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[graphic omitted]
[logo] WM
GROUP of FUNDS
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THE DIFFERENCE IS EXPERIENCE
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ANNUAL REPORT
FOR THE YEAR ENDED OCTOBER 31, 1999
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[graphic omitted]
FIXED INCOME FUNDS
target maturity 2002 fund
short term high quality bond fund
u.s. government securities fund
income fund
high yield fund
MUNICIPAL FUNDS
california insured
intermediate municipal fund
california municipal fund
florida insured municipal fund
tax-exempt bond fund
EQUITY FUNDS
bond & stock fund
growth & income fund
growth fund
northwest fund
emerging growth fund
international growth fund
CONTENTS
message from the president 1
events of the century 2
diversifying your portfolio and managing risk 5
individual fund reviews 8
statements of assets and liabilities 38
statements of operations 42
statements of changes in net assets 44
statements of changes in net assets - capital stock activity 51
financial highlights 62
portfolio of investments 92
notes to financial statements 137
independent auditor's report 150
special meeting of shareholders (unaudited) 151
tax information (unaudited) 152
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[Photo of William G. Papesh]
DEAR SHAREHOLDER,
The decade, the century, and the millennium are simultaneously drawing to a
close. To the typical investor, the more recent past is likely of greatest
interest. From 1990 through October 31, 1999, the value of the U.S. stock market
rose nearly 400%, as measured by the S&P 500(1). The 1990s also saw one of the
longest-running economic expansions on record. However, compared to other
historic investment events of this century, the 1990s are perhaps not all that
remarkable.
This year, our fund family celebrates its 60th year in the investment management
business. Our time-honored tradition dates to 1939 when Composite Research &
Management Co. (now known as WM Advisors) launched the Bond & Stock Fund, which
was one of the first 50 mutual funds in the U.S. Today, investors can choose
from more than 11,000 mutual funds. In the intervening 60 years, the investment
landscape has been permanently altered, first by theoretical advances in finance
and then by innovations in computer technology. We have managed stock and bond
investments through six decades of changing market environments, including World
War II, the Vietnam War, wage and price controls, the stock market crash of
1987, and 10 recessions. Throughout these events, our approach to investing has
remained the same, defined by rigorous research, a commitment to outstanding
performance, and a value-oriented investment philosophy.
From the beginning, the WM Group of Funds has recognized the value of
diversification in managing investment portfolios. By combining bond and stock
investments in a single portfolio in the 1930s, the Bond & Stock Fund sought to
offer investors a convenient and professionally managed investment vehicle
designed to weather the storms of changing market conditions. Of course, the
theory of diversification - which created a means to mathematically measure the
actual and potential risk-reduction benefits of investing in a diversified
portfolio - did not arise until the 1950s. Since then, computer technology has
led to more sophisticated asset allocation models such as those employed in
managing the WM Strategic Asset Management Portfolios. The addition of the
International Growth Fund to the WM Group of Funds family has provided expanded
opportunities for individuals to craft a well-diversified portfolio.
The importance of diversification in managing investment risk was evident in the
financial market results this year. During the 12-month period ended October 31,
1999, both U.S. and foreign stock markets posted strong gains, with the S&P 500
up 25.67% and the Morgan Stanley Capital International (MSCI) Europe,
Australasia and the Far East (EAFE) index rising 23.67%(2). A combination of low
inflation, strong economic growth and continued consumer spending helped sustain
corporate earnings and the U.S. market. Internationally, higher share prices in
Japan and a recovery from last year's currency crisis in Pacific Rim countries
helped boost the international index. However, U.S. bond markets declined during
the same period in response to actions by the Federal Reserve to raise interest
rates to forestall potential increases in inflation.
As is often the case, stock and bond markets moved in opposite directions
through much of 1999. Bond investors, who included some stock investments in
their portfolios, probably fared better than those who held only fixed-income
investments. Those who invested primarily in stock funds may have experienced
most of their gains in the first six months of 1999, as the S&P 500 posted a
6.24% decline from the end of June to the end of September(1). Including a small
allocation to bonds and bond funds in an equity portfolio can potentially help
temper risk and, over time, result in higher long-term returns.
Your Investment Representative can help you select an appropriate mix of
investments for your portfolio based on your financial goals. Whether you are
seeking current income or long-term capital appreciation, the WM Group of Funds
offers investment vehicles designed to meet your goals and financial needs. For
example, the Strategic Asset Management (SAM) Portfolios provide the convenience
of immediate diversification and the advantages of professionally-managed asset
allocation through changing market conditions. For more information about
additional strategies that can help you pursue your financial objectives, speak
with your Investment Representative.
As the new millennium approaches, we look forward to continuing to leverage our
experience and history to meet the investment challenges of tomorrow. Thank you
for your continued confidence in the WM Group of Funds.
Sincerely,
/s/ William G. Papesh
William G. Papesh
President
(1) Source: Standard & Poor's. The S&P 500 is an unmanaged index of common
stocks. Results include reinvestment of dividends.
(2) The Morgan Stanley Capital International Europe, Australasia and the Far
East (MSCI EAFE) index is a market capitalization weighted index designed to
measure the performance of 23 developed markets worldwide.
Past performance is no guarantee of future results. Individuals cannot invest
directly in any index.
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[graphic omitted]
EVENTS OF THE CENTURY
SHAPING THE DOW JONES INDUSTRIAL AVERAGE
As we move toward the beginning of the new millennium, it is important to
examine the events of the last century in order to gain some insight to the
future. During the past 100 years, we have witnessed tremendous change and have
overcome much adversity, and through it all, economies and markets have
continued to grow and expand. Despite two World Wars, the Great Depression, and
the rise and fall of Communism, equity markets in the United States have
increased more than 16,000% (as measured by the Dow Jones Industrial
Average).(2) Events of the past century have completely reshaped the way we live
and conduct business - and during this time, companies have flourished and often
times dramatically increased in value. By highlighting these major events, we
can examine their impact on the growth of the financial markets and the upward
trajectory of the Dow.
THE BIRTH OF U.S. STEEL CORP. 1901
On March 3, 1901, the merger between J.P. Morgan and Carnegie Steel created the
first billion-dollar corporation that controlled nearly two-thirds of the
nation's steel market.
THE WRIGHT BROTHERS TAKE FLIGHT 1903
On a beach near Kitty Hawk, North Carolina, Orville and Wilbur Wright used a
12-horsepower engine to fly 120 feet in 12 seconds. This signified the birth of
an industry that would eventually speed world travel, affect the outcome of
wars, and generate billions of dollars.
THE SAN FRANCISCO EARTHQUAKE 1906
On April 18, 1906, a major earthquake shook San Francisco and started fires that
destroyed the entire city. It took years to rebuild the nearly 20,000 buildings
destroyed in the quake. The Creation of the Ford Assembly Line 1913 Henry Ford
revolutionized the concept of mass production, increasing efficiencies and
cutting costs of the Model T, as the division of labor was born.
WORLD WAR I BEGINS 1914
The assassination of Austria-Hungary's Archduke Francis Ferdinand and his wife
in June 1914 led to war against Serbia. Pre-existing alliances drew in nearly
every European nation, and World War I was underway.
PANAMA CANAL OPENED 1914
In August 1914, world trade would forever be altered as the Panama Canal was
opened. The Canal drastically shortened shipping time and cost between the
Atlantic and Pacific Oceans.
WOMEN'S SUFFRAGE 1920
Stemming from an 1848 convention in Seneca Falls, the suffrage amendment was
finally ratified nationally in August 1920.
FIRST COMMERCIAL RADIO BROADCAST 1920
Westinghouse burst into the mainstream by broadcasting the first commercial
radio event on November 2, 1920. The company announced the results of the
Cox/Harding presidential election and, as a result, generated huge sales of
wireless sets.
THE STOCK MARKET CRASH 1929
In October 1929, panic shook the U.S. stock market, with investors eventually
losing $30 billion, or the equivalent of nearly one-third of the entire
country's economic output.
THE GREAT DEPRESSION 1932
The Depression reached its peak in 1932 with more than 25% of the workforce
unemployed, thousands of bank failures, and more than a million homeless people
wandering the streets.
SOCIAL SECURITY CREATED 1935
An important part of FDR's New Deal, the passing of the Social Security Act
created the first pension system for American workers.
UNIONS GAIN STRENGTH 1937
A sit-down strike organized by the United Auto Workers (UAW) turned violent as
riots broke out in Flint, Michigan. Labor won an important battle when General
Motors, facing substantial losses from a complete shutdown, signed an agreement
that gave UAW tremendous power in negotiation.
BOMBING OF PEARL HARBOR 1941
On December 7, 1941, 183 planes attacked unsuspecting Pearl Harbor, destroying
multiple ships and signaling the end to an isolationist stance and a beginning
to U.S. involvement in World War II.
ENIAC INTRODUCED 1946
Engineer Presper Eckert and physicist John Mauchly introduced the world's first
digital computer at the University of Pennsylvania. The beast weighed 30 tons
and covered 1,800 square feet. The two men later unveiled UNIVAC, the first
business computer and an important symbol of the beginning of what would be the
technological revolution.
THE BABY BOOM BEGINS 1947
The end of the Depression and World War II triggered the highest birthrate in
the history of the nation as the Baby Boom generation brought unprecedented
prosperity.
COLD WAR BEGINS WITH THE KOREAN WAR 1950
Communist North Korean troops invaded South Korea, eventually securing backing
from China, as United Nations forces fought to a standoff around the 38th
parallel.
TELEVISION ASSERTS ITS DOMINANCE 1954
Signifying the beginning of an era, television finally overtook radio in annual
revenues with over $590 million. Many of the biggest entertainers had already
made the jump to TV, as the set became a fixture in the American home.
RUSSIANS ENTER SPACE WITH SPUTNIK 1957
On October 4, 1957, the Soviet Union launched Sputnik, the first satellite to
enter outer space. This launch signaled the beginning of the space race, an
important aspect of the Cold War.
CUBAN MISSILE CRISIS 1962
It was late October 1962 when U.S. spy planes spotted a buildup of Russian
nuclear missiles in Cuba, less than one hundred miles from U.S. shores. Kennedy
responded with a full blockade and both countries stood at military readiness
for nearly a week. Finally, on October 28, the Russians agreed to remove the
weapons from Cuba.
JFK ASSASSINATED 1963
In Dallas, Texas, while campaigning for the 1964 presidential election,
President Kennedy was shot and killed, sending the nation into mourning.
MAN LANDS ON THE MOON 1969
On July 16, 1969, with hundreds of millions watching on television, astronaut
Neil Armstrong became the first person to set foot on the moon's surface.
THE U.S. LEAVES VIETNAM 1973
Following years of criticism and protest in the United States, a cease-fire was
signed on January 27, 1973, and the remaining troops in Vietnam were sent home.
Vietnam united under a communist regime two years later.
OIL EMBARGO 1973
War erupted between Arabs and Israelis in October 1973 and OPEC responded by
dramatically increasing the price of oil and cutting supplies to countries
supporting Israel. The embargo lasted six months and had a significant impact on
the U.S. economy, effectively ending the post-WWII economic boom.
[graphic omitted]
PRESIDENT NIXON RESIGNS 1974
Faced with impeachment stemming from the Watergate scandal, President Richard
Nixon resigned, and Gerald Ford took over control of the oval office.
RUNAWAY INFLATION 1980
For the first time in modern history, 1980 ends with back-to-back years of
double-digit inflation. Disgruntled by the economic situation, the American
public elected Ronald Reagan, who would bring an end to 50 years of strong
government involvement in economic programs.
BLACK MONDAY STOCK MARKET CRASH 1987
In October 1987, a thriving stock market came to a crash as fears over rising
inflation and interest rates caused a massive selloff in the equity markets.
FALL OF THE BERLIN WALL 1989
What had become the symbol of a divided Germany and a divided world of
Capitalism versus Communism, the Berlin Wall fell and Germany was united.
INTRODUCTION OF THE WORLD WIDE WEB 1993
Programmers at the University of Illinois released software that enabled any
computer to access the World Wide Web, forever changing the way business is
conducted.
PRESIDENTIAL IMPEACHMENT 1998
A scandal in the White House commanded global attention as Bill Clinton, the
impeached president, remained in office when he retained Senate votes.
BUDGET SURPLUSES 1999
With the close of the fiscal year in September 1999, the U.S. reported its
second consecutive budget surplus, marking the first surpluses since 1969. The
century closes in the midst of one of the longest lasting economic and stock
market expansions.
While these major events of the past century have significantly changed our
lives, the principles of long-term investing have remained true. The fundamental
strength of U.S. companies over the long term is what has continued to drive
equity markets higher. World Wars have come and gone, but investment principles
remain firmly in tact. Rather than being unduly concerned with short-term market
fluctuations, it is important to maintain your long-term focus and continue to
invest as we move into the next century.
(1) Source of historical data: Time-Life Books
(2) Source: Bloomberg Business News and Dow Jones. All Dow Jones Index
information is based on the month-end closing values. The Dow Jones
Industrial Average (DJIA) is an unmanaged index of industrial stocks that is
often used to measure the overall U.S. equity market. Individuals cannot
invest directly in an index. Chart uses logarithmic scale.
[graphic omitted]
<TABLE>
<CAPTION>
1900 1910 1920
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<S> <C> <C> <C> <C> <C> <C>
Birth of U.S. Wright Bros. San Francisco Ford Asembly World War I Women's Sufferage The Stock
Steel Corp. Dow 49.11 Earthquake Line Begins Dow 86.16 Market Crash
Dow 69.43 Dow 90.53 Dow 78.78 Dow 71.42 Dow 273.51
First Commercial
Panama Canal Radio Broadcast
Opens Dow 76.04
Dow 54.58
<CAPTION>
1930 1940 1950
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<S> <C> <C> <C> <C> <C> <C> <C> <C>
The Great Social Security Unions Gain Pearl Harbor ENIAC The Baby The Korean Television Sputnik
Depression Created Strength Bombed Introduced Boom Begins War Dow 404.38 Dow 441.03
Dow 59.93 Dow 144.13 Dow 185.74 Dow 110.96 Dow 190.09 Dow 181.16 Dow 200.10
<CAPTION>
1960 1970 1980
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<S> <C> <C> <C> <C> <C> <C> <C>
Cuban JFK Man Lands U.S. Leaves President Nixon Runaway Black Monday Fall of
Missile Assassinated on the Moon Vietnam Resigns Inflation Market Crash The Berlin
Crisis Dow 750.51 Dow 815.46 Dow 999.01 Dow 678.58 Dow 963.98 Dow 1993.50 Wall
Dow 589.77 Dow 2706.27
Oil Embargo
Dow 956.57
<CAPTION>
1990
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Introduction of the Presidential Budget Surplus
World Wide Web Impeachment Dow 10,336.95
Dow 3754.09 Dow 9116.55
</TABLE>
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DIVERSIFYING YOUR PORTFOLIO CAN HELP YOU MANAGE INVESTMENT RISK.
Building a diversified portfolio may provide the key to finding a balance
between risk and the pursuit of your investment goals.
Investment risk comes in many forms. The risk that most people think of is the
potential to lose money due to a decline in the value of an investment.
Understanding this type of risk - known as market risk - is critical to making
sound investment decisions.
Other types of risk, however, should also be considered when choosing
investments. Inflation risk is often overlooked by those who are investing for
current income or to preserve capital. But over time, inflation can eat away at
your purchasing power. If prices were to rise at an inflation rate of 4% per
year, after 20 years a dollar would buy only half as much as it does today.
Another more subtle form of risk involves the possibility of not meeting your
investment objectives. If you are investing to build a nest egg for retirement,
for example, the consequences of not meeting your goal could be significant.
Unfortunately, these different types of risk can make it difficult for people to
feel comfortable with their investment choices. For example, if you invest in
growth-oriented stock funds in order to have the best chance of outpacing
inflation, you will generally incur a higher degree of market risk, since stocks
tend to be more volatile than other types of investments.
[graphic omitted]
Building a diversified portfolio may provide the key to finding a balance
between risk and the pursuit of your investment goals.
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ASSET ALLOCATION TAKES THE CONCEPT OF DIVERSIFICATION ONE STEP FURTHER.
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WHY DIVERSIFICATION CAN HELP REDUCE RISK
Diversification helps put the law of averages to work for you. When you invest
in more than one stock or bond, your portfolio return is based on the average of
all the individual securities in the portfolio. But the variability of your
returns - a way to measure your chance of loss - will likely be less than the
average volatility of the individual securities. This means that by
diversifying, you can potentially reduce risk without having to sacrifice the
opportunity to earn higher returns.
Asset allocation takes the concept of diversification one step further. Because
prices of different types of assets, such as money market instruments, bonds,
and stocks, often don't react the same way to market events, they can provide
potentially greater diversification benefits than securities in the same asset
class. A measure that can help assess the potential risk-reduction afforded is
known as correlation. The lower the correlation between two securities, the
greater the diversification opportunities. In general, U.S. stocks tend to have
a correlation of around 0.70 with each other, while stocks and bonds have a
correlation of less than 0.40.*
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CORRELATION IS THE DEGREE TO WHICH INVESTMENTS MOVE UP AND DOWN TOGETHER.
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KEEP YOUR TIME FRAME IN MIND
The individual asset classes that you choose for your investment portfolio will
depend largely on your time frame. Whether you are pursuing a short-term goal or
have a longer-term investment horizon, it's always important to seek to
diversify your investments appropriately. For more information about how to
tailor your portfolio to fit your objectives, speak with your financial
representative.
Fixed-Income Investments Can Help
SMOOTH PORTFOLIO RETURNS
Although equity investments have dominated headlines in recent years,
fixed-income securities remain a viable investment alternative that can play an
important part in an overall investment portfolio. Bond investments are
generally less risky than stock investments and have a predictable income stream
that continues even if prices decline. With low inflation creating strong real
returns, the current market environment is quite positive for fixed-income
investments. The real return of an investment is the difference between the
overall return and the current rate of inflation; it measures the change in
wealth or buying power offered by an investment. Even with bond yields that are
less-than-historical averages, lower inflation can produce very attractive real
returns.
In addition to strong results, fixed-income investments offer diversification
and risk management characteristics as a part of an overall investment
portfolio. Bonds can reduce volatility in your portfolio if combined with stock
investments. Bond investments also offer a safer environment if you are closer
to reaching a long-term goal, such as a college fund or retirement portfolio.
Speak with your representative about your current portfolio and discuss
strategies to incorporate fixed-income investments.
STRONG REAL RETURNS FOR FIXED-INCOME INVESTMENTS VS. INFLATION
(January 1985 - October 1999)
HIGH-YIELD CORPORATE 11.36%
CORPORATE 9.95%
MORTGAGE 9.67%
GOVERNMENT 9.02%
INFLATION 3.22%
Source: Ibbotson Associates. Lehman Brothers indices used for Corporate,
Mortgage and Government Bonds; Ibbotson indices used for high-yield bonds and
inflation. Individuals cannot invest directly in an index.
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CONSIDER INTERNATIONAL INVESTMENTS
Over the years, the correlation between domestic stocks and bonds has gradually
risen. Therefore, the potential diversification benefits afforded today, while
still quite substantial, may not be as significant as they were in the '40s,
'50s, and '60s.
Because the concept of diversification applies to many types of investments,
however, you can potentially further reduce the variability of your portfolio
returns by investing in additional asset classes.
If you are investing for a long-term goal, including international investments
in your asset allocation may potentially help temper declines in the values of
your domestic stock and bond investments over time. Prices of stocks and bonds
issued by companies or governments in foreign countries often do not move in
tandem with securities prices in the U.S. For example, the foreign stocks that
comprise the Morgan Stanley Capital International EAFE index have a correlation
of 0.53 with the S&P 500 index.**
Of course, risk is only part of the equation. The chart to the left shows annual
historical returns for international stock and bond indices since 1985. As in
the U.S. markets, stocks have generally posted higher returns than bonds over
time, but also carry a greater degree of risk.
* Source: Standard & Poor's. Stocks are represented by the S&P 500. Bonds are
represented by the returns of 30-year Government bonds. Based on monthly
returns for the 20-year period ended September 30, 1999.
** Source: Standard & Poor's. Based on monthly returns for the 20-year period
ended September 30, 1999. International investments can carry greater risks
including currency, liquidity and political risks.
PERFORMANCE OF INTERNATIONAL INVESTMENTS INDICES
(January 1985 - October 1999)
MSCI Nordic Countries 22.13%
MSCI Europe 19.40%
MSCI World 16.44%
MSCI EAFE 15.55%
SB Foreign Government Bonds 12.91%
MSCI Far East 11.33%
IFCG Emerging Markets 11.09%
Source: Ibbotson Associates. Regional equity indices provided by Morgan Stanley
Capital International (MSCI), bond index provided by Salomon Brothers, and
Emerging Markets index provided by the International Finance Corporation.
Individuals cannot invest directly in an index. International investments can
carry greaster risks including currency, liquidity and political risks.
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[graphic omitted]
to our
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SHAREHOLDERS
We are pleased to provide you with an overview of the following funds in WM
Group of Funds family for the 12-month period ended October 31, 1999.
To help you better understand the professional investment management available
to you as a WM Group of Funds shareholder, we have also included biographies of
the investment professionals managing the Funds.
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INDIVIDUAL
FUND reviews [graphic omitted]
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WM ADVISORS, INC. is the investment advisor to the WM Group of Funds, and has
general oversight responsibility for the advisory services provided to the
Funds. These services include formulating the Funds' investment policies,
analyzing economic trends that affect the Funds, and directing and evaluating
the investment services provided by the Sub-Advisors and the individual
Portfolio Managers of each Fund. WM Advisors, Inc. supervises the Portfolio
Managers in their day-to-day management of the Funds in the WM Group of Funds to
ensure that the policies are met and guidelines are followed, and to determine
appropriate investment performance measures.
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UNDERSTANDING THE ENCLOSED CHARTS AND PERFORMANCE FIGURES
In order to help you understand the Funds' investment performance, we have
included the following discussions along with graphs that compare the Funds'
performance with certain market indices. Descriptions of these indices are
provided next to the individual graphs on the following pages.
Generally, an index represents the market value of an unmanaged group of
securities, regarded by investors as representative of a particular market. An
index does not reflect any charges for investment management or other expenses.
Total return is used to measure a Fund's performance and reflects both changes
in the price of the Fund's shares as well as any income dividend and/or capital
gain distributions made by the Fund during the period. Past performance is not a
guarantee of future results. A mutual fund's share price and investment return
will vary with market conditions, and the principal value of an investment when
you sell your shares may be more or less than the original cost.
Yield indicates the investment income per share as a percentage of the offering
price, whereas total return includes both net investment income and changes in
the value of the shares as a percentage of the initial investment. The 30-day
SEC yield is the yield calculated pursuant to a standard formula required by the
SEC for perforance advertisement purposes, and does not imply any endorsement
or recommendation by the SEC.
THE YEAR 2000 PROBLEM (Y2K)
Many computer systems in use today cannot properly process date-related
information in relation to the year 2000. This issue originates in the practice
of abbreviating years to their last two digits. Computer systems may not be able
to decide correctly when a date entered with a year of "00" should be
interpreted as 1900 or 2000. At the turn of the new century, computer systems
may not function properly because they may not be able to recognize or interpret
the year 2000.
Should any of the computer systems employed by the WM Funds' major service
providers fail to process this type of information properly, it could have a
negative impact on Fund operations and the services that are provided to
contract owners. Similarly, the values of certain of the WM Funds' assets may be
adversely affected by the inability of their issuers or third parties to
properly process date-related information.
The Advisor, Shareholder Service Agent and Administrator have advised the Funds
and Portfolios that they have reviewed their critical computer systems and are
confident that the systems will process information correctly regardless of the
end of the century. The Funds and Portfolios have received similar assurances
from other key service providers. We recognize that no one can guarantee that
there will not be problems when the Year 2000 arrives, and have developed
contingency plans in case problems should occur.
<PAGE>
TARGET MATURITY
2002 fund
PORTFOLIO MANAGER:
GARY POKRZYWINSKI
WM ADVISORS, INC.
The day-to-day management of the Target Maturity 2002 Fund's portfolio is the
responsibility of a fixed-income team led by Senior Portfolio Manager Gary
Pokrzywinski, who has over 14 years of asset management experience and has been
with WM Advisors, Inc. for more than seven years. Mr. Pokrzywinski is a
Chartered Financial Analyst and holds a Business Degree from the University of
Wisconsin. Mr. Pokrzywinski began managing the Target Maturity 2002 Fund on
March 23, 1998.
PERFORMANCE REVIEW
From the Fund's inception (March 20, 1995) through October 31, 1999, the TARGET
MATURITY 2002 FUND advanced 7.02% on an average annual total return basis, or
6.56% adjusted for the maximum sales charge. For the 12-month period ended
October 31, 1999, the Fund's total return was -2.20%, or -4.17% adjusted for the
maximum sales charge. THE FUND'S 30-DAY SEC YIELD AS OF OCTOBER 31, 1999, WAS
4.72%.
WHAT WERE THE MOST SIGNIFICANT FACTORS CONTRIBUTING TO THE FUND'S PERFORMANCE
OVER THE 12-MONTH PERIOD ENDED OCTOBER 31, 1999?
During the 12-month period, there was a fairly significant increase in interest
rates. this is negative for the Fund since its price moves in the opposite
direction of interest rates. Rates increased by 160 basis points (1.60%) for
intermediate-maturity Treasury bonds. The Fund's investment objective is to hold
90% of assets in zero-coupon Treasury notes with maturities in November of 2002.
WERE THERE ANY SHIFTS IN THE FUND'S PORTFOLIO HOLDINGS/SECTORS THAT HAVE HAD A
SIGNIFICANT IMPACT ON PERFORMANCE?
There have been no shifts in holdings that have had a significant impact on
performance. The Fund continued to hold the November 2002 zero-coupon Treasury
strips.
WHAT IS THE OUTLOOK FOR BOTH THE FUND AND THE OVERALL ECONOMY?
Given the objective of the Fund to remain invested in Treasury strips maturing
at the termination date, the Fund's net asset value (NAV) will move inversely to
interest rates. Over time, as its termination date approaches, the duration of
the Fund will shorten, lessening the impact of interest rate changes on the NAV.
When the termination date is reached, the November 2002 Treasury STRIPs will
mature.
Our long-term outlook for interest rates is quite positive. We believe that
fundamental structural forces are in place for a continued low global
inflationary environment. Despite the increase in commodity prices, demographic
forces, fiscal austerity, technological enhancements and excess capacity all
point toward a lack of pervasive price pressures and a positive environment for
fixed-income assets.
VALUE OF A $10,000 INVESTMENT (CLASS A SHARES)+
Fund Fund
(Class A (Class A
Shares; Shares;
not adjusted Lehman
adjusted for the Brothers
for maximum Government
sales 2% sales Bond Inflation
charge) charge) Index(1) (CPI)(1)
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Inception 3/20/95 $10,000 $ 9,800
9,990 9,790 $10,000 $10,000
Apr 95 10,140 9,937 10,131 10,007
10,690 10,476 10,539 10,020
Jun 10,780 10,564 10,620 10,020
10,670 10,457 10,581 10,060
Aug 10,840 10,623 10,705 10,100
10,960 10,741 10,808 10,134
Oct 11,160 10,937 10,972 10,167
11,390 11,162 11,143 10,187
Dec 95 11,570 11,339 11,301 10,208
11,642 11,410 11,370 10,208
Feb 11,311 11,085 11,138 10,234
11,146 10,923 11,046 10,255
Apr 10,990 10,770 10,975 10,289
10,928 10,710 10,957 10,281
Jun 11,094 10,872 11,098 10,274
11,104 10,882 11,126 10,335
Aug 11,042 10,821 11,101 10,368
11,270 11,044 11,285 10,422
Oct 11,580 11,349 11,534 10,463
11,808 11,572 11,734 10,482
Dec 96 11,621 11,389 11,615 10,489
11,643 11,410 11,627 10,509
Feb 11,631 11,399 11,644 10,529
11,443 11,214 11,520 10,562
Apr 11,632 11,399 11,686 10,596
11,732 11,497 11,787 10,616
Jun 11,865 11,628 11,920 10,616
12,232 11,987 12,258 10,650
Aug 12,065 11,824 12,137 10,683
12,243 11,998 12,319 10,710
Oct 12,442 12,193 12,532 10,723
12,442 12,193 12,596 10,716
Dec 97 12,582 12,330 12,728 10,729
12,798 12,542 12,919 10,750
Feb 12,738 12,483 12,884 10,770
12,762 12,507 12,920 10,790
Apr 12,834 12,577 12,978 10,810
12,917 12,659 13,112 10,829
Jun 13,025 12,765 13,262 10,842
13,097 12,835 13,282 10,855
Aug 13,493 13,223 13,627 10,868
13,900 13,622 13,995 10,881
Oct 13,984 13,704 13,947 10,908
13,864 13,587 13,951 10,908
Dec 98 13,847 13,570 13,982 10,901
13,860 13,582 14,063 10,928
Feb 13,597 13,325 13,728 10,941
13,676 13,403 13,782 10,974
Apr 13,702 13,428 13,814 11,054
13,558 13,287 13,692 11,054
Jun 13,558 13,287 13,665 11,054
13,545 13,274 13,644 11,087
Aug 13,558 13,287 13,644 11,114
13,663 13,390 13,755 11,167
Oct 99 13,676 13,403 13,777 11,207
(1) Index total returns were calculated from 3/31/95 to 10/31/99. The Lehman
Brothers Government Bond Index represents all U.S. Government agency and
Treasury securities. The Consumer Price Index is a measurement of inflation
for all urban consumers (CPI). The Index assumes reinvestment of all
dividends/distributions, and does not reflect any asset-based charges for
investment management or other expenses. Past performance does not guarantee
future performance. The returns shown for the Fund assume reinvestment of
all dividends/distributions by the shareholder. For comparison purposes, the
benchmark's performance is shown as of the Fund's inception date not from
the inception date of the benchmark.
The Fund's performance would have been lower had the Advisor not waived a
portion of its fees or reimbursed certain other expenses and the Fund's
custodian had not allowed its fees to be reduced by credits.
- --------------------------------------------------------------------------------
TOTAL RETURNS AS OF 10/31/99
CLASS A SHARES 1 YEAR SINCE INCEPTION*
(March 20, 1995)
Fund (not adjusted for sales charge) -2.20% 7.02%
Fund (adjusted for the maximum 2% sales charge) -4.17% 6.56%
Lehman Brothers Government Bond Index(1) 2.74% 7.24%(1)
*Annualized
<PAGE>
SHORT TERM high
quality bond fund
PORTFOLIO MANAGER:
GARY POKRZYWINSKI
WM ADVISORS, INC.
The Short Term High Quality Bond Fund is managed by a fixed-income team led by
Senior Portfolio Manager Gary Pokrzywinski, who has over 14 years of asset
management experience and has been with WM Advisors, Inc. for more than seven
years. Mr. Pokrzywinski is a Chartered Financial Analyst and holds a Business
Degree from the University of Wisconsin.
PERFORMANCE REVIEW
From the Fund's inception (November 1, 1993) through October 31, 1999, the SHORT
TERM HIGH QUALITY BOND FUND (Class A shares) returned 4.45% on an average annual
total return basis, or 3.83% adjusted for the maximum sales charge. For the
12-month period ended October 31, 1999, the Fund's total return was 2.84%, or
- -0.95% adjusted for the maximum sales charge. Interest rates increased
throughout the period, but because the Fund invests in short-term assets that
are less sensitive to changes in rates, performance remained positive. However,
rising interest rates did offset some of the income earned by the Fund during
the last 12 months. AS OF OCTOBER 31, 1999, THE FUND'S 30-DAY SEC YIELD WAS
5.52% FOR A SHARES AND 5.07% FOR B SHARES.
WHAT WERE THE MOST SIGNIFICANT FACTORS CONTRIBUTING TO THE FUND'S PERFORMANCE
OVER THE 12-MONTH PERIOD ENDED OCTOBER 31, 1999, AND WHAT INVESTMENT TECHNIQUES
WERE USED TO ADDRESS THOSE CONDITIONS?
VALUE OF A $10,000 INVESTMENT (CLASS A SHARES)+
Fund Fund
(Class A (Class A Lehman
Shares; Shares; Brothers
not adjusted Mutual Fund
adjusted for the Short (1-5)
for maximum Investment
sales 3.5% sales Grade Debt Inflation
charge) charge) Index(1) (CPI)(1)
- --------------------------------------------------------------------------------
Inception 11/1/93 $10,000 $ 9,650 $10,000 $10,000
10,005 9,655 9,991 10,014
Dec 93 10,052 9,700 9,940 10,028
10,098 9,745 10,046 10,028
10,063 9,711 9,944 10,056
Mar 9,947 9,599 9,831 10,077
9,908 9,561 9,772 10,119
9,915 9,568 9,788 10,126
Jun 9,927 9,580 9,816 10,126
9,981 9,632 9,944 10,153
9,989 9,639 9,988 10,187
Sep 9,993 9,644 9,933 10,222
9,997 9,647 9,945 10,236
10,002 9,652 9,888 10,244
Dec 94 9,842 9,497 9,910 10,278
9,851 9,507 10,074 10,306
9,942 9,594 10,274 10,347
Mar 10,037 9,685 10,339 10,375
10,130 9,776 10,461 10,383
10,357 9,995 10,730 10,396
Jun 10,366 10,003 10,800 10,396
10,375 10,012 10,828 10,438
10,472 10,105 10,922 10,479
Sep 10,524 10,156 10,993 10,514
10,625 10,253 11,100 10,549
10,726 10,351 11,233 10,570
Dec 95 10,829 10,450 11,340 10,591
10,933 10,550 11,458 10,591
10,852 10,472 11,376 10,618
Mar 10,815 10,437 11,331 10,640
10,776 10,399 11,321 10,675
10,786 10,408 11,330 10,667
Jun 10,890 10,509 11,437 10,660
10,950 10,567 11,480 10,723
10,963 10,579 11,504 10,757
Sep 11,069 10,682 11,650 10,813
11,171 10,780 11,830 10,855
11,268 10,874 11,960 10,876
Dec 96 11,274 10,879 11,918 10,882
11,278 10,883 11,979 10,903
11,337 10,940 12,010 10,924
Mar 11,349 10,952 11,956 10,959
11,404 11,005 12,080 10,994
11,506 11,104 12,177 11,015
Jun 11,560 11,156 12,284 11,015
11,720 11,310 12,498 11,050
11,727 11,317 12,460 11,084
Sep 11,780 11,368 12,590 11,112
11,840 11,425 12,678 11,125
11,846 11,431 12,700 11,119
Dec 97 11,925 11,508 12,783 11,132
12,034 11,613 12,937 11,153
12,030 11,609 12,946 11,174
Mar 12,084 11,661 12,995 11,195
12,139 11,714 13,067 11,216
12,192 11,765 13,155 11,236
Jun 12,246 11,817 13,224 11,249
12,301 11,870 13,277 11,263
12,463 12,027 13,390 11,276
Sep 12,625 12,183 13,665 11,290
12,628 12,186 13,641 11,317
12,625 12,183 13,704 11,317
Dec 98 12,678 12,234 13,749 11,310
12,734 12,288 13,851 11,338
12,674 12,231 13,730 11,352
Mar 12,779 12,332 13,858 11,386
12,832 12,383 13,924 11,469
12,777 12,329 13,838 11,469
Jun 12,775 12,328 13,875 11,469
12,831 12,382 13,857 11,504
12,835 12,386 13,875 11,531
12,969 12,515 14,006 11,586
Oct 99 12,987 12,532 14,043 11,628
(1) Index total returns were calculated from 10/31/93 to 10/31/99. The Lehman
Brothers Mutual Fund Short (1-5) Investment Grade Debt Index includes all
investment-grade, corporate debt securities with maturities of one to five
years, assumes reinvestment of all dividends/distributions, and does not
reflect any asset-based charges for investment management or other expenses.
The Consumer Price Index is a measurement of inflation for all urban
consumers (CPI). Past performance does not guarantee future performance. The
returns shown for the Fund assume reinvestment of all dividends/
distributions by the shareholder. For comparison purposes, the benchmark's
performance is shown as of the Fund's inception date not from the inception
date of the benchmark.
The Fund's performance would have been lower had the Advisor not waived a
portion of its fees or reimbursed certain other expenses and the Fund's
custodian had not allowed its fees to be reduced by credits.
+ The performance of the Class B Shares was different than that indicated by
the lines shown on the left for the Class A Shares, based on the differences
in sales loads and fees paid by Class B shareholders.
- --------------------------------------------------------------------------------
TOTAL RETURNS AS OF 10/31/99
CLASS A SHARES 1 YEAR 5 YEAR* SINCE INCEPTION*
(November 1, 1993)
Fund (not adjusted for sales charge) 2.84% 5.36% 4.45%
Fund (adjusted for the maximum 3.5%
sales charge) -0.95% 4.58% 3.83%
Lehman Brothers Mutual Fund Short
(1-5) Investment Grade Debt Index(1) 2.95% 7.15% 5.82%(1)
CLASS B SHARES 1 YEAR 5 YEAR* SINCE INCEPTION*
(July 1, 1994)
Fund (not adjusted for contingent
deferred sales charge) 1.79% 4.53% 4.32%
Fund (adjusted for the maximum
contingent deferred sales charge) -2.11% 4.53% 4.32%
Lehman Brothers Mutual Fund Short
(1-5) Investment Grade Debt Index(1) 2.95% 7.15% 6.95%(1)
*Annualized
PORTFOLIO composition(+)
A 17%
AA 10%
AAA 54%
BBB 19%
Although interest rate movements affect short-term funds less than long-term
funds, the dramatic rise in rates left almost no bonds untouched. The benefits
of reduced volatility, income characteristics, and a relatively stable NAV of a
short-term fund could be seen in the performance during the past year, as
short-term funds generally outperformed longer term assets.
The bonds in which the fund invest (corporate, mortgage, and asset-backed
securities) performed better than treasuries because their yields increased
considerably less than treasury securities with similar maturities (prices move
in the opposite direction of interest rates). In the aftermath of the global
crisis and flight to quality seen in 1998, the difference in yield between
corporate bonds and treasuries was quite pronounced. As stability returned to
the market, this yield gap narrowed, allowing for better performance for
corporate and mortgage-backed securities. Yield spreads widened again in early
summer as the Federal Reserve Open Market Committee began to raise rates and the
markets anticipated further tightening. This coincided with a significant
increase in the supply of corporate securities, as companies rushed to issue
ahead of Y2K. These events caused yield spreads to widen, but not nearly to the
level we saw in 1998. An additional benefit of corporate, mortgage and
asset-backed securities is the income they supply to the Fund. These securities
tend to have higher yields than treasuries, with similar maturities, and the
weighting in these holdings generated additional income for shareholders of the
Short Term High Quality Bond Fund.
WERE THERE ANY SHIFTS IN THE FUND'S PORTFOLIO HOLDINGS/SECTORS THAT HAVE HAD A
SIGNIFICANT IMPACT ON PERFORMANCE?
We maintained our core positions during the year, with nearly 90% of portfolio
assets in corporate, mortgage and asset-backed securities. With the back up in
interest rates mentioned above, we used the opportunity to capture increased
yields by raising the weighting of corporates and mortgage-backed securities
while slightly lengthening maturities. Spreads on corporates, mortgage-backed
and asset-backed securities, especially for short-maturity securities, offer
income and return characteristics that are historically attractive. Corporate
securities are the largest weighting of the Fund, representing 48% of net
assets. These holdings generate the strongest yield advantage over Treasuries,
and the issuing companies have benefited from a strong economy. The corporate
holdings represent much of the BBB-rated securities in the portfolio, and these
bonds tend to offer strong yields and limited credit risk.
We took advantage of economic conditions and invested assets into some
non-cyclical businesses during the period. Technology firms such as Sun
Microsystems and cable-provider Cox Communications were added to the portfolio.
In addition, we held positions in large financial firms such as Goldman Sachs
and Wells Fargo & Co.
WHAT IS THE OUTLOOK FOR BOTH THE FUND AND THE OVERALL ECONOMY?
Our long-term outlook for interest rates is quite positive. We believe that
fundamental structural forces are in place for a continued low global
inflationary environment. Despite the increase in commodity prices, demographic
forces, fiscal austerity, technological enhancements and excess capacity all
point toward a lack of pervasive price pressures, and a positive environment for
fixed-income assets.
The underlying and ongoing strategy will be to use a mix of mortgage- and
asset-backed investments. Overall, treasury securities will comprise a
relatively small portion of the Fund due to our outlook, on both a yield and
return basis, for non-treasury spread products and sectors. The Fund will move
between sectors based on historical yield relationships and will minimize risk
by its concentration in short-term assets.
Given reasonable yield relationships, the best long-term approach for the Fund
is to keep the majority of assets in corporate, mortgage-backed and asset-backed
securities and to keep a short-term maturity profile which can capture price
movements should interest rates fall.
(+) Bond ratings provided by a combination of Standard & Poors and Moody's.
Allocation percentages are based on total investment value of the portfolio
as of 10/31/99.
<PAGE>
U.S. GOVERNMENT
securities fund
PORTFOLIO MANAGER:
CRAIG SOSEY
WM ADVISORS, INC.
A fixed-income team led by senior portfolio manager Craig Sosey, who joined WM
Advisors, Inc. in 1988 and has over 15 years banking and financial analysis
experience, manages the U.S. Government Securities Fund. Mr. Sosey has a BS in
Finance from the University of the Pacific and an MBA from the University of
California, Berkeley. He has extensive experience managing government and
mortgage-backed securities.
PERFORMANCE REVIEW
For the 10-year period ended October 31, 1999, the U.S. GOVERNMENT SECURITIES
FUND (Class A shares) returned 7.27% on an average annual total return basis, or
6.78% adjusted for the maximum sales charge. For the 12-month period ended
October 31, 1999, the Fund's total return was 1.38%, or -3.20% adjusted for the
maximum sales charge. Long-term results are very favorable and provide the
potential for inflation protection as the Fund has averaged 7.90% (not adjusted
for sales charge) for the past five years. For additional information, see the
accompanying chart below. THE FUND'S 30-DAY SEC YIELD AS OF OCTOBER 31, 1999,
WAS 5.79% FOR A SHARES AND 5.07% FOR B SHARES.
VALUE OF A $10,000 INVESTMENT (CLASS A SHARES)+
Fund Fund
(Class A (Class A
Shares; Shares;
not adjusted Lehman
adjusted for the Brothers
for maximum Government
sales 4.5% sales Bond Inflation
charge) charge) Index(1) (CPI)(1)
- --------------------------------------------------------------------------------
Oct 89 $10,000 $ 9,550 $10,000 $10,000
10,102 9,647 10,097 10,057
Dec 89 10,145 9,689 10,114 10,081
10,048 9,596 9,971 10,105
10,119 9,664 9,990 10,122
10,101 9,646 9,988 10,154
10,030 9,578 9,901 10,203
10,291 9,828 10,177 10,227
Jun 10,407 9,939 10,338 10,243
10,578 10,102 10,470 10,349
10,516 10,042 10,324 10,398
10,601 10,124 10,424 10,455
10,718 10,235 10,593 10,472
10,942 10,450 10,829 10,496
Dec 90 11,105 10,605 10,996 10,552
11,235 10,729 11,114 10,592
11,306 10,797 11,177 10,690
11,381 10,868 11,234 10,780
11,479 10,962 11,358 10,844
11,566 11,046 11,402 10,868
Jun 11,563 11,042 11,386 10,868
11,707 11,181 11,522 10,933
11,933 11,396 11,789 10,950
12,170 11,622 12,037 10,966
12,318 11,764 12,143 10,983
12,428 11,869 12,264 11,016
Dec 91 12,739 12,166 12,682 11,048
12,519 11,956 12,484 11,064
12,631 12,062 12,533 11,096
12,564 11,998 12,460 11,145
12,663 12,093 12,539 11,162
12,886 12,306 12,771 11,194
Jun 13,049 12,461 12,954 11,202
13,224 12,629 13,280 11,219
13,350 12,749 13,403 11,259
13,477 12,870 13,592 11,317
13,316 12,716 13,397 11,332
13,302 12,704 13,374 11,348
Dec 92 13,519 12,910 13,599 11,389
13,762 13,143 13,888 11,413
13,929 13,302 14,166 11,445
13,982 13,352 14,213 11,477
14,071 13,438 14,322 11,517
14,107 13,472 14,306 11,533
Jun 14,339 13,694 14,624 11,525
14,412 13,763 14,713 11,582
14,617 13,959 15,041 11,622
14,624 13,966 15,099 11,663
14,684 14,023 15,156 11,696
14,528 13,875 14,989 11,712
Dec 93 14,616 13,959 15,048 11,728
14,796 14,130 15,254 11,728
14,498 13,846 14,930 11,761
14,078 13,444 14,595 11,786
13,915 13,289 14,479 11,834
13,931 13,304 14,460 11,843
Jun 13,850 13,227 14,427 11,843
14,132 13,496 14,693 11,875
14,134 13,498 14,696 11,915
13,855 13,232 14,488 11,955
13,788 13,167 14,478 11,972
13,764 13,145 14,452 11,981
Dec 94 13,898 13,273 14,540 12,021
14,220 13,580 14,811 12,054
14,586 13,930 15,129 12,102
14,693 14,032 15,224 12,135
14,901 14,230 15,424 12,143
15,553 14,853 16,046 12,159
Jun 15,645 14,941 16,169 12,159
15,558 14,858 16,109 12,208
15,756 15,047 16,298 12,256
15,908 15,192 16,454 12,297
16,137 15,411 16,704 12,337
16,368 15,631 16,965 12,362
Dec 95 16,601 15,854 17,206 12,387
16,696 15,945 17,311 12,387
16,314 15,579 16,958 12,419
16,148 15,421 16,817 12,444
16,041 15,319 16,709 12,485
16,007 15,277 16,681 12,476
Jun 16,203 15,474 16,896 12,467
16,238 15,507 16,938 12,541
16,177 15,449 16,901 12,581
16,468 15,727 17,182 12,647
16,874 16,114 17,559 12,696
17,249 16,473 17,865 12,720
Dec 96 17,013 16,247 17,683 12,728
17,049 16,282 17,702 12,752
17,067 16,299 17,727 12,776
16,825 16,068 17,539 12,817
17,126 16,355 17,792 12,858
17,281 16,503 17,945 12,882
Jun 17,501 16,713 18,146 12,882
18,040 17,228 18,661 12,924
17,824 17,022 18,476 12,964
18,113 17,298 18,753 12,996
18,422 17,593 19,078 13,012
18,492 17,660 19,175 13,004
Dec 97 18,701 17,859 19,377 13,019
18,908 18,058 19,667 13,044
18,889 18,039 19,614 13,069
18,933 18,081 19,669 13,094
19,047 18,189 19,757 13,117
19,214 18,350 19,961 13,141
Jun 19,381 18,509 20,189 13,157
19,443 18,568 20,219 13,172
19,682 18,797 20,745 13,188
19,940 19,043 21,305 13,204
19,892 18,997 21,232 13,236
20,010 19,109 21,239 13,236
Dec 98 20,050 19,148 21,285 13,228
20,164 19,257 21,409 13,261
20,003 19,103 20,899 13,277
20,117 19,212 20,981 13,317
20,173 19,265 21,029 13,414
20,044 19,142 20,844 13,414
Jun 19,912 19,016 20,802 13,414
19,816 18,924 20,771 13,454
19,798 18,907 20,771 13,486
20,089 19,185 20,939 13,551
Oct 99 20,170 19,262 20,973 13,600
(1) The Lehman Brothers Government Bond Index is an unmanaged index of all U.S.
government bonds. The Consumer Price Index is a measurement of inflation for
all urban consumers (CPI). The Index assumes reinvestment of all
dividends/distributions, and does not reflect any asset-based charges for
investment management or other expenses. Past investment performance does
not guarantee future performance. The returns shown for the Fund assume
reinvestment of all dividends/distributions by the shareholder. For
comparison purposes, the benchmark's performance is shown as of the Fund's
inception date not from the inception date of the benchmark.
The Fund's performance would have been lower had the Advisor not waived a
portion of its fees and the Fund's custodian had not allowed its fees to be
reduced by credits.
+ The performance of the Class B Shares was different than that indicated by
the lines shown on the left for the Class A Shares, based on the differences
in sales loads and fees paid by Class B shareholders.
- --------------------------------------------------------------------------------
TOTAL RETURNS AS OF 10/31/99
CLASS A SHARES 1 YEAR 5 YEAR* 10 YEAR*
Fund (not adjusted for sales charge) 1.38% 7.90% 7.27%
Fund (adjusted for the maximum 4.5%
sales charge) -3.20% 6.90% 6.78%
Lehman Brothers Government Bond
Index(1) -1.22% 7.69% 7.69%(1)
CLASS B SHARES 1 YEAR 5 YEAR* SINCE INCEPTION*
(MARCH 31, 1994)
Fund (not adjusted for contingent
deferred sales charge) 0.53 6.98% 5.75%
Fund (adjusted for the maximum
contingent deferred sales charge) -4.25% 6.83% 5.75%
Lehman Brothers Government Bond
Index(1) -1.22% 7.69% 6.71%(1)
* Annualized
PORTFOLIO composition(+)
GNMA 28%
FNMA 23%
FHLMC 21%
CMOs 14%
AGENCY OBLIGATIONS 7%
TREASURIES 6%
OTHER 1%
WHAT WERE THE MOST SIGNIFICANT FACTORS CONTRIBUTING TO THE FUND'S PERFORMANCE
OVER THE 12-MONTH PERIOD ENDED OCTOBER 31, 1999, AND WHAT INVESTMENT TECHNIQUES
WERE USED TO ADDRESS THOSE CONDITIONS?
Interest rates rose dramatically during the twelve months ended October 31,
1999, as the U.S. economy continued to strengthen and the global economy began
to recover. This caused concerns over rising inflation since wages continued to
increase and commodity prices rebounded from lows reached in previous periods.
Interest rates rose across the yield curve, while the shape of the curve
flattened significantly. This meant that although all interest rates increased,
the difference in yield between short- and long-term maturity bonds got smaller.
The two-year treasury yield rose from 4.11% in October 1998, to 5.78% a year
later. This represented an increase of 167 basis points (1.67%), a very
significant rise in rates and more dramatic than longer-term treasuries. The
yield on the 10-year treasury increased 142 basis points, while the 30-year bond
jumped 101 basis points, ending the period at 6.02% and 6.16%, respectively.
In an attempt to reduce the threat of inflation, the Federal Reserve Board's
Open Market Committee raised the Fed Funds rate 25 basis points twice during the
summer. Higher short-term interest rates work to constrict the economy, thus
slowing growth and reducing inflationary pressures. These moves took back two of
the three reductions in rates undertaken by the Fed in late 1998 which were a
response to the global crisis that began in Asia and spread throughout much of
the world.
The backup in interest rates far overshadowed any other factors, contributing to
the low total return for the Fund. bond prices dropped significantly, which
nearly offset the income earned by the Fund.
The strong housing market, buoyed by domestic economic strength, generally
supported the performance of some mortgage-backed holdings in the Fund. Despite
rising interest rates, prepayments were higher than expected (although they did
slow) as consumers were able to afford better homes and retired their old
mortgages. This allowed us to reinvest prepaid proceeds in higher-yielding
mortgages, adding additional income to the Fund.
WERE THERE ANY SHIFTS IN THE FUND'S PORTFOLIO HOLDINGS/SECTORS THAT HAVE HAD A
SIGNIFICANT IMPACT ON PERFORMANCE?
The Fund continued to hold a high percentage of its assets in agency
mortgage-backed securities. Throughout the period, these securities tended to
perform better than Treasuries with comparable durations (a measure of price
sensitivity to changes in interest rates). However, because of the backup in
interest rates and the subsequent slowdown in refinancings, the duration of
nearly all mortgage securities extended. When interest rates rise, the
likelihood of prepayment of mortgages falls, as refinancing would then be at a
higher interest rate. Given this scenario, prices of mortgage-backed securities
would then be affected more significantly by changes in interest rates.
The difference in yield between mortgages and treasuries (the spread) was
extremely volatile over the period, but ended the year slightly tighter. This
enabled mortgages to outperform treasuries as Treasury yields increased relative
to mortgage-backed securities, sending their prices lower. However, as we have
mentioned, these relative gains were overshadowed by the dramatic jump in rates.
We continued to purchase mortgage-backed securities that we felt had predictable
prepayment characteristics and would provide a good, stable return over all
interest rate scenarios. We believe this is especially important now that rates
are higher than in recent history and given that the probability of lower rates
has increased. These bonds should exhibit relative performance strength over a
longer-term time horizon and should benefit Fund shareholders if rates decline.
During the period, the Fund grew in size from $340 million to almost $480
million, due to a merger of the Griffin U.S. Government Securities Fund and two
large cash inflows into the Fund. The Griffin fund had a longer duration and a
lower percentage of mortgage-backed securities than our target and, therefore,
predicated a re-balancing of the combined portfolio to get us back to our target
levels. We used these opportunities to buy GNMA securities near the end of the
period; these bonds tend to prepay a bit slower than other bonds if rates begin
to fall.
WHAT IS THE OUTLOOK FOR BOTH THE FUND AND THE OVERALL ECONOMY?
Two overriding concerns in the bond market remain: the direction of short-term
interest rates and any possible problems resulting from Y2K. Until these
short-term issues are settled, the bond market may remain volatile with a
bearish bias. However, as we move into the New Year and these issues subside,
the bond market should improve. We believe the Fed will keep inflation in check,
the economy will run fairly smoothly, and that the long-term direction of
interest rates should be lower. The Fund, with its emphasis on mortgages, is
positioned to perform well if spreads tighten back toward historic levels as
well as during times of stable interest rates. In addition, the stable
prepayment characteristics of many of the mortgages in the Fund will become more
valuable in a rally, and benefit Fund shareholders. Overall, our long-term
outlook is very positive as inflation should remain under control and hold back
interest-rate levels.
(+) Allocation percentages are based on total investment value of the portfolio
as of 10/31/99.
<PAGE>
INCOME
fund
PORTFOLIO MANAGER:
GARY POKRZYWINSKI
WM ADVISORS, INC.
The Income Fund is managed by a fixed-income team led by Senior Portfolio
Manager Gary Pokrzywinski, who has over 14 years of asset management experience
and has been with WM Advisors, Inc. for more than seven years. Mr. Pokrzywinski
is a Chartered Financial Analyst and holds a Business Degree from the University
of Wisconsin.
PERFORMANCE REVIEW
For the 10-year period ended October 31, 1999, the INCOME FUND (Class A shares)
returned 7.90% on an average annual total return basis, or 7.41% adjusted for
the maximum sales charge. For the 12-month period ended October 31, 1999, the
Fund's total return was 1.98%, or -2.56% adjusted for the maximum sales charge.
Interest rates rose throughout the period, which put pressure on the prices of
the bonds in the portfolio. Intermediate-term treasury bonds increased
significantly, rising more than 160 basis points (1.60%) over the course of the
year. Rising interest rates offset some of the income earned by the Fund during
the last 12 months. AS OF OCTOBER 31, 1999, THE 30-DAY SEC YIELD OF THE FUND WAS
6.73% FOR A SHARES AND 6.33% FOR B SHARES.
VALUE OF A $10,000 INVESTMENT (CLASS A SHARES)+
Fund Fund
(Class A (Class A
Shares; Shares;
not adjusted Lehman
adjusted for the Brothers
for maximum Government/
sales 4.5% sales Corporate Bond Inflation
charge) charge) Index(1) (CPI)(1)
- --------------------------------------------------------------------------------
Oct 89 $10,000 $ 9,550 $10,000 $10,000
10,073 9,620 10,090 10,057
Dec 89 10,108 9,653 10,105 10,081
10,054 9,601 9,967 10,105
9,979 9,530 9,989 10,122
9,995 9,545 9,990 10,154
9,997 9,547 9,898 10,203
9,967 9,518 10,185 10,227
Jun 10,191 9,733 10,350 10,243
10,358 9,892 10,478 10,349
10,439 9,969 10,326 10,398
10,339 9,874 10,412 10,455
10,432 9,963 10,550 10,472
10,552 10,077 10,780 10,496
Dec 90 10,745 10,261 10,943 10,552
10,879 10,390 11,066 10,592
10,989 10,494 11,161 10,790
11,127 10,626 11,238 10,780
11,261 10,754 11,367 10,844
11,409 10,895 11,421 10,868
Jun 11,458 10,943 11,408 10,868
11,470 10,954 11,552 10,933
11,600 11,078 11,817 10,950
11,844 11,311 12,064 10,966
12,094 11,549 12,172 10,983
12,283 11,730 12,293 11,016
Dec 91 12,386 11,829 12,708 11,048
12,761 12,187 12,520 11,064
12,598 12,031 12,586 11,097
12,659 12,089 12,517 11,145
12,621 12,053 12,592 11,162
12,711 12,139 12,836 11,194
Jun 12,921 12,340 13,025 11,202
13,145 12,553 13,358 11,219
13,414 12,811 13,477 11,259
13,582 12,971 13,660 11,317
13,735 13,117 13,451 11,332
13,515 12,906 13,439 11,348
Dec 92 13,486 12,880 13,671 11,389
13,703 13,086 13,969 11,413
13,981 13,352 14,259 11,445
14,254 13,613 14,308 11,477
14,335 13,690 14,418 11,517
14,445 13,795 14,411 11,533
Jun 14,479 13,828 14,738 11,525
14,701 14,039 14,832 11,582
14,813 14,147 15,173 11,622
15,132 14,451 15,226 11,663
15,244 14,558 15,289 11,696
15,326 14,636 15,116 11,712
Dec 93 15,100 14,421 15,182 11,728
15,186 14,502 15,410 11,728
15,444 14,749 15,074 11,761
15,060 14,382 14,705 11,786
14,586 13,930 14,583 11,834
14,450 13,799 14,557 11,843
Jun 14,398 13,750 14,523 11,843
14,379 13,731 14,814 11,875
14,649 13,990 14,819 11,915
14,667 14,007 14,596 11,955
14,412 13,763 14,580 11,972
14,361 13,715 14,553 11,981
Dec 94 14,343 13,698 14,649 12,021
14,453 13,802 14,931 12,054
14,715 14,053 15,277 12,102
15,077 14,398 15,379 12,135
15,201 14,517 15,593 12,143
15,464 14,768 16,247 12,159
Jun 16,286 15,553 16,377 12,159
16,423 15,684 16,313 12,208
16,312 15,578 16,522 12,256
16,546 15,802 16,690 12,297
16,761 16,008 16,935 12,337
16,980 16,216 17,215 12,362
Dec 95 17,256 16,480 17,468 12,387
17,571 16,781 17,576 12,387
17,699 16,902 17,204 12,419
17,227 16,452 17,059 12,444
17,078 16,309 16,941 12,485
16,961 16,197 16,913 12,476
Jun 16,941 16,178 17,139 12,467
17,147 16,375 17,179 12,541
17,182 16,409 17,137 12,581
17,181 16,408 17,442 12,647
17,511 16,723 17,849 12,696
17,981 17,172 18,177 12,720
Dec 96 18,394 17,567 17,975 12,728
18,180 17,362 17,997 12,752
18,237 17,417 18,035 12,776
18,269 17,447 17,820 12,817
18,030 17,219 18,080 12,858
18,291 17,468 18,240 12,882
Jun 18,540 17,705 18,468 12,882
18,863 18,014 19,033 12,924
19,561 18,680 18,819 12,964
19,296 18,427 19,115 12,996
19,626 18,743 19,421 13,012
19,940 19,043 19,524 13,004
Dec 97 20,024 19,123 19,729 13,019
20,214 19,305 20,007 13,044
20,293 19,380 19,967 13,069
20,449 19,529 20,029 13,094
20,517 19,594 20,129 13,117
20,761 19,827 20,344 13,141
Jun 20,919 19,978 20,552 13,157
20,887 19,948 20,568 13,172
20,969 20,025 20,969 13,188
21,348 20,388 21,569 13,204
21,067 20,119 21,416 13,236
21,425 20,461 21,544 13,236
Dec 98 21,455 20,489 21,596 13,228
21,667 20,692 21,749 13,261
21,165 20,212 21,232 13,277
21,281 20,323 21,338 13,317
21,534 20,565 21,391 13,414
21,355 20,394 21,171 13,414
Jun 21,221 20,266 21,105 13,414
21,210 20,256 21,046 13,454
21,204 20,250 21,029 13,486
21,405 20,442 21,219 13,551
Oct 99 21,487 20,520 21,274 13,600
1 The Lehman Brothers Government/ Corporate Bond Index is unmanaged and
represents all government and corporate bonds. The Consumer Price Index is a
measurement of inflation for all urban consumers (CPI). The Index assumes
reinvestment of all dividends/ distributions, and does not reflect any
asset-based charges for investment management or other expenses. Past
investment performance does not guarantee future performance. The returns
shown for the Fund assume reinvestment of all dividends/distributions by the
shareholder. For comparison purposes, the benchmark's performance is shown as
of the Fund's inception date not from the inception date of the benchmark.
The Fund's performance would have been lower had the Advisor and Distributor
not waived a portion of their fees and the Fund's custodian had not allowed
its fees to be reduced by credits.
+ The performance of the Class B Shares was different than that indicated by
the lines shown on the left for the Class A Shares, based on the differences
in sales loads and fees paid by Class B shareholders.
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------
TOTAL RETURNS AS OF 10/31/99
CLASS A SHARES 1 YEAR 5 YEAR* 10 YEAR*
<S> <C> <C> <C>
Fund (not adjusted for sales charge) 1.98% 8.46% 7.90%
Fund (adjusted for the maximum 4.5% sales charge) -2.56% 7.48% 7.41%
Lehman Brothers Government/Corporate Bond Index(1) -0.66% 7.85% 7.84%(1)
<CAPTION>
CLASS B SHARES 1 YEAR 5 YEAR SINCE INCEPTION*
(MARCH 30, 1994)
Fund (not adjusted for contingent deferred sales charge) 1.12% 7.57% 6.33%
Fund (adjusted for the maximum contingent deferred sales charge) -3.64% 7.42% 6.33%
Lehman Brothers Government/Corporate Bond Index(1) -0.66% 7.85% 6.84%(1)
*Annualized
</TABLE>
PORTFOLIO composition+
Industrial Bonds 20%
Financial Bonds 15%
Foreign Bonds 13%
Other Corporate Bonds 23%
Mortgage-Backed 12%
Treasuries 7%
Other 1%
CMOs 2%
Transportation Bonds 7%
+ Bond ratings provided by a combination of Standard & Poors and Moody's.
Allocation percentages are based on total investment value of the portfolio
as of 10/31/99. Differences from financial statements are a result of a
consolidation of industries or sectors.
WHAT WERE THE MOST SIGNIFICANT FACTORS CONTRIBUTING TO THE FUND'S PERFORMANCE
OVER THE 12-MONTH PERIOD ENDED OCTOBER 31, 1999, AND WHAT INVESTMENT TECHNIQUES
WERE USED TO ADDRESS THOSE CONDITIONS?
Strong economic growth led by consumer spending and capital investment caused a
slight increase in inflation, which in turn pushed interest rates higher. Wage
pressures, as well as steep increases in oil prices, caused concerns in the
fixed-income market. Despite the rise in interest rates, corporate- and
mortgage-backed securities, reported positive performance, outperforming
treasuries for the year. The Fund performed relatively well given its marginally
long duration (a measure of price sensitivity to interest rates). Reasons for
the strong performance included high concentration in corporate securities,
strong income characteristics, a barbelled maturity structure, and a strong
performance by lower-rated securities.
Corporate bonds performed better than treasuries because their yields increased
less than treasury securities with similar maturities. In the aftermath of the
global crisis and flight to quality seen in 1998, the difference in yields
between corporate bonds and treasuries was quite pronounced. As stability
returned to the market, this yield gap narrowed, allowing for better performance
for corporate- and mortgage-backed securities. Yield spreads widened again in
early summer as the Federal Reserve Open Market Committee began to raise rates
and the markets anticipated further tightening. This coincided with a
significant increase in the supply of corporate securities, as companies rushed
to issue ahead of Y2K. These events caused widening yield spreads, but not
nearly to the level we saw in 1998. The other benefit of corporate- and
mortgage-backed securities is the income supplied to the Fund. Corporate- and
mortgage-backed bonds tend to have higher yields than similar maturity
treasuries, and the weighting in these holdings generated additional income for
shareholders of the Fund.
The Fund maintains a barbelled maturity strategy, with the majority of holdings
balanced between the short- and long-term areas, with just a smaller percentage
invested in intermediate-term holdings, usually mortgages. This strategy
benefited Fund shareholders as intermediate-term bonds saw the most dramatic
increase in yields (causing negative price performance), and short-term
securities outperformed all other maturity areas. In addition, because the Fund
is able to invest a portion of assets in lower-rated bonds, performance was
bolstered for the past 12 months. Higher-yielding bonds were the strongest
performing fixed-income sector for the period.
WERE THERE ANY SHIFTS IN THE FUND'S PORTFOLIO HOLDINGS/SECTORS THAT HAVE HAD A
SIGNIFICANT IMPACT ON PERFORMANCE?
There have been only minor changes to the Fund from year to year.
Mortgage-backed securities were increased because of their high-quality (backed
by a government agency) and good income characteristics. This served to enhance
the overall credit quality of the Fund by increasing the "AAA" portion of the
portfolio. During the late stages of the period, in an effort to capture higher
yields, we added marginally to the positions in lower-rated securities and were
rewarded with strong performance. Examples of these types of holdings were
Poland Communications and the Republic of Korea. As stability returned to the
markets, these bonds appreciated significantly providing strong income to the
Fund. We will likely continue this strategy if the gap in yields remains wide in
the coming months. As rates have been rising, we have also slightly lengthened
maturities to take advantage of the higher yields and position the Fund to
benefit in a more stable interest-rate environment.
Conversely, we did have some poor performing issues in the portfolio. Waste
Management and Lockheed Martin Corporation both encountered problems during the
course of the year, and their debt positions suffered. We maintained positions
in these firms, as their longer-term outlooks are more positive.
WHAT IS THE OUTLOOK FOR BOTH THE FUND AND THE OVERALL ECONOMY?
Our long-term outlook for interest rates is quite positive. We believe that
fundamental structural forces are in place for a continued low global
inflationary environment. Despite the increase in commodity prices, demographic
forces, fiscal austerity, technological enhancements, and excess capacity all
point toward a lack of pervasive price pressures and a positive environment for
fixed-income assets.
We focus the investments of the Fund in corporate securities of many highly-
recognizable companies. A smaller percentage of the portfolio is more bottom-up
and research-intensive, concentrating on issuers that can achieve a higher level
of income yet have enough financial strength to limit risk. The Fund moves in
and out of sectors and industries based on the ebbs and flows of the business
cycle, finding opportunities domestically and abroad. From an interest-rate
perspective, we manage the Fund based on our long-term secular inflation and
rate outlook, which continues to be positive. The Fund currently is long in
maturity and overweighted in corporate securities -- historically, this is the
best combination as long as inflation does not increase substantially. Overall,
we believe this focus will best serve shareholders and achieve the Fund's
objectives.
<PAGE>
HIGH YIELD
fund
PORTFOLIO MANAGER:
GARY POKRZYWINSKI
WM ADVISORS, INC.
The High Yield Fund is managed by a fixed-income team led by Senior Portfolio
Manager Gary Pokrzywinski, who has over 14 years of asset management experience
and has been with WM Advisors, Inc. for more than seven years. Mr. Pokrzywinski
is a Chartered Financial Analyst and holds a Business Degree from the University
of Wisconsin.
PERFORMANCE REVIEW
From the Fund's inception (April 8, 1998) through October 31, 1999, the HIGH
YIELD FUND (Class A shares) returned 2.86% on an average annual total return
basis, or -0.11% adjusted for the maximum sales charge. For the 12-month period
ended October 31, 1999, the Fund's total return was 12.26%, or 7.18% adjusted
for the maximum sales charge. The Fund outperformed the benchmark Lehman
Brothers High Yield Index which advanced 4.34% on an average annual total return
for the same period.1 Despite rising interest rates throughout the period, the
Fund nearly tripled the performance of its benchmark index. Intermediate-term
Treasury bond yields increased significantly, rising more than 160 basis points
(1.60%) over the course of the year, but a strong economy and improving global
conditions supported the strong performance of the Fund. The Fund reported high
levels of income as well. AS OF OCTOBER 31, 1999, THE 30-DAY SEC YIELD OF THE
FUND WAS 8.93% FOR A SHARES AND 8.60% FOR B SHARES.
VALUE OF A $10,000 INVESTMENT (CLASS A SHARES)+
Fund Fund
(Class A (Class A
Shares; Shares;
not adjusted Lehman
adjusted for the Brothers
for maximum High
sales 4.5% sales Yield Inflation
charge) charge) Index(1) (CPI)(1)
- --------------------------------------------------------------------------------
Inception 4/3/98 $10,000 $ 9,550
Apr 9,997 9,547 $10,000 $10,000
May 9,965 9,517 10,035 10,018
Jun 9,918 9,471 10,071 10,030
Jul 9,892 9,447 10,129 10,042
Aug 9,345 8,925 9,569 10,054
Sep 9,336 8,916 9,612 10,066
Oct 9,310 8,891 9,415 10,091
Nov 9,686 9,250 9,806 10,091
Dec 98 9,670 9,235 9,817 10,085
Jan 9,834 9,391 9,962 10,109
Feb 9,722 9,284 9,903 10,122
Mar 9,899 9,453 9,998 10,152
Apr 10,259 9,798 10,192 10,226
May 10,269 9,807 10,054 10,226
Jun 10,366 9,900 10,033 10,226
Jul 10,499 10,026 10,073 10,257
Aug 10,397 9,929 9,961 10,281
Sep 10,456 9,986 9,889 10,331
Oct 99 10,451 9,981 9,824 10,368
1 Index total returns were calculated from 4/30/98 to 10/31/99. The Lehman
Brothers High Yield Index includes all below investment-grade, corporate debt
securities, assumes reinvestment of all dividends/distributions, and does not
reflect any asset-based charges for investment management or other expenses.
The Consumer Price Index is a measurement of inflation for all urban
consumers (CPI). Past performance does not guarantee future performance. The
returns shown for the Fund assume reinvestment of all dividends/distributions
by the shareholder. For comparison purposes, the benchmark's performance is
shown as of the Fund's inception date not from the inception date of the
benchmark.
The Fund's performance would have been lower had the Advisor not waived a
portion of its fees and the Fund's custodian had not allowed its fees to be
reduced by credits.
+ The performance of the Class B Shares was different than that indicated by
the lines shown on the left for the Class A Shares, based on the differences
in sales loads and fees paid by Class B shareholders.Total Returns as of
10/31/99
- --------------------------------------------------------------------------------
<TABLE>
TOTAL RETURNS AS OF 10/31/99
<CAPTION>
CLASS A SHARES 1 YEAR SINCE INCEPTION*
(APRIL 8, 1998)
<S> <C> <C>
Fund (not adjusted for sales charge) 12.26% 2.86%
Fund (adjusted for the maximum 4.5% sales charge) 7.18% -0.11%
Lehman Brothers high yield index(1) 4.34% -1.18%(1)
<CAPTION>
CLASS B SHARES 1 YEAR SINCE INCEPTION*
(MAY 5, 1998)
Fund (not adjusted for contingent deferred sales charge) 11.44% 2.67%
Fund (adjusted for the maximum contingent deferred sales charge) 6.44% 0.28%
Lehman Brothers high yield index(1) 4.34% -1.18%(1)
*Annualized
</TABLE>
PORTFOLIO composition+
Health Care Bonds 12%
Service Bonds 9%
Telecommunications Bonds 6%
Treasury Notes 5%
Other Corporate Bonds 15%
Information Technology Bonds 13%
Equity Securities 8%
Foreign Bonds 29%
Other 3%
+ Allocation percentages are based on total investment value of the portfolio
as of 10/31/99. There may be additional risks associated with foreign
securities. There are also additional credit and default risks associated
with lower-rated securities.
WHAT WERE THE MOST SIGNIFICANT FACTORS CONTRIBUTING TO THE FUND'S PERFORMANCE
OVER THE 12-MONTH PERIOD ENDED OCTOBER 31, 1999, AND WHAT INVESTMENT TECHNIQUES
WERE USED TO ADDRESS THOSE CONDITIONS?
Even with the steep rise in interest rates, the high-yield market performed
fairly well during the 12-month period ended October 31, 1999. The high-yield
sector was the best performing area of the fixed-income market. High-yield bonds
tend to be more sensitive to economic strength than to rising interest rates.
Some of the strong performance can be explained by the resurgence of global
stability following the Asian Crisis of 1998. This caused high-yield bonds to
perform better than treasuries, because their yields increased less than
treasury securities with similar maturities. In the aftermath of the global
crisis and flight to quality seen in 1998, the difference in yield between
high-yield bonds and treasuries was quite pronounced. As stability returned to
the market, this yield gap narrowed, allowing for better performance for the
high-yield area. Yield spreads widened again in early summer as the Federal
Reserve Open Market Committee began to raise rates and the markets anticipated
further tightening. This coincided with a significant increase in the supply of
corporate securities, as companies rushed to issue ahead of Y2K. These events
caused yield spreads to widen, but not nearly to the level we saw early in the
period. The other benefit of these corporate securities is the income supplied
to the Fund. The securities held by the Fund tend to have significantly higher
yields than treasuries with similar maturities, generating additional income for
shareholders of the Fund.
The Fund significantly outperformed its benchmark index and the overall
high-yield market partially due to overweightings in the Technology sector and
in Asian positions (including some Japanese holdings). The Technology sector
benefited from continued strength of trends in capital investment which is
likely to persist. Our positions in Asia rallied considerably during the year
when global stability was restored. After the severely depressed period of late
1997 and 1998, the Asian countries (excluding Japan) started to rebound as a
result of rising exports, lower interest rates, and privatization. Japan has
improved slowly over the year, mainly the result of continued fiscal stimulus
and the gradual movement to a more open market economy. The Fund benefited from
its position in Poland Communications; the firm was bought during the period
and, as a result, the value of the holding appreciated significantly and
contributed to overall Fund results.
The Fund did experience difficulties in one sector during the period -- the
long-term care (nursing home) sector. Policy changes to Medicare reimbursements
and excess debt levels caused financial difficulties for a number of long-term
care operators. We continue to hold our positions in the Fund and feel that
given aging demographics, the long-term trends are positive for the industry.
Because the market has looked unfavorably upon the sector as a whole, we found
value by concentrating our holdings in higher-quality companies such as Beverly
Enterprises and other diversified companies (Health Care REITs).
WERE THERE ANY SHIFTS IN THE FUND'S PORTFOLIO HOLDINGS/SECTORS THAT HAVE HAD A
SIGNIFICANT IMPACT ON PERFORMANCE?
Although there were no significant changes to the Fund during the year, we did
increase the exposure to the Technology, Service, and Gaming sectors while
lowering the concentration of mortgage-backed securities, the Mining sector, and
Cash. Broadly speaking, we continue to favor the health care industry given
current demographic trends. As baby boomers grow older and live longer lives,
the demand for health care also increases. We also favor the Technology and
Media/Telecommunication sectors as firms continue to pour money into
technological enhancements to improve productivity. Some companies, particularly
in the Telecommunication sector, are expensive, and we will use any short-term
fluctuations to add positions in these areas. We are also positive about the
growth in the financial sector given current trends of globalization and the
reliance on financial intermediaries to fund this expansion.
A particular strategy is to focus on industries or companies that are out of
favor in the short term, but possess long-term positive fundamental
characteristics and solid asset value. While these companies work through their
problems, the Fund has the potential to earn very strong current income. The
Fund will continue to focus on broken or semi-broken convertible securities.
These are convertible securities where the underlying stock price has fallen 30%
or more, resulting in a performance that resembles a bond with a limited amount
of equity exposure. We believe this sector is less followed by the overall
market and offers an investment opportunity in sound companies that do not have
continuously leveraged balance sheets (as do straight high yields).
WHAT IS THE OUTLOOK FOR BOTH THE FUND AND THE OVERALL ECONOMY?
Our long-term outlook for interest rates is quite positive. We believe that
fundamental structural forces are in place to continue a low global inflationary
environment and continued economic stability. Despite the increase in commodity
prices, demographic forces, fiscal austerity, technological enhancements and
excess capacity all point toward a lack of pervasive price pressures and a
positive environment for high-yield assets. Although there is a chance that the
Federal Reserve will continue to raise interest rates and the economic expansion
will slow, high-yield investments still offer attractive income characteristics
especially given the current low inflationary environment.
<PAGE>
CALIFORNIA INSURED
intermediate
municipal fund
PORTFOLIO MANAGER:
JOSEPH PIRARO
VAN KAMPEN INVESTMENTS
Mr. Piraro is portfolio manager of both the WM California Municipal and the WM
California Insured Intermediate Municipal Funds. He serves as Vice President at
Van Kampen Investments and has been with the company since 1992.
PERFORMANCE REVIEW
From the Fund's inception (April 4, 1994) through October 31, 1999, the
CALIFORNIA INSURED INTERMEDIATE MUNICIPAL FUND (Class A shares) returned 5.86%
on an average annual total return basis, or 4.99% adjusted for the maximum sales
charge. For the 12-month period ended October 31, 1999, the Fund's total return
was -1.11%, or -5.57 adjusted for the maximum sales charge. AS OF OCTOBER 31,
1999, THE 30-DAY SEC YIELD FOR THE FUND WAS 3.76% FOR A SHARES AND 3.19% FOR B
SHARES; ON A TAX EQUIVALENT BASIS, THE YIELD WAS 6.86% FOR A SHARES AND 5.82%
FOR B SHARES.(++)
VALUE OF A $10,000 INVESTMENT (CLASS A SHARES)+
Fund Fund
(Class A (Class A
Shares; Shares;
not adjusted Lehman
adjusted for the Brothers
for maximum Municipal
sales 4.5% sales Bond Inflation
charge) charge) Index(1) (CPI)(1)
- --------------------------------------------------------------------------------
Inception 4/4/94 $10,000 $ 9,550
10,172 9,714 $10,000 $10,000
10,264 9,802 10,087 10,007
Jun 10,226 9,766 10,025 10,007
10,410 9,942 10,209 10,034
10,443 9,973 10,245 10,068
Sep 10,333 9,868 10,094 10,102
10,181 9,723 9,914 10,117
10,039 9,587 9,735 10,124
Dec 94 10,175 9,717 9,949 10,158
10,468 9,997 10,234 10,185
10,793 10,308 10,531 10,226
Mar 10,911 10,420 10,653 10,254
10,913 10,422 10,665 10,261
11,253 10,746 11,006 10,274
Jun 11,117 10,617 10,910 10,274
11,257 10,751 11,013 10,315
11,430 10,916 11,153 10,357
Sep 11,507 10,989 11,224 10,391
11,648 11,123 11,386 10,425
11,800 11,269 11,575 10,446
Dec 95 11,849 11,316 11,686 10,467
11,960 11,421 11,775 10,467
11,939 11,402 11,695 10,494
Mar 11,775 11,245 11,546 10,515
11,754 11,225 11,513 10,550
11,733 11,205 11,509 10,542
Jun 11,812 11,280 11,634 10,535
11,925 11,388 11,740 10,597
11,937 11,400 11,738 10,631
Sep 12,028 11,487 11,902 10,686
12,153 11,607 12,036 10,728
12,359 11,803 12,255 10,748
Dec 96 12,312 11,758 12,203 10,755
12,348 11,792 12,227 10,775
12,418 11,859 12,339 10,796
Mar 12,291 11,738 12,175 10,830
12,350 11,795 12,277 10,865
12,503 11,941 12,461 10,886
Jun 12,634 12,065 12,594 10,886
12,929 12,347 12,943 10,920
12,836 12,258 12,821 10,954
Sep 12,955 12,372 12,974 10,982
13,005 12,419 13,057 10,995
13,054 12,467 13,134 10,988
Dec 97 13,191 12,598 13,326 11,001
13,302 12,703 13,463 11,022
13,323 12,724 13,467 11,043
Mar 13,277 12,679 13,479 11,064
13,216 12,621 13,419 11,084
13,402 12,799 13,631 11,104
Jun 13,426 12,822 13,684 11,117
13,464 12,858 13,718 11,131
13,676 13,061 13,929 11,144
Sep 13,888 13,263 14,103 11,158
13,888 13,263 14,103 11,185
13,899 13,274 14,153 11,185
Dec 98 13,884 13,259 14,188 11,178
14,034 13,403 14,357 11,205
13,974 13,345 14,294 11,219
Mar 13,995 13,365 14,314 11,253
14,002 13,372 14,349 11,335
13,933 13,306 14,266 11,335
Jun 13,746 13,128 14,061 11,335
13,825 13,203 14,111 11,369
13,809 13,188 13,999 11,396
13,856 13,233 14,004 11,451
Oct 99 13,735 13,116 13,790 11,492
1 Index total returns were calculated from 4/30/94 to 10/31/99. The Lehman
Brothers Municipal Bond Index is a total return performance benchmark for the
long-term, investment-grade, tax-exempt bond market. The Consumer Price Index
is a measurement of inflation for all urban consumers (CPI). The index
assumes reinvestment of all dividends/distributions, and does not reflect any
asset-based charges for investment management or other expenses. Past
investment performance does not guarantee future performance. The returns
shown for the Fund assume reinvestment of all dividends/ distributions by the
shareholder. For comparison purposes, the benchmark's performance is shown as
of the Fund's inception date not from the inception date of the benchmark.
The Fund's performance would have been lower had the Advisor not waived a
portion of its fees or reimbursed certain other expenses and the Fund's
custodian had not allowed its fees to be reduced by credits.
+ The performance of the Class B Shares was different than that indicated by
the lines shown on the left for the Class A Shares, based on the differences
in sales loads and fees paid by Class B shareholders.
- --------------------------------------------------------------------------------
<TABLE>
TOTAL RETURNS AS OF 10/31/99
<CAPTION>
CLASS A SHARES 1 YEAR 5 YEAR* SINCE INCEPTION*
(April 4, 1994)
<S> <C> <C> <C>
Fund (not adjusted for sales charge) -1.11% 6.17% 5.86%
Fund (adjusted for the maximum 4.5% sales charge) -5.57% 5.19% 4.99%
Lehman Brothers Municipal Bond Index(1) -2.22% 6.82% 6.02%(1)
<CAPTION>
CLASS B SHARES 1 YEAR 5 YEAR* SINCE INCEPTION*
(July 1, 1994)
Fund (not adjusted for contingent deferred sales charge) -1.89% 5.37% 4.89%
Fund (adjusted for the maximum contingent deferred sales charge) -6.57% 5.21% 4.89%
Lehman Brothers high yield index(1) -2.22% 6.82% 6.16%(1)
*Annualized
</TABLE>
PORTFOLIO composition+
A 2%
AAA 88%
BBB 4%
NOT RATED 6%
WHAT WERE THE MOST SIGNIFICANT FACTORS CONTRIBUTING TO THE FUND'S PERFORMANCE
OVER THE 12-MONTH PERIOD ENDED OCTOBER 31, 1999, AND WHAT INVESTMENT TECHNIQUES
WERE USED TO ADDRESS THOSE CONDITIONS?
Bonds of all types experienced price declines during the past 12 months as
interest rates increased, especially toward the end of the reporting period. In
addition to the negative effects of the Federal Reserve Board's two interest
rate increases during the summer, the bond market declined as the nation's
strong economic growth continued to spark inflationary fears, leading to concern
about future rate hikes. Because of low institutional demand for municipal bonds
during the period, these conditions affected municipals more than their taxable
counterparts -- Corporate and Treasury bonds. The yields of newly issued 30-year
AAA-rated municipal bonds rose more than a full percentage point during the
12-month period, so the prices of existing bonds dropped accordingly. The bonds
in the Fund's portfolio were not spared from this market movement and suffered
price declines along with the rest of the municipal market.
The interest rate increases also suppressed municipal bond supply, bringing
nationwide issuance down more than 20% in the first 10 months of the year
relative to 1998. Supply was down in almost every sector, with Electric/Utility
and Health Care bonds experiencing the most significant drops. Although new
issuance kept pace with last year's active market, the amount of bonds issued
through refinancing was down more than 50% for the year through October. Many
municipalities simply chose not to refinance outstanding bonds because of the
higher interest rates they would have to pay in the current marketplace.
Overall, the lower supply helped support bonds prices somewhat because it meant
greater demand for available bonds.
In the intermediate range of the yield curve, 10-year California AAA-rated
insured securities yielded 4.15% at the end of the reporting period in 1998,
compared with 5.00% at the end of the third quarter in 1999.++
Issuance in the state was down 22% for the year, while insured issuance was down
to 50% of total issuance. The state of California has diversified its economy,
both regionally and by sector, since the early 1990's. The ratings of the
state's general obligations were upgraded by S&P from A+ to AA- in August 1999.
We took advantage of the general market declines to enhance the current income
potential and tax management of the Fund. We sold some of our holdings at a
capital loss to offset some of the gains we realized early in 1999. This allowed
us to reduce the taxable capital gains distributed to shareholders this year.
These bonds were replaced with higher yielding issues, increasing the Fund's
income stream. We also sold some bonds that were about to be called or refunded
and purchased intermediate duration securities in the 8- to 12-year maturity
range.
WERE THERE ANY SHIFTS IN THE FUND'S PORTFOLIO HOLDINGS/SECTORS THAT HAVE HAD A
SIGNIFICANT IMPACT ON PERFORMANCE?
We continue to maintain a higher than required percentage of AAA-rated
securities, which at the end of the reporting period totaled 88% of assets state
wide. Demand for quality California securities remains strong - both state wide
and nationally - and we will continue to maintain this level as we feel this
sector will outperform.
Sector concentrations were adjusted during the year, with a 12% increase in
exposure to public education bonds and a 12% decrease in the transportation
industry. Although we felt the Transportation sector was attractive, huge demand
for this sector in the intermediate area of the yield curve allowed us to sell
positions at strong prices. Concurrently, we were able to increase our public
education sector exposure (our largest Fund position at period end) due to a
large amount of intermediate area issuance being available at attractive yields.
The Fund continues to be well diversified,with exposure to fourteen industries.
WHAT IS THE INTERMEDIATE- AND LONG-TERM OUTLOOK FOR BOTH THE FUND AND THE
OVERALL ECONOMY?
In the coming months, we will probably see a slowing economy, which may be
partly the result of Y2K concerns. Wage increases will likely keep inflation
fears at the forefront, although increasing productivity should be able to
offset higher wage costs for employers.
Preparations for the turn of the millennium may also limit new issuance and
general market activity at the end of the year. Many municipal issuers are
planning to postpone issuing bonds until they feel certain that any potential
computer problems have been avoided. We will continue to focus our efforts on
finding attractive-yielding bonds, and protect the Fund from bond calls as much
as possible.
We do not expect to make any significant changes to the structure of the
portfolio. We feel the Fund is positioned for strong performance, and we will
continue our "bottom up" approach of investing by identifying individual
securities we feel will out-perform the general market. We will also use our
extensive research capabilities to look for attractive opportunities throughout
the coming months.
The Fund continues to experience good growth, and our outlook is positive. As
new assets flow into the Fund, we will invest the proceeds in line with current
structure and characteristics of the portfolio.
+ Bond ratings provided by a combination of Standard & Poors and Moody's.
Allocation percentages are based on total investment value of the portfolio
as of 10/31/99.
(++) A portion of income may be subject to some state and/or local taxes, and
for certain investors, may be subject to the federal alternative minimum
tax (AMT). Tax equivalent yield based on a 39.6% Federal and 9.3% State tax
brackets and the federal deduction of state taxes paid.
++ Insurance applies only to the timely repayment of principal and interest
and does not eliminate market risk.
<PAGE>
CALIFORNIA
municipal fund
PORTFOLIO MANAGER:
JOSEPH PIRARO
VAN KAMPEN INVESTMENTS
Mr. Piraro joined Van Kampen Investments in 1992, and serves as Vice President
and portfolio manager. He has had primary portfolio management responsibility
for the California Municipal Fund since May 1992.
PERFORMANCE REVIEW
For the 10-year period ended October 31, 1999, the CALIFORNIA MUNICIPAL FUND
(Class A shares) returned 6.40% on an average annual total return basis, or
5.91% adjusted for the maximum sales charge. For the 12-month period ended
October 31, 1999, the Fund's total return was -3.87%, or -8.19 adjusted for the
maximum sales charge. Interest rates increased throughout the period and rising
rates more than offset the income earned by the Fund. AS OF OCTOBER 31, 1999,
THE 30-DAY SEC YIELD OF THE FUND WAS 4.69% FOR A SHARES AND 4.16% FOR B SHARES;
ON A TAX EQUIVALENT BASIS, THE YIELD WAS 8.56% FOR A SHARES AND 7.59% FOR B
SHARES++++
VALUE OF A $10,000 INVESTMENT (CLASS A SHARES)+
Fund Fund
(Class A (Class A
Shares; Shares;
not adjusted Lehman
adjusted for the Brothers
for maximum High
sales 4.5% sales Yield Inflation
charge) charge) Index(1) (CPI)(1)
- --------------------------------------------------------------------------------
Oct 89 $10,000 $ 9,550 $10,000 $10,000
10,133 9,677 10,175 10,057
Dec 89 10,205 9,746 10,258 10,081
10,089 9,635 10,210 10,105
10,184 9,726 10,301 10,122
10,259 9,797 10,304 10,154
10,096 9,642 10,230 10,203
10,337 9,872 10,453 10,227
Jun 10,476 10,004 10,545 10,243
10,626 10,147 10,700 10,349
10,375 9,908 10,545 10,398
10,442 9,972 10,551 10,455
10,616 10,138 10,742 10,472
10,865 10,376 10,958 10,496
Dec 90 10,865 10,376 11,006 10,552
10,916 10,425 11,154 10,592
10,986 10,492 11,251 10,690
11,032 10,536 11,255 10,780
11,144 10,642 11,405 10,844
11,257 10,750 11,507 10,868
Jun 11,226 10,721 11,495 10,868
11,340 10,829 11,635 10,933
11,473 10,956 11,789 10,950
11,588 11,066 11,942 10,966
11,726 11,199 12,050 10,983
11,763 11,234 12,083 11,016
Dec 91 11,914 11,378 12,343 11,048
11,905 11,369 12,371 11,064
11,919 11,383 12,375 11,096
11,956 11,418 12,380 11,145
12,040 11,499 12,490 11,162
12,172 11,624 12,638 11,194
Jun 12,411 11,852 12,850 11,202
12,864 12,286 13,236 11,219
12,664 12,094 13,106 11,259
12,702 12,131 13,191 11,317
12,441 11,881 13,062 11,332
12,820 12,243 13,296 11,348
Dec 92 13,006 12,421 13,431 11,389
13,181 12,588 13,587 11,413
13,738 13,120 14,079 11,445
13,628 13,014 13,930 11,477
13,777 13,157 14,070 11,517
13,865 13,241 14,149 11,533
Jun 14,129 13,493 14,385 11,525
14,117 13,482 14,404 11,582
14,484 13,832 14,704 11,622
14,675 14,015 14,871 11,663
14,676 14,015 14,900 11,696
14,459 13,808 14,768 11,712
Dec 93 14,782 14,117 15,080 11,728
14,938 14,266 15,252 11,728
14,549 13,894 14,857 11,761
13,805 13,184 14,252 11,786
13,819 13,197 14,373 11,834
13,925 13,298 14,498 11,843
Jun 13,820 13,198 14,410 11,843
14,045 13,413 14,674 11,875
14,099 13,465 14,725 11,915
13,912 13,286 14,509 11,955
13,629 13,015 14,250 11,972
13,290 12,692 13,992 11,981
Dec 94 13,509 12,901 14,300 12,021
13,962 13,334 14,709 12,054
14,390 13,743 15,137 12,102
14,557 13,902 15,311 12,135
14,586 13,929 15,330 12,143
15,048 14,371 15,819 12,159
Jun 14,866 14,197 15,681 12,159
14,937 14,265 15,830 12,208
15,122 14,442 16,031 12,256
15,236 14,550 16,132 12,297
15,478 14,782 16,366 12,337
15,765 15,056 16,638 12,362
Dec 95 15,952 15,235 16,797 12,387
16,024 15,303 16,925 12,387
15,936 15,219 16,810 12,419
15,701 14,994 16,595 12,444
15,685 14,980 16,548 12,485
15,685 14,979 16,542 12,476
Jun 15,818 15,106 16,722 12,467
15,981 15,262 16,874 12,541
16,040 15,318 16,871 12,581
16,250 15,519 17,107 12,647
16,431 15,691 17,299 12,696
16,704 15,952 17,615 12,720
Dec 96 16,657 15,907 17,541 12,728
16,687 15,936 17,574 12,752
16,824 16,067 17,736 12,776
16,652 15,903 17,500 12,817
16,775 16,020 17,647 12,858
16,993 16,229 17,911 12,882
Jun 17,212 16,438 18,102 12,882
17,748 16,949 18,604 12,924
17,604 16,812 18,429 12,964
17,810 17,009 18,648 12,996
17,936 17,129 18,767 13,012
18,080 17,266 18,878 13,004
Dec 97 18,369 17,543 19,154 13,019
18,512 17,679 19,351 13,044
18,537 17,702 19,357 13,069
18,537 17,702 19,374 13,094
18,449 17,619 19,287 13,117
18,743 17,899 19,592 13,141
Jun 18,803 17,957 19,668 13,157
18,816 17,969 19,717 13,172
19,096 18,237 20,021 13,188
19,373 18,501 20,271 13,204
19,332 18,463 20,271 13,236
19,423 18,549 20,342 13,236
Dec 98 19,484 18,607 20,393 13,228
19,706 18,819 20,636 13,261
19,629 18,746 20,545 13,277
19,662 18,777 20,574 13,317
19,674 18,789 20,625 13,414
19,532 18,653 20,505 13,414
Jun 19,196 18,333 20,210 13,414
19,279 18,411 20,283 13,454
18,988 18,133 20,121 13,486
18,965 18,112 20,129 13,551
Oct 99 18,586 17,749 19,821 13,600
1 Index total returns were calculated from 10/31/89 to 10/31/99. The Lehman
Brothers Municipal Bond Index is a total return performance benchmark for the
long-term, investment-grade, tax-exempt bond market. The Consumer Price Index
is a measurement of inflation for all urban consumers (CPI). The index
assumes reinvestment of all dividends/distributions, and does not reflect any
asset-based charges for investment management or other expenses. Past
investment performance does not guarantee future performance. The returns
shown for the Fund assume reinvestment of all dividends/distributions by the
shareholder. For comparison purposes, the benchmark's performance is shown as
of the Fund's inception date not from the inception date of the benchmark.
The Fund's performance would have been lower had the Advisor not waived a
portion of its fees and the Fund's custodian had not allowed its fees to be
reduced by credits.
+ The performance of the Class B Shares was different than that indicated by
the lines shown on the left for the Class A Shares, based on the differences
in sales loads and fees paid by Class B shareholders.
- --------------------------------------------------------------------------------
<TABLE>
TOTAL RETURNS AS OF 10/31/99
<CAPTION>
CLASS A SHARES 1 YEAR 5 YEAR* 10 YEAR*
<S> <C> <C> <C>
Fund (not adjusted for sales charge) -3.87% 6.41% 6.40%
Fund (adjusted for the maximum 4.5% sales charge) -8.19% 5.44% 5.91%
Lehman Brothers Municipal Bond Index(1) -2.22% 6.82% 7.08%(1)
<CAPTION>
CLASS B SHARES 1 YEAR 5 YEAR* SINCE INCEPTION*
(July 1, 1994)
Fund (not adjusted for contingent deferred sales charge) -4.62% 5.61% 4.92%
Fund (adjusted for the maximum contingent deferred sales charge) -9.17% 5.45% 4.92%
Lehman Brothers Municipal Bond Index(1) -2.22% 6.82% 6.16%(1)
*Annualized
</TABLE>
WHAT WERE THE MOST SIGNIFICANT FACTORS CONTRIBUTING TO THE FUND'S PERFORMANCE
OVER THE 12-MONTH PERIOD ENDED OCTOBER 31, 1999, AND WHAT INVESTMENT TECHNIQUES
WERE USED TO ADDRESS THOSE CONDITIONS?
Bonds of all types experienced price declines during the past 12 months as
interest rates increased, especially toward the end of the reporting period. In
addition to the negative effects of the Federal Reserve Board's two interest
rate increases during the summer, the bond market declined as the nation's
strong economic growth continued to spark inflationary fears, leading to concern
about future rate hikes. Because of low institutional demand for municipal bonds
during the period, these conditions affected municipals more than their taxable
counterparts -- Corporate and Treasury bonds. The yields of newly issued 30-year
AAA municipal bonds rose more than a full percentage point during the 12-month
period, so the prices of existing bonds dropped concurrently. The bonds in the
Fund's portfolio were not spared from this market movement and suffered price
declines along with the rest of the municipal market.
PORTFOLIO composition+
A 4%
AA 5%
AAA 62%
BBB 14%
Not Rated 15%
The interest rate increases also suppressed municipal bond supply, bringing
nationwide issuance down more than 20% in the first 10 months of the year
compared with 1998. Supply was down in almost every sector, with
Electric/Utility and Health Care bonds experiencing the most significant drops.
Although new issuance kept pace with last year's active market, the amount of
bonds issued through refinancing was down more than 50% for the year through
October. Many municipalities simply chose not to refinance outstanding bonds
because of the higher interest rates they would have to pay in the current
marketplace. Overall, the lower supply helped support bond prices somewhat
because it meant greater demand for available bonds.
We took advantage of the general market price declines to enhance the current
income potential and tax management of the Fund. We sold some of our holdings
that were pre-refunded or were nearing their call dates, as well as securities
purchased at below-market interest rates, at a capital loss to offset some of
the gains we realized early in 1999. This allowed us to avoid the need to
distribute taxable capital gains to shareholders this year. These bonds were
replaced with longer-maturity, higher-yielding issues. The new bonds also had
better call protection. This should help the Fund maintain its income stream for
a longer period of time if interest rates fall.
We also sold bonds that were about to be called or refunded and purchased longer
duration securities, including bonds with 20- to 30-year maturities. We feel
this strategy will work well in a declining interest rate environment.
WERE THERE ANY SHIFTS IN THE FUND'S PORTFOLIO HOLDINGS/SECTORS THAT HAD A
SIGNIFICANT IMPACT ON PERFORMANCE?
We made some minor shifts in rating distribution and sector concentration, but
these adjustments did not significantly impact the Fund's performance. One of
the most attractive sectors during the past year was Transportation, especially
tollway bonds. Because these projects are visible ways for voters to see their
tax dollars at work, they tend to be well funded when the economy is strong.
Improving the transportation infrastructure in California also remains a high
priority, which contributed to the heavy supply and attractiveness of these
bonds.
To focus more on sectors such as Transportation, we reduced our position in
Health Care. Although many Health Care bonds remain attractive, the challenge
imposed by managed care and changing Medicare reimbursement policies have led us
to focus on other areas of the market.
Through October of 1999, over 50% of new issue volume in the state came to the
market insured. Although the portfolio saw a modest decline in AAA-rated
holdings (from 63% to 62%), we will maintain a high percentage in these holdings
for value and liquidity reasons. The Fund's BBB-rated issues increased to 14%
from 13%. This position should help support the portfolio dividend.
WHAT IS THE INTERMEDIATE- AND LONG-TERM OUTLOOK FOR BOTH THE FUND AND THE
OVERALL ECONOMY?
In the coming months, we will probably see a slowing economy, which may be
partly the result of Y2K concerns. Wage increases will likely keep inflationary
fears at the forefront, although increasing productivity should be able to
offset higher wage costs for employers.
Preparations for the turn of the millennium may also limit new issuance and
general market activity at the end of the year. Many municipal issuers are
planning to postpone issuing bonds until they feel certain that any potential
computer problems have been avoided. We will continue to focus on finding
attractive-yielding bonds and protecting the Fund from bond calls as much as
possible.
We do not expect to make any significant changes to the structure of the
portfolio. We feel the Fund is positioned for strong performance, and we will
continue our "bottom up" approach of investing by identifying individual
securities we feel will out- perform the general market. We will also use our
extensive research capabilities to look for attractive opportunities throughout
the coming months.
The Fund continues to experience strong growth, and our outlook is positive. As
new assets flow into the Fund, we will invest the proceeds in line with current
structure and characteristics of the portfolio.
++ Bond ratings provided by a combination of Standard & Poors and Moody's.
Allocation percentages are based on total investment value of the portfolio
as of 10/31/99.
++++ A portion of income may be subject to some State and/or local taxes, and
for certain investors, may be subject to the federal alternative minimum
tax (AMT). Tax equivalent yield based on a 39.6% Federal and 9.3% State tax
brackets and the federal deduction of state taxes paid.
<PAGE>
FLORIDA INSURED
municipal fund
PORTFOLIO MANAGER:
THOMAS BYRON
VAN KAMPEN INVESTMENTS
Mr. Byron, Vice President of Van Kampen Investments, has over 15 years of
experience with the company. He has been with Van Kampen since 1981 and holds
the position of Head Buyer and Manager, with responsibility for all tax-exempt
and taxable Unit Investment Trusts. Mr. Byron has had primary portfolio
management responsibility for the Florida Insured Municipal Fund since January
1997.
PERFORMANCE REVIEW
From the Fund's inception (June 7, 1993) through October 31, 1999, the
CALIFORNIA MUNICIPAL FUND (Class A shares) returned 4.46% on an average annual
total return basis, or 3.72% adjusted for the maximum sales charge. For the
12-month period ended October 31, 1999, the Fund's total return was -4.14%, or
- -8.42 adjusted for the maximum sales charge. AS OF OCTOBER 31, 1999, THE 30-DAY
SEC YIELD FOR THE FUND WAS 4.51% FOR A SHARES AND 3.99% FOR B SHARES; ON A TAX
EQUIVALENT BASIS, THE YIELD WAS 7.47% FOR A SHARES AND 6.61% FOR B SHARES.(++)
VALUE OF A $10,000 INVESTMENT (CLASS A SHARES)+
Fund Fund
(Class A (Class A
Shares; Shares;
not adjusted Lehman
adjusted for the Brothers
for maximum Municipal
sales 4.5% sales Bond Inflation
charge) charge) Index(1) (CPI)(1)
- --------------------------------------------------------------------------------
Inception 6/7/93 $10,000 $ 9,550
10,050 9,598 $10,000 $10,000
10,083 9,629 10,013 10,049
10,387 9,920 10,221 10,084
Sep 10,511 10,038 10,338 10,119
10,545 10,070 10,357 10,148
10,355 9,889 10,266 10,162
Dec 93 10,686 10,206 10,483 10,176
10,813 10,326 10,602 10,176
10,414 9,945 10,328 10,205
Mar 9,797 9,356 9,907 10,226
9,893 9,448 9,992 10,268
9,970 9,521 10,079 10,275
Jun 9,899 9,454 10,017 10,275
10,092 9,638 10,200 10,303
10,095 9,641 10,236 10,338
Sep 9,960 9,512 10,086 10,373
9,675 9,240 9,906 10,388
9,410 8,987 9,727 10,395
Dec 94 9,780 9,340 9,941 10,430
10,043 9,591 10,225 10,458
10,362 9,896 10,523 10,500
Mar 10,464 9,993 10,644 10,529
10,445 9,975 10,656 10,536
10,702 10,220 10,996 10,550
Jun 10,495 10,022 10,901 10,550
10,587 10,111 11,004 10,592
10,758 10,274 11,144 10,634
Sep 10,815 10,329 11,214 10,669
11,053 10,556 11,377 10,705
11,315 10,806 11,566 10,726
Dec 95 11,498 10,981 11,677 10,747
11,556 11,036 11,766 10,747
11,431 10,917 11,686 10,775
Mar 11,156 10,654 11,536 10,797
11,134 10,633 11,504 10,833
11,147 10,645 11,499 10,825
Jun 11,288 10,780 11,624 10,817
11,430 10,915 11,730 10,881
11,419 10,905 11,728 10,916
Sep 11,597 11,076 11,892 10,973
11,729 11,201 12,026 11,016
11,944 11,407 12,245 11,037
Dec 96 11,891 11,356 12,193 11,043
11,880 11,345 12,216 11,064
12,001 11,461 12,329 11,085
Mar 11,881 11,346 12,165 11,121
11,943 11,405 12,267 11,156
12,103 11,558 12,451 11,177
Jun 12,240 11,689 12,584 11,177
12,647 12,078 12,932 11,213
12,537 11,973 12,811 11,248
Sep 12,688 12,117 12,963 11,276
12,776 12,202 13,046 11,290
12,877 12,298 13,123 11,283
Dec 97 13,080 12,491 13,315 11,296
13,206 12,612 13,452 11,318
13,192 12,598 13,456 11,339
Mar 13,208 12,613 13,468 11,361
13,159 12,567 13,407 11,381
13,342 12,741 13,619 11,402
Jun 13,382 12,780 13,672 11,416
13,437 12,832 13,707 11,429
13,634 13,021 13,918 11,443
Sep 13,805 13,183 14,092 11,457
13,795 13,174 14,092 11,485
13,849 13,226 14,141 11,485
Dec 98 13,864 13,240 14,176 11,478
13,997 13,367 14,345 11,506
13,940 13,312 14,282 11,520
Mar 13,927 13,300 14,302 11,555
13,966 13,338 14,338 11,639
13,873 13,248 14,254 11,639
Jun 13,642 13,028 14,049 11,639
13,657 13,043 14,100 11,674
13,470 12,864 13,987 11,702
13,387 12,784 13,993 11,758
Oct 99 13,223 12,628 13,778 11,800
1 Index total returns were calculated from 6/30/93 to 10/31/99. The Lehman
Brothers Municipal Bond Index is a total return performance benchmark for the
long-term, investment-grade, tax-exempt bond market. The Consumer Price Index
is a measurement of inflation for all urban consumers (CPI). The index
assumes reinvestment of all dividends/distributions, and does not reflect any
asset-based charges for investment management or other expenses. Past
investment performance does not guarantee future performance. The returns
shown for the Fund assume reinvestment of all dividends/ distributions by the
shareholder. For comparison purposes, the benchmark's performance is shown as
of the Fund's inception date not from the inception date of the benchmark.
The Fund's performance would have been lower had the Advisor not waived a
portion of its fees or reimbursed certain other expenses and the Fund's
custodian had not allowed its fees to be reduced by credits.
+ The performance of the Class B Shares was different than that indicated by
the lines shown on the left for the Class A Shares, based on the differences
in sales loads and fees paid by Class B shareholders.
- --------------------------------------------------------------------------------
<TABLE>
TOTAL RETURNS AS OF 10/31/99
<CAPTION>
CLASS A SHARES 1 YEAR 5 YEAR* SINCE INCEPTION*
(June 7, 1993)
<S> <C> <C> <C>
Fund (not adjusted for sales charge) -4.14% 6.45% 4.46%
Fund (adjusted for the maximum 4.5% sales charge) -8.42% 5.46% 3.72%
Lehman Brothers Municipal Bond Index(1) -2.22% 6.82% 5.19%(1)
<CAPTION>
CLASS B SHARES 1 YEAR 5 YEAR* SINCE INCEPTION*
(June 30, 1994)
Fund (not adjusted for contingent deferred sales charge) -4.91% 5.65% 4.78%
Fund (adjusted for the maximum contingent deferred sales charge) -9.48% 5.49% 4.78%
Lehman Brothers Municipal Bond Index(1) -2.22% 6.82% 6.16%(1)
*Annualized
</TABLE>
PORTFOLIO composition+
AAA 84%
BBB 6%
Non Rated 10%
WHAT WERE THE MOST SIGNIFICANT FACTORS CONTRIBUTING TO THE FUND'S PERFORMANCE
OVER THE 12-MONTH PERIOD ENDED OCTOBER 31, 1999, AND WHAT INVESTMENT TECHNIQUES
WERE USED TO ADDRESS THOSE CONDITIONS?
Bonds of all types experienced price declines during the past 12 months as
interest rates increased, especially toward the end of the reporting period. In
addition to the negative effects of the Federal Reserve Board's two interest
rate increases during the summer, the bond market declined as the nation's
strong economic growth continued to spark inflationary fears, leading to concern
about future rate hikes. Because of low institutional demand for municipal bonds
during the period, these conditions affected municipals more than their taxable
counterparts -- Corporate and Treasury bonds. The yields of newly issued 30-year
AAA-rated municipal bonds rose more than a full percentage point during the
12-month period, therefore the prices of existing bonds also dropped. The bonds
in the Fund's portfolio were not spared from this market movement and suffered
price declines along with the rest of the municipal market.
The interest rate increases also suppressed municipal bond supply, bringing
nationwide issuance down more than 20% in the first 10 months of the year
compared with 1998.
Supply was down in almost every sector, with Electric/Utility and Health Care
bonds experiencing the most significant drops. Although new issuance kept pace
with last year's active market, the amount of bonds issued through refinancing
was down more than 50% for the year through October. Many municipalities simply
chose not to refinance outstanding bonds because of the higher interest rates
they would have to pay in the current marketplace. Overall, the lower supply
helped support bond prices somewhat because it meant greater demand for
available bonds.
We took advantage of the general market price declines to enhance the current
income potential and tax management of the Fund. We sold some of our holdings
that were pre-refunded or were nearing their call dates, as well as securities
purchased at below-market interest rates (at a capital loss) to offset some of
the gains we realized early in 1999. This allowed us to avoid the need to
distribute taxable capital gains to shareholders this year. These bonds were
replaced with longer-maturity, higher-yielding issues. The new bonds also had
better call protection. This should help the Fund maintain its income stream for
a longer period of time if interest rates fall.
WERE THERE ANY SHIFTS IN THE FUND'S PORTFOLIO HOLDINGS/SECTORS THAT HAVE HAD A
SIGNIFICANT IMPACT ON PERFORMANCE?
We made some minor adjustments to sector concentration, but these did not
significantly impact Fund performance. We increased our exposure to the public
education sector by 9% and higher education increased by 4%. The Health Care
sector decreased by 7% as this was the worst-performing sector this year. The
Industrial Revenue sector decreased by 5% and water and sewer decreased by 4%.
AAA-rated insured assets increased slightly to 84%, while the BBB-rated sector
decreased to 6%, and the non-rated portion fell to 10%[++]. Overall, while the
long duration of the Fund contributed to the negative performance, we will
maintain our positions in Florida municipal bonds with long maturities.
WHAT IS THE OUTLOOK FOR BOTH THE FUND AND THE OVERALL ECONOMY?
In the coming months, we will probably see a slowing economy, which may be
partly the result of Y2K concerns. Wage increases will likely keep inflation
fears at the forefront, although increasing productivity should be able to
offset higher wage costs for employers.
Preparations for the turn of the millennium may also limit new issuance and
general market activity at the end of the year. Many municipal issuers are
planning to postpone issuing bonds until they feel certain that any potential
computer problems have been avoided. We will continue to focus on finding
attractive-yielding bonds and protecting the Fund from bond calls as much as
possible.
We do not expect to make any significant changes to the structure of the
portfolio. We feel the Fund is positioned for strong performance, and we will
continue our "bottom up" approach of investing by identifying individual
securities we feel will outperform the general market. We will also use our
extensive research capabilities to look for attractive opportunities throughout
the coming months.
+ Bond ratings provided by a combination of Standard & Poors and Moody's.
Allocation percentages are based on total investment value of the portfolio
as of 10/31/99.
(++) A portion of income may be subject to some state and/or local taxes, and
for certain investors, may be subject to the federal alternative minimum
tax (AMT). Tax equivalent yield based on a 39.6% Federal tax rate.
[++] Insurance applies only to the timely repayment of principal and interest
and does not eliminate market risk.23
<PAGE>
TAX-EXEMPT bond
fund
PORTFOLIO MANAGERS:
DAVID JOHNSON AND THOMAS BYRON
VAN KAMPEN INVESTMENTS
The Fund is co-managed by David Johnson and Thomas Byron. Mr. Johnson, Senior
Portfolio Manager, has 14 years of tax-free management experience. He has a BS
from Lewis University and an MBA from Loyola University. Mr. Byron has been with
Van Kampen Investments since 1981 and currently serves as Vice President. He
received his BS in Finance from Marquette University and his MBA from DePaul
University. Van Kampen has had management responsibilities for the Fund since
January 1999.
PERFORMANCE REVIEW
For the 10-year period ended October 31, 1999, the TAX-EXEMPT BOND FUND (Class A
shares) returned 6.32% on an average annual total return basis, or 5.83%
adjusted for the maximum sales charge. For the 12-month period ended October 31,
1999, the Fund's total return was -3.77%, or -8.08% adjusted for the maximum
sales charge. Interest rates increased throughout the period, and the rising
rates more than offset the income earned by the Fund. AS OF OCTOBER 31, 1999,
THE 30-DAY SEC YIELD OF THE FUND WAS 4.61% FOR A SHARES AND 4.09% FOR B SHARES;
ON A TAX EQUIVALENT BASIS, THE YIELD WAS 7.63% FOR A SHARES AND 6.77% FOR B
SHARES.(++)
VALUE OF A $10,000 INVESTMENT (CLASS A SHARES)+
Fund Fund
(Class A (Class A
Shares; Shares;
not adjusted Lehman
adjusted for the Brothers
for maximum Municipal
sales 4.5% sales Bond Inflation
charge) charge) Index(1) (CPI)(1)
- --------------------------------------------------------------------------------
Oct 89 $10,000 $ 9,550 $10,000 $10,000
10,139 9,683 10,175 10,057
Dec 89 10,219 9,759 10,258 10,081
10,121 9,665 10,210 10,105
10,230 9,769 10,301 10,122
10,216 9,756 10,304 10,154
10,099 9,644 10,230 10,203
10,361 9,894 10,453 10,227
Jun 10,476 10,004 10,545 10,243
10,608 10,130 10,700 10,349
10,414 9,946 10,545 10,398
10,457 9,986 10,551 10,455
10,606 10,129 10,742 10,472
10,874 10,385 10,958 10,496
Dec 90 10,905 10,414 11,006 10,552
11,022 10,526 11,154 10,592
11,091 10,592 11,251 10,690
11,119 10,619 11,255 10,780
11,209 10,704 11,405 10,844
11,315 10,806 11,507 10,868
Jun 11,295 10,786 11,495 10,868
11,464 10,948 11,635 10,933
11,603 11,081 11,789 10,950
11,757 11,228 11,942 10,966
11,865 11,331 12,050 10,983
11,859 11,326 12,083 11,016
Dec 91 12,144 11,598 12,343 11,048
12,154 11,607 12,371 11,064
12,127 11,581 12,375 11,096
12,136 11,590 12,380 11,145
12,243 11,692 12,490 11,162
12,385 11,827 12,638 11,194
Jun 12,609 12,042 12,850 11,202
13,106 12,516 13,236 11,219
12,894 12,314 13,106 11,259
12,901 12,321 13,191 11,317
12,722 12,149 13,062 11,332
13,037 12,450 13,296 11,348
Dec 92 13,238 12,642 13,431 11,389
13,385 12,783 13,587 11,413
13,878 13,254 14,079 11,445
13,765 13,146 13,930 11,477
13,894 13,269 14,070 11,517
13,936 13,308 14,149 11,533
Jun 14,244 13,603 14,385 11,525
14,196 13,557 14,404 11,582
14,562 13,907 14,704 11,622
14,764 14,100 14,871 11,663
14,805 14,139 14,900 11,696
14,572 13,916 14,768 11,712
Dec 93 14,898 14,227 15,080 11,728
15,069 14,391 15,252 11,728
14,622 13,964 14,857 11,761
13,955 13,327 14,252 11,786
14,015 13,384 14,373 11,834
14,153 13,516 14,498 11,843
Jun 14,043 13,411 14,410 11,843
14,315 13,671 14,674 11,875
14,340 13,695 14,725 11,915
14,076 13,442 14,509 11,955
13,812 13,191 14,250 11,972
13,527 12,919 13,992 11,981
Dec 94 13,924 13,297 14,300 12,021
14,361 13,715 14,709 12,054
14,833 14,165 15,137 12,102
14,939 14,267 15,311 12,135
14,942 14,270 15,330 12,143
15,464 14,768 15,819 12,159
Jun 15,307 14,618 15,681 12,159
15,431 14,736 15,830 12,208
15,576 14,875 16,031 12,256
15,659 14,954 17,132 12,296
15,927 15,210 16,366 12,337
16,256 15,524 16,638 12,362
Dec 95 16,466 15,725 16,797 12,387
16,552 15,808 16,925 12,387
16,388 15,651 16,810 12,419
16,124 15,399 16,595 12,444
16,023 15,302 16,548 12,485
16,027 15,306 16,542 12,476
Jun 16,174 15,446 16,722 12,467
16,324 15,589 16,874 12,541
16,327 15,592 16,871 12,581
16,521 15,778 17,107 12,647
16,676 15,925 17,299 12,696
16,958 16,195 17,615 12,720
Dec 96 16,881 16,121 17,541 12,728
16,887 16,128 17,574 12,752
17,039 16,272 17,736 12,776
16,805 16,049 17,500 12,817
16,919 16,157 17,647 12,858
17,167 16,394 17,911 12,882
Jun 17,324 16,544 18,102 12,882
17,859 17,055 18,604 12,924
17,617 16,825 18,429 12,964
17,796 16,995 18,648 12,996
17,912 17,106 18,767 13,012
18,005 17,195 18,878 13,004
Dec 97 18,333 17,508 19,154 13,019
18,498 17,665 19,351 13,044
18,451 17,621 19,357 13,069
18,462 17,632 19,374 13,094
18,335 17,510 19,287 13,117
18,601 17,764 19,592 13,141
Jun 18,681 17,840 19,668 13,157
18,694 17,853 19,717 13,172
19,010 18,154 20,021 13,188
19,208 18,343 20,271 13,204
19,171 18,308 20,271 13,236
19,204 18,340 20,342 13,236
Dec 98 19,263 18,397 20,393 13,228
19,489 18,612 20,636 13,261
19,399 18,526 20,545 13,277
19,387 18,515 20,574 13,317
19,445 18,570 20,625 13,414
19,288 18,420 20,505 13,414
Jun 18,929 18,077 20,210 13,414
18,963 18,110 20,283 13,454
18,753 17,909 20,121 13,486
18,687 17,846 20,129 13,551
Oct 99 18,450 17,620 19,821 13,600
1 The Lehman Brothers Municipal Bond Index is unmanaged and includes all
investment grade municipal bond issues. The Consumer Price Index is a
measurement of inflation for all urban consumers (CPI). The Index assumes
reinvestment of all dividends/distributions, and does not reflect any
asset-based charges for investment management or other expenses. Past
investment per- formance does not guarantee future performance. The returns
shown for the Fund assume reinvestment of all dividends/ distributions by the
shareholder. For comparison purposes, the benchmark's performance is shown as
of the Fund's inception date not from the inception date of the benchmark.
The Fund's performance would have been lower had the Fund's custodian not
allowed its fees to be reduced by credits.
+ The performance of the Class B Shares was different than that indicated by
the lines shown on the left for the Class A Shares, based on the differences
in sales loads and fees paid by Class B shareholders.
- --------------------------------------------------------------------------------
<TABLE>
TOTAL RETURNS AS OF 10/31/99
<CAPTION>
CLASS A SHARES 1 YEAR 5 YEAR* 10 YEAR*
<S> <C> <C> <C>
Fund (not adjusted for sales charge) -3.77% 5.96% 6.32%
Fund (adjusted for the maximum 4.5% sales charge) -8.08% 4.98% 5.83%
Lehman Brothers Municipal Bond Index(1) -2.22% 6.82% 7.08%(1)
<CAPTION>
CLASS B SHARES 1 YEAR 5 YEAR* SINCE INCEPTION*
(March 30, 1994)
Fund (not adjusted for contingent deferred sales charge) -4.52% 5.09% 4.14%
Fund (adjusted for the maximum contingent deferred sales charge) -9.09% 4.93% 4.14%
Lehman Brothers Municipal Bond Index(1) -2.22% 6.82% 6.09%(1)
*Annualized
</TABLE>
PORTFOLIO composition+
AAA 43%
AA 26%
A 14%
BBB 11%
Other 6%
WHAT WERE THE MOST SIGNIFICANT FACTORS CONTRIBUTING TO THE FUND'S PERFORMANCE
OVER THE 12-MONTH PERIOD ENDED OCTOBER 31, 1999, AND WHAT INVESTMENT TECHNIQUES
WERE USED TO ADDRESS THOSE CONDITIONS?
Bonds of all types experienced price declines during the past 12 months as
interest rates increased, especially toward the end of the reporting period. In
addition to the negative effects of the Federal Reserve Board's two interest
rate increases during the summer, the bond market declined as the nation's
strong economic growth continued to spark inflationary fears, leading to concern
about future rate hikes. Because of low institutional demand for municipal bonds
during the period, these conditions affected municipals more than their taxable
counterparts -- Corporate and Treasury bonds. The yields of newly issued 30-year
AAA municipal bonds rose more than a full percentage point during the 12-month
period, so the prices of existing bonds dropped concurrently. The bonds in the
Fund's portfolio were not spared from this market movement and suffered price
declines along with the rest of the municipal market.
The interest rate increases also suppressed municipal bond supply, bringing
nationwide issuance down more than 20% in the first 10 months of the year
compared with 1998.
Supply was down in almost every sector, with Electric/Utility and Health Care
bonds experiencing the most significant drops. Although new issuance kept pace
with last year's active market, the amount of bonds issued through refinancing
was down more than 50% for the year through October. Many municipalities simply
chose not to refinance outstanding bonds because of the higher interest rates
they would have to pay in the current marketplace. Overall, the lower supply
helped support bond prices somewhat because it meant greater demand for
available bonds.
We took advantage of the general market price declines to enhance the current
income potential and tax management of the Fund. We sold some of our holdings
that were pre-refunded or were nearing their call dates, as well as securities
purchased at below-market interest rates, at a capital loss to offset some of
the gains we had earned early in 1999. This allowed us to avoid the need to
distribute taxable capital gains to shareholders this year. These bonds were
replaced with longer-maturity, higher-yielding issues. The new bonds also had
better call protection. This should help the Fund maintain its income stream for
a longer period of time if interest rates fall.
WERE THERE ANY SHIFTS IN THE FUND'S PORTFOLIO HOLDINGS/SECTORS THAT HAVE HAD A
SIGNIFICANT IMPACT ON PERFORMANCE?
We made some minor adjustments to sector concentration, but these did not
significantly impact fund performance. We decreased our exposure to the
wholesale electric sector by one percent, and increased exposure to the retail
gas sector by two percent. Higher education increased by one percent.
The credit quality of the portfolio remains high, with 43% of assets AAA-rated
and AA-rated at 26%. We increased our exposure slightly to non-rated securities
that help contribute to the Fund's dividend paying ability. As we see attractive
offerings of non-rated issues in the market, we will continue to add to this
position by leveraging on our research expertise.
WHAT IS THE OUTLOOK FOR BOTH THE FUND AND THE OVERALL ECONOMY?
In the coming months, we will probably see a slowing economy, which may be
partly the result of Y2K concerns. Wage increases will likely keep inflationary
fears at the forefront, although increasing productivity should be able to
offset higher wage costs for employers.
Preparations for the turn of the millennium may also limit new issuance and
general market activity at the end of the year. Many municipal issuers are
planning to postpone issuing bonds until they feel certain that any potential
computer problems have been avoided. We will continue to focus on finding
attractive-yielding bonds and protecting the Fund from bond calls as much as
possible.
We do not expect to make any significant changes to the structure of the
portfolio. We feel the Fund is positioned for strong performance and will
continue our "bottom up" approach of investing by identifying individual
securities we feel will out- perform the general market. We will also use our
extensive research capabilities to look for attractive opportunities throughout
the coming months.
+ Bond ratings provided by a combination of Standard & Poors and Moody's.
Allocation percentages are based on total investment value of the portfolio
as of 10/31/99.
(++) A portion of the Fund's income may be subject to some state and/or local
tax. In addition, exempt-interest dividends from the Fund will generally
increase a corporate shareholder's exposure to AMT liability. Tax
equivalent yield based on a 39.6% Federal tax rate.
<PAGE>
BOND & STOCK
fund
PORTFOLIO MANAGER:
JEFFREY D. HUFFMAN
WM ADVISORS, INC.
An equity team led by Jeffrey D. Huffman, Senior Portfolio Manager of WM
Advisors, Inc. has managed the Bond & Stock Fund since January 1995. Mr. Huffman
is a Chartered Financial Analyst, holds an MBA, and has over 14 years of
investment management experience.
PERFORMANCE REVIEW
For the 10-year period ended October 31, 1999, the BOND & STOCK FUND (Class A
shares) returned 10.63% on an average annual total return basis, or 10.00%
adjusted for the maximum sales charge. For the 12-month period ended October 31,
1999, the Fund's total return was 7.36%, or 1.43% adjusted for the maximum sales
charge. Value stocks, which comprise the majority of the Fund's equity holdings,
significantly underperformed growth and momentum stocks. The Fund has posted
stronger long-term results, averaging 13.85% per year for the past five years
(not adjusted for sales charge).
VALUE OF A $10,000 INVESTMENT (CLASS A SHARES)+
Fund Fund
(Class A (Class A
Shares; Shares; Lehman
not adjusted Brothers Standard
adjusted for the Government/ & Poor's
for maximum Corporate 500
sales 5.5% sales Bond Composite Inflation
charge) charge) Index(1) Index(1) (CPI)(1)
- --------------------------------------------------------------------------------
Oct 89 $10,000 $ 9,450 $10,000 $10,000 $10,000
9,936 9,389 10,090 10,208 10,057
Dec 89 9,917 9,371 10,105 10,449 10,081
9,586 9,059 9,967 9,748 10,105
9,633 9,104 9,989 9,874 10,122
9,727 9,192 9,990 10,133 10,154
9,489 8,967 9,898 9,883 10,203
10,014 9,463 10,185 10,847 10,227
Jun 10,033 9,481 10,350 10,771 10,243
10,004 9,453 10,478 10,736 10,349
9,423 8,905 10,326 9,767 10,398
9,218 8,711 10,412 9,286 10,455
9,277 8,767 10,550 9,252 10,472
9,708 9,174 10,780 9,848 10,496
Dec 90 9,925 9,379 10,943 10,117 10,552
10,263 9,699 11,066 10,565 10,592
10,761 10,169 11,161 11,321 10,690
10,911 10,310 11,238 11,590 10,780
11,072 10,463 11,367 11,623 10,844
11,334 10,710 11,421 12,120 10,868
Jun 11,121 10,510 11,408 11,566 10,868
11,244 10,625 11,552 12,108 10,933
11,407 10,779 11,817 12,392 10,950
11,489 10,857 12,064 12,189 10,966
11,541 10,907 12,172 12,352 10,983
11,355 10,730 12,293 11,853 11,016
Dec 91 12,083 11,410 12,708 13,208 11,048
12,040 11,378 12,520 12,963 11,064
12,138 11,470 12,586 13,128 11,096
12,088 11,423 12,517 12,871 11,145
12,364 11,684 12,592 13,246 11,162
12,430 11,746 12,836 13,317 11,194
Jun 12,420 11,737 13,025 13,124 11,202
12,810 12,106 13,358 13,653 11,219
12,743 12,043 13,477 13,377 11,259
12,889 12,181 13,660 13,531 11,317
12,709 12,010 13,451 13,580 11,332
13,002 12,287 13,439 14,037 11,348
Dec 92 13,279 12,549 13,671 14,221 11,389
13,394 12,657 13,969 14,325 11,413
13,567 12,821 14,259 14,519 11,445
13,820 13,060 14,308 14,831 11,477
13,704 12,950 14,418 14,467 11,517
13,843 13,082 14,411 14,858 11,533
Jun 13,891 13,127 14,738 14,907 11,525
13,914 13,149 14,832 14,837 11,582
14,349 13,560 15,173 15,402 11,622
14,308 13,521 15,226 15,288 11,663
14,485 13,689 15,289 15,599 11,696
14,284 13,498 15,116 15,452 11,712
Dec 93 14,510 13,712 15,182 15,642 11,728
14,921 14,100 15,410 16,166 11,728
14,570 13,769 15,074 15,730 11,761
13,997 13,227 14,705 15,045 11,786
14,082 13,308 14,583 15,241 11,834
14,155 13,377 14,557 15,489 11,843
Jun 13,886 13,122 14,523 15,107 11,843
14,244 13,460 14,814 15,607 11,875
14,601 13,798 14,819 16,242 11,915
14,293 13,507 14,596 15,851 11,955
14,355 13,566 14,580 16,213 11,972
14,044 13,272 14,553 15,618 11,981
Dec 94 14,200 13,419 14,649 15,846 12,021
14,442 13,647 14,931 16,258 12,054
14,873 14,055 15,277 16,889 12,102
15,235 14,397 15,379 17,389 12,135
15,620 14,761 15,593 17,895 12,143
16,158 15,270 16,247 18,602 12,159
Jun 16,485 15,578 16,377 19,039 12,159
16,822 15,896 16,313 19,673 12,208
16,990 16,055 16,522 19,726 12,256
17,528 16,564 16,690 20,553 12,297
17,593 16,625 16,935 20,481 12,337
18,128 17,131 17,215 21,382 12,362
Dec 95 18,628 17,603 17,468 21,778 12,387
19,154 18,101 17,576 22,527 12,387
19,073 18,024 17,204 22,743 12,419
19,106 18,055 17,059 22,961 12,444
19,228 18,171 16,941 23,299 12,485
19,514 18,441 16,913 23,900 12,476
Jun 19,630 18,551 17,139 23,998 12,467
19,123 18,071 17,179 22,930 12,541
19,383 18,317 17,137 23,416 12,581
20,071 18,967 17,442 24,732 12,647
20,347 19,228 17,849 25,410 12,696
21,274 20,104 18,177 27,339 12,720
Dec 96 21,161 19,998 17,975 26,803 12,728
21,683 20,490 17,997 28,467 12,752
21,921 20,715 18,035 28,698 12,776
21,530 20,346 17,820 27,504 12,817
21,920 20,714 18,080 29,146 12,858
22,896 21,637 18,240 30,936 12,882
Jun 23,585 22,288 18,468 32,315 12,882
24,735 23,375 19,033 34,881 12,924
23,933 22,617 18,819 32,942 12,964
24,902 23,532 19,115 34,747 12,996
24,581 23,230 19,421 33,586 13,012
25,130 23,748 19,524 35,141 13,004
Dec 97 25,371 23,976 19,729 35,746 13,019
25,371 23,976 20,007 36,143 13,044
26,274 24,829 19,967 38,748 13,069
26,805 25,331 20,029 40,732 13,094
26,984 25,500 20,129 41,144 13,117
26,553 25,092 20,344 40,436 13,141
Jun 26,754 25,283 20,552 42,078 13,157
25,687 24,274 20,568 41,632 13,172
23,026 21,759 20,969 35,612 13,188
24,039 22,717 21,569 37,895 13,204
25,570 24,164 21,416 40,977 13,236
26,792 25,319 21,544 43,461 13,236
Dec 98 27,127 25,635 21,596 45,965 13,228
27,423 25,915 21,749 47,887 13,261
26,354 24,904 21,232 46,399 13,277
26,923 25,442 21,338 48,255 13,317
28,463 26,897 21,391 50,123 13,414
28,722 27,142 21,171 48,939 13,414
Jun 29,408 27,791 21,105 51,655 13,414
28,679 27,102 21,046 50,043 13,454
27,821 26,291 21,029 49,795 13,486
26,756 25,284 21,219 48,430 13,551
Oct 99 27,452 25,942 21,274 51,492 13,600
- --------------------------------------------------------------------------------
1 The Standard & Poor's 500 Composite Index (S&P 500) represents an unmanaged
weighted index of 500 companies. The Lehman Brothers Government/Corporate
Bond Index represents all U.S. government and corporate bonds. The Consumer
Price Index is a measurement of inflation for all urban consumers (CPI). The
indices assume reinvestment of all dividends/distributions, and do not
reflect any asset-based charges for investment management or other expenses.
Past performance does not guarantee future performance. The returns shown for
the Fund assume reinvestment of all dividends/distributions by the
shareholder. For comparison purposes, the benchmark's performance is shown as
of the Fund's inception date not from the inception date of the benchmark.
The Fund's performance would have been lower had the Fund's custodian not
allowed its fees to be reduced by credits.
+ The performance of the Class B Shares was different than that indicated by
the lines shown on the left for the Class A Shares, based on the difference
in sales loads and fees paid by Class B shareholders.
- --------------------------------------------------------------------------------
<TABLE>
TOTAL RETURNS AS OF 10/31/99
<CAPTION>
CLASS A SHARES 1 YEAR 5 YEAR* 10 YEAR*
<S> <C> <C> <C>
Fund (not adjusted for sales charge) 7.36% 13.85% 10.63%
Fund (adjusted for the maximum 5.5% sales charge) 1.43% 12.57% 10.00%
Lehman Brothers Government/Corporate Bond Index(1) -0.66% 7.85% 7.84%(1)
Standard & Poor's 500 Composite Index(1) 25.67% 26.00% 17.81%(1)
<CAPTION>
CLASS B SHARES 1 YEAR 5 YEAR* SINCE INCEPTION*
(March 30, 1994)
Fund (not adjusted for contingent deferred sales charge) 6.46% 12.92% 11.87%
Fund (adjusted for the maximum contingent deferred sales charge) 1.46% 12.80% 11.87%
Lehman Brothers Government/Corporate Bond Index(1) -0.66% 7.85% 6.84%(1)
Standard & Poor's 500 Composite Index(1) 25.67% 26.00% 24.65%(1)
*Annualized
</TABLE>
PORTFOLIO composition+
Common Stocks 56%
Convertible Preferred Stocks 8%
CMOs 1%
Treasuries 8%
Corporate Bonds 14%
Mortgage-Backed 4%
Convertible Bonds 5%
Other 4%
WHAT WERE THE MOST SIGNIFICANT FACTORS CONTRIBUTING TO THE FUND'S PERFORMANCE
OVER THE 12-MONTH PERIOD ENDED OCTOBER 31, 1999, AND WHAT INVESTMENT TECHNIQUES
WERE USED TO ADDRESS THOSE CONDITIONS?
Equity style differences were again the primary factor influencing relative
performance for the Fund during the period. The year began with strong
performance from a large group of growth stocks, but during the second quarter
of 1999, market breadth improved and value stocks significantly outperformed the
growth style. The Fund performed well during this period, but the reversion was
short-lived, as growth stocks, led by the high-flying technology issues, resumed
market leadership during the past few months. Overall, large-cap growth stocks
outperformed large-cap value holdings by nearly 15% during the period as
measured by the S&P Barra Indices. (Source: Ibbotson Associates.)
Domestic equity performance was supported by strong economic fundamentals, led
by consumer spending, capital investment, and a strong housing market. However,
strong economic growth also instilled inflationary fears in many market
participants, which led to higher interest rates and heightened volatility
during the summer. This also caused weak performance in the fixed-income
holdings during the period, although corporate positions tended to perform
better than other fixed-income investments.
We continued to adhere to our long-term strategy of "bottom-up" value-driven
stock selection and feel that these stocks will eventually return to favor. We
were able to add some strong companies in the convertible area, where we found
value in a couple of telecommunications issues. A Telecommunication sector
purchase of last October, Qualcomm, was one of this year's best Wall Street
performers due to that sector and other related technology sectors experiencing
strong returns. Such strong returns benefited other holdings also. The firm has
expanded its scope into integrated circuits and telecommunications
infrastructure products, greatly enhancing its long-term outlook. We took some
profits along the way, but the stock remained in the Bond & Stock Fund portfolio
for the entire period. The Fund also benefited from software maker Adobe
Systems, whose stock price had been battered early in the period, but then
rallied considerably, and posted a gain of over 200%.
The Fund did experience some negative performance in a few of its technology
holdings. Autodesk, a software manufacturer, released a new product that did not
sell as well as expected, and the stock price suffered. Xerox Corp. had a
similar situation. As the company transitioned to a new product cycle, its
execution was weaker than expected, and the stock lost considerable value. Both
of these holdings were sold, but we continue to monitor these firms and could
re-enter if we see some improvements. Another company that performed poorly
during the year was Conseco, a financial services provider. The company bought
Greentree Financial, whose accounting practices came under question and the
price of Conseco stock dropped dramatically. We decided to hold this position
because we feel the company has strong upside potential after working through
its problems.
Recent market performance has been driven by computer hardware and wireless
telephone groups, in which the Fund had limited exposure. Health Care Services
was the weakest sector, a sector where the Fund was overweighted. We held firms
such as Aetna and PacifiCare Health Systems, which performed well in the spring,
but severely underperformed during the summer. Financial stocks generally
performed poorly due to interest rate increases, and are overweighted in the
Fund compared to the S&P 500 stock index.
The fixed-income portion of the portfolio produced marginally positive results
for the period, as rising interest rates hurt many holdings. We did shorten the
duration (a measure of price sensitivity to interest rates) in September as the
Federal Reserve was in the midst of raising short-term interest rates.
Fixed-income assets help temper overall portfolio price fluctuations during
periods of high equity market volatility, as the benefits of a diversified
portfolio are realized.
WERE THERE ANY SHIFTS IN THE FUND'S PORTFOLIO HOLDINGS/SECTORS THAT HAD A
SIGNIFICANT IMPACT ON PERFORMANCE?
We maintained our asset allocation throughout the period, focusing more than
two-thirds of Fund assets in value equities. On a secular basis, we trimmed some
Technology holdings, taking profits on some of the better performing holdings.
We were also able to find value in some consumer stocks, especially in Retail
and Media, where good fundamentals in wage and income growth helped drive very
strong consumer spending. We took some assets out of Health Care stocks given
the political turmoil surrounding the industry, but we are watching these
companies closely and could move back into the sector if we see significant
improvements. We also found value in the Energy sector - oil refiners in
particular. Companies such as Tosco Corp. and Valero Energy Corp. were added
during the period as we saw the sector near a bottom.
We shifted assets out of government bonds and into corporate-backed securities
during the period. This was done given our improved outlook for credits and the
possibility of tightening spreads. As spreads, the difference in yields between
corporate bonds, and Treasury bonds become smaller or tighten, corporate
securities tend to outperform Treasuries with similar maturities. These holdings
also provide a yield advantage for the Fund.
WHAT IS THE OUTLOOK FOR BOTH THE FUND AND THE OVERALL ECONOMY?
We are positive in our outlooks for both bond and stock markets. Sustained
moderate economic growth coupled with low inflation creates a strong environment
for financial assets. We feel the Fund is positioned to take advantage of
current market conditions. As global economies continue to recover, the overall
earnings outlook for value holdings should improve. Given the sustainability of
the recovery, confidence in these companies' ability to grow their earnings
should also improve and market breadth could then return. We will maintain our
asset mix at 70% equity and 30% debt and continue to focus on strong firms that
represent good values.
(+) Allocation percentages are based on total investment value of the portfolio
as of 10/31/99. Differences from financial statements are a result of a
consolidation of industries or sectors.
<PAGE>
GROWTH & INCOME
fund
PORTFOLIO MANAGER
RANDALL L. YOAKUM
WM ADVISORS, INC.
An equity team led by Senior Portfolio Manager Randall Yoakum manages the GROWTH
& INCOME FUND. Mr. Yoakum has 16 years experience in investment and financial
analysis including over eight years with WM Advisors, Inc. He holds a BBA in
Economics/Finance from Pacific Lutheran University, an MBA in Finance/Economics
from Arizona State University, and is a Chartered Financial Analyst. Mr. Yoakum
serves as chair of WM Advisors Investment Committee and leads the Fund's equity
team.
PERFORMANCE REVIEW
For the 10-year period ended October 31, 1999, the GROWTH & INCOME FUND (Class A
shares) returned 14.39% on an average annual total return basis, or 13.74%
adjusted for the maximum sales charge. For the 12-month period ended October 31,
1999, the Fund's total return was 23.57%, or 16.79% adjusted for the maximum
sales charge. The Fund slightly under- performed the S&P 500 Index's return of
25.67%. Long-term results continue to be very favorable, as the Fund has
averaged 21.08% (not adjusted for sales charge) for the past five years.
VALUE OF A $10,000 INVESTMENT (CLASS A SHARES)+
Fund Fund
(Class A (Class A
Shares; Shares;
not adjusted Standard
adjusted for the & Poor's
for maximum 500
sales 5.5% sales Composite Inflation
charge) charge) Index(1) (CPI)(1)
- --------------------------------------------------------------------------------
Oct 89 $10,000 $ 9,450 $10,000 $10,000
9,844 9,302 10,208 10,057
Dec 89 9,850 9,308 10,449 10,081
9,378 8,863 9,748 10,105
9,467 8,947 9,874 10,122
9,600 9,072 10,133 10,154
9,233 8,725 9,883 10,203
9,923 9,377 10,847 10,227
Jun 9,841 9,300 10,771 10,243
9,715 9,181 10,736 10,349
8,829 8,344 9,767 10,398
8,393 7,931 9,286 10,455
8,375 7,914 9,252 10,472
8,968 8,474 9,848 10,496
Dec 90 9,260 8,751 10,117 10,552
9,757 9,220 10,565 10,592
10,465 9,889 11,321 10,690
10,686 10,098 11,590 10,780
10,825 10,229 11,623 10,844
11,204 10,588 12,120 10,868
Jun 10,889 10,290 11,566 10,868
11,075 10,466 12,108 10,933
11,187 10,572 12,392 10,950
11,150 10,537 12,189 10,966
11,112 10,501 12,352 10,983
10,756 10,165 11,853 11,016
Dec 91 11,796 11,148 13,208 11,048
11,836 11,185 12,963 11,064
12,026 11,365 13,128 11,096
11,935 11,279 12,871 11,145
12,267 11,592 13,246 11,162
12,297 11,621 13,317 11,194
Jun 12,107 11,441 13,124 11,202
12,531 11,842 13,653 11,219
12,238 11,565 13,377 11,259
12,451 11,766 13,531 11,317
12,217 11,545 13,580 11,332
12,756 12,054 14,037 11,348
Dec 92 13,094 12,373 14,221 11,389
13,156 12,433 14,325 11,413
13,104 12,383 14,519 11,445
13,423 12,685 14,831 11,477
13,171 12,447 14,467 11,517
13,455 12,715 14,858 11,533
Jun 13,366 12,631 14,907 11,525
13,292 12,561 14,937 11,582
13,651 12,900 15,402 11,622
13,419 12,681 15,288 11,663
13,567 12,821 15,599 11,696
13,482 12,741 15,452 11,712
Dec 93 13,984 13,215 15,642 11,728
14,614 13,811 16,166 11,728
14,385 13,594 15,730 11,761
13,815 13,056 15,045 11,786
13,976 13,208 15,241 11,834
14,161 13,382 15,489 11,843
Jun 13,867 13,104 15,107 11,843
14,317 13,530 15,607 11,875
14,895 14,075 16,242 11,915
14,565 13,764 15,851 11,955
14,728 13,018 16,213 11,972
14,299 13,512 15,618 11,981
Dec 94 14,343 13,554 15,846 12,021
14,571 13,770 16,258 12,054
15,064 14,236 16,889 12,102
15,503 14,651 17,389 12,135
15,878 15,004 17,895 12,143
16,276 15,381 18,602 12,159
Jun 16,596 15,683 19,039 12,159
17,190 16,244 19,673 12,208
17,323 16,370 19,726 12,256
17,911 16,926 20,553 12,297
17,802 16,823 20,481 12,337
18,531 17,511 21,382 12,362
Dec 95 19,093 18,043 21,778 12,387
19,637 18,557 22,527 12,387
19,903 18,808 22,743 12,419
20,092 18,987 22,961 12,444
20,562 19,431 23,299 12,485
21,005 19,850 23,900 12,476
Jun 21,031 19,874 23,998 12,467
19,976 18,877 22,930 12,541
20,573 19,442 23,416 12,581
21,763 20,566 24,732 12,647
22,005 20,795 25,410 12,696
23,611 22,313 27,339 12,720
Dec 96 23,347 22,063 26,803 12,728
24,455 23,110 28,467 12,752
24,592 23,239 28,698 12,776
23,742 22,436 27,504 12,817
24,619 23,265 29,146 12,858
26,252 24,808 30,936 12,882
Jun 27,595 26,078 32,315 12,882
29,671 28,039 34,881 12,924
28,351 26,792 32,942 12,964
29,952 28,305 34,747 12,996
28,880 27,291 33,586 13,012
29,760 28,124 35,141 13,004
Dec 97 30,239 28,576 35,746 13,019
29,734 28,099 36,143 13,044
32,009 30,249 38,748 13,069
33,194 31,368 40,732 13,094
33,333 31,500 41,144 13,117
32,466 30,681 40,436 13,141
Jun 33,359 31,524 42,078 13,157
32,025 30,263 41,632 13,172
26,382 24,931 35,612 13,188
28,514 26,945 37,895 13,204
31,011 29,306 40,977 13,236
33,027 31,211 43,461 13,236
Dec 98 34,596 32,693 45,965 13,228
35,931 33,955 47,887 13,261
35,188 33,252 46,399 13,277
36,212 34,220 48,255 13,317
38,591 36,468 50,123 13,414
38,093 35,998 48,939 13,414
Jun 40,001 37,801 51,655 13,414
38,645 36,520 50,043 13,454
37,509 35,446 49,795 13,486
36,545 34,535 48,430 13,551
Oct 99 38,321 36,213 51,492 13,600
1 The Standard & Poor's 500 Composite Index (S&P 500) represents an unmanaged
weighted index of 500 companies. The Consumer Price Index is a measurement of
inflation for all urban consumers (CPI). The index assumes reinvestment of
all dividends/distributions, and does not reflect any asset-based charges for
investment management or other expenses. Past investment performance does not
guarantee future performance. The returns shown for the Fund assume
reinvestment of all dividends/distributions by the shareholder. For
comparison purposes, the benchmark's performance is shown as of the Fund's
inception date not from the inception date of the benchmark.
The Fund's performance would have been lower had the Distributor not waived a
portion of its fees and the Fund's custodian had not allowed its fees to be
reduced by credits.
+ The performance of the Class B Shares was different than that indicated by
the lines shown on the left for the Class A Shares, based on the differences
in sales loads and fees paid by Class B shareholders.portfolio
composition
- --------------------------------------------------------------------------------
<TABLE>
TOTAL RETURNS AS OF 10/31/99
<CAPTION>
CLASS A SHARES 1 YEAR 5 YEAR* 10 YEARS*
<S> <C> <C> <C>
Fund (not adjusted for sales charge) 23.57% 21.08% 14.39%
Fund (adjusted for the maximum 5.5% sales charge) 16.79% 19.72% 13.74%
Standard & Poor's 500 Composite Index(1) 25.67% 26.00% 17.81%(1)
<CAPTION>
CLASS B SHARES 1 YEAR 5 YEAR* SINCE INCEPTION*
(March 30, 1994)
Fund (not adjusted for contingent deferred sales charge) 22.61% 20.13% 19.08%
Fund (adjusted for the maximum contingent deferred sales charge) 17.61% 20.03% 19.08%
Standard & Poor's 500 Composite Index(1) 25.67% 26.00% 24.65%(1)
*Annualized
</TABLE>
PORTFOLIO composition+
Computer 17%
Health Care 11%
Telecommunications 7%
Consumer 17%
Financial Services 4%
Oil & Gas 7%
Transportation 2%
Insurance 5%
Capital Goods 2%
Other 5%
Electrical Equipment 2%
Semiconductors 2%
Media 5%
Banks/Savings & Loans 11%
Aerospace/Defense 3%
WHAT WERE THE MOST SIGNIFICANT FACTORS CONTRIBUTING TO THE FUND'S PERFORMANCE
OVER THE 12-MONTH PERIOD ENDED OCTOBER 31, 1999, AND WHAT INVESTMENT TECHNIQUES
WERE USED TO ADDRESS THOSE CONDITIONS?
Overall, the 12-month period ended October 31, 1999 was strong for equity
investments, but most of the performance came early in the period. The fourth
quarter of 1998 was one of the best quarters in equity market history, as
markets reached all-time highs in early 1999. The domestic economy was very
strong, causing concerns over inflation and higher interest rates. This scenario
created a volatile environment for equity investments. Results turned negative
in the third quarter of 1999, which wiped out some of the period's strong gains.
For the year, large-cap stocks continued to outperform smaller company holdings,
although there were periods of broader market participation where small- and
mid-cap companies gained some ground.
One of the dominant themes in the domestic equity markets during the past year
was the performance of momentum stocks relative to value holdings. Investment
assets have poured into high-growth technology firms, which have appreciated
significantly. The leadership of value stocks during the second quarter of 1999
shifted back to growth in recent months. Although the Fund benefited from the
appreciation of its Technology holdings, its bias towards value held back
performance during the period. Momentum investing was most pronounced in the
third quarter, with a narrow group of extremely high-valuation stocks driving
overall market performance. The top quintile of price momentum stocks, with
average price/earning ratios of 47, accounted for nearly 75% of the market's
returns. In 1998, the comparable group of stocks generated 51% of the market's
returns, while the average over the past 40 years has been 31%. The Fund's focus
on purchasing good businesses at attractive valuations tends to underperform in
a momentum-driven market. Typically our purchases are triggered by negative
price momentum -- prices that have experienced significant decline. We feel that
over the long run, market breadth will be restored and this style will reward
shareholders of the WM Growth & Income Fund.
There was also a disparity in performance of market sectors. Technology holdings
soared on strong prospects for growth. Stocks that not too long ago faced
considerable, but not insurmountable, challenges rebounded dramatically. Adobe
Systems, BMC Software and Oracle Corp. were all considered "broken" early in
1999 -- each lacking both earnings and price momentum that led to what we
considered attractive valuation levels. After we increased positions in these
companies, each stock more than doubled, surpassing Wall Street earnings
expectations and significantly contributing to overall Fund performance.
Conversely, Capital Goods and Health Care Services stocks within the Fund were
the major short-term disappointments. PacifiCare Health Systems and Aetna were
down significantly in recent months, reflecting the turmoil surrounding mounting
political pressures within the managed care industry. However, both stocks look
very attractive at current price levels. Waste Management was down more than 50%
in early July as it announced significantly weaker than expected revenues and
earnings. In addition, rising interest rates hurt our financial holdings, with
the entire sector contributing negative performance in recent months. However,
the Fund's Financial holdings generally outperformed the overall market, as
positions such as Bank of America and Wells Fargo & Company began to see
benefits from merger activity.
WERE THERE ANY SHIFTS IN THE FUND'S PORTFOLIO HOLDINGS/SECTORS THAT HAVE HAD A
SIGNIFICANT IMPACT ON PERFORMANCE?
We continued to pare down the number of holdings within the Fund, reducing the
size to approximately 100 (from 188 in March and 120 in June). Over the past
year, we also reduced the number of small- and mid-cap holdings in the portfolio
in favor of large-cap companies. This strategy helped performance during the
period, as large-caps tended to lead the market for much of the year. Currently,
the Fund has a nearly 75% weighting in large-cap stocks, which is close to our
target.
During the period, we reshaped the portfolio on a sector-by-sector basis. In the
Technology arena, positions in Software were increased, while Computer Hardware
(holdings such as Hewlett-Packard and IBM) was underweighted. This boosted
performance as the Software sector increased dramatically. Given our long-term
outlook for lower interest rates and increased productivity, we overweighted
Financial stocks, especially banks. We feel that efficiencies stemming from huge
merger activities and recent legislation will help generate good relative
performance for this sector. We also increased the Insurance positions held by
the Fund as it appears that this area is ripe for mergers and consolidations.
Although some Health Care positions had a drag on Fund performance, we are
positive about the Services sector and would use any price dips to add to
positions in Pharmaceutical stocks in the coming months.
Recent purchases demonstrate our long-term strategy, as we have been focused on
leading companies within their industries that have been hit with some
short-term price weakness. For example, we added to positions in supermarket
giant Kroger, Tyco International, and Avon Products, which is poised for growth
of its overseas operations. All had been hit by price declines, but are dominant
players within their industries and were priced at attractive valuations.
WHAT IS THE OUTLOOK FOR BOTH THE FUND AND THE OVERALL ECONOMY?
Moderate economic growth and low inflation provide a positive environment and
strong market fundamentals for large-cap domestic equity holdings. We expect
that economic growth will continue, with pockets of strength being offset by
pockets of weakness in other areas. Overall global stability and a smooth
transition through Y2K could bolster current market sentiment. Because the
increase in equity prices has been very concentrated, we are still able to find
companies at very attractive valuations. We plan to adhere to our strict
investment discipline, scouring the market for good business at prices that make
sense. We are cautious with some of our higher-priced Technology holdings and
will take profits where it is financially prudent. Overall, our long-standing
focus on research and low portfolio turnover should reward shareholders with a
long-term investment horizon.
+ Allocation percentages are based on total investment value of the portfolio
as of 10/31/99. Differences from financial statements are a result of a
consolidation of industries or sectors.
<PAGE>
GROWTH fund
PORTFOLIO MANAGER:
WARREN LAMMERT
JANUS CAPITAL CORPORATION
Mr. Lammert is a graduate of Yale University and the London School of Economics.
He first joined Janus in January 1987 and has been portfolio manager of the
Growth Fund since its inception. He is a Chartered Financial Analyst.
PERFORMANCE REVIEW
From the Fund's inception (April 5, 1993) through October 31, 1999, the GROWTH
FUND (Class A shares) returned 26.66% on an average annual total return basis,
or 25.58% adjusted for the maximum sales charge. The Fund's Class A shares
returned 84.96% (not adjusted for sales charge) for the 12-month period ended
October 31, 1999, more than tripling the return of the S&P 500 Index. Long-term
results continue to be very strong, with the Fund averaging more than 31% per
year over the past five years (not adjusted for sales charge).
VALUE OF A $10,000 INVESTMENT (CLASS A SHARES)+
Fund Fund
(Class A (Class A
Shares; Shares;
not adjusted Standard
adjusted for the & Poor's
for maximum 500
sales 5.5% sales Composite Inflation
charge) charge) Index(1) (CPI)(1)
- --------------------------------------------------------------------------------
Inception 4/5/93 $10,000 $ 9450
10,020 9469 $10,000 $10,000
10,550 9970 10,267 10,014
Jun 10,720 10130 10,297 10,007
10,480 9904 10,255 10,056
10,900 10301 10,644 10,091
Sep 11,250 10631 10,560 10,127
11,500 10868 10,778 10,155
11,300 10679 10,676 10,169
Dec 93 11,680 11038 10,805 10,183
12,160 11491 11,172 10,183
12,040 11378 10,869 10,212
Mar 11,740 11094 10,395 10,233
11,630 10990 10,529 10,275
11,190 10575 10,701 10,282
Jun 10,730 10140 10,439 10,282
11,150 10537 10,782 10,310
11,830 11179 11,223 10,345
Sep 11,870 11217 10,949 10,380
12,200 11529 11,194 10,395
11,750 11104 10,787 10,402
Dec 94 11,756 11109 10,947 10,438
11,886 11232 11,230 10,466
12,257 11583 11,668 10,508
Mar 12,507 11819 12,011 10,536
12,938 12226 12,365 10,543
13,428 12690 12,858 10,557
Jun 14,199 13418 13,156 10,557
15,121 14289 13,593 10,599
15,231 14393 13,627 10,642
Sep 15,681 14819 14,201 10,677
15,261 14421 14,151 10,712
15,942 15065 14,771 10,734
Dec 95 16,018 15137 15,056 10,755
16,393 15491 15,568 10,755
17,187 16242 15,712 10,783
Mar 17,312 16360 15,863 10,805
18,243 17240 16,096 10,840
18,606 17583 16,512 10,833
Jun 17,812 16832 16,575 10,825
16,563 15652 15,842 10,889
17,664 16693 16,176 10,924
Sep 18,822 17787 17,087 10,981
18,197 17196 17,558 11,023
18,856 17819 18,884 11,044
Dec 96 18,728 17698 18,510 11,051
19,642 18561 19,666 11,072
18,768 17735 19,820 11,093
Mar 17,535 16570 19,007 11,128
17,799 16820 20,141 11,164
19,019 17973 21,367 11,185
Jun 19,747 18661 22,323 11,185
21,429 20251 24,096 11,221
20,277 19161 22,756 11,256
Sep 21,469 20288 24,003 11,284
20,872 19724 23,201 11,298
20,780 19637 24,276 11,291
Dec 97 20,558 19427 24,693 11,304
21,195 20029 24,967 11,326
23,179 21904 26,767 11,347
Mar 24,294 22958 28,138 11,369
25,207 23821 28,422 11,389
24,438 23094 27,933 11,410
Jun 26,743 25272 29,067 11,424
26,628 25163 28,759 11,437
22,080 20866 24,601 11,451
Sep 24,745 23384 26,177 11,465
25,557 24151 28,307 11,493
27,282 25781 30,022 11,493
Dec 98 32,299 30522 31,752 11,486
36,578 34567 33,080 11,514
35,368 33422 32,052 11,528
Mar 39,665 37483 33,334 11,563
41,684 39391 34,624 11,647
39,345 37181 33,807 11,647
Jun 42,497 40160 35,683 11,647
40,827 38581 34,569 11,782
41,958 39650 34,398 11,710
44,009 41589 33,455 11,766
Oct 99 47,271 44671 35,592 11,808
1 Index total returns were calculated from 4/30/93 to 10/31/99. The Standard &
Poor's 500 Composite Index (S&P 500) represents an unmanaged weighted index
of 500 companies. The Consumer Price Index is a measurement of inflation for
all urban consumers (CPI). The index assumes reinvestment of all
dividends/distributions, and does not reflect any asset-based charges for
investment management or other expenses. Past investment performance does not
guarantee future performance. The returns shown for the Fund assume
reinvestment of all dividends/ distributions by the shareholder. For
comparison purposes, the benchmark's performance is shown as of the Fund's
inception date not from the inception date of the benchmark.
The Fund's performance would have been lower had the Advisor and Distributor
not waived a portion of their fees and the Fund's custodian had not allowed
its fees to be reduced by credits.
+ The performance of the Class B Shares was different than that indicated by
the lines shown on the left for the Class A Shares, based on the differences
in sales loads and fees paid by Class B shareholders.
- --------------------------------------------------------------------------------
<TABLE>
TOTAL RETURNS AS OF 10/31/99
<CAPTION>
CLASS A SHARES 1 YEAR 5 YEAR* SINCE INCEPTION*
(April 5, 1993)
<S> <C> <C> <C>
Fund (not adjusted for sales charge) 84.96% 31.11% 26.66%
Fund (adjusted for the maximum 5.5% sales charge) 74.29% 29.64% 25.58%
Standard & Poor's 500 Composite Index1 25.67% 26.00% 21.57%1
<CAPTION>
CLASS B SHARES 1 YEAR 5 YEAR* SINCE INCEPTION*
(July 1, 1994)
Fund (not adjusted for contingent deferred sales charge) 83.57% 30.14% 31.07%
Fund (adjusted for the maximum contingent deferred sales charge) 78.57% 30.07% 31.07%
Standard & Poor's 500 Composite Index 1 25.67% 26.00% 25.85%1
*Annualized
</TABLE>
PORTFOLIO composition+
Health Care 6%
Telecommunications 20%
Media 14%
Computer 26%
Semiconductors 8%
Cash & Other 5%
Technology 2%
Financial Services 3%
Banks/Savings & Loans 2%
Capital Goods 6%
Retail Sales 2%
Business Services 2%
WHAT WERE THE MOST SIGNIFICANT FACTORS CONTRIBUTING TO THE FUND'S PERFORMANCE
OVER THE 12-MONTH PERIOD ENDED OCTOBER 31, 1999, AND WHAT INVESTMENT TECHNIQUES
WERE USED TO ADDRESS THOSE CONDITIONS?
The period began with the global financial crisis in full swing. Market
confidence had been undermined earlier in the year by a series of events,
including a rapid devaluation of currencies and severe recession in Asia,
Russia's default on a significant portion of its sovereign debt, and the near
collapse of U.S. hedge fund Long Term Capital Management. The Federal Reserve
was forced to cut short-term interest rates three times in rapid succession to
restore liquidity to a market shaken by these events, a largely successful
campaign that stretched into the early weeks of the period.
Despite turmoil overseas, the U.S. economy remained resilient throughout the
year. If anything, the American economy proved a little too buoyant for comfort.
Because investors and central bankers alike worried that inflation was bound to
emerge as the economy continued to expand, interest rates trended higher
throughout the year. By the end of the fiscal year, the Federal Reserve had
taken back two of its quarter-point rate cuts and was threatening to reverse the
third, a prospect that is still pressuring markets.
Rising rates and the fear of inflation kept markets volatile and allowed
cyclical shares to enjoy a brief period of outperformance during the spring and
early summer. However, this trend was short-lived. A host of factors including
strong corporate earnings allowed growth-oriented companies to regain momentum
and widen their already significant lead over their economically sensitive
counterparts by year end.
Regardless of the state of the overall market, we remain convinced that our role
is to develop a deep understanding of individual firms that is largely
independent of their response to macroeconomic events. We continue to position
the Fund accordingly, adding only those shares that we feel are capable of
performing well in any environment.
WERE THERE ANY SHIFTS IN THE FUND'S PORTFOLIO HOLDINGS/SECTORS THAT HAVE HAD A
SIGNIFICANT IMPACT ON PERFORMANCE?
Wireless telecommunications remained an area of emphasis. Worldwide subscriber
growth has continued to accelerate as wireless providers added customers at an
astounding rate of more than 50% per year. Meanwhile, the advent of wireless
data is providing the industry with yet another avenue of growth. Companies are
positioning themselves to offer next-generation services, such as cellular
Internet access, to a public that is enthusiastically embracing such value-added
technology. Cellular handset manufacturer Nokia is perhaps the most obvious
beneficiary of this growth. While the company's dominance of cellular handset
manufacturing positions it to capitalize on the industry's accelerating
subscribership, its other businesses, most notably its strong share of the
cellular base station market, continue to underwrite performance. Sprint PCS,
whose all-digital network positions it to benefit from the industry's ongoing
evolution, was another notable performer. We are also excited about Mannesmann,
a German company that is rapidly becoming a dominant cellular player in Europe.
Mannesmann was one of our most exciting additions during the year.
Booming demand for cellular services also helped drive the performance of a
number of our Technology stocks. Microchip manufacturer Texas Instruments, whose
digital signal processing chips will power two-thirds of the nearly 300 million
cellular phones expected to be sold in 1999, was one of our best performing
stocks during the period. Other Technology standouts included Maxim Integrated
Products, ASM Lithography Holding and Vitesse Semiconductor Corp., all of which
have created a unique and highly profitable niche in different areas of the
microchip industry. Elsewhere in the Technology sector, Cisco Systems, EMC Corp.
and Sun Microsystems are contributing to the Internet's growth by providing the
technical infrastructure necessary to accommodate the growing number of Web
users.
Cable has been another important theme for the Fund. We are still extremely
excited about the opportunities that lie ahead for our Cable holdings,
particularly as broadband services become part of the consumer mainstream. The
value of quality content is also increasing as programming becomes more
accessible and services more robust, significantly raising the value of
advertising in the process. While a number of Cable stocks paused during the
last half of the year as consolidation cooled and legal battles surrounding the
question of open access were fought, our positions in Comcast Corp., Cox
Communications, Time Warner, NTL, and AT&T Liberty Media traded higher.
Unfortunately, not all of our holdings contributed equally to the Fund's
performance. Health Care stocks were our main area of disappointment, as rising
interest rates and uncertainty surrounding Medicare reform pressured the entire
sector. In addition, a number of our large drug companies encountered
pipeline-related difficulties, and we have trimmed our exposure to
Pharmaceuticals as a result. Despite lackluster performance by Schering-Plough,
our only remaining large-cap pharmaceutical position, we remain optimistic about
the company's long-term prospects. The company's research pipeline, led by
PEG-Intron, a promising treatment for hepatitis C and cancer, remains one of the
most promising in the industry.
WHAT IS THE OUTLOOK FOR BOTH THE FUND AND THE OVERALL ECONOMY?
Looking forward, we are somewhat concerned by recent increases in long-term
interest rates. While inflation remains at bay in the U.S., the recent increase
in interest rates may be appropriate given the improved economic environment in
Asia and Europe. And the central bank continues to watch closely for signs of
inflation and may act preemptively by raising short-term rates in an effort to
cool the economy before inflationary pressures emerge. Continued uncertainty
surrounding the direction of interest rates is likely to keep investors on edge
and markets volatile in the near term.
Nevertheless, the earnings outlook for our companies continues to be quite
positive, and we continue to find exciting opportunities in rapidly growing
areas of the economy such as: Cellular Communications, Cable, Media and Medical
Tech- nology. While the volatility that often accompanies uncertain markets can
quickly undermine a portfolio's performance, it can also create enormous
opportunities for astute investors. We believe that our superior research will
continue to identify companies that are capable of performing well in any market
environment and look forward to the coming year with cautious optimism.
+ Allocation percentages are based on total investment value of the portfolio
as of 10/31/99. Differences from financial statements are a result of a
consolidation of industries or sectors.
<PAGE>
NORTHWEST
FUND
PORTFOLIO MANAGER:
DAVID SIMPSON
WM ADVISORS, INC.
An equity team lead by David Simpson, Senior Portfolio Manager of WM Advisors,
Inc., has managed the Northwest Fund since March 1993. Mr. Simpson is a
Chartered Financial Analyst, holds an MBA, and has over 13 years of continuous
investment experience.
PERFORMANCE REVIEW
For the 10-year period ended October 31, 1999, the NORTHWEST FUND (Class A
shares) returned 16.44% on an average annual total return basis, or 15.78%
adjusted for the maximum sales charge. The Fund's Class A shares returned 57.29%
(not adjusted for sales charge), significantly outpacing the 25.67% return for
the S&P 500 and 14.87% return for small-cap Russell 2000 Index for the 12-month
period ended October 31, 1999. Long-term results are also very favorable, as the
Fund has averaged 24.81% per year for the past five years (not adjusted for
sales charge).
VALUE OF A $10,000 INVESTMENT (CLASS A SHARES)+
Fund Fund
(Class A (Class A
Shares; Shares;
not adjusted Standard
adjusted for the & Poor's
for maximum 500
sales 5.5% sales Composite Inflation
charge) charge) Index(1) (CPI)(1)
- --------------------------------------------------------------------------------
Oct 89 $10,000 $ 9,450 $10,000 $10,000
10,074 9,520 10,208 10,057
Dec 89 10,043 9,491 10,449 10,081
9,375 8,859 9,748 10,105
9,724 9,189 9,874 10,122
10,461 9,886 10,133 10,154
10,092 9,537 9,883 10,203
11,293 10,672 10,847 10,227
Jun 11,333 10,709 10,771 10,243
10,987 10,383 10,736 10,349
9,454 8,934 9,767 10,398
8,673 8,196 9,286 10,455
8,332 7,874 9,252 10,472
9,395 8,878 9,848 10,496
Dec 90 9,934 9,387 10,117 10,552
11,206 10,590 10,565 10,592
12,053 11,390 11,321 10,690
12,514 11,826 11,590 10,780
12,841 12,135 11,623 10,844
13,565 12,819 12,120 10,868
Jun 12,662 11,965 11,566 10,868
13,243 12,515 12,108 10,933
13,760 13,003 12,392 10,950
13,452 12,712 12,189 10,966
13,372 12,637 12,352 10,983
12,850 12,143 11,853 11,016
Dec 91 14,294 13,507 13,208 11,048
14,987 14,162 12,963 11,064
15,213 14,376 13,128 11,096
14,715 13,906 12,871 11,145
14,027 13,255 13,246 11,162
13,886 13,122 13,317 11,194
Jun 13,398 12,661 13,124 11,202
13,519 12,776 13,653 11,219
13,147 12,424 13,377 11,259
13,640 12,890 13,531 11,317
14,144 13,366 13,580 11,332
14,759 13,947 14,037 11,348
Dec 92 14,799 13,985 14,221 11,389
14,880 14,062 14,325 11,413
14,406 13,613 14,519 11,445
14,966 14,143 14,831 11,477
14,582 13,780 14,467 11,517
14,936 14,114 14,858 11,533
Jun 14,537 13,737 14,907 11,525
13,991 13,221 14,837 11,582
14,557 13,756 15,402 11,622
14,218 13,436 15,288 11,663
14,684 13,877 15,599 11,696
14,978 14,154 15,452 11,712
Dec 93 15,168 14,334 15,642 11,728
15,632 14,772 16,166 11,728
15,843 14,971 15,730 11,761
15,267 14,428 15,045 11,786
15,204 14,368 15,241 11,834
15,426 14,577 15,489 11,843
Jun 14,946 14,124 15,107 11,843
15,041 14,213 15,607 11,875
15,875 15,002 16,242 11,915
15,257 14,418 15,851 11,955
15,120 14,288 16,213 11,972
14,866 14,048 15,618 11,981
Dec 94 14,953 14,130 15,846 12,021
14,879 14,060 16,258 12,054
15,409 14,561 16,889 12,102
15,930 15,054 17,389 12,135
16,386 15,485 17,895 12,143
16,397 15,495 18,602 12,159
Jun 17,355 16,400 19,039 12,159
17,970 16,982 19,673 12,208
18,236 17,233 19,726 12,256
18,908 17,868 20,553 12,297
18,483 17,466 20,481 12,337
18,738 17,707 21,382 12,362
Dec 95 18,918 17,878 21,778 12,387
18,832 17,796 22,527 12,387
19,273 18,213 22,743 12,419
19,719 18,634 22,961 12,444
21,160 19,996 23,299 12,485
21,730 20,534 23,900 12,476
Jun 20,816 19,671 23,998 12,467
19,407 18,340 22,930 ]1,2541
20,622 19,488 23,416 12,581
21,213 20,047 24,732 12,647
21,170 20,006 25,410 12,696
22,633 21,388 27,339 12,720
Dec 96 23,187 21,911 26,803 12,728
24,638 23,283 28,467 12,752
24,579 23,227 28,698 12,776
23,611 22,313 27,504 12,817
24,437 23,093 29,146 12,858
27,033 25,546 30,936 12,882
Jun 28,284 26,728 32,315 12,882
30,219 28,557 34,881 12,924
29,794 28,156 32,942 12,964
32,272 30,497 34,747 12,996
30,585 28,903 33,586 13,012
31,353 29,628 35,141 13,004
Dec 97 30,810 29,116 35,746 13,019
30,866 29,168 36,143 13,044
33,647 31,796 38,748 13,069
34,131 32,254 40,732 13,094
34,288 32,402 41,144 13,117
32,444 30,659 40,436 13,141
Jun 31,801 30,052 42,078 13,157
29,671 28,039 41,632 13,172
23,668 22,366 35,612 13,188
26,085 24,650 37,895 13,204
29,116 27,514 40,977 13,236
33,419 31,581 43,461 13,236
Dec 98 37,894 35,810 45,965 13,228
38,936 36,794 47,887 13,261
36,393 34,392 46,399 13,277
37,409 35,351 48,255 13,317
39,668 37,487 50,123 13,414
41,568 39,282 48,939 13,414
Jun 45,326 42,833 51,644 13,414
44,968 42,495 50,043 13,454
45,112 42,631 49,795 13,486
43,470 41,079 48,430 13,551
Oct 99 45,800 43,281 51,492 13,600
1 The Standard & Poor's Composite Index (S&P 500) represents an unmanaged
weighted index of 500 companies. The Consumer Price Index is a measurement of
inflation for all urban consumers (CPI). The index assumes reinvestment of
all dividends/distributions, and does not reflect any asset-based charges for
investment management or other expenses. Past performance does not guarantee
future performance. The returns shown for the Fund assume reinvestment of all
dividends/ distributions by the shareholder. For comparison purposes, the
benchmark's performance is shown as of the Fund's inception date not from the
inception date of the benchmark.
The Fund's performance would have been lower had the Advisor not waived a
portion of its fees and the Fund's custodian had not allowed its fees to be
reduced by credits.
* The performance of the Class B Shares was different than that indicated by
the lines shown on the left for the Class A Shares, based on the differences
in sales loads and fees paid by Class B shareholders.
- --------------------------------------------------------------------------------
<TABLE>
Total Returns as of 10/31/99
<CAPTION>
CLASS A SHARES 1 YEAR 5 YEAR* 10 YEAR*
<S> <C> <C> <C>
Fund (not adjusted for sales charge) 57.29% 24.81% 16.44%
Fund (adjusted for the maximum 5.5% sales charge) 48.61% 23.41% 15.78%
Standard & Poor's 500 Composite Index(1) 25.67% 26.00% 17.81%(1)
<CAPTION>
CLASS B SHARES 1 YEAR 5 YEAR* SINCE INCEPTION*
(March 30, 1994)
Fund (not adjusted for contingent deferred sales charge) 55.96% 23.74% 20.78%
Fund (adjusted for the maximum contingent deferred sales charge) 50.96% 23.65% 20.78%
Standard & Poor's 500 Composite Index(1) 25.67% 26.00% 24.65%(1)
*Annualized
</TABLE>
PORTFOLIO composition+
Computer 23%
Health Care 15%
Semiconductors 7%
Basic Industry 5%
Banks/Savings & Loans 7%
Transportation 4%
Consumer 18%
Aerospace/Defense 3%
Telecommunications 4%
Electrical Equipment 9%
Other 5%
WHAT WERE THE MOST SIGNIFICANT FACTORS CONTRIBUTING TO THE FUND'S PERFORMANCE
OVER THE 12-MONTH PERIOD ENDED OCTOBER 31, 1999, AND WHAT INVESTMENT TECHNIQUES
WERE USED TO ADDRESS THESE CONDITIONS?
Markets advanced considerably during the end of 1998 when global stability was
restored and the crisis of late summer ended. We took advantage of lower prices
in the third quarter of 1998 and added significantly to positions, particularly
in small-cap Technology firms, that were battered by the "Asian flu." In
November and December of 1998, these stocks had a dramatic rebound and the Fund
benefited considerably. Much of the overall strong performance of the Fund was
concentrated in late 1998. During 1999, Technology stocks continued their
advance, but concern about rising inflation incited interest rate hikes and
general market volatility late in the period. Although the Fund advanced
throughout 1999, the overall market weakened -- the Standard and Poor's 500
Index increased just 2.74% (of its overall 26% return for the year) during the
six-month period ended October 31, 1999.
The Fund greatly benefited from its significant over-weighting in Technology
stocks of both small- and large-cap companies. Stocks of firms such as TriQuint
Semiconductor, Adobe Systems, and In Focus Systems, more than doubled during the
period, contributing to overall Fund results. TriQuint develops integrated
circuits for the telecommunications arena, capitalizing on proprietary
technology to gain market share and distribute their product worldwide. Adobe is
a software developer whose stock moved markedly lower during the Asian crisis,
but has since increased nearly 300% off the lows of last summer. In Focus has
been held by the Fund for quite some time and is a market leader in the
development of data and video projection products. The Fund also benefited from
light exposure to Financials, especially banks, which significantly
underperformed the overall market. However, we did add to our bank stocks late
in the fiscal year as the valuations began to look very compelling. Microsoft
Corp. remains one of our largest holdings despite current investigations by the
Department of Justice. We remain quite positive on the company and its prospects
for remaining the software industry leader.
Despite the overall strong performance, some holdings in the Fund disappointed
during the period. Our positions in Health Care Service companies such as
PacifiCare Health Systems and Foundation Health Systems underperformed as
political upheaval regarding HMOs created negative sentiment for the entire
sector. We used this price weakness to add to some of these holdings in October,
when we felt that prices may have bottomed. Not all medical firms performed
poorly during the period. The Fund benefited from its position in SonoSite,
Inc., a medical device manufacturer that developed a handheld ultrasound
machine. This position appreciated significantly, becoming the Fund's largest
holding during the latter stages of the period. Conversely, we sold our entire
position of Pathogenesis, a pharmaceutical firm whose sales numbers came in well
below expectations. We continue to watch the company and could re-enter if the
outlook improves.
WERE THERE ANY SHIFTS IN THE FUND'S PORTFOLIO HOLDINGS/SECTORS THAT HAVE HAD A
SIGNIFICANT IMPACT ON PERFORMANCE?
We continued our basic philosophy of trimming positions that outperform and
adding to positions that underperform as long as we have confidence in the
underlying fundamentals of the firm. We added to small-cap positions during the
year, as we were able to find some very compelling valuations. We continue to
closely watch valuation levels and look for strong investment opportunities
across all market capitalizations (the size of the firm). Toward the end of the
fiscal year, we began to see very attractive valuations in large-cap Retailing
(supermarkets) and Financials (banks). Given the current interest rate outlook
and the benefits of merger activities, we added to positions in some of these
large-cap Financial holdings. Technology remained our largest sector weighting
during the period. To maintain a stable exposure to the sector in light of its
considerable appreciation, we sold stocks and locked in strong profits.
WHAT IS THE OUTLOOK FOR BOTH THE FUND AND THE OVERALL ECONOMY?
The Fund is volatile by nature, and we expect that to continue. We believe our
basic investment style will continue to benefit long-term investors who are
patient and do not concern themselves with short-term market volatility. This
was clearly evident during the summer of 1998, when markets dropped considerably
in response to international crisis, then rebounded dramatically during the
fourth quarter. We will adhere to our philosophy of finding strong companies
that are favorably priced. Due to Technology's strong presence in the Northwest
and our positive outlook for its long-term growth, it will continue to exert a
significant influence on the Fund's portfolio composition.
The economy may slow due to higher interest rates. However, we believe weak
inflation will help keep interest rates relatively low. Consumer spending (and
net consumer borrowing) is a long-term concern. Currently, the market appears to
be weathering higher interest rates, as pervasive price pressures have not
surfaced and the Federal Reserve is poised to raise interest rates to quell any
signs of increases in inflation.
+ Allocation percentages are based on total investment value of the portfolio
as of 10/31/99. Differences from financial statements are a result of a
consolidation of industries or sectors.
<PAGE>
EMERGING growth
fund
PORTFOLIO MANAGERS:
DAVID SIMPSON AND LINDA WALK
WM ADVISORS, INC.
An equity team lead by Mr. Simpson and Ms. Walk have been managing the Fund
since March 23, 1998. David Simpson, Senior Portfolio Manager of WM Advisors,
Inc., is a Chartered Financial Analyst, holds an MBA and has over 13 years of
continuous investment experience. Linda Walk, Portfolio Manager of WM Advisors,
Inc., is a graduate of the University of Washington and has over 13 years of
investment experience. She is a Chartered Financial Analyst, a Certified
Financial Planner, and has participated in the Wharton Executive Education
program.
PERFORMANCE REVIEW
From the Fund's inception (July 18, 1990) through October 31, 1999, the EMERGING
GROWTH FUND (Class A shares) returned 13.40% on an average annual total return
basis, or 12.71% adjusted for the maximum sales charge. The Fund returned 42.60%
(not adjusted for sales charge) for the 12-month period, nearly tripling the
results of its benchmark index, the Russell 2000, which advanced 14.87%.
VALUE OF A $10,000 INVESTMENT (CLASS A SHARES)+
Fund Fund
(Class A (Class A
Shares; Shares;
not adjusted Standard
adjusted for the & Poor's
for maximum 500 Russell
sales 5.5% sales Composite Inflation 2000
charge) charge) Index(1) (CPI)(1) Index(1)
- --------------------------------------------------------------------------------
Jun 90 $10,000 $ 9,450
9,600 9,072 $10,000 $10,000 $10,000
8,520 8,051 9,097 10,047 8,662
7,810 7,380 8,655 10,102 7,892
7,620 7,201 8,618 10,118 7,410
8,190 7,740 9,174 10,142 7,975
Dec 90 8,263 7,808 9,430 10,196 8,289
8,474 8,266 9,840 10,235 9,035
9,231 8,723 10,542 10,329 10,048
9,846 9,305 10,797 10,416 10,753
9,897 9,353 10,823 10,479 10,725
10,179 9,619 11,288 10,502 11,235
Jun 9,705 9,171 10,772 10,502 10,586
10,018 9,467 11,273 10,565 10,956
10,179 9,619 11,540 10,581 11,361
10,310 9,743 11,346 10,596 11,449
10,916 10,315 11,498 10,612 11,751
10,664 10,077 11,037 10,644 11,207
Dec 91 11,509 10,876 12,297 10,675 12,104
12,161 11,492 12,067 10,691 13,085
12,456 11,771 12,224 10,722 13,468
11,896 11,242 11,986 10,769 13,012
11,804 11,155 12,338 10,785 12,556
12,049 11,386 12,398 10,817 12,723
Jun 11,886 11,232 12,214 10,824 12,125
12,100 11,434 12,713 10,840 12,547
11,733 11,088 12,453 10,879 12,192
11,845 11,194 12,599 10,935 12,472
12,395 11,713 12,642 10,950 12,866
12,935 12,223 13,072 10,966 13,852
Dec 92 13,281 12,551 13,232 11,005 14,334
13,581 12,834 13,342 11,028 14,818
13,850 13,088 13,524 11,059 14,476
14,212 13,430 13,810 11,090 14,945
13,581 12,834 13,476 11,129 14,534
14,191 13,411 13,835 11,144 15,176
Jun 14,233 13,450 13,876 11,137 15,270
14,078 13,303 13,820 11,191 15,481
14,905 14,085 14,343 11,230 16,150
15,133 14,300 14,230 11,270 16,605
15,505 14,652 14,524 11,301 17,034
15,029 14,203 14,386 11,317 16,478
Dec 93 16,243 15,349 14,560 11,333 17,042
16,356 15,456 15,055 11,333 17,575
16,322 15,424 14,646 11,365 17,512
15,643 14,783 14,009 11,388 16,589
15,270 14,431 14,189 11,435 16,687
15,248 14,409 14,421 11,443 16,500
Jun 14,717 13,907 14,068 11,443 15,944
15,384 14,537 14,529 11,474 16,206
16,050 15,168 15,124 11,513 17,108
16,152 15,264 14,755 11,552 17,050
17,056 16,118 15,085 11,568 16,982
15,870 14,997 14,536 11,577 16,296
Dec 94 16,187 15,297 14,752 11,616 16,733
16,280 15,384 15,134 11,647 16,522
16,650 15,734 15,723 11,694 17,209
16,627 15,712 16,186 11,725 17,503
16,476 15,570 16,663 11,734 17,892
16,499 15,592 17,237 11,749 18,200
Jun 17,887 16,903 17,729 11,749 19,144
19,193 18,138 18,317 11,796 20,247
19,795 18,706 18,363 11,843 20,666
20,685 19,547 19,137 11,882 21,036
19,852 18,761 19,069 11,921 20,096
20,153 19,045 19,905 11,945 20,940
Dec 95 21,409 20,231 20,289 11,969 21,492
21,095 19,935 20,979 11,969 21,469
22,216 20,994 21,174 12,000 22,139
23,651 22,350 21,377 12,024 22,590
24,326 22,988 21,691 12,064 23,799
25,266 23,876 22,251 12,055 24,737
Jun 24,314 22,976 22,336 12,047 23,720
21,348 20,174 21,348 12,118 21,649
23,048 21,780 21,799 12,157 22,907
23,844 22,532 23,026 12,220 23,803
23,059 21,791 23,661 12,268 23,436
23,336 22,052 25,448 12,291 24,402
Dec 96 23,226 21,949 24,944 12,298 25,041
22,506 21,268 26,501 12,322 25,542
21,968 20,760 26,709 12,345 24,921
20,239 19,126 25,614 12,385 23,745
20,318 19,201 27,142 12,424 23,811
22,754 21,503 28,793 12,448 26,459
Jun 23,947 22,630 30,082 12,448 27,594
24,131 22,804 32,471 12,488 28,877
24,368 23,027 30,666 12,526 29,539
25,966 24,538 32,346 12,558 31,701
25,468 24,067 31,266 12,573 30,309
25,597 24,190 32,713 12,565 30,112
Dec 97 26,158 24,719 33,276 12,580 30,639
25,852 24,430 33,645 12,604 30,156
27,990 26,450 36,071 12,628 32,385
29,266 27,657 37,918 12,652 33,721
29,058 27,460 38,301 12,675 33,907
26,932 25,453 37,642 12,698 32,081
Jun 27,045 25,557 39,171 12,713 32,148
24,992 23,617 38,755 12,728 29,546
19,289 18,228 33,151 12,744 23,809
21,023 19,867 35,276 12,759 25,672
22,550 21,310 38,146 12,790 26,719
24,922 23,551 40,458 12,790 28,119
Dec 98 27,449 25,939 42,789 12,782 29,859
27,268 25,768 44,578 12,813 30,256
24,710 23,351 43,193 12,829 27,805
24,532 23,183 44,921 12,868 28,239
25,649 24,238 46,659 12,962 30,769
27,403 25,896 45,558 12,962 31,219
Jun 29,601 27,973 48,086 12,962 32,631
30,486 28,809 46,585 13,000 31,736
29,977 28,328 46,354 13,032 30,561
30,582 28,900 45,084 13,094 30,568
Oct 99 32,157 30,388 47,937 13,141 30,692
1 Index total returns were calculated from 7/31/90 to 10/31/99. The Standard &
Poor's 500 Composite Index (S&P 500) represents an unmanaged weighted index
of 500 industrial, transportation, utility, and financial companies widely
regarded by investors as representative of the stock market. The Russell 2000
Index represents the smallest 2000 companies followed by Russell and is used
to measure the small-cap market. The Consumer Price Index is a measurement of
inflation for all urban consumers (CPI). The indices assume reinvestment of
all dividends/distributions, and do not reflect any asset-based charges for
investment management or other expenses. Past investment performance does not
guarantee future performance. The returns shown for the Fund assume
reinvestment of all dividends/ distributions by the shareholder. For
comparison purposes, the benchmark's performance is shown as of the Fund's
inception date not from the inception date of the benchmark.
The Fund's performance would have been lower had the Advisor not waived a
portion of its fees and the Fund's custodian had not allowed its fees to be
reduced by credits.
+ The performance of the Class B Shares was different than that indicated by
the lines shown on the left for the Class A Shares, based on the differences
in sales loads and fees paid by Class B shareholders.
- --------------------------------------------------------------------------------
<TABLE>
TOTAL RETURNS AS OF 10/31/99
<CAPTION>
CLASS A SHARES 1 YEAR 5 YEAR* SINCE INCEPTION*
(July 18, 1990)
<S> <C> <C> <C>
Fund (not adjusted for sales charge) 42.60% 13.52% 13.40%
Fund (adjusted for the maximum 5.5% sales charge) 34.41% 12.24% 12.71%
Standard & Poor's 500 Composite Index(1) 25.67% 26.00% 18.47%(1)
Russell 2000 Index(1) 14.87% 12.57% 12.89%(1)
<CAPTION>
CLASS B SHARES 1 YEAR 5 YEAR* SINCE INCEPTION*
(July 1, 1994)
Fund (not adjusted for contingent deferred sales charge) 41.32% 12.63% 14.87%
Fund (adjusted for the maximum contingent deferred sales charge) 36.32% 12.50% 14.87%
Standard & Poor's 500 Composite Index(1) 25.67% 26.00% 25.85%(1)
Russell 2000 Index(1) 14.87% 12.57% 13.07%(1)
*Annualized
</TABLE>
PORTFOLIO composition+
Computer 31%
Health Care 18%
Semiconductors 6%
Business Services 8%
Financial Services 9%
Other 3%
Consumer Stocks 12%
Telecommunications 5%
Transportation 4%
Electric Equipment 4%
WHAT WERE THE MOST SIGNIFICANT FACTORS CONTRIBUTING TO THE FUND'S PERFORMANCE
OVER THE 12-MONTH PERIOD ENDED OCTOBER 31, 1999, AND WHAT INVESTMENT TECHNIQUES
WERE USED TO ADDRESS THOSE CONDITIONS?
After struggling through the Asian Crisis of 1998, the Fund outperformed all
major benchmark indices during the 12-month period ended October 31, 1999.
Small-cap Technology stocks performed very well, as well as some of the biotech
and medical device firms held by the Fund. Growth momentum stocks led the
small-cap market, outperforming value stocks by a significant amount, yet the
Fund, while still paying attention to valuations, outdistanced both the Russell
2000 Growth and Value Indices by a wide margin. The Fund also outperformed
large-cap stock indices such as the Standard and Poor's 500 Index, despite a
market that was dominated by large-cap holdings for much of the period. Stock
selection played a major role in the performance for the period as many of our
Technology holdings including TriQuint Semiconductor and Check Point Software
Technologies appreciated substantially. TriQuint develops integrated circuits
for the telecommunications arena, capitalizing on proprietary technology to gain
market share, and distributes their products worldwide. Check Point Software
Technologies emerged as a market leader in Internet and e-commerce security. Its
software enables secure transactions to take place between companies by the
development of an expanded virtual private networking solution. The stocks of
both these companies skyrocketed during the past 12 months, significantly
contributing to the Fund's strong overall performance. While Health Care service
stocks were being battered by political upheaval, we were able to benefit from
other types of Health Care investments. For example, we took a position in
SonoSite, a firm that develops medical devices. The company created a handheld
portable ultrasound machine that weighs just five pounds, is priced at one-tenth
of the cost of the larger models of the past, and produces high-quality results.
The firm has just begun to distribute product and the stock has appreciated
significantly. We continue to hold this stock because of the company's upside
potential. In addition, two companies whose shares were held by the Fund were
bought out late in the period: Visio Corp., a software developer, was purchased
by Microsoft Corp.; Hambrecht & Quist, a boutique investment bank was purchased
by Chase Manhattan Bank.
Although the Fund performed very well for the period, there were some holdings
that disappointed during the year. Two consulting firms, Aris Corp. and First
Consulting Group, were hurt by Y2K budget freezes on information technology
spending. Pathogenesis, a biotechnology firm, had disappointing sales of a new
drug and its stock price dropped significantly. We took advantage of drops in
valuations to increase our holdings of those companies which still have strong
long-term outlooks. Our strategy remains to focus on dominant companies at
attractive valuations, adding to positions if the stock price weakens and
trimming positions as valuations escalate. We believe that over the long-term,
this strategy will benefit shareholders of the Fund.
WERE THERE ANY SHIFTS IN THE FUND'S PORTFOLIO HOLDINGS/SECTORS THAT HAD A
SIGNIFICANT IMPACT ON PERFORMANCE?
We took advantage of low valuations in the small-cap Technology sector after the
Asian Crisis, adding to positions. Although we have benefited from investments
in semiconductors and other technology hardware, we have been gradually
decreasing our weighting in this sector as many of these stocks have had
significant price appreciation and have reached what we believe are extended
valuations. On the other hand, the current relative valuation for small-cap
software stocks remains near its decade low. Given the fact that demand for
software is only deferred rather than lost as we approach the Y2K deadline, we
have increased our weighting in that sector due to these attractive valuations.
We underweighted financial stocks during the period as interest rates were
rising, although we benefited from the stocks that we did own.
WHAT IS THE OUTLOOK FOR BOTH THE FUND AND THE OVERALL ECONOMY?
The U.S. economy has been strong with healthy consumer spending and generally
positive profit reports. Recently, however, increasing inflation expectations
and a weaker dollar have exerted pressure on bonds and have caused volatility in
the equity markets. If this trend continues, it will make it difficult to
justify very high stock valuations. Thus, positions in stocks that have had
significant price appreciation and where multiples (price-to-earnings,
price-to-sales), are extended, have been trimmed. Although we remain cautious
about the prospects of small-cap companies outperforming large-caps over the
near term, there are a number of positive signs for the small-cap market.
Relative valuations of small-cap stocks remain depressed versus their long-term
average, which has created a strong environment for mergers and acquisitions (as
noted by the Visio and Hambrecht & Quist buyouts).
In addition, small-cap companies are buying back their outstanding shares at a
rate far greater than the overall market average. Although small-cap stocks have
historically been more volatile than large-cap stocks, we believe that the
risk/return profile remains very attractive, and current prospects for the Fund
are quite positive. We continue to invest in leading companies that trade at
valuations we feel are less than their intrinsic values. We will continue with
our philosophy of investing in companies with solid growth opportunities and
strong management teams, which we feel will benefit our shareholders over the
long-term.
+ Allocation percentages are based on total investment value of the portfolio
as of 10/31/99.37. Differences from financial statements are a result of a
consolidation of industries or sectors.
<PAGE>
INTERNATIONAL
growth fund
PORTFOLIO MANAGER:
CAPITAL GUARDIAN TRUST COMPANY
As of June 24, 1999, the Fund's investment management was transitioned from
Warburg Pincus to an international equity team at Capital Guardian Trust
Company. Eight portfolio managers and 27 analysts now share the management
responsibilities for the Fund. The managers average over 26 years of investment
experience and have been with the firm for an average of 20 years.
PERFORMANCE REVIEW
From the Fund's inception (July 18, 1990) through October 31, 1999, the
INTERNATIONAL GROWTH FUND (Class A shares) returned 4.63% on an average annual
total return basis, or 4.00% adjusted for the maximum sales charge. The Fund's
Class A shares performed very well during the 12-month period ended October 31,
1999. Not adjusted for sales charge, results topped 31%, significantly
outperforming the MSCI EAFE Index.
VALUE OF A $10,000 INVESTMENT (CLASS A SHARES)+
Fund Fund
(Class A (Class A
Shares; Shares; Morgan
not adjusted Stanley
adjusted for the Capital
for maximum International
sales 5.5% sales EAFE Inflation
charge) charge) Index(1) (CPI)(1)
- --------------------------------------------------------------------------------
Jun 90 $10,000 $ 9,450
9,780 9,242 $10,000 $10,000
8,690 8,212 9,032 10,047
7,760 7,333 7,776 10,102
8,730 8,250 8,989 10,118
8,250 7,796 8,462 10,142
Dec 90 8,150 7,702 8,602 10,196
8,460 7,995 8,883 10,235
9,190 8,685 9,838 10,329
8,630 8,155 9,249 10,416
8,720 8,240 9,343 10,479
8,870 8,382 9,443 10,502
Jun 8,270 7,815 8,751 10,502
8,680 8,203 9,184 10,565
8,700 8,222 8,999 10,581
9,020 8,524 9,509 10,596
9,050 8,552 9,645 10,612
8,800 8,316 9,198 10,644
Dec 91 9,325 8,812 9,675 10,675
9,255 8,746 9,471 10,691
9,124 8,622 9,135 10,722
8,742 8,261 8,535 10,769
8,792 8,308 8,577 10,785
9,214 8,708 9,155 10,817
Jun 8,872 8,384 8,723 10,824
8,540 8,071 8,503 10,840
9,043 8,546 9,039 10,879
8,651 8,175 8,864 10,935
8,279 7,823 8,401 10,950
8,319 7,862 8,483 10,966
Dec 92 8,339 7,881 8,529 11,005
8,359 7,900 8,531 11,028
8,642 8,167 8,791 11,059
9,197 8,691 9,561 11,090
9,833 9,293 10,471 11,129
10,055 9,502 10,695 11,144
Jun 9,894 9,350 10,530 11,137
10,217 9,655 10,901 11,191
10,792 10,199 11,492 11,230
10,762 10,170 11,235 11,270
11,065 10,456 11,584 11,301
10,439 9,865 10,573 11,317
Dec 93 11,037 10,430 11,339 11,333
11,813 11,164 12,301 11,333
11,503 10,870 12,269 11,365
10,933 10,332 11,742 11,388
11,265 10,645 12,244 11,435
11,296 10,674 12,176 11,443
Jun 11,120 10,508 12,352 11,443
11,430 10,802 12,473 11,474
11,679 11,036 12,771 11,513
11,296 10,674 12,371 11,552
11,513 10,880 12,785 11,568
11,026 10,420 12,174 11,577
Dec 94 10,892 10,293 12,253 11,616
10,324 9,757 11,785 11,647
10,182 9,622 11,755 11,694
10,368 9,798 12,492 11,725
10,695 10,107 12,965 11,734
10,794 10,200 12,814 11,749
Jun 10,674 10,087 12,592 11,749
11,143 10,530 13,379 11,796
11,001 10,396 12,872 11,843
11,088 10,478 13,127 11,882
10,859 10,262 12,777 11,921
10,968 10,365 13,137 11,945
Dec 95 11,422 10,794 13,669 11,969
11,825 11,175 13,727 11,969
11,733 11,088 13,777 12,000
11,837 11,186 14,073 12,024
12,009 11,349 14,485 12,064
11,963 11,305 14,222 12,055
Jun 12,078 11,414 14,306 12,047
11,503 10,870 13,891 12,118
11,641 11,001 13,924 12,157
11,906 11,251 14,297 12,220
11,825 11,174 14,154 12,268
12,355 11,675 14,720 12,291
Dec 96 12,338 11,660 14,535 12,298
12,398 11,716 14,029 12,322
12,503 11,815 14,262 12,345
12,409 11,727 14,318 12,385
12,598 11,905 14,396 12,424
13,387 12,650 15,336 12,448
Jun 13,951 13,184 16,186 12,448
14,423 13,630 16,452 12,488
13,199 12,473 15,226 12,526
13,905 13,140 16,082 12,558
12,363 11,683 14,850 12,573
12,092 11,427 14,701 12,565
Dec 97 12,031 11,370 14,834 12,580
12,123 11,456 15,516 12,604
12,896 12,187 16,515 12,628
13,591 12,844 17,027 12,652
13,933 13,166 17,165 12,675
13,814 13,054 17,086 12,698
Jun 13,368 12,633 17,219 12,713
13,512 12,769 17,398 12,728
11,599 10,961 15,246 12,744
11,035 10,428 14,783 12,759
11,612 10,974 16,328 12,790
12,255 11,581 17,168 12,790
Dec 98 12,523 11,834 17,850 12,782
12,659 11,963 17,802 12,813
12,277 11,602 17,382 12,829
12,742 12,042 18,112 12,868
13,193 12,468 18,849 12,962
12,663 11,967 17,882 12,962
Jun 13,498 12,755 18,583 12,962
14,044 13,272 19,140 13,000
14,249 13,466 19,214 13,032
14,550 13,750 19,462 13,094
Oct 99 15,234 14,396 20,192 13,141
1 Index total returns were calculated from 7/31/90 to 10/31/99. The Morgan
Stanley Capital International EAFE Index includes stock markets of Europe,
Australia, and the Far East weighted by capitalization. EAFE is a broad-based
index of equity markets representing 18 countries. The Consumer Price Index
is a measurement of inflation for all urban consumers (CPI). The index
assumes reinvestment of all dividends/ distributions, and does not reflect
any asset-based charges for investment management or other expenses. Past
investment performance does not guarantee future performance. The returns
shown for the Fund assume reinvestment of all dividends/ distributions by the
shareholder. For comparison purposes, the benchmark's performance is shown as
of the Fund's inception date not from the inception date of the benchmark.
The Fund's performance would have been lower had the Fund's custodian not
allowed its fees to be reduced by credits.
+ The performance of the Class B Shares was different than that indicated by
the lines shown on the left for the Class A Shares, based on the differences
in sales loads and fees paid by Class B shareholders.
- --------------------------------------------------------------------------------
<TABLE>
TOTAL RETURNS AS OF 10/31/99
<CAPTION>
CLASS A SHARES 1 YEAR 5 YEAR* SINCE INCEPTION*
(July 18, 1990)
<S> <C> <C> <C>
Fund (not adjusted for sales charge) 31.15% 5.75% 4.63%
Fund (adjusted for the maximum 5.5% sales charge) 23.61% 4.56% 4.00%
Morgan Stanley Capital International EAFE Index(1) 23.67% 9.57% 7.89%(1)
<CAPTION>
CLASS B SHARES 1 Year 5 Year* Since Inception*
(July 1, 1994)
Fund (not adjusted for contingent deferred sales charge) 29.87% 4.91% 5.24%
Fund (adjusted for the maximum contingent deferred sales charge) 24.87% 4.75% 5.24%
Morgan Stanley Capital International EAFE Index(1) 23.67% 9.57% 9.65%(1)
*Annualized
</TABLE>
PORTFOLIO composition+
Japan 29%
Latin America 2%
Other 5%
Europe 49%
Australia 4%
Cash 4%
Other Asia 7%
WHAT WERE THE MOST SIGNIFICANT FACTORS CONTRIBUTING TO THE FUND'S PERFORMANCE
OVER THE 12-MONTH PERIOD ENDED OCTOBER 31, 1999, AND WHAT INVESTMENT TECHNIQUES
WERE USED TO ADDRESS THOSE CONDITIONS?
The period was marked by strong results in most international markets,
particularly across Asia. Emerging markets rebounded considerably, posting
strong gains as global stability returned. In recent months, Japanese markets
advanced, primarily due to a powerful rally in the yen.
Optimism in Japan has been aided by two consecutive quarters of positive GDP
growth. Perhaps more important for equity investors, news of mergers and
restructuring has been on the rise. This was highlighted by three of Japan's
largest banks -- Dai-Ichi Kangyo Bank, Fuji Bank, and the Industrial Bank of
Japan -- announcing a merger that would create the world's first trillion-dollar
financial group. The announcement was a first, reflecting the desire of three
healthy banks to join for strategic reasons. Until now, mergers in the Japanese
banking industry have been motivated by the desire to prevent bankruptcies among
weak institutions by having them absorbed by stronger ones.
In Europe, the long-awaited economic recovery appears to be underway, with
positive economic news appearing on many fronts. In Germany, business confidence
has grown, and exporters are benefiting from economic improvement in Asia and
from a weak currency (the Deutschemark has fallen 29% against the yen over the
past 12 months). In France, domestic demand has led the recovery, with consumer
confidence and spending on the rise. In the U.K., a tight labor market along
with concerns about rising residential real estate prices caused the Bank of
England to increase short-term interest rates in September, despite a notable
lack of inflation. Throughout Europe, mergers and acquisitions continued at a
record pace with companies striving for pan-European size and scope.
The primary contributor to this period's strong relative performance has been
stock selection. The Fund's overweighting in Japan and underweighting in Europe
has also been beneficial. However, its weightings in regions and countries are
primarily the result of being attracted to individual securities. In Europe, we
began shifting away from Financials and increasing our exposure to cyclicals
like Peugeot SA (automobiles) and BMW AG (automobiles). That move has paid off
with this year's economic improvement rising interest-rate environment. In
Japan, a reluctance to hold Financial stocks has been a hindrance. However, we
have more than made up for that lost opportunity with a focus on holdings in
Japanese Technology firms such as NEC Corp. (electrical & electronics),
Advantest Corp. (electronic instruments) and Tokyo Electron (electronic
instruments). Japan was by far the biggest overall contributor to the Fund's
outperformance during the period. Companies such as Sony Corp. (appliances &
household durables) and NTT Mobile Communications Network (wireless
telecommunications services) were among the most helpful.
WERE THERE ANY SIGNIFICANT SHIFTS IN THE FUND'S PORTFOLIO HOLDINGS/SECTORS THAT
HAVE HAD A SIGNIFICANT IMPACT ON PERFORMANCE?
Probably the most significant change to the portfolio was an increase in
exposure to the solid exporting countries of Latin America and the Pacific
Basin, such as Mexico, Taiwan and Japan. On a selective basis, we found what we
believe to be attractively-valued companies with excellent growth prospects
despite generally weak macro-economic conditions. This shift lowered exposure to
some European countries, where we found securities to be fully valued and faced
with tough economic times ahead.
At the sector level, the allocation to Services went down. The Fund was con-
centrated in the Telecommunications industry with companies like Telemex, NTT
Mobile Communications Network, Mannesmann and Swisscom. We increased the Fund's
exposure to Capital Equipment and Consumer Goods at the expense of the Finance
sector. Technology and Telecommunications equipment providers dominated these
two sectors with companies like Nokia, Samsung Manufacturing, Taiwan
Semiconductor Electronics and ASM Lithography Holdings.
WHAT IS THE OUTLOOK FOR BOTH THE FUND AND THE OVERALL ECONOMY?
After surging 8.0% in the first quarter of this year, Japanese growth held up
much better than expected in the second quarter. As a result, growth in calendar
year 1999 should be positive. Falling inventory/sales ratios and other
indicators suggest that a cyclical recovery in Japan may be underway. However,
with unemployment rising, incomes falling, and Industrial sector capacity still
ample, domestic private demand fundamentals remain weak. Restructuring activity
will offset much of the benefit Japan receives from stronger global growth, and
with public sector finances in shambles, the extent of further fiscal stimulus
is limited. As a result, growth in Japan should remain sluggish this year and
next, and continue to post some of the lowest growth rates of the developed
countries.
Purchasing manager surveys, data on orders, sentiment indices, and a fair number
of other indicators show that a cyclical recovery in European economic activity
is clearly underway. Significant improvement is evident even in Germany, where
much of the recent weakness has been concentrated. European GDP growth could
exceed 3.0% in the second half of this year. With an improving global economy,
it could reach 3.5% in 2000. While higher commodity prices may exert some
moderate upward pressure on overall price levels, inflation rates across the
region still remain low, in some cases under 1.0%. Emerging countries in Europe,
after a disastrous 1998, are responding to the numerous currency devaluations
that took place over the past year.
With the exception of Hong Kong and Indonesia, most emerging Asian countries
continue to experience a fairly sharp increase in activity. While the rebound
has been led by exporting activity, improving domestic fundamentals and low
inflation, particularly in Korea and Thailand, suggest that growth should become
increasingly driven by domestic demand. In Latin America, activity is showing
signs of bottoming in response to sharply lower interest rates and a return of
capital inflows. However, interest rates are still high in many countries, and
any recovery in domestic demand should be much more moderate.
Overall, we are cautious as market sentiment and new issuance could be affected
by Y2K preparations, but continue to find what we believe to be strong,
international firms with healthy growth prospects.portfolio composition
+ Allocation percentages are base on total investment value of the portfolio as
of 10/31/99.
<PAGE>
STATEMENTS of ASSETS and LIABILITIES
WM GROUP OF FUNDS
OCTOBER 31, 1999
<TABLE>
<CAPTION>
CALIFORNIA
SHORT TERM U.S. INSURED
TARGET HIGH HIGH GOVERNMENT INTERMEDIATE
MATURITY YIELD QUALITY SECURITIES INCOME MUNICIPAL
2002 FUND FUND BOND FUND FUND FUND FUND
-------------- --------------- ---------------- ---------------- ---------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Investments, at value
(See portfolios of
investments):
Securities .............. $ 1,936,803 $ 69,505,660 $167,620,137 $511,354,868 $285,488,641 $ 65,458,987
Repurchase Agreements ... -- 946,000 1,089,000 3,445,000 -- --
----------- ------------ ------------ ------------ ------------ ------------
Total
Investments (a) ......... 1,936,803 70,451,660 168,709,137 514,799,868 285,488,641 65,458,987
Cash and/or foreign
currency (b) ............ 12,788 725 164 371 -- 88,778
Net unrealized appreciation
of forward foreign currency
contracts (See portfolios
of investments) ......... -- -- -- -- -- --
Variation margin .......... -- -- -- -- -- --
Dividends and/or interest
receivable .............. -- 1,390,863 2,242,966 3,281,561 5,460,707 918,661
Receivable for Fund shares
sold .................... -- 496,472 123,727 597,902 454,022 500,077
Receivable for investment
securities sold ......... -- -- 9,790 24,523 1,466,881 --
Unamortized organization
costs ................... 4,898 -- -- -- -- --
Prepaid expenses and other
assets .................. 28 134 868 2,906 2,233 855
----------- ------------ ------------ ------------ ------------ ------------
Total Assets .......... 1,954,517 72,339,854 171,086,652 518,707,131 292,872,484 66,967,358
----------- ------------ ------------ ------------ ------------ ------------
LIABILITIES:
Net unrealized depreciation
of forward foreign
currency contracts (See
portfolios of investments) . -- 9,407 -- -- -- --
Payable for Fund shares
redeemed ................ 1,401 9,231 224,271 1,211,054 944,749 59,048
Payable for when-issued
securities .............. -- -- -- 37,554,229 -- --
Payable for investment
securities purchased .... -- 420,000 -- -- -- --
Variation margin .......... -- -- 65,000 -- -- --
Investment advisory fee
payable ................. 4,003 -- 46,586 206,349 149,575 28,339
Shareholder servicing and
distribution fees payable.. 410 18,306 9,855 106,817 72,435 36,689
Dividends payable ......... -- 99,825 56,419 389,423 383,809 59,922
Due to custodian .......... -- -- -- -- 98,069 --
Accrued printing and
postage fees ............ 953 13,112 31,906 91,523 80,573 6,692
Accrued expenses and other
payables ................ 13,337 20,962 41,386 97,401 65,918 23,594
----------- ------------ ------------ ------------ ------------ ------------
Total Liabilities ..... 20,104 590,843 475,423 39,656,796 1,795,128 214,284
----------- ------------ ------------ ------------ ------------ ------------
NET ASSETS ................ $ 1,934,413 $ 71,749,011 $170,611,229 $479,050,335 $291,077,356 $ 66,753,074
=========== ============ ============ ============ ============ ============
- ------------
(a) Investments, at cost .. $ 1,940,058 $ 72,535,955 $170,642,340 $523,300,762 $287,301,605 $ 64,803,500
=========== ============ ============ ============ ============ ============
(b) Cash and/or foreign
currency, at cost ..... $ 12,788 $ 725 $ 164 $ 371 $ -- $ 88,778
=========== ============ ============ ============ ============ ============
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FLORIDA
CALIFORNIA INSURED TAX-EXEMPT BOND & GROWTH & EMERGING INTERNATIONAL
MUNICIPAL MUNICIPAL BOND STOCK INCOME GROWTH NORTHWEST GROWTH GROWTH
FUND FUND FUND FUND FUND FUND FUND FUND FUND
- -------------- ------------ ------------- ------------- --------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$417,797,082 $ 21,007,851 $280,984,484 $302,251,212 $1,373,185,954 $845,179,622 $421,541,930 $120,224,625 $196,104,544
-- -- -- 864,000 37,787,000 -- 2,672,000 -- 8,794,000
------------ ------------ ------------ ------------ -------------- ------------ ------------ ------------ ------------
417,797,082 21,007,851 280,984,484 303,115,212 1,410,972,954 845,179,622 424,213,930 120,224,625 204,898,544
10,278,676 160,865 90,989 749 600 111,565 223 65,921 539,420
-- -- -- -- -- 995,369 -- -- --
-- -- 218,750 -- -- -- -- -- --
5,863,146 280,786 4,446,464 1,890,987 936,552 41,673 65,614 10,622 411,156
1,570,806 15,067 653,396 675,297 2,402,551 6,513,949 1,421,210 1,310,075 118,628
-- 487,151 1,402,500 20,091,648 8,733,472 22,200,289 2,570,813 1,067,714 666,999
-- -- -- -- -- -- -- -- --
4,229 368 2,732 3,287 7,258 3,538 2,785 2,034 1,939
------------ ------------ ------------ ------------ -------------- ------------ ------------ ------------ ------------
435,513,939 21,952,088 287,799,315 325,777,180 1,423,053,387 875,046,005 428,274,575 122,680,991 206,636,686
------------ ------------ ------------ ------------ -------------- ------------ ------------ ------------ ------------
-- -- -- -- -- -- -- -- 275,982
1,908,659 51,858 1,301,766 1,342,271 2,167,135 1,232,246 875,204 334,594 121,812
-- 2,042,723 7,038,330 -- -- -- -- -- --
13,545,374 481,681 5,952,780 6,799,075 18,887,685 19,607,719 4,134,588 958,796 2,051,917
100,000 -- -- -- -- -- -- -- --
178,865 22,109 114,929 160,069 591,721 446,272 215,548 84,116 159,762
173,775 8,810 74,542 114,557 291,434 220,883 132,105 42,651 15,228
1,741,411 37,169 357,289 -- -- -- -- -- --
-- -- -- -- -- -- -- -- 571,915
44,258 2,480 36,672 67,171 261,446 191,966 107,304 99,488 44,835
51,501 17,787 49,668 62,874 174,008 109,767 69,705 62,374 65,679
------------ ------------ ------------ ------------ -------------- ------------ ------------ ------------ ------------
17,743,843 2,664,617 14,925,976 8,546,017 22,373,429 21,808,853 5,534,454 1,582,019 3,307,130
------------ ------------ ------------ ------------ -------------- ------------ ------------ ------------ ------------
$417,770,096 $ 19,287,471 $272,873,339 $317,231,163 $1,400,679,958 $853,237,152 $422,740,121 $121,098,972 203,329,556
============ ============ ============ ============ ============== ============ ============ ============ ===========
$421,946,186 $ 20,649,841 $271,676,034 $258,790,847 $1,092,245,088 $629,649,997 $255,942,061 $ 97,893,788 $180,536,047
============ ============ ============ ============ ============== ============ ============ ============ ===========
$ 10,278,676 $ 160,865 $ 95,561 $ 749 $ 600 $ 111,565 $ 223 $ 65,921 $ 536,942
============ ============ ============ ============ ============== ============ ============ ============ ===========
See Notes to Financial Statements.
</TABLE>
<PAGE>
STATEMENTS of ASSETS and LIABILITIES (continued)
WM GROUP OF FUNDS
OCTOBER 31, 1999
<TABLE>
<CAPTION>
CALIFORNIA
SHORT TERM U.S. INSURED
TARGET HIGH HIGH GOVERNMENT INTERMEDIATE
MATURITY YIELD QUALITY SECURITIES INCOME MUNICIPAL
2002 FUND FUND BOND FUND FUND FUND FUND
-------------- --------------- ---------------- ---------------- ---------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSETS CONSIST OF:
Undistributed net investment
income/(accumulated net
investment loss/
distributions in excess
of net investment
income) ................. $ 99,888 $ 9,408 $ 49,071 $ -- $ 54,991 $ 174
Accumulated net realized
gain/(loss) on investments
sold, futures contracts,
closed written options,
forward foreign currency
contracts and foreign
currency transactions ... 26,017 (216,843) (2,155,455) (69,289,201) (30,091,679) 163,218
Net unrealized appreciation/
(depreciation) of
investments, foreign
currency, futures
contracts, forward foreign
currency contracts and
other assets and
liabilities ............. (3,255) (2,093,732) (1,817,894) (8,500,894) (1,812,964) 655,487
Paid-in capital ........... 1,811,763 74,050,178 174,535,507 556,840,430 322,927,008 65,934,195
----------- ------------ ------------ ------------ ------------ ------------
Total Net Assets ...... $ 1,934,413 $ 71,749,011 $170,611,229 $479,050,335 $291,077,356 $ 66,753,074
=========== ============ ============ ============ ============ ============
NET ASSETS:
Class A Shares ............ $ 1,934,413 $ 5,827,098 $ 27,058,640 $221,591,589 $172,217,312 $ 31,252,568
=========== ============ ============ ============ ============ ============
Class B Shares ............ -- $ 21,259,422 $ 4,597,451 $ 72,750,734 $ 42,715,296 $ 35,500,506
============ ============ ============ ============ ============
Class I Shares ............ -- $ 44,662,491 $138,955,138 $184,708,012 $ 76,144,748 --
============ ============ ============ ============ ============
SHARES OUTSTANDING:
Class A Shares ............ 185,467 653,114 11,805,047 21,090,598 19,160,688 3,032,893
=========== ============ ============ ============ ============ ============
Class B Shares ............ -- 2,368,973 2,005,876 6,928,738 4,744,779 3,445,155
============ ============ ============ ============ ============
Class I Shares ............ -- 5,015,112 60,615,314 17,574,999 8,469,061 --
============ ============ ============ ============ ============
CLASS A SHARES:
Net asset value per share
of beneficial interest
outstanding* ............ $10.43 $ 8.92 $ 2.29 $10.51 $ 8.99 $10.30
=========== ============ ============ ============ ============ ============
Maximum sales charge ...... 2.00% 4.50% 3.50% 4.50% 4.50% 4.50%
=========== ============ ============ ============ ============ ============
Maximum offering price per
share of beneficial interest
outstanding ............... $10.64 $ 9.34 $ 2.37 $11.01 $ 9.41 $10.79
=========== ============ ============ ============ ============ ============
CLASS B SHARES:
Net asset value and offering
price per share of
beneficial interest
outstanding* ............ -- $ 8.97 $ 2.29 $10.50 $ 9.00 $10.30
============ ============ ============ ============ ============
CLASS I SHARES:
Net asset value, offering
and redemption price per
share of beneficial
interest outstanding .... -- $ 8.91 $ 2.29 $10.51 $ 8.99 --
============ ============ ============ ============
- --------------
* Redemption price per share is equal to net asset value per share less any applicable contingent deferred sales charge.
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FLORIDA
CALIFORNIA INSURED TAX-EXEMPT BOND & GROWTH & EMERGING INTERNATIONAL
MUNICIPAL MUNICIPAL BOND STOCK INCOME GROWTH NORTHWEST GROWTH GROWTH
FUND FUND FUND FUND FUND FUND FUND FUND FUND
- -------------- ------------ ------------- ------------ -------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ (432,588) $ 27,933 $ 51,442 $ 1,073,876 $ -- $ (995,369) $ -- $ -- $ 3,391,053
(4,094,844) (2,336,377) (2,850,460) 9,357,000 45,127,975 112,775,884 54,924,597 14,340,391 (2,644,776)
(4,331,162) 358,010 9,065,833 44,324,365 318,727,866 216,524,983 168,271,869 22,330,490 24,074,829
426,628,690 21,237,905 266,606,524 262,475,922 1,036,824,117 524,931,654 199,543,655 84,428,091 178,508,450
------------ ------------ ------------ ------------ -------------- ------------ ------------ ------------ ------------
$417,770,096 $ 19,287,471 $272,873,339 $317,231,163 $1,400,679,958 $853,237,152 $422,740,121 $121,098,972 $203,329,556
============ ============ ============ ============ ============== ============ ============ ============ ============
$283,928,581 $ 12,014,526 $247,814,376 $241,745,879 $ 705,834,794 $240,363,258 $338,979,682 $ 92,129,528 $ 28,618,458
============ ============ ============ ============ ============== ============ ============ ============ ============
$133,841,515 $ 7,272,945 $ 25,058,963 $ 75,485,284 $ 233,215,802 $226,506,524 $ 77,658,319 $ 28,969,444 $ 11,101,461
============ ============ ============ ============ ============== ============ ============ ============ ============
-- -- -- -- $ 461,629,362 $386,367,370 $ 6,102,120 -- $163,609,637
============== ============ ============ ============
27,218,303 1,251,398 33,445,528 16,560,447 28,683,889 8,088,987 10,580,908 4,698,599 2,569,442
============ ============ ============ ============ ============== ============ ============ ============ ============
12,830,497 757,534 3,381,932 5,194,356 9,620,222 8,006,571 2,535,493 1,556,777 1,021,044
============ ============ ============ ============ ============== ============ ============ ============ ============
-- -- -- -- 18,731,108 12,896,139 190,481 -- 14,663,379
============== ============ ============ ============
$10.43 $ 9.60 $ 7.41 $14.60 $24.61 $29.71 $32.04 $19.61 $11.14
============ ============ ============ ============ ============== ============ ============ ============ ============
4.50% 4.50% 4.50% 5.50% 5.50% 5.50% 5.50% 5.50% 5.50%
============ ============ ============ ============ ============== ============ ============ ============ ============
$10.92 $10.05 $ 7.76 $15.45 $26.04 $31.44 $33.90 $20.75 $11.79
============ ============ ============ ============ ============== ============ ============ ============ ============
$10.43 $ 9.60 $ 7.41 $14.53 $24.24 $28.29 $30.63 $18.61 $10.87
============ ============ ============ ============ ============== ============ ============ ============ ============
-- -- -- -- $24.65 $29.96 $32.04 -- $11.16
============== ============ ============ ============
See Notes to Financial Statements.
</TABLE>
<PAGE>
STATEMENTS of OPERATIONS
WM GROUP OF FUNDS
FOR THE YEAR ENDED OCTOBER 31, 1999
<TABLE>
<CAPTION>
CALIFORNIA
SHORT TERM U.S. INSURED
TARGET HIGH HIGH GOVERNMENT INTERMEDIATE
MATURITY YIELD QUALITY SECURITIES INCOME MUNICIPAL
2002 FUND FUND BOND FUND FUND FUND FUND
-------------- --------------- ---------------- ---------------- ---------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends ................. $ -- $ 367,454 $ -- $ -- $ 100,092 $ --
Foreign withhold ing tax
on dividend income ...... -- -- -- -- -- --
Interest .................. 130,878 4,497,043 8,004,047 27,685,255 23,014,848 3,360,795
Foreign withholding tax
on interest income ...... -- (21,065) (4,379) -- -- --
----------- ------------ ------------ ------------ ------------ ------------
Total investment income . 130,878 4,843,432 7,999,668 27,685,255 23,114,940 3,360,795
----------- ------------ ------------ ------------ ------------ ------------
EXPENSES:
Investment advisory fee ... 5,185 277,534 661,858 2,110,308 1,514,494 355,545
Custodian fees ............ 1,166 5,366 13,757 50,028 23,884 12,091
Legal and audit fees ...... 11,730 21,129 29,283 50,080 43,468 19,558
Amortization of organization
costs ................... 11,756 -- -- -- -- 677
Registration and filing
fees .................... 11,558 25,791 25,956 30,263 36,677 14,886
Printing and postage fees . 5,032 38,883 165,507 433,976 414,294 32,601
Other ..................... 541 8,165 48,897 134,531 79,340 18,804
Shareholder servicing and
distribution fees:
Class A Shares .......... 5,184 22,726 151,449 694,215 551,749 89,640
Class B Shares .......... -- 107,844 40,631 519,614 391,970 310,196
Class S Shares .......... -- 164 9,611 30,013 10,199 12
Transfer agent fees:
Class A Shares .......... 4,035 24,436 121,129 304,619 280,276 14,959
Class B Shares .......... -- 8,431 9,222 50,259 51,628 12,699
Class S Shares .......... -- 48 3,101 8,526 2,590 25
Fees waived and/or expenses
reimbursed by the
investment advisor and/or
distributor ............. (35,909) (277,534) (449,313) (327,909) (115,406) (41,952)
----------- ------------ ------------ ------------ ------------ ------------
Total expenses ........ 20,278 262,983 831,088 4,088,523 3,285,163 839,741
Fees reduced by credits
allowed by the custodian (986) (4,113) (6,634) (5,002) (2,046) (11,464)
----------- ------------ ------------ ------------ ------------ ------------
Net expenses .......... 19,292 258,870 824,454 4,083,521 3,283,117 828,277
----------- ------------ ------------ ------------ ------------ ------------
NET INVESTMENT INCOME/(LOSS) . 111,586 4,584,562 7,175,214 23,601,734 19,831,823 2,532,518
----------- ------------ ------------ ------------ ------------ ------------
NET REALIZED AND UNREALIZED
GAIN/ (LOSS) ON INVESTMENTS:
Realized gain/(loss) from:
Security transactions ... 26,026 (216,835) (453,292) 195,774 543,055 205,762
Forward foreign currency
contracts and foreign
currency transactions . -- (2,198) -- -- -- --
Futures contracts ....... -- -- 63,888 (559,066) -- (42,108)
----------- ------------ ------------ ------------ ------------ ------------
Net realized gain/(loss)
on investment
transactions ........ 26,026 (219,033) (389,404) (363,292) 543,055 163,654
----------- ------------ ------------ ------------ ------------ ------------
Change in unrealized
appreciation/(depreciation)
of:
Securities .............. (186,896) (423,149) (2,471,468) (18,492,115) (15,134,079) (3,715,242)
Forward foreign currency
contracts ............... -- (2,451) -- -- -- --
Foreign currency, futures
contracts and other
assets and liabilities -- 21 115,309 -- -- --
----------- ------------ ------------ ------------ ------------ ------------
Net change in unrealized
appreciation/
(depreciation) of
investment
transactions ........ (186,896) (425,579) (2,356,159) (18,492,115) (15,134,079) (3,715,242)
----------- ------------ ------------ ------------ ------------ ------------
Net realized and unrealized
gain/(loss) on investments (160,870) (644,612) (2,745,563) (18,855,407) (14,591,024) (3,551,588)
----------- ------------ ------------ ------------ ------------ ------------
NET INCREASE/(DECREASE) IN
NET ASSETS RESULTING FROM
OPERATIONS .............. $ (49,284) $ 3,939,950 $ 4,429,651 $ 4,746,327 $ 5,240,799 $ (1,019,070)
=========== ============ ============ ============ ============ ============
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FLORIDA INTERNATIONA
CALIFORNIA INSURED TAX-EXEMPT BOND & GROWTH & EMERGING L
MUNICIPAL MUNICIPAL BOND STOCK INCOME GROWTH NORTHWEST GROWTH GROWTH
FUND FUND FUND FUND FUND FUND FUND FUND FUND
------- ----- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ -- $ -- $ -- $ 5,115,936 $ 15,023,890 $ 1,268,613 $ 2,824,892 $ 538,062 $ 3,120,675
-- -- -- -- -- (37,171) -- -- (393,280)
23,065,180 1,224,495 18,538,590 8,078,666 839,447 1,177,916 688,715 268,806 495,221
-- -- -- -- -- -- -- -- --
------------ ------------ ------------ ------------ -------------- ------------ ------------ ------------ ------------
23,065,180 1,224,495 18,538,590 13,194,601 15,863,337 2,409,358 3,513,607 806,868 3,222,616
------------ ------------ ------------ ------------ -------------- ------------ ------------ ------------ ------------
2,098,572 115,533 1,475,712 2,114,106 6,133,736 4,855,072 2,331,602 1,144,150 1,577,276
37,096 5,108 18,793 54,645 95,597 41,602 24,489 28,909 148,303
42,839 15,405 47,374 49,618 94,482 59,471 46,621 59,062 66,544
-- -- -- -- -- -- -- -- --
11,280 23,089 17,863 30,888 90,966 42,482 24,648 23,467 23,179
188,848 13,004 178,336 340,763 1,128,192 701,979 519,397 529,525 195,095
91,811 9,200 78,902 82,720 257,187 153,137 84,293 38,040 36,127
755,106 35,579 711,695 702,775 1,678,265 508,227 767,330 224,928 77,573
947,296 74,162 217,483 791,823 1,852,178 1,140,181 641,549 245,784 57,609
40 12 10 290 84,951 98,085 11 30,780 50,119
122,285 7,422 131,475 162,566 526,807 320,726 269,519 249,214 110,439
37,539 3,051 11,245 80,714 318,513 230,262 115,032 109,735 30,227
40 25 25 25 12,169 12,072 4 11,428 11,631
(111,899) (31,428) -- -- (156,041) (1,050,546) -- (198,910) --
------------ ------------ ------------ ------------ -------------- ------------ ------------ ------------ ------------
4,220,853 270,162 2,888,913 4,410,933 12,117,002 7,112,750 4,824,495 2,496,112 2,384,122
(34,533) (4,845) (4,320) (6,334) (15,459) (13,722) (5,353) (736) (5,095)
------------ ------------ ------------ ------------ -------------- ------------ ------------ ------------ ------------
4,186,320 265,317 2,884,593 4,404,599 12,101,543 7,099,028 4,819,142 2,495,376 2,379,027
------------ ------------ ------------ ------------ -------------- ------------ ------------ ------------ ------------
18,878,860 959,178 15,653,997 8,790,002 3,761,794 (4,689,670) (1,305,535) (1,688,508) 843,589
------------ ------------ ------------ ------------ -------------- ------------ ------------ ------------ ------------
(3,354,741) (14,801) 195,009 12,594,357 55,169,792 157,528,746 64,144,998 20,927,824 16,906,338
-- -- -- -- -- 1,274,110 -- (109) (3,350,479)
(730,453) (167,525) (1,680,297) -- -- -- -- (140,948) --
------------ ------------ ------------ ------------ -------------- ------------ ------------ ------------ ------------
(4,085,194) (182,326) (1,485,288) 12,594,357 55,169,792 158,802,856 64,144,998 20,786,767 13,555,859
------------ ------------ ------------ ------------ -------------- ------------ ------------ ------------ ------------
(31,326,763) (1,726,040) (24,806,953) 5,658,178 185,462,770 158,771,409 94,783,487 23,844,958 28,731,647
-- -- -- -- -- 1,453,029 -- -- 2,024,333
(182,058) -- (242,617) -- -- (9) -- (196) (23,965)
------------ ------------ ------------ ------------ -------------- ------------ ------------ ------------ ------------
(31,508,821) (1,726,040) (25,049,570) 5,658,178 185,462,770 160,224,429 94,783,487 23,844,762 30,732,015
------------ ------------ ------------ ------------ -------------- ------------ ------------ ------------ ------------
(35,594,015) (1,908,366) (26,534,858) 18,252,535 240,632,562 319,027,285 158,928,485 44,631,529 44,287,874
------------ ------------ ------------ ------------ -------------- ------------ ------------ ------------ ------------
$(16,715,155) $ (949,188) $(10,880,861) $ 27,042,537 $ 244,394,356 $314,337,615 $157,622,950 $ 42,943,021 $ 45,131,463
============ ============ ============ ============ ============== ============ ============ ============ ============
See Notes to Financial Statements.
</TABLE>
<PAGE>
STATEMENTS of CHANGES in NET assets
WM GROUP OF FUNDS
FOR THE YEAR ENDED OCTOBER 31, 1999
<TABLE>
<CAPTION>
CALIFORNIA
SHORT TERM U.S. INSURED
TARGET HIGH HIGH GOVERNMENT INTERMEDIATE
MATURITY YIELD QUALITY SECURITIES INCOME MUNICIPAL
2002 FUND FUND BOND FUND FUND FUND FUND
-------------- --------------- ---------------- ---------------- ---------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Net investment income/(loss) $ 111,586 $ 4,584,562 $ 7,175,214 $ 23,601,734 $ 19,831,823 $ 2,532,518
Net realized gain/(loss) on
investment transactions . 26,026 (219,033) (389,404) (363,292) 543,055 163,654
Net change in unrealized
appreciation/(depreciation)
of investment transactions (186,896) (425,579) (2,356,159) (18,492,115) (15,134,079) (3,715,242)
----------- ------------ ------------ ------------ ------------ ------------
Net increase/(decrease) in
net assets resulting from
operations .............. (49,284) 3,939,950 4,429,651 4,746,327 5,240,799 (1,019,070)
Distributions to shareholders
from:
Net investment income:
Class A Shares ........ (158,581) (953,604) (3,192,387) (15,781,217) (15,130,951) (1,542,848)
Class B Shares ........ -- (1,025,321) (179,144) (2,500,924) (2,350,704) (998,452)
Class S Shares ........ -- (1,605) (41,351) (145,020) (58,122) (34)
Class I Shares ........ -- (2,604,114) (3,800,419) (4,534,753) (2,290,516) (33)
Distributions in excess of
net investment income:
Class A Shares ........ -- -- -- (143,587) -- --
Class B Shares ........ -- -- -- (22,755) -- --
Class S Shares ........ -- -- -- (1,319) -- --
Class I Shares ........ -- -- -- (41,260) -- --
Net realized gains on
investments:
Class A Shares ........ (40,651) (70,737) -- -- -- (551,842)
Class B Shares ........ -- (24,411) -- -- -- (380,181)
Class S Shares ........ -- (126) -- -- -- (26)
Class I Shares ........ -- (19,594) -- -- -- (17)
Net increase/(decrease) in
net assets from Fund share
transactions:
Class A Shares ........ (202,315) (5,334,713) (4,480,357) (31,267,391) (30,452,925) (3,869,985)
Class B Shares ........ -- 18,703,424 1,125,254 46,467,913 10,384,366 13,625,253
Class S Shares ........ -- (25,952) (911,044) (6,157,509) (1,597,339) (1,171)
Class I Shares ........ -- 44,142,123 138,773,018 148,054,667 70,649,258 (1,133)
----------- ------------ ------------ ------------ ------------ ------------
Net increase/(decrease) in
net assets .............. (450,831) 56,725,320 131,723,221 138,673,172 34,393,866 5,260,461
NET ASSETS:
Beginning of year ......... 2,385,244 15,023,691 38,888,008 340,377,163 256,683,490 61,492,613
----------- ------------ ------------ ------------ ------------ ------------
End of year ............... $ 1,934,413 $ 71,749,011 $170,611,229 $479,050,335 $291,077,356 $ 66,753,074
=========== ============ ============ ============ ============ ============
Undistributed net investment
income/(accumilated net
investment loss/
distributions in excess of
net investment income)
at end of year .......... $ 99,888 $ 9,408 $ 49,071 $ -- $ 54,991 $ 174
=========== ============ ============ ============ ============ ============
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FLORIDA INTERNATIONA
CALIFORNIA INSURED TAX-EXEMPT BOND & GROWTH & EMERGING L
MUNICIPAL MUNICIPAL BOND STOCK INCOME GROWTH NORTHWEST GROWTH GROWTH
FUND FUND FUND FUND FUND FUND FUND FUND FUND
------- ----- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 18,878,860 $ 959,178 $ 15,653,997 $ 8,790,002 $ 3,761,794 $ (4,689,670) $ (1,305,535) $ (1,688,508) $ 843,589
(4,085,194) (182,326) (1,485,288) 12,594,357 55,169,792 158,802,856 64,144,998 20,786,767 13,555,859
(31,508,821) (1,726,040) (25,049,570) 5,658,178 185,462,770 160,224,429 94,783,487 23,844,762 30,732,015
------------ ------------ ------------ ------------ -------------- ------------ ------------ ------------ ------------
(16,715,155) (949,188) (10,880,861) 27,042,537 244,394,356 314,337,615 157,622,950 42,943,021 45,131,463
(15,504,606) (672,564) (14,755,966) (7,559,965) (2,602,496) -- -- -- (910,893)
(3,858,984) (289,752) (956,931) (1,559,681) -- -- -- -- (103,845)
(157) (24) (17) (644) -- -- -- -- (224,002)
(40) (42) (45) -- (1,790,653) -- -- -- (3,219,638)
-- -- -- -- -- -- -- -- --
-- -- -- -- -- -- -- -- --
-- -- -- -- -- -- -- -- --
-- -- -- -- -- -- -- -- --
(1,424,459) -- -- (803,912) (121,462) (10,715,680) -- (14,838,773) (372,771)
(278,985) -- -- (208,365) -- (4,454,756) -- (3,867,191) (45,270)
(36) -- -- (108) -- (1,204,673) -- (743,226) (95,194)
(6) -- -- -- (54,140) (12,516,104) -- (4,308,281) (1,275,498)
23,495,259 (2,585,525) (28,830,750) (70,804,319) 30,439,066 8,149,895 (35,387,914) 9,931,687 (9,815,055)
94,783,391 1,916,021 9,791,011 (2,071,336) 83,250,940 133,358,773 4,440,907 (7,912,489) 6,184,898
(6,066) (495) (1,317) (31,483) (10,388,888) (5,835,817) -- (1,239,975) (8,285,762)
(1,139) (1,130) (1,087) -- 240,602,040 156,967,682 5,831,437 (25,943,679) 36,683,497
------------ ------------ ------------ ------------ -------------- ------------ ------------ ------------ ------------
80,489,017 (2,582,699) (45,635,963) (55,997,276) 583,728,763 578,086,935 132,507,380 (5,978,906) 63,651,930
337,281,079 21,870,170 318,509,302 373,228,439 816,951,195 275,150,217 290,232,741 127,077,878 139,677,626
------------ ------------ ------------ ------------ -------------- ------------ ------------ ------------ ------------
$417,770,096 $ 19,287,471 $272,873,339 $317,231,163 $1,400,679,958 $853,237,152 $422,740,121 $121,098,972 $203,329,556
============ ============ ============ ============ ============== ============ ============ ============ ============
$ (432,588) $ 27,933 $ 51,442 $ 1,073,876 $ -- $ (995,369) $ -- $ -- $ 3,391,053
============ ============ ============ ============ ============== ============ ============ ============ ============
See Notes to Financial Statements.
</TABLE>
<PAGE>
STATEMENTS of CHANGES in NET assets (continued)
WM GROUP OF FUNDS
FOR THE YEAR ENDED OCTOBER 31, 1998
<TABLE>
<CAPTION>
CALIFORNIA
SHORT TERM U.S. INSURED
TARGET HIGH HIGH GOVERNMENT INTERMEDIATE
MATURITY YIELD QUALITY SECURITIES INCOME MUNICIPAL
2002 FUND FUND BOND FUND FUND FUND FUND
-------------- --------------- ---------------- ---------------- ---------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Net investment income/(loss) $ 48,894 $ 598,305 $ 726,414 $ 14,812,357 $ 11,867,176 $ 835,876
Net realized gain/(loss) on
investment transactions . 32,506 107,884 46,436 4,998,746 6,461,709 248,796
Net change in unrealized
appreciation/(depreciation)
of investment transactions 89,659 (1,668,153) 380,029 6,541,683 9,512,086 888,856
----------- ------------ ------------ ------------ ------------ ------------
Net increase/(decrease) in
net assets resulting from
operations .............. 171,059 (961,964) 1,152,879 26,352,786 27,840,971 1,973,528
Distributions to shareholders
from:
Net investment income:
Class A Shares ........ -- (499,993) (609,802) (11,608,371) (10,237,430) (563,810)
Class B Shares ........ -- (57,889) (53,647) (762,576) (1,294,669) (272,587)
Class S Shares ........ -- (473) (11,951) (200,327) (63,170) (22)
Class I Shares ........ -- (26,018) (32,624) (2,016,083) (271,907) (18)
Distributions in excess of
net investment income:
Class A Shares ........ -- (11,898) -- -- -- --
Class B Shares ........ -- (1,434) -- -- -- --
Class S Shares ........ -- (11) -- -- -- --
Class I Shares ........ -- (538) -- -- -- --
Net realized gains on
investments:
Class A Shares ........ -- -- -- -- -- --
Class B Shares ........ -- -- -- -- -- --
Class S Shares ........ -- -- -- -- -- --
Class I Shares ........ -- -- -- -- -- --
Capital:
Class A Shares ........ -- -- -- -- -- --
Class B Shares ........ -- -- -- -- -- --
Net increase/(decrease) in
net assets from Fund share
transactions:
Class A Shares ........ (321,663) 12,128,281 (3,182,556) 150,896,689 121,902,271 (1,916,283)
Class B Shares ........ -- 3,034,079 249,247 24,695,898 23,027,651 1,857,862
Class S Shares ........ -- 25,952 (97,582) 5,098,895 1,458,569 22
Class I Shares ........ -- 1,395,597 (1,488,732) 37,514,925 6,765,814 18
----------- ------------ ------------ ------------ ------------ ------------
Net increase/(decrease) in
net assets .............. (150,604) 15,023,691 (4,074,768) 229,971,836 169,128,100 1,078,710
NET ASSETS:
Beginning of period ....... 2,535,848 -- 42,962,776 110,405,327 87,555,390 60,413,903
----------- ------------ ------------ ------------ ------------ ------------
End of period ............. $ 2,385,244 $ 15,023,691 $ 38,888,008 $340,377,163 $256,683,490 $ 61,492,613
=========== ============ ============ ============ ============ ============
Undistributed net investment
income/(accumulated net
investment loss/
distributions in excess of
net investment income) at
end of period ........... $ 135,040 $ (6,925) $ 47,920 $ (467,853) $ (16,407) $ 14,596
=========== ============ ============ ============ ============ ============
- --------------
* The High Yield Fund commenced operations on April 8, 1998.
(a) Fiscal year end changed to October 31 from June 30. The amounts reported are for the period July 1, 1998 through October 31,
1998.
(b) Fiscal year end changed to October 31 from December 31. The amounts reported are for the period January 1, 1998 through October
31, 1998.
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FLORIDA INTERNATIONA
CALIFORNIA INSURED TAX-EXEMPT BOND & GROWTH & EMERGING L
MUNICIPAL MUNICIPAL BOND STOCK INCOME GROWTH NORTHWEST GROWTH GROWTH
FUND FUND FUND FUND FUND FUND FUND FUND FUND
------- ----- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 5,312,537 $ 331,990 $ 12,382,951 $ 11,129,718 $ 2,881,849 $ (1,062,629) $ (686,962) $ (731,032) $ (96,155)
1,118,256 108,099 2,762,769 16,284,537 13,620,241 (548,823) 15,687,952 (693,245) (14,189,103)
2,680,980 190,205 14,926,609 (16,486,272) 46,786,931 (10,235,023) (33,975,835) (28,829,618) (7,200,561)
------------ ------------ ------------ ------------ -------------- ------------ ------------ ------------ ------------
9,111,773 630,294 30,072,329 10,927,983 63,289,021 (11,846,475) (18,974,845) (30,253,895) (21,485,819)
(4,707,679) (258,634) (11,894,595) (9,469,674) (1,675,441) -- -- -- --
(562,047) (72,319) (488,280) (1,454,890) (6,863) -- -- -- --
(100) (24) (37) (899) -- -- -- -- --
(22) (20) (39) -- (599,129) -- -- -- --
-- -- -- -- -- -- -- -- --
-- -- -- -- -- -- -- -- --
-- -- -- -- -- -- -- -- --
-- -- -- -- -- -- -- -- --
-- -- -- (44,700,817) (35,349,722) -- (48,525,837) -- --
-- -- -- (8,011,754) (6,489,532) -- (8,244,288) -- --
-- -- -- -- -- -- -- -- --
-- -- -- -- -- -- -- -- --
-- -- -- -- -- -- (403,517) -- --
-- -- -- -- -- -- (73,872) -- --
(6,121,441) (949,005) 96,159,954 35,961,096 204,140,230 (3,032,635) 50,296,608 (10,392,036) (3,249,877)
14,687,124 904,259 8,527,127 36,372,086 65,990,211 2,756,641 19,623,808 (1,508,977) (105,427)
(505) 24 1,303 31,557 10,374,502 (938,866) -- (1,254,006) (851,874)
22 20 1,075 -- 167,355,560 8,657,383 -- (16,400,862) 4,675,514
------------ ------------ ------------ ------------ -------------- ------------ ------------ ------------ ------------
12,407,125 254,595 122,378,837 19,654,688 467,028,837 (4,403,952) (6,301,943) (59,809,776) (21,017,483)
324,873,954 21,615,575 196,130,465 353,573,751 349,922,358 279,554,169 296,534,684 186,887,654 160,695,109
------------ ------------ ------------ ------------ -------------- ------------ ------------ ------------ ------------
$337,281,079 $ 21,870,170 $318,509,302 $373,228,439 $ 816,951,195 $275,150,217 $290,232,741 $127,077,878 $139,677,626
============ ============ ============ ============ ============== ============ ============ ============ ============
$ 32,263 $ 16,934 $ 79,147 $ 1,396,366 $ 626,908 $ (2,454) $ -- $ (7,953) $ 6,019,163
============ ============ ============ ============ ============== ============ ============ ============ ============
See Notes to Financial Statements.
</TABLE>
<PAGE>
STATEMENTS of CHANGES in NET assets (continued)
WM GROUP OF FUNDS
FOR THE YEAR ENDED JUNE 30, 1998
<TABLE>
<CAPTION>
SHORT TERM
TARGET HIGH
MATURITY QUALITY
2002 FUND BOND FUND
------------- ------------
<S> <C> <C>
Net investment income/(loss) ....................................................................... $ 148,042 $ 1,632,211
Net realized gain/(loss) on investment transactions ................................................ 22,489 (214,600)
Net unrealized appreciation/(depreciation) of investment transactions .............................. 79,878 72,112
------------ ------------
Net increase/(decrease) in net assets resulting from operations .................................... 250,409 1,489,723
Distributions to shareholders from:
Net investment income:
Class A Shares ................................................................................... (170,981) (1,197,547)
Class B Shares ................................................................................... -- (145,841)
Class S Shares ................................................................................... -- (29,081)
Class I Shares ................................................................................... -- (171,711)
Distributions in excess of net investment income:
Class A Shares ................................................................................... -- --
Class B Shares ................................................................................... -- --
Class S Shares ................................................................................... -- --
Class I Shares ................................................................................... -- --
Net realized gains on investments:
Class A Shares ................................................................................... (26,467) --
Class B Shares ................................................................................... -- --
Class S Shares ................................................................................... -- --
Class I Shares ................................................................................... -- --
Capital:
Class A Shares ................................................................................... -- (31,166)
Class B Shares ................................................................................... -- (3,795)
Class S Shares ................................................................................... -- (757)
Class I Shares ................................................................................... -- (4,469)
Net increase/(decrease) in net assets from Fund share transactions:
Class A Shares ................................................................................... (332,981) 21,970,831
Class B Shares ................................................................................... -- 460,337
Class S Shares ................................................................................... -- 51,136
Class I Shares ................................................................................... -- 345,142
------------ ------------
Net increase/(decrease) in net assets .............................................................. (280,020) 22,732,802
NET ASSETS:
Beginning of year .................................................................................. 2,815,868 20,229,974
------------ ------------
End of year ........................................................................................ $ 2,535,848 $ 42,962,776
============ ============
Undistributed net investment income/(accumulated net investment loss/ distributions in excess of net
investment income) at end of year ................................................................ $ 82,227 $ (650)
============ ============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CALIFORNIA
INSURED FLORIDA
INTERMEDIATE CALIFORNIA INSURED EMERGING INTERNATIONAL
MUNICIPAL MUNICIPAL MUNICIPAL GROWTH GROWTH GROWTH
FUND FUND FUND FUND FUND FUND
------------- ------------ ------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
$ 2,670,734 $ 17,231,177 $ 1,156,596 $ (2,552,797) $ (2,822,592) $ 924,661
883,975 8,843,806 484,348 58,434,054 79,122,078 10,921,112
184,266 3,864,365 620,889 33,501,266 (45,805,742) (21,911,580)
------------- ------------ ------------- ------------ ------------ ------------
3,738,975 29,939,348 2,261,833 89,382,523 30,493,744 (10,065,807)
(1,873,113) (16,032,716) (954,335) -- -- (1,975,295)
(797,504) (1,238,105) (204,787) -- -- (178,840)
(64) (548) (442) -- -- (317,435)
(53) (50) (53) -- -- (4,405,354)
(57) (9,986) -- -- -- (123,824)
(24) (771) -- -- -- (11,211)
-- -- -- -- -- (19,899)
-- -- -- -- -- (276,154)
(403,151) (23,641) -- (8,274,234) (8,507,941) (1,992,183)
(200,864) (1,826) -- (2,485,038) (1,627,499) (212,435)
(16) -- -- (1,125,281) (372,058) (403,997)
(10) -- -- (10,259,464) (2,639,418) (4,204,998)
-- -- -- -- -- --
-- -- -- -- -- --
-- -- -- -- -- --
-- -- -- -- -- --
(6,761,633) (39,569,128) (7,117,017) (24,983,912) (59,785,251) (14,343,542)
559,381 8,332,257 (200,018) 656,439 (2,364,589) 108,509
80 329 (28,294) (3,717,859) (2,844,853) (905,239)
63 61 53 (42,247,133) (20,847,090) 29,866,956
------------- ------------ ------------- ------------ ------------ ------------
(5,737,990) (18,604,776) (6,243,060) (3,053,959) (68,494,955) (9,460,748)
66,151,893 343,478,730 27,858,635 282,608,128 255,382,609 170,155,857
------------- ------------ ------------- ------------ ------------ ------------
$ 60,413,903 $324,873,954 $ 21,615,575 $279,554,169 $186,887,654 $160,695,109
============= ============ ============= ============ ============ ============
$ 15,157 $ (6,864) $ 13,135 $ (12,382) $ 161,566 $ 3,597,176
============= ============ ============= ============ ============ ============
See Notes to Financial Statements.
</TABLE>
<PAGE>
STATEMENTS of CHANGES in NET assets (continued)
WM GROUP OF FUNDS
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
U.S.
GOVERNMENT TAX-EXEMPT
SECURITIES INCOME BOND
FUND FUND FUND
------------ ------------ ------------
<S> <C> <C> <C>
Net investment income ...................... $ 7,263,894 $ 5,669,177 $ 9,648,920
Net realized gain/(loss) on investment
transactions ............................. (493,856) 1,059,244 2,286,826
Net unrealized appreciation of investments,
forward foreign currency contracts,
foreign currency, futures contracts and
other assets and liabilities during the
year ..................................... 4,371,425 1,919,907 4,270,931
------------ ------------ ------------
Net increase in net assets resulting from
operations ................................. 11,141,463 8,648,328 16,206,677
Distributions to shareholders from:
Net investment income:
Class A Shares ......................... (7,110,859) (5,227,656) (9,381,180)
Class B Shares ......................... (153,035) (441,521) (267,740)
Net realized gains on investments:
Class A Shares ......................... -- -- (283,504)
Class B Shares ......................... -- -- (11,875)
Net increase/(decrease) in net assets from Fund share transactions:
Class A Shares ......................... (34,875,593) (11,496,316) (21,611,179)
Class B Shares ......................... 281,357 2,293,277 2,607,483
------------ ------------ ------------
Net decrease in net assets ................. (30,716,667) (6,223,888) (12,741,318)
NET ASSETS:
Beginning of year .......................... 141,121,994 93,779,278 208,871,783
------------ ------------ ------------
End of year ................................ $110,405,327 $87,555,390 $196,130,465
============ =========== ============
See Notes to Financial Statements.
</TABLE>
<PAGE>
Main Head Format
STATEMENTS of CHANGES in NET assets -- CAPITAL stock ACTIVITY
WM GROUP OF FUNDS
<TABLE>
<CAPTION>
TARGET MATURITY 2002 FUND HIGH YIELD FUND
---------------------------------------------------- ---------------------------------
YEAR ENDED PERIOD ENDED YEAR ENDED YEAR ENDED PERIOD ENDED
10/31/99 10/31/98(a) 06/30/98 10/31/99 10/31/98(b)
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
AMOUNT
CLASS A:
Sold .............................. $ 30,679 $ 13,000 $ 34,948 $ 24,114,009 $ 11,803,472
Issued as reinvestment of dividends 199,232 -- 196,535 678,585 462,184
Redemption in-kind (Note 12) ...... -- -- -- (18,189,328) --
Redeemed .......................... (432,226) (334,663) (564,464) (11,937,979) (137,375)
------------ ------------ ------------ ------------ ------------
Net increase/(decrease) ........... $ (202,315) $ (321,663) $ (332,981) $ (5,334,713) $ 12,128,281
============ ============ ============ ============ ============
CLASS B:
Sold .............................. -- -- -- $ 19,815,931 $ 3,075,214
Converted from Class S shares of
Fund ............................ -- -- -- 23,493 --
Issued as reinvestment of dividends -- -- -- 538,148 22,719
Redeemed .......................... -- -- -- (1,674,148) (63,854)
------------ ------------
Net increase ...................... -- -- -- $ 18,703,424 $ 3,034,079
============ ============
CLASS S:
Sold .............................. -- -- -- $ 6,781 $ 25,593
Issued as reinvestment of dividends -- -- -- 1,585 359
Converted to Class B shares of Fund -- -- -- (23,493) --
Redeemed .......................... -- -- -- (10,825) --
------------ ------------
Net increase/(decrease) ........... -- -- -- $ (25,952) $ 25,952
============ ============
CLASS I:
Sold .............................. -- -- -- $ 41,671,290 $ 1,380,336
Contribution in-kind (Note 12) .... -- -- -- 18,189,328 --
Issued as
reinvestment of dividends ........... -- -- -- 2,625,806 26,556
Redeemed .......................... -- -- -- (18,344,301) (11,295)
------------ ------------
Net increase ...................... -- -- -- $ 44,142,123 $ 1,395,597
============ ============
SHARES
CLASS A:
Sold .............................. 2,909 1,167 3,257 2,642,096 1,197,921
Issued as reinvestment of dividends 18,778 -- 18,789 75,101 42,998
Redemption in-kind (Note 12) ...... -- -- -- (1,957,947) --
Redeemed .......................... (40,869) (29,926) (52,004) (1,332,436) (14,619)
------------ ------------ ------------ ------------ ------------
Net increase/(decrease) ........... (19,182) (28,759) (29,958) (573,186) 1,226,300
============ ============ ============ ============ ============
CLASS B:
Sold .............................. -- -- -- 2,173,216 322,674
Converted from Class S shares of
Fund ............................ -- -- -- 2,510 --
Issued as reinvestment of dividends -- -- -- 59,109 2,484
Redeemed .......................... -- -- -- (183,937) (7,083)
------------ ------------
Net increase ...................... -- -- -- 2,050,898 318,075
============ ============
CLASS S:
Sold .............................. -- -- -- 729 2,650
Issued as reinvestment of dividends -- -- -- 173 54
Converted to
Class B shares of Fund .......... -- -- -- (2,510) --
Redeemed .......................... -- -- -- (1,096) --
------------ ------------
Net increase/(decrease) ........... -- -- -- (2,704) 2,704
============ ============
CLASS I:
Sold .............................. -- -- -- 4,622,366 146,137
Contribution in-kind (Note 12) .... -- -- -- 1,962,171 --
Issued as reinvestment of dividends -- -- -- 289,914 2,971
Redeemed .......................... -- -- -- (2,007,198) (1,249)
------------ ------------
Net increase ...................... -- -- -- 4,867,253 147,859
============ ============
- ----------------
(a) Fiscal year end changed to October 31 from June 30. The amounts reported are for the period July 1, 1998 through October 31,
1998.
(b) The High Yield Fund commenced operations on April 8, 1998.
See Notes to Financial Statements.
</TABLE>
<PAGE>
STATEMENTS of CHANGES in NET assets -- CAPITAL stock ACTIVITY
WM GROUP OF FUNDS
<TABLE>
<CAPTION>
SHORT TERM HIGH QUALITY BOND FUND
---------------------------------------------------
YEAR ENDED PERIOD ENDED YEAR ENDED
10/31/99 10/31/98(a) 06/30/98
------------ ------------ ------------
<S> <C> <C> <C>
AMOUNT
CLASS A:
Sold .................................................................... $ 27,192,755 $ 394,104 $ 39,093,511
Issued in exchange for Class A shares of Sierra Trust Short-Term Global
Government Fund ....................................................... -- -- 33,873,483
Issued in exchange for Class A shares of Griffin Short-Term Bond Fund ... 91,614,250 -- --
Issued as reinvestment of dividends ..................................... 2,500,289 421,928 799,463
Redemption in-kind (Note 12) ............................................ (75,284,631) -- --
Redeemed ................................................................ (50,503,020) (3,998,588) (51,795,626)
------------ ------------ ------------
Net increase/(decrease) ................................................. $ (4,480,357) $ (3,182,556) $ 21,970,831
============ ============ ============
CLASS B:
Sold .................................................................... $ 1,720,335 $ 574,367 $ 348,662
Converted from Class S shares of Fund ................................... 1,258,939 -- --
Issued in exchange for Class B shares of Sierra Trust Short-Term Global
Government Fund ....................................................... -- -- 1,149,624
Issued in exchange for Class B shares of Griffin Short-Term Bond Fund ... 419,976 -- --
Issued as reinvestment of dividends ..................................... 140,363 39,967 110,925
Redeemed ................................................................ (2,414,359) (365,087) (1,148,874)
------------ ------------ ------------
Net increase ............................................................ $ 1,125,254 $ 249,247 $ 460,337
============ ============ ============
CLASS S:
Sold .................................................................... $ 983,060 $ 200 $ 27,837
Issued in exchange for Class S shares of Sierra Trust Short-Term Global
Government Fund ....................................................... -- -- 568,432
Issued as reinvestment of dividends ..................................... 31,859 8,328 21,221
Converted to Class B shares of Fund ..................................... (1,258,939) -- --
Redeemed ................................................................ (667,024) (106,110) (566,354)
------------ ------------ ------------
Net increase/(decrease) ................................................. $ (911,044) $ (97,582) $ 51,136
============ ============ ============
CLASS I:
Sold .................................................................... $ 73,030,498 $ 508,910 $ 131,968
Contribution in-kind (Note 12) .......................................... 75,284,631 -- --
Issued in exchange for Class I shares of Sierra Trust Short-Term Global
Government Fund ....................................................... -- -- 1,470,065
Issued as reinvestment of dividends ..................................... 3,705,635 -- --
Redeemed ................................................................ (13,247,746) (1,997,642) (1,256,891)
------------ ------------ ------------
Net increase/(decrease) ................................................. $138,773,018 $ (1,488,732) $ 345,142
============ ============ ============
SHARES
CLASS A:
Sold .................................................................... 11,722,723 167,245 16,747,592
Issued in exchange for Class A shares of Sierra Trust Short-Term Global
Government Fund ....................................................... -- -- 14,537,976
Issued in exchange for Class A shares of Griffin Short-Term Bond Fund ... 39,480,745 -- --
Issued as reinvestment of dividends ..................................... 1,079,642 180,152 363,171
Redemption in-kind (Note 12) ............................................ (32,590,750) -- --
Redeemed ................................................................ (21,824,751) (1,710,460) (22,246,314)
------------ ------------ ------------
Net increase/(decrease) ................................................. (2,132,391) (1,363,063) 9,402,425
============ ============ ============
CLASS B:
Sold .................................................................... 667,980 245,069 151,031
Converted from Class S shares of Fund ................................... 544,995 -- --
Issued in exchange for Class B shares of Sierra Trust Short-Term Global
Government Fund ....................................................... -- -- 493,401
Issued in exchange for Class B shares of Griffin Short-Term Bond Fund ... 180,972 -- --
Issued as reinvestment of dividends ..................................... 60,706 17,061 47,771
Redeemed ................................................................ (1,043,437) (156,010) (494,001)
------------ ------------ ------------
Net increase ............................................................ 411,216 106,120 198,202
============ ============ ============
CLASS S:
Sold .................................................................... 420,173 85 12,088
Issued in exchange for Class S shares of Sierra Trust Short-Term Global
Government Fund ....................................................... -- -- 243,962
Issued as reinvestment of dividends ..................................... 13,694 3,556 9,129
Converted to Class B shares of Fund ..................................... (544,995) -- --
Redeemed ................................................................ (212,999) (45,552) (243,870)
------------ ------------ ------------
Net increase/(decrease) ................................................. (324,127) (41,911) 21,309
============ ============ ============
CLASS I:
Sold .................................................................... 31,460,394 216,632 59,563
Contribution in-kind (Note 12) .......................................... 32,590,750 -- --
Issued in exchange for Class I shares of Sierra Trust Short-Term Global
Government Fund ....................................................... -- -- 630,929
Issued as reinvestment of dividends ..................................... 1,608,705 -- --
Redeemed ................................................................ (5,739,003) (857,694) (540,840)
------------ ------------ ------------
Net increase/(decrease) ................................................. 59,920,846 (641,062) 149,652
============ ============ ============
- ----------------
(a) Fiscal year end changed to October 31 from June 30. The amounts reported are for the period July 1, 1998 through October 31,
1998.
See Notes to Financial Statements.
</TABLE>
<PAGE>
STATEMENTS of CHANGES in NET assets -- CAPITAL stock ACTIVITY
WM GROUP OF FUNDS
<TABLE>
<CAPTION>
U.S. GOVERNMENT SECURITIES FUND(a) INCOME FUND(b)
------------------------------------------------ ------------------------------------------------
YEAR ENDED PERIOD ENDED YEAR ENDED YEAR ENDED PERIOD ENDED YEAR ENDED
10/31/99 10/31/98(c) 12/31/97 10/31/99 10/31/98(c) 12/31/97
----------- ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
AMOUNT
CLASS A:
Sold .................... $53,790,954 $ 10,226,965 $ 4,447,940 $ 31,599,173 $ 26,781,674 $ 11,286,277
Issued in exchange for Class
A shares of Sierra Trust
U.S. Government Fund .. -- 199,804,185 -- -- -- --
Issued in exchange for Class
A shares of Sierra Trust
Corporate Fund ........ -- -- -- -- 142,588,808 --
Issued in exchange for Class
A shares of Griffin U.S.
Government Income Fund 100,567,406 -- -- -- -- --
Issued in exchange for Class
A shares of Griffin Bond
Fund ................ -- -- -- 88,322,084 -- --
Issued as reinvestment of
dividends ............. 11,105,283 7,762,789 5,145,658 10,268,480 6,336,890 3,823,083
Redemption in-kind (Note 12)(89,139,223) -- -- (50,387,989) -- --
Redeemed ................ (107,591,811) (66,897,250) (44,469,191) (110,254,673) (53,805,101) (26,605,676)
----------- ------------ ------------ ------------ ------------ ------------
Net increase/(decrease) . $(31,267,391) $150,896,689 $(34,875,593) $(30,452,925) $121,902,271 $(11,496,316)
============ ============ ============ ============ ============ ============
CLASS B:
Sold .................... $55,627,638 $ 11,302,827 $ 864,913 $ 19,545,920 $ 11,883,309 $ 4,354,889
Converted from Class S
shares of Fund ........ (3,829,707) -- -- 1,322,036 -- --
Issued in exchange for Class
B shares of Sierra Trust
U.S. Government Fund .. -- 17,545,619 -- -- -- --
Issued in exchange for Class
B shares of Sierra Trust
Corporate Fund ........ -- -- -- -- 17,326,196 --
Issued in exchange for Class
B shares of Griffin U.S.
Government Income Fund 5,798,109 -- -- -- -- --
Issued in exchange for Class
B shares of Griffin Bond
Fund .................. -- -- -- 573,322 -- --
Issued as reinvestment of
dividends ............. 2,005,674 529,390 123,880 1,576,240 848,522 374,440
Redeemed ................ (13,133,801) (4,681,938) (707,436) (12,633,152) (7,030,376) (2,436,052)
----------- ------------ ------------ ------------ ------------ ------------
Net increase ............ $46,467,913 $ 24,695,898 $ 281,357 $ 10,384,366 $ 23,027,651 $ 2,293,277
============ ============ ============ ============ ============ ============
CLASS S:
Sold .................... $ 77,730 $ 97,657 -- $ 38,409 $ 64,835 --
Issued in exchange for Class
S shares of Sierra Trust
U.S. Government Fund .. -- 7,569,635 -- -- -- --
Issued in exchange for Class
S shares of Sierra Trust
Corporate Fund ........ -- -- -- -- 1,686,388 --
Issued as reinvestment of
dividends ............. 128,626 187,818 -- 45,668 51,094 --
Converted to Class B shares
of Fund ............... (3,829,707) -- -- (1,322,036) -- --
Redeemed ................ (2,534,158) (2,756,215) -- (359,380) (343,748) --
----------- ------------ ------------ ------------
Net increase/(decrease) . $(6,157,509) $ 5,098,895 -- $ (1,597,339) $ 1,458,569 --
============ ============ ============ ============
CLASS I:
Sold .................... $83,493,525 $ 1,897,904 -- $ 23,668,029 $ 1,682,081 --
Contribution in-kind
(Note 12) ............. 89,139,223 -- -- 50,387,989 -- --
Issued in exchange for Class
I shares of Sierra Trust
U.S. Government Fund .. -- 77,055,299 -- -- -- --
Issued in exchange for Class
I shares of Sierra Trust
Corporate Fund ........ -- -- -- -- 6,001,602 --
Issued as reinvestment of
dividends ............. 4,456,402 -- -- 2,301,452 -- --
Redeemed ................ (29,034,483) (41,438,278) -- (5,708,212) (917,869) --
----------- ------------ ------------ ------------
Net increase ............ $148,054,667 $ 37,514,925 -- $ 70,649,258 $ 6,765,814 --
============ ============ ============ ============
- ----------------
(a) Formerly Composite U.S. Government Securities, Inc. On March 23, 1998 shares were issued in exchange for the Sierra Trust U.S.
Government Fund.
(b) Formerly Composite Income Fund, Inc. On March 23, 1998 shares were issued in exchange for the Sierra Trust Corporate Fund.
(c) Fiscal year end changed to October 31 from December 31. The amounts reported are for the period January 1, 1998 through October
31, 1998.
See Notes to Financial Statements.
</TABLE>
<PAGE>
STATEMENTS of CHANGES in NET assets -- CAPITAL stock ACTIVITY
WM GROUP OF FUNDS
<TABLE>
<CAPTION>
U.S. GOVERNMENT SECURITIES FUND(a) INCOME FUND(b)
----------------------------------------------- -----------------------------------------------
YEAR ENDED PERIOD ENDED YEAR ENDED YEAR ENDED PERIOD ENDED YEAR ENDED
10/31/99 10/31/98(c) 12/31/97 10/31/99 10/31/98(c) 12/31/97
----------- ------------ ------------ ------------ ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
SHARES
CLASS A:
Sold ....................... 4,937,112 937,355 424,259 3,367,655 2,798,947 1,212,967
Issued in exchange for Class A
shares of Sierra Trust U.S.
Government Fund ......... -- 18,833,600 -- -- -- --
Issued in exchange for Class A
shares of Sierra Trust
Corporate Fund .......... -- -- -- -- 16,561,879 --
Issued in exchange for Class A
shares of Griffin U.S.
Government Income Fund .. 9,303,183 -- -- -- -- --
Issued in exchange for Class A
shares of Griffin Bond
Fund .................... -- -- -- 9,538,022 -- --
Issued as reinvestment of
dividends ................ 1,035,779 711,256 489,525 1,111,937 664,762 413,335
Redemption in-kind (Note 12) (8,393,524) -- -- (5,482,915) -- --
Redeemed ................... (10,051,648) (6,100,043) (4,240,473) (11,967,674) (5,645,131) (2,880,356)
----------- ---------- ---------- ----------- ---------- ----------
Net increase/(decrease) .... (3,169,098) 14,382,168 (3,326,689) (3,432,975) 14,380,457 (1,254,054)
=========== ========== ========== =========== ========== ==========
CLASS B:
Sold ....................... 4,818,623 1,033,341 81,465 2,164,259 1,248,615 467,109
Converted from Class S shares
of Fund .................. 361,031 -- -- 143,700 -- --
Issued in exchange for Class B
shares of Sierra Trust
U.S. Government Fund ..... -- 1,655,309 -- -- -- --
Issued in exchange for Class B
shares of Sierra Trust
Corporate Fund .......... -- -- -- -- 2,009,654 --
Issued in exchange for Class B
shares of Griffin U.S.
Government Income Fund .. 536,862 -- -- -- -- --
Issued in exchange for Class B
shares of Griffin Bond
Fund ..................... -- -- -- 6,187 -- --
Issued as reinvestment of
dividends ................ 188,329 48,455 11,762 170,868 88,864 40,332
Redeemed ................... (1,595,804) (426,676) (67,110) (1,370,789) (737,401) (263,592)
----------- ---------- ---------- ----------- ---------- ----------
Net increase ............... 4,309,041 2,310,429 26,117 1,114,225 2,609,732 243,849
=========== ========== ========== =========== ========== ==========
CLASS S:
Sold ....................... 7,136 8,987 -- 4,062 6,828 --
Issued in exchange for Class S
shares of Sierra Trust
U.S. Government Fund .... -- 714,499 -- -- -- --
Issued in exchange for Class S
shares of Sierra Trust
Corporate Fund .......... -- -- -- -- 195,664 --
Issued as reinvestment of
dividends ................ 11,851 17,192 -- 4,872 5,348 --
Converted to Class B shares of
Fund ..................... (360,613) -- -- (143,700) -- --
Redeemed ................... (145,946) (253,106) -- (37,028) (36,046) --
----------- ---------- ----------- ----------
Net increase/(decrease) .... (487,572) 487,572 -- (171,794) 171,794 --
=========== ========== =========== ==========
CLASS I:
Sold ....................... 7,793,119 172,564 -- 2,592,925 176,652 --
Contribution in-kind (Note 12) 8,393,524 -- -- 5,482,915 -- --
Issued in exchange for Class I
shares of Sierra Trust
U.S. Government Fund ..... -- 7,273,265 -- -- -- --
Issued in exchange for Class I
shares of Sierra Trust
Corporate Fund ........... -- -- -- -- 697,179 --
Issued as reinvestment of
dividends ................ 422,276 -- -- 247,746 -- --
Redeemed ................... (2,668,080) (3,811,669) -- (632,129) (96,227) --
----------- ---------- ----------- ----------
Net increase ............... 13,940,839 3,634,160 -- 7,691,457 777,604 --
=========== ========== =========== ==========
- ----------------
(a) Formerly Composite U.S. Government Securities, Inc. On March 23, 1998 shares were issued in exchange for the Sierra Trust U.S.
Government Fund.
(b) Formerly Composite Income Fund, Inc. On March 23, 1998 shares were issued in exchange for the Sierra Trust Corporate Fund.
(c) Fiscal year end changed to October 31 from December 31. The amounts reported are for the period January 1, 1998 through
October 31, 1998.
See Notes to Financial Statements.
</TABLE>
<PAGE>
STATEMENTS of CHANGES in NET assets -- CAPITAL stock ACTIVITY
WM GROUP OF FUNDS
<TABLE>
<CAPTION>
CALIFORNIA INSURED
INTERMEDIATE MUNICIPAL FUND CALIFORNIA MUNICIPAL FUND
------------------------------------------------- ----------------------------------------------
YEAR ENDED PERIOD ENDED YEAR ENDED YEAR ENDED PERIOD ENDED YEAR ENDED
10/31/99 10/31/98(a) 06/30/98 10/31/99 10/31/98(a) 06/30/98
-------- ----------- -------- -------- ----------- --------
<S> <C> <C> <C> <C> <C> <C>
AMOUNT
CLASS A:
Sold ........................... $ 5,801,531 $ 703,974 $ 45,133,314 $ 41,751,098 $ 6,565,808 $ 109,366,878
Issued in exchange for Class A
shares of Griffin California
Tax-Free Fund ................ -- -- -- 37,928,445 -- --
Issued as reinvestment of
dividends .................... 1,516,470 372,864 1,692,248 10,372,674 3,068,180 10,168,881
Redeemed ....................... (11,187,986) (2,993,121) (53,587,195) (66,556,958) (15,755,429) (159,104,887)
----------- ------------ ------------ ------------ ------------ -------------
Net increase/(decrease) ........ $(3,869,985) $ (1,916,283) $ (6,761,633) $ 23,495,259 $ (6,121,441) $ (39,569,128)
=========== ============ ============ ============ ============ =============
CLASS B:
Sold ........................... $20,313,812 $ 2,998,917 $ 3,830,587 $ 98,776,438 $ 15,977,261 $ 11,852,598
Issued in exchange for Class B
shares of Griffin California
Tax-Free Fund ................ -- -- -- 8,299,621 -- --
Issued as reinvestment of
dividends .................... 1,125,985 206,027 785,124 2,729,175 403,939 880,758
Redeemed ....................... (7,814,544) (1,347,082) (4,056,330) (15,021,843) (1,694,076) (4,401,099)
----------- ------------ ------------ ------------ ------------ -------------
Net increase ................... $13,625,253 $ 1,857,862 $ 559,381 $ 94,783,391 $ 14,687,124 $ 8,332,257
=========== ============ ============ ============ ============ =============
CLASS S:
Sold ........................... $ -- $ -- $ -- $ -- $ -- $ --
Issued as reinvestment of
dividends .................... 59 22 80 193 101 329
Redeemed ....................... (1,230) -- -- (6,259) (606) --
----------- ------------ ------------ ------------ ------------ -------------
Net increase/(decrease) ........ $ (1,171) $ 22 $ 80 $ (6,066) $ (505) $ 329
=========== ============ ============ ============ ============ =============
CLASS I:
Sold ........................... $ -- $ -- $ -- $ -- $ -- $ --
Issued as reinvestment of
dividends .................... 49 18 63 38 22 61
Redeemed ....................... (1,182) -- -- (1,177) -- --
----------- ------------ ------------ ------------ ------------ -------------
Net increase/(decrease) ........ $ (1,133) $ 18 $ 63 $ (1,139) $ 22 $ 61
=========== ============ ============ ============ ============ =============
SHARES
CLASS A:
Sold ........................... 541,797 64,616 4,166,073 3,895,529 577,201 9,670,102
Issued in exchange for Class A
shares of Griffin California
Tax-Free Fund ................ -- -- -- 3,337,347 -- --
Issued as reinvestment of
dividends .................... 141,850 34,046 155,891 926,781 268,682 903,373
Redeemed ....................... (1,057,115) (274,458) (4,944,950) (6,029,382) (1,382,174) (14,095,738)
----------- ------------ ------------ ------------ ------------ -------------
Net increase/(decrease) ........ (373,468) (175,796) (622,986) 2,130,275 (536,291) (3,522,263)
=========== ============ ============ ============ ============ =============
CLASS B:
Sold ........................... 1,905,592 273,439 353,152 8,896,807 1,399,254 1,051,959
Converted from shares of
Griffin California
Tax-Free Fund ................ -- -- -- 730,865 -- --
Issued as reinvestment of
dividends .................... 105,550 18,811 72,337 245,464 35,356 78,161
Redeemed ....................... (740,773) (123,678) (374,167) (1,376,764) (148,795) (391,417)
----------- ------------ ------------ ------------ ------------ -------------
Net increase ................... 1,270,369 168,572 51,322 8,496,372 1,285,815 738,703
=========== ============ ============ ============ ============ =============
CLASS S:
Sold ........................... -- -- -- -- -- --
Issued as reinvestment of
dividends .................... 5 2 7 16 8 29
Redeemed ....................... (169) -- -- (646) (53) --
----------- ------------ ------------ ------------ ------------ -------------
Net increase/(decrease) ........ (164) 2 7 (630) (45) 29
=========== ============ ============ ============ ============ =============
CLASS I:
Sold ........................... -- -- -- -- -- --
Issued as reinvestment of
dividends .................... 5 2 6 3 2 6
Redeemed ....................... (112) -- -- (110) -- --
----------- ------------ ------------ ------------ ------------ -------------
Net increase/(decrease) ........ (107) 2 6 (107) 2 6
=========== ============ ============ ============ ============ =============
- ----------------
(a) Fiscal year end changed to October 31 from June 30. The amounts reported are for the period July 1, 1998 through
October 31, 1998.
See Notes to Financial Statements.
</TABLE>
<PAGE>
STATEMENTS of CHANGES in NET assets -- CAPITAL stock ACTIVITY
WM GROUP OF FUNDS
<TABLE>
<CAPTION>
FLORIDA INSURED MUNICIPAL FUND TAX-EXEMPT BOND FUND(a)
----------------------------------------------- --------------------------------------------
YEAR ENDED PERIOD ENDED YEAR ENDED YEAR ENDED PERIOD ENDED YEAR ENDED
10/31/99 10/31/98(b) 06/30/98 10/31/99 10/31/98(c) 12/31/97
-------- ----------- -------- -------- ----------- --------
<S> <C> <C> <C> <C> <C> <C>
AMOUNT
CLASS A:
Sold ........................... $ 1,254,546 $ 147,296 $ 17,026,487 $ 10,218,537 $ 14,111,965 $ 9,139,630
Issued in exchange for Class A
shares of Sierra Trust National
Municipal Fund ............... -- -- -- -- 131,911,067 --
Issued in exchange for Class A
shares of
Griffin Municipal Bond Fund .. -- -- -- 21,016,760 -- --
Issued as reinvestment of
dividends .................... 320,965 123,333 430,764 10,215,393 7,889,912 7,486,759
Redeemed ....................... (4,161,036) (1,219,634) (24,574,268) (70,281,440) (57,752,990) (38,237,568)
----------- ------------ ------------ ------------ ------------ -------------
Net increase/(decrease) ........ $(2,585,525) $ (949,005) $ (7,117,017) $(28,830,750) $ 96,159,954 $ (21,611,179)
=========== ============ ============ ============ ============ =============
CLASS B:
Sold ........................... $ 3,424,000 $ 1,094,291 $ 1,328,489 $ 12,702,216 $ 4,749,727 $ 3,133,343
Issued in exchange for Class B
shares of Sierra Trust National
Municipal Fund ............... -- -- -- -- 5,255,068 --
Issued in exchange for Class B
shares of Griffin Municipal
Bond Fund .................... -- -- -- 565,210 -- --
Issued as reinvestment of
dividends .................... 181,259 50,148 134,076 733,907 362,204 218,328
Redeemed ....................... (1,689,238) (240,180) (1,662,583) (4,210,322) (1,839,872) (744,188)
----------- ------------ ------------ ------------ ------------ -------------
Net increase/(decrease) ........ $ 1,916,021 $ 904,259 $ (200,018) $ 9,791,011 $ 8,527,127 $ 2,607,483
=========== ============ ============ ============ ============ =============
CLASS S:
Sold ........................... $ -- $ -- $ -- $ -- $ 2 $ --
Issued in exchange for Class S
shares of Sierra Trust National
Municipal Fund ............... -- -- -- -- 1,265 --
Issued as reinvestment of
dividends .................... 24 24 358 -- 36 --
Redeemed ....................... (519) -- (28,652) (1,317) -- --
----------- ------------ ------------ ------------ ------------
Net increase/(decrease) ........ $ (495) $ 24 $ (28,294) $ (1,317) $ 1,303 --
=========== ============ ============ ============ ============
CLASS I:
Sold ........................... $ -- $ -- $ -- $ -- $ 3 --
Issued in exchange for Class I
shares of
Sierra Trust National
Municipal Fund ............... -- -- -- -- 1,035 --
Issued as reinvestment of
dividends .................... 40 20 53 43 37 --
Redeemed ....................... (1,170) -- -- (1,130) -- --
----------- ------------ ------------ ------------ ------------
Net increase/(decrease) ........ $ (1,130) $ 20 $ 53 $ (1,087) $ 1,075 --
=========== ============ ============ ============ ============
- ----------------
(a) Formerly, Composite Tax-Exempt Bond Fund, Inc. On March 23, 1998 shares were issued in exchange for the Sierra Trust National
Municipal Fund.
(b) Fiscal year end changed to October 31 from June 30. The amounts reported are for the period July 1, 1998 through
October 31, 1998.
(c) Fiscal year end changed to October 31 from December 31. The amounts reported are for the period January 1, 1998 through
October 31, 1998.
See Notes to Financial Statements.
</TABLE>
<PAGE>
STATEMENTS of CHANGES in NET assets -- CAPITAL stock ACTIVITY
WM GROUP OF FUNDS
<TABLE>
<CAPTION>
FLORIDA INSURED MUNICIPAL FUND TAX-EXEMPT BOND FUND(a)
--------------------------------------------- -------------------------------------------
YEAR ENDED PERIOD ENDED YEAR ENDED YEAR ENDED PERIOD ENDED YEAR ENDED
10/31/99 10/31/98(b) 06/30/98 10/31/99 10/31/98(c) 12/31/97
----------- ------------ ------------ ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
SHARES
CLASS A:
Sold ........................... 121,863 14,033 1,660,760 1,371,226 1,647,687 1,161,023
Issued in exchange for Class A
shares of Sierra Trust National
Municipal Fund ............... -- -- -- -- 18,330,460 --
Issued in exchange for Class A
shares of Griffin Municipal
Bond Fund .................... -- -- -- 2,614,025 -- --
Issued as reinvestment of
dividends .................... 31,470 11,782 41,985 1,299,806 964,582 951,410
Redeemed ....................... (408,274) (117,042) (2,396,458) (8,969,586) (7,066,128) (4,861,387)
----------- ------------ ------------ ------------ ------------ -------------
Net increase/(decrease) ........ (254,941) (91,227) (693,713) (3,684,529) 13,876,601 (2,748,954)
=========== ============ ============ ============ ============ =============
CLASS B:
Sold ........................... 329,416 104,711 129,041 1,619,222 585,326 398,272
Issued in exchange for Class B
shares of Sierra Trust National
Municipal Fund ............... -- -- -- -- 730,248 --
Issued in exchange for Class B
shares of Griffin Municipal
Bond Fund .................... -- -- -- 70,300 -- --
Issued as reinvestment of
dividends .................... 17,806 4,792 13,052 93,785 44,887 27,480
Redeemed ....................... (166,430) (23,021) (161,939) (539,376) (225,252) (95,335)
----------- ------------ ------------ ------------ ------------ -------------
Net increase/(decrease) ........ 180,792 86,482 (19,846) 1,243,931 1,135,209 330,417
=========== ============ ============ ============ ============ =============
CLASS S:
Sold ........................... -- -- -- -- 2 --
Issued in exchange for Class S
shares of Sierra Trust National
Municipal Fund ............... -- -- -- -- 175 --
Issued as reinvestment of
dividends .................... 3 3 36 -- 3 --
Redeemed ....................... (173) -- (2,810) (180) -- --
----------- ------------ ------------ ------------ ------------
Net increase/(decrease) ........ (170) 3 (2,774) (180) 180 --
=========== ============ ============ ============ ============
CLASS I:
Sold ........................... -- -- -- -- 1 --
Issued in exchange for Class I
shares of Sierra Trust National
Municipal Fund ............... -- -- -- -- 144 --
Issued as reinvestment of
dividends .................... 4 2 5 5 4 --
Redeemed ....................... (120) -- -- (154) -- --
----------- ------------ ------------ ------------ ------------
Net increase/(decrease) ........ (116) 2 5 (149) 149 --
=========== ============ ============ ============ ============
- --------------
(a) Formerly, Composite Tax-Exempt Bond Fund, Inc. On March 23, 1998 shares were issued in exchange for the Sierra Trust National
Municipal Fund.
(b) Fiscal year end changed to October 31 from June 30. The amounts reported are for the period July 1, 1998 through
October 31, 1998.
(c) Fiscal year end changed to October 31 from December 31. The amounts reported are for the period January 1, 1998 through
October 31, 1998.
See Notes to Financial Statements.
</TABLE>
<PAGE>
STATEMENTS of CHANGES in NET assets -- CAPITAL stock ACTIVITY
WM GROUP OF FUNDS
<TABLE>
<CAPTION>
BOND & STOCK FUND(a) GROWTH & INCOME FUND(b)
------------------------------------ ------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
10/31/99 10/31/98 10/31/99 10/31/98
-------- -------- -------- --------
<S> <C> <C> <C> <C>
AMOUNT
CLASS A:
Sold ....................... $ 19,134,660 $ 77,100,034 $ 190,640,822 $ 222,069,018
Issued in exchange for Class
A shares of Sierra Trust
Growth and Income Fund ... -- -- -- 158,740,743
Issued in exchange for Class
A shares of Griffin Growth
& Income Fund ............ -- -- 281,276,085 --
Issued as reinvestment of
dividends ................ 7,875,442 48,830,627 2,640,934 35,964,668
Redemption in-kind (Note 12) -- -- (166,275,618) --
Redeemed ................... (97,814,421) (89,969,565) (277,843,157) (212,634,199)
------------- ------------- -------------- --------------
Net increase/(decrease) .... $ (70,804,319) $ 35,961,096 $ 30,439,066 $ 204,140,230
============= ============= ============== ==============
CLASS B:
Sold ....................... $ 20,485,600 $ 39,221,359 $ 58,608,032 $ 36,396,662
Converted from Class S
shares of Fund ........... 42,306 -- 11,602,915 --
Issued in exchange for Class
B shares of Sierra Trust
Growth and Income Fund ... -- -- -- 40,265,726
Issued in exchange for Class
B shares of Griffin Growth
& Income Fund ............ -- -- 50,553,133 --
Issued as reinvestment of
dividends ................ 1,727,449 8,205,251 -- 6,447,498
Redeemed ................... (24,326,691) (11,054,524) (37,513,140) (17,119,675)
------------- ------------- -------------- --------------
Net increase/(decrease) .... $ (2,071,336) $ 36,372,086 $ 83,250,940 $ 65,990,211
============= ============= ============== ==============
CLASS S:
Sold ....................... $ 13,604 $ 106,558 $ 4,985,688 $ 1,551,469
Issued in exchange for Class
S shares of Sierra Trust
Growth and Income Fund ... -- -- -- 11,890,222
Issued as reinvestment of
dividends ................ 552 80 -- --
Converted to Class B shares
of Fund .................. (42,306) -- (11,602,915) --
Redeemed ................... (3,333) (75,081) (3,771,661) (3,067,189)
------------- ------------- -------------- --------------
Net increase/(decrease) .... $ (31,483) $ 31,557 $ (10,388,888) $ 10,374,502
============= ============= ============== ==============
CLASS I:
Sold ....................... -- -- $ 88,357,264 $ 21,232,340
Contribution in-kind (Note
12) ...................... -- -- 166,275,618 --
Issued in exchange for Class
I shares of Sierra Trust
Growth and Income Fund ... -- -- -- 156,826,637
Issued as reinvestment of
dividends ................ -- -- 1,844,793 --
Redeemed ................... -- -- (15,875,635) (10,703,417)
-------------- --------------
Net increase ............... -- -- $ 240,602,040 $ 167,355,560
============== ==============
- ----------------
(a)Formerly, Composite Bond & Stock Fund.
(b) Formerly Composite Growth & Income Fund. On March 23, 1998 shares were issued in exchange for the Sierra Trust Growth and Income
Fund.
See Notes to Financial Statements.
</TABLE>
<PAGE>
STATEMENTS of CHANGES in NET assets -- CAPITAL stock ACTIVITY
WM GROUP OF FUNDS
<TABLE>
<CAPTION>
BOND & STOCK FUND(a) GROWTH & INCOME FUND(b)
----------------------------- -------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
10/31/99 10/31/98 10/31/99 10/31/98
-------- -------- -------- --------
<S> <C> <C> <C> <C>
SHARES
CLASS A:
Sold ....................... 1,291,022 5,082,555 9,361,521 11,565,737
Issued in exchange for Class
A shares of Sierra Trust
Growth and Income Fund ... -- -- -- 8,901,693
Issued in exchange for Class
A shares of Griffin Growth
& Income Fund ............ -- -- 12,108,922 --
Issued as reinvestment of
dividends ................ 537,940 3,411,130 111,449 641,460
Redemption in-kind (Note 12) -- -- (6,291,170) --
Redeemed ................... (6,577,515) (6,215,419) (11,718,860) (10,275,325)
--------- --------- ---------- ----------
Net increase/(decrease) .... (4,748,553) 2,278,266 3,571,862 10,833,565
========== ========= ========== ==========
CLASS B:
Sold ....................... 1,407,652 2,650,249 2,654,554 1,991,929
Converted from Class S
shares of Fund ........... 2,669 -- 445,580 --
Issued in exchange for Class
B shares of Sierra Trust
Growth and Income Fund ... -- -- -- 2,281,424
Issued in exchange for Class
B shares of Griffin Growth
& Income Fund ............ -- -- 2,204,430 --
Issued as reinvestment of
dividends ................ 118,539 574,422 -- 116,619
Redeemed ................... (1,672,620) (779,074) (1,604,781) (867,171)
--------- --------- ---------- ----------
Net increase/(decrease) .... (143,760) 2,445,597 3,699,783 3,522,801
========== ========= ========== ==========
CLASS S:
Sold ....................... 953 8,164 31,900 73,567
Issued in exchange for Class
S shares of Sierra Trust
Growth and Income Fund ... -- -- -- 700,170
Issued as reinvestment of
dividends ................ 38 6 -- --
Converted to Class B shares
of Fund .................. (2,698) -- (445,409) --
Redeemed ................... (921) (5,542) (205,259) (154,969)
--------- --------- ---------- ----------
Net increase/(decrease) .... (2,628) 2,628 (618,768) 618,768
========== ========= ========== ==========
CLASS I:
Sold ....................... -- -- 3,785,718 1,012,389
Contribution in-kind (Note
12) ...................... -- -- 6,291,170 --
Issued in exchange for Class
I shares of Sierra Trust
Growth and Income Fund ... -- -- -- 8,777,545
Issued as reinvestment of
dividends ................ -- -- 77,193 --
Redeemed ................... -- -- (685,001) (527,906)
---------- ----------
Net increase ............... -- -- 9,469,080 9,262,028
========== ==========
- ----------------
(a) Formerly, Composite Bond & Stock Fund.
(b) Formerly Composite Growth & Income Fund. On March 23, 1998 shares were issued in exchange for the Sierra Trust Growth and Income
Fund.
See Notes to Financial Statements.
</TABLE>
<PAGE>
STATEMENTS of CHANGES in NET assets -- CAPITAL stock ACTIVITY
WM GROUP OF FUNDS
<TABLE>
<CAPTION>
GROWTH FUND NORTHWEST FUND(a)
------------------------------------------------------ ---------------------------------
YEAR ENDED PERIOD ENDED YEAR ENDED YEAR ENDED YEAR ENDED
10/31/99 10/31/98(b) 06/30/98 10/31/99 10/31/98
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
AMOUNT
CLASS A:
Sold ............................ $ 337,963,924 $ 99,386,706 $ 376,606,887 $ 68,805,400 $ 71,928,894
Issued in exchange for Class A
shares of Griffin Growth Fund . 82,274,308 -- -- -- --
Issued as reinvestment of
dividends ..................... 10,484,224 -- 8,098,957 -- 48,141,885
Redemption in-kind (Note 12) .... (105,326,502) -- -- (990,005) --
Redeemed ........................ (317,246,059) (102,419,341) (409,689,756) (103,203,309) (69,774,171)
------------- ------------- ------------- ------------- -------------
Net increase/(decrease) ........... $ 8,149,895 $ (3,032,635) $ (24,983,912) $ (35,387,914) $ 50,296,608
============= ============= ============= ============= =============
CLASS B:
Sold ............................ $ 135,842,242 $ 6,289,271 $ 21,624,274 $ 15,268,007 $ 19,506,022
Converted from Class S shares of
Fund .......................... 15,635,767 -- -- 4,417 --
Issued in exchange for Class B
shares of Griffin Growth Fund . 6,593,119 -- -- -- --
Issued as reinvestment of
dividends ..................... 4,359,229 -- 2,457,020 -- 8,274,120
Redeemed ........................ (29,071,584) (3,532,630) (23,424,855) (10,831,517) (8,156,334)
------------- ------------- ------------- ------------- -------------
Net increase .................... $ 133,358,773 $ 2,756,641 $ 656,439 $ 4,440,907 $ 19,623,808
============= ============= ============= ============= =============
CLASS S:
Sold ............................ $ 12,319,106 $ 638,109 $ 1,576,379 $ 3,584 --
Issued as reinvestment of
dividends ..................... 1,200,444 -- 1,116,531 -- --
Converted to Class B shares of
Fund .......................... (15,635,767) -- -- (3,584) --
Redeemed ........................ (3,719,600) (1,576,975) (6,410,769) -- --
------------- ------------- ------------- -------------
Net decrease .................... $ (5,835,817) $ (938,866) $ (3,717,859) $ -- --
============= ============= ============= =============
CLASS I:
Sold ............................ $ 78,054,512 $ 14,170,562 $ 24,923,298 $ 4,841,432 --
Contribution in-kind (Note 12) .. 105,326,502 -- -- 990,005 --
Issued as reinvestment of
dividends ..................... 12,516,104 -- -- -- --
Redeemed ........................ (38,929,436) (5,513,179) (67,170,431) -- --
------------- ------------- ------------- -------------
Net increase/(decrease) ......... $ 156,967,682 $ 8,657,383 $ (42,247,133) $ 5,831,437 --
============= ============= ============= =============
SHARES
CLASS A:
Sold ............................ 14,438,655 5,653,629 23,228,866 2,446,781 3,162,857
Issued in exchange for Class A
shares of Giffin Growth Fund .. 3,550,898 -- -- -- --
Issued as reinvestment of
dividends ..................... 562,458 -- 590,930 -- 2,054,110
Redemption in-kind (Note 12) .... (3,702,162) -- -- (30,192) --
Redeemed ........................ (12,699,261) (5,790,961) (25,206,344) (3,770,477) (3,194,232)
------------- ------------- ------------- ------------- -------------
Net increase/(decrease) ........... 2,150,588 (137,332) (1,386,548) (1,353,888) 2,022,735
============= ============= ============= ============= =============
CLASS B:
Sold ............................ 5,530,902 373,144 1,368,627 547,485 869,783
Converted from Class S shares of
Fund .......................... 580,608 -- -- 140 --
Issued in exchange for Class B
shares of Griffin Growth Fund . 297,523 -- -- -- --
Issued as reinvestment of
dividends ..................... 244,078 -- 184,877 -- 362,689
Redeemed ........................ (964,850) (208,958) (1,490,854) (410,513) (397,671)
------------- ------------- ------------- ------------- -------------
Net increase .................... 5,688,261 164,186 62,650 137,112 834,801
============= ============= ============= ============= =============
CLASS S:
Sold ............................ 24,052 37,098 104,482 144 --
Issued as reinvestment of
dividends ..................... 67,214 -- 83,953 -- --
Converted to Class B shares of
Fund .......................... (581,471) -- -- (144) --
Redeemed ........................ (195,203) (96,855) (408,947) -- --
------------- ------------- ------------- -------------
Net decrease .................... (685,408) (59,757) (220,512) -- --
============= ============= ============= =============
CLASS I:
Sold ............................ 2,949,912 795,462 1,783,635 160,298 --
Contribution in-kind (Note 12) .. 3,702,162 -- -- 30,183 --
Issued as reinvestment of
dividends ..................... 666,459 -- -- -- --
Redeemed ........................ (1,143,440) (308,846) (4,048,118) -- --
------------- ------------- ------------- -------------
Net increase/(decrease) ......... 6,175,093 486,616 (2,264,483) 190,481 --
============= ============= ============= =============
- ----------------
(a) Formerly Composite Northwest Fund.
(b) Fiscal year end changed to October 31 from June 30. The numbers reflected are for the period July 1, 1998 through
October 31, 1998.
See Notes to Financial Statements.
</TABLE>
<PAGE>
STATEMENTS of CHANGES in NET assets -- CAPITAL stock ACTIVITY
WM GROUP OF FUNDS
<TABLE>
<CAPTION>
EMERGING GROWTH FUND INTERNATIONAL GROWTH FUND
----------------------------------------------- ---------------------------------------------
YEAR ENDED PERIOD ENDED YEAR ENDED YEAR ENDED PERIOD ENDED YEAR ENDED
10/31/99 10/31/98(a) 06/30/98 10/31/99 10/31/98(a) 06/30/98
------------ ------------ ------------ ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
AMOUNT
CLASS A:
Sold ........................... $ 66,778,793 $ 45,697,143 $313,664,566 $ 53,460,353 $ 407,310 $ 187,840,932
Issued as reinvestment of
dividends .................... 14,642,298 -- 8,402,791 1,259,502 -- 4,018,393
Redemption in-kind (Note 12) ... -- -- -- (43,975,563) -- --
Redeemed ....................... (71,489,404) (56,089,179) (381,852,608) (20,559,347) (3,657,187) (206,202,867)
------------ ------------ ------------ ------------ ------------ -------------
Net increase/(decrease) ........ $ 9,931,687 $(10,392,036) $(59,785,251) $ (9,815,055) $ (3,249,877) $ (14,343,542)
============ ============ ============ ============ ============ =============
CLASS B:
Sold ........................... $ 1,953,827 $ 897,561 $ 14,180,902 $ 772,204 $ 759,141 $ 1,184,200
Converted from Class S shares
of Fund ...................... 4,813,233 -- -- 6,848,720 -- --
Issued as reinvestment of
dividends .................... 3,764,240 -- 1,579,773 145,074 -- 390,469
Redeemed ....................... (18,443,789) (2,406,538) (18,125,264) (1,581,100) (864,568) (1,466,160)
------------ ------------ ------------ ------------ ------------ -------------
Net increase/(decrease) ........ $ (7,912,489) $ (1,508,977) $ (2,364,589) $ 6,184,898 $ (105,427) $ 108,509
============ ============ ============ ============ ============ =============
CLASS S:
Sold ........................... $ 3,711,234 $ 47,525 $ 341,783 $ 369,294 $ 187,031 $ 2,290,224
Issued as reinvestment of
dividends .................... 742,277 -- 370,065 316,165 -- 735,597
Converted to Class B shares of
Fund ......................... (4,813,233) -- (6,848,720) -- -- --
Redeemed ....................... (880,253) (1,301,531) (3,556,701) (2,122,501) (1,038,905) (3,931,060)
------------ ------------ ------------ ------------ ------------ -------------
Net decrease ................... $ (1,239,975) $ (1,254,006) $ (2,844,853) $ (8,285,762) $ (851,874) $ (905,239)
============ ============ ============ ============ ============ =============
CLASS I:
Sold ........................... $ 15,296,619 $ 352,945 $ 2,367,463 $ 27,683,346 $ 6,040,073 $ 46,484,844
Contribution in-kind (Note 12)
. ................................ -- -- -- 43,975,563 -- --
Issued as reinvestment of
dividends .................... 4,308,281 -- -- 4,495,136 -- --
Redeemed ....................... (45,548,579) (16,753,807) (23,214,553) (39,470,548) (1,364,559) (16,617,888)
------------ ------------ ------------ ------------ ------------ -------------
Net increase/(decrease) ........ $(25,943,679) $(16,400,862) $(20,847,090) $ 36,683,497 $ 4,675,514 $ 29,866,956
============ ============ ============ ============ ============ =============
SHARES
CLASS A:
Sold ........................... 2,541,226 2,576,643 16,007,665 5,422,990 41,432 18,508,938
Issued as reinvestment of
dividends .................... 951,416 -- 466,974 140,440 -- 438,682
Redemption in-kind (Note 12) ... -- -- -- (4,281,944) -- --
Redeemed ....................... (4,241,475) (3,207,380) (19,463,142) (2,112,930) (393,624) (20,071,107)
------------ ------------ ------------ ------------ ------------ -------------
Net decrease ................... (748,833) (630,737) (2,988,503) (831,444) (352,192) (1,123,487)
============ ============ ============ ============ ============ =============
CLASS B:
Sold ........................... 120,310 56,594 758,262 81,463 75,429 108,136
Converted from Class S shares
of Fund ...................... 265,338 -- -- 680,111 -- --
Issued as reinvestment of
dividends .................... 255,722 -- 90,322 16,430 -- 43,146
Redeemed ....................... (499,868) (154,881) (966,584) (164,531) (94,402) (141,350)
------------ ------------ ------------ ------------ ------------ -------------
Net increase/(decrease) ........ 141,502 (98,287) (118,000) 613,473 (18,973) 9,932
============ ============ ============ ============ ============ =============
CLASS S:
Sold ........................... 35,487 2,816 18,531 39,598 19,151 213,909
Issued as reinvestment of
dividends .................... 50,426 -- 21,107 35,483 -- 80,569
Converted to Class B shares of
Fund ......................... (263,688) -- (672,762) -- --
Redeemed ....................... (61,736) (80,916) (189,249) (249,525) (116,365) (368,556)
------------ ------------ ------------ ------------ ------------ -------------
Net decrease ................... (239,511) (78,100) (149,611) (847,206) (97,214) (74,078)
============ ============ ============ ============ ============ =============
CLASS I:
Sold ........................... 887,057 19,660 125,672 2,887,901 642,775 4,334,679
Contribution in-kind (Note 12) -- -- -- 4,281,944 -- --
Issued as reinvestment of
dividends .................... 277,774 -- -- 502,812 -- --
Redeemed ....................... (1,938,470) (974,867) (1,245,200) (4,171,564) (161,051) (1,736,507)
------------ ------------ ------------ ------------ ------------ -------------
Net increase/(decrease) ........ (773,639) (955,207) (1,119,528) 3,501,093 481,724 2,598,172
============ ============ ============ ============ ============ =============
- ----------------
(a) Fiscal year end changed to October 31 from June 30. The numbers reflected are for the period July 1, 1998 through
October 31, 1998.
See Notes to Financial Statements.
</TABLE>
<PAGE>
FINANCIAL highlights
TARGET MATURITY 2002 FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<TABLE>
<CAPTION>
INCOME FROM INVESTMENT OPERATIONS LESS DISTRIBUTIONS
------------------------------------------------ -----------------------------------------
NET ASSET NET REALIZED DIVIDENDS DISTRIBUTIONS
VALUE, AND UNREALIZED TOTAL FROM FROM NET FROM NET
BEGINNING OF NET INVESTMENT GAIN/(LOSS) ON INVESTMENT INVESTMENT REALIZED TOTAL
PERIOD INCOME INVESTMENTS OPERATIONS INCOME GAINS DISTRIBUTIONS
------------ ------------ ------------ ------------ ---------- --------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
CLASS A
10/31/99 $11.66 $ 0.60 $(0.84) $(0.24) $(0.79) $(0.20) $(0.99)
10/31/98(a) 10.86 0.23 0.57 0.80 -- -- --
06/30/98 10.69 0.61++ 0.40 1.01 (0.73) (0.11) (0.84)
06/30/97 10.72 0.62++ 0.11 0.73 (0.71) (0.05) (0.76)
06/30/96 10.78 0.63 (0.30) 0.33 (0.39) -- (0.39)
06/30/95(c) 10.00 0.12 0.66 0.78 -- -- --
- ----------------
* Annualized.
+ Total return is not annualized for periods less than one year and does not reflect any applicable sales charges. The total
return would have been lower if certain fees had not been waived and expenses reimbursed by the investment advisor or if fees
had not been reduced by credits allowed by the custodian.
++ Per share numbers have been calculated using the average shares method.
(a) Fiscal year end changed to October 31 from June 30.
(b) Ratio of operating expenses to average net assets includes expenses paid indirectly beginning in fiscal year 1995.
(c) The Fund commenced operations on March 20, 1995.
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA
-----------------------------------------------------------------------------------------
RATIO OF
OPERATING
EXPENSES TO
AVERAGE NET
ASSETS
WITHOUT FEE
WAIVERS,
EXPENSES
REIMBURSED
RATIO OF RATIO OF AND/OR FEES
OPERATING NET INVESTMENT REDUCED BY
EXPENSES TO INCOME TO PORTFOLIO CREDITS
NET ASSET VALUE, NET ASSETS, END OF AVERAGE AVERAGE TURNOVER ALLOWED BY
END OF PERIOD TOTAL RETURN+ PERIOD (IN 000'S) NET ASSETS(b) NET ASSETS RATE THE CUSTODIAN
------------ ------------- ----------------- ------------- ---------- ---- -------------
<S> <C> <C> <C> <C> <C> <C>
$10.43 (2.20)% $1,934 0.93% 5.38% 0% 2.71%
11.66 7.37% 2,385 0.64%* 5.92%* 0% 1.47%*
10.86 9.78% 2,536 0.62% 5.61% 0% 2.63%
10.69 6.95% 2,816 0.64% 5.80% 0% 2.89%
10.72 2.91% 3,125 0.62% 5.66% 5% 2.55%
10.78 7.80% 2,626 0.74%* 5.22%* 0% 4.71%*
See Notes to Financial Statements.
</TABLE>
<PAGE>
FINANCIAL highlights
HIGH YIELD FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<TABLE>
<CAPTION>
INCOME FROM INVESTMENT OPERATIONS LESS DISTRIBUTIONS
-------------------------------------------- ------------------------------------------------------
NET REALIZED DISTRIBUTIONS
AND IN DISTRIBUTIONS
NET ASSET UNREALIZED DIVIDENDS EXCESS OF FROM
VALUE, NET GAIN/(LOSS) TOTAL FROM FROM NET NET NET
BEGINNING OF INVESTMENT ON INVESTMENT INVESTMENT INVESTMENT REALIZED TOTAL
PERIOD INCOME INVESTMENTS OPERATIONS INCOME INCOME GAINS DISTRIBUTIONS
------------ ---------- ----------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CLASS A
10/31/99 $ 8.86 $ 0.91++ $ 0.14## $ 1.05 $(0.94) $ -- $(0.05) $(0.99)
10/31/98(a) 10.00 0.47 (1.15) (0.68) (0.45) (0.01) -- (0.46)
CLASS B
10/31/99 8 .90 0.86++ 0.15## 1.01 (0.89) -- (0.05) (0.94)
10/31/98(a) 10.00 0.42 (1.09) (0.67) (0.42) (0.01) -- (0.43)
CLASS I
10/31/99 8.85 0.98++ 0.11## 1.09 (0.98) -- (0.05) (1.03)
10/31/98(a) 10.00 0.22 (1.13) (0.91) (0.23) (0.01) -- (0.24)
- ----------------
* Annualized.
+ Total return is not annualized for the periods less than one year and does not reflect any applicable sales charges. The total
returns would have been lower if certain fees had not been waived or if fees had not been reduced by credits allowed by the
custodian.
++ Per share numbers have been calculated using the average shares method.
## The amount shown may not accord with the change in aggregate gains and losses of portfolio securities due to the timing of sales
and redemptions of Fund shares.
(a) On April 8, 1998, May 5, 1998 and July 27, 1998 the Fund commenced selling Class A, Class B, and Class I shares, respectively.
(b) Ratio of operating expenses to average net assets includes expenses paid indirectly.
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA
-----------------------------------------------------------------------------------------
RATIO OF
OPERATING
EXPENSES TO
AVERAGE NET
ASSETS
WITHOUT FEE
WAIVERS OR
FEES
RATIO OF RATIO OF REDUCED BY
OPERATING NET INVESTMENT CREDITS
EXPENSES TO INCOME TO PORTFOLIO ALLOWED BY
NET ASSET VALUE, NET ASSETS, END OF AVERAGE AVERAGE TURNOVER THE
END OF PERIOD TOTAL RETURN+ PERIOD (IN 000'S) NET ASSETS(b) NET ASSETS RATE CUSTODIAN
------------ ------------- ----------------- ------------- ---------- ---- -------------
<S> <C> <C> <C> <C> <C> <C>
$ 8.92 12.26% $5,827 0.73% 10.17% 30% 1.37%
8.86 (6.90)% 10,861 0.78%* 8.80%* 54% 1.22%*
8.97 11.44% 21,259 1.29% 9.61% 30% 1.93%
8.90 (6.33)% 2,830 1.57%* 8.01%* 54% 2.02%*
8.91 12.75% 44,662 0.21% 10.69% 30% 0.85%
8.85 (9.13)% 1,309 0.48%* 9.10%* 54% 0.97%*
See Notes to Financial Statements.
</TABLE>
<PAGE>
FINANCIAL highlights
SHORT TERM HIGH QUALITY BOND FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<TABLE>
<CAPTION>
INCOME FROM INVESTMENT OPERATIONS LESS DISTRIBUTIONS
-------------------------------------------- ------------------------------------------------------
NET REALIZED DISTRIBUTIONS
AND IN
NET ASSET UNREALIZED DIVIDENDS EXCESS OF
VALUE, NET GAIN/(LOSS) TOTAL FROM FROM NET NET DISTRIBUTIONS
BEGINNING OF INVESTMENT ON INVESTMENT INVESTMENT INVESTMENT FROM TOTAL
PERIOD INCOME INVESTMENTS OPERATIONS INCOME INCOME CAPITAL DISTRIBUTIONS
------------ ---------- ----------- --------- --------- --------- --------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CLASS A
10/31/99 $ 2.35 $ 0.13++ $(0.06) $ 0.07 $(0.13) $ -- $ -- $(0.13)
10/31/98(a) 2.32 0.04 0.03 0.07 (0.04) -- -- (0.04)
06/30/98 2.32 0.13 0.00# 0.13 (0.13) -- (0.00)# (0.13)
06/30/97 2.32 0.14 0.00# 0.14 (0.14) -- -- (0.14)
06/30/96 2.35 0.15++ (0.03) 0.12 (0.15) -- (0.00)# (0.15)
06/30/95 2.39 0.08 0.02 0.10 (0.08) (0.06) (0.00)# (0.14)
CLASS B
10/31/99 2.35 0.10++ (0.06) 0.04 (0.10) -- -- (0.10)
10/31/98(a) 2.32 0.04 0.03 0.07 (0.04) -- -- (0.04)
06/30/98 2.32 0.12 0.00# 0.12 (0.12) -- (0.00)# (0.12)
06/30/97 2.32 0.12 0.00# 0.12 (0.12) -- -- (0.12)
06/30/96 2.35 0.13++ (0.03) 0.10 (0.13) -- (0.00)# (0.13)
06/30/95(c) 2.39 0.06 0.02 0.08 (0.06) (0.06) (0.00)# (0.12)
CLASS I
10/31/99 2.35 0.13++ (0.06) 0.07 (0.13) -- -- (0.13)
10/31/98(a) 2.32 0.04 0.03 0.07 (0.04) -- -- (0.04)
06/30/98 2.32 0.14 0.00# 0.14 (0.14) -- (0.00)# (0.14)
06/30/97(c) 2.32 0.14 0.00# 0.14 (0.14) -- -- (0.14)
- ----------------
* Annualized.
+ Total return is not annualized for periods less than one year and does not reflect any applicable sales charges. The total
returns would have been lower if certain fees had not been waived and expenses reimbursed by the investment advisor or if fees
had not been reduced by credits allowed by the custodian.
++ Per share numbers have been calculated using the average shares method.
# Amount represents less than $0.01 per share.
(a) Fiscal year end changed to October 31 from June 30.
(b) Ratio of operating expenses to average net assets includes expenses paid indirectly beginning in fiscal year 1995.
(c) On July 1, 1994 and July 25, 1996 the Fund commenced selling Class B and Class I shares, respectively.
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA
-----------------------------------------------------------------------------------------
RATIO OF
OPERATING
EXPENSES TO
AVERAGE NET
ASSETS
WITHOUT FEE
WAIVERS,
EXPENSES
REIMBURSED
RATIO OF RATIO OF AND/OR FEES
OPERATING NET INVESTMENT REDUCED BY
EXPENSES TO INCOME TO PORTFOLIO CREDITS
NET ASSET VALUE, NET ASSETS, END OF AVERAGE AVERAGE TURNOVER ALLOWED BY
END OF PERIOD TOTAL RETURN+ PERIOD (IN 000'S) NET ASSETS(b) NET ASSETS RATE THE CUSTODIAN
------------ ------------- ----------------- ------------- ---------- ---- -------------
<S> <C> <C> <C> <C> <C> <C>
$ 2.29 2.84% $27,059 0.82% 5.22% 85% 1.16%
2.35 3.11% 32,748 0.82%* 5.44%* 19% 1.40%*
2.32 5.91% 35,551 0.86% 5.71% 138% 1.32%
2.32 6.15% 13,685 0.82% 6.50% 51% 1.45%
2.32 5.05% 32,440 0.75% 6.22% 225% 1.42%
2.35 4.42% 43,811 0.75% 6.10% 137% 1.39%
2.29 1.79% 4,597 1.60% 4.44% 85% 1.94%
2.35 2.85% 3,747 1.57%* 4.69%* 19% 2.18%*
2.32 5.13% 3,459 1.61% 4.96% 138% 2.07%
2.32 5.37% 2,994 1.57% 5.75% 51% 2.20%
2.32 4.27% 3,437 1.50% 5.47% 225% 2.17%
2.35 3.64% 3,015 1.50% 5.35% 137% 2.14%
2.29 2.93% 138,955 0.37% 5.67% 85% 0.71%
2.35 3.20% 1,631 0.57%* 5.69%* 19% 0.96%*
2.32 6.17% 3,103 0.53% 6.03% 138% 1.00%
2.32 5.94% 2,752 0.57%* 6.75%* 51% 1.20%*
See Notes to Financial Statements.
</TABLE>
<PAGE>
FINANCIAL highlights
U.S. GOVERNMENT SECURITIES FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<TABLE>
<CAPTION>
INCOME FROM INVESTMENT OPERATIONS LESS DISTRIBUTIONS
------------------------------------------------ -----------------------------------------
NET ASSET NET REALIZED DIVIDENDS DISTRIBUTIONS
VALUE, AND UNREALIZED TOTAL FROM FROM NET FROM NET
BEGINNING OF NET INVESTMENT GAIN/(LOSS) ON INVESTMENT INVESTMENT REALIZED TOTAL
PERIOD INCOME INVESTMENTS OPERATIONS INCOME GAINS DISTRIBUTIONS
------------ ------------ ------------ ------------ ---------- --------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
CLASS A
10/31/99 $10.98 $ 0.62 $(0.47) $ 0.15 $(0.61) $(0.01) $(0.62)
10/31/98(a) 10.84 0.54 0.14 0.68 (0.54) -- (0.54)
12/31/97 10.46 0.62 0.38 1.00 (0.62) -- (0.62)
12/31/96 10.84 0.63 (0.38) 0.25 (0.63) -- (0.63)
12/31/95 9.64 0.63 1.20 1.83 (0.63) -- (0.63)
12/31/94 10.79 0.63 (1.15) (0.52) (0.63) -- (0.63)
CLASS B
10/31/99 10.97 0.54 (0.48) 0.06 (0.53) (0.00)# (0.53)
10/31/98(a) 10.84 0.47 0.12 0.59 (0.46) -- (0.46)
12/31/97 10.46 0.54 0.38 0.92 (0.54) -- (0.54)
12/31/96 10.84 0.54 (0.38) 0.16 (0.54) -- (0.54)
12/31/95 9.64 0.54 1.20 1.74 (0.54) -- (0.54)
12/31/94(c) 10.24 0.41 (0.60) (0.19) (0.41) -- (0.41)
CLASS I
10/31/99 10.99 0.66 (0.51) 0.15 (0.62) (0.01) (0.63)
10/31/98(c) 10.86 0.42 0.12 0.54 (0.41) -- (0.41)
- ----------------
* Annualized.
+ Total return is not annualized for periods less than one year and does not reflect any applicable sales charges. The total
returns would have been lower if certain fees had not been waived by the investment advisor or if fees had not been reduced by
credits allowed by the custodian.
# Amount represents less than $0.01 per share.
(a) Fiscal year end changed to October 31 from December 31.
(b) Ratio of operating expenses to average net assets includes expenses paid indirectly beginning in fiscal year 1995.
(c) On March 30, 1994 and March 23, 1998 the Fund commenced selling Class B and Class I shares, respectively.
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA
-----------------------------------------------------------------------------------------
RATIO OF
OPERATING
EXPENSES TO
AVERAGE NET
ASSETS
RATIO TO WITHOUT FEE
OPERATING WAIVERS AND/
EXPENSES OR FEES
RATIO OF TO AVERAGE RATIO OF REDUCED BY
OPERATING NET ASSETS NET INVESTMENT CREDITS
NET ASSET NET ASSETS, EXPENSES TO INCLUDING INCOME TO PORTFOLIO ALLOWED BY
VALUE, END TOTAL END OF PERIOD AVERAGE INTEREST AVERAGE TURNOVER THE
OF PERIOD RETURN+ (IN 000'S) NET ASSETS(b) EXPENSE NET ASSETS RATE CUSTODIAN
--------- ------- ---------- ------------- ------- ---------- ---- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
$10.51 1.38% $221,592 0.96% N/A 5.76% 55% 1.04%
10.98 6.38% 266,334 0.92%* 1.36%* 5.99%* 12% 1.45%*
10.84 9.92% 107,054 1.05% N/A 5.92% 6% 1.05%
10.46 2.48% 138,159 0.97% N/A 6.01% 16% 0.97%
10.84 19.45% 177,310 1.01% N/A 6.08% 8% 1.01%
9.64 (4.91)% 188,068 0.97% N/A 6.19% 34% 0.97%
10.50 0.53% 72,751 1.70% N/A 5.02% 55% 1.78%
10.97 5.54% 28,747 1.67%* 2.12%* 5.24%* 12% 2.22%*
10.84 9.03% 3,352 1.84% N/A 5.08% 6% 1.84%
10.46 1.58% 2,963 1.85% N/A 5.14% 16% 1.85%
10.84 18.48% 2,206 1.84% N/A 5.20% 8% 1.84%
9.64 (1.86)% 1,063 1.76%* N/A 5.43%* 34% 1.76%*
10.51 1.43% 184,708 0.60% N/A 6.12% 55% 0.68%
10.99 5.00% 39,939 0.66%* 1.10%* 6.25%* 12% 1.11%*
See Notes to Financial Statements.
</TABLE>
<PAGE>
FINANCIAL highlights
INCOME FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<TABLE>
<CAPTION>
INCOME FROM INVESTMENT OPERATIONS LESS DISTRIBUTIONS
------------------------------------------------ ------------------------------
NET ASSET NET REALIZED
VALUE, AND UNREALIZED TOTAL FROM DIVIDENDS FROM
BEGINNING OF NET INVESTMENT GAIN/(LOSS) ON INVESTMENT NET INVESTMENT TOTAL
PERIOD INCOME INVESTMENTS OPERATIONS INCOME DISTRIBUTIONS
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
CLASS A
10/31/99 $ 9.44 $ 0.63 $(0.45) $ 0.18 $(0.63) $(0.63)
10/31/98(a) 9.48 0.53 (0.04)## 0.49 (0.53) (0.53)
12/31/97 9.15 0.60 0.33 0.93 (0.60) (0.60)
12/31/96 9.44 0.59 (0.29) 0.30 (0.59) (0.59)
12/31/95 8.29 0.59 1.15 1.74 (0.59) (0.59)
12/31/94 9.33 0.60 (1.04) (0.44) (0.60) (0.60)
CLASS B
10/31/99 9.45 0.56 (0.45) 0.11 (0.56) (0.56)
10/31/98(a) 9.49 0.46 (0.04)## 0.42 (0.46) (0.46)
12/31/97 9.17 0.53 0.32 0.85 (0.53) (0.53)
12/31/96 9.46 0.52 (0.29) 0.23 (0.52) (0.52)
12/31/95 8.30 0.51 1.16 1.67 (0.51) (0.51)
12/31/94(c) 8.85 0.40 (0.55) (0.15) (0.40) (0.40)
CLASS I
10/31/99 9.44 0.65 (0.45) 0.20 (0.65) (0.65)
10/31/98(c) 9.57 0.41 (0.13)## 0.28 (0.41) (0.41)
- ----------------
* Annualized.
+ Total return is not annualized for periods less than one year and does not reflect any applicable sales charges. The total
returns would have been lower if certain fees had not been waived by the investment advisor and/or distributor or if fees had
not been reduced by credits allowed by the custodian.
## The amount shown may not accord with the change in aggregate gains and losses of portfolio securities due to the timing of sales
and redemptions of Fund shares.
(a) Fiscal year end changed to October 31 from December 31.
(b) Ratio of operating expenses to average net assets includes expenses paid indirectly beginning in fiscal year 1995.
(c) On March 30, 1994 and March 23, 1998 the Fund commenced selling Class B and Class I shares, respectively.
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA
-----------------------------------------------------------------------------------------
RATIO OF
OPERATING
EXPENSES TO
AVERAGE NET
ASSETS
WITHOUT FEE
WAIVERS AND
FEES
RATIO OF RATIO OF REDUCED BY
OPERATING NET INVESTMENT CREDITS
EXPENSES TO INCOME TO PORTFOLIO ALLOWED BY
NET ASSET VALUE, NET ASSETS, END OF AVERAGE AVERAGE TURNOVER THE
END OF PERIOD TOTAL RETURN+ PERIOD (IN 000'S) NET ASSETS(b) NET ASSETS RATE CUSTODIAN
------------ ------------- ----------------- ------------- ---------- ---- -------------
<S> <C> <C> <C> <C> <C> <C>
$ 8.99 1.98% $172,217 1.06% 6.84% 19% 1.10%
9.44 5.21% 213,397 1.07%* 6.66%* 37% N/A
9.48 10.51% 77,864 1.08% 6.47% 27% N/A
9.15 3.46% 86,657 1.03% 6.52% 42% N/A
9.44 21.58% 97,534 1.08% 6.59% 43% N/A
8.29 (4.82)% 88,102 1.04% 6.83% 26% N/A
9.00 1.12% 42,715 1.81% 6.09% 19% 1.85%
9.45 4.51% 34,321 1.84%* 5.89%* 37% N/A
9.49 9.51% 9,691 1.86% 5.65% 27% N/A
9.17 2.59% 7,122 1.89% 5.69% 42% N/A
9.46 20.70% 4,452 1.91% 5.73% 43% N/A
8.30 (1.67)% 2,299 1.80%* 6.25%* 26% N/A
8.99 2.24% 76,145 0.68% 7.22% 19% 0.72%
9.44 2.84% 7,342 0.71%* 7.02%* 37% N/A
See Notes to Financial Statements
</TABLE>
<PAGE>
FINANCIAL highlights
CALIFORNIA INSURED INTERMEDIATE MUNICIPAL FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<TABLE>
<CAPTION>
INCOME FROM INVESTMENT OPERATIONS LESS DISTRIBUTIONS
------------------------------------------- ------------------------------------------------------
NET REALIZED DISTRIBUTIO
AND NS IN DISTRIBUTIONS
NET ASSET UNREALIZED DIVIDENDS EXCESS OF FROM
VALUE, GAIN/(LOSS) TOTAL FROM FROM NET NET NET
BEGINNING OF NET INVESTMENT ON INVESTMENT INVESTMENT INVESTMENT REALIZED TOTAL
PERIOD INCOME INVESTMENTS OPERATIONS INCOME INCOME GAINS DISTRIBUTIONS
------------ ------------ ----------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CLASS A
10/31/99 $11.02 $ 0.44++ $(0.55) $(0.11) $(0.45) $ -- $(0.16) $(0.61)
10/31/98(a) 10.81 0.16 0.21 0.37 (0.16) -- -- (0.16)
06/30/98 10.74 0.49 0.17 0.66 (0.49) (0.00)# (0.10) (0.59)
06/30/97 10.56 0.49++ 0.23 0.72 (0.49) -- (0.05) (0.54)
06/30/96 10.45 0.49 0.15 0.64 (0.49) -- (0.04) (0.53)
06/30/95 10.10 0.50 0.35 0.85 (0.50) -- -- (0.50)
CLASS B
10/31/99 11.02 0.36++ (0.56) (0.20) (0.36) -- (0.16) (0.52)
10/31/98(a) 10.81 0.13 0.21 0.34 (0.13) -- -- (0.13)
06/30/98 10.74 0.41 0.17 0.58 (0.41) (0.00)# (0.10) (0.51)
06/30/97 10.56 0.41++ 0.23 0.64 (0.41) -- (0.05) (0.46)
06/30/96 10.45 0.41 0.15 0.56 (0.41) -- (0.04) (0.45)
06/30/95(c) 10.10 0.43 0.35 0.78 (0.43) -- -- (0.43)
- ----------------
* Annualized.
+ Total return is not annualized for periods less than one year and does not reflect any applicable sales charges. The total
returns would have been lower if certain fees had not been waived and expenses reimbursed by the investment advisor or if fees
had not been reduced by credits allowed by the custodian.
++ Per share numbers have been calculated using the average shares method.
# Amount represents less than $0.01 per share.
(a) Fiscal year end changed to October 31 from June 30.
(b) Ratio of operating expenses to average net assets includes expenses paid indirectly beginning in fiscal year 1995.
(c) On July 1, 1994 the Fund commenced selling Class B shares.
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA
-----------------------------------------------------------------------------------------
RATIO OF
OPERATING
EXPENSES TO
AVERAGE NET
ASSETS
WITHOUT FEE
WAIVERS,
EXPENSES
REIMBURSED
RATIO OF RATIO OF AND/OR FEES
OPERATING NET INVESTMENT REDUCED BY
EXPENSES TO INCOME TO PORTFOLIO CREDITS
NET ASSET VALUE, NET ASSETS, END OF AVERAGE AVERAGE TURNOVER ALLOWED BY
END OF PERIOD TOTAL RETURN+ PERIOD (IN 000'S) NET ASSETS(b) NET ASSETS RATE THE CUSTODIAN
------------ ------------- ----------------- ------------- ---------- ---- -------------
<S> <C> <C> <C> <C> <C> <C>
$10.30 (1.11)% $31,253 0.89% 4.13% 93% 0.97%
11.02 3.46% 37,529 0.82%* 4.39%* 7% 1.15%*
10.81 6.26% 38,724 0.86% 4.49% 25% 1.25%
10.74 6.97% 45,157 0.82% 4.61% 29% 1.31%
10.56 6.25% 54,518 0.73% 4.62% 27% 1.39%
10.45 8.71% 54,507 0.42% 4.95% 13% 1.41%
10.30 (1.89)% 35,501 1.64% 3.38% 93% 1.72%
11.02 3.20% 23,960 1.57%* 3.64%* 7% 1.90%*
10.81 5.47% 21,688 1.61% 3.74% 25% 2.01%
10.74 6.17% 20,992 1.57% 3.86% 29% 2.06%
10.56 5.46% 20,948 1.48% 3.87% 27% 2.14%
10.45 7.90% 12,391 1.17% 4.20% 13% 2.16%
See Notes to Financial Statements.
</TABLE>
<PAGE>
FINANCIAL highlights
CALIFORNIA MUNICIPAL FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<TABLE>
<CAPTION>
INCOME FROM INVESTMENT OPERATIONS LESS DISTRIBUTIONS
------------------------------------------------ ----------------------------------------
DISTRIBUTIO
NET ASSET NET REALIZED DIVIDENDS NS
VALUE, AND UNREALIZED TOTAL FROM FROM NET FROM NET TOTAL
BEGINNING OF NET INVESTMENT GAIN/(LOSS) ON INVESTMENT INVESTMENT REALIZED DISTRIBUTIO
PERIOD INCOME INVESTMENTS OPERATIONS INCOME GAINS NS
------------ ------------ ------------ ------------ ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
CLASS A
10/31/99 $11.46 $ 0.54 $(0.94) $(0.40) $(0.57) $(0.06) $(0.63)
10/31/98(a) 11.33 0.19++ 0.13 0.32 (0.19) -- (0.19)
06/30/98 10.92 0.58++ 0.41 0.99 (0.58) -- (0.58)
06/30/97 10.60 0.59 0.32 0.91 (0.59) -- (0.59)
06/30/96 10.53 0.60++ 0.07 0.67 (0.60) -- (0.60)
06/30/95 10.38 0.61 0.15 0.76 (0.61) (0.00)# (0.61)
CLASS B
10/31/99 11.46 0.48 (0.97) (0.49) (0.48) (0.06) (0.54)
10/31/98(a) 11.33 0.16++ 0.13 0.29 (0.16) -- (0.16)
06/30/98 10.92 0.50++ 0.41 0.91 (0.50) -- (0.50)
06/30/97 10.60 0.51 0.32 0.83 (0.51) -- (0.51)
06/30/96 10.53 0.51++ 0.07 0.58 (0.51) -- (0.51)
06/30/95(c) 10.38 0.53 0.15 0.68 (0.53) (0.00)# (0.53)
- ----------------
* Annualized.
+ Total return is not annualized for periods less than one year and does not reflect any applicable sales charges. The total
returns would have been lower if certain fees had not been waived by the investment advisor or if fees had not been reduced by
credits allowed by the custodian.
++ Per share numbers have been calculated using the average shares method.
# Amount represents less than $0.01 per share.
(a) Fiscal year end changed to October 31 from June 30.
(b) Ratio of operating expenses to average net assets includes expenses paid indirectly beginning in fiscal year 1995.
(c) On July 1, 1994 the Fund commenced selling Class B shares.
See Notes to Financial Statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA
-----------------------------------------------------------------------------------------
RATIO OF
OPERATING
EXPENSES TO
AVERAGE NET
ASSETS
WITHOUT FEE
WAIVERS AND
FEES
RATIO OF RATIO OF REDUCED BY
OPERATING NET INVESTMENT CREDITS
EXPENSES TO INCOME TO PORTFOLIO ALLOWED BY
NET ASSET VALUE, NET ASSETS, END OF AVERAGE AVERAGE TURNOVER THE
END OF PERIOD TOTAL RETURN+ PERIOD (IN 000'S) NET ASSETS(b) NET ASSETS RATE CUSTODIAN
------------ ------------- ----------------- ------------- ---------- ---- -------------
<S> <C> <C> <C> <C> <C> <C>
$10.43 (3.87)% $283,929 0.88% 4.94% 92% 0.91%
11.46 2.82% 287,590 0.97%* 4.87%* 28% 1.05%*
11.33 9.26% 290,328 1.00% 5.18% 87% 1.19%
10.92 8.83% 318,251 0.97% 5.51% 36% 1.26%
10.60 6.40% 372,177 0.94% 5.56% 17% 1.29%
10.53 7.57% 405,967 0.85% 5.89% 22% 1.29%
10.43 (4.62)% 133,842 1.63% 4.19% 92% 1.66%
11.46 2.56% 49,683 1.72%* 4.12%* 28% 1.81%*
11.33 8.45% 34,537 1.75% 4.42% 87% 1.95%
10.92 8.02% 25,219 1.72% 4.76% 36% 2.01%
10.60 5.61% 20,543 1.69% 4.81% 17% 2.04%
10.53 6.78% 7,230 1.60% 5.14% 22% 2.04%
See Notes to Financial Statements.
</TABLE>
<PAGE>
FINANCIAL highlights
FLORIDA INSURED MUNICIPAL FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<TABLE>
<CAPTION>
INCOME FROM INVESTMENT OPERATIONS LESS DISTRIBUTIONS
------------------------------------------------ ----------------------------------------
DISTRIBUTIONS
NET ASSET NET REALIZED DIVIDENDS IN EXCESS
VALUE, AND UNREALIZED TOTAL FROM FROM NET OF NET
BEGINNING OF NET INVESTMENT GAIN/(LOSS) ON INVESTMENT INVESTMENT INVESTMENT TOTAL
PERIOD INCOME INVESTMENTS OPERATIONS INCOME INCOME DISTRIBUTIONS
------------ ------------ ------------ ------------ ---------- --------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
CLASS A
10/31/99 $10.50 $ 0.48 $(0.90) $(0.42) $(0.48) $ -- $(0.48)
10/31/98(a) 10.35 0.17 0.15 0.32 (0.17) -- (0.17)
06/30/98 9.93 0.49 0.42 0.91 (0.49) -- (0.49)
06/30/97 9.64 0.49++ 0.30 0.79 (0.50) (0.00)# (0.50)
06/30/96 9.43 0.50 0.21 0.71 (0.50) -- (0.50)
06/30/95 9.40 0.52 0.03## 0.55 (0.52) -- (0.52)
CLASS B
10/31/99 10.50 0.40 (0.90) (0.50) (0.40) -- (0.40)
10/31/98(a) 10.35 0.14 0.15 0.29 (0.14) -- (0.14)
06/30/98 9.93 0.41 0.43 0.84 (0.42) -- (0.42)
06/30/97 9.64 0.42++ 0.30 0.72 (0.43) (0.00)# (0.43)
06/30/96 9.43 0.42 0.21 0.63 (0.42) -- (0.42)
06/30/95(c) 9.40 0.45 0.03## 0.48 (0.45) -- (0.45)
- ----------------
* Annualized.
+ Total return is not annualized for periods less than one year and does not reflect any applicable sales charges. The total
returns would have been lower if certain fees had not been waived and expenses reimbursed by the investment advisor or if fees
had not been reduced by credits allowed by the custodian.
++ Per share numbers have been calculated using the average shares method.
# Amount represents less than $0.01 per share.
## The amount shown may not accord with the change in aggregate gains and losses of portfolio securities due to the timing of sales
and redemptions of Fund shares.
(a) Fiscal year end changed to October 31 from June 30.
(b) Ratio of operating expenses to average net assets includes expenses paid indirectly beginning in fiscal year 1995.
(c) On July 1, 1994 the Fund commenced selling Class B shares.
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA
--------------------------------------------------------------------------------------
RATIO OF
OPERATING
EXPENSES TO
AVERAGE NET
ASSETS
WITHOUT FEE
WAIVERS,
EXPENSES
REIMBURSED
RATIO OF AND/OR FEES
RATIO OF NET REDUCED BY
NET ASSET NET ASSETS, OPERATING INVESTMENT CREDITS
VALUE, END OF EXPENSES TO INCOME TO PORTFOLIO ALLOWED BY
END OF TOTAL PERIOD (IN AVERAGE NET AVERAGE NET TURNOVER THE
PERIOD RETURN+ 000'S) ASSETS(b) ASSETS RATE CUSTODIAN
--------- --------- ---------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
$ 9.60 (4.14)% $12,015 0.97% 4.68% 104% 1.14%
10.50 3.08% 15,813 0.82%* 4.76%* 40% 1.40%*
10.35 9.34% 16,538 0.88% 4.79% 51% 1.45%
9.93 8.43% 22,761 0.82% 5.01% 53% 1.46%
9.64 7.56% 29,821 0.63% 5.08% 52% 1.46%
9.43 6.01% 33,714 0.39% 5.53% 44% 1.51%
9.60 (4.91)% 7,273 1.71% 3.94% 104% 1.88%
10.50 2.82% 6,054 1.57%* 4.01%* 40% 2.15%*
10.35 8.53% 5,075 1.63% 4.04% 51% 2.21%
9.93 7.63% 5,067 1.57% 4.26% 53% 2.21%
9.64 6.76% 5,428 1.38% 4.33% 52% 2.21%
9.43 5.23% 3,330 1.14% 4.78% 44% 2.26%
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL highlights
TAX-EXEMPT BOND FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<CAPTION>
INCOME FROM INVESTMENT OPERATIONS LESS DISTRIBUTIONS
----------------------------------------------- ----------------------------------------------
NET ASSET NET REALIZED DIVIDENDS DISTRIBUTIONS
VALUE, AND UNREALIZED TOTAL FROM FROM NET FROM NET
BEGINNING OF NET INVESTMENT GAIN/(LOSS) ON INVESTMENT INVESTMENT REALIZED TOTAL
PERIOD INCOME INVESTMENTS OPERATIONS INCOME GAINS DISTRIBUTIONS
------------ ------------ ------------ ------------ ---------- --------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
CLASS A
10/31/99 $ 8.11 $ 0.41 $(0.70) $(0.29) $(0.41) $ -- $(0.41)
10/31/98(a) 8.09 0.34 0.02 0.36 (0.34) -- (0.34)
12/31/97 7.83 0.38 0.27 0.65 (0.38) (0.01) (0.39)
12/31/96 8.02 0.38 (0.19) 0.19 (0.38) -- (0.38)
12/31/95 7.13 0.38 0.89 1.27 (0.38) -- (0.38)
12/31/94 8.04 0.39 (0.91) (0.52) (0.39) -- (0.39)
CLASS B
10/31/99 8.11 0.35 (0.70) (0.35) (0.35) -- (0.35)
10/31/98(a) 8.09 0.28 0.03 0.31 (0.29) -- (0.29)
12/31/97 7.83 0.32 0.27 0.59 (0.32) (0.01) (0.33)
12/31/96 8.02 0.31 (0.19) 0.12 (0.31) -- (0.31)
12/31/95 7.13 0.32 0.89 1.21 (0.32) -- (0.32)
12/31/94(c) 7.49 0.25 (0.36) (0.11) (0.25) -- (0.25)
- ----------------
* Annualized.
+ Total return is not annualized for the periods less than one year and does not reflect any applicable sales charges. The
total returns would have been lower if fees had not been reduced by credits allowed by the custodian.
(a) Fiscal year end changed to October 31 from December 31.
(b) Ratio of operating expenses to average net assets includes expenses paid indirectly beginning in fiscal year 1995.
(c) On March 30, 1994 the Fund commenced selling Class B shares.
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA
-----------------------------------------------------------------------------
RATIO OF
RATIO OF NET
NET ASSETS, OPERATING INVESTMENT
NET ASSET END OF EXPENSES TO INCOME TO PORTFOLIO
VALUE, TOTAL PERIOD (IN AVERAGE NET AVERAGE NET TURNOVER
END OF PERIOD RETURN+ 000'S) ASSETS(b) ASSETS RATE
------------- ------------ ------------ --------- --------- ---------
<S> <C> <C> <C> <C> <C>
$7.41 (3.77)% $247,814 0.89% 5.16% 57%
8.11 4.58% 301,162 0.84%* 5.14%* 6%
8.09 8.59% 188,021 0.80% 4.84% 21%
7.83 2.52% 203,606 0.75% 4.90% 22%
8.02 18.25% 230,055 0.81% 5.03% 8%
7.13 (6.53)% 215,438 0.79% 5.23% 12%
7.41 (4.52)% 25,059 1.64% 4.41% 57%
8.11 3.88% 17,344 1.62%* 4.36%* 6%
8.09 7.71% 8,110 1.62% 4.00% 21%
7.83 1.61% 5,266 1.65% 4.01% 22%
8.02 17.30% 2,682 1.62% 4.18% 8%
7.13 (1.46)% 1,258 1.58%* 4.53%* 12%
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL highlights
BOND & STOCK FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<CAPTION>
INCOME FROM INVESTMENT OPERATIONS LESS DISTRIBUTIONS
------------------------------------------------ ----------------------------------------
NET ASSET NET REALIZED DIVIDENDS DISTRIBUTIONS
VALUE, AND UNREALIZED TOTAL FROM FROM NET FROM NET
BEGINNING OF NET INVESTMENT GAIN ON INVESTMENT INVESTMENT REALIZED TOTAL
PERIOD INCOME INVESTMENTS OPERATIONS INCOME GAINS DISTRIBUTIONS
------------ -------------- -------------- ------------ ---------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
CLASS A
10/31/99 $14.02 $ 0.41 $ 0.61 $ 1.02 $(0.40) $(0.04) $(0.44)
10/31/98 16.13 0.45++ 0.21## 0.66 (0.45) (2.32) (2.77)
10/31/97 14.71 0.50 2.37 2.87 (0.51) (0.94) (1.45)
10/31/96 13.48 0.52 1.53 2.05 (0.50) (0.32) (0.82)
10/31/95 11.53 0.50 2.02 2.52 (0.49) (0.08) (0.57)
CLASS B
10/31/99 13.96 0.27 0.63 0.90 (0.29) (0.04) (0.33)
10/31/98 16.10 0.33++ 0.19## 0.52 (0.34) (2.32) (2.66)
10/31/97 14.69 0.39 2.36 2.75 (0.40) (0.94) (1.34)
10/31/96 13.47 0.41 1.53 1.94 (0.40) (0.32) (0.72)
10/31/95 11.51 0.39 2.03 2.42 (0.38) (0.08) (0.46)
- ----------------
+ Total return is not annualized for the periods less than one year and does not reflect any applicable sales charges. The total
returns would have been lower if fees had not been reduced by credits allowed by the custodian.
++ Per share numbers have been calculated using the average shares method.
## The amount shown may not accord with the change in aggregate gains and losses of portfolio securities due to the timing of
sales and redemptions of Fund shares.
(a) Ratio of operating expenses to average net assets includes expenses paid indirectly beginning in fiscal year 1995.
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA
-------------------------------------------------------------------------
RATIO OF RATIO OF
OPERATING NET
NET ASSETS, EXPENSES TO INVESTMENT
NET ASSET END OF AVERAGE INCOME TO PORTFOLIO
VALUE, TOTAL PERIOD (IN NET AVERAGE NET TURNOVER
END OF PERIOD RETURN+ 000'S) ASSETS(a) ASSETS RATE
------------- ------- ----------- ---------- ----------- ---------
<S> <C> <C> <C> <C> <C>
$14.60 7.36% $241,746 1.05% 2.61% 45%
14.02 4.03% 298,651 0.97% 3.09% 80%
16.13 20.81% 307,018 0.99% 3.31% 54%
14.71 15.66% 255,414 0.98% 3.68% 46%
13.48 22.55% 208,592 1.02% 3.98% 32%
14.53 6.46% 75,485 1.84% 1.82% 45%
13.96 3.12% 74,542 1.76% 2.30% 80%
16.10 19.86% 46,556 1.79% 2.48% 54%
14.69 14.73% 22,243 1.86% 2.80% 46%
13.47 21.60% 7,372 1.84% 3.10% 32%
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL highlights
GROWTH & INCOME FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<CAPTION>
INCOME FROM INVESTMENT OPERATIONS LESS DISTRIBUTIONS
--------------------------------------------- ----------------------------------------------
NET ASSET NET REALIZED DIVIDENDS DISTRIBUTIONS
VALUE, AND UNREALIZED TOTAL FROM FROM NET FROM NET
BEGINNING OF NET INVESTMENT GAIN/(LOSS) ON INVESTMENT INVESTMENT REALIZED TOTAL
PERIOD INCOME/(LOSS) INVESTMENTS OPERATIONS INCOME GAINS DISTRIBUTIONS
------------ ------------- --------------- ---------- ---------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
CLASS A
10/31/99 $19.99 $ 0.09++ $ 4.62 $ 4.71 $(0.09) $(0.00)# $(0.09)
10/31/98 21.01 0.11++ 1.43 1.54 (0.09) (2.47) (2.56)
10/31/97 17.26 0.12 4.98 5.10 (0.14) (1.21) (1.35)
10/31/96 14.65 0.20 3.16 3.36 (0.21) (0.54) (0.75)
10/31/95 12.71 0.22 2.31 2.53 (0.19) (0.40) (0.59)
CLASS B
10/31/99 19.77 (0.09)++ 4.56 4.47 -- -- --
10/31/98 20.85 (0.07)++ 1.46 1.39 (0.00)# (2.47) (2.47)
10/31/97 17.17 (0.02) 4.93 4.91 (0.02) (1.21) (1.23)
10/31/96 14.59 0.06 3.14 3.20 (0.08) (0.54) (0.62)
10/31/95 12.68 0.11 2.31 2.42 (0.11) (0.40) (0.51)
CLASS I
10/31/99 20.03 0.16++ 4.61 4.77 (0.15) (0.00)# (0.15)
10/31/98(a) 21.42 0.11++ (1.43)## (1.32) (0.07) -- (0.07)
- ----------------
* Annualized.
+ Total return is not annualized for the periods less than one year and does not reflect any applicable sales charges. The total
returns would have been lower if fees had not been waived by the investment advisor and/or distributor or if fees had not been
reduced by credits allowed by the custodian.
++ Per share numbers have been calculated using the average shares method.
# Amount represents less than $0.01 per share.
## The amount shown may not accord with the change in aggregate gains and losses of portfolio securities due to the timing of
sales and redemptions of Fund shares.
(a) On March 23, 1998 the Fund commenced selling Class I shares.
(b) Ratio of operating expenses to average net assets includes expenses paid indirectly beginning in fiscal year 1995.
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA
------------------------------------------------------------------------------
RATIO OF
OPERATING
EXPENSES TO
AVERAGE NET
ASSETS
WITHOUT FEE
RATIO OF WAIVERS
NET AND/OR FEES
RATIO OF INVESTMENT REDUCED BY
NET ASSET NET ASSETS, OPERATING INCOME/ CREDITS
VALUE, END OF EXPENSES TO (LOSS) TO PORTFOLIO ALLOWED BY
END OF TOTAL PERIOD (IN AVERAGE NET AVERAGE NET TURNOVER THE
PERIOD RETURN+ 000'S) ASSETS(b) ASSETS RATE CUSTODIAN
--------- --------- ---------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
$24.61 23.57% $705,835 1.00% 0.37% 47% N/A
19.99 7.38% 502,115 0.94% 0.52% 79% N/A
21.01 31.24% 299,928 1.05% 0.66% 71% N/A
17.26 23.61% 178,331 1.03% 1.26% 52% N/A
14.65 20.87% 130,630 1.07% 1.62% 39% N/A
24.24 22.61% 233,216 1.76% (0.39)% 47% 1.84%
19.77 6.60% 117,063 1.79% (0.33)% 79% N/A
20.85 30.20% 49,994 1.88% (0.19)% 71% N/A
17.17 22.55% 22,851 1.94% 0.34% 52% N/A
14.59 19.95% 8,871 1.91% 0.69% 39% N/A
24.65 23.87% 461,629 0.67% 0.70% 47% N/A
20.03 (6.18)% 185,528 0.62%* 0.84%* 79% N/A
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL highlights
GROWTH FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<CAPTION>
INCOME FROM INVESTMENT OPERATIONS LESS DISTRIBUTIONS
--------------------------------------------- -----------------------------------------------
NET ASSET NET REALIZED DIVIDENDS DISTRIBUTIONS
VALUE, AND UNREALIZED TOTAL FROM FROM NET FROM NET
BEGINNING OF NET INVESTMENT GAIN/(LOSS) ON INVESTMENT INVESTMENT REALIZED TOTAL
PERIOD INCOME/(LOSS) INVESTMENTS OPERATIONS INCOME GAINS DISTRIBUTIONS
------------ -------------- -------------- ---------- ---------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
CLASS A
10/31/99 $17.64 $(0.21)++ $14.11 $13.90 $ -- $(1.83) $(1.83)
10/31/98(a) 18.46 (0.07)++ (0.75) (0.82) -- -- --
06/30/98 14.90 (0.15)++ 4.99 4.84 -- (1.28) (1.28)
06/30/97 15.69 (0.03)++ 1.58 1.55 -- (2.34) (2.34)
06/30/96 14.18 (0.07)++ 3.47 3.40 -- (1.89) (1.89)
06/30/95 10.73 0.05++ 3.42 3.47 (0.02) (0.00)# (0.02)
CLASS B
10/31/99 16.99 (0.38)++ 13.51 13.13 -- (1.83) (1.83)
10/31/98(a) 17.82 (0.12)++ (0.71) (0.83) -- -- --
06/30/98 14.53 (0.25)++ 4.82 4.57 -- (1.28) (1.28)
06/30/97 15.47 (0.14)++ 1.54 1.40 -- (2.34) (2.34)
06/30/96 14.10 (0.19)++ 3.45 3.26 -- (1.89) (1.89)
06/30/95(c) 10.73 (0.04)++ 3.42 3.38 (0.01) (0.00)# (0.01)
CLASS I
10/31/99 17.76 (0.11)++ 14.14 14.03 -- (1.83) (1.83)
10/31/98(a) 18.56 (0.05)++ (0.75) (0.80) -- -- --
06/30/98 14.94 (0.10)++ 5.00 4.90 -- (1.28) (1.28)
06/30/97(c) 14.21 0.00++# 3.07 3.07 -- (2.34) (2.34)
- ----------------
* Annualized.
+ Total return is not annualized for the periods less than one year and does not reflect any applicable sales charges. The total
returns would have been lower if certain fees had not been waived by the investment advisor and/or distributor or if fees had
not been reduced by credits allowed by the custodian.
++ Per share numbers have been calculated using the average shares method.
# Amount represents less than $0.01 per share.
(a) Fiscal year end changed to October 31 from June 30.
(b) Ratio of operating expenses to average net assets includes expenses paid indirectly beginning in fiscal year 1995.
(c) On July 1, 1994 and July 25, 1996 the Fund commenced selling Class B and Class I shares, respectively.
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA
--------------------------------------------------------------------------------
RATIO OF
OPERATING
EXPENSES TO
AVERAGE NET
ASSETS
WITHOUT FEE
RATIO OF WAIVERS
NET AND/OR FEES
RATIO OF INVESTMENT REDUCED BY
NET ASSET NET ASSETS, OPERATING INCOME/ CREDITS
VALUE, END OF EXPENSES TO (LOSS) TO PORTFOLIO ALLOWED BY
END OF TOTAL PERIOD (IN AVERAGE NET AVERAGE NET TURNOVER THE
PERIOD RETURN+ 000'S) ASSETS(b) ASSETS RATE CUSTODIAN
--------- ------ ---------- ----------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
$29.71 84.96% $240,363 1.27% (0.84)% 119% 1.46%
17.64 (4.44)% 104,775 1.69%* (1.21)%* 24% N/A
18.46 35.43% 112,153 1.66% (0.91)% 153% N/A
14.90 10.88% 111,187 1.70% (0.22)% 156% N/A
15.69 25.44% 179,720 1.70% (0.49)% 205% N/A
14.18 32.33% 154,763 1.76% 0.28% 233% N/A
28.29 83.57% 226,507 2.03% (1.60)% 119% 2.25%
16.99 (4.66)% 39,379 2.54%* (2.06)%* 24% N/A
17.82 34.43% 38,390 2.46% (1.70)% 153% N/A
14.53 9.99% 30,397 2.45% (0.97)% 156% N/A
15.47 24.54% 25,067 2.45% (1.24)% 205% N/A
14.10 31.46% 6,928 2.51% (0.47)% 233% N/A
29.96 85.13% 386,367 0.87% (0.44)% 119% 1.06%
17.76 (4.31)% 119,351 1.26%* (0.78)%* 24% N/A
18.56 35.75% 115,729 1.36% (0.61)% 153% N/A
14.94 22.73% 126,986 1.45%* 0.03%* 156% N/A
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL highlights
NORTHWEST FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<CAPTION>
INCOME FROM INVESTMENT OPERATIONS LESS DISTRIBUTIONS
-------------------------------------------- ------------------------------------------------------
NET REALIZED
AND
NET ASSET UNREALIZED DIVIDENDS DISTRIBUTIONS
VALUE, GAIN/(LOSS) TOTAL FROM FROM NET FROM NET DISTRIBUTIONS
BEGINNING OF NET INVESTMENT ON INVESTMENT INVESTMENT REALIZED FROM TOTAL
PERIOD INCOME/(LOSS) INVESTMENTS OPERATIONS INCOME GAINS CAPITAL DISTRIBUTIONS
------------ ------------ ----------- --------- --------- ------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
CLASS A
10/31/99 $20.37 $(0.05) $11.72 $11.67 $ -- $ -- $ -- $ --
10/31/98 25.92 (0.02)++ (0.76) (0.78) -- (4.74) (0.03) (4.77)
10/31/97 19.69 (0.02) 8.13 8.11 -- (1.88) -- (1.88)
10/31/96 17.40 0.03 2.47 2.50 (0.03) (0.18) -- (0.21)
10/31/95 14.30 0.07 3.10 3.17 (0.07) -- -- (0.07)
CLASS B
10/31/99
19.64 (0.25) 11.24 10.99 -- -- -- --
10/31/98 25.34 (0.20)++ (0.73) (0.93) -- (4.74) (0.03) (4.77)
10/31/97 19.45 (0.08) 7.85 7.77 -- (1.88) -- (1.88)
10/31/96 17.31 (0.08) 2.40 2.32 -- (0.18) -- (0.18)
10/31/95 14.28 (0.05) 3.08 3.03 -- -- -- --
CLASS I
10/31/99(b) 29.72 0.01 2.31 2.32 -- -- -- --
- ---------------
* Annualized.
+ Total return is not annualized for the periods less than one year and does not reflect any applicable sales charges. The total
returns would have been lower if certain fees had not been waived by the investment advisor or if fees had not been reduced by
credits allowed by the custodian.
++ Per share numbers have been calculated using the average shares method.
(a) Ratio of operating expenses to average net assets includes expenses paid indirectly beginning in fiscal year 1995.
(b) On June 7, 1999 the Fund commenced selling Class I shares.
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA
----------------------------------------------------------------------------------
RATIO OF
OPERATING
EXPENSES TO
AVERAGE NET
ASSETS
WITHOUT FEE
RATIO OF WAIVERS
NET AND/OR FEES
RATIO OF INVESTMENT REDUCED BY
NET ASSET NET ASSETS, OPERATING INCOME/ CREDITS
VALUE, END OF EXPENSES TO (LOSS) TO PORTFOLIO ALLOWED BY
END OF TOTAL PERIOD (IN AVERAGE NET AVERAGE NET TURNOVER THE
PERIOD RETURN+ 000'S) ASSETS(a) ASSETS RATE CUSTODIAN
--------- --------- ---------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
$32.04 57.29% $338,980 1.15% (0.21)% 41% 1.15%
20.37 (4.81)% 243,126 1.10% (0.09)% 39% 1.10%
25.92 44.47% 256,908 1.05% (0.08)% 37% 1.11%
19.69 14.54% 176,706 1.08% 0.16% 42% 1.08%
17.40 22.24% 157,953 1.10% 0.44% 9% 1.10%
30.63 55.96% 77,658 1.99% (1.05)% 41% 1.99%
19.64 (5.63)% 47,106 1.95% (0.94)% 39% 1.95%
25.34 43.17% 39,627 1.91% (0.96)% 37% 1.97%
19.45 13.54% 14,653 1.98% (0.76)% 42% 1.98%
17.31 21.25% 7,083 1.95% (0.45)% 9% 1.95%
32.04 7.81% 6,102 0.81%* 0.13%* 41% 0.81%*
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL highlights
EMERGING GROWTH FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<CAPTION>
INCOME FROM INVESTMENT OPERATIONS LESS DISTRIBUTIONS
------------------------------------------------ ------------------------------
NET ASSET NET REALIZED
VALUE, AND UNREALIZED TOTAL FROM DISTRIBUTIONS
BEGINNING OF NET INVESTMENT GAIN/(LOSS) ON INVESTMENT FROM NET TOTAL
PERIOD LOSS INVESTMENTS OPERATIONS REALIZED GAINS DISTRIBUTIONS
------------ ------------ -------------- ------------ -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
CLASS A
10/31/99 $16.25 $(0.20)++ $ 6.36 $ 6.16 $(2.80) $(2.80)
10/31/98(a) 19.49 (0.08)++ (3.16) (3.24) -- --
06/30/98 18.28 (0.22)++ 2.50 2.28 (1.07) (1.07)
06/30/97 20.17 (0.21)++ (0.18) (0.39) (1.50) (1.50)
06/30/96 15.47 (0.19)++ 5.65 5.46 (0.76) (0.76)
06/30/95 13.02 (0.00)++# 2.77 2.77 (0.32) (0.32)
CLASS B
10/31/99 15.67 (0.34)++ 6.08 5.74 (2.80) (2.80)
10/31/98(a) 18.86 (0.13)++ (3.06) (3.19) -- --
06/30/98 17.85 (0.36)++ 2.44 2.08 (1.07) (1.07)
06/30/97 19.88 (0.34)++ (0.19) (0.53) (1.50) (1.50)
06/30/96 15.37 (0.32)++ 5.59 5.27 (0.76) (0.76)
06/30/95(c) 13.02 (0.10)++ 2.77 2.67 (0.32) (0.32)
- ----------------
* Annualized.
** Represents offering share price.
+ Total return is not annualized for the periods less than one year and does not reflect any applicable sales charges. The total
returns would have been lower if certain fees had not been waived by the investment advisor or if fees had not been reduced by
credits allowed by the custodian.
++ Per share numbers have been calculated using the average shares method.
# Amount represents less than $0.01 per share.
(a) Fiscal year end changed to October 31 from June 30.
(b) Ratio of operating expenses to average net assets includes expenses paid indirectly beginning in fiscal year 1995.
(c) On July 1, 1994 the Fund commenced selling Class B shares.
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA
-----------------------------------------------------------------------------------
RATIO OF
OPERATING
EXPENSES
TO
AVERAGE
NET
ASSETS
WITHOUT
FEE
WAIVERS
AND/OR
RATIO OF FEES
NET REDUCED
RATIO OF INVESTMENT BY
NET ASSETS, OPERATING LOSS TO CREDITS
NET ASSET END OF EXPENSES TO AVERAGE PORTFOLIO ALLOWED
VALUE, PERIOD (IN AVERAGE NET NET TURNOVER BY THE
END OF PERIOD TOTAL RETURN+ 000'S) ASSETS(b) ASSETS RATE CUSTODIAN
------------- ------------ ----------- ----------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
$19.61 42.60% $ 92,130 1.78% (1.16)% 45% 1.94%
16.25 (16.62)% 88,502 1.88%* (1.43)%* 20% 1.89%*
19.49 12.95% 118,473 1.66% (1.10)% 112% 1.66%
18.28 (1.50)% 165,719 1.64% (1.17)% 81% 1.64%
20.17 35.93% 283,747 1.64% (1.02)% 131% 1.65%
15.47 21.54% 185,722 1.68% (0.31)% 181% N/A
18.61 41.32% 28,969 2.70% (2.08)% 45% 2.86%
15.67 (16.87)% 22,172 2.84%* (2.39)%* 20% 2.85%*
18.86 12.05% 28,540 2.47% (1.92)% 112% 2.47%
17.85 (2.26)% 29,123 2.39% (1.92)% 81% 2.39%
19.88 34.93% 28,920 2.39% (1.77)% 131% 2.40%
15.37 20.69% 10,208 2.43% (1.06)% 181% N/A
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL highlights
INTERNATIONAL GROWTH FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT THE PERIOD.
<CAPTION>
INCOME FROM INVESTMENT OPERATIONS LESS DISTRIBUTIONS
------------------------------------- ------------------------------------------------------------------
NET DISTRIBUTIONS
REALIZED IN
AND DIVIDENDS DISTRIBUTIONS DISTRIBUTIONS EXCESS
NET ASSET UNREALIZED TOTAL FROM IN EXCESS FROM OF
VALUE, NET GAIN/(LOSS) FROM NET OF NET NET NET
BEGINNING INVESTMENT ON INVESTMENT INVESTMENT INVESTMENT REALIZED REALIZED TOTAL
OF PERIOD INCOME/(LOSS) INVESTMENTS OPERATIONS INCOME INCOME GAINS GAINS DISTRIBUTIONS
--------- ------------- ----------- ---------- ------ ------ ----- ----- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CLASS A
10/31/99 $ 8.86 $ 0.01++ $ 2.65 $ 2.66 $(0.27) $-- $(0.11) $-- $(0.38)
10/31/98(a) 10.20 (0.02)++ (1.32) (1.34) -- -- -- -- --
06/30/98 11.85 0.05++ (0.67) (0.62) (0.50) (0.03) (0.50) -- (1.03)
06/30/97 10.49 0.04++ 1.55 1.59 (0.13) -- (0.10) -- (0.23)
06/30/96 9.78 0.05++ 1.21 1.26 (0.05) (0.04) (0.46) -- (0.55)
06/30/95 10.74 (0.11)++ (0.31) (0.42) (0.04) -- (0.44) (0.06) (0.54)
CLASS B
10/31/99 8.72 (0.08)++ 2.60 2.52 (0.26) -- (0.11) -- (0.37)
10/31/98(a) 10.07 (0.05)++ (1.30) (1.35) -- -- -- -- --
06/30/98 11.70 (0.04)++ (0.64) (0.68) (0.42) (0.03) (0.50) -- (0.95)
06/30/97 10.39 (0.04)++ 1.53 1.49 (0.08) -- (0.10) -- (0.18)
06/30/96 9.73 (0.03)++ 1.21 1.18 (0.02) (0.04) (0.46) -- (0.52)
06/30/95(c) 10.74 (0.17)++ (0.31) (0.48) (0.03) -- (0.44) (0.06) (0.53)
CLASS I
10/31/99 8.83 0.07++ 2.65 2.72 (0.28) -- (0.11) -- (0.39)
10/31/98(a) 10.16 0.00++# (1.33) (1.33) -- -- -- -- --
06/30/98 11.82 0.09++ (0.69) (0.60) (0.53) (0.03) (0.50) -- (1.06)
06/30/97(c) 9.88 0.06++ 2.15 2.21 (0.17) -- (0.10) -- (0.27)
- ----------------
* Annualized.
+ Total return is not annualized for the periods less than one year and does not reflect any applicable sales charges. The total
returns would have been lower if certain fees had not been waived by the investment advisor or if fees had not been reduced by
credits allowed by the custodian.
++ Per share numbers have been calculated using the average shares method.
# Amount represents less than $0.01 per share.
(a) Fiscal year end changed to October 31 from June 30.
(b) Ratio of operating expenses to average net assets includes expenses paid indirectly beginning in fiscal year 1995.
(c) On July 1, 1994 and July 25, 1996 the Fund commenced selling Class B and Class I shares, respectively.
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA
-----------------------------------------------------------------------------------
RATIO OF
OPERATING
EXPENSES
TO
AVERAGE
NET
ASSETS
WITHOUT
FEE
WAIVERS
AND/OR
RATIO OF FEES
NET REDUCED
RATIO OF INVESTMENT BY
NET ASSETS, OPERATING LOSS TO CREDITS
NET ASSET END OF EXPENSES TO AVERAGE PORTFOLIO ALLOWED
VALUE, PERIOD (IN AVERAGE NET NET TURNOVER BY THE
END OF PERIOD TOTAL RETURN+ 000'S) ASSETS(b) ASSETS RATE CUSTODIAN
----------- ------------ ----------- --------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
$11.14 31.15% $ 28,618 1.88% 0.13% 164% 1.89%
8.86 (13.14)% 30,117 1.86%* (0.50)%* 41% 1.86%*
10.20 (4.19)% 38,281 1.67% 0.50% 118% 1.67%
11.85 15.50% 57,776 1.65% 0.35% 67% 1.65%
10.49 13.16% 116,254 1.77% 0.46% 125% 1.77%
9.78 (4.01)% 91,763 1.69% 0.62% 81% N/A
10.87 29.87% 11,101 2.80% (0.79)% 164% 2.81%
8.72 (13.41)% 3,552 2.97%* (1.61)%* 41% 2.97%*
10.07 (4.95)% 4,294 2.94% (0.35)% 118% 2.94%
11.70 14.66% 4,876 2.40% (0.40)% 67% 2.40%
10.39 12.34% 4,447 2.52% (0.29)% 125% 2.52%
9.73 (4.61)% 2,268 2.44% (0.13)% 81% N/A
11.16 31.98% 163,610 1.28% 0.73% 164% 1.29%
8.83 (13.09)% 98,554 1.32%* 0.04%* 41% 1.32%*
10.16 (3.98)% 108,521 1.36% 0.81% 118% 1.36%
11.82 22.76% 95,512 1.40%* 0.60%* 67% 1.40%*
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
PORTFOLIO of INVESTMENTS
TARGET MATURITY 2002 FUND
OCTOBER 31, 1999
<CAPTION>
PRINCIPAL
AMOUNT VALUE
--------- -----
<S> <C> <C>
U.S. TREASURY OBLIGATION - 100.1%
U.S. TREASURY STRIP (PRINCIPAL ONLY)
$2,310,000 Zero coupon due 11/15/2002 ......................................... $1,936,803
----------
TOTAL INVESTMENTS (Cost $1,940,058*) ................................... 100.1% 1,936,803
OTHER ASSETS AND LIABILITIES (NET) ..................................... (0.1) (2,390)
----------
NET ASSETS ............................................................. 100.0% $1,934,413
===== ==========
- --------------
*Aggregate cost for federal tax purposes.
- --------------------------------------------------------------------------------------------------
GLOSSARY OF TERMS
STRIP --Separate trading of registered interest and principal of securities
- --------------------------------------------------------------------------------------------------
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
PORTFOLIO of INVESTMENTS
HIGH YIELD FUND
OCTOBER 31, 1999
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- --------- -----
CORPORATE BONDS AND NOTES - 82.3%
FOREIGN (U.S. DOLLAR DENOMINATED) - 27.7%
<C> <S> <C>
$1,000,000 @Entertainment Inc., Sr. Disc. Note,
Zero coupon to 07/15/2003;
14.500% due 07/15/2008 ........................................... $ 647,500
1,000,000 @Entertainment Inc., Sr. Disc. Note,
Zero coupon to 02/01/2004;
14.500% due 02/01/2009 ........................................... 617,500
1,800,000 @Entertainment Inc., Unit, Sr. Disc. Note,
Zero coupon to 07/15/2003;
14.500% due 02/01/2009++ ......................................... 1,228,500
950,000 HIH Capital Ltd., Conv. Note,
7.500% due 09/25/2006 ............................................ 646,000
350,000 HIH Capital Ltd., Conv. Note,
7.500% due 09/25/2006++ .......................................... 238,000
2,500,000 MBI Metrobank Finance Ltd., Conv. Bond,
Zero coupon due 12/18/2001 ....................................... 2,062,500
590,000 Metro Pacific Capital Ltd., Company Guarantee,
2.500% due 04/11/2003 ............................................ 628,734
900,000 Mexican United States, Bond,
9.875% due 01/15/2007 ............................................ 904,500
1,800,000 Pemex Finance Ltd., Bond,
8.875% due 11/15/2010++ .......................................... 1,706,490
Philippine Long Distance Telephone Company, MTN:
1,500,000 7.850% due 03/06/2007 ............................................ 1,283,250
1,000,000 10.500% due 04/15/2009 ............................................ 982,956
1,100,000 Poland Communications Inc., Sr. Note,
9.875% due 11/01/2003 ............................................ 1,111,000
2,050,000 SB Treasury Company LLC, Bond,
9.400% to 06/30/2008;
10.925% due 12/29/2049++ ......................................... 2,061,301
1,415,000 Ssangyong Oil Refining Company, Conv. Deb.,
3.750% due 12/31/2008 ............................................ 1,572,419
300,000 Supercanal Holdings SA, Sr. Note,
11.500% due 05/15/2005++ ......................................... 154,500
2,600,000 Tokai Pfd Capital Company, Bond,
9.980% to 06/30/2008;
11.091% due 12/29/2049++ ......................................... 2,633,938
1,060,000 Total Access Communications, Conv. Note,
2.000% due 05/31/2006 ............................................ 1,048,075
1,000,000 V2 Music Holdings Plc, Sr. Disc. Note,
Zero coupon to 04/15/2003;
14.000% due 04/15/2008++ ......................................... 320,000
-----------
19,847,163
-----------
INFORMATION TECHNOLOGY - 13.2%
1,500,000 Adaptec Inc., Conv. Sub. Note,
4.750% due 02/01/2004 ............................................ 1,558,125
750,000 Arbor Software, Conv. Sub. Note,
4.500% due 03/15/2005 ............................................ 572,812
2,000,000 Credence Systems Corporation, Conv. Sub. Note,
5.250% due 09/15/2002 ............................................ 1,932,500
1,898,000 Integrated Device Technology Inc., Conv. Sub. Note,
5.500% due 06/01/2002 ............................................ 1,860,040
8,000,000 Network Associates Inc., Conv. Sub. Deb.,
Zero coupon due 02/13/2018 ....................................... 2,670,000
1,000,000 S3 Inc., Conv. Sub. Note,
5.750% due 10/01/2003 ............................................ 890,000
-----------
9,483,477
-----------
HEALTH CARE - 12.2%
2,000,000 Beverly Enterprises Inc., Gtd. Deb.,
9.000% due 02/15/2006 ............................................ 1,735,000
279,000 CII Financial Inc., Conv. Note,
7.500% due 09/15/2001 ............................................ 181,001
500,000 Columbia/HCA Healthcare Corporation, Note,
7.750% due 07/15/2036 ............................................ 400,753
2,800,000 Dura Pharmaceuticals Inc., Conv. Sub. Note,
3.500% due 07/15/2002 ............................................ 2,170,000
2,300,000 DVI Inc., Sr. Note,
9.875% due 02/01/2004 ............................................ 2,254,000
1,000,000 Ivax Corporation, Conv. Deb.,
6.500% due 11/15/2001 ............................................ 977,500
550,000 Mariner Post-Acute Network, Sub. Note,
9.500% due 11/01/2007 ............................................ 16,500
1,246,000 Medical Care International Inc. (Columbia), Conv. Sub. Deb.,
6.750% due 10/01/2006 ............................................ 1,041,968
-----------
8,776,722
-----------
SERVICE - 8.6%
950,000 Corporate Express Inc., Conv. Note,
4.500% due 07/01/2000 ............................................ 944,062
3,800,000 Veterinary Centers of America, Conv. Sub. Deb.,
5.250% due 05/01/2006 ............................................ 2,593,500
3,000,000 Waste Management Inc., Conv. Sub. Note,
4.000% due 02/01/2002 ............................................ 2,628,750
-----------
6,166,312
-----------
TELECOMMUNICATIONS - 5.8%
3,250,000 Loral Space & Communications Ltd., Sr. Note,
9.500% due 01/15/2006++ .......................................... 2,616,250
1,500,000 Nextlink Communications Inc., Sr. Note,
10.750% due 06/01/2009 ........................................... 1,537,500
-----------
4,153,750
-----------
GAMING - 4.9%
1,750,000 Riviera Black Hawk Inc., First Mortgage,
13.000% due 05/01/2005++ ......................................... 1,837,500
1,875,000 Riviera Holdings Corporation, Company Guarantee,
10.000% due 08/15/2004 ........................................... 1,659,375
-----------
3,496,875
-----------
TRANSPORTATION - 3.4%
3,979,000 Equimar Shipholdings Ltd., Gtd. Deb.,
9.875% due 07/01/2007 ............................................ 2,447,085
---------------
MEDIA - 2.3%
1,750,000 Charter Communications Holdings, LLC,
Sr. Note,
8.625% due 04/01/2009++ .......................................... 1,662,500
-----------
MANUFACTURING - 2.2%
1,750,000 Jackson Products Inc., Company Guarantee,
9.500% due 04/15/2005 ............................................ 1,601,250
-----------
CONSUMER NON-DURABLES - 0.9%
4,400,000 Sunbeam Corporation, Sr. Sub. Deb.,
Zero coupon due 03/25/2018++ ..................................... 632,500
-----------
FOREIGN (U.S. NON-DOLLAR DENOMINATED) - 0.7%
525,000 IPC Magazines Plc, Bond,
9.625% due 03/15/2008 ............................................ 530,580
-----------
REAL ESTATE INVESTMENT TRUST - 0.4%
325,000 Rockefeller Center Property Trust, Conv. Deb.,
Zero coupon due 12/31/2007 ....................................... 273,000
-----------
Total Corporate Bonds and Notes
(Cost $59,789,985) ............................................... 59,071,214
-----------
U.S. TREASURY NOTE - 5.0%
(Cost $3,587,227)
3,500,000 6.500% due 10/15/2006 ............................................. 3,563,438
-----------
LOAN PARTICIPATION AGREEMENTS - 1.1%
951,339 Mariner Post-Acute Term Loan B,
9.334% due 03/31/2005** .......................................... 394,806
951,339 Mariner Post-Acute Term Loan C,
9.584% due 03/31/2006** .......................................... 394,806
-----------
Total Loan Participation Agreements
(Cost $1,501,519) ................................................ 789,612
-----------
COLLATERALIZED MORTGAGE OBLIGATION - 0.4%
(Cost $389,890)
416,994 Donaldson, Lufkin & Jenrette Mortgage Acceptance
Corporation, 1995-Q10 B1,
7.620% due 01/25/2026 ............................................ 283,817
-----------
SHARES
COMMON STOCKS - 7.1%
18,800 Franchise Finance Corporation of America .......................... 408,900
82,000 Health Care Property Investors Inc. ............................... 2,152,500
347,200 Huntingdon Life Sciences Group Plc, ADR+ .......................... 347,200
131,700 Nationwide Health Properties Inc. ................................. 2,181,281
-----------
Total Common Stocks (Cost $5,540,264) ......-...................... 5,089,881
-----------
PREFERRED STOCKS - 1.0%
8,200 Cendant Corporation, Conv. Pfd.,
7.500% due 02/16/2001 ............................................ 229,600
20,900 First Industrial Realty Trust Inc., Series A, Conv. Pfd.,
9.500% due 11/17/2000 ............................................ 478,088
-----------
Total Preferred Stocks (Cost $781,060) ............................ 707,688
-----------
SHARES VALUE
------ -----
WARRANT - 0.0%***
(Cost $10)
1,000 V2 Music Holdings Plc,
Expires 04/15/2008+,++ ........................................... $ 10
-----------
PRINCIPAL
AMOUNT
- ---------
REPURCHASE AGREEMENT - 1.3%
(Cost $946,000)
$ 946,000 Agreement with Goldman Sachs & Company, 5.100%, dated
10/29/1999, to be repurchased at $946,402 on 11/01/1999,
collateralized by $964,920 U.S. Treasury Note, 6.500%
due 11/15/2026 (Market Value $970,111) ........................... 946,000
-----------
TOTAL INVESTMENTS (Cost $72,535,955*) ................................... 98.2% 70,451,660
OTHER ASSETS AND LIABILITIES (NET) ...................................... 1.8 1,297,351
---- -----------
NET ASSETS .............................................................. 100.0% $71,749,011
===== ===========
- --------------
* Aggregate cost for federal tax purposes.
** Illiquid security (Note 2).
*** Amount represents less than 0.1% of net assets.
+ Non-income producing security.
++ Security exempt from registration under Rule 144A of the Securities Act of 1933. These
securities may be resold in transactions exempt from registration, normally to qualified
institutional buyers.
</TABLE>
<TABLE>
SCHEDULE OF FORWARD FOREIGN CURRENCY CONTRACTS
U.S. FORWARD FOREIGN CURRENCY CONTRACTS TO SELL
<CAPTION>
CONTRACTS TO DELIVER
--------------------------------------------- NET
IN UNREALIZED
EXPIRATION LOCAL VALUE IN EXCHANGE (DEPRECIATION)
DATE CURRENCY U.S. $ FOR U.S. $ OF CONTRACTS
---------------- ----------------- ----------- ------------- ---------------
<S> <C> <C> <C> <C>
07/28/2000 GBP 300,000 $492,707 $483,300 $ (9,407)
========
- --------------------------------------------------------------------------------------------------
GLOSSARY OF TERMS
ADR -- American Depositary Receipt
GBP -- Great Britain Pound Sterling
MTN -- Medium Term Note
- --------------------------------------------------------------------------------------------------
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
PORTFOLIO of INVESTMENTS
SHORT TERM HIGH QUALITY BOND FUND
OCTOBER 31, 1999
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- --------- -----
CORPORATE BONDS AND NOTES - 48.1%
FINANCIAL - 11.0%
<C> <S> <C>
$ 250,000 Associates Corporation NA, Sr. Note,
6.000% due 03/15/2000 ............................................ $ 249,983
1,000,000 Bear Stearns Company, Inc., Note,
6.200% due 03/30/2003 ............................................ 972,026
1,000,000 CIT Group Inc., Sr. Note,
6.375% due 11/15/2002 ............................................ 986,906
1,500,000 Citigroup, Inc., Note,
6.125% due 06/15/2000 ............................................ 1,498,761
1,000,000 Donaldson, Lufkin & Jenrette Acceptance Corporation, MTN,
6.375% due 05/26/2000 ............................................ 1,001,247
1,000,000 Finova Capital Corporation, MTN,
6.280% due 11/01/1999 ............................................ 1,000,000
1,500,000 General Electric Capital Corporation,
Series A, MTN,
5.800% due 04/24/2000 ............................................ 1,499,833
General Motors Acceptance Corporation, Note:
200,000 5.625% due 02/15/2001 ............................................ 197,892
300,000 6.875% due 07/15/2001 ............................................ 301,521
255,000 Golden West Financial Corporation, Deb.,
10.250% due 12/01/2000 ........................................... 265,145
3,000,000 Goldman Sachs Group LP, Note,
7.800% due 07/15/2002++ .......................................... 3,057,054
1,000,000 Lehman Brothers Inc., Sr. Sub. Note,
6.125% due 02/01/2001 ............................................ 991,252
450,000 MBNA America Bank NA, Note,
6.100% due 12/15/2000 ............................................ 446,983
1,500,000 McDonnell Douglas Corporation, Sub. Note,
6.710% due 07/19/2000 ............................................ 1,504,438
1,500,000 Merrill Lynch & Company, Series B, Note,
8.300% due 11/01/2002 ............................................ 1,559,304
717,000 Paine Webber Group, Inc., Deb.,
9.250% due 12/15/2001 ............................................ 750,471
1,000,000 Potomac Capital Investment Corporation, Note,
6.800% due 09/12/2001++ .......................................... 1,000,205
1,000,000 Salomon Smith Barney Holdings, Note,
6.125% due 01/15/2003 ............................................ 977,173
500,000 US West Capital Funding Inc., Company Guarantee,
6.125% due 07/15/2002 ............................................ 490,006
------------
18,750,200
------------
BANKS - 10.0%
470,000 Bankers Trust Corporation, Sub. Deb.,
9.500% due 06/14/2000 ............................................ 478,843
1,500,000 Chase Manhattan Corporation, Note,
5.500% due 02/15/2001 ............................................ 1,483,908
5,227,000 Federal National Mortgage Association, Note,
5.125% due 02/13/2004 ............................................ 4,969,706
2,000,000 First Chicago Corporation, Sub. Note,
9.250% due 11/15/2001 ............................................ 2,104,437
1,000,000 Northern Trust Company, Sub. Note,
6.500% due 05/01/2003 ............................................ 987,868
3,000,000 Wachovia Corporation, Sr. Unsub. Note,
6.700% due 06/21/2004 ............................................ 2,996,774
4,000,000 Wells Fargo Company, Note,
6.500% due 09/03/2002 ............................................ 3,990,812
------------
17,012,348
------------
RETAIL SALES - 5.4%
1,000,000 Dillards, Inc., Note,
6.430% due 08/01/2004 ............................................ 954,540
500,000 Federated Department Stores, Inc., Bond,
6.790% due 07/15/2027 ............................................ 488,696
450,000 Penny (J.C.) & Company, Inc., Note,
6.950% due 04/01/2000 ............................................ 451,473
Wal-Mart Stores, Inc.:
Note:
1,250,000 5.850% due 06/01/2000 ............................................ 1,250,000
100,000 6.750% due 05/15/2002 ............................................ 101,008
6,000,000 Sr. Note,
6.150% due 08/10/2001 ............................................ 5,998,151
------------
9,243,868
------------
MEDIA - 4.9%
600,000 Continental Cablevision, Inc., Sr. Note,
8.500% due 09/15/2001 ............................................ 619,698
Cox Communications, Inc., Note:
40,000 8.550% due 06/01/2000 ............................................ 40,498
100,000 6.375% due 06/15/2000 ............................................ 100,252
7,500,000 7.000% due 08/15/2001 ............................................ 7,527,749
100,000 Time Warner, Inc., Note,
7.950% due 02/01/2000 ............................................ 100,436
------------
8,388,633
------------
INDUSTRIAL - 3.2%
2,500,000 Cendant Corporation, Note,
7.500% due 12/01/2000 ............................................ 2,508,897
1,000,000 Praxair, Inc., Note,
6.150% due 04/15/2003 ............................................ 973,404
2,000,000 Sun Microsystems Inc., Sr. Note,
7.000% due 08/15/2002 ............................................ 2,010,775
------------
5,493,076
------------
OIL & GAS - 2.5%
710,000 Enron Corporation, Deb.,
9.125% due 04/01/2003 ............................................ 752,321
2,500,000 Occidental Petroleum Company, Sr. Note,
6.400% due 04/01/2003 ............................................ 2,427,370
65,000 Texaco Capital, Inc., Note,
9.000% due 12/15/1999 ............................................ 65,241
1,000,000 Union Texas Petroleum Holdings, Inc.,
Series A, MTN,
6.600% due 12/04/2002 ............................................ 998,084
------------
4,243,016
-----------
FOREIGN (U.S. DOLLAR DENOMINATED) - 2.2%
750,000 Eaton Off Shore Ltd., Company Guarantee,
9.000% due 02/15/2001 ............................................ 774,633
1,000,000 Fairfax Financial Holdings Ltd., Note,
7.750% due 12/15/2003 ............................................ 966,917
1,200,000 PDVSA Finance Ltd., Bond,
6.450% due 02/15/2004 ............................................ 1,081,855
1,000,000 Sony Corporation, Unsub. Note,
6.125% due 03/04/2003 ............................................ 987,081
------------
3,810,486
------------
TRANSPORTATION - 2.1%
1,220,000 CSX Corporation, Deb.,
9.500% due 08/01/2000 ............................................ 1,247,302
1,000,000 Norfork Southern Corporation, Note,
6.950% due 05/01/2002 ............................................ 999,747
150,000 Southwest Airlines Company, Deb.,
9.400% due 07/01/2001 ............................................ 156,510
1,000,000 Union Pacific Corporation, Deb.,
9.625% due 12/15/2002 ............................................ 1,075,269
------------
3,478,828
------------
CONSUMER STAPLES - 1.8%
100,000 Anheuser-Busch Company, Inc., Deb.,
8.750% due 12/01/1999 ............................................ 100,218
2,000,000 Philip Morris Companies, Inc., Note,
7.500% due 04/01/2004 ............................................ 1,992,788
1,000,000 Tyson Foods, Inc., Note,
6.000% due 01/15/2003 ............................................ 986,029
------------
3,079,035
------------
UTILITIES - 1.5%
300,000 National Rural Utilities Cooperative Finance Corporation,
Collateral Trust,
6.750% due 09/01/2001 ............................................ 301,134
275,000 Orange & Rockland Utilities, Inc., Deb.,
9.375% due 03/15/2000 ............................................ 277,997
1,000,000 Philadelphia Electric Company, First Mortgage,
8.000% due 04/01/2002 ............................................ 1,027,013
60,000 Southern California Edison Company, Note,
8.250% due 02/01/2000 ............................................ 60,295
1,000,000 United Illuminating Company, Note,
6.000% due 12/15/2003 ............................................ 947,669
------------
2,614,108
------------
REAL ESTATE INVESTMENT TRUSTS/PROPERTY - 1.4%
400,000 Colonial Realty LP, Note,
7.500% due 07/15/2001 ............................................ 399,575
565,000 Dobie Centers Properties, Ltd., Note, Taxable,
6.060% due 05/01/2001++ .......................................... 560,833
1,500,000 Sun Communities Inc., Sr. Note,
7.625% due 05/01/2003 ............................................ 1,493,065
------------
2,453,473
------------
RENTAL AUTO/EQUIPMENT - 1.0%
1,000,000 Hertz Corporation, Sr. Note,
7.375% due 06/15/2001 ............................................ 1,010,799
750,000 Penske Truck Leasing Company, MTN, Company Guarantee,
6.650% due 11/01/2000 ............................................ 752,800
------------
1,763,599
------------
CAPITAL GOODS - 0.6%
1,000,000 Ingersoll-Rand Company, Sr. Note,
6.255% due 02/15/2001 ............................................ 999,927
------------
PAPER PRODUCTS - 0.5%
603,000 Boise Cascade Company, Deb.,
9.900% due 03/15/2000 ............................................ 608,707
150,000 International Paper Company, Deb.,
9.700% due 03/15/2000 ............................................ 151,950
------------
760,657
------------
Total Corporate Bonds & Notes
(Cost $83,032,706) .............................................. 82,091,254
-----------
ASSET-BACKED SECURITIES - 25.1%
6,416,000 California Infrastructure PG&E-1, 1997-1 A6,
6.320% due 09/25/2005 ............................................ 6,359,571
5,000,000 Citibank Credit Card Master Trust I, 1997-2 A,
6.550% due 02/15/2004 ............................................ 5,001,275
300,000 Conti-Mortgage Home Equity Loan Trust, 1996-4 A6,
6.710% due 06/15/2014 ............................................ 299,723
3,900,000 Dayton Hudson Credit Card Master Trust, 1997-1 A,
6.250% due 08/25/2005 ............................................ 3,858,680
FFCA Secured Lending Corporation:
4,848,187 1999-1A A1A,
6.370% due 10/18/2008++ .......................................... 4,693,991
4,000,000 1999-2 WA1A,
7.130% due 08/18/2008++ .......................................... 3,966,250
4,680,000 First USA Credit Card Master Trust, 1997-6 A,
6.420% due 03/17/2005 ............................................ 4,670,008
666,470 General Electric Capital Mortgage Association, 1996-HE3 A3,
7.150% due 09/25/2026 ............................................ 665,120
Green Tree Financial Corporation:
831,560 1994-A A,
6.900% due 02/15/2004 ............................................ 827,402
285,173 1995-6 B1,
7.700% due 09/15/2026 ............................................ 286,852
247,093 Green Tree Home Equity Loan Trust,
1997-B A5,
7.150% due 04/15/2027 ............................................ 248,137
600,000 MBNA Master Credit Card Trust, 1995-E A,
5.6262% due 01/15/2005+ .......................................... 601,336
3,877,493 Morgan Stanley Capital I, 1999-CAM1 A1,
6.540% due 04/15/2004 ............................................ 3,848,625
6,000,000 Providian Master Trust, 1997-4 A,
6.250% due 06/15/2007 ............................................ 5,950,470
1,000,000 Standard Credit Card Master Trust, 1994-4 A,
8.250% due 11/07/2003 ............................................ 1,031,685
62,840 The Money Store Home Equity Trust,
1997-C AF3,
6.307% due 08/15/2012 ............................................ 62,724
504,125 World Omni Automobile Lease Securitization, 1996-B B,
6.850% due 11/15/2002++ .......................................... 504,046
------------
Total Asset-Backed Securities
(Cost $43,299,345) .............................................. 42,875,895
------------
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED
SECURITIES - 11.6%
FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA) - 9.2%
118,635 #250235, 7 Year Balloon,
8.500% due 02/01/2002 ............................................ 121,743
763,149 #251621,
6.000% due 03/01/2005 ............................................ 740,604
2,754,798 #252214,
6.500% due 01/01/2014 ............................................ 2,703,231
182,534 #313030,
10.000% due 05/01/2022 ........................................... 196,384
4,242,456 #313293,
6.500% due 01/01/2012 ............................................ 4,163,042
325,127 #313641,
8.500% due 11/01/2017 ............................................ 337,313
4,459,388 #323075,
6.500% due 03/01/2013 ............................................ 4,375,913
3,012,827 #456445,
6.500% due 01/01/2014 ............................................ 2,956,430
------------
Total FNMAs (Cost $16,065,349) .................................... 15,594,660
------------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (GNMA) - 1.0%
117,348 #001991,
9.000% due 04/20/2025 ............................................ 123,016
98,816 #038720,
11.000% due 02/15/2010 ........................................... 109,862
51,168 #130183,
11.000% due 05/15/2015 ........................................... 56,888
140,105 #131917,
11.000% due 10/15/2015 ........................................... 155,766
52,603 #139704,
11.000% due 11/15/2015 ........................................... 58,483
154,595 #140835,
11.000% due 11/15/2015 ........................................... 171,876
70,783 #153965,
10.000% due 02/15/2019 ........................................... 77,266
37,154 #189482,
11.000% due 04/15/2020 ........................................... 41,308
580,027 #262996,
10.000% due 01/15/2019 ........................................... 633,147
141,458 #291375,
11.000% due 08/15/2020** ......................................... 157,270
56,201 #377550,
8.000% due 03/15/2012 ............................................ 57,757
------------
Total GNMAs (Cost $1,640,689) ..................................... 1,642,639
------------
ADJUSTABLE RATE MORTGAGE-BACKED SECURITIES (ARM) - 0.8%
279,499 Federal Home Loan Mortgage Corporation (FHLMC),
#845988,
7.513% due 11/01/2021+ ........................................... 284,963
Federal National Mortgage Association (FNMA):
276,973 #082247,
6.125% due 04/01/2019+ ........................................... 272,253
58,654 #124571,
7.410% due 11/01/2022+ ........................................... 60,179
155,117 #141461,
7.466% due 11/01/2021+ ........................................... 159,356
158,766 #152205,
7.204% due 01/01/2019+ ........................................... 162,321
392,640 #313257,
6.176% due 11/01/2035+ ........................................... 385,522
------------
Total ARMs (Cost $1,332,987) ...................................... 1,324,594
------------
FEDERAL HOME LOAN MORTGAGE CORPORATION (FHLMC) - 0.6%
197,093 #A01226,
9.500% due 08/01/2016 ............................................ 209,842
72,368 #G40221,
6.500% due 12/01/1999 ............................................ 71,460
76,668 #L73756,
5.500% due 05/01/2001 ............................................ 73,883
40,753 #L73821,
6.000% due 06/01/2001 ............................................ 39,875
193,984 #L74100,
7.000% due 09/01/2001 ............................................ 194,332
103,278 #L90217,
5.500% due 06/01/2001 ............................................ 99,526
205,065 #L90218,
6.000% due 06/01/2001 ............................................ 200,646
178,484 #M90453,
6.500% due 05/01/2001 ............................................ 177,082
------------
Total FHLMCs (Cost $1,080,279) .................................... 1,066,646
------------
Total U.S. Government Agency Mortgage-Backed Securities
(Cost $20,119,304) .............................................. 19,628,539
------------
COLLATERALIZED MORTGAGE OBLIGATIONS (CMO) - 6.9%
64,997 Countrywide Funding Corporation,
1994-1 A3,
6.250% due 03/25/2024 ............................................ 63,342
107,003 Countrywide Mortgage Backed Securities, Inc., 1994-C A5,
6.375% due 03/25/2024 ............................................ 106,327
1,281,205 Federal Home Loan Mortgage Corporation,
24 VG,
6.250% due 06/25/2004 ............................................ 1,268,131
66,804 Prudential Home Mortgage Securities,
1993-43 A1,
5.400% due 10/25/2023 ............................................ 66,556
Residential Funding Mortgage Security I:
5,652,337 1995-S14 A8,
7.500% due 09/25/2025 ............................................ 5,682,096
4,681,947 1998-S20 A18,
6.400% due 09/25/2028 ............................................ 4,528,169
------------
Total CMOs (Cost $11,804,001) ..................................... 11,714,621
------------
U.S. TREASURY NOTES - 5.3%
2,950,000 7.750% due 01/31/2000 ............................................ 2,970,280
2,600,000 5.500% due 12/31/2000 ............................................ 2,595,125
3,500,000 5.250% due 05/31/2001 ............................................ 3,472,658
------------
Total U.S. Treasury Notes (Cost $9,029,870) ...................... 9,038,063
------------
FOREIGN GOVERNMENT BONDS - 1.3%
1,000,000 Ontario, Province of Canada,
6.125% due 06/28/2000 ............................................ 1,002,690
1,250,000 Province of Alberta, Government Guarantee,
9.250% due 04/01/2000 ............................................ 1,269,075
------------
Total Foreign Government Bonds
(Cost $2,268,114) ............................................... 2,271,765
------------
REPURCHASE AGREEMENT - 0.6%
(Cost $1,089,000)
1,089,000 Agreement with Goldman Sachs & Company, 5.100%, dated
10/29/1999, to be repurchased at $1,089,463 on 11/01/1999,
collateralized by $1,110,780 U.S. Treasury Note, 6.500%
due 11/15/2026 (Market Value $1,116,755) ......................... 1,089,000
------------
TOTAL INVESTMENTS (Cost $170,642,340*) ................................. 98.9% 168,709,137
OTHER ASSETS AND LIABILITIES (NET) ..................................... 1.1 1,902,092
---- ------------
NET ASSETS ............................................................. 100.0% $170,611,229
===== ============
- --------------
* Aggregate cost for federal tax purposes.
** Security pledged as collateral for futures contract.
+ Variable rate security. The interest rate shown reflects the rate currently in effect.
++ Security exempt from registration under Rule 144A of the Securities Act of 1933. This security
may be resold in transactions exempt from registration, normally to qualified institutional
buyers.
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
NUMBER OF UNREALIZED
CONTRACTS VALUE APPRECIATION
- --------- ----- ------------
FUTURES CONTRACTS - SHORT POSITION
<C> <S> <C> <C>
130 U.S. 5 Year Treasury Note,
December 1999 .................................... $14,033,906 $115,309
========== ========
- --------------------------------------------------------------------------------------------------
GLOSSARY OF TERMS
BALLOON -- Five- and seven-year mortgages with larger dollar amounts of payments falling
due in the later years of the obligation.
MTN -- Medium Term Note
- --------------------------------------------------------------------------------------------------
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
PORTFOLIO of INVESTMENTS
U.S. GOVERNMENT SECURITIES FUND
OCTOBER 31, 1999
PRINCIPAL
AMOUNT VALUE
- --------- -----
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED
SECURITIES - 72.1%
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
(GNMA) - 27.9%
<C> <S> <C>
$10,056,185 6.000% due 04/20/2026 - 02/20/2029 .............................. $ 9,317,869
10,775,463 6.500% due 08/15/2023 - 03/15/2024 .............................. 10,308,971
2,891,707 6.800% due 04/20/2025 ........................................... 2,805,332
42,995,223 7.000% due 07/15/2008 - 08/20/2029 .............................. 42,210,779
37,754,801 7.500% due 11/15/2029 TBA# ...................................... 37,896,383
11,970,100 7.500% due 03/15/2024 - 08/15/2029 .............................. 12,015,729
717,373 8.000% due 04/15/2022 ........................................... 734,089
811,007 8.500% due 05/15/2022 ........................................... 845,551
8,181,942 9.000% due 10/15/2008 - 06/15/2022 .............................. 8,639,191
7,903,595 9.500% due 04/15/2016 - 08/15/2021 .............................. 8,484,218
28,432 13.500% due 09/15/2014 - 12/15/2014 ............................. 33,263
3,323 14.000% due 06/15/2011 .......................................... 3,912
------------
Total GNMAs (Cost $134,542,395) ................................. 133,295,287
------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION
(FNMA) - 23.3%
24,915 5.500% due 02/01/2009 ........................................... 23,464
2,271,111 5.864% due 03/01/2028 ........................................... 2,247,456
9,721,709 6.000% due 08/25/2007 - 02/01/2029 .............................. 9,070,799
51,835,872 6.500% due 08/01/2028 - 04/01/2029 .............................. 49,721,380
30,939,343 7.000% due 06/01/2010 - 04/01/2029 .............................. 30,453,507
16,759,319 7.500% due 12/01/2024 - 07/01/2029 .............................. 16,819,794
2,759,546 8.000% due 05/01/2022 - 01/01/2025 .............................. 2,814,908
403,191 8.500% due 02/01/2023 - 09/01/2025 .............................. 418,303
235,768 9.000% due 06/01/2016 - 06/01/2021 .............................. 247,129
------------
Total FNMAs (Cost $114,918,502) ................................. 111,816,740
------------
FEDERAL HOME LOAN MORTGAGE CORPORATION
(FHLMC) - 20.9%
28,063,139 6.500% due 02/01/2011 - 03/01/2029 .............................. 27,277,903
17,318,381 7.000% due 07/01/2024 - 07/01/2029 .............................. 17,030,634
42,255,707 7.500% due 01/01/2003 - 03/01/2013 .............................. 42,837,240
10,721,216 8.500% due 04/01/2019 - 07/01/2029 .............................. 11,123,926
576,516 8.750% due 01/01/2013 ........................................... 604,257
939,294 9.000% due 12/01/2008 - 08/01/2022 .............................. 984,556
330,996 9.500% due 06/01/2016 - 05/01/2017 .............................. 351,580
------------
Total FHLMCs (Cost $101,676,302) ................................ 100,210,096
------------
Total U.S. Government Agency Mortgage-Backed Securities
(Cost $351,137,199) ........................................... 345,322,123
------------
COLLATERALIZED MORTGAGE OBLIGATIONS - 13.6%
Federal Home Loan Mortgage Corporation:
2,010,430 Series 1049, Class F,
6.338% due 02/15/2021++ .......................................... 2,025,015
619,150 Series 1288, Class HA,
5.500% due 11/15/2020 ............................................ 614,002
4,770,000 Series 1638, Class K,
6.500% due 03/15/2023 ............................................ 4,593,295
2,000,000 Series 1652, Class PL,
7.000% due 01/15/2024 ............................................ 1,975,710
502,977 Series G2, Class E,
6.850% due 07/25/2018 ............................................ 501,793
520,491 Series 1730, Class A,
7.000% due 07/15/2017 ............................................ 520,551
7,500,000 Series 1981, Class C,
6.500% due 08/15/2027 ............................................ 7,080,630
4,837,873 Series 2073, Class VA,
6.500% due 12/15/2005 ............................................ 4,805,242
5,000,000 Series 2076, Class PB,
6.000% due 10/15/2017 ............................................ 4,932,525
Federal National Mortgage Association:
2,230,000 Series G93-11, Class D,
6.000% due 08/25/2007 ............................................ 2,222,451
3,810,588 Series 1989-18, Class-C,
9.500% due 04/25/2004 ............................................ 3,925,034
1,528,167 Series 1990-49, Class G,
9.000% due 05/25/2020 ............................................ 1,588,784
1,668,361 Series 1992-83, Class X,
7.000% due 02/25/2022 ............................................ 1,624,318
818,429 Series 1993-103, Class FA,
5.856% due 06/25/2019 ............................................ 820,399
4,200,000 Series 1993-103, Class PG,
6.250% due 06/25/2019 ............................................ 4,166,001
2,993,637 Series 1993-162, Class E,
6.000% due 08/25/2023 ............................................ 2,813,902
5,000,000 Series 1993-163, Class BE,
7.000% due 10/25/2021 ............................................ 4,948,105
1,950,000 Series 1994-643, Class JC,
7.500% due 08/25/2001 ............................................ 1,970,387
592,616 Series 1997-MI, Class A,
6.784% due 01/17/2003 ............................................ 595,588
2,128,034 Series 1997-32, Class FA,
6.006% due 04/25/2027 ............................................ 2,142,879
6,000,000 Series 1997-40, Class PE,
6.750% due 07/18/2019 ............................................ 6,007,230
6,363,891 Trust 259 STRIP,
7.000% due 04/01/2024 ............................................ 1,840,366
548,319 L.F. Rothschild Mortgage Trust,
Series 3, Class Z,
9.950% due 09/01/2017 ............................................ 585,910
2,785,491 Merrill Lynch Trust,
6.500% due 08/27/2015 ............................................ 2,773,255
------------
Total CMOs (Cost $63,885,346) ..................................... 65,073,372
------------
U.S. TREASURY OBLIGATIONS - 6.3%
U.S. TREASURY BONDS - 4.7%
1,500,000 6.000% due 02/15/2026 ........................................... 1,423,594
5,695,000 6.250% due 08/15/2023 ........................................... 5,575,763
1,888,000 6.625% due 02/15/2027 ........................................... 1,940,511
3,250,000 7.250% due 08/15/2022 ........................................... 3,546,563
7,000,000 8.125% due 08/15/2019 ........................................... 8,246,875
2,000,000 5.250% due 11/15/2028 ........................................... 1,720,000
------------
22,453,306
------------
U.S. TREASURY NOTES - 1.6%
7,000,000 4.750% due 11/15/2008 ........................................... 6,332,815
1,100,000 6.500% due 10/15/2006 ........................................... 1,119,938
------------
7,452,753
------------
Total U.S. Treasury Obligations
(Cost $31,742,647) ............................................ 29,906,059
------------
U.S. GOVERNMENT AGENCY OBLIGATIONS - 6.9%
3,000,000 Federal Home Loan Bank, Bond,
6.135% due 02/17/2009 ............................................ 2,797,500
6,500,000 Federal Home Loan Bank, Bond,
6.810% due 08/20/2007 ............................................ 6,331,870
10,000,000 Federal Home Loan Bank, Note,
5.125% due 10/15/2008 ............................................ 8,993,038
2,000,000 Federal National Mortgage Association, MTN,
6.000% due 01/14/2005 ............................................ 1,938,286
12,500,000 Federal National Mortgage Association, Note,
6.000% due 05/15/2008 ............................................ 11,977,286
1,250,000 Federal National Mortgage Association, Deb.,
6.210% due 08/06/2038 ............................................ 1,128,606
------------
Total U.S. Government Obligations
(Cost $35,203,842) .............................................. 33,166,586
------------
U.S. GOVERNMENT AGENCY DISCOUNT NOTE - 7.9%
(Cost $37,886,728)
38,000,000 Federal National Mortgage Association (FNMA),
5.110% due 11/22/1999**+ ......................................... 37,886,728
------------
REPURCHASE AGREEMENT - 0.7%
(Cost $3,445,000)
3,445,000 Agreement with Goldman Sachs & Company, 5.100% dated
10/29/1999, to be repurchased at $3,446,464, on 11/01/1999,
collateralized by $3,513,900 U.S. Treasury Note, 6.500%
due 11/15/2026 (Market Value $3,532,803) ......................... 3,445,000
------------
TOTAL INVESTMENTS (Cost $523,300,762*) ............................... 107.5% 514,799,868
OTHER ASSETS AND LIABILITIES (NET) ................................... (7.5) (35,749,533)
---- ------------
NET ASSETS ........................................................... 100.0% $479,050,335
===== ============
- --------------
* Aggregate cost for federal tax purposes is $523,401,402.
** Security pledged as collateral for when-issued security.
+ Rate represents discount rate at the date of purchase (unaudited).
++ Variable rate security. The interest rate shown reflects the rate currently in effect.
# Security purchased on when-issued basis (Note 2).
- --------------------------------------------------------------------------------------------------
GLOSSARY OF TERMS
MTN -- Medium Term Note
STRIP -- Separate trading of registered interest and principal of securities
TBA -- To Be Announced
- --------------------------------------------------------------------------------------------------
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
PORTFOLIO of INVESTMENTS
INCOME FUND
OCTOBER 31, 1999
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- --------- -----
<S> <C> <C>
CORPORATE BONDS AND NOTES - 76.2%
INDUSTRIAL - 19.3%
$ 250,000 Battle Mountain Gold Company, Conv. Note,
6.000% due 01/04/2005 ............................................ $ 156,958
Black & Decker Corporation, Note:
185,000 7.500% due 04/01/2003 ............................................ 188,467
50,000 7.000% due 02/01/2006 ............................................ 49,319
5,000,000 Cendant Corporation, Note,
7.750% due 12/01/2003 ............................................ 4,992,850
550,000 Comcast Cable Communication, Note,
6.200% due 11/15/2008 ............................................ 507,338
Conagra, Inc., Sr. Note:
750,000 9.750% due 03/01/2021 ............................................ 898,506
843,000 6.700% due 08/01/2027 ............................................ 806,571
2,000,000 Corporate Express, Inc., Conv. Note,
4.500% due 07/01/2000 ............................................ 1,987,500
350,000 CPC International, Inc., Note,
6.150% due 01/15/2006 ............................................ 336,123
500,000 Crane Company, Note,
8.500% due 03/15/2004 ............................................ 530,663
300,000 CSR America, Inc., Note,
6.875% due 07/21/2005 ............................................ 290,206
850,000 Golden Books Publishing Company,
Sr. Note, in default,
7.650% due 09/15/2002 ............................................ 361,250
400,000 Honeywell, Inc., Note,
6.600% due 04/15/2001 ............................................ 400,891
675,000 Ingersoll-Rand Company, Sr. Note,
6.255% due 02/15/2001 ............................................ 674,951
1,400,000 Integrated Device Technology, Inc.,
Conv. Sub. Note,
5.500% due 06/01/2002 ............................................ 1,372,000
200,000 International Business Machines Corporation, Note,
6.375% due 06/15/2000 ............................................ 200,607
160,000 International Paper Company, Deb.,
9.700% due 03/15/2000 ............................................ 162,080
1,500,000 Jackson Products, Inc., Company Guarantee,
9.500% due 04/15/2005 ............................................ 1,372,500
250,000 Lennar Corporation, Sr. Note,
7.625% due 03/01/2009 ............................................ 235,574
955,000 Lockheed Martin Corporation, Company Guarantee,
7.750% due 05/01/2026 ............................................ 905,274
Loral Corporation, Deb.:
1,000,000 8.375% due 06/15/2024 ............................................ 1,051,581
1,000,000 7.625% due 06/15/2025 ............................................ 970,983
2,250,000 Loral Space & Communications Ltd.,
Sr. Note,
9.500% due 01/15/2006++ .......................................... 1,811,250
996,000 MCI Worldcom, Inc., Sr. Note,
6.125% due 08/15/2001 ............................................ 989,621
540,000 Nabisco, Inc., Note,
6.000% due 02/15/2001 ............................................ 534,780
6,500,000 Ogden Corporation, Deb.,
9.250% due 03/01/2022 ............................................ 7,392,975
6,860,000 Praxair, Inc., Deb.,
8.700% due 07/15/2022 ............................................ 7,555,116
Raytheon Company:
750,000 Deb.,
7.200% due 08/15/2027 ............................................ 684,452
Note:
2,385,000 5.950% due 03/15/2001 ............................................ 2,354,310
1,070,000 6.450% due 08/15/2002 ............................................ 1,053,009
866,000 Saks, Inc., Company Guarantee,
8.250% due 11/15/2008 ............................................ 838,354
5,260,000 Time Warner, Inc., Deb.,
9.150% due 02/01/2023 ............................................ 6,046,780
USA Waste Services, Inc., Sr. Note:
495,000 7.125% due 10/01/2007 ............................................ 417,887
1,000,000 7.000% due 07/15/2028 ............................................ 726,589
1,012,000 USG Corporation, Series B, Sr. Note,
9.250% due 09/15/2001 ............................................ 1,057,617
1,200,000 Veterinary Centers of America,
Conv. Sub. Deb.,
5.250% due 05/01/2006 ............................................ 819,000
1,000,000 V.F. Corporation, Note,
9.500% due 05/01/2001 ............................................ 1,042,659
Waste Management, Inc.:
250,000 Conv. Note,
4.000% due 02/01/2002 ............................................ 219,062
1,145,000 Note,
7.700% due 10/01/2002 ............................................ 1,073,886
3,450,000 Sr. Note,
6.875% due 05/15/2009++ .......................................... 2,820,844
200,000 WMX Technologies Inc., Note,
8.250% due 11/15/1999 ............................................ 199,867
------------
56,090,250
------------
FOREIGN (U.S. DOLLAR DENOMINATED) - 12.5%
2,500,000 HIH Capital Ltd., Conv. Note,
7.500% due 09/25/2006 ............................................ 1,700,000
1,000,000 Hyder Plc, Bond,
6.750% due 12/15/2004++ .......................................... 971,775
4,250,000 MBI Metrobank Finance Ltd., Conv. Bond,
Zero coupon due 12/18/2001 ....................................... 3,506,250
250,000 Metro Pacific Capital, Ltd., Bond,
2.500% due 04/11/2003 ............................................ 266,413
8,500,000 Petro-Canada, Deb.,
9.250% due 10/15/2021 ............................................ 9,549,239
4,050,000 Poland Communications, Inc., Sr. Note,
9.875% due 11/01/2003 ............................................ 4,090,500
1,650,000 Republic of Korea, Unsub. Note,
8.875% due 04/15/2008 ............................................ 1,719,783
Royal Caribbean Cruises Ltd.,
Sr. Note:
426,000 7.125% due 09/18/2002 ............................................ 425,472
111,000 7.250% due 08/15/2006 ............................................ 108,333
1,750,000 SB Treasury Company LLC, Bond,
9.400% to 06/30/2008;
10.925% due 12/29/2049++ ......................................... 1,759,647
2,490,000 Ssangyong Oil Refining Company,
Conv. Deb.,
3.750% due 12/31/2008 ............................................ 2,767,013
2,500,000 Tatneft Finance Plc, Company Guarantee,
9.000% due 10/29/2002++ .......................................... 1,556,250
1,500,000 Tokai Pfd Capital Company, Bond,
11.091% due 12/29/2049++ ......................................... 1,519,579
500,000 Total Access Communications, Conv. Note,
2.000% due 05/31/2006 ............................................ 494,375
5,750,000 Trans-Canada Pipeline Corporation, Deb.,
8.500% due 03/20/2023 ............................................ 5,845,162
------------
36,279,791
------------
FINANCIAL - 9.4%
80,000 Associates Corporation NA, Sr. Note,
6.625% due 05/15/2001 ............................................ 80,220
9,000,000 Barclays North American Capital Corporation, Deb.,
9.750% due 05/15/2021 ............................................ 9,826,199
2,000,000 Continental Corporation, Note,
7.250% due 03/01/2003 ............................................ 1,973,484
440,000 Equitable Companies, Inc., Deb.,
7.000% due 04/01/2028 ............................................ 404,391
Finova Capital Corporation, MTN:
745,000 6.220% due 03/01/2000 ............................................ 745,516
1,146,000 5.980% due 02/27/2001 ............................................ 1,133,773
1,000,000 GATX Leasing Corporation, MTN,
10.000% due 03/21/2001 ........................................... 1,039,413
500,000 Jefferson-Pilot Capital Trust A, Bond,
8.140% due 01/15/2046++ .......................................... 464,085
100,000 Jefferson-Pilot Capital Trust B, Company Guarantee,
8.285% due 03/01/2046++ .......................................... 94,437
1,250,000 Kemper Corporation, Note,
6.875% due 09/15/2003 ............................................ 1,249,215
495,000 MBNA America Bank NA, Note,
6.920% due 05/30/2000 ............................................ 496,597
Merrill Lynch & Company Inc., Note:
1,450,000 6.500% due 07/15/2018 ............................................ 1,302,262
2,000,000 6.750% due 06/01/2028 ............................................ 1,780,112
Paine Webber Group, Inc., Sr. Note:
830,000 8.060% due 01/17/2017 ............................................ 819,619
415,000 7.390% due 10/16/2017 ............................................ 382,326
500,000 PNC Institute Capital B, Company Guarantee,
8.315% due 05/15/2027++ .......................................... 483,453
Salomon Smith Barney Holdings:
300,000 Sr. Note,
7.590% due 01/28/2000 ............................................ 301,293
1,382,000 Note,
6.500% due 03/01/2000 ............................................ 1,384,284
2,500,000 Superior Financial Corporation, Sr. Note,
8.650% due 04/01/2003 ............................................ 2,442,737
500,000 Travelers Property Casualty Corporation, Note,
6.750% due 04/15/2001 ............................................ 502,916
505,000 US Leasing International Corporation,
Sr. Note,
8.750% due 12/01/2001 ............................................ 524,105
------------
27,430,437
------------
TRANSPORTATION - 7.4%
1,000,000 AMR Corporation, Deb.,
9.750% due 03/15/2000 ............................................ 1,011,642
1,500,000 Burlington Northern Santa Fe, Note,
8.750% due 02/25/2022 ............................................ 1,649,554
3,030,000 Conrail, Inc., Deb.,
9.750% due 06/15/2020 ............................................ 3,608,957
250,000 Equimar Shipholdings Ltd., Company Guarantee,
9.875% due 07/01/2007 ............................................ 153,750
United Air Lines, Inc.:
5,000,000 Equipment Trust Certificates,
10.850% due 07/05/2014 ........................................... 5,880,475
Pass-through Certificates:
3,000,000 9.080% due 10/26/2015 ............................................ 3,230,790
5,500,000 9.560% due 10/19/2018 ............................................ 6,142,235
------------
21,677,403
------------
OIL & GAS - 6.5%
1,600,000 Burlington Resources, Deb.,
9.125% due 10/01/2021 ............................................ 1,826,261
8,700,000 Occidental Petroleum Corporation, Sr. Note,
11.125% due 08/01/2010 ........................................... 10,779,204
5,950,000 Phillips Petroleum Company, Deb.,
9.180% due 09/15/2021 ............................................ 6,228,543
------------
18,834,008
------------
AUTO - 6.0%
2,000,000 Ford Holdings, Inc., Deb.,
9.375% due 03/01/2020 ............................................ 2,382,380
Ford Motor Company, Deb.:
3,750,000 8.900% due 01/15/2032 ............................................ 4,335,333
825,000 7.400% due 11/01/2046 ............................................ 797,708
General Motors Corporation, Deb.:
350,000 9.625% due 12/01/2000 ............................................ 361,452
8,000,000 9.400% due 07/15/2021 ............................................ 9,467,447
------------
17,344,320
------------
BANKS - 4.9%
175,000 Abbey National First Capital, Sub. Note,
8.200% due 10/15/2004 ............................................ 182,385
400,000 Banc One Corporation, Sub. Note,
10.000% due 08/15/2010 ........................................... 478,147
1,000,000 BankAmerica Corporation, Sub. Note,
6.625% due 08/01/2007 ............................................ 967,121
1,000,000 Bank of New York, Sub. Note,
7.875% due 11/15/2002 ............................................ 1,025,915
1,000,000 Barnett Banks, Florida, Inc., Sub. Note,
10.875% due 03/15/2003 ........................................... 1,112,738
690,000 BB&T Corporation, Sub. Note,
7.250% due 06/15/2007 ............................................ 682,229
1,000,000 Chase Manhattan Corporation, Sub. Note,
8.500% due 02/15/2002 ............................................ 1,040,658
1,000,000 Citicorp, Sub. Note,
8.000% due 02/01/2003 ............................................ 1,030,773
1,100,000 First Interstate Bancorp, Sub. Note,
9.125% due 02/01/2004 ............................................ 1,187,274
1,000,000 First Nationwide Bank, Sub. Deb.,
10.000% due 10/01/2006 ........................................... 1,043,558
246,000 First Union Corporation, Sub. Note,
9.450% due 08/15/2001 ............................................ 257,627
995,000 Fleet Financial Group, Inc., Sub. Deb.,
6.875% due 01/15/2028 ............................................ 900,884
1,000,000 Key Bank NA, Sub. Deb.,
6.950% due 02/01/2028 ............................................ 908,910
1,000,000 Manufacturers & Trade Trust Company,
Sub. Note,
8.125% due 12/01/2002 ............................................ 1,033,493
500,000 Mercantile Bank, Sub. Note,
7.625% due 10/15/2002 ............................................ 509,858
670,000 NationsBank Corporation Sub. Note,
6.800% due 03/15/2028 ............................................ 607,047
1,000,000 Norwest Bancorp, Sub. Deb.,
6.650% due 10/15/2023 ............................................ 880,331
500,000 Summit Bancorp, Sub. Note,
8.625% due 12/10/2002 ............................................ 524,867
------------
14,373,815
------------
UTILITIES - 2.8%
300,000 Avon Energy Partners Holding, Sr. Note,
6.730% due 12/11/2002++ .......................................... 296,091
1,030,000 National Rural Utilities Cooperative Finance Corporation,
Collateral Trust,
5.700% due 01/15/2010 ............................................ 928,777
Niagara Mohawk Power Corporation, Deb.:
1,000,000 9.750% due 11/01/2005 ............................................ 1,113,411
1,396,000 8.770% due 01/01/2018 ............................................ 1,473,645
Texas Utilities Electric Company, First Mortgage:
1,200,000 8.875% due 02/01/2022 ............................................ 1,240,339
3,000,000 8.750% due 11/01/2023 ............................................ 3,079,892
220,000 Texas-New Mexico Power Company,
Sr. Note,
6.250% due 01/15/2009 ............................................ 192,050
------------
8,324,205
------------
HEALTH CARE - 2.8%
1,500,000 Aetna Services, Inc., Company Guarantee,
7.625% due 08/15/2026 ............................................ 1,393,057
1,500,000 American Home Products Corporation, Deb.,
7.250% due 03/01/2023 ............................................ 1,431,822
1,047,000 CII Financial Inc., Conv. Note,
7.500% due 09/15/2001 ............................................ 679,241
200,000 Dura Pharmaceuticals Inc., Sub. Note,
3.500% due 07/15/2002 ............................................ 155,000
3,000,000 FHP International, Sr. Note,
7.000% due 09/15/2003 ............................................ 3,005,628
1,800,000 Medical Care International Inc. (Columbia), Conv. Sub. Deb.,
6.750% due 10/01/2006 ............................................ 1,505,250
------------
8,169,998
------------
GAMING - 2.8%
5,000,000 Circus Circus Enterprise, Deb.,
7.000% due 11/15/2036 ............................................ 4,442,270
1,500,000 Louisiana Casino Cruises, Note,
11.000% due 12/01/2005 ........................................... 1,496,250
1,250,000 Riviera Black Hawk Inc., First Mortgage,
13.000% due 05/01/2005 ........................................... 1,312,500
1,000,000 Riviera Holdings Corporation, Company Guarantee,
10.000% due 08/15/2004 ........................................... 885,000
------------
8,136,020
------------
REAL ESTATE INVESTMENT TRUSTS - 1.8%
500,000 Developers Diversified Realty, MTN, Sr. Note,
6.580% due 02/06/2001 ............................................ 494,868
Franchise Finance Corporation:
3,000,000 MTN,
7.070% due 01/15/2008 ............................................ 2,743,908
Sr. Note:
900,000 7.000% due 11/30/2000 ............................................ 895,642
1,100,000 7.875% due 11/30/2005 ............................................ 1,083,428
------------
5,217,846
------------
Total Corporate Bonds and Notes
(Cost $221,259,437) ............................................. 221,878,093
------------
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED
SECURITIES - 12.1%
FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA) - 4.4%
1,256,691 6.000% due 08/01/2013 ............................................ 1,208,819
1,560,940 5.500% due 03/01/2014 ............................................ 1,470,081
315,797 7.536% due 06/01/2016 ............................................ 324,906
52,591 7.000% due 07/01/2022 ............................................ 51,684
148,793 7.000% due 07/01/2023 ............................................ 146,227
1,681,743 7.250% due 03/18/2026 ............................................ 1,687,291
56,190 7.000% due 08/01/2026 ............................................ 55,223
107,694 7.000% due 09/01/2026 ............................................ 105,837
18,649 7.000% due 11/01/2026 ............................................ 18,327
3,289,079 6.500% due 09/01/2028 ............................................ 3,154,910
2,854,693 6.500% due 11/01/2028 ............................................ 2,738,244
129,451 6.000% due 02/01/2029 ............................................ 120,757
984,809 6.000% due 03/01/2029 ............................................ 918,674
975,973 6.000% due 04/01/2029 ............................................ 910,430
------------
Total FNMAs (Cost $13,331,011) .................................... 12,911,410
------------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (GNMA) - 4.2%
96,283 9.000% due 12/01/2004 ............................................ 99,394
1,000,247 7.000% due 07/15/2023 ............................................ 982,066
574,503 6.500% due 08/15/2023 ............................................ 549,631
1,594,915 6.500% due 12/15/2023 ............................................ 1,525,858
357,676 7.500% due 12/15/2023 ............................................ 360,465
2,014,527 6.000% due 02/15/2024 ............................................ 1,871,054
1,567,895 6.500% due 03/15/2024 ............................................ 1,500,018
1,402,255 6.500% due 07/15/2024 ............................................ 1,353,819
146,051 8.000% due 06/15/2027 ............................................ 149,454
1,418,944 8.000% due 08/15/2027 ............................................ 1,452,008
366,479 7.500% due 01/15/2028 ............................................ 367,876
230,688 7.500% due 02/15/2028 ............................................ 231,567
733,386 7.500% due 03/15/2028 ............................................ 736,181
485,454 7.500% due 08/15/2028 ............................................ 487,305
482,594 7.500% due 10/15/2028 ............................................ 484,434
------------
Total GNMAs (Cost $12,389,563) .................................... 12,151,130
------------
FEDERAL HOME LOAN MORTGAGE CORPORATION (FHLMC) - 3.5%
1,266,003 #G10735,
7.500% due 09/01/2012 ............................................ 1,283,344
784,661 #C00362,
9.000% due 06/01/2024 ............................................ 822,471
297,587 #C80253,
9.000% due 01/01/2025 ............................................ 311,927
8,126,189 #C00701,
6.500% due 01/01/2029 ............................................ 7,798,857
------------
Total FHLMCs (Cost $10,618,851) ................................... 10,216,599
------------
Total U.S. Government Agency Mortgage-Backed Securities
(Cost $36,339,425) .............................................. 35,279,139
------------
COLLATERALIZED MORTGAGE OBLIGATIONS (CMO) - 2.1%
1,750,000 Donaldson, Lufkin & Jenrette Acceptance Corporation,
1993-MF17 A2,
7.350% due 12/18/2003 ............................................ 1,752,424
1,354,136 Donaldson, Lufkin & Jenrette Acceptance Corporation, 1995-
Q10 B1,
7.620% due 01/25/2026 ............................................ 921,659
150,000 Federal National Mortgage Association, Series 1996-M7 B,
6.889% due 06/17/2011 ............................................ 151,186
388,931 Resolution Trust Corporation, 1991-M2 A2,
7.132% due 09/25/2020 ............................................ 377,525
2,812,886 Weyerhauser Mortgage Corporation, 1982-C FHA Putable,
7.430% due 06/01/2022 ............................................ 2,853,912
------------
Total CMOs (Cost $6,222,978) ...................................... 6,056,706
------------
U.S. TREASURY OBLIGATIONS - 7.0%
U.S. TREASURY BONDS - 4.0%
10,500,000 6.250% due 08/15/2023 ............................................ 10,280,160
1,500,000 6.125% due 11/15/2027 ............................................ 1,449,375
------------
11,729,535
------------
U.S. TREASURY NOTES - 3.0%
3,985,000 7.250% due 08/15/2022 ............................................ 4,348,631
5,000,000 5.250% due 11/15/2028 ............................................ 4,300,000
------------
8,648,631
------------
U.S. TREASURY STRIP (PRINCIPAL ONLY) - 0.0%**
328,000 Zero coupon due 08/15/2022 ....................................... 76,688
------------
Total U.S. Treasury Obligations
(Cost $21,854,515) .............................................. 20,454,854
------------
SHARES
------
PREFERRED STOCKS - 0.7%
7,000 California Federal, Series A, Conv. Pfd.,
9.125% due 01/31/2002 ........................................... 155,750
15,100 First Industrial Realty Trust, Series A .......................... 345,412
13,000 Microsoft Corporation, Series A, Conv. Pfd.,
$2.196 due 12/15/2009 ........................................... 1,318,687
------------
Total Preferred Stocks (Cost $1,625,250) .......................... 1,819,849
------------
TOTAL INVESTMENTS (Cost $287,301,605*) ................................. 98.1% 285,488,641
OTHER ASSETS AND LIABILITIES (NET) ..................................... 1.9 5,588,715
---- ------------
NET ASSETS ............................................................. 100.0% $291,077,356
===== ============
- --------------
* Aggregate cost for federal tax purposes.
** Amount represents less than 0.1% of net assets.
++ Security exempt from registration under Rule 144A of the Securities Act of 1933. These
securities may be resold in transactions exempt from registration, normally to qualified
institutional buyers.
- --------------------------------------------------------------------------------------------------
GLOSSARY OF TERMS
FHA -- Federal Housing Authority
MTN -- Medium Term Note
STRIP -- Separate trading of registered interest and principal securities
- --------------------------------------------------------------------------------------------------
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
PORTFOLIO of INVESTMENTS
CALIFORNIA INSURED INTERMEDIATE MUNICIPAL FUND
OCTOBER 31, 1999
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- --------- -----
MUNICIPAL BONDS AND NOTES - 97.6%
CALIFORNIA - 96.6%
<C> <S> <C>
Alameda County:
$1,000,000 COP, (Santa Rita Jail Project),
(MBIA Insured),
5.375% due 06/01/2009 ............................................ $ 1,028,630
1,000,000 Public Financing Authority Revenue,
5.000% due 09/02/2008 ............................................ 951,500
500,000 California Educational Facilities, Financing Authority
Revenue, University San Diego, (AMBAC Insured),
Zero coupon due 10/01/2009 ....................................... 299,425
1,000,000 California Health Facilities, Financing Authority Revenue,
(Catholic Health Corporation), Series A, (AMBAC Insured),
5.875% due 07/01/2009 ............................................ 1,047,000
California Housing Finance Agency Revenue:
1,930,000 Home Mortgage, Series B1, AMT,
(AMBAC Insured),
6.200% due 02/01/2007 ............................................ 1,969,295
Home Mortgage, Series L, AMT,
(MBIA Insured):
330,000 5.000% due 08/01/2008 ............................................. 323,539
500,000 5.100% due 02/01/2009 ............................................. 492,180
445,000 Series E, (MBIA Insured),
6.050% due 08/01/2006 ........................................... 454,082
450,000 SFMR, Series D1,
4.750% due 08/01/2009 ........................................... 437,036
California State, GO:
1,240,000 County Jail and School Building,
(AMBAC Insured),
7.250% due 08/01/2003 ............................................ 1,362,338
1,000,000 (FGIC Insured),
6.200% due 09/01/2005 ............................................ 1,084,500
California State, Public Works Board, (Various California
University Projects), Series A, (AMBAC Insured):
1,500,000 Series A,
5.900% due 12/01/2003 ............................................ 1,589,220
2,000,000 Series D,
5.250% due 10/01/2010 ............................................ 2,025,640
California Statewide Communities Development Authority,
Children's Hospital of
Los Angeles, COP:
50,000 4.200% due 08/15/2007 ............................................. 48,088
1,600,000 (MBIA Insured),
6.000% due 06/01/2007 ............................................ 1,711,920
1,000,000 Castaic Lake, Water Agency, COP, (Water Systems Improvement
Project), Series A, (MBIA Insured),
5.600% due 08/01/2005 ............................................ 1,047,160
1,940,000 Central Valley, School Districts Financing Authority,
Capital Appreciation, School District, GO, Series A, (MBIA
Insured),
Zero coupon due 08/01/2008 ....................................... 1,247,730
850,000 Corona, Public Financing Authority, Superior Lien, Series A,
(FSA Insured),
4.375% due 09/01/2009 ............................................ 804,313
60,000 El Rancho, Unified School District, Series B, (FGIC
Insured),
Zero coupon due 08/01/2009 ....................................... 36,242
Foothill Eastern Transportation Corridor Agency, Toll Road
Revenue:
1,000,000 Capital Appreciation, Sr. Lien, Series A,
Zero coupon due 01/01/2004 ....................................... 827,670
(MBIA Insured):
1,500,000 4.375% due 01/15/2007 ............................................ 1,464,105
185,000 4.500% due 01/15/2008 ............................................ 180,218
Fresno, Unified School District, GO, Series C, (MBIA
Insured):
1,265,000 5.800% due 02/01/2012 ............................................ 1,319,623
1,375,000 5.800% due 02/01/2013 ............................................ 1,425,793
Gilroy, Unified School District, COP,
(FSA Insured):
1,390,000 5.600% due 09/01/2003 ............................................ 1,452,981
1,400,000 5.625% due 09/01/2004 ............................................ 1,472,366
685,000 Golden West Schools, Financing Authority, Series A, (MBIA
Insured),
5.650% due 02/01/2012 ............................................ 703,543
1,000,000 Inland Empire Solid Waste Financing Authority Revenue,
(Landfill Improvement Financing Project), Series B, AMT,
(FSA Insured),
6.000% due 02/01/2006 ............................................ 1,060,500
1,000,000 Irvine, Public Facilities and Infrastructure Authority
Assessment Revenue, Series A, (AMBAC Insured),
4.150% due 09/02/2009 ............................................ 930,150
1,000,000 Loma Linda, Hospital Revenue, (Loma Linda University Medical
Center), Series A, (AMBAC Insured),
5.050% due 12/01/2012 ............................................ 962,050
Los Angeles, Community Redevelopment Agency, MFHR, (AMBAC
Insured):
175,000 5.650% due 07/01/2000 ............................................ 175,557
855,000 6.000% due 07/01/2004 ............................................ 880,120
Los Angeles, COP:
1,200,000 5.000% due 02/01/2008 ............................................ 1,159,356
905,000 Department of Public Social Services,
Series A, (AMBAC Insured),
5.125% due 08/01/2012 ............................................ 879,352
Los Angeles, Department of Water and Power, Electric Plant
Revenue Bond,
(MBIA Insured):
1,100,000 8.500% due 01/15/2002 ............................................ 1,197,966
1,000,000 5.400% due 09/01/2006 ............................................ 1,039,510
1,500,000 Los Angeles, Unified School District, COP, Series B, (AMBAC
Insured),
6.000% due 12/01/2001 ............................................ 1,559,700
1,500,000 Los Angeles County, Capital Asset Leasing Corporation,
Leasehold Revenue,
(AMBAC Insured),
6.000% due 12/01/2006 ............................................ 1,610,265
Los Angeles County, Schools Regionalized Business Services,
Capital Appreciation, COP, Series A, (AMBAC Insured):
1,670,000 Zero coupon due 08/01/2008 ....................................... 1,059,515
1,980,000 Zero coupon due 08/01/2012 ....................................... 960,201
492,000 Modesto, Mortgage Revenue Bonds,
(GNMA Collateral),
5.875% due 12/01/2004 ............................................ 504,772
250,000 Oakland, Improvement Board Act of 1915, Medical Hill
Parking, Assessment District #3, (MBIA Insured),
6.000% due 09/02/2004 ............................................ 259,118
330,000 Oakland, Revenue Bonds, (YMCA East Bay Project),
6.250% due 06/01/2000 ............................................ 331,964
Paramount, Redevelopment Agency Tax Allocation,
(Redevelopment Project Area #1), (MBIA Insured):
1,610,000 6.100% due 08/01/2006 ............................................ 1,721,042
1,700,000 6.100% due 08/01/2007 ............................................ 1,817,249
1,155,000 Redondo Beach, Public Financing Authority Revenue, (South
Bay Center Redevelopment Project),
6.750% due 07/01/2006 ............................................ 1,209,608
1,300,000 Sacramento, Municipal Utility District, Electric Revenue,
(AMBAC Insured),
5.500% due 05/15/2007 ............................................ 1,348,606
940,000 San Bernardino, Unified City School District, Capital
Appreciation, Series B,
(FGIC Insured),
Zero coupon due 08/01/2008 ....................................... 604,570
San Diego, Unified School District, Capital Appreciation,
Series A, (FGIC Insured):
2,000,000 Zero coupon due 07/01/2008 ....................................... 1,291,740
1,500,000 Zero coupon due 07/01/2011 ....................................... 796,710
700,000 San Diego County, COP, Burnham Institute,
5.700% due 09/01/2011 ............................................ 692,531
San Francisco City & County, Airport Community International
Airport Revenue:
2,485,000 Second Series - Issue 18A, AMT,
(MBIA Insured),
6.000% due 05/01/2006 ............................................ 2,654,949
1,000,000 Second Series - Issue 22, AMT,
(AMBAC Insured),
6.000% due 05/01/2008 ............................................ 1,068,240
1,050,000 Santa Ana, COP, (Santa Ana Recycling Project), Series A,
AMT, (AMBAC Insured),
5.400% due 05/01/2007 ............................................ 1,080,177
650,000 Santa Clara, Redevelopment Agency, Tax Allocation, (Bay
Shore North Project), (AMBAC Insured),
7.000% due 07/01/2010 ............................................ 733,122
1,350,000 Solano County, COP, (Solano Park Hospital Project), (FSA
Insured),
6.500% due 08/01/2006 ............................................ 1,480,410
1,265,000 South Orange County, Public Financing Authority, Special Tax
Revenue, Series A, (FSA Insured),
4.750% due 08/15/2009 ............................................ 1,240,168
995,000 Southern California, Home Financing Authority, MFHR, (The
Fountains Project), Series A, AMT, (AMBAC Insured),
(FNMA Collateral),
5.400% due 01/01/2027 ............................................ 999,030
1,000,000 Stanton, MFHR, (Continental Gardens Apartments), (AMBAC
Insured), (FNMA Collateral), 5.625% due 08/01/2029 1,014,520
1,305,000 Stocton, Community Facilities Supplemental Tax, (Mello Roos-
Weston Ranch), Series A,
5.500% due 09/01/2009 ............................................ 1,255,513
1,070,000 University of California, Series A,
(CONNIE LEE Insured),
5.500% due 09/01/2006 ............................................ 1,097,595
1,000,000 Valley Health Systems, California Hospital Revenue,
(Hospital Revenue Refunding & Improvement Project), Series A,
(ACA Insured),
6.125% due 05/15/2005 ............................................ 1,040,570
------------
64,522,583
------------
PUERTO RICO - 1.0%
628,255 Centro de Recaudaciones de Ingresos Municipales, COP,
6.850% due 10/17/2003 ............................................ 636,404
------------
Total Municipal Bonds and Notes
(Cost $64,503,500) .............................................. 65,158,987
---------------
SHORT-TERM MUNICIPAL BONDS - 0.5%
200,000 California Statewide Communities Development Authority, John
Muir/Mt. Diablo Health Center, (AMBAC Insured),
3.550% due 08/15/2027+ ........................................... 200,000
100,000 Orange County Sanitation Districts 1-3, 5-7 & 11, COP,
3.500% due 08/01/2016+ ........................................... 100,000
------------
Total Short-Term Municipal Bonds
(Cost $300,000) ................................................. 300,000
------------
TOTAL INVESTMENTS (Cost $64,803,500*) ................................... 98.1% 65,458,987
OTHER ASSETS AND LIABILITIES (NET) ...................................... 1.9 1,294,087
---- ------------
NET ASSETS .............................................................. 100.0% $66,753,074
===== ===========
- --------------
* Aggregate cost for federal tax purposes.
+ Variable rate demand notes are payable upon not more than one business day's notice. The
interest rate shown reflects the rate currently in effect.
California Insured Intermediate Municipal Fund had the following industry concentrations greater
than 10% at October 31, 1999 (as a percentage of net assets):
Public Education 22.6%
General Purpose 11.5%
Tax District 10.5%
California Insured Intermediate Municipal Fund had the following insurance
concentrations greater than 10% at October 31, 1999 (as a percentage of net
assets):
AMBAC 35.6%
MBIA 30.1%
FSA 11.3%
- --------------------------------------------------------------------------------------------------
GLOSSARY OF TERMS
ACA -- American Capital Access
AMBAC -- American Municipal Bond Assurance Corporation
AMT -- Alternative Minimum Tax
CONNIE LEE -- College Construction Loan Association
COP -- Certificates of Participation
FGIC -- Federal Guaranty Insurance Corporation
FNMA -- Federal National Mortgage Association
FSA -- Financial Security Assurance
GNMA -- Government National Mortgage Association
GO -- General Obligation Bonds
MBIA -- Municipal Bond Investors Assurance
MFHR -- Multi-family Housing Revenue
SFMR -- Single Family Mortgage Revenue
- --------------------------------------------------------------------------------------------------
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
PORTFOLIO of INVESTMENTS
CALIFORNIA MUNICIPAL FUND
OCTOBER 31, 1999
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
MUNICIPAL BONDS AND NOTES - 97.9%
CALIFORNIA - 95.5%
$ 1,100,000 Abag, Financing Authority for Nonprofit Corporation, COP,
(Episcopal Homes Foundation),
5.000% due 07/01/2007 ........................................... $ 1,091,981
5,360,000 Alhambra, Improvement Board Act of 1915, Assessment
District No. 1, Public Works, (MBIA Insured),
6.125% due 09/02/2018 ........................................... 5,433,272
2,550,000 Alta Loma, School District, Capital Appreciation, Series A,
(FGIC Insured),
Zero coupon due 08/01/2022 ...................................... 636,225
2,000,000 Anaheim, Public Financing Authority Revenue, Residual
Interest Bond, (MBIA Insured),
9.494% due 12/28/2018+ .......................................... 2,212,500
1,475,000 Antioch, Public Financing Authority, Reassessment Revenue,
Series A, (AMBAC Insured),
5.000% due 09/02/2018 ........................................... 1,310,508
2,000,000 Barstow Redevelopment Agency, Central Redevelopment, Tax
Allocation, Series A, (MBIA Insured),
7.000% due 09/01/2014 ........................................... 2,291,500
2,910,000 Big Bear Lake, Improvement Agency, Housing Set Aside
Mountain Meadows II, (AMBAC Insured),
5.375% due 08/01/2029 ........................................... 2,695,154
1,000,000 Brawley, Wastewater Treatment Facility, (AMBAC Insured),
5.000% due 07/01/2016 ........................................... 915,660
1,000,000 Brea & Olinda, Unified School District, (High School
Refinancing), COP, Series A, (FSA Insured),
6.000% due 08/01/2009 ........................................... 1,058,500
4,000,000 California Community College Financing Authority Lease
Revenue, Series A, (MBIA Insured),
4.625% due 10/01/2019 ........................................... 3,359,320
California Educational Facilities Authority Revenue:
4,605,000 (College of Osteopathic Medicine),
(Pre-refunded to 06/01/2003),
7.500% due 06/01/2018 ........................................... 5,073,835
1,000,000 (Heald Colleges),
5.450% due 02/15/2022 ........................................... 901,030
2,000,000 (Pooled College and University), Series B,
5.125% due 04/01/2017 ........................................... 1,767,560
California Health Facilities, Financing Authority Revenue:
10,000,000 (Cedars-Sinai Medical Center),
6.125% due 12/01/2030 ........................................... 9,768,600
1,000,000 (Hospital of The Good Samaritan),
7.000% due 09/01/2021 ........................................... 1,022,880
California Housing Finance Agency, Home Mortgage, AMT:
500,000 (Multi-family Housing II), Series C,
6.875% due 08/01/2024 ........................................... 519,690
(Multi-family Housing III), Series A, (MBIA Insured):
1,000,000 5.850% due 08/01/2017 ........................................... 989,020
3,000,000 5.950% due 08/01/2028 ........................................... 2,923,140
Series B, (MBIA Insured):
1,000,000 6.000% due 08/01/2016 ........................................... 1,000,030
2,000,000 6.100% due 02/01/2028 ........................................... 1,986,440
925,000 Series N, (FHA/VA Insured),
6.375% due 02/01/2027 ........................................... 948,254
California Housing Finance Agency, Home Ownership &
Improvement Revenue:
2,000,000 Series A, (MBIA Insured),
Zero coupon due 02/01/2016 ...................................... 758,660
415,000 Series B, AMT, (MBIA Insured),
5.200% due 08/01/2026 ........................................... 418,577
5,010,000 Series C, AMT, (FHA Insured),
6.650% due 08/01/2014 ........................................... 5,135,050
665,000 Series D, AMT, (MBIA Insured),
6.300% due 08/01/2014 ........................................... 682,170
5,000,000 Series D, AMT,
Zero coupon due 02/01/2019 ...................................... 1,514,450
2,630,000 Series F, AMT, (MBIA Insured),
6.800% due 08/01/2014 ........................................... 2,744,142
1,060,000 Series F1, AMT, (AMBAC Insured),
6.500% due 08/01/2008 ........................................... 1,097,927
California, Pollution Control Financing Authority, PCR:
1,000,000 (Keller Canyon Landfill Company Project), AMT,
6.875% due 11/01/2027 ........................................... 990,190
2,500,000 San Diego Gas and Electric), Series A, AMT, (AMBAC Insured),
5.850% due 06/01/2021 ........................................... 2,438,550
(Southern California Edison Company):
13,250,000 Series B, AMT, (AMBAC Insured),
6.400% due 12/01/2024 ........................................... 13,444,378
5,000,000 Series B, AMT, (FGIC Insured),
6.400% due 12/01/2024** ......................................... 5,073,350
2,000,000 Series B, (MBIA Insured),
5.450% due 09/01/2029 ........................................... 1,862,820
5,000,000 (Waste Management), Series A, AMT,
7.150% due 02/01/2011 ........................................... 5,109,150
3,100,000 (Waste Removal Systems), Series A, AMT, LOC Wells Fargo
& Company,
7.100% due 11/01/2009 ........................................... 3,167,735
2,250,000 California Residential Efficiency Financing Authority,
(First Resource Efficiency), (AMBAC Insured),
6.000% due 07/01/2017 ........................................... 2,281,207
1,075,000 California Rural Home Mortgage Finance Authority, SFMR,
Mortgage-Backed Securities, Series A-2, AMT, (GNMA Collateral),
7.950% due 12/01/2024 ........................................... 1,162,741
California State, GO:
1,500,000 4.000% due 04/01/2008 ........................................... 1,399,335
2,000,000 5.500% due 04/01/2013 ........................................... 2,014,080
1,500,000 5.000% due 10/01/2018 ........................................... 1,340,190
(FGIC Insured):
1,000,000 6.750% due 02/01/2008 ........................................... 1,124,640
1,000,000 4.500% due 12/01/2021 ........................................... 814,000
415,000 (MBIA Insured),
6.000% due 10/01/2014 ........................................... 429,691
California State, Public Works Board Lease Revenue:
1,915,000 (California Community Colleges),
Series A,
5.000% due 12/01/2011 ........................................... 1,856,631
1,750,000 (Department Health Sevices), Series A, (MBIA Insured),
5.750% due 11/01/2024 ........................................... 1,699,215
California Statewide Communities Development Authority, COP:
3,000,000 (Cedars-Sinai Medical Center),
(MBIA Insured),
6.500% due 08/01/2012 ........................................... 3,276,420
735,000 (Children's Campus),
6.500% due 09/01/2022 ........................................... 754,963
California Statewide Communities Development Authority Revenue:
3,300,000 Multi-family, (Housing Equity Residential), Series C,
5.200% due 12/01/2029 ........................................... 3,171,729
1,000,000 Water & Wastewater, (Pooled Finance Program), Series A,
(FSA Insured),
5.000% due 10/01/2025 ........................................... 869,880
2,800,000 (Sherman Oaks Project), Series A, (AMBAC Insured),
5.000% due 08/01/2022 ........................................... 2,478,364
Capistrano Beach, Water District, COP, (Wastewater Enterprises),
Capital Improvements, (MBIA Insured):
2,645,000 4.750% due 12/01/2028 ........................................... 2,159,881
1,475,000 4.750% due 12/01/2028 ........................................... 1,204,470
6,225,000 Carson, Improvement Board Act of 1915, GO,
7.375% due 09/02/2022 ........................................... 6,544,591
Castaic Lake, Water Agency, COP, Water System Improvement, (AMBAC
Insured):
3,000,000 5.125% due 08/01/2030 ........................................... 2,620,020
10,445,000 Zero coupon due 08/01/2022 ...................................... 2,634,856
4,675,000 Chula Vista, IDR, (San Diego Gas and Electric), Series A, AMT,
(AMBAC Insured),
6.400% due 12/01/2027 ........................................... 4,741,572
2,885,000 Chula Vista, Redevelopment Agency, Tax Allocation Revenue,
8.625% due 09/01/2024 ........................................... 3,338,435
2,000,000 Coachella, Redevelopment Agency, Tax Allocation Revenue,
(Project Area No. 3),
5.875% due 12/01/2028 ........................................... 1,816,980
Contra Costa County, Finance Authority, Tax Allocation Revenue,
Series A:
1,595,000 7.000% due 08/01/2009 ........................................... 1,715,837
1,000,000 7.100% due 08/01/2022 ........................................... 1,065,050
Culver City, Redevelopment Finance Authority Revenue, Tax
Allocation:
5,000,000 Series A, (FSA Insured),
5.600% due 11/01/2025 ........................................... 4,740,200
1,500,000 Series B,
6.250% due 11/01/2025 ........................................... 1,453,230
2,500,000 Davis, Public Facilities Finance Authority, Mace Ranch
Area, Series A,
6.600% due 09/01/2025 ........................................... 2,511,375
Delano, COP:
1,720,000 Regional Medical Center,
5.250% due 01/01/2018 ........................................... 1,454,380
3,200,000 Series A, (Pre-refunded to 01/01/2003),
9.250% due 01/01/2022 ........................................... 3,709,920
Duarte, COP, Series A:
1,500,000 5.250% due 04/01/2024 ........................................... 1,258,305
2,500,000 5.250% due 04/01/2031 ........................................... 2,045,125
1,985,000 El Cajon, COP, (Helix View Nursing Hospital), Limited
Obligation, Series 1990, AMT, (FHA Insured),
7.750% due 02/01/2029 ........................................... 2,007,649
2,215,000 El Monte, COP, (AMBAC Insured),
4.750% due 06/01/2030 ........................................... 1,796,188
Escondido, Unified High School District, Capital Appreciation,
(MBIA Insured):
5,850,000 Zero coupon due 11/01/2019 ...................................... 1,759,973
3,715,000 Zero coupon due 05/01/2020 ...................................... 1,082,477
3,655,000 Zero coupon due 11/01/2020 ...................................... 1,033,451
4,595,000 Fairfield, Housing Authority Mortgage Revenue, (Creekside
Estates Project), (Pre-refunded to 08/01/2002),
7.875% due 02/01/2015 ........................................... 5,107,756
1,000,000 Fairfield, Housing Authority Revenue, (Creekside Estates
Mobile Homes),
5.625% due 09/01/2023 ........................................... 906,910
Foothill Eastern Transportation Corridor Agency, Toll Road
Revenue:
1,000,000 5.000% due 01/15/2006 ........................................... 1,002,840
5,000,000 5.750% due 01/15/2040 ........................................... 4,600,350
3,000,000 5.800% due 01/15/2020++ ......................................... 1,594,830
4,000,000 5.875% due 01/15/2026++ ......................................... 2,084,480
10,000,000 Zero coupon due 01/15/2032 ...................................... 1,248,400
10,000,000 Zero coupon due 01/15/2033 ...................................... 1,166,600
10,000,000 Zero coupon due 01/15/2034 ...................................... 1,093,500
10,000,000 Zero coupon due 01/15/2036 ...................................... 959,100
10,000,000 Zero coupon due 01/15/2037 ...................................... 898,000
10,000,000 Zero coupon due 01/15/2038 ...................................... 841,100
1,200,000 (MBIA Insured),
4.375% due 01/15/2007 ........................................... 1,171,284
5,000,000 Series A,
7.000% due 01/01/2008 ........................................... 4,065,350
1,655,000 Fresno, Unified School District, GO, Series C, (MBIA Insured),
5.800% due 02/01/2016 ........................................... 1,697,384
2,000,000 Gilroy, Unified School District, COP, (Measure J Capital
Projects), (FSA Insured),
6.250% due 09/01/2012 ........................................... 2,103,540
Golden West Schools Financing Authority:
(School District Refinancing Program), Series A, (MBIA Insured):
1,000,000 Zero coupon due 02/01/2010 ...................................... 579,870
1,740,000 Zero coupon due 02/01/2011 ...................................... 944,263
1,000,000 Zero coupon due 08/01/2011 ...................................... 528,140
1,215,000 Zero coupon due 08/01/2016 ...................................... 448,651
1,580,000 Zero coupon due 02/01/2017 ...................................... 559,541
2,225,000 Huntington Beach, School District, COP,
5.250% due 07/01/2029 ........................................... 2,060,194
2,000,000 Huntington Park, Public Financing Authority Lease Revenue,
(Waste Water System Project),
6.200% due 10/01/2025 ........................................... 1,901,420
1,500,000 Inglewood, Redevelopment Agency, Tax Allocation, (Merged
Redevelopment), Series A, (AMBAC Insured),
5.250% due 05/01/2023 ........................................... 1,372,425
1,700,000 Inglewood, Unified School District, GO, Series A, (FGIC Insured),
5.600% due 10/01/2024 ........................................... 1,630,130
2,000,000 Irvine, Meadows Mobile Home Park Revenue, Series A, (GNMA Collateral),
5.700% due 03/01/2018 ........................................... 1,895,340
1,270,000 Irvine, Public Facilities & Infrastructure Authority,
Assessment Revenue, Series A, (AMBAC Insured),
4.050% due 09/02/2008 ........................................... 1,192,441
1,175,000 Kings County, Waste Management Authority, Solid Waste Revenue, AMT,
7.200% due 10/01/2014 ........................................... $ 1,255,711
3,625,000 La Habra, COP, Park and Viewpark, Series A, (FSA Insured),
4.800% due 09/01/2022 ........................................... 3,053,918
1,500,000 La Verne, Public Financing Authority, Capital Improvement,
7.250% due 09/01/2026 ........................................... 1,564,830
2,000,000 Lake Elsinore, Public Financing Authority, Local Agency
Revenue, Series G,
5.800% due 09/02/2015 ........................................... 1,846,800
2,655,000 Loma Linda, Hospital Revenue, (Loma Linda University
Medical Center), Series A, (AMBAC Insured),
5.200% due 12/01/2014 ........................................... 2,537,490
Long Beach, Rainbow Harbor Revenue, AMT:
2,750,000 (AMBAC Insured),
5.125% due 05/01/2020 ........................................... 2,472,745
2,000,000 (FGIC Insured),
6.000% due 05/15/2010 ........................................... 2,099,560
Los Angeles, Community Redevelopment Agency, AMT:
1,425,000 5.850% due 12/01/2026 ........................................... 1,331,591
3,490,000 Series C, (AMBAC Insured),
6.750% due 07/01/2014 ........................................... 3,643,490
1,000,000 Los Angeles, Department of Airport Revenue, Series A,
(FGIC Insured),
5.500% due 05/15/2008 ........................................... 1,037,680
310,000 Los Angeles, Home Mortgage Revenue, Mortgage-Backed
Securities Project, (GNMA Collateral),
8.100% due 05/01/2017 ........................................... 313,534
315,000 Los Angeles, SFMR, Program 1990, Issue A, AMT, (GNMA Collateral),
7.550% due 12/01/2023 ........................................... 323,124
Los Angeles, State Building Authority Lease Revenue, Series A:
730,000 4.600% due 10/01/2007 ........................................... 719,262
500,000 4.750% due 10/01/2008 ........................................... 493,015
Los Angeles, Unified School District, GO:
1,445,000 Series A, (FGIC Insured),
6.000% due 07/01/2013 ........................................... 1,524,359
3,250,000 Series B,
5.000% due 07/01/2023 ........................................... 2,850,998
10,000,000 Los Angeles County, Disney Parking Refunding Project, COP,
(AMBAC Insured),
4.750% due 03/01/2023 ........................................... 8,346,900
1,000,000 Los Angeles County, Master Refunding Project, COP,
(Inverse Floater), (Pre-refunded to 05/01/2001),
9.076% due 06/01/2015 ........................................... 1,115,000
Los Angeles County, MFHR, AMT, (GNMA Collateral):
3,000,000 (Park Parthenia Project),
7.400% due 01/20/2022 ........................................... 3,067,380
1,000,000 (Ridgecroft Apartments Project), Series E, AMT,
6.250% due 09/20/2039 ........................................... 1,006,970
3,000,000 Los Angeles County, Metropolitan Transportation Authority,
Sales Tax Revenue, First Tier Properties, Series C,
5.000% due 07/01/2023 ........................................... 2,631,750
Los Angeles County, Residual Interest Bond, COP:
3,740,000 (Edmund D. Edelman Children's Center), (AMBAC Insured),
6.000% due 04/01/2012 ........................................... 3,867,833
6,920,000 (Pension Obligation), (MBIA Insured),
6.900% due 06/30/2008 ........................................... 7,880,634
650,000 Los Angeles County, SFHR, Series B, (GNMA Collateral),
7.600% due 08/01/2016 ........................................... 656,650
Los Angeles County, School Regionalized Business Service, COP,
Series A, (AMBAC Insured):
1,045,000 Zero coupon due 08/01/2014 ...................................... 439,621
1,910,000 Zero coupon due 08/01/2015 ...................................... 746,218
1,945,000 Zero coupon due 08/01/2016 ...................................... 708,933
1,980,000 Zero coupon due 08/01/2017 ...................................... 673,675
2,135,000 Zero coupon due 08/01/2021 ...................................... 556,701
2,180,000 Zero coupon due 08/01/2022 ...................................... 533,206
Midpeninsula, Financing Authority Revenue, Regional Open Space
District, Second Issue, (AMBAC Insured):
3,905,000 Zero coupon due 08/01/2028 ...................................... 614,530
4,055,000 Zero coupon due 09/01/2028 ...................................... 654,558
4,100,000 Zero coupon due 08/01/2029 ...................................... 605,037
1,000,000 Monterey County, COP, (Natividad Medical Center
Improvement Project), Series E, (MBIA Insured),
4.750% due 08/01/2017 ........................................... 871,920
2,785,000 Needles, Public Utilities Authority Revenue, (Utilities
System Acquisition Project), Series A,
6.500% due 02/01/2022 ........................................... 2,765,533
3,500,000 Novato, Special Tax Revenue, (Community Facilities District),
7.200% due 08/01/2015 ........................................... 3,655,610
2,000,000 Oakland, Revenue Bonds, (YMCA East Bay Project),
7.100% due 06/01/2010 ........................................... 2,069,760
Oakland, Unified School District:
2,645,000 7.000% due 11/15/2011 ........................................... 3,011,518
3,445,000 COP, Energy Retrofit,
6.750% due 11/15/2014 ........................................... 3,908,387
4,500,000 Palm Desert, Financing Authority, Tax Allocation Revenue,
(Inverse Floater), (MBIA Insured),
8.760% due 04/01/2022+ .......................................... 4,719,375
1,150,000 Palm Springs, Financing Authority, (Convention Center
Project), Series A, (MBIA Insured),
6.750% due 11/01/2021 ........................................... 1,219,506
Port Oakland, AMT, (Mitsu Osk Lines Ltd.), Series A, LOC
Industrial Bank of Japan Ltd.:
3,030,000 6.750% due 01/01/2012 ........................................... 3,184,712
2,300,000 6.800% due 01/01/2019 ........................................... 2,337,306
3,000,000 Rancho, Water District Financing Authority, Residual
Interest Bond, (AMBAC Insured), (Pre-refunded to 09/11/2001),
9.270% due 08/17/2021+ .......................................... 3,352,500
2,750,000 Redding, Electrical Systems Revenue, COP, (Inverse
Floater), (MBIA Insured),
9.004% due 07/08/2022+ .......................................... 3,066,250
1,000,000 Redondo Beach, Public Financing Authority Revenue, (South
Bay Center Redevelopment Project),
7.125% due 07/01/2026 ........................................... 1,051,970
Richmond, Power Financing Authority Term Lease Revenue:
1,180,000 4.450% due 06/01/2007 ........................................... 1,125,106
1,000,000 4.550% due 06/01/2008 ........................................... 946,960
1,500,000 Riverside, School District, Special Project,
7.250% due 09/01/2018 ........................................... 1,646,715
Riverside County, Public Financing Authority Revenue, COP:
1,500,000 5.750% due 05/15/2019 ........................................... 1,338,435
2,100,000 5.800% due 05/15/2029 ........................................... 1,829,142
Rocklin, Unified School District, (FGIC Insured):
1,030,000 Zero coupon due 08/01/2014 ...................................... 438,306
1,210,000 Zero coupon due 08/01/2016 ...................................... 446,805
1,255,000 Zero coupon due 08/01/2017 ...................................... 432,925
1,360,000 Zero coupon due 08/01/2019 ...................................... 409,034
1,415,000 Zero coupon due 08/01/2020 ...................................... 399,653
1,225,000 Zero coupon due 08/01/2023 ...................................... 286,883
Rohnert Park, Community Development Agency, Tax Allocation
Revenue, Capital Appreciation, (Rohnert Redevelopment), (MBIA
Insured):
1,745,000 Zero coupon due 08/01/2021 ...................................... 462,757
1,755,000 Zero coupon due 08/01/2023 ...................................... 411,003
1,755,000 Zero coupon due 08/01/2025 ...................................... 361,898
1,755,000 Zero coupon due 08/01/2027 ...................................... 320,147
1,755,000 Zero coupon due 08/01/2029 ...................................... 283,204
3,240,000 Sacramento County, Airport System Revenue, Series 1989,
AMT, (Unrefunded Balance), (AMBAC Insured),
7.000% due 07/01/2020 ........................................... 3,311,345
2,300,000 Saddleback Valley, Unified School District, Public
Financing Authority, Special Tax Revenue, Series A, (FSA
Insured),
4.750% due 09/01/2020 ........................................... 1,959,232
1,000,000 Salinas, California Improvement Board, Act 1915, Special
Assessment District #90-1, Series C-185,
5.400% due 09/02/2012 ........................................... 934,400
San Bernardino County, COP, (MBIA Insured):
3,500,000 Joint Powers, Financing Authority, (Police Station),
5.500% due 09/01/2024 ........................................... 3,290,210
10,000,000 Residual Interest Bond,
7.200% due 07/01/2016+ .......................................... 10,425,000
4,465,000 San Diego, Unified School District, GO, Series A, (FGIC Insured),
Zero coupon due 07/01/2018 ...................................... 1,465,859
San Diego County, COP:
1,600,000 5.700% due 02/01/2028 ........................................... 1,433,504
2,000,000 (Burnham Institute),
6.250% due 09/01/2029 ........................................... 1,961,100
4,000,000 San Diego County, Residual Interest Bond, COP, Series B,
(MBIA Insured), (Pre-refunded to 04/27/2006),
8.720% due 04/08/2021+ .......................................... 4,810,000
1,000,000 San Dimas, Housing Authority Revenue, (Charter Oak Mobile
Home Project), Series A, (FNMA Collateral),
5.700% due 07/01/2028 ........................................... 912,140
395,000 San Francisco, Bay Area Transportation, Financing
Authority, Bridge Toll Notes, (ACA Insured),
4.750% due 02/01/2004 ........................................... 393,546
1,415,000 San Francisco City and County, International Airport
Commission Revenue, Second Series, Issue 22, AMT, (AMBAC
Insured),
6.000% due 05/01/2008 ........................................... 1,511,560
San Francisco City and County, MFMR, Series A, (FNMA Collateral):
1,000,000 6.350% due 02/15/2012 ........................................... 1,015,870
1,250,000 6.450% due 02/15/2024 ........................................... 1,267,938
San Francisco City and County, Redevelopment Agency, Lease
Revenue, Capital Appreciation, (George R. Moscone Project):
2,000,000 Zero coupon due 07/01/2011 ...................................... 1,032,540
3,000,000 Zero coupon due 07/01/2013 ...................................... 1,346,670
235,000 San Francisco City and County, SFMR, AMT, GNMA and FNMA
Mortgage-Backed Securities Program,
7.450% due 01/01/2024 ........................................... 241,230
4,000,000 San Joaquin County, COP, (General Hospital), (MBIA Insured),
5.000% due 09/01/2017 ........................................... 3,575,320
1,000,000 San Joaquin Hills, Transportation Corridor Agency, Toll
Road Revenue, Capital Appreciation, Series A, (MBIA
Insured),
Zero coupon due 01/15/2007 ...................................... 700,630
1,000,000 San Jose, Redevelopment Agency, Tax Allocation, Merged
Area Redevelopment, (AMBAC Insured),
4.750% due 08/01/2023 ........................................... 837,740
San Juan, Unified School District, GO, (FSA Insured):
1,825,000 Zero coupon due 08/01/2020 ...................................... 503,152
1,000,000 Zero coupon due 08/01/2021 ...................................... 258,560
1,820,000 Zero coupon due 08/01/2022 ...................................... 441,241
2,000,000 San Macros, Public Facilities Authority Revenue,
5.800% due 09/01/2018 ........................................... 1,852,020
6,000,000 San Mateo County, Joint Powers Authority Lease Revenue,
Capital Projects, Series A, (FSA Insured),
4.750% due 07/15/2023 ........................................... 5,027,280
3,000,000 Santa Clarita, Community Development Authority,
7.500% due 11/15/2012 ........................................... 3,125,190
4,765,000 Santa Rosa, Mortgage Revenue, (Channate Lodge), (FHA Insured),
6.700% due 12/01/2024 ........................................... 4,932,442
2,000,000 Shasta Lake, COP, (FSA Insured),
6.000% due 04/01/2016 ........................................... 2,031,560
2,495,000 Simi Valley, Community Development Agency, Commonwealth
Mortgage Revenue, Sycamore Plaza II,
6.000% due 09/01/2012 ........................................... 2,516,033
5,000,000 South Orange County, Public Financing Authority, Special
Tax Revenue, Sr. Lien, Series A, (MBIA Insured),
6.200% due 09/01/2013 ........................................... 5,257,600
Southern California, Housing Finance Agency, SFMR, GNMA and FNMA
Mortgage-Backed Securities Program, (GNMA Collateral):
605,000 Series 1988A, AMT,
8.125% due 02/01/2021 ........................................... 623,350
1,030,000 Series A,
7.350% due 09/01/2024 ........................................... 1,063,588
155,000 Series B,
6.900% due 10/01/2024 ........................................... 158,932
45,000 Stockton, Community Facilities Supplemental Tax #90-2,
SFMR, GNMA Mortgage-Backed Securities Program,
(Brookside Estates), AMT,
7.450% due 08/01/2010 ........................................... 45,190
1,305,000 Stockton, Community Facilities Supplemental Tax #90-1,
(Mello Roos-Weston Ranch), Series A,
6.000% due 09/01/2018 ........................................... 1,236,592
5,350,000 Vallejo, Parity Revenue, (Water Improvement), Series A,
(FSA Insured),
5.250% due 05/01/2029 ........................................... 4,821,902
2,025,000 Vallejo, Public Financing Authority Revenue, (Fairgrounds
Drive Assessment District),
5.700% due 09/02/2011 ........................................... 1,938,289
-------------
399,148,916
-------------
GUAM - 1.2%
2,000,000 Guam Airport Authority Revenue, Series B, AMT,
6.700% due 10/01/2023 ........................................... 2,096,660
Guam Power Authority Revenue, Series A:
2,000,000 5.125% due 10/01/2029 ........................................... 1,688,700
1,500,000 5.250% due 10/01/2034 ........................................... 1,273,950
-------------
5,059,310
-------------
PUERTO RICO - 1.2%
1,256,511 Centro de Recaudaciones de Ingresos Municipales, COP,
6.850% due 10/17/2003 ........................................... 1,272,808
750,000 Puerto Rico, Electric Power Authority Revenue, Series U,
6.000% due 07/01/2014 ........................................... 765,398
3,000,000 Puerto Rico, Public Building Authority, Guaranteed Public
Education & Health Facilities,
5.700% due 07/01/2016 ........................................... 2,950,650
-------------
4,988,856
-------------
Total Municipal Bonds and Notes
(Cost $413,346,186) ............................................. 409,197,082
-------------
SHORT-TERM MUNICIPAL BONDS - 2.1%
400,000 California Statewide Communities Development Authority,
(John Muir/Mt. Diablo Health Center), (AMBAC Insured),
3.550% due 08/15/2027+ .......................................... 400,000
1,300,000 Irvine, Improvement Board Act 1915,
3.500% due 09/02/2015 ........................................... 1,300,000
2,800,000 Irvine Ranch, Water District Revenue, Consolidated Bonds,
3.500% due 04/01/2033++ ......................................... 2,800,000
4,100,000 Orange County, Sanitation District, COP,
3.500% due 08/01/2015++ ......................................... 4,100,000
Total Short-Term Municipal Bonds
(Cost $8,600,000) ............................................... 8,600,000
-------------
TOTAL INVESTMENTS (Cost $421,946,186*) ............................... 100.0% 417,797,082
OTHER ASSETS AND LIABILITES (NET) ................................... (0.0)# (26,986)
---- ------------
NET ASSETS ........................................................... 100.0% $417,770,096
===== ============
NUMBER OF UNREALIZED
CONTRACTS VALUE (DEPRECIATION)
FUTURES CONTRACTS - SHORT POSITION
100 Municipal Bond Future,
December 1999 $11,037,500 $(182,058)
=========== =========
- --------------
* Aggregate cost for federal tax purposes.
** Security pledged as collateral for futures contract.
+ Variable rate demand notes are payable upon not more than one business day's notice. The interest
rate shown reflects the rate currently in effect.
++ Variable rate security. The interest rate shown reflects the rate currently in effect.
# Amount represents less than 0.1% of net assets.
</TABLE>
California Municipal Fund had the following industry concentrations greater
than 10% at October 31, 1999 (as a percentage of net assets):
Tax District 12.8%
Public Building 11.6%
General Purpose 10.3%
California Municipal Fund had the following insurance concentrations greater
than 10% at October 31, 1999 (as a percentage of net assets):
MBIA 22.3%
AMBAC 20.0%
- -------------------------------------------------------------------------------
GLOSSARY OF TERMS
ACA -- American Capital Access
AMBAC -- American Municipal Bond Assurance Corporation
AMT -- Alternative Minimum Tax
COP -- Certificates of Participation
FGIC -- Federal Guaranty Insurance Corporation
FHA -- Federal Housing Authority
FNMA -- Federal National Mortgage Association
FSA -- Financial Security Assurance
GNMA -- Government National Mortgage Association
GO -- General Obligation Bonds
IDR -- Industrial Development Revenue
LOC -- Letter of Credit
MBIA -- Municipal Bond Investors Assurance
MFHR -- Multi-family Housing Revenue
MFMR -- Multi-family Mortgage Revenue
PCR -- Pollution Control Revenue
SFHR -- Single Family Housing Revenue
SFMR -- Single Family Mortgage Revenue
VA -- Veterans' Administration
- -------------------------------------------------------------------------------
See Notes to Financial Statements.
<PAGE>
<TABLE>
PORTFOLIO of INVESTMENTS
FLORIDA INSURED MUNICIPAL FUND
OCTOBER 31, 1999
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
MUNICIPAL BONDS AND NOTES - 108.9%
FLORIDA - 108.9%
$ 1,000,000 Brevard County, School Board Authority, COP, Series B,
(AMBAC Insured),
5.500% due 07/01/2021** ......................................... $ 949,580
1,000,000 Broward County, Educational Facilities Authority Revenue,
(Nova Southeastern University Project), (CONNIE LEE Insured),
6.000% due 04/01/2008** ......................................... 1,047,320
700,000 Collier County, Industrial Development Authority, IDR,
(Southern States Utilities Project), AMT,
6.500% due 10/01/2025 ........................................... 700,007
1,000,000 Dade County, Aviation Revenue, Series B, AMT, (MBIA Insured),
6.600% due 10/01/2022** ......................................... 1,053,130
600,000 Escambia County, Health Facilities Revenue, Baptist
Hospital, Series B,
6.000% due 10/01/2014 ........................................... 586,398
750,000 Escambia County, PCR, (Champion International Corporation
Project), AMT,
6.900% due 08/01/2022 ........................................... 783,562
Florida Housing Finance Agency, AMT:
700,000 SFMR, Series A, (AMBAC Insured), (GNMA Collateral),
6.650% due 01/01/2024** ......................................... 726,957
1,000,000 Spinnaker Cove Apartments, Series G, (AMBAC Insured),
6.500% due 07/01/2036** ......................................... 1,038,110
600,000 Florida State Board of Education, Capital Outlay, Public
Education, GO, Series B, (MBIA Insured),
4.500% due 06/01/2024 ........................................... 479,478
1,100,000 Florida State Board of Regional University System
Improvement Revenue, (AMBAC Insured),
4.500% due 07/01/2023 ........................................... 887,425
1,000,000 Florida State Turnpike Authority, Turnpike Revenue,
Department of Transportation, Series A, (FGIC Insured),
5.000% due 07/01/2016** ......................................... 908,690
500,000 Gulf Breeze, Capital Funding Revenue, Series B, (MBIA Insured),
4.500% due 10/01/2027 ........................................... 394,725
1,245,000 Hillsborough County, Capital Improvement Revenue, Criminal
Justice Facilities, (FGIC Insured),
5.250% due 08/01/2016** ......................................... 1,166,416
1,050,000 Hillsborough County, School Board Authority, COP, (MBIA Insured),
(Pre-refunded to 07/01/2004),
6.000% due 07/01/2012** ......................................... 1,125,548
1,000,000 Jacksonville, Water & Sewer Revenue, (United Water Project),
AMT, (AMBAC Insured),
6.350% due 08/01/2025** ......................................... 1,023,760
1,500,000 Leon County, School District, GO, (AMBAC Insured),
5.000% due 07/01/2008# .......................................... 1,476,705
500,000 Manatee County, Refunding Revenue Bonds, (MBIA Insured),
4.750% due 04/01/2011# .......................................... 469,050
890,000 Manatee County, Housing Finance Authority, SFMR, Sub. Series
4, AMT, (AMBAC Insured), (GNMA/FNMA Collateral),
6.875% due 11/01/2026 ........................................... 955,575
1,000,000 Orange County, Housing Finance Authority, MFHR, (Hands Inc.
Project), Series A,
8.000% due 10/01/2025** ......................................... 1,073,100
1,000,000 Orlando & Orange County, Expressway Authority, Expressway
Revenue, Jr. Lien, (FSA Insured),
5.950% due 07/01/2023 ........................................... 1,002,020
1,000,000 Pasco County, Solid Waste Disposal & Resource Recovery System, AMT,
(AMBAC Insured),
6.000% due 04/01/2011 ........................................... 1,038,930
980,000 Pinellas County, Housing Finance Authority Revenue, SFMR,
Series A, AMT, (AMBAC Insured), (GNMA Collateral),
6.000% due 09/01/2018 ........................................... 990,368
1,050,000 Seminole County, School Board Authority, COP, Series A,
(MBIA Insured), (Pre-refunded to 07/01/2004),
6.125% due 07/01/2014** ......................................... 1,130,997
------------
Total Municipal Bonds and Notes
(Cost $20,649,841) ............................................. 21,007,851
------------
TOTAL INVESTMENTS (Cost $20,649,841*) ................................. 108.9% 21,007,851
OTHER ASSETS AND LIABILITIES (NET) .................................... (8.9) (1,720,380)
---- ------------
NET ASSETS ............................................................ 100.0% $ 19,287,471
===== ============
- --------------
* Aggregate cost for federal tax purposes.
** Security pledged as collateral for when-issued securities.
# Security purchased on when-issued basis (Note 2).
</TABLE>
Florida Insured Municipal Fund had the following industry concentrations
greater than 10% at October 31, 1999 (as a percentage of net assets):
Public Education 26.8%
Water & Sewage 14.3%
Single Family Housing 13.9%
Transportation 12.0%
Multi-family Housing 10.9%
Higher Education 10.0%
Florida Insured Municipal Fund had the following insurance concentrations
greater than 10% at October 31, 1999 (as a percentage of net assets):
AMBAC 47.1%
MBIA 24.1%
FGIC 10.8%
- ------------------------------------------------------------------------------
GLOSSARY OF TERMS
AMBAC -- American Municipal Bond Assurance Corporation
AMT -- Alternative Minimum Tax
CONNIE LEE -- College Construction Loan Association
COP -- Certificates of Participation
FGIC -- Federal Guaranty Insurance Corporation
FNMA -- Federal National Mortgage Association
FSA -- Financial Security Assurance
GNMA -- Government National Mortgage Association
GO -- General Obligation Bonds
IDR -- Industrial Development Revenue
MBIA -- Municipal Bond Investors Assurance
MFHR -- Multi-family Housing Revenue
PCR -- Pollution Control Revenue
SFMR -- Single Family Mortgage Revenue
- ------------------------------------------------------------------------------
See Notes to Financial Statements.
<PAGE>
<TABLE>
PORTFOLIO of INVESTMENTS
TAX-EXEMPT BOND FUND
OCTOBER 31, 1999
<CAPTION>
PRINCIPAL
AMOUNT VALUE
------ -----
<S> <C> <C>
MUNICIPAL BONDS AND NOTES - 103.0%
ALABAMA - 1.5%
$ 1,000,000 Alabama Building Renovation Finance Authority Revenue,
(AMBAC Insured),
5.625% due 09/01/2024 ........................................... $ 948,720
1,000,000 Alabama Incentives Financing Authority, Special Oligation,
Series A, (AMBAC Insured),
6.000% due 10/01/2029 ........................................... 986,950
2,000,000 Courtland, Industrial Development Board of Solid Waste,
(Champion International Corporation Project), Disposal
Revenue, AMT,
7.750% due 01/01/2020 ........................................... 2,045,780
-------------
3,981,450
-------------
ALASKA - 1.2%
1,235,000 Anchorage, Electric Utility, (MBIA Insured),
6.500% due 12/01/2013 ........................................... 1,346,669
2,000,000 Anchorage, Ice Rink Revenue,
6.375% due 01/01/2020 ........................................... 1,842,500
-------------
3,189,169
-------------
ARIZONA - 3.3%
Salt River Project Agricultural Improvement & Power District:
3,000,000 Series A,
5.750% due 01/01/2009 ........................................... 3,131,130
5,000,000 Series C,
6.250% due 01/01/2019 ........................................... 5,116,150
740,000 Tucson, Airport Authority Inc., Supplemental Facilities
Revenue, AMT,
8.700% due 09/01/2019 ........................................... 775,498
-------------
9,022,778
-------------
CALIFORNIA - 5.7%
15,000,000 Anaheim, Public Financing Authority Lease, Capital
Appreciation Subordinated Public Improvements, Project-
C, (FSA Insured),
Zero coupon due 09/01/2034 ...................................... 1,795,350
2,000,000 Center Unified School District California, Capital
Appreciation, Series C, GO, (MBIA Insured),
Zero coupon due 09/01/2018 ...................................... 650,100
Foothill/Eastern Corridor Agency, California Toll Road Revenue,
(MBIA Insured):
2,000,000 Zero coupon due 01/15/2018 ...................................... 651,480
1,490,000 5.800% due 01/15/2020 ........................................... 792,099
3,500,000 Lodi, Electric System Revenue, COP,
Series B, (MBIA Insured),
Zero coupon due 01/15/2024 ...................................... 764,190
550,000 Los Angeles, Regional Airport Improvement, Series A, AMT,
6.700% due 01/01/2022 ........................................... 566,313
3,000,000 Orange County Recovery, COP, Series A, (MBIA Insured),
6.000% due 07/01/2026 ........................................... 3,004,710
1,173,000 Sacramento, COP, Centrex System Lease, Series A,
5.550% due 09/15/2004 ........................................... 1,152,907
1,000,000 Sacramento, City Financing Authority Revenue, Convention
Center Hotel, Series A,
6.250% due 01/01/2030 ........................................... 930,720
San Joaquin Hills, California Transportation Corridor, Agency Toll
Road Revenue:
2,000,000 5.000% due 01/01/2033 ........................................... 1,648,180
7,000,000 Series A, (MBIA Insured),
Zero coupon due 01/15/2034 ...................................... 865,340
3,000,000 Student Education Loan Marketing Corporation, California
Student Loan Revenue, Series IV-D-1, AMT,
5.875% due 01/01/2018 ........................................... 2,705,430
-------------
15,526,819
-------------
COLORADO - 5.2%
2,775,000 Colorado Springs, Utilities System Revenue, Pre-refunded,
6.750% due 11/15/2021 ........................................... 2,941,250
Denver City and County, Airport Revenue, AMT:
Series A, Pre-refunded:
1,045,000 8.500% due 11/15/2023** ......................................... 1,099,277
Series A, Unrefunded:
1,470,000 8.875% due 11/15/2012 ........................................... 1,599,316
1,835,000 8.000% due 11/15/2025** ......................................... 1,921,098
1,920,000 Series C,
6.600% due 11/15/2004 ........................................... 2,012,928
4,500,000 Meridian Metropolitan District, GO,
7.500% due 12/01/2011 ........................................... 4,758,075
-------------
14,331,944
-------------
CONNECTICUT - 0.4%
995,000 Mashantucket Western Pequot Tribe, Special Revenue, Series
A, Pre-refunded,
6.500% due 09/01/2005 ........................................... 1,083,595
-------------
DISTRICT OF COLUMBIA - 1.0%
815,000 District of Columbia, COP,
6.875% due 01/01/2003 ........................................... 832,148
500,000 District of Columbia, Water & Sewer Authority, (FSA Insured),
5.500% due 10/01/2017 ........................................... 480,970
1,500,000 Metropolitan District, Washington D.C., Airport Authority,
General Airport Revenue, Series A, AMT, (MBIA Insured),
6.625% due 10/01/2019** ......................................... 1,564,935
-------------
2,878,053
-------------
FLORIDA - 5.3%
22,520,000 Dade County, Guaranteed Entitlement Revenue, Capital
Appreciation, Series A, (MBIA Insured),
Zero coupon due 02/01/2018 ...................................... 7,309,091
Florida Board of Education (FGIC Insured):
1,000,000 Series A, 4.500% due 06/01/2023 ................................. 804,950
1,000,000 Series C, 5.750% due 06/01/2029 ................................. 977,010
5,000,000 Orlando Utilities Commission Water & Electric,
6.000% due 10/01/2010 ........................................... 5,327,750
-------------
14,418,801
-------------
GEORGIA - 6.4%
1,000,000 Atlanta, Airport Facilities Revenue, AMT,
7.250% due 01/01/2017 ........................................... 1,041,460
2,000,000 Georgia Municipal Electric Authority Power, Series Z,
(MBIA Insured),
5.500% due 01/01/2020 ........................................... 1,941,980
5,000,000 Georgia State, GO, Series B,
6.300% due 03/01/2009** ......................................... 5,459,200
Monroe, PCR, (Oglethorpe Power Company):
5,000,000 6.700% due 01/01/2009** ......................................... 5,436,550
3,410,000 6.750% due 01/01/2010 ........................................... 3,723,072
-------------
17,602,262
-------------
HAWAII - 2.6%
4,555,000 Hawaii State, GO, Series BW,
6.400% due 03/01/2009 ........................................... 4,891,113
Honolulu City & County, GO, Series A:
1,270,000 Unrefunded,
6.000% due 01/01/2012 ........................................... 1,317,117
730,000 Pre-refunded,
6.000% due 01/01/2012 ........................................... 768,975
-------------
6,977,205
-------------
IDAHO - 0.8%
2,000,000 Idaho Health Facilities Authority Revenue, (Inverse Floater), ETM,
6.650% due 02/15/2021+ .......................................... 2,172,380
-------------
ILLINOIS - 15.6%
Bolingbrook, Capital Appreciation, (MBIA Insured):
4,000,000 Series B,
Zero coupon due 01/01/2030 ...................................... 599,560
4,915,000 Series C,
Zero coupon due 01/01/2025 ...................................... 1,046,600
10,000,000 Chicago, Board of Education, School Reform, Series A,
(FGIC Insured),
Zero coupon due 12/01/2031 ...................................... 1,364,300
3,665,000 Chicago, Gas Supply Revenue, (Peoples Gas),
6.875% due 03/01/2015 ........................................... 3,861,151
Chicago, O'Hare International Airport Supplemental Facilities, AMT:
700,000 American Airlines, Special Series A,
7.875% due 11/01/2025 ........................................... 729,372
6,000,000 International Terminal, (MBIA Insured),
6.750% due 01/01/2012** ......................................... 6,308,760
United Air Lines:
615,000 8.400% due 05/01/2004 ........................................... 635,922
745,000 8.950% due 05/01/2018 ........................................... 791,197
Cook County, Community High School, Number 217, (AMBAC Insured):
1,090,000 6.400% due 12/01/2003** ......................................... 1,132,564
1,130,000 6.500% due 12/01/2004** ......................................... 1,176,353
1,370,000 6.600% due 12/01/2005** ......................................... 1,428,896
Cook County, School District, Number 026, ETM, (MBIA Insured):
1,445,000 Zero coupon due 12/01/2003 ...................................... 1,187,400
1,020,000 Zero coupon due 12/01/2004 ...................................... 792,938
Illinois Health Facilities Authority Revenue:
250,000 Glenoak Medical Center, Series D, Pre-refunded,
9.500% due 11/15/2015 ........................................... 269,190
4,460,000 Hindsdale Hospital, Series B, ETM,
9.000% due 11/15/2015 ........................................... 4,779,737
3,000,000 Rush Presbyterian - St. Luke's Medical Center, Residual
Interest Bond, (MBIA Insured),
9.767% due 10/01/2024+ .......................................... 3,367,500
1,230,000 Servantcor, Series A, Pre-refunded,
8.000% due 08/15/2021 ........................................... 1,330,122
5,000,000 Sister Services Hospital, Residual Interest Bond, (MBIA
Insured), Pre-refunded,
9.617% due 06/19/2015+ .......................................... 5,593,750
165,000 Illinois Housing Development Authority, Residential
Mortgage Revenue, Series A, AMT,
7.350% due 08/01/2010 ........................................... 169,473
Metropolitan Pier and Exposition Authority, Dedicated State Tax,
(FGIC Insured):
620,000 Zero coupon due 06/15/2008 ...................................... 393,812
Unrefunded:
3,380,000 Zero coupon due 06/15/2008 ...................................... 2,130,752
5,185,000 Zero coupon due 06/15/2009 ...................................... 3,078,127
815,000 Zero coupon due 06/15/2009, ETM ................................. 487,020
-------------
42,654,496
-------------
INDIANA - 2.4%
6,000,000 Indiana Municipal Power Agency, Series A, (MBIA Insured),
6.125% due 01/01/2013** ......................................... 6,434,160
-------------
KANSAS - 0.2%
500,000 Wichita, Health Care Facilities Revenue, (Larksfield
Place), Series I,
5.875% due 05/15/2027 ........................................... 429,275
-------------
KENTUCKY - 1.2%
Jefferson County, Hospital Revenue, Residual Interest Bond, (MBIA
Insured):
900,000 Pre-refunded, 8.597% due 10/09/2008+ ............................ 1,014,750
2,100,000 Unrefunded, 8.749% due 10/09/2008+ .............................. 2,331,000
-------------
3,345,750
-------------
LOUISIANA - 0.2%
1,500,000 Louisiana Public Facility Authority Revenue, Series B, ETM,
Zero coupon due 12/01/2019 ...................................... 441,645
-------------
MARYLAND - 2.6%
5,000,000 Baltimore, Port Facilities Revenue, Consolidated Coal
Sales, Series B,
6.500% due 10/01/2011+/** ....................................... 5,325,650
755,000 Maryland, Community Development Administration, Department
of Housing Revenue, Single Family Project, AMT,
7.450% due 04/01/2032 ........................................... 777,333
1,000,000 Maryland, Economic Development Corporation, Student
Housing Revenue, Collegiate Housing Towson, Series A,
5.750% due 06/01/2029 ........................................... 891,180
-------------
6,994,163
-------------
MASSACHUSETTS - 0.7%
1,000,000 Massachusetts, Development Finance Agency Revenue,
(Hillcrest Education Centers Inc.),
6.375% due 07/01/2029 ........................................... 944,760
1,000,000 Plymouth County, COP, Series A,
7.000% due 04/01/2022 ........................................... 1,087,410
-------------
2,032,170
-------------
MICHIGAN - 0.9%
Michigan State Hospital Finance Authority Revenue, Detroit
Medical, Series A, Pre-refunded:
1,000,000 5.250% due 08/15/2028 ........................................... 781,320
1,500,000 7.500% due 08/15/2011 ........................................... 1,612,005
-------------
2,393,325
-------------
MISSISSIPPI - 3.8%
Jackson County, PCR, (Chevron U.S.A. Inc. Project):
600,000 3.500% due 12/01/2016 ........................................... 600,000
100,000 3.600% due 06/01/2023 ........................................... 100,000
Lowndes County, Solid Waste Disposal, PCR, (Weyerhauser Company
Project):
4,000,000 Series A,
6.800% due 04/01/2022+ .......................................... 4,270,720
5,000,000 Series B,
6.700% due 04/01/2022+, ** ...................................... 5,309,750
200,000 Warren County, Solid Waste Disposal Revenue,
(International Paper Project), Series A, AMT,
7.700% due 11/15/2009 ........................................... 204,362
-------------
10,484,832
-------------
MISSOURI - 0.8%
2,000,000 St. Louis, Parking Facilities Revenue, Pre-refunded,
6.625% due 12/15/2021 ........................................... 2,155,740
-------------
MONTANA - 0.4%
1,000,000 Forsyth, PCR, Puget Sound Power & Light, Series B, AMT,
(AMBAC Insured),
7.250% due 08/01/2021** ......................................... 1,054,750
-------------
NEBRASKA - 3.3%
500,000 Nebraska Investment Finance Authority, Single Family
Housing Revenue, Residual Interest Bond, AMT, (GNMA
Collateral),
8.857% due 09/15/2024+ .......................................... 528,750
Omaha Public Power District Electric:
7,000,000 Series B, ETM,
6.150% due 02/01/2012 ........................................... 7,471,100
1,000,000 Series C,
5.500% due 02/01/2014 ........................................... 990,660
-------------
8,990,510
-------------
NEVADA - 1.5%
4,000,000 Clark County, IDR, Nevada Power Company, Series A, AMT,
(FGIC Insured),
6.700% due 06/01/2022** ......................................... 4,172,280
-------------
NEW JERSEY - 0.5%
1,000,000 New Jersey Economic Development Authority, Special
Facilities Revenue, Continental Airlines Inc.,
6.250% due 09/15/2029 ........................................... 934,810
350,000 New Jersey State, GO, Series D,
6.000% due 02/15/2011 ........................................... 372,274
-------------
1,307,084
-------------
NEW MEXICO - 1.4%
1,500,000 Lordsburg, PCR, (Phelps Dodge),
6.500% due 04/01/2013 ........................................... 1,517,955
1,000,000 New Mexico State Hospital, Equipment loan Council,
Hospital Revenue, (Memorial Medical Center, Inc.),
5.500% due 06/01/2028 ........................................... 849,720
1,500,000 Santa Fe County, New Mexico Correctional System, (FSA Insured),
6.000% due 02/01/2027 ........................................... 1,506,660
-------------
3,874,335
-------------
NEW YORK - 2.8%
1,265,000 Metropolitan Transportation Authority, Service Contract
Transportation Facilities, Series 7,
4.750% due 07/01/2019 ........................................... 1,035,036
1,000,000 New York, GO, Unrefunded, Series B, (FSA Insured), ETM,
7.000% due 06/01/2014*** ........................................ 1,048,440
2,000,000 New York State Dormitory Authority Revenue, New York
University, Series A, (AMBAC Insured),
5.250% due 07/01/2006# .......................................... 2,009,760
2,000,000 New York State Housing Finance Agency Revenue, MFHR,
Second Mortgage, Series F, AMT, (Sonyma Program Insured),
6.625% due 08/15/2012 ........................................... 2,065,800
105,000 New York State Medical Care Facilities Finance Agency
Revenue, Refunded,
7.750% due 08/15/2011 ........................................... 110,963
1,500,000 Niagara Frontier Authority Airport Revenue, (Buffalo
Niagara International Airport), AMT, (MBIA Insured),
5.625% due 04/01/2029 ........................................... 1,395,000
-------------
7,664,999
-------------
NORTH DAKOTA - 1.7%
4,370,000 Mercer County, PCR, (Otter Trail Power),
6.900% due 02/01/2019 ........................................... 4,549,388
-------------
OHIO - 2.3%
1,240,000 Lorain County, Hospital Revenue, Humility of Mary Health
Care, Series B, ETM,
7.200% due 12/15/2011 ........................................... 1,337,514
1,000,000 Montgomery County, Hospital Revenue, (Grandview Hospital &
Medical Center),
5.250% due 12/01/2003 ........................................... 977,760
4,000,000 Ohio Turnpike Revenue, Series A, (FGIC Insured),
5.500% due 02/15/2024 ........................................... 3,821,760
200,000 Ohio Water Development Authority Revenue, (AMBAC Insured),
5.700% due 06/01/2009 ........................................... 209,852
-------------
6,346,886
-------------
OKLAHOMA - 0.6%
1,240,000 Oklahoma Housing and Finance Authority, Single Family
Revenue, Series B, AMT, (GNMA Collateral),
7.997% due 08/01/2018** ......................................... 1,336,844
200,000 Tulsa, Municipal Airport Revenue, (American Airlines Project), AMT,
7.600% due 12/01/2030 ........................................... 209,524
-------------
1,546,368
-------------
OREGON - 0.2%
1,000,000 Columbia County, District No. 502, (FGIC Insured),
Zero coupon due 06/01/2016 ...................................... 383,610
100,000 Oregon State Department of Transportation Revenue, Light
Rail Funding, (Westside Project), (MBIA Insured),
6.250% due 06/01/2009 ........................................... 107,170
-------------
490,780
-------------
PENNSYLVANIA - 5.7%
Allegheny County, Hospital Development Revenue, (Ohio Valley
General Hospital):
700,000 5.100% due 04/01/2001 ........................................... 700,924
735,000 5.300% due 04/01/2002 ........................................... 737,947
625,000 5.400% due 04/01/2003 ........................................... 627,213
3,675,000 Beaver County, IDR, PCR, (Edison Project), Series A, (FGIC
Insured),
7.000% due 06/01/2021** ......................................... 3,858,493
500,000 McKean County, Hospital Authority Revenue, Bradford Hospital,
8.875% due 10/01/2020 ........................................... 530,640
4,000,000 Pennsylvania Higher Education Revenue, Assistance Agency,
Student Loan, Residual Interest Bond, AMT, (AMBAC Insured),
9.267% due 09/01/2026+ .......................................... 4,580,000
Pennsylvania State Turnpike, Community Oil Franchise Tax Revenue,
(AMBAC Insured):
2,250,000 Series A,
4.750% due 12/01/2027 ........................................... 1,837,552
1,750,000 Series B,
4.750% due 12/01/2027 ........................................... 1,429,208
1,000,000 Philadelphia, Gas Works Revenue, Second Series, (FSA Insured),
5.000% due 07/01/2029 ........................................... 845,710
2,775,000 Pittsburgh, Water & Sewer Authority, Water & Sewer System
Revenue, First Lien, Series B, (FGIC Insured),
Zero coupon due 09/01/2028 ...................................... 469,336
-------------
15,617,023
-------------
PUERTO RICO - 0.1%
200,000 Puerto Rico Electric Power Authority Revenue, Series S,
6.125% due 07/01/2008 ........................................... 212,980
-------------
SOUTH CAROLINA - 0.8%
1,000,000 Charleston County, Industrial Revenue, Ziegler Coal Holdings,
6.950% due 08/10/2028 ........................................... 956,720
1,375,000 Lancaster County, School District, GO, (FSA Insured),
4.750% due 03/01/2019 ........................................... 1,166,481
-------------
2,123,201
-------------
SOUTH DAKOTA - 0.0%##
90,000 South Dakota Housing Development Authority, Homeownership
Mortgage, Series D,
6.650% due 05/01/2014 ........................................... 93,357
-------------
TEXAS - 5.1%
415,000 Brazos, Higher Educational Facilities Authority, Series C-2, AMT,
7.100% due 11/01/2004 ........................................... 445,847
2,000,000 Dallas County, Utility & Reclamation District, GO, Series
B, (AMBAC Insured),
5.875% due 02/15/2029# .......................................... 1,958,040
5,000,000 Dallas-Fort Worth, International Airport, (Facility
Improvement Corporate Revenue), (American Airlines, Inc.), AMT,
7.500% due 11/01/2025** ......................................... 5,194,200
Harris County:
3,500,000 COP,
4.500%, due 10/01/2023 .......................................... 2,764,720
200,000 GO,
6.000%, due 12/15/2010 .......................................... 211,556
2,500,000 Lower Colorado River Authority, Revenue, Series A,
5.875%, due 05/15/2014 .......................................... 2,525,350
399,000 Texas, Higher Education Coordinating Board, Student Loan, AMT,
7.700% due 10/01/2025 ........................................... 416,935
500,000 West Side Calhoun County, Solid Waste Revenue Bond, (Union
Carbide Project), AMT,
8.200% due 03/15/2021 ........................................... 525,170
-------------
14,041,818
-------------
VIRGINIA - 1.4%
1,000,000 Pocahontas Parkway Association, Virginia Toll Road
Revenue, Series A,
5.000% due 08/15/2005 ........................................... 971,780
Richmond, GO, (FSA Insured):
1,000,000 5.125% due 01/15/2008# .......................................... 980,680
1,000,000 5.250% due 01/15/2009# .......................................... 981,210
1,000,000 5.500% due 01/15/2010# .......................................... 990,190
-------------
3,923,860
-------------
WASHINGTON - 10.3%
4,500,000 King County, School District #415 Kent, GO, Series C,
6.300% due 12/01/2008 ........................................... 4,852,980
Pierce County, Housing Authority Revenue:
3,735,000 5.400% due 12/01/2013 ........................................... 3,513,514
2,000,000 5.900% due 12/01/2028 ........................................... 1,848,860
950,000 Port Anacortes, Revenue Bond, Series A,
5.125% due 09/01/2009 ........................................... 902,833
250,000 Seattle, Water System Revenue,
5.250% due 12/01/2023 ........................................... 223,198
785,000 University of Washington Revenue Bond, (MBIA Insured),
Unrefunded,
7.000% due 12/01/2021 ........................................... 834,871
Washington State, GO:
200,000 5.750% due 09/01/2009 ............................................ 208,294
7,570,000 Series B,
5.000% due 05/01/2017 ........................................... 6,737,678
4,900,000 Series B & AT-7,
6.400% due 06/01/2017 ........................................... 5,229,525
Washington State Health Care Facilities Authority, Fred Hutchinson
Cancer Center, (LOC Morgan Guarantee Trust):
1,750,000 7.200% due 01/01/2007 ........................................... 1,834,157
1,750,000 7.375% due 01/01/2018 ........................................... 1,836,905
-------------
28,022,815
-------------
WEST VIRGINIA - 1.3%
2,500,000 Harrison County, Solid Waste Disposal, (Monongahela
Power), Series A, AMT,
6.875% due 04/15/2022 ........................................... 2,594,800
150,000 Kanawha County, IDR, (Union Carbide Project), Series A, AMT,
8.000% due 08/01/2020 ........................................... 155,478
750,000 South Charleston, IDR, (Union Carbide Project), Series A, AMT,
8.000% due 08/01/2020 ........................................... 777,360
-------------
3,527,638
-------------
WISCONSIN - 1.8%
1,000,000 Madison, IDR, (Madison Gas & Electric Company), (Project A), AMT,
6.750% due 04/01/2027 ........................................... 1,049,070
Wisconsin Health & Education Facilities Authority Revenue:
2,000,000 (Aurora Health Care Inc.), Series A,
5.600% due 02/15/2029 ........................................... 1,713,400
1,000,000 (Kenosha Hospital & Medical Center),
5.625% due 05/15/2029 ........................................... 874,510
1,000,000 (Waukesha Memorial Hospital), Series A, (AMBAC Insured),
7.125% due 08/15/2007 ........................................... 1,042,830
200,000 Wisconsin State, Transportation Revenue, Series A,
5.500% due 07/01/2014 ........................................... 194,590
-------------
4,874,400
-------------
Total Municipal Bonds and Notes
(Cost $271,676,034) ............................................. 280,984,484
-------------
TOTAL INVESTMENTS (Cost $271,676,034*) ................................ 103.0% 280,984,484
OTHER ASSETS AND LIABILITIES (NET) .................................... (3.0) (8,111,145)
----- ------------
NET ASSETS ............................................................ 100.0% $272,873,339
===== ============
- --------------
* Aggregate cost for federal tax purposes.
** Security pledged as collateral for when-issued securities.
*** Security pledged as collateral for futures contracts.
# Security purchased on when-issued basis (Note 2).
## Amount represents less than 0.1% of net assets.
+ Floating rate note. The interest rate shown reflects the rate currently in effect.
</TABLE>
Tax-Exempt Bond Fund had the following industry concentrations greater than
10% at October 31, 1999 (as a percentage of net assets):
Retail Utility 16.2%
General Purpose 16.0%
Health Care 12.6%
Industrial Revenue 11.6%
Tax-Exempt Bond Fund had the following insurance concentrations greater than
10% at October 31, 1999 (as a percentage of net assets):
MBIA 17.8%
UNREALIZED
NUMBER OF APPRECIATION/
CONTRACTS VALUE (DEPRECIATION)
--------- ----- --------------
FUTURES CONTRACTS - LONG POSITION
140 Municipal Bond,
December 1999 ............. $15,452,500 $(386,807)
60 U.S. Long Bond,
December 1999 ............. 6,815,625 144,190
----------- ---------
Net unrealized depreciation of
futures contracts long position ........ $(242,617)
=========
- -------------------------------------------------------------------------------
GLOSSARY OF TERMS
AMBAC -- American Municipal Bond Assurance
Corporation AMT -- Alternative Minimum Tax
COP -- Certificates of Participation
ETM -- Escrowed to Maturity Federal Guaranty Insurance
FGIC -- Corporation
FSA -- Financial Security Assurance Government National Mortgage
GNMA -- Association
GO -- General Obligation Bonds Industrial Development
IDR -- Revenue
LOC -- Letter of Credit Municipal Bond Investors
MBIA -- Assurance
MFHR -- Multi-family Housing Revenue
PCR -- Pollution Control Revenue
- -------------------------------------------------------------------------------
See Notes to Financial Statements.
<PAGE>
<TABLE>
PORTFOLIO of INVESTMENTS
BOND & STOCK FUND
OCTOBER 31, 1999
<CAPTION>
SHARES VALUE
------ -----
<S> <C> <C>
COMMON STOCKS - 55.5%
BANKS/SAVINGS & LOANS - 5.7%
22,200 Chase Manhattan Corporation ...................................... $ 1,939,725
70,000 Citigroup Inc. ................................................... 3,788,750
59,701 First State Bancorporation ....................................... 1,298,497
107,000 Mellon Bank Corporation .......................................... 3,952,313
72,500 U.S. Bancorp ..................................................... 2,687,031
95,200 Wells Fargo & Company ............................................ 4,557,700
------------
18,224,016
------------
REAL ESTATE INVESTMENT TRUSTS - 4.8%
60,000 Arden Realty Inc. ................................................ 1,207,500
30,000 CarrAmerica Realty Corporation ................................... 667,500
55,000 Essex Property Trust Inc. ........................................ 1,790,932
75,000 Franchise Finance Corporation of America ......................... 1,631,250
48,700 Health Care Property Investors Inc. .............................. 1,278,375
72,500 Hospitality Properties Trust ..................................... 1,531,563
55,000 Nationwide Health Properties Inc. ................................ 910,938
75,000 Shurgard Storage Centers Inc. .................................... 1,771,874
65,000 Simon Property Group Inc. ........................................ 1,499,062
58,500 Storage USA Inc. ................................................. 1,703,813
110,500 Taubman Centers Inc. ............................................. 1,250,031
------------
15,242,838
------------
CONSUMER STAPLES - 4.7%
62,500 Albertson's Inc. ................................................. 2,269,531
76,500 Libbey Inc. ...................................................... 2,027,250
100,000 PepsiCo Inc. ..................................................... 3,468,750
90,000 Ralston-Ralston Purina Group ..................................... 2,829,375
200,000 Supervalu Inc. ................................................... 4,200,000
------------
14,794,906
------------
FINANCIAL SERVICES - 4.6%
48,800 Federal National Mortgage Association ............................ 3,452,600
70,000 Finova Group Inc. ................................................ 3,084,375
60,000 Franklin Resources Inc. .......................................... 2,100,000
17,600 Merrill Lynch & Company Inc. ..................................... 1,381,600
60,000 Price (T. Rowe) Associates Inc. .................................. 2,130,000
22,000 Providian Financial Corporation .................................. 2,398,000
------------
14,546,575
------------
HEALTH CARE PRODUCTS - 3.8%
37,000 Abbott Laboratories .............................................. 1,493,875
36,000 Baxter International Inc. ........................................ 2,335,500
85,600 Becton Dickinson & Company ....................................... 2,172,100
75,000 DENTSPLY International Inc. ...................................... 1,739,062
24,000 Johnson & Johnson ................................................ 2,514,000
100,000 Mylan Laboratories Inc. .......................................... 1,793,750
------------
12,048,287
------------
UTILITIES/TELECOMMUNICATIONS - 3.8%
33,800 Alltel Corporation ............................................... 2,813,850
48,200 SBC Communications Inc. .......................................... 2,455,187
90,400 Sprint Corporation ............................................... 6,717,850
------------
11,986,887
------------
INSURANCE - 3.7%
26,875 American International Group Inc. ................................ 2,766,445
86,200 Conseco Inc. ..................................................... 2,095,738
100,000 MGIC Investment Corporation ...................................... 5,975,000
30,000 UnumProvident Corporation ........................................ 988,125
------------
11,825,308
------------
COMPUTER SOFTWARE/SERVICES - 3.6%
60,000 Adobe Systems Inc. ............................................... 4,196,250
125,800 Computer Associates International Inc. ........................... 7,107,700
------------
11,303,950
------------
RETAIL SALES - 3.3%
191,000 Blockbuster Inc., Class A+ ....................................... 2,315,875
132,374 Limited Inc. ..................................................... 5,443,881
40,650 May Department Stores Company .................................... 1,410,047
64,000 Ross Stores Inc. ................................................. 1,320,000
------------
10,489,803
------------
OIL & GAS - 2.8%
150,000 Repsol, Sponsored ADR ............................................ 3,075,000
96,500 Tosco Corporation ................................................ 2,442,657
63,200 Ultramar Diamond Shamrock Corporation ............................ 1,548,400
104,700 Valero Energy Corporation ........................................ 1,923,863
------------
8,989,920
------------
HEALTH CARE SERVICES - 2.4%
46,700 Cardinal Health Inc. ............................................. 2,013,937
107,100 Columbia/HCA Healthcare Corporation .............................. 2,583,788
150,000 HEALTHSOUTH Corporation+ ......................................... 862,500
44,000 United HealthCare Corporation .................................... 2,274,250
------------
7,734,475
------------
COMPUTER SYSTEMS - 2.3%
150,000 Diebold Inc. ..................................................... 3,937,500
44,000 Hewlett-Packard Company .......................................... 3,258,750
------------
7,196,250
------------
AEROSPACE/DEFENSE - 2.0%
33,200 Boeing Company ................................................... 1,529,274
39,225 General Dynamics Corporation ..................................... 2,174,536
40,500 Raytheon Company, Class B ........................................ 1,179,564
25,221 United Technologies Corporation .................................. 1,525,871
------------
6,409,245
------------
ELECTRICAL EQUIPMENT - 1.6%
22,625 Emerson Electric Company ......................................... 1,358,915
105,500 Tektronix Inc. ................................................... 3,560,625
------------
4,919,540
------------
CAPITAL GOODS - 1.4%
36,000 American Standard Companies Inc.+ ................................ 1,374,750
101,250 Crane Company .................................................... 2,069,297
25,500 Grainger (W.W.) Inc. ............................................. 1,080,565
------------
4,524,612
------------
CONSUMER CYCLICALS - 1.3%
70,000 Liz Claiborne Inc. ............................................... 2,800,000
102,800 The Warnaco Group Inc. ........................................... 1,464,900
------------
4,264,900
------------
MEDIA - 1.3%
38,100 Harcourt General Inc. ............................................ 1,466,850
56,000 Viacom Inc., Class A+ ............................................ 2,551,500
------------
4,018,350
------------
BASIC INDUSTRY - 1.2%
68,500 Engelhard Corporation ............................................ 1,207,313
35,700 Nalco Chemical Company ........................................... 1,885,406
50,000 Republic Services Inc.+ .......................................... 612,500
------------
3,705,219
------------
CONSUMER DURABLES - 0.8%
48,000 USG Corporation .................................................. 2,379,000
------------
LODGING & RESTAURANTS - 0.4%
60,000 Starwood Hotels & Resorts Worldwide Inc. ......................... 1,376,250
------------
Total Common Stocks (Cost $135,413,909) .......................... 175,980,331
------------
CONVERTIBLE PREFERRED STOCKS - 7.6%
50,000 Bank United Corporation, Conv. Pfd.,
8.000% due 08/16/2004 ........................................... 2,537,500
115,000 Cendant Corporation, Series CD, Conv. Pfd.,
1.300% due 02/16/2001 ........................................... 2,716,877
13,920 Estee Lauder Aces Trust II, Conv. Pfd.,
6.250% due 02/23/2002 ........................................... 1,248,885
23,800 Global Crossing Holdings Ltd., Conv. Pfd.,
6.375% due 11/05/2004++ ......................................... 2,380,000
9,100 McLeodUSA Inc., Series A, Conv. Pfd.,
6.750% due 08/15/2002 ........................................... 3,640,000
42,350 PSINet Inc., Conv. Pfd. .......................................... 1,709,881
10,000 Qualcomm Financial Trust, Conv. Pfd.,
5.750% due 03/01/2012 ........................................... 3,124,000
35,350 Qwest Trends Trust, Conv. Pfd.,
5.750% due 11/17/2003++ ......................................... 2,129,838
11,200 TCI Pacific Communications Inc., Conv. Pfd.,
5.000% due 07/31/2006 ........................................... 3,192,000
1,890 Winstar Communications Inc., Conv. Pfd.,
7.250% due 06/22/2002++ ......................................... 1,559,250
------------
Total Convertible Preferred Stocks
(Cost $18,505,419) .............................................. 24,238,231
------------
PRINCIPAL
AMOUNT
------
FIXED INCOME SECURITIES - 32.2%
CORPORATE BONDS AND NOTES - 13.6%
$ 1,500,000 Aetna Services Inc., Company Guarantee,
7.625% due 08/15/2026 ........................................... 1,393,057
1,250,000 American Home Products Corporation, Deb.,
7.250% due 03/01/2023 ........................................... 1,193,185
2,000,000 Cendant Corporation, Note,
7.750% due 12/01/2003 ........................................... 1,997,140
2,500,000 Citicorp, Sub. Note,
7.200% due 06/15/2007 ........................................... 2,496,345
2,000,000 CNA Financial Corporation, Note,
6.600% due 12/15/2008 ........................................... 1,861,296
1,000,000 Coastal Corporation, Note,
9.625% due 05/15/2012 ........................................... 1,162,444
Conagra Inc., Sr. Note:
750,000 9.750% due 03/01/2021 ........................................... 898,506
1,000,000 6.700% due 08/01/2027 ........................................... 956,786
1,000,000 Continental Corporation, Note,
7.250% due 03/01/2003 ........................................... 986,742
500,000 Developers Diversified Realty, MTN, Sr. Note,
6.580% due 02/06/2001 ........................................... 494,868
Federal National Mortgage Association:
2,000,000 Deb.,
8.250% due 12/18/2000 ........................................... 2,047,453
2,000,000 Note,
6.000% due 05/15/2008 ........................................... 1,916,368
2,000,000 FHP International Corporation, Sr. Note,
7.000% due 09/15/2003 ........................................... 2,003,752
1,250,000 First Nationwide Bank, Sub. Deb.,
10.000% due 10/01/2006 .......................................... 1,304,447
Franchise Finance Corporation, Sr. Note:
1,000,000 7.000% due 11/30/2000 ........................................... 995,158
1,000,000 7.875% due 11/30/2005 ........................................... 984,935
2,000,000 Loral Corporation, Deb.,
7.625% due 06/15/2025 ........................................... 1,941,966
1,000,000 Medpartners Inc., Sr. Note,
7.375% due 10/01/2006 ........................................... 830,000
1,000,000 Mercantile Bank, Sub. Note,
7.625% due 10/15/2002 ........................................... 1,019,717
2,500,000 Merrill Lynch & Company Inc., Note,
6.375% due 10/15/2008 ........................................... 2,357,530
Niagara Mohawk Power Corporation, Deb.:
1,100,000 9.500% due 06/01/2000 ........................................... 1,120,758
961,000 8.770% due 01/01/2018 ........................................... 1,014,451
1,000,000 Price/Costco Inc., Sr. Note,
7.125% due 06/15/2005 ........................................... 1,006,726
1,750,000 Raytheon Company, Deb.,
7.200% due 08/15/2027 ........................................... 1,597,055
500,000 Summit Bancorp, Sub. Note,
8.625% due 12/10/2002 ........................................... 524,867
1,500,000 Superior Financial Acquisition Corporation, Sr. Note,
8.650% due 04/01/2003 ........................................... 1,465,642
1,000,000 Tenet Healthcare Corporation, Sr. Note,
7.875% due 01/15/2003 ........................................... 961,250
2,000,000 Time Warner Inc., Deb.,
9.150% due 02/01/2023 ........................................... 2,299,155
2,000,000 Texas-New Mexico Power Company, Sr. Note,
6.250% due 01/15/2009 ........................................... 1,745,910
4,500,000 V2 Music Holdings Plc, Sr. Discount Note,
Zero coupon to 04/15/2003;
14.000% due 04/15/2008++ ........................................ 1,440,000
1,000,000 Westinghouse Electric Corporation, Deb.,
7.875% due 09/01/2023 ........................................... 991,970
------------
Total Corporate Bonds and Notes
(Cost $43,955,809) .............................................. 43,009,479
------------
U.S. TREASURY OBLIGATIONS - 8.0%
U.S. TREASURY NOTES - 4.8%
3,000,000 7.875% due 11/15/1999 ............................................ 3,005,625
3,000,000 5.875% due 11/30/2001 ............................................ 3,003,750
4,000,000 6.375% due 08/15/2002 ............................................ 4,050,000
5,000,000 6.500% due 10/15/2006 ............................................ 5,090,625
------------
15,150,000
------------
U.S. TREASURY BONDS - 2.6%
4,000,000 7.500% due 11/15/2016 ............................................ 4,415,000
4,000,000 6.250% due 08/15/2023 ............................................ 3,916,252
------------
8,331,252
------------
U.S. TREASURY STRIP (PRINCIPAL ONLY) - 0.6%
4,000,000 Zero coupon due 08/15/2012 ....................................... 1,739,228
------------
Total U.S. Treasury Obligations
(Cost $25,371,026) .............................................. 25,220,480
------------
CONVERTIBLE BONDS AND NOTES - 5.3%
2,770,000 At Home Corporation, Conv. Deb.,
0.525% due 12/28/2018++ ......................................... 1,620,450
1,450,000 Chiquita Brands International Inc., Conv. Note,
7.000% due 03/28/2001++ ......................................... 1,160,000
1,080,000 CII Financial Inc., Conv. Note,
7.500% due 09/15/2001 ........................................... 700,650
2,000,000 Corporate Express Inc., Conv. Note,
4.500% due 07/01/2000 ........................................... 1,987,500
2,700,000 Healthsouth Corporation, Conv. Deb.,
3.250% due 04/01/2003++ ......................................... 2,045,250
2,365,000 Level 3 Communications Inc., Conv. Bond,
6.000% due 09/15/2009 ........................................... 2,917,818
4,000,000 Network Associates Inc., Conv. Bond,
Zero coupon due 02/13/2018 ...................................... 1,335,000
1,750,000 Rockefeller Center Properties Trust, Conv. Deb.,
Zero coupon due 12/31/2000 ...................................... 1,470,000
100,000 Tribune Company, Conv. Note,
6.250% due 08/15/2001 ........................................... 1,737,500
2,000,000 Waste Management Inc., Conv. Deb.,
4.000% due 02/01/2002 ........................................... 1,752,500
------------
Total Convertible Bonds and Notes
(Cost $17,723,192) .............................................. 16,726,668
------------
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED
SECURITIES - 4.3%
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (GNMA) - 4.1%
Government National Mortgage Association:
251,259 10.000% due 08/15/2019 .......................................... 274,588
7,456,109 6.500% due 01/15/2024 - 05/15/2026 .............................. 7,133,316
5,090,393 7.000% due 01/20/2023 - 03/15/2028 .............................. 5,051,036
792,734 6.000% due 01/15/2026 - 02/15/2026 .............................. 736,281
------------
Total GNMAs (Cost $13,224,157) ................................... 13,195,221
------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA) - 0.2%
(Cost $569,645)
553,473 Federal National Mortgage Association,
8.000% due 12/01/2026 ........................................... 564,577
------------
Total U.S. Government Agency Mortgage-Backed Securities
(Cost $13,793,802) .............................................. 13,759,798
------------
COLLATERALIZED MORTGAGE OBLIGATIONS (CMO) - 1.0%
1,250,000 Donaldson, Lufkin & Jenrette Acceptance Corporation, 1993- M17 A2,
7.350% due 12/18/2003 ........................................... 1,252,512
118,348 Federal Home Loan Mortgage Corporation, Series 2 E,
6.850% due 07/25/2018 ........................................... 118,142
65,246 Merrill Lynch Mortgage Investors Inc., 1988 PA,
10.050% due 12/15/2008 .......................................... 66,769
389,064 Resolution Trust Corporation, 1991-M2 A2,
7.132% due 09/25/2020 ........................................... 377,896
1,479,286 Weyerhaeuser Mortgage Corporation, 1982-C FHA Putable,
7.430% due 06/01/2022 ........................................... 1,500,861
------------
Total CMOs (Cost $3,163,645) ..................................... 3,316,180
------------
Total Fixed Income Securities
(Cost $104,007,474) ............................................. 102,032,605
------------
WARRANT - 0.0%**
(Cost $45)
4,500 V2 Music Holdings Plc,
Expires 04/15/2008+, ++ ......................................... 45
------------
REPURCHASE AGREEMENT - 0.3%
(Cost $864,000)
$ 864,000 Agreement with Goldman Sachs & Company, 5.100% dated 10/29/1999,
to be repurchased at $864,367 on 11/01/1999, collateralized by
$881,280 U.S. Treasury Note, 6.500% due 11/15/2026
(value $886,021) ................................................ $ 864,000
------------
TOTAL INVESTMENTS (Cost $258,790,847*) .................................. 95.6% 303,115,212
OTHER ASSETS AND LIABILITIES (NET) ...................................... 4.4 14,115,951
----- ------------
NET ASSETS .............................................................. 100.0% $317,231,163
===== ============
- --------------
* Aggregate cost for federal tax purposes is $258,701,300.
** Amount represents less than 0.1% of net assets.
+ Non-income producing security.
++ Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities
may be resold in transactions exempt from registration, normally to qualified institutional buyers.
</TABLE>
- -------------------------------------------------------------------------------
GLOSSARY OF TERMS
ADR -- American Depositary Receipt
FHA -- Federal Housing Authority
MTN -- Medium Term Note
STRIP -- Separate trading of registered interest and principal securities
- -------------------------------------------------------------------------------
See Notes to Financial Statements.
<PAGE>
<TABLE>
PORTFOLIO of INVESTMENTS
GROWTH & INCOME FUND
OCTOBER 31, 1999
<CAPTION>
SHARES VALUE
------ -----
<S> <C> <C>
COMMON STOCKS - 97.8%
BANKS/SAVINGS & LOANS - 11.3%
350,000 Bank of America Corporation ...................................... $ 22,531,250
229,900 Chase Manhattan Corporation ...................................... 20,087,512
604,048 Citigroup Inc. ................................................... 32,694,098
450,000 First Union Corporation .......................................... 19,209,375
520,000 Mellon Bank Corporation .......................................... 19,207,500
233,800 Prime Bancshares Inc. ............................................ 6,312,600
405,000 U.S. Bancorp ..................................................... 15,010,313
476,174 Wells Fargo & Company ............................................ 22,796,830
--------------
157,849,478
--------------
COMPUTER SOFTWARE/SERVICES - 11.1%
440,000 Adobe Systems Inc. ............................................... 30,772,500
298,450 BARRA Inc.+ ...................................................... 6,593,880
470,000 BMC Software Inc.+ ............................................... 30,168,125
261,700 Computer Associates International Inc. ........................... 14,786,050
359,500 First Data Corporation ........................................... 16,424,656
312,000 Microsoft Corporation+ ........................................... 28,879,500
577,000 Oracle Corporation+ .............................................. 27,443,563
--------------
155,068,274
--------------
CONSUMER STAPLES - 8.6%
86,980 Alberto-Culver Company, Class A .................................. 1,739,600
216,000 Avon Products Inc. ............................................... 6,966,000
153,100 Campbell Soup Company ............................................ 6,889,500
79,000 Gillette Company ................................................. 2,858,812
241,500 Kimberly-Clark Corporation ....................................... 15,244,687
340,000 Kimberly-Clark de Mexico, ADR .................................... 5,447,358
1,000,000 Kroger Company+ .................................................. 20,812,500
271,700 Libbey Inc. ...................................................... 7,200,050
483,000 PepsiCo Inc. ..................................................... 16,754,063
82,000 Procter & Gamble Company ......................................... 8,599,750
280,700 Ralston-Ralston Purina Group ..................................... 8,824,506
706,600 Sara Lee Corporation ............................................. 19,122,363
--------------
120,459,189
--------------
HEALTH CARE PRODUCTS - 8.2%
224,200 Abbott Laboratories .............................................. 9,052,075
67,000 ALZA Corporation+ ................................................ 2,868,437
285,000 American Home Products Corporation ............................... 14,891,250
167,000 Bristol-Myers Squibb Company ..................................... 12,827,687
193,800 Johnson & Johnson ................................................ 20,300,550
196,400 Merck & Company Inc. ............................................. 15,626,075
1,134,700 Mylan Laboratories Inc. .......................................... 20,353,681
132,000 Pfizer Inc. ...................................................... 5,214,000
174,500 Warner Lambert Company ........................................... 13,927,281
--------------
115,061,036
--------------
UTILITIES/TELECOMMUNICATIONS - 7.4%
535,000 AT&T Corporation ................................................. 25,011,250
303,800 Comcast Corporation, Special Class A ............................. 12,797,575
265,000 MCI Worldcom+ .................................................... 22,740,313
263,500 SBC Communications Inc. .......................................... 13,422,031
408,800 Sprint Corporation, PCS Group+ ................................... 30,378,950
--------------
104,350,119
--------------
OIL & GAS - 6.6%
116,000 BP Amoco Plc, Sponsored ADR ...................................... 6,699,000
100,560 Exxon Corporation ................................................ 7,447,725
500,000 Halliburton Company .............................................. 18,843,750
160,600 Mobil Corporation ................................................ 15,497,900
229,900 Royal Dutch Petroleum ............................................ 13,779,631
75,200 Schlumberger Ltd. ................................................ 4,554,300
558,300 Tosco Corporation ................................................ 14,131,969
330,000 Unocal Corporation ............................................... 11,385,000
--------------
92,339,275
--------------
COMPUTER SYSTEMS - 5.9%
233,350 Cisco Systems Inc.+ .............................................. 17,267,900
550,000 Compaq Computer Corporation ...................................... 10,450,000
305,000 EMC Corporation+ ................................................. 22,265,000
240,000 Hewlett-Packard Company .......................................... 17,775,000
150,000 International Business Machines Corporation ...................... 14,756,250
--------------
82,514,150
--------------
INSURANCE - 4.9%
367,900 Allstate Corporation ............................................. 10,577,125
250,000 American International Group Inc. ................................ 25,734,375
645,154 Conseco Inc. ..................................................... 15,685,307
223,880 Liberty Financial Companies ...................................... 5,387,112
105,000 Marsh & McLennan Companies Inc. .................................. 8,301,563
53,500 MGIC Investment Corporation ...................................... 3,196,625
--------------
68,882,107
--------------
MEDIA - 4.7%
832,626 AT&T Corporation-Liberty Media Group, Class A+ ................... 33,044,844
348,600 News Corporation Ltd., Sponsored ADR ............................. 9,608,288
218,000 Viacom Inc., Class A+ ............................................ 9,932,625
500,000 Walt Disney Company+ ............................................. 13,187,500
--------------
65,773,257
--------------
RETAIL SALES - 3.6%
210,000 Dayton Hudson Corporation ........................................ 13,571,250
348,075 Intimate Brands Inc. ............................................. 14,271,075
217,368 Limited Inc. ..................................................... 8,939,259
150,750 May Department Stores Company .................................... 5,229,141
158,000 Wal-Mart Stores Inc. ............................................. 8,956,625
--------------
50,967,350
--------------
CONSUMER DURABLES - 3.5%
720,000 Federal-Mogul Corporation ........................................ 18,090,000
1,157,000 Mattel Inc. ...................................................... 15,474,875
839,350 Miller Industries Inc.+ .......................................... 2,045,916
598,400 U.S. Industries Inc. ............................................. 8,863,800
91,000 USG Corporation .................................................. 4,510,188
--------------
48,984,779
--------------
FINANCIAL SERVICES - 3.5%
53,900 Ambac Financial Group Inc. ....................................... 3,220,525
400,000 Federal Home Loan Mortgage Corporation ........................... 21,625,000
95,000 Merrill Lynch & Company Inc. ..................................... 7,457,500
144,900 Price (T. Rowe) Associates Inc. .................................. 5,143,950
100,000 Providian Financial Corporation .................................. 10,900,000
--------------
48,346,975
--------------
AEROSPACE/DEFENSE - 3.3%
112,700 AlliedSignal Inc. ................................................ 6,416,856
357,800 Boeing Company ................................................... 16,481,162
812,000 Raytheon Company, Class B ........................................ 23,649,500
--------------
46,547,518
--------------
HEALTH CARE SERVICES - 2.5%
260,000 Aetna Inc. ....................................................... 13,065,000
206,000 IMS Health Inc. .................................................. 5,974,000
417,000 PacifiCare Health Systems Inc.+ .................................. 16,445,438
--------------
35,484,438
--------------
CAPITAL GOODS - 2.4%
150,800 Crane Company .................................................... 3,081,975
383,448 Donaldson Company Inc. ........................................... 8,915,166
525,000 Tyco International Ltd. .......................................... 20,967,188
--------------
32,964,329
--------------
ELECTRONICS/SEMICONDUCTORS - 2.3%
579,625 General Semiconductor Inc.+ ...................................... 6,086,062
333,600 Intel Corporation ................................................ 25,833,150
--------------
31,919,212
--------------
TRANSPORTATION - 1.9%
55,700 Airborne Freight Corporation ..................................... 1,197,550
422,400 Expeditors International of Washington Inc. ...................... 15,787,200
183,800 Union Pacific Corporation ........................................ 10,246,850
--------------
27,231,600
--------------
ELECTRICAL EQUIPMENT - 1.9%
77,525 Emerson Electric Company ......................................... 4,656,345
157,900 General Electric Company ......................................... 21,405,319
--------------
26,061,664
--------------
BUSINESS SERVICES - 1.1%
264,433 ACNielson Corporation+ ........................................... $ 5,817,526
331,100 Dun & Bradstreet Corporation ..................................... 9,726,062
--------------
15,543,588
--------------
BASIC INDUSTRY - 1.1%
41,900 Nucor Corporation ................................................ 2,173,563
723,365 Waste Management Inc. ............................................ 13,291,832
--------------
15,465,395
--------------
LODGING & RESTAURANTS - 1.0%
327,780 Sunburst Hospitality Corporation+ ................................ 1,905,221
310,000 Tricon Global Restaurants Inc.+ .................................. 12,458,125
--------------
14,363,346
--------------
UTILITIES/GAS & ELECTRIC - 1.0%
338,000 Enron Corporation ................................................ 13,498,875
--------------
Total Common Stocks
(Cost $1,051,229,867) ........................................... 1,369,675,954
--------------
PRINCIPAL
AMOUNT
------
CONVERTIBLE BOND - 0.2%
(Cost $3,228,221)
$ 6,000,000 At Home Corporation, Sub. Deb.,
0.525% due 12/28/2018++ ......................................... 3,510,000
--------------
REPURCHASE AGREEMENT - 2.7%
(Cost $37,787,000)
37,787,000 Agreement with Goldman Sachs & Company, 5.100% dated 10/29/1999,
to be repurchased at $37,803,059 on 11/01/1999, collateralized by
$38,542,740 U.S. Treasury Note, 6.500% due 11/15/2026
(Market Value $38,750,079) ...................................... 37,787,000
--------------
TOTAL INVESTMENTS (Cost $1,092,245,088*) ............................ 100.7% 1,410,972,954
OTHER ASSETS AND LIABILITIES (NET) .................................. (0.7) (10,292,996)
----- --------------
NET ASSETS .......................................................... 100.0% $1,400,679,958
===== ==============
- --------------
* Aggregate cost for federal tax purposes is $1,094,164,219.
+ Non-income producing security.
++ Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities
may be resold in transactions exempt from registration, normally to qualified institutional
buyers.
</TABLE>
- -------------------------------------------------------------------------------
GLOSSARY OF TERMS
ADR --American Depositary Receipt
- -------------------------------------------------------------------------------
See Notes to Financial Statements.
<PAGE>
<TABLE>
PORTFOLIO of INVESTMENTS
GROWTH FUND
OCTOBER 31, 1999
<CAPTION>
SHARES VALUE
------ -----
<S> <C> <C>
COMMON STOCKS - 95.0%
UTILITIES/TELECOMMUNICATIONS - 20.1%
531,485 Comcast Corporation, Class A ..................................... $ 22,388,806
262,155 Cox Communications Inc., Class A+ ................................ 11,911,668
230,670 Level 3 Communications Inc.+ ..................................... 15,772,061
135,160 NEXTLINK Communications Inc.+ .................................... 8,084,257
640,125 Nokia Corporation, Class A, Sponsored ADR ........................ 73,974,445
3,427 Nokia Oyj ........................................................ 392,189
94,506 NTL Inc.+ ........................................................ 7,123,409
101,785 Sprint Corporation, PCS Group+ ................................... 8,441,793
1,141,270 Vodafone AirTouch Plc ............................................ 5,307,517
150,165 Vodafone AirTouch Plc, Sponsored ADR ............................. 7,198,535
115,085 VoiceStream Wireless Corporation+ ................................ 11,364,644
------------
171,959,324
------------
COMPUTER SOFTWARE/SERVICES - 17.7%
564,775 Amazon.com Inc.+ ................................................. 39,887,234
131,665 America Online Inc.+ ............................................. 17,075,305
122,840 DoubleClick Inc.+ ................................................ 17,197,600
54,125 eBay Inc.+ ....................................................... 7,313,641
73,220 Electronic Arts Inc.+ ............................................ 5,917,091
125,370 Exodus Communications Inc.+ ...................................... 10,781,820
32,365 Inktomi Corporation+ ............................................. 3,283,025
198,355 Microsoft Corporation+ ........................................... 18,360,235
26,290 Phone.com Inc.+ .................................................. 5,402,595
21,405 Verio Inc.+ ...................................................... 798,674
71,370 VeriSign Inc.+ ................................................... 8,814,195
89,750 Yahoo Inc.+ ...................................................... 16,070,859
------------
150,902,274
------------
MEDIA - 13.8%
1,229,612 AT&T Corporation-Liberty Media Group, Class A+ ................... 48,800,226
146,250 Cablevision Systems Corporation, Class A+ ........................ 9,881,016
74,465 Lamar Advertising Company+ ....................................... 4,021,110
42,990 Liberty Digital Inc., Class A+ ................................... 1,343,437
200,719 Outdoor Systems Inc.+ ............................................ 8,505,468
505,690 Time Warner Inc. ................................................. 35,240,272
115,140 UnitedGlobalCom Inc., Class A+ ................................... 10,017,180
------------
117,808,709
------------
COMPUTER SYSTEMS - 8.0%
152,545 ASM Lithography Holding NV+ ...................................... 11,078,581
360,269 Cisco Systems Inc.+ .............................................. 26,659,906
302,860 EMC Corporation+ ................................................. 22,108,780
80,970 Sun Microsystems Inc.+ ........................................... 8,567,638
------------
68,414,905
------------
ELECTRONICS/SEMICONDUCTORS - 7.8%
58,030 Broadcom Corporation, Class A+ ................................... 7,416,959
135,575 Conexant Systems Inc.+ ........................................... 12,659,316
88,110 JDS Uniphase Corporation+ ........................................ 14,703,356
52,230 Maxim Integrated Products Inc.+ .................................. 4,122,906
200,785 Texas Instruments Inc. ........................................... 18,020,454
208,180 Vitesse Semiconductor Corporation+ ............................... 9,550,258
------------
66,473,249
------------
CAPITAL GOODS - 6.3%
202,845 Applied Materials Inc.+ .......................................... 18,218,016
111,293 Mannesmann AG .................................................... 17,528,604
449,888 Tyco International Ltd. .......................................... 17,967,402
------------
53,714,022
------------
HEALTH CARE PRODUCTS - 6.2%
551,892 Medtronic Inc. ................................................... 19,109,261
129,795 MiniMed Inc.+ .................................................... 9,840,083
491,500 Schering-Plough Corporation ...................................... 24,329,250
------------
53,278,594
------------
OIL & GAS - 3.8%
818,525 Enron Corporation ................................................ 32,689,842
------------
FINANCIAL SERVICES - 2.9%
107,565 American Express Company ......................................... 16,565,010
328,520 E*TRADE Group Inc.+ .............................................. 7,822,882
------------
24,387,892
------------
BANKS/SAVINGS & LOANS - 2.4%
121,045 Fifth Third Bancorp .............................................. 8,934,634
405,159 Firstar Corporation .............................................. 11,901,546
------------
20,836,180
------------
RETAIL SALES - 2.2%
110,540 Home Depot Inc. .................................................. 8,345,770
459,620 Staples Inc.+ .................................................... 10,197,819
------------
18,543,589
------------
TECHNOLOGY - 2.0%
76,630 Comverse Technology Inc.+ ........................................ 8,697,505
58,755 PE Biosystems Group .............................................. 3,811,731
129,515 Pittway Corporation, Class A ..................................... 4,273,995
------------
16,783,231
------------
BUSINESS SERVICES - 1.8%
117,390 Sapient Corporation+ ............................................. 15,011,246
------------
Total Common Stocks (Cost $595,250,046) .......................... 810,803,057
------------
PORTFOLIO of INVESTMENTS (continued)
GROWTH FUND
OCTOBER 31, 1999
PRINCIPAL
AMOUNT
------
COMMERCIAL PAPER - 3.8%
(Cost $32,200,000)
$32,200,000 Associates First Capital Corporation,
5.300% due 11/01/1999++ ......................................... 32,200,000
------------
CORPORATE BOND - 0.3%
(Cost $2,199,951)
3,323,000 Amazon.com Inc., Step coupon, Sr. Disc. Note,
Zero coupon to 05/01/2003;
10.000% due 05/01/2008 .......................................... 2,176,565
------------
TOTAL INVESTMENTS (Cost $629,649,997*) .................................. 99.1% 845,179,622
OTHER ASSETS AND LIABILITIES (NET) ...................................... 0.9 8,057,530
----- ------------
NET ASSETS .............................................................. 100.0% $853,237,152
===== ============
- --------------
* Aggregate cost for federal tax purposes is $631,877,798.
+ Non-income producing security.
++ Rate represents annualized yield at date of purchase (unaudited).
</TABLE>
SCHEDULE OF FORWARD FOREIGN CURRENCY CONTRACTS
U.S. FORWARD FOREIGN CURRENCY CONTRACTS TO BUY
CONTRACTS TO RECEIVE
--------------------------------------------- NET
IN UNREALIZED
EXPIRATION LOCAL VALUE IN EXCHANGE (DEPRECIATION)
DATE CURRENCY U.S. $ FOR U.S. $ OF CONTRACTS
---------- ------------------ --------- ---------- ---------------
04/07/2000 EMU 5,000,000 5,318,960 5,506,575 $(187,615)
=========
U.S. FORWARD FOREIGN CURRENCY CONTRACTS TO SELL
CONTRACTS TO DELIVER
---------------------------------------------- NET
IN UNREALIZED
EXPIRATION LOCAL VALUE IN EXCHANGE APPRECIATION
DATE CURRENCY U.S. $ FOR U.S. $ OF CONTRACTS
---------- ------------------ -------- ---------- --------------
12/09/1999 EMU 29,000,000 30,591,119 31,284,195 $ 693,076
04/07/2000 EMU 20,000,000 21,275,842 21,765,750 489,908
----------
$1,182,984
----------
Net Unrealized Appreciation of Forward Foreign
Currency Contracts ......................................... $ 995,369
==========
- -------------------------------------------------------------------------------
GLOSSARY OF TERMS
ADR -- American Depositary Receipt
EMU -- European Monetary Unit
- ------------------------------------------------------------------------------
See Notes to Financial Statements.
<PAGE>
<TABLE>
PORTFOLIO of INVESTMENTS
NORTHWEST FUND
OCTOBER 31, 1999
<CAPTION>
SHARES VALUE
------ -----
<S> <C> <C>
COMMON STOCKS - 99.7%
COMPUTER SOFTWARE/SERVICES - 15.1%
131,630 Adobe Systems Inc. ............................................... $ 9,205,873
699,600 ARIS Corporation+ ................................................ 4,328,775
24,100 BSQUARE Corporation+ ............................................. 953,456
65,900 Check Point Software Technologies Ltd.+ .......................... 7,623,806
124,550 Click2Learn.com Inc.+ ............................................ 1,120,950
1,225,740 Mentor Graphics Corporation+ ..................................... 9,882,529
173,850 Microsoft Corporation+ ........................................... 16,091,991
298,665 Visio Corporation+ ............................................... 11,825,267
353,000 Wall Data Inc.+ .................................................. 2,890,187
------------
63,922,834
------------
HEALTH CARE PRODUCTS - 11.1%
556,200 Corixa Corporation+ .............................................. 7,230,600
326,970 ICOS Corporation+ ................................................ 9,379,952
195,270 Immunex Corporation+ ............................................. 12,302,010
807,000 NeoRx Corporation+ ............................................... 1,059,188
574,163 SonoSite Inc.+ ................................................... 16,937,809
------------
46,909,559
------------
ELECTRICAL EQUIPMENT - 8.7%
159,765 Electro Scientific Industries Inc.+ .............................. 8,627,310
889,625 FEI Company+ ..................................................... 6,727,789
491,850 Flir Systems Inc.+ ............................................... 6,978,122
313,635 Microvision Inc.+ ................................................ 4,802,536
284,480 Tektronix Inc. ................................................... 9,601,200
------------
36,736,957
------------
COMPUTER SYSTEMS - 7.5%
300,600 Apex Inc.+ ....................................................... 5,110,200
629,730 In Focus Systems Inc.+ ........................................... 12,476,525
263,895 RadiSys Corporation+ ............................................. 13,986,435
------------
31,573,160
------------
CONSUMER CYCLICALS - 6.9%
926,425 Building Materials Holding Corporation+ .......................... 10,248,577
178,900 Columbia Sportswear Company+ ..................................... 3,622,725
318,500 Cutter & Buck Inc.+ .............................................. 5,235,344
950,130 K2 Inc. .......................................................... 7,601,040
46,710 Nike Inc., Class B ............................................... 2,636,196
------------
29,343,882
------------
ELECTRONICS/SEMICONDUCTORS - 6.9%
158,620 Credence Systems Corporation+ .................................... 7,237,038
58,050 Intel Corporation ................................................ 4,495,247
276,440 Lattice Semiconductor Corporation+ ............................... 9,779,065
80,580 Micron Technology Inc.+ .......................................... 5,746,361
22,025 TriQuint Semiconductor Inc.+ ..................................... 1,762,000
------------
29,019,711
------------
BANKS/SAVINGS & LOANS - 6.8%
119,550 Bank of America Corporation ...................................... 7,696,031
170,705 First Savings Bank of Washington Bancorp Inc. .................... 2,901,985
27,947 Horizon Financial Corporation .................................... 316,150
104,850 Interwest Bancorp Inc. ........................................... 1,939,725
122,100 Sterling Financial Corporation+ .................................. 1,549,144
244,368 U.S. Bancorp ..................................................... 9,056,889
193,826 Washington Federal Inc. .......................................... 4,421,656
18,600 Wells Fargo & Company ............................................ 890,475
------------
28,772,055
------------
TRANSPORTATION - 5.1%
193,150 Airborne Freight Corporation ..................................... 4,152,725
128,410 Alaska Air Group Inc.+ ........................................... 5,104,298
325,660 Expeditors International of Washington Inc. ...................... 12,171,543
------------
21,428,566
------------
BASIC INDUSTRY - 4.6%
33,133 Boise Cascade Corporation ........................................ 1,180,363
236,430 Oregon Steel Mills Inc. .......................................... 1,994,878
413,680 Schnitzer Steel Industries Inc., Class A ......................... 6,670,590
78,200 Weyerhaeuser Company ............................................. 4,667,562
121,600 Willamette Industries Inc. ....................................... 5,054,000
------------
19,567,393
------------
HEALTH CARE SERVICES - 3.6%
1,076,860 Foundation Health Systems Inc., Class A+ ......................... 7,134,197
200,300 PacifiCare Health Systems Inc., Class B+ ......................... 7,899,331
------------
15,033,528
------------
UTILITIES/TELECOMMUNICATIONS - 3.5%
123,100 AVT Corporation+ ................................................. 4,123,850
202,200 General Communication Inc., Class A+ ............................. 985,725
28,250 GST Telecommunications Inc.+ ..................................... 190,687
615,995 Metro One Telecommunications Inc.+ ............................... 9,547,923
------------
14,848,185
------------
AEROSPACE/DEFENSE - 3.4%
200,964 Boeing Company ................................................... 9,256,904
179,825 Precision Castparts Corporation .................................. 5,304,837
------------
14,561,741
------------
CONSUMER STAPLES - 3.3%
165,800 Albertson's Inc. ................................................. 6,020,612
378,724 Kroger Company+ .................................................. 7,882,193
------------
13,902,805
------------
RETAIL SALES - 2.6%
93,270 Costco Wholesale Corporation+ .................................... 7,490,747
142,860 Multiple Zones International Inc.+ ............................... 821,445
110,200 Nordstrom Inc. ................................................... 2,748,112
------------
11,060,304
------------
CONSUMER DURABLES - 2.6%
139,900 Jore Corporation+ ................................................ $ 1,626,338
399,912 Monaco Coach Corporation+ ........................................ 9,397,932
------------
11,024,270
------------
LODGING & RESTAURANTS - 2.3%
669,685 Cavanaugh's Hospitality Corporation+ ............................. 5,064,493
168,340 Starbucks Corporation+ ........................................... 4,576,744
------------
9,641,237
------------
CAPITAL GOODS - 2.1%
467,000 Greenbrier Companies Inc. ........................................ 4,815,938
85,650 PACCAR Inc. ...................................................... 4,036,256
------------
8,852,194
------------
INSURANCE - 1.8%
124,790 SAFECO Corporation ............................................... 3,431,725
171,015 StanCorp Financial Group Inc. .................................... 4,339,505
------------
7,771,230
------------
REAL ESTATE INVESTMENT TRUSTS - 1.8%
244,815 Pacific Gulf Properties Inc. ..................................... 4,957,504
110,680 Shurgard Storage Centers Inc., Class A ........................... 2,614,815
------------
7,572,319
------------
Total Common Stocks (Cost $253,270,061) .......................... 421,541,930
------------
PRINCIPAL
AMOUNT
------
REPURCHASE AGREEMENT - 0.6%
(Cost $2,672,000)
$ 2,672,000 Agreement with Goldman Sachs & Company, 5.100% dated 10/29/1999,
to be repurchased at $2,673,136 on 11/01/1999, collaterlized by
2,725,440 U.S. Treasury Note, 6.500% due 11/15/2026
(Market Value of $2,740,101) .................................... $ 2,672,000
------------
TOTAL INVESTMENTS (Cost $255,942,061*) ................................ 100.3% 424,213,930
OTHER ASSETS AND LIABILITIES (NET) .................................... (0.3) (1,473,809)
----- ------------
NET ASSETS ............................................................ 100.0% $422,740,121
===== ============
- --------------
* Aggregate cost for federal tax purposes is $256,075,921.
+ Non-income producing security.
</TABLE>
See Notes to Financial Statements.
<PAGE>
<TABLE>
PORTFOLIO of INVESTMENTS
EMERGING GROWTH FUND
OCTOBER 31, 1999
<CAPTION>
SHARES VALUE
------ -----
<S> <C> <C>
COMMON STOCKS - 99.3%
COMPUTER SOFTWARE/SERVICES - 23.7%
403,850 ARIS Corporation+ ................................................ $ 2,498,822
91,300 AVT Corporation+ ................................................. 3,058,550
7,100 BSQUARE Corporation+ ............................................. 280,894
300,250 Carreker-Antinori Inc.+ .......................................... 2,064,219
39,700 Check Point Software Technologies Inc.+ .......................... 4,592,794
186,450 Harbinger Corporation+ ........................................... 2,971,547
67,400 HNC Software Inc.+ ............................................... 2,691,787
301,150 Made2Manage Systems Inc.+ ........................................ 1,769,256
152,500 Onyx Software Corporation+ ....................................... 3,412,188
92,400 Primus Knowledge Solutions Inc.+ ................................. 2,783,550
99,350 Sterling Commerce Inc.+ .......................................... 2,328,516
7,000 Visio Corporation+ ............................................... 277,156
------------
28,729,279
------------
HEALTH CARE PRODUCTS - 17.7%
87,900 ChiRex Inc.+ ..................................................... 2,483,175
162,550 Corixa Corporation+ .............................................. 2,113,150
38,200 Emisphere Technologies Inc.+ ..................................... 477,500
75,880 ICOS Corporation+ ................................................ 2,176,807
184,200 Incyte Pharmaceuticals Inc.+ ..................................... 3,545,850
204,825 NeoRx Corporation+ ............................................... 268,833
73,250 Pharmacyclics Inc.+ .............................................. 2,591,219
125,100 Shire Pharmaceuticals Group, ADR+ ................................ 3,971,925
129,371 SonoSite Inc.+ ................................................... 3,816,445
------------
21,444,904
------------
FINANCIAL SERVICES - 8.5%
168,617 American Capital Strategies Ltd. ................................. 3,530,418
74,500 Hambrecht & Quist Group+ ......................................... 3,678,437
68,391 Heller Financial Inc. ............................................ 1,624,286
35,412 Profit Recovery Group International Inc.+ ........................ 1,458,532
------------
10,291,673
------------
BUSINESS SERVICES - 8.4%
387,325 Asymetrix Learning Systems Inc.+ ................................. 3,485,925
94,900 Cognizant Technology Solutions Corporation+ ...................... 4,359,469
276,295 First Consulting Group Inc.+ ..................................... 2,331,239
------------
10,176,633
------------
COMPUTER SYSTEMS - 7.3%
122,000 Apex Inc.+ ....................................................... 2,074,000
87,700 In Focus Systems Inc.+ ........................................... 1,737,556
91,700 NVIDIA Corporation+ .............................................. 2,028,863
56,575 RadiSys Corporation+ ............................................. 2,998,475
------------
8,838,894
------------
ELECTRONICS/SEMICONDUCTORS - 5.7%
62,210 ATMI Inc.+ ....................................................... 1,675,782
41,675 Credence Systems Corporation+ .................................... 1,901,422
63,700 Lattice Semiconductor Corporation+ ............................... 2,253,387
13,140 TriQuint Semiconductor Inc.+ ..................................... 1,051,200
------------
6,881,791
------------
CONSUMER CYCLICALS - 5.7%
154,700 Building Materials Holding Corporation+ .......................... 1,711,369
110,450 Cutter & Buck Inc.+ .............................................. 1,815,522
170,955 K2 Inc. .......................................................... 1,367,640
63,850 Nortek Inc.+ ..................................................... 1,955,406
------------
6,849,937
------------
UTILITIES/TELECOMMUNICATIONS - 5.4%
74,000 Gilat Satellite Networks Ltd.+ ................................... 3,857,250
107,000 Metro One Telecommunications Inc.+ ............................... 1,658,500
23,600 Teligent Inc.+ ................................................... 1,059,050
------------
6,574,800
------------
ELECTRICAL EQUIPMENT - 4.2%
30,260 Electro Scientific Industries Inc.+ .............................. 1,634,040
214,700 FEI Company+ ..................................................... 1,623,669
122,080 Microvision Inc.+ ................................................ 1,869,350
------------
5,127,059
------------
TRANSPORTATION - 3.7%
62,300 Airborne Freight Corporation ..................................... 1,339,450
81,900 Expeditors International of Washington Inc. ...................... 3,061,012
------------
4,400,462
------------
CONSUMER DURABLES - 2.9%
400,800 J. Jill Group Inc.+ .............................................. 1,653,300
78,375 Monaco Coach Corporation+ ........................................ 1,841,812
------------
3,495,112
------------
OIL & GAS - 2.0%
63,831 Hanover Compressor Company+ ...................................... 2,361,747
------------
CONSUMER STAPLES - 1.8%
55,800 Beringer Wine Estates Holding Inc., Class B+ ..................... 2,218,050
------------
MEDIA - 1.2%
133,400 Bowne & Company Inc. ............................................. 1,484,075
------------
LODGING & RESTAURANTS - 1.1%
178,540 Cavanaugh's Hospitality Corporation+ ............................. 1,350,209
------------
Total Common Stocks (Cost $97,893,788) ........................... 120,224,625
------------
TOTAL INVESTMENTS (Cost $97,893,788*) ................................... 99.3% 120,224,625
OTHER ASSETS AND LIABILITIES (NET) ...................................... 0.7 874,347
----- ------------
NET ASSETS .............................................................. 100.0% $121,098,972
===== ============
- --------------
* Aggregate cost for federal tax purposes is $98,175,997.
+ Non-income producing security.
</TABLE>
- ------------------------------------------------------------------------------
GLOSSARY OF TERMS
ADR --American Depositary Receipt
- ------------------------------------------------------------------------------
See Notes to Financial Statements.
<PAGE>
<TABLE>
PORTFOLIO of INVESTMENTS
INTERNATIONAL GROWTH FUND
OCTOBER 31, 1999
SHARES VALUE
------ -----
COMMON STOCKS - 95.7%
JAPAN - 28.6%
22,610 Advantest Corporation ............................................ $ 3,404,402
2,976 Aiful Corporation ................................................ 462,369
62,000 Asahi Breweries Ltd. ............................................. 881,807
77 DDI Corporation .................................................. 841,853
12,000 Fanuc Ltd. ....................................................... 932,195
44,000 Fujitsu Ltd. ..................................................... 1,325,022
148,000 Hitachi Ltd. ..................................................... 1,599,655
55,000 Jusco Company Ltd. ............................................... 1,281,768
25,000 Kao Corporation .................................................. 762,444
6,000 Keyence Corporation .............................................. 1,608,325
149,000 Mitsubishi Heavy Industries Ltd. ................................. 584,454
210,000 Mitsubishi Motors Corporation .................................... 1,089,575
68,000 Mitsui Chemicals Inc. ............................................ 678,239
160,000 Mitsui Marine and Fire Insurance Company Ltd. .................... 1,060,324
25,000 Murata Manufacturing Company Ltd. ................................ 3,212,813
166,000 NEC Corporation .................................................. 3,359,164
17,000 Nichiei Company Ltd. ............................................. 880,407
7,800 NIDEC Corporation ................................................ 1,514,817
114,000 Nikon Corporation ................................................ 2,711,422
11,500 Nintendo Company Ltd. ............................................ 1,826,412
155,000 Nissan Motor Company Ltd.+ ....................................... 929,078
62,000 Nomura Securities Company Ltd. ................................... 1,023,324
216 NTT Mobile Communications Network Inc. ........................... 5,738,180
4,700 Orix Corporation ................................................. 631,054
11,100 Rohm Company Ltd. ................................................ 2,491,033
220,000 Sakura Bank Ltd. ................................................. 1,890,477
2,090 Shohkoh Fund & Company Ltd. ...................................... 1,278,815
33,200 Sony Corporation ................................................. 5,177,251
7,000 Sony Music Entertainment Inc. .................................... 912,343
70,000 Suzuki Motor Corporation ......................................... 1,063,393
25,000 Takeda Chemical Industries Ltd. .................................. 1,436,175
54,000 Tokyo Electron Ltd. .............................................. 4,484,895
72,000 Toray Industries Inc. ............................................ 397,046
122,000 Toshiba Corporation .............................................. 767,546
------------
58,238,077
------------
UNITED KINGDOM - 14.1%
106,400 3i Group Plc ..................................................... 1,327,089
104,800 AstraZeneca Group Plc ............................................ 4,739,432
12,200 AstraZeneca Group Plc, ADR ....................................... 558,150
24,200 Barclays Plc ..................................................... 740,875
166,000 BG Plc ........................................................... 921,340
220,000 Cadbury Schweppes Plc ............................................ 1,441,584
48,000 COLT Telecom Group Plc+ .......................................... 1,434,797
612,000 Corus Group Plc .................................................. 1,166,611
155,000 EMI Group Plc .................................................... 1,217,520
201,300 Enterprise Oil Plc ............................................... 1,429,039
63,000 GKN Plc .......................................................... 1,008,361
445,000 Invensys Plc ..................................................... 2,190,148
100,000 Kingfisher Plc ................................................... 1,091,972
58,651 Lloyds TSB Group Plc ............................................. 811,047
75,000 Orange Plc+ ...................................................... 1,869,663
187,000 Reuters Group Plc ................................................ 1,737,764
145,000 Royal & Sun Alliance Insurance Group Plc ......................... 986,472
155,000 Shell Transport & Trading Company Plc ............................ 1,188,228
194,000 TI Group Plc ..................................................... 1,313,456
315,000 Vodafone AirTouch Plc ............................................ 1,464,919
------------
28,638,467
------------
GERMANY - 8.9%
44,200 Bayerische Motoren Werke (BMW) AG ................................ 1,408,567
13,000 DaimlerChrysler AG ............................................... 1,011,784
15,700 Degussa-Huels AG+ ................................................ 599,403
40,000 Deutsche Telekom AG .............................................. 1,838,460
7,400 Epcos AG+ ........................................................ 303,379
17,000 Henkel KGaA-VORZUG ............................................... 1,153,244
42,400 Mannesmann AG .................................................... 6,677,984
22,400 Preussag AG ...................................................... 1,213,299
31,000 Siemens AG ....................................................... 2,782,774
49,000 Thyssen Krupp AG+ ................................................ 1,159,555
------------
18,148,449
------------
NETHERLANDS - 6.6%
50,469 ABN-Amro Holding NV .............................................. 1,220,327
36,719 Aegon NV ......................................................... 3,388,837
22,000 ASM Lithography Holding NV+ ...................................... 1,597,750
9,000 ASM Lithography Holding NV (F)+ .................................. 635,152
34,905 DSM NV ........................................................... 1,321,608
2,700 Heineken Holding NV, Class A ..................................... 97,971
31,700 Heineken NV ...................................................... 1,616,680
239 IHC Caland NV .................................................... 10,369
13,700 ING Groep NV+ .................................................... 808,056
26,600 STMicroelectronics NV ............................................ 2,417,275
3,000 STMicroelectronics NV (F) ........................................ 263,463
------------
13,377,488
------------
FRANCE - 5.1%
3,200 Bouygues SA+ ..................................................... 1,114,014
2,300 Christian Dior SA ................................................ 411,718
8,000 Compagnie de Saint Gobain ........................................ 1,388,310
20,000 Groupe BIC SA+ ................................................... 978,128
4,900 Groupe Danone SA ................................................. 1,249,742
32,100 Lagardere S.C.A.+ ................................................ 1,299,806
500 LVMH (Louis Vuitton Moet Hennessy) ............................... 150,926
6,300 PSA Peugeot Citroen .............................................. 1,209,250
41,000 Sanofi-Synthelabo SA+ ............................................ 1,808,958
6,300 Total Fina SA .................................................... 851,444
------------
10,462,296
------------
CANADA - 4.7%
59,000 Bank of Nova Scotia .............................................. 1,347,197
70,000 Bombardier Inc., Class B ......................................... 1,234,455
40,000 Clarica Life Insurance Company+ .................................. 646,959
40,000 Newbridge Networks Corporation+ .................................. 790,000
38,600 Nortel Networks Corporation ...................................... 2,375,284
23,500 Rogers Communications Inc.+ ...................................... 475,909
16,000 Teleglobe Inc. ................................................... 379,000
30,000 Teleglobe Inc. (F) ............................................... 709,480
53,000 Thomson Corporation .............................................. 1,548,760
4,700 Versus Technologies Inc.+ ........................................ 24,754
------------
9,531,798
------------
SWITZERLAND - 4.6%
630 Compagnie Financiere Richemont AG, Units ......................... 1,203,859
1,310 Holderbank Financiere Glarus AG .................................. 1,613,538
510 Nestle SA ........................................................ 983,923
1,220 Novartis AG ...................................................... 1,825,317
50 Roche Holding AG ................................................. 600,433
181 Schweizerische Rueckversicherungs-Gesellschaft ................... 375,326
5,869 Swisscom AG ...................................................... 1,788,930
3,250 UBS AG ........................................................... 945,846
------------
9,337,172
------------
FINLAND - 3.8%
50,800 Nokia Oyj ........................................................ 5,813,600
62,000 UPM-Kymmene Oyj .................................................. 1,956,256
------------
7,769,856
------------
AUSTRALIA - 3.7%
165,000 Australia & New Zealand Banking Group Ltd. ....................... 1,089,097
183,000 Broken Hill Proprietary Company Ltd. ............................. 1,891,638
4,500 Broken Hill Proprietary Company Ltd., Sponsored ADR .............. 95,063
204,700 Coles Myer Ltd. .................................................. 1,018,350
81,000 Lend Lease Corporation Ltd. ...................................... 932,134
318,700 Santos Ltd. ...................................................... 819,165
169,900 Westpac Banking Corporation Ltd. ................................. 1,090,340
130,000 WMC Ltd. ......................................................... 558,011
------------
7,493,798
------------
TAIWAN - 2.2%
75,000 Asustek Computer Inc., GDR ....................................... 1,057,500
17,600 Hon Hai Precision Industry Company Ltd., GDR++ ................... 285,560
91,635 Taiwan Semiconductor Manufacturing Company Ltd., Sponsored ADR+ .. 3,172,862
------------
4,515,922
------------
MEXICO - 1.9%
62,000 Cifra SA de CV, ADR+ ............................................. $ 1,232,560
31,000 Telefonos de Mexico SA, Sponsored ADR ............................ 2,650,500
------------
3,883,060
------------
HONG KONG - 1.8%
1,350,000 Amoy Properties Ltd. ............................................. 1,164,287
260,000 Cable & Wireless HKT Ltd. ........................................ 594,050
142,000 Hutchison Whampoa Ltd. ........................................... 1,425,721
100,500 Johnson Electric Holdings Ltd. ................................... 543,334
------------
3,727,392
------------
ITALY - 1.8%
42,000 Assicurazioni Generali ........................................... 1,347,292
265,000 ENI Spa .......................................................... 1,549,649
25,000 Fiat Spa+ ........................................................ 791,442
------------
3,688,383
------------
SOUTH KOREA - 1.8%
3,609 Hyundai Industrial Development & Construction Company ............ 37,760
43,970 Hyundai Motor Company Ltd., GDR+ ................................. 391,333
30,000 Pohang Iron & Steel Company Ltd., Sponsored ADR .................. 1,001,250
7,546 Samsung Electronics .............................................. 1,258,191
10,500 Samsung Electronics, Sponsored GDR ............................... 892,500
------------
3,581,034
------------
SINGAPORE - 1.6%
83,000 DBS Group Holdings Ltd. .......................................... 938,474
64,000 Singapore Press Holdings Ltd. .................................... 1,097,011
853,000 Singapore Technologies Engineering Ltd. .......................... 1,236,381
------------
3,271,866
------------
SWEDEN - 1.5%
24,000 Ericsson LM, B Shares ............................................ 992,097
68,700 ForeningsSparbanken AB ........................................... 1,106,717
70,000 Svenska Handelsbanken AB, A Shares ............................... 965,957
------------
3,064,771
------------
SPAIN - 1.0%
123,000 Telefonica SA+ ................................................... 2,023,273
------------
SOUTH AFRICA - 0.7%
25,700 De Beers Consolidated Mines, ADR ................................. 695,506
88,000 South African Breweries Ltd. ..................................... 770,761
------------
1,466,267
------------
PORTUGAL - 0.5%
3,420 Portugal Telecom, SA ............................................. 152,512
6,000 Telecel-Comunicacoes Pessoais, SA ................................ 778,716
------------
931,228
------------
IRELAND - 0.5%
44,000 CRH Plc .......................................................... 830,672
17,800 Eircom Plc+ ...................................................... 74,089
------------
904,761
------------
BRAZIL - 0.2%
30,000 Companhia Cervejaria Brahma, Sponsored ADR ....................... 375,000
------------
TURKEY - 0.1%
14,000,000 Yapi ve Kredi Bankasi AS (F) ..................................... 203,840
------------
Total Common Stocks (Cost $170,551,254) .......................... 194,634,198
------------
PREFERRED STOCK - 0.2%
(Cost $344,941)
ITALY - 0.2%
20,230 Fiat Spa ......................................................... 310,856
------------
CONVERTIBLE PREFERRED STOCK - 0.6%
(Cost $845,852)
JAPAN - 0.6%
93,000,000 Sanwa International Finance Berm Trust, Conv. Pfd., 1.250%
due 08/01/2005 (F) .............................................. 1,159,490
------------
PRINCIPAL
AMOUNT
------
REPURCHASE AGREEMENT - 4.3%
(Cost $8,794,000)
$ 8,794,000 Repurchase agreement with Goldman Sachs & Company, 5.100% dated
10/29/1999 to be repuchased at $8,797,737 on 11/01/1999,
collaterlized by $8,969,880 U.S. Treasury Note, 6.500%
due 11/15/2026 (Market Value of $9,018,133) ..................... 8,794,000
------------
TOTAL INVESTMENTS (Cost $180,536,047*) ................................ 100.8% 204,898,544
OTHER ASSETS AND LIABILITIES (NET) .................................... (0.8) (1,568,988)
----- ------------
NET ASSETS ............................................................ 100.0% $203,329,556
===== ============
- --------------
* Aggregate cost for federal tax purposes is $181,140,755.
** Amount represents less than 0.1% of net assets.
+ Non-income producing security.
++ Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities
may be resold in transactions exempt from registration, normally to qualified institutional buyers.
AS OF OCTOBER 31, 1999, SECTOR DIVERSIFICATION WAS AS FOLLOWS:
<CAPTION>
% OF
SECTOR DIVERSIFICATION NET ASSETS VALUE
---------------------- ---------- -----
<S> <C> <C>
COMMON STOCKS:
Technology..................................................... 18.5% $ 37,711,287
Telecommunications............................................. 16.1 32,785,312
Financial Services............................................. 13.7 27,846,858
Producer Durables.............................................. 8.5 17,213,849
Material & Processing.......................................... 7.3 14,775,773
Retail......................................................... 5.8 11,769,850
Health Care.................................................... 5.4 10,968,465
Autos & Transportation......................................... 4.4 8,902,783
Consumer Staples............................................... 4.1 8,330,838
Energy......................................................... 3.3 6,769,234
Other.......................................................... 8.6 17,559,949
----- ------------
TOTAL COMMON STOCKS............................................ 95.7 194,634,198
PREFERRED STOCK................................................ 0.2 310,856
CONVERTIBLE PREFERRED STOCK.................................... 0.6 1,159,490
OTHER INVESTMENTS.............................................. 4.3 8,794,000
----- ------------
TOTAL INVESTMENTS.............................................. 100.8 204,898,544
OTHER ASSETS AND LIABILITIES (NET)............................. (0.8) (1,568,988)
----- ------------
NET ASSETS..................................................... 100.0% $203,329,556
===== ============
SCHEDULE OF FORWARD FOREIGN CURRENCY CONTRACTS
U.S. FORWARD FOREIGN CURRENCY CONTRACTS TO BUY
<CAPTION>
CONTRACTS TO RECEIVE NET
---------------------------------------------- UNREALIZED
IN APPRECIATION/
EXPIRATION LOCAL VALUE IN EXCHANGE (DEPRECIATION)
DATE CURRENCY U.S. $ FOR U.S. $ OF CONTRACTS
- ------------ ------------------ -------- ---------- ---------------
<S> <C> <C> <C> <C>
11/01/1999 AUD 76,500 48,792 49,329 $ (537)
11/01/1999 CHF 893,645 586,494 587,306 (812)
11/01/1999 JPY 60,915,796 584,305 584,885 (580)
11/02/1999 EMU 89,593 94,244 94,188 56
11/02/1999 HKD 166,265 21,401 21,403 (2)
11/02/1999 JPY 26,882,129 257,895 255,913 1,982
11/03/1999 AUD 144,957 92,457 93,519 (1,062)
11/03/1999 GBP 20,867 34,291 34,206 85
11/04/1999 JPY 3,048,580 29,256 29,271 (15)
11/05/1999 GBP 149,188 245,163 245,479 (316)
11/30/1999 EMU 49,961 52,665 52,709 (44)
12/07/1999 EMU 427,351 450,728 459,877 (9,149)
12/20/1999 EMU 458,023 483,569 474,356 9,213
12/20/1999 JPY 49,819,200 481,779 477,215 4,564
01/19/2000 EMU 996,324 1,054,356 1,032,605 21,751
01/20/2000 EMU 3,271,558 3,462,381 3,496,538 (34,157)
01/28/2000 EMU 1,092,540 1,156,971 1,174,569 (17,598)
03/23/2000 EMU 722,278 767,608 766,591 1,017
--------
$(25,604)
--------
SCHEDULE OF FORWARD FOREIGN
CURRENCY CONTRACTS (CONTINUED)
U.S. FORWARD FOREIGN CURRENCY CONTRACTS TO SELL
<CAPTION>
CONTRACTS TO DELIVER NET
---------------------------------------------- UNREALIZED
IN APPRECIATION/
EXPIRATION LOCAL VALUE IN EXCHANGE (DEPRECIATION)
DATE CURRENCY U.S. $ FOR U.S. $ OF CONTRACTS
- ------------ ------------------ -------- ---------- ---------------
<S> <C> <C> <C> <C>
11/01/1999 EMU 25,763 27,099 27,126 $ 27
11/01/1999 JPY 3,177,897 30,482 30,513 31
11/03/1999 GBP 40,112 65,916 65,696 (220)
12/07/1999 CAD 687,010 467,297 459,877 (7,420)
12/20/1999 JPY 49,819,200 481,779 474,355 (7,424)
12/20/1999 EMU 458,023 483,569 482,017 (1,552)
01/19/2000 AUD 1,558,650 995,919 1,032,605 36,686
01/20/2000 JPY 375,171,500 3,647,902 3,496,538 (151,364)
01/28/2000 CAD 707,472 482,051 479,024 (3,027)
01/28/2000 GBP 418,171 687,603 695,544 7,941
02/28/2000 JPY 238,464,660 2,333,196 2,212,000 (121,196)
03/23/2000 CAD 1,128,422 769,451 766,591 (2,860)
---------
$(250,378)
---------
Net Unrealized Depreciation of Forward Foreign
Currency Contracts ....................................................... $(275,982)
=========
</TABLE>
- -------------------------------------------------------------------------------
GLOSSARY OF TERMS
ADR -- American Depositary Receipt
AUD -- Australian Dollar
CAD -- Canadian Dollar
CHF -- Swiss Franc
EMU -- European Monetary Unit
(F) -- Foreign Shares
GBP -- Great Britain Pound Sterling
GDR -- Global Depositary Receipt
HKD -- Hong Kong Dollar
JPY -- Japanese Yen
- -------------------------------------------------------------------------------
See Notes to Financial Statements.
<PAGE>
NOTES to FINANCIAL statements
WM GROUP OF FUNDS
1. ORGANIZATION AND BUSINESS
WM Trust I ("Trust I") and WM Trust II ("Trust II") were organized under the
laws of the Commonwealth of Massachusetts on September 19, 1997 and February 22,
1989, respectively, as business entities commonly known as "Massachusetts
business trusts." Trust I and Trust II are each registered under the Investment
Company Act of 1940, as amended ("1940 Act"), as open-end management investment
companies. The Trusts consist of 18 funds as follows:
TRUST I TRUST II
EQUITY FUNDS EQUITY FUNDS
Bond & Stock Fund Growth Fund
Growth & Income Fund Emerging Growth Fund
Northwest Fund International Growth Fund
FIXED INCOME FUNDS FIXED INCOME FUNDS
U.S. Government Securities Fund Short Term High Quality Bond Fund
Income Fund Target Maturity 2002 Fund
High Yield Fund
MUNICIPAL FUNDS
MUNICIPAL FUND California Municipal Fund
Tax-Exempt Bond Fund California Insured Intermediate Municipal Fund
Florida Insured Municipal Fund
MONEY MARKET FUNDS
Money Market Fund MONEY MARKET FUND
Tax-Exempt Money Market Fund California Money Fund
Trust I and Trust II (with the exception of the Money Market Funds) consist of
15 funds (each a "Fund", collectively, the "Funds") The financial statements for
the Money Market Funds are presented in a separate report.
WM Advisors, Inc. (the "Advisor" or "WM Advisors"), a wholly-owned subsidiary
of Washington Mutual, Inc. ("Washington Mutual"), a publicly owned financial
services company, serves as investment advisor to the Trusts.
Each of the Fixed Income Funds, except the Target Maturity 2002 Fund, as well as
the Growth & Income Fund, the Growth Fund and the International Growth Fund
offers three classes of shares: Class A shares, Class B shares and Class I
shares. The Target Maturity 2002 Fund offers only Class A shares. Each of the
Municipal Funds, as well as the Bond & Stock Fund, the Northwest Fund and the
Emerging Growth Fund currently offer Class A and Class B shares. Effective July
11, 1999, seed money was withdrawn from the Municipal Funds' Class I shares,
although they are still authorized and could be issued. Effective as of the
close of business on July 16, 1999, all Class S shares were converted into their
respective Funds' Class B shares with the exception of the Municipal Funds',
which shares were terminated. Class A shares of the Funds are subject to an
initial sales charge at the time of purchase.
Class A shares purchased by exchange from another Fund within Trust I or Trust
II may be subject to a contingent deferred sales charge ("CDSC") if redeemed
within two years of purchase. Class B shares are not subject to an initial sales
charge although they are generally subject to a CDSC if redeemed within five
years of purchase. Class I shares are sold exclusively to the various investment
portfolios of the WM Strategic Asset Management Portfolios, LLC (formerly WM
Strategic Asset Management Portfolios), an open-end management investment
company, and are not available for direct purchase by investors. Class I shares
are not subject to an initial sales charge or CDSC.
2. SIGNIFICANT ACCOUNTING POLICIES
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts and disclosures in the financial statements. Actual
results could differ from those estimates. The following is a summary of
significant accounting policies consistently followed by the Funds in the
preparation of their financial statements.
PORTFOLIO VALUATION:
A security that is primarily traded on a U.S. exchange (including securities
traded through the Nasdaq National Market System) is valued at the last sale
price on that exchange or, if there were no sales during the day, at the mean of
the current day's bid and asked prices. Securities traded only on
over-the-counter markets (other than the Nasdaq National Market System and U.S.
Government Securities) are valued at the over-the-counter bid prices or, if no
sale occurred on such day, at the mean of the current bid and asked prices. An
option is generally valued at the last sale price or, in the absence of a last
sale price, at the mean of the current day's bid and asked prices. Short term
debt securities that mature in 60 days or less are valued at amortized cost. The
value of a foreign security is determined in its national currency as of the
close of trading on the foreign exchange on which it is traded or as of 4:00
p.m. Eastern time, if that is earlier, and that value is then converted into its
U.S. dollar equivalent at the foreign exchange rate in effect at noon, Eastern
time, on the day the value of the foreign security is determined. The value of a
futures contract equals the unrealized gain or loss on the contract, which is
determined by marking the contract to the current settlement price for a like
contract acquired on the day on which the futures contract is being valued.
Debt securities of U.S. issuers (other than U.S. Government securities and
short-term investments), including municipal securities, are valued by one or
more independent pricing services (each a "Pricing Service") retained by the
Trusts. When, in the judgment of a Pricing Service, market quotations for these
securities are readily available, they are valued at the mean between the quoted
bid prices and asked prices. Securities for which market quotations are not
readily available are valued at fair value as determined by or under the
direction of the Board of Trustees, which may rely on the assistance of one or
more Pricing Services. The procedures of each Pricing Service are reviewed
periodically by the officers of the Trusts under the general supervision and
responsibility of the Board of Trustees.
REPURCHASE AGREEMENTS:
Each Fund may engage in repurchase agreement transactions. A repurchase
agreement is a purchase of an underlying debt obligation subject to an agreement
by the seller to repurchase the obligation at an agreed upon price and time. The
value of the collateral is at all times at least equal to the total amount of
the repurchase obligation. In the event of counterparty default, the Fund would
seek to use the collateral to offset losses incurred. There is potential loss in
the event the Fund is delayed or prevented from exercising its right to dispose
of the collateral securities, including the risk of a possible decline in the
value of the underlying securities during the period while the Fund seeks to
assert its rights. WM Advisors, acting under the supervision of the Board of
Trustees, reviews the value of the collateral and the creditworthiness of those
banks and dealers with whom each Fund enters into repurchase agreements.
REVERSE REPURCHASE AGREEMENTS:
Each Fund, except the Target Maturity 2002 Fund, may engage in reverse
repurchase agreements. Reverse repurchase agreements are the same as repurchase
agreements except that, in this instance, the Funds would assume the role of
seller/borrower in the transaction. The Funds may use reverse repurchase
agreements to borrow short term funds. The value of the reverse repurchase
agreements that the Funds have committed to sell are reflected in the Funds'
Statements of Assets and Liabilities. The Funds will segregate with the Trusts'
custodian liquid assets that at all times are in an amount equal to their
obligations under reverse repurchase agreements. Reverse repurchase agreements
involve the risks that the market value of the securities sold by the Funds may
decline below the repurchase price of the securities and, if the proceeds from
the reverse repurchase agreement are invested in securities, that the market
value of the securities bought may decline below the repurchase price of the
securities sold.
OPTION CONTRACTS:
The Equity Funds, Fixed Income Funds and the Municipal Funds may engage in
option contracts. The Funds may use option contracts to manage their exposure to
the stock and bond markets and to fluctuations in interest rates and currency
values. The underlying principal amounts and option values are shown in the
Portfolio of Investments under the captions "Put Options Purchased on Foreign
Currency," "Call Options Written on Foreign Currency" and "Call Options
Purchased on Stock Indices." These amounts reflect each contract's exposure to
the underlying instrument at October 31, 1999. Writing puts and buying calls
tends to increase the Funds' exposure to the underlying instrument. Buying puts
and writing calls tends to decrease the Funds' exposure to the underlying
instruments or to hedge other Fund investments.
Upon the purchase of a put option or a call option by the Funds, the premium
paid is recorded as an investment, the value of which is marked-to-market daily.
When a purchased option expires, the Funds will realize a loss in the amount of
the cost of the option. When the Funds enter into a closing sale transaction,
the Funds will realize a gain or loss depending on whether the sales proceeds
from the closing sale transaction are greater or less than the cost of the
option. When the Funds exercise a put option, they will realize a gain or loss
from the sale of the underlying security and the proceeds from such sale will be
decreased by the premium originally paid. When the Funds exercise a call option,
the cost of the security purchased will be increased by the premium originally
paid.
When the Funds write a call option or a put option, an amount equal to the
premium received by the Funds is recorded as a liability, the value of which is
marked-to-market daily. When a written option expires, the Funds realize a gain
equal to the amount of the premium received. When the Funds enter into a closing
purchase transaction, the Funds realize a gain (or loss if the cost of the
closing purchase transaction exceeds the premium received when the option was
sold) without regard to any unrealized gain or loss on the underlying security,
and the liability related to such option is eliminated. When a written call
option is exercised, the Funds realize a gain or loss from the sale of the
underlying security and the proceeds from such sale are increased by the premium
originally received. When a written put option is exercised, the amount of the
premium originally received will reduce the cost of the security that the Funds
purchased upon exercise.
The risk associated with purchasing options is limited to the premium originally
paid. Options written by a Fund involve, to varying degrees, risk of loss in
excess of the option value reflected in the Statements of Assets and
Liabilities. The risk in writing a covered call option is that the Funds may
forego the opportunity to profit if the market price of the underlying security
increases and the option is exercised. The risk in writing a covered put option
is that the Funds may incur a loss if the market price of the underlying
security decreases and the option is exercised. In addition, there is the risk
the Funds may not be able to enter into a closing transaction because of an
illiquid secondary market or, for over-the-counter options, because of the
counterparty's inability to perform.
The Equity Funds, Fixed Income Funds (except the Target Maturity 2002 Fund) and
the Municipal Funds may engage in options on foreign currency and options on
interest rate futures. Options on foreign currency and options on interest rate
futures act as a hedge to provide protection against adverse movements in the
value of foreign securities in the portfolio.
Certain risks are associated with the use of options on foreign currency and
options on interest rate futures contracts as hedging devices. The predominant
risk is that the movement in the price of the instrument underlying such options
may not correlate perfectly with the movement in the prices of the assets being
hedged. The lack of correlation could render the Funds' hedging strategy
unsuccessful and could result in a loss to the Funds. In addition, there is the
risk the Funds may not be able to enter into a closing transaction because of an
illiquid secondary market or, for over-the-counter options, because of the
counterparty's inability to perform. Options written by a Fund involve, to
varying degrees, risk of loss in excess of the option value reflected in the
Statements of Assets and Liabilities.
FUTURES CONTRACTS:
Each Fund may engage in futures transactions. The Funds may use futures
contracts to manage their exposure to the stock and bond markets and to
fluctuations in interest rates and currency values. The underlying value of a
futures contract is incorporated within the unrealized appreciation/
(depreciation) shown in the Portfolio of Investments under the caption "Futures
Contracts." This amount reflects each contract's exposure to the underlying
instrument at October 31, 1999. Buying futures contracts tends to increase the
Fund's exposure to the underlying instrument. Selling futures contracts tends to
either decrease the Fund's exposure to the underlying instrument, or to hedge
other Fund investments.
Upon entering into a futures contract, the Fund is required to deposit with the
broker an amount of cash or cash equivalents equal to a certain percentage of
the contract amount. This is known as the "initial margin." Subsequent payments
("variation margin") are made or received by the Fund each day, depending on the
daily fluctuation of the value of the contract. The daily changes in contract
value are recorded as unrealized gains or losses and the Fund recognizes a
realized gain or loss when the contract is closed.
There are several risks in connection with the use of futures contracts as a
hedging device. Futures contracts involve, to varying degrees, risk of loss in
excess of the futures variation margin reflected in the Statements of Assets and
Liabilities. The change in the value of futures contracts primarily corresponds
with the value of their underlying instruments, which may not correlate with the
change in the value of the hedged instruments. In addition, there is the risk
that the Fund may not be able to enter into a closing transaction because of an
illiquid secondary market.
FOREIGN CURRENCY:
The books and records of the Funds are maintained in U.S. dollars. Foreign
currencies, investments and other assets and liabilities are translated into
U.S. dollars at the exchange rates prevailing at the end of the period.
Purchases and sales of investment securities, income and expenses are translated
on the respective dates of such transactions. It is not practicable to isolate
that portion of the results of operations arising as a result of changes in the
foreign exchange rates from the portion that arising from changes in market
prices of investments during the period. Accordingly, all such changes have been
reflected as realized and unrealized net gain/(loss) from security transactions
in the Statements of Operations.
Unrealized gains and losses, not relating to securities, which result from
changes in foreign currency exchange rates have been included in unrealized
appreciation/(depreciation) of foreign currency and other assets and
liabilities. Unrealized gains and losses of securities, which result from
changes in foreign currency exchange rates as well as changes in market prices
of securities, have been included in unrealized appreciation/(depreciation) of
securities. Net realized foreign currency gains and losses include foreign
currency gains and losses resulting from changes in exchange rates between trade
date and settlement date on investment securities transactions, gains and losses
on foreign currency transactions and the difference between the amounts of
interest and dividends recorded on the books of the Funds and the amount
actually received. The portion of foreign currency gains and losses related to
fluctuation in exchange rates between the initial purchase trade date and
subsequent sale trade date is included in realized gains/(losses) from security
transactions.
FORWARD FOREIGN CURRENCY CONTRACTS:
The Equity Funds and Fixed Income Funds (with the exception of the Target
Maturity 2002, U.S. Government Securities, Bond & Stock, Growth & Income and
Northwest Funds) may enter into forward foreign currency contracts. Forward
foreign currency contracts are agreements to exchange one currency for another
at a future date and at a specified price. These Funds may use forward foreign
currency contracts to facilitate transactions in foreign securities and to
manage the Funds' foreign currency exposure. The U.S. dollar market value,
contract value and the foreign currencies the Funds have committed to buy or
sell are shown in the Portfolio of Investments under the caption "Schedule of
Forward Foreign Currency Contracts." These amounts represent the aggregate
exposure to each foreign currency the Funds have acquired or hedged through
forward foreign currency contracts at October 31, 1999. Forward foreign currency
contracts are reflected as both a forward foreign currency contract to buy and a
forward foreign currency contract to sell.
Forward foreign currency contracts to buy generally are used to acquire exposure
to foreign currencies, while forward foreign currency contracts to sell are used
to hedge the Funds' investments against currency fluctuations. Also, a forward
foreign currency contract to buy or sell can offset a previously acquired
opposite forward foreign currency contract.
Forward foreign currency contracts are marked-to-market daily using foreign
currency exchange rates supplied by an independent pricing service. The change
in a contract's market value is recorded by the Funds as an unrealized gain or
loss. When the contract is closed or delivery is taken, the Funds record a
realized gain or loss equal to the difference between the value of the contract
at the time it was opened and the value at the time it was closed.
The use of forward foreign currency contracts does not eliminate fluctuations in
the underlying prices of the Fund's securities, but it does establish a rate of
exchange that can be achieved in the future. These forward foreign currency
contracts involve market risk in excess of the unrealized
appreciation/(depreciation) of forward foreign currency contracts reflected in
the Funds' Statements of Assets and Liabilities. Although forward foreign
currency contracts used for hedging purposes limit the risk of loss due to a
decline in the value of the hedged currency, they also limit any potential gain
that might result should the value of the currency increase. In addition, the
Funds could be exposed to risks if the counterparties to the contracts are
unable to meet the terms of their contracts. The Fund's Advisor and/or Sub-
advisor will enter into forward foreign currency contracts only with parties
approved by the Board of Trustees because there is a risk of loss to the Funds
if the counterparties do not complete the transaction.
DOLLAR ROLL TRANSACTIONS:
In order to seek a high level of current income, the Income Fund, the Short Term
High Quality Bond Fund and the U.S. Government Securities Fund may enter into
dollar roll transactions with financial institutions to take advantage of
opportunities in the mortgage market. The value of the dollar roll transactions
are reflected in the Funds' Statements of Assets and Liabilities. A dollar roll
transaction involves a sale by the Funds of securities that they hold with an
agreement by the Funds to repurchase similar securities at an agreed upon price
and date. The securities repurchased will bear the same interest as those sold,
but generally will be collateralized at time of delivery by different pools of
mortgages with different prepayment histories than those securities sold. The
Funds are paid a fee for entering into a dollar roll transaction, that is
accrued as income over the life of the dollar roll contract. During the period
between the sale and repurchase, the Funds will not be entitled to receive
interest and principal payments on the securities sold. Management anticipates
that the proceeds of the sale will be invested in additional instruments for the
Funds, and the income from these investments, together with any additional fee
income received on the dollar roll transaction will generate income for the
Funds exceeding the interest that would have been earned on the securities sold.
Dollar roll transactions involve the risk that the market value of the
securities sold by the Funds may decline below the repurchase price of those
similar securities which the Fund is obligated to purchase or that the return
earned by the Fund with the proceeds of a dollar roll may not exceed transaction
costs.
INDEXED SECURITIES:
Each of the Funds may invest in indexed securities whose value is linked either
directly or inversely to changes in foreign currencies, interest rates,
commodities, inflation, indices, or other reference instruments. Indexed
securities may be more volatile than the reference instrument itself, but any
loss is limited to the amount of the original investment.
ILLIQUID INVESTMENTS:
Up to 15% of the net assets of each Fund may be invested in securities that are
not readily marketable, including: (1) repurchase agreements with maturities
greater than seven calendar days; (2) time deposits maturing in more than seven
calendar days; (3) futures contracts and options to the extent a liquid
secondary market does not exist for the instruments; (4) certain
over-the-counter options; (5) certain variable rate demand notes having a demand
period of more than seven days; and (6) securities, the disposition of which are
restricted under Federal securities laws, excluding certain Rule 144A
securities, as defined below.
Illiquid securities generally cannot be sold or disposed of in the ordinary
course of business (within seven days) at approximately the value at which the
Funds have valued the investments. This may have an adverse effect on the Fund's
ability to dispose of particular illiquid securities at fair market value and
may limit the Fund's ability to obtain accurate market quotations for purposes
of valuing the securities and calculating the net asset value of shares of the
Fund. The Funds may also purchase securities that are not registered under the
Securities Act of 1933, as amended (the "Act"), but that can be sold to
qualified institutional buyers in accordance with Rule 144A under the Act ("Rule
144A Securities"). Rule 144A Securities generally may be resold only to other
qualified institutional buyers. If a particular investment in Rule 144A
Securities is not determined to be liquid under the guidelines established by
the Board of Trustees, that investment will be included within the 15%
limitation, as applicable, on investment in illiquid securities.
SECURITIES TRANSACTIONS AND INVESTMENT INCOME:
Securities transactions are recorded as of the trade date (the date the order to
buy or sell is executed). Realized gains and losses from securities sold are
recorded on the identified cost basis. Interest income is recorded on the
accrual basis and consists of interest accrued and, if applicable, discount
accreted less premiums amortized. Premiums on bonds can be amortized on the
basis of any of the following methods: yield-to-maturity, straight-line, or
yield-to-call. Discounts can be accreted using yield-to-maturity or
straight-line methods. Premiums and discount on mortgage-backed securities are
amortized or accreted using only the straight-line method. Dividend income is
recorded on the ex-dividend date, except certain dividends from foreign
securities are recorded as soon as the Funds are informed of the ex-dividend
date. Each Fund's investment income and realized and unrealized gains and losses
are allocated among the classes of that Fund based upon the relative average net
assets of each class.
Securities purchased or sold on a when-issued or delayed-delivery basis may be
settled a month or more after the trade date; interest income is not accrued
until settlement date. Each Fund instructs the custodian to segregate assets of
the Fund with a current value at least equal to the amount of its when- issued
purchase commitments.
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS:
Dividends from net investment income of the Fixed Income Funds (except the
Target Maturity 2002 Fund), and the Municipal Funds are declared daily and paid
monthly. Dividends from the net investment income of the Bond & Stock and Growth
& Income Funds are declared and paid quarterly. Dividends from the net
investment income of the Growth Fund are declared and paid semiannually.
Dividends from the net investment income of the Target Maturity 2002, Emerging
Growth, International Growth and Northwest Funds are declared and paid annually.
Distributions of any net long-term capital gains earned by a Fund are made
annually. Distributions of any net short-term capital gains earned by a Fund are
distributed no less frequently than annually at the discretion of the Board of
Trustees. Additional distributions of net investment income and capital gains
for each Fund may be made at the discretion of the Board of Trustees in order to
avoid the application of a 4% non-deductible excise tax on certain undistributed
amounts of ordinary income and capital gains. Income distributions and capital
gain distributions are determined in accordance with income tax regulations
which may differ from generally accepted accounting principles. These
differences are primarily due to differing treatments of income and gains on
various investment securities held by the Funds, organizational costs, dividends
payable, redesignated distributions and differing characterization of
distributions made by each Fund as a whole. Net investment income per share
calculations in the financial highlights for the year ended October 31, 1999
excludes these adjustments:
<TABLE>
<CAPTION>
INCREASE/ INCREASE/
(DECREASE) (DECREASE)
INCREASE/ UNDISTRIBUTED ACCUMULATED
(DECREASE) NET INVESTMENT NET REALIZED
PAID-IN CAPITAL INCOME/(LOSS) GAIN/(LOSS)
--------------- ------------- -----------
<S> <C> <C> <C>
Target Maturity 2002 Fund .......................... $ (11,843) $ 11,843 $ --
High Yield Fund .................................... (18,613) 16,415 2,198
Short Term High Quality Bond Fund .................. (650) 39,238 (38,588)
U.S. Government Securities Fund .................... (45,159) 36,954 8,205
Income Fund ........................................ (5,362) 69,868 (64,506)
California Insured Intermediate
Municipal Fund ................................... 5,573 (5,573) --
California Municipal Fund .......................... (10,426) 20,076 (9,650)
Florida Insured Municipal Fund ..................... (4,350) 14,203 (9,853)
Tax-Exempt Bond Fund ............................... 89,108 31,257 (120,365)
Bond & Stock Fund .................................. 1,682,434 7,798 (1,690,232)
Growth & Income Fund ............................... 6,733,887 4,447 (6,738,334)
Growth Fund ........................................ 41,722,484 3,696,755 (45,419,239)
Northwest Fund ..................................... 7,730,409 1,305,535 (9,035,944)
Emerging Growth Fund ............................... 3,572,533 1,696,461 (5,268,994)
International Growth Fund .......................... (4,793) 986,679 (981,886)
</TABLE>
FEDERAL INCOME TAXES:
It is each Fund's policy to qualify as a regulated investment company by
complying with the requirements of the Internal Revenue Code of 1986, as
amended, applicable to regulated investment companies and by, among other
things, distributing substantially all of its taxable earnings to its
shareholders. Therefore, no Federal income tax provision is required.
EXPENSES:
General expenses of the Trusts are allocated to all the Funds based upon
relative net assets of each Fund except printing and postage expenses which are
allocated to all the Funds based upon the relative number of shareholder
accounts of each Fund. Operating expenses directly attributable to a class of
shares are charged to the operations of that class of shares. Expenses of each
Fund not directly attributable to the operations of any class of shares are
prorated among the classes to which the expenses relate based on the relative
average net assets of each class of shares.
OTHER:
The Municipal Funds and the Fixed Income Funds may purchase floating rate,
inverse floating rate and variable rate obligations, including municipal
securities and participation interests therein. Floating rate obligations have
an interest rate that changes whenever there is a change in the external
interest rate, while variable rate obligations provide for a specified periodic
adjustment in the interest rate. The interest rate on an inverse floating rate
obligation (an "inverse floater") can be expected to move in the opposite
direction from the market rate of interest to which the inverse floater is
indexed. The Fixed Income Funds may also purchase mortgage-backed securities
that are floating rate, inverse floating rate and variable rate obligations.
Although variable rate demand notes are frequently not rated by credit rating
agencies, unrated notes purchased by the Fund will be of comparable quality at
the time of purchase to rated instruments that may be purchased by such Fund, as
determined by the Advisor. The absence of such an active secondary market,
however, could make it difficult for the Fund to dispose of a particular
variable rate demand note in the event the issuer of the note defaulted on its
payment obligations, and the Fund could, for this or other reasons, suffer a
loss to the extent of the default.
An inverse floater may be considered to be leveraged to the extent that its
interest rate varies by a magnitude that exceeds the magnitude of the change in
the index rate of interest. The higher degree of leverage inherent in inverse
floaters is associated with greater volatility in their market values.
Accordingly, the duration of an inverse floater may exceed its stated final
maturity.
3. INVESTMENT ADVISORY AND OTHER TRANSACTIONS
WM Advisors serves as investment advisor to the Trusts. The Advisor is entitled
to a monthly fee based upon a percentage of the average daily net assets of each
Fund at the following rates:
<TABLE>
<CAPTION>
FEES ON NET ASSETS
EXCEEDING
FEES ON NET ASSETS $200 MILLION
EQUAL TO AND EQUAL TO FEES ON NET ASSETS
OR LESS THAN OR LESS THAN EXCEEDING
NAME OF FUND $200 MILLION $500 MILLION $500 MILLION
- ------------ ------------------ ------------------ ------------------
<S> <C> <C> <C>
Short Term High Quality Bond Fund................... .500% .450% .400%
FEES ON
<CAPTION>
FEES ON NET ASSETS EXCEEDING AVERAGE DAILY
UP TO $500 MILLION $500 MILLION NET ASSETS
------------------ ------------ -------------
<S> <C> <C> <C>
California Insured Intermediate
Municipal Fund
(11/01/1998 - 12/31/1998) .......................... .700% .550% --
(01/01/1999 - 10/31/1999) .......................... -- -- .500%
California Municipal Fund
(11/01/1998 - 12/31/1998) .......................... .700% .550% --
(01/01/1999 - 10/31/1999) .......................... -- -- .500%
Florida Insured Municipal Fund
(11/01/1998 - 12/31/1998) .......................... .700% .550% --
(01/01/1999 - 10/31/1999) .......................... -- -- .500%
<CAPTION>
FEES ON NET ASSETS FEES ON NET ASSETS FEES ON
UP TO EXCEEDING AVERAGE DAILY
NAME OF FUND $250 MILLION $250 MILLION NET ASSETS
- ------------ ------------------ ------------------ ------------------
<S> <C> <C> <C>
High Yield Fund .................................... .625% .500% --
U.S. Government Securities Fund
(11/01/1998 - 12/31/1998) .......................... .625% .500% --
(01/01/1999 - 10/31/1999) .......................... -- -- .500%
Income Fund
(11/01/1998 - 12/31/1998) .625% .500% --
(01/01/1999 - 10/31/1999) .......................... -- -- .500%
Tax-Exempt Bond Fund ............................... .500% .400% --
Bond & Stock Fund .................................. .625% .500% --
Growth & Income Fund ............................... .625% .500% --
<CAPTION>
FEES ON NET ASSETS
EXCEEDING
FEES ON NET ASSETS $100 MILLION
EQUAL TO AND EQUAL TO FEES ON NET ASSETS FEES ON
OR LESS THAN OR LESS THAN EXCEEDING AVERAGE DAILY
NAME OF FUND $100 MILLION $200 MILLION $200 MILLION NET ASSETS
- ------------ ----------------- ------------------ ------------------ --------------
<S> <C> <C> <C> <C>
Growth Fund
(11/01/1998 - 12/31/1998) ......... 1.100% 1.050% 1.025% --
(01/01/1999 - 10/31/1999) ......... -- -- -- .850%
<CAPTION>
FEES ON NET ASSETS
EXCEEDING
FEES ON NET ASSETS $500 MILLION
EQUAL TO AND EQUAL TO FEES ON NET ASSETS
OR LESS THAN OR LESS THAN EXCEEDING
NAME OF FUND $500 MILLION $1 BILLION $1 BILLION
- ------------ ------------------ ------------------- ------------------
<S> <C> <C> <C>
Northwest Fund ............................. .625% .500% .375%
<CAPTION>
FEES ON NET ASSETS
EXCEEDING
FEES ON NET ASSETS $50 MILLION
EQUAL TO AND EQUAL TO FEES ON NET ASSETS
OR LESS THAN OR LESS THAN EXCEEDING
$50 MILLION $125 MILLION $125 MILLION
------------------ ------------------- ------------------
<S> <C> <C> <C>
International Growth Fund .................. 1.100% 1.000% .800%
<CAPTION>
FEES ON NET ASSETS
EXCEEDING
FEES ON NET ASSETS $100 MILLION
EQUAL TO AND EQUAL TO FEES ON NET ASSETS FEES ON
OR LESS THAN OR LESS THAN EXCEEDING AVERAGE DAILY
$100 MILLION $500 MILLION $500 MILLION NET ASSETS
----------------- ------------------ ------------------ --------------
<S> <C> <C> <C> <C>
Emerging Growth Fund
(11/01/1998 - 12/31/1998) ......... 1.050% 1.000% .900% --
(01/01/1999 - 10/31/1999) ......... -- -- -- .850%
FEES ON
AVERAGE DAILY
NET ASSETS
--------------
Target Maturity 2002 Fund ....................................................... .250%
</TABLE>
WM Advisors provides administration services to the Trusts at no additional fee.
The Advisor has agreed to waive a portion of its management fees and/or
reimburse expenses. Fees waived and/or expenses reimbursed by the Advisor for
the year ended October 31, 1999 were as follows:
<TABLE>
<CAPTION>
NAME OF FUND FEES WAIVED EXPENSES REIMBURSED
- ------------ ----------- -------------------
<S> <C> <C>
Target Maturity 2002 Fund ...................................... $ 5,185 $ 30,724
High Yield Fund ................................................ 277,534 --
Short Term High Quality Bond Fund .............................. 449,313 --
U.S. Government Securities Fund ................................ 327,909 --
Income Fund .................................................... 115,406 --
California Insured Intermediate Municipal Fund ................. 41,952 --
California Municipal Fund ...................................... 111,899 --
Florida Insured Municipal Fund ................................. 31,428 --
Growth Fund .................................................... 1,002,117 --
Emerging Growth Fund ........................................... 198,910 --
</TABLE>
WM Shareholder Services, Inc. (the "Transfer Agent"), an indirect wholly owned
subsidiary of Washington Mutual serves as the transfer and shareholder servicing
agent of the Funds. Shareholder servicing fees were paid to the Transfer Agent
for services incidental to issuance and transfer of shares, maintaining
shareholder lists, and issuing and mailing distributions and reports. Effective
as of the close of business on July 16, 1999, there were no longer any Transfer
Agent fees associated with Class S shares. The authorized monthly shareholder
servicing fees are as follows:
<TABLE>
<CAPTION>
NAME OF FUND CLASS A CLASS B & S
- ------------ ------- -----------
<S> <C> <C>
The Fixed Income Funds:
(11/01/1998-09/30/1999) ........................................ $1.45 $1.55
(10/01/1999-10/31/1999) ........................................ 1.35 1.35
The Equity Funds:
(11/01/1998-09/30/1999) ........................................ 1.25 1.35
(10/01/1999-10/31/1999) ........................................ 1.35 1.35
The Municipal Funds:
(11/01/1998-09/30/1999) ........................................ 1.45 1.55
(10/01/1999-10/31/1999) ........................................ 1.35 1.35
Class I shares are not subject to shareholder servicing fees.
</TABLE>
Custodian fees for certain Funds have been reduced by credits allowed by the
custodian for uninvested cash balances. These Funds could have invested this
cash in income producing securities. Fees reduced by credits allowed by the
custodian for the year ended October 31,1999 are shown separately in the
Statement of Operations.
4. TRUSTEES' FEES
No director, officer or employee of Washington Mutual or its subsidiaries
receives any compensation from the Trusts for serving as an officer or Trustee
of the Trusts. The Trusts, together with other mutual funds advised by WM
Advisors, Inc., pays each Trustee who is not an officer or employee of
Washington Mutual or its subsidiaries, $18,000 per annum plus $3,000 per board
meeting attended or $1,000 per board meeting attended by telephone. Trustees are
also reimbursed for travel and out-of-pocket expenses. The Chairman of each
committee receives $500 per committee meeting attended.
Pursuant to an exemptive order granted by the Securities and Exchange
Commission, the Trusts' eligible Trustees may participate in a deferred
compensation plan (the "Plan") which may be terminated at any time. Under the
Plan, Trustees may elect to defer receipt of all or a portion of their fees
which, in accordance with the Plan, are invested in mutual fund shares. Upon
termination of the Plan, Trustees that have deferred accounts under the Plan
will be paid benefits no later than the time the payments would otherwise have
been made without regard to such termination. All benefits provided under these
Plans are funded and any payments to plan participants are paid solely out of
the Trusts' assets.
5. DISTRIBUTION PLANS
WM Funds Distributor, Inc. (the "Distributor"), a registered broker-dealer and
an indirect wholly-owned subsidiary of Washington Mutual, serves as distributor
for Class A and Class B shares. Prior to the close of business on July 16, 1999
it also served as distributor to Class S shares, of the Funds. For the year
ended October 31, 1999, the Distributor received $5,206,747 representing
commissions (front-end sales charges) on Class A shares and $19,485,216
representing CDSC fees from Class B and S shares. For the year ended October 31,
1999, WM Financial Services, Inc. ("WM Securities"), also a registered
broker-dealer for the Funds, received $365,434 representing commissions on Class
A shares and $686,157 representing CDSC fees from Class B and S shares.
Each of the Funds, except for Target Maturity 2002 Fund, has adopted two
distribution plans, pursuant to Rule 12b-1 under the 1940 Act, applicable to
Class A and Class B shares of the Fund (each, a "Rule 12b-1 Plan"),
respectively. There are no 12b-1 Plans applicable to Class I shares of the
Funds. Under the applicable Rule 12b-1 Plans, the Distributor receives a service
fee at an annual rate of 0.25% of the average daily net assets of both classes.
In addition, the Distributor is paid a fee as compensation in connection with
the offering and sale of Class B shares at an annual rate of 0.75% of the
average daily net assets of such shares. These fees may be used to cover the
expenses of the Distributor primarily intended to result in the sale of such
shares, including payments to the Distributor's representatives or others for
selling shares. For the year ended October 31, 1999, the Distributor waived fees
of $156,041 and $48,429 for the Growth & Income Fund and the Growth Fund,
respectively. Because the Distributor may retain any amount of its fee that is
not so expended, the Rule 12b-1 Plans are characterized by the SEC as
"compensation-type" plans. The service fee is paid by the Fund to the
Distributor, which in turn, pays a portion of the service fee to broker/dealers
that provide services, such as accepting telephone inquiries and transaction
requests and processing correspondences, new account applications and subsequent
purchases by check for the shareholders. Under their terms, both the Class A
Plan and the Class B Plan shall remain in effect from year to year, provided
such continuance is approved annually by vote of the Board of Trustees,
including a majority of those Trustees who are not "interested persons" of the
Trust, as defined in the 1940 Act, and who have no direct or indirect financial
interest in the operation of such distribution plans, or any agreements related
to such plans, respectively.
Prior to the close of business on July 16, 1999, each of the Funds had adopted a
distribution plan, pursuant to Rule 12b-1 under the 1940 Act, applicable to
Class S shares (a "Rule 12b-1 Plan"). Under the applicable Rule 12b-1 Plan, the
Distributor received a service fee at an annual rate of 0.25% of the average
daily net assets of Class S shares. In addition, the Distributor was paid a fee
as compensation in connection with the offering and sale of Class S shares at an
annual rate of 0.75% of the average daily net assets.
6. PURCHASES AND SALES OF SECURITIES
The aggregate cost of purchases and proceeds from sales of securities, excluding
U.S. Government and short-term investments, for the year ended October 31, 1999
were as follows:
<TABLE>
<CAPTION>
NAME OF FUND PURCHASES SALES
- ------------ --------- -----
<S> <C> <C>
High Yield Fund ................................................ $ 61,813,733 $ 11,168,227
Short Term High Quality Bond Fund .............................. 189,124,902 13,154,146
U.S. Government Securities Fund ................................ -- 2,601,766
Income Fund .................................................... 24,527,873 66,901,910
California Insured Intermediate Municipal Fund ................. 67,417,908 64,222,827
California Municipal Fund ...................................... 460,342,924 360,101,257
Florida Insured Municipal Fund ................................. 24,809,203 26,450,725
Tax-Exempt Bond Fund ........................................... 168,014,616 186,493,773
Bond & Stock Fund .............................................. 151,282,168 211,146,092
Growth & Income Fund ........................................... 545,997,550 535,440,913
Growth Fund .................................................... 881,627,764 636,274,525
Northwest Fund ................................................. 145,995,304 171,615,202
Emerging Growth Fund ........................................... 55,821,961 106,591,163
International Growth Fund ...................................... 269.040,289 244,883,463
</TABLE>
The aggregate cost of purchases and proceeds from sales of U.S. Government
securities, excluding short-term investments, for the year ended October 31,
1999 were as follows:
<TABLE>
<CAPTION>
NAME OF FUND PURCHASES SALES
- ------------ --------- -----
<S> <C> <C>
Target Maturity 2002 Fund ...................................... $ -- $ 396,868
High Yield Fund ................................................ 6,115,055 1,731,172
Short Term High Quality Bond Fund .............................. 48,243,237 91,263,310
U.S. Government Securities Fund ................................ 239,224,615 218,430,389
Income Fund .................................................... 29,896,150 17,586,746
Bond & Stock Fund .............................................. 9,577,657 32,958,605
</TABLE>
At October 31, 1999, aggregate gross unrealized appreciation for all securities
in which there is an excess of value over tax cost and aggregate gross
unrealized depreciation for all securities in which there is an excess of tax
cost over value were as follows:
<TABLE>
<CAPTION>
TAX BASIS TAX BASIS
UNREALIZED UNREALIZED
NAME OF FUND APPRECIATION DEPRECIATION
<S> <C> <C>
Target Maturity 2002 Fund ...................................... $ -- $ 3,255
High Yield Fund ................................................ 2,593,874 4,678,169
Short Term High Quality Bond Fund .............................. 65,897 1,999,100
U.S. Government Securities Fund ................................ 3,118,907 11,720,441
Income Fund .................................................... 7,550,969 9,363,933
California Insured Intermediate Municipal Fund ................. 1,526,971 871,484
California Municipal Fund ...................................... 12,883,893 17,032,997
Florida Insured Municipal Fund ................................. 629,373 271,363
Tax-Exempt Bond Fund ........................................... 13,110,781 3,802,331
Bond & Stock Fund .............................................. 57,016,188 12,602,276
Growth & Income Fund ........................................... 413,225,546 96,416,811
Growth Fund .................................................... 219,120,888 5,819,064
Northwest Fund ................................................. 181,832,909 13,694,900
Emerging Growth Fund ........................................... 35,134,483 13,085,855
International Growth Fund ...................................... 29,164,721 5,406,932
</TABLE>
7. SHARES OF BENEFICIAL INTEREST
The Trust may issue an unlimited number of shares of beneficial interest, each
without par value.
8. ORGANIZATION COSTS
Expenses incurred in connection with the organization of the Funds, including
the fees and expenses of registering and qualifying its shares for distribution
under Federal and state securities regulations, are being amortized on a
straight-line basis over a period of five years from commencement of operations
of each Fund, respectively. In the event any of the initial shares of a Fund are
redeemed by any holder thereof during the amortization period, the proceeds of
such redemptions will be reduced by an amount equal to the pro-rata portion of
unamortized deferred organizational expenses in the same proportion as the
number of shares being redeemed bears to the number of initial shares of such
Fund outstanding at the time of such redemption.
9. CAPITAL LOSS CARRYFORWARDS
At October 31, 1999, the following Funds had available for Federal income tax
purposes unused capital losses as follows:
<TABLE>
<CAPTION>
EXPIRING EXPIRING EXPIRING EXPIRING EXPIRING EXPIRING
IN 2002 IN 2003 IN 2004 IN 2005 IN 2006 IN 2007
--------- ---------- ---------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
High Yield Fund ............................ $ -- $ -- $ -- $ -- $ -- $ 216,842
Short Term High Quality Bond Fund .......... -- 206,653 672,111 773,684 75,015 312,683
U.S. Government Securities Fund ............ 31,268,228 33,964,115 3,198,017 503,754 -- 254,447
Income Fund ................................ -- 19,582,056 9,833,025 676,598 -- --
California Municipal Fund .................. -- -- -- -- -- 4,276,902
Florida Insured Municipal Fund ............. 681,503 1,462,695 -- -- -- 192,179
Tax-Exempt Bond Fund ....................... -- -- 1,320,681 -- -- 1,759,162
International Growth Fund .................. -- -- -- -- 2,611,528 --
</TABLE>
10. GEOGRAPHIC AND INDUSTRY CONCENTRATION AND RISK FACTORS
There are certain risks arising from the California Insured Intermediate
Municipal and California Municipal Funds' investments in California municipal
securities. The California Insured Intermediate Municipal and California
Municipal Funds' are more susceptible to factors adversely affecting issuers of
California municipal securities than is a municipal bond fund that is not
concentrated in these issuers to the same extent. Uncertain economic conditions
or governmental developments may affect the ability of California municipal
securities issuers to meet their financial obligations.
The Florida Insured Municipal Fund primarily invests in debt obligations issued
by the State of Florida and its political subdivisions, agencies and public
authorities to obtain funds for various public purposes. The Florida Insured
Municipal Fund is more susceptible to factors adversely affecting issuers of
Florida municipal securities than is a municipal bond fund that is not
concentrated in these issuers to the same extent. Uncertain economic conditions
may affect the ability of Florida municipal securities issuers to meet their
financial obligations.
The High Yield Fund, Short Term High Quality Bond Fund, Income Fund and the
Equity Funds invest in securities of foreign companies and foreign governments.
There are certain risks involved in investing in foreign securities. These risks
include those resulting from future adverse political and economic developments
and the possible imposition of currency exchange restrictions or other foreign
laws or restrictions.
The Northwest Fund concentrates its investments in companies located or doing
business in the Northwest region of the United States. The Northwest Fund is not
intended as a complete investment program and could be adversely impacted by
economic trends within the region.
Certain Funds may invest a portion of their assets in foreign securities;
developing or emerging markets countries; enter into forward foreign currency
transactions; lend their portfolio securities; enter into stock index, interest
rate and currency futures contracts, and options on such contracts; enter into
interest rate swaps or purchase or sell interest rate caps or floors; engage in
other types of options transactions; make short sales; purchase zero coupon and
payment-in-kind bonds; engage in repurchase or reverse repurchase agreements;
purchase and sell "when-issued" securities and engage in "delayed-delivery"
transactions; and engage in various other investment practices each with
inherent risks.
11. REORGANIZATION
On March 5, 1999, each Acquiring Fund, as listed below, acquired the assets and
certain liabilities of the Acquired Fund, also listed below, in a tax-free
exchange for shares of the Acquiring Fund, pursuant to a plan of reorganization
approved by the Acquired Fund's shareholders. Total shares issued by the
Acquiring Fund, the value of the shares issued by the Acquiring Fund, the total
net assets of the Acquired Fund and the Acquiring Fund and any unrealized
appreciation/(depreciation) included in the Acquired Fund's total net assets at
the acquisition date are as follows:
<TABLE>
<CAPTION>
TOTAL NET ACQUIRED
SHARES VALUE OF TOTAL NET TOTAL NET ASSETS OF FUND
ISSUED BY SHARES ISSUED ASSETS OF ASSETS OF ACQUIRING UNREALIZED
ACQUIRING BY ACQUIRING ACQUIRED ACQUIRING FUND AFTER APPRECIATION/
ACQUIRING FUND ACQUIRED FUND FUND FUND FUND FUND ACQUISITION (DEPRECIATION)
- -------------- ------------------- ------------ ------------- ------------- ------------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
WM Short Term
High Quality Griffin Short-Term
Bond Fund Bond Fund 39,494,937 $ 91,795,293 $ 91,795,293 $ 75,432,745 $ 167,228,038 $ (64,260)
WM U.S.
Government Griffin U.S.
Securities Government Income
Fund Fund 9,840,045 106,365,515 106,365,515 314,082,056 420,447,571 5,355,490
WM Income Fund Griffin Bond Fund 9,599,869 88,895,406 88,895,406 248,628,981 337,524,387 (408,651)
WM California Griffin California
Municipal Fund Tax-Free Fund 4,053,967 46,053,062 46,053,062 357,003,927 403,056,989 1,834,004
WM Tax-Exempt Griffin Municipal
Bond Fund Bond Fund 2,684,325 21,581,970 21,581,970 307,360,142 328,942,112 599,436
WM Growth & Griffin Growth &
Income Fund Income Fund 14,293,381 331,373,832 331,373,832 928,644,038 1,260,017,870 30,243,249
WM Growth Fund Griffin Growth Fund 3,848,421 88,867,427 88,867,427 412,602,290 501,469,717 24,492,457
</TABLE>
12. CONTRIBUTION IN KIND
Effective as of the close of business on July 16, 1999 the Griffin Portfolio
Builder Accounts (asset allocation accounts that were invested in Class A shares
of certain Funds in the WM Group of Funds) redeemed in kind their investments in
Class A shares of the certain Funds and contributed these assets to the WM
Strategic Asset Management Portfolios (the "Portfolios"). The Portfolios used
these contributed assets to acquire shares in Class I of certain Funds in the WM
Group of Funds.
<PAGE>
INDEPENDENT auditors' REPORT
To the Trustees and Shareholders of WM Trust I and WM Trust II:
We have audited the accompanying statements of assets and liabilities, including
the portfolios of investments, of WM High Yield Fund, WM Income Fund, WM U.S.
Government Securities Fund, WM Tax-Exempt Bond Fund, WM Bond & Stock Fund, WM
Growth & Income Fund and WM Northwest Fund (all funds of WM Trust I) and WM
Short Term High Quality Bond Fund, WM California Insured Intermediate Municipal
Fund, WM California Municipal Fund, WM Florida Insured Municipal Fund, WM Growth
Fund, WM International Growth Fund, WM Emerging Growth Fund, and WM Target
Maturity 2002 Fund (all funds of WM Trust II) (collectively the "Funds") as of
October 31, 1999, the related statements of operations for the year then ended,
and the statements of changes in net assets and financial highlights for the
year then ended and the periods ended October 31, 1998. These financial
statements and financial highlights are the responsibility of the Funds'
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits. The statements of
changes in net assets of WM Short Term High Quality Bond Fund, WM California
Insured Intermediate Municipal Fund, WM California Municipal Fund, WM Florida
Insured Municipal Fund, WM Growth Fund, WM International Growth Fund, WM
Emerging Growth Fund, and WM Target Maturity 2002 Fund for the year ended June
30, 1998 and financial highlights for the period ended June 30, 1998 and prior
were audited by other auditors whose report, dated August 14, 1998, expressed an
unqualified opinion on those statements. The statements of changes in net assets
of WM Income Fund, WM U.S. Government Securities Fund and WM Tax-Exempt Bond
Fund for the year ended December 31, 1997 and financial highlights for the year
ended December 31, 1997 and prior were audited by other auditors whose report,
dated January 20, 1998, expressed an unqualified opinion on those statements.
The financial highlights of WM Bond & Stock Fund, WM Growth & Income Fund and WM
Northwest Fund for the year ended October 31, 1997 and prior were audited by
other auditors whose report, dated November 24, 1997, expressed an unqualified
opinion on those financial highlights.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights. Our procedures included confirmation of
securities owned at October 31, 1999, by correspondence with the custodian and
brokers; where replies were not received from brokers, we performed other
auditing procedures. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of the aforementioned
Funds at October 31, 1999, the results of their operations for the year then
ended, and the changes in their net assets and their financial highlights for
the respective stated periods ended October 31, 1999 and 1998 in conformity with
generally accepted accounting principles.
Deloitte & Touche LLP
San Francisco, California
December 15, 1999
<PAGE>
SPECIAL meeting OF shareholders (unaudited)
WM GROUP OF FUNDS
SHAREHOLDER VOTES
1. A special meeting of shareholders of the International Growth Fund was
convened on June 23, 1999, at which shareholders approved the proposed Sub-
Advisory Agreement relating to the Fund by and between WM Advisors, Inc.
and Capital Guardian Trust Company.
FOR AGAINST ABSTAINED TOTAL
--- ------- --------- -----
10,001,064 461,626 900,023 11,362,713
<PAGE>
TAX information (unaudited)
WM GROUP OF FUNDS
YEAR ENDED OCTOBER 31, 1999
The following tax information represents fiscal year end disclosures of various
tax benefits passed through to shareholders at calendar year end.
The amounts of long term capital gain paid as follows:
NAME OF FUND
------------
Target Maturity 2002 Fund ............................. $ 40,651
California Insured Intermediate Municipal Fund ........ 836,159
California Municipal Fund ............................. 637,934
Bond & Stock Fund ..................................... 1,012,385
Growth Fund ........................................... 11,572,792
Emerging Growth Fund .................................. 16,955,985
International Growth Fund ............................. 518,571
Of the distributions made from investment income the following percentages are
tax exempt for regular Federal income tax purposes.
NAME OF FUND
------------
California Insured Intermediate Municipal Fund ........ 96.36%
California Municipal Fund ............................. 94.77%
Florida Insured Municipal Fund ........................ 100.00%
Tax-Exempt Bond Fund .................................. 99.83%
Of the distributions made by the following Funds, the corresponding percentages
represent the amount of each distribution which will qualify for the dividends
received deduction available to corporate shareholders.
NAME OF FUND
------------
High Yield Fund ....................................... 7.82%
Income Fund ........................................... 0.50%
Bond & Stock Fund ..................................... 56.17%
Growth & Income Fund .................................. 100.00%
Growth Fund ........................................... 5.56%
Emerging Growth Fund .................................. 5.73%
The total amount of income received by the International Growth Fund from
sources within foreign countries and possessions of the United States was
$0.1955 per share (representing a total of $3,568,646). The total amount of
taxes paid to such countries was $0.0215 per share (representing a total of
$393,280).
The above figures may differ from those cited elsewhere in this report due to
differences in the calculation of income and capital gains for Securities and
Exchange Commission (book) purposes and Internal Revenue Service (tax) purposes.
<PAGE>
[graphic omitted]
This Annual Report is published for the general information of the shareholders
of the WM Group of Funds. It is authorized for distribution to prospective
investors only when preceded or accompanied by a current WM Group of Funds
prospectus. A mutual funds share price and investment return will vary with
market conditions, and the principal value of an investment when you sell your
shares may be more or less than the original cost.
The WM Group of Funds are not insured by the FDIC. They are not deposits or
obligations of, nor are they guaranteed by, any bank. These securities are
subject to investment risk, including possible loss of principal amount
invested.
Distributed by WM Funds Distributor, Inc.
Member NASD
[logo] WM ---------------
GROUP of FUNDS Bulk Rate
U.S. Postage
P.O. Box 9757 PAID
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---------------
[recycle symbol] Printed on recycled paper
WMGAR 170M (12/20/99)
