<PAGE>
No. 811-07577
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-8A/A
AMENDMENT TO NOTIFICATION OF REGISTRATION
FILED PURSUANT TO SECTION 8(a) OF THE
INVESTMENT COMPANY ACT OF 1940
The undersigned investment company hereby notifies the Securities and
Exchange Commission that it registers under and pursuant to the provisions of
Section 8(a) of the Investment Company Act of 1940 and in connection with such
notification of registration submits the following information:
- --------------------------------------------------------------------------------
Name: WM Strategic Asset Management Portfolios, LLC (No. 811-07577)(1)
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Address of Principal Business Office (No. & Street, City, State, Zip Code):
- ---------------------------------------------------------------------------
1201 Third Avenue, 22nd Floor, Seattle, WA 98101
Telephone Number (including area code): (206) 461-3800
- ---------------------------------------
- --------
(1) Effective as of the close of business on July 16, 1999, or such later
date as WM Strategic Asset Management Portfolios, a Massachusetts business trust
(the "Predecessor Registrant"), and WM Strategic Asset Management Portfolios,
LLC, a Massachusetts limited liability company (the "LLC"), may agree (the
"Effective Time"), the Strategic Growth Portfolio, Conservative Growth
Portfolio, Balanced Portfolio, Flexible Income Portfolio and Income Portfolio,
the five initial series of shares of the LLC, will succeed to all of the assets,
rights, obligations and liabilities of the Strategic Growth Portfolio,
Conservative Growth Portfolio, Balanced Portfolio, Flexible Income Portfolio and
Income Portfolio, respectively, the five series of shares of the Predecessor
Registrant. The LLC hereby expressly adopts the Notification of Registration on
Form N-8A of the Predecessor Registrant, as amended hereby, as its own,
effective as of the Effective Time, for all purposes of the Investment Company
Act of 1940.
Name and address of agent for service of process:
- -------------------------------------------------
John T. West, Secretary
1201 Third Avenue
22nd Floor
Seattle, WA 98101
Copies to:
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Joseph B. Kittredge, Esq.
Ropes & Gray
One International Place
Boston, MA 02110
Check Appropriate Box:
- ----------------------
Registrant is filing a Registration Statement pursuant to Section 8(b)
of the Investment Company Act of 1940 concurrently with the filing of Form
N-8A/A: YES / / NO / X /
<PAGE>
Item 1. Exact name of registrant.
The exact name of the registrant is WM Strategic Asset Management
Portfolios, LLC (the "Registrant").
Item 2. Name of state under the laws of which registrant was organized or
created and the date of such organization or creation.
The Registrant was organized under the laws of the Commonwealth of
Massachusetts on March 12, 1999.
Item 3. Form of organization of registrant (for example, corporation,
partnership, trust, joint stock company, association, fund).
The Registrant is a limited liability company.
Item 4. Classification of registrant (face-amount certificate company, unit
investment trust, or management company).
The Registrant is a management company.
Item 5. If registrant is a management company: (a) state whether registrant is
a "closed-end" company or an "open-end" company; (b) state whether
registrant is registering as a "diversified" company or a
"non-diversified" company.
The Registrant is an open-end diversified management company.
Item 6. Name and address of each investment adviser of registrant.
The investment adviser of the Registrant is WM Advisors, Inc.,
located at 1201 Third Avenue, 22nd Floor, Seattle, Washington 98101.
Item 7. If registrant is an investment company having a board of directors,
state the name and address of each officer and director of registrant.
TRUSTEES
- --------
David E. Anderson 17960 Seabreeze Drive
Pacific Palisades, California 90272
Wayne L. Attwood, MD 2931 S. Howard
Spokane, Washington 99203
Arthur H. Bernstein 11661 San Vicente Blvd., Suite 701
Los Angeles, California 90049
Kristianne Blake 705 W. 7th, Suite D
Spokane, Washington 99204
Edmond R. Davis 550 South Hope Street, 21st Floor
Los Angeles, California 90071-2604
John W. English 50 H New England Ave.
P.O. Box 640
Summit, New Jersey 07902-0640
Anne V. Farrell 425 Pike Street, Suite 510
Seattle, Washington 98101
Carrol R. McGinnis 9225 Katy Freeway, Suite 205
Houston, TX 77024
Michael K. Murphy PO Box 3366
Spokane, Washington 99220-3366
Alfred E. Osborne, Jr., Ph.D 110 Westwood Plaza, Suite C305
Los Angeles, California 90095-1481
William G. Papesh 1201 Third Avenue
President and Chief Executive 22nd Floor
Officer Seattle, WA 98101
Daniel L. Pavelich Two Prudential Plaza
180 North Stetson Avenue, Suite 4300
Chicago, Illinois 60601
Jay Rockey 2121 Fifth Avenue
Seattle, Washington 98121
Morton O. Schapiro 4535 Lenox Avenue
Sherman Oaks, CA 91423
Richard C. Yancey 535 Madison Avenue
New York, New York 10022
OFFICERS
Monte D. Calvin, CPA 1201 Third Avenue
Vice President, Treasurer, 22nd Floor
Chief Financial Officer and Seattle, WA 98101
Chief Compliance Officer
John T. West, CPA 1201 Third Avenue
Secretary 22nd Floor
Seattle, WA 98101
Item 8. If registrant is an unincorporated investment company not having a
board of directors: (a) state the name and address of each sponsor of
registrant; (b) state the name and address of each officer and director
of each sponsor of registrant; (c) state the name and address of each
trustee and each custodian of registrant.
Not Applicable.
Item 9. (a) State whether registrant is currently issuing and offering its
securities directly to the public (yes or no).
Yes.
(b) If registrant is currently issuing and offering its securities to
the public through an underwriter, state the name and address of such
underwriter.
WM Funds Distributor, Inc.
1201 Third Avenue, 22nd Floor
Seattle, WA 98101
(c) If the answer to Item 9(a) is "no" and the answer to Item 9(b) is
"not applicable," state whether registrant presently proposes to make a
public offering of its securities (yes or no).
Not applicable.
(d) State whether registrant has any securities currently issued and
outstanding (yes or no).
Yes.
(e) If the answer to Item 9(d) is "yes," state as of a date not to
exceed ten days prior to the filing of this notification of
registration the number of beneficial owners of registrant's
outstanding securities (other than short-term paper) and the name of
any company owning 10 percent or more of registrant's outstanding
voting securities.
As of July 7, 1999, there were 23,585 beneficial owners of the
Predecessor Registrant's outstanding securities and no beneficial
owners owning 10% or more of the Predecessor Registrant's outstanding
voting securities. The number of beneficial owners of each Portfolio of
the Predecessor Registrant was as follows:
Portfolio Beneficial Owners
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Strategic Growth Portfolio 5,055
Conservative Growth Portfolio 9,132
Balanced Portfolio 7,632
Flexible Income Portfolio 1,225
Income Portfolio 541
Item 10. State the current value of registrant's total assets.
As of July 7, 1999, the current value of the Predecessor Registrant's
total assets was $882,222,452. The current value of total assets of
each Portfolio of the Predecessor Registrant was as follows:
Portfolio Current Value of Total Assets
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Strategic Growth Portfolio $144,360,303
Conservative Growth Portfolio $360,640,354
Balanced Portfolio $306,082,459
Flexible Income Portfolio $ 49,861,047
Income Portfolio $ 21,278,289
Item 11. State whether registrant has applied or intends to apply for a license
to operate as a small business investment company under the Small
Business Investment Act of 1958 (yes or no).
No.
Item 12 Attach as an exhibit a copy of the registrant's last regular periodic
report to its security holders, if any.
The Predecessor Registrant's last regular periodic report is
attached as Exhibit 12.
<PAGE>
SIGNATURES
A copy of the LLC Certificate of Formation of WM Strategic Asset
Management Portfolios, LLC (the "LLC") is on file with the Secretary of the
Commonwealth of Massachusetts, and notice is hereby given that this instrument
is executed on behalf of the LLC by an officer of the LLC as officer and not
individually and that the obligations of or arising out of this instrument as
they relate to each series of the LLC are binding only on assets and properties
of that series and are not binding upon any other series of the LLC or any
Trustee, officer, or shareholder individually.
Pursuant to the requirements of the Investment Company Act of 1940, the
registrant has caused this amendment to notification of registration to be duly
signed on its behalf in the City of Seattle and the State of Washington on the
16th day of July, 1999.
Signature: WM Strategic Asset Management Portfolios, LLC
By: /s/ William G. Papesh
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William G. Papesh, President and Trustee
Attest: /s/ John T. West
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John T. West, Secretary
<PAGE>
EXHIBIT 12
[logo] WM
GROUP OF FUNDS
STRATEGIC ASSET
MANAGEMENT PORTFOLIOS
[graphic omitted]
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THE DIFFERENCE IS EXPERIENCE
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SEMI-ANNUAL REPORT
FOR THE PERIOD ENDED APRIL 30, 1999
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WM STRATEGIC ASSET
MANAGEMENT PORTFOLIOS
strategic growth portfolio
conservative growth portfolio
balanced portfolio
flexible income portfolio
income portfolio
<PAGE>
[graphic omitted]
message from the president ...................................2
WM Group of Funds market &
economic overview ..........................................4
individual portfolio reviews .................................7
statements of assets and liabilities ........................18
statements of operations ....................................20
statements of changes in net assets .........................21
statements of changes in net assets -
capital stock activity ....................................24
financial highlights ........................................26
portfolio of investments ....................................36
notes to financial statements ...............................41
<PAGE>
MESSAGE FROM
the president
[graphic omitted]
[Photo of William G. Papesh]
We are pleased to provide you this WM Group of Funds semi-annual report for the
period ended April 30, 1999. As I review recent market activity, I am struck by
certain similarities between the current investment environment and that of the
1950s and `60 s. As in that period of American economic expansion, U.S.
investors today are enjoying an extended period of economic abundance, brought
about by structural changes in the global economy, as well as revolutionary
technological advances.
Equity investors have benefited from exceptionally strong returns through much
of this decade. The S&P 500 rose 28% in 1998, bringing the market's four-year
cumulative gain to 190%.(1) Since 1995, the U.S. stock market has created almost
$7 trillion in wealth.(2) On the fixed-income side, the early 1990s brought bond
investors significant opportunities to benefit from declining interest rates.
Internationally, increased opportunities in emerging markets have offered
aggressive growth investors new venues in which to invest.
While this decade has been quite rewarding for many investors, there are aspects
of the economy and financial markets that warrant some caution. For example, the
domestic economy is expanding rapidly due primarily to strong consumer spending,
with GDP growing between 4%-6% on an annualized basis. As a result, there is
increased fear among investors that higher inflation may lead to higher interest
rates. Also, while the Dow Jones Industrial Average continues to post record
highs, the stock market's current strength is not broad based. Stocks of small-
and medium-sized companies have not kept pace with the mega-cap growth stocks,
some of which are trading at more than 100 times earnings. There is also concern
that rapid change in the technology sector has created a speculative
environment, particularly with regard to some Internet stocks.
DEVELOP A STRATEGY TO WEATHER MARKET CYCLES
While no one can precisely predict the future course of the stock market, the
economy and financial markets are often linked in more predictable ways.
Economic growth can fuel inflation and higher interest rates, typically
resulting in reduced consumer spending and slower corporate earnings growth. On
the other hand, when the economy slows, interest rates typically fall, which
helps to spur renewed investment. These cycles are an inherent part of
investing. Fortunately, there are a variety of strategies that individual
investors can employ to lessen the effects of market volatility on their
portfolios.
First and foremost, investors can seek to remain diversified by investing in a
mix of equity and fixed-income investments. Some investors may be tempted to
ignore this strategy when stocks are posting 20%+ returns per year. From April
1993 through April 1999, for example, the WM GROWTH FUND posted an average
annual return of 26.52%, not adjusted for the maximum sales charge. For the 12
months ended April 30, 1999, the Fund gained 65.36%.(3) Yet, I would caution
investors to remember that these years have been marked by an exceptionally
strong stock market. Over an investment horizon of 10 or 20 years, a diversified
strategy can provide strong returns with less risk than a pure equity portfolio.
Since 1926, the long-term average annual return for stocks, as measured by the
S&P 500, has been in the 10%-12% range. From its inception in May 1939 through
April 30, 1999, the WM BOND & STOCK FUND has posted an average annual return of
9.06%, not adjusted for the maximum sales charge, with significantly less
volatility in year-to-year returns than the S&P 500.(4)
Another strategy investors can use to help reduce risk in their investment
portfolios is known as dollar cost averaging (DCA). With this strategy, a set
amount is invested on a regular basis, usually monthly or quarterly. The
advantage of a DCA program is that it allows you to take advantage of potential
temporary price declines. For example, if you invest $100 each month, more
shares will be bought when prices are low and fewer shares when prices are high.
It is important to note that DCA does not guarantee a profit or protect against
a loss, and you must consider your ability to continue purchases in a declining
market. However, as a long-term investment strategy, it can help you lower the
average cost of the shares you purchase.
YOUR INVESTMENT REPRESENTATIVE IS A VALUABLE RESOURCE
Whether you are investing for retirement, future college tuition costs, or
short-term goals, your ability to meet your financial goals will require a
well-defined investment strategy. Your Investment Representative can help you in
several ways. First, he or she has the tools and resources available to help you
clearly define your goals. Many individuals today who are saving for retirement,
for example, may be unsure about the amount they actually need to save. Your
Investment Representative can help you evaluate how the rising cost of living,
coupled with today's longer lifespans, will affect your retirement savings goal.
Secondly, your Investment Representative can assist you in determining which
types of investment vehicles are best suited for your goals and objectives.
The WM GROUP OF FUNDS offers a diverse family of mutual funds with a variety of
investment objectives to help you meet your financial goals. You can choose to
combine individual funds, including stock, bond, and tax-exempt fixed-income
funds, to create a diversified portfolio. Or, if you seek the advantages of a
professionally managed asset allocation portfolio, consider also the WM
STRATEGIC ASSET MANAGEMENT PORTFOLIOS. We suggest you consult with your
Investment Representative to determine which investments are appropriate for
your particular needs.
Thank you for your continued trust in the WM GROUP OF FUNDS. We look forward to
continuing to provide you with investment opportunities, today and into the next
century.
Sincerely,
/s/ William G. Papesh
William G. Papesh
President
(1) Source: Ibbotson Associates
(2) Source: YOUR MONEY, June/July 1999
(3) Performance for A shares through March 31, 1999, adjusted for the maximum
sales charge, is as follows: 1-year: 54.24%, 5-year: 26.14%, since
inception: 24.70%. Past performance is not a guarantee of future results.
(4) Performance for A shares through March 31, 1999, adjusted for the maximum
sales charge, is as follows: 1- year: -5.09%, 5-year: 12.69%, since
inception: 8.87%. Past performance is not a guarantee of future results. The
S&P 500 is an unmanaged, weighted index of 500 companies frequently used in
the equity markets for comparison purposes. Investors cannot invest directly
in an index, and there is no guarantee that the WM Bond & Stock Fund will be
less volatile than this index in the future.
<PAGE>
WM GROUP OF FUNDS
MARKET & ECONOMIC OVERVIEW
STEPHEN C. SCOTT
SENIOR PORTFOLIO MANAGER
WM ADVISORS, INC.
Mr. Scott received his BA and MBA from California State University, Long Beach.
He is responsible for providing economic and investment analysis, as well as
managing the Strategic Asset Management (SAM) Portfolios. Mr. Scott is also
Senior Portfolio Manager of WM Advisors, Inc., the investment advisor to WM
Group of Funds, which he joined in March 1998. Prior to that date, Mr. Scott
managed the SAM Portfolios under Sierra Investment Services (SISC). Before
joining SISC, Mr. Scott was President & Chairman of his own firm, SDS Investment
Advisors, after serving nine years as Senior Pension Investment Manager with the
Group Pension and Investment Division of The Equitable Life Assurance Society of
the United States.
STRONG ECONOMIC GROWTH A POSITIVE FOR INVESTORS
In the wake of the Russian debt default and the bailout of Long-Term Capital
Management, U.S. financial markets experienced a period of marked instability in
August and September of last year. Markets then largely recovered in the fourth
quarter of 1998. Normal price relationships in debt securities have been
restored, and with investor confidence high, the Dow Jones Industrial Average
broke through the 10,000 point barrier on March 29, 1999.
Following trends of recent periods, the largest companies tended to outperform
smaller companies. The S&P 500, after giving up nearly all of its 1998 gains in
the late summer correction, ended the year up 28.6%. The S&P Mid-Cap 400 posted
a 19.1% gain for 1998, while the Russell 2000 fell 2.5%. This trend continued
into 1999, with the S&P 500 gaining 9% through April 30, 1999. In the first four
months of 1999, mid- and small-capitalization stocks as a group lost ground in
January and February, posted minor gains in March, and rebounded significantly
in April. The S&P Mid-Cap 400 advanced 4.3% through April 30, 1999, and the
Russell 2000 climbed 3.1%.
STRONG ECONOMY BOLSTERS U.S. MARKETS
The U.S. economy posted surprisingly strong growth in the fourth quarter of 1998
and continued to expand in the first quarter of 1999, which bolstered corporate
earnings growth. In 1998, gross domestic product (GDP) grew 3.9%, with increases
in consumer spending generating a large amount of the results. Strong fourth
quarter growth of 6% raised concerns of potentially higher inflation, but
significant wage and price pressures have yet to materialize. This phenomenon is
unique as inflation pressures normally follow periods of such strong economic
growth.
In the first quarter, GDP growth of 4.1% was attributed to increases in consumer
spending and business investment in technology. Consumer spending grew at a 6.7%
annual rate in the first quarter, a significant increase over prior quarters.
Rising consumer confidence is due in part to falling energy prices and low
interest rates, which has led to a boom in mortgage refinancing. Business
investment in durable equipment also rose, with spending on information
technology up 21% on an annualized basis. Residential construction spending also
posted strong gains in the first quarter.
Strong economic growth can often negatively impact the stock market as investors
fear rising inflation will trigger higher interest rates and dampen corporate
earnings. Yet despite historically low unemployment levels, inflation has
remained relatively subdued. As a result, the Federal Reserve left interest
rates unchanged at its March 30, 1999 Federal Open Market Committee (FOMC)
meeting.
DOW JONES INDUSTRIAL AVERAGE
six months ended 4-30-99
Oct 98 8,592
Nov 98 8,975
8,919
9,159
9,333
Dec 98 9,016
8,821
8,903
9,217
9,181
Jan 99 9,643
9,340
9,120
9,358
Feb 99 9,304
9,274
9,339
9,306
Mar 99 9,736
9,876
9,903
9,822
10,006
Apr 99 9,832
10,173
10,493
10,689
10,789
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 averall U.S. stock market performance. Individuals
cannot invest directly in an index.
ASSET CLASS PERFORMANCE DISPARITY
six months ended 4-30-99
LARGE-CAP STOCKS 22.30%
MID-CAP STOCKS 18.90%
SMALL-CAP STOCKS 15.20%
MORTGAGE BONDS 2.40%
T-BILLS 2.20%
CORPORATE BONDS 1.80%
GOVERNMENT BONDS -1.00%
Source: Ibbotson Associates. Domestic Stocks are represented by: S&P 500, S&P
Mid-Cap 400, and the Russell 2000, respectively. Bonds are represented by Lehman
Brothers indices. An investor would typically purchase stocks for long-term
growth of capital. However, stocks are often subject to significant price
fluctuation, and therefore, an investor may have a gain or loss in principal
when the shares are sold. Indices are unmanaged and individuals cannot invest
directly in an index. This chart is not intended to represent the performance of
any mutual fund.
INTEREST RATES STABILIZE
Following Russia's debt default last August, investors flocked to U.S. debt
issues, and as a result, rates on lower-quality debt rose dramatically. With
strong demand for U.S. government debt, yields on Treasuries fell while prices
increased significantly. Medium- and long-term Treasury bonds outperformed all
conventional fixed-income investments in 1998. Thirty-year zero-coupon bonds
gained 20.1% in 1998, as measured by Merrill Lynch's fixed-income indices.
As the financial crisis spread to Latin America, the Federal Reserve acted to
forestall a "liquidity crunch" and to maintain normal price relationships
between short- and long-term debt. By the end of 1998, the Federal Reserve had
dropped the target federal funds rate from 5.5% to 4.8%, and cut the discount
rate on two occasions to 4.5%.
Overall investor confidence continued to strengthen in the first quarter of
1999. As a result, the Federal Reserve's interest rate policy is once again
focused on inflation. Although job growth continues to be strong and the
unemployment rate (4.2% in March) remains at the lowest point in three decades,
inflation remains under 2%. A combination of modest increases in wages and
better-than-expected productivity gains have resulted in flat or lower unit
labor costs.
Yields on long-term U.S. Treasury bonds climbed to 5.6% on March 31, from 5.1%
at the end of 1998. Since February, long-term interest rates have drifted in the
5.3% to 6.0% range, amid concerns that the Federal Reserve would raise interest
rates to forestall inflation.
INTERNATIONAL MARKETS POST MIXED RESULTS
Many international economies have shown signs of recovery, but many analysts do
not expect economic growth in emerging economies to reach the levels seen
earlier in the decade for some time. The Morgan Stanley Capital International
(MSCI) Europe, Australasia and Far East (EAFE) Index gained over 15% for the
six-month period ended April 30, 1999, with stronger performances by several
European countries. The introduction of the Euro on January 1 established a new
benchmark indicator for the direction of European economic growth and
import/export activity. The cooperative framework between the 11 participating
countries is being tested as the European Central Bank seeks to satisfy
competing agendas. The bank recently cut interest rates 50 basis points to
stimulate growth and increase pressure for corporate restructurings and labor
market reform.
YIELD ON THE 30-YEAR TREASURY BOND
six months ended 4-30-99
- -----------------------------------
Oct 98 5.160
Nov 98 5.390
5.250
5.220
5.160
Dec 98 5.040
5.030
5.000
5.220
5.100
Jan 99 5.270
5.110
5.080
5.090
Feb 99 5.350
5.420
5.390
5.580
Mar 99 5.600
5.530
5.560
5.660
Apr 99 5.600
5.460
5.570
5.600
5.660
Source: The Wall Street Journal
Note: Represents yield on the 30-year Treasury bond which is sometimes used to
characterize the overall bond market.
Japan continues to be mired in a recession. In yet another attempt to jump-start
its economy, the Bank of Japan dropped short-term interest rates to nearly zero
percent in March. However, corporate borrowing remains at very low levels.
Despite strong gains in the fourth quarter of 1998, the recession-plagued Asian
emerging markets were down an average of 7% for the year. Financial stability in
the region is gradually being restored and markets have responded. Efforts to
dispose of problem loans intensified with the development of a secondary market
for corporate debt led by 15 Singapore and Hong Kong banks. In Latin America,
stock markets of both Mexico and Brazil strengthened in the first quarter of
1999 as global uncertainty eased.
Slower economic growth internationally has had a negative effect on U.S. export
growth. Exports did rise in the fourth quarter of last year as Asian markets
began showing signs of recovery, but the gains were not sustained in the first
quarter of 1999. In the near term, the U.S. economy will continue to rely on
domestic consumer demand. Advances in corporate productivity will likely be a
key factor for driving future growth in the economy and the markets.
TEMPERING THE EFFECTS OF MARKET VOLATILITY
While the stock market has continued to reach new highs this year, no one can
predict what direction it is headed next. As an investor, however, one thing you
can count on with certainty is market volatility. Investors should not become
overconfident that the markets will continue to provide the above-average
returns we have witnessed in recent years. Even in a bull market, it is wise to
be prepared for market volatility. Since investment risk and reward go
hand-in-hand, it is essential that you take steps to protect your assets while
striving to meet your long-term goals.
Asset allocation and diversification help to minimize risk. Investing in
different asset classes, such as stocks, bonds and cash equivalents, can help
you minimize the effect a downturn in one market sector may have on your entire
portfolio. While creating a well-diversified portfolio can help smooth out the
effects of market swings on your overall portfolio, it is essential that you
review your investment mix on a regular basis. Allowing your portfolio to become
too heavily weighted in one asset class can reduce diversification and expose
you to unnecessary risk.
CONSULT REGULARLY WITH YOUR INVESTMENT REPRESENTATIVE
In order to keep your investment portfolio on track, it is important to stay
focused on your investment objective and time frame. To ensure that your
portfolio is properly diversified and in line with your goals, we encourage you
to meet with your Investment Representative at least once a year. He or she can
help you re-evaluate your portfolio and determine which investments are best
suited for your particular needs.
The WM GROUP OF FUNDS offers an array of professionally managed investments that
may be appropriate for your portfolio. Depending on your financial goals, you
can choose among a variety of investment options, including six equity funds,
four tax-exempt bond funds, five taxable bond funds, three money market funds
and five asset allocation funds.
To find out how the WM GROUP OF FUNDS can help you reach your long-term goals,
please contact your Investment Representative for a WM GROUP OF FUNDS
prospectus, which contains more complete information, including charges and
expenses.
INTERNATIONAL MARKET PERFORMANCE
six months ended 4-30-99
- -----------------------------------------
WORLD 19.80%
EAFE 15.44%
EUROPE 11.00%
PACIFIC REGION 27.70%
JAPAN 30.10%
NORDIC REGION 22.00%
IFCG EMERGING MARKETS 29.10%
Sources: Morgan Stanley Capital International (MSCI). MSCI indices are
maintained and calculated by Morgan Stanley's Capital International group, which
tracks more than 45 equity markets throughout the world. The MSCI indices are
market capitalization weighted and cover both developed and emerging markets. In
addition to the country indices, MSCI also calculates aggregate indices for the
world, Europe, North America, Asia and Latin America. Most international mutual
funds measure their performance against MSCI indices. Each region above is
represented by the corresponding MSCI Index in U.S. Dollars. There are
additional risks associated with international investing, including currency
fluctuations.
<PAGE>
INDIVIDUAL
PORTFOLIO REVIEWS
TO OUR ASSET ALLOCATION CLIENTS
Welcome to the Strategic Asset Management Portfolios.
We are pleased to provide you with an overview of our five asset allocation
portfolios, each designed to meet your individual investment needs.
This report includes performance reviews and highlights of the investment
strategies incorporated during the six-month period ended April 30, 1999.
UNDERSTANDING THE ENCLOSED CHARTS AND PERFORMANCE
In order to help you understand the Strategic Asset Management (SAM) Portfolios'
investment performance, we have included the following discussions along with
graphs that compare the Portfolios' performance with certain capital market
benchmarks. The benchmarks are a blended mix of capital market indices intended
to represent a proxy for Portfolio performance. Descriptions of the indices used
are as follows:
o The SALOMON BROTHERS U.S. 90-DAY T-BILL INDEX measures performance of United
States Treasury bills with maturities of three months.
o The LEHMAN BROTHERS MUTUAL FUND (1-5) GOVERNMENT/ CORPORATE INDEX is
represented by all U.S. government agency and Treasury securities and all
investment-grade corporate debt securities with maturities of one to five
years.
o The LEHMAN BROTHERS MORTGAGE-BACKED SECURITIES INDEX includes 15- and 30-year
fixed rate securities backed by mortgage pools of the Government National
Mortgage Association (GNMA), Federal Home Loan Mortgage Corporation (FHLMC),
and Federal National M ortgage Association (FNMA). Balloons are included in
the index; graduated payment mortgages (GPMs), buydowns, manufactured home
mortgages, and graduated equity mortgages (GEMs) are not.
o The LEHMAN BROTHERS BAA LONG-TERM CORPORATE BOND INDEX includes all publicly
issued, fixed-rate, nonconvertible BAA rated, dollar-denominated,
SEC-registered corporate debt with maturities greater than ten years.
o The LEHMAN BROTHERS AGGREGATE INDEX is an all-inclusive bond index which
contains government, corporate, mortgage and asset-backed securities.
o The STANDARD & POOR'S 500 COMPOSITE INDEX is a capitalization-weighted index
of 500 stocks designed to measure performance of the broad domestic economy
and all economic sectors.
o The RUSSELL 2000 INDEX measures the performance of the 2,000 smallest
companies (approximately 10% of the total market capitalization) of the
Russell 3000 Index.
o The RUSSELL 2000 GROWTH INDEX measures the performance of the companies with
higher price-to-book ratios and higher forecasted growth values within the
Russell 2000 Index.
o The RUSSELL 3000 INDEX is comprised of the 3,000 largest U.S. companies based
on total market capitalization, which represents approximately 98% of the
investable U.S. equity market.
o The MORGAN STANLEY CAPITAL INTERNATIONAL (MSCI) EUROPE, AUSTRALASIA, AND THE
FAR EAST PLUS EMERGING MARKETS FREE INDEX is a market capitalization weighted
index composed of companies representative of the market structure of 48
developed and emerging market countries. The index is calculated with gross
dividends reinvested and in United States Dollars.
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. Index results on the following pages include changes in value
and the reinvestment of dividends. Total return is used to measure a Portfolio's
performance and reflects both changes in the value of the Portfolio's shares as
well as any income dividend and/or capital gain distributions made by the
Portfolio during the period. Past performance is not a guarantee of future
results. A mutual fund's share price and investment return will vary with market
conditions, and the principal value of an investment when you sell your shares
may be more or less than the original cost.
The 30-day Securities and Exchange Commission (SEC) yield is the yield
calculated pursuant to a standard formula required by the SEC for performance
advertisement purposes, and does not imply any endorsement or recommendation by
the SEC.
Yield indicates the investment income per share as a percentage of the ending
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 YEAR 2000 PROBLEM
Many computer systems in use today cannot process date-related information in
relation to year 2000. This issue originates in the practice of abbreviating
years to their last two digits. Computer systems may not be able to decide
correctly when a date entered with a year of "00" should be interpreted as 1900
or 2000. At the turn of the new century, computer systems may not function
properly because they may not be able to recognize or interpret the year 2000.
Should any of the computer systems employed by the WM Funds' or Portfolios'
major service providers fail to process this type of information properly, it
could have a negative impact on Fund or Portfolio operations and the services
that are provided to shareholders. Similarly, the values of certain of the WM
Funds' or Portfolios' assets may be adversely affected by the inability of their
issues or third parties to properly process date-related information.
The Advisor, Shareholder Service Agent and Administrator have advised the Funds
and Portfolios that they are reviewing all of their computer systems with the
goal of modifying or replacing such systems prior to January 1, 2000 to the
extent necessary to avoid any such negative impact. The Funds and Portfolios are
seeking assurance from each of their key service providers that similar
replacements or modifications will be completed to avoid any negative impact
from this issue. As of this date, the Funds and Portfolios have received
assurances from their key service providers. However, there can be no guarantee
that these assurances will ultimately be successful. In the event a key service
provider cannot provide such assurance, the Funds and Portfolios may consider
retaining an alternative service provider.
In addition, the Advisor has been advised by the Custodian that it is also in
the process of reviewing its systems with the same goal. As of the date of this
report, the Funds, Portfolios, and Advisors have no reason to believe that these
goals will not be achieved.
<PAGE>
STRATEGIC GROWTH
PORTFOLIO
GROWTH OF A $10,000 INVESTMENT(5)
(class A shares)
Fund
(Class A
Fund adjusted
(Class A for
not maximum
adjusted 5.5% Capital Russell
for sales sales Market 3000
charge) charge) Benchmark(1) Index Inflation
- --------------------------------------------------------------------------------
Inception - 5/31/95 $10,000 $ 9,450 $10,000 $10000 $10,000
10,375 9,805 10,235 10289 10,000
10,908 10,308 10,576 10703 10,040
10,992 10,387 10,604 10798 10,080
11,291 10,670 11,049 11217 10,113
10,951 10,349 11,010 11120 10,147
11,346 10,722 11,494 11614 10,167
Dec 95 11,657 11,015 11,707 11803 10,187
11,849 11,197 12,110 12146 10,187
12,208 11,536 12,226 12324 10,214
12,530 11,840 12,343 12448 10,234
12,886 12,177 12,525 12684 10,268
13,146 12,423 12,848 13009 10,261
Jun 12,799 12,095 12,901 12967 10,254
11,893 11,238 12,327 12288 10,314
12,444 11,760 12,588 12660 10,347
12,982 12,268 13,295 13349 10,401
12,824 12,118 13,660 13593 10,442
13,455 12,715 14,696 14551 10,461
Dec 96 13,358 12,623 14,408 14377 10,468
13,730 12,975 15,303 15172 10,488
13,537 12,792 15,427 15188 10,508
12,919 12,209 14,785 14502 10,541
13,177 12,452 15,668 15217 10,575
14,038 13,266 16,630 16256 10,595
Jun 14,489 13,692 17,372 16932 10,595
15,441 14,592 18,751 18260 10,629
14,862 14,044 17,709 17518 10,662
15,569 14,713 18,678 18512 10,689
14,914 14,094 18,055 17890 10,701
14,966 14,143 18,891 18575 10,695
Dec 97 14,981 14,157 19,215 18946 10,708
15,159 14,325 19,429 19143 10,728
16,325 15,427 20,830 20512 10,748
17,094 16,154 21,897 21530 10,769
17,326 16,373 22,117 21741 10,788
16,819 15,894 21,737 21204 10,808
Jun 17,367 16,412 22,620 21920 10,821
16,955 16,023 22,379 21521 10,834
14,266 13,482 19,143 18224 10,847
15,158 14,324 20,370 19467 10,860
16,008 15,128 22,027 20945 10,886
16,942 16,010 23,362 22226 10,886
Dec 98 18,370 17,359 24,708 23639 10,880
19,472 18,401 25,741 24442 10,906
18,897 17,858 24,941 23576 10,919
20,031 18,930 25,939 24441 10,952
Apr 99 21,043 19,886 26,943 25543 10,975
+ The performance of the Class B Shares was different than that shown above for
the Class A Shares, based on the difference in sales loads and fees paid by
Class B shareholders.
- --------------------------------------------------------------------------------
TOTAL RETURNS AS OF 4/30/99(5)
CLASS A SHARES 1 Year 5 Year* Since Inception*
(May 31, 1995)
Fund (not adjusted for sales charge) 21.46% N/A 20.96%
- --------------------------------------------------------------------------------
Fund (adjusted for maximum 5.5% sales charge) 14.74% N/A 19.23%
- --------------------------------------------------------------------------------
Capital Market Benchmark(1) 21.82% N/A 28.80%
- --------------------------------------------------------------------------------
CLASS B SHARES 1 Year 5 Year* Since Inception*
(May 31, 1995)
Fund (not adjusted for contingent
deferred sales charge) 20.55% N/A 20.12%
- --------------------------------------------------------------------------------
Fund (adjusted for maximum contingent
deferred sales charge) 15.55% N/A 19.52%
- --------------------------------------------------------------------------------
Capital Market Benchmark(1) 21.82% N/A 28.80%
- --------------------------------------------------------------------------------
(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 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 Russell 3000 Index is a broad-based index and is intended to represent
the majority of the U.S equity market.
(3) Inflation is measured by the Consumer Price Index for all urban consumers.
(4) Annual rate of inflation: 2.14%. 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.
The Portfolio's performance would have been lower had the Advisor not waived a
portion of its fees or reimbursed certain other expenses and the Fund's
custodian had not allowed its fees to be reduced by credits.
* Annualized
PERFORMANCE REVIEW
The SAM Strategic Growth Portfolio (A Shares) returned 31.45% (24.21% adjusted
for the maximum sales charge+) for the six-month period ended April 30, 1999,
significantly outperforming its benchmark index(1) which returned 22.32% for the
same period. The Portfolio continues to be managed in an effort to reduce
volatility relative to single asset class equity investments. Long-term results
are favorable and provide a premium over inflation; since inception, the
Portfolio has returned 18.82%* above the rate of inflation(4) (17.09%* adjusted
for the maximum sales charge+).
ECONOMIC/MARKET REVIEW
The U.S. economy grew at a very strong rate over the past six months, advancing
6% in the fourth quarter of 1998 and 4.1% in the first quarter of 1999. These
results surprised most market participants, as the effects of a negative trade
balance did not offset the strength of consumer spending as much as expected.
High levels of personal income, large tax refunds, and strong consumer
confidence propelled the economy forward. The high growth rates and tight labor
markets in the U.S. economy created concern that inflation may begin to
accelerate, and the Federal Reserve may need to tighten short-term rates to slow
growth. The result of this concern has led to steadily rising interest rates
during 1999.
Equity markets rose substantially throughout the period as the Dow Jones
Industrial Average broke through the 10,000 point barrier for the first time in
history. Stocks in the technology and communication sectors led the way, as
investors drove up prices based on the potential for future earnings growth.
Productivity accelerated throughout the period -- if sufficient, this can enable
firms to expand their earnings without raising prices, even with higher wage
costs. Although the market advance was narrow and favored large-cap growth
stocks, lately there has been a resurgence in large-cap value stocks and small-
and mid-cap growth stocks. In addition, a broadening of sectors enabled consumer
cyclicals, financials, and basic materials to report strong performance. The
increase in oil prices helped many international economies as well as the
domestic energy sector perform favorably. International markets bounced back
during the period, led by strong performance in the Pacific region. In
particular, Asian markets reported strong results, as the crisis of the past
year seems to be over. Equity markets in developing or emerging countries
advanced significantly, as the improving economies of Asia and Latin America
helped ease global unrest.
INVESTMENT STRATEGY
The Strategic Growth Portfolio is diversified in five funds, representing six
major asset classes. The combination of asset classes increases our ability to
manage risk over a long-term investment horizon. Asset classes ranging in risk
levels from money market instruments to international equities are intended to
shield the Portfolio from drastic swings in any one specific area of the
financial markets.
The overall investment strategy for the period was to:
o Increase overall equity positions to approximately 90% of assets; primarily
focused in large-cap companies (57%), which continued to lead the market.
o Reduce the cash, bond, and foreign equity positions in favor of large-cap
equities given the strength in the sector.
o Increase positions in technology and communication sectors through investment
in the WM GROWTH FUND.
REVIEW OF PORTFOLIO ALLOCATIONS
The Portfolio slightly increased its overall equity position during the period,
as strong results helped boost overall performance. The WM GROWTH FUND, which is
composed primarily of large-cap growth equities, was significantly increased due
to the market leadership of domestic growth investments and a favorable outlook
for these types of holdings. The WM GROWTH FUND held large positions in firms
such as America Online, Time Warner, and Nokia, all of which appreciated
substantially during the period. Much of the overall Portfolio return was
generated by the WM GROWTH and the WM GROWTH & INCOME FUNDS, which both
benefited from their concentration in large-cap issues. The WM GROWTH & INCOME
FUND is concentrated in large-cap value stocks, which also performed well during
the period as market breadth expanded. Although international equities performed
well and held a notable allocation (15%), the position was reduced in order to
take advantage of the greater growth potential provided by domestic equities.
OUTLOOK
The outlook for inflation is the decisive factor in determining the direction of
the current market environment. Markets are apt to become more volatile as
economic reports shed light on future growth and price pressures. While we see
price increases in some commodities driven by increasing global demand, we think
that deeply ingrained deflationary forces stemming from globalization, new
technology, and free-market reforms will continue to hold inflation in check --
if growth remains at current levels or slows somewhat. Although inflation has
been trending upward, we forecast this trend to remain moderate. The Federal
Reserve has announced a bias towards increasing interest rates and is poised to
do so if inflation accelerates from current levels. If employment cost growth
remains slow and prices do not advance, the Fed may not intervene, but instead
allow the markets to dictate the levels of short-term interest rates. In
addition, we think long-term interest rates are near their highs and do not
think they will exceed much beyond the 6% level.
We expect the U.S. stock market performance will continue to broaden in the
coming months. As market and sector leadership widens, the benefits of a
diversified portfolio will be even more evident. We also see strength in the
manufacturing sector as economic growth continues. With the rebound in
international markets, we expect the trade balance to improve from its lows of
recent quarters. Improvement in Japan will be slight as structural problems
remain, but the situation will help keep global prices in check.
The Y2K issue is an important area to address. Risk will probably come from
investor psychology rather than a fundamental disruption in business practice.
There could be less liquidity in fixed-income markets as lenders constrict loan
practices, especially overseas. In addition, market fears could incite a
sell-off of higher growth stocks. While these possibilities demand attention,
our long-term outlook on global equity markets remains strongly positive.
PORTFOLIO ALLOCATION AS OF APRIL 30, 1999++
GROWTH FUND 41%
MONEY MARKET FUND 2%
INTERNATIONAL GROWTH FUND 11%
SHORT TERM HIGH QUALITY BOND FUND 2%
GROWTH & INCOME FUND 44%
Note: as a percentage of investment company securities
ASSET CLASS DIVERSIFICATION AS OF APRIL 30, 1999++
LARGE-CAP STOCKS 57%
BONDS 5%
FOREIGN STOCKS 15%
CASH EQUIVALENTS 5%
MID-CAP STOCKS 16%
SMALL-CAP STOCKS 2%
++ may not reflect current allocation
<PAGE>
CONSERVATIVE GROWTH
PORTFOLIO
GROWTH OF A $10,000 INVESTMENT(5)
(CLASS A SHARES)
Fund
(Class A
Fund adjusted
(Class A for
not maximum
adjusted 5.5% Capital Russell
for sales sales Market 3000
charge) charge) Benchmark(1) Index(2) Inflation(3)
- --------------------------------------------------------------------------------
Inception - 9/30/90 $10,000 $ 9,450 $10,000 $10,000 $10,000
10,199 9,639 10,294 9,922 10,016
10,427 9,854 10,490 10,604 10,039
10,555 9,975 10,691 10,930 10,093
10,911 10,311 11,013 11,479 10,132
11,482 10,850 11,619 12,340 10,225
11,495 10,863 11,654 12,704 10,311
11,608 10,970 11,719 12,717 10,373
11,872 11,219 11,980 13,243 10,395
Jun 11,416 10,788 11,604 12,639 10,395
11,804 11,155 11,971 13,236 10,458
11,991 11,331 12,103 13,590 10,473
12,118 11,451 12,215 13,436 10,489
12,375 11,695 12,375 13,660 10,505
12,105 11,439 12,094 13,137 10,536
Dec 91 12,971 12,258 12,822 14,609 10,567
13,125 12,403 12,750 14,510 10,583
13,238 12,510 12,749 14,703 10,613
12,799 12,095 12,475 14,378 10,660
12,848 12,141 12,609 14,668 10,676
13,152 12,428 12,830 14,767 10,707
Jun 12,975 12,261 12,636 14,501 10,715
13,090 12,370 12,822 15,100 10,731
13,166 12,442 12,883 14,774 10,769
13,123 12,401 12,943 14,972 10,824
13,068 12,350 12,848 15,120 10,839
13,370 12,635 13,079 15,741 10,855
Dec 92 13,550 12,805 13,212 16,023 10,894
13,737 12,981 13,305 16,180 10,917
14,001 13,231 13,448 16,285 10,947
14,408 13,616 13,810 16,692 10,978
14,498 13,701 13,947 16,250 11,016
14,831 14,015 14,179 16,716 11,032
Jun 14,835 14,019 14,201 16,825 11,024
14,940 14,119 14,296 16,796 11,078
15,576 14,719 14,721 17,450 11,117
15,620 14,761 14,666 17,448 11,156
15,935 15,059 14,905 17,698 11,187
15,540 14,685 14,596 17,425 11,202
Dec 93 16,068 15,184 14,936 17,767 11,218
16,659 15,742 15,416 18,310 11,218
16,309 15,412 15,227 17,867 11,250
15,655 14,794 14,787 17,086 11,273
15,711 14,847 14,949 17,281 11,319
15,555 14,699 15,031 17,471 11,327
Jun 15,207 14,371 14,914 16,993 11,327
15,656 14,795 15,185 17,519 11,358
16,083 15,198 15,577 18,283 11,397
15,827 14,956 15,360 17,894 11,435
16,071 15,187 15,593 18,189 11,451
15,521 14,667 15,210 17,525 11,459
Dec 94 15,510 14,657 15,317 17,797 11,498
15,447 14,597 15,366 18,186 11,529
15,694 14,831 15,653 18,928 11,575
15,932 15,056 16,050 19,400 11,607
16,236 15,343 16,402 19,906 11,615
16,610 15,696 16,711 20,629 11,630
Jun 17,137 16,194 16,892 21,225 11,630
17,913 16,927 17,377 22,078 11,676
18,076 17,082 17,321 22,275 11,723
18,498 17,481 17,689 23,139 11,762
18,045 17,053 17,577 22,940 11,801
18,551 17,531 18,020 23,958 11,824
Dec 95 19,023 17,977 18,351 24,349 11,848
19,293 18,232 18,657 25,055 11,848
19,847 18,755 18,754 25,423 11,879
20,268 19,153 18,910 25,678 11,902
20,789 19,646 19,207 26,165 11,942
21,123 19,961 19,388 26,835 11,933
Jun 20,730 19,590 19,426 26,749 11,925
19,446 18,377 18,907 25,348 11,995
20,234 19,121 19,159 26,116 12,034
20,942 19,790 19,737 27,536 12,096
20,647 19,511 19,905 28,040 12,144
21,279 20,108 20,663 30,017 12,167
Dec 96 21,166 20,002 20,504 29,657 12,174
21,416 20,238 20,924 31,297 12,197
21,103 19,942 21,029 31,332 12,220
20,251 19,137 20,656 29,915 12,259
20,583 19,451 21,165 31,390 12,299
21,871 20,668 22,086 33,534 12,322
Jun 22,578 21,336 22,772 34,929 12,322
23,720 22,415 23,633 37,668 12,361
22,826 21,570 22,852 36,138 12,400
23,885 22,571 23,689 38,187 12,431
22,929 21,668 22,993 36,904 12,446
22,909 21,649 23,314 38,318 12,438
Dec 97 22,994 21,729 23,560 39,084 12,453
23,258 21,979 23,862 39,490 12,477
24,730 23,370 24,910 42,314 12,500
25,742 24,326 25,607 44,413 12,524
26,071 24,637 25,784 44,848 12,547
25,435 24,036 25,488 43,740 12,569
Jun 26,007 24,577 25,899 45,219 12,584
25,503 24,100 25,806 44,396 12,599
21,813 20,613 23,582 37,594 12,615
22,888 21,629 24,234 40,158 12,630
Oct 98 24,096 22,771 25,527 43,207 12,661
25,479 24,078 26,459 45,849 12,661
27,327 25,824 27,337 48,763 12,653
28,709 27,130 27,826 50,420 12,684
27,957 26,420 27,251 48,634 12,699
29,629 28,000 28,009 50,418 12,737
Apr 99 31,037 29,330 28,731 52,692 12,764
+ The performance of the Class B Shares was different than that shown above for
the Class A Shares, based on the difference in sales loads and fees paid by
Class B shareholders.
- --------------------------------------------------------------------------------
TOTAL RETURNS AS OF 4/30/99(5)
CLASS A SHARES 1 Year 5 Year* Since Inception*
(September 30, 1990)
Fund (not adjusted for sales charge) 19.03% 14.56% 14.10%
- --------------------------------------------------------------------------------
Fund (adjusted for maximum 5.5%
sales charge) 12.49% 13.28% 13.36%
- --------------------------------------------------------------------------------
Capital Market Benchmark(1) 11.43% 13.96% 13.08%
- --------------------------------------------------------------------------------
CLASS B SHARES 1 Year 5 Year* Since Inception*
(May 31, 1994)
Fund (not adjusted for contingent
deferred sales charge) 18.19% N/A 15.07%
- --------------------------------------------------------------------------------
Fund (adjusted for maximum contingent
deferred sales charge) 13.19% N/A 14.95%
- --------------------------------------------------------------------------------
Capital Market Benchmark(1) 11.43% N/A 14.53%
- --------------------------------------------------------------------------------
(1) The Conservative Growth Portfolio's benchmark is a blended mix of capital
market indices that are intended to represent a proxy for Portfolio
performance. The benchmark allocation is as follows: 35% S&P 500 Index, 20%
MSCI EAFE + Emerging Markets Index, 20% Lehman Bros. Mutual Fund (1-5)
Gov/Corp Index, 20% Salomon Bros. 90-day T-Bills Index, and 5% Russell 2000
Growth 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 Russell 3000 Index is a broad-based index and is intended to represent
the majority of the U.S. equity market.
(3) Inflation is measured by the Consumer Price Index for all urban consumers.
(4) Annual rate of inflation: 2.60%. 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. The Portfolio's performance would have been lower had the
Advisor not waived a portion of its fees or reimbursed certain other
expenses and the Fund's custodian had not allowed its fees to be reduced by
credits.
* Annualized
PERFORMANCE REVIEW
The SAM CONSERVATIVE GROWTH PORTFOLIO (A Shares) returned 28.80% (21.70%
adjusted for the maximum sales charge+) for the six-month period ended April 30,
1999. The Portfolio (not adjusted for sales charge) outperformed its benchmark
index for all periods. The Portfolio continues to be managed in an effort to
reduce volatility relative to single asset class investments. Long-term results
are favorable and provide a premium over inflation; since inception, the
Portfolio's A shares have returned 11.50%* above the rate of inflation(4)
(10.76%* adjusted for the maximum sales charge+).
ECONOMIC/MARKET REVIEW
The U.S. economy grew at a very strong rate over the past six months, advancing
6% in the fourth quarter of 1998 and 4.1% in the first quarter of 1999. These
results surprised most market participants, as the effects of a negative trade
balance did not hamper overall results as much as expected. High levels of
personal income, large tax refunds, and strong consumer confidence propelled the
economy forward. The high growth rates and tight labor markets in the U.S.
economy created concern that inflation may begin to accelerate, and the Federal
Reserve may need to tighten short-term rates to slow growth. The result of this
concern has led to steadily rising interest rates during 1999. With prices
moving in the opposite direction as interest rates, fixed-income investments
generally reported weak results for the period. However, high-yield bonds
performed very well relative to other bond classes as economic strength
positively influenced lower-grade issues.
Equity markets rose substantially throughout the period, as the Dow Jones
Industrial Average broke through the 10,000 point barrier for the first time in
history. Stocks in the technology and communication sectors led the way, as
investors drove up prices based on the potential for future growth. Productivity
accelerated throughout the period -- if sufficient, this can enable firms to
expand their earnings without raising prices, even with higher wage costs.
Although the market advance was narrow and favored large-cap growth stocks,
lately there has been a resurgence in large-cap value stocks and small- and
mid-cap growth stocks. Interna-tional markets bounced back during the period,
led by strong performance in the Pacific region. In particular, Asian markets
reported strong results, as the crisis of the past year seems to be over. Equity
markets in developing or emerging countries advanced significantly, as the
improving econ omies of Asia and Latin America helped ease global unrest.
INVESTMENT STRATEGY
The CONSERVATIVE GROWTH PORTFOLIO is diversified in five funds, representing six
major asset classes. The combination of asset classes increases our ability to
manage risk over a long-term investment horizon. Asset classes ranging in risk
levels from money market instruments to international equities are intended to
shield the Portfolio from drastic swings in any one specific area of the
financial markets.
The overall investment strategy for the period was to:
o Increase overall equity positions to approximately 82% of assets; primarily
focused in large-cap companies (49%), which continued to lead the market.
o Reduce the cash, small-cap positions, and international equities in favor of
large-cap equities given strength in the sector.
o Introduce a small holding in high-yield bonds to take advantage of growth
potential and yield characteristics offered by these lower-grade bonds.
REVIEW OF PORTFOLIO ALLOCATIONS
The Portfolio slightly increased its overall equity position during the period
as strong results helped boost overall performance. The WM GROWTH FUND, which is
composed primarily of large-cap growth equities, was significantly increased due
to a favorable long-term outlook for this asset class. The WM GROWTH FUND held
large positions in firms such as America Online, Time Warner, and Nokia, all
which appreciated substantially during the period. Much of the overall return
for the Portfolio was generated by the WM GROWTH and the WM GROWTH & INCOME
FUNDS, which benefited from their concentration in strong performing large-cap
issues. Although international equities performed well as foreign markets
rebounded, our position (18%) was reduced in order to take advantage of the
strength in domestic markets. We added a position in the WM HIGH YIELD FUND to
take advantage of the relative strength of that asset class as the
flight-to-quality ended and prospects for global growth improved -- the position
provided strong performance for the period.
OUTLOOK
The outlook for inflation is the decisive factor in determining the direction of
the current market environment. Markets are apt to become more volatile as
economic reports shed light on future growth and price pressures. While we see
price increases in some commodities driven by increasing global demand, we think
that deeply ingrained deflationary forces stemming from globalization, new
technology, and free market reforms will continue to hold inflation in check if
growth remains at current levels or slows somewhat. Although inflation has been
trending upward, we forecast this trend to remain moderate. The Federal Reserve
has announced a bias towards increasing interest rates and is poised to do so if
inflation accelerates from current levels. If employment cost growth remains
slow and prices do not advance, the Fed may not intervene, but instead allow the
marke ts to dictate the levels of short-term interest rates. In addition, we
think long-term interest rates are near their highs and do not think they will
exceed much beyond the 6% level.
We expect the U.S. stock market performance will continue to broaden in the
coming months. As market and sector leadership widens, the benefits of a
diversified portfolio will be even more evident. We also see strength in the
manufacturing sector as economic growth continues. With the rebound in
international markets, we expect the trade balance to improve from its lows of
recent quarters. Improvement in Japan will be slight as structural problems
remain, but the situation will help keep global prices in check.
The Y2K issue is an important area to address. Risk will probably come from
investor psychology rather than a fundamental disruption in business practice.
There could be less liquidity in fixed-income markets as lenders constrict loan
practices, especially overseas. In addition, market fears could incite a
sell-off of higher growth stocks. While these possibilities demand attention,
our longer-term outlook on global equity markets remains strongly positive.
PORTFOLIO ALLOCATION AS OF APRIL 30, 1999++
GROWTH FUND 34%
HIGH YIELD FUND 5%
INTERNATIONAL GROWTH FUND 14%
MONEY MARKET FUND 8%
GROWTH & INCOME FUND 39%
Note: as a percentage of investment company securities
ASSET CLASS DIVERSIFICATION AS OF APRIL 30, 1999++
LARGE-CAP STOCKS 49%
CORPORATE BONDS 3%
OTHER BONDS 4%
FOREIGN STOCKS 18%
CASH EQUIVALENTS 11%
MID-CAP STOCKS 14%
SMALL-CAP STOCKS 1%
++ may not reflect current allocation
<PAGE>
BALANCED
PORTFOLIO
GROWTH OF A $10,000 INVESTMENT(6)
(CLASS A SHARES)
<TABLE>
<CAPTION>
Fund
Fund (Class A
(Class A Shares;
Shares; not adjusted
adjusted for the Capital Russell Lehman Brothers
for sales maximum 5.5% Market 3000 Aggregate
charge sales chg Benchmark(1) Index(2) Bond Index(3) Inflation(4)
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Inception - 9/30/90 $10,000 $ 9,450 $10,000 $10,000 $10,000 $10,000
10,211 9,649 10,286 9,922 10,127 10,016
10,335 9,767 10,384 10,604 10,345 10,039
10,458 9,883 10,537 10,930 10,506 10,093
10,736 10,145 10,734 11,479 10,636 10,132
11,160 10,546 11,076 12,340 10,727 10,225
11,059 10,451 11,071 12,704 10,801 10,311
11,180 10,566 11,156 12,717 10,917 10,373
11,349 10,724 11,301 13,243 10,981 10,395
Jun 11,059 10,451 11,137 12,639 10,975 10,395
11,360 10,735 11,378 13,236 11,128 10,458
11,527 10,893 11,489 13,590 11,368 10,473
11,649 11,008 11,647 13,436 11,599 10,489
11,768 11,121 11,783 13,660 11,728 10,505
11,604 10,966 11,694 13,137 11,836 10,536
Dec 91 12,279 11,604 12,104 14,609 12,187 10,567
12,201 11,530 12,014 14,510 12,021 10,583
12,247 11,574 12,021 14,703 12,100 10,613
11,962 11,304 11,865 14,378 12,032 10,660
12,063 11,399 11,987 14,668 12,118 10,676
12,340 11,661 12,200 14,767 12,347 10,707
Jun 12,236 11,563 12,159 14,501 12,518 10,715
12,329 11,651 12,268 15,100 12,773 10,731
12,454 11,769 12,405 14,774 12,902 10,769
12,398 11,716 12,456 14,972 13,056 10,824
12,235 11,562 12,332 15,120 12,882 10,839
12,438 11,754 12,416 15,741 12,885 10,855
Dec 92 12,581 11,889 12,529 16,023 13,090 10,894
12,741 12,040 12,634 16,180 13,341 10,917
12,969 12,255 12,787 16,285 13,574 10,947
13,318 12,585 13,025 16,692 13,631 10,978
13,502 12,759 13,201 16,250 13,727 11,016
13,743 12,987 13,310 16,716 13,745 11,032
Jun 13,770 13,013 13,357 16,825 13,993 11,024
13,887 13,124 13,443 16,796 14,073 11,078
14,330 13,542 13,694 17,450 14,319 11,117
14,366 13,576 13,660 17,448 14,358 11,156
14,601 13,797 13,796 17,698 14,411 11,187
14,257 13,473 13,612 17,425 14,289 11,202
Dec 93 14,620 13,816 13,842 17,767 14,366 11,218
15,101 14,270 14,153 18,310 14,560 11,218
14,790 13,977 14,037 17,867 14,306 11,250
14,215 13,433 13,751 17,086 13,953 11,273
14,163 13,384 13,818 17,281 13,841 11,319
14,019 13,248 13,878 17,471 13,840 11,327
Jun 13,749 12,993 13,858 16,993 13,810 11,327
14,169 13,390 14,064 17,519 14,084 11,358
14,462 13,667 14,252 18,283 14,101 11,397
14,185 13,405 14,096 17,894 13,894 11,435
14,342 13,553 14,221 18,189 13,882 11,451
13,940 13,173 14,028 17,525 13,851 11,459
Dec 94 13,945 13,178 14,099 17,797 13,947 11,498
13,993 13,224 14,191 18,186 14,223 11,529
14,282 13,496 14,406 18,928 14,561 11,575
14,462 13,667 14,645 19,400 14,650 11,607
14,759 13,947 14,894 19,906 14,855 11,615
15,229 14,392 15,167 20,629 15,430 11,630
Jun 15,476 14,625 15,245 21,225 15,543 11,630
15,936 15,059 15,487 22,078 15,509 11,676
16,097 15,211 15,489 22,275 15,696 11,723
16,382 15,481 15,693 23,139 15,848 11,762
16,236 15,343 15,704 22,940 16,054 11,801
16,678 15,761 15,957 23,958 16,295 11,824
Dec 95 16,975 16,042 16,191 24,349 16,523 11,848
17,181 16,236 16,383 25,055 16,632 11,848
17,300 16,348 16,369 25,423 16,343 11,879
17,373 16,418 16,432 25,678 16,229 11,902
17,633 16,664 16,547 26,165 16,138 11,942
17,762 16,785 16,582 26,835 16,105 11,933
Jun 17,617 16,648 16,707 26,749 16,321 11,925
17,029 16,092 16,558 25,348 16,365 11,995
17,363 16,408 16,649 26,116 16,338 12,034
17,871 16,888 16,970 27,536 16,622 12,096
17,941 16,954 17,152 28,040 16,991 12,144
18,542 17,522 17,550 30,017 17,281 12,167
Dec 96 18,418 17,405 17,459 29,657 17,121 12,174
18,720 17,690 17,630 31,297 17,174 12,197
18,645 17,620 17,743 31,332 17,217 12,220
18,158 17,160 17,605 29,915 17,026 12,259
18,514 17,496 17,901 31,390 17,281 12,299
19,292 18,231 18,317 33,534 17,445 12,322
Jun 19,730 18,645 18,693 34,929 17,653 12,322
20,726 19,586 19,127 37,668 18,129 12,361
20,065 18,962 18,747 36,138 17,975 12,400
20,739 19,599 19,164 38,187 18,241 12,431
20,132 19,024 18,924 36,904 18,506 12,446
20,158 19,049 19,065 38,318 18,591 12,438
Dec 97 20,297 19,181 19,236 39,084 18,779 12,453
20,551 19,420 19,475 39,490 19,019 12,477
21,516 20,333 19,910 42,314 19,004 12,500
22,203 20,982 20,215 44,413 19,068 12,524
22,454 21,219 20,334 44,848 19,168 12,547
22,164 20,945 20,301 43,740 19,350 12,569
Jun 22,552 21,312 20,486 45,219 19,514 12,584
22,320 21,092 20,557 44,396 19,555 12,599
19,992 18,892 19,816 37,594 19,874 12,615
20,643 19,508 20,102 40,158 20,339 12,630
21,461 20,281 20,691 43,207 20,231 12,661
22,371 21,140 21,082 45,849 20,346 12,661
Dec 98 23,601 22,303 21,432 48,763 20,407 12,653
24,463 23,117 21,632 50,420 20,552 12,684
23,898 22,583 21,418 48,634 20,193 12,699
24,868 23,500 21,793 50,418 20,304 12,737
Apr 99 25,766 24,348 22,133 52,692 20,369 12,764
+ The performance of the Class B Shares was different than that shown above for the Class A Shares, based
on the difference in sales loads and fees paid by Class B shareholders.
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
TOTAL RETURNS AS OF 4/30/99(6)
CLASS A SHARES 1 YEAR 5 YEAR* SINCE INCEPTION*
(SEPTEMBER 30, 1990)
<S> <C> <C> <C>
Fund (not adjusted for sales charge) 14.73% 12.71% 11.65%
Fund (adjusted for maximum 5.5% sales charge) 8.37% 11.44% 10.91%
Capital Market Benchmark(1) 8.85% 9.88% 9.70%
<CAPTION>
CLASS B SHARES 1 Year 5 Year* Since Inception*
(June 30, 1994)
<S> <C> <C> <C>
Fund (not adjusted for contingent deferred sales charge) 13.94% N/A 13.08%
Fund (adjusted for maximum contingent deferred sales charge) 8.94% N/A 12.96%
Capital Market Benchmark(1) 8.85% N/A 10.17%
(1) The Balanced Portfolio's benchmark is a blended mix of capital market indices that are 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 Index, 20% Lehman Bros. Mortgage
Index, 15% S&P 500, and 15% MSCI EAFE +Emerging Markets Free 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 Russell 3000 Index is a broad-based index and is intended to represent the majority of the U.S. equity
market.
(3) The Lehman Brothers Aggregate Bond Index is a broad-based index intended to represent the fixed-income
market as a whole.
(4) Inflation is measured by the Consumer Price Index for all urban consumers.
(5) Annual rate of inflation: 2.60%. Source: Ibbotson Associates.
(6) 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. The Portfolio's performance would have been lower
had the Advisor not waived a portion of its fees or reimbursed certain other expenses and the Fund's
custodian had not allowed its fees to be reduced by credits.
* Annualized
</TABLE>
PERFORMANCE REVIEW
The SAM BALANCED PORTFOLIO (A Shares) returned 20.05% (13.46% adjusted for the
maximum sales charge+) for the six-month period ended April 30, 1999. The
Portfolio outperformed its benchmark index for all periods(1) (not adjusted for
sales charge), while managing to reduce volatility relative to single asset
class investments. Long-term results are favorable and provide a premium over
inflation; since inception, the Portfolio has returned 9.05%* above the rate of
inflation(5) (8.31%* adjusted for the maximum sales charge+).
ECONOMIC/MARKET REVIEW
The U.S. economy grew at a very strong rate over the past six months, advancing
6% in the fourth quarter of 1998 and 4.1% in the first quarter of 1999. These
results surprised most market participants, as the effects of a negative trade
balance did not offset the strength of consumer spending as much as expected.
High levels of personal income, large tax refunds, and strong consumer
confidence propelled the economy forward. The high growth rates and tight labor
markets in the U.S. economy created con cern that inflation may begin to
accelerate, and the Federal Reserve may need to raise short-term rates to slow
growth. The result of this concern has been steadily rising interest rates
during 1999. With prices moving in the opposite direction as interest rates,
fixed-income investments generally reported weak results for the period.
However, high-yield bonds performed very well relative to other bond classes, as
economic strength positively influenced lower-grade issues.
Equity markets rose substantially throughout the period as the Dow Jones
Industrial Average broke through the 10,000 point barrier for the first time in
history. Stocks in the technology and communication sectors led the way, as
investors drove up prices based on the potential for growth in the future.
Productivity accelerated throughout the period -- if sufficient, this can enable
firms to expand their earnings without raising prices, even with higher wage
costs. Although the market advance was generally narrow and favored large-cap
growth stocks, lately there has been a resurgence in large-cap value stocks and
small- and mid-cap growth stocks as market breadth has begun to widen.
International markets bounced back during the period, led by strong performance
in the Pacific region. In particular, Asian markets reported strong results, as
the crisis of the past year seems to be over. Equity markets in developing or
emerging countries advanced significantly as the improving economies of Asia and
Latin America helped ease global unrest.
INVESTMENT STRATEGY
The BALANCED PORTFOLIO is diversified in seven funds, representing nine major
asset classes. The combination of asset classes increases our ability to manage
risk over a long-term investment horizon. Asset classes ranging in risk levels
from short-term money market instruments to international equities are intended
to shield the Portfolio from drastic swings in any one specific area of the
financial markets.
The overall investment strategy for the period was to:
o Increase overall equity positions to approximately 62% of assets; primarily
focused in large-cap companies, which continued to lead the market.
o Reduce the cash position in favor of high-yield bonds and short-term bonds to
gain yield without substantially extending interest rate risk.
o Reduce positions in both international and small-cap equities to lower overall
Portfolio risk levels.
REVIEW OF PORTFOLIO ALLOCATIONS
The Portfolio slightly increased its equity position during the period as strong
results helped boost performance. Much of the overall return was generated by
the WM GROWTH and the WM GROWTH & INCOME FUNDS, which benefited from their
concentration in strong performing large-cap issues. The WM GROWTH FUND held
large positions in firms such as America Online, Time Warner, and Nokia, all of
which appreciated significantly during the period. International equities (17%
of the Portfolio) also performed well during the period, adding to performance.
The position in the WM EMERGING GROWTH FUND was eliminated during the period, as
the Portfolio remained focused on large-cap holdings. Fixed-income investments
provided positive performance and helped manage overall risk levels. The
investment strategy of the bond holdings focused on positions in mortgage
securities to gain yield, and in high-yield bonds, as the flight-to-quality
ended and lower-rated debt performed very well.
OUTLOOK
The outlook for inflation is the decisive factor in determining the direction of
the current market environment. Markets are apt to become more volatile as
economic reports shed light on future growth and price pressures. While we see
price increases in some commodities driven by increasing global demand, we think
that deeply ingrained deflationary forces stemming from globalization, new
technology, and free market reforms will continue to hold inflation in check--if
growth remains at current levels or slows somewhat. The Federal Reserve has
announced a bias towards increasing interest rates and is poised to do so if
inflation accelerates from current levels. If employment cost growth remains
slow and prices do not advance, the Fed may not intervene, but instead allow the
markets to dictate the levels of short-term interest rates. In addition, we
think long-term interest rates are near their highs and do not think they will
exceed much beyond the 6% level.
We expect the U.S. stock market performance will continue to broaden in the
coming months. As market and sector leadership widens, the benefits of a
diversified portfolio will be even more evident. We also see strength in the
manufacturing sector as economic growth continues. With the rebound in
international markets, we expect the trade balance to improve from its lows of
recent quarters. Improvement in Japan will be slight as structural problems
remain, but the situation will help keep global prices in check.
The Y2K issue is an important area to address. Risk will probably come
from investor psychology rather than a fundamental disruption in business
practice. There could be less liquidity in fixed-income markets as lenders
constrict loan practices, especially overseas. In addition, market fears could
incite a sell-off of higher-growth stocks. While these possibilities demand
attention, our longer-term outlook on global equity markets remains strongly
positive.
PORTFOLIO ALLOCATION AS OF APRIL 30, 1999++
GROWTH FUND 24%
INTERNATIONAL GROWTH FUND 15%
SHORT TERM HIGH QUALITY BOND FUND 9%
HIGH YIELD FUND 5%
MONEY MARKET FUND 7%
U.S. GOVERNMENT SECURITIES FUND 13%
GROWTH & INCOME FUND 27%
Note: as a percentage of investment company securities
ASSET CLASS DIVERSIFICATION AS OF APRIL 30, 1999++
LARGE-CAP STOCKS 34%
OTHER BONDS 4%
FOREIGN STOCKS 17%
SHORT-TERM BONDS 8%
CASH EQUIVALENTS 10%
TREASURIES 2%
MORTGAGE BACKED 11%
SMALL-CAP STOCKS 1%
MID-CAP STOCKS 10%
CORPORATE BONDS 3%
++ may not reflect current allocation
FLEXIBLE INCOME
PORTFOLIO
GROWTH OF A $10,000 INVESTMENT(5)
(CLASS A SHARES)
Fund
(Class A
Fund adjusted
(Class A for Lehman
not maximum Brothers
adjusted 4.5% Capital Aggregate
for sales sales Market Bond
charge) charge) Benchmark(1) Index(2) Inflation(3)
- --------------------------------------------------------------------------------
Inception*- 3/31/93 $10,000 $ 9,550 $10,000 $10,000 $10,000
9,977 9,528 10,022 10,070 10,035
10,121 9,666 10,052 10,083 10,049
10,255 9,793 10,117 10,266 10,042
10,301 9,838 10,135 10,324 10,091
10,539 10,065 10,238 10,505 10,127
10,562 10,087 10,255 10,533 10,162
10,676 10,195 10,300 10,572 10,190
10,544 10,069 10,290 10,482 10,205
Dec 93 10,643 10,164 10,339 10,539 10,219
10,863 10,374 10,430 10,681 10,219
10,636 10,157 10,363 10,495 10,248
10,302 9,839 10,260 10,236 10,269
10,173 9,715 10,253 10,154 10,311
10,039 9,588 10,291 10,153 10,318
Jun 9,907 9,461 10,284 10,131 10,318
10,140 9,684 10,399 10,332 10,346
10,225 9,765 10,473 10,345 10,381
10,093 9,639 10,426 10,193 10,417
10,123 9,667 10,471 10,184 10,431
10,028 9,576 10,424 10,161 10,439
Dec 94 9,994 9,544 10,476 10,231 10,474
10,140 9,684 10,609 10,434 10,502
10,382 9,915 10,770 10,682 10,544
10,483 10,012 10,853 10,747 10,573
10,659 10,180 10,967 10,898 10,580
11,083 10,585 11,168 11,320 10,594
Jun 11,177 10,674 11,249 11,402 10,594
11,318 10,808 11,321 11,377 10,636
11,476 10,960 11,389 11,515 10,679
11,645 11,121 11,494 11,626 10,714
11,654 11,129 11,565 11,778 10,750
11,897 11,362 11,699 11,954 10,771
Dec 95 12,090 11,546 11,797 12,122 10,793
12,131 11,585 11,911 12,202 10,793
12,035 11,493 11,899 11,989 10,821
12,026 11,485 11,912 11,905 10,842
12,044 11,502 11,943 11,839 10,878
12,074 11,530 11,994 11,815 10,870
Jun 12,120 11,575 12,078 11,973 10,863
12,007 11,467 12,067 12,006 10,927
12,083 11,539 12,126 11,985 10,962
12,343 11,787 12,289 12,194 11,019
12,579 12,013 12,437 12,465 11,062
12,942 12,360 12,618 12,678 11,083
Dec 96 12,874 12,294 12,596 12,560 11,090
13,046 12,459 12,729 12,599 11,111
13,083 12,494 12,774 12,630 11,132
12,896 12,315 12,715 12,490 11,167
13,072 12,484 12,882 12,677 11,203
13,287 12,689 13,034 12,798 11,224
Jun 13,438 12,833 13,171 12,950 11,224
13,881 13,257 13,401 13,300 11,260
13,725 13,107 13,338 13,187 11,295
13,963 13,335 13,501 13,382 11,323
13,973 13,344 13,543 13,576 11,337
14,047 13,415 13,643 13,638 11,330
Dec 97 14,193 13,555 13,743 13,776 11,344
14,321 13,677 13,860 13,952 11,365
14,527 13,874 13,985 13,941 11,387
14,700 14,039 14,107 13,989 11,409
14,774 14,109 14,181 14,061 11,429
14,766 14,102 14,226 14,195 11,450
Jun 14,924 14,253 14,346 14,316 11,463
14,835 14,167 14,387 14,346 11,477
14,270 13,627 14,297 14,580 11,491
14,651 13,991 14,537 14,921 11,505
14,886 14,217 14,692 14,842 11,533
15,211 14,526 14,805 14,926 11,533
Dec 98 15,505 14,807 14,938 14,971 11,526
15,813 15,101 15,064 15,077 11,554
15,587 14,886 14,980 14,813 11,568
15,853 15,140 15,118 14,895 11,603
Apr 99 16,178 15,450 15,225 14,943 11,627
+ The performance of the Class B Shares was different than that shown above for
the Class A Shares, based on the difference in sales loads and fees paid by
Class B shareholders.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
TOTAL RETURNS AS OF 4/30/99(5)
CLASS A SHARES 1 YEAR 5 YEAR* SINCE INCEPTION*
(MARCH 31, 1993)
<S> <C> <C> <C>
Fund (not adjusted for sales charge) 9.51% 9.71% 8.22%
Fund (adjusted for maximum 4.5% sales charge) 4.55% 8.71% 7.39%
Capital Market Benchmark(1) 7.36% 8.23% 7.15%
<CAPTION>
CLASS B SHARES 1 YEAR 5 YEAR* SINCE INCEPTION*
(JUNE 30, 1994)
<S> <C> <C> <C>
Fund (not adjusted for contingent deferred sales charge) 8.71% N/A 9.89%
Fund (adjusted for maximum contingent deferred sales charge) 3.71% N/A 9.74%
Capital Market Benchmark(1) 7.36% N/A 8.46%
(1) The Flexible Income Portfolio's benchmark is a blended mix of capital market indices that are 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-Bills Index, 10% Lehman Bros. Mortgage
Index, and 10% S&P 500 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 Bond Index is a broad-based index intended to represent the U.S.
fixed-income market as a whole.
(3) Inflation is measured by the Consumer Price Index for all urban consumers.
(4) Annual rate of inflation: 2.34%. 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.
The Portfolio's performance would have been lower had the Advisor not waived a portion of its fees or
reimbursed certain other expenses and the Fund's custodian had not allowed its fees to be reduced by
credits.
* Annualized
</TABLE>
PERFORMANCE REVIEW
The SAM FLEXIBLE INCOME PORTFOLIO (A Shares) returned 8.68% (3.80% adjusted for
the maximum sales charge+) for the six-month period ended April 30, 1999. The
Portfolio outperformed its benchmark index for all periods, while managing to
reduce volatility relative to single asset class investments. Long-term results
are favorable and provide a premium over i nflation; since inception, the
Portfolio has returned 5.88%* above the rate of inflation4 (5.05%* adjusted for
the maximum sales charge+).
ECONOMIC/MARKET REVIEW
The U.S. economy grew at a very strong rate over the past six months, advancing
6% in the fourth quarter of 1998 and 4.1% in the first quarter of 1999. These
results surprised most market participants, as the effects of a negative trade
balance did not offset the strength of consumer spending as much as expected.
High levels of personal income, large tax refunds, and strong consumer
confidence propelled the economy forward. The high growth rates and tight labor
markets in the U.S. economy created concern that inflation may begin to
accelerate, and the Federal Reserve may need to tighten short-term rates to slow
growth. The result of this concern has been steadily rising interest rates
during 1999. With prices moving in the opposite direction as interest rates,
fixed-income investments generally reported weak results for the period.
However, high-yield bonds performed very well relative to other bond classes, as
economic strength positively influenced lower-grade issues.
Equity markets rose substantially throughout the period as the Dow Jones
Industrial Average broke through the 10,000 point barrier for the first time in
history. Stocks in the technology and communication sectors led the way as
investors drove up prices based on the potential for growth in the future.
Productivity accelerated throughout the period -- if sufficient, this can enable
firms to expand their earnings without raising prices, even with higher wage
costs. Although the market advance was narrow and favored large-cap growth
stocks, lately there has been a resurgence in large-cap value stocks and small-
and mid-cap growth stocks.
INVESTMENT STRATEGY
THE FLEXIBLE INCOME PORTFOLIO is diversified in seven funds, representing eight
major asset classes. The combination of asset classes increases our ability to
manage risk over a long-term investment horizon. Asset classes ranging in risk
levels from short-term money market instruments to equities are intended to
shield the Portfolio from drastic swings in any one specific area of the
financial markets.
The overall investment strategy for the period was to:
o Maintain positions in WM GROWTH and WM GROWTH & INCOME FUNDS as large-cap
stocks dominated the market.
o Significantly reduce the cash position and allocate into short-term
high-quality bonds in an effort to increase yield while managing risk.
o Introduce a small position in high yield bonds to provide additional yield and
potential for price appreciation as economic growth continued.
o Reduce allocations to U.S. government securities and increase positions in
corporate debt as the flight-to quality ended.
REVIEW OF PORTFOLIO ALLOCATIONS
Much of the overall return was generated by the 26% weighting in the WM GROWTH
and the WM GROWTH & INCOME FUNDS, which benefited from their concentration in
strong performing large-cap equity issues. Fixed-income investments provided
positive performance and helped to manage overall risk levels. The investment
strategies of the bond holdings focused on positions in mortgage securities to
gain yield; and in corporate bonds, as the flight-to-quality ended and
lower-rated debt performed very well. We allocated 5% of the overall Portfolio
into the WM HIGH YIELD FUND, which provided both income and price appreciation
throughout the period. Although strong growth caused interest rates to increase
in 1999, the Portfolio was cushioned by its emphasis on short- to
intermediate-term securities. In order to enhance overall yield, a large portion
of the cash position was allocated into the WM SHORT TERM HIGH QUALITY BOND
FUND. This Fund generates more income while managing interest rate risk with its
concentration in short-term holdings. We continue to hold 19% of the Portfolio
in mortgage-backed securities, which should perform very well if interest rates
remain relatively stable.
OUTLOOK
The outlook for inflation is the decisive factor in determining the direction of
the current market environment. Markets are apt to become more volatile as
economic reports shed light on future growth and price pressures. While we see
price increases in some commodities driven by increasing global demand, we think
that deeply ingrained deflationary forces stemming from globalization, new
technology, and free market reforms will continue to hold inflation in check if
growth remains at current levels or slows somewhat. Although inflation has been
trending upward, we forecast this trend to remain moderate. The Federal Reserve
has announced a bias towards increasing interest rates and is poised to do so if
inflation accelerates from current levels. If employment cost growth remains
slow and prices do not advance, the Fed may not intervene, but instead allow the
markets to dictate the levels of short-term interest rates. In addition, we
think long-term interest rates are near their highs and do not think they will
exceed much beyond the 6% level.
We expect the U.S. stock market performance will continue to broaden in the
coming months. As market and sector leadership widens, the benefits of a
diversified portfolio will be even more evident. We also see strength in the
manufacturing sector as economic growth continues.
The Y2K issue is an important area to address. Risk will probably come from
investor psychology rather than a fundamental disruption in business practice.
There could be less liquidity in fixed-income markets as lenders constrict loan
practices, especially overseas. In addition, market fears could incite a
sell-off of higher growth stocks. While these possibilities demand attention,
our longer-term outlook on global markets remains positive.
PORTFOLIO ALLOCATION AS OF APRIL 30, 1999++
INCOME FUND 20%
HIGH YIELD FUND 5%
GROWTH & INCOME FUND 21%
GROWTH FUND 5%
MONEY MARKET FUND 10%
SHORT TERM HIGH QUALITY BOND FUND 20%
U.S. GOVERNMENT SECURITIES FUND 19%
Note: as a percentage of investment company securities
ASSET CLASS DIVERSIFICATION AS OF APRIL 30, 1999++
FOREIGN BONDS 3%
DOMESTIC STOCKS 23%
FOREIGN STOCKS 1%
SHORT-TERM BONDS 19%
CASH EQUIVALENTS 13%
TREASURIES 4%
MORTGAGE BACKED 19%
OTHER BONDS 1%
CORPORATE BONDS 17%
++ may not reflect current allocation
<PAGE>
INCOME
PORTFOLIO
GROWTH OF A $10,000 INVESTMENT(5)
(CLASS A SHARES)
Fund
(Class A
Fund adjusted
(Class A for Lehman
not maximum Brothers
adjusted 4.5% Capital Aggregate
for sales sales Market Bond
charge) charge) Benchmark(1) Index(2) Inflation(3)
- --------------------------------------------------------------------------------
Inception*- 9/30/90 $10,000 $ 9,550 $10,000 $10,000 $10,000
10,007 9,556 10,074 10,127 10,016
10,173 9,715 10,177 10,345 10,039
10,328 9,864 10,284 10,506 10,093
10,386 9,919 10,370 10,636 10,132
10,558 10,083 10,457 10,727 10,225
10,661 10,182 10,530 10,801 10,311
10,823 10,336 10,616 10,917 10,373
10,891 10,401 10,681 10,981 10,395
Jun 10,896 10,406 10,730 10,975 10,395
11,047 10,550 10,825 11,128 10,458
11,302 10,794 10,951 11,368 10,473
11,455 10,940 11,065 11,599 10,489
11,596 11,075 11,155 11,728 10,505
11,711 11,184 11,234 11,836 10,536
Dec 91 12,033 11,492 11,386 12,187 10,567
11,913 11,377 11,364 12,021 10,583
12,004 11,464 11,419 12,100 10,613
11,926 11,390 11,421 12,032 10,660
11,997 11,458 11,485 12,118 10,676
12,241 11,691 11,597 12,347 10,707
Jun 12,416 11,858 11,692 12,518 10,715
12,688 12,117 11,810 12,773 10,731
12,767 12,192 11,885 12,902 10,769
12,868 12,289 11,966 13,056 10,824
12,673 12,103 11,911 12,882 10,839
12,690 12,119 11,928 12,885 10,855
Dec 92 12,890 12,310 12,024 13,090 10,894
13,120 12,530 12,141 13,341 10,917
13,371 12,769 12,244 13,574 10,947
13,447 12,841 12,284 13,631 10,978
13,533 12,924 12,342 13,727 11,016
13,625 13,012 12,360 13,745 11,032
Jun 13,869 13,245 12,463 13,993 11,024
13,979 13,350 12,507 14,073 11,078
14,225 13,585 12,611 14,319 11,117
14,214 13,574 12,637 14,358 11,156
14,331 13,686 12,678 14,411 11,187
14,191 13,553 12,663 14,289 11,202
Dec 93 14,245 13,604 12,711 14,366 11,218
14,466 13,815 12,810 14,560 11,218
14,123 13,488 12,740 14,306 11,250
13,627 13,013 12,636 13,953 11,273
13,422 12,818 12,603 13,841 11,319
13,329 12,729 12,615 13,840 11,327
Jun 13,250 12,654 12,634 13,810 11,327
13,531 12,922 12,771 14,084 11,358
13,481 12,874 12,808 14,101 11,397
13,277 12,680 12,758 13,894 11,435
13,240 12,644 12,784 13,882 11,451
13,259 12,662 12,792 13,851 11,459
Dec 94 13,177 12,584 12,858 13,947 11,498
13,352 12,751 13,005 14,223 11,529
13,616 13,004 13,175 14,561 11,575
13,688 13,072 13,254 14,650 11,607
13,870 13,246 13,373 14,855 11,615
14,433 13,784 13,624 15,430 11,630
Jun 14,450 13,800 13,704 15,543 11,630
14,393 13,745 13,741 15,509 11,676
14,624 13,966 13,848 15,696 11,723
14,746 14,083 13,938 15,848 11,762
14,957 14,284 14,034 16,054 11,801
15,170 14,487 14,156 16,295 11,824
Dec 95 15,373 14,681 14,276 16,523 11,848
15,448 14,753 14,358 16,632 11,848
15,127 14,446 14,298 16,343 11,879
14,990 14,315 14,298 16,229 11,902
14,880 14,211 14,302 16,138 11,942
14,851 14,182 14,333 16,105 11,933
Jun 15,011 14,335 14,448 16,321 11,925
15,053 14,375 14,503 16,365 11,995
15,007 14,332 14,536 16,338 12,034
15,248 14,561 14,681 16,622 12,096
15,575 14,875 14,859 16,991 12,144
15,817 15,105 14,998 17,281 12,167
Dec 96 15,717 15,010 14,982 17,121 12,174
15,731 15,023 15,045 17,174 12,197
15,810 15,099 15,103 17,217 12,220
15,641 14,937 15,074 17,026 12,259
15,814 15,103 15,200 17,281 12,299
15,957 15,239 15,303 17,445 12,322
Jun 16,131 15,405 15,420 17,653 12,322
16,545 15,801 15,634 18,129 12,361
16,401 15,663 15,620 17,975 12,400
16,610 15,862 15,754 18,241 12,431
16,821 16,064 15,875 18,506 12,446
16,869 16,110 15,940 18,591 12,438
Dec 97 17,019 16,254 16,050 18,779 12,453
17,196 16,423 16,168 19,019 12,477
17,184 16,411 16,202 19,004 12,500
17,226 16,451 16,268 19,068 12,524
17,300 16,521 16,349 19,168 12,547
17,426 16,642 16,451 19,350 12,569
Jun 17,536 16,747 16,535 19,514 12,584
17,562 16,772 16,590 19,555 12,599
17,611 16,819 16,697 19,874 12,615
17,810 17,009 16,902 20,339 12,630
Oct 98 17,703 16,907 16,895 20,231 12,661
17,907 17,101 16,993 20,346 12,661
17,918 17,111 17,049 20,407 12,653
18,056 17,243 17,148 20,552 12,684
17,859 17,055 17,075 20,193 12,699
17,979 17,170 17,170 20,304 12,737
18,148 17,331 17,233 20,369 12,764
+ The performance of the Class B Shares was different than that shown above for
the Class A Shares, based on the difference in sales loads and fees paid by
Class B shareholders.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
TOTAL RETURNS AS OF 4/30/99(5)
CLASS A SHARES 1 YEAR 5 YEAR* SINCE INCEPTION*
(MARCH 31, 1993)
<S> <C> <C> <C>
Fund (not adjusted for sales charge) 4.90% 6.22% 7.19%
Fund (adjusted for maximum 4.5% sales charge) 0.22% 5.26% 6.61%
Capital Market Benchmark(1) 5.41% 6.46% 6.55%
<CAPTION>
CLASS B SHARES 1 YEAR 5 YEAR* SINCE INCEPTION*
(JUNE 30, 1994)
<S> <C> <C> <C>
Fund (not adjusted for contingent deferred sales charge) 4.11% N/A 5.93%
Fund (adjusted for maximum contingent deferred sales charge) -0.84% N/A 5.76%
Capital Market Benchmark(1) 5.41% N/A 6.63%
(1) The Income Portfolio's benchmark is a blended mix of capital market indices that are intended to represent
a proxy for Portfolio performance. The benchmark allocation is as follows: 50% Salomon Bros. 90-day
T-Bills Index, 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 Bond Index is a broad-based index intended to represent the U.S.
fixed-income market as a whole.
(3) Inflation is measured by the Consumer Price Index for all urban consumers.
(4) Annual rate of inflation: 2.60%. 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. The Portfolio's performance would have been lower
had the Advisor not waived a portion of its fees or reimbursed certain other expenses and the Fund's
custodian had not allowed its fees to be reduced by credits.
* Annualized
</TABLE>
PERFORMANCE REVIEW
The SAM Income Portfolio (A Shares) returned 2.50% (-2.08% adjusted for the
maximum sales load+) for the six-month period ended April 30, 1999. The
Portfolio's A Shares outperformed its benchmark index since inception, while
managing to reduce volatility relative to single asset class investments(1).
Long-term results are favorable and provide a premium over inflation; since
inception, the Portfolio has returned 4.59%* above the rate of inflation(4)
(4.01%* adjusted for the maximum sales charge ). As of April 30, 1999, the
Portfolio's 30-day SEC Yield was 5.16% (4.64% for B Shares).
ECONOMIC/MARKET REVIEW
The U.S. economy grew at a very strong rate over the past six months, advancing
6% in the fourth quarter of 1998 and 4.1% in the first quarter of 1999. These
results surprised most market participants, as the effects of a negative trade
balance did not offset the strength of consumer spending as much as expected.
High levels of personal income, large tax refunds, and strong consumer
confidence propelled the economy forward. The high growth rates and tight labor
markets in the U.S. economy created concern that inflation may begin to
accelerate and the Federal Reserve may need to tighten short-term rates to slow
growth. The result of this concern has been steadily rising interest rates
during 1999. With prices moving in the opposite direction as interest rates,
fixed-income investments generally reported weak results for the period.
The interest rate cuts enacted by the Federal Reserve at the end of 1998
restored liquidity to the fixed-income markets, easing the credit crunch and
ending the flight-to-quality. Performance in the fixed-income markets for
the past six months reflected this phenomenon as market leadership shifted away
from Treasuries and into some of the lower-rated issues and mortgage-backed
securities. High-yield bonds performed very well relative to other bond classes,
as economic strength positively influenced lower-grade issues.
INVESTMENT STRATEGY
The INCOME PORTFOLIO is diversified in five funds, representing six major asset
classes. The combination of asset classes increases our ability to manage risk
over a long-term investment horizon. Asset classes ranging in risk levels from
short-term bonds to high-yield and international bonds are intended to shield
the Portfolio from drastic swings in any one specific area of the fixed-income
markets.
The overall investment strategy for the period was to:
o Focus on short- to intermediate-term securities to reduce exposure to interest
rate increases.
o Increase exposure to lower-rated issues to gain yield and price appreciation
as growth in the economy accelerated.
o Maintain a competitive yield and manage risk by balancing high-quality issues
with some lower-rated securities.
REVIEW OF PORTFOLIO ALLOCATIONS
Throughout the period, we allocated assets in the WM HIGH YIELD FUND. This
produced very strong results as lower-rated securities led the market with a
significant rebound. These holdings are less sensitive to interest rates and
more tied to domestic economic strength. Although strong growth caused interest
rates to increase in 1999, the Portfolio was positioned with an emphasis on
short- to intermediate-term securities as we reduced allocations to both the WM
U.S. GOVERNMENT SECURITIES FUND and the WM INCOME FUND. In order to enhance
overall yield, some of the cash position was allocated into the WM SHORT TERM
HIGH QUALITY BOND FUND. This Fund generates more income while managing interest
rate risk, with its concentration in short-term holdings. We continue to hold
25% of the Portfolio in mortgage-backed securities, which should perform very
well if interest rates remain relatively stable. The overall Portfolio is very
high quality, with over 55% of the bonds rated AAA.(++)
OUTLOOK
The outlook for inflation is the decisive factor in determining the direction of
the current market environment. Markets are apt to become more volatile as
economic reports shed light on future growth and price pressures. While we see
price increases in some commodities driven by increasing global demand, we think
that deeply ingrained deflationary forces stemming from globalization, new
technology, and free market reforms will continue to hold inflation in check --
if growth remains at current levels or slows somewhat. Although inflation has
been trending upward, we forecast this trend to remain moderate. The Federal
Reserve has announced a bias towards increasing interest rates and is poised to
do so if inflation accelerates from current levels. If employment cost growth
remains slow and prices do not advance, the Fed may not intervene, but instead
allow the markets to dictate the levels of short-term interest rates. In
addition, we think long-term interest rates are near their highs and do not
think they will exceed much beyond the 6% level, although rates may be slightly
volatile in 1999. With the rebound in international markets, we expect the trade
balance to improve from its lows of recent quarters. Improvement in Japan will
be slight as s tructural problems remain, but the situation will help keep
global prices in check.
The Y2K issue is an important area to address. Risk will probably come from
investor psychology rather than a fundamental disruption in business practice.
There could be less liquidity in fixed-income markets as lenders constrict loan
practices, especially overseas. While these possibilities demand attention, our
longer-term outlook on global markets remains positive. We will continue to
focus the majority of the Portfolio on high-quality liquid fixed-income assets,
which will aid in the management of overall risk levels of the Portfolio.
(++) Bond ratings are provided by a combination of both Moody's and Standard &
Poor's.
PORTFOLIO ALLOCATION AS OF APRIL 30, 1999++
INCOME FUND 30%
U.S. GOVERNMENT SECURITIES FUND 25%
HIGH YIELD FUND 15%
MONEY MARKET FUND 15%
SHORT TERM HIGH QUALITY BOND FUND 15%
Note: as a percentage of investment company securities
ASSET CLASS DIVERSIFICATION AS OF APRIL 30, 1999++
CORPORATE BONDS 31%
MORTGAGE BACKED 25%
CASH EQUIVALENTS 16%
SHORT-TERM BONDS 15%
TREASURIES 5%
FOREIGN BONDS 6%
OTHER BONDS 2%
++ may not reflect current allocation
<PAGE>
<TABLE>
STATEMENTS of ASSETS and LIABILITIES
WM Group of Funds
April 30, 1999 (unaudited)
<CAPTION>
STRATEGIC CONSERVATIVE FLEXIBLE
GROWTH GROWTH BALANCED INCOME INCOME
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
ASSETS:
Investments, at value
(See portfolios of investments) (a) .......... $123,119,894 $335,050,153 $270,145,643 $ 38,974,392 $ 19,182,760
Cash ............................................ 228 197,657 426,817 63,471 38,424
Dividends and/or interest receivable ............ 143 370 15,451 1,757 2,413
Receivable for Fund shares sold ................. 1,031,710 1,697,397 3,065,574 1,244,537 30,930
Receivable for investment securities sold ....... -- -- -- -- 276,657
Unamortized organization costs .................. 19,567 19,567 19,567 19,567 19,567
Receivable from investment advisor .............. -- -- -- -- 2,230
Prepaid expenses and other assets ............... 845 3,458 2,636 200 145
------------ ------------ ------------ ------------ ------------
Total Assets ................................. 124,172,387 336,968,602 273,675,688 40,303,924 19,553,126
------------ ------------ ------------ ------------ ------------
LIABILITIES:
Payable for Fund shares redeemed ................ 109,474 870,042 312,160 197,277 94,104
Payable for investment securities purchased ..... 738,229 597,957 300,270 455,938 --
Investment advisory fee payable ................. 14,451 40,570 32,609 2,771 --
Administration fee payable ...................... 48,171 135,232 108,695 15,021 7,775
Shareholder servicing and distribution
fees payable ................................. 76,838 192,259 147,875 22,913 10,415
Dividends payable ............................... 1,225 880 2,760 4,268 --
Accrued legal and audit fees .................... 10,761 12,032 11,649 10,442 10,407
Accrued expenses and other payables ............. 10,171 23,043 18,881 2,748 1,494
------------ ------------ ------------ ------------ ------------
Total Liabilities ............................ 1,009,320 1,872,015 934,899 711,378 124,195
------------ ------------ ------------ ------------ ------------
NET ASSETS ...................................... $123,163,067 $335,096,587 $272,740,789 $ 39,592,546 $ 19,428,931
============ ============ ============ ============ ============
- ----------
(a) Investments, at cost ........................ $101,042,593 $272,730,516 $235,743,184 $ 37,470,500 $ 19,130,563
============ ============ ============ ============ ============
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
STATEMENTS of ASSETS and LIABILITIES (continued)
WM Group of Funds
April 30, 1999 (unaudited)
<CAPTION>
STRATEGIC CONSERVATIVE FLEXIBLE
GROWTH GROWTH BALANCED INCOME INCOME
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
NET ASSETS consist of:
Distributions in excess of net
investment income ........................... $ (2,012,562) $ (5,940,015) $ (2,834,066) $ (58,778) $ (11,988)
Accumulated net realized gain on
investments sold ............................ 1,972,819 5,399,500 3,547,265 257,554 53,464
Net unrealized appreciation of investments ..... 22,077,301 62,319,637 34,402,459 1,503,892 52,197
Paid-in capital ................................ 101,125,509 273,317,465 237,625,131 37,889,878 19,335,258
------------ ------------ ------------ ------------ ------------
Total Net Assets ............................ $123,163,067 $335,096,587 $272,740,789 $ 39,592,546 $ 19,428,931
============ ============ ============ ============ ============
NET ASSETS:
Class A Shares ................................. $ 33,175,562 $128,413,488 $114,570,496 $ 11,949,123 $ 7,982,903
============ ============ ============ ============ ============
Class B Shares ................................. $ 89,987,505 $206,683,099 $158,170,293 $ 27,643,423 $ 11,446,028
============ ============ ============ ============ ============
SHARES OUTSTANDING:
Class A Shares ................................. 2,381,016 10,031,940 9,483,216 1,090,439 783,483
============ ============ ============ ============ ============
Class B Shares ................................. 6,529,499 16,293,985 13,098,989 2,522,950 1,123,408
============ ============ ============ ============ ============
CLASS A SHARES:
Net asset value per share of beneficial
interest outstanding* ....................... $ 13.93 $ 12.80 $ 12.08 $ 10.96 $ 10.19
============ ============ ============ ============ ============
Maximum sales charge ........................... 5.50% 5.50% 5.50% 4.50% 4.50%
============ ============ ============ ============ ============
Maximum offering price per share of
beneficial interest outstanding ............. $ 14.74 $ 13.54 $ 12.78 $ 11.48 $ 10.67
============ ============ ============ ============ ============
CLASS B SHARES:
Net asset value and offering price per share
of beneficial interest outstanding* ......... $ 13.78 $ 12.68 $ 12.08 $ 10.96 $ 10.19
============ ============ ============ ============ ============
- ----------------
* Redemption price per share is equal to net asset value per share less any applicable contingent deferred sales charge.
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
STATEMENTS of OPERATIONS
WM Group of Funds
For the Six Months Ended April 30, 1999 (unaudited)
<CAPTION>
STRATEGIC CONSERVATIVE FLEXIBLE
GROWTH GROWTH BALANCED INCOME INCOME
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends ...................................... $ 583,142 $ 2,641,995 $ 3,335,813 $ 612,770 $ 529,277
Interest ....................................... 14,614 46,671 45,352 9,801 6,408
------------ ------------ ------------ ------------ ------------
Total investment income ................. 597,756 2,688,666 3,381,165 622,571 535,685
------------ ------------ ------------ ------------ ------------
EXPENSES:
Investment advisory fee ........................ 70,025 219,830 173,689 20,517 12,216
Administration fee ............................. 233,418 732,768 578,963 68,390 40,718
Custodian fees ................................. 1,265 2,102 1,818 683 725
Legal and audit fees ........................... 12,330 18,481 16,200 10,347 10,149
Registration and filing fees ................... 13,737 12,649 13,701 11,336 9,736
Other .......................................... 42,717 101,227 74,069 12,530 9,657
Shareholder servicing and distribution fees:
Class A Shares .............................. 31,883 142,271 127,293 13,357 10,008
Class B Shares .............................. 339,303 896,451 648,755 83,351 41,407
Transfer agent fees:
Class A Shares .............................. 7,788 24,904 23,735 3,057 2,141
Class B Shares .............................. 20,901 40,467 30,719 3,975 2,099
Fees waived and/or expenses reimbursed
by investment advisor ....................... (25,530) (49,644) (34,598) (31,688) (27,068)
------------ ------------ ------------ ------------ ------------
Total expenses .......................... 747,837 2,141,506 1,654,344 195,855 111,788
Fees reduced by credits allowed
by the custodian ............................ (365) (989) (898) (208) (211)
------------ ------------ ------------ ------------ ------------
Net expenses ............................ 747,472 2,140,517 1,653,446 195,647 111,577
------------ ------------ ------------ ------------ ------------
NET INVESTMENT INCOME/(LOSS) ................... (149,716) 548,149 1,727,719 426,924 424,108
------------ ------------ ------------ ------------ ------------
NET REALIZED AND UNREALIZED
GAIN/(LOSS) ON INVESTMENTS:
Net realized gain on investments
during the period ........................... 2,326,574 7,030,301 3,962,591 269,873 58,381
Net change in unrealized appreciation/
(depreciation) of investments
during the period ........................... 22,525,107 65,417,048 35,598,705 1,483,476 (117,975)
------------ ------------ ------------ ------------ ------------
Net realized and unrealized gain/(loss)
on investments .............................. 24,851,681 72,447,349 39,561,296 1,753,349 (59,594)
------------ ------------ ------------ ------------ ------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS ................... $ 24,701,965 $ 72,995,498 $ 41,289,015 $ 2,180,273 $ 364,514
============ ============ ============ ============ ============
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
STATEMENTS of CHANGES in NET assets
WM Group of Funds
For the Six Months Ended April 30, 1999 (unaudited)
<CAPTION>
STRATEGIC CONSERVATIVE FLEXIBLE
GROWTH GROWTH BALANCED INCOME INCOME
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net investment income/(loss) .................. $ (149,716) $ 548,149 $ 1,727,719 $ 426,924 $ 424,108
Net realized gain on investments
during the period .......................... 2,326,574 7,030,301 3,962,591 269,873 58,381
Net unrealized appreciation/(depreciation)
of investments during the period ........... 22,525,107 65,417,048 35,598,705 1,483,476 (117,975)
------------ ------------ ------------ ------------ ------------
Net increase in net assets
resulting from operations .................. 24,701,965 72,995,498 41,289,015 2,180,273 364,514
Distributions to shareholders from:
Net investment income:
Class A Shares ........................... -- (1,441,763) (1,742,275) (240,343) (229,083)
Class B Shares ........................... -- (1,200,342) (1,736,007) (286,195) (201,605)
Distributions in excess of
net investment income:
Class A Shares ........................... (699,720) (2,306,581) (1,246,215) (22,960) (5,893)
Class B Shares ........................... (1,506,321) (3,633,434) (1,587,851) (35,818) (6,095)
Net realized gain on investments:
Class A Shares ........................... (1,390,661) (6,616,992) (5,455,895) (277,666) (11,412)
Class B Shares ........................... (3,742,181) (10,584,105) (6,796,285) (336,348) (10,095)
Net increase in net assets from
Fund share transactions:
Class A Shares ........................... 8,740,831 10,156,070 11,121,135 1,840,760 422,949
Class B Shares ........................... 25,617,668 22,640,098 34,778,362 15,862,668 5,796,364
------------ ------------ ------------ ------------ ------------
Net increase in net assets .................... 51,721,581 80,008,449 68,623,984 18,684,371 6,119,644
NET ASSETS:
Beginning of period ........................... 71,441,486 255,088,138 204,116,805 20,908,175 13,309,287
------------ ------------ ------------ ------------ ------------
End of period ................................. $123,163,067 $335,096,587 $272,740,789 $ 39,592,546 $ 19,428,931
============ ============ ============ ============ ============
Distributions in excess of net investment
income at end of period .................... $ (2,012,562) $ (5,940,015) $ (2,834,066) $ (58,778) $ (11,988)
============ ============ ============ ============ ============
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
STATEMENTS of CHANGES in NET ASSETS (continued)
WM Group of Funds(a)
For the Period Ended October 31, 1998
<CAPTION>
STRATEGIC CONSERVATIVE FLEXIBLE
GROWTH GROWTH BALANCED INCOME INCOME
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net investment income/(loss) ................... $ (247,331) $ (354,452) $ 563,094 $ 191,559 $ 207,716
Net realized gain/(loss) on investments
during the period ........................... (64,796) (761,954) 83,566 55,085 41,770
Net unrealized depreciation of
investments during the period ............... (5,346,706) (20,541,582) (11,355,763) (240,391) (148,281)
------------ ------------ ------------ ------------ ------------
Net increase/(decrease) in net assets
resulting from operations ................... (5,658,833) (21,657,988) (10,709,103) 6,253 101,205
Distributions to shareholders from
net investment income:
Class A Shares ............................ -- -- (389,135) (108,577) (139,418)
Class B Shares ............................ -- -- (174,108) (81,407) (68,390)
Net increase/(decrease) in net assets from
Fund share transactions:
Class A Shares ............................ 2,756,174 (6,408,482) (2,997,578) 1,068,611 (113,235)
Class B Shares ............................ 4,840,772 (1,061,147) 1,717,446 3,531,424 1,651,308
------------ ------------ ------------ ------------ ------------
Net increase/(decrease) in net assets .......... 1,938,113 (29,127,617) (12,552,478) 4,416,304 1,431,470
NET ASSETS:
Beginning of period ............................ 69,503,373 284,215,755 216,669,283 16,491,871 11,877,817
------------ ------------ ------------ ------------ ------------
End of period .................................. $ 71,441,486 $255,088,138 $204,116,805 $ 20,908,175 $ 13,309,287
============ ============ ============ ============ ============
Undistributed net investment income
at end of period ............................ $ 343,195 $ 2,093,956 $ 1,750,563 $ 99,614 $ 6,580
============ ============ ============ ============ ============
- ----------------
(a) Fiscal year end changed to October 31. Prior to this, the fiscal year end was June 30. The amounts reflected are for the period
July 1, 1998 through October 31, 1998.
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
STATEMENTS of CHANGES in NET ASSETS (continued)
WM Group of Funds
For the Year Ended June 30, 1998
<CAPTION>
STRATEGIC CONSERVATIVE FLEXIBLE
GROWTH GROWTH BALANCED INCOME INCOME
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net investment income/(loss) .................... $ (327,265) $ 2,141,908 $ 3,795,331 $ 666,597 $ 919,616
Net realized gain/(loss) on investments
during the year .............................. 70,811 634,997 1,600,513 180,143 (146)
Capital gain distribution received .............. 8,834,729 29,135,400 21,083,866 950,791 --
Net unrealized appreciation of
investments during the year .................. 2,307,572 7,816,736 1,378,617 38,924 368,927
------------ ------------ ------------ ------------ ------------
Net increase in net assets
resulting from operations .................... 10,885,847 39,729,041 27,858,327 1,836,455 1,288,397
Distributions to shareholders from:
Net investment income:
Class A Shares ............................. -- (974,521) (2,029,043) (390,981) (687,206)
Class B Shares ............................. -- (1,167,578) (1,843,104) (296,913) (250,566)
Distributions in excess of net investment
income:
Class A Shares ............................. (950,866) (4,768,523) (4,295,670) (200,387) (979)
Class B Shares ............................. (2,366,606) (5,713,185) (3,902,019) (152,174) (357)
Net realized gains on investments:
Class A Shares ............................. (53,136) (709,436) (1,050,143) (218,896) --
Class B Shares ............................. (140,517) (922,315) (1,095,753) (167,811) --
Net increase/(decrease) in net assets from
Fund share transactions:
Class A Shares ............................. 2,069,016 (32,508,160) (14,387,577) (4,062,849) (5,873,876)
Class B Shares ............................. 10,004,844 (3,587,306) 8,172,018 147,178 (544,041)
------------ ------------ ------------ ------------ ------------
Net increase/(decrease) in net assets ........... 19,448,582 (10,621,983) 7,427,036 (3,506,378) (6,068,628)
NET ASSETS:
Beginning of year ............................... 50,054,791 294,837,738 209,242,247 19,998,249 17,946,445
------------ ------------ ------------ ------------ ------------
End of year ..................................... $ 69,503,373 $284,215,755 $216,669,283 $ 16,491,871 $ 11,877,817
============ ============ ============ ============ ============
Undistributed net investment income
at end of year ............................... $ 343,195 $ 2,093,956 $ 1,751,125 $ 96,037 $ 4,670
============ ============ ============ ============ ============
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
STATEMENTS of CHANGES in NET assets -- CAPITAL stock ACTIVITY
WM Group of Funds
<CAPTION>
STRATEGIC GROWTH PORTFOLIO CONSERVATIVE GROWTH PORTFOLIO
---------------------------------------------------------------------------------------
SIX MONTHS SIX MONTHS
ENDED PERIOD YEAR ENDED PERIOD YEAR
04/30/99 ENDED ENDED 04/30/99 ENDED ENDED
(UNAUDITED) 10/31/98(A) 06/30/98 (UNAUDITED) 10/31/98(A) 06/30/98
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
AMOUNT
Class A:
Sold ......................... $ 11,903,144 $ 4,093,087 $ 7,185,762 $ 14,233,200 $ 3,500,446 $ 16,883,750
Issued as reinvestment
of dividends ............ 2,070,954 -- 985,685 10,188,147 -- 6,378,314
Redeemed .................. (5,233,267) (1,336,913) (6,102,431) (14,265,277) (9,908,928) (55,770,224)
------------ ------------ ------------ ------------ ------------ ------------
Net increase/(decrease) ... $ 8,740,831 $ 2,756,174 $ 2,069,016 $ 10,156,070 $ (6,408,482) $(32,508,160)
============ ============ ============ ============ ============ ============
Class B:
Sold ...................... $ 27,281,084 $ 8,406,722 $ 16,349,909 $ 31,633,120 $ 12,766,400 $ 29,916,859
Issued as reinvestment
of dividends ............ 5,137,467 -- 2,469,178 15,133,435 -- 7,663,465
Redeemed .................. (6,800,883) (3,565,950) (8,814,243) (24,126,457) (13,827,547) (41,167,630)
------------ ------------ ------------ ------------ ------------ ------------
Net increase/(decrease) ... $ 25,617,668 $ 4,840,772 $ 10,004,844 $ 22,640,098 $ (1,061,147) $ (3,587,306)
============ ============ ============ ============ ============ ============
SHARES
Class A:
Sold ...................... 930,480 353,399 602,394 1,206,867 320,925 1,496,544
Issued as reinvestment
of dividends ............ 173,302 -- 93,688 915,226 -- 628,647
Redeemed .................. (410,353) (114,051) (513,861) (1,207,067) (909,242) (4,959,288)
------------ ------------ ------------ ------------ ------------ ------------
Net increase/(decrease) ... 693,429 239,348 182,221 915,026 (588,317) (2,834,097)
============ ============ ============ ============ ============ ============
Class B:
Sold ...................... 2,143,249 731,727 1,392,992 2,689,686 1,219,668 2,663,779
Issued as reinvestment
of dividends ............ 433,541 -- 236,345 1,368,710 -- 758,711
Redeemed .................. (540,105) (323,112) (743,910) (2,060,293) (1,343,665) (3,691,585)
------------ ------------ ------------ ------------ ------------ ------------
Net increase/(decrease) ... 2,036,685 408,615 885,427 1,998,103 (123,997) (269,095)
============ ============ ============ ============ ============ ============
(a) Fiscal year end changed to October 31. Prior to this, the fiscal year end was June 30. The amounts reflected are for the
period July 1, 1998 through October 31, 1998.
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
BALANCED PORTFOLIO FLEXIBLE INCOME PORTFOLIO INCOME PORTFOLIO
------------------------------------- -------------------------------------- ------------------------------------
SIX MONTHS SIX MONTHS SIX MONTHS
ENDED PERIOD YEAR ENDED PERIOD YEAR ENDED PERIOD YEAR
04/30/99 ENDED ENDED 04/30/99 ENDED ENDED 04/30/99 ENDED ENDED
(UNAUDITED) 10/31/98(A) 06/30/98 (UNAUDITED) 10/31/98(A) 06/30/98 (UNAUDITED) 10/31/98(A) 06/30/98
----------- ----------- -------- ----------- ----------- -------- ----------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 16,342,161 $ 5,387,129 $ 19,339,371 $ 2,808,354 $ 1,695,735 $ 1,432,574 $ 1,862,442 $ 520,319 $ 1,269,248
8,349,308 379,722 7,178,526 525,289 102,837 794,058 125,620 65,592 352,767
(13,570,334) (8,764,429) (40,905,474) (1,492,883) (729,961) (6,289,481) (1,565,113) (699,146) (7,495,891)
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
$ 11,121,135 $ (2,997,578) $(14,387,577) $ 1,840,760 $ 1,068,611 $ (4,062,849) $ 422,949 $ (113,235) $ (5,873,876)
============ ============ ============ ============ ============ ============ ============ ============ ============
$ 43,862,695 $ 12,689,247 $ 27,242,146 $ 17,583,985 $ 3,993,004 $ 1,998,856 $ 7,201,024 $ 1,926,369 $ 1,358,238
9,940,531 169,403 6,704,966 607,109 74,833 535,294 167,586 54,623 186,208
(19,024,864) (11,141,204) (25,775,094) (2,328,426) (536,413) (2,386,972) (1,572,246) (329,684) (2,088,487)
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
$ 34,778,362 $ 1,717,446 $ 8,172,018 $ 15,862,668 $ 3,531,424 $ 147,178 $ 5,796,364 $ 1,651,308 $ (544,041)
============ ============ ============ ============ ============ ============ ============ ============ ============
1,419,688 495,626 1,719,960 263,125 162,071 134,118 182,122 50,467 123,065
763,505 35,208 676,566 49,380 9,780 75,144 12,296 6,367 34,204
(1,184,227) (796,592) (3,640,170) (141,206) (69,274) (586,227) (153,375) (67,860) (727,213)
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
998,966 (265,758) (1,243,644) 171,299 102,577 (376,965) 41,043 (11,026) (569,944)
============ ============ ============ ============ ============ ============ ============ ============ ============
3,814,158 1,157,429 2,426,948 1,633,117 380,195 185,916 705,125 187,661 131,591
903,707 15,550 635,623 57,118 7,114 50,797 16,416 5,303 18,089
(1,658,726) (1,020,050) (2,292,460) (215,787) (51,101) (223,256) (153,987) (31,983) (202,516)
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
3,059,139 152,929 770,111 1,474,448 336,208 13,457 567,554 160,981 (52,836)
============ ============ ============ ============ ============ ============ ============ ============ ============
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL highlights
STRATEGIC GROWTH PORTFOLIO
FOR A PORTFOLIO SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<CAPTION>
INCOME FROM INVESTMENT OPERATIONS LESS DISTRIBUTIONS
--------------------------------- -------------------------------------------------------------
NET DISTRIBUTIONS
NET NET REALIZED AND DIVIDENDS IN EXCESS DISTRIBUTIONS
ASSET VALUE, INVESTMENT UNREALIZED TOTAL FROM FROM NET OF NET FROM
BEGINNING INCOME/ GAIN/(LOSS) ON INVESTMENT INVESTMENT INVESTMENT NET REALIZED TOTAL
OF PERIOD (LOSS) INVESTMENTS OPERATIONS INCOME INCOME CAPITAL GAINS DISTRIBUTIONS
--------- ------ ----------- ---------- ------ ------ ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Class A
04/30/99
(unaudited) $ 11.67 $ 0.01 $ 3.46 $ 3.47 $ (0.01) $ (0.40) $ (0.80) $ (1.21)
10/31/98(c) 12.66 (0.02) (0.97) (0.99) -- -- -- --
06/30/98 11.26 0.00# 2.12 2.12 -- (0.68) (0.04) (0.72)
06/30/97* 10.00 (0.02) 1.90 1.88 -- (0.62) (0.00)# (0.62)
Class B
04/30/99
(unaudited) 11.52 (0.03) 3.41 3.38 -- (0.32) (0.80) (1.12)
10/31/98(c) 12.53 (0.05) (0.96) (1.01) -- -- -- --
06/30/98 11.19 (0.09) 2.11 2.02 -- (0.64) (0.04) (0.68)
06/30/97* 10.00 (0.10) 1.90 1.80 -- (0.61) (0.00)# (0.61)
- ----------
* The Portfolio's Class A Shares and Class B Shares commenced operations on July 25, 1996.
** Annualized.
# Amount represents less than $0.01 per share. Total return is not annualized for periods less than one year and does not
reflect any applicable sales charges. The total return would have been lower if certain fees had not been waived and expenses
reimbursed 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.
(a) The Portfolio also will indirectly bear its prorated share of expenses of the Underlying Funds. (b) Ratio of operating
expenses to average net assets includes expenses paid indirectly. (c) Fiscal year end changed to October 31. Prior to this,
the fiscal year end was June 30.
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA
--------------------------------------------------------------------------------------------
RATIO OF OPERATING
EXPENSES TO AVERAGE
NET ASSETS WITHOUT
RATIO OF RATIO OF FEE WAIVERS, EXPENSES
OPERATING NET INVESTMENT REIMBURSED AND/OR
NET ASSETS, EXPENSES TO INCOME/(LOSS) PORTFOLIO FEES REDUCED BY
NET ASSET VALUE, END OF PERIOD AVERAGE NET TO AVERAGE TURNOVER CREDITS ALLOWED BY
END OF PERIOD TOTAL RETURN+ (IN 000'S) ASSETS(A)(B) NET ASSETS RATE THE CUSTODIAN(A)
------------- ------------- ---------- ------------ ---------- ---- ----------------
<S> <C> <C> <C> <C> <C> <C>
$ 13.93 31.45% $ 33,176 1.06%** 0.22%** 19% 1.11%**
11.67 (7.82)% 19,690 0.95%** (0.53)%** 10% 1.13%**
12.66 20.11% 18,330 0.94% 0.01% 23% 1.08
11.26 19.33% 14,253 0.90%** (0.19)%** 33% 1.45%**
13.78 31.01% 89,988 1.81%** (0.53)%** 19% 1.86%**
11.52 (8.06)% 51,752 1.70%** (1.28)%** 10% 1.88%**
12.53 19.24% 51,173 1.68% (0.74)% 23% 1.83%
11.19 18.48% 35,802 1.65%** (0.94)%** 33% 2.20%**
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL highlights
CONSERVATIVE GROWTH PORTFOLIO
FOR A PORTFOLIO SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<CAPTION>
INCOME FROM INVESTMENT OPERATIONS LESS DISTRIBUTIONS
--------------------------------- -------------------------------------------------------------
NET DISTRIBUTIONS
NET NET REALIZED AND DIVIDENDS IN EXCESS DISTRIBUTIONS
ASSET VALUE, INVESTMENT UNREALIZED TOTAL FROM FROM NET OF NET FROM
BEGINNING INCOME/ GAIN/(LOSS) ON INVESTMENT INVESTMENT INVESTMENT NET REALIZED TOTAL
OF PERIOD (LOSS) INVESTMENTS OPERATIONS INCOME INCOME CAPITAL GAINS DISTRIBUTIONS
--------- ------ ----------- ---------- ------ ------ ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Class A
04/30/99
(unaudited) $ 10.97 $ 0.05 $ 2.94 $ 2.99 $ (0.18) $ (0.24) $ (0.74) $ (1.16)
10/31/98(c) 11.84 0.01 (0.88) (0.87) -- -- -- --
06/30/98 10.86 0.13 1.42 1.55 (0.09) (0.42) (0.06) (0.57)
06/30/97* 10.00 0.08 1.32 1.40 (0.08) (0.46) -- (0.54)
Class B
04/30/99
(unaudited) 10.85 0.00 # 2.91 2.91 (0.10) (0.24) (0.74) (1.08)
10/31/98(c) 11.74 (0.03) (0.86) (0.89) -- -- -- --
06/30/98 10.80 0.04 1.43 1.47 (0.08) (0.39) (0.06) (0.53)
06/30/97* 10.00 0.01 1.31 1.32 (0.01) (0.51) -- (0.52)
- ----------
* The Portfolio's Class A Shares and Class B Shares commenced operations on July 25, 1996.
** Annualized.
# Amount represents less than $0.01 per share. Total return is not annualized for periods less than one year and does not
reflect any applicable sales charges. The total return would have been lower if certain fees had not been waived and expenses
reimbursed 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.
(a) The Portfolio also will indirectly bear its prorated share of expenses of the Underlying Funds. (b) Ratio of operating
expenses to average net assets includes expenses paid indirectly. (c) Fiscal year end changed to October 31. Prior to this,
the fiscal year end was June 30.
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA
--------------------------------------------------------------------------------------------
RATIO OF OPERATING
EXPENSES TO AVERAGE
NET ASSETS WITHOUT
RATIO OF RATIO OF FEE WAIVERS, EXPENSES
OPERATING NET INVESTMENT REIMBURSED AND/OR
NET ASSETS, EXPENSES TO INCOME/(LOSS) PORTFOLIO FEES REDUCED BY
NET ASSET VALUE, END OF PERIOD AVERAGE NET TO AVERAGE TURNOVER CREDITS ALLOWED BY
END OF PERIOD TOTAL RETURN+ (IN 000'S) ASSETS(A)(B) NET ASSETS RATE THE CUSTODIAN(A)
------------- ------------- ---------- ------------ ---------- ---- ----------------
<S> <C> <C> <C> <C> <C> <C>
$ 12.80 28.80% $128,413 1.00%** 0.83%** 13% 1.04%**
10.97 (7.35)% 100,024 0.95%** 0.05%** 9% 1.03%**
11.84 15.18% 114,946 0.95% 1.17% 28% 1.00%
10.86 14.39% 136,141 0.92%** 0.81%** 20% 1.17%**
12.68 28.33% 206,683 1.75%** 0.08%** 13% 1.79%**
10.85 (7.58)% 155,064 1.70%** (0.70)%** 9% 1.78%**
11.74 14.44% 169,269 1.70% 0.40% 28% 1.74%
10.80 13.59% 158,697 1.67%** 0.06%** 20% 1.92%**
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL highlights
BALANCED PORTFOLIO
FOR A PORTFOLIO SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<CAPTION>
INCOME FROM INVESTMENT OPERATIONS LESS DISTRIBUTIONS
--------------------------------- -------------------------------------------------------------
NET DISTRIBUTIONS
NET NET REALIZED AND DIVIDENDS IN EXCESS DISTRIBUTIONS
ASSET VALUE, INVESTMENT UNREALIZED TOTAL FROM FROM NET OF NET FROM
BEGINNING INCOME/ GAIN/(LOSS) ON INVESTMENT INVESTMENT INVESTMENT NET REALIZED TOTAL
OF PERIOD (LOSS) INVESTMENTS OPERATIONS INCOME INCOME CAPITAL GAINS DISTRIBUTIONS
--------- ------ ----------- ---------- ------ ------ ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Class A
04/30/99
(unaudited) $ 11.02 $ 0.11 $ 1.98 $ 2.09 $ (0.22) $ (0.14) $ (0.67) $ (1.03)
10/31/98(c) 11.63 0.05 (0.61) (0.56) (0.05) -- -- (0.05)
06/30/98 10.95 0.22 1.25 1.47 (0.23) (0.45) (0.11) (0.79)
06/30/97* 10.00 0.20 1.27 1.47 (0.20) (0.32) (0.00)# (0.52)
Class B
04/30/99
(unaudited) 11.02 0.07 1.99 2.06 (0.19) (0.14) (0.67) (1.00)
10/31/98(c) 11.63 0.02 (0.61) (0.59) (0.02) -- -- (0.02)
06/30/98 10.95 0.17 1.22 1.39 (0.20) (0.40) (0.11) (0.71)
06/30/97* 10.00 0.14 1.25 1.39 (0.14) (0.30) (0.00)# (0.44)
- ----------
* The Portfolio's Class A Shares and Class B Shares commenced operations on July 25, 1996.
** Annualized.
# Amount represents less than $0.01 per share. Total return is not annualized for periods less than one year and does not
reflect any applicable sales charges. The total return would have been lower if certain fees had not been waived and expenses
reimbursed 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.
(a) The Portfolio also will indirectly bear its prorated share of expenses of the Underlying Funds. (b) Ratio of operating
expenses to average net assets includes expenses paid indirectly. (c) Fiscal year end changed to October 31. Prior to this,
the fiscal year end was June 30.
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA
--------------------------------------------------------------------------------------------
RATIO OF OPERATING
EXPENSES TO AVERAGE
NET ASSETS WITHOUT
RATIO OF RATIO OF FEE WAIVERS, EXPENSES
OPERATING NET INVESTMENT REIMBURSED AND/OR
NET ASSETS, EXPENSES TO INCOME/(LOSS) PORTFOLIO FEES REDUCED BY
NET ASSET VALUE, END OF PERIOD AVERAGE NET TO AVERAGE TURNOVER CREDITS ALLOWED BY
END OF PERIOD TOTAL RETURN+ (IN 000'S) ASSETS(A)(B) NET ASSETS RATE THE CUSTODIAN(A)
------------- ------------- ---------- ------------ ---------- ---- ----------------
<S> <C> <C> <C> <C> <C> <C>
$ 12.08 20.05% $114,570 1.01%** 1.91%** 35% 1.04%**
11.02 (4.85)% 93,491 0.95%** 1.22%** 3% 1.02%**
11.63 14.32% 101,726 0.95% 2.14% 29% 1.00%
10.95 15.02% 109,421 0.92%** 2.48%** 46% 1.17%**
12.08 19.71% 158,170 1.76%** 1.16%** 35% 1.79%**
11.02 (5.09)% 110,626 1.70%** 0.47%** 3% 1.77%**
11.63 13.47% 114,944 1.70% 1.39% 29% 1.75%
10.95 14.23% 99,821 1.67%** 1.73%** 46% 1.92%**
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL highlights
FLEXIBLE INCOME PORTFOLIO
FOR A PORTFOLIO SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<CAPTION>
INCOME FROM INVESTMENT OPERATIONS LESS DISTRIBUTIONS
--------------------------------- -------------------------------------------------------------
NET DISTRIBUTIONS
NET NET REALIZED AND DIVIDENDS IN EXCESS DISTRIBUTIONS
ASSET VALUE, INVESTMENT UNREALIZED TOTAL FROM FROM NET OF NET FROM
BEGINNING INCOME/ GAIN/(LOSS) ON INVESTMENT INVESTMENT INVESTMENT NET REALIZED TOTAL
OF PERIOD (LOSS) INVESTMENTS OPERATIONS INCOME INCOME CAPITAL GAINS DISTRIBUTIONS
--------- ------ ----------- ---------- ------ ------ ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Class A
04/30/99
(unaudited) $ 10.63 $ 0.19 $ 0.70 $ 0.89 $ (0.25) $ (0.02) $ (0.29) $ (0.56)
10/31/98(c) 10.79 0.12 (0.15) (0.03) (0.13) -- -- (0.13)
06/30/98 10.57 0.45 0.67 1.12 (0.45) (0.21) (0.24) (0.90)
06/30/97* 10.00 0.43 0.70 1.13 (0.43) (0.13) (0.00)# (0.56)
Class B
04/30/99
(unaudited) 10.63 0.15 0.70 0.85 (0.21) (0.02) (0.29) (0.52)
10/31/98(c) 10.79 0.10 (0.16) (0.06) (0.10) -- -- (0.10)
06/30/98 10.57 0.31 0.73 1.04 (0.37) (0.21) (0.24) (0.82)
06/30/97* 10.00 0.38 0.68 1.06 (0.38) (0.11) (0.00)# (0.49)
- ----------
* The Portfolio's Class A Shares and Class B Shares commenced operations on July 25, 1996.
** Annualized.
# Amount represents less than $0.01 per share. Total return is not annualized for periods less than one year and does not
reflect any applicable sales charges. The total return would have been lower if certain fees had not been waived and expenses
reimbursed 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.
(a) The Portfolio also will indirectly bear its prorated share of expenses of the Underlying Funds. (b) Ratio of operating
expenses to average net assets includes expenses paid indirectly. (c) Fiscal year end changed to October 31. Prior to this,
the fiscal year end was June 30.
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA
--------------------------------------------------------------------------------------------
RATIO OF OPERATING
EXPENSES TO AVERAGE
NET ASSETS WITHOUT
RATIO OF RATIO OF FEE WAIVERS, EXPENSES
OPERATING NET INVESTMENT REIMBURSED AND/OR
NET ASSETS, EXPENSES TO INCOME/(LOSS) PORTFOLIO FEES REDUCED BY
NET ASSET VALUE, END OF PERIOD AVERAGE NET TO AVERAGE TURNOVER CREDITS ALLOWED BY
END OF PERIOD TOTAL RETURN+ (IN 000'S) ASSETS(A)(B) NET ASSETS RATE THE CUSTODIAN(A)
------------- ------------- ---------- ------------ ---------- ---- ----------------
<S> <C> <C> <C> <C> <C> <C>
$ 10.96 8.68% $ 11,949 0.98%** 3.57%** 30% 1.21%**
10.63 (0.26)% 9,766 0.95%** 3.62%** 15% 1.37%**
10.79 11.07% 8,808 0.95% 4.07% 24% 1.23%
10.57 11.58% 12,613 0.92%** 4.95%** 54% 1.67%**
10.96 8.30% 27,643 1.72%** 2.83%** 30% 1.95%**
10.63 (0.51)% 11,142 1.70%** 2.87%** 15% 2.12%**
10.79 10.24% 7,684 1.70% 3.32% 24% 1.98%
10.57 10.80% 7,385 1.67%** 4.20%** 54% 2.42%**
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL highlights
INCOME PORTFOLIO
FOR A PORTFOLIO SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<CAPTION>
INCOME FROM INVESTMENT OPERATIONS LESS DISTRIBUTIONS
--------------------------------- -------------------------------------------------------------
NET DISTRIBUTIONS
NET NET REALIZED AND DIVIDENDS IN EXCESS DISTRIBUTIONS
ASSET VALUE, INVESTMENT UNREALIZED TOTAL FROM FROM NET OF NET FROM
BEGINNING INCOME/ GAIN/(LOSS) ON INVESTMENT INVESTMENT INVESTMENT NET REALIZED TOTAL
OF PERIOD (LOSS) INVESTMENTS OPERATIONS INCOME INCOME CAPITAL GAINS DISTRIBUTIONS
--------- ------ ----------- ---------- ------ ------ ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Class A
04/30/99
(unaudited) $ 10.25 $ 0.28 $ (0.02) $ 0.26 $ (0.29) $ (0.01) $ (0.02) $ (0.32)
10/31/98(c) 10.34 0.19 (0.09) 0.10 (0.19) -- -- (0.19)
06/30/98 10.13 0.64 0.22 0.86 (0.65) (0.00)# -- (0.65)
06/30/97* 10.00 0.58 0.14## 0.72 (0.58) (0.01) (0.00)# (0.59)
Class B
04/30/99
(unaudited) 10.25 0.25 (0.03) 0.22 (0.25) (0.01) (0.02) (0.28)
10/31/98(c) 10.34 0.16 (0.09) 0.07 (0.16) -- -- (0.16)
06/30/98 10.13 0.56 0.22 0.78 (0.57) (0.00)# -- (0.57)
06/30/97* 10.00 0.51 0.14## 0.65 (0.51) (0.01) (0.00)# (0.52)
- ----------
* The Portfolio's Class A Shares and Class B Shares commenced operations on July 25, 1996.
** Annualized.
# Amount represents less than $0.01 per share.
## 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 is not annualized for periods less than one year and does not reflect
any applicable sales charges. The total return would have been lower if certain fees had not been waived and expenses
reimbursed 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.
(a) The Portfolio also will indirectly bear its prorated share of expenses of the Underlying Funds. (b) Ratio of operating
expenses to average net assets includes expenses paid indirectly. (c) Fiscal year end changed to October 31. Prior to this,
the fiscal year end was June 30.
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA
--------------------------------------------------------------------------------------------
RATIO OF OPERATING
EXPENSES TO AVERAGE
NET ASSETS WITHOUT
RATIO OF RATIO OF FEE WAIVERS, EXPENSES
OPERATING NET INVESTMENT REIMBURSED AND/OR
NET ASSETS, EXPENSES TO INCOME/(LOSS) PORTFOLIO FEES REDUCED BY
NET ASSET VALUE, END OF PERIOD AVERAGE NET TO AVERAGE TURNOVER CREDITS ALLOWED BY
END OF PERIOD TOTAL RETURN+ (IN 000'S) ASSETS(A)(B) NET ASSETS RATE THE CUSTODIAN(A)
------------- ------------- ---------- ------------ ---------- ---- ----------------
<S> <C> <C> <C> <C> <C> <C>
$ 10.19 2.50% $ 7,983 0.99%** 5.59%** 29% 1.32%**
10.25 0.96% 7,611 0.95%** 5.40%** 22% 1.53%**
10.34 8.71% 7,793 0.95% 6.23% 14% 1.25%
10.13 7.38% 13,410 0.93%** 6.09%** 56% 1.65%**
10.19 2.12% 11,446 1.74%** 4.84%** 29% 2.07%**
10.25 0.70% 5,698 1.70%** 4.65%** 22% 2.28%**
10.34 7.90% 4,084 1.70% 5.48% 14% 2.01%
10.13 6.63% 4,537 1.68%** 5.34%** 56% 2.40%**
See Notes to Financial Statements.
</TABLE>
<PAGE>
PORTFOLIO OF INVESTMENTS
STRATEGIC GROWTH PORTFOLIO
APRIL 30, 1999 (UNAUDITED)
SHARES VALUE
------ -----
INVESTMENT COMPANY SECURITIES - 99.0%
1,928,097 WM Growth Fund ................................ $ 50,978,883
2,135,117 WM Growth & Income Fund ....................... 53,100,379
1,350,709 WM International Growth Fund .................. 12,993,817
2,447,150 WM Money Market Fund .......................... 2,447,150
1,013,590 WM Short Term High Quality Bond Fund .......... 2,361,665
------------
Total Investment Company Securities
(Cost $99,804,593) ......................... 121,881,894
------------
PRINCIPAL
AMOUNT
REPURCHASE AGREEMENT - 1.0%
(Cost $1,238,000)
$1,238,000 Agreement with Boston Safe Deposit & Trust Company,
4.150% dated 04/30/1999, to be repurchased at
$1,238,428 on 05/03/1999 collateralized by
$1,262,760 Federal Home Loan Mortgage
Corporation, 6.000% due 12/01/2013 (Market
Value $1,274,419) .......................... 1,238,000
------------
TOTAL INVESTMENTS (Cost $101,042,593*) ......... 100.0% 123,119,894
OTHER ASSETS AND LIABILITIES (Net) ............. 0.0# 43,173
------ ------------
NET ASSETS ..................................... 100.0% $123,163,067
===== ============
- ---------------
* Aggregate cost for federal tax purposes.
# Amount represents less than 0.1% of net assets.
See Notes to Financial Statements.
<PAGE>
PORTFOLIO OF INVESTMENTS
CONSERVATIVE GROWTH PORTFOLIO
APRIL 30, 1999 (UNAUDITED)
SHARES VALUE
------ -----
INVESTMENT COMPANY SECURITIES - 99.1%
4,249,346 WM Growth Fund ............................... $112,352,704
5,217,629 WM Growth & Income Fund ....................... 129,762,421
1,725,141 WM High Yield Fund ............................ 15,871,298
5,066,206 WM International Growth Fund .................. 48,736,901
25,229,829 WM Money Market Fund .......................... 25,229,829
------------
Total Investment Company Securities
(Cost $269,633,516) .......................... 331,953,153
------------
PRINCIPAL
AMOUNT
--------
REPURCHASE AGREEMENT - 0.9%
(Cost $3,097,000)
$ 3,097,000 Agreement with Boston Safe Deposit & Trust
Company, 4.150% dated 04/30/1999, to be
repurchased at $3,098,071 on 05/03/1999
collateralized by $3,158,940 Federal Home
Loan Mortgage Corporation, 6.000% due
12/01/2013 (Market Value $3,167,647) ........ 3,097,000
------------
TOTAL INVESTMENTS (Cost $272,730,516*)................. 100.0% 335,050,153
OTHER ASSETS AND LIABILITIES (Net) .................... 0.0# 46,434
----- ------------
NET ASSETS ............................................ 100.0% $335,096,587
===== ============
- ---------------
* Aggregate cost for federal tax purposes.
# Amount represents less than 0.1% of net assets.
See Notes to Financial Statements.
<PAGE>
PORTFOLIO OF INVESTMENTS
BALANCED PORTFOLIO
APRIL 30, 1999 (UNAUDITED)
SHARES VALUE
------ -----
INVESTMENT COMPANY SECURITIES - 98.2%
2,430,040 WM Growth Fund ................................ $ 64,250,253
2,948,137 WM Growth & Income Fund ....................... 73,320,181
1,437,251 WM High Yield Fund ............................ 13,222,707
4,136,229 WM International Growth Fund .................. 39,790,504
18,069,920 WM Money Market Fund .......................... 18,069,920
9,999,392 WM Short Term High Quality Bond Fund .......... 23,298,585
3,317,327 WM U.S. Government Securities Fund ............ 35,893,493
------------
Total Investment Company Securities
(Cost $233,443,184) .......................... 267,845,643
------------
Principal
Amount
--------
REPURCHASE AGREEMENT - 0.8%
(Cost $2,300,000)
$ 2,300,000 Agreement with Boston Safe Deposit & Trust
Company, 4.150% dated 04/30/1999, to be
repurchased at $2,300,795 on 05/03/1999
collateralized by $2,346,000 Federal
Home Loan Mortgage Corporation, 6.000%
due 12/01/2013 (Market Value $2,352,941).... 2,300,000
------------
TOTAL INVESTMENTS (Cost $235,743,184*) ................ 99.0% 270,145,643
OTHER ASSETS AND LIABILITIES (Net) .................... 1.0 2,595,146
----- ------------
NET ASSETS ............................................ 100.0% $272,740,789
===== ============
- ---------------
* Aggregate cost for federal tax purposes.
See Notes to Financial Statements.
<PAGE>
PORTFOLIO OF INVESTMENTS
FLEXIBLE INCOME PORTFOLIO
APRIL 30, 1999 (UNAUDITED)
SHARES VALUE
------ -----
INVESTMENT COMPANY SECURITIES - 96.5%
76,466 WM Growth Fund ................................ $ 2,021,751
318,613 WM Growth & Income Fund ....................... 7,923,909
211,141 WM High Yield Fund ............................ 1,942,500
804,739 WM Income Fund ................................ 7,516,265
3,760,258 WM Money Market Fund .......................... 3,760,258
3,246,026 WM Short Term High Quality Securities Fund .... 7,563,241
692,372 WM U.S. Government Securities Fund ............ 7,491,468
------------
Total Investment Company Securities
(Cost $36,715,500) ......................... 38,219,392
------------
Principal
Amount
---------
REPURCHASE AGREEMENT - 1.9%
(Cost $755,000)
$ 755,000 Agreement with Boston Safe Deposit & Trust
Company, 4.150% dated 04/30/1999, to be
repurchased at $755,261 on 05/03/1999
collateralized by $770,100 Federal Home Loan
Mortgage Corporation, 6.000% due 12/01/2013
(Market Value $772,549) ..................... 755,000
------------
TOTAL INVESTMENTS (Cost $37,470,500*) ................. 98.4% 38,974,392
OTHER ASSETS AND LIABILITIES (Net)..................... 1.6 618,154
----- ------------
NET ASSETS ............................................ 100.0% $ 39,592,546
===== ============
- ---------------
* Aggregate cost for federal tax purposes.
See Notes to Financial Statements.
<PAGE>
PORTFOLIO OF INVESTMENTS
INCOME PORTFOLIO
APRIL 30, 1999 (UNAUDITED)
SHARES VALUE
------ -----
INVESTMENT COMPANY SECURITIES - 98.7%
321,779 WM High Yield Fund ............................ $ 2,960,368
612,909 WM Income Fund ................................ 5,724,571
2,860,871 WM Money Market Fund .......................... 2,860,871
1,237,366 WM Short Term High Quality Bond Fund .......... 2,883,062
439,361 WM U.S. Government Securities Fund ............ 4,753,888
------------
TOTAL INVESTMENTS (Cost $19,130,563*) ................. 98.7% 19,182,760
OTHER ASSETS AND LIABILITIES (Net) .................... 1.3 246,171
----- ------------
NET ASSETS ............................................ 100.0% $ 19,428,931
===== ============
- ---------------
* Aggregate cost for federal tax purposes.
See Notes to Financial Statements.
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
WM GROUP OF FUNDS
1. ORGANIZATION AND BUSINESS
WM Strategic Asset Management Portfolios (the "Trust") was organized under the
laws of the Commonwealth of Massachusetts on March 26, 1996 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 investment company. The Trust was established in order to
offer a range of asset allocation strategies to accommodate different investment
philosophies and goals. The Trust offers five portfolios; the Strategic Growth
and the Conservative Growth (the "Equity Portfolios"), Balanced , Flexible
Income and Income Portfolios (the "Fixed Income Portfolios") (each a "Portfolio"
and collectively, the "Portfolios"). Each of the Portfolios offers two classes
of shares: Class A shares and Class B shares. Class A shares are subject to an
initial sales charge at the time of purchase. Certain Class A shares purchased
without an initial sales charge may be subject to a contingent deferred sales
charge ("CDSC") if redeemed within two years of purchase. Class B shares are not
subject to an initial sales charge. Class B shares are subject to a CDSC if
redeemed within five years from the date of purchase.
Each of the Portfolios invests, within certain percentage ranges, in Class I
Shares of certain funds in the WM Group of Funds and certain other mutual funds
(collectively, the "Underlying Funds"). Each Portfolio typically allocates its
assets, within determined percentage ranges, among certain of the Underlying
Funds. The percentages 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 investments in those market segments and their corresponding
Underlying Funds. WM Advisors, Inc. (the "Advisor" or "WM Advisors"), a
wholly-owned subsidiary of Washington Mutual, Inc. ("Washington Mutual"), 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 certain short-term debt
instruments.
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 Portfolios in the
preparation of their financial statements.
PORTFOLIO VALUATION:
Investments in the Underlying Funds are valued at net asset value per Class I
share of the respective Underlying Funds determined as of the close of the New
York Stock Exchange on each valuation date. Short- term debt securities that
mature in 60 days or less are valued at amortized cost.
REPURCHASE AGREEMENTS:
Each Portfolio may engage in repurchase agreement transactions. Under the terms
of a typical repurchase agreement, the Portfolio, through its custodian, takes
possession of an underlying debt obligation subject to an obligation of the
seller to repurchase. The Portfolio is then obligated to resell the obligation
at an agreed upon price and time, thereby determining the yield during the
Portfolio's holding period. The value of the collateral is at all times at least
equal to the total amount of the repurchase obligation, including interest. In
the event of counterparty default, the Portfolio would seek to use the
collateral to offset losses incurred. There is potential loss to the Portfolio
in the event the Portfolio is delayed or prevented from exercising its right to
dispose of the collateral securities, including the risk of a possible decline
in the value of the underlying securities during the period while the Portfolio
seeks to assert its rights. WM Advisors, acting under the supervision of the
Board of Trustees, reviews the value of the collateral and the credit worthiness
of those banks and dealers with whom each Portfolio enters into repurchase
agreements.
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
accrual basis and consists of interest accrued and, if applicable, discount
accreted less premiums amortized. Dividend income is recorded on the ex-dividend
date. Each Portfolio's investment income and realized and unrealized gains and
losses are allocated among the Portfolio's classes of shares based upon the
relative average net assets of each class.
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS:
Dividends from net investment income of the 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 declared
and paid quarterly. Dividends from the net investment income of the Strategic
Growth Portfolio are declared and paid semi-annually. Distributions of any net
long-term capital gains earned by a Portfolio are made annually. Distributions
of any net short-term capital gains earned by a Portfolio are distributed no
less frequently than annually at the discretion of the Board of Trustees.
Additional distributions of net investment income and capital gains for each
Portfolio may be made at the discretion of the Board of Trustees in 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 determined in accordance with income tax regulations
which may differ from generally accepted accounting principles. These
differences are primarily due to differing treatments of income and gains on
various investment securities held by the Portfolios, organizational costs,
dividends payable, redesignated distributions and differing characterization of
distributions made by each Portfolio as a whole.
FEDERAL INCOME TAXES:
It is each Portfolio's policy to qualify as a regulated investment company by
complying with the requirements of the Internal Revenue Code of 1986, as
amended, applicable to regulated investment companies and by, among other
things, distributing substantially all of its taxable and tax-exempt earnings to
its shareholders. Therefore, no Federal income tax provision is required.
EXPENSES:
General expenses of the Trust are allocated to all the Portfolios based upon the
relative net assets of each Portfolio. In addition, the Portfolios will
indirectly bear their prorated share of expenses of the Underlying Funds.
Operating expenses directly attributable to a class of shares are charged to the
operations of that class of shares. Expenses of each Portfolio not directly
attributable to the operations of any class of shares are prorated among the
classes to which the expenses relate based on the relative average net assets of
each class of shares.
3. INVESTMENT ADVISORY AND OTHER TRANSACTIONS
WM Advisors serves as investment advisor to the Trust. As investment advisor to
the Portfolios, WM Advisors provides its proprietary asset allocation services
to the Portfolios, formulates the Portfolios' investment policies, analyzes
economic and market trends, exercises investment discretion over the assets of
the Portfolios and monitors the allocation of each Portfolio's assets and each
Portfolio's performance. For its investment advisory services to the Portfolios,
WM Advisors is entitled to a monthly fee, at an annual rate of 0.15% of each
Portfolio's average daily net assets. WM Shareholder Services, Inc., an indirect
wholly-owned subsidiary of Washington Mutual, serves as administrator to the
Portfolios and is entitled to a monthly fee at an annual rate of 0.50% of
average daily net assets of each Portfolio.
The Advisor has agreed to waive a portion of its management fees and/or
reimburse expenses. Fees waived and/or expenses reimbursed by the Advisor for
the six months ended April 30, 1999 are as follows:
NAME OF PORTFOLIO FEES WAIVED EXPENSES REIMBURSED
----------------- ----------- -------------------
Strategic Growth Portfolio $25,530 $ --
Conservative Growth Portfolio 49,644 --
Balanced Portfolio 34,598 --
Flexible Income Portfolio 20,517 11,171
Income Portfolio 12,216 14,852
WM Shareholder Services, Inc. (the "Transfer Agent") serves as the transfer and
shareholder servicing agent of the Portfolios. Shareholder 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 servicing fees are as follows:
NAME OF PORTFOLIO CLASS A CLASS B
----------------- ------- -------
The Fixed Income Portfolios $1.45 $1.55
The Equity Portfolios 1.25 1.35
Custodian fees for certain Portfolios have been reduced by credits allowed by
the custodian for uninvested cash balances. These Portfolios could have invested
this cash in income producing investments. Fees reduced by credits allowed by
the custodian for the period ended April 30, 1999 are shown separately in the
Statements of Operations.
4. TRUSTEES' FEES
No director, officer or employee of Washington Mutual or its subsidiaries
receives any compensation from the Trust for serving as an officer or Trustee of
the Trust. 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 telephone. The
Chairman of the each committee receives $500 per committee meeting attended.
Pursuant to an exemptive order granted by the Securities and Exchange
Commission, 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 accounts under 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 provided under these
plans are funded and any payments to plan participants are paid solely out of
the Trust's assets.
5. DISTRIBUTION PLANS
WM Funds Distributor, Inc. (the "Distributor"), a registered broker-dealer and
indirect wholly-owned subsidiary of Washington Mutual, serves as distributor for
Class A and B shares of the Portfolios. For the six months ended April 30, 1999,
the Distributor and WM Financial Services, Inc. ("WM Securities") received
$758,993 and $36,664, respectively, representing commissions (front end sales
charges) on Class A shares. In addition, the Distributor and WM Securities
received $678,559 and $83,183, respectively, representing CDSC Fees from Class B
shares.
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 Class of shares. In addition,
under the Class B Plan, the Distributor is to be paid an annual distribution fee
of up to 0.75% of the average daily net asset of the Class B shares of each
Portfolio of activities primarily intended to result in the sale of Class B
shares for the Portfolios.
6. PURCHASES AND SALES OF SECURITIES
The aggregate cost of purchases and proceeds from sales of securities, excluding
U.S. Government and short-term investments, for the six months ended April 30,
1999 were as follows:
NAME OF PORTFOLIO PURCHASES SALES
----------------- --------- -----
Strategic Growth Portfolio $ 47,304,046 $ 17,985,234
Conservative Growth Portfolio 54,130,558 37,801,674
Balanced Portfolio 114,385,549 82,319,383
Flexible Income Portfolio 24,977,906 8,246,462
Income Portfolio 11,144,410 4,614,652
At April 30, 1999, aggregate gross unrealized appreciation for all Underlying
Funds in which there is an excess of value over tax cost and aggregate gross
unrealized depreciation for all Underlying Funds in which there is an excess of
tax cost over value were as follows:
TAX BASIS TAX BASIS
UNREALIZED UNREALIZED
NAME OF PORTFOLIO APPRECIATION DEPRECIATION
----------------- ------------ ------------
Strategic Growth Portfolio $ 22,690,664 $ 613,363
Conservative Growth Portfolio 65,557,564 3,237,927
Balanced Portfolio 37,015,835 2,613,376
Flexible Income Portfolio 1,521,677 17,785
Income Portfolio 60,059 7,862
7. SHARES OF BENEFICIAL INTEREST
The Trust may issue an unlimited number of shares of beneficial interest, each
without par value.
8. ORGANIZATION COSTS
Expenses incurred in connection with the organization of the Portfolios,
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 Portfolio, respectively. In the event any of the initial
shares of a Portfolio 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 Portfolio outstanding at the time of such redemption.
9. RISK FACTORS OF THE PORTFOLIOS
Investing in the Underlying Funds through the Portfolios involves certain
additional expenses and tax results that would not be present in a direct
investment in the Underlying Funds. For example, under certain circumstances, an
Underlying Fund may determine to make payment of a redemption request by a
Portfolio wholly or partly by a distribution in kind of securities from its
portfolio, instead of cash, in accordance with the rules of the Securities and
Exchange Commission. In such cases, the Portfolios may hold securities
distributed by an Underlying Fund until the Advisor determines that it is
appropriate to dispose of such securities.
Certain Underlying Funds may invest a portion of their assets in foreign
securities; enter into forward foreign currency transactions; lend their
portfolio securities; enter into stock index, interest rate and currency futures
contracts, and options on such contracts; enter into interest rate swaps or
purchase or sell interest rate caps or floors; 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 WM Growth Fund, 50% of its total assets in the WM Emerging Growth Fund and
25% of its total assets in the WM High Yield Fund, each of which Underlying
Funds 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.
Certain Portfolios may invest as much as 50% of their total assets in the WM
Growth or WM Emerging Growth Funds, each of which may invest up to 25% of its
total 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 WM International Growth Fund,
which invests primarily in the foreign equity securities, and may invest as much
as 30% of its total assets in securities in developing or emerging market
countries. These investments will subject such Portfolios to risks associated
with investing in foreign securities, including those resulting from adverse
political 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 these persons and companies seek to fulfill their fiduciary
responsibilities to both the Portfolios and the Underlying Funds.
From time to time, one or more of the Underlying Funds used for investment by a
Portfolio may experience relatively large investments or redemptions due to
reallocations or rebalancings by the Portfolios. These transactions will affect
the Underlying Funds, since the Underlying Funds that experience redemptions as
a result of the reallocations or rebalancings may have to sell portfolio
securities and the Underlying Funds that receive additional cash will have to
invest such cash. While it is impossible to predict the overall impact of these
transactions over time, there could be adverse effects on portfolio management
to the extent that the Underlying Funds may be required to sell securities or
invest cash at times when they would not otherwise do so. These transactions
could also have tax consequences if sales of securities resulted in gains and
could also increase transaction costs. The Advisor is committed to minimizing
such impact on the Funds to the extent it is consistent with pursuing the
investment objectives of the Portfolios. The Advisor may nevertheless face
conflicts in fulfilling its responsibilities. The Advisor will, at all times,
monitor the impact on the Funds of transactions by the Portfolios.
10. SUBSEQUENT EVENT
Trustees unanimously approved a reorganization of the Trust from a Massachusetts
business trust to a Massachusetts limited liability company at their March 9,
1999 meeting. Trustees also recommended that shareholders approve the
reorganization at a special shareholder meeting scheduled for June 23, 1999.
Should shareholders approve, it is anticipated that the reorganization will
occur on or about July 16, 1999.
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This Semi-Annual Report is published for the general information of the
shareholders of the WM Group of Funds. It is authorized for distribution to
prospective investors only when preceded or accompanied by a current WM Group of
Funds prospectus. A mutual fund's share price and investment return will vary
with market conditions, and the principal value of an investment when you sell
your shares may be more or less than the original cost.
The WM Group of Funds are not insured by the FDIC. They are not deposits or
obligations of, nor are they guaranteed by, any bank. These securities are
subject to investment risk, including possible loss of principal amount
invested.
Distributed by WM Funds Distributor, Inc.
Member NASD
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GROUPofFUNDS U.S. Postage
P.O. Box 5118 P A I D
Westborough, MA 01581-5118 No. Reading, MA
Permit # 105
[recycle symbol] Printed on recycled paper
WMSAMSAR (6/24/99)
