** 4,496
490,345 Viacom Inc., Class B 19,550
27,800 XM Satellite Radio Holdings Inc.,
Class A+** 563
----------
92,648
----------
RETAILING - 4.0%
25,800 Abercrombie & Fitch Company, Class A+ 735
29,300 AutoZone, Inc.+ 2,816
28,000 Bed Bath & Beyond Inc.+ 1,183
37,000 Best Buy Company, Inc. 2,157
49,400 Chico's FAS, Inc.+ 1,854
42,300 eBay Inc.+ 2,366
23,000 Federated Department Stores, Inc. 1,094
190,500 Gap, Inc.** 3,635
22,800 Home Depot, Inc. 845
48,650 InterActiveCorp+** 1,786
68,950 Lowe's Companies, Inc. 4,063
7,700 Nordstrom, Inc. 235
VALUE
SHARES (000S)
------ ------
124,285 Staples, Inc.+ $ 3,333
218,600 Target Corporation 8,687
78,490 TJX Companies, Inc. 1,648
----------
36,437
----------
Total Consumer Discretionary 168,408
----------
CONSUMER STAPLES - 6.3%
FOOD & STAPLES RETAILING - 1.3%
177,800 Costco Wholesale Corporation+ 6,289
31,300 Sysco Corporation 1,054
56,800 Wal-Mart Stores Inc. 3,348
14,300 Whole Foods Market, Inc.+ 847
----------
11,538
----------
FOOD, BEVERAGE & TOBACCO - 3.3%
60,100 Altria Group, Inc. 2,795
191,500 Anheuser-Busch Companies, Inc. 9,433
29,900 Coca-Cola Company 1,387
43,800 Dean Foods Company+ 1,325
6,200 Diageo PLC, Sponsored ADR** 297
67,800 General Mills, Inc. 3,041
248,500 PepsiCo Inc. 11,883
----------
30,161
----------
HOUSEHOLD & PERSONAL PRODUCTS - 1.7%
19,250 Alberto-Culver Company, Class B 1,220
20,105 Avon Products, Inc. 1,366
54,630 Colgate-Palmolive Company** 2,906
65,200 Estee Lauder Companies Inc., Class A 2,438
80,800 Procter & Gamble Company 7,942
----------
15,872
----------
Total Consumer Staples 57,571
----------
ENERGY - 4.7%
31,800 Baker Hughes Inc. 899
143,140 BJ Services Company+ 4,696
40,000 Burlington Resources Inc. 1,945
52,700 ConocoPhillips Company 3,012
100,700 EnCana Corporation (F) 3,459
331,070 Exxon Mobil Corporation 12,110
53,800 Halliburton Company 1,285
76,538 Kinder Morgan Management LLC+ 2,904
42,505 Murphy Oil Corporation 2,507
51,200 Noble Drilling Corporation+ 1,758
58,200 Rowan Companies, Inc.+** 1,394
25,500 Schlumberger Ltd. 1,198
31,900 Smith International Inc.+ 1,187
40,500 Total SA, Sponsored ADR 3,162
36,600 Varco International, Inc.+ 644
----------
Total Energy 42,160
----------
43
See Notes to Financial Statements.
PORTFOLIO OF INVESTMENTS (CONTINUED)
GROWTH FUND
OCTOBER 31, 2003
VALUE
SHARES (000S)
------ ------
COMMON STOCKS - (CONTINUED)
FINANCIALS - 11.3%
BANKS - 1.5%
75,200 Bank of America Corporation $ 5,695
121,200 Bank One Corporation 5,145
23,767 Fifth Third Bancorp 1,377
20,200 U.S. Bancorp** 550
14,600 Wachovia Corporation 670
----------
13,437
----------
DIVERSIFIED FINANCIALS - 8.0%
276,775 American Express Company 12,989
286,400 Charles Schwab Corporation 3,884
421,254 Citigroup Inc. 19,967
106,515 Fannie Mae 7,636
53,915 Goldman Sachs Group, Inc.** 5,063
64,400 J.P. Morgan Chase & Company 2,312
92,700 Merrill Lynch & Company, Inc.** 5,488
279,835 Morgan Stanley Dean Witter & Company 15,354
----------
72,693
----------
INSURANCE - 1.8%
91,645 Allstate Corporation 3,620
138,050 American International Group Inc. 8,398
702 Berkshire Hathaway, Class B+ 1,820
11,900 Everest Re Group Ltd. 987
20,000 XL Capital Ltd., Class A 1,390
----------
16,215
----------
Total Financials 102,345
----------
HEALTH CARE - 16.2%
HEALTH CARE EQUIPMENT & SERVICES - 6.2%
70,000 Aetna Inc. 4,019
28,600 Alcon, Inc. 1,576
44,465 Anthem, Inc.+ 3,043
58,500 Applera Corporation-Applied Biosystems
Group** 1,350
18,400 Apria Healthcare Group Inc.+ 534
25,400 Boston Scientific Corporation+ 1,720
192,025 Caremark Rx, Inc.+** 4,810
53,190 Guidant Corporation 2,713
16,300 Invitrogen Corporation+ 1,037
57,045 McKesson Corporation 1,727
328,755 Medtronic Inc. 14,981
83,500 Millipore Corporation+** 3,661
24,600 Nektar Therapeutics+ 323
83,525 St. Jude Medical, Inc.+ 4,858
111,450 UnitedHealth Group Inc. 5,671
18,300 Varian Medical Systems, Inc.+ 1,170
18,400 WellPoint Health Networks, Inc.+ 1,636
19,000 Zimmer Holdings, Inc.+ 1,212
----------
56,041
----------
VALUE
SHARES (000S)
------ ------
PHARMACEUTICALS & BIOTECHNOLOGY - 10.0%
103,050 Abbott Laboratories $ 4,392
232,885 Amgen, Inc.+ 14,383
49,800 Barr Laboratories Inc.+ 3,823
74,900 Bristol-Myers Squibb Company 1,900
64,200 Celgene Corporation+** 2,677
19,500 Chiron Corporation+** 1,065
32,500 Dr. Reddy's Laboratories Ltd., ADR** 867
21,300 Eli Lilly & Company 1,419
40,445 Forest Laboratories, Inc.+ 2,023
82,055 Genentech, Inc.+ 6,726
69,300 Gilead Sciences, Inc.+ 3,782
36,400 GlaxoSmithKline PLC, ADR 1,576
47,400 IDEC Pharmaceuticals Corporation+** 1,665
21,100 Medicis Pharmaceutical Corporation,
Class A 1,337
25,900 Merck & Company, Inc. 1,146
74,827 Mylan Laboratories Inc. 1,807
114,250 OSI Pharmaceuticals, Inc.+ 3,199
117,200 Perrigo Company 1,576
621,365 Pfizer Inc. 19,635
29,706 Roche Holding AG-Genusschein 2,458
90,700 Serono SA, ADR 1,564
60,800 SICOR, Inc.+ 1,629
163,200 Teva Pharmaceutical Industries Ltd.,
Sponsored ADR** 9,285
31,200 Wyeth 1,377
----------
91,311
----------
Total Health Care 147,352
----------
INDUSTRIALS - 7.1%
CAPITAL GOODS - 4.9%
44,700 3M Company 3,525
17,100 Danaher Corporation** 1,417
28,900 Dover Corporation 1,128
661,755 General Electric Company 19,197
119,500 Honeywell International Inc. 3,658
51,700 Ingersoll-Rand Company, Class A 3,123
29,220 Lockheed Martin Corporation 1,355
47,640 Northrop Grumman Corporation** 4,259
75,850 Tyco International Ltd. 1,584
49,670 United Technologies Corporation 4,206
15,300 York International Corporation 608
----------
44,060
----------
COMMERCIAL SERVICES & SUPPLIES - 0.8%
105,400 Cendant Corporation+ 2,153
38,400 Dun & Bradstreet Corporation+ 1,788
140,500 Waste Management Inc. 3,642
----------
7,583
----------
44
See Notes to Financial Statements.
PORTFOLIO OF INVESTMENTS (CONTINUED)
GROWTH FUND
OCTOBER 31, 2003
VALUE
SHARES (000S)
------ ------
COMMON STOCKS - (CONTINUED)
INDUSTRIALS - (CONTINUED)
TRANSPORTATION - 1.4%
57,300 Expeditors International of
Washington, Inc. $ 2,151
83,200 FedEx Corporation 6,303
112,145 Southwest Airlines Company 2,176
33,100 United Parcel Service, Inc., Class B 2,400
----------
13,030
----------
Total Industrials 64,673
----------
INFORMATION TECHNOLOGY - 27.1%
COMMUNICATIONS EQUIPMENT - 4.2%
26,700 Alcatel SA, Sponsored ADR** 352
70,560 American Tower Corporation, Class A+ 819
907,640 Cisco Systems Inc.+ 19,042
30,570 Crown Castle International Corporation+ 387
466,300 Lucent Technologies Inc.+ 1,492
802,128 Nokia Oyj, Sponsored ADR** 13,628
19,100 QUALCOMM Inc. 907
36,400 UTStarcom, Inc.+** 1,147
----------
37,774
----------
COMPUTERS & PERIPHERALS - 3.7%
133,415 Apple Computer, Inc.+ 3,054
393,860 Dell Computer Corporation+ 14,226
229,025 EMC Corporation+ 3,170
86,900 International Business Machines
Corporation 7,776
53,555 Lexmark International, Inc.+ 3,942
25,400 Maxtor Corporation+ 347
5,500 SanDisk Corporation+ 443
32,900 Seagate Technology LLC 756
----------
33,714
----------
ELECTRONIC EQUIPMENT & INSTRUMENTS - 0.8%
26,900 Agilent Technologies, Inc.+ 670
80,600 Flextronics International Ltd.+ 1,128
232,700 Sanmina-SCI Corporation+ 2,455
177,800 Vishay Intertechnology, Inc.+ 3,334
----------
7,587
----------
INTERNET SOFTWARE & SERVICES - 2.1%
53,700 Infosys Technologies Ltd.,
Sponsored ADR** 4,544
26,365 Symantec Corporation+ 1,757
289,200 Yahoo! Inc.+** 12,638
----------
18,939
----------
IT SERVICES - 0.7%
102,000 Accenture Ltd., Class A+ 2,387
31,200 Concord EFS, Inc.+ 333
93,350 First Data Corporation 3,333
----------
6,053
----------
VALUE
SHARES (000S)
------ ------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT - 7.9%
32,900 Advanced Micro Devices, Inc.+** $ 500
52,000 Analog Devices, Inc.+ 2,305
299,295 Applied Materials, Inc.+ 6,995
117,100 ASML Holding NV (F)+ 2,055
16,900 Broadcom Corporation, Class A+ 540
8,700 Cabot Microelectronics Corporation+ 496
200,300 Cypress Semiconductor Corporation+ 4,298
691,650 Intel Corporation 22,859
71,700 International Rectifier Corporation+ 3,422
15,200 Intersil Corporation, Class A 392
100,295 Linear Technology Corporation** 4,274
116,000 LSI Logic Corporation+ 1,072
28,400 Marvell Technology Group Ltd.+ 1,246
4,500 Maxim Integrated Products Inc.** 224
5,570 Microchip Technology Inc. 182
79,800 National Semiconductor Corporation+** 3,242
38,950 NVIDIA Corporation+ 689
7,900 Samsung Electronics Company Ltd.,
GDR++** 1,569
8,400 Silicon Laboratories Inc.+ 453
64,700 STMicroelectronics NV (F) 1,724
318,200 Taiwan Semiconductor Manufacturing
Company Ltd., Sponsored ADR+** 3,519
330,185 Texas Instruments Inc. 9,549
67,900 United Microelectronics Corporation, ADR+ 356
10,400 Xilinx, Inc.+ 330
----------
72,291
----------
SOFTWARE - 7.7%
24,100 Activision, Inc.+ 364
141,000 Adobe Systems Inc. 6,181
52,000 Amdocs Ltd.+ 1,116
149,300 Cadence Design Systems, Inc.+** 2,298
157,635 Computer Associates International, Inc. 3,707
50,905 Electronic Arts Inc.+ 5,042
85,595 Intuit Inc.+ 4,278
18,300 Mercury Interactive Corporation+ 850
1,185,510 Microsoft Corporation 31,001
370,785 Oracle Corporation+ 4,434
54,100 SAP AG, Sponsored ADR 1,977
233,075 VERITAS Software Corporation+** 8,426
----------
69,674
----------
Total Information Technology 246,032
----------
MATERIALS - 1.4%
56,000 Air Products & Chemicals, Inc. 2,543
63,100 Alcoa Inc. 1,992
39,900 Ecolab, Inc. 1,073
14,200 International Paper Company** 559
94,400 Praxair, Inc. 6,568
----------
Total Materials 12,735
----------
45
See Notes to Financial Statements.
PORTFOLIO OF INVESTMENTS (CONTINUED)
GROWTH FUND
OCTOBER 31, 2003
VALUE
SHARES (000S)
------ ------
COMMON STOCKS - (CONTINUED)
TELECOMMUNICATION SERVICES - 0.3%
4,600 Mobile Telesystems OJSC, Sponsored ADR+ $ 356
63,300 Telefonos de Mexico SA de CV, Class L,
Sponsored ADR 2,035
5,500 VimpelCom, Sponsored ADR+ 358
----------
Total Telecommunication Services 2,749
----------
UTILITIES - 0.0%+++
11,600 Philadelphia Suburban Corporation 274
----------
Total Common Stocks
(Cost $763,866) 844,299
----------
REAL ESTATE INVESTMENT TRUST - 0.3%
(Cost $2,483)
233,600 Host Marriott Corporation+ 2,441
----------
INVESTMENT COMPANY SECURITY - 0.2%
(Cost $1,899)
67,400 Nasdaq-100 Index Tracking Stock+** 2,371
----------
PRINCIPAL
AMOUNT
(000S)
------
COMMERCIAL PAPER - 0.7%
(Cost $6,100)
$ 6,100 Prudential Funding LLC,
1.000% due 11/03/2003 6,100
----------
REPURCHASE AGREEMENT - 6.0%
(Cost $54,794)
54,794 Agreement with Goldman Sachs Group,
Inc., 0.960% dated 10/31/2003, to be
repurchased at $54,798 on 11/03/2003
(Collateralized by $46,497 U.S.
Treasury Bonds, having various
interest rates and maturities
Market Value $55,779) 54,794
----------
TOTAL INVESTMENTS (Cost $829,142*) 100.1% 910,005
OTHER ASSETS AND LIABILITIES (NET) (0.1) (1,110)
----- ----------
NET ASSETS 100.0% $ 908,895
===== ==========
<FN>
- --------
* Aggregate cost for federal tax purposes is $839,327.
** Some or all of these securities are on loan at October 31, 2003, and
have an aggregate market value of $39,195, representing 4.3% of the
total net assets of the Fund (Collateral Value $40,660).
+ Non-income producing security.
++ Security acquired in a transaction exempt from registration under
Rule 144A of the Securities Act of 1933.
+++ Amount represents less than 0.1% of total net assets.
SCHEDULE OF FORWARD FOREIGN CURRENCY CONTRACTS
FORWARD FOREIGN CURRENCY CONTRACTS TO BUY
CONTRACTS TO RECEIVE
(000S)
NET
IN UNREALIZED
EXPIRATION LOCAL VALUE IN EXCHANGE APPRECIATION
DATE CURRENCY U.S. $ FOR U.S. $ OF CONTRACTS
---------- ---------------- -------- ---------- ------------
11/12/2003 KRW 110,000 93 93 $--***
11/21/2003 KRW 1,671,000 1,410 1,407 3
---
$ 3
---
FORWARD FOREIGN CURRENCY CONTRACTS TO SELL
CONTRACTS TO DELIVER
(000S)
NET
UNREALIZED
IN APPRECIATION/
EXPIRATION LOCAL VALUE IN EXCHANGE (DEPRECIATION)
DATE CURRENCY U.S. $ FOR U.S. $ OF CONTRACTS
---------- ---------------- -------- ---------- ------------
11/12/2003 KRW 110,000 93 90 $ (3)
11/21/2003 KRW 1,671,000 1,410 1,376 (34)
02/06/2004 EUR 350 406 399 (7)
03/26/2004 EUR 1,175 1,360 1,341 (19)
04/16/2004 EUR 130 150 151 1
----
$(62)
----
Net Unrealized Depreciation of Forward Foreign
Currency Contracts $(59)
====
<FN>
- --------
*** Amount represents less than $500.
- ------------------------------------------------------------------------------
GLOSSARY OF TERMS
ADR -- American Depository Receipt
EUR -- EURO
(F) -- Foreign Shares
KRW -- South Korean Won
- ------------------------------------------------------------------------------
46
See Notes to Financial Statements.
PORTFOLIO OF INVESTMENTS
SMALL CAP STOCK FUND
OCTOBER 31, 2003
VALUE
SHARES (000S)
------ ------
COMMON STOCKS - 99.4%
CONSUMER DISCRETIONARY - 14.8%
CONSUMER DURABLES & APPAREL - 0.7%
23,300 Cutter & Buck Inc.+ $ 177
177,000 Quiksilver, Inc.+ 3,039
----------
3,216
----------
HOTELS, RESTAURANTS & LEISURE - 3.7%
965,600 Intrawest Corporation 16,232
9,700 WestCoast Hospitality Corporation+ 46
----------
16,278
----------
MEDIA - 2.7%
114,400 Getty Images, Inc.+ 5,114
2,792,000 Sirius Satellite Radio Inc.+** 6,561
----------
11,675
----------
RETAILING - 7.7%
326,500 AnnTaylor Stores Corporation+ 11,689
526,300 Building Materials Holding Corporation 7,442
651,500 West Marine, Inc.+ 14,437
----------
33,568
----------
Total Consumer Discretionary 64,737
----------
CONSUMER STAPLES - 4.2%
FOOD & STAPLES RETAILING - 4.2%
738,500 Stake Technology Ltd.+ 7,082
292,800 United Natural Foods, Inc.+ 11,326
----------
Total Consumer Staples 18,408
----------
ENERGY - 3.6%
577,000 Headwaters Inc.+ 10,813
358,800 Hydrogenics Corporation+** 2,357
270,900 Quantum Fuel Systems Technologies
Worldwide, Inc.+ 2,474
----------
Total Energy 15,644
----------
FINANCIALS - 8.8%
DIVERSIFIED FINANCIALS - 8.8%
134,200 Affiliated Managers Group, Inc.+ 9,730
460,017 American Capital Strategies Ltd.** 12,420
195,700 First Albany Companies Inc. 2,808
377,300 Investors Financial Services Corporation** 13,330
----------
Total Financials 38,288
----------
HEALTH CARE - 19.9%
HEALTH CARE EQUIPMENT & SERVICES - 5.4%
179,500 Accredo Health, Inc.+ 5,737
338,800 Affymetrix, Inc.+ 8,683
465,200 SonoSite, Inc.+ 9,188
----------
23,608
----------
VALUE
SHARES (000S)
------ ------
PHARMACEUTICALS & BIOTECHNOLOGY - 14.5%
391,700 Antigenics Inc.+** $ 4,285
937,300 Corixa Corporation+** 5,596
1,111,700 Dendreon Corporation+** 9,360
796,300 Emisphere Technologies, Inc.+ 4,977
178,200 Medicis Pharmaceutical Corporation,
Class A 11,289
394,700 Myriad Genetics, Inc.+ 4,997
541,900 Neose Technologies, Inc.+ 4,438
848,400 Pain Therapeutics, Inc.+ 5,345
944,500 Pharmacyclics, Inc.+ 5,327
633,700 Zymogenetics, Inc.+ 7,801
----------
63,415
----------
Total Health Care 87,023
----------
INDUSTRIALS - 6.2%
COMMERCIAL SERVICES & SUPPLIES - 5.6%
899,900 Digimarc Corporation+ 15,100
269,800 Edison Schools Inc.+** 470
777,000 Exult Inc.+ 6,162
482,695 First Consulting Group, Inc.+ 2,625
----------
24,357
----------
TRANSPORTATION - 0.6%
75,200 Expeditors International of
Washington, Inc. 2,823
----------
Total Industrials 27,180
----------
INFORMATION TECHNOLOGY - 40.0%++
COMMUNICATIONS EQUIPMENT - 2.3%
429,600 InterDigital Communications Corporation+ 7,299
151,600 ViaSat, Inc.+ 2,976
----------
10,275
----------
COMPUTERS & PERIPHERALS - 1.2%
426,600 Immersion Corporation+ 2,474
411,600 Pinnacle Systems, Inc.+ 2,861
----------
5,335
----------
ELECTRONIC EQUIPMENT & INSTRUMENTS - 0.4%
249,700 Microvision, Inc.+** 1,748
----------
INTERNET SOFTWARE & SERVICES - 11.0%
94,800 aQuantive, Inc.+ 995
2,879,825 Click2learn, Inc.+** 6,393
2,586,200 Corillian Corporation+ 17,095
1,119,400 Interwoven, Inc.+ 4,243
5,058,600 Intraware, Inc.+ 12,141
681,000 Online Resources Corporation+ 4,392
966,500 Primus Knowledge Solutions, Inc.+ 2,706
----------
47,965
----------
47
See Notes to Financial Statements.
PORTFOLIO OF INVESTMENTS (CONTINUED)
SMALL CAP STOCK FUND
VALUE
SHARES (000S)
------ ------
COMMON STOCKS - (CONTINUED)
INFORMATION TECHNOLOGY - (CONTINUED)
IT SERVICES - 5.5%
580,000 Euronet Worldwide, Inc.+ $ 8,253
1,751,800 Lionbridge Technologies, Inc.+ 15,819
----------
24,072
----------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT - 6.1%
257,050 Credence Systems Corporation+** 4,193
294,700 FEI Company+ 6,999
1,026,000 Pixelworks, Inc.+** 12,394
113,500 Rudolph Technologies, Inc.+ 2,968
----------
26,554
----------
SOFTWARE - 13.5%
3,082,800 BSQUARE Corporation+ 5,302
250,900 Business Objects SA, Sponsored ADR+** 8,245
818,400 Informatica Corporation+ 8,921
693,489 NetIQ Corporation+ 8,419
1,077,700 Nuance Communications Inc.+ 7,781
1,134,350 ONYX Software Corporation+ 5,093
484,100 PDF Solutions, Inc.+ 5,712
1,632,000 ScanSoft, Inc.+ 9,433
----------
58,906
----------
Total Information Technology 174,855
----------
MATERIALS - 0.6%
919,000 Liquidmetal Technologies Inc.+** 2,527
----------
TELECOMMUNICATION SERVICES - 1.3%
123,885 Gilat Satellite Networks Ltd.+** 592
1,925,280 Latitude Communications, Inc.+ 5,333
----------
Total Telecommunication Services 5,925
----------
Total Common Stocks
(Cost $422,917) 434,587
----------
PRINCIPAL
AMOUNT VALUE
(000s) (000S)
------ ------
REPURCHASE AGREEMENT - 0.4%
(Cost $1,633)
$ 1,633 Agreement with Goldman Sachs Group,
Inc., 0.960% dated 10/31/2003, to be
repurchased at $1,633 on 11/03/2003
(Collateralized by $1,386 U.S.
Treasury Bonds, having various
interest rates and maturities
Market Value $1,662) $ 1,633
----------
TOTAL INVESTMENTS (Cost $424,550*) 99.8% 436,220
OTHER ASSETS AND LIABILITIES (NET) 0.2 726
----- ----------
NET ASSETS 100.0% $ 436,946
===== ==========
<FN>
- --------
* Aggregate cost for federal tax purposes is $436,897.
** Some or all of these securities are on loan at October 31, 2003, and
have an aggregate market value of $55,133, representing 12.6% of the
total net assets of the Fund (Collateral Value $62,941).
+ Non-income producing security.
++ Investments in the Information Technology sector as of October 31,
2003 are 40.0% of the total net assets of the Fund.
- -----------------------------------------------------------------------------
GLOSSARY OF TERMS
ADR -- American Depository Receipt
- -----------------------------------------------------------------------------
48
See Notes to Financial Statements.
PORTFOLIO OF INVESTMENTS
INTERNATIONAL GROWTH FUND
OCTOBER 31, 2003
VALUE
SHARES (000S)
------ ------
COMMON STOCKS - 93.5%
JAPAN - 20.6%+++
16,510 Advantest Corporation $ 1,230
93,000 AEON Company Ltd. 3,071
10,165 Aiful Corporation 643
37,000 Canon Inc. 1,790
52,387 Chugai Pharmaceutical Company Ltd. 746
45,000 Dai Nippon Printing Company Ltd. 695
72,000 Daiwa House Industry Company Ltd. 777
97,000 Daiwa Securities Group Inc. 709
14,800 FANUC Ltd. 890
19,000 Fuji Photo Film Company Ltd. 560
17,900 Hirose Electric Company Ltd. 2,200
21,700 Hoya Corporation 1,964
155,000 Japan Airlines System Corporation 446
185 Japan Telecom Company Ltd. 554
77,700 Kansai Electric Power Company, Inc. 1,343
98 Millea Holdings, Inc. 1,168
133,000 Mitsubishi Corporation 1,380
224,000 Mitsubishi Estate Company Ltd. 2,148
202,000 Mitsubishi Heavy Industries Ltd. 555
342,000 Mitsubishi Motors Corporation+** 734
60 Mitsubishi Tokyo Financial Group, Inc. 431
139,000 Mitsui Fudosan Company Ltd. 1,293
237,000 Mitsui Sumitomo Insurance Company Ltd. 1,953
20,000 Murata Manufacturing Company Ltd. 1,137
538,000 NEC Corporation 4,752
9,100 Nidec Corporation** 882
155,000 Nikko Cordial Corporation 836
43,000 Nikon Corporation 653
12,200 Nintendo Company Ltd. 942
471,000 Nippon Steel Corporation 968
297,000 Nissan Motor Company Ltd. 3,328
1,000 Nissin Food Products Company Ltd. 23
47,300 Nitto Denko Corporation 2,483
86,000 Nomura Securities Company Ltd. 1,477
218 NTT DoCoMo Inc. 472
22,800 ORIX Corporation 1,918
42,000 Ricoh Company, Ltd. 797
18,500 Rohm Company Ltd. 2,494
85,000 Sankyo Company Ltd. 1,361
174,000 Sekisui House Ltd. 1,708
9,300 Shimamura Company Ltd. 646
16,600 Shin-Etsu Chemical Company Ltd. 618
105,000 Shionogi & Company Ltd. 1,762
13,000 SMC Corporation 1,564
38,000 Sompo Japan Insurance Inc. 315
37,190 Sony Corporation 1,296
208,000 Sumitomo Chemical Company Ltd. 776
150,000 Suzuki Motor Corporation 2,169
5,500 TDK Corporation 360
55,600 Tokyo Electron Ltd. 3,985
216,000 Toray Industries Inc. 898
24,000 Tostem Corporation 428
34,400 Toyota Motor Corporation 979
126 Yahoo! Japan Corporation+** 1,868
VALUE
SHARES (000S)
------ ------
35,000 Yamato Transport Company Ltd. $ 465
----------
71,640
----------
UNITED KINGDOM - 16.9%
35,200 Anglo American PLC 720
111,000 ARM Holdings PLC+ 214
131,300 AstraZeneca PLC 6,167
119,100 AstraZeneca PLC (F) 5,657
316,569 BAE SYSTEMS PLC 983
196,600 Barclays PLC 1,658
732,500 BG Group PLC 3,341
501,584 BHP Billiton PLC 3,939
37,400 Brambles Industries PLC 113
315,800 Centrica PLC 989
59,500 Compass Group PLC 343
93,900 Diageo PLC 1,104
21,400 GlaxoSmithKline PLC 458
112,700 HBOS PLC 1,311
225,400 HSBC Holdings PLC** 3,385
232,600 National Grid Group PLC 1,485
211,700 Pearson PLC 2,191
102,000 Prudential PLC 791
32,200 Reckitt Benckiser PLC 678
91,300 Reed Elsevier PLC 710
167,300 Royal Bank of Scotland Group PLC 4,483
199,840 Smiths Group PLC 2,379
145,800 Standard Chartered PLC 2,332
194,000 TI Automotive Ltd., Class A+ 0***
228,300 Unilever PLC 1,947
5,058,919 Vodafone Group PLC 10,624
97,100 Xstrata PLC 997
----------
58,999
----------
FRANCE - 10.8%
36,500 Accor SA 1,435
99,100 BNP Paribas SA 5,207
97,300 Bouygues SA++ 2,647
14,700 Carrefour SA 772
21,800 Essilor International SA 1,049
59,900 France Telecom SA+ 1,450
14,500 Groupe Danone 2,188
10,262 L'Air Liquide SA 1,521
17,200 L'Oreal SA 1,272
53,500 Renault SA 3,539
152,600 Sanofi-Synthelabo SA 9,447
34,100 Schneider Electric SA 1,996
9,500 Societe Generale Group 706
48,100 STMicroelectronics NV 1,280
14,600 STMicroelectronics NV (F) 389
128,200 Vivendi Universal SA+ 2,693
----------
37,591
----------
NETHERLANDS - 9.9%
255,840 ABN AMRO Holding NV 5,369
313,968 AEGON NV 4,117
5,800 ASML Holding NV+ 101
11,900 ASML Holding NV (F)+ 209
49
See Notes to Financial Statements.
PORTFOLIO OF INVESTMENTS (CONTINUED)
INTERNATIONAL GROWTH FUND
OCTOBER 31, 2003
VALUE
SHARES (000S)
------ ------
COMMON STOCKS - (CONTINUED)
NETHERLANDS - (CONTINUED)
68,500 Heineken Holding NV, Class A $ 2,136
83,525 Heineken NV 2,981
127,212 ING Groep NV 2,641
451,700 Koninklijke (Royal) KPN NV+ 3,434
67,100 Koninklijke (Royal) Philips Electronics NV 1,809
4,600 Koninklijke (Royal) Philips
Electronics NV (F) 123
31,000 Koninklijke Numico NV+ 700
19,000 Reed Elsevier NV 212
174,300 Royal Dutch Petroleum Company 7,734
14,900 Royal Dutch Petroleum Company (F) 661
22,200 Unilever NV** 1,290
27,167 VNU NV 827
----------
34,344
----------
SWITZERLAND - 8.4%
159,582 Compagnie Financiere Richemont
AG, A Units 3,591
22,897 Credit Suisse Group 807
59,646 Holcim Ltd. 2,510
18,113 Nestle SA 3,988
148,827 Novartis AG 5,673
19,400 Roche Holding AG-Genusschein 1,605
69,225 Swiss Reinsurance Company 4,357
11,821 Swisscom AG 3,439
906 Synthes-Stratec, Inc. 832
41,956 UBS AG 2,577
----------
29,379
----------
GERMANY - 5.0%
20,300 Allianz AG 2,176
18,900 Bayerische Motoren Werke (BMW) AG 757
42,600 DaimlerChrysler AG 1,589
29,000 Deutsche Bank AG 1,913
43,200 Deutsche Telekom AG+ 681
13,600 Epcos AG+** 281
58,300 Infineon Technologies AG+ 860
24,500 Metro AG 1,002
13,100 Muenchener Rueckversicherungs-
Gesellschaft AG** 1,562
13,000 SAP AG 1,891
5,200 SAP AG, Sponsored ADR 190
54,700 Siemens AG 3,688
39,500 ThyssenKrupp AG 659
----------
17,249
----------
CANADA - 3.7%
140,100 Abitibi-Consolidated Inc.** 943
24,800 Alcan Inc.** 990
91,400 BCE Inc.** 2,070
538,300 Bombardier Inc., Class B** 2,418
22,000 Inco Ltd.+ 730
44,800 Suncor Energy Inc. 941
66,100 TELUS Corporation** 1,158
113,700 Thomson Corporation 3,723
----------
12,973
----------
VALUE
SHARES (000S)
------ ------
SPAIN - 2.7%
274,400 Banco Bilbao Vizcaya Argentaria SA $3,149
126,200 Industria de Diseno Textil SA (Inditex) 2,607
52,700 Repsol YPF SA 919
217,641 Telefonica SA 2,707
----------
9,382
----------
HONG KONG - 2.6%+++
152,000 Cheung Kong Holdings Ltd. 1,267
860,000 Hang Lung Properties Ltd.** 1,124
86,200 Hang Seng Bank Ltd. 1,077
329,000 Hongkong Land Holdings Ltd. 510
90,200 Hutchison Whampoa Ltd. 700
736,000 Johnson Electric Holdings Ltd. 957
874,000 Li & Fung Ltd. 1,469
458,000 Shangri-La Asia Ltd.++ 439
72,000 Sung Hung Kai Properties Ltd. 610
138,300 Swire Pacific Ltd., Class A 844
----------
8,997
----------
AUSTRALIA - 2.0%+++
186,000 Alumina Ltd. 787
61,400 Australia & New Zealand Banking
Group Ltd. 775
25,740 BHP Billiton Ltd. 214
97,100 Brambles Industries Ltd.** 322
475,802 Foster's Brewing Group Ltd. 1,543
46,300 National Australia Bank Ltd. 1,005
64,414 News Corporation Ltd. 574
96,091 QBE Insurance Group Ltd.++** 702
4,200 Wesfarmers Ltd. 86
100,000 WMC Resources Ltd.+ 363
82,600 Woolworths Ltd. 652
----------
7,023
----------
SINGAPORE - 1.6%+++
110,000 DBS Group Holdings Ltd. 904
70,000 DBS Group Holdings Ltd., ADR++ 575
64,000 Singapore Press Holdings Ltd. 724
618,000 Singapore Technologies Engineering Ltd. 685
2,699,880 Singapore Telecommunications Ltd. (F)++ 2,673
----------
5,561
----------
NORWAY - 1.6%
127,700 DnB Holding ASA** 746
47,500 Norsk Hydro ASA 2,673
19,700 Norske Skogindustrier ASA 374
186,500 Statoil ASA 1,754
----------
5,547
----------
SWEDEN - 1.3%
141,600 Assa Abloy AB, B Shares 1,398
119,700 ForeningsSparbanken AB 1,995
25,500 Sandvik AB 758
31,500 Svenska Handlesbanken AB, A Shares 555
----------
4,706
----------
50
See Notes to Financial Statements.
PORTFOLIO OF INVESTMENTS (CONTINUED)
INTERNATIONAL GROWTH FUND
OCTOBER 31, 2003
VALUE
SHARES (000S)
------ ------
COMMON STOCKS - (CONTINUED)
FINLAND - 1.2%
170,600 Nokia Oyj $ 2,898
61,400 UPM-Kymmene Oyj 1,149
----------
4,047
----------
SOUTH KOREA - 1.1%+++
7,410 Hyundai Motor Company Ltd., GDR++ 125
8,976 Samsung Electronics Company Ltd. 3,565
840 Samsung Electronics Company Ltd., GDR 168
----------
3,858
----------
TAIWAN - 1.1%+++
348,523 Taiwan Semiconductor Manufacturing
Company Ltd., Sponsored ADR+** 3,855
----------
MEXICO - 0.7%
47,600 America Movil SA de C.V., Series L, ADR 1,133
39,600 Telefonos de Mexico SA de CV, Class L,
Sponsored ADR 1,273
----------
2,406
----------
ITALY - 0.6%
17,600 Assicurazioni Generali SpA 405
114,250 Eni SpA 1,814
----------
2,219
----------
BRAZIL - 0.5%
20,197 Companhia Vale do Rio Doce, ADR 924
24,000 Companhia Vale do Rio Doce,
Sponsored ADR 969
----------
1,893
----------
DENMARK - 0.4%
25,400 Novo Nordisk A/S, Class B 913
10,200 TDC A/S 328
----------
1,241
----------
IRELAND - 0.3%
62,968 CRH PLC 1,132
----------
CHINA - 0.2%+++
229,500 China Mobile (Hong Kong) Ltd. 652
----------
BELGIUM - 0.2%
63,600 SES GLOBAL, FDR 566
----------
NEW ZEALAND - 0.1%+++
87,855 Telecom Corporation of New Zealand Ltd. 261
----------
Total Common Stocks
(Cost $289,943) 325,521
----------
CONVERTIBLE PREFERRED STOCKS - 0.6%
JAPAN - 0.6%+++
42,000,000 Sumitomo Mitsui Finance Group Inc. (F),
Conv. Pfd., 2.250% due 07/11/2005 663
99,000,000 Sumitomo Mitsui Finance Group Inc. (F),
Conv. Pfd., 2.250% due 07/11/2005++ 1,562
----------
2,225
----------
Total Convertible Preferred Stocks
(Cost $1,326) 2,225
----------
VALUE
SHARES (000S)
------ ------
PREFERRED STOCK - 0.2%
(Cost $218)
SOUTH KOREA - 0.2%+++
3,360 Samsung Electronics Company Ltd. $ 667
----------
PRINCIPAL
AMOUNT
(000S)
------
CONVERTIBLE BONDS - 0.3%
(Cost $707)
SWITZERLAND - 0.3%
$ 826 Credit Suisse Group Financial, Conv.
Jr. Bond, 6.000% due 12/23/2005 876
----------
SHARES
------
RIGHTS - 0.1%
AUSTRALIA - 0.0%+++,++++
11,164 Australia & New Zealand Banking
Group Ltd.-Rights+ 34
----------
GERMANY - 0.1%
13,100 Muenchener Rueckversicherungs-
Gesellschaft AG-Rights+ 109
----------
Total Rights
(Cost $0) 143
----------
PRINCIPAL
AMOUNT
(000S)
------
REPURCHASE AGREEMENT - 5.2%
(Cost $18,163)
$ 18,163 Agreement with Goldman Sachs Group,
Inc., 0.960% dated 10/31/2003, to be
repurchased at $18,164 on 11/03/2003
(Collateralized by $15,413 U.S.
Treasury Bonds, having various
interest rates and maturities
Market Value $18,490) 18,163
----------
TOTAL INVESTMENTS (Cost $310,357*) 99.9% 347,595
OTHER ASSETS AND LIABILITIES (NET) 0.1 440
----- ----------
NET ASSETS 100.0% $ 348,035
===== ==========
<FN>
- --------
* Aggregate cost for federal tax purposes is $313,181.
** Some or all of these securities are on loan at October 31, 2003, and
have an aggregate market value of $15,811, representing 4.5% of the
total net assets of the Fund (Collateral Value $16,469).
*** Value of security is $0.
+ Non-income producing security.
++ Security acquired in a transaction exempt from registration under Rule
144A of the Securities Act of 1933.
+++ Investments in the areas of the Pacific Rim as of October 31, 2003 are
30.1% of the total net assets of the Fund.
++++ Amount represents less than 0.1% of total net assets.
51
See Notes to Financial Statements.
PORTFOLIO OF INVESTMENTS (CONTINUED)
INTERNATIONAL GROWTH FUND
OCTOBER 31, 2003
SCHEDULE OF FORWARD FOREIGN CURRENCY CONTRACTS
FORWARD FOREIGN CURRENCY CONTRACTS TO BUY
CONTRACTS TO RECEIVE
(000S)
-----------------------------------------
NET
UNREALIZED
IN APPRECIATION/
EXPIRATION LOCAL VALUE IN EXCHANGE (DEPRECIATION)
DATE CURRENCY U.S. $ FOR U.S. $ OF CONTRACTS
---------- ---------------- -------- ---------- ------------
11/03/2003 GBP 44 75 75 $ --***
11/04/2003 EUR 17 20 20 --***
11/04/2003 JPY 12,933 118 120 (2)
11/05/2003 EUR 10 12 12 --***
11/05/2003 GBP 137 232 232 --***
11/05/2003 JPY 1,253 11 11 --***
11/06/2003 JPY 959 9 9 --***
11/25/2003 JPY 410,406 3,736 3,501 235
01/20/2004 CAD 2,695 2,037 2,027 10
01/30/2004 CHF 2,051 1,540 1,462 78
----
$321
----
FORWARD FOREIGN CURRENCY CONTRACTS TO SELL
CONTRACTS TO DELIVER
(000S)
------------------------------------------
NET
UNREALIZED
IN APPRECIATION/
EXPIRATION LOCAL VALUE IN EXCHANGE (DEPRECIATION)
DATE CURRENCY U.S. $ FOR U.S. $ OF CONTRACTS
---------- ---------------- -------- ---------- ------------
11/03/2003 HKD 224 29 29 $ --***
11/04/2003 HKD 223 29 29 --***
11/25/2003 CHF 4,922 3,688 3,501 (187)
01/20/2004 JPY 220,170 2,008 2,027 19
01/30/2004 CHF 2,051 1,540 1,524 (16)
03/04/2004 JPY 128,420 1,173 1,111 (62)
-----
$(246)
-----
Net Unrealized Appreciation of Forward
Foreign Currency Contracts $ 75
=====
<FN>
- --------
*** Amount represents less than $500.
AS OF OCTOBER 31, 2003, SECTOR DIVERSIFICATION IS AS FOLLOWS:
% OF VALUE
SECTOR DIVERSIFICATION NET ASSETS (000S)
---------------------- ---------- ------
COMMON STOCKS:
Banks 11.8% $ 40,960
Telecommunication Services 10.2 35,556
Pharmaceuticals & Biotechnology 9.7 33,789
Materials 7.2 25,178
Capital Goods 5.8 20,351
Energy 5.7 19,837
Semiconductors & Semiconductor Equipment 5.6 19,003
Food, Beverage & Tobacco 5.1 17,900
Insurance 5.0 17,546
Automobiles & Components 3.8 13,220
Media 3.5 12,220
Consumer Durables & Apparel 2.9 10,246
Diversified Financials 2.6 9,068
Retailing 2.5 8,795
Electronic Equipment & Instruments 2.1 7,384
Real Estate Investment Trusts 2.0 6,952
Computers & Peripherals 1.4 4,752
Utilities 1.1 3,817
Commercial Services & Supplies 1.1 3,717
Other 4.4 15,230
----- ----------
TOTAL COMMON STOCKS 93.5 325,521
CONVERTIBLE PREFERRED STOCKS 0.6 2,225
PREFERRED STOCK 0.2 667
CONVERTIBLE BONDS 0.3 876
RIGHTS 0.1 143
REPURCHASE AGREEMENT 5.2 18,163
TOTAL INVESTMENTS 99.9 347,595
OTHER ASSETS AND LIABILITIES (NET) 0.1 440
----- ----------
NET ASSETS 100.0% $ 348,035
===== ==========
- ------------------------------------------------------------------------------
GLOSSARY OF TERMS
ADR -- American Depository Receipt
CAD -- Canadian Dollar
CHF -- Swiss Franc
EUR -- EURO
(F) -- Foreign Shares
FDR -- Fiduciary Depository Receipt
GBP -- Great Britain Pound Sterling
GDR -- Global Depository Receipt
HKD -- Hong Kong Dollar
JPY -- Japanese Yen
- ------------------------------------------------------------------------------
52
See Notes to Financial Statements.
PORTFOLIO OF INVESTMENTS
SHORT TERM INCOME FUND
OCTOBER 31, 2003
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
------ ------
CORPORATE BONDS AND NOTES - 50.1%
FINANCIAL SERVICES - 9.9%
$ 6,000 Berkshire Hathaway Inc., Note,
3.375% due 10/15/2008** $ 5,933
CIT Group Inc., Sr. Note:
1,500 7.375% due 04/02/2007 1,693
2,000 7.625% due 08/16/2005 2,185
3,750 Countrywide Home Loans, Inc., Company
Guarantee, Series K,
5.500% due 02/01/2007 4,005
2,500 Goldman Sachs Group, Inc., Note,
4.125% due 01/15/2008 2,555
Household Finance Corporation, Note:
3,500 5.750% due 01/30/2007 3,782
1,500 7.875% due 03/01/2007 1,723
3,500 Rollins Truck Leasing Corporation, Deb.,
8.375% due 02/15/2007++ 4,086
----------
25,962
----------
REAL ESTATE INVESTMENT TRUSTS/PROPERTY - 8.9%
4,250 Developers Diversified Realty Corporation,
Sr. Note, 6.625% due 01/15/2008 4,580
4,000 Duke-Weeks Realty Corporation, Note,
7.375% due 08/01/2007 4,550
3,750 EOP Operating LP, Note,
7.750% due 11/15/2007 4,299
3,500 Health Care Property Investors, Inc.,
Note, 6.875% due 06/08/2005 3,681
3,000 Nationwide Health Properties Inc., Note,
9.750% due 03/20/2008 3,470
2,750 Shurgard Storage Centers, Inc., Note,
7.500% due 04/25/2004++ 2,819
----------
23,399
----------
BANKS - 5.6%
4,250 Capital One Bank, Sr. Note,
8.250% due 06/15/2005 4,620
3,000 J.P. Morgan Chase & Company, Note,
5.350% due 03/01/2007 3,223
3,500 MBNA America Bank N.A., Note,
6.500% due 06/20/2006 3,814
3,000 Wachovia Corporation, Sr. Note,
6.700% due 06/21/2004 3,103
----------
14,760
----------
AUTO MANUFACTURING & PARTS - 3.6%
4,000 Ford Motor Credit Company, Note,
6.500% due 01/25/2007 4,130
5,000 Toyota Motor Credit Corporation, Note,
5.650% due 01/15/2007 5,485
----------
9,615
----------
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
------ ------
TELECOMMUNICATIONS - 3.3%
$ 3,250 Deutsche Telekom International Finance
BV, Company Guarantee, 8.250% due
06/15/2005 $ 3,553
1,500 TELUS Corporation, Note,
7.500% due 06/01/2007 1,667
3,500 Verizon Global Funding Corporation, Note,
4.000% due 01/15/2008 3,549
----------
8,769
----------
UTILITIES - 3.1%
4,000 Constellation Energy Group, Inc., Note,
6.350% due 04/01/2007 4,364
2,750 Texas-New Mexico Power Company, Sr. Note,
6.250% due 01/15/2009 2,796
1,000 United Illuminating Company, Note,
6.000% due 12/15/2003 1,004
----------
8,164
----------
FOOD - 2.5%
2,000 ConAgra Inc., Sr. Note,
9.875% due 11/15/2005 2,287
----------
4,000 Safeway Inc., Sr. Note,
6.150% due 03/01/2006 4,302
----------
6,589
----------
CABLE TV - 3.2%
4,000 AOL Time Warner Inc., Note,
6.150% due 05/01/2007 4,352
4,000 Cox Enterprises, Inc., Note,
4.375% due 05/01/2008** 4,049
----------
8,401
----------
AIRLINES - 1.6%
4,000 Southwest Airlines Company, Pass-thru
Certificates, 5.496% due 11/01/2006 4,309
----------
PAPER/FOREST PRODUCTS - 1.4%
3,500 Weyerhaeuser Company, Note,
6.000% due 08/01/2006 3,755
----------
SERVICES - 1.4%
3,500 PHH Corporation, Note,
6.000% due 03/01/2008 3,748
----------
CHEMICALS/MINING/MACHINERY - 1.3%
3,250 Consolidated Coal Company,
Company Guarantee,
8.210% due 06/21/2004 3,326
----------
INFORMATION TECHNOLOGY - 1.3%
3,000 Computer Science Corporation, Note,
6.750% due 06/15/2006 3,308
----------
PIPELINES - 1.1%
3,000 El Paso Natural Gas Company, Note,
6.750% due 11/15/2003++ 3,000
----------
53
See Notes to Financial Statements.
PORTFOLIO OF INVESTMENTS (CONTINUED)
SHORT TERM INCOME FUND
OCTOBER 31, 2003
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
------ ------
CORPORATE BONDS AND NOTES - (CONTINUED)
INDUSTRIAL PRODUCTS - 0.9%
$ 2,000 Sealed Air Corporation, Company Guarantee,
8.750% due 07/01/2008** $ 2,357
----------
AEROSPACE/DEFENSE - 0.8%
2,000 Boeing Capital Corporation, Sr. Note,
5.650% due 05/15/2006 2,135
----------
RETAIL - 0.2%
500 Federated Department Stores Inc., Bond,
6.790% due 07/15/2027 530
----------
Total Corporate Bonds and Notes
(Cost $126,817) 132,127
----------
ASSET-BACKED SECURITIES - 4.8%
5,000 Capital One Multi-Asset Execution Trust,
Series 2003-A6, Class A6,
2.950% due 08/17/2009 5,000
FFCA Secured Lending Corporation:
3,090 Series 1999-1A , Class A1A,
6.370% due 10/18/2008** 3,123
1,154 Series 1999-2, Class WA1A,
7.130% due 02/18/2009** 1,166
120 Green Tree Financial Corporation,
Series 1995-6, Class B1,
7.700% due 09/15/2026 81
3,200 Residential Asset Mortgage Products, Inc.,
Series 2003-RS4, Class AI3,
2.742% due 11/25/2028 3,164
----------
Total Asset-Backed Securities
(Cost $12,562) 12,534
----------
U.S. GOVERNMENT AGENCY OBLIGATIONS - 13.0%
Federal Home Loan Bank, Bond:
4,000 1.625% due 04/15/2005 4,001
4,000 1.875% due 06/15/2006 3,943
4,000 2.500% due 12/15/2005 4,028
Federal Home Loan Mortgage Corporation:
3,500 Bond, 3.250% due 02/25/2008 3,462
Note:
2,000 4.250% due 06/15/2005 2,077
4,000 6.875% due 01/15/2005 4,253
Federal National Mortgage Association:
Note:
4,000 4.250% due 07/15/2007 4,171
3,000 5.500% due 02/15/2006 3,216
5,000 Sub. Note,
4.000% due 09/02/2008 5,032
----------
Total U.S. Government Agency Obligations
(Cost $33,668) 34,183
----------
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
------ ------
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED
SECURITIES - 3.4%
ADJUSTABLE RATE MORTGAGE-BACKED SECURITIES (ARMS) - 1.4%
100 Federal Home Loan Mortgage Corporation
(FHLMC), 3.497% due 11/01/2021+ $ 102
Federal National Mortgage Association
(FNMA):
10 3.410% due 11/01/2022+ 10
21 4.125% due 11/01/2021+ 21
3,356 4.656% due 11/01/2032+ 3,425
108 4.856% due 11/01/2035+ 110
54 4.996% due 01/01/2019+ 55
53 5.595% due 04/01/2019+ 54
----------
Total ARMSs
(Cost $3,820 3,777
----------
FEDERAL HOME LOAN MORTGAGE CORPORATION (FHLMC) - 1.1%
2,755 6.000% due 04/01/2017-05/01/2017 2,863
54 9.500% due 08/01/2016 60
----------
Total FHLMCs
(Cost $2,865) 2,923
----------
FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA) - 0.7%
1,619 6.500% due 01/01/2012-01/01/2014 1,708
94 8.500% due 11/01/2017 103
48 10.000% due 05/01/2022 54
----------
Total FNMAs (Cost $1,773) 1,865
----------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (GNMA) - 0.2%
19 8.000% due 03/15/2012 20
20 9.000% due 04/20/2025 22
183 10.000% due 01/15/2019-02/15/2019 208
191 11.000% due 02/15/2010-08/15/2020 216
----------
Total GNMAs
(Cost $445) 466
----------
Total U.S. Government Agency Mortgage-
Backed Securities
(Cost $8,903) 9,031
----------
COLLATERALIZED MORTGAGE OBLIGATIONS (CMO) - 9.0%
373 Deutsche Mortgage Securities, Inc.,
Series 2002-1, Class A13,
8.500% due 01/25/2033 381
Federal Home Loan Mortgage Corporation:
5,000 Series 2442, Class PG,
6.000% due 06/15/2030 5,223
3,012 Series 2541, Class LU,
4.000% due 12/15/2027 3,020
5,000 Series 2552, Class KB,
4.250% due 06/15/2027 4,923
4,777 Series 2575, Class LM,
4.500% due 05/15/2032 4,820
5,000 Federal National Mortgage Association,
Series 2002-58, Class HB,
5.500% due 11/25/2015 5,193
----------
Total CMOs
(Cost $23,694) 23,560
----------
54
See Notes to Financial Statements.
PORTFOLIO OF INVESTMENTS (CONTINUED)
SHORT TERM INCOME FUND
OCTOBER 31, 2003
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
------ ------
U.S. TREASURY NOTES - 2.5%
U.S. Treasury Notes:
$ 5,000 1.500% due 02/28/2005 $ 5,006
1,500 6.000% due 08/15/2004++ 1,556
----------
Total U.S. Treasury Notes
(Cost $6,528) 6,562
----------
COMMERCIAL MORTGAGE-BACKED SECURITIES (CMBS) - 0.8%
(Cost $1,956)
1,956 GMAC Commercial Mortgage Securities Inc.,
Series 1999-CTL1, Class A,
7.150% due 12/15/2016** 2,116
----------
REPURCHASE AGREEMENT - 15.3%
(Cost $40,382)
40,382 Agreement with Goldman Sachs Group,
Inc., 0.960% dated 10/31/2003, to be
repurchased at $40,385 on 11/03/2003
(Collateralized by $34,267 U.S.
Treasury Bonds, having various
interest rates and maturities
Market Value $41,108) 40,382
----------
TOTAL INVESTMENTS (Cost $254,510*) 98.9% 260,495
OTHER ASSETS AND LIABILITIES (NET) 1.1 3,021
----- ----------
NET ASSETS 100.0% $ 263,516
===== ==========
<FN>
- --------
* Aggregate cost for federal tax purposes.
** Security acquired in a transaction exempt from registration under Rule
144A of the Securities Act of 1933.
+ Variable rate security. The interest rate shown reflects the rate in
effect at October 31, 2003.
++ Security segregated as collateral for futures contracts.
UNREALIZED
NUMBER OF VALUE DEPRECIATION
CONTRACTS (000S) (000S)
--------- ------ ------------
FUTURES CONTRACTS-SHORT POSITION
100 U.S. 5 Year Treasury Note,
December 2003 $11,181 $ (229)
==========
55
See Notes to Financial Statements.
PORTFOLIO OF INVESTMENTS
U.S. GOVERNMENT SECURITIES FUND
OCTOBER 31, 2003
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
--------- ------
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED
SECURITIES - 73.3%
FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA) - 35.0%
$ 60,181 5.000% due 04/01/2018-10/01/2018 $ 61,192
87,023 5.500% due 02/01/2009-06/01/2033 88,341
95,356 6.000% due 12/01/2016-03/01/2033 98,361
98,513 6.500% due 09/01/2024-02/01/2033 102,485
3,149 6.820% due 02/01/2011 3,423
19,870 7.000% due 06/01/2010-11/01/2031 20,995
7,487 7.500% due 12/01/2024-02/01/2030 8,012
725 8.000% due 05/01/2022-01/01/2025 782
104 8.500% due 02/01/2023-09/01/2025 113
1,687 9.000% due 08/01/2016-09/01/2030 1,835
----------
Total FNMAs
(Cost $384,747) 385,539
----------
FEDERAL HOME LOAN MORTGAGE CORPORATION (FHLMC) - 29.4%
20,786 4.000% due 08/01/2018 20,278
26,587 4.500% due 04/01/2018-08/01/2033 25,985
67,851 5.000% due 04/01/2018-08/01/2033** 67,287
56,806 5.500% due 11/01/2032-08/01/2033 57,326
56,129 6.000% due 04/01/2017-11/01/2032 57,851
52,013 6.500% due 02/01/2011-01/01/2032 54,263
24,524 7.000% due 07/01/2024-04/01/2032 25,825
10,257 7.500% due 12/01/2006-02/01/2031 10,929
1,024 8.000% due 12/01/2030 1,102
1,380 8.500% due 04/01/2019-07/01/2029 1,487
138 8.750% due 01/01/2013 144
218 9.000% due 12/01/2008-08/01/2022 242
111 9.500% due 06/01/2016-05/01/2017 123
----------
Total FHLMCs
(Cost $322,891) 322,842
----------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (GNMA) - 8.9%
24,685 5.500% due 07/20/2033 24,987
35,295 6.000% due 04/20/2026-07/20/2033 36,377
11,882 6.500% due 03/15/2024-07/15/2032 12,437
787 6.800% due 04/20/2025 831
8,595 7.000% due 07/15/2008-06/20/2031 9,116
7,064 7.500% due 03/15/2024-11/15/2029 7,557
567 7.750% due 12/15/2029 610
1,736 8.000% due 04/15/2022-06/20/2030 1,866
182 8.500% due 05/15/2022 200
1,162 9.000% due 11/15/2021 1,290
2,094 9.500% due 04/15/2016-08/15/2021 2,325
14 13.500% due 09/15/2014-12/15/2014 16
----------
Total GNMAs
(Cost $94,958) 97,612
----------
ADJUSTABLE RATE MORTGAGE-BACKED SECURITIES
(ARMS) - 0.0%++
(Cost $236)
235 Federal National Mortgage Association
(FNMA), 3.975% due 03/01/2028+ 242
----------
Total U.S. Government Agency Mortgage-
Backed Securities
(Cost $802,832) 806,235
----------
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
--------- ------
COLLATERALIZED MORTGAGE OBLIGATIONS (CMO) - 10.8%
Federal Home Loan Mortgage Corporation:
$ 382 Series 1049, Class F,
2.025% due 02/15/2021+ $ 381
2,000 Series 1652, Class PL,
7.000% due 01/15/2024 2,147
2,436 Series 1981, Class C,
6.500% due 08/15/2027 2,537
10,000 Series 2435, Class GE,
6.500% due 06/15/2031 10,568
5,500 Series 2442, Class PG,
6.000% due 06/15/2030 5,745
24,000 Series 2449, Class ND,
6.500% due 05/15/2030+++ 25,394
12,122 Series 2481, Class VC,
6.000% due 06/15/2017 12,604
9,000 Series 2551, Class QK,
5.500% due 01/15/2033+++ 9,034
16,242 Series 2575, Class LM,
4.500% due 05/15/2032 16,388
Federal National Mortgage Association:
7,000 Grantor Trust, Series 2000-T5, Class B,
7.300% due 05/25/2010 8,270
19,509 Series 2002-16, Class TM,
7.000% due 04/25/2032 20,827
1,272 Trust 259 STRIP,
7.000% due 04/01/2024 217
Federal National Mortgage Association,
REMIC, Pass-through Certificates:
79 Series 1989-18, Class C,
9.500% due 04/25/2004 80
277 Series 1990-49, Class G,
9.000% due 05/25/2020 300
2 Series 1992-83, Class X,
7.000% due 02/25/2022 2
520 Series 1993-162, Class E,
6.000% due 08/25/2023 534
302 Series 1997-32, Class FA,
1.725% due 04/25/2027+ 304
3,862 Government National Mortgage Association,
Series 2000-16, Class PB,
7.500% due 02/16/2028 4,013
157 L.F. Rothschild Mortgage Trust, Series 3,
Class Z, 9.950% due 09/01/2017 165
----------
Total CMOs
(Cost $117,911) 119,510
----------
56
See Notes to Financial Statements.
PORTFOLIO OF INVESTMENTS (CONTINUED)
U.S. GOVERNMENT SECURITIES FUND
OCTOBER 31, 2003
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
--------- ------
U.S. GOVERNMENT AGENCY OBLIGATIONS - 4.7%
$ 10,000 Federal Home Loan Bank, Bond,
2.875% due 09/15/2006 $ 10,061
10,000 Federal Home Loan Mortgage Corporation,
Sub Note, 5.875% due 03/21/2011 10,710
Federal National Mortgage Association:
10,000 Bond, 3.250% due 01/15/2008 9,994
1,250 Deb., 6.210% due 08/06/2038 1,347
7,500 Note, 6.000% due 05/15/2008 8,313
10,000 Sub. Note, 6.250% due 02/01/2011 10,954
----------
Total U.S. Government Agency Obligations
(Cost $48,681) 51,379
----------
U.S. TREASURY NOTES - 4.6%
30,000 3.000% due 11/15/2007 30,166
20,000 3.250% due 08/15/2007 20,345
----------
Total U.S. Treasury Notes
(Cost $50,511) 50,511
----------
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
--------- ------
REPURCHASE AGREEMENT - 7.4%
(Cost $81,168)
$ 81,168 Agreement with Goldman Sachs Group,
Inc., 0.960% dated 10/31/2003, to be
repurchased at $81,174 on 11/03/2003
(Collateralized by $68,877 U.S.
Treasury Bonds, having various
interest rates and maturities
Market Value $82,628) $ 81,168
----------
TOTAL INVESTMENTS (Cost $1,101,103*) 100.8% 1,108,803
OTHER ASSETS AND LIABILITIES (NET) (0.8) (8,761)
----- ----------
NET ASSETS 100.0% $1,100,042
===== ==========
<FN>
- --------
* Aggregate cost for federal tax purposes is $1,101,137.
** A portion of these securities have been purchased on a when-issued
basis.
+ Variable rate security. The interest rate shown reflects the rate in
effect at October 31, 2003.
++ Amount represents less than 0.1% of total net assets.
+++ Security segregated as collateral for when-issued securities.
- ------------------------------------------------------------------------------
GLOSSARY OF TERMS
REMIC -- Real Estate Mortage Investment Conduit
STRIP -- Separate trading of registered interest and
principal of securities
- ------------------------------------------------------------------------------
57
See Notes to Financial Statements.
PORTFOLIO OF INVESTMENTS
INCOME FUND
OCTOBER 31, 2003
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
--------- ------
CORPORATE BONDS AND NOTES - 62.4%
OIL & GAS - 7.8%
$ 1,600 Burlington Resources Inc., Deb.,
9.125% due 10/01/2021 $ 2,090
7,500 Consolidated Natural Gas Company, Sr.
Note, 6.850% due 04/15/2011 8,453
10,000 El Paso Natural Gas Company, Deb.,
7.500% due 11/15/2026 8,950
5,309 Express Pipeline LP, Sub. Note,
7.390% due 12/31/2017** 5,319
5,000 NiSource Finance Corporation, Sr. Note,
6.150% due 03/01/2013 5,330
PDVSA Finance Ltd.:
8,470 Note, 8.500% due 11/16/2012 7,581
3,000 Sr. Note, 9.750% due 02/15/2010 2,985
Petro-Canada:
8,500 Deb., 9.250% due 10/15/2021 11,322
3,000 Note, 4.000% due 07/15/2013 2,756
8,000 Petrobras International Finance Company,
Sr. Note, 9.750% due 07/06/2011 8,880
Southern Natural Gas Company, Sr. Note:
4,000 8.000% due 03/01/2032 4,000
1,000 8.875% due 03/15/2010 1,095
2,000 Tennessee Gas Pipeline Company, Bond,
8.375% due 06/15/2032 2,035
4,500 Tesoro Petroleum Corporation, Note,
8.000% due 04/15/2008 4,793
5,750 Trans-Canada Pipeline Corporation, Deb.,
8.500% due 03/20/2023 6,042
----------
81,631
----------
FINANCIAL SERVICES/BANKS - 7.7%
175 Abbey National First Capital BV, Sub.
Note, 8.200% due 10/15/2004 186
1,500 Aetna Inc., Company Guarantee,
7.625% due 08/15/2026 1,704
400 Banc One Corporation, Sub. Note,
10.000% due 08/15/2010 521
5,000 Bank of America Corporation, Sub. Note,
7.800% due 02/15/2010 5,932
1,000 BankAmerica Corporation, Sub. Note,
6.625% due 08/01/2007 1,113
690 BB&T Corporation, Sub. Note,
7.250% due 06/15/2007 785
2,500 CIT Group Inc., Sr. Note,
7.750% due 04/02/2012 2,922
10,000 Citigroup Inc. Note,
6.000% due 02/21/2012 10,897
1,100 First Interstate Bancorp, Sub. Note,
9.125% due 02/01/2004 1,121
1,000 First Nationwide Bank, Sub. Deb.,
10.000% due 10/01/2006 1,182
995 Fleet Financial Group, Inc., Sub. Deb.,
6.875% due 01/15/2028 1,090
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
--------- ------
$ 10,000 Golman Sachs Group, Inc., Note,
6.600% due 01/15/2012 $ 11,109
7,500 Jefferies Group, Inc., Sr. Note,
7.750% due 03/15/2012 8,381
1,000 Key Bank NA, Sub. Deb.,
6.950% due 02/01/2028 1,061
3,000 Legg Mason, Inc., Sr. Note,
6.750% due 07/02/2008 3,344
MBNA Corporation:
3,000 Note, 6.250% due 01/17/2007 3,254
2,000 Sr. Note, 7.500% due 03/15/2012 2,285
Merrill Lynch & Company Inc., Note:
5,000 6.000% due 02/17/2009 5,454
1,450 6.500% due 07/15/2018 1,598
2,000 6.750% due 06/01/2028 2,156
7,500 Morgan Stanley Dean Witter & Company,
Unsub. Note,6.750% due 04/15/2011 8,440
670 NationsBank Corporation, Sub. Note,
6.800% due 03/15/2028 740
1,000 Norwest Bancorp, Sub. Deb.,
6.650% due 10/15/2023 1,066
Paine Webber Group, Inc., Sr. Note:
415 7.390% due 10/16/2017 477
830 8.060% due 01/17/2017 974
500 PNC Institute Capital B, Company Guarantee,
8.315% due 05/15/2027** 565
1,750 SB Treasury Company LLC, Bond,
9.400% to 06/30/2008;
10.925% due 12/29/2049** 1,951
----------
80,308
----------
UTILITIES - 7.5%
5,000 Arizona Public Service Company, Note,
6.500% due 03/01/2012 5,479
5,000 Constellation Energy Group, Inc., Note,
7.000% due 04/01/2012 5,677
10,000 Dominion Resources, Inc., Sr. Note,
5.000% due 03/15/2013 9,940
Illinois Power Company, First Mortgage:
5,500 7.500% due 06/15/2009 5,995
1,000 11.500% due 12/15/2010 1,200
7,000 Metropolitan Edison Company, Note,
4.950% due 03/15/2013** 6,836
1,307 Niagara Mohawk Power Corporation, Deb.,
8.770% due 01/01/2018 1,363
5,000 Ohio Power Company, Sr. Note,
5.500% due 02/15/2013 5,118
Oncor Electric Delivery Company, Deb.:
1,000 5.000% due 09/01/2007 1,052
8,000 7.000% due 09/01/2022 8,765
5,000 PPL Energy Supply LLC, Sr. Note,
6.400% due 11/01/2011 5,324
2,000 Public Service Company of New Mexico,
Sr. Note, 4.400% due 09/15/2008 2,020
58
See Notes to Financial Statements.
PORTFOLIO OF INVESTMENTS (CONTINUED)
INCOME FUND
OCTOBER 31, 2003
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
--------- ------
CORPORATE BONDS AND NOTES - (CONTINUED)
UTILITIES - (CONTINUED)
$ 5,000 Sempra Energy, Note,
6.000% due 02/01/2013 $ 5,269
6,500 Southwestern Electric Power Company,
Note, 5.375% due 04/15/2015 6,420
6,845 Texas-New Mexico Power Company, Sr. Note,
6.250% due 01/15/2009 6,961
1,000 WPD Holdings UK, Jr. Note,
6.750% due 12/15/2004** 1,028
----------
78,447
----------
REAL ESTATE INVESTMENT TRUSTS - 5.6%
2,000 American Health Properties, Inc., Note,
7.500% due 01/15/2007 2,222
10,000 Developers Diversified Realty Corporation,
Note, 4.625% due 08/01/2010 9,779
Franchise Finance Corporation:
3,000 MTN, 7.070% due 01/15/2008 3,397
1,100 Sr. Note, 7.875% due 11/30/2005 1,204
Health Care Property Investors, Inc.:
Note:
1,750 6.000% due 03/01/2015 1,759
1,000 6.875% due 06/08/2005 1,052
Sr. Note:
3,000 6.450% due 06/25/2012 3,209
1,000 6.500% due 02/15/2006 1,067
5,000 Health Care REIT, Inc., Sr. Note,
7.500% due 08/15/2007 5,521
7,500 Healthcare Realty Trust, Inc., Sr. Note,
8.125% due 05/01/2011 8,324
Nationwide Health Properties Inc., Note:
1,500 7.060% due 12/05/2006 1,632
8,500 9.750% due 03/20/2008 9,831
9,000 Shurgard Storage Centers, Inc., Note,
5.875% due 03/15/2013 9,202
----------
58,199
----------
CONSUMER PRODUCTS/SERVICES - 5.2%
1,000 Allied Waste North America Inc., Sr. Note,
7.875% due 04/15/2013 1,077
4,000 Cendant Corporation, Note,
6.875% due 08/15/2006 4,399
5,000 ConAgra, Inc., Sr. Note,
7.125% due 10/01/2026 5,737
350 CPC International, Inc., Note,
6.150% due 01/15/2006 377
3,650 International Speedway Corporation,
Company Guarantee,
7.875% due 10/15/2004 3,844
Mattel, Inc., Note:
1,750 6.125% due 07/15/2005 1,886
1,000 7.300% due 06/13/2011 1,109
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
--------- ------
$ 10,000 Reed Elsevier Capital, Company Guarantee,
6.750% due 08/01/2011 $ 11,375
Royal Caribbean Cruises Ltd.:
2,000 Deb., 7.250% due 03/15/2018 1,930
Sr. Note:
1,250 8.000% due 05/15/2010 1,350
3,000 8.750% due 02/02/2011 3,360
6,500 Sealed Air Corporation, Company Guarantee,
8.750% due 07/01/2008** 7,662
USA Waste Services, Inc., Sr. Note:
1,000 7.000% due 07/15/2028 1,074
495 7.125% due 10/01/2007 556
Waste Management Inc.:
3,450 Company Guarantee,
6.875% due 05/15/2009 3,877
3,500 Sr. Note, 7.375% due 08/01/2010 4,053
----------
53,666
----------
HEALTH CARE - 4.8%
4,500 Aetna Inc., Sr. Note,
7.375% due 03/01/2006 4,973
1,500 American Home Products Corporation, Deb.,
7.250% due 03/01/2023 1,690
10,000 Cardinal Health, Inc., Note,
6.750% due 02/15/2011 11,440
DVI, Inc., Sr. Note, (in default):
8,125 9.875% due 02/01/2004 1,747
400 9.875% due 02/01/2004 86
HCA Inc.:
3,000 Note, 5.250% due 11/06/2008 2,991
5,000 Sr. Note, 6.950% due 05/01/2012 5,186
4,850 HIH Capital Ltd., Conv. Note,
7.500% due 09/25/2006 3,710
7,350 IVAX Corporation, Conv. Sr. Sub. Note,
4.500% due 05/15/2008 7,194
12,000 Tenet Healthcare Corporation, Sr. Note,
6.375% due 12/01/2011 11,190
----------
50,207
----------
INFORMATION TECHNOLOGY - 4.5%
5,000 BEA Systems Inc., Conv. Sub. Note,
4.000% due 12/15/2006 5,000
11,250 Conexant Systems Inc., Conv. Sub. Note,
4.000% due 02/01/2007 9,942
5,000 Extreme Networks, Inc., Conv. Sub. Note,
3.500% due 12/01/2006 4,719
1,921 Komag, Inc., Sr. Note, Class 3,
9.496% due 06/30/2007++ 1,902
7,500 LSI Logic Corporation, Conv. Sub. Note,
4.000% due 02/15/2005 7,500
3,900 RadiSys Corporation, Conv. Sub. Note,
5.500% due 08/15/2007 3,841
11,250 TriQuint Semiconductor, Inc.,
Conv. Sub. Note,
4.000% due 03/01/2007 10,322
59
See Notes to Financial Statements.
PORTFOLIO OF INVESTMENTS (CONTINUED)
INCOME FUND
OCTOBER 31, 2003
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
--------- ------
CORPORATE BONDS AND NOTES - (CONTINUED)
INFORMATION TECHNOLOGY - (CONTINUED)
$ 4,000 Vitesse Semiconductor Corporation, Conv.
Sub. Deb., 4.000% due 03/15/2005 $ 3,905
----------
47,131
----------
TRANSPORTATION/AUTO - 4.0%
Burlington Northern Santa Fe:
5,000 Deb., 8.125% due 04/15/2020 5,934
1,500 Note, 8.750% due 02/25/2022 1,920
3,030 Consolidated Rail Corporation, Deb.,
9.750% due 06/15/2020 4,016
2,000 Ford Holdings Inc., Company Guarantee,
9.300% due 03/01/2030 2,090
Ford Motor Company, Deb.:
825 7.400% due 11/01/2046 697
3,750 8.900% due 01/15/2032 3,690
5,000 Ford Motor Credit Company, Sr. Note,
5.800% due 01/12/2009 4,876
8,000 General Motors Corporation, Deb.,
9.400% due 07/15/2021 8,740
5,000 Norfolk Southern Corporation, Sr. Note,
6.200% due 04/15/2009 5,498
United Air Lines Inc.:
5,000 Equipment Trust Certificates,
(in default), 10.850% due 07/05/2014 1,588
Pass-through Certificates, (in default):
3,000 9.080% due 10/26/2015 797
5,500 9.560% due 10/19/2018 2,295
----------
42,141
----------
TELECOMMUNICATIONS - 3.1%
5,000 Deutsche Telephone Finance, Bond,
8.500% due 06/15/2010 6,027
8,000 Qwest Corporation, Note,
8.875% due 03/15/2012** 9,080
7,000 TELUS Corporation, Note,
8.000% due 06/01/2011 8,062
8,000 Vodafone Group, PLC, Note,
7.750% due 02/15/2010 9,476
----------
32,645
----------
GAMING - 2.7%
5,000 Circus Circus Enterprise Inc., Deb.,
7.000% due 11/15/2036 5,244
3,500 Harrah's Operating Company Inc.,
Company Guarantee,
8.000% due 02/01/2011 4,079
3,000 Mandalay Resort Group, Sr. Sub. Note,
Series B, 10.250% due 08/01/2007 3,472
Park Place Entertainment Corporation,
Sr. Note:
1,500 7.500% due 09/01/2009 1,642
5,000 8.500% due 11/15/2006 5,538
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
------ ------
$ 7,900 Riviera Holdings Corporation,
Company Guarantee,
11.000% due 06/15/2010 $ 8,098
----------
28,073
----------
MEDIA - 2.5%
Comcast Cable Communications Inc.:
550 Note, 6.200% due 11/15/2008 600
7,000 Sr. Note, 7.125% due 06/15/2013 7,873
7,500 Cox Communications, Inc., Note,
6.750% due 03/15/2011 8,375
2,000 Dex Media East LLC, Company Guarantee,
12.125% due 11/15/2012 2,422
5,260 Time Warner Inc., Deb.,
9.150% due 02/01/2023 6,585
----------
25,855
----------
INDUSTRIAL PRODUCTS - 2.1%
5,000 Champion International Corporation, Deb.,
7.200% due 11/01/2026 5,571
6,000 Corn Products International, Inc.,
Sr. Note, 8.450% due 08/15/2009 6,765
500 Crane Company, Note,
8.500% due 03/15/2004 513
1,500 Hanover Compressor Company,
Conv. Sr. Note,
4.750% due 03/15/2008 1,380
250 Lennar Corporation, Sr. Note,
7.625% due 03/01/2009 286
5,850 Ogden Corporation, Deb., (in default),
9.250% due 03/01/2022 3,656
Weyerhaeuser Company:
1,500 Deb., 7.375% due 03/15/2032 1,620
1,500 Note, 6.750% due 03/15/2012 1,627
----------
21,418
----------
INDEX PRODUCT - 1.6%
15,840 J.P. Morgan HYDI(SM) (High Yield Diversified
Index) June 20, 2008,
Credit-Linked Trust Certificates,
8.000% due 06/20/2008** 16,206
----------
RETAIL - 1.2%
5,000 Fred Meyer Inc., Company Guarantee,
7.450% due 03/01/2008 5,690
5,000 Safeway Inc., Note,
7.500% due 09/15/2009 5,726
866 Saks Inc., Company Guarantee,
8.250% due 11/15/2008 983
----------
12,399
----------
60
See Notes to Financial Statements.
PORTFOLIO OF INVESTMENTS (CONTINUED)
INCOME FUND
OCTOBER 31, 2003
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
------ ------
CORPORATE BONDS AND NOTES - (CONTINUED)
AEROSPACE/DEFENSE - 1.1%
Lockheed Martin Corporation:
$ 955 Company Guarantee,
7.750% due 05/01/2026 $ 1,146
5,000 Note, 8.200% due 12/01/2009 6,048
1,000 Loral Corporation, Deb.,
7.625% due 06/15/2025 1,178
2,750 Orbital Sciences Corporation, Sr. Note,
9.000% due 07/15/2011 2,943
----------
11,315
----------
FOREIGN GOVERNMENT (U.S. DOLLAR DENOMINATED) - 1.0%
4,926 Federative Republic of Brazil, C-Bond,
8.000% due 04/15/2014 4,615
5,000 United Mexican States, Bond,
9.875% due 02/01/2010 6,288
----------
10,903
----------
Total Corporate Bonds and Notes
(Cost $617,863) 650,544
----------
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED
SECURITIES - 24.0%
FEDERAL HOME LOAN MORTGAGE CORPORATION (FHLMC) - 14.3%
62,285 4.500% due 08/01/2033 59,442
41,497 5.000% due 04/01/2018-05/01/2033 41,427
22,803 5.500% due 11/01/2017-05/01/2031 23,386
10,055 6.000% due 03/01/2031-05/01/2032 10,325
10,031 6.500% due 01/01/2029-08/01/2029 10,446
3,883 7.000% due 01/01/2032 4,087
----------
Total FHLMCs
(Cost $148,555) 149,113
----------
FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA) - 8.4%
16,920 5.000% due 01/01/2018-10/01/2032 17,023
39,711 5.500% due 03/01/2033-06/01/2033 40,107
4,099 6.000% due 04/01/2032 4,210
15,518 6.500% due 09/01/2028-05/01/2032 16,129
363 7.000% due 01/01/2030 383
300 7.536% due 06/01/2016 332
8,000 7.630% due 02/01/2010 9,187
----------
Total FNMAs
(Cost $86,709) 87,371
----------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (GNMA) - 1.3%
11,337 6.000% due 05/20/2032 11,685
2,219 7.000% due 06/20/2031 2,343
----------
Total GNMAs
(Cost $13,501) 14,028
----------
Total U.S. Government Agency Mortgage-
Backed Securities
(Cost $248,765) 250,512
----------
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
------ ------
U.S. TREASURY OBLIGATIONS - 5.3%
U.S. TREASURY NOTE - 3.4%
$ 36,000 4.000% due 11/15/2012 $ 35,467
----------
U.S. TREASURY BOND - 1.9%
19,000 5.500% due 08/15/2028 19,623
----------
Total U.S. Treasury Obligations
(Cost $55,489) 55,090
----------
COMMERCIAL MORTGAGE-BACKED SECURITIES (CMBS) - 0.2%
(Cost $1,541)
1,538 Reilly Mortgage FHA, Series 1982,
7.430% due 08/01/2022 1,642
----------
COLLATERALIZED MORTGAGE OBLIGATIONS (CMO) - 0.1%
(Cost $1,117)
1,195 Donaldson, Lufkin & Jenrette Mortgage
Acceptance Corporation, Series
1995-Q10, Class B1,
6.250% due 01/25/2026+ 1,229
----------
SHARES
------
CONVERTIBLE PREFERRED STOCK - 0.4%
(Cost $5,100)
100,000 Ford Motor Company Capital Trust II,
Conv. Pfd., 6.500% due 01/15/2032 4,645
----------
PRINCIPAL
AMOUNT
(000S)
------
REPURCHASE AGREEMENT - 6.6%
(Cost $68,574)
$ 68,574 Agreement with Goldman Sachs Group,
Inc., 0.960% dated 10/31/2003, to be
repurchased at $68,579 on 11/03/2003
(Collateralized by $58,190 U.S.
Treasury Bonds, having various
interest rates and maturities
Market Value $69,807) 68,574
----------
TOTAL INVESTMENTS (Cost $998,449*) 99.0% 1,032,236
OTHER ASSETS AND LIABILITIES (NET) 1.0 10,227
----- ----------
NET ASSETS 100.0% $1,042,463
===== ==========
<FN>
- --------
* Aggregate cost for federal tax purposes is $1,003,963.
** Security acquired in a transaction exempt from registration under Rule
144A of the Securities Act of 1933.
+ Floating rate security whose rate is reset periodically based on an
index.
++ Floating rate security whose rate is a combination of a cash pay rate
that is reset periodically based on an index and 12.000% Payment-in-Kind
bonds.
- ------------------------------------------------------------------------------
GLOSSARY OF TERMS
FHA -- Federal Housing Authority
MTN -- Medium Term Note
- ------------------------------------------------------------------------------
61
See Notes to Financial Statement.
PORTFOLIO OF INVESTMENTS
HIGH YIELD FUND
OCTOBER 31, 2003
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
------ ------
CORPORATE BONDS AND NOTES - 89.3%
TELECOMMUNICATIONS - 16.8%
$ 16,250 Extreme Networks, Inc., Conv. Sub. Note,
3.500% due 12/01/2006 $ 15,336
14,500 Nortel Networks Corporation, Conv.
Company Guarantee,
4.250% due 09/01/2008 13,739
13,500 Qwest Corporation, Note,
8.875% due 03/15/2012** 15,322
13,700 RadiSys Corporation, Conv. Sub. Note,
5.500% due 08/15/2007 13,495
9,500 TELUS Corporation, Note,
8.000% due 06/01/2011 10,941
17,710 TriQuint Semiconductor, Inc., Conv.
Sub. Note, 4.000% due 03/01/2007 16,249
12,750 Vitesse Semiconductor Corporation, Conv.
Sub. Deb., 4.000% due 03/15/2005 12,447
----------
97,529
----------
OIL/ENERGY - 13.7%
El Paso Natural Gas:
12,500 Bond, 8.375% due 06/15/2032 11,688
2,750 Sr. Note, 7.625% due 08/01/2010 2,736
15,700 Hanover Compressor Company, Conv.
Sr. Note, 4.750% due 03/15/2008 14,444
16,000 PDVSA Finance Ltd., Note,
8.500% due 11/16/2012 14,320
10,000 Petrobras International Finance Company,
Sr. Note, 9.750% due 07/06/2011 11,100
7,500 Southern Natural Gas Company, Sr. Note,
8.000% due 03/01/2032 7,500
Tesoro Petroleum Corporation:
6,000 Company Guarantee, Series B,
9.000% due 07/01/2008 6,075
10,000 Sr. Sub. Note,
9.625% due 04/01/2012 10,375
Tri-Union Development Corporation,
Company Guarantee, (in default):
2,962 12.500% due 06/01/2006 1,407
219 Series AI, (Payment-in-Kind),
12.500% due 06/01/2006** 104
----------
79,749
----------
HEALTH CARE - 13.1%
20,000 Athena Neurosciences Finance LLC,
Company Guarantee,
7.250% due 02/21/2008 17,900
DVI, Inc., Sr. Note, (in default):
10,375 9.875% due 02/01/2004 2,231
2,850 9.875% due 02/01/2004 613
HEALTHSOUTH Corporation:
11,250 Note, 7.625% due 06/01/2012 9,844
5,000 Sr. Note, 8.500% due 02/01/2008 4,450
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
------ ------
HIH Capital Ltd., Conv. Note:
$ 3,500 7.500% due 09/25/2006 $ 2,677
10,050 7.500% due 09/25/2006** 7,939
5,000 Inhale Therapeutic Systems, Inc., Conv.
Sub. Note, 5.000% due 02/08/2007 4,425
14,850 IVAX Corporation, Conv. Sr. Sub. Note,
4.500% due 05/15/2008 14,534
5,000 Medarex, Inc., Conv. Jr. Sub. Note,
4.500% due 07/01/2006 4,475
4,000 Sepracor Inc., Conv. Sub. Deb.,
5.000% due 02/15/2007 3,750
3,750 Vertex Pharmaceuticals Inc., Conv. Sub.
Note, 5.000% due 09/19/2007 3,338
----------
76,176
----------
INDEX PRODUCT - 9.6%
27,225 J.P. Morgan HYDI(SM) (High Yield Diversified
Index) June 20, 2008,
Credit-Linked Trust Certificates,
8.000% due 06/20/2008** 27,855
25,597 TRAINS (Targeted Return Index Securities)
Trust Series HY-2003-1, Grantor Trust,
8.666% due 05/15/2013** 27,893
----------
55,748
----------
INFORMATION TECHNOLOGY - 9.1%
14,000 BEA Systems Inc., Conv. Sub. Note,
4.000% due 12/15/2006 14,000
18,500 Conexant Systems Inc., Conv. Sub. Note,
4.000% due 02/01/2007 16,349
8,350 Komag, Inc., Sr. Note, Class 3,
9.496% due 06/30/2007+++ 8,269
14,370 LSI Logic Corporation, Conv. Sub. Note,
4.000% due 02/15/2005 14,370
----------
52,988
----------
FOREIGN GOVERNMENT (U.S. DOLLAR DENOMINATED) - 5.0%
18,163 Federative Republic of Brazil, C-Bond,
8.000% due 04/15/2014 17,019
12,000 United Mexican States, Note,
6.625% due 03/03/2015 12,360
----------
29,379
----------
GAMING - 4.4%
11,500 Old Evangeline Downs, LLC,
Company Guarantee, Series B,
13.000% due 03/01/2010 11,917
13,500 Riviera Holdings Corporation,
Company Guarantee,
11.000% due 06/15/2010 13,837
----------
25,754
----------
SERVICES - 3.1%
16,500 Allied Waste North America Inc., Sr. Note,
7.875% due 04/15/2013 17,779
----------
62
See Notes to Financial Statements.
PORTFOLIO OF INVESTMENTS (CONTINUED)
HIGH YIELD FUND
OCTOBER 31, 2003
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
------ ------
CORPORATE BONDS AND NOTES - (CONTINUED)
UTILITIES - 2.8%
Illinois Power Company, First Mortgage:
$ 10,500 7.500% due 06/15/2009 $ 11,445
4,000 11.500% due 12/15/2010 4,800
----------
16,245
----------
TRANSPORTATION/AUTO - 2.7%
Northwest Airlines, Inc., Pass-through
Certificates:
9,193 Series 1999-2, Class B,
7.950% due 03/01/2015 7,722
9,530 Series 2001-1, Class B,
7.691% due 04/01/2017 7,922
----------
15,644
----------
CONSUMER PRODUCTS/LEISURE - 2.4%
Royal Caribbean Cruises Ltd.:
3,000 Deb., 7.250% due 03/15/2018 2,895
10,000 Sr. Note, 8.750% due 02/02/2011 11,200
----------
14,095
----------
AEROSPACE/DEFENSE - 2.4%
13,000 Orbital Sciences Corporation, Sr. Note,
9.000% due 07/15/2011 13,910
----------
MEDIA - 2.0%
XM Satellite Radio Holdings Inc., Sr. Note:
6,500 12.000% due 06/15/2010 7,264
5,000 Zero Coupon to 12/31/2005;
14.000% due 12/31/2009 4,312
----------
11,576
----------
CABLE TV - 1.7%
5,500 Century Communications Corporation,
Sr. Note, (in default),
8.750% due 10/01/2007 4,455
5,000 Olympus Communications LP, Sr. Note,
Series B, (in default),
10.625% due 11/15/2006 5,175
----------
9,630
----------
MANUFACTURING - 0.5%
5,000 Ogden Corporation, Deb., (in default),
9.250% due 03/01/2022 3,125
----------
Total Corporate Bonds and Notes
(Cost $487,703) 519,327
----------
COLLATERALIZED MORTGAGE OBLIGATIONS (CMO) - 0.1%
(Cost $347)
368 Donaldson, Lufkin & Jenrette Mortgage
Acceptance Corporation, Series 1995-Q10,
Class B1, 6.250% due 01/25/2026++ 378
----------
VALUE
SHARES (000S)
------ ------
COMMON STOCKS - 7.0%
57,845 Credence Systems Corporation+ $ 944
229,400 Health Care Property Investors, Inc. 10,697
302,500 Health Care REIT, Inc. 10,028
180,460 ICO Global Communications Holdings Ltd.+ 131
206,173 Komag Inc.+ 3,888
123,430 Life Sciences Research, Inc.+ 275
820,100 Nationwide Health Properties Inc. 15,008
2,064 Tri-Union Development Corporation, Class A+ 0***
3,500 Tribo Petroleum Corporation, Class A+** 0***
----------
Total Common Stocks
(Cost $33,154) 40,971
----------
CONVERTIBLE PREFERRED STOCK - 0.8%
(Cost $4,597)
100,000 Ford Motor Company Capital Trust II,
Conv. Pfd., 6.500% due 01/15/2032 4,645
----------
WARRANTS - 0.1%
45,327 ICO Global Communications Holdings Ltd.,
Expires 05/16/2006+ 0***
45,870 Komag Inc., Expires 06/30/2005+ 470
5,000 Mikohn Gaming Corporation,
Expires 08/15/2008+** 13
----------
Total Warrants
(Cost $12) 483
----------
PRINCIPAL
AMOUNT
(000S)
------
REPURCHASE AGREEMENT - 1.2%
(Cost $7,060)
$ 7,060 Agreement with Goldman Sachs Group,
Inc., 0.960% dated 10/31/2003, to be
repurchased at $7,061 on 11/03/2003
(Collateralized by $5,991 U.S.
Treasury Bonds, having various
interest rates and maturities
Market Value $7,187) 7,060
----------
TOTAL INVESTMENTS (Cost $532,873*) 98.5% 572,864
OTHER ASSETS AND LIABILITIES (NET) 1.5 8,740
----- ----------
NET ASSETS 100.0% $ 581,604
===== ==========
<FN>
- --------
* Aggregate cost for federal tax purposes is $538,832.
** Security acquired in a transaction exempt from registration under Rule
144A of the Securities Act of 1933.
*** Value of security is less than $500.
+ Non-income producing security.
++ Floating rate security whose rate is reset periodically based on an
index.
+++ Floating rate security whose rate is a combination of a cash pay rate
that is reset periodically based on an index and 12.000% Payment-in-Kind
bonds.
63
See Notes to Financial Statements.
PORTFOLIO OF INVESTMENTS
TAX-EXEMPT BOND FUND
OCTOBER 31, 2003
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
------ ------
MUNICIPAL BONDS AND NOTES - 99.2%
ALASKA - 3.3%
$ 4,500 Alaska State International Airports,
Airport & Marina Revenue, Series B,
(AMBAC Insured), 5.250% due 10/01/2027 $ 4,619
1,235 Anchorage, Electric Utilities, Power
& Light Revenue, Sr. Lien, (MBIA
Insured), 6.500% due 12/01/2013 1,512
2,000 Anchorage, Ice Rink, Recreational Revenue,
6.375% due 01/01/2020 2,381
----------
8,512
----------
ARIZONA - 3.1%
1,000 Arizona School Facilities Board, COP,
Series A, (MBIA Insured),
5.250% due 09/01/2017 1,085
2,000 Arizona Tourism & Sports Authority,
Recreational Revenue, (Multipurpose
Stadium Facility Project), Series A,
(MBIA Insured),
5.375% due 07/01/2019 2,168
3,000 Salt River Project, Agricultural
Improvement & Power District,
Electric Systems Revenue,
Series A, 5.750% due 01/01/2009 3,431
1,000 Tucson, Street & Highway User Revenue,
Jr. Lien, (Projects of 1994 & 2000),
(AMBAC Insured),
6.000% due 07/01/2013 1,179
----------
7,863
----------
CALIFORNIA - 10.4%
1,000 Alameda County, Fremont Unified School
District, GO, Series A, (FGIC Insured),
5.000% due 08/01/2025 1,014
1,400 Anaheim, Unified High School District, GO,
Series A, (FSA Insured),
5.000% due 08/01/2025 1,417
1,000 California Infrastructure & Economic
Development Bank, Seismic Retrofit
Charge Revenue, First Lien, (Bay Area
Toll Bridges Seismic Retrofit Project),
Series A, (AMBAC Insured),
5.000% due 07/01/2033 1,006
California State Department of Water
Resources, Power Supply Revenue, Series A:
1,000 6.000% due 05/01/2015 1,137
(AMBAC Insured):
2,000 5.375% due 05/01/2018 2,171
1,000 5.500% due 05/01/2016 1,107
3,000 (Inverse Floater), (MBIA-IBC Insured),
8.981% due 05/01/2011+ 3,409
2,000 Center Unified School District, Capital
Appreciation, GO, Series C, (MBIA
Insured), Zero coupon due 09/01/2018 975
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
------ ------
$ 2,000 Foothill Eastern Transportation Corridor
Agency, Capital Appreciation, Toll Road
Revenue, (MBIA Insured),
Zero coupon due 01/15/2018 $ 954
2,700 Jurupa, Unified School District, GO,
(FGIC Insured), 5.125% due 08/01/2022 2,804
1,140 Los Angeles, Unified School District, GO,
Series A, (FSA Insured),
5.250% due 07/01/2019 1,227
2,000 Orange County, COP, Series A, (MBIA
Insured), 6.000% due 07/01/2026 2,238
1,180 Palmdale, COP, (Park Improvement & Avenue
S Construction Project), (MBIA Insured),
5.250% due 09/01/2018 1,285
1,050 Port of Oakland, Airport & Marina Revenue,
Series L, AMT, (FGIC Insured),
5.000% due 11/01/2032 1,045
531 Sacramento, COP, (Centrex System Lease),
Series A, 5.550% due 09/15/2004 546
2,000 San Francisco City and County,
International Airports Commission,
Airport Revenue, Second Series,
Issue 29B, (FGIC Insured),
5.125% due 05/01/2020 2,108
7,000 San Joaquin Hills, Transportation Corridor
Agency, Toll Road Revenue, Series A,
(MBIA Insured),
Zero coupon due 01/15/2034 1,314
1,000 University of California, College &
University Revenue, Series A,
(AMBAC Insured),
5.000% due 05/15/2033 1,006
----------
26,763
----------
COLORADO - 1.1%
1,000 Colorado Health Facility Authority,
Health Care Revenue, (Catholic Health
Initiatives), 5.250% due 09/01/2021 1,021
1,650 Lakewood, COP, (AMBAC Insured),
5.350% due 12/01/2017 1,801
----------
2,822
----------
CONNECTICUT - 1.4%
1,500 Connecticut State Special Obligation
Parking, Airport & Marina Revenue,
(Bradley International Airport),
Series A, AMT, (ACA Insured),
6.600% due 07/01/2024 1,599
995 Mashantucket Western Pequot Tribe,
Special Revenue, Series A, ETM,
6.500% due 09/01/2005 1,090
1,000 Stamford, Water Pollution Control System
& Facility, Water Revenue, Series A,
5.000% due 11/15/2032 1,010
----------
3,699
----------
64
See Notes to Financial Statements.
PORTFOLIO OF INVESTMENTS (CONTINUED)
TAX-EXEMPT BOND FUND
OCTOBER 31, 2003
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
------ ------
MUNICIPAL BONDS AND NOTES - (CONTINUED)
DISTRICT OF COLUMBIA - 0.2%
$ 500 District of Columbia, Water & Sewer
Authority, Public Utilities Revenue,
(FSA Insured), 5.500% due 10/01/2017 $ 565
----------
FLORIDA - 10.0%
250 Bay County, Water Systems Revenue,
(AMBAC Insured),
5.700% due 09/01/2030 269
500 Brevard County, School Board Authority,
COP, Series B, (AMBAC Insured),
5.500% due 07/01/2021 539
450 Collier County, Industrial Development
Authority, IDR, (Southern States Utilities
Project), AMT, 6.500% due 10/01/2025 443
9,750 Dade County, Guaranteed Entitlement Revenue,
Series A, (MBIA Insured),
Zero coupon due 02/01/2018 4,555
1,000 Escambia County, Health Facilities Authority,
Health Facilities Revenue, (Florida Health
Care Facilities Loan-VHA Program),
(AMBAC Insured), 5.950% due 07/01/2020 1,059
650 Escambia County, Utilities Authority,
Utility Systems Revenue, (FGIC Insured),
5.250% due 01/01/2029 672
900 Florida Housing Finance Agency, Housing
Revenue, (Spinnaker Cove Apartments
Project), Series G, AMT, (AMBAC Insured),
6.500% due 07/01/2036 939
330 Florida Housing Finance Agency, SFMR,
Series A, AMT, (GNMA/FNMA Collateral),
6.650% due 01/01/2024 341
800 Florida State Board of Education, Lottery
Revenue, Series A, (FGIC Insured),
5.250% due 07/01/2017 869
Florida State Municipal Power Agency,
Power & Light Revenue, (FSA Insured):
675 (Stanton Project),
5.500% due 10/01/2014 754
1,500 (Tri-City Project), Series A,
5.000% due 10/01/2018 1,583
1,000 Hillsborough County, Port District Revenue,
(Tampa Port Authority Project), Series A,
AMT, (MBIA Insured),
5.375% due 06/01/2027 1,032
1,615 Jacksonville Electric Authority, Water &
Sewer Revenue, Series A,
5.000% due 10/01/2014 1,704
600 Jacksonville, Water & Sewer Revenue,
(United Waterworks Inc. Project), AMT,
(AMBAC Insured),
6.350% due 08/01/2025 657
335 Manatee County, Housing Finance Authority,
SFMR, Series 94-4, AMT, (GNMA/FNMA
Collateral), 6.875% due 11/01/2026 347
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
------ ------
$ 1,095 Marion County, School Board, COP,
(FSA Insured), 5.250% due 06/01/2018 $ 1,184
500 Orange County, Housing Finance Authority,
MFHR, (Hands Inc. Project), Series A,
7.000% due 10/01/2025 527
5,000 Orlando, Utilities Commission, Water &
Electric Revenue,
6.000% due 10/01/2010 5,893
1,300 Osceola County, School Board, COP, Series A,
(AMBAC Insured),
5.125% due 06/01/2022 1,350
900 Pasco County, Solid Waste Disposal &
Resource Recovery System, Resource
Recovery Revenue, AMT, (AMBAC
Insured), 6.000% due 04/01/2011 1,018
----------
25,735
----------
GEORGIA - 5.0%
5,000 Georgia State, GO, Series B,
6.300% due 03/01/2009 5,883
Monroe County, Development Authority, PCR,
(Oglethorpe Power Corporation Project),
Series A, (MBIA-IBC Insured):
2,500 6.700% due 01/01/2009 2,963
3,410 6.750% due 01/01/2010 4,098
----------
12,944
----------
HAWAII - 0.9%
Honolulu City and County, GO, Series A:
1,270 (Unrefunded Balance),
6.000% due 01/01/2012 1,471
730 ETM, 6.000% due 01/01/2012 858
----------
2,329
----------
IDAHO - 1.0%
2,000 Idaho Health Facilities Authority, Health
Care Revenue, (IHC Hospitals Inc.
Project), (Inverse Floater), ETM,
6.650% due 02/15/2021+ 2,512
----------
ILLINOIS - 8.7%
5,000 Chicago, O'Hare International Airport,
Airport Revenue, (Inverse Floater),
AMT, (FSA Insured),
8.590% due 01/01/2020+ 5,761
Chicago, O'Hare International Airport,
Special Facilities Revenue, Series B:
965 (Second Lien Passenger Facility),
(AMBAC Insured),
5.500% due 01/01/2017 1,051
1,000 (United Airlines Project), AMT,
(in default),
6.100% due 11/01/2035 200
2,570 Cook County, Oak Lawn School District
No. 122, Capital Appreciation, GO,
(FGIC Insured),
Zero coupon due 12/01/2016 1,397
65
See Notes to Financial Statements.
PORTFOLIO OF INVESTMENTS (CONTINUED)
TAX-EXEMPT BOND FUND
OCTOBER 31, 2003
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
------ ------
MUNICIPAL BONDS AND NOTES - (CONTINUED)
ILLINOIS - (CONTINUED)
$ 1,020 Cook County, River Trails School District
No. 026, Capital Appreciation, GO, ETM,
(MBIA Insured),
Zero coupon due 12/01/2004 $ 1,008
2,000 Illinois State, GO, Series 1,
(MBIA Insured), 5.750% due 12/01/2012 2,347
Metropolitan Pier & Exposition Authority,
Capital Appreciation, Dedicated State
Tax Revenue, Series A, (FGIC Insured):
(Unrefunded Balance):
85 Zero coupon due 06/15/2008 74
130 Zero coupon due 06/15/2009 109
ETM:
3,295 Zero coupon due 06/15/2008 2,909
620 Zero coupon due 06/15/2008 547
5,055 Zero coupon due 06/15/2009 4,256
815 Zero coupon due 06/15/2009 686
2,000 Metropolitan Pier & Exposition Authority,
Sales Tax Revenue, (McCormick Place
Expansion Project), Series A, (MBIA
Insured), 5.250% due 06/15/2042 2,049
----------
22,394
----------
INDIANA - 2.7%
6,000 Indiana Municipal Power Agency, Power
Supply System Revenue, Series A, ETM,
(MBIA Insured),
6.125% due 01/01/2013 7,047
----------
KANSAS - 0.6%
1,430 Wyandotte County, School District
No. 500, GO, (FSA Insured),
5.000% due 09/01/2019 1,511
----------
KENTUCKY - 1.3%
1,435 Kentucky State Property & Buildings
Commission, Lease Revenue, (Project
No. 74), (FSA Insured),
5.375% due 02/01/2016 1,570
1,500 Kentucky State Turnpike Authority, Economic
Development Road Revenue,
(Revitalization Project), (FSA Insured),
(Pre-refunded to 01/01/2011),
5.625% due 07/01/2013 1,687
----------
3,257
----------
LOUISIANA - 0.9%
1,500 Louisiana Public Facilities Authority,
Customer Receipts Revenue, Series B,
ETM, Zero coupon due 12/01/2019 690
1,500 Louisiana State, GO, Series A,
(FGIC Insured),
5.500% due 11/15/2008 1,712
----------
2,402
----------
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
------ ------
MARYLAND - 1.5%
$ 2,000 Baltimore, Port Facilities, Industrial
Revenue, (Consolidated Coal Sales
Project), Series B, 6.500%
due 10/01/2011 $ 2,049
1,750 Maryland State Economic Development
Corporation, Student Housing Revenue,
(University of Maryland College Park
Project), 5.625% due 06/01/2035 1,734
----------
3,783
----------
MASSACHUSETTS - 1.5%
1,000 Massachusetts State Development Finance
Agency, Revenue Bonds,
(Hillcrest Educational Centers Inc.
Project), 6.375% due 07/01/2029 949
1,000 Massachusetts State Health & Educational
Facilities Authority, Health Care Revenue,
(Health Care System-Covenant Health),
6.000% due 07/01/2031 1,041
1,500 Massachusetts State, Federal Highway Grant
Anticipation Notes Revenue, Series A,
5.750% due 06/15/2015 1,738
----------
3,728
----------
MICHIGAN - 0.7%
750 Macomb County, Hospital Finance Authority,
Hospital Revenue, (Mount Clemens General
Hospital, Inc. Project), Series B,
5.750% due 11/15/2025 715
1,000 Michigan State Strategic Fund, Limited
Obligation Revenue, (Detroit Edison
Company Exempt Facilities Project),
Series C, AMT, (XLCA Insured),
5.450% due 12/15/2032 1,026
----------
1,741
----------
MISSOURI - 2.8%
2,250 Bi-State Development Agency of the
Missouri-Illinois Metropolitan District,
Mass Transit Sales Tax Revenue,
(Metrolink Cross County Extension
Project), Series B, (FSA Insured),
5.250% due 10/01/2019 2,417
1,000 Cape Girardeau County, Industrial
Development Authority, Health Care
Facilities Revenue, (Southeast Hospital
Association Project),
5.625% due 06/01/2027 1,012
600 Fenton, Tax Increment Revenue, (Gravois
Bluffs Improvement Project),
7.000% due 10/01/2021 646
1,000 Missouri State Health and Education
Facilities Authority, Education
Facilities Revenue, (University
of Missouri-Columbia Arena Project),
5.000% due 11/01/2018 1,051
66
See Notes to Financial Statements.
PORTFOLIO OF INVESTMENTS (CONTINUED)
TAX-EXEMPT BOND FUND
OCTOBER 31, 2003
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
------ ------
MUNICIPAL BONDS AND NOTES - (CONTINUED)
MISSOURI - (CONTINUED)
St. Louis County, Pattonville School
District No. R-3, GO, (Missouri
Direct Deposit Program), (FGIC Insured):
$ 1,000 5.750% due 03/01/2017 $ 1,130
880 5.750% due 03/01/2018 992
----------
7,248
----------
NEBRASKA - 4.0%
7,000 Omaha Public Power District, Electric
Revenue, Series B, ETM,
6.150% due 02/01/2012 8,275
2,000 University of Nebraska, Lincoln Student
Fees & Facilities Revenue, Series B,
5.000% due 07/01/2023** 2,037
----------
10,312
----------
NEVADA - 0.4%
1,000 Reno, Sales & Room Tax Revenue, Sr. Lien,
(ReTrac-Reno Transportation Rail Access
Corridor Project), (AMBAC Insured),
5.125% due 06/01/2037 1,009
----------
NEW JERSEY - 1.8%
1,000 New Jersey Economic Development Authority,
Economic Development Revenue,
(Kapkowski Road Landfill Project),
5.750% due 04/01/2031 963
1,340 New Jersey Educational Facilities Authority,
Government Fund Grant Revenue, (Higher
Education Capital Improvement Project),
Series A, (AMBAC Insured),
5.250% due 09/01/2020 1,428
1,000 New Jersey Transit Corporation, COP,
(Federal Transit Administration Grants
Projects), Series A, (AMBAC Insured),
5.500% due 09/15/2013 1,136
1,000 New Jersey Transportation Trust Fund
Authority, Transportation System Revenue,
Series C, (FSA Insured),
5.500% due 06/15/2020 1,097
----------
4,624
----------
NEW YORK - 4.4%
1,265 Metropolitan Transportation Authority,
Service Contract Revenue, (Transportation
Facilities Project), Series 7,
4.750% due 07/01/2019 1,345
1,500 Metropolitan Transportation Authority,
Transportation Revenue, Series A,
(FGIC Insured),
5.250% due 11/15/2031 1,554
2,000 Nassau County, Interim Finance Authority,
Sales Tax Revenue, Series A,
5.750% due 11/15/2013 2,261
1,000 New York State Dormitory Authority, College
& University Revenue, (State University
Educational Facilities Project),
(MBIA Insured),
6.000% due 05/15/2016 1,156
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
------ ------
$ 580 New York State Housing Finance Agency,
MFHR, (Secured Mortgage Program),
Series F, AMT,
6.625% due 08/15/2012 $ 592
1,235 New York State Mortgage Agency,
Homeowner Mortgage Revenue,
Series 82, AMT,
5.650% due 04/01/2030 1,311
1,000 New York State Urban Development
Corporation, Personal Income Tax
Revenue, Series C-1, (FGIC Insured),
5.500% due 03/15/2019 1,102
New York State, GO:
1,000 Series B, ETM, (FSA Insured),
7.000% due 06/01/2014 1,007
1,000 Series H, 5.750% due 03/15/2013 1,099
----------
11,427
----------
NORTH CAROLINA - 1.3%
1,000 Charlotte, COP, (Convention Facility
Project), Series A,
5.500% due 08/01/2019 1,101
2,000 North Carolina Municipal Power Agency
No. 1, Catawba Electric Revenue,
Series A, (MBIA Insured),
5.250% due 01/01/2018 2,145
----------
3,246
----------
OHIO - 2.6%
1,000 Cuyahoga County, Hospital Facilities
Revenue, (Canton Inc. Project),
7.500% due 01/01/2030 1,103
1,000 Franklin County, Convention Facilities
Authority, Tax & Lease Revenue,
(AMBAC Insured),
5.250% due 12/01/2013 1,113
1,000 Montgomery County, Hospital Revenue,
(Grandview Hospital & Medical Center
Project), ETM,
5.250% due 12/01/2003 1,003
2,175 Ohio State Building Authority, Lease
Revenue, (Administrative Building Fund
Projects), Series A, (FSA Insured),
5.500% due 04/01/2015 2,415
1,000 Ohio State University, General Receipts
Revenue, Series A,
5.125% due 12/01/2031 1,019
----------
6,653
----------
OKLAHOMA - 1.2%
1,385 Central Oklahoma Transportation &
Parking Authority, Parking Systems
Revenue, (AMBAC Insured),
5.000% due 07/01/2022** 1,422
450 Oklahoma Housing & Finance Authority,
SFMR, Series B, AMT, (GNMA Collateral),
7.997% due 08/01/2018 487
67
See Notes to Financial Statements.
PORTFOLIO OF INVESTMENTS (CONTINUED)
TAX-EXEMPT BOND FUND
OCTOBER 31, 2003
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
------ ------
MUNICIPAL BONDS AND NOTES - (CONTINUED)
OKLAHOMA - (CONTINUED)
$ 1,000 Tulsa County, Public Facilities Authority,
Capital Improvement Revenue, (AMBAC
Insured), 6.250% due 11/01/2022 $ 1,153
----------
3,062
----------
OREGON - 2.1%
1,000 Oregon Health Sciences University,
College & University Revenue, Series A,
(MBIA Insured), 5.250% due 07/01/2022 1,053
1,000 Oregon State Department of Administrative
Services, COP, Series C, (MBIA Insured),
5.250% due 11/01/2018 1,070
2,000 Portland, Sewer System Revenue, Second
Lien, Series A, (FSA Insured),
5.250% due 06/01/2020 2,134
1,000 Portland, Tax Allocation Revenue,
(Downtown Waterfront Urban Renewal &
Redevelopment Project), Series A,
(AMBAC Insured), 5.750% due 06/15/2016 1,135
----------
5,392
----------
PENNSYLVANIA - 2.9%
Philadelphia, Gas Works Revenue,
(1998 General Ordinance),
(FSA Insured):
1,000 Fourth Series,
5.250% due 08/01/2020 1,063
2,500 Second Series,
5.250% due 07/01/2029 2,567
820 Philadelphia, Parking Authority, Auto
Parking Revenue, Series A, (AMBAC
Insured), 5.250% due 02/15/2029 842
1,000 Philadelphia, Redevelopment Authority
Revenue, (Neighborhood Transformation
Project), Series A, (FGIC Insured),
5.500% due 04/15/2017 1,100
1,750 State Public School Building Authority,
School Revenue, (Philadelphia School
District Project), (FSA Insured),
5.000% due 06/01/2033 1,762
----------
7,334
----------
PUERTO RICO - 0.4%
1,000 Puerto Rico Municipal Finance Agency,
Revenue Bonds, Series A, (FSA Insured),
5.250% due 08/01/2021 1,066
----------
SOUTH CAROLINA - 2.1%
1,300 Chesterfield County, School District, GO,
(FSA Insured),
5.375% due 03/01/2018 1,407
1,955 Greenville, Waterworks System Revenue,
5.250% due 02/01/2019 2,096
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
------ ------
$ 850 Myrtle Beach, Jobs Economic Development
Authority, Revenue Bonds, (Myrtle Beach
Convention Center Hotel Project),
Series B, 6.625% due 04/01/2036 $ 820
1,000 South Carolina Jobs-Economic Development
Authority, IDR, (Electric & Gas Company
Project), Series A, (AMBAC Insured),
5.200% due 11/01/2027 1,031
----------
5,354
----------
TENNESSEE - 1.1%
1,000 Johnson City, Health & Educational Facility
Board, Hospital Revenue, (Mountain States
Health Care Facilities First Mortgage
Project), Series A,
7.500% due 07/01/2033 1,074
1,755 Tennessee Housing Development Agency,
Housing Revenue, (Homeownership
Program), Series 2A, AMT,
5.700% due 07/01/2031 1,807
----------
2,881
----------
TEXAS - 5.8%
1,500 Austin, Water & Wastewater System Revenue,
(MBIA Insured),
5.250% due 11/15/2019 1,603
1,000 Corpus Christi, GO, (FSA Insured),
5.750% due 03/01/2018 1,122
1,500 Dallas-Fort Worth International Airport
Board, Airport & Marina Revenue,
Series A, AMT, (FGIC Insured),
5.500% due 11/01/2031 1,547
1,000 Houston, GO, (Public Improvement Project),
(FSA Insured), 5.750% due 03/01/2015 1,128
1,000 Houston, Hotel Occupancy Tax & Special
Revenue, (Convention & Entertainment
Project), Series B, (AMBAC Insured),
5.750% due 09/01/2015 1,136
2,050 Houston, Water & Sewer System Revenue, Jr.
Lien, Series C, (FGIC Insured),
5.375% due 12/01/2027 2,132
1,100 Metro Health Facilities Development
Corporation, Health Care Revenue,
(Wilson N. Jones Memorial Hospital
Project), 7.200% due 01/01/2021 1,048
North Central, Health Facilities
Development Corporation Revenue:
1,000 (Baylor Health Care System Project),
Series A, 5.125% due 05/15/2029 997
1,000 (Children's Medical Center of Dallas
Project), (AMBAC Insured),
5.250% due 08/15/2032 1,028
1,000 Texas Tech University System, Financing
System Revenue, Seventh Series, (MBIA
Insured), 5.000% due 08/15/2025 1,008
2,000 University of Texas Financing System,
College & University Revenue, Series A,
5.250% due 08/15/2019 2,146
----------
14,895
----------
68
See Notes to Financial Statements.
PORTFOLIO OF INVESTMENTS (CONTINUED)
TAX-EXEMPT BOND FUND
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
------ ------
MUNICIPAL BONDS AND NOTES - (CONTINUED)
VIRGINIA - 1.1%
Richmond, GO, (FSA Insured):
$ 600 5.125% due 01/15/2008 $ 667
1,000 5.250% due 01/15/2009 1,124
1,000 5.500% due 01/15/2010 1,140
----------
2,931
----------
WASHINGTON - 9.6%
2,500 Energy Northwest, Electric Revenue,
(Nuclear Project 3), Series A, (FSA
Insured), 5.500% due 07/01/2017 2,732
5,000 Franklin County, Pasco School District
No.1, GO, (FSA Insured),
5.250% due 12/01/2019 5,343
4,500 King County, Kent School District No. 415
GO, Series C, 6.300% due 12/01/2008 5,258
Washington State, GO:
3,000 Series B & AT-7, 6.400% due 06/01/2017 3,696
7,440 Series B, (Unrefunded Balance),
5.000% due 05/01/2017 7,589
----------
24,618
----------
WEST VIRGINIA - 1.0%
2,500 Harrison County, County Community Solid
Waste Disposal Authority, IDR,
(Monongahela Power Company Project),
Series A, AMT, (MBIA-IBC Insured),
6.875% due 04/15/2022 2,537
----------
WISCONSIN - 0.3%
710 Wisconsin State Health & Educational
Facilities Authority, Health Care Revenue,
(Waukesha Memorial Hospital Project),
Series A, (AMBAC Insured),
7.125% due 08/15/2007 713
----------
Total Municipal Bonds and Notes
(Cost $234,646) 254,909
----------
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
------ ------
SHORT-TERM MUNICIPAL BONDS - 0.9%
$ 1,700 New York City, GO, Subseries E-2,
1.130% due 08/01/2020++ $ 1,700
600 Washington Health Care Facilities
Authority, Health Care Revenue,
(Virginia Mason Medical Center
Project), Series B, (MBIA
Insured), 1.150% due 02/15/2027++ 600
----------
Total Short-Term Municipal Bonds
(Cost $2,300) 2,300
----------
TOTAL INVESTMENTS+++ (Cost $236,946*) 100.1% $ 257,209
OTHER ASSETS AND LIABILITIES (NET) (0.1) (383)
----- ----------
NET ASSETS 100.0% $ 256,826
===== ==========
<FN>
- --------
* Aggregate cost for federal tax purposes is $236,866.
** Security purchased on a when-issued basis.
+ Floating rate note. The interest rate shown reflects the rate in
effect at October 31, 2003.
++ Variable rate securities payable upon demand with not more than five
business days' notice, and secured by bank letters of credit or
guarantees by certain corporations. The interest rate shown reflects
the rate in effect at October 31, 2003.
+++ All securities segregated as collateral for when-issued securities or
futures contracts.
Tax-Exempt Bond Fund had the following sector concentrations greater than
10% at October 31, 2003 (as a percentage of net assets):
General Obligation 18.2%
Pre-refunded 17.9%
Power 15.3%
Transportation 13.4%
General Purpose 12.9%
Tax-Exempt Bond Fund had the following insurance concentrations greater than
10% at October 31, 2003 (as a percentage of net assets):
MBIA 19.9%
FSA 18.5%
AMBAC 12.8%
FGIC 11.6%
69
See Notes to Financial Statements.
PORTFOLIO OF INVESTMENTS (CONTINUED)
TAX-EXEMPT BOND FUND
UNREALIZED
NUMBER OF VALUE DEPRECIATION
CONTRACTS (000S) (000S)
--------- ------ ------------
FUTURES CONTRACTS-SHORT POSITION
68 U.S. 5 Year Treasury Note,
December 2003 $7,603 $ (150)
16 U.S. 10 Year Treasury Note,
December 2003 1,797 (53)
----------
Net Unrealized Depreciation of
Futures Contracts $ (203)
==========
- -----------------------------------------------------------------------------
GLOSSARY OF TERMS
ACA -- ACA Financial Guaranty Corporation
AMBAC -- American Municipal Bond Assurance Corporation
AMT -- Alternative Minimum Tax
COP -- Certificate of Participation
ETM -- Escrowed to Maturity
FGIC -- Federal Guaranty Insurance Corporation
FNMA -- Federal National Mortgage Association
FSA -- Financial Security Assurance
GNMA -- Government National Mortgage Association
GO -- General Obligation Bond
IBC -- Insured Bond Certificate
IDR -- Industrial Development Revenue
MBIA -- Municipal Bond Investors Assurance
MFHR -- Multi-family Housing Revenue
PCR -- Pollution Control Revenue
SFMR -- Single Family Mortgage Revenue
UTGO -- Unlimited Tax General Obligation Bond
VHA -- Veterans Housing Authority
XLCA -- XL Capital Assurance Inc.
- -----------------------------------------------------------------------------
70
See Notes to Financial Statements.
PORTFOLIO OF INVESTMENTS
CALIFORNIA MUNICIPAL FUND
OCTOBER 31, 2003
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
------ ------
MUNICIPAL BONDS AND NOTES - 98.0%
CALIFORNIA - 97.6%
ABAG Financing Authority for Nonprofit
Corporations, COP:
$ 340 (Episcopal Homes Foundation),
5.000% due 07/01/2007 $ 358
(O'Connor Woods Obligation Group),
(ACA Insured):
1,000 5.400% due 11/01/2009 1,095
2,530 5.700% due 11/01/2013 2,734
1,000 ABAG Financing Authority for Nonprofit
Corporations, MFHR, (Archstone
Redwood), Series A,
5.300% due 10/01/2008 1,073
1,240 ABAG Financing Authority for Nonprofit
Corporations, Revenue Bonds, (California
School of Mechanical Arts),
5.250% due 10/01/2026 1,271
1,345 ABC Unified School District, GO, Series A,
(MBIA Insured),
4.800% due 02/01/2018 1,423
5,360 Alhambra, Improvement Board Act of 1915,
Special Tax Revenue, (Public Works
Assessment District No. 1),
(MBIA Insured), 6.125% due 09/02/2018 5,500
3,095 Alhambra, Redevelopment Agency, Tax
Allocation Revenue, (Industrial
Redevelopment Project), (FSA Insured),
5.000% due 05/01/2018 3,254
1,050 Alta Loma, School District, Capital
Appreciation, GO, Series A,
(FGIC Insured), Zero coupon due
08/01/2022 396
2,000 Anaheim, Public Financing Authority,
Tax Allocation Revenue, (Inverse
Floater), (MBIA Insured),
11.720% due 12/28/2018+ 2,706
2,210 Azusa, Community Facilities District
No. 1, Special Tax Revenue, (Mountain
Cove), Series A, 6.000% due 09/01/2026 2,223
2,000 Barstow, Redevelopment Agency, Tax
Allocation Revenue, (Central
Redevelopment Project), Series A,
(MBIA Insured), 7.000% due 09/01/2014 2,542
800 Beverly Hills, Unified School District,
GO, Series A, 5.000% due 08/01/2022 821
3,155 Burbank, Waste Disposal Revenue, Series B,
(FSA Insured), 5.250% due 05/01/2024 3,279
2,000 California Department of Veteran Affairs,
Home Purchase Revenue, Series A,
(AMBAC Insured), 5.400% due 12/01/2018 2,183
California Educational Facilities
Authority, College & University Revenue:
2,485 (Heald College), 5.450% due 02/15/2022 2,249
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
------ ------
$ 1,000 (Pooled College & University), Series B,
6.625% due 06/01/2020 $ 1,092
1,000 (University of San Diego), Series A,
5.250% due 10/01/2030 1,015
1,000 California Educational Facilities
Authority, Student Loan Revenue,
(California Loan Program), Series A,
AMT, (MBIA Insured),
5.100% due 03/01/2014 1,057
California Financing Authority for
Resource Efficiency, Multiple Utility
Revenue, (First Resource Efficiency
Program), (AMBAC Insured):
1,860 (Pre-refunded to 07/01/2004),
6.000% due 07/01/2017 1,955
390 (Unrefunded Balance),
6.000% due 07/01/2017 411
1,000 California Health Facilities Financing
Authority, Health Care Revenue,
(Adventist Health System Project),
Series A, 5.000% due 03/01/2028 928
540 California Housing Finance Agency, Home
Mortgage Revenue, Series B, AMT,
(MBIA Insured),
6.000% due 08/01/2016 567
California Housing Finance Agency, Home
Ownership & Improvement Revenue, AMT,
(MBIA Insured):
55 Series B, 5.200% due 08/01/2026 55
665 Series D,
6.300% due 08/01/2014 684
2,630 Series F, 6.800% due 08/01/2014 2,733
1,000 California Infrastructure & Economic
Development Bank, Health Care Revenue,
(The J. David Gladstone Institute
Project), 5.500% due 10/01/2015 1,087
3,855 California Infrastructure & Economic
Development Bank, Lease Revenue, (Asian
Art Museum of San Francisco Project),
(MBIA Insured),
5.500% due 06/01/2017 4,273
California Infrastructure & Economic
Development Bank, Seismic Retrofit
Charge Revenue, First Lien, (Bay Area
Toll Bridges Seismic Retrofit
Project), Series A:
5,000 (AMBAC Insured),
5.000% due 07/01/2033 5,032
(FGIC Insured):
5,000 5.000% due 07/01/2026 5,059
2,000 5.000% due 07/01/2029 2,019
2,500 California Pollution Control
Financing Authority, PCR,
(San Diego Gas and Electric),
Series A, AMT, (AMBAC Insured),
5.850% due 06/01/2021 2,559
330 California Rural Home Mortgage Finance
Authority, SFMR, (Mortgage-Backed
Securities Program), Issue A, Series 2,
AMT, (GNMA/FHLMC Collateral),
7.950% due 12/01/2024 350
71
See Notes to Financial Statements.
PORTFOLIO OF INVESTMENTS (CONTINUED)
CALIFORNIA MUNICIPAL FUND
OCTOBER 31, 2003
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
------ ------
MUNICIPAL BONDS AND NOTES - (CONTINUED)
CALIFORNIA - (CONTINUED)
$ 6,320 California State Department of
Transportation, COP, Series A,
(MBIA Insured), 5.250% due 03/01/2016 $ 6,850
California State Department of Water
Resources, Power Supply Revenue,
Series A:
5,000 5.750% due 05/01/2017 5,462
5,000 5.875% due 05/01/2016 5,530
2,000 (AMBAC Insured),
5.500% due 05/01/2016 2,214
7,000 (MBIA-IBC Insured),
5.125% due 05/01/2018 7,483
3,000 (XLCA Insured),
5.375% due 05/01/2017 3,254
California State Department of Water
Resources, Water Revenue:
2,500 (Center Valley Project), Series Y, (FGIC
Insured), 5.250% due 12/01/2013 2,809
Series W, (FSA Insured):
2,000 5.000% due 12/01/2018 2,102
1,000 5.500% due 12/01/2013 1,149
California State Public Works Board,
Lease Revenue:
1,500 (California Community Colleges),
Series A, 5.250% due 12/01/2014 1,574
3,000 (California State University), Series C,
5.400% due 10/01/2022 3,033
(Department of Corrections Program):
2,000 Series A, (MBIA-IBC Insured),
5.000% due 09/01/2018 2,065
2,000 Series B, (CIFG-TCRS Insured),
5.250% due 01/01/2012 2,223
4,000 Series B, (CIFG-TCRS Insured),
5.250% due 01/01/2013 4,434
(Department of Corrections-Ten
Administrative Segregation Housing
Units), Series A, (AMBAC Insured):
2,500 5.250% due 03/01/2018 2,669
4,330 5.250% due 03/01/2019 4,596
4,200 (UC M.I.N.D. Institute), Series A,
5.000% due 04/01/2023 4,214
California State University, Fresno
Association Inc. Revenue, (Auxiliary
Organization Event Center):
1,500 6.000% due 07/01/2022 1,551
1,500 6.000% due 07/01/2031 1,528
California State, GO:
1,000 (AGC-ICC Insured),
5.750% due 10/01/2010 1,158
(CIFG-TCRS Insured):
2,000 5.000% due 10/01/2022 2,043
1,265 5.000% due 02/01/2032 1,265
4,430 (FGIC-TCRS Insured),
5.500% due 06/01/2025 4,637
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
------ ------
$ 6,000 (MBIA-IBC Insured),
5.000% due 02/01/2032 $ 6,033
1,280 (Veterans), Series BJ, AMT,
5.700% due 12/01/2032 1,302
(Veterans), Series BT, AMT:
1,500 4.900% due 12/01/2011 1,529
2,510 5.000% due 12/01/2012 2,549
(XLCA Insured):
5,000 5.000% due 10/01/2028 5,034
3,050 6.750% due 08/01/2012 3,725
3,000 California Statewide Communities
Development Authority, COP, (Cedars-
Sinai Medical Center), (MBIA-IBC
Insured), 6.500% due 08/01/2012 3,464
California Statewide Communities
Development Authority, MFHR,
(Equity Residential Housing):
1,000 Series B, 5.200% due 12/01/2029 1,079
3,300 Series C, 5.200% due 06/15/2009 3,561
1,000 Carson, Improvement Board Act of 1915,
GO, 7.375% due 09/02/2022 1,026
1,000 Carson, Redevelopment Agency, Tax
Allocation Revenue, (Area No. 1
Project), (MBIA Insured),
5.500% due 10/01/2016 1,143
1,000 Chino Valley, Unified School District,
COP, Series A, (FSA Insured),
5.250% due 09/01/2014 1,102
3,000 Chula Vista, COP, (MBIA Insured),
5.000% due 08/01/2027 3,031
4,675 Chula Vista, IDR, (San Diego Gas and
Electric), Series A, AMT, (AMBAC
Insured), 6.400% due 12/01/2027 4,789
1,825 Chula Vista, Public Financing Authority,
Special Tax Revenue, (Assessment
Districts Refinancing), Sr. Lien,
Series A, (FSA Insured),
4.700% due 09/02/2014 1,950
2,715 Chula Vista, Redevelopment Agency, Tax
Allocation Revenue,
8.625% due 09/01/2024 3,205
2,000 Coachella, Redevelopment Agency, Tax
Allocation Revenue, (Area No. 3
Project), 5.875% due 12/01/2028 2,024
2,160 Contra Costa County, Public Financing
Authority, Lease Revenue, (Capital
Projects), Series B, (MBIA Insured),
5.250% due 06/01/2027 2,229
Contra Costa, Water District Revenue,
Series K, (FSA Insured):
1,445 5.000% due 10/01/2017 1,532
1,520 5.000% due 10/01/2018 1,597
1,285 Corona, COP, (Clearwater Cogeneration
Project), (MBIA Insured),
5.000% due 09/01/2017 1,368
72
See Notes to Financial Statements.
PORTFOLIO OF INVESTMENTS (CONTINUED)
CALIFORNIA MUNICIPAL FUND
OCTOBER 31, 2003
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
------ ------
MUNICIPAL BONDS AND NOTES - (CONTINUED)
CALIFORNIA - (CONTINUED)
$ 1,500 Culver City, Redevelopment Finance
Authority, Tax Allocation Revenue,
Series B, 6.250% due 11/01/2025 $ 1,529
1,000 Cupertino, Unified School District, GO,
(FSA Insured),
5.000% due 08/01/2020 1,035
1,670 Davis, Public Facilities Finance Authority
Local Agency, Special Tax Revenue,
(Mace Ranch Area), Series A,
6.600% due 09/01/2025 1,757
1,200 Duarte, Unified School District, Capital
Appreciation, GO, Series B, (FSA
Insured), Zero coupon due 11/01/2024 388
1,985 El Cajon, COP, (Helix View Nursing Home
Project), AMT, (FHA Insured),
7.750% due 02/01/2029 1,988
2,215 Fairfield, Housing Authority, Mortgage
Revenue, (Creekside Estates
Mobile Homes), 5.625% due 09/01/2023 2,139
1,000 Fontana, Redevelopment Agency, Tax
Allocation Revenue, (Southwest
Industrial Park Project), (MBIA
Insured), 5.200% due 09/01/2030 1,020
Foothill Eastern Transportation Corridor
Agency, Toll Road Revenue:
9,000 Zero coupon due 01/15/2026 6,494
20,000 Zero coupon due 01/15/2030 4,223
10,000 Zero coupon due 01/15/2032 1,864
10,000 Zero coupon due 01/15/2033 1,752
10,000 Zero coupon due 01/15/2034 1,646
10,000 Zero coupon due 01/15/2036 1,457
10,000 Zero coupon due 01/15/2037 1,372
9,000 Zero coupon due 01/15/2038 1,160
2,000 Fresno, Joint Powers Financing Authority,
Lease Revenue, Series A, (FSA Insured),
5.750% due 06/01/2026 2,184
1,860 Glendale, Unified School District, GO,
Series F, (MBIA Insured),
5.000% due 09/01/2023 1,901
Golden West Schools Financing Authority,
Capital Appreciation, Revenue Bonds,
(School District Refinancing Program),
Series A, (MBIA Insured):
1,215 Zero coupon due 08/01/2016 641
1,580 Zero coupon due 02/01/2017 796
Hi Desert, Members Health Care District,
Health Care Revenue:
2,250 5.500% due 10/01/2015 2,082
1,175 5.500% due 10/01/2019 1,041
2,000 Huntington Park, Public Financing
Authority, Lease Revenue, (Wastewater
System Project), 6.200% due 10/01/2025 2,074
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
------ ------
$ 5,000 Imperial Irrigation District, COP, (Water
System Projects), (AMBAC Insured),
5.500% due 07/01/2029 $ 5,301
1,250 Imperial, Water Facilities Revenue, COP,
(FGIC Insured), 5.000% due 10/15/2020 1,301
1,000 Irvine, Meadows Mobile Home Park,
Mortgage Revenue, Series A,
5.700% due 03/01/2018 963
Irvine, Public Facilities & Infrastructure
Authority, Assessment Revenue,
(AMBAC Insured):
Series B:
1,455 5.000% due 09/02/2020 1,500
3,630 5.000% due 09/02/2021 3,729
2,000 Series C, 5.000% due 09/02/2023 2,007
1,175 Kings County, Waste Management
Authority, Solid Waste Revenue, AMT,
7.200% due 10/01/2014 1,226
4,950 La Quinta, Redevelopment Agency, Tax
Allocation Revenue, (Area No. 1
Project), (AMBAC Insured),
5.000% due 09/01/2021 5,103
1,500 La Verne, Public Financing Authority,
Revenue Bonds, (Capital Improvement
Projects), 7.250% due 09/01/2026 1,590
1,000 Laguna Hills, COP, (Community Center
Project), (MBIA Insured),
5.000% due 12/01/2017 1,055
1,975 Lake Elsinore, Public Financing Authority,
Local Agency Revenue, Series G,
5.800% due 09/02/2015 2,051
1,070 Larkspur, School District, Capital
Appreciation, GO, Series A, (FGIC
Insured), Zero coupon due 08/01/2019 490
2,000 Long Beach, Community Facilities District
No. 5, Special Tax Revenue, (Towne
Center), 6.875% due 10/01/2025 2,100
1,315 Long Beach, Redevelopment Agency, Tax
Allocation Revenue, (North Long Beach
Redevelopment Projects), Series A,
(AMBAC Insured),
5.000% due 08/01/2022 1,347
1,425 Los Angeles, Community Redevelopment
Agency, Financing Authority Revenue,
(Grand Central Square Multi-family
Housing Project), Series A, AMT,
5.850% due 12/01/2026 1,355
1,490 Los Angeles, Community Redevelopment
Agency, Housing Revenue, Series C,
(AMBAC Insured),
6.750% due 07/01/2014 1,529
1,000 Los Angeles, Community Redevelopment
Agency, Parking Systems Revenue,
(Cinerama Dome Public Parking Project),
(ACA Insured),
5.500% due 07/01/2016 1,031
73
See Notes to Financial Statements.
PORTFOLIO OF INVESTMENTS (CONTINUED)
CALIFORNIA MUNICIPAL FUND
OCTOBER 31, 2003
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
------ ------
MUNICIPAL BONDS AND NOTES - (CONTINUED)
CALIFORNIA - (CONTINUED)
$ 2,500 Los Angeles, Community Redevelopment
Agency, Tax Allocation Revenue, (North
Hollywood Project), Series E, (MBIA
Insured), 5.400% due 07/01/2024 $ 2,630
Los Angeles, Department of Airports,
Airport Revenue, (Ontario International
Airport), Series A, AMT, (FGIC Insured):
2,205 5.600% due 05/15/2007 2,407
2,575 5.700% due 05/15/2008 2,786
65 Los Angeles, Home Mortgage Revenue,
(Mortgage-Backed Securities Project),
(GNMA Collateral),
8.100% due 05/01/2017 66
Los Angeles, MFHR, AMT, (GNMA Collateral):
3,000 (Park Parthenia Project),
7.400% due 01/20/2022 3,004
1,000 (Ridgecroft Apartments Project),
Series E, 6.250% due 09/20/2039 1,038
1,445 Los Angeles, Special Assessment Revenue,
(Landscaping & Lighting District
No. 96-1 Project), (AMBAC Insured),
5.000% due 03/01/2022 1,482
6,660 Los Angeles, Unified School District, GO,
(Election of 1997), Series E, (MBIA
Insured), 5.500% due 07/01/2018 7,316
Los Angeles, Water & Power Revenue,
(Power Systems), Series A-A-3:
1,705 5.250% due 07/01/2018 1,797
3,000 5.250% due 07/01/2019 3,139
3,000 5.375% due 07/01/2020 3,148
1,405 Los Gatos-Saratoga, Joint Unified High
School District, GO, (Election of 1998),
Series B, 5.750% due 12/01/2021 1,558
2,000 Mammoth Lakes, Community Facilities
District No. 001, Special Tax Revenue,
(North Village Area Project),
5.650% due 10/01/2023 1,935
1,490 Mountain View, Shoreline Regional Park
Community, Tax Allocation Revenue,
Series A, (MBIA Insured),
5.250% due 08/01/2015 1,634
2,785 Needles, Public Utilities Authority,
Utilities Revenue, (Utilities System
Acquisition Project), Series A,
6.500% due 02/01/2022 2,836
3,500 Novato, Community Facilities District
No. 1, Special Tax Revenue,
7.200% due 08/01/2015 3,676
Oakland, Alameda County Unified School
District, COP, (Energy Retrofit
Project):
1,925 (Pre-refunded to 11/15/2005),
7.000% due 05/15/2011 2,183
3,445 (Pre-refunded to 11/15/2006),
6.750% due 11/15/2014 4,034
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
------ ------
$ 1,500 Oakland, Revenue Bonds, (YMCA East Bay
Project), 7.100% due 06/01/2010 $ 1,572
1,565 Oakland, Unified School District, GO,
(Alameda County School Improvements),
(FSA Insured), 5.000% due 08/01/2017 1,623
1,500 Oceanside, COP, Series A, (AMBAC Insured),
5.250% due 04/01/2018 1,614
4,000 Orange County, COP, Series A, (MBIA
Insured), 5.800% due 07/01/2016 4,481
1,495 Oxnard, Financing Authority, Wastewater
Revenue, (FGIC Insured),
5.000% due 06/01/2020 1,558
1,280 Palm Desert, Financing Authority, Tax
Allocation Revenue, (Project Area No. 2),
Series A, (MBIA Insured),
5.000% due 08/01/2022 1,317
1,995 Pomona, COP, (Mission Promenade Project),
Series AE, (AMBAC Insured),
5.375% due 10/01/2032 2,084
5,000 Pomona, Public Financing Authority, Tax
Allocation Revenue, (Merged
Redevelopment Project), Series AD,
(MBIA Insured),
5.000% due 02/01/2021 5,142
1,000 Pomona, Unified School District, GO,
(MBIA Insured),
6.150% due 08/01/2030 1,167
Port of Oakland, Airport & Marina
Revenue, AMT:
5,000 Series K, (FGIC Insured),
5.750% due 11/01/2029 5,250
Series N, (MBIA Insured):
4,960 5.000% due 11/01/2011 5,380
3,000 5.000% due 11/01/2022 3,014
Port of Oakland, Special Facilities
Revenue, (Mitsui O.S.K. Lines Ltd.
Project), Series A, AMT:
3,030 6.750% due 01/01/2012 3,066
1,465 6.800% due 01/01/2019 1,477
1,000 Poway, Housing Revenue, (Poinsettia
Mobile Home Park Project),
5.000% due 05/01/2023 950
Poway, Redevelopment Agency, Tax
Allocation Revenue, (Paguay
Redevelopment Project):
1,000 (AMBAC Insured),
5.375% due 06/15/2019 1,079
5,000 Series A, (MBIA Insured),
5.000% due 06/15/2028 5,043
1,000 Poway, Unified School District, Special
Tax Revenue, (Community Facilities
District No. 1), (MBIA Insured),
5.000% due 10/01/2026 1,012
2,750 Redding, Electrical Systems, COP, (Inverse
Floater), (MBIA Insured),
11.590% due 07/01/2022+ 3,858
74
See Notes to Financial Statements.
PORTFOLIO OF INVESTMENTS (CONTINUED)
CALIFORNIA MUNICIPAL FUND
OCTOBER 31, 2003
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
------ ------
MUNICIPAL BONDS AND NOTES - (CONTINUED)
CALIFORNIA - (CONTINUED)
$ 3,155 Redlands, COP, (AMBAC Insured),
5.000% due 09/01/2017 $ 3,358
1,000 Redondo Beach, Public Financing Authority,
Revenue Bonds, (South Bay Center
Redevelopment Project),
7.125% due 07/01/2026 1,065
Riverside County, Public Financing
Authority, COP:
1,500 5.750% due 05/15/2019 1,534
2,100 5.800% due 05/15/2029 2,107
Rocklin, Unified School District,
Capital Appreciation, GO,
(FGIC Insured):
1,030 Zero coupon due 08/01/2014 609
1,210 Zero coupon due 08/01/2016 633
1,255 Zero coupon due 08/01/2017 619
1,360 Zero coupon due 08/01/2019 594
1,415 Zero coupon due 08/01/2020 583
1,225 Zero coupon due 08/01/2023 414
Rohnert Park, Community Development
Agency, Tax Allocation Revenue, (Rohnert
Redevelopment Project), (MBIA Insured):
1,745 Zero coupon due 08/01/2021 703
1,755 Zero coupon due 08/01/2023 616
1,755 Zero coupon due 08/01/2025 540
1,755 Zero coupon due 08/01/2027 482
1,755 Zero coupon due 08/01/2029 429
Sacramento County, Airport System Revenue,
Series A, (FSA Insured):
2,425 5.250% due 07/01/2019 2,595
2,550 5.250% due 07/01/2020 2,711
2,000 Sacramento County, Sanitation District
Financing Authority, Sewer Revenue, ETM,
5.000% due 12/01/2016 2,047
1,500 Sacramento, City Financing Authority,
Lease Revenue, (City Hall &
Redevelopment Projects), Series A,
(FSA Insured),
5.000% due 12/01/2028 1,515
Salinas Valley, Solid Waste Authority,
Resource Recovery Revenue, AMT,
(AMBAC Insured):
2,475 5.250% due 08/01/2027 2,520
2,000 5.250% due 08/01/2031 2,033
995 Salinas, Improvement Board Act of 1915,
Special Tax Revenue, (Assessment
District No. 90-1), Series C-185,
5.400% due 09/02/2012 1,027
San Bernardino, Redevelopment Agency,
Tax Allocation Revenue, (San Sevaine
Redevelopment Project), Series A:
1,000 6.900% due 09/01/2018 1,073
2,000 7.100% due 09/01/2029 2,122
1,885 San Buenaventura, COP, Series B, (AMBAC
Insured), 5.500% due 01/01/2017 2,075
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
------ ------
$ 600 San Diego County, COP,
5.700% due 02/01/2028 $ 536
San Diego, Redevelopment Agency, Auto
Parking Revenue:
1,000 (Centre City Redevelopment Project),
Series A, 6.400% due 09/01/2019 1,076
1,105 (Southcrest Redevelopment Project),
6.500% due 10/01/2025 1,193
4,000 San Diego, Water Authority Revenue, COP,
Series B, (Inverse Floater),
(MBIA Insured), 11.420% due 04/08/2021+ 5,063
1,000 San Dimas, Housing Authority Revenue,
(Charter Oak Mobile Home Project),
Series A, 5.700% due 07/01/2028 935
1,455 San Elijo, Joint Powers Authority, Loan
Agreement Revenue, (San Elijo
Wastewater Treatment Facilities),
(FSA Insured), 5.000% due 03/01/2020 1,515
San Francisco City and County,
International Airports Commission,
Airport Revenue,
Second Series, AMT:
Issue 27A, (MBIA Insured):
4,000 5.250% due 05/01/2026 4,061
3,000 5.250% due 05/01/2031 3,040
4,070 Issue 28A, (MBIA Insured),
5.250% due 05/01/2020 4,181
San Francisco City and County,
Redevelopment Agency, Lease Revenue,
(George R. Moscone Convention Center
Project):
750 Zero coupon due 07/01/2011 553
3,000 Zero coupon due 07/01/2013 1,956
2,000 (FSA Insured), 5.000% due 07/01/2017 2,111
San Francisco City and County,
Redevelopment Financing Authority, Tax
Allocation Revenue, (San Francisco
Redevelopment Projects), Series A,
(FSA Insured):
3,150 5.000% due 08/01/2017 3,319
3,320 5.000% due 08/01/2018 3,471
2,000 San Francisco, State Building Authority,
Lease Revenue, (San Francisco Civic
Center Complex), Series A, (AMBAC
Insured), 5.250% due 12/01/2016 2,175
1,855 San Joaquin County, COP, (Solid Waste
System Facilities Projects),
(MBIA Insured), 5.000% due 04/01/2021 1,918
4,815 San Jose, Airport Revenue, Series A,
(FSA Insured), 5.375% due 03/01/2017 5,275
9,310 San Jose, Financing Authority, Lease
Revenue, (Convention Center Project),
Series F, (MBIA Insured),
5.000% due 09/01/2018 9,781
75
See Notes to Financial Statements.
PORTFOLIO OF INVESTMENTS (CONTINUED)
CALIFORNIA MUNICIPAL FUND
OCTOBER 31, 2003
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
------ ------
MUNICIPAL BONDS AND NOTES - (CONTINUED)
CALIFORNIA - (CONTINUED)
$ 1,000 San Jose, MFHR, (Sixth & Martha Family
Apartments), AMT, (FNMA Collateral),
5.875% due 03/01/2033 $ 1,037
1,795 San Juan, Basin Authority, Lease Revenue,
(Ground Water Recovery Project),
(AMBAC Insured), 5.000% due 12/01/2022 1,844
2,000 San Marcos, Public Facilities Authority,
Revenue Bonds,
5.800% due 09/01/2018 2,089
1,000 San Mateo County, Joint Powers Authority,
Lease Revenue, (Capital Projects
Program), (MBIA Insured),
6.500% due 07/01/2015 1,226
1,500 Santa Clarita, Community College District,
GO, (FGIC Insured),
5.125% due 08/01/2026 1,534
1,500 Santa Maria, Joint Unified High School
District, GO, Series A, (FSA Insured),
5.250% due 08/01/2025 1,571
1,350 Santa Monica-Malibu, Unified School
District, GO,
5.750% due 08/01/2025 1,463
4,670 Santa Rosa, Mortgage Revenue, (Channate
Lodge), (FHA Insured),
6.700% due 12/01/2024 4,809
2,055 Simi Valley, Community Development
Agency, Commonwealth Mortgage Revenue,
(Sycamore Plaza II),
6.000% due 09/01/2012** 2,172
1,500 South Gate, Public Financing Authority,
Tax Allocation Revenue, (South Gate
Redevelopment Project No. 1), (XLCA
Insured), 5.000% due 09/01/2016 1,596
1,305 Stockton, Community Facilities District
No. 1, Special Tax Revenue, (Mello
Roos-Weston Ranch), Series A,
6.000% due 09/01/2018 1,368
1,780 Stockton-East, Water District, COP,
(1975 & 1990 Projects), Series A,
(FGIC Insured), 5.250% due 04/01/2022 1,874
3,270 Temecula, Redevelopment Agency,
Tax Allocation Revenue, (Redevelopment
Project No. 1), (MBIA Insured),
5.250% due 08/01/2036 3,353
1,000 Torrance, Hospital Revenue, (Torrance
Memorial Medical Center), Series A,
6.000% due 06/01/2022 1,075
1,625 Trinity County, Public Utilities
District, COP, (Electric Distribution
Facilities Project),
AMT, (AMBAC Insured),
5.000% due 04/01/2023 1,629
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
------ ------
University of California, College &
University Revenue, (Multi Purpose
Projects), (FGIC Insured):
$ 1,720 Series F, 5.000% due 09/01/2016 $ 1,826
Series M:
2,260 5.125% due 09/01/2017 2,411
4,635 5.125% due 09/01/2018 4,909
1,000 University of California, College &
University Revenue, Series A,
(AMBAC Insured),
5.000% due 05/15/2026 1,012
2,035 Vallejo City, Unified School District, GO,
Series A, (MBIA Insured),
5.900% due 02/01/2021 2,365
2,025 Vallejo, Public Financing Authority,
Revenue Bonds, (Fairgrounds Drive
Assessment District), 5.700% due
09/02/2011 2,052
Ventura County, COP, (FSA Insured):
3,040 (Public Financing Authority I), Series A,
5.250% due 08/15/2016 3,303
2,305 (Public Financing Authority II),
5.250% due 08/15/2018 2,495
Walnut, Public Financing Authority, Tax
Allocation Revenue, (Walnut
Improvement Project), (AMBAC Insured):
1,660 5.375% due 09/01/2018 1,798
2,305 5.375% due 09/01/2022 2,446
1,350 West Contra Costa, Unified School District,
GO, Series A, (MBIA Insured),
5.350% due 02/01/2017 1,512
----------
503,607
----------
VIRGIN ISLANDS - 0.4%
Virgin Islands, Public Finance Authority,
Revenue Bonds, (Gross Receipts of Taxes
on Loan Notes), Series A:
1,000 5.625% due 10/01/2010 1,087
1,000 6.375% due 10/01/2019 1,106
----------
2,193
----------
Total Municipal Bonds and Notes
(Cost $484,768) 505,800
----------
76
See Notes to Financial Statements.
PORTFOLIO OF INVESTMENTS (CONTINUED)
CALIFORNIA MUNICIPAL FUND
OCTOBER 31, 2003
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
------ ------
SHORT-TERM MUNICIPAL BONDS - 0.6%
$ 800 California Housing Finance Agency,
Housing Revenue, (Home Mortgages),
Series U, AMT, (MBIA Insured),
1.150% due 08/01/2032++ $ 800
1,000 California Statewide Communities
Development Authority, COP,
(John Muir/Mt. Diablo Health Center),
(AMBAC Insured),
1.130% due 08/15/2027++ 1,000
1,500 Irvine, Improvement Board Act of 1915,
Special Tax Revenue, (Assessment
District No. 00-18), Series A,
1.150% due 09/02/2026++ 1,500
----------
Total Short-Term Municipal Bonds
(Cost $3,300) 3,300
----------
TOTAL INVESTMENTS+++ (Cost $488,068*) 98.6% 509,100
OTHER ASSETS AND LIABILITIES (NET) 1.4 7,049
----- ----------
NET ASSETS 100.0% $ 516,149
===== ==========
<FN>
- --------
* Aggregate cost for federal tax purposes is $487,944.
** Security deemed illiquid by the Portfolio Manager.
+ Variable rate security. The interest rate shown reflects the rate in
effect at October 31, 2003.
++ Variable rate securities payable upon demand with not more than five
business days' notice, and secured by bank letters of credit or
guarantees by certain corporations. The interest rate shown reflects
the rate in effect at October 31, 2003.
+++ All securities segregated as collateral for futures contracts.
California Municipal Fund had the following sector concentrations greater
than 10% at October 31, 2003 (as a percentage of net assets):
General Purpose 39.8%
Transportation 12.2%
General Obligation 11.8%
California Municipal Fund had the following insurance concentrations greater
than 10% at October 31, 2003 (as a percentage of net assets):
MBIA 27.2%
AMBAC 14.5%
UNREALIZED
NUMBER OF VALUE DEPRECIATION
CONTRACTS (000S) (000S)
--------- ------ ------
FUTURES CONTRACTS-SHORT POSITION
224 U.S. 5 Year Treasury Note,
December 2003 $25,046 $ (453)
52 U.S. 10 Year Treasury Note,
December 2003 5,839 (173)
----------
Net Unrealized Depreciation of
Futures Contracts $ (626)
==========
77
See Notes to Financial Statements.
PORTFOLIO OF INVESTMENTS
CALIFORNIA INSURED INTERMEDIATE MUNICIPAL FUND
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
------ ------
MUNICIPAL BONDS AND NOTES - 92.9%
CALIFORNIA - 90.4%
$ 1,000 ABAG Financing Authority for Nonprofit
Corporations, COP, (Episcopal Homes
Foundation), 6.250% due 08/15/2030 $ 1,062
1,000 Alameda County, COP, (MBIA Insured),
(Santa Rita Jail Project),
5.375% due 06/01/2009 1,118
1,000 Alameda County, Public Financing
Authority, Lease Revenue,
5.000% due 09/02/2008 1,027
2,000 Anaheim, Public Financing Authority,
Lease Revenue, (Convention Center
Project), Series A, (AMBAC Insured),
5.250% due 08/01/2013 2,229
Anaheim, Public Financing Authority,
Power & Light Revenue, (Electric System
Generation Project), Series B, (FSA
Insured):
2,000 5.000% due 10/01/2015 2,154
2,000 5.250% due 10/01/2014 2,210
1,810 5.250% due 10/01/2017 1,963
1,000 California Educational Facilities
Authority, Student Loan Revenue,
(California Loan Program), Series A,
AMT, (MBIA Insured),
5.100% due 03/01/2014 1,057
1,000 California Health Facilities Financing
Authority, Health Care Revenue,
(Insured De Las Companas Project),
Series A, (AMBAC Insured),
5.875% due 07/01/2009 1,093
California Housing Finance Agency,
Mortgage Revenue:
445 Series E, (MBIA Insured),
6.050% due 08/01/2006 473
Series L, AMT, (MBIA Insured):
330 5.000% due 08/01/2008 357
500 5.100% due 02/01/2009 537
Series N, AMT, (AMBAC Insured):
1,000 5.000% due 08/01/2008 1,082
1,000 5.100% due 02/01/2009 1,075
150 California Housing Finance Agency,
SFMR, Series D1,
4.750% due 08/01/2009 162
California State Department of Water
Resources, Power Supply Revenue,
Series A:
2,000 (AMBAC Insured),
5.500% due 05/01/2016 2,214
1,675 (MBIA-IBC Insured),
5.250% due 05/01/2015 1,831
4,000 (XLCA Insured),
5.375% due 05/01/2017 4,339
3,000 California State Department of Water
Resources, Water System Revenue,
(Central Valley Project), Series Y,
(FGIC Insured),
5.250% due 12/01/2014 3,335
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
------ ------
California State Public Works Board,
Lease Revenue:
$ 1,000 (California Community Colleges),
Series A, (AMBAC Insured),
5.250% due 12/01/2012 $ 1,099
2,000 (California State University), Series A,
(AMBAC Insured),
5.375% due 10/01/2017 2,189
(Department of Corrections Program):
2,000 Series A, (AMBAC Insured),
5.250% due 06/01/2012 2,237
1,000 Series B, (CIFG-TCRS Insured),
5.250% due 01/01/2013 1,108
1,000 (Department of Corrections-Ten
Administrative Segregation Housing
Units), Series A, (AMBAC Insured),
5.250% due 03/01/2016 1,079
2,750 (Department of General Services), (Capitol
East End Complex-Blocks 171-174 & 225),
Series A, (AMBAC Insured),
5.250% due 12/01/2014 3,022
1,000 (Regents University), Series A, (AMBAC
Insured), 5.250% due 06/01/2014 1,112
1,000 California State University, Fresno
Association Inc. Revenue, (Auxiliary
Organization Event Center),
5.000% due 07/01/2012 1,037
California State, GO:
2,000 (FGIC-TCRS Insured),
7.000% due 10/01/2010 2,481
1,000 (FSA Insured),
5.500% due 03/01/2012 1,119
(MBIA-IBC Insured):
2,000 5.000% due 02/01/2010 2,228
3,000 5.250% due 02/01/2011 3,360
2,000 5.750% due 10/01/2010 2,334
2,000 6.250% due 09/01/2012 2,388
1,985 (XLCA Insured),
5.500% due 03/01/2011 2,245
1,600 California Statewide Communities
Development Authority, COP, (Children's
Hospital of Los Angeles Project), (MBIA
Insured), 6.000% due 06/01/2007 1,824
1,000 Carson, Redevelopment Agency, Tax
Allocation Revenue, (Area No. 1
Project), (MBIA Insured),
5.500% due 10/01/2014 1,141
1,240 Chino Valley, Unified School District,
COP, Series A, (FSA Insured),
5.250% due 09/01/2013 1,370
1,195 Chula Vista, Public Financing Authority,
Special Tax Revenue, (Assessment
Districts Refinancing), Sr. Lien,
Series A, (FSA Insured), 4.500% due
09/02/2013 1,273
78
See Notes to Financial Statements.
PORTFOLIO OF INVESTMENTS (CONTINUED)
CALIFORNIA INSURED INTERMEDIATE MUNICIPAL FUND
OCTOBER 31, 2003
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
------ ------
MUNICIPAL BONDS AND NOTES - (CONTINUED)
CALIFORNIA - (CONTINUED)
$ 2,175 Corona, COP, (Clearwater Cogeneration
and Recycled Water Projects),
(MBIA Insured), 5.000% due 09/01/2016 $ 2,333
Emeryville, Public Financing Authority,
Revenue Bonds, (Emeryville
Redevelopment Project), Series A,
(MBIA Insured):
1,265 5.250% due 09/01/2015 1,399
1,400 5.250% due 09/01/2017 1,527
1,795 Escondido, Unified School District, GO,
Series A, (FSA Insured),
5.250% due 08/01/2016 1,957
1,050 Fresno, Joint Powers Financing Authority,
Lease Revenue, (Fresno City Hall),
(AMBAC Insured), 5.250% due 08/01/2017 1,139
685 Golden West Schools Financing Authority,
Revenue Bonds, Series A, (MBIA Insured),
5.650% due 02/01/2012 788
1,075 Hartnell, Community College District, GO,
(Election of 2002), Series A,
(MBIA Insured), 5.000% due 08/01/2016 1,154
1,615 Inglewood, Unified School District, GO,
(Election of 1998), Series C,
(FSA Insured), 5.250% due 10/01/2017 1,764
1,195 Kings Canyon, Joint Unified School
District, GO, (FGIC Insured),
5.375% due 08/01/2015 1,321
1,080 Long Beach, Bond Financing Authority,
Lease Revenue, (Public Safety
Facilities Projects),
(AMBAC Insured), 5.250% due 11/01/2013 1,207
1,000 Long Beach, Bond Financing Authority, Tax
Allocation Revenue, (North Long Beach
Redevelopment Projects), Series A,
(AMBAC Insured), 5.375% due 08/01/2018 1,083
1,000 Los Angeles County, Metropolitan
Transportation Authority, Sales Tax
Revenue, (Proposition C Second Senior),
Series A, (AMBAC Insured),
5.600% due 07/01/2011 1,093
65 Los Angeles, Community Redevelopment
Agency, Housing Revenue, Series C,
(FHA Collateral), (AMBAC Insured),
6.000% due 07/01/2004 66
1,500 Los Angeles, Department of Airports,
Airport Revenue, (Ontario International
Airport), Series A, AMT, (FGIC Insured),
5.900% due 05/15/2012 1,657
1,300 Los Angeles, Department of Water & Power,
Power System Revenue, Series A-2,
(MBIA Insured), 5.000% due 07/01/2017 1,385
2,500 Los Angeles, Harbor Department Revenue,
Series B, AMT, 5.500% due 08/01/2008 2,732
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
------ ------
$ 1,045 Los Angeles, Municipal Improvement
Corporation, Lease Revenue, (City of
Los Angeles Central Library Project),
Series AT, (MBIA Insured),
5.500% due 06/01/2017 $ 1,154
1,500 Los Angeles, State Building Authority,
Lease Revenue, (State of California
Department of General Services Lease
Project), Series A, (MBIA-IBC Insured),
5.625% due 05/01/2011 1,700
Los Angeles, Unified School District,
COP, Series B:
(Capital Project I), (AMBAC Insured):
1,150 5.000% due 08/01/2016 1,233
1,210 5.000% due 08/01/2017 1,287
2,000 (FSA Insured),
5.000% due 10/01/2011 2,231
Los Angeles, Unified School District, GO,
Series A, (MBIA Insured):
2,000 5.375% due 07/01/2016 2,219
2,000 5.375% due 07/01/2017 2,206
2,105 M-S-R Public Power Agency, San Juan
Project Revenue, Series I,
(MBIA Insured), 5.000% due 07/01/2015 2,252
151 Modesto, Mortgage Revenue, (Stonebridge
Project), Series A, (GNMA Collateral),
5.875% due 12/01/2004 152
Moulton-Niguel, Water District, GO,
(AMBAC Insured):
2,000 5.000% due 09/01/2015 2,158
1,700 5.000% due 09/01/2016 1,817
1,015 Nevada Irrigation District, COP, (FGIC
Insured), 5.000% due 01/01/2013 1,114
1,000 North Orange County, Community College
District, GO, Series A, (MBIA Insured),
5.250% due 08/01/2014 1,111
55 Oakland, Improvement Board Act of 1915,
Special Tax Revenue, (Medical Hill
Parking Assessment District No. 3),
(MBIA Insured), 6.000% due 09/02/2004 57
1,575 Oceanside, COP, Series A, (AMBAC Insured),
5.250% due 04/01/2016 1,716
Ontario, Redevelopment Financing
Authority, Lease Revenue:
1,055 (Capital Projects), (AMBAC Insured),
5.500% due 08/01/2016 1,169
1,060 (Project No. 1, Center City & Cimarron
Projects), (MBIA Insured),
5.250% due 08/01/2016 1,154
1,000 Orange County, Public Financing Authority,
Lease Revenue, (Juvenile Justice Center
Facility Project), (AMBAC Insured),
5.375% due 06/01/2016 1,107
795 Palm Desert, Financing Authority, Tax
Allocation Revenue, (Project Area No. 2),
Series A, (MBIA Insured),
5.000% due 08/01/2012 877
79
See Notes to Financial Statements.
PORTFOLIO OF INVESTMENTS (CONTINUED)
CALIFORNIA INSURED INTERMEDIATE MUNICIPAL FUND
OCTOBER 31, 2003
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
------ ------
MUNICIPAL BONDS AND NOTES - (CONTINUED)
CALIFORNIA - (CONTINUED)
$ 1,000 Port of Oakland, Airport & Marina Revenue,
Series N, AMT, (MBIA Insured),
5.000% due 11/01/2011 $ 1,085
560 Redondo Beach, Public Financing Authority,
Revenue Bonds, (South Bay Center
Redevelopment Project),
6.750% due 07/01/2006 601
2,090 Richmond, Joint Powers Financing
Authority, Tax Allocation Revenue,
Series A, (MBIA Insured), 5.500%
due 09/01/2017 2,320
1,100 Riverside, Special Tax Revenue,
(Community Facilities District
No. 90-1-A), (MBIA Insured),
5.500% due 09/01/2013 1,230
1,000 San Bernardino County, COP, (West Valley
Detention Center Refinancing Project),
Series B, (MBIA Insured),
5.000% due 11/01/2009 1,131
1,840 San Diego County, COP, (Motorola),
(AMBAC Insured),
5.000% due 02/01/2011 2,040
San Francisco City and County,
International Airports Commission,
Airport Revenue, Second Series, AMT:
2,485 Issue 18A, (MBIA Insured),
6.000% due 05/01/2006 2,735
Issue 22, (AMBAC Insured):
1,705 6.000% due 05/01/2006 1,877
1,000 6.000% due 05/01/2008 1,137
690 Issue 23A, (FGIC Insured),
5.500% due 05/01/2005 731
2,690 Issue 28A, (MBIA Insured),
5.000% due 05/01/2012 2,865
1,000 San Francisco City and County, Public
Utilities Commission, Water Revenue,
Series A, (FSA Insured),
5.000% due 11/01/2016 1,069
2,325 San Francisco City and County,
Redevelopment Agency, Tax Allocation
Revenue, (San Franciso Redevelopment
Projects), Series B, (FGIC Insured),
5.250% due 08/01/2017 2,523
1,555 San Joaquin County, COP, (Solid Waste
System Facilities Project),
(MBIA Insured), 5.000% due 04/01/2016 1,664
2,000 San Jose, Airport Revenue, Series A, (FSA
Insured), 5.375% due 03/01/2017 2,191
1,200 San Jose, Financing Authority, Lease
Revenue, (Convention Center Project),
Series F, (MBIA Insured),
5.000% due 09/01/2016 1,281
270 San Mateo, Unified High School District,
Capital Appreciation, GO, (Election of
2000), Series B, (FGIC Insured),
Zero coupon due 09/01/2013 179
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
------ ------
$ 1,050 Santa Ana, COP, (Santa Ana Recycling
Project), Series A, AMT, (AMBAC
Insured), 5.400% due 05/01/2007 $ 1,129
1,500 Santa Clara, Electric Utilities, Electric
Revenue Bonds, Series A, (MBIA Insured),
5.250% due 07/01/2017 1,636
650 Santa Clara, Redevelopment Agency, Tax
Allocation Revenue, (Bay Shore North
Project), (AMBAC Insured),
7.000% due 07/01/2010 783
Santa Maria, Redevelopment Agency, Lease
Revenue, (Town Center & Westside
Parking Facilities Project), (AMBAC
Insured):
1,325 5.000% due 06/01/2013 1,453
1,085 5.250% due 06/01/2015 1,193
1,160 Shasta, Joint Powers Financing Authority,
Lease Revenue, (County Administration
Building Project), Series A, (MBIA
Insured), 5.250% due 04/01/2017 1,263
Sierra, Unified School District, COP,
(FSA Insured):
700 2.000% due 03/01/2005** 708
720 2.000% due 03/01/2006** 730
130 2.300% due 03/01/2007** 132
1,000 South Gate, Public Financing Authority,
Tax Allocation Revenue, (South Gate
Redevelopment Project No. 1), (XLCA
Insured), 5.000% due 09/01/2016 1,064
1,300 South Orange County, Public Financing
Authority, Special Tax Revenue,
(Foothill Area-Mello Roos), Series C,
(FGIC Insured), 6.500% due 08/15/2010 1,575
995 Southern California Home Financing
Authority, MFHR, (The Fountains Project),
Series A, AMT, (FNMA Collateral),
5.400% due 01/01/2027 1,045
950 Stanton, MFHR, (Continental Gardens LP
Project), AMT, (FNMA Collateral),
5.625% due 08/01/2029 1,012
1,305 Stockton, Community Facilities District
No. 1, Supplemental Tax Revenue,
(Mello Roos-Weston Ranch), Series A,
5.500% due 09/01/2009 1,397
Sunnyvale, Solid Waste Revenue, (AMBAC
Insured):
1,000 5.250% due 10/01/2012 1,086
1,000 5.500% due 10/01/2014 1,091
1,000 5.500% due 10/01/2016 1,075
1,000 Tracy, Area Public Facilities Financing
Agency, Special Tax Revenue, (Community
Facilities District No. 87-1-H),
(MBIA Insured), 5.875% due 10/01/2013 1,132
2,190 Ventura County, Public Financing Authority,
COP, Series II, (FSA Insured),
5.250% due 08/15/2017 2,385
----------
161,831
----------
80
See Notes to Financial Statements.
PORTFOLIO OF INVESTMENTS (CONTINUED)
CALIFORNIA INSURED INTERMEDIATE MUNICIPAL FUND
OCTOBER 31, 2003
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
------ ------
MUNICIPAL BONDS AND NOTES - (CONTINUED)
GUAM - 0.6%
$ 1,000 Guam Government, GO, Series A, (FSA
Insured), 5.500% due 12/01/2011 $ 1,151
----------
PUERTO RICO - 1.9%
3,000 Puerto Rico Commonwealth, GO, Series E,
(MBIA Insured),
5.000% due 07/01/2028 3,315
----------
Total Municipal Bonds and Notes
(Cost $161,836) 166,297
----------
SHORT-TERM MUNICIPAL BONDS - 7.1%
6,000 California Housing Finance Agency,
Housing Revenue, (Home Mortgages),
Series U, AMT, (MBIA Insured),
1.150% due 08/01/2032+ 6,000
6,500 California Statewide Communities
Development Authority, COP,
(John Muir/Mt. Diablo Health Center),
(AMBAC Insured),
1.130% due 08/15/2027+ 6,500
200 M-S-R Public Power Agency, San Juan
Project Revenue, Sub. Lien, Series F,
(MBIA Insured), 1.150% due 07/01/2022+ 200
----------
Total Short-Term Municipal Bonds
(Cost $12,700) 12,700
----------
TOTAL INVESTMENTS ++ (Cost $174,536*) 100.0% 178,997
OTHER ASSETS AND LIABILITIES (NET) 0.0 (1)
----- ----------
NET ASSETS 100.0% $ 178,996
===== ==========
<FN>
- --------
* Aggregate cost for federal tax purposes is $174,534.
** Security purchased on a when-issued basis.
+ Variable rate securities payable upon demand with not more than five
business days' notice, and secured by bank letters of credit or
guarantees by certain corporations. The interest rate shown
reflects the rate in effect at October 31, 2003.
++ All securities segregated as collateral for when-issued securities or
futures contracts.
California Insured Intermediate Municipal Fund had the following sector
concentrations greater than 10% at October 31, 2003 (as a percentage of net
assets):
General Purpose 31.7%
General Obligation 22.8%
Transportation 12.0%
California Insured Intermediate Municipal Fund had the following insurance
concentrations greater than 10% at October 31, 2003 (as a percentage of net
assets):
MBIA 37.9%
AMBAC 28.3%
FSA 13.6%
UNREALIZED
NUMBER OF VALUE DEPRECIATION
CONTRACTS (000S) (000S)
--------- ------ ------
FUTURES CONTRACTS-SHORT POSITION
224 U.S. 5 Year Treasury Note,
December 2003 $25,046 $ (475)
53 U.S. 10 Year Treasury Note,
December 2003 5,952 (176)
----------
Net Unrealized Depreciation of
Futures Contracts $ (651)
==========
- -----------------------------------------------------------------------------
GLOSSARY OF TERMS
AMBAC -- American Municipal Bond Assurance Corporation
AMT -- Alternative Minimum Tax
CIFG -- CDC IXIS Financial Guaranty North America, Inc.
COP -- Certificates of Participation
FGIC -- Federal Guaranty Insurance Corporation
FHA -- Federal Housing Authority
FNMA -- Federal National Mortgage Association
FSA -- Financial Security Assurance
GNMA -- Government National Mortgage Association
GO -- General Obligation Bond
IBC -- Insured Bond Certificate
MBIA -- Municipal Bond Investors Assurance
MFHR -- Multi-family Housing Revenue
SFMR -- Single Family Mortgage Revenue
TCRS -- Transferable Custodial Receipts
XLCA -- XL Capital Assurance Inc.
- -----------------------------------------------------------------------------
81
See Notes to Financial Statements.
STATEMENTS OF ASSETS AND LIABILITIES
WM GROUP OF FUNDS
OCTOBER 31, 2003
(IN THOUSANDS)
EQUITY GROWTH & WEST COAST MID CAP
REIT INCOME INCOME EQUITY STOCK GROWTH
FUND FUND FUND FUND FUND FUND
-------- -------- ---------- ---------- -------- ----------
ASSETS:
Investments, at value:
Securities $179,379 $867,301 $1,472,775 $ 959,937 $392,304 $ 855,211
Repurchase Agreements 10,288 37,417 72,048 40,152 36,343 54,794
-------- -------- ---------- ---------- -------- ----------
Total Investments (a) 189,667 904,718 1,544,823 1,000,089 428,647 910,005
Cash --* -- --* 1 --* 7
Cash held as collateral for securities loaned -- 6,983 56,594 46,275 6,469 40,660
Unrealized appreciation of forward
foreign currency contracts -- -- -- -- -- 4
Dividends and/or interest receivable 347 1,925 1,671 327 355 659
Receivable for Fund shares sold 312 2,727 2,840 2,621 1,027 1,568
Receivable for investment securities sold -- -- 5,967 1,021 1,041 10,916
Prepaid expenses 1 4 8 4 2 4
-------- -------- ---------- ---------- -------- ----------
Total Assets 190,327 916,357 1,611,903 1,050,338 437,541 963,823
-------- -------- ---------- ---------- -------- ----------
LIABILITIES:
Payable upon return of securities loaned -- 6,983 56,594 46,275 6,469 40,660
Unrealized depreciation of forward
foreign currency contracts -- -- -- -- -- 63
Payable for Fund shares redeemed 52 565 541 865 82 318
Payable for when-issued securities -- -- -- -- -- --
Payable for investment securities purchased 678 -- -- 3,743 4,232 12,768
Investment advisory fee payable 126 402 677 466 259 585
Shareholder servicing and distribution
fees payable 4 148 215 215 23 134
Transfer agent fees payable 1 39 73 67 8 97
Variation margin -- -- -- -- -- --
Dividends payable -- -- -- -- -- --
Due to custodian -- 40 -- -- -- --
Accrued expenses and other payables 39 165 269 222 65 303
-------- -------- ---------- ---------- -------- ----------
Total Liabilities 900 8,342 58,369 51,853 11,138 54,928
-------- -------- ---------- ---------- -------- ----------
NET ASSETS $189,427 $908,015 $1,553,534 $ 998,485 $426,403 $ 908,895
======== ======== ========== ========== ======== ==========
(a) Investments, at cost $160,102 $827,568 $1,335,856 $ 759,725 $337,821 $ 829,142
======== ======== ========== ========== ======== ==========
NET ASSETS CONSIST OF:
Undistributed net investment income $ 939 $ 2,013 $ 13,414 $ 432 $ 893 $ 59
Accumulated net realized gain/(loss)
on investment transactions 875 (3,437) (81,464) (13,736) (1,489) (426,872)
Net unrealized appreciation
of investments 29,565 78,244 208,967 240,364 90,826 80,804
Paid-in capital 158,048 831,195 1,412,617 771,425 336,173 1,254,904
-------- -------- ---------- ---------- -------- ----------
Total Net Assets $189,427 $908,015 $1,553,534 $ 998,485 $426,403 $ 908,895
======== ======== ========== ========== ======== ==========
<FN>
- --------------------
*Amount represents less than $500.
See Notes to Financial Statements.
82
U.S.
SMALL CAP INTERNATIONAL SHORT TERM GOVERNMENT
STOCK GROWTH INCOME SECURITIES INCOME
FUND FUND FUND FUND FUND
-------- -------- -------- ---------- ----------
ASSETS:
Investments, at value:
Securities $434,587 $329,432 $220,113 $1,027,635 $ 963,662
Repurchase Agreements 1,633 18,163 40,382 81,168 68,574
-------- -------- -------- ---------- ----------
Total Investments (a) 436,220 347,595 260,495 1,108,803 1,032,236
Cash 41 4 1 -- --
Cash held as collateral for securities loaned 62,941 16,469 -- -- --
Unrealized appreciation of forward
foreign currency contracts -- 342 -- -- --
Dividends and/or interest receivable 66 441 2,960 5,530 12,602
Receivable for Fund shares sold 514 618 813 1,642 2,084
Receivable for investment securities sold 2,831 317 --* 61,106 31,886
Prepaid expenses 1 1 1 6 6
-------- -------- -------- ---------- ----------
Total Assets 502,614 365,787 264,270 1,177,087 1,078,814
-------- -------- -------- ---------- ----------
LIABILITIES:
Payable upon return of securities loaned 62,941 16,469 -- -- --
Unrealized depreciation of forward
foreign currency contracts -- 267 -- -- --
Payable for Fund shares redeemed 60 14 458 1,320 1,046
Payable for when-issued securities -- -- -- 23,353 --
Payable for investment securities purchased 2,204 650 -- 51,073 33,737
Investment advisory fee payable 298 251 108 462 436
Shareholder servicing and distribution
fees payable 31 9 68 268 212
Transfer agent fees payable 29 9 -- 47 35
Variation margin -- -- 17 -- --
Dividends payable -- -- 62 317 586
Due to custodian -- -- -- 4 135
Accrued expenses and other payables 105 85 41 201 164
-------- -------- -------- ---------- ----------
Total Liabilities 65,668 17,754 754 77,045 36,351
-------- -------- -------- ---------- ----------
NET ASSETS $436,946 $348,033 $263,516 $1,100,042 $1,042,463
======== ======== ======== ========== ==========
(a) Investments, at cost $424,550 $310,357 $254,510 $1,101,103 $ 998,449
======== ======== ======== ========== ==========
NET ASSETS CONSIST OF:
Undistributed net investment income $ -- $ 4,050 $ 18 $ 530 $ 883
Accumulated net realized gain/(loss)
on investment transactions (68,475) (41,575) (4,912) (13,668) (13,191)
Net unrealized appreciation
of investments 11,670 37,322 5,756 7,700 33,787
Paid-in capital 493,751 348,236 262,654 1,105,480 1,020,984
-------- -------- -------- ---------- ----------
Total Net Assets $436,946 $348,033 $263,516 $1,100,042 $1,042,463
======== ======== ======== ========== ==========
CALIFORNIA
INSURED
HIGH TAX-EXEMPT CALIFORNIA INTERMEDIATE
YIELD BOND MUNICIPAL MUNICIPAL
FUND FUND FUND FUND
-------- -------- -------- --------
ASSETS:
Investments, at value:
Securities $565,804 $257,209 $509,100 $178,997
Repurchase Agreements 7,060 -- -- --
-------- -------- -------- --------
Total Investments (a) 572,864 257,209 509,100 178,997
Cash 1 63 -- 123
Cash held as collateral for securities loaned -- -- -- --
Unrealized appreciation of forward
foreign currency contracts -- -- -- --
Dividends and/or interest receivable 8,959 3,620 6,886 2,338
Receivable for Fund shares sold 2,760 151 896 370
Receivable for investment securities sold 5,006 289 1,894 5,711
Prepaid expenses 2 2 4 1
-------- -------- -------- --------
Total Assets 589,592 261,334 518,780 187,540
-------- -------- -------- --------
LIABILITIES:
Payable upon return of securities loaned -- -- -- --
Unrealized depreciation of forward
foreign currency contracts -- -- -- --
Payable for Fund shares redeemed 875 516 1,252 585
Payable for when-issued securities -- 3,457 -- 1,552
Payable for investment securities purchased 6,134 -- -- 6,023
Investment advisory fee payable 264 108 220 59
Shareholder servicing and distribution
fees payable 99 86 279 104
Transfer agent fees payable 11 10 18 6
Variation margin -- 17 56 57
Dividends payable 523 280 601 102
Due to custodian -- -- 108 --
Accrued expenses and other payables 82 34 97 56
-------- -------- -------- --------
Total Liabilities 7,988 4,508 2,631 8,544
-------- -------- -------- --------
NET ASSETS $581,604 $256,826 $516,149 $178,996
======== ======== ======== ========
(a) Investments, at cost $532,873 $236,946 $488,068 $174,536
======== ======== ======== ========
NET ASSETS CONSIST OF:
Undistributed net investment income $ 617 $ 119 $ 39 $ 62
Accumulated net realized gain/(loss)
on investment transactions (54,459) 3,136 (270) 2,289
Net unrealized appreciation
of investments 39,991 20,060 20,406 3,810
Paid-in capital 595,455 233,511 495,974 172,835
-------- -------- -------- --------
Total Net Assets $581,604 $256,826 $516,149 $178,996
======== ======== ======== ========
See Notes to Financial Statements.
83
STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED)
WM GROUP OF FUNDS
OCTOBER 31, 2003
EQUITY GROWTH & WEST COAST MID CAP
REIT INCOME INCOME EQUITY STOCK GROWTH
FUND FUND FUND FUND FUND FUND
-------- -------- -------- -------- -------- --------
NET ASSETS:
Class A Shares $ 3,159 $268,489 $541,707 $523,308 $ 38,676 $114,757
======== ======== ======== ======== ======== ========
Class B Shares $ 2,808 $103,888 $115,457 $122,221 $ 17,405 $129,239
======== ======== ======== ======== ======== ========
Class C Shares $ 1,322 $ 5,973 $ 823 $ 3,593 $ 550 $ 565
======== ======== ======== ======== ======== ========
Class I Shares $182,138 $529,665 $895,547 $349,363 $369,772 $664,334
======== ======== ======== ======== ======== ========
SHARES OUTSTANDING:
Class A Shares 254 17,368 25,090 16,281 2,521 8,372
======== ======== ======== ======== ======== ========
Class B Shares 226 6,766 5,568 4,194 1,175 10,348
======== ======== ======== ======== ======== ========
Class C Shares 106 390 40 123 37 45
======== ======== ======== ======== ======== ========
Class I Shares 14,603 34,272 41,300 10,785 23,854 47,032
======== ======== ======== ======== ======== ========
CLASS A SHARES:**
Net asset value per share of
beneficial interest
outstanding * $ 12.46 $ 15.46 $ 21.59 $ 32.14 $ 15.34 $ 13.71
======== ======== ======== ======== ======== ========
Maximum sales charge 5.50% 5.50% 5.50% 5.50% 5.50% 5.50%
======== ======== ======== ======== ======== ========
Maximum offering price per share
of beneficial interest
outstanding $ 13.19 $ 16.36 $ 22.85 $ 34.01 $ 16.23 $ 14.51
======== ======== ======== ======== ======== ========
CLASS B SHARES:**
Net asset value and offering price
per share of beneficial
interest outstanding * $ 12.43 $ 15.36 $ 20.74 $ 29.14 $ 14.82 $ 12.49
======== ======== ======== ======== ======== ========
CLASS C SHARES:**
Net asset value per share of
beneficial interest
outstanding * $ 12.43 $ 15.29 $ 20.62 $ 29.20 $ 14.83 $ 12.55
======== ======== ======== ======== ======== ========
Maximum sales charge 1.00% 1.00% 1.00% 1.00% 1.00% 1.00%
======== ======== ======== ======== ======== ========
Maximum offering price per share
of beneficial interest
outstanding $ 12.56 $ 15.44 $ 20.83 $ 29.49 $ 14.98 $ 12.68
======== ======== ======== ======== ======== ========
CLASS I SHARES:
Net asset value, offering and
redemption price per share
of beneficial interest
outstanding $ 12.47 $ 15.45 $ 21.68 $ 32.39 $ 15.50 $ 14.13
======== ======== ======== ======== ======== ========
<FN>
- --------------
* Redemption price per share is equal to net asset value per share less
any applicable contingent deferred sales charge and/or applicable
redemption fees for Class A Shares of the International Growth Fund.
** Net asset value and maximum offering price are not shown in thousands.
See Notes to Financial Statements.
84
U.S.
SMALL CAP INTERNATIONAL SHORT TERM GOVERNMENT
STOCK GROWTH INCOME SECURITIES INCOME
FUND FUND FUND FUND FUND
-------- -------- -------- -------- --------
NET ASSETS:
Class A Shares $ 81,234 $ 26,429 $ 71,920 $176,859 $153,654
======== ======== ======== ======== ========
Class B Shares $ 18,037 $ 4,020 $ 44,310 $251,153 $194,396
======== ======== ======== ======== ========
Class C Shares $ 404 $ 91 $ 17,843 $ 13,354 $ 15,274
======== ======== ======== ======== ========
Class I Shares $337,271 $317,495 $129,443 $658,676 $679,140
======== ======== ======== ======== ========
SHARES OUTSTANDING:
Class A Shares 6,052 3,152 30,068 16,247 16,441
======== ======== ======== ======== ========
Class B Shares 1,508 500 18,521 23,087 20,737
======== ======== ======== ======== ========
Class C Shares 34 11 7,457 1,229 1,629
======== ======== ======== ======== ========
Class I Shares 24,519 37,643 54,104 60,490 72,522
======== ======== ======== ======== ========
CLASS A SHARES:**
Net asset value per share
of beneficial interest
outstanding * $ 13.42 $ 8.38 $ 2.39 $ 10.89 $ 9.35
======== ======== ======== ======== ========
Maximum sales charge 5.50% 5.50% 3.50% 4.50% 4.50%
======== ======== ======== ======== ========
Maximum offering price per share
of beneficial interest
outstanding $ 14.20 $ 8.87 $ 2.48 $ 11.40 $ 9.79
======== ======== ======== ======== ========
CLASS B SHARES:**
Net asset value and offering price
per share of beneficial
interest outstanding * $ 11.96 $ 8.03 $ 2.39 $ 10.88 $ 9.37
======== ======== ======== ======== ========
CLASS C SHARES:**
Net asset value per share of
beneficial interest
outstanding * $ 12.06 $ 8.02 $ 2.39 $ 10.87 $ 9.37
======== ======== ======== ======== ========
Maximum sales charge 1.00% 1.00% 1.00% 1.00% 1.00%
======== ======== ======== ======== ========
Maximum offering price per share
of beneficial interest
outstanding $ 12.18 $ 8.10 $ 2.41 $ 10.98 $ 9.46
======== ======== ======== ======== ========
CLASS I SHARES:
Net asset value, offering and
redemption price per share
of beneficial interest
outstanding $ 13.76 $ 8.43 $ 2.39 $ 10.89 $ 9.36
======== ======== ======== ======== ========
CALIFORNIA
INSURED
HIGH TAX-EXEMPT CALIFORNIA INTERMEDIATE
YIELD BOND MUNICIPAL MUNICIPAL
FUND FUND FUND FUND
-------- -------- -------- -------
NET ASSETS:
Class A Shares $ 48,618 $207,433 $252,511 $75,231
======== ======== ======== =======
Class B Shares $ 83,665 $ 45,061 $255,445 $93,448
======== ======== ======== =======
Class C Shares $ 24,540 $ 4,332 $ 8,193 $10,317
======== ======== ======== =======
Class I Shares $424,781 -- -- --
========
SHARES OUTSTANDING:
Class A Shares 6,172 26,075 22,502 6,753
======== ======== ======== =======
Class B Shares 10,571 5,664 22,763 8,389
======== ======== ======== =======
Class C Shares 3,102 544 730 926
======== ======== ======== =======
Class I Shares 54,009 -- -- --
========
CLASS A SHARES:**
Net asset value per share of
beneficial interest
outstanding * $ 7.88 $ 7.96 $ 11.22 $ 11.14
======== ======== ======== =======
Maximum sales charge 4.50% 4.50% 4.50% 4.50%
======== ======== ======== =======
Maximum offering price per
share of beneficial
interest outstanding $ 8.25 $ 8.34 $ 11.75 $ 11.66
======== ======== ======== =======
CLASS B SHARES:**
Net asset value and offering price
per share of beneficial
interest outstanding * $ 7.91 $ 7.96 $ 11.22 $ 11.14
======== ======== ======== =======
CLASS C SHARES:**
Net asset value per share of
beneficial interest
outstanding * $ 7.91 $ 7.96 $ 11.22 $ 11.14
======== ======== ======== =======
Maximum sales charge 1.00% 1.00% 1.00% 1.00%
======== ======== ======== =======
Maximum offering price per share
of beneficial interest
outstanding $ 7.99 $ 8.04 $ 11.33 $ 11.25
======== ======== ======== =======
CLASS I SHARES:
Net asset value, offering and
redemption price per share
of beneficial interest
outstanding $ 7.86 -- -- --
========
See Notes to Financial Statements.
85
STATEMENTS OF OPERATIONS
WM GROUP OF FUNDS
FOR THE YEAR ENDED OCTOBER 31, 2003
(IN THOUSANDS)
EQUITY GROWTH & WEST COAST MID CAP
REIT INCOME INCOME EQUITY STOCK GROWTH
FUND** FUND FUND FUND FUND FUND
-------- -------- ---------- ---------- -------- --------
INVESTMENT INCOME:
Dividends $ 4,764 $ 18,401 $ 26,641 $ 8,541 $ 3,571 $ 6,044
Interest 86 5,832 711 355 319 646
Foreign withholding taxes -- (126) (240) -- -- (92)
Securities lending income -- 80 33 97 36 83
------- -------- -------- -------- ------- --------
Total investment income 4,850 24,187 27,145 8,993 3,926 6,681
------- -------- -------- -------- ------- --------
EXPENSES:
Investment advisory fee 774 3,889 6,922 4,483 2,392 5,505
Custodian fees 6 32 63 43 18 89
Legal and audit fees 30 51 70 50 40 122
Registration and filing fees 56 51 27 51 41 53
Printing and postage expenses 5 182 340 281 33 406
Other 16 181 322 244 63 279
Shareholder servicing and
distribution fees:
Class A Shares 3 557 1,240 1,049 78 249
Class B Shares 9 885 1,166 1,070 146 1,236
Class C Shares 3 28 4 20 3 4
Transfer agent fees:
Class A Shares 2 195 459 438 31 449
Class B Shares 2 247 434 368 63 762
Class C Shares 1 5 1 5 1 1
------- -------- -------- -------- ------- --------
Total expenses 907 6,303 11,048 8,102 2,909 9,155
Fees waived by the investment advisor
and/or transfer agent -- -- -- -- -- --
Fees reduced by custodian credits --* --* --* --* --* (1)
------- -------- -------- -------- ------- --------
Net expenses 907 6,303 11,048 8,102 2,909 9,154
------- -------- -------- -------- ------- --------
NET INVESTMENT INCOME/(LOSS) 3,943 17,884 16,097 891 1,017 (2,473)
------- -------- -------- -------- ------- --------
NET REALIZED AND UNREALIZED
GAIN/(LOSS) ON INVESTMENTS:
Net realized gain/(loss) on
investment transactions 351 (1,976) (48,720) (2,358) 2,758 (22,380)
Net change in unrealized
appreciation/depreciation
of investments 29,565 142,701 251,269 249,254 68,840 163,238
------- -------- -------- -------- ------- --------
Net realized and unrealized gain/
(loss) on investments 29,916 140,725 202,549 246,896 71,598 140,858
------- -------- -------- -------- ------- --------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $33,859 $158,609 $218,646 $247,787 $72,615 $138,385
======= ======== ======== ======== ======= ========
<FN>
- --------------------
* Amount represents less than $500.
** The REIT Fund commenced operations on March 1, 2003.
See Notes to Financial Statements.
86
U.S.
SMALL CAP INTERNATIONAL SHORT TERM GOVERNMENT
STOCK GROWTH INCOME SECURITIES INCOME
FUND FUND FUND FUND FUND
-------- -------- -------- -------- --------
INVESTMENT INCOME:
Dividends $ 1,274 $ 5,680 $ -- $ -- $ 325
Interest 52 157 8,683 44,854 58,742
Foreign withholding taxes -- (589) -- -- --
Securities lending income 780 168 32 133 193
-------- -------- ------- -------- -------
Total investment income 2,106 5,416 8,715 44,987 59,260
-------- -------- ------- -------- -------
EXPENSES:
Investment advisory fee 2,299 2,247 980 4,969 4,657
Custodian fees 26 227 15 64 49
Legal and audit fees 36 38 34 60 57
Registration and filing fees 42 40 54 84 74
Printing and postage expenses 114 37 30 211 149
Other 76 71 45 257 215
Shareholder servicing and
distribution fees:
Class A Shares 138 55 109 497 365
Class B Shares 144 40 365 2,999 1,887
Class C Shares 1 1 123 167 134
Transfer agent fees:
Class A Shares 239 86 55 232 186
Class B Shares 122 34 41 289 180
Class C Shares 1 --* 8 12 10
-------- -------- ------- -------- -------
Total expenses 3,238 2,876 1,859 9,841 7,963
Fees waived by the investment advisor
and/or transfer agent -- -- (104) -- --
Fees reduced by custodian credits (1) --* (1) --* (1)
-------- -------- ------- -------- -------
Net expenses 3,237 2,876 1,754 9,841 7,962
-------- -------- ------- -------- -------
NET INVESTMENT INCOME/(LOSS) (1,131) 2,540 6,961 35,146 51,298
-------- -------- ------- -------- -------
NET REALIZED AND UNREALIZED
GAIN/(LOSS) ON INVESTMENTS:
Net realized gain/(loss) on
investment transactions (39,625) (12,285) (120) 3,661 (554)
Net change in unrealized
appreciation/depreciation
of investments 198,438 73,387 3,462 (22,244) 34,433
-------- -------- ------- -------- -------
Net realized and unrealized
gain/(loss) on investments 158,813 61,102 3,342 (18,583) 33,879
-------- -------- ------- -------- -------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $157,682 $ 63,642 $10,303 $ 16,563 $85,177
======== ======== ======= ======== =======
CALIFORNIA
INSURED
HIGH TAX-EXEMPT CALIFORNIA INTERMEDIATE
YIELD BOND MUNICIPAL MUNICIPAL
FUND FUND FUND FUND
-------- -------- -------- --------
INVESTMENT INCOME:
Dividends $ 1,952 $ -- $ -- $ --
Interest 37,578 13,510 28,775 7,243
Foreign withholding taxes -- -- -- --
Securities lending income 185 -- -- --
-------- ------- ------- -------
Total investment income 39,715 13,510 28,775 7,243
-------- ------- ------- -------
EXPENSES:
Investment advisory fee 2,470 1,313 2,887 923
Custodian fees 31 15 32 14
Legal and audit fees 42 37 48 34
Registration and filing fees 68 58 30 26
Printing and postage expenses 38 38 74 28
Other 85 76 158 56
Shareholder servicing and
distribution fees:
Class A Shares 81 535 691 186
Class B Shares 651 485 2,921 996
Class C Shares 117 34 89 108
Transfer agent fees:
Class A Shares 26 102 106 19
Class B Shares 60 20 96 38
Class C Shares 9 1 2 4
-------- ------- ------- -------
Total expenses 3,678 2,714 7,134 2,432
Fees waived by the investment advisor
and/or transfer agent -- -- -- (167)
Fees reduced by custodian credits (5) (1) (2) (3)
-------- ------- ------- -------
Net expenses 3,673 2,713 7,132 2,262
-------- ------- ------- -------
NET INVESTMENT INCOME/(LOSS) 36,042 10,797 21,643 4,981
-------- ------- ------- -------
NET REALIZED AND UNREALIZED
GAIN/(LOSS) ON INVESTMENTS:
Net realized gain/(loss) on
investment transactions (16,228) 3,451 (585) 2,643
Net change in unrealized
appreciation/depreciation
of investments 88,798 (1,438) (2,957) (1,578)
-------- ------- ------- -------
Net realized and unrealized
gain/(loss) on investments 72,570 2,013 (3,542) 1,065
-------- ------- ------- -------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $108,612 $12,810 $18,101 $ 6,046
======== ======= ======= =======
See Notes to Financial Statements.
87
STATEMENTS OF CHANGES IN NET ASSETS
WM GROUP OF FUNDS
FOR THE YEAR ENDED OCTOBER 31, 2003
(IN THOUSANDS)
EQUITY GROWTH & WEST COAST MID CAP
REIT INCOME INCOME EQUITY STOCK GROWTH
FUND** FUND FUND FUND FUND FUND
-------- -------- ---------- ---------- -------- ----------
Net investment income/(loss) $ 3,943 $ 17,884 $ 16,097 $ 891 $ 1,017 $ (2,473)
Net realized gain/(loss) on
investment transactions 351 (1,976) (48,720) (2,358) 2,758 (22,380)
Net change in unrealized
appreciation/depreciation
of investments 29,565 142,701 251,269 249,254 68,840 163,238
-------- -------- ---------- -------- -------- --------
Net increase in net assets
resulting from operations 33,859 158,609 218,646 247,787 72,615 138,385
Distributions to shareholders from:
Net investment income:
Class A Shares (25) (5,278) (4,443) -- -- --
Class B Shares (20) (1,310) -- -- -- --
Class C Shares (7) (45) (2) -- -- --
Class I Shares (2,428) (10,743) (8,955) -- (731) --
Net realized gains on investments:
Class A Shares -- -- -- -- -- --
Class B Shares -- -- -- -- -- --
Class C Shares -- -- -- -- -- --
Class I Shares -- -- -- -- -- --
Net increase/(decrease) in net assets
from Fund share transactions:
Class A Shares 2,871 24,812 (13,099) 13,010 3,423 1,597
Class B Shares 2,536 4,186 (25,890) (11,883) 1,097 (19,346)
Class C Shares 1,223 3,615 499 1,627 433 284
Class I Shares 151,418 101,118 116,890 73,546 76,625 207,625
Redemption fees -- -- -- -- -- --
-------- -------- ---------- -------- -------- --------
Net increase/(decrease) in net assets 189,427 274,964 283,646 324,087 153,462 328,545
NET ASSETS:
Beginning of year -- 633,051 1,269,888 674,398 272,941 580,350
-------- -------- ---------- -------- -------- --------
End of year $189,427 $908,015 $1,553,534 $998,485 $426,403 $908,895
======== ======== ========== ======== ======== ========
Undistributed net investment
income at end of year $ 939 $ 2,013 $ 13,414 $ 432 $ 893 $ 59
======== ======== ========== ======== ======== ========
<FN>
- --------------
* Amount represents less than $500.
** The REIT Fund commenced operations on March 1, 2003.
See Notes to Financial Statements.
88
U.S.
SMALL CAP INTERNATIONAL SHORT TERM GOVERNMENT
STOCK GROWTH INCOME SECURITIES INCOME
FUND FUND FUND FUND FUND
-------- -------- -------- -------- --------
Net investment income/(loss) $ (1,131) $ 2,540 $ 6,961 $ 35,146 $ 51,298
Net realized gain/(loss) on
investment transactions (39,625) (12,285) (120) 3,661 (554)
Net change in unrealized
appreciation/depreciation
of investments 198,438 73,387 3,462 (22,244) 34,433
-------- -------- -------- ---------- ----------
Net increase in net assets
resulting from operations 157,682 63,642 10,303 16,563 85,177
Distributions to shareholders from:
Net investment income:
Class A Shares -- (132) (1,634) (9,254) (8,813)
Class B Shares -- -- (1,127) (11,697) (9,963)
Class C Shares -- --* (365) (645) (702)
Class I Shares -- (2,398) (4,377) (23,771) (37,421)
Net realized gains on investments:
Class A Shares -- -- -- -- --
Class B Shares -- -- -- -- --
Class C Shares -- -- -- -- --
Class I Shares -- -- -- -- --
Net increase/(decrease) in net assets
from Fund share transactions:
Class A Shares 8,514 (33) 43,313 (13,689) 18,854
Class B Shares (3,193) (1,504) 19,193 (11,451) 47,302
Class C Shares 246 24 12,002 2,282 7,310
Class I Shares 92,786 77,066 38,527 306,496 172,935
Redemption fees -- 128 -- -- --
-------- -------- -------- ---------- ----------
Net increase/(decrease) in net assets 256,035 136,793 115,835 254,834 274,679
NET ASSETS:
Beginning of year 180,911 211,240 147,681 845,208 767,784
-------- -------- -------- ---------- ----------
End of year $436,946 $348,033 $263,516 $1,100,042 $1,042,463
======== ======== ======== ========== ==========
Undistributed net investment
income at end of year $ -- $ 4,050 $ 18 $ 530 $ 883
======== ======== ======== ========== ==========
CALIFORNIA
INSURED
HIGH TAX-EXEMPT CALIFORNIA INTERMEDIATE
YIELD BOND MUNICIPAL MUNICIPAL
FUND FUND FUND FUND
-------- -------- -------- --------
Net investment income/(loss) $ 36,042 $ 10,797 $ 21,643 $ 4,981
Net realized gain/(loss) on
investment transactions (16,228) 3,451 (585) 2,643
Net change in unrealized
appreciation/depreciation
of investments 88,798 (1,438) (2,957) (1,578)
-------- -------- -------- --------
Net increase in net assets
resulting from operations 108,612 12,810 18,101 6,046
Distributions to shareholders from:
Net investment income:
Class A Share (2,848) (9,009) (11,448) (2,332)
Class B Shares (5,361) (1,677) (9,904) (2,389)
Class C Shares (926) (117) (299) (256)
Class I Shares (30,363) -- -- --
Net realized gains on investments:
Class A Shares -- (1,785) (1,820) (290)
Class B Shares -- (397) (1,892) (455)
Class C Shares -- (21) (45) (43)
Class I Shares -- -- -- --
Net increase/(decrease) in net assets
from Fund share transactions:
Class A Shares 30,461 (6,143) (30,048) 18,113
Class B Shares 29,384 (2,166) (36,607) 3,952
Class C Shares 20,399 1,955 1,689 2,355
Class I Shares 127,185 -- -- --
Redemption fees -- -- -- --
-------- -------- -------- --------
Net increase/(decrease) in net assets 276,543 (6,550) (72,273) 24,701
NET ASSETS:
Beginning of year 305,061 263,376 588,422 154,295
-------- -------- -------- --------
End of year $581,604 $256,826 $516,149 $178,996
======== ======== ======== ========
Undistributed net investment
income at end of year $ 617 $ 119 $ 39 $ 62
======== ======== ======== ========
See Notes to Financial Statements.
89
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
WM GROUP OF FUNDS
FOR THE YEAR ENDED OCTOBER 31, 2002
(IN THOUSANDS)
EQUITY GROWTH & WEST COAST MID CAP SMALL CAP
INCOME INCOME EQUITY STOCK GROWTH STOCK
FUND FUND FUND FUND FUND FUND
-------- ---------- ---------- -------- ---------- ---------
Net investment income/(loss) $ 17,795 $ 12,332 $ 60 $ 617 $ (4,112) $ (1,964)
Net realized gain/(loss) on
investment transactions (3,235) (32,166) (12,410) (2,402) (150,465) (26,327)
Net increase from payments
by a related party -- -- -- -- 3,388 --
Net change in unrealized
appreciation/depreciation
of investments (100,837) (213,212) (111,616) (14,762) (26,852) (61,874)
--------- ---------- --------- -------- --------- --------
Net increase/(decrease) in net
assets resulting from operations (86,277) (233,046) (123,966) (16,547) (178,041) (90,165)
Distributions to shareholders from:
Net investment income:
Class A Shares (5,411) (698) (1,178) -- -- --
Class B Shares (1,385) (6) (3) -- -- --
Class C Shares (19) -- -- -- -- --
Class I Shares (9,061) (1,825) (1,122) (398) -- --
Net realized gains on investments:
Class A Shares (4,485) (8,852) (15,119) (232) -- (4,663)
Class B Shares (1,484) (3,028) (4,226) (399) -- (2,251)
Class I Shares (5,461) (12,468) (6,308) (8,297) -- (9,676)
Net increase/(decrease) in net assets
from Fund share transactions:
Class A Shares 22,373 16,629 35,944 25,381 (22,991) 5,234
Class B Shares 29,568 (29,887) 19,420 4,606 (41,119) (2,319)
Class C Shares 2,168 307 1,683 68 227 107
Class I Shares 160,079 27,738 56,100 32,272 246,627 54,574
Redemption Fee -- -- -- -- -- --
--------- ---------- --------- -------- --------- --------
Net increase/(decrease) in net assets 100,605 (245,136) (38,775) 36,454 4,703 (49,159)
NET ASSETS:
Beginning of year 532,446 1,515,024 713,173 236,487 575,647 230,070
--------- ---------- --------- -------- --------- --------
End of year $ 633,051 $1,269,888 $ 674,398 $272,941 $ 580,350 $180,911
========= ========== ========= ======== ========= ========
Undistributed net investment
income at end of year $ 2,210 $ 10,717 $ -- $ 607 $ 171 $ --
========= ========== ========= ======== ========= ========
<FN>
- --------------
* Amount represents less than $500.
See Notes to Financial Statements.
90
U.S.
INTERNATIONAL SHORT TERM GOVERNMENT
GROWTH INCOME SECURITIES INCOME
FUND FUND FUND FUND
-------- -------- -------- --------
Net investment income/(loss) $ 727 $ 7,976 $ 34,494 $ 44,917
Net realized gain/(loss) on
investment transactions (15,074) (1,259) 1,842 (3,030)
Net increase from payments
by a related party -- -- -- --
Net change in unrealized
appreciation/depreciation
of investments (9,475) (2,355) 4,047 (15,640)
-------- -------- -------- --------
Net increase/(decrease) in net
assets resulting from operations (23,822) 4,362 40,383 26,247
Distributions to shareholders from:
Net investment income:
Class A Shares (171) (1,101) (9,231) (8,126)
Class B Shares (13) (517) (7,926) (5,953)
Class C Shares --* (36) (105) (123)
Class I Shares (3,045) (6,425) (20,353) (33,115)
Net realized gains on investments:
Class A Shares -- -- -- --
Class B Shares -- -- -- --
Class I Shares -- -- -- --
Net increase/(decrease) in net assets
from Fund share transactions:
Class A Shares 7,270 9,725 22,450 14,089
Class B Shares (1,743) 18,332 142,263 72,825
Class C Shares 62 5,774 11,564 7,757
Class I Shares 83,906 (18,667) 62,305 113,204
Redemption Fee 102 -- -- --
-------- -------- -------- --------
Net increase/(decrease) in net assets 62,546 11,447 241,350 186,805
NET ASSETS:
Beginning of year 148,694 136,234 603,858 580,979
-------- -------- -------- --------
End of year $211,240 $147,681 $845,208 $767,784
======== ======== ======== ========
Undistributed net investment
income at end of year $ 2,046 $ 66 $ 648 $ 776
======== ======== ======== ========
CALIFORNIA
INSURED
HIGH TAX-EXEMPT CALIFORNIA INTERMEDIATE
YIELD BOND MUNICIPAL MUNICIPAL
FUND FUND FUND FUND
-------- -------- -------- --------
Net investment income/(loss) $ 29,730 $ 11,441 $ 22,437 $ 3,727
Net realized gain/(loss) on
investment transactions (16,272) 2,372 8,618 920
Net increase from payments
by a related party -- -- -- --
Net change in unrealized
appreciation/depreciation
of investments (18,545) (1,504) (8,063) 770
-------- -------- -------- --------
Net increase/(decrease) in net
assets resulting from operations (5,087) 12,309 22,992 5,417
Distributions to shareholders from:
Net investment income:
Class A Shares (1,393) (9,579) (12,527) (1,696)
Class B Shares (4,214) (1,696) (9,589) (1,928)
Class C Shares (109) (29) (75) (59)
Class I Shares (27,972) -- -- --
Net realized gains on investments:
Class A Shares -- (327) -- (205)
Class B Shares -- (68) -- (270)
Class I Shares -- -- -- --
Net increase/(decrease) in net assets
from Fund share transactions:
Class A Shares 6,184 (6,692) (5,115) 16,783
Class B Shares 13,702 3,232 57,411 36,828
Class C Shares 2,819 2,365 6,599 7,905
Class I Shares 75,320 -- -- --
Redemption Fee -- -- -- --
-------- -------- -------- --------
Net increase/(decrease) in net assets 59,250 (485) 59,696 62,775
NET ASSETS:
Beginning of year 245,811 263,861 528,726 91,520
-------- -------- -------- --------
End of year $305,061 $263,376 $588,422 $154,295
======== ======== ======== ========
Undistributed net investment
income at end of year $ 1 $ 50 $ 52 $ 61
======== ======== ======== ========
See Notes to Financial Statements.
91
STATEMENTS OF CHANGES IN NET ASSETS -- CAPITAL STOCK ACTIVITY
WM GROUP OF FUNDS
(IN THOUSANDS)
WEST COAST EQUITY
REIT FUND** EQUITY INCOME FUND GROWTH & INCOME FUND FUND
------------ ----------------------- ----------------------- -----------------------
PERIOD ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
10/31/03 10/31/03 10/31/02 10/31/03 10/31/02 10/31/03 10/31/02
------------ ---------- ---------- ---------- ---------- ---------- ----------
AMOUNT
CLASS A:
Sold $ 2,955 $ 56,481 $ 53,362 $ 66,365 $ 115,320 $ 74,984 $ 87,171
Issued as reinvestment
of dividends 22 4,956 9,388 4,315 9,270 -- 15,956
Redeemed (106) (36,625) (40,377) (83,779) (107,961) (61,975) (67,183)
-------- -------- -------- -------- --------- -------- --------
Net increase/(decrease) $ 2,871 $ 24,812 $ 22,373 $(13,099) $ 16,629 $ 13,009 $ 35,944
======== ======== ======== ======== ========= ======== ========
CLASS B:
Sold $ 2,702 $ 26,991 $ 55,360 $ 10,310 $ 18,457 $ 19,122 $ 48,734
Issued as reinvestment
of dividends 15 1,258 2,784 -- 2,982 -- 4,129
Redeemed (181) (24,063) (28,576) (36,200) (51,326) (31,005) (33,443)
-------- -------- -------- -------- --------- -------- --------
Net increase/(decrease) $ 2,536 $ 4,186 $ 29,568 $(25,890) $ (29,887) $(11,883) $ 19,420
======== ======== ======== ======== ========= ======== ========
CLASS C:
Sold $ 1,369 $ 4,653 $ 2,982 $ 650 $ 321 $ 2,289 $ 1,861
Issued as reinvestment
of dividends 6 36 17 2 -- -- --
Redeemed (152) (1,074) (831) (153) (14) (662) (178)
-------- -------- -------- -------- --------- -------- --------
Net increase $ 1,223 $ 3,615 $ 2,168 $ 499 $ 307 $ 1,627 $ 1,683
======== ======== ======== ======== ========= ======== ========
CLASS I:
Sold $149,045 $129,517 $155,553 $200,685 $ 163,737 $ 76,832 $ 50,593
Issued as reinvestment
of dividends 2,428 10,743 14,523 8,955 14,293 -- 7,431
Redeemed (55) (39,142) (9,997) (92,750) (150,292) (3,286) (1,924)
-------- -------- -------- -------- --------- -------- --------
Net increase $151,418 $101,118 $160,079 $116,890 $ 27,738 $ 73,546 $ 56,100
======== ======== ======== ======== ========= ======== ========
SHARES
CLASS A:
Sold 261 4,099 3,649 3,449 5,597 2,844 3,024
Issued as reinvestment
of dividends 2 365 633 232 398 -- 518
Redeemed (9) (2,707) (2,905) (4,358) (5,310) (2,401) (2,493)
-------- -------- -------- -------- --------- -------- --------
Net increase/(decrease) 254 1,757 1,377 (677) 685 443 1,049
======== ======== ======== ======== ========= ======== ========
CLASS B:
Sold 241 1,956 3,738 545 878 780 1,809
Issued as reinvestment
of dividends 1 93 188 -- 132 -- 146
Redeemed (16) (1,791) (2,058) (1,942) (2,642) (1,290) (1,356)
-------- -------- -------- -------- --------- -------- --------
Net increase/(decrease) 226 258 1,868 (1,397) (1,632) (510) 599
======== ======== ======== ======== ========= ======== ========
CLASS C:
Sold 118 322 202 33 16 87 70
Issued as reinvestment
of dividends 1 3 1 --* -- -- --
Redeemed (13) (76) (62) (8) (1) (26) (8)
-------- -------- -------- -------- --------- -------- --------
Net increase 106 249 141 25 15 61 62
======== ======== ======== ======== ========= ======== ========
CLASS I:
Sold 14,399 9,118 10,296 9,825 8,139 2,740 1,948
Issued as reinvestment
of dividends 209 789 988 480 613 -- 240
Redeemed (5) (3,141) (778) (5,242) (6,846) (139) (84)
-------- -------- -------- -------- --------- -------- --------
Net increase 14,603 6,766 10,506 5,063 1,906 2,601 2,104
======== ======== ======== ======== ========= ======== ========
<FN>
- --------
* Amount represents less than $500.
**The REIT Fund commenced operations on March 1, 2003.
See Notes to Financial Statements.
92
MID CAP SMALL CAP INTERNATIONAL
STOCK FUND GROWTH FUND STOCK FUND GROWTH FUND
----------------------- ----------------------- ----------------------- -----------------------
YEAR ENDED YEAR ENDED 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 10/31/03 10/31/02
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
AMOUNT
CLASS A:
Sold $ 13,942 $ 29,821 $ 22,793 $ 17,591 $ 24,009 $ 21,456 $ 24,133 $ 46,858
Issued as reinvestment
of dividends -- 225 -- -- -- 4,574 129 167
Redeemed (10,519) (4,665) (21,196) (40,582) (15,495) (20,796) (24,295) (39,755)
-------- -------- -------- -------- -------- -------- -------- --------
Net increase/(decrease) $ 3,423 $ 25,381 $ 1,597 $(22,991) $ 8,514 $ 5,234 $ (33) $ 7,270
======== ======== ======== ======== ======== ======== ======== ========
CLASS B:
Sold $ 4,263 $ 7,790 $ 8,554 $ 11,993 $ 2,742 $ 6,032 $ 498 $ 401
Issued as reinvestment
of dividends -- 394 -- -- -- 2,063 -- 13
Redeemed (3,166) (3,578) (27,900) (53,112) (5,935) (10,414) (2,002) (2,157)
-------- -------- -------- -------- -------- -------- -------- --------
Net increase/(decrease) $ 1,097 $ 4,606 $(19,346) $(41,119) $ (3,193) $ (2,319) $ (1,504) $ (1,743)
======== ======== ======== ======== ======== ======== ======== ========
CLASS C:
Sold $ 535 $ 91 $ 868 $ 312 $ 253 $ 107 $ 46 $ 65
Issued as reinvestment
of dividends -- -- -- -- -- -- --* --
Redeemed (102) (23) (584) (85) (7) --* (22) (3)
-------- -------- -------- -------- -------- -------- -------- --------
Net increase $ 433 $ 68 $ 284 $ 227 $ 246 $ 107 $ 24 $ 62
======== ======== ======== ======== ======== ======== ======== ========
CLASS I:
Sold $ 89,217 $ 42,955 $221,664 $258,202 $ 94,896 $ 45,855 $ 75,087 $ 89,935
Issued as reinvestment
of dividends 731 8,695 -- -- -- 9,676 2,398 3,045
Redeemed (13,323) (19,378) (14,039) (11,575) (2,110) (957) (419) (9,074)
-------- -------- -------- -------- -------- -------- -------- --------
Net increase $ 76,625 $ 32,272 $207,625 $246,627 $ 92,786 $ 54,574 $ 77,066 $ 83,906
======== ======== ======== ======== ======== ======== ======== ========
SHARES
CLASS A:
Sold 1,031 2,175 1,869 1,317 2,424 2,052 3,439 6,084
Issued as reinvestment
of dividends -- 16 -- -- -- 307 19 22
Redeemed (790) (367) (1,764) (3,024) (1,609) (1,993) (3,460) (5,138)
-------- -------- -------- -------- -------- -------- -------- --------
Net increase/(decrease) 241 1,824 105 (1,707) 815 366 (2) 968
======== ======== ======== ======== ======== ======== ======== ========
CLASS B:
Sold 326 568 765 899 284 510 71 53
Issued as reinvestment
of dividends -- 29 -- -- -- 152 -- 2
Redeemed (245) (274) (2,551) (4,346) (700) (1,093) (298) (304)
-------- -------- -------- -------- -------- -------- -------- --------
Net increase/(decrease) 81 323 (1,786) (3,447) (416) (431) (227) (249)
======== ======== ======== ======== ======== ======== ======== ========
CLASS C:
Sold 40 7 77 25 25 9 6 8
Issued as reinvestment
of dividends -- -- -- -- -- -- --* --
Redeemed (7) (2) (51) (6) (1) --* (3) --
-------- -------- -------- -------- -------- -------- -------- --------
Net increase 33 5 26 19 24 9 3 8
======== ======== ======== ======== ======== ======== ======== ========
CLASS I:
Sold 6,369 3,190 17,849 18,248 9,921 4,496 10,121 11,892
Issued as reinvestment
of dividends 57 631 -- -- -- 642 353 388
Redeemed (1,069) (1,517) (1,249) (969) (201) (126) (62) (1,292)
-------- -------- -------- -------- -------- -------- -------- --------
Net increase 5,357 2,304 16,600 17,279 9,720 5,012 10,412 10,988
======== ======== ======== ======== ======== ======== ======== ========
See Notes to Financial Statements.
93
STATEMENTS OF CHANGES IN NET ASSETS -- CAPITAL STOCK ACTIVITY (CONTINUED)
WM GROUP OF FUNDS
(IN THOUSANDS)
SHORT TERM U.S. GOVERNMENT
INCOME FUND SECURITIES FUND INCOME FUND
----------------------- ----------------------- -----------------------
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 $ 71,736 $ 14,889 $ 69,243 $ 65,564 $ 60,366 $ 35,639
Issued as reinvestment
of dividends 1,216 852 6,886 6,479 5,763 5,276
Redeemed (29,639) (6,016) (89,818) (49,593) (47,275) (26,826)
-------- -------- --------- -------- -------- --------
Net increase/(decrease) $ 43,313 $ 9,725 $ (13,689) $ 22,450 $ 18,854 $ 14,089
======== ======== ========= ======== ======== ========
CLASS B:
Sold $ 36,739 $ 22,423 $ 113,475 $180,691 $110,302 $ 95,785
Issued as reinvestment
of dividends 961 439 9,525 6,358 6,133 3,670
Redeemed (18,507) (4,530) (134,451) (44,786) (69,133) (26,630)
-------- -------- --------- -------- -------- --------
Net increase/(decrease) $ 19,193 $ 18,332 $ (11,451) $142,263 $ 47,302 $ 72,825
======== ======== ========= ======== ======== ========
CLASS C:
Sold $ 20,332 $ 6,070 $ 18,299 $ 12,094 $ 15,209 $ 8,129
Issued as reinvestment
of dividends 297 28 498 88 493 86
Redeemed (8,627) (324) (16,515) (618) (8,392) (458)
-------- -------- --------- -------- -------- --------
Net increase $ 12,002 $ 5,774 $ 2,282 $ 11,564 $ 7,310 $ 7,757
======== ======== ========= ======== ======== ========
CLASS I:
Sold $ 43,564 $ 37,494 $ 288,492 $120,973 $167,205 $175,985
Issued as reinvestment
of dividends 4,377 6,424 23,771 20,353 37,421 33,115
Redeemed (9,414) (62,585) (5,767) (79,021) (31,691) (95,897)
-------- -------- --------- -------- -------- --------
Net increase/(decrease) $ 38,527 $(18,667) $ 306,496 $ 62,305 $172,935 $113,203
======== ======== ========= ======== ======== ========
SHARES
CLASS A:
Sold 29,949 6,307 6,234 5,912 6,421 3,917
Issued as reinvestment
of dividends 508 361 622 587 617 579
Redeemed (12,377) (2,548) (8,146) (4,501) (5,074) (2,944)
-------- -------- --------- -------- -------- --------
Net increase/(decrease) 18,080 4,120 (1,290) 1,998 1,964 1,552
======== ======== ========= ======== ======== ========
CLASS B:
Sold 15,353 9,497 10,189 16,314 11,762 10,494
Issued as reinvestment
of dividends 402 186 861 576 654 402
Redeemed (7,735) (1,923) (12,238) (4,064) (7,403) (2,921)
-------- -------- --------- -------- -------- --------
Net increase/(decrease) 8,020 7,760 (1,188) 12,826 5,013 7,975
======== ======== ========= ======== ======== ========
CLASS C:
Sold 8,484 2,575 1,646 1,088 1,623 894
Issued as reinvestment
of dividends 124 12 45 8 53 9
Redeemed (3,601) (137) (1,503) (55) (899) (50)
-------- -------- --------- -------- -------- --------
Net increase 5,007 2,450 188 1,041 777 853
======== ======== ========= ======== ======== ========
CLASS I:
Sold 18,183 15,886 26,164 10,991 17,970 19,316
Issued as reinvestment
of dividends 1,829 2,720 2,152 1,844 4,001 3,630
Redeemed (3,958) (26,571) (518) (7,066) (3,401) (10,524)
-------- -------- --------- -------- -------- --------
Net increase/(decrease) 16,054 (7,965) 27,798 5,769 18,570 12,422
======== ======== ========= ======== ======== ========
See Notes to Financial Statements.
94
CALIFORNIA INSURED
CALIFORNIA INTERMEDIATE
HIGH YIELD FUND TAX-EXEMPT BOND FUND MUNICIPAL FUND MUNICIPAL FUND
----------------------- ----------------------- ----------------------- -----------------------
YEAR ENDED YEAR ENDED 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 10/31/03 10/31/02
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
AMOUNT
CLASS A:
Sold $ 82,999 $ 15,329 $ 37,452 $ 19,237 $ 40,491 $ 46,522 $ 57,345 $ 30,316
Issued as reinvestment
of dividends 1,486 613 7,653 6,867 8,684 8,705 1,916 1,474
Redeemed (54,024) (9,758) (51,248) (32,796) (79,223) (60,342) (41,148) (15,007)
-------- -------- -------- -------- -------- -------- -------- --------
Net increase/(decrease) $ 30,461 $ 6,184 $ (6,143) $ (6,692) $(30,048) $ (5,115) $ 18,113 $ 16,783
======== ======== ========= ======== ======== ======== ======== ========
CLASS B:
Sold $ 45,952 $ 25,105 $ 12,667 $ 11,843 $ 32,825 $ 88,442 $ 32,897 $ 47,458
Issued as reinvestment
of dividends 2,344 1,712 1,402 1,132 8,456 7,084 2,258 1,697
Redeemed (18,912) (13,115) (16,235) (9,743) (77,888) (38,115) (31,203) (12,327)
-------- -------- -------- -------- -------- -------- -------- --------
Net increase/(decrease) $ 29,384 $ 13,702 $ (2,166) $ 3,232 $(36,607) $ 57,411 $ 3,952 $ 36,828
======== ======== ========= ======== ======== ======== ======== ========
CLASS C:
Sold $ 22,849 $ 3,154 $ 3,001 $ 2,384 $ 5,866 $ 6,968 $ 7,940 $ 8,829
Issued as reinvestment
of dividends 494 60 118 26 279 62 238 50
Redeemed (2,944) (395) (1,164) (45) (4,456) (431) (5,823) (974)
-------- -------- -------- -------- -------- -------- -------- --------
Net increase $ 20,399 $ 2,819 $ 1,955 $ 2,365 $ 1,689 $ 6,599 $ 2,355 $ 7,905
======== ======== ========= ======== ======== ======== ======== ========
CLASS I:
Sold $107,483 $ 83,276 -- -- -- -- -- --
Issued as reinvestment
of dividends 30,363 27,972 -- -- -- -- -- --
Redeemed (10,661) (35,928) -- -- -- -- -- --
-------- --------
Net increase/(decrease) $127,185 $ 75,320 -- -- -- -- -- --
======== ========
SHARES
CLASS A:
Sold 11,040 2,135 4,702 2,454 3,569 4,149 5,143 2,759
Issued as reinvestment
of dividends 198 80 962 877 768 776 172 135
Redeemed (7,111) (1,385) (6,452) (4,181) (7,049) (5,384) (3,713) (1,385)
-------- -------- -------- -------- -------- -------- -------- --------
Net increase/(decrease) 4,127 830 (788) (850) (2,712) (459) 1,602 1,509
======== ======== ========= ======== ======== ======== ======== ========
CLASS B:
Sold 6,182 3,494 1,587 1,506 2,891 7,879 2,949 4,328
Issued as reinvestment
of dividends 313 219 176 144 748 631 203 155
Redeemed (2,527) (1,845) (2,047) (1,245) (6,933) (3,405) (2,814) (1,125)
-------- -------- -------- -------- -------- -------- -------- --------
Net increase/(decrease) 3,968 1,868 (284) 405 (3,294) 5,105 338 3,358
======== ======== ========= ======== ======== ======== ======== ========
CLASS C:
Sold 3,042 430 375 304 516 620 712 800
Issued as reinvestment
of dividends 65 13 14 3 25 5 21 4
Redeemed (389) (59) (146) (6) (398) (38) (524) (87)
-------- -------- -------- -------- -------- -------- -------- --------
Net increase 2,718 384 243 301 143 587 209 717
======== ======== ========= ======== ======== ======== ======== ========
CLASS I:
Sold 14,436 11,648 -- -- -- -- -- --
Issued as reinvestment
of dividends 4,104 3,626 -- -- -- -- -- --
Redeemed (1,513) (5,403) -- -- -- -- -- --
-------- --------
Net increase/(decrease) 17,027 9,871 -- -- -- -- -- --
======== ========
See Notes to Financial Statements.
95
FINANCIAL HIGHLIGHTS
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
INCOME FROM INVESTMENT OPERATIONS LESS DISTRIBUTIONS
---------------------------------------- ---------------------------------------
DISTRIBUTIONS
NET ASSET NET REALIZED DIVIDENDS FROM NET NET ASSET
VALUE, NET AND UNREALIZED TOTAL FROM FROM NET REALIZED VALUE,
BEGINNING INVESTMENT GAIN/(LOSS) ON INVESTMENT INVESTMENT CAPITAL TOTAL END OF
OF PERIOD INCOME INVESTMENTS OPERATIONS INCOME GAINS DISTRIBUTIONS PERIOD
--------- ---------- -------------- ---------- ---------- ------------- ------------- ---------
REIT FUND
CLASS A
10/31/03(3) $10.00 $0.28(6) $ 2.35 $ 2.63 $(0.17) $ -- $(0.17) $12.46
CLASS B
10/31/03(3) 10.00 0.22(6) 2.35 2.57 (0.14) -- (0.14) 12.43
CLASS C
10/31/03(3) 10.00 0.23(6) 2.35 2.58 (0.15) -- (0.15) 12.43
CLASS I
10/31/03(3) 10.00 0.34(6) 2.32 2.66 (0.19) -- (0.19) 12.47
EQUITY INCOME FUND
CLASS A
10/31/03 $12.73 $0.33(6) $ 2.73 $ 3.06 $(0.33) $ -- $(0.33) $15.46
10/31/02 14.85 0.40(6) (1.85) (1.45) (0.35) (0.32) (0.67) 12.73
10/31/01 15.59 0.48(6) 0.37 0.85 (0.46) (1.13) (1.59) 14.85
10/31/00 14.60 0.49(6) 1.42 1.91 (0.48) (0.44) (0.92) 15.59
10/31/99 14.02 0.41 0.61 1.02 (0.40) (0.04) (0.44) 14.60
CLASS B
10/31/03 12.65 0.20(6) 2.71 2.91 (0.20) -- (0.20) 15.36
10/31/02 14.78 0.27(6) (1.85) (1.58) (0.23) (0.32) (0.55) 12.65
10/31/01 15.52 0.35(6) 0.38 0.73 (0.34) (1.13) (1.47) 14.78
10/31/00 14.53 0.37(6) 1.42 1.79 (0.36) (0.44) (0.80) 15.52
10/31/99 13.96 0.27 0.63 0.90 (0.29) (0.04) (0.33) 14.53
CLASS C
10/31/03 12.62 0.22(6) 2.68 2.90 (0.23) -- (0.23) 15.29
10/31/02(4) 15.09 0.18(6) (2.43) (2.25) (0.22) -- (0.22) 12.62
CLASS I
10/31/03 12.73 0.38(6) 2.72 3.10 (0.38) -- (0.38) 15.45
10/31/02 14.85 0.45(6) (1.85) (1.40) (0.40) (0.32) (0.72) 12.73
10/31/01 15.59 0.54(6) 0.35 0.89 (0.50) (1.13) (1.63) 14.85
10/31/00(5) 14.47 0.11(6) 1.13 1.24 (0.12) -- (0.12) 15.59
See Notes to Financial Highlights on page 112.
See Notes to Financial Statements.
96
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA
-----------------------------------------------------------------------------------------------
RATIO OF OPERATING
EXPENSES TO AVERAGE
NET ASSETS WITHOUT
FEE WAIVERS, EXPENSES
RATIO OF RATIO OF REIMBURSED AND/OR FEES
NET ASSETS, OPERATING NET INVESTMENT REDUCED BY CREDITS
END OF PERIOD EXPENSES TO INCOME TO AVERAGE PORTFOLIO ALLOWED BY THE
TOTAL RETURN(1) (IN 000'S) AVERAGE NET ASSETS NET ASSETS TURNOVER RATE CUSTODIAN(2)
--------------- ------------- ------------------ ---------------- ------------- ----------------------
REIT FUND
CLASS A
10/31/03(3) 26.43% $ 3,159 1.41%(7) 3.60%(7) 7% 1.41%(7)
CLASS B
10/31/03(3) 25.86% 2,808 2.13%(7) 2.88%(7) 7% 2.13%(7)
CLASS C
10/31/03(3) 25.88% 1,322 2.06%(7) 2.95%(7) 7% 2.06%(7)
CLASS I
10/31/03(3) 26.76% 182,138 0.92%(7) 4.09%(7) 7% 0.92%(7)
EQUITY INCOME FUND
CLASS A
10/31/03 24.43% $268,489 0.95% 2.43% 18% 0.95%
10/31/02 (10.35)% 198,756 0.97% 2.77% 16% 0.97%
10/31/01 5.92% 211,445 0.96% 3.17% 17% 0.97%
10/31/00 13.73% 191,850 1.05% 3.39% 84% 1.05%
10/31/99 7.36% 241,746 1.05% 2.61% 45% 1.05%
CLASS B
10/31/03 23.19% 103,888 1.89% 1.49% 18% 1.89%
10/31/02 (11.20)% 82,330 1.88% 1.86% 16% 1.88%
10/31/01 5.09% 68,549 1.81% 2.32% 17% 1.82%
10/31/00 12.84% 47,386 1.85% 2.59% 84% 1.85%
10/31/99 6.46% 75,485 1.84% 1.82% 45% 1.84%
CLASS C
10/31/03 23.29% 5,973 1.78% 1.60% 18% 1.78%
10/31/02(4) (15.07)% 1,780 1.80%(7) 1.94%(7) 16% 1.80%(7)
CLASS I
10/31/03 24.77% 529,665 0.61% 2.77% 18% 0.61%
10/31/02 (10.04)% 350,185 0.63% 3.11% 16% 0.63%
10/31/01 6.26% 252,453 0.64% 3.49% 17% 0.65%
10/31/00(5) 8.63% 96,436 0.72%(7) 3.72%(7) 84% 0.72%(7)
See Notes to Financial Highlights on page 112.
See Notes to Financial Statements.
97
FINANCIAL HIGHLIGHTS
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
INCOME FROM INVESTMENT OPERATIONS LESS DISTRIBUTIONS
---------------------------------------- ---------------------------------------
DISTRIBUTIONS
NET ASSET NET NET REALIZED DIVIDENDS FROM NET NET ASSET
VALUE, INVESTMENT AND UNREALIZED TOTAL FROM FROM NET REALIZED VALUE,
BEGINNING INCOME/ GAIN/(LOSS) ON INVESTMENT INVESTMENT CAPITAL TOTAL END OF
OF PERIOD (LOSS) INVESTMENTS OPERATIONS INCOME GAINS DISTRIBUTIONS PERIOD
--------- ---------- -------------- ---------- ---------- ------------- ------------- ---------
GROWTH &
INCOME FUND
CLASS A
10/31/03 $18.44 $ 0.22(6) $ 3.11 $ 3.33 $(0.18) $ -- $(0.18) $21.59
10/31/02 22.34 0.17(6) (3.68) (3.51) (0.03) (0.36) (0.39) 18.44
10/31/01 27.11 0.10 (3.63) (3.53) (0.07) (1.17) (1.24) 22.34
10/31/00 24.61 0.06 3.30 3.36 (0.03) (0.83) (0.86) 27.11
10/31/99 19.99 0.09(6) 4.62 4.71 (0.09) (0.00)(9) (0.09) 24.61
CLASS B
10/31/03 17.72 0.02(6) 3.00 3.02 -- -- -- 20.74
10/31/02 21.67 (0.04)(6) (3.55) (3.59) (0.00)(9) (0.36) (0.36) 17.72
10/31/01 26.49 (0.13) (3.52) (3.65) -- (1.17) (1.17) 21.67
10/31/00 24.24 (0.17) 3.25 3.08 -- (0.83) (0.83) 26.49
10/31/99 19.77 (0.09)(6) 4.56 4.47 -- -- -- 24.24
CLASS C
10/31/03 17.73 0.03(6) 2.98 3.01 (0.12) -- (0.12) 20.62
10/31/02(4) 21.36 (0.01)(6) (3.62) (3.63) -- -- -- 17.73
CLASS I
10/31/03 18.52 0.29(6) 3.12 3.41 (0.25) -- (0.25) 21.68
10/31/02 22.39 0.24(6) (3.70) (3.46) (0.05) (0.36) (0.41) 18.52
10/31/01 27.16 0.18 (3.64) (3.46) (0.14) (1.17) (1.31) 22.39
10/31/00 24.65 0.14 3.31 3.45 (0.11) (0.83) (0.94) 27.16
10/31/99 20.03 0.16(6) 4.61 4.77 (0.15) (0.00)(9) (0.15) 24.65
WEST COAST
EQUITY FUND
CLASS A
10/31/03 $23.73 $ 0.04(6) $ 8.37 $ 8.41 $ -- $ -- $ -- $32.14
10/31/02 28.89 0.02(6) (4.09) (4.07) (0.07) (1.02) (1.09) 23.73
10/31/01 36.23 0.11 (2.35) (2.24) (0.03) (5.07) (5.10) 28.89
10/31/00 32.04 0.10(6) 8.22 8.32 -- (4.13) (4.13) 36.23
10/31/99 20.37 (0.05) 11.72 11.67 -- -- -- 32.04
CLASS B
10/31/03 21.73 (0.20)(6) 7.61 7.41 -- -- -- 29.14
10/31/02 26.71 (0.23)(6) (3.73) (3.96) (0.00)(9) (1.02) (1.02) 21.73
10/31/01 34.12 (0.15) (2.19) (2.34) -- (5.07) (5.07) 26.71
10/31/00 30.63 (0.19)(6) 7.81 7.62 -- (4.13) (4.13) 34.12
10/31/99 19.64 (0.25) 11.24 10.99 -- -- -- 30.63
CLASS C
10/31/03 21.74 (0.18)(6) 7.64 7.46 -- -- -- 29.20
10/31/02(4) 27.59 (0.14)(6) (5.71) (5.85) -- -- -- 21.74
CLASS I
10/31/03 23.83 0.13(6) 8.43 8.56 -- -- -- 32.39
10/31/02 29.00 0.12(6) (4.10) (3.98) (0.17) (1.02) (1.19) 23.83
10/31/01 36.34 0.20 (2.34) (2.14) (0.13) (5.07) (5.20) 29.00
10/31/00 32.04 0.22(6) 8.21 8.43 -- (4.13) (4.13) 36.34
10/31/99(8) 29.72 0.01 2.31 2.32 -- -- -- 32.04
See Notes to Financial Highlights on page 112.
See Notes to Financial Statements.
98
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA
-----------------------------------------------------------------------------------------------
RATIO OF OPERATING
EXPENSES TO AVERAGE
NET ASSETS WITHOUT
RATIO OF FEE WAIVERS, EXPENSES
RATIO OF NET INVESTMENT REIMBURSED AND/OR FEES
NET ASSETS, OPERATING INCOME/(LOSS) REDUCED BY CREDITS
END OF PERIOD EXPENSES TO TO AVERAGE PORTFOLIO ALLOWED BY THE
TOTAL RETURN(1) (IN 000'S) AVERAGE NET ASSETS NET ASSETS TURNOVER RATE CUSTODIAN(2)
--------------- ------------- ------------------ ---------------- ------------- ----------------------
GROWTH &
INCOME FUND
CLASS A
10/31/03 18.18% $541,707 0.93% 1.12% 17% 0.93%
10/31/02 (16.10)% 475,010 0.94% 0.79% 22% 0.94%
10/31/01 (13.40)% 560,226 0.92% 0.40% 35% 0.92%
10/31/00 13.95% 662,086 0.94% 0.21% 35% 0.94%
10/31/99 23.57% 705,835 1.00% 0.37% 47% 1.00%
CLASS B
10/31/03 16.99% 115,457 1.96% 0.09% 17% 1.96%
10/31/02 (16.94)% 123,423 1.91% (0.18)% 22% 1.91%
10/31/01 (14.20)% 186,247 1.82% (0.50)% 35% 1.82%
10/31/00 13.01% 242,611 1.78% (0.63)% 35% 1.78%
10/31/99 22.61% 233,216 1.76% (0.39)% 47% 1.84%
CLASS C
10/31/03 17.08% 823 1.89% 0.16% 17% 1.89%
10/31/02(4) (17.00)% 264 1.83%(7) (0.10)%(7) 22% 1.83%(7)
CLASS I
10/31/03 18.61% 895,547 0.59% 1.46% 17% 0.59%
10/31/02 (15.84)% 671,191 0.60% 1.13% 22% 0.60%
10/31/01 (13.12)% 768,550 0.58% 0.74% 35% 0.58%
10/31/00 14.35% 725,241 0.60% 0.55% 35% 0.60%
10/31/99 23.87% 461,629 0.67% 0.70% 47% 0.67%
WEST COAST
EQUITY FUND
CLASS A
10/31/03 35.44% $523,308 1.02% 0.14% 14% 1.02%
10/31/02 (14.94)% 375,821 1.05% 0.07% 16% 1.05%
10/31/01 (6.55)% 427,215 1.01% 0.38% 27% 1.01%
10/31/00 28.73% 442,253 1.02% 0.27% 42% 1.02%
10/31/99 57.29% 338,980 1.15% (0.21)% 41% 1.15%
CLASS B
10/31/03 34.10% 122,221 2.01% (0.85)% 14% 2.01%
10/31/02 (15.73)% 102,208 2.00% (0.88)% 16% 2.00%
10/31/01 (7.40)% 109,655 1.89% (0.50)% 27% 1.89%
10/31/00 27.67% 116,672 1.84% (0.55)% 42% 1.84%
10/31/99 55.96% 77,658 1.99% (1.05)% 41% 1.99%
CLASS C
10/31/03 34.27% 3,593 1.90% (0.74)% 14% 1.90%
10/31/02(4) (21.20)% 1,341 1.96%(7) (0.84)%(7) 16% 1.96%(7)
CLASS I
10/31/03 35.92% 349,363 0.67% 0.49% 14% 0.67%
10/31/02 (14.65)% 195,029 0.70% 0.42% 16% 0.70%
10/31/01 (6.22)% 176,303 0.68% 0.71% 27% 0.68%
10/31/00 29.11% 148,954 0.70% 0.59% 42% 0.70%
10/31/99(8) 7.81% 6,102 0.81%(7) 0.13%(7) 41% 0.81%(7)
See Notes to Financial Highlights on page 112.
See Notes to Financial Statements.
99
FINANCIAL HIGHLIGHTS
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
INCOME FROM INVESTMENT OPERATIONS LESS DISTRIBUTIONS
---------------------------------------- ---------------------------------------
DISTRIBUTIONS
NET ASSET NET NET REALIZED DIVIDENDS FROM NET NET ASSET
VALUE, INVESTMENT AND UNREALIZED TOTAL FROM FROM NET REALIZED VALUE,
BEGINNING INCOME/ GAIN/(LOSS) ON INVESTMENT INVESTMENT CAPITAL TOTAL END OF
OF PERIOD (LOSS) INVESTMENTS OPERATIONS INCOME GAINS DISTRIBUTIONS PERIOD
--------- ---------- -------------- ---------- ---------- ------------- ------------- ---------
MID CAP STOCK FUND
CLASS A
10/31/03 $12.39 $ 0.01(6) $ 2.94 $ 2.95 $ -- $ -- $ -- $15.34
10/31/02 13.50 (0.01)(6) (0.60) (0.61) -- (0.50) (0.50) 12.39
10/31/01 12.58 (0.03)(6) 1.00 0.97 -- (0.05) (0.05) 13.50
10/31/00(10) 10.00 (0.02)(6) 2.60 2.58 -- -- -- 12.58
CLASS B
10/31/03 12.09 (0.13)(6) 2.86 2.73 -- -- -- 14.82
10/31/02 13.31 (0.15)(6) (0.57) (0.72) -- (0.50) (0.50) 12.09
10/31/01 12.51 (0.15)(6) 1.00 0.85 -- (0.05) (0.05) 13.31
10/31/00(10) 10.00 (0.08)(6) 2.59 2.51 -- -- -- 12.51
CLASS C
10/31/03 12.10 (0.12)(6) 2.85 2.73 -- -- -- 14.83
10/31/02(4) 13.60 (0.10)(6) (1.40) (1.50) -- -- -- 12.10
CLASS I
10/31/03 12.51 0.06(6) 2.97 3.03 (0.04) -- (0.04) 15.50
10/31/02 13.59 0.04(6) (0.60) (0.56) (0.02) (0.50) (0.52) 12.51
10/31/01 12.62 0.04(6) 1.00 1.04 (0.02) (0.05) (0.07) 13.59
10/31/00(10) 10.00 0.02(6) 2.60 2.62 -- -- -- 12.62
GROWTH FUND
CLASS A
10/31/03 $11.47 $(0.08)(6) $ 2.32 $ 2.24 $ -- $ -- $ -- $13.71
10/31/02 15.23 (0.10)(6) (3.66) (3.76) -- -- -- 11.47
10/31/01 32.78 (0.09)(6) (13.13) (13.22) (0.20) (4.13) (4.33) 15.23
10/31/00 29.71 (0.14)(6) 7.04 6.90 -- (3.83) (3.83) 32.78
10/31/99 17.64 (0.21)(6) 14.11 13.90 -- (1.83) (1.83) 29.71
CLASS B
10/31/03 10.55 (0.18)(6) 2.12 1.94 -- -- -- 12.49
10/31/02 14.13 (0.21)(6) (3.37) (3.58) -- -- -- 10.55
10/31/01 30.78 (0.24)(6) (12.24) (12.48) (0.04) (4.13) (4.17) 14.13
10/31/00 28.29 (0.38)(6) 6.70 6.32 -- (3.83) (3.83) 30.78
10/31/99 16.99 (0.38)(6) 13.51 13.13 -- (1.83) (1.83) 28.29
CLASS C
10/31/03 10.56 (0.14)(6) 2.13 1.99 -- -- -- 12.55
10/31/02(4) 13.48 (0.11)(6) (2.81) (2.92) -- -- -- 10.56
CLASS I
10/31/03 11.74 0.00(6)(9) 2.39 2.39 -- -- -- 14.13
10/31/02 15.48 (0.01)(6) (3.73) (3.74) -- -- -- 11.74
10/31/01 33.23 0.02(6) (13.31) (13.29) (0.33) (4.13) (4.46) 15.48
10/31/00 29.96 0.01(6) 7.09 7.10 -- (3.83) (3.83) 33.23
10/31/99 17.76 (0.11)(6) 14.14 14.03 -- (1.83) (1.83) 29.96
See Notes to Financial Highlights on page 112.
See Notes to Financial Statements.
100
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA
-----------------------------------------------------------------------------------------------
RATIO OF OPERATING
EXPENSES TO AVERAGE
NET ASSETS WITHOUT
RATIO OF FEE WAIVERS, EXPENSES
RATIO OF NET INVESTMENT REIMBURSED AND/OR FEES
NET ASSETS, OPERATING INCOME/(LOSS) REDUCED BY CREDITS
END OF PERIOD EXPENSES TO TO AVERAGE PORTFOLIO ALLOWED BY THE
TOTAL RETURN(1) (IN 000'S) AVERAGE NET ASSETS NET ASSETS TURNOVER RATE CUSTODIAN(2)
--------------- ------------- ------------------ ---------------- ------------- ----------------------
MID CAP STOCK FUND
CLASS A
10/31/03 23.81% $ 38,676 1.16% 0.07% 28% 1.16%
10/31/02 (4.86)% 28,248 1.25% (0.10)% 27% 1.25%
10/31/01 7.71% 6,165 1.36% (0.25)% 33% 1.36%
10/31/00(10) 25.80% 2,451 1.40%(7) (0.29)%(7) 9% 1.40%(7)
CLASS B
10/31/03 22.50% 17,405 2.24% (1.01)% 28% 2.24%
10/31/02 (5.79)% 13,229 2.26% (1.11)% 27% 2.26%
10/31/01 6.79% 10,271 2.17% (1.06)% 33% 2.17%
10/31/00(10) 25.10% 3,778 2.16%(7) (1.05)%(7) 9% 2.16%(7)
CLASS C
10/31/03 22.56% 550 2.15% (0.92)% 28% 2.15%
10/31/02(4) (11.03)% 55 2.24%(7) (1.09)%(7) 27% 2.24%(7)
CLASS I
10/31/03 24.27% 369,772 0.81% 0.42% 28% 0.81%
10/31/02 (4.44)% 231,409 0.83% 0.32% 27% 0.83%
10/31/01 8.29% 220,052 0.81% 0.30% 33% 0.81%
10/31/00(10) 26.20% 176,653 0.88%(7) 0.23%(7) 9% 0.88%(7)
GROWTH FUND
CLASS A
10/31/03 19.53% $114,757 1.62% (0.66)% 71% 1.62%
10/31/02 (24.69)% 94,848 1.69% (0.74)% 170% 1.69%
10/31/01 (45.77)% 151,893 1.52% (0.43)% 99% 1.52%
10/31/00 24.21% 341,777 1.30% (0.39)% 92% 1.36%
10/31/99 84.96% 240,363 1.27% (0.84)% 119% 1.46%
CLASS B
10/31/03 18.39% 129,239 2.54% (1.58)% 71% 2.54%
10/31/02 (25.34)% 128,007 2.54% (1.59)% 170% 2.54%
10/31/01 (46.19)% 220,108 2.31% (1.22)% 99% 2.31%
10/31/00 23.28% 481,935 2.05% (1.14)% 92% 2.11%
10/31/99 83.57% 226,507 2.03% (1.60)% 119% 2.25%
CLASS C
10/31/03 18.85% 565 2.19% (1.23)% 71% 2.19%
10/31/02(4) (21.66)% 199 2.38%(7) (1.43)%(7) 170% 2.38%(7)
CLASS I
10/31/03 20.27% 664,334 0.92% 0.04% 71% 0.92%
10/31/02 (24.16)% 357,296 1.03% (0.08)% 170% 1.03%
10/31/01 (45.50)% 203,646 1.00% 0.09% 99% 1.00%
10/31/00 24.73% 399,028 0.90% 0.01% 92% 0.96%
10/31/99 85.13% 386,367 0.87% (0.44)% 119% 1.06%
See Notes to Financial Highlights on page 112.
See Notes to Financial Statements.
101
FINANCIAL HIGHLIGHTS
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
INCOME FROM INVESTMENT OPERATIONS LESS DISTRIBUTIONS
---------------------------------------- ---------------------------------------
DISTRIBUTIONS
NET ASSET NET NET REALIZED DIVIDENDS FROM NET NET ASSET
VALUE, INVESTMENT AND UNREALIZED TOTAL FROM FROM NET REALIZED VALUE,
BEGINNING INCOME/ GAIN/(LOSS) ON INVESTMENT INVESTMENT CAPITAL TOTAL REDEMPTION END OF
OF PERIOD (LOSS) INVESTMENTS OPERATIONS INCOME GAINS DISTRIBUTIONS FEES PERIOD
--------- ---------- -------------- ---------- ---------- ------------- ------------- ---------- ---------
SMALL CAP
STOCK FUND
CLASS A
10/31/03 $ 8.21 $(0.09)(6) $ 5.30 $ 5.21 $ -- $ -- $ -- $ -- $13.42
10/31/02 13.60 (0.14)(6) (4.28) (4.42) -- (0.97) (0.97) -- 8.21
10/31/01 26.67 (0.20) (9.56) (9.76) -- (3.31) (3.31) -- 13.60
10/31/00 19.61 (0.27)(6) 10.01 9.74 -- (2.68) (2.68) -- 26.67
10/31/99 16.25 (0.20)(6) 6.36 6.16 -- (2.80) (2.80) -- 19.61
CLASS B
10/31/03 7.40 (0.18)(6) 4.74 4.56 -- -- -- -- 11.96
10/31/02 12.46 (0.23)(6) (3.86) (4.09) -- (0.97) (0.97) -- 7.40
10/31/01 24.93 (0.32) (8.84) (9.16) -- (3.31) (3.31) -- 12.46
10/31/00 18.61 (0.47)(6) 9.47 9.00 -- (2.68) (2.68) -- 24.93
10/31/99 15.67 (0.34)(6) 6.08 5.74 -- (2.80) (2.80) -- 18.61
CLASS C
10/31/03 7.42 (0.14)(6) 4.78 4.64 -- -- -- -- 12.06
10/31/02(4) 11.51 (0.10)(6) (3.99) (4.09) -- -- -- -- 7.42
CLASS I
10/31/03 8.35 (0.02)(6) 5.43 5.41 -- -- -- -- 13.76
10/31/02 13.74 (0.06)(6) (4.36) (4.42) -- (0.97) (0.97) -- 8.35
10/31/01 26.77 (0.06) (9.66) (9.72) -- (3.31) (3.31) -- 13.74
10/31/00(11) 24.98 (0.15)(6) 1.94 1.79 -- -- -- -- 26.77
INTERNATIONAL
GROWTH FUND
CLASS A
10/31/03 $ 6.76 $ 0.03(6) $ 1.63 $ 1.66 $(0.04) $ -- $(0.04) $0.00(9) $ 8.38
10/31/02 7.61 (0.02)(6) (0.75) (0.77) (0.08) -- (0.08) 0.00(9) 6.76
10/31/01 10.97 (0.02) (2.67) (2.69) (0.01) (0.66) (0.67) -- 7.61
10/31/00 11.14 (0.03)(6) 0.00(9) (0.03) (0.14) (0.00)(9) (0.14) -- 10.97
10/31/99 8.86 0.01(6) 2.65 2.66 (0.27) (0.11) (0.38) -- 11.14
CLASS B
10/31/03 6.51 (0.05)(6) 1.57 1.52 -- -- -- 0.00(9) 8.03
10/31/02 7.35 (0.09)(6) (0.73) (0.82) (0.02) -- (0.02) 0.00(9) 6.51
10/31/01 10.70 (0.10) (2.58) (2.68) (0.01) (0.66) (0.67) -- 7.35
10/31/00 10.87 (0.12)(6) 0.02 (0.10) (0.07) (0.00)(9) (0.07) -- 10.70
10/31/99 8.72 (0.08)(6) 2.60 2.52 (0.26) (0.11) (0.37) -- 10.87
CLASS C
10/31/03 6.53 (0.03)(6) 1.56 1.53 (0.04) -- (0.04) 0.00(9) 8.02
10/31/02(4) 7.55 (0.05)(6) (0.96) (1.01) (0.01) -- (0.01) 0.00(9) 6.53
CLASS I
10/31/03 6.80 0.08(6) 1.64 1.72 (0.09) -- (0.09) 0.00(9) 8.43
10/31/02 7.69 0.04(6) (0.75) (0.71) (0.18) -- (0.18) 0.00(9) 6.80
10/31/01 11.00 0.04 (2.68) (2.64) (0.01) (0.66) (0.67) -- 7.69
10/31/00 11.16 0.05(6) 0.00(9) 0.05 (0.21) (0.00)(9) (0.21) -- 11.00
10/31/99 8.83 0.07(6) 2.65 2.72 (0.28) (0.11) (0.39) -- 11.16
See Notes to Financial Highlights on page 112.
See Notes to Financial Statements.
102
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA
-----------------------------------------------------------------------------------------------
RATIO OF OPERATING
EXPENSES TO AVERAGE
NET ASSETS WITHOUT
RATIO OF FEE WAIVERS, EXPENSES
RATIO OF NET INVESTMENT REIMBURSED AND/OR FEES
NET ASSETS, OPERATING INCOME/(LOSS) REDUCED BY CREDITS
END OF PERIOD EXPENSES TO TO AVERAGE PORTFOLIO ALLOWED BY THE
TOTAL RETURN(1) (IN 000'S) AVERAGE NET ASSETS NET ASSETS TURNOVER RATE CUSTODIAN(2)
--------------- ------------- ------------------ ---------------- ------------- ----------------------
SMALL CAP
STOCK FUND
CLASS A
10/31/03 63.46% $ 81,234 1.64% (0.86)% 40% 1.64%
10/31/02 (35.71)% 42,984 1.68% (1.20)% 21% 1.68%
10/31/01 (40.84)% 66,262 1.52% (1.03)% 46% 1.52%
10/31/00 53.57% 132,274 1.42% (0.96)% 49% 1.43%
10/31/99 42.60% 92,130 1.78% (1.16)% 45% 1.94%
CLASS B
10/31/03 61.62% 18,037 2.81% (2.03)% 40% 2.81%
10/31/02 (36.36)% 14,238 2.64% (2.16)% 21% 2.64%
10/31/01 (41.35)% 29,346 2.42% (1.93)% 46% 2.42%
10/31/00 52.34% 54,407 2.24% (1.78)% 49% 2.25%
10/31/99 41.32% 28,969 2.70% (2.08)% 45% 2.86%
CLASS C
10/31/03 62.53% 404 2.28% (1.50)% 40% 2.28%
10/31/02(4) (35.53)% 69 2.25%(7) (1.77)%(7) 21% 2.25%(7)
CLASS I
10/31/03 64.67% 337,271 0.96% (0.18)% 40% 0.96%
10/31/02 (35.32)% 123,620 1.00% (0.52)% 21% 1.00%
10/31/01 (40.49)% 134,462 0.97% (0.48)% 46% 0.97%
10/31/00(11) 7.21% 150,073 0.98%(7) (0.52)%(7) 49% 0.99%(7)
INTERNATIONAL
GROWTH FUND
CLASS A
10/31/03 24.75% $ 26,429 1.70% 0.47% 19% 1.70%
10/31/02 (10.36)% 21,317 1.93% (0.20)% 25% 1.93%
10/31/01 (25.99)% 16,636 1.93% (0.25)% 27% 1.93%
10/31/00 (0.43)% 28,997 1.78% (0.25)% 37% 1.78%
10/31/99 31.15% 28,618 1.88% 0.13% 164% 1.89%
CLASS B
10/31/03 23.35% 4,020 2.91% (0.74)% 19% 2.91%
10/31/02 (11.23)% 4,732 2.91% (1.18)% 25% 2.91%
10/31/01 (26.68)% 7,172 2.74% (1.06)% 27% 2.74%
10/31/00 (1.03)% 12,272 2.48% (0.95)% 37% 2.48%
10/31/99 29.87% 11,101 2.80% (0.79)% 164% 2.81%
CLASS C
10/31/03 23.57% 91 2.64% (0.47)% 19% 2.64%
10/31/02(4) (13.34)% 53 2.67%(7) (0.94)%(7) 25% 2.67%(7)
CLASS I
10/31/03 25.56% 317,493 1.07% 1.10% 19% 1.07%
10/31/02 (9.61)% 185,137 1.19% 0.54% 25% 1.19%
10/31/01 (25.53)% 124,886 1.18% 0.50% 27% 1.18%
10/31/00 0.26% 145,176 1.14% 0.39% 37% 1.14%
10/31/99 31.98% 163,610 1.28% 0.73% 164% 1.29%
See Notes to Financial Highlights on page 112.
See Notes to Financial Statements.
103
FINANCIAL HIGHLIGHTS
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
INCOME FROM INVESTMENT OPERATIONS
----------------------------------------
NET ASSET NET REALIZED DIVIDENDS NET ASSET
VALUE, NET AND UNREALIZED TOTAL FROM FROM NET VALUE,
BEGINNING INVESTMENT GAIN/(LOSS) ON INVESTMENT INVESTMENT END OF
OF PERIOD INCOME INVESTMENTS OPERATIONS INCOME PERIOD
--------- ---------- -------------- ---------- ---------- ---------
SHORT TERM
INCOME FUND
CLASS A
10/31/03 $ 2.34 $0.09 $ 0.06 $ 0.15 $(0.10) $ 2.39
10/31/02 2.41 0.12 (0.07) 0.05 (0.12) 2.34
10/31/01 2.29 0.13 0.12 0.25 (0.13) 2.41
10/31/00 2.29 0.13 (0.00)(9) 0.13 (0.13) 2.29
10/31/99 2.35 0.13(6) (0.06) 0.07 (0.13) 2.29
CLASS B
10/31/03 2.34 0.07 0.06 0.13 (0.08) 2.39
10/31/02 2.41 0.10 (0.07) 0.03 (0.10) 2.34
10/31/01 2.29 0.12 0.12 0.24 (0.12) 2.41
10/31/00 2.29 0.11 (0.00)(9) 0.11 (0.11) 2.29
10/31/99 2.35 0.10(6) (0.06) 0.04 (0.10) 2.29
CLASS C
10/31/03 2.34 0.07 0.06 0.13 (0.08) 2.39
10/31/02(4) 2.37 0.07 (0.03) 0.04 (0.07) 2.34
CLASS I
10/31/03 2.34 0.09 0.06 0.15 (0.10) 2.39
10/31/02 2.41 0.13 (0.07) 0.06 (0.13) 2.34
10/31/01 2.29 0.15 0.12 0.27 (0.15) 2.41
10/31/00 2.29 0.14 (0.00)(9) 0.14 (0.14) 2.29
10/31/99 2.35 0.13(6) (0.06) 0.07 (0.13) 2.29
U.S. GOVERNMENT
SECURITIES FUND
CLASS A
10/31/03 $11.19 $0.40(6) $(0.19) $ 0.21 $(0.51) $10.89
10/31/02 11.20 0.54 0.04 0.58 (0.59) 11.19
10/31/01 10.55 0.62 0.65 1.27 (0.62) 11.20
10/31/00 10.51 0.63 0.04 0.67 (0.63) 10.55
10/31/99 10.98 0.62 (0.47) 0.15 (0.62) 10.51
CLASS B
10/31/03 11.18 0.32(6) (0.19) 0.13 (0.43) 10.88
10/31/02 11.19 0.46 0.03 0.50 (0.51) 11.18
10/31/01 10.54 0.54 0.65 1.19 (0.54) 11.19
10/31/00 10.50 0.56 0.04 0.60 (0.56) 10.54
10/31/99 10.97 0.54 (0.48) 0.06 (0.53) 10.50
CLASS C
10/31/03 11.18 0.32(6) (0.20) 0.12 (0.43) 10.87
10/31/02(4) 11.00 0.33 0.18 0.51 (0.33) 11.18
CLASS I
10/31/03 11.19 0.44(6) (0.19) 0.25 (0.55) 10.89
10/31/02 11.20 0.58 0.04 0.62 (0.63) 11.19
10/31/01 10.55 0.66 0.65 1.31 (0.66) 11.20
10/31/00 10.51 0.67 0.04 0.71 (0.67) 10.55
10/31/99 10.99 0.66 (0.51) 0.15 (0.63) 10.51
See Notes to Financial Highlights on page 112.
See Notes to Financial Statements.
104
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA
---------------------------------------------------------------------------------------------
RATIO OF OPERATING
EXPENSES TO AVERAGE
NET ASSETS WITHOUT
FEE WAIVERS, EXPENSES
RATIO OF RATIO OF REIMBURSED AND/OR FEES
NET ASSETS, OPERATING NET INVESTMENT REDUCED BY CREDITS
END OF PERIOD EXPENSES TO INCOME TO AVERAGE PORTFOLIO ALLOWED BY THE
TOTAL RETURN(1) (IN 000'S) AVERAGE NET ASSETS NET ASSETS TURNOVER RATE CUSTODIAN(2)
--------------- ------------- ------------------ ---------------- ------------- ----------------------
SHORT TERM
INCOME FUND
CLASS A
10/31/03 6.28% $ 71,920 0.84% 3.58% 33% 0.97%
10/31/02 2.18% 28,106 0.96% 5.03% 28% 1.09%
10/31/01 11.31% 18,929 0.83% 5.63% 27% 1.15%
10/31/00 (5.70)% 20,224 0.99% 5.55% 14% 1.29%
10/31/99 2.84% 27,059 0.82% 5.22% 85% 1.16%
CLASS B
10/31/03 5.49% 44,310 1.59% 2.83% 33% 1.70%
10/31/02 1.41% 24,621 1.71% 4.28% 28% 1.77%
10/31/01 10.52% 6,595 1.54% 4.92% 27% 1.86%
10/31/00 5.12% 3,461 1.55% 4.99% 14% 1.85%
10/31/99 1.79% 4,597 1.60% 4.44% 85% 1.94%
CLASS C
10/31/03 5.48% 17,843 1.59% 2.83% 33% 1.65%
10/31/02(4) 1.61% 5,743 1.68%(7) 4.31%(7) 28% 1.68%(7)
CLASS I
10/31/03 6.55% 129,443 0.59% 3.83% 33% 0.59%
10/31/02 2.53% 89,210 0.61% 5.38% 28% 0.61%
10/31/01 11.93% 110,710 0.27% 6.19% 27% 0.59%
10/31/00 6.43% 93,741 0.30% 6.24% 14% 0.60%
10/31/99 2.93% 138,955 0.37% 5.67% 85% 0.71%
U.S. GOVERNMENT
SECURITIES FUND
CLASS A
10/31/03 1.94% $176,859 0.93% 3.59% 62% 0.93%
10/31/02 5.37% 196,222 0.96% 4.91% 48% 0.96%
10/31/01 12.39% 174,047 0.95% 5.71% 30% 0.95%
10/31/00 6.65% 168,728 0.96% 6.12% 13% 0.99%
10/31/99 1.38% 221,592 0.96% 5.76% 55% 1.04%
CLASS B
10/31/03 1.20% 251,153 1.66% 2.86% 62% 1.66%
10/31/02 4.62% 271,440 1.68% 4.19% 48% 1.68%
10/31/01 11.59% 128,155 1.67% 4.99% 30% 1.67%
10/31/00 5.91% 55,071 1.66% 5.42% 13% 1.69%
10/31/99 0.53% 72,751 1.70% 5.02% 55% 1.78%
CLASS C
10/31/03 1.12% 13,354 1.64% 2.88% 62% 1.64%
10/31/02(4) 4.74% 11,634 1.63%(7) 4.24%(7) 48% 1.63%(7)
CLASS I
10/31/03 2.32% 658,676 0.57% 3.95% 62% 0.57%
10/31/02 5.77% 365,912 0.58% 5.29% 48% 0.58%
10/31/01 12.81% 301,656 0.57% 6.09% 30% 0.57%
10/31/00 7.07% 247,204 0.56% 6.52% 13% 0.59%
10/31/99 1.43% 184,708 0.60% 6.12% 55% 0.68%
See Notes to Financial Highlights on page 112.
See Notes to Financial Statements.
105
FINANCIAL HIGHLIGHTS
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
INCOME FROM INVESTMENT OPERATIONS LESS DISTRIBUTIONS
---------------------------------------- ---------------------------------------
DISTRIBUTIONS
NET ASSET NET REALIZED DIVIDENDS FROM NET NET ASSET
VALUE, NET AND UNREALIZED TOTAL FROM FROM NET REALIZED VALUE,
BEGINNING INVESTMENT GAIN/(LOSS) ON INVESTMENT INVESTMENT CAPITAL TOTAL END OF
OF PERIOD INCOME INVESTMENTS OPERATIONS INCOME GAINS DISTRIBUTIONS PERIOD
--------- ---------- -------------- ---------- ---------- ------------- ------------- ---------
INCOME FUND
CLASS A
10/31/03 $9.02 $0.51 $ 0.38 $ 0.89 $(0.56) $ -- $(0.56) $9.35
10/31/02 9.32 0.60 (0.28) 0.32 (0.62) -- (0.62) 9.02
10/31/01 8.90 0.62 0.43 1.05 (0.63) -- (0.63) 9.32
10/31/00 8.99 0.62 (0.09) 0.53 (0.62) -- (0.62) 8.90
10/31/99 9.44 0.63 (0.45) 0.18 (0.63) -- (0.63) 8.99
CLASS B
10/31/03 9.04 0.44 0.38 0.82 (0.49) -- (0.49) 9.37
10/31/02 9.35 0.54 (0.29) 0.25 (0.56) -- (0.56) 9.04
10/31/01 8.92 0.56 0.44 1.00 (0.57) -- (0.57) 9.35
10/31/00 9.00 0.56 (0.08) 0.48 (0.56) -- (0.56) 8.92
10/31/99 9.45 0.56 (0.45) 0.11 (0.56) -- (0.56) 9.00
CLASS C
10/31/03 9.04 0.45 0.38 0.83 (0.50) -- (0.50) 9.37
10/31/02(4) 9.21 0.37 (0.17) 0.20 (0.37) -- (0.37) 9.04
CLASS I
10/31/03 9.03 0.55 0.38 0.93 (0.60) -- (0.60) 9.36
10/31/02 9.34 0.64 (0.29) 0.35 (0.66) -- (0.66) 9.03
10/31/01 8.91 0.66 0.44 1.10 (0.67) -- (0.67) 9.34
10/31/00 8.99 0.66 (0.08) 0.58 (0.66) -- (0.66) 8.91
10/31/99 9.44 0.65 (0.45) 0.20 (0.65) -- (0.65) 8.99
HIGH YIELD FUND
CLASS A
10/31/03 $6.63 $0.61(6) $ 1.31 $ 1.92 $(0.67) $ -- $(0.67) $7.88
10/31/02 7.44 0.71 (0.72) (0.01) (0.80) -- (0.80) 6.63
10/31/01 8.50 0.84 (1.00) (0.16) (0.90) -- (0.90) 7.44
10/31/00 8.92 0.90(6) (0.43) 0.47 (0.89) -- (0.89) 8.50
10/31/99 8.86 0.91(6) 0.14(12) 1.05 (0.94) (0.05) (0.99) 8.92
CLASS B
10/31/03 6.66 0.56(6) 1.31 1.87 (0.62) -- (0.62) 7.91
10/31/02 7.47 0.66 (0.72) (0.06) (0.75) -- (0.75) 6.66
10/31/01 8.54 0.78 (1.01) (0.23) (0.84) -- (0.84) 7.47
10/31/00 8.97 0.84(6) (0.43) 0.41 (0.84) -- (0.84) 8.54
10/31/99 8.90 0.86(6) 0.15(12) 1.01 (0.89) (0.05) (0.94) 8.97
CLASS C
10/31/03 6.67 0.56(6) 1.30 1.86 (0.62) -- (0.62) 7.91
10/31/02(4) 7.55 0.46 (0.86) (0.40) (0.48) -- (0.48) 6.67
CLASS I
10/31/03 6.62 0.63(6) 1.30 1.93 (0.69) -- (0.69) 7.86
10/31/02 7.43 0.73 (0.72) 0.01 (0.82) -- (0.82) 6.62
10/31/01 8.48 0.87 (0.99) (0.12) (0.93) -- (0.93) 7.43
10/31/00 8.91 0.93(6) (0.43) 0.50 (0.93) -- (0.93) 8.48
10/31/99 8.85 0.98(6) 0.11(12) 1.09 (0.98) (0.05) (1.03) 8.91
See Notes to Financial Highlights on page 112.
See Notes to Financial Statements.
106
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA
---------------------------------------------------------------------------------------------
RATIO OF OPERATING
EXPENSES TO AVERAGE
NET ASSETS WITHOUT
FEE WAIVERS, EXPENSES
RATIO OF RATIO OF REIMBURSED AND/OR FEES
NET ASSETS, OPERATING NET INVESTMENT REDUCED BY CREDITS
END OF PERIOD EXPENSES TO INCOME TO AVERAGE PORTFOLIO ALLOWED BY THE
TOTAL RETURN(1) (IN 000'S) AVERAGE NET ASSETS NET ASSETS TURNOVER RATE CUSTODIAN(2)
--------------- ------------- ------------------ ---------------- ------------- ----------------------
INCOME FUND
CLASS A
10/31/03 10.10% $153,654 0.94% 5.42% 33% 0.94%
10/31/02 3.63% 130,512 0.97% 6.61% 20% 0.97%
10/31/01 12.21% 120,508 0.97% 6.86% 35% 0.97%
10/31/00 6.16% 131,665 1.02% 6.98% 32% 1.03%
10/31/99 1.98% 172,217 1.06% 6.84% 19% 1.10%
CLASS B
10/31/03 9.31% 194,396 1.65% 4.71% 33% 1.65%
10/31/02 2.79% 142,186 1.68% 5.90% 20% 1.68%
10/31/01 11.52% 72,472 1.69% 6.14% 35% 1.69%
10/31/00 5.53% 39,347 1.73% 6.27% 32% 1.74%
10/31/99 1.12% 42,715 1.81% 6.09% 19% 1.85%
CLASS C
10/31/03 9.33% 15,274 1.63% 4.73% 33% 1.63%
10/31/02(4) 2.25% 7,710 1.62%(7) 5.96%(7) 20% 1.62%(7)
CLASS I
10/31/03 10.51% 679,139 0.56% 5.80% 33% 0.56%
10/31/02 3.94% 487,376 0.56% 7.02% 20% 0.56%
10/31/01 12.78% 387,998 0.56% 7.27% 35% 0.56%
10/31/00 6.72% 286,979 0.60% 7.40% 32% 0.61%
10/31/99 2.24% 76,145 0.68% 7.22% 19% 0.72%
HIGH YIELD FUND
CLASS A
10/31/03 30.13% $ 48,618 0.97% 8.24% 61% 0.97%
10/31/02 (0.48)% 13,563 1.03% 9.72% 60% 1.03%
10/31/01 (1.97)% 9,035 1.08% 10.47% 27% 1.09%
10/31/00 5.28% 8,182 1.08% 10.08% 40% 1.08%
10/31/99 12.26% 5,827 0.73% 10.17% 30% 1.37%
CLASS B
10/31/03 29.08% 83,665 1.73% 7.48% 61% 1.73%
10/31/02 (1.17)% 44,004 1.78% 8.97% 60% 1.78%
10/31/01 (2.72)% 35,391 1.77% 9.78% 27% 1.78%
10/31/00 4.46% 32,881 1.78% 9.38% 40% 1.78%
10/31/99 11.44% 21,259 1.29% 9.61% 30% 1.93%
CLASS C
10/31/03 29.08% 24,540 1.71% 7.50% 61% 1.71%
10/31/02(4) (5.66)% 2,556 1.78%(7) 8.97%(7) 60% 1.78%(7)
CLASS I
10/31/03 30.44% 424,781 0.64% 8.57% 61% 0.64%
10/31/02 (0.15)% 244,937 0.68% 10.07% 60% 0.68%
10/31/01 (1.49)% 201,385 0.68% 10.87% 27% 0.69%
10/31/00 5.54% 168,097 0.72% 10.44% 40% 0.72%
10/31/99 12.75% 44,662 0.21% 10.69% 30% 0.85%
See Notes to Financial Highlights on page 112.
See Notes to Financial Statements.
107
FINANCIAL HIGHLIGHTS
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
INCOME FROM INVESTMENT OPERATIONS LESS DISTRIBUTIONS
---------------------------------------- ---------------------------------------
DISTRIBUTIONS
NET ASSET NET REALIZED DIVIDENDS FROM NET NET ASSET
VALUE, NET AND UNREALIZED TOTAL FROM FROM NET REALIZED VALUE,
BEGINNING INVESTMENT GAIN/(LOSS) ON INVESTMENT INVESTMENT CAPITAL TOTAL END OF
OF PERIOD INCOME INVESTMENTS OPERATIONS INCOME GAINS DISTRIBUTIONS PERIOD
--------- ---------- -------------- ---------- ---------- ------------- ------------- ---------
TAX-EXEMPT
BOND FUND
CLASS A
10/31/03 $ 7.95 $0.34 $ 0.08 $ 0.42 $(0.34) $(0.07) $(0.41) $ 7.96
10/31/02 7.93 0.35 0.03 0.38 (0.35) (0.01) (0.36) 7.95
10/31/01 7.55 0.37 0.38 0.75 (0.37) -- (0.37) 7.93
10/31/00 7.41 0.40 0.14 0.54 (0.40) -- (0.40) 7.55
10/31/99 8.11 0.41 (0.70) (0.29) (0.41) -- (0.41) 7.41
CLASS B
10/31/03 7.95 0.28 0.08 0.36 (0.28) (0.07) (0.35) 7.96
10/31/02 7.93 0.29 0.03 0.32 (0.29) (0.01) (0.30) 7.95
10/31/01 7.55 0.31 0.38 0.69 (0.31) -- (0.31) 7.93
10/31/00 7.41 0.34 0.14 0.48 (0.34) -- (0.34) 7.55
10/31/99 8.11 0.35 (0.70) (0.35) (0.35) -- (0.35) 7.41
CLASS C
10/31/03 7.95 0.28 0.08 0.36 (0.28) (0.07) (0.35) 7.96
10/31/02(4) 7.83 0.20 0.12 0.32 (0.20) -- (0.20) 7.95
CALIFORNIA
MUNICIPAL FUND
CLASS A
10/31/03 $11.35 $0.47 $(0.06) $ 0.41 $(0.47) $(0.07) $(0.54) $11.22
10/31/02 11.34 0.50 0.00(9) 0.50 (0.49) -- (0.49) 11.35
10/31/01 10.81 0.53 0.53 1.06 (0.53) -- (0.53) 11.34
10/31/00 10.43 0.55 0.38 0.93 (0.55) -- (0.55) 10.81
10/31/99 11.46 0.54 (0.94) (0.40) (0.57) (0.06) (0.63) 10.43
CLASS B
10/31/03 11.35 0.38 (0.06) 0.32 (0.38) (0.07) (0.45) 11.22
10/31/02 11.34 0.42 0.00(9) 0.42 (0.41) -- (0.41) 11.35
10/31/01 10.81 0.44 0.53 0.97 (0.44) -- (0.44) 11.34
10/31/00 10.43 0.48 0.38 0.86 (0.48) -- (0.48) 10.81
10/31/99 11.46 0.48 (0.97) (0.49) (0.48) (0.06) (0.54) 10.43
CLASS C
10/31/03 11.35 0.38 (0.06) 0.32 (0.38) (0.07) (0.45) 11.22
10/31/02(4) 11.20 0.28 0.14 0.42 (0.27) -- (0.27) 11.35
See Notes to Financial Highlights on page 112.
See Notes to Financial Statements.
108
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA
---------------------------------------------------------------------------------------------
RATIO OF OPERATING
EXPENSES TO AVERAGE
NET ASSETS WITHOUT
FEE WAIVERS, EXPENSES
RATIO OF RATIO OF REIMBURSED AND/OR FEES
NET ASSETS, OPERATING NET INVESTMENT REDUCED BY CREDITS
END OF PERIOD EXPENSES TO INCOME TO AVERAGE PORTFOLIO ALLOWED BY THE
TOTAL RETURN(1) (IN 000'S) AVERAGE NET ASSETS NET ASSETS TURNOVER RATE CUSTODIAN(2)
--------------- ------------- ------------------ ---------------- ------------- ----------------------
TAX-EXEMPT
BOND FUND
CLASS A
10/31/03 5.31% $207,433 0.88% 4.20% 47% 0.88%
10/31/02 5.02% 213,673 0.90% 4.49% 46% 0.90%
10/31/01 10.16% 219,883 0.89% 4.75% 44% 0.89%
10/31/00 7.52% 207,309 0.88% 5.41% 28% 0.90%
10/31/99 (3.77)% 247,814 0.89% 5.16% 57% 0.89%
CLASS B
10/31/03 4.53% 45,061 1.62% 3.46% 47% 1.62%
10/31/02 4.25% 47,308 1.64% 3.75% 46% 1.64%
10/31/01 9.35% 43,978 1.63% 4.01% 44% 1.63%
10/31/00 6.73% 26,332 1.61% 4.68% 28% 1.63%
10/31/99 (4.52)% 25,059 1.64% 4.41% 57% 1.64%
CLASS C
10/31/03 4.54% 4,332 1.61% 3.47% 47% 1.61%
10/31/02(4) 4.06% 2,395 1.61%(7) 3.78%(7) 46% 1.61%(7)
CALIFORNIA
MUNICIPAL FUND
CLASS A
10/31/03 3.69% $252,511 0.85% 4.14% 34% 0.85%
10/31/02 4.57% 286,095 0.86% 4.39% 48% 0.86%
10/31/01 9.99% 291,132 0.85% 4.74% 52% 0.86%
10/31/00 9.33% 248,941 0.87% 5.30% 40% 0.88%
10/31/99 (3.87)% 283,929 0.88% 4.94% 92% 0.91%
CLASS B
10/31/03 2.92% 255,445 1.59% 3.40% 34% 1.59%
10/31/02 3.79% 295,662 1.60% 3.65% 48% 1.60%
10/31/01 9.19% 237,594 1.58% 4.01% 52% 1.59%
10/31/00 8.53% 160,086 1.60% 4.57% 40% 1.61%
10/31/99 (4.62)% 133,842 1.63% 4.19% 92% 1.66%
CLASS C
10/31/03 2.92% 8,193 1.59% 3.40% 34% 1.59%
10/31/02(4) 3.77% 6,665 1.58%(7) 3.67%(7) 48% 1.58%(7)
See Notes to Financial Highlights on page 112.
See Notes to Financial Statements.
109
FINANCIAL HIGHLIGHTS
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
INCOME FROM INVESTMENT OPERATIONS LESS DISTRIBUTIONS
---------------------------------------- ---------------------------------------
DISTRIBUTIONS
NET ASSET NET REALIZED DIVIDENDS FROM NET NET ASSET
VALUE, NET AND UNREALIZED TOTAL FROM FROM NET REALIZED VALUE,
BEGINNING INVESTMENT GAIN/(LOSS) ON INVESTMENT INVESTMENT CAPITAL TOTAL END OF
OF PERIOD INCOME INVESTMENTS OPERATIONS INCOME GAINS DISTRIBUTIONS PERIOD
--------- ---------- -------------- ---------- ---------- ------------- ------------- ---------
CALIFORNIA INSURED
INTERMEDIATE
MUNICIPAL FUND
CLASS A
10/31/03 $11.08 $0.35 $0.12 $0.47 $(0.35) $(0.06) $(0.41) $11.14
10/31/02 10.98 0.39 0.15 0.54 (0.39) (0.05) (0.44) 11.08
10/31/01 10.58 0.44 0.49 0.93 (0.44) (0.09) (0.53) 10.98
10/31/00 10.30 0.44 0.31 0.75 (0.44) (0.03) (0.47) 10.58
10/31/99 11.02 0.44(6) (0.55) (0.11) (0.45) (0.16) (0.61) 10.30
CLASS B
10/31/03 11.08 0.27 0.12 0.39 (0.27) (0.06) (0.33) 11.14
10/31/02 10.98 0.31 0.15 0.46 (0.31) (0.05) (0.36) 11.08
10/31/01 10.58 0.36 0.49 0.85 (0.36) (0.09) (0.45) 10.98
10/31/00 10.30 0.36 0.31 0.67 (0.36) (0.03) (0.39) 10.58
10/31/99 11.02 0.36(6) (0.56) (0.20) (0.36) (0.16) (0.52) 10.30
CLASS C
10/31/03 11.08 0.27 0.12 0.39 (0.27) (0.06) (0.33) 11.14
10/31/02(4) 10.90 0.21 0.18 0.39 (0.21) -- (0.21) 11.08
See Notes to Financial Highlights on page 112.
See Notes to Financial Statements.
110
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA
---------------------------------------------------------------------------------------------
RATIO OF OPERATING
EXPENSES TO AVERAGE
NET ASSETS WITHOUT
FEE WAIVERS, EXPENSES
RATIO OF RATIO OF REIMBURSED AND/OR FEES
NET ASSETS, OPERATING NET INVESTMENT REDUCED BY CREDITS
END OF PERIOD EXPENSES TO INCOME TO AVERAGE PORTFOLIO ALLOWED BY THE
TOTAL RETURN(1) (IN 000'S) AVERAGE NET ASSETS NET ASSETS TURNOVER RATE CUSTODIAN(2)
--------------- ------------- ------------------ ---------------- ------------- ----------------------
CALIFORNIA INSURED
INTERMEDIATE
MUNICIPAL FUND
CLASS A
10/31/03 4.29% $75,231 0.77% 3.15% 65% 0.86%
10/31/02 5.12% 57,102 0.70% 3.59% 28% 0.89%
10/31/01 9.00% 39,996 0.73% 4.09% 23% 0.92%
10/31/00 7.37% 29,657 0.91% 4.19% 45% 0.93%
10/31/99 (1.11)% 31,253 0.89% 4.13% 93% 0.97%
CLASS B
10/31/03 3.51% 93,448 1.53% 2.39% 65% 1.62%
10/31/02 4.32% 89,240 1.46% 2.83% 28% 1.65%
10/31/01 8.19% 51,525 1.48% 3.34% 23% 1.67%
10/31/00 6.57% 35,685 1.66% 3.44% 45% 1.68%
10/31/99 (1.89)% 35,501 1.64% 3.38% 93% 1.72%
CLASS C
10/31/03 3.50% 10,317 1.53% 2.39% 65% 1.62%
10/31/02(4) 3.58% 7,953 1.45%(7) 2.84%(7) 28% 1.64%(7)
See Notes to Financial Highlights on page 112.
See Notes to Financial Statements.
111
FINANCIAL HIGHLIGHTS
NOTES TO FINANCIAL HIGHLIGHTS
(1) Total return is not annualized for periods less than one year and does
not reflect any applicable sales charges. The total returns would have
been lower if certain fees had not been waived and/or expenses
reimbursed by the investment advisor or if fees had not been reduced by
credits allowed by the custodian.
(2) Ratio of operating expenses to average net assets includes expenses
paid indirectly through custodian credits.
(3) The REIT Fund commenced operations on March 1, 2003.
(4) The Funds commenced selling Class C shares on March 1, 2002.
(5) The Equity Income Fund commenced selling Class I shares on August 1,
2000.
(6) Per share numbers have been calculated using the average shares method.
(7) Annualized.
(8) The West Coast Equity Fund commenced selling Class I shares on June 7,
1999.
(9) Amount represents less than $0.01 per share.
(10) The Mid Cap Stock Fund commenced operations on March 1, 2000.
(11) The Small Cap Stock Fund commenced selling Class I shares on
January 5, 2000.
(12) The amount shown may not agree with the change in aggregate gains and
losses of portfolio securities due to the timing of sales and
redemptions of Fund shares.
See Notes to Financial Statements.
112
NOTES TO FINANCIAL STATEMENTS
WM GROUP OF FUNDS
1. ORGANIZATION AND BUSINESS
WM Trust I ("Trust I") and WM Trust II ("Trust II") (collectively, the
"Trusts") were organized as Massachusetts business trusts on September
19, 1997 and February 22, 1989, respectively. The Trusts are each
registered under the Investment Company Act of 1940, as amended ("1940
Act"), as open-end management investment companies. Trust I and Trust II
consist of 18 funds (each a "Fund," collectively, the "Funds"), 15 of
which are presented in this report. The REIT Fund commenced operations
on March 1, 2003. Financial statements for the other Funds included in
the Trusts are presented in a separate report. The Funds being reported
on are as follows:
TRUST I TRUST II
EQUITY FUNDS EQUITY FUNDS
REIT Fund Growth Fund
Equity Income Fund Small Cap Stock Fund
Growth & Income Fund International Growth Fund
West Coast Equity Fund
Mid Cap Stock Fund
FIXED-INCOME FUNDS FIXED-INCOME FUND
U.S. Government Securities Fund Short Term Income Fund
Income Fund
High Yield Fund
MUNICIPAL FUNDS
MUNICIPAL FUND California Municipal Fund
Tax-Exempt Bond Fund California Insured Intermediate
Municipal Fund
WM Advisors, Inc. (the "Advisor" or "WM Advisors") serves as investment
advisor to the Trusts. The Advisor is a wholly-owned subsidiary of
Washington Mutual, Inc. ("Washington Mutual"), a publicly owned
financial services company.
The Trusts are authorized to issue an unlimited number of shares of
beneficial interest, each without par value. Each of the Fixed-Income
Funds and the Equity Funds offer four classes of shares: Class A shares,
Class B shares, Class C shares and Class I shares. Each of the Municipal
Funds currently offers Class A shares, Class B shares and Class C
shares. Class A shares of the Funds are generally subject to an initial
sales charge at the time of purchase. Certain Class A shares purchased
without an initial sales charge may be subject to a contingent deferred
sales charge ("CDSC") if redeemed within eighteen months from the date
of purchase. Class B shares are not subject to an initial sales charge
although they are generally subject to a CDSC if redeemed within five
years from the date of purchase. Class C shares are 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. In addition,
redemptions from International Growth Fund, Class A shares, including
exchange redemptions, within 90 days of purchase are subject to a
redemption fee equal to 2.00% of the redemption proceeds, which will be
retained by the Fund. Class I shares are sold exclusively to the various
investment portfolios of the WM Strategic Asset Management Portfolios,
LLC (the "Portfolios"), an affiliated open-end management investment
company, and affiliates of Washington Mutual and are not available for
direct purchase by investors. Class I shares are not subject to an
initial sales charge or CDSC.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies, in
conformity with accounting principles generally accepted in the United
States of America ("generally accepted accounting principles"), which
are consistently followed by the Funds in the preparation of their
financial statements.
PORTFOLIO VALUATION:
Securities that are primarily traded on a U.S. exchange (excluding
securities traded through the Nasdaq National Market System, which are
valued at the Nasdaq official close price) are valued at the last sale
price on that exchange or, if there were no sales during the day, at the
mean of the current day's bid and asked prices. Securities traded only
on over-the-counter markets (other than the Nasdaq National Market
System and the U.S. Government Securities System) are valued at the mean
of the current bid and asked prices.
113
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
WM GROUP OF FUNDS
The value of a foreign security is determined in its functional currency
as of the close of trading on the foreign exchange on which it is traded
or at the close of the New York Stock Exchange, if that is earlier, and
that value is then converted into its U.S. dollar equivalent using
prevailing exchange rates on the day the value of the foreign security
is determined.
Options are generally valued at the last sale price or, in the absence
of a last sale price, at the mean of the current day's bid and asked
prices. The value of a futures contract equals the unrealized gain or
loss on the contract, which is determined by marking the contract to the
current settlement price for a like contract acquired on the day on
which the futures contract is being valued.
Debt securities of U.S. issuers (other than short-term investments),
including municipal securities, are valued by one or more independent
pricing services (each a "Pricing Service") retained by the Trusts.
When, in the judgment of a Pricing Service, market quotations for these
securities are readily available, they are valued at the mean between
the quoted bid and asked prices. Short-term debt securities that mature
in 60 days or less are valued at amortized cost, which approximates
market value.
Securities for which market quotations are not readily available are
valued at fair value as determined by or under the direction of the
Board of Trustees.
REPURCHASE AGREEMENTS:
Each Fund may enter into repurchase agreement transactions. A repurchase
agreement is a purchase of an underlying debt obligation subject to an
agreement by the seller to repurchase the obligation at an agreed upon
price and time. 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 Fund would seek to use the collateral to
offset losses incurred. There is potential loss to the Fund in the event
the Fund is delayed or prevented from exercising its right to dispose of
the collateral securities, including the risk of a possible decline in
the value of the underlying securities during the period while the Fund
seeks to assert its rights. 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 Fund
enters into repurchase agreements.
FUTURES CONTRACTS:
Certain Funds may enter into futures transactions. The underlying value
of a futures contract is incorporated within the unrealized appreciation/
(depreciation) shown in the Portfolio of Investments under the caption
"Futures Contracts."
Upon entering into a futures contract, the Fund is required to deposit
with the broker an amount of cash or cash equivalents equal to a certain
percentage of the contract amount (known as an initial margin deposit).
Subsequent payments (known as variation margins) are made or received by
the Fund each day, depending on the daily fluctuation of the value of
the contract. The daily changes in contract value are recorded as
unrealized gains or losses and the Fund recognizes a realized gain or
loss when the contract is closed. Should market conditions change
unexpectedly, the Funds may not achieve the anticipated benefits of the
futures contracts and may realize a loss. The use of futures
transactions involves the risk of imperfect correlation in movements in
the price of futures contracts, interest rates, and the underlying
hedged assets.
FOREIGN CURRENCY:
The books and records of the Funds are maintained in U.S. dollars.
Foreign currencies, investments and other assets and liabilities are
translated into U.S. dollars on a daily basis using prevailing exchange
rates. Purchases and sales of investment securities, income and expenses
are translated on the respective dates of such transactions.
Unrealized gains and losses, not relating to securities, which result
from changes in foreign currency exchange rates have been included in
unrealized appreciation/(depreciation) of investments. Unrealized gains
and losses of securities, which result from changes in foreign currency
exchange rates as well as changes in market prices of securities, have
been included in unrealized appreciation/(depreciation) of investments.
Net realized foreign currency gains and losses, which result from
changes in exchange rates between trade date and settlement date on
investment transactions as well as the difference between the amounts of
interest and dividends recorded on the books of the Funds and the amount
actually received, have been included in realized gains/(losses) on
investment transactions. Foreign currency gains and losses, which result
from fluctuations in exchange rates between the initial purchase trade
date and subsequent sale trade date, have been included in realized
gains/(losses) on investment transactions.
114
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
WM GROUP OF FUNDS
FORWARD FOREIGN CURRENCY CONTRACTS:
Certain Funds may enter into forward foreign currency contracts. Forward
foreign currency contracts are agreements to exchange one currency for
another at a future date and at a specified price. These Funds may use
forward foreign currency contracts to facilitate transactions in foreign
securities and to manage the Funds' foreign currency exposure. These
contracts are valued daily, and a Fund's net equity therein,
representing unrealized gain or loss on the contracts as measured by the
difference between the forward foreign exchange rates at the dates of
entry into the contracts and the forward rates at the reporting date, is
included in the "Statements of Assets and Liabilities". Realized and
unrealized gains and losses are included in the "Statements of
Operations". These instruments involve market risk, credit risk, or both
kinds of risks, in excess of the amount recognized in the "Statement of
Assets and Liabilities". Risks arise from the possible inability of
counterparties to meet the terms of their contracts and from movement in
currency and securities values and interest rates.
ILLIQUID INVESTMENTS:
Each Fund may invest a portion of its net assets in securities that are
not readily marketable, including: (1) repurchase agreements with
maturities greater than seven calendar days; (2) time deposits maturing
in more than seven calendar days; (3) certain futures contracts and
options; (4) certain variable rate demand notes having a demand period
of more than seven calendar days; and (5) securities, the disposition of
which are restricted under Federal securities laws, excluding certain
Rule 144A securities, as defined in the following paragraph.
Illiquid securities generally cannot be sold or disposed of in the
ordinary course of business (within seven calendar days) at
approximately the value at which the Funds have valued the investments.
This may have an adverse effect on the Fund's ability to dispose of
particular illiquid securities at fair market value and may limit the
Fund's ability to obtain accurate market quotations for purposes of
valuing the securities and calculating the net asset value of shares of
the Fund. The Funds may also purchase securities that are not registered
under the Securities Act of 1933, as amended (the "Act"), but that can
be sold to qualified institutional buyers in accordance with Rule 144A
under the Act ("Rule 144A Securities"). Rule 144A Securities generally
may be resold only to other qualified institutional buyers. If a
particular investment in Rule 144A Securities is not determined to be
liquid under the guidelines established by the Board of Trustees, that
investment will be included within a Fund's limitation on investment in
illiquid securities.
SECURITIES TRANSACTIONS AND INVESTMENT INCOME:
Securities transactions are recorded on a trade date basis (the date the
order to buy or sell is executed). Realized gains and losses from
securities sold are recorded on the identified cost basis. Securities
purchased or sold on a when-issued or delayed-delivery basis may be
settled a month or more after the trade date; interest income is not
accrued until settlement date. Each Fund instructs the custodian to
segregate assets of the Fund with a current value at least equal to the
amount of its when-issued purchase commitments.
Interest income on debt securities is accrued daily. Premiums and
discounts are amortized using the interest method. Paydown gains and
losses on mortgage-backed and asset-backed securities are presented as
an adjustment to interest income. Dividend income is recorded on the ex-
dividend date, except certain dividends from foreign securities are
recorded as soon as the Funds are informed of the ex-dividend date. Each
Fund's investment income and realized and unrealized gains and losses
are allocated among the classes of that Fund based upon the relative
average net assets of each class.
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS:
Dividends from net investment income of the Fixed-Income Funds and the
Municipal Funds are declared daily and paid monthly. Dividends from net
investment income of the REIT and Equity Income Funds are declared and
paid quarterly. Dividends from any net investment income of the Growth &
Income, West Coast Equity, Mid Cap Stock, Growth, Small Cap Stock and
International Growth Funds are declared and paid annually. Distributions
of any net capital gains earned by a Fund are distributed no less
frequently than annually at the discretion of the Board of Trustees.
Additional distributions of net investment income and capital gains for
each Fund may be made at the discretion of the Board of Trustees in
accordance with federal income tax regulations.
Distributions from income and capital gains are determined in accordance
with income tax regulations which may differ from generally accepted
accounting principles. These differences are primarily due to differing
treatments of income and gains on various investment securities held by
the Funds, dividends payable, redesignated distributions and differing
characterization of distributions made by each Fund.
115
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
WM GROUP OF FUNDS
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:
INCREASE/ INCREASE/
(DECREASE) (DECREASE)
INCREASE/ UNDISTRIBUTED ACCUMULATED
(DECREASE) NET INVESTMENT NET REALIZED
PAID-IN CAPITAL INCOME/(LOSS) GAIN/(LOSS)
(000S) (000S) (000S)
--------------- -------------- ------------
REIT Fund $ -- $ (524) $ 524
Equity Income Fund -- (705) 705
West Coast Equity Fund -- (459) 459
Growth Fund (3,060) 2,360 700
Small Cap Stock Fund (1,131) 1,131 --
International Growth Fund 1,994 (1,994)
Short Term Income Fund (207) 493 (286)
U.S. Government Securities Fund (33,964) 10,102 23,862
Income Fund (11,487) 5,709 5,778
High Yield Fund -- 4,072 (4,072)
Tax-Exempt Bond Fund 410 75 (485)
California Municipal Fund -- (6) 6
California Insured Intermediate
Municipal Fund 417 (3) (414)
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 Fund'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 Trusts are allocated to all the Funds based upon
the relative average net assets of each Fund except printing and postage
expenses, which are allocated to all the Funds based upon the relative
number of shareholder accounts of each Fund. Operating expenses directly
attributable to a class of shares are charged to the operations of that
class of shares. Expenses of each Fund not directly attributable to the
operations of any class of shares are prorated among the classes to
which the expenses relate based on the relative average net assets of
each class of shares.
USE OF ESTIMATES:
The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts and disclosures in the
financial statements. Actual results could differ from those estimates.
3. INVESTMENT ADVISORY AND OTHER TRANSACTIONS
WM Advisors serves as investment advisor to the Trusts. The Advisor is
entitled to a monthly fee at an annual rate based upon a percentage of
the average daily net assets of each Fund at the following rates:
FROM $0 FROM $125 FROM $200 FROM $250 FROM $500 FROM $1 FROM $2
TO $125 TO $200 TO $250 TO $500 MILLION TO TO $2 TO $3 OVER
NAME OF FUND MILLION MILLION MILLION MILLION $1 BILLION BILLION BILLION $3 BILLION
------------ ---------------------------------------------------------------------------------------------
REIT Fund 0.800% 0.800% 0.800% 0.800% 0.750% 0.750% 0.700% 0.650%
Equity Income Fund 0.625% 0.625% 0.625% 0.500% 0.500% 0.500% 0.500% 0.500%
Growth & Income Fund 0.625% 0.625% 0.625% 0.500% 0.500% 0.500% 0.500% 0.500%
West Coast Equity Fund 0.625% 0.625% 0.625% 0.625% 0.500% 0.375% 0.375% 0.375%
Mid Cap Stock Fund 0.750% 0.750% 0.750% 0.750% 0.750% 0.750% 0.750% 0.700%
Growth Fund 0.800% 0.800% 0.800% 0.800% 0.750% 0.750% 0.700% 0.650%
Small Cap Stock Fund 0.850% 0.850% 0.850% 0.850% 0.850% 0.850% 0.850% 0.800%
International Growth Fund 1.000% 0.800% 0.800% 0.800% 0.800% 0.750% 0.750% 0.700%
116
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
WM GROUP OF FUNDS
FROM $0 FROM $125 FROM $200 FROM $250 FROM $500 FROM $1 FROM $2
TO $125 TO $200 TO $250 TO $500 MILLION TO TO $2 TO $3 OVER
NAME OF FUND MILLION MILLION MILLION MILLION $1 BILLION BILLION BILLION $3 BILLION
------------ ---------------------------------------------------------------------------------------------
Short Term Income Fund 0.500% 0.500% 0.450% 0.450% 0.400% 0.400% 0.400% 0.400%
U.S. Government Securities Fund 0.500% 0.500% 0.500% 0.500% 0.500% 0.500% 0.500% 0.450%
Income Fund 0.500% 0.500% 0.500% 0.500% 0.500% 0.500% 0.500% 0.450%
High Yield Fund 0.625% 0.625% 0.625% 0.500% 0.500% 0.500% 0.500% 0.500%
Tax-Exempt Bond Fund 0.500% 0.500% 0.500% 0.400% 0.400% 0.400% 0.400% 0.400%
California Municipal Fund 0.500% 0.500% 0.500% 0.500% 0.500% 0.450% 0.450% 0.450%
California Insured Intermediate
Municipal Fund 0.500% 0.500% 0.500% 0.500% 0.500% 0.450% 0.450% 0.450%
The Advisor has voluntarily waived $167,066 of its advisory fees for the
California Insured Intermediate Municipal Fund 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 Funds.
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, $20.21 and $20.21 for Class A, Class B and Class C
shareholder accounts for the Equity Funds, Fixed-Income Funds and Municipal
Funds, respectively. Prior to December 1, 2002, the authorized monthly
shareholder servicing fee was $20.52, $22.70 and $22.70 for Class A, Class B
and Class C shareholder accounts for the Equity Funds, Fixed-Income Funds
and Municipal Funds, respectively. Class I shares are not subject to
shareholder servicing fees. The Transfer Agent has voluntarily waived
$54,558, $41,344 and $7,924 of its transfer agent fees for Class A, Class B
and Class C shares of the Short Term Income Fund for the year ended
October 31, 2003, respectively.
Custodian fees for certain Funds have been reduced by credits allowed by the
Funds' custodian for uninvested cash balances. The Funds could have invested
this cash in income producing securities. Fees reduced by credits allowed by
the custodian for the year ended October 31, 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 Trusts for serving as an officer or Trustee of the
Trusts. The Trusts, together with other mutual funds advised by WM Advisors,
pay each Trustee who is not an officer or employee of Washington Mutual or
its subsidiaries, a per annum retainer plus attendance fees for each meeting
at which they are present. The Lead Trustee, Committee Chairs and Committee
Members receive additional remuneration for these services to the Trusts.
Trustees are also reimbursed for travel and out-of-pocket expenses. Each
Trustee serves in the same capacity for all 40 funds within the WM Group of
Funds.
5. DISTRIBUTION PLANS
WM Funds Distributor, Inc. (the "Distributor"), a registered broker-dealer
and a wholly-owned subsidiary of Washington Mutual, serves as distributor
for Class A, Class B and Class C shares. For the year ended October 31,
2003, the Distributor has received $1,001,995 representing commissions
(front-end sales charges) on Class A and Class C shares and $3,971,058
representing CDSCs on Class A, Class B and Class C Shars.
Each of the Funds 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 Fund (each, a "Rule 12b-1 Plan"), respectively. There are no 12b-1
Plans applicable to Class I shares of the Funds. Under the applicable Rule
12b-1 Plans, the Distributor may receive a service fee at an annual rate of
0.25% of the average daily net assets of each class. In addition, the
Distributor is paid a fee as compensation in connection with the offering
and sale of Class B and Class C shares 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 Fund 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 Trusts,
as defined in the 1940 Act, and who have no direct or indirect financial
interest in the operation of such distribution plans, or any agreements
related to such plans, respectively.
117
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
WM GROUP OF FUNDS
6. PURCHASES AND SALES OF INVESTMENTS
The aggregate cost of purchases and proceeds from sales of securities,
excluding U.S. Government and short-term investments, for the year ended
October 31, 2003, are as follows:
PURCHASES SALES
NAME OF FUND (000S) (000S)
- ------------ --------- ------
REIT Fund* $158,387 $ 8,924
Equity Income Fund 252,635 117,495
Growth & Income Fund 263,405 214,996
West Coast Equity Fund 171,409 105,678
Mid Cap Stock Fund 151,486 83,057
Growth Fund 628,865 459,102
Small Cap Stock Fund 204,473 108,451
International Growth Fund 109,764 45,164
Short Term Income Fund 70,244 30,954
Income Fund 241,434 146,716
High Yield Fund 448,265 254,702
Tax-Exempt Bond Fund 123,220 126,905
California Municipal Fund 192,611 261,897
California Insured Intermediate Municipal Fund 132,641 112,848
<FN>
*The REIT Fund commenced operations on March 1, 2003.
The aggregate cost of purchases and proceeds from sales of U.S. Government
securities, excluding short-term investments, for the year ended October 31,
2003, are as follows:
PURCHASES SALES
NAME OF FUND (000S) (000S)
- ------------ --------- ------
Equity Income Fund $ -- $ 3,020
Short Term Income Fund 72,015 25,648
U.S. Government Securities Fund 841,177 576,755
Income Fund 249,900 138,928
7. LENDING OF SECURITIES
Certain Funds may lend securities to brokers, dealers and other financial
organizations to earn additional income. Each security loan is
collateralized with collateral assets in an amount equal to or greater than
the current market value of the loaned securities. There is a risk of delay
in receiving collateral, that the collateral could lose value or become
valueless, or in recovering the securities loaned or even a loss of rights
in collateral should the borrower fail financially.
At October 31, 2003, each of the Funds with outstanding loans of securities
to certain brokers, dealers or other financial institutions has segregated
cash and/or securities at least equal to the market value of securities
loaned with the Funds' custodian.
8. TRANSACTIONS WITH AFFILIATES
At October 31, 2003, the WM Strategic Asset Management Portfolios, LLC, hold
investments in a number of the Funds. The figures presented below represent
the percentage of shares outstanding of each Fund owned by the Portfolios:
PORTFOLIOS
--------------------------------------------------------
FLEXIBLE CONSERVATIVE CONSERVATIVE STRATEGIC
INCOME BALANCED BALANCED GROWTH GROWTH
NAME OF FUND PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
- ------------ --------- ------------ --------- ------------ ---------
REIT Fund 4.1% 3.0% 35.2% 35.3% 18.6%
Equity Income Fund 2.5% 1.7% 21.7% 20.9% 11.4%
Growth & Income Fund 3.5% 1.6% 19.1% 20.0% 13.2%
West Coast Equity Fund 1.2% 0.9% 11.7% 12.3% 8.4%
Mid Cap Stock Fund 4.3% 2.3% 28.0% 28.7% 23.3%
Growth Fund 3.1% 2.1% 25.0% 25.9% 15.5%
Small Cap Stock Fund 3.8% 1.9% 25.2% 27.2% 18.3%
International Growth Fund -- 2.3% 32.8% 33.4% 22.7%
Short Term Income Fund 31.7% 6.9% 10.5% -- --
U.S. Government Securities Fund 16.3% 5.4% 27.6% 10.5% --
Income Fund 17.7% 5.8% 29.6% 12.1% --
High Yield Fund 8.9% 3.5% 23.5% 16.5% 8.7%
118
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
WM GROUP OF FUNDS
9. CAPITAL LOSS CARRYFORWARDS
At October 31, 2003, the following Funds have available for federal income
tax purposes unused capital losses as follows:
(IN THOUSANDS)
-----------------------------------------------------------------------------------------------
EXPIRING EXPIRING EXPIRING EXPIRING EXPIRING EXPIRING EXPIRING EXPIRING
NAME OF FUND IN 2004 IN 2005 IN 2006 IN 2007 IN 2008 IN 2009 IN 2010 IN 2011
------------ -------- -------- -------- -------- -------- -------- -------- ---------
Equity Income Fund $ -- $ -- $ -- $ -- $ -- $ -- $ 2,912 $ 361
Growth & Income Fund -- -- -- -- -- -- 26,587 43,461
West Coast Equity Fund -- -- -- -- -- -- 11,751 1,083
Growth Fund -- -- -- -- -- 241,088 151,769 23,894
Small Cap Stock Fund -- -- -- -- -- -- 21,455 34,674
International Growth Fund -- -- -- 9,424 15,436 14,786
Short Term Income Fund 672 774 75 313 1,103 381 1,139 684
U.S. Government Securities Fund 3,198 504 -- 254 1,967 -- 852 6,859
Income Fund 677 -- -- -- -- -- 4,333 2,468
High Yield Fund -- -- -- 217 925 10,498 20,940 16,759
California Municipal Fund -- -- -- -- -- -- -- 1,020
10. COMPONENTS OF DISTRIBUTABLE EARNINGS
At October 31, 2003, the components of distributable earnings on a tax basis
are as follows:
(IN THOUSANDS)
-----------------------------------------------------------------------------------------------
EQUITY GROWTH & West Coast Mid Cap Small Cap International
REIT Income Income Equity Stock Growth Stock Growth
Fund Fund Fund Fund Fund Fund Fund Fund
------- -------- -------- -------- ------- -------- --------- --------
Gross tax unrealized appreciation $29,917 $138,746 $275,012 $300,342 $92,270 $ 90,183 $ 102,532 $ 47,124
Gross tax unrealized depreciation (356) (60,586) (77,461) (60,880) (4,056) (19,505) (101,855) (12,710)
------- -------- -------- -------- ------- -------- --------- --------
Net tax unrealized appreciation/
(depreciation) $29,561 $ 78,160 $197,551 $239,462 $88,214 $ 70,678 $ (677) $ 34,414
======= ======== ======== ======== ======= ======== ========= ========
Undistributed ordinary income $ 939 $ 2,013 $ 13,414 $ 432 $ 893 $ -- $ -- $ 5,022
Undistributed accumulated gains $ 879 $ -- $ -- $ -- $ 1,124 $ -- $ -- $ --
Tax Composition of Distributions:
Ordinary income $ 2,480 $ 17,376 $ 13,400 $ -- $ 731 $ -- $ -- $ 2,530
Long-term capital gain $ -- $ -- $ -- $ -- $ -- $ -- $ -- $ --
CALIFORNIA
U.S. INSURED
SHORT TERM GOVERNMENT HIGH TAX-EXEMPT CALIFORNIA INTERMEDIATE
INCOME SECURITIES INCOME YIELD BOND MUNICIPAL MUNICIPAL
FUND FUND FUND FUND FUND FUND FUND
------- -------- -------- -------- ------- -------- ---------
Gross tax unrealized appreciation $ 6,683 $ 14,170 $ 53,470 $ 49,973 $21,388 $ 22,146 $ 4,874
Gross tax unrealized depreciation (698) (6,504) (25,197) (15,102) (1,045) (990) (411)
------- -------- -------- -------- ------- -------- ---------
Net tax unrealized appreciation $ 5,985 $ 7,666 $ 28,273 $ 34,871 $20,343 $ 21,156 $ 4,463
======= ======== ======== ======== ======= ======== =========
Undistributed ordinary income $ 79 $ 847 $ 1,469 $ 1,141 $ 399 $ 639 $ 163
Undistributed accumulated gains $ -- $ -- $ -- $ -- $ 2,854 $ -- $ 1,637
Tax Composition of Distributions:
Ordinary income $ 7,503 $ 45,367 $ 56,899 $ 39,498 $11,329 $ 21,619 $ 4,977
Long-term capital gain $ -- $ -- $ -- $ -- $ 1,677 $ 3,790 $ 788
11. INDUSTRY AND GEOGRAPHIC CONCENTRATION AND OTHER RISK FACTORS
While no individual fund is intended as a complete investment program, this
is especially true for funds that concentrate their investments such as
those investing in particular industries or regions.
The REIT Fund concentrates its investments in real estate investment trust
("REIT") securities or debt securities of issuers that are principally
engaged in the U.S. real estate or related industries. The REIT Fund could
be adversely impacted by economic trends within this industry.
119
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
WM GROUP OF FUNDS
The West Coast Equity Fund concentrates its investments in companies located
or doing business in Alaska, California, Idaho, Montana, Oregon and
Washington. The West Coast Equity Fund could be adversely impacted by
economic trends within this region.
The High Yield Fund invests in lower rated debt securities, which may be
more susceptible to adverse economic conditions than investment grade
holdings. These securities are often subordinated to the prior claims of
other senior lenders, and uncertainties exist as to an issuer's ability to
meet principal and interest payments.
The California Municipal and California Insured Intermediate Municipal Funds
are more susceptible to factors adversely affecting issuers of California
municipal securities than is a municipal bond fund that is not concentrated
in these issuers. Uncertain economic conditions or governmental developments
may affect the ability of California municipal securities issuers to meet
their financial obligations.
Certain Funds may invest a portion of their assets in foreign securities,
developing or emerging markets countries; enter into forward foreign
currency transactions; lend their portfolio securities; enter into stock
index, interest rate and currency futures contracts, and options on such
contracts; enter into interest rate swaps or purchase or sell interest rate
caps or floors; enter into other types of options transactions; make short
sales; purchase zero coupon and payment-in-kind bonds; enter into repurchase
or reverse repurchase agreements; purchase and sell "when-issued" securities
and enter into "delayed-delivery" transactions; and enter into various other
investment practices, each with inherent risks. The risks involved in
investing in foreign securities include those resulting from future adverse
political and economic developments and the possible imposition of currency
exchange restrictions or other foreign laws or restrictions. The risks
involved in investing in a high concentration of a single sector include
those resulting from future adverse political and economic developments or
regulatory occurrences and the potential for adverse effects to the
financial conditions of the industries within the sector due to market
fluctuations.
120
INDEPENDENT AUDITORS' REPORT
To the Trustees and Shareholders of
WM Trust I and WM Trust II:
We have audited the accompanying statements of assets and liabilities,
including the portfolios of investments, of WM REIT Fund, WM Equity Income
Fund, WM Growth & Income Fund, WM High Yield Fund, WM Income Fund, WM Mid
Cap Stock Fund, WM Tax-Exempt Bond Fund, WM U.S. Government Securities Fund
and WM West Coast Equity Fund (all funds of WM Trust I) and WM California
Insured Intermediate Municipal Fund, WM California Municipal Fund, WM Growth
Fund, WM International Growth Fund, WM Short Term Income Fund, and WM Small
Cap Stock Fund (all funds of WM Trust II) (collectively the "Funds") 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 Funds' management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with 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 as of October 31, 2003,
by correspondence with the custodian and brokers; where replies were not
received from brokers, we performed other auditing procedures. 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 Funds 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 the 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
121
OTHER INFORMATION (UNAUDITED)
WM GROUP OF FUNDS
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.
The amounts of long term capital gain paid as follows (in thousands):
NAME OF FUND
------------
REIT Fund $ 524
Mid Cap Stock Fund 906
Tax-Exempt Bond Fund 2,913
California Insured Intermediate Municipal Fund 1,674
Of the distributions made from investment income, the following percentages
are tax exempt for regular Federal income tax purposes.
NAME OF FUND
------------
Tax-Exempt Bond Fund 99.44%
California Municipal Fund 99.88%
California Insured Intermediate Municipal Fund 100.00%
Of the distributions made by the following Funds, the corresponding
percentages represent the amount of each distribution which may qualify for
the dividends received deduction available to corporate shareholders.
NAME OF FUND
------------
REIT Fund 2.49%
Equity Income Fund 78.65%
Growth & Income Fund 100.00%
West Coast Equity Fund 100.00%
Mid Cap Stock Fund 100.00%
Income Fund 0.57%
High Yield Fund 0.82%
The total amount of income received by the International Growth Fund from
sources within foreign countries and possessions of the United States was
$0.1375 per share (representing a total of $5,680,040). The total amount of
taxes paid to such countries was $0.0143 per share (representing a total of
$588,940).
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 Funds prior to January 1, 2003 does not qualify for the
reduced tax rate.
Of the distributions made by the following Funds, the corresponding
percentages represent the amount of each distribution which will qualify for
the 15% dividend income tax rate available as of January 1, 2003.
NAME OF FUND
------------
REIT Fund 1.81%
Equity Income Fund 69.54%
Growth & Income Fund 100.00%
West Coast Equity Fund 100.00%
Mid Cap Stock Fund 100.00%
International Growth Fund 62.65%
Income Fund 0.43%
High Yield Fund 0.61%
The above figures may differ from those cited elsewhere in this report due
to differences in the calculation of income and capital gains for generally
accepted accounting principles (book) purposes and federal income tax (tax)
purposes.
122
OTHER INFORMATION (UNAUDITED) (CONTINUED)
WM GROUP OF FUNDS
YEAR ENDED OCTOBER 31, 2003
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 Braille Institute of America, Inc;
Age 75 WM Group of Davis & 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 Trust Company.
Funds-5 years Chief Operating Officer of
Transamerica Fund Management
Company.
- -----------------------------------------------------------------------------------------------------------------------------------
Alfred E. Osborne, Jr., Sierra Funds-7 years Senior Associate Dean of the Nordstrom Inc.; K2, Inc.; First Pacific
Ph.D. WM Group of Anderson Graduate School of Advisors' Capital, Crescent and New
Age 58 Funds-5 years Management at the University Income Funds; Equity Marketing Inc.;
of California Los Angeles. 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.; Vaagen
Age 59 WM Group of Seidman, LLP. Bros. Lumber, Inc.
Funds-5 years
- -----------------------------------------------------------------------------------------------------------------------------------
Jay Rockey Composite Funds-3 years Founder and Chairman of The Downtown Seattle Association; The Rainier
Age 75 WM Group of Rockey Company, now Rockey, Club; WSU Foundation
Funds-5 years Hill & Knowlton.
- -----------------------------------------------------------------------------------------------------------------------------------
Morton O. Schapiro Griffin Funds-5 years President of Williams College Marsh & McLennan Companies
Age 50 WM Group of since 2000. Prior thereto,
Funds-5 years Dean of the College of Letters,
(Retired February 2003) Arts and Sciences; Professor of
Economics and Vice President of
Planning, University of
Southern California.
- -----------------------------------------------------------------------------------------------------------------------------------
Richard C. Yancey Composite Funds-23 years Retired Managing Director of AdMedia Partners Inc.; Czech and Slovak
(Lead Trustee) WM Group of Dillon, Read & Co., an Investment 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(3) 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
President and CEO WM Group of of the Advisor, Distributor
Age 60 Funds-5 years and Transfer Agent.
- -----------------------------------------------------------------------------------------------------------------------------------
123
OTHER INFORMATION (UNAUDITED) (CONTINUED)
WM GROUP OF FUNDS
YEAR ENDED OCTOBER 31, 2003
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 Transfer Agent, Advisor and Distributor.
Officer 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
Age 27 Compliance Officer since 2003. Officer 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
Age 53 Director of the Advisor, Distributor,
and Transfer Agent.
- --------------------------------------------------------------------------------------------------------------------------------
Jeffrey L. Lunzer, CPA Vice President, Chief Financial Vice President of the Transfer Agent.
Age 42 Officer and Treasurer since 2003. Prior 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.
Age 45 Prior thereto, senior level positions
with Smoot, Miller, Cheney & Co.
- --------------------------------------------------------------------------------------------------------------------------------
John T. West First Vice President, Secretary and Compliance First Vice President of the Transfer
Age 48 Officer since 2003. Prior to 2003, First Vice President, Agent, 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.
124
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
LOGO: WM
GROUP OF FUNDS
MONEY
MARKET
FUNDS
Common sense. Uncommon solutions.
Photo: Lake
ANNUAL REPORT
for the year ended
October 31, 2003
MONEY MARKET FUNDS
Money Market Fund
Tax-Exempt Money Market Fund
California Money Fund
TABLE OF CONTENTS
Message from the President.............................. 1
Individual Portfolio Reviews............................ 2
Portfolio of Investments................................ 4
Statements of Assets and Liabilities.................... 12
Statements of Operations................................ 13
Statements of Changes in Net Assets..................... 14
Statements of Changes in Net
Assets - Capital Stock Activity......................... 15
Financial Highlights.................................... 16
Notes to Financial Statements........................... 4
Independent Auditors' Report............................ 22
Other Information (unaudited)........................... 23
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] Money Market Funds
Portfolio Manager
Scott J. Peterson, CFA
WM Advisors, Inc.
The Funds are managed by a fixed-income team led by Scott J. Peterson,
Portfolio Manager of WM Advisors, Inc. Mr. Peterson, CFA, who joined WM
Advisors in 2002, has investment and financial analysis experience dating
back to 1989. He holds a B.S. in Mathematics from Brigham Young University
and an M.B.A. in Finance from New York University.
Economic Overview
The Federal Reserve remained very accommodative throughout the year in an
effort to stimulate the economy. With the prospects for war and the
potential for deflation in mind, the Fed lowered rates by 50 basis points
(0.5%) last November. This was followed by a 25 basis point decrease in late
June, putting the federal funds rate at a 45-year low of 1% and providing
substantial liquidity to the economy. The Fed has since released several
statements reaffirming plans to keep interest rates low for as long as is
necessary and inflation remains in check. The economy responded by
registering strong growth in both the second and third quarters of 2003.
Third quarter domestic growth levels topped 8%, the largest quarterly
economic growth rate in nearly two decades. Although economic growth has
rebounded, employment has remained weak, and a lack of new jobs could
eventually affect consumption.
===========================================================================================
Fund Performance* 7-Day 7-Day
as of October 31, 2003 Simple Yield Compounded Yield Weighted Average
Class A shares Class A shares Maturity (days)
WM Money Market Fund 0.58% 0.59% 56
- -------------------------------------------------------------------------------------------
WM Tax-Exempt Money Market Fund(1) 0.38% 0.38% 51
- -------------------------------------------------------------------------------------------
WM California Money Fund(1) 0.40% 0.40% 54
===========================================================================================
<FN>
NOTE: AN INVESTMENT IN THE FUNDS IS NOT INSURED OR GUARANTEED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY.
ALTHOUGH THE FUNDS SEEK TO PRESERVE THE VALUE OF YOUR INVESTMENT AT
$1.00 PER SHARE, IT IS POSSIBLE TO LOSE MONEY BY INVESTING IN THE FUNDS.
* During the period noted, WM Advisors, Inc. waived a portion of its
management fees for the WM Tax-Exempt Money Market and WM California
Money Funds. The Funds' yields would have been lower had the Advisor
not waived a portion of its fees. All yield information represents
past performance, which cannot guarantee future results. Yields
for Class B and Class C shares will differ.
(1) A portion of the income may be subject to state and/or local taxes,
and it may be subject to federal alternative minimum tax (AMT) for
certain investors.
(2) Insurance applies only to the timely repayment of principal and
interest of the underlying securities and does not protect the
market value of the Fund.
2
Economic and Interest Rate Outlook
The Fed has incentive to hold rates low and help broaden the recovery, but
it could raise rates at the first sign of true inflation. Currently,
inflation remains historically weak, but the Fed may act quickly to avert
potential price pressures. Although this does not seem likely in the very
near term, it is something we are watching very closely. As a result, we
will maintain a somewhat conservative stance in managing maturities.
Interest rates are much lower now compared to their long-term historical
average, and we expect that over time rates could increase as the economy
improves. In general, as rates move higher so do yields of short-term money
market instruments, an outcome that benefits the WM Money Market Funds.
Portfolio Strategy
WM Money Market Fund
As of October 31, 2003, the Fund's net assets totaled more than $817
million, representing a decrease relative to the previous fiscal year's
total. The decline in asset levels may be partially due to the recent equity
market resurgence. With low interest rates providing stimulus for the
economy and reducing money market yields, assets flowed back into the equity
markets. As rates moved to historical lows, we kept the Fund's weighted
average maturity in a neutral stance. We also utilized a conservative
strategy of seeking yield through longer-term corporate issues nearing
maturity and incorporating taxable municipal securities with yield
advantages over commercial paper. We continue to look for instruments that
have competitive yield characteristics, but that we believe will not be
adversely affected by interest rate movements.
WM Tax-Exempt Money Market Fund
At the close of the period, net assets in the Fund totaled over $30 million,
a decrease from the previous fiscal year-end. The Fund's yield was affected
by the very low short-term interest rates that persisted throughout the
period. However, the Fund continues to offer stability and liquidity while
producing tax-exempt income.(1) Currently, the Fund's average maturity is
slightly longer than that of its peer group. We continue to seek tax-exempt
securities with yield advantages.
WM California Money Fund
The California Money Fund's net assets totaled nearly $25 million at the end
of the period, representing a small decline from a year ago. Due to our
concern about the state's credit issues, we have bought only securities with
additional credit enhancement such as bond insurance or a letter of
credit.(2)
VALUE OF A $10,000 INVESTMENT (CLASS A SHARES)(3)
[graph]
NAV Inflation
OCT-93 $10,000 $10,000
$10,021 $10,007
$10,042 $10,007
$10,061 $10,034
$10,080 $10,068
$10,102 $10,102
$10,126 $10,117
$10,152 $10,124
$10,179 $10,158
$10,209 $10,185
$10,240 $10,226
$10,272 $10,254
OCT-94 $10,308 $10,261
$10,346 $10,274
$10,389 $10,274
$10,435 $10,315
$10,477 $10,357
$10,533 $10,391
$10,579 $10,425
$10,626 $10,446
$10,670 $10,467
$10,716 $10,467
$10,762 $10,494
$10,808 $10,515
OCT-95 $10,855 $10,550
$10,902 $10,542
$10,950 $10,535
$10,996 $10,597
$11,037 $10,631
$11,081 $10,686
$11,122 $10,728
$11,165 $10,748
$11,206 $10,755
$11,250 $10,775
$11,297 $10,796
$11,342 $10,830
OCT-96 $11,390 $10,865
$11,436 $10,886
$11,482 $10,886
$11,528 $10,920
$11,570 $10,954
$11,616 $10,982
$11,663 $10,995
$11,712 $10,988
$11,760 $11,001
$11,809 $11,015
$11,859 $11,036
$11,907 $11,063
OCT-97 $11,957 $11,091
$12,006 $11,084
$12,059 $11,071
$12,112 $11,092
$12,158 $11,113
$12,210 $11,134
$12,259 $11,154
$12,312 $11,174
$12,364 $11,188
$12,417 $11,201
$12,468 $11,215
$12,518 $11,228
OCT-98 $12,568 $11,255
$12,616 $11,255
$12,665 $11,248
$12,713 $11,275
$12,754 $11,289
$12,798 $11,323
$12,842 $11,405
$12,889 $11,405
$12,936 $11,405
$12,985 $11,439
$13,034 $11,467
$13,084 $11,522
OCT-99 $13,136 $11,543
$13,187 $11,550
$13,243 $11,550
$13,299 $11,577
$13,355 $11,646
$13,415 $11,741
$13,477 $11,748
$13,543 $11,755
$13,610 $11,823
$13,679 $11,843
$13,751 $11,858
$13,822 $11,919
OCT-00 $13,895 $11,940
$13,964 $11,947
$14,037 $11,940
$14,106 $12,015
$14,162 $12,063
$14,222 $12,091
$14,274 $12,139
$14,323 $12,194
$14,366 $12,214
$14,405 $12,180
$14,442 $12,180
$14,477 $12,235
OCT-01 $14,506 $12,193
$14,527 $12,173
$14,548 $12,125
$14,565 $12,153
$14,580 $12,202
$14,596 $12,270
$14,612 $12,339
$14,629 $12,339
$14,645 $12,346
$14,662 $12,360
$14,678 $12,400
$14,694 $12,428
OCT-02 $14,710 $12,448
$14,723 $12,448
$14,736 $12,421
$14,748 $12,476
$14,759 $12,572
$14,769 $12,648
$14,779 $12,620
$14,788 $12,599
$14,797 $12,613
$14,804 $12,627
$14,812 $12,675
$14,819 $12,716
OCT-03 $14,827 $12,761
<FN>
(3) The returns shown above for the Fund are for Class A shares and assume
reinvestment of all dividends and distributions. Performance for Class B
and Class C shares will differ. Inflation is measured by the Consumer
Price Index for all urban consumers. Past performance does not guarantee
future results.
3
PORTFOLIO OF INVESTMENTS
MONEY MARKET FUND
OCTOBER 31, 2003
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
---------- ------
COMMERCIAL PAPER (DOMESTIC) - 0.2%
(Cost $1,992)
$ 2,000 Cooperative Association of Tractor Dealers Inc.,
Series B, (AMBAC Insured),
1.160% due 02/27/2004+++ $ 1,992
------------
CERTIFICATES OF DEPOSIT (YANKEE) - 8.4%
25,000 Bank of Nova Scotia,
1.070% due 08/26/2004++ 24,999
23,700 Bayerische Landesbank NY,
1.080% due 08/25/2004++ 23,700
20,000 Royal Bank of Canada,
1.045% due 06/02/2004++ 19,998
------------
Total Certificates of Deposit (Yankee)
(Cost $68,697) 68,697
------------
MEDIUM TERM NOTES - 28.2%
11,900 American Express Credit Corporation, Series B,
1.170% due 12/17/2003++ 11,901
American Honda Finance Corporation:
10,000 1.090% due 02/20/2004++** 10,000
15,000 1.280% due 05/20/2004++** 15,014
6,000 1.330% due 02/17/2004++** 6,004
3,000 Associates Corporation NA, Sr. Note, Series G,
8.250% due 10/15/2004 3,193
25,000 Caterpillar Financial Services Corporation,
Series F,
1.306% due 03/05/2004++ 25,018
7,000 Citigroup Global Markets, Series K,
1.260% due 06/17/2004++ 7,007
6,640 Credit Suisse First Boston, Inc. (USA),
1.360% due 01/20/2004++ 6,644
General Electric Capital Corporation,
Series A:
15,000 1.120% due 01/28/2004++ 15,002
8,590 7.250% due 05/03/2004 8,843
3,500 8.090% due 04/01/2004 3,596
20,000 Goldman Sachs Group, Inc., Series B,
1.490% due 03/08/2004++ 20,028
900 International Business Machines Corporation,
5.250% due 12/01/2003 903
26,000 J.P. Morgan Chase & Company, Series C,
1.240% due 12/29/2003++ 26,006
20,000 MBIA Global Funding LLC,
1.100% due 01/02/2004++** 20,000
Merrill Lynch & Company, Series B:
9,775 5.350% due 06/15/2004 10,025
2,400 5.880% due 01/15/2004 2,423
8,500 Salomon Smith Barney Holdings Inc.,
Series K,
1.280% due 12/19/2003++ 8,502
Toyota Motor Credit Corporation:
15,000 1.070% due 01/16/2004++ 15,000
15,000 1.070% due 06/17/2004++ 14,999
------------
Total Medium Term Notes
(Cost $230,108) 230,108
------------
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
---------- ------
CORPORATE BONDS AND NOTES - 21.5%
$ 2,955 ASSK Properties LC, Note, (LOC: Wells
Fargo & Company),
1.300% due 12/01/2017+ $ 2,955
12,060 Associates Corporation NA, Sr. Note,
5.800% due 04/20/2004 12,304
3,000 Campus Research Corporation, Note, Series A,
(LOC: Wells Fargo & Company),
1.350% due 06/01/2013+ 3,000
2,309 Citigroup Inc., Sr. Note,
5.800% due 03/15/2004 2,346
3,500 Corporate Finance Managers, Note,
(LOC: Wells Fargo & Company),
1.200% due 02/02/2043+ 3,500
1,600 DBSI First Mortgage 1998, Note,
(LOC: U.S. Bancorp),
1.150% due 07/01/2023+ 1,600
31,316 Everett Clinic, P.S., Bond,
(LOC: Bank of America Corporation),
1.150% due 05/01/2022+ 31,316
12,000 First Union National Bank, Sr. Note,
1.310% due 06/21/2004++ 12,016
4,600 Foster Schweihofer Real Estate Holdings
Company, LLC, Note,
(LOC: Fifth Third Bancorp),
1.090% due 09/20/2033+ 4,600
7,350 General Electric Capital Corporation, Note,
1.210% due 03/25/2004++** 7,353
2,000 Gulf Gate Apartments, Bond,
(LOC: Wells Fargo & Company),
1.200% due 09/01/2028+** 2,000
1,000 Lauren Company, LLC, Bond,
1.200% due 07/01/2033+** 1,000
2,000 Marsh Enterprises LLC, Note,
(LOC: Fifth Third Bancorp),
1.090% due 01/01/2028+ 2,000
4,500 Medical Properties Inc., Revenue Bonds,
(Dakota Clinic Ltd. Project),
(LOC: ABN AMRO Bank NV),
1.190% due 12/15/2024+ 4,500
5,100 National City Bank, Note,
1.150% due 11/14/2003++ 5,100
5,000 Pineview Estates LC, Note,
(LOC: Fifth Third Bancorp),
1.090% due 01/01/2023+** 5,000
15,000 Portland Clinic LLP, Bond,
(LOC: U.S. Bancorp),
1.190% due 11/20/2027+ 15,000
15,955 Presbyterian Homes & Services of New Jersey
Obligated Group, Revenue Bonds, Series
1998-B1, (LOC: PNC Financial Services
Group, Inc.),
1.120% due 12/01/2028+ 15,955
4,750 Rise Inc., Note, (LOC: Wells Fargo &
Company),
1.300% due 11/01/2022+ 4,750
5,000 Rockwood Quarry LLC, Note,
(LOC: Fifth Third Bancorp),
1.090% due 12/01/2022+ 5,000
See Notes to Financial Statements.
4
PORTFOLIO OF INVESTMENTS (CONTINUED)
MONEY MARKET FUND
OCTOBER 31, 2003
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
---------- ------
CORPORATE BONDS AND NOTES - (CONTINUED)
$ 1,000 Sanders CRS Exchange LLC, Note,
(LOC: Wells Fargo & Company),
1.300% due 10/01/2023+** $ 1,000
3,000 Tacoma Goodwill Industries, Bond,
(LOC: Bank of America Corporation),
1.150% due 02/01/2023+ 3,000
12,000 Toyota Motor Credit Corporation, Note,
5.625% due 11/13/2003 12,017
16,500 Wachovia Corporation, Sr. Note,
6.700% due 06/21/2004 17,076
1,478 Watts Brothers Frozen Foods, Bond,
(LOC: U.S. Bancorp),
1.150% due 07/01/2013+ 1,478
------------
Total Corporate Bonds and Notes
(Cost $175,866) 175,866
------------
TAXABLE MUNICIPAL BONDS - 24.2%
2,000 ABAG, California, Finance Authority
for Nonprofit Corporations, Revenue Bonds,
(Public Policy Institute of California Project),
Series B, (LOC: Bank of New York
Company, Inc.),
1.200% due 11/01/2031+ 2,000
7,450 Acworth, Georgia, Downtown Development
Authority, IDR, (City of Acworth Cable
Fiber Optic Project), (AMBAC Insured),
1.150% due 01/01/2017+ 7,450
10,000 Brooks County, Georgia, Development
Authority, IDR, (Langboard Inc. Project),
(LOC: Bank of America Corporation),
1.120% due 04/01/2018+ 10,000
5,600 California Educational Facilities Authority,
Loan Agreement Revenue, (University of
Judaism), Series B,
(LOC: Allied Irish Bank PLC),
1.190% due 12/01/2028+ 5,600
Connecticut State Housing Finance Authority,
Housing Revenue, (AMBAC Insured):
(Housing Mortgage Finance Program):
14,000 Series A-4,
1.070% due 05/15/2032+ 14,000
2,860 Series F-1,
1.070% due 11/15/2016+ 2,860
25,000 Subseries B-6,
1.070% due 11/15/2027+ 25,000
Illinois Health Facilities Authority, Health Care
Revenue, Series B:
6,000 (Silver Cross Hospital Project),
(LOC: Fifth Third Bancorp),
1.120% due 08/15/2017+ 6,000
1,300 (West Suburban Hospital Medical Center
Project), (LOC: American National Bank),
1.120% due 07/01/2024+ 1,300
3,430 Kit Carson County, Colorado, Agricultural
Development Revenue, (Midwest Farms LLC),
(LOC: Wells Fargo & Company),
1.100% due 06/01/2027+ 3,430
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
---------- ------
$ 4,030 Michigan State Strategic Fund, Limited
Obligation Revenue, (Environmental Research
Institute of Michigan Project), Series B,
(LOC: Fifth Third Bancorp),
1.100% due 10/01/2025+ $ 4,030
2,500 New York City Housing Development
Corporation, MFHR, Series B,
(LOC: KeyBank National Association),
1.120% due 07/01/2035+ 2,500
20,000 New York City, GO, Subseries A-11,
(FGIC Insured),
1.070% due 11/01/2020+ 20,000
New York State Housing Finance Agency,
Housing Revenue, Series B:
14,000 (350 West 43rd Street Project),
(LOC: Fleet National Bank),
1.070% due 11/01/2034+ 14,000
4,800 (West 33rd Street Project), (FNMA
Collateral),
1.070% due 11/15/2036+ 4,800
41,100 Oakland-Alameda County, California,
Coliseum Authority, Lease Revenue,
(Coliseum Project), Series D,
(LOC: Wachovia Corporation),
1.050% due 02/01/2011+ 41,100
2,320 Orange County, Florida, Housing Finance
Authority, MFHR, (Northbridge At Millenia-
Phase II Project), Series B, (LOC:
SouthTrust Bank),
1.160% due 08/15/2036+ 2,320
2,435 Plymouth, Minnesota, Health Facilities
Revenue, (Westhealth Project), Series B,
(FSA Insured),
1.100% due 06/01/2024+ 2,435
2,000 Roman Catholic Diocese of Raleigh, North
Carolina, Demand Notes, Series A,
(LOC: Bank of America Corporation),
1.170% due 06/01/2018+ 2,000
5,250 Santa Rosa, California, Pension Obligation,
Revenue Bonds, Series A,
(LOC: Landesbank Hessen-Thuringen),
1.200% due 09/01/2024+ 5,250
11,100 South Fulton, Georgia, Municipal Regional
Jail Authority, Lease Revenue, (Union City
Justice Center Project), (MBIA Insured),
1.120% due 11/01/2017+ 11,100
5,750 Union County Improvement Authority, New
Jersey, Revenue Bonds, (Cedar Glen
Housing Corporation- Hanover Township
Housing Project), Series B, (FNMA
Collateral),
1.100% due 12/15/2014+ 5,750
See Notes to Financial Statements.
5
PORTFOLIO OF INVESTMENTS (CONTINUED)
MONEY MARKET FUND
OCTOBER 31, 2003
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
---------- ------
TAXABLE MUNICIPAL BONDS - (CONTINUED)
Washington State Housing Finance
Commission, MFHR, Series B:
$ 2,010 (Boardwalk Apartments Project),
(FNMA Collateral),
1.130% due 09/01/2028+ $ 2,010
1,830 (Cedar Landing Project),
(LOC: U.S. Bancorp),
1.050% due 12/01/2028+ 1,830
1,160 (Oxford Square Project),
(LOC: U.S. Bancorp),
1.050% due 12/01/2028+ 1,160
------------
Total Taxable Municipal Bonds
(Cost $197,925) 197,925
------------
U.S. GOVERNMENT AGENCY OBLIGATIONS - 11.6%
20,000 Federal Home Loan Bank, Bond,
1.010% due 07/06/2004++ 19,989
Federal Home Loan Mortgage Corporation,
Note:
10,000 1.290% due 04/22/2004+++ 9,938
10,000 1.360% due 08/06/2004 9,998
15,000 1.510% due 09/03/2004 15,000
Federal National Mortgage Association,
Note:
15,000 1.030% due 07/26/2004 15,000
10,000 1.200% due 07/23/2004+++ 9,912
15,000 1.350% due 10/22/2004 15,000
------------
Total U.S. Government Agency Obligations
(Cost $94,837) 94,837
------------
FUNDING AGREEMENT - 4.3%
(Cost $35,000)
35,000 New York Life Insurance,
1.171% due 08/04/2004 35,000
------------
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
---------- ------
REPURCHASE AGREEMENT - 1.1%
(Cost $9,010)
$ 9,010 Agreement with Goldman Sachs Group, Inc.,
0.960% dated 10/31/2003, to be
repurchased at $9,011 on 11/03/2003
(Collateralized by $7,646 U.S. Treasury
Bonds, having various interest rates and
maturities, Market Value $9,172) $ 9,010
------------
TOTAL INVESTMENTS (Cost $813,435*) 99.5% 813,435
OTHER ASSETS AND LIABILITIES (NET) 0.5 3,759
----- ------------
NET ASSETS 100.0% $ 817,194
===== ============
<FN>
- ---------------
* Aggregate cost for federal tax purposes.
** Security acquired in a transaction exempt from registration under Rule 144A
of the Securities Act of 1933.
+ Variable rate securities payable upon demand with not more than five
business days' notice, and secured by bank letters of credit or guarantees
by certain corporations. The interest rate shown reflects the rate in
effect at October 31, 2003.
++ Floating rate security whose interest rate is reset periodically based on
an index.
+++ Rate represents discount rate on purchase date.
- ----------------------------------------------------------------------------
GLOSSARY OF TERMS
AMBAC -- American Municipal Bond Assurance Corporation
FGIC -- Federal Guaranty Insurance Corporation
FNMA -- Federal National Mortgage Association
FSA -- Financial Security Assurance
GO -- General Obligation Bond
IDR -- Industrial Development Revenue
LOC -- Letter of Credit
MBIA -- Municipal Bond Investors Assurance
MFHR -- Multi-family Housing Revenue
- ----------------------------------------------------------------------------
See Notes to Financial Statements.
6
PORTFOLIO OF INVESTMENTS
TAX-EXEMPT MONEY MARKET FUND
OCTOBER 31, 2003
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
------ ------
MUNICIPAL BONDS AND NOTES - 101.4%
ALABAMA - 0.5%
$ 150 Homewood, Educational Building Authority,
College & University Revenue, (Educational
Facilities-Samford University Project),
3.750% due 12/01/2003 $ 150
------------
ALASKA - 2.7%
Anchorage, UTGO, (MBIA Insured):
300 (Pre-refunded to 07/01/2004 @ $102),
6.000% due 07/01/2014 316
500 Series A,
2.500% due 06/01/2004 504
------------
820
------------
ARIZONA - 2.8%
855 Arizona Health Facilities Authority, Health
Care Revenue, (Pooled Loan Program),
(FGIC Insured),
1.040% due 10/01/2015+ 855
------------
CALIFORNIA - 5.0%
1,500 Los Angeles, Regional Airports Improvement
Corporation, Lease Revenue, (LAX Two
Corporation Project), (LOC: Societe
Generale Group),
1.150% due 12/01/2025+ 1,500
------------
COLORADO - 2.4%
320 Metropolitan Football Stadium District,
Sales Tax Revenue, Series B, (MBIA
Insured),
Zero coupon due 01/01/2004 319
150 Platte River Power Authority, Power Revenue,
Series DD, (MBIA Insured),
5.750% due 06/01/2004 154
250 Weld County School District No. 001, UTGO,
(AMBAC Insured),
6.000% due 12/01/2003 251
------------
724
------------
DISTRICT OF COLUMBIA - 2.6%
300 District of Columbia, IDR, (Resources for the
Future Inc. Project), (LOC: Wachovia
Corporation),
1.100% due 08/01/2029+,++ 300
465 District of Columbia, UTGO, Series B-2,
(FSA Insured),
5.300% due 06/01/2004 476
------------
776
------------
FLORIDA - 11.0%
1,500 Dade County, Industry Development
Authority, IDR, (Dolphins Stadium Project),
Series C, (LOC: Societe Generale Group),
1.030% due 01/01/2016+ 1,500
200 First Governmental Financing Commission,
Revenue Bonds, (MBIA Insured),
3.500% due 07/01/2004 203
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
------ ------
$ 200 Lake County, COP, (AMBAC Insured),
4.550% due 12/01/2003 $ 201
200 Lee County, COP, (FSA Insured),
5.400% due 08/01/2004 206
500 Orange County, Health Facilities Authority,
Health Care Revenue, (Presbyterian
Retirement Community Project),
(LOC: Bank of America Corporation),
1.100% due 11/01/2028+ 500
700 Orange County, IDR, (Central Florida YMCA
Project), Series A, (LOC: Bank of America
Corporation),
1.100% due 05/01/2027+ 700
------------
3,310
------------
GEORGIA - 2.5%
750 Dahlonega, Downtown Development
Authority, Student Housing Revenue,
(North Georgia Student Housing LLC
Project), Series A, (LOC: Wachovia
Corporation),
1.150% due 06/01/2028+ 750
------------
ILLINOIS - 7.1%
150 Calumet City, UTGO, (Corporate Purpose
Bonds), Series B, (FGIC Insured),
(Pre-refunded to 01/01/2004 @ $100),
6.200% due 01/01/2006 151
250 Hoffman Estates, Tax Increment & Allocation
Revenue, (Economic Development Project),
(AMBAC Insured),
5.000% due 11/15/2003 251
350 Illinois Health Facilities Authority, Health
Care Revenue, (Blessing Hospital Project),
Series B, (FSA Insured),
1.150% due 11/15/2029+ 350
1,000 Illinois International Port District Facilities,
Revenue Bonds, (LOC: ABN AMRO
Bank NV),
1.070% due 01/01/2023+ 1,000
200 Illinois State, UTGO, (Pre-refunded to
04/01/2004 @ $102),
5.800% due 04/01/2019 208
200 Southern Illinois University, Housing &
Auxiliary Facilities System Revenue,
Series A, (MBIA Insured),
Zero coupon due 04/01/2004 199
------------
2,159
------------
INDIANA - 0.6%
180 Indiana State Educational Facilities
Authority, College & University Revenue,
(Franklin College Project),
(LOC: Bank One Corporation),
1.150% due 10/01/2019+ 180
------------
IOWA - 2.0%
600 Webster County, Educational Facilities
Revenue, (State Edmond Project),
(LOC: Wells Fargo & Company),
1.100% due 07/01/2020+ 600
------------
See Notes to Financial Statements.
7
PORTFOLIO OF INVESTMENTS (CONTINUED)
TAX-EXEMPT MONEY MARKET FUND
OCTOBER 31, 2003
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
------ ------
MUNICIPAL BONDS AND NOTES - (CONTINUED)
KANSAS - 5.0%
$ 1,500 Shawnee, IDR, (Shawnee Village
Association LP), (LOC: J.P. Morgan
Chase & Company),
1.000% due 12/01/2009+ $ 1,500
------------
KENTUCKY - 1.6%
500 Breckinridge County, Lease Program Revenue,
(Kentucky Association Counties Leasing
Trust Project), (LOC: U.S. Bancorp),
1.040% due 12/01/2029+ 500
------------
MASSACHUSETTS - 5.6%
575 Massachusetts State Health & Educational
Facilities Authority, Revenue Bonds,
(Capital Asset Program), Series M-2,
(LOC: Fleet National Bank),
1.000% due 07/01/2031+ 575
390 Massachusetts State, UTGO, (Consolidated
Loan Project), Series A, (FGIC Insured),
Zero coupon due 03/01/2004 388
500 Massachusetts Water Pollution Abatement
Trust, Water Revenue, Series A, ETM,
6.000% due 08/01/2004 518
212 Northbridge, UTGO, (MBIA Insured),
2.500% due 06/01/2004 214
------------
1,695
------------
MICHIGAN - 3.5%
900 Michigan State Hospital Finance Authority,
Health Care Revenue, (Hospital Equipment
Loan Program), Series A,
(LOC: National City Corporation),
1.020% due 12/01/2023+ 900
150 Novi, Community School District, UTGO,
(FGIC Insured), (Pre-refunded to
05/01/2004 @ $101),
5.300% due 05/01/2010 155
------------
1,055
------------
MINNESOTA - 1.0%
300 Golden Valley, IDR, (Unicare Homes Inc.
Project), (LOC: Bank of America
Corporation),
1.070% due 09/01/2014+ 300
------------
MISSOURI - 2.3%
370 Macon, COP, (MBIA Insured),
2.500% due 08/01/2004 374
300 St. Louis, Board of Education, UTGO,
Series A, (FGIC Insured),
8.500% due 04/01/2004 309
------------
683
------------
NEVADA - 0.4%
120 Clark County, School District, LTGO,
& Renovation Project), Series B,
(FGIC Insured),
6.500% due 06/15/2004 124
------------
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
------ ------
NEW JERSEY - 1.2%
$ 150 Essex County, UTGO, Series A-1, (FGIC
Insured),
5.000% due 11/15/2003 $ 151
200 Keansburg, UTGO, Series A, (MBIA Insured),
2.500% due 12/01/2003 200
------------
351
------------
NEW YORK - 1.4%
220 New York State Housing Finance Agency,
Revenue Bonds, (Nursing Home and Health
Care Project), Series A, (MBIA Insured),
4.250% due 11/01/2003 220
210 New York State Urban Development
Corporation, Economic Development &
Natural Resource Preservation Service
Contract Revenue, Series A, (FSA Insured),
4.700% due 04/01/2004 213
------------
433
------------
NORTH DAKOTA - 3.8%
1,150 Grand Forks, Hospital Facilities Revenue,
(The United Hospital Obligated Group
Project), (LOC: ABN AMRO Bank NV),
1.150% due 12/01/2016++,+ 1,150
------------
OHIO - 4.6%
1,400 Warren County, Health Care Facilities
Authority, Health Care Revenue,
(Otterbein Homes Project), Series A,
(LOC: Fifth Third Bancorp),
1.040% due 07/01/2021+ 1,400
------------
OKLAHOMA - 1.7%
500 Oklahoma State Industrial Authority, Health
Care Revenue, (Tealridge Manor
Corporation Project), (LOC: Bank of
America Corporation),
1.100% due 11/01/2018+ 500
------------
OREGON - 2.1%
240 Lane County, Fire District No. 1, UTGO,
(FSA Insured),
2.000% due 01/01/2004 240
195 Oregon State Department of Transportation,
Transit Revenue, (Regional Light Rail
Extension-Westside Project),
(AMBAC Insured),
1.650% due 06/01/2004 196
200 Port of Portland, Portland International
Airport Revenue, Series Fifteen A,
(FGIC Insured),
5.000% due 07/01/2004 205
------------
641
------------
PENNSYLVANIA - 3.2%
175 Allegheny County, Hospital Development
Authority, Health Care Revenue, (UPMC
Health System Project), Series A,
(MBIA Insured),
5.000% due 08/01/2004 180
See Notes to Financial Statements.
8
PORTFOLIO OF INVESTMENTS (CONTINUED)
TAX-EXEMPT MONEY MARKET FUND
OCTOBER 31, 2003
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
------ ------
MUNICIPAL BONDS AND NOTES - (CONTINUED)
PENNSYLVANIA - (CONTINUED)
$ 200 Middletown, Area School District, UTGO,
Series A, (FGIC Insured),
2.000% due 02/15/2004 $ 201
200 Sharon, City School District, UTGO,
(FSA Insured),
2.000% due 05/15/2004 201
385 Wilson, Area School District, UTGO,
(FSA Insured),
2.000% due 03/15/2004 386
------------
968
------------
RHODE ISLAND - 0.3%
100 Warwick, UTGO, Series A, (AMBAC Insured),
4.650% due 02/15/2004 101
------------
TENNESSEE - 3.3%
1,000 Metropolitan Government Nashville &
Davidson County, Industrial Development
Board, MFHR, (Chimneytop II Project),
(LOC: Bank of America Corporation),
1.050% due 09/01/2006+ 1,000
------------
TEXAS - 7.4%
225 Brownsville, Naval District, UTGO,
(AMBAC Insured),
2.500% due 03/01/2004 226
375 Deer Park, Waterworks & Sewer System,
(FSA Insured),
2.500% due 03/01/2004 377
320 Garland, Water & Sewer Revenue,
(AMBAC Insured),
2.000% due 03/01/2004 321
1,300 Port of Port Arthur Navigation, District of
Jefferson County Revenue, (ATOFINA
Petrochemicals, Inc. Project), Series C,
(LOC: Total SA),
1.100% due 04/01/2027+ 1,300
------------
2,224
------------
VIRGINIA - 1.2%
350 Norfolk Industrial Development Authority, IDR,
(Children's Hospital of the King's Daughters
Inc. Project), (LOC: Wachovia Corporation),
1.050% due 06/01/2020+ 350
------------
WASHINGTON - 10.5%
310 Bellingham, Housing Authority, Housing
Revenue, (Cascade Meadows Project),
(MBIA Insured),
4.200% due 11/01/2003 310
500 Benton County, Public Utility District No. 1,
Electric Power & Light Revenue,
(AMBAC Insured),
6.000% due 11/01/2003 500
1,000 King County, Economic Enterprise Corporation
Revenue, (Puget Sound Blood Center Project),
(LOC: U.S. Bancorp),
1.150% due 04/01/2023+ 1,000
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
------ ------
$ 1,010 Seattle, Low Income Housing Assistance
Authority, Health Care Revenue, (Bayview
Manor Homes Project), Series B,
(LOC: U.S. Bancorp),
1.150% due 05/01/2019+ $ 1,010
340 Washington State Housing Finance
Commission, Elderly Housing Revenue,
(Riverview Retirement Project),
(LOC: U.S. Bancorp),
1.150% due 07/01/2022+ 340
------------
3,160
------------
WEST VIRGINIA - 2.1%
645 West Virginia State Parkways Economic
Development & Tourism Authority, Highway
Tolls Revenue, (FGIC Insured),
Zero coupon due 05/15/2004 641
------------
Total Municipal Bonds and Notes
(Cost $30,600) 30,600
------------
SHARES
------
INVESTMENT COMPANY SECURITIES - 0.5%
136,995 Dreyfus Tax-Exempt Cash
Management Fund 137
1,000 Wells Fargo Tax Free Institutional
Money Market Fund 1
------------
Total Investment Company Securities
(Cost $138) 138
------------
TOTAL INVESTMENTS (Cost $30,738*) 101.9% 30,738
OTHER ASSETS AND LIABILITIES (NET) (1.9) (576)
----- ------------
NET ASSETS 100.0% $30,162
===== ============
<FN>
- --------------------
* Aggregate cost for federal tax purposes.
+ Variable rate securities payable upon demand with not more than five
business days' notice, and secured by bank letters of credit or guarantees
by certain corporations. The interest rate shown reflects the rate in
effect at October 31, 2003.
++ Security is a private placement.
- ----------------------------------------------------------------------------
GLOSSARY OF TERMS
AMBAC -- American Municipal Bond Assurance Corporation
COP -- Certificate of Participation
ETM -- Escrowed to Maturity
FGIC -- Federal Guaranty Insurance Corporation
FSA -- Financial Security Assurance
IDR -- Industrial Development Revenue
LOC -- Letter of Credit
LTGO -- Limited Tax General Obligation Bond
MBIA -- Municipal Bond Investors Assurance
MFHR -- Multi-family Housing Revenue
UTGO -- Unlimited Tax General Obligation Bond
- ----------------------------------------------------------------------------
Tax-Exempt Money Market Fund had the following insurance concentrations
greater than 10% at October 31, 2003 (as a percentage of net assets):
MBIA 10.6%
FGIC 10.5%
See Notes to Financial Statements.
9
PORTFOLIO OF INVESTMENTS
CALIFORNIA MONEY FUND
OCTOBER 31, 2003
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
------ ------
MUNICIPAL BONDS AND NOTES - 98.5%
CALIFORNIA - 95.3%
ABAG Financing Authority For Nonprofit
Corporation, Revenue Bonds:
$ 1,200 (Hamlin School Project), Series A,
(LOC: BNP Paribas SA),
1.100% due 08/01/2032+ $ 1,200
1,000 (Point Loma Nazarene University Project),
(LOC: Allied Irish Bank PLC),
1.100% due 10/01/2033+ 1,000
1,000 (Public Policy Institute of California Project),
Series A, (LOC: California State Teachers
Retirement System),
1.000% due 11/01/2031+ 1,000
Alameda County, IDR, Series A, AMT,
(LOC: Wells Fargo & Company):
800 (Heat and Control Inc. Project),
1.150% due 11/01/2025+ 800
400 (JMS Family Partnership Project),
1.100% due 10/01/2025+ 400
Bay Area Governments Association,
Federal Transit Administration Capital
Grant Revenue, (BART SFO Extension
Project), Series A,
(AMBAC Insured):
100 3.375% due 06/15/2004 101
200 5.000% due 06/15/2004 205
190 California Community College Financing
Authority, Lease Revenue,
(AMBAC Insured),
3.000% due 06/01/2004 192
1,200 California State Department of Water
Resources, Power Supply Revenue,
Series C-10, (LOC: Landesbank Hessen-
Thuringen),
0.980% due 05/01/2022+ 1,200
California State Economic Development
Financing Authority, IDR, AMT,
(LOC: Wells Fargo & Company):
100 (Calco Project),
1.250% due 04/01/2027+ 100
1,050 (Wesflex Pipe Manufacturing Project),
1.200% due 04/01/2018+ 1,050
150 California State Public Works Board, Lease
Revenue, (Various Community College
Projects), (Pre-refunded to 03/01/2004
@ $102),
7.000% due 03/01/2014 156
125 California State University, Housing System
Revenue, (FGIC Insured),
4.900% due 11/01/2003 125
1,200 California State, UTGO, Series C-1,
(LOC: Bank of America Corporation),
1.100% due 05/01/2033+ 1,200
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
------ ------
California Statewide Communities Development
Authority, College & University Revenue:
$ 1,000 (Biola University Project), Series A,
(LOC: Allied Irish Bank PLC),
1.100% due 10/01/2032+ $ 1,000
1,000 (Masters College), (LOC: U.S. Bancorp),
1.000% due 02/01/2032+ 1,000
100 California Statewide Communities
Development Authority, COP,
(John Muir/Mt. Diablo Health Center),
(AMBAC Insured),
1.130% due 08/15/2027+ 100
500 California Statewide Communities
Development Authority, Limited Obligation
Revenue, (The Painted Turtle Gang Camp
Foundation), (LOC: Allied Irish Bank PLC),
1.100% due 04/01/2033+ 500
1,000 California Statewide Communities
Development Authority, MFHR, (Ivy Hill
Apartments Project), Series I, AMT,
(LOC: Bank of America Corporation),
1.130% due 02/01/2033+ 1,000
130 Charter Oak, Unified School District,
UTGO, (Election of 2000), Series B,
(FSA Insured),
2.000% due 07/01/2004 131
340 Desert Sands, Unified School District, COP,
(MBIA Insured),
3.000% due 03/01/2004 342
400 Fontana, COP, (Refunding Project),
(AMBAC Insured),
3.850% due 09/01/2004 409
200 Fullerton, COP, (MBIA Insured),
3.000% due 08/01/2004 203
390 Irvine Ranch, Water District, UTGO,
(Consolidated Improvement Districts Nos.
102, 103, 105 & 106), (LOC: State Street
Bank & Trust Company),
1.130% due 09/01/2006+ 390
1,200 Los Angeles County, Industrial Development
Authority, IDR, (Tulip Corporation Project),
Series A, AMT, (LOC: California State
Teachers Retirement System),
1.100% due 07/01/2014+,++ 1,200
300 Los Angeles County, Metropolitan
Transportation Authority, Sales Tax
Revenue, (Proposition C Local Allocation),
Series A, (FSA Insured),
4.100% due 07/01/2004 306
100 Los Angeles, Unified School District, COP,
(Multiple Properties Project), Series B,
(FSA Insured),
4.000% due 10/01/2004 103
1,000 Los Angeles, Wastewater System Revenue,
(Multimodal Project), Series C,
(FGIC Insured),
1.250% due 12/01/2031+ 1,000
330 Marin County ,COP, (Capital Improvement
Projects), Series B, (FSA Insured),
4.000% due 08/01/2004 337
1,200 Novato, MFHR, (Nova-Ro III Senior Housing
Project), (LOC: BNP Paribas SA),
1.080% due 10/01/2032+ 1,200
See Notes to Financial Statements.
10
PORTFOLIO OF INVESTMENTS (CONTINUED)
CALIFORNIA MONEY FUND
OCTOBER 31, 2003
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
------ ------
MUNICIPAL BONDS AND NOTES - (CONTINUED)
CALIFORNIA - (CONTINUED)
$ 800 Pasadena, COP, (Rose Bowl Improvements
Project), (LOC: California State Teachers
Retirement System),
1.050% due 12/01/2016+ $ 800
200 Riverside County, Transportation Commission,
Sales Tax Revenue, Series A, (AMBAC
Insured),
5.500% due 06/01/2004 205
1,000 San Diego, MFHR, Issue A, (LOC: Fifth
Third Bancorp),
1.000% due 02/01/2009+ 1,000
320 San Francisco City and County International
Airports Commission, Airport Revenue,
Second Series, Issue 15B, (FSA Insured),
4.000% due 05/01/2004 325
665 San Joaquin Hills, Transportation Corridor
Agency, Toll Road Revenue, Series A,
(MBIA Insured),
Zero coupon due 01/15/2004 664
320 San Juan, Unified School District, UTGO,
(Election of 1998), Series B, (MBIA
Insured),
Zero coupon due 08/01/2004 317
500 San Rafael, Elementary School District,
UTGO, (Election of 2002), Series A,
(FSA Insured),
4.000% due 08/01/2004 511
1,000 Val Verde, Unified School District, COP,
Series A, (LOC: Bank of America
Corporation),
1.100% due 10/01/2027+ 1,000
800 Walnut Creek, MFHR, (Creekside Drive
Apartments Project), (LOC: Bank of
America Corporation),
0.950% due 04/01/2007+ 800
------------
23,572
------------
PUERTO RICO - 3.2%
200 Puerto Rico Commonwealth, Highway &
Transportation Authority, Highway Revenue,
Series Z, (MBIA Insured),
6.250% due 07/01/2004 207
Puerto Rico Commonwealth, UTGO,
(MBIA-IBC Insured),
(Unrefunded Balance):
410 Zero coupon due 07/01/2004 407
170 5.300% due 07/01/2004 175
------------
789
------------
Total Municipal Bonds and Notes
(Cost $24,361) 24,361
------------
VALUE
SHARES (000S)
------ ------
INVESTMENT COMPANY SECURITIES - 0.0%**
2,876 Dreyfus Basic California Municipal
Money Market Fund $ 3
1,000 Wells Fargo California Tax-Free
Money Market Fund 1
------------
Total Investment Company Securities
(Cost $4) 4
------------
TOTAL INVESTMENTS (Cost $24,365*) 98.5% 24,365
OTHER ASSETS AND LIABILITIES (NET) 1.5 365
----- ------------
NET ASSETS 100.0% $ 24,730
===== ============
<FN>
- --------------------
* Aggregate cost for federal tax purposes.
** Amount represents less than 0.1% of total net assets.
+ Variable rate securities payable upon demand with not more than five
business days' notice, and secured by bank letters of credit or guarantees
by certain corporations. The interest rate shown reflects the rate in
effect at October 31, 2003.
++ Security is a private placement.
- ----------------------------------------------------------------------------
GLOSSARY OF TERMS
AMBAC -- American Municipal Bond Assurance Corporation
AMT -- Alternative Minimum Tax
COP -- Certificate of Participation
FGIC -- Federal Guaranty Insurance Corporation
FSA -- Financial Security Assurance
IBC -- Insured Bond Certificate
IDR -- Industrial Development Revenue
LOC -- Letter of Credit
MBIA -- Municipal Bond Investors Assurance
MFHR -- Multi-family Housing Revenue
UTGO -- Unlimited Tax General Obligation Bond
- ----------------------------------------------------------------------------
See Notes to Financial Statements.
11
STATEMENTS OF ASSETS AND LIABILITIES
WM GROUP OF FUNDS
OCTOBER 31, 2003
(IN THOUSANDS)
TAX-EXEMPT
MONEY MONEY CALIFORNIA
MARKET MARKET MONEY
FUND FUND FUND
--------- -------- --------
ASSETS:
Investments, at amortized cost and value $ 813,435 $ 30,738 $ 24,365
Interest receivable 2,539 144 71
Receivable for Fund shares sold 3,629 65 1
Receivable for investment securities sold -- -- 500
Prepaid expenses 6 --* --*
--------- -------- --------
Total Assets 819,609 30,947 24,937
--------- -------- --------
LIABILITIES:
Payable for Fund shares redeemed 1,544 27 162
Payable for investment securities purchased -- 709 --
Investment advisory fee payable 336 10 6
Shareholder servicing and distribution fees payable 25 -- --
Transfer agent fees payable 50 2 2
Dividends payable 79 --* --*
Accrued printing and postage expenses 315 9 8
Accrued legal and audit fees 38 26 26
Accrued expenses and other payables 28 2 3
--------- -------- --------
Total Liabilities 2,415 785 207
--------- -------- --------
NET ASSETS $ 817,194 $ 30,162 $ 24,730
========= ======== ========
NET ASSETS CONSIST OF:
Accumulated net realized loss on investment transactions $ (46) $ --* $ --*
Paid-in capital 817,240 30,162 24,730
--------- -------- --------
Total Net Assets $ 817,194 $ 30,162 $ 24,730
========= ======== ========
NET ASSETS:
Class A Shares $ 707,954 $ 30,162 $ 24,730
========= ======== ========
Class B Shares $ 79,314 -- --
=========
Class C Shares $ 5,046 -- --
=========
Class I Shares $ 24,880 -- --
=========
SHARES OUTSTANDING:
Class A Shares 707,977 30,162 24,776
========= ======== ========
Class B Shares 79,309 -- --
=========
Class C Shares 5,046 -- --
=========
Class I Shares 24,893 -- --
=========
CLASS A SHARES:**
Net asset value, offering and redemption price per share
of beneficial interest outstanding *** $ 1.00 $ 1.00 $ 1.00
========= ======== ========
CLASS B SHARES:**
Net asset value and offering price per share of beneficial
interest outstanding *** $ 1.00 -- --
=========
CLASS C SHARES:**
Net asset value per share of beneficial interest
outstanding *** $ 1.00 -- --
=========
Maximum sales charge 1.00% -- --
=========
Maximum offering price per share of beneficial
interest outstanding $ 1.01 -- --
=========
CLASS I SHARES:**
Net asset value, offering and redemption price per share of
beneficial interest outstanding $ 1.00 -- --
=========
<FN>
- --------------
* Amount represents less than $500.
** Net asset value and maximum offering price are not shown in thousands.
*** Redemption price per share is equal to net asset value per share less
any applicable contingent deferred sales charge.
See Notes to Financial Statements.
12
STATEMENTS OF OPERATIONS
WM GROUP OF FUNDS
FOR THE YEAR ENDED OCTOBER 31, 2003
(IN THOUSANDS)
TAX-EXEMPT
MONEY MONEY CALIFORNIA
MARKET MARKET MONEY
FUND FUND FUND
-------- -------- --------
INVESTMENT INCOME:
Interest $ 12,113 $ 363 $ 298
-------- -------- --------
EXPENSES:
Investment advisory fee 3,964 137 118
Custodian fees 45 2 2
Legal and audit fees 57 28 28
Registration and filing fees 59 15 9
Printing and postage expenses 457 16 16
Other 184 18 13
Shareholder servicing and distribution fees:
Class B Shares 938 -- --
Class C Shares 49 -- --
Transfer agent fees:
Class A Shares 376 24 25
Class B Shares 156 -- --
Class C Shares 6 -- --
-------- -------- --------
Total expenses 6,291 240 211
Fees waived by the investment advisor
and/or the distributor (366) (37) (45)
Fees reduced by custodian credits (3) --* --*
-------- -------- --------
Net expenses 5,922 203 166
-------- -------- --------
NET INVESTMENT INCOME 6,191 160 132
-------- -------- --------
NET REALIZED GAIN/(LOSS) ON
INVESTMENT TRANSACTIONS --* --* --
-------- -------- --------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $ 6,191 $ 160 $ 132
======== ======== ========
<FN>
- --------------
*Amount represents less than $500.
See Notes to Financial Statements.
13
STATEMENTS OF CHANGES IN NET ASSETS
WM GROUP OF FUNDS
FOR THE YEAR ENDED OCTOBER 31, 2003
(IN THOUSANDS)
TAX-EXEMPT
MONEY MONEY CALIFORNIA
MARKET MARKET MONEY
FUND FUND FUND
--------- -------- --------
Net investment income $ 6,191 $ 160 $ 132
Net realized gain/(loss) on investment transactions --* --* --
--------- -------- --------
Net increase in net assets resulting from operations 6,191 160 132
Distributions to shareholders from net investment income:
Class A Shares (5,447) (160) (132)
Class B Shares (49) -- --
Class C Shares (3) -- --
Class I Shares (692) -- --
Net increase/(decrease) in net assets from Fund share transactions:
Class A Shares 18,955 (3,138) (2,942)
Class B Shares (25,219) -- --
Class C Shares 1,370 -- --
Class I Shares (144,414) -- --
--------- -------- --------
Net decrease in net assets (149,308) (3,138) (2,942)
NET ASSETS:
Beginning of year 966,502 33,300 27,672
--------- -------- --------
End of year $ 817,194 $ 30,162 $ 24,730
========= ======== ========
FOR THE YEAR ENDED OCTOBER 31, 2002
Net investment income $ 10,167 $ 320 $ 334
Net realized loss on investment transactions (3) -- --
--------- -------- --------
Net increase in net assets resulting from operations 10,164 320 334
Distributions to shareholders from net investment income:
Class A Shares (9,282) (320) (334)
Class B Shares (247) -- --
Class C Shares (2) -- --
Class I Shares (641) -- --
Net increase/(decrease) in net assets from Fund share transactions:
Class A Shares 41,056 1,773 (14,886)
Class B Shares 29,928 -- --
Class C Shares 3,676 -- --
Class I Shares 151,541 -- --
--------- -------- --------
Net increase/(decrease) in net assets 226,193 1,773 (14,886)
NET ASSETS:
Beginning of year 740,309 31,527 42,558
--------- -------- --------
End of year $ 966,502 $ 33,300 $ 27,672
========= ======== ========
<FN>
- --------------
*Amount represents less than $500.
See Notes to Financial Statements.
14
STATEMENTS OF CHANGES IN NET ASSETS -- CAPITAL STOCK ACTIVITY
WM GROUP OF FUNDS
(IN THOUSANDS)
Since the Funds have sold, issued as reinvestment of dividends and redeemed
shares only at a constant net asset value of $1.00 per share, the number of
shares represented by such sales, reinvestments and redemptions is the same
as the amounts shown below for such transactions.
TAX-EXEMPT
MONEY MARKET FUND MONEY MARKET FUND CALIFORNIA MONEY FUND
--------------------------- --------------------------- ---------------------------
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
------------ ------------ ------------ ------------ ------------ ------------
CLASS A:
Sold $ 540,768 $ 651,390 $ 40,843 $ 60,799 $ 31,012 $ 43,920
Issued as reinvestment of dividends 4,207 8,782 155 311 132 326
Redeemed (526,020) (619,116) (44,136) (59,337) (34,086) (59,132)
------------ ------------ ------------ ------------ ------------ ------------
Net increase/(decrease) $ 18,955 $ 41,056 $ (3,138) $ 1,773 $ (2,942) $ (14,886)
============ ============ ============ ============ ============ ============
CLASS B
Sold $ 72,301 $ 118,259 -- -- -- --
Issued as reinvestment of dividends 46 231 -- -- -- --
Redeemed (97,566) (88,562) -- -- -- --
------------ ------------
Net increase/(decrease) $ (25,219) $ 29,928 -- -- -- --
============ ============
CLASS C:
Sold $ 13,554 $ 6,003 -- -- -- --
Issued as reinvestment of dividends 2 2 -- -- -- --
Redeemed (12,186) (2,329) -- -- -- --
------------ ------------
Net increase $ 1,370 $ 3,676 -- -- -- --
============ ============
CLASS I:
Sold $ 43,936 $ 265,035 -- -- -- --
Issued as reinvestment of dividends 692 640 -- -- -- --
Redeemed (189,042) (114,134) -- -- -- --
------------ ------------
Net increase/(decrease) $ (144,414) $ 151,541 -- -- -- --
============ ============
See Notes to Financial Statements.
15
FINANCIAL HIGHLIGHTS
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
NET DIVIDENDS
ASSET VALUE, NET FROM NET NET
BEGINNING OF INVESTMENT INVESTMENT ASSET VALUE,
PERIOD INCOME INCOME END OF PERIOD
------------ ---------- ---------- -------------
MONEY MARKET FUND
CLASS A
10/31/03 $1.00 $0.008 $(0.008) $1.00
10/31/02 1.00 0.014 (0.014) 1.00
10/31/01 1.00 0.043 (0.043) 1.00
10/31/00 1.00 0.056 (0.056) 1.00
10/31/99 1.00 0.044 (0.044) 1.00
CLASS B
10/31/03 1.00 0.001 (0.001) 1.00
10/31/02 1.00 0.003 (0.003) 1.00
10/31/01 1.00 0.033 (0.033) 1.00
10/31/00 1.00 0.046 (0.046) 1.00
10/31/99 1.00 0.034 (0.034) 1.00
CLASS C
10/31/03 1.00 0.001 (0.001) 1.00
10/31/02(3) 1.00 0.002 (0.002) 1.00
CLASS I
10/31/03 1.00 0.008 (0.008) 1.00
10/31/02 1.00 0.015 (0.015) 1.00
10/31/01 1.00 0.044 (0.044) 1.00
10/31/00 1.00 0.057 (0.057) 1.00
10/31/99 1.00 0.046 (0.046) 1.00
TAX-EXEMPT MONEY MARKET FUND
CLASS A
10/31/03 $1.00 $0.005 $(0.005) $1.00
10/31/02 1.00 0.010 (0.010) 1.00
10/31/01 1.00 0.025 (0.025) 1.00
10/31/00 1.00 0.033 (0.033) 1.00
10/31/99 1.00 0.026 (0.026) 1.00
CALIFORNIA MONEY FUND
CLASS A
10/31/03 $1.00 $0.005 $(0.005) $1.00
10/31/02 1.00 0.009 (0.009) 1.00
10/31/01 1.00 0.023 (0.023) 1.00
10/31/00 1.00 0.028 (0.028) 1.00
10/31/99 1.00 0.022 (0.022) 1.00
<FN>
- ------------------------
(1) Total return is not annualized for periods less than one year and does
not reflect any applicable sales charges. The total returns would have
been lower if certain fees had not been waived and expenses reimbursed
by the investment advisor and/or the distributor or if fees had not
been reduced by credits allowed by the custodian.
(2) Ratio of operating expenses to average net assets includes expenses
paid indirectly.
(3) The Money Market Fund commenced selling Class C shares on March 1,
2002.
(4) Annualized.
See Notes to Financial Statements.
16
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA
-------------------------------------------------------------------
RATIO OF OPERATING
EXPENSES TO AVERAGE
NET ASSETS WITHOUT
RATIO OF RATIO OF FEE WAIVERS, EXPENSES
OPERATING NET INVESTMENT REIMBURSED AND FEES
NET ASSETS, EXPENSES TO INCOME TO REDUCED BY CREDITS
TOTAL END OF PERIOD AVERAGE NET AVERAGE NET ALLOWED BY THE
RETURN(1) (IN 000'S) ASSETS ASSETS CUSTODIAN(2)
--------- ------------- ----------- -------------- ---------------------
MONEY MARKET FUND
CLASS A
10/31/03 0.78% $707,954 0.59% 0.78% 0.59%
10/31/02 1.42% 689,002 0.59% 1.41% 0.59%
10/31/01 4.40% 647,951 0.64% 4.21% 0.64%
10/31/00 5.79% 458,368 0.65% 5.62% 0.65%
10/31/99 4.52% 460,444 0.72% 4.43% 0.73%
CLASS B
10/31/03 0.05% 79,314 1.33% 0.04% 1.71%
10/31/02 0.34% 104,530 1.67% 0.33% 1.67%
10/31/01 3.32% 74,603 1.69% 3.16% 1.69%
10/31/00 4.68% 23,469 1.71% 4.56% 1.71%
10/31/99 3.44% 20,452 1.77% 3.38% 1.78%
CLASS C
10/31/03 0.06% 5,046 1.29% 0.08% 1.67%
10/31/02(3) 0.17% 3,676 1.64%(4) 0.36%(4) 1.64%(4)
CLASS I
10/31/03 0.84% 24,880 0.54% 0.83% 0.54%
10/31/02 1.47% 169,295 0.54% 1.46% 0.54%
10/31/01 4.46% 17,755 0.58% 4.27% 0.58%
10/31/00 5.90% 15,885 0.55% 5.72% 0.55%
10/31/99 4.66% 102,760 0.62% 4.53% 0.63%
TAX-EXEMPT MONEY MARKET FUND
CLASS A
10/31/03 0.52% $30,162 0.67% 0.53% 0.79%
10/31/02 1.00% 33,300 0.67% 0.99% 0.78%
10/31/01 2.57% 31,527 0.74% 2.52% 0.74%
10/31/00 3.39% 28,596 0.72% 3.33% 0.88%
10/31/99 2.65% 31,353 0.57% 2.63% 0.89%
CALIFORNIA MONEY FUND
CLASS A
10/31/03 0.50% $24,730 0.63% 0.50% 0.80%
10/31/02 0.89% 27,673 0.63% 0.89% 0.70%
10/31/01 2.32% 42,558 0.62% 2.27% 0.70%
10/31/00 2.79% 35,407 0.69% 2.76% 0.69%
10/31/99 2.24% 34,216 0.81% 2.22% 0.81%
See Notes to Financial Statements.
17
NOTES TO FINANCIAL STATEMENTS
WM GROUP OF FUNDS
1. ORGANIZATION AND BUSINESS
WM Trust I ("Trust I") and WM Trust II ("Trust II") (collectively,
the "Trusts") were organized as Massachusetts business trusts on
September 19, 1997 and February 22, 1989, respectively. The Trusts
are registered under the Investment Company Act of 1940 (the "1940
Act"), as open-end management investment companies. The Money Market
Fund and Tax-Exempt Money Market Fund are diversified series of WM
Trust I. The California Money Fund is a non-diversified series of WM
Trust II. Information presented in this report pertains only to the
three named "Funds". Financial statements for the other funds
included in the Trusts are presented in a separate report. WM
Advisors, Inc. (the "Advisor" or "WM Advisors") serves as investment
manager to the Funds. The Advisor is a wholly-owned subsidiary of
Washington Mutual, Inc. ("Washington Mutual"), a publicly owned
financial services company.
The Trusts are authorized to issue an unlimited number of shares of
beneficial interest, each without par value. Each Fund may offer four
classes of shares: Class A shares, Class B shares, Class C shares and
Class I shares. Class A and Class I shares are not subject to an
initial sales charge or, generally, to a contingent deferred sales
charge ("CDSC"). Certain Class A shares purchased by exchange from
another fund within the Trusts may be subject to a 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. Class I shares are currently only
offered to the WM Strategic Asset Management Portfolios, LLC, an
open-end management investment company, and affiliates of Washington
Mutual, and are not available for direct purchase by investors. The
Tax-Exempt Money Market and California Money Funds are not currently
offering Class B, Class C or Class I shares.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies, in
conformity with accounting principles generally accepted in the
United States of America ("generally accepted accounting
principles"), which are consistently followed by the Funds in the
preparation of their financial statements.
PORTFOLIO VALUATION:
Securities are valued on the basis of amortized cost in accordance
with Rule 2a-7 of the Investment Company Act of 1940, which
approximates market value. Amortized cost valuation involves
initially valuing an instrument at its cost and thereafter assuming a
constant amortization to maturity of any discount or premium, as long
as the amortized cost fairly reflects the market-based net asset
value per share. Certain assets may be valued by the Advisor under
the supervision of the Board of Trustees.
REPURCHASE AGREEMENTS:
Each Fund may enter into repurchase agreement transactions. A
repurchase agreement is a purchase of an underlying debt obligation
subject to an agreement by the seller to repurchase the obligation at
an agreed upon price and time. 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 Fund would seek
to use the collateral to offset losses incurred. There is potential
loss to the Fund in the event the Fund is delayed or prevented from
exercising its right to dispose of the collateral securities,
including the risk of a possible decline in the value of the
underlying securities during the period while the Fund seeks to
assert its rights. 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
Fund enters into repurchase agreements.
ILLIQUID INVESTMENTS:
Each Fund may invest a portion of its net assets in securities that
are not readily marketable, including: (1) repurchase agreements with
maturities greater than seven calendar days; (2) time deposits
maturing in more than seven calendar days; (3) certain futures
contracts and options; (4) certain variable rate demand notes having
a demand period of more than seven days; and (5) securities, the
disposition of which are restricted under Federal securities laws,
excluding certain Rule 144A securities, as defined in the following
paragraph.
Illiquid securities generally cannot be sold or disposed of in the
ordinary course of business (within seven days) at approximately the
value at which the Funds have valued the investments. This may have
an adverse effect on the Fund's ability to dispose of particular
illiquid securities at fair market value and may limit the Fund's
ability to obtain accurate market quotations for purposes of valuing
the securities and calculating the net asset value of shares of the
Fund. The Funds may also purchase securities that are not registered
under the Securities Act of 1933, as amended (the "Act"), but that
can be sold to
18
NOTES TO FINANCIAL STATEMENTS (continued)
WM GROUP OF FUNDS
qualified institutional buyers in accordance with Rule 144A under the
Act ("Rule 144A Securities"). Rule 144A Securities generally may be
resold only to other qualified institutional buyers. If a particular
investment in Rule 144A Securities is not determined to be liquid
under the guidelines established by the Board of Trustees, that
investment will be included within a Fund's limitation on investments
in illiquid securities.
SECURITIES TRANSACTIONS AND INVESTMENT INCOME:
Securities transactions are recorded on a trade date basis (the date
the order to buy or sell is executed). Realized gains and losses from
securities sold are recorded on the identified cost basis. Securities
purchased or sold on a when-issued or delayed-delivery basis may be
settled a month or more after the trade date; interest income is not
accrued until settlement date. Each Fund instructs the custodian to
segregate assets of the Fund with a current value at least equal to
the amount of its when-issued purchase commitments.
Interest income on debt securities is accrued daily. Premiums and
discounts are amortized using the interest method. Dividend income is
recorded on the ex-dividend date. Each Fund's investment income and
realized and unrealized gains and losses are allocated among the
classes of that Fund based upon the relative average net assets of
each class.
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS:
Dividends from net investment income of the Funds are declared daily
and paid monthly. Distributions of any net capital gains earned by a
Fund are distributed no less frequently than annually at the
discretion of the Board of Trustees. Additional distributions of net
investment income and capital gains for each Fund may be made at the
discretion of the Board of Trustees 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 timing differences and differing characterizations
of distributions made by each Fund. 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
ACCUMULATED
DECREASE NET REALIZED
PAID-IN CAPITAL LOSS
(000S) (000S)
--------------- ------------
California Money Fund $ (19) $ 19
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 Fund'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 Trusts are allocated to all the Funds based
upon the relative average net assets of each Fund except printing and
postage expenses, which are allocated to all the Funds based upon the
relative number of shareholder accounts of each Fund. Operating
expenses directly attributable to a class of shares are charged to
the operations of that class of shares. Expenses of each Fund not
directly attributable to the operations of any class of shares are
prorated among the classes to which the expenses relate based on the
relative average net assets of each class of shares.
USE OF ESTIMATES:
The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts and disclosures in
the financial statements. Actual results could differ from those
estimates.
19
NOTES TO FINANCIAL STATEMENTS (continued)
WM GROUP OF FUNDS
3. INVESTMENT ADVISORY AND OTHER TRANSACTIONS
WM Advisors serves as investment advisor to the Funds. The Advisor is
entitled to a monthly fee at an annual rate based upon on a
percentage of the average daily net assets of each Fund at the
following rates:
FEES ON NET ASSETS
EXCEEDING
FEES ON NET ASSETS $500 MILLION AND FEES ON NET ASSETS
UP TO EQUAL TO OR LESS THAN EXCEEDING
NAME OF FUND $500 MILLION $1 BILLION $1 BILLION
------------ ------------------ --------------------- ------------------
Money Market Fund 0.45% 0.45% 0.40%
Tax-Exempt Money Market Fund 0.45% 0.45% 0.40%
California Money Fund 0.45% 0.40% 0.40%
The Advisor has voluntarily waived $36,725 and $44,654 of its
advisory fees for the Tax-Exempt Money Market and California Money
Funds for the year ended October 31, 2003, respectively.
WM Shareholder Services, Inc. (the "Transfer Agent"), a wholly-owned
subsidiary of Washington Mutual, serves as the transfer agent of the
Funds. 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 $25.01 for Class A, Class B and
Class C shareholder accounts. Prior to December 1, 2002, the
authorized annual shareholder servicing fee was $21.42 for Class A,
Class B and Class C shareholder accounts. Class I shares are not
subject to shareholder servicing fees.
Custodian fees for certain Funds have been reduced by credits allowed
by the custodian for uninvested cash balances. The Funds 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 Trusts for serving as an officer
or Trustee of the Trusts. The Trusts, together with other mutual
funds advised by WM Advisors, pay each Trustee who is not an officer
or employee of Washington Mutual or its subsidiaries, a per annum
retainer plus attendance fees for each meeting at which they are
present. The Lead Trustee, Committee Chairs and Committee Members
receive additional remuneration for these services to the Trusts.
Trustees are also reimbursed for travel and out-of-pocket expenses.
Each Trustee serves in the same capacity for all 40 funds within the
WM Group of Funds.
5. DISTRIBUTION PLANS
WM Funds Distributor, Inc. (the "Distributor"), a registered broker-
dealer and a wholly-owned subsidiary of Washington Mutual, serves as
distributor for Class A, Class B and Class C shares. For the year
ended October 31, 2003, the Distributor has received no commissions
(front-end sales charges) on Class C shares and $972,383 representing
CDSCs on Class A, Class B and Class C shares.
Each of the Funds 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 Fund (each, a "Rule 12b-1 Plan"), respectively.
There are no 12b-1 Plans applicable to the Class I shares of the
Funds. Under the applicable Rule 12b-1 Plans, the Distributor may
receive a service fee at an annual rate of 0.25% of the average daily
net assets of each class. The Trustees have not authorized, and the
Funds do not currently pay, service fees with respect to Class A
shares. 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 Fund 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 Trusts, as
defined in the 1940 Act, and who have no direct or indirect financial
interest in the operation of such distribution plans, or any
agreements related to such plans, respectively.
20
NOTES TO FINANCIAL STATEMENTS (continued)
WM GROUP OF FUNDS
The Distributor has voluntarily waived $347,775 and $18,551 of its
distribution fees for Class B and Class C shares of the Money Market
Fund for the year ended October 31, 2003, respectively.
6. CAPITAL LOSS CARRYFORWARDS
At October 31, 2003, the following Funds have available for federal
income tax purposes unused capital losses as follows:
(IN THOUSANDS)
-----------------------------------------------------
EXPIRING EXPIRING EXPIRING EXPIRING
IN 2006 IN 2007 IN 2010 IN 2011
-------- -------- -------- --------
Money Market Fund $ 42 $ -- $ 3 $ --*
Tax-Exempt Money
Market Fund --* -- -- --
California Money Fund -- --* -- --
<FN>
- --------------
*Amount represents less than $500.
7. COMPONENTS OF DISTRIBUTABLE EARNINGS
At October 31, 2003, the components of distributable earnings on a
tax basis are as follows:
(IN THOUSANDS)
--------------------------------------
TAX-EXEMPT
MONEY MONEY CALIFORNIA
MARKET MARKET MONEY
FUND FUND FUND
------ ---------- ----------
Undistributed ordinary income $ 79 $ --* $ --*
Undistributed accumulated gains $ -- $ -- $ --
Tax Composition of Distributions:
Ordinary income $6,191 $160 $132
<FN>
- --------------
*Amount represents less than $500.
8. GEOGRAPHIC AND INDUSTRY CONCENTRATION RISK FACTORS
There are certain risks arising from the concentration of the
California Money Fund's investments in California municipal
securities. The California Money Fund is more susceptible to factors
adversely affecting issuers of California municipal securities than a
fund that is not concentrated in these issuers to the same extent.
Uncertain economic conditions or governmental developments may affect
the ability of California municipal securities issuers to meet their
financial obligations.
21
INDEPENDENT AUDITORS' REPORT
To the Trustees and Shareholders of
WM Money Market Fund, WM Tax-Exempt Money Market Fund
and WM California Money Fund
We have audited the accompanying statements of assets and
liabilities, including the portfolios of investments, of WM Money
Market Fund, WM Tax-Exempt Money Market Fund and WM California Money
Fund (collectively, the "Funds") 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 Funds' management. Our responsibility is to
express an opinion on these financial statements and financial
highlights based on our audits.
We conducted our audits in accordance with 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 brokers; where replies were not
received from brokers, we performed other auditing procedures. 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 Funds 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
22
OTHER INFORMATION (unaudited)
WM GROUP OF FUNDS
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 from investment income the following
percentages are tax exempt for regular Federal income tax purposes:
NAME OF FUND
------------
Tax-Exempt Money Market Fund 100%
California Money Fund 100%
A portion of this income may be subject to alternative minimum tax.
The above percentages 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;
Age 76 WM Group of California, Inc. Upward Bound House of Santa
Funds-5 years Monica
(Retired May 2003)
- -----------------------------------------------------------------------------------------------------------------------------------
Wayne L. Attwood, M.D. Composite Funds-11 years Retired doctor of internal medicine
Age 74 WM Group of and gastroenterology.
Funds-5 years
- -----------------------------------------------------------------------------------------------------------------------------------
Kristianne Blake Composite Funds-3 years CPA specializing in personal financial Frank Russell Investment
Age 49 WM Group of and tax planning. Company; Russell Insurance
Funds-5 years Funds; Avista Corporation;
St. George's School
- -----------------------------------------------------------------------------------------------------------------------------------
Edmond R. Davis, Esq. Sierra Funds-8 years Partner at the law firm of Davis & Braille Institute of America,
Age 75 WM Group of Whalen LLP. Inc; Children's Bureau of
Funds-5 years Southern California, Children's
Bureau Foundation; Fifield
Manors, Inc.
- -----------------------------------------------------------------------------------------------------------------------------------
Carrol R. McGinnis Griffin Funds-5 years Founder of McGinnis Investments. Baptist Foundation of Texas;
Age 60 WM Group of Prior to 1994, President and Chief Concord 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 Anderson Nordstrom Inc.; K2, Inc.; First
Age 58 WM Group of Graduate School of Management at the Pacific Advisors' Capital,
Funds-5 years University of California Los Angeles. Crescent and New Income Funds;
Equity 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;
Age 75 WM Group of Company, now Rockey, Hill & Knowlton. The Rainier Club; WSU
Funds-5 years Foundation
- -----------------------------------------------------------------------------------------------------------------------------------
Morton O. Schapiro Griffin Funds-5 years President of Williams College since Marsh & McLennan Companies
Age 50 WM Group of 2000. Prior thereto, Dean of the
Funds-5 years College of Letters, Arts and Sciences;
(Retired February 2003) Professor of Economics and Vice
President of Planning, University of
Southern California.
- -----------------------------------------------------------------------------------------------------------------------------------
Richard C. Yancey (Lead Trustee) Composite Funds-23 years Retired Managing Director of AdMedia Partners Inc.; Czech
Age 77 WM Group of Dillon, Read & Co., an Investment and Slovak American Enterprise
Funds-5 years Bank now part of UBS. Fund
- -----------------------------------------------------------------------------------------------------------------------------------
23
OTHER INFORMATION (unaudited) (continued)
WM GROUP OF FUNDS
YEAR ENDED OCTOBER 31, 2003
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 Foundation. Washington Mutual, Inc.; REI
Age 68 WM Group of
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.
24
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 Trust II
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