<PAGE> 1
As filed with the Securities and Exchange Commission on August 11, 2000
Registration No.
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
FORM N-14
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
[ ] Pre-Effective Amendment No. ___
[ ] Post Effective Amendment No. ___
WM Trust I
(Exact name of Registrant as Specified in Charter)
1201 Third Avenue, 22nd Floor
Seattle, Washington 98101
(Address of Principal Executive Offices) (Zip Code)
(206) 461-3800
(Area Code and Telephone Number)
William G. Papesh
President
WM Advisors, Inc.
1201 Third Avenue, Suite 1400
Seattle, Washington 98101
Copies to:
J.B. Kittredge, Esq.
Ropes & Gray
One International Place
Boston, Massachusetts 02110-2624
---------------
Approximate Date of Proposed Public Offering:
As soon as practicable after this Registration Statement becomes effective.
---------------
It is proposed that this filing will become effective on
September , 2000 pursuant to Rule 488.
---------------
The Registrant has registered an indefinite amount of its securities
under the Securities Act of 1933, pursuant to Rule 24f-2 under the Investment
Company Act of 1940. In reliance upon Rule 24f-2, no filing fee is being paid at
this time.
<PAGE> 2
WM TRUST I
Cross-Reference Sheet as required by Rule 481(a)
FORM N-14 ITEM CAPTION IN PROSPECTUS/PROXY STATEMENT
1 Cross-Reference Sheet; Outside Front Cover of Prospectus
2 Outside Back Cover Page of Prospectus; Table of Contents
3 Overview of Mergers; Risk Factors
4 The Proposal: Approval or Disapproval of Agreement and
Plan of Reorganization
5 Information about the Funds
6 Information about the Funds
7 Voting Information, Special Meeting of Shareholders
8,9 Not Applicable
FORM N-14 ITEM CAPTION IN STATEMENT OF ADDITIONAL INFORMATION
10 Cover Page
11 Table of Contents
12, 13 Additional Information about the Acquiring and Acquired
Funds
14 Financial Statements
FORM N-14 ITEM CAPTION IN PART C
15 Indemnification
16 Exhibits
17 Undertakings
<PAGE> 3
WM TRUST II
Florida Insured Municipal Fund
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
November 1, 2000
To the Shareholders:
This is to notify you that a Special Meeting of Shareholders of the Florida
Insured Municipal Fund, a series of WM Trust II, will be held on November 1,
2000 at 10:00 a.m., Pacific Time, at the offices of WM Group of Funds, 1201
Third Avenue, 22nd Floor, Seattle, WA 98101, for the following purposes:
1. To approve or disapprove an Agreement and Plan of Reorganization
providing for the transfer of all of the assets of the Florida Insured
Municipal Fund to the Tax-Exempt Bond Fund, a series of WM Trust I, in
exchange for shares of the Tax-Exempt Bond Fund and the assumption by the
Tax-Exempt Bond Fund of all of the liabilities of the Florida Insured
Municipal Fund, and the distribution of such shares to the shareholders of
the Florida Insured Municipal Fund in complete liquidation of the Florida
Insured Municipal Fund.
2. To transact such other business as may properly come before the
meeting.
The Trustees have fixed the close of business on August 31, 2000 as the
record date for determination of shareholders entitled to notice of, and to
vote at, the Special Meeting.
By order of the Board of Trustees
[___________]
September 15, 2000
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WE URGE YOU TO MARK, SIGN, DATE AND MAIL THE ENCLOSED PROXY IN THE
POSTAGE-PAID ENVELOPE PROVIDED SO THAT YOU WILL BE REPRESENTED AT THE
SPECIAL MEETING.
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-1-
<PAGE> 4
PROSPECTUS/PROXY STATEMENT
September __, 2000
INTRODUCTION
This Prospectus/Proxy Statement relates to the proposed merger (the
"Merger") of the Florida Insured Municipal Fund (the "Acquired Fund") into the
Tax-Exempt Bond Fund (the "Acquiring Fund"). The Acquired Fund is a series of WM
Trust II, and the Acquiring Fund is a series of WM Trust I. The Acquired Fund
and the Acquiring Fund are referred to in this Prospectus/Proxy Statement as the
"Funds." The Merger is to be effected through the transfer of all of the assets
of the Acquired Fund to the Acquiring Fund in exchange for shares of beneficial
interest of the Acquiring Fund (the "Merger Shares") and the assumption by the
Acquiring Fund of all of the liabilities of the Acquired Fund. This will be
followed by the distribution of the Merger Shares to the shareholders of the
Acquired Fund in liquidation of the Acquired Fund. As a result of the proposed
transaction, each shareholder of the Acquired Fund will receive in exchange for
his or her Acquired Fund shares a number of Merger Shares of the same class
equal in value at the date of the exchange to the aggregate value of the
shareholder's Acquired Fund shares. This means that you may end up with a
different number of shares than you originally held, but the total dollar value
of your shares will remain the same.
Because shareholders of the Acquired Fund are being asked to approve
transactions which will result in their receiving shares of the Acquiring Fund,
this Proxy Statement also serves as a Prospectus for the Merger Shares of the
Acquiring Fund.
Both WM Trust I and WM Trust II (collectively, the "Trusts") are open-end
series management investment companies organized as Massachusetts business
trusts.
Each of the Trusts has its principal executive offices at 1201 Third
Avenue, Seattle, Washington 98101, and toll-free telephone number (800)
222-5852.
The Acquiring Fund seeks to provide a high level of income that is exempt
from federal income tax while protecting investors' capital. The Acquired Fund
seeks to provide as high a level of current income that is exempt from federal
income tax as is consistent with prudent investment management and preservation
of capital. The Acquired Fund also seeks to ensure that the value of its shares
is exempt from Florida intangible personal property tax.
This Prospectus/Proxy Statement explains concisely what you should know
before investing in the Acquiring Fund. Please read it carefully and keep it for
future reference.
The following documents have been filed with the Securities and Exchange
Commission (the "SEC") and are incorporated into this Prospectus/Proxy Statement
by reference:
- the Funds' current Prospectus (which includes all of the series of both WM
Trust I and WM Trust II, among other funds), dated March 1, 2000 and as
supplemented through June 18, 2000 (the "Fund Prospectus");
- the Funds' current Statement of Additional Information, dated March 1,
2000 (the "Fund SAI");
- the Statement of Additional Information relating to this Prospectus/Proxy
Statement dated September __, 2000 (the "Merger SAI"); and
- the Report of Independent Accountants and financial statements in respect
of each Fund included in the Funds' Annual Report to Shareholders for the
year ended October 31, 1999 (the "Annual Report").
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<PAGE> 5
This Prospectus/Proxy Statement is accompanied by or has been preceded by a
copy of the Fund Prospectus. For a free copy of the Fund Prospectus, SAI, Merger
SAI, or Annual Report, please call 1-800-222-5852 or write to WM Group of Funds
at:
WM Group of Funds
1201 Third Avenue
22/nd/ Floor
Seattle, WA 98101
The SEC has not approved or disapproved these securities or passed upon the
accuracy or adequacy of this Prospectus/Proxy Statement. Any representation to
the contrary is a crime.
You can lose money by investing in the Acquiring Fund. The Acquiring Fund may
not achieve its goals, and is not intended as a complete investment program. An
investment in the Acquiring Fund is not a deposit in a bank and is not insured
or guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.
2
<PAGE> 6
--------------------------------------------------------------------------------
OVERVIEW OF MERGER
Proposed Transaction
The Trustees of each of the Trusts, on behalf of their respective Funds,
have approved the proposed Merger of the Acquired Fund into the Acquiring Fund.
The Merger is proposed to be accomplished pursuant to an Agreement and Plan of
Reorganization providing for the transfer of all of the assets of the Acquired
Fund to the Acquiring Fund in exchange for shares of the Acquiring Fund and the
assumption by the Acquiring Fund of all the liabilities of the Acquired Fund,
followed by the liquidation of the Acquired Fund.
As a result of the proposed Merger, the Acquired Fund will receive a
number of Class A or Class B Merger Shares of the Acquiring Fund equal in value
to the value of the net assets of the Acquired Fund being transferred and
attributable to the Class A or Class B shares of the Acquired Fund, as the case
may be. Following the transfer, (i) the Acquired Fund will distribute to each
of its Class A and Class B shareholders a number of full and fractional Class A
or Class B Merger Shares equal in value to the aggregate value of the
shareholder's Class A and Class B Acquired Fund shares, and (ii) the Acquired
Fund will be liquidated.
The Class A and Class B shares of the Acquired Fund have identical
characteristics to the corresponding classes of shares of the Acquiring Funds,
as described in the Fund Prospectus.
You will not be charged a front end sales load on the issuance of the
Merger Shares, or a Contingent Deferred Sales Charge ("CDSC") on Acquired Fund
shares exchanged for Merger Shares. The Merger Shares that you receive will be
subject to a CDSC on redemption to the same extent that that Acquired Fund
shares exchanged were so subject. For purposes of computing the CDSC, if any,
payable on redemption of Class A and Class B Merger Shares, the Merger Shares
will be treated as having been purchased as of the date that, and for the price
(adjusted to reflect the Merger) at which, you originally purchased the Acquired
Fund shares.
As described more fully below, the Trustees of each Trust have approved,
and recommend that shareholders of the Acquired Fund approve, the Merger. In
reaching their decision, the Trustees considered that the Merger offers
shareholders the opportunity to pursue a generally similar investment objective
(with the exception that the Acquiring Fund does not seek to ensure that the
value of its assets is exempt from the Florida intangible personal property tax)
in a larger Fund, which should offer economies of scale and opportunities for
greater diversification of risk.
3
<PAGE> 7
See "Proposals-- Background and Reasons for the Proposed Mergers."
Operating Expenses
As the following tables suggest, the Merger should result in Acquired Fund
shareholders experiencing lower Fund expenses. Of course, there can be no
assurance that the Merger will result in expense savings for shareholders. These
tables summarize, for Class A shares and Class B shares, expenses:
- that each Fund incurred in its fiscal year ended October 31, 1999; and
- that the Acquiring Fund would have incurred in its most recent fiscal year
on a pro forma basis, giving effect to the proposed Merger, as if the
Merger had occurred as of the beginning of such fiscal year.
The tables are provided to help you understand an investor's share of the
operating expenses which each Fund incurs. The examples show the estimated
cumulative expenses attributable to a hypothetical $10,000 investment in each
Fund and the Acquiring Fund on a pro forma basis, over specified periods. By
translating "Total Annual Fund Operating Expenses" into dollar amounts, these
examples help you compare the costs of investing in a Fund, or a particular
class of shares, with the costs of investing in other mutual funds.
<TABLE>
<CAPTION>
Class A Class B
---------------------------------------
Shareholder Fees
-------------------------------------------------------------------------------------------------------
<S> <C> <C>
Maximum Sales Charge Imposed on Purchase
(as a percentage of offering price at the time of purchase) 5.50% None
Maximum Contingent Deferred Sales Charge (as a
percentage of original purchase price or redemption price,
as applicable) 0%/1/ 5%/2/
-------------------------------------------------------------------------------------------------------
</TABLE>
(1) Certain investors who purchase Class A shares without paying an initial
sales charge may be subject to a deferred sales charge of 1.00% on
redemptions within the first year or 0.50% on redemptions within the second
year after purchase. Class A shares are not otherwise subject to a deferred
sales charge.
(2) 5% first year; 4% second year; 3% third year; 2% fourth year; 1% fifth year
and 0% thereafter.
4
<PAGE> 8
<TABLE>
<CAPTION>
Current
Expenses
Florida Pro Forma
Insured Current Expenses Expenses
Municipal Tax-Exempt Bond Tax-Exempt
Fund Fund Bond Fund
--------- ---------------- -----------
<S> <C> <C> <C>
Annual Fund Operating Expenses
(as a percentage of average net assets)
Management Fees
Class A.................................... 0.50% 0.48% 0.48%
Class B.................................... 0.50% 0.48% 0.48%
------------------------------------------------------------------------------------------------------
Service (12b-1) Fees
Class A.................................... 0.25% 0.25% 0.25%
Class B.................................... 1.00% 1.00% 1.00%
------------------------------------------------------------------------------------------------------
Other Expenses
Class A.................................... 0.39% 0.16% 0.16%
Class B.................................... 0.38% 0.16% 0.16%
------------------------------------------------------------------------------------------------------
Total Annual Fund Operating Expenses
Class A.................................... 1.14% 0.89% 0.89%
Class B.................................... 1.88% 1.64% 1.64%
------------------------------------------------------------------------------------------------------
Expense Reimbursement
Class A.................................... -- 0.01%/1/ 0.01%(1)
Class B.................................... -- 0.01%/1/ 0.01%(1)
------------------------------------------------------------------------------------------------------
Net Expenses
Class A.................................... 1.14% 0.88%/1/ 0.88%(1)
Class B.................................... 1.88% 1.63%/1/ 1.63%(1)
------------------------------------------------------------------------------------------------------
</TABLE>
(1) Reflects WM Advisors, Inc.'s obligation to limit Total Annual Fund
Operating Expenses through October 31, 2000.
5
<PAGE> 9
Example of Fund Expenses:
An investment of $10,000 would incur the following expenses, assuming 5%
annual return, constant expenses and, except as indicated, redemption at the end
of each time period:
<TABLE>
<CAPTION>
Pro Forma
Current Expenses Current Expenses Expenses
Florida Insured Tax-Exempt Bond Tax-Exempt
Municipal Fund Fund Bond Fund
---------------- ---------------- ----------
<S> <C> <C> <C>
Class A
1 year................................... $ 561 $ 537 $ 537
3 years.................................. $ 796 $ 721 $ 721
5 years.................................. $1,054 $ 924 $ 924
10 years................................. $1,774 $1,497 $1,497
-------------------------------------------------------------------------------------------------------
Class B
1 year................................... $ 691 $ 667 $ 667
3 years.................................. $ 891 $ 817 $ 817
5 years.................................. $1,122 $ 997 $ 997
10 years................................. $2,006 $1,742 $1,742
-------------------------------------------------------------------------------------------------------
Class B (no redemption)
1 year................................... $ 191 $ 167 $ 167
3 years.................................. $ 591 $ 517 $ 517
5 years.................................. $1,022 $ 897 $ 897
10 years................................. $2,006 $1,742 $1,742
-------------------------------------------------------------------------------------------------------
</TABLE>
6
<PAGE> 10
Federal Income Tax Consequences
For federal income tax purposes the Merger will be a tax-free
reorganization. Accordingly, no gain or loss will be recognized by the Acquired
Fund or its shareholders as a result of the Merger, and the aggregate tax basis
of the Merger Shares received by each Acquired Fund shareholder will be the
same as the aggregate tax basis of the shareholder's Acquired Fund shares.
A substantial portion of the portfolio assets of the Acquired Fund may be
sold in connection with the Merger. The actual tax impact of such sales will
depend on the difference between the price at which such portfolio assets are
sold and the Acquired Fund's basis in such assets. Any capital gains recognized
in these sales will be distributed to the Acquired Fund's shareholders as
capital gain dividends (to the extent of net realized long-term capital gains)
and/or ordinary dividends (to the extent of net realized long-term capital
gains) during or with respect to the year of sale, and such distributions will
be taxable to the shareholders. See "Information about the Mergers--Federal
Income Tax Consequences."
Comparison of Investment Objectives, Policies and Restrictions
The Acquiring Fund has investment objectives that are generally similar to
those of the Acquired Fund. Both Funds seek to provide a high level of current
income that is exempt from federal income tax while protecting investor capital;
however, unlike the Acquired Fund, the Acquiring Fund does not seek to ensure
that the value of its shares is exempt from Florida intangible personal property
tax. As a result, it is likely that holders of Merger Shares who are subject to
the Florida intangible personal property tax will be so taxed on the value of
such shares. In this event, the effective after-tax return obtained as a result
of holding Merger Shares would be lower for holders subject to the Florida
intangible personal property tax. The significance of this differential may be
lessened by the fact that the Florida intangible personal property tax has
recently been reduced and proposals have been made which, if implemented, would
eliminate the tax entirely. However, it is not certain that such proposals
will ever be so adopted or implemented.
The total return for the Acquired Fund and the Acquiring Fund is set forth
in the chart below.
Total Return Comparison
As of 6/30/00*
<TABLE>
<CAPTION>
Since Since
5 Years 10 Years 1/3/77 6/9/93
1 Year Annualized Annualized Annualized Annualized
------ ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Tax-Exempt
Bond Fund............ (3.03)% 3.68% 5.75% 5.70% N/A
Florida Insured
Municipal Fund...... (4.23)% 4.48% N/A N/A 3.86%
</TABLE>
* Performance is for Class A shares of both Funds. Fund performance data is
after all expenses and sales charges. For further information about each Fund's
performance, including information about waivers/ reimbursements that affected
the Fund's performance, see the Fund Prospectus.
** Since Acquired Fund Class A inception.
It is a fundamental policy of both Funds to invest at least 80% of the
value of its total assets (except when maintaining a temporary defensive
position) in municipal obligations, including inverse floating rate obligations.
However, with respect to such 80%, the Acquiring Fund specifically limits its
investments to municipal bonds, municipal notes and securities of affiliated
tax-exempt mutual funds, while the Acquired Fund must invest such 80% in insured
Florida obligations.
The Acquiring Fund may invest up to 35% of its assets in lower-rated
securities ("junk bonds"). The following chart sets forth, for each bond grade
in Moody's rating system, the percentage of assets of the Acquiring Fund which
are invested in obligations currently rated by Moody's or Standard & Poor's, as
applicable, to be of that grade.
<TABLE>
<CAPTION>
----------------------------------------
PERCENTAGE OF ASSETS
CREDIT RATINGS AS OF 3/31/00
-------------- --------------------
<S> <C>
AAA 43.6%
AA 27.7%
A 13.2%
BBB 10.2%
BB 0.0%
Unrated Securities 5.3%
---------------------------------------
</TABLE>
7
<PAGE> 11
Both Funds may invest in interest rate futures and options.
Both Funds may invest in certain municipal obligations issued to finance
private activities, such as airports, housing projects, student loan programs,
water and sewer projects and certain other projects. Interest on such private
activity bonds is a specific tax preference item for purposes of the federal
individual and corporate alternative minimum taxes ("AMT"). The Acquired Fund
may invest without limitation in AMT-subject bonds, whereas the Acquiring Fund
limits these instruments to 20% of its total assets.
With respect to the maintenance of temporary defensive positions, the
Acquired Fund may invest without limitation in taxable short-term instruments
and securities of unaffiliated money market mutual funds, but the Acquiring Fund
may only invest up to 50% of its portfolio in taxable short term investments
such as U.S. Government securities, commercial paper rated in the highest grade
by either Standard & Poor's or Moody's, time or demand deposits in U.S. banks,
and repurchase agreements relating to municipalities.
For a more detailed description of the investment techniques used by the
Acquired Fund and the Acquiring Fund, please see the Fund Prospectus and the
Fund SAI.
Comparison of Distribution Policies and Purchase, Exchange and Redemption
Procedures
The Acquired Fund and the Acquiring Fund each declare dividends daily and
pay them monthly. Both Funds also distribute any net realized capital gains at
least annually.
The Acquired Fund and the Acquiring Fund have the same procedures for
purchasing shares, as described in the Fund Prospectus.
Shares of each Fund can be exchanged for shares of the same class of any
other fund or portfolio offered by the WM Group of Funds.
See the Fund Prospectus and the Fund SAI for further information.
Advisory Services
WM Advisors, Inc. (the "Advisor"), the investment advisor to both Trusts,
has been in the business of investment management since 1944. The advisor has
delegated responsibility for managing the portfolios of both the Acquired Fund
and the Acquiring Fund to a sub-advisor. The sub-advisor is Van Kampen
Management, Inc. ("Van Kampen"), One Parkview Plaza, Oakbrook, Illinois 60181.
Van Kampen is an indirect wholly-owned subsidiary of Morgan Stanley, Dean
Witter, Discover & Co., a publicly held global financial services company. Van
Kampen provides investment advice to a wide variety of individual, institutional
and investment company clients and, together with its affiliates, had aggregate
assets under management or supervision of more than $64 billion, as of December
31, 1999.
8
<PAGE> 12
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RISK FACTORS
Certain risks associated with an investment in the Acquiring Fund are
summarized below. Because the Acquiring Fund and the Acquired Fund share certain
policies described more fully above under "Overview of Mergers--Comparisons of
Investment Objectives, Policies and Restrictions," many of the risks of an
investment in the Acquiring Fund are substantially similar to the risks of an
investment in the Acquired Fund.
The values of all securities and other instruments held by the Acquiring
Fund vary from time to time in response to a wide variety of market factors.
Consequently, the net asset value per share of the Acquiring Fund will vary, and
may be less at the time of redemption than it was at the time of investment.
Market Risk
The Acquiring Fund is subject to market risk, which is the general risk of
unfavorable changes in the market value of a Fund's portfolio securities.
One aspect of market risk is interest rate risk. As interest rates rise,
your investment in the Acquiring Fund is likely to be worth less. This risk may
be compounded in the case of the Acquiring Fund, as it invests in mortgage-
backed or other asset-backed securities that may be prepaid. These securities
have variable maturities that tend to lengthen when that is least desirable -
when interest rates are rising.
Credit Risk
The Acquiring Fund may be subject to credit risk, as it invests in fixed-
income securities. This is the risk that the issuer or the guarantor of a debt
security, or the counterparty to any of a Fund's portfolio transactions
(including without limitation repurchase agreements, reverse repurchase
agreements, lending of securities and other over-the-counter transactions), will
be unable or unwilling to make timely principal and/or interest payments, or to
otherwise honor its obligations. Varying degrees of credit risk, often reflected
in credit ratings, apply. Credit risk is particularly significant for the
Acquiring Fund as it may from time to time invest significantly in lower-rated
securities. These securities and similar unrated securities (commonly known as
"junk bonds") have speculative elements or are predominantly speculative credit
risks.
Leveraging Risk
When the Acquiring Fund borrows money or otherwise leverages its portfolio,
the value of an investment in the Acquiring Fund will be more volatile and all
other risks will tend to be compounded. The Acquiring Fund may achieve leverage
through the use of inverse floating rate investments.
Derivatives Risk
The Acquiring Fund may, subject to the limitations and restrictions stated
elsewhere in this Proxy Statement/Prospectus and the Fund SAI, enter into
strategic transactions involving derivatives such as futures contracts which are
financial contracts whose value depends on, or is derived from, the value of
something else, such as an underlying asset, reference rate or
9
<PAGE> 13
index. In addition to other risks such as the credit risk of the counterparty,
derivatives involve the risk of mispricing or improper valuation and the risk
that changes in the value of the derivative may not correlate perfectly with
relevant assets, rates and indices.
Liquidity Risk
Liquidity risk exists when particular investments are difficult to purchase
or sell, possibly preventing a fund from selling out of these illiquid
securities at an advantageous price. The Acquiring Fund may be subject to
liquidity risk.
Management Risk
The Acquiring Fund is subject to management risk because it is an actively
managed investment portfolio. WM Advisors, or Van Kampen will apply its
investment techniques and risk analyses in making investment decisions for the
Acquiring Fund, but there can be no guarantee that they will meet stated
objectives or produce desired results. In some cases derivatives and other
investments may be unavailable or WM Advisors or Van Kampen may choose not to
use them under market conditions when their use, in hindsight, may be determined
to have been beneficial to the Acquiring Fund.
Tax Risk
The Acquiring Fund is subject to the risk that some or all of the income it
receives might become taxable by law or be determined by the Internal Revenue
Service (or the relevant state tax authority) to be taxable. In this event, the
value of the Acquiring Fund's investments would likely fall, and some or all of
the income distributions paid by the Acquiring Fund might become taxable. In
addition, some or all of the income distributions paid by the Fund may be
subject to federal alternative minimum income tax.
Additionally, the Acquiring Fund does not specifically seek to ensure that
the value of its shares is exempt from Florida intangible personal property tax.
As a result, it is likely that holders of Merger Shares who are otherwise
subject to the Florida intangible personal property tax will be so taxed on the
value of such shares. In this event, the effective after-tax return obtained as
a result of holding Merger Shares would be lower for holders subject to the
Florida intangible personal property tax. The significance of this differential
may be lessened by the fact that the Florida intangible personal property tax
has recently been reduced and proposals have been made which, if implemented,
would eliminate the tax entirely. However, it is not certain that such
proposals will ever be so adopted or implemented.
10
<PAGE> 14
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SPECIAL MEETING OF SHAREHOLDERS
This Prospectus/Proxy Statement is being furnished in connection with a
Special Meeting of Shareholders of the Acquired Fund to be held on November 1,
2000 or at such later time made necessary by adjournment (the "Meeting") and
the solicitation of proxies by and on behalf of the shareholders of the Acquired
Funds for use at the Meeting. The Meeting is being held to consider the proposed
Merger of the Acquired Fund with the Acquiring Fund by the transfer of all of
the Acquired Fund's assets and liabilities to the Acquiring Fund. This
Prospectus/Proxy Statement and the enclosed form of proxy are being mailed to
shareholders on or about September ____ 2000.
The Trustees know of no matters other than those set forth herein to be
brought before the Meeting. If, however, any other matters properly come before
the Meeting, it is the Trustees' intention that proxies will be voted on such
matters in accordance with the judgment of the persons named in the enclosed
form of proxy.
-------------------------------------------------------------------------------
THE PROPOSAL:
APPROVAL OR DISAPPROVAL OF AGREEMENT AND PLAN OF REORGANIZATION
Shareholders of the Acquired Fund are being asked to approve or disapprove
a Merger between the Acquired Fund and the Acquiring Fund. The Merger is
proposed to take place pursuant to an Agreement and Plan of Reorganization
between the Acquired Fund and the Acquiring Fund (the "Agreement") in the form
attached to this Prospectus/Proxy Statement as Appendix A.
The Agreement provides, among other things, for the transfer of all of the
assets of the Acquired Fund to the Acquiring Fund in exchange for (i) the
issuance to the Acquired Fund of the Class A and Class B Merger Shares, the
number of which will be calculated based on the value of the net assets
attributable to the Class A and Class B shares, respectively, of the Acquired
Fund acquired by the Acquiring Fund and the net asset value per Class A and
Class B shares of the Acquiring Fund and (ii) the assumption by the Acquiring
Fund of all of the liabilities of the Acquired Fund, all as more fully described
below under "Information About the Mergers."
After receipt of the Merger Shares, each Acquired Fund will cause the Class
A Merger Shares to be distributed to its Class A shareholders, and the Class B
Merger Shares to be distributed to its Class B shareholders, in complete
liquidation of the Acquired Fund. Each shareholder of the Acquired Fund will
receive a number of full and fractional Class A and Class B Merger Shares equal
in value at the date of the exchange to the aggregate value of the shareholder's
Class A and Class B Acquired Fund shares.
11
<PAGE> 15
Trustees' Recommendations. The Board of Trustees has voted unanimously to
approve the Merger and to recommend that shareholders of the Acquired Fund also
approve the Merger.
Required Shareholder Vote. Approval of the Merger requires the approval not
only of a majority of the Trustees, but also of a "majority of the outstanding
voting securities" of the fund, as defined in the 1940 Act, which means the
lesser of (A) 67% or more of the shares of the fund present at a meeting, if the
holders of more than 50% of the outstanding shares of the fund are present or
represented by proxy, or (B) more than 50% of the outstanding shares of the
fund.
Background and Reasons for the Proposed Merger
The Board of Trustees, including all of its Trustees who are not
"interested persons" of the Funds (the "Independent Trustees"), has unanimously
determined that the Merger would be in the best interests of the Funds, and that
the interests of the Funds' shareholders would not be diluted as a result of
effecting the Merger. At a meeting held on June 6, 2000, the Trustees
unanimously approved the proposed Merger and recommended its approval by
shareholders. Before reaching their conclusions, the Board considered (i) that
the Advisor will be bearing the expenses associated with the Merger, including
those described under "Information about the Merger," (ii) that the portfolio
manager of the Acquired Fund and the other service providers to the Acquired
Fund would not change, (iii) the decreased overall expenses expected to be borne
by Acquired Fund shareholders, (iv) the presently unfavorable conditions in the
Florida municipal bond market, (v) the prospects for growth of the Acquiring
Fund, possibly enabling further economies of scale and even lower management
fees for all shareholders of the Fund in the future, and (vi) the difficulties
of managing the Acquired Fund as its assets continue to shrink. In addition, the
Board took into account the relative historical investment performance of the
Acquiring Fund and the Acquired Fund. Furthermore, the Trustees took into
account the capital loss carry-forwards for the Acquired Fund and the Acquiring
Fund, and the unrealized capital appreciation in each Acquired Fund and in the
Acquiring Fund, in each case as a percentage of the Fund's total net assets.
Those percentages as of June 30, 2000 were as follows:
<TABLE>
<CAPTION>
Unrealized
Capital
Capital Loss Carry- Appreciation (as
Forwards (as a % of a % of total net
total net assets) on assets) on
Fund 6/30/00 6/30/00
---- -------------------- ------------------
<S> <C> <C>
Tax-Exempt Bond
Fund........................... 1.3% 2.8%
Florida Insured
Municipal
Fund........................... 14.5% 1.4%
</TABLE>
The principal reasons why the Board of Trustees is recommending the Merger
are as follows:
(i) Sustainable decreases in overall expenses. The Merger is expected to result
in aggregate operating expenses that would be lower than those expected to be
borne by the Acquired Fund as described more fully in the Overview under
"Operating Expenses." Of course, there can be no assurance that the Merger will
result in savings in operating expenses to shareholders.
12
<PAGE> 16
(ii) Appropriate investment objectives, diversification, etc. The investment
objective, policies, and restrictions of the Acquiring Fund are generally
similar to those of the Acquired Fund, with the exception that the Acquiring
Fund does not seek to ensure that the value of its assets is exempt from the
Florida intangible personal property tax. The Trustees believe that an
investment in shares of the Acquiring Fund (whose portfolio will have been
combined with that of the Acquired Fund) will provide shareholders with an
investment opportunity comparable to that currently afforded by the Acquired
Fund, with the potential for reduced investment risk because of the
opportunities for additional diversification of portfolio investments through
increased Fund assets.
Information About the Mergers
Agreement and Plan of Reorganization. The proposed Agreement and Plan of
Reorganization provides that the Acquiring Fund will acquire all of the assets
of the Acquired Fund in exchange for the issuance of the Class A and Class B
Merger Shares and for the assumption by the Acquiring Fund of all of the
liabilities of the Acquired Fund, all as of the Exchange Date (defined in each
Agreement to be November 1, 2000 or such other date as may be agreed upon by the
Acquiring Fund and the Acquired Fund). The following discussion of the
Agreements is qualified in its entirety by the full text of each Agreement, the
form of which is attached as Appendix A to this Prospectus/Proxy Statement.
The Acquired Fund will sell all of its assets to the Acquiring Fund, and,
in exchange, the Acquiring Fund will assume all of the liabilities of the
Acquired Fund and deliver to the Acquired Fund (i) a number of full and
fractional Class A Merger Shares having an aggregate net asset value equal to
the value of the assets of the Acquired Fund attributable to its Class A shares,
less the value of the liabilities of the Acquired Fund assumed by the Acquiring
Fund attributable to the Class A shares of the Acquired Fund, and (ii) a number
of full and fractional Class B Merger Shares having an aggregate net asset value
equal to the value of assets of the Acquired Fund attributable to its Class B
shares, less the value of the liabilities of the Acquired Fund assumed by the
Acquiring Fund attributable to the Class B shares of the Acquired Fund.
Immediately following the Exchange Date, each Acquired Fund will distribute
pro rata to its shareholders of record as of the close of business on the
Exchange Date the full and fractional Merger Shares received by the Acquired
Fund, with Class A Merger Shares being distributed to holders of Class A shares
of the Acquired Fund and Class B Merger Shares being distributed to holders of
Class B
13
<PAGE> 17
shares of the Acquired Fund. As a result of the proposed transaction, each
holder of Class A and Class B shares of the Acquired Fund will receive a number
of Class A and Class B Merger Shares equal in aggregate value at the Exchange
Date to the value of the Class A and Class B shares of the Acquired Fund held by
the shareholder. This distribution will be accomplished by the establishment of
accounts on the share records of the Acquiring Fund in the names of the Acquired
Fund shareholders, each account representing the respective number of full and
fractional Class A and Class B Merger Shares due such shareholder. Because the
shares of the Acquiring Fund will not be represented by certificates,
certificates for Merger Shares will not be issued.
The consummation of each Merger is subject to the conditions set forth in
the Agreement, any of which may be waived, except for the condition requiring
shareholder approval of the Agreement. The Agreement may be terminated and the
Merger abandoned at any time, before or after approval by the shareholders of
the Acquired Fund, prior to the Exchange Date, by mutual consent of the Funds
or, if any condition set forth in the Agreement has not been fulfilled and has
not been waived by the party entitled to its benefits, by such party.
All legal and accounting fees and expenses, printing other fees and
expenses (other than portfolio transfer taxes (if any), brokerage and other
similar expenses, all of which will be borne by the relevant Fund) incurred in
connection with the consummation of the transactions contemplated by the
Agreement will be borne by WM Advisors, Inc. Notwithstanding the foregoing,
expenses will in any event be paid by the party directly incurring such expenses
if and to the extent that the payment by any other party of such expenses would
result in the disqualification of the first party as a "regulated investment
company" within the meaning of Section 851 of the Internal Revenue Code of 1986,
as amended (the "Code").
Description of the Merger Shares. Full and fractional Merger Shares will be
issued to the Acquired Fund's shareholders in accordance with the procedure
under the Agreement as described above. The Merger Shares are Class A and Class
B shares of the Acquiring Fund, which have characteristics identical to those of
the corresponding class of Acquired Fund shares with respect to sales charges,
CDSCs, conversion and 12b-1 servicing and distribution fees. For purposes of
determining the CDSC payable on redemption of Class B Merger Shares received by
holders of Class B shares of the Acquired Fund, such shares will be treated as
having been purchased as of the dates that, and for the price (adjusted to
reflect the Merger) at which, such shareholders originally purchased shares of
the Acquired Fund, and the CDSC will be applied at the same rate as was in
effect for the Acquiring Fund at the time the shares of the Acquired Fund were
originally purchased. For purposes of determining the conversion date of Class B
Merger Shares to Class A shares, the Merger Shares will be treated as having
been purchased as of the date that the Acquired Fund shares exchanged for such
Merger Shares were originally purchased (so that the conversion of such shares
will be unchanged by the Mergers). See the Fund Prospectus for more information
about the characteristics of Class A and Class B shares of the Funds.
Organization. Each of the Merger Shares will be fully paid and nonassessable by
the Acquiring Fund when issued, will be
14
<PAGE> 18
transferable without restriction, and will have no preemptive or conversion
rights, except that Class B Merger Shares convert automatically into Class A
shares as described above. The Amended and Restated Agreement and Declaration of
Trust of WM Trust I (the "WM Trust I Declaration of Trust") permits the Trustees
of WM Trust I to divide its shares, without shareholder approval, into two or
more series of shares representing separate investment portfolios and to further
divide any such series, without shareholder approval, into two or more classes
of shares having such preferences and special or relative rights and privileges
as the Trustees may determine, The Acquiring Fund's shares are currently divided
into two classes: Class A and Class B.
Under Massachusetts law, shareholders of a Massachusetts business trust
could, under certain circumstances, be held personally liable for the
obligations of the trust. However, the WM Trust I Declaration of Trust disclaims
shareholder liability for acts or obligations of the Acquiring Fund and requires
that notice of such disclaimer be given in each agreement, undertaking, or
obligation entered into or executed by the WM Trust I. The WM Trust I
Declaration of Trust provides for indemnification out of Acquiring Fund property
for all loss and expense of any shareholder held personally liable for the
obligations of the Acquiring Fund. Thus, the risk of a shareholder's incurring
financial loss from shareholder liability is limited to circumstances in which
the Acquiring Fund would be unable to meet its obligations. The likelihood of
such a circumstances is considered remote. The shareholders of the Acquired Fund
are currently subject to substantially the same risk of shareholder liability,
under Massachusetts law and the Master Trust Agreement of WM Trust II and the
amendments thereto (the "WM Trust II Declaration of Trust").
Except as otherwise noted below, the provisions of the WM Trust I Declaration of
Trust are substantially similar to those of the WM Trust II Declaration of
Trust. The WM Trust I Declaration of Trust provides that Trustees may be removed
by a majority of the Trustees, whereas the WM Trust II Declaration of Trust
provides that Trustees may be removed by two-thirds vote of the Trustees or by
vote of shareholders holding at least two-thirds of the outstanding shares of WM
Trust II. In addition, the WM Trust II Declaration of Trust provides that
shareholders holding 10% or more of the outstanding shares of WM Trust II may
call a meeting of shareholders to consider the removal of any Trustee. The WM
Trust I Declaration of Trust specifies no minimum number of Trustees, while the
WM Trust II Declaration of Trust specifies a minimum of two Trustees.
Unlike the WM Trust I Declaration of Trust, the WM Trust II Declaration of Trust
provides that the liquidation or merger of any fund requires the approval not
only of a majority of the Trustees, but also of a "majority of the outstanding
voting securities" of the fund, as defined in the 1940 Act, which means the
lesser of (A) 67% or more of the shares of the fund present at a meeting, if the
holders of more than 50% of the outstanding shares of the fund are present or
represented by proxy, or (B) more than 50% of the outstanding shares of the
fund. The WM Trust I Declaration of Trust requires only the vote of a majority
of the Trustees for the liquidation of any fund. The WM Trust I Declaration of
Trust provides that WM Trust I or any fund thereof may be terminated by a vote
of at least 50% of the shares of each fund entitled to vote (voting separately
by fund) or by a majority of the Trustees by written notice to shareholders,
whereas the WM Trust II Declaration of Trust
15
<PAGE> 19
provides that WM Trust II may be terminated only by both the vote of a majority
of the outstanding voting securities of each fund and the vote of a majority of
the Trustees. The WM Trust I Declaration of Trust provides that a quorum for a
meeting of shareholders is 10% of the shares entitled to vote at the meeting,
while the WM Trust II Declaration of Trust provides that a quorum for a meeting
of shareholders is a majority of the shares entitled to vote at the meeting.
Federal income tax consequences. The Merger will be a tax-free reorganization.
The Merger will be conditioned on receipt of an opinion from Ropes & Gray,
special counsel to WM Group of Funds, to the effect that, on the basis of the
existing provisions of the Code, current administrative rules and court
decisions, for federal income tax purposes: (i) under Section 361 of the Code,
no gain or loss will be recognized by the Acquired Fund as a result of the
Merger; (ii) under Section 354 of the code, no gain or loss will be recognized
by shareholders of the Acquired Fund on the distribution of Merger Shares to
them in exchange for their shares of the Acquired Fund; (iii) under Section 358
of the Code, the aggregate tax basis of the Merger Shares that the Acquired
Fund's shareholders receive in place of their Acquired Fund shares will be the
same as the aggregate basis of the Acquired Fund shares; (iv) under Section
1223(1) of the Code, an Acquired Fund's shareholder's holding period for the
Merger Shares received pursuant to the Agreement will be determined by including
the holding period for the Acquired Fund shares exchanged for the Merger Shares,
provided that the shareholder held the Acquired Fund shares as a capital asset;
(v) under Section 1032 of the Code, no gain or loss will be recognized by the
Acquiring Fund as a result of the reorganization; (vi) under Section 362(b) of
the Code, the Acquiring Fund's tax basis in the assets that the Acquiring Fund
receives from the Acquired Fund will be the same as the Acquired Fund's tax
basis in such assets; and (vii) under Section 1223(2) of the Code, the Acquiring
Fund's holding period in such assets will include the Acquired Fund's holding
period in such assets. The opinion will be based on certain factual
certifications made by officers of WM Trust I and WM Trust II, and will also be
based on customary assumptions.
A substantial portion of the portfolio assets of the Acquired Fund may be
sold in connection with the Merger. The actual tax impact of such sales will
depend on the difference between the price at which such portfolio assets are
sold and the Acquired Fund's basis in such assets. Any capital gains to be
recognized in these sales will be distributed to the Acquired Fund's
shareholders as capital gain dividends (to the extent of net realized long-term
capital gains and/or ordinary dividends (to the extent of net realized short-
term capital gains) during or with respect to the year of sale, and such
distributions will be taxable to the shareholders.
Prior to the Exchange Date, the Acquired Fund will declare a distribution
to shareholders which, together with all previous distributions, will have the
effect of distributing to shareholders of all of its investment company taxable
income (computed without regard to the deduction for dividends paid) and net
realized capital gains, if any, through the Exchange Date.
The foregoing description of the federal income tax consequences of the
Merger is made without regard to the particular circumstances of any
shareholder. Shareholders are therefore urged to consult their tax adviser as to
the specific consequences to them of the Merger, including the applicability and
effect of state, local, foreign and other taxes.
Capitalization. The following tables show the capitalization of the
Acquiring Fund and each Acquired Fund as of June 30, 2000 and of the Acquiring
Fund on a pro forma basis as of that date, giving effect to the proposed
acquisition by the Acquiring Fund of the assets and liabilities of the
Acquired Fund at net asset value:
16
<PAGE> 20
Capitalization Tables
June 30, 2000
(Unaudited)
<TABLE>
<CAPTION>
Florida Insured Tax-Exempt Pro Forma
Municipal Fund Bond Fund Combined
-------------- --------- --------
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net assets (000's omitted)
Class A....................................... $9,802 $212,012 $221,814
Class B....................................... 6,172 24,549 30,721
-------------------------------------------------------------------------------------------------------------
Shares outstanding (000's omitted)
Class A....................................... $1,019 $ 28,492 $ 29,814
Class B....................................... 643 3,299 4,129
-------------------------------------------------------------------------------------------------------------
Net asset value per share
Class A....................................... $ 9.62 $ 7.44 $ 7.44
Class B....................................... 9.62 7.44 7.44
-------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------
</TABLE>
INFORMATION ABOUT THE FUNDS
Other information regarding the Funds, including information with respect to
their investment objectives, policies and restrictions and financial history may
be found in the Fund Prospectus, the Fund SAI and the Annual Report, which are
available upon request by calling 1-800-222-5852.
Proxy materials, reports and other information filed by WM Trust I and WM Trust
II with respect to the Funds can be inspected and copied at the Securities and
Exchange Commission's public reference room located at 450 5th Street NW, Room
1200, Washington, DC 20549-6009. You may call the Commission at 1-202-942-8090
for information about the operation of the public reference room. You may also
access reports and other information about the Trusts on the EDGAR database or
the Commission's Internet site at http://www.sec.gov. You may also obtain copies
of this information, with payment of a duplication fee, by electronic request at
the following email address: public [email protected] by writing the Public
Reference Section of the Commission, Washington, D.C. 20549-6009. You may need
to refer to the following file numbers:
File No. 811-00123: WM Trust I (Tax-Exempt Bond Fund)
File No. 811-05775: WM Trust II (Florida Insured Municipal Fund)
17
<PAGE> 21
VOTING INFORMATION
Record date, quorum and method of tabulation. Shareholders of record of each
Acquired Fund at the close of business on August 31, 2000 (the "Record Date")
will be entitled to notice of and to vote at the Meeting or any adjournment
thereof. The holders of more than 50% of the shares of the Acquired Fund
outstanding at the close of business on the Record Date present in person or
represented by proxy will constitute a quorum for the Meeting. Shareholders are
entitled to one vote for each share held, with fractional shares voting
proportionally. Class A and Class B shareholders of the Acquired Fund vote
together as a single class in connection with the approval or disapproval of the
Merger. Votes cast by proxy or in person at the Meeting will be counted by
persons appointed by WM Trust II as tellers for the Meeting. The tellers will
count the total number of votes cast "for" approval of the Proposal for purposes
of determining whether sufficient affirmative votes have been cast. The tellers
will count shares represented by proxies that reflect abstentions and "broker
non-votes" (i.e., shares held by brokers or nominees as to which (i)
instructions have not been received from the beneficial owners or the persons
entitled to vote and (ii) the broker or nominee does not have the discretionary
voting power on a particular matter) as shares that are present and entitled to
vote on the matter for purposes of determining the presence of a quorum. So long
as a quorum is present, abstentions and broker non-votes have the effect of
negative votes on the Merger.
Shares outstanding and beneficial ownership. As of the Record Date, as shown on
the books of the Acquired Fund, there were issued and outstanding the following
number of shares of beneficial interest of each class of the Acquired Fund.
<TABLE>
<CAPTION>
Number of Shares
Outstanding
----------------
<S> <C>
Class A.................................................... -----------
Class B.................................................... -----------
</TABLE>
As of the Record Date, the officers and Trustees of WM Trust II as a group
beneficially owned [less than 1% of the outstanding shares of each class of the
Acquired Fund. As of June 30, 2000, to the best of the Acquired Fund's
knowledge, no person owned of record or beneficially 5% or more of the
outstanding shares of the Acquired Funds and the Acquiring Fund.]
Solicitation of Proxies. Solicitation of proxies by personal interview, mail,
and telephone, may be made by officers and Trustees of the Funds and the
employees of the Advisor. and its affiliates. The costs for solicitation of
proxies, like the other costs associated with the Merger of the Funds, will be
borne by the Advisor. See "Information About the Mergers."
The Advisor or its affiliates may call shareholders to ask if they would be
willing to have their votes recorded by telephone. The telephone voting
procedure is designed to authenticate shareholders' identities, to allow
shareholders to authorize the voting of their shares in accordance with their
instructions and to confirm that their instructions have been recorded properly.
Shareholders voting by telephone would be asked for their social security number
or other identifying information, and would be given an opportunity to authorize
proxies to vote their shares in accordance with their instructions.
18
<PAGE> 22
To ensure that the shareholders' instructions have been recorded correctly, they
will receive a confirmation of their instructions in the mail. A special toll-
free number will be available in case the information contained in the
confirmation is incorrect. Although a shareholder's vote may be taken by
telephone, each shareholder will receive a copy of this Prospectus/Proxy
Statement, and may vote by mail using the enclosed proxy card. Shareholders may
contact WM Shareholder Services at (800) 222-5852.
Revocation of proxies. Any shareholder giving a proxy has the power to revoke it
by mail (addressed to the Secretary of WM Trust II, 1201 Third Avenue, 22/nd/
Floor, Seattle, WA 98101), or in person at the Meeting, by executing a
superseding proxy, or by submitting a notice of revocation to the Secretary of
WM Trust II. All properly executed proxies received in time for the Meeting will
be voted as specified in the proxy, or, if no specification is made FOR the
proposal to implement the Merger.
Shareholder proposals at future meetings of shareholders. The Declaration of
Trust of WM Trust II does not provide for annual meetings of shareholders, and
the Acquired Fund does not currently intend to hold such a meeting for
shareholders. Shareholder proposals for inclusion in a proxy statement for any
subsequent meeting of the Acquired Fund shareholders must be received by the
Acquired Fund a reasonable period of time prior to any such meeting. If the
Merger is consummated, there will be no further meetings of the shareholders of
the Acquired Fund.
Adjournment. If sufficient votes in favor of any proposal are not received by
the time scheduled for the Meeting, the persons named as proxies may propose one
or more adjournments of the Meeting to permit further solicitation of proxies.
Any adjournment will require the affirmative vote of a plurality of the votes
cast on the question in person or by proxy at the session of the Meeting to be
adjourned. If the Meeting is adjourned only with respect to one proposal, any
other proposal may still be acted upon by the shareholders. The persons named as
proxies will vote in favor of such adjournment those proxies which they are
entitled to vote in favor of the proposal. They will vote against any such
adjournment those proxies required to be voted against the proposal.
September __, 2000
19
<PAGE> 23
Appendix A
AGREEMENT AND PLAN OF REORGANIZATION
This Agreement and Plan of Reorganization (the "Agreement") is made as of
June __, 2000 in Boston, Massachusetts, by and between WM Trust II, a
Massachusetts business trust, on behalf of its Florida Insured Municipal Fund
series (the "Acquired Fund"), and WM Trust I, a Massachusetts business trust,
on behalf of its Tax-Exempt Bond Fund series (the "Acquiring Fund").
Plan of Reorganization
(a) The Acquired Fund will sell, assign, convey, transfer and deliver to
the Acquiring Fund on the Exchange Date (as defined in Section 6) all of its
properties and assets. In consideration therefor, the Acquiring Fund shall, on
the Exchange Date, assume all of the liabilities of the Acquired Fund existing
at the Valuation Time (as defined in Section 3(c)) and deliver to the Acquired
Fund (i) a number of full and fractional Class A shares of beneficial interest
of the Acquiring Fund (the "Class A Merger Shares") having an aggregate net
asset value equal to the value of the assets of the Acquired Fund attributable
to the Class A shares of the Acquired Fund transferred to the Acquiring Fund on
such date less the value of the liabilities of the Acquired Fund attributable to
the Class A shares of the Acquired Fund assumed by the Acquiring Fund on that
date, and (ii) a number of full and fractional Class B shares of beneficial
interest of the Acquiring Fund (the "Class B Merger Shares") having an aggregate
net asset value equal to the value of the assets of the Acquired Fund
attributable to the Class B shares of the Acquired Fund transferred to the
Acquiring Fund on such date less the value of the liabilities of the Acquired
Fund attributable to the Class B shares of the Acquired Fund assumed by the
Acquiring Fund on that date. (The Class A Merger Shares and the Class B Merger
Shares shall be referred to collectively as the "Merger Shares"). It is intended
that the reorganization described in this Agreement shall be a reorganization
within the meaning of Section 368 of the Internal Revenue Code of 1986, as
amended (the "Code").
(b) Upon consummation of the transaction described in paragraph (a) of this
Agreement, the Acquired Fund shall distribute in complete liquidation to its
Class A and Class B shareholders of record as of the Exchange Date the Class A
and Class B Merger Shares, each such shareholder being entitled to receive that
proportion of such Class A and Class B Merger Shares which the number of Class A
and Class B shares of beneficial interest of the Acquired Fund held by such
shareholder bears to the number of Class A and Class B shares of the Acquired
Fund outstanding on such date. Certificates representing the Class A and Class B
Merger Shares will not be issued. All issued and outstanding Class A and Class B
shares of the Acquired Fund will simultaneously be canceled on the books of the
Acquired Fund.
(c) As promptly as practicable after the liquidation of the Acquired Fund
as aforesaid, the Acquired Fund shall be dissolved pursuant to the provisions of
the Amended and Restated Agreement and Declaration of Trust of WM Trust II (the
"WM Trust II Declaration of Trust"), as amended, and applicable law, and its
legal existence terminated. Any reporting responsibility
1
<PAGE> 24
of the Acquired Fund is and shall remain the responsibility of the Acquired Fund
up to and including the Exchange Date and, if applicable, such later date on
which the Acquired Fund is liquidated.
Agreement
The Acquiring Fund and the Acquired Fund agree as follows:
1. Representations, Warranties and Agreements of the Acquiring Fund. The
Acquiring Fund represents and warrants to and agrees with the Acquired Fund
that:
a. The Acquiring Fund is a series of WM Trust I, a Massachusetts business
trust duly established and validly existing under the laws of The Commonwealth
of Massachusetts, and has power to own all of its properties and assets and to
carry out its obligations under this Agreement. WM Trust I is qualified as a
foreign association in every jurisdiction where required, except to the extent
that failure to so qualify would not have a material adverse effect on WM Trust
I. Each of WM Trust I and the Acquiring Fund has all necessary federal, state
and local authorizations to carry on its business as now being conducted and to
carry out this Agreement.
b. Reserved
c. The statement of assets and liabilities, statement of operations,
statement of changes in net assets and a schedule of investments (indicating
their market values) of the Acquiring Fund as of and for the year ended October
31, 1999 have been furnished to the Acquired Fund. Such statement of assets and
liabilities and schedule fairly present the financial position of the Acquiring
Fund as of that date and such statements of operations and changes in net assets
fairly reflect the results of its operations and changes in net assets for the
periods covered thereby in conformity with generally accepted accounting
principles.
d. The current prospectus and statement of additional information of WM
Group of Funds, each dated March 1, 2000, and as supplemented on March 2, 2000
and March 22, 2000 (collectively, as from time to time amended, the
"Prospectus"), which have previously been furnished to the Acquired Fund, did
not as of such date and does not contain as of the date hereof, with respect to
the Acquiring Fund, any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading.
e. There are no material legal, administrative or other proceedings pending
or, to the knowledge of WM Trust I or the Acquiring Fund, threatened against WM
Trust I or the Acquiring Fund which assert liability on the part of the
Acquiring Fund. The Acquiring Fund knows of no facts which might form the basis
for the institution of such proceedings and is not a party to or subject to the
provisions of any order, decree or judgment of any court or governmental body
which materially and adversely affects its business or its ability to consummate
the transactions herein contemplated.
2
<PAGE> 25
f. The Acquiring Fund has no known liabilities of a material nature,
contingent or otherwise, other than those shown belonging to it on its statement
of assets and liabilities as of October 31, 1999, those incurred in the ordinary
course of its business as an investment company since October 31, 1999 and those
to be assumed pursuant to this Agreement. Prior to the Exchange Date, the
Acquiring Fund will endeavor to quantify and to reflect on its balance sheet all
of its material known liabilities and will advise the Acquired Fund of all
material liabilities, contingent or otherwise, incurred by it subsequent to
October 31, 1999, whether or not incurred in the ordinary course of business.
g. As of the Exchange Date, the Acquiring Fund will have filed all federal
and other tax returns and reports which, to the knowledge of WM Trust I's
officers, are required to have been filed by the Acquiring Fund and will have
paid or will pay all federal and other taxes shown to be due on said returns or
on any assessments received by the Acquiring Fund. All tax liabilities of the
Acquiring Fund have been adequately provided for on its books, and no tax
deficiency or liability of the Acquiring Fund has been asserted, and no question
with respect thereto has been raised or is under audit, by the Internal Revenue
Service or by any state or local tax authority for taxes in excess of those
already paid.
h. No consent, approval, authorization or order of any court or
governmental authority is required for the consummation by the Acquiring Fund of
the transactions contemplated by this Agreement, except such as may be required
under the Securities Act of 1933, as amended (the "1933 Act"), the Securities
Exchange Act of 1934, as amended (the "1934 Act"), the Investment Company Act of
1940, as amended (the "1940 Act") and state insurance, securities or blue sky
laws (which term as used herein shall include the laws of the District of
Columbia and of Puerto Rico).
i. The registration statement (the "Registration Statement") filed with the
Securities and Exchange Commission (the "Commission") by WM Trust I on Form N-14
on behalf of the Acquiring Fund and relating to the Merger Shares issuable
hereunder and the proxy statement of the Acquired Fund relating to the meeting
of the Acquired Fund shareholders referred to in Section 7(a) herein (together
with the documents incorporated therein by reference, the "Acquired Fund Proxy
Statement"), on the effective date of the Registration Statement, (i) will
comply in all material respects with the provisions of the 1933 Act, the 1934
Act and the 1940 Act and the rules and regulations thereunder and (ii) will not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading; and at the time of the shareholders meeting referred to in Section
7(a) and on the Exchange Date, the prospectus which is contained in the
Registration Statement, as amended or supplemented by any amendments or
supplements filed with the Commission by WM Trust I, and the Acquired Fund Proxy
Statement will not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading; provided, however, that none of the
representations and warranties in this subsection shall apply to statements in
or omissions from the Registration Statement or the Acquired Fund Proxy
Statement made in reliance upon and in conformity with information furnished in
writing by the Acquired Fund to the Acquiring Fund specifically for use in the
Registration Statement or the Acquired Fund Proxy Statement.
3
<PAGE> 26
j. There are no material contracts outstanding to which the Acquiring Fund
is a party, other than as are or will be disclosed in the Prospectus, the
Registration Statement or the Acquired Fund Proxy Statement.
k. All of the issued and outstanding shares of beneficial interest of the
Acquiring Fund have been offered for sale and sold in conformity with all
applicable federal and state securities laws (including any applicable
exemptions therefrom), or the Acquiring Fund has taken any action necessary to
remedy any prior failure to have offered for sale and sold such shares in
conformity with such laws.
l. The Acquiring Fund qualifies and will at all times through the Exchange
Date qualify for taxation as a "regulated investment company" under Sections 851
and 852 of the Code.
m. The issuance of the Merger Shares pursuant to this Agreement will be in
compliance with all applicable federal and state securities laws.
n. The Merger Shares to be issued to the Acquired Fund have been duly
authorized and, when issued and delivered pursuant to this Agreement, will be
legally and validly issued and will be fully paid and non-assessable by the
Acquiring Fund, and no shareholder of the Acquiring Fund will have any
preemptive right of subscription or purchase in respect thereof.
o. All issued and outstanding shares of the Acquiring Fund are, and at the
Exchange Date will be, duly authorized, validly issued, fully paid and non-
assessable by the Acquiring Fund. The Acquiring Fund does not have outstanding
any options, warrants or other rights to subscribe for or purchase any Acquiring
Fund shares, nor is there outstanding any security convertible into any
Acquiring Fund shares.
2. Representations, Warranties and Agreements of the Acquired Fund. The
Acquired Fund represents and warrants to and agrees with the Acquiring Fund
that:
a. The Acquired Fund is a series of WM Trust II, a Massachusetts business
trust duly established and validly existing under the laws of The Commonwealth
of Massachusetts, and has power to own all of its properties and assets and to
carry out this Agreement. WM Trust II is qualified as a foreign association in
every jurisdiction where required, except to the extent that failure to so
qualify would not have a material adverse effect on WM Trust II. Each of WM
Trust II and the Acquired Fund has all necessary federal, state and local
authorizations to own all of its properties and assets and to carry on its
business as now being conducted and to carry out this Agreement.
b. Reserved
c. A statement of assets and liabilities, statement of operations,
statement of changes in net assets and a schedule of investments (indicating
their market values) of the Acquired Fund as of and for the year ended October
31, 1999 have been furnished to the Acquiring Fund. Such
4
<PAGE> 27
statement of assets and liabilities and schedule fairly present the financial
position of the Acquired Fund as of that date, and such statements of operations
and changes in net assets fairly reflect the results of its operations and
changes in net assets for the period covered thereby, in conformity with
generally accepted accounting principles.
d. The Prospectus, which has been previously furnished to the Acquiring
Fund, did not contain as of such dates and does not contain, with respect to the
Acquired Fund, any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading.
e. There are no material legal, administrative or other proceedings pending
or, to the knowledge of WM Trust II or the Acquired Fund, threatened against WM
Trust II or the Acquired Fund, which assert liability on the part of the
Acquired Fund. The Acquired Fund knows of no facts which might form the basis
for the institution of such proceedings and is not a party to or subject to the
provisions of any order, decree or judgment of any court or governmental body
which materially and adversely affects its business or its ability to consummate
the transactions herein contemplated.
f. There are no material contracts outstanding to which the Acquired Fund
is a party, other than as are disclosed in the WM Trust II registration
statement on Form N-1A or the Prospectus.
g. The Acquired Fund has no known liabilities of a material nature,
contingent or otherwise, other than those shown on the Acquired Fund's statement
of assets and liabilities as of October 31, 1999 referred to above and those
incurred in the ordinary course of its business as an investment company since
such date. Prior to the Exchange Date, the Acquired Fund will endeavor to
quantify and to reflect on its balance sheet all of its material known
liabilities and will advise the Acquiring Fund of all material liabilities,
contingent or otherwise, incurred by it subsequent to October 31, 1999, whether
or not incurred in the ordinary course of business.
h. As of the Exchange Date, the Acquired Fund will have filed all federal
and other tax returns and reports which, to the knowledge of WM Trust II's
officers, are required to have been filed by the Acquired Fund and has paid or
will pay all federal and other taxes shown to be due on said returns or on any
assessments received by the Acquired Fund. All tax liabilities of the Acquired
Fund have been adequately provided for on its books, and no tax deficiency or
liability of the Acquired Fund has been asserted, and no question with respect
thereto has been raised or is under audit, by the Internal Revenue Service or by
any state or local tax authority for taxes in excess of those already paid.
i. At the Exchange Date, WM Trust II, on behalf of the Acquired Fund, will
have full right, power and authority to sell, assign, transfer and deliver the
Investments (as defined below) and any other assets and liabilities of the
Acquired Fund to be transferred to the Acquiring Fund pursuant to this
Agreement. At the Exchange Date, subject only to the delivery of the Investments
and any such other assets and liabilities as contemplated by this Agreement, the
Acquiring Fund will acquire the Investments and any such other assets and
liabilities subject to no encumbrances, liens or security interests whatsoever
and without any restrictions upon the
5
<PAGE> 28
transfer thereof, except as previously disclosed to the Acquiring Fund. As used
in this Agreement, the term "Investments" shall mean the Acquired Fund's
investments shown on the schedule of its investments as of October 31, 1999
referred to in Section 2(c) hereof, as supplemented with such changes in the
portfolio as the Acquired Fund shall make, and changes resulting from stock
dividends, stock split-ups, mergers and similar corporate actions through the
Exchange Date.
j. No registration under the 1933 Act of any of the Investments would be
required if they were, as of the time of such transfer, the subject of a public
distribution by either of the Acquiring Fund or the Acquired Fund, except as
previously disclosed to the Acquiring Fund by the Acquired Fund.
k. No consent, approval, authorization or order of any court or
governmental authority is required for the consummation by the Acquired Fund of
the transactions contemplated by this Agreement, except such as may be required
under the 1933 Act, 1934 Act, the 1940 Act or state insurance, securities or
blue sky laws.
l. The Registration Statement and the Acquired Fund Proxy Statement, on the
effective date of the Registration Statement, (i) will comply in all material
respects with the provisions of the 1933 Act, the 1934 Act and the 1940 Act and
the rules and regulations thereunder and (ii) will not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading; and
at the time of the shareholders meeting referred to in Section 7(a) and on the
Exchange Date, the Acquired Fund Proxy Statement and the Registration Statement
will not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading; provided, however, that none of the representations and
warranties in this subsection shall apply to statements in or omissions from the
Registration Statement or the Acquired Fund Proxy Statement made in reliance
upon and in conformity with information furnished in writing by the Acquiring
Fund to the Acquired Fund or North American Funds specifically for use in the
Registration Statement or the Acquired Fund Proxy Statement.
m. The Acquired Fund qualifies and will at all times through the Exchange
Date qualify for taxation as a "regulated investment company" under Section 851
and 852 of the Code.
n. At the Exchange Date, the Acquired Fund will have sold such of its
assets, if any, as are necessary to assure that, after giving effect to the
acquisition of the assets of the Acquired Fund pursuant to this Agreement, the
Acquiring Fund will remain a "diversified company" within the meaning of Section
5(b)(1) of the 1940 Act and in compliance with such other mandatory investment
restrictions as are set forth in the Prospectus, as amended through the Exchange
Date. Notwithstanding the foregoing, nothing herein will require the Acquired
Fund to dispose of any assets if, in the reasonable judgment of the Acquired
Fund, such disposition would adversely affect the tax-free nature of the
reorganization or would violate the Acquired Fund's fiduciary duty to its
shareholders.
6
<PAGE> 29
o. All of the issued and outstanding shares of beneficial interest of the
Acquired Fund shall have been offered for sale and sold in conformity with all
applicable federal and state securities laws (including any applicable
exemptions therefrom), or the Acquired Fund has taken any action necessary to
remedy any prior failure to have offered for sale and sold such shares in
conformity with such laws.
p. All issued and outstanding shares of the Acquired Fund are, and at the
Exchange Date will be, duly authorized, validly issued, fully paid and non-
assessable by the Acquired Fund. The Acquired Fund does not have outstanding any
options, warrants or other rights to subscribe for or purchase any of the
Acquired Fund shares, nor is there outstanding any security convertible into any
of the Acquired Fund shares.
3. Reorganization.
a. Subject to the requisite approval of the shareholders of the Acquired
Fund and to the other terms and conditions contained herein (including the
Acquired Fund's obligation to distribute to its shareholders all of its
investment company taxable income and net capital gain as described in Section
8(l)), the Acquired Fund agrees to sell, assign, convey, transfer and deliver to
the Acquiring Fund, and the Acquiring Fund agrees to acquire from the Acquired
Fund, on the Exchange Date all of the Investments and all of the cash and other
properties and assets of the Acquired Fund, whether accrued or contingent
(including cash received by the Acquired Fund upon the liquidation by the
Acquired Fund of any Investments), in exchange for that number of shares of
beneficial interest of the Acquiring Fund provided for in Section 4 and the
assumption by the Acquiring Fund of all of the liabilities of the Acquired Fund,
whether accrued or contingent, existing at the Valuation Time (as defined below)
except for the Acquired Fund's liabilities, if any, arising in connection with
this Agreement. Pursuant to this Agreement, the Acquired Fund will, as soon as
practicable after the Exchange Date, distribute all of the Class A and Class B
Merger Shares received by it to the shareholders of the Acquired Fund in
exchange for their Class A and Class B shares of the Acquired Fund.
b. The Acquired Fund will pay or cause to be paid to the Acquiring Fund any
interest, cash or such dividends, rights and other payments received by it on or
after the Exchange Date with respect to the Investments and other properties and
assets of the Acquired Fund, whether accrued or contingent, received by it on or
after the Exchange Date. Any such distribution shall be deemed included in the
assets transferred to the Acquiring Fund at the Exchange Date and shall not be
separately valued unless the securities in respect of which such distribution is
made shall have gone "ex" such distribution prior to the Valuation Time, in
which case any such distribution which remains unpaid at the Exchange Date shall
be included in the determination of the value of the assets of the Acquired Fund
acquired by the Acquiring Fund.
c. The Valuation Time shall be 4:00 p.m. Eastern time on the Exchange Date
or such earlier or later day as may be mutually agreed upon in writing by the
parties hereto (the "Valuation Time").
7
<PAGE> 30
4. Transaction. On the Exchange Date, the Acquiring Fund will deliver to
the Acquired Fund (i) a number of full and fractional Class A Merger Shares
having an aggregate net asset value equal to the value of the assets of the
Acquired Fund attributable to the Class A shares of the Acquired Fund
transferred to the Acquiring Fund on such date less the value of the liabilities
of the Acquired Fund attributable to the Class A shares of the Acquired Fund
assumed by the Acquiring Fund on that date, and (ii) a number of full and
fractional Class B Merger Shares having an aggregate net asset value equal to
the value of the assets of the Acquired Fund attributable to the Class B shares
of the Acquired Fund transferred to the Acquiring Fund on such date less the
value of the liabilities of the Acquired Fund attributable to the Class B shares
of the Acquired Fund assumed by the Acquiring Fund on that date.
a. The net asset value of the Class A and Class B Merger Shares to be
delivered to the Acquired Fund, the value of the assets attributable to the
Class A and Class B shares of the Acquired Fund, and the value of the
liabilities attributable to the Class A and Class B shares of the Acquired Fund
to be assumed by the Acquiring Fund, shall in each case be determined as of the
Valuation Time.
b. The net asset value of the Class A and Class B Merger Shares shall be
computed in the manner set forth in the Prospectus. The value of the assets and
liabilities of the Class A and Class B shares of the Acquired Fund shall be
determined by the Acquiring Fund, in cooperation with the Acquired Fund,
pursuant to procedures which the Acquiring Fund would use in determining the
fair market value of the Acquiring Fund's assets and liabilities.
c. No adjustment shall be made in the net asset value of either the
Acquired Fund or the Acquiring Fund to take into account differences in realized
and unrealized gains and losses.
d. The Acquired Fund shall distribute the Merger Shares to the shareholders
of the Acquired Fund by furnishing written instructions to the Acquiring Fund's
transfer agent, which will as soon as practicable set up open accounts for each
Acquired Fund shareholder in accordance with such written instructions.
e. The Acquiring Fund shall assume all liabilities of the Acquired Fund,
whether accrued or contingent, in connection with the acquisition of assets and
subsequent dissolution of the Acquired Fund or otherwise, except for the
Acquired Fund's liabilities, if any, pursuant to this Agreement.
5. Expenses, Fees, etc.
a. The costs of all transactions contemplated by this Agreement will be
borne by WM Advisors, Inc. ("WM Advisors"). Notwithstanding the foregoing,
expenses will be paid by the party directly incurring such expenses if and to
the extent that the payment by the other party of such expenses would result in
the disqualification of such party as a "regulated investment company" within
the meaning of Section 851 of the Code.
b. Reserved
8
<PAGE> 31
c. Reserved
d. In the event the transactions contemplated by this Agreement are not
consummated for any reason, WM Advisors and/or its affiliates shall bear all
expenses incurred in connection with such transactions.
e. Notwithstanding any other provisions of this Agreement, if for any
reason the transactions contemplated by this Agreement are not consummated, no
party shall be liable to the other party for any damages resulting therefrom,
including, without limitation, consequential damages, except as specifically set
forth above.
6. Exchange Date. Delivery of the assets of the Acquired Fund to be
transferred, assumption of the liabilities of the Acquired Fund to be assumed,
and the delivery of the Merger Shares to be issued shall be made at Boston,
Massachusetts, as of August __, 2000, or at such other date agreed to by the
Acquiring Fund and the Acquired Fund, the date and time upon which such delivery
is to take place being referred to herein as the "Exchange Date."
7. Meetings of Shareholders; Dissolution.
a. WM Trust II, on behalf of the Acquired Fund, agrees to call a meeting of
the Acquired Fund's shareholders as soon as is practicable after the effective
date of the Registration Statement for the purpose of considering the sale of
all of its assets to and the assumption of all of its liabilities by the
Acquiring Fund as herein provided and adopting this Agreement.
b. The Acquired Fund agrees that the liquidation and dissolution of the
Acquired Fund will be effected in the manner provided in the Amended and
Restated Agreement and Declaration of Trust of WM Trust II in accordance with
applicable law and that on and after the Exchange Date, the Acquired Fund shall
not conduct any business except in connection with its liquidation and
dissolution.
c. The Acquiring Fund has, in consultation with the Acquired Fund and based
in part on information furnished by the Acquired Fund, filed the Registration
Statement with the Commission. Each of the Acquired Fund and the Acquiring Fund
will cooperate with the other, and each will furnish to the other the
information relating to itself required by the 1933 Act, the 1934 Act and the
1940 Act and the rules and regulations thereunder to be set forth in the
Registration Statement.
8. Conditions to the Acquiring Fund's Obligations. The obligations of the
Acquiring Fund hereunder shall be subject to the following conditions:
a. That this Agreement shall have been adopted and the transactions
contemplated hereby shall have been approved by the requisite votes of the
holders of the outstanding shares of beneficial interest of the Acquired Fund
entitled to vote.
9
<PAGE> 32
b. That the Acquired Fund shall have furnished to the Acquiring Fund a
statement of the Acquired Fund's assets and liabilities, with values determined
as provided in Section 4 of this Agreement, together with a list of Investments
with their respective tax costs, all as of the Valuation Time, certified on the
Acquired Fund's behalf by WM Trust II's President (or any Vice President) and
Treasurer (or any Assistant Treasurer), and a certificate of both such officers,
dated the Exchange Date, that there has been no material adverse change in the
financial position of the Acquired Fund since October 31, 1999, other than
changes in the Investments and other assets and properties since that date or
changes in the market value of the Investments and other assets of the Acquired
Fund, or changes due to dividends paid or losses from operations.
c. That the Acquired Fund shall have furnished to the Acquiring Fund a
statement, dated the Exchange Date, signed by WM Trust II's President (or any
Vice President) and Treasurer (or any Assistant Treasurer) certifying that as of
the Valuation Time and as of the Exchange Date all representations and
warranties of the Acquired Fund made in this Agreement are true and correct in
all material respects as if made at and as of such dates and the Acquired Fund
has complied with all the agreements and satisfied all the conditions on its
part to be performed or satisfied at or prior to such dates.
d. Reserved
e. That there shall not be any material litigation pending with respect to
the matters contemplated by this Agreement.
f. That the Acquiring Fund shall have received an opinion of Ropes & Gray,
counsel to the Acquired Fund, in form satisfactory to counsel to the Acquiring
Fund, and dated the Exchange Date, to the effect that (i) WM Trust II is a
Massachusetts business trust duly formed and is validly existing under the laws
of The Commonwealth of Massachusetts and has the power to own all its properties
and to carry on its business as presently conducted; (ii) this Agreement has
been duly authorized, executed and delivered by WM Trust II on behalf of the
Acquired Fund and, assuming that the Registration Statement, the Prospectus and
the Acquired Fund Proxy Statement comply with the 1933 Act, the 1934 Act and the
1940 Act and assuming due authorization, execution and delivery of this
Agreement by WM Trust II on behalf of the Acquiring Fund, is a valid and binding
obligation of WM Trust II and the Acquired Fund; (iii) WM Trust II, on behalf of
the Acquired Fund, has power to sell, assign, convey, transfer and deliver the
assets contemplated hereby and, upon consummation of the transactions
contemplated hereby in accordance with the terms of this Agreement, the Acquired
Fund will have duly sold, assigned, conveyed, transferred and delivered such
assets to the Acquiring Fund; (iv) the execution and delivery of this Agreement
did not, and the consummation of the transactions contemplated hereby will not,
violate the WM Trust II Declaration of Trust or By-Laws or any provision of any
agreement known to such counsel to which WM Trust II or the Acquired Fund is a
party or by which it is bound; and (v) to the knowledge of such counsel, no
consent, approval, authorization or order of any court or governmental authority
is required for the consummation by WM Trust II on behalf of the Acquired Fund
of the transactions contemplated hereby, except such as have been obtained under
the 1933 Act, the 1934 Act and the 1940 Act and such as may be required under
state securities or blue sky laws.
10
<PAGE> 33
g. That the Acquiring Fund shall have received an opinion of Ropes & Gray
(which opinion would be based upon certain factual representations), dated the
Exchange Date, in form satisfactory to the Acquiring Fund and its counsel, to
the effect that, on the basis of the existing provisions of the Code, current
administrative rules, and court decisions, for federal income tax purposes (i)
no gain or loss will be recognized by the Acquiring Fund upon receipt of the
Investments transferred to the Acquiring Fund pursuant to this Agreement in
exchange for the Merger Shares; (ii) the tax basis to the Acquiring Fund of the
Investments will be the same as the tax basis of the Investments in the hands of
the Acquired Fund immediately prior to such exchange; and (iii) the Acquiring
Fund's holding periods with respect to the Investments will include the
respective periods for which the Investments were held by the Acquired Fund.
h. That the assets of the Acquired Fund to be acquired by the Acquiring
Fund will include no assets which the Acquiring Fund, by reason of charter
limitations or of investment restrictions disclosed in the Registration
Statement in effect on the Exchange Date, may not properly acquire.
i. That the Registration Statement shall have become effective under the
1933 Act, and no stop order suspending such effectiveness shall have been
instituted or, to the knowledge of WM Trust I or the Acquiring Fund, threatened
by the Commission.
j. That WM Trust I shall have received from the Commission, any relevant
state securities administrator and any relevant state insurance regulatory
authority such order or orders as are reasonably necessary or desirable under
the 1933 Act, the 1934 Act, the 1940 Act, and any applicable state securities or
blue sky laws or state insurance laws in connection with the transactions
contemplated hereby, and that all such orders shall be in full force and effect.
k. That all actions taken by WM Trust II on behalf of the Acquired Fund in
connection with the transactions contemplated by this Agreement and all
documents incidental thereto shall be satisfactory in form and substance to the
Acquiring Fund and its counsel.
l. That, prior to the Exchange Date, the Acquired Fund shall have declared
a dividend or dividends which, together with all previous such dividends, shall
have the effect of distributing to the shareholders of the Acquired Fund (i) all
of the excess of (x) the Acquired Fund's investment income excludable from gross
income under Section 103(a) of the Code over (y) the Acquired Fund's deductions
disallowed under Sections 265 and 171(a)(2) of the Code, (ii) all of the
Acquired Fund's investment company taxable income (as defined in Section 852 of
the Code) (computed without regard to any deduction for dividends paid), and
(iii) all of the Acquired Fund's net capital gain realized (after reduction for
any capital loss carryover), in each case for its taxable years ending on or
after October 31, 1999 and on or prior to the Exchange Date.
m. That the Acquired Fund shall have furnished to the Acquiring Fund a
certificate, signed by the President (or any Vice President) and the Treasurer
(or any Assistant Treasurer) of WM Trust II, as to the tax cost to the Acquired
Fund of the securities delivered to the Acquiring Fund pursuant to this
Agreement, together with any such other evidence as to such tax cost as the
Acquiring Fund may reasonably request.
11
<PAGE> 34
n. That the Acquired Fund's custodian shall have delivered to the Acquiring
Fund a certificate identifying all of the assets of the Acquired Fund held or
maintained by such custodian as of the Valuation Time.
o. That the Acquired Fund's transfer agent shall have provided to the
Acquiring Fund (i) the originals or true copies of all of the records of the
Acquired Fund in the possession of such transfer agent as of the Exchange Date,
(ii) a certificate setting forth the number of shares of the Acquired Fund
outstanding as of the Valuation Time, and (iii) the name and address of each
holder of record of any shares and the number of shares held of record by each
such shareholder.
p. Reserved
q. Reserved
r. Reserved
9. Conditions to the Acquired Fund's Obligations. The obligations of the
Acquired Fund hereunder shall be subject to the following conditions:
a. That this Agreement shall have been adopted and the transactions
contemplated hereby shall have been approved by the requisite votes of the
holders of the outstanding shares of beneficial interest of the Acquired Fund
entitled to vote.
b. That WM Trust I, on behalf of the Acquiring Fund, shall have executed
and delivered to the Acquired Fund an Assumption of Liabilities dated as of the
Exchange Date pursuant to which the Acquiring Fund will assume all of the
liabilities of the Acquired Fund existing at the Valuation Time in connection
with the transactions contemplated by this Agreement, other than liabilities
arising pursuant to this Agreement.
c. That the Acquiring Fund shall have furnished to the Acquired Fund a
statement, dated the Exchange Date, signed by WM Trust I's President (or any
Vice President) and Treasurer (or any Assistant Treasurer) certifying that as of
the Valuation Time and as of the Exchange Date all representations and
warranties of the Acquiring Fund made in this Agreement are true and correct in
all material respects as if made at and as of such dates, and that the Acquiring
Fund has complied with all of the agreements and satisfied all of the conditions
on its part to be performed or satisfied at or prior to each of such dates; and
that WM Trust I shall have furnished to the Acquired Fund a statement, dated the
Exchange Date, signed by an officer of WM Trust I certifying that as of the
Valuation Time and as of the Exchange Date, to the best of WM Trust I's
knowledge, after due inquiry, all representations and warranties of the
Acquiring Fund made in this Agreement are true and correct in all material
respects as if made at and as of such date.
d. That there shall not be any material litigation pending or threatened
with respect to the matters contemplated by this Agreement.
12
<PAGE> 35
e. That the Acquired Fund shall have received an opinion of Ropes & Gray,
counsel to the Acquiring Fund, in form satisfactory to counsel to the Acquired
Fund, and dated the Exchange Date, to the effect that (i) WM Trust I is a
Massachusetts business trust duly formed and is validly existing under the laws
of The Commonwealth of Massachusetts and has the power to own all its properties
and to carry on its business as presently conducted; (ii) the Merger Shares to
be delivered to the Acquired Fund as provided for by this Agreement are duly
authorized and upon such delivery will be validly issued and will be fully paid
and non-assessable by WM Trust I and the Acquiring Fund and no shareholder of
the Acquiring Fund has any preemptive right to subscription or purchase in
respect thereof; (iii) this Agreement has been duly authorized, executed and
delivered by North American Funds on behalf of the Acquiring Fund and, assuming
that the Prospectus, the Registration Statement and the Acquired Fund Proxy
Statement comply with the 1933 Act, the 1934 Act and the 1940 Act and assuming
due authorization, execution and delivery of this Agreement by WM Trust II on
behalf of the Acquired Fund, is a valid and binding obligation of WM Trust I and
the Acquiring Fund; (iv) the execution and delivery of this Agreement did not,
and the consummation of the transactions contemplated hereby will not, violate
WM Trust I's Amended and Restated Declaration of Trust ("WM Trust I Declaration
of Trust") or its By-Laws, or any provision of any agreement known to such
counsel to which WM Trust I or the Acquiring Fund is a party or by which it is
bound; (v) no consent, approval, authorization or order of any court or
governmental authority is required for the consummation by WM Trust I on behalf
of the Acquiring Fund of the transactions contemplated herein, except such as
have been obtained under the 1933 Act, the 1934 Act and the 1940 Act and such as
may be required under state securities or blue sky laws; and (vi) the
Registration Statement has become effective under the 1933 Act, and to best of
the knowledge of such counsel, no stop order suspending the effectiveness of the
Registration Statement has been issued and no proceedings for that purpose have
been instituted or are pending or contemplated under the 1933 Act. In addition,
such counsel shall also state that they have participated in conferences with
officers and other representatives of the Acquiring Fund at which the contents
of the Acquired Fund Proxy Statement and related matters were discussed, and,
although they are not passing upon and do not assume any responsibility for the
accuracy, completeness or fairness of the statements contained in the Acquired
Fund Proxy Statement, on the basis of the foregoing (relying as to materiality
to a large extent upon the opinions of officers and other representatives of the
Acquiring Fund), no facts have come to their attention that lead them to believe
that the portions of the Acquired Fund Proxy Statement relevant to the transfer
of assets contemplated by this Agreement as of its date, as of the date of the
Acquired Fund shareholders' meeting, or as of the Exchange Date, contained an
untrue statement of a material fact regarding the Acquiring Fund or omitted to
state a material fact required to be stated therein or necessary to make the
statements therein regarding the Acquiring Fund, in light of the circumstances
under which they were made, not misleading. Such opinion may state that such
counsel does not express any opinion or belief as to the financial statements or
other financial data, or as to the information relating to the Acquired Fund,
contained in the Acquired Fund Proxy Statement or the Registration Statement,
and may contain other customary or appropriate qualifications.
f. That the Acquired Fund shall have received an opinion of Ropes & Gray,
dated the Exchange Date (which opinion would be based upon certain factual
representations), in form satisfactory to the Acquired Fund and its counsel, to
the effect that, on the basis of the existing
13
<PAGE> 36
provisions of the Code, current administrative rules, and court decisions, for
federal income tax purposes: (i) no gain or loss will be recognized by the
Acquired Fund as a result of the reorganization; (ii) no gain or loss will be
recognized by shareholders of the Acquired Fund on the distribution of Merger
Shares to them in exchange for their shares of the Acquired Fund; (iii) the
aggregate tax basis of the Merger Shares that the Acquired Fund's shareholders
receive in place of their Acquired Fund shares will be the same as the aggregate
tax basis of the Acquired Fund shares; and (iv) an Acquired Fund's shareholder's
holding period for the Merger Shares received pursuant to the Agreement will be
determined by including the holding period for the Acquired Fund shares
exchanged for the Merger Shares, provided that the shareholder held the Acquired
Fund shares as a capital asset.
g. That all actions taken by WM Trust I on behalf of the Acquiring Fund in
connection with the transactions contemplated by this Agreement and all
documents incidental thereto shall be satisfactory in form and substance to the
Acquired Fund and its counsel.
h. That the Registration Statement shall have become effective under the
1933 Act, and no stop order suspending such effectiveness shall have been
instituted or, to the knowledge of North American Funds or the Acquiring Fund,
threatened by the Commission.
i. That WM Trust I shall have received from the Commission, any relevant
state securities administrator and any relevant state insurance regulatory
authority such order or orders as are reasonably necessary or desirable under
the 1933 Act, the 1934 Act, the 1940 Act, and any applicable state securities or
blue sky laws or state insurance laws in connection with the transactions
contemplated hereby, and that all such orders shall be in full force and effect.
j. Reserved
10. Reserved
11. Waiver of Conditions. Each of the Acquired Fund or the Acquiring Fund,
after consultation with counsel and by consent of its Board of Trustees behalf,
or an officer authorized by such trustees, may waive any condition to their
respective obligations hereunder, except for the conditions set forth in
Sections 8(a) and 9(a).
12. No Broker, etc. Each of the Acquired Fund and the Acquiring Fund
represents that there is no person who has dealt with it or the Trust of which
such fund is a series who by reason of such dealings is entitled to any broker's
or finder's or other similar fee or commission arising out of the transactions
contemplated by this Agreement.
13. Termination. The Acquired Fund and the Acquiring Fund may, by consent
of its Board of Trustees on behalf of each Fund, terminate this Agreement. If
the transactions contemplated by this Agreement have not been substantially
completed by January 1, 2000, this Agreement shall automatically terminate on
that date unless a later date is agreed to by the Acquired Fund and the
Acquiring Fund.
14
<PAGE> 37
14. Reserved
15. Covenants, etc. Deemed Material. All covenants, agreements,
representations and warranties made under this Agreement and any certificates
delivered pursuant to this Agreement shall be deemed to have been material and
relied upon by each of the parties, notwithstanding an investigation made by
them or on their behalf.
16. Sole Agreement; Amendments. This Agreement supersedes all previous
correspondence and oral communications between the parties regarding the subject
matter hereof, constitutes the only understanding with respect to such subject
matter, may not be changed except by a letter of agreement signed by each party
hereto, and shall be construed in accordance with and governed by the laws of
The Commonwealth of Massachusetts.
15
<PAGE> 38
17. Declaration of Trust. Copies of the WM Trust I Declaration of Trust and
the WM Trust II Declaration of Trust are on file with the Secretary of State of
The Commonwealth of Massachusetts, and notice is hereby given that this
instrument is executed on behalf of the trustees of WM Trust II on behalf of the
Acquired Fund and by the trustees of WM Trust I on behalf of Acquiring Fund, in
each case, as trustees and not individually and that the obligations of this
instrument are not binding upon any of the trustees, officers or shareholders of
either trust individually but are binding only upon the assets and property of
the Acquired Fund and the Acquiring Fund.
WM TRUST II,
on behalf of its Florida Insured Municipal Fund series
By:______________________________
WM Trust I,
on behalf of its Tax-Exempt Bond Fund series
By: ______________________________
16
<PAGE> 39
TABLE OF CONTENTS
INTRODUCTION
OVERVIEW OF MERGER
Proposed Transaction
Operating Expenses
Example of Fund Expenses
Federal Income Tax Consequences
Comparison of Investment Objectives, Policies and Restrictions
Advisory Services
RISK FACTORS
SPECIAL MEETING OF SHAREHOLDERS
THE PROPOSAL: APPROVAL OR DISAPPROVAL OF AGREEMENT
AND PLAN OF REORGANIZATION
Background and Reasons for the Proposed Merger
Information about the Mergers
Capitalization Tables
INFORMATION ABOUT THE FUNDS
VOTING INFORMATION
APPENDIX A: AGREEMENT AND PLAN OF REORGANIZATION
<PAGE> 40
WM TRUST I
FORM N-14
PART B
STATEMENT OF ADDITIONAL INFORMATION
September _, 2000
This Joint Statement of Additional Information (the "SAI") relates to
proposed merger (the "Merger") of the Florida Insured Municipal Fund (the
"Acquired Fund"), a series of WM Trust II, a Massachusetts business trust, into
the Tax-Exempt Bond Fund (the "Acquiring Fund"), a series of WM Trust I, also a
Massachusetts business trust.
This SAI contains information which may be of interest to shareholders
but which is not included in the Prospectus/Proxy Statement dated September _,
2000 (the "Prospectus/Proxy Statement") of the Acquiring Fund which relates to
the Merger. As described in the Prospectus/Proxy Statement, the Merger would
involve the transfer of all the assets of the Acquired Fund in exchange for
shares of the Acquiring Fund and the assumption of all the liabilities of the
Acquired Fund. The Acquired Fund would distribute the Acquiring Fund shares it
receives to its shareholders in complete liquidation of the Acquired Fund.
This SAI is not a prospectus and should be read in conjunction with the
Prospectus/Proxy Statement. The Prospectus/Proxy Statement has been filed with
the Securities and Exchange Commission and is available upon request and without
charge by writing to WM Group of Funds, 1201 Third Avenue, 22nd Floor, Seattle,
Washington 98101 or by calling 1-800-222-5852.
<PAGE> 41
Table of Contents
<TABLE>
<S> <C>
I. Additional Information about the Acquiring Fund and the Acquired Fund.....................1
II. Financial Statements......................................................................1
</TABLE>
-i-
<PAGE> 42
I. Additional Information about the Acquiring Fund and the Acquired Fund.
Incorporated by reference to Post-Effective Amendment No. 33 to the
Acquired Fund's Registration Statement Form N-1A (filed on February 29, 2000)
(Registration Nos. 33-27489 and 811-5775).
Incorporated by reference to Post-Effective Amendment No. 78 to the
Acquiring Fund's Registration Statement Form N-1A (filed on February 29, 2000)
(Registration Nos. 333-36941 and 811-00123).
II. Financial Statements.
This Statement of Additional Information is accompanied by the Annual
Report for the year ended October 31, 1999 of each of the Acquiring Fund and
Acquired Fund (the "WM Group of Funds Annual Report"), which contains historical
financial information regarding the Acquiring Fund and Acquired Fund. Such
report has been filed with the Securities and Exchange Commission and is
incorporated herein by reference.
<PAGE> 43
WM TRUST I
FORM N-14
PART C
OTHER INFORMATION
Item 15. Indemnification
Incorporated by reference to Item 25 of Post-Effective Amendment No. 78
to the Registrant's Registration Statement Form N-1A (filed on February 29,
2000) (Registration Nos. 333-36941 and 811-00123).
Item 16. Exhibits
(1) Registrant's Charter -
(A) Form of Amended and Restated Agreement and Declaration of Trust
dated as of September 19, 1997 -- incorporated by reference to
Post-Effective Amendment ("PEA") No. 67 to the Registrant's
Registration Statement, filed with the SEC on March 27, 1998.
(B) Amendment No. 1 to Amended and Restated Agreement and
Declaration of Trust dated March 20, 1998 -- incorporated by
reference to PEA No. 74 to the Registrant's Registration
Statement.
(C) Amendment No. 2 to Amended and Restated Agreement and
Declaration of Trust dated March 20, 1998 -- incorporated by
reference to PEA No. 74 to the Registrant's Registration
Statement.
(2) Registrant's Bylaws - incorporated by reference to PEA No. 67 to the
Registrant's Registration Statement.
(3) None.
(4) Form of Agreement and Plan of Reorganization - filed as Appendix A to
Part A hereof.
(5) See (1) and (2) above.
(6) Investment Advisory Contracts - Investment Management Agreement dated
March 20, 1998, as amended as of January 1, 1999 - incorporated by
reference to PEA No. 76 of the Registrant's Registration Statement.
-2-
<PAGE> 44
(7) Underwriting Contracts -
(A) Distribution Contract dated March 20, 1998 - incorporated by
reference to PEA No. 74 to the Registrant's Registration
Statement.
(B) Form of Selected Dealer Agreement - incorporated by reference to
PEA No. 67 to the Registrant's Registration Statement.
(8) None.
(9) Custodian Agreements - Custody Agreement dated March 20, 1998 -
incorporated by reference to PEA No. 74 to Registrant's Registration
Statement.
(10) 12b-1 Plans -
(A) Class A Distribution Plan dated March 20, 1998 - incorporated by
reference to PEA No. 74 to the Registrant's Registration
Statement.
(B) Class B Distribution Plan dated March 24, 1998 - incorporated by
reference to PEA No. 74 to the Registrant's Registration
Statement.
(11) Opinion and consent of counsel as to legality of securities being
registered. Filed as Exhibit 11 to this filing.
(12) Opinion of counsel as to tax matters. To be filed by post-effective
amendment to this filing.
(13) Other material contracts -
(A) Shareholders Service Contract - incorporated by reference to PEA
No. 67 to the Registrant's Registration Statement.
(B) Transfer Agent Contract dated September 14, 1999 - incorporated
by reference to PEA No. 75 to the Registration Statement.
(14) Consent of Independent Accountant - filed as Exhibit 14 hereto.
(15) None.
(16) Power of Attorney - filed as Exhibit 16 hereto.
-3-
<PAGE> 45
Item 17. Undertakings
(1) The Registrant agrees that prior to any public reoffering of the
securities registered through the use of a prospectus which is a part of
this registration statement by any person or party who is deemed to be
an underwriter within the meaning of Rule 145(c) of the Securities Act
of 1933, the reoffering prospectus will contain the information called
for by the applicable registration form for reofferings by persons who
may be deemed underwriters, in addition to the information called for by
the other items of the applicable form.
(2) The Registrant agrees that every prospectus that is filed under
paragraph (1) above will be filed as a part of an amendment of the
registration statement and will not be used until the amendment is
effective, and that, in determining any liability under the Securities
Acts of 1933, each post-effective amendment shall be deemed to be a new
registration statement for the securities offered therein, and the
offering of the securities at that time shall be deemed to be the
initial bona fide offering of them.
(3) The Registrant agrees to file, by post-effective amendment, an opinion
of counsel or a copy of an Internal Revenue Service ruling supporting
the tax consequences of the proposed mergers described in this
Registration Statement within a reasonable time after receipt of such
opinion or ruling.
-4-
<PAGE> 46
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereto duly
authorized, in the City of Seattle and the State of Washington, on this 11th day
of August, 2000.
WM TRUST I
By: /s/ William G. Papesh
----------------------------------
Name: William G. Papesh
Title: President and Trustee
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities indicated on this 11th day of August, 2000.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
/s/ David E. Anderson*
--------------------------------------- Trustee
David E. Anderson
/s/ Wayne L. Attwood, M.D.*
--------------------------------------- Trustee
Wayne L. Attwood, M.D.
/s/ Arthur H. Bernstein, Esq.*
--------------------------------------- Trustee
Arthur H. Bernstein, Esq.
/s/ Kristianne Blake*
--------------------------------------- Trustee
Kristianne Blake
/s/ Edmond R. Davis, Esq.*
--------------------------------------- Trustee
Edmond R. Davis, Esq.
/s/ John W. English*
--------------------------------------- Trustee
John W. English
/s/ Anne V. Farrell*
--------------------------------------- Trustee
Anne V. Farrell
/s/ Carrol R. McGinnis*
--------------------------------------- Trustee
Carrol R. McGinnis
</TABLE>
-5-
<PAGE> 47
<TABLE>
<S> <C>
/s/ Michael K. Murphy*
--------------------------------------- Trustee
Michael K. Murphy
/s/ Alfred E. Osborne, Jr., Ph.D.*
--------------------------------------- Trustee
Alfred E. Osborne, Jr., Ph.D.
/s/ Daniel L. Pavelich*
--------------------------------------- Trustee
Daniel L. Pavelich
/s/ Jay Rockey*
--------------------------------------- Trustee
Jay Rockey
/s/ Norton O. Schapiro*
--------------------------------------- Trustee
Norton O. Schapiro
/s/ Richard C. Yancey*
--------------------------------------- Trustee
Richard C. Yancey
</TABLE>
* By: /s/ William G. Papesh
------------------------
William G. Papesh
Attorney-in-Fact
-6-
<PAGE> 48
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Exhibit Name
----------- ------------
<S> <C>
(11) Opinion of Ropes & Gray.
(14) Consent of Deloitte & Touche LLP.
(16) Power of Attorney.
</TABLE>
-7-
