WM TRUST II, 485APOS, 1998-12-31

WM TRUST II
485APOS, 1998-12-31

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<PAGE> 1

As filed with the Securities and Exchange Commission on December 31, 1998

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

Securities Act of 1933 File #33-27489
Investment Company Act of 1940 File #811-5775
FORM N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
-
Pre-Effective Amendment No.

Post-Effective Amendment No. 30

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
-

Amendment No. 33

WM Trust II

(Exact name of Registrant as specified in Charter)

And

Securities Act of 1933 File #333-01999
Investment Company Act of 1940 File #811-07577
FORM N-1A

REGISTRATION UNDER THE SECURITIES ACT OF 1933 X
-

Pre-Effective Amendment No.

Post-Effective Amendment No. 6

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
-

Amendment No. 8

WM Strategic Asset Management Portfolios

(Exact name of Registrant as specified in Charter)

1201 Third Avenue, Suite 1400, Seattle, WA 98101

(Address of principal executive offices)

Registrant's telephone number, including area code (206) 461-3800

John T. West
1201 Third Avenue, Suite 1400, Seattle, WA 98101
(Name and address of agent for service)

With a copy to:

Joseph B. Kittredge, Esq.
Ropes & Gray
One International Place
Boston, MA 02110

It is proposed that this filing will become effective:

____ immediately upon filing pursuant to paragraph (b) of Rule 48

____ on (date) pursuant to paragraph (b) of Rule 485

X
____ 60 days after filing pursuant to paragraph (a)(i) of Rule 485

____ on (date) pursuant to paragraph (a)(i) of Rule 485

____ 75 days after filing pursuant to paragraph (a)(ii) of Rule 485

____ on (date) pursuant to paragraph (a)(ii) of Rule 485

____ this post-effective amendment designated a new effective date for a
previously filed post-effective amendment.

<PAGE> 2

PROSPECTUS
March 1, 1999

WM GROUP OF FUNDS

MONEY FUNDS
Money Market Fund
Tax-Exempt Money Market Fund
California Money Fund

FIXED-INCOME FUNDS

Short Term High Quality Bond Fund
Target Maturity 2002 Fund
U.S. Government Securities Fund
Income Fund
High Yield Fund

MUNICIPAL FUNDS
Tax-Exempt Bond Fund
California Municipal Fund
California Insured Intermediate Municipal Fund
Florida Insured Municipal Fund

EQUITY FUNDS
Bond & Stock Fund
Growth & Income Fund
Northwest Fund
Growth Fund
Emerging Growth Fund
International Growth Fund

STRATEGIC ASSET MANAGEMENT PORTFOLIOS

Strategic Growth Portfolio
Conservative Growth Portfolio
Balanced Portfolio
Flexible Income Portfolio
Income Portfolio

The WM Group of Funds provide a broad selection
of investment alternatives to investors.

The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the adequacy of this prospectus. Any representation to
the contrary is a crime.

<PAGE> 3
THE WM GROUP OF FUNDS

- --------------------------------------------------------------------------------

CONTENTS

<TABLE>
<CAPTION>
PAGE
<S> <C>
Risk/Return Summary 2
Summary of Principal Risks 26
Principal Risks by Fund 31
Fees and Expenses of the Funds and Portfolios 33
Description of the Funds
Money Funds 36
Fixed-Income Funds 37
Municipal Funds 39
Equity Funds 41
Common Investment Practices 43
Ways to Set Up Your Account 52
How Can I Invest in the Funds and Portfolios? 53
Which Class of Share is Best for me? 55
Class A Shares 55
Class B Shares 56
Distribution of Income and Capital Gains 58
How Can I Sell Shares? 58
How Can I Exchange My Shares? 59
Dividends, Capital Gains and Taxes 59
Organization 60
Financial Highlights 64
</TABLE>

<PAGE> 4

RISK/RETURN SUMMARY

The WM Group of Funds provide a broad range of investment choices, including
asset allocation strategies available through the WM Strategic Asset Management
Portfolios (the "Portfolios"). This summary identifies the investment objective
and principal investment strategies of each Fund and Portfolio. A "Summary of
Principal Risks" describing the principal risks of investing in the Funds and
Portfolios begins on page [__]. You can find additional information about each
Fund and Portfolio, including a more detailed description of the risks of an
investment in each Fund or Portfolio, after this summary. Investments mentioned
in the summary and described in greater detail under "Description of the Funds"
or "Common Investment Practices" below appear in BOLD TYPE. Please be sure to
read the more complete descriptions of the Funds and Portfolios, and the related
risks, before you invest.

Below the description of each Fund or Portfolio is a bar chart showing how the
investment returns of its Class A shares have varied in the past ten years, or
in the years since the Fund or Portfolio began if it is less than ten years old.
The table following each bar chart shows how, for each Class of shares, average
annual returns of the Fund (other than the Money Funds) or Portfolio compare to
returns of a broad-based securities market index for the last one, five and ten
years (or, for newer Funds or Portfolios, for shorter periods). Performance
shown in the table reflects the maximum applicable sales charge, but performance
shown in the bar chart does not reflect any sales charges. PAST PERFORMANCE IS
NOT NECESSARILY AN INDICATION OF FUTURE PERFORMANCE.

There can be no assurance that any Fund or Portfolio will achieve its
objective. It is possible to lose money on investments in the Funds and
Portfolios. An investment in a Fund or Portfolio is not a deposit of a bank and
is not insured or guaranteed by the Federal Deposit Insurance Corporation or any
other government agency. Although the Money Funds seek to preserve the value of
your investment at $1.00 per share, it is possible to lose money by investing
in the Money Funds.

-2-
<PAGE> 5

MONEY MARKET FUND

- - OBJECTIVE. This Fund seeks to maximize current income while preserving
capital and maintaining liquidity.

- - PRINCIPAL INVESTMENT STRATEGIES. The Fund invests in high-quality money
market instruments. The Fund's investments in high-quality money market
instruments may include U.S. GOVERNMENT SECURITIES, FLOATING AND VARIABLE
RATE SECURITIES, MUNICIPAL OBLIGATIONS, U.S. DOLLAR DENOMINATED FOREIGN
INVESTMENTS, ASSET-BACKED SECURITIES, REPURCHASE AGREEMENTS, and
WHEN-ISSUED AND DELAYED - DELIVERY SECURITIES.

YEARLY PERFORMANCE*

[BAR GRAPH]

<TABLE>
<CAPTION>
Calendar Year Annual Return(%)
------------- ----------------
<S> <C>
1989 8.60
1990 7.61
1991 5.41
1992 3.07
1993 2.41
1994 3.47
1995 5.33
1996 4.88
1997 5.04
1998
</TABLE>

During the periods shown above, the highest quarterly return was _____% (for the
quarter ended __________ __, 19__), and the lowest was ____% (for the quarter
ended _________ __, 19__).

PERFORMANCE TABLE*

<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS (FOR PAST ONE PAST FIVE PAST TEN SINCE CLASS B
PERIODS ENDING DECEMBER 31, 1998) YEAR YEARS YEARS INCEPTION
(5/24/94)
<S> <C> <C> <C> <C>
Class A Shares N/A
Class B Shares N/A N/A
</TABLE>

* The Fund's performance through ________ __, 19__ benefitted from the agreement
of WM Advisors and its affiliates to limit the Fund's expenses.

-3-
<PAGE> 6

TAX-EXEMPT MONEY MARKET FUND

- - OBJECTIVE. This Fund seeks to maximize current income that is exempt from
federal income tax while preserving capital and maintaining liquidity.

- - PRINCIPAL INVESTMENT STRATEGIES. The Fund invests primarily in
high-quality, short-term fixed income obligations issued by states,
counties, cities or other governmental entities that generate income exempt
from federal income tax. The Fund's investments in high-quality,
short-term, debt securities may include VARIABLE RATE OBLIGATIONS, HOLDINGS
IN OTHER INVESTMENT COMPANIES, MUNICIPAL LEASES, WHEN-ISSUED AND
DELAYED-DELIVERY SECURITIES and ALTERNATIVE MINIMUM TAX ("AMT") - SUBJECT
BONDS.
YEARLY PERFORMANCE*

[BAR GRAPH]

<TABLE>
<CAPTION>
Calendar Year Annual Return(%)
------------- ----------------
<S> <C>
1989 6.05
1990 5.77
1991 4.19
1992 2.41
1993 2.06
1994 2.37
1995 4.01
1996 3.05
1997 3.18
1998
</TABLE>

During the periods shown above, the highest quarterly return was _____% (for the
quarter ended _______ __, 19__), and the lowest was ____% (for the quarter ended
________ __, 19__).

PERFORMANCE TABLE*

<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS (FOR PAST ONE PAST FIVE PAST TEN SINCE CLASS B
PERIODS ENDING DECEMBER 31, 1998) YEAR YEARS YEARS INCEPTION
(5/2/94)
<S> <C> <C> <C> <C>
Class A Shares N/A
Class B Shares N/A N/A
</TABLE>

* The Fund's performance through ________ __, 19__ benefitted from the agreement
of WM Advisors and its affiliates to limit the Fund's expenses.

-4-
<PAGE> 7

CALIFORNIA MONEY FUND

- - OBJECTIVE. This non-diversified Fund seeks to maximize current income that
is exempt from federal and California state personal income tax, consistent
with safety of principal and maintenance of liquidity.

- - PRINCIPAL INVESTMENT STRATEGIES. The Fund invests primarily in
high-quality, short-term fixed income obligations issued by states,
counties, cities or other governmental bodies that generate income exempt
from California state personal income tax. The Fund may also invest in
high quality instruments that may generate taxable income, including U.S.
GOVERNMENT SECURITIES, MORTGAGE- AND ASSET-BACKED SECURITIES (including
collateralized mortgage obligations) and REPURCHASE AGREEMENTS.

- - The Fund is "NON-DIVERSIFIED," which means that the Fund may invest more
of its assets in the securities of fewer issuers than other mutual funds.

YEARLY PERFORMANCE*

[BAR GRAPH]
<TABLE>
<CAPTION>
Calendar Year Annual Return (%)
------------- -----------------
<S> <C>
1991 4.52
1992 3.35
1993 2.07
1994 1.81
1995 2.79
1996 3.00
1997 2.81
1998
</TABLE>

During the periods shown above, the highest quarterly return was ____% (for the
quarter ended _______ __, 19__), and the lowest was ___% (for the quarter ended
_______ __, 19__).

PERFORMANCE TABLE*

<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS (FOR PAST ONE PAST FIVE LIFE OF FUND SINCE CLASS B
PERIODS ENDING DECEMBER 31, 1998) YEAR YEARS (SINCE 7/10/89) INCEPTION
(7/1/94)
<S> <C> <C> <C> <C>
Class A Shares N/A
Class B Shares N/A N/A
</TABLE>

* The Fund's performance through ________ __, 19__ benefitted from the agreement
of WM Advisors and its affiliates to limit the Fund's expenses.

-5-
<PAGE> 8

SHORT TERM HIGH QUALITY BOND FUND

- - OBJECTIVE. This Fund seeks as high a level of current income as is
consistent with prudent investment management and stability of principal.

- - PRINCIPAL INVESTMENT STRATEGIES. The Fund invests primarily in high-grade
short-term bonds and other debt securities. The Fund generally maintains a
dollar-weighted average portfolio maturity of three years or less. The
Fund's investments may include U.S. GOVERNMENT SECURITIES, REPURCHASE
AGREEMENTS AND MORTGAGE- AND ASSET-BACKED SECURITIES.

YEARLY PERFORMANCE*

[BAR GRAPH]
<TABLE>
<CAPTION>
Calendar Year Annual Return (%)
------------- -----------------
<S> <C>
1995 4.42
1996 5.05
1997 6.15
1998

</TABLE>

During the periods shown above, the highest quarterly return was ____% (for the
quarter ended _______ __, 19__), and the lowest was ___% (for the quarter ended
_______ __, 19__).

PERFORMANCE TABLE*

<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS (FOR PAST ONE PAST FIVE LIFE OF FUND SINCE CLASS B
PERIODS ENDING DECEMBER 31, 1998) YEAR YEARS (11/1/93) INCEPTION
(7/1/94)
<S> <C> <C> <C> <C>
Class A Shares N/A
Class B Shares N/A N/A
Lehman Brothers Mutual Fund Short (1-5
[year]) Investment Grade Debt Index**
</TABLE>

* The Fund's performance through ________ __, 19__ benefitted from the
agreement of WM Advisors and its affiliates to limit the Fund's expenses.

** This index includes all investment-grade, corporate debt securities with
maturities of one to five years.

-6-
<PAGE> 9

TARGET MATURITY 2002 FUND

- - OBJECTIVE. This Fund seeks as high a level of return as is consistent with
preservation of capital through December 31, 2002, and current income
consistent with the creditworthiness of U.S. Treasury securities
thereafter.

- - PRINCIPAL INVESTMENT STRATEGIES. This Fund invests primarily in zero-coupon
U.S. Treasury Securities that will mature during 2002. The Fund may also
invest in other U.S. GOVERNMENT SECURITIES and fixed-income securities.

YEARLY PERFORMANCE*

[BAR GRAPH]
<TABLE>
<CAPTION>
Calendar Year Annual Return (%)
------------- -----------------
<S> <C>
1996 2.91
1997 6.95
1998
</TABLE>

During the periods shown above, the highest quarterly return was ____% (for the
quarter ended ______ __, 19__), and the lowest was ______% (for the quarter
ended _______ __, 19__).

PERFORMANCE TABLE*

<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS (FOR PAST ONE YEAR LIFE OF FUND
PERIODS ENDING DECEMBER 31, 1998) (SINCE 3/20/95)
<S> <C> <C>
Class A Shares
Lehman Brothers Government Bond Index**
</TABLE>

* The Fund's performance through ________ __, 19__ benefitted from the
agreement of WM Advisors and its affiliates to limit the Fund's expenses.

** This index includes all U.S. Government agency and Treasury securities.

-7-
<PAGE> 10

U.S. GOVERNMENT SECURITIES FUND

- - OBJECTIVE. This Fund seeks a high level of current income, consistent with
safety and liquidity.

- - PRINCIPAL INVESTMENT STRATEGIES. The Fund invests primarily in securities
issued by the U.S. Government and its agencies, including collateralized
mortgage obligations and other MORTGAGE-BACKED SECURITIES. The Fund may
also invest in fixed-income securities and DOLLAR ROLLS for leverage.

YEARLY PERFORMANCE*

[BAR GRAPH]
<TABLE>
<CAPTION>
Calendar Year Annual Return (%)
------------- -----------------
<S> <C>
1989 2.94
1990 12.31
1991 -4.91
1992 11.72
1993 7.03
1994 8.12
1995 19.45
1996 2.48
1997 9.92
1998
</TABLE>

During the periods shown above, the highest quarterly return was ______% (for
the quarter ended _______ __, 19__), and the lowest was _____% (for the quarter
ended _______ __, 19__).

PERFORMANCE TABLE*

<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS (FOR PAST ONE PAST FIVE PAST TEN SINCE CLASS B
PERIODS ENDING DECEMBER 31, 1998) YEAR YEARS YEARS INCEPTION
(3/2/94)
<S> <C> <C> <C> <C>
Class A Shares N/A
Class B Shares N/A N/A
Lehman Brothers Government Bond
Index**
</TABLE>

* The Fund's performance through ________ __, 19__ benefitted from the
agreement of WM Advisors and its affiliates to limit the Fund's expenses.

** This index includes all U.S. Government agency and Treasury securities.

-8-
<PAGE> 11

INCOME FUND

- - OBJECTIVE. This Fund seeks a high level of current income consistent with
preservation of capital.

- - PRINCIPAL INVESTMENT STRATEGIES. The Fund invests primarily in a
diversified pool of debt securities including U.S. GOVERNMENT SECURITIES
and MORTGAGE-BACKED SECURITIES (including collateralized mortgage
obligations), of which up to 35% may be in lower-rated fixed income
securities (which are sometimes called "junk bonds"). The Fund may also
invest in convertible securities.

YEARLY PERFORMANCE*

[BAR GRAPH]
<TABLE>
<CAPTION>
Calendar Year Annual Return (%)
------------- -----------------
<S> <C>
1989 6.58
1990 4.32
1991 15.93
1992 13.57
1993 10.82
1994 -4.82
1995 21.58
1996 3.46
1997 10.51
1998
</TABLE>

During the periods shown above, the highest quarterly return was ____% (for the
quarter ended _____ __, 19__), and the lowest was ______% (for the quarter ended
______ __, 19__).

PERFORMANCE TABLE*

<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS (FOR PAST ONE PAST FIVE PAST TEN SINCE CLASS B
PERIODS ENDING DECEMBER 31, 1998) YEAR YEARS YEARS INCEPTION
(3/30/94)
<S> <C> <C> <C> <C>
Class A Shares N/A
Class B Shares N/A N/A
Lehman Brothers Government/Corporate
Bond Index**
</TABLE>

* The Fund's performance through ______________, 19__ benefitted from the
agreement of WM Advisors and its affiliates to limit the Fund's expenses.

** This index is generally considered representative of the U.S. government and
corporate bond markets.

-9-
<PAGE> 12

HIGH YIELD FUND

- - OBJECTIVE. This Fund seeks to provide a high level of current income.

- - PRINCIPAL INVESTMENT STRATEGIES. The Fund invests primarily in
high-yielding lower-rated securities (sometimes called "junk bonds"), which
may include FOREIGN INVESTMENTS. The Fund may also invest in higher-rated
FIXED-INCOME SECURITIES, preferred stock and convertible securities.

No performance information is available for the High Yield Fund because it
has not yet been in operation for a full year.

-10-
<PAGE> 13

TAX-EXEMPT BOND FUND

- - OBJECTIVE. This Fund seeks to provide a high level of income that is exempt
from federal income taxes while protecting investors' capital.

- - PRINCIPAL INVESTMENT STRATEGIES. The Fund invests primarily in obligations
issued by states, counties, cities or other governmental entities,
including municipal leases, ALTERNATIVE MINIMUM TAX ("AMT") SUBJECT BONDS
AND INVERSE FLOATING RATE OBLIGATIONS, that generate income exempt from
federal income tax. The Fund may also invest in taxable FIXED-INCOME
SECURITIES and STRATEGIC TRANSACTIONS such as interest rate futures and
options.

YEARLY PERFORMANCE*

[BAR GRAPH]
<TABLE>
<CAPTION>
Calendar Year Annual Return (%)
------------- -----------------
<S> <C>
1989 8.08
1990 6.71
1991 11.36
1992 9.00
1993 12.54
1994 -6.53
1995 18.25
1996 2.52
1997 8.59
1998
</TABLE>

During the periods shown above, the highest quarterly return was ____% (for the
quarter ended _____ __, 19__), and the lowest was ____% (for the quarter ended
_______ __, 19__).

PERFORMANCE TABLE*

<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS (FOR PAST ONE PAST FIVE PAST TEN SINCE CLASS B
PERIODS ENDING DECEMBER 31, 1998) YEAR YEARS YEARS OR INCEPTION
SINCE (3/20/94)
INCEPTION
<S> <C> <C> <C> <C>
Class A Shares N/A
Class B Shares N/A N/A
Lehman Brothers Municipal Bond Index**
</TABLE>

* The Fund's performance through _____________, 19__ benefitted from the
agreement of WM Advisors and its affiliates to limit the Fund's expenses.

** This index includes all investment grade, tax-exempt bond issues.

-11-
<PAGE> 14

CALIFORNIA MUNICIPAL FUND

- - OBJECTIVE. This non-diversified Fund seeks to provide as high a level of
current income that is exempt from federal and California state income tax
as is consistent with prudent investment management and preservation of
capital.

- - PRINCIPAL INVESTMENT STRATEGIES. The Fund invests primarily in
intermediate- and long-term California municipal obligations, including
municipal leases and AMT-SUBJECT BONDS. The Fund may also invest in other
MUNICIPAL OBLIGATIONS and STRATEGIC TRANSACTIONS such as interest rate
futures and options.

- - The Fund is "NON-DIVERSIFIED," which means that the Fund may invest more
of its assets in the securities of fewer issuers than other mutual funds.

YEARLY PERFORMANCE*

[BAR GRAPH]
<TABLE>
<CAPTION>
Calendar Year Annual Return (%)
------------- -----------------
<S> <C>
1991 7.16
1992 10.56
1993 13.84
1994 -2.94
1995 7.57
1996 6.40
1997 8.83
1998 9.26
</TABLE>

During the periods shown above, the highest quarterly return was ___% (for the
quarter ended _______ __, 19__), and the lowest was ___% (for the quarter ended
_______ __, 19__).

PERFORMANCE TABLE*

<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS (FOR PAST ONE PAST FIVE LIFE OF FUND SINCE CLASS B
PERIODS ENDING DECEMBER 31, 1998) YEAR YEARS (SINCE INCEPTION
7/25/89) (7/1/94)
<S> <C> <C> <C> <C>
Class A Shares N/A
Class B Shares N/A N/A
Lehman Brothers Municipal Bond Index**
</TABLE>

* The Fund's performance through __________, 19__ benefitted from the agreement
of WM Advisors and its affiliates to limit the Fund's expenses.

** This index includes all investment grade tax-exempt bond issues.

-12-
<PAGE> 15

CALIFORNIA INSURED INTERMEDIATE MUNICIPAL FUND

- - PRINCIPAL INVESTMENT STRATEGIES. The Fund invests primarily in
intermediate-term insured California municipal obligations, including
municipal leases and AMT-Subject Bonds. The weighted average effective
maturity of the Fund's investments is ten years or less, and the maximum
effective maturity of any of its investments is fifteen years. The Fund may
also invest in other MUNICIPAL OBLIGATIONS and STRATEGIC TRANSACTIONS such
as interest rate futures and options.

- - The Fund is "NON-DIVERSIFIED," which means that the Fund may invest more
of its assets in the securities of fewer issuers than other mutual funds.

YEARLY PERFORMANCE*

[BAR GRAPH]

<TABLE>
<CAPTION>
Calendar Year Annual Return(%)
------------- ----------------
<S> <C>
1995 8.71
1996 6.25
1997 6.97
1998
</TABLE>

During the periods shown above, the highest quarterly return was ____% (for the
quarter ended _______ __, 19__), and the lowest was ____% (for the quarter ended
______ __, 19__).

PERFORMANCE TABLE*

<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS (FOR PAST ONE YEAR LIFE OF FUND SINCE CLASS B
PERIODS ENDING DECEMBER 31, 1998) (SINCE 4/04/94) INCEPTION
( / /95)
<S> <C> <C> <C>
Class A Shares N/A
Class B Shares N/A
Lehman Brothers Municipal Bond Index**
</TABLE>

* The Fund's performance through _________, 19__ benefitted from the agreement
of WM Advisors and its affiliates to limit the Fund's expenses.

** This index includes all investment grade tax-exempt bond issues.

-13-
<PAGE> 16

FLORIDA INSURED MUNICIPAL FUND

- - OBJECTIVE. This non-diversified Fund seeks to provide as high a level of
current income that is exempt from federal income tax as is consistent with
prudent investment management and preservation of capital. The Fund also
seeks to ensure that the value of its shares is exempt from Florida
intangible personal property tax.

- - PRINCIPAL INVESTMENT STRATEGIES. The Fund invests primarily in
intermediate- and long-term insured Florida municipal obligations,
including municipal leases and AMT-SUBJECT BONDS. The Fund may also invest
in other MUNICIPAL OBLIGATIONS and interest rate futures and options.

- - The Fund is "NON-DIVERSIFIED," which means that the Fund may invest more
of its assets in the securities of fewer issuers than other mutual funds.

YEARLY PERFORMANCE*

[BAR GRAPH]

<TABLE>
<CAPTION>
Calendar Year Annual Return(%)
------------- ----------------
<S> <C>
1994 -1.50
1995 6.01
1996 7.56
1997 8.43
1998
</TABLE>

During the periods shown above, the highest quarterly return was ____% (for the
quarter ended _______ __, 199_), and the lowest was ____% (for the quarter ended
________ __, 19__).

PERFORMANCE TABLE*

<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS (FOR PAST ONE PAST FIVE LIFE OF FUND SINCE CLASS B
PERIODS ENDING DECEMBER 31, 1998) YEAR YEARS (SINCE INCEPTION
6/07/93) (7/1/94)
<S> <C> <C> <C> <C>
Class A Shares N/A
Class B Shares N/A N/A
Lehman Brothers Municipal Bond Index**
</TABLE>

* The Fund's performance through ______________________ __, 19__ benefitted
from the agreement of WM Advisors and its affiliates to limit the Fund's
expenses.

** This index includes all investment grade tax-exempt bond issues.

-14-

<PAGE> 17

BOND & STOCK FUND

- - OBJECTIVE. This Fund seeks to provide continuity of income, conservation of
principal and long-term growth of income and principal.

- - PRINCIPAL INVESTMENT STRATEGIES. The Fund invests primarily in common
stocks, preferred stocks, bonds and convertible securities. At least 25% of
the Fund's assets are generally invested in debt securities. The Fund's
investments may include U.S. GOVERNMENT SECURITIES, AMERICAN DEPOSITORY
RECEIPTS (ADRS) AND EUROPEAN DEPOSITORY RECEIPTS (EDRS), MORTGAGE-BACKED
SECURITIES (including collateralized mortgage obligations), REPURCHASE
AGREEMENTS and REAL ESTATE INVESTMENT TRUSTS (REITS)

YEARLY PERFORMANCE*

[BAR GRAPH]

<TABLE>
<CAPTION>
Calendar Year Annual Return(%)
------------- ----------------
<S> <C>
1989 13.21
1990 -2.29
1991 16.96
1992 11.92
1993 13.99
1994 -0.09
1995 22.55
1996 15.66
1997 20.81
1998
</TABLE>

During the periods shown above, the highest quarterly return was ____% (for the
quarter ended ________ __, 19__), and the lowest was___% (for the quarter ended
________ __, 19__).

PERFORMANCE TABLE*

<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS (FOR PAST ONE PAST FIVE PAST TEN SINCE CLASS B
PERIODS ENDING DECEMBER 31, 1998) YEAR YEARS YEARS INCEPTION
(3/30/94)
<S> <C> <C> <C> <C>
Class A Shares N/A
Class B Shares N/A N/A
Standard & Poor's 500 Composite Index**
Lehman Brothers Government/Corporate
Bond***

</TABLE>

* The Fund's performance through ______________________ __, 19__ benefitted
from the agreement of WM Advisors and its affiliates to limit the Fund's
expenses.

** This index represents an unmanaged weighted index of 500 industrial,
transportation, utility and financial companies widely regarded by investors as
representative of the stock market.

*** This index is generally considered representative of the U.S. government and
corporate bond markets.

-15-
<PAGE> 18

GROWTH & INCOME FUND

- - OBJECTIVE. This Fund seeks to provide long-term capital growth. Current
income is a secondary consideration.

- - PRINCIPAL INVESTMENT STRATEGIES. The Fund invests primarily in common
stocks.

YEARLY PERFORMANCE*

[BAR GRAPH]

<TABLE>
<CAPTION>
Calendar Year Annual Return(%)
------------- ----------------
<S> <C>
1989 13.00
1990 -16.25
1991 32.69
1992 9.94
1993 11.06
1994 8.55
1995 20.87
1996 23.61
1997 31.24
1998
</TABLE>

During the periods shown above, the highest quarterly return was __% (for the
quarter ended ________ __, 19__), and the lowest was _____% (for the quarter
ended _________ __, 19__). [For the period ended March 31, 1999 the Funds return
was %].

PERFORMANCE TABLE*

* The Fund's performance through ______________________ __, 19__ benefitted
from the agreement of WM Advisors and its affiliates to limit the Fund's
expenses.

** This index represents an unmanaged weighted index of 500 industrial,
transportation, utility and financial companies widely regarded by investors as
representative of the stock market.

-16-
<PAGE> 19

NORTHWEST FUND

- - OBJECTIVE. This Fund seeks long-term growth of capital.

- - PRINCIPAL INVESTMENT STRATEGIES. The Fund invests primarily in common
stocks of companies located or doing business in Alaska, Idaho, Montana,
Oregon and Washington. The Fund's investments may include REPURCHASE
AGREEMENTS and REAL ESTATE INVESTMENT TRUSTS (REITS).

YEARLY PERFORMANCE

[BAR GRAPH]

<TABLE>
<CAPTION>
Calendar Year Annual Return(%)
------------- ----------------
<S> <C>
1989 36.14
1990 -16.68
1991 60.49
1992 5.77
1993 3.82
1994 2.97
1995 22.24
1996 14.54
1997 44.47
1998
</TABLE>

During the periods shown above, the highest quarterly return was ___% (for the
quarter ended ________ __, 19__), and the lowest was ____% (for the quarter
ended ________ __, 19__).

PERFORMANCE TABLE

* The Fund's performance through ______________________ __, 19__ benefitted
from the agreement of WM Advisors and its affiliates to limit the Fund's
expenses.

** This index represents an unmanaged weighted index of 500 industrial,
transportation, utility and financial companies widely regarded by investors as
representative of the stock market.

-17-
<PAGE> 20

GROWTH FUND

- - OBJECTIVE. This Fund seeks long-term capital appreciation.

- - PRINCIPAL INVESTMENT STRATEGIES. The Fund invests primarily in common
stocks, including foreign stocks, that, in the opinion of WM Advisors or
the sub-advisor, offer potential for growth. The Fund may also invest in
commercial paper and preferred stock.

YEARLY PERFORMANCE*

[BAR GRAPH]

<TABLE>
<CAPTION>
Calendar Year Annual Return(%)
------------- ----------------
<S> <C>
1994 0
1995 32.33
1996 25.44
1997 10.88
1998
</TABLE>

During the periods shown above, the highest quarterly return was ___% (for the
quarter ended ________ __, 19__), and the lowest was ____% (for the quarter
ended _________ __, 19__).

PERFORMANCE TABLE*

<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS (FOR PAST ONE PAST FIVE LIFE OF THE SINCE CLASS B
PERIODS ENDING DECEMBER 31, 1998) YEAR YEARS FUND INCEPTION
(4/5/93) (7/1/94)
<S> <C> <C> <C> <C>
Class A Shares
Class B Shares N/A N/A
Standard & Poor's 500 Composite Index**
</TABLE>

* The Fund's performance through ______________________ __, 19__ benefitted
from the agreement of WM Advisors and its affiliates to limit the Fund's
expenses.

** This index represents an unmanaged weighted index of 500 industrial,
transportation, utility and financial companies widely regarded by investors as
representative of the stock market.

-18-
<PAGE> 21

EMERGING GROWTH FUND

- - OBJECTIVE. This Fund seeks long-term capital appreciation.

- - PRINCIPAL INVESTMENT STRATEGIES. The Fund invests primarily in equity
securities, including FOREIGN SECURITIES, of companies with market
capitalizations of less than $1.4 billion. The Fund may also invest in
REPURCHASE AGREEMENTS and STRATEGIC TRANSACTIONS such as futures and
options on futures.

YEARLY PERFORMANCE*

[BAR GRAPH]

<TABLE>
<CAPTION>
Calendar Year Annual Return(%)
------------- ----------------
<S> <C>
1992 22.47
1993 19.75
1994 3.40
1995 21.54
1996 35.93
1997 -1.50
1998
</TABLE>

During the periods shown above, the highest quarterly return was ____% (for the
quarter ended _____ __, 19__), and the lowest was ___% (for the quarter ended
________ __, 19__).

PERFORMANCE TABLE*

<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS (FOR PAST ONE PAST FIVE LIFE OF FUND SINCE CLASS B
PERIODS ENDING DECEMBER 31, 1998) YEAR YEARS (SINCE INCEPTION
7/18/90) (7/1/94)
<S> <C> <C> <C> <C>
Class A Shares N/A
Class B Shares N/A N/A
Standard & Poor's 500 Composite Index**
Russell 2000 Index***
</TABLE>

* The Fund's performance through _______________ __, 19__ benefitted from the
agreement of WM Advisors and its affiliates to limit the Fund's expenses.

** This index represents an unmanaged weighted index of 500 industrial,
transportation, utility and financial companies widely regarded by investors as
representative of the stock market.

*** This index represents the smallest 2000 companies followed by Russell and is
used to measure the small-cap market.

-19-
<PAGE> 22

INTERNATIONAL GROWTH FUND

- - OBJECTIVE. This Fund seeks to provide long-term capital appreciation.

- - PRINCIPAL INVESTMENT STRATEGIES. The Fund invests primarily in equity
securities of foreign issuers, including issuers located in developing or
emerging market countries. The Fund may also use derivatives such as
FOREIGN CURRENCY EXCHANGE TRANSACTIONS and REPURCHASE AGREEMENTS.

YEARLY PERFORMANCE*

[BAR GRAPH]

<TABLE>
<CAPTION>
Calendar Year Annual Return(%)
------------- ----------------
<S> <C>
1992 7.28
1993 11.51
1994 12.39
1995 -4.01
1996 13.16
1997 15.50
1998
</TABLE>

During the periods shown above, the highest quarterly return was ___% (for the
quarter ended ________ __, 19__), and the lowest was ____% (for the quarter
ended _________ __, 19__).

PERFORMANCE TABLE*

<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS (FOR PAST ONE PAST FIVE LIFE OF FUND SINCE CLASS B
PERIODS ENDING DECEMBER 31, 1998) YEAR YEARS (SINCE INCEPTION
7/18/90) (7/1/94)
<S> <C> <C> <C> <C>
Class A Shares N/A
Class B Shares N/A N/A
Morgan Stanley Capital International
EAFE Index**
</TABLE>

* The Fund's performance through _______________ __, 19__ benefitted from the
agreement of WM Advisors and its affiliates to limit the Fund's expenses.

** This index includes stock markets of Europe, Australia and the Far East
weighted by capitalization and represents the equity markets of 18 countries.

-20-
<PAGE> 23

STRATEGIC GROWTH PORTFOLIO

- - OBJECTIVE. This Portfolio seeks to provide long-term capital appreciation.
In general, relative to the other Portfolios, the Strategic Growth
Portfolio should offer investors the potential for a higher level of
capital growth while exposing investors to corresponding levels of
principal risk.

- - PRINCIPAL INVESTMENT STRATEGIES. All of the Portfolios allocate their
assets among certain of the Funds to achieve their objectives. This
Portfolio invests at least 75% of its net assets in the Equity Funds under
normal market conditions.

The Portfolio may invest up to 25% of its assets in each of the Money
Market, Short-Term High Quality Bond or High Yield Funds. It may also
invest up to 50% of its assets in each of the Growth & Income, Northwest,
Growth, Emerging Growth or International Growth Funds.

The Portfolio may also make use of various other principal investment
strategies, including U.S. GOVERNMENT SECURITIES, short-term debt rated A
or higher, commercial paper including master notes and bank obligations,
REPURCHASE AGREEMENTS and STRATEGIC TRANSACTIONS such as futures contracts
and options.

YEARLY PERFORMANCE*

[BAR GRAPH]

<TABLE>
<CAPTION>
Calendar Year Annual Return(%)
------------- ----------------
<S> <C>
1997 19.33
1998
</TABLE>

During the periods shown above, the highest quarterly return was____% (for the
quarter ended _____ __, 19__), and the lowest was _____% (for the quarter ended
______ __, 19__).

PERFORMANCE TABLE*

<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS (FOR PAST ONE YEAR LIFE OF FUND
PERIODS ENDING DECEMBER 31, 1998) (SINCE 7/25/96)
<S> <C> <C>
Class A Shares
Class B Shares
Standard & Poor's 500 Composite Index**
</TABLE>

* Performance information shown for periods prior to November 1, 1996 reflects
the performance of an asset allocation service investing in the Funds and their
predecessors. Because the asset allocation service was not a mutual fund, it was
not subject to certain restrictions applicable to the Portfolio. If it had been,
performance shown might have differed. The Portfolio's performance through
October 31, 1998 benefitted from the agreement of WM Advisors and its affiliates
to limit the Portfolio's expenses.

** This index represents an unmanaged weighted index of 500 industrial,
transportation, utility and financial companies widely regarded by investors as
representative of the stock market.

-21-
<PAGE> 24

CONSERVATIVE GROWTH PORTFOLIO

- - OBJECTIVE. This Portfolio seeks to provide long-term capital appreciation.
In general, relative to the other Portfolios, the Conservative Growth
Portfolio should offer you the potential for a low level of income and the
potential for a medium to high level of capital growth while exposing you
to a medium level of principal risk.

- - PRINCIPAL INVESTMENT STRATEGIES. All of the Portfolios allocate their
assets among certain of the Funds to achieve their objectives. This
Portfolio generally invests at least 60% of its net assets in the Equity
Funds.

The Portfolio may invest up to 30% of its assets in each of the Money
Market, Short-Term High Quality Bond, U.S. Government Securities, Income or
High Yield Funds. It may also invest up to 40% of its assets in each of the
Growth & Income, Northwest, Growth, Emerging Growth or International Growth
Funds.

YEARLY PERFORMANCE*

[BAR GRAPH]

<TABLE>
<CAPTION>
Calendar Year Annual Return(%)
------------- ----------------
<S> <C>
1997 14.39
1998
</TABLE>

During the periods shown above, the highest quarterly return was ___% (for the
quarter ended _______ __, 19__), and the lowest was ___% (for the quarter ended
_______ __, 19__).

PERFORMANCE TABLE*

<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS (FOR PAST ONE YEAR LIFE OF FUND
PERIODS ENDING DECEMBER 31, 1998) (SINCE 7/25/96)
<S> <C> <C>
Class A Shares
Class B Shares
Capital Market Benchmark***
Standard & Poor's 500 Index**
</TABLE>

** This index represents an unmanaged weighted index of 500 industrial,
transportation, utility and financial companies widely regarded by investors as
representative of the stock market.

** This is a blended mix of capital market indices that is intended to represent
a proxy for portfolio performance. The benchmark allocation is as follows: 35%
S&P 500, 20% MSCI EAFE + Emerging Markets, 20% Lehman Bros. Mutual Fund (1-5)
Gov/Corp Index, 20% Salomon Bros. 90-day T-Bills, and 5% Russell 2000 Growth. A
description of the components of the the Portfolio's Capital Market Index can
be found in the Statement of Additional Information, which you can obtain
free of charge by calling 800-222-5852.

-22-
<PAGE> 25

BALANCED PORTFOLIO

- - OBJECTIVE. This Portfolio seeks to provide as high a level of total return
(consisting of reinvested income and capital appreciation) consistent with
reasonable risk. In general, relative to the other Portfolios, the Balanced
Portfolio should offer you the potential for a medium level of income and
the potential for a medium level of capital growth while exposing you to a
medium level of principal risk.

- - PRINCIPAL INVESTMENT STRATEGIES. All of the Portfolios allocate their
investments among certain of the Funds to achieve their objectives. This
Portfolio invests at least 30% and no more than 70% of its net assets in
both the Equity Funds and the Fixed-Income Funds.

The Portfolio may invest up to 40% of its assets in each of the Money
Market, Short-Term High Quality Bond U.S. Government Securities, Income or
High Yield Funds. It may also invest up to 30% of its assets in each of the
Growth & Income, Northwest, Growth, Emerging Growth and International
Growth Funds.

YEARLY PERFORMANCE*

[BAR GRAPH]
<TABLE>
<CAPTION>
Calendar Year Annual Return (%)
------------- -----------------
<S> <C>
1997 15.02
1998
</TABLE>

During the periods shown above, the highest quarterly return was ___% (for the
quarter ended ______ __, 19__), and the lowest was ____% (for the quarter ended
_______ __, 19__).

PERFORMANCE TABLE*

* This index represents an unmanaged weighted index of 500 industrial,
transportation, utility and financial companies widely regarded by investors as
representative of the stock market.

** This is a blended mix of capital market indices that is intended to represent
a proxy for portfolio performance. The benchmark allocation is as follows: 25%
Lehman Bros Mutual Fund Short (1-5) Gov/Corp Index, 25% Salomon Bros 90-day
T-Bills, 20% Lehman Bros Mortgage Index, 15% S&P 500, and 15% MSCI EAFE +
Emerging Markets. A description of the components of the the Portfolio's
capital Market Index can be found in the Statement of Additional Information,
which you can obtain free of charge by calling 800-222-5852.

-23-
<PAGE> 26

FLEXIBLE INCOME PORTFOLIO

- - OBJECTIVE. This Portfolio seeks to provide a high level of total return
consisting of reinvestment of income with some capital appreciation. In
general, relative to the other Portfolios, the Flexible Income Portfolio
should offer you the potential for a medium to high level of reinvestment
income and the potential for a low to medium level of capital growth, while
exposing you to a low to medium level of principal risk.

- - PRINCIPAL INVESTMENT STRATEGIES. All of the Portfolios allocate their
assets among certain of the Funds to achieve their objectives. This
Portfolio generally invests at no more than 30% of its net assets in the
Equity Funds.

The Portfolio may invest up to 40% of its assets in each of the Money
Market, Short-Term High Quality Bond, U.S. Government Securities, Income or
High Yield Funds. It may also invest up to 30% of its assets in each of the
Growth & Income, Northwest, Growth and Emerging Growth.

YEARLY PERFORMANCE*

[BAR GRAPH]
<TABLE>
<CAPTION>
Calendar Year Annual Return (%)
------------- -----------------
<S> <C>
1997 11.58
1998
</TABLE>

During the periods shown above, the highest quarterly return was ___% (for the
quarter ended _______ __, 19__), and the lowest was ____% (for the quarter ended
_______ __, 19__).

PERFORMANCE CHART*

* This index represents an unmanaged weighted index of 500 industrial,
transportation, utility and financial companies widely regarded by investors as
representative of the stock market.

** This is a blended mix of capital market indices that is intended to
represent a proxy for portfolio performance. The benchmark allocation is as
follows: 40% Lehman Bros Mutual Fund Short (1-5) Gov/Corp Index, 40% Salomon
Bros 90-day T-Bills, 10% Lehman Bros Mortgage Index and 10% S&P 500. A
description of the components of the the Portfolio's Capital Market Index can
be found in the Statement of Additional Information, which you can obtain free
of charge by calling 800-222-5852.

-24-
<PAGE> 27

INCOME PORTFOLIO

- - OBJECTIVE. This Portfolio seeks long-term total return through reinvestment
of current income consistent with preservation of capital. In general,
relative to the other Portfolios, the Income Portfolio should offer you the
potential for a high level of income while maintaining principal and
exposing you to a low level of principal risk.

- - PRINCIPAL INVESTMENT STRATEGIES. All of the Portfolios allocate their
assets among certain of the Funds to achieve their objectives. This
Portfolio generally invests 100% of its net assets in the Fixed-Income
Funds.

The Portfolio may invest up to 50% of its assets in each of the Money
Market, Short-Term High Quality Bond or U.S. Government Securities Funds.
It may also invest up to 40% of its assets in each of the Income or High
Yield Funds.

YEARLY PERFORMANCE*

[BAR GRAPH]
<TABLE>
<CAPTION>
Calendar Year Annual Return (%)
------------- -----------------
<S> <C>
1997 7.38
1998
</TABLE>

During the periods shown above, the highest quarterly return was ____% (for the
quarter ended _______ __, 19__), and the lowest was ____% (for the quarter ended
_______ __, 19__).

PERFORMANCE TABLE*

* This index represents an unmanaged weighted index of 500 industrial,
transportation, utility and financial companies widely regarded by investors as
representative of the stock market.

** This is a blended mix of capital market indices that is intended to represent
a proxy for portfolio performance. The benchmark allocation is as follows: 20%
Salomon Bros, 90-day T-Bills, 30% Lehman Bros Mutual Fund Short (1-5) Gov/Corp
Index 10% Lehman Bros Mortgages Index and 10% Lehman Bros BAA LT Corporate Bond
Index. A description of the components of the the Portfolio's Capital Market
Index can be found in the Statement of Additional Information, which you can
obtain free of charge by calling 800-222-5852.

-25-
<PAGE> 28

SUMMARY OF PRINCIPAL RISKS

The value of your investment in a Fund or Portfolio changes with the value of
the investments held by that Fund or Portfolio. Many factors can affect that
value. Factors that may affect a particular Fund or Portfolio as a whole are
called "principal risks." They are summarized in this section. The chart at the
end of this section displays similar information. All Funds and Portfolios are
subject to principal risks. These risks can change over time, because the types
of investments made by the Funds and Portfolios can change over time.
Investments mentioned in this summary and described in greater detail under
"Description of the Funds" or "Common Investment Practices" appear in BOLD TYPE.
Those sections also include more information about the Funds, their investments
and the related risks.

- - MARKET RISK. Each of the Funds and Portfolios is subject to market risk,
which is the general risk of unfavorable changes in the market value of a
Fund's portfolio securities. The Equity Funds, by investing in equity
securities, such as common stock, preferred stock and Convertible
Securities, are exposed to the risk of changes in the value of equity
securities. Those risks include the risks of broader market declines as
well as more specific risks affecting the issuer, such as management
performance, financial leverage, industry problems and reduced demand for
the issuer's goods or services.

- - Another aspect of market risk is interest rate risk. As interest rates
rise, your investment in a Fund or Portfolio is likely to be worth less
because its income-producing equity or debt investments are likely to be
worth less.

Even Funds such as the Short Term High Quality Bond, U.S. Government
Securities and Target Maturity 2002 Funds are subject to interest rate
risk, even though they generally invest substantial portions of their
assets in the highest quality debt securities, such as U.S. GOVERNMENT
SECURITIES. Interest rate risk is generally greater, however, for Funds
such as the Tax-Exempt Bond, Income, Growth & Income, High Yield and Growth
Funds which invest significantly in LOWER-RATED SECURITIES or Comparable
Unrated Securities.

Interest rate risk is generally greater for Funds that invest in debt
securities with longer maturities. This risk is usually compounded for
Funds such as the Tax-Exempt Bond, California Municipal, Florida Insured
Municipal, Income and U.S. Government Securities Funds that invest
significantly in GOVERNMENT STRIPPED MORTGAGE-BACKED or OTHER ASSET-BACKED
SECURITIES that may be prepaid. These securities have variable maturities
that tend to lengthen when that is least desirable - when interest rates
are rising. Increased market risk is also likely for Funds such as the
Income, Short Term High Quality Bond and Target Maturity 2002 Funds that
invest in debt securities paying no interest, such as ZERO-COUPON,
Principal-Only and Interest-Only Securities.

- - CREDIT RISK. Each of the Funds may be subject to credit risk to the extent
it invests in debt securities. This is the risk that the issuer or the
guarantor (or, in the case of the California Insured Intermediate Municipal
Fund and the Florida Insured Municipal Fund, the insurer) of a debt
security, or the counterparty to any of a Fund's portfolio transactions
(including without limitation REPURCHASE AGREEMENTS, REVERSE REPURCHASE
AGREEMENTS, securities loans and other over- the-counter transactions),
will be unable or unwilling to make timely principal and/or interest
payments, or to otherwise honor its obligations. Varying degrees of credit
risk, often reflected in Credit Ratings, apply. Credit risk is particularly
significant for Funds such as the Income, High Yield, Tax-Exempt Bond, Bond
& Stock, Growth & Income, Growth and Emerging Growth Funds that invest
significantly in LOWER-RATED SECURITIES. These securities and similar
Unrated Securities (commonly known as "junk bonds") have

-26-
<PAGE> 29
speculative elements or are predominantly speculative credit risks. The
Short Term High Quality Bond, Income, High Yield, Bond & Stock, Growth &
Income, Growth, Emerging Growth and International Growth Funds which make
FOREIGN INVESTMENTS denominated in U.S. dollars, are also subject to
increased credit risk because of the difficulties of requiring foreign
entities to honor their contractual commitments, and because a number of
foreign governments and other issuers are already in default. The Money
Market Fund may also invest in U.S. dollar denominated foreign securities.

- - CURRENCY RISK. Funds such as the Money Market, Short Term High Quality
Bond, Income, High Yield, Bond & Stock, Growth & Income, Growth, Emerging
Growth and International Growth Funds that invest in securities denominated
in, and/or receive revenues in, FOREIGN CURRENCIES will be subject to
currency risk. This is the risk that those currencies will decline in value
relative to the U.S. Dollar, or, in the case of hedging positions, that the
U.S. Dollar will decline in value relative to the currency hedged.

- - FOREIGN INVESTMENT RISK. Each of the Funds with FOREIGN INVESTMENTS such as
the Short Term High Quality Bond, Income, High Yield, Bond & Stock, Growth
& Income, Growth, Emerging Growth and International Growth Funds, may
experience more rapid and extreme changes in value than Funds with
investments solely in securities of U.S. companies. This is because the
securities markets of many foreign countries are relatively small, with a
limited number of companies representing a small number of industries.
Additionally, foreign securities issuers are usually not subject to the
same degree of regulation as U.S. issuers. Reporting, accounting and
auditing standards of foreign countries differ, in some cases
significantly, from U.S. standards. Also, nationalization, expropriation or
confiscatory taxation, currency blockage, political changes or diplomatic
developments could adversely affect a Fund's investments in a foreign
country. In the event of nationalization, expropriation or other
confiscation, a Fund could lose its entire investment. Adverse developments
in certain regions, such as Southeast Asia, may adversely affect the
markets of other countries whose economies appear to be unrelated. The
Money Market Fund may also invest in U.S. dollar denominated foreign
securities.

- - GEOGRAPHIC CONCENTRATION RISK. Funds such as the Northwest, California
Municipal, California Insured Intermediate Municipal and the Florida
Insured Municipal Funds that invest significant portions of their assets in
concentrated geographic areas like the northwestern United States,
California or Florida, generally have more exposure to regional economic
risks than Funds making investments more broadly.

- - LEVERAGING RISK. When a Fund is BORROWING money or otherwise leveraging its
portfolio, the value of an investment in that Fund will be more volatile
and all other risks will tend to be compounded. The Income, Short-Term High
Quality Bond, U.S. Government Securities, California Municipal, California
Insured Intermediate Municipal, Florida Insured Municipal, Growth,
International Growth and Emerging Growth Funds may achieve leverage by
using REVERSE REPURCHASE AGREEMENTS and/or DOLLAR ROLLS. The Municipal
Funds, the Fixed-Income Funds, and the Growth & Income Fund may achieve
leverage through the use of INVERSE FLOATING RATE INSTRUMENTS. Funds such
as the

-27-
<PAGE> 30

California Money, California Insured Intermediate Municipal, Short Term
High Quality Bond, Emerging Growth, Growth and International Growth may
take on leveraging risk by investing collateral from Securities Loans, by
using Derivatives and by BORROWING money to meet redemption requests.

- - CONCENTRATION RISK. Most analysts believe that overall risk can be reduced
through diversification, while concentration of investments in a small
number of securities increases risk. Each of the California Money,
California Municipal, California Insured Intermediate Municipal and Florida
Insured Municipal Funds is Non-Diversified. This means they can invest a
greater portion of their assets in a relatively small number of issuers and
will have greater concentration of risk. Some of those issuers may present
substantial credit or other risks.

- - DERIVATIVES RISK. Each of the Funds, except the Money Funds, may, subject
to the limitations and restrictions stated elsewhere in this Prospectus and
the SAI, enter into STRATEGIC TRANSACTIONS involving derivatives such as
forward contracts, futures contracts, options, swaps, caps, floors and
collars which are financial contracts whose value depends on, or is derived
from, the value of an underlying asset, reference rate or index. In
addition to other risks such as the credit risk of the counterparty,
derivatives involve the risk of mispricing or improper valuation and the
risk that changes in the value of the derivative may not correlate
perfectly with relevant assets, rates and indices.

- - LIQUIDITY RISK. Liquidity risk exists when particular investments are
difficult to purchase or sell, possibly preventing a Fund from selling out
of these ILLIQUID SECURITIES at an advantageous price. All of the Funds may
be subject to liquidity risk. Funds that make STRATEGIC TRANSACTIONS or
FOREIGN INVESTMENTS, or that invest in securities involving substantial
market and/or credit risk tend to involve greater liquidity risk. In
addition, liquidity risk increases for Funds that hold RESTRICTED
SECURITIES.

- - MANAGEMENT RISK. Each Fund is subject to management risk because it is an
actively managed investment portfolio. The Advisor or sub-advisor (if
applicable) will apply its investment techniques and risk analyses in
making investment decisions for the Funds or Portfolios, but there can be
no guarantee that they will produce the desired results. In some cases
derivatives and other investments may be unavailable or the Advisor or
sub-advisor may choose not to use them under market conditions when their
use would be beneficial to the Funds.

-28-
<PAGE> 31

- - SMALLER COMPANY RISK. Market risk and liquidity risk are particularly
pronounced for stocks of companies with relatively Small Market
Capitalizations. These companies may have limited product lines, markets or
financial resources or they may depend on a few key employees. The Equity
Funds, and the Emerging Growth Fund in particular, generally have the
greatest exposure to this risk.

- - TAX RISK. Each of the California Money Fund and the Municipal Funds is
subject to the risk that some or all of the interest the Fund receives
might become taxable by law or be determined by the Internal Revenue
Service (or the relevant state tax authority) to be taxable. In this event,
the value of the Fund's investments would likely fall, and some or all of
the income distributions paid by the Fund might become taxable. In
addition, some or all of the income distributions paid by these Funds may
be subject to federal alternative minimum income tax.

- - MONEY MARKET RISK. While the Money Funds are designed to be relatively low
risk investments, they are not entirely free of risk. The Money Funds may
not be able to maintain a net asset value of $1.00 per share. In addition,
the Money Funds are still subject to the risk that the value of your
investment may be eroded over time by inflation.

- - NON-DIVERSIFICATION RISK. Each of the California Money, California
Municipal, California Insured Intermediate Municipal and Florida Insured
Municipal Funds is a "non-diversified" fund which means that each of them
may invest more of its assets in the securities of fewer issues than other
mutual funds. To the extent that a Fund invests significantly in the
securities of a particular issuer, it may suffer greater losses if the
value of such issuer's securities declines.

- - PORTFOLIO REALLOCATION RISK. From time to time, one or more of a
Portfolio's underlying Funds may experience relatively large investments or
redemptions due to reallocations or rebalancings by the Portfolios as
recommended by the Advisor. These transactions will affect such Funds,
since the Funds that experience redemptions as a result of reallocations or
rebalancings may have to sell portfolio securities and Funds that receive
additional cash will have to invest such cash. While it is impossible to
predict the overall impact of these transactions over time, there could be
adverse effects on portfolio management to the extent that the Funds may be
required to sell securities or invest cash at times when they would not
otherwise do so. These transactions could also have tax consequences if
sales of securities resulted in gains and could also increase transaction
costs. The Advisor is committed to minimizing such impact on the Funds to
the extent it is consistent with pursuing the investment objectives of the
Portfolios. The Advisor may nevertheless face conflicts in fulfilling its
responsibilities. The Advisor will at all times monitor the impact on the
Funds of transactions by the Portfolios.

- - PORTFOLIO RISK. Each of the Portfolios allocates its assets among the Funds
as determined by its Advisor and in accordance with the investment
restrictions discussed above. As a result, the Portfolios share the risks
of each of the Funds in which they invest, which are described above.

In particular, the Portfolios may be subject to credit risk. For instance,
the Strategic Growth Portfolio can invest up to 50% of its assets in each
of the Growth, Growth & Income and Emerging Growth Funds and up to 25% of
its assets in the High Yield Fund. Each of these Funds may invest
significant amounts of its assets in lower-rated securities ("junk bonds").
The Portfolios may also be exposed to FOREIGN INVESTMENT RISK through

-29-
<PAGE> 32

their investments in the Growth or Emerging Growth Funds. In choosing among
the Portfolios investors should understand the risks of each of the Funds
and the extent to which each Portfolio invests in each Fund.

Investing in Funds through the Portfolios involves certain additional
expenses and tax results that would not be present in a direct investment
in the Funds. See "Dividends, Capital Gains and Taxes" for additional
information about tax implications of investing in the Portfolios.

Under certain circumstances, a Fund may determine to pay a redemption
request by a Portfolio wholly or partly by a distribution in kind of
securities from its portfolio, instead of cash. In such cases, the
Portfolios may hold portfolio securities until the Advisor determines that
it is appropriate to dispose of such securities.

The officers, trustees, Advisor, Distributor and transfer agent of the
Portfolios serve in the same capacities for the Funds. Conflicts may arise
as these persons and companies seek to fulfill their fiduciary
responsibilities to the Portfolios and the Funds.

-30-
<PAGE> 33

PRINCIPAL RISKS BY FUND

The following chart summarizes the Principal Risks of each Fund. Risks not
marked for a particular Fund may, however, still apply to some extent to that
Fund at various times.

<TABLE>
<CAPTION>
FUND MARKET CREDIT CURRENCY FOREIGN LEVERAGING GEO- DERIVA- LIQUIDITY MANAGEMENT
RISK RISK RISK INVEST- RISK GRAPHIC TIVES RISK RISK
MENT CONCEN- RISK
RISK TRATION
RISK
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Money X
Market
Fund

Tax- X
Exempt
Money
Market
Fund

California X X
Money Fund

Short X X X X X X X X
Term
High
Quality
Bond Fund

Target X X X X X X X
Maturity
2002 Fund

U.S. X X X X X X X
Government
Securities
Fund

Income X X X X X X X
Fund

High X X X X X X X X
Yield
Fund

Tax- X X X X X X X
Exempt
Bond Fund

California X X X X X X X X
Municipal
Fund
</TABLE>

<TABLE>
<CAPTION>
FUND SMALLER TAX MONEY NON-
COMPANY RISK MARKET DIVERSIFICATION
RISK RISK RISK

<S> <C> <C> <C> <C>
Money X
Market
Fund

Tax- X X
Exempt
Money
Market
Fund

California X X X
Money Fund

Short
Term
High
Quality
Bond Fund

Target
Maturity
2002 Fund

U.S.
Government
Securities
Fund

Income
Fund

High
Yield
Fund

Tax- X
Exempt
Bond Fund

California X X
Municipal
Fund
</TABLE>

-31-
<PAGE> 34

Florida X X X X X X
Insured
Municipal
Fund

Bond & X X X X X X X
Stock Fund

Growth X X X X X X
& Income
Fund

Northwest X X X X X X
Fund

Growth X X X X X X X X
Fund

Emerging X X X X X X X X
Growth
Fund

International X X X X X X X
Growth Fund
</TABLE>

<TABLE>
<CAPTION>
FUND SMALLER TAX MONEY NON-
COMPANY RISK MARKET DIVERSIFICATION
RISK RISK RISK

<S> <C> <C> <C> <C>
California X X
Insured
Intermediate
Municipal
Fund

Florida X X
Insured
Municipal
Fund

Bond & X
Stock Fund

Growth X
& Income
Fund

Northwest X
Fund

Growth X
Fund

Emerging X
Growth
Fund

International X
Growth Fund
</TABLE>

-32-
<PAGE> 35
- --------------------------------------------------------------------------------

FEES AND EXPENSES OF THE FUNDS

AND PORTFOLIOS

This table summarizes the fees and expenses that you may pay if you invest in a
Fund or Portfolio. The Examples on the next two pages are intended to help you
compare the cost of investing in the Funds and Portfolios with the costs of
investing in other mutual funds. The Examples assume that your investment has a
5% return each year, as required by the Securities and Exchange Commission, and
that the Fund's or Portfolio's operating expenses remain the same. Your actual
costs may be higher or lower than those in the Examples.

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
SHAREHOLDER FEES CLASS A CLASS B
(fees paid directly from your investment) SHARES (in %) SHARES (in %)
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Maximum sales charge (load) imposed on purchases (as a
percentage of offering price)
Equity Funds and Strategic Growth, Conservative Growth and
Balanced Portfolios 5.50 0.00
-----------------------------------------------------------------------------------------------
Fixed-Income Funds, Municipal Funds and Flexible Income and
Income Portfolios 4.50(1) 0.00
-----------------------------------------------------------------------------------------------
Money Funds 0.00(2) 0.00
-----------------------------------------------------------------------------------------------
Maximum deferred sales charge (load) (as a percentage of
original purchase price or redemption proceeds, as
applicable)(5) 0.00(3) 5.00(4)
-----------------------------------------------------------------------------------------------
(1) 3.50% for Short Term High Quality Bond Fund and 2.00% for Target Maturity 2002 Fund.
(2) Regular sales charges apply when Class A shares of a Money Market Fund (on which no sales
charge was paid at time of purchase) are exchanged for shares of any other Fund.
(3) Certain investors who purchase Class A shares without paying an initial sales charge may
be subject to a deferred sales charge of 1.00% on redemptions within the first year or
0.50% on redemptions within the second year after purchase. Class A shares are not
otherwise subject to a deferred sales charge.
(4) The maximum deferred sales charge is imposed on shares redeemed in the first year. For
shares held longer than one year, the deferred sales charge declines according to the
schedules set forth under "Buying Class B Shares -- Contingent deferred sales charge" in
this Prospectus. The maximum deferred sales charge for Class B shares of the Short Term
High Quality Bond Fund is 4.00%.
(5) A $10 fee may be charged for redemptions made by wire transfer.
- --------------------------------------------------------------------------------------------------------
</TABLE>

33
<PAGE> 36

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------

ANNUAL FUND
OPERATING EXPENSES
(expenses that are deducted
CLASS A SHARES from Fund assets)
-----------------------------------------------------------------------------------------------------------
Total
Annual
Service Fund
Management (12b-1) Other Operating Expense Net
Fees Fees(2) Expenses Expenses Reimbursement Expenses
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Money Market Fund(1) % 0.00% % % --% --%
-----------------------------------------------------------------------------------------------------------
Tax-Exempt Money Market Fund(1) 0.00
-----------------------------------------------------------------------------------------------------------
California Money Fund(1) 0.00
-----------------------------------------------------------------------------------------------------------
Short Term High Quality Bond
Fund(1) 0.25
-----------------------------------------------------------------------------------------------------------
Target Maturity 2002 Fund(1) 0.25
-----------------------------------------------------------------------------------------------------------
U.S. Government Securities Fund(1) 0.25
-----------------------------------------------------------------------------------------------------------
Income Fund(1) 0.25
-----------------------------------------------------------------------------------------------------------
High Yield Fund(1,2) 0.25
-----------------------------------------------------------------------------------------------------------
Tax-Exempt Bond Fund 0.25
-----------------------------------------------------------------------------------------------------------
California Municipal Fund(1) 0.25
-----------------------------------------------------------------------------------------------------------
California Insured Intermediate(1)
Municipal Fund 0.25
-----------------------------------------------------------------------------------------------------------
Florida Insured Municipal Fund(1) 0.25
-----------------------------------------------------------------------------------------------------------
Bond & Stock Fund 0.25
-----------------------------------------------------------------------------------------------------------
Growth & Income Fund(1) 0.25
-----------------------------------------------------------------------------------------------------------
Northwest Fund 0.25
-----------------------------------------------------------------------------------------------------------
Growth Fund(1) 0.25
-----------------------------------------------------------------------------------------------------------
Emerging Growth Fund(1) 0.25
-----------------------------------------------------------------------------------------------------------
International Growth Fund 0.25
-----------------------------------------------------------------------------------------------------------
Strategic Growth Portfolio 0.25
-----------------------------------------------------------------------------------------------------------
Conservative Growth Portfolio 0.25
-----------------------------------------------------------------------------------------------------------
Balanced Portfolio 0.25
-----------------------------------------------------------------------------------------------------------
Flexible Income Portfolio 0.25
-----------------------------------------------------------------------------------------------------------
Income Portfolio 0.25
-----------------------------------------------------------------------------------------------------------

<CAPTION>
- --- ---------------------------------------------
EXAMPLES: You would pay the
following expenses on a $10,000
investment assuming a 5% annual
return and redemption at the end of
each period:
---------------------------------------------

One Three Five Ten
Year Years Years Years
---------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ $ $ $
---------------------------------------------
---------------------------------------------
---------------------------------------------
---------------------------------------------
---------------------------------------------
---------------------------------------------
---------------------------------------------
N/A N/A
---------------------------------------------
---------------------------------------------
---------------------------------------------
---------------------------------------------
---------------------------------------------
---------------------------------------------
---------------------------------------------
---------------------------------------------
---------------------------------------------
---------------------------------------------
---------------------------------------------
---------------------------------------------
---------------------------------------------
---------------------------------------------
---------------------------------------------
---------------------------------------------
</TABLE>

(1) Reflects the Advisors designation to limit Total Award Fund Operating
Expenses as described on page .

(2) Because the High Yield Fund has not completed its first full fiscal
year, the expenses for the 5-year and 10-year periods are not
applicable.

- --------------------------------------------------------------------------------

34
<PAGE> 37

<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------

ANNUAL FUND
OPERATING EXPENSES
(expenses that are deducted
CLASS B SHARES from Fund assets)
----------------------------------------------------------------------------------------------------------
Distribution Total
and Annual
Service Fund
Management (12b-1) Other Operating Expense Net
Fees Fees Expenses Expenses Reimbursement Expenses
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Money Market Fund 1.00% % %
----------------------------------------------------------------------------------------------------------
Tax-Exempt Money Market Fund 1.00
----------------------------------------------------------------------------------------------------------
California Money Fund 1.00
----------------------------------------------------------------------------------------------------------
Short Term High Quality Bond
Fund 1.00
----------------------------------------------------------------------------------------------------------
U.S. Government Securities
Fund 1.00
----------------------------------------------------------------------------------------------------------
Income Fund 1.00
----------------------------------------------------------------------------------------------------------
High Yield Fund(1,4) 1.00
----------------------------------------------------------------------------------------------------------
Tax-Exempt Bond Fund 1.00
----------------------------------------------------------------------------------------------------------
California Municipal Fund 1.00
----------------------------------------------------------------------------------------------------------
California Insured
Intermediate Municipal Fund 1.00
----------------------------------------------------------------------------------------------------------
Florida Insured Municipal
Fund 1.00
----------------------------------------------------------------------------------------------------------
Bond & Stock Fund 1.00
----------------------------------------------------------------------------------------------------------
Growth & Income Fund 1.00
----------------------------------------------------------------------------------------------------------
Northwest Fund 1.00
----------------------------------------------------------------------------------------------------------
Growth Fund 1.00
----------------------------------------------------------------------------------------------------------
Emerging Growth Fund 1.00
----------------------------------------------------------------------------------------------------------
International Growth Fund 1.00
----------------------------------------------------------------------------------------------------------
Strategic Growth Portfolio 1.00
----------------------------------------------------------------------------------------------------------
Conservative Growth
Portfolio 1.00
----------------------------------------------------------------------------------------------------------
Balanced Portfolio 1.00
----------------------------------------------------------------------------------------------------------
Flexible Income Portfolio 1.00
----------------------------------------------------------------------------------------------------------
Income Portfolio 1.00
----------------------------------------------------------------------------------------------------------

<CAPTION>
- --------------------------------------------- ---------------------------------------------------------------------------
EXAMPLES: You would pay the following
expenses on a $10,000 investment assuming a
5% annual return and either
1) redemption at the end of each period or
CLASS B SHARES 2) no redemption:
---------------------------------------- -----------------------------------------------------------------------

(1) (2)
Management One Three Five Ten One Three Five Ten
Fees Year Years Years Years(3) Year Years Years Years(3)
---------------------------------------- -----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Money Market Fund
----------------------------------------------------------------------------------------------------------
Tax-Exempt Money Market Fund
----------------------------------------------------------------------------------------------------------
California Money Fund
----------------------------------------------------------------------------------------------------------
Short Term High Quality Bond
Fund
----------------------------------------------------------------------------------------------------------
U.S. Government Securities
Fund
----------------------------------------------------------------------------------------------------------
Income Fund
----------------------------------------------------------------------------------------------------------
High Yield Fund(1,4) N/A N/A N/A N/A
----------------------------------------------------------------------------------------------------------
Tax-Exempt Bond Fund
----------------------------------------------------------------------------------------------------------
California Municipal Fund
----------------------------------------------------------------------------------------------------------
California Insured
Intermediate Municipal Fund
----------------------------------------------------------------------------------------------------------
Florida Insured Municipal
Fund
----------------------------------------------------------------------------------------------------------
Bond & Stock Fund
----------------------------------------------------------------------------------------------------------
Growth & Income Fund
----------------------------------------------------------------------------------------------------------
Northwest Fund
----------------------------------------------------------------------------------------------------------
Growth Fund
----------------------------------------------------------------------------------------------------------
Emerging Growth Fund
----------------------------------------------------------------------------------------------------------
International Growth Fund
----------------------------------------------------------------------------------------------------------
Strategic Growth Portfolio
----------------------------------------------------------------------------------------------------------
Conservative Growth
Portfolio
----------------------------------------------------------------------------------------------------------
Balanced Portfolio
----------------------------------------------------------------------------------------------------------
Flexible Income Portfolio
----------------------------------------------------------------------------------------------------------
Income Portfolio
----------------------------------------------------------------------------------------------------------
</TABLE>

(1) Reflects the Advisor's obligation to limit Total Annual Fund Operating
Expenses as described on page .

(2) 0.25% of the 12b-1 fees shown represent servicing fees which are paid to
the Distributor. Long-term Class B shareholders may pay more than the
sales charge paid by long-term Class A shareholders.

(3) Class B shares convert to Class A shares after eight years; accordingly,
the expense amounts for years nine and ten are based on Class A shares.

(4) Because the High Yield Fund has not completed its first full fiscal year,
the expenses for the 5-year and 10-year periods are not applicable.

- --------------------------------------------------------------------------------

35
<PAGE> 38

DESCRIPTION OF THE FUNDS

This section provides a more complete description of the principal investment
strategies and risks of each Fund and Portfolio. The "Common Investment
Practices" section that follows provides additional information about the
principal investment strategies of the Funds and identifies the Funds and
Portfolios that may engage in such practices to a significant extent. You can
find additional descriptions of the Funds' strategies and risks in the Statement
of Additional Information ("SAI"). Except for policies explicitly identified as
"fundamental" in this Prospectus or the SAI, the investment objectives and
investment policies set forth in this Prospectus and the SAI are not fundamental
and may be changed at any time without shareholder consent. Except as otherwise
indicated, all policies and limitations are considered at the time of purchase;
the sale of securities is not required in the event of a subsequent change in
valuation or other circumstances.

MONEY FUNDS

The Money Funds invest only in U.S. dollar-denominated short-term, money market
securities. They will only purchase obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities or comparable securities that are,
or have issuers that are,

- - rated by at least two nationally recognized statistical rating organizations
("NRSROs"), such as Standard & Poor's ("S&P") or Moody's Investors Service,
Inc. ("Moody's"), in one of the two highest rating categories for short-term
debt securities,

- - rated in one of the two highest categories for short-term debt by the only
NRSRO that has issued a rating, or

- - if not so rated, are determined to be of comparable quality.

A description of the rating systems of S&P and Moody's is contained in Appendix
A to this Prospectus and in the SAI. At the time of investment, no security
purchased by a Money Fund (except U.S. Government Securities subject to
repurchase agreements and variable rate demand notes) will have a maturity
exceeding 397 days, and each Money Fund's average portfolio maturity will not
exceed 90 days. The Money Funds will attempt to maintain a stable net asset
value ("NAV") of $1.00, but there can be no assurance that any Money Fund will
be able to do so.

MONEY MARKET FUND. To accomplish its objective, the Money Market Fund invests
solely in money market instruments that are selected from the following six
general categories:

- - U.S. Government Securities;

- - short-term commercial notes (including asset-backed securities) issued
directly by U.S. and foreign businesses, banking institutions, financial
institutions (including brokerage, finance and insurance companies) and state
and local governments and municipalities to finance short-term cash needs;

- - obligations of U.S. and foreign banks with assets of more than $500 million;

- - securities issued by foreign governments, their agencies or instrumentalities
or by supranational entities;

- - short-term corporate obligations rated in one of the two highest rating
categories by Moody's or S&P; and

- - repurchase agreements.

TAX-EXEMPT MONEY MARKET FUND. The Tax-Exempt Money Market Fund invests
primarily in a diversified selection of Municipal Obligations, the income from
which is exempt from federal income tax. These obligations include fixed income
obligations issued by states, counties, cities or other governmental bodies that
generate income exempt from federal income tax. Short-term Municipal Obligations
may include, but are not limited to, tax anticipation notes, bond anticipation
notes, revenue anticipation notes and project notes, or other forms of
short-term municipal loans and obligations. Under normal market conditions, the
Fund will not invest more than 20% of its assets in obligations that pay
interest subject to alternative minimum tax ("AMT-Subject Bonds").

For temporary defensive purposes, the Fund may invest more than 20% of its
assets in instruments eligible for purchase by the Money Market Fund, which may
produce income that is not exempt from federal income taxes.

The Fund may also invest in variable rate demand obligations, stand-by
commitments, when-issued securities and forward commitments.

36
<PAGE> 39

CALIFORNIA MONEY FUND. To accomplish its objective, the California Money Fund
invests in a portfolio of Municipal Obligations. It is a fundamental policy of
the Fund to invest, under normal market conditions, at least 80% of its total
assets in Municipal Obligations. The Fund normally invests at least 80% of its
total assets in Municipal Obligations issued by the State of California and its
political subdivisions and certain other governmental issuers (such as the
Commonwealth of Puerto Rico), which produce income that is exempt from
California state personal income tax. The Fund may also invest in AMT-Subject
Bonds.

The Fund may also invest in variable rate demand obligations, stand-by
commitments, when-issued securities and forward commitments.

FIXED-INCOME FUNDS

SHORT TERM HIGH QUALITY BOND FUND. Although the Short Term High Quality Bond
Fund maintains a dollar-weighted average portfolio maturity of three years or
less, it may hold individual securities with remaining maturities of more than
three years. [For purposes of the weighted average maturity calculation, a
mortgage instrument's average life will be considered to be its maturity, and
the date on which the interest rate of a floating rate security can next change
will be used in place of its maturity date.]

[The Fund will invest substantially all of its assets in debt securities that,
at the time of purchase, are rated in one of the top four rating categories by
one or more NRSROs or, if unrated, are judged to be of comparable quality by the
Advisor ("investment grade" securities).] All debt securities purchased by the
Fund will be investment grade at the time of purchase. Under normal market
conditions, the Fund will invest at least 65% of its total assets in U.S.
Government securities, corporate debt obligations or mortgage-related securities
rated in one of the two highest categories by an NRSRO or determined by the
Advisor to be of comparable quality.

The Fund may invest in obligations issued or guaranteed by domestic and foreign
governments and government agencies and instrumentalities and in high-grade
corporate debt obligations, such as bonds, debentures, notes, equipment lease
and trust certificates, mortgage-backed securities, collateralized mortgage
obligations and asset-backed securities.

The Fund may invest up to 10% of its assets in foreign fixed-income securities,
primarily bonds of foreign governments or their political subdivisions, foreign
companies and supranational organizations, including non-U.S. dollar-denominated
securities and U.S. dollar-denominated debt securities issued by foreign issuers
and foreign branches of U.S. banks. Investment in foreign securities is subject
to special risks. [The Fund may invest up to 5% of its assets in preferred
stock.] The Fund may engage in certain options transactions, enter into
financial futures contracts and related options for the purpose of portfolio
hedging and enter into currency forwards or futures contracts and related
options for the purpose of currency hedging. The Fund may invest in certain
illiquid investments, such as privately placed obligations, including restricted
securities. The Fund may invest up to 10% of its assets in securities of
unaffiliated mutual funds. The Fund may borrow money or enter into reverse
repurchase agreements or dollar roll transactions in the aggregate up to 33 1/3%
of its total assets. The Fund may invest up to 25% of its total assets in
asset-backed securities, which represent a participation in, or are secured by
and payable from, a stream of payments generated by particular assets, most
often a pool of similar assets.

TARGET MATURITY 2002 FUND. The Target Maturity 2002 Fund will invest at least
90% of its net assets in zero-coupon U.S. Treasury securities maturing during
2002. Generally, the Fund will endeavor to purchase those zero-coupon securities
that mature toward the end of 2002. Until the Fund's target maturity date,
December 31, 2002, the Fund may also invest up to 10% of its net assets in
coupon-bearing (income-producing) U.S. Treasury securities maturing on or before
that date and money market instruments. If the Advisor determines that the
desired zero-coupon securities are not otherwise readily available for purchase,
the Fund may invest in zero-coupon and income-producing U.S. Government
Securities maturing on or before December 31, 2002. The Fund may also invest in
cash and cash equivalents for temporary defensive purposes.

37
<PAGE> 40

The market value of fixed-income securities held by the Fund and, consequently,
the Fund's NAV, can be expected to vary inversely to changes in prevailing
interest rates. Consequently, redemptions made prior to December 31, 2002 may
result in substantial capital gains or losses.

To the extent that the Fund holds zero-coupon securities that mature prior to
December 31, 2002, the proceeds of these securities at their maturity will be
reinvested in short-term coupon-bearing U.S. Treasury securities or money market
instruments until that date. Therefore, towards the end of the target maturity
year, 2002, the percentage of the Fund's assets invested in coupon-bearing U.S.
Treasury securities and money market instruments may increase up to 100%. After
December 31, 2002, the Fund intends to remain open, with all its assets invested
in money market instruments and U.S. Treasury securities with maturities of up
to three years. The Fund will then be managed as a relatively short-term bond
fund and the normal risks of a bond fund will apply.

To approximate the return you would receive if you purchased zero-coupon
securities directly, the Advisor manages the Fund to track as closely as
possible the price behavior of zero-coupon securities maturing towards the end
of 2002. To correct for factors such as shareholder purchase and redemption
activity (and related transaction costs) that differentiate investing in a
portfolio of zero-coupon securities from investing directly in a zero-coupon
security, the Advisor executes portfolio transactions necessary to accommodate
net shareholder activity each business day.

By adhering to these investment parameters, the Advisor expects that if you hold
your shares and do not make any redemptions until December 31, 2002, and you
reinvest all dividends and capital gain distributions, you will realize a
maturity value that does not differ substantially from the anticipated value at
maturity, as calculated on the purchase date. There can be no assurance,
however, that these objectives will be achieved. Furthermore, if you do not
reinvest all dividends and capital gain distributions, then the AVM cannot be
estimated accurately.

The Fund's AVM is calculated by the Advisor each day the Fund is open for
business. It may vary from day-to-day due to redemptions and distributions, as
well as transaction costs, interest rate changes, and the Advisor's efforts to
improve total return by taking advantage of market opportunities.

Relatively few mutual funds with investment objectives and policies similar to
those of the Fund have reached their target maturity date. As a result, there is
relatively little experience regarding the types of risk involved in investing
in the Fund.

U.S. GOVERNMENT SECURITIES FUND. The U.S. Government Securities Fund invests
primarily in a selection of obligations of the U.S. Government and its agencies.
The Fund may also invest in collateralized mortgage obligations or repurchase
agreements which are secured by those types of obligations. It is a fundamental
policy of the Fund to invest only in the following types of securities: (1) U.S.
Government securities, including mortgage-backed securities; (2) obligations
secured by the full faith and credit of the U.S. Government or its
instrumentalities; and (3) collateralized mortgage obligations and repurchase
agreements which are secured by obligations identified in (1) and (2) above. The
Fund [may borrow up to 5% of its total net assets for emergency, non-investment
purposes] and may enter into dollar roll transactions.

INCOME FUND. The Income Fund invests most of its assets in

- - debt and convertible debt securities;

- - U.S. Government Securities, including mortgage-backed securities issued by the
Government National Mortgage Association ("GNMA"), Federal National Mortgage
Association ("FNMA"), and Federal Home Loan Mortgage Corporation ("FHLMC") or
similar government agencies;

- - obligations of U.S. banks that belong to the Federal Reserve System;

- - preferred stocks and convertible preferred stocks;

- - the highest grade commercial paper as rated by S&P or Moody's; and

- - deposits in U.S. banks.

The Fund may also invest in securities denominated in foreign currencies and
receive interest, dividends and sale proceeds in foreign currencies. The Fund
may engage in foreign currency exchange transactions for hedging purposes in
connection with the purchase and sale of foreign securities or to protect
against changes in the value of specific securities held by the Fund. It may
also purchase and sell currencies on a spot (cash) basis, enter into forward
contracts to purchase or sell

38
<PAGE> 41

foreign currencies at a future date, and buy and sell foreign currency futures
contracts. The Fund [may borrow up to 5% of its total net assets for emergency,
non-investment purposes, and] may enter into dollar roll transactions. The Fund
may purchase securities of issuers which deal in real estate or securities which
are secured by interests in real estate, and it may acquire and dispose of real
estate or interests in real estate acquired through the exercise of its rights
as a holder of debt obligations secured by real estate or interests therein. The
Fund may also purchase and sell interest rate futures and options. The Fund may
invest up to 35% of its assets in lower-rated fixed-income securities (sometimes
called "junk bonds").

HIGH YIELD FUND. The High Yield Fund invests, under normal market conditions,
at least 65% of its assets in a diversified portfolio of fixed income securities
(including debt securities, convertible securities and preferred stocks) rated
lower than BBB by S&P or Baa by Moody's or of equivalent quality as determined
by the Advisor. The remainder of the Fund's assets may be invested in any other
securities the Advisor believes are consistent with the Fund's objective. These
may include higher rated fixed-income securities, common stocks and other equity
securities. The Fund may also invest in securities of foreign issuers and engage
in hedging strategies involving options.

MUNICIPAL FUNDS

Each of the Municipal Funds and the California Money Fund, invests most of its
assets in Municipal Obligations. Current federal income tax laws limit the types
and volume of bonds qualifying for the federal income tax exemption of interest
which may affect the ability of a Fund to purchase sufficient amounts of
tax-exempt securities.

TAX-EXEMPT BOND FUND. The Tax-Exempt Bond Fund will invest at least 80% of its
assets in Municipal Obligations, including inverse floating rate obligations,
under normal market conditions.

The Fund specifically limits these investments to: municipal bonds, municipal
notes and securities of unaffiliated tax-exempt mutual funds. The Fund also may
invest up to 35% of its assets in lower-rated securities.

In adverse markets, the Fund may seek to protect its investment position by
investing up to 50% of its portfolio in taxable short-term investments such as:

- - U.S. Government securities;

- - commercial paper rated in the highest grade by either S&P or Moody's;

- - obligations of U.S. banks;

- - time or demand deposits in U.S. banks; and

- - repurchase agreements relating to municipal securities or any of the foregoing
taxable instruments.

Interest income from these investments that is distributed to you by the Fund
may be taxable.

The Fund may also purchase and sell interest rate futures and options. The Fund
may also invest in AMT-Subject Bonds, although, so long as its name includes the
words "tax-exempt" and the SEC so requires, those investments will be limited to
20% of the Fund's total assets.

CALIFORNIA MUNICIPAL FUND. The California Municipal Fund invests primarily in
intermediate- and long-term California municipal obligations which are Municipal
Obligations that generate interest which is exempt from California state
personal income tax. It is a fundamental policy of the Fund that, under normal
market conditions, at least 80% of its total assets will be invested in these
obligations. The Fund may also invest in AMT-Subject Bonds.

The Fund will invest primarily in investment grade Municipal Obligations. The
Fund may also invest in inverse floating rate obligations, which are generally
more volatile than other types of Municipal Obligations.

The Fund may, under normal circumstances, invest up to 20% of its assets in

- - Municipal Obligations that are not exempt from California personal income tax;

- - short-term Municipal Obligations;

- - taxable cash equivalents, including short-term U.S. Government securities,
certificates of deposit and bankers' acceptances, commercial paper rated
Prime-1 by Moody's or A-1+ or A-1 by S&P, repurchase agreements (collectively
"Short-Term Instruments"); and

39
<PAGE> 42

- - securities of money market mutual funds (subject to the limitations set forth
under "Common Investment Practices").

The Fund may, for temporary defensive purposes, invest in these securities
without limitation. Also, as a non-diversified investment company under the 1940
Act, the Fund may invest a larger portion of its assets in the securities of a
small number of issuers.

CALIFORNIA INSURED INTERMEDIATE MUNICIPAL FUND. The California Insured
Intermediate Municipal Fund will invest primarily in insured intermediate-term
California Municipal Obligations. It is a fundamental policy of the Fund that it
will invest at least 80% of the value of its total assets in Insured California
Municipal Obligations (except when maintaining a temporary defensive position).
The weighted average effective maturity of the securities in which the Fund
invests will be ten years or less. The maximum effective maturity (the maturity
date without regard to call provisions, except that for pooled single family
mortgage securities effective maturity is the average life of the underlying
mortgage obligations) of any Municipal Obligation in which the Fund invests will
be fifteen years.

All of the Municipal Obligations in which the Fund invests, taking into account
any insurance, are investment grade securities. For more information, see "About
Bond Insurance" below.

The Fund may invest without limitation in AMT-Subject Bonds.

Under normal market conditions, the Fund may invest up to 20% of its assets in

- - uninsured Municipal Obligations;

- - Municipal Obligations that are not exempt from California personal income tax;
and

- - short-term Municipal Obligations and taxable cash equivalents, including
Short-Term Instruments and securities of unaffiliated money market mutual
funds (subject to the limitations set forth under "Common Investment
Practices") and may, for temporary defensive purposes, invest in these
securities without limitation.

In addition, the Fund may invest in inverse floating rate obligations. The Fund
may engage in hedging transactions through the use of financial futures and
options thereon. It may also purchase and sell securities on a when-issued or
forward commitment basis, invest in mortgage-backed securities, enter into
repurchase agreements, invest in stand-by commitments and lend portfolio
securities. The Fund may invest in floating rate and variable rate obligations,
including participation interests therein [(referred to collectively as "Hedging
Transactions").]

FLORIDA INSURED MUNICIPAL FUND. The Florida Insured Municipal Fund will invest
primarily in insured, intermediate- and long-term Municipal Obligations issued
by the State of Florida and its political subdivisions. The Fund will invest
primarily in investment-grade Municipal Obligations. It is a fundamental policy
of the Fund that it will invest at least 80% of the value of its total assets
(except when maintaining a temporary defensive position) in insured Florida
Municipal Obligations. See "About Bond Insurance" below. The Fund may invest
without limitation in AMT-Subject Bonds. The Fund may also invest in inverse
floating rate obligations.

The Fund may invest up to 20% of its total assets in:

- - uninsured Municipal Obligations;

- - Municipal Obligations that are not exempt from Florida intangible personal
property tax; and

- - Short-Term Instruments and securities of unaffiliated money market mutual
funds and, for temporary defensive purposes, invest in these securities
without limitation.

Florida does not impose an income tax on individuals. Distributions of
investment income and capital gains by the Fund will be subject to Florida
corporate income taxes. Florida imposes a tax on intangible personal property
owned by Florida residents. Based on a ruling the Fund has received from the
Florida Department of Revenue, if the Fund's assets consist, on the last
business day of the calendar year, solely of assets exempt from Florida
intangible personal property tax, shares of the Fund owned by Florida residents
will be exempt from Florida intangible personal property tax. Assets exempt from
Florida intangible personal property tax include Florida Municipal Obligations;
obligations of the U. S. Government or its agencies; and cash.

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insured under insurance policies that relate to the specific Municipal
Obligation in question and that are issued by an insurer having a claims-paying
ability rated AAA by S&P or Aaa by Moody's. This insurance is generally
non-cancelable and will continue in force so long as the Municipal Obligations
are outstanding and the insurer remains in business.

The insured Municipal Obligations are insured as to the scheduled payment of all
installments of principal and interest as they fall due. The insurance covers
only credit risk and therefore does not guarantee the market value of the
obligations in a Fund's investment portfolio or a Fund's NAV. The Fund's NAV
will continue to fluctuate in response to fluctuations in interest rates. A
Fund's investment policy requiring investment in insured Municipal Obligations
will not affect the Fund's ability to hold its assets in cash or to invest in
escrow-secured and defeased bonds or in certain short-term tax-exempt
obligations, or affect its ability to invest in uninsured taxable obligations
for temporary or liquidity purposes or on a defensive basis.

EQUITY FUNDS

BOND & STOCK FUND. Under normal market conditions, at least 25% of the Bond &
Stock Fund's assets will be invested in fixed-income securities, including
preferred stocks and that portion of the value of convertible securities which
is not attributable to a conversion feature. The Fund may invest in money market
instruments for temporary or defensive purposes. The Fund may invest in
fixed-income securities of any maturity, including mortgage-backed securities,
U.S. Government securities and asset-backed securities, and may also invest up
to 35% of its assets, in below investment grade bonds (sometimes called junk
bonds). The Fund may purchase or sell U.S. Government securities or
collateralized mortgage obligations on "when-issued" or "delayed-delivery" basis
in an aggregate of up to 20% of the market value of its total net assets. The
Fund may invest up to 25% of its assets in real estate investment trusts, known
as "REITs." The Fund may write (sell) covered call options. The Fund may invest
up to 25% of its assets in U.S. dollar-denominated securities of foreign
issuers.

GROWTH & INCOME FUND. The Growth & Income Fund invests primarily in common
stocks. The Fund may also invest in money market instruments for temporary or
defensive purposes. To limit risk, repurchase agreements maturing in more than
seven days will not exceed 10% of the Fund's total assets. The Fund may invest
up to 25% of its assets in REITs. The Fund may invest in fixed-income securities
of any maturity, including mortgage-backed securities, and may invest up to 35%
of its assets in below investment grade fixed-income securities.

The Fund may purchase or sell U.S. Government securities or collateralized
mortgage obligations on a "when-issued" or "delayed-delivery" basis in an
aggregate up to 20% of the market value of its total assets minus total
liabilities (except for the obligations created by these commitments). The Fund
may write (sell) covered call options. The Fund may invest up to 25% of its
assets in U.S. dollar-denominated securities of foreign issuers.

NORTHWEST FUND. The Northwest Fund invests in common stocks of companies
located or doing business in the Northwest states of Alaska, Idaho, Montana,
Oregon and Washington. Under normal circumstances, at least 65% of the Fund's
total assets will be invested in companies whose principal executive offices are
located in one of those states.

The Fund is permitted to invest in money market instruments for temporary or
defensive purposes. The Fund may invest up to 25% of its assets in REITs, and
may write (sell) covered call options.

Because the Fund concentrates its investments in companies located or doing
business in the Northwest, the Fund is not intended as a complete investment
program, and could be adversely impacted by economic trends within the
five-state area.

GROWTH FUND. The Growth Fund invests primarily in common stocks believed to
have significant appreciation potential. The Fund also may invest in debt
securities, bonds, convertible bonds, preferred stock and convertible preferred
stock, including up to 35% of its assets in non-investment-grade debt
securities.

The Fund may invest up to 25% of its assets in foreign securities, usually
foreign common stocks[, and up to 5% of its assets in securities of companies in
(or governments of) developing or emerging countries (sometimes referred to as
"emerging markets").] The Fund may also engage in certain options transactions,
enter into financial futures contracts and related options for the purpose of
portfolio hedging and enter into currency forwards or futures

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<PAGE> 44

contracts and related options for the purpose of currency hedging.

EMERGING GROWTH FUND. The Emerging Growth Fund invests primarily in equity
securities of companies with market capitalization of less than $1.4 billion at
the time of purchase. In addition to common stock, the Fund's equity securities
may include convertible bonds, convertible preferred stock and warrants to
purchase common stock, as well as cash and cash equivalents. The Fund may invest
up to 25% of its assets in securities of foreign issuers and up to 5% of its
assets in securities in developing or emerging countries. The Fund may invest up
to 35% of its assets in non-investment-grade debt securities if the Advisor
believes that doing so will be consistent with the goal of capital appreciation.

INTERNATIONAL GROWTH FUND. The International Growth Fund invests primarily in
equity securities of issuers located in foreign countries that the Fund's
sub-advisor believes present attractive investment opportunities. Criteria for
determining the appropriate distribution of investments among various countries
and regions include prospects for relative economic growth, expected levels of
inflation, government policies influencing business conditions, the outlook for
currency relationships and the range of investment opportunities available to
international investors. The relative strength or weakness of a particular
country's currency or economy may dictate whether securities of issuers located
in such country will be purchased or sold. The Fund may invest without limit in
the securities of issuers located in any one country (except as provided below
with respect to emerging markets countries). The Fund will emphasize established
companies, although it may invest in companies of varying sizes as measured by
assets, sales and capitalization.

The Fund invests in common stock and may invest in other securities with equity
characteristics, such as trust or limited partnership interests, preferred
stock, rights and warrants. The Fund may also invest in convertible securities.
The Fund invests in securities listed on foreign or domestic securities
exchanges and securities traded in foreign or domestic over-the-counter markets,
and may invest in restricted or unlisted securities.

The Fund intends to stay fully invested in the securities described above to the
extent practical. Fund assets may be invested in short-term debt instruments to
meet anticipated day-to-day operating expenses, and for temporary defensive
purposes. In addition, when the Fund experiences large cash inflows, it may hold
short-term investments until desirable equity securities become available. These
short-term instruments are generally rated A or higher by Moody's or S&P, or, if
unrated, of comparable quality in the opinion of the Fund's sub-advisor.

The Fund may invest up to 30% of its assets in the securities of companies in or
governments of developing or emerging markets, provided that no more than 5% of
the Fund's total assets are invested in any one emerging markets country. For
temporary defensive purposes, the Fund may invest a major portion of its assets
in securities of U.S. issuers. [Furthermore, the Fund may invest up to 5% of its
total assets in investment grade corporate debt securities having maturities
longer than one year, including Euro-currency instruments and securities.]

STRATEGIC ASSET MANAGEMENT PORTFOLIOS

The Portfolios offer you the opportunity to pursue a variety of specially
constructed asset allocation strategies. The Portfolios are designed for
long-term investors seeking total return for tax-advantaged retirement and other
long-term investment or savings accounts.

In order to achieve its investment objective, each Portfolio typically allocates
its assets, within predetermined percentage ranges, among certain of the Funds.
Even so, the Portfolios may temporarily exceed one or more of the applicable
percentage limits for short periods. The percentages reflect the extent to which
each Portfolio will normally invest in the particular market segment represented
by each underlying Fund, and the varying degrees of potential investment risk
and reward represented by each Portfolio's investments in those market segments
and their corresponding Funds. The Advisor may alter these percentage ranges
when it deems appropriate. The assets of each Portfolio will be allocated among
the Funds in accordance with its investment objective, the Advisor's outlook for
the economy and the financial markets, and the relative market valuations of the
Funds.

In addition, in order to meet liquidity needs or for temporary defensive
purposes, each Portfolio may invest, without limit, directly in cash stock or
bond

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<PAGE> 45

index futures and options thereon and the following short-term instruments:

- - short-term obligations of the U.S. Government, its agencies,
instrumentalities, authorities or political subdivisions;

- - other short-term debt securities rated A or higher by Moody's or S&P, or if
unrated, of comparable quality in the opinion of the Advisor;

- - commercial paper, including master notes;

- - bank obligations, including negotiable certificates of deposit, time deposits
and bankers' acceptances; and

- - repurchase agreements.

At the time a Portfolio invests in any commercial paper, bank obligations or
repurchase agreements, the issuer must have outstanding debt rated A or higher
by Moody's or S&P; the issuer's parent corporation, if any, must have
outstanding commercial paper rated Prime-1 by Moody's or A-1 by S&P; or, if no
such ratings are available, the investment must be of comparable quality in the
opinion of the Advisor. In addition to purchasing shares of the Funds, a
Portfolio may use futures contracts and options in order to remain effectively
fully invested in proportions consistent with the Advisor's current asset
allocation strategy for the Portfolio. Specifically, each Portfolio may enter
into futures contracts and options thereon, provided that the aggregate deposits
required on these contracts do not exceed 5% of the Portfolio's total assets. A
Portfolio may also use futures contracts and options for bona fide hedging
transactions. Futures contracts and options may also be used to reallocate the
Portfolio's assets among asset categories while minimizing transaction costs, to
maintain cash reserves while simulating full investment, to facilitate trading,
to seek higher investment returns, or to simulate full investment when a futures
contract is priced attractively or is otherwise considered more advantageous
than the underlying security or index. As a fundamental policy, which may not be
changed without shareholder vote, each Portfolio will concentrate its
investments in shares of the Funds.

COMMON INVESTMENT PRACTICES

The next several pages contain more detailed information about types of
securities in which the Funds may invest, and strategies which the Advisor or
the respective sub-advisor may employ in pursuit of that Fund's investment
objective and a summary of risks and restrictions associated with these
securities and investment practices. For more information, see the SAI.

BORROWING. The Funds may borrow money from banks solely for temporary or
emergency purposes, subject to various limitations. If a Fund borrows money, its
share price may be subject to greater fluctuation until the borrowing is paid
off. For the California Money, Short Term High Quality Bond, Target Maturity
2002, California Municipal, California Insured Intermediate Municipal, Florida
Insured Municipal, Growth, International Growth and Emerging Growth Funds, and
for the Portfolios, such borrowings may not exceed 30% of total assets. The
Money Market, Tax-Exempt Money Market, U.S. Government Securities, Income, High
Yield, Tax-Exempt Bond, Bond & Stock, Growth & Income and Northwest Funds may
borrow up to 5% of their total assets for emergency purposes. In addition, the
Money Market and Tax-Exempt Money Market Funds may borrow up to one-third of
their total assets to meet redemption requests. The Short Term High Quality Bond
Fund is prohibited from borrowing money or entering into reverse repurchase
agreements or dollar roll transactions (described below) in the aggregate in
excess of one-third of the Fund's total assets (after giving effect to such
borrowings and transactions). If a Fund makes additional leverage investments
while borrowings are outstanding, this will have the effect of leveraging the
Fund. The California Money, Short Term High Quality Bond, Target Maturity 2002,
California Municipal, California Insured Intermediate Municipal, Florida Insured
Municipal, Growth, International Growth and Emerging Growth Funds and the
Portfolios may not purchase additional securities when borrowings, including
reverse repurchase agreements, for each of these except the Short Term High
Quality Bond Fund, exceed 5% of total assets. Leveraging will magnify declines
as well as increases in the NAV of a Fund's or Portfolio's shares and in the
yield on a Fund's or Portfolio's investments. Each of the foregoing percentage
limitations on borrowings is a fundamental policy of the respective Funds and
Portfolios.

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<PAGE> 46

30 or 60 days, substantially similar (same type, coupon and maturity) securities
on a specified future date. Under the Investment Company Act of 1940, as amended
(the "1940 Act"), this may be considered borrowing from the counterparty and may
produce similar leveraging effects. The proceeds of the initial sale of
securities in the dollar roll transactions, for example, may be used to purchase
long-term securities which will be held during the roll period. To the extent
that the proceeds of the initial sale of securities are invested in bonds, the
Fund will be subject to market risk on those bonds as well as similar risk with
respect to the securities the Fund is required to repurchase.

Each of the Short Term High Quality Bond, California Municipal, California
Insured Intermediate Municipal, Florida Insured Municipal, Growth, International
Growth and Emerging Growth Funds may engage in REVERSE REPURCHASE AGREEMENTS.
Reverse repurchase agreements involve the risk that the market value of the
securities sold by a Fund 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 at the same time there is decline in the securities sold (and required
to be repurchased).

FIXED-INCOME OBLIGATIONS. The market value of fixed-income securities held by a
Fund and, consequently, the value of the Fund's shares can be expected to vary
inversely to changes in prevailing interest rates. You should recognize that, in
periods of declining interest rates, the Fund's yield will tend to be somewhat
higher than prevailing market rates and, in periods of rising interest rates,
the Fund's yield will tend to be somewhat lower. Also, when interest rates are
falling, any net inflow of money to the Fund will likely be invested in
instruments producing lower yields than the balance of its assets, thereby
reducing current yield. In periods of rising interest rates, the opposite can be
expected to occur. The prices of longer maturity securities are also subject to
greater market fluctuations as a result of changes in interest rates. In
addition, obligations purchased by a Fund may be subject to the risk of default.
Fixed-Income obligations, including Municipal Obligations, rated in the lower
end of the investment-grade category (Baa or BBB) may have speculative
characteristics and may be more sensitive to economic changes and changes in the
financial condition of their issuers.

The fixed-income securities in which the Funds may invest include zero-coupon
securities, which make no payments of interest or principal until maturity.
Because these securities avoid the need to make current interest payments, they
may involve greater credit risks than other fixed-income securities.

FLOATING RATE, INVERSE FLOATING RATE AND VARIABLE RATE OBLIGATIONS. The
Municipal Funds, the Fixed-Income Funds and the Growth & Income Fund may
purchase floating rate, inverse floating rate and variable rate obligations,
including participation interests therein.

The Money Funds may purchase floating rate and variable rate obligations,
including participation interests therein.

The Fixed-Income Funds may purchase mortgage-backed securities that are floating
rate, inverse floating rate and variable rate obligations. Municipal Obligations
purchased by the Municipal Funds may include floating rate, inverse floating
rate and variable rate obligations, including variable rate demand notes issued
by industrial development authorities and other governmental entities, as well
as participation interests therein. Although variable rate demand notes are
frequently not rated by credit rating agencies, a Fund may purchase unrated
notes that are determined by the Advisor or the Fund's sub-advisor to be of
comparable quality at the time of purchase to rated instruments that may be
purchased by the Fund. The absence of an active secondary market could make it
difficult for a Fund to dispose of these securities in the event the issuer of
the note were to default on its payment obligations, and the Fund could, for
this or other reasons, suffer a loss as a result of the default.

Each Fund may also invest in securities representing interests in tax-exempt
securities, known as inverse floating obligations or "residual interest bonds,"
which pay interest rates that vary inversely with changes in the interest rates
of specified short-term tax-exempt securities or an index of short-term
tax-exempt securities. The interest rates on inverse floating-rate obligations
or residual interest bonds will typically decline as short-term market interest
rates increase and increase as short-term market rates decline. These securities
have the effect of providing a degree of investment leverage. They will
generally respond to changes in market interest rates more rapidly than
fixed-rate long-term securities (typically twice as fast). As a result, the
market values of inverse floating-rate

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obligations and residual interest bonds will generally be more volatile than the
market values of fixed-rate tax-exempt securities.

FOREIGN CURRENCY EXCHANGE TRANSACTIONS AND CURRENCY MANAGEMENT. 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, subject to the investment limitations stated elsewhere in this Prospectus
and the SAI, engage in foreign currency exchange transactions. Funds that buy
and sell securities denominated in currencies other than the U.S. dollar, and
receive interest, dividends and sale proceeds in currencies other than the U.S.
dollar, may enter into foreign currency exchange transactions to convert to and
from different foreign currencies and to convert foreign currencies to and from
the U.S. dollar. These Funds either enter into these transactions on a spot
(i.e., cash) basis at the spot rate prevailing in the foreign currency exchange
market, or use forward contracts to purchase or sell foreign currencies.

These Funds also may enter into foreign currency hedging transactions in an
attempt to protect against changes in foreign currency exchange rates between
the trade and settlement dates of specific securities transactions or changes in
foreign currency exchange rates that would adversely affect a portfolio position
or an anticipated portfolio position. These transactions tend to limit any
potential gain that might be realized should the value of the hedged currency
increase. The precise matching of the forward contract amounts and the value of
the securities involved will not generally be possible because the future value
of these securities in foreign currencies will change as a consequence of market
movements in the value of those securities between the date the forward contract
is entered into and the date it matures. The projection of currency market
movements is extremely difficult, and the successful execution of a hedging
strategy is highly uncertain. In addition, when the Advisor or a Fund's
sub-advisor believes that the currency of a specific country may deteriorate
against another currency, it may enter into a forward contract to sell the less
attractive currency and buy the more attractive one. The amount in question
could be less than or equal to the value of the Fund's securities denominated in
the less attractive currency. The Fund may also enter into a forward contract to
sell a currency which is linked to a currency or currencies in which some or all
of the Fund's portfolio securities are or could be denominated, and to buy U.S.
dollars. These practices are referred to as "cross hedging" and "proxy hedging."

Forward currency exchange contracts are agreements to exchange one currency for
another - for example, to exchange a certain amount of U.S. dollars for a
certain amount of Japanese yen - at a future date and specified price. Because
there is a risk of loss to the Fund if the other party does not complete the
transaction, the Advisor or the Fund's sub-advisor will enter into forward
currency exchange contracts only with parties approved by the Trusts' Board of
Trustees or persons acting pursuant to their direction.

Each of the Funds other than the Money Funds (with the exception of the Target
Maturity 2002, U.S. Government Securities Bond & Stock, Growth & Income and
Northwest Funds) may invest in securities which are indexed to certain specific
foreign currency exchange rates. These securities expose you to the risk of
significant changes in rates of exchange between the U.S. dollar and any foreign
currency to which an exchange rate-related security is linked. In addition,
there is no assurance that sufficient trading interest to create a liquid
secondary market will exist for a particular exchange rate-related security due
to conditions in the debt and foreign currency markets. Illiquidity in the
forward foreign exchange market and the high volatility of the foreign exchange
market may from time to time combine to make it difficult to sell an exchange
rate-related security prior to maturity without incurring a significant loss.

While the foregoing actions are intended to protect the Fund from adverse
currency movements, there is a risk that currency movements involved will not be
properly anticipated, and there can be no assurance that such transactions will
be available or that the Funds will use such transactions even if they are
available. Use of currency hedging techniques may also be limited by the need to
protect the status of the Fund as a regulated investment company under the
Internal Revenue Code of 1986, as amended (the "Code").

FOREIGN INVESTMENTS. The Money Market, Bond & Stock, Growth & Income and
Northwest Funds may invest in securities of foreign issuers if such securities
are denominated in U.S. dollars. The High Yield, Income, Short Term High Quality
Bond, Emerging Growth, Growth and International Growth Funds may invest in both
U.S. dollar denominated and non-

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<PAGE> 48
U.S. dollar denominated foreign securities. There are certain risks involved in
investing in foreign securities, including those resulting from

- - fluctuations in currency exchange rates,

- - devaluation of currencies,

- - future political or economic developments and the possible imposition of
currency exchange blockages or other foreign governmental laws or
restrictions,

- - reduced availability of public information concerning issuers, and

- - the fact that foreign companies are not generally subject to uniform
accounting, auditing and financial reporting standards or to other regulatory
practices and requirements comparable to those applicable to domestic
companies.

Moreover, securities of many foreign companies may be less liquid and their
prices more volatile than those of securities of comparable domestic companies.
In addition, there is the possibility of expropriation, nationalization,
confiscatory taxation and limitations on the use or removal of funds or other
assets of the Funds, including the withholding of dividends. The risks
associated with foreign securities are generally greater for securities of
issuers in emerging markets.

In addition, while the volume of transactions effected on foreign stock
exchanges has increased in recent years, in most cases it remains well below
that of the New York Stock Exchange (the "NYSE"). Accordingly, the Funds'
foreign investments may be less liquid and their prices may be more volatile
than comparable investments in securities of U.S. companies. Moreover, the
settlement periods for foreign securities, which are often longer than those for
securities of U.S. issuers, may affect portfolio liquidity. In buying and
selling securities on foreign exchanges, the Funds normally pay fixed
commissions that are generally higher than the negotiated commissions charged in
the United States. In addition, there is generally less governmental supervision
and regulation of securities exchanges, brokers and issuers in foreign countries
than in the United States. Foreign securities generally are denominated and pay
dividends or interest in foreign currencies, and the value of the Funds' net
assets as measured in U.S. dollars will be affected favorably or unfavorably by
changes in exchange rates.

The Equity Funds, the Short Term High Quality Bond Fund, the Income Fund and the
High Yield Fund may invest in securities of foreign issuers directly or in the
form of American Depositary Receipts ("ADRs"), European Depositary Receipts
("EDRs"), Global Depositary Receipts ("GDRs") or other similar securities
representing securities of foreign issuers. These securities may not be
denominated in the same currency as the securities they represent. ADRs are
receipts typically issued by a United States bank or trust company evidencing
ownership of the underlying foreign securities. EDRs, which are sometimes
referred to as Continental Depositary Receipts ("CDRs"), are receipts issued by
a European financial institution evidencing a similar arrangement. Generally,
ADRs, in registered form, are designed for use in the United States securities
markets, and EDRs, in bearer form, are designed for use in European securities
markets.

GEOGRAPHIC CONCENTRATION. Potential investors in the Northwest Fund, the
Municipal Funds (other than the Tax-Exempt Bond Fund) and the California Money
Fund should consider the possibly greater risk arising from the geographic
concentration of their investments, as well as the current and past financial
condition of California and Florida municipal issuers in the case of the
Municipal Funds. In addition to factors affecting the state or regional economy,
certain California and Florida constitutional amendments, legislative measures,
executive orders, administrative regulations, court decisions and voter
initiatives could result in certain adverse consequences affecting California
and Florida municipal obligations, respectively. See the SAI for a more detailed
description of these risks.

GOVERNMENT STRIPPED MORTGAGE-BACKED SECURITIES. The Income, Short Term High
Quality Bond, Target Maturity 2002, U.S. Government Securities and High Yield
Funds may invest in government stripped mortgage-backed securities issued or
guaranteed by GNMA, FNMA or FHLMC. These securities represent beneficial
ownership interests in either periodic principal distributions (principal-only
or "PO strips") or interest distributions (interest-only or "IO strips") on
mortgage-backed certificates issued by GNMA, FNMA or FHLMC, as the case may be.
The mortgages backing GNMA certificates include conventional 30-year fixed-rate
mortgages, 15-year fixed-rate mortgages, graduated payment mortgages, and
adjustable-rate mortgages. The U.S. Government guarantees the timely payment of
interest and principal for these securities. However, the guarantees do not
extend to

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<PAGE> 49

the securities' yield or value, which are likely to vary inversely with
fluctuations in interest rates. Also the guarantees do not extend to the yield
or value of the Fund's shares. Investing in government stripped mortgage-backed
securities involves the risks normally associated with investing in
mortgage-backed securities issued by government or government-related entities.
See "Mortgage-Backed Securities" below. In addition, the yields on PO and IO
strips are extremely sensitive to prepayments on the underlying PO and IO
strips, mortgage loans. If a decline in the level of prevailing interest rates
results in a higher than anticipated rate of principal prepayment, distributions
of principal will be accelerated, thereby reducing the yield to maturity on IO
strips and increasing the yield to maturity on PO strips. Conversely, if an
increase in the level of prevailing interest rates results in a rate of
principal prepayments lower than anticipated, distributions of principal will be
deferred, thereby increasing the yield to maturity on IO strips and decreasing
the yield to maturity on PO strips. Sufficiently high prepayment rates could
result in the Fund losing some or all of its initial investment in an IO strip.
The Funds will acquire government stripped mortgage-backed securities only if a
liquid secondary market for the securities exists at the time of acquisition.
However, there can be no assurance that the Funds will be able to effect a trade
of a government stripped mortgage-backed security at a time when it wishes to do
so.

HOLDINGS IN OTHER INVESTMENT COMPANIES. When the Advisor or a Fund's
sub-advisor believes that it would be beneficial to the Fund, each of the Tax-
Exempt Money Market, California Money, California Insured Intermediate
Municipal, California Municipal, Florida Insured Municipal, Short Term High
Quality Bond, Tax-Exempt Bond, Emerging Growth, Growth and International Growth
Funds may invest up to 10% of its assets in securities of mutual funds that are
not affiliated with the Advisor or the Fund's sub-advisor. As a shareholder in
any such mutual fund, the Fund will bear its ratable share of the mutual fund's
expenses, including management fees, and will remain subject to the Fund's
advisory and administration fees with respect to the assets so invested. In
addition, the Growth Fund may invest Fund assets in money market funds affilia-
ted with Janus (its sub-advisor), provided that Janus remits to the Fund the
amount of any investment advisory and administrative services fees paid to Janus
as the investment manager of the money market fund.

ILLIQUID SECURITIES. Up to 10% of the net assets of each Money Fund and up to
15% of the net assets of every other Fund may be invested in securities that are
not readily marketable. Such illiquid securities may include:

- - repurchase agreements with maturities greater than seven calendar days;

- - time deposits maturing in more than seven calendar days;

- - to the extent a liquid secondary market does not exist for the instruments,
futures contracts and options thereon;

- - certain over-the-counter options, as described in the SAI;

- - certain variable rate demand notes having a demand period of more than seven
days; and

- - securities the disposition of which is restricted under federal securities
laws (excluding certain Rule 144A securities, as described below).

Securities which may be resold pursuant to Rule 144A under the Securities Act of
1933, as amended, will not be included for the purposes of these restrictions,
so long as such securities meet liquidity guidelines established by the Trusts'
Board of Trustees.

LENDING OF SECURITIES. The California Money, California Insured Intermediate
Municipal, Short Term High Quality Bond, Emerging Growth, Growth and
International Growth Funds each may lend portfolio securities up to 20% of total
assets to brokers and other financial organizations. The Bond & Stock, Growth &
Income and Northwest Funds may lend portfolio securities up to 33% of total
assets. These transactions involve a risk of loss to the Fund if the
counterparty should fail to return such securities to the Fund upon demand.

LOWER-RATED SECURITIES. The Income, Tax-Exempt Bond, Bond & Stock, Emerging
Growth, Growth & Income and Growth Funds may each invest up to 35% of their
total assets in non-investment grade debt securities, sometimes referred to as
"junk bonds." The High Yield Fund may invest all of its assets in these
securities, and will generally invest at least 65% of its assets in them.

47
<PAGE> 50

Non-investment-grade debt securities usually entail greater risk (including the
possibility of default or bankruptcy of the issuers), generally involve greater
price volatility and risk of principal and income, and may be less liquid than
higher-rated securities. Both price volatility and illiquidity may make it
difficult for a Fund to value or to sell certain of these securities under
certain market conditions. These securities are often considered to be
speculative and involve greater risk of default or price changes due to changes
in the issuer's creditworthiness. The market prices of these securities may
fluctuate more than higher-rated securities and may decline significantly in
periods of general economic difficulty, which may follow periods of rising
interest rates. For further information, see Appendix A to this Prospectus.

The following table shows, for each indicated Fund, the average percentage of
its total assets that was invested during the past fiscal year in securities
assigned to the various rating categories by S&P, or if unrated by S&P, assigned
to comparable rating categories by another NRSRO, and in unrated securities
determined by the Advisor to be of comparable quality:

<TABLE>
<CAPTION>
Income Tax-Exempt Bond & Stock
S&P RATING Fund Bond Fund Fund
- -------------------------------------------------------------------
<S> <C> <C> <C>
AAA (or US Treasury).........
AA...........................
A............................
BBB..........................
BB...........................
B............................
Not Rated....................
</TABLE>

MORTGAGE-BACKED AND ASSET-BACKED SECURITIES. The California Insured
Intermediate Municipal, California Municipal, Florida Insured Municipal, Short
Term High Quality Bond, U.S. Government Securities, Emerging Growth and
International Growth Funds may invest in mortgage-backed U.S. Government
securities, which represent interests in a pool of mortgage loans. See
"Government Stripped Mortgage-Backed Securities" above. In addition, the Income,
Bond & Stock and Growth & Income Funds may invest in commercial mortgage-backed
securities, which are similar to those securities, except that they are not
issued or guaranteed by governmental entities. Commercial mortgage-backed
securities include collateralized mortgage obligations and real estate mortgage
investment conduits ("REMICs"). While commercial mortgage-backed securities are
generally structured with one or more types of credit enhancement, they
typically lack a guarantee by an entity having the credit status of a
governmental agency or instrumentality.

To the extent that a Fund purchases mortgage-backed securities at a premium,
mortgage foreclosures and payments and prepayments of principal (which may be
made at any time without penalty) will tend to result in the loss of that
premium. The yield of a Fund may be affected by reinvestment of prepayments at
higher or lower rates than the original investment. In addition, like other debt
securities, the value of mortgage-related securities, including government and
government-related mortgage pools, will generally fluctuate in response to
market interest rates.

The Money Market, Tax-Exempt Money Market, Short Term High Quality Bond, Bond &
Stock, Emerging Growth and High Yield Funds may purchase asset-backed
securities. These Funds will not invest more than 10% of their total assets in
asset-backed securities, except that the Short Term High Quality Bond Fund may
invest up to 25% of its total assets in such securities. Asset-backed securities
are structured like mortgage-backed securities, but instead of mortgage loans or
interests in mortgage loans, the underlying assets may include such items as
motor vehicle installment sales or installment loan contracts, leases of various
types of real and personal property, including home equity loans, and
receivables from credit card agreements. The ability of an issuer of
asset-backed securities to enforce its security interest in the underlying
assets may be limited.

MUNICIPAL OBLIGATIONS, LEASES AND AMT-SUBJECT BONDS. The two principal
classifications of municipal bonds are "general obligation" and "revenue" bonds.
General obligation bonds are secured by the issuer's pledge of its full faith
and credit, with either limited or unlimited taxing power for the payment of
principal and interest. Revenue bonds are not supported by the issuer's full
taxing authority. Generally, they are payable only from the revenues of a
particular facility, a class of facilities, or the proceeds of another specific
revenue source.

48
<PAGE> 51

municipality for which the municipality's taxing power is pledged. Certain of
these lease obligations contain "non-appropriation" clauses, which provide that
the municipality has no obligation to make lease or installment purchase
payments in future years unless money is appropriated for such purpose on a
yearly basis. In addition to the "non-appropriation" risk, these securities
represent a relatively new type of financing that has not yet developed the
depth of marketability associated with more conventional bonds. In the case of a
"non-appropriation" lease, the Fund's ability to recover under the lease in the
event of non-appropriation or default will be limited solely to the repossession
of the leased property, and in any event, foreclosure of that property might
prove difficult.

"AMT-Subject Bonds" are Municipal Obligations issued to finance certain "private
activities," such as bonds used to finance airports, housing projects, student
loan programs and water and sewer projects. Interest on AMT-Subject Bonds is a
specific tax preference item for purposes of the federal individual and
corporate alternative minimum taxes. See "Dividends, Capital Gains and Taxes"
for a discussion of the tax consequences of investing in AMT-Subject Bonds.

Current federal income tax laws limit the types and volume of bonds qualifying
for the federal income tax exemption of interest, which may have an effect upon
the ability of the Fund to purchase sufficient amounts of tax-exempt securities.

REAL ESTATE INVESTMENT TRUSTS. The Income, Bond & Stock, Growth & Income and
Northwest Funds may invest in real estate investment trusts, known as "REITs."
REITs involve certain unique risks in addition to those risks associated with
investing in the real estate industry in general (such as possible declines in
the value of real estate, lack of availability of mortgage funds or extended
vacancies of property). Equity REITs may be affected by changes in the value of
the underlying property owned by the REITs, while mortgage REITs may be affected
by the quality of any credit extended. REITs are dependent upon management
skills, are not diversified, are subject to heavy cash flow dependency, risks of
default by borrowers, and self-liquidation. REITs are also subject to the
possibilities of failing to qualify for tax-free pass-through of income under
the Code, and failing to maintain their exemptions from registration under the
1940 Act.

Investment in REITs involves risks similar to those associated with investing in
small capitalization companies. REITs may have limited financial resources, may
trade less frequently and in a limited volume and may be subject to more abrupt
or erratic price movements than larger company securities.

REPURCHASE AGREEMENTS. All of the Funds may invest in repurchase agreements,
which are purchases of underlying debt obligations from financial institutions,
such as banks and broker-dealers, subject to the seller's agreement to
repurchase the obligations at an established time and price. Repurchase
agreements can be regarded as loans to the seller, collateralized by the
securities that are the subject of the agreement. Default by the seller would
expose the Fund to possible loss because of adverse market action or delay in
connection with the disposition of the underlying obligations. In addition, if
bankruptcy proceedings are commenced with respect to the seller of the
obligations, the Fund may be delayed or limited in its ability to sell the
collateral. The Tax-Exempt Money Market and California Money Funds' investments
in repurchase agreements are limited by their restrictions on investment in
taxable instruments. Pursuant to an exemptive order granted by the SEC, the
Funds may transfer daily uninvested cash balances into one or more joint trading
accounts. Assets in the joint trading accounts are invested in money market
instruments, and the proceeds are allocated to the participating funds on a pro
rata basis.

RESTRICTED SECURITIES. Each of the Funds may purchase restricted securities
(provided such securities are in the case of the Money Market, Tax-Exempt Money
Market, Income, U.S. Government Securities, Tax-Exempt Bond, Bond & Stock,
Growth & Income and Northwest Funds eligible for resale pursuant to Rule 144A
under the Securities Act of 1933, as amended). Although recent and ongoing
developments in the securities markets have resulted in greater trading of
restricted securities, making restricted securities, in many instances, more
liquid than they once were considered to be, investing in restricted securities
could increase the level of illiquidity of the portfolio securities of a Fund.
This could make it more difficult for a Fund to fulfill shareholder redemption
orders on a timely basis. If a Fund were required to sell these securities on
short notice, it might be unable to obtain fair market value.

49
<PAGE> 52

STAND-BY COMMITMENTS. The California Money, Tax-Exempt Money Market and the
Municipal Funds may acquire "stand-by commitments" with respect to Municipal
Obligations held in their portfolios. Under a stand-by commitment, a dealer
agrees to purchase, at a Fund's option, specified Municipal Obligations at a
specified price. A Fund may pay for stand-by commitments either separately in
cash or by paying a higher price for the securities acquired with the
commitment, thus increasing the cost of the securities and reducing the yield
otherwise available from them. The Funds will acquire stand-by commitments
solely to facilitate portfolio liquidity and do not intend to exercise their
rights thereunder for trading purposes.

STRATEGIC TRANSACTIONS. Subject to the investment limitations and restrictions
stated elsewhere in this Prospectus and the SAI, each of the Funds and
Portfolios except the Money Funds may utilize various investment strategies as
described below to hedge various market risks, to manage the effective maturity
or duration of fixed-income securities or for other bona fide hedging purposes.
Utilizing these investment strategies, the Fund or Portfolio may purchase and
sell, exchange-listed and over-the-counter put and call options on securities,
equity and fixed-income indices and other financial instruments. It may also
purchase and sell financial futures contracts and options thereon, enter into
various interest rate transactions such as swaps, caps, floors or collars, and
enter into various currency transactions such as currency forward contracts,
currency futures contracts, currency swaps or options on currencies or currency
futures. The Funds may write (sell) covered call options as well. A call option
is "covered" if the Fund owns the security underlying the option it has written
or it maintains enough cash, cash equivalents or liquid securities to purchase
the underlying security. All the above are collectively referred to as
"Strategic Transactions."

Strategic Transactions may be used

- - to attempt to protect against possible changes in the market value of
securities held in, or to be purchased for, the Fund's portfolio resulting
from securities markets or currency exchange rate fluctuations,

- - to protect the Fund's unrealized gains in the value of its portfolio
securities,

- - to facilitate the sale of such securities for investment purposes,

- - to manage the effective maturity or duration of the Fund's portfolio, or

- - to establish a position in the derivatives markets as a temporary substitute
for purchasing or selling particular securities.

Some Strategic Transactions may also be used to seek potentially higher returns.
Any or all of these investment techniques may be used at any time, as the use of
any Strategic Transaction is a function of numerous variables including market
conditions.

The use of Strategic Transactions involves special considerations and risks; for
example,

- - the ability of the Fund to utilize Strategic Transactions successfully will
depend on the ability of the Advisor or the sub-advisor to predict pertinent
market movements,

- - the risk that the other party to a Strategic Transaction will fail to meet its
obligations to the Fund,

- - the risk that the Fund will be unable to close out a Strategic Transaction at
a time when it would otherwise do so, due to the illiquidity of the Strategic
Transaction and

- - the risk of imperfect correlation, or even no correlation, between price
movements of Strategic Transactions and price movements of the related
portfolio positions.

Strategic Transactions can reduce opportunity for gain by offsetting the
positive effect of favorable price movements in the related portfolio positions.

U.S. GOVERNMENT SECURITIES. All of the Funds may invest in U.S. Government
Securities, which include direct obligations of the U.S. Treasury (such as U.S.
Treasury bills, notes and bonds) and obligations issued or guaranteed by U.S.
Government agencies or instrumentalities. Some obligations issued or guaranteed
by agencies or instrumentalities of the U.S. Government are backed by the full
faith and credit of the U.S. Government (such as GNMA bonds), others are backed
only by the right of the issuer to borrow from the U.S. Treasury (such as
securities of Federal Home Loan Banks) and still others are backed only by the
credit of the instrumentality (such as FNMA and FHLMC bonds).

50
<PAGE> 53

WHEN-ISSUED SECURITIES, FORWARD COMMITMENTS AND DELAYED-DELIVERY
TRANSACTIONS. In order to secure yields or prices deemed advantageous at the
time, the Funds (with the exception of the Money Funds and the Target Maturity
2002 Fund) may purchase or sell securities on a when-issued or a
delayed-delivery basis. The Funds will enter into a when-issued transactions
only for the purpose of acquiring portfolio securities. Due to fluctuations in
the value of securities purchased on a when-issued or a delayed-delivery basis,
the yields obtained on such securities may be higher or lower than the yields
available in the market on the dates when the securities are actually delivered
to the Fund. Similarly, the sale of securities for delayed-delivery can involve
the risk that the prices available in the market when delivery is made may
actually be higher than those obtained in the transaction itself. The California
Money Fund and the Municipal Funds may purchase Municipal Obligations offered on
a "forward commitment" basis.

When-issued Municipal Obligations may include bonds purchased on a "when, as and
if issued" basis, under which the issuance of the securities depends on the
occurrence of a subsequent event, such as approval of a proposed financing by
appropriate municipal authorities. No when-issued or forward commitments will be
made by the California Money Fund or any Municipal Fund if, as a result, more
than 20% of the value of the Fund's total assets would be committed to such
transactions. A significant commitment of a Fund's assets to the purchase of
securities on a "when, as and if issued" basis may increase the volatility of
the Fund's NAV.

YEAR 2000. Many computer software systems in use today cannot properly process
date-related information from and after January 1, 2000. Should any of the
computer systems employed by the Fund's or Portfolio's major service providers
fail to process this type of information properly, that could have a negative
impact on the Fund's or Portfolio's operations and the services that are
provided to the Fund's or Portfolio's shareholders. The Advisor and Shareholder
Services have advised the Funds and Portfolios that they are reviewing all of
their computer systems with the goal of modifying or replacing such systems
prior to January 1, 2000 to the extent necessary to avoid any such negative
impact. In addition, the Advisor has been advised by the Custodian that it is
also in the process of reviewing its systems with the same goal. As of the date
of this prospectus, the Funds and Portfolios and the Advisor have no reason to
believe that these goals will not be achieved. Similarly, the values of certain
of the Funds' or Portfolio's assets may be adversely affected by the inability
of their issues or third parties to properly process date-related information
from and after January 1, 2000.

PORTFOLIO TRANSACTIONS AND TURNOVER. Each Fund's turnover rate varies from year
to year, depending on market conditions and investment strategies. High turnover
rates increase transaction costs and may increase taxable capital gains.
Historical portfolio turnover rates for each Fund are shown under "Financial
Highlights" below. The Advisor and the sub-advisors will not consider portfolio
turnover rate to be a limiting factor in making investment decisions consistent
with the Funds' investment objectives and policies.

51
<PAGE> 54
WAYS TO SET UP YOUR ACCOUNT

+ Individual or Joint Account
Individual accounts are owned by one person. Two types of joint accounts
(having two or more owners) can be opened:

1) in a "joint tenancy" account, the surviving owner(s) automatically
receive(s) the shares of any owner(s) who die(s); and

2) in a "tenants in common" account, the heir(s) of any deceased owner
receive(s) such owner's shares, rather than the surviving owners of the joint
account.

+ Retirement
Retirement plans protect investment income and capital gains from current
taxes. Contributions to these accounts may be tax deductible. Retirement
accounts require special applications and typically have lower minimums.

- INDIVIDUAL RETIREMENT ACCOUNTS ("IRAS") If you are of legal age and under
70 1/2 years old with Adjusted Gross Income ("AGI") of less than $40,000
(or $60,000 if married and filing jointly) you may protect up to $2,000
(subject to certain limitations for single persons with AGI equal to or
greater than $30,000 and married persons who file jointly with AGI equal to
or greater than $50,000) per tax year from certain tax effects. If your
spouse does not work, you can protect up to an additional $2,000 per year
in your spouse's name.

- ROTH IRAS If you are of legal age with AGI not exceeding $110,000 (or
$160,000 if married and filing jointly) you may protect up to $2,000 on a
non-deductible basis (subject to certain limitations for single persons
with AGI equal to or greater than $95,000 and married persons who file
jointly with AGI equal to or greater than $150,000) per tax year from
certain tax effects.

- ROLLOVER IRAS You may transfer money from certain employer-sponsored
retirement plans and keep your tax benefits (often happens when you change
employers).

- SIMPLIFIED EMPLOYEE PENSION PLANS ("SEP-IRAS") If you own a small business
or are self-employed, you and your eligible employees could get many of the
same advantages as a Keogh, but with fewer administrative requirements.

+ Gifts or Transfers to a Minor Child
("UGMA" or "UTMA")

You can give money to a child and obtain certain tax benefits. A parent or
grandparent can give up to $10,000 a year to each child or grandchild without
paying federal gift tax. Depending on state laws, you can set up a custodial
account under the Uniform Gifts to Minors Act (UGMA) or the Uniform Transfers
to Minors Act (UTMA).

+ Trust

You can use a Trust for many purposes, including charitable contributions and
providing a regular income for a child until a certain age. The trust must be
established before an account can be opened.

+ Corporation or Other Organization
Corporations, associations, partnerships, institutions, or other groups may
invest for many purposes.

52
<PAGE> 55

HOW CAN I INVEST IN THE FUNDS

AND PORTFOLIOS?

<TABLE>
<CAPTION>
TO OPEN AN ACCOUNT: TO ADD TO AN ACCOUNT:
(MINIMUM $1,000*) (MINIMUM $50**)
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
+ By Phone -- 800-222-5852 Exchange from another Fund or Exchange from another Fund or
Portfolio account with the same Portfolio account with the same
registration, including name, registration, including name,
address, and taxpayer ID number address, and taxpayer ID number.
(social security number for an
individual). Call WM Shareholder Services at
800-222-5852
Call WM Shareholder Services at
800-222-5852. (5:00 a.m. to 6:00
p.m., Pacific Time/8:00 a.m. to
9:00 p.m., Eastern Time, Monday
through Friday and 6:00 a.m. to
3:00 p.m., Pacific Time/9:00 a.m.
to 6:00 p.m., Eastern Time, on
Saturdays)
- ------------------------------------------------------------------------------------------------------------------
+ By Mail Complete and sign the application. Make your check payable to The WM
Make your check or negotiable bank Group of Funds. Indicate your
draft payable to The WM Group of account number on your check.
Funds. Third-party checks are not Include the "next investment" stub
accepted. from your previous account
statement. Mail the check and stub
Mail the completed application to the address printed on your
form and check to: account statement.

THE WM GROUP OF FUNDS Exchange by mail: call
P.O. BOX 9757 800-222-5852 for instructions
PROVIDENCE, RI 02940-9757
- ------------------------------------------------------------------------------------------------------------------
+ By Wire 1) Telephone WM Shareholder Ser- Instruct your bank/financial
vices for an application form and institution to wire Federal Funds
instructions. as described at left under
2) Instruct your bank to wire paragraph 2.
Federal Funds exactly as follows:
BOSTON SAFE DEPOSIT AND TRUST
BOSTON, MA
ABA# 011-001234
FOR CREDIT TO:
THE WM GROUP OF FUNDS
ACCOUNT #167053
(FUND NAME AND CLASS OF SHARES)
(CUSTOMER'S NAME)
(CUSTOMER'S SOCIAL SECURITY
NUMBER)
3) Mail the completed application
form to:
THE WM GROUP OF FUNDS
P.O. BOX 9757
PROVIDENCE, RI 02940-9757
</TABLE>

53
<PAGE> 56
HOW CAN I INVEST IN THE FUNDS
AND PORTFOLIOS? (CONT.)

<TABLE>
<CAPTION>
TO OPEN AN ACCOUNT: TO ADD TO AN ACCOUNT:
(MINIMUM $1,000*) (MINIMUM $50**)
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
+ Systematic 1) Obtain and complete an Pre-authorized periodic
application form. investments will be processed
(Minimum New Account amount automatically. (Minimum Amount
$50+) 2) Attach a voided check or $25++)
deposit slip from the bank account
you would like the investments
transferred from and indicate
either the day of the week or
day(s) of the month when the
purchase would occur.

3) Mail the application to the
address listed above.
- ------------------------------------------------------------------------------------------------------------------
</TABLE>

* $10,000 for the Portfolios and $2,000 for IRA accounts investing in the
Portfolios.
** $100 for the Portfolios.
+ $1,000 for the Portfolios.
++ $100 for the Portfolios.

54
<PAGE> 57

WHICH CLASS OF SHARES IS BEST FOR ME?

This prospectus offers you a choice of two classes of fund shares: Class A and
Class B. The next several pages will expand upon the "Fees and Expenses" section
above to help you determine which class of shares is best for you. This will
depend upon a number of factors, including the amount you plan to invest and how
long you plan to hold your shares.

CLASS A SHARES

The offering price for Class A shares of the Non-Money Funds is the NAV next
calculated after receipt of a properly completed purchase order, plus an initial
sales charge as shown in the table below. Sales charges may be reduced or waived
as discussed following the table. The final column in each table indicates what
dealers receive for selling Class A shares.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
+ FIXED-INCOME FUNDS
(other than Short Term High Quality Bond
and Target Maturity 2002 Funds)
+ MUNICIPAL FUNDS
+ Income and Flexible Income
Portfolios
----------------------------------------------------------------------------------------
REALLOWED
SALES CHARGE TO DEALERS
----------------------------------------------------------------------------------------
Percentage Percentage of Percentage
of Offering Net Amount of Offering
Purchase of Class A Shares Price Invested Price
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Less than $50,000 4.50% 4.71% 4.00%
----------------------------------------------------------------------------------------
$50,000 to $100,000 4.00 4.17 3.50
----------------------------------------------------------------------------------------
$100,000 to $250,000 3.50 3.63 3.00
----------------------------------------------------------------------------------------
$250,000 to $500,000 2.50 2.56 2.00
----------------------------------------------------------------------------------------
$500,000 to $1,000,000 2.00 2.04 1.75
----------------------------------------------------------------------------------------
$1,000,000 and above* .00 .00 .00
----------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------

<CAPTION>
- --- -----------------------------------------------------
+ Equity Funds

Strategic Growth,
Conservative Growth and
Balanced Portfolios
-------------------------------------------------
REALLOWED
SALES CHARGE TO DEALERS
-------------------------------------------------
Percentage Percentage of Percentage
of Offering Net Amount of Offering
Price Invested Price
-------------------------------------------------
<S> <C> <C> <C> <C> <C>
5.50% 5.82% 4.75%
-----------------------------------------------------------------------------------------
4.75 4.99 4.00
-----------------------------------------------------------------------------------------
3.75 3.90 3.00
-----------------------------------------------------------------------------------------
3.00 3.09 2.50
-----------------------------------------------------------------------------------------
2.00 2.04 1.75
-----------------------------------------------------------------------------------------
.00 .00 .00
-----------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
+ SHORT TERM HIGH QUALITY
Bond Fund
----------------------------------------------------------------------------------------
REALLOWED
SALES CHARGE TO DEALERS
----------------------------------------------------------------------------------------
Percentage Percentage of Percentage
of Offering Net Amount of Offering
Purchase of Class A Shares Price Invested Price
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Less than $50,000 3.50% 3.63% 3.00%
----------------------------------------------------------------------------------------
$50,000 to $100,000 3.00 3.09 2.50
----------------------------------------------------------------------------------------
$100,000 to $250,000 2.50 2.56 2.00
----------------------------------------------------------------------------------------
$250,000 to $500,000 2.25 2.30 2.00
----------------------------------------------------------------------------------------
$500,000 to $1,000,000 2.00 2.04 1.75
----------------------------------------------------------------------------------------
$1,000,000 and above* .00 .00 .00
----------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------

<CAPTION>
- --- -----------------------------------------------------
+ Target Maturity
2002 Fund
-----------------------------------------------------
REALLOWED
SALES CHARGE TO DEALERS
-------------------------------------------------
Percentage Percentage of Percentage
of Offering Net Amount of Offering
Price Invested Price
-------------------------------------------------
<S> <C> <C> <C> <C> <C>
2.00% 2.04% 1.75%
-----------------------------------------------------------------------------------------
1.50 1.52 1.25
-----------------------------------------------------------------------------------------
1.00 1.01 0.75
-----------------------------------------------------------------------------------------
1.00 1.01 0.75
-----------------------------------------------------------------------------------------
0.50 0.50 0.50
-----------------------------------------------------------------------------------------
.00 .00 .00
-----------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
</TABLE>

* See "net asset value purchases" below.

Example: An investor considers putting $1,000 into an Equity Fund's Class A
shares. Based on the first column in the above table, 5.50% of the $1,000 would
pay for a sales charge. The charge would be $55.00, which is 5.82% of the net
investment of $945.00, as the next column shows. The dealer selling the shares
would be paid $47.50 of the $55.00, which is 4.75% of $1,000, as the last column
shows.

55
<PAGE> 58

CUMULATIVE DISCOUNT. This allows your current purchases to qualify for the
foregoing discounts by including the value of shares of the Funds and Portfolios
that were purchased subject to an initial or contingent deferred sales charge.
The discount will be based on current market value. Individuals, immediate
family members and trustees purchasing for single fiduciary accounts are
eligible for this discount.

LETTER OF INTENT. This discount is for purchases made over an extended period.
It provides you with a cumulative discount on the same basis as explained in the
previous paragraph if the following conditions are met: Purchases of Class A
shares must be made within a 13-month period that begins no earlier than 90 days
before the submission of a letter of intent from the investor to the Funds. For
more information about this discount, please contact Shareholder Services or
your Investment Representative.

REINVESTMENT. You can reinvest redemption proceeds of Class A shares that were
subject to a sales charge when first purchased in other Class A shares within
120 days without incurring another initial sales charge. You can also reinvest
any redemption proceeds of Class B shares that were subject to a contingent
deferred sales charge Class A shares within 120 days without incurring an
initial sales charge.

NET ASSET VALUE PURCHASES. There is no initial sales charge on Class A
purchases of $1 million or more, but such purchases are generally subject to a
contingent deferred sales charge of 1.00% if you redeem them during the first
year after purchase or .50% if you redeem them during the second year after
purchase.

Qualified employee benefit plans (including SEPs and SIMPLEs) that have more
than 100 participants or that have more than $500,000 invested in the Funds and
Portfolios may purchase shares without an initial sales charge. However, a
contingent deferred sales charge of 1% may be imposed on the amount that was
invested through such a plan in Class A shares and that is redeemed (1) if,
within the first two years after the plan's initial investment in the Funds or
Portfolios, the named fiduciary of the plan withdraws the plan from investing in
the Funds and Portfolios in a manner that causes all shares held by the plan's
participants to be redeemed; or (2) by a plan participant within two years of
the plan participant's purchase of such Class A shares. The contingent deferred
sales charge will be waived on redemptions in connection with certain
involuntary distributions, including distributions arising out of the death or
post purchase disability of a shareholder (including one who owns the shares as
joint tenant).

Class A shares may be purchased at net asset value, and in any amount, by
officers, directors and employees of the Advisor or its affiliates, or companies
which have entered into selling agreements with the Distributor, and to certain
family members of such individuals. The purchase must be for investment purposes
only and may not be resold other than through redemption by the Fund or
Portfolio. The Funds and Portfolios may also offer their shares at net asset
value to certain retirement plans; to investors who purchase shares with the
proceeds of redemptions of shares of other mutual funds advised by WM Advisors
or its affiliates within five business days of such redemptions; and to brokers,
dealers or registered investment advisors who have entered into arrangements
with the Distributor providing specifically for the shares to be used in
particular investment products made available to their clients for which they
may charge a separate fee. No sales charge will be assessed on a purchase by any
other investment company in connection with the combination of such company with
the Trust by merger, acquisition of assets or otherwise. The Distributor will
pay authorized dealers commissions on certain net asset value purchases as
described in the SAI.

EACH FUND AND PORTFOLIO RESERVES THE RIGHT TO SUSPEND THE OFFERING OF SHARES OF
ANY CLASS OF ANY FUND OR PORTFOLIO AT ANY TIME. Each Fund and Portfolio also
reserves the right to reject any specific purchase order, including purchases by
exchange.

CONSULT AN INVESTMENT REPRESENTATIVE OR SEE THE SAI IF YOU THINK YOU MAY QUALIFY
FOR ANY OF THESE PURCHASE PLANS. YOU MUST NOTIFY THE FUND OR PORTFOLIO AT THE
TIME OF PURCHASE WHENEVER A REDUCED SALES CHARGE OR NET ASSET VALUE PURCHASE
APPLIES.

CLASS B SHARES

Class B shares are offered at the NAV next calculated after receipt of a
properly completed purchase order, without an initial sales charge. The entire
amount of the purchase price is invested in the Fund selected. However, Class B
shares have higher distribution and service fees than Class A shares for eight
years. Also,
56
<PAGE> 59

if you redeem Class B shares within five years of purchase (four years in the
case of Class B shares of the Short Term High Quality Bond Fund), you generally
must pay a contingent deferred sales charge.

The proceeds from any contingent deferred sales charges are paid to the
Distributor to defray expenses for providing distribution services for Class B
shares. Examples of such expenses include compensation to salespeople and
selected dealers. The Distributor currently pays authorized dealers commissions
of 4.00% of the price of Class B shares sold by them (3.00% for Class B shares
of the Short Term High Quality Bond Fund).

CONTINGENT DEFERRED SALES CHARGE. Class B shares redeemed within five years of
purchase are subject to a contingent deferred sales charge according to the
following schedule. Class B shares purchased by exchange will be subject to a
contingent deferred sales charge using the schedule of the Fund originally
purchased. Shares purchased through reinvestment of dividends or capital gain
distributions are not subject to a contingent deferred sales charge.

Class B shares of all Funds (except for the Short Term High Quality Bond Fund)
and Class B shares of all Portfolios:

<TABLE>
<CAPTION>
YEAR OF
REDEMPTION Contingent
AFTER PURCHASE Deferred Sales Charge
- ------------------------------------------------------------------
<S> <C>
First...................................... 5.00%
Second..................................... 4.00%
Third...................................... 3.00%
Fourth..................................... 2.00%
Fifth...................................... 1.00%
Sixth and following........................ 0.00%
</TABLE>

Class B shares of the Short Term High Quality Bond Fund:

<TABLE>
<CAPTION>
YEAR OF
REDEMPTION Contingent
AFTER PURCHASE Deferred Sales Charge
- ------------------------------------------------------------------
<S> <C>
First.................................... 4.00%
Second................................... 3.00%
Third.................................... 2.00%
Fourth................................... 1.00%
Fifth and following...................... 0.00%
</TABLE>

Class B shares of certain Funds purchased prior to March 20, 1998 may be subject
to a different contingent deferred sales charge schedule, as described in the
SAI.

The contingent deferred sales charge is calculated by applying the above
percentages to the lesser of (1) the NAV of the redeemed shares at the time they
were purchased or (2) the NAV of the redeemed shares at the time of redemption.
This means that no contingent deferred sales charge will be charged on any NAV
increases above the initial purchase price. Shares are redeemed in the order
that results in the lowest possible rate being charged. Accordingly, they will
be redeemed first from shares purchased through reinvested dividends or capital
gain distributions and then in the order of purchase.

Here is an example:

An investor purchases 100 Class B shares at $10 per share -- for a total cost of
$1,000. In the second year after the purchase, the NAV has risen to $12 per
share, and the investor has acquired 10 more shares through dividend
reinvestment.

At that time, the investor decides to make the first redemption. The transaction
includes 50 shares at $12 per share -- for a total of $600.

The first 10 shares to be redeemed will not be subject to any charge because of
the 10 shares received from dividend reinvestment.

As for the other 40 shares, the charge will be applied only to the original cost
of $10 per share. The NAV increase of $2 per share will not be considered. As a
result, $400 of the redemption proceeds (40 X $10) will be charged a rate of 4%,
which is the second-year rate shown in the table above. The resulting sales
charge will be 4% X $400, which will be $16.

The contingent deferred sales charge may be waived for redemptions of Class B
shares under these circumstances:

- - Following the death or post-purchase disability of a shareholder, as defined
in Section 72(m)(7) of the Code;

- - In connection with certain distributions from an IRA or other retirement plan,
as described in the SAI, including IRA distributions made to shareholders over
age 59 1/2;

- - According to a systematic withdrawal plan -- but limited to 33% annually of
the value of the account at the time the plan is established; and

- - In connection with the liquidation by the Fund or Portfolio of a shareholder's
account as described under "How to Sell Shares."

57
<PAGE> 60

YOU MUST NOTIFY THE FUND OR PORTFOLIO WHENEVER YOU ARE ENTITLED TO A WAIVER OR
REIMBURSEMENT OF CDSC.

CONVERSION FEATURE. Class B shares that remain outstanding for eight years will
generally convert to Class A shares of the same Fund or Portfolio based on the
relative NAVs at the time of conversion.

DISTRIBUTION OF INCOME AND CAPITAL GAINS

The Funds and Portfolios distribute dividends from net investment income (which
is essentially interest and dividends from securities held), minus expenses.
They also make capital gain distributions if realized gains from the sale of
securities exceed realized losses. The amount of dividends of net investment
income and distributions of net realized long- and short-term capital gains
payable to shareholders will be determined separately for each Fund or
Portfolio. Dividends from the net investment income of the Money, Fixed-Income
and Municipal Funds and the Balanced, Flexible Income and Income Portfolios will
normally be declared daily and paid monthly. Dividends from the net investment
income of the Bond & Stock and Growth & Income Funds and the Conservative Growth
Portfolio will normally be declared and paid quarterly. Dividends from the net
investment income of the Growth Fund and the Strategic Growth Portfolio will
normally be declared and paid semiannually. Dividends from the net investment
income of the Northwest, Emerging Growth and International Growth Funds will
normally be declared and paid annually. Except as otherwise specified, the Funds
and Portfolios distribute capital gains, if any, at least annually, normally in
December.

You have three choices regarding what you do with dividends and capital gain
distributions. You can make your choice at the time of your initial purchase or
by contacting the Funds' offices or your investment representative. The options
include:

AUTOMATIC REINVESTMENT. This procedure is automatically effective unless you
choose another option. All dividends and capital gain distributions are
reinvested into additional shares of the Fund or Portfolio.

REINVEST DIVIDENDS IN ANOTHER FUND OR PORTFOLIO. Income dividends may be
automatically invested in the same class of shares of another Fund or Portfolio,
provided that Fund or Portfolio is available for sale in your state of
residence.

CASH PAYMENT OF ALL DISTRIBUTIONS. All dividends and capital gain distributions
are deposited to your pre-authorized bank account or paid by check.

Reinvestments of income dividends and capital gain distributions are made at the
closing NAV on the day dividends or distributions are deducted from the Fund's
assets.

If you've chosen to receive dividends or capital gain distributions in cash and
your check is returned as undeliverable, the Funds and Portfolios reserve the
right (but are not obligated) to reinvest your check at the then-current NAV and
to automatically reinvest subsequent dividends and capital gain distributions in
your account. The Funds and Portfolios may also automatically reinvest dividends
or distributions of $10 or less.

HOW CAN I SELL SHARES?

You may redeem shares at any time in the following ways. The price paid per
share will be the next NAV that is calculated (less any applicable CDSC).

TELEPHONE. You may authorize telephone transactions on your account
application. Provided you have pre-authorized these transactions, you may redeem
or exchange shares by telephoning 800-222-5852. You may also request these
transactions through your investment representative. Proceeds may be directed to
a pre-authorized bank or broker account or to the address of record for the
account. Exchanges also may be made by telephone.

It may be difficult to reach the Trusts' offices by telephone during periods of
unusual economic or market activity. Please be persistent if this occurs. The
Funds' and Portfolios' transfer agent is committed to extending its 5:00 a.m. to
6:00 p.m. Pacific time business hours during such periods.

WRITTEN REQUEST. You may also sell shares by writing the Trusts' offices.
Written requests may require a signature guarantee, as discussed below, and the
return of any outstanding share certificates. Changes in pre-authorized
redemption instructions or your account registration may also require signature
guarantees. For your protection, the signature(s) must be guaranteed by an
eligible guarantor institutions which includes banks, credit unions, broker
dealers,

58
<PAGE> 61

national securities exchanges, savings institutions as well as medallion
signature guarantee.

PROMPT PAYMENT. Payment normally will be made on the next business day after
redemption, but no later than seven days after the transaction, unless you
recently purchased Fund shares by check or Automated Clearing House transfer. In
that case, redemption proceeds may be delayed for up to 15 days, until the
Transfer Agent verifies collection of funds. Redemption proceeds will be sent by
check or Automated Clearing House transfer to your bank account without charge.
Wire redemption proceeds may be subject to a $10 fee. The receiving bank also
may charge a fee.

SYSTEMATIC WITHDRAWAL PLAN. Shareholders may choose to receive specific cash
withdrawals on a periodic basis. A $5,000 minimum balance in the applicable Fund
or $10,000 in the applicable Portfolio is required to establish a systematic
withdrawal plan (the minimum balance requirement is waived for IRA accounts).
Shares of the Fund or Portfolio will be redeemed to provide the requested
payment. Naturally, withdrawals that continually exceed dividend income and
capital gains will eventually exhaust the account. Class B shareholders may use
a systematic withdrawal plan to redeem up to 12% of the beginning balance
annually without incurring a contingent deferred sales charge. The beginning
balance is the account balance at the time the plan is established.

OTHER CONSIDERATIONS. It is costly to maintain small accounts. Accordingly, an
account may be closed after 90 days' written notice if the total account value
falls below a minimum (currently $7,000 for the Portfolios and $700 for the
Funds or, in the case of an IRA account, $500 for the Portfolios and $300 for
the Funds) when any transfer or redemption is made. Shares will be redeemed at
the next calculated NAV, less any applicable CDSC, on the day the account is
closed. To prevent an account closure, you may purchase shares to bring your
account balance above the minimum during the 90-day grace period.

IRAS AND OTHER TAX-SHELTERED RETIREMENT PLANS

Shares of the Funds or Portfolios may be appropriate for many retirement plans,
including IRAs. Retirement plan contributions are tax deductible in some cases,
and earnings compound on a tax-deferred basis until withdrawn.

Information about IRAs and other qualified retirement plans is available from
the Trusts' offices or your Investment Representative.

HOW CAN I EXCHANGE MY SHARES?

You may exchange shares of any of the Funds or Portfolios for shares of the same
class of any other of the Funds or Portfolios. Exchanges of shares are sales and
may result in a gain or loss for income tax purposes.

Exchanges are made at the relative NAVs of the shares being exchanged. No
additional sales charge will be incurred when exchanging shares from a Fund
which imposes an initial or contingent deferred sales charge. Any contingent
deferred sales charge on the subsequent sale of shares acquired by exchange will
be based on the contingent deferred sales charge schedule of the Fund from which
the shares were initially purchased. Shares exchanged from a Money Fund will be
subject to the acquired Fund's sales charge unless the shares given in exchange
were previously exchanged from a Fund that imposes an initial or contingent
deferred sales charge.

All exchanges are subject to the minimum investment requirements of the Fund or
Portfolio being acquired and to its availability for sale in your state of
residence. You may arrange for automatic monthly exchanges. The Funds and
Portfolios reserve the right to refuse any order for the purchase of shares,
including those by exchange. In particular, a pattern of exchanges that
coincides with a "market timing" strategy may be disruptive to a Fund or
Portfolio and, consequently, may be disallowed.

DIVIDENDS, CAPITAL GAINS AND TAXES

Each Fund and Portfolio will distribute substantially all of its net investment
income and net realized capital gain on a current basis.

You are responsible for federal income tax (and state and local income taxes, if
applicable) on dividends and capital gain distributions. This is true whether
such dividends or distributions are paid in cash or reinvested in additional
shares.

Generally, dividends paid by the Funds and Portfolios from interest, dividends
or net short-term capital gains will be taxed as ordinary income. Distributions
designated by the Fund or Portfolio as deriving from net gains on securities
held for more than one year are
59
<PAGE> 62

taxable as such (generally at a 20% tax rate), regardless of how long you have
held your shares.

A dividend or distribution made shortly after the purchase of shares of a Fund
or Portfolio by a shareholder, although in effect a return of capital to that
particular shareholder, would be taxable to him or her as described above.

Because of tax law requirements, you must provide the Trusts an accurate and
certified taxpayer identification number (for individuals, a Social Security
number) to avoid the 31% "back-up" withholding tax.

Early in each calendar year each Fund and Portfolio will notify you of the
amount and tax status of distributions paid to you for the preceding year.

A Portfolio's use of a fund-of-funds structure could affect the amount, timing
and character of distributions to shareholders. See "Taxes" in the Statement of
Additional Information.

Any gain resulting from the sale or exchange of your shares will generally also
be subject to tax. You should consult your tax advisor for more information on
your own tax situation, including possible foreign, state and local taxes.

ADDITIONAL CONSIDERATIONS FOR SHAREHOLDERS OF THE MUNICIPAL FUNDS, THE
TAX-EXEMPT MONEY MARKET FUND, AND THE CALIFORNIA MONEY MARKET FUND.
Distributions designated as "exempt-interest dividends" by any of the Municipal
Funds, the Tax-Exempt Money Market Fund or the California Money Market Fund are
not generally subject to federal income tax. However, if you receive social
security or railroad retirement benefits, you should consult your tax adviser to
determine what effect, if any, an investment in the fund may have on the federal
taxation of your benefits. In addition, an investment in the Fund may result in
liability for federal alternative minimum tax, both for individual and corporate
shareholders.

ADDITIONAL CONSIDERATIONS FOR SHAREHOLDERS OF THE FLORIDA INSURED MUNICIPAL
FUND. It is expected that shares of the Florida Insured Municipal Fund held by
a Florida resident will be exempt from the Florida intangible personal property
tax and that a portion of the dividends paid by the California Money Fund,
California Municipal Fund and the California Insured Intermediate Municipal Fund
will be exempt from California State personal income tax, but not from
California State franchise tax or California State corporate income tax.
Corporate taxpayers should consult their tax advisor concerning the Florida and
California state tax treatment of investments in these funds.

ADDITIONAL CONSIDERATIONS FOR SHAREHOLDERS OF THE INTERNATIONAL GROWTH
FUND. The International Growth Fund's investments in foreign securities may be
subject to foreign withholding taxes. In that case, the Fund's yield on those
securities would be decreased. Shareholders may be entitled to claim a credit or
deduction with respect to foreign taxes. In addition, the Fund's investments in
foreign securities or foreign currencies may increase or accelerate the Fund's
recognition of ordinary income and may affect the timing or amount of the Fund's
distributions.

THE INFORMATION CONTAINED IN THIS PROSPECTUS IS NOT A COMPLETE DESCRIPTION OF
THE FEDERAL, STATE OR LOCAL TAX CONSEQUENCES OF INVESTING IN THE FUNDS OR
PORTFOLIOS. YOU SHOULD CONSULT YOUR TAX ADVISOR BEFORE INVESTING IN THE FUNDS OR
PORTFOLIOS.

ORGANIZATION

HOW NAV IS DETERMINED

Investment securities and other assets are valued primarily on the basis of
market quotations or, if quotations are not readily available, by a method that
the Board of Trustees believes accurately reflects fair value. Foreign
securities are valued on the basis of quotations from the primary market in
which they are traded, and are translated from the local currency into U.S.
dollars using current exchange rates. As a result, changes in the value of those
currencies in relation to the U.S. dollar may affect the Funds' NAV. Because
foreign markets may be open at different times than the New York Stock Exchange,
the value of the Funds' shares may change on days when shareholders are not able
to buy or sell them. If events materially affecting the values of the Funds'
foreign investments occur between the closed foreign markets and the close of
regular trading on the New York Stock Exchange, those investments may be valued
at their fair value. The NAVs are determined at the end of each business day of
the New York Stock Exchange or at 1:00 p.m. Pacific time, whichever is earlier.

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<PAGE> 63

ADVISOR AND SUB-ADVISORS

The Funds and Portfolios are managed by WM Advisors, Inc., which is referred to
as the Advisor in this Prospectus. The Advisor's address is 1201 Third Avenue,
Suite 1400, Seattle, Washington 98101. The Advisor has delegated portfolio
management responsibilities in respect of the Growth, California Municipal,
Florida Insured Municipal, California Insured Intermediate Municipal and
International Growth Funds, and it is expected that the Advisor will, effective
January 1, 1999, delegate portfolio management responsibility in respect of the
Tax-Exempt Bond Fund, to a sub-advisor. Each Fund and Portfolio may, to the
extent permitted under the 1940 Act, place portfolio transactions with (and pay
brokerage commissions to) affiliates of the Advisor and the sub-advisors to the
Funds indicated below. For more information see the SAI.

The Advisor has been in the business of investment management since 1944. Its
responsibilities include formulating each Fund's and Portfolio's investment
policies (subject to the terms of this Prospectus), analyzing economic trends,
directing and evaluating the investment services provided by the sub-advisors
and monitoring each Fund's or Portfolio's investment performance and reporting
to the Board of Trustees, as well as providing certain administrative services
to the Funds and Portfolios. In connection with its service as investment
advisor to each Fund and Portfolio, the Advisor may engage one or more
sub-advisors to provide investment advisory services to any of the Funds or
Portfolios and may change or eliminate any such sub-advisor if it deems such
action to be in the best interests of a Fund or Portfolio and its shareholders.
Where the Advisor has not delegated such duties to a sub-advisor, it is
responsible for managing the investment and reinvestment of the Fund's or
Portfolio's assets. The Advisor is an indirect wholly owned subsidiary of
Washington Mutual, Inc. ("Washington Mutual"), a publicly owned financial
services company.

The following organizations, under the supervision of the Advisor, act as
sub-advisors to the Funds indicated below, and are responsible for continuously
reviewing, supervising and administering such Funds' respective investment
programs:

JANUS, 100 Fillmore Street, Denver, Colorado 80206, acts as sub-advisor to the
Growth Fund. Janus is an indirectly majority owned subsidiary of Kansas City
Southern Industries, Inc., a publicly traded holding company whose primary
subsidiaries are engaged in transportation, information processing and financial
services. Janus has been providing investment advice to mutual funds or other
large institutional clients since 1970. As of March 27, 1998, Janus' assets
under management were in excess of $67.8 billion.

VAN KAMPEN, One Parkview Plaza, Oakbrook, Illinois 60181, acts as sub-advisor to
the California Municipal, California Insured Intermediate Municipal and Florida
Insured Municipal Funds. Subject to shareholder approval, it is expected that,
effective January 1, 1999, Van Kampen will become sub-advisor to the Tax-Exempt
Bond Fund. Van Kampen is an indirect wholly owned subsidiary of Morgan Stanley,
Dean Witter, Discover & Co., a publicly held global financial services company.
Van Kampen provides investment advice to a wide variety of individual,
institutional and investment company clients and, together with its affiliates,
had aggregate assets under management or supervision, as of June 5, 1998, of
more than $3.9 billion.

WARBURG, 466 Lexington Avenue, New York, New York 10017, acts as sub-advisor to
the International Growth Fund. Warburg is a professional investment counseling
firm which provides investment services to investment companies, employee
benefit plans, endowment funds, foundations and other institutions and
individuals. As of March 30, 1998, Warburg managed approximately $15 billion of
assets. Incorporated in 1970, Warburg is indirectly controlled by Warburg,
Pincus & Co. ("WP & Co."), which has no business other than being a holding
company of Warburg and its affiliates. Lionel I. Pincus, the managing partner of
WP & Co., may be deemed to control both WP & Co. and Warburg.

INDIVIDUAL FUND MANAGERS

Gary J. Pokrzywinski, CFA, Vice President and Senior Portfolio Manager of the
Advisor, is primarily responsible for the day-to-day management of the High
Yield, Income, Short Term High Quality Bond and Target Maturity 2002 Funds. He
has managed such Funds since March 1998, 1992, January 1998 and January 1998,
respectively, and has been employed by the Advisor since 1992. Effective
November 1, 1998, Craig V. Sosey, Vice President and Portfolio Manager of the
Advisor, is primarily responsible for the day-to-day management of the U.S.
Government Securities

61
<PAGE> 64

Fund. He has been employed by the Advisor since May 1998. Prior to that he was
the Assistant Treasurer of California Federal Bank, where he worked for over
eight years. He holds an MBA from University of California Berkeley. A team of
investment professionals employed by the Adviser will be jointly and primarily
responsible for the day-to-day management of the Growth and Income Fund. Jeffrey
D. Huffman, CFA, Vice President and Senior Portfolio Manager of the Advisor, has
had primary responsibility for the day-to-day management of the Bond & Stock
Fund since 1995. Prior to 1995, Mr. Huffman was Vice President of Trust
Investments for First Interstate Bank since 1994 and a portfolio manager at
Safeco since 1992. David W. Simpson, CFA, Vice President and Senior Portfolio
Manager of the Advisor, has had primary responsibility for the day-to-day
management of the Northwest Fund since 1993 and he and Linda C. Walk, CFA, who
is Vice President and Portfolio Manager of the Advisor, have been co-managers of
the Emerging Growth Fund since March 1998. Mr. Simpson has been employed by the
Advisor since 1993. Prior to 1997, Ms. Walk was a portfolio manager at Laird
Norton Trust Company since 1996, a valuation consultant for Ernst & Young LLP
since 1994, and a valuation consultant for Management Advising Services since
1990. Audrey S. Quaye, CPA, Vice President and Portfolio Manager of the Advisor,
is primarily responsible for the day-to-day management of the Money Market Fund,
the Tax-Exempt Money Market Fund and the California Money Fund. She has managed
such Funds since 1997, 1997, and March 1998, respectively, and has been employed
at the Advisor since 1996. Prior to 1996, Ms. Quaye worked at the Benham Group
as a municipal credit analyst. Stephen C. Scott, Senior Portfolio Manager, has
had primary responsibility for the day-to-day management of the Strategic Growth
Portfolio, the Conservative Growth Portfolio, the Balanced Portfolio, the
Flexible Income Portfolio and the Income Portfolio since their inception. Mr.
Scott has been employed by WM Advisors, Inc since March of 1998, prior to that
date he was employed by Sierra Investment Services Corporation with essentially
identical responsibility for the Portfolios.

Warren B. Lammert has had primary responsibility for the day-to-day management
of the Growth Fund since its inception. Mr. Lammert is a Vice President of
Janus. Mr. Lammert joined Janus in 1987, and his duties at Janus include the
management of separate equity accounts.

Since May 1992, Joseph A. Piraro, Vice President of Van Kampen, has had primary
responsibility for the day-to-day management of the California Municipal Fund.
Mr. Piraro has been employed by Van Kampen since 1992. Mr. Piraro has also had
primary responsibility for the day-to-day management of the California Insured
Intermediate Municipal Fund since the Fund's inception. Since January 1997,
Thomas M. Byron, Vice President of Van Kampen, has had primary responsibility
for the day-to-day management of the Florida Insured Municipal Fund. Mr. Byron
has been at Van Kampen for over 15 years and prior to taking over responsibility
for managing the Fund, Mr. Byron was Head Buyer and Manager of Van Kampen's Unit
Investment Trust desk. David C. Johnson, Senior Vice President of Van Kampen,
has primary responsibility for the day-to-day management of the Tax-Exempt Bond
Fund's portfolio since January 1, 1999. Mr. Johnson has been employed by Van
Kampen since 1989.

The following people are primarily responsible for the day-to-day management of
the International Growth Fund: Harold W. Ehrlich, CFA, CIC, Managing Director of
Warburg, has 14 years of investment experience. Prior to 1998, Mr. Ehrlich was a
senior vice president, portfolio manager and analyst at Templeton Investment
Counsel Inc. Todd Jacobson, CFA, Vice President of Warburg. Prior to joining
Warburg in 1997, Mr. Jacobson was an analyst at Brown Brothers Harriman from
1993 to 1997.

Each of the Funds (other than the Target Maturity 2002 Fund, which offers only
Class A shares) has adopted distribution plans, pursuant to Rule 12b-1 under the
1940 Act, applicable to Class A and Class B and shares of the Fund (each, a
"Rule 12b-1 Plan"), respectively. The Target Maturity 2002 Fund has adopted a
12b-1 Plan applicable to its Class A shares. 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 each class. 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.

The Distributor may, from time to time, pay to other dealers, in connection with
retail sales or the distribution of shares of a Fund or Portfolio, material

62
<PAGE> 65

compensation in the form of merchandise or trips. Salespersons, including
representatives of WM Financial Services, Inc. (a subsidiary of Washington
Mutual), and any other person entitled to receive any compensation for selling
or servicing Fund or Portfolio shares may receive different compensation with
respect to one particular class of shares over another, and may receive
additional compensation or other incentives for selling Fund or Portfolio
shares.

MANAGEMENT FEES

During their most recent fiscal years, each of the Funds paid management fees to
the Advisor at the following rates:

<TABLE>
<CAPTION>
Fees Paid as a Percentage
FUNDS of Net Assets
- -------------------------------------------------------------------
<S> <C>
Money Market Fund................. .45%
Tax-Exempt Money Market Fund...... .45%
California Money Fund............. .45%
Short Term High Quality Bond
Fund............................ .50%
Target Maturity 2002 Fund......... .25%
U.S. Government Securities Fund... .625%
Income Fund....................... .625%
High Yield Fund................... .625% of the first $250 million,
.50% thereafter*
Bond & Stock Fund................. .625%
Growth & Income Fund.............. .625%
Tax-Exempt Bond Fund.............. .50%
California Municipal Fund......... .70%
California Insured Intermediate
Municipal Fund.................. .70%
Florida Insured Municipal Fund.... .70%
Northwest Fund.................... .625%
Growth Fund....................... 1.10%
Emerging Growth Fund.............. 1.05%
International Growth Fund......... 1.10%
</TABLE>

*The High Yield Fund has not completed a full fiscal year. These numbers
represent the percentages of net assets the Fund has agreed to pay the Advisor
in its first full fiscal year.

The Advisor has voluntarily undertaken, through October 31, 1999, to waive a
portion of its management fees for the following Funds to the extent that total
Fund operating expenses for Class A shares would otherwise exceed the indicated
annual rates:

<TABLE>
<CAPTION>
Total Fund
FUNDS Operating Expenses
- -----------------------------------------------------------------
<S> <C>
California Money Fund........................ 0.85%
Short-Term High Quality Bond Fund............ 0.82%
Target Maturity 2002 Fund.................... 1.00%
California Municipal Fund.................... 0.88%
California Insured Intermediate Municipal
Fund....................................... 1.00%
Florida Insured Municipal Fund............... 1.00%
Growth & Income Fund......................... 1.01%
Growth Fund.................................. 1.30%
Income Portfolio............................. 1.00%
Flexible Income Portfolio.................... 1.00%
</TABLE>

In addition, the Distributor has agreed to waive its distribution fees for Class
B shares of the following Funds to the extent that total Fund operating expenses
for Class B shares would otherwise exceed the indicated annual rates.

<TABLE>
<CAPTION>
Total Fund
FUNDS Operating Expenses
- -----------------------------------------------------------------
<S> <C>
Income Fund.................................. 1.83%
Growth & Income Fund......................... 1.76%
Growth Fund.................................. 2.05%
</TABLE>

The Advisor has also undertaken to waive its management fees and reimburse
expenses to the extent necessary to limit the total Fund operating expenses for
Class A shares of the following funds to the indicated annual rates through
November 1, 2000 (except that beginning on November 1, 1999, the waivers and
reimbursements for the Tax-Exempt Money Market Fund and the Short Term High
Quality Bond Fund may be adjusted, so long as total fund operating expenses as a
percentage of assets do not exceed the annual rate of 0.72% and 1.00%,
respectively):

<TABLE>
<CAPTION>
Total Fund
FUNDS Operating Expenses
- -----------------------------------------------------------------
<S> <C>
Money Market Fund............................ 0.73%
Tax-Exempt Money Market Fund................. 0.57%
Short Term High Quality Bond Fund............ 0.82%
U.S. Government Security Fund................ 0.96%
Tax-Exempt Bond Fund......................... 0.88%
California Municipal Fund.................... 0.88%
Income Fund.................................. 1.04%
Growth & Income Fund......................... 1.00%
Growth Fund.................................. 1.30%
</TABLE>

In addition, the Advisor has undertaken, through October 31, 1999, to waive all
of its management fees for the High Yield Fund.

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND IN THE FUNDS'
AND PORTFOLIOS' OFFICIAL SALES LITERATURE IN CONNECTION WITH THE OFFERING OF THE
FUNDS' AND PORTFOLIOS' SHARES, AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUNDS
OR PORTFOLIOS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER IN ANY STATE IN
WHICH, OR TO ANY PERSON TO WHOM, SUCH OFFER MAY NOT LAWFULLY BE MADE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

63
<PAGE> 66

FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD

The financial highlights table is intended to help you understand the Funds' and
Portfolios' financial performance for the past 5 years (or, if shorter, the
period of the Fund's or Portfolios' operations). Certain information reflects
financial results for a single Fund or Portfolio share. The total returns in the
table represent the rate that an investor would have earned (or lost) on an
investment in the Fund or Portfolio (assuming reinvestment of all dividends and
distributions). The information provided below with respect to each of the Funds
within WM Trust I (Money Market, Tax-Exempt Money Market, Income, U.S.
Government Securities, Tax-Exempt Bond, Bond & Stock, Growth & Income and
Northwest Funds) for periods prior to October 31, 1998 has been audited by
LeMaster & Daniels PLLC. The information provided below with respect to each of
the Funds within WM Trust II (California Money, Short Term High Quality Bond,
Target Maturity 2002, California Municipal, California Insured Intermediate
Municipal, Florida Insured Municipal, Growth, International Growth and Emerging
Growth Funds) and the Portfolios for periods prior to October 31, 1998 has been
audited by PricewaterhouseCoopers LLP. The information for the period ended
October 31, 1998 has been audited by Deloitte & Touche LLP. The Reports of
Independent Accountants for each such period along with the Funds' and
Portfolios' financial statements, are included in the Annual Reports to
Shareholders for such periods, which are available upon request.

MONEY MARKET FUND CLASS A SHARES(15)

<TABLE>
<CAPTION>
FISCAL
PERIOD ENDED YEAR ENDED DECEMBER 31,
OCTOBER 31, -----------------------------------------------
1998(1) 1997 1996 1995 1994 1993
--------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period........................ $1.0000 $1.0000 $1.0000 $1.0000 $1.0000 $1.0000
------- ------- ------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income..................................... 0.041 0.0493 0.0476 0.0519 0.0341 0.024
Net Realized & Unrealized Gain on Investments............. - - - - - -
------- ------- ------- ------- ------- -------
Total From Investment Operations........................ 0.041 0.0493 0.0476 0.0519 0.0341 0.024
------- ------- ------- ------- ------- -------
LESS DISTRIBUTIONS:
Dividends from Net Investment Income...................... (0.041) (0.0493) (0.0476) (0.0519) (0.0341) (0.024)
Distributions from Net Realized Gains..................... - - - - - -
------- ------- ------- ------- ------- -------
Total Distributions..................................... (0.041) (0.0493) (0.0476) (0.0519) (0.0341) (0.024)
------- ------- ------- ------- ------- -------
Net Asset Value, End of Period.............................. $1.0000 $1.0000 $1.0000 $1.0000 $1.0000 $1.0000
======= ======= ======= ======= ======= =======
Total Return(2)............................................. 4.19% 5.04% 4.88% 5.33% 3.47% 2.41%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period ($1,000's)...................... $403,443 $260,877 $229,355 $171,225 $125,651 $135,187
Ratio of Operating Expenses to Average Net Assets(3)...... 0.60%(5) 0.75% 0.79% 0.92% 0.95% 0.97%
Ratio of Net Investment Income to Average Net Assets...... 4.94%(5) 4.93% 4.77% 5.19% 3.39% 2.38%
Ratio of Operating Expenses to Average Net Assets Without
Fee Waivers, Expenses Absorbed and/or Credits Allowed by
the Custodian............................................ 0.67%(5) 0.83% 0.89% 1.04% 1.04% 1.03%
</TABLE>

MONEY MARKET FUND CLASS B SHARES(15)

<TABLE>
<CAPTION>
FISCAL
PERIOD ENDED YEAR ENDED DECEMBER 31,
OCTOBER 31, --------------------------------------
1998(1) 1997 1996 1995 1994(14)
-----------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period........................ $1.0000 $1.0000 $1.0000 $1.0000 $1.0000
------- ------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income..................................... 0.035 0.0407 0.0384 0.0421 0.018
Net Realized & Unrealized Gain on Investments............. - - - - -
------- ------- ------- ------- -------
Total From Investment Operations........................ 0.035 0.0407 0.0384 0.0421 0.018
------- ------- ------- ------- -------
LESS DISTRIBUTIONS:
Dividends from Net Investment Income...................... (0.035) (0.0407) (0.0384) (0.0421) (0.018)
Distributions from Net Realized Gains..................... - - - - -
------- ------- ------- ------- -------
Total Distributions..................................... (0.035) (0.0407) (0.0384) (0.0421) (0.018)
------- ------- ------- ------- -------
Net Asset Value, End of Period.............................. $1.0000 $1.0000 $1.0000 $1.0000 $1.0000
======= ======= ======= ======= =======
Total Return(2)............................................. 3.52% 4.15% 3.91% 4.30% 2.78%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period ($1,000's)...................... $6,619 $471 $117 $74 $11
Ratio of Operating Expenses to Average Net Assets(3)...... 1.64%(5) 1.59% 1.69% 1.94% 1.43%(5)
Ratio of Net Investment Income to Average Net Assets...... 3.96%(5) 4.15% 3.87% 4.19% 3.24%(5)
Ratio of Operating Expenses to Average Net Assets Without
Fee Waivers, Expenses Absorbed and/or Credits Allowed by
the Custodian............................................ 1.65%(5) 1.80% 1.90% 2.10% 2.62%(5)
</TABLE>

Footnotes appear on page 84

64
<PAGE> 67
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD

TAX-EXEMPT MONEY MARKET FUND CLASS A SHARES(16)

<TABLE>
<CAPTION>
FISCAL
PERIOD ENDED YEAR ENDED DECEMBER 31,
OCTOBER 31, ---------------------------------------------------
1998(1) 1997 1996 1995 1994 1993
------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period........................ $1.0000 $1.0000 $1.0000 $1.0000 $1.0000 $1.0000
------- ------- ------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income..................................... 0.026 0.0314 0.0301 0.034 0.0235 .020
Net Realized & Unrealized Gain on Investments............. - - - 0.000(8) - -
------- ------- ------- ------- ------- -------
Total From Investment Operations........................ 0.026 0.0314 0.0301 0.034 0.0235 .020
------- ------- ------- ------- ------- -------
LESS DISTRIBUTIONS:
Dividends from Net Investment Income...................... (0.026) (0.0314) (0.0301) (0.034) (0.0235) (.020)
Distributions from Net Realized Gains..................... - - - 0.000(8) - -
------- ------- ------- ------- ------- -------
Total Distributions..................................... (0.026) 0.0314 (0.0301) (0.034) (0.0235) (0.20)
------- ------- ------- ------- ------- -------
Net Asset Value, End of Period.............................. $1.0000 $1.0000 $1.0000 $1.0000 $1.0000 $1.0000
======= ======= ======= ======= ======= =======
Total Return(2)............................................. 2.60% 3.18% 3.05% 4.01% 2.37% 2.06%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period ($1,000's)...................... $25,441 $32,134 $31,974 $30,988 $33,612 $34,513
Ratio of Operating Expenses to Average Net Assets(3)...... 0.55%(5) 0.57% 0.57% 0.61% 0.60% 0.50%
Ratio of Net Investment Income to Average Net Assets...... 3.09%(5) 3.14% 3.01% 3.39% 2.33% 2.03%
Ratio of Operating Expenses to Average Net Assets Without
Fee Waivers, Expenses Absorbed and/or Credits Allowed by
the Custodian............................................ 0.72%(5) 0.71% 0.72% 0.81% 0.76% 0.77%
</TABLE>

TAX-EXEMPT MONEY MARKET FUND CLASS B SHARES(16)

<TABLE>
<CAPTION>
FISCAL
PERIOD ENDED YEAR ENDED DECEMBER 31, MAY 2, 1994 TO
OCTOBER 31, --------------------------- DECEMBER 31,
1998(1) 1997 1996 1995 1994(4)
-----------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period........................ $1.0000 $1.0000 $1.0000 $1.0000 $1.0000
------- ------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income..................................... 0.018 0.0223 0.0199 0.023 0.0097
Net Realized & Unrealized Gain on Investments............. - - - 0.00(8) -
------- ------- ------- ------- -------
Total From Investment Operations........................ 0.018 0.0223 0.0199 0.023 0.0097
------- ------- ------- ------- -------
LESS DISTRIBUTIONS:
Dividends from Net Investment Income...................... (0.018) (0.0223) (0.0199) (0.023) (0.0097)
Distributions from Net Realized Gains..................... - - - 0.00(8) -
------- ------- ------- ------- -------
Total Distributions..................................... (0.018) (0.0223) (0.0199) (0.023) (0.0097)
------- ------- ------- ------- -------
Net Asset Value, End of Period.............................. $1.0000 $1.0000 $1.0000 $1.0000 $1.0000
======= ======= ======= ======= =======
Total Return(2)............................................. 1.79% 2.26% 2.01% 2.83% 1.45%(5)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period ($1,000's)...................... $212 $12 $2 $1 $1
Ratio of Operating Expenses to Average Net Assets(3)...... 1.63%(5) 1.50% 1.53% 1.73% 1.66%(5)
Ratio of Net Investment Income to Average Net Assets...... 2.01%(5) 2.32% 1.99% 2.12% 1.38%(5)
Ratio of Operating Expenses to Average Net Assets Without
Fee Waivers, Expenses Absorbed and/or Credits Allowed by
the Custodian............................................ 1.80%(5) 2.27% 4.22% 3.66% 3.61%(5)
</TABLE>

Footnotes appear on page 84

65
<PAGE> 68
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD

CALIFORNIA MONEY FUND CLASS A SHARES

<TABLE>
<CAPTION>
FISCAL
PERIOD ENDED YEAR ENDED JUNE 30,
OCTOBER 31, -----------------------------------------------
1998(1) 1998(6) 1997 1996 1995 1994
---------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period........................ $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
------- ------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income..................................... 0.008 0.027 0.028 0.029 0.028 0.018
Net Realized & Unrealized Gain on Investments............. - - - - - -
------- ------ ------ ------ ------ ------
Total From Investment Operations........................ 0.008 0.027 0.028 0.029 0.028 0.018
------- ------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends from Net Investment Income...................... (0.008) (0.027) (0.028) (0.029) (0.028) (0.018)
Distributions in Excess of Net Investment Income.......... - - - - - -
Distributions from Net Realized Gains..................... - - - - - -
Distributions in Excess of Net Realized Gains............. - - - - - -
Distributions from Capital................................ - - - - - -
------- ------ ------ ------ ------ ------
Total Distributions..................................... (0.008) (0.027) (0.028) (0.029) (0.028) (0.018)
------- ------ ------ ------ ------ ------
Net Asset Value, End of Period.............................. $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
======= ====== ====== ====== ====== ======
Total Return(2)............................................. 0.99% 2.73% 2.81% 3.00% 2.79% 1.81%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period ($1,000's)...................... $37,167 $37,403 $42,923 $51,211 $48,836 $62,500
Ratio of Operating Expenses to Average Net Assets(3)...... 0.73%(5) 0.82% 0.85% 0.85% 0.85% 0.85%
Ratio of Net Investment Income to Average Net Assets...... 2.31%(5) 2.71% 2.75% 2.94% 2.73% 1.80%
Ratio of Operating Expenses to Average Net Assets Without
Fee Waivers, Expenses Absorbed and/or Credits Allowed by
the Custodian............................................ 0.87%(5) 0.99% 1.14% 1.14% 1.15% 1.27%
</TABLE>

CALIFORNIA MONEY FUND CLASS B SHARES

<TABLE>
<CAPTION>
FISCAL
PERIOD ENDED YEAR ENDED JUNE 30,
OCTOBER 31, --------------------------------------
1998(1) 1998(6) 1997 1996 1995(7)
------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period........................ $1.00 $1.00 $1.00 $1.00 $1.00
------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income..................................... 0.005 0.019 0.020 0.022 0.020
Net Realized & Unrealized Gain on Investments............. - - - - -
------ ------ ------ ------ ------
Total From Investment Operations........................ 0.005 0.019 0.020 0.022 0.020
------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends from Net Investment Income...................... (0.005) (0.019) (0.020) (0.022) (0.020)
Distributions in Excess of Net Investment Income.......... - - - - -
Distributions from Net Realized Gains..................... - - - - -
Distributions in Excess of Net Realized Gains............. - - - - -
Distributions from Capital................................ - - - - -
------ ------ ------ ------ ------
Total Distributions..................................... (0.005) (0.019) (0.020) (0.022) (0.020)
------ ------ ------ ------ ------
Net Asset Value, End of Period.............................. $1.00 $1.00 $1.00 $1.00 $1.00
====== ====== ====== ====== ======
Total Return(2)............................................. 0.63% 1.96% 2.03% 2.22% 2.04%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period ($1,000's)...................... $58 $63 $68 $147 $79
Ratio of Operating Expenses to Average Net Assets(3)...... 1.60%(5) 1.60% 1.60% 1.60% 1.60%
Ratio of Net Investment Income to Average Net Assets...... 1.44%(5) 1.88% 2.00% 2.19% 1.98%
Ratio of Operating Expenses to Average Net Assets Without
Fee Waivers, Expenses Absorbed and/or Credits Allowed by
the Custodian............................................ 2.05%(5) 1.82%(8) 1.89% 1.89% 1.90%
</TABLE>

Footnotes appear on page 84

66
<PAGE> 69
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD

SHORT TERM HIGH QUALITY BOND FUND CLASS A SHARES

<TABLE>
<CAPTION>
FISCAL NOVEMBER 1,
PERIOD ENDED YEAR ENDED JUNE 30, 1993 TO
OCTOBER 31, ------------------------------------------------------- JUNE 30,
1998(1) 1998(6) 1997 1996 1995 1994(4)
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Period.......................... $2.32 $2.32 $2.32 $2.35 $2.39 $2.50
------- ------- ------- ------- ------- -------
INCOME FROM INVESTMENT
OPERATIONS:
Net Investment Income......... 0.04 0.13 0.14 0.15(9) 0.08 0.09
Net Realized & Unrealized
Gain/(Loss) on Investments... 0.03 0.00(8) 0.00(8) (0.03) 0.02 (0.11)
------- ------- ------- ------- ------- -------
Total From Investment
Operations.................. 0.07 0.13 0.14 0.12 0.10 (0.02)
------- ------- ------- ------- ------- -------
LESS DISTRIBUTIONS:
Dividends from Net Investment
Income....................... (0.04) (0.13) (0.14) (0.15) (0.08) (0.09)
Distributions in Excess of Net
Investment Income............ - - - - (0.06) -
Distributions from Net
Realized Gains............... - - - - - -
Distributions in Excess of Net
Realized Gains............... - - - - - -
Distributions from Capital.... - (0.00)(8) - (0.00)(8) (0.00)(8) -
------- ------- ------- ------- ------- -------
Total Distributions......... (0.04) (0.13) (0.14) (0.15) (0.14) (0.09)
------- ------- ------- ------- ------- -------
Net Asset Value, End of
Period.......................... $2.35 $2.32 $2.32 $2.32 $2.35 $2.39
======= ======= ======= ======= ======= =======
Total Return(2)................. 3.11% 5.91% 6.15% 5.05% 4.42% (0.73)%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period
($1,000's)................... $32,748 $35,551 $13,685 $32,440 $43,811 $21,771
Ratio of Operating Expenses to
Average Net Assets(3)........ 0.82%(5) 0.86% 0.82% 0.75% 0.75% 0.00%(5)
Ratio of Net Investment Income
to Average Net Assets........ 5.44%(5) 5.71% 6.50% 6.22% 6.10% 5.70%(5)
Portfolio Turnover Rate....... 19% 138% 51% 225% 137% 95%
Ratio of Operating Expenses to
Average Net Assets Without
Fee Waivers, Expenses
Absorbed and/or Credit
Allowed by the Custodian..... 1.40%(5) 1.32%(10) 1.45%(10) 1.42%(10) 1.39% 1.61%(5)
</TABLE>

SHORT TERM HIGH QUALITY BOND FUND CLASS B SHARES

<TABLE>
<CAPTION>
FISCAL
PERIOD ENDED YEAR ENDED JUNE 30,
OCTOBER 31, ----------------------------------------------------
1998(1) 1998(6) 1997 1996 1995(7)
-------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period.................. $2.32 $2.32 $2.32 $2.35 $2.39
------ ------ ----- ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income............................... 0.04 0.12 0.12 0.13(9) 0.06
Net Realized & Unrealized Gain/(Loss) on
Investments........................................ 0.03 0.00(8) 0.00(8) (0.03) 0.02
------ ------ ----- ------ ------
Total From Investment Operations.................. 0.07 0.12 0.12 0.10 0.08
------ ------ ----- ------ ------
LESS DISTRIBUTIONS:
Dividends from Net Investment Income................ (0.04) (0.12) (0.12) (0.13) (0.06)
Distributions in Excess of Net Investment Income.... - - - - (0.06)
Distributions from Net Realized Gains............... - - - - -
Distributions in Excess of Net Realized Gains....... - - - - -
Distributions from Capital.......................... - (0.00)(8) - (0.00)(8) (0.00)(8)
------ ------ ----- ------ ------
Total Distributions............................... (0.04) (0.12) (0.12) (0.13) (0.12)
------ ------ ----- ------ ------
Net Asset Value, End of Period........................ $2.35 $2.32 $2.32 $2.32 $2.35
====== ====== ===== ====== ======
Total Return(2)....................................... 2.85% 5.13 5.37 4.27 3.64
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period ($1,000's)................ $3,747 $3,459 $800 $3,437 $3,015
Ratio of Operating Expenses to Average Net
Assets(3).......................................... 1.57%(5) 1.61% 1.57% 1.50% 1.50%
Ratio of Net Investment Income to Average Net
Assets............................................. 4.69%(5) 4.96% 5.75% 5.47% 5.35%
Portfolio Turnover Rate............................. 19% 138% 51% 225% 137%
Ratio of Operating Expenses to Average Net Assets
Without Fee Waivers, Expenses Absorbed and/or
Credit Allowed by the Custodian.................... 2.18%(5) 2.07(10) 2.20(10) 2.17(10) 2.14(10)
</TABLE>

Footnotes appear on page 84

67
<PAGE> 70
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD

TARGET MATURITY 2002 FUND CLASS A SHARES

<TABLE>
<CAPTION>
FISCAL MARCH 20,
PERIOD ENDED YEAR ENDED JUNE 30, 1995 TO
OCTOBER 31, --------------------------- JUNE 30,
1998(1) 1998(6) 1997 1996 1995(4)
-------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period........................ $10.86 $10.69 $10.72 $10.78 $10.00
------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income..................................... 0.23 0.61(9) 0.62(9) 0.63 0.12
Net Realized & Unrealized Gain/(Loss) on Investments...... 0.57 0.40 0.11 (0.30) 0.66
------ ------ ------ ------ ------
Total From Investment Operations........................ 0.80 1.01 0.73 0.33 0.78
------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends from Net Investment Income...................... - (0.73) (0.71) (0.39) -
Distributions from Net Realized Gains..................... - (0.11) (0.05) - -
------ ------ ------ ------ ------
Total Distributions..................................... - (0.84) (0.76) (0.39) -
------ ------ ------ ------ ------
Net Asset Value, End of Period.............................. $11.66 $10.86 $10.69 $10.72 $10.78
====== ====== ====== ====== ======
Total Return(2)............................................. 7.37% 9.78% 6.95% 2.91% 7.80%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period ($1,000's)...................... $2,385 $2,536 $2,816 $3,125 $2,626
Ratio of Operating Expenses to Average Net Assets(3)...... 0.64%(5) 0.62% 0.64% 0.62% 0.74%(5)
Ratio of Net Investment Income to Average Net Assets...... 5.92%(5) 5.61% 5.80% 5.66% 5.22%(5)
Portfolio Turnover Rate................................... 0% 0% 0% 5% 0%
Ratio of Operating Expenses to Average Net Assets Without
Credits Allowed by the Custodian......................... - 0.71%(10) 0.72%(10) 0.70%(10) N/A
Ratio of Operating Expenses to Average Net Assets Without
Fee Waivers, Expenses Absorbed and/or Credits Allowed by
the Custodian............................................ 1.47%(5) 2.63%(10) 2.89%(10) 2.55%(10) 4.71%(5)
</TABLE>

Footnotes appear on page 84

68
<PAGE> 71
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD

U.S. GOVERNMENT SECURITIES FUND CLASS A SHARES(17)

<TABLE>
<CAPTION>
FISCAL
PERIOD ENDED YEAR ENDED DECEMBER 31,
OCTOBER 31, ----------------------------------------------------
1998(1) 1997 1996 1995 1994 1993
-------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period........................ $10.84 $10.46 $10.84 $9.64 $10.79 $10.63
-------- -------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income..................................... 0.54 0.62 0.63 0.63 0.63 0.69
Net Realized & Unrealized Gain/(Loss) on Investments...... 0.14 0.38 (0.38) 1.20 (1.15) 0.16
-------- -------- -------- -------- -------- --------
Total From Investment Operations........................ 0.68 1.00 0.25 1.83 (0.52) 0.85
-------- -------- -------- -------- -------- --------
LESS DISTRIBUTIONS:
Dividends from Net Investment Income...................... (0.54) (0.62) (0.63) (0.63) (0.63) (0.69)
-------- -------- -------- -------- -------- --------
Net Asset Value, End of Period.............................. $10.98 $10.84 $10.46 $10.84 $9.64 $10.79
======== ======== ======== ======== ======== ========
Total Return(2)............................................. 6.38% 9.92% 2.48% 19.45% (4.91)% 8.12%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period ($1,000's)...................... $266,334 $107,054 $138,159 $177,310 $188,068 $268,112
Ratio of Operating Expenses to Average Net Assets(3)...... 0.92%(5) 1.05% 0.97% 1.01% 0.97% 0.99%
Ratio of Net Investment Income to Average Net Assets...... 5.99%(5) 5.92% 6.01% 6.08% 6.19% 6.29%
Portfolio Turnover Rate................................... 12% 6% 16% 8% 34% 51%
Ratio of operating expenses to average net assets w/o fee
waivers or fees reduced by credits allowed by the
custodian................................................ 1.45%(5) 1.05% 0.97% 1.01% 0.97% 0.99%
Ratio of operating expenses to average net assets
including interest expense............................... 1.36%(5) N/A N/A N/A N/A N/A
</TABLE>

U.S. GOVERNMENT SECURITIES FUND CLASS B SHARES(17)

<TABLE>
<CAPTION>
FISCAL MARCH 20,
PERIOD ENDED YEAR ENDED DECEMBER 31, 1994 TO
OCTOBER 31, ------------------------ DECEMBER 31,
1998(1) 1997 1996 1995 1994(8)
------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period........................ $10.84 $10.46 $10.84 $9.64 $10.24
------- ------ ------ ------ -------
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income..................................... 0.47 0.54 0.54 0.54 0.41
Net Realized & Unrealized Gain/(Loss) on Investments...... 0.12 0.38 (0.38) 1.20 (0.60)
------- ------ ------ ------ -------
Total From Investment Operations........................ 0.59 0.92 0.16 1.74 (0.19)
------- ------ ------ ------ -------
LESS DISTRIBUTIONS:
Dividends from Net Investment Income...................... (0.46) (0.54) (0.54) (0.54) (0.41)
------- ------ ------ ------ -------
Net Asset Value, End of Period.............................. $10.97 $10.84 $10.46 $10.84 $9.64
======= ====== ====== ====== =======
Total Return(2)............................................. 5.54% 9.03% 1.58% 18.48% (1.86)%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period ($1,000's)...................... $28,747 $3,352 $2,963 $2,206 $1,063
Ratio of Operating Expenses to Average Net Assets(3)...... 1.67%(5) 1.84% 1.85% 1.84% 1.76%(5)
Ratio of Net Investment Income to Average Net Assets...... 5.24%(5) 5.08% 5.14% 5.20% 5.43%(5)
Portfolio Turnover Rate................................... 12% 6% 16% 8% 34%
Ratio of operating expenses to average net assets w/o fee
waivers or fees reduced by credits allowed by the
custodian................................................ 2.23%(5) 1.84% 1.85% 1.84% 1.76%
Ratio of operating expenses to average net assets
including interest expense............................... 2.12%(5) N/A N/A N/A N/A
</TABLE>

Footnotes appear on page 84

69
<PAGE> 72
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD

INCOME FUND CLASS A SHARES(19)

<TABLE>
<CAPTION>
FISCAL
PERIOD ENDED YEAR ENDED DECEMBER 31,
OCTOBER 31, ------------------------------------------------
1998(1) 1997 1996 1995 1994 1993
---------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period:....................... $9.48 $9.15 $9.44 $8.29 $9.33 $8.99
-------- ------- ------- ------- ------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income..................................... 0.53 0.60 0.59 0.59 0.60 0.61
Net Realized & Unrealized Gain/(Loss) on Investments...... (0.04)(12) 0.33 (0.29) 1.15 (1.04) 0.34
-------- ------- ------- ------- ------- --------
Total From Investment Operations........................ 0.49 0.93 0.30 1.74 (0.44) 0.95
-------- ------- ------- ------- ------- --------
LESS DISTRIBUTIONS:
Dividends from Net Investment Income...................... (0.53) (0.60) (0.59) (0.59) (0.60) (0.61)
-------- ------- ------- ------- ------- --------
Net Asset Value, End of Period.............................. $9.44 $9.48 $9.15 $9.44 $8.29 $9.33
======== ======= ======= ======= ======= ========
Total Return(2)............................................. 5.21% 10.51% 3.46% 21.58% (4.82)% 10.82%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period ($1,000's)...................... $213,397 $77,864 $86,657 $97,534 $88,102 $104,876
Ratio of Operating Expenses to Average Net Assets(3)...... 1.07%(5) 1.08% 1.03% 1.08% 1.04% 1.08%
Ratio of Net Investment Income to Average Net Assets...... 6.66%(5) 6.47% 6.52% 6.59% 6.83% 6.58%
Portfolio Turnover Rate................................... 37% 27% 42% 43% 26% 51%
</TABLE>

INCOME FUND CLASS B SHARES(19)

<TABLE>
<CAPTION>
FISCAL MARCH 30,
PERIOD ENDED YEAR ENDED DECEMBER 31, 1994 TO
OCTOBER 31, ------------------------ APRIL 30,
1998(1) 1997 1996 1995 1994(18)
------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period:....................... $9.49 $9.17 $9.46 $8.30 $8.85
------- ------ ------ ------ -------
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income..................................... 0.46 0.53 0.52 0.51 0.40
Net Realized & Unrealized Gain/(Loss) on Investments...... (0.04)(12) 0.32 (0.29) 1.16 (0.55)
------- ------ ------ ------ -------
Total From Investment Operations........................ 0.42 0.85 0.23 1.67 (0.15)
------- ------ ------ ------ -------
LESS DISTRIBUTIONS:
Dividends from Net Investment Income...................... (0.46) (0.53) (0.52) (0.51) (0.40)
------- ------ ------ ------ -------
Net Asset Value, End of Period.............................. $9.45 $9.49 $9.17 $9.46 $8.30
======= ====== ====== ====== =======
Total Return(2)............................................. 4.51% 9.51% 2.59% 20.70% (1.67)%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period ($1,000's)...................... $34,321 $9,691 $7,122 $4,452 $2,299
Ratio of Operating Expenses to Average Net Assets(3)...... 1.84%(5) 1.86% 1.89% 1.91% 1.80%(5)
Ratio of Net Investment Income to Average Net Assets...... 5.89%(5) 5.65% 5.69% 5.73% 6.25%(5)
Portfolio Turnover Rate................................... 37% 27% 42% 43% 26%
</TABLE>

Footnotes appear on page 84

70
<PAGE> 73
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD

TAX EXEMPT BOND FUND CLASS A SHARES(21)

<TABLE>
<CAPTION>
FISCAL
PERIOD ENDED YEAR ENDED DECEMBER 31,
OCTOBER 31, -------------------------------------------
1998(1) 1997 1996 1995 1994 1993
----------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period........................ $8.09 $7.83 $8.02 $7.13 $8.04 $7.58
----- ----- ------ ------ ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income..................................... 0.34 0.38 0.38 0.38 0.39 0.40
Net Realized & Unrealized Gain/(Loss) on Investments...... 0.02 0.27 (0.19) 0.89 (0.91) 0.54
----- ----- ------ ------ ------- -------
Total From Investment Operations........................ 0.36 0.65 0.19 1.27 (0.52) 0.94
----- ----- ------ ------ ------- -------
LESS DISTRIBUTIONS:
Dividends from Net Investment Income...................... (0.34) (0.38) (0.38) (0.38) (0.39) (0.40)
Distribution from Capital Gains........................... - (0.01) - - - (0.08)
----- ----- ------ ------ ------- -------
Total Distributions..................................... (0.34) (0.39) (0.38) (0.38) (0.39) (0.48)
----- ----- ------ ------ ------- -------
Net Asset Value, End of Period.............................. $8.11 $8.09 $7.83 $8.02 $7.13 $8.04
===== ===== ====== ====== ======= =======
Total Return(2)............................................. 4.58% 8.59% 2.52% 18.25% (6.53)% 12.54%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period ($1,000's)...................... $301,162 $188,021 $203,606 $230,055 $215,438 $259,045
Ratio of Operating Expenses to Average Net Assets(3)...... 0.84%(5) 0.80% 0.75% 0.81% 0.79% 0.81%
Ratio of Net Investment Income to Average Net Assets...... 5.14%(5) 4.84% 4.90% 5.03% 5.23% 4.97%
Portfolio Turnover Rate................................... 6% 21% 22% 8% 12% 19%
</TABLE>

TAX-EXEMPT BOND FUND CLASS B SHARES(21)

<TABLE>
<CAPTION>
FISCAL MARCH 20,
PERIOD ENDED YEAR ENDED DECEMBER 31, 1994 TO
OCTOBER 31, ------------------------- DECEMBER 31,
1998(1) 1997 1996 1995 1994(18)
-------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period........................ $8.09 $7.83 $8.02 $7.13 $7.49
----- ----- ----- ------ -------
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income..................................... 0.28 0.32 0.31 0.32 0.25
Net Realized & Unrealized Gain/(Loss) on Investments...... 0.03 0.27 (0.19) 0.89 (0.36)
----- ----- ----- ------ -------
Total From Investment Operations........................ 0.31 0.59 0.12 1.21 (0.11)
----- ----- ----- ------ -------
LESS DISTRIBUTIONS:
Dividends from Net Investment Income...................... (0.29) (0.32) (0.31) (0.32) (0.25)
Distribution from Capital Gains........................... - (0.01) - - -
----- ----- ----- ------ -------
Total Distributions..................................... (0.29) (0.33) - - -
----- ----- ----- ------ -------
Net Asset Value, End of Period.............................. $8.11 $8.09 $7.83 $8.02 $7.13
===== ===== ===== ====== =======
Total Return(2)............................................. 3.88% 7.71% 1.61% 17.30% (1.46)%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period ($1,000's)...................... $17,344 $8,110 $5,266 $2,682 $1,258
Ratio of Operating Expenses to Average Net Assets(3)...... 1.62%(5) 1.62% 1.65% 1.62% 1.58%(5)
Ratio of Net Investment Income to Average Net Assets...... 4.36%(5) 4.00% 4.01% 4.18% 4.53%(5)
Portfolio Turnover Rate................................... 6% 21% 22% 8% 12%
</TABLE>

Footnotes appear on page 84

71
<PAGE> 74
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD

CALIFORNIA MUNICIPAL FUND CLASS A SHARES

<TABLE>
<CAPTION>
FISCAL
PERIOD ENDED YEAR ENDED JUNE 30,
OCTOBER 31, ------------------------------------------------
1998(1) 1998(6) 1997 1996 1995 1994
---------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period........................ $11.33 $10.92 $10.60 $10.53 $10.38 $11.22
------ ------ ------ ------ ------ -------
INCOME FROM INVESTMENT OPERATIONS:
Net Investments Income.................................... 0.19(9) 0.58(9) 0.59 0.60(9) 0.61 0.61
Net Realized & Unrealized Gain/(Loss) on Investments...... 0.13 0.41 0.32 0.07 0.15 (0.82)
------ ------ ------ ------ ------ -------
Total From Investment Operations........................ 0.32 0.99 0.91 0.67 0.76 (0.21)
------ ------ ------ ------ ------ -------
LESS DISTRIBUTIONS:
Dividends from Net Investment Income...................... (0.19) (0.58) (0.59) (0.60) (0.61) (0.61)
Distributions in Excess of Net Investment Income.......... - - - - - (0.00)(8)
Distributions from Net Realized Gains..................... - - - - (0.00)(8) -
Distributions in Excess of Net Realized Gains............. - - - - - (0.02)
Distributions from Capital................................ - - - - - -
------ ------ ------ ------ ------ -------
Total Distributions..................................... (0.19) (0.58) (0.59) (0.60) (0.61) (0.63)
------ ------ ------ ------ ------ -------
Net Asset Value, End of Period.............................. $11.46 $11.33 $10.92 $10.60 $10.53 $10.38
====== ====== ====== ====== ====== =======
Total Return(2)............................................. 2.82% 9.26% 8.83% 6.40% 7.57% (2.19)%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period ($1,000's)...................... $287,590 $290,328 $318,251 $372,177 $405,967 $509,223
Ratio of Operating Expenses to Average Net Assets(3)...... 0.97%(5) 1.00% 0.97% 0.94% 0.85% 0.79%
Ratio of Net Investment Income to Average Net Assets...... 4.87%(5) 5.18% 5.51% 5.56% 5.89% 5.45%
Portfolio Turnover Rate................................... 28% 87% 36% 17% 22% 50%
Ratio of Operating Expenses to Average Net Assets Without
Fee Waivers, Expenses Absorbed and/or Credits Allowed by
the Custodian............................................ 1.05%(5) 1.19%(10) 1.26%(10) 1.29%(10) 1.29% 1.39%
</TABLE>

CALIFORNIA MUNICIPAL FUND CLASS B SHARES

<TABLE>
<CAPTION>
FISCAL
PERIOD ENDED YEAR ENDED JUNE 30,
OCTOBER 31, -----------------------------------
1998(1) 1998(6) 1997 1996 1995(7)
--------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period........................ $11.33 $10.92 $10.60 $10.53 $10.38
------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net Investments Income.................................... 0.16(9) 0.50(9) 0.51 0.51(9) 0.53
Net Realized & Unrealized Gain on Investments............. 0.13 0.41 0.32 0.07 0.15
------ ------ ------ ------ ------
Total From Investment Operations........................ 0.29 0.91 0.83 0.58 0.68
------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends from Net Investment Income...................... (0.16) (0.50) (0.51) (0.51) (0.53)
Distributions in Excess of Net Investment Income.......... - - - - -
Distributions from Net Realized Gains..................... - - - - (0.00)(8)
Distributions in Excess of Net Realized Gains............. - - - - -
Distributions from Capital................................ - - - - -
------ ------ ------ ------ ------
Total Distributions..................................... (0.16) (0.50) (0.51) (0.51) (0.53)
------ ------ ------ ------ ------
Net Asset Value, End of Period.............................. $11.46 $11.33 $10.92 $10.60 $10.53
====== ====== ====== ====== ======
Total Return(2)............................................. 2.56% 8.45% 8.02% 5.61% 6.78%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period ($1,000's)...................... $49,683 $34,537 $25,219 $20,543 $7,230
Ratio of Operating Expenses to Average Net Assets(3)...... 1.72%(5) 1.75% 1.72% 1.69% 1.60%
Ratio of Net Investment Income to Average Net Assets...... 4.12%(5) 4.42% 4.76% 4.81% 5.14%
Portfolio Turnover Rate................................... 28% 87% 36% 17% 22%
Ratio of Operating Expenses to Average Net Assets Without
Fee Waivers, Expenses Absorbed and/or Credits Allowed by
the Custodian............................................ 1.81%(5) 1.95%(10) 2.01%(10) 2.04%(10) 2.04%
</TABLE>

Footnotes appear on page 84

72
<PAGE> 75
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD

CALIFORNIA INSURED INTERMEDIATE MUNICIPAL FUND CLASS A SHARES

<TABLE>
<CAPTION>
FISCAL APRIL 4,
PERIOD ENDED YEAR ENDED JUNE 30, 1994 TO
OCTOBER 31, -------------------------------------- JUNE 30,
1998(1) 1998(6) 1997 1996 1995 1994(4)
-------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period........................ $10.81 $10.74 $10.56 $10.45 $10.10 $10.00
------ ------ ------ ------- ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net Investments Income.................................... 0.16 0.49 0.49(9) 0.49 0.50 0.11
Net Realized & Unrealized Gain on Investments............. 0.21 0.17 0.23 0.15 0.35 0.11(12)
------ ------ ------ ------- ------ ------
Total From Investment Operations........................ 0.37 0.66 0.72 0.64 0.85 0.22
------ ------ ------ ------- ------ ------
LESS DISTRIBUTIONS:
Dividends from Net Investment Income...................... (0.16) (0.49) (0.49) (0.49) (0.50) (0.11)
Distributions in Excess of Net Investment Income.......... - (0.00)(8) - - - -
Distributions from Net Realized Gains..................... - (0.10) (0.05) (0.04) - (0.01)
Distributions in Excess of Net Realized Gains............. - - - - - -
Distributions from Capital................................ - - - - - -
------ ------ ------ ------- ------ ------
Total Distributions..................................... (0.16) (0.59) (0.54) (0.53) (0.50) (0.12)
------ ------ ------ ------- ------ ------
Net Asset Value, End of Period.............................. $11.02 $10.81 $10.74 $10.56 $10.45 $10.10
====== ====== ====== ======= ====== ======
Total Return(2)............................................. 3.46% 6.26% 6.97% 6.25% 8.71% 2.20%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period ($1,000's)...................... $37,529 $38,724 $45,157 $54,518(10) $54,507 $34,147
Ratio of Operating Expenses to Average Net Assets(3)...... 0.82%(5) 0.86% 0.82% 0.73% 0.42% 0.00%(5)
Ratio of Net Investment Income to Average Net Assets...... 4.39%(5) 4.49% 4.61% 4.62% 4.95% 4.25%(5)
Portfolio Turnover Rate................................... 7% 25% 29% 27% 13% 17%
Ratio of Operating Expenses to Average Net Assets Without
Credits Allowed by the Custodian......................... - 0.86%(10) 0.83%(10) 0.75%(10) N/A N/A
Ratio of Operating Expenses to Average Net Assets Without
Fee Waivers, Expenses Absorbed and/or Credits Allowed by
the Custodian............................................ 1.15%(5) 1.25%(10) 1.31%(10) 1.39%(10) 1.41% 1.95%(5)
</TABLE>

CALIFORNIA INSURED INTERMEDIATE MUNICIPAL FUND CLASS B SHARES

<TABLE>
<CAPTION>
FISCAL
PERIOD ENDED YEAR ENDED JUNE 30,
OCTOBER 31, --------------------------------------
1998(1) 1998(6) 1997 1996 1995(7)
-----------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period........................ $10.81 $10.74 $10.56 $10.45 $10.10
------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net Investments Income.................................... 0.13 0.41 0.41(9) 0.41 0.43
Net Realized & Unrealized Gain on Investments............. 0.21 0.17 0.23 0.15 0.35
------ ------ ------ ------ ------
Total From Investment Operations........................ 0.34 0.58 0.64 0.56 0.78
------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends from Net Investment Income...................... (0.13) (0.41) (0.41) (0.41) (0.43)
Distributions in Excess of Net Investment Income.......... - (0.00)(8) - - -
Distributions from Net Realized Gains..................... - (0.10) (0.05) (0.04) -
Distributions in Excess of Net Realized Gains............. - - - - -
Distributions from Capital................................ - - - - -
------ ------ ------ ------ ------
Total Distributions..................................... (0.13) (0.51) (0.46) (0.45) (0.43)
------ ------ ------ ------ ------
Net Asset Value, End of Period.............................. $11.02 $10.81 $10.74 $10.56 $10.45
====== ====== ====== ====== ======
Total Return(2)............................................. 3.20% 5.47% 6.17% 5.46% 7.90%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period ($1,000's)...................... $23,960 $21,688 $20,992 $20,948 $12,391
Ratio of Operating Expenses to Average Net Assets(3)...... 1.57%(5) 1.61% 1.57% 1.48% 1.17%
Ratio of Net Investment Income to Average Net Assets...... 3.64%(5) 3.74% 3.86% 3.87% 4.20%
Portfolio Turnover Rate................................... 7% 25% 29% 27% 13%
Ratio of Operating Expenses to Average Net Assets Without
Credits Allowed by the Custodian......................... - 1.61%(10) 1.58%(10) 1.50%(10) N/A
Ratio of Operating Expenses to Average Net Assets Without
Fee Waivers, Expenses Absorbed and/or Credits Allowed by
the Custodian............................................ 1.90%(5) 2.01%(10) 2.06%(10) 2.14%(10) 2.16%
</TABLE>

Footnotes appear on page 84

73
<PAGE> 76
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD

FLORIDA INSURED MUNICIPAL FUND CLASS A SHARES

<TABLE>
<CAPTION>
FISCAL
PERIOD ENDED YEAR ENDED JUNE 30,
OCTOBER 31, ------------------------------------------------
1998(1) 1998(6) 1997 1996 1995 1994
---------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period........................ $10.35 $9.93 $9.64 $9.43 $9.40 $10.05
------ ------ ----- ----- ----- ------
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income..................................... 0.17 0.49 0.49(9) 0.50 0.52 0.52
Net Realized & Unrealized Gain/(Loss) on Investments...... 0.15 0.42 0.30 0.21 0.03(12) (0.65)
------ ------ ----- ----- ----- ------
Total From Investment Operations........................ 0.32 0.91 0.79 0.71 0.55 (0.13)
------ ------ ----- ----- ----- ------
LESS DISTRIBUTIONS:
Dividends from Net Investment Income...................... (0.17) (0.49) (0.50) (0.50) (0.52) (0.52)
Distributions in Excess of Net Investment Income.......... - - (0.00)(8) - - (0.00)(8)
Distributions from Net Realized Gains..................... - - - - - -
Distributions in Excess of Net Realized Gains............. - - - - - (0.00)(8)
Distributions from Capital................................ - - - - - -
------ ------ ----- ----- ----- ------
Total Distributions..................................... (0.17) (0.49) (0.50) (0.50) (0.52) (0.52)
------ ------ ----- ----- ----- ------
Net Asset Value, End of Period.............................. $10.50 $10.35 $9.93 $9.64 $9.43 $9.40
====== ====== ===== ===== ===== ======
Total Return(2)............................................. 3.08% 9.34% 8.43% 7.56% 6.01% (1.50%)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period ($1,000's)...................... $15,813 $16,538 $22,761 $29,821 $33,714 $38,541
Ratio of Operating Expenses to Average Net Assets(3)...... 0.82%(5) 0.88% 0.82% 0.63% 0.39% 0.00%
Ratio of Net Investment Income to Average Net Assets...... 4.76%(5) 4.79% 5.01% 5.08% 5.53% 5.09%
Portfolio Turnover Rate................................... 40% 51% 53% 52% 44% 83%
Net Investment Income Per Share Without Fee Waivers,
Expenses Absorbed and/or Credits Allowed by the
Custodian................................................ - -(10) 0.43(9)(10) 0.42(10) 0.42 0.36
Ratio of Operating Expenses to Average Net Assets Without
Credit Allowed by the Custodian.......................... - 0.89%(10) 0.84%(10) 0.66%(10) N/A N/A
Ratio of Operating Expenses to Average Net Assets Without
Fee Waivers, Expenses Absorbed and/or Credit Allowed by
the Custodian............................................ 1.40%(5) 1.45%(10) 1.46%(10) 1.46%(10) 1.51% 1.55%
</TABLE>

FLORIDA INSURED MUNICIPAL FUND CLASS B SHARES

<TABLE>
<CAPTION>
FISCAL
PERIOD ENDED YEAR ENDED JUNE 30,
OCTOBER 31, --------------------------------------
1998(1) 1998(6) 1997 1996 1995(7)
-------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period........................ $10.35 $9.93 $9.64 $9.43 $9.40
------ ------ ----- ----- -----
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income..................................... 0.14 0.41 0.42(9) 0.42 0.45
Net Realized & Unrealized Gain on Investments............. 0.15 0.43 0.30 0.21 0.03(12)
------ ------ ----- ----- -----
Total From Investment Operations........................ 0.29 0.84 0.72 0.63 0.48
------ ------ ----- ----- -----
LESS DISTRIBUTIONS:
Dividends from Net Investment Income...................... (0.14) (0.42) (0.43) (0.42) (0.45)
Distributions in Excess of Net Investment Income.......... - - (0.00)(8) - -
Distributions from Net Realized Gains..................... - - - - -
Distributions in Excess of Net Realized Gains............. - - - - -
Distributions from Capital................................ - - - - -
------ ------ ----- ----- -----
Total Distributions..................................... (0.14) (0.42) (0.43) (0.42) (0.45)
------ ------ ----- ----- -----
Net Asset Value, End of Period.............................. $10.50 $10.35 $9.93 $9.64 $9.43
====== ====== ===== ===== =====
Total Return(2)............................................. 2.82% 8.53% 7.63% 6.76% 5.23%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period ($1,000's)...................... $6,054 $5,075 $5,067 $5,428 $3,330
Ratio of Operating Expenses to Average Net Assets(3)...... 1.57%(5) 1.63% 1.57% 1.38% 1.14%
Ratio of Net Investment Income to Average Net Assets...... 4.01%(5) 4.04% 4.26% 4.33% 4.78%
Portfolio Turnover Rate................................... 40% 51% 53% 52% 44%
Ratio of Operating Expenses to Average Net Assets Without
Credit Allowed by the Custodian.......................... - 1.64%(10) 1.59%(10) 1.41%(10) N/A
Ratio of Operating Expenses to Average Net Assets Without
Fee Waivers, Expenses Absorbed and/or Credit Allowed by
the Custodian............................................ 2.15%(5) 2.21%(10) 2.21%(10) 2.21%(10) 2.26%
</TABLE>

Footnotes appear on page 84

74
<PAGE> 77
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD

BOND & STOCK FUND CLASS A SHARES(22)

<TABLE>
<CAPTION>
FISCAL
PERIOD ENDED YEAR ENDED OCTOBER 31,
OCTOBER 31, ---------------------------------
1998 1997 1996 1995 1994
------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period........................ 16.13% $14.71 $13.48 $11.53 $12.23
------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income..................................... 0.45(9) 0.50 0.52 0.50 0.46
Net Realized & Unrealized Gain/(Loss) on Investments...... 0.21(12) 2.37 1.53 2.02 (0.57)
------ ------ ------ ------ ------
Total From Investment Operations........................ 0.66 2.87 2.05 2.52 (0.11)
------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends from Net Investment Income...................... (0.45) (0.51) (0.50) (0.49) (0.44)
Distributions from Capital Gains.......................... (2.32) (0.94) (0.32) (0.08) (0.15)
------ ------ ------ ------ ------
Total Distributions..................................... (2.77) (1.45) (0.82) (0.57) (0.59)
------ ------ ------ ------ ------
Net Asset Value, End of Period.............................. $14.02 $16.13 $14.71 $13.48 $11.53
====== ====== ====== ====== ======
Total Return(2)............................................. 3.12% 20.81% 15.66% 22.55% (0.90)%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period ($1,000's)...................... $298,651 $307,018 $255,414 $208,592 $191,615
Ratio of Operating Expenses to Average Net Assets(3)...... 0.97% 0.99% 0.98% 1.02% 1.06%
Ratio of Net Investment Income to Average Net Assets...... 3.09% 3.31% 3.68% 3.98% 3.97%
Portfolio Turnover Rate................................... 80% 54% 46% 32% 25%
</TABLE>

BOND & STOCK FUND CLASS B SHARES(22)

<TABLE>
<CAPTION>
FISCAL MARCH 30,
PERIOD ENDED YEAR ENDED OCTOBER 31, 1994 TO
OCTOBER 31, ------------------------ OCTOBER 31,
1998 1997 1996 1995 1994(18)
-----------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period........................ $16.10 $14.69 $13.47 $11.51 $11.49
------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income..................................... 0.33(9) 0.39 0.41 0.39 0.18
Net Realized & Unrealized Gain on Investments............. 0.19(12) 2.36 1.53 2.03 0.04
------ ------ ------ ------ ------
Total From Investment Operations........................ 0.52 2.75 1.94 2.42 0.22
------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends from Net Investment Income...................... (0.34) (0.40) (0.40) (0.38) (0.20)
Distributions from Capital Gains.......................... (2.32) (0.94) (0.32) (0.08) -
------ ------ ------ ------ ------
Total Distributions..................................... (2.66) (1.34) (0.72) (0.46) (0.20)
------ ------ ------ ------ ------
Net Asset Value, End of Period.............................. $13.96 $16.10 $14.69 $13.47 $11.51
====== ====== ====== ====== ======
Total Return(2)............................................. 3.12% 19.86% 14.73% 21.60% 1.94%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period ($1,000's)...................... $74,542 $46,556 $22,243 $7,372 $3,362
Ratio of Operating Expenses to Average Net Assets(3)...... 1.76% 1.79% 1.86% 1.84% 1.77%(5)
Ratio of Net Investment Income to Average Net Assets...... 2.30% 2.48% 2.80% 3.10% 3.22%(5)
Portfolio Turnover Rate................................... 80% 54% 46% 32% 25%
</TABLE>

Footnotes appear on page 84

75
<PAGE> 78
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD

GROWTH & INCOME FUND CLASS A SHARES(23)

<TABLE>
<CAPTION>
FISCAL
PERIOD ENDED YEAR ENDED OCTOBER 31,
OCTOBER 31, ---------------------------------
1998 1997 1996 1995 1994
------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period........................ $21.01 $17.26 $14.65 $12.71 $12.81
------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income..................................... 0.11(9) 0.12 0.20 0.22 0.18
Net Realized & Unrealized Gain/(Loss) on Investments...... 1.43 4.98 3.16 2.31 0.85
------ ------ ------ ------ ------
Total From Investment Operations........................ 1.54 5.10 3.36 2.53 1.03
------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends from Net Investment Income...................... (0.09) (0.14) (0.21) (0.19) (0.18)
Distributions from Capital Gains.......................... (2.47) (1.21) (0.54) (0.40) (0.95)
------ ------ ------ ------ ------
Total Distributions..................................... (2.56) (1.35) (0.75) (0.59) (1.13)
------ ------ ------ ------ ------
Net Asset Value, End of Period.............................. $19.99 $21.01 $17.26 $14.65 $12.71
====== ====== ====== ====== ======
Total Return(2)............................................. 7.38% 31.24% 23.61% 20.87% 8.55%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period ($1,000's)...................... $502,115 $299,928 $178,331 $130,630 $102,837
Ratio of Operating Expenses to Average Net Assets(3)...... 0.94% 1.05% 1.03% 1.07% 1.10%
Ratio of Net Investment Income to Average Net Assets...... 0.52% 0.66% 1.26% 1.62% 1.45%
Portfolio Turnover Rate................................... 79% 71% 52% 39% 34%
</TABLE>

GROWTH & INCOME FUND CLASS B SHARES(23)

<TABLE>
<CAPTION>
FISCAL MARCH 30,
PERIOD ENDED YEAR ENDED OCTOBER 31, 1994 TO
OCTOBER 31, ------------------------- OCTOBER 31,
1998 1997 1996 1995 1994(18)
------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period........................ $20.85 $17.17 $14.59 $12.68 $12.00
------- ------- ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income/(Loss).............................. (0.07)(9) (0.02) 0.06 0.11 0.05
Net Realized & Unrealized Gain on Investments............. 1.46 4.93 3.14 2.31 0.69
------- ------- ------ ------ ------
Total From Investment Operations........................ 1.39 4.91 3.20 2.42 0.74
------- ------- ------ ------ ------
LESS DISTRIBUTIONS:
Dividends from Net Investment Income...................... (0.00)(8) (0.02) (0.08) (0.11) (0.06)
Distributions from Capital Gains.......................... (2.47) (1.21) (0.54) (0.40) -
------- ------- ------ ------ ------
Total Distributions..................................... (2.47) (1.23) (0.62) (0.51) (0.06)
------- ------- ------ ------ ------
Net Asset Value, End of Period.............................. $19.77 $20.85 $17.17 $14.59 $12.68
======= ======= ====== ====== ======
Total Return(2)............................................. 6.60% 30.20% 22.55% 19.95% 6.14%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period ($1,000's)...................... $117,063 $49,994 $22,851 $8,871 $2,082
Ratio of Operating Expenses to Average Net Assets(3)...... 1.79% 1.88% 1.94% 1.91% 1.85%(5)
Ratio of Net Investment Income/(Loss) to Average Net
Assets................................................... (0.33)% (0.19)% 0.34% 0.69% 0.65%(5)
Portfolio Turnover Rate................................... 79% 71% 52% 39% 34%
</TABLE>

Footnotes appear on page 84

76
<PAGE> 79
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD

NORTHWEST FUND CLASS A SHARES(24)

<TABLE>
<CAPTION>
FISCAL
PERIOD ENDED YEAR ENDED OCTOBER 31,
OCTOBER 31, ----------------------------------
1998 1997 1996 1995 1994
-------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period........................ $25.92 $19.69 $17.40 $14.30 $14.50
------ ------- ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income/(Loss).............................. (0.02)(9) (0.02) 0.03 0.07 0.08
Net Realized & Unrealized Gain/(Loss) on Investments...... (0.76) 8.13 2.47 3.10 0.35
------ ------- ------ ------ ------
Total From Investment Operations........................ (0.78) 8.11 2.50 3.17 0.43
------ ------- ------ ------ ------
LESS DISTRIBUTIONS:
Dividends from Net Investment Income...................... - - (0.03) (0.07) (0.08)
Distributions from Capital Gains.......................... (4.74) (1.88) (0.18) - (0.55)
Distributions from Capital................................ (0.03) - - - -
------ ------- ------ ------ ------
Total Distributions..................................... (4.77) (1.88) (0.21) (0.07) (0.63)
------ ------- ------ ------ ------
Net Asset Value, End of Period.............................. $20.37 $25.92 $19.69 $17.40 $14.30
====== ======= ====== ====== ======
Total Return(2)............................................. (4.81)% 44.47% 14.54% 22.24% 2.97%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period ($1,000's)...................... $243,126 $256,908 $176,706 $157,953 $152,622
Ratio of Operating Expenses to Average Net Assets(3)...... 1.10% 1.05% 1.08% 1.10% 1.09%
Ratio of Net Investment Income/(Loss) to Average Net
Assets................................................... (0.09)% (0.08)% 0.16% 0.44% 0.51%
Portfolio Turnover Rate................................... 39% 37% 42% 9% 11%
Ratio of operating expenses to average net assets w/o fee
waivers or fees reduced by credits allowed by the
custodian................................................ 1.10% 1.11% 1.08% 1.10% 1.09%
</TABLE>

NORTHWEST FUND CLASS B SHARES(24)

<TABLE>
<CAPTION>
FISCAL MARCH 30,
PERIOD ENDED YEAR ENDED OCTOBER 31, 1994 TO
OCTOBER 31, --------------------------- OCTOBER 31,
1998 1997 1996 1995 1994(18)
---------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period........................ $25.34 $19.45 $17.31 $14.28 $14.42
------- ------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Loss....................................... (0.20)(9) (0.08) (0.08) (0.05) (0.02)
Net Realized & Unrealized Gain/(Loss) on Investments...... (0.73) 7.85 2.40 3.08 (0.12)
------- ------- ------- ------- -------
Total From Investment Operations........................ (0.93) 7.77 2.32 3.03 (0.14)
------- ------- ------- ------- -------
LESS DISTRIBUTIONS:
Dividends from Net Investment Income...................... - - - - -
Distributions from Capital Gains.......................... (4.74) (1.88) (0.18) - -
Distributions from Capital................................ (0.03) - - - -
------- ------- ------- ------- -------
Total Distributions..................................... (4.77) (1.88) (0.18) - -
------- ------- ------- ------- -------
Net Asset Value, End of Period.............................. $19.64 $25.34 $19.45 $17.31 $14.28
======= ======= ======= ======= =======
Total Return(2)............................................. (5.63)% 43.17 13.54 21.25 (0.97)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period ($1,000's)...................... $47,106 $39,627 $14,653 $7,083 $3,012
Ratio of Operating Expenses to Average Net Assets(3)...... 1.95% 1.91% 1.98% 1.95% 1.96%(5)
Ratio of Net Investment Loss to Average Net Assets........ (0.94)% (0.94)% (0.76)% (0.45)% (0.39)%(5)
Portfolio Turnover Rate................................... 39% 37% 42% 9% 11%
Ratio of operating expenses to average net assets w/o fee
waivers or fees reduced by credits allowed by the
custodian................................................ 1.95% 1.97% 1.98% 1.95% 1.96%(5)
</TABLE>

Footnotes appear on page 84

77
<PAGE> 80
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD

GROWTH FUND CLASS A SHARES

<TABLE>
<CAPTION>
FISCAL
PERIOD ENDED YEAR ENDED JUNE 30,
OCTOBER 31, ---------------------------------------------------
1998(1) 1998(6) 1997 1996 1995 1994
--------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period.............. $18.46 $14.90 $15.69 $14.18 $10.73 $10.72
------ ------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income/(Loss).................... (0.07)(9) (0.15)(9) (0.03)(9) (0.07)(9) 0.05(9) (0.02)
Net Realized & Unrealized Gain/(Loss) on
Investments.................................... (0.75) 4.99 1.58 3.47 3.42 0.03(12)
------ ------ ------ ------ ------ ------
Total From Investment Operations.............. (0.82) 4.84 1.55 3.40 3.47 0.01
------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends from Net Investment Income............ - - - - (0.02) -
Distributions in Excess of Net Investment
Income......................................... - - - - - -
Distributions from Net Realized Gains........... - (1.28) (2.34) (1.89) (0.00)(8) -
Distributions in Excess of Net Realized Gains... - - - - - -
Distributions from Capital...................... - - - - - -
------ ------ ------ ------ ------ ------
Total Distributions........................... - (1.28) (2.34) (1.89) (0.02) -
------ ------ ------ ------ ------ ------
Net Asset Value, End of Period.................... $17.64 $18.46 $14.90 $15.69 $14.18 $10.73
====== ====== ====== ====== ====== ======
Total Return(2)................................... (4.44)% 35.43% 10.88% 25.44% 32.33% 0.00%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period ($1,000's)............ $104,775 $112,153 $111,187 $179,720 $154,763 $126,808
Ratio of Operating Expenses to Average Net
Assets(3)...................................... 1.69%(5) 1.66% 1.70% 1.70% 1.76% 1.75%
Ratio of Net Investment Income to Average Net
Assets......................................... (1.21)%(5) (0.91)% (0.22)% (0.49)% 0.28% -0.35%
Portfolio Turnover Rate......................... 24% 153% 156% 205% 233% 227%
Ratio of Operating Expenses to Average Net
Assets Without Credits Allowed by the
Custodian...................................... - 1.66%(10) 1.70%(10) 1.71%(10) N/A N/A
Ratio of Operating Expenses to Average Net
Assets Without Fee Waivers, Expenses Absorbed
and/or Credits Allowed by the Custodian........ - 1.66%(10) 1.70%(10) 1.71%(10) 1.76% 1.75%
</TABLE>

GROWTH FUND CLASS B SHARES

<TABLE>
<CAPTION>
FISCAL
PERIOD ENDED YEAR ENDED JUNE 30,
OCTOBER 31, -----------------------------------------
1998(1) 1998(6) 1997 1996 1995(7)
----------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period........................ $17.82 $14.53 $15.47 $14.10 $10.73
------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Loss....................................... (0.12)(9) (0.25)(9) (0.14)(9) (0.19)(9) (0.04)(9)
Net Realized & Unrealized Gain on Investments............. (0.71) 4.82 1.54 3.45 3.42
------ ------ ------ ------ ------
Total From Investment Operations........................ (0.83) 4.57 1.40 3.26 3.38
------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends from Net Investment Income...................... - - - - (0.01)
Distributions in Excess of Net Investment Income.......... - - - - -
Distributions from Net Realized Gains..................... - (1.28) (2.34) (1.89) (0.00)(8)
Distributions in Excess of Net Realized Gains............. - - - - -
Distributions from Capital................................ - - - - -
------ ------ ------ ------ ------
Total Distributions..................................... - (1.28) (2.34) (1.89) (0.01)
------ ------ ------ ------ ------
Net Asset Value, End of Period.............................. $16.99 $17.82 $14.53 $15.47 $14.10
====== ====== ====== ====== ======
Total Return(2)............................................. (4.66)% 34.43% 9.99% 24.54% 31.46%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period ($1,000's)...................... $39,379 $38,390 $30,397 $25,067 $6,928
Ratio of Operating Expenses to Average Net Assets(3)...... 2.54%(5) 2.46% 2.45% 2.45% 2.51%
Ratio of Net Investment Loss to Average Net Assets........ (2.06)%(5) (1.70)% (0.97)% (1.24)% (0.47)%
Portfolio Turnover Rate................................... 24% 153% 156% 205% 233%
Ratio of Operating Expenses to Average Net Assets Without
Credits Allowed by the Custodian......................... - 2.46%(10) 2.45%(10) 2.46%(10) N/A
Ratio of Operating Expenses to Average Net Assets Without
Fee Waivers, Expenses Absorbed and/or Credits Allowed by
the Custodian............................................ - 2.46%(10) 2.45%(10) 2.46%(10) 2.51%
</TABLE>

Footnotes appear on page 84

78
<PAGE> 81
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD

EMERGING GROWTH FUND CLASS A SHARES

<TABLE>
<CAPTION>
FISCAL
PERIOD ENDED
OCTOBER 31,
1998(1)
----------------
<S> <C>
Net Asset Value, Beginning of Period... $19.49
--------
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Loss.................. (0.08)(9)
Net Realized & Unrealized Gain/(Loss)
on Investments...................... (3.16)
--------
Total From Investment Operations... (3.24)
--------
LESS DISTRIBUTIONS:
Dividends from Net Investment
Income.............................. -
Distributions in Excess of Net
Investment Income................... -
Distributions from Net Realized
Gains............................... -
Distributions in Excess of Net
Realized Gains...................... -
Distributions from Capital........... -
--------
Total Distributions................ -
--------
Net Asset Value, End of Period......... $16.25
========
Total Return(2)........................ (16.62)%
RATIOS/SUPPLEMENTAL DATA:

Net Assets, End of Period
($1,000's).......................... $88,502
Ratio of Operating Expenses to
Average Net Assets(3)............... 1.88%(5)
Ratio of Net Investment Loss to
Average Net Assets.................. (1.43)%(5)
Portfolio Turnover Rate.............. 20%
Ratio of Operating Expenses to
Average Net Assets Without Fee
Waivers, Expenses Absorbed and/or
Credits Allowed by the Custodian.... 1.89%(5)

YEAR ENDED JUNE 30,
--------------------------------------------------------------------
1998(6) 1997 1996 1995 1994
--------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period... $18.28 $20.17 $15.47 $13.02 $13.76
------- ------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Loss.................. (0.22)(9) (0.21)(9) (0.19)(9) (0.00)(8)(9) (0.09)
Net Realized & Unrealized Gain/(Loss)
on Investments...................... 2.50 (0.18) 5.65 2.77 0.68
------- ------- ------- ------- -------
Total From Investment Operations... 2.28 (0.39) 5.46 2.77 0.59
------- ------- ------- ------- -------
LESS DISTRIBUTIONS:
Dividends from Net Investment
Income.............................. - - - - -
Distributions in Excess of Net
Investment Income................... - - - - -
Distributions from Net Realized
Gains............................... (1.07) (1.50) (0.76) (0.32) (1.33)
Distributions in Excess of Net
Realized Gains...................... - - - - -
Distributions from Capital........... - - - - -
------- ------- ------- ------- -------
Total Distributions................ (1.07) (1.50) (0.76) (0.32) (1.33)
------- ------- ------- ------- -------
Net Asset Value, End of Period......... $19.49 $18.28 $20.17 $15.47 $13.02
======= ======= ======= ======= =======
Total Return(2)........................ 12.95% (1.50)% 35.93% 21.54% 3.40%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period
($1,000's).......................... $118,473 $165,719 $283,747 $185,722 $124,941
Ratio of Operating Expenses to
Average Net Assets(3)............... 1.66% 1.64% 1.64% 1.68% 1.66%
Ratio of Net Investment Loss to
Average Net Assets.................. (1.10)% (1.17)% (1.02)% (0.31)% (0.68)%
Portfolio Turnover Rate.............. 112% 81% 131% 181% 224%
Ratio of Operating Expenses to
Average Net Assets Without Fee
Waivers, Expenses Absorbed and/or
Credits Allowed by the Custodian.... 1.66%(10) 1.64%(10) 1.65%(10) N/A N/A
</TABLE>

EMERGING GROWTH FUND CLASS B SHARES

<TABLE>
<CAPTION>
FISCAL
PERIOD ENDED
OCTOBER 31,
1998(1)
----------------
<S> <C>
Net Asset Value, Beginning of Period.................. $18.86
--------
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income/(Loss)........................ (0.13)(9)
Net Realized & Unrealized Gain/(Loss) on
Investments........................................ (3.06)
--------
Total From Investment Operations.................. (3.19)
--------
LESS DISTRIBUTIONS:
Dividends from Net Investment Income................ -
Distributions in Excess of Net Investment Income.... -
Distributions from Net Realized Gains............... -
Distributions in Excess of Net Realized Gains....... -
Distributions from Capital.......................... -
--------
Total Distributions............................... -
--------
Net Asset Value, End of Period........................ $15.67
========
Total Return(2)....................................... (16.87)%
RATIOS/SUPPLEMENTAL DATA:

Net Assets, End of Period ($1,000's)................ $22,172
Ratio of Operating Expenses to Average Net
Assets(3).......................................... 2.84%(5)
Ratio of Net Investment Income/Loss to Average Net
Assets............................................. (2.39)%(5)
Portfolio Turnover Rate............................. 20%
Ratio of Operating Expenses to Average Net Assets
Without Fee Waivers,
Expenses Absorbed and/or Credits Allowed by the
Custodian.......................................... 2.85%(5)

YEAR ENDED JUNE 30,
-----------------------------------------------------
1998(6) 1997 1996 1995(7)
-----------------------------------------------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period.................. $17.85 $19.88 $15.37 $13.02
------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income/(Loss)........................ (0.36)(9) (0.34)(9) (0.32)(9) (0.10)(9)
Net Realized & Unrealized Gain/(Loss) on
Investments........................................ 2.44 (0.19) 5.59 2.77
------- ------- ------- -------
Total From Investment Operations.................. 2.08 (0.53) 5.27 2.67
------- ------- ------- -------
LESS DISTRIBUTIONS:
Dividends from Net Investment Income................ - - - -
Distributions in Excess of Net Investment Income.... - - - -
Distributions from Net Realized Gains............... (1.07) (1.50) (0.76) (0.32)
Distributions in Excess of Net Realized Gains....... - - - -
Distributions from Capital.......................... - - - -
------- ------- ------- -------
Total Distributions............................... (1.07) (1.50) (0.76) (0.32)
------- ------- ------- -------
Net Asset Value, End of Period........................ $18.86 $17.85 $19.88 $15.37
======= ======= ======= =======
Total Return(2)....................................... 12.05% (2.26)% 34.93% 20.69%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period ($1,000's)................ $28,540 $29,123 $28,920 $10,208
Ratio of Operating Expenses to Average Net
Assets(3).......................................... 2.47% 2.39% 2.39% 2.43%
Ratio of Net Investment Income/Loss to Average Net
Assets............................................. (1.92)% (1.92)% (1.77)% (1.06)%
Portfolio Turnover Rate............................. 112% 81% 131% 181%
Ratio of Operating Expenses to Average Net Assets
Without Fee Waivers,
Expenses Absorbed and/or Credits Allowed by the
Custodian.......................................... 2.47%(10) 2.39%(10) 2.40%(10) N/A
</TABLE>

Footnotes appear on page 84

79
<PAGE> 82
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD

INTERNATIONAL GROWTH FUND CLASS A SHARES

<TABLE>
<CAPTION>
FISCAL
PERIOD ENDED
OCTOBER 31,
1998(1)
----------------
<S> <C>
Net Asset Value, Beginning of Period.................. $10.20
---------
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income/(Loss)........................ (0.02)(9)
Net Realized & Unrealized Gain/(Loss) on
Investments........................................ (1.32)
---------
Total From Investment Operations.................. (1.34)
---------
LESS DISTRIBUTIONS:
Dividends from Net Investment Income................ -
Distributions in Excess of Net Investment Income.... -
Distributions from Net Realized Gains............... -
Distributions in Excess of Net Realized Gains....... -
---------
Total Distributions............................... -
---------
Net Asset Value, End of Period........................ $8.86
=========
Total Return(2)....................................... (13.14)%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period ($1,000's)................ $30,117
Ratio of Operating Expenses to Average Net
Assets(3).......................................... 1.86%(5)
Ratio of Net Investment Income/(Loss) to Average Net
Assets............................................. (0.50)%(5)
Portfolio Turnover Rate............................. 41%
Ratio of Operating Expenses to Average Net Assets
Without Fee Waivers, Expenses Absorbed and/or
Credits Allowed by the Custodian................... 1.86%(5)

YEAR ENDED JUNE 30,
----------------------------------------------------
1998(6) 1997 1996 1995 1994
----------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period.................. $11.85 $10.49 $9.78 $10.74 $9.80
------- -------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income/(Loss)........................ 0.05(9) 0.04(9) 0.05(9) (0.11)(9) 0.06
Net Realized & Unrealized Gain/(Loss) on
Investments........................................ (0.67) 1.55 1.21 (0.31) 1.15
------- -------- ------- ------- -------
Total From Investment Operations.................. (0.62) 1.59 1.26 (0.42) 1.21
------- -------- ------- ------- -------
LESS DISTRIBUTIONS:
Dividends from Net Investment Income................ (0.50) (0.13) (0.05) (0.04) (0.02)
Distributions in Excess of Net Investment Income.... (0.03) - (0.04) - -
Distributions from Net Realized Gains............... (0.50) (0.10) (0.46) (0.44) (0.25)
Distributions in Excess of Net Realized Gains....... - - - (0.06) -
------- -------- ------- ------- -------
Total Distributions............................... (1.03) (0.23) (0.55) (0.54) (0.27)
------- -------- ------- ------- -------
Net Asset Value, End of Period........................ $10.20 $11.85 $10.49 $9.78 $10.74
======= ======== ======= ======= =======
Total Return(2)....................................... (4.19)% 15.50% 13.16% (4.01)% 12.39%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period ($1,000's)................ $38,281 $57,776 $116,254 $91,763 $127,764
Ratio of Operating Expenses to Average Net
Assets(3).......................................... 1.67% 1.65% 1.77% 1.69% 1.69%
Ratio of Net Investment Income/(Loss) to Average Net
Assets............................................. 0.50% 0.35% 0.46% 0.62% 0.54%
Portfolio Turnover Rate............................. 118% 67% 125% 81% 44%
Ratio of Operating Expenses to Average Net Assets
Without Fee Waivers, Expenses Absorbed and/or
Credits Allowed by the Custodian................... 1.67%(10) 1.65%(10) 1.77%(10) N/A N/A
</TABLE>

INTERNATIONAL GROWTH FUND CLASS B SHARES

<TABLE>
<CAPTION>
FISCAL
PERIOD ENDED YEAR ENDED JUNE 30,
OCTOBER 31, ----------------------------------------
1998(1) 1998(6) 1997 1996 1995(7)
--------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period........................ $10.07 $11.70 $10.39 $9.73 $10.74
--------- ------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Loss....................................... (0.05)(9) (0.04)(9) (0.04)(9) (0.03)(9) (0.17)(9)
Net Realized & Unrealized Gain/(Loss) on Investments...... (1.30) (0.64) 1.53 1.21 (0.31)
--------- ------- ------- ------- -------
Total From Investment Operations........................ (1.35) (0.68) 1.49 1.18 (0.48)
--------- ------- ------- ------- -------
LESS DISTRIBUTIONS:
Dividends from Net Investment Income...................... - (0.42) (0.08) (0.02) (0.03)
Distributions in Excess of Net Investment Income.......... - (0.03) - (0.04) -
Distributions from Net Realized Gains..................... - (0.50) (0.10) (0.46) (0.44)
Distributions in Excess of Net Realized Gains............. - - - - (0.06)
--------- ------- ------- ------- -------
Total Distributions..................................... - (0.95) (0.18) (0.52) (0.53)
--------- ------- ------- ------- -------
Net Asset Value, End of Period.............................. $8.72 $10.07 $11.70 $10.39 $9.73
========= ======= ======= ======= =======
Total Return(2)............................................. (13.41)% (4.95)% 14.66% 12.34% (4.61)%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period ($1,000's)...................... $3,552 $4,294 $4,876 $4,447 $2,268
Ratio of Operating Expenses to Average Net Assets(3)...... 2.97%(5) 2.49% 2.40% 2.52% 2.44%
Ratio of Net Investment Loss to Average Net Assets........ (1.61)%(5) (0.35)% (0.40)% (0.29)% (0.13)%
Portfolio Turnover Rate................................... 41% 118% 67% 125% 81%
Net Investment Income (Loss) Per Share Without Fee
Waivers, Expenses Absorbed and/or Credits Allowed by the
Custodian................................................ - $-(8)(9) $(0.04)(8)(9) $(0.03)(9)(10) N/A
Ratio of Operating Expenses to Average Net Assets Without
Fee Waivers, Expenses Absorbed and/or Credits Allowed by
the Custodian............................................ - 2.53%(10) 2.40%(10) 2.52%(10) 2.44%
</TABLE>

Footnotes appear on page 84

80
<PAGE> 83
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD

STRATEGIC GROWTH PORTFOLIO

CLASS A
----------------
FISCAL
PERIOD ENDED
OCTOBER 31,
1998(1)
----------------
<S> <C>
Net Asset Value, Beginning of Period........... $12.66
---------
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income/(Loss)................. (0.02)(9)
Net Realized & Unrealized Gain on
Investments................................. (0.97)
---------
Total From Investment Operations........... (0.99)
---------
LESS DISTRIBUTIONS:
Dividends from Net Investment Income......... -
Distributions in Excess of Net Investment
Income...................................... -
Distributions from Net Realized Gains........ -
---------
Total Distributions........................ -
---------
Net Asset Value, End of Period................. $11.67
=========
Total Return(2)................................ (7.82)%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period ($1,000's)......... $19,690
Ratio of Operating Expenses to Average Net
Assets(3)................................... 0.95%(5)
Ratio of Net Investment Income/(Loss) to
Average Net Assets.......................... (0.53)%(5)
Portfolio Turnover Rate...................... 10%
Ratio of Operating Expenses to Average Net
Assets Without Credits Allowed by the
Custodian(13)............................... -
Ratio of Operating Expenses to Average Net
Assets Without Fee Waivers, Expenses
Absorbed and/or Credits Allowed by the
Custodian................................... 1.13%(5)

<CAPTION>
CLASS B
CLASS A -----------------------------------
-------------------- FISCAL
YEAR JULY 25, PERIOD YEAR JULY 25,
ENDED 1996 TO ENDED ENDED 1996 TO
JUNE 30, JUNE 30, OCTOBER 31, JUNE 30, JUNE 30,
1998(6) 1997(4) 1998(1) 1998(6) 1997(4)
-----------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period........... $11.26 $10.00 $12.53 $11.19 $10.00
------- ------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income/(Loss)................. 0.00(8)(9) (0.02)(9) (0.05)(4) (0.09)(9) (0.10)(9)
Net Realized & Unrealized Gain on
Investments................................. 2.12 1.90 (0.96) 2.11 1.90
------- ------- ------- ------- -------
Total From Investment Operations........... 2.12 1.88 (1.01) 2.02 1.80
------- ------- ------- ------- -------
LESS DISTRIBUTIONS:
Dividends from Net Investment Income......... - - - - -
Distributions in Excess of Net Investment
Income...................................... (0.68) (0.62) - (0.64) (0.61)
Distributions from Net Realized Gains........ (0.04) (0.00)(8) - (0.04) (0.00)(8)
------- ------- ------- ------- -------
Total Distributions........................ (0.72) (0.62) - (0.68) (0.61)
------- ------- ------- ------- -------
Net Asset Value, End of Period................. $12.66 $11.26 $11.52 $12.53 $11.19
======= ======= ======= ======= =======
Total Return(2)................................ 20.11% 19.33% (8.06)% 19.24% 18.48%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period ($1,000's)......... $18,330 $14,253 $51,752 $51,173 $35,802
Ratio of Operating Expenses to Average Net
Assets(3)................................... 0.94% 0.90%(5) 1.70%(5) 1.68% 1.65%(5)
Ratio of Net Investment Income/(Loss) to
Average Net Assets.......................... 0.01% (0.19)%(5) (1.28)%(5) (0.74)% (0.94)%(5)
Portfolio Turnover Rate...................... 23% 33% 10% 23% 33%
Ratio of Operating Expenses to Average Net
Assets Without Credits Allowed by the
Custodian(13)............................... 0.94% 0.91%(5) - 1.68% 1.66%(5)
Ratio of Operating Expenses to Average Net
Assets Without Fee Waivers, Expenses
Absorbed and/or Credits Allowed by the
Custodian................................... 1.08% 1.45%(5) 1.88%(5) 1.83% 2.20%(5)
</TABLE>

CONSERVATIVE GROWTH PORTFOLIO

<TABLE>
<CAPTION>
CLASS A CLASS B
-------------------------------------------- --------------------------------------------
FISCAL FISCAL
PERIOD ENDED YEAR ENDED JULY 25, 1996 TO PERIOD ENDED YEAR ENDED JULY 25, 1996 TO
OCTOBER 31, JUNE 30, JUNE 30, OCTOBER 31, JUNE 30, JUNE 30,
1998(1) 1998(6) 1997(4) 1998(1) 1998(6) 1997(4)
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Period.............................. $11.84 $10.86 $10.00 $11.74 $10.80 $10.00
-------- ------- ------ -------- ------- ------
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income/(Loss)...... 0.01 0.13(9) 0.08(9) (0.03) 0.04(9) 0.01(9)
Net Realized & Unrealized Gain on
Investments...................... (0.88) 1.42 1.32 (0.86) 1.43 1.31
-------- ------- ------ -------- ------- ------
Total From Investment
Operations...................... (0.87) 1.55 1.40 (0.89) 1.47 1.32
-------- ------- ------ -------- ------- ------
LESS DISTRIBUTIONS:
Dividends from Net Investment
Income........................... - (0.09) (0.08) - (0.08) (0.01)
Distributions in Excess of Net
Investment Income................ - (0.42) (0.46) - (0.39) (0.51)
Distributions from Net Realized
Gains............................ - (0.06) - - (0.06) -
-------- ------- ------ -------- ------- ------
Total Distributions............. - (0.57) (0.54) - (0.53) (0.52)
-------- ------- ------ -------- ------- ------
Net Asset Value, End of Period...... $10.97 $11.84 $10.86 $10.85 $11.74 $10.80
======== ======= ====== ======== ======= ======
Total Return(2)..................... (7.35)% 15.18% 14.39% (7.58)% 14.44% 13.59%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period
($1,000's)....................... $100,024 $114,946 $136,141 $155,064 $169,269 $158,697
Ratio of Operating Expenses to
Average Net Assets(13)(3)........ 0.95%(5) 0.95% 0.92%(5) 1.70%(5) 1.70% 1.67%(5)
Ratio of Net Investment
Income/(Loss) to Average Net
Assets........................... 0.05%(5) 1.17% 0.81%(5) (.70)%(5) 0.40% 0.06%(5)
Portfolio Turnover Rate........... 9% 28% 20% 9% 28% 20%
Ratio of Operating Expenses to
Average Net Assets Without
Credits Allowed by the
Custodian(13).................... - 0.95% 0.93%(5) - 1.70% 1.68%(5)
Ratio of Operating Expenses to
Average Net Assets Without Fee
Waivers, Expenses Absorbed and/or
Credits Allowed by the
Custodian........................ 1.03%(5) 1.00% 1.17%(5) 1.78%(5) 1.74% 1.92%(5)
</TABLE>

Footnotes appear on page 84

81
<PAGE> 84
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD

BALANCED PORTFOLIO

<TABLE>
<CAPTION>
CLASS A CLASS B
-------------------------------------------- --------------------------------------------
FISCAL FISCAL
PERIOD YEAR PERIOD YEAR
ENDED ENDED JULY 25, 1996 TO ENDED ENDED JULY 25, 1996 TO
OCTOBER 31, JUNE 30, JUNE 30, OCTOBER 31, JUNE 30, JUNE 30,
1998(1) 1998(6) 1997(4) 1998(1) 1998(6) 1997(4)
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Period.............................. $11.63 $10.95 $10.00 $11.63 $10.95 $10.00
------- ------- ------- -------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income............. 0.05 0.22 0.20(9) 0.02 0.17 0.14(9)
Net Realized & Unrealized
Gain/(Loss) on Investments....... (0.61) 1.25 1.27 (0.61) 1.22 1.25
------- ------- ------- -------- ------- -------
Total From Investment
Operations...................... (0.56) 1.47 1.47 (0.59) 1.39 1.39
------- ------- ------- -------- ------- -------
LESS DISTRIBUTIONS:
Dividends from Net Investment
Income........................... (0.05) (0.23) (0.20) (0.02) (0.20) (0.14)
Distributions in Excess of Net
Investment Income................ - (0.45) (0.32) - (0.40) (0.30)
Distributions from Net Realized
Gains............................ - (0.11) (0.00)(8) - (0.11) (0.00)(8)
------- ------- ------- -------- ------- -------
Total Distributions............. (0.05) (0.79) (0.52) (0.02) (0.71) (0.44)
------- ------- ------- -------- ------- -------
Net Asset Value, End of Period...... $11.02 $11.63 $10.95 $11.02 $11.63 $10.95
======= ======= ======= ======== ======= =======
Total Return(2)..................... (4.85)% 14.32% 15.02% (5.09)% 13.47% 14.23%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period
($1,000's)....................... $93,491 $101,726 $109,421 $110,626 $114,944 $99,821
Ratio of Operating Expenses to
Average Net Assets(13)(3)........ 0.95%(5) 0.95% 0.92%(5) 1.70%(5) 1.70% 1.67%(5)
Ratio of Net Investment
Income/Loss to Average Net
Assets........................... 1.22%(5) 2.14% 2.48%(5) 0.47%(5) 1.39% 1.73%(5)
Portfolio Turnover Rate........... 3% 29% 46% 3% 29% 46%
Ratio of Operating Expenses to
Average Net Assets Without
Credits Allowed by the
Custodian(13).................... - 0.95% 0.93%(5) - 1.70% 1.68%(5)
Ratio of Operating Expenses to
Average Net Assets Without Fee
Waivers, Expenses Absorbed and/or
Credits Allowed by the
Custodian........................ 1.02%(5) 1.00% 1.17%(5) 1.77%(5) 1.75% 1.92%(5)
</TABLE>

FLEXIBLE INCOME PORTFOLIO

<TABLE>
<CAPTION>
CLASS A CLASS B
-------------------------------------------- --------------------------------------------
FISCAL FISCAL
PERIOD YEAR PERIOD YEAR
ENDED ENDED JULY 25, 1996 TO ENDED ENDED JULY 25, 1996 TO
OCTOBER 31, JUNE 30, JUNE 30, OCTOBER 31, JUNE 30, JUNE 30,
1998(1) 1998(6) 1997(4)* 1998(1) 1998(6) 1997(4)
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Period.............................. $10.79 $10.57 $10.00 $10.79 $10.57 $10.00
------- ------ ------ ------- ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income............. 0.12 0.45 0.43(9) 0.10 0.31 0.38(9)
Net Realized & Unrealized
Gain/(Loss) on Investments....... (0.15) 0.67 0.70 (0.16) 0.73 0.68
------- ------ ------ ------- ------ ------
Total From Investment
Operations...................... (0.03) 1.12 1.13 (0.06) 1.04 1.06
------- ------ ------ ------- ------ ------
LESS DISTRIBUTIONS:
Dividends from Net Investment
Income........................... (0.13) (0.45) (0.43) (0.10) (0.37) (0.38)
Distributions in Excess of Net
Investment Income................ - (0.21) (0.13) - (0.21) (0.11)
Distributions from Net Realized
Gains............................ - (0.24) (0.00)(8) - (0.24) (0.00)(8)
------- ------ ------ ------- ------ ------
Total Distributions............. (0.13) (0.90) (0.56) (0.10) (0.82) (0.49)
------- ------ ------ ------- ------ ------
Net Asset Value, End of Period...... $10.63 $10.79 $10.57 $10.63 $10.79 $10.57
======= ====== ====== ======= ====== ======
Total Return(2)..................... (0.26)% 11.07% 11.58% (0.51)% 10.24% 10.80%
RATIOS/SUPPLEMENTAL DATA:
Net Assets End of Period
($1,000's)....................... $9,766 $8,808 $12,613 $11,142 $7,684 $7,385
Ratio of Operating Expenses to
Average Net Assets(13)(3)........ 0.95%(5) 0.95% 0.92%(5) 1.70%(5) 1.70% 1.67%(5)
Ratio of Net Investment Income to
Average Net Assets............... 3.62%(5) 4.07% 4.95%(5) 2.87%(5) 3.32% 4.20%(5)
Portfolio Turnover Rate........... 15% 24% 54% 15% 24% 54%
Ratio of Operating Expenses to
Average Net Assets Without
Credits Allowed by the
Custodian(13).................... - 0.95% 0.93%(5) - 1.70% 1.68%(5)
Ratio of Operating Expenses to
Average Net Assets Without Fee
Waivers, Expenses Absorbed and/or
Credits Allowed by the
Custodian........................ 1.37%(5) 1.23% 1.67%(5) 2.12%(5) 1.98% 2.42%(5)
</TABLE>

Footnotes appear on page 84

82
<PAGE> 85
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD

INCOME PORTFOLIO

<TABLE>
<CAPTION>
CLASS A CLASS B
-------------------------------------------- --------------------------------------------
FISCAL FISCAL
PERIOD ENDED YEAR ENDED JULY 25, 1996 TO PERIOD ENDED YEAR ENDED JULY 25, 1996 TO
OCTOBER 31, JUNE 30, JUNE 30, OCTOBER 31, JUNE 30, JUNE 30,
1998(1) 1998(6) 1997(4) 1998(1) 1998(6) 1997(4)
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Period.............................. $10.34 $10.13 $10.00 $10.34 $10.13 $10.00
------ ------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income............. 0.19 0.64 0.58(9) 0.16 0.56 0.51(9)
Net Realized & Unrealized
Gain/(Loss) on
Investments...................... (0.09) 0.22 0.14(12) (0.09) 0.22 0.14(12)
------ ------ ------ ------ ------ ------
Total From Investment
Operations...................... 0.10 0.86 0.72 0.07 0.78 0.65
------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends from Net Investment
Income........................... (0.19) (0.65) (0.58) (0.16) (0.57) (0.51)
Distributions in Excess of Net
Investment Income................ - (0.00)(8) (0.01) - (0.00)(8) (0.01)
Distributions from Net Realized
Gains............................ - - (0.00)(8) - - (0.00)(8)
------ ------ ------ ------ ------ ------
Total Distributions............. (0.19) (0.65) (0.59) (0.16) (0.57) (0.52)
------ ------ ------ ------ ------ ------
Net Asset Value, End of Period...... $10.25 $10.34 $10.13 $10.25 $10.34 $10.13
====== ====== ====== ====== ====== ======
Total Return(2)..................... (0.96)% 8.71% 7.38% 0.70% 7.90% 6.63%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period
($1,000's)....................... $7,611 $7,793 $13,410 $5,698 $4,084 $4,537
Ratio of Operating Expenses to
Average Net
Assets(13)(3).................... 0.95%(5) 0.95% 0.93%(5) 1.70%(5) 1.70% 1.68%(5)
Ratio of Net Investment
Income/Loss to Average Net
Assets........................... 5.40%(5) 6.23% 6.09%(5) 4.65%(5) 5.48% 5.34%(5)
Portfolio Turnover Rate........... 22% 14% 56% 22% 14% 56%
Ratio of Operating Expenses to
Average Net Assets Without
Credits Allowed by the
Custodian(13).................... - 0.95% 0.93%(5) - 1.71% 1.68%(5)
Ratio of Operating Expenses to
Average Net Assets Without Fee
Waivers, Expenses Absorbed and/or
Credits Allowed by the
Custodian........................ 1.53%(5) 1.25% 1.65%(5) 2.28%(5) 2.01% 2.40%(5)
</TABLE>

Footnotes appear on page 84

83
<PAGE> 86
- --------------------------------------------------------------------------------

FOOTNOTES TO FINANCIAL HIGHLIGHTS

<TABLE>
<C> <S>
(1) Fiscal year end changed to October 31.
(2) 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/or expenses absorbed by the investment
advisor or if fees had not been reduced by credits allowed
by the custodian.
(3) Ratio of operating expenses to average net assets includes
expenses paid indirectly beginning in fiscal 1995.
(4) From the commencement of offering shares.
(5) Annualized.
(6) On March 23, 1998, WM Advisors, Inc. replaced Sierra
Investment Advisers Corporation as investment adviser to the
Fund. In the case of the portfolios, on March 23, 1998, WM
Advisors, Inc. replace Sierra Investment Services
Corporation as investment advisor to the portfolio.
(7) On July 1, 1994, the Funds commenced selling Class B shares
in addition to Class A shares. Those shares in existence
prior to July 1, 1994 were designated Class A shares.
(8) Amount represents less than $0.01 per share.
(9) Per share numbers have been calculated using the average
shares method.
(10) The ratio and per share numbers include custodian fees
before reduction by credits allowed by the custodian as
required by amended disclosure requirements effective
September 1, 1995.
(11) Total returns do not reflect a sales charge and are not
annualized.
(12) 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.
(13) The Portfolios will indirectly incur their pro rata share of
the expenses of the Funds when they purchase. Such
underlying Fund expenses are not included in the table.
(14) On May 2, 1994, the Fund commenced selling Class B shares.
Those shares in existence prior to May 2, 1994 were
designated as Class A shares.
(15) Formerly, Composite Cash Management Company Money Market
Portfolio.
(16) Formerly, Composite Cash Management Company Tax-Exempt
Portfolio.
(17) Formerly, Composite U.S. Government Securities, Inc.
(18) On March 30, 1994 the Fund commenced selling Class B shares.
Those shares in existence prior to March 30, 1994 were
designated as Class A shares.
(19) Formerly, Composite Income Fund, Inc.
(20) Amounts distributed in excess of accumulated net investment
income as determined for financial statement purposes have
been reported as distributions from paid-in capital at the
fiscal year end in which the distribution was made. Certain
of these distributions which are reported as being from
paid-in capital for financial statement purposes may be
reported to shareholders as taxable distributions due to
differing tax and accounting rules.
(21) Formerly, Composite Tax-Exempt Bond Fund, Inc.
(22) Formerly, Composite Bond & Stock Fund, Inc.
(23) Formerly, Composite Growth & Income Fund.
(24) Formerly, Composite Northwest Fund, Inc.
</TABLE>

84
<PAGE> 87

For more information about the WM Group of Funds

The WM Group's Statement of Additional Information (SAI) and Annual and
Semi-annual Reports to shareholders include additional information about the
Funds and Portfolios. The SAI is incorporated by reference into this
prospectus, which means they are part of this prospectus for legal purposes.
The Funds' and Portfolio's Annual Reports discuss the market conditions and
investment strategies that significantly affected performance during the last
fiscal year. You may obtain free copies of these materials, request other
information about the WM Group of Funds, or make shareholder inquiries, by
contacting your financial advisor or by calling toll-free at 1-800-222-5852.

You may review and copy information about the Funds and Portfolios, including
the SAI, at the Securities and Exchange Commission's public reference room in
Washington, D.C. You may call the Commission at 1-800-SEC-0330 for information
about the operation of the public reference room. You may also access reports
and other information about the Funds and Portfolios on the Commission's
Internet site at http://www.sec.gov. You may obtain copies of this information,
with payment of a duplication fee, by writing the Public Reference Section of
the Commission, Washington, D.C. 20549-6009. You may need to refer to the
following file number:

<TABLE>
<S> <C> <C>
Money Market Fund California Money Fund

Tax-Exempt Money Market Fund Short Term High Quality Bond Fund

U.S. Government Securities Target Maturity 2002 Fund
Fund

Income Fund California Municipal Fund

High Yield Fund California Insured Intermediate Strategic Growth Portfolio
Municipal Fund

Tax-Exempt Bond Fund Florida Insured Municipal Fund Conservative Growth Portfolio

Bond & Stock Fund Growth Fund Balanced Portfolio

Growth & Income Fund Emerging Growth Fund Flexible Income Portfolio

Northwest Fund International Growth Fund Income Portfolio

File No. 333-36941 File No. 33-27489 File No. 333-01999
</TABLE>
<PAGE> 88

I&S
PROSPECTUS
March 1, 1999

WM GROUP OF FUNDS

MONEY FUNDS
Money Market Fund
Tax-Exempt Money Market Fund
California Money Fund

FIXED-INCOME FUNDS
Short Term High Quality Bond Fund
U.S. Government Securities Fund
Income Fund
High Yield Fund

MUNICIPAL FUNDS
Tax-Exempt Bond Fund
California Municipal Fund
California Insured Intermediate Municipal Fund
Florida Insured Municipal Fund

EQUITY FUNDS
Bond & Stock Fund
Growth & Income Fund
Northwest Fund
Growth Fund
Emerging Growth Fund
International Growth Fund

The WM Group of Funds provide a broad selection
of investment alternatives to investors.

The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the adequacy of this prospectus. Any representation to
the contrary is a crime.

<PAGE> 89

THE WM GROUP OF FUNDS

- --------------------------------------------------------------------------------

CONTENTS [TO BE UPDATED]

<TABLE>
<CAPTION>
PAGE
<S> <C>
Risk/Return Summary 2
Summary of Principal Risks 20
Principal Risks by Fund 25
Fees and Expenses of the Funds 28
Description of the Funds 31
Money Funds 31
Fixed-Income Funds 32
Municipal Funds 33
Equity Funds 35
Common Investment Practices 37
Ways to Set Up Your Account 46
How Can I Invest in the Funds? 47
Class I Shares 49
Class S Shares 49
Distribution of Income and Capital Gains 50
How Can I Sell Shares? 50
How Can I Exchange My Shares? 51
Dividends, Capital Gains and Taxes 52
Organization 52
Financial Highlights 55
</TABLE>

<PAGE> 90

RISK/RETURN SUMMARY

-2-
<PAGE> 91

MONEY MARKET FUND

- - OBJECTIVE. This Fund seeks to maximize current income while preserving
capital and maintaining liquidity.

YEARLY PERFORMANCE*

[BAR GRAPH]

<TABLE>
<CAPTION>
Calendar Year Annual Return(%)
------------- ----------------
<S> <C>
1989 8.60
1990 7.61
1991 5.41
1992 3.07
1993 2.41
1994 3.47
1995 5.33
1996 4.88
1997 5.04
1998
</TABLE>

During the periods shown above, the highest quarterly return was _____% (for the
quarter ended __________ __, 19__), and the lowest was ____% (for the quarter
ended _________ __, 19__).

PERFORMANCE TABLE*

<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS (FOR PAST ONE PAST FIVE PAST TEN SINCE
PERIODS ENDING DECEMBER 31, 1998) YEAR YEARS YEARS INCEPTION
(3/23/98)
<S> <C> <C> <C> <C>
Class I Shares N/A
Class S Shares N/A N/A
</TABLE>

* The Fund's performance through ________ __, 19__ benefitted from the agreement
of WM Advisors and its affiliates to limit the Fund's expenses.

-3-
<PAGE> 92

TAX-EXEMPT MONEY MARKET FUND

- - OBJECTIVE. This Fund seeks to maximize current income that is exempt from
federal income tax while preserving capital and maintaining liquidity.

[BAR GRAPH]

<TABLE>
<CAPTION>
Calendar Year Annual Return(%)
------------- ----------------
<S> <C>
1989 6.05
1990 5.77
1991 4.19
1992 2.41
1993 2.06
1994 2.37
1995 4.01
1996 3.05
1997 3.18
1998
</TABLE>

During the periods shown above, the highest quarterly return was _____% (for the
quarter ended _______ __, 19__), and the lowest was ____% (for the quarter ended
________ __, 19__).

PERFORMANCE TABLE*

<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS (FOR PAST ONE PAST FIVE PAST TEN SINCE
PERIODS ENDING DECEMBER 31, 1998) YEAR YEARS YEARS INCEPTION
<S> <C> <C> <C> <C>
Class I Shares N/A N/A N/A N/A
Class S Shares N/A N/A N/A N/A
</TABLE>

* The Fund's performance through ________ __, 19__ benefitted from the agreement
of WM Advisors and its affiliates to limit the Fund's expenses.

** The Tax-Exempt Money Market Fund has yet to issue Class I or Class S shares.

-4-
<PAGE> 93

CALIFORNIA MONEY FUND

- - PRINCIPAL INVESTMENT STRATEGIES. The Fund invests primarily in
high-quality, short-term fixed income obligations issued by states,
counties, cities or other governmental bodies that generate income exempt
from California state personal income tax. The Fund may also invest in
high quality instruments that may generate taxable income, including U.S.
GOVERNMENT SECURITIES, MORTGAGE- AND ASSET-BACKED SECURITIES (including
collateralized mortgage obligations) and REPURCHASE AGREEMENTS.

- - The Fund is "NON-DIVERSIFIED," which means that the Fund may invest more of
its assets in the securities of fewer issuers than other mutual funds.

YEARLY PERFORMANCE*

[BAR GRAPH]
<TABLE>
<CAPTION>
Calendar Year Annual Return (%)
------------- -----------------
<S> <C>
1991 4.52
1992 3.35
1993 2.07
1994 1.81
1995 2.79
1996 3.00
1997 2.81
1998
</TABLE>

During the periods shown above, the highest quarterly return was ____% (for the
quarter ended _______ __, 19__), and the lowest was ___% (for the quarter ended
_______ __, 19__).

PERFORMANCE TABLE*

<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS (FOR PAST ONE PAST FIVE LIFE OF FUND SINCE CLASS S
PERIODS ENDING DECEMBER 31, 1998) YEAR YEARS (SINCE 7/25/96) INCEPTION
(7/1/94)
<S> <C> <C> <C> <C>
Class I Shares N/A N/A
Class S Shares N/A N/A
</TABLE>

* The Fund's performance through ________ __, 19__ benefitted from the agreement
of WM Advisors and its affiliates to limit the Fund's expenses.

-5-
<PAGE> 94

SHORT TERM HIGH QUALITY BOND FUND

- - OBJECTIVE. This Fund seeks as high a level of current income as is
consistent with prudent investment management and stability of principal.

YEARLY PERFORMANCE*

[BAR GRAPH]
<TABLE>
<CAPTION>
Calendar Year Annual Return (%)
------------- -----------------
<S> <C>
1995 4.42
1996 5.05
1997 6.15
1998

</TABLE>

During the periods shown above, the highest quarterly return was ____% (for the
quarter ended _______ __, 19__), and the lowest was ___% (for the quarter ended
_______ __, 19__).

PERFORMANCE TABLE*

<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS (FOR PAST ONE PAST FIVE LIFE OF FUND SINCE CLASS S
PERIODS ENDING DECEMBER 31, 1998) YEAR YEARS (7/25/96) INCEPTION
(7/1/94)
<S> <C> <C> <C> <C>
Class I Shares N/A N/A
Class S Shares N/A N/A
Lehman Brothers Mutual Fund Short (1-5
[year]) Investment Grade Debt Index**
</TABLE>

* The Fund's performance through ________ __, 19__ benefitted from the
agreement of WM Advisors and its affiliates to limit the Fund's expenses.

** This index includes all investment-grade, corporate debt securities with
maturities of one to five years.

-6-
<PAGE> 95

U.S. GOVERNMENT SECURITIES FUND

- - OBJECTIVE. This Fund seeks a high level of current income, consistent with
safety and liquidity.

YEARLY PERFORMANCE*

During the periods shown above, the highest quarterly return was ______% (for
the quarter ended _______ __, 19__), and the lowest was _____% (for the quarter
ended _______ __, 19__).

PERFORMANCE TABLE*

<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS (FOR PAST ONE PAST FIVE PAST TEN SINCE
PERIODS ENDING DECEMBER 31, 1998) YEAR YEARS YEARS INCEPTION
(3/2/94)
<S> <C> <C> <C> <C>
Class I Shares N/A N/A
Class S Shares N/A N/A
Lehman Brothers Government Bond
Index**
</TABLE>

* The Fund's performance through ________ __, 19__ benefitted from the
agreement of WM Advisors and its affiliates to limit the Fund's expenses.

** This index includes all U.S. Government agency and Treasury securities.

-7-
<PAGE> 96

INCOME FUND

- - OBJECTIVE. This Fund seeks a high level of current income consistent with
preservation of capital.

YEARLY PERFORMANCE*

During the periods shown above, the highest quarterly return was ____% (for the
quarter ended _____ __, 19__), and the lowest was ______% (for the quarter ended
______ __, 19__).

PERFORMANCE TABLE*

<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS (FOR PAST ONE PAST FIVE PAST TEN SINCE CLASS S
PERIODS ENDING DECEMBER 31, 1998) YEAR YEARS YEARS INCEPTION
(3/27/98)
<S> <C> <C> <C> <C>
Class I Shares N/A N/A
Class S Shares N/A N/A
Lehman Brothers Government/Corporate
Bond Index**
</TABLE>

* The Fund's performance through ______________, 19__ benefitted from the
agreement of WM Advisors and its affiliates to limit the Fund's expenses.

** This index is generally considered representative of the U.S. government and
corporate bond markets.

-8-
<PAGE> 97

HIGH YIELD FUND

- - OBJECTIVE. This Fund seeks to provide a high level of current income.

No performance information is available for the High Yield Fund because it
has not yet been in operation for a full year.

-9-
<PAGE> 98

TAX-EXEMPT BOND FUND

- - OBJECTIVE. This Fund seeks to provide a high level of income that is exempt
from federal income taxes while protecting investors' capital.

YEARLY PERFORMANCE*

During the periods shown above, the highest quarterly return was ____% (for the
quarter ended _____ __, 19__), and the lowest was ____% (for the quarter ended
_______ __, 19__).

PERFORMANCE TABLE*

<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS (FOR PAST ONE PAST FIVE PAST TEN SINCE
PERIODS ENDING DECEMBER 31, 1998) YEAR YEARS YEARS OR INCEPTION
SINCE (3/23/98)
INCEPTION
<S> <C> <C> <C> <C>
Class I Shares N/A N/A
Class S Shares N/A N/A
Lehman Brothers Municipal Bond Index**
</TABLE>

* The Fund's performance through _____________, 19__ benefitted from the
agreement of WM Advisors and its affiliates to limit the Fund's expenses.

** This index includes all investment grade, tax-exempt bond issues.

-10-
<PAGE> 99

CALIFORNIA MUNICIPAL FUND

- - The Fund is "NON-DIVERSIFIED," which means that the Fund may invest more
of its assets in the securities of fewer issuers than other mutual funds.

YEARLY PERFORMANCE*

[BAR GRAPH]
<TABLE>
<CAPTION>
Calendar Year Annual Return (%)
------------- -----------------
<S> <C>
1991 7.16
1992 10.56
1993 13.84
1994 -2.94
1995 7.57
1996 6.40
1997 8.83
1998 9.26
</TABLE>

During the periods shown above, the highest quarterly return was ___% (for the
quarter ended _______ __, 19__), and the lowest was ___% (for the quarter ended
_______ __, 19__).

PERFORMANCE TABLE*

<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS (FOR PAST ONE PAST FIVE LIFE OF FUND SINCE CLASS S
PERIODS ENDING DECEMBER 31, 1998) YEAR YEARS (SINCE INCEPTION
7/25/96) (7/1/94)
<S> <C> <C> <C> <C>
Class I Shares N/A N/A
Class S Shares N/A
Lehman Brothers Municipal Bond Index**
</TABLE>

* The Fund's performance through __________, 19__ benefitted from the agreement
of WM Advisors and its affiliates to limit the Fund's expenses.

** This index includes all investment grade tax-exempt bond issues.

-11-
<PAGE> 100

CALIFORNIA INSURED INTERMEDIATE MUNICIPAL FUND

- - The Fund is "NON-DIVERSIFIED," which means that the Fund may invest more
of its assets in the securities of fewer issuers than other mutual funds.

YEARLY PERFORMANCE*

[BAR GRAPH]

<TABLE>
<CAPTION>
Calendar Year Annual Return(%)
------------- ----------------
<S> <C>
1995 8.71
1996 6.25
1997 6.97
1998
</TABLE>

During the periods shown above, the highest quarterly return was ____% (for the
quarter ended _______ __, 19__), and the lowest was ____% (for the quarter ended
______ __, 19__).

PERFORMANCE TABLE*

<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS (FOR PAST ONE YEAR LIFE OF FUND SINCE CLASS S
PERIODS ENDING DECEMBER 31, 1998) (SINCE 7/25/96) INCEPTION
(7/1/94)
<S> <C> <C> <C>
Class I Shares N/A
Class S Shares N/A
Lehman Brothers Municipal Bond Index**
</TABLE>

* The Fund's performance through _________, 19__ benefitted from the agreement
of WM Advisors and its affiliates to limit the Fund's expenses.

** This index includes all investment grade tax-exempt bond issues.

-12-
<PAGE> 101

FLORIDA INSURED MUNICIPAL FUND

- - The Fund is "NON-DIVERSIFIED," which means that the Fund may invest more
of its assets in the securities of fewer issuers than other mutual funds.

YEARLY PERFORMANCE*

[BAR GRAPH]

<TABLE>
<CAPTION>
Calendar Year Annual Return(%)
------------- ----------------
<S> <C>
1994 -1.50
1995 6.01
1996 7.56
1997 8.43
1998
</TABLE>

During the periods shown above, the highest quarterly return was ____% (for the
quarter ended _______ __, 199_), and the lowest was ____% (for the quarter ended
________ __, 19__).

PERFORMANCE TABLE*

* The Fund's performance through ______________________ __, 19__ benefitted
from the agreement of WM Advisors and its affiliates to limit the Fund's
expenses.

** This index includes all investment grade tax-exempt bond issues.

-13-

<PAGE> 102

BOND & STOCK FUND

- - OBJECTIVE. This Fund seeks to provide continuity of income, conservation of
principal and long-term growth of income and principal.

YEARLY PERFORMANCE*

[BAR GRAPH]

During the periods shown above, the highest quarterly return was ____% (for the
quarter ended ________ __, 19__), and the lowest was___% (for the quarter ended
________ __, 19__).

PERFORMANCE TABLE*

<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS (FOR PAST ONE PAST FIVE PAST TEN SINCE CLASS S
PERIODS ENDING DECEMBER 31, 1998) YEAR YEARS YEARS INCEPTION
(5/28/98)
<S> <C> <C> <C> <C>
Class I Shares N/A N/A N/A N/A
Class S Shares N/A N/A
Standard & Poor's 500 Composite Index**
Lehman Brothers Government/Corporate
Bond***

</TABLE>

* The Fund's performance through ______________________ __, 19__ benefitted
from the agreement of WM Advisors and its affiliates to limit the Fund's
expenses.

** This index represents an unmanaged weighted index of 500 industrial,
transportation, utility and financial companies widely regarded by investors as
representative of the stock market.

*** This index is generally considered representative of the U.S. government and
corporate bond markets.

-14-
<PAGE> 103

GROWTH & INCOME FUND

- - OBJECTIVE. This Fund seeks to provide long-term capital growth. Current
income is a secondary consideration.

- - PRINCIPAL INVESTMENT STRATEGIES. The Fund invests primarily in common
stocks.

YEARLY PERFORMANCE*

[BAR GRAPH]

<TABLE>
<CAPTION>
Calendar Year Annual Return(%)
------------- ----------------
<S> <C>
1989 13.00
1990 -16.25
1991 32.69
1992 9.94
1993 11.06
1994 8.55
1995 20.87
1996 23.61
1997 31.24
1998
</TABLE>

PERFORMANCE TABLE*

<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS (FOR PAST ONE PAST FIVE PAST TEN LIFE OF FUND
PERIODS ENDING DECEMBER 31, 1998) YEAR YEARS YEARS (3/23/98)
<S> <C> <C> <C> <C>
Class I Shares N/A N/A
Class S Shares N/A N/A
Standard & Poor's 500 Composite Index**
</TABLE>

* The Fund's performance through ______________________ __, 19__ benefitted
from the agreement of WM Advisors and its affiliates to limit the Fund's
expenses.

** This index represents an unmanaged weighted index of 500 industrial,
transportation, utility and financial companies widely regarded by investors as
representative of the stock market.

-15-
<PAGE> 104

NORTHWEST FUND

- - OBJECTIVE. This Fund seeks long-term growth of capital.

YEARLY PERFORMANCE

[BAR GRAPH]

<TABLE>
<CAPTION>
Calendar Year Annual Return(%)
------------- ----------------
<S> <C>
1989 36.14
1990 -16.68
1991 60.49
1992 5.77
1993 3.82
1994 2.97
1995 22.24
1996 14.54
1997 44.47
1998
</TABLE>

During the periods shown above, the highest quarterly return was ___% (for the
quarter ended ________ __, 19__), and the lowest was ____% (for the quarter
ended ________ __, 19__).

PERFORMANCE TABLE

<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS (FOR PAST ONE PAST FIVE PAST TEN LIFE OF FUND
PERIODS ENDING DECEMBER 31, 1998) YEAR YEARS YEARS
<S> <C> <C> <C> <C>
Class I Shares N/A N/A N/A N/A
Class S Shares N/A N/A N/A N/A
Standard & Poor's 500 Composite Index**
</TABLE>

* The Fund's performance through ______________________ __, 19__ benefitted
from the agreement of WM Advisors and its affiliates to limit the Fund's
expenses.

** This index represents an unmanaged weighted index of 500 industrial,
transportation, utility and financial companies widely regarded by investors as
representative of the stock market.

-16-
<PAGE> 105

GROWTH FUND

- - OBJECTIVE. This Fund seeks long-term capital appreciation.

YEARLY PERFORMANCE*

[BAR GRAPH]

<TABLE>
<CAPTION>
Calendar Year Annual Return(%)
------------- ----------------
<S> <C>
1994 0
1995 32.33
1996 25.44
1997 10.88
1998
</TABLE>

During the periods shown above, the highest quarterly return was ___% (for the
quarter ended ________ __, 19__), and the lowest was ____% (for the quarter
ended _________ __, 19__).

PERFORMANCE TABLE*

<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS (FOR PAST ONE PAST FIVE LIFE OF THE SINCE CLASS S
PERIODS ENDING DECEMBER 31, 1998) YEAR YEARS FUND INCEPTION
(7/1/96) (7/1/94)
<S> <C> <C> <C> <C>
Class I Shares N/A N/A
Class S Shares N/A N/A
Standard & Poor's 500 Composite Index**
</TABLE>

* The Fund's performance through ______________________ __, 19__ benefitted
from the agreement of WM Advisors and its affiliates to limit the Fund's
expenses.

** This index represents an unmanaged weighted index of 500 industrial,
transportation, utility and financial companies widely regarded by investors as
representative of the stock market.

-17-
<PAGE> 106

EMERGING GROWTH FUND

- - OBJECTIVE. This Fund seeks long-term capital appreciation.

YEARLY PERFORMANCE*

[BAR GRAPH]

<TABLE>
<CAPTION>
Calendar Year Annual Return(%)
------------- ----------------
<S> <C>
1992 22.47
1993 19.75
1994 3.40
1995 21.54
1996 35.93
1997 -1.50
1998
</TABLE>

During the periods shown above, the highest quarterly return was ____% (for the
quarter ended _____ __, 19__), and the lowest was ___% (for the quarter ended
________ __, 19__).

PERFORMANCE TABLE*

* The Fund's performance through _______________ __, 19__ benefitted from the
agreement of WM Advisors and its affiliates to limit the Fund's expenses.

** This index represents an unmanaged weighted index of 500 industrial,
transportation, utility and financial companies widely regarded by investors as
representative of the stock market.

*** This index represents the smallest 2000 companies followed by Russell and is
used to measure the small-cap market.

-18-
<PAGE> 107

INTERNATIONAL GROWTH FUND

- - OBJECTIVE. This Fund seeks to provide long-term capital appreciation.

YEARLY PERFORMANCE*

[BAR GRAPH]

<TABLE>
<CAPTION>
Calendar Year Annual Return(%)
------------- ----------------
<S> <C>
1992 7.28
1993 11.51
1994 12.39
1995 -4.01
1996 13.16
1997 15.50
1998
</TABLE>

During the periods shown above, the highest quarterly return was ___% (for the
quarter ended ________ __, 19__), and the lowest was ____% (for the quarter
ended _________ __, 19__).

PERFORMANCE TABLE*

* The Fund's performance through _______________ __, 19__ benefitted from the
agreement of WM Advisors and its affiliates to limit the Fund's expenses.

** This index includes stock markets of Europe, Australia and the Far East
weighted by capitalization and represents the equity markets of 18 countries.

-19-
<PAGE> 108
SUMMARY OF PRINCIPAL RISKS

-20-
<PAGE> 109
speculative elements or are predominantly speculative credit risks. The
Short Term High Quality Bond, Income, High Yield, Bond & Stock, Growth &
Income, Growth, Emerging Growth and International Growth Funds which make
FOREIGN INVESTMENTS denominated in U.S. dollars, are also subject to
increased credit risk because of the difficulties of requiring foreign
entities to honor their contractual commitments, and because a number of
foreign governments and other issuers are already in default. The Money
Market Fund may also invest in U.S. dollar denominated foreign securities.

-21-
<PAGE> 110

-22-
<PAGE> 111

- - NON-DIVERSIFICATION RISK. Each of the California Money, California
Municipal, California Insured Intermediate Municipal and Florida Insured
Municipal Funds is a "non-diversified" fund which means that each of them
may invest more of its assets in the securities of fewer issuers than other
mutual funds. To the extent that a Fund invests significantly in the
securities of a particular issuer, it may suffer greater losses if the
value of such issuer's securities declines.

-23-
<PAGE> 112

-24-
<PAGE> 113

PRINCIPAL RISKS BY FUND

The following chart summarizes the Principal Risks of each Fund. Risks not
marked for a particular Fund may, however, still apply to some extent to that
Fund at various times.

Tax- X
Exempt
Money
Market
Fund

California X X
Money Fund

Short X X X X X X X X
Term
High
Quality
Bond Fund

Target X X X X X X X
Maturity
2002 Fund

U.S. X X X X X X X
Government
Securities
Fund

Income X X X X X X X
Fund

High X X X X X X X X
Yield
Fund

Tax- X X X X X X X
Exempt
Bond Fund

California X X X X X X X X
Municipal
Fund
</TABLE>

<TABLE>
<CAPTION>
FUND SMALLER TAX MONEY NON-
COMPANY RISK MARKET DIVERSIFICATION
RISK RISK RISK

<S> <C> <C> <C> <C>
Money X
Market
Fund

Tax- X X
Exempt
Money
Market
Fund

California X X X
Money Fund

Short
Term
High
Quality
Bond Fund

Target
Maturity
2002 Fund

U.S.
Government
Securities
Fund

Income
Fund

High
Yield
Fund

Tax- X
Exempt
Bond Fund

California X X
Municipal
Fund
</TABLE>

-25-
<PAGE> 114

Florida X X X X X X
Insured
Municipal
Fund

Bond & X X X X X X X
Stock Fund

Growth X X X X X X
& Income
Fund

Northwest X X X X X X
Fund

Growth X X X X X X X X
Fund

Emerging X X X X X X X X
Growth
Fund

International X X X X X X X
Growth Fund
</TABLE>

<TABLE>
<CAPTION>
FUND SMALLER TAX MONEY NON-
COMPANY RISK MARKET DIVERSIFICATION
RISK RISK RISK

<S> <C> <C> <C> <C>
California X X
Insured
Intermediate
Municipal
Fund

Florida X X
Insured
Municipal
Fund

Bond & X
Stock Fund

Growth X
& Income
Fund

Northwest X
Fund

Growth X
Fund

Emerging X
Growth
Fund

International X
Growth Fund
</TABLE>

-26-
<PAGE> 115

THE WM GROUP OF FUNDS

- --------------------------------------------------------------------------------

CONTENTS [TO BE UPDATED]

<TABLE>
<CAPTION>
PAGE
<S> <C>
Fees and Expenses of the Funds 28
Description of the Funds 31
Money Funds 31
Fixed-Income Funds 32
Municipal Funds 33
Equity Funds 35
Common Investment Practices 37
Ways to Set Up Your Account 46
How Can I Invest in the Funds? 47
Class I Shares 49
Class S Shares 49
Distribution of Income and Capital Gains 50
How Can I Sell Shares? 50
How Can I Exchange My Shares? 51
Dividends, Capital Gains and Taxes 52
Organization 52
Financial Highlights 55
</TABLE>

<PAGE> 116

- --------------------------------------------------------------------------------

FEES AND EXPENSES OF THE FUNDS

This table summarizes the fees and expenses that you may pay if you invest in a
Fund. The Examples on the next two pages are intended to help you compare the
cost of investing in the Funds with the costs of investing in other mutual
funds. The Examples assume that your investment has a 5% return each year, as
required by the Securities and Exchange Commission, and that the Fund's
operating expenses remain the same. Your actual costs may be higher or lower
than those in the Examples.

<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
SHAREHOLDER FEES CLASS S
(fees paid directly from your investment) SHARES (in %)
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Maximum sales charge (load) imposed on purchases (as a
percentage of offering price) 0.00
------------------------------------------------------------------------------------
Maximum sales charge imposed on reinvested dividends 0.00
------------------------------------------------------------------------------------
Maximum deferred sales charge ("load") (as a percentage of
original purchase price or redemption proceeds, as
applicable)(2) 5.00(1)
------------------------------------------------------------------------------------
Exchange Fee 0.00
------------------------------------------------------------------------------------
(1) The maximum deferred sales charge is imposed on shares redeemed in the
first year. For shares held longer than one year, the CDSC declines according
to the schedules set forth under "Buying Class S Shares -- Contingent
deferred sales charge" in this Prospectus.
(2) A $10 fee may be charged for redemptions made by wire transfer.
- -------------------------------------------------------------------------------------------------
</TABLE>

28
<PAGE> 117

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------

ANNUAL FUND
OPERATING EXPENSES
(Expenses that are deducted
CLASS I SHARES from Fund assets)
-----------------------------------------------------------------------------------------------------
Total
Annual Fund
Management Other Operating Expense Net
Fee Expenses Expenses Reimbursement Expenses
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Money Market Fund(1) % % % % %
-----------------------------------------------------------------------------------------------------
Tax-Exempt Money Market Fund(1)
-----------------------------------------------------------------------------------------------------
California Money Fund(1)
-----------------------------------------------------------------------------------------------------
Short Term High Quality Bond Fund(1)
-----------------------------------------------------------------------------------------------------
U.S. Government Securities Fund(1)
-----------------------------------------------------------------------------------------------------
Income Fund
-----------------------------------------------------------------------------------------------------
High Yield Fund(1,2)
-----------------------------------------------------------------------------------------------------
Tax-Exempt Bond Fund
-----------------------------------------------------------------------------------------------------
California Municipal Fund(1)
-----------------------------------------------------------------------------------------------------
California Insured Intermediate
Municipal Fund(1)
-----------------------------------------------------------------------------------------------------
Florida Insured Municipal Fund(1)
-----------------------------------------------------------------------------------------------------
Bond & Stock Fund
-----------------------------------------------------------------------------------------------------
Growth & Income Fund(1)
-----------------------------------------------------------------------------------------------------
Northwest Fund
-----------------------------------------------------------------------------------------------------
Growth Fund(1)
-----------------------------------------------------------------------------------------------------
Emerging Growth Fund(1)
-----------------------------------------------------------------------------------------------------
International Growth Fund
-----------------------------------------------------------------------------------------------------
(1) Reflects the Advisor's obligation to limit Total Annual Fund Operating Expenses as described on
page .
(2) Because the High Yield Fund has not completed its first full fiscal year, the expenses for the
5-year and 10-year periods are not applicable.
- --------------------------------------------------------------------------------------------------------------

<CAPTION>
- --- -----------------------------------------
EXAMPLES: You would pay
the following expenses on a
$10,000 investment assuming
a 5% annual return and
redemption at the end of each
period:
-----------------------------------------

One Three Five Ten
Year Years Years Years
-----------------------------------------
<S> <C> <C> <C> <C> <C> <C>
-----------------------------------------
-----------------------------------------
-----------------------------------------
-----------------------------------------
-----------------------------------------
-----------------------------------------
-----------------------------------------
-----------------------------------------
-----------------------------------------
-----------------------------------------
-----------------------------------------
-----------------------------------------
-----------------------------------------
-----------------------------------------
-----------------------------------------
-----------------------------------------
-----------------------------------------
- --------------------------------------------------
</TABLE>

29
<PAGE> 118
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------

ANNUAL FUND
OPERATING EXPENSES
(Expenses that are deducted
CLASS S SHARES from Fund assets)
-----------------------------------------------------------------------------------------------------------
Distribution
and
Service Total Fund
Management (12b-1) Other Operating Expense Net
Fees Fees(2) Expenses Expenses Reimbursement Expenses
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Money Market Fund(1) 1.00% % %
-----------------------------------------------------------------------------------------------------------
Tax-Exempt Money Market
Fund(1) 1.00
-----------------------------------------------------------------------------------------------------------
California Money Fund(1) 1.00
-----------------------------------------------------------------------------------------------------------
Short Term High Quality Bond
Fund(1) 1.00
-----------------------------------------------------------------------------------------------------------
U.S. Government Securities
Fund(1) 1.00
-----------------------------------------------------------------------------------------------------------
Income Fund 1.00
-----------------------------------------------------------------------------------------------------------
High Yield Fund(1,4) 1.00
-----------------------------------------------------------------------------------------------------------
Tax-Exempt Bond Fund 1.00
-----------------------------------------------------------------------------------------------------------
California Municipal Fund(1) 1.00
-----------------------------------------------------------------------------------------------------------
California Insured
Intermediate Municipal
Fund(1) 1.00
-----------------------------------------------------------------------------------------------------------
Florida Insured Municipal
Fund(1) 1.00
-----------------------------------------------------------------------------------------------------------
Bond & Stock Fund 1.00
-----------------------------------------------------------------------------------------------------------
Growth & Income Fund(1) 1.00
-----------------------------------------------------------------------------------------------------------
Northwest Fund 1.00
-----------------------------------------------------------------------------------------------------------
Growth Fund(1) 1.00
-----------------------------------------------------------------------------------------------------------
Emerging Growth Fund(1) 1.00
-----------------------------------------------------------------------------------------------------------
International Growth Fund 1.00
-----------------------------------------------------------------------------------------------------------
(1) Reflects the Advisor's obligation to limit Total Annual Fund Operating Expenses as described on page
.
(2) 0.25% of the 12b-1 fees shown represent servicing fees which are paid to the Distributor. Long-term
Class S shareholders may pay more than the salese -han the sales charges paid by long-term Class A
shareholders.
(3) Class S shares convert to Class A shares after eight years, accordingly the expense amounts for years
nine and ten are based on Class A shares.A s-ares.
(4) Because the High Yield Fund has not completed its first full fiscal year, the expenses for the 5-year
and 10-year periods are not applicable.
- ----------------------------------------------------------------------------------------------------------------

<CAPTION>
- --------------------------------- -----------------------------------------------------------------------------
EXAMPLES: You would pay the following
expenses on a $10,000 investment
assuming a 5% annual return and either
1) redemption at the end of each period or
CLASS S SHARES 2) no redemption:
---------------------------- -------------------------------------------------------------------------

(1) (2)
One Three Five Ten One Three Five Ten
Year Years Years Years(3) Year Years Years Years(3)
---------------------------- -------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Money Market Fund(1)
-----------------------------------------------------------------------------------------------------------
Tax-Exempt Money Market
Fund(1)
-----------------------------------------------------------------------------------------------------------
California Money Fund(1)
-----------------------------------------------------------------------------------------------------------
Short Term High Quality Bond
Fund(1)
-----------------------------------------------------------------------------------------------------------
U.S. Government Securities
Fund(1)
-----------------------------------------------------------------------------------------------------------
Income Fund
-----------------------------------------------------------------------------------------------------------
High Yield Fund(1,4) n/a n/a n/a n/a
-----------------------------------------------------------------------------------------------------------
Tax-Exempt Bond Fund
-----------------------------------------------------------------------------------------------------------
California Municipal Fund(1)
-----------------------------------------------------------------------------------------------------------
California Insured
Intermediate Municipal
Fund(1)
-----------------------------------------------------------------------------------------------------------
Florida Insured Municipal
Fund(1)
-----------------------------------------------------------------------------------------------------------
Bond & Stock Fund
-----------------------------------------------------------------------------------------------------------
Growth & Income Fund(1)
-----------------------------------------------------------------------------------------------------------
Northwest Fund
-----------------------------------------------------------------------------------------------------------
Growth Fund(1)
-----------------------------------------------------------------------------------------------------------
Emerging Growth Fund(1)
-----------------------------------------------------------------------------------------------------------
International Growth Fund
-----------------------------------------------------------------------------------------------------------
(1) Reflects the Advisor's obligation to limit Total Annual Fund Operating Expenses as described on page
.
(2) 0.25% of the 12b-1 fees shown represent servicing fees which are paid to the Distributor. Long-term
Class S shareholders may pay more than the salese -han the sales charges paid by long-term Class A
shareholders.
(3) Class S shares convert to Class A shares after eight years, accordingly the expense amounts for years
nine and ten are based on Class A shares.A s-ares.
(4) Because the High Yield Fund has not completed its first full fiscal year, the expenses for the 5-year
and 10-year periods are not applicable.
- ----------------------------------------------------------------------------------------------------------------
</TABLE>

30
<PAGE> 119

DESCRIPTION OF THE FUNDS

This section provides a more complete description of the investment strategies
and risks of each Fund. The "Common Investment Practices" section that follows
provides additional information about the principal investment strategies of the
Funds and identifies the Funds that may engage in such practices to a
significant extent. You can find additional descriptions of the Funds'
strategies and risks in the Statement of Additional Information ("SAI"). Except
for policies explicitly identified as "fundamental" in this Prospectus or the
SAI, the investment objectives and investment policies set forth in this
Prospectus and the SAI are not fundamental and may be changed at any time
without shareholder consent. Except as otherwise indicated, all policies and
limitations are considered at the time of purchase; the sale of securities is
not required in the event of a subsequent change in valuation or other
circumstances.

MONEY FUNDS

The Money Funds invest only in U.S. dollar-denominated short-term, money market
securities. They will only purchase obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities ("U.S. Government Securities") or
securities that are, or have issuers that are,

- - rated in one of the two highest categories for short-term debt by the only
NRSRO that has issued a rating, or

- - if not so rated, are determined to be of comparable quality.

MONEY MARKET FUND. To accomplish its objective, the Money Market Fund invests
solely in money market instruments that are selected from the following six
general categories:

- - U.S. Government Securities;

- - obligations of U.S. and foreign banks with assets of more than $500 million;

- - securities issued by foreign governments, their agencies or instrumentalities
or by supranational entities;

- - short-term corporate obligations rated in one of the two highest rating
categories by Moody's or S&P; and

- - repurchase agreements.

TAX-EXEMPT MONEY MARKET FUND. The Tax-Exempt Money Market Fund invests
primarily in a diversified selection of Municipal Obligations, the income from
which is exempt from federal income tax. "Municipal Obligations" include fixed
income obligations issued by states, counties, cities or other governmental
bodies that generate income exempt from federal income tax. Short-term Municipal
Obligations may include, but are not limited to, tax anticipation notes, bond
anticipation notes, revenue anticipation notes and project notes, or other forms
of short-term municipal loans and obligations. Under normal market conditions,
the Fund will not invest more than 20% of its assets in obligations that pay
interest subject to alternative minimum tax ("AMT-Subject Bonds").

The Fund may also invest in variable rate demand obligations, stand-by
commitments, when-issued securities and forward commitments.

CALIFORNIA MONEY FUND. To accomplish its objective, the California Money Fund
invests in a portfolio of

31
<PAGE> 120

Municipal Obligations. It is a fundamental policy of the Fund to invest, under
normal market conditions, at least 80% of its total assets in Municipal
Obligations. The Fund normally invests at least 80% of its total assets in
Municipal Obligations issued by the State of California and its political
subdivisions and certain other governmental issuers such as the Commonwealth of
Puerto Rico ("California Municipal Obligations"), which produce income that is
exempt from California state personal income tax. The Fund may also invest in
AMT-Subject Bonds.

The Fund may also invest in variable rate demand obligations, stand-by
commitments, when-issued securities and forward commitments.

FIXED-INCOME FUNDS

SHORT TERM HIGH QUALITY BOND FUND. The Short Term High Quality Bond Fund
invests primarily in short-term bonds and other debt securities. Under normal
market conditions the Fund maintains a dollar-weighted average portfolio
maturity of three years or less. The Fund may, however, hold individual
securities with remaining maturities of more than three years. For purposes of
the weighted average maturity calculation, a mortgage instrument's average life
will be considered to be its maturity, and the date on which the interest rate
of a floating rate security can next change will be used in place of its
maturity date.

The Fund will invest substantially all of its assets in debt securities that, at
the time of purchase, are rated in one of the top four rating categories by one
or more NRSROs or, if unrated, are judged to be of comparable quality by the
Advisor ("investment grade" securities). All debt securities purchased by the
Fund will be investment grade at the time of purchase. Under normal market
conditions, the Fund will invest at least 65% of its total assets in U.S.
Government securities, corporate debt obligations or mortgage-related securities
rated in one of the two highest categories by an NRSRO or determined by the
Advisor to be of comparable quality.

The Fund may invest up to 10% of its assets in foreign fixed-income securities,
primarily bonds of foreign governments or their political subdivisions, foreign
companies and supranational organizations, including non-U.S. dollar-denominated
securities and U.S. dollar-denominated debt securities issued by foreign issuers
and foreign branches of U.S. banks. Investment in foreign securities is subject
to special risks. The Fund may invest up to 5% of its assets in preferred stock.
The Fund may also invest in high-quality, short-term obligations (with
maturities of 12 months or less). The Fund may engage in certain options
transactions, enter into financial futures contracts and related options for the
purpose of portfolio hedging and enter into currency forwards or futures
contracts and related options for the purpose of currency hedging. The Fund may
invest in certain illiquid investments, such as privately placed obligations,
including restricted securities. The Fund may invest up to 10% of its assets in
securities of unaffiliated mutual funds. The Fund may borrow money or enter into
reverse repurchase agreements or dollar roll transactions in the aggregate up to
33 1/3% of its total assets. The Fund may invest up to 25% of its total assets
in asset-backed securities, which represent a participation in, or are secured
by and payable from, a stream of payments generated by particular assets, most
often a pool of similar assets.

U.S. GOVERNMENT SECURITIES FUND. To accomplish its objective, the U.S.
Government Securities Fund invests primarily in a selection of obligations of
the U.S. Government and its agencies. The Fund may also invest in collateralized
mortgage obligations or repurchase agreements which are secured by those types
of obligations. It is a fundamental policy of the Fund to invest only in the
following types of securities: (1) U.S. Government securities, including
mortgage-backed securities; (2) obligations secured by the full faith and credit
of the U.S. Government or its instrumentalities; and (3) collateralized mortgage
obligations and repurchase agreements which are secured by obligations
identified in (1) and (2) above. The Fund may borrow up to 5% of its total net
assets for

32
<PAGE> 121

emergency, non-investment purposes and may enter into dollar roll transactions.

INCOME FUND. The Income Fund invests most of its assets in:

- - debt and convertible debt securities;

- - obligations of U.S. banks that belong to the Federal Reserve System;

- - preferred stocks and convertible preferred stocks;

- - the highest grade commercial paper as rated by S&P or Moody's; and

- - deposits in U.S. banks.

The Fund may also invest in securities denominated in foreign currencies and
likewise receive interest, dividends and sale proceeds in foreign currencies.
The Fund may engage in foreign currency exchange transactions for hedging
purposes in connection with the purchase and sale of foreign securities or to
protect against changes in the value of specific securities held by the Fund,
and may purchase and sell currencies on a spot (cash) basis, enter into forward
contracts to purchase or sell foreign currencies at a future date, and buy and
sell foreign currency futures contracts. The Fund may also borrow up to 5% of
its total net assets for emergency, non-investment purposes, and may enter into
dollar roll transactions. The Fund may purchase securities of issuers which deal
in real estate or securities which are secured by interests in real estate, and
it may acquire and dispose of real estate or interests in real estate acquired
through the exercise of its rights as a holder of debt obligations secured by
real estate or interests therein. The Fund may also purchase and sell interest
rate futures and options. The Fund may invest up to 35% of its assets in
lower-rated fixed-income securities (sometimes called "junk bonds").

HIGH YIELD FUND. The High Yield Fund invests, under normal market conditions,
at least 65% of its assets in a diversified portfolio of fixed income securities
(including debt securities, convertible securities and preferred stocks) rated
lower than BBB by S&P or Baa by Moody's or of equivalent quality as determined
by the Advisor. The remainder of the Fund's assets may be invested in any other
securities the Advisor believes are consistent with the Fund's objective,
including higher rated fixed-income securities, common stocks and other equity
securities. The Fund may also invest in securities of foreign issuers and engage
in hedging strategies involving options.

MUNICIPAL FUNDS

Each of the Municipal Funds and the California Money Fund, invests most of its
assets in Municipal Obligations. Current federal income tax laws limit the types
and volume of bonds qualifying for the federal income tax exemption of interest,
which may have an effect on the ability of the Fund to purchase sufficient
amounts of tax-exempt securities.

TAX-EXEMPT BOND FUND. The Tax-Exempt Bond Fund will invest at least 80% of its
assets in Municipal Obligations, including inverse floating rate obligations,
under normal market conditions.

In adverse markets, the Fund may seek to protect its investment position by
investing up to 50% of its portfolio in taxable short-term investments such as:

- - U.S. Government Securities;

- - commercial paper rated in the highest grade by either S&P or Moody's;

- - obligations of U.S. banks;

- - time or demand deposits in U.S. banks; and

- - repurchase agreements relating to municipal securities or any of the foregoing
taxable instruments.

Interest income from these short-term investments that is distributed to you may
be taxable.

The Fund may also purchase and sell interest rate futures and options. The Fund
may also invest in AMT-Subject Bonds, although, so long as its name includes the
words "tax-exempt" and the SEC so requires, such investments will be limited to
20% of its total assets.

CALIFORNIA MUNICIPAL FUND. The California Municipal Fund invests primarily in
intermediate- and long-term California municipal obligations which are mu-

33
<PAGE> 122

nicipal obligations that generate interest that is exempt from California state
personal income tax. It is a fundamental policy of the Fund that, under normal
market conditions, at least 80% of the Fund's total assets will be invested in
California Municipal Obligations. The Fund may invest in AMT-Subject Bonds.

The Fund will invest primarily in investment grade Municipal Obligations. The
Fund may also invest in inverse floating obligations, which will generally be
more volatile than other types of Municipal Obligations.

The Fund may, under normal circumstances, invest up to 20% of its assets in:

- - Municipal Obligations that are not exempt from California personal income tax;

- - short-term Municipal Obligations;

- - taxable cash equivalents, including short-term U.S. Government Securities,
certificates of deposit and bankers' acceptances, commercial paper rated
Prime-1 by Moody's or A-1+ or A-1 by S&P, repurchase agreements (collectively
"Short-Term Instruments"); and

- - securities of money market mutual funds (subject to the limitations set forth
under "Common Investment Practices").

The Fund may, for temporary defensive purposes, invest in these securities
without limitation. As a non-diversified investment company under the 1940 Act,
the Fund may invest a larger portion of its assets in the securities of a small
number of issuers.

CALIFORNIA INSURED INTERMEDIATE MUNICIPAL FUND. The California Insured
Intermediate Municipal Fund will invest primarily in insured intermediate-term
California Municipal Obligations. It is a fundamental policy of the Fund that it
will invest at least 80% of the value of its total assets in insured California
Municipal Obligations (except when maintaining a temporary defensive position).
The weighted average effective maturity of the securities in which the Fund
invests will be ten years or less, and the maximum effective maturity (the
maturity date without regard to call provisions, except that for pooled single
family mortgage securities effective maturity is the average life of the
underlying mortgage obligations) of any Municipal Obligation in which the Fund
invests will be fifteen years.

All of the Municipal Obligations in which the Fund will invest, taking into
account any insurance, are investment grade securities. For more information,
see "About Bond Insurance" below.

The Fund may invest without limitation in AMT-Subject Bonds.

Under normal market conditions, the Fund may invest up to 20% of its assets in:

- - uninsured Municipal Obligations;

- - Municipal Obligations that are not exempt from California personal income tax;
and

In addition, the Fund may invest in inverse floating rate obligations. The Fund
may engage in hedging transactions through the use of financial futures and
options thereon, purchase and sell securities on a when-issued or forward
commitment basis, invest in mortgage-backed securities, enter into repurchase
agreements, invest in stand-by commitments and lend portfolio securities. The
Fund may invest in floating rate and variable rate obligations, including
participation interests therein (referred to collectively as "Hedging
Transactions").

FLORIDA INSURED MUNICIPAL FUND. The Florida Insured Municipal Fund will invest
primarily in insured, intermediate- and long-term Municipal Obligations, issued
by the State of Florida and its political subdivisions. The Fund will invest
primarily in investment-grade Municipal Obligations. It is a fundamental policy
of the Fund that it will invest at least 80% of the value of its total assets
(except when maintaining a temporary defensive position) in insured Florida
Municipal Obligations. See "About Bond Insurance" below. The Fund may invest
without limitation in AMT-Subject Bonds. The Fund may also invest in inverse
floating rate obligations.

The Fund may invest up to 20% of its total assets in:

- - uninsured Municipal Obligations;

- - Municipal Obligations that are not exempt from Florida intangible personal
property tax; and

34
<PAGE> 123

- - Short-Term Instruments and securities of unaffiliated money market mutual
funds and, for temporary defensive purposes, invest in these securities
without limitation.

As a non-diversified investment company under the 1940 Act, the Fund may invest
a larger portion of its assets in the securities of a small number of issuers.
See "Common Investment Practices -- Non-Diversified Status."

ABOUT BOND INSURANCE. The insured Municipal Obligations in which the California
Insured Intermediate Municipal and Florida Insured Municipal Funds will invest
and the other Municipal Funds may invest are insured under insurance policies
that relate to the specific Municipal Obligation in question ("Specific Issue
Insurance") and that are issued by an insurer having a claims-paying ability
rated AAA by S&P or Aaa by Moody's. Specific Issue Insurance is generally
non-cancelable and will continue in force so long as the Municipal Obligations
are outstanding and the insurer remains in business.

The insured Municipal Obligations are insured as to the scheduled payment of all
installments of principal and interest as they fall due. Such insurance does not
insure against market risk and therefore does not guarantee the market value of
the obligations in a Fund's investment portfolio or a Fund's NAV. Such market
value and NAV will continue to fluctuate in response to fluctuations in interest
rates. A Fund's investment policy requiring investment in insured Municipal
Obligations will not affect the Fund's ability to hold its assets in cash or to
invest in escrow-secured and defeased bonds or in certain short-term tax-exempt
obligations as set forth herein, or affect its ability to invest in uninsured
taxable obligations for temporary or liquidity purposes or on a defensive basis.

EQUITY FUNDS

BOND & STOCK FUND. Under normal market conditions at least 25% of the Bond &
Stock Fund's assets will be invested in fixed-income securities, including
preferred stocks and that portion of the value of convertible securities which
is not attributable to a conversion feature. The Fund may invest in money market
instruments for temporary or defensive purposes. The Fund may invest in
fixed-income securities of any maturity, including mortgage-backed securities,
U.S. Government Securities and asset-backed securities, and may also invest up
to 35% of its assets, in below investment grade bonds (sometimes called junk
bonds). The Fund may purchase or sell U.S. Government Securities or
collateralized mortgage obligations on "when-issued" or "delayed-delivery" basis
in an aggregate of up to 20% of the market value of its total net assets. The
Fund may invest up to 25% of its assets in real estate investment trusts, known
as "REITs." The Fund may write (sell) covered call options. The Fund may invest
up to 25% of its assets in U.S. dollar-denominated securities of foreign
issuers.

NORTHWEST FUND. The Northwest Fund invests in common stocks of companies
located or doing busi-

35
<PAGE> 124

ness in the Northwest states of Alaska, Idaho, Montana, Oregon and Washington.
Under normal circumstances, at least 65% of the Fund's total assets will be
invested in companies whose principal executive offices are located in one of
those states.

The Fund is permitted to invest in money market instruments for temporary or
defensive purposes. The Fund may invest up to 25% of its assets in REITs, and
may write (sell) covered call options.

The Fund may invest up to 25% of its assets in foreign securities, usually
foreign common stocks, and up to 5% of its assets in securities of companies in
(or governments of) developing or emerging countries (sometimes referred to as
"emerging markets"). The Fund may also engage in certain options transactions,
enter into financial futures contracts and related options for the purpose of
portfolio hedging and enter into currency forwards or futures contracts and
related options for the purpose of currency hedging.

The Fund intends to stay fully invested in the securities described above to the
extent practical. Fund assets may be invested in short-term debt instruments to
meet anticipated day-to-day operating expenses, and for temporary defensive
purposes. In addition, when the Fund experiences large cash inflows, the Fund
may hold short-term investments until desirable equity securities become
available. These short-term instruments are generally rated A or higher by
Moody's or S&P, or, if unrated, of comparable quality in the opinion of the
Fund's sub-advisor.

The Fund may invest up to 30% of its assets in the securities of companies in or
governments of developing or emerging markets, provided that no more than 5% of
the Fund's total assets are invested in any one emerging markets country. For
temporary defensive purposes, the Fund may invest a major portion of its assets
in securities of U.S. issuers. Furthermore, the Fund may invest up to 5% of its
total assets in investment grade corporate debt securities having maturities
longer than one year, including Euro-currency instruments and securities.

36
<PAGE> 125

COMMON INVESTMENT PRACTICES

BORROWING. The Funds may borrow money from banks solely for temporary or
emergency purposes, subject to various limitations. If a Fund borrows money, its
share price may be subject to greater fluctuation until the borrowing is paid
off. For the California Money, Short Term High Quality Bond, California
Municipal, California Insured Intermediate Municipal, Florida Insured Municipal,
Growth, International Growth and Emerging Growth Funds, such borrowings may not
exceed 30% of total assets. The Money Market, Tax-Exempt Money Market, U.S.
Government Securities, Income, High Yield, Tax-Exempt Bond, Bond & Stock, Growth
& Income and Northwest Funds may borrow up to 5% of total assets for emergency
purposes. In addition, the Money Market and Tax-Exempt Money Market Funds may
borrow up to 33 1/3% of total assets to meet redemption requests. The Short Term
High Quality Bond Fund is prohibited from borrowing money or entering into
reverse repurchase agreements or dollar roll transactions (described below) in
the aggregate in excess of 33 1/3% of the Fund's total assets (after giving
effect to such borrowings and transactions). If a Fund makes additional leverage
investments while borrowings are outstanding, this will have the effect of
leveraging the Fund. The California Money, Short Term High Quality Bond,
California Municipal, California Insured Intermediate Municipal, Florida Insured
Municipal, Growth, International Growth and Emerging Growth Funds may not
purchase additional securities when borrowings, including, for each such Fund
other than the Short Term High Quality Bond Fund, reverse repurchase agreements,
exceed 5% of total assets. Leveraging will magnify declines as well as increases
in the NAV of a Fund's shares and in the yield on a Fund's investments. Each of
the foregoing percentage limitations on borrowings is a fundamental policy of
the respective Funds.

The Income, Short Term High Quality Bond and U.S. Government Securities Funds
may enter into DOLLAR ROLLS. A Fund enters into a DOLLAR ROLL by selling
securities for delivery in the current month and simultaneously contracts to
repurchase, typically in 30 or 60 days, substantially similar (same type, coupon
and maturity) securities on a specified future date, which, under the Investment
Company Act of 1940, as amended (the "1940 Act") may be considered borrowings
from the counterparty and may produce similar leveraging effects. The proceeds
of the initial sale of securities in the dollar roll transactions, for example,
may be used to purchase long-term securities which will be held during the roll
period. To the extent that the proceeds of the initial sale of securities are
invested in bonds, the Fund will be subject to market risk on these bonds as
well as similar risk with respect to the securities the Fund is required to
repurchase. See "Fixed-Income Obligations" below.

FIXED-INCOME OBLIGATIONS. The market value of fixed-income securities held by a
Fund and, consequently, the value of the Fund's shares can be expected to vary
inversely to changes in prevailing interest rates. Investors should also
recognize that, in periods of declining interest rates, the yield of the Fund
will tend to be somewhat higher than prevailing market rates and, in periods of
rising interest rates, the Fund's yield will tend to be somewhat lower. Also,
when interest rates are falling, any net inflow of money to the Fund will likely
be invested in instruments producing lower yields than the balance of its
assets, thereby reducing current yield. In periods of rising interest rates, the
opposite can be expected to occur. The prices of longer maturity securities are
also subject to greater market fluctuations as a result of changes in interest
rates. In addition, obligations purchased by a Fund may be subject to the risk
of default. Fixed-Income obligations, including Municipal Obligations, rated in
the lower end of the investment-grade category (Baa or BBB) may have speculative

37
<PAGE> 126

characteristics and may be more sensitive to economic changes and changes in the
financial condition of their issuers.

The fixed-income securities in which the Funds may invest include zero coupon
securities, which make no payments of interest or principal until maturity.
Because these securities avoid the need to make current interest payments, they
may involve greater credit risks than other fixed-income securities.

The Money Funds may purchase floating rate and variable rate obligations,
including participation interests therein.

Each Fund may also invest in securities representing interests in tax-exempt
securities, known as inverse floating obligations or "residual interest bonds,"
which pay interest rates that vary inversely with changes in the interest rates
of specified short-term tax-exempt securities or an index of short-term
tax-exempt securities. The interest rates on inverse floating obligations or
residual interest bonds will typically decline as short-term market interest
rates increase and increase as short-term market rates decline. These securities
have the effect of providing a degree of investment leverage. They will
generally respond to changes in market interest rates more rapidly than
fixed-rate long-term securities (typically twice as fast). As a result, the
market values of inverse floating obligations and residual interest bonds will
generally be more volatile than the market values of fixed-rate tax-exempt
securities.

FOREIGN CURRENCY EXCHANGE TRANSACTIONS AND CURRENCY MANAGEMENT. The Equity
Funds and Fixed-Income Funds (with the exception of the U.S. Government
Securities, Bond & Stock, Growth & Income and Northwest Funds) may, subject to
the investment limitations stated elsewhere in this Prospectus and the SAI,
engage in foreign currency exchange transactions. Funds that buy and sell
securities denominated in currencies other than the U.S. dollar, and receive
interest, dividends and sale proceeds in currencies other than the U.S. dollar,
may enter into foreign currency exchange transactions to convert to and from
different foreign currencies and to convert foreign currencies to and from the
U.S. dollar. The Fund either enters into these transactions on a spot (i.e.,
cash) basis at the spot rate prevailing in the foreign currency exchange market,
or uses forward contracts to purchase or sell foreign currencies.

These Funds may enter into foreign currency hedging transactions in an attempt
to protect against changes in foreign currency exchange rates between the trade
and settlement dates of specific securities transactions or changes in foreign
currency exchange rates that would adversely affect a portfolio position or an
anticipated portfolio position. These transactions tend to limit any potential
gain that might be realized should the value of the hedged currency increase.
The precise matching of the forward contract amounts and the value of the
securities involved will not generally be possible because the future value of
these securities in foreign currencies will change as a consequence of market
movements in the value of those securities between the date the forward contract
is entered into and the date it matures. The projection of currency market
movements is extremely difficult, and the successful execution of a hedging
strategy is highly uncertain. In addition, when the Advisor or a Fund's
sub-advisor believes that the currency of a specific country may deteriorate
against another currency, it may enter into a forward contract to sell the less
attractive currency and buy the more attractive one. The amount in question
could be less than or equal to the value of the Fund's securities denominated in
the less attractive currency. The Fund may also enter into
38
<PAGE> 127

a forward contract to sell a currency which is linked to a currency or
currencies in which some or all of the Fund's portfolio securities are or could
be denominated, and to buy U.S. dollars. These practices are referred to as
"cross hedging" and "proxy hedging."

Each of the Funds other than the Money Funds (the "Non-Money Funds") (with the
exception of the U.S. Government Securities Bond & Stock, Growth & Income and
Northwest Funds) may invest in securities which are indexed to certain specific
foreign currency exchange rates. These securities expose you to the risk of
significant changes in rates of exchange between the U.S. dollar and any foreign
currency to which an exchange rate-related security is linked. In addition,
there is no assurance that sufficient trading interest to create a liquid
secondary market will exist for a particular exchange rate-related security due
to conditions in the debt and foreign currency markets. Illiquidity in the
forward foreign exchange market and the high volatility of the foreign exchange
market may from time to time combine to make it difficult to sell an exchange
rate-related security prior to maturity without incurring a significant loss.

- - fluctuations in currency exchange rates,

- - devaluation of currencies,

- - future political or economic developments and the possible imposition of
currency exchange blockages or other foreign governmental laws or
restrictions,

- - reduced availability of public information concerning issuers, and

In addition, while the volume of transactions effected on foreign stock
exchanges has increased in recent years, in most cases it remains appreciably
below that of the New York Stock Exchange (the "NYSE"). Accordingly, the Funds'
foreign investments may be less liquid and their prices may be more volatile
than comparable investments in securities of U.S. companies. Moreover, the
settlement periods for foreign securities, which are often longer than those for
securities of U.S. issuers, may affect portfolio liquidity. In buying and
selling securities on foreign exchanges, the Fund normally pays fixed
commissions that are generally higher than the negotiated commissions charged in
the United States. In addition, there is generally less governmental supervision
and regulation of securities exchanges, brokers and issuers in foreign countries
than in the United States. Foreign securities generally are denominated and pay
dividends or interest in foreign currencies, and the value of the Funds' net
assets as measured in U.S. dollars will be affected favorably or unfavorably by
changes in exchange rates.

39
<PAGE> 128

The Equity Funds, the Short Term High Quality Bond Fund, the Income Fund and the
High Yield Fund may invest in securities of foreign issuers directly or in the
form of AMERICAN DEPOSITARY RECEIPTS ("ADRS"), EUROPEAN DEPOSITARY RECEIPTS
("EDRS"), GLOBAL DEPOSITARY RECEIPTS ("GDRS") or other similar securities
representing securities of foreign issuers. These securities may not necessarily
be denominated in the same currency as the securities they represent. ADRs are
receipts typically issued by a United States bank or trust company evidencing
ownership of the underlying foreign securities. EDRs, which are sometimes
referred to as Continental Depositary Receipts ("CDRs"), are receipts issued by
a European financial institution evidencing a similar arrangement. Generally,
ADRs, in registered form, are designed for use in the United States securities
markets, and EDRs, in bearer form, are designed for use in European securities
markets.

GOVERNMENT STRIPPED MORTGAGE-BACKED SECURITIES. The Income, Short Term High
Quality Bond, U.S. Government Securities and High Yield Funds may invest in
government stripped mortgage-backed securities issued or guaranteed by GNMA,
FNMA or FHLMC. These securities represent beneficial ownership interests in
either periodic principal distributions (principal-only or "PO strips") or
interest distributions (interest-only or "IO strips") on mortgage-backed
certificates issued by GNMA, FNMA or FHLMC, as the case may be. The mortgages
backing GNMA certificates include conventional 30-year fixed-rate mortgages,
15-year fixed-rate mortgages, graduated payment mortgages, and adjustable-rate
mortgages. The U.S. Government guarantees the timely payment of interest and
principal for these securities. However, the guarantees do not extend to the
securities' yield or value, which are likely to vary inversely with fluctuations
in interest rates, nor do the guarantees extend to the yield or value of the
Fund's shares. Investing in government stripped mortgage-backed securities
involves the risks normally associated with investing in mortgage-backed
securities issued by government or government-related entities. See
"Mortgage-Backed Securities" below. In addition, the yields on PO and IO strips
are extremely sensitive to prepayments on the underlying PO and IO strips
mortgage loans. If a decline in the level of prevailing interest rates results
in a higher than anticipated rate of principal prepayment, distributions of
principal will be accelerated, thereby reducing the yield to maturity on IO
strips and increasing the yield to maturity on PO strips. Conversely, if an
increase in the level of prevailing interest rates results in a rate of
principal prepayments lower than anticipated, distributions of principal will be
deferred, thereby increasing the yield to maturity on IO strips and decreasing
the yield to maturity on PO strips. Sufficiently high prepayment rates could
result in the Fund losing some or all of its initial investment in an IO strip.
The Funds will acquire government stripped mortgage-backed securities only if a
liquid secondary market for the securities exists at the time of acquisition.
However, there can be no assurance that the Funds will be able to effect a trade
of a government stripped mortgage-backed security at a time when it wishes to do
so.

HOLDINGS IN OTHER INVESTMENT COMPANIES. When the Advisor or a Fund's
sub-advisor believes that it would be beneficial to the Fund, each of the Tax-
Exempt Money Market, California Money, California Insured Intermediate
Municipal, California Municipal, Florida Insured Municipal, Short Term High
Quality Bond, Tax-Exempt Bond, Emerging Growth, Growth and International Growth
Funds may invest up to 10% of its assets in securities of mutual funds that are
not affiliated with the Advisor or the Fund's sub-advisor, if any. As a
shareholder in any such mutual fund, the Fund will bear its ratable share of the
mutual fund's expenses, including management fees, and will remain subject to
the Fund's advisory and administration fees with respect to the assets so
invested. In addition, the Growth Fund may invest Fund assets in money market
funds affiliated with Janus, provided that Janus remits to the Fund the amount
of any investment advisory and administrative

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services fees paid to Janus as the investment manager of the money market fund.

ILLIQUID SECURITIES. Up to 15% of the net assets of each Non-Money Fund, and up
to 10% of the net assets of each Money Fund, may be invested in securities that
are not readily marketable. Such illiquid securities may include:

- - repurchase agreements with maturities greater than seven calendar days;

- - time deposits maturing in more than seven calendar days;

- - to the extent a liquid secondary market does not exist for the instruments,
futures contracts and options thereon;

- - certain over-the-counter options, as described in the SAI;

- - certain variable rate demand notes having a demand period of more than seven
days; and

- - securities the disposition of which is restricted under federal securities
laws (excluding certain Rule 144A securities, as described below).

LOWER-RATED SECURITIES. The Income, Tax-Exempt Bond, Bond & Stock, Emerging
Growth, Growth & Income and Growth Funds may each invest up to 35% of the total
assets of the Fund in non-investment grade debt securities, sometimes referred
to as "junk bonds." The High Yield Fund may invest all of its assets in such
securities and will generally invest at least 65% of its assets in such
securities.

Non-investment grade securities usually entail greater risk (including the
possibility of default or bankruptcy of the issuers), generally involve greater
price volatility and risk of principal and income, and may be less liquid than
higher-rated securities. Both price volatility and illiquidity may make it
difficult for the Fund to value or to sell certain of these securities under
certain market conditions. Non-investment-grade debt securities are often
considered to be speculative and involve greater risk of default or price
changes due to changes in the issuer's creditworthiness. The market prices of
these securities may fluctuate more than higher-rated securities and may decline
significantly in periods of general economic difficulty, which may follow
periods of rising interest rates. For further information, see Appendix A to
this Prospectus.

<TABLE>
<CAPTION>
Income Tax-Exempt Bond & Stock
S&P RATING Fund Bond Fund Fund
- -------------------------------------------------------------------
<S> <C> <C> <C>
AAA (or US Treasury)......... % % %
AA...........................
A............................
BBB..........................
BB...........................
B............................
Not Rated....................
</TABLE>

MORTGAGE-BACKED AND ASSET-BACKED SECURITIES. The California Insured
Intermediate Municipal, California Municipal, Florida Insured Municipal, Short
Term High Quality Bond, U.S. Government Securities, Emerging Growth and
International Growth Funds may invest in mortgage-backed U.S. Government
securities, which represent interests in a pool of mortgage loans. See
"Government Stripped Mortgage-Backed Securities" above. In addition, the Income,
Bond & Stock and Growth & Income Funds may invest in commercial mortgage-backed
securities, which are similar to the above mortgage-backed securities, except
they are not issued or guaranteed by governmental entities. Commercial
mortgage-backed securities include collateralized mortgage obligations and real
estate mortgage investment conduits ("REMICs"). While commercial mortgage-backed
securities are generally structured with one or more types of credit
enhancement, they typically lack a guarantee

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by an entity having the credit status of a governmental agency or
instrumentality.

To the extent that a Fund purchases mortgage-backed securities at a premium,
mortgage foreclosures and payments and prepayments of principal (which may be
made at any time without penalty) will tend to result in the loss of that
premium. The yield of the Fund may be affected by reinvestment of prepayments at
higher or lower rates than the original investment. In addition, like other debt
securities, the value of mortgage-related securities, including government and
government-related mortgage pools, will generally fluctuate in response to
market interest rates.

The Tax-Exempt Money Market, California Money and California Insured
Intermediate Municipal Funds may acquire participations in lease obligations or
installment purchase contract obligations (collectively, "lease obligations") of
municipal authorities or entities. Lease obligations do not constitute general
obligations of the municipality for which the municipality's taxing power is
pledged. Certain of these lease obligations contain "non-appropriation" clauses,
which provide that the municipality has no obligation to make lease or
installment purchase payments in future years unless money is appropriated for
such purpose on a yearly basis. In addition to the "non-appropriation" risk,
these securities represent a relatively new type of financing that has not yet
developed the depth of marketability associated with more conventional bonds. In
the case of a "non-appropriation" lease, the Fund's ability to recover under the
lease in the event of non-appropriation or default will be limited solely to the
repossession of the leased property, and in any event foreclosure of that
property might prove difficult.

NON-DIVERSIFIED STATUS. Each of the California Money, California Municipal,
Florida Insured Municipal and California Insured Intermediate Municipal Funds is
classified as "non-diversified" under the 1940 Act, which means that the Fund is
not limited by the 1940 Act in the proportion of its assets that may be invested
in the obligations of a single issuer. Each of these Funds must, however, meet
certain diversification standards to qualify as a regulated investment company
under the Code. See the "Taxes" section in the SAI. Each of these Funds may
assume large positions in the obligations of a small number of issuers, which
may subject the Fund to greater credit and other risks than a more broadly
diversified portfolio.

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declines in the value of real estate, lack of availability of mortgage funds or
extended vacancies of property). Equity REITs may be affected by changes in the
value of the underlying property owned by the REITs, while mortgage REITs may be
affected by the quality of any credit extended. REITs are dependent upon
management skills, are not diversified, are subject to heavy cash flow
dependency, risks of default by borrowers, and self-liquidation. REITs are also
subject to the possibilities of failing to qualify for tax-free pass-through of
income under the Code, and failing to maintain their exemptions from
registration under the 1940 Act.

RESTRICTED SECURITIES. Each of the Funds may purchase restricted securities,
provided such securities are (in the case of the Money Market, Tax-Exempt Money
Market, Income, U.S. Government Securities, Tax-Exempt Bond, Bond & Stock,
Growth & Income and Northwest Funds) eligible for resale pursuant to Rule 144A
under the Securities Act of 1933, as amended. Although recent and ongoing
developments in the securities markets have resulted in greater trading of
restricted securities, making restricted securities, in many instances, more
liquid than they once were considered to be, investing in restricted securities
could have the effect of increasing the level of illiquidity of the portfolio
securities of a Fund. While such conditions are in effect, it could be more
difficult for a Fund to fulfill shareholder redemption orders on a timely basis.
If a Fund were required to sell these securities on short notice, it might be
unable to obtain fair market value.

STAND-BY COMMITMENTS. The California Money and Tax-Exempt Money Market Funds
and the Municipal Funds may acquire "stand-by commitments" with respect to
Municipal Obligations held in their portfolios. Under a stand-by commitment, a
dealer agrees to purchase, at a Fund's option, specified Municipal Obligations
at a specified price. A Fund may pay for stand-by commitments either separately
in cash or by paying a higher price for the securities acquired with the
commitment, thus increasing the cost of the securities and reducing the yield
otherwise available from them. The Funds will acquire stand-by commitments
solely to facilitate portfolio liquidity and do not intend to exercise their
rights thereunder for trading purposes.

STRATEGIC TRANSACTIONS. Subject to the investment limitations and restrictions
stated elsewhere in this Prospectus and the SAI, each of the Funds except the
Money Funds may utilize various investment strategies as described below to
hedge various market risks, to manage the effective maturity or duration of
fixed-income securities or for other bona fide hedging purposes. Utilizing these
investment strategies, the Fund may purchase and sell, to the extent not
otherwise limited or restricted for such Fund, exchange-listed and
over-the-counter put and call options on securities, equity and fixed-income
indices and other financial instruments, purchase and sell financial futures
contracts and options thereon, enter into various interest rate transactions
such as swaps, caps, floors or collars, and enter into various currency
transactions such as currency forward contracts, currency futures contracts,
currency swaps or options on currencies or currency futures. The Funds may write
(sell) covered call options as well. A call option is "covered" if the Fund owns
the security underlying the option it has written or it maintains enough cash,

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cash equivalents or liquid securities to purchase the underlying security. All
the above are collectively referred to as "Strategic Transactions."

Strategic Transactions may be used: