<PAGE>
[Logo] WM
GROUP of FUNDS
[Graphic Omitted]
STRATEGIC ASSET
MANAGEMENT PORTFOLIOS
----------------------------
the difference is experience
----------------------------
Annual Report
for the year ended October 31, 1999
<PAGE>
[Graphic Omitted]
WM Strategic Asset
MANAGEMENT PORTFOLIOS
strategic growth portfolio
conservative growth portfolio
balanced portfolio
flexible income portfolio
income portfolio
CONTENTS
message from the president 1
events of the century 2
diversifying your portfolio 5
and managing risks
individual portfolio reviews 7
statements of assets 18
and liabilities
statements of operations 20
statements of changes 21
in net assets
statements of changes 24
in net assets - capital
stock activity
financial highlights 26
portfolio of investments 36
notes to financial 41
statements
independent 46
auditors' report
special meeting of 47
shareholders (unaudited)
tax information 48
(unaudited)
<PAGE>
[Photo of William G. Papesh]
DEAR SHAREHOLDER,
The decade, the century, and the millennium are simultaneously drawing to a
close. To the typical investor, the more recent past is likely of greatest
interest. From 1990 through October 31, 1999, the value of the U.S. stock market
rose nearly 400%, as measured by the S&P 500(1). The 1990s also saw one of the
longest-running economic expansions on record. However, compared to other
historic investment events of this century, the 1990s are perhaps not all that
remarkable.
This year, our fund family celebrates its 60th year in the investment management
business. Our time-honored tradition dates to 1939 when Composite Research &
Management Co. (now known as WM Advisors) launched the Bond & Stock Fund, which
was one of the first 50 mutual funds in the U.S. Today, investors can choose
from more than 11,000 mutual funds. In the intervening 60 years, the investment
landscape has been permanently altered, first by theoretical advances in finance
and then by innovations in computer technology. We have managed stock and bond
investments through six decades of changing market environments, including World
War II, the Vietnam War, wage and price controls, the stock market crash of
1987, and 10 recessions. Throughout these events, our approach to investing has
remained the same, defined by rigorous research, a commitment to outstanding
performance, and a value-oriented investment philosophy.
From the beginning, the WM Group of Funds has recognized the value of
diversification in managing investment portfolios. By combining bond and stock
investments in a single portfolio in the 1930s, the Bond & Stock Fund sought to
offer investors a convenient and professionally managed investment vehicle
designed to weather the storms of changing market conditions. Of course, the
theory of diversification - which created a means to mathematically measure the
actual and potential risk-reduction benefits of investing in a diversified
portfolio - did not arise until the 1950s. Since then, computer technology has
led to more sophisticated asset allocation models such as those employed in
managing the WM Strategic Asset Management Portfolios. The addition of the
International Growth Fund to the WM Group of Funds family has provided expanded
opportunities for individuals to craft a well-diversified portfolio.
The importance of diversification in managing investment risk was evident in the
financial market results this year. During the 12-month period ended October 31,
1999, both U.S. and foreign stock markets posted strong gains, with the S&P 500
up 25.67% and the Morgan Stanley Capital International (MSCI) Europe,
Australasia and the Far East (EAFE) index rising 23.67%(2). A combination of low
inflation, strong economic growth and continued consumer spending helped sustain
corporate earnings and the U.S. market. Internationally, higher share prices in
Japan and a recovery from last year's currency crisis in Pacific Rim countries
helped boost the international index. However, U.S. bond markets declined during
the same period in response to actions by the Federal Reserve to raise interest
rates to forestall potential increases in inflation.
As is often the case, stock and bond markets moved in opposite directions
through much of 1999. Bond investors, who included some stock investments in
their portfolios, probably fared better than those who held only fixed-income
investments. Those who invested primarily in stock funds may have experienced
most of their gains in the first six months of 1999, as the S&P 500 posted a
6.24% decline from the end of June to the end of September(1). Including a small
allocation to bonds and bond funds in an equity portfolio can potentially help
temper risk and, over time, result in higher long-term returns.
Your Investment Representative can help you select an appropriate mix of
investments for your portfolio based on your financial goals. Whether you are
seeking current income or long-term capital appreciation, the WM Group of Funds
offers investment vehicles designed to meet your goals and financial needs. For
example, the Strategic Asset Management (SAM) Portfolios provide the convenience
of immediate diversification and the advantages of professionally-managed asset
allocation through changing market conditions. For more information about
additional strategies that can help you pursue your financial objectives, speak
with your Investment Representative.
As the new millennium approaches, we look forward to continuing to leverage our
experience and history to meet the investment challenges of tomorrow. Thank you
for your continued confidence in the WM Group of Funds.
Sincerely,
/s/ William G. Papesh
William G. Papesh
President
(1) Source: Standard & Poor's. The S&P 500 is an unmanaged index of common
stocks. Results include reinvestment of dividends.
(2) The Morgan Stanley Capital International Europe, Australasia and the Far
East (MSCI EAFE) index is a market capitalization weighted index designed to
measure the performance of 23 developed markets worldwide.
Past performance is no guarantee of future results. Individuals cannot invest
directly in any index.
<PAGE>
[graphic omitted]
EVENTS OF THE CENTURY
SHAPING THE DOW JONES INDUSTRIAL AVERAGE
As we move toward the beginning of the new millennium, it is important to
examine the events of the last century in order to gain some insight to the
future. During the past 100 years, we have witnessed tremendous change and have
overcome much adversity, and through it all, economies and markets have
continued to grow and expand. Despite two World Wars, the Great Depression, and
the rise and fall of Communism, equity markets in the United States have
increased more than 16,000% (as measured by the Dow Jones Industrial
Average).(2) Events of the past century have completely reshaped the way we live
and conduct business - and during this time, companies have flourished and often
times dramatically increased in value. By highlighting these major events, we
can examine their impact on the growth of the financial markets and the upward
trajectory of the Dow.
THE BIRTH OF U.S. STEEL CORP. 1901
On March 3, 1901, the merger between J.P. Morgan and Carnegie Steel created the
first billion-dollar corporation that controlled nearly two-thirds of the
nation's steel market.
THE WRIGHT BROTHERS TAKE FLIGHT 1903
On a beach near Kitty Hawk, North Carolina, Orville and Wilbur Wright used a
12-horsepower engine to fly 120 feet in 12 seconds. This signified the birth of
an industry that would eventually speed world travel, affect the outcome of
wars, and generate billions of dollars.
THE SAN FRANCISCO EARTHQUAKE 1906
On April 18, 1906, a major earthquake shook San Francisco and started fires that
destroyed the entire city. It took years to rebuild the nearly 20,000 buildings
destroyed in the quake. The Creation of the Ford Assembly Line 1913 Henry Ford
revolutionized the concept of mass production, increasing efficiencies and
cutting costs of the Model T, as the division of labor was born.
WORLD WAR I BEGINS 1914
The assassination of Austria-Hungary's Archduke Francis Ferdinand and his wife
in June 1914 led to war against Serbia. Pre-existing alliances drew in nearly
every European nation, and World War I was underway.
PANAMA CANAL OPENED 1914
In August 1914, world trade would forever be altered as the Panama Canal was
opened. The Canal drastically shortened shipping time and cost between the
Atlantic and Pacific Oceans.
WOMEN'S SUFFRAGE 1920
Stemming from an 1848 convention in Seneca Falls, the suffrage amendment was
finally ratified nationally in August 1920.
FIRST COMMERCIAL RADIO BROADCAST 1920
Westinghouse burst into the mainstream by broadcasting the first commercial
radio event on November 2, 1920. The company announced the results of the
Cox/Harding presidential election and, as a result, generated huge sales of
wireless sets.
THE STOCK MARKET CRASH 1929
In October 1929, panic shook the U.S. stock market, with investors eventually
losing $30 billion, or the equivalent of nearly one-third of the entire
country's economic output.
THE GREAT DEPRESSION 1932
The Depression reached its peak in 1932 with more than 25% of the workforce
unemployed, thousands of bank failures, and more than a million homeless people
wandering the streets.
SOCIAL SECURITY CREATED 1935
An important part of FDR's New Deal, the passing of the Social Security Act
created the first pension system for American workers.
UNIONS GAIN STRENGTH 1937
A sit-down strike organized by the United Auto Workers (UAW) turned violent as
riots broke out in Flint, Michigan. Labor won an important battle when General
Motors, facing substantial losses from a complete shutdown, signed an agreement
that gave UAW tremendous power in negotiation.
BOMBING OF PEARL HARBOR 1941
On December 7, 1941, 183 planes attacked unsuspecting Pearl Harbor, destroying
multiple ships and signaling the end to an isolationist stance and a beginning
to U.S. involvement in World War II.
ENIAC INTRODUCED 1946
Engineer Presper Eckert and physicist John Mauchly introduced the world's first
digital computer at the University of Pennsylvania. The beast weighed 30 tons
and covered 1,800 square feet. The two men later unveiled UNIVAC, the first
business computer and an important symbol of the beginning of what would be the
technological revolution.
THE BABY BOOM BEGINS 1947
The end of the Depression and World War II triggered the highest birthrate in
the history of the nation as the Baby Boom generation brought unprecedented
prosperity.
COLD WAR BEGINS WITH THE KOREAN WAR 1950
Communist North Korean troops invaded South Korea, eventually securing backing
from China, as United Nations forces fought to a standoff around the 38th
parallel.
TELEVISION ASSERTS ITS DOMINANCE 1954
Signifying the beginning of an era, television finally overtook radio in annual
revenues with over $590 million. Many of the biggest entertainers had already
made the jump to TV, as the set became a fixture in the American home.
RUSSIANS ENTER SPACE WITH SPUTNIK 1957
On October 4, 1957, the Soviet Union launched Sputnik, the first satellite to
enter outer space. This launch signaled the beginning of the space race, an
important aspect of the Cold War.
CUBAN MISSILE CRISIS 1962
It was late October 1962 when U.S. spy planes spotted a buildup of Russian
nuclear missiles in Cuba, less than one hundred miles from U.S. shores. Kennedy
responded with a full blockade and both countries stood at military readiness
for nearly a week. Finally, on October 28, the Russians agreed to remove the
weapons from Cuba.
JFK ASSASSINATED 1963
In Dallas, Texas, while campaigning for the 1964 presidential election,
President Kennedy was shot and killed, sending the nation into mourning.
MAN LANDS ON THE MOON 1969
On July 16, 1969, with hundreds of millions watching on television, astronaut
Neil Armstrong became the first person to set foot on the moon's surface.
THE U.S. LEAVES VIETNAM 1973
Following years of criticism and protest in the United States, a cease-fire was
signed on January 27, 1973, and the remaining troops in Vietnam were sent home.
Vietnam united under a communist regime two years later.
OIL EMBARGO 1973
War erupted between Arabs and Israelis in October 1973 and OPEC responded by
dramatically increasing the price of oil and cutting supplies to countries
supporting Israel. The embargo lasted six months and had a significant impact on
the U.S. economy, effectively ending the post-WWII economic boom.
[graphic omitted]
PRESIDENT NIXON RESIGNS 1974
Faced with impeachment stemming from the Watergate scandal, President Richard
Nixon resigned, and Gerald Ford took over control of the oval office.
RUNAWAY INFLATION 1980
For the first time in modern history, 1980 ends with back-to-back years of
double-digit inflation. Disgruntled by the economic situation, the American
public elected Ronald Reagan, who would bring an end to 50 years of strong
government involvement in economic programs.
BLACK MONDAY STOCK MARKET CRASH 1987
In October 1987, a thriving stock market came to a crash as fears over rising
inflation and interest rates caused a massive selloff in the equity markets.
FALL OF THE BERLIN WALL 1989
What had become the symbol of a divided Germany and a divided world of
Capitalism versus Communism, the Berlin Wall fell and Germany was united.
INTRODUCTION OF THE WORLD WIDE WEB 1993
Programmers at the University of Illinois released software that enabled any
computer to access the World Wide Web, forever changing the way business is
conducted.
PRESIDENTIAL IMPEACHMENT 1998
A scandal in the White House commanded global attention as Bill Clinton, the
impeached president, remained in office when he retained Senate votes.
BUDGET SURPLUSES 1999
With the close of the fiscal year in September 1999, the U.S. reported its
second consecutive budget surplus, marking the first surpluses since 1969. The
century closes in the midst of one of the longest lasting economic and stock
market expansions.
While these major events of the past century have significantly changed our
lives, the principles of long-term investing have remained true. The fundamental
strength of U.S. companies over the long term is what has continued to drive
equity markets higher. World Wars have come and gone, but investment principles
remain firmly in tact. Rather than being unduly concerned with short-term market
fluctuations, it is important to maintain your long-term focus and continue to
invest as we move into the next century.
(1) Source of historical data: Time-Life Books
(2) Source: Bloomberg Business News and Dow Jones. All Dow Jones Index
information is based on the month-end closing values. The Dow Jones
Industrial Average (DJIA) is an unmanaged index of industrial stocks that is
often used to measure the overall U.S. equity market. Individuals cannot
invest directly in an index. Chart uses logarithmic scale.
[graphic omitted]
<TABLE>
<CAPTION>
1900 1910 1920
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Birth of U.S. Wright Bros. San Francisco Ford Asembly World War I Women's Sufferage The Stock
Steel Corp. Dow 49.11 Earthquake Line Begins Dow 86.16 Market Crash
Dow 69.43 Dow 90.53 Dow 78.78 Dow 71.42 Dow 273.51
First Commercial
Panama Canal Radio Broadcast
Opens Dow 76.04
Dow 54.58
<CAPTION>
1930 1940 1950
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
The Great Social Security Unions Gain Pearl Harbor ENIAC The Baby The Korean Television Sputnik
Depression Created Strength Bombed Introduced Boom Begins War Dow 404.38 Dow 441.03
Dow 59.93 Dow 144.13 Dow 185.74 Dow 110.96 Dow 190.09 Dow 181.16 Dow 200.10
<CAPTION>
1960 1970 1980
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Cuban JFK Man Lands U.S. Leaves President Nixon Runaway Black Monday Fall of
Missile Assassinated on the Moon Vietnam Resigns Inflation Market Crash The Berlin
Crisis Dow 750.51 Dow 815.46 Dow 999.01 Dow 678.58 Dow 963.98 Dow 1993.50 Wall
Dow 589.77 Dow 2706.27
Oil Embargo
Dow 956.57
<CAPTION>
1990
- ------------------------------------------------------------------------------
Introduction of the Presidential Budget Surplus
World Wide Web Impeachment Dow 10,336.95
Dow 3754.09 Dow 9116.55
</TABLE>
<PAGE>
[graphic omitted]
DIVERSIFYING YOUR PORTFOLIO CAN HELP YOU MANAGE INVESTMENT RISK.
Building a diversified portfolio may provide the key to finding a balance
between risk and the pursuit of your investment goals.
Investment risk comes in many forms. The risk that most people think of is the
potential to lose money due to a decline in the value of an investment.
Understanding this type of risk - known as market risk - is critical to making
sound investment decisions.
Other types of risk, however, should also be considered when choosing
investments. Inflation risk is often overlooked by those who are investing for
current income or to preserve capital. But over time, inflation can eat away at
your purchasing power. If prices were to rise at an inflation rate of 4% per
year, after 20 years a dollar would buy only half as much as it does today.
Another more subtle form of risk involves the possibility of not meeting your
investment objectives. If you are investing to build a nest egg for retirement,
for example, the consequences of not meeting your goal could be significant.
Unfortunately, these different types of risk can make it difficult for people to
feel comfortable with their investment choices. For example, if you invest in
growth-oriented stock funds in order to have the best chance of outpacing
inflation, you will generally incur a higher degree of market risk, since stocks
tend to be more volatile than other types of investments.
[graphic omitted]
Building a diversified portfolio may provide the key to finding a balance
between risk and the pursuit of your investment goals.
- --------------------------------------------------------------------------------
ASSET ALLOCATION TAKES THE CONCEPT OF DIVERSIFICATION ONE STEP FURTHER.
- --------------------------------------------------------------------------------
WHY DIVERSIFICATION CAN HELP REDUCE RISK
Diversification helps put the law of averages to work for you. When you invest
in more than one stock or bond, your portfolio return is based on the average of
all the individual securities in the portfolio. But the variability of your
returns - a way to measure your chance of loss - will likely be less than the
average volatility of the individual securities. This means that by
diversifying, you can potentially reduce risk without having to sacrifice the
opportunity to earn higher returns.
Asset allocation takes the concept of diversification one step further. Because
prices of different types of assets, such as money market instruments, bonds,
and stocks, often don't react the same way to market events, they can provide
potentially greater diversification benefits than securities in the same asset
class. A measure that can help assess the potential risk-reduction afforded is
known as correlation. The lower the correlation between two securities, the
greater the diversification opportunities. In general, U.S. stocks tend to have
a correlation of around 0.70 with each other, while stocks and bonds have a
correlation of less than 0.40.*
- --------------------------------------------------------------------------------
CORRELATION IS THE DEGREE TO WHICH INVESTMENTS MOVE UP AND DOWN TOGETHER.
- --------------------------------------------------------------------------------
KEEP YOUR TIME FRAME IN MIND
The individual asset classes that you choose for your investment portfolio will
depend largely on your time frame. Whether you are pursuing a short-term goal or
have a longer-term investment horizon, it's always important to seek to
diversify your investments appropriately. For more information about how to
tailor your portfolio to fit your objectives, speak with your financial
representative.
Fixed-Income Investments Can Help
SMOOTH PORTFOLIO RETURNS
Although equity investments have dominated headlines in recent years,
fixed-income securities remain a viable investment alternative that can play an
important part in an overall investment portfolio. Bond investments are
generally less risky than stock investments and have a predictable income stream
that continues even if prices decline. With low inflation creating strong real
returns, the current market environment is quite positive for fixed-income
investments. The real return of an investment is the difference between the
overall return and the current rate of inflation; it measures the change in
wealth or buying power offered by an investment. Even with bond yields that are
less-than-historical averages, lower inflation can produce very attractive real
returns.
In addition to strong results, fixed-income investments offer diversification
and risk management characteristics as a part of an overall investment
portfolio. Bonds can reduce volatility in your portfolio if combined with stock
investments. Bond investments also offer a safer environment if you are closer
to reaching a long-term goal, such as a college fund or retirement portfolio.
Speak with your representative about your current portfolio and discuss
strategies to incorporate fixed-income investments.
STRONG REAL RETURNS FOR FIXED-INCOME INVESTMENTS VS. INFLATION
(January 1985 - October 1999)
HIGH-YIELD CORPORATE 11.36%
CORPORATE 9.95%
MORTGAGE 9.67%
GOVERNMENT 9.02%
INFLATION 3.22%
Source: Ibbotson Associates. Lehman Brothers indices used for Corporate,
Mortgage and Government Bonds; Ibbotson indices used for high-yield bonds and
inflation. Individuals cannot invest directly in an index.
- --------------------------------------------------------------------------------
CONSIDER INTERNATIONAL INVESTMENTS
Over the years, the correlation between domestic stocks and bonds has gradually
risen. Therefore, the potential diversification benefits afforded today, while
still quite substantial, may not be as significant as they were in the '40s,
'50s, and '60s.
Because the concept of diversification applies to many types of investments,
however, you can potentially further reduce the variability of your portfolio
returns by investing in additional asset classes.
If you are investing for a long-term goal, including international investments
in your asset allocation may potentially help temper declines in the values of
your domestic stock and bond investments over time. Prices of stocks and bonds
issued by companies or governments in foreign countries often do not move in
tandem with securities prices in the U.S. For example, the foreign stocks that
comprise the Morgan Stanley Capital International EAFE index have a correlation
of 0.53 with the S&P 500 index.**
Of course, risk is only part of the equation. The chart to the left shows annual
historical returns for international stock and bond indices since 1985. As in
the U.S. markets, stocks have generally posted higher returns than bonds over
time, but also carry a greater degree of risk.
* Source: Standard & Poor's. Stocks are represented by the S&P 500. Bonds are
represented by the returns of 30-year Government bonds. Based on monthly
returns for the 20-year period ended September 30, 1999.
** Source: Standard & Poor's. Based on monthly returns for the 20-year period
ended September 30, 1999. International investments can carry greater risks
including currency, liquidity and political risks.
PERFORMANCE OF INTERNATIONAL INVESTMENTS INDICES
(January 1985 - October 1999)
MSCI Nordic Countries 22.13%
MSCI Europe 19.40%
MSCI World 16.44%
MSCI EAFE 15.55%
SB Foreign Government Bonds 12.91%
MSCI Far East 11.33%
IFCG Emerging Markets 11.09%
Source: Ibbotson Associates. Regional equity indices provided by Morgan Stanley
Capital International (MSCI), bond index provided by Salomon Brothers, and
Emerging Markets index provided by the International Finance Corporation.
Individuals cannot invest directly in an index. International investments can
carry greaster risks including currency, liquidity and political risks.
<PAGE>
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INDIVIDUAL
PORTFOLIO reviews
- -----------------
TO OUR ASSET
ASSET ALLOCATION CLIENTS
Welcome to the Strategic Asset Management Portfolios.
We are pleased to provide you with an overview of
our five asset allocation portfolios, each
designed to meet your
individual investment needs.
This report includes performance reviews and highlights
of the investment strategies incorporated during the
twelve-month period ended October 31, 1999.
UNDERSTANDING THE ENCLOSED
CHARTS AND PERFORMANCE
In order to help you understand the Strategic Asset Management (SAM) Portfolios'
investment performance, we have included the following discussions along with
graphs that compare the Portfolios' performance with certain capital market
benchmarks. The benchmarks are a blended mix of capital market indices intended
to represent a proxy for Portfolio performance. Descriptions of the indices used
are as follows:
o The SALOMON BROTHERS U.S. 90-DAY T-BILL INDEX measures performance of United
States Treasury bills with maturities of three months.
o The LEHMAN BROTHERS MUTUAL FUND SHORT (1-5) GOVERNMENT/ CORPORATE INDEX is
designed to represent all U.S. government agency and Treasury securities and
all investment-grade corporate debt securities with maturities of one to five
years.
o The LEHMAN BROTHERS MORTGAGE-BACKED SECURITIES (MBS) INDEX includes 15- and
30-year fixed rate securities backed by mortgage pools of the Government
National Mortgage Association (GNMA), Federal Home Loan Mortgage Corporation
(FHLMC), and Federal National Mortgage Association (FNMA). Balloons are
included in the index, however graduated payment mortgages (GPMs), buydowns,
manufactured home mortgages, and graduated equity mortgages (GEMs) are not.
o The LEHMAN BROTHERS BAA LONG-TERM CORPORATE BOND INDEX includes all publicly
issued, fixed-rate, nonconvertible BAA rated, dollar-denominated,
SEC-registered corporate debt with maturities greater than ten years.
o The LEHMAN BROTHERS AGGREGATE INDEX is an all- inclusive bond index which
contains government, corporate, mortgage and asset-backed securities.
o The STANDARD & POOR'S 500 COMPOSITE INDEX is a capitalization-weighted index
of 500 stocks designed to measure performance of the broad domestic economy
and all economic sectors.
o The RUSSELL 2000 INDEX measures the performance of the 2,000 smallest
companies (approximately 10% of the total market capitalization) of the
Russell 3000 Index.
o The RUSSELL 2000 GROWTH INDEX measures the performance of the companies with
higher price-to-book ratios and higher forecasted growth values within the
Russell 2000 Index.
o The RUSSELL 3000 INDEX is comprised of the 3,000 largest U.S. companies based
on total market capitalization, which represents approximately 98% of the
investable U.S. equity market.
o The MORGAN STANLEY CAPITAL INTERNATIONAL (MSCI) EUROPE, AUSTRALASIA, AND THE
FAR EAST (EAFE) PLUS EMERGING MARKETS FREE INDEX is a market capitalization
weighted index composed of companies representative of the market structure
of 48 developed and emerging market countries. The index is calculated with
gross dividends reinvested and in United States Dollars.
Generally, an index represents the market value of an unmanaged group of
securities, regarded by investors as representative of a particular market. An
index does not reflect any asset-based charges for investment management or
other expenses. Index results on the following pages include changes in value
and the reinvestment of dividends. Total return is used to measure a Portfolio's
performance and reflects both changes in the value of the Portfolio's shares as
well as any income dividend and/or capital gain distributions made by the
Portfolio during the period. Past performance is not a guarantee of future
results. A mutual fund's share price and investment return will vary with market
conditions, and the principal value of an investment when you sell your shares
may be more or less than the original cost.
The 30-day Securities and Exchange Commission (SEC) yield is the yield
calculated pursuant to a standard formula required by the SEC for performance
advertisement purposes and does not imply any endorsement or recommendation by
the SEC.
Yield indicates the investment income per share as a percentage of the ending
offering price, whereas total return includes both net investment income and
changes in the value of the shares as a percentage of the initial investment.
THE YEAR 2000 PROBLEM (Y2K)
Many computer systems in use today cannot process date-related information in
relation to year 2000. This issue originates in the practice of abbreviating
years to their last two digits. Computer systems may not be able to decide
correctly when a date entered with a year of "00" should be interpreted as 1900
or 2000. At the turn of the new century, computer systems may not function
properly because they may not be able to recognize or interpret the year 2000.
Should any of the computer systems employed by the WM Funds' or Portfolios'
major service providers fail to process this type of information properly, it
could have a negative impact on Fund or Portfolio operations and the services
that are provided to shareholders. Similarly, the values of certain of the WM
Funds' or Portfolios' assets may be adversely affected by the inability of their
issuers or third parties to properly process date-related information.
The Advisor, Shareholder Service Agent and Administrator have advised the Funds
and Portfolios that they have reviewed their critical computer systems and are
confident that the systems will process information correctly regardless of the
end of the century. The Funds and Portfolios have received similar assurances
from other key service providers. We recognize that no one can guarantee that
there will not be problems when the Year 2000 arrives, and have developed
contingency plans in case problems should occur.
<PAGE>
- ----------------
STRATEGIC
GROWTH portfolio
- ----------------
GROWTH OF A $10,000 INVESTMENT(5)
(class A shares)+
Fund Fund
(Class A (Class A
Shares; Shares;
not adjusted
adjusted for the
for maximum Capital Russell
sales 5.5% sales Market 3000
charge) charge) Benchmark(1) Inflation(3) Index(2)
- ------------------------------------------------------------------------
$10,000 $ 9,450 $10,000 $10,000 $10,000
10,375 9,805 10,235 10,000 10,289
10,908 10,308 10,576 10,040 10,703
10,992 10,387 10,604 10,080 10,798
11,291 10,670 11,049 10,113 11,217
10,951 10,349 11,010 10,147 11,120
11,346 10,722 11,494 10,167 11,614
Dec 95 11,657 11,015 11,707 10,187 11,803
11,849 11,197 12,110 10,187 12,146
12,208 11,536 12,226 10,214 12,324
12,530 11,840 12,343 10,234 12,448
12,886 12,177 12,525 10,268 12,684
13,146 12,423 12,848 10,261 13,009
Jun 12,799 12,095 12,901 10,254 12,967
11,893 11,238 12,327 10,314 12,288
12,444 11,760 12,588 10,347 12,660
12,982 12,268 13,295 10,401 13,349
12,824 12,118 13,660 10,442 13,593
13,455 12,715 14,696 10,461 14,551
Dec 96 13,358 12,623 14,408 10,468 14,377
13,730 12,975 15,303 10,488 15,172
13,537 12,792 15,427 10,508 15,188
12,919 12,209 14,785 10,541 14,502
13,177 12,452 15,668 10,575 15,217
14,038 13,266 16,630 10,595 16,256
Jun 14,489 13,692 17,372 10,595 16,932
15,441 14,592 18,751 10,629 18,260
14,862 14,044 17,709 10,662 17,518
15,569 14,713 18,678 10,689 18,512
14,914 14,094 18,055 10,701 17,890
14,966 14,143 18,891 10,695 18,575
Dec 97 14,981 14,157 19,215 10,708 18,946
15,159 14,325 19,429 10,728 19,143
16,325 15,427 20,830 10,748 20,512
17,094 16,154 21,897 10,769 21,530
17,326 16,373 22,117 10,788 21,741
16,819 15,894 21,737 10,808 21,204
Jun 17,367 16,412 22,620 10,821 21,920
16,955 16,023 22,379 10,834 21,521
14,266 13,482 19,143 10,847 18,224
15,158 14,324 20,370 10,860 19,467
16,008 15,128 22,027 10,886 20,945
16,942 16,010 23,362 10,886 22,226
Dec 98 18,370 17,359 24,708 10,880 23,639
19,472 18,401 25,741 10,906 24,442
18,897 17,858 24,941 10,919 23,576
20,031 18,930 25,939 10,953 24,441
21,043 19,886 26,944 11,032 25,543
20,348 19,229 26,308 11,032 25,058
Jun 21,557 20,371 27,768 11,032 26,324
21,009 19,854 26,901 11,065 25,526
20,994 19,840 26,768 11,092 25,236
21,194 20,028 26,034 11,145 24,591
Oct 99 22,340 21,112 27,681 11,185 26,132
++ The performance of the Class B Shares was different than that shown above for
the Class A Shares, based on the difference in sales charges and fees paid by
Class B shareholders.
- --------------------------------------------------------------------------------
Total Returns as of 10/31/99(5)
CLASS A SHARES
1 YEAR 5 YEAR* SINCE INCEPTION*
(MAY 31, 1995)
Fund (not adjusted for sales
charge) 39.55% N/A 19.99%
---------------------------------------------------------------------------
Fund (adjusted for maximum 5.5%
sales charge) 31.55% N/A 18.46%
---------------------------------------------------------------------------
Capital Market Benchmark(1) 25.67% N/A 25.93%(1)
- --------------------------------------------------------------------------------
CLASS B SHARES
1 YEAR 5 YEAR* SINCE INCEPTION*
(MAY 31, 1995)
Fund (not adjusted for contingent
deferred sales charge) 38.60% N/A 19.15%
---------------------------------------------------------------------------
Fund (adjusted for maximum
contingent deferred sales charge) 33.60% N/A 19.03%
---------------------------------------------------------------------------
Capital Market Benchmark(1) 25.67% N/A 25.93%(1)
- --------------------------------------------------------------------------------
(1) The Strategic Growth Portfolio's benchmark is a capital market index that is
intended to represent a proxy for Portfolio performance. The benchmark
allocation is as follows: 100% S&P 500 Index. Past investment performance
does not guarantee future performance. The returns shown for the Portfolio
assume reinvestment of all dividends/distributions by the shareholder. For
comparison purposes, the benchmark's performance is shown as of the
Portfolio's inception date not from the inception date of the benchmark.
(2) The Russell 3000 Index is a broad-based index and is intended to represent
the majority of the U.S equity market.
(3) Inflation is measured by the Consumer Price Index for all urban consumers.
(4) Annual rate of inflation: 2.33%. Source: Ibbotson Associates.
(5) All performance shown prior to the November 1, 1996 asset conversion date
(the date on which the majority of existing SAM clients voluntarily
exchanged into the new SAM Portfolios) for the Sierra Asset Management
Portfolios represents the performance of the Sierra Asset Management Account
("SAM Account"), a discretionary asset allocation service that invested in
the Sierra Trust Funds. The SAM Account was not registered as an investment
company under the Investment Company Act of 1940 ("Act") and, therefore, was
not subject to certain restrictions that the Act imposes. If the SAM Account
had been registered under the Act, its performance may have differed
significantly.
The Portfolio's performance would have been lower had the Advisor not waived
a portion of its fees or reimbursed certain other expenses, and the Fund's
custodian had not allowed its fees to be reduced by credits.
* Annualized
PERFORMANCE REVIEW
The SAM STRATEGIC GROWTH PORTFOLIO (A shares) returned 39.55% (not adjusted for
sales charge) for the 12-month period ended October 31, 1999. The Portfolio
significantly outperformed its benchmark index for the period, while being
managed in an effort to reduce volatility relative to a single asset-class
equity investment. Long-term results have been favorable, providing a premium
over inflation. Since inception, the Portfolio (not adjusted for sales charge)
has returned 17.66% above the rate of inflation(4).
ECONOMIC/MARKET REVIEW
The domestic economy accelerated during the past 12 months with overall output
increasing more than 4% (for the year ended 9-30-99). Consumer spending
continued, as income increased and unemployment remained very low. Economic
growth was stronger than most analysts expected, causing inflationary concerns.
The Federal Reserve responded with two interest-rate increases during the
summer. The inflation fire was stoked by rising commodity prices throughout the
year, especially in energy, where the price of oil more than doubled from its
lowest point. Although inflation did increase somewhat, overall price pressures
have remained very tame during the past year. This is important to the
performance of all financial assets, as weak inflation is very positive for the
performance of both bonds and stocks.
Equity markets advanced during the past year, with much of the broad gains
concentrated in the early part of the period. During the closing months of 1998
and early 1999, there were broad-based rallies in domestic equity markets with
gains seen in both growth and value, small- and large-sized companies, and
across multiple sectors. However, this performance narrowed considerably during
the latter part of the period. Growth stocks, especially in the Technology and
Telecommunications areas, rose significantly, while value stocks fell behind
across all capitalization levels. For the period, small-, mid-, and large-cap
growth stocks performed very well, outdistancing their value counterparts by
significant margins. Cellular, Networking, and Biotech sector indices drove
performance, as each more than doubled during the past year. International
markets rebounded, led by developing countries and the entire Asian region.
Japan reported its best performance in years, and European stocks were generally
solid performers, supported by improving economic fundamentals. Overall, equity
results around the globe were quite positive for the 12-month period.
INVESTMENT STRATEGY
The STRATEGIC GROWTH PORTFOLIO is diversified in five WM Funds, representing
five major asset classes. The combination of asset classes increases our ability
to manage risk over a long-term investment horizon. Asset classes ranging in
risk levels from short-term money market instruments to international equities
are intended to shield the Portfolio from drastic swings in any one specific
area of the equity markets.
The overall investment strategy for the period was to:
o Maintain and increase equity focus on large-cap domestic holdings, as
prospects for earnings growth improve, although market volatility could
continue.
o Reduce exposure to international equities to manage risk, but maintain core
position (16%) as markets have stabilized and rebounded.
o Reduce holdings in small-cap stocks during the year to manage Portfolio risk.
o Initiate a position in cash to smooth market volatility.
REVIEW OF PORTFOLIO ALLOCATIONS
The major strategies of the past year were to manage risk levels and concentrate
equities in large-cap holdings. We reduced international holdings and small-cap
stocks in favor of large-cap domestic equities. We achieved this by focusing
assets into the GROWTH FUND (42%), which was the best performing fund over the
past year. Its focus on growth holdings in the Technology sector helped generate
strong results for the STRATEGIC GROWTH PORTFOLIO. A position in the NORTHWEST
FUND also contributed to the strong overall results. Despite accounting for just
3% of assets, the Fund was the second best performer for the year, also being
overweighted in the technology arena. While international holdings rebounded and
positively added to portfolio results, they were reduced to help manage overall
risk levels. The GROWTH & INCOME FUND remains the second largest holding (38%)
in the STRATEGIC GROWTH PORTFOLIO, as earnings growth in large-cap stocks were
very strong and have been forecast to continue. In addition, we added some
assets in cash to help manage risk during volatile periods in the equity
markets.
OUTLOOK
The economy continues to grow at strong levels and, although higher oil prices
and wage pressures spooked the markets, pervasive inflation has not surfaced.
Consumer spending remains strong, although the pace in consumption growth seems
to be slowing to a more sustainable level, as retail sales have softened and the
housing sector has cooled. The job market is still very tight, with the
unemployment rate at a 30-year low and the economy continuing to generate new
jobs. Manufacturing has been weaker than previously expected, but very low
levels of inventories may need to be restocked, which would add to overall
output. While global growth is accelerating, it is not causing as much of an
increase in U.S. export activity as was expected. International economies are
improving, although it may be difficult to sustain the current levels of
improvements in Asia. Europe is strengthening and Latin America seems to be
rebounding and is poised for continued improvement.
The net result of strong economic growth has been fears of inflation and
corresponding increases in interest rates, which has caused equity market
volatility. We do not expect recent increases in inflation indicators to
translate into accelerating price inflation since companies are still unable to
pass on price increases to the consumer. Strong competitive forces make it very
difficult to raise prices without sacrificing market share, while enhancements
in overall productivity have allowed firms to expand their profitability without
raising prices. This positive economic backdrop of strong growth and low
inflation continues to provide a positive environment for financial assets.
Although volatility could continue, our long-term outlook for both the bond and
stock market is very positive.
PORTFOLIO ALLOCATION
as of October 31, 1999++
GROWTH FUND 42%
GROWTH & INCOME FUND 38%
INTERNATIONAL GROWTH FUND 9%
MONEY MARKET FUND 8%
NORTHWEST FUND 3%
Note: as a percentage of investment company securities
ASSET CLASS DIVERSIFICATION
as of October 31, 1999++
LARGE-CAP STOCKS 52%
MID-CAP STOCKS 18%
FOREIGN STOCKS 16%
CASH EQUIVALENTS 11%
SMALL-CAP STOCKS 3%
++ may not reflect current allocation
- ----------------
CONSERVATIVE
GORWTH portfolio
- ----------------
GROWTH OF A $10,000 INVESTMENT(5)
(class A shares)+
Fund Fund
(Class A (Class A
Shares; Shares;
not adjusted
adjusted for the
for maximum Capital Russell
sales 5.5% sales Market 3000
charge) charge) Benchmark(1) Inflation(3) Index(2)
- ----------------------------------------------------------------------------
$10,000 $ 9,450 $10,000 $10,000 $10,000
10,199 9,639 10,294 10,016 9,922
10,427 9,854 10,490 10,039 10,604
10,555 9,975 10,691 10,093 10,930
10,911 10,311 11,013 10,132 11,479
11,482 10,850 11,619 10,225 12,340
11,495 10,863 11,654 10,311 12,704
11,608 10,970 11,719 10,373 12,717
11,872 11,219 11,980 10,395 13,243
Jun 11,416 10,788 11,604 10,395 12,639
11,804 11,155 11,971 10,458 13,236
11,991 11,331 12,103 10,473 13,590
12,118 11,451 12,215 10,489 13,436
12,375 11,695 12,375 10,505 13,660
12,105 11,439 12,094 10,536 13,137
Dec 91 12,971 12,258 12,822 10,567 14,609
13,125 12,403 12,750 10,583 14,510
13,238 12,510 12,749 10,613 14,703
12,799 12,095 12,475 10,660 14,378
12,848 12,141 12,609 10,676 14,668
13,152 12,428 12,830 10,707 14,767
Jun 12,975 12,261 12,636 10,715 14,501
13,090 12,370 12,822 10,731 15,100
13,166 12,442 12,883 10,769 14,774
13,123 12,401 12,943 10,824 14,972
13,068 12,350 12,848 10,839 15,120
13,370 12,635 13,079 10,855 15,741
Dec 92 13,550 12,805 13,212 10,894 16,023
13,737 12,981 13,305 10,917 16,180
14,001 13,231 13,448 10,947 16,285
14,408 13,616 13,810 10,978 16,692
14,498 13,701 13,947 11,016 16,250
14,831 14,015 14,179 11,032 16,716
Jun 14,835 14,019 14,201 11,024 16,825
14,940 14,119 14,296 11,078 16,796
15,576 14,719 14,721 11,117 17,450
15,620 14,761 14,666 11,156 17,448
15,935 15,059 14,905 11,187 17,698
15,540 14,685 14,596 11,202 17,425
Dec 93 16,068 15,184 14,936 11,218 17,767
16,659 15,742 15,416 11,218 18,310
16,309 15,412 15,227 11,250 17,867
15,655 14,794 14,787 11,273 17,086
15,711 14,847 14,949 11,319 17,281
15,555 14,699 15,031 11,327 17,471
Jun 15,207 14,371 14,914 11,327 16,993
15,656 14,795 15,185 11,358 17,519
16,083 15,198 15,577 11,397 18,283
15,827 14,956 15,360 11,435 17,894
16,071 15,187 15,593 11,451 18,189
15,521 14,667 15,210 11,459 17,525
Dec 94 15,510 14,657 15,317 11,498 17,797
15,447 14,597 15,366 11,529 18,186
15,694 14,831 15,653 11,575 18,928
15,932 15,056 16,050 11,607 19,400
16,236 15,343 16,402 11,615 19,906
16,610 15,696 16,711 11,630 20,629
Jun 17,137 16,194 16,892 11,630 21,225
17,913 16,927 17,377 11,676 22,078
18,076 17,082 17,321 11,723 22,275
18,498 17,481 17,689 11,762 23,139
18,045 17,053 17,577 11,801 22,940
18,551 17,531 18,020 11,824 23,958
Dec 95 19,023 17,977 18,351 11,848 24,349
19,293 18,232 18,657 11,848 25,055
19,847 18,755 18,754 11,879 25,423
20,268 19,153 18,910 11,902 25,678
20,789 19,646 19,207 11,942 26,165
21,123 19,961 19,388 11,933 26,835
Jun 20,730 19,590 19,426 11,925 26,749
19,446 18,377 18,907 11,995 25,348
20,234 19,121 19,159 12,034 26,116
20,942 19,790 19,737 12,096 27,536
20,647 19,511 19,905 12,144 28,040
21,279 20,108 20,663 12,167 30,017
Dec 96 21,166 20,002 20,504 12,174 29,657
21,416 20,238 20,924 12,197 31,297
21,103 19,942 21,029 12,220 31,332
20,251 19,137 20,656 12,259 29,915
20,583 19,451 21,165 12,299 31,390
21,871 20,668 22,086 12,322 33,534
Jun 22,578 21,336 22,772 12,322 34,929
23,720 22,415 23,633 12,361 37,668
22,826 21,570 22,852 12,400 36,138
23,885 22,571 23,689 12,431 38,187
22,929 21,668 22,993 12,446 36,904
22,909 21,649 23,314 12,438 38,318
Dec 97 22,994 21,729 23,560 12,453 39,084
23,258 21,979 23,862 12,477 39,490
24,730 23,370 24,910 12,500 42,314
25,742 24,326 25,607 12,524 44,413
26,071 24,637 25,784 12,547 44,848
25,435 24,036 25,488 12,569 43,740
Jun 26,007 24,577 25,899 12,584 45,219
25,503 24,100 25,806 12,599 44,396
21,813 20,613 23,582 12,615 37,594
22,888 21,629 24,234 12,630 40,158
24,096 22,771 25,527 12,661 43,207
25,479 24,078 26,459 12,661 45,849
27,327 25,824 27,337 12,653 48,763
Dec 98 28,709 27,130 27,826 12,684 50,420
27,957 26,420 27,251 12,699 48,634
29,629 28,000 28,009 12,738 50,418
31,037 29,330 28,819 12,830 52,692
30,115 28,459 28,302 12,830 51,691
Jun 31,738 29,993 29,219 12,830 54,303
31,161 29,447 29,016 12,869 52,657
31,086 29,376 28,965 12,900 52,058
31,381 29,655 28,811 12,962 50,727
Oct 99 32,900 31,091 29,727 13,008 53,908
+ The performance of the Class B Shares was different than that shown above for
the Class A Shares, based on the difference in sales charges and fees paid by
Class B shareholders.
- --------------------------------------------------------------------------------
Total Returns as of 10/31/99(5)
CLASS A SHARES
1 YEAR 5 YEAR* SINCE INCEPTION*
(SEPTEMBER 30, 1990)
Fund (not adjusted for sales
charge) 36.54% 15.41% 14.01%
---------------------------------------------------------------------------
Fund (adjusted for maximum 5.5%
sales charge) 29.01% 14.12% 13.32%
---------------------------------------------------------------------------
Capital Market Benchmark(1) 16.45% 13.77% 12.74%(1)
- --------------------------------------------------------------------------------
CLASS B SHARES
1 YEAR 5 YEAR* SINCE INCEPTION*
(JUNE 30, 1994)
Fund (not adjusted for contingent
deferred sales charge) 34.98% 14.42% 14.58%
---------------------------------------------------------------------------
Fund (adjusted for maximum
contingent deferred sales charge) 29.98% 14.30% 14.58%
---------------------------------------------------------------------------
Capital Market Benchmark(1) 16.45% 13.77% 13.81%(1)
- --------------------------------------------------------------------------------
(1) The Conservative Growth Portfolio's benchmark is a blended mix of capital
market indices that are intended to represent a proxy for Portfolio
performance. The benchmark allocation is as follows: 35% S&P 500 Index, 20%
MSCI EAFE + Emerging Markets Index, 20% Lehman Bros. Mutual Fund (1-5)
Govt/Corp Index, 20% Salomon Bros. U.S. 90-day T-Bill Index, and 5% Russell
2000 Growth Index. Past investment performance does not guarantee future
performance. The returns shown for the Portfolio assume reinvestment of all
dividends/distributions by the shareholder. For comparison purposes, the
benchmark's performance is shown as of the Portfolio's inception date not
from the inception date of the benchmark.
(2) The Russell 3000 Index is a broad-based index and is intended to represent
the majority of the U.S. equity market.
(3) Inflation is measured by the Consumer Price Index for all urban consumers.
(4) Annual rate of inflation: 2.66%. Source: Ibbotson Associates.
(5) All performance shown prior to the November 1, 1996 asset conversion date
(the date on which the majority of existing SAM clients voluntarily
exchanged into the new SAM Portfolios) for the Sierra Asset Management
Portfolios represents the performance of the Sierra Asset Management Account
("SAM Account"), a discretionary asset allocation service that invested in
the Sierra Trust Funds. The SAM Account was not registered as an investment
company under the Investment Company Act of 1940 ("Act") and, therefore, was
not subject to certain restrictions that the Act imposes. If the SAM Account
had been registered under the Act, its performance may have differed
significantly.
The Portfolio's performance would have been lower had the Advisor not waived
a portion of its fees or reimbursed certain other expenses, and the Fund's
custodian had not allowed its fees to be reduced by credits.
* Annualized
PERFORMANCE REVIEW
The SAM CONSERVATIVE GROWTH PORTFOLIO (A shares) returned 36.54% (not adjusted
for sales charge) for the 12-month period ended October 31, 1999. The Portfolio
significantly outperformed its benchmark index for all periods, while being
managed in an effort to reduce volatility relative to single asset-class
investments. Long-term results have been favorable, providing a premium over
inflation. Since inception, the Portfolio (not adjusted for sales charge) has
returned 11.35% above the rate of inflation(4).
ECONOMIC/MARKET REVIEW
The domestic economy accelerated over the past 12 months with overall output
increasing more than 4% (for the year ended 9-30-99). Consumer spending
continued, as income increased and unemployment remained very low. Economic
growth was stronger than most analysts expected, causing inflationary concerns.
The Federal Reserve responded with two interest rate increases during the
summer. The inflation fire was stoked by rising commodity prices throughout the
year, especially in energy, where the price of oil more than doubled from its
lowest point. Although inflation did increase somewhat, overall price pressures
remained very tame during the past year. This is important to the performance of
all financial assets, as weak inflation is very positive for the performance of
both bonds and stocks.
Equity markets advanced during the past year, with much of the broad gains
concentrated in the early part of the period. During the closing months of 1998
and early 1999, there were broad-based rallies in domestic equity markets with
gains seen in both growth and value, small- and large-sized companies, and
across multiple sectors. However, this performance narrowed considerably during
the latter part of the period. Growth stocks, especially in the Technology and
Telecommunications areas, rose significantly, while value stocks fell behind
across all capitalization levels. International markets rebounded, led by
developing countries and the entire Asian region. Japan reported its best
performance in years, and European stocks were generally solid performers,
supported by improving economic fundamentals. Overall, equity results around the
globe were quite positive for the 12-month period. Fixed-income assets were
negatively affected by the higher interest rates throughout the past 12-months.
Short-term assets provided the best results, as their prices are less sensitive
to changes in rates. Higher-yielding corporate bonds performed very well during
the year, as performance was bolstered by the strong economic conditions in the
U.S. Overall, most fixed-income assets saw price declines that offset some of
the income earned throughout the period.
INVESTMENT STRATEGY
The CONSERVATIVE GROWTH PORTFOLIO is diversified among eight WM Funds,
representing six major asset classes. The combination of asset classes increases
our ability to manage risk over a long-term investment horizon. Asset classes
ranging in risk levels from short-term money market instruments to international
equities are intended to shield the Portfolio from drastic swings in any one
specific area of the financial markets.
The overall investment strategy for the period was to:
o Maintain and increase equity focus on large-cap domestic holdings, as
prospects for earnings growth improve, although market volatility could
continue.
o Reduce exposure to international equities to manage risk, but maintain a core
position (19%) as markets have stabilized and rebounded.
o Reduce holdings in small-cap stocks during the year to manage Portfolio risk.
o Slightly increase the fixed-income fund exposure to 17%, while diversifying
these holdings in short-term and some higher-yielding bonds to generate
income.
REVIEW OF PORTFOLIO ALLOCATIONS
The major themes of the past year were to manage risk levels and concentrate
equities in large-cap holdings. We increased the fixed-income fund positions
(17%) to reduce volatility and equity investment risk, as we move towards the
end of the year and the markets prepare for Y2K. At the same time, we
diversified these positions in short-term bonds and some corporate securities.
This was done in an effort to generate additional yield and take advantage of
the possibility of interest rate declines. We also initiated a position in the
HIGH YIELD FUND during the period, which contributed to overall performance in
addition to income levels generated by the Portfolio.
In the equity portion of the Portfolio, we reduced international holdings and
small-cap stocks in favor of large-cap domestic equities. We achieved this by
focusing assets into the GROWTH FUND (33%), which was the best performing
underlying fund over the past year. Its focus on growth holdings in the
Technology sector helped generate strong results for the CONSERVATIVE GROWTH
PORTFOLIO. While international holdings rebounded and contributed to portfolio
results, they were reduced to help manage overall risk levels. The GROWTH &
INCOME FUND remains the largest holding (36%) in the CONSERVATIVE GROWTH
PORTFOLIO, as earnings growth in large-cap stocks were very strong and have been
forecasted to continue.
OUTLOOK
The economy continues to strengthen and, although higher oil prices and wage
pressures spooked the markets, pervasive inflation has not surfaced. Consumer
spending remains strong, although the pace in consumption growth seems to be
slowing to a more sustainable level, as retail sales have softened and the
housing sector has cooled. The job market is still very tight, with the
unemployment rate at a 30-year low and the economy continuing to generate new
jobs. Manufacturing has been weaker than previously expected, but very low
levels of inventories may need to be restocked, which would add to overall
output. Global growth is accelerating, but, it is not causing as much of an
increase in U.S. export activity as was expected. International economies are
improving, although it may be difficult to sustain the current levels of
improvements in Asia. Europe is strengthening and Latin America seems to be
rebounding and is poised for continued improvement.
The net result of strong economic growth has been fears of inflation and
corresponding increases in interest rates, which also have caused equity market
volatility. We do not expect recent increases in inflation indicators to
translate into accelerating price inflation since companies are still unable to
pass on price increases to the consumer. Strong competitive forces have made it
very difficult to raise prices without sacrificing market share, while
enhancements in overall productivity have allowed firms to expand their
profitability without raising prices. This economic backdrop of strong growth
and low inflation continues to provide a positive environment for financial
assets. Although volatility could continue, our long-term outlook for both the
bond and stock market is very positive.
PORTFOLIO ALLOCATION
as of October 31, 1999++
GROWTH & INCOME FUND 36%
GROWTH FUND 33%
INTERNATIONAL GROWTH FUND 14%
CASH/MONEY MARKET FUND 8%
U.S. GOVERNMENT SECURITIES FUND 4%
HIGH YIELD FUND 3%
SHORT TERM HIGH QUALITY BOND FUND 1%
INCOME FUND 1%
Note: as a percentage of investment company securities
ASSET CLASS DIVERSIFICATION
as of October 31, 1999++
LARGE-CAP STOCKS 45%
FOREIGN STOCKS 19%
MID-CAP STOCKS 15%
CASH EQUIVALENTS 11%
OTHER BONDS 9%
SMALL-CAP STOCKS 1%
++ may not reflect current allocation>
<PAGE>
- --------------
BALANCED
portfolio
- --------------
GROWTH OF A $10,000 INVESTMENT(6)
(class A shares)+
Fund Fund
(Class A (Class A
Shares; Shares;
not adjusted Lehman
adjusted for the Brothers
for maximum Capital Russell Aggregate
sales 5.5% sales Market 3000 Bond
charge) charge) Benchmark(1) Inflation(3) Index(2) Index(3)
- -----------------------------------------------------------------------------
$10,000 $ 9,450 $10,000 $10,000 $10,000 $10,000
10,211 9,649 10,286 10,016 9,922 10,127
10,335 9,767 10,384 10,039 10,604 10,345
10,458 9,883 10,537 10,093 10,930 10,506
10,736 10,145 10,734 10,132 11,479 10,636
11,160 10,546 11,076 10,225 12,340 10,727
11,059 10,451 11,071 10,311 12,704 10,801
11,180 10,566 11,156 10,373 12,717 10,917
11,349 10,724 11,301 10,395 13,243 10,981
Jun 11,059 10,451 11,137 10,395 12,639 10,975
11,360 10,735 11,378 10,458 13,236 11,128
11,527 10,893 11,489 10,473 13,590 11,368
11,649 11,008 11,647 10,489 13,436 11,599
11,768 11,121 11,783 10,505 13,660 11,728
11,604 10,966 11,694 10,536 13,137 11,836
Dec 91 12,279 11,604 12,104 10,567 14,609 12,187
12,201 11,530 12,014 10,583 14,510 12,021
12,247 11,574 12,021 10,613 14,703 12,100
11,962 11,304 11,865 10,660 14,378 12,032
12,063 11,399 11,987 10,676 14,668 12,118
12,340 11,661 12,200 10,707 14,767 12,347
Jun 12,236 11,563 12,159 10,715 14,501 12,518
12,329 11,651 12,268 10,731 15,100 12,773
12,454 11,769 12,405 10,769 14,774 12,902
12,398 11,716 12,456 10,824 14,972 13,056
12,235 11,562 12,332 10,839 15,120 12,882
12,438 11,754 12,416 10,855 15,741 12,885
Dec 92 12,581 11,889 12,529 10,894 16,023 13,090
12,741 12,040 12,634 10,917 16,180 13,341
12,969 12,255 12,787 10,947 16,285 13,574
13,318 12,585 13,025 10,978 16,692 13,631
13,502 12,759 13,201 11,016 16,250 13,727
13,743 12,987 13,310 11,032 16,716 13,745
Jun 13,770 13,013 13,357 11,024 16,825 13,993
13,887 13,124 13,443 11,078 16,796 14,073
14,330 13,542 13,694 11,117 17,450 14,319
14,366 13,576 13,660 11,156 17,448 14,358
14,601 13,797 13,796 11,187 17,698 14,411
14,257 13,473 13,612 11,202 17,425 14,289
Dec 93 14,620 13,816 13,842 11,218 17,767 14,366
15,101 14,270 14,153 11,218 18,310 14,560
14,790 13,977 14,037 11,250 17,867 14,306
14,215 13,433 13,751 11,273 17,086 13,953
14,163 13,384 13,818 11,319 17,281 13,841
14,019 13,248 13,878 11,327 17,471 13,840
Jun 13,749 12,993 13,858 11,327 16,993 13,810
14,169 13,390 14,064 11,358 17,519 14,084
14,462 13,667 14,252 11,397 18,283 14,101
14,185 13,405 14,096 11,435 17,894 13,894
14,342 13,553 14,221 11,451 18,189 13,882
13,940 13,173 14,028 11,459 17,525 13,851
Dec 94 13,945 13,178 14,099 11,498 17,797 13,947
13,993 13,224 14,191 11,529 18,186 14,223
14,282 13,496 14,406 11,575 18,928 14,561
14,462 13,667 14,645 11,607 19,400 14,650
14,759 13,947 14,894 11,615 19,906 14,855
15,229 14,392 15,167 11,630 20,629 15,430
Jun 15,476 14,625 15,245 11,630 21,225 15,543
15,936 15,059 15,487 11,676 22,078 15,509
16,097 15,211 15,489 11,723 22,275 15,696
16,382 15,481 15,693 11,762 23,139 15,848
16,236 15,343 15,704 11,801 22,940 16,054
16,678 15,761 15,957 11,824 23,958 16,295
Dec 95 16,975 16,042 16,191 11,848 24,349 16,523
17,181 16,236 16,383 11,848 25,055 16,632
17,300 16,348 16,369 11,879 25,423 16,343
17,373 16,418 16,432 11,902 25,678 16,229
17,633 16,664 16,547 11,942 26,165 16,138
17,762 16,785 16,582 11,933 26,835 16,105
Jun 17,617 16,648 16,707 11,925 26,749 16,321
17,029 16,092 16,558 11,995 25,348 16,365
17,363 16,408 16,649 12,034 26,116 16,338
17,871 16,888 16,970 12,096 27,536 16,622
17,941 16,954 17,152 12,144 28,040 16,991
18,542 17,522 17,550 12,167 30,017 17,281
Dec 96 18,418 17,405 17,459 12,174 29,657 17,121
18,720 17,690 17,630 12,197 31,297 17,174
18,645 17,620 17,743 12,220 31,332 17,217
18,158 17,160 17,605 12,259 29,915 17,026
18,514 17,496 17,901 12,299 31,390 17,281
19,292 18,231 18,317 12,322 33,534 17,445
Jun 19,730 18,645 18,693 12,322 34,929 17,653
20,726 19,586 19,127 12,361 37,668 18,129
20,065 18,962 18,747 12,400 36,138 17,975
20,739 19,599 19,164 12,431 38,187 18,241
20,132 19,024 18,924 12,446 36,904 18,506
20,158 19,049 19,065 12,438 38,318 18,591
Dec 97 20,297 19,181 19,236 12,453 39,084 18,779
20,551 19,420 19,475 12,477 39,490 19,019
21,516 20,333 19,910 12,500 42,314 19,004
22,203 20,982 20,215 12,524 44,413 19,068
22,454 21,219 20,334 12,547 44,848 19,168
22,164 20,945 20,301 12,569 43,740 19,350
Jun 22,552 21,312 20,486 12,584 45,219 19,514
22,320 21,092 20,557 12,599 44,396 19,555
19,992 18,892 19,816 12,615 37,594 19,874
20,643 19,508 20,102 12,630 40,158 20,339
21,461 20,281 20,691 12,661 43,207 20,231
22,371 21,140 21,082 12,661 45,849 20,346
Dec 98 23,601 22,303 21,432 12,653 48,763 20,407
24,463 23,117 21,632 12,684 50,420 20,552
23,898 22,583 21,418 12,699 48,634 20,193
24,868 23,500 21,793 12,738 50,418 20,304
25,766 24,348 22,133 12,830 52,692 20,369
25,148 23,465 21,868 12,830 51,691 20,189
Jun 26,154 24,716 22,219 12,830 54,303 20,125
25,804 24,385 22,188 12,869 52,657 20,040
25,750 24,333 22,216 12,900 52,058 20,030
25,976 24,548 22,278 12,962 50,727 20,263
Oct 99 26,865 25,387 22,670 13,008 53,908 20,338
+ The performance of the Class B Shares was different than that shown above for
the Class A Shares, based on the difference in sales charges and fees paid by
Class B shareholders.
- --------------------------------------------------------------------------------
Total Returns as of 10/31/99(6)
CLASS A SHARES
1 YEAR 5 YEAR* SINCE INCEPTION*
(SEPTEMBER 30, 1990)
Fund (not adjusted for sales
charge) 25.16% 13.48% 11.55%
---------------------------------------------------------------------------
Fund (adjusted for maximum 5.5%
sales charge) 18.29% 12.22% 10.85%
---------------------------------------------------------------------------
Capital Market Benchmark(1) 9.56% 9.78% 9.43%(1)
- --------------------------------------------------------------------------------
CLASS B SHARES
1 YEAR 5 YEAR* SINCE INCEPTION*
(JUNE 30, 1994)
Fund (not adjusted for contingent
deferred sales charge) 24.22% 12.44% 12.46%
---------------------------------------------------------------------------
Fund (adjusted for maximum
contingent deferred sales charge) 19.22% 12.31% 12.46%
---------------------------------------------------------------------------
Capital Market Benchmark(1) 9.56% 9.78% 9.67%(1)
- --------------------------------------------------------------------------------
(1) The Balanced Portfolio's benchmark is a blended mix of capital market
indices that are intended to represent a proxy for Portfolio performance.
The benchmark allocation is as follows: 25% Lehman Bros. Mutual Fund Short
(1-5) Govt/Corp Index, 25% Salomon Bros. U.S. 90-day T-Bill Index, 20%
Lehman Bros. (MBS) Index, 15% S&P 500, and 15% MSCI EAFE + Emerging Markets
Free Index. Past investment performance does not guarantee future
performance. The returns shown for the Portfolio assume reinvestment of all
dividends/distributions by the shareholder. For comparison purposes, the
benchmark's performance is shown as of the Portfolio's inception date not
from the inception date of the benchmark.
(2) The Russell 3000 Index is a broad-based index and is intended to represent
the majority of the U.S. equity market.
(3) The Lehman Brothers Aggregate Bond Index is a broad-based index intended to
represent the fixed-income market as a whole.
(4) Inflation is measured by the Consumer Price Index for all urban consumers.
(5) Annual rate of inflation: 2.66%. Source: Ibbotson Associates.
(6) All performance shown prior to the November 1, 1996 asset conversion date
(the date on which the majority of existing SAM clients voluntarily
exchanged into the new SAM Portfolios) for the Sierra Asset Management
Portfolios represents the performance of the Sierra Asset Management Account
("SAM Account"), a discretionary asset allocation service that invested in
the Sierra Trust Funds. The SAM Account was not registered as an investment
company under the Investment Company Act of 1940 ("Act") and, therefore, was
not subject to certain restrictions that the Act imposes. If the SAM Account
had been registered under the Act, its performance may have differed
significantly.
The Portfolio's performance would have been lower had the Advisor not waived
a portion of its fees or reimbursed certain other expenses, and the Fund's
custodian had not allowed its fees to be reduced by credits.
* Annualized
PERFORMANCE REVIEW
The SAM BALANCED PORTFOLIO (A shares) returned 25.16% (not adjusted for sales
charge) for the 12-month period ended October 31, 1999. The Portfolio
significantly outperformed its benchmark index for all periods, while being
managed in an effort to reduce volatility relative to single asset-class
investments. Long-term results have been favorable, providing a premium over
inflation. Since inception, the Portfolio (not adjusted for sales charge) has
returned 8.58% above the rate of inflation(5).
ECONOMIC/MARKET REVIEW
The domestic economy accelerated over the past 12 months with overall output
increasing more than 4% (for the year ended 9-30-99). Consumer spending
continued, as income increased and unemployment remained very low. Economic
growth was stronger than most analysts expected, causing inflationary concerns.
The Federal Reserve responded with two interest rate increases during the
summer. The inflation fire was stoked by rising commodity prices throughout the
year, especially in energy, where the price of oil more than doubled from its
lowest point. Although inflation did increase somewhat, overall price pressures
remained very tame during the past year. This is important to the performance of
all financial assets, as weak inflation is very positive for the performance of
both bonds and stocks.
Fixed-income assets were negatively affected by rising interest rates throughout
the past 12 months. Short-term assets provided the best results, as their prices
are less sensitive to changes in rates. Higher-yielding corporate bonds
performed very well during the year, as performance was bolstered by strong
economic conditions in the U.S. Overall, most fixed-income assets saw price
declines that offset some of the income earned throughout the period. Equity
markets advanced during the past year, with much of the broad gains concentrated
in the early part of the period. During the closing months of 1998 and early
1999, there were broad-based rallies in domestic equity markets with gains seen
in both growth and value, small- and large-sized companies, and across multiple
sectors. However, this performance narrowed considerably during the latter part
of the period. Growth stocks, especially in the Technology and
Telecommunications areas, rose significantly, while value stocks fell behind
across all capitalization levels. International markets rebounded, led by
developing countries and the entire Asian region. Japan reported its best
performance in years, and European stocks were generally solid performers,
supported by improving economic fundamentals. Overall, equity results around the
globe were quite positive for the 12-month period.
INVESTMENT STRATEGY
The BALANCED PORTFOLIO is diversified among seven WM Funds, representing nine
major asset classes. The combination of asset classes increases our ability to
manage risk over a long-term investment horizon. Asset classes ranging in risk
levels from short-term money market instruments to international equities are
intended to shield the Portfolio from drastic swings in any specific area of the
financial markets.
The overall investment strategy for the period was to:
o Maintain equity focus on large-cap domestic holdings, as prospects for
earnings growth improve, although market volatility could continue.
o Slightly increase the fixed-income fund exposure to 39%, while reducing the
cash position in favor of short-term and some higher-yielding bonds to
generate income.
o Focus fixed-income holdings on high-quality issues to improve credit risk
during the second half of 1999.
o Reduce exposure to international equities to manage risk, but maintain a core
position (13%) as markets have stabilized and rebounded.
REVIEW OF PORTFOLIO ALLOCATIONS
The major themes of the past year were to manage risk levels and concentrate
equities in large-cap holdings. We increased the fixed-income fund positions
(39%) to reduce volatility and equity investment risk, as we move towards the
end of the year and the markets prepare for Y2K. At the same time, the cash
position was dramatically reduced and assets were shifted into short-term bonds
and mortgage-backed securities. This was done in an effort to generate
additional yield and take advantage of the possibility of interest rate
declines. We also initiated a position in the HIGH YIELD FUND during the period,
which contributed to overall performance in addition to income levels generated
by the Portfolio.
In the equity portion of the Portfolio, we reduced international holdings in
favor of large-cap domestic equities. We achieved this by focusing assets into
the GROWTH FUND (21%), which was the best performing underlying fund over the
past year. Its focus on growth holdings in the Technology sector helped generate
strong results for the BALANCED PORTFOLIO. While international holdings
rebounded and positively added to portfolio results, they were reduced to help
manage overall risk levels. The GROWTH & INCOME FUND remains the largest holding
(27%) in the BALANCED PORTFOLIO, as earnings growth in large-cap stocks has been
very strong and has been forecasted to continue.
OUTLOOK
The economy continues to grow at strong levels and, although higher oil prices
and wage pressures spooked the markets, pervasive inflation has not surfaced.
Consumer spending remains strong, but the pace in consumption growth seems to be
slowing to a more sustainable level, as retail sales have softened and the
housing sector has cooled. The job market is still very tight, with the
unemployment rate at a 30-year low and the economy continuing to generate new
jobs. Manufacturing has been weaker than previously expected, but very low
levels of inventories may need to be restocked, which would add to overall
output. While global growth is accelerating, it is not causing as much of an
increase in U.S. export activity as was expected. International economies are
improving, although it may be difficult to sustain the current levels of
improvements in Asia. Europe is strengthening and Latin America seems to be
rebounding and is poised for continued improvement.
The net result of strong economic growth has been fears of
inflation and corresponding increases in interest rates, which has caused equity
market volatility. We do not expect recent increases in inflation indicators to
translate into accelerating price inflation since companies are still unable to
pass on price increases to the consumer. Strong competitive forces make it very
difficult to raise prices without sacrificing market share, while enhancements
in overall productivity have allowed firms to expand their profitability without
raising prices. This positive economic backdrop of strong growth and low
inflation continues to provide a positive environment for financial assets.
Although volatility could continue, our long-term outlook for both the bond and
stock market is very positive.
PORTFOLIO ALLOCATION
as of October 31, 1999++
GROWTH & INCOME FUND 27%
GROWTH FUND 21%
U.S. GOVERNMENT SECURITIES FUND 19%
SHORT TERM HIGH QUALITY BOND FUND 15%
INTERNATIONAL GROWTH FUND 13%
INCOME FUND 3%
HIGH YIELD FUND 2%
Note: as a percentage of investment company securities
ASSET CLASS DIVERSIFICATION
as of October 31, 1999++
LARGE-CAP STOCKS 31%
MORTGAGE BACKED 18%
FOREIGN STOCKS 16%
SHORT TERM BONDS 14%
MID-CAP STOCKS 10%
CASH EQUIVALENTS 3%
CORPORATE BONDS 3%
OTHER BONDS 3%
SMALL-CAP STOCKS 1%
TREASURIES 1%
++ may not reflect current allocation>
- ----------------
FLEXIBLE
INCOME portfolio
- ----------------
GROWTH OF A $10,000 INVESTMENT(5)
(class A shares)+
Fund Fund
(Class A (Class A
Shares; Shares;
not adjusted Lehman
adjusted for the Brothers
for maximum Capital Aggregate
sales 4.5% sales Market Bond
charge) charge) Benchmark(1) Inflation(3) Index(2)
- ------------------------------------------------------------------------
$10,000 $ 9,550 $10,000 $10,000 $10,000
9,977 9,528 10,022 10,035 10,070
10,121 9,666 10,052 10,049 10,083
10,255 9,793 10,117 10,042 10,266
10,301 9,838 10,135 10,091 10,324
10,539 10,065 10,238 10,127 10,505
10,562 10,087 10,255 10,162 10,533
10,676 10,195 10,300 10,190 10,572
10,544 10,069 10,290 10,205 10,482
Dec 93 10,643 10,164 10,339 10,219 10,539
10,863 10,374 10,430 10,219 10,681
10,636 10,157 10,363 10,248 10,495
10,302 9,839 10,260 10,269 10,236
10,173 9,715 10,253 10,311 10,154
10,039 9,588 10,291 10,318 10,153
Jun 99,07 9,461 10,284 10,318 10,131
10,140 9,684 10,399 10,346 10,332
10,225 9,765 10,473 10,381 10,345
10,093 9,639 10,426 10,417 10,193
10,123 9,667 10,471 10,431 10,184
10,028 9,576 10,424 10,439 10,161
Dec 94 9,994 9,544 10,476 10,474 10,231
10,140 9,684 10,609 10,502 10,434
10,382 9,915 10,770 10,544 10,682
10,483 10,012 10,853 10,573 10,747
10,659 10,180 10,967 10,580 10,898
11,083 10,585 11,168 10,594 11,320
Jun 11,177 10,674 11,249 10,594 11,402
11,318 10,808 11,321 10,636 11,377
11,476 10,960 11,389 10,679 11,515
11,645 11,121 11,494 10,714 11,626
11,654 11,129 11,565 10,750 11,778
11,897 11,362 11,699 10,771 11,954
Dec 95 12,090 11,546 11,797 10,793 12,122
12,131 11,585 11,911 10,793 12,202
12,035 11,493 11,899 10,821 11,989
12,026 11,485 11,912 10,842 11,905
12,044 11,502 11,943 10,878 11,839
12,074 11,530 11,994 10,870 11,815
Jun 12,120 11,575 12,078 10,863 11,973
12,007 11,467 12,067 10,927 12,006
12,083 11,539 12,126 10,962 11,985
12,343 11,787 12,289 11,019 12,194
12,579 12,013 12,437 11,062 12,465
12,942 12,360 12,618 11,083 12,678
Dec 96 12,874 12,294 12,596 11,090 12,560
13,046 12,459 12,729 11,111 12,599
13,083 12,494 12,774 11,132 12,630
12,896 12,315 12,715 11,167 12,490
13,072 12,484 12,882 11,203 12,677
13,287 12,689 13,034 11,224 12,798
Jun 13,438 12,833 13,171 11,224 12,950
13,881 13,257 13,401 11,260 13,300
13,725 13,107 13,338 11,295 13,187
13,963 13,335 13,501 11,323 13,382
13,973 13,344 13,543 11,337 13,576
14,047 13,415 13,643 11,330 13,638
Dec 97 14,193 13,555 13,743 11,344 13,776
14,321 13,677 13,860 11,365 13,952
14,527 13,874 13,985 11,387 13,941
14,700 14,039 14,107 11,409 13,989
14,774 14,109 14,181 11,429 14,061
14,766 14,102 14,226 11,450 14,195
Jun 14,924 14,253 14,346 11,463 14,316
14,835 14,167 14,387 11,477 14,346
14,270 13,627 14,297 11,491 14,580
14,651 13,991 14,537 11,505 14,921
14,886 14,217 14,692 11,533 14,842
15,211 14,526 14,805 11,533 14,926
Dec 98 15,505 14,807 14,938 11,526 14,971
15,813 15,101 15,064 11,554 15,077
15,587 14,886 14,980 11,568 14,813
15,853 15,140 15,118 11,603 14,895
16,178 15,450 15,225 11,688 14,943
16,049 15,327 15,180 11,688 14,811
Jun 16,216 15,486 15,300 11,688 14,764
16,083 15,359 15,272 11,723 14,702
15,988 15,268 15,302 11,751 14,694
16,053 15,331 15,357 11,807 14,865
Oct 99 16,285 15,552 15,506 11,849 14,920
++ The performance of the Class B Shares was different than that shown above for
the Class A Shares, based on the difference in sales charges and fees paid by
Class B shareholders.
- --------------------------------------------------------------------------------
Total Returns as of 10/31/99(5)
CLASS A SHARES
1 YEAR 5 YEAR* SINCE INCEPTION*
(MARCH 31, 1993)
Fund (not adjusted for sales
charge) 9.39% 10.23% 7.87%
---------------------------------------------------------------------------
Fund (adjusted for maximum 4.5%
sales charge) 4.48% 9.22% 7.11%
---------------------------------------------------------------------------
Capital Market Benchmark(1) 5.54% 8.17% 6.89%(1)
- --------------------------------------------------------------------------------
CLASS B SHARES
1 YEAR 5 YEAR* SINCE INCEPTION*
(JUNE 30, 1994)
Fund (not adjusted for contingent
deferred sales charge) 8.60% 9.04% 8.87%
---------------------------------------------------------------------------
Fund (adjusted for maximum
contingent deferred sales charge) 3.60% 8.90% 8.87%
---------------------------------------------------------------------------
Capital Market Benchmark(1) 5.54% 8.17% 8.00%(1)
- --------------------------------------------------------------------------------
(1) The Flexible Income Portfolio's benchmark is a blended mix of capital market
indices that are intended to represent a proxy for Portfolio performance.
The benchmark allocation is as follows: 40% Lehman Bros. Mutual Fund Short
(1-5) Govt/Corp Index, 40% Salomon Bros. 90-day T-Bill Index, 10% Lehman
Bros. (MBS) Index, and 10% S&P 500 Index. Past investment performance does
not guarantee future performance. The returns shown for the Portfolio assume
reinvestment of all dividends/distributions by the shareholder. For
comparison purposes, the benchmark's performance is shown as of the
Portfolio's inception date not from the inception date of the benchmark.
(2) The Lehman Brothers Aggregate Bond Index is a broad-based index intended to
represent the U.S. fixed-income market as a whole.
(3) Inflation is measured by the Consumer Price Index for all urban consumers.
(4) Annual rate of inflation: 2.46%. Source: Ibbotson Associates.
(5) All performance shown prior to the November 1, 1996 asset conversion date
(the date on which the majority of existing SAM clients voluntarily
exchanged into the new SAM Portfolios) for the Sierra Asset Management
Portfolios represents the performance of the Sierra Asset Management Account
("SAM Account"), a discretionary asset allocation service that invested in
the Sierra Trust Funds. The SAM Account was not registered as an investment
company under the Investment Company Act of 1940 ("Act") and, therefore, was
not subject to certain restrictions that the Act imposes. If the SAM Account
had been registered under the Act, its performance may have differed
significantly.
The Portfolio's performance would have been lower had the Advisor not waived
a portion of its fees or reimbursed certain other expenses, and the Fund's
custodian had not allowed its fees to be reduced by credits.
* Annualized
PERFORMANCE REVIEW
The SAM FLEXIBLE INCOME PORTFOLIO (A shares) returned 9.39% (not adjusted for
sales charge) for the 12-month period ended October 31, 1999. The Portfolio
outperformed its benchmark index for all periods, while being managed in an
effort to reduce volatility relative to single asset-class investments.
Long-term results have been favorable, providing a premium over inflation. Since
inception, the Portfolio (not adjusted for sales charge) has returned 5.41%
above the rate of inflation(4).
ECONOMIC/MARKET REVIEW
The domestic economy accelerated over the past 12 months with overall output
increasing more than 4% (for the year ended 9-30-99). Consumer spending
continued, as income increased and unemployment remained very low. Economic
growth was stronger than most analysts expected, causing inflationary
concerns.The Federal Reserve responded with two interest rate increases during
the summer. The inflation fire was stoked by rising commodity prices throughout
the year, especially in energy, where the price of oil more than doubled from
its lowest point. Although inflation did increase somewhat, overall price
pressures remained very tame during the past year. This is important to the
performance of all financial assets, as weak inflation is very positive for the
performance of both bonds and stocks.
Fixed-income assets were negatively affected by rising interest rates throughout
the past 12 months. Short-term assets provided the best results, as their prices
are less sensitive to changes in rates. Long-term Treasuries had negative
performance for the period, with mortgage-backed securities generally
outperforming Treasury bonds with similar maturities. Higher-yielding corporate
bonds performed very well during the year, as performance was bolstered by
strong economic conditions in the U.S. Overall, most fixed-income assets saw
price declines that offset some of the income earned throughout the period.
Equity markets advanced during the past year, with much of the broad gains
concentrated in the early part of the period. During the closing months of 1998
and early 1999, there were broad-based rallies in domestic equity markets.
However, this performance narrowed considerably during the latter part of the
period. Growth stocks, especially in the Technology and Telecommunications
areas, rose significantly, while value stocks fell behind across all
capitalization levels.
INVESTMENT STRATEGY
The FLEXIBLE INCOME PORTFOLIO is diversified among seven WM Funds, representing
eight major asset classes. The combination of asset classes increases our
ability to manage risk over a long-term investment horizon. Asset classes
ranging in risk levels from short-term money market instruments to domestic
equities are intended to shield the Portfolio from drastic swings in any
specific area of the financial markets.
The overall investment strategy for the period was to:
o Reallocate the fixed-income fund assets to reduce the cash position in favor
of short-term and some higher-yielding corporate bonds to generate income.
o Focus fixed-income holdings on high-quality issues during the second half of
1999.
o Increase equity fund focus (25%) on large-cap domestic holdings, as prospects
for earnings growth improve, although market volatility could continue.
REVIEW OF PORTFOLIO ALLOCATIONS
The major themes of the past year were to manage risk levels and generate income
by concentrating assets in shorter-term securities and increasing corporate debt
exposure. We increased the equity fund positions (25%) to gain performance
strength by focusing almost solely on large-cap holdings. We achieved this by
initiating a position in the GROWTH FUND (6%), which was the best performing
underlying fund over the past year. focus on growth holdings in the Technology
sector helped generate strong results for the FLEXIBLE INCOME PORTFOLIO. In
addition, the GROWTH & INCOME FUND (19%) remained a core position and also
contributed strong results for the period. In the fixed-income portion of the
Portfolio, the cash position was dramatically reduced and assets were shifted
into short-term bonds and corporate securities. This was done in an effort to
generate additional yield while not significantly increasing interest-rate risk.
We initiated a position in the HIGH YIELD FUND, which was the best performing
fixed-income fund, and contributed to overall performance in addition to income
levels generated by the Portfolio. We increased the positions in both the SHORT
TERM HIGH QUALITY BOND FUND and the INCOME FUND while reducing the allocation to
the U.S. GOVERNMENT SECURITIES FUND. Overall, the allocations made during the
past 12 months benefited shareholders of the Portfolio as most fixed-income
assets reported just slightly positive results, while the FLEXIBLE INCOME
PORTFOLIO had a nearly double-digit return (not adjusted for sales charge).
OUTLOOK
The economy continues to strengthen and, although higher oil prices and wage
pressures spooked the markets, pervasive inflation has not surfaced. Consumer
spending remains strong, although the pace in consumption growth seems to be
slowing to a more sustainable level as retail sales have softened and the
housing sector has cooled. The job market is still very tight, with the
unemployment rate at a 30-year low and the economy continuing to generate new
jobs. Manufacturing has been weaker than previously expected, but very low
levels of inventories may need to be restocked, which would add to overall
output. Global growth is accelerating, but is not causing as much of an increase
in U.S. export activity as was expected. International economies are improving,
although it may be difficult to sustain the current levels of improvements in
Asia. Europe is strengthening and Latin America seems to be rebounding and is
poised for continued improvement.
The net result of strong economic growth has been fears of inflation and
corresponding increases in interest rates, which has caused equity market
volatility. We do not expect recent increases in inflation indicators to
translate into accelerating price inflation, since companies are still unable to
pass on price increases to the consumer. Strong competitive forces make it very
difficult to raise prices without sacrificing market share, while enhancements
in overall productivity have allowed firms to expand their profitability without
raising prices. This economic backdrop of strong growth and low inflation
continues to provide a positive environment for financial assets. Although
volatility could continue, our long-term outlook for both the bond and stock
market is very positive.
PORTFOLIO ALLOCATION
as of October 31, 1999++
INCOME FUND 20%
SHORT TERM HIGH QUALITY BOND FUND 20%
U.S. GOVERNMENT SECURITIES FUND 20%
GROWTH & INCOME FUND 19%
MONEY MARKET FUND 10%
GROWTH FUND 6%
HIGH YIELD FUND 5%
Note: as a percentage of investment company securities>
ASSET CLASS DIVERSIFICATION
as of October 31, 1999++
DOMESTIC STOCKS 23%
MORTGAGE BACKED 21%
SHORT-TERM BONDS 20%
CORPORATE BONDS 17%
CASH EQUIVALENTS 11%
FOREIGN BONDS 3%
TREASURIES 3%
FOREIGN STOCKS 1%
OTHER BONDS 1%
++ may not reflect current allocation
<PAGE>
- -------------
INCOME
portfolio
- -------------
growth of a $10,000 investment(5)
(class A shares)
Fund Fund
(Class A (Class A
Shares; Shares;
not adjusted Lehman
adjusted for the Brothers
for maximum Capital Aggregate
sales 4.5% sales Market Bond
charge) charge) Benchmark(1) Inflation(3) Index(2)
- ------------------------------------------------------------------------
$10,000 $ 9,550 $10,000 $10,000 $10,000
10,007 9,556 10,074 10,016 10,127
10,173 9,715 10,177 10,039 10,345
10,328 9,864 10,284 10,093 10,506
10,386 9,919 10,370 10,132 10,636
10,558 10,083 10,457 10,225 10,727
10,661 10,182 10,530 10,311 10,801
10,823 10,336 10,616 10,373 10,917
10,891 10,401 10,681 10,395 10,981
Jun 10,896 10,406 10,730 10,395 10,975
11,047 10,550 10,825 10,458 11,128
11,302 10,794 10,951 10,473 11,368
11,455 10,940 11,065 10,489 11,599
11,596 11,075 11,155 10,505 11,728
11,711 11,184 11,234 10,536 11,836
Dec 91 12,033 11,492 11,386 10,567 12,187
11,913 11,377 11,364 10,583 12,021
12,004 11,464 11,419 10,613 12,100
11,926 11,390 11,421 10,660 12,032
11,997 11,458 11,485 10,676 12,118
12,241 11,691 11,597 10,707 12,347
Jun 12,416 11,858 11,692 10,715 12,518
12,688 12,117 11,810 10,731 12,773
12,767 12,192 11,885 10,769 12,902
12,868 12,289 11,966 10,824 13,056
12,673 12,103 11,911 10,839 12,882
12,690 12,119 11,928 10,855 12,885
Dec 92 12,890 12,310 12,024 10,894 13,090
13,120 12,530 12,141 10,917 13,341
13,371 12,769 12,244 10,947 13,574
13,447 12,841 12,284 10,978 13,631
13,533 12,924 12,342 11,016 13,727
13,625 13,012 12,360 11,032 13,745
Jun 13,869 13,245 12,463 11,024 13,993
13,979 13,350 12,507 11,078 14,073
14,225 13,585 12,611 11,117 14,319
14,214 13,574 12,637 11,156 14,358
14,331 13,686 12,678 11,187 14,411
14,191 13,553 12,663 11,202 14,289
Dec 93 14,245 13,604 12,711 11,218 14,366
14,466 13,815 12,810 11,218 14,560
14,123 13,488 12,740 11,250 14,306
13,627 13,013 12,636 11,273 13,953
13,422 12,818 12,603 11,319 13,841
13,329 12,729 12,615 11,327 13,840
Jun 13,250 12,654 12,634 11,327 13,810
13,531 12,922 12,771 11,358 14,084
13,481 12,874 12,808 11,397 14,101
13,277 12,680 12,758 11,435 13,894
13,240 12,644 12,784 11,451 13,882
13,259 12,662 12,792 11,459 13,851
Dec 94 13,177 12,584 12,858 11,498 13,947
13,352 12,751 13,005 11,529 14,223
13,616 13,004 13,175 11,575 14,561
13,688 13,072 13,254 11,607 14,650
13,870 13,246 13,373 11,615 14,855
14,433 13,784 13,624 11,630 15,430
Jun 14,450 13,800 13,704 11,630 15,543
14,393 13,745 13,741 11,676 15,509
14,624 13,966 13,848 11,723 15,696
14,746 14,083 13,938 11,762 15,848
14,957 14,284 14,034 11,801 16,054
15,170 14,487 14,156 11,824 16,295
Dec 95 15,373 14,681 14,276 11,848 16,523
15,448 14,753 14,358 11,848 16,632
15,127 14,446 14,298 11,879 16,343
14,990 14,315 14,298 11,902 16,229
14,880 14,211 14,302 11,942 16,138
14,851 14,182 14,333 11,933 16,105
Jun 15,011 14,335 14,448 11,925 16,321
15,053 14,375 14,503 11,995 16,365
15,007 14,332 14,536 12,034 16,338
15,248 14,561 14,681 12,096 16,622
15,575 14,875 14,859 12,144 16,991
15,817 15,105 14,998 12,167 17,281
Dec 96 15,717 15,010 14,982 12,174 17,121
15,731 15,023 15,045 12,197 17,174
15,810 15,099 15,103 12,220 17,217
15,641 14,937 15,074 12,259 17,026
15,814 15,103 15,200 12,299 17,281
15,957 15,239 15,303 12,322 17,445
Jun 16,131 15,405 15,420 12,322 17,653
16,545 15,801 15,634 12,361 18,129
16,401 15,663 15,620 12,400 17,975
16,610 15,862 15,754 12,431 18,241
16,821 16,064 15,875 12,446 18,506
16,869 16,110 15,940 12,438 18,591
Dec 97 17,019 16,254 16,050 12,453 18,779
17,196 16,423 16,168 12,477 19,019
17,184 16,411 16,202 12,500 19,004
17,226 16,451 16,268 12,524 19,068
17,300 16,521 16,349 12,547 19,168
17,426 16,642 16,451 12,569 19,350
Jun 17,536 16,747 16,535 12,584 19,514
17,562 16,772 16,590 12,599 19,555
17,611 16,819 16,697 12,615 19,874
17,810 17,009 16,902 12,630 20,339
17,703 16,907 16,895 12,661 20,231
17,907 17,101 16,993 12,661 20,346
Dec 98 17,918 17,111 17,049 12,653 20,407
18,056 17,243 17,148 12,684 20,552
17,859 17,055 17,075 12,699 20,193
17,979 17,170 17,170 12,738 20,304
18,148 17,331 17,233 12,830 20,369
18,071 17,258 17,207 12,830 20,189
Jun 18,047 17,235 17,227 12,830 20,125
18,027 17,216 17,238 12,869 20,040
18,013 17,202 17,270 12,900 20,030
18,188 17,369 17,392 12,962 20,263
Oct 99 18,217 17,397 17,463 13,008 20,338
+ The performance of the Class B Shares was different than that shown above for
the Class A Shares, based on the difference in sales charges and fees paid by
Class B shareholders.
TOTAL RETURNS AS OF 10/31/99(5)
CLASS A SHARES
1 YEAR 5 YEAR* SINCE INCEPTION*
(SEPTEMBER 31, 1990)
Fund (not adjusted for sales
charge) 2.89% 6.82% 6.96%
---------------------------------------------------------------------------
Fund (adjusted for maximum 5.5%
sales charge) -1.71% 5.84% 6.42%
---------------------------------------------------------------------------
Capital Market Benchmark(1) 3.36% 6.44% 6.33%(1)
- --------------------------------------------------------------------------------
CLASS B SHARES
1 YEAR 5 YEAR* SINCE INCEPTION*
(JUNE 30, 1994)
Fund (not adjusted for contingent
deferred sales charge) 2.05% 5.66% 5.24%
---------------------------------------------------------------------------
Fund (adjusted for maximum
contingent deferred sales charge) -2.79% 5.50% 5.24%
---------------------------------------------------------------------------
Capital Market Benchmark(1) 3.36% 6.44% 6.26%(1)
- --------------------------------------------------------------------------------
(1) The Income Portfolio's benchmark is a blended mix of capital market indices
that are intended to represent a proxy for Portfolio performance. The
benchmark allocation is as follows: 50% Salomon Bros. 90-day T-Bill Index,
30% Lehman Bros. Mutual Fund Short (1-5) Govt/Corp Index, 10% Lehman Bros.
(MBS) Index, and 10% Lehman Bros. BAA LT Corporate Bond Index. Past
investment performance does not guarantee future performance. The returns
shown for the Portfolio assume reinvestment of all dividends/distributions
by the shareholder. For comparison purposes, the benchmark's performance is
shown as of the Portfolio's inception date not from the inception date of
the benchmark.
(2) The Lehman Brothers Aggregate Bond Index is a broad-based index intended to
represent the U.S. fixed-income market as a whole.
(3) Inflation is measured by the Consumer Price Index for all urban consumers.
(4) Annual rate of inflation: 2.66%. Source: Ibbotson Associates.
(5) All performance shown prior to the November 1, 1996, asset conversion date
(the date on which the majority of existing SAM clients voluntarily
exchanged into the new SAM Portfolios) for the Sierra Asset Management
Portfolios represents the performance of the Sierra Asset Management Account
("SAM Account"), a discretionary asset allocation service that invested in
the Sierra Trust Funds. The SAM Account was not registered as an investment
company under the Investment Company Act of 1940 ("Act") and, therefore, was
not subject to certain restrictions that the Act imposes. If the SAM Account
had been registered under the Act, its performance may have differed
significantly.
The Portfolio's performance would have been lower had the Advisor not waived
a portion of its fees or reimbursed certain other expenses, and the Fund's
custodian had not allowed its fees to be reduced by credits.
* Annualized
PERFORMANCE REVIEW
The SAM INCOME PORTFOLIO (A shares) returned 2.89% (not adjusted for sales
charge) for the 12-month period ended October 31, 1999. Long-term results have
been favorable, providing a premium over inflation. Since inception, the
Portfolio (not adjusted for sales charge) has returned 4.30% above the rate of
inflation4. The SEC Yield of the Portfolio as of October 31, 1999 was 5.28% for
A shares and 4.79% for B shares.
ECONOMIC/MARKET REVIEW
The domestic economy accelerated over the past 12 months with overall output
increasing more than 4% (for the year ended 9-30-99). Consumer spending
continued, as income increased and unemployment remained very low. Economic
growth was stronger than most analysts expected, causing inflationary concerns.
The Federal Reserve responded with two interest-rate increases during the
summer. The inflation fire was stoked by rising commodity prices throughout the
year, especially in energy, where the price of oil more than doubled from its
lowest point. Although inflation did increase somewhat, overall price pressures
remained very tame during the past year. This is important to the performance of
financial assets, as weak inflation is very positive for fixed-income
securities.
Fixed-income assets were negatively affected by rising interest rates throughout
the past 12 months. Interest rates rose across the board, with the yield on the
30-year Treasury bond increasing more than 100 basis points (1%). Shorter-term
assets provided the best results, because their prices are less sensitive to
changes in interest rates. Long-term Treasuries reported negative performance
for the period, with mortgage-backed securities generally outperforming Treasury
bonds with similar maturities. Higher-yielding corporate bonds performed very
well during the year, as performance was bolstered by strong economic conditions
in the U.S. Overall, most fixed-income assets saw price declines that offset
some of the income earned throughout the period.
INVESTMENT STRATEGY
The INCOME PORTFOLIO is diversified among five WM Funds, representing six major
asset classes. The combination of asset classes increases our ability to manage
risk over a long-term investment horizon. Asset classes ranging in risk levels
from short-term money market instruments to high-yield bonds are intended to
shield the Portfolio from drastic swings in any specific area of the
fixed-income markets.
The overall investment strategy for the period was to:
o Reallocate the fixed-income fund assets to include a position in
higher-yielding corporate bonds to generate income.
o Focus core fixed-income holdings on high-quality issues during the second half
of 1999.
o Reduce exposure to Treasuries while increasing concentration in
mortgage-backed securities.
REVIEW OF PORTFOLIO ALLOCATIONS
The major strategies of the past year were to manage risk levels and generate
income by concentrating assets in shorter-term securities and increasing
high-yield debt exposure. We initiated a position in the HIGH YIELD FUND, which
was the best performing fixed-income fund, and contributed to overall
performance in addition to income levels generated by the Portfolio. This Fund
is less affected by changes in interest rates and benefits from economic
strength. We slightly reduced the positions in the SHORT TERM HIGH QUALITY BOND
FUND and the U.S. GOVERNMENT SECURITIES FUNDS to make the move into high-yield
bonds. We maintained our core position in the INCOME FUND (30%) as its corporate
holdings provided positive results during the period. The net results of the
allocations throughout the year were an overall reduction in Treasury bonds and
an increase in the allocation of mortgage-backed securities. This helped
generate additional income as well as some relative performance strength.
Overall, the Portfolio reported positive results as the income generated by the
securities in the portfolio offset the falling prices caused by a steep rise in
interest rates.
OUTLOOK
The economy continues to strengthen and, although higher oil prices and wage
pressures spooked the markets, pervasive inflation has not surfaced. Consumer
spending remains strong, although the pace in consumption growth seems to be
slowing to a more sustainable level as retail sales have softened and the
housing sector has cooled. The job market is still very tight, with the
unemployment rate at a 30-year low and the economy continuing to generate new
jobs. Manufacturing has been weaker than previously expected, but very low
levels of inventories may need to be restocked, which would add to overall
output.
The net result of strong economic growth has been fears of inflation and
corresponding increases in interest rates, which have caused increased market
volatility. We do not expect recent increases in inflation indicators to
translate into accelerating price inflation, since companies are still unable to
pass on price increases to the consumer. Strong competitive forces make it very
difficult to raise prices without sacrificing market share, while enhancements
in overall productivity have allowed firms to expand their profitability without
raising prices. Because of this, our long-term outlook for interest rates, and
therefore, the bond market, is very positive.
Although short-term volatility could continue, the economic backdrop of lower
interest rates and low inflation provides a positive environment for all
fixed-income assets.
PORTFOLIO ALLOCATION
as of October 31, 1999++
U.S. GOVERNMENT SECURITIES FUND 35%
INCOME FUND 30%
SHORT TERM HIGH QUALITY BOND FUND 15%
HIGH YIELD FUND 10%
MONEY MARKET FUND 10%
Note: as a percentage of investment company securities
ASSET CLASS DIVERSIFICATION
as of October 31, 1999++
MORTGAGE BACKED 36%
CORPORATE BONDS 27%
SHORT-TERM BONDS 15%
CASH EQUIVALENTS 12%
FOREIGN BONDS 5%
TREASURIES 5%
++ may not reflect current allocation
<PAGE>
STATEMENTS of ASSETS and LIABILITIES
WM GROUP OF FUNDS
OCTOBER 31, 1999
<TABLE>
<CAPTION>
STRATEGIC CONSERVATIVE FLEXIBLE
GROWTH GROWTH BALANCED INCOME INCOME
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
ASSETS
Investments, at value
(See portfolios of
investments) (a) ........ $204,579,599 $512,821,671 $568,372,352 $241,134,778 $20,543,973
Cash ...................... 394 251 628 938,894 5,024
Dividends and/or interest
receivable .............. 196 1,220 1,587 2,806 133
Receivable for Fund
shares sold ............. 1,086,712 2,206,417 5,224,708 803,883 242,586
Unamortized organization
costs ................... 15,052 15,052 15,052 15,052 15,052
Receivable from investment
advisor ................. -- -- -- -- 238
Prepaid expenses and other
assets .................. 1,208 4,151 3,269 314 202
------------ ------------ ------------ ------------ -----------
Total Assets .......... 205,683,161 515,048,762 573,617,596 242,895,727 20,807,208
------------ ------------ ------------ ------------ -----------
LIABILITIES:
Payable for Fund shares
redeemed ................ 206,462 675,396 1,192,319 1,415,417 3,135
Payable for investment
securities purchased .... -- 192,252 689,628 -- --
Investment advisory fee
payable ................. 24,750 62,473 69,899 15,525 --
Administration fee payable 82,501 208,243 232,996 102,410 8,745
Shareholder servicing and
distribution fees payable 119,273 263,266 258,581 80,230 12,932
Dividends payable ......... -- -- 6,832 15,150 23,810
Printing and postage fees
payable ................. 25,055 47,242 50,193 20,169 2,238
Accrued legal and audit fees 12,517 15,886 14,893 11,265 11,008
Accrued expenses and other
payables ................ 12,393 23,522 24,635 10,361 5,824
------------ ------------ ------------ ------------ -----------
Total Liabilities ..... 482,951 1,488,280 2,539,976 1,670,527 67,692
------------ ------------ ------------ ------------ -----------
NET ASSETS ................ $205,200,210 $513,560,482 $571,077,620 $241,225,200 $20,739,516
============ ============ ============ ============ ===========
-----------
- ---------------------
(a) Investments, at cost .. $173,151,236 $431,775,779 $528,593,067 $245,582,774 $20,932,057
============ ============ ============ ============ ===========
See Notes to Financial Statements.
</TABLE>
<PAGE>
STATEMENTS of ASSETS and LIABILITIES (continued)
WM GROUP OF FUNDS
OCTOBER 31, 1999
<TABLE>
<CAPTION>
STRATEGIC CONSERVATIVE FLEXIBLE
GROWTH GROWTH BALANCED INCOME INCOME
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
NET ASSETS CONSIST OF:
Undistributed net investment
income .................. $ 1 $ -- $ 205,259 $ 65,147 $ 6,008
Accumulated net realized
gain/(loss) on investments
sold .................... (600,452) (1,071,575) (1,136,262) 563,851 (23,699)
Net unrealized appreciation/
(depreciation) of
investments ............ 31,428,363 81,045,892 39,779,285 (4,447,996) (388,084)
Paid-in capital ........... 174,372,298 433,586,165 532,229,338 245,044,198 21,145,291
------------ ------------ ------------ ------------ -----------
Total Net Assets ...... $205,200,210 $513,560,482 $571,077,620 $241,225,200 $20,739,516
============ ============ ============ ============ ===========
NET ASSETS:
Class A Shares ............ $ 74,677,922 $249,649,511 $333,639,142 $194,403,968 $ 7,296,575
============ ============ ============ ============ ===========
Class B Shares ............ $130,522,288 $263,910,971 $237,438,478 $ 46,821,232 $13,442,941
============ ============ ============ ============ ===========
SHARES OUTSTANDING:
Class A Shares ............ 5,110,529 18,594,169 27,305,754 18,092,408 734,060
============ ============ ============ ============ ===========
Class B Shares ............ 9,064,445 19,970,568 19,447,138 4,357,471 1,352,362
============ ============ ============ ============ ===========
CLASS A SHARES:
Net asset value per share of
beneficial interest
outstanding* ............ $ 14.61 $ 13.43 $ 12.22 $ 10.75 $ 9.94
============ ============ ============ ============ ===========
Maximum sales charge ...... 5.50% 5.50% 5.50% 4.50% 4.50%
============ ============ ============ ============ ===========
Maximum offering price per
share of beneficial
interest outstanding .... $ 15.46 $ 14.21 $ 12.93 $ 11.26 $ 10.41
============ ============ ============ ============ ===========
CLASS B SHARES:
Net asset value and offering
price per share of
beneficial interest
outstanding* ............ $ 14.40 $ 13.21 $ 12.21 $ 10.75 $ 9.94
============ ============ ============ ============ ===========
- --------------
* Redemption price per share is equal to net asset value per share less any applicable contingent deferred sales
charge.
See Notes to Financial Statements.
</TABLE>
<PAGE>
STATEMENTS of OPERATIONS
WM GROUP OF FUNDS
FOR THE YEAR ENDED OCTOBER 31, 1999
<TABLE>
<CAPTION>
STRATEGIC CONSERVATIVE FLEXIBLE
GROWTH GROWTH BALANCED INCOME INCOME
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends ................. $ 1,075,667 $ 5,266,229 $ 8,845,963 $ 4,654,794 $ 1,211,042
Interest .................. 34,615 113,228 119,411 32,393 13,713
------------ ------------ ------------ ------------ -----------
Total investment income 1,110,282 5,379,457 8,965,374 4,687,187 1,224,755
------------ ------------ ------------ ------------ -----------
EXPENSES:
Investment advisory fee ... 193,472 538,570 500,484 144,701 27,945
Administration fee ........ 644,908 1,795,234 1,668,282 482,338 93,149
Custodian fees ............ 1,804 3,117 3,150 2,048 1,302
Legal and audit fees ...... 16,622 31,570 26,662 11,453 10,622
Amortization of organization
costs ................... 9,030 9,030 9,030 9,030 9,030
Registration and filing fees 29,466 22,671 27,440 22,657 19,777
Other ..................... 116,564 255,546 221,384 56,109 13,743
Shareholder servicing and
distribution fees:
Class A Shares .......... 102,558 385,654 430,661 172,260 19,620
Class B Shares .......... 879,586 2,047,854 1,613,921 275,634 107,819
Transfer agent fees:
Class A Shares .......... 24,269 68,218 85,193 37,006 4,354
Class B Shares .......... 55,652 91,713 79,453 13,187 5,260
Fees waived and/or expenses
reimbursed by investment
advisor ................. (25,530) (49,644) (34,597) (54,603) (45,995)
------------ ------------ ------------ ------------ -----------
Total expenses ........ 2,048,401 5,199,533 4,631,063 1,171,820 266,626
Fees reduced by credits
allowed by the custodian (551) (1,267) (903) (553) (274)
------------ ------------ ------------ ------------ -----------
Net expenses .......... 2,047,850 5,198,266 4,630,160 1,171,267 266,352
------------ ------------ ------------ ------------ -----------
NET INVESTMENT INCOME/(LOSS) (937,568) 181,191 4,335,214 3,515,920 958,403
------------ ------------ ------------ ------------ -----------
NET REALIZED AND UNREALIZED
GAIN/(LOSS)ON INVESTMENTS:
Net realized gain/ (loss)
on investments .......... 201,044 (30,780) 3,638,526 864,625 (18,781)
Capital gain distribution
received ................ 3,004,756 9,527,211 5,459,522 116,398 12,184
Net change in unrealized
appreciation/(depreciation)
of investments .......... 31,876,169 84,143,303 40,975,531 (4,468,412) (558,256)
------------ ------------ ------------ ------------ -----------
Net realized and unrealized
gain/(loss) on investments 35,081,969 93,639,734 50,073,579 (3,487,389) (564,853)
------------ ------------ ------------ ------------ -----------
NET INCREASE IN NET
ASSETS RESULTING FROM
OPERATIONS .............. $ 34,144,401 $ 93,820,925 $ 54,408,793 $ 28,531 $ 393,550
============ ============ ============ ============ ===========
See Notes to Financial Statements.
</TABLE>
<PAGE>
STATEMENTS of CHANGES in NET assets
WM GROUP OF FUNDS
FOR THE YEAR ENDED OCTOBER 31, 1999
<TABLE>
<CAPTION>
STRATEGIC CONSERVATIVE FLEXIBLE
GROWTH GROWTH BALANCED INCOME INCOME
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------ ------------ ------------ ------------ -----------
<S> <C> <C> <C> <C> <C>
Net investment income/(loss) $ (937,568) $ 181,191 $ 4,335,214 $ 3,515,920 $ 958,403
Net realized gain/(loss) on
investments ............. 201,044 (30,780) 3,638,526 864,625 (18,781)
Capital gain distribution
received ................ 3,004,756 9,527,211 5,459,522 116,398 12,184
Net change in unrealized
appreciation/(depreciation)
of investments .......... 31,876,169 84,143,303 40,975,531 (4,468,412) (558,256)
------------ ------------ ------------ ------------ -----------
Net increase in net assets
resulting from operations 34,144,401 93,820,925 54,408,793 28,531 393,550
Distributions to shareholders
from:
Net investment income:
Class A Shares .......... (107,238) (1,038,646) (3,390,680) (2,705,301) (447,960)
Class B Shares .......... (235,957) (1,236,501) (2,695,097) (910,233) (517,023)
Distributions in excess of
net investment income:
Class A Shares .......... (592,113) (2,709,359) (1,357,621) (9,717) (5,133)
Class B Shares .......... (1,269,569) (3,596,734) (1,271,937) (3,887) (7,053)
Net realized gain on
investments:
Class A Shares .......... (1,864,169) (8,005,825) (8,213,824) (373,109) (11,412)
Class B Shares .......... (5,092,714) (13,002,709) (11,040,671) (573,961) (10,095)
Net increase/(decrease)
in net assets from
Fund share transactions:
Class A Shares .......... 48,320,715 125,283,751 229,975,091 189,252,311 (73,395)
Class B Shares .......... 60,455,368 68,957,442 110,546,761 35,612,391 8,108,750
------------ ------------ ------------ ------------ -----------
Net increase in net assets 133,758,724 258,472,344 366,960,815 220,317,025 7,430,229
NET ASSETS:
Beginning of year ......... 71,441,486 255,088,138 204,116,805 20,908,175 13,309,287
------------ ------------ ------------ ------------ -----------
End of year ............... $205,200,210 $513,560,482 $571,077,620 $241,225,200 $20,739,516
============ ============ ============ ============ ===========
Undistributed net investment
income at end of year ... $ 1 $ -- $ 205,259 $ 65,147 $ 6,008
============ ============ ============ ============ ===========
See Notes to Financial Statements.
</TABLE>
<PAGE>
STATEMENTS of CHANGES in NET assets (continued)
WM GROUP OF FUNDS(a)
FOR THE PERIOD ENDED OCTOBER 31, 1998
<TABLE>
<CAPTION>
STRATEGIC CONSERVATIVE FLEXIBLE
GROWTH GROWTH BALANCED INCOME INCOME
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------ ------------ ------------ ------------ -----------
<S> <C> <C> <C> <C> <C>
Net investment income/(loss) $ (247,331) $ (354,452) $ 563,094 $ 191,559 $ 207,716
Net realized gain/(loss) on
investments ............. (64,796) (761,954) 83,566 55,085 41,770
Net change in unrealized
depreciation of investments (5,346,706) (20,541,582) (11,355,763) (240,391) (148,281)
------------ ------------ ------------ ------------ -----------
Net increase/(decrease) in
net assets resulting
from operations ......... (5,658,833) (21,657,988) (10,709,103) 6,253 101,205
Distributions to shareholders
from:
Net investment income:
Class A Shares .......... -- --
(389,135) (108,577) (139,418)
Class B Shares .......... -- --
(174,108) (81,407) (68,390)
Net increase/(decrease) in
net assets from
Fund share transactions:
Class A Shares .......... 2,756,174 (6,408,482) (2,997,578) 1,068,611 (113,235)
Class B Shares .......... 4,840,772 (1,061,147) 1,717,446 3,531,424 1,651,308
------------ ------------ ------------ ------------ -----------
Net increase/ decrease) in
net assets .............. 1,938,113 (29,127,617) (12,552,478) 4,416,304 1,431,470
NET ASSETS:
Beginning of period ....... 69,503,373 284,215,755 216,669,283 16,491,871 11,877,817
------------ ------------ ------------ ------------ -----------
End of period ............. $ 71,441,486 $255,088,138 $204,116,805 $ 20,908,175 $13,309,287
============ ============ ============ ============ ===========
Undistributed net investment
income at end of period . $ 343,195 $ 2,093,956 $ 1,750,563 $ 99,614 $ 6,580
============ ============ ============ ============ ===========
- ----------------
(a) Fiscal year end changed to October 31 from June 30. The amounts reflected are for the period July 1, 1998
through October 31, 1998.
See Notes to Financial Statements.
</TABLE>
<PAGE>
STATEMENTS of CHANGES in NET assets (continued)
WM GROUP OF FUNDS
FOR THE YEAR ENDED JUNE 30, 1998
<TABLE>
<CAPTION>
STRATEGIC CONSERVATIVE FLEXIBLE
GROWTH GROWTH BALANCED INCOME INCOME
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------ ------------ ------------ ------------ -----------
<S> <C> <C> <C> <C> <C>
Net investment income/(loss) $ (327,265) $ 2,141,908 $ 3,795,331 $ 666,597 $ 919,616
Net realized gain/(loss) on
investments ............. 70,811 634,997 1,600,513 180,143 (146)
Capital gain distribution
received ................ 8,834,729 29,135,400 21,083,866 950,791 --
Net change in unrealized
appreciation of investments 2,307,572 7,816,736 1,378,617 38,924 368,927
------------ ------------ ------------ ------------ -----------
Net increase in net
assets resulting from
operations .............. 10,885,847 39,729,041 27,858,327 1,836,455 1,288,397
Distributions to
shareholders from:
Net investment income:
Class A Shares .......... --
(974,521) (2,029,043) (390,981) (687,206)
Class B Shares .......... --
(1,167,578) (1,843,104) (296,913) (250,566)
Distributions in excess of
net investment income:
Class A Shares .......... (950,866) (4,768,523) (4,295,670) (200,387) (979)
Class B Shares .......... (2,366,606) (5,713,185) (3,902,019) (152,174) (357)
Net realized gains on
investments:
Class A Shares .......... (53,136) (709,436) (1,050,143) (218,896) --
Class B Shares .......... (140,517) (922,315) (1,095,753) (167,811) --
Net increase/(decrease) in
net assets from
Fund share transactions:
Class A Shares .......... 2,069,016 (32,508,160) (14,387,577) (4,062,849) (5,873,876)
Class B Shares .......... 10,004,844 (3,587,306) 8,172,018 147,178 (544,041)
------------ ------------ ------------ ------------ -----------
Net increase/(decrease) in
net assets .............. 19,448,582 (10,621,983) 7,427,036 (3,506,378) (6,068,628)
NET ASSETS:
Beginning of year ......... 50,054,791 294,837,738 209,242,247 19,998,249 17,946,445
------------ ------------ ------------ ------------ -----------
End of year ............... $ 69,503,373 $284,215,755 $216,669,283 $ 16,491,871 $11,877,817
============ ============ ============ ============ ===========
Undistributed net investment
income at end of year ... $ 343,195 $ 2,093,956 $ 1,751,125 $ 96,037 $ 4,670
============ ============ ============ ============ ===========
See Notes to Financial Statements
</TABLE>
<PAGE>
STATEMENTS of CHANGES in NET assets -- CAPITAL stock ACTIVITY
WM GROUP OF FUNDS
<TABLE>
<CAPTION>
STRATEGIC GROWTH PORTFOLIO CONSERVATIVE GROWTH PORTFOLIO
--------------------------------------------- ---------------------------------------------
YEAR ENDED PERIOD ENDED YEAR ENDED YEAR ENDED PERIOD ENDED YEAR ENDED
10/31/99 10/31/98(a) 06/30/98 10/31/99 10/31/98(a) 06/30/98
-------- ----------- -------- -------- ----------- --------
<S> <C> <C> <C> <C> <C> <C>
AMOUNT
CLASS A:
Sold ......................... $ 98,311,574 $ 4,093,087 $ 7,185,762 $ 36,408,180 $ 3,500,446 $ 16,883,750
Contribution in-kind (Note 1) 32,378,262 -- -- 114,020,652 -- --
Issued as reinvestment of
dividends .................... 2,539,601 -- 985,685 11,559,002 -- 6,378,314
Redeemed ..................... (84,908,722) (1,336,913) (6,102,431) (36,704,083) (9,908,928) (55,770,224)
-------------- -------------- ------------- -------------- ------------- -------------
Net increase/(decrease) ...... $ 48,320,715 $ 2,756,174 $ 2,069,016 $125,283,751 $ (6,408,482) $(32,508,160)
============= ============ ============ ============ ============= ============
CLASS B:
Sold ......................... $181,187,449 $ 8,406,722 $ 16,349,909 $ 94,691,081 $ 12,766,400 $ 29,916,859
Issued as reinvestment of
dividends .................... 6,458,074 -- 2,469,178 17,500,095 -- 7,663,465
Redeemed ..................... (127,190,155) (3,565,950) (8,814,243) (43,233,734) (13,827,547) (41,167,630)
-------------- -------------- ------------- -------------- ------------- -------------
Net increase/(decrease) ...... $ 60,455,368 $ 4,840,772 $10,004,844 $ 68,957,442 $ (1,061,147) $ (3,587,306)
============= ============ ============ ============ ============= ============
SHARES
CLASS A:
Sold ......................... 6,888,775 353,399 602,394 2,909,519 320,925 1,496,544
Contribution in-kind (Note 1) 2,214,655 -- -- 8,509,004 -- --
Issued as reinvestment of
dividends .................... 205,455 -- 93,688 1,017,836 -- 628,647
Redeemed ..................... (5,885,943) (114,051) (513,861) (2,959,104) (909,242) (4,959,288)
-------------- -------------- ------------- -------------- ------------- -------------
Net increase/(decrease) ...... 3,422,942 239,348 182,221 9,477,255 (588,317) (2,834,097)
============= ============ ============ ============ ============= ============
CLASS B:
Sold ......................... 12,957,573 731,727 1,392,992 7,693,451 1,219,668 2,663,779
Issued as reinvestment of
dividends .................... 525,313 -- 236,345 1,547,745 -- 758,711
Redeemed ..................... (8,911,255) (323,112) (743,910) (3,566,510) (1,343,665) (3,691,585)
-------------- -------------- ------------- -------------- ------------- -------------
Net increase/(decrease) ...... 4,571,631 408,615 885,427 5,674,686 (123,997) (269,095)
============= ============ ============ ============ ============= ============
- ----------------
(a) Fiscal year end changed to October 31 from June 30. The amounts reflected are for the period July 1, 1998 through October 31,
1998.
See Notes to Financial Statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
BALANCED PORTFOLIO FLEXIBLE INCOME PORTFOLIO INCOME PORTFOLIO
- ------------------------------------------ ------------------------------------------ ----------------------------------------
YEAR ENDED PERIOD ENDED YEAR ENDED YEAR ENDED PERIOD ENDED YEAR ENDED YEAR ENDED PERIOD ENDED YEAR ENDED
10/31/99 10/31/98(a) 06/30/98 10/31/99 10/31/98(a) 06/30/98 10/31/99 10/31/98(a) 06/30/98
- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 44,514,028 $ 5,387,129 $ 19,339,371 $ 8,898,276 $ 1,695,735 $ 1,432,574 $ 3,483,186 $ 520,319 $ 1,269,248
221,368,654 -- -- 213,729,146 -- -- -- -- --
12,792,803 379,722 7,178,526 2,987,879 102,837 794,058 238,112 65,592 352,767
(48,700,394) (8,764,429) (40,905,474) (36,362,990) (729,961) (6,289,481) (3,794,693) (699,146) (7,495,891)
- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ---------- ------------
$229,975,091 $ (2,997,578) $(14,387,577) $189,252,311 $ 1,068,611 $ (4,062,849) $ (73,395) $ (113,235) $ (5,873,876)
============ ============ ============ ============ ============ ============ ============ ========== ============
$137,812,380 $ 12,689,247 $ 27,242,146 $ 44,201,324 $ 3,993,004 $ 1,998,856 $ 12,710,412 $1,926,369 $ 1,358,238
14,729,178 169,403 6,704,966 1,391,288 74,833 535,294 424,051 54,623 186,208
(41,994,797) (11,141,204) (25,775,094) (9,980,221) (536,413) (2,386,972) (5,025,713) (329,684)
- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ---------- ------------
$110,546,761 $ 1,717,446 $ 8,172,018 $ 35,612,391 $ 3,531,424 $ 147,178 $ 8,108,750 $1,651,308 $ (544,041)
============ ============ ============ ============ ============ ============ ============ ========== ============
3,776,656 495,626 1,719,960 822,244 162,071 134,118 344,897 50,467 123,065
18,056,171 -- -- 19,483,058 -- -- -- -- --
1,130,113 35,208 676,566 279,908 9,780 75,144 23,554 6,367 34,204
(4,141,436) (796,592) (3,640,170) (3,411,942) (69,274) (586,227) (376,831) (67,860) (727,213)
- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ---------- ------------
18,821,504 (265,758) (1,243,644) 17,173,268 102,577 (376,965) (8,380) (11,026) (569,944)
============ ============ ============ ============ ============ ============ ============ ========== ============
11,686,498 1,157,429 2,426,948 4,103,474 380,195 185,916 1,252,218 187,661 131,591
1,296,525 15,550 635,623 129,523 7,114 50,797 42,095 5,303 18,089
(3,575,735) (1,020,050) (2,292,460) (924,028) (51,101) (223,256) (497,805) (31,983) (202,516)
- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ---------- ------------
9,407,288 152,929 770,111 3,308,969 336,208 13,457 796,508 160,981 (52,836)
============ ============ ============ ============ ============ ============ ============ ========== ============
See Notes to Financial Statements
</TABLE>
<PAGE>
FINANCIAL highlights
STRATEGIC GROWTH PORTFOLIO
FOR A PORTFOLIO SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<TABLE>
<CAPTION>
INCOME FROM INVESTMENT OPERATIONS LESS DISTRIBUTIONS
--------------------------------- ----------------------------------------------------------
NET REALIZED DISTRIBUTIONS
NET AND DIVIDENDS IN EXCESS DISTRIBUTIONS
ASSET VALUE, NET UNREALIZED TOTAL FROM FROM NET OF NET FROM
BEGINNING INVESTMENT GAIN/(LOSS) INVESTMENT INVESTMENT INVESTMENT NET REALIZED TOTAL
OF PERIOD INCOME/(LOSS) ON INVESTMENTS OPERATIONS INCOME INCOME CAPITAL GAINS DISTRIBUTIONS
----------- ------------ ------------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CLASS A
10/31/99 $11.67 $(0.03)++ $ 4.36 $ 4.33 $(0.22) $(0.19) $(0.98) $(1.39)
10/31/98(c) 12.66 (0.02)++ (0.97) (0.99) -- -- -- --
06/30/98 11.26 0.00#++ 2.12 2.12 -- (0.68) (0.04) (0.72)
06/30/97* 10.00 (0.02)++ 1.90 1.88 -- (0.62) (0.00)# (0.62)
CLASS B
10/31/99 11.52 (0.13)++ 4.31 4.18 (0.13) (0.19) (0.98) (1.30)
10/31/98(c) 12.53 (0.05)++ (0.96) (1.01) -- -- -- --
06/30/98 11.19 (0.09)++ 2.11 2.02 -- (0.64) (0.04) (0.68)
06/30/97* 10.00 (0.10)++ 1.90 1.80 -- (0.61) (0.00)# (0.61)
- ----------------
* The Portfolio's Class A and Class B shares commenced operations on July 25, 1996.
** Annualized.
# Amount represents less than $0.01 per share.
+ Total return is not annualized for periods less than one year and does not reflect any applicable sales charges. The total
return would have been lower if certain fees had not been waived and expenses reimbursed by the investment advisor or if fees
had not been reduced by credits allowed by the custodian.
++ Per share numbers have been calculated using the average shares method.
(a) The Portfolio also will indirectly bear its prorated share of expenses of the Underlying Funds.
(b) Ratio of operating expenses to average net assets includes expenses paid indirectly.
(c) Fiscal year end changed to October 31 from June 30.
See Notes to Financial Statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA
------------------------------------------------------------------------------------------
RATIO OF OPERATING
EXPENSES TO
AVERAGE NET ASSETS
WITHOUT FEE
RATIO OF RATIO OF WAIVERS, EXPENSES
OPERATING NET INVESTMENT REIMBURSED AND/OR
NET NET ASSETS, EXPENSES TO INCOME/(LOSS) PORTFOLIO FEES REDUCED BY
ASSET VALUE, TOTAL END OF PERIOD AVERAGE NET TO AVERAGE TURNOVER CREDITS ALLOWED BY
END OF PERIOD RETURN+ (IN 000'S) ASSETS(a)(b) NET ASSETS RATE THE CUSTODIAN(a)
------------- ------- ---------- ------------ ---------- ---- ----------------
<S> <C> <C> <C> <C> <C> <C>
$14.61 39.55 % $ 74,678 1.07% (0.21)% 20% 1.09%
11.67 (7.82)% 19,690 0.95%** (0.53)%** 10% 1.13%**
12.66 20.11 % 18,330 0.94% 0.01 % 23% 1.08%
11.26 19.33 % 14,253 0.90%** (0.19)%** 33% 1.45%**
14.40 38.60 % 130,522 1.83% (0.97)% 20% 1.85%
11.52 (8.06)% 51,752 1.70%** (1.28)%** 10% 1.88%**
12.53 19.24 % 51,173 1.68% (0.74)% 23% 1.83%
11.19 18.48 % 35,802 1.65%** (0.94)%** 33% 2.20%**
See Notes to Financial Statements
</TABLE>
<PAGE>
FINANCIAL highlights
CONSERVATIVE GROWTH PORTFOLIO
FOR A PORTFOLIO SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<TABLE>
<CAPTION>
INCOME FROM INVESTMENT OPERATIONS LESS DISTRIBUTIONS
--------------------------------- ------------------------------------------------------
NET REALIZED DISTRIBUTIONS
NET AND DIVIDENDS IN EXCESS DISTRIBUTIONS
ASSET VALUE, NET UNREALIZED TOTAL FROM FROM NET OF NET FROM
BEGINNING INVESTMENT GAIN/(LOSS) INVESTMENT INVESTMENT INVESTMENT NET REALIZED TOTAL
OF PERIOD INCOME/(LOSS) ON INVESTMENTS OPERATIONS INCOME INCOME CAPITAL GAINS DISTRIBUTIONS
----------- ------------ ------------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CLASS A
10/31/99 $10.97 $ 0.06++ $ 3.70 $ 3.76 $(0.20) $(0.22) $(0.88) $(1.30)
10/31/98(c) 11.84 0.01 (0.88) (0.87) -- -- -- --
06/30/98 10.86 0.13++ 1.42 1.55 (0.09) (0.42) (0.06) (0.57)
06/30/97* 10.00 0.08++ 1.32 1.40 (0.08) (0.46) -- (0.54)
CLASS B
10/31/99 10.85 (0.03)++ 3.61 3.58 (0.13) (0.21) (0.88) (1.22)
10/31/98(c) 11.74 (0.03) (0.86) (0.89) -- -- -- --
06/30/98 10.80 0.04++ 1.43 1.47 (0.08) (0.39) (0.06) (0.53)
06/30/97* 10.00 0.01++ 1.31 1.32 (0.01) (0.51) -- (0.52)
- ----------------
* The Portfolio's Class A and Class B shares commenced operations on July 25, 1996.
** Annualized.
+ Total return is not annualized for periods less than one year and does not reflect any applicable sales charges. The total
return would have been lower if certain fees had not been waived and expenses reimbursed by the investment advisor or if fees
had not been reduced by credits allowed by the custodian.
++ Per share numbers have been calculated using the average shares method.
(a) The Portfolio also will indirectly bear its prorated share of expenses of the Underlying Funds.
(b) Ratio of operating expenses to average net assets includes expenses paid indirectly.
(c) Fiscal year end changed to October 31 from June 30.
See Notes to Financial Statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA
------------------------------------------------------------------------------------------
RATIO OF OPERATING
EXPENSES TO
AVERAGE NET ASSETS
WITHOUT FEE
RATIO OF RATIO OF WAIVERS, EXPENSES
OPERATING NET INVESTMENT REIMBURSED AND/OR
NET NET ASSETS, EXPENSES TO INCOME/(LOSS) PORTFOLIO FEES REDUCED BY
ASSET VALUE, TOTAL END OF PERIOD AVERAGE NET TO AVERAGE TURNOVER CREDITS ALLOWED BY
END OF PERIOD RETURN+ (IN 000'S) ASSETS(a)(b) NET ASSETS RATE THE CUSTODIAN(a)
------------- ------- ---------- ------------ ---------- ---- ----------------
<S> <C> <C> <C> <C> <C> <C>
$13.43 36.54 % $249,650 1.02% 0.48 % 16% 1.03%
10.97 (7.35)% 100,024 0.95%** 0.05 %** 9% 1.03%**
11.84 15.18 % 114,946 0.95% 1.17 % 28% 1.00%
10.86 14.39 % 136,141 0.92%** 0.81 %** 20% 1.17%**
13.21 34.98 % 263,911 1.77% (0.27)% 16% 1.78%
10.85 (7.58)% 155,064 1.70%** (0.70)%** 9% 1.78%**
11.74 14.44 % 169,269 1.70% 0.40 % 28% 1.74%
10.80 13.59 % 158,697 1.67%** 0.06 %** 20% 1.92%**
See Notes to Financial Statements
</TABLE>
<PAGE>
FINANCIAL highlights
BALANCED PORTFOLIO
FOR A PORTFOLIO SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<TABLE>
<CAPTION>
INCOME FROM INVESTMENT OPERATIONS LESS DISTRIBUTIONS
--------------------------------- -------------------------------------------------------
NET REALIZED DISTRIBUTIONS
NET AND DIVIDENDS IN EXCESS DISTRIBUTIONS
ASSET VALUE, NET UNREALIZED TOTAL FROM FROM NET OF NET FROM
BEGINNING INVESTMENT GAIN/(LOSS) INVESTMENT INVESTMENT INVESTMENT NET REALIZED TOTAL
OF PERIOD INCOME/(LOSS) ON INVESTMENTS OPERATIONS INCOME INCOME CAPITAL GAINS DISTRIBUTIONS
----------- ------------ ------------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CLASS A
10/31/99 $11.02 $ 0.19++ $ 2.39 $ 2.58 $(0.35) $(0.09) $(0.94) $(1.38)
10/31/98(c) 11.63 0.05 (0.61) (0.56) (0.05) -- -- (0.05)
06/30/98 10.95 0.22 1.25 1.47 (0.23) (0.45) (0.11) (0.79)
06/30/97* 10.00 0.20++ 1.27 1.47 (0.20) (0.32) (0.00)# (0.52)
CLASS B
10/31/99 11.02 0.11++ 2.38 2.49 (0.27) (0.09) (0.94) (1.30)
10/31/98(c) 11.63 0.02 (0.61) (0.59) (0.02) -- -- (0.02)
06/30/98 10.95 0.17 1.22 1.39 (0.20) (0.40) (0.11) (0.71)
06/30/97* 10.00 0.14++ 1.25 1.39 (0.14) (0.30) (0.00)# (0.44)
- ----------------
* The Portfolio's Class A and Class B shares commenced operations on July 25, 1996.
** Annualized.
# Amount represents less than $0.01 per share.
+ Total return is not annualized for periods less than one year and does not reflect any applicable sales charges. The total
return would have been lower if certain fees had not been waived and expenses reimbursed by the investment advisor or if fees
had not been reduced by credits allowed by the custodian.
++ Per share numbers have been calculated using the average shares method.
(a) The Portfolio also will indirectly bear its prorated share of expenses of the Underlying Funds.
(b) Ratio of operating expenses to average net assets includes expenses paid indirectly.
(c) Fiscal year end changed to October 31 from June 30.
See Notes to Financial Statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA
------------------------------------------------------------------------------------------
RATIO OF OPERATING
EXPENSES TO
AVERAGE NET ASSETS
WITHOUT FEE
RATIO OF RATIO OF WAIVERS, EXPENSES
OPERATING NET INVESTMENT REIMBURSED AND/OR
NET NET ASSETS, EXPENSES TO INCOME/(LOSS) PORTFOLIO FEES REDUCED BY
ASSET VALUE, TOTAL END OF PERIOD AVERAGE NET TO AVERAGE TURNOVER CREDITS ALLOWED BY
END OF PERIOD RETURN+ (IN 000'S) ASSETS(a)(b) NET ASSETS RATE THE CUSTODIAN(a)
------------- ------- ---------- ------------ ---------- ---- ----------------
<S> <C> <C> <C> <C> <C> <C>
$12.22 25.16 % $333,639 1.03% 1.66% 39% 1.04%
11.02 (4.85)% 93,491 0.95%** 1.22%** 3% 1.02%**
11.63 14.32 % 101,726 0.95% 2.14% 29% 1.00%
10.95 15.02 % 109,421 0.92%** 2.48%** 46% 1.17%**
12.21 24.22 % 237,438 1.77% 0.92% 39% 1.78%
11.02 (5.09)% 110,626 1.70%** 0.47%** 3% 1.77%**
11.63 13.47 % 114,944 1.70% 1.39% 29% 1.75%
10.95 14.23 % 99,821 1.67%** 1.73%** 46% 1.92%**
See Notes to Financial Statements
</TABLE>
<PAGE>
FINANCIAL highlights
FLEXIBLE INCOME PORTFOLIO
FOR A PORTFOLIO SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<TABLE>
<CAPTION>
INCOME FROM INVESTMENT OPERATIONS LESS DISTRIBUTIONS
--------------------------------- ---------------------------------------------------
NET REALIZED DISTRIBUTIONS
NET AND DIVIDENDS IN EXCESS DISTRIBUTIONS
ASSET VALUE, NET UNREALIZED TOTAL FROM FROM NET OF NET FROM
BEGINNING INVESTMENT GAIN/(LOSS) INVESTMENT INVESTMENT INVESTMENT NET REALIZED TOTAL
OF PERIOD INCOME/(LOSS) ON INVESTMENTS OPERATIONS INCOME INCOME CAPITAL GAINS DISTRIBUTIONS
----------- ------------ ------------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CLASS A
10/31/99 $10.63 $ 0.40++ $ 0.57## $ 0.97 $(0.48) $(0.00)# $(0.37) $(0.85)
10/31/98(c) 10.79 0.12 (0.15) (0.03) (0.13) -- -- (0.13)
06/30/98 10.57 0.45 0.67 1.12 (0.45) (0.21) (0.24) (0.90)
06/30/97* 10.00 0.43++ 0.70 1.13 (0.43) (0.13) (0.00)# (0.56)
CLASS B
10/31/99 10.63 0.33++ 0.56## 0.89 (0.40) (0.00)# (0.37) (0.77)
10/31/98(c) 10.79 0.10 (0.16) (0.06) (0.10) -- -- (0.10)
06/30/98 10.57 0.31 0.73 1.04 (0.37) (0.21) (0.24) (0.82)
06/30/97* 10.00 0.38++ 0.68 1.06 (0.38) (0.11) (0.00)# (0.49)
- ----------------
* The Portfolio's Class A and Class B shares commenced operations on July 25, 1996.
** Annualized.
# Amount represents less than $0.01 per share.
## The amount shown may not accord with the change in aggregate gains and losses of portfolio securities due to the timing of
sales and redemptions of Portfolio shares.
+ Total return is not annualized for periods less than one year and does not reflect any applicable sales charges. The total
return would have been lower if certain fees had not been waived and expenses reimbursed by the investment advisor or if fees
had not been reduced by credits allowed by the custodian.
++ Per share numbers have been calculated using the average shares method.
(a) The Portfolio also will indirectly bear its prorated share of expenses of the Underlying Funds.
(b) Ratio of operating expenses to average net assets includes expenses paid indirectly.
(c) Fiscal year end changed to October 31 from June 30.
See Notes to Financial Statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA
------------------------------------------------------------------------------------------
RATIO OF OPERATING
EXPENSES TO
AVERAGE NET ASSETS
WITHOUT FEE
RATIO OF RATIO OF WAIVERS, EXPENSES
OPERATING NET INVESTMENT REIMBURSED AND/OR
NET NET ASSETS, EXPENSES TO INCOME/(LOSS) PORTFOLIO FEES REDUCED BY
ASSET VALUE, TOTAL END OF PERIOD AVERAGE NET TO AVERAGE TURNOVER CREDITS ALLOWED BY
END OF PERIOD RETURN+ (IN 000'S) ASSETS(a)(b) NET ASSETS RATE THE CUSTODIAN(a)
------------- ------- ---------- ------------ ---------- ---- ----------------
<S> <C> <C> <C> <C> <C> <C>
$10.75 9.39 % $194,404 1.00% 3.86% 31% 1.06%
10.63 (0.26)% 9,766 0.95%** 3.62%** 15% 1.37%**
10.79 11.07 % 8,808 0.95% 4.07% 24% 1.23%
10.57 11.58 % 12,613 0.92%** 4.95%** 54% 1.67%**
10.75 8.60 % 46,821 1.75% 3.11% 31% 1.81%
10.63 (0.51)% 11,142 1.70%** 2.87%** 15% 2.12%**
10.79 10.24 % 7,684 1.70% 3.32% 24% 1.98%
10.57 10.80 % 7,385 1.67%** 4.20%** 54% 2.42%**
See Notes to Financial Statements
</TABLE>
<PAGE>
FINANCIAL highlights
INCOME PORTFOLIO
FOR A PORTFOLIO SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<TABLE>
<CAPTION>
INCOME FROM INVESTMENT OPERATIONS LESS DISTRIBUTIONS
--------------------------------------------------------- ----------------------------------------------------------
NET REALIZED DISTRIBUTIONS
NET AND DIVIDENDS IN EXCESS DISTRIBUTIONS
ASSET VALUE, NET UNREALIZED TOTAL FROM FROM NET OF NET FROM
BEGINNING INVESTMENT GAIN/(LOSS) INVESTMENT INVESTMENT INVESTMENT NET REALIZED TOTAL
OF PERIOD INCOME/(LOSS) ON INVESTMENTS OPERATIONS INCOME INCOME CAPITAL GAINS DISTRIBUTIONS
----------- ------------ ------------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CLASS A
10/31/99 $10.25 $ 0.56 $(0.27) $ 0.29 $(0.57) $(0.01) $(0.02) $(0.60)
10/31/98(c) 10.34 0.19 (0.09) 0.10 (0.19) -- -- (0.19)
06/30/98 10.13 0.64 0.22 0.86 (0.65) (0.00)# -- (0.65)
06/30/97* 10.00 0.58++ 0.14## 0.72 (0.58) (0.01) (0.00)# (0.59)
CLASS B
10/31/99 10.25 0.50 (0.29) 0.21 (0.49) (0.01) (0.02) (0.52)
10/31/98(c) 10.34 0.16 (0.09) 0.07 (0.16) -- -- (0.16)
06/30/98 10.13 0.56 0.22 0.78 (0.57) (0.00)# -- (0.57)
06/30/97* 10.00 0.51++ 0.14## 0.65 (0.51) (0.01) (0.00)# (0.52)
- ----------------
* The Portfolio's Class A and Class B shares commenced operations on July 25, 1996.
** Annualized.
# Amount represents less than $0.01 per share.
## The amount shown may not accord with the change in the aggregate gains and losses of portfolio securities due to timing of
sales and redemptions of Portfolio shares.
+ Total return is not annualized for periods less than one year and does not reflect any applicable sales charges. The total
return would have been lower if certain fees had not been waived and expenses reimbursed by the investment advisor or if fees
had not been reduced by credits allowed by the custodian.
++ Per share numbers have been calculated using the average shares method.
(a) The Portfolio also will indirectly bear its prorated share of expenses of the Underlying Funds.
(b) Ratio of operating expenses to average net assets includes expenses paid indirectly.
(c) Fiscal year end changed to October 31 from June 30.
See Notes to Financial Statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA
------------------------------------------------------------------------------------------
RATIO OF OPERATING
EXPENSES TO
AVERAGE NET ASSETS
WITHOUT FEE
RATIO OF RATIO OF WAIVERS, EXPENSES
OPERATING NET INVESTMENT REIMBURSED AND/OR
NET NET ASSETS, EXPENSES TO INCOME/(LOSS) PORTFOLIO FEES REDUCED BY
ASSET VALUE, TOTAL END OF PERIOD AVERAGE NET TO AVERAGE TURNOVER CREDITS ALLOWED BY
END OF PERIOD RETURN+ (IN 000'S) ASSETS(a)(b) NET ASSETS RATE THE CUSTODIAN(a)
------------- ------- ---------- ------------ ---------- ---- ----------------
<S> <C> <C> <C> <C> <C> <C>
$ 9.94 2.89% $ 7,297 1.00% 5.57% 51% 1.24%
10.25 0.96% 7,611 0.95%** 5.40%** 22% 1.53%**
10.34 8.71% 7,793 0.95% 6.23% 14% 1.25%
10.13 7.38% 13,410 0.93%** 6.09%** 56% 1.65%**
9.94 2.05% 13,443 1.74% 4.83% 51% 1.98%
10.25 0.70% 5,698 1.70%** 4.65%** 22% 2.28%**
10.34 7.90% 4,084 1.70% 5.48% 14% 2.01%
10.13 6.63% 4,537 1.68%** 5.34%** 56% 2.40%**
See Notes to Financial Statements
</TABLE>
<PAGE>
PORTFOLIO of INVESTMENTS
STRATEGIC GROWTH PORTFOLIO
OCTOBER 31, 1999
SHARES VALUE
------ -----
INVESTMENT COMPANY SECURITIES - 99.4%
2,846,963 WM Growth Fund ................................ $ 85,295,009
3,136,091 WM Growth & Income Fund ....................... 77,304,640
1,751,557 WM International Growth Fund .................. 19,547,373
15,762,576 WM Money Market Fund .......................... 15,762,576
190,480 WM Northwest Fund ............................. 6,103,001
------------
Total Investment Company Securities
(Cost $172,584,236) ......................... 204,012,599
------------
PRINCIPAL
AMOUNT
------
REPURCHASE AGREEMENT - 0.3%
(Cost $567,000)
$ 567,000 Agreement with Boston Safe Deposit & Trust
Company, 4.150%dated 10/29/1999, to be
repurchased at $567,196 on 11/01/1999
collateralized by $608,036 Federal Home
Loan Mortgage Corporation, 6.000% due
01/01/2019 (Market Value $575,923) .......... 567,000
------------
TOTAL INVESTMENTS (COST $173,151,236*) ............... 99.7% 204,579,599
OTHER ASSETS AND LIABILITIES (NET) ................... 0.3 620,611
----- ------------
NET ASSETS ........................................... 100.0% $205,200,210
===== ============
- ----------------
* Aggregate cost for federal tax purposes is $174,097,644.
See Notes to Financial Statements
<PAGE>
PORTFOLIO of INVESTMENTS
CONSERVATIVE GROWTH PORTFOLIO
OCTOBER 31, 1999
SHARES VALUE
------ -----
INVESTMENT COMPANY SECURITIES - 99.2%
5,682,127 WM Growth Fund ................................ $170,236,538
7,472,511 WM Growth & Income Fund ....................... 184,197,391
1,654,617 WM High Yield Fund ............................ 14,742,642
558,976 WM Income Fund ................................ 5,025,194
6,348,711 WM International Growth Fund .................. 70,851,616
39,489,164 WM Money Market Fund .......................... 39,489,164
2,194,367 WM Short Term High Quality Bond Fund .......... 5,025,100
1,880,307 WM U.S. Government Securities Fund ............ 19,762,026
------------
Total Investment Company Securities
(Cost $428,283,779) ......................... 509,329,671
------------
PRINCIPAL
AMOUNT
------
REPURCHASE AGREEMENT - 0.7%
(Cost $3,492,000)
$ 3,492,000 Agreement with Boston Safe Deposit & Trust
Company, 4.150% dated 10/29/1999, to be
repurchased at $3,493,208, on 11/01/1999
collateralized by $3,744,728 Federal Home
Loan Mortgage Corporation, 6.000% due
01/01/2019 (Market Value $3,546,960) ........ 3,492,000
------------
TOTAL INVESTMENTS (COST $431,775,779*) .............. 99.9% 512,821,671
OTHER ASSETS AND LIABILITIES (NET) .................. 0.1 738,811
----- ------------
NET ASSETS .......................................... 100.0% $513,560,482
===== ============
- ----------------
*Aggregate cost for federal tax purposes is $433,206,848.
See Notes to Financial Statements
<PAGE>
PORTFOLIO of INVESTMENTS
BALANCED PORTFOLIO
OCTOBER 31, 1999
SHARES VALUE
------ -----
INVESTMENT COMPANY SECURITIES - 98.7%
3,910,122 WM Growth Fund ................................ $117,147,259
6,233,760 WM Growth & Income Fund ....................... 153,662,181
1,241,501 WM High Yield Fund ............................ 11,061,775
1,844,167 WM Income Fund ................................ 16,579,065
6,563,111 WM International Growth Fund .................. 73,244,320
36,070,481 WM Short Term High Quality Bond Fund .......... 82,601,401
10,417,446 WM U.S. Government Securities Fund ............ 109,487,351
------------
Total Investment Company Securities
(Cost $524,004,067) ....................... 563,783,352
------------
PRINCIPAL
AMOUNT
------
REPURCHASE AGREEMENT - 0.8%
(Cost $4,589,000)
$ 4,589,000 Agreement with Boston Safe Deposit & Trust
Company, 4.150% dated 10/29/1999, to be
repurchased at $4,590,587 on 11/01/1999
collateralized by $4,921,122 Federal Home
Loan Mortgage Corporation, 6.000% due
01/01/2019 (Market Value $4,661,225) ........ 4,589,000
------------
TOTAL INVESTMENTS (COST $528,593,067*) .............. 99.5% 568,372,352
OTHER ASSETS AND LIABILITIES (NET) .................. 0.5 2,705,268
----- ------------
NET ASSETS .......................................... 100.0% $571,077,620
===== ============
- ----------------
* Aggregate cost for federal tax purposes is $530,450,570.
See Notes to Financial Statements
<PAGE>
PORTFOLIO of INVESTMENTS
FLEXIBLE INCOME PORTFOLIO
OCTOBER 31, 1999
SHARES VALUE
------ -----
INVESTMENT COMPANY SECURITIES - 100.0%
456,932 WM Growth Fund ................................ $ 13,689,687
1,888,744 WM Growth & Income Fund ....................... 46,557,535
1,334,499 WM High Yield Fund ............................ 11,890,384
5,392,640 WM Income Fund ................................ 48,479,838
23,942,090 WM Money Market Fund .......................... 23,942,090
21,029,171 WM Short Term High Quality Bond Fund .......... 48,156,803
4,606,893 WM U.S. Government Securities Fund ............ 48,418,441
------------
TOTAL INVESTMENTS (COST $245,582,774*) ............... 100.0% 241,134,778
OTHER ASSETS AND LIABILITIES (NET) ................... 0.0# 90,422
----- ------------
NET ASSETS ........................................... 100.0% $241,225,200
===== ============
- ----------------
* Aggregate cost for federal tax purposes is $245,709,811.
# Amount represents less than 0.1% of net assets.
See Notes to Financial Statements
<PAGE>
PORTFOLIO of INVESTMENTS
INCOME PORTFOLIO
OCTOBER 31, 1999
SHARES VALUE
------ -----
INVESTMENT COMPANY SECURITIES - 97.2%
226,136 WM High Yield Fund ............................ $ 2,014,874
673,236 WM Income Fund ................................ 6,052,392
2,019,898 WM Money Market Fund .......................... 2,019,898
1,321,291 WM Short Term High Quality Bond Fund .......... 3,025,756
670,319 WM U.S. Government Securities Fund ............ 7,045,053
------------
Total Investment Company Securities
(Cost $20,546,057) ........................ 20,157,973
------------
PRINCIPAL
AMOUNT
------
REPURCHASE AGREEMENT - 1.9%
(Cost $386,000)
$ 386,000 Agreement with Boston Safe Deposit & Trust
Company, 4.150% dated 10/29/1999, to be
repurchased at $386,133 on 11/01/1999
collateralized by $413,936 Federal Home
Loan Mortgage Corporation, 6.000% due
01/01/2019 (Market Value $392,075) .......... 386,000
------------
TOTAL INVESTMENTS (COST $20,932,057*) ................ 99.1% 20,543,973
OTHER ASSETS AND LIABILITIES (NET) ................... 0.9 195,543
----- -----------
NET ASSETS ........................................... 100.0% $20,739,516
===== ============
- ----------------
*Aggregate cost for federal tax purposes is $20,975,574.
See Notes to Financial Statements
<PAGE>
NOTES to FINANCIAL statements
WM STRATEGIC ASSETS MANAGEMENT PORTFOLIO
1. ORGANIZATION AND BUSINESS
WM Strategic Asset Management Portfolios, LLC (the "LLC") was organized under
the laws of the Commonwealth of Massachusetts on March 12, 1999 as a business
entity commonly known as a "Limited Liability Company." Effective as of the
close of business on July 16, 1999, the LLC adopted the Notification of
Registration from WM Strategic Asset Management Portfolios which was organized
under the laws of Massachusetts on March 26, 1996 as a business entity
commonly known as a "Massachusetts business trust". The LLC is registered
under the Investment Company Act of 1940, as amended (the "1940 Act"), as an
open-end management investment company. The LLC offers five portfolios; the
Strategic Growth and the Conservative Growth Portfolios (the "Equity
Portfolios"), and the Balanced, the Flexible Income and the Income Portfolios
(the "Fixed Income Portfolios") (each a "Portfolio" and collectively, the
"Portfolios"). Also on July 16, 1999, the Griffin Portfolio Builder Accounts
(asset allocation accounts that were invested in certain Funds in the WM Group
of Funds) contributed all of their assets in kind to the LLC in a tax-free
exchange for shares of Portfolios with similar objectives. Each of the
Portfolios offers two classes of shares: Class A shares and Class B shares.
Class A shares are subject to an initial sales charge at the time of purchase.
Certain Class A shares purchased without an initial sales charge may be
subject to a contingent deferred sales charge ("CDSC") if redeemed within two
years of purchase. Class B shares are not subject to an initial sales charge.
Class B shares are subject to a CDSC if redeemed within five years from the
date of purchase.
Each of the Portfolios invests, within certain percentage ranges, in Class I
Shares of certain funds in the WM Group of Funds (collectively, the
"Underlying Funds"). Each Portfolio typically allocates its assets, within
determined percentage ranges, among the Underlying Funds. The percentages
reflect the extent to which each Portfolio can invest in the particular market
segment represented by each Underlying Fund, and the varying degrees of
potential investment risk and reward represented by each Portfolio's
investments in those market segments and their corresponding Underlying Funds.
WM Advisors, Inc. (the "Advisor" or "WM Advisors"), a wholly-owned subsidiary
of Washington Mutual, Inc. ("Washington Mutual"), a publicly owned financial
services company, serves as investment advisor to the Portfolio. The advisor
may alter these percentage ranges when it deems appropriate. The assets of
each Portfolio will be allocated among the Underlying Funds in accordance with
its investment objective based on the Advisor's outlook for the economy, the
financial markets and the relative market valuations of the Underlying Funds.
In addition, in order to meet liquidity needs or for temporary defensive
purposes, each Portfolio may invest its assets directly in cash, stock or bond
index futures, options, money market securities and certain short-term debt
instruments.
2. SIGNIFICANT ACCOUNTING POLICIES
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts and disclosures in the financial statements.
Actual results could differ from those estimates. The following is a summary
of significant accounting policies consistently followed by the Portfolios in
the preparation of their financial statements.
PORTFOLIO VALUATION:
Investments in the Underlying Funds are valued at net asset value per Class I
share of the respective Underlying Funds determined as of the close of the New
York Stock Exchange on each valuation date. Short-term debt securities that
mature in 60 days or less at the time of purchase are valued at amortized
cost.
REPURCHASE AGREEMENTS:
Each Portfolio may engage in repurchase agreement transactions. A repurchase
agreement is a purchase of an underlying debt obligation subject to an
agreement by the seller to repurchase the obligation at an agreed upon price
and time. The value of the collateral is at all times at least equal to the
total amount of the repurchase obligation. In the event of counterparty
default, the Portfolio would seek to use the collateral to offset losses
incurred. There is potential loss in the event the Portfolio is delayed or
prevented from exercising its right to dispose of the collateral securities,
including the risk of a possible decline in the value of the underlying
securities during the period while the Portfolio seeks to assert its rights.
WM Advisors, acting under the supervision of the Board of Trustees, reviews
the value of the collateral and the creditworthiness of those banks and
dealers with whom each Portfolio enters into repurchase agreements.
SECURITIES TRANSACTIONS AND INVESTMENT INCOME:
Securities transactions are recorded as of the trade date (the date the order
to buy or sell is executed). Realized gains and losses from securities sold
are recorded on the identified cost basis. Interest income is recorded on the
accrual basis and consists of interest accrued and, if applicable, discount
accreted less premiums amortized. Dividend income is recorded on the ex-
dividend date. Each Portfolio's investment income and realized and unrealized
gains and losses are allocated among the Portfolio's classes of shares based
upon the relative average net assets of each class.
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS:
Dividends from net investment income of the Balanced Portfolio, Flexible
Income Portfolio and Income Portfolio are declared daily and paid monthly.
Dividends from the net investment income of the Conservative Growth Portfolio
are declared and paid quarterly. Dividends from the net investment income of
the Strategic Growth Portfolio are declared and paid semi-annually.
Distributions of any net long-term capital gains earned by a Portfolio are
made annually. Distributions of any net short-term capital gains earned by a
Portfolio are distributed no less frequently than annually at the discretion
of the Board of Trustees. Additional distributions of net investment income
and capital gains for each Portfolio may be made at the discretion of the
Board of Trustees in order to avoid the application of a 4% non-deductible
excise tax on certain undistributed amounts of ordinary income and capital
gains. Income distributions and capital gain distributions are determined in
accordance with income tax regulations, which may differ from generally
accepted accounting principles. These differences are primarily due to
differing treatments of income and gains on various investment securities held
by the Portfolios, organizational costs, dividends payable, redesignated
distributions and differing characterization of distributions made by each
Portfolio as a whole. Net investment income per share calculations in the
financial highlights for the year ended October 31, 1999 exclude these
adjustments:
DECREASE
INCREASE ACCUMULATED
DECREASE UNDISTRIBUTED NET NET REALIZED
PAID-IN CAPITAL INVESTMENT INCOME GAIN/(LOSS)
--------------- ----------------- -----------
Strategic Growth Portfolio ... $(1,170,795) $2,799,251 $(1,628,456)
Conservative Growth Portfolio (1,176,325) 6,306,093 (5,129,768)
Balanced Portfolio ........... (18,148) 2,834,817 (2,816,669)
Flexible Income Portfolio .... (6,954) 78,751 (71,797)
Income Portfolio ............. (6,009) 18,194 (12,185)
FEDERAL INCOME TAXES:
It is each Portfolio's policy to qualify as a regulated investment company by
complying with the requirements of the Internal Revenue Code of 1986, as
amended, applicable to regulated investment companies and by, among other
things, distributing substantially all of its taxable and tax-exempt earnings
to its shareholders. Therefore, no Federal income tax provision is required.
EXPENSES:
General expenses of the LLC are allocated to all the Portfolios based upon the
relative net assets of each Portfolio except printing and postage expenses,
which are allocated to all the Portfolios based upon the relative number of
shareholder accounts of each Portfolio. In addition, the Portfolios will
indirectly bear their prorated share of expenses of the Underlying Funds.
Operating expenses directly attributable to a class of shares are charged to
the operations of that class of shares. Expenses of each Portfolio not
directly attributable to the operations of any class of shares are prorated
among the classes to which the expenses relate based on the relative average
net assets of each class of shares.
3. INVESTMENT ADVISORY AND OTHER TRANSACTIONS
WM Advisors serves as investment advisor to the LLC. As investment advisor to
the Portfolios, WM Advisors provides its proprietary asset allocation services
to the Portfolios, formulates the Portfolios' investment policies, analyzes
economic and market trends, exercises investment discretion over the assets of
the Portfolios and monitors the allocation of each Portfolio's assets and each
Portfolio's performance. For its investment advisory services to the
Portfolios, WM Advisors is entitled to a monthly fee, at an annual rate of
0.15% of each Portfolio's average daily net assets. WM Shareholder Services,
Inc., an indirect wholly-owned subsidiary of Washington Mutual, serves as
administrator to the Portfolios and is entitled to a monthly fee at an annual
rate of 0.50% of average daily net assets of each Portfolio.
The Advisor has agreed to waive a portion of its management fees and/or
reimburse expenses. Fees waived and/or expenses reimbursed by the Advisor for
the year ended October 31, 1999 are as follows:
NAME OF PORTFOLIO FEES WAIVED EXPENSES REIMBURSED
- ----------------- ----------- -------------------
Strategic Growth Portfolio ............ $25,530 $ --
Conservative Growth Portfolio ......... 49,644 --
Balanced Portfolio .................... 34,597 --
Flexible Income Portfolio ............. 54,603 --
Income Portfolio ...................... 27,945 18,050
WM Shareholder Services, Inc. (the "Transfer Agent") serves as the transfer
and shareholder servicing agent of the Portfolios. Shareholder servicing fees
were paid to the Transfer Agent for services incidental to issuance and
transfer of shares, maintaining shareholder lists, and issuing and mailing
distributions and reports. The authorized monthly shareholder servicing fees
are as follows:
NAME OF PORTFOLIO CLASS A CLASS B
- ----------------- ------- -------
The Fixed Income Portfolios:
(11/01/1998-09/30/1999) ................ $1.45 $1.55
(10/01/1999-10/31/1999 ................. 1.35 1.35
The Equity Portfolios:
(11/01/1998-09/30/1999 ................. 1.25 1.35
(10/01/1999-10/31/1999) ................ 1.35 1.35
Custodian fees for certain Portfolios have been reduced by credits allowed by
the custodian for uninvested cash balances. These Portfolios could have
invested this cash in income producing investments. Fees reduced by credits
allowed by the custodian for the year ended October 31, 1999 are shown
separately in the Statements of Operations.
4. TRUSTEES' FEES
No director, officer or employee of Washington Mutual or its subsidiaries
receives any compensation from the LLC for serving as an officer or Trustee of
the LLC. The LLC, together with other Trusts advised by WM Advisors, Inc.,
pays each Trustee who is not a director, officer or employee of Washington
Mutual or its subsidiaries, $18,000 per annum plus $3,000 per board meeting
attended in person and $1,000 per board meeting attended by telephone.
Trustees are also reimbursed for travel and out-of-pocket expenses. The
Chairman of each committee receives $500 per committee meeting attended.
Pursuant to an exemptive order granted by the Securities and Exchange
Commission, the LLC's eligible Trustees may participate in a deferred
compensation plan (the "Plan") which may be terminated at any time. Under the
Plan, Trustees may elect to defer receipt of all or a portion of their fees
which, in accordance with the Plan, are invested in mutual fund shares. Upon
termination of the Plan, Trustees who have deferred accounts under the Plan
will be paid benefits no later than the time the payments would otherwise have
been made without regard to such termination. All benefits provided under
these plans are funded and any payments to plan participants are paid solely
out of the LLC's assets.
5. DISTRIBUTION PLANS
WM Funds Distributor, Inc. (the "Distributor"), a registered broker-dealer and
indirect wholly-owned subsidiary of Washington Mutual, serves as distributor
for Class A and B shares of the Portfolios. For the year ended October 31,
1999, the Distributor and WM Financial Services, Inc. ("WM Securities")
received $1,246,903 and $46,910, respectively, representing commissions (front
end sales charges) on Class A shares. In addition, the Distributor and WM
Securities received $8,599,160 and $134,806, respectively, representing CDSC
Fees from Class B shares.
Each of the Portfolios has adopted two distribution plans, pursuant to Rule
12b-1 under the 1940 Act, one for the Class A shares ("Class A Plan") and one
for the Class B shares ("Class B Plan"). Under the Class A and Class B Plans,
the Distributor is to be paid a shareholder service fee at an annual rate of
0.25% of the average daily net assets of each class of shares. In addition,
under the Class B Plan, the Distributor is to be paid an annual distribution
fee of up to 0.75% of the average daily net assets of the Class B shares of
each Portfolio for activities primarily intended to result in the sale of
Class B shares for the Portfolios.
6. PURCHASES AND SALES OF SECURITIES
The aggregate cost of purchases and proceeds from sales of securities,
excluding U.S. Government and short-term investments, for the year ended
October 31, 1999 were as follows:
NAME OF PORTFOLIO PURCHASES SALES
- ----------------- --------- -----
Strategic Growth Portfolio ............. $127,297,276 $ 26,078,048
Conservative Growth Portfolio .......... 228,929,166 56,416,149
Balanced Portfolio ..................... 446,928,496 129,436,905
Flexible Income Portfolio .............. 255,057,565 30,169,997
Income Portfolio ....................... 17,239,324 9,229,094
At October 31, 1999, aggregate gross unrealized appreciation for all
Underlying Funds in which there is an excess of value over tax cost and
aggregate gross unrealized depreciation for all Underlying Funds in which
there is an excess of tax cost over value were as follows:
TAX BASIS TAX BASIS
UNREALIZED UNREALIZED
NAME OF PORTFOLIO APPRECIATION DEPRECIATION
- ----------------- ------------ ------------
Strategic Growth Portfolio ............. $30,481,955 $ --
Conservative Growth Portfolio .......... 80,071,249 456,426
Balanced Portfolio ..................... 40,705,072 2,783,290
Flexible Income Portfolio .............. 895,488 5,470,521
Income Portfolio ....................... -- 431,601
7. SHARES OF BENEFICIAL INTEREST
The LLC may issue an unlimited number of shares of beneficial interest, each
without par value.
8. ORGANIZATION COSTS
Expenses incurred in connection with the organization of the Portfolios,
including the fees and expenses of registering and qualifying its shares for
distribution under federal and state securities regulations, are being
amortized on a straight-line basis over a period of five years from
commencement of operations of each Portfolio, respectively. In the event any
of the initial shares of a Portfolio are redeemed by any holder thereof during
the amortization period, the proceeds of such redemptions will be reduced by
an amount equal to the pro-rata portion of unamortized deferred organizational
expenses in the same proportion as the number of shares being redeemed bears
to the number of initial shares of such Portfolio outstanding at the time of
such redemption.
9. CAPITAL LOSS CARRYFORWARDS
At October 31, 1999, the following Funds had available for federal income tax
purposes unused capital losses as follows:
EXPIRING
IN 2007
------
Strategic Growth Portfolio ................................ $7
10. RISK FACTORS OF THE PORTFOLIOS
Investing in the Underlying Funds through the Portfolios involves certain
additional expenses and tax results that would not be present in a direct
investment in the Underlying Funds. For example, under certain circumstances,
an Underlying Fund may determine to make payment of a redemption request by a
Portfolio wholly or partly by a distribution in kind of securities from its
portfolio, instead of cash, in accordance with the rules of the Securities and
Exchange Commission. In such cases, the Portfolios may hold securities
distributed by an Underlying Fund until the Advisor determines that it is
appropriate to dispose of such securities.
Certain Underlying Funds may invest a portion of their assets in foreign
securities; enter into forward foreign currency transactions; lend their
portfolio securities; enter into stock index, interest rate and currency
futures contracts, and options on such contracts; enter into interest rate
swaps or purchase or sell interest rate caps or floors; engage in other types
of options transactions; make short sales; purchase zero coupon and payment-
in-kind bonds; engage in repurchase or reverse repurchase agreements; purchase
and sell "when-issued" securities and engage in "delayed-delivery"
transactions; and engage in various other investment practices each with
inherent risks.
The Strategic Growth Portfolio can invest as much as 50% of its total assets
in the WM Growth Fund, 50% of its total assets in the WM Emerging Growth Fund
and 25% of its total assets in the WM High Yield Fund, each of which
Underlying Funds may invest as much as 35% (100% in the case of the High Yield
Fund) of its total assets in lower-rated bonds. Securities rated below
investment grade generally involve greater price volatility and risk of
principal and income and may be less liquid than higher rated securities.
Certain Portfolios may invest as much as 50% of their total assets in the WM
Growth or WM Emerging Growth Funds, each of which may invest up to 25% of its
total assets in foreign equity securities and as much as 5% of its total
assets in securities in developing or emerging markets countries. Certain
Portfolios invest as much as 50% of their total assets in the WM International
Growth Fund, which invests primarily in the foreign equity securities, and may
invest as much as 30% of its total assets in securities in developing or
emerging market countries. These investments will subject such Portfolios to
risks associated with investing in foreign securities, including those
resulting from adverse political and economic developments and the possible
imposition of currency exchange restrictions or other foreign laws or
restrictions.
The officers and Trustees, the Advisor, the Distributor and Transfer Agent of
the Portfolios serve in the same capacity for the Underlying Funds. Conflicts
may arise as these persons and companies seek to fulfill their fiduciary
responsibilities to both the Portfolios and the Underlying Funds.
From time to time, one or more of the Underlying Funds used for investment by
a Portfolio may experience relatively large investments or redemptions due to
reallocations or rebalancings by the Portfolios. These transactions will
affect the Underlying Funds, since the Underlying Funds that experience
redemptions as a result of the reallocations or rebalancings may have to sell
portfolio securities and the Underlying Funds that receive additional cash
will have to invest such cash. While it is impossible to predict the overall
impact of these transactions over time, there could be adverse effects on
portfolio management to the extent that the Underlying Funds may be required
to sell securities or invest cash at times when they would not otherwise do
so. These transactions could also have tax consequences if sales of securities
resulted in gains and could also increase transaction costs. The Advisor is
committed to minimizing such impact on the Funds to the extent it is
consistent with pursuing the investment objectives of the Portfolios. The
Advisor may nevertheless face conflicts in fulfilling its responsibilities.
The Advisor will, at all times, monitor the impact on the Funds of
transactions by the Portfolios.
<PAGE>
INDEPENDENT auditors' REPORT
To the Trustees and Shareholders of
WM Strategic Asset Management Portfolios:
We have audited the accompanying statements of assets and liabilities,
including the portfolios of investments, of WM Strategic Growth Portfolio, WM
Conservative Growth Portfolio, WM Balanced Portfolio, WM Flexible Income
Portfolio and WM Income Portfolio, (the "Portfolios") as of October 31, 1999
and the related statements of operations for the year then ended, and the
statements of changes in net assets and financial highlights for the year then
ended and the period ended October 31, 1998. These financial statements and
financial highlights are the responsibility of the Portfolios' management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits. The statements changes in net assets
of the Portfolios' for the year ended June 30, 1998 and financial highlights
for the periods ended June 30, 1998 and prior were audited by other auditors
whose report, dated August 14, 1998, expressed an unqualified opinion on those
statements.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements and financial highlights. Our procedures included
confirmation of securities owned at October 31, 1999, by correspondence with
the custodian and brokers; where replies were not received from brokers, we
performed other auditing procedures. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of the aforementioned
Portfolios at October 31, 1999, the results of their operations for the year
then ended, and the changes in their net assets and their financial highlights
for the respective stated periods ended October 31, 1999 and 1998 in
conformity with generally accepted accounting principles.
Deloitte & Touche LLP
San Francisco, California
December 15, 1999
<PAGE>
SPECIAL meeting OF shareholders (unaudited)
WM STRATEGIC ASSETS MANAGEMENT PORTFOLIO
SHAREHOLDER VOTES
1. A special meeting of the Portfolios' shareholders was held on June 23,
1999, with an adjournment to July 14, 1999, at which shareholders approved
the reorganization of each of the Portfolios as a series of a Massachusetts
business trust into a series of a Massachusetts Limited Liability Company.
FOR AGAINST ABSTAINED TOTAL
--- ------- --------- -----
Strategic Growth Portfolio 4,481,275 96,202 270,622 4,848,099
Conservative Growth Portfolio 13,924,252 332,282 739,377 14,995,911
Balanced Portfolio 11,990,085 155,686 721,394 12,867,165
Flexible Income Portfolio 1,841,772 11,549 146,622 1,999,943
Income Portfolio 1,024,011 9,694 68,458 1,102,163
<PAGE>
TAX information (unaudited)
WM STRATEGIC ASSETS MANAGEMENT PORTFOLIO
YEAR ENDED OCTOBER 31, 1999
The following tax information represents fiscal year end disclosures of
various tax benefits passed through to shareholders at calendar year end.
Of the distributions made by the following Portfolios, the corresponding
percentages represent the amount of each distribution which will qualify for
the dividends received deduction available to corporate shareholders.
NAME OF PORTFOLIO
Strategic Growth Portfolio ......................................... 19.13%
Conservative Growth Portfolio ...................................... 13.74%
Balanced Portfolio ................................................. 8.67%
Flexible Income Portfolio .......................................... 3.83%
Income Portfolio ................................................... 2.25%
The above figures may differ from those cited elsewhere in this report due to
differences in the calculation of income and capital gains for Securities and
Exchange Commission (book) purposes and Internal Revenue Service (tax)
purposes.
<PAGE>
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This Annual Report is published for the general information of the shareholders
of the WM Group of Funds. It is authorized for distribution to prospective
investors only when preceded or accompanied by a current WM Group of Funds
prospectus. A mutual fundshare price and investment return will vary with market
conditions, and the principal value of an investment when you sell your shares
may be more or less than the original cost.
The WM Group of Funds are not insured by the FDIC. They are not deposits or
obligations of, nor are they guaranteed by, any bank. These securities are
subject to investment risk, including possible loss of principal amount
invested.
Distributed by WM Funds Distributor, Inc.
Member NASD
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