<PAGE>
[LOGO OF WM GROUP OF FUNDS APPEARS HERE]
ANNUAL
REPORT
[PHOTO APPEARS HERE]
For the year ended June 30, 1998
the difference is experience
<PAGE>
MESSAGE FROM THE PRESIDENT.............................................1
THE YEAR IN REVIEW FOR 1998............................................2
INDIVIDUAL FUND REVIEWS................................................5
PORTFOLIOS OF INVESTMENTS.............................................32
STATEMENTS OF ASSETS AND LIABILITIES..................................52
STATEMENTS OF OPERATIONS..............................................56
STATEMENTS OF CHANGES IN NET ASSETS...................................58
STATEMENTS OF CHANGES IN NET ASSETS -
CAPITAL STOCK ACTIVITY..............................................62
FINANCIAL HIGHLIGHTS..................................................66
NOTES TO FINANCIAL STATEMENTS.........................................89
REPORT OF INDEPENDENT ACCOUNTANTS....................................100
TAX INFORMATION (UNAUDITED)..........................................101
SPECIAL MEETING OF SHAREHOLDERS (UNAUDITED)..........................102
<PAGE>
DEAR SHAREHOLDER:
[PICTURE APPEARS HERE]
We are pleased to provide your WM Group of Funds' annual report for the period
ended June 30, 1998. The tradition at WM Group of Funds began in 1939 with the
creation of the BOND & STOCK FUND, one of the first 50 mutual funds in the
country. For nearly 60 years the organization has built a reputation in the
mutual fund industry for performance, integrity and commitment to client
services. Today, we manage approximately $5 billion in assets and serve almost
210,000 shareholder accounts.
The equity market continued to set record highs during the past 12 months, with
the Dow Jones Industrial Average breaking through the 9000 mark. As share prices
have risen on Wall Street, so has investors' interest in -- and reliance on --
stocks and stock mutual funds as the building blocks for retirement portfolios
and other investment strategies.
If you've been invested in equity funds during the last several years, you've
likely noticed some impressive gains in your portfolio. During the three years
ended June 30, 1998, the stock market posted an average annual return of over
30%, as measured by Standard & Poor's Composite Index (S&P 500). This is far
above the longer-term average of 11% a year--so it may be time to review your
investment strategy and your overall portfolio allocation.*
As part of a diversified portfolio, stocks play an important role in long-term
investing. Historically, they have offered investors the opportunity to earn
returns significantly higher than the rate of inflation. Yet you should be
careful about being overly optimistic in your expectations, and also remember
that ups and downs are a normal part of the market cycle.
Because market turbulence is part of investing in equities, I encourage you to
look at the returns of any investment relative to its potential volatility.
Although stocks have historically provided higher average annual returns than
other investment classes, they also carry greater risk of volatility. One way to
help reduce volatility in your portfolio while still pursuing opportunities for
growth is to allocate your investments among several appropriate asset classes.
For example, during the 20-year period ended June 30, 1998 stocks returned
17.42% annually on average, compared with 10.94% for long-term bonds. Allocating
70% of a portfolio to stocks and 30% to bonds during that period would have
resulted in a slightly lower average annual return of 15.69% per year, but with
a 20% reduction in volatility relative to an all-stock portfolio.*
The same theory also holds true for investors who seek income. Allocating a
small percentage of the portfolio to stocks can actually help reduce overall
volatility. That's because bond prices often react differently to changes in the
economy than do stocks. This is also true on a global perspective, where
economies and markets are less correlated and a portion of assets invested
internationally can lower overall portfolio risk, in addition to providing the
potential for higher returns.
With the complexities of today's global markets, building an appropriately
diversified portfolio is increasingly difficult. WM Group of Funds offers
investors a broad range of professionally-managed diversification solutions,
including our family of 18 mutual funds (9 of which are presented in this
report) and 5 STRATEGIC ASSET MANAGEMENT PORTFOLIOS, which use active asset
allocation designed to meet specific investment objectives and help investors
manage risk.
Together with the WM STRATEGIC ASSET MANAGER, A TAX-DEFERRED VARIABLE ANNUITY,
the WM Funds offer you a diversity of asset classes and investment vehicles
through which you can pursue your financial goals. We suggest meeting with your
Investment Representative to discuss your overall investment strategy. Thank you
for your continued confidence in us.
Sincerely,
William G. Papesh
President
- --------------------------------------------------------------------------------
* Source: Ibbotson Associates. Stocks are represented by Standard & Poor's
Composite Index of 500 Stocks, an unmanaged index of common stocks generally
representative of the U.S. stock market. Long-term bonds are represented by the
Lehman Brothers Long Term Government Corporate Bond Index. Volatility is
measured by standard deviation. Individuals cannot invest directly in any index.
Past performance is no guarantee of future results.
1
<PAGE>
THE YEAR IN REVIEW AND OUR OUTLOOK FOR 1998-1999
STRONG FUNDAMENTALS CONTINUE TO DRIVE FINANCIAL MARKETS
The bull market continued its strength during the 12 months ended June 30, 1998,
with stocks rising over 30%. Among the strongest performers were large-cap
growth stocks, while mid-caps followed, and small-caps rounded out domestic
equity results.
Underlying this strength are sound fundamentals in the economic picture. A low-
inflation environment is generally good for financial markets, and inflation has
been very benign. That, in turn, has helped keep interest rates in check despite
a growing economy.
Interest rates dropped throughout the period. The yield on the benchmark 30-year
Treasury bond hovered around 6% for much of the period, hitting a record low in
June.
CONSUMERS SPUR GROWTH
Paradoxically, personal incomes have risen even though companies' labor costs
have shown only small increases. Real (after inflation) personal income rose
2.9% in 1997 and is expected to rise about 3.9% in 1998. One way that companies
have managed to control costs without sacrificing wage increases is through more
efficient use of technology. U.S. businesses have continued to post significant
gains in productivity, helping them remain cost competitive even in a tight
labor market.
Dow Jones Industrial Average
12 months ended 6-30-98
[GRAPH APPEARS HERE]
30-YEAR TREASURY YIELDS DJIA
27-Jun-97 7687
25-Jul-97 8113
29-Aug-97 7622
26-Sep-97 7922
24-Oct-97 7715
28-Nov-97 7823
26-Dec-97 7679
23-Jan-98 7700
27-Feb-98 8545
27-Mar-98 8796
24-Apr-98 9064
Source: The Wall Street Journal
Note: The Dow Jones Industrial Average is an unmanaged index of 30 stocks and is
sometimes used to measure the overall U.S. equity market. Individuals cannot
invest directly in an index.
The increase in personal incomes has contributed to a boost in consumer
spending, helping to sustain economic growth in the 3% to 4% range. During the
first quarter of 1998, gross domestic product (GDP) rose at an annual rate of
5.5%, largely driven by consumer rather than business or government spending.
Although GDP growth slowed in the second quarter, prospects for the second half
of 1998 are strong.
Government spending has actually been declining, which is another bright spot
for the economy. The current fiscal year, ending September 30, is likely to see
a budget surplus for the first time in nearly 30 years.
POTENTIAL TROUBLE SPOTS FOLLOW WEAKNESS IN ASIA
Nevertheless, there are several possible spots in the economy which could have a
negative impact on the markets, and which investors will want to watch closely.
One factor is that short-term interest rates remain unusually high when compared
with inflation. The Federal Reserve, which influences short-term rates, has
maintained a steady policy during the last year even as inflation has fallen. As
a result, rates on three-month Treasuries have remained at about 5%, while
inflation is only 1.7% (as measured by CPI).
In administering interest-rate policy, members of the Federal Reserve Board's
("Fed") Open Market Committee look to potential future inflation -- so the
current stance may indicate that they believe the strength of the economy could
trigger higher inflation in coming months. In a recent address, Fed Chairman
Alan Greenspan indicated that they may have to notch interest rates upward given
the prospects for growth in the second half of 1998.
Another area of potential concern is the rising trade deficit, due largely to a
slowdown in exports to Asian markets. Remember Asia's bout of severe market
volatility and the financial crisis it sparked late last year? Many newly-
industrialized Asian markets remain in turmoil while Japan, the second-largest
export market for the U.S., remains in an economic slump.
The impact of the Asian crisis on American companies, particularly those in the
technology sector, is more favorable for companies that import goods from Asia
than those who export there. Dell Computer, for example, reported that lower-
cost Asian components have allowed them to reduce prices and spur sales. Digital
Equipment, on the other hand, said that it lost substantial business when Asian
orders were canceled as
2
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yield on the 30-year treasury bond
12 months ended 6-30-98
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
30-YEAR TREASURY YIELD
<S> <C>
27-Jun-97 6.74%
25-Jul-97 6.45%
29-Aug-97 6.61%
26-Sep-97 6.37%
24-Oct-97 6.27%
28-Nov-97 6.05%
26-Dec-97 5.90%
23-Jan-98 5.97%
27-Feb-98 5.92%
27-Mar-98 5.96%
24-Apr-98 5.95%
22-May-98 5.90%
26-Jun-98 5.63%
</TABLE>
Source: The Wall Street Journal
Note: Represents yield on the 30-year Treasury Bond which is sometimes used to
characterize the overall bond market.
a result of the sharp slowdown in economic activity there. Overall, the degree
of impact of the Asian crisis on the domestic economy and corporate profits
remains unclear.
THE YEAR 2000 PROBLEM
At the stroke of midnight on New Year's Eve, 1999, some computer systems could
become seriously confused. They may miscalculate critical data, delete vital
files, or simply not turn on, all because the computer's internal calendars and
clocks may not recognize the year 2000.
This computer system problem, that has come to be popularly known as the Year
2000 Problem, The Millennium Bug -- or simply Y2K -- grows out of the habit of
abbreviating years to their last two digits. Now, many systems may not be able
to decide correctly when a year 00 should be interpreted as 1900, and when it
should be seen as 2000.
Aside from being an enormous inconvenience, the Y2K problem could have
significant market repercussions for individual stocks as well as the overall
markets. Services of companies which have already prepared for the millennium,
or which have capabilities to assist other companies in preventing future
problems, are in line to receive the lion's share of government and corporate
capital spending on technology. The Clinton Administration has budgeted $3.9
billion in fiscal 1999 to upgrade the federal government's computers. Worldwide,
a survey by Giga Information Group estimated that companies will spend $300
billion to fix systems with Y2k problems.
INTERNATIONAL INVESTMENTS POST GAINS
On the international front, many investors in developed international markets
saw significant gains over the last 12 months. Stocks in Europe outpaced the
gains seen in the high-flying domestic markets. Countries in Asia and the
Pacific region showed very poor overall results throughout the past year. As a
whole, measured by the Morgan Stanley Capital International World Index, global
equities advanced over 17%. This was concentrated in the more developed
countries as emerging international markets were down for the year.
Looking ahead, the outlook for international investment remains favorable. The
Organization for Economic Cooperation and Development predicts that Western
Europe's GDP will match that of the United States' for 1998, forecast at 2.7%
growth. A major longer-term factor is the planned introduction of a single
currency -- the Euro -- in 1999. As of June 1998, 11 European countries have
indicated they will adopt the Euro as their common currency.
A DIVERSITY OF OPPORTUNITIES
Today's economic and market environment offers diverse opportunities in domestic
stock and fixed-income investments as well as investments in foreign markets.
This was clearly evident during the period as the economic crisis in Asia caused
investors to pour money out of investments and currencies of the region. In
addition, a close look at domestic markets uncovers a huge disparity in results
relative to market capitalization. Over the period, large-cap stocks appreciated
twice as much as small-caps. Volatility has increased in all markets, and the
need for professional, active money
[GRAPH APPREARS HERE]
PERFORMANCE AROUND THE GLOBE
12 MONTHS ENDED 6-30-98
EUROPE NORTH AMERICA NORDIC PACIFIC FAR EAST WORLD
12 MONTHS ENDED
6-30-98 37.46% 29.58% 31.08% -34.46% -35.97% 17.46%
Source: Ibbotson Associates. Each region is represented by the corresponding
MSCI Index in U.S. Dollars. There are additional risks associated with
international investing, including currency fluctuations.
3
<PAGE>
management is greater than ever. Because of these factors, we at the WM Group of
Funds, stress diversification and the benefits provided by asset allocation.
Different markets and asset classes respond differently to ever-changing
economic factors. When one market is up, another may be down. Therefore,
investing in a properly-allocated portfolio will help to avoid some of the risks
of a single asset class.
Diversification works to manage risk. The example below demonstrates the
positive tradeoff between risk and reward achieved through diversification. Over
the past 20 years, THE DIVERSIFIED PORTFOLIO GENERATED NEARLY 80% OF THE RETURN
WITH MORE THAN 40% LESS RISK. This concept is especially important in today's
marketplace. Many of your portfolios will have a larger concentration in stocks
than you originally planned. The rebalancing of assets is another way to reduce
your portfolio's risk exposure.
[GRAPH APPEARS HERE]
ASSET CLASS RESULTS
12 MONTHS ENDED 6-30-98
<TABLE>
<CAPTION>
T-BILLS GOVERNMENT MORTGAGES CORPORATE LARGE-COMPANY SMALL-COMPANY INTERNATIONAL
(90-DAY) BONDS BONDS STOCKS STOCKS STOCKS
<S> <C> <C> <C> <C> <C> <C> <C>
12 MONTHS ENDED
6-30-98 5.29% 11.26% 8.92% 11.09% 30.21% 16.50% 6.38%
</TABLE>
Source: Ibbotson Associates. T-bills represent 90-day U.S. Treasury bills;
Government bonds are represented by the Lehman Brothers Government Bond Index;
mortgage-backed bonds are represented by Lehman Brothers Mortgage-Backed Bond
Index; corporate bonds are represented by Lehman Brothers Corporate Bond Index;
large-company stocks are represented by S&P 500 Composite Index; small-company
stocks are represented by the Russell 2000 Index; and international stocks are
represented by MSCI EAFE Index. Indices represent unmanaged performance. T-bills
are generally considered the safest securities because they are short-term and
offer a fixed yield at maturity, which is guaranteed by the U.S. Government.
Government bonds are riskier than T-bills because of the longer maturities. An
investor would typically purchase stocks for long-term growth of capital.
However, stocks are often subject to significant price fluctuations and
therefore an investor may have a gain or loss in principal when the shares are
sold. This chart is not intended to represent the performance of any mutual
fund.
The WM Group of Funds offers a
diverse array of professionally managed investments including mutual funds,
annuities, and other professionally allocated investments through the Strategic
Asset Management Portfolios. The WM Group of Funds provides all the tools to
take advantage of the benefits of asset allocation. For more information about
how your portfolio can be positioned to potentially benefit from multiple market
opportunities, speak to your Investment Representative.
a diversified, rebalanced portfolio generated 80% of the return with over 40%
less risk
[PIE CHARTS APPEAR HERE]
A DIVERSIFIED, REBALANCED PORTFOLIO GENERATED 80% OF
THE RETURN WITH OVER 40% LESS RISK
DIVERSIFIED
100% STOCKS REBALANCED PORTFOLIO
----------- --------------------
AVERAGE ANNUAL RETURN 17.42% AVERAGE ANNUAL RETURN 13.72%
RISK 17.13% RISK 9.98%
1)LARGE-COMPANY STOCKS 20%
2)SMALL-COMPANY STOCKS 20%
3)T-BILLS 20%
4)INTERNATIONAL STOCKS 20%
5)GOV/CORP BONDS 20%
Source: Ibbotson Associates July 1978-June 1998. Returns are geometric means.
Risk is measured by the standard deviation of investment returns. Standard
deviation is a measurement of volatility relative to the average return. A lower
standard deviation means less volatility or investment risk. Past performance is
not a guarantee of future results.
4
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INDIVIDUAL FUND
REVIEWS
to our shareholders:
We are pleased to provide you with an overview of the following Funds in the
WM Group of Funds family for the
12-month period ended June 30, 1998.
To help you better understand the professional investment management available
to you as a WM Group of Funds' shareholder, we have also included biographies of
the investment professionals managing the following funds:
California Money Fund
Target Maturity 2002 Fund
Short Term High Quality Bond Fund
California Municipal Fund
California Insured Intermediate
Municipal Fund
Florida Insured Municipal Fund
Growth Fund
Emerging Growth Fund
International Growth Fund
Strategic Growth Portfolio
Conservative Growth Portfolio
Balanced Portfolio
Flexible Income Portfolio
Income Portfolio
WM Advisors, Inc. is the investment advisor to the WM Group of Funds, and has
general oversight responsibility for the advisory services provided to the
Funds. These services include formulating the Funds' investment policies,
analyzing economic trends that affect the Funds, and directing and evaluating
the investment services provided by the Sub-Advisors and the individual
Portfolio Managers of each Fund. WM Advisors supervises the Portfolio Managers
in their day-to-day management of the Funds in the WM Group of Funds family to
ensure that the policies are met and guidelines are followed, and to determine
appropriate investment performance measures.
UNDERSTANDING THE ENCLOSED CHARTS AND PERFORMANCE FIGURES
In order to help you understand the WM Funds' investment performance, we have
included the following discussions along with graphs that compare the Funds'
performance with certain market indices. Descriptions of these indices are
provided next to the individual graphs on the following pages.
Generally, an index represents the market value of an unmanaged group of
securities, regarded by investors as representative of a particular market. An
index does not reflect any asset-based charges for investment management or
other expenses. Total return is used to measure a Fund's performance and
reflects both changes in the price of the Fund's shares as well as any income
dividend and/or capital gain distributions made by the Fund during the period.
Past performance is not a guarantee of future results.
A mutual fund's share price and investment return will vary with market
conditions, and the principal value of an investment when you sell your shares
may be more or less than the original cost.
The 30-day SEC yield is computed by dividing net investment income per share
over the one-month period ended June 30, 1998, by the maximum offering price on
that date, and annualizing the result.
Yield indicates the investment income per share as a percentage of the offering
price, whereas total return includes both net investment income and changes in
the value of the shares as a percentage of the initial investment. The 30-day
SEC yield is the yield calculated pursuant to a standard formula required by the
Securities and Exchange Commission ("SEC") for performance advertisement
purposes, and does not imply any endorsement or recommendation by the SEC.
5
<PAGE>
CALIFORNIA MONEY FUND
PORTFOLIO MANAGER:
AUDREY QUAYE
WM ADVISORS, INC.
Audrey Quaye has over five years' experience in investment management and
analysis. She is a Certified Public Accountant, holds an MBA, and has been with
WM Advisors, Inc. since 1996. Ms. Quaye began managing the California Money Fund
on March 23,1998.
ECONOMIC CONDITIONS WHICH AFFECTED THE FUND PERFORMANCE
The Asian economic crisis, which commenced at the beginning of 1997 and reached
its peak in mid to late 1997, resulted in a "flight to quality" and a strong
rally in the U.S. bond market as Treasury bond yields declined. Economic data
released during the 12 months ended June 30, 1998, continued to indicate
strength in the U.S. economy. However, the pace of growth was moderate in some
regions due to a slowdown in manufacturing and export activity. Consumer
confidence remained high as income and spending continued to increase. Also,
housing demand was up due to relatively low interest rates. However, the labor
market remained tight, and the unemployment rate declined to a 28-year low of
4.3% during April and May of 1998.
The State of California also experienced economic growth during the period,
albeit at a slower pace. Housing sales and construction activity during the
period were both strong. However, manufactur-ing activity was tempered by a
reduction in exports to Asia.
[PICTURE APPEARS HERE]
- --------------------------------------------------------------------------------
7-Day Simple Yield* A Shares B Shares
- --------------------------------------------------------------------------------
California Money Fund 2.51% 1.76%
* The Funds' Advisor, Distributor, and Transfer Agent waived or reimbursed a
portion of the expenses. Without the waivers and reimbursements, the seven-day
simple yield would have been lower. Class B shares are available only by
exchanging the B shares from other WM Group funds and are intended as temporary
investments. The alternative minimum tax, as well as state and local taxes, may
apply to income distributed by the WM California Money Fund
All yield information represents past performance, which cannot guarantee future
results. Principal is not guaranteed or insured by the U.S. Government, and
yields will fluctuate depending on market conditions. There is no assurance that
the portfolios will maintain the $1.00 per share net asset value ("NAV").
Due to a lack of inflationary pressures, the Federal Reserve left its target Fed
funds rate (the rate at which banks borrow from one another) unchanged at 5.50%
during its May and June 1998 meetings. The benchmark 90-day U.S. Treasury bill
yield declined from 5.48% in December 1997, to 4.98% on June 1, 1998, and then
rose to 5.08% on June 30, 1998. Average tax-free daily money market yields also
declined from 3.55%, in January 1998, to 1.75% in February 1998, and then rose
to 4% on June 30, 1998.
ECONOMIC AND INTEREST RATE OUTLOOK
We expect inflation to remain tame and anticipate a gradual slowdown in the U.S
economy as exports to Asia continue to decline and domestic price levels
decrease due to cheaper imports from Asia. We also expect the slowdown in the
economy to reduce the risk of inflation, resulting in a continued decline in
interest rates. Conversely, there is still a risk of pressures on both prices
and rates, if the effect of the Asian economic crisis is not as strong as
projected. Nevertheless, we do not anticipate a Fed rate action in the near
future.
Despite the growth in revenues resulting from California's economic expansion,
the State government continues to be plagued by a General Fund deficit that
accumulated during the early 1990s. In addition, the fiscal flexibility of the
State and its municipa-ities are hampered by various ballot initiatives.
Nevertheless, we continue to view the State's outlook as stable.
PORTFOLIO STRATEGY
Effective March 23, 1998, WM Advisors, Inc. assumed management of the California
Money Fund. The WM California Money Fund's net assets at June 30, 1998, totaled
$37.47 million. As part of our overall strategy, we reduced the Fund's exposure
to securities subject to the alternative minimum tax. We also extended the
Fund's weighted average maturity to reduce its exposure to the more volatile
daily variable rate securities.
PORTFOLIO'S PERFORMANCE
As of June 30, 1998, the seven-day simple yield for Class A shares of the WM
California Money Fund was 2.51%, or 2.54% on a compounded annual basis. The Fund
had a weighted average maturity of 52 days* as of June 30, 1998.
6
<PAGE>
TARGET MATURITY 2002 FUND
PORTFOLIO MANAGER:
GARY POKRZYWINSKI
WM ADVISORS, INC.
The day-to-day management of the Target Maturity 2002 Fund's portfolio is the
responsibility of a fixed-income team headed by Senior Portfolio Manager Gary
Pokrzywinski, who has over 12 years of asset management experience and has been
with WM Advisors, Inc. for more than 5 years. Mr. Pokrzywinski is a Chartered
Financial Analyst and holds a Business Degree from the University of Wisconsin.
Mr. Pokrzywinski began managing the Target Maturity 2002 Fund on March 23, 1998.
WHAT WERE THE MOST SIGNIFICANT FACTORS CONTRIBUTING TO THE FUND'S PERFORMANCE
OVER THE LAST SIX MONTHS?
The Fund's investment objective is to hold 90% of its assets in zero-coupon
Treasury Notes with a November 2002 maturity. Therefore, its net asset value
(NAV) has increased due to the net decrease in Treasury rates during the entire
period. The yield on the 30-year U.S. Treasury Bond hit an all-time low on June
15, 1998. The price of the Fund is sensitive to interest rate changes, so as
rates have dropped, the Fund has performed well.
WERE THERE ANY SHIFTS IN THE FUND'S PORTFOLIO HOLDINGS THAT HAVE HAD A
SIGNIFICANT IMPACT ON FUND PERFORMANCE?
Consistent with the Fund's investment objective, the Fund has consistently held
90% of its assets in November 2002 zero-coupon Treasury STRIPs. As of March
1998, WM Advisors, Inc. took over management of the Fund with no significant
changes in management style.
WHAT IS OUR INTERMEDIATE AND LONG-TERM OUTLOOK FOR THE FUND?
Given the objective of the Fund to remain invested in Treasury STRIPs maturing
at its termination date, the Fund's NAV will move inversely to interest rates.
Over time, as its termination date approaches, the duration of the Fund will
shorten, lessening the impact of changes in interest rates on the NAV.
When the termination date is reached, the November 2002 Treasury STRIP will
mature.
WHAT IS OUR OVERALL ECONOMIC OUTLOOK FOR THE NEXT 12 MONTHS?
Over the next 12 months we expect the economy to exhibit moderate growth. The
effects of the fallout in Asia should help keep growth and inflation under
control. Global price competition and the higher levels of imports into the
United States should support this scenario. Overall, there continues to be
worldwide structural forces at work (fiscal austerity, demographics, excess
capacity) which should keep inflation under control for the next 3 to 5 years.
Unexpected economic impacts stemming from Asia and Russia remain wildcards for
overall global growth.
growth of a $10,000 investment (class A shares)
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
NAV Offer LB Gen Govt Index*
$10,000 $ 9,800
<S> <C> <C> <C> <C> <C>
Mar-95 -0.10% $ 9,990 $ 9,790 $10,000
Jun-95 0.84% $10,780 $10,564 0.77% $10,620
Aug-95 1.59% $10,840 $10,623 1.17% $10,705
Oct-95 1.82% $11,160 $10,937 1.52% $10,972
Dec-95 1.58% $11,570 $11,339 1.42% $11,301
Feb-96 -2.84% $11,311 $11,085 -2.04% $11,138
Apr-96 -1.40% $10,990 $10,770 -0.64% $10,975
Jun-96 1.52% $11,094 $10,872 1.29% $11,098
Aug-96 -0.56% $11,042 $10,821 -0.22% $11,101
Oct-96 2.75% $11,580 $11,349 2.20% $11,534
Dec-96 -1.58% $11,621 $11,389 -1.02% $11,615
Feb-97 -0.10% $11,631 $11,399 0.14% $11,644
Apr-97 1.65% $11,632 $11,399 1.44% $11,686
Jun-97 1.14% $11,865 $11,628 1.12% $11,920
Aug-97 -1.36% $12,065 $11,824 -0.99% $12,137
Oct-97 1.63% $12,442 $12,193 1.73% $12,532
Dec-97 1.12% $12,582 $12,330 1.05% $12,728
Feb-98 -0.47% $12,738 $12,483 -0.27% $12,884
Apr-98 0.56% $12,834 $12,577 0.45% $12,978
Jun-98 0.84% $13,025 $12,765 1.14% $13,262
</TABLE>
1 Index total returns were calculated from 3/31/95 to 6/30/98. The Lehman
Brothers U.S. General Government Index represents all U.S. Government agency
and Treasury securities. The Index assumes reinvestment of all
dividends/distributions, and does not reflect any asset-based charges for
investment management or other expenses. Past performance does not guarantee
future performance. The returns shown for the Fund assume reinvestment of all
dividends/distributions by the shareholder.
During the period noted, the Advisor waived a portion of its fees, the Advisor
absorbed other expenses, and credits were allowed by the Custodian. In the
absence of the waivers and absorption of other expenses, or credits, yield and
total return would have been lower.
<TABLE>
<CAPTION>
Total Returns as of 6/30/98 6 Month 1 Year Since Inception*
(March 20, 1995)
<S> <C> <C> <C>
Class A Shares
Fund (not adjusted for sales charge) 3.53% 9.78% 8.39%
Fund (adjusted for the maximum 2% sales charge) 1.50% 7.56% 7.74%
Lehman Brothers U.S. Government Index/1/ 4.19% 11.26% 9.07%
</TABLE>
*Annualized
7
<PAGE>
SHORT TERM HIGH QUALITY BOND FUND
PORTFOLIO MANAGER:
GARY POKRZYWINSKI
WM ADVISORS, INC.
The Short Term High Quality Bond Fund is managed by a fixed-income team led by
Senior Portfolio Manager Gary Pokrzywinski, who has over 12 years of asset
management experience and has been with WM Advisors, Inc. for more than 5 years.
Mr. Pokrzywinski is a Chartered Financial Analyst and holds a Business Degree
from the University of Wisconsin.
WHAT WERE THE MOST SIGNIFICANT FACTORS CONTRIBUTING TO THE FUND'S PERFORMANCE
OVER THE PAST 12 MONTHS?
The fixed-income market benefited from low inflation and an overall "flight to
quality" stemming from the Asian economic crisis. Many investors worldwide moved
assets from volatile global regions to U.S. Government securities. The yield on
the 30-year Treasury dropped to a record low of 5.57% in June of 1998. Given
this positive economic backdrop, the WM Short Term High Quality Bond Fund's
total return for the 12 months ended June 30, 1998 was 5.91%, for Class A shares
(2.38% adjusted for the maximum sales charge). Because the Fund has a short
duration, it is less affected by changes in interest rates, and is less
sensitive to fluctuations as long-term Funds. The Fund is managed to provide
income to its shareholders and the 30-day SEC yield of the portfolio was 5.30%
at the close of the period (4.73% for B shares).
growth of a $10,000 investment (class A shares)
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Lehman Brothers
Mutual Fund Short
Fund (Class A shares; Fund (Class A shares; (I-5) Investment
not adjusted for sales adjusted for the maximum Grade Debt
charge) 3.5% sales charge) Index /1/
<S> <C> <C> <C>
Inception/1/
11/01/93 $10,005 $ 9,655 $ 9,991
Mar 94 $ 9,947 $ 9,599 $ 9,831
Jun 94 $ 9,927 $ 9,580 $ 9,816
Sep 94 $ 9,993 $ 9,644 $ 9,933
Dec 94 $ 9,842 $ 9,497 $ 9,910
Mar 95 $10,037 $ 9,685 $10,339
Jun 95 $10,366 $10,003 $10,800
Sep 95 $10,524 $10,156 $10,993
Dec 95 $10,829 $10,450 $11,340
Mar 96 $10,815 $10,437 $11,331
Jun 96 $10,890 $10,509 $11,437
Sep 96 $11,069 $10,682 $11,650
Dec 96 $11,274 $10,879 $11,918
Mar 97 $11,349 $10,952 $11,956
Jun 97 $11,560 $11,156 $12,284
Sep 97 $11,780 $11,368 $12,590
Dec 97 $11,925 $11,508 $12,783
Mar 98 $12,084 $11,661 $12,995
Jun 98 $12,246 $11,817 $13,224
</TABLE>
The performance of the Class B Shares and Class S Shares was different than that
indicated by the lines shown above for the Class A Shares, based on the
differences in sales loads and fees paid by Class B and Class S shareholders.
1 Index total returns were calculated from 10/31/93 to 6/30/98. The Lehman
Brothers Mutual Fund Short (1-5) Investment Grade Debt Index includes all
investment-grade, corporate debt securities with maturities of one to five
years, assumes reinvestment of all dividends/distributions, and does not
reflect any asset-based charges for investment management or other expenses.
Past performance does not guarantee future performance. The returns shown for
the Fund assume reinvestment of all dividends/distributions by the
shareholder.
During the period noted, the Advisor waived a portion of its management fees,
the Advisor absorbed other expenses, and credits were allowed by the
Custodian. In the absence of the waivers and absorption of other expenses or
credits, yield and total return would have been lower.
<TABLE>
<CAPTION>
Total Returns as of 6/30/98 6 Month 1 Year Since Inception*
(November 1, 1993)
<S> <C> <C> <C>
Class A Shares
Fund (not adjusted for sales charge) 2.68% 5.91% 4.44%
Fund (adjusted for the maximum 3.5% sales charge) -0.74% 2.38% 3.65%
Lehman Brothers Mutual Fund Short (1-5) Investment Grade Debt Index/1/ 3.44% 7.66% 6.17%
Class B Shares 6 Month 1 Year Since Inception*
(June 30, 1994)
Fund (not adjusted for contingent deferred sales charge) 2.30% 5.13% 4.60%
Fund (adjusted for the maximum contingent deferred sales charge) -1.70% 1.13% 4.39%
Lehman Brothers Mutual Fund Short (1-5) Investment Grade Debt Index/1/ 3.44% 7.66% 7.74%
Class S Shares
Fund (not adjusted for contingent deferred sales charge) 2.30% 5.13% 4.60%
Fund (adjusted for the maximum contingent deferred sales charge) -2.70% 0.13% 4.17%
Lehman Brothers Mutual Fund Short (1-5) Investment Grade Debt Index/1/ 3.44% 7.66% 7.74%
</TABLE>
*Annualized
8
<PAGE>
[PIE CHART APPEARS HERE]
PORTFOLIO COMPOSITION++
1)AAA 64%
2)AA 9%
3)A 4%
4)BBB 23%
WHAT MARKET CONDITIONS AFFECTED THE FUND'S PERFORMANCE DURING THE PERIOD, AND
WHAT INVESTMENT TECHNIQUES WERE USED TO ADDRESS THOSE CONDITIONS?
Interest rates dropped during the past year. The effects of this was positive
for the Fund and its total return performance. However, the income stream
provided the largest impact on performance. Our position in asset-backed
securities also helped to boost performance as that class provided relative
strength. Because of the drop in interest rates, mortgage-backed securities
tended to underperform other sectors as investors were nervous about the
prospects for increased prepayments. Corporate yields did not fall as much as
other fixed-income sectors towards the end of the period so we took advantage of
good relative prices to add to these positions.
WERE THERE ANY SHIFTS IN THE FUND'S PORTFOLIO HOLDINGS THAT HAVE HAD A
SIGNIFICANT IMPACT ON FUND PERFORMANCE?
During the past 12 months, the Short Term Global Government Fund was merged into
this Fund and WM Advisors took over the management of the merged Fund. Due to
the merger and the inflows of assets, we used the cash to restructure the
portfolio favoring corporate bonds and Treasury notes. We also decreased
exposure to mortgage-backed securities which helped performance in the second
quarter of 1998. Although the overall management outlook remains the same, the
Fund's average maturity and duration--a measurement of price sensitivity to
changes in interest rates--increased slightly in the period. We also maintained
the Fund's position in asset-backed securities during the period.
WHAT IS OUR INTERMEDIATE- AND LONG-TERM OUTLOOK FOR THE FUND?
The long-term strategy of the Fund is to continue to have a diversified
portfolio of high-quality securities with a yield advantage. The Fund will
invest a significant percentage of its holdings in corporates, asset-backed, and
mortgage-backed securities. Over a complete cycle of interest rates, mortgage
securities should continue to provide a high level of income. The Fund will
maintain its short-term structure to lessen price volatility relative to long-
term assets. We will shift the sector allocations depending upon our outlook for
interest rates and the overall business cycle.
WHAT IS OUR OVERALL ECONOMIC OUTLOOK FOR THE NEXT 12 MONTHS?
Over the next 12 months we expect the economy to exhibit moderate growth. The
effects of the fallout in Asia should help keep growth and inflation under
control. Global price competition and the higher levels of imports into the
United States should support this scenario. Overall, there continues to be
worldwide structural forces at work (fiscal austerity, demographics, excess
capacity) which should keep inflation under control for the next 3-5 years.
Although there will be periods of volatility, we believe the overall interest
rate trend is lower. These aforementioned factors should continue to produce
slow growth and keep price pressures at bay.
Note: Bond ratings provided by Standard & Poors.
++ Allocation percentages are based on total investment value of the portfolio
as of 6/30/98.
9
<PAGE>
CALIFORNIA MUNICIPAL FUND
PORTFOLIO MANAGER:
JOSEPH PIRARO
VAN KAMPEN INVESTMENTS
Mr. Piraro joined the company in 1992, and serves as Vice President and
portfolio manager of Van Kampen Investments. He has had primary portfolio
management responsibility for the California Municipal Fund since May 1992.
WHAT WERE THE MOST SIGNIFICANT FACTORS CONTRIBUTING TO THE FUND'S PERFORMANCE
OVER THE PAST 12 MONTHS?
The strength of the economy, the decision by the Federal Reserve Board not to
adjust short-term interest rates, and the financial problems in Asia
significantly affected the U.S. bond markets. As inflation remained benign, the
bond market rallied throughout the reporting period. The yield of the 30-year
Treasury bond, which moves in the opposite direction of its price, fell from
6.79% on June 30, 1997 to 5.63% a year later.
The impact of the Asian financial crisis was evident in the underperformance of
the tax-exempt market relative to treasuries. As problems in Asia have continued
and the U.S. Dollar has risen relative to Asian currencies, demand for
treasuries has increased. This "flight to quality" drove the yield on the 30-
year Treasury down to historically low levels. The Federal Government's surplus
also caused a reduction in issuance of treasury securities, resulting in fewer
bonds to meet this strong demand.
growth of a $10,000 investment (class A shares)
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Date Fund (Class Fund (Class Lehman
A Shares; A Shares; Brothers
Not Adjusted Adjusted for Municipal
For Sales the Maximum Bond
Charge) 4.5% Sales Index/1/
Charge)
<S> <C> <C> <C>
Inception/1/
7/25/89 $10,080 $ 9,626 $10,000
Dec-89 $10,325 $ 9,860 $10,251
Jun-90 $10,598 $10,122 $10,537
Dec-90 $10,993 $10,498 $10,998
Jun-91 $11,357 $10,846 $11,487
Dec-91 $12,054 $11,511 $12,334
Jun-92 $12,556 $11,991 $12,841
Dec-92 $13,159 $12,567 $13,421
Jun-93 $14,294 $13,651 $14,375
Dec-93 $14,955 $14,282 $15,069
Jun-94 $13,982 $13,352 $14,400
Dec-94 $13,667 $13,052 $14,290
Jun-95 $15,040 $14,363 $15,670
Dec-95 $16,139 $15,413 $16,785
Jun-96 $16,003 $15,283 $16,710
Dec-96 $16,852 $16,094 $17,528
Jun-97 $17,414 $16,631 $18,089
Dec-97 $18,585 $17,748 $19,140
Jun-98 $19,023 $18,167 $19,654
</TABLE>
The performance of the Class B Shares and Class S Shares was different than that
indicated by the lines shown above for the Class A Shares, based on the
differences in sales loads and fees paid by Class B and Class S shareholders.
1 Index total returns were calculated from 7/31/89 to 6/30/98. The Lehman
Brothers Municipal Bond Index is a total return performance benchmark for the
long-term, investment-grade, tax-exempt bond market. The index assumes
reinvestment of all dividends/distributions, and does not reflect any asset-
based charges for investment management or other expenses. Past investment
performance does not guarantee future performance. The returns shown for the
Fund assume reinvestment of all dividends/distributions by the shareholder.
During the period noted, the Advisor waived a portion of its fees, absorbed
other expenses, and credits were allowed by the Custodian. In the absence of
the waivers and absorption of other expenses, or credits, yield and total
return would have been lower.
<TABLE>
<CAPTION>
Total Returns as of 6/30/98 6 Month 1 Year 5 Year* Since Inception*
(July 25, 1989)
<S> <C> <C> <C> <C>
Class A Shares
Fund (not adjusted for sales charge) 2.37% 9.26% 5.89% 7.42%
Fund (adjusted for the maximum 4.5% sales charge) -2.19% 4.38% 4.92% 6.87%
Lehman Brothers Municipal Bond Index/1/ 2.69% 8.66% 6.46% 7.87%
Class B Shares 6 Month 1 Year 5 Year* Since Inception*
(June 30, 1994)
Fund (not adjusted for contingent deferred sales charge) 1.99% 8.45% N/A 7.21%
Fund (adjusted for the maximum contingent deferred sales charge) -3.00% 3.45% N/A 6.80%
Lehman Brothers Municipal Bond Index/1/ 2.69% 8.66% N/A 8.09%
Class S Shares
Fund (not adjusted for contingent deferred sales charge) 1.99% 8.45% N/A 7.21%
Fund (adjusted for the maximum contingent deferred sales charge) -3.00% 3.45% N/A 6.80%
Lehman Brothers Municipal Bond Index/1/ 2.69% 8.66% N/A 8.09%
</TABLE>
*Annualized
10
<PAGE>
[PIE CHART APPEARS HERE]
PORTFOLIO COMPOSITION++
1)AAA 61%
2)AA 8%
3)A 7%
4)BBB 6%
5)NOT RATED 18%
Because of supply and demand fundamentals, the municipal market did not perform
as well as treasuries during the period. Historically, low interest rates have
fueled refundings as well as new borrowings, resulting in a 51 percent increase
in issuance year-to-date over 1997. Although these lower rates were not quite as
attractive to investors seeking yield, demand did keep pace with supply. The
good ratio of municipal yields to Treasuries attracted some individuals as well
as cross-over buyers (institutions who typically purchase taxable securities).
At the end of the reporting period, the Bond Buyer 40 Index (an index of 40
actively traded, long-term investment grade securities) had a yield of 5.22%, or
93% of long-term treasuries.
WHAT MARKET CONDITIONS AFFECTED THE FUND'S PERFORMANCE DURING THE PERIOD, AND
WHAT INVESTMENT TECHNIQUES WERE USED TO ADDRESS THOSE CONDITIONS?
The duration (a measure of the price sensitivity to changes in interest rates)
of the portfolio at the end of the period was 7.3 years, slightly shorter than
our benchmark 8.3 years. As market conditions caused duration to shorten over
the reporting period, we offset the market effect through the acquisition of
long-term discount securities and the sale of premium bonds. While the duration
of the securities in the portfolio was shorter than our target, we felt it was
more beneficial to our shareholders to maintain the core positions in the
portfolio than to lengthen the duration.
As of June 30, 1998, the 30-day SEC yield of the Fund's Class A shares was 4.24%
or 7.74% on a tax-equivalent basis (3.69% and 6.74% for B shares).2 Yield
spreads between credit ratings remain very narrow. As a result, most
acquisitions focused on AAA-rated securities, which we felt had more relative
value than lower-rated paper. While we continue to seek non-rated offerings to
add yield to the Fund, we saw few opportunities that rewarded the investor for
the additional credit risk. On June 30, 1998, over 62 percent of assets were
AAA-rated, up slightly over the period. The quality sector of the market
performed well during the year.
WERE THERE ANY SHIFTS IN THE FUND'S PORTFOLIO HOLDINGS/SECTORS THAT HAD A
SIGNIFICANT IMPACT ON THE FUND'S PERFORMANCE?
Health care exposure increased by almost 10 percent to 14 percent of assets.
Although most of these bonds are insured, they tend to trade at a small yield
advantage over other sectors. Additionally, health care continues to be the best
performing sector of the revenue bond index. As a result of this increase, we
decreased our exposures to the transportation, tax district, and multi-family
housing sectors. We also decreased our exposure to securities that are subject
to the Alternative Minimum Tax (AMT). As the yield spread between AMT and non-
AMT offerings narrowed, we saw an opportunity to sell several positions at a
profit and, at the same time, use some of the proceeds of these sales to invest
in discount securities to extend duration.
The Fund has excellent diversification, with exposure to 15 industries. Because
of the attractive yields on our current holdings, as well the good balance
between sectors, we do not expect significant changes in the near future. The
credit quality of the portfolio remains very high, and we will maintain that
level given the demand for quality California securities and the relative
attractiveness of these bonds.
WHAT IS OUR OVERALL ECONOMIC OUTLOOK FOR THE NEXT 12 MONTHS?
Despite the strong economy, inflation has remained dormant as a result of weak
commodity prices and a strong Dollar. There are, however, hints that the good
news on inflation could be coming to an end. The various domestic factors that
might have prompted serious fears about inflation were offset by the Asian
situation. Currently, the situation overseas could create a dilemma. After the
decision to support the Yen, raising U.S. interest rates would be counter-
productive since it would strengthen the U.S. Dollar. However, if competition
from Asia does not sufficiently cool the U.S. economy, the Fed may feel
compelled to raise short-term rates, which would put upward pressure on long-
term rates. With its status as a shipping and import/export hub, any ripples
that rock Asia are likely to be felt in California.
We will maintain our slightly bullish duration, as we expect the low interest
rate environ-ment to continue in the near term, but we are not overly bullish on
the market as a whole. Unless the taxable market makes a significant move, we
expect municipal yields to remain within their recent trading range. The supply
of municipal issues looks like it will remain strong, possibly setting an annual
record for the industry. As the second largest state issuer, we expect the
California market will play a big role in this surge of volume.
2 Tax-equivalent yield is based on Federal income taxes at 39.6% and California
income taxes at 9.3%, and the federal deduction of state taxes paid.
A portion of income may be subject to some State and/or local taxes, and for
certain investors, may be subject to the federal alternative minimum tax
(AMT).
Note: Bond ratings provided by Standard & Poors.
++ Allocation percentages are based on total investment value of the portfolio
as of 6/30/98.
11
<PAGE>
CALIFORNIA INSURED INTERMEDIATE MUNICIPAL FUND
PORTFOLIO MANAGER:
JOSEPH PIRARO
VAN KAMPEN INVESTMENTS
Mr. Piraro is portfolio manager of Van Kampen's California and National Insured
Municipal Funds, as well as portfolio manager for the WM California Municipal
and WM California Insured Intermediate Municipal Funds. He serves as Vice
President at Van Kampen Investments and has been with the company since 1992.
WHAT WERE THE MOST SIGNIFICANT FACTORS CONTRIBUTING TO THE FUND'S PERFORMANCE
OVER THE PAST 12 MONTHS?
The strength of the economy, the decision by the Federal Reserve Board not to
adjust short-term interest rates, and the financial problems in Asia
significantly affected the U.S. bond markets. As inflation remained benign, the
bond market rallied throughout the reporting period. The yield of the 30-year
Treasury bond, which moves in the opposite direction of its price, fell from
6.79% on June 30, 1997 to 5.63% a year later.
The impact of the Asian financial crisis was evident in the underperformance of
the tax-exempt market relative to treasuries. As problems in Asia have continued
and the U.S. Dollar has risen relative to Asian currencies, demand for
treasuries has increased. This "flight to quality" drove the yield on the 30-
year Treasury down to historically low levels. The Federal Government's surplus
also caused a reduction in issuance of treasury securities, resulting in fewer
bonds to meet this strong demand.
growth of a $10,000 investment (class A shares)
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Fund (Class A shares; Fund (Class A shares; Lehman Brothers
not adjusted for adjusted for the Municipal Bond
sales charge) maximum 4.5% sales charge Index/1/
<S> <C> <C> <C>
Inception/1/
04/04/94 $10,000 $ 9,550
Jun 94 $10,226 $ 9,766 $10,025
Sep 94 $10,333 $ 9,868 $10,094
Dec 94 $10,175 $ 9,717 $ 9,949
Mar 95 $10,911 $10,420 $10,653
Jun 95 $11,117 $10,617 $10,910
Sep 95 $11,507 $10,989 $11,224
Dec 95 $11,849 $10,316 $11,686
Mar 96 $11,775 $11,245 $11,546
Jun 96 $11,812 $11,280 $11,634
Sep 96 $12,028 $11,487 $11,902
Dec 96 $12,312 $11,758 $12,203
Mar 97 $12,291 $11,738 $12,175
Jun 97 $12,634 $12,065 $12,594
Sep 97 $12,955 $12,372 $12,974
Dec 97 $13,191 $12,598 $13,326
Mar 98 $13,277 $12,679 $13,479
Jun 98 $13,426 $12,822 $13,684
</TABLE>
The performance of the Class B Shares and Class S Shares was different than that
indicated by the lines shown above for the Class A Shares, based on the
differences in sales loads and fees paid by Class B and Class S shareholders.
1 Index total returns were calculated from 4/30/94 to 6/30/98. The Lehman
Brothers Municipal Bond Index is a total return performance benchmark for the
long-term, investment-grade, tax-exempt bond market. The index assumes
reinvestment of all dividends/distributions, and does not reflect any asset-
based charges for investment management or other expenses. Past investment
performance does not guarantee future performance. The returns shown for the
Fund assume reinvestment of all dividends/distributions by the shareholder.
During the period noted, the Advisor waived a portion of its fees, the Advisor
absorbed other expenses, and credits were allowed by the Custodian. In the
absence of the waivers and absorption of other expenses, or credits, yield and
total return would have been lower.
<TABLE>
<CAPTION>
Total Returns as of 6/30/98 6 Month 1 Year Since Inception*
(April 4, 1994)
<S> <C> <C> <C>
Class A Shares
Fund (not adjusted for sales charge) 1.78% 6.26% 7.20%
Fund (adjusted for the maximum 4.5% sales charge) -2.79% 1.45% 6.04%
Lehman Brothers Municipal Bond Index/1/ 2.69% 8.66% 7.82%
Class B Shares 6 Month 1 Year Since Inception*
(June 30, 1994)
Fund (not adjusted for contingent deferred sales charge) 1.40% 5.47% 6.25%
Fund (adjusted for the maximum contingent deferred sales charge) -3.58% 0.47% 5.83%
Lehman Brothers Municipal Bond Index/1/ 2.69% 8.66% 8.09%
Class S Shares
Fund (not adjusted for contingent deferred sales charge) 1.40% 5.47% 6.25%
Fund (adjusted for the maximum contingent deferred sales charge) -3.58% 0.47% 5.83%
Lehman Brothers Municipal Bond Index/1/ 2.69% 8.66% 8.09%
</TABLE>
*Annualized
12
<PAGE>
[PIE CHART APPEARS HERE]
PORTFOLIO COMPOSITION++
1)AAA 87%
2)A 2%
3)BBB 3%
4)NOT RATED 8%
Because of supply and demand fundamentals, the municipal market did not perform
as well as treasuries during the period. Historically, low interest rates have
fueled refundings as well as new borrowings, resulting in a 51 percent increase
in issuance year-to-date over 1997. Although these lower rates were not quite as
attractive to investors seeking yield, demand did keep pace with supply. The
ratio of municipal yields to Treasuries attracted some individuals as well as
cross-over buyers (institutions who typically purchase taxable securities). At
the end of the reporting period, the Bond Buyer 40 Index (an index of 40
actively traded, long-term investment grade securities) had a yield of 5.22%, or
93% of long-term treasuries. As of June 30, 1998, the Fund's Class A shares had
a 30-day SEC yield of 3.49%, with a tax-equivalent yield of 6.37% (2.90% and
5.29% respectively for B shares)./2/
WHAT MARKET CONDITIONS AFFECTED THE FUND'S PERFORMANCE DURING THE PERIOD, AND
WHAT INVESTMENT TECHNIQUES WERE USED TO ADDRESS THOSE CONDITIONS?
California municipal issuance was up 80% in 1998 relative to the same period in
1997. Through the end of the first quarter, over 60 percent of new issue volume
was insured paper. We focused on AAA-rated insured discount securi-ties for two
reasons. First, the yield spread between insured and lower rated offerings
continues to be very narrow. As a result, we see greater relative value in
quality securi-ties, as we feel the higher yield offered on lower rated paper
does not adequately reward the investor for the additional credit risk. Second,
as yields decline, the duration (a measure of price sensitivity to interest
rates) of the portfo-lio shortens. To offset this market effect, we invested in
discount securities to maintain a neutral duration compared to our benchmark. At
the end of the reporting period, the portfolio had a duration of 5.3 years,
compared to the Lehman Brothers California Insured Municipal Bond Index duration
of 5.8 years.
WERE THERE ANY SHIFTS IN THE FUND'S PORTFOLIO HOLDINGS/SECTORS THAT HAD A
SIGNIFICANT IMPACT ON THE FUND'S PERFORMANCE?
Our exposure to the transportation sector increased by 9% and now totals 16% of
assets, due to a purchase early this year of Los Angeles County Metropolitan
Transit Authority. This position is our largest exposure to a single issuer and
is AAA-rated. We decreased our exposure to the general purpose, high education
and multi-family housing sectors. At the end of the reporting period, 86% of
assets were insured, slightly higher than the 80 percent mandated by the
prospectus. Given the continued demand for quality California securities, we
will maintain our high credit quality.
WHAT IS OUR OVERALL ECONOMIC OUTLOOK FOR THE NEXT 12 MONTHS?
Despite the strong economy, inflation has remained dormant as a result of weak
commodity prices and a strong dollar. There are, however, hints that the good
news on inflation could be coming to an end. The various domestic factors that
might have prompted serious fears about inflation were offset by the Asian
situation. Currently, the situation overseas could create a dilemma. After the
decision to support the Yen, raising U.S. interest rates would be counter-
productive since it would strengthen the U.S. Dollar. However, if competition
from Asia does not sufficiently cool the U.S. economy, the Fed may feel
compelled to raise short-term rates, which would put upward pressure on long-
term interest rates. With its status as a shipping and import/export hub, any
ripples that rock Asia are likely to be felt in California.
We will maintain our slightly bullish duration, as we expect the low interest
rate environ-ment to continue in the near term, but we are not overly bullish on
the market as a whole. Unless the taxable market makes a significant move, we
expect municipal yields to remain within their recent trading range. The supply
of municipal issues looks like it will remain strong, possibly setting an annual
record for the industry. As the second largest state issuer, we expect the
California market will play a big role in this surge of volume.
2 Tax-equivalent yield is based on Federal income taxes at 39.6% and California
income taxes at 9.3% and the federal deduction of state taxes paid.
A portion of income may be subject to some state and/or local taxes, and for
certain investors, may be subject to the federal alternative minimum tax (AMT).
Note: Bond ratings provided by Standard & Poors.
++ Allocation percentages are based on total investment value of the portfolio
as of 6/30/98.
13
<PAGE>
FLORIDA INSURED MUNICIPAL FUND
PORTFOLIO MANAGER:
THOMAS BYRON
VAN KAMPEN AMERICAN CAPITAL MANAGEMENT, INC.
Mr. Byron, Vice President of Van Kampen, has over 15 years of experience with
the Company. He has been with Van Kampen since 1981 and held the position of
Head Buyer and Manager, with responsibility for all tax-exempt and taxable UITs.
Mr. Byron has had primary portfolio management responsibility for the WM Florida
Insured Municipal Fund since
January 1997.
WHAT WERE THE MOST SIGNIFICANT FACTORS CONTRIBUTING TO THE FUND'S PERFORMANCE
OVER THE PAST 12 MONTHS?
The strength of the economy, the decision by the Federal Reserve Board not to
adjust short-term interest rates, and the financial problems in Asia
significantly affected the U.S. bond markets. As inflation remained benign, the
bond market rallied throughout the reporting period. The yield of the 30-year
Treasury bond, which moves in the opposite direction of its price, fell from
6.79% on June 30, 1997 to 5.63% a year later.
The impact of the Asian financial crisis was evident in the underperformance of
the tax-exempt market relative to treasuries. As problems in Asia have continued
and the U.S. Dollar has risen relative to Asian currencies, demand for
treasuries has increased. This "flight to quality" drove the yield on the 30-
year Treasury down to historically low levels. The Federal Government's surplus
also caused a reduction in issuance of treasury securities, resulting in fewer
bonds to meet this strong demand.
growth of a $10,000 investment (class A shares)
[GRAPH APPEARS HERE]
Florida Insured
Fund (Class A Fund (Class A
shares not shares; adjusted Lehman Brothers
adjusted for for the maximum Municipal Bond
sales charge) 4.5% sales charge) Index/1/
Inception/1/
6/7/93 $10,050 $ 9,598 $10,000
Sep-93 $10,511 $10,038 $10,338
Dec-93 $10,686 $10,206 $10,483
Mar-93 $ 9,797 $ 9,356 $ 9,907
Jun-93 $ 9,899 $ 9,454 $10,017
Sep-93 $ 9,960 $ 9,512 $10,086
Dec-93 $ 9,780 $ 9,340 $ 9,941
Mar-94 $10,464 $ 9,993 $10,644
Jun-94 $10,495 $10,022 $10,901
Sep-94 $10,815 $10,329 $11,214
Dec-94 $11,498 $10,981 $11,677
Mar-95 $11,156 $10,654 $11,536
Jun-95 $11,288 $10,780 $11,624
Sep-95 $11,597 $11,076 $11,892
Dec-95 $11,891 $11,356 $12,193
Mar-96 $11,881 $11,346 $12,165
1 Index total returns were calculated from 6/30/93 to 6/30/98. The Lehman
Brothers Municipal Bond Index is a total return performance benchmark for the
long-term, investment-grade, tax-exempt bond market. The index assumes
reinvestment of all dividends/distributions, and does not reflect any asset-
based charges for investment management or other expenses. Past investment
performance does not guarantee future performance. The returns shown for the
Fund assume reinvestment of all dividends/distributions by the shareholder.
During the period noted, the Advisor waived a certain portion of fees and
absorbed other expenses, and credits were allowed by the Custodian. In the
absence of the waiver and absorption of other expenses or credits, yield and
total return would have been lower.
The performance of the Class B Shares and Class S Shares was different than that
indicated by the lines shown above for the Class A Shares, based on the
differences in sales loads and fees paid by Class B and Class S shareholders.
<TABLE>
<CAPTION>
TOTAL RETURNS AS OF 6/30/98 6 MONTH 1 YEAR 5 YEAR* SINCE INCEPTION*
(June 7, 1993)
<S> <C> <C> <C> <C>
Class A Shares
__ Fund (not adjusted for sales charge) 2.31% 9.34% 5.90% 5.84%
__ Fund (adjusted for the maximum 4.5% sales charge) -2.31% 4.40% 4.93% 4.88%
__ Lehman Brothers Municipal Bond Index1 2.69% 8.66% 6.46% 6.46%
Class B Shares 6 Month 1 Year 5 Year* Since Inception*
(June 30, 1994)
Fund (not adjusted for contingent deferred sales charge) 1.93% 8.53% N/A 7.03%
Fund (adjusted for the maximum contingent deferred sales charge) -3.06% 3.53% N/A 6.62%
Lehman Brothers Municipal Bond Index1 2.69% 8.66% N/A 8.09%
Class S Shares
Fund (not adjusted for contingent deferred sales charge) 1.93% 8.53% N/A 7.03%
Fund (adjusted for the maximum contingent deferred sales charge) -3.06% 3.53% N/A 6.62%
Lehman Brothers Municipal Bond Index1 2.69% 8.66% N/A 8.09%
</TABLE>
*Annualized
14
<PAGE>
[GRAPH APPEARS HERE]
PORTFOLIO COMPOSITION++
1)AAA 82%
2)BBB 9%
3)NOT RATED 9%
Because of supply and demand fundamentals, the municipal market did not perform
as well as treasuries during the period. Historically, low interest rates have
fueled refundings as well as new borrowings, resulting in a 51 percent increase
in issuance year-to-date over 1997. Although these lower rates were not quite as
attractive to investors seeking yield, demand did keep pace with supply. The
attractive ratio of municipal yields to Treasuries attracted some individuals as
well as cross-over buyers (institutions who typically purchase taxable
securities). At the end of the reporting period, the Bond Buyer 40 Index (an
index of 40 actively traded, long-term investment grade securities) had a yield
of 5.22%, or 93% of long-term treasuries.
Income remains an important part of managing the Fund; as of June 30, 1998, the
Fund's Class A shares had an SEC yield of 4.03% or 7.36% on a tax-equivalent
basis (3.47% and 6.33% for B shares)./2/
WHAT MARKET CONDITIONS AFFECTED THE FUND'S PERFORMANCE DURING THE PERIOD, AND
WHAT INVESTMENT TECHNIQUES WERE USED TO ADDRESS THOSE CONDITIONS?
The strong supply of municipal bonds benefited the portfolio as there were
plenty of quality bond issues coming to market. Issuance for the state was up
34% in 1998. Of total new volume, insured issuance accounted for 79% of the
state's supply through the end of the first quarter. This supply provided for a
highly diversified portfolio.
At the end of the reporting period, the portfolio had a duration (a measure of
the price sensitivity to changes in interest rates) of 6.9 years, compared to
the Lehman Brothers Florida Municipal Bond Index duration of 7.7 years. The long
duration benefited the Fund as rates fell throughout the period. While we did
find some attractive offerings during the period, we maintained the core
position of the Fund.
WERE THERE ANY SHIFTS IN THE FUND'S PORTFOLIO HOLDINGS/SECTORS THAT HAD A
SIGNIFICANT IMPACT ON THE FUND'S PERFORMANCE?
We increased our exposure to the water/sewer sector by 6%, and decreased
holdings in the airport and retail utility industries. The portfolio has a very
high credit quality, with 82% of assets AAA rated. The remaining 18% of assets
were evenly split between BBB-rated and non-rated holdings to strengthen the
overall yield.
WHAT IS OUR OVERALL ECONOMIC OUTLOOK FOR THE NEXT 12 MONTHS?
Despite the strong economy, inflation has remained dormant as a result of weak
commodity prices and a strong U.S. Dollar. There are, how-ever, hints the good
news on inflation could be coming to an end. The various domestic factors that
might have prompted serious fears about inflation were offset by the Asian
situation. Currently, the situation overseas could create a dilemma. After the
decision to support the Yen, raising U.S. interest rates would be counter-
productive since it would strengthen the U.S. Dollar. However, if competition
from Asia does not sufficiently cool the U.S. economy, the Fed may feel
compelled to raise short-term rates, which would put upward pressure on long-
term interest rates.
We will maintain our slightly bullish duration policy, as we expect the low
interest rate environment to continue in the near term, but we are not overly
bullish on the market as a whole. Unless the taxable market makes a significant
move, we expect municipal yields to remain within their recent trading range.
The supply of municipal issues looks like it will remain strong, possibly
setting an annual record for the industry. The Florida economy remains strong
and vibrant, with tourism, construction and other key sectors on the rise. Our
strategy going forward will be to take advantage of the new issue market, which
we expect to be highly active. We believe the portfolio is positioned to provide
an attractive level of tax-exempt income without undue risk.
2 Tax-equivalent yield is based on Federal income taxes at 39.6%.
A portion of income may be subject to some state and/or local taxes, and for
certain investors, may be subject to the federal alternative minimum tax
(AMT). Note: Bond ratings provided by Standard & Poors.
++ Allocation percentages are based on total investment value of the portfolio
as of 6/30/98.
15
<PAGE>
GROWTH FUND
PORTFOLIO MANAGER:
WARREN LAMMERT
JANUS CAPITAL CORPORATION
Mr. Lammert is a graduate of Yale University and the London School of Economics.
He first joined Janus in January 1987 and has been portfolio manager of the
Growth Fund since its inception. He is a Chartered Financial Analyst.
WHAT WERE THE MOST SIGNIFICANT FACTORS CONTRIBUTING TO THE FUND'S PERFORMANCE
OVER THE PAST 12 MONTHS?
For the past 12 months, the stock market has put up very impressive numbers,
with the S&P 500 Index gaining over 30%. Meanwhile, the Fund returned 35.43%.
Looking back, market performance has been quite volatile over the past year.
After a broad market rally last summer, equities came under pressure by year-end
amid a few disappointing announcements and the growing financial crisis in Asia.
We took this opportunity, however, to expand our positions in several promising
technology stocks, which have performed well for us. Domestic equities posted
impressive gains in the first part of 1998 and managed to build on these results
early in the second quarter. Then the market experienced renewed volatility,
reflecting mounting concerns over Asia and related uncertainty surrounding
corporate profits. Consequently, stocks lost ground in late May and early June.
Equities proved resilient, however, and managed to end the second quarter of
1998 with a strong rally, thanks to a significant drop in long-term interest
rates and a resurgent technology sector.
Portfolio returns benefited as several of our issues came alive at the end of
the period, adding to strong results accumulated since the start of the year.
Robust portfolio performance continues to reflect our emphasis on companies with
dominant franchises and exceptional earnings growth.
growth of a $10,000 investment (class A shares)
[GRAPH APPEARS HERE]
Growth Fund (Class A Fund (Class A Standard &
Fund shares; not shares; adjusted Poor's 500
adjusted for for the minimum Composite
sales charge) 5.5% sales charge) Index/1/
Inception/1/
4/5/93 $10,000 $ 9,450
Jun-93 $10,720 $10,130 $10,297
Sep-93 $11,250 $10,631 $10,560
Dec-93 $11,680 $11,038 $10,805
Mar-94 $11,740 $11,094 $10,395
Jun-94 $10,730 $10,140 $10,439
Sep-94 $11,870 $11,217 $10,949
Dec-94 $11,756 $11,109 $10,947
Mar-95 $12,507 $11,819 $12,011
Jun-95 $14,199 $13,418 $13,156
Sep-95 $15,681 $14,819 $14,201
Dec-95 $16,018 $15,137 $15,056
Mar-96 $17,312 $16,360 $15,863
Jun-96 $17,812 $16,832 $16,575
Sep-96 $18,822 $17,787 $17,087
Dec-96 $18,728 $17,698 $18,510
Mar-97 $17,535 $16,570 $19,007
The performance of the Class B Shares and Class S Shares was different than that
indicated by the lines shown above for the Class A Shares, based on the
differences in sales loads and fees paid by Class B and Class S shareholders.
1 Index total returns were calculated from 4/30/93 to 6/30/98. The Standard &
Poor's 500 Composite Index (S&P 500) represents an unmanaged weighted index
of 500 industrial, transportation, utility, and financial companies widely
regarded by investors as representative of the stock market. The index
assumes reinvestment of all dividends/distributions, and does not reflect any
asset-based charges for investment management or other expenses. Past
investment performance does not guarantee future performance. The returns
shown for the Fund assume reinvestment of all dividends/distributions by the
shareholder.
During the period noted, the Advisor waived a portion of its management fees
and absorbed other expenses, and credits were allowed by the Custodian. In
the absence of the waivers and absorption of other expenses or credits, yield
and total return would have been lower.
<TABLE>
<CAPTION>
Total Returns as of 6/30/98 6 Month 1 Year 5 Year* Since Inception*
(April 5, 1993)
<S> <C> <C> <C> <C>
Class A Shares
Fund (not adjusted for sales charge) 30.09% 35.43% 20.06% 20.67%
Fund (adjusted for the maximum 5.5% sales charge) 22.90% 27.96% 18.72% 19.38%
Standard & Poor's 500 Composite Index1 17.72% 30.21% 23.07% 22.94%
Class B Shares 6 Month 1 Year 5 Year* Since Inception*
(June 30, 1994)
Fund (not adjusted for contingent deferred sales charge) 29.60% 34.43% N/A 24.74%
Fund (adjusted for the maximum contingent deferred sales charge) 24.60% 29.43% N/A 24.48%
Standard & Poor's 500 Composite Index1 17.72% 30.21% N/A 29.18%
Class S Shares
Fund (not adjusted for contingent deferred sales charge) 29.58% 34.40% N/A 24.74%
Fund (adjusted for the maximum contingent deferred sales charge) 24.58% 29.40% N/A 24.48%
Standard & Poor's 500 Composite Index1 17.72% 30.21% N/A 29.18%
</TABLE>
*Annualized
16
<PAGE>
[GRAPH APPEARS HERE]
PORTFOLIO COMPOSITION++
1)TECHNOLOGY 34%
2)TELECOMMUNICATIONS 19%
3)HEALTHCARE 13%
4)FINANCIALS 10%
5)MEDIA 10%
6)CAPITAL GOODS 5%
7)CONSUMER STOCKS 4%
8)BUSINESS SERVICES 4%
9)ENERGY 1%
WHAT MARKET CONDITIONS AFFECTED THE FUND'S PERFORMANCE DURING THE PERIOD, AND
WHAT INVESTMENT TECHNIQUES WERE USED TO ADDRESS THOSE CONDITIONS?
The large-stock indices continued to be tough competitors for active managers,
in part because investors are favoring large-capitalization stocks for their
perceived earnings stability and liquidity. Additionally, the trend toward
indexing continues to bolster the stocks that comprise the S&P 500 Index, as new
money chases returns. However, we are starting to see more of an emphasis on
earnings growth, because broad S&P 500 profits are coming under increasing
pressure from Asian weakness and rising labor costs. As a slowdown in corporate
earnings continues to unfold, those companies with more positive earnings
characteristics should receive renewed attention, regardless of their size. We
are confident that our research will continue to identify those companies can
meet or exceed their earnings projections, and these companies will be rewarded
for their performance.
WERE THERE ANY SHIFTS IN THE FUNDS PORTFOLIO'S HOLDINGS/SECTORS THAT HAVE HAD A
SIGNIFICANT IMPACT ON PERFORMANCE?
The Portfolio reflects our commitment to a variety of themes, particularly
technology, pharmaceuticals, cable and financial services. In 1998, we created a
more focused portfolio, shortening our list of names and trimming a number of
smaller positions.
Among our technology stocks, our positions in Dell, Microsoft, and America
Online (AOL) have all performed well. Dell continues to exploit its highly-
successful business model, despite a generally weak environment for PC manufac-
turers. Meanwhile, Microsoft advanced strongly after over-coming concerns
related to the Justice Department's antitrust suit. The company is beginning a
major new product cycle with the current launch of Windows 98 and the roll-out
of Windows NT 5.0 later this year. Additionally, AOL, supported by the growing
acceptance of the Internet as a new media avenue, continues to perform well.
We have also succeeded with our Internet positions, including Amazon.com, the
leading Internet book and music retailer. Amazon.com was added to the Fund
during the second quarter, and the stock price more than doubled over a
thirteen-day period in June. While we are excited about Amazon.com's prospects,
given its strong brand name and explosive growth, we also realize that such
quick gains can easily reverse themselves. Consequently, we opted to trim the
position at a significant profit.
Several of our pharmaceutical stocks have also performed exceptionally well,
including Warner-Lambert and Pfizer. Both companies continue to experience
strong results from their new product launches, effectively driving revenues
higher. More recently, we also added Cognizant, which owns IMS, a provider of
prescription and market share data for pharmaceutical companies.
During the period, a number of developments helped to validate our thesis on the
cable industry--an area that remains very compelling. After years of equipment
and infrastructure upgrades, cable operators are on the verge of rolling out a
two-way digital platform that will allow a variety of new services, including
telephony data and expanded video offerings. These factors, combined with a
dramatic decline in capital expenditures, create a promising outlook. As a
result, we built positions in Comcast, Time Warner, Media One, and Tele-
Communications, Inc. (TCI), all of which performed very well. In addition,
AT&T's recent decision to purchase TCI highlights the value of the cable
pipeline, and we believe the combined entity will unlock a variety of important
synergies moving ahead.
WHAT IS OUR INTERMEDIATE- AND LONG-TERM OUTLOOK FOR THE FUND?
We remain generally positive on the outlook for equities; however, Asian
weakness and the impact of the strong Dollar remain a concern. For this reason,
we emphasize companies with robust earnings growth that are well-insulated from
Asia's downturn. As always, we rely on Janus' strategy to find promising
individual companies with strong fundamentals and positive earnings growth
potential. We also continue to follow our disciplined portfolio approach and are
willing to trim positions that are fully priced or where our earnings estimates
appear to be in jeopardy.
WHAT IS OUR OVERALL ECONOMIC OUTLOOK FOR THE NEXT 12 MONTHS?
Looking ahead, Asia's continuing economic difficulties contribute an element of
uncertainty to global markets. Japan's economy has moved into a severe
recession, brought about by the Japanese government's failure to enact
meaningful economic reforms and by its fragile banking system. Additionally,
the recent weakness in the Yen versus the U.S. Dollar highlights the currency
risk that still lingers throughout the region. On the positive side, Asia's
slowdown has been an effective brake on the global economy and has helped keep
domestic inflation in check, despite an impressive U.S. expansion. As a result,
domestic interest rates continue to reflect these positive fundamentals and
remain at very low levels.
++ Allocation percentages are based on total investment value of the portfolio
as of 6/30/98.
Differences from financial statements are a result of a consolidation of
industries or sectors.
17
<PAGE>
EMERGING GROWTH FUND
PORTFOLIO MANAGERS:
DAVID SIMPSON
LINDA WALK
WM ADVISORS, INC.
The Fund is co-managed by David Simpson and Linda Walk of WM Advisors, Inc. Mr.
Simpson and Ms. Walk began managing the fund on March 23, 1998. Both managers
are Chartered Financial Analysts have experience in small-cap management.
WHAT WERE THE MOST SIGNIFICANT FACTORS CONTRIBUTING TO THE FUND'S PERFORMANCE
OVER THE PAST 12 MONTHS?
The Fund's Class A shares appreciated nearly 13% (6.75% adjusted for the maximum
sales charge) during the 12-month period ended June 30, 1998. The performance
was slightly under the Russell 2000 Index and significantly outpaced the
S&P/Barra small-cap growth index (a measure of growth style small-cap stocks).
The performance of the WM Emerging Growth Fund was impacted by the under-
performance of small-capitalization companies relative to large-capitalization
companies. During the past 12-months, large-caps appreciated nearly twice as
much as stocks of smaller companies. The Fund has lagged both the S&P 500 and
the Russell 2000 due to weakness in small-cap growth stocks, particularly small-
cap technology stocks. These equity classes were especially
growth of a $10,000 investment (class A shares)
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Fund (Class A Fund (Class A
shares; not shares; adjusted Standard & Poor's
adjusted for for the maximum 500 Composite Russell
sales charge) 5.5% sales charge) Index/1/ 2001/1/
<S> <C> <C> <C> <C>
Inception/1/ $ 9,600 $ 9,072 $10,000 $10,000
7/18/90
Dec-90 $ 8,263 $ 7,808 $ 9,430 $ 8,289
Jun-91 $ 9,705 $ 9,171 $10,772 $10,586
Dec-91 $11,509 $10,876 $12,297 $12,104
Jun-92 $11,886 $11,232 $12,214 $12,125
Dec-92 $13,281 $12,551 $13,232 $14,334
</TABLE>
The performance of the Class B Shares and Class S Shares was different than that
indicated by the lines shown above for the Class A Shares, based on the
differences in sales loads and fees paid by Class B and Class S shareholders.
1 Index total returns were calculated from 7/31/90 to 6/30/98. The Standard &
Poor's 500 Composite Index (S&P 500) represents an unmanaged weighted index
of 500 industrial, transportation, utility, and financial companies widely
regarded by investors as representative of the stock market. The Russell 2000
Index represents the smallest 2000 companies followed by Russell and is used
to measure the small-cap market. The indices assume reinvestment of all
dividends/distributions, and do not reflect any asset-based charges for
investment management or other expenses. Past investment performance does not
guarantee future performance. The returns shown for the Fund assume
reinvestment of all dividends/distributions by the shareholder.
During the period noted, the Advisor waived a portion of its management fees,
and credits were allowed by the Custodian. In the absence of the waivers or
credits, yield and total return would have been lower.
<TABLE>
<CAPTION>
Total Returns as of 6/30/98 6 Month 1 Year 5 Year* Since Inception*
(July 18, 1990)
<S> <C> <C> <C> <C>
Class A Shares
Fund (not adjusted for sales charge) 3.40% 12.95% 13.70% 13.33%
Fund (adjusted for the maximum 5.5% sales charge) -2.31% 6.75% 12.42% 12.53%
Standard & Poor's 500 Composite Index/1/ 17.72% 30.21% 23.07% 18.82%
Russell 2000 Index/1/ 4.93% 16.50% 16.05% 15.89%
Class B Shares 6 Month 1 Year 5 Year* Since Inception*
(June 30, 1994)
Fund (not adjusted for contingent deferred sales charge) 2.95% 12.05% N/A 15.57%
Fund (adjusted for the maximum contingent deferred sales charge) -2.05% 7.05% N/A 15.25%
Standard & Poor's 500 Composite Index/1/ 17.72% 30.21% N/A 29.18%
Russell 2000 Index/1/ 4.93% 16.50% N/A 19.16%
Class S Shares
Fund (not adjusted for contingent deferred sales charge) 3.00% 12.11% N/A 15.59%
Fund (adjusted for the maximum contingent deferred sales charge) -2.00% 7.11% N/A 15.26%
Standard & Poor's 500 Composite Index/1/ 17.72% 30.21% N/A 29.18%
Russell 2000 Index/1/ 4.93% 16.50% N/A 19.16%
</TABLE>
*Annualized
18
<PAGE>
[PIE CHARTS APPEARS HERE]
PORTFOLIO COMPOSITION++
1)TECHNOLOGY 24%
2)CONSUMER STOCKS 19%
3)HEALTHCARE 16%
4)FINANCIALS 13%
5)CASH/OTHER 7%
6)MEDIA 6%
7)ENERGY 4%
8)TRANSPORTATION 3%
9)BASIC INDUSTRY 1%
10)BUSINESS SERVICES 3%
11)ELECTRICAL EQUIPMENT 2%
12)TELECOMMUNICATIONS 2%
affected by concerns over the effects of the Asian crisis. A number of companies
preannounced disappointing earnings as weakness in Asia was compounded by a
slowdown in PC demand.
WHAT MARKET CONDITIONS AFFECTED THE FUND'S PERFORMANCE DURING THE PERIOD, AND
WHAT INVESTMENT TECHNIQUES WERE USED TO ADDRESS THOSE CONDITIONS?
Although the Fund reported positive performance, the "flight to large", liquid
stocks hampered the performance relative to the S&P 500. Investors poured money
into the largest domestic companies with more predictable earnings streams
during this period of market uncertainty. With the collapse in Asia, it was
difficult to predict the underlying effects on domestic companies. The small-cap
technology firms have not yet rebounded and their performance was not as strong
as some of the larger technology firms. Examples include Radisys and In Focus
Systems. Radisys designs and produces embedded computer solutions, while In
Focus builds portable projectors for multimedia presentations.
Both companies have struggled recently, but we maintain our positions as our
long-term outlook looks good.
Prior to March, the Fund was managed by earnings momentum--a growth style.
Stocks were bought on earnings growth and sold when prices fell. Although large-
cap growth investing led the market, this style has not performed well in the
small-cap market recently. The Fund is now managed with more of a value style--
looking for strong companies at good prices. We will now use near-term weakness
as an opportunity to add to positions in companies where long-run prospects are
strong.
WERE THERE ANY SHIFTS IN THE FUND'S PORTFOLIO HOLDINGS/SECTORS THAT HAVE HAD A
SIGNIFICANT IMPACT ON FUND PERFORMANCE?
We took over management of the Fund in March of 1998 and began to subtly reshape
the portfolio. We increased concentrations in industries such as technology and
health-care and reduced holdings in consumer-discretionary stocks, particularly
restaurants. We believe these new positions will add to performance over the
long-run, as the industries are growing faster than the economy as a whole.
We intend to shift focus to stocks with lower relative valuations. These stocks
may be currently out of favor, but with strong fundamentals and good business
prospects. The net effect on the Fund will be a lower overall price-to-earnings
ratio as these more moderately-priced companies are included in the portfolio.
This will work to reduce risk given the high valuations of domestic equities.
We had success with Icos, a biopharmaceutical firm that currently has eight
products in phase II trials for approval. A medical equipment firm, ATL
Ultrasound, was recently purchased and has been a strong performer.
WHAT IS OUR INTERMEDIATE- AND LONG-TERM OUTLOOK FOR THE FUND?
The market has been dominated by the large-cap stocks. We believe this trend
will not continue in the long-run, and valuations of these very large companies
may have reached excessive levels. It seems likely the performance gap between
large and small companies will close and our valuation discipline will reward
our shareholders over the long run. The Fund focuses on companies with good
management teams and excellent long-term prospects. We attempt to buy stocks
below their intrinsic value with the expectation their value will ultimately be
realized.
It is important to maintain your long-term focus to small-cap equity investing.
These stocks tend to be more volatile, but long-term results have been very
favorable.
WHAT IS OUR OVERALL ECONOMIC OUTLOOK FOR THE NEXT 12 MONTHS?
The domestic economy continues to support strong growth without significant
inflation. However, it is unclear if all of the effects of Asia have rippled
through the U.S. economy. Currently, the effects of Asia have only muted growth
and inflation. Should the impact be more profound, the markets could be upset by
a substantially weaker economy than was previously forecasted. The tight labor
market could cause inflationary pressures, although currently inflation is well
contained. These factors will all play an important role in the overall
performance of financial assets, as stocks benefit from a low inflation, low
interest rate environment.
++ Allocation percentages are based on total investment value of the portfolio
as of 6/30/98.
Differences from financial statements are a result of a consolidation of
industries or sectors.
19
<PAGE>
INTERNATIONAL GROWTH FUND
PORTFOLIO MANAGER:
WARBURG PINCUS ASSET MANAGEMENT, INC.
The following team has been primarily responsible for managing the International
Growth Fund: Richard H. King, Senior Managing Director, joined the firm in 1989
to found the international equity department and has 33 years of investment
experience. Prior to joining Warburg, Mr. King was chief investment officer and
a director of Fiduciary Trust Company International S.A. in London from 1984 to
1988. P. Nicholas Edwards, Managing Director, has 15 years of investment
experience. Prior to joining Warburg, Mr. Edwards was a director and senior Fund
manager at Jardine Fleming Investment Advisers in Tokyo from 1991 to 1995.
Harold W. Ehrlich, CFA, CIC, Managing Director, has 15 years of investment
experience. Prior to joining Warburg, Mr. Ehrlich was a senior vice president,
portfolio manager and analyst at Templeton Investment Counsel Inc. from 1987 to
1995. Vincent J. McBride, Senior Vice President, has 12 years of investment
experience. Prior to joining Warburg, Mr. McBride was an international equity
analyst at Smith Barney Inc. from 1993 to 1994. He was an international equity
analyst at General Electric Investments from 1992 to 1993 and a portfolio
manager/analyst at United Jersey Bank from 1989 to 1992.
WHAT WERE THE MOST SIGNIFICANT FACTORS CONTRIBUTING TO THE FUND'S PERFORMANCE
OVER THE PAST 12 MONTHS?
For the 12 months ended June 30, 1998, the most significant factor affecting the
Fund's performance was the Asian region's economic and financial problems. These
problems started very early in the period, with the Thai Baht being devalued on
July 2, 1997. After that point, having almost any exposure to Asia was a
liability. Across the region, economic growth continued to contract, and the
picture is unlikely to improve
growth of a $10,000 investment (class A shares)
[GRAPH APPEARS HERE]
INTERNATIONAL GROWTH
<TABLE>
<CAPTION>
Fund
Fund (Class A shares;
(Class A shares; adjusted for the Morgan Stanley
not adjusted for maximum 5.5% Capital International
sales charge) sales charge) EAFE, Index/1/
---------------- ---------------- ---------------------
<S> <C> <C> <C>
Inception/1/
7/18/90 $ 9,780 $ 9,242 $10,000
Dec-90 $ 8,150 $ 7,702 $ 8,589
Jun-91 $ 8,270 $ 7,815 $ 8,724
Dec-91 $ 9,325 $ 8,812 $ 9,632
Jun-92 $ 8,872 $ 8,384 $ 8,668
Dec-92 $ 8,339 $ 7,881 $ 8,459
Jun-93 $ 9,894 $ 9,350 $10,426
Dec-93 $11,037 $10,430 $11,214
Jun-94 $11,120 $10,508 $12,198
Dec-94 $10,892 $10,293 $12,085
Jun-95 $10,674 $10,087 $12,400
Dec-95 $11,422 $10,794 $13,440
Jun-96 $12,078 $11,414 $14,047
Dec-96 $12,338 $11,660 $14,243
Jun-97 $13,951 $13,184 $15,839
Dec-97 $12,031 $11,370 $14,495
Jun-98 $13,368 $12,633 $16,807
</TABLE>
The performance of the Class B Shares and Class S Shares was different than that
indicated by the lines shown above for the Class A Shares, based on the
differences in sales loads and fees paid by Class B and Class S shareholders.
1 Index total returns were calculated from 7/31/90 to 6/30/98. The Morgan
Stanley Capital International EAFE Index includes stock markets of Europe,
Australia, and the Far East weighted by capitalization. EAFE is a broad-based
index of equity markets representing 18 countries. The index assumes
reinvestment of all dividends/distributions, and does not reflect any asset-
based charges for investment management or other expenses. Past investment
performance does not guarantee future performance. The returns shown for the
Fund assume reinvestment of all dividends/distributions by the shareholder.
During the period noted, the Advisor waived a portion of its management fees,
and credits were allowed by the Custodian. In the absence of the waivers or
credits, yield and total return would have been lower.
<TABLE>
<CAPTION>
Total Returns as of 6/30/98 6 Month 1 Year 5 Year* Since Inception*
(July 18, 1990)
<S> <C> <C> <C> <C>
Class A Shares
Fund (not adjusted for sales charge) 11.11% -4.19% 6.20% 3.72%
Fund (adjusted for the maximum 5.5% sales charge) 5.05% -9.46% 5.01% 2.98%
Morgan Stanley Capital International EAFE Index/1/ 16.08% 6.38% 10.34% 6.78%
Class B Shares 6 Month 1 Year 5 Year* Since Inception*
(June 30, 1994)
Fund (not adjusted for contingent deferred sales charge) 10.66% -4.95% N/A 3.96%
Fund (adjusted for the maximum contingent deferred sales charge) 5.66% -9.25% N/A 3.54%
Morgan Stanley Capital International EAFE Index/1/ 16.08% 6.38% N/A 8.34%
Class S Shares
Fund (not adjusted for contingent deferred sales charge) 10.66% -4.94% N/A 3.94%
Fund (adjusted for the maximum contingent deferred sales charge) 5.66% -9.26% N/A 3.51%
Morgan Stanley Capital International EAFE Index/1/ 16.08% 6.38% N/A 8.34%
</TABLE>
*Annualized
20
<PAGE>
[PIE CHARTS APPEARS HERE]
PORTFOLIO COMPOSITION++
1)EUROPE 77%
2)JAPAN 9%
3)FAR EAST (EXCLUDING JAPAN) 5%
4)LATIN AMERICA 4%
5)CASH/OTHER 4%
6)AUSTRALIA & NEW ZEALAND 1%
dramatically any time soon. The near-term earnings outlook from most companies
was correspondingly poor, and in some cases, it was difficult to gauge earnings
prospects at all, especially given the absence of currency stability. Investor
sentiment, which had picked up briefly in the first quarter of 1998, has once
again turned overwhelmingly bearish in the second quarter, exacerbated by
growing worries about Japan.
Europe, whose markets showed near-universal gains, rose throughout the period on
continued economic improvement and robust profit growth. In the second quarter
of 1998, Europe's performance was even stronger from the perspective of U.S.
Dollar-based investors, as most regional currencies rose vs. the U.S. Dollar,
bucking the recent trend.
WHAT MARKET CONDITIONS AFFECTED THE FUND'S PERFORMANCE DURING THE PERIOD, AND
WHAT INVESTMENT TECHNIQUES WERE USED TO ADDRESS THOSE CONDITIONS?
The collapse in Asia during the second half of 1997 was addressed by largely
reducing holdings in the region. Many positions were sold, but still had an
adverse effect on performance. As of June 30, the Fund had 77% of its
investments in Europe and 14% in Asia.
In the first quarter of 1998, foreign stock markets staged a strong rally,
bouncing back convincingly after 1997's fourth quarter. By region, the most
impressive results came from Europe, where markets showed across-the-board
strength, propelled by robust corporate profits, merger speculation and
increased optimism toward the prospects for European Monetary Union. Asian
markets generally rose as well, with several of last year's hardest-hit markets
rallying sharply.
Non-U.S. equity markets had mixed results in the second quarter of 1998, with
performance divided almost entirely along regional lines.
Asian/Pacific markets mostly declined, with several falling sharply, amid
renewed worries over the region's economic and financial straits. Adding a
considerable amount of fuel to the fire was a further deterioration of Japan's
economy, as a healthy Japan is requisite for a broad, sustained regional
recovery. Asia's weakness had spillover effects on Latin American and, to a
lesser extent, Eastern European markets, whose troubles were compounded by the
threat of an economic implosion in Russia. Losses in all of these markets were
magnified in Dollar terms, as most countries' currencies fell in value against
the U.S. Dollar.
The safe harbor through the period was, once again, Europe, where most markets
showed gains. Because of the continued strength there, as well as the
uncertainty and underperformance in the Asian region, we continued to focus on
Europe.
WERE THERE ANY SHIFTS IN THE FUND'S PORTFOLIO HOLDINGS/SECTORS THAT HAD A
SIGNIFICANT IMPACT ON FUND PERFORMANCE?
Our continued shift away from a lagging Asian region in favor of Europe has
helped the performance of the Fund. We further trimmed our Asian-Pacific
exposure during the period, reflecting our ongoing concerns about the region. In
particular, the Fund's remaining exposure to Japan was concentrated in a handful
of strong, globally-competitive companies, primarily electronics firms, as these
companies continue to generate strong earnings gains. Asian economic weakness
notwithstanding, their stocks remain reasonably priced vs. those of their global
peers.
WHAT IS OUR INTERMEDIATE- AND LONG-TERM OUTLOOK FOR THE FUND?
We expect to maintain the Europe-heavy positioning for at least the near term,
given the tailwind that continues to drive these markets. Economic growth, which
has improved significantly over the past year, continues apace, with most
continental European economies projected to expand by 2.5%-3% over the next 12
months. Growth in Europe stands to be even higher in 1999, barring a major
external shock (e.g., a total collapse in Russia or a significant tightening of
U.S. monetary policy).
Also, the interest-rate backdrop remains supportive, local-investor sentiment
towards stocks grows increasingly bullish, and foreign sentiment towards Europe
remains positive. In short, we maintain our positive outlook regarding Europe,
and all things considered, we are comfortable with our current level of
exposure.
Economic growth across the Asian region continues to contract, and the picture
is unlikely to improve dramatically any time soon. Given this, we have deemed
it prudent to maintain a cautious posture, limiting our exposure to only those
stocks in which we have a very high level of conviction. This short list of
names is concentrated primarily in Hong Kong, Singapore, South Korea and New
Zealand.
++ Allocation percentages are based on total investment value of the portfolio
as of 6/30/98.
21
<PAGE>
STRATEGIC GROWTH PORTFOLIO
PORTFOLIO MANAGER:
STEPHEN C. SCOTT
WM ADVISORS, INC.
The Strategic Asset Management Portfolios are managed by Senior Portfolio
Manager, Steve Scott. Mr. Scott is a pioneer in the business of asset
allocation, with over 28 years experience. He is the architect and founder of
the SAM Portfolios and holds both a B.S. and an MBA from California State
University, Long Beach.
PERFORMANCE REVIEW
The Strategic Asset Management Strategic Growth Portfolio returned 19.87%
(13.27% adjusted for the maximum sales charge) for the year ended June 30, 1998.
The year was marked with market volatility and change. During the period, the WM
Group of Funds were introduced as a result of the merger between Sierra and
Composite Funds. We are pleased to report the architectural design, fundamental
policies, and management of the SAM Portfolios continued to provide benefit to
shareholders. In addition, the continuity of asset management personnel for the
SAM Portfolios remained in place. Although the Fund underperformed its benchmark
index/3/(the S&P 500), it is managed with an effort to reduce volatility
relative to single asset-class investments. The Fund participated in the
appreciation of the large-cap market, but the underperformance of small-caps and
international stocks hurt overall performance.
ECONOMIC / MARKET REVIEW
Strong economic fundamentals drove the financial markets forward in the 12-month
period ended June 30, 1998. Low unemployment, strong consumer spending, low
interest rates, and a booming housing market provided some
<TABLE>
<CAPTION>
[GRAPH APPEARS HERE]
GROWTH OF A $10,000 INVESTMENT (CLASS A SHARES)
Fund (Class A Fund (Class A
Shares; not Shares; adjusted
adjusted for for the maximum Capital Market Russell 3000
sales charge) 5.5% sales charge) Benchmark /1/ Index /2/
<S> <C> <C> <C> <C>
Inception /1/
5/31/95 $ 10,000 $ 9,450 $ 10,000 $ 10,000
Aug $ 10,992 $ 10,387 $ 10,604 $ 10,798
Oct $ 10,951 $ 10,349 $ 11,010 $ 11,120
Dec 95 $ 11,657 $ 11,015 $ 11,707 $ 11,803
Feb $ 12,208 $ 11,536 $ 12,226 $ 12,324
Apr $ 12,886 $ 12,177 $ 12,525 $ 12,684
Jun $ 12,799 $ 12,095 $ 12,901 $ 12,967
Aug $ 12,444 $ 11,760 $ 12,588 $ 12,660
Oct $ 12,824 $ 12,118 $ 13,660 $ 13,593
Dec 96 $ 13,358 $ 12,623 $ 14,408 $ 14,377
Feb $ 13,537 $ 12,792 $ 15,427 $ 15,188
Apr $ 13,177 $ 12,452 $ 15,668 $ 15,217
Jun $ 14,489 $ 13,692 $ 17,372 $ 16,932
Aug $ 14,862 $ 14,044 $ 17,709 $ 17,518
Oct $ 14,914 $ 14,094 $ 18,055 $ 17,890
Dec 97 $ 14,981 $ 14,157 $ 19,216 $ 18,946
Feb $ 16,325 $ 15,427 $ 20,830 $ 20,407
Apr $ 17,326 $ 16,373 $ 22,118 $ 21,629
Jun $ 17,367 $ 16,412 $ 22,620 $ 21,807
</TABLE>
The performance of the Class B Shares was different than that indicated by the
lines shown above for the Class A Shares, based on the difference in sales loads
and fees paid by Class B shareholders.
1 The Strategic Growth Portfolio's benchmark is a capital market index that is
intended to represent a proxy for Portfolio performance. The benchmark
allocation is as follows: 100% S&P 500. Past investment performance does not
guarantee future performance. The returns shown for the Portfolio assume
reinvestment of all dividends/distributions by the shareholder.
2 The Russell 3000 Index is a broad-based index and is intended to represent
the equity market as a whole.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS AS OF 6/30/984 1 YEAR 5 YEAR* SINCE INCEPTION*
(May 31, 1995)
<S> <C> <C> <C>
CLASS A SHARES
Fund (not adjusted for sales charge) 19.87% N/A 19.59%
Fund (adjusted for the maximum 5.5% sales charge) 13.27% N/A 17.41%
Capital Market Benchmark/1/ 30.21% N/A 30.31%
CLASS B SHARES 1 YEAR 5 YEAR* SINCE INCEPTION*
(May 31, 1995)
Fund (not adjusted for sales charge) 19.01% N/A 18.76%
Fund (adjusted for the maximum CDSC) 14.01% N/A 18.30%
Capital Market Benchmark/1/ 30.21% N/A 30.31%
</TABLE>
3 The stated goals may or may not be met and are in no way a guarantee.
4 All performance shown prior to the November 1, 1996 asset conversion date
(the date on which the majority of existing SAM clients voluntarily exchanged
into the new SAM Portfolios) for the Sierra Asset Management Portfolios
represents the performance of the Sierra Asset Management Account ("SAM
Account"), a discretionary asset allocation service that invested in the
Sierra Trust Funds. The SAM Account was not registered as an investment
company under the Investment Company Act of 1940 ("Act") and therefore, was
not subject to certain restrictions that the Act imposes. If the SAM Account
had been registered under the Act, its performance may have differed
significantly.
For the period November 1, 1996 to June 30, 1998, the Advisor waived its
management fee and absorbed other expenses, the Administrator waived a
portion of its management fee, and credits were allowed by the Custodian.
Prior to November 1, 1996, only the Custodian allowed credits. In the absence
of the waivers and absorption of other expenses, or Custodian credits, total
return would have been lower.
*Annualized
22
<PAGE>
[PIE CHART APPEARS HERE]
MUTUAL FUND ALLOCATION
AS OF JUNE 30, 1998+
1)Growth & Income Fund 40%
2)Growth Fund 31%
3)Emerging Growth Fund 10%
4)International Growth Fund 19%
of the positive backdrop for economic growth. While both fixed-income and equity
investments posted very positive results, it was not without volatility. The
crisis in the Far East sent shock waves throughout the financial markets
worldwide in the fourth quarter of 1997. The extent to which the Asian collapse
ultimately impacts U.S. and European growth is not yet known, but the
uncertainty is likely to increase market volatility until a turnaround becomes
visible.
In the equity markets, a dichotomy of results relative to market capitalization
continued throughout the period. Large capitalization companies (S&P 500) have
appreciated three times as much as small-caps (Russell 2000) during the first
six months of 1998; they returned twice as much as small-caps over the past year
ended June 30, 1998. Style differences also provided a disparity in results in
1998, as growth stocks significantly outperformed value stocks in both the
large- and the mid-sized capitalization areas. Small-cap growth continued to be
the worst performing domestic equity sector. The backlash of the Asian currency
crisis on global equity markets was quite pronounced, as results across Asia and
Latin America were very poor. Europe on the other hand, proved resilient,
outpacing even the high flying large-cap domestic markets in the period.
INVESTMENT STRATEGY
The SAM Strategic Growth Portfolio remained diversified in four equity funds,
representing six major asset classes. This diversification enables the Portfolio
to manage risk during periods of market volatility. The diversified portfolio of
equity classes shield the Portfolio from drastic market swings in one specific
area of the global markets.
The overall investment strategy for the period was to:
. Increase exposure to European holdings (17%) to take advantage of prospects
for strength in the region.
. Overweight (63%) the equity portion of the portfolio in core domestic mid-
to large-capitalization stocks.
REVIEW OF PORTFOLIO ALLOCATIONS
We have positioned the Portfolio to take advantage of current market trends as
well as to manage overall portfolio risk levels. The Fund benefited from its
emphasis in mid- to large-cap holdings, whose strong performance offset
underperformance by the small-cap position. Prior to the Asian collapse, the
Portfolio was underweighted in international stocks which aided both performance
and the overall risk of the Portfolio. Recently, we have increased exposure
overseas due to a positive outlook in Europe. We also reduced our concentration
in the very highly-valued U.S. domestic market. We removed our position in
fixed-income securities and now maintain a nearly (97%) fully-invested
Portfolio. This reflects our positive long-term outlook on equities, and we feel
the diversified positions should help to manage the overall risk levels of the
Strategic Growth Portfolio given the high valuation levels of domestic equities.
OUTLOOK
Inflation remains weak and interest rates are low. Both the Bundesbank (Europe)
and the Federal Reserve Board (U.S.) have announced they are closely watching
inflation and maintaining a bias towards raising interest rates. If the negative
impact from Asia is less than expected, and if consumption remains strong, the
Federal Reserve may be forced to adjust interest rates later in the year. This
would be done to prevent the economy from overheating. We believe inflation is
manageable and Chairman Greenspan has been very effective in interest rate
policy during this new paradigm.
We maintain our long-term positive outlook on the equity markets. Although there
will always be periods of volatility, the overriding economic fundamentals
provided by globalization and efficiency improvements brought about by
technological enhancements create a dynamically-positive environment for stocks.
Current low levels of interest rates and inflation also provide support for
equities. We are also bullish on foreign equities, especially Europe, in where
an improving structural foundation also furnishes a positive long-term forecast.
In the same respect, we are reluctant to extend portfolio risk much beyond
current levels due to the high equity valuations. We prefer to make allocation
changes only if diversification can be maintained and portfolio risk is not
measurably extended.
[PIE CHART APPEARS HERE]
ASSET CLASS DIVERSIFICATION
AS OF JUNE 30, 1998
1)Cash Equivalent 2%
2)Bonds 1%
3)Small-Cap 10%
4)Mid-Cap 21%
5)Large-Cap 42%
6)Foreign Stocks 24%
23
<PAGE>
CONSERVATIVE GROWTH PORTFOLIO
PORTFOLIO MANAGER:
STEPHEN C. SCOTT
WM ADVISORS, INC.
The Strategic Asset Management Portfolios are managed by Senior Portfolio
Manager, Steve Scott. Mr. Scott is a pioneer in the business of asset
allocation, with over 28 years experience. He is the architect and founder of
the SAM Portfolios and holds both a B.S. and an MBA from California State
University, Long Beach.
PERFORMANCE REVIEW
The Strategic Asset Management Conservative Growth Portfolio returned 15.18%
(8.84% adjusted for the maximum sales charge) for the year ended June 30, 1998.
The year was marked with market volatility and change. During the period, the WM
Group of Funds were introduced as a result of the merger between Sierra and
Composite Funds. We are pleased to report the architectural design, fundamental
policies, and management of the SAM Portfolios continued to provide benefit to
shareholders. In addition, the continuity of asset management personnel for the
SAM Portfolios remained in place. The Fund beat its benchmark index for the past
year and since inception, while being managed with an effort to volatility
relative to single asset-class investments. Long-term results continue to
provide a premium over inflation; since inception, the Fund returned 10.43%
above the rate of inflation (9.61% adjusted for the maximum sales charge)/3/.
ECONOMIC / MARKET REVIEW
Strong economic fundamentals drove the financial markets forward in the 12-
month period ended June 30, 1998. Low unemployment, strong consumer spending,
low
[GRAPH APPEARS HERE]
GROWTH OF A $10,000 INVESTMENT (CLASS A SHARES)
<TABLE>
<CAPTION>
Fund (Class A Fund (Class A
Shares; not Shares; adjusted
adjusted for for the maximum Capital Market Russell 3000
sales charge) 5.5% sales charge) Benchmark /1/ Index /2/
<S> <C> <C> <C> <C>
Inception /1/
9/30/90 $ 10,000 $ 9,450 $ 10,000 $ 10,000
Jun-91 $ 11,416 $ 10,788 $ 11,604 $ 12,639
Dec-91 $ 12,971 $ 12,258 $ 12,823 $ 14,609
Jun-92 $ 12,975 $ 12,261 $ 12,636 $ 14,501
Dec-92 $ 13,550 $ 12,805 $ 13,213 $ 16,023
Jun-93 $ 14,835 $ 14,019 $ 14,200 $ 16,825
Dec-93 $ 16,068 $ 15,184 $ 14,936 $ 17,767
Jun-94 $ 15,207 $ 14,371 $ 14,917 $ 16,993
Dec-94 $ 15,510 $ 14,657 $ 15,321 $ 17,797
Jun-95 $ 17,137 $ 16,194 $ 16,899 $ 21,225
Dec-95 $ 19,023 $ 17,977 $ 18,359 $ 24,349
Jun-96 $ 20,730 $ 19,590 $ 19,437 $ 26,749
Dec-96 $ 21,166 $ 20,002 $ 20,516 $ 29,657
Jun-97 $ 22,578 $ 21,336 $ 22,788 $ 34,929
Dec-97 $ 22,994 $ 21,729 $ 23,583 $ 39,084
Jun-98 $ 26,007 $ 24,577 $ 25,948 $ 44,986
</TABLE>
The performance of the Class B Shares was different than that indicated by the
lines shown above for the Class A Shares, based on the difference in sales loads
and fees paid by Class B shareholders.
1 The Conservative Growth Portfolio's benchmark is a blended mix of capital
market indices that is intended to represent a proxy for Portfolio
performance. The benchmark allocation is as follows: 35% S&P 500, 20% MSCI
EAFE + Emerging Markets, 20% Lehman Bros. Mutual Fund (1-5) Gov/Corp Index,
20% Salomon Bros. 90-day T-Bills, and 5% Russell 2000 Growth. Past investment
performance does not guarantee future performance. The returns shown for the
Portfolio assume reinvestment of all dividends/distributions by the
shareholder.
2 The Russell 3000 Index is a broad-based index and is intended to represent
the equity market as a whole.
<TABLE>
<CAPTION>
Average Annual Total Returns as of 6/30/984 1 Year 5 Year* Since Inception*
(September 30, 1990)
<S> <C> <C> <C>
Class A Shares
Fund (not adjusted for sales charge) 15.18% 11.88% 13.13%
Fund (adjusted for the maximum 5.5% sales charge) 8.84% 10.62% 12.31%
Capital Market Benchmark/1/ 13.87% 12.81% 13.09%
Class B Shares 1 Year 5 Year* Since Inception*
(June 30, 1994)
Fund (not adjusted for sales charge) 14.44% N/A 13.54%
Fund (adjusted for the maximum CDSC) 9.44% N/A 13.19%
Capital Market Benchmark/1/ 13.87% N/A 14.84%
</TABLE>
3 The stated goals may or may not be met and are in no way a guarantee. Annual
rate of inflation: 2.70%. Source: Ibbotson Associates
4 All performance shown prior to the November 1, 1996 asset conversion date
(the date on which the majority of existing SAM clients voluntarily exchanged
into the new SAM Portfolios) for the Sierra Asset Management Portfolios
represents the performance of the Sierra Asset Management Account ("SAM
Account"), a discretionary asset allocation service that invested in the
Sierra Trust Funds. The SAM Account was not registered as an investment
company under the Investment Company Act of 1940 ("Act") and therefore, was
not subject to certain restrictions that the Act imposes. If the SAM Account
had been registered under the Act, its performance may have differed
significantly.
For the period November 1, 1996 to June 30, 1998, the Advisor waived its
management fee and absorbed other expenses, the Administrator waived a
portion of its management fee, and Custodian allowed credits. Prior to
November 1, 1996, the Advisor Administrator and Distributor waived a portion
of their management or distribution fees, the Advisor and Administrator
absorbed other expenses, and the Custodian allowed credits. In the absence of
the waivers, absorption of other expenses, or Custodian credits, yield and
total return would have been lower.
*Annualized
24
<PAGE>
[PIE CHART APPEARS HERE]
MUTUAL FUND ALLOCATION
AS OF JUNE 30, 1998+
1)Money Market Fund 10%
2)U.S. Government Fund 5%
3)Growth & Income Fund 35%
4)Growth Fund 21%
5)Emerging Growth Fund 10%
6)International Growth Fund 19%
interest rates, and a booming housing market provided some of the positive
backdrop for economic growth. While both fixed-income and equity investments
posted very positive results, it was not without volatility. The crisis in the
Far East sent shock waves throughout the financial markets worldwide in the
fourth quarter of 1997. The extent to which the Asian collapse ultimately
impacts U.S. and European growth is not yet known, but the uncertainty is likely
to increase market volatility until a turn around is visible.
In the equity markets, a dichotomy of results relative to market capitalization
continued throughout the period. Large capitalization companies (S&P 500) have
appreciated three times as much as small-caps (Russell 2000) during the first
six months of 1998; they returned twice as much as small-caps over the past year
ended June 30, 1998. Style differences also provided a disparity in results in
1998 as growth stocks significantly outperformed value stocks in both the large
and the mid-sized capitalization areas. Small-cap growth continued to be the
worst performing domestic equity sector. The backlash of the Asian crisis on
global equity markets was quite pronounced, as results across Asia and Latin
America were very poor. Europe on the other hand, proved resilient, outpacing
even the high-flying large-cap domestic markets in the period.
INVESTMENT STRATEGY
The SAM Conservative Growth Portfolio remained diversified in six funds,
representing eight major asset classes. This broad diversification enables the
Portfolio to manage risk during periods of market volatility. Asset classes,
ranging in risk levels from cash to foreign stocks, shield the Portfolio from
drastic swings in one specific area of the financial markets.
The overall investment strategy for the period was to:
. Positioned a portion of the Portfolio in cash and fixed-income to help
manage risk.
. Increase exposure to European holdings (17%) to take advantage of prospects
for strength in the region.
. Overweight (50%) the equity portion of the portfolio in core domestic mid-
to large-capitalization stocks.
REVIEW OF PORTFOLIO ALLOCATIONS
We have positioned the Portfolio to take advantage of current market trends as
well as to manage overall portfolio risk levels. The Fund benefited from its
emphasis in mid- to large-cap holdings, whose strong performance offset
underperformance by the small-cap position. Prior to the Asian collapse, the
Portfolio was underweighted in international stocks which aided both performance
and the overall risk of the Portfolio. Recently, we have increased exposure
overseas due to a positive outlook in Europe. We also reduced our concentration
in the very highly-valued U.S. domestic market. These moves further diversify
the assets and, in conjunction with the cash position, should work to manage the
overall risk levels of the Conservative Growth Portfolio given the high
valuation levels of domestic equities.
OUTLOOK
Inflation remains weak and interest rates are low. Both the Bundesbank (Europe)
and the Federal Reserve Board (U.S.) have announced they are closely watching
inflation and maintain a bias towards raising interest rates. If the negative
impact from Asia is less than expected, and if consumption remains strong, the
Federal Reserve may be forced to adjust interest rates later in the year. This
would be done to prevent the economy from overheating. We believe inflation is
manageable and Chairman Greenspan has been very effective in interest rate
policy during this new paradigm.
We maintain our long-term positive outlook on the equity markets. Although there
will always be periods of volatility, the overriding economic fundamentals
provided by globalization and efficiency improvements brought about by
technological enhancements create a dynamically positive environment for stocks.
Current low levels of interest rates and inflation also provide support for
equities. We are also bullish on foreign equities, especially in Europe, where
an improving structural foundation also furnishes a positive long-term forecast.
In the same respect, we are reluctant to extend portfolio risk much beyond
current levels due to the high equity valuations. We prefer to make allocation
changes only if diversification can be maintained and portfolio risk is not
measurably extended.
[PIE CHART APPEARS HERE]
ASSET CLASS DIVERSIFICATION
AS OF JUNE 30, 1998+
1)Cash 12%
2)Treasuries 1%
3)Mortgage-backed 4%
4)Other Bonds 1%
5)Small-cap 9%
6)Mid-cap 17%
7)Large-cap 33%
8)Foreign Stocks 23%
+ may not reflect current allocation
25
<PAGE>
BALANCED PORTFOLIO
PORTFOLIO MANAGER:
STEPHEN C. SCOTT
WM ADVISORS, INC.
The Strategic Asset Management Portfolios are managed by Senior Portfolio
Manager, Steve Scott. Mr. Scott is a pioneer in the business of asset
allocation, with over 28 years experience. He is the architect and founder of
the SAM Portfolios and holds both a B.S. and an MBA from California State
University, Long Beach.
PERFORMANCE REVIEW
The SAM Balanced Portfolio returned 14.32% (8.03% adjusted for the maximum sales
charge) for the year ended June 30, 1998. The year was marked with market
volatility and change. During the period, the WM Group of Funds were introduced
as a result of the merger between Sierra and Composite Funds. We are pleased to
report that the archi-tectural design, fundamental policies, and management of
the SAM Portfolios continued to provide benefit to shareholders. In addition,
the continuity of asset management personnel for the SAM Portfolios remained in
place. The Fund continues to beat its benchmark index for all periods/4/ while
being managed with an effort to reduce volatility relative to single asset-class
investments. Long-term results continue to provide a premium over inflation;
since inception, the Fund returned 8.36% above the rate of inflation (7.55%
adjusted for the maximum sales charge)/4/.
ECONOMIC / MARKET REVIEW
Strong economic fundamentals drove the financial markets forward in the year
ended June 30, 1998. Low unemployment, strong consumer spending, low interest
rates, and a booming housing market provided some of the positive backdrop for
economic growth. While both fixed-income and equity investments posted very
positive results, it was not without volatility. The
[GRAPH APPEARS HERE]
GROWTH OF A $10,000 INVESTMENT (CLASS A SHARES)
<TABLE>
<CAPTION>
Fund (Class A Fund (Class A
Shares; not Shares; adjusted Lehman Brothers
adjusted for for the maximum Capital Market Russell 3000 Aggregate Bond
sales charge) 5.5% sales charge) Benchmark /1/ Index /2/ Index /3/
<S> <C> <C> <C> <C> <C>
Inception /1/
9/30/90 $ 10,000 $ 9,450 $ 10,000 $ 10,000 $ 10,000
Jun-91 $ 11,059 $ 10,451 $ 11,137 $ 12,639 $ 10,975
Dec-91 $ 12,279 $ 11,604 $ 12,104 $ 14,609 $ 12,187
Jun-92 $ 12,236 $ 11,563 $ 12,160 $ 14,501 $ 12,518
Dec-92 $ 12,581 $ 11,889 $ 12,529 $ 16,023 $ 13,090
Jun-93 $ 13,770 $ 13,013 $ 13,358 $ 16,825 $ 13,993
Dec-93 $ 14,620 $ 13,816 $ 13,844 $ 17,767 $ 14,366
Jun-94 $ 13,749 $ 12,993 $ 13,862 $ 16,993 $ 13,810
Dec-94 $ 13,945 $ 13,178 $ 14,102 $ 17,797 $ 13,947
Jun-95 $ 15,476 $ 14,625 $ 15,248 $ 21,225 $ 15,543
Dec-95 $ 16,975 $ 16,042 $ 16,195 $ 24,349 $ 16,523
Jun-96 $ 17,617 $ 16,648 $ 16,709 $ 26,749 $ 16,321
Dec-96 $ 18,418 $ 17,405 $ 17,461 $ 29,657 $ 17,121
Jun-97 $ 19,730 $ 18,645 $ 18,697 $ 34,929 $ 17,653
Dec-97 $ 20,297 $ 19,181 $ 19,242 $ 39,084 $ 18,779
Jun-98 $ 22,552 $ 21,312 $ 20,500 $ 44,986 $ 19,514
</TABLE>
The performance of the Class B Shares was different than that indicated by the
lines shown above for the Class A Shares, based on the difference in sales loads
and fees paid by Class B shareholders.
1 The Balanced Portfolio's benchmark is a blended mix of capital market indices
that is intended to represent a proxy for Portfolio performance. The benchmark
allocation is as follows: 25% Lehman Bros Mutual Fund Short (1-5) Gov/Corp
Index, 25% Salomon Bros. 90-day T-Bills, 20% Lehman Bros Mortgage Index, 15%
S&P 500, and 15% MSCI EAFE + Emerging Markets. Past investment performance
does not guarantee future performance. The returns shown for the Portfolio
assume reinvestment of all dividends/distributions by the shareholder.
2 The Russell 3000 Index is a broad-based index and is intended to represent the
equity market as a whole.
3 The Lehman Brothers Aggregate Index is a broad-based index intended to
represent the fixed-income market as a whole.
<TABLE>
<CAPTION>
TOTAL RETURNS AS OF 6/30/98/4/ 1 YEAR 5 YEAR* SINCE INCEPTION*
(SEPTEMBER 30, 1990)
<S> <C> <C> <C>
CLASS A SHARES
Fund (not adjusted for sales charge) 14.32% 10.35% 11.06%
Fund (adjusted for the maximum 4.5% sales charge) 8.03% 9.11% 10.25%
Capital Market Benchmark/1/ 9.64% 8.94% 9.70%
CLASS B SHARES 1 YEAR 5 YEAR* SINCE INCEPTION*
(JUNE 30, 1994)
Fund (not adjusted for sales charge) 13.47% N/A 12.38%
Fund (adjusted for the maximum CDSC) 8.47% N/A 12.03%
Capital Market Benchmark/1/ 9.64% N/A 10.28%
</TABLE>
4 The stated goals may or may not be met and are in no way a guarantee. Annual
rate of inflation: 2.70%. Source: Ibbotson Associates
5 All performance shown prior to the November 1, 1996 asset conversion date (the
date on which the majority of existing SAM clients voluntarily exchanged into
the new SAM Portfolios) for the Sierra Asset Management Portfolios represents
the performance of the Sierra Asset Management Account ("SAM Account"), a
discretionary asset allocation service that invested in the Sierra Trust
Funds. The SAM Account was not registered as an investment company under the
Investment Company Act of 1940 ("Act") and therefore, was not subject to
certain restrictions that the Act imposes. If the SAM Account had been
registered under the Act, its performance may have differed significantly.
For the period November 1, 1996 to June 30, 1998, the Advisor waived its
management fee and absorbed other expenses, the Administrator waived a portion
of its management fee, and Custodian allowed credits. Prior to November 1,
1996, the Advisor, Administrator and Distributor waived a portion of their
management or distribution fees, the Advisor and Administrator absorbed other
expenses, and the Custodian allowed credits. In the absence of the waivers,
absorption of other expenses, or credits, yield and total return would have
been lower.
*Annualized
26
<PAGE>
[PIE CHART APPEARS HERE]
MUTUAL FUND ALLOCATION
AS OF JUNE 30, 1998+
1)Money Market Fund 20%
2)U.S. Government 15%
Securities Fund
3)Growth & Income Fund 30%
4)Growth Fund 16%
5)International Growth Fund 19%
crisis in the Far East sent shock waves throughout the financial markets
worldwide in the fourth quarter of 1997. The extent to which the Asian collapse
ultimately impacts U.S. and European growth is not yet known, but the
uncertainty is likely to increase market volatility until a turnaround becomes
visible.
Although there were pockets of slowing, the U.S. economy continued to move
forward. In the equity markets, a dichotomy of results relative to market
capitalization continued throughout the period. Large capitalization companies,
the type found among the S&P 500, have appreciated three times as much as small-
caps (Russell 2000) so far in 1998; they returned twice as much as small-caps
over the past 12 months.
Interest rates fell during the period, with the yield on the 30-year Treasury
Bond reaching a record low of 5.57% on June 15, 1998. With falling yields, the
longer-term fixed-income holdings performed very well in the period. It seems
that the Federal Reserve has been correct in its decision to allow interest
rates to remain unchanged in light of the prospective economic cooling influence
from Asia. Inflation was dormant throughout the period. Recently, housing and
medical costs have increased while wages continue to modestly accelerate, but
most of these pressures have been countered by falling commodity prices. It is
important to consider the inflation outlook as an indicator of the future
direction of interest rates, given the Fed's anti-inflation stance.
INVESTMENT STRATEGY
The SAM Balanced Portfolio remained diversified in five funds, representing
seven major asset classes. This broad diversification enables the Portfolio to
manage risk during periods of market volatility. Asset classes, ranging in risk
levels from cash to foreign stock, shield the Portfolio from drastic swings in
one specific area of the financial markets.
The overall investment strategy for the period was to:
. Increase equity exposure to 63% of assets while slightly reducing fixed-
income exposure to 37%.
. Increase exposure to European holdings to take advantage of prospects for
strength in the region.
. Overweight the equity portion of the portfolio in middle- and large-
capitalization stocks.
. Maintain a bias towards intermediate-term bonds to take advantage of
falling rates and provide positive risk/reward characteristics.
REVIEW OF PORTFOLIO ALLOCATIONS
We have positioned the Portfolio to take advantage of current market trends as
well as to manage overall portfolio risk levels. The Fund benefited from its
emphasis in mid- to large-cap holdings. Prior to the Asian collapse, the
Portfolio was underweighted in international stocks which aided both performance
and the overall risk of the Portfolio. Recently, we have increased exposure
overseas due to a positive outlook in Europe. We also reduced our concentration
in the very highly-valued U.S. domestic market. These moves further diversify
the assets and, in conjunction with the cash and mortgage position, should work
to manage the overall risk levels of the Balanced Portfolio given the high
valuation levels of domestic equities.
OUTLOOK
Inflation remains weak and interest rates are low. Both the Bundesbank (Europe)
and the Federal Reserve Board (U.S.) have announced they are closely watching
inflation and maintaining a bias towards raising interest rates. If the negative
impact from Asia is less than expected, and if consumption remains strong, the
Federal Reserve may be forced to adjust rates later in the year. We believe
inflation is manageable and Chairman Greenspan has been very effective in
interest rate policy during this new paradigm. However, we believe domestic
growth will increase. Therefore, until evidence shows us weakness beyond current
forecasts, we are reluctant to extend portfolio risk on the fixed-income side of
the Fund.
We maintain our long-term positive outlook on the equity markets. The overriding
economic fundamentals provided by globalization and efficiency improvements
brought about by technological enhancements create a dynamically positive
environment for stocks. We are also bullish on foreign equities, especially
Europe, where an improving structural foundation also furnishes a positive long-
term forecast. In the same respect, we are reluctant to extend portfolio risk
much beyond current levels due to the high equity valuations.
[PIE CHART APPEARS HERE]
ASSET CLASS DIVERSIFICATION
AS OF JUNE 30, 1998+
1)Cash Equivalent 21%
2)Mortgage-Backed 11%
3)Treasuries 4%
4)Other Bonds 1%
5)Small-Cap 3%
6)Mid-Cap 12%
7)Large-Cap 27%
8)Foreign Stocks 21%
+ may not reflect current allocation
27
<PAGE>
FLEXIBLE INCOME PORTFOLIO
PORTFOLIO MANAGER:
STEPHEN C. SCOTT
WM ADVISORS, INC.
The Strategic Asset Management Portfolios are managed by Senior Portfolio
Manager, Steve Scott. Mr. Scott is a pioneer in the business of asset
allocation, with over 28 years experience. He is the architect and founder of
the SAM Portfolios and holds both a B.S. and an MBA from California State
University, Long Beach.
PERFORMANCE REVIEW
The SAM Flexible Income Portfolio returned 11.06% (6.06% adjusted for the
maximum sales charge) for the year ended June 30, 1998. The year was
characterized by market volatility and change. During the period, the WM Group
of Funds were introduced as a result of the merger between Sierra and Composite
Funds. We are pleased to report the architectural design, fundamental policies,
and management of the SAM Portfolios continued to provide benefit to
shareholders. In addition, the continuity of asset management personnel for the
SAM Portfolios remained in place. The Fund continues to beat its benchmark index
for all periods, while being managed with an effort to reduce volatility
relative to single asset class investments. Long-term results continue to
provide a premium over inflation; since inception, the Fund returned 5.45% above
the rate of inflation (4.51% adjusted for the maximum sales charge)/3/.
ECONOMIC / MARKET REVIEW
Strong economic fundamentals drove the financial markets forward in the 12-month
period ended June 30, 1998. Low unemployment, strong consumer spending, low
interest rates, and a booming housing market provided some of the
<TABLE>
<CAPTION>
[GRAPH APPEARS HERE]
GROWTH OF A $10,000 INVESTMENT (CLASS A SHARES)
Fund (Class A Fund (Class A Lehman
Shares; not Shares; adjusted Brothers
adjusted for for the maximum Capital Market Aggregate
sales charge) 4.5% sales charge) Benchmark /1/ Bond Index /2/
<S> <C> <C> <C> <C>
Inception /1/
3/31/93 $ 10,000 $ 9,550 $ 10,000 $ 10,000
Jun-93 $ 10,255 $ 9,793 $ 10,117 $ 10,266
Sep-93 $ 10,562 $ 10,087 $ 10,255 $ 10,533
Dec-93 $ 10,643 $ 10,164 $ 10,340 $ 10,539
Mar-94 $ 10,302 $ 9,839 $ 10,261 $ 10,236
Jun-94 $ 9,907 $ 9,461 $ 10,285 $ 10,131
Sep-94 $ 10,093 $ 9,639 $ 10,428 $ 10,193
Dec-94 $ 9,994 $ 9,544 $ 10,478 $ 10,231
Mar-95 $ 10,483 $ 10,012 $ 10,854 $ 10,747
Jun-95 $ 11,177 $ 10,674 $ 11,250 $ 11,402
Sep-95 $ 11,645 $ 11,121 $ 11,496 $ 11,626
Dec-95 $ 12,090 $ 11,546 $ 11,798 $ 12,122
Mar-96 $ 12,026 $ 11,485 $ 11,914 $ 11,905
Jun-96 $ 12,120 $ 11,575 $ 12,080 $ 11,973
Sep-96 $ 12,343 $ 11,787 $ 12,291 $ 12,194
Dec-96 $ 12,874 $ 12,294 $ 12,598 $ 12,560
Mar-97 $ 12,896 $ 12,315 $ 12,716 $ 12,490
Jun-97 $ 13,438 $ 12,833 $ 13,172 $ 12,950
Sep-97 $ 13,963 $ 13,335 $ 13,504 $ 13,382
Dec-97 $ 14,193 $ 13,555 $ 13,746 $ 13,776
Mar-98 $ 14,700 $ 14,039 $ 14,109 $ 13,989
Jun-98 $ 14,924 $ 14,253 $ 14,349 $ 14,316
</TABLE>
The performance of the Class B Shares was different than that indicated by the
lines shown above for the Class A Shares, based on the difference in sales loads
and fees paid by Class B shareholders.
1 The Flexible Income Portfolio's benchmark is a blended mix of capital market
indices that is intended to represent a proxy for Portfolio performance. The
benchmark allocation is as follows: 40% Lehman Bros Mutual Fund Short (1-5)
Gov/Corp Index, 40% Salomon Bros 90-day T-Bill, 10% Lehman Bros Mortgage
Index, and 10% S & P 500 Past investment performance does not guarantee future
performance. The returns shown for the Portfolio assume reinvestment of all
dividends/distributions by the shareholder.
2 The Lehman Brothers Aggregate Index is a broad-based index intended to
represent the fixed-income market as a whole.
<TABLE>
<CAPTION>
TOTAL RETURNS AS OF 6/30/98/4/ 1 YEAR 5 YEAR* SINCE INCEPTION*
(MARCH 31,1993)
<S> <C> <C> <C>
CLASS A SHARES
Fund (not adjusted for sales charge) 11.06% 7.78% 7.91%
Fund (adjusted for the maximum 4.5% sales charge) 6.06% 6.79% 6.97%
Capital Market Benchmark/1/ 8.93% 7.24% 7.12%
CLASS B SHARES 1 YEAR 5 YEAR* SINCE INCEPTION*
(JUNE 30, 1994)
Fund (not adjusted for sales charge) 10.24% N/A 10.00%
Fund (adjusted for the maximum CDSC) 5.24% N/A 9.62%
Capital Market Benchmark/1/ 8.93% N/A 8.68%
</TABLE>
3 The stated goals may or may not be met and are in no way a guarantee. Annual
rate of inflation: 2.70%. Source: Ibbotson Associates
4 All performance shown prior to the November 1, 1996, asset conversion date
(the date on which the majority of existing SAM clients voluntarily exchanged
into the new SAM Portfolios) for the Sierra Asset Management Portfolios
represents the performance of the Sierra Asset Management Account ("SAM
Account"), a discretionary asset allocation service that invested in the
Sierra Trust Funds. The SAM Account was not registered as an investment
company under the Investment Company Act of 1940 ("Act") and therefore, was
not subject to certain restrictions that the Act imposes. If the SAM Account
had been registered under the Act, its performance may have differed
significantly.
For the period November 1, 1996 to June 30, 1998, the Advisor waived its
management fee and absorbed other expenses, the Administrator waived a portion
of its fee, and Custodian allowed credits. Prior to November 1, 1996, the
Advisor, Administrator and Distributor waived a portion of their management or
distribution fees, the Advisor and Administrator absorbed other expenses, and
the Custodian allowed credits. In the absence of the waivers, absorption of
other expenses or credits, yield and total return would have been lower.
*Annualized
28
<PAGE>
[PIE CHART APPEARS HERE]
MUTUAL FUND ALLOCATION
AS OF JUNE 30, 1998+
1)Money Market Fund 25%
2)Short Term High
Quality Bond Fund 5%
3)U.S. Government
Securities Fund 35%
4)Income Fund 15%
5)Growth & Income Fund 20%
positive backdrop for economic growth. While both fixed-income and equity
investments posted very positive results, it was not without volatility. The
crisis in the Far East sent shock waves throughout the financial markets world-
wide in the fourth quarter of 1997. The extent to which the Asian collapse
ultimately impacts U.S. and European growth is not yet known, but the
uncertainty is likely to increase market volatility until a turnaround becomes
visible.
Although there were pockets of slowing, the U.S. economy continued to move
forward. The bull market also continued as large-cap stocks drove market indices
higher.
Interest rates fell during the period, with the yield on the 30-year Treasury
Bond reaching a record low of 5.57% on June 15, 1998. With falling yields, the
longer-term fixed-income holdings performed very well in the period. It seems
the Federal Reserve has been correct in its decision to allow interest rates to
remain unchanged in light of the prospective economic cooling influence from
Asia. Inflation was dormant throughout the period. Recently, housing and medical
costs have increased while wages continue to modestly accelerate, but most of
these pressures have been countered by falling commodity prices. It is important
to consider the inflation outlook as an indicator of the future direction of
interest rates, given the Fed's anti-inflation stance.
INVESTMENT STRATEGY
The SAM Flexible Income Portfolio remained diversified in five funds,
representing eight major asset classes. This broad diversification enables the
Portfolio to manage risk during periods of market volatility. Asset classes
ranging in risk levels from cash to foreign stock shield the Portfolio from
drastic swings in one specific area of the financial markets.
The overall investment strategy for the period was to:
. Maintain equity exposure at 19% of assets to participate in the strength of
the large-cap market
. Hold a position in cash to manage risk in a volatile market
. Invest 65% of the Portfolio in AAA-rated securities to reduce credit risk
. Maintain a bias towards intermediate-term bonds to take advantage of
falling rates and provide positive risk/reward characteristics.
REVIEW OF PORTFOLIO ALLOCATIONS
We have positioned the Portfolio to take advantage of current market trends as
well as to manage overall risk levels. The Portfolio benefited from its
weighting in large-cap holdings, which had strong performance. As interest rates
fell in 1998, there was a rush to prepay mortgages and mortgage-backed
securities underperformed relative to other types of bonds. The overall fixed-
income structure targets the intermediate portion of the yield curve which
provides good risk/return elements. If interest rates are more stable, the
mortgage-backed securities should close the performance gap. The Portfolio has
been rebalanced during the period to keep asset levels at their target
positions. These moves further diversify the assets and should work to manage
the overall risk levels of the Flexible Income Portfolio, given our outlook for
interest rates.
OUTLOOK
Inflation remains weak and interest rates are low. Both the Bundesbank (Europe)
and the Federal Reserve Board (U.S.) have announced they are closely watching
inflation and maintaining a bias towards raising interest rates. If the negative
impact from Asia is less than expected, and if consumption remains strong, the
Federal Reserve may be forced to adjust interest rates later in the year. This
would be done to prevent the economy from overheating. We believe inflation is
manageable and Chairman Greenspan has been very effective in interest rate
policy during this new paradigm. However, we believe domestic growth will
increase. Therefore, until evidence shows us weakness beyond current forecasts,
we are reluctant to extend risk of fixed-income assets.
We maintain our long-term positive outlook on the equity markets. Although there
will always be periods of volatility, the overriding economic fundamentals
provided by globalization and efficiency improvements brought about by
technological enhancements create a dynamically positive environment for stocks.
In the same respect, we are reluctant to extend portfolio risk much beyond
current levels due to the high equity valuations. We prefer to make allocation
changes only if diversification can be maintained, and portfolio risk is not
measurably extended.
[PIE CHART APPEARS HERE]
ASSET CLASS DIVERSIFICATION
AS OF JUNE 30, 1998+
1)Cash Equivalent 27%
2)Short Term Bonds 5%
3)Mortgage-Backed 26%
4)Treasuries 9%
5)Corporate Bonds 13%
6)Other Bonds 1%
7)Domestic Stocks 18%
8)Foreign Stocks 1%
+ may not reflect current allocation
29
<PAGE>
INCOME PORTFOLIO
PORTFOLIO MANAGER:
STEPHEN C. SCOTT
WM ADVISORS, INC.
The Strategic Asset Management Portfolios are managed by Senior Portfolio
Manager, Steve Scott. Mr. Scott is a pioneer in the business of asset
allocation, with over 28 years experience. He is the architect and founder of
the SAM Portfolios and holds both a B.S. and an MBA from California State
University, Long Beach.
PERFORMANCE REVIEW
The SAM Income Portfolio returned 8.71% (3.82% adjusted for the maximum sales
charge) for the year ended June 30, 1998. The year was characterized by market
volatility and change. During the period, the WM Group of Funds were introduced
as a result of the merger between Sierra and Composite Funds. We are pleased to
report the architectural design, fundamental policies, and management of the SAM
Portfolios continued to provide benefits to shareholders. In addition, the
continuity of asset management personnel for the SAM Portfolios remained in
place. The Fund continued to beat its benchmark index since inception, while
being managed with an effort to reduce volatility relative to single asset class
investments. Long-term results continue to provide a premium over inflation;
since inception, the Fund returned 4.82% above the rate of inflation (4.18%
adjusted for the maximum sales charge)/3/. The 30-day SEC yield on the Income
Portfolio was 5.05% as of June 30, 1998.
ECONOMIC / MARKET REVIEW
Strong economic fundamentals drove the financial markets forward in the 12-month
period ended June 30, 1998. Low unemployment, strong consumer spending, low
interest rates, and a booming housing market provided some
<TABLE>
<CAPTION>
[GRAPH APPEARS HERE]
GROWTH OF A $10,000 INVESTMENT (CLASS A SHARES)
Fund (Class A Fund (Class A Lehman
Shares; not Shares; adjusted Brothers
adjusted for for the maximum Capital Market Aggregate
sales charge) 4.5% sales charge) Benchmark /1/ Bond Index /2/
<S> <C> <C> <C> <C>
Inception
Date $ 10,000 $ 9,550 $ 10,000 $ 10,000
Jun-91 $ 10,896 $ 10,406 $ 10,731 $ 10,975
Dec-91 $ 12,033 $ 11,492 $ 11,386 $ 12,187
Jun-92 $ 12,416 $ 11,858 $ 11,692 $ 12,518
Dec-92 $ 12,890 $ 12,310 $ 12,023 $ 13,090
Jun-93 $ 13,869 $ 13,245 $ 12,463 $ 13,993
Dec-93 $ 14,245 $ 13,604 $ 12,709 $ 14,366
Jun-94 $ 13,250 $ 12,654 $ 12,632 $ 13,810
Dec-94 $ 13,177 $ 12,584 $ 12,857 $ 13,947
Jun-95 $ 14,450 $ 13,800 $ 13,704 $ 15,543
Dec-95 $ 15,373 $ 14,681 $ 14,277 $ 16,523
Jun-96 $ 15,011 $ 14,335 $ 14,448 $ 16,321
Dec-96 $ 15,717 $ 15,010 $ 14,983 $ 17,121
Jun-97 $ 16,131 $ 15,405 $ 15,420 $ 17,653
Dec-97 $ 17,019 $ 16,254 $ 16,051 $ 18,779
Jun-98 $ 17,536 $ 16,747 $ 16,537 $ 19,514
</TABLE>
The performance of the Class B Shares was different than that indicated by the
lines shown above for the Class A Shares, based on the difference in sales loads
and fees paid by Class B shareholders.
1 The Income Portfolio's benchmark is a blended mix of capital market indices
that is intended to represent a proxy for Portfolio performance. The benchmark
allocation is as follows: 50% Salomon Bros. 90-day T-Bills, 30% Lehman Bros
Mutual Fund Short (1-5) Gov/Corp Index, 10% Lehman Bros Mortgage Index, and
10% Lehman Bros BAA LT Corporate Bond Index. Past investment performance does
not guarantee future performance. The returns shown for the Portfolio assume
reinvestment of all dividends/distributions by the shareholder.
2 The Lehman Brothers Aggregate Index is a broad-based index intended to
represent the fixed-income market as a whole.
<TABLE>
<CAPTION>
TOTAL RETURNS AS OF 6/30/98/4/ 1 YEAR 5 YEAR* SINCE INCEPTION*
(SEPTEMBER 30, 1990)
<S> <C> <C> <C>
CLASS A SHARES
Fund (not adjusted for sales charge) 8.71% 4.79% 7.52%
Fund (adjusted for the maximum 4.5% sales charge) 3.82% 3.83% 6.88%
Capital Market Benchmark/1/ 7.24% 5.82% 6.71%
CLASS B SHARES 1 YEAR 5 YEAR* SINCE INCEPTION*
(JUNE 30, 1994)
Fund (not adjusted for sales charge) 7.90% N/A 6.46%
Fund (adjusted for the maximum CDSC) 2.90% N/A 6.04%
Capital Market Benchmark/1/ 7.24% N/A 6.97%
</TABLE>
3 The stated goals may or may not be met and are in no way a guarantee. Annual
rate of inflation: 2.70%. Source: Ibbotson Associates
4 All performance shown prior to the November 1, 1996, asset conversion date
(the date on which the majority of existing SAM clients voluntarily exchanged
into the new SAM Portfolios) for the Sierra Asset Management Portfolios
represents the performance of the Sierra Asset Management Account ("SAM
Account"), a discretionary asset allocation service that invested in the
Sierra Trust Funds. The SAM Account was not registered as an investment
company under the Investment Company Act of 1940 ("Act") and therefore, was
not subject to certain restrictions that the Act imposes. If the SAM Account
had been registered under the Act, its performance may have differed
significantly.
For the period November 1, 1996 to June 30, 1998, the Advisor waived its
management fee and absorbed other expenses, the Administrator waived a portion
of its fee, and Custodian allowed credits. Prior to November 1, 1996, the
Advisor, Administrator and Distributor waived a portion of their management or
distribution fees, the Advisor and Administrator absorbed other expenses, and
the Custodian allowed credits. In the absence of the waivers, absorption of
other expenses or credits, yield and total return would have been lower.
*Annualized
30
<PAGE>
[PIE CHART APPEARS HERE]
MUTUAL FUND ALLOCATION
AS OF JUNE 30, 1998+
1)U.S.Government 40%
Securities Fund
2)Income Fund 30%
3)Short Term High 20%
Quality Bond Fund
4)Money Market Fund 10%
of the positive backdrop for economic growth. While both fixed-income and equity
investments posted very positive results, it was not without volatility. The
crisis in the Far East sent shock waves throughout the financial markets world-
wide in the fourth quarter of 1997. The extent to which the Asian collapse
ultimately impacts U.S. and European growth is not yet known, but the
uncertainty is likely to increase market volatility until a turnaround becomes
visible.
Interest rates fell during the period, with the yield on the 30-year Treasury
Bond reaching a record low of 5.57% on June 15, 1998. With falling yields, the
longer-term fixed-income holdings performed very well in the period. It seems
the Federal Reserve has been correct in its decision to allow interest rates to
remain unchanged in light of the prospective economic cooling influence from
Asia. Inflation was dormant throughout the period. Recently, housing and medical
costs have increased while wages continue to modestly accelerate, but most of
these pressures have been countered by falling commodity prices. It is important
to consider the inflation outlook as an indicator of the future direction of
interest rates, given the Fed's anti-inflation stance.
INVESTMENT STRATEGY
The SAM Income Portfolio remained diversified in four fixed-income funds,
representing six major asset classes. This broad diversification enables the
Portfolio to manage risk during periods of market volatility. Asset classes
ranging in risk levels from short-term money markets to long-term corporate
bonds shield the Portfolio from drastic swings in one specific area of the
financial markets.
The overall investment strategy for the period was to:
. Maintain a concentration (31%) in mortgages to boost overall yield
. Hold a small position in cash to manage risk in a volatile market
. Invest 66% of the Portfolio in AAA rated securities to reduce credit risk
. Maintain a bias towards intermediate-term bonds (portfolio duration of 4.1
years) to take advantage of falling rates and provide positive risk/reward
characteristics.
REVIEW OF PORTFOLIO ALLOCATIONS
We have positioned the Portfolio to take advantage of current market trends as
well as to manage overall portfolio risk levels. As interest rates fell in 1998,
there was a rush to prepay mortgages, and mortgage-backed securities
underperformed relative to other types of bonds. This hurt relative performance,
but mortgages should bounce back if interest rates remain stable. The position
in foreign bonds was reduced as the result of the merger of funds--this also
reduced the currency exposure in a volatile foreign market-place. The overall
fixed-income structure targets the intermediate portion of the yield curve which
provides good risk/return elements. The Portfolio has been rebalanced during the
period to keep asset levels at their target positions. These moves further
diversify the assets and should work to manage the overall risk levels of the
Income Portfolio given the outlook for interest rates.
OUTLOOK
Inflation remains weak and interest rates are low. Both the Bundesbank (Europe)
and the Federal Reserve Board (U.S.) have announced they are closely watching
inflation and maintaining a bias towards raising interest rates. If the negative
impact from Asia is less than expected, and if consumption remains strong, the
Federal Reserve may be forced to increase interest rates later in the year. This
would be done to prevent the economy from overheating. We believe inflation is
manageable and Fed Chairman Greenspan has been very effective in interest rate
policy during this new paradigm. However, we believe domestic growth will
increase. Therefore, until evidence shows us weakness beyond current forecasts,
we are reluctant to extend portfolio risk.
[PIE CHART APPEARS HERE]
ASSET CLASS DIVERSIFICATION
AS OF JUNE 30, 1998+
1)Cash Equivalent 11%
2)Short-Term Bonds 20%
3)Mortgage-Backed 31%
4)Treasuries 11%
5)Corporate Bonds 26%
6)Other Bonds 1%
+ may not reflect current allocation
31
<PAGE>
PORTFOLIO OF INVESTMENTS
CALIFORNIA MONEY FUND
JUNE 30, 1998
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
--------- -----------
<C> <S> <C>
MUNICIPAL BONDS AND NOTES - 91.0%
CALIFORNIA - 91.0%
Alameda County, IDR:
$1,000,000 Heat and Control Inc. Project, Series 1995A,
3.550% due 11/01/2025+............................... $ 1,000,000
500,000 JMS Family Partnership, Series 1995A,
3.550% due 10/01/2025+............................... 500,000
600,000 California Educational Facilities Authority Revenue,
Point Nazarene College,
3.00% due 10/01/2021+................................ 600,000
California Health Facilities Financing Authority
Revenue:
1,500,000 Pooled Loan Program, Series B,
3.100% due 10/01/2010+............................... 1,500,000
200,000 Scripps Health, Series A,
3.200% due 10/01/2022+............................... 200,000
300,000 Scripps Health, Series B,
3.200% due 10/01/2022+............................... 300,000
300,000 Sutter Health, Series B,
3.250% due 03/01/2020+............................... 300,000
California Pollution Control Financing Authority:
100,000 OMS Equity Stanislaus Project,
3.700% due 12/01/2017+............................... 100,000
1,500,000 Pacific Gas & Electric, Series 1996A,
3.150% due 12/01/2016+............................... 1,500,000
850,000 California State, Department of Veteran Affairs, Home
Purchase Revenue Bonds, Series A,
7.500% due 08/01/1998................................ 852,858
1,500,000 California State Economic Development Authority, IDR,
Tri-Valley Growers,
Series 1995F,
3.250% due 12/01/2010+............................... 1,500,000
1,000,000 California Statewide Communities Projects, MFHR,
Ocotillo Place Apartments Project, Series 1998O,
3.900% due 06/25/2024, (Mandatory Put on
06/01/1999)+......................................... 1,000,000
900,000 Chula Vista, Charter City Revenue, Home Depot Inc.
Project,
3.000% due 12/01/2010+............................... 900,000
250,000 Contra Costa County, Water District Revenue, Series
D,
5.300% due 10/01/1998................................ 251,005
250,000 Contra Costa County, Water Treatment Revenue, Series
A,
4.300% due 10/01/1998................................ 250,459
500,000 Elk Grove, Unified School District, TRAN,
4.500% due 06/30/1999................................ 504,330
230,000 Folsom Cordova, Unified School District, COP, 1998
Financing Project,
4.000% due 03/01/1999................................ 230,215
300,000 Galt, Community Facilities District, Special Tax #88-
1, (Pre-refunded to 09/01/1998 @ 102%)
7.700% due 09/01/2019................................ 307,982
1,000,000 Irvine, Improvement Board Act of 1915, Assessment
District 89-10,
3.300% due 09/02/2015+............................... 1,000,000
105,000 King City, GO, Joint Unified High School District,
4.000% due 08/01/1998................................ 105,042
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
--------- -----------
<C> <S> <C>
$1,000,000 Livermore, MFHR, Portola Meadows Apartments, Series
1989A,
3.100% due 05/01/2019+............................... $ 1,000,000
Los Angeles, Regional Airports Improvement Corp.,
Lease Revenue:
100,000 American Airlines Inc., Series 1984C,
4.000% due 12/01/2024+............................... 100,000
1,000,000 Los Angeles International - Two Corp., Sublease,
4.000% due 12/01/2025+............................... 1,000,000
100,000 Los Angeles County, COP, (Pre-refunded to 06/01/1999
@ 102%)
7.000% due 06/01/2004................................ 104,945
700,000 Los Angeles County, Pension Obligation, Refunding
Revenue, Series A,
3.100% due 06/30/2007+............................... 700,000
700,000 Los Angeles County, Unified School District, COP,
Belmont Learning Complex, Series 1997A,
3.200% due 12/01/2017+............................... 700,000
100,000 Mesa, Water District, COP,
4.000% due 03/15/1999................................ 100,216
365,000 Mountain View, School District, Community Facilities,
Special Tax, Series 1998A,
4.000% due 10/01/1998................................ 365,329
1,000,000 Orange County, Apartment Development Revenue, Wood
Canyon Villas,
3.200% due 12/01/2021+............................... 1,000,000
500,000 Orange County, COP, Florence Crittendoc Services,
3.200% due 03/01/2016+............................... 500,000
2,000,000 Orange County, Fire Authority, TRAN,
4.250% due 09/17/1998................................ 2,001,436
850,000 Orange County, Local Transportation Authority, Sales
Tax Revenue,
5.000% due 02/15/1999................................ 856,775
400,000 Orange County, Sanitation Districts, COP,
3.000% due 08/01/2013+............................... 400,000
700,000 Orange County, Water Districts, COP, Series B,
3.550% due 08/15/2015+............................... 700,000
Palm Springs, Community Redevelopment Agency, COP:
100,000 Headquarters Hot-1,
3.250% due 12/01/2014+............................... 100,000
900,000 Headquarters Hot-9,
3.250% due 12/01/2014+............................... 900,000
600,000 Headquarters Hot-11,
3.250% due 12/01/2014+............................... 600,000
1,000,000 Rancho Mirage, Joint Power Financing Authority, COP,
Eisenhower Medical Center, Series 1997B,
3.200% due 07/01/2022+............................... 1,000,000
495,000 Redwood City, Public Financing Authority, Lease
Revenue, Capital Facilities Project,
4.000% due 07/15/1999................................ 496,465
964,000 Riverside County, Public Facilities Authority, COP,
Series B,
3.000% due 12/01/2015+............................... 964,000
110,000 Sacramento, Redevelopment Agency, Tax Allocation,
Merged Downtown Redevelopment Project, Series A,
4.000% due 11/01/1998................................ 110,144
</TABLE>
See Notes to Financial Statements.
32
<PAGE>
PORTFOLIO OF INVESTMENTS (CONTINUED)
CALIFORNIA MONEY FUND
JUNE 30, 1998
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
--------- -----------
<C> <S> <C>
MUNICIPAL BONDS AND NOTES - (CONTINUED)
CALIFORNIA - (CONTINUED)
$ 200,000 Sacramento, TRAN,
4.500% due 09/30/1998................................ $ 200,434
300,000 San Bernardino County, IDR, Master Holco Inc.,
3.000% due 12/01/2006+............................... 300,000
750,000 San Bernardino County, MFHR, Village Green
Apartments, Series 1998A,
3.800% due 06/25/2024 (Mandatory Put on 06/01/1999).. 750,000
1,800,000 San Jose, Redevelopment Agency Revenue, Merged Area
Redevelopment Project, Series B,
3.000% due 07/01/2026+............................... 1,800,000
1,300,000 Santa Barbara County, TRAN, Series A,
4.500% due 10/01/1998................................ 1,302,652
Santa Clara, Electric Revenue:
600,000 Series A,
3.150% due 07/01/2010+............................... 600,000
100,000 Series B,
3.150% due 07/01/2010+............................... 100,000
175,000 Santa Clara County, TRAN,
4.750% due 10/01/1998................................ 175,489
Southern California Public Power Authority: Palo
100,000 Verde Project, Series C,
3.100% due 07/01/2017+............................... 100,000
1,900,000 Southern Transmission Project,
3.100% due 07/01/2019+............................... 1,900,000
250,000 Yorba Linda, Redevelopment Agency, Tax Allocation
Revenue,
6.750% due 09/01/2014+............................... 256,294
-----------
Total Municipal Bonds and Notes
(Cost $34,086,070)................................... 34,086,070
-----------
<CAPTION>
SHARES
------
<C> <S> <C>
INVESTMENT COMPANY SECURITY - 11.0%
4,115,435 Dreyfus Basic California Municipal Money Market Fund
(Cost $4,115,435).................................... 4,115,435
-----------
</TABLE>
<TABLE>
<S> <C> <C>
TOTAL INVESTMENTS (Cost $38,201,505*)....................... 102.0% 38,201,505
OTHER ASSETS AND LIABILITIES (NET).......................... (2.0) (733,638)
----- -----------
NET ASSETS.................................................. 100.0% $37,467,867
===== ===========
</TABLE>
- -------------
* Aggregate cost for federal tax purposes is $38,201,505.
+ Variable rate security that is payable on demand or upon a five business day
notice, and secured by a letter of credit, liquidity agreement or other
credit support. The interest rate shown reflects the rate currently in ef-
fect.
California Money Fund had the following industry concentrations greater than
10% at June 30, 1998 (as a percentage of net assets): (Unaudited)
Industrial Development
Revenue 17.9%
General Purpose 13.6%
GLOSSARY OF TERMS
<TABLE>
<S> <C>
COP - Certificate of Participation
GO - General Obligation Bonds
IDR - Industrial Development Revenue
MFHR - Multi-family Housing Revenue
TRAN - Tax and Revenue Anticipation Note
</TABLE>
See Notes to Financial Statements.
33
<PAGE>
PORTFOLIO OF INVESTMENTS (CONTINUED)
TARGET MATURITY 2002 FUND
JUNE 30, 1998
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
---------- ----------
<C> <S> <C>
U.S. TREASURY OBLIGATION - 100.9%
U.S. TREASURY STRIP
$3,235,000 Zero coupon due 11/15/2002............................. $2,558,335
----------
</TABLE>
<TABLE>
<S> <C> <C>
TOTAL INVESTMENTS (Cost $2,464,353*)......................... 100.9% 2,558,335
OTHER ASSETS AND LIABILITIES (NET)........................... (0.9) (22,487)
----- ----------
NET ASSETS................................................... 100.0% $2,535,848
===== ==========
</TABLE>
- -------------
* Aggregate cost for federal tax purposes is $2,464,353.
GLOSSARY OF TERMS
<TABLE>
<C> <S>
STRIP - Separate trading of registered
interest and
principal of securities
</TABLE>
See Notes to Financial Statements.
34
<PAGE>
PORTFOLIO OF INVESTMENTS (CONTINUED)
SHORT TERM HIGH QUALITY BOND FUND
JUNE 30, 1998
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
---------- -----------
<C> <S> <C>
CORPORATE NOTES - 29.9%
$ 400,000 Colonial Realty, Sr. Note,
7.500% due 07/15/2001................................. $ 414,000
1,000,000 Crane Company, Note,
7.250% due 06/15/1999................................. 1,011,510
1,220,000 CSX Corp, Deb.,
9.500% due 08/01/2000................................. 1,298,666
400,000 ERP Operating LP,
8.500% due 05/15/1999++............................... 407,544
500,000 Federated Department Stores,
6.790% due 07/15/2027................................. 511,525
1,500,000 General Electric Capital Corporation, Series A, MTN,
5.800% due 04/24/2000................................. 1,500,000
1,500,000 McDonald Douglas Finance Corp., Series X, MTN,
6.710% due 07/19/2000................................. 1,516,215
1,500,000 Merrill Lynch Finance Corp.,
Series B, MTN,
6.100% due 10/04/1999................................. 1,506,870
200,000 Nabisco, Inc., Industrial Note,
6.300% due 08/26/1999++............................... 199,840
1,500,000 Sun Communities, Inc., Sr. Note,
7.625% due 05/01/2003................................. 1,554,210
Taubman Realty Corporation, MTN:
300,000 7.400% due 06/10/2002................................. 314,037
500,000 7.500% due 06/15/2002................................. 516,395
100,000 Time Warner, Inc.,
7.950% due 02/01/2000................................. 102,756
1,500,000 Travelers Inc., Notes,
6.125% due 06/15/2000................................. 1,507,500
500,000 US West Capital Funding, Inc.,
6.125% due 07/15/2002................................. 500,010
-----------
Total Corporate Notes (Cost $12,793,716).............. 12,861,078
-----------
U.S. TREASURY NOTES - 27.3%
500,000 6.000% due 08/15/2000................................. 504,765
3,000,000 5.750% due 11/15/2000................................. 3,015,000
2,000,000 5.625% due 11/30/1999................................. 2,002,500
650,000 5.250% due 01/31/2001................................. 645,938
3,000,000 5.625% due 02/15/2006................................. 3,012,180
500,000 5.625% due 02/28/2001................................. 501,250
2,000,000 6.250% due 04/30/2001................................. 2,037,180
-----------
Total U.S. Treasury Notes (Cost $11,737,587).......... 11,718,813
-----------
ASSET-BACKED SECURITIES - 16.6%
300,000 Conti-Mortgage Home Equity Loan Trust, 1996-4-A6,
6.710% due 06/15/2014................................. 302,529
300,000 Green Tree Financial Corporation, 1995-6-B1,
7.700% due 09/15/2026................................. 305,413
300,000 Green Tree Home Equity Loan Trust, 1997-B-A5,
7.150% due 04/15/2027................................. 306,500
1,962,628 Green Tree Security Mortgage Trust, 1994-A,
6.900% due 02/15/2004................................. 1,968,761
300,000 H & T Master Trust,
8.430% due 08/15/2002++............................... 300,422
600,000 MBNA Master Credit Card Trust, 1995-E-A,
5.876% due 01/15/2005+................................ 602,808
Merrill Lynch Mortgage Investors, Inc.:
13,787 1991-B-A,
9.200% due 04/15/2011................................. 13,858
269,248 1992-B-A4,
7.850% due 04/15/2012................................. 276,528
71,120 Old Stone Credit Corporation, 1992-4A,
6.550% due 11/15/2007................................. 71,009
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
---------- -----------
<C> <S> <C>
ASSET-BACKED SECURITIES - (CONTINUED)
$1,000,000 Standard Credit Card Master Trust, 1994-4A,
8.250% due 11/07/2003................................ $ 1,065,620
1,200,000 The Money Store Home Equity Trust, 1997-C-AF,
6.307% due 08/15/2012................................ 1,201,500
696,423 World Omni Automobile Lease Securitization, 1996-B,
6.850% due 11/15/2002++.............................. 707,305
-----------
Total Asset-Backed Securities (Cost $7,091,742)...... 7,122,253
-----------
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED
SECURITIES - 13.9%
FEDERAL HOME LOAN MORTGAGE CORPORATION
(FHLMC) - 0.8%
326,612 #A01226, Seasoned,
9.500% due 08/01/2016 (Cost $353,181)................ 354,051
-----------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
(GNMA) - 4.6%
169,725 #038720, Seasoned,
11.000% due 02/15/2010**............................. 189,479
52,647 #130183, Seasoned,
11.000% due 05/15/2015**............................. 59,171
171,295 #131917, Seasoned,
11.000% due 10/15/2015**............................. 192,522
22,348 #132833, Seasoned,
11.000% due 12/15/2015**............................. 25,167
54,327 #139704, Seasoned,
11.000% due 11/15/2015**............................. 61,059
174,076 #140835, Seasoned,
11.000% due 11/15/2015**............................. 195,287
134,075 #153965, Seasoned,
10.000% due 02/15/2019............................... 147,243
64,698 #189482, Seasoned,
11.000% due 04/15/2020**............................. 72,962
709,111 #262996, Seasoned,
10.000% due 01/15/2019............................... 778,072
152,846 #291375, Seasoned,
11.000% due 08/15/2020**............................. 172,943
84,676 #377550, Seasoned,
8.000% due 03/15/2012................................ 87,745
-----------
Total GNMAs (Cost $1,973,719)........................ 1,981,650
-----------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION II
(GNMA II) - 0.6%
250,190 9.000% due 04/20/2025 (Cost $267,361)................ 266,243
-----------
ADJUSTABLE RATE MORTGAGE-BACKED SECURITIES (ARM) - 5.0%
412,145 Federal Home Loan Mortgage Corporation (FHLMC),
#845988,
7.859% due 11/01/2021+............................... 428,824
Federal National Mortgage Association (FNMA):
404,600 #82247,
6.250% due 04/01/2019+............................... 407,129
178,197 #124571,
7.649% due 11/01/2022+............................... 184,323
219,707 #152205,
7.398% due 01/01/2019+............................... 226,812
294,219 #141461,
7.577% due 11/01/2021+............................... 299,229
592,492 #313257,
6.258% due 11/01/2035+............................... 596,195
-----------
Total ARMs (Cost $2,122,711)......................... 2,142,512
-----------
</TABLE>
See Notes to Financial Statements.
35
<PAGE>
PORTFOLIO OF INVESTMENTS (CONTINUED)
SHORT TERM HIGH QUALITY BOND FUND
JUNE 30, 1998
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
---------- -----------
<C> <S> <C>
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED
SECURITIES - (CONTINUED)
FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA) - 2.9%
$ 250,657 #250235, 7 Year Balloon,
8.500% due 02/01/2002................................ $ 256,266
317,745 #313030, Seasoned,
10.000% due 05/01/2022**............................. 349,265
588,127 #313641, Seasoned
8.500% due 11/01/2017................................ 617,163
-----------
Total FNMAs (Cost $1,217,483)........................ 1,222,694
-----------
Total U.S. Government Agency Mortgage-Backed
Securities
(Cost $5,934,455)................................... 5,967,150
-----------
COLLATERALIZED MORTGAGE OBLIGATIONS - 9.0%
29,058 Chemical Mortgage Securities Inc., 1993-1-A4,
7.450% due 02/25/2023................................ 29,022
Countrywide Funding Corporation:
92,587 1994-1-A3,
6.250% due 03/25/2024................................ 91,747
170,000 1994-C-A5,
6.375% due 03/25/2024................................ 169,308
353,610 Federal Home Loan Mortgage Corporation (FHLMC), P/O,
REMIC, #1719-C,
Zero coupon due 04/15/1999........................... 343,002
General Electric Capital Mortgage Association:
296,558 1994-27-A1,
6.500% due 07/25/2024................................ 295,942
1,850,000 1996-HE3-A3,
7.150% due 09/25/2026................................ 1,901,295
580,220 Norwest Asset Securities Corporation, 1996-5-A13,
7.500% due 11/25/2026................................ 583,665
427,049 Prudential Home Mortgage Securities, 1993-43-A1,
5.400% due 10/25/2023................................ 423,978
31,654 Ryland Acceptance Corporation,
8.950% due 08/20/2019................................ 31,683
-----------
Total Collateralized Mortgage Obligations
(Cost $3,817,816)................................... 3,869,642
-----------
FOREIGN GOVERNMENT BONDS - 2.3%
$1,000,000 Ontario (Province of Canada),
6.125% due 06/28/2000 (Cost $1,004,004) ............. $ 1,005,350
-----------
</TABLE>
<TABLE>
<S> <C> <C>
TOTAL INVESTMENTS (Cost $42,379,320*)....................... 99.0% 42,544,286
OTHER ASSETS AND LIABILITIES (NET).......................... 1.0 418,490
----- -----------
NET ASSETS.................................................. 100.0% $42,962,776
===== ===========
</TABLE>
- -------------
* Aggregate cost for federal tax purposes is $42,379,320.
** A portion or all of these securities are pledged as collateral for futures
contracts.
+ Variable rate security. The interest rate shown reflects the rate currently
in effect.
++ Security exempt from registration under Rule 144A of the Securities Act of
1933. This security may be resold in transactions exempt from registration,
normally to qualified institutional buyers.
<TABLE>
<CAPTION>
NUMBER OF UNREALIZED
CONTRACTS (DEPRECIATION)
--------- --------------
<C> <S> <C>
FUTURES CONTRACTS - SHORT POSITION
12 U.S. Treasury Note, Five Year, September 1998....... $(6,730)
========
</TABLE>
GLOSSARY OF TERMS
<TABLE>
<C> <S>
BALLOON - Five- and seven-year mortgages
with larger dollar amounts of
payments falling due in the later
years of the obligation.
LP - Limited Partnership
MTN - Medium Term Note
P/O - Principal Only
REMIC - Real Estate Mortgage Investment
Conduit
</TABLE>
See Notes to Financial Statements.
36
<PAGE>
PORTFOLIO OF INVESTMENTS (CONTINUED)
CALIFORNIA MUNICIPAL FUND
JUNE 30, 1998
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
--------- -----------
<C> <S> <C>
MUNICIPAL BONDS AND NOTES - 101.9%
CALIFORNIA - 101.4%
$ 5,360,000 Alhambra, Improvement Board Act of 1915, Assessment
District No. 1, Public Works, (MBIA Insured),
6.125% due 09/02/2018............................... $ 5,755,300
2,000,000 Anaheim, Public Financing Authority Revenue,
Residual Interest Bond, (MBIA Insured),
8.930% due 12/28/2018+.............................. 2,565,000
1,000,000 Arcadia, Hospital Revenue Authority,
(Methodist Hospital),
6.500% due 11/15/2012............................... 1,070,000
2,000,000 Barstow Redevelopment Agency, Central Redevelopment
Project, Tax Allocation, Series A, (MBIA Insured),
7.000% due 09/01/2014............................... 2,465,000
1,000,000 Brawley, Wastewater Treatment Facility, (AMBAC
Insured),
5.000% due 07/01/2016............................... 1,006,250
1,000,000 Brea & Olinda, Unified School District, (High School
Refinancing Project), COP, Series A, (FSA Insured),
6.000% due 08/01/2009............................... 1,076,250
4,715,000 California Educational Facilities Authority Revenue,
(College of Osteopathic Medicine), (Pre-refunded to
06/01/2003),
7.500% due 06/01/2018............................... 5,428,144
California Health Facilities Authority Revenue:
1,000,000 (Kaiser Permanent), Series A, (FSA Insured)
7.000% due 12/01/2010............................... 1,080,000
10,250,000 (Enloe Health Systems), Series A,
5.000% due 11/15/2028............................... 9,916,875
California Housing Finance Agency, Home Mortgage,
AMT:
Series A, (Multi-family Housing III),
(MBIA Insured):
1,000,000 5.850% due 08/01/2017............................... 1,056,250
3,000,000 5.950% due 08/01/2028............................... 3,153,750
Series B, (MBIA Insured):
1,000,000 6.000% due 08/01/2016............................... 1,062,500
2,000,000 6.100% due 02/01/2028............................... 2,122,500
1,000,000 Series N, (FHA/VA Insured),
6.375% due 02/01/2027............................... 1,078,750
California Housing Finance Agency, Home Ownership &
Improvement Revenue:
1,500,000 Series 1988G, AMT, (FHA Insured),
8.150% due 08/01/2019............................... 1,531,305
2,150,000 Series 1989D, AMT, (FHA Insured),
7.500% due 08/01/2020............................... 2,227,701
5,010,000 Series C, AMT, (FHA Insured),
6.650% due 08/01/2014............................... 5,423,325
665,000 Series D, AMT, (MBIA Insured),
6.300% due 08/01/2014............................... 709,888
2,630,000 Series F, AMT, (MBIA Insured),
6.800% due 08/01/2014............................... 2,889,712
3,385,000 Series F-2, (FHA Insured),
7.250% due 08/01/2016............................... 3,698,113
California, Pollution Control Financing
Authority, PCR:
1,000,000 (Keller Canyon Landfill Company Project), AMT,
6.875% due 11/01/2027............................... 1,101,250
2,890,000 (Mobil Oil Corporation Project),
5.500% due 12/01/2029............................... 2,944,188
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
--------- -----------
<C> <S> <C>
$ 2,500,000 (San Diego Gas and Electric), Series A, AMT, (AMBAC
Insured),
5.850% due 06/01/2021............................... $ 2,621,875
(Southern California Edison Company):
13,250,000 Series B, AMT, (AMBAC Insured),
6.400% due 12/01/2024............................... 14,492,188
5,000,000 Series B, AMT, (FGIC Insured),
6.400% due 12/01/2024............................... 5,468,750
6,565,000 (Tracy Material Recovery Project), Series A, AMT,
6.600% due 08/01/2014............................... 6,664,854
5,000,000 (Waste Management), Series A, AMT,
7.150% due 02/01/2011............................... 5,425,000
3,100,000 (Waste Removal Systems), Series A, AMT,
7.100% due 11/01/2009............................... 3,266,625
2,250,000 California Residential Efficiency Financing
Authority, (First Resource Efficiency), (AMBAC
Insured),
6.000% due 07/01/2017............................... 2,424,375
1,355,000 California Rural Home Mortgage Finance Authority,
SFMR, Mortgage-Backed Securities Project, Series A-
2, AMT, (GNMA Insured),
7.950% due 12/01/2024............................... 1,549,781
415,000 California State, GO, (MBIA Insured),
6.000% due 10/01/2014............................... 448,200
California Statewide Communities Development
Authority, COP:
3,000,000 (Cedars-Sinai Medical Center), (MBIA Insured),
6.500% due 08/01/2012............................... 3,483,750
735,000 (Childrens Campus),
6.500% due 09/01/2022............................... 790,125
14,800,000 California Statewide Communities Development
Authority Revenue, (Sherman Oaks Project), Series
A, (AMBAC Insured),
5.000% due 08/01/2022............................... 14,467,000
5,715,000 Carson, Improvement Board Act of 1915, GO,
7.375% due 09/02/2022............................... 6,150,769
4,675,000 Chula Vista, IDR, (San Diego Gas and Electric),
Series A, AMT, (AMBAC Insured),
6.400% due 12/01/2027............................... 5,113,281
2,950,000 Chula Vista, Redevelopment Agency, Tax Allocation
Revenue,
8.625% due 09/01/2024............................... 3,606,375
Contra Costa County, Finance Authority, Tax
Allocation Revenue, Series A:
1,595,000 7.000% due 08/01/2009............................... 1,746,525
1,000,000 7.100% due 08/01/2022............................... 1,092,500
2,500,000 Davis, Public Facilities Finance Authority, Mace
Ranch Area, Series A,
6.600% due 09/01/2025............................... 2,609,375
3,215,000 Delano, COP, Series A,
9.250% due 01/01/2022............................... 3,721,363
8,985,000 East Bay Regional Parks District, GO, Series D,
5.000% due 09/01/2023............................... 8,906,381
1,985,000 El Cajon, COP, (Helix View Nursing Hospital),
Limited Obligation, Series 1990, AMT, (FHA
Insured),
7.750% due 02/01/2029............................... 2,020,333
</TABLE>
See Notes to Financial Statements.
37
<PAGE>
PORTFOLIO OF INVESTMENTS (CONTINUED)
CALIFORNIA MUNICIPAL FUND
JUNE 30, 1998
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
--------- -----------
<C> <S> <C>
MUNICIPAL BONDS AND NOTES - (CONTINUED)
CALIFORNIA - (CONTINUED)
$ 4,785,000 Fairfield Housing Authority Revenue, Mortgage
Revenue, (Creekside Estates Project),
7.875% due 02/01/2015............................... $ 5,000,325
5,000,000 Foothill Eastern Transportation Corridor Agency,
Series A,
Zero coupon due 01/01/2008.......................... 3,775,000
2,000,000 Gilroy, Unified School District, COP, (Measure J
Capital Projects), (FSA Insured),
6.250% due 09/01/2012............................... 2,225,000
2,000,000 Huntington Park, Public Financing Authority Lease
Revenue, (Waste Water System Project),
6.200% due 10/01/2025............................... 2,027,500
5,000,000 Imperial Irrigation District, Electric Revenue,
(MBIA Insured)
5.000% due 11/01/2018............................... 4,931,250
2,000,000 Irvine, Meadows Mobile Home Park Revenue, Series A,
(GNMA Collateral)
5.700% due 03/01/2018............................... 2,000,000
1,250,000 Kings County, Waste Management Authority, Solid
Waste Revenue, AMT,
7.200% due 10/01/2014............................... 1,396,875
1,500,000 La Verne, Public Financing Authority, Capital
Improvement,
7.250% due 09/01/2026............................... 1,642,500
Los Angeles, Community Redevelopment Agency, AMT:
1,425,000 5.850% due 12/01/2026............................... 1,425,000
2,055,000 (Hollywood Redevelopment Project), Series C, (MBIA
Insured),
5.000% due 07/01/2022............................... 2,008,762
3,490,000 Series C, (AMBAC Insured),
6.750% due 07/01/2014............................... 3,804,100
1,000,000 Los Angeles County, Master Refunding Project,
(Inverse Floater),
9.330% due 06/01/2015+.............................. 1,192,500
Los Angeles County, MFHR, AMT, (GNMA Insured):
3,000,000 (Park Parthenia Project),
7.400% due 01/20/2022............................... 3,076,560
1,000,000 (Ridgecroft Apartments Project), Series E, (GNMA
Collateral),
6.250% due 09/20/2039............................... 1,058,750
Los Angeles County, Residual Interest Bond:
3,740,000 (Edmund D. Edelman Children's Center), COP, (AMBAC
Insured),
6.000% due 04/01/2012............................... 3,997,125
6,110,000 (Pension Obligation), COP, (MBIA Insured),
6.900% due 06/30/2008............................... 7,309,087
1,360,000 Los Angeles County, Single Family Housing Revenue,
Series B, (GNMA Insured),
7.600% due 08/01/2016............................... 1,513,000
395,000 Los Angeles Home Mortgage Revenue, Mortgage-Backed
Securities Project, (GNMA Insured),
8.100% due 05/01/2017............................... 445,856
415,000 Los Angeles, SFMR, Program 1990, Issue A, AMT, GNMA
collateralized,
7.550% due 12/01/2023............................... 432,638
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
--------- -----------
<C> <S> <C>
$ 2,785,000 Needles, Public Utilities Authority Revenue,
(Utilities System Aquisition Project), Series A,
6.500% due 02/01/2022............................... $ 2,913,806
3,500,000 Novato, Special Tax Revenue, (Community Facilities
District),
7.200% due 08/01/2015............................... 3,775,625
2,000,000 Oakland, Revenue Bonds, (YMCA East Bay Project),
7.100% due 06/01/2010............................... 2,202,500
Oakland, Unified School District:
2,645,000 7.000% due 11/15/2011............................... 2,892,969
3,445,000 COP, Energy Retrofit,
6.750% due 11/15/2014............................... 3,711,988
4,500,000 Palm Desert, Financing Authority, Tax Allocation
Revenue, (MBIA Insured), (Inverse Floater),
8.705% due 04/01/2022+.............................. 5,315,625
1,150,000 Palm Springs, Financing Authority, (Convention
Center Project), Series A, (MBIA Insured),
6.750% due 11/01/2021............................... 1,256,375
Port Oakland, AMT, (Mitsu Osk Lines Ltd.), Series A:
3,030,000 6.750% due 01/01/2012............................... 3,242,100
2,300,000 6.800% due 01/01/2019............................... 2,452,375
3,000,000 Rancho, Water District Financing Authority, Residual
Interest Bond, (AMBAC Insured), (Pre-refunded to
09/11/2001),
9.024% due 08/17/2021+.............................. 3,521,250
2,750,000 Redding, Electrical Systems Revenue, COP, (Inverse
Floater), (MBIA Insured),
8.670% due 07/08/2022+.............................. 3,746,875
1,000,000 Redondo Beach, Public Financing Authority Revenue,
(South Bay Center Redevelopment Project),
7.125% due 07/01/2026............................... 1,116,250
1,500,000 Riverside, School District, Special Project,
7.250% due 09/01/2018............................... 1,620,000
6,500,000 Sacramento County, Airport System Revenue, Series
1989, AMT, (AMBAC Insured),
7.000% due 07/01/2020............................... 6,804,525
1,000,000 Salinas, California Improvement Board, Act 1915,
Special Assessment District #90-1, Series C-185,
5.400% due 09/02/2012............................... 990,000
10,000,000 San Bernardino County, COP, (MBIA Insured), Residual
Interest Bond,
7.450% due 07/01/2016+.............................. 10,675,000
4,000,000 San Diego County, Residual Interest Bond, COP,
Series B, (MBIA Insured), (Pre-refunded to
04/27/2006),
8.520% due 04/08/2021+.............................. 5,200,000
1,000,000 San Dimas, Housing Authority Revenue, (Charter Oak
Mobile Home Project), Series A, (FNMA Collateral)
5.700% due 07/01/2028............................... 970,000
San Francisco, City and County, Multi-family
Mortgage Revenue, Series A, (FNMA Insured):
1,000,000 6.350% due 02/15/2012............................... 1,046,250
1,250,000 6.450% due 02/15/2024............................... 1,301,563
</TABLE>
See Notes to Financial Statements.
38
<PAGE>
PORTFOLIO OF INVESTMENTS (CONTINUED)
CALIFORNIA MUNICIPAL FUND
JUNE 30, 1998
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
--------- -----------
<C> <S> <C>
MUNICIPAL BONDS AND NOTES - (CONTINUED)
CALIFORNIA - (CONTINUED)
San Francisco, City and County, Redevelopment
Agency, Lease Revenue, Capital Appreciation,
(George R. Moscone Project):
$ 3,750,000 Zero coupon due 07/01/2011.......................... $ 1,964,062
4,250,000 Zero coupon due 07/01/2013.......................... 1,960,313
270,000 San Francisco, City and County, SFMR, AMT, GNMA and
FNMA Mortgage-Backed Securities Program,
7.450% due 01/01/2024............................... 282,487
2,370,000 San Jose, Financing Authority Revenue, Series C,
7.000% due 09/02/2015............................... 2,424,036
3,000,000 Santa Clarita, Community Development Authority,
7.500% due 11/15/2012............................... 3,195,000
4,765,000 Santa Rosa, Mortgage Revenue, (Channate Lodge), (FHA
Insured),
6.700% due 12/01/2024............................... 5,128,331
3,050,000 Shasta, Joint Powers Financing Authority, Lease
Revenue, (County Courthouse Improvement Project),
Series A, (MBIA Insured),
5.000% due 06/01/2023............................... 2,981,375
2,000,000 Shasta Lake, COP, (FSA Insured),
6.000% due 04/01/2016............................... 2,167,500
5,000,000 Sierra View, Healthcare District Revenue, (ACA
Insured),
5.250% due 07/01/2018............................... 4,900,000
5,000,000 South Orange County, Public Financing Authority,
Special Tax Revenue, Sr. Lien, Series A, (MBIA
Insured),
6.200% due 09/01/2013............................... 5,468,750
Southern California, Housing Finance Agency, SFMR,
GNMA and FNMA Mortgage-Backed Securities Program:
1,035,000 Series 1988A, AMT, GNMA collateralized,
8.125% due 02/01/2021............................... 1,183,781
1,545,000 Series A, (GNMA Collateral),
7.350% due 09/01/2024............................... 1,622,250
195,000 Series B, (GNMA Collateral),
6.900% due 10/01/2024............................... 206,944
55,000 Stockton, Community Facilities Supplemental Tax #90-
2, SFMR, GNMA Mortgage-Backed Securities Program,
(Brookside Estates), AMT,
7.450% due 08/01/2010............................... 61,325
1,305,000 Stockton, Community Facilities Supplemental Tax #90-
1, (Mello Roos-Weston Ranch), Series A,
6.000% due 09/01/2018............................... 1,303,369
University of California, Refunding Revenue:
10,000,000 Multi-Purpose Projects, Series F, (FGIC Insured),
5.000% due 09/01/2022............................... 9,775,000
5,760,000 Research Facilities, Series C, (FSA Insured),
5.000% due 09/01/2024............................... 5,630,400
7,885,000 Research Facilities, Series D, (FSA Insured),
5.000% due 09/01/2024............................... 7,707,587
2,025,000 Vallejo, Public Financing Authority Revenue,
(Fairgrounds Drive Assessment District),
5.700% due 09/02/2011............................... 2,004,750
-----------
329,415,640
-----------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
--------- ------------
<C> <S> <C>
PUERTO RICO - 0.5%
$ 1,647,018 Centro de Recaudaciones de Ingresos Municipales,
6.850% due 10/17/2003.............................. $ 1,737,603
------------
Total Municipal Bonds and Notes
(Cost $306,656,564)................................ 331,153,243
------------
SHORT-TERM MUNICIPAL BONDS - 0.2%
700,000 Irvine Ranch, Water District Revenue,
3.300% due 04/01/2033+............................. 700,000
5,000 Los Angeles, Regional Airports Improvement,
Corporate Lease Revenue, (Los Angeles
International Airport),
4.000% due 12/01/2025+............................. 5,000
------------
Total Short-Term Municipal Bonds
(Cost $705,000).................................... 705,000
------------
</TABLE>
<TABLE>
<S> <C> <C>
TOTAL INVESTMENTS (Cost $307,361,564*)..................... 102.1% 331,858,243
OTHER ASSETS AND LIABILITES (NET).......................... (2.1) (6,984,289)
----- ------------
NET ASSETS................................................. 100.0% $324,873,954
===== ============
</TABLE>
- -------------
* Aggregate cost for federal tax purposes is $307,361,564.
+ Floating Rate Security. The interest rate shown reflects the rate currently
in effect.
California Municipal Fund had the following industry concentrations greater
than 10% at June 30, 1998 (as a percentage of net assets): (Unaudited)
<TABLE>
<S> <C>
Tax District 13.6%
Retail Utility 12.1%
Health Care 11.8%
General Purpose 10.6%
Single-Family
Housing 10.0%
</TABLE>
California Municipal Fund had the following insurance concentrations greater
than 10% at June 30, 1998 (as a percentage of net assets): (Unaudited)
<TABLE>
<S> <C>
MBIA 23.0%
AMBAC 17.9%
</TABLE>
GLOSSARY OF TERMS
<TABLE>
<S> <C>
ACA - American Capital Access
AMBAC - American Municipal Bond Assurance Corporation
AMT - Alternative Minimum Tax
CONNIE LEE - College Construction Loan Association
COP - Certificates of Participation
FGIC - Financial Guaranty Insurance Corporation
FHA - Federal Housing Authority
FNMA - Federal National Mortgage Association
FSA - Financial Security Assurance
GNMA - Government National Mortgage Association
GO - General Obligation Bonds
IDR - Industrial Development Revenue
MBIA - Municipal Bond Investors Assurance
MFHR - Multi-family Housing Revenue
PCR - Pollution Control Revenue
SFMR - Single Family Mortgage Revenue
VA - Veterans' Administration
</TABLE>
See Notes to Financial Statements.
39
<PAGE>
PORTFOLIO OF INVESTMENTS (CONTINUED)
CALIFORNIA INSURED INTERMEDIATE MUNICIPAL FUND
JUNE 30, 1998
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
--------- -----------
<C> <S> <C>
MUNICIPAL BONDS AND NOTES - 104.6%
CALIFORNIA - 103.2%
Alameda County:
$1,000,000 COP, (Santa Rita Jail Project), (MBIA Insured),
5.375% due 06/01/2009................................ $ 1,075,000
1,000,000 Public Financing Authority Revenue, Marina Village
Assesement District,
5.950% due 09/02/2007................................ 1,022,760
625,000 Berkeley, Unified School District, Series C, (AMBAC
Insured),
5.875% due 08/01/2006................................ 686,716
1,000,000 California Health Facilities, Financing Authority
Revenue, (Catholic Health Corporation), Series A,
(AMBAC Insured),
5.875% due 07/01/2009................................ 1,096,250
California Housing Finance Agency Revenue:
2,245,000 Home Mortgage, Series B1, AMT, (AMBAC Insured),
6.200% due 02/01/2007................................ 2,441,438
445,000 Series E, (MBIA Insured),
6.05% due 08/01/2006................................. 477,819
California State, GO:
1,240,000 County Jail and School Building, (AMBAC Insured)
7.250% due 08/01/2003................................ 1,410,500
1,000,000 (FGIC Insured),
6.200% due 09/01/2005................................ 1,118,750
1,500,000 California State, Public Works Board, (Various
California University Projects), Series A, (AMBAC
Insured),
5.900% due 12/01/2003................................ 1,625,625
1,495,000 California State University Revenue, Series AJ, AL,
AM, AN, AP, AQ, AR, (AMBAC Insured),
6.750% due 11/01/2007................................ 1,603,388
1,600,000 California Statewide Communities Development
Authority, (Children's Hospital), (MBIA Insured),
6.000% due 06/01/2007................................ 1,780,000
1,000,000 Castaic Lake, Water Agency, COP, (Water Systems
Improvement Project), Series A, (MBIA Insured),
5.600% due 08/01/2005................................ 1,075,000
1,000,000 Foothill Eastern Transportation Corridor Agency, Toll
Road Revenue, Capital Appreciation, Sr. Lien, Series
A,
Zero coupon due 01/01/2004........................... 773,750
Gilroy, Unified School District, COP, (FSA Insured):
1,390,000 5.600% due 09/01/2003................................ 1,478,613
1,400,000 5.625% due 09/01/2004................................ 1,499,750
1,000,000 Inland Empire Solid Waste Financing Authority
Revenue, (Landfill Improvement Financing Project),
Series B, AMT, (FSA Insured),
6.000% due 02/01/2006................................ 1,095,000
1,200,000 Los Angeles, COP
5.000% due 02/01/2008................................ 1,204,500
Los Angeles, Community Redevelopment Agency, MFHR,
(AMBAC Insured):
485,000 5.650% due 07/01/2000................................ 498,944
950,000 6.000% due 07/01/2004................................ 1,023,625
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
--------- -----------
<C> <S> <C>
Los Angeles, Department of Water and Power, Electric
Revenue Bond, (MBIA Insured):
$1,500,000 8.500% due 01/15/2002................................ $ 1,711,875
1,000,000 5.400% due 09/01/2006................................ 1,063,750
1,000,000 Los Angeles, GO, Series A, (FGIC Insured),
5.700% due 09/01/2008................................ 1,070,000
1,000,000 Los Angeles, Unified School District, COP:
(FSA Insured),
5.400% due 11/01/2009................................ 1,000,200
1,500,000 Series B, (AMBAC Insured),
6.000% due 12/01/2001................................ 1,591,875
1,500,000 Los Angeles County, Capital Asset Leasing
Corporation, Leasehold Revenue, (AMBAC Insured),
6.000% due 12/01/2006................................ 1,672,500
Los Angeles County, Metropolitan Transportation
Authority, Sales Tax Revenue, 1st Tier, Series A,
(FSA Insured):
2,000,000 5.250% due 07/01/2008#............................... 2,112,500
1,800,000 5.250% due 07/01/2009#............................... 1,899,000
2,000,000 5.250% due 07/01/2010#............................... 2,100,000
1,000,000 Madera County, COP, Valley Children's Hospital, (MBIA
Insured)
6.250% due 03/15/2007................................ 1,128,750
564,000 Modesto, Mortgage Revenue Bond, (GNMA Insured),
5.875% due 12/01/2004................................ 597,840
250,000 Oakland, Improvement Board Act of 1915, Medical Hill
Parking, Assessment District #3, (MBIA Insured),
6.000% due 09/02/2004................................ 258,193
600,000 Oakland Revenue Bonds, (YMCA East Bay Project),
6.250% due 06/01/2000................................ 615,000
1,395,000 Oroville, Hospital Revenue, Series A, (MBIA Insured),
5.000% due 12/01/2009................................ 1,442,081
Oxnard, Harbor District Revenue, (FSA Insured):
1,075,000 7.000% due 08/01/2001................................ 1,165,031
1,155,000 7.000% due 08/01/2002................................ 1,277,719
1,240,000 7.000% due 08/01/2003................................ 1,396,550
Paramount, Redevelopment Agency Tax Allocation,
(Redevelopment Project Area #1), (MBIA Insured):
1,610,000 6.100% due 08/01/2006................................ 1,771,000
1,700,000 6.100% due 08/01/2007................................ 1,870,000
560,000 Pioneers Memorial Hospital District, GO, (AMBAC
Insured), (Pre-refunded to 10/01/2004),
7.000% due 10/01/2005................................ 655,200
1,280,000 Redondo Beach, Public Financing Authority Revenue,
(South Bay Center Redevelopment Project),
6.750% due 07/01/2006................................ 1,395,200
1,300,000 Sacramento, Municipal Utility District, Electric
Revenue, (AMBAC Insured),
5.500% due 05/15/2007................................ 1,382,875
1,050,000 Santa Ana, COP, (Santa Ana Recycling Project), Series
A, AMT, (AMBAC Insured),
5.400% due 05/01/2007................................ 1,110,375
</TABLE>
See Notes to Financial Statements.
40
<PAGE>
PORTFOLIO OF INVESTMENTS (CONTINUED)
CALIFORNIA INSURED INTERMEDIATE MUNICIPAL FUND
JUNE 30, 1998
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
--------- -----------
<C> <S> <C>
MUNICIPAL BONDS AND NOTES - (CONTINUED)
CALIFORNIA - (CONTINUED)
$ 650,000 Santa Clara, Redevelopment Agency, Tax Allocation,
(Bay Shore North Project), (AMBAC Insured),
7.000% due 07/01/2010................................ $ 790,563
1,350,000 Solano County, (Solano Park Hospital Project), COP,
(FSA Insured),
6.500% due 08/01/2006................................ 1,522,125
1,000,000 Southern California, Home Financing Authority, MFHR,
(The Fountains Project), Series A, AMT, (FNMA
Collateral),
5.400% due 01/01/2027................................ 1,041,250
1,000,000 Stanton, MFHR, (Continental Gardens Apartments),
(FNMA Collateral),
5.625% due 08/01/2029................................ 1,060,000
1,305,000 Stocton, Community Facilities Supplemental Tax,
(Mello Roos-Weston Ranch), Series A,
5.500% due 09/01/2009................................ 1,291,950
University of California:
1,000,000 (Multiple Purpose Review Projects), (MBIA Insured),
10.000% due 09/01/2001............................... 1,172,500
1,070,000 Series A, (CONNIE LEE Insured),
5.500% due 09/01/2006................................ 1,120,825
1,000,000 Valley Health Systems, California Hospital Revenue,
(Hospital Revenue Refunding & Improvement Project),
Series A, (ACA Insured),
6.125% due 05/15/2005................................ 1,080,000
-----------
62,354,155
-----------
PUERTO RICO - 1.4%
823,509 Centro de Recaudaciones de Ingresos Municipales, COP,
6.850% due 10/17/2003................................ 868,802
-----------
Total Municipal Bonds and Notes
(Cost $59,741,084)................................... 63,222,957
-----------
</TABLE>
<TABLE>
<C> <S> <C>
SHORT-TERM MUNICIPAL BONDS - 4.0%
California, Pollution Control Financing Authority, PCR:
900,000 (Pacific Gas and Electric)
3.350% due 11/01/2026+.................................... 900,000
900,000 (Southern California Edison Company)
3.450% due 02/28/2008+.................................... 900,000
600,000 Los Angeles, Regional Airport Improvement Corp., Lease
Revenue Bond, (American Airlines Inc.),
4.000% due 12/01/2024+.................................... 600,000
---------
Total Short-Term Municipal Bonds
(Cost $2,400,000)......................................... 2,400,000
---------
</TABLE>
<TABLE>
<S> <C> <C>
TOTAL INVESTMENTS (Cost $62,141,084*)....................... 108.6% 65,622,957
OTHER ASSETS AND LIABILITIES (NET).......................... (8.6) (5,209,054)
----- -----------
NET ASSETS.................................................. 100.0% $60,413,903
===== ===========
</TABLE>
- -------------
* Aggregate cost for federal tax purposes is $62,141,084.
+ Floating rate security. The interest rate shown reflects the rate currently
in effect.
# Security purchased on a when-issued basis (Note 2).
California Insured Intermediate Municipal Fund had the following industry con-
centrations greater than 10% at June 30, 1998 (as a percentage of net assets):
(Unaudited)
Transportation 17.0%
Health Care 13.8%
General Purpose 11.9%
Tax District 11.1%
Public Education 10.2%
California Insured Intermediate Municipal Fund had the following insurance con-
centrations greater than 10% at June 30, 1998 (as a percentage of net assets):
(Unaudited)
<TABLE>
<S> <C>
AMBAC 29.1%
MBIA 24.5%
FSA 27.4%
</TABLE>
GLOSSARY OF TERMS
<TABLE>
<S> <C>
ACA - American Capital Access
AMBAC - American Municipal Bond Assurance Corporation
AMT - Alternative Minimum Tax
CONNIE LEE - College Construction Loan Association
COP - Certificates of Participation
FGIC - Financial Guaranty Insurance Corporation
FNMA - Federal National Mortgage Association
FSA - Financial Security Assurance
GNMA - Government National Mortgage Association
GO - General Obligation Bonds
MBIA - Municipal Bond Investors Assurance
MFHR - Multi-family Housing Revenue
PCR - Pollution Control Revenue
</TABLE>
See Notes to Financial Statements.
41
<PAGE>
PORTFOLIO OF INVESTMENTS (CONTINUED)
FLORIDA INSURED MUNICIPAL FUND
JUNE 30, 1998
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
--------- -----------
<C> <S> <C>
MUNICIPAL BONDS AND NOTES - 112.7%
FLORIDA - 112.7%
$1,000,000 Brevard County, School Board Authority, COP, Series
B, (AMBAC Insured),
5.500% due 07/01/2021................................ $ 1,028,750
1,200,000 Broward County, Educational Facilities Authority
Revenue, (Nova Southeastern University Project),
(CONNIE LEE Insured),
6.000% due 04/01/2008................................ 1,312,500
435,000 Clay County, Housing Finance Authority Revenue, SFMR,
Multi-County Program, (GNMA/FNMA Collateral),
5.950% due 10/01/2019................................ 460,013
1,000,000 Collier County, Industrial Development Authority,
IDR, (Southern States Utilities Project), AMT,
6.500% due 10/01/2025................................ 1,078,750
1,100,000 Dade County, Aviation Revenue, Series B, AMT, (MBIA
Insured),
6.600% due 10/01/2022................................ 1,212,750
600,000 Dade County, Public Facilities Authority Revenue,
(Jackson Memorial Hospital), (FSA Insured),
5.000% due 06/01/2018................................ 579,750
1,000,000 Dade County, School Board Authority, COP, Series A,
(AMBAC Insured),
5.000% due 08/01/2026................................ 962,500
950,000 Escambia County, Health Facilities Revenue, Baptist
Hospital, Series B,
6.000% due 10/01/2014................................ 999,875
1,000,000 Escambia County, PCR, (Champion International
Corporation Project), AMT,
6.900% due 08/01/2022................................ 1,111,250
705,000 Florida Housing Finance Agency, AMT:
SFMR, Series A, (GNMA Collateralized),
6.650% due 01/01/2024................................ 757,875
1,000,000 Spinnaker Cove Apartments, Series G, (AMBAC Insured),
6.500% due 07/01/2036................................ 1,081,250
1,000,000 Florida State Turnpike Authority, Turnpike Revenue,
Department of Transportation, Series A, (FGIC
Insured),
5.000% due 07/01/2016................................ 991,250
1,445,000 Hillsborough County, Capital Improvement Revenue,
Criminal Justice Facilities, (FGIC Insured),
5.250% due 08/01/2016................................ 1,472,094
1,400,000 Hillsborough County, School Board Authority, COP,
(MBIA Insured),
6.000% due 07/01/2012 (Prerefunded 07/01/2004)....... 1,554,000
1,250,000 Jacksonville, Water & Sewer Revenue, (United Water
Project), AMT, (AMBAC Insured),
6.350% due 08/01/2025................................ 1,395,312
960,000 Manatee County, Housing Finance Authority, SFMR, Sub
Series 4, AMT, (GNMA/FNMA Collateral),
6.875% due 11/01/2026................................ 1,082,400
1,000,000 Orange County, Housing Finance Authority, MFHR,
(Hands Inc. Project), Series A,
8.000% due 10/01/2025................................ 1,117,500
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
--------- -----------
<C> <S> <C>
$1,000,000 Orlando & Orange County, Expressway Authority,
Expressway Revenue, Jr. Lien, (FSA Insured),
5.950% due 07/01/2023................................ $ 1,042,500
1,000,000 Pasco County, Solid Waste Disposal & Resource
Recovery System, AMT,
6.000% due 04/01/2011................................ 1,111,250
1,000,000 Pinellas County, Housing Finance Authority Revenue,
SFMR, Series A, AMT,
6.000% due 09/01/2018................................ 1,071,250
Port Orange, Water and Sewer Refunding Revenue,
(AMBAC Insured):
1,000,000 5.000% due 10/01/2012#............................... 987,500
500,000 5.000% due 10/01/2016#............................... 483,750
1,050,000 Seminole County, School Board Authority, COP, Series
A, (MBIA Insured),
6.125% due 07/01/2014................................ 1,172,063
300,000 Tampa, Utility Tax Improvement, (FSA Insured),
5.000% due 10/01/2019................................ 294,750
-----------
Total Municipal Bonds and Notes
(Cost $22,467,037)................................... 24,360,882
-----------
</TABLE>
<TABLE>
<S> <C> <C>
TOTAL INVESTMENTS (Cost $22,467,037*)....................... 112.7% 24,360,882
OTHER ASSETS AND LIABILITIES (NET).......................... (12.7) (2,745,307)
----- -----------
NET ASSETS.................................................. 100.0% $21,615,575
===== ===========
</TABLE>
- -------------
* Aggregate cost for federal tax purposes is $22,467,037.
# Security purchased on a when-issued basis (Note 2).
Florida Insured Municipal Fund had the following industry concentrations
greater than 10% at June 30, 1998 (as a percentage of net assets): (Unaudited)
Public Education 19.4%
Water & Sewage 16.3%
Single-Family Housing 13.8%
Industrial Revenue 10.2%
Florida Insured Municipal Fund had the following insurance concentrations
greater than 10% at June 30, 1998 (as a percentage of net assets): (Unaudited)
<TABLE>
<S> <C>
AMBAC 23.0%
MBIA 18.2%
FGIC 11.4%
GNMA 10.6%
</TABLE>
GLOSSARY OF TERMS
<TABLE>
<S> <C>
AMBAC - American Municipal Bond Assurance Corporation
AMT - Alternative Minimum Tax
CONNIE LEE - College Construction Loan Association
COP - Certificates of Participation
FGIC - Financial Guaranty Insurance Corporation
FNMA - Federal National Mortgage Association
FSA - Financial Security Assurance
GNMA - Government National Mortgage Association
IDR - Industrial Development Revenue
MBIA - Municipal Bond Investors Assurance
MFHR - Multi-family Housing Revenue
PCR - Pollution Control Revenue
SFMR - Single Family Mortgage Revenue
</TABLE>
See Notes to Financial Statements.
42
<PAGE>
PORTFOLIO OF INVESTMENTS (CONTINUED)
GROWTH FUND
JUNE 30, 1998
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 2)
------ ------------
<C> <S> <C>
COMMON STOCKS - 99.8%
COMPUTER SOFTWARE/SERVICES - 20.3%
29,700 Amazon.com, Inc.+ .................................... $ 2,962,575
91,527 America Online, Inc................................... 9,701,862
7,035 Aspect Development, Inc.+ ............................ 532,022
115,910 Aspen Technology, Inc.+ .............................. 5,853,455
161,765 Cadence Design Systems, Inc.+ ........................ 5,055,156
57,145 Intuit, Inc.+ ........................................ 3,500,131
50,905 JDA Software Group, Inc.+ ............................ 2,227,094
122,070 Microsoft Corporation+ ............................... 13,229,336
359,935 Parametric Technology Company+ ....................... 9,763,237
58,170 Peoplesoft, Inc.+ .................................... 2,733,990
48 Structural Dynamics Research Corporation+ ............ 1,110
41,917 Wind River Systems+ .................................. 1,503,772
------------
57,063,740
------------
UTILITIES/TELECOMMUNICATIONS - 19.0%
77,790 At Home Corporation+ ................................. 3,680,439
335,745 Comcast Corporation, Class A.......................... 13,629,149
77,665 Cox Communications, Inc., Class A+ ................... 3,761,898
60,920 Liberty Media Group+ ................................. 2,364,458
266,790 MediaOne Group, Inc.+ ................................ 11,722,086
337,589 Tele-Communications, Inc., Class A+ .................. 12,976,080
362,722 Telecom Italia SPA.................................... 2,671,292
1 US West, Inc.......................................... 23
114,510 Western Wireless Corporation+......................... 2,283,043
------------
53,088,468
------------
HEALTH CARE PRODUCTS - 13.1%
82,330 ALZA Corporation+ .................................... 3,560,772
35,275 Centocor, Inc.+ ...................................... 1,278,719
83,350 Eli Lilly and Company+ ............................... 5,506,309
75,104 Omnicare, Inc. ....................................... 2,863,340
46,725 Pfizer, Inc.+ ........................................ 5,078,423
43,400 Sofamor Danek Group, Inc.+ ........................... 3,756,813
2,070 United States Surgical Corporation.................... 94,444
208,175 Warner Lambert Company................................ 14,442,141
------------
36,580,961
------------
MEDIA - 10.2%
126,430 CBS Corporation+ ..................................... 4,014,153
59,405 Chancellor Media Corporation+......................... 2,949,830
328,421 TCI Ventures, Class A+ ............................... 6,588,943
173,702 Time Warner Inc....................................... 14,840,665
7,295 United International Holdings, Inc.+ ................. 116,720
------------
28,510,311
------------
COMPUTER/SYSTEMS - 6.9%
113,862 Cisco Systems, Inc.+ ................................. 10,482,420
47,090 Dell Computer Corporation+ ........................... 4,370,541
65,045 General Instrument Corporation+ ...................... 1,768,411
74,475 HBO & Company......................................... 2,625,244
------------
19,246,616
------------
CAPITAL GOODS - 5.5%
68,620 Federal-Mogul Corporation............................. 4,631,850
85,210 Monsanto Company...................................... 4,761,109
82,150 Solutia, Inc. ........................................ 2,356,678
59,085 Tyco International Ltd. .............................. 3,722,355
------------
15,471,992
------------
BANKS/SAVINGS & LOANS - 4.8%
12,690 Ambanc Holding Company, Inc. ......................... 225,247
44,580 Bank of New York Company, Inc......................... 2,705,449
</TABLE>
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 2)
------ ------------
<C> <S> <C>
BANKS/SAVINGS & LOANS - (CONTINUED)
62,035 BankAmerica Corporation............................... $ 5,362,150
18,615 First Defiance Financial Corporation.................. 260,610
11,050 Provident Financial Holdings, Inc.+ .................. 229,287
28,245 Star Banc Corporation................................. 1,804,149
66,255 U.S. Bancorp+......................................... 2,848,965
------------
13,435,857
------------
ELECTRONICS/SEMICONDUCTORS - 4.2%
27,989 Analog Devices, Inc.+ ................................ 687,480
66,845 Maxim Integrated Products, Inc.+ ..................... 2,118,151
123,140 Nokia Corporation, Class A, Sponsored ADR............. 8,935,346
------------
11,740,977
------------
BUSINESS SERVICES - 4.2%
15,640 Apollo Group, Inc.+ .................................. 517,098
48,940 Cognizant Corporation................................. 3,089,338
58,030 Lamar Advertising Company+ ........................... 2,081,826
93,309 Outdoor Systems, Inc.+ ............................... 2,612,652
36,605 Sapient Corporation+ ................................. 1,930,914
35,600 Snyder Communications+ ............................... 1,566,400
------------
11,798,228
------------
FINANCIAL SERVICES - 2.6%
55,750 Associates First Capital Corporation, Class A......... 4,285,781
58,335 Household International............................... 2,902,166
------------
7,187,947
------------
CONSUMER STAPLES - 2.5%
53,660 Delta and Pine Land Company........................... 2,387,870
260,340 Raisio Group Plc.+ ................................... 4,731,684
------------
7,119,554
------------
TECHNOLOGY - 2.5%
25,675 Orbital Sciences Corporation+ ........................ 959,603
80,570 Pittway Corporation, Class A.......................... 5,952,109
------------
6,911,712
------------
INSURANCE - 2.3%
114,710 UNUM Corporation...................................... 6,366,405
------------
RETAIL SALES - 1.2%
51,335 Costco Companies, Inc.+ .............................. 3,237,313
------------
OIL & GAS - 0.5%
1,731,236 Ocean Rig ASA+ ....................................... 1,287,668
------------
</TABLE>
<TABLE>
<S> <C> <C>
TOTAL INVESTMENTS (Cost $212,485,953*)..................... 99.8% 279,047,749
OTHER ASSETS AND LIABILITIES (NET)......................... 0.2 506,420
----- ------------
NET ASSETS................................................. 100.0% $279,554,169
===== ============
</TABLE>
- -------------
* Aggregate cost for federal tax purposes is $212,742,581.
+ Non-income producing security.
See Notes to Financial Statements.
43
<PAGE>
PORTFOLIO OF INVESTMENTS (CONTINUED)
GROWTH FUND
JUNE 30, 1998
SCHEDULE OF FORWARD FOREIGN CURRENCY CONTRACTS
U.S. FORWARD FOREIGN CURRENCY CONTRACTS TO BUY
<TABLE>
<CAPTION>
CONTRACTS TO RECEIVE
-------------------------------------------------
NET UNREALIZED
APPRECIATION/
EXPIRATION LOCAL VALUE IN IN EXCHANGE (DEPRECIATION)
DATE CURRENCY U.S. $ FOR U.S. $ OF CONTRACTS
- ---------- ----------------- --------- ----------- --------------
<S> <C> <C> <C> <C>
07/02/1998 NLG 3,900,000 1,918,694 1,932,366 $(13,672)
07/10/1998 NLG 2,600,000 1,279,630 1,278,705 925
07/10/1998 ITL 4,350,000,000 2,448,525 2,440,185 8,340
07/17/1998 NLG 1,300,000 640,238 636,365 3,873
07/23/1998 FIM 571,000 104,337 103,760 577
07/31/1998 NLG 900,000 443,645 441,270 2,375
07/31/1998 FIM 26,029,000 4,758,425 4,774,416 (15,991)
08/07/1998 SEK 550,000 69,074 68,520 554
08/07/1998 ITL 1,430,000,000 805,331 806,543 (1,212)
08/07/1998 GBP 280,000 467,873 460,048 7,825
08/13/1998 GBP 36,000 60,162 59,832 330
08/14/1998 SEK 5,850,000 734,902 732,207 2,695
10/07/1998 GBP 575,000 962,022 941,624 20,398
11/04/1998 FIM 7,500,000 1,378,059 1,369,662 8,397
11/12/1998 ITL 1,400,000,000 790,334 801,396 (11,062)
--------
$ 14,352
--------
</TABLE>
U.S. FORWARD FOREIGN CURRENCY CONTRACTS TO SELL
<TABLE>
<CAPTION>
CONTRACTS TO DELIVER
-------------------------------------------------
NET UNREALIZED
APPRECIATION/
EXPIRATION LOCAL VALUE IN IN EXCHANGE (DEPRECIATION)
DATE CURRENCY U.S. $ FOR U.S. $ OF CONTRACTS
- ---------- ----------------- --------- ----------- --------------
<S> <C> <C> <C> <C>
07/01/1998 FIM 279,063 50,923 50,685 $ (238)
07/02/1998 NLG 3,900,000 1,918,695 1,900,585 (18,110)
07/10/1998 ITL 4,450,000,000 2,504,812 2,499,719 (5,093)
07/10/1998 NLG 2,600,000 1,279,630 1,285,856 6,226
07/10/1998 FIM 1,160,000 211,757 211,293 (464)
07/17/1998 NLG 1,300,000 640,238 638,507 (1,731)
07/23/1998 FIM 571,000 104,337 105,050 713
07/31/1998 FIM 47,869,000 8,751,047 8,720,522 (30,525)
07/31/1998 NLG 900,000 443,645 444,532 887
08/07/1998 ITL 1,430,000,000 805,332 789,172 (16,160)
08/07/1998 SEK 550,000 69,074 68,731 (343)
08/07/1998 GBP 280,000 467,873 457,870 (10,003)
08/07/1998 FIM 3,000,000 548,655 540,472 (8,183)
08/13/1998 GBP 36,000 60,162 58,176 (1,986)
08/14/1998 SEK 5,850,000 734,902 730,948 (3,954)
10/07/1998 GBP 575,000 962,023 953,350 (8,673)
11/04/1998 FIM 7,500,000 1,378,059 1,415,094 37,035
11/12/1998 ITL 4,720,000,000 2,664,555 2,673,161 8,606
--------
$(51,996)
--------
Net Unrealized Depreciation of Forward Foreign
Currency Contracts.................................... $(37,644)
========
</TABLE>
GLOSSARY OF TERMS
<TABLE>
<S> <C>
ADR - American Depositary Receipt
FIM - Finnish Markka
GBP - Great Britain Pound Sterling
ITL - Italian Lira
NLG - Netherlands Guilder
SEK - Swedish Krona
</TABLE>
See Notes to Financial Statements.
44
<PAGE>
PORTFOLIO OF INVESTMENTS (CONTINUED)
EMERGING GROWTH FUND
JUNE 30, 1998
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 2)
------ ------------
<C> <S> <C>
COMMON STOCKS - 92.5%
HEALTH CARE PRODUCTS - 13.0%
76,400 ATL Ultrasound, Inc.+................................... $ 3,485,750
204,600 Corixa Corporation+..................................... 1,406,625
53,100 ESC Medical Systems Ltd.+............................... 1,792,125
174,100 ICOS Corporation+....................................... 3,329,662
204,825 NeoRx Corporation+...................................... 1,011,323
150,700 Omnicare, Inc........................................... 5,745,437
107,379 1-800 Contacts, Inc.+................................... 1,637,530
93,700 PathoGenesis Corporation+............................... 2,717,300
34,950 Sofamor Danek Group, Inc.+.............................. 3,025,359
25,466 SonoSight, Inc.+........................................ 186,220
------------
24,337,331
------------
COMPUTER SOFTWARE/SERVICES - 11.2%
82,550 ARIS Corporation+....................................... 2,311,400
109,950 Cadence Design Systems, Inc.+........................... 3,435,937
169,650 Carreker-Antinori, Inc.+................................ 1,781,325
83,100 Check Point Software Technologies Ltd.+................. 2,721,525
91,300 Harbinger Corporation+.................................. 2,208,319
57,650 Made2Manage Systems, Inc.+.............................. 670,181
127,925 Tier Technologies, Inc.+................................ 2,278,664
58,100 Visio Corporation+...................................... 2,774,275
171,590 Wall Data, Inc.+........................................ 2,745,440
------------
20,927,066
------------
FINANCIAL SERVICES - 10.0%
232,650 American Capital Strategies, Ltd........................ 5,321,869
90,555 HealthCare Financial Partners, Inc.+.................... 5,552,153
134,350 Paychex, Inc. .......................................... 5,466,366
83,375 Profit Recovery Group International, Inc.+.............. 2,329,289
------------
18,669,677
------------
ELECTRONICS/SEMICONDUCTORS - 7.9%
80,925 Berg Electronics Corporation+........................... 1,583,095
164,075 Credence Systems Corporation+........................... 3,117,425
174,150 FEI Company+............................................ 1,621,772
229,400 General Semiconductor, Inc.+............................ 2,265,325
207,245 Innova Corporation+..................................... 1,062,131
67,350 Lattice Semiconductor Corporation+...................... 1,913,161
31,250 Maxim Integrated Products, Inc.+........................ 990,234
120,800 TriQuint Semiconductor, Inc.+........................... 2,295,200
------------
14,848,343
------------
RETAIL SALES - 7.4%
46,907 Duane Reade, Inc.+...................................... 1,407,210
78,885 Fastenal Company........................................ 3,663,222
891,667 J.D. Wetherspoon Plc Ord................................ 4,354,788
71,175 MSC Industrial Direct Company, Inc., Class A+........... 2,028,488
117,625 Petco Animal Supplies, Inc.+............................ 2,345,148
------------
13,798,856
------------
MEDIA - 5.5%
57,950 Chancellor Media Corporation............................ 2,877,580
24,815 Jacor Communication, Inc.+.............................. 1,464,085
81,567 Lamar Advertising Company+.............................. 2,926,216
106,480 Outdoor Systems, Inc.+.................................. 2,981,440
------------
10,249,321
------------
</TABLE>
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 2)
------ ------------
<C> <S> <C>
LODGING & RESTAURANTS - 5.3%
149,540 Cavanaughs Hospitality Corporation+..................... $ 1,953,366
62,850 JP Foodservice, Inc.+................................... 2,203,678
47,945 Papa John's International, Inc.+........................ 1,890,831
99,400 PJ America, Inc.+....................................... 1,814,050
20,520 Premier Parks, Inc.+.................................... 1,367,145
69,410 Royal Olympic Cruise Lines, Inc.+....................... 694,100
------------
9,923,170
------------
CONSUMER CYCLICALS - 4.9%
136,600 Building Materials Holding Corporation+................. 1,886,788
71,400 Cutter & Buck, Inc.+.................................... 1,927,800
91,987 Family Golf Centers, Inc.+.............................. 2,328,421
99,250 Nortek, Inc.+........................................... 3,051,938
------------
9,194,947
------------
COMPUTER SYSTEMS - 4.9%
100,000 Apex PC Solutions, Inc.+................................ 2,787,500
314,200 In Focus Systems, Inc.+................................. 2,219,038
192,500 RadiSys Corporation+.................................... 4,138,750
------------
9,145,288
------------
TRANSPORTATION - 3.4%
52,300 Expeditors International of Washington, Inc............. 2,301,200
116,175 Ryanair Holdings PLC-Sponsored ADR+..................... 4,138,734
------------
6,439,934
------------
INSURANCE - 2.9%
166,450 PennCorp Financial Group, Inc. ......................... 3,412,225
56,880 Protective Life Corporation............................. 2,086,785
------------
5,499,010
------------
HEALTH CARE SERVICES - 2.8%
63,110 Concentra Managed Care, Inc.+........................... 1,640,860
43,865 Medallion Financial Corporation......................... 1,206,287
60,000 Pediatrix Medical Group, Inc+........................... 2,231,250
------------
5,078,397
------------
BUSINESS SERVICES - 2.5%
95,147 Apollo Group, Inc., Class A+............................ 3,145,799
58,795 First Consulting Group, Inc.+........................... 1,543,369
------------
4,689,168
------------
UTILITES/GAS/ELECTRIC - 2.4%
324,500 Trigen Energy Corporation............................... 4,482,156
------------
UTILITIES/TELECOMMUNICATION - 2.2%
119,610 American TeleSource International, Inc.+................ 1,794,150
61,200 Teligent, Inc.+......................................... 1,801,575
29,100 US LEC Corp.+........................................... 607,463
------------
4,203,188
------------
ELECTRICAL EQUIPMENT - 2.2%
83,400 Eloctro Scientific Industries, Inc.+.................... 2,632,313
55,365 Littelfuse, Inc.+....................................... 1,397,966
------------
4,030,279
------------
OIL & GAS - 1.5%
102,200 Hanover Compressor Company+............................. 2,765,788
------------
CONSUMER STAPLES - 1.1%
69,749 Renters Choice, Inc.+................................... 1,979,128
------------
</TABLE>
See Notes to Financial Statements.
45
<PAGE>
PORTFOLIO OF INVESTMENTS (CONTINUED)
EMERGING GROWTH FUND
JUNE 30, 1998
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 2)
------ ------------
<C> <S> <C>
COMMON STOCKS - (CONTINUED)
BASIC INDUSTRY - 0.7%
37,220 Sealed Air Corporation+................................. $ 1,367,835
------------
BANKS/SAVINGS & LOANS - 0.7%
73,050 Richmond County Financial Corp.......................... 1,365,121
------------
Total Common Stocks
(Cost $145,514,740)..................................... 172,994,003
------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
---------
<C> <S> <C>
REPURCHASE AGREEMENT - 18.2%
$33,964,000 Agreement with Goldman Sachs, 5.500% dated
06/30/1998, to be repurchased at $33,969,189 on
07/01/1998, collateralized by $24,891,332 U.S.
Treasury Note, 8.875% due 08/15/2017 (value
$34,713,266) (Cost $33,964,000).................... 33,964,000
----------
</TABLE>
<TABLE>
<S> <C> <C>
TOTAL INVESTMENTS (Cost $179,478,740*)..................... 110.7% 206,958,003
OTHER ASSETS AND LIABILITIES (NET)......................... (10.7) (20,070,349)
----- ------------
NET ASSETS................................................. 100.0% $186,887,654
===== ============
</TABLE>
- -------------
* Aggregate cost for federal tax purposes is $180,126,943.
+Non-income producing security.
SCHEDULE OF FORWARD FOREIGN CURRENCY CONTRACTS
U.S. FORWARD FOREIGN CURRENCY CONTRACTS TO BUY
<TABLE>
<CAPTION>
CONTRACTS TO RECEIVE
-------------------------------------------------- NET UNREALIZED
EXPIRATION LOCAL VALUE IN IN EXCHANGE APPRECIATION
DATE CURRENCY U.S. $ FOR U.S. $ OF CONTRACTS
- ---------- -------- --------- ----------- --------------
<S> <C> <C> <C> <C>
07/10/1998 GBP 687,000 1,147,220 1,142,797 $ 4,423
08/07/1998 GBP 515,000 860,552 855,724 4,828
08/13/1998 GBP 650,000 1,086,266 1,079,910 6,356
08/14/1998 GBP 3,500,000 5,849,243 5,811,050 38,193
-------
$53,800
-------
</TABLE>
U.S. FORWARD FOREIGN CURRENCY CONTRACTS TO SELL
<TABLE>
<CAPTION>
CONTRACTS TO DELIVER
-------------------------------------------------- NET UNREALIZED
EXPIRATION LOCAL VALUE IN IN EXCHANGE DEPRECIATION
DATE CURRENCY U.S. $ FOR U.S. $ OF CONTRACTS
- ---------- -------- --------- ----------- --------------
<S> <C> <C> <C> <C>
07/10/1998 GBP 687,000 1,147,220 1,115,825 $ (31,395)
08/07/1998 GBP 515,000 860,552 843,081 (17,471)
08/13/1998 GBP 650,000 1,086,266 1,050,400 (35,866)
08/14/1998 GBP 3,500,000 5,849,243 5,716,900 (132,343)
---------
$(217,075)
---------
Net Unrealized Depreciation of Forward Foreign Currency
Contracts............................................. $(163,275)
=========
</TABLE>
GLOSSARY OF TERMS
ADR- American Depositary Receipt
GBP- Great Britain Pound Sterling
See Notes to Financial Statements.
46
<PAGE>
PORTFOLIO OF INVESTMENTS (CONTINUED)
INTERNATIONAL GROWTH FUND
JUNE 30, 1998
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 2)
--------- ------------
<C> <S> <C>
COMMON STOCKS - 97.7%
GERMANY - 14.5%
45,300 Commerzbank AG........................................ $ 1,725,977
46,800 Degussa AG............................................ 2,997,837
14,000 Fresenius Medical Care AG............................. 877,378
5,000 GEA AG................................................ 1,954,966
16,200 Hannover Rueckversicherungs AG........................ 1,868,782
52,200 Hoechst AG............................................ 2,627,225
4,841 KSB AG................................................ 1,208,169
9,000 Mannesmann AG......................................... 925,905
32,800 Moebel Walther AG..................................... 1,546,226
7,200 Muenchener Rueckversicherungs - Gesellschaft AG....... 3,577,838
5,900 Preussag AG........................................... 2,113,804
2,670 Viag AG............................................... 1,839,133
------------
23,263,240
------------
UNITED KINGDOM - 14.5%
56,900 Barclays Plc+......................................... 1,641,702
88,100 Bass Plc.............................................. 1,651,939
35,200 Biocompatibles International Plc+..................... 71,116
71,752 British Airport Authority............................. 775,134
244,900 British Energy Plc.................................... 2,142,686
162,800 British Sky Broadcasting Group Plc.................... 1,170,216
488,403 Cookson Group Plc..................................... 1,679,902
210,100 Dixons Group Plc...................................... 1,676,843
150,476 Guardian Royal Exchange Plc........................... 881,888
69,900 Glaxo Wellcome Plc.................................... 2,099,654
127,500 London Forfaiting Company Plc......................... 580,116
319,200 Medeva Plc............................................ 911,376
122,500 Orange Plc+........................................... 1,298,818
10,700 Perpetual Plc......................................... 722,225
622,600 Pilkington Plc........................................ 1,153,906
318,600 Rolls Royce Plc....................................... 1,316,617
62,900 Royal & Sun Alliance Insurance Group Plc.............. 650,624
58,500 Safeway, Inc.......................................... 383,384
112,400 Standard Chartered Plc................................ 1,278,062
173,450 Williams Holdings Plc................................. 1,114,996
------------
23,201,204
------------
FRANCE - 12.8%
21,800 Banque Nationale de Paris............................. 1,781,299
8,990 Copagnie de St. Gobain................................ 1,666,935
32,500 Elf Aquitaine SA...................................... 4,569,363
35,063 La Gardere Groupe..................................... 1,459,774
9,800 PSA Peugeot Citroen................................... 2,107,283
43,300 Rhone-Poulenc Rorer, Inc.............................. 2,442,281
21,300 SCOR.................................................. 1,351,134
54,300 Societe Generale Ord. ................................ 2,567,834
8,000 Total SA.............................................. 1,040,078
94,200 TRANSGENE SA, Sponsored ADR+.......................... 1,636,725
------------
20,622,706
------------
JAPAN - 9.3%
32,810 Advantest Corporation................................. 1,770,179
155,000 Fujitsu Ltd........................................... 1,636,653
86,000 Hankyu Realty......................................... 380,025
236,000 Minibea Company Ltd. ................................. 2,357,098
4,730 Nichiei Company Ltd................................... 322,928
24,800 Orix Corporation...................................... 1,680,596
17,000 Rohm Company.......................................... 1,752,007
3,600 Shohkoh Fund & Company Ltd............................ 887,828
22,700 Sony Corporation...................................... 1,961,850
600 Sumitomo Bank Ltd..................................... 5,858
12,000 Takefuji Corporation++................................ 555,435
18,000 TDK Corporation....................................... 1,334,346
</TABLE>
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 2)
--------- ------------
<C> <S> <C>
JAPAN - (CONTINUED)
50 Tohoku Electric & Power Company...................... $ 740
11,000 Tokyo Electron Ltd. ................................. 338,107
------------
14,983,650
------------
NETHERLANDS - 6.0%
37,800 Hagemeyer NV......................................... 1,636,484
36,400 ING Groep NV......................................... 2,385,300
42,600 KPN NV............................................... 1,383,219
26,600 Philips Electronics NV............................... 2,237,768
30,000 Vendex NV............................................ 1,129,068
29,604 Vendior NV........................................... 837,444
------------
9,609,283
------------
SWEDEN - 5.9%
102,600 ABB AB, B Shares..................................... 1,428,038
28,200 Biora AB, ADR+....................................... 747,300
86,137 Electrolux AB, B Shares.............................. 1,479,720
23,700 Kinnevik AB, B Shares................................ 771,179
250,669 Nordbanken AB........................................ 1,838,763
113,500 SKF AB, B Shares..................................... 2,063,636
39,700 Telefonaktiebolaget LM Ericsson...................... 1,159,887
------------
9,488,523
------------
ITALY - 5.7%
86,200 Assicurazioni Generali, Spa+......................... 2,804,199
410,300 Parmalat Finanziaria Spa+............................ 837,111
3,538,000 Seat Spa+............................................ 1,672,672
515,600 Telecom Italia Spa................................... 3,797,172
------------
9,111,154
------------
AUSTRIA - 4.2%
31,500 Bank Austria AG...................................... 2,564,441
11,250 OMV AG............................................... 1,508,276
11,928 VA Technologie AG.................................... 1,485,418
4,850 Wienerberger Baustoffindustrie AG.................... 1,174,321
------------
6,732,456
------------
SWITZERLAND - 3.8%
809 Scheiz Ruckversicherungs AG.......................... 2,049,346
1,720 SIG Schweizerische Industrie-Gesellschaft Holding
AG.................................................. 1,402,760
1,531 Sulzer AG............................................ 1,210,201
15,700 TAG Heuer International SA........................... 1,490,375
------------
6,152,682
------------
DENMARK - 3.1%
13,300 International Service Systems AS, Class B............ 774,438
45,900 SAS Danmark A/S...................................... 922,076
36,900 Unidanmark A/S....................................... 3,319,630
------------
5,016,144
------------
ISRAEL - 2.4%
49,300 Blue Square-Israel Ltd., ADR......................... 761,069
47,200 ECI Telecommunications Ltd., ADR..................... 1,787,700
37,200 Orbotech Ltd.+....................................... 1,353,150
------------
3,901,919
------------
HONG KONG - 2.4%
1,704,000 Costco Pacific Ltd................................... 610,299
846,125 First Pacific Company................................ 354,918
54,500 Guangshen Railway Ltd., ADR.......................... 371,281
</TABLE>
See Notes to Financial Statements.
47
<PAGE>
PORTFOLIO OF INVESTMENTS (CONTINUED)
INTERNATIONAL GROWTH FUND
JUNE 30, 1998
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 2)
--------- ------------
<C> <S> <C>
COMMON STOCKS - (CONTINUED)
HONG KONG - (CONTINUED)
66,800 HSBC Holdings Ord. ................................... $ 1,633,789
364,500 Smartone Telecommunications........................... 889,139
------------
3,859,426
------------
FINLAND - 2.0%
30,950 Huhtamaki Group, I Shares............................. 1,762,101
73,575 Rauma Group........................................... 1,510,422
------------
3,272,523
------------
BRAZIL - 1.8%
2,771,000 Cia Saneamento Basico Estado.......................... 333,033
59,800 Companhia Vale do Rio Doce............................ 1,189,227
7,900 Telebras, Sponsored ADR............................... 862,581
2,570,000 Telerj Celular S.A. .................................. 152,860
4,404,000 Telesp Celular S.A. .................................. 365,556
------------
2,903,257
------------
ARGENTINA - 1.7%
35,300 Telefonica de Argentina, ADR.......................... 1,145,044
52,200 YPF Sociedad Anonima, Sponsored ADR................... 1,569,263
------------
2,714,307
------------
NORWAY - 1.3%
90,400 Fred Olsen Energy ASA+................................ 1,203,210
49,900 Smedvig ASA, B Shares................................. 553,468
2,500 Smedvig ASA, B Shares, Sponsored ADR.................. 28,438
10,300 Sparebanken NOR....................................... 295,687
------------
2,080,803
------------
SPAIN - 1.3%
95,100 Endesa S.A. .......................................... 2,080,603
------------
SINGAPORE - 1.1%
289,540 Development Bank of Singapore (F)..................... 1,606,646
212,000 Keppel Bank........................................... 174,884
------------
1,781,530
------------
KOREA - 1.0%
13,300 Hyundai Heavy Industries.............................. 280,918
42,880 LG Electronics........................................ 351,347
19,953 Samsung Display Devices Company....................... 544,965
72,900 Samsung Heavy Industries+............................. 363,704
------------
1,540,934
------------
IRELAND - 0.8%
77,800 Greencore Group Plc................................... 423,817
63,200 Kerry Group Plc....................................... 873,950
------------
1,297,767
------------
MEXICO - 0.7%
36,600 Fomento Economico Mexico SA, Sponsored ADR+........... 1,152,900
------------
NEW ZEALAND - 0.7%
2,262,500 Brierley Investments Ltd. Ord. ....................... 1,130,200
104,300 Wrightson Ltd. ....................................... 20,081
------------
1,150,281
------------
PORTUGAL - 0.6%
78,400 Banco Mello, SA....................................... 967,047
------------
</TABLE>
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 2)
---------- ------------
<C> <S> <C>
AUSTRALIA - 0.1%
27,100 Foodland Associates Ltd. ........................... $ 164,859
------------
Total Common Stocks (Cost $156,825,936)............. 157,049,198
------------
RIGHTS - 0.1%
31,500 Bank Austria AG Rights**............................ 1,634
23,700 Kinnevik AB Rights**................................ 108,470
------------
Total Rights (Cost $0).............................. 110,104
------------
<CAPTION>
PRINCIPAL
AMOUNT
----------
<C> <S> <C>
REPURCHASE AGREEMENT- 1.5%
$2,401,000 Agreement with State Street Corp., 5.750% dated
06/30/1998, to be repurchased at $2,401,383 on
07/01/1998, collateralized by $1,765,000 U.S.
Treasury Note, 8.875% due 08/15/2017 (Market Value
$2,509,885) (Cost $2,401,000)...................... 2,401,000
------------
</TABLE>
<TABLE>
<S> <C> <C>
TOTAL INVESTMENTS (Cost $159,226,936*)..................... 99.3% 159,560,302
OTHER ASSETS AND LIABILITIES (NET)......................... 0.7 1,134,807
----- ------------
NET ASSETS................................................. 100.0% $160,695,109
===== ============
</TABLE>
- -------------
* Aggregate cost for federal tax purposes is $160,395,345.
** Security valued by Management.
+ Non-income producing security.
++ Security exempt from registration under Rule 144A of the Securities Act of
1933. This security may be resold in transactions exempt from registration,
normally to qualified institutional buyers.
As of June 30, 1998, sector diversification was as follows:
<TABLE>
<CAPTION>
% OF VALUE
SECTOR DIVERSIFICATION NET ASSETS (NOTE 2)
---------------------- ---------- ------------
<S> <C> <C>
COMMON STOCKS:
Financial Services..................................... 25.9% $ 41,474,253
Material & Processing.................................. 12.3 19,816,800
Energy................................................. 10.4 16,711,075
Producer Durables...................................... 8.3 13,308,889
Technology............................................. 8.1 13,086,453
Telecommunications..................................... 8.0 12,841,976
Health Care............................................ 5.6 8,970,774
Autos & Transportation................................. 3.4 5,492,391
Consumer Staples....................................... 3.3 5,276,593
Consumer Discretionary................................. 3.1 5,058,933
Retail................................................. 1.5 2,438,380
Consumer Durables...................................... 1.0 1,636,484
Other.................................................. 6.8 10,936,197
----- ------------
TOTAL COMMON STOCKS.................................... 97.7 157,049,198
OTHER INVESTMENTS...................................... 1.6 2,511,104
----- ------------
TOTAL INVESTMENTS...................................... 99.3 159,560,302
OTHER ASSETS AND LIABILITIES (NET)..................... 0.7 1,134,807
----- ------------
NET ASSETS............................................. 100.0% $160,695,109
===== ============
</TABLE>
See Notes to Financial Statements.
48
<PAGE>
PORTFOLIO OF INVESTMENTS (CONTINUED)
INTERNATIONAL GROWTH FUND
JUNE 30, 1998
SCHEDULE OF FORWARD FOREIGN CURRENCY CONTRACTS
U. S. FORWARD FOREIGN CURRENCY CONTRACTS TO BUY
<TABLE>
<CAPTION>
CONTRACTS TO RECEIVE NET
---------------------------------- UNREALIZED
EXPIRATION LOCAL VALUE IN IN EXCHANGE APPRECIATION
DATE CURRENCY U.S. $ FOR U.S. $ OF CONTRACTS
- ---------- ----------------- ---------- ----------- --------------
<S> <C> <C> <C> <C>
07/01/1998 GBP 86,038 143,658 143,405 $ 253
08/31/1998 JPY 430,000,000 3,138,746 3,103,774 34,972
--------
Net Unrealized Appreciation of Forward Foreign
Currency Contracts...................................... $ 35,225
--------
U. S. FORWARD FOREIGN CURRENCY CONTRACTS TO SELL
<CAPTION>
NET
CONTRACTS TO DELIVER UNREALIZED
---------------------------------- APPRECIATION/
EXPIRATION LOCAL VALUE IN IN EXCHANGE (DEPRECIATION)
DATE CURRENCY U.S. $ FOR U.S. $ OF CONTRACTS
- ---------- ----------------- ---------- ----------- --------------
<S> <C> <C> <C> <C>
07/01/1998 NZD 54,247 28,228 27,883 $(345)
07/02/1998 NZD 253,566 131,947 129,578 (2,369)
07/02/1998 ATS 287,701 22,676 22,618 (58)
07/02/1998 CHF 17,688 11,681 11,649 (32)
07/02/1998 ESP 2,765,973 18,037 18,025 (12)
07/02/1998 FIM 83,987 15,326 15,265 (61)
07/02/1998 FRF 574,287 94,991 94,759 (232)
07/02/1998 NLG 59,155 29,102 29,026 (76)
07/02/1998 NZD 303 157 157 --
07/02/1998 PTE 34,520 187 187 --
07/02/1998 SEK 136,162 17,074 17,042 (32)
07/06/1998 NZD 3,507 1,825 1,799 (26)
07/07/1998 AUD 1,485,998 922,318 917,981 (4,337)
08/31/1998 JPY 2,331,000,000 17,014,922 17,173,136 158,214
--------
$150,634
--------
Net Unrealized Appreciation of Forward Foreign
Currency Contracts...................................... $185,859
========
</TABLE>
GLOSSARY OF TERMS
<TABLE>
<C> <S>
ADR - American Depositary Receipt
ATS - Austrian Schilling
AUD - Australian Dollar
CHF - Swiss Franc
ESP - Spanish Peseta
(F) - Foreign or Alien Shares
FIM - Finnish Markka
FRF - French Franc
GBP - Great Britain Pound Sterling
JPY - Japanese Yen
NLG - Netherlands Guilder
NZD - New Zealand Dollar
PTE - Portugese Escudo
SEK - Swedish Krona
</TABLE>
See Notes to Financial Statements.
49
<PAGE>
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 1998
STRATEGIC GROWTH PORTFOLIO
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 2)
--------- -----------
<C> <S> <C>
INVESTMENT COMPANY SECURITIES - 99.1%
349,782 WM Emerging Growth Fund............................... $ 6,855,723
1,273,014 WM Growth & Income Fund............................... 27,446,175
1,145,037 WM Growth Fund........................................ 21,251,892
1,311,994 WM International Growth Fund.......................... 13,329,859
-----------
Total Investment Company Securities
(Cost $63,984,749)................................... 68,883,649
-----------
<CAPTION>
PRINCIPAL
AMOUNT
---------
<C> <S> <C>
REPURCHASE AGREEMENT - 0.0%#
$ 23,000 Agreement with Boston Safe Deposit & Trust Company,
5.000% dated 06/30/1998, to be repurchased at $23,003
on 07/01/1998 collateralized by $25,000 Student Loan
Marketing Association, 5.621% due 02/08/1999 (Market
Value $24,955) (Cost $23,000)........................ 23,000
-----------
</TABLE>
<TABLE>
<S> <C> <C>
TOTAL INVESTMENTS (Cost $64,007,749*)....................... 99.1% 68,906,649
OTHER ASSETS AND LIABILITIES (NET).......................... 0.9 596,724
----- -----------
NET ASSETS.................................................. 100.0% $69,503,373
===== ===========
</TABLE>
- -------------
* Aggregate cost for federal tax purposes is $64,296,170.
# Amount represents less than 0.1% of net assets.
CONSERVATIVE GROWTH PORTFOLIO
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 2)
---------- ------------
<C> <S> <C>
INVESTMENT COMPANY SECURITIES - 99.6%
1,379,064 WM Emerging Growth Fund............................. $ 27,029,651
4,630,970 WM Growth & Income Fund............................. 99,843,709
3,233,181 WM Growth Fund...................................... 60,007,837
5,329,732 WM International Growth Fund........................ 54,150,073
27,970,246 WM Money Market Fund................................ 27,970,246
1,284,688 WM U.S. Government Securities Fund.................. 14,028,795
------------
Total Investment Company Securities
(Cost $265,586,140)................................ 283,030,311
------------
<CAPTION>
PRINCIPAL
AMOUNT
----------
<C> <S> <C>
REPURCHASE AGREEMENT - 0.6%
$1,752,000 Agreement with Boston Safe Deposit & Trust Company,
5.000% dated 06/30/1998, to be repurchased at
$1,752,243 on 07/01/1998 collateralized by
$1,840,000 Student Loan Marketing Association,
5.621% due 02/08/1999 (Market Value $1,836,688)
(Cost $1,752,000).................................. 1,752,000
------------
</TABLE>
<TABLE>
<S> <C> <C>
TOTAL INVESTMENTS (Cost $267,338,140*)..................... 100.2% 284,782,311
OTHER ASSETS AND LIABILITIES (NET)......................... (0.2) (566,556)
----- ------------
NET ASSETS................................................. 100.0% $284,215,755
===== ============
</TABLE>
- -------------
* Aggregate cost for federal tax purposes is $268,204,645.
BALANCED PORTFOLIO
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 2)
---------- ------------
<C> <S> <C>
INVESTMENT COMPANY SECURITIES - 99.4%
3,011,220 WM Growth & Income Fund............................. $ 64,921,913
1,856,218 WM Growth Fund...................................... 34,451,399
4,038,836 WM International Growth Fund........................ 41,034,579
42,741,863 WM Money Market Fund................................ 42,741,863
2,947,825 WM U.S. Government Securities Fund.................. 32,190,254
------------
Total Investment Company Securities
(Cost $205,180,491)................................ 215,340,008
------------
<CAPTION>
PRINCIPAL
AMOUNT
----------
<C> <S> <C>
REPURCHASE AGREEMENT - 0.6%
$1,224,000 Agreement with Boston Safe Deposit & Trust Company,
5.000% dated 06/30/1998, to be repurchased at
$1,224,170 on 07/01/1998 collateralized by
$1,290,000 Student Loan Marketing Association,
5.621% due 02/08/1999 (Market Value $1,287,678)
(Cost $1,224,000).................................. 1,224,000
------------
</TABLE>
<TABLE>
<S> <C> <C>
TOTAL INVESTMENTS (Cost $206,404,491*)..................... 100.0% 216,564,008
OTHER ASSETS AND LIABILITIES (NET)......................... 0.0 105,275
----- ------------
NET ASSETS................................................. 100.0% $216,669,283
===== ============
</TABLE>
- -------------
* Aggregate cost for federal tax purposes is $206,644,626.
FLEXIBLE INCOME PORTFOLIO
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 2)
--------- -----------
<C> <S> <C>
INVESTMENT COMPANY SECURITIES - 96.7%
249,120 WM Income Fund........................................ $ 2,389,061
149,553 WM Growth & Income Fund............................... 3,224,365
3,968,834 WM Money Market Fund.................................. 3,968,834
342,141 WM Short Term High Quality Bond Fund.................. 793,767
510,719 WM U.S. Government Securities Fund.................... 5,577,053
-----------
Total Investment Company Securities
(Cost $15,692,274)................................... 15,953,080
-----------
<CAPTION>
PRINCIPAL
AMOUNT
---------
<C> <S> <C>
REPURCHASE AGREEMENT - 2.5%
$ 401,000 Agreement with Boston Safe Deposit & Trust Company,
5.000% dated 06/30/1998, to be repurchased at
$401,056 on 07/01/1998 collateralized by $425,000
Student Loan Marketing Association, 5.621% due
02/08/1999 (Market Value $424,235) (Cost $401,000)... 401,000
-----------
</TABLE>
<TABLE>
<S> <C> <C>
TOTAL INVESTMENTS (Cost $16,093,274*)....................... 99.2% 16,354,080
OTHER ASSETS AND LIABILITIES (NET).......................... 0.8 137,791
----- -----------
NET ASSETS.................................................. 100.0% $16,491,871
===== ===========
</TABLE>
- -------------
* Aggregate cost for federal tax purposes is $16,106,065.
See Notes to Financial Statements.
50
<PAGE>
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 1998
INCOME PORTFOLIO
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 2)
--------- -----------
<C> <S> <C>
INVESTMENT COMPANY SECURITIES - 97.2%
361,603 WM Income Fund........................................ $ 3,467,776
1,152,336 WM Money Market Fund.................................. 1,152,336
993,389 WM Short Term High Quality Bond Fund.................. 2,304,664
423,652 WM U.S. Government Securities Fund.................... 4,626,281
-----------
Total Investment Company Securities
(Cost $11,232,604)................................... 11,551,057
-----------
<CAPTION>
PRINCIPAL
AMOUNT
---------
<C> <S> <C>
REPURCHASE AGREEMENT - 1.5%
$ 178,000 Agreement with Boston Safe Deposit & Trust Company,
5.000% dated 06/30/1998, to be repurchased at
$178,025 on 07/01/1998 collateralized by $190,000
Student Loan Marketing Association, 5.621% due
02/08/1999 (Market Value $189,658) (Cost $178,000)... 178,000
-----------
</TABLE>
<TABLE>
<S> <C> <C>
TOTAL INVESTMENTS (Cost $11,410,604*)....................... 98.7% 11,729,057
OTHER ASSETS AND LIABILITIES (NET).......................... 1.3 148,760
----- -----------
NET ASSETS.................................................. 100.0% $11,877,817
===== ===========
</TABLE>
- -------------
* Aggregate cost for federal tax purposes is $11,415,527.
See Notes to Financial Statements.
51
<PAGE>
STATEMENTS OF ASSETS AND LIABILITIES
WM GROUP OF FUNDS
JUNE 30, 1998
<TABLE>
<CAPTION>
CALIFORNIA
SHORT TERM INSURED
CALIFORNIA TARGET HIGH CALIFORNIA INTERMEDIATE
MONEY MATURITY QUALITY MUNICIPAL MUNICIPAL
FUND 2002 FUND BOND FUND FUND FUND
----------- ---------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
ASSETS:
Investments, at value
See portfolios of
investments:
Securities............... $38,201,505 $2,558,335 $42,544,286 $331,858,243 $65,622,957
Repurchase Agreements.... -- -- -- -- --
----------- ---------- ----------- ------------ -----------
Total investments(a)....... 38,201,505 2,558,335 42,544,286 331,858,243 65,622,957
Cash and/or foreign
currency(b)............... 69,371 -- 138,548 -- 71,284
Net unrealized appreciation
of forward
foreign currency contracts
See portfolios of
investments............... -- -- -- -- --
Dividends and/or interest
receivable................ 428,665 -- 444,756 5,043,338 1,006,400
Receivable for Fund shares
sold...................... 45,256 -- 2,000 773,513 682
Receivable for investment
securities sold........... -- -- 19,132 9,172,268 135,000
Unamortized organization
costs..................... -- 20,573 1,182 -- 1,218
Receivable from investment
advisor................... -- 7,527 23,039 -- 7,160
Prepaid expenses and other
assets.................... 465 22 1,397 2,984 848
----------- ---------- ----------- ------------ -----------
Total Assets............. 38,745,262 2,586,457 43,174,340 346,850,346 66,845,549
----------- ---------- ----------- ------------ -----------
LIABILITIES:
Due to custodian........... -- 20,678 -- 1,262,975 --
Net unrealized depreciation
of forward
foreign currency contracts
See portfolios of
investments............... -- -- -- -- --
Payable for Fund shares
redeemed.................. 2,774 1,534 82,015 182,853 209,362
Payable for investment
securities purchased...... 1,202,885 -- -- 19,646,770 6,098,228
Variation margin payable... -- -- 1,688 -- --
Investment advisory fee
payable................... 36,722 -- -- 178,669 --
Administration fee
payable................... -- -- -- -- --
Shareholder servicing and
distribution fees payable
.......................... 53 526 11,029 86,945 25,782
Dividends payable.......... 2,447 -- 66,483 492,746 63,700
Accrued expenses and other
payables.................. 32,514 27,871 50,349 125,434 34,574
----------- ---------- ----------- ------------ -----------
Total Liabilities........ 1,277,395 50,609 211,564 21,976,392 6,431,646
----------- ---------- ----------- ------------ -----------
NET ASSETS................. $37,467,867 $2,535,848 $42,962,776 $324,873,954 $60,413,903
=========== ========== =========== ============ ===========
- -------------
(a) Investments, at cost... $38,201,505 $2,464,353 $42,379,320 $307,361,564 $62,141,084
(b) Cash and/or foreign
currency, at cost......... $ 69,371 $ -- $ 138,548 $ -- $ 71,284
</TABLE>
See Notes to Financial Statements.
52
<PAGE>
<TABLE>
<CAPTION>
FLORIDA
INSURED EMERGING INTERNATIONAL STRATEGIC CONSERVATIVE FLEXIBLE
MUNICIPAL GROWTH GROWTH GROWTH GROWTH GROWTH BALANCED INCOME INCOME
FUND FUND FUND FUND PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
- ----------- ------------ ------------ ------------- ----------- ------------ ------------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$24,360,882 $279,047,749 $172,994,003 $157,159,302 $68,883,649 $283,030,311 $215,340,008 $15,953,080 $11,551,057
-- -- 33,964,000 2,401,000 23,000 1,752,000 1,224,000 401,000 178,000
- ----------- ------------ ------------ ------------ ----------- ------------ ------------ ----------- -----------
24,360,882 279,047,749 206,958,003 159,560,302 68,906,649 284,782,311 216,564,008 16,354,080 11,729,057
-- -- 877 -- 6,703 700 526 716 52
-- -- -- 185,859 -- -- -- -- --
453,235 78,502 22,729 496,041 -- 198,884 356,839 64,420 60,268
198,563 124,357 26,245 37,213 282,814 193,951 406,074 125,294 128,000
196,946 3,837,149 6,327,987 5,355,863 523,721 -- -- -- --
-- -- -- -- 27,092 27,092 27,092 27,092 27,092
27,310 -- -- -- 32,138 25,557 31,503 25,061 17,034
557 3,648 10,161 1,017 241 275 274 -- --
- ----------- ------------ ------------ ------------ ----------- ------------ ------------ ----------- -----------
25,237,493 283,091,405 213,346,002 165,636,295 69,779,358 285,228,770 217,386,316 16,596,663 11,961,503
- ----------- ------------ ------------ ------------ ----------- ------------ ------------ ----------- -----------
2,740 1,225,485 -- 1,235,577 -- -- -- -- --
-- 37,644 163,275 -- -- -- -- -- --
15,000 1,343,140 25,576,937 44,068 167,777 645,235 437,554 68,912 36,926
3,534,744 431,425 305,779 3,386,163 -- -- -- -- --
-- -- -- -- -- -- -- -- --
-- 264,023 196,321 111,415 -- -- -- -- --
-- -- -- -- 27,780 115,114 87,955 6,718 4,907
7,418 9,924 57,367 19,926 44,651 160,023 113,647 8,029 4,866
38,574 204 -- -- -- -- 2,415 3,990 21,383
23,442 225,391 158,669 144,037 35,777 92,643 75,462 17,143 15,604
- ----------- ------------ ------------ ------------ ----------- ------------ ------------ ----------- -----------
3,621,918 3,537,236 26,458,348 4,941,186 275,985 1,013,015 717,033 104,792 83,686
- ----------- ------------ ------------ ------------ ----------- ------------ ------------ ----------- -----------
$21,615,575 $279,554,169 $186,887,654 $160,695,109 $69,503,373 $284,215,755 $216,669,283 $16,491,871 $11,877,817
=========== ============ ============ ============ =========== ============ ============ =========== ===========
$22,467,037 $212,485,953 $179,478,740 $159,226,936 $64,007,749 $267,338,140 $206,404,491 $16,093,274 $11,410,604
$ -- $ -- $ 877 $ -- $ 6,703 $ 700 $ 526 $ 716 $ 52
</TABLE>
See Notes to Financial Statements.
53
<PAGE>
STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED)
WM GROUP OF FUNDS
JUNE 30, 1998
<TABLE>
<CAPTION>
CALIFORNIA
SHORT TERM INSURED
CALIFORNIA TARGET HIGH CALIFORNIA INTERMEDIATE
MONEY MATURITY QUALITY MUNICIPAL MUNICIPAL
FUND 2002 FUND BOND FUND FUND FUND
----------- ---------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
NET ASSETS CONSIST OF:
Undistributed net investment
income/(accumulated net
investment loss/distributions in
excess of net investment
income).......................... $ 2,366 $ 82,227 $ (650) $ (6,864) $ 15,157
Accumulated net realized
gain/(loss) on investments sold,
futures contracts, closed written
options, forward foreign currency
contracts and foreign currency
transactions..................... (40,974) 8,136 (1,743,719) 581,668 682,834
Net unrealized
appreciation/(depreciation) of
invesments, foreign currency,
written options, futures
contracts, forward foreign
currency contracts and other
assets and liabilities........... -- 93,982 158,236 24,496,679 3,481,873
Paid-in capital................... 37,506,475 2,351,503 44,548,909 299,802,471 56,234,039
----------- ---------- ----------- ------------ -----------
Total Net Assets................ $37,467,867 $2,535,848 $42,962,776 $324,873,954 $60,413,903
=========== ========== =========== ============ ===========
NET ASSETS:
Class A Shares.................... $37,402,811 $2,535,848 $35,551,039 $290,328,335 $38,723,516
=========== ========== =========== ============ ===========
Class B Shares.................... $ 62,823 -- $ 3,458,674 $ 34,536,784 $21,687,501
=========== =========== ============ ===========
Class S Shares.................... $ 1,175 -- $ 850,463 $ 7,645 $ 1,751
=========== =========== ============ ===========
Class I Shares.................... $ 1,058 -- $ 3,102,600 $ 1,190 $ 1,135
=========== =========== ============ ===========
SHARES OUTSTANDING:
Class A Shares.................... 37,444,542 233,408 15,300,501 25,624,319 3,582,157
=========== ========== =========== ============ ===========
Class B Shares.................... 62,893 -- 1,488,540 3,048,310 2,006,214
=========== =========== ============ ===========
Class S Shares.................... 1,176 -- 366,038 675 162
=========== =========== ============ ===========
Class I Shares.................... 1,060 -- 1,335,530 105 105
=========== =========== ============ ===========
CLASS A SHARES:
Net asset value per share of
beneficial interest
outstanding*..................... $ 1.00 $ 10.86 $ 2.32 $ 11.33 $ 10.81
=========== ========== =========== ============ ===========
Maximum sales charge.............. -- 2.00% 3.50% 4.50% 4.50%
Maximum offering price per share
of
beneficial interest outstanding.. -- $ 11.09 $ 2.41 $ 11.86 $ 11.32
========== =========== ============ ===========
CLASS B SHARES:
Net asset value and offering price
per share of
beneficial interest outstanding*.. $ 1.00 -- $ 2.32 $ 11.33 $ 10.81
=========== =========== ============ ===========
CLASS S SHARES:
Net asset value and offering price
per share of
beneficial interest outstanding*.. $ 1.00 -- $ 2.32 $ 11.33 $ 10.81
=========== =========== ============ ===========
CLASS I SHARES:
Net asset value, offering and
redemption price per share of
beneficial interest outstanding.. $ 1.00 -- $ 2.32 $ 11.33 $ 10.81
=========== =========== ============ ===========
</TABLE>
- -------------
* Redemption price per share is equal to Net Asset Value less any applicable
contingent deferred sales charge.
See Notes to Financial Statements.
54
<PAGE>
<TABLE>
<CAPTION>
FLORIDA
INSURED EMERGING INTERNATIONAL STRATEGIC CONSERVATIVE FLEXIBLE
MUNICIPAL GROWTH GROWTH GROWTH GROWTH GROWTH BALANCED INCOME INCOME
FUND FUND FUND FUND PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
- ----------- ------------ ------------ ------------- ----------- ------------ ------------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 13,135 $ (12,382) $ 161,566 $ 3,597,176 $ 343,195 $ 2,093,956 $ 1,751,125 $ 96,037 $ 4,670
(2,246,010) 45,367,823 55,984,486 1,282,148 4,843,883 16,332,250 11,753,288 546,611 (25,180)
1,893,845 66,535,577 27,315,346 543,375 4,898,900 17,444,171 10,159,517 260,807 318,453
21,954,605 167,663,151 103,426,256 155,272,410 59,417,395 248,345,378 193,005,353 15,588,416 11,579,874
- ----------- ------------ ------------ ------------ ----------- ------------ ------------ ----------- -----------
$21,615,575 $279,554,169 $186,887,654 $160,695,109 $69,503,373 $284,215,755 $216,669,283 $16,491,871 $11,877,817
=========== ============ ============ ============ =========== ============ ============ =========== ===========
$16,537,727 $112,153,051 $118,472,847 $ 38,281,364 $18,330,270 $114,946,285 $101,725,605 $ 8,808,325 $ 7,793,333
=========== ============ ============ ============ =========== ============ ============ =========== ===========
$ 5,074,939 $ 38,389,530 $ 28,539,942 $ 4,293,589 $51,173,103 $169,269,470 $114,943,678 $ 7,683,546 $ 4,084,484
=========== ============ ============ ============ =========== ============ ============ =========== ===========
$ 1,729 $ 13,282,870 $ 5,989,298 $ 9,599,446 -- -- -- -- --
=========== ============ ============ ============
$ 1,180 $115,728,718 $ 33,885,567 $108,520,710 -- -- -- -- --
=========== ============ ============ ============
1,597,566 6,075,731 6,078,169 3,753,078 1,448,239 9,705,231 8,750,008 816,563 753,466
=========== ============ ============ ============ =========== ============ ============ =========== ===========
490,260 2,154,124 1,513,562 426,544 4,084,199 14,419,879 9,886,921 712,294 394,873
=========== ============ ============ ============ =========== ============ ============ =========== ===========
167 745,165 317,611 944,420 -- -- -- -- --
=========== ============ ============ ============
114 6,234,430 1,728,846 10,680,562 -- -- -- -- --
=========== ============ ============ ============
$ 10.35 $ 18.46 $ 19.49 $ 10.20 $ 12.66 $ 11.84 $ 11.63 $ 10.79 $ 10.34
=========== ============ ============ ============ =========== ============ ============ =========== ===========
4.50% 5.50% 5.50% 5.50% 5.50% 5.50% 5.50% 4.50% 4.50%
$ 10.84 $ 19.53 $ 20.62 $ 10.79 $ 13.40 $ 12.53 $ 12.31 $ 11.30 $ 10.83
=========== ============ ============ ============ =========== ============ ============ =========== ===========
$ 10.35 $ 17.82 $ 18.86 $ 10.07 $ 12.53 $ 11.74 $ 11.63 $ 10.79 $ 10.34
=========== ============ ============ ============ =========== ============ ============ =========== ===========
$ 10.35 $ 17.83 $ 18.86 $ 10.16 -- -- -- -- --
=========== ============ ============ ============
$ 10.35 $ 18.56 $ 19.60 $ 10.16 -- -- -- -- --
=========== ============ ============ ============
</TABLE>
See Notes to Financial Statements.
55
<PAGE>
STATEMENTS OF OPERATIONS
WM GROUP OF FUNDS
FOR THE YEAR ENDED JUNE 30, 1998
<TABLE>
<CAPTION>
CALIFORNIA
SHORT TERM INSURED
CALIFORNIA TARGET HIGH CALIFORNIA INTERMEDIATE
MONEY MATURITY QUALITY MUNICIPAL MUNICIPAL
FUND 2002 FUND BOND FUND FUND FUND
---------- --------- ---------- ----------- ------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends................... $ -- $ -- $ -- $ -- $ --
Foreign withholding tax on
dividend income............ -- -- -- -- --
Interest.................... 1,425,585 164,517 1,898,116 20,795,207 3,371,439
---------- -------- ---------- ----------- ----------
Total investment income... 1,425,585 164,517 1,898,116 20,795,207 3,371,439
---------- -------- ---------- ----------- ----------
EXPENSES:
Investment advisory fee..... 188,184 6,596 145,180 2,010,319 380,528
Administration fee.......... 73,762 5,515 33,910 860,498 161,117
Custodian fees.............. 4,887 2,514 8,438 17,049 3,649
Legal and audit fees........ 17,190 11,374 23,529 37,650 18,270
Trustees' fees and
expenses................... 4,108 1,378 3,790 25,532 5,753
Amortization of organization
costs...................... -- 11,757 3,545 -- 1,622
Registration and filing
fees....................... 11,849 11,213 25,417 15,775 13,505
Printing and postage
expenses................... 25,721 10,388 38,884 126,691 27,270
Other....................... 3,092 721 5,653 53,537 14,542
Shareholder servicing and
distribution fees:
Class A Shares............. 61,358 6,596 55,796 771,965 104,424
Class B Shares............. 695 -- 30,496 279,831 213,039
Class S Shares............. 12 -- 6,400 75 17
Transfer agent fees:
Class A Shares............. 11,899 1,311 16,690 30,491 4,540
Class B Shares............. -- -- 2,274 4,200 2,670
Class S Shares............. -- -- 313 -- --
Fees waived and/or expenses
absorbed by investment
advisor and/or
administrator.............. (70,002) (50,726) (133,982) (656,426) (246,808)
---------- -------- ---------- ----------- ----------
Total expenses............ 332,755 18,637 266,333 3,577,187 704,138
Fees reduced by credits
allowed by the custodian... (1,759) (2,162) (428) (13,157) (3,433)
---------- -------- ---------- ----------- ----------
Net expenses.............. 330,996 16,475 265,905 3,564,030 700,705
---------- -------- ---------- ----------- ----------
NET INVESTMENT
INCOME/(LOSS).............. 1,094,589 148,042 1,632,211 17,231,177 2,670,734
---------- -------- ---------- ----------- ----------
NET REALIZED AND UNREALIZED
GAIN/(LOSS) ON INVESTMENTS:
Realized gain/(loss) from:
Security transactions...... -- 22,489 (108,783) 7,849,255 954,502
Forward foreign currency
contracts and foreign
currency transactions..... -- -- -- -- --
Futures contracts.......... -- -- (105,817) 994,551 (70,527)
Capital gain distribution
received................... -- -- -- -- --
Net unrealized
appreciation/(depreciation)
of:
Securities................. -- 79,878 63,850 3,864,365 184,266
Forward foreign currency
contracts................. -- -- -- -- --
Foreign currency, written
options, futures contracts
and other assets and
liabilities............... -- -- 8,262 -- --
---------- -------- ---------- ----------- ----------
Net realized and unrealized
gain/(loss) on
investments................ -- 102,367 (142,488) 12,708,171 1,068,241
---------- -------- ---------- ----------- ----------
NET INCREASE/(DECREASE) IN
NET ASSETS RESULTING FROM
OPERATIONS................. $1,094,589 $250,409 $1,489,723 $29,939,348 $3,738,975
========== ======== ========== =========== ==========
</TABLE>
See Notes to Financial Statements.
56
<PAGE>
<TABLE>
<CAPTION>
FLORIDA
INSURED EMERGING INTERNATIONAL STRATEGIC CONSERVATIVE FLEXIBLE
MUNICIPAL GROWTH GROWTH GROWTH GROWTH GROWTH BALANCED INCOME INCOME
FUND FUND FUND FUND PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
---------- ----------- ------------ ------------- ----------- ------------ ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ -- $ 1,382,894 $ 766,746 $ 3,152,573 $ 546,974 $ 6,078,778 $ 6,582,937 $ 875,048 $1,084,829
-- (16,446) (31,377) (328,410) -- -- -- -- --
1,414,701 774,473 598,853 450,512 26,543 79,334 82,016 17,721 13,766
---------- ----------- ------------ ------------ ----------- ----------- ----------- ---------- ----------
1,414,701 2,140,921 1,334,222 3,274,675 573,517 6,158,112 6,664,953 892,769 1,098,595
---------- ----------- ------------ ------------ ----------- ----------- ----------- ---------- ----------
146,555 2,739,222 2,214,151 1,354,934 91,196 438,904 323,735 26,686 22,941
65,423 723,887 620,085 370,136 303,985 1,463,013 1,079,118 88,955 76,470
2,465 64,008 28,455 141,813 1,402 3,165 1,420 1,597 1,208
16,552 34,992 33,881 35,290 13,856 21,027 24,863 10,735 12,728
2,935 18,682 18,340 10,985 4,167 18,512 13,937 1,103 901
12,457 9,110 -- -- 9,030 9,030 9,030 9,030 9,030
21,696 33,132 29,889 31,102 28,232 30,102 30,247 14,907 19,548
18,822 236,559 316,038 118,636 39,041 153,100 112,091 17,501 8,326
10,313 21,117 20,942 19,803 1,826 8,175 6,018 731 673
49,647 272,672 402,102 115,246 41,197 318,337 265,656 25,447 27,083
50,711 320,219 296,876 45,383 443,183 1,652,679 1,095,612 76,123 44,611
109 137,559 71,785 96,331 -- -- -- -- --
2,370 53,641 79,198 28,655 3,209 15,331 13,619 1,590 1,268
733 30,565 33,324 7,474 8,537 21,868 14,289 1,072 671
-- 4,502 3,923 4,363 -- -- -- -- --
(141,047) -- (3,472) (29,113) (88,030) (135,615) (119,725) (49,055) (46,267)
---------- ----------- ------------ ------------ ----------- ----------- ----------- ---------- ----------
259,741 4,699,867 4,165,517 2,351,038 900,831 4,017,628 2,869,910 226,422 179,191
(1,636) (6,149) (8,703) (1,024) (49) (1,424) (288) (250) (212)
---------- ----------- ------------ ------------ ----------- ----------- ----------- ---------- ----------
258,105 4,693,718 4,156,814 2,350,014 900,782 4,016,204 2,869,622 226,172 178,979
---------- ----------- ------------ ------------ ----------- ----------- ----------- ---------- ----------
1,156,596 (2,552,797) (2,822,592) 924,661 (327,265) 2,141,908 3,795,331 666,597 919,616
---------- ----------- ------------ ------------ ----------- ----------- ----------- ---------- ----------
555,785 57,657,686 79,544,854 3,336,138 70,811 634,997 1,600,513 180,143 (146)
-- 776,368 (422,776) 7,584,974 -- -- -- -- --
(71,437) -- -- -- -- -- -- -- --
-- -- -- -- 8,834,729 29,135,400 21,083,866 950,791 --
620,889 33,821,257 (46,050,910) (19,379,433) 2,307,572 7,816,736 1,378,617 38,924 368,927
-- (333,137) 239,541 (2,561,790) -- -- -- -- --
-- 13,146 5,627 29,643 -- -- -- -- --
---------- ----------- ------------ ------------ ----------- ----------- ----------- ---------- ----------
1,105,237 91,935,320 33,316,336 (10,990,468) 11,213,112 37,587,133 24,062,996 1,169,858 368,781
---------- ----------- ------------ ------------ ----------- ----------- ----------- ---------- ----------
$2,261,833 $89,382,523 $ 30,493,744 $(10,065,807) $10,885,847 $39,729,041 $27,858,327 $1,836,455 $1,288,397
========== =========== ============ ============ =========== =========== =========== ========== ==========
</TABLE>
See Notes to Financial Statements.
57
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
WM GROUP OF FUNDS
FOR THE YEAR ENDED JUNE 30, 1998
<TABLE>
<CAPTION>
CALIFORNIA
SHORT TERM INSURED
CALIFORNIA TARGET HIGH CALIFORNIA INTERMEDIATE
MONEY MATURITY QUALITY MUNICIPAL MUNICIPAL
FUND 2002 FUND BOND FUND FUND FUND
----------- ---------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Net investment
income/(loss).............. $ 1,094,589 $ 148,042 $ 1,632,211 $ 17,231,177 $ 2,670,734
Net realized gain/(loss) on
investments sold, forward
foreign currency contracts,
foreign currency
transactions, futures
contracts and closed
written options during the
year....................... -- 22,489 (214,600) 8,843,806 883,975
Capital gain distribution
received................... -- -- -- -- --
Net unrealized
appreciation/(depreciation)
of investments, forward
foreign currency contracts,
foreign currency,
futures contracts, written
options and other assets
and liabilities during the
year....................... -- 79,878 72,112 3,864,365 184,266
----------- ---------- ----------- ------------ -----------
Net increase/(decrease) in
net assets resulting from
operations................. 1,094,589 250,409 1,489,723 29,939,348 3,738,975
Distributions to
shareholders from:
Net investment income:
Class A Shares............. (1,093,207) (170,981) (1,197,547) (16,032,716) (1,873,113)
Class B Shares............. (1,326) -- (145,841) (1,238,105) (797,504)
Class S Shares............. (22) -- (29,081) (548) (64)
Class I Shares............. (31) -- (171,711) (50) (53)
Distributions in excess of
net investment income
Class A Shares............. -- -- -- (9,986) (57)
Class B Shares............. -- -- -- (771) (24)
Class S Shares............. -- -- -- -- --
Class I Shares............. -- -- -- -- --
Net realized gains on
investments:
Class A Shares............. -- (26,467) -- (23,641) (403,151)
Class B Shares............. -- -- -- (1,826) (200,864)
Class S Shares............. -- -- -- -- (16)
Class I Shares............. -- -- -- -- (10)
Capital:
Class A Shares............. -- -- (31,166) -- --
Class B Shares............. -- -- (3,795) -- --
Class S Shares............. -- -- (757) -- --
Class I Shares............. -- -- (4,469) -- --
Net increase/(decrease) in
net assets from Fund share
transactions:
Class A Shares............. (5,520,424) (332,981) 21,970,831 (39,569,128) (6,761,633)
Class B Shares............. (4,780) -- 460,337 8,332,257 559,381
Class S Shares............. 22 -- 51,136 329 80
Class I Shares............. 31 -- 345,142 61 63
----------- ---------- ----------- ------------ -----------
Net increase/(decrease) in
net assets................. (5,525,148) (280,020) 22,732,802 (18,604,776) (5,737,990)
NET ASSETS:
Beginning of year........... 42,993,015 2,815,868 20,229,974 343,478,730 66,151,893
----------- ---------- ----------- ------------ -----------
End of year................. $37,467,867 $2,535,848 $42,962,776 $324,873,954 $60,413,903
=========== ========== =========== ============ ===========
Undistributed net investment
income/(accumulated net
investment
loss/distributions in
excess of net investment
income) at end of year..... $ 2,366 $ 82,227 $ (650) $ (6,864) $ 15,157
=========== ========== =========== ============ ===========
</TABLE>
See Notes to Financial Statements.
58
<PAGE>
<TABLE>
<CAPTION>
FLORIDA
INSURED EMERGING INTERNATIONAL STRATEGIC CONSERVATIVE FLEXIBLE
MUNICIPAL GROWTH GROWTH GROWTH GROWTH GROWTH BALANCED INCOME INCOME
FUND FUND FUND FUND PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
- ----------- ------------ ------------ ------------- ----------- ------------ ------------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 1,156,596 $ (2,552,797) $ (2,822,592) $ 924,661 $ (327,265) $ 2,141,908 $ 3,795,331 $ 666,597 $ 919,616
484,348 58,434,054 79,122,078 10,921,112 70,811 634,997 1,600,513 180,143 (146)
-- -- -- -- 8,834,729 29,135,400 21,083,866 950,791 --
620,889 33,501,266 (45,805,742) (21,911,580) 2,307,572 7,816,736 1,378,617 38,924 368,927
- ----------- ------------ ------------ ------------ ----------- ------------ ------------ ----------- -----------
2,261,833 89,382,523 30,493,744 (10,065,807) 10,885,847 39,729,041 27,858,327 1,836,455 1,288,397
(954,335) -- -- (1,975,295) -- (974,521) (2,029,043) (390,981) (687,206)
(204,787) -- -- (178,840) -- (1,167,578) (1,843,104) (296,913) (250,566)
(442) -- -- (317,435) -- -- -- -- --
(53) -- -- (4,405,354) -- -- -- -- --
-- -- -- (123,824) (950,866) (4,768,523) (4,295,670) (200,387) (979)
-- -- -- (11,211) (2,366,606) (5,713,185) (3,902,019) (152,174) (357)
-- -- -- (19,899) -- -- -- -- --
-- -- -- (276,154) -- -- -- -- --
-- (8,274,234) (8,507,941) (1,992,183) (53,136) (709,436) (1,050,143) (218,896) --
-- (2,485,038) (1,627,499) (212,435) (140,517) (922,315) (1,095,753) (167,811) --
-- (1,125,281) (372,058) (403,997) -- -- -- -- --
-- (10,259,464) (2,639,418) (4,204,998) -- -- -- -- --
-- -- -- -- -- -- -- -- --
-- -- -- -- -- -- -- -- --
-- -- -- -- -- -- -- -- --
-- -- -- -- -- -- -- -- --
(7,117,017) (24,983,912) (59,785,251) (14,343,542) 2,069,016 (32,508,160) (14,387,577) (4,062,849) (5,873,876)
(200,018) 656,439 (2,364,589) 108,509 10,004,844 (3,587,306) 8,172,018 147,178 (544,041)
(28,294) (3,717,859) (2,844,853) (905,239) -- -- -- -- --
53 (42,247,133) (20,847,090) 29,866,956 -- -- -- -- --
- ----------- ------------ ------------ ------------ ----------- ------------ ------------ ----------- -----------
(6,243,060) (3,053,959) (68,494,955) (9,460,748) 19,448,582 (10,621,983) 7,427,036 (3,506,378) (6,068,628)
27,858,635 282,608,128 255,382,609 170,155,857 50,054,791 294,837,738 209,242,247 19,998,249 17,946,445
- ----------- ------------ ------------ ------------ ----------- ------------ ------------ ----------- -----------
$21,615,575 $279,554,169 $186,887,654 $160,695,109 $69,503,373 $284,215,755 $216,669,283 $16,491,871 $11,877,817
=========== ============ ============ ============ =========== ============ ============ =========== ===========
$ 13,135 $ (12,382) $ 161,566 $ 3,597,176 $ 343,195 $ 2,093,956 $ 1,751,125 $ 96,037 $ 4,670
=========== ============ ============ ============ =========== ============ ============ =========== ===========
</TABLE>
See Notes to Financial Statements.
59
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
WM GROUP OF FUNDS
FOR THE YEAR ENDED JUNE 30, 1997
<TABLE>
<CAPTION>
CALIFORNIA
SHORT TERM INSURED
CALIFORNIA TARGET HIGH CALIFORNIA INTERMEDIATE
MONEY MATURITY QUALITY MUNICIPAL MUNICIPAL
FUND 2002 FUND BOND FUND FUND FUND
----------- ---------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net investment
income/(loss).............. $ 1,285,640 $ 179,846 $ 1,965,746 $ 20,486,611 $ 3,182,357
Net realized gain/(loss) on
investments sold, forward
foreign currency contracts,
foreign currency
transactions, futures
contracts and closed
written options during the
year....................... -- 20,427 (460,363) 5,995,910 529,710
Capital gain distribution
received................... -- -- -- -- --
Net unrealized
appreciation/(depreciation)
of investments, forward
foreign currency contracts,
foreign currency, futures
contracts, written options
and other assets and
liabilities during the
year....................... -- 6,041 308,395 5,182,081 1,035,421
----------- ---------- ------------ ------------ ------------
Net increase/(decrease) in
net assets resulting from
operations................. 1,285,640 206,314 1,813,778 31,664,602 4,747,488
Distributions to
shareholders from:
Net investment income:
Class A Shares............. (1,284,111) (200,615) (1,327,651) (19,363,780) (2,354,600)
Class B Shares............. (1,373) -- (173,000) (1,122,377) (827,004)
Class S Shares............. (125) -- (97,246) (398) (278)
Class I Shares............. (31) -- (227,346) (56) (47)
Distributions in excess of
net investment income:
Class A Shares............. -- -- -- -- --
Class B Shares............. -- -- -- -- --
Class S Shares............. -- -- -- -- --
Class I Shares............. -- -- -- -- --
Net realized gains on
investments:
Class A Shares............. -- (14,491) -- -- (231,272)
Class B Shares............. -- -- -- -- (96,670)
Class S Shares............. -- -- -- -- (52)
Class I Shares............. -- -- -- -- (5)
Net increase/(decrease) in
net assets from
Fund share transactions:
Class A Shares............. (8,287,958) (300,042) (18,780,368) (64,410,300) (10,241,881)
Class B Shares............. (79,592) -- (447,758) 3,983,769 (312,536)
Class S Shares............. (9,276) -- (2,738,794) (4,601) (9,871)
Class I Shares............. 1,029 -- 2,800,633 1,056 1,052
----------- ---------- ------------ ------------ ------------
Net increase/(decrease) in
net assets................. (8,375,797) (308,834) (19,177,752) (49,252,085) (9,325,676)
NET ASSETS:
Beginning of year........... 51,368,812 3,124,702 39,407,726 392,730,815 75,477,569
----------- ---------- ------------ ------------ ------------
End of year................. $42,993,015 $2,815,868 $ 20,229,974 $343,478,730 $ 66,151,893
=========== ========== ============ ============ ============
Undistributed net investment
income/(accumulated net
investment
loss/distributions in
excess of net investment
income) at end of year..... $ 2,363 $ 93,410 $ 16,879 $ 33,691 $ 3,196
=========== ========== ============ ============ ============
</TABLE>
See Notes to Financial Statements.
60
<PAGE>
<TABLE>
<CAPTION>
FLORIDA
INSURED EMERGING INTERNATIONAL STRATEGIC CONSERVATIVE FLEXIBLE
MUNICIPAL GROWTH GROWTH GROWTH GROWTH GROWTH BALANCED INCOME INCOME
FUND FUND FUND FUND PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
- ----------- ------------ ------------- ------------- ----------- ------------ ------------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 1,541,262 $ (842,668) $ (3,798,378) $ 552,504 $ (178,097) $ 742,917 $ 2,691,767 $ 621,784 $ 730,796
343,304 23,854,848 (7,974,694) 8,783,992 (832,813) (4,572,450) (2,221,544) (82,264) (25,028)
-- -- -- -- 2,663,475 17,000,068 8,289,328 498,118 --
678,418 4,925,545 (3,135,432) 15,640,885 2,591,328 9,627,435 8,780,900 221,883 (50,474)
- ----------- ------------ ------------- ------------ ----------- ------------ ------------ ----------- -----------
2,562,984 27,937,725 (14,908,504) 24,977,381 4,243,893 22,797,970 17,540,451 1,259,521 655,294
(1,349,518) -- -- (944,934) -- (656,680) (1,872,563) (438,577) (571,274)
(226,428) -- -- (33,752) -- (86,237) (819,204) (183,207) (159,522)
(386) -- -- -- -- -- -- -- --
(107) -- -- (1,421,219) -- -- -- -- --
(7,232) -- -- -- (432,599) (5,678,412) (2,697,778) (121,042) (12,235)
(1,421) -- -- -- (1,142,282) (6,029,325) (2,177,251) (62,906) (3,903)
(3) -- -- -- -- -- -- -- --
-- -- -- -- -- -- -- -- --
-- (19,083,057) (16,295,524) (740,078) (406) -- (389) (256) (5)
-- (4,239,788) (2,456,114) (45,566) (1,155) -- (270) (115) (1)
-- (2,712,699) (1,158,776) (157,954) -- -- -- -- --
-- (13,384,790) (5,828,460) (867,959) -- -- -- -- --
(7,880,857) (62,908,925) (91,171,361) (65,266,118) 13,405,891 131,432,582 104,172,141 12,313,830 13,469,251
(517,149) 6,890,521 3,406,635 (148,620) 33,961,449 153,037,840 95,077,110 7,211,001 4,548,840
17,772 (31,340,022) (31,941,983) (28,119,034) -- -- -- -- --
1,052 131,010,126 59,424,781 83,322,919 -- -- -- -- --
- ----------- ------------ ------------- ------------ ----------- ------------ ------------ ----------- -----------
(7,401,293) 32,169,091 (100,929,306) 10,555,066 50,034,791 294,817,738 209,222,247 19,978,249 17,926,445
35,259,928 250,439,037 356,311,915 159,600,791 20,000 20,000 20,000 20,000 20,000
- ----------- ------------ ------------- ------------ ----------- ------------ ------------ ----------- -----------
$27,858,635 $282,608,128 $ 255,382,609 $170,155,857 $50,054,791 $294,837,738 $209,242,247 $19,998,249 $17,946,445
=========== ============ ============= ============ =========== ============ ============ =========== ===========
$ 2,892 $ (114,094) $ (215,392) $ 1,856,754 $ (202,159) $ 191 $ 76,816 $ 21,297 $ 18,156
=========== ============ ============= ============ =========== ============ ============ =========== ===========
</TABLE>
See Notes to Financial Statements.
61
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS - CAPITAL STOCK ACTIVITY
WM GROUP OF FUNDS
FOR THE YEAR ENDED JUNE 30, 1998
<TABLE>
<CAPTION>
CALIFORNIA
SHORT TERM INSURED
CALIFORNIA TARGET HIGH CALIFORNIA INTERMEDIATE
MONEY MATURITY QUALITY MUNICIPAL MUNICIPAL
FUND 2002 FUND BOND FUND(A) FUND FUND
------------ --------- ------------ ------------- ------------
<S> <C> <C> <C> <C> <C>
AMOUNT
CLASS A:
Sold.................. $ 30,331,723 $ 34,948 $ 39,093,511 $ 109,366,878 $ 45,133,314
Issued in exchange for
Class A shares....... -- -- 33,873,483 -- --
Issued as reinvestment
of dividends......... 1,056,492 196,535 799,463 10,168,881 1,692,248
Redeemed.............. (36,908,639) (564,464) (51,795,626) (159,104,887) (53,587,195)
------------ --------- ------------ ------------- ------------
Net
increase/(decrease).. $ (5,520,424) $(332,981) $ 21,970,831 $ (39,569,128) $ (6,761,633)
============ ========= ============ ============= ============
CLASS B:
Sold.................. $ 70,100 -- $ 348,662 $ 11,852,598 $ 3,830,587
Issued in exchange for
Class B shares....... -- -- 1,149,624 -- --
Issued as reinvestment
of dividends......... 1,322 -- 110,925 880,758 785,124
Redeemed.............. (76,202) -- (1,148,874) (4,401,099) (4,056,330)
------------ ------------ ------------- ------------
Net
increase/(decrease).. $ (4,780) -- $ 460,337 $ 8,332,257 $ 559,381
============ ============ ============= ============
CLASS S:
Sold.................. $ -- -- $ 27,837 $ -- $ --
Issued in exchange for
Class S shares....... -- -- 568,432 -- --
Issued as reinvestment
of dividends......... 22 -- 21,221 329 80
Redeemed.............. -- -- (566,354) -- --
------------ ------------ ------------- ------------
Net
increase/(decrease).. $ 22 -- $ 51,136 $ 329 $ 80
============ ============ ============= ============
CLASS I:
Sold.................. $ -- -- $ 131,968 $ -- $ --
Issued in exchange for
Class I shares....... -- -- 1,470,065 -- --
Issued as reinvestment
of dividends......... 31 -- -- 61 63
Redeemed.............. -- -- (1,256,891) -- --
------------ ------------ ------------- ------------
Net
increase/(decrease).. $ 31 -- $ 345,142 $ 61 $ 63
============ ============ ============= ============
SHARES
CLASS A:
Sold.................. 30,331,723 3,257 16,747,592 9,670,102 4,166,073
Issued in exchange for
Class A shares....... -- -- 14,537,976 -- --
Issued as reinvestment
of dividends......... 1,056,492 18,789 363,171 903,373 155,891
Redeemed.............. (36,908,639) (52,004) (22,246,314) (14,095,738) (4,944,950)
------------ --------- ------------ ------------- ------------
Net
increase/(decrease).. (5,520,424) (29,958) 9,402,425 (3,522,263) (622,986)
============ ========= ============ ============= ============
CLASS B:
Sold.................. 70,100 -- 151,031 1,051,959 353,152
Issued in exchange for
Class B shares....... -- -- 493,401 -- --
Issued as reinvestment
of dividends......... 1,322 -- 47,771 78,161 72,337
Redeemed.............. (76,202) -- (494,001) (391,417) (374,167)
------------ ------------ ------------- ------------
Net
increase/(decrease).. (4,780) -- 198,202 738,703 51,322
============ ============ ============= ============
CLASS S:
Sold.................. -- -- 12,088 -- --
Issued in exchange for
Class S shares....... -- -- 243,962 -- --
Issued as reinvestment
of dividends......... 22 -- 9,129 29 7
Redeemed.............. -- -- (243,870) -- --
------------ ------------ ------------- ------------
Net
increase/(decrease).. 22 -- 21,309 29 7
============ ============ ============= ============
CLASS I:
Sold.................. -- -- 59,563 -- --
Issued in exchange for
Class I shares....... -- -- 630,929 -- --
Issued as reinvestment
of dividends......... 31 -- -- 6 6
Redeemed.............. -- -- (540,840) -- --
------------ ------------ ------------- ------------
Net
increase/(decrease).. 31 -- 149,652 6 6
============ ============ ============= ============
</TABLE>
- -------------
(a) On January 30, 1998, shares were issued in exchange for the shares of the
Sierra Short Term Global Government Fund.
(b) Formerly, Sierra Asset Management Capital Growth Portfolio.
(c) Formerly, Sierra Asset Management Growth Portfolio.
(d) Formerly, Sierra Asset Management Value Portfolio.
See Notes to Financial Statements.
62
<PAGE>
<TABLE>
<CAPTION>
FLORIDA
INSURED EMERGING INTERNATIONAL STRATEGIC CONSERVATIVE FLEXIBLE
MUNICIPAL GROWTH GROWTH GROWTH GROWTH GROWTH BALANCED INCOME INCOME
FUND FUND FUND FUND PORTFOLIO(B) PORTFOLIO(C) PORTFOLIO PORTFOLIO(D) PORTFOLIO
- ------------ ------------- ------------- ------------- ------------ ------------ ------------ ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 17,026,487 $ 376,606,887 $ 313,664,566 $ 187,840,932 $ 7,185,762 $ 16,883,750 $ 19,339,371 $ 1,432,574 $ 1,269,248
-- -- -- -- -- -- -- -- --
430,764 8,098,957 8,402,791 4,018,393 985,685 6,378,314 7,178,526 794,058 352,767
(24,574,268) (409,689,756) (381,852,608) (206,202,867) (6,102,431) (55,770,224) (40,905,474) (6,289,481) (7,495,891)
- ------------ ------------- ------------- ------------- ----------- ------------ ------------ ----------- -----------
$ (7,117,017) $ (24,983,912) $ (59,785,251) $ (14,343,542) $ 2,069,016 $(32,508,160) $(14,387,577) $(4,062,849) $(5,873,876)
============ ============= ============= ============= =========== ============ ============ =========== ===========
$ 1,328,489 $ 21,624,274 $ 14,180,902 $ 1,184,200 $16,349,909 $ 29,916,859 $ 27,242,146 $ 1,998,856 $ 1,358,238
-- -- -- -- -- -- -- -- --
134,076 2,457,020 1,579,773 390,469 2,469,178 7,663,465 6,704,966 535,294 186,208
(1,662,583) (23,424,855) (18,125,264) (1,466,160) (8,814,243) (41,167,630) (25,775,094) (2,386,972) (2,088,487)
- ------------ ------------- ------------- ------------- ----------- ------------ ------------ ----------- -----------
$ (200,018) $ 656,439 $ (2,364,589) $ 108,509 $10,004,844 $ (3,587,306) $ 8,172,018 $ 147,178 $ (544,041)
============ ============= ============= ============= =========== ============ ============ =========== ===========
$ -- $ 1,576,379 $ 341,783 $ 2,290,224 -- -- -- -- --
-- -- -- -- -- -- -- -- --
358 1,116,531 370,065 735,597 -- -- -- -- --
(28,652) (6,410,769) (3,556,701) (3,931,060) -- -- -- -- --
- ------------ ------------- ------------- -------------
$ (28,294) $ (3,717,859) $ (2,844,853) $ (905,239) -- -- -- -- --
============ ============= ============= =============
$ -- $ 24,923,298 $ 2,367,463 $ 46,484,844 -- -- -- -- --
-- -- -- -- -- -- -- -- --
53 -- -- -- -- -- -- -- --
-- (67,170,431) (23,214,553) (16,617,888) -- -- -- -- --
- ------------ ------------- ------------- -------------
$ 53 $ (42,247,133) $ (20,847,090) $ 29,866,956 -- -- -- -- --
============ ============= ============= =============
1,660,760 23,228,866 16,007,665 18,508,938 602,394 1,496,544 1,719,960 134,118 123,065
-- -- -- -- -- -- -- -- --
41,985 590,930 466,974 438,682 93,688 628,647 676,566 75,144 34,204
(2,396,458) (25,206,344) (19,463,142) (20,071,107) (513,861) (4,959,288) (3,640,170) (586,227) (727,213)
- ------------ ------------- ------------- ------------- ----------- ------------ ------------ ----------- -----------
(693,713) (1,386,548) (2,988,503) (1,123,487) 182,221 (2,834,097) (1,243,644) (376,965) (569,944)
============ ============= ============= ============= =========== ============ ============ =========== ===========
129,041 1,368,627 758,262 108,136 1,392,992 2,663,779 2,426,948 185,916 131,591
-- -- -- -- -- -- -- -- --
13,052 184,877 90,322 43,146 236,345 758,711 635,623 50,797 18,089
(161,939) (1,490,854) (966,584) (141,350) (743,910) (3,691,585) (2,292,460) (223,256) (202,516)
- ------------ ------------- ------------- ------------- ----------- ------------ ------------ ----------- -----------
(19,846) 62,650 (118,000) 9,932 885,427 (269,095) 770,111 13,457 (52,836)
============ ============= ============= ============= =========== ============ ============ =========== ===========
-- 104,482 18,531 213,909 -- -- -- -- --
-- -- -- -- -- -- -- -- --
36 83,953 21,107 80,569 -- -- -- -- --
(2,810) (408,947) (189,249) (368,556) -- -- -- -- --
- ------------ ------------- ------------- -------------
(2,774) (220,512) (149,611) (74,078) -- -- -- -- --
============ ============= ============= =============
-- 1,783,635 125,672 4,334,679 -- -- -- -- --
-- -- -- -- -- -- -- -- --
5 -- -- -- -- -- -- -- --
-- (4,048,118) (1,245,200) (1,736,507) -- -- -- -- --
- ------------ ------------- ------------- -------------
5 (2,264,483) (1,119,528) 2,598,172 -- -- -- -- --
============ ============= ============= =============
</TABLE>
See Notes to Financial Statements.
63
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS - CAPITAL STOCK ACTIVITY
WM GROUP OF FUNDS
FOR THE YEAR ENDED JUNE 30, 1997*
<TABLE>
<CAPTION>
CALIFORNIA
SHORT TERM INSURED
CALIFORNIA TARGET HIGH CALIFORNIA INTERMEDIATE
MONEY MATURITY QUALITY MUNICIPAL MUNICIPAL
FUND 2002 FUND BOND FUND FUND FUND
------------ --------- ------------ ------------- ------------
<S> <C> <C> <C> <C> <C>
AMOUNT
CLASS A:
Sold.................. $ 33,810,325 $ 198,410 $ 2,416,682 $ 24,072,942 $ 6,433,077
Issued as reinvestment
of dividends......... 1,243,547 214,280 854,246 12,279,190 1,935,689
Redeemed.............. (43,341,830) (712,732) (22,051,296) (100,762,432) (18,610,647)
------------ --------- ------------ ------------- ------------
Net
increase/(decrease).. $ (8,287,958) $(300,042) $(18,780,368) $ (64,410,300) $(10,241,881)
============ ========= ============ ============= ============
CLASS B:
Sold.................. $ 2,200 -- $ 589,127 $ 7,989,764 $ 3,085,841
Issued as reinvestment
of dividends......... 1,341 -- 129,765 790,210 705,578
Redeemed.............. (83,133) -- (1,166,650) (4,796,205) (4,103,955)
------------ ------------ ------------- ------------
Net
increase/(decrease).. $ (79,592) -- $ (447,758) $ 3,983,769 $ (312,536)
============ ============ ============= ============
CLASS S:
Sold.................. $ -- -- $ 252,492 $ 6,710 $ --
Issued as reinvestment
of dividends......... 124 -- 70,056 398 329
Redeemed.............. (9,400) -- (3,061,342) (11,709) (10,200)
------------ ------------ ------------- ------------
Net
increase/(decrease).. $ (9,276) -- $ (2,738,794) $ (4,601) $ (9,871)
============ ============ ============= ============
CLASS I:
Sold.................. $ 1,000 -- $ 7,949,206 $ 1,000 $ 1,000
Issued as reinvestment
of dividends......... 29 -- -- 56 52
Redeemed.............. -- -- (5,148,573) -- --
------------ ------------ ------------- ------------
Net increase.......... $ 1,029 -- $ 2,800,633 $ 1,056 $ 1,052
============ ============ ============= ============
SHARES
CLASS A:
Sold.................. 33,810,325 18,881 1,042,539 2,233,283 603,408
Issued as reinvestment
of dividends......... 1,243,547 20,369 368,009 1,138,174 181,346
Redeemed.............. (43,341,830) (67,265) (9,497,646) (9,335,254) (1,743,747)
------------ --------- ------------ ------------- ------------
Net
increase/(decrease).. (8,287,958) (28,015) (8,087,098) (5,963,797) (958,993)
============ ========= ============ ============= ============
CLASS B:
Sold.................. 2,200 -- 254,315 742,146 289,579
Issued as reinvestment
of dividends......... 1,341 -- 55,922 73,182 66,108
Redeemed.............. (83,133) -- (502,572) (443,547) (385,086)
------------ ------------ ------------- ------------
Net increase.......... (79,592) -- (192,335) 371,781 (29,399)
============ ============ ============= ============
CLASS S:
Sold.................. -- -- 108,858 629 --
Issued as reinvestment
of dividends......... 124 -- 30,150 37 32
Redeemed.............. (9,400) -- (1,316,825) (1,085) (954)
------------ ------------ ------------- ------------
Net
increase/(decrease).. (9,276) -- (1,177,817) (419) (922)
============ ============ ============= ============
CLASS I:
Sold.................. 1,000 -- 3,412,404 95 95
Issued as reinvestment
of dividends......... 29 -- -- 4 4
Redeemed.............. -- -- (2,226,526) -- --
------------ ------------ ------------- ------------
Net increase.......... 1,029 -- 1,185,878 99 99
============ ============ ============= ============
</TABLE>
- -------------
* The Funds, with the exception of the Target Maturity 2002 Fund and the Port-
folios, began selling Class I shares, in addition to Class A, Class B and
Class S shares, on July 25, 1996. The Portfolio's Class A shares and Class B
shares commenced operations on July 25, 1996.
See Notes to Financial Statements.
64
<PAGE>
<TABLE>
<CAPTION>
FLORIDA
INSURED EMERGING INTERNATIONAL STRATEGIC CONSERVATIVE FLEXIBLE
MUNICIPAL GROWTH GROWTH GROWTH GROWTH GROWTH BALANCED INCOME INCOME
FUND FUND FUND FUND PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
- ------------ ------------- ------------- ------------- ----------- ------------ ------------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 2,152,770 $ 106,289,081 $ 174,380,122 $ 111,215,761 $14,561,758 $153,704,747 $126,999,007 $16,188,869 $18,811,393
663,299 18,433,017 16,032,518 1,660,481 406,975 6,299,489 4,442,814 512,504 269,092
(10,696,926) (187,631,023) (281,584,001) (178,142,360) (1,562,842) (28,571,654) (27,269,680) (4,387,543) (5,611,234)
- ------------ ------------- ------------- ------------- ----------- ------------ ------------ ----------- -----------
$ (7,880,857) $ (62,908,925) $ (91,171,361) $ (65,266,118) $13,405,891 $131,432,582 $104,172,141 $12,313,830 $13,469,251
============ ============= ============= ============= =========== ============ ============ =========== ===========
$ 920,129 $ 19,851,498 $ 23,017,303 $ 1,321,751 $34,262,712 $162,649,840 $104,072,070 $ 8,433,643 $ 5,718,919
151,321 4,183,527 2,398,228 77,717 1,130,781 6,026,225 2,955,038 231,229 99,878
(1,588,599) (17,144,504) (22,008,896) (1,548,088) (1,432,044) (15,638,225) (11,949,998) (1,453,871) (1,269,957)
- ------------ ------------- ------------- ------------- ----------- ------------ ------------ ----------- -----------
$ (517,149) $ 6,890,521 $ 3,406,635 $ (148,620) $33,961,449 $153,037,840 $ 95,077,110 $ 7,211,001 $ 4,548,840
============ ============= ============= ============= =========== ============ ============ =========== ===========
$ 27,586 $ 11,228,550 $ 8,285,980 $ 12,591,343 -- -- -- -- --
386 2,644,251 1,126,275 154,429 -- -- -- -- --
(10,200) (45,212,823) (41,354,238) (40,864,806) -- -- -- -- --
- ------------ ------------- ------------- -------------
$ 17,772 $ (31,340,022) $ (31,941,983) $ (28,119,034) -- -- -- -- --
============ ============= ============= =============
$ 1,000 $ 131,408,441 $ 98,759,210 $ 102,400,555 -- -- -- -- --
52 -- -- -- -- -- -- -- --
-- (398,315) (39,334,429) (19,077,636) -- -- -- -- --
- ------------ ------------- ------------- -------------
$ 1,052 $ 131,010,126 $ 59,424,781 $ 83,322,919 -- -- -- -- --
============ ============= ============= =============
219,446 7,003,738 9,426,433 10,541,386 1,373,772 14,708,889 12,169,876 1,564,273 1,849,003
67,495 1,319,471 928,883 159,831 39,283 622,409 428,830 49,180 26,612
(1,088,997) (12,312,534) (15,355,631) (16,902,883) (148,037) (2,792,970) (2,606,054) (420,925) (553,205)
- ------------ ------------- ------------- ------------- ----------- ------------ ------------ ----------- -----------
(802,056) (3,989,325) (5,000,315) (6,201,666) 1,265,018 12,538,328 9,992,652 1,192,528 1,322,410
============ ============= ============= ============= =========== ============ ============ =========== ===========
93,965 1,352,409 1,294,271 127,312 3,224,045 15,618,441 9,967,493 814,464 562,467
14,770 305,813 141,655 7,547 109,360 598,687 285,165 22,213 9,879
(161,649) (1,187,173) (1,259,280) (146,269) (135,633) (1,529,154) (1,136,848) (138,840) (125,637)
- ------------ ------------- ------------- ------------- ----------- ------------ ------------ ----------- -----------
(52,914) 471,049 176,646 (11,410) 3,197,772 14,687,974 9,115,810 697,837 446,709
============ ============= ============= ============= =========== ============ ============ =========== ===========
2,774 735,121 444,186 1,237,033 -- -- -- -- --
39 193,152 66,525 14,891 -- -- -- -- --
(1,039) (2,912,975) (2,238,511) (3,980,047) -- -- -- -- --
- ------------ ------------- ------------- -------------
1,774 (1,984,702) (1,727,800) (2,728,123) -- -- -- -- --
============ ============= ============= =============
103 8,525,955 5,305,292 9,883,459 -- -- -- -- --
6 -- -- -- -- -- -- -- --
-- (27,042) (2,456,918) (1,801,069) -- -- -- -- --
- ------------ ------------- ------------- -------------
109 8,498,913 2,848,374 8,082,390 -- -- -- -- --
============ ============= ============= =============
</TABLE>
See Notes to Financial Statements.
65
<PAGE>
FINANCIAL HIGHLIGHTS
CALIFORNIA MONEY FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
CLASS A SHARES
--------------------------------------------------
YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
06/30/98(A) 06/30/97 06/30/96 06/30/95 06/30/94
----------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning
of period................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- ------- ------- -------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income...... 0.027 0.028 0.029 0.028 0.018
------- ------- ------- ------- -------
Total from investment
operations................ 0.027 0.028 0.029 0.028 0.018
LESS DISTRIBUTIONS:
Dividends from net
investment income......... (0.027) (0.028) (0.029) (0.028) (0.018)
------- ------- ------- ------- -------
Total distributions........ (0.027) (0.028) (0.029) (0.028) (0.018)
------- ------- ------- ------- -------
Net asset value, end of
period.................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======= ======= ======= =======
TOTAL RETURN+.............. 2.73% 2.81% 3.00% 2.79% 1.81%
======= ======= ======= ======= =======
RATIOS TO AVERAGE NET
ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period
(in 000's)................ $37,403 $42,923 $51,211 $48,836 $62,500
Ratio of operating expenses
to average net assets..... 0.82% 0.85% 0.85% 0.85% 0.85%
Ratio of net investment
income to average net
assets.................... 2.71% 2.75% 2.94% 2.73% 1.80%
Ratio of operating expenses
to average net assets
without fee waivers....... 0.99% 1.14% 1.14% 1.15% 1.27%
</TABLE>
- -------------
* On July 1, 1994 the Fund commenced selling Class B and Class S shares in ad-
dition to Class A shares. Those shares in existence prior to July 1, 1994
were designated Class A shares. On July 25, 1996 the Fund commenced selling
Class I shares.
** Annualized.
+ Total return represents aggregate total return for the periods indicated.
The total returns would have been lower if certain fees had not been waived
by the investment advisor or without credits allowed by custodian.
(a) On March 20, 1998, WM Advisors, Inc. replaced Sierra Investment Advisors
Corporation as investment advisor for the Fund.
See Notes to Financial Statements.
66
<PAGE>
<TABLE>
<CAPTION>
CLASS B SHARES CLASS S SHARES CLASS I SHARES
- ---------------------------------------- --------------------------------------- ---------------------
YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED
06/30/98(A) 06/30/97 06/30/96 06/30/95* 06/30/98(A) 06/30/97 06/30/96 06/30/95* 06/30/98(A) 06/30/97*
- ----------- -------- -------- --------- ----------- -------- -------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
0.019 0.020 0.022 0.020 0.019 0.020 0.022 0.020 0.029 0.028
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
0.019 0.020 0.022 0.020 0.019 0.020 0.022 0.020 0.029 0.028
(0.019) (0.020) (0.022) (0.020) (0.019) (0.020) (0.022) (0.020) (0.029) (0.028)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
(0.019) (0.020) (0.022) (0.020) (0.019) (0.020) (0.022) (0.020) (0.029) (0.028)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
$ 1.00 $ 1.00 $ 1.00 $ 1.00 $1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
1.96% 2.03% 2.22% 2.04% 1.96% 2.03% 2.22% 2.04% 2.99% 2.89%
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
$ 63 $ 68 $ 147 $ 79 $1 $ 1 $ 10 $ 10 $ 1 $ 1
1.60% 1.60% 1.60% 1.60% 1.60% 1.60% 1.60% 1.60% 0.63% 0.60%**
1.88% 2.00% 2.19% 1.98% 1.85% 2.00% 2.19% 1.98% 2.89% 3.00%**
1.82% 1.89% 1.89% 1.90% 1.85% 1.89% 1.89% 1.90% 0.81% 0.89%**
</TABLE>
See Notes to Financial Statements.
67
<PAGE>
FINANCIAL HIGHLIGHTS
TARGET MATURITY 2002 FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
YEAR YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED
06/30/98(A) 06/30/97 06/30/96 06/30/95*
----------- -------- -------- ---------
<S> <C> <C> <C> <C>
Net asset value, beginning of
period........................ $10.69 $10.72 $10.78 $10.00
------ ------ ------ ------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income.......... 0.61++ 0.62++ 0.63 0.12
Net realized and unrealized
gain/(loss) on investments.... 0.40 0.11 (0.30) 0.66
------ ------ ------ ------
Total from investment
operations.................... 1.01 0.73 0.33 0.78
LESS DISTRIBUTIONS:
Dividends from net investment
income........................ (0.73) (0.71) (0.39) --
Distributions from net realized
gains......................... (0.11) (0.05) -- --
------ ------ ------ ------
Total distributions............ (0.84) (0.76) (0.39) --
------ ------ ------ ------
Net asset value, end of
period........................ $10.86 $10.69 $10.72 $10.78
====== ====== ====== ======
TOTAL RETURN+.................. 9.78% 6.95% 2.91% 7.80%
====== ====== ====== ======
RATIOS TO AVERAGE NET
ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in
000's)........................ $2,536 $2,816 $3,125 $2,626
Ratio of operating expenses to
average net assets............ 0.62% 0.64% 0.62% 0.74%**
Ratio of net investment income
to average net assets......... 5.61% 5.80% 5.66% 5.22%**
Portfolio turnover rate........ 0% 0% 5% 0%
Ratio of operating expenses to
average net assets without
fees reduced by credits
allowed by the custodian...... 0.71%(b) 0.72%(b) 0.70%(b) N/A
Ratio of operating expenses to
average net assets without fee
waivers, expenses absorbed
and/or fees reduced by credits
allowed by the custodian...... 2.63%(b) 2.89%(b) 2.55%(b) 4.71%**
</TABLE>
- -------------
* The Fund commenced operations on March 20, 1995.
** Annualized.
+ Total return represents aggregate total return for the period indicated and
does not reflect any applicable sales charges. The total return would have
been lower if certain fees had not been waived and expenses absorbed by the
investment advisor or without credits allowed by the custodian.
++ Per share numbers have been calculated using the average shares method.
(a) On March 20, 1998, WM Advisors, Inc. replaced Sierra Investment Advisors
Corporation as investment advisor for the Fund.
(b) The ratio includes custodian fees before reduction by credits allowed by
the custodian as required by amended disclosure requirements effective Sep-
tember 1, 1995.
See Notes to Financial Statements.
68
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
69
<PAGE>
FINANCIAL HIGHLIGHTS
SHORT TERM HIGH QUALITY BOND FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
CLASS A SHARES
--------------------------------------------------------------
YEAR YEAR YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED ENDED
06/30/98(A) 06/30/97 06/30/96 06/30/95 06/30/94***
----------- -------- -------- -------- -----------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period.... $ 2.32 $ 2.32 $ 2.35 $ 2.39 $ 2.50
------- ------- ------- ------- -------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income... 0.13 0.14 0.15++ 0.08 0.09
Net realized and
unrealized gain/(loss)
on investments......... 0.00# 0.00# (0.03) 0.02 (0.11)
------- ------- ------- ------- -------
Total from investment
operations............. 0.13 0.14 0.12 0.10 (0.02)
LESS DISTRIBUTIONS:
Dividends from net
investment income...... (0.13) (0.14) (0.15) (0.08) (0.09)
Distributions in excess
of net investment
income................. -- -- -- (0.06) --
Distributions from
capital................ (0.00)# -- (0.00)# (0.00)# --
------- ------- ------- ------- -------
Total distributions..... (0.13) (0.14) (0.15) (0.14) (0.09)
------- ------- ------- ------- -------
Net asset value, end of
period................. $ 2.32 $ 2.32 $ 2.32 $ 2.35 $ 2.39
======= ======= ======= ======= =======
TOTAL RETURN+........... 5.91% 6.15% 5.05% 4.42% (0.73)%
======= ======= ======= ======= =======
RATIOS TO AVERAGE NET
ASSETS/SUPPLEMENTAL
DATA:
Net assets, end of
period (in 000's)...... $35,551 $13,685 $32,440 $43,811 $21,771
Ratio of operating
expenses to average net
assets................. 0.86% 0.82% 0.75% 0.75% 0.00%**
Ratio of net investment
income to average net
assets................. 5.71% 6.50% 6.22% 6.10% 5.70%**
Portfolio turnover
rate................... 138% 51% 225% 137% 95%
Ratio of operating
expenses to average net
assets without fees
reduced by credits
allowed by the
custodian.............. 0.86%(b) 0.82%(b) 0.75%(b) N/A N/A
Ratio of operating
expenses to average net
assets without fee
waivers, expenses
absorbed and/or fees
reduced by credits
allowed by the
custodian.............. 1.32%(b) 1.45%(b) 1.42%(b) 1.39% 1.61%**
</TABLE>
- -------------
* On July 1, 1994 the Fund commenced selling Class B and Class S shares in ad-
dition to Class A shares. Those shares in existence prior to July 1, 1994
were designated Class A shares. On July 25, 1996 the Fund commenced selling
Class I shares.
** Annualized.
*** The Fund commenced operations on November 1, 1993.
+ Total return represents aggregate total return for the periods indicated and
does not reflect any applicable sales charges. The total returns would have
been lower if certain fees had not been waived by the investment advisor or
without credits allowed by custodian.
++ Per share numbers have been calculated using the average shares method.
# Amount represents less than $0.01 per share.
(a) On March 20, 1998, WM Advisors, Inc. replaced Sierra Investment Advisors
Corporation as investment advisor for the Fund.
(b) The ratio includes custodian fees before reduction by credits allowed by
the custodian as required by amended disclosure requirements effective
September 1, 1995.
See Notes to Financial Statements.
70
<PAGE>
<TABLE>
<CAPTION>
CLASS B SHARES CLASS S SHARES CLASS I SHARES
- ----------------------------------------------- ---------------------------------------------- -----------------------
YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED
06/30/98(A) 06/30/97 06/30/96 06/30/95* 06/30/98(A) 06/30/97 06/30/96 06/30/95* 06/30/98(A) 06/30/97*
- ----------- -------- -------- --------- ----------- -------- -------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 2.32 $ 2.32 $ 2.35 $ 2.39 $2.32 $2.32 $ 2.35 $ 2.39 $ 2.32 $ 2.32
------ ------ ------ ------ ----- ----- ------ ------ ------ ------
0.12 0.12 0.13++ 0.06 0.12 0.12 0.13++ 0.06 0.14 0.14
0.00# 0.00# (0.03) 0.02 0.00# 0.00# (0.03) 0.02 0.00# 0.00#
------ ------ ------ ------ ----- ----- ------ ------ ------ ------
0.12 0.12 0.10 0.08 0.12 0.12 0.10 0.08 0.14 0.14
(0.12) (0.12) (0.13) (0.06) (0.12) (0.12) (0.13) (0.06) (0.14) (0.14)
-- -- -- (0.06) -- -- -- (0.06) -- --
(0.00)# -- (0.00)# (0.00)# (0.00)# -- (0.00)# (0.00)# (0.00)# --
------ ------ ------ ------ ----- ----- ------ ------ ------ ------
(0.12) (0.12) (0.13) (0.12) (0.12) (0.12) (0.13) (0.12) (0.14) (0.14)
------ ------ ------ ------ ----- ----- ------ ------ ------ ------
$ 2.32 $ 2.32 $ 2.32 $ 2.35 $2.32 $2.32 $ 2.32 $ 2.35 $ 2.32 $ 2.32
====== ====== ====== ====== ===== ===== ====== ====== ====== ======
5.13% 5.37% 4.27% 3.64% 5.13% 5.37% 4.27% 3.64% 6.17% 5.94%
====== ====== ====== ====== ===== ===== ====== ====== ====== ======
$3,459 $2,994 $3,437 $3,015 $850 $ 800 $3,531 $2,303 $3,103 $2,752
1.61% 1.57% 1.50% 1.50% 1.58% 1.57% 1.50% 1.50% 0.53% 0.57%**
4.96% 5.75% 5.47% 5.35% 4.98% 5.75% 5.47% 5.35% 6.03% 6.75%**
138% 51% 225% 137% 138% 51% 225% 137% 138% 51%
1.61%(b) 1.57%(b) 1.50%(b) N/A 1.58%(b) 1.57%(b) 1.50%(b) N/A 0.53%(b) 0.57%**(b)
2.07%(b) 2.20%(b) 2.17%(b) 2.14% 2.05%(b) 2.20%(b) 2.17%(b) 2.14% 1.00%(b) 1.20%**(b)
</TABLE>
See Notes to Financial Statements.
71
<PAGE>
FINANCIAL HIGHLIGHTS
CALIFORNIA MUNICIPAL FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
CLASS A SHARES
------------------------------------------------------------
YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
06/30/98(A) 06/30/97 06/30/96 06/30/95 06/30/94
----------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period.... $ 10.92 $ 10.60 $ 10.53 $ 10.38 $ 11.22
-------- -------- -------- -------- --------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income... 0.58 0.59 0.60++ 0.61 0.61
Net realized and
unrealized gain/(loss)
on investments......... 0.41 0.32 0.07 0.15 (0.82)
-------- -------- -------- -------- --------
Total from investment
operations............. 0.99 0.91 0.67 0.76 (0.21)
LESS DISTRIBUTIONS:
Dividends from net
investment income...... (0.58) (0.59) (0.60) (0.61) (0.61)
Distributions in excess
of net investment
income................. -- -- -- -- (0.00)#
Distributions from net
realized gains......... -- -- -- (0.00)# --
Distributions in excess
of net realized gains.. -- -- -- -- (0.02)
-------- -------- -------- -------- --------
Total distributions..... (0.58) (0.59) (0.60) (0.61) (0.63)
-------- -------- -------- -------- --------
Net asset value, end of
period................. $ 11.33 $ 10.92 $ 10.60 $ 10.53 $ 10.38
======== ======== ======== ======== ========
TOTAL RETURN+........... 9.26% 8.83% 6.40% 7.57% (2.19)%
======== ======== ======== ======== ========
RATIOS TO AVERAGE NET
ASSETS/SUPPLEMENTAL
DATA:
Net assets, end of
period (in 000's)...... $290,328 $318,251 $372,177 $405,967 $509,223
Ratio of operating
expenses to average net
assets................. 1.00% 0.97% 0.94% 0.85% 0.79%
Ratio of net investment
income to average net
assets................. 5.18% 5.51% 5.56% 5.89% 5.45%
Portfolio turnover
rate................... 87% 36% 17% 22% 50%
Ratio of operating
expenses to average net
assets without fees
reduced by credits
allowed by the
custodian.............. 1.00%(b) 0.97%(b) 0.94%(b) N/A N/A
Ratio of operating
expenses to average net
assets without fee
waivers and/or fees
reduced by credits
allowed by the
custodian.............. 1.19%(b) 1.26%(b) 1.29%(b) 1.29% 1.39%
</TABLE>
- -------------
* On July 1, 1994 the Fund commenced selling Class B and Class S shares in ad-
dition to Class A shares. Those shares in existence prior to July 1, 1994
were designated Class A shares. On July 25, 1996 the Fund commenced selling
Class I shares.
** Annualized.
+ Total return represents aggregate total return for the periods indicated and
does not reflect any applicable sales charges. The total returns would have
been lower if certain fees had not been waived by the investment advisor or
without credits allowed by custodian.
++ Per share numbers have been calculated using the average shares method.
# Amount represents less than $0.01 per share.
(a) On March 20, 1998, WM Advisors, Inc. replaced Sierra Investment Advisors
Corporation as investment advisor for the Fund.
(b) The ratio includes custodian fees before reduction by credits allowed by
the custodian as required by amended disclosure requirements effective Sep-
tember 1, 1995.
See Notes to Financial Statements.
72
<PAGE>
<TABLE>
<CAPTION>
CLASS B SHARES CLASS S SHARES CLASS I SHARES
- ------------------------------------------------- ----------------------------------------------- -----------------------
YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED
06/30/98(A) 06/30/97 06/30/96 06/30/95* 06/30/98(A) 06/30/97 06/30/96 06/30/95* 06/30/98(A) 06/30/97*
- ----------- -------- -------- --------- ----------- -------- -------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 10.92 $ 10.60 $ 10.53 $10.38 $10.92 $10.60 $10.53 $10.38 $10.92 $10.62
------- ------- ------- ------ ------ ------ ------ ------ ------ ------
0.50 0.51 0.51++ 0.53 0.50++ 0.51 0.51++ 0.53 0.61++ 0.58
0.41 0.32 0.07 0.15 0.41 0.32 0.07 0.15 0.41 0.30
------- ------- ------- ------ ------ ------ ------ ------ ------ ------
0.91 0.83 0.58 0.68 0.91 0.83 0.58 0.68 1.02 0.88
(0.50) (0.51) (0.51) (0.53) (0.50) (0.51) (0.51) (0.53) (0.61) (0.58)
-- -- -- -- -- -- -- -- -- --
-- -- -- (0.00)# -- -- -- (0.00)# -- --
-- -- -- -- -- -- -- -- -- --
------- ------- ------- ------ ------ ------ ------ ------ ------ ------
(0.50) (0.51) (0.51) (0.53) (0.50) (0.51) (0.51) (0.53) (0.61) (0.58)
------- ------- ------- ------ ------ ------ ------ ------ ------ ------
$ 11.33 $ 10.92 $ 10.60 $10.53 $11.33 $10.92 $10.60 $10.53 $11.33 $10.92
======= ======= ======= ====== ====== ====== ====== ====== ====== ======
8.45% 8.02% 5.61% 6.78% 8.45% 8.02% 5.61% 6.78% 9.53% 8.49%
======= ======= ======= ====== ====== ====== ====== ====== ====== ======
$34,537 $25,219 $20,543 $7,230 $ 8 $ 7 $ 11 $ 11 $ 1 $ 1
1.75% 1.72% 1.69% 1.60% 1.74% 1.72% 1.69% 1.60% 0.74% 0.72%**
4.42% 4.76% 4.81% 5.14% 4.43% 4.76% 4.81% 5.14% 5.44% 5.76%**
87% 36% 17% 22% 87% 36% 17% 22% 87% 36%
1.75%(b) 1.72%(b) 1.69%(b) N/A 1.74%(b) 1.72%(b) 1.69%(b) N/A 0.74%(b) 0.72%**(b)
1.95%(b) 2.01%(b) 2.04%(b) 2.04% 1.95%(b) 2.01%(b) 2.04%(b) 2.04% 0.93%(b) 1.01%**(b)
</TABLE>
See Notes to Financial Statements.
73
<PAGE>
FINANCIAL HIGHLIGHTS
CALIFORNIA INSURED INTERMEDIATE MUNICIPAL FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
CLASS A SHARES
-------------------------------------------------------------
YEAR YEAR YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED ENDED
06/30/98(A) 06/30/97 06/30/96 06/30/95 06/30/94***
----------- -------- -------- -------- -----------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period.... $ 10.74 $ 10.56 $ 10.45 $ 10.10 $ 10.00
------- ------- ------- ------- -------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income... 0.49 0.49++ 0.49 0.50 0.11
Net realized and
unrealized gain on
investments............ 0.17 0.23 0.15 0.35 0.11##
------- ------- ------- ------- -------
Total from investment
operations............. 0.66 0.72 0.64 0.85 0.22
LESS DISTRIBUTIONS:
Dividends from net
investment income...... (0.49) (0.49) (0.49) (0.50) (0.11)
Distributions in excess
of net investment
income................. (0.00)# -- -- -- --
Distributions from net
realized gains......... (0.10) (0.05) (0.04) -- (0.01)
------- ------- ------- ------- -------
Total distributions..... (0.59) (0.54) (0.53) (0.50) (0.12)
------- ------- ------- ------- -------
Net asset value, end of
period................. $ 10.81 $ 10.74 $ 10.56 $ 10.45 $ 10.10
======= ======= ======= ======= =======
TOTAL RETURN+........... 6.26% 6.97% 6.25% 8.71% 2.20%
======= ======= ======= ======= =======
RATIOS TO AVERAGE NET
ASSETS/SUPPLEMENTAL
DATA:
Net assets, end of
period (in 000's)...... $38,724 $45,157 $54,518 $54,507 $34,147
Ratio of operating
expenses to average net
assets................. 0.86% 0.82% 0.73% 0.42% 0.00%**
Ratio of net investment
income to average net
assets................. 4.49% 4.61% 4.62% 4.95% 4.25%**
Portfolio turnover
rate................... 25% 29% 27% 13% 17%
Ratio of operating
expenses to average net
assets without fees
reduced by credits
allowed by the
custodian.............. 0.86%(b) 0.83%(b) 0.75%(b) N/A N/A
Ratio of operating
expenses to average net
assets without fee
waivers, expenses
absorbed and/or fees
reduced by credits
allowed by the
custodian.............. 1.25%(b) 1.31%(b) 1.39%(b) 1.41% 1.95%**
</TABLE>
- -------------
* On July 1, 1994 the Fund commenced selling Class B and Class S shares in ad-
dition to Class A shares. Those shares in existence prior to July 1, 1994
were designated Class A shares. On July 25, 1996 the Fund commenced selling
Class I shares.
** Annualized.
*** The Fund commenced operations on April 4, 1994.
+ Total return represents aggregate total return for the periods indicated and
does not reflect any applicable sales charges. The total returns would have
been lower if certain fees had not been waived by the investment advisor or
without credits allowed by custodian.
++ Per share numbers have been calculated using the average shares method.
## The amount shown may not accord with the change in aggregate gains and
losses of portfolio securities due to the timing of sales and redemptions of
Fund shares.
(a) On March 20, 1998, WM Advisors, Inc. replaced Sierra Investment Advisors
Corporation as investment advisor for the Fund.
(b) The ratio includes custodian fees before reduction by credits allowed by
the custodian as required by amended disclosure requirements effective Sep-
tember 1, 1995.
See Notes to Financial Statements.
74
<PAGE>
<TABLE>
<CAPTION>
CLASS B SHARES CLASS S SHARES CLASS I SHARES
- ------------------------------------------------- ----------------------------------------------- -----------------------
YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR PERIOD
YEAR ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED
06/30/98(A) 06/30/97 06/30/96 06/30/95* 06/30/98(A) 06/30/97 06/30/96 06/30/95* 06/30/98(A) 06/30/97*
- ----------- -------- -------- --------- ----------- -------- -------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 10.74 $ 10.56 $ 10.45 $ 10.10 $10.74 $10.56 $10.45 $10.10 $10.74 $10.58
------- ------- ------- ------- ------ ------ ------ ------ ------ ------
0.41 0.41++ 0.41 0.43 0.41 0.41++ 0.41 0.43 0.51 0.49++
0.17 0.23 0.15 0.35 0.17 0.23 0.15 0.35 0.17 0.21
------- ------- ------- ------- ------ ------ ------ ------ ------ ------
0.58 0.64 0.56 0.78 0.58 0.64 0.56 0.78 0.68 0.70
(0.41) (0.41) (0.41) (0.43) (0.41) (0.41) (0.41) (0.43) (0.51) (0.49)
(0.00)# -- -- -- -- -- -- -- -- --
(0.10) (0.05) (0.04) -- (0.10) (0.05) (0.04) -- (0.10) (0.05)
------- ------- ------- ------- ------ ------ ------ ------ ------ ------
(0.51) (0.46) (0.45) (0.43) (0.51) (0.46) (0.45) (0.43) (0.61) (0.54)
------- ------- ------- ------- ------ ------ ------ ------ ------ ------
$ 10.81 $ 10.74 $ 10.56 $ 10.45 $10.81 $10.74 $10.56 $10.45 $10.81 $10.74
======= ======= ======= ======= ====== ====== ====== ====== ====== ======
5.47% 6.17% 5.46% 7.90% 5.47% 6.17% 5.46% 7.90% 6.53% 6.70%
======= ======= ======= ======= ====== ====== ====== ====== ====== ======
$21,688 $20,992 $20,948 $12,391 $ 2 $ 2 $ 11 $ 11 $ 1 $ 1
1.61% 1.57% 1.48% 1.17% 1.59% 1.57% 1.48% 1.17% 0.60% 0.57%**
3.74% 3.86% 3.87% 4.20% 3.76% 3.86% 3.87% 4.20% 4.75% 4.86%**
25% 29% 27% 13% 25% 29% 27% 13% 25% 29%
1.61%(b) 1.58%(b) 1.50%(b) N/A 1.59%(b) 1.58%(b) 1.50%(b) N/A 0.60%(b) 0.58%**(b)
2.01%(b) 2.06%(b) 2.14%(b) 2.16% 1.98%(b) 2.06%(b) 2.14%(b) 2.16% 0.99%(b) 1.06%**(b)
</TABLE>
See Notes to Financial Statements.
75
<PAGE>
FINANCIAL HIGHLIGHTS
FLORIDA INSURED MUNICIPAL FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
CLASS A SHARES
-----------------------------------------------------------
YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
06/30/98(A) 06/30/97 06/30/96 06/30/95 06/30/94
----------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period.... $ 9.93 $ 9.64 $ 9.43 $ 9.40 $ 10.05
------- ------- ------- ------- -------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income... 0.49 0.49++ 0.50 0.52 0.52
Net realized and
unrealized gain/(loss)
on investments......... 0.42 0.30 0.21 0.03## (0.65)
------- ------- ------- ------- -------
Total from investment
operations............. 0.91 0.79 0.71 0.55 (0.13)
LESS DISTRIBUTIONS:
Dividends from net
investment income...... (0.49) (0.50) (0.50) (0.52) (0.52)
Distributions in excess
of net investment
income................. -- (0.00)# -- -- (0.00)#
Distributions in excess
of net realized gains.. -- -- -- -- (0.00)#
------- ------- ------- ------- -------
Total distributions..... (0.49) (0.50) (0.50) (0.52) (0.52)
------- ------- ------- ------- -------
Net asset value, end of
period................. $ 10.35 $ 9.93 $ 9.64 $ 9.43 $ 9.40
======= ======= ======= ======= =======
TOTAL RETURN+........... 9.34% 8.43% 7.56% 6.01% (1.50)%
======= ======= ======= ======= =======
RATIOS TO AVERAGE NET
ASSETS/SUPPLEMENTAL
DATA:
Net assets, end of
period (in 000's)...... $16,538 $22,761 $29,821 $33,714 $38,541
Ratio of operating
expenses to average net
assets................. 0.88% 0.82% 0.63% 0.39% 0.00%
Ratio of net investment
income to average net
assets................. 4.79% 5.01% 5.08% 5.53% 5.09%
Portfolio turnover
rate................... 51% 53% 52% 44% 83%
Ratio of operating
expenses to average net
assets without fees
reduced by credits
allowed by the
custodian.............. 0.89%(b) 0.84%(b) 0.66%(b) N/A N/A
Ratio of operating
expenses to average net
assets without fee
waivers, expenses
absorbed and/or fees
reduced by credits
allowed by the
custodian.............. 1.45%(b) 1.46%(b) 1.46%(b) 1.51% 1.55%
</TABLE>
- -------------
* On July 1, 1994 the Fund commenced selling Class B and Class S shares in ad-
dition to Class A shares. Those shares in existence prior to July 1, 1994
were designated Class A shares. On July 25, 1996 the Fund commenced selling
Class I shares.
** Annualized.
+ Total return represents aggregate total return for the period indicated and
does not reflect any applicable sales charges. The total return would have
been lower if certain fees had not been waived and expenses absorbed by the
investment advisor or without credits allowed by the custodian.
++ Per share numbers have been calculated using the average shares method.
# Amount represents less than $0.01 per share.
## The amount shown may not accord with the change in aggregate gains and
losses of portfolio securities due to the timing of sales and redemptions of
Fund shares.
(a) On March 20, 1998, WM Advisors, Inc. replaced Sierra Investment Advisors
Corporation as investment advisor for the Fund.
(b) The ratio includes custodian fees before reduction by credits allowed by
the custodian as required by amended disclosure requirements effective Sep-
tember 1, 1995.
See Notes to Financial Statements.
76
<PAGE>
<TABLE>
<CAPTION>
CLASS B SHARES CLASS S SHARES CLASS I SHARES
- ----------------------------------------------- ----------------------------------------------- -----------------------
YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED
06/30/98(A) 06/30/97 06/30/96 06/30/95* 06/30/98(A) 06/30/97 06/30/96 06/30/95* 06/30/98(A) 06/30/97*
- ----------- -------- -------- --------- ----------- -------- -------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 9.93 $ 9.64 $ 9.43 $ 9.40 $9.93 $9.64 $9.43 $9.40 $ 9.93 $9.68
------ ------ ------ ------ ------ ----- ----- ----- ------ -----
0.41 0.42++ 0.42 0.45 0.36 0.42++ 0.42 0.45 0.54 0.49++
0.43 0.30 0.21 0.03## 0.48 0.30 0.21 0.03## 0.36 0.26
------ ------ ------ ------ ------ ----- ----- ----- ------ -----
0.84 0.72 0.63 0.48 0.84 0.72 0.63 0.48 0.90 0.75
(0.42) (0.43) (0.42) (0.45) (0.42) (0.43) (0.42) (0.45) (0.48) (0.50)
-- (0.00)# -- -- -- (0.00)# -- -- -- (0.00)#
-- -- -- -- -- -- -- -- -- --
------ ------ ------ ------ ------ ----- ----- ----- ------ -----
(0.42) (0.43) (0.42) (0.45) (0.42) (0.43) (0.42) (0.45) (0.48) (0.50)
------ ------ ------ ------ ------ ----- ----- ----- ------ -----
$10.35 $ 9.93 $ 9.64 $ 9.43 $10.35 $9.93 $9.64 $9.43 $10.35 $9.93
====== ====== ====== ====== ====== ===== ===== ===== ====== =====
8.53% 7.63% 6.76% 5.23% 8.53% 7.63% 6.76% 5.23% 9.61% 7.88%
====== ====== ====== ====== ====== ===== ===== ===== ====== =====
$5,075 $5,067 $5,428 $3,330 $ 2 $ 29 $ 11 $ 11 $ 1 $ 1
1.63% 1.57% 1.38% 1.14% 1.62% 1.57% 1.38% 1.14% 0.62% 0.57%**
4.04% 4.26% 4.33% 4.78% 4.05% 4.26% 4.33% 4.78% 5.05% 5.26%**
51% 53% 52% 44% 51% 53% 52% 44% 51% 53%
1.64%(b) 1.59%(b) 1.41%(b) N/A 1.63%(b) 1.59%(b) 1.41%(b) N/A 0.63%(b) 0.59%**(b)
2.21%(b) 2.21%(b) 2.21%(b) 2.26% 2.19%(b) 2.21%(b) 2.21%(b) 2.26% 1.19%(b) 1.21%**(b)
</TABLE>
See Notes to Financial Statements.
77
<PAGE>
FINANCIAL HIGHLIGHTS
GROWTH FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
CLASS A SHARES
------------------------------------------------------------
YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
06/30/98(A) 06/30/97 06/30/96 06/30/95 06/30/94
----------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period.... $ 14.90 $ 15.69 $ 14.18 $ 10.73 $ 10.72
-------- -------- -------- -------- --------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment
income/(loss).......... (0.15)++ (0.03)++ (0.07)++ 0.05++ (0.02)
Net realized and
unrealized gain on
investments............ 4.99 1.58 3.47 3.42 0.03##
-------- -------- -------- -------- --------
Total from investment
operations............. 4.84 1.55 3.40 3.47 0.01
LESS DISTRIBUTIONS:
Dividends from net
investment income...... -- -- -- (0.02) --
Distributions from net
realized gains......... (1.28) (2.34) (1.89) (0.00)# --
-------- -------- -------- -------- --------
Total distributions..... (1.28) (2.34) (1.89) (0.02) --
-------- -------- -------- -------- --------
Net asset value, end of
period................. $ 18.46 $ 14.90 $ 15.69 $ 14.18 $ 10.73
======== ======== ======== ======== ========
TOTAL RETURN+........... 35.43% 10.88% 25.44% 32.33% 0.00%
======== ======== ======== ======== ========
RATIOS TO AVERAGE NET
ASSETS/SUPPLEMENTAL
DATA:
Net assets, end of
period (in 000's)...... $112,153 $111,187 $179,720 $154,763 $126,808
Ratio of operating
expenses to average net
assets................. 1.66% 1.70% 1.70% 1.76% 1.75%
Ratio of net investment
income/(loss) to
average net assets..... (0.91)% (0.22)% (0.49)% 0.28% (0.35)%
Portfolio turnover
rate................... 153% 156% 205% 233% 227%
Ratio of operating
expenses to average net
assets without fees
reduced by credits
allowed by the
custodian.............. 1.66%(b) 1.70%(b) 1.71%(b) N/A N/A
</TABLE>
- -------------
* On July 1, 1994 the Fund commenced selling Class B and Class S shares in ad-
dition to Class A shares. Those shares in existence prior to July 1, 1994
were designated Class A shares. On July 25, 1996 the Fund commenced selling
Class I shares.
** Annualized.
+ Total return represents aggregate total return for the periods indicated and
does not reflect any applicable sales charges. The total returns would have
been lower if certain fees had not been waived and expenses absorbed by the
investment advisor or if fees had not been reduced by credits allowed by the
custodian.
++ Per share numbers have been calculated using the average shares method.
# Amount represents less than $0.01 per share.
## The amount shown may not accord with the change in aggregate gains and
losses of portfolio securities due to the timing of sales and redemptions of
Fund shares.
(a) On March 20, 1998, WM Advisors, Inc. replaced Sierra Investment Advisors
Corporation as investment advisor for the Fund.
(b) The ratio includes custodian fees before reduction by credits allowed by
the custodian as required by amended disclosure requirements effective Sep-
tember 1, 1995.
See Notes to Financial Statements.
78
<PAGE>
<TABLE>
<CAPTION>
CLASS B SHARES CLASS S SHARES
- ------------------------------------------------- ---------------------------------------------------
YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED
06/30/98(A) 06/30/97 06/30/96 06/30/95* 06/30/98(A) 06/30/97 06/30/96 06/30/95*
- ----------- -------- -------- --------- ----------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 14.53 $ 15.47 $ 14.10 $10.73 $14.54 $ 15.47 $ 14.11 $ 10.73
------- ------- ------- ------ ------- ------- ------- -------
(0.25)++ (0.14)++ (0.19)++ (0.04)++ (0.25)++ (0.14)++ (0.19)++ (0.04)++
4.82 1.54 3.45 3.42 4.82 1.55 3.44 3.42
------- ------- ------- ------ ------- ------- ------- -------
4.57 1.40 3.26 3.38 4.57 1.41 3.25 3.38
-- -- -- (0.01) -- -- -- (0.00)#
(1.28) (2.34) (1.89) (0.00)# (1.28) (2.34) (1.89) (0.00)#
------- ------- ------- ------ ------- ------- ------- -------
(1.28) (2.34) (1.89) (0.01) (1.28) (2.34) (1.89) (0.00)
------- ------- ------- ------ ------- ------- ------- -------
$ 17.82 $ 14.53 $ 15.47 $14.10 $17.83 $ 14.54 $ 15.47 $ 14.11
======= ======= ======= ====== ======= ======= ======= =======
34.43% 9.99% 24.54% 31.46% 34.40% 10.06% 24.54% 31.44%
======= ======= ======= ====== ======= ======= ======= =======
$38,390 $30,397 $25,067 $6,928 $13,283 $14,038 $45,652 $18,730
2.46% 2.45% 2.45% 2.51% 2.39% 2.45% 2.45% 2.51%
(1.70)% (0.97)% (1.24)% (0.47)% (1.64)% (0.97)% (1.24)% (0.47)%
153% 156% 205% 233% 153% 156% 205% 233%
2.46%(b) 2.45%(b) 2.46%(b) N/A 2.40%(b) 2.45%**(b) 2.46%(b) N/A
<CAPTION>
CLASS I SHARES
- ------------------------------
YEAR PERIOD
ENDED ENDED
06/30/98(A) 06/30/97*
- -------------- ---------------
<S> <C>
$ 14.94 $ 14.21
- -------------- ---------------
(0.10)++ 0.00#++
5.00 3.07
- -------------- ---------------
4.90 3.07
-- --
(1.28) (2.34)
- -------------- ---------------
(1.28) (2.34)
- -------------- ---------------
$ 18.56 $ 14.94
============== ===============
35.75% 22.73%
============== ===============
$115,729 $126,986
1.36% 1.45%**
(0.61)% 0.03%**
153% 156%
1.36%(b) 1.45%**(b)
</TABLE>
See Notes to Financial Statements.
79
<PAGE>
FINANCIAL HIGHLIGHTS
EMERGING GROWTH FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
CLASS A SHARES
--------------------------------------------------------------
YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
06/30/98(A) 06/30/97 06/30/96 06/30/95 06/30/94
----------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period.... $ 18.28 $ 20.17 $ 15.47 $ 13.02 $ 13.76
-------- -------- -------- -------- --------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment loss..... (0.22)++ (0.21)++ (0.19)++ (0.00)++# (0.09)
Net realized and
unrealized gain/(loss)
on investments......... 2.50 (0.18) 5.65 2.77 0.68
-------- -------- -------- -------- --------
Total from investment
operations............. 2.28 (0.39) 5.46 2.77 0.59
LESS DISTRIBUTIONS:
Distributions from net
realized gains......... (1.07) (1.50) (0.76) (0.32) (1.33)
-------- -------- -------- -------- --------
Total distributions..... (1.07) (1.50) (0.76) (0.32) (1.33)
-------- -------- -------- -------- --------
Net asset value, end of
period................. $ 19.49 $ 18.28 $ 20.17 $ 15.47 $ 13.02
======== ======== ======== ======== ========
TOTAL RETURN+........... 12.95% (1.50)% 35.93% 21.54% 3.40%
======== ======== ======== ======== ========
RATIOS TO AVERAGE NET
ASSETS/SUPPLEMENTAL
DATA:
Net assets, end of
period (in 000's)...... $118,473 $165,719 $283,747 $185,722 $124,941
Ratio of operating
expenses to average net
assets................. 1.66% 1.64% 1.64% 1.68% 1.66%
Ratio of net investment
loss to average net
assets................. (1.10)% (1.17)% (1.02)% (0.31)% (0.68)%
Portfolio turnover
rate................... 112% 81% 131% 181% 224%
Ratio of operating
expenses to average net
assets without credits
allowed by the
custodian.............. 1.66%(b) 1.64%(b) 1.65%(b) N/A N/A
</TABLE>
- -------------
* On July 1, 1994 the Fund commenced selling Class B and Class S shares in ad-
dition to Class A shares. Those shares in existence prior to July 1, 1994
were designated Class A shares. On July 25, 1996 the Fund commenced selling
Class I shares.
** Annualized.
+ Total return represents aggregate total return for the periods indicated and
does not reflect any applicable sales charges. The total returns would have
been lower if certain fees had not been waived by the investment advisor or
without credits allowed by custodian.
++ Per share numbers have been calculated using the average shares method.
# Amount represents less than $0.01 per share.
## The amount shown may not accord with the change in aggregate gains and
losses of portfolio securities due to the timing of sales and redemptions of
Fund shares.
(a) On March 20, 1998, WM Advisors, Inc. replaced Sierra Investment Advisors
Corporation as investment advisor for the Fund.
(b) The ratio includes custodian fees before reduction by credits allowed by
the custodian as required by amended disclosure requirements effective Sep-
tember 1, 1995.
See Notes to Financial Statements.
80
<PAGE>
<TABLE>
<CAPTION>
CLASS B SHARES CLASS S SHARES
- ------------------------------------------------- ------------------------------------------------
YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED
06/30/98(A) 06/30/97 06/30/96 06/30/95* 06/30/98(A) 06/30/97 06/30/96 06/30/95*
- ----------- -------- -------- --------- ----------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 17.85 $ 19.88 $ 15.37 $ 13.02 $17.85 $19.88 $ 15.37 $ 13.02
------- ------- ------- ------- ------ ------ ------- -------
(0.36)++ (0.34)++ (0.32)++ (0.10)++ (0.35)++ (0.34)++ (0.32)++ (0.10)++
2.44 (0.19) 5.59 2.77 2.43 (0.19) 5.59 2.77
------- ------- ------- ------- ------ ------ ------- -------
2.08 (0.53) 5.27 2.67 2.08 (0.53) 5.27 2.67
(1.07) (1.50) (0.76) (0.32) (1.07) (1.50) (0.76) (0.32)
------- ------- ------- ------- ------ ------ ------- -------
(1.07) (1.50) (0.76) (0.32) (1.07) (1.50) (0.76) (0.32)
------- ------- ------- ------- ------ ------ ------- -------
$ 18.86 $ 17.85 $ 19.88 $ 15.37 $18.86 $17.85 $ 19.88 $ 15.37
======= ======= ======= ======= ====== ====== ======= =======
12.05% (2.26)% 34.93% 20.69% 12.11% (2.26)% 34.91% 20.76%
======= ======= ======= ======= ====== ====== ======= =======
$28,540 $29,123 $28,920 $10,208 $5,989 $8,341 $43,645 $11,840
2.47% 2.39% 2.39% 2.43% 2.41% 2.39% 2.39% 2.43%
(1.92)% (1.92)% (1.77)% (1.06)% (1.86)% (1.92)% (1.77)% (1.06)%
112% 81% 131% 181% 112% 81% 131% 181%
2.47%(b) 2.39%(b) 2.40%(b) N/A 2.42%(b) 2.39%(b) 2.40%(b) N/A
<CAPTION>
CLASS I SHARES
- ----------------------------
YEAR PERIOD
ENDED ENDED
06/30/98(A) 06/30/97*
- ------------- --------------
<S> <C>
$ 18.33 $ 17.52
- ------------- --------------
(0.16)++ (0.16)++
2.50 2.47##
- ------------- --------------
2.34 2.31
(1.07) (1.50)
- ------------- --------------
(1.07) (1.50)
- ------------- --------------
$ 19.60 $ 18.33
============= ==============
13.25% 13.69%
============= ==============
$33,886 $52,199
1.36% 1.39%**
(0.80)% (0.92)%**
112% 81%
1.36%(b) 1.39%**(b)
</TABLE>
See Notes to Financial Statements.
81
<PAGE>
FINANCIAL HIGHLIGHTS
INTERNATIONAL GROWTH FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
CLASS A SHARES
------------------------------------------------------------
YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
06/30/98(A) 06/30/97 06/30/96 06/30/95 06/30/94
----------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period.... $ 11.85 $ 10.49 $ 9.78 $ 10.74 $ 9.80
------- ------- -------- ------- --------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment
income/(loss).......... 0.05++ 0.04++ 0.05++ (0.11)++ 0.06
Net realized and
unrealized gain/(loss)
on investments......... (0.67) 1.55 1.21 (0.31) 1.15
------- ------- -------- ------- --------
Total from investment
operations............. (0.62) 1.59 1.26 (0.42) 1.21
LESS DISTRIBUTIONS:
Dividends from net
investment income...... (0.50) (0.13) (0.05) (0.04) (0.02)
Distributions in excess
of net investment
income................. (0.03) -- (0.04) -- --
Distributions from net
realized gains......... (0.50) (0.10) (0.46) (0.44) (0.25)
Distributions in excess
of net realized gains.. -- -- -- (0.06) --
------- ------- -------- ------- --------
TOTAL DISTRIBUTIONS..... (1.03) (0.23) (0.55) (0.54) (0.27)
------- ------- -------- ------- --------
Net asset value, end of
period................. $ 10.20 $ 11.85 $ 10.49 $ 9.78 $ 10.74
======= ======= ======== ======= ========
TOTAL RETURN+........... (4.19)% 15.50% 13.16% (4.01)% 12.39%
======= ======= ======== ======= ========
RATIOS TO AVERAGE NET
ASSETS/SUPPLEMENTAL
DATA:
Net assets, end of
period (in 000's)...... $38,281 $57,776 $116,254 $91,763 $127,764
Ratio of operating
expenses to average net
assets................. 1.67% 1.65% 1.77% 1.69% 1.69%
Ratio of net investment
income to average net
assets................. 0.50% 0.35% 0.46% 0.62% 0.54%
Portfolio turnover
rate................... 118% 67% 125% 81% 44%
Ratio of operating
expenses to average net
assets without credits
allowed by the
custodian.............. 1.67%(b) 1.65%(b) 1.77%(b) N/A N/A
</TABLE>
- -------------
* On July 1, 1994 the Fund commenced selling Class B and Class S shares in ad-
dition to Class A shares. Those shares in existence prior to July 1, 1994
were designated Class A shares. On July 25, 1996 the Fund commenced selling
Class I shares.
** Annualized.
+ Total return represents aggregate total return for the periods indicated and
does not reflect any applicable sales charges. The total returns would have
been lower if certain fees had not been absorbed by the investment advisor or
without credits allowed by custodian.
++ Per share numbers have been calculated using the average shares method.
(a) On March 20, 1998, WM Advisors, Inc. replaced Sierra Investment Advisors
Corporation as investment advisor for the Fund.
(b) The ratio includes custodian fees before reduction by credits allowed by
the custodian as required by amended disclosure requirements effective Sep-
tember 1, 1995.
See Notes to Financial Statements.
82
<PAGE>
<TABLE>
<CAPTION>
CLASS B SHARES CLASS S SHARES
- ----------------------------------------------- -------------------------------------------------
YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED
06/30/98(A) 06/30/97 06/30/96 06/30/95* 06/30/98(A) 06/30/97 06/30/96 06/30/95*
- ----------- -------- -------- --------- ----------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
$11.70 $10.39 $ 9.73 $10.74 $11.77 $ 10.38 $ 9.73 $ 10.74
------ ------ ------ ------ ------ ------- ------- -------
(0.04)++ (0.04)++ (0.03)++ (0.17)++ (0.02)++ (0.04)++ (0.03)++ (0.17)++
(0.64) 1.53 1.21 (0.31) (0.67) 1.53 1.20 (0.31)
------ ------ ------ ------ ------ ------- ------- -------
(0.68) 1.49 1.18 (0.48) (0.69) 1.49 1.17 (0.48)
(0.42) (0.08) (0.02) (0.03) (0.40) -- (0.02) (0.03)
(0.03) -- (0.04) -- (0.02) -- (0.04) --
(0.50) (0.10) (0.46) (0.44) (0.50) (0.10) (0.46) (0.44)
-- -- -- (0.06) -- -- -- (0.06)
------ ------ ------ ------ ------ ------- ------- -------
(0.95) (0.18) (0.52) (0.53) (0.92) (0.10) (0.52) (0.53)
------ ------ ------ ------ ------ ------- ------- -------
$10.07 $11.70 $10.39 $ 9.73 $10.16 $ 11.77 $ 10.38 $ 9.73
====== ====== ====== ====== ====== ======= ======= =======
(4.95)% 14.66% 12.34% (4.61)% (4.94)% 14.61% 12.29% (4.61)%
====== ====== ====== ====== ====== ======= ======= =======
$4,294 $4,876 $4,447 $2,268 $9,599 $11,991 $38,900 $11,120
2.49% 2.40% 2.52% 2.44% 2.41% 2.40% 2.52% 2.44%
(0.35)% (0.40)% (0.29)% (0.13)% (0.23)% (0.40)% (0.29)% (0.13)%
118% 67% 125% 81% 118% 67% 125% 81%
2.53%(b) 2.40%(b) 2.52%(b) N/A 2.41%(b) 2.40%(b) 2.52%(b) N/A
<CAPTION>
CLASS I SHARES
- -----------------------------
YEAR PERIOD
ENDED ENDED
06/30/98(A) 06/30/97*
- -------------- --------------
<C> <C>
$ 11.82 $ 9.88
- -------------- --------------
0.09++ 0.06++
(0.69) 2.15
- -------------- --------------
(0.60) 2.21
(0.53) (0.17)
(0.03) --
(0.50) (0.10)
-- --
- -------------- --------------
(1.06) (0.27)
- -------------- --------------
$ 10.16 $ 11.82
============== ==============
(3.98)% 22.76%
============== ==============
$108,521 $95,512
1.36% 1.40%**
0.81% 0.60%**
118% 67%
1.36%(b) 1.40%**(b)
</TABLE>
See Notes to Financial Statements.
83
<PAGE>
FINANCIAL HIGHLIGHTS
STRATEGIC GROWTH PORTFOLIO
FOR A PORTFOLIO SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES
---------------------- ----------------------
YEAR PERIOD YEAR PERIOD
ENDED ENDED ENDED ENDED
06/30/98(A) 06/30/97* 06/30/98(A) 06/30/97*
----------- --------- ----------- ---------
<S> <C> <C> <C> <C>
Net asset value, beginning
of period................ $ 11.26 $ 10.00 $ 11.19 $ 10.00
------- ------- ------- -------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment
income/(loss)............ 0.00#++ (0.02)++ (0.09)++ (0.10)++
Net realized and
unrealized gain on
investments.............. 2.12 1.90 2.11 1.90
------- ------- ------- -------
Total from investment
operations............... 2.12 1.88 2.02 1.80
LESS DISTRIBUTIONS:
Dividends from net
investment income........ -- -- -- --
Distributions in excess of
net investment income.... (0.68) (0.62) (0.64) (0.61)
Distributions from net
realized capital gains... (0.04) (0.00)# (0.04) (0.00)#
------- ------- ------- -------
Total distributions....... (0.72) (0.62) (0.68) (0.61)
------- ------- ------- -------
Net asset value, end of
period................... $ 12.66 $ 11.26 $ 12.53 $ 11.19
======= ======= ======= =======
TOTAL RETURN+............. 20.11% 19.33% 19.24% 18.48%
======= ======= ======= =======
RATIOS TO AVERAGE NET
ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period
(in 000's)............... $18,330 $14,253 $51,173 $35,802
Ratio of operating
expenses to average net
assets(b)................ 0.94% 0.90%** 1.68% 1.65%**
Ratio of net investment
income/(loss) to average
net assets............... 0.01% (0.19)%** (0.74)% (0.94)%**
Portfolio turnover rate... 23% 33% 23% 33%
Ratio of operating
expenses to average net
assets without credits
allowed by the
custodian(b)............. 0.94% 0.91%** 1.68% 1.66%**
Ratio of operating
expenses to average net
assets without fee
waivers, expenses
absorbed and/or credits
allowed by the
custodian(b)............. 1.08% 1.45%** 1.83% 2.20%**
</TABLE>
- -------------
* The Portfolio's Class A Shares and Class B Shares commenced operations on
July 25, 1996.
** Annualized.
# Amount represents less than $0.01.
+ Total return represents aggregate total return for the period indicated and
does not reflect any applicable sales charges. The total return would have
been lower if certain fees had not been waived and expenses absorbed by the
investment advisor or without credits allowed by the custodian.
++ Per shares numbers have been calculated using the average shares method.
(a) On March 20, 1998, WM Advisors, Inc. replaced Sierra Investment Advisors
Corporation as investment advisor for the Portfolio.
(b) The Portfolio also will indirectly bear its prorated share of expenses of
the Underlying Funds.
See Notes to Financial Statements.
84
<PAGE>
FINANCIAL HIGHLIGHTS
CONSERVATIVE GROWTH PORTFOLIO
FOR A PORTFOLIO SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES
---------------------- ----------------------
YEAR PERIOD YEAR PERIOD
ENDED ENDED ENDED ENDED
06/30/98(A) 06/30/97* 06/30/98(A) 06/30/97*
----------- --------- ----------- ---------
<S> <C> <C> <C> <C>
Net asset value, beginning
of period................. $ 10.86 $ 10.00 $ 10.80 $ 10.00
-------- -------- -------- --------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income...... 0.13++ 0.08++ 0.04++ 0.01++
Net realized and unrealized
gain on investments....... 1.42 1.32 1.43 1.31
-------- -------- -------- --------
Total from investment
operations................ 1.55 1.40 1.47 1.32
LESS DISTRIBUTIONS:
Dividends from net
investment income......... (0.09) (0.08) (0.08) (0.01)
Distributions in excess of
net investment income..... (0.42) (0.46) (0.39) (0.51)
Distributions from net
realized capital gains.... (0.06) -- (0.06) --
-------- -------- -------- --------
Total distributions........ (0.57) (0.54) (0.53) (0.52)
-------- -------- -------- --------
Net asset value, end of
period.................... $ 11.84 $ 10.86 $ 11.74 $ 10.80
======== ======== ======== ========
TOTAL RETURN+.............. 15.18% 14.39% 14.44% 13.59%
======== ======== ======== ========
RATIOS TO AVERAGE NET
ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period
(in 000's)................ $114,946 $136,141 $169,269 $158,697
Ratio of operating expenses
to average net assets(b).. 0.95% 0.92%** 1.70% 1.67%**
Ratio of net investment
income to average net
assets.................... 1.17% 0.81%** 0.40% 0.06%**
Portfolio turnover rate.... 28% 20% 28% 20%
Ratio of operating expenses
to average net assets
without credits allowed by
the custodian(b).......... 0.95% 0.93%** 1.70% 1.68%**
Ratio of operating expenses
to average net assets
without fee waivers,
expenses absorbed and/or
credits allowed by the
custodian(b).............. 1.00% 1.17%** 1.74% 1.92%**
</TABLE>
- -------------
* The Portfolio's Class A Shares and Class B Shares commenced operations on
July 25, 1996.
** Annualized.
+ Total return represents aggregate total return for the period indicated and
does not reflect any applicable sales charges. The total return would have
been lower if certain fees had not been waived and expenses absorbed by the
investment advisor or without credits allowed by the custodian.
++ Per share numbers have been calculated using the average shares method.
(a) On March 20, 1998, WM Advisors, Inc. replaced Sierra Investment Advisors
Corporation as investment advisor for the Portfolio.
(b) The Portfolio also will indirectly bear its prorated share of expenses of
the Underlying Funds.
See Notes to Financial Statements.
85
<PAGE>
FINANCIAL HIGHLIGHTS
BALANCED PORTFOLIO
FOR A PORTFOLIO SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES
--------------------- ---------------------
YEAR PERIOD YEAR PERIOD
ENDED ENDED ENDED ENDED
06/30/98(A) 06/30/97* 06/30/98(A) 06/30/97*
----------- --------- ----------- ---------
<S> <C> <C> <C> <C>
Net asset value, beginning of
period...................... $ 10.95 $ 10.00 $ 10.95 $ 10.00
-------- -------- -------- -------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income........ 0.22 0.20++ 0.17 0.14++
Net realized and unrealized
gain on investments......... 1.25 1.27 1.22 1.25
-------- -------- -------- -------
Total from investment
operations.................. 1.47 1.47 1.39 1.39
LESS DISTRIBUTIONS:
Dividends from net investment
income...................... (0.23) (0.20) (0.20) (0.14)
Distributions in excess of
net investment income....... (0.45) (0.32) (0.40) (0.30)
Distributions from net
realized capital gains...... (0.11) (0.00)# (0.11) (0.00)#
-------- -------- -------- -------
Total distributions.......... (0.79) (0.52) (0.71) (0.44)
-------- -------- -------- -------
Net asset value, end of
period...................... $ 11.63 $ 10.95 $ 11.63 $ 10.95
======== ======== ======== =======
TOTAL RETURN+................ 14.32% 15.02% 13.47% 14.23%
======== ======== ======== =======
RATIOS TO AVERAGE NET
ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in
000's)...................... $101,726 $109,421 $114,944 $99,821
Ratio of operating expenses
to average net assets(b).... 0.95% 0.92%** 1.70% 1.67%**
Ratio of net investment
income to average net
assets...................... 2.14% 2.48%** 1.39% 1.73%**
Portfolio turnover rate...... 29% 46% 29% 46%
Ratio of operating expenses
to average net assets
without credits allowed by
the custodian(b)............ 0.95% 0.93%** 1.70% 1.68%**
Ratio of operating expenses
to average net assets
without fee waivers,
expenses absorbed and/or
credits allowed by the
custodian(b)................ 1.00% 1.17%** 1.75% 1.92%**
</TABLE>
- -------------
* The Portfolio's Class A Shares and Class B Shares commenced operations on
July 25, 1996.
** Annualized.
# Amount represents less than $0.01.
+ Total return represents aggregate total return for the period indicated and
does not reflect any applicable sales charges. The total return would have
been lower if certain fees had not been waived and expenses absorbed by the
investment advisor or without credits allowed by the custodian.
++ Per share numbers have been calculated using the average shares method.
(a) On March 20, 1998, WM Advisors, Inc. replaced Sierra Investment Advisors
Corporation as investment advisor for the Portfolio.
(b) The Portfolio also will indirectly bear its prorated share of expenses of
the Underlying Funds.
See Notes to Financial Statements.
86
<PAGE>
FINANCIAL HIGHLIGHTS
FLEXIBLE INCOME PORTFOLIO
FOR A PORTFOLIO SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES
--------------------- ---------------------
YEAR PERIOD YEAR PERIOD
ENDED ENDED ENDED ENDED
06/30/98(A) 06/30/97* 06/30/98(A) 06/30/97*
----------- --------- ----------- ---------
<S> <C> <C> <C> <C>
Net asset value, beginning of
period........................ $10.57 $ 10.00 $10.57 $10.00
------ ------- ------ ------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income.......... 0.45 0.43++ 0.31 0.38++
Net realized and unrealized
gain on investments........... 0.67 0.70 0.73 0.68
------ ------- ------ ------
Total from investment
operations.................... 1.12 1.13 1.04 1.06
LESS DISTRIBUTIONS:
Dividends from net investment
income........................ (0.45) (0.43) (0.37) (0.38)
Distributions in excess of net
investment income............. (0.21) (0.13) (0.21) (0.11)
Distributions from net realized
capital gains................. (0.24) 0.00# (0.24) 0.00#
------ ------- ------ ------
Total distributions............ (0.90) (0.56) (0.82) (0.49)
------ ------- ------ ------
Net asset value, end of
period........................ $10.79 $ 10.57 $10.79 $10.57
====== ======= ====== ======
TOTAL RETURN+.................. 11.07% 11.58% 10.24% 10.80%
====== ======= ====== ======
RATIOS TO AVERAGE NET
ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in
000's)........................ $8,808 $12,613 $7,684 $7,385
Ratio of operating expenses to
average net assets(b)......... 0.95% 0.92%** 1.70% 1.67%**
Ratio of net investment income
to average net assets......... 4.07% 4.95%** 3.32% 4.20%**
Portfolio turnover rate........ 24% 54% 24% 54%
Ratio of operating expenses to
average net assets without
credits allowed by the
custodian(b).................. 0.95% 0.93%** 1.70% 1.68%**
Ratio of operating expenses to
average net assets without fee
waivers, expenses absorbed
and/or fees credits allowed by
the custodian(b).............. 1.23% 1.67%** 1.98% 2.42%**
</TABLE>
- -------------
* The Portfolio's Class A Shares and Class B Shares commenced operations on
July 25, 1996.
** Annualized.
# Amount represents less than $0.01.
+ Total return represents aggregate total return for the period indicated and
does not reflect any applicable sales charges. The total return would have
been lower if certain fees had not been waived and expenses absorbed by the
investment advisor or without credits allowed by the custodian.
++ Per share numbers have been calculated using the average shares method.
(a) On March 20, 1998, WM Advisors, Inc. replaced Sierra Investment Advisors
Corporation as investment advisor for the Portfolio.
(b) The Portfolio also will indirectly bear its prorated share of expenses of
the Underlying Funds.
See Notes to Financial Statements.
87
<PAGE>
FINANCIAL HIGHLIGHTS
INCOME PORTFOLIO
FOR A PORTFOLIO SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES
--------------------- ---------------------
YEAR PERIOD YEAR PERIOD
ENDED ENDED ENDED ENDED
06/30/98(A) 06/30/97* 06/30/98(A) 06/30/97*
----------- --------- ----------- ---------
<S> <C> <C> <C> <C>
Net asset value, beginning of
period........................ $10.13 $ 10.00 $10.13 $10.00
------ ------- ------ ------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income.......... 0.64 0.58++ 0.56 0.51++
Net realized and unrealized
gain on investments........... 0.22 0.14## 0.22 0.14##
------ ------- ------ ------
Total from investment
operations.................... 0.86 0.72 0.78 0.65
LESS DISTRIBUTIONS:
Dividends from net investment
income........................ (0.65) (0.58) (0.57) (0.51)
Distributions in excess of net
investment income............. (0.00)# (0.01) (0.00)# (0.01)
Distributions from net realized
capital gains................. -- (0.00)# -- (0.00)#
------ ------- ------ ------
Total distributions............ (0.65) (0.59) (0.57) (0.52)
------ ------- ------ ------
Net asset value, end of
period........................ $10.34 $ 10.13 $10.34 $10.13
====== ======= ====== ======
TOTAL RETURN+.................. 8.71% 7.38% 7.90% 6.63%
====== ======= ====== ======
RATIOS TO AVERAGE NET
ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in
000's)........................ $7,793 $13,410 $4,084 $4,537
Ratio of operating expenses to
average net assets(b)......... 0.95% 0.93%** 1.70% 1.68%**
Ratio of net investment income
to average net assets......... 6.23% 6.09%** 5.48% 5.34%**
Portfolio turnover rate........ 14% 56% 14% 56%
Ratio of operating expenses to
average net assets without
credits allowed by the
custodian(b).................. 0.95% 0.93%** 1.71% 1.68%**
Ratio of operating expenses to
average net assets without fee
waivers, expenses absorbed
and/or fees credits allowed by
the custodian(b).............. 1.25% 1.65%** 2.01% 2.40%**
</TABLE>
- -------------
* The Portfolio's Class A Shares and Class B Shares commenced operations on
July 25, 1996.
** Annualized.
# Amount represents less than $0.01.
## The amount shown may not accord with the change in the aggregate gains and
losses of portfolio securities due to timing of sales and redemptions of
Portfolio shares.
+ Total return represents aggregate total return for the period indicated and
does not reflect any applicable sales charges. The total return would have
been lower if certain fees had not been waived and expenses absorbed by the
investment advisor or without credits allowed by the custodian.
++ Per share numbers have been calculated using the average shares method.
(a) On March 20, 1998, WM Advisors, Inc. replaced Sierra Investment Advisors
Corporation as investment advisor for the Portfolio.
(b) The Portfolio also will indirectly bear its prorated share of expenses of
the Underlying Funds.
See Notes to Financial Statements.
88
<PAGE>
NOTES TO FINANCIAL STATEMENTS
WM GROUP OF FUNDS
1. ORGANIZATION AND BUSINESS
WM Trust II (the "Trust") was organized under the laws of the Commonwealth of
Massachusetts on February 22, 1989 as a business entity commonly known as a
"Massachusetts Business Trust." The Trust is registered under the Investment
Company Act of 1940, as amended (the "1940 Act"), as an open-end management in-
vestment company. The Trust offers nine managed investment funds: the Short
Term High Quality Bond Fund; the California Money Fund; the Growth, Interna-
tional Growth and Emerging Growth Funds (the "Equity Funds"); the California
Municipal, California Insured Intermediate Municipal and the Florida Insured
Municipal Funds (the "Municipal Funds"); and the Target Maturity 2002 Fund
(collectively the "Funds"). WM Strategic Asset Management Portfolios ("SAM")
were organized as a Massachusetts Business Trust under the laws of the Common-
wealth of Massachusetts on March 26, 1996 and is registered under the 1940 Act,
as an open-end management investment company. SAM was established in order to
offer a range of asset allocation strategies to accommodate different invest-
ment philosophies and goals. SAM offers five portfolios: the Strategic Growth,
Conservative Growth, Balanced, Flexible Income and Income Portfolios (each a
"Portfolio" and collectively, the "Portfolios"). Prior to March 23, 1998, the
Trust was known as Sierra Trust Funds and SAM was known as Sierra Asset Manage-
ment Portfolios.
WM Advisors, Inc. (the "Advisor" or "WM Advisor"), a wholly-owned subsidiary of
Washington Mutual, Inc. ("Washington Mutual"), a publicly owned financial serv-
ices company, serves as investment advisor to the Trust and SAM. Sierra Invest-
ment Advisors Corporation ("Sierra Advisors") served as investment advisor to
the Trust and SAM prior to March 23, 1998. Sierra Advisors became an indirect
wholly-owned subsidiary of Washington Mutual as a result of a merger between
its parent, Great Western Financial Corporation ("GWFC"), and Washington Mutu-
al.
Each of the Funds, except the Target Maturity 2002 Fund, consists of four clas-
ses of shares: Class A shares, Class B shares, Class S shares and Class I
shares. The Target Maturity 2002 Fund offers only Class A shares. The Portfo-
lios offer Class A shares and Class B shares. Class A shares of the Funds and
Portfolios are subject to an initial sales charge at the time of purchase. Cer-
tain Class A shares of the Funds or Portfolios purchased without an initial
sales charge may be subject to a contingent deferred sales charge ("CDSC") if
redeemed within two years of purchase. Class B shares and Class S shares are
not subject to an initial sales charge. Class B shares and Class S shares are
generally subject to a CDSC if redeemed within five years of purchase. Class I
shares are sold exclusively to the Portfolios and are not available for direct
purchase by investors. Class I shares are not subject to an initial sales
charge or CDSC, but are subject to the annual operating expenses of the Funds.
Each of the Portfolios invests, within certain percentage ranges, in Class I
shares of certain of the Trust Funds and certain other mutual funds (collec-
tively, the "Underlying Funds"). Each Portfolio typically allocates its assets,
within determined percentage ranges, among the Underlying Funds. The percent-
ages reflect the extent to which each Portfolio can invest in the particular
market segment represented by each Underlying Fund, and the varying degrees of
potential investment risk and reward represented by each Portfolio's invest-
ments in those market segments and their corresponding 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
and 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 other short-term debt in-
struments.
2. SIGNIFICANT ACCOUNTING POLICIES
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. The following is a summary of
significant accounting policies consistently followed by the Funds and Portfo-
lios in the preparation of their financial statements.
PORTFOLIO VALUATION:
A security that is primarily traded on a U.S. exchange (including securities
traded through the Nasdaq National Market System) is valued at the last sale
price on that exchange or, if there were no sales during the day, at the mean
of the current day's bid and asked prices. Over-the-counter securities that are
not traded through the Nasdaq National Market System and U.S. Government Secu-
rities are valued at the mean of the current day's bid and asked prices. An op-
tion is generally valued at the last sale price or, in the absence of a last
sale price, at the mean of the current day's bid and asked prices. Short term
debt securities that mature in 60 days or less are valued at amortized cost.
The value of a foreign security is determined in its national currency as of
the close
89
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
WM GROUP OF FUNDS
of trading on the foreign exchange on which it is traded or as of 4:00 p.m.
Eastern Standard time, if that is earlier, and that value is then converted
into its U.S. dollar equivalent at the foreign exchange rate in effect at noon,
Eastern Standard time, on the day the value of the foreign security is deter-
mined. The value of a futures contract equals the unrealized gain or loss on
the contract, which is determined by marking the contract to the current set-
tlement price for a like contract acquired on the day on which the futures con-
tract is being valued. If the market makes a limit move with respect to the se-
curity or index underlying the futures contract, the futures contract will be
valued at a fair market valued as determined by or under the direction of the
Board of Trustees.
Debt securities of U.S. issuers (other than U.S. Government Securities and
short-term investments), including municipal securities, are valued by one or
more independent pricing services (each a "Pricing Service") retained by the
Trusts. When, in the judgement of a Pricing Service, market quotations for
these securities are readily available, they are valued at the mean between the
quoted bid prices and asked prices. Securities for which market quotations are
not readily available are valued at fair value as determined by or under the
direction of the Board of Trustees, which may rely on the assistance of one or
more Pricing Services. The procedures of each Pricing Service are reviewed pe-
riodically by the officers of the Trusts under the general supervision and re-
sponsibility of the Board of Trustees.
The Portfolios' investments in the Underlying Funds are valued at the 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.
VALUATION OF THE CALIFORNIA MONEY FUND. Securities are valued on the basis of
amortized cost, which approximates market value. Amortized cost valuation in-
volves initially valuing an instrument at its cost and thereafter assuming a
constant amortization to maturity of any discount or premium, as long as the
effect of fluctuating interest rates on the market value of the instrument is
not significant. Restricted securities and certain other assets are valued by
the investment advisor under the supervision of the Board of Trustees.
REPURCHASE AGREEMENTS:
Each Fund or Portfolio may engage in repurchase agreement transactions. Under
the terms of a typical repurchase agreement, the Fund or Portfolio, through its
custodian, takes possession of an underlying debt obligation subject to an ob-
ligation of the seller to repurchase, and the Fund or Portfolio subject to ob-
ligation to resell the obligation at an agreed upon price and time, thereby de-
termining the yield during the Fund's or Portfolio's holding period. The value
of the collateral is at all times at least equal to the total amount of the re-
purchase obligation, including interest. In the event of counterparty default,
the Fund would seek to use the collateral to offset losses incurred. There is
potential loss to the Fund or Portfolio in the event the Fund or Portfolio is
delayed or prevented from exercising its right to dispose of the collateral se-
curities, including the risk of a possible decline in the value of the under-
lying securities during the period while the Fund or Portfolio seeks to assert
its rights. WM Advisors, acting under the supervision of the Board of Trustees,
reviews the value of the collateral and the credit worthiness of those banks
and dealers which each Fund or Portfolio enters into repurchase agreements.
FUTURES CONTRACTS:
Each Fund and Portfolio, except the California Money Fund, may engage in
futures transactions. The Funds or Portfolios may use futures contracts to man-
age their exposure to the stock and bond markets and to fluctuations in inter-
est rates and currency values. The underlying value of a futures contract is
incorporated within the unrealized appreciation/(depreciation) shown in the
Portfolio of Investments under the caption "Futures Contracts." This amount re-
flects each contract's exposure to the underlying instrument at June 30, 1998.
Buying futures contracts tends to increase the Fund's or Portfolio's exposure
to the underlying instrument. Selling futures contracts tends to either de-
crease the Fund's or Portfolio's exposure to the underlying instrument, or to
hedge other Fund and Portfolio investments.
Upon entering into a futures contract, the Fund or Portfolio is required to de-
posit with the broker an amount of cash or cash equivalents equal to a certain
percentage of the contract amount. This is known as the "initial margin." Sub-
sequent payments ("variation margin") are made or received by the Fund or Port-
folio each day, depending on the daily fluctuation of the value of the con-
tract. The daily changes in contract value are recorded as unrealized gains or
losses and the Fund or Portfolio recognizes a realized gain or loss when the
contract is closed.
There are several risks in connection with the use of futures contracts as a
hedging device. Futures contracts involve, to varying degrees, risk of loss in
excess of the futures variation margin reflected in the Statements of Assets
and Liabilities. The change in
90
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
WM GROUP OF FUNDS
the value of futures contracts primarily corresponds with the value of their
underlying instruments, which may not correlate with the change in the value of
the hedged instruments. In addition, there is the risk that the Fund or Portfo-
lio may not be able to enter into a closing transaction because of an illiquid
secondary market.
FOREIGN CURRENCY:
The books and records of the Funds and Portfolios are maintained in U.S. dol-
lars. Foreign currencies, investments and other assets and liabilities are
translated into U.S. dollars at the exchange rates prevailing at the end of the
period. Purchases and sales of investment securities, income and expenses are
translated on the respective dates of such transactions. It is not practicable
to isolate that portion of the results of operations arising as a result of
changes in the foreign exchange rates from the portion that arises from changes
in market prices of investments during the period. Accordingly, all such
changes have been reflected as realized and unrealized net gains/(losses) from
security transactions in the Statements of Operations.
Unrealized gains and losses, not relating to securities, which result from
changes in foreign currency exchange rates have been included in unrealized
appreciation/(depreciation) of foreign currency and other assets and liabili-
ties. Unrealized gains and losses of securities, which result from changes in
foreign currency exchange rates as well as changes in market prices of securi-
ties, have been included in unrealized appreciation/(depreciation) of securi-
ties. Net realized foreign currency gains and losses include foreign currency
gains and losses resulting from changes in exchange rates between trade date
and settlement date on investment securities transactions, gains and losses on
foreign currency transactions, and the difference between the amounts of inter-
est and dividends recorded on the books of the Funds and the amount actually
received. The portion of foreign currency gains and losses related to fluctua-
tion in exchange rates between the initial purchase trade date and subsequent
sale trade date is included in realized gain/(loss) from security transactions.
FORWARD FOREIGN CURRENCY CONTRACTS:
The Short Term High Quality Bond Fund and the Equity Funds may enter into for-
ward foreign currency contracts. Forward foreign currency contracts are agree-
ments to exchange one currency for another at a future date at a specified
price. The Funds may use forward foreign currency contracts to facilitate
transactions in foreign securities and to manage the Funds' foreign currency
exposure. The U.S. dollar market value, contract value and the foreign curren-
cies the Funds have committed to buy or sell are shown in the Portfolio of In-
vestments under the caption "Schedule of Forward Foreign Currency Contracts."
These amounts represent the aggregate exposure to each foreign currency the
Funds have acquired or hedged through forward foreign currency contracts at
June 30, 1998. Forward foreign currency contracts are reflected as both a for-
ward foreign currency contract to buy and a forward foreign currency contract
to sell. Forward foreign currency contracts to buy generally are used to ac-
quire exposure to foreign currencies, while forward foreign currency contracts
to sell are used to hedge the Funds' investments against currency fluctuations.
Also, a forward foreign currency contract to buy or sell can offset a previ-
ously acquired opposite forward foreign currency contract.
Forward foreign currency contracts are marked-to-market daily using foreign
currency exchange rates supplied by an independent pricing service. The change
in a contract's market value is recorded by the Funds as an unrealized gain or
loss. When the contract is closed or delivery is taken, the Funds record a re-
alized gain or loss equal to the difference between the value of the contract
at the time it was opened and the value at the time it was closed.
The use of forward foreign currency contracts does not eliminate fluctuations
in the underlying prices of the Fund's securities, but it does establish a rate
of exchange that can be achieved in the future. These forward foreign currency
contracts involve market risk in excess of the unrealized
appreciation/(depreciation) of forward foreign currency contracts reflected in
the Funds' Statements of Assets and Liabilities. Although forward foreign cur-
rency contracts used for hedging purposes limit the risk of loss due to a de-
cline in the value of the hedged currency, they also limit any potential gain
that might result should the value of the currency increase. In addition, the
Funds could be exposed to risks if the counterparties to the contracts are un-
able to meet the terms of their contracts. The Fund's Advisor and/or Sub-advi-
sor will enter into forward foreign currency contracts only with parties ap-
proved by the Board of Trustees because there is a risk of loss to the Funds if
the counterparties do not complete the transaction.
INDEXED SECURITIES:
Each of the Funds and the Portfolios, except the California Money Fund, may in-
vest in indexed securities whose value is linked either directly or inversely
to changes in foreign currencies, interest rates, commodities, inflation, indi-
ces, or other reference
91
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
WM GROUP OF FUNDS
instruments. Indexed securities may be more volatile than the reference instru-
ment itself, but any loss is limited to the amount of the original investment.
ILLIQUID INVESTMENTS:
Up to 15% of the assets of each Fund and Portfolio, and up to 10% of the net
assets of the California Money Fund, may be invested 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) to the extent a liquid secondary market does not exist for
the instruments, futures contracts and options thereon; (4) certain over-the-
counter options; (5) certain variable rate demand notes having a demand period
of more than seven days; and (6) securities, the disposition of which are re-
stricted under Federal securities laws, excluding certain Rule 144A securities,
as defined below.
Illiquid securities generally cannot be sold or disposed of in the ordinary
course of business within seven days at approximately the value at which the
investments have valued. This may have an adverse effect on the Fund's or Port-
folio's ability to dispose of particular illiquid securities at fair market
value and may limit the Fund's or Portfolio's ability to obtain accurate market
quotations for purposes of valuing the securities and calculating the net asset
value of shares of the Fund or Portfolio. The Funds or Portfolios may also pur-
chase 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 Se-
curities generally may be resold only to other qualified institutional buyers.
If a particular investment in Rule 144A Securities is not determined to be liq-
uid under the guidelines established by the Board of Trustees, that investment
will be included within the 15%/10% limitation, as applicable, on investment in
illiquid securities.
SECURITIES TRANSACTIONS AND INVESTMENT INCOME:
Securities transactions are recorded as of the trade date (the date the order
to buy or sell is executed). Realized gains and losses from securities sold are
recorded on the identified cost basis. Interest income is recorded on the ac-
crual basis and consists of interest accrued and, if applicable, discount ac-
creted less premiums amortized. Dividend income is recorded on the ex-dividend
date, except certain dividends from foreign securities are recorded as soon as
the Funds or Portfolios are informed of the ex-dividend date. Each Fund's or
Portfolio's investment income and realized and unrealized gains and losses are
allocated among the classes of that Fund or Portfolio based upon the relative
average net assets of each class.
Securities purchased or sold on a when-issued or delayed-delivery basis may be
settled a month or more after the trade date; interest income is not accrued
until settlement date. Each Fund or Portfolio instructs the custodian to segre-
gate assets of the Fund with a current value at least equal to the amount of
its when-issued purchase commitments.
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS:
Dividends from net investment income of the Short Term High Quality Bond Fund,
California Money Fund, Municipal Funds, Flexible Income Portfolio, Balanced
Portfolio and Income Portfolio are declared daily and paid monthly. Dividends
from the net investment income of the Conservative Growth Portfolio are de-
clared and paid quarterly. Dividends from the net investment income of the
Growth Fund and the Strategic Growth Portfolio are declared and paid
semiannually. Dividends from the net investment income of the Emerging Growth,
International Growth and the Target Maturity 2002 Funds are declared and paid
annually. Distributions of any net long-term capital gains earned by a Fund or
Portfolio are made annually. Distributions of any net short-term capital gains
earned by a Fund or Portfolio are distributed no less frequently than annually
at the discretion of the Board of Trustees. Additional distributions of net in-
vestment income and capital gains for each Fund or Portfolio may be made at the
discretion of the Board of Trustees in order to avoid the application of a 4%
non-deductible excise tax on certain undistributed amounts of ordinary income
and capital gains. Income distributions and capital gain distributions are de-
termined in accordance with income tax regulations which may differ from gener-
ally accepted accounting principles. These differences are primarily due to
differing treatments of income and gains on various investment securities held
by the Funds or Portfolios, organizational costs, dividends payable,
redesignated distributions and differing characterization of distributions made
by each Fund or Portfolio as a whole. Net investment income per share calcula-
tions in the financial highlights for the year ended June 30, 1998 for the Cal-
ifornia Money Fund, Short Term High Quality Bond Fund, California Municipal
Fund, California Insured Intermediate Municipal Fund, Florida Insured Municipal
Fund, Income Portfolio, Flexible Income Portfolio and Balanced Portfolio ex-
cludes these adjustments.
92
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
WM GROUP OF FUNDS
<TABLE>
<CAPTION>
INCREASE/ INCREASE/
(DECREASE) (DECREASE)
UNDISTRIBUTED ACCUMULATED
DECREASE NET INVESTMENT NET REALIZED
PAID-IN CAPITAL INCOME/(LOSS) GAIN/(LOSS)
--------------- -------------- ------------
<S> <C> <C> <C>
Target Maturity 2002 Fund........ $(11,756) $ 11,756 $ --
Short Term High Quality Bond
Fund............................ (42,964) (65,373) 108,337
California Municipal Fund........ -- 10,444 (10,444)
California Insured Intermediate
Municipal Fund.................. -- 12,042 (12,042)
Florida Insured Municipal Fund... (2,014) 13,264 (11,250)
Growth Fund...................... (359) 2,654,509 (2,654,150)
Emerging Growth Fund............. -- 3,199,550 (3,199,550)
International Growth Fund........ -- 8,123,773 (8,123,773)
Strategic Growth Portfolio....... (6,006) 4,190,091 (4,184,085)
Conservative Growth Portfolio.... (6,006) 12,575,664 (12,569,658)
Balanced Portfolio............... (6,006) 9,948,814 (9,942,808)
Flexible Income Portfolio........ (6,006) 448,598 (442,592)
Income Portfolio................. (6,006) 6,006 --
</TABLE>
FEDERAL INCOME TAXES:
It is each Fund's and Portfolio's policy to qualify as a regulated investment
company by complying with the requirements of the Internal Revenue Code of
1986, as amended, applicable to regulated investment companies and by, among
other things, distributing substantially all of its taxable and tax-exempt
earnings to its shareholders. Therefore, no Federal income tax provision is re-
quired.
EXPENSES:
General expenses of the Trust are allocated to all the Funds based upon rela-
tive net assets of each Fund. General expenses of SAM are allocated to all the
Portfolios based upon relative net assets of each Portfolio. Operating expenses
directly attributable to a class of shares are charged to the operations of
that class of shares. Expenses of each Fund or Portfolio not directly attribut-
able 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.
OTHER:
The Municipal Funds and the Short Term High Quality Bond Fund may purchase
floating rate, inverse floating rate and variable rate obligations, including
municipal securities and participation interests therein. Floating rate obliga-
tions have an interest rate that changes whenever there is a change in the ex-
ternal interest rate, while variable rate obligations provide for a specified
periodic adjustment in the interest rate. The interest rate on an inverse
floating rate obligation (an "inverse floater") can be expected to move in the
opposite direction from the market rate of interest to which the inverse
floater is indexed. The Short Term High Quality Bond Fund may also purchase
mortgage-backed securities that are floating rate, inverse floating rate and
variable rate obligations. Although variable rate notes are frequently not
rated by credit rating agencies, unrated notes purchased by the Fund will be of
comparable quality at the time of purchase to rated instruments that may be
purchased by the Fund, as determined by the Advisor. The absence of such an ac-
tive secondary market, however, could make it difficult for the Fund to dispose
of a particular variable rate demand note in the event the issuer of the note
defaulted on its payment obligations, and the Fund could, for this or other
reasons, suffer a loss to the extent of the default.
An inverse floater may be considered to be leveraged to the extent that its in-
terest rate varies by a magnitude that exceeds the magnitude of the change in
the index rate of interest. The higher degree of leverage inherent in inverse
floaters is associated with greater volatility in their market values. Accord-
ingly, the duration of an inverse floater may exceed its stated final maturity.
3. INVESTMENT ADVISORY AND OTHER TRANSACTIONS
WM Advisors serves as investment advisor to the Trust and SAM. Sierra Advisors
served as investment advisor to the Trust and SAM prior to March 23, 1998.
93
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
WM GROUP OF FUNDS
The Advisor is entitled to a monthly fee, in arrears, based on a percentage of
the average daily net assets of each Fund at the following rates. WM Advisors
provides administration services to the Trust at no additional fee. Prior to
March 23, 1998, a fee of 0.35% of average daily net assets of each Fund (except
California Money Fund which was charged a fee of 0.30% of average daily net as-
sets) was assessed for administration and transfer agent services in addition
to the fees shown for Sierra Advisors.
<TABLE>
<CAPTION>
FEES ON NET
FEES ON NET ASSETS EXCEEDING
ASSETS $200 MILLION FEES ON NET
EQUAL TO AND EQUAL TO ASSETS
OR LESS THAN OR LESS THAN EXCEEDING
$200 MILLION $500 MILLION $500 MILLION
------------- ---------------- ------------
<S> <C> <C> <C>
Short Term High Quality Bond
Fund............................. .50% .45% .40%
<CAPTION>
FEES ON NET
ASSETS FEES ON NET
UP TO ASSETS EXCEEDING
$500 MILLION $500 MILLION
------------- ----------------
<S> <C> <C> <C>
California Money Fund (03/23/1998-
06/30/1998)...................... .45% .40%
California Money Fund (07/01/1997-
03/22/1998)...................... .50% .40%
The Municipal Funds (03/23/1998-
06/30/1998)...................... .70% .55%
California Municipal Fund
(07/01/1997-03/22/1998).......... .65% .50%
California Insured Intermediate
Municipal Fund (07/01/1997-
03/22/1998)...................... .65% .50%
Florida Insured Municipal Fund
(07/01/1997-03/22/1998).......... .60% .45%
<CAPTION>
FEES ON NET
FEES ON NET ASSETS EXCEEDING
ASSETS $100 MILLION FEES ON NET
EQUAL TO AND EQUAL TO ASSETS
OR LESS THAN OR LESS THAN EXCEEDING
$100 MILLION $200 MILLION $200 MILLION
------------- ---------------- ------------
<S> <C> <C> <C>
Growth Fund (03/23/1998-
06/30/1998)...................... 1.10% 1.05% 1.025%
Growth Fund (07/01/1997-
03/22/1998)...................... .95% .90% .875%
<CAPTION>
FEES ON NET
FEES ON NET ASSETS EXCEEDING
ASSETS $50 MILLION FEES ON NET
EQUAL TO AND EQUAL TO ASSETS
OR LESS THAN OR LESS THAN EXCEEDING
$50 MILLION $125 MILLION $125 MILLION
------------- ---------------- ------------
<S> <C> <C> <C>
International Growth Fund
(03/23/1998-06/30/1998).......... 1.10% 1.00% .80%
International Growth Fund
(07/01/1997-03/22/1998).......... .95% .85% .65%
<CAPTION>
FEES ON NET
FEES ON NET ASSETS EXCEEDING
ASSETS $100 MILLION FEES ON NET
EQUAL TO AND EQUAL TO ASSETS
OR LESS THAN OR LESS THAN EXCEEDING
$100 MILLION $500 MILLION $500 MILLION
------------- ---------------- ------------
<S> <C> <C> <C>
Emerging Growth Fund (03/23/1998-
06/30/1998)...................... 1.05% 1.00% .90%
Emerging Growth Fund (07/01/1997-
03/22/1998)...................... .90% .85% .75%
<CAPTION>
FEES ON
AVERAGE DAILY
NET ASSETS
-------------
<S> <C> <C> <C>
Target Maturity 2002 Fund......... .25%
</TABLE>
As investment advisor of the Portfolios, WM Advisors provides its proprietary
asset allocation services to the Portfolios, formulates the Portfolios' invest-
ment policies, analyzes economic and market trends, exercises investment dis-
cretion over the assets of the Portfolios and monitors the allocation of each
Portfolio's assets and each Portfolio's performance. For its investment advi-
sory services to the Portfolios, WM Advisors is entitled to a monthly fee, at
an annual rate of 0.15% of each Portfolio's average daily net assets. WM Share-
holder Services, Inc., an indirect wholly-owned subsidiary of Washington Mutu-
al, serves as administrator to the Portfolios and is entitled to a monthly fee
of 0.50% of average daily net assets of each Portfolio. Prior to March 23,
1998, Sierra Fund Administration Corporation served as administrator to the
Portfolios for the same fee.
94
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
WM GROUP OF FUNDS
The Advisor has agreed to waive a portion of its management fees and reimburse
expenses for the year ended June 30, 1998. Fees waived and expenses absorbed by
the Advisor for the year ended June 30, 1998 are as follows:
<TABLE>
<CAPTION>
NAME OF FUND FEES WAIVED EXPENSES ABSORBED
- ------------ ----------- -----------------
<S> <C> <C>
California Money Fund............................ $ 70,002 $ --
Target Maturity 2002 Fund........................ 33,075 17,651
Short Term High Quality Bond Fund................ 133,982 --
California Municipal Fund........................ 656,426 --
California Insured Intermediate Municipal Fund... 246,808 --
Florida Insured Municipal Fund................... 140,651 396
Emerging Growth Fund............................. 3,472 --
International Growth Fund........................ -- 29,113
Strategic Growth Portfolio....................... 86,276 1,754
Conservative Growth Portfolio.................... 116,516 19,099
Balanced Portfolio............................... 107,755 11,970
Flexible Income Portfolio........................ 35,116 13,939
Income Portfolio................................. 34,864 11,403
</TABLE>
As of March 23, 1998, WM Shareholder Services, Inc. (the "Transfer Agent")
serves as the transfer and shareholder servicing agent of the Funds. Share-
holder servicing fees were paid to the Transfer Agent for services incidental
to issuance and transfer of shares, maintaining shareholder lists, and issuing
and mailing distributions and reports. The authorized monthly shareholder ser-
vicing fees per shareholder account are as follows:
<TABLE>
<CAPTION>
NAME OF FUND CLASS A CLASS B & S
- ------------ ------- -----------
<S> <C> <C>
The Money Market Funds...................................... $1.85 $1.95
The Fixed Income Funds and Portfolios....................... 1.45 1.55
The Equity Funds and Portfolios............................. 1.25 1.35
</TABLE>
Prior to March 23, 1998, Sierra Fund Administration Corporation, an indirect
wholly-owned subsidiary of GWFC, paid transfer agent fees from its administra-
tion fee and did not charge the Funds or Portfolios a separate transfer agent
fee.
Custodian fees for certain Funds have been reduced by credits allowed by the
custodian for uninvested cash balances. These Funds could have invested this
cash in income producing investments.
<TABLE>
<CAPTION>
CREDITS ALLOWED
NAME OF FUND BY THE CUSTODIAN
- ------------ ----------------
<S> <C>
California Money Fund.......................................... $ 1,759
Target Maturity 2002 Fund...................................... 2,162
Short Term High Quality Bond Fund.............................. 428
California Municipal Fund...................................... 13,157
California Insured Intermediate Municipal Fund................. 3,433
Florida Insured Municipal Fund................................. 1,636
Growth Fund.................................................... 6,149
Emerging Growth Fund........................................... 8,703
International Growth Fund...................................... 1,024
Strategic Growth Portfolio..................................... 49
Conservative Growth Portfolio.................................. 1,424
Balanced Portfolio............................................. 288
Flexible Income Portfolio...................................... 250
Income Portfolio............................................... 212
</TABLE>
95
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
WM GROUP OF FUNDS
4. TRUSTEES' FEES
On March 20, 1998, the board of trustees of the Trust and SAM combined with the
board of trustees of the WM Group of Funds.
No director, officer or employee of Washington Mutual or its subsidiaries re-
ceives any compensation from the Trust or SAM for serving as an officer or
Trustee of the Trust or SAM. The Trust, together with other Trusts advised by
WM Advisors, Inc., pays each Trustee who is not a director, officer or employee
of Washington Mutual or its subsidiaries, $18,000 per annum plus $3,000 per
board meeting attended in person and $1,000 per board meeting attended by tele-
phone and reimbursement for travel and out-of-pocket expenses. The Chairman of
each committee receives $500 per committee meeting attended.
Pursuant to an exemptive order granted by the Securities and Exchange Commis-
sion (the "SEC"), the Trust's eligible Trustees may participate in a deferred
compensation plan (the "Plan") which may be terminated at any time. Under the
Plan, Trustees may elect to defer receipt of all or a portion of their fees
which, in accordance with the Plan, are invested in mutual fund shares. Upon
termination of the Plan, Trustees that have deferred compensation accounts un-
der the Plan will be paid benefits no later than the time the payments would
otherwise have been made without regard to such termination. All benefits pro-
vided under these Plans are funded and any payments to Plan participants are
paid solely out of the Trust's assets.
5. DISTRIBUTION PLANS
As of March 23, 1998 WM Funds Distributor, Inc. (the "Distributor"), a regis-
tered broker-dealer and indirect wholly-owned subsidiary of Washington Mutual,
serves as distributor for Class A, B and S shares of the Funds. Prior to March
23, 1998, WM Fund Services, Inc. ("WM Services"), formerly Sierra Investment
Services Corporation, a registered investment company and broker-dealer, served
as distributor. The Distributor and WM Services received $58,233 and $121,932,
respectively, representing commissions (front-end sales charges) on Class A
shares. In addition, the Distributor and WM Services received $653,684 and
$1,497,900 respectively, representing CDSC fees from Class B and S shares. On
May 1, 1998 Great Western Financial Securities Corporation ("GW Securities"), a
registered broker-dealer, merged with WM Financial Services, Inc. ("WM Securi-
ties"). GW Securities and WM Securities received $718,887 representing commis-
sions on Class A shares. In addition, GW Securities and WM Securities received
$654,594 representing CDSC fees from Class B and S shares.
Each of the Funds has adopted three distribution plans, pursuant to Rule 12b-1
under the 1940 Act, applicable to Class A, Class B and Class S shares of the
Fund (each, a "Rule 12b-1 Plan"), respectively. There are no 12b-1 Plans appli-
cable to Class I shares of the Funds. Under the applicable Rule 12b-1 Plans,
the Distributor receives a service fee at an annual rate of 0.25% of the aver-
age daily net assets of each class. In addition, the Distributor is paid a fee
as compensation in connection with the offering and sale of Class B and Class S
shares at an annual rate of 0.75% of the average daily net assets of such
shares. These fees may be used to cover the expenses of the Distributor primar-
ily intended to result in the sale of such shares, including payments to the
Distributor's representatives or others for selling shares. Because the Dis-
tributor may retain any amount of its fee that is not so expended, the Rule
12b-1 Plans are characterized by the SEC as "compensation-type" plans. The
service fee is paid by the Fund to the Distributor, which in turn pays a por-
tion of the service fee to broker/dealers that provide services, such as ac-
cepting telephone inquiries and transaction requests and processing correspon-
dences, new account applications and subsequent purchases by check for the
shareholders. Under their terms, each of the Class A Plan, Class B Plan and
Class S Plan shall remain in effect from year to year, provided such continu-
ance is approved annually by vote of the Board of Trustees, including a major-
ity of those Trustees who are not "interested persons" of the Trust, as defined
in the 1940 Act, and who have no direct or indirect financial interest in the
operations of such distribution plans, or any agreements related to such plans,
respectively.
Each of the Portfolios has adopted two distribution plans, pursuant to Rule
12b-1 under the 1940 Act, one for the Class A shares ("Class A Plan") and one
for the Class B shares ("Class B Plan"). Under the Class A and Class B Plans,
the Distributor is to be paid a shareholder service fee at an annual rate of
0.25% of the average daily net assets of each Classes shares. In addition, un-
der the Class B Plan, the Distributor is to be paid an annual distribution fee
of up to 0.75% of the average daily net assets of the Class B shares of each
Portfolio for activities primarily intended to result in the sale of Class B
shares of the Portfolios.
96
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
WM GROUP OF FUNDS
6. PURCHASES AND SALES OF SECURITIES
The aggregate cost of purchases and proceeds from sales of securities, exclud-
ing U.S. Government and short-term investments, for the year ended June 30,
1998 were as follows:
<TABLE>
<CAPTION>
NAME OF FUND PURCHASES SALES
- ------------ ------------ ------------
<S> <C> <C>
Short Term High Quality Bond Fund.................... $ 14,767,138 $ 5,769,269
California Municipal Fund............................ 292,575,205 308,270,723
California Insured Intermediate Municipal Fund....... 16,034,784 18,050,320
Florida Insured Municipal Fund....................... 12,976,232 18,141,360
Growth Fund.......................................... 412,382,409 450,527,668
Emerging Growth Fund................................. 251,779,944 354,574,742
International Growth Fund............................ 180,506,631 167,422,189
Strategic Growth Portfolio........................... 30,848,728 13,800,963
Conservative Growth Portfolio........................ 80,231,780 100,422,941
Balanced Portfolio................................... 65,747,729 61,614,137
Flexible Income Portfolio............................ 4,184,929 8,175,908
Income Portfolio..................................... 2,114,398 8,631,385
</TABLE>
The aggregate cost of purchases and proceeds from sales of U.S. Government se-
curities, excluding short-term investments, for the year ended June 30, 1998
were as follows:
<TABLE>
<CAPTION>
NAME OF FUND PURCHASES SALES
- ------------ ---------- -----------
<S> <C> <C>
Target Maturity 2002 Fund............................... $ -- $ 423,873
Short Term High Quality Bond Fund....................... 4,739,008 10,059,750
</TABLE>
At June 30, 1998, aggregate gross unrealized appreciation for all securities in
which there is an excess of value over tax cost and aggregate gross unrealized
depreciation for all securities in which there is an excess of tax cost over
value were as follows:
<TABLE>
<CAPTION>
TAX BASIS TAX BASIS
UNREALIZED UNREALIZED
NAME OF FUND APPRECIATION DEPRECIATION
- ------------ ------------ ------------
<S> <C> <C>
Target Maturity 2002 Fund............................ $ 93,982 $ --
Short Term High Quality Bond Fund.................... 226,708 61,742
California Municipal Fund............................ 24,568,310 71,631
California Insured Intermediate Municipal Fund....... 3,484,013 2,140
Florida Insured Municipal Fund....................... 1,912,258 18,413
Growth Fund.......................................... 68,702,120 2,396,952
Emerging Growth Fund................................. 42,431,740 15,600,680
International Growth Fund............................ 14,431,856 15,266,899
Strategic Growth Portfolio........................... 5,534,381 923,902
Conservative Growth Portfolio........................ 18,165,920 1,588,254
Balanced Portfolio................................... 11,741,205 1,821,823
Flexible Income Portfolio............................ 257,114 9,099
Income Portfolio..................................... 323,025 9,495
</TABLE>
7. SHARES OF BENEFICIAL INTEREST
Each of the Trust and SAM may issue an unlimited number of shares of beneficial
interest, each without par value.
As of June 30, 1998, WM Shareholder Services, Inc. owned greater than five per-
cent of the respective share classes:
<TABLE>
<CAPTION>
NUMBER OF PERCENTAGE OF
FUND SHARES TOTAL FUND SHARES
--------------- -------------------
NAME OF FUND CLASS S CLASS I CLASS S CLASS I
- ------------ ------- ------- -------- --------
<S> <C> <C> <C> <C>
California Money Fund.................... 589 1,060 100.00% 100.00%
California Municipal Fund................ 160 105 23.66 100.00
California Insured Intermediate Municipal
Fund.................................... 162 105 100.00 100.00
Florida Insured Municipal Fund........... 167 114 100.00 100.00
</TABLE>
97
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
WM GROUP OF FUNDS
8. ORGANIZATION COSTS
Expenses incurred in connection with the organization of the Funds, including
the fees and expenses of registering and qualifying its shares for distribution
under Federal and state securities regulations, are being amortized on a
straight-line basis over a period of five years from commencement of operations
of each Fund, respectively. In the event any of the initial shares of a Fund
are redeemed by any holder thereof during the amortization period, the proceeds
of such redemptions will be reduced by an amount equal to the pro-rata portion
of unamortized deferred organizational expenses in the same proportion as the
number of shares being redeemed bears to the number of initial shares of such
Fund outstanding at the time of such redemption.
9. CAPITAL LOSS CARRYFORWARDS
At June 30 1998, the following Funds had available for Federal income tax pur-
poses unused capital losses as follows:
<TABLE>
<CAPTION>
EXPIRING EXPIRING EXPIRING EXPIRING EXPIRING EXPIRING EXPIRING
NAME OF FUND IN 2000 IN 2001 IN 2002 IN 2003 IN 2004 IN 2005 IN 2006
- ------------ -------- -------- -------- -------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
California Money Fund... $7,635 $5,715 $7,549 $ 1,294 $ 18,781 $ -- $ --
Short Term High Quality
Bond Fund.............. -- -- -- 206,653 672,111 773,684 54,561
Florida Insured
Municipal Fund......... -- -- -- 783,315 1,462,695 -- --
Income Portfolio........ -- -- -- -- -- -- 2,904
</TABLE>
10. GEOGRAPHIC AND INDUSTRY CONCENTRATION AND RISK FACTORS
There are certain risks arising from the California Money, California Municipal
and California Insured Intermediate Municipal Funds' investments in California
municipal securities. The California Money, California Municipal and California
Insured Intermediate Municipal Funds' are more susceptible to factors adversely
affecting issuers of California municipal securities than is a municipal bond
fund that is not concentrated in these issuers to the same extent. Uncertain
economic conditions or governmental developments may affect the ability of Cal-
ifornia municipal securities issuers to meet their financial obligations.
The Florida Insured Municipal Fund primarily invests in debt obligations issued
by the State of Florida and its political subdivisions, agencies and public au-
thorities to obtain funds for various public purposes. The Florida Insured Mu-
nicipal Fund is more susceptible to factors adversely affecting issuers of
Florida municipal securities than is a municipal bond fund that is not concen-
trated in these issuers to the same extent. Uncertain economic conditions or
governmental developments may affect the ability of Florida municipal securi-
ties issuers to meet their financial obligations.
The Short Term High Quality Bond Fund and the Equity Funds invest in securities
of foreign companies and foreign governments. There are additional certain
risks involved in investing in foreign securities. These risks include those
resulting from adverse political and economic developments and the possible im-
position of currency exchange restrictions or other foreign laws or restric-
tions.
Investing in the Underlying Funds through the Portfolios involves certain addi-
tional expenses and tax results that would not be present in a direct invest-
ment in the Underlying Funds. For example, under certain circumstances, an Un-
derlying Fund may determine to make payment of a redemption request by a Port-
folio wholly or partly by a distribution in kind of securities from its Portfo-
lio, instead of cash, in accordance with the rules of the SEC. 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 secu-
rities; enter into forward foreign currency transactions; lend their portfolio
securities; enter into stock index, interest rate and currency futures con-
tracts, and options on such contracts; enter into interest rate swaps or pur-
chase or sell interest rate caps or floors; engage in other types of options
transactions; make short sales; purchase zero coupon and payment-in-kind bonds;
engage in repurchase or reverse repurchase agreements; purchase and sell "when-
issued" securities and engage in "delayed-delivery" transactions; and engage in
various other investment practices, each with inherent risks.
The Strategic Growth Portfolio can invest as much as 50% of its total assets in
the Growth Fund, 50% of its total assets in the Emerging Growth Fund and 25% of
its total assets in the High Yield Fund, each of which may invest as much as
35% (100% in the case of the High Yield Fund) of its total assets in lower-
rated bonds. Securities rated below investment grade generally involve greater
price volatility and risk of principal and income and may be less liquid than
higher rated securities.
98
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
WM GROUP OF FUNDS
Certain Portfolios may invest as much as 50% of their total assets in the
Growth or Emerging Growth Funds, each of which may invest up to 25% of its to-
tal assets in foreign equity securities and as much as 5% of its total assets
in securities in developing or emerging markets countries. Certain Portfolios
invest as much as 50% of their total assets in the International Growth Fund,
which invests primarily in foreign equity securities, and may invest as much as
30% of its total assets in securities in developing or emerging market coun-
tries. These investments will subject such Portfolios to risks associated with
investing in foreign securities, including those resulting from adverse politi-
cal and economic developments and the possible imposition of currency exchange
restrictions or other foreign laws or restrictions.
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 theses persons and companies seek to fulfill their fiduciary re-
sponsibilities 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 secu-
rities and the Underlying Funds that receive additional cash will have to in-
vest 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 transactions costs. The Advisor is committed to minimizing
such impact on the Funds to the extent it is consistent with pursuing the in-
vestment objectives of the Portfolios. The Advisor may nevertheless face con-
flicts in fulfilling its responsibilities. The Advisor will, at all times, mon-
itor the impact on the Funds of transactions by the Portfolios.
11. REORGANIZATION
On January 30, 1998, the Short Term High Quality Bond Fund acquired the assets
and certain liabilities of the Short Term Global Government Fund, in a taxable
exchange for shares of the Short Term High Quality Bond Fund, pursuant to a
plan of reorganization approved by the Short Term Global Government Fund's
shareholders. Total shares issued by, the value of the shares issued by, and
the total net assets of the Short Term High Quality Bond Fund were 15,906,268,
$37,061,604 and $14,588,984, respectively. The total net assets of the Short
Term Global Government Fund were $37,061,604. The total net assets of the Short
Term High Quality Bond Fund after the acquisition were $51,650,588.
99
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE TRUSTEES AND SHAREHOLDERS OF WM TRUST II AND WM STRATEGIC ASSET
MANAGEMENT PORTFOLIOS
In our opinion, the accompanying statements of assets and liabilities, includ-
ing the portfolios of investments, and the related statements of operations and
of changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of each of the nine funds constitut-
ing the WM Trust II and five portfolios constituting WM Strategic Asset Manage-
ment Portfolios, collectively the "Trusts", at June 30, 1998, and the results
of each of their operations for the year then ended, the changes in each of
their net assets and the financial highlights of each of the funds and portfo-
lios for the periods indicated, in conformity with generally accepted account-
ing principles. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the Trusts'
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with generally accepted auditing standards which re-
quire that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and dis-
closures in the financial statements, assessing the accounting principles used
and significant estimates made by management, and evaluating the overall finan-
cial statement presentation. We believe that our audits, which included confir-
mation of securities at June 30, 1998 by correspondence with the custodian and
brokers, provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
August 14, 1998
100
<PAGE>
TAX INFORMATION (UNAUDITED)
WM GROUP OF FUNDS
FISCAL YEAR ENDED JUNE 30, 1998 (UNAUDITED)
The following tax information represents fiscal year end disclosures of various
tax benefits passed through to a shareholders at calendar year end.
The amount of long term capital gain paid as follows:
<TABLE>
<CAPTION>
NAME OF FUND
------------
<S> <C>
Target Maturity 2002 Fund....................................... $ 26,467
California Municipal Fund....................................... 25,467
California Insured Intermediate Municipal Fund.................. 433,971
Growth Fund..................................................... 11,722,283
Emerging Growth Fund............................................ 13,145,812
International Growth Fund....................................... 2,953,016
Strategic Growth Portfolio...................................... 186,327
Conservative Growth Portfolio................................... 1,421,108
Balanced Portfolio.............................................. 1,173,078
Flexible Income Portfolio....................................... 252,189
</TABLE>
Of the distributions made from investment income the following percentages are
tax exempt for regular Federal income tax purposes.
<TABLE>
<CAPTION>
NAME OF FUND
------------
<S> <C>
California Money Fund................................................ 100.00%
California Municipal Fund............................................ 99.95%
California Insured Intermediate Municipal Fund....................... 99.64%
Florida Insured Municipal Fund....................................... 99.20%
</TABLE>
A portion of this income may be subject to alternative minimum tax.
Of the distributions made by the following Funds the corresponding percentages
represent the amount of each distribution which will qualify for the dividends
received deduction available to corporate shareholders.
<TABLE>
<CAPTION>
NAME OF FUND
------------
<S> <C>
International Growth Fund............................................. 2.85%
Strategic Growth Portfolio............................................ 12.02%
Conservative Growth Portfolio......................................... 8.86%
Balanced Portfolio.................................................... 8.02%
Flexible Income Portfolio............................................. 4.89%
</TABLE>
The above figures may differ from those cited elsewhere in this report due to
differences in the calculations of income and capital gains for Securities and
Exchange Commission (book) purposes and Internal Revenue Service (tax) purpos-
es.
101
<PAGE>
SPECIAL MEETING OF SHAREHOLDERS (UNAUDITED)
SHAREHOLDER VOTES
WM TRUST II
1. The shareholders of each Fund elected the following thirteen trustees on De-
cember 23, 1997:
<TABLE>
<CAPTION>
SHARES
SHARES WITHHOLDING
VOTED AUTHORITY
"FOR" TO VOTE
----------- -----------
<S> <C> <C>
Arthur H. Bernstein, Esq............................. 237,149,832 34,790,295
David E. Anderson.................................... 237,652,027 94,288,100
Edmund R. Davis, Esq................................. 237,663,171 34,276,957
John W. English...................................... 237,774,306 34,165,821
Alfred E. Osborne, Jr., Ph.D......................... 237,694,942 34,245,186
Wayne L. Attwood, M.D................................ 237,372,719 34,567,409
Kristianne Blake..................................... 237,292,971 34,647,157
Anne V. Farrell...................................... 237,356,999 34,583,128
Michael K. Murphy.................................... 237,367,195 34,572,932
William G. Papesh.................................... 237,286,858 34,653,269
Daniel L. Pavelich................................... 236,675,357 35,264,770
Jay Rockey........................................... 237,051,649 34,888,478
Richard C. Yancey.................................... 237,423,574 34,516,554
</TABLE>
2. The shareholders of each Fund approved a new investment management agreement
between the Trust, on behalf of each Fund, and WM Advisors, Inc. on December
23, 1997, except for shareholders of California Money Fund, Short Term High
Quality Bond Fund, California Municipal Fund, Emerging Growth Fund, and Tar-
get Maturity 2002 Fund who approved the proposal on January 9, 1998:
<TABLE>
<CAPTION>
SHARES SHARES
VOTED VOTED
"FOR" "AGAINST" ABSTAINED
---------- --------- ---------
<S> <C> <C> <C>
California Money Fund....................... 17,072,684 792,631 2,805,224
Short Term High Quality Bond Fund........... 3,471,427 129,760 295,773
California Municipal Fund................... 15,925,602 537,615 1,695,580
Florida Insured Municipal Fund.............. 1,204,340 8,047 50,999
California Insured Intermediate Municipal
Fund....................................... 2,736,964 82,308 122,442
Growth Fund................................. 9,262,022 244,723 643,880
Emerging Growth Fund........................ 6,313,262 164,403 370,288
International Growth Fund................... 8,705,234 249,323 642,464
Target Maturity 2002 Fund................... 113,861 0 7,635
</TABLE>
3. The shareholders of each Fund approved a proposal to authorize the Board of
Trustees to replace or appoint investment Sub-Advisors for each Fund of the
trust without seeking shareholder approval on December 23, 1997, except for
shareholders of California Money Fund, Short Term High Quality Bond Fund,
California Municipal Fund, Emerging Growth Fund, and Target Maturity 2002
Fund who approved the proposal on January 9, 1998:
<TABLE>
<CAPTION>
SHARES SHARES
VOTED VOTED
"FOR" "AGAINST" ABSTAINED
---------- --------- ---------
<S> <C> <C> <C>
California Money Fund....................... 15,990,794 1,806,786 2,872,959
Short Term High Quality Bond Fund........... 3,324,861 234,505 308,567
California Municipal Fund................... 14,813,767 1,453,033 1,736,435
Florida Insured Municipal Fund.............. 1,152,262 31,211 69,636
California Insured Intermediate Municipal
Fund....................................... 2,623,171 167,569 123,083
Growth Fund................................. 8,173,127 940,911 701,977
Emerging Growth Fund........................ 5,876,835 501,409 389,702
International Growth Fund................... 7,912,255 793,693 693,504
Target Maturity 2002 Fund................... 105,525 8,916 6,655
</TABLE>
102
<PAGE>
SPECIAL MEETING OF SHAREHOLDERS (UNAUDITED) (CONTINUED)
SHAREHOLDER VOTES
WM TRUST II (CONTINUED)
4. The shareholders of the Growth Fund approved a proposal, on December 23,
1997, for a new Investment Sub-Advisory Agreement for the Growth Fund be-
tween Composite Research & Management Co. and Janus Capital Corporation.
<TABLE>
<CAPTION>
AGAINST OR
FOR WITHHELD ABSTAINED TOTAL*
--- ---------- --------- ----------
<S> <C> <C> <C>
9,169,206 332,818 802,569 10,304,593
</TABLE>
5. The shareholders of the Emerging Growth Fund approved a proposal, on January
9, 1998, for a new Investment Sub-Advisory Agreement for the Emerging Growth
Fund between Composite Research & Management Co. and Janus Capital Corpora-
tion.
<TABLE>
<CAPTION>
AGAINST OR
FOR WITHHELD ABSTAINED TOTAL*
--- ---------- --------- ---------
<S> <C> <C> <C>
6,219,765 218,189 389,674 6,827,628
</TABLE>
6. The shareholders of the International Growth Fund approved a proposal, on
December 23, 1997, for a new Investment Sub-Advisory Agreement for the In-
ternational Growth Fund between Composite Research & Management Co. and
Warburg Pincus Management, Inc.
<TABLE>
<CAPTION>
AGAINST OR
FOR WITHHELD ABSTAINED TOTAL*
--- ---------- --------- ---------
<S> <C> <C> <C>
8,467,120 364,713 744,342 9,576,174
</TABLE>
7. The shareholders of the California Municipal Fund approved a proposal, on
January 9, 1998, for a new Investment Sub-Advisory Agreement for the Cali-
fornia Municipal Fund between Composite Research & Management Co. and Van
Kampen American Capital Management, Inc.
<TABLE>
<CAPTION>
AGAINST OR
FOR WITHHELD ABSTAINED TOTAL*
--- ---------- --------- ----------
<S> <C> <C> <C>
15,553,324 667,316 1,782,595 18,003,235
</TABLE>
8. The shareholders of the Florida Insured Municipal Fund approved a proposal,
on December 23, 1997, for a new Investment Sub-Advisory Agreement for the
Florida Insured Municipal Fund between Composite Research & Management Co.
and Van Kampen American Capital Management, Inc.
<TABLE>
<CAPTION>
AGAINST OR
FOR WITHHELD ABSTAINED TOTAL*
--- ---------- --------- ---------
<S> <C> <C> <C>
1,187,796 11,172 54,142 1,253,110
</TABLE>
9. The shareholders of the California Insured Intermediate Municipal Fund ap-
proved a proposal, on December 23, 1997, for a new Investment Sub-Advisor
for the California Insured Intermediate Municipal Fund between Composite Re-
search & Management Co. and Van Kampen American Capital Management, Inc.
<TABLE>
<CAPTION>
AGAINST OR
FOR WITHHELD ABSTAINED TOTAL*
--- ---------- --------- ---------
<S> <C> <C> <C>
2,695,266 83,001 135,555 2,913,823
</TABLE>
10. The shareholders of the Short Term Global Government Fund and the Short
Term High Quality Bond Fund approved a proposal, on January 9, 1998, for an
Agreement and Plan of Reorganization providing for the reorganization of
the Short Term Global Government Fund with and into the Short Term High
Quality Bond Fund.
<TABLE>
<CAPTION>
AGAINST OR
FOR WITHHELD ABSTAINED TOTAL*
--- ---------- --------- ----------
<S> <C> <C> <C>
9,856,441 342,360 708,057 10,906,858
</TABLE>
- -------------
* Votes for, against or withheld and abstained may not add up to the total due
to rounding of fractional shares.
103
<PAGE>
SPECIAL MEETING OF SHAREHOLDERS (UNAUDITED) (CONTINUED)
SHAREHOLDER VOTES
WM STRATEGIC ASSET MANAGEMENT PORTFOLIOS
1. The shareholders of each Portfolio elected the following thirteen trustees
on January 9, 1998.
<TABLE>
<CAPTION>
SHARES
SHARES WITHHOLDING
VOTED AUTHORITY
"FOR" TO VOTE
---------- -----------
<S> <C> <C>
Arthur H. Bernstein, Esq.............................. 29,551,690 932,076
David E. Anderson..................................... 29,588,830 894,935
Edmund R. Davis, Esq.................................. 29,565,096 918,889
John W. English....................................... 29,592,322 891,444
Alfred E. Osborne, Jr., Ph.D.......................... 29,578,370 905,396
Wayne L. Attwood, M.D................................. 29,543,141 940,624
Kristianne Blake...................................... 29,541,914 941,852
Anne V. Farrell....................................... 29,568,546 915,220
Michael K. Murphy..................................... 29,573,986 909,779
William G. Papesh..................................... 29,581,139 902,627
Daniel L. Pavelich.................................... 29,579,683 904,062
Jay Rockey............................................ 29,526,990 956,776
Richard C. Yancey..................................... 29,518,449 965,317
</TABLE>
2. The shareholders of the Income Portfolio and the Value Portfolio voted on
December 23, 1997, to approve a new investment management agreement between
the Trust and WM Advisors, Inc. and the shareholders of the Balanced Portfo-
lio, the Growth Portfolio and the Capital Growth Portfolio voted to approve
a new investment management agreement between the Trust and WM Advisors,
Inc. on January 9, 1998.
<TABLE>
<CAPTION>
SHARES SHARES
VOTED VOTED
"FOR" "AGAINST" ABSTAINED
---------- --------- ---------
<S> <C> <C> <C>
Income Portfolio.............................. 712,925 7,681 134,076
Value Portfolio............................... 822,441 2,178 20,991
Balanced Portfolio............................ 10,403,193 199,062 610,874
Growth Portfolio.............................. 13,278,974 243,524 806,048
Capital Growth Portfolio...................... 2,453,829 36,839 97,242
</TABLE>
104
<PAGE>
This Annual Report is published for the general information of the shareholders
of WM Group of Funds. It is authorized for distribution to prospective
investors only when preceded or accompanied by a current WM Group of Funds
prospectus. A mutual fund's share price and investment return will vary with
market conditions, and the principal value of an investment when you sell your
shares may be more or less than the original cost.
The WM Group of Funds are not insured by the FDIC. They are not deposits or
obligations of, nor are they guaranteed by any bank. These securities are
subject to investment risks, including possible loss of principal amount
invested.
Distributed by
WM Funds Distributor, Inc.
Member NASD
[LOGO OF WM GROUP OF FUNDS APPEARS HERE] Bulk Rate
P.O. Box 5118 U.S. Postage
Westborough, MA 01581-5118 P A I D
Los Angeles, CA
Permit #30835
<PAGE>
This Annual Report is published for the general information of the shareholders
of the WM Group of Funds. It is authorized for distribution to prospective
investors only when preceded or accompanied by a current WM Group of Funds
prospectus. A mutual fund's share price and investment return will vary with
market conditions, and the principal value of an investment when you sell your
shares may be more or less than the original cost.
The WM Group of Funds are not insured by the FDIC. They are not deposits or
obligations of, nor are they guaranteed by any bank. These securities are
subject to investment risks, including possible loss of principal amount
invested.
Distributed by
WM Funds Distributor, Inc.
Member NASD
[STAMP OF BULK RATE APPEARS HERE]
