UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number 811-07577
WM Strategic Asset Management Portfolios, LLC
(Exact name of registrant as specified in charter)
1201 Third Avenue, 22nd Floor, Seattle, WA 98101
(Address of principal executive offices) (Zip code)
Jeffrey L. Lunzer
1201 Third Avenue, 22nd Floor, Seattle, WA 98101
(Name and address of agent for service)
Registrant's telephone number, including area code: (206) 461-3800
Date of fiscal year end: October 31, 2004
Date of reporting period: October 31, 2004
ITEM 1.
[logo] wm
GroupofFunds
Annual Report
October 31, 2004
WM Strategic Asset Management Portfolios
and WM Money Market Fund
WM Strategic Asset
Management Portfolios WM Money Market Fund
Flexible Income Portfolio
Conservative Balanced Portfolio
Balanced Portfolio
Conservative Growth Portfolio
Strategic Growth Portfolio
At the WM Group of Funds, our passion is piecing together individual
investments into comprehensive portfolios to make your financial plan more
effective.
Table of Contents
1 Message from the President
2 Economy & Financial Markets: Review & Outlook
6 Our SAM Process and Asset Allocation Team
SAM Portfolio Investment Strategy
8 Flexible Income Portfolio
10 Conservative Balanced Portfolio
12 Balanced Portfolio
14 Conservative Growth Portfolio
16 Strategic Growth Portfolio
18 Money Market Fund Investment Strategy
20 Expense Information
22 Financial Statements
42 Notes to Financial Statements
47 Report of Independent Registered Public
Accounting Firm
48 Other Information
Not FDIC Insured
- --------------------------------------------------
May Lose Value * Not a Deposit * No Bank Guarantee
Not Insured by any Federal Government Agency
Dear Shareholder,
[PHOTO] During my 36 years in the investment management business, I have
seen many changes--some caused a lasting impact and others came into fashion
but then quickly faded. Thankfully, there have also been a few things that
have remained the same. Among the most important of these is our long-term
investment philosophy.
One test of our consistent investment approach can be found in the
performance of our Strategic Asset Management (SAM) Portfolios. We believe
these results validate our forecasting, portfolio construction, risk
management, and asset allocation processes, which have taken years to build.
We are thankful to the important partners who have helped us deliver our
investment promise to shareholders so successfully: our investment
management, fund distribution, and shareholder servicing teams, as well as
the WM Group of Funds Board of Trustees.
EXPANDING OUR CAPABILITIES, RECOGNIZING OUR HERITAGE
Our fund family is committed to seeking ways to improve our investment
process. As part of these ongoing efforts, in March of this year we launched
our new WM Small Cap Value Fund, which invests in undervalued smaller
companies. (Note that small-cap stocks may have additional risks, including
greater price volatility.) With the addition of this new Fund, our SAM
Portfolios can invest in up to 14 distinct asset classes, which expands our
choice of investments while increasing our portfolio diversification
opportunities.
During this fiscal year, we also celebrated two major anniversaries: the
65th anniversary of the WM Equity Income Fund and the 55th anniversary of
the WM Growth & Income Fund. The WM Equity Income Fund was one of the first
50 mutual funds in the U.S. and has been in continuous operation since
1939. The WM Growth & Income Fund was among the first 100 mutual funds in
the U.S. Just to keep these milestones in perspective, today there are over
8,000 mutual funds operating in the U.S., according to the Investment
Company Institute.
BENEFITING FROM A STRONG FOUNDATION
I am proud to be only the fourth president of our mutual fund family, which
can trace its roots back more than six decades. From my vantage point, I
believe our strong heritage has been built on trust and integrity. Although
these characteristics are intangible, they are essential to building strong
shareholder relationships and are the foundation of our organization.
Our heritage includes producing positive results guided by a fund's stated
investment objective. The powerful combination of consistent fund
performance and quality shareholder services has produced shareholder
satisfaction that has resulted in a very low redemption rate relative to our
peers in the mutual fund industry. We will continue striving to meet the
expectations of our existing shareholders while attracting new investors and
assets under management.
Based on our achievements this year and our continuous efforts to improve
our processes, I am extremely positive about our direction and ability to
assist you in meeting your financial goals. On behalf of the entire
company, we thank you for your continued support and confidence.
Sincerely,
/s/ William G. Papesh
William G. Papesh
President
Economy & Financial Markets: Review & Outlook
MODERATE ECONOMIC GROWTH AMID AN ABNORMAL RECOVERY
Fiscal year 2004--the 12 months from November 1, 2003 through October 31,
2004--was a transition period for the U.S. economy, which experienced a
cyclical rebound accompanied by a shift from consumer to business spending.
Improved corporate productivity, stronger cash flows, and profit growth all
indicated that a cyclical recovery was underway as the fiscal year
progressed. This rebound was powered by the Federal Reserve's very
successful reflation policy, which allowed the economy to benefit from the
lowest interest rates seen in 45 years.
While we believe the economy continues to improve, this recovery has shown
some unusual characteristics. Historically, in a normal recovery, businesses
add more jobs, which in turn gives individuals the confidence to increase
spending. In this recovery, businesses restrained both capital expenditures
and new hiring for most of the period. Despite the bad news, consumers kept
spending even as layoffs continued. What allowed consumers to keep spending
were record levels of home refinancings and a general willingness to assume
debt.
What also made this period unusual was that the economic slowdown was not
restricted to the U.S. In addition, Europe and Asia (with the exception of
Japan and China) suffered from slow economic growth, which reduced demand
for U.S. imports. Furthermore, news about terrorism, the war in Iraq, and
scandals involving some major U.S. corporations reduced investor
confidence.
REFLATION POLICY AND TAX CUTS HELP PROFITABILITY
The economy began the period on a firm footing thanks to the Federal
Reserve's powerful reflation policy, accompanied by the third largest
federal tax cut in 50 years. These factors helped propel corporate
profitability to its highest levels in 20 years and allowed businesses to
repair their balance sheets.
Within this environment, stocks began the year with a strong rally and,
despite short-term volatility, finished the fiscal year with the S&P 500
posting a total return of 9.4%. As the fiscal year progressed, geopolitical
concerns, slow job growth, the U.S. Presidential
[VALUE OF A $10,000 INVESTMENT OCTOBER 31, 1994 - OCTOBER 31, 2004 GRAPH]
VALUE OF $10,000
- -------------------------------------------------------------
Lehman Brothers
Aggregate
Date Bond Index S&P 500 Inflation
- -------------------------------------------------------------
10/31/94 10,000 10,000 10,000
11/30/94 9,978 9,633 10,013
12/31/94 10,047 9,774 10,013
1/31/95 10,246 10,028 10,053
2/28/95 10,490 10,417 10,093
3/31/95 10,554 10,725 10,127
4/30/95 10,701 11,037 10,160
5/31/95 11,116 11,473 10,180
6/30/95 11,197 11,743 10,201
7/31/95 11,172 12,134 10,201
8/31/95 11,307 12,167 10,227
9/30/95 11,417 12,676 10,248
10/31/95 11,565 12,632 10,281
11/30/95 11,739 13,188 10,274
12/31/95 11,903 13,432 10,267
1/31/96 11,982 13,894 10,328
2/29/96 11,773 14,027 10,361
3/31/96 11,691 14,162 10,415
4/30/96 11,625 14,370 10,455
5/31/96 11,602 14,741 10,475
6/30/96 11,758 14,801 10,481
7/31/96 11,789 14,143 10,501
8/31/96 11,769 14,443 10,521
9/30/96 11,974 15,254 10,555
10/31/96 12,240 15,672 10,589
11/30/96 12,449 16,862 10,609
12/31/96 12,333 16,531 10,609
1/31/97 12,372 17,558 10,643
2/28/97 12,403 17,700 10,676
3/31/97 12,265 16,964 10,702
4/30/97 12,449 17,976 10,715
5/31/97 12,567 19,080 10,709
6/30/97 12,717 19,931 10,722
7/31/97 13,060 21,514 10,735
8/31/97 12,949 20,317 10,755
9/30/97 13,141 21,431 10,782
10/31/97 13,331 20,715 10,809
11/30/97 13,392 21,674 10,802
12/31/97 13,528 22,047 10,789
1/31/98 13,701 22,292 10,810
2/28/98 13,690 23,899 10,830
3/31/98 13,737 25,123 10,851
4/30/98 13,808 25,376 10,870
5/31/98 13,939 24,940 10,890
6/30/98 14,058 25,952 10,903
7/31/98 14,087 25,677 10,916
8/31/98 14,317 21,964 10,929
9/30/98 14,652 23,372 10,942
10/31/98 14,574 25,272 10,969
11/30/98 14,657 26,804 10,969
12/31/98 14,701 28,348 10,962
1/31/99 14,806 29,533 10,988
2/28/99 14,546 28,614 11,002
3/31/99 14,626 29,759 11,035
4/30/99 14,673 30,911 11,115
5/31/99 14,544 30,181 11,115
6/30/99 14,498 31,856 11,115
7/31/99 14,437 30,862 11,148
8/31/99 14,429 30,708 11,175
9/30/99 14,597 29,867 11,229
10/31/99 14,651 31,757 11,249
11/30/99 14,649 32,402 11,256
12/31/99 14,579 34,310 11,256
1/31/00 14,531 32,588 11,283
2/29/00 14,707 31,972 11,349
3/31/00 14,901 35,099 11,442
4/30/00 14,858 34,042 11,449
5/31/00 14,850 33,344 11,456
6/30/00 15,159 34,165 11,523
7/31/00 15,297 33,632 11,542
8/31/00 15,519 35,720 11,556
9/30/00 15,617 33,834 11,616
10/31/00 15,720 33,692 11,636
11/30/00 15,978 31,037 11,643
12/31/00 16,275 31,189 11,636
1/31/01 16,540 32,296 11,709
2/28/01 16,684 29,351 11,756
3/31/01 16,767 27,493 11,783
4/30/01 16,697 29,629 11,830
5/31/01 16,797 29,828 11,883
6/30/01 16,861 29,103 11,904
7/31/01 17,239 28,818 11,870
8/31/01 17,437 27,014 11,870
9/30/01 17,639 24,831 11,924
10/31/01 18,008 25,305 11,883
11/30/01 17,759 27,246 11,863
12/31/01 17,646 27,486 11,817
1/31/02 17,789 27,085 11,844
2/28/02 17,961 26,562 11,891
3/31/02 17,663 27,561 11,958
4/30/02 18,006 25,891 12,025
5/31/02 18,159 25,699 12,025
6/30/02 18,317 23,869 12,032
7/31/02 18,538 22,007 12,045
8/31/02 18,852 22,153 12,085
9/30/02 19,157 19,745 12,106
10/31/02 19,069 21,482 12,126
11/30/02 19,063 22,748 12,126
12/31/02 19,458 21,410 12,100
1/31/03 19,475 20,849 12,153
2/28/03 19,744 20,536 12,246
3/31/03 19,728 20,735 12,320
4/30/03 19,892 22,444 12,293
5/31/03 20,262 23,627 12,273
6/30/03 20,221 23,929 12,287
7/31/03 19,542 24,350 12,300
8/31/03 19,671 24,825 12,347
9/30/03 20,192 24,562 12,388
10/31/03 20,004 25,952 12,374
11/30/03 20,052 26,181 12,341
12/31/03 20,257 27,553 12,327
1/31/04 20,419 28,060 12,387
2/29/04 20,640 28,450 12,454
3/31/04 20,794 28,020 12,534
4/30/04 20,254 27,580 12,574
5/31/04 20,173 27,958 12,648
6/30/04 20,288 28,500 12,689
7/31/04 20,488 27,557 12,668
8/31/04 20,880 27,667 12,675
9/30/04 20,936 27,966 12,701
10/31/04 21,112 28,394 12,718
Data shown is past performance and does not guarantee future results.
Source: Ibbotson Associates. The S&P 500 is a broad-based index intended to
represent the U.S. equity market. The Lehman Brothers Aggregate Bond Index
is a broad-based index intended to represent the U.S. fixed-income market.
Returns shown for indices assume reinvestment of all dividends and
distributions. Inflation is measured by the Consumer Price Index for all
urban consumers. Indices are unmanaged, and individuals cannot invest
directly in an index.
This economic and financial market analysis represents the opinions of WM
Advisors. It should not be considered as investment advice. No forecast
based on the opinions expressed can be guaranteed, and they may be subject
to change without notice.
2
campaign, and rising oil prices added to equity market uncertainty.
Companies in cyclical growth sectors, such as energy and industrials,
performed best. At the style level, value stocks outpaced growth stocks,
while small-cap stocks significantly outperformed large-cap stocks.
With bond markets concerned about inflation and Federal Reserve policy
shifts, bonds had a volatile year. They benefited early in the period from
historically low short-term interest rates and low inflation, which
effectively created 0% inflation-adjusted interest rates. The second
quarter was the worst for the Treasury market since 1980, but in the third
quarter, Treasuries rebounded strongly. That exceptional reversal was
attributed to concerns that the increase in oil prices, which moved to over
$50 per barrel in late September, would curb consumer spending and further
reduce growth in an already slowing economy.
LOOKING AHEAD
Looking ahead, we continue to be concerned about several factors: global
excess capacity, which curtails corporate pricing power; the large federal
deficit, which can raise interest rates and curb individual savings; the
declining U.S. dollar, which makes U.S. financial assets less attractive;
rising oil prices; and the timing of future interest rate hikes.
Our fixed-income outlook assumes the Federal Reserve (the Fed) will
continue its stated policy of gradual short-term interest rate increases.
As a result, we expect the yield curve will continue to flatten with
short-term rates moving up more than longer-term rates. As the Fed moves to
increase short-term interest rates, our long-term interest rate scenario
remains positive. Given these competing factors, we are positioned
neutrally with respect to interest rate risk. From a sector standpoint, we
view mortgages as offering the best value followed by high-yield and
investment-grade corporate bonds. Mortgages should do well in a stable to
modestly rising interest rate environment, while high-yield securities
should continue to benefit from a growing economy.
Our equity outlook is for the economy to continue to grow, but at a slow
pace, accompanied by moderate inflation. In this environment, we continue to
focus on companies that we believe can generate organic growth and not only
pay dividends, but also increase them. In a slow-growth environment,
dividends can become a larger component of total return, which makes these
companies more attractive.
We also believe an important element of a sustained recovery is higher
employment, rather than increases in consumer debt.
DIVERSIFICATION AND RISK MANAGEMENT
As long-term investors, we develop strategies designed to reduce volatility
and provide competitive risk-adjusted returns. Unlike many other fund
managers, we do not rebalance our Portfolios to static benchmark
allocations. Instead, we continually reallocate the Portfolios to future
targets to take advantage of changing market conditions. This is how we
practice active portfolio management, and we believe it has served our
shareholders well.
To better illustrate how our Portfolio activities transpired over the past
year, the chart on the following pages shows portfolio allocation actions
over the period as market activities unfolded.
MARKET PERFORMANCE AS OF OCTOBER 31, 2004
1 Year 5 Year 10 Year
- ----------------------------------------------------------------------------
S&P 500 9.41% -2.22% 11.00%
Energy 44.52% 8.37% 13.02%
Industrials 18.04% 2.38% 11.96%
Consumer Staples 3.85% 2.94% 10.55%
Telecommunication Services 20.95% -15.43% 4.04%
Utilities 24.11% 0.98% 7.53%
Financials 8.07% 4.27% 16.24%
Health Care 1.76% -0.45% 14.38%
Consumer Discretionary 9.08% -0.18% 10.83%
Materials 16.76% 5.23% 7.19%
Information Technology -0.86% -12.52% 12.14%
Lehman Brothers Aggregate Bond Index 5.54% 7.58% 7.76%
Data shown is past performance and does not guarantee future results.
Source: Ibbotson Associates. Equity sectors are represented by S&P 500
sector categories. Returns shown for indices and sectors are annualized
returns and assume reinvestment of all dividends and distributions. Indices
are unmanaged, and individuals cannot invest directly in an index.
3
Economy & Financial Markets: Review & Outlook
STRATEGIC ASSET MANAGEMENT (SAM) PORTFOLIOS:
DYNAMIC REALLOCATION PROCESS AT WORK
November 2003 - January 2004
* Slightly increased equity holdings as a broad-based rally developed.
* Continued to take advantage of strong performance in small-cap growth
stocks, but began to take some profits.
* Maintained an overweighting in small- and mid-cap holdings, which
historically tend to outperform during recovery periods.
* Benefited from an advance in growth stocks throughout 2003, but also
looked to add to less aggressive positions if market valuations expand.
* Favored mortgage-backed securities, which historically tend to perform
relatively well in a more stable interest rate environment.
* Maintained positions in lower-rated corporate issues, which led
fixed-income markets.
February - April 2004
* Widened diversification levels to manage risk and participate in cyclical
advances.
* Continued to favor small- and mid-cap stocks, introducing a position in
small-cap value stocks and taking profits in small-cap growth stocks to
maintain desired diversification.
* Maintained overweightings in traditional value sectors and in cyclically
sensitive sectors that could benefit from economic growth.
* Took profits in corporate-backed bonds and increased holdings in
mortgage-backed bonds.
[MAJOR MARKET EVENTS OCTOBER 31, 2003 - OCTOBER 31, 2004 GRAPH]
Closing Value
of the
Date S&P 500
---- -------
10/31/2003 1050.71
11/3/2003 1059.02
11/4/2003 1053.25
11/5/2003 1051.81
11/6/2003 1058.05
11/7/2003 1053.21
11/10/2003 1047.11
11/11/2003 1046.57
11/12/2003 1058.56
11/13/2003 1058.41
11/14/2003 1050.35
11/17/2003 1043.63
11/18/2003 1034.15
11/19/2003 1042.44
11/20/2003 1033.65
11/21/2003 1035.28
11/24/2003 1052.08
11/25/2003 1053.89
11/26/2003 1058.45
11/28/2003 1058.2
12/1/2003 1070.12
12/2/2003 1066.62
12/3/2003 1064.73
12/4/2003 1069.72
12/5/2003 1061.5
12/8/2003 1069.3
12/9/2003 1060.18
12/10/2003 1059.05
12/11/2003 1071.21
12/12/2003 1074.14
12/15/2003 1068.04
12/16/2003 1075.13
12/17/2003 1076.48
12/18/2003 1089.18
12/19/2003 1088.67
12/22/2003 1092.94
12/23/2003 1096.02
12/24/2003 1094.04
12/26/2003 1095.89
12/29/2003 1109.48
12/30/2003 1109.64
12/31/2003 1111.92
1/2/2004 1108.48
1/5/2004 1122.22
1/6/2004 1123.67
1/7/2004 1126.33
1/8/2004 1131.92
1/9/2004 1121.86
1/12/2004 1127.23
1/13/2004 1121.22
1/14/2004 1130.52
1/15/2004 1132.05
1/16/2004 1139.83
1/20/2004 1138.77
1/21/2004 1147.62
1/22/2004 1143.94
1/23/2004 1141.55
1/26/2004 1155.37
1/27/2004 1144.05
1/28/2004 1128.48
1/29/2004 1134.11
1/30/2004 1131.13
2/2/2004 1135.26
2/3/2004 1136.03
2/4/2004 1126.52
2/5/2004 1128.59
2/6/2004 1142.76
2/9/2004 1139.81
2/10/2004 1145.54
2/11/2004 1157.76
2/12/2004 1152.11
2/13/2004 1145.81
2/17/2004 1156.99
2/18/2004 1151.82
2/19/2004 1147.06
2/20/2004 1144.11
2/23/2004 1140.99
2/24/2004 1139.09
2/25/2004 1143.67
2/26/2004 1144.91
2/27/2004 1144.94
3/1/2004 1155.97
3/2/2004 1149.1
3/3/2004 1151.04
3/4/2004 1154.88
3/5/2004 1156.86
3/8/2004 1147.2
3/9/2004 1140.58
3/10/2004 1123.89
3/11/2004 1106.78
3/12/2004 1120.57
3/15/2004 1104.49
3/16/2004 1110.7
3/17/2004 1123.75
3/18/2004 1122.32
3/19/2004 1109.78
3/22/2004 1095.4
3/23/2004 1093.95
3/24/2004 1091.33
3/25/2004 1109.19
3/26/2004 1108.06
3/29/2004 1122.47
3/30/2004 1127
3/31/2004 1126.21
4/1/2004 1132.17
4/2/2004 1141.81
4/5/2004 1150.57
4/6/2004 1148.16
4/7/2004 1140.53
4/8/2004 1139.32
4/12/2004 1145.2
4/13/2004 1129.44
4/14/2004 1128.17
4/15/2004 1128.84
4/16/2004 1134.61
4/19/2004 1135.82
4/20/2004 1118.15
4/21/2004 1124.09
4/22/2004 1139.93
4/23/2004 1140.6
4/26/2004 1135.53
4/27/2004 1138.11
4/28/2004 1122.41
4/29/2004 1113.89
4/30/2004 1107.3
MAJOR MARKET EVENTS
- -------------------
NOVEMBER
Unemployment hits an eight-month low of 5.9%.
NOVEMBER 20
S&P 500 low for the fiscal year: 1033.65.
DECEMBER 9
Federal Reserve (the Fed) votes to hold fed funds rate at 45-year low of 1.00%.
DECEMBER 31
S&P 500 closes the year at 1111.92.
JANUARY 5
One day after Federal Reserve Governor suggests rates should remain low,
S&P 500 closes at 1122.22.
JANUARY 14
Commerce Dept. announces that trade deficit shrank to $38 billion in Nov. '03.
JANUARY 28
Fed releases statement that market interprets as moving closer to raising
interest rates.
JANUARY 30
Estimates for 4th quarter '03 consumer spending growth released. Down
significantly from prior quarter.
FEBRUARY
U.S. dollar falls to record lows against the euro.
FEBRUARY 11
Fed says the economy is continuing to expand. S&P 500 closes at 1157.76,
its high for the fiscal year.
MARCH 1
WM Small Cap Value Fund is launched.
MARCH 8-15
Terror attack on a train in Madrid, Spain is linked to al Qaeda. S&P 500
begins slide from 1147.20 to 1104.49.
MARCH 16
Fed meeting leaves rates unchanged.
MARCH 25
Corporate profits report strong as economy gains 4.1% in 4th quarter '03.
Source: Bloomberg L.P. (S&P 500 data). Indices are unmanaged, and
individuals cannot invest directly in an index.
4
May - July 2004
* Maintained an emphasis on cyclically sensitive stocks, which could rebound
along with the economy.
* Expanded our position in mortgage securities while continuing to take
profits in corporate bond issues.
* Positioned the Portfolios to manage the risk of interest rate shifts and
market concerns that could arise with increased inflationary pressures.
* Continued to focus on diversification, quality holdings, and yield to help
manage risk.
August - October 2004
* Kept diversification levels high to participate in cyclical advances and
to manage risk.
* Continued to hold positions in high-yield securities, which benefited from
broad advances in many credit sectors.
* Maintained overweightings in traditional value sectors and in cyclically
sensitive sectors that could benefit from economic growth.
[MAJOR MARKET EVENTS OCTOBER 31, 2003 - OCTOBER 31, 2004 GRAPH]
Closing Value
of the
Date S&P 500
---- -------
5/3/2004 1117.49
5/4/2004 1119.55
5/5/2004 1121.53
5/6/2004 1113.99
5/7/2004 1098.7
5/10/2004 1087.12
5/11/2004 1095.45
5/12/2004 1097.28
5/13/2004 1096.44
5/14/2004 1095.7
5/17/2004 1084.1
5/18/2004 1091.49
5/19/2004 1088.68
5/20/2004 1089.19
5/21/2004 1093.56
5/24/2004 1095.41
5/25/2004 1113.05
5/26/2004 1114.94
5/27/2004 1121.28
5/28/2004 1120.68
6/1/2004 1121.2
6/2/2004 1124.99
6/3/2004 1116.64
6/4/2004 1122.5
6/7/2004 1140.42
6/8/2004 1142.18
6/9/2004 1131.33
6/10/2004 1136.47
6/14/2004 1125.29
6/15/2004 1132.01
6/16/2004 1133.56
6/17/2004 1132.05
6/18/2004 1135.02
6/21/2004 1130.3
6/22/2004 1134.41
6/23/2004 1144.06
6/24/2004 1140.65
6/25/2004 1134.43
6/28/2004 1133.35
6/29/2004 1136.2
6/30/2004 1140.84
7/1/2004 1128.94
7/2/2004 1125.38
7/6/2004 1116.21
7/7/2004 1118.33
7/8/2004 1109.11
7/9/2004 1112.81
7/12/2004 1114.35
7/13/2004 1115.14
7/14/2004 1111.47
7/15/2004 1106.69
7/16/2004 1101.39
7/19/2004 1100.9
7/20/2004 1108.67
7/21/2004 1093.88
7/22/2004 1096.84
7/23/2004 1086.2
7/26/2004 1084.07
7/27/2004 1094.83
7/28/2004 1095.42
7/29/2004 1100.43
7/30/2004 1101.72
8/2/2004 1106.62
8/3/2004 1099.69
8/4/2004 1098.63
8/5/2004 1080.7
8/6/2004 1063.97
8/9/2004 1065.22
8/10/2004 1079.04
8/11/2004 1075.79
8/12/2004 1063.23
8/13/2004 1064.8
8/16/2004 1079.34
8/17/2004 1081.71
8/18/2004 1095.17
8/19/2004 1091.23
8/20/2004 1098.35
8/23/2004 1095.68
8/24/2004 1096.19
8/25/2004 1104.96
8/26/2004 1105.09
8/27/2004 1107.77
8/30/2004 1099.15
8/31/2004 1104.24
9/1/2004 1105.91
9/2/2004 1118.31
9/3/2004 1113.63
9/7/2004 1121.3
9/8/2004 1116.27
9/9/2004 1118.38
9/10/2004 1123.92
9/13/2004 1125.82
9/14/2004 1128.33
9/15/2004 1120.37
9/16/2004 1123.5
9/17/2004 1128.55
9/20/2004 1122.2
9/21/2004 1129.3
9/22/2004 1113.56
9/23/2004 1108.36
9/24/2004 1110.11
9/27/2004 1103.52
9/28/2004 1110.06
9/29/2004 1114.8
9/30/2004 1114.58
10/1/2004 1131.5
10/4/2004 1135.17
10/5/2004 1134.48
10/6/2004 1142.05
10/7/2004 1130.65
10/8/2004 1122.14
10/11/2004 1124.39
10/12/2004 1121.84
10/13/2004 1113.65
10/14/2004 1103.29
10/15/2004 1108.2
10/18/2004 1114.02
10/19/2004 1103.23
10/20/2004 1103.66
10/21/2004 1106.49
10/22/2004 1095.74
10/25/2004 1094.81
10/26/2004 1111.09
10/27/2004 1125.4
10/28/2004 1127.44
10/29/2004 1130.2
11/1/2004 1130.51
11/2/2004 1130.54
11/3/2004 1143.2
11/4/2004 1161.67
11/5/2004 1166.17
11/8/2004 1164.89
11/9/2004 1164.08
11/10/2004 1162.91
MAY 4
Fed keeps short-term interest rates at 1.00%.
MAY 7
Strong employment report fuels speculation that the Fed will raise rates.
MAY 31
65th anniversary of the WM Equity Income Fund.
JUNE 1
Oil prices spike higher.
JUNE 23
S&P 500 closes at 1144.06, its high for the quarter.
JUNE 30
Fed increases short-term interest rates for the first time in 4 years by
1/4 point to 1.25%.
AUGUST 10
Fed hikes rates again by 1/4 point.
SEPTEMBER 21
Fed raises rates for third time this year to 1.75%. Says it will
continue tightening policy at a "measured" pace.
SEPTEMBER 27
Fannie Mae reaches agreement with its regulator to address improper
accounting procedures.
SEPTEMBER 28
Oil hits $50 per barrel.
OCTOBER 29
Estimates for 3rd quarter '04 consumer spending growth released. Up
strongly from prior quarter.
OCTOBER 31
55th anniversary of the WM Growth & Income Fund.
5
Our SAM Process and Asset Allocation Team
OUR 3-STEP PROCESS FOR ACTIVE ASSET ALLOCATION
The five Strategic Asset Management (SAM) Portfolios are constructed and
managed according to a highly disciplined and dynamic process:
Step 1:
SETTING LONG-TERM ASSET ALLOCATION TARGETS FOR EACH PORTFOLIO.
Extensive research into risk and asset classes forms the basis for
strategic decisions about each Portfolio's long-term asset allocation
policies. This research involves analyzing historical and projected risk,
return, and correlation between asset classes. The results help position
the Portfolios to maximize the potential for returns at their assigned risk
level.
WM Advisors
Asset Allocation Team
[PHOTO]
Randall L. Yoakum, CFA
Chief Investment Strategist and Senior Co-Portfolio Manager of the SAM
Portfolios
Mr. Yoakum currently serves as chairman of the Asset Allocation Team and
works closely with Mr. Meighan and Mr. Pokrzywinski in establishing
economic strategy. He was instrumental in developing the investment
policies at WM Advisors from 1987 to 1994, as well as after rejoining the
company in 1999. His investment management experience dates back to 1984.
He holds the Chartered Financial Analyst designation and has a B.B.A. from
Pacific Lutheran University and an M.B.A. from Arizona State University.
[PHOTO]
Michael D. Meighan, CFA
Co-Portfolio Manager of the SAM Portfolios
Mr. Meighan oversees the Team analysts and works collaboratively with Mr.
Yoakum and Mr. Pokrzywinski in developing the asset allocation and
investment outlook for the Portfolios as well as formulating economic
strategy. Mr. Meighan has been instrumental in developing the current
investment policy for the Portfolios since joining WM Advisors in 1999. His
investment management experience dates back to 1994. He holds the Chartered
Financial Analyst designation and has a B.S. from Santa Clara University
and an M.B.A. from Gonzaga University.
6
Step 2:
DEVELOPING A NEAR-TERM INVESTMENT OUTLOOK THAT DETERMINES HOW MUCH RISK EACH
PORTFOLIO SHOULD TAKE.
Research into dozens of global and domestic market forces shapes the Asset
Allocation Team's outlook for the economy and capital markets. This view of
investment conditions determines the Team's tactical decisions about each
Portfolio's exact equity and fixed-income allocations. Here are just some
of the criteria tracked for this step:
Federal Reserve monetary policy Government budget deficits State and federal fiscal policy
Consumer debt Tax policy Trade pacts
Corporate profits Demographic trends Interest rate changes
Elections Mortgage demand Business confidence
Employment trends Business spending Geopolitical risks
Consumer spending Inflationary pressures Wage and payroll trends
Currency flows Housing trends Investment flows
Commodity prices GDP growth Import prices
Yield spreads Historical financial market returns Factory capacity utilization
Stock market volume Inventories Market capitalization relative values
Capital goods expenditures Investor psychology Productivity growth
Historical asset class returns Technology trends Asset class correlations
Cyclical and secular economic trends Risk-return characteristics Business activity
Volatility analysis Stock valuations Performance attribution by allocation
Consumer confidence and sector
Step 3:
CONSTRUCTING EACH PORTFOLIO'S SPECIFIC MIX OF ASSET CLASSES.
The Team refines its tactical decisions by examining hundreds of possible
Portfolio compositions. Combinations of equity styles, sectors, and
capitalizations, as well as bond ratings and maturity structures, are
analyzed before each Portfolio is built.
Continuous Active Management
Once the Portfolios are constructed, the Team continually monitors and
reallocates them to take advantage of changing investment
conditions--unlike many funds of funds that are only periodically
rebalanced to static models. We also repeatedly test the Portfolios'
structure by assessing how fund allocations and holdings affect
performance. This dynamic process works toward optimizing the Portfolios
for building long-term investment value.
[PHOTO]
Gary J. Pokrzywinski, CFA
Head of Investments and Senior Portfolio Manager
Mr. Pokrzywinski helps develop the outlook and policy for the fixed-income
assets within the Portfolios. He is also instrumental in developing
economic strategy with Mr. Yoakum and Mr. Meighan. Mr. Pokrzywinski joined
WM Advisors in 1992 and currently manages the WM Income Fund and WM High
Yield Fund. He holds the Chartered Financial Analyst designation and has a
B.B.A. from the University of Wisconsin.
[PHOTO]
Charles D. Averill, CFA
Senior Quantitative Analyst
Mr. Averill is dedicated to the Asset Allocation Team as a Senior
Quantitative Analyst. His responsibilities include the ongoing analysis of
both the current and potential fund holdings, as well as the structural
model underlying the asset allocation process. To help examine the
performance of the SAM Portfolios' holdings, he also develops performance
attribution procedures. Mr. Averill holds the Chartered Financial Analyst
designation and has been with WM Advisors since 1990. Before joining the
firm, he taught economics at Gonzaga University and worked as a newspaper
editor. He has a B.A. in Economics from Reed College and an M.A. in
Economics from Princeton University.
[PHOTO]
Nicole Verbrugghe, CFA
Quantitative Analyst
Ms. Verbrugghe works with the Asset Allocation Team as a Quantitative
Analyst. She gathers and analyzes economic data in order to track
indicators that specifically affect the SAM Portfolios. She continually
reviews holdings and performance characteristics of the underlying funds
and assesses how the weighting of each fund influences the five Portfolios'
investment policies and goals. Ms. Verbrugghe joined WM Advisors in 2001
and holds the Chartered Financial Analyst designation. Before joining the
Asset Allocation Team, Ms. Verbrugghe worked for 12 years in financial
accounting and analysis. She holds a B.A. in Mathematics from Whitman
College.
7
Flexible Income Portfolio
ANNUAL TOTAL RETURNS(1)
Class A shares at net asset value(2)
(Calendar Year)
2003 +12.08%
2002 +1.03%
2001 +4.33%
2000 +5.10%
1999 +8.64%
1998 +9.24%
1997 +10.25%
INVESTMENT STRATEGY
As of October 31, 2004, the WM Strategic Asset Management (SAM) Flexible
Income Portfolio was diversified among 12 funds representing 13 major asset
classes. This structure allows the Portfolio to manage risk through
allocations among the underlying WM Funds. The Portfolio held a 25%/75%
equity-to-fixed-income ratio during the latter half of the fiscal year, but
made several adjustments earlier in the period that allowed it to benefit
from strong performance in certain stock and bond sectors.
During the spring and summer of this year, the Portfolio trimmed corporate
bond positions by reducing exposure to the WM Income Fund and WM High Yield
Fund, and built positions in mortgage securities by increasing exposure to
the WM U.S. Government Securities Fund. Mortgages can provide favorable
opportunities in the current interest rate environment.
In March 2004, we launched the new WM Small Cap Value Fund, which provides a
way
Data shown is past performance and does not guarantee future results.
Current performance, including the most recent month-end results, which may
be higher or lower than the data shown, can be obtained by calling
800-222-5852. An investment's return and principal value will fluctuate, so
it may be worth more or less upon redemption. A sales charge may apply as
follows: Class A shares: maximum up-front sales charge of 4.5%; Class B
shares: contingent deferred sales charge of 5%, which declines over 5 years
(5-5-4-3-2-0%); Class C shares: contingent deferred sales charge of 1% on
redemptions made during the first 12 months. See the prospectus for
details. Performance listed with sales charge reflects the maximum sales
charge noted above.
Fixed-income investments are subject to interest rate risk, and their value
will decline as interest rates rise.
AVERAGE ANNUAL TOTAL RETURNS(1) AS OF OCTOBER 31, 2004
1 Year 5 Year Since Inception Inception Date
- --------------------------------------------------------------------------------------------------------------
Class A Shares Net Asset Value(2) 6.38% 5.87% 7.35% 7/25/96
With Sales Charge 1.63% 4.89% 6.76%
Class B Shares Net Asset Value(2) 5.56% 5.08% 6.59% 7/25/96
With Sales Charge 0.56% 4.75% 6.59%
Class C Shares Net Asset Value(2) 5.57% - 5.27% 3/1/02
With Sales Charge 4.57% - 5.27%
Lehman Brothers Aggregate Bond Index(3) 5.54% 7.58% 7.32%
Capital Market Benchmark(3) 6.34% 5.82% 7.88%
[VALUE OF A $10,000 INVESTMENT(1),(4) JULY 25, 1996 - OCTOBER 31, 2004 GRAPH]
- ------------------------------------------------------------------------------------------
Class A Class A Shares Lehman Brothers Capital Market
Date Shares at with Maximum Aggregate Bond Benchmark(3)
NAV(2) Sales Charge Index(3)
- ------------------------------------------------------------------------------------------
Jun-96 10,000 9,550
Jul-96 10,018 9,567 10,000 10,000
Aug-96 10,046 9,594 9,983 10,029
Sep-96 10,266 9,804 10,157 10,282
Oct-96 10,446 9,976 10,382 10,520
Nov-96 10,748 10,264 10,560 10,824
Dec-96 10,690 10,209 10,462 10,701
Jan-97 10,836 10,348 10,494 10,860
Feb-97 10,866 10,377 10,520 10,899
Mar-97 10,711 10,229 10,403 10,712
Apr-97 10,857 10,369 10,559 10,968
May-97 11,035 10,539 10,660 11,186
Jun-97 11,161 10,659 10,787 11,392
Jul-97 11,529 11,011 11,078 11,819
Aug-97 11,399 10,886 10,984 11,608
Sep-97 11,598 11,076 11,146 11,872
Oct-97 11,606 11,083 11,308 11,931
Nov-97 11,667 11,142 11,360 12,084
Dec-97 11,790 11,259 11,475 12,223
Jan-98 11,896 11,360 11,622 12,376
Feb-98 12,067 11,524 11,612 12,547
Mar-98 12,211 11,661 11,652 12,710
Apr-98 12,272 11,719 11,712 12,789
May-98 12,266 11,714 11,824 12,843
Jun-98 12,397 11,839 11,924 13,034
Jul-98 12,322 11,768 11,949 13,027
Aug-98 11,853 11,320 12,144 12,820
Sep-98 12,169 11,622 12,428 13,224
Oct-98 12,365 11,809 12,362 13,383
Nov-98 12,635 12,066 12,433 13,606
Dec-98 12,891 12,311 12,470 13,795
Jan-99 13,136 12,545 12,558 13,989
Feb-99 12,948 12,366 12,339 13,706
Mar-99 13,169 12,576 12,407 13,876
Apr-99 13,439 12,834 12,446 14,019
May-99 13,331 12,731 12,337 13,854
Jun-99 13,470 12,864 12,297 13,971
Jul-99 13,359 12,758 12,246 13,837
Aug-99 13,280 12,683 12,239 13,818
Sep-99 13,335 12,735 12,381 13,870
Oct-99 13,527 12,918 12,427 14,087
Nov-99 13,708 13,091 12,426 14,143
Dec-99 13,992 13,362 12,366 14,255
Jan-00 13,834 13,211 12,326 14,074
Feb-00 13,985 13,355 12,475 14,157
Mar-00 14,343 13,697 12,639 14,583
Apr-00 14,214 13,574 12,603 14,462
May-00 14,134 13,498 12,596 14,397
Jun-00 14,367 13,721 12,858 14,708
Jul-00 14,382 13,734 12,975 14,769
Aug-00 14,780 14,115 13,164 15,124
Sep-00 14,699 14,037 13,246 15,041
Oct-00 14,685 14,025 13,334 15,107
Nov-00 14,436 13,786 13,553 15,068
Dec-00 14,706 14,044 13,805 15,307
Jan-01 15,226 14,541 14,030 15,615
Feb-01 14,978 14,304 14,152 15,438
Mar-01 14,758 14,094 14,223 15,304
Apr-01 14,951 14,278 14,163 15,491
May-01 15,077 14,398 14,248 15,585
Jun-01 15,102 14,423 14,302 15,557
Jul-01 15,255 14,568 14,622 15,806
Aug-01 15,228 14,542 14,790 15,754
Sep-01 14,943 14,270 14,962 15,645
Oct-01 15,225 14,540 15,275 15,966
Nov-01 15,318 14,629 15,064 16,035
Dec-01 15,338 14,648 14,967 15,980
Jan-02 15,349 14,658 15,089 16,038
Feb-02 15,358 14,667 15,235 16,100
Mar-02 15,427 14,733 14,982 16,007
Apr-02 15,441 14,746 15,273 16,061
May-02 15,484 14,787 15,403 16,146
Jun-02 15,263 14,576 15,537 16,029
Jul-02 14,982 14,308 15,725 15,934
Aug-02 15,144 14,462 15,990 16,170
Sep-02 14,956 14,283 16,249 16,028
Oct-02 15,165 14,483 16,175 16,250
Nov-02 15,478 14,781 16,170 16,437
Dec-02 15,496 14,799 16,505 16,516
Jan-03 15,512 14,814 16,519 16,442
Feb-03 15,572 14,871 16,747 16,573
Mar-03 15,617 14,915 16,734 16,595
Apr-03 16,044 15,322 16,873 16,978
May-03 16,501 15,758 17,187 17,409
Jun-03 16,575 15,829 17,152 17,427
Jul-03 16,345 15,609 16,576 17,019
Aug-03 16,467 15,726 16,685 17,176
Sep-03 16,705 15,953 17,128 17,504
Oct-03 16,905 16,144 16,968 17,572
Nov-03 17,044 16,277 17,009 17,637
Dec-03 17,367 16,586 17,183 17,965
Jan-04 17,586 16,795 17,320 18,146
Feb-04 17,743 16,944 17,507 18,353
Mar-04 17,806 17,005 17,638 18,408
Apr-04 17,412 16,629 17,180 17,968
May-04 17,381 16,599 17,111 17,959
Jun-04 17,571 16,780 17,209 18,110
Jul-04 17,492 16,704 17,379 18,134
Aug-04 17,714 16,917 17,711 18,426
Sep-04 17,809 17,008 17,759 18,505
Oct-04 17,985 17,176 17,908 18,686
<FN>
(1) The Portfolio's performance through 10/31/99 benefited from the
agreement of WM Advisors and its affiliates to limit the Portfolio's
expenses. Performance reflects ongoing expenses and assumes reinvestment
of all dividends and capital gains. It also reflects investment advisory
fees paid by the Portfolio's applicable Funds, which include the effects
of expense reimbursement. Performance does not reflect the impact of
federal, state, or municipal taxes. If it did, performance would be
lower.
(2) Net asset value is not adjusted for sales charge.
(3) The Lehman Brothers Aggregate Bond Index is a broad-based index intended
to represent the U.S. fixed-income market. The Capital Market Benchmark
is intended to represent a relevant proxy for market and Portfolio
performance. It is allocated as follows: 20% S&P 500 (a broad-based
index intended to represent the U.S. equity market) and 80% Lehman
Brothers Aggregate Bond Index. Returns shown for the indices assume
reinvestment of all dividends and distributions, and since-inception
returns shown for the indices are calculated from 7/31/96. Indices are
unmanaged, and individuals cannot invest directly in an index.
(4) Performance of Class B shares (offered as of 7/96) and C shares (offered
as of 3/02) will differ.
8
to further diversify the Portfolio's holdings among undervalued small-cap
assets. For the year, small-cap stocks performed better than large-cap
stocks, while value outperformed growth. As a result of this sector's
performance, as well as the Fund's advantageous stock selection, the WM
Small Cap Value Fund posted the second highest return among the underlying
WM Equity Funds for the period.
The Portfolio also benefited from real estate holdings in the WM REIT Fund,
which is part of the Portfolio's overweighted position in value securities.
This Fund closed the fiscal year with the highest performance of all the
underlying WM Funds.
Looking forward, we believe the economy has entered the self-sustaining
phase of the current recovery, but we feel any benefits may be muted by
longer-term challenges. Just after the fiscal year ended, President Bush was
re-elected, which removed some degree of market uncertainty in the short
term.
However, secular forces remain that could curtail future economic growth.
These include the large federal deficit and current account imbalance,
overspent consumers, and a low level of personal savings. Corporate
profitability and price-to-earnings ratios may be difficult to increase in
this low-growth environment. This combination of factors has caused us to
remain conservative and focus on diversification and risk management to
pursue long-term investment objectives.
PORTFOLIO CHARACTERISTICS AS OF OCTOBER 31, 2004
Equity/Fixed-Income Allocation:(5) 25% Equity/75% Fixed-Income
Weighted Average Market Capitalization (Equities): $58.4 billion
Weighted Average P/E (Equities):(6) 15.9
Beta:(7) 0.18
Portfolio Standard Deviation:(8) 3.88
S&P 500 Standard Deviation:(8) 16.23
Turnover: 3%
Number of Securities:(9) 1,423
Total Net Assets: $904.5 million
ASSET CLASS DIVERSIFICATION(5)
As of As of
10/31/04 10/31/03 Change
- ----------------------------------------------------------------------------
Mortgage- & Asset-Backed Bonds 37% 33% +4%
Investment-Grade Corporate Bonds 19% 19% 0%
High-Yield Corporate Bonds 9% 9% 0%
U.S. Large-Cap Value Stocks 7% 8% -1%
U.S. Government Securities 6% 6% 0%
U.S. Large-Cap Growth Stocks 6% 5% +1%
U.S. Mid-Cap Value Stocks 3% 3% 0%
Convertible Securities 2% 3% -1%
U.S. Mid-Cap Growth Stocks 2% 3% -1%
REITs 2% 2% 0%
U.S. Small-Cap Growth Stocks 1% 2% -1%
U.S. Small-Cap Value Stocks 1% 1% 0%
Cash Equivalents 5% 6% -1%
<FN>
(5) May not reflect current allocations.
(6) Based on estimated earnings.
(7) Source: Lipper, Inc. Beta is a quantitative measure of the Portfolio's
volatility relative to the overall market (S&P 500). A beta above 1
indicates more volatility than the market, and a beta below 1 indicates
less volatility. Results are calculated using three-month rolling
returns for Class A shares for the three-year period ended 10/31/04.
(8) Source: Ibbotson Associates and Lipper, Inc. Standard deviation measures
the fluctuation of returns around the arithmetic average return of the
investment. The higher the standard deviation, the greater the
variability (and thus risk) of the investment returns. Results are
calculated for the three-year period ended 10/31/04, and Portfolio
results are for Class A shares.
(9) Represents the sum of securities held by the underlying WM Funds. Some
securities may be held by more than one WM Fund.
9
Conservative Balanced Portfolio*
ANNUAL TOTAL RETURNS(1)
Class A shares at net asset value(2)
(Calendar Year)
2003 +15.98%
2002 -2.98%
2001 +2.20%
2000 +3.97%
1999 +1.97%
1998 +5.28%
1997 +8.29%
<FN>
* As of 8/1/00, the Income Portfolio became the Conservative Balanced
Portfolio, and the Portfolio's objectives and strategies changed. This
information should be considered when reviewing past performance. Please
review the prospectus for detailed information.
INVESTMENT STRATEGY
As of October 31, 2004, the WM Strategic Asset Management (SAM)
Conservative Balanced Portfolio was diversified among 13 funds representing
14 major asset classes. This structure allows the Portfolio to manage risk
through allocations in the underlying WM Funds. The Portfolio held a
40%/60% equity-to-fixed-income ratio during most of the fiscal year, but
made several adjustments that allowed it to benefit from strong performance
in certain stock and bond sectors.
During the spring and summer of this year, the Portfolio trimmed corporate
bond positions by reducing exposure to the WM Income Fund and WM High Yield
Fund, and built larger positions in mortgage securities by increasing
exposure to the WM U.S. Government Securities Fund. Mortgages can provide
favorable opportunities in the current interest rate environment.
In March 2004, we launched the new WM Small Cap Value Fund, which provides a
way
Data shown is past performance and does not guarantee future results.
Current performance, including the most recent month-end results, which may
be higher or lower than the data shown, can be obtained by calling
800-222-5852. An investment's return and principal value will fluctuate, so
it may be worth more or less upon redemption. A sales charge may apply as
follows: Class A shares: maximum up-front sales charge of 5.5%; Class B
shares: contingent deferred sales charge of 5%, which declines over 5 years
(5-5-4-3-2-0%); Class C shares: contingent deferred sales charge of 1% on
redemptions made during the first 12 months. See the prospectus for
details. Performance listed with sales charge reflects the maximum sales
charge noted above.
Fixed-income investments are subject to interest rate risk, and their value
will decline as interest rates rise.
AVERAGE ANNUAL TOTAL RETURNS(1) AS OF OCTOBER 31, 2004
1 Year 5 Year Since Inception Inception Date
- --------------------------------------------------------------------------------------------------------------
Class A Shares Net Asset Value(2) 7.29% 4.44% 5.08% 7/25/96
With Sales Charge 1.39% 3.27% 4.37%
Class B Shares Net Asset Value(2) 6.47% 3.66% 4.31% 7/25/96
With Sales Charge 1.47% 3.31% 4.31%
Class C Shares Net Asset Value(2) 6.55% - 5.47% 3/1/02
With Sales Charge 5.55% - 5.47%
Lehman Brothers Aggregate Bond Index(3) 5.54% 7.58% 7.32%
Capital Market Benchmark(3) 7.14% 3.95% 8.31%
[VALUE OF A $10,000 INVESTMENT(1),(4) JULY 25, 1996 - OCTOBER 31, 2004 GRAPH]
- -------------------------------------------------------------------------------
CLASS A LEHMAN
CLASS A SHARES BROTHERS CAPITAL
DATE SHARES WITH MAXIMUM AGGREGATE BOND MARKET
AT NAV(2) SALES CHARGE INDEX(3) BENCHMARK(3)
- -------------------------------------------------------------------------------
Jun-96 10,000 9,450
Jul-96 10,041 9,489 10,000 10,000
Aug-96 9,994 9,445 9,983 10,075
Sep-96 10,144 9,586 10,157 10,406
Oct-96 10,368 9,798 10,382 10,659
Nov-96 10,529 9,950 10,560 11,092
Dec-96 10,462 9,886 10,462 10,943
Jan-97 10,467 9,891 10,494 11,236
Feb-97 10,519 9,941 10,520 11,288
Mar-97 10,407 9,834 10,403 11,025
Apr-97 10,522 9,944 10,559 11,388
May-97 10,617 10,033 10,660 11,733
Jun-97 10,733 10,142 10,787 12,027
Jul-97 11,009 10,403 11,078 12,604
Aug-97 10,913 10,313 10,984 12,260
Sep-97 11,051 10,444 11,146 12,637
Oct-97 11,192 10,576 11,308 12,578
Nov-97 11,224 10,607 11,360 12,846
Dec-97 11,324 10,701 11,475 13,012
Jan-98 11,442 10,813 11,622 13,169
Feb-98 11,434 10,805 11,612 13,543
Mar-98 11,461 10,831 11,652 13,848
Apr-98 11,511 10,878 11,712 13,946
May-98 11,595 10,957 11,824 13,929
Jun-98 11,668 11,026 11,924 14,226
Jul-98 11,685 11,043 11,949 14,183
Aug-98 11,718 11,073 12,144 13,501
Sep-98 11,850 11,199 12,428 14,037
Oct-98 11,779 11,131 12,362 14,450
Nov-98 11,915 11,259 12,433 14,850
Dec-98 11,922 11,266 12,470 15,218
Jan-99 12,014 11,353 12,558 15,538
Feb-99 11,883 11,229 12,339 15,182
Mar-99 11,962 11,304 12,407 15,475
Apr-99 12,075 11,411 12,446 15,744
May-99 12,024 11,363 12,337 15,513
Jun-99 12,008 11,348 12,297 15,828
Jul-99 11,995 11,335 12,246 15,590
Aug-99 11,986 11,326 12,239 15,555
Sep-99 12,102 11,436 12,381 15,492
Oct-99 12,121 11,455 12,427 15,918
Nov-99 12,155 11,487 12,426 16,047
Dec-99 12,159 11,490 12,366 16,380
Jan-00 12,145 11,477 12,326 16,018
Feb-00 12,241 11,568 12,475 16,013
Mar-00 12,350 11,671 12,639 16,767
Apr-00 12,331 11,652 12,603 16,536
May-00 12,286 11,610 12,596 16,395
Jun-00 12,496 11,809 12,858 16,761
Jul-00 12,582 11,890 12,975 16,747
Aug-00 13,013 12,297 13,164 17,308
Sep-00 12,851 12,145 13,246 17,009
Oct-00 12,792 12,089 13,334 17,048
Nov-00 12,389 11,708 13,553 16,678
Dec-00 12,643 11,948 13,805 16,896
Jan-01 13,160 12,437 14,030 17,302
Feb-01 12,776 12,074 14,152 16,760
Mar-01 12,498 11,810 14,223 16,387
Apr-01 12,796 12,093 14,163 16,855
May-01 12,924 12,213 14,248 16,962
Jun-01 12,932 12,221 14,302 16,834
Jul-01 12,981 12,267 14,622 16,994
Aug-01 12,859 12,152 14,790 16,687
Sep-01 12,414 11,731 14,962 16,264
Oct-01 12,666 11,970 15,275 16,593
Nov-01 12,874 12,166 15,064 16,965
Dec-01 12,920 12,210 14,967 16,960
Jan-02 12,861 12,154 15,089 16,943
Feb-02 12,815 12,110 15,235 16,910
Mar-02 12,980 12,266 14,982 16,997
Apr-02 12,884 12,175 15,273 16,783
May-02 12,898 12,189 15,403 16,819
Jun-02 12,594 11,901 15,537 16,428
Jul-02 12,221 11,549 15,725 16,035
Aug-02 12,331 11,653 15,990 16,240
Sep-02 11,984 11,325 16,249 15,691
Oct-02 12,277 11,602 16,175 16,200
Nov-02 12,638 11,943 16,170 16,579
Dec-02 12,534 11,845 16,505 16,395
Jan-03 12,507 11,819 16,519 16,232
Feb-03 12,507 11,819 16,747 16,270
Mar-03 12,543 11,853 16,734 16,325
Apr-03 12,982 12,268 16,873 16,944
May-03 13,462 12,722 17,187 17,489
Jun-03 13,546 12,801 17,152 17,558
Jul-03 13,445 12,706 16,576 17,328
Aug-03 13,588 12,841 16,685 17,532
Sep-03 13,755 12,998 17,128 17,737
Oct-03 14,041 13,269 16,968 18,041
Nov-03 14,184 13,404 17,009 18,131
Dec-03 14,536 13,737 17,183 18,622
Jan-04 14,738 13,928 17,320 18,849
Feb-04 14,883 14,064 17,507 19,075
Mar-04 14,920 14,099 17,638 19,047
Apr-04 14,557 13,757 17,180 18,630
May-04 14,586 13,784 17,111 18,687
Jun-04 14,782 13,969 17,209 18,897
Jul-04 14,607 13,804 17,379 18,759
Aug-04 14,768 13,956 17,711 19,005
Sep-04 14,905 14,086 17,759 19,117
Oct-04 15,067 14,238 17,908 19,331
<FN>
(1) The Portfolio's performance through 10/31/03 benefited from the
agreement of WM Advisors and its affiliates to limit the Portfolio's
expenses. Performance reflects ongoing expenses and assumes reinvestment
of all dividends and capital gains. It also reflects investment advisory
fees paid by the Portfolio's applicable Funds, which include the effects
of expense reimbursement. Performance does not reflect the impact of
federal, state, or municipal taxes. If it did, performance would be
lower.
(2) Net asset value is not adjusted for sales charge.
(3) The Lehman Brothers Aggregate Bond Index is a broad-based index intended
to represent the U.S. fixed-income market. The Capital Market Benchmark
is intended to represent a relevant proxy for market and Portfolio
performance. It is allocated as follows: 40% S&P 500 (a broad-based
index intended to represent the U.S. equity market) and 60% Lehman
Brothers Aggregate Bond Index. Returns shown for the indices assume
reinvestment of all dividends and distributions, and since-inception
returns shown for the indices are calculated from 7/31/96. Indices are
unmanaged, and individuals cannot invest directly in an index.
(4) Performance of Class B shares (offered as of 7/96) and C shares (offered
as of 3/02) will differ.
10
to further diversify the Portfolio's holdings among undervalued small-cap
assets. For the year, small-cap stocks performed better than large-cap
stocks, while value outperformed growth. As a result of this sector's
performance, as well as the Fund's advantageous stock picking, the WM Small
Cap Value Fund posted the second highest return among the underlying WM
Equity Funds for the period.
The Portfolio also benefited from real estate holdings in the WM REIT Fund,
which is part of the Portfolio's overweighted position in value securities.
This Fund closed the fiscal year with the highest performance of all the
underlying WM Funds.
Looking forward, we believe the economy has entered the self-sustaining
phase of the current recovery, but we feel any benefits may be muted by
longer-term challenges. Just after the fiscal year ended, President Bush
was re-elected, which removed some degree of market uncertainty in the
short term.
However, secular forces remain that could curtail future economic growth.
These include the large federal deficit and current account imbalance,
overspent consumers, and a low level of personal savings. Corporate
profitability and price-to-earnings ratios may be difficult to increase in
this low-growth environment. This combination of factors has caused us to
remain conservative and focus on diversification and risk management to
pursue long-term investment objectives.
PORTFOLIO CHARACTERISTICS AS OF OCTOBER 31, 2004
Equity/Fixed-Income Allocation:(5) 40% Equity/60% Fixed-Income
Weighted Average Market Capitalization (Equities): $56.9 billion
Weighted Average P/E (Equities):(6) 16.0
Beta:(7) 0.32
Portfolio Standard Deviation:(8) 5.52
S&P 500 Standard Deviation:(8) 16.23
Turnover: 2%
Number of Securities:(9) 1,671
Total Net Assets: $466.8 million
ASSET CLASS DIVERSIFICATION(5)
As of As of
10/31/04 10/31/03 Change
- ----------------------------------------------------------------------------
Mortgage- & Asset-Backed Bonds 30% 27% +3%
Investment-Grade Corporate Bonds 13% 14% -1%
U.S. Large-Cap Value Stocks 10% 11% -1%
U.S. Large-Cap Growth Stocks 9% 8% +1%
High-Yield Corporate Bonds 7% 9% -2%
U.S. Mid-Cap Value Stocks 5% 4% +1%
U.S. Government Securities 5% 4% +1%
Foreign Stocks 4% 3% +1%
U.S. Mid-Cap Growth Stocks 3% 4% -1%
REITs 3% 3% 0%
Convertible Securities 2% 3% -1%
U.S. Small-Cap Growth Stocks 2% 3% -1%
U.S. Small-Cap Value Stocks 2% 1% +1%
Cash Equivalents 5% 6% -1%
<FN>
(5) May not reflect current allocations.
(6) Based on estimated earnings.
(7) Source: Lipper, Inc. Beta is a quantitative measure of the Portfolio's
volatility relative to the overall market (S&P 500). A beta above 1
indicates more volatility than the market, and a beta below 1 indicates
less volatility. Results are calculated using three-month rolling
returns for Class A shares for the three-year period ended 10/31/04.
(8) Source: Ibbotson Associates and Lipper, Inc. Standard deviation measures
the fluctuation of returns around the arithmetic average return of the
investment. The higher the standard deviation, the greater the
variability (and thus risk) of the investment returns. Results are
calculated for the three-year period ended 10/31/04, and Portfolio
results are for Class A shares.
(9) Represents the sum of securities held by the underlying WM Funds. Some
securities may be held by more than one WM Fund.
11
Balanced Portfolio
ANNUAL TOTAL RETURNS(1)
Class A shares at net asset value(2)
(Calendar Year)
2003 +21.34%
2002 -9.41%
2001 -0.51%
2000 +0.13%
1999 +26.97%
1998 +16.27%
1997 +10.22%
INVESTMENT STRATEGY
As of October 31, 2004, the WM Strategic Asset Management (SAM) Balanced
Portfolio was diversified among 13 funds representing 14 major asset
classes. This structure allows the Portfolio to manage risk through
allocations in the underlying WM Funds. The Portfolio held a 60%/40%
equity-to-fixed-income ratio during most of the fiscal year, but made
several adjustments that allowed it to benefit from strong performance in
certain stock and bond sectors.
In March 2004, we launched the new WM Small Cap Value Fund, which provides
a way to further diversify the Portfolio's holdings among undervalued
small-cap assets. For the year, small-cap stocks performed better than
large-cap stocks, while value outperformed growth. As a result of this
sector's performance, as well as the Fund's advantageous stock picking, the
WM Small Cap Value Fund posted the second highest return among the
underlying WM Equity Funds for the period.
Data shown is past performance and does not guarantee future results.
Current performance, including the most recent month-end results, which may
be higher or lower than the data shown, can be obtained by calling
800-222-5852. An investment's return and principal value will fluctuate, so
it may be worth more or less upon redemption. A sales charge may apply as
follows: Class A shares: maximum up-front sales charge of 5.5%; Class B
shares: contingent deferred sales charge of 5%, which declines over 5 years
(5-5-4-3-2-0%); Class C shares: contingent deferred sales charge of 1% on
redemptions made during the first 12 months. See the prospectus for
details. Performance listed with sales charge reflects the maximum sales
charge noted above.
Fixed-income investments are subject to interest rate risk, and their value
will decline as interest rates rise.
AVERAGE ANNUAL TOTAL RETURNS(1) AS OF OCTOBER 31, 2004
1 Year 5 Year Since Inception Inception Date
- -------------------------------------------------------------------------------------------------------------
Class A Shares Net Asset Value(2) 8.51% 4.85% 8.64% 7/25/96
With Sales Charge 2.53% 3.67% 7.90%
Class B Shares Net Asset Value(2) 7.59% 4.05% 7.84% 7/25/96
With Sales Charge 2.59% 3.71% 7.84%
Class C Shares Net Asset Value(2) 7.64% - 5.28% 3/1/02
With Sales Charge 6.64% - 5.28%
Lehman Brothers Aggregate Bond Index(3) 5.54% 7.58% 7.32%
Capital Market Benchmark(3) 7.91% 1.99% 8.61%
Russell 3000(R) Index(3) 9.51% -0.99% 8.86%
[VALUE OF A $10,000 INVESTMENT(1),(4) JULY 25, 1996 - OCTOBER 31, 2004 GRAPH]
- --------------------------------------------------------------------------------------------------
CLASS A
CLASS A SHARES WITH LEHMAN BROTHERS CAPITAL
DATE SHARES AT MAXIMUM AGGREGATE RUSSELL 3000(R) MARKET
NAV(2) SALES CHARGE BOND INDEX(3) INDEX(3) BENCHMARK(3)
- --------------------------------------------------------------------------------------------------
Jun-96 10,000 9,450
Jul-96 10,074 9,520 10,000 10,000 10,000
Aug-96 10,162 9,604 9,983 10,303 10,120
Sep-96 10,432 9,858 10,157 10,863 10,532
Oct-96 10,462 9,886 10,382 11,062 10,798
Nov-96 10,813 10,218 10,560 11,842 11,364
Dec-96 10,740 10,150 10,462 11,700 11,188
Jan-97 10,912 10,312 10,494 12,347 11,619
Feb-97 10,868 10,271 10,520 12,361 11,687
Mar-97 10,585 10,003 10,403 11,802 11,344
Apr-97 10,792 10,199 10,559 12,384 11,818
May-97 11,245 10,627 10,660 13,230 12,298
Jun-97 11,501 10,868 10,787 13,780 12,685
Jul-97 12,082 11,417 11,078 14,860 13,426
Aug-97 11,696 11,053 10,984 14,257 12,932
Sep-97 12,089 11,424 11,146 15,065 13,434
Oct-97 11,735 11,090 11,308 14,559 13,243
Nov-97 11,750 11,104 11,360 15,117 13,635
Dec-97 11,831 11,181 11,475 15,419 13,831
Jan-98 11,979 11,320 11,622 15,499 13,994
Feb-98 12,542 11,852 11,612 16,607 14,596
Mar-98 12,942 12,230 11,652 17,431 15,065
Apr-98 13,089 12,369 11,712 17,602 15,187
May-98 12,920 12,209 11,824 17,167 15,088
Jun-98 13,146 12,423 11,924 17,748 15,507
Jul-98 13,010 12,295 11,949 17,425 15,422
Aug-98 11,653 11,012 12,144 14,755 14,185
Sep-98 12,033 11,371 12,428 15,761 14,863
Oct-98 12,510 11,822 12,362 16,958 15,557
Nov-98 13,040 12,323 12,433 17,995 16,158
Dec-98 13,757 13,001 12,470 19,140 16,736
Jan-99 14,260 13,475 12,558 19,791 17,203
Feb-99 13,930 13,164 12,339 19,090 16,763
Mar-99 14,496 13,698 12,407 19,791 17,202
Apr-99 15,019 14,193 12,446 20,683 17,624
May-99 14,659 13,852 12,337 20,290 17,312
Jun-99 15,245 14,406 12,297 21,315 17,866
Jul-99 15,039 14,212 12,246 20,669 17,501
Aug-99 15,008 14,182 12,239 20,434 17,445
Sep-99 15,140 14,307 12,381 19,910 17,239
Oct-99 15,657 14,796 12,427 21,159 17,918
Nov-99 16,292 15,395 12,426 21,751 18,137
Dec-99 17,468 16,507 12,366 23,139 18,743
Jan-00 17,096 16,155 12,326 22,232 18,152
Feb-00 17,697 16,724 12,475 22,439 18,034
Mar-00 18,366 17,356 12,639 24,196 19,189
Apr-00 17,852 16,870 12,603 23,344 18,820
May-00 17,563 16,597 12,596 22,688 18,585
Jun-00 17,934 16,947 12,858 23,360 19,014
Jul-00 17,738 16,762 12,975 22,946 18,906
Aug-00 18,552 17,532 13,164 24,649 19,721
Sep-00 18,140 17,143 13,246 23,532 19,145
Oct-00 18,024 17,033 13,334 23,198 19,147
Nov-00 17,098 16,157 13,553 21,059 18,368
Dec-00 17,491 16,529 13,805 21,413 18,559
Jan-01 18,369 17,359 14,030 22,145 19,075
Feb-01 17,482 16,520 14,152 20,121 18,098
Mar-01 16,863 15,936 14,223 18,809 17,446
Apr-01 17,504 16,541 14,163 20,318 18,230
May-01 17,735 16,759 14,248 20,480 18,346
Jun-01 17,765 16,788 14,302 20,103 18,106
Jul-01 17,653 16,682 14,622 19,772 18,162
Aug-01 17,284 16,334 14,790 18,605 17,563
Sep-01 16,354 15,455 14,962 16,964 16,794
Oct-01 16,714 15,795 15,275 17,360 17,126
Nov-01 17,216 16,269 15,064 18,696 17,820
Dec-01 17,403 16,446 14,967 18,960 17,868
Jan-02 17,149 16,206 15,089 18,723 17,770
Feb-02 16,942 16,010 15,235 18,341 17,633
Mar-02 17,387 16,431 14,982 19,144 17,913
Apr-02 17,013 16,078 15,273 18,139 17,401
May-02 16,969 16,036 15,403 17,929 17,383
Jun-02 16,351 15,452 15,537 16,638 16,700
Jul-02 15,555 14,700 15,725 15,315 16,000
Aug-02 15,675 14,813 15,990 15,387 16,172
Sep-02 14,915 14,094 16,249 13,770 15,222
Oct-02 15,489 14,637 16,175 14,866 15,999
Nov-02 16,108 15,222 16,170 15,765 16,562
Dec-02 15,764 14,897 16,505 14,875 16,115
Jan-03 15,626 14,767 16,519 14,510 15,867
Feb-03 15,535 14,680 16,747 14,271 15,811
Mar-03 15,554 14,698 16,734 14,421 15,898
Apr-03 16,305 15,408 16,873 15,599 16,737
May-03 17,086 16,146 17,187 16,541 17,392
Jun-03 17,250 16,301 17,152 16,764 17,512
Jul-03 17,297 16,345 16,576 17,148 17,461
Aug-03 17,574 16,607 16,685 17,529 17,711
Sep-03 17,700 16,727 17,128 17,338 17,785
Oct-03 18,288 17,282 16,968 18,387 18,322
Nov-03 18,535 17,515 17,009 18,641 18,436
Dec-03 19,130 18,077 17,183 19,492 19,090
Jan-04 19,472 18,401 17,320 19,900 19,361
Feb-04 19,674 18,592 17,507 20,168 19,607
Mar-04 19,676 18,594 17,638 19,928 19,488
Apr-04 19,177 18,122 17,180 19,516 19,102
May-04 19,286 18,225 17,111 19,799 19,228
Jun-04 19,627 18,548 17,209 20,193 19,495
Jul-04 19,190 18,134 17,379 19,430 19,185
Aug-04 19,362 18,297 17,711 19,509 19,377
Sep-04 19,595 18,517 17,759 19,810 19,524
Oct-04 19,846 18,754 17,908 20,135 19,768
<FN>
(1) The Portfolio's performance through 1/31/99 benefited from the agreement
of WM Advisors and its affiliates to limit the Portfolio's expenses.
Performance reflects ongoing expenses and assumes reinvestment of all
dividends and capital gains. It also reflects investment advisory fees
paid by the Portfolio's applicable Funds, which include the effects of
expense reimbursement. Performance does not reflect the impact of
federal, state, or municipal taxes. If it did, performance would be
lower.
(2) Net asset value is not adjusted for sales charge.
(3) The Lehman Brothers Aggregate Bond Index is a broad-based index intended
to represent the U.S. fixed-income market. The Capital Market Benchmark
is intended to represent a relevant proxy for market and Portfolio
performance. It is allocated as follows: 60% S&P 500 (a broad-based
index intended to represent the U.S. equity market) and 40% Lehman
Brothers Aggregate Bond Index. The Russell 3000(R) Index measures the
performance of the 3,000 largest U.S. companies based on total market
capitalization, which represents approximately 98% of the investable
U.S. equity market. Returns shown for the indices assume reinvestment of
all dividends and distributions, and since-inception returns shown for
the indices are calculated from 7/31/96. Indices are unmanaged, and
individuals cannot invest directly in an index.
(4) Performance of Class B shares (offered as of 7/96) and C shares (offered
as of 3/02) will differ.
12
The Portfolio also benefited from real estate holdings in the WM REIT Fund,
which is part of the Portfolio's overweighted position in value securities.
This Fund closed the fiscal year with the highest performance of all the
underlying WM Funds.
During the spring and summer of this year, the Portfolio trimmed corporate
bond positions by reducing exposure to the WM Income Fund and WM High Yield
Fund, and built positions in mortgage securities by increasing exposure to
the WM U.S. Government Securities Fund. Mortgages can provide favorable
opportunities in the current interest rate environment.
Looking forward, we believe the economy has entered the self-sustaining
phase of the current recovery, but we feel any benefits may be muted by
longer-term challenges. Just after the fiscal year ended, President Bush
was re-elected, which removed some degree of market uncertainty in the
short term.
However, secular forces remain that could curtail future economic growth.
These include the large federal deficit and current account imbalance,
overspent consumers, and a low level of personal savings. Corporate
profitability and price-to-earnings ratios may be difficult to increase in
this low-growth environment. This combination of factors has caused us to
remain conservative and focus on diversification and risk management to
pursue long-term investment objectives.
PORTFOLIO CHARACTERISTICS AS OF OCTOBER 31, 2004
Equity/Fixed-Income Allocation:(5) 60% Equity/40% Fixed-Income
Weighted Average Market Capitalization (Equities): $57.1 billion
Weighted Average P/E (Equities):(6) 16.0
Beta:(7) 0.52
Portfolio Standard Deviation:(8) 8.37
S&P 500 Standard Deviation:(8) 16.23
Turnover: 2%
Number of Securities:(9) 1,671
Total Net Assets: $3,362.3 million
ASSET CLASS DIVERSIFICATION(5)
As of As of
10/31/04 10/31/03 Change
- --------------------------------------------------------------------------
Mortgage- & Asset-Backed Bonds 19% 16% +3%
U.S. Large-Cap Value Stocks 16% 17% -1%
U.S. Large-Cap Growth Stocks 14% 12% +2%
U.S. Mid-Cap Value Stocks 8% 7% +1%
Investment-Grade Corporate Bonds 7% 7% 0%
High-Yield Corporate Bonds 5% 6% -1%
U.S. Mid-Cap Growth Stocks 5% 6% -1%
Foreign Stocks 5% 5% 0%
REITs 5% 4% +1%
U.S. Small-Cap Growth Stocks 3% 5% -2%
U.S. Small-Cap Value Stocks 3% 2% +1%
U.S. Government Securities 2% 2% 0%
Convertible Securities 1% 3% -2%
Cash Equivalents 7% 8% -1%
<FN>
(5) May not reflect current allocations.
(6) Based on estimated earnings.
(7) Source: Lipper, Inc. Beta is a quantitative measure of the Portfolio's
volatility relative to the overall market (S&P 500). A beta above 1
indicates more volatility than the market, and a beta below 1 indicates
less volatility. Results are calculated using three-month rolling
returns for Class A shares for the three-year period ended 10/31/04.
(8) Source: Ibbotson Associates and Lipper, Inc. Standard deviation measures
the fluctuation of returns around the arithmetic average return of the
investment. The higher the standard deviation, the greater the
variability (and thus risk) of the investment returns. Results are
calculated for the three-year period ended 10/31/04, and Portfolio
results are for Class A shares.
(9) Represents the sum of securities held by the underlying WM Funds. Some
securities may be held by more than one WM Fund.
13
Conservative Growth Portfolio
ANNUAL TOTAL RETURNS(1)
Class A shares at net asset value(2)
(Calendar Year)
2003 +26.97%
2002 -15.70%
2001 -4.20%
2000 -2.96%
1999 +40.28%
1998 +18.82%
1997 +8.65%
INVESTMENT STRATEGY
As of October 31, 2004, the WM Strategic Asset Management (SAM)
Conservative Growth Portfolio was diversified among 12 funds representing
14 major asset classes. This structure allows the Portfolio to manage risk
through allocations in the underlying WM Funds. The Portfolio held a
79%/21% equity-to-fixed-income ratio during the latter half of the fiscal
year, but made several adjustments earlier in the period that allowed it to
benefit from strong performance in certain stock and bond sectors.
In March 2004, we launched the new WM Small Cap Value Fund, which provides
a way to further diversify the Portfolio's holdings among undervalued
small-cap assets. For the year, small-cap stocks performed better than
large-cap stocks, while value outperformed growth. As a result of this
sector's performance, as well as the Fund's advantageous stock picking, the
WM Small Cap Value Fund posted the second highest return among the
underlying WM Equity Funds for the period.
Data shown is past performance and does not guarantee future results.
Current performance, including the most recent month-end results, which may
be higher or lower than the data shown, can be obtained by calling
800-222-5852. An investment's return and principal value will fluctuate, so
it may be worth more or less upon redemption. A sales charge may apply as
follows: Class A shares: maximum up-front sales charge of 5.5%; Class B
shares: contingent deferred sales charge of 5%, which declines over 5 years
(5-5-4-3-2-0%); Class C shares: contingent deferred sales charge of 1% on
redemptions made during the first 12 months. See the prospectus for
details. Performance listed with sales charge reflects the maximum sales
charge noted above.
Fixed-income investments are subject to interest rate risk, and their value
will decline as interest rates rise.
AVERAGE ANNUAL TOTAL RETURNS(1) AS OF OCTOBER 31, 2004
1 Year 5 Year Since Inception Inception Date
- --------------------------------------------------------------------------------------------------------------
Class A Shares Net Asset Value(2) 9.44% 3.75% 8.76% 7/25/96
With Sales Charge 3.38% 2.58% 8.02%
Class B Shares Net Asset Value(2) 8.53% 2.96% 7.94% 7/25/96
With Sales Charge 3.52% 2.60% 7.94%
Class C Shares Net Asset Value(2) 8.53% - 4.92% 3/1/02
With Sales Charge 7.53% - 4.92%
Capital Market Benchmark(3) 8.67% -0.07% 8.78%
Russell 3000(R) Index(3) 9.51% -0.99% 8.86%
[VALUE OF A $10,000 INVESTMENT(1),(4) JULY 25, 1996 - OCTOBER 31, 2004 GRAPH]
- -------------------------------------------------------------------------------
CLASS A
CLASS A SHARES WITH CAPITAL
SHARES AT MAXIMUM RUSSELL 3000(R) MARKET
DATE NAV(2) SALES CHARGE INDEX(3) BENCHMARK(3)
- -------------------------------------------------------------------------------
Jun-96 10,000 9,450
Jul-96 10,130 9,573 10,000 10,000
Aug-96 10,281 9,715 10,303 10,166
Sep-96 10,592 10,009 10,863 10,658
Oct-96 10,462 9,886 11,062 10,939
Nov-96 10,782 10,189 11,842 11,641
Dec-96 10,725 10,135 11,700 11,437
Jan-97 10,849 10,252 12,347 12,012
Feb-97 10,690 10,102 12,361 12,096
Mar-97 10,258 9,694 11,802 11,667
Apr-97 10,427 9,853 12,384 12,260
May-97 11,079 10,470 13,230 12,885
Jun-97 11,437 10,808 13,780 13,376
Jul-97 12,016 11,355 14,860 14,297
Aug-97 11,563 10,927 14,257 13,637
Sep-97 12,099 11,434 15,065 14,275
Oct-97 11,615 10,977 14,559 13,935
Nov-97 11,605 10,967 15,117 14,465
Dec-97 11,648 11,007 15,419 14,693
Jan-98 11,782 11,134 15,499 14,861
Feb-98 12,528 11,839 16,607 15,715
Mar-98 13,040 12,323 17,431 16,369
Apr-98 13,207 12,481 17,602 16,518
May-98 12,885 12,176 17,167 16,321
Jun-98 13,175 12,450 17,748 16,880
Jul-98 12,919 12,208 17,425 16,743
Aug-98 11,050 10,442 14,755 14,861
Sep-98 11,594 10,957 15,761 15,692
Oct-98 12,207 11,535 16,958 16,696
Nov-98 12,907 12,197 17,995 17,524
Dec-98 13,843 13,082 19,140 18,342
Jan-99 14,543 13,744 19,791 18,983
Feb-99 14,162 13,383 19,090 18,444
Mar-99 15,009 14,184 19,791 19,054
Apr-99 15,722 14,858 20,683 19,656
May-99 15,255 14,416 20,290 19,251
Jun-99 16,078 15,193 21,315 20,094
Jul-99 15,785 14,917 20,669 19,576
Aug-99 15,747 14,881 20,434 19,496
Sep-99 15,897 15,022 19,910 19,114
Oct-99 16,666 15,749 21,159 20,096
Nov-99 17,609 16,641 21,751 20,422
Dec-99 19,420 18,352 23,139 21,365
Jan-00 18,959 17,917 22,232 20,491
Feb-00 19,904 18,809 22,439 20,231
Mar-00 20,809 19,665 24,196 21,868
Apr-00 19,941 18,845 23,344 21,328
May-00 19,431 18,362 22,688 20,976
Jun-00 19,891 18,797 23,360 21,477
Jul-00 19,559 18,483 22,946 21,247
Aug-00 20,670 19,533 24,649 22,365
Sep-00 20,031 18,930 23,532 21,448
Oct-00 19,815 18,725 23,198 21,403
Nov-00 18,359 17,349 21,059 20,123
Dec-00 18,843 17,807 21,413 20,276
Jan-01 19,961 18,863 22,145 20,917
Feb-01 18,597 17,575 20,121 19,427
Mar-01 17,643 16,673 18,809 18,462
Apr-01 18,693 17,665 20,318 19,593
May-01 18,966 17,923 20,480 19,723
Jun-01 18,974 17,930 20,103 19,354
Jul-01 18,645 17,620 19,772 19,288
Aug-01 17,987 16,998 18,605 18,366
Sep-01 16,566 15,655 16,964 17,222
Oct-01 16,979 16,045 17,360 17,556
Nov-01 17,777 16,799 18,696 18,585
Dec-01 18,052 17,059 18,960 18,691
Jan-02 17,637 16,667 18,723 18,502
Feb-02 17,265 16,315 18,341 18,252
Mar-02 17,950 16,963 19,144 18,741
Apr-02 17,290 16,339 18,139 17,906
May-02 17,203 16,257 17,929 17,830
Jun-02 16,307 15,410 16,638 16,844
Jul-02 15,198 14,362 15,315 15,835
Aug-02 15,285 14,444 15,387 15,971
Sep-02 14,238 13,455 13,770 14,635
Oct-02 14,990 14,165 14,866 15,652
Nov-02 15,756 14,889 15,765 16,387
Dec-02 15,218 14,381 14,875 15,684
Jan-03 15,014 14,189 14,510 15,358
Feb-03 14,824 14,008 14,271 15,217
Mar-03 14,840 14,024 14,421 15,333
Apr-03 15,762 14,895 15,599 16,369
May-03 16,698 15,779 16,541 17,120
Jun-03 16,908 15,978 16,764 17,288
Jul-03 17,113 16,172 17,148 17,416
Aug-03 17,450 16,490 17,529 17,710
Sep-03 17,509 16,546 17,338 17,654
Oct-03 18,302 17,296 18,387 18,420
Nov-03 18,597 17,574 18,641 18,558
Dec-03 19,322 18,260 19,492 19,375
Jan-04 19,722 18,638 19,900 19,690
Feb-04 19,973 18,874 20,168 19,952
Mar-04 19,929 18,833 19,928 19,741
Apr-04 19,383 18,317 19,516 19,389
May-04 19,561 18,485 19,799 19,587
Jun-04 19,976 18,877 20,193 19,914
Jul-04 19,325 18,262 19,430 19,426
Aug-04 19,458 18,388 19,509 19,562
Sep-04 19,754 18,667 19,810 19,742
Oct-04 20,034 18,933 20,135 20,017
<FN>
(1) The Portfolio's performance through 1/31/99 benefited from the agreement
of WM Advisors and its affiliates to limit the Portfolio's expenses.
Performance reflects ongoing expenses and assumes reinvestment of all
dividends and capital gains. It also reflects investment advisory fees
paid by the Portfolio's applicable Funds, which include the effects of
expense reimbursement. Performance does not reflect the impact of
federal, state, or municipal taxes. If it did, performance would be
lower.
(2) Net asset value is not adjusted for sales charge.
(3) The Capital Market Benchmark is intended to represent a relevant proxy
for market and Portfolio performance. It is allocated as follows: 80%
S&P 500 (a broad-based index intended to represent the U.S. equity
market) and 20% Lehman Brothers Aggregate Bond Index (a broad-based
index intended to represent the U.S. fixed-income market). The Russell
3000(R) Index measures the performance of the 3,000 largest U.S.
companies based on total market capitalization, which represents
approximately 98% of the investable U.S. equity market. Returns shown
for the indices assume reinvestment of all dividends and distributions,
and since-inception returns shown for the indices are calculated from
7/31/96. Indices are unmanaged, and individuals cannot invest directly
in an index.
(4) Performance of Class B shares (offered as of 7/96) and C shares (offered
as of 3/02) will differ.
14
The Portfolio also benefited from real estate holdings in the WM REIT Fund,
which is part of the Portfolio's overweighted position in value securities.
This Fund closed the fiscal year with the highest performance of all the
underlying WM Funds.
During the spring and summer of this year, the Portfolio trimmed corporate
bond positions by reducing exposure in the WM Income Fund and WM High Yield
Fund, and built positions in mortgage securities by increasing exposure to
the WM U.S. Government Securities Fund. Mortgages can provide favorable
opportunities in the current interest rate environment.
Looking forward, we believe the economy has entered the self-sustaining
phase of the current recovery, but we feel any benefits may be muted by
longer-term challenges. Just after the fiscal year ended, President Bush
was re-elected, which removed some degree of market uncertainty in the
short term.
However, secular forces remain that could curtail future economic growth.
These include the large federal deficit and current account imbalance,
overspent consumers, and a low level of personal savings. Corporate
profitability and price-to-earnings ratios may be difficult to increase in
this low-growth environment. This combination of factors has caused us to
remain conservative and focus on diversification and risk management to
pursue long-term investment objectives.
PORTFOLIO CHARACTERISTICS AS OF OCTOBER 31, 2004
Equity/Fixed-Income Allocation:(5) 79% Equity/21% Fixed-Income
Weighted Average Market Capitalization (Equities): $57.0 billion
Weighted Average P/E (Equities):(6) 16.0
Beta:(7) 0.73
Portfolio Standard Deviation:(8) 11.51
S&P 500 Standard Deviation:(8) 16.23
Turnover: 5%
Number of Securities:(9) 1,579
Total Net Assets: $2,640.1 million
ASSET CLASS DIVERSIFICATION(5)
As of As of
10/31/04 10/31/03 Change
- ----------------------------------------------------------------------------
U.S. Large-Cap Value Stocks 21% 22% -1%
U.S. Large-Cap Growth Stocks 19% 15% +4%
U.S. Mid-Cap Value Stocks 11% 9% +2%
Mortgage- & Asset-Backed Bonds 9% 8% +1%
U.S. Mid-Cap Growth Stocks 7% 8% -1%
Foreign Stocks 7% 7% 0%
REITs 6% 5% +1%
U.S. Small-Cap Growth Stocks 4% 7% -3%
U.S. Small-Cap Value Stocks 4% 2% +2%
High-Yield Corporate Bonds 3% 5% -2%
Investment-Grade Corporate Bonds 2% 4% -2%
Convertible Securities 1% 2% -1%
U.S. Government Securities 1% 1% 0%
Cash Equivalents 5% 5% 0%
<FN>
(5) May not reflect current allocations.
(6) Based on estimated earnings.
(7) Source: Lipper, Inc. Beta is a quantitative measure of the Portfolio's
volatility relative to the overall market (S&P 500). A beta above 1
indicates more volatility than the market, and a beta below 1 indicates
less volatility. Results are calculated using three-month rolling
returns for Class A shares for the three-year period ended 10/31/04.
(8) Source: Ibbotson Associates and Lipper, Inc. Standard deviation measures
the fluctuation of returns around the arithmetic average return of the
investment. The higher the standard deviation, the greater the
variability (and thus risk) of the investment returns. Results are
calculated for the three-year period ended 10/31/04, and Portfolio
results are for Class A shares.
(9) Represents the sum of securities held by the underlying WM Funds. Some
securities may be held by more than one WM Fund.
15
Strategic Growth Portfolio
ANNUAL TOTAL RETURNS(1)
Class A shares at net asset value(2)
(Calendar Year)
2003 +31.27%
2002 -20.85%
2001 -6.69%
2000 -4.43%
1999 +44.48%
1998 +22.63%
1997 +12.38%
INVESTMENT STRATEGY
As of October 31, 2004, the WM Strategic Asset Management (SAM) Strategic
Growth Portfolio was diversified among 10 funds representing 11 major asset
classes. This structure allows the Portfolio to manage risk through
allocations in the underlying WM Funds. The Portfolio closed the fiscal
year with a 91%/9% equity-to-fixed-income ratio, but made several
adjustments earlier in the period that allowed it to benefit from strong
performance in certain stock sectors.
In March 2004, we launched the new WM Small Cap Value Fund, which provides
a way to further diversify the Portfolio's holdings among undervalued
small-cap assets. For the year, small-cap stocks performed better than
large-cap stocks, while value outperformed growth. As a result of this
sector's performance, as well as the Fund's advantageous stock picking, the
WM Small Cap Value Fund posted the second highest return among the
underlying WM Equity Funds for the period.
Data shown is past performance and does not guarantee future results.
Current performance, including the most recent month-end results, which may
be higher or lower than the data shown, can be obtained by calling
800-222-5852. An investment's return and principal value will fluctuate, so
it may be worth more or less upon redemption. A sales charge may apply as
follows: Class A shares: maximum up-front sales charge of 5.5%; Class B
shares: contingent deferred sales charge of 5%, which declines over 5 years
(5-5-4-3-2-0%); Class C shares: contingent deferred sales charge of 1% on
redemptions made during the first 12 months. See the prospectus for
details. Performance listed with sales charge reflects the maximum sales
charge noted above.
AVERAGE ANNUAL TOTAL RETURNS(1) AS OF OCTOBER 31, 2004
1 Year 5 Year Since Inception Inception Date
- ---------------------------------------------------------------------------------------------------------------
Class A Shares Net Asset Value(2) 10.11% 2.67% 9.41% 7/25/96
With Sales Charge 4.02% 1.52% 8.66%
Class B Shares Net Asset Value(2) 9.19% 1.89% 8.62% 7/25/96
With Sales Charge 4.19% 1.51% 8.62%
Class C Shares Net Asset Value(2) 9.34% - 4.45% 3/1/02
With Sales Charge 8.34% - 4.45%
S&P 500(3) 9.41% -2.22% 8.81%
Russell 3000(R) Index(3) 9.51% -0.99% 8.86%
[VALUE OF A $10,000 INVESTMENT(1),(4) JULY 25, 1996 - OCTOBER 31, 2004 GRAPH]
- -------------------------------------------------------------------------------
CLASS A
CLASS A SHARES WITH
SHARES AT MAXIMUM RUSSELL 3000(R)
DATE NAV(2) SALES CHARGE INDEX(3) S&P 500(3)
- -------------------------------------------------------------------------------
Jun-96 10,000 9,450
Jul-96 10,110 9,554 10,000 10,000
Aug-96 10,300 9,734 10,303 10,212
Sep-96 10,690 10,102 10,863 10,786
Oct-96 10,560 9,979 11,062 11,081
Nov-96 11,080 10,471 11,842 11,923
Dec-96 11,001 10,396 11,700 11,689
Jan-97 11,308 10,686 12,347 12,415
Feb-97 11,148 10,535 12,361 12,515
Mar-97 10,640 10,055 11,802 11,995
Apr-97 10,852 10,255 12,384 12,711
May-97 11,561 10,925 13,230 13,491
Jun-97 11,932 11,276 13,780 14,093
Jul-97 12,716 12,017 14,860 15,212
Aug-97 12,240 11,566 14,257 14,366
Sep-97 12,822 12,117 15,065 15,153
Oct-97 12,282 11,607 14,559 14,647
Nov-97 12,325 11,647 15,117 15,325
Dec-97 12,362 11,682 15,419 15,589
Jan-98 12,509 11,821 15,499 15,762
Feb-98 13,471 12,730 16,607 16,898
Mar-98 14,106 13,330 17,431 17,764
Apr-98 14,298 13,511 17,602 17,943
May-98 13,879 13,115 17,167 17,634
Jun-98 14,331 13,543 17,748 18,350
Jul-98 13,992 13,222 17,425 18,156
Aug-98 11,773 11,125 14,755 15,531
Sep-98 12,508 11,820 15,761 16,526
Oct-98 13,210 12,483 16,958 17,870
Nov-98 13,980 13,211 17,995 18,953
Dec-98 15,159 14,325 19,140 20,044
Jan-99 16,068 15,184 19,791 20,882
Feb-99 15,594 14,737 19,090 20,233
Mar-99 16,530 15,621 19,791 21,042
Apr-99 17,365 16,410 20,683 21,856
May-99 16,792 15,868 20,290 21,340
Jun-99 17,789 16,811 21,315 22,525
Jul-99 17,337 16,384 20,669 21,822
Aug-99 17,325 16,372 20,434 21,713
Sep-99 17,490 16,528 19,910 21,118
Oct-99 18,436 17,422 21,159 22,455
Nov-99 19,621 18,542 21,751 22,911
Dec-99 21,901 20,697 23,139 24,260
Jan-00 21,446 20,266 22,232 23,042
Feb-00 22,799 21,545 22,439 22,607
Mar-00 23,802 22,493 24,196 24,818
Apr-00 22,552 21,312 23,344 24,071
May-00 21,901 20,696 22,688 23,577
Jun-00 22,551 21,311 23,360 24,157
Jul-00 22,057 20,844 22,946 23,780
Aug-00 23,502 22,209 24,649 25,257
Sep-00 22,604 21,361 23,532 23,923
Oct-00 22,279 21,053 23,198 23,823
Nov-00 20,325 19,207 21,059 21,946
Dec-00 20,931 19,779 21,413 22,053
Jan-01 22,320 21,093 22,145 22,836
Feb-01 20,448 19,323 20,121 20,754
Mar-01 19,180 18,125 18,809 19,440
Apr-01 20,666 19,530 20,318 20,950
May-01 21,011 19,856 20,480 21,091
Jun-01 21,066 19,907 20,103 20,578
Jul-01 20,459 19,334 19,772 20,376
Aug-01 19,537 18,462 18,605 19,101
Sep-01 17,540 16,575 16,964 17,558
Oct-01 18,036 17,044 17,360 17,893
Nov-01 19,097 18,047 18,696 19,265
Dec-01 19,527 18,453 18,960 19,435
Jan-02 18,908 17,868 18,723 19,151
Feb-02 18,374 17,364 18,341 18,781
Mar-02 19,339 18,275 19,144 19,488
Apr-02 18,432 17,418 18,139 18,307
May-02 18,274 17,269 17,929 18,171
Jun-02 17,108 16,167 16,638 16,877
Jul-02 15,638 14,778 15,315 15,561
Aug-02 15,696 14,833 15,387 15,664
Sep-02 14,327 13,539 13,770 13,961
Oct-02 15,249 14,410 14,866 15,190
Nov-02 16,185 15,295 15,765 16,084
Dec-02 15,455 14,605 14,875 15,139
Jan-03 15,180 14,345 14,510 14,742
Feb-03 14,890 14,071 14,271 14,521
Mar-03 14,905 14,085 14,421 14,662
Apr-03 15,965 15,086 15,599 15,870
May-03 17,068 16,129 16,541 16,706
Jun-03 17,329 16,376 16,764 16,920
Jul-03 17,691 16,718 17,148 17,218
Aug-03 18,098 17,102 17,529 17,553
Sep-03 18,083 17,089 17,338 17,367
Oct-03 19,100 18,049 18,387 18,350
Nov-03 19,434 18,365 18,641 18,512
Dec-03 20,291 19,175 19,492 19,482
Jan-04 20,770 19,627 19,900 19,840
Feb-04 21,032 19,875 20,168 20,116
Mar-04 20,944 19,793 19,928 19,812
Apr-04 20,379 19,258 19,516 19,501
May-04 20,611 19,478 19,799 19,769
Jun-04 21,106 19,945 20,193 20,152
Jul-04 20,293 19,177 19,430 19,485
Aug-04 20,381 19,260 19,509 19,563
Sep-04 20,743 19,603 19,810 19,774
Oct-04 21,034 19,877 20,135 20,077
<FN>
(1) The Portfolio's performance through 1/31/99 benefited from the agreement
of WM Advisors and its affiliates to limit the Portfolio's expenses.
Performance reflects ongoing expenses and assumes reinvestment of all
dividends and capital gains. It also reflects investment advisory fees
paid by the Portfolio's applicable Funds, which include the effects of
expense reimbursement. Performance does not reflect the impact of
federal, state, or municipal taxes. If it did, performance would be
lower.
(2) Net asset value is not adjusted for sales charge.
(3) The S&P 500 is a broad-based index intended to represent the U.S. equity
market. The Russell 3000(R) Index measures the performance of the 3,000
largest U.S. companies based on total market capitalization, which
represents approximately 98% of the investable U.S. equity market.
Returns shown for the indices assume reinvestment of all dividends and
distributions, and since-inception returns shown for the indices are
calculated from 7/31/96. Indices are unmanaged, and individuals cannot
invest directly in an index.
(4) Performance of Class B shares (offered as of 7/96) and C shares (offered
as of 3/02) will differ.
16
The Portfolio also benefited from real estate holdings in the WM REIT Fund,
which is part of the Portfolio's overweighted position in value securities.
This Fund closed the fiscal year with the highest performance of all the
underlying WM Funds.
During the spring and summer, the Portfolio added to its allocation in the
WM Growth Fund. It also trimmed corporate bond positions by reducing
exposure to the WM High Yield Fund.
Looking forward, we believe the economy has entered the self-sustaining
phase of the current recovery, but we feel any benefits may be muted by
longer-term challenges. Just after the fiscal year ended, President Bush
was re-elected, which removed some degree of market uncertainty in the
short term. However, secular forces remain that could curtail future
economic growth. These include the large federal deficit and current
account imbalance, overspent consumers, and a low level of personal
savings.
Corporate profitability and price-to-earnings ratios may be difficult to
increase in this low-growth environment. This combination of factors has
caused us to remain conservative and focus on diversification and risk
management to pursue long-term investment objectives.
PORTFOLIO CHARACTERISTICS AS OF OCTOBER 31, 2004
Equity/Fixed-Income Allocation:(5) 91% Equity/9% Fixed-Income
Weighted Average Market Capitalization (Equities): $55.8 billion
Weighted Average P/E (Equities):(6) 16.0
Beta:(7) 0.91
Portfolio Standard Deviation:(8) 14.16
S&P 500 Standard Deviation:(8) 16.23
Turnover: 3%
Number of Securities:(9) 1,030
Total Net Assets: $1,499.3 million
ASSET CLASS DIVERSIFICATION(5)
As of As of
10/31/04 10/31/03 Change
- ------------------------------------------------------------------------------
U.S. Large-Cap Value Stocks 24% 25% -1%
U.S. Large-Cap Growth Stocks 21% 18% +3%
U.S. Mid-Cap Value Stocks 13% 11% +2%
Foreign Stocks 9% 8% +1%
U.S. Mid-Cap Growth Stocks 8% 10% -2%
REITs 6% 5% +1%
U.S. Small-Cap Growth Stocks 5% 8% -3%
U.S. Small-Cap Value Stocks 4% 3% +1%
High-Yield Corporate Bonds 3% 4% -1%
Convertible Securities 1% 2% -1%
Investment-Grade Corporate Bonds 0% 1% -1%
Cash Equivalents 6% 5% +1%
<FN>
(5) May not reflect current allocations.
(6) Based on estimated earnings.
(7) Source: Lipper, Inc. Beta is a quantitative measure of the Portfolio's
volatility relative to the overall market (S&P 500). A beta above 1
indicates more volatility than the market, and a beta below 1 indicates less
volatility. Results are calculated using three-month rolling returns for
Class A shares for the three-year period ended 10/31/04.
(8) Source: Ibbotson Associates and Lipper, Inc. Standard deviation measures
the fluctuation of returns around the arithmetic average return of the
investment. The higher the standard deviation, the greater the variability
(and thus risk) of the investment returns. Results are calculated for the
three-year period ended 10/31/04, and Portfolio results are for Class A
shares.
(9) Represents the sum of securities held by the underlying WM Funds. Some
securities may be held by more than one WM Fund.
17
Money Market Fund PORTFOLIO MANAGER
-------------------------
Scott J. Peterson, CFA
WM Advisors, Inc.
INVESTMENT STRATEGY
Because money market investments are closely tied to the federal funds
rate, the actions of the Federal Reserve (the Fed) have a substantial
impact on WM Money Market Fund performance. After keeping interest rates
steady for one year, the Fed raised its target rate from 1.00% to 1.25% on
June 30, 2004. Following the expectations of many economists and investors,
the Fed continued raising rates by 0.25% increments in August and
September, as well as in November (to 2.00%) after the fiscal year ended.
The Fed continues to state that additional rate hikes will be implemented
at a measured pace, depending on changes in economic conditions. The
futures market is now predicting a 25 basis point rate hike in December
2004, and another in February or March 2005.
During this fiscal year, the Fund's 7-day simple yield (annualized)
increased from 0.58% on October 31, 2003 to 1.23% on October 31, 2004 as
the Fed increased its target rate from 1.00% to 1.75% during the period.
Some of the difference between the Fund's yield and the Fed's target rate
was due to Fund expenses. The Fund's assets decreased substantially from
$817 million on October 31, 2003 to $683 million on October 31, 2004, due
to shareholder redemptions.
Data shown is past performance and does not guarantee future results.
Current performance, including the most recent month-end results, which may
be higher or lower, can be obtained by calling 800-222-5852. An
investment's return and principal value will fluctuate, so it may be worth
more or less upon redemption. A contingent deferred sales charge may apply
as follows: Class B shares: 5%, which declines over 5 years (5-5-4-3-2-0%);
Class C shares: 1% on redemptions made during the first 12 months. See the
prospectus for details. Performance listed with sales charge reflects the
maximum sales charge noted above.
An investment in the Fund is not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other government agency. Although the
Fund seeks to preserve the value of your investment at $1.00 per share, it
is possible to lose money by investing in the Fund.
The 7-day simple yield more closely reflects current Fund earnings than the
total return data.
AVERAGE ANNUAL TOTAL RETURNS(1) AS OF OCTOBER 31, 2004
Since Inception
1 Year 5 Year 10 Year of Class C Shares Inception Date
- --------------------------------------------------------------------------------------------------------------------------------
Class A Shares Net Asset Value(2) 0.74% 2.61% 3.77% N/A 11/19/79
Class B Shares Net Asset Value(2) 0.06% 1.67% 2.97% N/A 5/2/94
With Sales Charge -4.95% 1.29% 2.97% N/A
Class C Shares Net Asset Value(2) 0.06% - - 0.11% 3/1/02
With Sales Charge -0.94% - - 0.11%
FUND YIELDS AND AVERAGE MATURITY(3)
AS OF OCTOBER 31, 2004
7-Day 7-Day Weighted
Simple Yield Effective Yield Average Maturity
(Class A Shares) (Class A Shares) (Days)
- -------------------------------------------------------------------------------------
Money Market Fund 1.23% 1.24% 41
PORTFOLIO COMPOSITION(4)
AS OF OCTOBER 31, 2004
Corporate Bonds and Notes 34%
Taxable Municipal Bonds 29%
Medium Term Notes 14%
Commercial Paper (Domestic and Yankee) 9%
U.S. Government Agency Obligations 9%
Other 5%
<FN>
(1) Performance reflects ongoing expenses and assumes reinvestment of all
dividends and capital gains. It also reflects investment advisory fees,
which may include the effects of expense reimbursement. Performance does
not reflect the impact of federal, state, or municipal taxes. If it did,
performance would be lower. Performance results benefited from an
agreement between WM Advisors and its affiliates to limit the Fund's
expenses.
(2) Net asset value is not adjusted for sales charge.
(3) The 7-day simple yield is calculated based on the income generated by an
investment in the Fund over a 7-day period and is expressed as an annual
percentage rate. The 7-day effective yield is calculated similarly to
the 7-day simple yield but assumes that income earned from the Fund's
investments is reinvested and compounded.
(4) May not reflect the current portfolio composition.
18
[Art]
Expense Information
- --------------------------------------------------------------------------
As a shareholder of the Flexible Income Portfolio, Conservative Balanced
Portfolio, Balanced Portfolio, Conservative Growth Portfolio or Strategic
Growth Portfolio ("the Portfolios") or the Money Market Fund (the "Fund"),
you incur two types of costs: (1) transaction costs, including sales
charges (loads) on purchase of Class A shares and, if applicable,
contingent deferred sales charges on redemption of shares and (2) ongoing
costs, including management fees, distribution and/or service fees, and
other Portfolio or Fund expenses. This example is intended to help you
understand your ongoing costs (in dollars) of investing in the Portfolios
or the Fund and to compare these costs with the ongoing costs of investing
in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning
of the period and held for the entire period May 1, 2004 to October 31,
2004.
Actual Expenses:
The first section of the table below provides information about actual
account values and actual expenses. You may use the information in these
columns, together with the amount you invested, to estimate the expenses
that you paid over the period. Simply divide your account value by $1,000
(for example, an $8,600 account value divided by $1,000 = 8.6), then
multiply the result by the number in the third column under the heading
entitled "Expenses Paid During Period" to estimate the expenses you paid
on your account during this period.
Hypothetical Example for Comparison Purposes:
The second section of the table below provides information about
hypothetical account values and hypothetical expenses based on each
Portfolio's and Fund's actual expense ratios and an assumed rate of return
of 5% per year before expenses (rather than each Portfolio's and Fund's
actual rate of return). The hypothetical account values and expenses may
not be used to estimate the actual ending balance or expenses you paid for
the period. You may use this information to compare the ongoing costs of
investing in the Portfolios or the Fund and other funds. To do so, compare
this 5% hypothetical example with the 5% hypothetical examples that appear
in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight
your ongoing costs only and do not reflect any transactional costs, such
as sales charges (loads). Therefore, the hypothetical section of the table
is useful in comparing ongoing costs only, and will not help you compare
the relative total costs of owning different funds. In addition, if these
transactional costs were included, the cost shown would have been higher.
Hypothetical
Actual Expenses (5% Return Before Expenses)
-------------------------------------- --------------------------------------
Expenses Expenses
Beginning Ending Paid During Beginning Ending Paid During
Account Account Period* Account Account Period*
Value Value 05/01/2004- Value Value 05/01/2004- Expense
05/01/2004 10/31/2004 10/31/2004 05/01/2004 10/31/2004 10/31/2004 Ratio
------------ ------------ ------------ ------------------------ ------------ --------
Flexible Income Portfolio
Class A $1,000 $1,033 $5.21 $1,000 $1,020 $5.18 1.02%
Class B 1,000 1,029 9.13 1,000 1,016 9.07 1.79%
Class C 1,000 1,029 9.08 1,000 1,016 9.02 1.78%
Conservative Balanced Portfolio
Class A $1,000 $1,035 $5.27 $1,000 $1,020 $5.23 1.03%
Class B 1,000 1,030 9.24 1,000 1,016 9.17 1.81%
Class C 1,000 1,030 9.14 1,000 1,016 9.07 1.79%
Balanced Portfolio
Class A $1,000 $1,035 $5.01 $1,000 $1,020 $4.98 0.98%
Class B 1,000 1,031 8.93 1,000 1,016 8.87 1.75%
Class C 1,000 1,031 8.83 1,000 1,016 8.77 1.73%
Conservative Growth Portfolio
Class A $1,000 $1,034 $5.11 $1,000 $1,020 $5.08 1.00%
Class B 1,000 1,029 9.08 1,000 1,016 9.02 1.78%
Class C 1,000 1,029 8.93 1,000 1,016 8.87 1.75%
Strategic Growth Portfolio
Class A $1,000 $1,032 $5.41 $1,000 $1,020 $5.38 1.06%
Class B 1,000 1,028 9.33 1,000 1,016 9.27 1.83%
Class C 1,000 1,028 9.18 1,000 1,016 9.12 1.80%
Money Market Fund
Class A $1,000 $1,004 $2.83 $1,000 $1,022 $2.85 0.57%
Class B 1,000 1,000 6.88 1,000 1,018 6.94 1.39%
Class C 1,000 1,000 6.97 1,000 1,018 7.03 1.41%
Class I 1,000 1,005 2.58 1,000 1,022 2.60 0.52%
<FN>
* Expenses are equal to each Portfolio's or the Fund's annualized expense
ratio, multiplied by the average account value over the period, multiplied
by the 184 days in the most recent fiscal half-year, divided by 366 days in
the year (to reflect the one-half year period).
20
Expense Information (continued)
- ---------------------------------------------------------------------------
The following table sets forth the estimated ongoing aggregate expenses of
the Portfolios, including expenses of the Underlying Funds, based upon
expenses shown in the table above for each Portfolio and corresponding
expenses for each Underlying Fund's Class I shares. These estimates assume
a constant allocation by each Portfolio of its assets among the Underlying
Funds identical to the actual allocation of the Portfolio at October 31,
2004. A Portfolio's actual expenses may be higher as a result of changes in
the allocation of the Portfolio's assets among the Underlying Funds, the
expenses of the Underlying Funds and/or the Portfolio's own expenses.
Hypothetical
Actual Expenses (5% Return Before Expenses)
-------------------------------------- --------------------------------------
Expenses Expenses
Beginning Ending Paid During Beginning Ending Paid During
Account Account Period* Account Account Period*
Value Value 05/01/2004- Value Value 05/01/2004- Expense
05/01/2004 10/31/2004 10/31/2004 05/01/2004 10/31/2004 10/31/2004 Ratio
------------ ------------ ------------ ------------ ------------ ------------ -------
Flexible Income Portfolio
Class A $1,000 $1,033 $ 8.28 $1,000 $1,017 $ 8.21 1.62%
Class B 1,000 1,029 12.19 1,000 1,013 12.09 2.39%
Class C 1,000 1,029 12.14 1,000 1,013 12.04 2.38%
Conservative Balanced Portfolio
Class A $1,000 $1,035 $ 8.54 $1,000 $1,017 $ 8.47 1.67%
Class B 1,000 1,030 12.45 1,000 1,013 12.35 2.44%
Class C 1,000 1,030 12.35 1,000 1,013 12.25 2.42%
Balanced Portfolio
Class A $1,000 $1,035 $ 8.44 $1,000 $1,017 $ 8.36 1.65%
Class B 1,000 1,031 12.35 1,000 1,013 12.25 2.42%
Class C 1,000 1,031 12.30 1,000 1,013 12.19 2.41%
Conservative Growth Portfolio
Class A $1,000 $1,034 $ 8.79 $1,000 $1,016 $ 8.72 1.72%
Class B 1,000 1,029 12.70 1,000 1,013 12.60 2.49%
Class C 1,000 1,029 12.60 1,000 1,013 12.50 2.47%
Strategic Growth Portfolio
Class A $1,000 $1,032 $ 9.30 $1,000 $1,016 $ 9.22 1.82%
Class B 1,000 1,028 13.15 1,000 1,012 13.05 2.58%
Class C 1,000 1,028 13.05 1,000 1,012 12.95 2.56%
<FN>
* Expenses are equal to each Portfolio's or the Fund's annualized expense
ratio, multiplied by the average account value over the period, multiplied
by the 184 days in the most recent fiscal half-year, divided by 366 days in
the year (to reflect the one-half year period).
21
Financial Statements:
Portfolio of Investments
- ---------------------------------------------------------------------------
FLEXIBLE INCOME PORTFOLIO
October 31, 2004
- ---------------------------------------------------------------------------
Value
Shares (000s)
------ ------
INVESTMENT COMPANY SECURITIES -- 100.2%
1,830,240 WM Equity Income Fund $ 32,560
2,660,129 WM Growth & Income Fund 62,566
3,289,963 WM Growth Fund+ 49,218
7,913,894 WM High Yield Fund 65,448
24,053,163 WM Income Fund 228,024
1,556,986 WM Mid Cap Stock Fund 26,873
668,825 WM REIT Fund 10,467
45,239,898 WM Short Term Income Fund 107,671
646,869 WM Small Cap Growth Fund+ 8,662
894,144 WM Small Cap Value Fund+ 9,684
27,169,309 WM U.S. Government Securities Fund 295,602
268,942 WM West Coast Equity Fund 9,518
---------
Total Investment Company Securities
(Cost $857,429) 906,293
---------
Principal
Amount
(000s)
- -------------
REPURCHASE AGREEMENT -- 0.1%
(Cost $1,317)
$ 1,317 Agreement with Morgan Stanley,
1.770% dated 10/29/2004, to be
repurchased at $1,317,000 on
11/01/2004 (Collateralized by
U.S. Treasury Obligations, having
various interest rates and maturities,
market value $1,359,000) 1,317
---------
TOTAL INVESTMENTS (Cost $858,746*) 100.3% 907,610
OTHER ASSETS AND LIABILITIES (Net) (0.3) (3,110)
----- ---------
NET ASSETS 100.0% $ 904,500
===== =========
<FN>
- --------
* Aggregate cost for federal tax purposes is $864,037.
+ Non-income producing security.
- ---------------------------------------------------------------------------
CONSERVATIVE BALANCED PORTFOLIO
October 31, 2004
- ---------------------------------------------------------------------------
Value
Shares (000s)
------ ------
INVESTMENT COMPANY SECURITIES -- 99.1%
1,709,877 WM Equity Income Fund $ 30,419
1,731,560 WM Growth & Income Fund 40,726
2,620,032 WM Growth Fund+ 39,196
3,438,202 WM High Yield Fund 28,434
9,767,499 WM Income Fund 92,596
2,026,270 WM International Growth Fund 18,763
1,056,491 WM Mid Cap Stock Fund 18,235
656,259 WM REIT Fund 10,270
11,428,370 WM Short Term Income Fund 27,200
513,650 WM Small Cap Growth Fund+ 6,878
680,825 WM Small Cap Value Fund+ 7,373
11,783,050 WM U.S. Government Securities Fund 128,200
393,992 WM West Coast Equity Fund 13,943
---------
Total Investment Company Securities
(Cost $433,282) 462,233
---------
Principal
Amount
(000s)
- -------------
REPURCHASE AGREEMENT -- 0.2%
(Cost $1,027)
$ 1,027 Agreement with Morgan Stanley,
1.770% dated 10/29/2004, to be
repurchased at $1,027,000 on
11/01/2004 (Collateralized by
U.S. Treasury Obligations, having
various interest rates and maturities,
market value $1,060,000) 1,027
----------
TOTAL INVESTMENTS (Cost $434,309*) 99.3% 463,260
OTHER ASSETS AND LIABILITIES (Net) 0.7 3,494
----- ----------
NET ASSETS 100.0% $ 466,754
===== ==========
<FN>
- --------
* Aggregate cost for federal tax purposes is $437,297.
+ Non-income producing security.
See Notes to Financial Statements.
22
Portfolio of Investments
- ---------------------------------------------------------------------------
BALANCED PORTFOLIO
October 31, 2004
- ---------------------------------------------------------------------------
Value
Shares (000s)
------ ------
INVESTMENT COMPANY SECURITIES -- 98.0%
19,117,327 WM Equity Income Fund $ 340,097
19,496,590 WM Growth & Income Fund 458,560
29,715,572 WM Growth Fund+ 444,545
21,157,392 WM High Yield Fund 174,972
42,867,024 WM Income Fund 406,379
20,081,039 WM International Growth Fund 185,950
11,527,675 WM Mid Cap Stock Fund 198,968
7,286,205 WM REIT Fund 114,029
14,432,845 WM Short Term Income Fund 34,350
5,859,412 WM Small Cap Growth Fund+ 78,458
8,205,497 WM Small Cap Value Fund+ 88,866
55,266,472 WM U.S. Government Securities Fund 601,299
4,795,203 WM West Coast Equity Fund 169,702
----------
Total Investment Company Securities
(Cost $3,021,136) 3,296,175
----------
Principal
Amount
(000s)
- -------------
REPURCHASE AGREEMENT -- 2.0%
(Cost $67,042)
$ 67,042 Agreement with Morgan Stanley,
1.770% dated 10/29/2004, to be
repurchased at $67,052,000 on
11/01/2004 (Collateralized by
U.S. Treasury Obligations, having
various interest rates and maturities,
market value $69,188,000) 67,042
----------
TOTAL INVESTMENTS (Cost $3,088,178*) 100.0% 3,363,217
OTHER ASSETS AND LIABILITIES (Net) (0.0) (902)
----- ----------
NET ASSETS 100.0% $3,362,315
===== ==========
<FN>
- --------
* Aggregate cost for federal tax purposes is $3,124,684.
+ Non-income producing security.
- ---------------------------------------------------------------------------
CONSERVATIVE GROWTH PORTFOLIO
October 31, 2004
- ---------------------------------------------------------------------------
Value
Shares (000s)
------ ------
INVESTMENT COMPANY SECURITIES -- 99.9%
18,133,221 WM Equity Income Fund $ 322,590
21,180,180 WM Growth & Income Fund 498,158
31,333,476 WM Growth Fund+ 468,749
13,300,805 WM High Yield Fund 109,997
11,383,877 WM Income Fund 107,919
21,393,301 WM International Growth Fund 198,102
12,093,161 WM Mid Cap Stock Fund 208,728
7,407,674 WM REIT Fund 115,930
6,510,375 WM Small Cap Growth Fund+ 87,174
9,129,273 WM Small Cap Value Fund+ 98,870
21,572,215 WM U.S. Government Securities Fund 234,706
5,252,201 WM West Coast Equity Fund 185,875
----------
Total Investment Company Securities
(Cost $2,409,452) 2,636,798
----------
Principal
Amount
(000s)
- -------------
REPURCHASE AGREEMENT -- 0.1%
(Cost $3,191)
$ 3,191 Agreement with Morgan Stanley,
1.770% dated 10/29/2004, to be
repurchased at $3,191,000 on
11/01/2004 (Collateralized by
U.S. Treasury Obligations, having
various interest rates and maturities,
market value $3,293,000) 3,191
----------
TOTAL INVESTMENTS (COST $2,412,643*) 100.0% 2,639,989
OTHER ASSETS AND LIABILITIES (NET) 0.0 149
------ ----------
NET ASSETS 100.0% $2,640,138
===== ==========
<FN>
- --------
* Aggregate cost for federal tax purposes is $2,433,540.
+ Non-income producing security.
See Notes to Financial Statements.
23
Portfolio of Investments
- ---------------------------------------------------------------------------
STRATEGIC GROWTH PORTFOLIO
October 31, 2004
- ---------------------------------------------------------------------------
Value
Shares (000s)
------ ------
INVESTMENT COMPANY SECURITIES -- 99.8%
10,312,729 WM Equity Income Fund $ 183,463
14,241,718 WM Growth & Income Fund 334,965
18,706,330 WM Growth Fund+ 279,847
9,233,462 WM High Yield Fund 76,361
14,730,278 WM International Growth Fund 136,402
9,467,674 WM Mid Cap Stock Fund 163,412
4,234,090 WM REIT Fund 66,264
4,211,258 WM Small Cap Growth Fund+ 56,389
5,862,507 WM Small Cap Value Fund+ 63,491
3,853,132 WM West Coast Equity Fund 136,362
----------
Total Investment Company Securities
(Cost $1,393,141) 1,496,956
----------
Principal
Amount
(000s)
- -------------
REPURCHASE AGREEMENT -- 0.2%
(Cost $2,164)
$ 2,164 Agreement with Morgan Stanley,
1.770% dated 10/29/2004, to be
repurchased at $2,164,000 on
11/01/2004 (Collateralized by
U.S. Treasury Obligations, having
various interest rates and maturities,
market value $2,233,000) 2,164
----------
TOTAL INVESTMENTS (COST $1,395,305*) 100.0% 1,499,120
OTHER ASSETS AND LIABILITIES (NET) 0.0 180
----- ----------
NET ASSETS 100.0% $1,499,300
===== ==========
<FN>
- --------
* Aggregate cost for federal tax purposes is $1,414,477.
+ Non-income producing security.
See Notes to Financial Statements.
24
Portfolio of Investments
- ---------------------------------------------------------------------------
MONEY MARKET FUND
October 31, 2004
- ---------------------------------------------------------------------------
Principal
Amount Value
(000s) (000s)
--------- ------
COMMERCIAL PAPER (DOMESTIC) - 2.3%
Cooperative Association of Tractor Dealers Inc.:
$ 3,000 Series A,
2.180% due 03/04/2005+++ $ 2,978
Series B:
4,073 1.510% due 11/03/2004+++ 4,073
5,300 1.620% due 11/04/2004+++ 5,299
3,000 1.830% due 11/12/2004+++ 2,998
----------
Total Commercial Paper (Domestic)
(Cost $15,348) 15,348
----------
COMMERCIAL PAPER (YANKEE) - 6.5%
15,000 ABN AMRO Bank NV North America,
1.770% due 11/08/2004+++ 14,995
29,561 UBS Finance (D.E.) LLC,
1.840% due 11/01/2004+++ 29,561
----------
Total Commercial Paper (Yankee)
(Cost $44,556) 44,556
----------
MEDIUM TERM NOTES - 14.1%
2,000 American Express Credit Corporation,
Series B,
4.250% due 02/07/2005 2,016
American Honda Finance Corporation:
15,000 1.780% due 02/11/2005++** 15,007
10,000 2.010% due 07/11/2005++** 10,000
General Electric Capital Corporation,
Series A:
10,200 1.760% due 05/12/2005++ 10,207
5,200 1.925% due 12/15/2004++ 5,200
6,035 4.250% due 01/28/2005 6,077
8,778 7.250% due 02/01/2005 8,909
3,500 J.P. Morgan Chase & Company, Sr. Note,
2.070% due 03/07/2005++ 3,503
10,000 MBIA Global Funding LLC,
1.800% due 02/07/2005++** 10,000
10,000 Merrill Lynch & Company, Inc., Note,
2.210% due 07/11/2005++ 10,014
5,000 National City Bank, Note,
1.700% due 05/19/2005++ 4,999
10,000 U.S. Bancorp, Sr. Note, Series J,
6.875% due 12/01/2004 10,046
----------
Total Medium Term Notes
(Cost $95,978) 95,978
----------
CORPORATE BONDS AND NOTES - 33.6%
1,150 2440 LLC, Note, (LOC: Fifth Third Bank),
1.960% due 05/01/2024+** 1,150
3,250 2880 Stevens Creek LLC, Bond,
(LOC: Bank of the West),
1.940% due 11/01/2033+ 3,250
2,915 ASSK Properties LC, Note,
(LOC: Wells Fargo Bank),
2.000% due 12/01/2017+ 2,915
Principal
Amount Value
(000s) (000s)
--------- ------
Associates Corporation NA, Sr. Note:
$ 3,950 6.200% due 05/16/2005 $ 4,031
14,625 7.750% due 02/15/2005 14,898
1,750 Avatar Corporation, Note,
(LOC: Fifth Third Bank),
1.960% due 05/01/2039+** 1,750
1,000 Banaba Properties LLC, Note,
(LOC: Fifth Third Bank),
1.960% due 03/01/2020+ 1,000
1,400 Bedford Hills Golf Club, Note,
(LOC: Fifth Third Bank),
1.960% due 04/01/2013+ 1,400
2,445 Boardwalk Enterprises, Note,
(LOC: Fifth Third Bank),
1.960% due 04/01/2024+** 2,445
2,010 BP Canada Energy Company, Deb.,
6.750% due 02/15/2005 2,041
4,750 BP Capital Markets PLC, Note,
4.000% due 04/29/2005 4,791
1,450 Brookville Enterprises, Note,
(LOC: Fifth Third Bank),
1.960% due 10/01/2025+ 1,450
3,000 Campus Research Corporation, Note,
Series A, (LOC: Wells Fargo Bank),
2.050% due 06/01/2013+ 3,000
4,000 Chatham Capital Corporation, Note,
(LOC: Fifth Third Bank),
1.910% due 11/01/2026+ 4,000
12,315 Commercial Credit Corporation, Note,
(LOC: Citigroup),
6.500% due 06/01/2005 12,625
2,000 Community Housing Development, Bond,
(LOC: Wells Fargo Bank),
1.900% due 08/01/2024+ 2,000
3,140 Corporate Finance Managers, Note,
(LOC: Wells Fargo Bank),
1.900% due 02/02/2043+ 3,140
1,150 Corvasc Real Estate, Note,
(LOC: Fifth Third Bank),
1.960% due 05/01/2024+ 1,150
1,000 Crestmont Nursing Home, Note,
(LOC: Fifth Third Bank),
1.910% due 03/01/2024+** 1,000
1,600 DBSI First Mortgage 1998, Note,
(LOC: U.S. Bank),
1.920% due 07/01/2023+ 1,600
200 Derby Fabricating LLC, Bond,
(LOC: Fifth Third Bank),
1.960% due 06/01/2024+ 200
1,000 Elmhurst Memorial Healthcare, Note,
(LOC: Fifth Third Bank),
1.940% due 01/01/2034+** 1,000
28,031 Everett Clinic, P.S., Bond,
(LOC: Bank of America),
1.990% due 05/01/2022+ 28,031
1,000 Exal Corporation, Note,
(LOC: Fifth Third Bank),
1.960% due 03/01/2009+ 1,000
See Notes to Financial Statements.
25
Portfolio of Investments (continued)
- ---------------------------------------------------------------------------
MONEY MARKET FUND
October 31, 2004
- ---------------------------------------------------------------------------
Principal
Amount Value
(000s) (000s)
--------- ------
CORPORATE BONDS AND NOTES - (continued)
$ 1,000 Family Express LLC, Note,
(LOC: Fifth Third Bank),
1.910% due 04/01/2028+ $ 1,000
1,100 Fifth Third Bank, Note,
(LOC: Fifth Third Bank),
1.960% due 06/01/2018+** 1,100
5,000 First Union National Bank, Note,
7.700% due 02/15/2005 5,091
7,490 Foster Schweihofer Real Estate Holdings
Company, LLC, Note,
(LOC: Fifth Third Bank),
1.910% due 09/20/2033+ 7,490
9,000 General Electric Capital Corporation,
Deb., 8.850% due 04/01/2005 9,279
1,630 Gold Key Processing Limited, Note,
(LOC: Fifth Third Bank),
1.960% due 07/01/2024+ 1,630
11,815 Goldman Sachs Group,
6.625% due 12/01/2004** 11,863
2,000 Gulf Gate Apartments, Bond,
(LOC: Wells Fargo Bank),
1.900% due 09/01/2028+** 2,000
1,000 Henderson Regional Authority, Bond,
(LOC: Fifth Third Bank),
1.960% due 07/01/2023+ 1,000
4,800 Iowa 80 Group Inc., Note,
(LOC: Wells Fargo Bank),
1.890% due 06/01/2016+ 4,800
1,000 ISO Building LLC, Note,
(LOC: Fifth Third Bank),
1.960% due 03/01/2023+** 1,000
1,000 JUL-Mark Investments LLC, Note,
(LOC: Fifth Third Bank),
1.960% due 10/01/2025+** 1,000
2,146 KAT LLC, Note, (LOC: Fifth Third Bank),
1.960% due 06/01/2029+ 2,146
1,935 KL Morris Family LP, Note,
(LOC: Fifth Third Bank),
1.960% due 02/01/2020+ 1,935
1,000 LAL Holding Company, Note,
(LOC: Fifth Third Bank),
1.960% due 08/01/2019+ 1,000
955 Lauren Company LLC, Bond,
(LOC: Wells Fargo Bank),
1.900% due 07/01/2033+** 955
1,000 Lee Family Partnership, Note,
(LOC: Fifth Third Bank),
1.960% due 06/01/2034+ 1,000
2,200 Lincoln Parkway LLC, Note,
(LOC: Fifth Third Bank),
1.960% due 06/01/2044+ 2,200
1,900 Marsh Enterprises LLC, Note,
(LOC: Fifth Third Bank),
1.910% due 01/01/2028+ 1,900
900 Martin Road Investments, Bond,
(LOC: Fifth Third Bank),
1.960% due 10/01/2027+ 900
10,000 MBIA Global Funding, Note,
1.860% due 04/08/2005++** 10,002
Principal
Amount Value
(000s) (000s)
--------- ------
$ 4,900 Medical Properties Inc., Revenue Bonds,
(Dakota Clinic Ltd. Project),
(LOC: ABN AMRO Bank NV),
1.990% due 12/15/2024+ $ 4,900
Michigan Equity Group, Note,
(LOC: Fifth Third Bank):
1,000 1.960% due 04/01/2034+ 1,000
2,530 Series B,
1.960% due 04/01/2034+** 2,530
2,300 NO S Properties LLC, Note,
(LOC: Fifth Third Bank),
1.960% due 08/01/2024+ 2,300
1,390 Northern Trust Company, Note,
6.650% due 11/09/2004 1,392
4,800 Pineview Estates LC, Note,
(LOC: Fifth Third Bank),
1.910% due 01/01/2023+ 4,800
14,526 Portland Clinic LLP, Bond,
(LOC: U.S. Bank),
1.990% due 11/20/2027+ 14,526
1,000 R.O. Davis Real Estate, Note,
(LOC: Fifth Third Bank),
1.960% due 04/01/2023+ 1,000
1,610 Realty Holding Company LLC, Note,
(LOC: Fifth Third Bank),
1.960% due 05/01/2024+** 1,610
4,615 Rise Inc., Note, (LOC: Wells Fargo Bank),
2.000% due 11/01/2022+ 4,615
4,800 Rockwood Quarry LLC, Note,
(LOC: Fifth Third Bank),
1.910% due 12/01/2022+ 4,800
900 Sanders CRS Exchange LLC, Note,
(LOC: Wells Fargo Bank),
2.090% due 10/01/2023+** 900
1,000 SJD Service Company LLC, Note,
(LOC: Fifth Third Bank),
1.960% due 10/01/2023+ 1,000
1,000 Skeletal Properties, Note,
(LOC: Fifth Third Bank),
1.960% due 11/01/2014+ 1,000
3,000 SouthTrust Bank NA, Note,
1.754% due 05/02/2005++ 3,000
1,250 Spartan Medical Facility, Note,
(LOC: Fifth Third Bank),
1.960% due 12/01/2026+** 1,250
2,900 Tacoma Goodwill Industries, Bond,
(LOC: Bank of America),
1.930% due 02/01/2023+ 2,900
2,000 Titan Holdings Group LLC, Note,
(LOC: Fifth Third Bank),
1.960% due 05/01/2012+ 2,000
1,125 United Transportation Union, Bond,
(LOC: Fifth Third Bank),
1.960% due 06/01/2009+ 1,125
1,393 Watts Brothers Frozen Foods, Bond,
(LOC: U.S. Bank),
1.920% due 07/01/2013+ 1,393
2,500 Wells Fargo & Company, Sr. Note,
7.500% due 04/15/2005 2,567
----------
Total Corporate Bonds and Notes
(Cost $229,766) 229,766
----------
See Notes to Financial Statements.
26
Portfolio of Investments (continued)
- ---------------------------------------------------------------------------
MONEY MARKET FUND
October 31, 2004
- ---------------------------------------------------------------------------
Principal
Amount Value
(000s) (000s)
--------- ------
TAXABLE MUNICIPAL BONDS - 29.3%
$ 2,000 ABAG, California, Finance Authority for
Nonprofit Corporations, Revenue Bonds,
(Public Policy Institute of California
Project), Series B,
(LOC: Bank of New York),
2.040% due 11/01/2031+ $ 2,000
7,450 Acworth, Georgia, Downtown Development
Authority, IDR, (City of Acworth Cable
Fiber Optic Project), (AMBAC Insured),
1.930% due 01/01/2017+ 7,450
10,000 Brooks County, Georgia, Development
Authority, IDR, (Langboard Inc.
Project), (LOC: Bank of America),
1.960% due 05/01/2018+ 10,000
200 California Educational Facilities
Authority, Loan Agreement Revenue,
(University of Judaism), Series B,
(LOC: Allied Irish Bank PLC),
2.030% due 12/01/2028+ 200
1,400 California Statewide Communities
Development Authority, MFHR,
(Pavilions at Sunrise Apartments),
Series M-T, (LOC: Fannie Mae),
1.960% due 08/15/2034+ 1,400
2,085 Collier County, Florida, MFHR,
(Brittany Bay Apartments Project),
Series B, (FNMA Collateral),
1.930% due 07/15/2034+ 2,085
1,225 Colorado Housing & Finance Authority,
Economic Development Revenue, (G.A.
Wright Asset Management, LLC Project),
(LOC: Wells Fargo Bank),
1.900% due 04/01/2029+ 1,225
25,000 Connecticut State Housing Finance
Authority, Housing Revenue, (Housing
Mortgage Finance Program),
Subseries B-6, (AMBAC Insured),
1.930% due 11/15/2027+ 25,000
4,250 Four Dam Pool Power Agency, Alaska,
Electric Revenue, Series B,
(LOC: Dexia Bank),
1.850% due 07/01/2026+ 4,250
1,400 Illinois Health Facilities Authority,
Health Care Revenue, (West Suburban
Hospital Medical Center Project),
Series B, (LOC: American National
Bank), 1.950% due 07/01/2024+ 1,400
2,900 Kern Water Bank Authority, California,
Water Revenue, Series B,
(LOC: Wells Fargo Bank),
1.900% due 07/01/2028+ 2,900
3,000 Kit Carson County, Colorado, Agricultural
Development Revenue,
(Midwest Farms LLC),
(LOC: Wells Fargo Bank),
1.870% due 06/01/2027+ 3,000
3,000 Long Beach, California, Revenue Bonds,
Long Beach Towne Center Site
Refinancing Project), Series A,
(LOC: Allied Irish Bank PLC),
1.940% due 11/01/2030+ 3,000
Principal
Amount Value
(000s) (000s)
--------- ------
$ 4,340 Los Angeles, California, Community
Redevelopment Agency, Financing
Authority Revenue, (Bunker Hill
Project), Series B, (AMBAC Insured),
1.490% due 12/01/2004 $ 4,340
2,450 Massachusetts State Development Finance
Agency, Solid Waste Disposal Revenue,
(The Newark Group Project), Series D,
(LOC: JPMorgan Chase Bank),
1.930% due 07/01/2016+ 2,450
2,000 Memorial Health System, Illinois, Health
Care Revenue, (LOC: Bank One NA),
1.870% due 10/01/2024+ 2,000
3,005 Michigan State Strategic Fund, Limited
Obligation Revenue, (Environmental
Research Institute of Michigan
Project), Series B, (LOC: Fifth Third
Bank), 1.860% due 10/01/2025+ 3,005
1,000 Montrose County, Colorado, Economic
Development Revenue, (Gordon
Development Project), Series A,
(LOC: Wells Fargo Bank),
1.900% due 06/01/2010+ 1,000
4,215 New Hampshire State Housing Finance
Authority, MFHR, (Pheasant Run
Properties Limited Partnership
Project), (FNMA Collateral),
1.950% due 04/15/2016+ 4,215
2,500 New York City Housing Development
Corporation, MFHR, Series B,
(LOC: KeyBank National Association),
1.950% due 07/01/2035+ 2,500
20,000 New York City, GO, Subseries A-11,
(FGIC Insured),
1.930% due 11/01/2020+ 20,000
4,800 New York State Housing Finance Agency,
Housing Revenue, (West 33rd Street
Project), Series B, (FNMA Collateral),
1.850% due 11/15/2036+ 4,800
33,000 Oakland-Alameda County, California,
Coliseum Authority, Lease Revenue,
(Coliseum Project), Series D,
(LOC: Wachovia Bank),
1.930% due 02/01/2011+ 33,000
Orange County, Florida, Housing Finance
Authority, MFHR, Series B:
2,320 (Northbridge At Millenia - Phase II
Project), (LOC: SouthTrust Bank),
1.990% due 08/15/2036+ 2,320
1,550 (The Landings on Millenia Blvd.
Apartments), (LOC: Fannie Mae),
1.990% due 08/15/2035+ 1,550
2,375 Plymouth, Minnesota, Health Facilities
Revenue, (Westhealth Project),
Series B, (FSA Insured),
1.870% due 06/01/2024+ 2,375
3,200 Richmond, California, MFHR, (Bay Cliff
Apartments Project), Series B,
(FNMA Collateral),
1.950% due 08/15/2037+ 3,200
See Notes to Financial Statements.
27
Portfolio of Investments (continued)
- ---------------------------------------------------------------------------
MONEY MARKET FUND
October 31, 2004
- ---------------------------------------------------------------------------
Principal
Amount Value
(000s) (000s)
--------- ------
TAXABLE MUNICIPAL BONDS - (continued)
$ 5,250 Santa Rosa, California, Pension
Obligation, Revenue Bonds, Series A,
(LOC: Landesbank Hessen-Thuringen),
2.040% due 09/01/2024+ $ 5,250
3,000 Savannah College of Art & Design, Inc.,
Georgia, Revenue Bonds, (LOC: Bank of
America),
1.960% due 04/01/2024+ 3,000
10,700 South Fulton, Georgia, Municipal Regional
Jail Authority, Lease Revenue, (Union
City Justice Center Project), (MBIA
Insured), 1.950% due 11/01/2017+ 10,700
5,750 Union County Improvement Authority, New
Jersey, Revenue Bonds, (Cedar Glen
Housing Corporation - Hanover Township
Housing Project), Series B,
(FNMA Collateral),
1.950% due 12/15/2014+ 5,750
1,445 University of Illinois, College &
University Revenue, (UIC South Campus
Development Project), (FGIC Insured),
7.620% due 01/15/2005 1,463
7,000 Utah Telecommunication Open
Infrastructure Agency,
Telecommunications Revenue,
(LOC: Bank of America Corporation),
1.930% due 07/01/2026+ 7,000
3,600 Val Verde Unified School District,
California, COP, (Land Bank Program),
Series B, (LOC: Bank of America),
1.930% due 09/01/2010+ 3,600
Washington State Housing Finance
Commission, MFHR, Series B:
1,910 (Boardwalk Apartments Project),
(FNMA Collateral),
1.930% due 09/01/2028+ 1,910
1,725 (Cedar Landing Project),
(LOC: U.S. Bank),
1.920% due 12/01/2028+ 1,725
1,070 (Oxford Square Project),
(LOC: U.S. Bank),
1.920% due 12/01/2028+ 1,070
5,250 (Silver Creek Apartment Project),
1.950% due 12/20/2037+ 5,250
2,730 (Washington Terrace Senior Apartments
Project), (FNMA Collateral),
1.930% due 09/15/2037+ 2,730
---------
Total Taxable Municipal Bonds
(Cost $200,113) 200,113
---------
U.S. GOVERNMENT AGENCY OBLIGATIONS - 9.2%
Federal Home Loan Bank, Bond:
18,000 1.260% due 04/08/2005 17,929
15,000 1.400% due 03/29/2005 15,000
5,000 1.500% due 03/08/2005 5,000
Principal
Amount Value
(000s) (000s)
--------- ------
Federal National Mortgage Association,
Note:
$ 5,000 1.610% due 05/13/2005 $ 5,000
5,000 1.750% due 05/23/2005 5,000
5,000 1.800% due 05/27/2005 5,000
10,000 1.850% due 06/03/2005 10,000
----------
Total U.S. Government Agency Obligations
(Cost $62,929) 62,929
----------
FUNDING AGREEMENT - 4.7%
(Cost $32,000)
32,000 New York Life Insurance,
1.720% due 08/03/2005*** 32,000
----------
TOTAL INVESTMENTS (Cost $680,690*) 99.7% 680,690
OTHER ASSETS AND LIABILITIES (Net) 0.3 2,325
----- ----------
NET ASSETS 100.0% $ 683,015
===== ==========
<FN>
- --------
* Aggregate cost for federal tax purposes.
** Security acquired in a transaction exempt from registration under
Rule 144A of the Securities Act of 1933, as amended.
*** Security is restricted and illiquid. It was acquired on August
4, 2004, and has a value of $0.05 per Fund share at October 31,
2004.
+ 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, 2004.
++ 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
COP -- Certificate of Participation
FGIC -- Federal Guaranty Insurance Corporation
FNMA -- Federal National Mortgage Association
FSA -- Financial Security Assurance
GO -- General Obligation
IDR -- Industrial Development Revenue
LOC -- Letter of Credit
MBIA -- Municipal Bond Investors Assurance
MFHR -- Multi-family Housing Revenue
See Notes to Financial Statements.
28
Statements of Assets and Liabilities
- ------------------------------------------------------------------------------------------------------------------------
October 31, 2004
(In thousands)
------------------------------------------------------------------------------------------------------------------
Flexible Conservative Conservative Strategic Money
Income Balanced Balanced Growth Growth Market
Portfolio Portfolio Portfolio Portfolio Portfolio Fund
--------- ------------ --------- ----------- --------- ------
ASSETS:
Investments, at value (a) $ 907,610 $ 463,260 $3,363,217 $2,639,989 $1,499,120 $680,690
Cash 1 1 --* 1 1 1
Dividends and/or interest
receivable --* --* 10 --* --* 3,059
Receivable for Portfolio/Fund
shares sold 3,305 5,505 13,499 9,569 5,709 802
Prepaid expenses and other assets 3 1 12 10 5 6
--------- --------- ---------- ---------- ---------- --------
Total Assets 910,919 468,767 3,376,738 2,649,569 1,504,835 684,558
--------- --------- ---------- ---------- ---------- --------
LIABILITIES:
Payable for Portfolio/Fund
shares redeemed 5,200 967 8,144 4,320 2,295 909
Payable for investment securities
purchased -- 427 2,042 1,691 1,164 --
Investment advisory fee payable 495 251 1,713 1,363 791 261
Shareholder servicing and
distribution fees payable 536 259 1,857 1,480 869 53
Transfer agent fees payable 31 14 111 108 87 34
Dividends payable -- -- -- -- -- 13
Accrued printing and postage expenses 87 39 321 282 210 221
Accrued legal and audit fees 28 25 42 38 31 34
Accrued expenses and other payables 42 31 193 149 88 18
--------- --------- ---------- ---------- ---------- --------
Total Liabilities 6,419 2,013 14,423 9,431 5,535 1,543
--------- --------- ---------- ---------- ---------- --------
NET ASSETS $ 904,500 $ 466,754 $3,362,315 $2,640,138 $1,499,300 $683,015
========= ========= ========== ========== ========== ========
(a) Investments, at cost $ 858,746 $ 434,309 $3,088,178 $2,412,643 $1,395,305 $680,690
========= ========= ========== ========== ========== ========
NET ASSETS consist of:
Undistributed net investment income/
(accumulated net investment loss) $ 1,673 $ 582 $ 1,467 $ (1,722) $ (9,034) $ --
Accumulated net realized loss on
investment transactions (3,170) (2,307) (69,451) (81,959) (65,559) (45)
Net unrealized appreciation of
investments 48,864 28,951 275,039 227,346 103,815 --
Paid-in capital 857,133 439,528 3,155,260 2,496,473 1,470,078 683,060
--------- --------- ---------- ---------- ---------- --------
Total Net Assets $ 904,500 $ 466,754 $3,362,315 $2,640,138 $1,499,300 $683,015
========= ========= ========== ========== ========== ========
<FN>
- --------------
*Amount represents less than $500.
See Notes to Financial Statements.
29
Statements of Assets and Liabilities (continued)
- ------------------------------------------------------------------------------------------------------------------------
October 31, 2004
(In thousands)
------------------------------------------------------------------------------------------------------------------
Flexible Conservative Conservative Strategic Money
Income Balanced Balanced Growth Growth Market
Portfolio Portfolio Portfolio Portfolio Portfolio Fund
--------- ------------ --------- ----------- --------- ------
NET ASSETS:
Class A Shares $ 357,735 $ 207,816 $1,524,988 $1,157,038 $ 609,250 $530,052
========= ========= ========== ========== ========= ========
Class B Shares $ 418,994 $ 161,623 $1,354,528 $1,001,081 $ 612,914 $ 52,764
========= ========= ========== ========== ========= ========
Class C Shares $ 127,771 $ 97,315 $ 482,799 $ 482,019 $ 277,136 $ 8,480
========= ========= ========== ========== ========= ========
Class I Shares $ 91,719
========
SHARES OUTSTANDING:
Class A Shares 31,780 20,237 120,684 85,356 42,033 530,072
========= ========= ========== ========== ========= ========
Class B Shares 37,283 15,765 107,439 75,992 44,088 52,761
========= ========= ========== ========== ========= ========
Class C Shares 11,417 9,524 38,462 36,771 19,891 8,480
========= ========= ========== ========== ========= ========
Class I Shares 91,732
========
CLASS A SHARES:**
Net asset value per share of
beneficial interest outstanding* $ 11.26 $ 10.27 $ 12.64 $ 13.56 $ 14.49 $ 1.00
========= ========= ========== ========== ========= ========
Maximum sales charge 4.50% 5.50% 5.50% 5.50% 5.50% --
========= ========= ========== ========== =========
Maximum offering price per share of
beneficial interest outstanding $ 11.79 $ 10.87 $ 13.38 $ 14.35 $ 15.33 --
========= ========= ========== ========== =========
CLASS B SHARES:**
Net asset value and offering price
per share of beneficial interest
outstanding * $ 11.24 $ 10.25 $ 12.61 $ 13.17 $ 13.90 $ 1.00
========= ========= ========== ========== ========= ========
CLASS C SHARES:**
Net asset value and offering price
per share of beneficial interest
outstanding * $ 11.19 $ 10.22 $ 12.55 $ 13.11 $ 13.93 $ 1.00
========= ========= ========== ========== ========= ========
CLASS I SHARES:**
Net asset value, offering and
redemption price per share of
beneficial interest outstanding $ 1.00
========
<FN>
- --------
* Redemption price per share is equal to net asset value per share less
any applicable contingent deferred sales charge.
** Net asset value and maximum offering price are not shown in thousands.
See Notes to Financial Statements.
30
Statements of Operations
- ------------------------------------------------------------------------------------------------------------------------
For the Year Ended October 31, 2004
(In thousands)
------------------------------------------------------------------------------------------------------------------
Flexible Conservative Conservative Strategic Money
Income Balanced Balanced Growth Growth Market
Portfolio Portfolio Portfolio Portfolio Portfolio Fund
--------- ------------ --------- ----------- --------- ------
INVESTMENT INCOME:
Dividends from investment company
securities $ 32,735 $ 12,865 $ 70,898 $ 38,998 $ 14,283 $ --
Interest 29 14 755 56 37 10,298
--------- --------- ---------- ---------- ---------- --------
Total investment income 32,764 12,879 71,653 39,054 14,320 10,298
--------- --------- ---------- ---------- ---------- --------
EXPENSES:
Investment advisory fee 5,206 2,416 17,412 13,878 8,046 3,575
Custodian fees 3 3 3 3 3 27
Legal and audit fees 44 33 95 80 55 47
Trustees' fees 20 9 69 55 31 22
Registration and filing fees 155 105 383 313 202 64
Printing and postage expenses 238 115 900 818 603 309
Other 96 46 324 255 141 122
Shareholder servicing and
distribution fees:
Class A Shares 743 383 3,002 2,317 1,196 --
Class B Shares 4,054 1,442 12,561 9,462 5,744 614
Class C Shares 984 744 3,674 3,566 2,055 61
Transfer agent fees:
Class A Shares 155 85 646 646 487 328
Class B Shares 271 111 921 815 639 97
Class C Shares 57 45 209 239 172 7
--------- --------- ---------- ---------- ---------- --------
Total expenses 12,026 5,537 40,199 32,447 19,374 5,273
Fees waived by the distributor -- -- -- -- -- (290)
Fees reduced by custodian credits --* --* (1) --* --* (2)
--------- --------- ---------- ---------- ---------- --------
Net expenses 12,026 5,537 40,198 32,447 19,374 4,981
--------- --------- ---------- ---------- ---------- --------
NET INVESTMENT INCOME/(LOSS) 20,738 7,342 31,455 6,607 (5,054) 5,317
--------- --------- ---------- ---------- ---------- --------
NET REALIZED AND UNREALIZED
GAIN ON INVESTMENTS:
Net realized gain/(loss) on
investment transactions 2,394 646 (21,358) (33,528) (25,066) 1
Capital gain distributions received 81 53 619 633 435 --
Net change in unrealized
appreciation/depreciation of
investments 19,948 14,620 184,763 192,878 127,779 --
--------- --------- ---------- ---------- ---------- --------
Net realized and unrealized gain on
investments 22,423 15,319 164,024 159,983 103,148 1
--------- --------- ---------- ---------- ---------- --------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $ 43,161 $ 22,661 $ 195,479 $ 166,590 $ 98,094 $ 5,318
========= ========= ========== ========== ========== ========
<FN>
- --------------
* Amount represents less than $500.
See Notes to Financial Statements.
31
Statements of Changes in Net Assets
- ------------------------------------------------------------------------------------------------------------------------
For the Year Ended October 31, 2004
(In thousands)
--------------------------------------------------------------------------------------------------------------------
Flexible Conservative Conservative Strategic Money
Income Balanced Balanced Growth Growth Market
Portfolio Portfolio Portfolio Portfolio Portfolio Fund
--------- ------------ --------- ----------- --------- ------
Net investment income/(loss) $ 20,738 $ 7,342 $ 31,455 $ 6,607 $ (5,054) $ 5,317
Net realized gain/(loss) on
investment transactions 2,394 646 (21,358) (33,528) (25,066) 1
Capital gain distributions received 81 53 619 633 435 --
Net change in unrealized
appreciation/depreciation of
investments 19,948 14,620 184,763 192,878 127,779 --
--------- --------- ---------- ---------- ---------- ---------
Net increase in net assets
resulting from operations 43,161 22,661 195,479 166,590 98,094 5,318
Distributions to shareholders from:
Net investment income:
Class A Shares (9,197) (3,698) (18,617) (3,971) -- (4,740)
Class B Shares (9,486) (2,374) (10,238) (3,187) -- (34)
Class C Shares (2,379) (1,260) (3,132) (1,027) -- (4)
Class I Shares -- -- -- -- -- (539)
Net increase/(decrease) in net
assets from Portfolio/Fund share
transactions:
Class A Shares 125,662 107,648 665,510 474,242 272,782 (177,905)
Class B Shares 35,707 38,752 203,662 104,834 81,770 (26,548)
Class C Shares 56,455 42,994 228,227 264,288 155,320 3,434
Class I Shares -- -- -- -- -- 66,839
--------- --------- ---------- ---------- ---------- ---------
Net increase/(decrease) in net
assets 239,923 204,723 1,260,891 1,001,769 607,966 (134,179)
NET ASSETS:
Beginning of year 664,577 262,031 2,101,424 1,638,369 891,334 817,194
--------- --------- ---------- ---------- ---------- ---------
End of year $ 904,500 $ 466,754 $3,362,315 $2,640,138 $1,499,300 $ 683,015
========= ========= ========== ========== ========== =========
Undistributed net investment
income/(accumulated net
investment loss) at end of year $ 1,673 $ 582 $ 1,467 $ (1,722) $ (9,034) $ --
========= ========= ========== ========== ========== =========
See Notes to Financial Statements.
32
Statements of Changes in Net Assets (continued)
- ----------------------------------------------------------------------------------------------------------------------------
For the Year Ended October 31, 2003
(In thousands)
----------------------------------------------------------------------------------------------------------------------
Flexible Conservative Conservative Strategic Money
Income Balanced Balanced Growth Growth Market
Portfolio Portfolio Portfolio Portfolio Portfolio Fund
--------- ------------ --------- ----------- --------- ------
Net investment income/(loss) $ 16,979 $ 4,114 $ 23,759 $ 9,132 $ (1,375) $ 6,191
Net realized gain/(loss) on
investment transactions (4,679) (1,915) (23,365) (27,792) (18,516) --*
Net change in unrealized
appreciation/depreciation
of investments 43,834 19,838 258,639 267,163 170,878 --
--------- --------- ---------- ---------- ---------- --------
Net increase in net assets resulting
from operations 56,134 22,037 259,033 248,503 150,987 6,191
Distributions to shareholders from:
Net investment income:
Class A Shares (6,392) (1,486) (10,917) (5,264) -- (5,447)
Class B Shares (8,956) (1,756) (11,375) (3,864) -- (49)
Class C Shares (1,284) (605) (1,556) (519) -- (3)
Class I Shares -- -- -- -- -- (692)
Net realized gains on investments:
Class A Shares (226) -- -- (1,176) (1,363) --
Class B Shares (389) -- -- (2,123) (2,912) --
Class C Shares (37) -- -- (182) (240) --
Net increase/(decrease) in net assets
from Portfolio/Fund share
transactions:
Class A Shares 66,490 56,926 284,390 182,874 84,392 18,955
Class B Shares 104,021 49,644 200,435 74,140 48,369 (25,219)
Class C Shares 44,830 37,641 159,237 126,407 68,120 1,370
Class I Shares -- -- -- -- -- (144,414)
--------- --------- ---------- ---------- ---------- --------
Net increase/(decrease) in net
assets 254,191 162,401 879,247 618,796 347,353 (149,308)
NET ASSETS:
Beginning of year 410,386 99,630 1,222,177 1,019,573 543,981 966,502
--------- --------- ---------- ---------- ---------- --------
End of year $ 664,577 $ 262,031 $2,101,424 $1,638,369 $ 891,334 $817,194
========= ========= ========== ========== ========== ========
Undistributed net investment income/
(accumulated net investment loss)
at end of year $ 1,974 $ 556 $ 1,815 $ (331) $ (4,099) $ --
========= ========= ========== ========== ========== ========
<FN>
- --------
*Amount represents less than $500.
See Notes to Financial Statements.
33
Statements of Changes in Net Assets -- Capital Stock Activity
- ------------------------------------------------------------------------------------------------------------------------
(In thousands)
------------------------------------------------------------------------------------------------------------------
Conservative
Flexible Income Portfolio Balanced Portfolio Balanced Portfolio
-------------------------- ------------------------- -------------------------
Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended
10/31/04 10/31/03 10/31/04 10/31/03 10/31/04 10/31/03
----------- ---------- ---------- ---------- ---------- ----------
AMOUNT
Class A:
Sold $ 205,718 $ 132,626 $ 146,926 $ 77,203 $ 833,154 $ 388,253
Issued as reinvestment
of dividends 8,244 6,038 3,374 1,400 17,690 10,557
Redeemed (88,300) (72,174) (42,652) (21,677) (185,334) (114,420)
----------- ---------- ---------- --------- ---------- ----------
Net increase/(decrease) $ 125,662 $ 66,490 $ 107,648 $ 56,926 $ 665,510 $ 284,390
=========== ========== ========== ========= ========== ==========
Class B:
Sold $ 131,911 $ 188,101 $ 70,538 $ 77,595 $ 384,734 $ 363,002
Issued as reinvestment
of dividends 8,441 8,565 2,179 1,659 9,770 11,004
Redeemed (104,645) (92,645) (33,965) (29,610) (190,842) (173,571)
----------- ---------- ---------- --------- ---------- ----------
Net increase/(decrease) $ 35,707 $ 104,021 $ 38,752 $ 49,644 $ 203,662 $ 200,435
=========== ========== ========== ========= ========== ==========
Class C:
Sold $ 79,388 $ 66,013 $ 58,347 $ 48,833 $ 276,378 $ 178,337
Issued as reinvestment
of dividends 2,086 1,207 1,151 574 2,947 1,494
Redeemed (25,019) (22,390) (16,504) (11,766) (51,098) (20,594)
----------- ---------- ---------- --------- ---------- ----------
Net increase $ 56,455 $ 44,830 $ 42,994 $ 37,641 $ 228,227 $ 159,237
=========== ========== ========== ========= ========== ==========
Class I:
Sold
Issued as reinvestment
of dividends
Redeemed
Net increase/(decrease)
SHARES
Class A:
Sold 18,450 12,528 14,538 8,237 67,334 35,203
Issued as reinvestment
of dividends 741 574 334 150 1,433 977
Redeemed (7,941) (6,804) (4,219) (2,322) (14,979) (10,622)
----------- ---------- ---------- --------- ---------- ----------
Net increase/(decrease) 11,250 6,298 10,653 6,065 53,788 25,558
=========== ========== ========== ========= ========== ==========
Class B:
Sold 11,851 17,920 6,992 8,360 31,147 33,351
Issued as reinvestment
of dividends 760 816 216 179 797 1,031
Redeemed (9,420) (8,770) (3,366) (3,199) (15,466) (16,183)
----------- ---------- ---------- --------- ---------- ----------
Net increase/(decrease) 3,191 9,966 3,842 5,340 16,478 18,199
=========== ========== ========== ========= ========== ==========
Class C:
Sold 7,161 6,291 5,800 5,256 22,496 16,269
Issued as reinvestment
of dividends 189 115 115 62 241 138
Redeemed (2,261) (2,120) (1,644) (1,258) (4,153) (1,895)
----------- ---------- ---------- --------- ---------- ----------
Net increase 5,089 4,286 4,271 4,060 18,584 14,512
=========== ========== ========== ========= ========== ==========
Class I:
Sold
Issued as reinvestment
of dividends
Redeemed
Net increase/(decrease)
See Notes to Financial Statements.
34
Conservative Growth
Portfolio Strategic Growth Portfolio Money Market Fund
-------------------------- -------------------------- -------------------------
Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended
10/31/04 10/31/03 10/31/04 10/31/03 10/31/04 10/31/03
----------- ---------- ---------- --------- ---------- ----------
AMOUNT
Class A:
Sold $ 597,373 $ 255,874 $ 348,227 $ 125,879 $ 847,283 $ 540,768
Issued as reinvestment
of dividends 3,856 6,302 -- 1,345 4,517 4,207
Redeemed (126,987) (79,302) (75,445) (42,832) (1,029,705) (526,020)
----------- ---------- ---------- --------- ---------- ----------
Net increase/(decrease) $ 474,242 $ 182,874 $ 272,782 $ 84,392 $ (177,905) $ 18,955
=========== ========== ========== ========= ========== ==========
Class B:
Sold $ 249,220 $ 209,247 $ 160,387 $ 109,265 $ 36,057 $ 72,301
Issued as reinvestment
of dividends 3,092 5,859 -- 2,863 30 46
Redeemed (147,478) (140,966) (78,617) (63,759) (62,635) (97,566)
----------- ---------- ---------- --------- ---------- ----------
Net increase/(decrease) $ 104,834 $ 74,140 $ 81,770 48,369 $ (26,548) $ (25,219)
=========== ========== ========== ========= ========== ==========
Class C:
Sold $ 306,396 $ 141,969 $ 177,989 $ 75,726 $ 14,376 $ 13,554
Issued as reinvestment
of dividends 960 678 -- 236 3 2
Redeemed (43,068) (16,240) (22,669) (7,842) (10,945) (12,186)
----------- ---------- ---------- --------- ---------- ----------
Net increase $ 264,288 $ 126,407 $ 155,320 $ 68,120 $ 3,434 $ 1,370
=========== ========== ========== ========= ========== ==========
Class I:
Sold $ 134,300 $ 43,936
Issued as reinvestment
of dividends 539 692
Redeemed (68,000) (189,042)
Net increase/(decrease) ---------- ----------
$ 66,839 $ (144,414)
========== ==========
SHARES
Class A:
Sold 45,316 22,560 24,697 10,682 847,283 540,768
Issued as reinvestment
of dividends 301 581 -- 124 4,517 4,207
Redeemed (9,635) (7,272) (5,365) (3,815) (1,029,705) (526,020)
----------- ---------- ---------- --------- ---------- ----------
Net increase/(decrease) 35,982 15,869 19,332 6,991 (177,905) 18,955
=========== ========== ========== ========= ========== ==========
Class B:
Sold 19,332 19,061 11,813 9,686 36,057 72,301
Issued as reinvestment
of dividends 246 570 -- 271 30 46
Redeemed (11,484) (13,258) (5,796) (5,899) (62,635) (97,566)
----------- ---------- ---------- --------- ---------- ----------
Net increase/(decrease) 8,094 6,373 6,017 4,058 (26,548) (25,219)
=========== ========== ========== ========= ========== ==========
Class C:
Sold 23,937 12,791 13,091 6,566 14,376 13,554
Issued as reinvestment
of dividends 77 65 -- 22 3 2
Redeemed (3,368) (1,524) (1,664) (706) (10,945) (12,186)
----------- ---------- ---------- --------- ---------- ----------
Net increase 20,646 11,332 11,427 5,882 3,434 1,370
=========== ========== ========== ========= ========== ==========
Class I:
Sold 134,300 43,936
Issued as reinvestment
of dividends 539 692
Redeemed (68,000) (189,042)
---------- ----------
Net increase/(decrease) 66,839 (144,414)
========== ==========
See Notes to Financial Statements.
35
Financial Highlights
- ---------------------------------------------------------------------------------------------------------------------------------
For a Portfolio share outstanding throughout each period.
- ---------------------------------------------------------------------------------------------------------------------------------
Flexible Income Portfolio Class A
------------------------------------------------------------------
Years Ended October 31 2004 2003 2002 2001 2000
------------------------------------------------------------------
Net asset value, beginning of period $ 10.92 $ 10.17 $ 10.71 $ 11.06 $ 10.75
-------- -------- -------- -------- --------
Income from investment operations:
Net investment income 0.34(6) 0.38(6) 0.45(6) 0.50(6) 0.47(6)
Net realized and unrealized gain/(loss) on investments 0.35 0.77 (0.48) (0.04) 0.42
-------- -------- -------- -------- --------
Total from investment operations 0.69 1.15 (0.03) 0.46 0.89
-------- -------- -------- -------- --------
Less distributions:
Dividends from net investment income(1) (0.35) (0.38) (0.43) (0.61) (0.55)
Distributions from net realized capital gains -- (0.02) (0.08) (0.20) (0.03)
-------- -------- -------- -------- --------
Total distributions (0.35) (0.40) (0.51) (0.81) (0.58)
-------- -------- -------- -------- --------
Net asset value, end of period $ 11.26 $ 10.92 $ 10.17 $ 10.71 $ 11.06
======== ======== ======== ======== ========
Total Return(2) 6.38% 11.49% (0.37)% 3.67% 8.56%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $357,735 $224,192 $144,710 $110,680 $129,386
Ratio of operating expenses to average net assets(3) 1.02% 1.04% 1.06% 1.06% 1.06%
Ratio of net investment income to average net assets 3.07% 3.64% 4.41% 4.61% 4.28%
Portfolio turnover rate 3% 3% 9% 7% 27%
Ratio of operating expenses to average net assets without
fee waivers, expenses reimbursed and/or fees reduced
by credits allowed by the custodian(3) (4) 1.02% 1.04% 1.06% 1.06% 1.06%
Conservative Balanced Portfolio Class A
------------------------------------------------------------------
Years Ended October 31 2004 2003 2002 2001 2000
------------------------------------------------------------------
Net asset value, beginning of period $ 9.81 $ 8.83 $ 9.43 $ 9.96 $ 9.94
-------- -------- -------- -------- --------
Income from investment operations:
Net investment income 0.24 0.28(6) 0.33 0.34(6) 0.51(6)
Net realized and unrealized gain/(loss) on investments 0.47 0.97 (0.61) (0.44) 0.02(8)
-------- -------- -------- -------- --------
Total from investment operations 0.71 1.25 (0.28) (0.10) 0.53
-------- -------- -------- -------- --------
Less distributions:
Dividends from net investment income(1) (0.25) (0.27) (0.32) (0.43) (0.50)
Distributions from net realized capital gains -- -- -- -- (0.01)
-------- -------- -------- -------- --------
Total distributions (0.25) (0.27) (0.32) (0.43) (0.51)
-------- -------- -------- -------- --------
Net asset value, end of period $ 10.27 $ 9.81 $ 8.83 $ 9.43 $ 9.96
======== ======== ======== ======== ========
Total Return(2) 7.29% 14.38% (3.06)% (0.99)% 5.52%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $207,816 $ 94,005 $ 31,070 $ 12,257 $ 4,557
Ratio of operating expenses to average net assets(3) 1.04% 1.05% 1.05% 1.16% 1.32%
Ratio of net investment income to average net assets 2.42% 2.99% 3.67% 3.65% 5.16%
Portfolio turnover rate 2% 4% 9% 18% 59%
Ratio of operating expenses to average net assets
without fee waivers, expenses reimbursed and/or fees
reduced by credits allowed by the custodian(3) (4) 1.04% 1.09% 1.17% 1.30% 1.32%
Flexible Income Portfolio Class B
---------------------------------------------------------------
Years Ended October 31 2004 2003 2002 2001 2000
---------------------------------------------------------------
Net asset value, beginning of period $ 10.90 $ 10.15 $ 10.71 $ 11.06 $ 10.75
-------- -------- -------- -------- -------
Income from investment operations:
Net investment income 0.26(6) 0.30(6) 0.38(6) 0.42(6) 0.39(6)
Net realized and unrealized gain/(loss) on investments 0.34 0.77 (0.50) (0.04) 0.42
-------- -------- -------- -------- -------
Total from investment operations 0.60 1.07 (0.12) 0.38 0.81
-------- -------- -------- -------- -------
Less distributions:
Dividends from net investment income(1) (0.26) (0.30) (0.36) (0.53) (0.47)
Distributions from net realized capital gains -- (0.02) (0.08) (0.20) (0.03)
-------- -------- -------- -------- -------
Total distributions (0.26) (0.32) (0.44) (0.73) (0.50)
-------- -------- -------- -------- -------
Net asset value, end of period $ 11.24 $ 10.90 $ 10.15 $ 10.71 $ 11.06
======== ======== ======== ======== =======
Total Return(2) 5.56% 10.60% (1.08)% 2.92% 7.76%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $418,994 $371,639 $244,999 $146,555 $77,238
Ratio of operating expenses to average net assets(3) 1.79% 1.79% 1.81% 1.79% 1.80%
Ratio of net investment income to average net assets 2.30% 2.89% 3.66% 3.88% 3.54%
Portfolio turnover rate 3% 3% 9% 7% 27%
Ratio of operating expenses to average net assets without
fee waivers, expenses reimbursed and/or fees reduced
by credits allowed by the custodian(3) (4) 1.79% 1.79% 1.81% 1.79% 1.80%
Conservative Balanced Portfolio Class B
---------------------------------------------------------------
Years Ended October 31 2004 2003 2002 2001 2000
---------------------------------------------------------------
Net asset value, beginning of period $ 9.79 $ 8.82 $ 9.43 $ 9.96 $ 9.94
-------- -------- -------- -------- -------
Income from investment operations:
Net investment income 0.17 0.21(6) 0.27 0.27(6) 0.44(6)
Net realized and unrealized gain/(loss) on investments 0.46 0.96 (0.62) (0.44) 0.02(8)
-------- -------- -------- -------- -------
Total from investment operations 0.63 1.17 (0.35) (0.17) 0.46
-------- -------- -------- -------- -------
Less distributions:
Dividends from net investment income(1) (0.17) (0.20) (0.26) (0.36) (0.43)
Distributions from net realized capital gains -- -- -- -- (0.01)
-------- -------- -------- -------- -------
Total distributions (0.17) (0.20) (0.26) (0.36) (0.44)
-------- -------- -------- -------- -------
Net asset value, end of period $ 10.25 $ 9.79 $ 8.82 $ 9.43 $ 9.96
======== ======== ======== ======== =======
Total Return(2) 6.47% 13.46% (3.77)% (1.71)% 4.76%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $161,623 $116,742 $ 58,054 $ 30,554 $10,947
Ratio of operating expenses to average net assets(3) 1.81% 1.82% 1.80% 1.89% 2.04%
Ratio of net investment income to average net assets 1.65% 2.22% 2.92% 2.92% 4.44%
Portfolio turnover rate 2% 4% 9% 18% 59%
Ratio of operating expenses to average net assets
without fee waivers, expenses reimbursed and/or fees
reduced by credits allowed by the custodian(3) (4) 1.81% 1.86% 1.92% 2.03% 2.04%
<FN>
- --------
(1) Includes dividends paid from the short-term portion of capital gain
distributions received from the Underlying Funds.
(2) Total return is not annualized for periods less than one year and does
not reflect any applicable sales charges. The total return would have
been lower if certain fees had not been waived and/or expenses
reimbursed by the investment advisor or if fees had not been reduced by
credits allowed by the custodian.
(3) The Portfolio also will indirectly bear its prorated share of expenses
of the Underlying Funds.
(4) Ratio of operating expenses to average net assets includes expenses
paid indirectly.
(5) The Portfolios commenced selling Class C shares on March 1, 2002.
(6) Per share numbers have been calculated using the average shares method.
(7) Annualized.
(8) The amount shown may not agree with the change in the aggregate gains
and losses of portfolio securities due to the timing of sales and
redemptions of Portfolio shares.
See Notes to Financial Statements.
36
Flexible Income Portfolio Class C
--------------------------------------------
Years Ended October 31 2004 2003 2002(5)
--------------------------------------------
Net asset value, beginning of period $ 10.86 $ 10.13 $ 10.54
-------- ------- -------
Income from investment operations:
Net investment income 0.26(6) 0.30(6) 0.24(6)
Net realized and unrealized gain/(loss) on investments 0.34 0.76 (0.43)
-------- ------- -------
Total from investment operations 0.60 1.06 (0.19)
-------- ------- -------
Less distributions:
Dividends from net investment income(1) (0.27) (0.31) (0.22)
Distributions from net realized capital gains -- (0.02) --
-------- ------- -------
Total distributions (0.27) (0.33) (0.22)
-------- ------- -------
Net asset value, end of period $ 11.19 $ 10.86 $ 10.13
======== ======= =======
Total Return(2) 5.57% 10.63% (1.78)%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $127,771 $68,746 $20,677
Ratio of operating expenses to average net assets(3) 1.78% 1.79% 1.81%(7)
Ratio of net investment income to average net assets 2.31% 2.89% 3.66%(7)
Portfolio turnover rate 3% 3% 9%
Ratio of operating expenses to average net assets without
fee waivers, expenses reimbursed and/or fees reduced
by credits allowed by the custodian(3) (4) 1.78% 1.79% 1.81%(7)
Conservative Balanced Portfolio Class C
--------------------------------------------
Years Ended October 31 2004 2003 2002(5)
--------------------------------------------
Net asset value, beginning of period $ 9.76 $ 8.80 $ 9.39
-------- ------- -------
Income from investment operations:
Net investment income 0.16 0.21(6) 0.16
Net realized and unrealized gain/(loss) on investments 0.48 0.97 (0.60)
-------- ------- -------
Total from investment operations 0.64 1.18 (0.44)
-------- ------- -------
Less distributions:
Dividends from net investment income(1) (0.18) (0.22) (0.15)
Distributions from net realized capital gains -- -- --
-------- ------- -------
Total distributions (0.18) (0.22) (0.15)
-------- ------- -------
Net asset value, end of period $ 10.22 $ 9.76 $ 8.80
======== ======= =======
Total Return(2) 6.55% 13.53% (4.70)%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 97,315 $51,284 $10,505
Ratio of operating expenses to average net assets(3) 1.79% 1.80% 1.78%(7)
Ratio of net investment income to average net assets 1.67% 2.24% 2.94%(7)
Portfolio turnover rate 2% 4% 9%
Ratio of operating expenses to average net assets
without fee waivers, expenses reimbursed and/or fees
reduced by credits allowed by the custodian(3) (4) 1.79% 1.84% 1.90%(7)
See Notes to Financial Statements.
37
Financial Highlights
- ------------------------------------------------------------------------------------------------------------------------------
For a Portfolio share outstanding throughout each period.
- ------------------------------------------------------------------------------------------------------------------------------
Balanced Portfolio Class A
--------------------------------------------------------------
Years Ended October 31 2004 2003 2002 2001 2000
--------------------------------------------------------------
Net asset value, beginning of period $ 11.85 $ 10.24 $ 11.63 $ 13.55 $ 12.22
---------- -------- -------- -------- --------
Income from investment operations:
Net investment income 0.20 0.22 0.28 0.33(6) 0.28(6)
Net realized and unrealized gain/(loss) on investments 0.79 1.62 (1.08) (1.27) 1.53
---------- -------- -------- -------- --------
Total from investment operations 0.99 1.84 (0.80) (0.94) 1.81
---------- -------- -------- -------- --------
Less distributions:
Dividends from net investment income(1) (0.20) (0.23) (0.33) (0.51) (0.48)
Distributions from net realized capital gains -- -- (0.26) (0.47) --
---------- -------- -------- -------- --------
Total distributions (0.20) (0.23) (0.59) (0.98) (0.48)
---------- -------- -------- -------- --------
Net asset value, end of period $ 12.64 $ 11.85 $ 10.24 $ 11.63 $ 13.55
========== ======== ======== ======== ========
Total Return (2) 8.51% 18.07% (7.32)% (7.28)% 15.11%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $1,524,988 $792,423 $423,478 $380,681 $391,655
Ratio of operating expenses to average net assets(3) 0.98% 1.02% 1.04% 1.02% 1.03%
Ratio of net investment income to average net assets 1.56% 2.03% 2.55% 2.63% 2.05%
Portfolio turnover rate 2% 5% 19% 6% 22%
Ratio of operating expenses to average net assets
without fee waivers, expenses reimbursed and/or
fees reduced by credits allowed by the custodian(3) (4) 0.98% 1.02% 1.04% 1.02% 1.03%
Conservative Growth Portfolio Class A
--------------------------------------------------------------
Years Ended October 31 2004 2003 2002 2001 2000
--------------------------------------------------------------
Net asset value, beginning of period $ 12.47 $ 10.37 $ 12.35 $ 15.52 $ 13.43
---------- -------- -------- -------- --------
Income from investment operations:
Net investment income/(loss) 0.10(6) 0.14(6) 0.16(6) 0.20(6) 0.12(6)
Net realized and unrealized gain/(loss) on investments 1.06 2.14 (1.52) (2.34) 2.40
---------- -------- -------- -------- --------
Total from investment operations 1.16 2.28 (1.36) (2.14) 2.52
---------- -------- -------- -------- --------
Less distributions:
Dividends from net investment income(1) (0.07) (0.14) (0.22) (0.58) (0.43)
Distributions from net realized capital gains -- (0.04) (0.40) (0.45) --
---------- -------- -------- -------- --------
Total distributions (0.07) (0.18) (0.62) (1.03) (0.43)
---------- -------- -------- -------- --------
Net asset value, end of period $ 13.56 $ 12.47 $ 10.37 $ 12.35 $ 15.52
========== ======== ======== ======== ========
Total Return(2) 9.44% 22.12% (11.72)% (14.31)% 18.89%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $1,157,038 $615,501 $347,297 $319,583 $341,685
Ratio of operating expenses to average net assets(3) 1.01% 1.05% 1.06% 1.03% 1.02%
Ratio of net investment income/(loss) to average
net assets 0.74% 1.24% 1.41% 1.45% 0.76%
Portfolio turnover rate 5% 7% 14% 5% 17%
Ratio of operating expenses to average net assets
without fee waivers, expenses reimbursed and/or
fees reduced by credits allowed by the custodian(3) (4) 1.01% 1.05% 1.06% 1.03% 1.02%
Balanced Portfolio Class B
----------------------------------------------------------------
Years Ended October 31 2004 2003 2002 2001 2000
----------------------------------------------------------------
Net asset value, beginning of period $ 11.82 $ 10.22 $ 11.62 $ 13.54 $ 12.21
---------- ---------- -------- -------- --------
Income from investment operations:
Net investment income 0.10 0.14 0.20 0.23(6) 0.18(6)
Net realized and unrealized gain/(loss) on investments 0.79 1.61 (1.09) (1.27) 1.55
---------- ---------- -------- -------- --------
Total from investment operations 0.89 1.75 (0.89) (1.04) 1.73
---------- ---------- -------- -------- --------
Less distributions:
Dividends from net investment income(1) (0.10) (0.15) (0.25) (0.41) (0.40)
Distributions from net realized capital gains -- -- (0.26) (0.47) --
---------- ---------- -------- -------- --------
Total distributions (0.10) (0.15) (0.51) (0.88) (0.40)
---------- ---------- -------- -------- --------
Net asset value, end of period $ 12.61 $ 11.82 $ 10.22 $ 11.62 $ 13.54
========== ========== ======== ======== ========
Total Return (2) 7.59% 17.25% (8.03)% (7.98)% 14.26%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $1,354,528 $1,074,925 $743,953 $670,318 $549,849
Ratio of operating expenses to average net assets(3) 1.75% 1.78% 1.80% 1.78% 1.77%
Ratio of net investment income to average net assets 0.79% 1.27% 1.79% 1.87% 1.31%
Portfolio turnover rate 2% 5% 19% 6% 22%
Ratio of operating expenses to average net assets
without fee waivers, expenses reimbursed and/or
fees reduced by credits allowed by the custodian(3) (4) 1.75% 1.78% 1.80% 1.78% 1.77%
Conservative Growth Portfolio Class B
----------------------------------------------------------------
Years Ended October 31 2004 2003 2002 2001 2000
----------------------------------------------------------------
Net asset value, beginning of period $ 12.18 $ 10.14 $ 12.10 $ 15.17 $ 13.21
---------- ---------- -------- -------- --------
Income from investment operations:
Net investment income/(loss) (0.00)(6)(8) 0.05(6) 0.08(6) 0.09(6) 0.00(6)(8)
Net realized and unrealized gain/(loss) on investments 1.04 2.09 (1.50) (2.28) 2.37
---------- ---------- -------- -------- --------
Total from investment operations 1.04 2.14 (1.42) (2.19) 2.37
---------- ---------- -------- -------- --------
Less distributions:
Dividends from net investment income(1) (0.05) (0.06) (0.14) (0.43) (0.41)
Distributions from net realized capital gains -- (0.04) (0.40) (0.45) --
---------- ---------- -------- -------- --------
Total distributions (0.05) (0.10) (0.54) (0.88) (0.41)
---------- ---------- -------- -------- --------
Net asset value, end of period $ 13.17 $ 12.18 $ 10.14 $ 12.10 $ 15.17
========== ========== ======== ======== ========
Total Return(2) 8.53% 21.24% (12.46)% (14.93)% 18.07%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $1,001,081 $ 827,312 $623,852 $636,145 $604,460
Ratio of operating expenses to average net assets(3) 1.78% 1.81% 1.82% 1.79% 1.77%
Ratio of net investment income/(loss) to average
net assets (0.03)% 0.48% 0.65% 0.69% 0.01%
Portfolio turnover rate 5% 7% 14% 5% 17%
Ratio of operating expenses to average net assets
without fee waivers, expenses reimbursed and/or
fees reduced by credits allowed by the custodian(3) (4) 1.78% 1.81% 1.82% 1.79% 1.77%
<FN>
- --------
(1) Includes dividends paid from the short-term portion of capital gain
distributions received from the Underlying Funds.
(2) Total return is not annualized for periods less than one year and does
not reflect any applicable sales charges. The total return would have
been lower if certain fees had not been waived and/or expenses
reimbursed by the investment advisor or if fees had not been reduced by
credits allowed by the custodian.
(3) The Portfolio also will indirectly bear its prorated share of expenses
of the Underlying Funds.
(4) Ratio of operating expenses to average net assets includes expenses
paid indirectly.
(5) The Portfolios commenced selling Class C shares on March 1, 2002.
(6) Per share numbers have been calculated using the average shares method.
(7) Annualized.
(8) Amount represents less than $0.01 per share.
See Notes to Financial Statements.
38
Balanced Portfolio Class C
------------------------------------------
Years Ended October 31 2004 2003 2002(5)
------------------------------------------
Net asset value, beginning of period $ 11.78 $ 10.20 $ 11.35
-------- -------- -------
Income from investment operations:
Net investment income 0.10 0.14 0.13
Net realized and unrealized gain/(loss) on investments 0.78 1.60 (1.15)
-------- -------- -------
Total from investment operations 0.88 1.74 (1.02)
-------- -------- -------
Less distributions:
Dividends from net investment income(1) (0.11) (0.16) (0.13)
Distributions from net realized capital gains -- -- --
-------- -------- -------
Total distributions (0.11) (0.16) (0.13)
-------- -------- -------
Net asset value, end of period $ 12.55 $ 11.78 $ 10.20
======== ======== =======
Total Return (2) 7.64% 17.15% (9.00)%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $482,799 $234,076 $54,745
Ratio of operating expenses to average net assets(3) 1.74% 1.76% 1.80%(7)
Ratio of net investment income to average net assets 0.80% 1.29% 1.79%(7)
Portfolio turnover rate 2% 5% 19%
Ratio of operating expenses to average net assets
without fee waivers, expenses reimbursed and/or
fees reduced by credits allowed by the custodian(3) (4) 1.74% 1.76% 1.80%(7)
Conservative Growth Portfolio Class C
------------------------------------------
Years Ended October 31 2004 2003 2002(5)
------------------------------------------
Net asset value, beginning of period $ 12.13 $ 10.10 $ 11.79
-------- -------- -------
Income from investment operations:
Net investment income/(loss) (0.00)(6)(8) 0.06(6) 0.05(6)
Net realized and unrealized gain/(loss) on investments 1.03 2.08 (1.66)
-------- -------- -------
Total from investment operations 1.03 2.14 (1.61)
-------- -------- -------
Less distributions:
Dividends from net investment income(1) (0.05) (0.07) (0.08)
Distributions from net realized capital gains -- (0.04) --
-------- -------- -------
Total distributions (0.05) (0.11) (0.08)
-------- -------- -------
Net asset value, end of period $ 13.11 $ 12.13 $ 10.10
======== ======== =======
Total Return(2) 8.53% 21.41% (13.72)%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $482,019 $195,556 $48,424
Ratio of operating expenses to average net assets(3) 1.76% 1.79% 1.82%(7)
Ratio of net investment income/(loss) to average net assets (0.01)% 0.50% 0.65%(7)
Portfolio turnover rate 5% 7% 14%
Ratio of operating expenses to average net assets
without fee waivers, expenses reimbursed and/or
fees reduced by credits allowed by the custodian(3) (4) 1.76% 1.79% 1.82%(7)
See Notes to Financial Statements.
39
Financial Highlights
- --------------------------------------------------------------------------------------------------------------------------------
For a Portfolio/Fund share outstanding throughout each period.
- --------------------------------------------------------------------------------------------------------------------------------
Strategic Growth Portfolio Class A
-----------------------------------------------------------------
Years Ended October 31 2004 2003 2002 2001 2000
-----------------------------------------------------------------
Net asset value, beginning of period $ 13.16 $ 10.59 $ 13.10 $ 17.11 $ 14.61
-------- -------- -------- -------- --------
Income from investment operations:
Net investment income/(loss) 0.01(6) 0.03(6) 0.03(6) 0.05(6) (0.04)(6)
Net realized and unrealized gain/(loss)
on investments 1.32 2.63 (1.92) (3.21) 3.07
-------- -------- -------- -------- --------
Total from investment operations 1.33 2.66 (1.89) (3.16) 3.03
-------- -------- -------- -------- --------
Less distributions:
Dividends from net investment income(1) -- -- (0.14) (0.47) (0.53)
Distributions from net realized capital gains -- (0.09) (0.48) (0.38) --
-------- -------- -------- -------- --------
Total distributions -- (0.09) (0.62) (0.85) (0.53)
-------- -------- -------- -------- --------
Net asset value, end of period $ 14.49 $ 13.16 $ 10.59 $ 13.10 $ 17.11
======== ======== ======== ======== ========
Total Return(2) 10.11% 25.24% (15.45)% (19.03)% 20.84%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $609,250 $298,852 $166,354 $153,857 $142,241
Ratio of operating expenses to average net assets(3) 1.07% 1.13% 1.13% 1.08% 1.06%
Ratio of net investment income/(loss) to average
net assets 0.07% 0.30% 0.23% 0.34% (0.21)%
Portfolio turnover rate 3% 7% 10% 2% 15%
Ratio of operating expenses to average net assets
without fee waivers, expenses reimbursed and/or
fees reduced by credits allowed by the
custodian(3) (4) 1.07% 1.13% 1.13% 1.08% 1.06%
Money Market Fund Class A
-----------------------------------------------------------------
Years Ended October 31 2004 2003 2002 2001 2000
-----------------------------------------------------------------
Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- --------
Net investment income 0.007 0.008 0.014 0.043 0.056
Dividends from net investment income (0.007) (0.008) (0.014) (0.043) (0.056)
-------- -------- -------- -------- --------
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ========
Total Return(2) 0.74% 0.78% 1.42% 4.40% 5.79%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $530,052 $707,954 $689,002 $647,951 $458,368
Ratio of operating expenses to average net assets 0.57% 0.59% 0.59% 0.64% 0.65%
Ratio of net investment income to average net assets 0.72% 0.78% 1.41% 4.21% 5.62%
Ratio of operating expenses to average net assets
without fee waivers, expenses reimbursed and/or
fees reduced by credits allowed by the custodian(4) 0.57% 0.59% 0.59% 0.64% 0.65%
Strategic Growth Portfolio Class B
-----------------------------------------------------------------
Years Ended October 31 2004 2003 2002 2001 2000
-----------------------------------------------------------------
Net asset value, beginning of period $ 12.73 $ 10.32 $ 12.78 $ 16.75 $ 14.40
-------- -------- -------- -------- --------
Income from investment operations:
Net investment income/(loss) (0.09)(6) (0.05)(6) (0.06)(6) (0.06)(6) (0.16)(6)
Net realized and unrealized gain/(loss)
on investments 1.26 2.55 (1.88) (3.14) 3.02
-------- -------- -------- -------- --------
Total from investment operations 1.17 2.50 (1.94) (3.20) 2.86
-------- -------- -------- -------- --------
Less distributions:
Dividends from net investment income(1) -- -- (0.04) (0.39) (0.51)
Distributions from net realized capital gains -- (0.09) (0.48) (0.38) --
-------- -------- -------- -------- --------
Total distributions -- (0.09) (0.52) (0.77) (0.51)
-------- -------- -------- -------- --------
Net asset value, end of period $ 13.90 $ 12.73 $ 10.32 $ 12.78 $ 16.75
======== ======== ======== ======== ========
Total Return(2) 9.19% 24.35% (16.04)% (19.70)% 19.95%
Ratios to average net assets/supplemental data:
Net assets, end of period (in (000's) $612,914 $484,656 $350,982 $384,566 $363,910
Ratio of operating expenses to average net assets(3) 1.83% 1.88% 1.87% 1.84% 1.81%
Ratio of net investment income/(loss) to average
net assets (0.69)% (0.45)% (0.51)% (0.42)% (0.96)%
Portfolio turnover rate 3% 7% 10% 2% 15%
Ratio of operating expenses to average net assets
without fee waivers, expenses reimbursed and/or
fees reduced by credits allowed by the
custodian(3) (4) 1.83% 1.88% 1.87% 1.84% 1.81%
Money Market Fund Class B
-----------------------------------------------------------------
Years Ended October 31 2004 2003 2002 2001 2000
-----------------------------------------------------------------
Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- --------
Net investment income 0.001 0.001 0.003 0.033 0.046
Dividends from net investment income (0.001) (0.001) (0.003) (0.033) (0.046)
-------- -------- -------- -------- --------
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ========
Total Return(2) 0.06% 0.05% 0.34% 3.32% 4.68%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 52,764 $ 79,314 $104,530 $ 74,603 $ 23,469
Ratio of operating expenses to average net assets 1.24% 1.33% 1.67% 1.69% 1.71%
Ratio of net investment income to average net assets 0.06% 0.04% 0.33% 3.16% 4.56%
Ratio of operating expenses to average net assets
without fee waivers, expenses reimbursed and/or
fees reduced by credits allowed by the custodian(4) 1.68% 1.71% 1.67% 1.69% 1.71%
<FN>
- --------
(1) Includes dividends paid from the short-term portion of capital gain
distributions received from the Underlying Funds.
(2) Total return is not annualized for periods less than one year and does
not reflect any applicable sales charges. The total return would have
been lower if certain fees had not been waived and/or expenses
reimbursed by the investment advisor and/or distributor or if fees had
not been reduced by credits allowed by the custodian.
(3) The Portfolio also will indirectly bear its prorated share of expenses
of the Underlying Funds.
(4) Ratio of operating expenses to average net assets includes expenses
paid indirectly.
(5) The Portfolio/Fund commenced selling Class C shares on March 1, 2002.
(6) Per share numbers have been calculated using the average shares method.
(7) Annualized.
See Notes to Financial Statements.
40
Strategic Growth Portfolio Class C
------------------------------------------------
Years Ended October 31 2004 2003 2002(5)
------------------------------------------------
Net asset value, beginning of period $ 12.74 $ 10.32 $ 12.50
-------- -------- -------
Income from investment operations:
Net investment income/(loss) (0.09)(6) (0.05)(6) (0.04)(6)
Net realized and unrealized gain/(loss)
on investments 1.28 2.56 (2.14)
-------- -------- -------
Total from investment operations 1.19 2.51 (2.18)
-------- -------- -------
Less distributions:
Dividends from net investment income(1) -- -- --
Distributions from net realized capital gains -- (0.09) --
-------- -------- -------
Total distributions -- (0.09) --
-------- -------- -------
Net asset value, end of period $ 13.93 $ 12.74 $ 10.32
======== ======== =======
Total Return(2) 9.34% 24.44% (17.44)%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $277,136 $107,826 $26,645
Ratio of operating expenses to average net assets(3) 1.81% 1.84% 1.85%(7)
Ratio of net investment income/(loss) to average
net assets (0.67)% (0.41)% (0.49)%(7)
Portfolio turnover rate 3% 7% 10%
Ratio of operating expenses to average net assets
without fee waivers, expenses reimbursed and/or
fees reduced by credits allowed by the
custodian(3) (4) 1.81% 1.84% 1.85%(7)
Money Market Fund Class C
------------------------------------------------
Years Ended October 31 2004 2003 2002(5)
------------------------------------------------
Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00
-------- -------- -------
Net investment income 0.001 0.001 0.002
Dividends from net investment income (0.001) (0.001) (0.002)
-------- -------- -------
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00
======== ======== =======
Total Return(2) 0.06% 0.06% 0.17%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 8,480 $ 5,046 $ 3,676
Ratio of operating expenses to average net assets 1.30% 1.29% 1.64%(7)
Ratio of net investment income to average net assets 0.07% 0.08% 0.36%(7)
Ratio of operating expenses to average net assets
without fee waivers, expenses reimbursed and/or
fees reduced by credits allowed by the custodian(4) 1.65% 1.67% 1.64%(7)
Strategic Growth Portfolio
Years Ended October 31
Net asset value, beginning of period
Income from investment operations:
Net investment income/(loss)
Net realized and unrealized gain/(loss)
on investments
Total from investment operations
Less distributions:
Dividends from net investment income(1)
Distributions from net realized capital gains
Total distributions
Net asset value, end of period
Total Return(2)
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's)
Ratio of operating expenses to average net assets(3)
Ratio of net investment income/(loss) to average
net assets
Portfolio turnover rate
Ratio of operating expenses to average net assets
without fee waivers, expenses reimbursed and/or
fees reduced by credits allowed by the
custodian(3) (4)
Money Market Fund Class I
----------------------------------------------------------
Years Ended October 31 2004 2003 2002 2001 2000
----------------------------------------------------------
Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- -------- ------- -------
Net investment income 0.008 0.008 0.015 0.044 0.057
Dividends from net investment income (0.008) (0.008) (0.015) (0.044) (0.057)
------- ------- -------- ------- -------
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======= ======== ======= =======
Total Return(2) 0.79% 0.84% 1.47% 4.46% 5.90%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $91,719 $24,880 $169,295 $17,755 $15,885
Ratio of operating expenses to average net assets 0.52% 0.54% 0.54% 0.58% 0.55%
Ratio of net investment income to average net assets 0.83% 0.83% 1.46% 4.27% 5.72%
Ratio of operating expenses to average net assets
without fee waivers, expenses reimbursed and/or
fees reduced by credits allowed by the custodian(4) 0.52% 0.54% 0.54% 0.58% 0.55%
See Notes to Financial Statements.
41
Notes to Financial Statements
- ------------------------------------------------------------------------------
1. Organization and Business
WM Strategic Asset Management Portfolios, LLC (the "LLC") was organized
under the laws of the Commonwealth of Massachusetts on March 12, 1999 as a
limited liability company. The LLC is registered under the Investment
Company Act of 1940, as amended (the "1940 Act"), as an open-end management
investment company. The LLC offers five portfolios: Flexible Income,
Conservative Balanced, Balanced, Conservative Growth and Strategic Growth
Portfolios (each a "Portfolio" and collectively, the "Portfolios").
WM Trust I ("Trust") was organized as a Massachusetts business trust on
September 19, 1997. The Trust is registered under the Investment Company Act
of 1940 (the "1940 Act"), as open-end management investment company.
Information presented in this report relating to the Trust pertains only to
the Money Market Fund (the "Fund"). The Fund is a diversified series of WM
Trust I. Financial statements for the other funds included in the Trust are
presented in a separate report.
The LLC and Trust are authorized to issue an unlimited number of shares of
beneficial interest, each without par value. Each Portfolio offers three
classes of shares: Class A shares, Class B shares and Class C shares. The
Fund offers four classes of shares: Class A shares, Class B shares, Class C
shares and Class I shares. Class A shares are generally subject to an
initial sales charge at the time of purchase. Certain Class A shares
purchased without an initial sales charge may be subject to a contingent
deferred sales charge ("CDSC") if redeemed within eighteen months from the
date of purchase. Class B shares are not subject to an initial sales charge
although they are generally subject to a CDSC if redeemed within five years
from the date of purchase. Class C shares are not subject to an initial
sales charge although they are subject to a CDSC if redeemed within one year
from the date of purchase. Prior to January 1, 2004, Class C shares were
subject to an initial sales charge at the time of purchase. Class I shares
are currently only offered to the LLC and affiliates of Washington Mutual,
Inc. ("Washington Mutual"), a publicly owned financial services company, and
are not available for direct purchase by investors.
WM Advisors, Inc. (the "Advisor" or "WM Advisors"), a wholly-owned
subsidiary of Washington Mutual, serves as investment advisor to the
Portfolios and the Fund. Each of the Portfolios invests, within certain
percentage ranges, in Class I shares of various funds in the WM Group of
Funds (collectively, the "Underlying Funds"). The Advisor may alter these
percentage ranges when it deems appropriate. The assets of each Portfolio
will be allocated among the Underlying Funds in accordance with its
investment objective based on the Advisor's outlook for the economy, the
financial markets and the relative market valuations of the Underlying
Funds. In addition, in order to meet liquidity needs or for temporary
defensive purposes, each Portfolio may invest its assets directly in cash,
stock or bond index futures, options, money market securities and certain
short-term debt instruments, including repurchase agreements.
2. Significant Accounting Policies
The following is a summary of significant accounting policies, in conformity
with accounting principles generally accepted in the United States of
America ("generally accepted accounting principles"), which are consistently
followed by the Portfolios in the preparation of their financial statements.
Portfolio valuation:
Investments in the Underlying Funds are valued at net asset value per Class
I share of the respective Underlying Funds determined as of the close of the
New York Stock Exchange on each valuation date. Short-term debt securities
that mature in 60 days or less are valued at amortized cost, which
approximates market value.
Securities of the Fund are valued on the basis of amortized cost in
accordance with Rule 2a-7 of the 1940 Act, 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 Portfolio and the Fund may enter into repurchase agreement
transactions. A repurchase agreement is a purchase of an underlying debt
obligation subject to an agreement by the seller to repurchase the
obligation at an agreed upon price and time. It is each Portfolio's and the
Fund's policy that its custodian take possession of the underlying
collateral securities. The fair value of the collateral is at all times at
least equal to the total amount of the repurchase obligation. In the event
of counterparty default, the Portfolio and the Fund would seek to use the
collateral to offset losses incurred. There is potential loss to the
Portfolio or the Fund in the event the Portfolio or 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 Portfolio or 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 Portfolio and the Fund enters
into repurchase agreements.
42
Notes to Financial Statements (continued)
- ------------------------------------------------------------------------------
Illiquid investments:
The 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 Fund has 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 Fund may also purchase securities
that are not registered under the Securities Act of 1933, as amended (the
"Act"), but that can be sold to qualified institutional buyers in accordance
with Rule 144A under the Act ("Rule 144A Securities"). Rule 144A Securities
generally must be sold only to other qualified institutional buyers. If a
particular investment in Rule 144A Securities is not determined to be liquid
under the guidelines established by the Board of Trustees, that investment
will be subject to the Fund's limitation on investment in illiquid
securities.
Securities transactions and investment income:
Securities transactions are recorded on a trade date basis. Realized gains
and losses from securities sold are recorded on the identified cost basis.
Securities purchased or sold on a when-issued or delayed-delivery basis may
be settled a month or more after the trade date; interest income is not
accrued until settlement date. The 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 Portfolio's and the Fund's investment income and
realized and unrealized gains and losses are allocated among the classes of
that Portfolio or Fund based upon the relative average net assets of each
class.
Dividends and distributions to shareholders:
Dividends from net investment income of the Flexible Income, Conservative
Balanced, Balanced and Conservative Growth Portfolios are declared and paid
quarterly. Dividends from any net investment income of the Strategic Growth
Portfolio are declared and paid annually. Dividends from net investment
income of the Fund are declared daily and paid monthly. Distributions of any
net capital gains earned by a Portfolio or the 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
Portfolio or the 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 investments held by the
Portfolios, redesignated distributions and differing characterization of
distributions made by each Portfolio. At October 31, 2004, the following
adjustments have been reflected in the components of net assets on the
"Statement of Assets and Liabilities" to present these balances on an income
tax basis, excluding certain temporary differences:
Increase/
Increase (Decrease)
Increase/ Undistributed Accumulated
(Decrease) Net Investment Net Realized
Paid-in Capital Income/(Loss) Gain/(Loss)
(000s) (000s) (000s)
--------------- -------------- ------------
Flexible Income Portfolio $(944) $ 23 $ 921
Conservative Balanced Portfolio 77 16 (93)
Balanced Portfolio 20 184 (204)
Conservative Growth Portfolio -- 187 (187)
Strategic Growth Portfolio -- 119 (119)
The above adjustments are not reflected in the calculation of net investment
income per share presented in the Financial Highlights.
Federal income taxes:
It is each Portfolio's and the 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.
43
Notes to Financial Statements (continued)
- ------------------------------------------------------------------------------
Expenses:
General expenses of the LLC and the Trust are allocated to all the
Portfolios and Funds based upon the relative average net assets of each
Portfolio and Fund except printing and postage expenses, which are allocated
to all the Portfolios and Funds based upon the relative number of
shareholder accounts of each Portfolio and Fund. In addition, the Portfolios
will indirectly bear their prorated share of expenses of the Underlying
Funds. Operating expenses directly attributable to a class of shares are
charged to the operations of that class of shares. Expenses of each
Portfolio and 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 provides its proprietary asset allocation services to the
Portfolios, formulates the Portfolios' investment policies, analyzes
economic and market trends, exercises investment discretion over the assets
of the Portfolios and monitors the allocation of each Portfolio's assets and
each Portfolio's performance. For its investment advisory services to the
Portfolios, WM Advisors is entitled to a monthly fee at an annual rate of
0.65% of each Portfolio's average daily net assets up to $1 billion, 0.60%
of the next $2 billion of each Portfolio's average daily net assets and
0.55% of each Portfolio's average daily net assets over $3 billion. For its
investment advisory services to the Fund, WM Advisors is entitled to a
monthly fee at an annual rate of 0.45% of the Fund's average daily net
assets up to $1 billion and 0.40% of the Fund's average daily net assets
over $1 billion.
Effective November 1, 2004, the Advisor will implement a discount for its
monthly fee based upon aggregate average daily net assets ("aggregate net
assets") of the LLC. Each Portfolio will receive a discount of 0.025% of
average daily net assets for aggregate net assets from $5 to $10 billion;
0.050% of average daily net assets for aggregate net assets from $10 to $15
billion; 0.075% of average daily net assets for aggregate net assets from
$15 to $20 billion; 0.100% of average daily net assets for aggregate net
assets from $20 to $25 billion; and 0.125% of average daily net assets for
aggregate net assets over $25 billion.
WM Shareholder Services, Inc. (the "Transfer Agent"), a wholly-owned
subsidiary of Washington Mutual, serves as the transfer agent of the
Portfolios and the Fund. 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 $20.40 for Class A, Class B and Class C
shareholder accounts, with the exception of the Flexible Income Portfolio
and the Money Market Fund, for which the fee is $21.15 and $24.19,
respectively. Prior to December 1, 2003, the authorized annual shareholder
servicing fees was $19.68 for Class A, Class B and Class C shareholder
accounts, with the exception of the Flexible Income Portfolio and the Money
Market Fund, for which the fee was $20.21 and $25.01, respectively. Class I
shares are not subject to shareholder servicing fees.
Custodian fees for certain Portfolios and the Fund have been reduced by
credits allowed by the Portfolio's and the Fund's custodian for uninvested
cash balances. The Portfolios and the Fund could have invested this cash in
income producing investments. Fees reduced by credits allowed by the
custodian for the year ended October 31, 2004 are shown separately in the
"Statements of Operations".
4. Trustees' Fees
No officer or employee of Washington Mutual or its subsidiaries receives any
compensation from the LLC or Trust for serving as an officer or Trustee of
the LLC or Trust. The LLC and Trust, together with other mutual funds
advised by WM Advisors, pays each Trustee who is not an officer or employee
of Washington Mutual or its subsidiaries, a per annum retainer plus
attendance fees for each meeting at which they are present. The Lead
Trustee, Committee Chairs and Committee Members receive additional
remuneration for these services to the LLC and Trust. Trustees are also
reimbursed for travel and out-of-pocket expenses. Each Trustee serves in the
same capacity for all 42 funds within the WM Group of Funds.
5. Distribution Plans
WM Funds Distributor, Inc. (the "Distributor"), a registered broker-dealer
and a wholly-owned subsidiary of Washington Mutual, serves as distributor
for Class A, Class B and Class C shares of the Portfolios and the Fund. For
the year ended October 31, 2004, the Distributor has received $7,622,947
representing commissions (front end sales charges) on Class A and Class C
shares and $6,900,845 representing CDSCs from Class A, Class B and Class C
shares.
Each of the Portfolios and the Fund have 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 Portfolios and the Fund (each, a "Rule 12b-1
Plan"), respectively. There are no 12b-1 Plans applicable to the Class I
shares of the Fund. 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 Money
Market Fund does not currently pay, service fees with respect to Class A
shares. In addition, the Distributor is paid a fee
44
Notes to Financial Statements (continued)
- ------------------------------------------------------------------------------
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 each Portfolio and the Fund to the Distributor, which
in turn, pays service fees to broker/dealers that provide services, such as
accepting telephone inquiries and transaction requests and processing
correspondence, new account applications and subsequent purchases for the
shareholders. Under their terms, each Rule 12b-1 plan shall remain in effect
from year to year, provided such continuance is approved annually by vote of
the Board of Trustees, including a majority of those Trustees who are not
"interested persons" of the LLC and Trust, 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.
The Distributor has voluntarily waived $269,084 and $20,949 of its
distribution fees for Class B and Class C shares of the Fund for the year
ended October 31, 2004, respectively.
6. Purchases and Sales of Investments
The aggregate cost of purchases and proceeds from sales of Underlying Funds
for the year ended October 31, 2004 are as follows:
Purchases Sales
Name of Portfolio (000s) (000s)
- ----------------- ---------- --------
Flexible Income Portfolio $ 245,827 $ 21,690
Conservative Balanced Portfolio 192,960 5,943
Balanced Portfolio 1,161,045 61,807
Conservative Growth Portfolio 965,851 117,544
Strategic Growth Portfolio 551,438 41,286
7. Components of Distributable Earnings
At October 31, 2004, the components of distributable earnings on a tax basis
and the tax character of distributions paid during 2004 and 2003 are as
follows:
(In thousands)
----------------------------------------------------------------------------
Flexible Conservative Conservative Strategic Money
Income Balanced Balanced Growth Growth Market
Portfolio Portfolio Portfolio Portfolio Portfolio Fund
--------- ------------ --------- ------------ --------- ------
Gross tax unrealized appreciation $43,991 $26,614 $238,533 $206,449 $103,311 $ --
Gross tax unrealized depreciation (418) (651) -- -- (18,668) --
------- ------- -------- -------- -------- ------
Net tax unrealized appreciation $43,573 $25,963 $238,533 $206,449 $ 84,643 $ --
======= ======= ======== ======== ======== ======
Undistributed ordinary income $ 1,673 $ 1,169 $ 1,467 $ -- $ -- $ 13
Undistributed accumulated gains $ -- $ 94 $ -- $ -- $ -- $ --
Tax Composition of Distributions:
2004
Ordinary income $21,062 $ 7,332 $ 31,987 $ 8,185 $ -- $5,317
2003
Ordinary income $16,632 $ 3,847 $ 23,848 $ 9,647 $ -- $6,191
Long-term capital gain $ 652 $ -- $ -- $ 3,481 $ 4,516 $ --
8. Post October Loss
Under the current tax law, capital and currency losses realized after
October 31 may be deferred and treated as occurring on the first day of the
following fiscal year. For the fiscal tax year ended December 31, 2003, the
following Portfolios have elected to defer capital losses occurring between
November 1, 2003 and December 31, 2003 as follows:
Capital Losses
Name of Portfolio (000s)
----------------- --------------
Flexible Income Portfolio $ 539
Balanced Portfolio 17,108
Conservative Growth Portfolio 18,528
Strategic Growth Portfolio 11,374
45
Notes to Financial Statements (continued)
- ------------------------------------------------------------------------------
9. Capital Loss Carryforwards
At October 31, 2004, the following Portfolios and the Fund have available
for federal income tax purposes unused capital losses as follows:
(In thousands)
-----------------------------------------------------
Expiring in Expiring in Expiring in Expiring in
2006 2009 2010 2011
----------- ----------- ----------- -----------
Balanced Portfolio $ -- $ 4,005 $ 2,892 $ 7,703
Conservative Growth Portfolio -- -- 6,370 24,246
Strategic Growth Portfolio -- -- 8,026 15,146
Money Market Fund 42 -- 3 --*
<FN>
- --------
*Amount represents less than $500.
10. Risk Factors of the Portfolios
Investing in the Underlying Funds through the Portfolios involves certain
additional expenses and tax results that would not be present in a direct
investment in the Underlying Funds. For example, under certain
circumstances, an Underlying Fund may determine to make payment of a
redemption request by a Portfolio wholly or partly by a distribution in kind
of securities from its portfolio, instead of cash, in accordance with the
rules of the Securities and Exchange Commission. In such cases, the
Portfolios may hold securities distributed by an Underlying Fund until the
Advisor determines that it is appropriate to dispose of such securities.
Certain Underlying Funds may invest a portion of their assets in foreign
securities; enter into forward foreign currency transactions; lend their
portfolio securities; enter into stock index, interest rate and currency
futures contracts, and options on such contracts; enter into interest rate
swaps or purchase or sell interest rate caps or floors; enter into other
types of options transactions; make short sales; purchase zero coupon and
payment-in-kind bonds; enter into repurchase or reverse repurchase
agreements; purchase and sell "when-issued" securities and enter into
"delayed-delivery" transactions; and enter into various other investment
practices, each with inherent risks. In addition, the REIT Fund could be
adversely impacted by economic trends in the real estate industry; the West
Coast Equity Fund by economic trends in the West Coast region; and the High
Yield Fund by the conditions affecting issuers of lower rated securities.
The officers and Trustees, the Advisor, the Distributor and Transfer Agent
of the Portfolios serve in the same capacity for the Underlying Funds.
Conflicts may arise as these persons and companies seek to fulfill their
fiduciary responsibilities to both the Portfolios and the Underlying Funds.
From time to time, one or more of the Underlying Funds used for investment
by a Portfolio may experience relatively large investments or redemptions
due to reallocations or rebalancings by the Portfolios. These transactions
will affect the Underlying Funds, since the Underlying Funds that experience
redemptions as a result of the reallocations or rebalancings may have to
sell portfolio securities and the Underlying Funds that receive additional
cash will have to invest such cash. While it is impossible to predict the
overall impact of these transactions over time, there could be adverse
effects on portfolio management to the extent that the Underlying Funds may
be required to sell securities or invest cash at times when they would not
otherwise do so. These transactions could also have tax consequences if
sales of securities resulted in gains and could also increase transaction
costs. The Advisor is committed to minimizing such impact on the Underlying
Funds to the extent it is consistent with pursuing the investment objectives
of the Portfolios. The Advisor may nevertheless face conflicts in fulfilling
its responsibilities. The Advisor will, at all times, monitor the impact on
the Underlying Funds of transactions by the Portfolios.
46
Report of Independent Registered Public Accounting Firm
- ------------------------------------------------------------------------------
TO THE TRUSTEES AND SHAREHOLDERS OF
WM STRATEGIC ASSET MANAGEMENT PORTFOLIOS LLC & WM MONEY MARKET FUND
- ------------------------------------------------------------------------------
We have audited the accompanying statements of assets and liabilities,
including the portfolios of investments, of WM Strategic Growth Portfolio,
WM Conservative Growth Portfolio, WM Balanced Portfolio, WM Conservative
Balanced Portfolio and WM Flexible Income Portfolio (collectively, the
"Portfolios") and the WM Money Market Fund (the "Fund") as of October 31,
2004, and the related statements of operations for the year then ended, the
statements of changes in net assets for each of the two years in the period
then ended, and the financial highlights for the periods presented. These
financial statements and financial highlights are the responsibility of the
Portfolios' and the Fund's 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 standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements and financial highlights are free of material
misstatement. 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, 2004, 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
each of the aforementioned Portfolios and the Fund as of October 31, 2004,
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 periods presented, in conformity with
accounting principles generally accepted in the United States of America.
Deloitte & Touche LLP
Boston, Massachusetts
December 17, 2004
47
Other Information (unaudited)
- ------------------------------------------------------------------------------
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 amount of long term capital gains designated by the Conservative
Balanced Portfolio is $104,361.
Of the distributions made by the Conservative Balanced Portfolio, 12.29%
represents the amount of each distribution which may qualify for the
dividends received deduction available to corporate shareholders.
The following tax information represents fiscal year end percentages and may
differ from those provided to shareholders at calendar year end.
Of the distributions made by the following Portfolios, the corresponding
percentages represent the amount of each distribution which qualifies for
the 15% dividend income tax rate.
Name of Fund
------------
Flexible Income Portfolio 6.51%
Conservative Balanced Portfolio 12.98%
Balanced Portfolio 36.13%
Conservative Growth Portfolio 100.00%
The above percentage may differ from those cited elsewhere in this report
due to differences in the calculation of income and capital gains for
generally accepted accounting principles (book) purposes and federal income
tax (tax) purposes.
2. Trustees and Officers Information
Trustees and Officers:
Name, Age, and Address (1) Length of Principal Occupation(s) During Other Directorships
Of Non-Interested Trustee(4) Time Served (2) Past 5 Years Held by Trustee
====================================================================================================================================
Wayne L. Attwood, M.D. Composite Funds-11 years Retired doctor of internal medicine and None.
Age 75 WM Group of gastroenterology.
Funds-6 years
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Kristianne Blake Composite Funds-3 years CPA specializing in personal financial Frank Russell Investment Company;
Age 50 WM Group of and tax planning. Russell Insurance Funds; Avista
Funds-6 years Corporation; St. George's School
- ------------------------------------------------------------------------------------------------------------------------------------
Edmond R. Davis, Esq. Sierra Funds-8 years Partner at the law firm of Davis & Whalen Braille Institute of America, Inc;
Age 76 WM Group of LLP. Prior thereto, partner at the law Children's Bureau of Southern
Funds-6 years firm of Brobeck, Phlegar & Harrison, LLP. California, Children's Bureau
Foundation; Fifield Manors, Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
Carrol R. McGinnis Griffin Funds-3 years Founder of McGinnis Investments. Baptist Foundation of Texas;
Age 61 WM Group of Prior thereto, 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, University of Nordstrom Inc.; K2, Inc.; First
Age 59 WM Group of California at Los Angeles Anderson Pacific Advisors' Capital,
Funds-6 years Graduate School of Management, and Crescent and New Income Funds;
Faculty Director of the Harold Price EMAK Worldwide, Inc.; Member of
Center for Entreprenurial Studies, the Investment Company Institute
University of California at Los Angeles. Board of Governors; Director of
Independent Directors Council and
member of Communication &
Education Committee.
- ------------------------------------------------------------------------------------------------------------------------------------
Daniel L. Pavelich Composite Funds-1 year Retired Chairman and CEO of BDO Catalytic, Inc.; Vaagen Bros.
Age 60 WM Group of Seidman, LLP. Lumber, Inc.
Funds-6 years
- ------------------------------------------------------------------------------------------------------------------------------------
Jay Rockey Composite Funds-3 years Founder and Senior Counsel of The Rockey Downtown Seattle Association;
Age 76 WM Group of Company, now Rockey, Hill & Knowlton. The Rainier Club; WSU Foundation
Funds-6 years
- ------------------------------------------------------------------------------------------------------------------------------------
Richard C. Yancey Composite Funds-23 years Retired Managing Director of AdMedia Partners Inc.; Czech
(Lead Trustee) WM Group of Dillon, Read & Co., an Investment Bank and Slovak American Enterprise
Age 78 Funds-6 years now part of UBS. Fund
- ------------------------------------------------------------------------------------------------------------------------------------
48
Other Information (unaudited) (continued)
- ------------------------------------------------------------------------------------------------------------------------------------
Name, Age, and Address (1) Length of Principal Occupation(s) During Other Directorships
Of Non-Interested Trustee(3)(4) Time Served (2) Past 5 Years Held by Trustee
====================================================================================================================================
Anne V. Farrell Composite Funds-4 years President Emeritus of the Seattle Washington Mutual, Inc.; REI
Age 69 WM Group of Foundation.
Funds-6 years
- ------------------------------------------------------------------------------------------------------------------------------------
Michael K. Murphy Composite Funds-3 years Chairman of CPM Development Washington Mutual, Inc.
Age 67 WM Group of Corporation.
Funds-6 years
- ------------------------------------------------------------------------------------------------------------------------------------
William G. Papesh, Composite Funds-9 years President and Director of the Advisor, Member of Investment Company
President and CEO WM Group of Transfer Agent and Distributor. Institute Board of Governors.
Age 61 Funds-6 years
- ------------------------------------------------------------------------------------------------------------------------------------
Name, Age, and Address (1) Position(s) Held with Registrant & Principal Occupation(s) During
Of Officer (4) Length of Time Served Past 5 Years
====================================================================================================================================
Wendi B. Bernard Assistant Vice President Assistant Vice President of the Advisor.
Age 36 and Assistant Secretary since 2003.
- ------------------------------------------------------------------------------------------------------------------------------------
Jeffrey L. Lunzer, CPA First Vice President, Chief Financial First Vice President of the Advisor, Transfer Agent and
Age 43 Officer and Treasurer since 2003. Distributor. Prior to 2003, senior level positions at
the Columbia Funds and Columbia Management Co.
- ------------------------------------------------------------------------------------------------------------------------------------
William G. Papesh President and CEO since 1987. Prior to 1987, President and Director of the Advisor, Transfer Agent
Age 61 other officer positions since 1972. and Distributor.
- ------------------------------------------------------------------------------------------------------------------------------------
Gary Pokrzywinski Senior Vice President since 2004. Senior Vice President and Director of the Advisor,
Age 43 Prior to 2004, other officer positions held Transfer Agent and Distributor.
since 1999.
- ------------------------------------------------------------------------------------------------------------------------------------
Debra Ramsey Senior Vice President since 2004. Senior Vice President and Director of the Advisor,
Age 51 Transfer Agent and Distributor.
- ------------------------------------------------------------------------------------------------------------------------------------
John T. West First Vice President, Secretary, Chief First Vice President of the Advisor, Transfer Agent and
Age 49 Compliance Officer and Anti-Money Laundering Distributor.
Compliance Officer since 2004. Prior to 2004,
other officer positions held since 1993.
- ------------------------------------------------------------------------------------------------------------------------------------
Randall L. Yoakum Senior Vice President since 2001. Senior Vice President, Chief Investment Strategist of
Age 44 Prior to 2001, other officer positions held the Advisor. Director of the Advisor, Transfer Agent and
since 1999. Distributor from 1999 to 2004. Prior thereto, 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.
(4) The Trustees oversee 42 Portfolios and Funds in the Fund Complex. Each
Trustee and executive officer shall hold the indicated positions until
his or her resignation or removal.
3. Portfolio Information
Schedules of Investments
The LLC and the Trust file their complete schedules of portfolio holdings
with the Securities and Exchange Commission ("SEC") for the first and third
quarters of each fiscal year on Form N-Q. The LLC's and the Trust's Forms
N-Q are available, without charge and upon request, by calling
1-800-222-5852. The LLC's and the Trust's Forms N-Q are also available at
http://www.sec.gov and also may be reviewed and copied at the SEC's Public
Reference Room ("PRR") in Washington, DC. Information regarding the
operation of the PRR may be obtained by calling 1-800-SEC-0330.
Proxy Voting Information
The policies and procedures that the LLC and the Trust use to determine how
to vote proxies relating to portfolio securities held by the Portfolio or
Fund are included in the LLC's and Trust's Statement of Additional
Information which is available, without charge and upon request, by calling
1-800-222-5852. Information regarding how the Portfolio or Fund voted
proxies relating to portfolio securities during the most recent twelve-month
period ended June 30 is available at http://www.wmgroupoffunds.com. This
information is also available at http://www.sec.gov.
49
[logo] wm
GroupofFunds
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A mutual fund's share price and investment return will vary with market
conditions, and the principal value of an investment when you sell your
shares may be more or less than the original cost.
This annual report is published for the general information of the
shareholders of the WM Group of Funds. This material is not authorized for
distribution unless preceded or accompanied by a current prospectus that
includes more information regarding the risk factors, expenses, policies,
and objectives of the funds. Investors should read the prospectus carefully
before investing. To obtain an additional prospectus, please contact your
Investment Representative or call 800-222-5852.
The WM Group of mutual funds is advised by WM Advisors, Inc., distributed by
WM Funds Distributor, Inc., and sold through WM Financial Services, Inc.
(all affiliates of Washington Mutual, Inc.) and independent broker/dealers.
Distributed by:
WM Funds Distributor, Inc.
Member NASD
[logo] wm PRSRT STD
GroupofFunds U.S. POSTAGE
PAID
P.O. Box 9757 N. READING, MA
Providence, RI 02940-9757 PERMIT #105
WMSAM (12/27/04)
ITEM 2. CODE OF ETHICS
The registrant has adopted a code of ethics that applies to the registrant's
principal executive officer, principal financial officer and principal
accounting officer, a copy of which is attached hereto.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT
The Board of Trustees of the registrant has determined that there is at
least one Trustee who is an audit committee financial expert serving on its
Audit Committee and has designated Daniel L. Pavelich as an "audit committee
financial expert." Mr. Pavelich is "independent," as such term has been
defined by the Securities and Exchange Commission (the "SEC") for purposes
of implementing Section 407 of the Sarbanes Oxley Act of 2002. The SEC has
stated that the designation or identification of a person as an audit
committee financial expert pursuant to this Item 3 of Form N-CSR does not
impose on such person any duties, obligations or liability that are greater
than the duties, obligations and liability imposed on such person as a
member of the Audit Committee and the Board of Trustees in the absence of
such designation or identification.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES
(a) Audit Fees
2003 2004
- ---- ----
$94,400 $99,500
(b) Audit-Related Fees
2003 2004
- ---- ----
None None
For the last two fiscal years, no audit-related fees were required to be
approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X.
(c) Tax Fees
2003 2004
- ---- ----
$11,940 $11,665
The tax fees consist of fees billed in connection with reviewing the federal
regulated investment company income tax returns for WM Strategic Asset
Management Portfolios for the tax years ended December 31, 2003 and December
31, 2004.
For the last two fiscal years, no tax fees were required to be approved
pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X.
(d) All Other Fees
For the last two fiscal years, no other fees were required to be approved
pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X.
- ----------------------------------------------------------------------------
(e) (1) Pre-approval Policies and Procedures
Pursuant to the Audit Committee charter, the Audit Committee of the
registrant will review and pre-approve or disapprove its principal
accountant's engagement for all services with the registrant and its
principal accountant's engagement for non-audit services with the
registrant's investment advisor (not including a sub-advisor whose role is
primarily portfolio management and is sub-contracted or overseen by another
investment advisor) and any entity controlling, controlled by or under
common control with the investment advisor that provides ongoing services to
the funds in accordance with paragraph (c)(7)(i) of Rule 2-01 of Regulation
S-X, if the engagement relates directly to the operations and financial
reporting of the registrant.
(2) None of the services described in paragraphs (b) through (d) of this
Item 4 were approved by the Audit Committee pursuant to paragraph
(c)(7)(i)(C) of Rule 2-01 of Regulation S-X.
(f) Not applicable.
(g) For the fiscal year ended December 31, 2004, the registrant's principal
accountant billed aggregate non-audit fees in the amount of $92,210 for
services rendered to the registrant, WM Advisors, Inc., WM Funds
Distributor, Inc., WM Shareholder Services, Inc. and WM Financial Services,
Inc. For the fiscal year ended December 31, 2003, the registrant's principal
accountant billed aggregate non-audit fees in the amount of $487,871 for
services rendered to the registrant, WM Advisors, Inc., WM Funds
Distributor, Inc., WM Shareholder Services, Inc. and WM Financial Services,
Inc.
(h) The Audit Committee has considered whether the provision of non-audit
services that were rendered to the registrant's investment advisor (not
including any subadvisor whose role is primarily portfolio management and is
subcontracted with or overseen by another investment advisor), and any
entity controlling, controlled by, or under common control with the
investment advisor that provides ongoing services to the registrant that
were not
pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X
is compatible with maintaining the principal accountant's independence.
- ----------------------------------------------------------------------------
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS
Not Applicable.
ITEM 6. SCHEDULE OF INVESTMENTS
Not Applicable.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES
Not Applicable.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES
Not Applicable.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANIES AND AFFILIATED PURCHASERS
Not Applicable.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable.
ITEM 11. CONTROLS AND PROCEDURES:
(a) The registrant's principal executive officer and principal financial
officer have concluded, based on their evaluation of the effectiveness of
the design and operation of the registrant's disclosure controls and
procedures as of a date within 90 days of the filing date of this report on
Form N-CSR, that the design and operation of such procedures are effective
to provide reasonable assurance that information required to be disclosed by
the registrant in the reports that it files or submits on Form N-CSR is
recorded, processed, summarized, and reported within the time periods
specified in the SEC's rules and forms.
(b) There have been no changes in the registrant's internal control over
financial reporting (as defined in Rule 30a-3(d) under the Investment
Company Act of 1940, as amended) that occurred during the registrant's
second fiscal half-year that have materially affected, or are reasonably
likely to materially affect, the registrant's internal control over
financial reporting.
ITEM 12. EXHIBITS
(a) Registrant's Code of Ethics. The registrant's code of ethics required to
be disclosed under Item 2 of Form N-CSR attached hereto at Exhibit 99.CODE ETH.
(b) A separate certification for each principal executive officer and
principal financial officer of the registrant as required by Rule 30a-2 of
the Investment Company Act of 1940 attached hereto as Exhibit 99.CERT.
(c) Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
attached hereto as Exhibit 99.906 CERT.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized.
WM STRATEGIC ASSET MANAGEMENT PORTFOLIOS
By: /s/ William G. Papesh
---------------------
William G. Papesh, President and Chief Executive Officer
Date: January 7, 2005
Pursuant to the requirements of the Securities Exchange Act of 1934 and
the Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on
the dates indicated.
By: /s/ Jeffrey L. Lunzer
---------------------
Jeffrey L. Lunzer, Treasurer and Chief Financial Officer
Date: January 7, 2005
By: /s/ William G. Papesh
---------------------
William G. Papesh, President and Chief Executive Officer
Date: January 7, 2005