<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
FILED BY THE REGISTRANT [X] FILED BY A PARTY OTHER THAN THE REGISTRANT [ ]
- --------------------------------------------------------------------------------
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
WM Strategic Asset Management Portfolios
(Name of Registrant as Specified In Its Charter)
[NAME OF PERSON FILING]
(Name of Person(s) Filing Proxy Statement)
PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
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<PAGE> 2
[WM Group of Funds letterhead]
May 14, 1999
Dear Strategic Asset Management Portfolio Shareholder:
It has been an exciting twelve months, and I thought it would be timely to
bring you up to date on a number of recent developments at WM Group of Funds. On
October 1, 1998, H.F. Ahmanson & Company, the parent company of Home Savings of
America and the former advisor to The Griffin Funds, merged with Washington
Mutual, Inc. On March 6, 1999, we successfully completed the merger of the
Griffin Funds into the corresponding WM Funds -- representing an additional $1.1
billion for the Fund complex.
During the process, we determined that changing the legal structure of the
WM Strategic Asset Management Portfolios would allow us to offer former Griffin
Funds shareholders the opportunity to exchange from their current asset
allocation service into the WM Strategic Asset Management Portfolios on a
tax-free basis. The exchange provides an opportunity to capture over $600
million additional assets for the SAM Portfolios.
What this means to you, as a shareholder, is that you will benefit from:
- Opportunities for greater economies of scale associated with increased
assets under management
- Potentially lower operating costs and shareholder expenses than without
these assets
- Maintaining a high level of service and operational efficiency
WE ARE SEEKING YOUR VOTE IN FAVOR OF THE REORGANIZATION. PLEASE TAKE THE
TIME TO REVIEW THE ENCLOSED PROXY MATERIALS, SIGN AND RETURN THE ENCLOSED PROXY
CARD.
For the reorganization to qualify as a "TAX-FREE" transaction, the SAM
Portfolios (including your Portfolio) and former shareholders of the Griffin
Funds need to contribute their shares of the WM Group of Funds to the newly
organized WM Strategic Asset Management Portfolios, LLC as part of a single
transaction. This reorganization is currently scheduled to take place on or
about July 16, 1999. PLEASE BE ASSURED THAT THIS REORGANIZATION WILL NOT AFFECT
YOUR INVESTMENT OPTIONS OR ACCOUNT VALUE.
The new SAM Portfolios' structure will maintain the versatility and
flexibility you have become accustomed to within your asset allocation option.
As a result, we urge you to vote in favor of the reorganization of the SAM
Portfolios.
Distributed by WM Funds Distributor, Inc.
<PAGE> 3
PROVEN PERFORMANCE
The SAM Portfolios will continue to offer specific advantages to you:
- ACTIVELY MANAGED ASSET ALLOCATION which reflects our disciplined approach
to managing assets from a perspective to maximizing return while managing
risk
- ONGOING PORTFOLIO MONITORING and periodic adjustments based on economic
trends
- QUARTERLY PORTFOLIO REPORTS to keep you informed about Portfolio
performance
The WM Funds' heritage in the investment business dates back to 1939.
Although past performance is no guarantee of future results, our long-term
performance has demonstrated our ability to produce value-added results for our
shareholders over time.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN
FOR THE PERIOD ENDED MARCH 31, 1999
-------------------------------------------------------------------------------
SAM PORTFOLIOS 1 YEAR 5 YEAR SINCE INCEPTION*
-------------------------------------------------------------------------------
NO SALES WITH MAX. NO SALES WITH MAX. NO SALES WITH MAX.
CHARGE SALES CHARGE CHARGE SALES CHARGE CHARGE SALES CHARGE
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Strategic Growth
(maximum 5.5% sales
charge) 17.19% 10.75% n/a n/a 19.92% 18.16%
- -----------------------------------------------------------------------------------------------------------
Conservative Growth
(maximum 5.5% sales
charge) 15.09% 8.76% 13.59% 12.31% 13.63% 12.88%
- -----------------------------------------------------------------------------------------------------------
Balanced
(maximum 5.5% sales
charge) 11.99% 5.83% 11.84% 10.58% 11.31% 10.57%
- -----------------------------------------------------------------------------------------------------------
Flexible Income
(maximum 4.5% sales
charge) 7.84% 2.99% 8.98% 7.98% 7.97% 7.14%
- -----------------------------------------------------------------------------------------------------------
Income
(maximum 4.5% sales
charge) 4.37% -0.32% 5.69% 4.72% 7.15% 6.57%
</TABLE>
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* 5/31/95 -- Strategic Growth, 9/30/90 -- Conservative Growth, Balanced, and
Income, 3/31/93 -- Flexible Income. 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 SAM Portfolio) for the
Strategic Asset Management Portfolios represents the performance of the 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 investment restrictions that the Act imposes. If the SAM Account had
been registered under the Act, its performance may have differed. Investment
return and principal value of an investment in the Fund will fluctuate, so
that an investor's shares, when redeemed, may be worth more or less than their
original cost. Each Portfolio's performance has benefited from the agreement
of WM Advisors and its affiliates to limit the Portfolio's expenses.
Thank you for choosing WM Group of Funds. We appreciate the confidence you
have placed with us, and thank you for considering this important opportunity.
If you have any questions regarding the SAM Portfolios, please do not hesitate
to contact your Investment Representative, or call us at (800) 222-5852. We look
forward to receiving your signed PROXY CARD soon.
Sincerely,
/s/ William G. Papesh
- ---------------------
William G. Papesh
President
The WM Group of Funds prospectus contains more complete information including
charges and expenses.
<PAGE> 4
[WM GROUP OF FUNDS LOGO]
IMPORTANT NEWS FOR
STRATEGIC ASSET MANAGEMENT
PORTFOLIO SHAREHOLDERS
THIS IS A BRIEF OVERVIEW OF THE MAJOR MATTER TO BE VOTED UPON. YOU SHOULD
CAREFULLY READ THE TEXT OF THE ENCLOSED PROXY STATEMENT.
WHY AM I RECEIVING THIS PROXY STATEMENT?
The transaction discussed in the proxy will effectively allow the WM
Strategic Asset Management (SAM) Portfolios to acquire the shares of
the underlying WM Group of Funds that are held by participants in a
separate asset allocation advisory service. The transaction has been
structured so it can be accomplished on a tax-free basis for both
those participants and for existing SAM Portfolio shareholders. The
transaction involves changing the SAM Portfolios from a Massachusetts
business trust to a Massachusetts limited liability company.
HOW WILL THIS AFFECT MY ACCOUNT?
The reorganization will not affect your account value or investment
option. After the reorganization, you will be a shareholder of a new
Portfolio that will continue to seek the same investment objective,
following the same investment policies and disciplined thinking that
have served SAM clients so well over the years. You will continue to
receive the same shareholder services. All applicable fees will remain
the same and in time, this change may result in lower operating costs
and expenses, as a percentage of net assets, than would be the case
without an increase in assets under management. Of course, there can
be no assurance that the expected investments by WMFS clients, if
any, will result in savings for current Portfolio shareholders.
[IMPORTANT NEWS SIDEBAR]
<PAGE> 5
[IMPORTANT NEWS SIDEBAR]
WHY DO I NEED TO VOTE?
Your vote is important and is needed to ensure that the proposal
outlined in the proxy statement can be acted upon. YOUR IMMEDIATE
RESPONSE ON THE ENCLOSED PROXY CARD(S) OR BY TELEPHONE WILL HELP
PREVENT THE NEED FOR ANY FURTHER SOLICITATIONS FOR A SHAREHOLDER VOTE.
We encourage all shareholders to participate in the governance of the
Portfolios.
HOW DOES THE BOARD OF TRUSTEES SUGGEST THAT I VOTE?
After careful consideration, the Board of Trustees unanimously
recommends that you vote "FOR" the proposal. The attached proxy
statement is designed to give you information relating to the proposal
on which you are being asked to vote. We encourage you to support the
Trustees' recommendation.
HOW DO I VOTE MY SHARES?
You may vote by mail, phone, fax or in person at the Special Meeting.
To vote by mail, simply sign and send us the enclosed authorization
card(s) in the envelope provided. In the alternative, you may vote by
phone or fax through D.F. King, our proxy solicitor. To vote by fax,
sign the proxy card and fax (both sides) to (212) 269-2796. The proxy
solicitor can accept your vote over the phone anytime between 5:00
a.m. and 6:00 p.m. Pacific Time (8:00 a.m. and 9:00 p.m. Eastern
Time), Monday through Friday -- SIMPLY CALL (800) 755-7250. Finally,
you can vote in person at the Special Meeting on June 23, 1999.
WHOM DO I CALL IF I HAVE QUESTIONS?
D.F. King, our proxy solicitor, will be happy to answer your questions
about the solicitation. Please call (800) 755-7250 between 5:00 a.m.
and 6:00 p.m. Pacific Time (8:00 a.m. and 9:00 p.m. Eastern Time),
Monday through Friday, or you may call your Investment Representative.
WHO IS PAYING THE COST OF THE SHAREHOLDER MEETING AND THIS PROXY SOLICITATION?
WM Advisors and its affiliates -- not your Portfolio -- are paying all
costs.
IF THE CHANGES ARE APPROVED BY THE SHAREHOLDERS, WHEN WILL THEY GO INTO EFFECT?
If the shareholders approve the proposed changes at the special
meeting on June 23, 1999, they should become effective on or about
July 16, 1999.
THANK YOU FOR MAILING
YOUR PROXY CARD PROMPTLY!
WE APPRECIATE YOUR CONTINUED SUPPORT AND LOOK FORWARD TO SERVING YOUR
FUTURE INVESTMENT NEEDS.
<PAGE> 6
WM GROUP OF FUNDS
WM STRATEGIC ASSET MANAGEMENT PORTFOLIOS
STRATEGIC GROWTH PORTFOLIO
CONSERVATIVE GROWTH PORTFOLIO
BALANCED PORTFOLIO
FLEXIBLE INCOME PORTFOLIO
INCOME PORTFOLIO
1201 THIRD AVENUE, 22ND FLOOR
SEATTLE, WASHINGTON 98101
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE 23, 1999
A Special Meeting of Shareholders (the "Meeting") of WM Strategic Asset
Management Portfolios (the "Trust") will be held at 1201 Third Avenue, 22nd
Floor, Seattle, Washington on June 23, 1999 at 11:00 a.m. (Pacific time), to
consider and take action on the following proposal (the "Proposal"):
A. REORGANIZATION AS A MASSACHUSETTS LIMITED LIABILITY COMPANY. To
approve the reorganization of each of the Portfolios (the "Existing Portfolios")
listed above (a "Reorganization"), currently a series of a Massachusetts
business trust (the "Trust") as a series (a "New Portfolio") of a Massachusetts
limited liability company (the "Company") pursuant to an Agreement and Plan of
Reorganization providing for, and the authorization of certain related actions
involving, the transfer of all of the assets of the Existing Portfolio to the
corresponding New Portfolio, in exchange for shares of the corresponding New
Portfolio and the assumption by the corresponding New Portfolio of all of the
liabilities of the Existing Portfolio, and the distribution of such shares of
the New Portfolio to the shareholders of the Existing Portfolio in complete
liquidation of the Existing Portfolio; and the taking of any other actions by
the Existing Portfolio or its affiliates to the extent necessary to complete the
transactions contemplated in connection with the Existing Portfolio's
Reorganization. (TO BE VOTED UPON BY THE SHAREHOLDERS OF EACH EXISTING
PORTFOLIO, VOTING SEPARATELY BY PORTFOLIO BUT WITHOUT REGARD TO CLASS.)
B. OTHER BUSINESS. To transact such other business as may properly come
before the Meeting or any adjournment thereof.
The Board of Trustees has fixed the close of business on April 26, 1999 as
the record date for determination of shareholders of the Trust entitled to
notice of, and to vote at, the Meeting.
By Order of the Board of Trustees
John T. West
Secretary
May 14, 1999
YOUR VOTE IS IMPORTANT! WE URGE YOU TO PROMPTLY SIGN, DATE AND COMPLETE THE
ENCLOSED PROXY AND RETURN IT IN THE PREPAID POSTAGE ENVELOPE WHICH IS ALSO
ENCLOSED FOR YOUR CONVENIENCE OR YOU MAY CALL (800) 755-7250 TO VOTE BY
TELEPHONE OR FAX YOUR PROXY TO (212) 269-2796. THIS WILL HELP AVOID THE
ADDITIONAL EXPENSE OF A SECOND SOLICITATION.
<PAGE> 7
WM GROUP OF FUNDS
WM STRATEGIC ASSET MANAGEMENT PORTFOLIOS
STRATEGIC GROWTH PORTFOLIO
CONSERVATIVE GROWTH PORTFOLIO
BALANCED PORTFOLIO
FLEXIBLE INCOME PORTFOLIO
INCOME PORTFOLIO
1201 THIRD AVENUE, 22ND FLOOR
SEATTLE, WASHINGTON 98101
SPECIAL MEETING OF SHAREHOLDERS
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Trustees of WM Strategic Asset Management Portfolios, a
Massachusetts business trust (the "Trust") for use at the Special Meeting of
Shareholders (the "Meeting") to be held at 1201 Third Avenue, 22nd Floor,
Seattle, Washington 98101 on June 23, 1999 at 11:00 a.m. (Pacific time), or any
adjournment thereof. Accompanying this Proxy Statement is a Notice of the
Meeting (the "Notice") and a proxy for the Meeting solicited by the Board of
Trustees. It is expected that this Proxy Statement, the Notice and the proxy
will be mailed to shareholders on or about May 14, 1999. Except as specifically
provided herein, the term "Existing Portfolios" shall refer to the Portfolios
listed above, each of which is currently organized as a series of the Trust.
THE TRUST WILL FURNISH TO SHAREHOLDERS, UPON REQUEST AND WITHOUT CHARGE, A
COPY OF ITS ANNUAL REPORT FOR THE FISCAL YEAR ENDED OCTOBER 31, 1998. THE ANNUAL
REPORT OF THE TRUST MAY BE OBTAINED BY CONTACTING THE TRUST AT THE ADDRESS
LISTED ON THE COVER PAGE OF THIS PROXY STATEMENT OR BY CALLING TOLL-FREE (800)
222-5852.
The Meeting has been called for the purpose of having the shareholders of
the Trust consider and take action upon the proposal set forth in the Notice
(the "Proposal"). Shareholders of each Existing Portfolio are entitled to vote
on the Proposal as it affects that Portfolio, voting separately by Portfolio.
Shareholders of both Classes of each Existing Portfolio will vote together. Each
share of an Existing Portfolio outstanding on the Record Date, as defined below,
will be entitled to one vote, with fractional shares voting proportionately.
The close of business on April 26, 1999, has been established as the record
date (the "Record Date") for determining shareholders entitled to notice of, and
to vote at, the Meeting. As of the Record Date, the following number of shares
of each Existing Portfolio were outstanding:
<TABLE>
<CAPTION>
NUMBER OF
SHARES
OUTSTANDING
-----------
<S> <C>
Strategic Growth Portfolio.................................. 8,745,973
Conservative Growth Portfolio............................... 26,180,200
Balanced Portfolio.......................................... 22,272,181
Flexible Income Portfolio................................... 3,425,909
Income Portfolio............................................ 1,841,754
</TABLE>
1
<PAGE> 8
As of the Record Date, the Trust believes that the Trustees and officers of
the Trust, as a group, owned less than one percent of the shares of each
Existing Portfolio and of the Trust as a whole. To the best knowledge of the
Trust, no person owned of record or beneficially 5% or more of the outstanding
shares of any Existing Portfolio as of the Record Date.
The holders of 30% of the shares of each Existing Portfolio outstanding on
the Record Date, present in person or represented by proxy, will constitute a
quorum for the Meeting with respect to the Existing Portfolio. A majority of all
shares outstanding of each Existing Portfolio is required to approve the
Proposal with respect to such Existing Portfolio. If shareholders of some of the
Existing Portfolios approve the Proposal and others do not, the Board of
Trustees will consider what further actions may be appropriate with respect to
the Proposal.
Timely, properly executed proxies will be voted as you instruct. IF NO
SPECIFICATION IS MADE, SHARES WILL BE VOTED FOR THE APPROVAL OF THE PROPOSAL. At
any time before it has been voted, the enclosed proxy may be revoked by the
signer by a written revocation received by the Secretary of the Trust, by
properly executing a later-dated proxy or by attending the Meeting, requesting
the return of any previously delivered proxy and voting in person.
Votes cast by proxy or in person at the Meeting will be counted by persons
appointed by the Trust as tellers for the Meeting. The tellers will count the
total number of votes cast "for" approval of the Proposal for purposes of
determining whether sufficient affirmative votes have been cast. The tellers
will count shares represented by proxies that reflect abstentions and "broker
non-votes" (i.e., shares held by brokers or nominees as to which (i)
instructions have not been received from the beneficial owners or the persons
entitled to vote and (ii) the broker or nominee does not have the discretionary
voting power on a particular matter) as shares that are present and entitled to
vote on the matter for purposes of determining the presence of a quorum.
Abstentions and broker non-votes have the effect of votes against the Proposal.
The Proposal described in this Proxy Statement has been approved by the
Board of Trustees of the Trust. The Board of Trustees does not intend to bring
any other matters before the Meeting and does not know of any other matters
which will be brought before the Meeting by others. In the event any other
matters not mentioned in the Proxy Statement properly come before the Meeting,
the enclosed proxy authorizes the persons named in the proxy to vote on such
other matters in their discretion.
Solicitation of proxies by personal interview, mail and telephone may be
made by officers and Trustees of the Trust and employees of WM Advisors, Inc.
(the "Manager"), WM Funds Distributor, Inc. (the "Distributor") and their
affiliates. The Trust has retained D.F. King to aid in solicitation of proxies
for a fee not to exceed $50,000. The costs of retaining D.F. King and other
expenses incurred in connection with the solicitation of proxies, and the costs
of holding the Meeting, will be borne by the Manager and/or its affiliates, not
by the Existing Portfolios.
If sufficient votes in favor of the Proposal are not received by the time
currently scheduled for the Meeting, the persons named as proxies may propose
one or more adjournments of the Meeting to permit further solicitation of
proxies. Any adjournment will require the affirmative vote of a plurality of the
votes cast on the question in person or by proxy at the session of the Meeting
to be adjourned. If the Meeting is adjourned with respect to one or more
Existing Portfolios, one or more of the other Existing Portfolios may still
proceed to vote on the Proposal and such vote will be dispositive for that
Existing Portfolio. The persons named as proxies will vote in favor of such
adjournment those proxies which they are entitled to vote in favor of the
Proposal. They will vote against any such adjournment those proxies required to
be voted against the
2
<PAGE> 9
Proposal. The costs of any additional solicitation and of any adjourned session
will be borne by the Manager and/or its affiliates. See Proposal 1
-- "Reorganization as a Massachusetts Limited Liability Company."
In order that your shares may be represented at the Meeting, please sign,
date and complete the enclosed proxy and return it in the prepaid postage
envelope enclosed for your convenience.
In the alternative, you may vote by phone or fax through D.F. King, our
proxy solicitor. To vote by fax, sign the proxy card and fax (both sides) to
(212) 269-2796 or simply call (800) 755-7250.
SHAREHOLDER PROPOSALS AT FUTURE MEETINGS
The Trust does not, and the Company will not, hold annual or other regular
meetings of shareholders. Shareholder proposals to be presented at any future
meeting of shareholders of the Company must be received by the Company at a
reasonable time before the Company's mailing of solicitation of proxies for that
meeting in order for such proposals to be considered for inclusion in the proxy
materials relating to that meeting.
PROPOSAL 1:
REORGANIZATION AS A MASSACHUSETTS LIMITED LIABILITY COMPANY
At the Meeting, it is proposed that the shareholders of each Existing
Portfolio approve the reorganization (a "Reorganization") of their Existing
Portfolio, currently a series of a Massachusetts business trust, as a series of
a Massachusetts limited liability company (a "New Portfolio"). Each
Reorganization would be effected pursuant to an Agreement and Plan of
Reorganization (a "Plan") which provides for the transfer of all of the assets
of the Existing Portfolio to the New Portfolio in exchange for shares of the New
Portfolio and the assumption by the New Portfolio of all of the liabilities of
the Existing Portfolio, followed by the liquidation of the Existing Portfolio
(the "SAMP Reorganization"). This Proposal also would authorize the taking of
any other actions by the Existing Portfolio and its affiliates to the extent
necessary to complete the Existing Portfolio's Reorganization. A vote in favor
of this Proposal will constitute a vote in favor of both the Reorganization of
the relevant Existing Portfolio and any other actions necessary to complete the
Reorganization.
The name of the Company is "WM Strategic Asset Management Portfolios, LLC."
The Company has been newly organized for the purpose of effecting the
Reorganization. Like the Trust, the Company will have separate series
representing different Portfolios. The Trust is, and the Company will be,
registered as an open-end diversified management investment company under the
Investment Company Act of 1940, as amended (the "1940 Act"). The Trust's shares
are, and the Company's shares will be, registered under the Securities Act of
1933, as amended. Like the Existing Portfolios, each New Portfolio will have
shares representing beneficial interests in the assets and liabilities belonging
to that series, and each series will be further divided into separate classes
(Class A and Class B) that have the same attributes as the corresponding classes
of the Existing Portfolio. Each New Portfolio will have the same investment
objectives, policies and restrictions, and the same name (Strategic Growth
Portfolio, Conservative Growth Portfolio, Balanced Portfolio, Flexible Income
Portfolio or Income Portfolio) as the corresponding Existing Portfolio. In each
Reorganization, the shareholders of an Existing Portfolio will receive shares of
the corresponding New Portfolio which are of the same class (Class A or Class B)
as the shares of the Existing Portfolio they currently hold.
3
<PAGE> 10
BACKGROUND AND REASONS FOR THE REORGANIZATION
The Board of Trustees of the Trust, including all Trustees who are not
"interested persons" of the Trust, the Manager or the Distributor within the
meaning of the 1940 Act, has unanimously approved the Reorganizations of the
Existing Portfolios and recommended shareholder approval of this Proposal. The
Board of Trustees determined that the Reorganization of each Existing Portfolio
would be in the best interests of that Existing Portfolio and that the interests
of each Existing Portfolio's shareholders would not be diluted as a result of
the Reorganization. The Board of Trustees also considered the tax consequences
of the Reorganizations.
The Massachusetts Limited Liability Company Act provides statutory limited
liability for shareholders. While the possibility of shareholder liability of a
shareholder of a Massachusetts business trust is considered remote,
reorganization as a Massachusetts limited liability company is expected to offer
New Portfolio shareholders greater protection from potential personal liability.
The Reorganizations of the Existing Portfolios will also permit the assets
of certain of the Existing Portfolios to be combined on a tax-free basis with
the assets of certain investors who currently receive asset allocation services
from WM Financial Services ("WMFS"), an affiliate of the Manager and
Distributor. Those investors currently hold shares of certain WM Funds, just as
each of the Existing Portfolios holds shares of the same WM Funds (the
"Underlying WM Funds"). The expected addition of up to $610 million by those
WMFS clients to the Strategic Growth, Conservative Growth, Balanced and Flexible
Income Portfolios will provide some protection from possible increases in
expenses (as a percentage of average net assets) that could result if the
Portfolios were to shrink in size and may provide a greater opportunity for
lowering aggregate operating expenses (as a percentage of average net assets)
for those Portfolios than would otherwise be the case. While the Reorganizations
are expected to result in the same or lower expenses for each Portfolio, there
can be no assurance that the expected additions by those investors will result
in savings for any Existing Portfolio shareholders.
The tax-free treatment of the Reorganizations means that all assets
contributed to each New Portfolio, both by the Existing Portfolios and by WMFS
advisory clients, will be carried on the New Portfolio's books at the tax basis
in effect immediately prior to the Reorganizations. This means that, when shares
of the Underlying WM Funds originally belonging to WMFS advisory clients are
sold by a New Portfolio, any gain on sale will result in a capital gain which,
when subsequently distributed to shareholders of the New Portfolio, will be
taxable to all shareholders of the New Portfolio at the time of distribution,
not only to the former WMFS advisory clients who originally owned the
securities. Similarly, when securities originally belonging to the Existing
Portfolios are sold by a New Portfolio, any gain on sale will generally be
taxable to all shareholders of that New Portfolio at the time of distribution of
such gain, not only to the shareholders of the Existing Portfolio which held the
securities at the time of the Reorganization. For a further discussion of tax
consequences, please see Federal Income Tax Consequences on page 9.
AGREEMENT AND PLAN OF REORGANIZATION
Each Plan provides that the relevant New Portfolio will acquire all of the
assets of the corresponding Existing Portfolio in exchange for the assumption by
the New Portfolio of all of the liabilities of the Existing Portfolio and for
the issuance of the shares of the New Portfolio ("Reorganization Shares"), all
as of the Exchange Date (defined in each Plan to be July 16, 1999 or such other
date as may be agreed upon by the New Portfolio and the Existing Portfolio). The
following discussion of the Plans is qualified in its entirety by
4
<PAGE> 11
the full text of the Plan for each Existing Portfolio, the form of which is
attached as Appendix A to this Proxy Statement.
Each Existing Portfolio will transfer all of its assets to the
corresponding New Portfolio, and, in exchange, the New Portfolio will assume all
of the liabilities of the Existing Portfolio and deliver to the Existing
Portfolio (i) a number of full and fractional Class A Reorganization Shares
having an aggregate net asset value equal to the value of the assets of the
Existing Portfolio attributable to its Class A shares, less the value of the
liabilities of the Existing Portfolio assumed by the New Portfolio attributable
to the Class A shares of the Existing Portfolio and (ii) a number of full and
fractional Class B Reorganization Shares having an aggregate net asset value
equal to the value of assets of the Existing Portfolio attributable to its Class
B shares, less the value of the liabilities of the Existing Portfolio assumed by
the New Portfolio attributable to the Class B shares of the Existing Portfolio.
Immediately following the Exchange Date, each Existing Portfolio will
distribute pro rata to its shareholders of record as of the close of business on
the Exchange Date the full and fractional Reorganization Shares received by the
Existing Portfolio, with Class A Reorganization Shares being distributed to
holders of Class A shares of the Existing Portfolio and Class B Reorganization
Shares being distributed to holders of Class B shares of the Existing Portfolio.
As a result of the proposed transaction, each holder of Class A and Class B
shares of the Existing Portfolio will receive a number of Class A and Class B
Reorganization Shares equal in aggregate value at the Exchange Date to the value
of the Class A and Class B shares, respectively, of the Existing Portfolio held
by the shareholder. This distribution will be accomplished by the establishment
of accounts on the records of the corresponding New Portfolio in the names of
the Existing Portfolio shareholders, each account representing the respective
number of full and fractional Class A and Class B Reorganization Shares due such
shareholder. Because the shares of the New Portfolio will not be represented by
certificates, certificates for Reorganization Shares will not be issued.
The consummation of each Reorganization is subject to the conditions set
forth in the relevant Plan, any of which may be waived. Each Plan may be
terminated and the Reorganization abandoned at any time, before or after
approval by the shareholders of the Existing Portfolio, prior to the Exchange
Date, by mutual consent of the relevant Existing Portfolio and New Portfolio or,
if any condition set forth in the Plan has not been fulfilled and has not been
waived by the party entitled to its benefits, by such party.
All legal and accounting fees and expenses, printing and other fees and
expenses incurred in connection with the consummation of the transactions
contemplated by the Plan will be borne by the Manager and/or its affiliates.
Notwithstanding any of the foregoing, expenses will in any event be paid by
the party directly incurring such expenses if and to the extent that the payment
by any other party of such expenses would result in the disqualification of the
first party as a "regulated investment company" within the meaning of Section
851 of the Internal Revenue Code of 1986, as amended (the "Code").
REORGANIZATION SHARES
Full and fractional Reorganization Shares will be issued to each Existing
Portfolio's shareholders in accordance with the procedures under the Plan as
described above. The Reorganization Shares are Class A and Class B shares of the
New Portfolio, which will have characteristics identical to those of the
corresponding class of Existing Portfolio shares with respect to contingent
deferred sales charges ("CDSCs") and conversion. For purposes of determining the
CDSC payable on redemption of Class B Reorganization Shares, as well as the
conversion date of Class B Reorganization Shares, (i) the Class B Reorganization
Shares will be
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<PAGE> 12
treated as having been acquired as of the dates that, and for the prices at
which, the shareholders originally acquired their Class B shares of the Existing
Portfolio, (ii) any CDSC will be applied using the schedule in effect for the
Existing Portfolio at the time the shares of the Existing Portfolio were
originally purchased, and (iii) Class B Reorganization Shares will convert
automatically into Class A shares of the New Portfolio after the same conversion
period as was in effect at the time the shares of the Existing Portfolio were
originally purchased. Class A Reorganization Shares will be subject to service
and distribution fees, payable under the New Portfolio's Class A Distribution
Plan, which is substantially identical to the Existing Portfolio's existing
Class A Distribution Plan. Class B Reorganization Shares will be subject to
service and distribution fees payable under the New Portfolio's Class B
Distribution Plan, which is substantially identical to the Existing Portfolio's
existing Class B Distribution Plan.
OTHER MATTERS
The investment objectives, policies and restrictions of each New Portfolio
will be the same as those for the corresponding Existing Portfolio; they will
not change as a result of the Reorganizations. The Manager and an officer of the
Trust, as the sole members of the Company (the "Initial Members") prior to the
Existing Portfolios' Reorganization, will vote for the current Trustees of the
Trust as Trustees of the Company (the "Trustees"). The Trust's officers will
become officers of the Company with comparable responsibilities. The Initial
Members will approve an Investment Management Agreement between the Company and
the Manager substantially identical to the Investment Management Agreement
currently in effect and a Distribution Plan for each Class of shares
substantially identical to those currently in effect for the Existing Portfolio.
The Distributor will serve as the distributor of the shares of the Company under
the same terms as it does for the Trust.
STRUCTURE OF THE COMPANY AND THE NEW PORTFOLIOS
The Company has been established pursuant to a Limited Liability Company
Agreement (the "Company Agreement") under the laws of The Commonwealth of
Massachusetts. Immediately prior to the Reorganization, the Company will have
nominal assets and no liabilities and the sole members of the Company will be
the Initial Members. After the Reorganization, the same Trustees who currently
serve as Trustees on the Trust will be the Trustees of the Company.
Each of the Reorganization Shares will be fully paid and nonassessable by
the Company when issued, will be transferable without restriction, and will have
no preemptive or conversion rights, except that Class B Reorganization Shares
convert automatically into Class A shares as described above. The Company
Agreement permits the Company to issue an unlimited number of shares and,
without shareholder approval, to divide its shares into two or more series of
shares representing separate investment portfolios and to further divide any
such series into two or more classes of shares having such preferences and
special or relative rights and privileges as the Trustees may determine. Each
New Portfolio's shares will initially be divided into two classes, Class A and
Class B, which correspond to the classes of shares of the relevant Existing
Portfolio.
COMPARISON OF GOVERNING DOCUMENTS OF EXISTING PORTFOLIOS AND NEW PORTFOLIOS
As a Massachusetts limited liability company, the Company will be subject
to the provisions of its Company Agreement and Bylaws (the "Company Bylaws").
The provisions of the Company Agreement and the Company Bylaws differ in certain
respects from those of the Trust's Agreement and Declaration of Trust (the
"Declaration of Trust") and Bylaws ("Trust Bylaws"). The following is a summary
of certain of those differences. For additional information regarding all of the
differences, shareholders should refer directly to
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<PAGE> 13
such documents, copies of which may be obtained without charge by contacting the
Trust at its address listed on the cover of this Proxy Statement or by calling
toll-free (800) 222-5852.
SHAREHOLDER LIABILITY. Under Massachusetts law, shareholders of a
Massachusetts business trust could, under certain circumstances, be held
personally liable for the obligations of the Trust, although this possibility is
considered remote. The Massachusetts Limited Liability Company Act provides, by
statute, that shareholders shall not be liable for liabilities of the Company by
virtue of their being shareholders.
VOTING RIGHTS, MEETINGS AND PROCEDURES. The voting rights of shareholders
of the Company are set forth in the Company Agreement. The shareholders of each
New Portfolio generally have the same rights to vote and to call shareholder
meetings as shareholders of each Existing Portfolio except with regard to
derivative litigation and amendment of the respective Agreements. (Please see
discussion below of voting rights with respect to amendments and derivative
litigation). The Trust Bylaws provide that a quorum is 30% of the aggregate
number of Shares entitled to vote, while the Company Agreement provides that 10%
of the Shares entitled to vote shall constitute a quorum. Neither a New
Portfolio nor an Existing Portfolio is required to hold annual shareholder
meetings for matters such as the election of Trustees, although the requirements
of the 1940 Act may effectively require that a New Portfolio or an Existing
Portfolio call special shareholder meetings under certain conditions.
DIFFERENCES IN REDEMPTION RIGHTS OF SHAREHOLDERS. The Trust Agreement
requires at least weekly redemptions to be permitted even if not required by the
1940 Act. Redemption of shares by shareholders under the Company Agreement is
only subject to the requirements of the 1940 Act, which gives shareholders the
right to daily redemptions.
MANDATORY REDEMPTION RIGHTS BY THE TRUST/COMPANY. The Declaration of Trust
provides that the Trust may redeem shares at any time, if the Trustees determine
in their sole discretion that failure to so redeem may have materially adverse
consequences to the holders of the shares of the Trust or any class or series of
shares thereof. The Company Agreement provides that the Company shall have the
right at any time to redeem shares of any shareholder to the extent such
shareholder owns shares equal to or in excess of a percentage determined from
time to time by the Trustees of (a) the outstanding shares of the Company or (b)
the shares of any Series. Both the Declaration of Trust and the Company
Agreement provide that the Portfolio may redeem shares of an account which falls
below a minimum value set by the Trustees.
DIFFERENCES IN RECORDS PROVISIONS. The Declaration of Trust provides that
the Declaration of Trust and any amendments thereto shall be filed with the
Secretary of the Commonwealth of Massachusetts, and a copy thereof shall be kept
at the office of the Trust where it may be inspected by any Shareholder. The
Company Agreement provides that "[a]ny documents which a Shareholder may have a
right to obtain pursuant to the [Massachusetts Limited Liability Company] Act or
otherwise shall be furnished at the sole expense of such Shareholder at the
Company's principal office only after the Shareholder gives 30 days' prior
written notice of its intent to obtain such records, and further subject to such
rules and procedures as the Trustees may establish, which may include rules and
procedures established after the date of such request." The Company Agreement
will be filed with the Securities and Exchange Commission.
DIFFERENCES IN PROVISIONS REGARDING COMBINING SERIES/CLASSES. Both the
Declaration of Trust and the Company Agreement provide that the Trustees may
combine two or more classes or series of the Trust's shares into a single one.
The Company Agreement further provides that the Trustees may from time to time
divide or combine the shares of shareholders of any particular series or class
into a greater or lesser number of shares without thereby changing the
proportionate beneficial interest of the shareholders of that series or class in
the assets belonging to that series or class or in any way affecting the rights
of shareholders of any other
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<PAGE> 14
series or class. The Declaration of Trust has no corresponding provision
allowing division of a series or Class or changing the number of Shares.
DIFFERENCES IN PROVISIONS REGARDING SALE OF ASSETS AND MERGERS. The
Declaration of Trust provides that a two-thirds vote of Shareholders is required
for the Trust to merge or consolidate with any other corporation, association,
trust or other organization or for the Trust to sell, lease or exchange all or
substantially all of the Trust property, including its goodwill. However, if
such merger, consolidation, sale, lease or exchange is recommended by the
Trustees, the vote or written consent of the holders of the majority of the
Shares outstanding and entitled to vote is sufficient authorization. The Company
Agreement does not provide any requirement for shareholder approval for sales of
substantially all of the assets of the Company. The Company Agreement provides
that, upon majority vote of shareholder votes properly cast upon the question,
the Trustees may cause the Company to be merged into or consolidated with
another entity or its shares exchanged under or pursuant to any state or federal
statute, if any, or otherwise to the extent permitted by law.
INTERESTED TRANSACTIONS PROVISIONS. The Declaration of Trust provides that
certain transactions of the Trust with Principal Shareholders (as defined
therein) shall require a two-thirds vote of the Shares outstanding in order to
be valid. Transactions subject to the two-thirds vote requirement under the
Declaration of Trust include the merger or consolidation of the Trust with or
into any Principal Shareholders; the issuance of any securities of the Trust to
any Principal Shareholder for cash; the sale, lease or exchange of all or any
substantial part of the assets of the Trust to any principal Shareholder; and
the sale, lease or exchange to the Trust in exchange for securities of the Trust
of any assets of any Principal Shareholder.
However, the two-thirds vote requirement under the Declaration of Trust is
not applicable if the Trustees approve a memorandum of understanding with the
Principal Shareholder with regard to the transactions or if the transaction is
with a corporation, a majority of the outstanding Shares normally entitled to
vote in elections of trustees of which is owned of record or beneficially by the
Trust. The Company Agreement has no comparable provision.
DERIVATIVE LITIGATION PROVISIONS. The Trust Bylaws provide that the
shareholders shall have voting power "to the same extent as the stockholders of
the Massachusetts business corporation as to whether or not a court action,
proceeding or claim should or should not be brought or maintained derivatively
or as a class action on behalf of the Trust or the Shareholders." The Company
Agreement provides that no shareholder shall have the right to bring or maintain
any court action, proceeding or claim on behalf of the Company or any series
without first making demand on the Trustees to bring or maintain such action,
proceeding or claim. Demand is excused only when the plaintiff makes a specific
showing that irreparable injury to the Company or series would otherwise result.
In their sole discretion, the Trustees may submit the matter to a vote of
shareholders of the Company or series, as appropriate. Any decision by the
Trustees to bring, maintain or settle (or not to bring, maintain or settle) such
court action, proceeding or claim, or to submit the matter to a vote of
shareholders shall be made by the Trustees in their business judgment and shall
be binding upon the shareholders. However, if this provision is found not to be
enforceable, any decision by any shareholder to bring such a court action,
proceeding or claim shall require a majority affirmative vote of the shares
outstanding of the Company or series, as applicable.
DIFFERENCES IN AMENDMENT PROVISIONS. The Declaration of Trust provides
that most amendments may be made by a majority of the Trustees when authorized
by a majority of the shares outstanding and entitled to vote, while the Company
Agreement provides that amendments need only the approval of a majority of
Shareholder votes properly cast upon the question. In both cases, amendments
affecting only certain classes
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<PAGE> 15
require only the approval of the affected classes, and amendments to change the
name of the Trust/Company or for the purpose of "supplying any omission, curing
any ambiguity or curing, correcting or supplementing any defective or
inconsistent provision" of the Agreement do not require Shareholder
authorization. In the case of the Trust, amendments dealing with par value of
shares do not require shareholder vote; par value is a concept inapplicable to
the Company.
ABILITY TO EFFECT STATUTORY MERGERS. Under Massachusetts law pertaining to
business trusts, Massachusetts business trusts may merge with or into one or
more domestic limited liability companies but not with or into a corporation.
Massachusetts limited liability companies, however, may merge with or into one
or more domestic or foreign limited liability companies, domestic or foreign
professional corporations, one or more domestic business trusts or associations,
a domestic or foreign general or limited partnership. Thus, if in future the
Portfolios should desire to effect another merger, organization as a limited
liability company will afford the Portfolios greater flexibility.
FEDERAL INCOME TAX CONSEQUENCES
As a condition to each Existing Portfolio's obligation to consummate the
Reorganization, the Existing Portfolio will receive an opinion from Ropes &
Gray, counsel to the Trust, to the effect that, on the basis of the existing
provisions of the Code, current administrative rules and court decisions, for
federal income tax purposes: (i) no gain or loss will be recognized by the
Existing Portfolio as a result of the Reorganization; (ii) no gain or loss will
be recognized by shareholders of the Existing Portfolio on the distribution of
Reorganization Shares to them in exchange for their shares of the Existing
Portfolio; (iii) the tax basis of the Reorganization Shares that the Existing
Portfolio's shareholders receive in place of their Existing Portfolio shares
will be the same as the basis in the Existing Portfolio shares; (iv) a
shareholder's holding period for the Reorganization Shares received pursuant to
the Plan will be determined by including the holding period for the Existing
Portfolio shares exchanged for the Reorganization Shares, provided that the
shareholder held the Existing Portfolio shares as a capital asset; (v) no gain
or loss will be recognized by the New Portfolio as a result of the
reorganization; (vi) the New Portfolio's tax basis in the assets that the New
Portfolio receives from the Existing Portfolio will be the same as the Existing
Portfolio's basis in such assets; and (vii) the New Portfolio's holding period
in such assets will include the Existing Portfolio's holding period in such
assets. Each opinion will be based on certain factual certifications made by
officers of the Trust and the Existing Portfolios and will also be based on
customary assumptions.
Prior to the Exchange Date, each Existing Portfolio will declare a
distribution to shareholders which, together with all previous distributions,
will have the effect of distributing to shareholders all of its investment
company taxable income (computed without regard to the deduction for dividends
paid) and net realized capital gains, if any, through the Exchange Date.
The tax-free treatment of the Reorganizations means that all assets
contributed to the New Portfolios, both by the Existing Portfolios and by WMFS
advisory clients, will be carried on the New Portfolio's books at the tax basis
in effect immediately prior to the Reorganizations. This means that, when shares
of the Underlying WM Funds originally belonging to WMFS advisory clients are
sold by a New Portfolio, any gain on sale will result in a capital gain which,
when subsequently distributed to shareholders of the New Portfolio, will be
taxable to all shareholders of the New Portfolio at the time of distribution,
not only to the former WMFS advisory clients who originally owned the
securities. Similarly, when securities originally belonging to the Existing
Portfolios are sold by a New Portfolio, any gain on sale will generally be
taxable to all shareholders of that New Portfolio at the time of distribution of
such gain, not only to the shareholders of the Existing Portfolio which held the
securities at the time of the Reorganization.
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<PAGE> 16
The table below lists the following for each of the Existing Portfolios
which is expected to receive investments by WMFS clients: (1) such Existing
Portfolio's total assets, as of March 31, 1999; (2) the total assets of WMFS
clients, as of March 31, 1999, eligible for contribution to such Existing
Portfolio; (3) the pro forma combined assets assuming all relevant WMFS client
assets are contributed as of the closing and no other changes in net assets
occur before the closing (figures may not add due to rounding); (4) the
unrealized capital gain as a percentage of net assets of such Existing
Portfolio; (5) the estimated unrealized capital gain as a percentage of net
assets of the relevant WMFS clients; and (6) the pro forma estimated combined
unrealized capital gain as a percentage of net assets, assuming all relevant
WMFS client assets are contributed as of the closing and no other changes in net
assets occur before the closing.
<TABLE>
<CAPTION>
UNREALIZED GAIN
AS A PERCENTAGE
NET ASSETS OF NET ASSETS
AS OF 3/31/99 AS OF 3/31/99
-------------- ---------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Strategic Growth Portfolio......................... 110,780 14.8
Eligible WMFS client assets........................ 32,752 16.2
PRO FORMA (COMBINED).......................... 143,531 15.1%
Conservative Growth Portfolio...................... 318,794 14.4
Eligible WMFS client assets........................ 113,327 13.9
PRO FORMA (COMBINED).......................... 432,121 14.2%
Balanced Portfolio................................. 255,583 10.0
Eligible WMFS client assets........................ 228,928 11.0
PRO FORMA (COMBINED).......................... 484,511 10.5%
Flexible Income Portfolio.......................... 33,543 2.7
Eligible WMFS client assets........................ 235,003 7.1
PRO FORMA (COMBINED).......................... 268,546 6.6%
</TABLE>
No WMFS client assets are expected to be contributed to the Income
Portfolio. None of the SAM Portfolios had capital loss carryforwards exceeding
0.20% of its net assets as of October 31, 1998. However, this number, as well as
the numbers set forth in the table above, is subject to change up until the
closing of the Reorganizations.
TAKING OF OTHER ACTIONS
It is also proposed, as part of this Proposal, that the shareholders of
each Existing Portfolio approve the taking of any other actions by the Existing
Portfolio or its affiliates to the extent necessary to complete the Existing
Portfolio's Reorganization. Such actions will include any necessary procedures
to effect the Reorganization, including but not limited to the ratification of
the current Trustees of the Trust as Trustees of the Company, the approval of an
investment management agreement for the Company that is substantially identical
to the investment management agreement currently in effect for the Trust, the
approval of Class A and Class B distribution plans for each New Portfolio which
are substantially identical to those currently in effect for the Existing
Portfolios, the temporary waiver of any fundamental investment restrictions
which would otherwise prevent the Reorganization and the approval of any other
necessary agreements.
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<PAGE> 17
INFORMATION ABOUT THE MANAGER
The Manager is registered under the Investment Advisers Act of 1940, as
amended and, together with its predecessors, has been in the investment
management business since 1944. The Manager is a subsidiary of Washington
Mutual, Inc. The principal address of Washington Mutual, Inc. is 1201 Third
Avenue, Seattle, Washington 98101.
PRINCIPAL UNDERWRITER
The Principal Underwriter of both the Existing Portfolios and New
Portfolios is WM Funds Distributor, Inc., located at 1201 Third Avenue, Suite
2210, Seattle, Washington 98101.
THE BOARD OF TRUSTEES OF THE TRUST RECOMMENDS THAT THE SHAREHOLDERS OF EACH
PORTFOLIO VOTE FOR APPROVAL OF THIS PROPOSAL.
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<PAGE> 18
APPENDIX A
FORM OF
AGREEMENT AND PLAN OF REORGANIZATION
([Strategic Growth] Portfolio, a series of WM Strategic Asset Management
Portfolios, a Massachusetts business trust reorganizing as a series of WM
Strategic Asset Management Portfolios, LLC, a Massachusetts limited liability
company)
This Agreement and Plan of Reorganization (this "Agreement") is made as of
July 16, 1999 by and between WM Strategic Asset Management Portfolios, a
Massachusetts business trust (the "Trust"), on behalf of its [Strategic Growth]
Portfolio series (the "Portfolio"), and WM Strategic Asset Management
Portfolios, LLC, a Massachusetts limited liability company (the "LLC"), on
behalf of its [Strategic Growth] Portfolio series (the "New Portfolio").
PLAN OF REORGANIZATION
(a) The Portfolio will sell, assign, convey, transfer and deliver to the
New Portfolio on the Exchange Date (as defined in Section 6) all of its
properties and assets. In consideration therefor, the New Portfolio shall, on
the Exchange Date, assume all of the liabilities of the Portfolio existing at
the Valuation Time and deliver to the Portfolio (i) a number of full and
fractional Class A shares of beneficial interest of the New Portfolio (the
"Class A Reorganization Shares") having an aggregate net asset value equal to
the value of the assets of the Portfolio attributable to Class A shares of the
Portfolio transferred to the New Portfolio on such date less the value of the
liabilities of the Portfolio attributable to Class A shares of the Portfolio
assumed by the New Portfolio on that date, (ii) a number of full and fractional
Class B shares of beneficial interest of the New Portfolio (the "Class B
Reorganization Shares") having an aggregate net asset value equal to the value
of the assets of the Portfolio attributable to Class B shares of the Portfolio
assumed by the New Portfolio on that date.
The Class A Reorganization Shares and the Class B Reorganization Shares
shall be referred to collectively as the "Reorganization Shares." It is intended
that the reorganization described in this Agreement shall be a reorganization
within the meaning of Section 368 of the Internal Revenue Code of 1986, as
amended (the "Code").
(b) The transactions described in paragraph (a) of this Agreement are
intended to occur as part of a single plan that includes the contribution by
certain participants in an asset allocation service offered by WM Financial
Services (the "WMFS participants") of shares in WM Funds to the New Portfolio in
exchange for shares in the New Portfolio. It is intended that the contributions
by the WMFS participants shall qualify as tax-free transfers under Section 351
of the Code and the regulations promulgated thereunder.
(c) Upon consummation of the transactions described in paragraph (a) of
this Agreement, the Portfolio shall distribute in complete liquidation to its
Class A and Class B shareholders of record as of the Exchange Date the Class A
and Class B Reorganization Shares, each shareholder being entitled to receive
that proportion of such Class A and Class B Reorganization Shares which the
number of Class A and Class B shares of beneficiary interest of the Portfolio
held by such shareholder bears to the number of Class A and Class B shares of
the Portfolio outstanding on such date. Certificates representing the
Reorganization Shares will not be issued. All issued and outstanding shares of
the Portfolio will simultaneously be canceled on the books of the Portfolio.
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<PAGE> 19
(d) As promptly as practicable after the liquidation of the Portfolio as
aforesaid, the Portfolio shall be dissolved pursuant to the provisions of the
Amended and Restated Agreement and Declaration of Trust and By-Laws of the
Trust, as amended, and applicable law, and its legal existence terminated. Any
reporting responsibility of the Portfolio is and shall remain the responsibility
of the Portfolio up to and including the Exchange Date and, if applicable, such
later date on which the Portfolio is liquidated.
AGREEMENT
The New Portfolio and the Portfolio agree as follows:
1. Representations, Warranties and Agreements of the New Portfolio. The
New Portfolio represents and warrants to and agrees with the Portfolio that:
a. The New Portfolio is a series of WM Strategic Asset Management
Portfolios, LLC, a limited liability company duly established and validly
existing under the laws of The Commonwealth of Massachusetts, and has power
to own all of its properties and assets and to carry out its obligations
under this Agreement. The LLC is qualified as a foreign association in
every jurisdiction where required, except to the extent that failure to so
qualify would not have a material adverse effect on the LLC. Each of the
LLC and the New Portfolio has all necessary federal, state and local
authorizations to carry on its business as now being conducted and to carry
out this Agreement.
b. On the Effective Date, the LLC will be registered under the
Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end
management investment company, and such registration has not been revoked
or rescinded and is in full force and effect.
c. [Reserved.]
d. [Reserved.]
e. There are no material legal, administrative or other proceedings
pending or, to the knowledge of the LLC or the New Portfolio, threatened
against the LLC or the New Portfolio, which assert liability on the part of
the LLC or the New Portfolio. The New Portfolio knows of no facts which
might form the basis for the institution of such proceedings and is not a
party to or subject to the provisions of any order, decree or judgment of
any court or governmental body which materially and adversely affects its
business or its ability to consummate the transactions herein contemplated.
f. The New Portfolio has no known liabilities of a material nature,
contingent or otherwise.
g. As of the Exchange Date, the New Portfolio will have filed all
federal and other tax returns and reports which, to the knowledge of the
LLC's officers, are required to be filed by the New Portfolio and has paid
or will pay all federal and other taxes shown to be due on said returns or
on any assessments received by the New Portfolio. All tax liabilities of
the New Portfolio have been adequately provided for on its books, and no
tax deficiency or liability of the New Portfolio has been asserted, and no
question with respect thereto has been raised or is under audit, by the
Internal Revenue Service or by any state or local tax authority for taxes
in excess of those already paid.
h. No consent, approval, authorization or order of any court or
governmental authority is required for the consummation by the New
Portfolio of the transactions contemplated by this Agreement, except such
as may be required under the Securities Act of 1933, as amended (the "1933
Act"), the Securities Exchange Act of 1934, as amended (the "1934 Act"),
the 1940 Act and state securities or blue sky laws (which term as used
herein shall include the laws of the District of Columbia and of Puerto
Rico).
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<PAGE> 20
i. The definitive proxy statement of the Portfolio filed with the
Securities and Exchange Commission pursuant to Rule 14a-6(b) under the 1934
Act and relating to the meeting of the Portfolio 's shareholders referred
to in Section 7(a) (together with the documents incorporated therein by
reference, the "Portfolio Proxy Statement"), on the date of such filing (i)
complied in all material respects with the provisions of the 1934 Act and
the 1940 Act and the rules and regulations thereunder and (ii) did not
contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements
therein not misleading; and at the time of the shareholders meeting
referred to in Section 7(a) and on the Exchange Date, the Portfolio Proxy
Statement will not contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make
the statements therein not misleading; provided, however, that the
representations and warranties in this subsection shall apply only to
statements in or omissions from the Portfolio Proxy Statement made in
reliance upon and in conformity with information furnished by the New
Portfolio and the LLC for use in the Portfolio Proxy Statement.
j. There are no material contracts outstanding to which the New
Portfolio is a party, other than as disclosed in the New Portfolio
Prospectus or the Portfolio Proxy Statement.
k. The New Portfolio has no shares of beneficial interest issued and
outstanding.
l. The New Portfolio was established by the Trustees of the LLC in
order to effect the transactions described in this Agreement. It has not
yet filed its first federal income tax return and, thus, has not yet
elected to be treated as a "regulated investment company" for federal
income tax purposes. However, upon filing its first income tax return at
the completion of its first taxable year, the New Portfolio will elect to
be a "regulated investment company" and until such time will take all steps
necessary to ensure that it qualifies for taxation as a "regulated
investment company" under Sections 851 and 852 of the Code.
m. The issuance of the Reorganization Shares pursuant to this
Agreement will be in compliance with all applicable federal and state
securities laws.
n. The Reorganization Shares to be issued to the Portfolio have been
duly authorized and, when issued and delivered pursuant to this Agreement,
will be legally and validly issued and will be fully paid and nonassessable
by the New Portfolio, and no shareholder of the New Portfolio will have any
preemptive right of subscription or purchase in respect thereof.
o. All issued and outstanding shares of the New Portfolio at the
Exchange Date will be duly and validly issued and outstanding, fully paid
and non-assessable by the New Portfolio. The New Portfolio does not have
outstanding any options, warrants or other rights to subscribe for or
purchase any of the New Portfolio shares, nor is there outstanding any
security convertible into any of the New Portfolio shares.
2. Representations, Warranties and Agreements of the Portfolio. The
Portfolio represents and warrants to and agrees with the New Portfolio that:
a. The Portfolio is a series of WM Strategic Asset Management
Portfolios, a Massachusetts business trust duly established and validly
existing under the laws of The Commonwealth of Massachusetts, and has power
to own all of its properties and assets and to carry out this Agreement.
The Trust is qualified as a foreign limited liability company in every
jurisdiction where required, except to the extent that failure to so
qualify would not have a material adverse effect on the Trust. Each of the
Trust
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<PAGE> 21
and the Portfolio has all necessary federal, state and local authorizations
to own all of its properties and assets and to carry on its business as now
being conducted and to carry out this Agreement.
b. The Trust is registered under the 1940 Act as an open-end
management investment company, and such registration has not been revoked
or rescinded and is in full force and effect.
c. A statement of assets and liabilities, statements of operations,
statements of changes in net assets and a schedule of investments
(indicating their market values) of the Portfolio as of and for the fiscal
year ended October 31, 1998 will be furnished to the New Portfolio. Such
statement of assets and liabilities and schedule will fairly present the
financial position of the Portfolio as of the date indicated therein, and
said statements of operations and statements of changes in net assets
fairly reflect the results of its operations and changes in net assets for
the periods covered thereby in conformity with generally accepted
accounting principles.
d. The current prospectus and statement of additional information of
the Portfolio dated March 1, 1999 (collectively, the "Portfolio
Prospectus"), which has been previously furnished to the New Portfolio, did
not contain as of such dates and does not contain, with respect to the
Portfolio, any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading.
e. There are no material legal, administrative or other proceedings
pending or, to the knowledge of the Trust or the Portfolio, threatened
against the Trust or the Portfolio, which assert liability on the part of
the Portfolio. The Portfolio knows of no facts which might form the basis
for the institution of such proceedings and is not a party to or subject to
the provisions of any order, decree or judgment of any court or
governmental body which materially and adversely affects its business or
its ability to consummate the transactions herein contemplated.
f. There are no material contracts outstanding to which the Portfolio
is a party, other than as disclosed in the Portfolio Prospectus or the
Portfolio Proxy Statement.
g. The Portfolio has no known liabilities of a material nature,
contingent or otherwise, other than those that will be shown on the
Portfolio's statement of assets and liabilities as of June 30, 1998
referred to above and those incurred in the ordinary course of its business
as an investment company since such date. Prior to the Exchange Date, the
Portfolio will endeavor to quantify and reflect on its balance sheet all of
its material known liabilities and will advise the New Portfolio of all
material liabilities, contingent or otherwise, incurred by it subsequent to
October 31, 1998, whether or not incurred in the ordinary course of
business.
h. As of the Exchange Date, the Portfolio will have filed all federal
and other tax returns and reports which, to the knowledge of the
Portfolio's officers, are required to be filed by the Portfolio and has
paid or will pay all federal and other taxes shown to be due on said
returns or on any assessments received by the Portfolio. All tax
liabilities of the Portfolio have been adequately provided for on its
books, and no tax deficiency or liability of the Portfolio has been
asserted, and no question with respect thereto has been raised or is under
audit, by the Internal Revenue Service or by any state or local tax
authority for taxes in excess of those already paid.
i. At the Exchange Date, the Portfolio will have full right, power
and authority to sell, assign, transfer and deliver the Investments (as
defined below) and any other assets and liabilities of the Portfolio to be
transferred to the New Portfolio pursuant to this Agreement. At the
Exchange Date, subject only to the delivery of the Investments and any such
other assets and liabilities as contemplated
A-4
<PAGE> 22
by this Agreement, the New Portfolio will acquire the Investments and any
such other assets and liabilities subject to no encumbrances, liens or
security interests whatsoever and without any restrictions upon the
transfer thereof. As used in this Agreement, the term "Investments" shall
mean the Portfolio's investments shown on the schedule of its investments
as of June 30, 1998 referred to in Section 2(c) hereof, as supplemented
with such changes in the portfolio as the Portfolio shall make, and changes
resulting from stock dividends, stock split-ups, mergers and similar
corporate actions through the Exchange Date.
j. No registration under the 1933 Act of any of the Investments would
be required if they were, as of the time of such transfer, the subject of a
public distribution by either of the New Portfolio or the Portfolio, except
as previously disclosed to the New Portfolio by the Portfolio.
k. No consent, approval, authorization or order of any court or
governmental authority is required for the consummation by the Portfolio of
the transactions contemplated by this Agreement, except such as may be
required under the 1933 Act, 1934 Act, the 1940 Act or state securities or
blue sky laws.
l. The Portfolio Proxy Statement, on the date of its filing (i)
complied in all material respects with the provisions of the 1934 Act and
the 1940 Act and the rules and regulations thereunder and (ii) did not
contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements
therein not misleading; and at the time of the shareholders meeting
referred to in Section 7(a) and on the Exchange Date, the Portfolio Proxy
Statement will not contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make
the statements therein not misleading; provided, however, that none of the
representations and warranties in this subsection shall apply to statements
in or omissions from the Portfolio Proxy Statement made in reliance upon
and in conformity with information furnished by the New Portfolio for use
in the Portfolio Proxy Statement.
m. The Portfolio qualifies and will at all times through the Exchange
Date qualify for taxation as a "regulated investment company" under
Sections 851 and 852 of the Code.
n. At the Exchange Date, the Portfolio will have sold such of its
assets, if any, as are necessary to assure that, after giving effect to the
acquisition of the assets of the Portfolio pursuant to this Agreement, the
New Portfolio will constitute a "diversified company" within the meaning of
Section 5(b)(1) of the 1940 Act.
o. To the best of its knowledge, all of the issued and outstanding
shares of beneficial interest of the Portfolio shall have been offered for
sale and sold in conformity with all applicable federal and state
securities laws (including any applicable exemptions therefrom), or the
Portfolio has taken any action necessary to remedy any prior failure to
have offered for sale and sold such shares in conformity with such laws.
p. All issued and outstanding shares of the Portfolio are, and at the
Exchange Date will be, duly and validly issued and outstanding, fully paid
and non-assessable by the Portfolio. The Portfolio does not have
outstanding any options, warrants or other rights to subscribe for or
purchase any of the Portfolio shares, nor is there outstanding any security
convertible into any of the Portfolio shares, except that Class B shares of
the Portfolio are convertible into Class A shares of the Portfolio in the
manner and on the terms described in the Portfolio Prospectus.
A-5
<PAGE> 23
3. Reorganization.
a. Subject to the requisite approval of the shareholders of the
Portfolio and to the other terms and conditions contained herein, the
Portfolio agrees to sell, assign, convey, transfer and deliver to the New
Portfolio, and the New Portfolio agrees to acquire from the Portfolio, on
the Exchange Date all of the Investments and all of the cash and other
properties and assets of the Portfolio, whether accrued or contingent, in
exchange for that number of shares of beneficial interest of the New
Portfolio provided for in Section 4 and the assumption by the New Portfolio
of all of the liabilities of the Portfolio, whether accrued or contingent,
existing at the Valuation Time (as defined below) except for the
Portfolio's liabilities, if any, arising in connection with this Agreement.
The Portfolio will, as soon as practicable after the Exchange Date,
distribute all of the Reorganization Shares received by it to the
shareholders of the Portfolio in exchange for their Class A and Class B
shares of the Portfolio.
b. The Portfolio will pay or cause to be paid to the New Portfolio
any interest, cash or such dividends, rights and other payments received by
it on or after the Exchange Date with respect to the Investments and other
properties and assets of the Portfolio, whether accrued or contingent,
received by it on or after the Exchange Date. Any such distribution shall
be deemed included in the assets transferred to the New Portfolio at the
Exchange Date and shall not be separately valued unless the securities in
respect of which such distribution is made shall have gone "ex" such
distribution prior to the Valuation Time, in which case any such
distribution which remains unpaid at the Exchange Date shall be included in
the determination of the value of the assets of the Portfolio acquired by
the New Portfolio.
c. The Valuation Time shall be 4:00 p.m. Eastern time on the Exchange
Date or such earlier or later day as may be mutually agreed upon in writing
by the parties hereto (the "Valuation Time").
4. Exchange Date; Valuation Time. On the Exchange Date, the New Portfolio
will deliver to the Portfolio (i) a number of full and fractional Class A
Reorganization Shares having an aggregate net asset value equal to the value of
the assets of the Portfolio attributable to Class A shares of the Portfolio
transferred to the New Portfolio on such date less the value of the liabilities
of the Portfolio attributable to Class A shares of the Portfolio assumed by the
New Portfolio on that date, (ii) a number of full and fractional Class B
Reorganization Shares having an aggregate net asset value equal to the value of
the assets of the Portfolio attributable to Class B shares of the Portfolio
transferred to the New Portfolio on such date less the value of the liabilities
of the Portfolio attributable to Class B shares of the Portfolio assumed by the
New Portfolio on that date, determined as hereinafter provided in this Section
4.
a. The net asset value of the Reorganization Shares to be delivered
to the Portfolio, the value of the assets attributable to the Class A and
Class B shares of the Portfolio, and the value of the liabilities
attributable to the Class A and Class B Shares of the Portfolio to be
assumed by the New Portfolio shall in each case be determined as of the
Valuation Time.
b. The net asset value of the Class A and Class B Reorganization
Shares shall be computed in the manner set forth in the New Portfolio
Prospectus. The value of the assets and liabilities of the Class A and
Class B shares of the Portfolio shall be determined by the New Portfolio,
in cooperation with the Portfolio, pursuant to procedures which the New
Portfolio would use in determining the fair market value of the New
Portfolio's assets and liabilities.
c. No adjustment shall be made in the net asset value of either the
Portfolio or the New Portfolio to take into account differences in realized
and unrealized gains and losses.
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<PAGE> 24
d. The Portfolio shall distribute the Class A Reorganization Shares
to the Class A shareholders of the Portfolio by furnishing written
instructions to the New Portfolio's transfer agent, which will as soon as
practicable set up open accounts for each Class A Portfolio shareholder in
accordance with such written instructions. The Portfolio shall distribute
the Class B Reorganization Shares to the Class B shareholders of the
Portfolio by furnishing written instructions to the New Portfolio's
transfer agent, which will as soon as practicable set up open accounts for
each Class B Portfolio shareholder in accordance with such written
instructions.
e. The New Portfolio shall assume all liabilities of the Portfolio,
whether accrued or contingent, in connection with the acquisition of assets
and subsequent dissolution of the Portfolio or otherwise, except for the
Portfolio's liabilities, if any, pursuant to this Agreement.
5. Expenses, Fees, etc.
a. The parties hereto understand and agree that the transactions
contemplated by this Agreement are being undertaken contemporaneously with
a general restructuring and consolidation of certain of the registered
investment companies advised by WM Advisors, Inc.; and that in connection
therewith the costs of all such transactions are being borne by WM
Advisors, Inc. and/or its affiliates. Notwithstanding any of the foregoing,
expenses will in any event be paid by the party directly incurring such
expenses if and to the extent that the payment by the other party of such
expenses would result in the disqualification of such party as a "regulated
investment company" within the meaning of Section 851 of the Code.
b. [Reserved.]
c. [Reserved.]
d. [Reserved.]
e. Notwithstanding any other provision of this Agreement, if for any
reason the transactions contemplated by this Agreement are not consummated,
no party shall be liable to the other party for any damages resulting
therefrom, including, without limitation, consequential damages.
6. Exchange Date. Delivery of the assets of the Portfolio to be
transferred, assumption of the liabilities of the Portfolio to be assumed, and
the delivery of the Reorganization Shares to be issued shall be made at Boston,
Massachusetts as of July 16, 1999 or at such other time and date agreed to by
the New Portfolio and the Portfolio, the date and time upon which such delivery
is to take place being referred to herein as the "Exchange Date."
7. Meetings of Shareholders; Dissolution.
a. The Trust, on behalf of the Portfolio, agrees to call a meeting of
the Portfolio's shareholders as soon as is practicable after the date of
filing of the Portfolio Proxy Statement for the purpose of considering the
sale of all of its assets to and the assumption of all of its liabilities
by the New Portfolio as herein provided, adopting this Agreement, and
authorizing the liquidation and dissolution of the Portfolio.
b. The Portfolio agrees that the liquidation and dissolution of the
Portfolio will be effected in the manner provided in the Amended and
Restated Agreement and Declaration of Trust and By-Laws of the Trust, as
amended, and in accordance with applicable law and that on and after the
Exchange Date, the Portfolio shall not conduct any business except in
connection with its liquidation and dissolution.
c. [Reserved.]
A-7
<PAGE> 25
d. [Reserved.]
8. Conditions to the New Portfolio's Obligations. The obligations of the
New Portfolio hereunder shall be subject to the following conditions:
a. That this Agreement shall have been adopted and the transactions
contemplated hereby shall have been approved by the requisite votes of the
holders of the outstanding shares of beneficial interest of the Portfolio
entitled to vote.
b. That the Portfolio shall have furnished to the New Portfolio a
statement of the Portfolio's assets and liabilities, with values determined
as provided in Section 4 of this Agreement, together with a list of
Investments with their respective tax costs, all as of the Valuation Time,
certified on the Portfolio's behalf by the Portfolio's President (or any
Vice President) and Treasurer, a certificate of both such officers, dated
the Exchange Date, that there has been no material adverse change in the
financial position of the Portfolio since October 31, 1998 other than
changes in the Investments and other assets and properties since that date
or changes in the market value of the Investments and other assets of the
Portfolio, or changes due to dividends paid or losses from operations.
c. That the Portfolio shall have furnished to the New Portfolio a
statement, dated the Exchange Date, signed by the Portfolio's President (or
any Vice President) and Treasurer certifying that as of the Exchange Date
all representations and warranties of the Portfolio made in this Agreement
are true and correct in all material respects as if made at and as of such
date and the Portfolio has complied with all the agreements and satisfied
all the conditions on its part to be performed or satisfied at or prior to
such date.
d. [Reserved.]
e. That there shall not be any material litigation pending with
respect to the matters contemplated by this Agreement.
f. That the New Portfolio shall have received an opinion of counsel
to the Portfolio, in form satisfactory to counsel to the New Portfolio and
dated the Exchange Date, to the effect that (i) the Trust is a
Massachusetts business trust duly established and is validly existing under
the laws of the Commonwealth of Massachusetts and has the power to own all
its properties and to carry on its business as presently conducted; (ii)
this Agreement has been duly authorized, executed and delivered by the
Portfolio and, assuming that the Portfolio Proxy Statement complies with
the 1934 Act and the 1940 Act and assuming due authorization, execution and
delivery of this Agreement by the LLC, on behalf of the New Portfolio, is a
valid and binding obligation of the Portfolio; (iii) the Portfolio has
power to sell, assign, convey, transfer and deliver the assets contemplated
hereby and, upon consummation of the transactions contemplated hereby in
accordance with the terms of this Agreement, the Portfolio will have duly
sold, assigned, conveyed, transferred and delivered such assets to the New
Portfolio; (iv) the execution and delivery of this Agreement did not, and
the consummation of the transactions contemplated hereby will not, violate
the Portfolio's Amended and Restated Declaration of Trust or By-Laws or any
provision of any agreement known to such counsel to which the Portfolio is
a party or by which it is bound, it being understood that with respect to
investment restrictions as contained in the Portfolio's Amended and
Restated Declaration of Trust or By-Laws or then-current prospectus or
statement of additional information, such counsel may rely upon a
certificate of an officer of the Portfolio whose responsibility it is to
advise the Portfolio with respect to such matters; and (v) no consent,
approval, authorization or order of any court or governmental authority is
required for the consummation
A-8
<PAGE> 26
by the Portfolio of the transactions contemplated hereby, except such as
have been obtained under the 1933 Act, the 1934 Act and the 1940 Act and
such as may be required under state securities or blue sky laws.
g. That the New Portfolio shall have received an opinion of counsel
to the Portfolio in form satisfactory to counsel to the New Portfolio
(which opinion would be based upon certain factual representations and
certain qualifications), with respect to the matters specified in Section
9(g) of this Agreement.
h. That the New Portfolio shall have received an opinion of counsel
to the Portfolio in form satisfactory to counsel to the New Portfolio
(which opinion would be based upon certain factual representations and
subject to certain qualifications), to the effect that, on the basis of the
existing provisions of the Code, current administrative rules, and court
decisions, for federal income tax purposes (i) no gain or loss will be
recognized by the New Portfolio upon receipt of the Investments transferred
to the New Portfolio pursuant to this Agreement in exchange for the
Reorganization Shares; (ii) the basis to the New Portfolio of the
Investments will be the same as the basis of the Investments in the hands
of the Portfolio immediately prior to such exchange; and (iii) the New
Portfolio's holding periods with respect to the Investments will include
the respective periods for which the Investments were held by the
Portfolio.
i. That the assets of the Portfolio to be acquired by the New
Portfolio will include no assets which the New Portfolio, by reason of
charter limitations or of investment restrictions disclosed in its current
registration statement in effect on the Exchange Date, may not properly
acquire.
j. [Reserved.]
k. That the Portfolio shall have received from the commission and any
relevant state securities administrator such order or orders as are
reasonably necessary or desirable under the 1933 Act, the 1933 Act, the
1934 Act, the 1940 Act, and any applicable state securities or blue sky
laws in Connection with the transactions contemplated hereby, and that all
such order shall be in full force and effect.
l. That all actions taken by the Portfolio in connection with the
transactions contemplated by this Agreement and all documents incidental
thereto shall be satisfactory in form and substance to the New Portfolio
and its counsel.
m. That, prior to the Exchange Date, the Portfolio shall have
declared a dividend or dividends which, together with all previous such
dividends, shall have the effect of distributing to the shareholders of the
Portfolio (i) all of the excess of (x) the Portfolio's investment income
excludable from gross income under Section 103(a) of the Code over (y) the
Portfolio's deductions disallowed under Sections 265 and 171(a)(2) of the
Code, (ii) all of the Portfolio's investment company taxable income (as
defined in Section 852 of the Code) for its taxable years ending on or
after October 31, 1998 and on or prior to the Exchange Date (computed in
each case without regard to any deduction for dividends paid), and (iii)
all of the Portfolio's net capital gain realized (after reduction for any
capital loss carryover), in each case for both the taxable year ending on
October 31, 1998 and the short taxable period beginning on November 1, 1998
and ending on the Exchange Date.
n. That the Portfolio shall have furnished to the New Portfolio a
certificate, signed by the President (or any Vice President) and the
Treasurer of the Portfolio as to the tax cost to the Portfolio of the
securities delivered to the New Portfolio pursuant to this Agreement,
together with any such other evidence as to such tax cost as the New
Portfolio may reasonably request.
A-9
<PAGE> 27
o. That the Portfolio's custodian shall have delivered to the New
Portfolio a certificate identifying all of the assets of the Portfolio held
or maintained by such custodian as of the Valuation Time.
p. That the Portfolio's transfer agent shall have provided to the New
Portfolio (i) the originals or true copies of all of the records of the
Portfolio in the possession of such transfer agent as of the Exchange Date,
(ii) a certificate setting forth the number of shares of the Portfolio
outstanding as of the Valuation Time, and (iii) the name and address of
each holder of record of any shares and the number of shares held of record
by each such shareholder.
q. That all of the issued and outstanding shares of beneficial
interest of the Portfolio shall have been offered for sale and sold in
conformity with all applicable state securities or blue sky laws (including
any applicable exemptions therefrom) and, to the extent that any audit of
the records of the Portfolio or its transfer agent by the New Portfolio or
its agents shall have revealed otherwise, either (i) the Portfolio shall
have taken all actions that in the opinion of the New Portfolio or its
counsel are necessary to remedy any prior failure on the part of the
Portfolio to have offered for sale and sold such shares in conformity with
such laws or (ii) the Portfolio shall have furnished (or caused to be
furnished) surety, or deposited (or caused to be deposited) assets in
escrow, for the benefit of the New Portfolio in amounts sufficient and upon
terms satisfactory, in the opinion of the New Portfolio or its counsel to
indemnify the New Portfolio against any expense, loss, claim, damage or
liability whatsoever that may be asserted or threatened by reason of such
failure on the part of the Portfolio to have offered and sold such shares
in conformity with such laws.
r. [Reserved.]
9. Conditions to the Portfolio's Obligations. The obligations of the
Portfolio hereunder shall be subject to the following conditions:
a. That this Agreement shall have been adopted and the transactions
contemplated hereby shall have been approved by the requisite votes of the
holders of the outstanding shares of beneficial interest of the Portfolio
entitled to vote.
b. [Reserved.]
c. That the LLC, on behalf of the New Portfolio, shall have executed
and delivered to the Portfolio an Assumption of Liabilities dated as of the
Exchange Date pursuant to which the New Portfolio will assume all of the
liabilities of the Portfolio existing at the Valuation Time in connection
with the transactions contemplated by this Agreement, other than
liabilities arising pursuant to this Agreement.
d. That the New Portfolio shall have furnished to the Portfolio a
statement, dated the Exchange Date, signed by the LLC's President (or any
Vice President) and Treasurer (or any Assistant Treasurer) certifying that
as of the Exchange Date all representations and warranties of the New
Portfolio made in this Agreement are true and correct in all material
respects as if made at and as of such date, and that the New Portfolio has
complied with all of the agreements and satisfied all of the conditions on
its part to be performed or satisfied at or prior to each of such date.
e. That there shall not be any material litigation pending or
threatened with respect to the matters contemplated by this Agreement.
f. That the Portfolio shall have received an opinion of counsel to
the New Portfolio in form satisfactory to counsel to the Portfolio, and
dated the Exchange Date, to the effect that (i) the LLC is a Massachusetts
limited liability company duly formed and is validly existing under the
laws of The
A-10
<PAGE> 28
Commonwealth of Massachusetts and has the power to own all its properties
and to carry on its business as presently conducted; (ii) the
Reorganization Shares to be delivered to the Portfolio as provided for by
this Agreement are duly authorized and upon such delivery will be validly
issued and will be fully paid and nonassessable by the LLC and the New
Portfolio and no shareholder of the New Portfolio has any preemptive right
to subscription or purchase in respect thereof; (iii) this Agreement has
been duly authorized, executed and delivered by the LLC on behalf of the
New Portfolio and, assuming that the Portfolio Proxy Statement complies
with the 1934 Act and the 1940 Act and assuming due authorization,
execution and delivery of this Agreement by the Portfolio is a valid and
binding obligation of the LLC and the New Portfolio; (iv) the execution and
delivery of this Agreement did not, and the consummation of the
transactions contemplated hereby will not, violate the LLC Agreement or
By-Laws, or any provision of any agreement known to such counsel to which
the LLC or the New Portfolio is a party or by which it is bound, it being
understood that with respect to investment restrictions as contained in the
LLC Agreement or By-Laws, or any provision of any agreement known to such
counsel to which the LLC or the New Portfolio is a party or by which it is
bound, it being understood that with respect to investment restrictions as
contained in the LLC Agreement, By-Laws or then-current prospectus or
statement of additional information, such counsel may rely upon a
certificate of an officer whose responsibility is to advise the LLC and the
New Portfolio with respect to such matters; and (v) no consent, approval,
authorization or order of any court or governmental authority is required
for the consummation by the LLC on behalf of the New Portfolio of the
transactions contemplated herein, except such as have been obtained under
the 1933 Act, the 1934 Act and the 1940 Act and such as may be required
under state securities or blue sky laws.
g. That the Portfolio shall have received an opinion of counsel to
the New Portfolio dated the Exchange Date in form satisfactory to counsel
to the Portfolio (which opinion would be based upon certain factual
representations and subject to certain qualifications), to the effect that,
on the basis of the existing provisions of the Code, current administrative
rules, and court decisions, for federal income tax purposes: (i) no gain or
loss will be recognized by the Portfolio as a result of the reorganization;
(ii) no gain or loss will be recognized by shareholders of the Portfolio on
the distribution of the Reorganization Shares to them in exchange for their
shares of the Portfolio; (iii) the tax basis of the Reorganization Shares
that the Portfolio's shareholder received in place of their Portfolio
shares will be the same as the basis of the Portfolio shares; and (iv) a
shareholder's holding period for the Reorganization Shares received
pursuant to this Agreement will be determined by including the holding
period for the Portfolio shares exchanged for the Reorganization Shares,
provided that the shareholder held the Portfolio shares as a capital asset.
h. That all actions taken by the LLC on behalf of the New Portfolio
in connection with the transactions contemplated by this Agreement and all
documents incidental thereto shall be satisfactory in form and substance to
the Portfolio and its counsel.
i. [Reserved.]
j. That the New Portfolio shall have received from the Commission and
any relevant state securities administrator such order or orders as are
reasonably necessary or desirable under the 1933 Act, the 1934 Act, and any
applicable state securities or blue sky laws in connection with the
transactions contemplated hereby, and that all such orders shall be in full
force and effect.
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<PAGE> 29
10. Indemnification.
a. The Trust shall indemnify and hold harmless, out of the assets of
the Portfolio (which shall be deemed to include the assets of the New
Portfolio represented by the Reorganization Shares following the Exchange
Date) but no other assets, the trustees and officers of the LLC (of
purposes of this subparagraph, the "Indemnified Parties") against any and
all expenses, losses, claims, damages and liabilities at any time imposed
upon or reasonably incurred by any one or more of the Indemnified Parties
in connection with, arising out of, or resulting from any claim, action,
suit or proceeding in which any one or more of the Indemnified Parties may
be involved or with which any one or more of the Indemnified Parties may be
threatened by reason of any untrue statement or alleged untrue statement of
a material fact relating to the Portfolio contained in the Portfolio Proxy
Statement or any amendment or supplement to any of the foregoing, or
arising out of or based upon the omission or alleged omission to state in
any of the foregoing a material fact relating to the Portfolio required to
be stated therein or necessary to make the statements relating to the
Portfolio therein not misleading, including, without limitation, any
amounts paid by any one or more of the Indemnified Parties in a reasonable
compromise or settlement of any such claim, action, suit or proceeding, or
threatened claim, action, suit or proceeding made with the consent of the
Portfolio. The Indemnified Parties will notify the Portfolio in writing
within ten days after the receipt by any one or more of the Indemnified
Parties of any notice of legal process or any suit brought against or claim
made against such Indemnified Parties of any notice of legal process or any
suit brought against or claim made against such Indemnified Party as to any
matters covered by this Section 10(a). The Portfolio shall be entitled to
participate in the defense of any such claim, action, suit or proceeding at
their expense. The Trust's obligation under Section 10(a) to indemnify and
hold harmless the Indemnified parties shall constitute a guarantee of
payment so that the Portfolio will pay in the first instance of any
expenses, losses, claims, damages and liabilities required to be paid by it
under this Section 10(a) without the necessity of the Indemnified Parties,
first paying the same. The indemnification obligations of the Portfolio
under this Section 10(a) shall be assumed by the New Portfolio upon the
Exchange Date, at which time the Trust shall be automatically released from
such indemnification obligations.
b. The New Portfolio shall indemnify and hold harmless, out of the
assets of the New Portfolio but no other assets, the trustees and officers
of the Portfolio for purposes of this subparagraph, the "Indemnified
Parties") against any and all expenses, losses, claims, damages and
liabilities at any time imposed upon or reasonably incurred by any one or
more of the Indemnified Parties in connection with, arising out of, or
resulting from any claim, action, suit or proceeding in which any one or
more of the Indemnified Parties may be involved or with which any one or
more of the Indemnified Parties may be threatened by reason of any untrue
statement or alleged untrue statement of a material fact relating to the
New Portfolio contained in the Portfolio Proxy Statement or any amendment
or supplement thereof, or arising out of, or based upon, the omission or
alleged omission to state in any of the foregoing a material fact relating
to the Company or the New Portfolio required to be stated therein or
necessary to make statements relating to the Company or the New Portfolio
therein not misleading, including, without limitation, any amounts paid by
any one or more of the Indemnified Parties in a reasonable compromise or
settlement of any such claim, action, suit or proceeding, or threatened
claim, action, suit or proceeding, made with the consent of the LLC or the
New Portfolio . The Indemnified Parties will notify the LLC and the New
Portfolio in writing within ten days after the receipt by any one or more
of the Indemnified parties of any notice of legal process or any suit
brought against or claim made against such Indemnified Party as to any
matters covered by this Section 10(b). The New Portfolio shall be entitled
to participate at its own expense in the defense of any claim, action,
suit, or proceeding covered by this Section 10(b),
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<PAGE> 30
or, if it so elects, to assume at its expense by counsel satisfactory to
the Indemnified Parties the defense of any such claim, action, suit or
proceeding, and, if the New Portfolio elects to assume such defense, the
Indemnified Parties shall be entitled to participate in the defense of any
such claim, action, suit or proceeding at their own expense. The New
Portfolio's obligation under this Section 10(b) to indemnify and hold
harmless the Indemnified Parties shall constitute a guarantee of payment so
that the New Portfolio will pay in the first instance any expenses, losses,
claims, damages and liabilities required to be paid by it under this
Section 10(b) without the necessity of the Indemnified Parties' first
paying the same.
11. No Broker, etc. Each of the Portfolio and the New Portfolio
represents that there is no person who has dealt with it, or the Trust or LLC,
who by reason of such dealings is entitled to any broker's or finder's or other
similar fee or commission arising out of the transactions contemplated by this
Agreement.
12. Termination. The Portfolio and the New Portfolio may, by mutual
consent of the trustees of the Trust and the trustees of the LLC on behalf the
Portfolio and the New Portfolio, respectively, terminate this Agreement, and the
Portfolio or the New Portfolio, after consultation with counsel and by consent
of their trustees or an officer authorized by such trustees, may waive any
condition to their respective obligations hereunder. If the transactions
contemplated by this Agreement have not been substantially completed by December
31, 1999, this Agreement shall automatically terminate on that date unless a
later date is agreed to by the Portfolio and the New Portfolio.
13. [Reserved.]
14. Covenants, etc. Deemed Material. All covenants, agreements,
representations and warranties made under this Agreement and any certificates
delivered pursuant to this Agreement shall be deemed to have been material and
relied upon by each of the parties, notwithstanding any investigation made by
them or on their behalf.
15. Sole Agreement; Amendments; Governing Law. This Agreement supersedes
all previous correspondence and oral communications between the parties
regarding the subject matter hereof, constitutes the only understanding with
respect to such subject matter, may not be changed except by a letter of
agreement signed by each party hereto, and shall be construed in accordance with
and governed by the laws of The Commonwealth of Massachusetts.
16. Declaration of Trust. A copy of the Declaration of Trust is on file
with the Secretary of State of The Commonwealth of Massachusetts, and notice is
hereby given that this instrument is executed on behalf of the trustees of the
Trust on behalf of the [Strategic Growth] Portfolio as trustees and not
individually and that the obligations of this instrument are not binding upon
any of the trustees, officers or shareholders of the Trust individually but are
binding only upon the assets and property of the [Strategic Growth] Portfolio.
17. Notice. Notice is hereby given that this instrument is executed on
behalf of the LLC on behalf of the New Portfolio and not individually and that
the obligations of this instrument are not binding upon any of the trustees,
officers or shareholders of the LLC individually but are binding only upon the
assets and property of the New Portfolio.
A-13
<PAGE> 31
EXECUTED as of the date first set forth above.
WM STRATEGIC ASSET MANAGEMENT PORTFOLIOS, LLC,
a Massachusetts limited liability company,
on behalf of its [Strategic Growth] Portfolio series
By:
-----------------------------------------------------
William G. Papesh, President
WM Strategic Asset Management Portfolios,
a Massachusetts business trust,
on behalf of its [Strategic Growth] Portfolio series
By:
-----------------------------------------------------
Monte D. Calvin, Senior Vice President
A-14
<PAGE> 32
[WM GROUP of FUNDS LOGO]
<PAGE> 33
WM STRATEGIC ASSET MANAGEMENT PORTFOLIOS
[NAME OF PORTFOLIO]
PROXY SOLICITED BY THE BOARD OF TRUSTEES
PROXY FOR SPECIAL MEETING OF SHAREHOLDERS-JUNE 23, 1999
The undersigned hereby appoints William G. Papesh, Monte D. Calvin and John
T. West, and each of them separately, proxies with power of substitution to
each, and hereby authorizes them to represent and to vote, as designated on the
reverse side, at the Special Meeting of Shareholders of the above Portfolio, a
series of WM Strategic Asset Management Portfolios, on June 23, 1999 at 11:00
a.m. Pacific time, and any adjournment thereof, all of the shares of the
Portfolio which the undersigned would be entitled to vote if personally present.
PLEASE VOTE, SIGN AND DATE THIS PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED
ENVELOPE.
NOTE: PLEASE SIGN EXACTLY AS
YOUR NAME APPEARS ON THIS
PROXY CARD. All joint owners
should sign. When signing as
executor, administrator,
attorney, trustee or guardian
or as custodian for a minor,
please give full title as
such. If a corporation, please
sign in full corporate name
and indicate the signer's
office. If a partner, sign in
the partnership name.
--------------------------------------------
Signature
--------------------------------------------
Signature (if held jointly)
--------------------------------------------
Date
<PAGE> 34
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY
WILL BE VOTED FOR THE PROPOSAL.
In their discretion, the proxies are authorized to vote upon such other business
as may properly come before the Meeting. The Trustees recommend a vote FOR
Proposal 1.
Please vote by filling in the appropriate box below.
<TABLE>
<S> <C> <C> <C>
A. To approve the Reorganization of the Portfolio as a
series of WM Strategic Asset For Against Abstain
Management Portfolios, LLC, a Massachusetts limited
liability company. [ ] [ ] [ ]
</TABLE>
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PLEASE VOTE, SIGN AND DATE ON THE REVERSE SIDE
AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE.
IF YOU HAVE ANY QUESTIONS REGARDING THIS PROXY, YOU MAY CALL (800) 755-7250.
-----------------------------------------------------------------------------
IN THE ALTERNATIVE, YOU MAY VOTE BY PHONE OR FAX THROUGH D.F. KING, OUR PROXY
SOLICITOR. TO VOTE BY FAX, SIGN THE PROXY CARD AND FAX (BOTH SIDES) TO (212)
269-2796. TO VOTE BY PHONE, SIMPLY CALL (800) 755-7250.
