<PAGE>
[logo] WM
GROUPofFUNDS
ANNUAL REPORT
[graphic omitted]
THE DIFFERENCE IS EXPERIENCE
for the period ended October 31, 1998
<PAGE>
MESSAGE FROM THE PRESIDENT ............................................. 1
WM GROUP OF FUNDS MARKET & ECONOMIC OVERVIEW ........................... 2
INDIVIDUAL PORTFOLIO REVIEWS ........................................... 5
STATEMENTS OF ASSETS AND LIABILITIES ................................... 34
STATEMENTS OF OPERATIONS ............................................... 38
STATEMENTS OF CHANGES IN ASSETS ........................................ 44
STATEMENTS OF CHANGES IN NET ASSETS - CAPITAL STOCK ACTIVITY ........... 53
FINANCIAL HIGHLIGHTS ................................................... 60
PORTFOLIOS OF INVESTMENTS .............................................. 95
NOTES TO FINANCIAL STATEMENTS .......................................... 130
INDEPENDENT AUDITORS REPORT ........................................... 143
TAX INFORMATION (UNAUDITED) ............................................ 144
<PAGE>
DEAR shareholder:
[Photo of William G. Papesh]
As 1998 draws to a close, I would like to take this opportunity to reflect on
the events that we have witnessed in the investment markets this year. While the
U.S. stock and bond markets both posted positive returns to investors through
October, 1998, you probably know that there were some unusually bumpy periods
along the way.
The widespread stock market volatility that began in Asia and culminated in
substantial declines in some Latin American markets demonstrated quite clearly
that the world's financial markets have become intertwined in recent years. Yet
the economies of these geographic regions, and even individual countries, remain
less closely linked. In 1998, this difference between economic events and market
events highlighted the importance of maintaining a long-term perspective when
pursuing long-term objectives.
Twenty years ago, money moved more slowly between investment markets than it
does today. The development of new communication and money-transfer technologies
over the years has created a new type of investor-institutions who invest large
amounts of capital in short-term opportunities throughout the world. One result
is that local events which affect one financial market can quickly spill over to
far distant economies as money is moved around the globe. In some cases the
result can be the tail wagging the dog. An example is the nearly 11% decline in
the U.S. stock market in August immediately following Russia's devaluation of
its currency. That decline was in part due to the need by some investment
companies to raise cash by selling holdings in the U.S.
Maintaining a long-term perspective during such periods can help investors avoid
turning a "paper loss" into a real one. Focusing on the longer term can also be
key to recognizing opportunity. A basic tenet of the investment approach
followed by portfolio managers who steer the individual funds in the WM Group of
Funds is that long-term investment opportunities are identified by focusing on
fundamental factors such as earnings. When distortions in market prices occur
due to temporary factors that do not affect fundamentals, investment managers
often have opportunities to buy at below-value prices.
THREE KEY REASONS FOR KEEPING ON TRACK
STAYING FOCUSED ON INVESTMENT OBJECTIVES can help individuals withstand market
turbulence. As an individual investor, how you pursue your financial goals will
be affected by several factors including your investment time frame, and your
ability to withstand a potential loss in the value of your investments. If you
choose investments that are appropriate to your goals, you'll probably be less
tempted to abandon your strategy during a market downturn.
MAINTAINING REALISTIC EXPECTATIONS is another key to keeping your equilibrium
during changing markets. According to a recent survey, nearly two thirds of
individual investors expect the long-term total return on their stock
investments to average 12% per year or less.* That's actually lower than recent
long-term historical trends. For example, over the four decades that ended on
June 30, 1998, the compound rate of return on the S&P 500 was 12.24%, with
periods of declining as well as rising prices. During those 40 years, there were
12 corrections in which prices slid by 10% or more before resuming their
generally upward trend.**
Finally, FOLLOWING SOUND INVESTMENT PRINCIPLES BY DIVERSIFYING YOUR INVESTMENTS
is always wise. Stock investments have captured the media's attention for the
last several years, but fixed-income investments have always been an important
part of a diversified portfolio, providing an income stream that can help smooth
out returns. For example, during the second and third quarters of 1998, bond
investments were the top performers while stock prices were on the decline.
Thank you for your continued confidence in the WM Group of Funds. We are
committed to continuing to serve you, our shareholder, by providing an
appropriate selection of investment vehicles and mutual funds managed by
experienced professionals-just as we have done for nearly 60 years.
Sincerely,
/s/ William G. Papesh
William G. Papesh
President
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* Source: Business Week, June 15, 1998.
** Source: Standard & Poor's. The S&P 500 is an unmanaged index that is
generally considered representative of the U.S. stock market. The performance
of any index is not indicative of the performance of a particular investment
and does not take into account the effects of fees and expenses associated
with purchasing mutual fund shares. Individuals cannot invest directly in any
index. Past performance does not guarantee future results.
<PAGE>
WM GROUP OF FUNDS market & economic overview
INTERNATIONAL EVENTS UNDERLIE U.S. MARKET
ENVIRONMENT IN 1998
The exceptional performance of the U.S. stock market in recent years has been
driven largely by a vibrant U.S. economy. But in 1998, events in international
markets have played a key role.
From January through June, the Dow Jones Industrial Average index of 30 Stocks
(DJIA) rose 13%, from 7908 at December 31, 1997 to 8952 at the end of June. But
from June through August, the index fell nearly 16%, erasing all of the year's
gains, as political and economic uncertainty in Asia, Eastern Europe, and Latin
America roiled financial markets around the world.
While U.S. stocks have since recovered - the DJIA posted a total return of
nearly 14% in September and October a look at the events underlying the market's
recent volatility provides valuable investment insights.*
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Dow Jones Industrial Average
12 months ended 10-31-98
Oct 97 7442
Nov 97 7581
7572
7881
7823
Dec 97 8149
7838
7756
7679
7908
Jan 98 7965
7580
7753
7700
7906
Feb 98 8189
8370
8413
8545
Mar 98 8569
8602
8906
8796
Apr 98 8983
8994
9167
9064
May 98 9147
9055
9096
9114
8899
Jun 98 9037
8834
8712
8945
Jul 98 9025
9106
9338
8937
8883
Aug 98 8598
8425
8534
8052
Sep 98 7640
7796
7896
8029
Oct 98 7785
7900
8417
8452
8592
* Source: The Wall Street Journal
Note: The Dow Jones Industrial Average is an unmanaged index of 30 stocks and is
sometimes used to measure the overall U.S. equity market. Individuals cannot
invest directly in an index.
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AN INTERNATIONAL CONFIDENCE CRISIS
The start of the summer's market slide coincided with a deepening currency
crisis in Southeast Asia, which led to currency devaluations in emerging market
economies there, including Malaysia and Indonesia. The result was a sharp
decline in economic growth in these countries. Last year the International
Monetary Fund predicted Indonesia's gross domestic product would grow by 8% in
1998; instead, it will probably shrink by 10%. From growth rates of around 8% in
1996 and 1997, Malaysia is down 7% in 1998. The recession in these "growth
engine" countries has also put further pressure on Japan, which is still
struggling to reform and stabilize its financial institutions.
As analysts began scaling back earnings forecasts for some U.S. companies that
sell products and services in Asia, particularly technology companies, problems
arose in other parts of the world. In August, political and economic troubles
surfaced in Russia.
On August 17, Russia defaulted on interest payments on $40 billion in short-term
debts and devalued the Ruble. The resulting losses incurred by Russia's
financial institutions led to widespread bank failures in that country,
particularly among the nation's smaller banks, and a collapse in stock prices.
As the scope of Russia's problems widened, prices of U.S. stocks fell sharply,
with the DJIA price index dropping 4.19% on August 27 and more than 6% on August
31.*
The U.S. market's reaction to the crisis in Russia reflected short-term
considerations rather than long-term fundamentals. Russia is not a significant
trading partner with the U.S., and the impact on U.S. companies due to a slower
economy in Russia is likely to be minimal. However, some investment companies in
the U.S. and Europe which had invested in Russia's emerging financial markets
were forced to sell U.S. stock holdings to provide cash needed to cover losses
in Russia.
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ASSET CLASS PERFORMANCE DISPARITY
ONE YEAR ENDED 10-31-98
LARGE-CAP STOCKS 22.00%
MID-CAP STOCKS 6.71%
SMALL-CAP STOCKS -11.84%
EUROPEAN STOCKS 23.42%
PACIFIC STOCKS -13.70%
EMERGING COUNTRIES -28.86%
INTERMEDIATE TREASURY BONDS 13.46%
INTERMEDIATE CORPORATE BONDS 8.06%
HIGH-YIELD CORPORATE BONDS -2.49%
Source: Ibbotson Associates. Domestic stocks are represented by: S&P 500, S&P
400 Midcap, and the Russell 2000, respectively. International equities are
represented by the Morgan Stanley Capital International regional indices. Bond
indices are represented by: Merrill Lynch, Lehman Brothers, and Ibbotson,
respectively. There are additional risks associated with international
investing, including currency fluctuations. An investor would typically purchase
stocks for long-term growth of capital. However, stocks are often subject to
significant price fluctuation and therefore an investor may have a gain or loss
in principal when the shares are sold. Indices are unmanaged and individuals
cannot invest directly in an index. This chart is not intended to represent the
performance of any mutual fund.
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Adding to the problems in Russia and Asia were concerns about economic stability
in Latin America. These fears adversely affected stock prices in the region.
Interest rates in Brazil and Mexico rose sharply as central banks sought to stem
capital outflows from worried investors.
With the spread of the confidence crisis to Latin America in September, Federal
Reserve Chairman Alan Greenspan urged the U.S. and other developed nations to
focus on efforts designed to promote economic growth. Mr. Greenspan's comments
fueled a record 381 point surge in the DJIA on September 8 as Fed watchers began
anticipating a cut in U.S. interest rates.
The Federal Reserve Open Market Committee (FOMC) lowered short-term rates at its
September 29 meeting, by one-quarter of a percentage point. This cut was less
than many investors expected, however, as evidenced by a subsequent 6% decline
in the DJIA. In October, the Federal Reserve again lowered rates another quarter
point, citing slower growth in new jobs and indications of lower inflation.
OUTLOOK FOR MODEST GROWTH, LOW INFLATION
As the fourth quarter draws to a close, the outlook for fundamental economic
indicators - unemployment, inflation, and interest rates - remains positive for
U.S. investors. However, there are remaining concerns that pressure from the
slowdown in Asia may further slow domestic growth, despite the fact that only
about 5% of U.S. economic activity involves Asia.
Another factor affecting the domestic stock market positively is a high level of
merger activity. During the first half of 1998, corporate mergers totaled a
record $1.4 trillion - more than double 1997's first-half total with seven of
the ten largest mergers in history having been announced since April.
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WITH THE SPREAD OF THE CONFIDENCE CRISIS, FEDERAL RESERVE CHAIRMAN ALAN
GREENSPAN URGED THE U.S. AND OTHER DEVELOPED NATIONS TO FOCUS ON EFFORTS
DESIGNED TO PROMOTE ECONOMIC GROWTH.
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YIELD ON THE 30-YEAR TREASURY BOND
12 MONTHS ENDED 10-31-98
Oct 97 6.15
Nov 97 6.16
6.11
6.03
6.05
Dec 97 6.08
5.92
5.92
5.9
5.92
Jan 98 5.84
5.73
5.81
5.97
5.8
Feb 98 5.92
5.85
5.87
5.92
Mar 98 6.02
5.89
5.88
5.96
Apr 98 5.79
5.88
5.88
5.95
May 98 5.93
5.98
5.97
5.9
5.8
Jun 98 5.79
5.66
5.67
5.63
Jul 98 5.6
5.63
5.75
5.69
5.71
Aug 98 5.63
5.54
5.43
5.34
Sep 98 5.29
5.23
5.15
5.11
Oct 98 4.84
5.12
4.98
5.18
5.16
Source: The Wall Street Journal
Note: Represents yield on the 30-year Treasury Bond which is sometimes used to
characterize the overall bond market.
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In 1999, investors will be evaluating the potential effects of the introduction
of the new Euro currency. On January 1, eleven European countries will comprise
the European Monetary Union (EMU). With a population 10% greater than the United
States, the EMU will control the world's second-largest economy and generate
nearly 25% of the world's total economic output. Countries admitted into the EMU
have to meet strict criteria to ensure their economic and financial strength, a
factor that market analysts believe may strengthen the EMU's competitive
position and, in turn, stimulate growth and employment.
By adopting a single currency, the 11 participating countries will eliminate the
costs and complications associated with currency fluctuations and conversions.
As a result, trade activities within the EMU may become less risky and less
expensive. Cost comparisons among goods and services should also be facilitated.
Monetary policy governing the Euro will be directed by the European Central
Bank, an organization similar to the U.S. Federal Reserve Bank. This
organization will monitor the money supply and set interest rate policy.
PREPARING FOR WHAT TOMORROW MAY BRING
Long-term investment opportunities remain attractive, both in the U.S. and
abroad. But as 1998 has shown, many factors can affect investment returns from
month to month. Individual investors can best prepare to weather inevitable
periods of market volatility by ensuring that their investment portfolios match
their goals and investment time frame.
The WM Group of Funds offers a comprehensive spectrum of professionally managed
mutual funds to provide investors with appropriate opportunities to pursue their
financial goals. Your Investment Representative can help you evaluate your
individual circumstances, including your need for cash reserves, investment
income, and long-term growth potential. He or she can then assist you in
selecting a portfolio of funds that is designed to pursue your objectives with
an acceptable level of risk.
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THE RETURN OF MARKET VOLATILITY
DAILY EQUITY VOLATILITY FOR VARIOUS PERIODS
ENDED 10-31-98
AS DAILY MARKET SWINGS HAVE INCREASED IN RECENT MONTHS, NOW IS THE TIME TO
CONSIDER A DIVERSIFIED PORTFOLIO.
3 Months 1.9
1 Year 1.26
10 Years 0.87
20 Years 1.01
Source: Bloomberg Business News. Represents daily results of the Dow Jones
Industrial Average. Volatility is measured by the standard deviation of
investment results. Standard deviation is a measurement of results relative to
the average return. A lower standard deviation means less volatility or
investment risk. Past performance is not a guarantee of future results.
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In creating your individual portfolio, remember that diversifying among several
asset classes - money market, bond, and stock investments - will help temper the
effects of market volatility on your portfolio returns over time. Stock and bond
prices, for example, often do not react in identical ways to economic events. A
price decline in the stock market may be partially offset by a rally in bond
prices, so holding some of each in your portfolio can help smooth out your
returns.
The Strategic Asset Management Portfolios offered by the WM Group of Funds may
be another choice to consider. These investment options offer you the added
convenience of investing in a portfolio that is actively managed to pursue
market opportunities as they arise while seeking the potential risk reduction
benefits of diversification. For more information on the Strategic Asset
Management Portfolios, or any of the funds in the WM Group of Funds family,
speak with your Investment Representative.
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The WM Group of Funds offers a comprehensive spectrum of professionally managed
mutual funds to provide investors with appropriate opportunities to pursue their
financial goals. Your Investment Representative can help you evaluate your
individual circumstances, including your need for cash reserves, investment
income, and long-term growth potential as well as assist you in selecting a
portfolio of funds that is designed to pursue your objectives with an acceptable
level of risk.
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<PAGE>
INDIVIDUAL FUND
REVIEWS
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TO OUR SHAREHOLDERS:
We are pleased to provide you with an
overview of the following Funds in the
WM Group of Funds family for the
12-month period ended October 31, 1998.
To help you better understand the
professional investment management
available to you as a WM Group of Funds'
shareholder, we have also included
biographies of the investment professionals
managing the funds.
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WM ADVISORS, INC. is the investment advisor to the WM Group of Funds, and has
general oversight responsibility for the advisory services provided to the
Funds. These services include formulating the Funds' investment policies,
analyzing economic trends that affect the Funds, and directing and evaluating
the investment services provided by the Sub-Advisors and the individual
Portfolio Managers of each Fund. WM Advisors supervises the Portfolio Managers
in their day-to-day management of the Funds in the WM Group of Funds family to
ensure that the policies are met and guidelines are followed, and to determine
appropriate investment performance measures.
UNDERSTANDING THE ENCLOSED CHARTS AND PERFORMANCE FIGURES
In order to help you understand the Funds' investment performance, we have
included the following discussions along with graphs that compare the Funds'
performance with certain market indices. Descriptions of these indices are
provided next to the individual graphs on the following pages.
Generally, an index represents the market value of an unmanaged group of
securities, regarded by investors as representative of a particular market. An
index does not reflect any asset-based charges for investment management or
other expenses. Total return is used to measure a Fund's performance and
reflects both changes in the price of the Fund's shares as well as any income
dividend and/or capital gain distributions made by the Fund during the period.
Past performance is not a guarantee of future results. A mutual fund's share
price and investment return will vary with market conditions, and the principal
value of an investment when you sell your shares may be more or less than the
original cost.
The 30-day SEC yield is computed by dividing net investment income per share
over the one-month period ended October 31, 1998, by the maximum offering price
on that date, and annualizing the result.
Yield indicates the investment income per share as a percentage of the offering
price, whereas total return includes both net investment income and changes in
the value of the shares as a percentage of the initial investment. The 30-day
SEC yield is the yield calculated pursuant to a standard formula required by the
Securities and Exchange Commission ("SEC") for performance advertisement
purposes, and does not imply any endorsement or recommendation by the SEC.
THE YEAR 2000 PROBLEM
Many computer systems in use today cannot process date-related information from
and after January 1, 2000. At the stroke of midnight on New Year's Eve, 1999,
some computer systems could become seriously confused. They may miscalculate
critical data, delete vital files, or simply not turn on because the computer's
internal calendars and clocks may not recognize the year 2000. This issue stems
from the practice of abbreviating years to their last two digits. Computer
systems may not be able to decide correctly when a date entered with a year of
"00" should be interpreted as 1900 or 2000.
Should any of the computer systems employed by the WM Funds' major service
providers fail to process this type of information properly, that could have a
negative impact on Funds operations and the services that are provided to
shareholders. Similarly, the values of certain Funds' 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.
The Advisor, Shareholder Servicing Agent and Administrator have advised the
Funds that they are reviewing all of their computer systems with their goal of
modifying or replacing such systems prior to January 1, 2000 to the extent
necessary to avoid any such negative impact. Furthermore, the Funds are seeking
assurance from each of their key service providers that similar replacements or
modifications will be completed to avoid any negative impact from this issue. In
the event a key service provider cannot provide such assurance, the Funds may
consider retaining an alternate service provider.
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
report, the Funds and Advisor have no reason to believe that these goals will
not be achieved.
<PAGE>
TARGET MATURITY
2002 fund
PORTFOLIO MANAGER:
GARY POKRZYWINSKI
WM ADVISORS, INC.
The day-to-day management of the Target Maturity 2002 Fund's portfolio is the
responsibility of a fixed-income team led by Senior Portfolio Manager Gary
Pokrzywinski, who has over 12 years of asset management experience and has been
with WM Advisors, Inc. for more than six years. Mr. Pokrzywinski is a Chartered
Financial Analyst and holds a Business Degree from the University of Wisconsin.
Mr. Pokrzywinski began managing the Target Maturity 2002 Fund on March 23, 1998.
WHAT WERE THE MOST SIGNIFICANT FACTORS CONTRIBUTING TO THE FUND'S PERFORMANCE
OVER THE LAST 12 MONTHS?
During the 12-month period, there was a fairly significant drop in interest
rates; this is positive for the Fund as its price moves in the opposite
direction of interest rates. Rates dropped by nearly 150 basis points (1.5%) for
intermediate-maturity treasury notes. The interest rate decline was segmented to
the highest-quality assets such as Treasuries. The Fund's investment objective
is to hold 90% of assets in zero-coupon Treasury Notes with maturities in
November of 2002. Therefore, the flight to quality was positive for overall Fund
performance.
WERE THERE ANY SHIFTS IN THE FUND'S PORTFOLIO HOLDINGS THAT HAVE HAD A
SIGNIFICANT IMPACT ON FUND PERFORMANCE?
WM Advisors, Inc. began managing the Fund in March of 1998 and there were no
shifts in holdings that had a significant impact on performance. The Fund
continued to hold the November 2002 zero-coupon Treasury strips.
WHAT IS OUR INTERMEDIATE- AND LONG-TERM OUTLOOK FOR THE FUND?
Given the strategy of the Fund to remain invested in Treasury STRIPs maturing at
the termination date, the Fund's NAV (net asset value) will move inversely to
interest rates. Over time, as its termination date approaches, the duration of
the Fund will shorten, lessening the impact of changes in interest rates on the
NAV. When the termination date is reached, the November 2002 Treasury STRIPs
will mature.
WHAT IS OUR OVERALL ECONOMIC OUTLOOK FOR THE NEXT 12 MONTHS?
Slow economic growth should continue for the next 12 months, with a slight
possibility that growth slips to below potential. The economy will have a
difficult time gathering momentum against the major worldwide structural forces
(excess capacity, aging demographics, fiscal austerity) pushing against growth.
These forces are slowly beginning to change, but it will likely be two or more
years before we see anything but a slow growth, low inflation environment. As
such, we believe interest rates should continue to trend down over the next
year. These factors should create a positive environment for fixed-income
securities and, therefore, a positive environment for the Fund.
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GROWTH OF A $10,000 INVESTMENT (CLASS A SHARES)
Fund (Class A Fund (Class A Lehman
Shares; not Shares; adjusted Brothers
adjusted for for the maximum Government Inflation
sales charge) 2% sales charge) Bond Index(1) (CPI)(1)
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Inception 3/20/95 $10,000 $ 9,800
9,990 9,790 $10,000 $10,000
Apr 95 10,140 9,937 10,131 10,007
10,690 10,476 10,539 10,020
Jun 10,780 10,564 10,620 10,020
10,670 10,457 10,581 10,060
Aug 10,840 10,623 10,705 10,100
10,960 10,741 10,808 10,134
Oct 11,160 10,937 10,972 10,167
11,390 11,162 11,143 10,187
Dec 95 11,570 11,339 11,301 10,208
11,642 11,410 11,370 10,208
Feb 11,311 11,085 11,138 10,234
11,146 10,923 11,046 10,255
Apr 10,990 10,770 10,975 10,289
10,928 10,710 10,957 10,281
Jun 11,094 10,872 11,098 10,274
11,104 10,882 11,126 10,335
Aug 11,042 10,821 11,101 10,368
11,270 11,044 11,285 10,422
Oct 11,580 11,349 11,534 10,463
11,808 11,572 11,734 10,482
Dec 96 11,621 11,389 11,615 10,489
11,643 11,410 11,627 10,509
Feb 11,631 11,399 11,644 10,529
11,443 11,214 11,520 10,562
Apr 11,632 11,399 11,686 10,596
11,732 11,497 11,787 10,616
Jun 11,865 11,628 11,920 10,616
12,232 11,987 12,258 10,650
Aug 12,065 11,824 12,137 10,683
12,243 11,998 12,319 10,710
Oct 12,442 12,193 12,532 10,723
12,442 12,193 12,596 10,716
Dec 97 12,582 12,330 12,728 10,729
12,798 12,542 12,919 10,750
Feb 12,738 12,483 12,884 10,770
12,762 12,507 12,920 10,790
Apr 12,834 12,577 12,978 10,810
12,917 12,659 13,112 10,829
Jun 13,025 12,765 13,262 10,842
13,097 12,835 13,282 10,855
Aug 13,493 13,223 13,627 10,868
13,900 13,622 13,995 10,881
Oct 98 13,817 13,540 13,995 10,894
(1) Index total returns were calculated from 3/31/95 to 10/31/98. The Lehman
Brothers Government Bond Index represents all U.S. Government agency and
Treasury securities. The Consumer Price Index is a measurement of inflation
for all urban consumers (CPI-U). The Index assumes reinvestment of all
dividends/distributions, and does not reflect any asset-based charges for
investment management or other expenses. Past performance does not guarantee
future performance. The returns shown for the Fund assume reinvestment of
all dividends/distributions by the shareholder. During the period noted, the
Advisor waived a portion of its fees, the Advisor absorbed other expenses,
and credits were allowed by the Custodian. In the absence of the waivers and
absorption of other expenses or credits, yield and total return would have
been lower.
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TOTAL RETURNS AS OF 10/31/98
CLASS A SHARES 1 YEAR SINCE INCEPTION*
(March 20, 1995)
Fund (not adjusted for sales charge) 12.40% 9.72%
Fund (adjusted for the maximum 2% sales charge) 10.14% 9.12%
Lehman Brothers Government Bond Index(1) 11.67% 9.83%
*Annualized
<PAGE>
HIGH YIELD
fund
PORTFOLIO MANAGER:
GARY POKRZYWINSKI
WM ADVISORS, INC.
The High Yield Fund is managed by a fixed-income team led by Senior Portfolio
Manager Gary Pokrzywinski, who has over 12 years of asset management experience
and has been with WM Advisors, Inc. for more than six years. Mr. Pokrzywinski is
a Chartered Financial Analyst and holds a Business Degree from the University of
Wisconsin.
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PORTFOLIO COMPOSITION++
Foreign Government Bonds 6%
Health Care Bonds 23%
Media Bonds 13%
Finance Bonds 9%
Treasury Notes 5%
Other Corporate Bonds 29%
REITs 3%
Preferred Stock 4%
CMOs 3%
Other 5%
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WHAT WERE THE MOST SIGNIFICANT FACTORS CONTRIBUTING TO THE FUND'S PERFORMANCE
OVER THE PAST 12 MONTHS?
The High Yield Fund began investment in April of 1998, as the market experienced
its worst performance since the economic contraction and troubled real estate
market of 1989-90. The turbulence of the sector was due to multiple events in
global markets. One area of concern stemmed from pronounced worldwide economic
troubles as markets and currencies collapsed in Asia, Russia, and Latin America.
Another factor was the excess leverage built up in the financial system that
culminated in the collapse of a number of hedge funds. Lastly, stock market
volatility and a general worry of a fairly severe economic slowdown combined to
produce an almost panic-like atmosphere in the high-yield market and led to a
sharp drop in prices.
WHAT MARKET CONDITIONS AFFECTED THE FUND'S PERFORMANCE DURING THE PERIOD, AND
WHAT INVESTMENT TECHNIQUES WERE USED TO ADDRESS THOSE CONDITIONS?
The ability of our Fund to withstand this negative market was better than most
because of our "value" investment philosophy, our avoidance of a few sectors
that had extreme difficulty, and our overweight in the improving Asian region.
We view the market environment as an exceptional opportunity to invest at very
cheap prices. Going forward, the high-yield market should gradually improve as
the Federal Reserve responds to concerns by lowering short-term interest rates.
These moves are very positive for the high-yield market, and it is likely that
the Fed will continue this activity should difficulties re-emerge. Additionally,
although the economy may soften a bit, most high-yield issuers have been running
their businesses in a slow growth economy for some time now, and their cost
structures are very competitive. Our forecasts call for this slow growth to
continue. There is only a remote possibility we will see a recessionary
environment that would cause increased defaults for high-yield issuers. The
overriding benefit and primary reason for investing in the high-yield sector is
the substantial income derived from these securities. Over time, it is the
income component that is the largest contributor to performance and not the
short-term movements in price.
WERE THERE ANY SHIFTS IN THE FUND'S PORTFOLIO HOLDINGS/SECTORS THAT HAD A
SIGNIFICANT IMPACT ON FUND PERFORMANCE?
We differentiate our Fund by overweighting the health care, technology, and the
Asian region (all in U.S. Dollars). The healthcare industry looks strong as it
is non-sensitive to the economy and has favorable demographics, which should
continue to generate profits. The technology sector has been very volatile, but
there are strong companies with healthy finances and proprietary products that
should be able to withstand this cyclical downturn. As the environment for this
sector improves, prices could rebound quickly and significantly. In addition, we
have found a handful of companies in the Asian region that have positive
long-term fundamentals, but have been trading at prices depressed primarily by
the overall region. These firms should lead the market from its bottom and offer
some of the best risk / reward prospects.
WHAT IS OUR INTERMEDIATE- AND LONG-TERM OUTLOOK FOR THE FUND?
The long-term results of the high-yield market are very favorable. The recent
setback serves as a reminder to maintain your long-term focus in investing.
Historically, positive markets follow periods of negative performance in the
high-yield sector as prices correct on the upside. The longer the time horizon
of investors, the better they will be able to withstand short-term volatility
and take advantage of the potential for favorable income and performance
characteristics of high-yield securities. We concentrate our research function
on issues that are out of favor in the short term-buying securities at prices
that are undervalued by the markets. By identifying the positive attributes for
a rebound, we add good positions at good prices and improve the risk / reward
profile of the Fund. Because the high-yield market has been distressed by the
global flight-to-quality, we feel that there are many opportunities in the
market and that prospects for good relative performance of the Fund are strong.
WHAT IS OUR OVERALL ECONOMIC OUTLOOK FOR THE NEXT 12-MONTHS?
We forecast subdued economic growth with contained inflation over the next year.
There may be a slim chance that the economy slows more than currently
anticipated, but the Federal Reserve is poised to lower interest rates and prop
up the economy given that scenario. This slow growth, low inflation environment
will be very positive for the stock market, bond market, and the high-yield
market.
++ Allocation percentages are based on total investment value of the portfolio
as of 10/31/98. There may be additional risks associated with foreign
securities. There are also additional credit and default risks associated
with lower-rated securities.
<PAGE>
SHORT TERM high
quality bond fund
PORTFOLIO MANAGER:
GARY POKRZYWINSKI
WM ADVISORS, INC.
The Short Term High Quality Bond Fund is managed by a fixed-income team led by
Senior Portfolio Manager Gary Pokrzywinski, who has over 12 years of asset
management experience and has been with WM Advisors, Inc. for more than six
years. Mr. Pokrzywinski is a Chartered Financial Analyst and holds a Business
Degree from the University of Wisconsin.
WHAT WERE THE MOST SIGNIFICANT FACTORS CONTRIBUTING TO THE FUND'S PERFORMANCE
OVER THE PAST 12 MONTHS?
During the 12-month period, there was a fairly significant drop in interest
rates; this is positive for the Fund as its price moves in the opposite
direction of rates. Rates dropped by nearly 150 basis points (1.5%) for
intermediate-maturity treasury notes. The interest rate decline was segmented to
the highest-quality assets such as Treasuries. The flight to quality was most
evident during the period of August through October, as Treasuries outperformed
all other types of fixed-income securities. Because the Fund is comprised of
higher-quality securities (nearly 70% rated AA or AAA++) the portfolio was able
to capture the majority of the decline in rates. With a short-term fund, the
most important attribute for return is the income characteristics of the
securities that make up the fund. As of October 31, 1998, the 30-day SEC Yield
of the Fund is 4.87% (4.30% for B shares).
- -------------------------------------------------------------------------------
GROWTH OF A $10,000 INVESTMENT (CLASS A SHARES)+
Lehman
Brothers
Mutual Fund
Fund (Class A Fund (Class A Short(1-5)
Shares; not Shares; adjusted Investment
adjusted for for the maximum Grade Debt Inflation
sales charge) 3.5% sales charge) Index(1) (CPI)(1)
- --------------------------------------------------------------------------------
Inception 11/1/93 $10,000 $ 9,650 $10,000 $10,000
10,005 9,655 9,991 10,014
Dec 93 10,052 9,700 9,940 10,028
10,098 9,745 10,046 10,028
10,063 9,711 9,944 10,056
Mar 9,947 9,599 9,831 10,077
9,908 9,561 9,772 10,119
9,915 9,568 9,788 10,126
Jun 9,927 9,580 9,816 10,126
9,981 9,632 9,944 10,153
9,989 9,639 9,988 10,187
Sep 9,993 9,644 9,933 10,222
9,997 9,647 9,945 10,236
10,002 9,652 9,888 10,244
Dec 94 9,842 9,497 9,910 10,278
9,851 9,507 10,074 10,306
9,942 9,594 10,274 10,347
Mar 10,037 9,685 10,339 10,375
10,130 9,776 10,461 10,383
10,357 9,995 10,730 10,396
Jun 10,366 10,003 10,800 10,396
10,375 10,012 10,828 10,438
10,472 10,105 10,922 10,479
Sep 10,524 10,156 10,993 10,514
10,625 10,253 11,100 10,549
10,726 10,351 11,233 10,570
Dec 95 10,829 10,450 11,340 10,591
10,933 10,550 11,458 10,591
10,852 10,472 11,376 10,618
Mar 10,815 10,437 11,331 10,640
10,776 10,399 11,321 10,675
10,786 10,408 11,330 10,667
Jun 10,890 10,509 11,437 10,660
10,950 10,567 11,480 10,723
10,963 10,579 11,504 10,757
Sep 11,069 10,682 11,650 10,813
11,171 10,780 11,830 10,855
11,268 10,874 11,960 10,876
Dec 96 11,274 10,879 11,918 10,882
11,278 10,883 11,979 10,903
11,337 10,940 12,010 10,924
Mar 11,349 10,952 11,956 10,959
11,404 11,005 12,080 10,994
11,506 11,104 12,177 11,015
Jun 11,560 11,156 12,284 11,015
11,720 11,310 12,498 11,050
11,727 11,317 12,460 11,084
Sep 11,780 11,368 12,590 11,112
11,840 11,425 12,678 11,125
11,846 11,431 12,700 11,119
Dec 97 11,925 11,508 12,783 11,132
12,034 11,613 12,937 11,153
12,030 11,609 12,946 11,174
Mar 12,084 11,661 12,995 11,195
12,139 11,714 13,067 11,216
12,192 11,765 13,155 11,236
Jun 12,246 11,817 13,224 11,249
12,301 11,870 13,277 11,263
12,463 12,027 13,390 11,276
12,625 12,183 13,665 11,290
Oct 98 12,628 12,186 13,641 11,303
(1) Index total returns were calculated from 10/31/93 to 10/31/98. The Lehman
Brothers Mutual Fund Short (1-5) Investment Grade Debt Index includes all
investment-grade, corporate debt securities with maturities of one to five
years, assumes reinvestment of all dividends/distributions, and does not
reflect any asset-based charges for investment management or other
expenses. The Consumer Price Index is a measurement of inflation for all
urban consumers (CPI-U). Past performance does not guarantee future
performance. The returns shown for the Fund assume reinvestment of all
dividends/distributions by the shareholder.
During the period noted, the Advisor waived a portion of its management
fees, the Advisor absorbed other expenses, and credits were allowed by the
Custodian. In the absence of the waivers and absorption of other expenses
or credits, yield and total return would have been lower.
+ The performance of the Class B Shares and Class S Shares was different than
that indicated by the lines shown on the left for the Class A Shares, based
on the differences in sales loads and fees paid by Class B and Class S
shareholders.
- -------------------------------------------------------------------------------
TOTAL RETURNS AS OF 10/31/98
CLASS A SHARES 1 YEAR 5 YEAR* SINCE INCEPTION*
(November 1, 1993)
Fund (not adjusted for sales charge) 6.63% 4.77% 4.77%
Fund (adjusted for the maximum 3.5%
sales charge) 3.09% 4.03% 4.03%
Lehman Brothers Mutual Fund Short
(1-5) Investment Grade Debt Index(1) 7.59% 6.41% 6.41%
CLASS B SHARES 1 Year 5 Year* SINCE INCEPTION*
(June 30, 1994)
Fund (not adjusted for contingent
deferred sales charge) 5.84% N/A 4.91%
Fund (adjusted for the maximum
contingent deferred sales charge) 1.84% N/A 4.91%
Lehman Brothers Mutual Fund Short
(1-5) Investment Grade Debt Index(1) 7.59% N/A 7.89%
CLASS S SHARES 1 Year 5 Year* SINCE INCEPTION*
(June 30, 1994)
Fund (not adjusted for contingent
deferred sales charge) 5.84% N/A 4.91%
Fund (adjusted for the maximum
contingent deferred sales charge) 0.84% N/A 4.72%
Lehman Brothers Mutual Fund Short
(1-5) Investment Grade Debt Index(1) 7.59% N/A 7.89%
*Annualized
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
PORTFOLIO COMPOSITION++
AAA 51%
AA 17%
A 9%
BBB 23%
- -------------------------------------------------------------------------------
WHAT MARKET CONDITIONS AFFECTED THE FUND'S PERFORMANCE DURING THE PERIOD, AND
WHAT INVESTMENT TECHNIQUES WERE USED TO ADDRESS THOSE CONDITIONS?
Global economic uncertainty, stock market jitters, excess financial leverage,
and the general slowdown in economic growth caused investors to shy away from
perceived riskier assets. These factors coupled with the volume of money flowing
into the Treasury market and the easing of interest rates by the Federal
Reserve, pushed Treasury rates to unprecedented lows. The risk aversion caused
yield spreads between securities that are not guaranteed by the government, such
as corporate bonds and asset-backed securities, to increase substantially. The
result was that these securities underperformed Treasuries over the past year.
Despite this relative performance, historical results show that investors with a
long-term time horizon benefit from having a diverse portfolio of non-government
guaranteed securities++++. Also, with declining interest rates, the prices of
mortgage backed securities suffered due to fears of prepayments. The
underperformance of the non-treasury securities held by the Fund was very modest
because they are generally of higher quality and shorter maturities. We feel the
extreme relative performance strength of the Treasury market will subside and,
therefore, we continue to invest in and hold the majority of the Fund in
mortgage-backed, asset-backed, and corporate securities. Because of the flight
to quality, these securities now offer even more attractive income
characteristics relative to other investments. It is important to remember that
because the Fund is of shorter maturity and higher quality, the income
characteristics will be the dominant determinant of the return to shareholders
and not the price movement (or NAV movement) of the Fund.
WERE THERE ANY SHIFTS IN THE FUND'S PORTFOLIO HOLDINGS THAT HAVE HAD A
SIGNIFICANT IMPACT ON FUND PERFORMANCE?
WM Advisors, Inc. began managing the Fund in March of 1998. In the early part of
the year, we shifted the portfolio away from a heavy reliance on mortgage-backed
securities to a more balanced structure. Corporate securities now make up the
largest portion of the Fund followed by asset-backed, mortgage-related, and
Treasury Notes. The concentration in corporate securities is due to their higher
yields and the fact that these securities cannot be called or prepaid (unlike
mortgages). The impact of this shift was positive, as additional income and
positive price movement was generated by these securities. The focus of the Fund
will remain in high-quality securities with an average rating of AA++. The Fund
invests in fixed-income securities with an average maturity of 2.8 years and an
average duration of 1.8 years; this limits the volatility of price movements
relative to longer-term funds.
WHAT IS OUR INTERMEDIATE- AND LONG-TERM OUTLOOK FOR THE FUND?
The intermediate and long-term outlook remains optimistic. By investing largely
in a diverse portfolio of shorter-term, higher-quality securities, the price
(NAV) volatility of the Fund should be fairly low while the income
characteristics should remain attractive, especially when compared to inflation.
We continue to closely monitor and shift between different sectors of the market
in an attempt to add income and relative performance to the Fund.
WHAT IS OUR OVERALL ECONOMIC OUTLOOK FOR THE NEXT 12 MONTHS?
Slow economic growth should continue for the next 12 months, with a slight
possibility that growth slips to below potential. The economy will have a
difficult time gathering momentum against the major worldwide structural forces
(excess capacity, aging demographics, fiscal austerity) pushing against growth.
These forces are slowly beginning to change, but it will likely be two or more
years before we see anything but a slow growth, low inflation environment. As
such, we believe interest rates should continue to trend down over the next
year. These factors should create a positive environment for fixed-income
securities and, therefore, a positive environment for the Fund.
++ Bond ratings provided by Standard & Poors. Allocation percentages are based
on total investment value of the portfolio as of 10/31/98.
++++ Past performance does not guarantee future results.
<PAGE>
U.S. GOVERNMENT
securities fund
PORTFOLIO MANAGER:
CRAIG SOSEY
WM ADVISORS, INC.
The U.S. Government Securities Fund is managed by a fixed-income team led by
Craig Sosey, who has over 15 years banking and financial analysis experience and
joined WM Advisors, Inc. in 1998. Mr. Sosey has a B.S. in Finance from the
University of the Pacific and an MBA from the University of California Berkeley.
He has extensive experience managing government and mortgage-backed securities.
WHAT WERE THE MOST SIGNIFICANT FACTORS CONTRIBUTING TO THE FUND'S PERFORMANCE
OVER THE PAST 12 MONTHS?
Turmoil in the international financial markets and the near collapse of several
large hedge funds drove investors to the relative safety and liquidity of U.S.
Treasury securities - this flight to quality peaked in early October. As a
consequence, huge inflows of global money came into the Treasury market.
Interest rates on long-term Treasury bonds dropped to a record low during the
period, breaking under 5%. Rates on nearly all Treasury maturities dropped
between 100 and 150 basis points over the past 12 months. The two-year note
ended at 4.11%, while the 30-year bond ended the period at 5.16%. As a result of
this drop in rates and the flight to quality and liquidity, other fixed-income
securities advanced but did not perform nearly as well as Treasury securities.
- -------------------------------------------------------------------------------
GROWTH OF A $10,000 INVESTMENT (CLASS A SHARES)+
Fund (Class A Fund (Class A Lehman
Shares; not Shares; adjusted Brothers
adjusted for for maximum Government Inflation
sales charge) 4.5% sales charge) Bond Index(1) (CPI)(1)
- --------------------------------------------------------------------------------
Inception* 11/18/88 $10,000 $ 9,550 $10,000 $10,000
9,875 9,431 9,882 10,034
Dec 88 9,852 9,408 9,920 10,077
9,970 9,521 10,046 10,119
9,912 9,466 9,964 10,162
9,919 9,472 10,025 10,230
10,131 9,675 10,239 10,264
10,387 9,920 10,481 10,272
Jun 10,677 10,197 10,831 10,289
10,881 10,392 11,060 10,341
10,735 10,252 10,874 10,383
10,771 10,286 10,921 10,444
11,002 10,507 11,204 10,511
11,114 10,614 11,312 10,571
Dec 89 11,162 10,659 11,331 10,597
11,055 10,557 11,171 10,622
11,133 10,632 11,193 10,639
11,113 10,613 11,191 10,673
11,034 10,538 11,092 10,724
11,322 10,813 11,402 10,750
Jun 11,450 10,935 11,582 10,767
11,637 11,114 11,730 10,878
11,569 11,048 11,567 10,929
11,663 11,138 11,678 10,990
11,791 11,261 11,868 11,007
12,038 11,496 12,132 11,032
Dec 90 12,217 11,667 12,320 11,092
12,360 11,804 12,452 11,134
12,438 11,878 12,523 11,237
12,521 11,957 12,587 11,331
12,629 12,060 12,725 11,399
12,725 12,152 12,775 11,424
Jun 12,721 12,148 12,757 11,424
12,880 12,301 12,909 11,493
13,128 12,537 13,208 11,510
13,389 12,786 13,485 11,527
13,552 12,942 13,604 11,544
13,673 13,058 13,740 11,579
Dec 91 14,015 13,385 14,209 11,613
13,773 13,154 13,987 11,630
13,896 13,271 14,042 11,664
13,822 13,200 13,960 11,715
13,931 13,305 14,048 11,733
14,177 13,539 14,308 11,767
Jun 14,356 13,710 14,513 11,775
14,549 13,894 14,878 11,793
14,687 14,026 15,017 11,835
14,827 14,160 15,228 11,895
14,650 13,990 15,009 11,912
14,635 13,976 14,984 11,929
Dec 92 14,873 14,204 15,235 11,972
15,141 14,459 15,560 11,997
15,324 14,635 15,871 12,030
15,382 14,690 15,923 12,064
15,480 14,784 16,046 12,106
15,520 14,822 16,028 12,123
Jun 15,776 15,066 16,384 12,115
15,856 15,142 16,484 12,174
16,081 15,357 16,852 12,217
16,089 15,365 16,916 12,259
16,155 15,428 16,980 12,294
15,984 15,264 16,793 12,311
Dec 93 16,081 15,357 16,859 12,328
16,278 15,546 17,090 12,328
15,950 15,233 16,727 12,363
15,488 14,791 16,351 12,389
15,309 14,620 16,222 12,440
15,327 14,637 16,201 12,448
Jun 15,238 14,552 16,163 12,448
15,547 14,848 16,461 12,482
15,550 14,851 16,464 12,524
15,243 14,557 16,232 12,567
15,169 14,486 16,221 12,584
15,143 14,462 16,191 12,593
Dec 94 15,290 14,602 16,290 12,636
15,644 14,940 16,593 12,670
16,047 15,325 16,950 12,721
16,165 15,437 17,057 12,755
16,394 15,656 17,280 12,764
17,111 16,341 17,977 12,781
Jun 17,212 16,437 18,115 12,781
17,116 16,346 18,048 12,832
17,334 16,554 18,259 12,883
17,501 16,714 18,434 12,926
17,754 16,955 18,715 12,968
18,008 17,197 19,007 12,994
Dec 95 18,264 17,442 19,277 13,020
18,368 17,542 19,394 13,020
17,948 17,140 18,998 13,054
17,765 16,966 18,841 13,080
17,648 16,854 18,720 13,123
17,600 16,808 18,688 13,114
Jun 17,826 17,024 18,929 13,105
17,864 17,060 18,977 13,182
17,798 16,997 18,935 13,225
18,118 17,303 19,249 13,293
18,564 17,729 19,673 13,345
18,977 18,123 20,015 13,371
Dec 96 18,717 17,875 19,811 13,379
18,757 17,913 19,833 13,404
18,777 17,932 19,861 13,429
18,511 17,678 19,650 13,472
18,841 17,993 19,933 13,515
19,012 18,157 20,104 13,541
Jun 19,254 18,387 20,330 13,541
19,847 18,954 20,907 13,585
19,609 18,727 20,700 13,627
19,928 19,031 21,010 13,661
20,267 19,355 21,374 13,677
20,344 19,429 21,483 13,669
Dec 97 20,574 19,648 21,709 13,685
20,803 19,866 22,034 13,711
20,782 19,847 21,975 13,737
20,830 19,892 22,036 13,763
20,954 20,012 22,135 13,788
21,139 20,188 22,363 13,813
Jun 21,323 20,363 22,618 13,830
21,391 20,428 22,652 13,846
21,654 20,680 23,241 13,863
21,938 20,951 23,869 13,879
Oct 98 21,885 20,900 23,869 13,896
(1) The Lehman Brothers Government Bond Index is an unmanaged index of all U.S.
government bonds. The Consumer Price Index is a measurement of inflation for
all urban consumers (CPI-U). The Index assumes reinvestment of all
dividends/ distributions, and does not reflect any asset-based charges for
investment management or other expenses. Past investment performance does
not guarantee future performance. The returns shown for the Fund assume
reinvestment of all dividends/ distributions by the shareholder.
+ The performance of the Class B Shares and Class S Shares was different than
that indicated by the lines shown on the left for the Class A Shares, based
on the differences in sales loads and fees paid by Class B and Class S
shareholders.
- -------------------------------------------------------------------------------
Total Returns as of 10/31/98
CLASS A SHARES 1 YEAR 5 YEAR* 10 YEAR*
Fund (not adjusted for sales charge) 7.99% 6.26% 8.15%
Fund (adjusted for the maximum 4.5%
sales charge) 3.11% 5.28% 7.65%
Lehman Brothers Government Bond Index(1) 11.67% 7.05% 9.09%
CLASS B SHARES 1 YEAR 5 YEAR* SINCE INCEPTION*
(March 31, 1994)
Fund (not adjusted for contingent
deferred sales charge) 7.00% N/A 6.92%
Fund (adjusted for the maximum
contingent deferred sales charge) 2.00% N/A 6.75%
Lehman Brothers Government Bond Index(1) 11.67% N/A 8.60%
CLASS S SHARES SINCE INCEPTION
(March 23, 1998)
Fund (not adjusted for contingent
deferred sales charge) 4.35%
Fund (adjusted for the maximum
contingent deferred sales charge) -0.65%
*Annualized
- -------------------------------------------------------------------------------
PORTFOLIO COMPOSITION++
FNMA 7%
Other 2%
GNMA 35%
Treasuries 14%
CMOs 9%
FHLMC 33%
- -------------------------------------------------------------------------------
WHAT MARKET CONDITIONS AFFECTED THE FUND'S PERFORMANCE DURING THE PERIOD, AND
WHAT INVESTMENT TECHNIQUES WERE USED TO ADDRESS THOSE CONDITIONS?
Spreads on mortgage-backed securities (MBS) widened dramatically during the last
few months of the period, as investors became increasingly worried about faster
prepayments given the low interest rate environment. In addition, a great deal
of selling by hedge funds and mortgage originators kept pressure on MBS spreads.
Given the high percentage of MBS in the Fund, this spread widening kept the Fund
from performing as well as might have been expected. However, the wide spreads
presented opportunities to buy additional mortgage products that should perform
very well in the future. Although MBS have prepayment risk, they also provide a
strong level of income, evidenced by the 30-day SEC Yield (as of October 31,
1998) of 5.54% (5.02% for B shares).
WERE THERE ANY SHIFTS IN THE FUND'S PORTFOLIO HOLDINGS/SECTORS THAT HAVE HAD A
SIGNIFICANT IMPACT ON FUND PERFORMANCE?
The increased spreads and the flat yield curve (marginal differences between
yields of short- and long-term securities) decreased the attractiveness of the
mortgage "dollar-roll" market, as a way to increase the income of the Fund. A
fund uses dollar-rolls by selling securities and simultaneously contracting to
repurchase similar securities in the future. As a result of our outlook, all of
the dollar-rolls were terminated during the latter part of the period. We were
also able to sell, at favorable prices, some mortgage-backed securities that
were exhibiting higher-than-average rates of prepayments. We maintain our focus
on mortgages and the additional income that they provide. The intermediate-term
stance of the Fund also was a benefit to overall performance as intermediate
yields dropped more than both short- and long-term yields.
WHAT IS OUR INTERMEDIATE- AND LONG-TERM OUTLOOK FOR THE FUND?
We believe the Fund has the opportunity to perform very favorably over the
intermediate and longer term. Eventually, we believe mortgage spreads will come
back to a more historical average, while continuing to provide higher levels of
income than Treasuries. Once interest rate volatility calms down and the initial
wave of mortgage refinancing is finished, spreads should tighten, resulting in
very good overall performance. This should be especially true with the recently
purchased securities. We will continue to rely heavily on mortgage-backed
securities to provide a high level of return.
WHAT IS OUR OVERALL ECONOMIC OUTLOOK FOR THE NEXT 12 MONTHS?
The interest rate environment over the next 12 months should continue to be
volatile, although rates in general should trend downward. Overall, the
worldwide economy should remain sluggish, negatively impacting the U.S. economy.
However, given an accommodating Federal Reserve Bank, the U.S. economy should
not fall into a recession. The possibility of certain events, such as a
devaluation of a major Asian or Latin American currency, or collapse of a large
hedge fund, will keep the markets volatile and could potentially deepen economic
problems throughout the world and cause problems for the U.S. economy. However,
we feel that the likelihood of such a major event is diminishing and slow growth
should continue.
++ Allocation percentages are based on total investment value of the portfolio
as of 10/31/98.
<PAGE>
INCOME
fund
PORTFOLIO MANAGER:
GARY POKRZYWINSKI
WM ADVISORS, INC.
The Income Fund is managed by a fixed-income team led by Senior Portfolio
Manager Gary Pokrzywinski, who has over 12 years of asset management experience
and has been with WM Advisors, Inc. for more than six years. Mr. Pokrzywinski is
a Chartered Financial Analyst and holds a Business Degree from the University of
Wisconsin.
WHAT WERE THE MOST SIGNIFICANT FACTORS CONTRIBUTING TO THE FUND'S PERFORMANCE
OVER THE PAST 12 MONTHS?
During the 12-month period, there was a fairly significant drop in interest
rates; this is positive for the Fund as its price moves in the opposite
direction of interest rates. Rates dropped by nearly 150 basis points (1.5%) for
intermediate-maturity Treasury notes. The interest rate decline was segmented to
the highest quality assets such as Treasuries. The flight to quality was most
evident during the period of August through October, as Treasuries outperformed
all other types of fixed-income securities. To summarize, despite the drop in
rates and corresponding increase in price for Treasury securities, corporate
securities, which make up the majority of the holdings of the Fund,
significantly underperformed the U.S. Treasury market. Corporate yields fell by
only 75 basis points for intermediate "A" or average quality rating++, and
therefore the price increase was half that of similar maturity Treasuries.
Typical of a fund of this nature, the income characteristics of the securities
produced the majority of the overall return to shareholders during the year. The
performance of the higher-risk securities (below investment grade) in the Fund
was neutral as a few did poorly and a few did exceptionally well.
- -------------------------------------------------------------------------------
GROWTH OF A $10,000 INVESTMENT (CLASS A SHARES)+
Lehman
Brothers
Fund (Class A Fund (Class A Government/
Shares; not Shares; adjusted Corporate
adjusted for for the maximum Bond Inflation
sales charge) 4.5% sales charge) Index(1) (CPI)(1)
- --------------------------------------------------------------------------------
Inception* 11/18/88 $10,000 $ 9,550 $10,000 $10,000
10,077 9,623 9,887 10,034
Dec 88 10,041 9,589 9,921 10,077
10,038 9,586 10,053 10,119
10,127 9,671 9,976 10,162
10,134 9,678 10,030 10,230
10,140 9,684 10,243 10,264
10,289 9,826 10,495 10,272
Jun 10,439 9,970 10,837 10,289
10,505 10,032 11,062 10,341
10,659 10,180 10,891 10,383
10,592 10,115 10,939 10,444
10,658 10,179 11,215 10,511
10,736 10,253 11,316 10,571
Dec 89 10,773 10,289 11,333 10,597
10,716 10,233 11,178 10,622
10,636 10,157 11,203 10,639
10,652 10,173 11,204 10,673
10,655 10,176 11,101 10,724
10,623 10,145 11,423 10,750
Jun 10,862 10,373 11,608 10,767
11,040 10,543 11,752 10,878
11,126 10,625 11,581 10,929
11,020 10,524 11,677 10,990
11,119 10,618 11,833 11,007
11,246 10,740 12,091 11,032
Dec 90 11,452 10,936 12,273 11,092
11,596 11,074 12,411 11,134
11,712 11,185 12,517 11,237
11,860 11,326 12,604 11,331
12,002 11,462 12,749 11,399
12,160 11,613 12,809 11,424
Jun 12,212 11,663 12,794 11,424
12,225 11,674 12,956 11,493
12,363 11,807 13,254 11,510
12,623 12,055 13,531 11,527
12,890 12,309 13,651 11,544
13,091 12,502 13,788 11,579
Dec 91 13,202 12,608 14,252 11,613
13,601 12,989 14,041 11,630
13,427 12,823 14,116 11,664
13,492 12,885 14,038 11,715
13,452 12,846 14,122 11,733
13,547 12,938 14,396 11,767
Jun 13,771 13,152 14,608 11,775
14,010 13,379 14,982 11,793
14,297 13,654 15,115 11,835
14,476 13,825 15,321 11,895
14,639 13,980 15,086 11,912
14,404 13,756 15,073 11,929
Dec 92 14,374 13,727 15,332 11,972
14,605 13,948 15,666 11,997
14,901 14,230 15,992 12,030
15,192 14,509 16,046 12,064
15,278 14,591 16,170 12,106
15,396 14,703 16,162 12,123
Jun 15,432 14,738 16,529 12,115
15,668 14,963 16,635 12,174
15,788 15,078 17,017 12,217
16,128 15,402 17,077 12,259
16,247 15,516 17,147 12,294
16,334 15,599 16,953 12,311
Dec 93 16,094 15,370 17,028 12,328
16,185 15,457 17,283 12,328
16,460 15,720 16,906 12,363
16,051 15,329 16,492 12,389
15,546 14,846 16,355 12,440
15,401 14,708 16,326 12,448
Jun 15,345 14,655 16,288 12,448
15,325 14,635 16,614 12,482
15,613 14,910 16,621 12,524
15,632 14,928 16,370 12,567
15,361 14,669 16,352 12,584
15,306 14,617 16,322 12,593
Dec 94 15,287 14,599 16,430 12,636
15,404 14,711 16,745 12,670
15,683 14,978 17,134 12,721
16,069 15,346 17,249 12,755
16,202 15,473 17,488 12,764
16,482 15,740 18,221 12,781
Jun 17,357 16,576 18,367 12,781
17,504 16,717 18,295 12,832
17,385 16,603 18,529 12,883
17,635 16,842 18,718 12,926
17,864 17,060 18,994 12,968
18,098 17,283 19,307 12,994
Dec 95 18,392 17,565 19,591 13,020
18,728 17,885 19,712 13,020
18,864 18,015 19,294 13,054
18,361 17,534 19,132 13,080
18,202 17,383 19,000 13,123
18,077 17,263 18,968 13,114
Jun 18,056 17,243 19,222 13,105
18,275 17,453 19,266 13,182
18,313 17,489 19,220 13,225
18,312 17,488 19,562 13,293
18,663 17,823 20,018 13,345
19,164 18,302 20,386 13,371
Dec 96 19,605 18,723 20,160 13,379
19,376 18,504 20,184 13,404
19,438 18,563 20,227 13,429
19,472 18,596 19,986 13,472
19,217 18,352 20,278 13,515
19,495 18,617 20,466 13,541
Jun 19,760 18,871 20,712 13,541
20,105 19,200 21,346 13,585
20,848 19,910 21,107 13,627
20,566 19,640 21,438 13,661
20,918 19,977 21,781 13,677
21,253 20,296 21,897 13,669
Dec 97 21,342 20,382 22,126 13,685
21,413 20,449 22,438 13,711
21,616 20,643 22,394 13,737
21,700 20,724 22,463 13,763
21,867 20,883 22,575 13,788
21,939 20,952 22,817 13,813
Jun 22,201 21,202 23,050 13,830
22,369 21,363 23,068 13,846
22,336 21,331 23,518 13,863
22,423 21,414 24,190 13,879
Oct 98 22,829 21,801 24,019 13,896
(1) Index total returns were calculated from 10/31/88 to 10/31/98. The Lehman
Brothers Government/Corporate Bond Index is unmanaged and represents all
government and corporate bonds. The Consumer Price Index is a measurement
of inflation for all urban consumers (CPI-U). The Index assumes
reinvestment of all dividends/distributions, and does not reflect any
asset-based charges for investment management or other expenses. Past
investment performance does not guarantee future performance. The returns
shown for the Fund assume reinvestment of all dividends/distributions by
the shareholder.
+ The performance of the Class B Shares and Class S Shares was different than
that indicated by the lines shown on the left for the Class A Shares, based
on the differences in sales loads and fees paid by Class B and Class S
shareholders.
- -------------------------------------------------------------------------------
TOTAL RETURNS AS OF 10/31/98
CLASS A SHARES 1 YEAR 5 YEAR* 10 YEAR*
Fund (not adjusted for sales charge) 6.00% 6.64% 8.38%
Fund (adjusted for the maximum
4.5% sales charge) 1.21% 5.66% 7.88%
Lehman Brothers Government/Corporate
Bond Index(1) 10.27% 6.97% 9.16%
CLASS B SHARES 1 YEAR 5 YEAR* SINCE INCEPTION*
(March 30, 1994)
Fund (not adjusted for contingent
deferred sales charge) 5.17% N/A 7.50%
Fund (adjusted for the maximum
contingent deferred sales charge) 0.20% N/A 7.33%
Lehman Brothers Government/Corporate
Bond Index(1) 10.27% N/A 8.55%
CLASS S SHARES SINCE INCEPTION
(March 23, 1998)
Fund (not adjusted for contingent
deferred sales charge) 2.20%
Fund (adjusted for the maximum
contingent deferred sales charge) -2.73%
*Annualized
- -------------------------------------------------------------------------------
PORTFOLIO COMPOSITION++
TREASURIES 3%
OTHER 7%
INDUSTRIAL BONDS 48%
FINANCIAL BONDS 11%
FOREIGN BONDS 12%
OTHER CORPORATE BONDS 10%
MORTGAGE-BACKED 9%
- -------------------------------------------------------------------------------
WHAT MARKET CONDITIONS AFFECTED THE FUND'S PERFORMANCE DURING THE PERIOD, AND
WHAT INVESTMENT TECHNIQUES WERE USED TO ADDRESS THOSE CONDITIONS?
Global economic uncertainty, stock market jitters, excess financial leverage,
and the general slowdown in economic growth caused investors to shy away from
perceived riskier assets. These factors coupled with the volume of money flowing
into the Treasury market and the easing stance of the Federal Reserve, pushed
Treasury rates to unprecedented lows. The risk aversion caused yield spreads
between securities that are not guaranteed by the government, like corporate
bonds, to increase substantially. The result was that corporate bonds
underperformed Treasury securities during the year. Despite this
underperformance, historical results show that investors with a long-term time
horizon benefit from having a diverse portfolio of non-government guaranteed
securities.++++ The income generated from these securities can be substantial
relative to similar maturity Treasuries. As of October 31, 1998, the 30-day SEC
Yield of the Fund is 6.06% (5.57% for B shares). We feel that the extreme
relative performance strength of the Treasury market will subside and,
therefore, we continue to invest in and hold the majority of the Fund in
corporate securities. Because the corporate rates did not drop as much as
government rates, these securities now offer even more attractive income
characteristics relative to other investments.
WERE THERE ANY SHIFTS IN THE FUND'S PORTFOLIO HOLDINGS/SECTORS THAT HAVE HAD A
SIGNIFICANT IMPACT ON FUND PERFORMANCE?
There were no shifts that had a significant impact. We strive to meet the
objective of current income by investing principally in a portfolio of corporate
securities. The Fund has an average rating of BBB++ and invests in securities
that average 12 years in maturity and 6 years in duration (a measure of the
price sensitivity to changes in interest rates). The general theme of the
portfolio has been to concentrate purchases in the less economic sensitive
sectors of the market, like healthcare, consumer non-durable and defense
companies.
WHAT IS OUR INTERMEDIATE- AND LONG-TERM OUTLOOK FOR THE FUND?
The intermediate outlook of the Fund looks positive as the worries that caused
the recent underperformance of non-government guaranteed securities should
diminish. As yield spreads between Treasuries and corporate securities close, we
may see performance shift back to the corporate sector. The longer-term outlook
remains the same. By investing largely in intermediate-maturity securities
issued by corporations, doing proprietary research, and keeping the portfolio to
an average risk profile, the volatility of the Fund should be reasonable and the
income characteristics should be attractive, especially when compared to
inflation.
WHAT IS OUR OVERALL ECONOMIC OUTLOOK FOR THE NEXT 12 MONTHS?
Slow economic growth should continue for the next 12 months, with a slight
possibility that growth could slip to below potential. The economy will have a
difficult time gathering momentum against the major worldwide structural forces
(excess capacity, aging demographics, fiscal austerity) pushing against growth.
These forces are slowly beginning to change, but it will likely be two or more
years before we see anything but a slow growth, low inflation environment. As
such, we believe interest rates should continue to trend down over the next
year. These factors create a positive environment for fixed-income securities
and, therefore, a positive environment for the Fund.
++ Allocation percentages are based on total investment value of the
portfolio as of 10/31/98.
++++ Bond ratings provided by Standard & Poors. Past performance is not a
guarantee of future results.
<PAGE>
CALIFORNIA INSURED
intermediate
municipal fund
PORTFOLIO MANAGER:
JOSEPH PIRARO
VAN KAMPEN INVESTMENTS
Mr. Piraro is Portfolio Manager of the WM California Municipal and WM California
Insured Intermediate Municipal Funds. He serves as Vice President at Van Kampen
Investments and has been with the company since 1992.
WHAT WERE THE MOST SIGNIFICANT FACTORS CONTRIBUTING TO THE FUND'S PERFORMANCE
OVER THE PAST 12 MONTHS?
The strength of the economy, the decision by the Federal Reserve Board to delay
adjusting short-term interest rates earlier in the year, and the financial
problems in Asia significantly affected the U.S. bond markets. As inflation
remained benign, fixed-income assets rallied throughout most of the 12-month
period. The yield of the 30-year Treasury bond, which moves in the opposite
direction of its price, fell from 6.15% on October 21, 1997 to 4.69% in October
of 1998, before closing the period slightly higher at 5.16%.
The impact of the Asian financial crisis on U.S. bond markets was evident in the
divergent paths taken by the Treasury market and the tax-exempt market. The
problems in Asia, Russia, and Latin America continued to worsen and are
beginning to spill over to the United States. These events caused the "flight to
quality" to reach unparalleled levels and drove the yield on 30-year Treasury
Bonds to historically low levels, while driving the U.S. Dollar higher relative
to Asian currencies.
- -------------------------------------------------------------------------------
GROWTH OF A $10,000 INVESTMENT (CLASS A SHARES)+
Fund (Class A Fund (Class A Lehman
Shares; not Shares; adjusted Brothers
adjusted for for the maximum Municipal Inflation
sales charge) 4.5% sales charge) Bond Index(1) (CPI)(1)
- --------------------------------------------------------------------------------
Inception* 4/4/94 $10,000 $ 9,550
10,172 9,714 $10,000 $10,000
10,264 9,802 10,087 10,007
Jun 10,226 9,766 10,025 10,007
10,410 9,942 10,209 10,034
10,443 9,973 10,245 10,068
Sep 10,333 9,868 10,094 10,102
10,181 9,723 9,914 10,117
10,039 9,587 9,735 10,124
Dec 94 10,175 9,717 9,949 10,158
10,468 9,997 10,234 10,185
10,793 10,308 10,531 10,226
Mar 10,911 10,420 10,653 10,254
10,913 10,422 10,665 10,261
11,253 10,746 11,006 10,274
Jun 11,117 10,617 10,910 10,274
11,257 10,751 11,013 10,315
11,430 10,916 11,153 10,357
Sep 11,507 10,989 11,224 10,391
11,648 11,123 11,386 10,425
11,800 11,269 11,575 10,446
Dec 95 11,849 11,316 11,686 10,467
11,960 11,421 11,775 10,467
11,939 11,402 11,695 10,494
Mar 11,775 11,245 11,546 10,515
11,754 11,225 11,513 10,550
11,733 11,205 11,509 10,542
Jun 11,812 11,280 11,634 10,535
11,925 11,388 11,740 10,597
11,937 11,400 11,738 10,631
Sep 12,028 11,487 11,902 10,686
12,153 11,607 12,036 10,728
12,359 11,803 12,255 10,748
Dec 96 12,312 11,758 12,203 10,755
12,348 11,792 12,227 10,775
12,418 11,859 12,339 10,796
Mar 12,291 11,738 12,175 10,830
12,350 11,795 12,277 10,865
12,503 11,941 12,461 10,886
Jun 12,634 12,065 12,594 10,886
12,929 12,347 12,943 10,920
12,836 12,258 12,821 10,954
Sep 12,955 12,372 12,974 10,982
13,005 12,419 13,057 10,995
13,054 12,467 13,134 10,988
Dec 97 13,191 12,598 13,326 11,001
13,302 12,703 13,463 11,022
13,323 12,724 13,467 11,043
Mar 13,277 12,679 13,479 11,064
13,216 12,621 13,419 11,084
13,402 12,799 13,631 11,104
Jun 13,426 12,822 13,684 11,117
13,464 12,858 13,718 11,131
13,676 13,061 13,929 11,144
13,888 13,263 14,103 11,158
Oct 98 13,888 13,263 14,103 11,171
(1) Index total returns were calculated from 4/30/94 to 10/31/98. The Lehman
Brothers Municipal Bond Index is a total return performance benchmark for
the long-term, investment-grade, tax-exempt bond market. The Consumer Price
Index is a measurement of inflation for all urban consumers (CPI-U). The
index assumes reinvestment of all dividends/distributions, and does not
reflect any asset-based charges for investment management or other
expenses. Past investment performance does not guarantee future
performance. The returns shown for the Fund assume reinvestment of all
dividends/distributions by the shareholder.
During the period noted, the Advisor waived a portion of its fees, the
Advisor absorbed other expenses, and credits were allowed by the Custodian.
In the absence of the waivers and absorption of other expenses or credits,
yield and total return would have been lower.
+ The performance of the Class B Shares and Class S Shares was different than
that indicated by the lines shown on the left for the Class A Shares, based
on the differences in sales loads and fees paid by Class B and Class S
shareholders.
- -------------------------------------------------------------------------------
Total Returns as of 10/31/98
CLASS A SHARES 1 YEAR SINCE INCEPTION*
(April 4, 1994)
Fund (not adjusted for sales charge) 6.81% 7.45%
Fund (adjusted for the maximum
4.5% sales charge) 2.03% 6.37%
Lehman Brothers Municipal
Bond Index(1) 8.01% 7.22%
CLASS B SHARES 1 YEAR SINCE INCEPTION*
(June 30, 1994)
Fund (not adjusted for contingent
deferred sales charge) 6.01% 6.52%
Fund (adjusted for the maximum
contingent deferred sales charge) 1.01% 6.33%
Lehman Brothers Municipal Bond
Index(1) 8.01% 8.19%
CLASS S SHARES 1 YEAR SINCE INCEPTION*
(June 30, 1994)
Fund (not adjusted for contingent
deferred sales charge) 6.01% 6.52%
Fund (adjusted for the maximum
contingent deferred sales charge) 1.01% 6.33%
Lehman Brothers Municipal Bond
Index(1) 8.01% 8.19%
*Annualized
- -------------------------------------------------------------------------------
PORTFOLIO COMPOSITION++
NOT RATED 8%
AAA 85%
A 2%
BBB 5%
- -------------------------------------------------------------------------------
The Federal Reserve cut rates in September by 25 basis points, and in a surprise
move in October, rates were cut again by a further 25 basis points. This move
caused the U.S. Dollar to fall and the increased liquidity took pressure off the
debt problems in the Asian, Russian, and Latin American economies.
Because of supply and demand fundamentals, the municipal market did not perform
as well as Treasuries. Historically low interest rates fueled refundings as well
as new borrowings, resulting in a 32% increase in issuance year- to-date over
1997. Although these lower rates were not quite as attractive to investors
seeking yield, demand did keep pace with supply. In addition to interest from
property and casualty companies and banks, the attractive ratio of municipal
yields to Treasuries attracted some individuals as well as cross-over buyers
(institutions who typically purchase taxable securities). At the end of the
reporting period, the Bond Buyer 40 Index (an index of 40 actively traded,
long-term investment grade securities) had a yield of 5.13% or 99.6% of
long-term Treasuries.
WHAT MARKET CONDITIONS AFFECTED THE FUND'S PERFORMANCE DURING THE PERIOD, AND
WHAT INVESTMENT TECHNIQUES WERE USED TO ADDRESS THOSE CONDITIONS?
The strong supply of municipal bonds benefited the Fund as there were plenty of
quality bond issues on the market. Issuance for the state was up 34%
year-to-date over the same period in 1997. California continues to be the second
largest issuer of tax exempt bonds in the nation. Of total new volume, insured
issuance accounted for 60% of the state's supply through the end of the second
quarter.
As of October 31, 1998, the portfolio had a duration (a measure of a fund's
sensitivity to interest rate movements) of 5.83 years, compared to the Lehman
Brothers California Intermediate Municipal Bond Index duration of 5.87 years.
When interest rates decline, funds with longer durations tend to perform better,
while the opposite is true when interest rates increase. While we did find some
attractive offerings during the period, we maintained the core position of the
Fund.
WERE THERE ANY SHIFTS IN THE FUND'S PORTFOLIO HOLDINGS/SECTORS THAT HAD A
SIGNIFICANT IMPACT ON THE FUND'S PERFORMANCE?
Our exposure to the transportation sector increased by 9% and now totals 16% of
assets, due to a purchase early this year of Los Angeles County Metropolitan
Transit Authority. This position is our largest exposure to a single issuer and
is AAA++ rated. We decreased our exposure in the general purpose, high-education
and multi-family housing sectors. At the end of the reporting period, 86% of
assets were insured,2 slightly higher than the 80% mandated by the prospectus.
Given the continued demand for quality California securities, we will maintain
this level.
WHAT IS OUR INTERMEDIATE- AND LONG-TERM OUTLOOK FOR THE FUND?
We do not anticipate making any drastic changes in the Fund's structure. We feel
confident that the Fund is positioned for continued strong performance. We will
continue to manage the portfolio in a manner consistent with our philosophy, as
we seek to achieve our objective of providing shareholders with current income
exempt from federal and California state income tax.
WHAT IS OUR OVERALL ECONOMIC OUTLOOK FOR THE NEXT 12 MONTHS?
We believe the economy will continue to grow at a moderate rate for the
remainder of the year, supported by low interest rates. The housing industry has
already benefited from the sharp decline in interest rates, and other sectors
could follow if consumer and business spending picks up. Looking ahead into next
year, we see the potential for continued economic growth as long as domestic
interest rates remain low and the global financial crisis stabilizes. We believe
the current low inflationary environment in the United States paves the way for
further Fed interest rate cuts if the economy resumes its slowdown.
Unless the taxable market makes a significant move, we expect municipal yields
to remain within their recent trading range. The supply of municipal issues
looks like it will remain strong, possibly setting an annual record for the
industry. Our strategy going forward will be to take advantage of the new issue
market, which we expect to be highly active. We believe the portfolio is
positioned to provide an attractive level of tax-exempt income without undue
risk.(1)
Overseas, we see some promising signs of recovery, including Japan's new bank
reform package, which includes a willingness to let problem banks fail, and
approval of an International Monetary Fund rescue package for Brazil. We will
closely monitor these global and domestic events and their effects on the
performance of the Fund, adjusting the portfolio when appropriate. We remain
committed to the Fund's objective of providing a high level of tax-exempt income
while preserving shareholders' capital.
(1) A portion of income may be subject to some state and/or local taxes, and
for certain investors, may be subject to the federal alternative minimum
tax (AMT).
(2) Insurance applies only to the timely repayment of principal and interest
and does not eliminate market risk.
++ Bond ratings provided by Standard & Poors. Allocation percentages are based
on total investment value of the portfolio as of 10/31/98.
<PAGE>
CALIFORNIA
municipal fund
PORTFOLIO MANAGER:
JOSEPH PIRARO
VAN KAMPEN INVESTMENTS
Mr. Piraro joined the company in 1992, and serves as Vice President and
Portfolio Manager of Van Kampen Investments. He has had primary portfolio
management responsibility for the California Municipal Fund since May 1992.
WHAT WERE THE MOST SIGNIFICANT FACTORS CONTRIBUTING TO THE FUND'S PERFORMANCE
OVER THE PAST 12 MONTHS?
The strength of the economy, the decision by the Federal Reserve Board to delay
adjusting short-term interest rates and the financial problems in Asia
significantly affected the U.S. bond markets. As inflation remained benign,
fixed-income assets rallied throughout most of the 12-month period. The yield of
30-year Treasury bonds, which moves in the opposite direction of its price, fell
from 6.15% on October 21, 1997 to 4.69% in October 1998 before closing the
period slightly higher at 5.16%.
The impact of the Asian financial crisis on U.S. bond markets was evident in the
divergent paths taken by the Treasury market and the tax-exempt market. The
problems in Asia, Russia, and Latin America continued to worsen and are
beginning to spill over to the United States. These events caused the "flight to
quality" to reach unparalleled levels and drove the yield on 30-year Treasury
bonds to historically low levels, while driving the U.S. Dollar higher relative
to Asian currencies.
The Federal Reserve cut rates in September by 25 basis points, and in a surprise
move in October, the Fed again cut 25 basis points from rates. This move caused
the U.S. Dollar to fall and the increased liquidity took pressure off the debt
problems in the Asian, Russian, and Latin American economies.
GROWTH OF A $10,000 INVESTMENT (CLASS A SHARES)+
Fund (Class A Fund (Class A Lehman
Shares; not Shares; adjusted Brothers
adjusted for for the maximum Municipal Inflation
sales charge) 4.5% sales charge) Bond Index(1) (CPI)(1)
- --------------------------------------------------------------------------------
Inception** 7/25/89 $10,000 $ 9,550
10,080 9,626 $10,000 $10,000
9,978 9,529 9,902 10,041
9,952 9,504 9,872 10,099
10,117 9,662 9,993 10,165
10,252 9,790 10,168 10,223
Dec 89 10,325 9,860 10,251 10,247
10,208 9,748 10,203 10,272
10,303 9,840 10,294 10,288
10,379 9,912 10,297 10,321
10,214 9,755 10,223 10,371
10,458 9,988 10,445 10,396
Jun 10,598 10,122 10,537 10,412
10,750 10,266 10,692 10,520
10,497 10,024 10,537 10,569
10,564 10,089 10,544 10,627
10,740 10,257 10,734 10,644
10,992 10,498 10,950 10,669
Dec 90 10,993 10,498 10,998 10,726
11,044 10,547 11,146 10,767
11,115 10,615 11,243 10,866
11,161 10,659 11,247 10,957
11,274 10,767 11,397 11,023
11,389 10,876 11,498 11,047
Jun 11,357 10,846 11,487 11,047
11,472 10,956 11,627 11,114
11,607 11,085 11,780 11,130
11,724 11,196 11,933 11,147
11,864 11,330 12,041 11,164
11,901 11,365 12,075 11,197
Dec 91 12,054 11,511 12,334 11,230
12,045 11,503 12,362 11,247
12,059 11,516 12,366 11,279
12,096 11,552 12,371 11,329
12,182 11,633 12,481 11,346
12,315 11,761 12,629 11,379
Jun 12,556 11,991 12,841 11,387
13,015 12,430 13,226 11,404
12,812 12,236 13,096 11,445
12,851 12,273 13,181 11,503
12,587 12,020 13,052 11,519
12,970 12,387 13,286 11,535
Dec 92 13,159 12,567 13,421 11,577
13,336 12,736 13,577 11,601
13,899 13,274 14,069 11,634
13,787 13,167 13,919 11,666
13,939 13,311 14,060 11,707
14,028 13,396 14,139 11,724
Jun 14,294 13,651 14,375 11,715
14,282 13,640 14,394 11,773
14,654 13,994 14,693 11,814
14,847 14,179 14,860 11,855
14,848 14,180 14,889 11,888
14,628 13,970 14,758 11,905
Dec 93 14,955 14,282 15,069 11,922
15,113 14,433 15,241 11,922
14,719 14,057 14,846 11,955
13,967 13,338 14,242 11,980
13,981 13,352 14,363 12,029
14,088 13,454 14,488 12,038
Jun 13,982 13,352 14,400 12,038
14,210 13,570 14,663 12,070
14,264 13,622 14,714 12,111
14,075 13,441 14,498 12,153
13,788 13,168 14,240 12,170
13,446 12,841 13,982 12,178
Dec 94 13,667 13,052 14,290 12,219
14,126 13,490 14,699 12,252
14,559 13,904 15,126 12,301
14,728 14,065 15,300 12,335
14,757 14,093 15,319 12,343
15,224 14,539 15,807 12,359
Jun 15,040 14,363 15,670 12,359
15,112 14,432 15,819 12,409
15,300 14,611 16,019 12,458
15,414 14,721 16,120 12,500
15,660 14,955 16,354 12,541
15,950 15,232 16,626 12,566
Dec 95 16,139 15,413 16,785 12,591
16,212 15,483 16,913 12,591
16,123 15,397 16,798 12,624
15,885 15,170 16,583 12,649
15,869 15,155 16,536 12,691
15,869 15,155 16,530 12,682
Jun 16,003 15,283 16,710 12,673
16,168 15,441 16,862 12,748
16,228 15,498 16,859 12,789
16,441 15,701 17,095 12,855
16,623 15,875 17,287 12,905
16,899 16,139 17,602 12,930
Dec 96 16,852 16,094 17,528 12,937
16,882 16,123 17,561 12,962
17,021 16,255 17,723 12,987
16,847 16,089 17,487 13,028
16,972 16,208 17,634 13,070
17,192 16,419 17,898 13,095
Jun 17,414 16,631 18,089 13,095
17,956 17,148 18,590 13,137
17,810 17,009 18,415 13,177
18,019 17,208 18,634 13,210
18,147 17,330 18,754 13,226
18,292 17,469 18,864 13,218
Dec 97 18,585 17,748 19,140 13,234
18,730 17,887 19,337 13,259
18,754 17,910 19,343 13,284
18,754 17,910 19,360 13,310
18,666 17,826 19,273 13,334
18,963 18,109 19,577 13,358
Jun 19,023 18,167 19,654 13,374
19,036 18,180 19,703 13,390
19,320 18,451 20,006 13,406
19,600 18,718 20,256 13,422
Oct 98 19,559 18,679 20,256 13,438
(1) Index total returns were calculated from 7/31/89 to 10/31/98. The Lehman
Brothers Municipal Bond Index is a total return performance benchmark for
the long-term, investment-grade, tax-exempt bond market. The Consumer Price
Index is a measurement of inflation for all urban consumers (CPI-U). The
index assumes reinvestment of all dividends/distributions, and does not
reflect any asset-based charges for investment management or other expenses.
Past investment performance does not guarantee future performance. The
returns shown for the Fund assume reinvestment of all
dividends/distributions by the shareholder.
During the period noted, the Advisor waived a portion of its fees, absorbed
other expenses, and credits were allowed by the Custodian. In the absence of
the waivers and absorption of other expenses or credits, yield and total
return would have been lower.
+ The performance of the Class B Shares and Class S Shares was different than
that indicated by the lines shown on the left for the Class A Shares, based on
the differences in sales loads and fees paid by Class B and Class S
shareholders.
- -------------------------------------------------------------------------------
TOTAL RETURNS AS OF 10/31/98
CLASS A SHARES 1 YEAR 5 YEAR* SINCE INCEPTION*
(July 25, 1989)
Fund (not adjusted for sales charge) 7.80% 5.67% 7.51%
Fund (adjusted for the maximum
4.5% sales charge) 2.92% 4.70% 6.98%
Lehman Brothers Municipal Bond Index(1) 8.01% 6.35% 7.93%
CLASS B SHARES 1 YEAR 5 YEAR* SINCE INCEPTION*
(June 30, 1994)
Fund (not adjusted for contingent
deferred sales charge) 7.00% N/A 7.26%
Fund (adjusted for the maximum
contingent deferred sales charge) 2.00% N/A 7.07%
Lehman Brothers Municipal Bond
Index(1) 8.01% N/A 8.19%
CLASS S SHARES 1 YEAR 5 YEAR* SINCE INCEPTION*
(June 30, 1994)
Fund (not adjusted for contingent
deferred sales charge) 7.00% N/A 7.26%
Fund (adjusted for the maximum
contingent deferred sales charge) 2.00% N/A 7.07%
Lehman Brothers Municipal
Bond Index(1) 8.01% N/A 8.19%
*Annualized
- -------------------------------------------------------------------------------
PORTFOLIO COMPOSITION++
AAA 64%
AA 6%
A 6%
BBB 7%
Not Rated 17%
- -------------------------------------------------------------------------------
Because of supply and demand fundamentals, the municipal market did not perform
as well as Treasuries. Historically low interest rates fueled refundings as well
as new borrowings, resulting in a 32% increase in issuance year to date over
1997. Although these lower rates were not quite as attractive to investors
seeking yield, demand did keep pace with supply. In addition to interest from
property and casualty companies and banks, the attractive ratio of municipal
yields to Treasuries attracted some individuals as well as cross-over buyers
(institutions who typically purchase taxable securities). At the end of the
reporting period, the Bond Buyer 40 Index (an index of 40 actively traded,
long-term investment grade securities) had a yield of 5.13% or 99.6% of
long-term Treasuries.
WHAT MARKET CONDITIONS AFFECTED THE FUND'S PERFORMANCE DURING THE PERIOD, AND
WHAT INVESTMENT TECHNIQUES WERE USED TO ADDRESS THOSE CONDITIONS?
The strong supply of municipal bonds benefited the Fund as there were plenty of
quality bond issues on the market. Issuance for the state was up 34% year to
date over the same period in 1997. California continues to be the second largest
issuer of tax-exempt bonds in the nation. This allowed ample opportunity to keep
the portfolio well diversified.
At the end of the reporting period, the portfolio had a duration (a measure of a
fund's sensitivity to interest rate movements) of 7.73 years, compared to the
Lehman Brothers California Municipal Bond Index duration of 8.20 years. When
interest rates decline, funds with longer durations tend to perform better,
while the opposite is true when interest rates increase.
We did trade very selectively, however, given the existing structure of the
Fund. While we did find some attractive offerings during the period, we
maintained the core position of the Fund.
WERE THERE ANY SHIFTS IN THE FUND'S PORTFOLIO HOLDINGS/SECTORS THAT HAD A
SIGNIFICANT IMPACT ON THE FUND'S PERFORMANCE?
We did not make any major shifts in sector concentration or rating distribution
that had a significant impact on the Fund. This is primarily due to the
continuing decline in interest rates, which are currently at levels
significantly below the acquisition yields of securities in the Fund. The Fund
has excellent diversification, with exposure to 16 industries, the largest of
which is Tax Districts. Because of the attractive yields on our current
holdings, as well as the good balance between sectors, we do not expect
significant changes in the near future. The credit quality of the portfolio
remains very high, and we expect to maintain that level given the demand for
quality California securities. Given the compression in yield spreads on
investment grade securities as noted above, we expect this position to continue
to perform very well.
WHAT IS OUR INTERMEDIATE- AND LONG-TERM OUTLOOK FOR THE FUND?
We do not anticipate making any drastic changes in the Fund's structure. We feel
confident that the Fund is positioned for continued strong performance. Given
our economic outlook, which is described below, we will maintain an average to
slightly short duration. We will continue to manage the portfolio in a manner
consistent with our philosophy, as we seek to achieve our objective of providing
shareholders with a higher level of current income exempt from federal and
California state income tax.
WHAT IS OUR OVERALL ECONOMIC OUTLOOK FOR THE NEXT 12 MONTHS?
We believe the economy will continue to grow at a moderate rate for the
remainder of the year, supported by low interest rates. The housing industry has
already benefited from the sharp decline in interest rates, and other sectors
could follow if consumer and business spending picks up. Looking ahead into next
year, we see the potential for continued economic growth as long as domestic
interest rates remain low and the global financial crisis stabilizes. We believe
the current low inflationary environment in the United States paves the way for
further Fed interest rate cuts if the economy resumes its slowdown.
Unless the taxable market makes a significant move, we expect municipal yields
to remain within their recent trading range. The supply of municipal issues
looks like it will remain strong, possibly setting an annual record for the
industry. Our strategy going forward will be to take advantage of the new issue
market, which we expect to be highly active. We believe the portfolio is
positioned to provide the potential for an attractive level of tax-exempt income
without undue risk.
Overseas, we see some promising signs of recovery, including Japan's new bank
reform package, which includes a willingness to let problem banks fail, and
approval of an International Monetary Fund rescue package for Brazil. We will
closely monitor these global and domestic events and their effects on the
performance of the Fund, adjusting the portfolio when appropriate. We remain
committed to the Fund's objective of providing a high level of tax-exempt income
while preserving shareholders' capital.
Note: A portion of income may be subject to some State and/or local taxes, and
for certain investors, may be subject to the federal alternative minimum tax
(AMT).
++ Bond ratings provided by Standard & Poors. Allocation percentages are based
on total investment value of the portfolio as of 10/31/98.
<PAGE>
FLORIDA INSURED
municipal fund
PORTFOLIO MANAGER:
THOMAS BYRON
VAN KAMPEN INVESTMENTS
Mr. Byron, Vice President at Van Kampen, has over 15 years of experience with
the company. He has been with Van Kampen since 1981 and held the position of
Head Buyer and Manager, with responsibility for all tax-exempt and taxable Unit
Investment Trusts. Mr. Byron has had primary portfolio management responsibility
for the Florida Insured Municipal Fund since January 1997.
WHAT WERE THE MOST SIGNIFICANT FACTORS CONTRIBUTING TO THE FUND'S PERFORMANCE
OVER THE PAST 12 MONTHS?
The strength of the economy, the decision by the Federal Reserve Board to delay
adjusting short-term interest rates and the financial problems in Asia
significantly affected the U.S. bond markets. As inflation remained benign,
fixed-income assets rallied throughout most of the 12-month period. The yield of
30-year Treasury bonds, which moves in the opposite direction of its price, fell
from 6.15% on October 21, 1997 to 4.69% in October 1998 before closing the
period slightly higher at 5.16%.
The impact of the Asian financial crisis on U.S. bond markets was evident in the
divergent paths taken by the Treasury market and the tax-exempt market. The
problems in Asia, Russia, and Latin America continued to worsen and are
beginning to spill over to the United States. These events caused the "flight to
quality" to reach unparalleled levels and drove the yield on 30-year Treasuries
to historically low levels, while driving the U.S.
Dollar higher relative to Asian currencies.
GROWTH OF A $10,000 INVESTMENT (CLASS A SHARES)+
Fund (Class A Fund (Class A Lehman
Shares; not Shares; adjusted Brothers
adjusted for for the maximum Municipal Inflation
sales charge) 4.5% sales charge) Bond Index(1) (CPI)(1)
- --------------------------------------------------------------------------------
Inception* 6/7/93 $10,000 $ 9,550
10,050 9,598 $10,000 $10,000
10,083 9,629 10,013 10,049
10,387 9,920 10,221 10,084
Sep 10,511 10,038 10,338 10,119
10,545 10,070 10,357 10,148
10,355 9,889 10,266 10,162
Dec 93 10,686 10,206 10,483 10,176
10,813 10,326 10,602 10,176
10,414 9,945 10,328 10,205
Mar 9,797 9,356 9,907 10,226
9,893 9,448 9,992 10,268
9,970 9,521 10,079 10,275
Jun 9,899 9,454 10,017 10,275
10,092 9,638 10,200 10,303
10,095 9,641 10,236 10,338
Sep 9,960 9,512 10,086 10,373
9,675 9,240 9,906 10,388
9,410 8,987 9,727 10,395
Dec 94 9,780 9,340 9,941 10,430
10,043 9,591 10,225 10,458
10,362 9,896 10,523 10,500
Mar 10,464 9,993 10,644 10,529
10,445 9,975 10,656 10,536
10,702 10,220 10,996 10,550
Jun 10,495 10,022 10,901 10,550
10,587 10,111 11,004 10,592
10,758 10,274 11,144 10,634
Sep 10,815 10,329 11,214 10,669
11,053 10,556 11,377 10,705
11,315 10,806 11,566 10,726
Dec 95 11,498 10,981 11,677 10,747
11,556 11,036 11,766 10,747
11,431 10,917 11,686 10,775
Mar 11,156 10,654 11,536 10,797
11,134 10,633 11,504 10,833
11,147 10,645 11,499 10,825
Jun 11,288 10,780 11,624 10,817
11,430 10,915 11,730 10,881
11,419 10,905 11,728 10,916
Sep 11,597 11,076 11,892 10,973
11,729 11,201 12,026 11,016
11,944 11,407 12,245 11,037
Dec 96 11,891 11,356 12,193 11,043
11,880 11,345 12,216 11,064
12,001 11,461 12,329 11,085
Mar 11,881 11,346 12,165 11,121
11,943 11,405 12,267 11,156
12,103 11,558 12,451 11,177
Jun 12,240 11,689 12,584 11,177
12,647 12,078 12,932 11,213
12,537 11,973 12,811 11,248
Sep 12,688 12,117 12,963 11,276
12,776 12,202 13,046 11,290
12,877 12,298 13,123 11,283
Dec 97 13,080 12,491 13,315 11,296
13,206 12,612 13,452 11,318
13,192 12,598 13,456 11,339
Mar 13,208 12,613 13,468 11,361
13,159 12,567 13,407 11,381
13,342 12,741 13,619 11,402
Jun 13,382 12,780 13,672 11,416
13,437 12,832 13,707 11,429
13,634 13,021 13,918 11,443
13,805 13,183 14,092 11,457
Oct 98 13,683 13,067 14,092 11,470
(1) Index total returns were calculated from 6/30/93 to 10/31/98. The Lehman
Brothers Municipal Bond Index is a total return performance benchmark for
the long-term, investment-grade, tax-exempt bond market. The Consumer Price
Index is a measurement of inflation for all urban consumers (CPI-U). The
index assumes reinvestment of all dividends/distributions, and does not
reflect any asset-based charges for investment management or other expenses.
Past investment performance does not guarantee future performance. The
returns shown for the Fund assume reinvestment of all
dividends/distributions by the shareholder.
During the period noted, the Advisor waived a certain portion of fees and
absorbed other expenses, and credits were allowed by the Custodian. In the
absence of the waiver and absorption of other expenses or credits, yield and
total return would have been lower.
+ The performance of the Class B Shares and Class S Shares was different than
that indicated by the lines shown on the left for the Class A Shares, based on
the differences in sales loads and fees paid by Class B and Class S
shareholders.
- -------------------------------------------------------------------------------
TOTAL RETURNS AS OF 10/31/98
CLASS A SHARES 1 YEAR 5 YEAR* SINCE INCEPTION*
(June 7, 1993)
Fund (not adjusted for sales charge) 7.97% 5.52% 6.14%
Fund (adjusted for the maximum
4.5% sales charge) 3.12% 4.55% 5.24%
Lehman Brothers Municipal Bond
Index(1) 8.01% 6.35% 6.64%
CLASS B SHARES 1 YEAR 5 YEAR* SINCE INCEPTION*
(June 30, 1994)
Fund (not adjusted for contingent
deferred sales charge) 7.17% N/A 7.15%
Fund (adjusted for the maximum
contingent deferred sales charge) 2.17% N/A 6.97%
Lehman Brothers Municipal Bond
Index(1) 8.01% N/A 8.19%
CLASS S SHARES 1 YEAR 5 YEAR* SINCE INCEPTION*
(June 30, 1994)
Fund (not adjusted for contingent
deferred sales charge) 7.17% N/A 7.15%
Fund (adjusted for the maximum
contingent deferred sales charge) 2.17% N/A 6.97%
Lehman Brothers Municipal Bond
Index(1) 8.01% N/A 8.19%
*Annualized
- -------------------------------------------------------------------------------
PORTFOLIO COMPOSITION++
AAA 82%
BBB 9%
Not Rated 9%
- -------------------------------------------------------------------------------
The Federal Reserve cut rates in September by 25 basis points and in a surprise
move in October, again cut 25 basis points from rates. This move caused the U.S.
Dollar to fall and the increased liquidity took pressure off the debt problems
in the Asian, Russian, and Latin American economies.
Because of supply and demand fundamentals, the municipal market did not perform
as well as Treasuries. Historically low interest rates fueled refundings as well
as new borrowings, resulting in a 32% increase in issuance year to date over
1997. Although these lower rates were not quite as attractive to investors
seeking yield, demand did keep pace with supply. In addition to interest from
casualty companies and banks, the attractive ratio of municipal yields to
Treasuries attracted some individuals as well as cross-over buyers (institutions
who typically purchase taxable securities). At the end of the reporting period,
the Bond Buyer 40 Index (an index of 40 actively traded, long-term investment
grade securities) had a yield of 5.13% or 99.6% of long-term Treasuries.
WHAT MARKET CONDITIONS AFFECTED THE FUND'S PERFORMANCE DURING THE PERIOD, AND
WHAT INVESTMENT TECHNIQUES WERE USED TO ADDRESS THOSE CONDITIONS?
The strong supply of municipal bonds benefited us as there were plenty of
quality bond issues on the market. Issuance for the state was up 24% year to
date over the same period in 1997. Of total new volume, insured issuance
accounted for 76% of the state's supply through the end of the second quarter.
This allowed ample opportunity to keep the portfolio well diversified.
At the end of the reporting period, the portfolio had a duration (a measure of a
fund's sensitivity to interest rate movements) of 8.44 years, compared to the
Lehman Brothers Florida Municipal Bond Index duration of 7.95 years. When
interest rates decline, funds with longer durations tend to perform better,
while the opposite is true when interest rates rise.
We did trade very selectively, however, given the existing structure of the
Fund. While we did find some attractive offerings during the period, we
maintained the core position of the Fund.
WERE THERE ANY SHIFTS IN THE FUND'S PORTFOLIO HOLDINGS/SECTORS THAT HAD A
SIGNIFICANT IMPACT ON THE FUND'S PERFORMANCE?
While there were some fluctuations in sector concentration, these did not
significantly impact performance. We increased our exposure to the water/sewer
sector by 6%, and decreased holdings in the airport and retail utility
industries. At the end of the period, 82% of assets were AAA rated versus the
80% minimum+ required by prospectus guidelines. The remaining 18% of assets were
evenly split between BBB-rated and non-rated holdings.++
WHAT IS OUR INTERMEDIATE- AND LONG-TERM OUTLOOK FOR THE FUND?
Assuming that interest rates remain at or near current levels, we do not
anticipate any significant restructuring of the portfolio. The core holdings in
the portfolio have coupons and yields significantly above current market levels.
The Fund is well diversified with exposure to 11 sectors. If the credit spread
between AAA-rated and lower-rated paper were to widen, we would look for
higher-yielding securities to acquire, which would help the income generation of
the Fund. Currently, however, yield spreads are too narrow to make this a
prudent strategy. Our interest rate outlook has shifted to a more neutral
stance. As a result, we will look for new acquisitions that will maintain
duration at its current level or slightly shorten it.
WHAT IS OUR OVERALL ECONOMIC OUTLOOK FOR THE NEXT 12 MONTHS?
We believe the economy will continue to grow at a moderate rate for the
remainder of the year, supported by low interest rates. The housing industry has
already benefited from the sharp decline in interest rates, and other sectors
could follow if consumer and business spending picks up. Looking ahead into next
year, we see the potential for continued economic growth as long as domestic
interest rates remain low and the global financial crisis stabilizes. We believe
the current low inflationary environment in the United States paves the way for
further Fed interest rate cuts if the economy resumes its slowdown.
Unless the taxable market makes a significant move, we expect municipal yields
to remain within their recent trading range. The supply of municipal issues
looks like it will remain strong, possibly setting an annual record for the
industry. The Florida economy remains strong and vibrant, with tourism,
construction and other key sectors on the rise. Our strategy going forward will
be to take advantage of the new issue market, which we expect to be highly
active. We believe the portfolio is positioned to provide the potential for an
attractive level of tax-exempt income without undue risk.
Overseas, we see some promising signs of recovery, including Japan's new bank
reform package, which includes a willingness to let problem banks fail, and
approval of an International Monetary Fund rescue package for Brazil. We will
closely monitor these global and domestic events and their effects on the
performance of the Fund, adjusting the portfolio when appropriate. We remain
committed to providing a high level of tax-exempt income while preserving
shareholders' capital.
Note: A portion of income may be subject to some state and/or local taxes, and
for certain investors, may be subject to the federal alternative minimum tax
(AMT).
++ As rated by Standard & Poors. Allocation percentages are based on total
investment value of the portfolio as of 10/31/98.
<PAGE>
TAX-EXEMPT bond
fund
PORTFOLIO MANAGER:
BRIAN PLACZEK
WM ADVISORS, INC.
Brian Placzek of WM Advisors, Inc. is the portfolio manager for the Tax-Exempt
Bond Fund. Mr. Placzek is a Chartered Financial Analyst and has been with WM
Advisors, Inc. for over seven years.
WHAT WERE THE MOST SIGNIFICANT FACTORS CONTRIBUTING TO THE FUND'S PERFORMANCE
OVER THE PAST 12 MONTHS?
The year began with the economic crises in the emerging countries of Asia:
Thailand, South Korea, Malaysia and Indonesia. Interest rates on Treasury bonds
dropped as investors worldwide flocked to the safe haven of U.S. Treasury bonds.
The concern that the Asian crises would negatively impact domestic economic
growth also pushed rates lower. These concerns intensified as the Asian crises
deepened and began to impact our more developed trading partners such as Japan,
Hong Kong, and China. The flight to quality peaked with the August collapse of
the Russian economy and the government's default on its debt. The Russian
collapse heightened investors concern about the exposure of Western banks,
brokerages and investment funds to any type of risky assets. The fears increased
when the Federal Reserve had to mediate a rescue of Long Term Capital
Management, a multi-billion dollar hedge fund. The Fed again moved to calm the
markets by cutting short-term interest rates in September from 5.50% to 5.25%,
and again in October to 5.00%.
- -------------------------------------------------------------------------------
GROWTH OF A $10,000 INVESTMENT (CLASS A SHARES)+
Fund (Class A Fund (Class A Lehman
Shares; not Shares; adjusted Brothers
adjusted for for the maximum Municipal Inflation
sales charge) 4.5% sales charge) Bond Index(1) (CPI)(1)
- --------------------------------------------------------------------------------
Inception* 11/18/88 $10,000 $ 9,550 $10,000 $10,000
9,947 9,499 9,908 10,034
Dec 88 10,061 9,608 10,009 10,077
10,217 9,757 10,216 10,119
10,151 9,694 10,100 10,162
10,140 9,684 10,076 10,230
10,328 9,863 10,314 10,264
10,474 10,002 10,529 10,272
Jun 10,561 10,086 10,672 10,289
10,665 10,185 10,817 10,341
10,580 10,104 10,711 10,383
10,565 10,090 10,679 10,444
10,641 10,162 10,809 10,511
10,789 10,304 10,999 10,571
Dec 89 10,874 10,385 11,089 10,597
10,770 10,285 11,037 10,622
10,886 10,396 11,135 10,639
10,871 10,382 11,138 10,673
10,746 10,263 11,058 10,724
11,025 10,529 11,299 10,750
Jun 11,148 10,646 11,398 10,767
11,288 10,780 11,566 10,878
11,082 10,584 11,398 10,929
11,128 10,627 11,405 10,990
11,286 10,778 11,612 11,007
11,572 11,051 11,845 11,032
Dec 90 11,604 11,082 11,897 11,092
11,728 11,201 12,057 11,134
11,802 11,271 12,161 11,237
11,833 11,300 12,166 11,331
11,928 11,391 12,328 11,399
12,041 11,499 12,438 11,424
Jun 12,019 11,478 12,425 11,424
12,199 11,650 12,577 11,493
12,347 11,792 12,743 11,510
12,511 11,948 12,909 11,527
12,626 12,057 13,025 11,544
12,620 12,052 13,061 11,579
Dec 91 12,923 12,342 13,342 11,613
12,934 12,352 13,373 11,630
12,905 12,324 13,377 11,664
12,914 12,333 13,382 11,715
13,028 12,442 13,501 11,733
13,179 12,586 13,661 11,767
Jun 13,418 12,814 13,890 11,775
13,946 13,319 14,307 11,793
13,721 13,104 14,167 11,835
13,729 13,111 14,259 11,895
13,538 12,929 14,119 11,912
13,873 13,248 14,372 11,929
Dec 92 14,087 13,453 14,518 11,972
14,244 13,603 14,687 11,997
14,768 14,104 15,218 12,030
14,648 13,989 15,057 12,064
14,785 14,120 15,209 12,106
14,829 14,162 15,294 12,123
Jun 15,157 14,475 15,550 12,115
15,107 14,427 15,570 12,174
15,496 14,798 15,894 12,217
15,711 15,004 16,075 12,259
15,755 15,046 16,105 12,294
15,506 14,808 15,964 12,311
Dec 93 15,853 15,140 16,301 12,328
16,036 15,314 16,486 12,328
15,559 14,859 16,059 12,363
14,850 14,182 15,406 12,389
14,914 14,243 15,537 12,440
15,060 14,383 15,672 12,448
Jun 14,943 14,271 15,576 12,448
15,233 14,547 15,861 12,482
15,260 14,573 15,917 12,524
14,979 14,305 15,683 12,567
14,698 14,037 15,404 12,584
14,395 13,747 15,125 12,593
Dec 94 14,817 14,150 15,458 12,636
15,282 14,594 15,900 12,670
15,784 15,074 16,362 12,721
15,897 15,182 16,551 12,755
15,901 15,185 16,570 12,764
16,456 15,715 17,099 12,781
Jun 16,289 15,556 16,950 12,781
16,420 15,681 17,111 12,832
16,575 15,829 17,329 12,883
16,663 15,913 17,438 12,926
16,948 16,186 17,691 12,968
17,298 16,520 17,984 12,994
Dec 95 17,522 16,733 18,157 13,020
17,614 16,821 18,295 13,020
17,439 16,654 18,171 13,054
17,158 16,386 17,938 13,080
17,051 16,284 17,888 13,123
17,055 16,287 17,881 13,114
Jun 17,211 16,437 18,075 13,105
17,371 16,589 18,240 13,182
17,374 16,592 18,236 13,225
17,581 16,790 18,492 13,293
17,745 16,947 18,700 13,345
18,046 17,234 19,041 13,371
Dec 96 17,964 17,155 18,960 13,379
17,971 17,162 18,996 13,404
18,131 17,315 19,171 13,429
17,883 17,078 18,916 13,472
18,004 17,194 19,075 13,515
18,267 17,445 19,361 13,541
Jun 18,435 17,605 19,567 13,541
19,004 18,149 20,109 13,585
18,747 17,904 19,920 13,627
18,938 18,085 20,157 13,661
19,061 18,203 20,286 13,677
19,160 18,297 20,406 13,669
Dec 97 19,508 18,630 20,704 13,685
19,684 18,798 20,917 13,711
19,635 18,751 20,923 13,737
19,647 18,762 20,942 13,763
19,511 18,633 20,848 13,788
19,794 18,903 21,177 13,813
Jun 19,879 18,984 21,260 13,830
19,893 18,998 21,313 13,846
20,229 19,319 21,641 13,863
20,439 19,520 21,912 13,879
Oct 98 20,401 19,483 21,912 13,896
(1) The Lehman Brothers Municipal Bond Index is unmanaged and includes all
investment grade municipal bond issues. The Consumer Price Index is a
measurement of inflation for all urban consumers (CPI-U). The Index assumes
reinvestment of all dividends/ distributions, and does not reflect any
asset-based charges for investment management or other expenses. Past
investment performance does not guarantee future performance. The returns
shown for the Fund assume reinvestment of all dividends/ distributions by
the shareholder.
+ The performance of the Class B Shares and Class S Shares was different than
that indicated by the lines shown on the left for the Class A Shares, based
on the differences in sales loads and fees paid by Class B and Class S
shareholders.
- -------------------------------------------------------------------------------
TOTAL RETURNS AS OF 10/31/98
CLASS A SHARES 1 YEAR 5 YEAR* 10 YEAR*
Fund (not adjusted for sales charge) 7.03% 5.30% 7.39%
Fund (adjusted for the maximum 4.5%
sales charge) 2.16% 4.35% 6.90%
Lehman Brothers Municipal Bond
Index(1) 8.01% 6.35% 8.16%
CLASS B SHARES 1 YEAR 5 YEAR SINCE INCEPTION*
(March 30, 1994)
Fund (not adjusted for contingent
deferred sales charge) 6.17% N/A 6.13%
Fund (adjusted for the maximum
contingent deferred sales charge) 1.17% N/A 5.96%
Lehman Brothers Municipal Bond Index(1) 8.01% N/A 7.99%
CLASS S SHARES SINCE INCEPTION
(March 23, 1998)
Fund (not adjusted for contingent
deferred sales charge) 3.27%
Fund (adjusted for the maximum
contingent deferred sales charge) -1.73%
*Annualized
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PORTFOLIO composition++
AAA 38%
AA 26%
A 17%
BBB 13%
Other 6%
Bond yields generally fell throughout the year, sometimes declining in a
volatile and dramatic fashion. The drop in yields was concentrated in
intermediate-term assets as five-year Treasury yields fell 149 basis points
(1.49%) from 5.72% to 4.23%, 10-year yields fell 123 basis points to 4.60%, and
30- year Treasury yields fell 100 basis points to 5.15%. Yields in the municipal
market followed suit as they are usually tied to the overall trends in rates,
particularly Treasuries. While municipal yields did not fall as much as Treasury
yields, declines ranged from 31 to 45 basis points. Overall, this caused
positive performance for the Fund as its price moves in the opposite direction
of interest rates, but had a negative impact relative to Treasuries. The weaker
relative performance was primarily due to three factors: the global flight to
quality, overall issuance and supply factors, and the callable nature of
municipal bonds.
WHAT MARKET CONDITIONS AFFECTED THE FUND'S PERFORMANCE DURING THE PERIOD, AND
WHAT INVESTMENT TECHNIQUES WERE USED TO ADDRESS THOSE CONDITIONS?
The decline in interest rates had the biggest impact on the Fund. We maintained
our position in non-callable bonds to take advantage of the decline in rates. In
a market of declining rates, these bonds perform much better than the typical
municipal bond with call features. When the supply of non-callable bonds
diminished or were too expensive, we purchased discount bonds - bonds on which
the coupon is significantly below its yield. In an environment of falling rates
the lower coupon on these bonds provide significant protection against their
call feature. This can provide positive overall total return results to the
Fund.
We maintained a barbell structure in the portfolio, with concentrations at the
long- and short-term maturities. This strategy tends to perform better when the
yield curve flattens (when the difference between long-term and short-term rates
lessen). We also added positions in zero-coupon bonds to the portfolio; these
securities also perform better when the yield curve flattens. With respect to
rating quality of assets, the Fund was negatively impacted by its high quality
holdings during the first half of the reporting period. Lower-quality bonds
(those bonds rated below BBB) outperformed higher-quality bonds as their yields
declined faster. This trend shifted in March as we saw value in and added
positions in non-rated bonds. This is a market where careful research can turn
up some very strong holdings.
WERE THERE ANY SHIFTS IN THE FUND'S PORTFOLIO HOLDINGS/SECTORS THAT HAVE HAD A
SIGNIFICANT IMPACT ON FUND PERFORMANCE?
WM Advisors, Inc. began managing the Fund in March of 1998. Prior to the merger,
the Fund had negligible holdings of BBB-rated securities and performance was
impacted by the underweight in lower-rated bonds. We picked up some of these
BBB-rated bonds through the merger, but we felt that the outperformance of these
positions had run its course and the risk/reward tradeoff did not warrant
building up the position. Our focus on intermediate-term municipal securities
also provided value in both price performance and risk management as these
yields dropped more than long-term municipal yields. Our objective of tax-exempt
income is evident in the 30-day SEC Yield as of October 31, 1998 of 3.97% (3.38%
for B shares). With low inflation, and relative to taxable investments, this
yield provides a quality tax-exempt investment opportunity.
WHAT IS OUR INTERMEDIATE- AND LONG-TERM OUTLOOK FOR THE FUND?
We expect yields to resume their downward trend. Given this outlook, municipal
bonds again may underperform Treasuries. However, over the longer term, as new
issuance subsides and investors acclimate themselves generally to the lower
levels of interest rates, municipal yields should decline and assume a more
historical relationship to Treasury yields. Normally, long-term municipal yields
are approximately 80-85% of long-term Treasury yields; during the recent drop,
municipal yields were actually higher than similar maturity Treasuries. Given
the tax benefit, this provides a unique investment opportunity. Overall, the
decline in municipal yields would be positive for the Fund and its shareholders
as prices move in the opposite direction of interest rates.
WHAT IS OUR OVERALL ECONOMIC OUTLOOK FOR THE NEXT 12 MONTHS?
There still exists the potential for international economic crises to create
market volatility and impact the U.S. economy. There still is pressing concern
regarding Brazil and Latin America - although the IMF has offered a helping
hand, a great deal needs to be accomplished by Brazil to avoid structural
problems. A blow-up in Brazil would impact other Latin American countries.
Furthermore, the U.S. economy and its banks are much more exposed to Latin
America than Asia or Russia.
Generally we expect a continued slowdown in the economy; low inflation and
further eases by the Fed will bring rates down to new levels.
Since August, the markets panicked and drove rates down precipitously -
particularly Treasuries. As the panic dwindled, rates backed up some from the
lows achieved at the very beginning of October. However, while the market was
overreacting to events in Russia and Long Term Capital Management, there is
evidence of an underlying slowing in the economy. In the face of this slowing
and comforted by record low inflation, it is expected that the Federal Reserve
will lower rates further over the next year.
Note: A portion of the Fund's income may be subject to some state and/or local
tax. In addition, exempt-interest dividends from the Fund will generally
increase a corporate shareholder's exposure to AMT liability.
++ As rated by Standard & Poors. Allocation percentages are based on total
investment value of the portfolio as of 10/31/98.
<PAGE>
BOND & STOCK
fund
PORTFOLIO MANAGER:
JEFFREY D. HUFFMAN
WM ADVISORS, INC.
Jeffrey D. Huffman, Senior Portfolio Manager of WM Advisors, Inc. has been the
lead manager for the Bond & Stock Fund since January 1995. Mr. Huffman is a
Chartered Financial Analyst, holds an MBA, and has over 12 years of investment
management experience.
WHAT WERE THE MOST SIGNIFICANT FACTORS CONTRIBUTING TO THE FUND'S PERFORMANCE
OVER THE PAST 12 MONTHS?
Over the course of the past year, the stock market generated strong returns
despite the deterioration of economic and business fundamentals stemming from a
collapse of emerging market economies. This began in Asia and spread into Latin
America and Russia with currencies and markets crashing. Returns of the stock
market were distorted by a small group of highly-priced stocks; a select group
of 20 stocks accounted for nearly all the gain in the S&P 500 index for the
year. If we take a broader look at the overall market, we find that most stocks
have under-performed the index. The Fund was also impacted by its value style of
management over the past 12 months. Value style managers under-performed their
growth style counterparts by approximately 20% for the year. The performance
disparity between growth and value is the largest it has been in the last 30
years.
- -------------------------------------------------------------------------------
GROWTH OF A $10,000 INVESTMENT (CLASS A SHARES)+
Fund
(Class A Lehman
Shares; Brothers
Fund (Class A adjusted Government/ Standard &
Shares; not for the Corporate Poor's 500
adjusted for maximum 5.5% Bond Composite Inflation
sales charge) sales charge) Index(1) Index(1) (CPI)(1)
- --------------------------------------------------------------------------------
Inception* 11/18/88 $10,000 $ 9,450 $10,000 $10,000 $10,000
9,855 9,313 9,887 9,858 10,034
Dec 88 9,913 9,368 9,921 10,036 10,077
10,290 9,724 10,053 10,762 10,119
10,241 9,678 9,976 10,494 10,162
10,301 9,734 10,030 10,742 10,230
10,532 9,953 10,243 11,296 10,264
10,833 10,238 10,495 11,750 10,272
Jun 10,924 10,323 10,837 11,687 10,289
11,351 10,727 11,062 12,736 10,341
11,402 10,775 10,891 12,982 10,383
11,342 10,718 10,939 12,931 10,444
11,229 10,611 11,215 12,630 10,511
11,157 10,543 11,316 12,893 10,571
Dec 89 11,135 10,522 11,333 13,197 10,597
10,764 10,172 11,178 12,311 10,622
10,817 10,222 11,203 12,470 10,639
10,923 10,322 11,204 12,798 10,673
10,654 10,068 11,101 12,482 10,724
11,244 10,626 11,423 13,699 10,750
Jun 11,265 10,646 11,608 13,603 10,767
11,233 10,615 11,752 13,560 10,878
10,581 9,999 11,581 12,335 10,929
10,350 9,781 11,677 11,728 10,990
10,417 9,844 11,833 11,685 11,007
10,901 10,301 12,091 12,438 11,032
Dec 90 11,144 10,531 12,273 12,778 11,092
11,524 10,890 12,411 13,343 11,134
12,083 11,418 12,517 14,298 11,237
12,251 11,577 12,604 14,639 11,331
12,432 11,748 12,749 14,680 11,399
12,726 12,026 12,809 15,308 11,424
Jun 12,488 11,801 12,794 14,608 11,424
12,625 11,931 12,956 15,292 11,493
12,808 12,104 13,254 15,652 11,510
12,901 12,191 13,531 15,395 11,527
12,958 12,246 13,651 15,601 11,544
12,750 12,049 13,788 14,971 11,579
Dec 91 13,568 12,822 14,252 16,682 11,613
13,519 12,775 14,041 16,372 11,630
13,629 12,880 14,116 16,581 11,664
13,573 12,826 14,038 16,256 11,715
13,883 13,119 14,122 16,729 11,733
13,957 13,190 14,396 16,820 11,767
Jun 13,946 13,179 14,608 16,576 11,775
14,384 13,593 14,982 17,244 11,793
14,309 13,522 15,115 16,895 11,835
14,473 13,677 15,321 17,090 11,895
14,270 13,486 15,086 17,151 11,912
14,600 13,797 15,073 17,729 11,929
Dec 92 14,910 14,090 15,332 17,962 11,972
15,040 14,212 15,666 18,093 11,997
15,233 14,396 15,992 18,337 12,030
15,518 14,664 16,046 18,731 12,064
15,387 14,541 16,170 18,272 12,106
15,544 14,689 16,162 18,766 12,123
Jun 15,597 14,739 16,529 18,828 12,115
15,624 14,764 16,635 18,739 12,174
16,112 15,225 17,017 19,453 12,217
16,065 15,182 17,077 19,309 12,259
16,265 15,370 17,147 19,701 12,294
16,039 15,157 16,953 19,516 12,311
Dec 93 16,292 15,396 17,028 19,756 12,328
16,754 15,833 17,283 20,418 12,328
16,360 15,460 16,906 19,866 12,363
15,716 14,852 16,492 19,002 12,389
15,812 14,942 16,355 19,249 12,440
15,894 15,020 16,326 19,563 12,448
Jun 15,592 14,735 16,288 19,080 12,448
15,994 15,114 16,614 19,711 12,482
16,395 15,494 16,621 20,514 12,524
16,049 15,166 16,370 20,019 12,567
16,119 15,232 16,352 20,478 12,584
15,769 14,902 16,322 19,726 12,593
Dec 94 15,945 15,068 16,430 20,014 12,636
16,216 15,324 16,745 20,534 12,670
16,701 15,782 17,134 21,331 12,721
17,107 16,166 17,249 21,963 12,755
17,539 16,574 17,488 22,602 12,764
18,143 17,146 18,221 23,495 12,781
Jun 18,510 17,492 18,367 24,047 12,781
18,888 17,849 18,295 24,847 12,832
19,077 18,028 18,529 24,914 12,883
19,681 18,599 18,718 25,958 12,926
19,754 18,668 18,994 25,868 12,968
20,355 19,236 19,307 27,006 12,994
Dec 95 20,917 19,766 19,591 27,505 13,020
21,508 20,325 19,712 28,451 13,020
21,417 20,239 19,294 28,725 13,054
21,453 20,273 19,132 29,000 13,080
21,591 20,403 19,000 29,427 13,123
21,911 20,706 18,968 30,186 13,114
Jun 22,042 20,830 19,222 30,310 13,105
21,472 20,291 19,266 28,961 13,182
21,765 20,568 19,220 29,575 13,225
22,536 21,297 19,562 31,237 13,293
22,847 21,590 20,018 32,093 13,345
23,888 22,574 20,386 34,529 13,371
Dec 96 23,761 22,454 20,160 33,852 13,379
24,347 23,007 20,184 35,954 13,404
24,614 23,260 20,227 36,245 13,429
24,175 22,845 19,986 34,738 13,472
24,613 23,259 20,278 36,811 13,515
25,709 24,295 20,466 39,072 13,541
Jun 26,483 25,026 20,712 40,814 13,541
27,774 26,246 21,346 44,055 13,585
26,874 25,396 21,107 41,605 13,627
27,961 26,423 21,438 43,885 13,661
27,601 26,083 21,781 42,420 13,677
28,217 26,665 21,897 44,384 13,669
Dec 97 28,488 26,921 22,126 45,147 13,685
28,488 26,921 22,438 45,648 13,711
29,502 27,879 22,394 48,939 13,737
30,098 28,443 22,463 51,445 13,763
30,300 28,633 22,575 51,965 13,788
29,815 28,175 22,817 51,071 13,813
Jun 30,041 28,389 23,050 53,144 13,830
28,843 27,256 23,068 52,581 13,846
25,855 24,433 23,518 44,978 13,863
26,992 25,508 24,190 47,861 13,879
Oct 98 28,712 27,133 24,019 51,751 13,896
(1) The Standard & Poor's 500 Composite Index (S&P 500) represents an unmanaged
weighted index of 500 companies. The Lehman Brothers Government/Corporate
Bond Index represents all U.S. government and corporate bonds. The Consumer
Price Index is a measurement of inflation for all urban consumers (CPI-U).
The indices assume reinvestment of all dividends/distributions, and do not
reflect any asset-based charges for investment management or other expenses.
Past performance does not guarantee future performance. The returns shown
for the Fund assume reinvestment of all dividends/ distributions by the
shareholder.
+ The performance of the Class B Shares was different than that indicated by
the lines shown on the left for the Class A Shares, based on the difference
in sales loads and fees paid by Class B shareholders.
- --------------------------------------------------------------------------------
TOTAL RETURNS AS OF 10/31/98
CLASS A SHARES 1 YEAR 5 YEAR* 10 YEAR*
Fund (not adjusted for sales charge) 4.03% 12.04% 11.12%
Fund (adjusted for the maximum
5.5% sales charge) -1.70% 10.78% 10.50%
Lehman Brothers Government/
Corporate Bond Index(1) 10.27% 6.97% 9.16%
Standard & Poor's 500 Composite Index1 22.00% 21.31% 17.87%
CLASS B SHARES 1 YEAR 5 YEAR SINCE INCEPTION*
(March 30, 1994)
Fund (not adjusted for sales charge) 3.12% N/A 13.08%
Fund (adjusted for the maximum
contingent deferred sales charge) -1.22% N/A 12.94%
Lehman Brothers Government/Corporate
Bond Index(1) 10.27% N/A 8.55%
Standard & Poor's 500 Composite Index1 22.00% N/A 24.43%
CLASS S SHARES SINCE INCEPTION
(May 6, 1998)
Fund (not adjusted for contingent
deferred sales charge) -6.25%
Fund (adjusted for the maximum
contingent deferred sales charge) -10.87%
*Annualized
- --------------------------------------------------------------------------------
PORTFOLIO composition++
Common Stocks 57%
Treasuries & Agencies 14%
Corporate Bonds 10%
Convertible Bonds &
Preferred Stocks 7%
Mortgage-backed 6%
REITs 5%
Other 1%
We believe that, over time, this disparity between growth and value will close
and therefore maintain our value discipline. This focus has the potential to
reward shareholders without undue risk.
WHAT MARKET CONDITIONS AFFECTED THE FUND'S PERFORMANCE DURING THE PERIOD, AND
WHAT INVESTMENT TECHNIQUES WERE USED TO ADDRESS THOSE CONDITIONS?
Two basic market factors produced disappointing investment results: the
underperformance of the value style and the high concentration of results in the
largest firms. We overemphasized the value component of the Fund, which led us
to hold lower-quality, lower-priced securities. Additionally, we did not focus
assets on that small group of higher priced stocks that led the market over the
course of the past year. With the summer's decline in prices, we have
implemented portfolio changes to take advantage of current market conditions.
The decline in equity prices in August and September allowed us to purchase
higher quality assets at prices we feel represent excellent value. For example,
we added equity positions in Pepsico, Xerox, Mattel, T. Rowe Price, and Carnival
Cruise Lines. At the same time, we eliminated several names from the portfolio
where fundamental prospects had weakened. The net result was an increase in the
overall quality of the portfolio without materially altering its valuation
characteristics. We were able to add strong positions to the Fund without
increasing the overall portfolio risk.
WERE THERE ANY SHIFTS IN THE FUND'S PORTFOLIO HOLDINGS THAT HAVE HAD A
SIGNIFICANT IMPACT ON FUND PERFORMANCE?
Our asset allocation remains largely unchanged from earlier in the year. We
continue to favor equity investments, with approximately two-thirds of the
portfolio invested in common stocks, real estate investment trusts, and
convertible securities. These investments offer higher potential for capital
growth, yet do increase the potential for price volatility. This was evident as
we look at short-term results, but equity investments provide the potential for
higher long-term growth. To add stability to the Fund and to generate current
income, we allocate a percentage of assets in fixed-income securities
concentrated in high-quality U.S. Treasury issues, and also higher-yielding
corporate bonds, and mortgage-backed securities. This serves to mitigate risk as
well as provide both income and price performance during interest rate declines.
The fixed-income portion of assets provided positive results during the decline
in equity markets. This demonstrates the benefits of a diversified portfolio in
managing overall investment risk. Despite the recent volatility in the market,
we think the low inflation environment provides a positive backdrop that
continues to favor the long-term ownership of both stocks and bonds.
WHAT IS OUR INTERMEDIATE- AND LONG-TERM OUTLOOK FOR THE FUND?
Our outlook for the Fund is positive. The economic backdrop to the financial
markets appears to be improving as emerging markets stabilize, Japan enacts
policy to reform their financial sector, and the Federal Reserve is
accommodative. Our strategy continues to emphasize quality and value. For our
equity investments, we search for businesses that generate high rates of return
on their capital, that have good growth prospects, and that trade in the market
at levels which represent a discount to the underlying value of the company. In
the fixed-income portion of the Fund, we seek out a competitive level of current
income consistent with maintaining a high level of overall quality in the
portfolio. Our overriding objective continues to be that of maintaining a
broadly diversified portfolio of quality investments that have the potential to
reward Fund shareholders without taking unnecessary risk.
WHAT IS OUR OVERALL ECONOMIC OUTLOOK FOR THE NEXT 12 MONTHS?
We believe that there will be an economic slowdown stemming from global unrest,
and we forecast slower domestic growth, yet we do not foresee a recession. We do
not see inflationary pressures on the horizon and, therefore, with slow growth
and the absence of price increases, interest rates should continue to decline.
It appears that emerging markets worldwide may stabilize, but at relatively weak
levels. The effects on financial markets will be mixed with weaker corporate
profits potentially inciting continued stock market volatility with the
potential for lower interest rates providing a positive outlook for fixed-income
investments.
++ Allocation percentages are based on total investment value of the portfolio
as of 10/31/98. Differences from financial statements are a result of a
consolidation of industries or sectors.
<PAGE>
GROWTH & INCOME
fund
PORTFOLIO MANAGER:
WM ADVISORS, INC.
The Growth & Income Fund is managed by a team of investment professionals at WM
Advisors, Inc. The Fund was formerly managed by an employee of the firm.
WHAT WERE THE MOST SIGNIFICANT FACTORS CONTRIBUTING TO THE FUND'S PERFORMANCE
OVER THE PAST 12 MONTHS?
The period began with strong results as, although volatile, large-cap stocks
advanced to new highs. The positive performance lasted until July when markets
began to slide in the midst of global turmoil and uncertainty. August proved to
be a very negative month, with the S&P 500 dropping nearly 15%. The period
closed on a positive note as accommodative monetary policy aided in quelling
some of the unrest worldwide. During the period, drug holdings contributed
positively toward overall performance as many pharmaceutical firms, such as
Warner Lambert, led the market. The Fund was negatively impacted by its lack of
retail exposure as the consumer continued to spend, propelling the economy
forward. Additionally, performance of the overall market was concentrated in the
largest, most-liquid, mega-caps of the S&P 500. Small stocks again failed to
participate in the equity rally for the third year in a row. Style factors also
played a significant role in Fund performance as the growth style advanced three
times that of the value style employed by the Fund. Overall, while the Fund
performance was positive, it significantly underperformed the S&P 500 for the
12-month period.
- --------------------------------------------------------------------------------
GROWTH OF A $10,000 INVESTMENT (CLASS A SHARES)+
Fund (Class A Fund (Class A Standard &
Shares; not Shares; adjusted Poor's 500
adjusted for for the maximum Composite Inflation
sales charge) 5.5% sales charge) Index(1) (CPI)(1)
- --------------------------------------------------------------------------------
Inception* 11/18/88 $10,000 $ 9,450 $10,000 $10,000
9,811 9,271 9,858 10,034
Dec 88 9,928 9,382 10,036 10,077
10,447 9,873 10,762 10,119
10,420 9,847 10,494 10,162
10,502 9,924 10,742 10,230
10,768 10,176 11,296 10,264
11,079 10,470 11,750 10,272
Jun 11,006 10,401 11,687 10,289
11,541 10,906 12,736 10,341
11,735 11,089 12,982 10,383
11,597 10,959 12,931 10,444
11,300 10,679 12,630 10,511
11,124 10,512 12,893 10,571
Dec 89 11,130 10,518 13,197 10,597
10,598 10,015 12,311 10,622
10,698 10,110 12,470 10,639
10,849 10,252 12,798 10,673
10,433 9,859 12,482 10,724
11,213 10,597 13,699 10,750
Jun 11,121 10,509 13,603 10,767
10,978 10,374 13,560 10,878
9,977 9,428 12,335 10,929
9,484 8,962 11,728 10,990
9,463 8,943 11,685 11,007
10,134 9,576 12,438 11,032
Dec 90 10,464 9,889 12,778 11,092
11,025 10,419 13,343 11,134
11,825 11,175 14,298 11,237
12,075 11,411 14,639 11,331
12,232 11,559 14,680 11,399
12,661 11,965 15,308 11,424
Jun 12,304 11,628 14,608 11,424
12,515 11,827 15,292 11,493
12,641 11,946 15,652 11,510
12,599 11,906 15,395 11,527
12,557 11,866 15,601 11,544
12,155 11,486 14,971 11,579
Dec 91 13,330 12,597 16,682 11,613
13,375 12,640 16,372 11,630
13,590 12,842 16,581 11,664
13,487 12,745 16,256 11,715
13,862 13,099 16,729 11,733
13,896 13,131 16,820 11,767
Jun 13,681 12,928 16,576 11,775
14,160 13,381 17,244 11,793
13,829 13,068 16,895 11,835
14,070 13,296 17,090 11,895
13,806 13,046 17,151 11,912
14,414 13,622 17,729 11,929
Dec 92 14,796 13,982 17,962 11,972
14,867 14,049 18,093 11,997
14,808 13,993 18,337 12,030
15,169 14,334 18,731 12,064
14,883 14,065 18,272 12,106
15,204 14,368 18,766 12,123
Jun 15,104 14,273 18,828 12,115
15,020 14,194 18,739 12,174
15,426 14,577 19,453 12,217
15,163 14,329 19,309 12,259
15,331 14,488 19,701 12,294
15,235 14,397 19,516 12,311
Dec 93 15,802 14,933 19,756 12,328
16,514 15,606 20,418 12,328
16,255 15,361 19,866 12,363
15,612 14,753 19,002 12,389
15,794 14,925 19,249 12,440
16,002 15,121 19,563 12,448
Jun 15,670 14,808 19,080 12,448
16,179 15,289 19,711 12,482
16,831 15,905 20,514 12,524
16,459 15,554 20,019 12,567
16,642 15,727 20,478 12,584
16,158 15,269 19,726 12,593
Dec 94 16,207 15,316 20,014 12,636
16,466 15,560 20,534 12,670
17,023 16,087 21,331 12,721
17,519 16,555 21,963 12,755
17,942 16,955 22,602 12,764
18,392 17,381 23,495 12,781
Jun 18,754 17,722 24,047 12,781
19,425 18,356 24,847 12,832
19,575 18,499 24,914 12,883
20,240 19,126 25,958 12,926
20,116 19,010 25,868 12,968
20,940 19,788 27,006 12,994
Dec 95 21,576 20,389 27,505 13,020
22,190 20,970 28,451 13,020
22,491 21,254 28,725 13,054
22,704 21,456 29,000 13,080
23,235 21,957 29,427 13,123
23,736 22,431 30,186 13,114
Jun 23,765 22,458 30,310 13,105
22,573 21,331 28,961 13,182
23,248 21,969 29,575 13,225
24,592 23,239 31,237 13,293
24,866 23,498 32,093 13,345
26,681 25,213 34,529 13,371
Dec 96 26,382 24,931 33,852 13,379
27,635 26,115 35,954 13,404
27,789 26,261 36,245 13,429
26,828 25,353 34,738 13,472
27,820 26,290 36,811 13,515
29,665 28,033 39,072 13,541
Jun 31,183 29,468 40,814 13,541
33,528 31,684 44,055 13,585
32,037 30,275 41,605 13,627
33,846 31,985 43,885 13,661
32,634 30,839 42,420 13,677
33,629 31,780 44,384 13,669
Dec 97 34,171 32,292 45,147 13,685
33,600 31,752 45,648 13,711
36,171 34,181 48,939 13,737
37,509 35,446 51,445 13,763
37,667 35,595 51,965 13,788
36,687 34,669 51,071 13,813
Jun 37,696 35,623 53,144 13,830
36,188 34,198 52,581 13,846
29,812 28,172 44,978 13,863
32,221 30,449 47,861 13,879
Oct 98 35,043 33,116 51,751 13,896
(1) The Standard & Poor's 500 Composite Index (S&P 500) represents an unmanaged
weighted index of 500 companies. The Consumer Price Index is a measurement
of inflation for all urban consumers (CPI-U). The index assumes reinvestment
of all dividends/distributions, and does not reflect any asset-based charges
for investment management or other expenses. Past investment performance
does not guarantee future performance. The returns shown for the Fund assume
reinvestment of all dividends/distributions by the shareholder.
+ The performance of the Class B Shares and Class S Shares was different than
that indicated by the lines shown on the left for the Class A Shares, based
on the differences in sales loads and fees paid by Class B and Class S
shareholders.
- --------------------------------------------------------------------------------
TOTAL RETURNS AS OF 10/31/98
CLASS A SHARES 1 YEAR 5 YEAR* 10 YEAR*
Fund (not adjusted for sales charge) 7.38% 17.99% 13.37%
Fund (adjusted for the maximum 5.5%
sales charge) 1.48% 16.66% 12.27%
Standard & Poor's 500 Composite Index(1) 22.00% 21.31% 17.87%
CLASS B SHARES 1 YEAR 5 YEAR SINCE INCEPTION*
(March 30, 1994)
Fund (not adjusted for sales charge) 6.50% N/A 18.33%
Fund (adjusted for the maximum
contingent deferred sales charge) 1.86% N/A 18.21%
Standard & Poor's 500 Composite Index(1) 22.00% N/A 24.43%
CLASS S SHARES SINCE INCEPTION
(March 23, 1998)
Fund (not adjusted for contingent
deferred sales charge) -6.83%
Fund (adjusted for the maximum
contingent deferred sales charge) -11.49%
*Annualized
- --------------------------------------------------------------------------------
PORTFOLIO composition++
Other 15%
Consumer Stocks 14%
Computer Stocks 13%
Health Care 13%
Capital Goods 7%
Bank/Savings & Loan 7%
Financial Services 7%
Oil & Gas 6%
Utilities/Telecom 6%
Electronics 5%
Media 4%
Preferred Stock 3%
- --------------------------------------------------------------------------------
WHAT MARKET CONDITIONS AFFECTED THE FUND'S PERFORMANCE DURING THE PERIOD, AND
WHAT INVESTMENT TECHNIQUES WERE USED TO ADDRESS THOSE CONDITIONS?
What could have provided a lift to the Fund did not, as a number of mergers did
not occur or fell apart in process. Management turned down high offers with Fund
holdings such as Humana, Zurn, Mellon Bank, and Pennzoil. Also, a tougher stance
by the Justice Department on the Northrop merger hurt performance as the stock
fell when the merger was denied. Although many of the stocks in the portfolio
were out of favor relative to the largest positions in the S&P 500, we continue
to believe that we own many good businesses that are trading at attractive
prices. We utilized the volatility in the markets to buy positions in companies
whose prices had been pushed down to levels under our overall valuation of the
firm. The short-term weakness in financial markets is a reminder to maintain a
long-term focus to equity investment.
WERE THERE ANY SHIFTS IN THE FUND'S PORTFOLIO HOLDINGS/SECTORS THAT HAVE HAD A
SIGNIFICANT IMPACT ON FUND PERFORMANCE?
An environment of slow growth and low inflation helped our overweighted position
in foods and drugs as these sectors provided relative performance strength.
Strong domestic economic growth was good for retail and consumer cyclical
stocks, but we were underweighted in these sectors. A holding that provided a
boost to the Fund was Viacom, which produced The Titanic, a monstrous hit
worldwide that helped send the stock up over 50%. We will maintain our focus of
finding strong companies at good valuations. Although value investing has
underperformed growth recently, we feel that our commitment to this approach has
the opportunity to reward shareholders over the long-term.
WHAT IS OUR INTERMEDIATE- AND LONG-TERM OUTLOOK FOR THE FUND?
Our outlook is very positive, as interest rate easing by the Federal Reserve is
quite beneficial for stocks. We think that small- and mid-cap stocks are
undervalued and oversold, and the Fund's positions in these firms could provide
strong relative performance in the coming months. We have over 30% in mid- and
small-company stocks, making the portfolio 20% smaller than S&P 500. Lower
interest rates are especially good for these holdings. We are finding great
companies that are on sale: Disney, Merrill Lynch, and Sony for example, were
all hampered by the summer's sell-off and prices dropped to very attractive
levels. Another positive demographic factor is the currently low global savings
rate. We feel that as the population ages, this rate will increase and more
money will head into investments.
WHAT IS OUR OVERALL ECONOMIC OUTLOOK FOR THE NEXT 12 MONTHS?
We expect the Fed easing of interest rates that has taken place recently to
improve the outlook for the U.S. economy by the end of 1999. We also see ahead a
bottom in the Asian economies and currencies as Japan cuts its taxes to the
consumer. There does not seem to be any indication of global inflationary
pressures, and we forecast inflation to remain under control throughout 1999. We
expect slow growth and low inflation in 1999, a scenario that is positive for
financial assets.
++ Allocation percentages are based on total investment value of the portfolio
as of 10/31/98. Differences from financial statements are a result of a
consolidation of industries or sectors.
<PAGE>
GROWTH fund
PORTFOLIO MANAGER:
WARREN LAMMERT
JANUS CAPITAL CORPORATION
Mr. Lammert is a graduate of Yale University and the London School of Economics.
He first joined Janus in January 1987 and has been portfolio manager of the
Growth Fund since its inception. He is a Chartered Financial Analyst.
WHAT WERE THE MOST SIGNIFICANT FACTORS CONTRIBUTING TO THE FUND'S PERFORMANCE
OVER THE PAST 12 MONTHS?
The past twelve months were characterized by extreme volatility stemming from
worldwide financial unrest. In the last few months of 1997, global stock markets
fluctuated as investors tried to assess potential ramifications of the downturn
in some of the Pacific Rim economies. However, at the beginning of 1998, markets
resumed their trend upward after investors turned their attention to strong U.S.
corporate profits and the healthy domestic economy. In the spring, the SEC
enacted regulation effectively tightening the spreads on over-the-counter
stocks. As the profitability evaporated for market makers, small- and
mid-capitalization stocks started to slide. However, large domestic corporations
continued their ascent, but the rally narrowed.
In the summer, uncertainty dominated. Investors were already becoming
increasingly concerned over the impact that the Asian slowdown might have on
global economies, so when Russia defaulted and the ruble collapsed, all of the
worst-case scenarios that had been discarded in the spring were suddenly
revitalized. Investors sold securities indiscriminately. Any issue, regardless
of how attractive, was sold in favor of the relative safety of U.S. Treasuries.
This initial downturn was later amplified in August by the broad based selling
of financial services stocks as investors worried about the potential losses
that these firms might have suffered from Russian and hedge fund exposure.
- --------------------------------------------------------------------------------
GROWTH OF A $10,000 INVESTMENT (CLASS A SHARES)+
Fund (Class A Fund (Class A Standard &
Shares; not Shares; adjusted Poor's 500
adjusted for for the maximum Composite Inflation
sales charge) 5.5% sales charge) Index(1) (CPI)(1)
- --------------------------------------------------------------------------------
Inception* 4/5/93 $10,000 $ 9,450
10,020 9,469 $10,000 $10,000
10,550 9,970 10,267 10,014
Jun 10,720 10,130 10,297 10,007
10,480 9,904 10,255 10,056
10,900 10,301 10,644 10,091
Sep 11,250 10,631 10,560 10,127
11,500 10,868 10,778 10,155
11,300 10,679 10,676 10,169
Dec 93 11,680 11,038 10,805 10,183
12,160 11,491 11,172 10,183
12,040 11,378 10,869 10,212
Mar 11,740 11,094 10,395 10,233
11,630 10,990 10,529 10,275
11,190 10,575 10,701 10,282
Jun 10,730 10,140 10,439 10,282
11,150 10,537 10,782 10,310
11,830 11,179 11,223 10,345
Sep 11,870 11,217 10,949 10,380
12,200 11,529 11,194 10,395
11,750 11,104 10,787 10,402
Dec 94 11,756 11,109 10,947 10,438
11,886 11,232 11,230 10,466
12,257 11,583 11,668 10,508
Mar 12,507 11,819 12,011 10,536
12,938 12,226 12,365 10,543
13,428 12,690 12,858 10,557
Jun 14,199 13,418 13,156 10,557
15,121 14,289 13,593 10,599
15,231 14,393 13,627 10,642
Sep 15,681 14,819 14,201 10,677
15,261 14,421 14,151 10,712
15,942 15,065 14,771 10,734
Dec 95 16,018 15,137 15,056 10,755
16,393 15,491 15,568 10,755
17,187 16,242 15,712 10,783
Mar 17,312 16,360 15,863 10,805
18,243 17,240 16,096 10,840
18,606 17,583 16,512 10,833
Jun 17,812 16,832 16,575 10,825
16,563 15,652 15,842 10,889
17,664 16,693 16,176 10,924
Sep 18,822 17,787 17,087 10,981
18,197 17,196 17,558 11,023
18,856 17,819 18,884 11,044
Dec 96 18,728 17,698 18,510 11,051
19,642 18,561 19,666 11,072
18,768 17,735 19,820 11,093
Mar 17,535 16,570 19,007 11,128
17,799 16,820 20,141 11,164
19,019 17,973 21,367 11,185
Jun 19,747 18,661 22,323 11,185
21,429 20,251 24,096 11,221
20,277 19,161 22,756 11,256
Sep 21,469 20,288 24,003 11,284
20,872 19,724 23,201 11,298
20,780 19,637 24,276 11,291
Dec 97 20,558 19,427 24,693 11,304
21,195 20,029 24,967 11,326
23,179 21,904 26,767 11,347
Mar 24,294 22,958 28,138 11,369
25,207 23,821 28,422 11,389
24,438 23,094 27,933 11,410
Jun 26,743 25,272 29,067 11,424
26,628 25,163 28,759 11,437
22,080 20,866 24,601 11,451
24,745 23,384 26,177 11,465
Oct 98 25,557 24,151 28,305 11,478
(1) Index total returns were calculated from 4/30/93 to 10/31/98. The Standard &
Poor's 500 Composite Index (S&P 500) represents an unmanaged weighted index
of 500 industrial, transportation, utility, and financial companies widely
regarded by investors as representative of the stock market. The Consumer
Price Index is a measurement of inflation for all urban consumers (CPI-U).
The index assumes reinvestment of all dividends/distributions, and does not
reflect any asset-based charges for investment management or other expenses.
Past investment performance does not guarantee future performance. The
returns shown for the Fund assume reinvestment of all
dividends/distributions by the shareholder. During the period noted, the
Advisor waived a portion of its management fees and absorbed other expenses,
and credits were allowed by the Custodian. In the absence of the waivers and
absorption of other expenses or credits, yield and total return would have
been lower.
+ The performance of the Class B Shares and Class S Shares was different than
that indicated by the lines shown on the left for the Class A Shares, based
on the differences in sales loads and fees paid by Class B and Class S
shareholders.
- -------------------------------------------------------------------------------
TOTAL RETURNS AS OF 10/31/98
CLASS A SHARES 1 YEAR 5 YEAR* SINCE INCEPTION*
(April 5, 1993)
Fund (not adjusted for contingent
deferred sales charge) 22.43% 17.32% 18.34%
Fund (adjusted for the maximum 5.5%
sales charge) 15.68% 16.00% 17.15%
Standard & Poor's 500 Composite Index(1) 22.00% 21.30% 20.83%
CLASS B SHARES 1 YEAR 5 YEAR* SINCE INCEPTION*
(June 30, 1994)
Fund (not adjusted for contingent
deferred sales charge) 21.56% N/A 21.27%
Fund (adjusted for the maximum
contingent deferred sales charge) 16.56% N/A 21.15%
Standard & Poor's 500 Composite Index(1) 22.00% N/A 25.88%
CLASS S SHARES 1 YEAR 5 YEAR* SINCE INCEPTION*
(June 30, 1994)
Fund (not adjusted for contingent
deferred sales charge) 21.47% N/A 21.26%
Fund (adjusted for the maximum
contingent deferred sales charge) 16.47% N/A 21.14%
Standard & Poor's 500 Composite
Index(1) 22.00% N/A 25.88%
*Annualized
- --------------------------------------------------------------------------------
PORTFOLIO composition++
Health Care 18%
Utilities/Telecom 18%
Computer Stocks 17%
Media 13%
Other 6%
Elec/Semiconductors 6%
Capital Goods 5%
Bank/Savings & Loan 5%
U.S. Government Agency 5%
Cash Equivalent 4%
Business Services 3%
- --------------------------------------------------------------------------------
In September and October, the Federal Reserve decided that the potential
negative impact of the Asian contagion on the domestic economy outweighed the
specter of inflation. As a result, the Fed lowered rates. This served to bolster
investor and consumer confidence, and stocks rallied, ending the year on an
up-note.
WHAT MARKET CONDITIONS AFFECTED THE FUND'S PERFORMANCE DURING THE PERIOD, AND
WHAT INVESTMENT TECHNIQUES WERE USED TO ADDRESS THOSE CONDITIONS?
The volatility at the end of 1997, though it lacked direction, offered the
opportunity to increase our holdings in some of the strongest technology
companies such as Microsoft and Dell Computer. These companies supported returns
early in the year, and withstood much of the selling in the summer.
As "bottom-up" investors, we try to zero in on individual company fundamentals.
If the events capturing the market's attention are legitimately impacting our
holdings' fundamentals, then we remain sensitive to those developments. However,
more often than not, as investors get caught up in the emotion of the
short-term, they sell great companies that are not directly impacted by the
events of the broader market. When this happens, we revisit the company
fundamentals in an effort to determine whether or not the story has actually
changed. If it has not, we use this broad market myopia to build or increase our
positions.
WERE THERE ANY SHIFTS IN THE FUND'S HOLDINGS/SECTORS THAT HAVE HAD A SIGNIFICANT
IMPACT ON PERFORMANCE?
Several of our holdings performed well in the period. In addition to Microsoft
and Dell, America Online had a stellar year as its subscription rates soared.
More importantly, however, is that the company's reputation as a mainstream
advertising medium is gaining momentum.
Our cable positions, such as TCI and Time Warner, also had a strong showing. The
cable industry is evolving from a business that is historically capital
intensive to one that generates strong, free cash flows. For the better part of
a decade, many of these cable companies have been perpetually upgrading their
pipelines. However, many companies are nearing the end of these system upgrades,
which should significantly decrease costs. In addition, several of these cable
companies are expanding their range of services. Many are offering telephony and
high-speed data transfer at significantly lower costs than offered by
traditional service providers. This combination of lower costs and potentially
higher revenues hints of exciting things for selected players in this industry.
We also saw strong results in a number of our pharmaceutical holdings. Our
positions in Pfizer and Warner-Lambert, for example, continued to enjoy strong
results from their new product launches. However, we also added IMS Health, a
play on the periphery of the growing pharmaceutical industry. IMS Health
provides information on prescription drug sales to the drug manufacturers. We
believe that the company's earnings will behave with a high degree of
correlation with those of the broader pharmaceutical industry.
Despite our strong performance, there were a few holdings that disappointed.
Schlumberger, the oil-services company, suffered as oil prices fell
dramatically. Additionally, many of our financial services holdings had a rough
summer stemming from the Russian credit debacle.
WHAT IS OUR INTERMEDIATE- AND LONG-TERM OUTLOOK FOR THE FUND?
We believe the market is transforming into a true "stockpicker's market." This
transformation is the result of the slowing domestic economy. Considering the
vigor with which Americans consumed during the latest expansion, in order for a
company to increase their business, they merely had to open their doors.
However, this trend seems to be ending. As the economy slows, companies will
have to find more creative ways to build their businesses. As a result,
investors favoring a more selective discipline should be rewarded. To these
ends, the portfolio holds a number of strong companies led by visionary and
effective management teams. Our hope is that if the economy turns choppy, as
those second-tier businesses falter, the companies with unique niches and
dominant franchises will continue to flourish and will be appropriately valued
by the market.
WHAT IS OUR OVERALL ECONOMIC OUTLOOK FOR THE NEXT 12 MONTHS?
Despite the market's recent run-up and the vigilance of the Federal Reserve,
although subdued, uncertainty remains. We are eager to see whether or not the
Japanese government's bank reformation package will ignite that stagnant
economy. The same holds true for the Brazilian austerity package. Moreover, it
will be interesting to see how the recent Fed rate cuts impact the domestic and
the global economy. That is not to say that we are skeptical about the potency
of these measures, but rather, we are simply curious.
Furthermore, it is difficult to determine which force will ultimately prevail:
the industry of the American consumer or the fear spreading through the emerging
markets. Considering all of these variables, it is difficult to speculate on the
direction of the economy over any meaningful duration of time. We do feel,
however, that with our bottom-up approach to stock selection, the portfolio will
be well-positioned to withstand any market.
++ Allocation percentages are based on total investment value of the portfolio
as of 10/31/98. Differences from financial statements are a result of a
consolidation of industries or sectors.
<PAGE>
NORTHWEST
fund
PORTFOLIO MANAGER:
DAVID SIMPSON
WM ADVISORS, INC.
David Simpson, Senior Portfolio Manager of WM Advisors, Inc., has managed the
Northwest Fund since March 1993. He is a Chartered Financial Analyst, holds an
MBA, and has over 11 years of continuous investment experience.
WHAT WERE THE MOST SIGNIFICANT FACTORS CONTRIBUTING TO THE FUND'S PERFORMANCE
OVER THE PAST 12 MONTHS?
Equity markets were extremely volatile during the period; the volatility was
magnified in the small-capitalization area where the Fund invests. Although
small-caps underperformed large-cap holdings early in the period, performance
was positive until May of 1998, when small-company stocks began to contract,
eventually dropping nearly 40% in four months (as measured by the Russell 2000
Index). The Fund bounced back in September and October as equities generally
rose around the globe. Over the period, the Fund was particularly impacted by
its high concentration in small-cap technology holdings as the sector was
especially damaging relative to the overall market, although large-cap
technology investments did provide strong results. The weakness was largely due
to the perceived dependency of small technology companies on the economies of
Asia. Equities of companies with such exposure were indiscriminately sold as the
impact of the Asian crisis created concern for investors. In addition,
semiconductor and personal computer manufacturers had to deal with excess
inventory for much of the year, impacting their performance and the performance
of their suppliers.
- --------------------------------------------------------------------------------
GROWTH OF A $10,000 INVESTMENT (CLASS A SHARES)+
Fund (Class A Fund (Class A Standard &
Shares; not Shares; adjusted Poor's 500
adjusted for for the maximum Composite Inflation
sales charge) 5.5% sales charge) Index(1) (CPI)(1)
- --------------------------------------------------------------------------------
Inception* 11/18/88 $10,000 $ 9,450 $10,000 $10,000
9,775 9,237 9,858 10,034
Dec 88 9,908 9,363 10,036 10,077
10,711 10,122 10,762 10,119
10,724 10,134 10,494 10,162
10,977 10,373 10,742 10,230
11,858 11,206 11,296 10,264
12,385 11,704 11,750 10,272
Jun 11,964 11,306 11,687 10,289
12,799 12,096 12,736 10,341
13,554 12,809 12,982 10,383
13,855 13,093 12,931 10,444
13,614 12,866 12,630 10,511
13,715 12,960 12,893 10,571
Dec 89 13,673 12,921 13,197 10,597
12,763 12,061 12,311 10,622
13,238 12,510 12,470 10,639
14,242 13,459 12,798 10,673
13,740 12,984 12,482 10,724
15,375 14,529 13,699 10,750
Jun 15,429 14,580 13,603 10,767
14,959 14,136 13,560 10,878
12,871 12,163 12,335 10,929
11,808 11,159 11,728 10,990
11,344 10,720 11,685 11,007
12,791 12,087 12,438 11,032
Dec 90 13,524 12,780 12,778 11,092
15,257 14,418 13,343 11,134
16,410 15,507 14,298 11,237
17,037 16,100 14,639 11,331
17,482 16,521 14,680 11,399
18,468 17,453 15,308 11,424
Jun 17,238 16,290 14,608 11,424
18,030 17,038 15,292 11,493
18,733 17,703 15,652 11,510
18,314 17,307 15,395 11,527
18,206 17,204 15,601 11,544
17,495 16,533 14,971 11,579
Dec 91 19,460 18,390 16,682 11,613
20,404 19,281 16,372 11,630
20,711 19,572 16,581 11,664
20,034 18,932 16,256 11,715
19,096 18,046 16,729 11,733
18,905 17,865 16,820 11,767
Jun 18,241 17,238 16,576 11,775
18,405 17,393 17,244 11,793
17,898 16,914 16,895 11,835
18,570 17,549 17,090 11,895
19,256 18,197 17,151 11,912
20,093 18,988 17,729 11,929
Dec 92 20,149 19,040 17,962 11,972
20,258 19,144 18,093 11,997
19,612 18,534 18,337 12,030
20,376 19,255 18,731 12,064
19,853 18,761 18,272 12,106
20,334 19,216 18,766 12,123
Jun 19,791 18,703 18,828 12,115
19,047 18,000 18,739 12,174
19,819 18,729 19,453 12,217
19,357 18,293 19,309 12,259
19,992 18,892 19,701 12,294
20,391 19,270 19,516 12,311
Dec 93 20,650 19,515 19,756 12,328
21,282 20,111 20,418 12,328
21,569 20,382 19,866 12,363
20,786 19,642 19,002 12,389
20,700 19,561 19,249 12,440
21,001 19,846 19,563 12,448
Jun 20,348 19,228 19,080 12,448
20,477 19,351 19,711 12,482
21,613 20,424 20,514 12,524
20,772 19,629 20,019 12,567
20,585 19,452 20,478 12,584
20,239 19,126 19,726 12,593
Dec 94 20,358 19,238 20,014 12,636
20,257 19,142 20,534 12,670
20,978 19,824 21,331 12,721
21,688 20,495 21,963 12,755
22,309 21,082 22,602 12,764
22,323 21,095 23,495 12,781
Jun 23,627 22,328 24,047 12,781
24,466 23,120 24,847 12,832
24,827 23,461 24,914 12,883
25,742 24,326 25,958 12,926
25,163 23,779 25,868 12,968
25,510 24,107 27,006 12,994
Dec 95 25,756 24,339 27,505 13,020
25,639 24,229 28,451 13,020
26,239 24,796 28,725 13,054
26,846 25,370 29,000 13,080
28,808 27,223 29,427 13,123
29,584 27,956 30,186 13,114
Jun 28,339 26,781 30,310 13,105
26,422 24,969 28,961 13,182
28,076 26,532 29,575 13,225
28,881 27,292 31,237 13,293
28,822 27,237 32,093 13,345
30,813 29,118 34,529 13,371
Dec 96 31,567 29,831 33,852 13,379
33,543 31,698 35,954 13,404
33,463 31,622 36,245 13,429
32,146 30,378 34,738 13,472
33,270 31,440 36,811 13,515
36,804 34,780 39,072 13,541
Jun 38,507 36,389 40,814 13,541
41,142 38,879 44,055 13,585
40,564 38,333 41,605 13,627
43,937 41,521 43,885 13,661
41,640 39,350 42,420 13,677
42,685 40,337 44,384 13,669
Dec 97 41,947 39,639 45,147 13,685
42,022 39,711 45,648 13,711
45,808 43,289 48,939 13,737
46,468 43,912 51,445 13,763
46,682 44,114 51,965 13,788
44,170 41,741 51,071 13,813
Jun 43,296 40,914 53,144 13,830
40,395 38,173 52,581 13,846
32,223 30,451 44,978 13,863
35,513 33,560 47,861 13,879
Oct 98 39,639 37,459 51,751 13,896
(1) The Standard & Poor's 500 Composite Index (S&P 500) represents an unmanaged
weighted index of 500 companies. The Consumer Price Index is a measurement
of inflation for all urban consumers (CPI-U). The index assumes reinvestment
of all dividends/distributions, and does not reflect any asset-based charges
for investment management or other expenses. Past performance does not
guarantee future performance. The returns shown for the Fund assume
reinvestment of all dividends/ distributions by the shareholder.
WM Advisors, Inc. waived a portion of its management fees during the
periods reflected in the graph and the table below. Without the waiver,
total return and the growth in the hypothetical investment would have been
lower.
+ The performance of the Class B Shares was different than that indicated by
the lines shown on the left for the Class A Shares, based on the differences
in sales loads and fees paid by Class B shareholders.
- --------------------------------------------------------------------------------
TOTAL RETURNS AS OF 10/31/98
CLASS A SHARES 1 YEAR 5 YEAR* 10 YEAR*
Fund (not adjusted for sales charge) -4.81% 14.67% 14.77%
Fund (adjusted for the maximum
5.5% sales charge) -10.05% 13.39% 14.12%
Standard & Poor's 500 Composite
Index(1) 22.00% 21.31% 17.87%
CLASS B SHARES 1 YEAR 5 YEAR* SINCE INCEPTION*
(March 30, 1994)
Fund (not adjusted for sales charge) -5.63% N/A 14.24%
Fund (adjusted for the maximum
contingent deferred sales charge) -9.51% N/A 14.10%
Standard & Poor's 500 Composite
Index(1) 22.00% N/A 24.43%
*Annualized
- --------------------------------------------------------------------------------
PORTFOLIO composition++
Computer Stocks 19%
Other 17%
Health Care 11%
Consumer Stocks 11%
Electronic/Semiconductors 10%
Bank/Savings & Loan 8%
Electrical Equipment 7%
Basic Industry 6%
Transportation 5%
Utilities/Telecom 3%
Aerospace & Defense 3%
- --------------------------------------------------------------------------------
WHAT MARKET CONDITIONS AFFECTED THE FUND'S PERFORMANCE DURING THE PERIOD, AND
WHAT INVESTMENT TECHNIQUES WERE USED TO ADDRESS THOSE CONDITIONS?
Although market volatility negatively impacted Fund performance, our long-term
investment focus remains unchanged. We will continue to seek out strong
companies located or doing business in the Northwest region of the United
States. In fact, with the depressed prices of many equities, we were able to
find good companies at attractive valuations. Our basic buy-and-hold strategy
continues as we maintain our long-term approach to stock selection. Short-term
volatility serves as a reminder of the significance of a long-term outlook and
highlights the importance of keeping sight of your financial goals.
WERE THERE ANY SHIFTS IN THE FUND'S PORTFOLIO HOLDINGS/SECTORS THAT HAVE HAD A
SIGNIFICANT IMPACT ON FUND PERFORMANCE?
Early in the period, the Fund benefited from holdings in the retail and
technology sectors. Throughout the course of the summer, prices fell across the
board with almost no company left untouched. With over 50% of the portfolio
invested in small-cap companies, the Fund was especially vulnerable. After the
Asian crisis unwound and small-cap stocks dropped in value, we increased the
weighting of these holdings in the portfolio. The valuations appeared compelling
as many stocks had dropped 50% in price, providing a good buying opportunity.
Holdings such as Electro Scientific and Visio provided positive performance in
October as prices nearly doubled after hitting lows early in the month. We also
reduced our exposure to both retail and financial stocks that may be impacted if
the economy of the Northwest slows.
WHAT IS OUR INTERMEDIATE- AND LONG-TERM OUTLOOK FOR THE FUND?
Until global unrest is resolved, we expect volatility in both the equity markets
and the performance of the Fund to continue. It is still too early to understand
all of the ramifications of the crash in global emerging markets on worldwide
growth and demand for goods. We continue to stress that long-term investing and
patience should be rewarded. The portfolio is geared towards a longer-term time
horizon and should be able to withstand short-term market volatility. While the
economy of the Northwest region is very important to the Fund, many companies
such as Microsoft, Boeing, Starbucks, Intel, and Micron Technology have a
national or a global scope and bring increased levels of economic
diversification to the Fund. As small-cap stocks have been battered over the
summer, good values and the possibility of some catch-up in relative performance
create a positive environment for the Fund.
WHAT IS OUR OVERALL ECONOMIC OUTLOOK FOR THE NEXT 12 MONTHS?
We expect both regional and national economies to slow in the coming months. The
effects of an overall global slowdown will be felt in the United States, but
lower interest rates and an accommodative Federal Reserve, should mitigate the
magnitude of the impact. The diversity of the Northwest economy should also
continue to provide benefit as investments are spread across multiple sectors.
Regional employment factors will play a role in economic advances, as the
effects of workforce reductions by Boeing will ripple through the area.
Conversely, Microsoft continues to aggressively hire and is spending in excess
of $3 billion on research and development in fiscal 1999 alone.
++ Allocation percentages are based on total investment value of the portfolio
as of 10/31/98. Differences from financial statements are a result of a
consolidation of industries or sectors.
<PAGE>
EMERGING growth
fund
PORTFOLIO MANAGERS:
DAVID SIMPSON
LINDA WALK
WM ADVISORS, INC.
The Fund is co-managed by David Simpson and Linda Walk of WM Advisors, Inc. Mr.
Simpson and Ms. Walk began managing the Fund on March 23, 1998. Both managers
are Chartered Financial Analysts and have experience in small-cap management.
WHAT WERE THE MOST SIGNIFICANT FACTORS CONTRIBUTING TO THE FUND'S PERFORMANCE
OVER THE PAST 12 MONTHS?
Over the past year, investors have shown increased risk aversion, which
presented itself by a flight to quality and liquidity. This phenomenon surfaced
through severe underperformance of all small-cap holdings relative to the
overall market as renewed concerns about Asia pushed money managers into
larger-cap, more liquid stocks. In addition, at the end of the fiscal year,
tax-loss selling by small-cap mutual fund managers reached record levels and
pushed prices down even lower. The result was an historically large performance
disparity between large- and small-cap stocks. This severely hampered the Fund's
performance as approximately 70% of assets are invested in small-company
equities. Beginning in the fall of 1997, the destruction in value within
smaller-cap portfolios has reduced the group to its most oversold condition on
record. Smaller-capitalization companies continued to receive lower valuations
relative to the larger companies represented in the S&P 500 with every relative
valuation measure below its historical average.
- --------------------------------------------------------------------------------
GROWTH OF A $10,000 INVESTMENT (CLASS A SHARES)+
Fund
(Class A
Shares;
Fund (Class A adjusted Standard &
Shares; not for the Poor's 500 Russell
adjusted for maximum 5.5% Composite 2000 Inflation
sales charge) sales charge) Index(1) Index(1) (CPI)(1)
- --------------------------------------------------------------------------------
Inception* 7/18/90 $10,000 $ 9,450
9,600 9,072 $10,000 $10,000 $10,000
8,520 8,051 9,097 8,662 10,047
7,810 7,380 8,655 7,892 10,102
7,620 7,201 8,618 7,410 10,118
8,190 7,740 9,174 7,975 10,142
Dec 90 8,263 7,808 9,430 8,289 10,196
8,747 8,266 9,840 9,035 10,235
9,231 8,723 10,542 10,048 10,329
9,846 9,305 10,797 10,753 10,416
9,897 9,353 10,823 10,725 10,479
10,179 9,619 11,288 11,235 10,502
Jun 9,705 9,171 10,772 10,586 10,502
10,018 9,467 11,273 10,956 10,565
10,179 9,619 11,540 11,361 10,581
10,310 9,743 11,346 11,449 10,596
10,916 10,315 11,498 11,751 10,612
10,664 10,077 11,037 11,207 10,644
Dec 91 11,509 10,876 12,297 12,104 10,675
12,161 11,492 12,067 13,085 10,691
12,456 11,771 12,224 13,468 10,722
11,896 11,242 11,986 13,012 10,769
11,804 11,155 12,338 12,556 10,785
12,049 11,386 12,398 12,723 10,817
Jun 11,886 11,232 12,214 12,125 10,824
12,100 11,434 12,713 12,547 10,840
11,733 11,088 12,453 12,192 10,879
11,845 11,194 12,599 12,472 10,935
12,395 11,713 12,642 12,866 10,950
12,935 12,223 13,072 13,852 10,966
Dec 92 13,281 12,551 13,232 14,334 11,005
13,581 12,834 13,342 14,818 11,028
13,850 13,088 13,524 14,476 11,059
14,212 13,430 13,810 14,945 11,090
13,581 12,834 13,476 14,534 11,129
14,191 13,411 13,835 15,176 11,144
Jun 14,233 13,450 13,876 15,270 11,137
14,078 13,303 13,820 15,481 11,191
14,905 14,085 14,343 16,150 11,230
15,133 14,300 14,230 16,605 11,270
15,505 14,652 14,524 17,034 11,301
15,029 14,203 14,386 16,478 11,317
Dec 93 16,243 15,349 14,560 17,042 11,333
16,356 15,456 15,055 17,575 11,333
16,322 15,424 14,646 17,512 11,365
15,643 14,783 14,009 16,589 11,388
15,270 14,431 14,189 16,687 11,435
15,248 14,409 14,421 16,500 11,443
Jun 14,717 13,907 14,068 15,944 11,443
15,384 14,537 14,529 16,206 11,474
16,050 15,168 15,124 17,108 11,513
16,152 15,264 14,755 17,050 11,552
17,056 16,118 15,085 16,982 11,568
15,870 14,997 14,536 16,296 11,577
Dec 94 16,187 15,297 14,752 16,733 11,616
16,280 15,384 15,134 16,522 11,647
16,650 15,734 15,723 17,209 11,694
16,627 15,712 16,186 17,503 11,725
16,476 15,570 16,663 17,892 11,734
16,499 15,592 17,327 18,200 11,749
Jun 17,887 16,903 17,729 19,144 11,749
19,193 18,138 18,317 20,247 11,796
19,795 18,706 18,363 20,666 11,843
20,685 19,547 19,137 21,036 11,882
19,852 18,761 19,069 20,096 11,921
20,153 19,045 19,905 20,940 11,945
Dec 95 21,409 20,231 20,289 21,492 11,969
21,095 19,935 20,979 21,469 11,969
22,216 20,994 21,174 22,139 12,000
23,651 22,350 21,377 22,590 12,024
24,326 22,988 21,691 23,799 12,064
25,266 23,876 22,251 24,737 12,055
Jun 24,314 22,976 22,336 23,720 12,047
21,348 20,174 21,348 21,649 12,118
23,048 21,780 21,799 22,907 12,157
23,844 22,532 23,026 23,803 12,220
23,059 21,791 23,661 23,436 12,268
23,336 22,052 25,448 24,402 12,291
Dec 96 23,226 21,949 24,944 25,041 12,298
22,506 21,268 26,501 25,542 12,322
21,968 20,760 26,709 24,921 12,345
20,239 19,126 25,614 23,745 12,385
20,318 19,201 27,142 23,811 12,424
22,754 21,503 28,793 26,459 12,448
Jun 23,947 22,630 30,082 27,594 12,448
24,131 22,804 32,471 28,877 12,488
24,368 23,027 30,666 29,539 12,526
25,966 24,538 32,346 31,701 12,558
25,468 24,067 31,266 30,309 12,573
25,597 24,190 32,713 30,112 12,565
Dec 97 26,158 24,719 33,276 30,639 12,580
25,852 24,430 33,645 30,156 12,604
27,990 26,450 36,071 32,385 12,628
29,266 27,657 37,918 33,721 12,652
29,058 27,460 38,301 33,907 12,675
26,934 25,453 37,642 32,081 12,698
Jun 27,045 25,557 39,171 32,148 12,713
24,992 23,617 38,755 29,546 12,728
19,289 18,228 33,151 23,809 12,744
21,023 19,867 35,276 25,672 12,759
Oct 98 22,550 21,310 38,143 26,720 12,774
(1) Index total returns were calculated from 7/31/90 to 10/31/98. The Standard &
Poor's 500 Composite Index (S&P 500) represents an unmanaged weighted index
of 500 industrial, transportation, utility, and financial companies widely
regarded by investors as representative of the stock market. The Russell
2000 Index represents the smallest 2000 companies followed by Russell and is
used to measure the small-cap market. The Consumer Price Index is a
measurement of inflation for all urban consumers (CPI-U). The indices assume
reinvestment of all dividends/distributions, and do not reflect any
asset-based charges for investment management or other expenses. Past
investment performance does not guarantee future performance. The returns
shown for the Fund assume reinvestment of all dividends/distributions by the
shareholder. During the period noted, the Advisor waived a portion of its
management fees, and credits were allowed by the Custodian. In the absence
of the waivers or credits, yield and total return would have been lower.
+ The performance of the Class B Shares and Class S Shares was different than
that indicated by the lines shown on the left for the Class A Shares, based
on the differences in sales loads and fees paid by Class B and Class S
shareholders.
- -------------------------------------------------------------------------------
TOTAL RETURNS AS OF 10/31/98
CLASS A SHARES 1 YEAR 5 YEAR* SINCE INCEPTION*
(July 18, 1990)
Fund (not adjusted for contingent
deferred sales charge) -11.45% 7.78% 10.31%
Fund (adjusted for the maximum
5.5% sales charge) -16.31% 6.57% 9.56%
Standard & Poor's 500 Composite
Index(1) 22.00% 21.30% 17.62%
Russell 2000 Index(1) -11.84% 9.42% 12.65%
CLASS B SHARES 1 YEAR 5 YEAR* SINCE INCEPTION*
(June 30, 1994)
Fund (not adjusted for contingent
deferred sales charge) -12.21% N/A 9.52%
Fund (adjusted for the maximum
contingent deferred sales charge) -16.35% N/A 9.35%
Standard & Poor's 500 Composite
Index(1) 22.00% N/A 25.88%
Russell 2000 Index(1) -11.84% N/A 12.65%
CLASS S SHARES 1 YEAR 5 YEAR* SINCE INCEPTION*
(June 30, 1994)
Fund (not adjusted for contingent
deferred sales charge) -12.21% N/A 9.52%
Fund (adjusted for the maximum
contingent deferred sales charge) -16.35% N/A 9.34%
Standard & Poor's 500 Composite
Index(1) 22.00% N/A 25.88%
Russell 2000 Index(1) -11.84% N/A 12.65%
* Annualized
- --------------------------------------------------------------------------------
PORTFOLIO composition++
Computer Stocks 23%
Health Care 16%
Elec/Semiconductors 12%
Other 12%
Consumer Stocks 9%
Financial Services 9%
Business Services 7%
Transportation 4%
Media 4%
Utilities/Telecom 4%
- --------------------------------------------------------------------------------
WHAT MARKET CONDITIONS AFFECTED THE FUND'S PERFORMANCE DURING THE PERIOD, AND
WHAT INVESTMENT TECHNIQUES WERE USED TO ADDRESS THOSE CONDITIONS?
The "flight to quality" bid up share prices for companies that had relatively
little Asian exposure as well as companies that were thought to be lower risk.
In addition, the value style of many of our holdings severely underperformed a
growth or earnings momentum approach. WM Advisors, Inc. began managing the Fund
in March of 1998 and focused on overweighting sectors such as technology, which
previously had a significant underweight. While this sector was very volatile in
1998, we believe the long-term prospects are strong. We also brought down the
overall average market capitalization of the Fund as well as the average
valuation or price-to-earnings multiple. We tend to focus more on valuations,
looking for excellent companies at reasonable valuations. We believe that
despite the short-term disappointments, this strategy will provide long-term
value for shareholders of the Emerging Growth Fund.
WERE THERE ANY SHIFTS IN THE FUND'S PORTFOLIO HOLDINGS/SECTORS THAT HAVE HAD A
SIGNIFICANT IMPACT ON FUND PERFORMANCE?
We reduced our exposure to consumer cyclical stocks, which had previously been
significantly overweighted. In that sector, many companies had reached valuation
multiples which were at ten-year highs, leaving them vulnerable in a slowdown.
Given the global uncertainty, we encountered liquidity problems with a few
foreign issues in the Fund. Another area of concern was small-cap technology,
which was hit very hard (even for companies whose fundamentals remained strong)
as investors became increasingly risk averse. Technology hardware companies were
particularly challenged by the Asian situation as well as short-term inventory
shifts at companies (such as Compaq Computer) which were beginning to use a
direct sales model and were liquidating inventory.
WHAT IS OUR INTERMEDIATE- AND LONG-TERM OUTLOOK FOR THE FUND?
We have had the opportunity to invest in strong companies at compelling
valuations. Small-cap technology companies, in particular, appear to be oversold
and have an excellent long-term outlook. Our overall focus will continue to be
investing in companies with solid growth opportunities and strong management
teams. This strategy should benefit shareholders over the long term. The
combination of aggressive tax-loss selling, high cash reserves of many mutual
fund managers, and a deeply oversold condition have created an environment for a
material rally for the smaller-cap growth issues. For this rally to be
sustained, the group must deliver strong earnings growth over the next several
quarters. If they can do this, we may see a parallel to 1990-1992, where
large-cap profits suffered while small-cap earnings remained robust.
We believe that there is likely to be improved relative performance by small-
and mid-cap stocks that appear to be extremely inexpensive as a result of the
sharp widening of the risk premium. As global risk premiums come down, small-cap
stocks should continue to rally, adding to October results that saw the Russell
2000 up 22% over a three-week period. Technology stocks led the rally with an
average 33% gain, helping the Fund to outperform the Russell 2000 during this
period. In addition, an accommodative Federal Reserve adds to the positive
backdrop for small-cap stocks.
WHAT IS OUR OVERALL ECONOMIC OUTLOOK FOR THE NEXT 12 MONTHS?
We forecast slowing growth for the U.S. economy as consumer spending, inventory
accumulation, and business investments weaken modestly. In addition, we see
declining corporate profits, tighter credit conditions, and a slightly stronger
trade drag through year-end 1999.
While we feel that a recession is possible, it is not likely due to three major
factors. These factors include: structural changes in the economy making the
business cycle less volatile (e.g. just-in-time inventory management), sharply
declining interest rates, and the ability of policy makers to prevent a
recession by aggressively easing monetary and fiscal policy. Globally, Brazil
and Japan remain important wild cards in this picture. A credible fiscal package
from Brazil and viable bank restructuring from Japan would calm market jitters.
We also see a reduction in global risk premiums across a broad class of assets
as capital concerns begin to moderate at the margin. This is due to several
recent developments including an accommodative Fed, a U.S. budget agreement, a
Japanese banking program, and a better clarification of global hedge fund
exposures. It is possible that any of these issues could re-emerge to frighten
investors and again re-inflate risk premiums. Since small stocks sit as the
highest risk investment in the U.S. equity market, the recent reduction in risk
premiums and a lessening magnitude of global unrest should be particularly
beneficial to the Fund.
++ Allocation percentages are based on total investment value of the portfolio
as of 10/31/98. Differences from financial statements are a result of a
consolidation of industries or sectors.
<PAGE>
INTERNATIONAL
growth fund
PORTFOLIO MANAGER:
WARBURG PINCUS ASSET MANAGEMENT, INC.
The following team has been primarily responsible for managing the International
Growth Fund: Richard H. King, Senior Managing Director, joined the firm in 1989
to found the international equity department and has 33 years of investment
experience. Prior to joining Warburg, Mr. King was chief investment officer and
a director of Fiduciary Trust Company International S.A. in London from 1984 to
1988. P. Nicholas Edwards, Managing Director, has 15 years of investment
experience. Prior to joining Warburg, Mr. Edwards was a director and senior Fund
manager at Jardine Fleming Investment Advisers in Tokyo from 1991 to 1995.
Harold W. Ehrlich, CFA, CIC, Managing Director, has 15 years of investment
experience. Prior to joining Warburg, Mr. Ehrlich was a senior vice president,
portfolio manager and analyst at Templeton Investment Counsel Inc. from 1987 to
1995. Vincent J. McBride, Senior Vice President, has 12 years of investment
experience. Prior to joining Warburg, Mr. McBride was an international equity
analyst at Smith Barney Inc. from 1993 to 1994. He also served as international
equity analyst at General Electric Investments from 1992 to 1993 and a portfolio
manager/analyst at United Jersey Bank from 1989 to 1992.
WHAT WERE THE MOST SIGNIFICANT FACTORS CONTRIBUTING TO THE FUND'S PERFORMANCE
OVER THE PAST 12 MONTHS?
For the 12 months ended October 31, 1998, the Fund had a loss of 6.07%, vs. a
gain of 9.78% for the Morgan Stanley Europe, Australasia and Far East ("EAFE")
Index. This underperformance reflected both untimely regional allocations and
weakness in specific stocks. Regional allocations that hurt the Fund included
its Latin American exposure - while it represented a relatively small portion of
the Fund's assets through the period - it proved a liability, given the
substantial declines suffered by that region's stock markets. Also exerting a
sizable drag on the Fund's performance was its relatively high level of exposure
to the Asia-Pacific region heading into the period (we subsequently reduced that
exposure significantly), as these markets were then in the throes of a
substantial sell-off triggered by Thailand's currency devaluation. The Fund was
also hurt significantly on an opportunity-cost basis by its underweighting in
Europe in the first few months of 1998, a period that saw these markets rally
strongly.
- --------------------------------------------------------------------------------
GROWTH OF A $10,000 INVESTMENT (CLASS A SHARES)+
Morgan
Fund (Class A Fund (Class A Stanley
Shares; not Shares; adjusted Capital
adjusted for for the maximum International Inflation
sales charge) 5.5% sales charge) EAFE Index(1) (CPI)(1)
- --------------------------------------------------------------------------------
Inception* 7/18/90 $10,000 $ 9,450
9,780 9,242 $10,000 $10,000
8,690 8,212 9,032 10,047
7,760 7,333 7,776 10,102
8,730 8,250 8,989 10,118
8,250 7,796 8,462 10,142
Dec 90 8,150 7,702 8,602 10,196
8,460 7,995 8,883 10,235
9,190 8,685 9,838 10,329
8,630 8,155 9,249 10,416
8,720 8,240 9,343 10,479
8,870 8,382 9,443 10,502
Jun 8,270 7,815 8,751 10,502
8,680 8,203 9,184 10,565
8,700 8,222 8,999 10,581
9,020 8,524 9,509 10,596
9,050 8,552 9,645 10,612
8,800 8,316 9,198 10,644
Dec 91 9,325 8,812 9,675 10,675
9,255 8,746 9,471 10,691
9,124 8,622 9,135 10,722
8,742 8,261 8,535 10,769
8,792 8,308 8,577 10,785
9,214 8,708 9,155 10,817
Jun 8,872 8,384 8,723 10,824
8,540 8,071 8,503 10,840
9,043 8,546 9,039 10,879
8,651 8,175 8,864 10,935
8,279 7,823 8,401 10,950
8,319 7,862 8,483 10,966
Dec 92 8,339 7,881 8,529 11,005
8,359 7,900 8,531 11,028
8,642 8,167 8,791 11,059
9,197 8,691 9,561 11,090
9,833 9,293 10,471 11,129
10,055 9,502 10,695 11,144
Jun 9,894 9,350 10,530 11,137
10,217 9,655 10,901 11,191
10,792 10,199 11,492 11,230
10,762 10,170 11,235 11,270
11,065 10,456 11,584 11,301
10,439 9,865 10,573 11,317
Dec 93 11,037 10,430 11,339 11,333
11,813 11,164 12,301 11,333
11,503 10,870 12,269 11,365
10,933 10,332 11,742 11,388
11,265 10,645 12,244 11,435
11,296 10,674 12,176 11,443
Jun 11,120 10,508 12,352 11,443
11,430 10,802 12,473 11,474
11,679 11,036 12,771 11,513
11,296 10,674 12,371 11,552
11,513 10,880 12,785 11,568
11,026 10,420 12,174 11,577
Dec 94 10,892 10,293 12,253 11,616
10,324 9,757 11,785 11,647
10,182 9,622 11,755 11,694
10,368 9,798 12,492 11,725
10,695 10,107 12,965 11,734
10,794 10,200 12,814 11,749
Jun 10,674 10,087 12,592 11,749
11,143 10,530 13,379 11,796
11,001 10,396 12,872 11,843
11,088 10,478 13,127 11,882
10,859 10,262 12,777 11,921
10,968 10,365 13,137 11,945
Dec 95 11,422 10,794 13,669 11,969
11,825 11,175 13,727 11,969
11,733 11,088 13,777 12,000
11,837 11,186 14,073 12,024
12,009 11,349 14,485 12,064
11,963 11,305 14,222 12,055
Jun 12,078 11,414 14,306 12,047
11,503 10,870 13,891 12,118
11,641 11,001 13,924 12,157
11,906 11,251 14,297 12,220
11,825 11,174 14,154 12,268
12,355 11,675 14,720 12,291
Dec 96 12,338 11,660 14,535 12,298
12,398 11,716 14,029 12,322
12,503 11,815 14,262 12,345
12,409 11,727 14,318 12,385
12,598 11,905 14,396 12,424
13,387 12,650 15,336 12,448
Jun 13,951 13,184 16,186 12,448
14,423 13,630 16,452 12,488
13,199 12,473 15,226 12,526
13,905 13,140 16,082 12,558
12,363 11,683 14,850 12,573
12,092 11,427 14,701 12,565
Dec 97 12,031 11,370 14,834 12,580
12,123 11,456 15,516 12,604
12,896 12,187 16,515 12,628
13,591 12,844 17,027 12,652
13,933 13,166 17,165 12,675
13,814 13,054 17,086 12,698
Jun 13,368 12,633 17,219 12,713
13,512 12,769 17,398 12,728
11,599 10,961 15,246 12,744
11,035 10,428 14,783 12,759
Oct 98 11,612 10,974 16,302 12,774
(1) Index total returns were calculated from 7/31/90 to 10/31/98. The Morgan
Stanley Capital International EAFE Index includes stock markets of Europe,
Australia, and the Far East weighted by capitalization. EAFE is a
broad-based index of equity markets representing 18 countries. The Consumer
Price Index is a measurement of inflation for all urban consumers (CPI-U).
The index assumes reinvestment of all dividends/ distributions, and does not
reflect any asset-based charges for investment management or other expenses.
Past investment performance does not guarantee future performance. The
returns shown for the Fund assume reinvestment of all
dividends/distributions by the shareholder. During the period noted, the
Advisor waived a portion of its management fees, and credits were allowed by
the Custodian. In the absence of the waivers or credits, yield and total
return would have been lower.
+ The performance of the Class B Shares and Class S Shares was different than
that indicated by the lines shown on the left for the Class A Shares, based
on the differences in sales loads and fees paid by Class B and Class S
shareholders.
- -------------------------------------------------------------------------------
TOTAL RETURNS AS OF 10/31/98
CLASS A SHARES 1 YEAR 5 YEAR* SINCE INCEPTION*
(July 18, 1990)
Fund (not adjusted for sales charge) -6.07% 0.97% 1.82%
Fund (adjusted for the maximum
5.5% sales charge) -11.23% -0.17% 1.13%
Morgan Stanley Capital
International EAFE Index1 9.78% 7.07% 6.10%
CLASS B SHARES 1 YEAR 5 YEAR* SINCE INCEPTION*
(June 30, 1994)
Fund (not adjusted for contingent
deferred sales charge) -6.88% N/A 0.26%
Fund (adjusted for the maximum
contingent deferred sales charge) -11.09% N/A 0.07%
Morgan Stanley Capital
International EAFE Index(1) 9.78% N/A 6.61%
CLASS S SHARES 1 YEAR 5 YEAR* SINCE INCEPTION*
(June 30, 1994)
Fund (not adjusted for contingent
deferred sales charge) -6.92% N/A 0.23%
Fund (adjusted for the maximum
contingent deferred sales charge) -11.15% N/A 0.04%
Morgan Stanley Capital
International EAFE Index(1) 9.78% N/A 6.61%
*Annualized
- --------------------------------------------------------------------------------
PORTFOLIO composition++
Other Europe 35%
United Kingdom 14%
Japan 12%
France 12%
Germany 11%
Cash Equivalent 11%
Africa & Mid-east 2%
Latin America 2%
Other Asia 1%
- --------------------------------------------------------------------------------
WHAT MARKET CONDITIONS AFFECTED THE FUND'S PERFORMANCE DURING THE PERIOD, AND
WHAT INVESTMENT TECHNIQUES WERE USED TO ADDRESS THOSE CONDITIONS?
The period saw a marked divergence in performance among foreign stock markets.
European markets enjoyed impressive gains, benefiting from a host of factors,
including low inflation, falling interest rates and optimism regarding the
approach of European Monetary Union. Markets elsewhere saw far less favorable
results. Among developed markets, Japan was a noteworthy casualty, weighed down
by mounting concerns over its economy, and in particular, its troubled banking
sector. Emerging markets suffered sharp losses across the board, as the economic
and financial contagion that began following the Thai Baht devaluation in
mid-1997 continued to spread, dragging down markets from Asia to Eastern Europe
to Latin America.
WERE THERE ANY SHIFTS IN THE FUND'S PORTFOLIO HOLDINGS/SECTORS THAT HAD A
SIGNIFICANT IMPACT ON FUND PERFORMANCE?
In Europe, the Fund maintained a fairly large weighting in economically
sensitive stocks through the period, based on our view that there was
considerable value to be found in the group. This served the Fund well for a
time but ultimately proved costly, as these stocks sold off heavily (and, we
would argue, indiscriminately) in August and September amid the global market
sell-off and widening fears of global recession. The Fund also had a fair
weighting in European financial stocks heading into that period, and these too
fell sharply, largely due to worries over these companies' exposure to Russia
and other emerging markets.
WHAT IS OUR INTERMEDIATE- AND LONG-TERM OUTLOOK FOR THE FUND?
It was a disappointing and frustrating year for the Fund and, obviously, our
shareholders. We believe, that with the recent return of some stability to
global financial markets, our investment discipline - which is fundamentally
driven and seeks to identify undervalued stocks that have the potential for
strong gains over an 18- to 24-month period - stands to generate far better
relative results going forward. Much of the extreme volatility in the markets
during the reporting period was emotionally, rather than rationally, driven,
with investors abandoning companies, countries and entire regions based on
knee-jerk, fear-based reactions. This worked to the advantage of practitioners
of momentum-based investment styles, but took a heavy toll on those who employ a
more-patient, longer-term, stock-by-stock approach to investing such as ours.
Thankfully, a calmer, more-rational mindset seems to have returned to the
markets, one in which investors value companies based primarily on fundamentals,
rather than emotion, and this is an environment in which we believe our
methodology and research efforts can add a considerable amount of value.
Accordingly, we would encourage our investors to stay the course, and maintain a
long-term outlook in evaluating their investment in the Fund. In turn, know that
we will continue to strive to identify the most attractive companies and the
best candidates for long-term appreciation within international markets.
WHAT IS OUR OVERALL ECONOMIC OUTLOOK FOR THE NEXT 12-MONTHS?
To say the current environment is a difficult one for international-equity
investors would be an understatement, given the vast amount of economic,
financial and, increasingly, political uncertainty on the global landscape.
Analysts are almost daily scaling back their economic-growth and profit
forecasts, and the attitude toward equities has become one of caution, if not
bearishness. While this has had a very favorable effect on the prices of
developed-country bonds, which investors have flocked to in a so-called flight
to quality, stock markets have taken it on the chin, and it is hard to predict
when the situation will finally stabilize. Nevertheless, we believe investors
would be well served to maintain their exposure to international markets, since
we see an ample number of very attractive investment opportunities being
presented, especially for investors willing to take a 12-month or longer
outlook.
++ Allocation percentages are based on total investment value of the portfolio
as of 10/31/98.
<PAGE>
<TABLE>
STATEMENTS of ASSETS and LIABILITIES
WM GROUP OF FUNDS
OCTOBER 31, 1998
<CAPTION>
CALIFORNIA
SHORT TERM U.S. INSURED
TARGET HIGH HIGH GOVERNMENT INTERMEDIATE
MATURITY YIELD QUALITY SECURITIES INCOME MUNICIPAL
2002 FUND FUND BOND FUND FUND FUND FUND
---------- ----------- ----------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Investments, at value
(See portfolios of
investments):
Securities ................ $2,363,816 $13,662,799 $38,148,023 $335,198,440 $239,793,747 $66,534,771
Repurchase Agreements ....... -- 695,000 -- 6,469,000 11,842,000 --
---------- ----------- ----------- ------------ ------------ -----------
Total Investments (a) ... 2,363,816 14,357,799 38,148,023 341,667,440 251,635,747 66,534,771
Cash and/or foreign
currency (b) .............. 17,004 29,714 -- -- 24,049 41,218
Dividends and/or interest
receivable ................ -- 332,035 545,776 2,602,507 4,478,256 925,835
Receivable for Fund shares
sold ...................... -- 176,080 519,073 591,068 348,414 240,048
Receivable for investment
securities sold ........... -- 330,473 8,750 2,735 1,416,313 --
Unamortized organization
costs ..................... 16,654 -- -- -- -- 677
Receivable from investment
advisor ................... 4,753 -- 7,233 -- -- --
Prepaid expenses and other
assets .................... 8 -- 466 994 63,365 282
---------- ----------- ----------- ------------ ------------ -----------
Total Assets ............ 2,402,235 15,226,101 39,229,321 344,864,744 257,966,144 67,742,831
---------- ----------- ----------- ------------ ------------ -----------
LIABILITIES:
Net unrealized depreciation
of forward foreign currency
contracts (See portfolios
of investments) ........... -- 6,956 -- -- -- --
Payable for Fund shares
redeemed .................. 1,535 -- 41,947 249,176 473,816 16,927
Payable for when-issued
securities ................ -- -- -- -- -- 6,098,227
Payable for investment
securities purchased ...... -- 154,375 -- 3,268,311 -- --
Investment advisory fee
payable ................... -- 2,107 -- 109,128 136,256 15,051
Shareholder servicing and
distribution fees payable . 509 4,304 10,745 84,475 76,004 28,024
Dividends payable ........... -- 17,654 167,075 650,480 512,719 63,254
Due to custodian ............ -- -- 72,174 4,154 -- --
Accrued legal and audit
fees ...................... 12,978 15,189 22,474 15,594 16,422 15,044
Accrued expenses and other
payables .................. 1,969 1,825 26,898 106,263 67,437 13,691
---------- ----------- ----------- ------------ ------------ -----------
Total Liabilities ....... 16,991 202,410 341,313 4,487,581 1,282,654 6,250,218
---------- ----------- ----------- ------------ ------------ -----------
NET ASSETS .................. $2,385,244 $15,023,691 $38,888,008 $340,377,163 $256,683,490 $61,492,613
========== =========== =========== ============ ============ ===========
(a) Investments, at cost .... $2,180,175 $16,018,945 $37,609,758 $331,676,219 $238,314,632 $62,164,042
========== =========== =========== ============ ============ ===========
(b) Cash and/or foreign
currency, at cost ......... $ 17,004 $ 29,714 $ -- $ -- $ 24,049 $ 41,218
========== =========== =========== ============ =========== ===========
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FLORIDA
CALIFORNIA INSURED TAX-EXEMPT BOND & GROWTH & EMERGING INTERNATIONAL
MUNICIPAL MUNICIPAL BOND STOCK INCOME GROWTH NORTHWEST GROWTH GROWTH
FUND FUND FUND FUND FUND FUND FUND FUND FUND
- ------------ ----------- ------------ ------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$352,991,069 $24,391,267 $314,132,886 $366,706,974 $817,857,300 $274,974,342 $288,233,343 $126,221,045 $126,309,733
-- -- -- 423,000 -- -- 5,336,000 1,717,000 15,919,000
- ------------ ----------- ------------ ------------ ------------ ------------ ------------ ------------ ------------
352,991,069 24,391,267 314,132,886 367,129,974 817,857,300 274,974,342 293,569,343 127,938,045 142,228,733
327,202 50,724 60,290 -- -- 6,160 -- -- --
5,099,051 285,603 4,995,465 2,393,144 739,274 61,368 69,261 11,585 354,393
1,377,052 171,576 967,134 684,537 1,366,881 624,159 740,644 228,434 63,571
-- -- -- 28,609,752 16,862,204 1,784,157 -- 365,028 435,944
- ------------ ----------- ------------ ------------ ------------ ------------ ------------ ------------ ------------
995 186 56,819 45,280 656 586 -- 756 339
- ------------ ----------- ------------ ------------ ------------ ------------ ------------ ------------ ------------
359,795,369 24,899,356 320,212,594 398,862,687 836,826,315 277,450,772 294,379,248 128,543,848 143,082,980
- ------------ ----------- ------------ ------------ ------------ ------------ ------------ ------------ ------------
-- -- -- -- -- 457,660 -- -- 2,300,314
363,879 -- 1,424,606 1,077,310 1,147,092 110,731 391,783 166,468 65,946
3,502,430 1,482,258 -- -- -- -- -- -- --
17,873,552 1,475,417 -- 24,157,294 17,151,497 1,304,534 3,409,319 1,059,900 729,880
154,001 1,793 135,784 178,287 348,856 228,973 139,405 99,305 125,680
101,250 8,326 78,767 120,807 200,511 60,114 82,892 35,992 15,088
445,374 39,177 143 851 -- 204 -- -- --
-- -- -- 4,515 808,394 -- 3,380 867 49,367
15,350 15,000 15,546 18,174 19,355 16,092 17,136 16,480 23,761
58,454 7,215 48,446 77,010 199,415 122,247 102,592 86,958 95,318
- ------------ ----------- ------------ ------------ ------------ ------------ ------------ ------------ ------------
22,514,290 3,029,186 1,703,292 25,634,248 19,875,120 2,300,555 4,146,507 1,465,970 3,405,354
- ------------ ----------- ------------ ------------ ------------ ------------ ------------ ------------ ------------
$337,281,079 $21,870,170 $318,509,302 $373,228,439 $816,951,195 $275,150,217 $290,232,741 $127,077,878 $139,677,626
============ =========== ============ ============ ============ ============ ============ ============ ============
$325,813,410 $22,307,217 $280,017,483 $328,463,787 $684,592,204 $218,216,126 $220,080,961 $129,452,166 $146,597,883
============ =========== ============ ============ ============ ============ ============ ============ ============
$ 327,202 $ 50,724 $ 60,290 $ -- $ -- $ 6,162 $ -- $ -- $ --
============ =========== ============ ============ ============ ============ ============ ============ ============
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
STATEMENTS of ASSETS and LIABILITIES (continued)
WM GROUP OF FUNDS
OCTOBER 31, 1998
<CAPTION>
CALIFORNIA
SHORT TERM U.S. INSURED
TARGET HIGH HIGH GOVERNMENT INTERMEDIATE
MATURITY YIELD QUALITY SECURITIES INCOME MUNICIPAL
2002 FUND FUND BOND FUND FUND FUND FUND
---------- ----------- ----------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
NET ASSETS consist of:
Undistributed net investment
income/(accumulated net
investment loss/
distributions in excess of
net investment income) .... $ 135,040 $ (6,925) $ 47,920 $ (467,853) $ (16,407) $ 14,596
Accumulated net realized
gain/(loss) on
investments sold, futures
contracts, closed written
options, forward foreign
currency contracts and
foreign currency
transactions .............. 40,642 114,860 (1,727,463) (68,934,114) (30,570,228) 931,630
Net unrealized appreciation/
(depreciation) of
investments, foreign
currency, futures
contracts, forward foreign
currency contracts and
other assets and
liabilities ............... 183,641 (1,668,153) 538,265 9,991,221 13,321,115 4,370,729
Paid-in capital ............. 2,025,921 16,583,909 40,029,286 399,787,909 273,949,010 56,175,658
---------- ----------- ----------- ------------ ----------- -----------
Total Net Assets ........ $2,385,244 $15,023,691 $38,888,008 $340,377,163 $256,683,490 $61,492,613
========== =========== =========== ============ =========== ===========
NET ASSETS:
Class A Shares .............. $2,385,244 $10,860,831 $32,748,295 $266,333,578 $213,396,691 $37,529,320
========== =========== =========== ============ =========== ===========
Class B Shares .............. -- $ 2,829,629 $ 3,747,317 $ 28,747,277 $34,320,519 $23,960,307
=========== =========== ============ =========== ===========
Class S Shares .............. -- $ 24,114 $ 761,573 $ 5,356,840 $ 1,623,856 $ 1,807
========== =========== =========== ============ =========== ===========
Class I Shares .............. -- $ 1,309,117 $ 1,630,823 $ 39,939,468 $ 7,342,424 $ 1,179
========== =========== =========== ============ =========== ===========
SHARES OUTSTANDING:
Class A Shares .............. 204,649 1,226,300 13,937,438 24,259,696 22,593,663 3,406,361
========== =========== =========== ============ =========== ===========
Class B Shares .............. -- 318,075 1,594,660 2,619,697 3,630,554 2,174,786
=========== =========== ============ =========== ===========
Class S Shares .............. -- 2,704 324,127 487,572 171,794 164
=========== =========== ============ =========== ===========
Class I Shares .............. -- 147,859 694,468 3,634,160 777,604 107
=========== =========== ============ =========== ===========
CLASS A SHARES:
Net asset value per share
of beneficial interest
outstanding* .............. $11.66 $8.86 $2.35 $10.98 $9.44 $11.02
========== =========== =========== ============ =========== ===========
Maximum sales charge ........ 2.00% 4.50% 3.50% 4.50% 4.50% 4.50%
========== =========== =========== ============ =========== ===========
Maximum offering price per
share of beneficial
interest outstanding ...... $11.90 $9.28 $2.44 $11.50 $9.88 $11.54
========== =========== =========== ============ =========== ===========
CLASS B SHARES:
Net asset value and offering
price per share of
beneficial interest
outstanding* .............. -- $8.90 $2.35 $10.97 $9.45 $11.02
=========== =========== ============ =========== ===========
CLASS S SHARES:
Net asset value and offering
price per share of
beneficial interest
outstanding* .............. -- $8.92 $2.35 $10.99 $9.45 $11.02
=========== =========== ============ =========== ===========
CLASS I SHARES:
Net asset value, offering
and redemption price
per share of beneficial
interest outstanding ...... -- $8.85 $2.35 $10.99 $9.44 $11.02
=========== =========== ============ =========== ===========
- --------------
* Redemption price per share is equal to net asset value per share less any applicable contingent deferred sales charge.
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FLORIDA
CALIFORNIA INSURED TAX-EXEMPT BOND & GROWTH & EMERGING INTERNATIONAL
MUNICIPAL MUNICIPAL BOND STOCK INCOME GROWTH NORTHWEST GROWTH GROWTH
FUND FUND FUND FUND FUND FUND FUND FUND FUND
- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 32,263 $ 16,934 $ 79,147 $ 1,396,366 $ 626,908 $ (2,454) $ -- $ (7,953) $ 6,019,163
1,703,486 (2,144,198) (1,244,807) (534,740) (3,127,881) 28,283,480 (184,457) 22,580,089 (13,430,016)
27,177,659 2,084,050 34,115,403 38,666,187 133,265,096 56,300,554 73,488,382 (1,514,272) (6,657,186)
308,367,671 21,913,384 285,559,559 333,700,626 686,187,072 190,568,637 216,928,816 106,020,014 153,745,665
- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
$337,281,079 $ 21,870,170 $318,509,302 $373,228,439 $816,951,195 $275,150,217 $290,232,741 $127,077,878 $139,677,626
============ ============ ============ ============ ============ ============ ============ ============ ============
$287,589,803 $ 15,812,746 $301,162,321 $298,650,540 $502,114,889 $104,775,378 $243,126,354 $ 88,502,149 $ 30,117,254
============ ============ ============ ============ ============ ============ ============ ============ ============
$ 49,682,830 $ 6,054,421 $ 17,344,313 $ 74,541,653 $117,063,362 $ 39,379,445 $ 47,106,387 22,171,599 $ 3,552,085
============ ============ ============ ============ ============ ============ ============ ============ ============
$ 7,220 $ 1,785 $ 1,460 $ 36,246 $ 12,245,178 $ 11,644,711 -- $ 3,752,657 $ 7,454,502
============ ============ ============ ============ ============ ============ ============ ============ ============
$ 1,226 $ 1,218 $ 1,208 -- $185,527,766 $119,350,683 -- $ 12,651,473 $ 98,553,785
============ ============ ============ ============ ============ ============ ============ ============ ============
25,088,028 1,506,339 37,130,057 21,309,000 25,112,027 5,938,399 11,934,796 5,447,432 3,400,886
============ ============ ============ ============ ============ ============ ============ ============ ============
4,334,125 576,742 2,138,001 5,338,116 5,920,439 2,318,310 2,398,381 1,415,275 407,571
============ ============ ============ ============ ============ ============ ============ ============ ============
630 170 180 2,628 618,768 685,408 -- 239,511 847,206
============ ============ ============ ============ ============ ============ ============ ============ ============
107 116 149 -- 9,262,028 6,721,046 -- 773,639 11,162,286
============ ============ ============ ============ ============ ============ ============ ============ ============
$11.46 $10.50 $8.11 $14.02 $19.99 $17.64 $20.37 $16.25 $8.86
============ ============ ============ ============ ============ ============ ============ ============ ============
4.50% 4.50% 4.50% 5.50% 5.50% 5.50% 5.50% 5.50% 5.50%
============ ============ ============ ============ ============ ============ ============ ============ ============
$12.00 $10.99 $8.49 $14.84 $21.15 $18.67 $21.56 $17.20 $9.38
============ ============ ============ ============ ============ ============ ============ ============ ============
$11.46 $10.50 $8.11 $13.96 $19.77 $16.99 $19.64 $15.67 $8.72
============ ============ ============ ============ ============ ============ ============ ============ ============
$11.46 $10.50 $8.11 $13.79 $19.79 $16.99 -- $15.67 $8.80
============ ============ ============ ============ ============ ============ ============ ============ ============
$11.46 $10.50 $8.11 -- $20.03 $17.76 -- $16.35 $8.83
============ ============ ============ ============ ============ ============ ============
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
STATEMENTS of OPERATIONS
WM GROUP OF FUNDS
FOR THE YEAR ENDED OCTOBER 31, 1998
<CAPTION>
SHORT TERM CALIFORNIA
TARGET HIGH U.S. INSURED
MATURITY HIGH QUALITY GOVERNMENT INTERMEDIATE
2002 YIELD BOND SECURITIES INCOME MUNICIPAL
FUND(A) FUND* FUND(A) FUND(B) FUND(B) FUND(A)
---------- ----------- ---------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends ................... $ -- $ 34,552 $ -- $ -- $ 112,773 $ --
Foreign withholding tax on
dividend income ........... -- -- -- -- -- --
Foreign withholding tax on
interest income ........... -- (292) -- -- (11,723) --
Interest .................... 54,186 622,385 846,898 18,164,074 13,860,224 1,058,909
Fee income (Note 6) ......... -- -- -- 79,607 -- --
---------- ----------- ---------- ----------- ----------- ----------
Total investment income . 54,186 656,645 846,898 18,243,681 13,961,274 1,058,909
---------- ----------- ---------- ----------- ----------- ----------
EXPENSES:
Investment advisory fee ..... 2,065 42,864 67,678 1,467,714 1,124,138 142,361
Custodian fees .............. 509 2,404 4,474 67,401 38,325 1,729
Legal and audit fees ........ 10,414 15,551 13,507 10,274 10,693 13,340
Trustees' fees and expenses . 78 731 1,296 25,802 19,433 1,881
Amortization of organization
costs ..................... 3,919 -- 1,182 -- -- 541
Registration and filing fees. 4,433 3,522 17,549 22,508 20,498 7,852
Printing and postage fees .. (12,930) 802 19,242 71,982 96,535 (225)
Other ....................... 84 463 5,022 (16,573) (24,778) 8,404
Shareholder servicing and
distribution fees:
Class A Shares ............ 2,065 14,689 28,672 490,808 384,243 32,068
Class B Shares ............ -- 7,084 11,917 150,349 220,472 75,090
Class S Shares ............ -- 54 2,643 38,991 10,668 6
Transfer agent fees:
Class A Shares ............ 1,489 399 21,488 177,447 165,984 5,108
Class B Shares ............ -- 375 2,633 16,465 27,703 3,252
Class S Shares ............ -- 12 326 8,883 2,226 9
Interest expense .......... -- -- -- 1,102,300 -- --
Fees waived and/or expenses
absorbed by investment
advisor ................... (6,834) (29,768) (77,145) (202,160) -- (66,654)
---------- ----------- ---------- ----------- ----------- ----------
Total expenses .......... 5,292 59,182 120,484 3,432,191 2,096,140 224,762
Fees reduced by credits
allowed by the custodian .. -- (842) -- (867) (2,042) (1,729)
---------- ----------- ---------- ----------- ----------- ----------
Net expenses ............ 5,292 58,340 120,484 3,431,324 2,094,098 223,033
---------- ----------- ---------- ----------- ----------- ----------
NET INVESTMENT INCOME/(LOSS). 48,894 598,305 726,414 14,812,357 11,867,176 835,876
---------- ----------- ---------- ----------- ----------- ----------
NET REALIZED AND UNREALIZED
GAIN/(LOSS) ON INVESTMENTS:
Realized gain/(loss) from:
Security transactions ..... 32,506 114,860 106,416 5,237,814 6,461,709 248,796
Forward foreign currency
contracts and foreign
currency transactions ... -- (6,976) -- -- -- --
Futures contracts ......... -- -- (59,980) (239,068) -- --
Change in unrealized appreciation/
(depreciation) of:
Securities ................ 89,659 (1,661,146) 373,299 6,541,683 9,512,086 888,856
Forward foreign currency
contracts ................. -- (6,956) -- -- -- --
Foreign currency, futures
contracts and other
assets and liabilities .. -- (51) 6,730 -- -- --
---------- ----------- ---------- ----------- ----------- ----------
Net realized and unrealized
gain/(loss) on
investments ............... 122,165 (1,560,269) 426,465 11,540,429 15,973,795 1,137,652
---------- ----------- ---------- ----------- ----------- ----------
NET INCREASE/(DECREASE) IN
NET ASSETS RESULTING FROM
OPERATIONS ................ $ 171,059 $ (961,964) $1,152,879 $26,352,786 $27,840,971 $1,973,528
========== =========== ========== =========== =========== ==========
- --------------
* The High Yield Fund commenced operations on April 8, 1998.
(a) Fiscal year end changed to October 31. Prior to this, the fiscal year end was June 30. The amounts reported are for the period
July 1, 1998 through October 31, 1998.
(b) Fiscal year end changed to October 31. Prior to this, the fiscal year end was December 31. The amounts reported are for the
period January 1, 1998 through October 31, 1998.
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FLORIDA
CALIFORNIA INSURED TAX-EXEMPT BOND & GROWTH & EMERGING INTERNATIONAL
MUNICIPAL MUNICIPAL BOND STOCK INCOME GROWTH NORTHWEST GROWTH GROWTH
FUND(A) FUND(A) FUND(B) FUND FUND FUND(A) FUND FUND(A) FUND(A)
- ---------- -------- ----------- ----------- ----------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ -- $ -- $ -- $ 6,150,276 $ 9,248,394 $ 240,508 $ 2,434,909 $ 99,169 $ 561,302
-- -- -- -- -- -- -- -- (57,586)
-- -- -- -- -- -- -- -- --
6,494,712 405,178 14,499,086 9,131,067 192,905 185,291 662,526 118,735 168,750
-- -- -- -- -- -- -- -- --
- ---------- -------- ----------- ----------- ----------- ------------ ------------ ------------ ------------
6,494,712 405,178 14,499,086 15,281,343 9,441,299 425,799 3,097,435 217,904 672,466
- ---------- -------- ----------- ----------- ----------- ------------ ------------ ------------ ------------
778,933 50,825 1,213,255 2,190,790 3,575,552 955,950 1,920,011 493,746 497,321
11,142 370 27,378 47,702 140,403 42,355 28,824 3,974 62,778
17,666 12,704 12,311 32,848 34,679 17,314 28,835 14,857 22,826
10,161 661 26,753 36,155 64,109 8,795 30,623 4,879 4,684
- ---------- -------- ----------- ----------- ----------- ------------ ------------ ------------ ------------
16,663 11,603 15,380 40,340 17,564 13,053 40,201 14,661 16,767
(4,703) 249 50,025 178,195 180,381 89,598 268,906 112,851 43,288
16,887 3,741 (18,651) (35,546) (17,257) 2,398 (48,462) 2,835 4,665
243,655 13,587 579,559 781,136 1,075,860 87,371 648,859 79,727 28,070
138,111 18,248 113,218 636,837 924,497 125,313 475,377 77,778 13,265
24 6 9 211 84,486 41,033 -- 14,719 28,349
34,980 2,619 92,611 185,212 318,154 65,918 291,730 89,971 32,907
6,006 859 5,392 62,975 154,006 35,585 102,626 38,320 8,637
14 9 10 14 10,505 5,398 -- 4,592 5,239
- ---------- -------- ----------- ----------- ----------- ------------ ------------ ------------ ------------
(76,222) (41,923) -- -- -- -- -- -- --
- ---------- -------- ----------- ----------- ----------- ------------ ------------ ------------ ------------
1,193,317 73,558 2,117,250 4,156,869 6,562,939 1,490,081 3,787,530 952,910 768,796
(11,142) (370) (1,115) (5,244) (3,489) (1,653) (3,133) (3,974) (175)
- ---------- -------- ----------- ----------- ----------- ------------ ------------ ------------ ------------
1,182,175 73,188 2,116,135 4,151,625 6,559,450 1,488,428 3,784,397 948,936 768,621
- ---------- -------- ----------- ----------- ----------- ------------ ------------ ------------ ------------
5,312,537 331,990 12,382,951 11,129,718 2,881,849 (1,062,629) (686,962) (731,032) (96,155)
- ---------- -------- ----------- ----------- ----------- ------------ ------------ ------------ ------------
1,126,382 108,099 2,762,769 16,284,537 13,620,241 (345,938) 15,687,952 (527,165) (14,371,123)
-- -- -- -- -- (202,885) -- (166,080) 182,020
(8,126) -- -- -- -- -- -- -- --
2,680,980 190,205 14,926,609 (16,486,272) 46,786,931 (9,803,580) (33,975,835) (28,993,384) (4,702,516)
-- -- -- -- -- (420,016) -- 163,275 (2,486,174)
-- -- -- -- -- (11,427) -- 491 (11,871)
- ---------- -------- ----------- ----------- ----------- ------------ ------------ ------------ ------------
3,799,236 298,304 17,689,378 (201,735) 60,407,172 (10,783,846) (18,287,883) (29,522,863) (21,389,664)
- ---------- -------- ----------- ----------- ----------- ------------ ------------ ------------ ------------
$9,111,773 $630,294 $30,072,329 $10,927,983 $63,289,021 $(11,846,475) $(18,974,845) $(30,253,895) $(21,485,819)
========== ======== =========== =========== =========== ============ ============ ============ ============
See Notes to Financial Statements.
</TABLE>
<PAGE>
STATEMENTS of OPERATIONS (continued)
WM GROUP OF FUNDS
FOR THE YEAR ENDED JUNE 30, 1998
SHORT TERM
TARGET HIGH
MATURITY QUALITY
2002 FUND BOND FUND
--------- ----------
INVESTMENT INCOME:
Dividends ........................................ $ -- $ --
Foreign withholding tax on dividend income ....... -- --
Interest ......................................... 164,517 1,898,116
-------- ----------
Total investment income ...................... 164,517 1,898,116
-------- ----------
EXPENSES:
Investment advisory fee .......................... 6,596 145,180
Administration fee ............................... 5,515 33,910
Custodian fees ................................... 2,514 8,438
Legal and audit fees ............................. 11,374 23,529
Trustees' fees and expenses ...................... 1,378 3,790
Amortization of organization costs ............... 11,757 3,545
Registration and filing fees ..................... 11,213 25,417
Printing and postage fees ........................ 10,388 38,884
Other ............................................ 721 5,653
Shareholder servicing and distribution fees:
Class A Shares ................................. 6,596 55,796
Class B Shares ................................. -- 30,496
Class S Shares ................................. -- 6,400
Transfer agent fees:
Class A Shares ................................. 1,311 16,690
Class B Shares ................................. -- 2,274
Class S Shares ................................. -- 313
Fees waived and/or expenses absorbed by investment
advisor and/or administrator ..................... (50,726) (133,982)
-------- ----------
Total expenses ............................... 18,637 266,333
Fees reduced by credits allowed by the custodian . (2,162) (428)
-------- ----------
Net expenses ................................. 16,475 265,905
-------- ----------
NET INVESTMENT INCOME/(LOSS) ..................... 148,042 1,632,211
-------- ----------
NET REALIZED AND UNREALIZED GAIN/(LOSS) ON
INVESTMENTS:
Realized gain/(loss) from:
Security transactions .......................... 22,489 (108,783)
Forward foreign currency contracts and foreign
currency transactions ........................ -- --
Futures contracts .............................. -- (105,817)
Change in unrealized appreciation/(depreciation) of:
Securities ..................................... 79,878 63,850
Forward foreign currency contracts ............. -- --
Foreign currency, written options, futures
contracts and other assets and liabilities ... -- 8,262
-------- ----------
Net realized and unrealized gain/(loss) on
investments .................................... 102,367 (142,488)
-------- ----------
NET INCREASE/(DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS ................................ $250,409 $1,489,723
======== ==========
See Notes to Financial Statements.
<PAGE>
<TABLE>
<CAPTION>
CALIFORNIA
INSURED FLORIDA
INTERMEDIATE CALIFORNIA INSURED EMERGING INTERNATIONAL
MUNICIPAL MUNICIPAL MUNICIPAL GROWTH GROWTH GROWTH
FUND FUND FUND FUND FUND FUND
- ---------- ----------- ---------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C>
$ -- $ -- $ -- $ 1,382,894 $ 766,746 $ 3,152,573
-- -- -- (16,446) (31,377) (328,410)
3,371,439 20,795,207 1,414,701 774,473 598,853 450,512
- ---------- ----------- ---------- ----------- ----------- ------------
3,371,439 20,795,207 1,414,701 2,140,921 1,334,222 3,274,675
- ---------- ----------- ---------- ----------- ----------- ------------
380,528 2,010,319 146,555 2,739,222 2,214,151 1,354,934
161,117 860,498 65,423 723,887 620,085 370,136
3,649 17,049 2,465 64,008 28,455 141,813
18,270 37,650 16,552 34,992 33,881 35,290
5,753 25,532 2,935 18,682 18,340 10,985
1,622 -- 12,457 9,110 -- --
13,505 15,775 21,696 33,132 29,889 31,102
27,270 126,691 18,822 236,559 316,038 118,636
14,542 53,537 10,313 21,117 20,942 19,803
104,424 771,965 49,647 272,672 402,102 115,246
213,039 279,831 50,711 320,219 296,876 45,383
17 75 109 137,559 71,785 96,331
4,540 30,491 2,370 53,641 79,198 28,655
2,670 4,200 733 30,565 33,324 7,474
-- -- -- 4,502 3,923 4,363
(246,808) (656,426) (141,047) -- (3,472) (29,113)
- ---------- ----------- ---------- ----------- ----------- ------------
704,138 3,577,187 259,741 4,699,867 4,165,517 2,351,038
(3,433) (13,157) (1,636) (6,149) (8,703) (1,024)
- ---------- ----------- ---------- ----------- ----------- ------------
700,705 3,564,030 258,105 4,693,718 4,156,814 2,350,014
- ---------- ----------- ---------- ----------- ----------- ------------
2,670,734 17,231,177 1,156,596 (2,552,797) (2,822,592) 924,661
- ---------- ----------- ---------- ----------- ----------- ------------
954,502 7,849,255 555,785 57,657,686 79,544,854 3,336,138
-- -- -- 776,368 (422,776) 7,584,974
(70,527) 994,551 (71,437) -- -- --
184,266 3,864,365 620,889 33,821,257 (46,050,910) (19,379,433)
-- -- -- (333,137) 239,541 (2,561,790)
-- -- -- 13,146 5,627 29,643
- ---------- ----------- ---------- ----------- ----------- ------------
1,068,241 12,708,171 1,105,237 91,935,320 33,316,336 (10,990,468)
- ---------- ----------- ---------- ----------- ----------- ------------
$3,738,975 $29,939,348 $2,261,833 $89,382,523 $30,493,744 $(10,065,807)
========== =========== ========== =========== =========== ============
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
STATEMENTS of OPERATIONS (continued)
WM GROUP OF FUNDS
FOR THE YEAR ENDED DECEMBER 31, 1997
<CAPTION>
U.S.
GOVERNMENT TAX-EXEMPT
SECURITIES INCOME BOND
FUND FUND FUND
----------- ---------- -----------
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest ....................................... $ 8,575,819 $6,681,231 $11,310,385
----------- ---------- -----------
EXPENSES:
Investment advisory fee ........................ 769,591 553,562 987,356
Custodian fees ................................. 43,651 23,081 18,650
Legal and audit fees ........................... 11,787 11,192 12,426
Trustees' fees and expenses .................... 8,499 8,499 8,499
Registration and filing fees ................... 22,077 22,666 18,037
Printing and postage fees ...................... 69,911 52,029 54,947
Insurance ...................................... 3,927 3,195 6,047
Shareholder servicing and distribution fees:
Class A Shares ............................... 249,837 169,132 407,707
Class B Shares ............................... 29,872 78,016 66,282
----------- ---------- -----------
Transfer agent fees:
Class A Shares ............................... 102,702 85,007 80,006
Class B Shares ............................... 2,742 8,515 4,541
----------- ---------- -----------
Total expenses ............................. 1,314,596 1,014,894 1,664,498
Fees reduced by credits allowed by the
custodian .................................... (2,671) (2,840) (3,033)
----------- ---------- -----------
Net expenses ............................... 1,311,925 1,012,054 1,661,465
----------- ---------- -----------
NET INVESTMENT INCOME .......................... 7,263,894 5,669,177 9,648,920
----------- ---------- -----------
NET REALIZED AND UNREALIZED GAIN/(LOSS)
ON INVESTMENTS:
Realized gain/(loss) from security
transactions ................................... (493,856) 1,059,244 2,286,826
Change in unrealized appreciation of:
Securities ................................... 4,371,425 1,919,907 4,270,931
----------- ---------- -----------
Net realized and unrealized gain on
investments .................................. 3,877,569 2,979,151 6,557,757
----------- ---------- -----------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS ................................... $11,141,463 $8,648,328 $16,206,677
=========== ========== ===========
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
STATEMENTS of OPERATIONS (continued)
WM GROUP OF FUNDS
FOR THE YEAR ENDED OCTOBER 31, 1997
<CAPTION>
BOND & GROWTH & NORTHWEST
STOCK FUND INCOME FUND FUND
----------- ----------- -----------
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends ..................................... $ 5,322,979 $ 4,332,639 $ 2,113,823
Interest ...................................... 8,412,688 188,590 242,821
----------- ----------- -----------
Total investments income .................. 13,735,667 4,521,229 2,356,644
----------- ----------- -----------
EXPENSES:
Investment advisory fee ....................... 1,912,341 1,630,777 1,538,183
Custodian fees ................................ 45,819 55,954 32,497
Legal and audit fees .......................... 16,551 15,587 15,558
Trustees' fees and expenses ................... 8,745 8,745 8,745
Registration and filing fees .................. 56,359 80,933 40,153
Printing and postage fees ..................... 123,830 124,511 154,301
Insurance ..................................... 5,602 4,332 4,338
Shareholder servicing and distribution fees:
Class A Shares .............................. 701,288 563,809 537,269
Class B Shares .............................. 334,855 365,290 247,630
----------- ----------- -----------
Transfer agent fees:
Class A Shares .............................. 198,953 188,439 290,223
Class B Shares .............................. 36,983 56,918 57,338
Expenses absorbed by investment advisor ....... -- -- (137,944)
----------- ----------- -----------
Total expenses ............................ 3,441,326 3,095,295 2,788,291
Fees reduced by credits allowed by the
custodian ................................... (9,658) (10,113) (7,353)
----------- ----------- -----------
Net expenses .............................. 3,431,668 3,085,182 2,780,938
----------- ----------- -----------
NET INVESTMENT INCOME/(LOSS) .................. 10,303,999 1,436,047 (424,294)
----------- ----------- -----------
NET REALIZED AND UNREALIZED GAIN
ON INVESTMENTS:
Realized gain from security transactions ...... 36,021,498 26,629,017 41,408,116
Change in unrealized appreciation of:
Securities .................................. 12,620,413 37,406,069 45,605,120
----------- ----------- -----------
Net realized and unrealized gain on
investments ................................. 48,641,911 64,035,086 87,013,236
----------- ----------- -----------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS .................................. $58,945,910 $65,471,133 $86,588,942
=========== =========== ===========
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
STATEMENTS of CHANGES in NET assets
WM GROUP OF FUNDS
FOR THE YEAR ENDED OCTOBER 31, 1998
<CAPTION>
SHORT TERM CALIFORNIA
TARGET HIGH U.S. INSURED
MATURITY HIGH QUALITY GOVERNMENT INTERMEDIATE
2002 YIELD BOND SECURITIES INCOME MUNICIPAL
FUND(A) FUND* FUND(A) FUND(B) FUND(B) FUND(A)
---------- ----------- ----------- ------------ ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Net investment income/
(loss) .................... $ 48,894 $ 598,305 $ 726,414 $ 14,812,357 $ 11,867,176 $ 835,876
Net realized gain/(loss) on
investments sold, forward
foreign currency contracts,
foreign currency
transactions, and futures
contracts during the
period .................... 32,506 107,884 46,436 4,998,746 6,461,709 248,796
Net unrealized appreciation/
(depreciation) of
investments, forward
foreign currency contracts,
foreign currency, futures
contracts and other assets
and liabilities during the
period .................... 89,659 (1,668,153) 380,029 6,541,683 9,512,086 888,856
---------- ----------- ----------- ------------ ------------ -----------
Net increase/(decrease) in
net assets resulting from
operations .................. 171,059 (961,964) 1,152,879 26,352,786 27,840,971 1,973,528
Distributions to shareholders from:
Net investment income:
Class A Shares .......... -- (499,993) (609,802) (11,608,371) (10,237,430) (563,810)
Class B Shares .......... -- (57,889) (53,647) (762,576) (1,294,669) (272,587)
Class S Shares .......... -- (473) (11,951) (200,327) (63,170) (22)
Class I Shares .......... -- (26,018) (32,624) (2,016,083) (271,907) (18)
Distributions in excess of
net investment income:
Class A Shares .......... -- (11,898) -- -- -- --
Class B Shares .......... -- (1,434) -- -- -- --
Class S Shares .......... -- (11) -- -- -- --
Class I Shares .......... -- (538) -- -- -- --
Net realized gains on investments:
Class A Shares .......... -- -- -- -- -- --
Class B Shares .......... -- -- -- -- -- --
Class S Shares .......... -- -- -- -- -- --
Class I Shares .......... -- -- -- -- -- --
Capital:
Class A Shares .......... -- -- -- -- -- --
Class B Shares .......... -- -- -- -- -- --
Net increase/(decrease) in
net assets from
Fund share transactions:
Class A Shares .......... (321,663) 12,128,281 (3,182,556) 150,896,689 121,902,271 (1,916,283)
Class B Shares .......... -- 3,034,079 249,247 24,695,898 23,027,651 1,857,862
Class S Shares .......... -- 25,952 (97,582) 5,098,895 1,458,569 22
Class I Shares .......... -- 1,395,597 (1,488,732) 37,514,925 6,765,814 18
---------- ----------- ----------- ------------ ------------ -----------
Net increase/(decrease) in
net assets ................ (150,604) 15,023,691 (4,074,768) 229,971,836 169,128,100 1,078,710
NET ASSETS:
Beginning of period ......... 2,535,848 -- 42,962,776 110,405,327 87,555,390 60,413,903
---------- ----------- ----------- ------------ ------------ -----------
End of period ............... $2,385,244 $15,023,691 $38,888,008 $340,377,163 $256,683,490 $61,492,613
========== =========== =========== ============ ============ ===========
Undistributed net investment
income/(accumulated net
investment loss/
distributions in excess of
net investment income) at
end of period ............. $ 135,040 $ (6,925) $ 47,920 $ (467,853) $ (16,407) $ 14,596
========== =========== =========== ============ ============ ===========
- --------------
* The High Yield Fund commenced operations on April 8, 1998.
(a) Fiscal year end changed to October 31. Prior to this, the fiscal year end was June 30. The amounts reported are for the period
July 1, 1998 through October 31, 1998.
(b) Fiscal year end changed to October 31. Prior to this, the fiscal year end was December 31. The amounts reported are for the
period January 1, 1998 through October 31, 1998.
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FLORIDA
CALIFORNIA INSURED TAX-EXEMPT BOND & GROWTH & EMERGING INTERNATIONAL
MUNICIPAL MUNICIPAL BOND STOCK INCOME GROWTH NORTHWEST GROWTH GROWTH
FUND(A) FUND(A) FUND(B) FUND FUND FUND(A) FUND FUND(A) FUND(A)
- ------------ ----------- ------------ ------------ ------------ ------------ ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 5,312,537 $ 331,990 $ 12,382,951 $ 11,129,718 $ 2,881,849 $ (1,062,629) $ (686,962) $ (731,032) $ (96,155)
1,118,256 108,099 2,762,769 16,284,537 13,620,241 548,823 15,687,952 (693,245) (14,189,103)
2,680,980 190,205 14,926,609 (16,486,272) 46,786,931 (10,235,023) (33,975,835) (28,829,618) (7,200,561)
- ------------ ----------- ------------ ------------ ------------ ------------ ------------ ------------ ------------
9,111,773 630,294 30,072,329 10,927,983 63,289,021 (11,846,475) (18,974,845) (30,253,895) (21,485,819)
(4,707,679) (258,634) (11,894,595) (9,469,674) (1,675,441) -- -- -- --
(562,047) (72,319) (488,280) (1,454,890) (6,863) -- -- -- --
(100) (24) (37) (899) -- -- -- -- --
(22) (20) (39) -- (599,129) -- -- -- --
-- -- -- -- -- -- -- -- --
-- -- -- -- -- -- -- --
-- -- -- -- -- -- -- -- --
-- -- -- -- -- -- -- -- --
-- -- -- (44,700,817) (35,349,722) -- (48,525,837) -- --
-- -- -- (8,011,754) (6,489,532) -- (8,244,288) -- --
-- -- -- -- -- -- -- -- --
-- -- -- -- -- -- -- -- --
-- -- -- -- -- -- (403,517) -- --
-- -- -- -- -- -- (73,872) -- --
(6,121,441) (949,005) 96,159,954 35,961,096 204,140,230 (3,032,635) 50,296,608 (10,392,036) (3,249,877)
14,687,124 904,259 8,527,127 36,372,086 65,990,211 2,756,641 19,623,808 (1,508,977) (105,427)
(505) 24 1,303 31,557 10,374,502 (938,866) -- (1,254,006) (851,874)
22 20 1,075 -- 167,355,560 8,657,383 -- (16,400,862) 4,675,514
- ------------ ----------- ------------ ------------ ------------ ------------ ------------ ------------ ------------
12,407,125 254,595 122,378,837 19,654,688 467,028,837 (4,403,952) (6,301,943) (59,809,776) (21,017,483)
324,873,954 21,615,575 196,130,465 353,573,751 349,922,358 279,554,169 296,534,684 186,887,654 160,695,109
- ------------ ----------- ------------ ------------ ------------ ------------ ------------ ------------ ------------
$337,281,079 $21,870,170 $318,509,302 $373,228,439 $816,951,195 $275,150,217 $290,232,741 $127,077,878 $139,677,626
============ =========== ============ ============ ============ ============ ============ ============ ============
$ 32,263 $ 16,934 $ 79,147 $ 1,396,366 $ 626,908 $ (2,454) $ -- $ (7,953) $ 6,019,163
============ =========== ============ ============ ============ ============ ============ ============ ============
See Notes to Financial Statements.
</TABLE>
<PAGE>
STATEMENTS of CHANGES in NET assets (continued)
WM GROUP OF FUNDS
FOR THE YEAR ENDED JUNE 30, 1998
SHORT TERM
TARGET HIGH
MATURITY QUALITY
2002 FUND BOND FUND
---------- -----------
Net investment income/(loss) .................... $ 148,042 $ 1,632,211
Net realized gain/(loss) on investments sold,
forward foreign currency contracts, foreign
currency transactions and futures contracts
during the year ............................... 22,489 (214,600)
Net unrealized appreciation/(depreciation) of
investments, forward foreign currency contracts,
foreign currency, futures contracts and other
assets and liabilities during the year ........ 79,878 72,112
---------- -----------
Net increase in net assets resulting from
operations ...................................... 250,409 1,489,723
Distributions to shareholders from:
Net investment income:
Class A Shares ................................ (170,981) (1,197,547)
Class B Shares ................................ -- (145,841)
Class S Shares ................................ -- (29,081)
Class I Shares ................................ -- (171,711)
Distributions in excess of investment income:
Class A Shares ................................ -- --
Class B Shares ................................ -- --
Class S Shares ................................ -- --
Class I Shares ................................ -- --
Net realized gains on investments:
Class A Shares ................................ (26,467) --
Class B Shares ................................ -- --
Class S Shares ................................ -- --
Class I Shares ................................ -- --
Capital:
Class A Shares ................................ -- (31,166)
Class B Shares ................................ -- (3,795)
Class S Shares ................................ -- (757)
Class I Shares ................................ -- (4,469)
Net increase/(decrease) in net assets from Fund
share transactions:
Class A Shares ................................ (332,981) 21,970,831
Class B Shares ................................ -- 460,337
Class S Shares ................................ -- 51,136
Class I Shares ................................ -- 345,142
---------- -----------
Net increase/(decrease) in net assets ........... (280,020) 22,732,802
NET ASSETS:
Beginning of year ............................... 2,815,868 20,229,974
---------- -----------
End of year ..................................... $2,535,848 $42,962,776
========== ===========
Undistributed net investment income/(accumulated
net investment loss/distributions in excess of
net investment income) at end of year ......... $ 82,227 $ (650)
========== ===========
See Notes to Financial Statements.
<PAGE>
<TABLE>
<CAPTION>
CALIFORNIA
INSURED FLORIDA
INTERMEDIATE CALIFORNIA INSURED EMERGING INTERNATIONAL
MUNICIPAL MUNICIPAL MUNICIPAL GROWTH GROWTH GROWTH
FUND FUND FUND FUND FUND FUND
- ----------- ------------ ----------- ------------ ------------ -------------
<S> <C> <C> <C> <C> <C>
$ 2,670,734 $ 17,231,177 $ 1,156,596 $ (2,552,797) $ (2,822,592) $ 924,661
883,975 8,843,806 484,348 58,434,054 79,122,078 10,921,112
184,266 3,864,365 620,889 33,501,266 (45,805,742) (21,911,580)
- ----------- ------------ ----------- ------------ ------------ ------------
3,738,975 29,939,348 2,261,833 89,382,523 30,493,744 (10,065,807)
(1,873,113) (16,032,716) (954,335) -- -- (1,975,295)
(797,504) (1,238,105) (204,787) -- -- (178,840)
(64) (548) (442) -- -- (317,435)
(53) (50) (53) -- -- (4,405,354)
(57) (9,986) -- -- -- (123,824)
(24) (771) -- -- -- (11,211)
-- -- -- -- -- (19,899)
-- -- -- -- -- (276,154)
(403,151) (23,641) -- (8,274,234) (8,507,941) (1,992,183)
(200,864) (1,826) -- (2,485,038) (1,627,499) (212,435)
(16) -- -- (1,125,281) (372,058) (403,997)
(10) -- -- (10,259,464) (2,639,418) (4,204,998)
-- -- -- -- -- --
-- -- -- -- -- --
-- -- -- -- -- --
-- -- -- -- -- --
(6,761,633) (39,569,128) (7,117,017) (24,983,912) (59,785,251) (14,343,542)
559,381 8,332,257 (200,018) 656,439 (2,364,589) 108,509
80 329 (28,294) (3,717,859) (2,844,853) (905,239)
63 61 53 (42,247,133) (20,847,090) 29,866,956
- ----------- ------------ ----------- ------------ ------------ ------------
(5,737,990) (18,604,776) (6,243,060) (3,053,959) (68,494,955) (9,460,748)
66,151,893 343,478,730 27,858,635 282,608,128 255,382,609 170,155,857
- ----------- ------------ ----------- ------------ ------------ ------------
$60,413,903 $324,873,954 $21,615,575 $279,554,169 $186,887,654 $160,695,109
=========== ============ =========== ============ ============ ============
$ 15,157 $ (6,864) $ 13,135 $ (12,382) $ 161,566 $ 3,597,176
=========== ============ =========== ============ ============ ============
See Notes to Financial Statements.
</TABLE>
<PAGE>
STATEMENTS of CHANGES in NET assets (continued)
WM GROUP OF FUNDS
FOR THE YEAR ENDED JUNE 30, 1997
SHORT TERM
TARGET HIGH
MATURITY QUALITY
2002 FUND BOND FUND
---------- -----------
Net investment income/(loss) ....................... $ 179,846 $ 1,965,746
Net realized gain/(loss) on investments sold,
forward foreign currency contracts, foreign
currency transactions, futures contracts and
closed written options during the year ........... 20,427 (460,363)
Net unrealized appreciation/(depreciation) of
investments, forward foreign currency contracts,
foreign currency, futures contracts, written
options and other assets and liabilities during
the year ......................................... 6,041 308,395
---------- -----------
Net increase/(decrease) in net assets resulting
from operations .................................... 206,314 1,813,778
Distributions to shareholders from:
Net investment income:
Class A Shares ................................... (200,615) (1,327,651)
Class B Shares ................................... -- (173,000)
Class S Shares ................................... -- (97,246)
Class I Shares ................................... -- (227,346)
Distributions in excess of investment income:
Class A Shares ................................... -- --
Class B Shares ................................... -- --
Class S Shares ................................... -- --
Class I Shares ................................... -- --
Net realized gains on investments:
Class A Shares ................................... (14,491) --
Class B Shares ................................... -- --
Class S Shares ................................... -- --
Net increase/(decrease) in net assets from Fund
share transactions:
Class A Shares ................................... (300,042) (18,780,368)
Class B Shares ................................... -- (447,758)
Class S Shares ................................... -- (2,738,794)
Class I Shares ................................... -- 2,800,633
---------- -----------
Net increase/(decrease) in net assets .............. (308,834) (19,177,752)
NET ASSETS:
Beginning of year .................................. 3,124,702 39,407,726
---------- -----------
End of year ........................................ $2,815,868 $20,229,974
========== ===========
Undistributed net investment income/(accumulated
net investment loss/distributions in excess of
net investment income) at end of year ............ $ 93,410 $ 16,879
========== ===========
See Notes to Financial Statements.
<PAGE>
<TABLE>
<CAPTION>
CALIFORNIA
INSURED FLORIDA
INTERMEDIATE CALIFORNIA INSURED EMERGING INTERNATIONAL
MUNICIPAL MUNICIPAL MUNICIPAL GROWTH GROWTH GROWTH
FUND FUND FUND FUND FUND FUND
- ------------ ------------ ----------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
$ 3,182,357 $ 20,486,611 $ 1,541,262 $ (842,668) $ (3,798,378) $ 552,504
529,710 5,995,910 343,304 23,854,848 (7,974,694) 8,783,992
1,035,421 5,182,081 678,418 4,925,545 (3,135,432) 15,640,885
- ------------ ------------ ----------- ------------ ------------ ------------
4,747,488 31,664,602 2,562,984 27,937,725 (14,908,504) 24,977,381
(2,354,600) (19,363,780) (1,349,518) -- -- (944,934)
(827,004) (1,122,377) (226,428) -- -- (33,752)
(278) (398) (386) -- -- --
(47) (56) (107) -- -- (1,421,219)
-- -- (7,232) -- -- --
-- -- (1,421) -- -- --
-- -- (3) -- -- --
(231,272) -- -- (19,083,057) (16,295,524) (740,078)
(96,670) -- -- (4,239,788) (2,456,114) (45,566)
(52) -- -- (2,712,699) (1,158,776) (157,954)
(5) -- -- (13,384,790) (5,828,460) (867,959)
(10,241,881) (64,410,300) (7,880,857) (62,908,925) (91,171,361) (65,266,118)
(312,536) 3,983,769 (517,149) 6,890,521 3,406,635 (148,620)
(9,871) (4,601) 17,772 (31,340,022) (31,941,983) (28,119,034)
1,052 1,056 1,052 131,010,126 59,424,781 83,322,919
- ------------ ------------ ----------- ------------ ------------ ------------
(9,325,676) (49,252,085) (7,401,293) 32,169,091 (100,929,306) 10,555,066
75,477,569 392,730,815 35,259,928 250,439,037 356,311,915 159,600,791
- ------------ ------------ ----------- ------------ ------------ ------------
$ 66,151,893 $343,478,730 $27,858,635 $282,608,128 $255,382,609 $170,155,857
============ ============ =========== ============ ============ ============
$ 3,196 $ 33,691 $ 2,892 $ (114,094) $ (215,392) $ 1,856,754
============ ============ =========== ============ ============ ============
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
STATEMENTS of CHANGES in NET assets (continued)
WM GROUP OF FUNDS
FOR THE YEAR ENDED OCTOBER 31, 1997
<CAPTION>
BOND & GROWTH &
STOCK INCOME NORTHWEST
FUND FUND FUND
------------ ------------ ------------
<S> <C> <C> <C>
Net investment income/(loss) ................ $ 10,303,999 $ 1,436,047 $ (424,294)
Net realized gain on investments sold,
forward foreign currency contracts,
foreign currency transactions and futures
contracts during the year ................. 36,021,498 26,629,017 41,408,116
Net unrealized appreciation of investments,
forward foreign currency contracts,
foreign currency, futures contracts and
other assets and liabilities during the
year ...................................... 12,620,413 37,406,069 45,605,120
------------ ------------ ------------
Net increase in net assets resulting from
operations .................................. 58,945,910 65,471,133 86,588,942
Distributions to shareholders from:
Net investment income:
Class A Shares .......................... (9,565,088) (1,646,567) --
Class B Shares .......................... (866,492) (33,995) --
Net realized gains on investments:
Class A Shares .......................... (16,337,631) (12,746,652) (16,815,468)
Class B Shares .......................... (1,513,284) (1,708,904) (1,448,706)
Net increase in net assets from Fund share
transactions:
Class A Shares .......................... 24,198,233 79,235,236 18,342,906
Class B Shares .......................... 21,054,537 20,170,211 18,507,592
------------ ------------ ------------
Net increase in net assets .................. 75,916,185 148,740,462 105,175,266
NET ASSETS:
Beginning of year ........................... 277,657,566 201,181,896 191,359,418
------------ ------------ ------------
End of year ................................. $353,573,751 $349,922,358 $296,534,684
============ ============ ============
Undistributed net investment income/
(accumulated net investment loss) at end
of year ................................... $ 1,194,421 $ 30,939 $ (422,848)
============ ============ ============
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
STATEMENTS of CHANGES in NET assets (continued)
WM GROUP OF FUNDS
FOR THE YEAR ENDED DECEMBER 31, 1997
<CAPTION>
U.S.
GOVERNMENT TAX-EXEMPT
SECURITIES INCOME BOND
FUND FUND FUND
------------ ------------ ------------
<S> <C> <C> <C>
Net investment income ....................... $ 7,263,894 $ 5,669,177 $ 9,648,920
Net realized gain/(loss) on investments
sold, forward foreign currency contracts,
foreign currency transactions and futures
contracts during the year ................. (493,856) 1,059,244 2,286,826
Net unrealized appreciation of investments,
forward foreign currency contracts,
foreign currency, futures contracts and
other assets and liabilities during the
year ...................................... 4,371,425 1,919,907 4,270,931
------------ ------------ ------------
Net increase in net assets resulting from
operations .................................. 11,141,463 8,648,328 16,206,677
Distributions to shareholders from:
Net investment income:
Class A Shares .......................... (7,110,859) (5,227,656) (9,381,180)
Class B Shares .......................... (153,035) (441,521) (267,740)
Net realized gains on investments:
Class A Shares .......................... -- -- (283,504)
Class B Shares .......................... -- -- (11,875)
Net increase/(decrease) in net assets from
Fund share transactions:
Class A Shares .......................... (34,875,593) (11,496,316) (21,611,179)
Class B Shares .......................... 281,357 2,293,277 2,607,483
------------ ------------ ------------
Net decrease in net assets .................. (30,716,667) (6,223,888) (12,741,318)
NET ASSETS:
Beginning of year ........................... 141,121,994 93,779,278 208,871,783
------------ ------------ ------------
End of year ................................. $110,405,327 $ 87,555,390 $196,130,465
============ ============ ============
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
STATEMENTS of CHANGES in NET assets (continued)
WM GROUP OF FUNDS
FOR THE YEAR ENDED DECEMBER 31, 1996
<CAPTION>
U.S.
GOVERNMENT TAX-EXEMPT
SECURITIES INCOME BOND
FUND FUND FUND
------------ ------------ ------------
<S> <C> <C> <C>
Net investment income ....................... $ 9,447,418 $ 6,205,553 $ 10,608,652
Net realized gain/(loss) on investments
sold during the year ...................... (386,962) 1,098,430 (1,336,656)
Net unrealized depreciation of investments
during the year ........................... (6,198,006) (4,354,365) (4,335,561)
------------ ------------ ------------
Net increase in net assets resulting from
operations .................................. 2,862,450 2,949,618 4,936,435
Distributions to shareholders from:
Net investment income:
Class A Shares .......................... (9,312,060) (5,877,677) (10,445,418)
Class B Shares .......................... (135,358) (327,876) (163,235)
Net increase/(decrease) in net assets
from Fund share transactions:
Class A Shares ............................ (32,648,901) (7,741,496) (20,829,678)
Class B Shares ............................ 840,035 2,790,064 2,636,917
------------ ------------ ------------
Net decrease in net assets .................. (38,393,834) (8,207,367) (23,864,979)
NET ASSETS:
Beginning of year ........................... 179,515,828 101,986,645 232,736,762
------------ ------------ ------------
End of year ................................. $141,121,994 $ 93,779,278 $208,871,783
============ ============ ============
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
STATEMENTS of CHANGES in NET assets -- CAPITAL stock ACTIVITY
WM GROUP OF FUNDS
<CAPTION>
HIGH YIELD SHORT TERM
TARGET MATURITY 2002 FUND FUND(B) HIGH QUALITY BOND FUND
------------------------------------ ------------ -------------------------------------------
PERIOD ENDED YEAR ENDED YEAR ENDED PERIOD ENDED PERIOD ENDED YEAR ENDED YEAR ENDED
10/31/98(A) 06/30/98 06/30/97 10/31/98 10/31/98(A) 06/30/98 06/30/97
--------- --------- --------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
AMOUNT
CLASS A:
Sold .......................... $ 13,000 $ 34,948 $ 198,410 $11,803,472 $ 394,104 $39,093,511 $ 2,416,682
Issued in exchange for Class A
shares of Sierra Trust ...... -- -- -- -- -- 33,873,483 --
Issued as reinvestment of
dividends ................... -- 196,535 214,280 462,184 421,928 799,463 854,246
Redeemed ...................... (334,663) (564,464) (712,732) (137,375) (3,998,588) (51,795,626) (22,051,296)
--------- --------- --------- ----------- ----------- ----------- ------------
Net increase/(decrease) ....... $(321,663) $(332,981) $(300,042) $12,128,281 $(3,182,556) $21,970,831 $(18,780,368)
========= ========= ========= =========== =========== =========== ============
CLASS B:
Sold .......................... -- -- -- $ 3,075,214 $ 574,367 $ 348,662 $ 589,127
Issued in exchange for Class
B shares of Sierra Trust .... -- -- -- -- -- 1,149,624 --
Issued as reinvestment of
dividends ................... -- -- -- 22,719 39,967 110,925 129,765
Redeemed ...................... -- -- -- (63,854) (365,087) (1,148,874) (1,166,650)
----------- ----------- ----------- ------------
Net increase/(decrease) ....... -- -- -- $ 3,034,079 $ 249,247 $ 460,337 $ (447,758)
=========== =========== =========== ============
CLASS S:
Sold .......................... -- -- -- $ 25,593 $ 200 $ 27,837 $ 252,492
Issued in exchange
for Class S shares
of Sierra Trust ............. -- -- -- -- -- 568,432 --
Issued as
reinvestment of
dividends ................... -- -- -- 359 8,328 21,221 70,056
Redeemed ...................... -- -- -- -- (106,110) (566,354) (3,061,342)
----------- ----------- ----------- ------------
Net increase/(decrease) ....... -- -- -- $ 25,952 $ (97,582) $ 51,136 $ (2,738,794)
=========== =========== =========== ============
CLASS I:
Sold .......................... -- -- -- $ 1,380,336 $ 508,910 $ 131,968 $ 7,949,206
Issued in exchange for Class I
shares of Sierra Trust ...... -- -- -- -- -- 1,470,065 --
Issued as reinvestment of
dividends ................... -- -- -- 26,556 -- -- --
Redeemed ...................... -- -- -- (11,295) (1,997,642) (1,256,891) (5,148,573)
----------- ----------- ----------- ------------
Net increase/(decrease) ....... -- -- -- $ 1,395,597 $(1,488,732) $ 345,142 $ 2,800,633
=========== =========== =========== ============
SHARES
CLASS A:
Sold .......................... 1,167 3,257 18,881 1,197,921 167,245 16,747,592 1,042,539
Issued in exchange for Class A
shares of Sierra Trust ...... -- -- -- -- -- 14,537,976 --
Issued as reinvestment of
dividends ................... -- 18,789 20,369 42,998 180,152 363,171 368,009
Redeemed ...................... (29,926) (52,004) (67,265) (14,619) (1,710,460) (22,246,314) (9,497,646)
--------- --------- --------- ----------- ----------- ----------- ------------
Net increase/(decrease) ....... (28,759) (29,958) (28,015) 1,226,300 (1,363,063) 9,402,425 (8,087,098)
=========== =========== =========== ============
CLASS B:
Sold .......................... -- -- -- 322,674 245,069 151,031 254,315
Issued in exchange for Class B
shares of Sierra Trust ...... -- -- -- -- -- 493,401 --
Issued as reinvestment of
dividends ................... -- -- -- 2,484 17,061 47,771 55,922
Redeemed ...................... -- -- -- (7,083) (156,010) (494,001) (502,572)
----------- ----------- ----------- ------------
Net increase/(decrease) ....... -- -- -- 318,075 106,120 198,202 (192,335)
=========== =========== =========== ============
CLASS S:
Sold .......................... -- -- -- 2,650 85 12,088 108,858
Issued in exchange for Class S
shares of Sierra Trust ........ -- -- -- -- -- 243,962 --
Issued as reinvestment of
dividends ................... -- -- -- 54 3,556 9,129 30,150
Redeemed ...................... -- -- -- -- (45,552) (243,870) (1,316,825)
----------- ----------- ----------- ------------
Net increase/(decrease) ....... -- -- -- 2,704 (41,911) 21,309 (1,177,817)
=========== =========== =========== ============
CLASS I:
Sold .......................... -- -- -- 146,137 216,632 59,563 3,412,404
Issued in exchange for Class I
shares of Sierra Trust ...... -- -- -- -- -- 630,929 --
Issued as reinvestment of
dividends ................... -- -- -- 2,971 -- -- --
Redeemed ...................... -- -- -- (1,249) (857,694) (540,840) (2,226,526)
----------- ----------- ----------- ------------
Net increase/(decrease) ....... -- -- -- 147,859 (641,062) 149,652 1,185,878
=========== =========== =========== ============
- --------------
(a) Fiscal year end changed to October 31. Prior to this, the fiscal year end was June 30. The amounts reported are for the period
July 1, 1998 through October 31, 1998.
(b) The High Yield Fund commenced operations on April 8, 1998.
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
STATEMENTS of CHANGES in NET assets -- CAPITAL stock ACTIVITY
WM GROUP OF FUNDS
<CAPTION>
U.S. GOVERNMENT SECURITIES FUND(A) INCOME FUND(B)
---------------------------------------------- ---------------------------------------------
PERIOD ENDED YEAR ENDED YEAR ENDED PERIOD ENDED YEAR ENDED YEAR ENDED
10/31/98(C) 12/31/97 12/31/96 10/31/98(C) 12/31/97 12/31/96
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
AMOUNT
CLASS A:
Sold ......................... $ 10,226,965 $ 4,447,940 $ 7,854,380 $ 26,781,674 $ 11,286,277 $ 10,996,951
Issued in exchange for Class
A shares of Sierra Trust ... 199,804,185 -- -- 142,588,808 -- --
Issued as reinvestment of
dividends .................. 7,762,789 5,145,658 6,819,272 6,336,890 3,823,083 4,323,174
Redeemed ..................... (66,897,250) (44,469,191) (47,322,553) (53,805,101) (26,605,676) (23,061,621)
------------ ------------ ------------ ------------ ------------ ------------
Net increase/(decrease) ...... $150,896,689 $(34,875,593) $(32,648,901) $121,902,271 $(11,496,316) $ (7,741,496)
============ ============ ============ ============ ============ ============
CLASS B:
Sold ......................... $ 11,302,827 $ 864,913 $ 1,194,334 $ 11,883,309 $ 4,354,889 $ 3,492,257
Issued in exchange for Class B
shares of Sierra Trust ..... 17,545,619 -- -- 17,326,196 -- --
Issued as reinvestment of
dividends .................. 529,390 123,880 111,800 848,522 374,440 280,728
Redeemed ..................... (4,681,938) (707,436) (466,099) (7,030,376) (2,436,052) (982,921)
------------ ------------ ------------ ------------ ------------ ------------
Net increase ................. $ 24,695,898 $ 281,357 $ 840,035 $ 23,027,651 $ 2,293,277 $ 2,790,064
============ ============ ============ ============ ============ ============
CLASS S:
Sold ......................... $ 97,657 -- -- $ 64,835 -- --
Issued in exchange for Class S
shares of Sierra Trust ..... 7,569,635 -- -- 1,686,388 -- --
Issued as reinvestment of
dividends .................. 187,818 -- -- 51,094 -- --
Redeemed ..................... (2,756,215) -- -- (343,748) -- --
------------ ------------
Net increase ................. $ 5,098,895 -- -- $ 1,458,569 -- --
============ ============
CLASS I:
Sold ......................... $ 1,897,904 -- -- $ 1,682,081 -- --
Issued in exchange for Class I
shares of Sierra Trust ..... 77,055,299 -- -- 6,001,602 -- --
Issued as reinvestment of
dividends .................. -- -- -- -- -- --
Redeemed ..................... (41,438,278) -- -- (917,869) -- --
------------ ------------
Net increase ................. $ 37,514,925 -- -- $ 6,765,814 -- --
============ ============
SHARES
CLASS A:
Sold ......................... 937,355 424,259 749,623 2,798,947 1,212,967 1,208,364
Issued in exchange for Class A
shares of Sierra Trust ..... 18,833,600 -- -- 16,561,879 -- --
Issued as reinvestment of
dividends .................. 711,256 489,525 655,835 664,762 413,335 477,619
Redeemed ..................... (6,100,043) (4,240,473) (4,553,107) (5,645,131) (2,880,356) (2,547,839)
------------ ------------ ------------ ------------ ------------ ------------
Net increase/(decrease) ...... 14,382,168 (3,326,689) (3,147,649) 14,380,457 (1,254,054) (861,856)
============ ============ ============ ============ ============ ============
CLASS B:
Sold ......................... 1,033,341 81,465 113,842 1,248,615 467,109 383,465
Issued in exchange for Class B
shares of Sierra Trust ..... 1,655,309 -- -- 2,009,654 -- --
Issued as reinvestment of
dividends .................. 48,455 11,762 10,765 88,864 40,332 30,990
Redeemed ..................... (426,676) (67,110) (44,911) (737,401) (263,592) (108,355)
------------ ------------ ------------ ------------ ------------ ------------
Net increase ................. 2,310,429 26,117 79,696 2,609,732 243,849 306,100
============ ============ ============ ============ ============ ============
CLASS S:
Sold ......................... 8,987 -- -- 6,828 -- --
Issued in exchange for Class S
shares of Sierra Trust ..... 714,499 -- -- 195,664 -- --
Issued as reinvestment of
dividends .................. 17,192 -- -- 5,348 -- --
Redeemed ..................... (253,106) -- -- (36,046) -- --
------------ ------------
Net increase ................. 487,572 -- -- 171,794 -- --
============ ============
CLASS I:
Sold ......................... 172,564 -- -- 176,652 -- --
Issued in exchange for Class I
shares of Sierra Trust ..... 7,273,265 -- -- 697,179 -- --
Issued as reinvestment of
dividends .................. -- -- -- -- -- --
Redeemed ..................... (3,811,669) -- -- (96,227) -- --
------------ ------------
Net increase ................. 3,634,160 -- -- 777,604 -- --
============ ============
- --------------
(a) Formerly Composite U.S. Government Securities, Inc. On March 23, 1998 shares were issued in exchange for the Sierra Trust U.S.
Government Fund.
(b) Formerly Composite Income Fund, Inc. On March 23, 1998 shares were issued in exchange for the Sierra Trust Corporate Income
Fund.
(c) Fiscal year end changed to October 31. Prior to this, the fiscal year end was December 31. The amounts reported are for the
period January 1, 1998 through October 31, 1998.
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
STATEMENTS of CHANGES in NET assets -- CAPITAL stock ACTIVITY
WM GROUP OF FUNDS
<CAPTION>
CALIFORNIA INSURED INTERMEDIATE MUNICIPAL FUND CALIFORNIA MUNICIPAL FUND
---------------------------------------------- ---------------------------------------------
PERIOD ENDED YEAR ENDED YEAR ENDED PERIOD ENDED YEAR ENDED YEAR ENDED
10/31/98(A) 06/30/98 06/30/97 10/31/98(A) 06/30/98 06/30/97
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
AMOUNT
CLASS A:
Sold ......................... $ 703,974 $ 45,133,314 $ 6,433,077 $ 6,565,808 $109,366,878 $ 24,072,942
Issued in exchange for Class A
shares of Sierra Trust ..... -- -- -- -- -- --
Issued as reinvestment of
dividends .................. 372,864 1,692,248 1,935,689 3,068,180 10,168,881 12,279,190
Redeemed ..................... (2,993,121) (53,587,195) (18,610,647) (15,755,429) (159,104,887) (100,762,432)
------------ ------------ ------------ ------------ ------------ ------------
Net decrease ................. $ (1,916,283) $ (6,761,633) $(10,241,881) $ (6,121,441) $(39,569,128) $(64,410,300)
============ ============ ============ ============ ============ ============
CLASS B:
Sold ......................... $ 2,998,917 $ 3,830,587 $ 3,085,841 $ 15,977,261 $ 11,852,598 $ 7,989,764
Issued in exchange for Class B
shares of Sierra Trust ..... -- -- -- -- -- --
Issued as reinvestment of
dividends .................. 206,027 785,124 705,578 403,939 880,758 790,210
Redeemed ..................... (1,347,082) (4,056,330) (4,103,955) (1,694,076) (4,401,099) (4,796,205)
------------ ------------ ------------ ------------ ------------ ------------
Net increase/(decrease) ...... $ 1,857,862 $ 559,381 $ (312,536) $ 14,687,124 $ 8,332,257 $ 3,983,769
============ ============ ============ ============ ============ ============
CLASS S:
Sold ......................... $ -- $ -- $ -- $ -- $ -- $ 6,710
Issued in exchange for Class S
shares of Sierra Trust ..... -- -- -- -- -- --
Issued as reinvestment of
dividends .................. 22 80 329 101 329 398
Redeemed ..................... -- -- (10,200) (606) -- (11,709)
------------ ------------ ------------ ------------ ------------ ------------
Net increase/(decrease) ...... $ 22 $ 80 $ (9,871) $ (505) $ 329 $ (4,601)
============ ============ ============ ============ ============ ============
CLASS I:
Sold ......................... $ -- $ -- $ 1,000 $ -- $ -- $ 1,000
Issued in exchange for Class I
shares of Sierra Trust ..... -- -- -- -- -- --
Issued as reinvestment of
dividends .................. 18 63 52 22 61 56
Redeemed ..................... -- -- -- -- -- --
------------ ------------ ------------ ------------ ------------ ------------
Net increase ................. $ 18 $ 63 $ 1,052 $ 22 $ 61 $ 1,056
============ ============ ============ ============ ============ ============
SHARES
CLASS A:
Sold ......................... 64,616 4,166,073 603,408 577,201 9,670,102 2,233,283
Issued in exchange for Class A
shares of Sierra Trust ..... -- -- -- -- -- --
Issued as reinvestment of
dividends .................. 34,046 155,891 181,346 268,682 903,373 1,138,174
Redeemed ..................... (274,458) (4,944,950) (1,743,747) (1,382,174) (14,095,738) (9,335,254)
------------ ------------ ------------ ------------ ------------ ------------
Net decrease ................. (175,796) (622,986) (958,993) (536,291) (3,522,263) (5,963,797)
============ ============ ============ ============ ============ ============
CLASS B:
Sold ......................... 273,439 353,152 289,579 1,399,254 1,051,595 742,146
Issued in exchange for Class B
shares of Sierra Trust ..... -- -- -- -- -- --
Issued as reinvestment of
dividends .................. 18,811 72,337 66,108 35,356 78,161 73,182
Redeemed ..................... (123,678) (374,167) (385,086) (148,795) (391,417) (443,547)
------------ ------------ ------------ ------------ ------------ ------------
Net increase/(decrease) ...... 168,572 51,322 (29,399) 1,285,815 738,703 371,781
============ ============ ============ ============ ============ ============
CLASS S:
Sold ......................... -- -- -- -- -- 629
Issued in exchange for Class S
shares of Sierra Trust ..... -- -- -- -- -- --
Issued as reinvestment of
dividends .................. 2 7 32 8 29 37
Redeemed ..................... -- -- (954) (53) -- (1,085)
------------ ------------ ------------ ------------ ------------ ------------
Net increase/(decrease) ...... 2 7 (922) (45) 29 (419)
============ ============ ============ ============ ============ ============
CLASS I:
Sold ......................... -- -- 95 -- -- 95
Issued in exchange for Class I
shares of Sierra Trust ..... -- -- -- -- -- --
Issued as reinvestment of
dividends .................. 2 6 4 2 6 4
Redeemed ..................... -- -- -- -- -- --
------------ ------------ ------------ ------------ ------------ ------------
Net increase ................. 2 6 99 2 6 99
============ ============ ============ ============ ============ ============
- --------------
(a) Fiscal year end changed to October 31. Prior to this, the fiscal year end was June 30. The amounts reported are for the period
July 1, 1998 through October 31, 1998.
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
STATEMENTS of CHANGES in NET assets -- CAPITAL stock ACTIVITY
WM GROUP OF FUNDS
<CAPTION>
FLORIDA INSURED MUNICIPAL FUND TAX-EXEMPT BOND FUND(A)
---------------------------------------------- ----------------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
10/31/98(C) 06/30/98 06/30/97 10/31/98(B) 12/31/97 12/31/96
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
AMOUNT
CLASS A:
Sold ......................... $ 147,296 $ 17,026,487 $ 2,152,770 $ 14,111,965 $ 9,139,630 $ 11,398,132
Issued in exchange for Class A
shares of Sierra Trust ..... -- -- -- 131,911,067 -- --
Issued as reinvestment of
dividends .................. 123,333 430,764 663,299 7,889,912 7,486,759 8,078,800
Redeemed ..................... (1,219,634) (24,574,268) (10,696,926) (57,752,990) (38,237,568) (40,306,611)
------------ ------------ ------------ ------------ ------------ ------------
Net increase/(decrease) ...... $ (949,005) $ (7,117,017) $ (7,880,857) $ 96,159,954 $(21,611,179) $(20,829,679)
============ ============ ============ ============ ============ ============
CLASS B:
Sold ......................... $ 1,094,291 $ 1,328,489 $ 920,129 $ 4,749,727 $ 3,133,343 $ 3,119,779
Issued in exchange for Class B
shares of Sierra Trust ..... -- -- -- 5,255,068 -- --
Issued as reinvestment of
dividends .................. 50,148 134,076 151,321 362,204 218,328 128,510
Redeemed ..................... (240,180) (1,662,583) (1,588,599) (1,839,872) (744,188) (611,372)
------------ ------------ ------------ ------------ ------------ ------------
Net increase/(decrease) ...... $ 904,259 $ (200,018) $ (517,149) $ 8,527,127 $ 2,607,483 $ 2,636,917
============ ============ ============ ============ ============ ============
CLASS S:
Sold ......................... $ -- $ -- $ 27,586 $ 2 $ -- $ --
Issued in exchange for Class S
shares of Sierra Trust ..... -- -- -- 1,265 -- --
Issued as reinvestment of
dividends .................. 24 358 386 36 -- --
Redeemed ..................... -- (28,652) (10,200) -- -- --
------------ ------------
Net increase/(decrease) ...... $ 24 $ (28,294) $ 17,772 $ 1,303 -- --
============ ============ ============ ============
CLASS I:
Sold ......................... $ -- $ -- $ 1,000 $ 3 $ -- $ --
Issued in exchange for Class I
shares of Sierra Trust ..... -- -- -- 1,035 -- --
Issued as reinvestment of
dividends .................. 20 53 52 37 -- --
Redeemed ..................... -- -- -- -- -- --
------------ ------------
Net increase ................. $ 20 $ 53 $ 1,052 $ 1,075 -- --
============ ============ ============ ============
SHARES
CLASS A:
Sold ......................... 14,033 1,660,760 219,446 1,647,687 1,161,023 1,460,406
Issued in exchange for Class A
shares of Sierra Trust ..... -- -- -- 18,330,460 -- --
Issued as reinvestment of
dividends .................. 11,782 41,985 67,495 964,582 951,410 1,037,464
Redeemed ..................... (117,042) (2,396,458) (1,088,997) (7,066,128) (4,861,387) (5,197,278)
------------ ------------ ------------ ------------ ------------ ------------
Net increase/(decrease) ...... (91,227) (693,713) (802,056) 13,876,601 (2,748,954) (2,699,408)
============ ============ ============ ============ ============ ============
CLASS B:
Sold ......................... 104,711 129,041 93,965 585,326 398,272 390,317
Issued in exchange for Class B
shares of Sierra Trust ..... -- -- -- 730,248 -- --
Issued as reinvestment of
dividends .................. 4,792 13,052 14,770 44,887 27,480 26,578
Redeemed ..................... (23,021) (161,939) (161,649) (225,252) (95,335) (79,060)
------------ ------------ ------------ ------------ ------------ ------------
Net increase/(decrease) ...... 86,482 (19,846) (52,914) 1,135,209 330,417 337,835
============ ============ ============ ============ ============ ============
CLASS S:
Sold ......................... -- -- 2,774 2 -- --
Issued in exchange for Class S
shares of Sierra Trust ..... -- -- -- 175 -- --
Issued as reinvestment of
dividends .................. 3 36 39 3 -- --
Redeemed ..................... -- (2,810) (1,039) -- -- --
------------ ------------
Net increase/(decrease) ...... 3 (2,774) 1,774 180 -- --
============ ============ ============ ============
CLASS I:
Sold ......................... -- -- 103 1 -- --
Issued in exchange for Class I
shares of Sierra Trust ..... -- -- -- 144 -- --
Issued as reinvestment of
dividends .................. 2 5 6 4 -- --
Redeemed ..................... -- -- -- -- -- --
------------ ------------
Net increase ................. 2 5 109 149 -- --
============ ============ ============ ============
- --------------
(a) Formerly, Composite Tax-Exempt Bond Fund, Inc. On March 23, 1998 shares were issued in exchange for the Sierra Trust National
Municipal Fund.
(b) Fiscal year end changed to October 31. Prior to this, the fiscal year end was December 31. The amounts reported are for the
period January 1, 1998 through October 31, 1998.
(c) Fiscal year end changed to October 31. Prior to this, the fiscal year end was June 30. The amounts reported are for the period
July 1, 1998 through October 31, 1998.
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
STATEMENTS of CHANGES in NET assets -- CAPITAL stock ACTIVITY
WM GROUP OF FUNDS
<CAPTION>
BOND AND STOCK FUND(A) GROWTH & INCOME FUND(B)
---------------------------------------------- ---------------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
10/31/98 10/31/97 10/31/96 10/31/98 10/31/97 10/31/96
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
AMOUNT
CLASS A:
Sold ......................... $ 77,100,034 $ 52,484,804 $ 44,698,687 $222,069,018 $106,141,702 $ 34,852,996
Issued in exchange for Class A
shares of Sierra Trust ..... -- -- -- 158,740,743 -- --
Issued as reinvestment of
dividends .................. 48,830,627 24,871,733 12,571,523 35,964,668 13,852,602 6,465,408
Redeemed ..................... (89,969,565) (53,158,304) (30,757,745) (212,634,199) (40,759,068) (18,800,145)
------------ ------------ ------------ ------------ ------------ ------------
Net increase ................. $ 35,961,096 $ 24,198,233 $ 26,512,465 $204,140,230 $ 79,235,236 $ 22,518,259
============ ============ ============ ============ ============ ============
CLASS B:
Sold ......................... $ 39,221,359 $ 22,935,586 $ 14,984,826 $ 36,396,662 $ 22,289,439 $ 12,562,783
Issued in exchange for Class B
shares of Sierra Trust ..... -- -- -- 40,265,726 -- --
Issued as reinvestment of
dividends .................. 8,205,251 2,352,873 592,143 6,447,498 1,737,586 413,214
Redeemed ..................... (11,054,524) (4,233,922) (1,885,259) (17,119,675) (3,856,814) (1,379,794)
------------ ------------ ------------ ------------ ------------ ------------
Net increase ................. $ 36,372,086 $ 21,054,537 $ 13,691,710 $ 65,990,211 $ 20,170,211 $ 11,596,203
============ ============ ============ ============ ============ ============
CLASS S:
Sold ......................... $ 106,558 -- -- $ 1,551,469 -- --
Issued in exchange for Class S
shares of Sierra Trust ..... -- -- -- 11,890,222 -- --
Issued as reinvestment of
dividends .................. 80 -- -- -- -- --
Redeemed ..................... (75,081) -- -- (3,067,189) -- --
------------ ------------
Net increase ................. $ 31,557 -- -- $ 10,374,502 -- --
============ ============
CLASS I:
Sold ......................... -- -- -- $ 21,232,340 -- --
Issued in exchange for Class I
shares of Sierra Trust ..... -- -- -- 156,826,637 -- --
Issued as reinvestment of
dividends .................. -- -- -- -- -- --
Redeemed ..................... -- -- -- (10,703,417) -- --
------------
Net increase ................. -- -- -- $167,355,560 -- --
============
SHARES
CLASS A:
Sold ......................... 5,082,555 3,423,606 3,502,594 11,565,737 5,205,714 2,162,456
Issued in exchange for Class A
shares of Sierra Trust ..... -- -- -- 8,901,693 -- --
Issued as reinvestment of
dividends .................. 3,411,130 1,697,502 551,925 641,460 798,609 424,694
Redeemed ..................... (6,215,419) (3,452,180) (2,170,504) (10,275,325) (2,059,919) (1,172,395)
------------ ------------ ------------ ------------ ------------ ------------
Net increase ................. 2,278,266 1,668,928 1,884,015 10,833,565 3,944,404 1,414,755
============ ============ ============ ============ ============ ============
CLASS B:
Sold ......................... 2,650,249 1,491,572 1,071,938 1,991,929 1,165,851 781,671
Issued in exchange for Class B
shares of Sierra Trust ..... -- -- -- 2,281,424 -- --
Issued as reinvestment
of dividends ............... 574,422 160,463 28,182 116,619 101,631 27,517
Redeemed ..................... (779,074) (274,187) (132,719) (867,171) (201,009) (86,112)
------------ ------------ ------------ ------------ ------------ ------------
Net increase ................. 2,445,597 1,377,848 967,401 3,522,801 1,066,473 723,076
============ ============ ============ ============ ============ ============
CLASS S:
Sold ......................... 8,164 -- -- 73,567 -- --
Issued in exchange for Class S
shares of Sierra Trust ..... -- -- -- 700,170 -- --
Issued as reinvestment of
dividends .................. 6 -- -- -- -- --
Redeemed ..................... (5,542) -- -- (154,969) -- --
------------ ------------
Net increase ................. 2,628 -- -- 618,768 -- --
============ ============
CLASS I:
Sold ......................... -- -- -- 1,012,389 -- --
Issued in exchange for Class I
shares of Sierra Trust ..... -- -- -- 8,777,545 -- --
Issued as reinvestment of
dividends .................. -- -- -- -- -- --
Redeemed ..................... -- -- -- (527,906) -- --
------------
Net increase ................. -- -- -- 9,262,028 -- --
============
- --------------
(a) Formerly Composite Bond & Stock Fund, Inc.
(b) Formerly Composite Growth & Income Fund. On March 23, 1998 shares were issued in exchange for the Sierra Trust Growth and Income
Fund.
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
STATEMENTS of CHANGES in NET assets -- CAPITAL stock ACTIVITY
WM GROUP OF FUNDS
<CAPTION>
GROWTH FUND NORTHWEST FUND(B)
---------------------------------------------- ---------------------------------------------
PERIOD ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
10/31/98(A) 06/30/98 06/30/97 10/31/98 10/31/97 10/31/96
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
AMOUNT
CLASS A:
Sold ......................... $ 99,386,706 $376,606,887 $106,289,081 $ 71,928,894 $ 37,595,728 $ 30,838,126
Issued in exchange for Class A
shares of Sierra Trust ..... -- -- -- -- -- --
Issued as reinvestment of
dividends .................. -- 8,098,957 18,433,017 48,141,885 16,535,329 1,894,196
Redeemed ..................... (102,419,341) (409,689,756) (187,631,023) (69,774,171) (35,788,151) (34,773,718)
------------ ------------ ------------ ------------ ------------ ------------
Net increase/(decrease) ...... $ (3,032,635) $(24,983,912) $(62,908,925) $ 50,296,608 $ 18,342,906 $ (2,041,396)
============ ============ ============ ============ ============ ============
CLASS B:
Sold ......................... $ 6,289,271 $ 21,624,274 $ 19,851,498 $ 19,506,022 $ 19,318,236 $ 7,154,271
Issued in exchange for Class B
shares of Sierra Trust ..... -- -- -- -- -- --
Issued as reinvestment of
dividends .................. -- 2,457,020 4,183,527 8,274,120 1,445,397 80,228
Redeemed ..................... (3,532,630) (23,424,855) (17,144,504) (8,156,334) (2,256,041) (836,094)
------------ ------------ ------------ ------------ ------------ ------------
Net increase ................. $ 2,756,641 $ 656,439 $ 6,890,521 $ 19,623,808 $ 18,507,592 $ 6,398,405
============ ============ ============ ============ ============ ============
CLASS S:
Sold ......................... $ 638,109 $ 1,576,379 $ 11,228,550 -- -- --
Issued in exchange for Class S
shares of Sierra Trust ..... -- -- -- -- -- --
Issued as reinvestment of
dividends .................. -- 1,116,531 2,644,251 -- -- --
Redeemed ..................... (1,576,975) (6,410,769) (45,212,823) -- -- --
------------ ------------ ------------
Net decrease ................. $ (938,866) $ (3,717,859) $(31,340,022) -- -- --
============ ============ ============
CLASS I:
Sold ......................... $ 14,170,562 $ 24,923,298 $131,408,441 -- -- --
Issued in exchange for Class I
shares of Sierra Trust ..... -- -- -- -- -- --
Issued as reinvestment of
dividends .................. -- -- -- -- -- --
Redeemed ..................... (5,513,179) (67,170,431) (398,315) -- -- --
------------ ------------ ------------
Net increase/(decrease) ...... $ 8,657,383 $(42,247,133) $131,010,126 -- -- --
============ ============ ============
SHARES
CLASS A:
Sold ......................... 5,653,629 23,228,866 7,003,738 3,162,857 1,637,573 1,670,374
Issued in exchange for Class A
shares of Sierra Trust ..... -- -- -- -- -- --
Issued as reinvestment of
dividends .................. -- 590,930 1,319,471 2,054,110 855,423 107,929
Redeemed ..................... (5,790,961) (25,206,344) (12,312,534) (3,194,232) (1,553,311) (1,881,146)
------------ ------------ ------------ ------------ ------------ ------------
Net increase/(decrease) ...... (137,332) (1,386,548) (3,989,325) 2,022,735 939,685 (102,843)
============ ============ ============ ============ ============ ============
CLASS B:
Sold ......................... 373,144 1,368,627 1,352,409 869,783 836,203 384,301
Issued in exchange for Class B
shares of Sierra Trust ..... -- -- -- -- -- --
Issued as reinvestment of
dividends .................. -- 184,877 305,813 362,689 74,775 4,603
Redeemed ..................... (208,958) (1,490,854) (1,187,173) (397,671) (100,926) (44,652)
------------ ------------ ------------ ------------ ------------ ------------
Net increase ................. 164,186 62,650 471,049 834,801 810,052 344,252
============ ============ ============ ============ ============ ============
CLASS S:
Sold ......................... 37,098 104,482 735,121 -- -- --
Issued in exchange for Class S
shares of Sierra Trust ..... -- -- -- -- -- --
Issued as reinvestment of
dividends .................. -- 83,953 193,152 -- -- --
Redeemed ..................... (96,855) (408,947) (2,912,975) -- -- --
------------ ------------ ------------
Net decrease ................. (59,757) (220,512) (1,984,702) -- -- --
============ ============ ============
CLASS I:
Sold ......................... 795,462 1,783,635 8,525,955 -- -- --
Issued in exchange for Class I
shares of Sierra Trust ..... -- -- -- -- -- --
Issued as reinvestment of
dividends .................. -- -- -- -- -- --
Redeemed ..................... (308,846) (4,048,118) (27,042) -- -- --
------------ ------------ ------------
Net increase/(decrease) ...... 486,616 (2,264,483) 8,498,913 -- -- --
============ ============= =============
- --------------
(a) Fiscal year end changed to October 31. Prior to this, the fiscal year end was June 30. The amounts reported are for the period
July 1, 1998 through October 31, 1998.
(b) Formerly Composite Northwest Fund, Inc.
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
STATEMENTS of CHANGES in NET assets -- CAPITAL stock ACTIVITY
WM GROUP OF FUNDS
<CAPTION>
EMERGING GROWTH FUND INTERNATIONAL GROWTH FUND
---------------------------------------------- ---------------------------------------------
PERIOD ENDED YEAR ENDED YEAR ENDED PERIOD ENDED YEAR ENDED YEAR ENDED
10/31/98(A) 06/30/98 06/30/97 10/31/98(A) 06/30/98 06/30/97
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
AMOUNT
Class A:
Sold ......................... $ 45,697,143 $313,664,566 $174,380,122 $ 407,310 $187,840,932 $111,215,761
Issued in exchange for Class A
shares of Sierra Trust ..... -- -- -- -- -- --
Issued as reinvestment of
dividends .................. -- 8,402,791 16,032,518 -- 4,018,393 1,660,481
Redeemed ..................... (56,089,179) (381,852,608) (281,584,001) (3,657,187) (206,202,867) (178,142,360)
------------ ------------ ------------ ------------ ------------ ------------
Net decrease ................. $(10,392,036) $(59,785,251) $(191,171,361) $ (3,249,877) $(14,343,542) $(65,266,118)
============ ============ ============ ============ ============ ============
Class B:
Sold ......................... $ 897,561 $ 14,180,902 $ 23,017,303 $ 759,141 $ 1,184,200 $ 1,321,751
Issued in exchange for Class B
shares of Sierra Trust ..... -- -- -- -- -- --
Issued as reinvestment of
dividends .................. -- 1,579,773 2,398,228 -- 390,469 77,717
Redeemed ..................... (2,406,538) (18,125,264) (22,008,896) (864,568) (1,466,160) (1,548,088)
------------ ------------ ------------ ------------ ------------ ------------
Net increase/(decrease) ...... $ (1,508,977) $ (2,364,589) $ 3,406,635 $ (105,427) $ 108,509 $ (148,620)
============ ============ ============ ============ ============ ============
Class S:
Sold ......................... $ 47,525 $ 341,783 $ 8,285,980 $ 187,031 $ 2,290,224 $ 12,591,343
Issued in exchange for Class S
shares of Sierra Trust ..... -- -- -- -- -- --
Issued as reinvestment of
dividends .................. -- 370,065 1,126,275 -- 735,597 154,429
Redeemed ..................... (1,301,531) (3,556,701) (41,354,238) (1,038,905) (3,931,060) (40,864,806)
------------ ------------ ------------ ------------ ------------ ------------
Net decrease ................. $ (1,254,006) $ (2,844,853) $(31,941,983) $ (851,874) $ (905,239) $(28,119,034)
============ ============ ============ ============ ============ ============
Class I:
Sold ......................... $ 352,945 $ 2,367,463 $ 98,759,210 $ 6,040,073 $ 46,484,844 $102,400,555
Issued in exchange for Class I
shares of Sierra Trust ..... -- -- -- -- -- --
Issued as reinvestment of
dividends .................. -- -- -- -- -- --
Redeemed ..................... (16,753,807) (23,214,553) (39,334,429) (1,364,559) (16,617,888) (19,077,636)
------------ ------------ ------------ ------------ ------------ ------------
Net increase/(decrease) ...... $(16,400,862) $(20,847,090) $ 59,424,781 $ 4,675,514 $ 29,866,956 $ 83,322,919
============ ============ ============ ============ ============ ============
SHARES
Class A:
Sold ......................... 2,576,643 16,007,665 9,426,433 41,432 18,508,938 10,541,386
Issued in exchange for Class A
shares of Sierra Trust ..... -- -- -- -- -- --
Issued as reinvestment of
dividends .................. -- 466,974 928,883 -- 438,682 159,831
Redeemed ..................... (3,207,380) (19,463,142) (15,355,631) (393,624) (20,071,107) (16,902,883)
------------ ------------ ------------ ------------ ------------ ------------
Net decrease ................. (630,737) (2,988,503) (5,000,315) (352,192) (1,123,487) (6,201,666)
============ ============ ============ ============ ============ ============
Class B:
Sold ......................... 56,594 758,262 1,294,271 75,429 108,136 127,312
Issued in exchange for Class B
shares of Sierra Trust ..... -- -- -- -- -- --
Issued as reinvestment of
dividends .................. -- 90,322 141,655 -- 43,146 7,547
Redeemed ..................... (154,881) (966,584) (1,259,280) (94,402) (141,350) (146,269)
------------ ------------ ------------ ------------ ------------ ------------
Net increase/(decrease) ...... (98,287) (118,000) (76,646) (18,973) 9,932 (11,410)
============ ============ ============ ============ ============ ============
Class S:
Sold ......................... 2,816 18,531 444,186 19,151 213,909 1,237,033
Issued in exchange for
Class S shares of Sierra Trust -- -- -- -- -- --
Issued as reinvestment of
dividends .................. -- 21,107 66,525 -- 80,569 14,891
Redeemed ..................... (80,916) (189,249) (2,238,511) (116,365) (368,556) (3,980,047)
------------ ------------ ------------ ------------ ------------ ------------
Net decrease ................. (78,100) (149,611) (1,727,800) (97,214) (74,078) (2,728,123)
============ ============ ============ ============ ============ ============
Class I:
Sold ......................... 19,660 125,672 5,305,292 642,775 4,334,679 9,883,459
Issued in exchange for Class I
shares of Sierra Trust ..... -- -- -- -- -- --
Issued as reinvestment of
dividends .................. -- -- -- -- -- --
Redeemed ..................... (974,867) (1,245,200) (2,456,918) (161,051) (1,736,507) (1,801,069)
------------ ------------ ------------ ------------ ------------ ------------
Net increase/(decrease) ...... (955,207) (1,119,528) 2,848,374 481,724 2,598,172 8,082,390
============ ============ ============ ============ ============ ============
- --------------
(a) Fiscal year end changed to October 31. Prior to this, the fiscal year end was June 30. The amounts reported are for the period
July 1, 1998 through October 31, 1998.
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL highlights
TARGET MATURITY 2002 FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<CAPTION>
PERIOD YEAR YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED ENDED
10/31/98(A) 06/30/98 06/30/97 06/30/96 06/30/95*
----------- -------- -------- -------- ---------
<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++ 0.62++ 0.63 0.12
Net realized and
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+ ................ 7.37% 9.78% 6.95% 2.91% 7.80%
==== ==== ==== ==== ====
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period
(in 000's) .................. $2,385 $2,536 $2,816 $3,125 $2,626
Ratio of operating
expenses to average net
assets(b) ................... 0.64%** 0.62% 0.64% 0.62% 0.74%**
Ratio of net investment
income to average net
assets ...................... 5.92%** 5.61% 5.80% 5.66% 5.22%**
Portfolio turnover rate ...... 0% 0% 0% 5% 0%
Ratio of operating
expenses to average net
assets without fee
waivers, expenses
absorbed and/or fees
reduced by credits
allowed by the custodian .... 1.47%** 2.63% 2.89% 2.55% 4.71%**
- ----------------
* The Fund commenced operations on March 20, 1995.
** Annualized.
+ Total return is not annualized for periods less than one year and does not reflect any
applicable sales charges. The total returns would have been lower if certain fees had not been
waived and expenses absorbed by the investment advisor or if fees had not been reduced by
credits allowed by the custodian.
++ Per share numbers have been calculated using the average shares method.
(a) Fiscal year end changed to October 31. Prior to this, the fiscal year end was June 30.
(b) Ratio of operating expenses to average net assets includes expenses paid indirectly beginning in
fiscal year 1995.
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL highlights
HIGH YIELD FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT THE PERIOD.
<CAPTION>
CLASS A SHARES CLASS B SHARES CLASS S SHARE CLASS I SHARES
-------------- -------------- ------------- --------------
PERIOD PERIOD PERIOD PERIOD
ENDED ENDED ENDED ENDED
10/31/98(A) 10/31/98(A) 10/31/98(A) 10/31/98(A)
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net asset value, beginning
of period ........................... $10.00 $10.00 $ 9.61 $10.00
------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ................ 0.47 0.42 0.16 0.22
Net realized and unrealized
loss on investments ................. (1.15) (1.09) (0.67) (1.13)
------ ------ ------ ------
Total from investment
operations .......................... (0.68) (0.67) (0.51) (0.91)
------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends from net
investment income ................... (0.45) (0.42) (0.18) (0.23)
Distributions in excess of
net investment income ............... (0.01) (0.01) (0.00)# (0.01)
------ ------ ------ ------
Total distributions .................. (0.46) (0.43) (0.18) (0.24)
------ ------ ------ ------
Net asset value, end of
period .............................. $ 8.86 $ 8.90 $ 8.92 $ 8.85
====== ====== ====== ======
TOTAL RETURN+ ........................ (6.90)% (6.33)% (5.30)% (9.13)%
====== ====== ====== ======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period
(in 000's) .......................... $10,861 $2,830 $ 24 $1,309
Ratio of operating expenses
to average net assets(b) ............ 0.78%* 1.57%* 1.51%* 0.48%*
Ratio of net investment
income to average net
assets .............................. 8.80%* 8.01%* 8.07%* 9.10%*
Portfolio turnover rate .............. 54% 54% 54% 54%
Ratio of operating expenses
to average net assets
without fee waivers or fees
reduced by credits allowed
by the custodian .................... 1.22%* 2.02%* 2.18%* 0.97%*
- ----------------
* Annualized.
+ Total return is not annualized for periods less than one year and does not reflect any applicable sales charges.
# Amount represents less than $0.01 per share.
(a) On April 8, 1998, May 5, 1998, August 10, 1998 and July 27, 1998 the Fund commenced selling
Class A, Class B, Class S and Class I shares, respectively.
(b) Ratio of operating expenses to average net assets includes expenses paid indirectly.
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL highlights
SHORT TERM HIGH QUALITY BOND FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<CAPTION>
CLASS A SHARES
-------------------------------------------------------------------------------------------
PERIOD YEAR YEAR YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED ENDED ENDED
10/31/98(A) 06/30/98 06/30/97 06/30/96 06/30/95 06/30/94*
----------- -------- -------- -------- -------- ---------
<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++ 0.08 0.09
Net realized and
unrealized gain/(loss)
on investments ....... 0.03 0.00# 0.00# (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
capital .............. -- (0.00)# -- (0.00)# (0.00)# --
------ ------ ------ ------ ------ ------
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+ ......... 3.11% 5.91% 6.15% 5.05% 4.42% (0.73)%
====== ====== ====== ====== ====== ======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of
period (in 000's) ... $32,748 $35,551 $13,685 $32,440 $43,811 $21,771
Ratio of operating
expenses to average
net assets(b) ........ 0.82%** 0.86% 0.82% 0.75% 0.75% 0.00%**
Ratio of net investment
income to average
net assets ........... 5.44%** 5.71% 6.50% 6.22% 6.10% 5.70%**
Portfolio turnover rate 19% 138% 51% 225% 137% 95%
Ratio of operating
expenses to average
net assets without
fee waivers, expenses
absorbed and/or fees
reduced by credits
allowed by the
custodian ............ 1.40%** 1.32% 1.45% 1.42% 1.39% 1.61%**
- ----------------
* The Fund commenced operations on November 1, 1993.
** Annualized.
+ Total return is not annualized for periods less than one year and does not reflect any applicable sales charges.
The total return would have been lower if certain fees had not been waived and expenses absorbed by the investment
advisor or if fees had not been reduced by credits allowed by the custodian.
++ Per share numbers have been calculated using the average shares method.
# Amounts represent less than $0.01 per share.
(a) Fiscal year end changed to October 31. Prior to this, the fiscal year end was June 30.
(b) Ratio of operating expenses to average net assets include expenses paid indirectly beginning in fiscal year 1995.
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL highlights
SHORT TERM HIGH QUALITY BOND FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<CAPTION>
CLASS B SHARES
--------------------------------------------------------------------
PERIOD YEAR YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED ENDED
10/31/98(A) 06/30/98 06/30/97 06/30/96 06/30/95*
----------- -------- -------- -------- ---------
<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++ 0.06
Net realized and
unrealized gain/(loss)
on investments .............. 0.03 0.00# 0.00# (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
capital ..................... -- (0.00)# -- (0.00)# (0.00)#
------ ------ ------ ------ ------
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+ ................ 2.85% 5.13% 5.37% 4.27% 3.64%
====== ====== ====== ====== ======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of
period (in 000's) ........... $3,747 $3,459 $2,994 $3,437 $3,015
Ratio of operating
expenses to average
net assets(b) ............... 1.57%** 1.61% 1.57% 1.50% 1.50%
Ratio of net investment
income to average net
assets ...................... 4.69%** 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 fees
reduced by credits
allowed by the
custodian ................... 2.18%** 2.07% 2.20% 2.17% 2.14%
- ----------------
* On July 1, 1994 the Fund commenced selling Class B and Class S shares in addition to Class A
shares. Those shares in existence prior to July 1, 1994 were designated Class A shares. On July
25, 1996 the Fund commenced selling Class I shares.
** Annualized.
+ Total return is not annualized for periods less than one year and does not reflect any
applicable sales charges. The total return would have been lower if certain fees had not been
waived and expenses absorbed by the investment advisor or if fees had not been reduced by
credits allowed by the custodian.
++ Per share numbers have been calculated using the average shares method.
# Amount represents less than $0.01 per share.
(a) Fiscal year end changed to October 31. Prior to this, the fiscal year end was June 30.
(b) Ratio of operating expenses to average net assets includes expenses paid indirectly beginning in
fiscal year 1995.
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL highlights
SHORT TERM HIGH QUALITY BOND FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<CAPTION>
CLASS S SHARES CLASS I SHARES
----------------------------------------------------------------- ------------------------------------
PERIOD YEAR YEAR YEAR YEAR PERIOD YEAR PERIOD
ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED
10/31/98(A) 06/30/98 06/30/97 06/30/96 06/30/95* 10/31/98(A) 06/30/98 06/30/97*
----------- -------- -------- -------- --------- ----------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period . $ 2.32 $ 2.32 $ 2.32 $ 2.35 $ 2.39 $ 2.32 $ 2.32 $ 2.32
------ ------ ------ ------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.04 0.12 0.12 0.13++ 0.06 0.04 0.14 0.14
Net realized and
unrealized gain/(loss)
on investments ...... 0.03 0.00# 0.00# (0.03) 0.02 0.03 0.00# 0.00#
------ ------ ------ ------ ------ ------ ------ ------
Total from investment
operations .......... 0.07 0.12 0.12 0.10 0.08 0.07 0.14 0.14
------ ------ ------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends from net
investment income ... (0.04) (0.12) (0.12) (0.13) (0.06) (0.04) (0.14) (0.14)
Distributions in
excess of net
investment income ... -- -- -- -- (0.06) -- -- --
Distributions from
capital ............. -- (0.00)# -- (0.00)# (0.00)# -- (0.00)# --
------ ------ ------ ------ ------ ------ ------ ------
Total distributions .. (0.04) (0.12) (0.12) (0.13) (0.12) (0.04) (0.14) (0.14)
------ ------ ------ ------ ------ ------ ------ ------
Net asset value, end
of period ........... $ 2.35 $ 2.32 $ 2.32 $ 2.32 $ 2.35 $ 2.35 $ 2.32 $ 2.32
====== ====== ====== ====== ====== ====== ====== ======
TOTAL RETURN+ 2.85% 5.13% 5.37% 4.27% 3.64% 3.20% 6.17% 5.94%
====== ====== ====== ====== ====== ====== ====== ======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of
period (in 000's) ... $762 $850 $800 $3,531 $2,303 $1,631 $3,103 $2,752
Ratio of operating
expenses to average
net assets(b) ....... 1.57%** 1.58% 1.57% 1.50% 1.50% 0.57%** 0.53% 0.57%**
Ratio of net
investment income to
average net assets .. 4.69%** 4.98% 5.75% 5.47% 5.35% 5.69%** 6.03% 6.75%**
Portfolio turnover
rate ................ 19% 138% 51% 225% 137% 19% 138% 51%
Ratio of operating
expenses to average
net assets without
fee waivers, expenses
absorbed and/or fees
reduced by credits
allowed by the
custodian ........... 2.08%** 2.05% 2.20% 2.17% 2.14% 0.96%** 1.00% 1.20%**
- ----------------
* On July 1, 1994 the Fund commenced selling Class B and Class S shares in addition to Class A shares. Those shares in
existence prior to July 1, 1994 were designated Class A shares. On July 25, 1996 the Fund commenced selling Class I shares.
** Annualized.
+ Total return is not annualized for periods less than one year and does not reflect any applicable sales charges. The total
return would have been lower if certain fees had not been waived and expenses absorbed by the investment advisor or if fees
had not been reduced by credits allowed by the custodian.
++ Per share numbers have been calculated using the average shares method.
# Amount represents less than $0.01 per share.
(a) Fiscal year end changed to October 31. Prior to this, the fiscal year end was June 30.
(b) Ratio of operating expenses to average net assets includes expenses paid indirectly beginning in fiscal year 1995.
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL highlights
U.S. GOVERNMENT SECURITIES FUND(a)
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<CAPTION>
CLASS A SHARES
-----------------------------------------------------------------------------------------------------------
PERIOD YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
10/31/98(C) 12/31/97 12/31/96 12/31/95 12/31/94 12/31/93
----------- -------- -------- -------- -------- --------
<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 and
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)
------ ------ ------ ------ ------ ------
Total distributions .. (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+ ........ 6.38% 9.92% 2.48% 19.45% (4.91)% 8.12%
====== ====== ====== ====== ====== ======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of
period (in 000's) ... $266,334 $107,054 $138,159 $177,310 $188,068 $268,112
Ratio of operating
expenses to average
net assets(b) ....... 0.92%* 1.05% 0.97% 1.01% 0.97% 0.99%
Ratio of net
investment income to
average net assets .. 5.99%* 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 without
fee waviers or
fees reduced by
credits allowed by
the custodian ....... 1.45%* 1.05% 0.97% 1.01% 0.97% 0.99%
Ratio of operating
expenses to average
net assets including
interest expense .... 1.36%* N/A N/A N/A N/A N/A
- ----------------
* Annualized.
+ Total return is not annualized for periods less than one year and does not reflect any applicable sales charges. The total
returns would have been lower if certain expenses had not been waived by the investment advisor or if fees had not been
reduced by credits allowed by the custodian.
(a) Formerly, Composite U.S. Government Securities, Inc.
(b) Ratio of operating expenses to average net assets includes expenses paid indirectly beginning in fiscal year 1995.
(c) Fiscal year end changed to October 31. Prior to this, the fiscal year end was December 31.
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL highlights
U.S. GOVERNMENT SECURITIES FUND(a)
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<CAPTION>
CLASS S CLASS I
CLASS B SHARES SHARES SHARES
------------------------------------------------------------------------- ------------- -------------
PERIOD YEAR YEAR YEAR PERIOD PERIOD PERIOD
ENDED ENDED ENDED ENDED ENDED ENDED ENDED
10/31/98(C) 12/31/97 12/31/96 12/31/95 12/31/94(D) 10/31/98(E) 10/31/98(E)
--------------- ---------- ----- ----------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period ... $10.84 $10.46 $10.84 $ 9.64 $10.24 $10.86 $10.86
------ ------ ------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income .. 0.47 0.54 0.54 0.54 0.41 0.35 0.42
Net realized and
unrealized gain/(loss)
on investments ........ 0.12 0.38 (0.38) 1.20 (0.60) 0.13 0.12
------ ------ ------ ------ ------ ------ ------
Total from investment
operations ............ 0.59 0.92 0.16 1.74 (0.19) 0.48 0.54
------ ------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends from net
investment income ..... (0.46) (0.54) (0.54) (0.54) (0.41) (0.35) (0.41)
------ ------ ------ ------ ------ ------ ------
Total distributions .... (0.46) (0.54) (0.54) (0.54) (0.41) (0.35) (0.41)
------ ------ ------ ------ ------ ------ ------
Net asset value, end of
period ................ $10.97 $10.84 $10.46 $10.84 $ 9.64 $10.99 $10.99
====== ====== ====== ====== ====== ====== ======
TOTAL RETURN+ .......... 5.54% 9.03% 1.58% 18.48% (1.86)% 4.35% 5.00%
====== ====== ====== ====== ====== ====== ======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of
period (in 000's) ..... $28,747 $3,352 $2,963 $2,206 $1,063 $5,357 $39,939
Ratio of operating
expenses to average net
assets(b) ............. 1.67%* 1.84% 1.85% 1.84% 1.76%* 1.67%* 0.66%*
Ratio of net investment
income to average net
assets ................ 5.24%* 5.08% 5.14% 5.20% 5.43%* 5.24%* 6.25%*
Portfolio turnover rate 12% 6% 16% 8% 34% 12% 12%
Ratio of operating
expenses to average net
assets without fee
waivers or fees reduced
by credits allowed by
the custodian ......... 2.22%* 1.84% 1.85% 1.84% 1.76%* 2.34%* 1.11%*
Ratio of operating
expenses to average net
assets including
interest expense ...... 2.12%* N/A N/A N/A N/A 2.12%* 1.10%*
- ----------------
* Annualized.
+ Total return is not annualized for periods less than one year and does not reflect any applicable sales charges. The total
returns would have been lower if certain fees had not been waived by the investment advisor of if fees had not been reduced
by credits allowed by the custodian.
(a) Formerly, Composite U.S. Government Securities, Inc.
(b) Ratio of operating expenses to average net assets includes expenses paid indirectly beginning in fiscal year 1995.
(c) Fiscal year end changed to October 31. Prior to this, the fiscal year end was December 31.
(d) 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.
(e) On March 23, 1998 the Fund commenced selling Class S and Class I shares.
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL highlights
INCOME FUND(a)
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<CAPTION>
CLASS A SHARES
------------------------------------------------------------------------------------------------------------
PERIOD YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
10/31/98(C) 12/31/97 12/31/96 12/31/95 12/31/94 12/31/93
----------- -------- -------- -------- -------- --------
<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 and
unrealized gain/
(loss) on investments (0.04)# 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)
------ ------ ------ ------ ------ ------
Total distributions .. (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+ ........ 5.21% 10.51% 3.46% 21.58% (4.82)% 10.82%
====== ====== ====== ====== ====== ======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of
period (in 000's) ... $213,397 $77,864 $86,657 $97,534 $88,102 $104,876
Ratio of operating
expenses to
average net assets(b) .. 1.07%* 1.08% 1.03% 1.08% 1.04% 1.08%
Ratio of net investment
income to average
net assets .......... 6.66%* 6.47% 6.52% 6.59% 6.83% 6.58%
Portfolio turnover
rate ................ 37% 27% 42% 43% 26% 51%
- ----------------
* Annualized.
+ Total return is not annualized for periods less than one year and does not reflect any applicable sales charges. The total
returns would have been lower if fees had not been reduced by credits allowed by the custodian.
# The amount shown may not accord with the change in aggregate gains and losses of portfolio securities due to the timing of
sales and redemptions of Fund shares.
(a) Formerly, Composite Income Fund, Inc.
(b) Ratio of operating expenses to average net assets includes expenses paid indirectly beginning in fiscal year 1995.
(c) Fiscal year end changed to October 31. Prior to this, the fiscal year end was December 31.
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL highlights
INCOME FUND(a)
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<CAPTION>
CLASS S CLASS I
CLASS B SHARES SHARES SHARES
----------------------------------------------------------------------- ------------- -------------
PERIOD YEAR YEAR YEAR PERIOD PERIOD PERIOD
ENDED ENDED ENDED ENDED ENDED ENDED ENDED
10/31/98(C) 12/31/97 12/31/96 12/31/95 12/31/94(D) 10/31/98(E) 10/31/98(E)
----------- -------- -------- -------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period ... $ 9.49 $ 9.17 $ 9.46 $ 8.30 $ 8.85 $ 9.58 $ 9.57
------ ------ ------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income .. 0.46 0.53 0.52 0.51 0.40 0.35 0.41
Net realized and
unrealized gain/(loss)
on investments ........ (0.04)# 0.32 (0.29) 1.16 (0.55) (0.13)# (0.13)#
------ ------ ------ ------ ------ ------ ------
Total from investment
operations ............ 0.42 0.85 0.23 1.67 (0.15) 0.22 0.28
------ ------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends from net
investment income ..... (0.46) (0.53) (0.52) (0.51) (0.40) (0.35) (0.41)
------ ------ ------ ------ ------ ------ ------
Total distributions .... (0.46) (0.53) (0.52) (0.51) (0.40) (0.35) (0.41)
------ ------ ------ ------ ------ ------ ------
Net asset value, end of
period ................ $ 9.45 $ 9.49 $ 9.17 $ 9.46 $ 8.30 $ 9.45 $ 9.44
====== ====== ====== ====== ====== ====== ======
TOTAL RETURN+ .......... 4.51% 9.51% 2.59% 20.70% (1.67)% 2.20% 2.84%
====== ====== ====== ====== ====== ====== ======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of
period (in 000's) ..... $34,321 $9,691 $7,122 $4,452 $2,299 $1,624 $7,342
Ratio of operating
expenses to average net
assets(b) ............. 1.84%* 1.86% 1.89% 1.91% 1.80%* 1.92%* 0.71%*
Ratio of net investment
income to average net
assets ................ 5.89%* 5.65% 5.69% 5.73% 6.25%* 5.81%* 7.02%*
Portfolio turnover rate 37% 27% 42% 43% 26% 37% 37%
- ----------------
* Annualized.
+ Total return is not annualized for periods less than one year and does not reflect any applicable sales charges. The total
returns would have been lower if fees had not been reduced by credits allowed by the custodian.
# The amount shown may not accord with the change in aggregate gains and losses of portfolio securities due to the timing of
sales and redemptions of Fund shares.
(a) Formerly, Composite Income Fund, Inc.
(b) Ratio of operating expenses to average net assets includes expenses paid indirectly beginning in fiscal year 1995.
(c) Fiscal year end changed to October 31. Prior to this, the fiscal year end was December 31.
(d) 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.
(e) On March 23, 1998 the Fund commenced selling Class S and Class I shares.
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL highlights
CALIFORNIA INSURED INTERMEDIATE MUNICIPAL FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<CAPTION>
CLASS A SHARES
------------------------------------------------------------------------------------------------------------
PERIOD YEAR YEAR YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED ENDED ENDED
10/31/98(A) 06/30/98 06/30/97 06/30/96 06/30/95 06/30/94*
----------- -------- -------- -------- -------- ---------
<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 investment income 0.16 0.49 0.49++ 0.49 0.50 0.11
Net realized and
unrealized gain
on investments ...... 0.21 0.17 0.23 0.15 0.35 0.11##
------ ------ ------ ------ ------ ------
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)# -- -- -- --
Distributions
from net
realized gains ...... -- (0.10) (0.05) (0.04) -- (0.01)
------ ------ ------ ------ ------ ------
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+ ........ 3.46% 6.26% 6.97% 6.25% 8.71% 2.20%
====== ====== ====== ====== ====== ======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end
of period (in 000's) $37,529 $38,724 $45,157 $54,518 $54,507 $34,147
Ratio of operating
expenses to
average net assets(b) 0.82%** 0.86% 0.82% 0.73% 0.42% 0.00%**
Ratio of net investment
income to average net
assets ......... 4.39%** 4.49% 4.61% 4.62% 4.95% 4.25%**
Portfolio
turnover rate .. 7% 25% 29% 27% 13% 17%
Ratio of operating
expenses to average
net assets without
fee waivers, expenses
absorbed and/or
fees reduced by
credits allowed
by the custodian..... 1.15%** 1.25% 1.31% 1.39% 1.41% 1.95%**
- ----------------
* The Fund commenced operations on April 4, 1994.
** Annualized.
+ Total return is not annualized for periods less than one year and does not reflect any applicable sales charges. The total
return would have been lower if certain fees had not been waived and expenses absorbed by the investment advisor or if fees
had not been reduced by credits allowed by the custodian.
++ Per share numbers have been calculated using the average shares method.
# Amount represents less than $0.01 per share.
## The amount shown may not accord with the change in aggregate gains and losses of portfolio securities due to the timing of
sales and redemptions of Fund shares.
(a) Fiscal year end changed to October 31. Prior to this, the fiscal year end was June 30.
(b) Ratio of operating expenses to average net assets includes expenses paid indirectly beginning in fiscal year 1995.
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL highlights
CALIFORNIA INSURED INTERMEDIATE MUNICIPAL FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<CAPTION>
CLASS B SHARES
---------------------------------------------------------------------------------------------
PERIOD YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
10/31/98(A) 06/30/98 06/30/97 06/30/96 06/30/95*
----------- -------- -------- -------- ---------
<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 investment income ..... 0.13 0.41 0.41++ 0.41 0.43
Net realized and 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)# -- -- --
Distributions from net
realized gains ........... -- (0.10) (0.05) (0.04) --
------ ------ ------ ------ ------
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+ ............. 3.20% 5.47% 6.17% 5.46% 7.90%
====== ====== ====== ====== ======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period
(in 000's) ............... $23,960 $21,688 $20,992 $20,948 $12,391
Ratio of operating expenses
to average net assets(b) . 1.57%** 1.61% 1.57% 1.48% 1.17%
Ratio of net investment
income to average net
assets ................... 3.64%** 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 fee waivers,
expenses absorbed and/or
fees reduced by credits
allowed by the custodian . 1.90%** 2.01% 2.06% 2.14% 2.16%
- ----------------
* On July 1, 1994 the Fund commenced selling Class B and Class S shares in addition to Class A shares. Those shares in
existence prior to July 1, 1994 were designated Class A shares. On July 25, 1996 the Fund commenced selling Class I shares.
** Annualized.
+ Total return is not annualized for periods less than one year and does not reflect any applicable sales charges. The total
return would have been lower if certain fees had not been waived and expenses absorbed by the investment advisor or if fees
had not been reduced by credits allowed by the custodian.
++ Per share numbers have been calculated using the average shares method.
# Amount represents less than $0.01 per share.
(a) Fiscal year end changed to October 31. Prior to this, the fiscal year end was June 30.
(b) Ratio of operating expenses to average net assets includes expenses paid indirectly beginning in fiscal year 1995.
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL highlights
CALIFORNIA INSURED INTERMEDIATE MUNICIPAL FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<CAPTION>
CLASS S SHARES CLASS I SHARES
----------------------------------------------------------------- ----------------------------------
PERIOD YEAR YEAR YEAR YEAR PERIOD YEAR PERIOD
ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED
10/31/98(A) 06/30/98 06/30/97 06/30/96 06/30/95* 10/31/98(A) 06/30/98 06/30/97*
----------- -------- -------- -------- --------- ----------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period . $10.81 $10.74 $10.56 $10.45 $10.10 $10.81 $10.74 $10.58
------ ------ ------ ------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.13 0.41 0.41++ 0.41 0.43 0.17 0.51 0.49++
Net realized and
unrealized gain on
investments ......... 0.21 0.17 0.23 0.15 0.35 0.21 0.17 0.21
------ ------ ------ ------ ------ ------ ------ ------
Total from investment
operations .......... 0.34 0.58 0.64 0.56 0.78 0.38 0.68 0.70
------ ------ ------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends from net
investment income ... (0.13) (0.41) (0.41) (0.41) (0.43) (0.17) (0.51) (0.49)
Distributions from net
realized gains ...... -- (0.10) (0.05) (0.04) -- -- (0.10) (0.05)
------ ------ ------ ------ ------ ------ ------ ------
Total distributions .. (0.13) (0.51) (0.46) (0.45) (0.43) (0.17) (0.61) (0.54)
------ ------ ------ ------ ------ ------ ------ ------
Net asset value, end
of period ........... $11.02 $10.81 $10.74 $10.56 $10.45 $11.02 $10.81 $10.74
====== ====== ====== ====== ====== ====== ====== ======
TOTAL RETURN+ ........ 3.20% 5.47% 6.17% 5.46% 7.90% 3.54% 6.53% 6.70%
====== ====== ====== ====== ====== ====== ====== ======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of
period (in 000's) ... $2 $2 $2 $11 $11 $1 $1 $1
Ratio of operating
expenses to average
net assets(b) ....... 1.57%** 1.59% 1.57% 1.48% 1.17% 0.57%** 0.60% 0.57%**
Ratio of net
investment income to
average net assets .. 3.64%** 3.76% 3.86% 3.87% 4.20% 4.64%** 4.75% 4.86%**
Portfolio turnover
rate ................ 7% 25% 29% 27% 13% 7% 25% 29%
Ratio of operating
expenses to average
net assets without
fee waivers, expenses
absorbed and/or fees
reduced by credits
allowed by the
custodian ........... 3.36%** 1.98% 2.06% 2.14% 2.16% 0.86%** 0.99% 1.06%**
- ----------------
* On July 1, 1994 the Fund commenced selling Class B and Class S shares in addition to Class A shares. Those shares in
existence prior to July 1, 1994 were designated Class A shares. On July 25, 1996 the Fund commenced selling Class I shares.
** Annualized.
+ Total return is not annualized for periods less than one year and does not reflect any applicable sales charges. The total
return would have been lower if certain fees had not been waived and expenses absorbed by the investment advisor or if fees
had not been reduced by credits allowed by the custodian.
++ Per share numbers have been calculated using the average shares method.
(a) Fiscal year end changed to October 31. Prior to this, the fiscal year end was June 30.
(b) Ratio of operating expenses to average net assets includes expenses paid indirectly beginning in fiscal year 1995.
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL highlights
CALIFORNIA MUNICIPAL FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<CAPTION>
CLASS A SHARES
---------------------------------------------------------------------------------------------------------
PERIOD YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
10/31/98(A) 06/30/98 06/30/97 06/30/96 06/30/95 06/30/94
----------- -------- -------- -------- -------- --------
<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 investment income 0.19++ 0.58++ 0.59 0.60++ 0.61 0.61
Net realized and
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)#
Distributions from
net realized gains .. -- -- -- -- (0.00)# --
Distributions in
excess of net
realized gains ...... -- -- -- -- -- (0.02)
------ ------ ------ ------ ------ ------
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+ ........ 2.82% 9.26% 8.83% 6.40% 7.57% (2.19)%
====== ====== ====== ====== ====== ======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of
period (in 000's) .. $287,590 $290,328 $318,251 $372,177 $405,967 $509,223
Ratio of operating
expenses to average
net assets(b) ...... 0.97%* 1.00% 0.97% 0.94% 0.85% 0.79%
Ratio of net
investment income to
average net assets . 4.87%* 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 and/or
fees reduced by
credits allowed by
the custodian ...... 1.05%* 1.19% 1.26% 1.29% 1.29% 1.39%
- ----------------
* Annualized.
+ Total return is not annualized for periods less than one year and does not reflect any applicable sales charges. The total
returns would have been lower if certain fees had not been waived by the investment advisor or if fees had not been reduced
by credits allowed by the custodian.
++ Per share numbers have been calculated using the average shares method.
# Amount represents less than $0.01 per share.
(a) Fiscal year end changed to October 31. Prior to this, the fiscal year end was June 30.
(b) Ratio of operating expenses to average net assets includes expenses paid indirectly beginning in fiscal year 1995.
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL highlights
CALIFORNIA MUNICIPAL FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<CAPTION>
CLASS B SHARES
--------------------------------------------------------------------
PERIOD YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
10/31/98(A) 06/30/98 06/30/97 06/30/96 06/30/95*
----------- -------- -------- -------- ---------
<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 investment income ........ 0.16++ 0.50++ 0.51 0.51++ 0.53
Net realized and 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 from net
realized gains .............. -- -- -- -- (0.00)#
------ ------ ------ ------ ------
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+ ................ 2.56% 8.45% 8.02% 5.61% 6.78%
====== ====== ====== ====== ======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of year (in
000's) ...................... $49,683 $34,537 $25,219 $20,543 $7,230
Ratio of operating expenses
to average net assets(b) .... 1.72%** 1.75% 1.72% 1.69% 1.60%
Ratio of net investment
income to average net assets 4.12%** 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 and/or
fees reduced by credits
allowed by the custodian .... 1.81%** 1.95% 2.01% 2.04% 2.04%
- ----------------
* On July 1, 1994 the Fund commenced selling Class B and Class S shares in addition to Class A
shares. Those shares in existence prior to July 1, 1994 were designated Class A shares. On July
25, 1996 the Fund commenced selling Class I shares.
** Annualized.
+ Total return is not annualized for periods less than one year and does not reflect any
applicable sales charges. The total returns would have been lower if certain fees had not been
waived by the investment advisor or if fees had not been reduced by credits allowed by the
custodian.
++ Per share numbers have been calculated using the average shares method.
# Amount represents less than $0.01 per share.
(a) Fiscal year end changed to October 31. Prior to this, the fiscal year end was June 30.
(b) Ratio of operating expenses to average net assets includes expenses paid indirectly beginning
in fiscal year 1995.
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL highlights
CALIFORNIA MUNICIPAL FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<CAPTION>
CLASS S SHARES CLASS I SHARES
----------------------------------------------------------------- ------------------------------------
PERIOD YEAR YEAR YEAR YEAR PERIOD YEAR PERIOD
ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED
10/31/98(A) 06/30/98 06/30/97 06/30/96 06/30/95* 10/31/98(A) 06/30/98 06/30/97*
----------- -------- -------- -------- --------- ----------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period .. $11.33 $10.92 $10.60 $10.53 $10.38 $11.33 $10.92 $10.62
------ ------ ------ ------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income . 0.16++ 0.50++ 0.51 0.51++ 0.53 0.20++ 0.61++ 0.58
Net realized and
unrealized gain on
investments .......... 0.13 0.41 0.32 0.07 0.15 0.13 0.41 0.30
------ ------ ------ ------ ------ ------ ------ ------
Total from investment
operations ........... 0.29 0.91 0.83 0.58 0.68 0.33 1.02 0.88
------ ------ ------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends from net
investment income .... (0.16) (0.50) (0.51) (0.51) (0.53) (0.20) (0.61) (0.58)
Distributions from net
realized gains ....... -- -- -- -- (0.00)# -- -- --
------ ------ ------ ------ ------ ------ ------ ------
Total distributions ... (0.16) (0.50) (0.51) (0.51) (0.53) (0.20) (0.61) (0.58)
------ ------ ------ ------ ------ ------ ------ ------
Net asset value, end
of period ............ $11.46 $11.33 $10.92 $10.60 $10.53 $11.46 $11.33 $10.92
====== ====== ====== ====== ====== ====== ====== ======
TOTAL RETURN+ ......... 2.56% 8.45% 8.02% 5.61% 6.78% 2.90% 9.53% 8.49%
====== ====== ====== ====== ====== ====== ====== ======
RATIOS TO AVERAGE NET
ASSETS/SUPPLEMENTAL DATA:
Net assets, end of
period (in 000's) .... $7 $8 $7 $11 $11 $1 $1 $1
Ratio of operating
expenses to average
net assets(b) ........ 1.72%** 1.74% 1.72% 1.69% 1.60% 0.72%** 0.74% 0.72%**
Ratio of net
investment income to
average net assets ... 4.12%** 4.43% 4.76% 4.81% 5.14% 5.12%** 5.44% 5.76%**
Portfolio turnover
rate ................. 28% 87% 36% 17% 22% 28% 87% 36%
Ratio of operating
expenses to average
net assets without
fee waivers and/or
fees reduced by
credits allowed by
the custodian ........ 2.33%** 1.95% 2.01% 2.04% 2.04% 0.76%** 0.93% 1.01%**
- ----------------
* On July 1, 1994 the Fund commenced selling Class B and Class S shares in addition to Class A shares. Those shares in existence
prior to July 1, 1994 were designated Class A shares. On July 25, 1996 the Fund commenced selling Class I shares.
** Annualized.
+ Total return is not annualized for periods less than one year and does not reflect any applicable sales charges. The total
returns would have been lower if certain fees had not been waived by the investment advisor or if fees had not been reduced by
credits allowed by the custodian.
++ Per share numbers have been calculated using the average shares method.
# Amount represents less than $0.01 per share.
(a) Fiscal year end changed to October 31. Prior to this, the fiscal year end was June 30.
(b) Ratio of operating expenses to average net assets includes expenses paid indirectly beginning in fiscal year 1995.
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL highlights
FLORIDA INSURED MUNICIPAL FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<CAPTION>
CLASS A SHARES
----------------------------------------------------------------------------------------------------------
PERIOD YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
10/31/98(A) 06/30/98 06/30/97 06/30/96 06/30/95 06/30/94
----------- -------- -------- -------- -------- --------
<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++ 0.50 0.52 0.52
Net realized and
unrealized gain/
(loss) on
investments ......... 0.15 0.42 0.30 0.21 0.03## (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)# -- -- (0.00)#
Distributions in
excess of net
realized gains ...... -- -- -- -- -- (0.00)#
------ ------ ------ ------ ------ ------
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+ ........ 3.08% 9.34% 8.43% 7.56% 6.01% (1.50)%
====== ====== ====== ====== ====== ======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of
period (in 000's) ... $15,813 $16,538 $22,761 $29,821 $33,714 $38,541
Ratio of operating
expenses to
average net
assets(b) ........... 0.82%* 0.88% 0.82% 0.63% 0.39% 0.00%
Ratio of net
investment income
to average net
assets .............. 4.76%* 4.79% 5.01% 5.08% 5.53% 5.09%
Portfolio turnover
rate ................ 40% 51% 53% 52% 44% 83%
Ratio of operating
expenses to
average net assets
without fee
waviers, expenses
absorbed and/or
fees reduced by
credits allowed by
the custodian ....... 1.40%* 1.45% 1.46% 1.46% 1.51% 1.55%
- ----------------
* Annualized.
+ Total return is not annualized for periods less than one year and does not reflect any applicable sales charges. The total
return would have been lower if certain fees had not been waived and expenses absorbed by the investment advisor or if fees
had not been reduced by credits allowed by the custodian.
++ Per share numbers have been calculated using the average shares method.
# Amount represents less than $0.01 per share.
## The amount shown may not accord with the change in aggregate gains and losses of portfolio securities due to the timing of
sales and redemptions of Fund shares.
(a) Fiscal year end changed to October 31. Prior to this, the fiscal year end was June 30.
(b) Ratio of operating expenses to average net assets includes expenses paid indirectly beginning in fiscal year 1995.
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL highlights
FLORIDA INSURED MUNICIPAL FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<CAPTION>
CLASS B SHARES
-------------------------------------------------------------------
PERIOD YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
10/31/98(A) 06/30/98 06/30/97 06/30/96 06/30/95*
----------- -------- -------- -------- ---------
<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++ 0.42 0.45
Net realized and unrealized
gain on investments ......... 0.15 0.43 0.30 0.21 0.03##
------ ------ ------ ------ ------
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)# -- --
------ ------ ------ ------ ------
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+ ................ 2.82% 8.35% 7.63% 6.76% 5.23%
====== ====== ====== ====== ======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period
(in 000's) .................. $6,054 $5,075 $5,067 $5,428 $3,330
Ratio of operating expenses
to average net assets(b) .... 1.57%** 1.63% 1.57% 1.38% 1.14%
Ratio of net investment
income to average net
assets ...................... 4.01%** 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 fee waivers,
expenses absorbed and/or
fees reduced by credits
allowed by the custodian .... 2.15%** 2.21% 2.21% 2.21% 2.26%
- ----------------
* On July 1, 1994 the Fund commenced selling Class B and Class S shares in addition to Class A
shares. Those shares in existence prior
to July 1, 1994 were designated Class A shares. On July 25, 1996 the Fund commenced selling
Class I shares.
** Annualized.
+ Total return is not annualized for periods less than one year and does not reflect any
applicable sales charges. The total return would have been lower if certain fees had not been
waived and expenses absorbed by the investment advisor or if fees had not been reduced by
credits allowed by the custodian.
++ Per share numbers have been calculated using the average shares method.
# Amount represents less than $0.01 per share.
## The amount shown may not accord with the change in aggregate gains and losses of portfolio
securities due to the timing of sales and redemptions of Fund shares.
(a) Fiscal year end changed to October 31. Prior to this, the fiscal year end was June 30.
(b) Ratio of operating expenses to average net assets includes expenses paid indirectly beginning
in fiscal year 1995.
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL highlights
FLORIDA INSURED MUNICIPAL FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<CAPTION>
CLASS S SHARES CLASS I SHARES
------------------------------------------------------------------ -----------------------------------
PERIOD YEAR YEAR YEAR YEAR PERIOD YEAR PERIOD
ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED
10/31/98(A) 06/30/98 06/30/97 06/30/96 06/30/95* 10/31/98(A) 06/30/98 06/30/97*
----------- -------- -------- -------- --------- ----------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period .. $10.35 $ 9.93 $ 9.64 $ 9.43 $ 9.40 $10.35 $ 9.93 $ 9.68
------ ------ ------ ------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income . 0.14 0.36 0.42++ 0.42 0.45 0.19 0.54 0.49++
Net realized and
unrealized gain on
investments .......... 0.15 0.48 0.30 0.21 0.03 0.14## 0.36 0.26
------ ------ ------ ------ ------ ------ ------ ------
Total from investment
operations ........... 0.29 0.84 0.72 0.63 0.48 0.33 0.90 0.75
------ ------ ------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends from net
investment income .... (0.14) (0.42) (0.43) (0.42) (0.45) (0.18) (0.48) (0.50)
Distributions in
excess of net
investment income .... -- -- (0.00)# -- -- -- -- (0.00)#
------ ------ ------ ------ ------ ------ ------ ------
Total distributions ... (0.14) (0.42) (0.43) (0.42) (0.45) (0.18) (0.48) (0.50)
------ ------ ------ ------ ------ ------ ------ ------
Net asset value, end
of period ............ $10.50 $10.35 $ 9.93 $ 9.64 $ 9.43 $10.50 $10.35 $ 9.93
====== ====== ====== ====== ====== ====== ====== ======
TOTAL RETURN+ ......... 2.82% 8.53% 7.63% 6.76% 5.23% 3.17% 9.61% 7.88%
====== ====== ====== ====== ====== ====== ====== ======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of
period (in 000's) .... $2 $2 $29 $11 $11 $1 $1 $1
Ratio of operating
expenses to average
net assets(b) ........ 1.57%** 1.62% 1.57% 1.38% 1.14% 0.57%** 0.62% 0.57%**
Ratio of net
investment income to
average net assets ... 4.01%** 4.05% 4.26% 4.33% 4.78% 5.01%** 5.05% 5.26%**
Portfolio turnover
rate ................. 40% 51% 53% 52% 44% 40% 51% 53%
Ratio of operating
expenses to average
net assets without
fee waivers, expenses
absorbed and/or fees
reduced by credits
allowed by the
custodian ............ 3.64%** 2.19% 2.21% 2.21% 2.26% 1.10%** 1.19% 1.21%**
- ----------------
* On July 1, 1994 the Fund commenced selling Class B and Class S shares in addition to Class A shares. Those shares in existence
prior to July 1, 1994 were designated Class A shares. On July 25, 1996 the Fund commenced selling Class I shares.
** Annualized.
+ Total return is not annualized for periods less than one year and does not reflect any applicable sales charges. The total
return would have been lower if certain fees had not been waived and expenses absorbed by the investment advisor or if fees had
not b een reduced by credits allowed by the custodian.
++ Per share numbers have been calculated using the average shares method.
# Amount represents less than $0.01 per share.
## The amount shown may not accord with the change in aggregate gains and losses of portfolio securities due to the timing of
sales and redemptions of Fund shares.
(a) Fiscal year end changed to October 31. Prior to this, the fiscal year end was June 30.
(b) Ratio of operating expenses to average net assets includes expenses paid indirectly beginning in fiscal year 1995.
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL highlights
TAX-EXEMPT BOND FUND(a)
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<CAPTION>
CLASS A SHARES
---------------------------------------------------------------------------------------------------------
PERIOD YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
10/31/98(C) 12/31/97 12/31/96 12/31/95 12/31/94 12/31/93
----------- -------- -------- -------- -------- --------
<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 and
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)
Distributions
from net
realized 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+ ........ 4.58% 8.59% 2.52% 18.25% (6.53)% 12.54%
====== ====== ====== ====== ====== ======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end
of period (in
000's) .............. $301,162 $188,021 $203,606 $230,055 $215,438 $259,045
Ratio of
operating
expenses to
average net
assets(b) ........... 0.84%* 0.80% 0.75% 0.81% 0.79% 0.81%
Ratio of net
investment
income to
average net
assets .............. 5.14%* 4.84% 4.90% 5.03% 5.23% 4.97%
Portfolio
turnover rate ....... 6% 21% 22% 8% 12% 19%
- ----------------
* Annualized.
+ Total return is not annualized for periods less than one year and does not reflect any applicable sales charges. The total
returns would have been lower if fees had not been reduced by credits allowed by the custodian.
(a) Formerly, Composite Tax-Exempt Bond Fund, Inc.
(b) Ratio of operating expenses to average net assets includes expenses paid indirectly beginning in fiscal year 1995.
(c) Fiscal year end changed to October 31. Prior to this, the fiscal year end was December 31.
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL highlights
TAX-EXEMPT BOND FUND(a)
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<CAPTION>
CLASS S
CLASS B SHARES SHARES CLASS I SHARES
----------------------------------------------------------------------------- --------------
PERIOD YEAR YEAR YEAR PERIOD PERIOD PERIOD
ENDED ENDED ENDED ENDED ENDED ENDED ENDED
10/31/98(C) 12/31/97 12/31/96 12/31/95 12/31/94(D) 10/31/98(E) 10/31/98(E)
----------- -------- -------- -------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period ......................... $ 8.09 $ 7.83 $ 8.02 $ 7.13 $ 7.49 $ 8.06 $ 8.06
------ ------ ------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ........... 0.28 0.32 0.31 0.32 0.25 0.16 0.27
Net realized and unrealized gain/
(loss) on investments .......... 0.03 0.27 (0.19) 0.89 (0.36) 0.10 0.05
------ ------ ------ ------ ------ ------ ------
Total from investment operations 0.31 0.59 0.12 1.21 (0.11) 0.26 0.32
------ ------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends from net investment
income ......................... (0.29) (0.32) (0.31) (0.32) (0.25) (0.21) (0.27)
Distributions from net realized
gains .......................... -- (0.01) -- -- -- -- --
------ ------ ------ ------ ------ ------ ------
Total distributions ............. (0.29) (0.33) (0.31) (0.32) (0.25) (0.21) (0.27)
------ ------ ------ ------ ------ ------ ------
Net asset value, end of period .. $ 8.11 $ 8.09 $ 7.83 $ 8.02 $ 7.13 $ 8.11 $ 8.11
====== ====== ====== ====== ====== ====== ======
TOTAL RETURN+ ........................ 3.88% 7.71% 1.61% 17.30% (1.46)% 3.27% 4.00%
====== ====== ====== ====== ====== ====== ======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in
000's) ......................... $17,344 $8,110 $5,266 $2,682 $1,258 $1 $1
Ratio of operating expenses
to average net assets(b) ....... 1.62%* 1.62% 1.65% 1.62% 1.58%* 2.70%* 0.55%*
Ratio of net investment income
to average net assets .......... 4.36%* 4.00% 4.01% 4.18% 4.53%* 3.28%* 5.43%*
Portfolio turnover rate ......... 6% 21% 22% 8% 12% 6% 6%
- ----------------
* Annualized.
+ Total return is not annualized for periods less than one year and does not reflect any applicable sales charges. The total
returns would have been lower if fees had not been reduced by credits allowed by the custodian.
(a) Formerly, Composite Tax-Exempt Bond Fund, Inc.
(b) Ratio of operating expenses to average net assets includes expenses paid indirectly beginning in fiscal year 1995.
(c) Fiscal year end changed to October 31. Prior to this, the fiscal year end was December 31.
(d) 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.
(e) On March 23, 1998 the Fund commenced selling Class S and Class I shares.
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL highlights
BOND & STOCK FUND(a)
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH YEAR.
<CAPTION>
CLASS A SHARES
----------------------------------------------------------------------------------------
YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
10/31/98 10/31/97 10/31/96 10/31/95 10/31/94
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
year .......................... $16.13 $14.71 $13.48 $11.53 $12.23
------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income .......... 0.45++ 0.50 0.52 0.50 0.46
Net realized and unrealized
gain/(loss) on investments .... 0.21## 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 net realized
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 year ... $14.02 $16.13 $14.71 $13.48 $11.53
====== ====== ====== ====== ======
TOTAL RETURN+ .................. 4.03% 20.81% 15.66% 22.55% (0.90)%
====== ====== ====== ====== ======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of year (in
000's) ........................ $298,651 $307,018 $255,414 $208,592 $191,615
Ratio of operating expenses to
average net assets(b) ......... 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%
- ----------------
+ Total return does not reflect any applicable sales charges. The total returns would have been lower if fees had not been reduc
ed by credits allowed by the custodian.
++ Per share numbers have been calculated using the average shares method.
## The amount shown may not accord with the change in aggregate gains and losses of portfolio securities due to the timing of sal
es and redemption of Fund shares.
(a) Formerly, Composite Bond & Stock Fund, Inc.
(b) Ratio of operating expenses to average net assets includes expenses paid indirectly beginning in fiscal year 1995.
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL highlights
BOND & STOCK FUND(a)
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH YEAR.
<CAPTION>
CLASS B SHARES CLASS S SHARES
--------------------------------------------------------------------------------- -------------
YEAR YEAR YEAR YEAR PERIOD PERIOD
ENDED ENDED ENDED ENDED ENDED ENDED
10/31/98 10/31/97 10/31/96 10/31/95 10/31/94(C) 10/31/98(D)
-------- -------- -------- -------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of year .... $16.10 $14.69 $13.47 $11.51 $11.49 $14.72
------ ------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment
income ............... 0.33++ 0.39 0.41 0.39 0.18 0.14++
Net realized and
unrealized gain/
(loss) on
investments .......... 0.19## 2.36 1.53 2.03 0.04 (0.87)##
------ ------ ------ ------ ------ ------
Total from investment
operations ........... 0.52 2.75 1.94 2.42 0.22 (0.73)
------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends from net
investment income .... (0.34) (0.40) (0.40) (0.38) (0.20) (0.20)
Distributions from
net realized gains ... (2.32) (0.94) (0.32) (0.08) -- --
------ ------ ------ ------ ------ ------
Total distributions ... (2.66) (1.34) (0.72) (0.46) (0.20) (0.20)
------ ------ ------ ------ ------ ------
Net asset value, end
of year .............. $13.96 $16.10 $14.69 $13.47 $11.51 $13.79
====== ====== ====== ====== ====== ======
TOTAL RETURN+ ......... 3.12% 19.86% 14.73% 21.60% 1.94% (4.66)%
====== ====== ====== ====== ====== ======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of
year (in 000's) ...... $74,542 $46,556 $22,243 $7,372 $3,362 $36
Ratio of operating
expenses to average
net assets(b) ........ 1.76% 1.79% 1.86% 1.84% 1.77%* 1.73%*
Ratio of net investment
income to average net
assets ............... 2.30% 2.48% 2.80% 3.10% 3.22%* 2.33%*
Portfolio turnover
rate ................. 80% 54% 46% 32% 25% 80%
- ----------------
* Annualized.
+ Total return is not annualized for periods less than one year and does not reflect any applicable sales charges. The total
returns would have been lower if fees had not been reduced by credits allowed by the custodian.
++ Per share numbers have been calculated using the average shares method.
## The amount shown may not accord with the change in aggregate gains and losses of portfolio securities due to the timing of
sales and redemption of Fund shares.
(a) Formerly, Composite Bond & Stock Fund, Inc.
(b) Ratio of operating expenses to average net assets includes expenses paid indirectly beginning in fiscal year 1995.
(c) On March 30, 1994 the Fund commenced selling Class B Shares. Those shares in existence prior to March 30, 1994 were designated
as Class A shares.
(d) On May 28, 1998 the Fund commenced selling Class S shares.
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL highlights
GROWTH & INCOME FUND(a)
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH YEAR.
<CAPTION>
CLASS A SHARES
---------------------------------------------------------------------------------------
YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
10/31/98 10/31/97 10/31/96 10/31/95 10/31/94
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
year ......................... $21.01 $17.26 $14.65 $12.71 $12.81
------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ......... 0.11++ 0.12 0.20 0.22 0.18
Net realized and unrealized
gain 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 net realized
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 year .. $19.99 $21.01 $17.26 $14.65 $12.71
====== ====== ====== ====== ======
TOTAL RETURN+ ................. 7.38% 31.24% 23.61% 20.87% 8.55%
====== ====== ====== ====== ======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of year (in
000's) ....................... $502,115 $299,928 $178,331 $130,630 $102,837
Ratio of operating expenses to
average net assets(b) ........ 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%
- ----------------
+ Total return does not reflect any applicable sales charges. The total returns would have been lower if fees had not been
reduced by credits allowed by the custodian.
++ Per share numbers have been calculated using the average shares method.
(a) Formerly, Composite Growth & Income Fund.
(b) Ratio of operating expenses to average net assets includes expenses paid indirectly beginning in fiscal year 1995.
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL highlights
GROWTH & INCOME FUND(a)
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<CAPTION>
CLASS B SHARES CLASS S SHARES CLASS I SHARES
----------------------------------------------------------- -------------- --------------
YEAR YEAR YEAR YEAR PERIOD PERIOD PERIOD
ENDED ENDED ENDED ENDED ENDED ENDED ENDED
10/31/98 10/31/97 10/31/96 10/31/95 10/31/94(C) 10/31/98(D) 10/31/98(D)
-------- -------- -------- -------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of period ................ $20.85 $17.17 $14.59 $12.68 $12.00 $21.26 $21.42
------ ------ ------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income/
(loss) ................... (0.07)++ (0.02) 0.06 0.11 0.05 (0.03)++ 0.11++
Net realized and unrealized
gain/(loss) on
investments .............. 1.46 4.93 3.14 2.31 0.69 (1.44)## (1.43)##
------ ------ ------ ------ ------ ------ ------
Total from investment
operations ............... 1.39 4.91 3.20 2.42 0.74 (1.47) (1.32)
------ ------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends from net
investment income ........ (0.00)# (0.02) (0.08) (0.11) (0.06) -- (0.07)
Distributions from net
realized gains ........... (2.47) (1.21) (0.54) (0.40) -- -- --
------ ------ ------ ------ ------ ------ ------
Total distributions ....... (2.47) (1.23) (0.62) (0.51) (0.06) -- (0.07)
------ ------ ------ ------ ------ ------ ------
Net asset value, end of
period ................... $19.77 $20.85 $17.17 $14.59 $12.68 $19.79 $20.03
====== ====== ====== ====== ====== ====== ======
TOTAL RETURN+ ............. 6.60% 30.20% 22.55% 19.95% 6.14% (6.83)% (6.18)%
====== ====== ====== ====== ====== ====== ======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period
(in 000's) ............... $117,063 $49,994 $22,851 $8,871 $2,082 $12,245 $185,528
Ratio of operating expenses
to average net assets(b) . 1.79% 1.88% 1.94% 1.91% 1.85%* 1.74%* 0.62%*
Ratio of net investment
income/(loss) to average
net assets ............... (0.33)% (0.19)% 0.34% 0.69% 0.65%* (0.28)%* 0.84%*
Portfolio turnover rate ... 79% 71% 52% 39% 34% 79% 79%
- ----------------
* Annualized.
+ Total return is not annualized for periods less than one year and does not reflect any applicable sales charges. The total
returns
would have been lower if fees had not been reduced by credits allowed by the custodian.
++ Per share numbers have been calculated using the average shares method.
# Amount represents less than $0.01 per share.
## The amount shown may not accord with the change in aggregate gains and losses of portfolio securities due to the timing of
sales and redemption of Fund shares.
(a) Formerly, Composite Growth & Income Fund.
(b) Ratio of operating expenses to average net assets includes expenses paid indirectly beginning in fiscal year 1995.
(c) On March 30, 1994 the Fund commenced selling Class B shares. Those shares in existence prior to March 30, 1994 were designated
as Class A shares.
(d) On March 23, 1998 the Fund commenced selling Class S and Class I shares.
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL highlights
GROWTH FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<CAPTION>
CLASS A SHARES
------------------------------------------------------------------------------------------------------
PERIOD YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
10/31/98(A) 06/30/98 06/30/97 06/30/96 06/30/95 06/30/94
----------- -------- -------- -------- -------- --------
<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)++ (0.15)++ (0.03)++ (0.07)++ 0.05++ (0.02)
Net realized and
unrealized gain/
(loss) on
investments .......... (0.75) 4.99 1.58 3.47 3.42 0.03##
------ ------ ------ ------ ------ ------
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 from
net realized gains ... -- (1.28) (2.34) (1.89) (0.00)# --
------ ------ ------ ------ ------ ------
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+ ......... (4.44)% 35.43% 10.88% 25.44% 32.33% 0.00%
====== ====== ====== ====== ====== ======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of
period (in 000's) .... $104,775 $112,153 $111,187 $179,720 $154,763 $126,808
Ratio of operating
expenses to average
net assets(b) ........ 1.69%* 1.66% 1.70% 1.70% 1.76% 1.75%
Ratio of net investment
income/(loss) to
average net assets ... (1.21)%* (0.91)% (0.22)% (0.49)% 0.28% (0.35)%
Portfolio turnover
rate ................. 24% 153% 156% 205% 233% 227%
- ----------------
* Annualized.
+ Total return is not annualized for periods less than one year and does not reflect any applicable sales charges. The total
returns would have been lower if certain fees had not been reduced by credits allowed by the custodian.
++ Per share numbers have been calculated using the average shares method.
# Amount represents less than $0.01 per share.
## The amount shown may not accord with the change in aggregate gains and losses of portfolio securities due to the timing of
sales and redemptions of Fund shares.
(a) Fiscal year end changed to October 31. Prior to this, the fiscal year end was June 30.
(b) Ratio of operating expenses to average net assets include expenses paid indirectly beginning in fiscal year 1995.
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL highlights
GROWTH FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<CAPTION>
CLASS B SHARES
-------------------------------------------------------------------------------------------
PERIOD YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
10/31/98(A) 06/30/98 06/30/97 06/30/96 06/30/95*
----------- -------- -------- -------- ---------
<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)++ (0.25)++ (0.14)++ (0.19)++ (0.04)++
Net realized and unrealized
gain/(loss) 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 from net
realized gains ................ -- (1.28) (2.34) (1.89) (0.00)#
------ ------ ------ ------ ------
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+ .................. (4.66)% 34.43% 9.99% 24.54% 31.46%
====== ====== ====== ====== ======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period
(in 000's) .................... $39,379 $38,390 $30,397 $25,067 $6,928
Ratio of operating expenses
to average net assets(b) ...... 2.54%** 2.46% 2.45% 2.45% 2.51%
Ratio of net investment
loss to average net assets .... (2.06)%** (1.70)% (0.97)% (1.24)% (0.47)%
Portfolio turnover rate ........ 24% 153% 156% 205% 233%
- ----------------
* On July 1, 1994 the Fund commenced selling Class B and Class S shares in addition to Class A shares. Those shares in existence
prior to July 1, 1994 were designated Class A shares. On July 25, 1996 the Fund commenced selling Class I shares.
** Annualized.
+ Total return is not annualized for periods less than one year and does not reflect any applicable sales charges. The total
returns would have been lower if certain fees had not been reduced by credits allowed by the custodian.
++ Per share numbers have been calculated using the average shares method.
# Amount represents less than $0.01 per share.
(a) Fiscal year end changed to October 31. Prior to this, the fiscal year end was June 30.
(b) Ratio of operating expenses to average net assets includes expenses paid indirectly beginning in fiscal year 1995.
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL highlights
GROWTH FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<CAPTION>
CLASS S SHARES CLASS I SHARES
---------------------------------------------------------------- -------------------------------------
PERIOD YEAR YEAR YEAR YEAR PERIOD YEAR PERIOD
ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED
10/31/98(A) 06/30/98 06/30/97 06/30/96 06/30/95* 10/31/98(A) 06/30/98 06/30/97*
----------- -------- -------- -------- --------- ----------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of
period ................ $17.83 $14.54 $15.47 $14.11 $10.73 $18.56 $14.94 $14.21
------ ------ ------ ------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income/
(loss) ................ (0.11)++ (0.25)++ (0.14)++ (0.19)++ (0.04)++ (0.05)++ (0.10)++ 0.00#++
Net realized and
unrealized gain/(loss)
on investments ........ (0.73) 4.82 1.55 3.44 3.42 (0.75) 5.00 3.07
------ ------ ------ ------ ------ ------ ------ ------
Total from investment
operations ............ (0.84) 4.57 1.41 3.25 3.38 (0.80) 4.90 3.07
------ ------ ------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends from net
investment income ..... -- -- -- -- (0.00)# -- -- --
Distributions from net
realized gains ........ -- (1.28) (2.34) (1.89) (0.00)# -- (1.28) (2.34)
------ ------ ------ ------ ------ ------ ------ ------
Total distributions .... -- (1.28) (2.34) (1.89) (0.00) -- (1.28) (2.34)
------ ------ ------ ------ ------ ------ ------ ------
Net asset value, end
of period ............. $16.99 $17.83 $14.54 $15.47 $14.11 $17.76 $18.56 $14.94
====== ====== ====== ====== ====== ====== ====== ======
TOTAL RETURN+ .......... (4.71)% 34.40% 10.06% 24.54% 31.44% (4.31)% 35.75% 22.73%
====== ====== ====== ====== ====== ====== ====== ======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of
period (in 000's) ... $11,645 $13,283 $14,038 $45,652 $18,730 $119,351 $115,729 $126,986
Ratio of operating
expenses to average
net assets(b) ......... 2.39%** 2.39% 2.45% 2.45% 2.51% 1.26%** 1.36% 1.45%**
Ratio of net
investment income/
(loss) to average net
assets ................ (1.91)%** (1.64)% (0.97)% (1.24)% (0.47)% (0.78)%** (0.61)% 0.03%**
Portfolio turnover
rate .................. 24% 153% 156% 205% 233% 24% 153% 156%
- ----------------
* On July 1, 1994 the Fund commenced selling Class B and Class S shares in addition to Class A shares. Those shares in existence
prior to July 1, 1994 were designated Class A shares. On July 25, 1996 the Fund commenced selling Class I shares.
** Annualized.
+ Total return is not annualized for periods less than one year and does not reflect any applicable sales charges. The total
returns would have been lower if certain fees had not been reduced by credits allowed by the custodian.
++ Per share numbers have been calculated using the average shares method.
# Amount represents less than $0.01 per share.
(a) Fiscal year end changed to October 31. Prior to this, the fiscal year end was June 30.
(b) Ratio of operating expenses to average net assets includes expenses paid indirectly beginning in fiscal year 1995.
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL highlights
NORTHWEST FUND(a)
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH YEAR.
<CAPTION>
CLASS A SHARES
----------------------------------------------------------------------------------------
YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
10/31/98 10/31/97 10/31/96 10/31/95 10/31/94
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
year .......................... $25.92 $19.69 $17.40 $14.30 $14.50
------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income/(loss) ... (0.02)++ (0.02) 0.03 0.07 0.08
Net realized and 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 net realized
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 year ... $20.37 $25.92 $19.69 $17.40 $14.30
====== ====== ====== ====== ======
TOTAL RETURN+ .................. (4.81)% 44.47% 14.54% 22.24% 2.97%
====== ====== ====== ====== ======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of year (in
000's) ........................ $243,126 $256,908 $176,706 $157,953 $152,622
Ratio of operating expenses to
average net assets(b) ......... 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 without fee
waivers or fees reduced by
credits allowed by the
custodian ..................... 1.10% 1.11% 1.08% 1.10% 1.09%
- ----------------
+ Total return does not reflect any applicable sales charges. The total returns would have been lower if certain fees had not
been waived by the investment advisor or if fees had not been reduced by credits allowed by the custodian.
++ Per share numbers have been calculated using the average shares method.
(a) Formerly, Composite Northwest Fund, Inc.
(b) Ratio of operating expenses to average net assets includes expenses paid indirectly beginning in fiscal year 1995.
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL highlights
NORTHWEST FUND(a)
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH YEAR.
<CAPTION>
CLASS B SHARES
-----------------------------------------------------------------------------------------
YEAR YEAR YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED ENDED
10/31/98 10/31/97 10/31/96 10/31/95 10/31/94(C)
-------- -------- -------- -------- -----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
year .......................... $25.34 $19.45 $17.31 $14.28 $14.42
------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment loss ............ (0.20)++ (0.08) (0.08) (0.05) (0.02)
Net realized and 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:
Distributions from net realized
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 year ... $19.64 $25.34 $19.45 $17.31 $14.28
------ ------ ------ ------ ------
TOTAL RETURN+ .................. (5.63)% 43.17% 13.54% 21.25% (0.97)%
------ ------ ------ ------ ------
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of year (in
000's) ....................... $47,106 $39,627 $14,653 $7,083 $3,102
Ratio of operating expenses to
average net assets(b) ......... 1.95% 1.91% 1.98% 1.95% 1.96%*
Ratio of net investment loss to
average net assets ............ (0.94)% (0.96)% (0.76)% (0.45)% (0.39)%*
Portfolio turnover rate ........ 39% 37% 42% 9% 11%
Ratio of operating expenses to
average net assets without fee
waivers or fees reduced by
credits allowed by the
custodian ..................... 1.95% 1.97% 1.98% 1.95% 1.96%*
- ----------------
* Annualized.
+ Total return is not annualized for periods less than one year and does not reflect any applicable sales charges. The total
returns would have been lower if certain fees had not been waived by the investment advisor or if fees had not been reduced by
credits allowed by the custodian.
++ Per share numbers have been calculated using the average shares method.
(a) Formerly, Composite Northwest Fund, Inc.
(b) Ratio of operating expenses to average net assets includes expenses paid indirectly beginning in fiscal year 1995.
(c) On March 30, 1994 the Fund commenced selling Class B Shares. Those shares in existence prior to March 30, 1994 were designated
as Class A shares.
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL highlights
EMERGING GROWTH FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<CAPTION>
CLASS A SHARES
-------------------------------------------------------------------------------------------------------------
PERIOD YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
10/31/98(A) 06/30/98 06/30/97 06/30/96 06/30/95 06/30/94
----------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period .. $19.49 $18.28 $20.17 $15.47 $13.02 $13.76
------ ------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment loss ... (0.08)++ (0.22)++ (0.21)++ (0.19)++ (0.00)++# (0.09)
Net realized and
unrealized gain/(loss)
on investments ....... (3.16) 2.50 (0.18) 5.65 2.77 0.68
------ ------ ------ ------ ------ ------
Total from investment
operations ........... (3.24) 2.28 (0.39) 5.46 2.77 0.59
------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
Distributions from net
realized gains ....... -- (1.07) (1.50) (0.76) (0.32) (1.33)
------ ------ ------ ------ ------ ------
Total distributions ... -- (1.07) (1.50) (0.76) (0.32) (1.33)
------ ------ ------ ------ ------ ------
Net asset value, end
of period ............ $16.25 $19.49 $18.28 $20.17 $15.47 $13.02
====== ====== ====== ====== ====== ======
TOTAL RETURN+ ......... (16.62)% 12.95% (1.50)% 35.93% 21.54% 3.40%
====== ====== ====== ====== ====== ======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of
period (in 000's) .... $88,502 $118,473 $165,719 $283,747 $185,722 $124,941
Ratio of operating
expenses to average
net assets(b) ........ 1.88%* 1.66% 1.64% 1.64% 1.68% 1.66%
Ratio of net investment
loss to average net
assets ............... (1.43)%* (1.10)% (1.17)% (1.02)% (0.31)% (0.68)%
Portfolio turnover rate 20% 112% 81% 131% 181% 224%
Ratio of operating
expenses to average
net assets without
fee waivers and/or
fees reduced by
credits allowed by
the custodian ........ 1.89%* 1.66% 1.64% 1.65% N/A N/A
- ----------------
* Annualized.
+ Total return is not annualized for periods less than one year and does not reflect any applicable sales charges. The total
returns would have been lower if certain fees had not been waived by the investment advisor or if fees had not been reduced by
credits allowed by the custodian.
++ Per share numbers have been calculated using the average shares method.
# Amount represents less than $0.01 per share.
(a) Fiscal year end changed to October 31. Prior to this, the fiscal year end was June 30.
(b) Ratio of operating expenses to average net assets includes expenses paid indirectly beginning in fiscal year 1995.
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL highlights
EMERGING GROWTH FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<CAPTION>
CLASS B SHARES
---------------------------------------------------------------------------------------------
PERIOD YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
10/31/98(A) 06/30/98 06/30/97 06/30/96 06/30/95*
----------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning
of period ..................... $18.86 $17.85 $19.88 $15.37 $13.02
------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment loss ............ (0.13)++ (0.36)++ (0.34)++ (0.32)++ (0.10)++
Net realized and unrealized
gain/(loss) on investments .... (3.06) 2.44 (0.19) 5.59 2.77
------ ------ ------ ------ ------
Total from investment operations (3.19) 2.08 (0.53) 5.27 2.67
------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
Distributions from net
realized gains ................ -- (1.07) (1.50) (0.76) (0.32)
------ ------ ------ ------ ------
Total distributions ............ -- (1.07) (1.50) (0.76) (0.32)
------ ------ ------ ------ ------
Net asset value, end of period . $15.67 $18.86 $17.85 $19.88 $15.37
====== ====== ====== ====== ======
TOTAL RETURN+ .................. (16.87)% 12.05% (2.26)% 34.93% 20.69%
====== ====== ====== ====== ======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period
(in 000's) .................... $22,172 $28,540 $29,123 $28,920 $10,208
Ratio of operating expenses
to average net assets(b) ...... 2.84%** 2.47% 2.39% 2.39% 2.43%
Ratio of net investment
loss to average net assets .... (2.39)%** (1.92)% (1.92)% (1.77)% (1.06)%
Portfolio turnover rate ........ 20% 112% 81% 131% 181%
Ratio of operating expenses
to average net assets
without fee waivers and/or
fees reduced by credits
allowed by the custodian ...... 2.85%** 2.47% 2.39% 2.40% N/A
- ----------------
* On July 1, 1994 the Fund commenced selling Class B and Class S shares in addition to Class A shares. Those shares in existence
prior to July 1, 1994 were designated Class A shares. On July 25, 1996 the Fund commenced selling Class I shares.
** Annualized.
+ Total return is not annualized for periods less than one year and does not reflect any applicable sales charges. The total
returns would have been lower if certain fees had not been waived by the investment advisor or if fees had not been reduced by
credits allowed by the custodian.
++ Per share numbers have been calculated using the average shares method.
(a) Fiscal year end changed to October 31. Prior to this, the fiscal year end was June 30.
(b) Ratio of operating expenses to average net assets includes expenses paid indirectly beginning in fiscal year 1995.
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL highlights
EMERGING GROWTH FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<CAPTION>
CLASS S SHARES CLASS I SHARES
--------------------------------------------------------------- -------------------------------------
PERIOD YEAR YEAR YEAR YEAR PERIOD YEAR PERIOD
ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED
10/31/98(A) 06/30/98 06/30/97 06/30/96 06/30/95* 10/31/98(A) 06/30/98 06/30/97*
----------- -------- -------- -------- --------- ----------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period ... $18.86 $17.85 $19.88 $15.37 $13.02 $19.60 $18.33 $17.52
------ ------ ------ ------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment loss .... (0.12)++ (0.35)++ (0.34)++ (0.32)++ (0.10)++ (0.05)++ (0.16)++ (0.16)++
Net realized and
unrealized gain/(loss)
on investments ........ (3.07) 2.43 (0.19) 5.59 2.77 (3.20) 2.50 2.47##
------ ------ ------ ------ ------ ------ ------ ------
Total from investment
operations ............ (3.19) 2.08 (0.53) 5.27 2.67 (3.25) 2.34 2.31
------ ------ ------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends from net
investment income ..... -- (1.07) (1.50) (0.76) (0.32) -- (1.07) (1.50)
------ ------ ------ ------ ------ ------ ------ ------
Total distributions .... -- (1.07) (1.50) (0.76) (0.32) -- (1.07) (1.50)
------ ------ ------ ------ ------ ------ ------ ------
Net asset value, end
of period ............. $15.67 $18.86 $17.85 $19.88 $15.37 $16.35 $19.60 $18.33
====== ====== ====== ====== ====== ====== ====== ======
TOTAL RETURN+ .......... (16.91)% 12.11% (2.26)% 34.91% 20.76% (16.58)% 13.25% 13.69%
====== ====== ====== ====== ====== ====== ====== ======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of
period (in 000's) ..... $3,753 $5,989 $8,341 $43,645 $11,840 $12,651 $33,886 $52,199
Ratio of operating
expenses to average
net assets(b) ......... 2.66%** 2.41% 2.39% 2.39% 2.43% 1.35%** 1.36% 1.39%**
Ratio of net investment
loss to average net
assets ................ (2.21)%** (1.86)% (1.92)% (1.77)% (1.06)% (0.90)%** (0.80)% (0.92)%**
Portfolio turnover
rate .................. 20% 112% 81% 131% 181% 20% 112% 81%
Ratio of operating
expenses to average
net assets without fee
waivers and/or fees
reduced by credits
allowed by the
custodian ............. 2.67%** 2.42% 2.39% 2.40% N/A 1.36%** 1.36% 1.39%**
- ----------------
* On July 1, 1994 the Fund commenced selling Class B and Class S shares in addition to Class A shares. Those shares in existence
prior to July 1, 1994 were designated Class A shares. On July 25, 1996 the Fund commenced selling Class I shares.
** Annualized.
+ Total return is not annualized for periods less than one year and does not reflect any applicable sales charges. The total
returns would have been lower if certain fees had not been waived by the investment advisor or if fees had not been reduced by
credits allowed by the custodian.
++ Per share numbers have been calculated using the average shares method.
## The amount shown may not accord with the change in aggregate gains and losses of portfolio securities due to the timing of
sales and redemptions of Fund shares.
(a) Fiscal year end changed to October 31. Prior to this, the fiscal year end was June 30.
(b) Ratio of operating expenses to average net assets includes expenses paid indirectly beginning in fiscal year 1995.
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL highlights
INTERNATIONAL GROWTH FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<CAPTION>
CLASS A SHARES
-----------------------------------------------------------------------------------------------------
PERIOD YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
10/31/98(A) 06/30/98 06/30/97 06/30/96 06/30/95 06/30/94
----------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period .. $10.20 $11.85 $10.49 $ 9.78 $10.74 $ 9.80
------ ------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment
income/(loss) ........ (0.02)++ 0.05++ 0.04++ 0.05++ (0.11)++ 0.06
Net realized and
unrealized gain/(loss)
on investments ....... (1.32) (0.67) 1.55 1.21 (0.31) 1.15
------ ------ ------ ------ ------ ------
Total from investment
operations ........... (1.34) (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 ........ $ 8.86 $10.20 $11.85 $10.49 $ 9.78 $10.74
====== ====== ====== ====== ====== ======
TOTAL RETURN+ ......... (13.14)% (4.19)% 15.50% 13.16% (4.01)% 12.39%
====== ====== ====== ====== ====== ======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of
period (in 000's) .... $30,117 $38,281 $57,776 $116,254 $91,763 $127,764
Ratio of operating
expenses to average
net assets(b) ........ 1.86%* 1.67% 1.65% 1.77% 1.69% 1.69%
Ratio of net investment
income/(loss) to
average net assets ... (0.50)%* 0.50% 0.35% 0.46% 0.62% 0.54%
Portfolio turnover
rate ................. 41% 118% 67% 125% 81% 44%
Ratio of operating
expenses to average
net assets without
expenses absorbed
and/or fees reduced
by credits allowed
by the custodian ..... 1.86%* 1.67% 1.65% 1.77% N/A N/A
- ----------------
* Annualized.
+ Total return is not annualized for periods less than one year and does not reflect any applicable sales charges. The total
returns would have been lower if certain expenses had not been absorbed by the investment advisor or if fees had not been
reduced by credits allowed by the custodian.
++ Per share numbers have been calculated using the average shares method.
(a) Fiscal year end changed to October 31. Prior to this, the fiscal year end was June 30.
(b) Ratio of operating expenses to average net assets includes expenses paid indirectly beginning in fiscal year 1995.
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL highlights
INTERNATIONAL GROWTH FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<CAPTION>
CLASS B SHARES
------------------------------------------------------------------------------------------
PERIOD YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
10/31/98(A) 06/30/98 06/30/97 06/30/96 06/30/95*
----------- -------- -------- -------- ---------
<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)++ (0.04)++ (0.04)++ (0.03)++ (0.17)++
Net realized and 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+ .................. (13.41)% (4.95)% 14.66% 12.34% (4.61)%
====== ====== ====== ====== ======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period
(in 000's) .................... $3,552 $4,294 $4,876 $4,447 $2,268
Ratio of operating expenses
to average net assets(b) ...... 2.97%** 2.94% 2.40% 2.52% 2.44%
Ratio of net investment
loss to average net assets
............................. (1.61)%** (0.35)% (0.40)% (0.29)% (0.13)%
Portfolio turnover rate ........ 41% 118% 67% 125% 81%
- ----------------
* On July 1, 1994 the Fund commenced selling Class B and Class S shares in addition to Class A shares. Those shares in existence
prior to July 1, 1994 were designated Class A shares. On July 25, 1996 the Fund commenced selling Class I shares.
** Annualized.
+ Total return is not annualized for periods less than one year and does not reflect any applicable sales charges. The total
returns would have been lower if certain expenses had not been absorbed by the investment advisor or if fees had not been
reduced by credits allowed by the custodian.
++ Per share numbers have been calculated using the average shares method.
(a) Fiscal year end changed to October 31. Prior to this, the fiscal year end was June 30.
(b) Ratio of operating expenses to average net assets includes expenses paid indirectly beginning in fiscal year 1995.
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL highlights
INTERNATIONAL GROWTH FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<CAPTION>
CLASS S SHARES CLASS I SHARES
---------------------------------------------------------------- -------------------------------------
PERIOD YEAR YEAR YEAR YEAR PERIOD YEAR PERIOD
ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED
10/31/98(A) 06/30/98 06/30/97 06/30/96 06/30/95* 10/31/98(A) 06/30/98 06/30/97*
----------- -------- -------- -------- --------- ----------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period ... $10.16 $11.77 $10.38 $ 9.73 $10.74 $10.16 $11.82 $ 9.88
------ ------ ------ ------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income/
(loss) ................ (0.04)++ (0.02)++ (0.04)++ (0.03)++ (0.17)++ 0.00#++ 0.09++ 0.06++
Net realized and
unrealized gain/(loss)
on investments ........ (1.32) (0.67) 1.53 1.20 (0.31) (1.33) (0.69) 2.15
------ ------ ------ ------ ------ ------ ------ ------
Total from investment
operations ............ (1.36) (0.69) 1.49 1.17 (0.48) (1.33) (0.60) 2.21
------ ------ ------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends from net
investment income ..... -- (0.40) -- (0.02) (0.03) -- (0.53) (0.17)
Distributions in excess
of net investment
income ................ -- (0.02) -- (0.04) -- -- (0.03) --
Distributions from net
realized
gains ................. -- (0.50) (0.10) (0.46) (0.44) -- (0.50) (0.10)
Distributions in excess
of net realized gains . -- -- -- -- (0.06) -- -- --
------ ------ ------ ------ ------ ------ ------ ------
Total distributions .... -- (0.92) (0.10) (0.52) (0.53) -- (1.06) (0.27)
------ ------ ------ ------ ------ ------ ------ ------
Net asset value, end
of period ............. $ 8.80 $10.16 $11.77 $10.38 $ 9.73 $ 8.83 $10.16 $11.82
====== ====== ====== ====== ====== ====== ====== ======
TOTAL RETURN+ .......... (13.47)% (4.94)% 14.61% 12.29% (4.61)% (13.09)% (3.98)% 22.76%
====== ====== ====== ====== ====== ====== ====== ======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of
period (in 000's) ..... $7,455 $9,599 $11,991 $38,900 $11,120 $98,554 $108,521 $95,512
Ratio of operating
expenses to average
net assets(b) ......... 2.50%** 2.41% 2.40% 2.52% 2.44% 1.32%** 1.36% 1.40%**
Ratio of net
investment income/
(loss) to average net
assets ................ (1.14)%** (0.23)% (0.40)% (0.29)% (0.13)% 0.04%** 0.81% 0.60%**
Portfolio turnover
rate .................. 41% 118% 67% 125% 81% 41% 118% 67%
- ----------------
* On July 1, 1994 the Fund commenced selling Class B and Class S shares in addition to Class A shares. Those shares in existence
prior to July 1, 1994 were designated Class A shares. On July 25, 1996 the Fund commenced selling Class I shares.
** Annualized.
# Amount represents less than $0.01 per share.
+ Total return is not annualized for periods less than one year and does not reflect any applicable sales charges. The total
returns would have been lower if certain expenses had not been absorbed by the investment advisor or if fees had not been
reduced by credits allowed by the custodian.
++ Per share numbers have been calculated using the average shares method.
(a) Fiscal year end changed to October 31. Prior to this, the fiscal year end was June 30.
(b) Ratio of operating expenses to average net assets includes expenses paid indirectly beginning in fiscal year 1995.
See Notes to Financial Statements.
</TABLE>
<PAGE>
PORTFOLIO of INVESTMENTS
TARGET MATURITY 2002 FUND
OCTOBER 31, 1998
PRINCIPAL
AMOUNT VALUE
--------- -----
U.S. TRESAURY OBLIGATION - 99.1%
U.S. TREASURY STRIP (PRINCIPAL ONLY)
$ 2,785,000 Zero coupon due 11/15/2002 ........................ $ 2,363,816
------------
TOTAL INVESTMENTS (Cost $2,180,175*) .................... 99.1% 2,363,816
OTHER ASSETS AND LIABILITIES (Net) ...................... 0.9 21,428
----- ------------
NET ASSETS .............................................. 100.0% $ 2,385,244
===== ============
- --------------
* Aggregate cost for federal tax purposes.
- ------------------------------------------------------------------------------
GLOSSARY OF TERMS
STRIP -- Separate trading of registered interest and principal securities
- ------------------------------------------------------------------------------
See Notes to Financial Statements.
<PAGE>
<TABLE>
PORTFOLIO OF INVESTMENTS
HIGH YIELD FUND
OCTOBER 31, 1998
<CAPTION>
PRINCIPAL
AMOUNT VALUE
--------- -----
CORPORATE BONDS AND NOTES - 79.3%
FOREIGN (U.S. DOLLAR DENOMINATED) - 27.2%
<S> <C> <C>
$ 350,000 DSC Communications Corporation,
Conv. Sub. Note,
7.000% due 08/01/2004 ........................ $ 357,000
350,000 HIH Capital Ltd., Conv. Note,
7.500% due 09/25/2006 ........................ 224,000
850,000 MBI Metrobank Finance Ltd., Conv. Note,
Zero coupon, due 12/18/2001 .................. 527,000
250,000 Metro Pacific Capital, Gtd. Deb.,
2.500% due 04/11/2003 ........................ 186,250
400,000 Mexican United States, Bond,
9.875% due 01/15/2007 ........................ 379,000
300,000 Orange Plc, Sr. Note,
8.000% due 08/01/2008 ........................ 293,250
350,000 Poland Communication Inc., Sr. Note,
9.875% due 11/01/2003 ........................ 267,750
550,000 Republic of Korea, Unsub. Note,
8.875% due 04/15/2008 ........................ 501,158
500,000 SB Treasury Company, Bond,
9.400% due 12/29/2049+ ....................... 450,816
465,000 Ssangyong Oil Refining, Conv. Unsub. Note,
3.750% due 07/20/2001 ........................ 406,875
300,000 Supercanal Holdings SA, Sr. Note,
11.500% due 05/15/2005+ ...................... 144,000
450,000 Tokai Pfd Capital Company,
11.091% due 12/29/2049+ ...................... 356,347
------------
4,093,446
------------
HEALTH CARE - 20.2%
212,000 CII Financial Inc., Sub. Deb.,
7.500% due 09/15/2001 ........................ 205,905
650,000 Dura Pharmaceuticals Inc., Conv. Sub. Note,
3.500% due 07/15/2002 ........................ 461,500
500,000 DVI, Inc. Sr. Note,
9.875% due 02/01/2004 ........................ 477,500
550,000 Ivax Corporation, Conv. Deb.,
6.500% due 11/15/2001+ ....................... 508,062
300,000 Mariner Post-Acute Network, Sub. Note,
9.500% due 11/01/2007 ........................ 246,000
500,000 Medical Care International (Columbia),
Conv. Sub. Note,
6.750% due 10/01/2006 ........................ 426,250
225,000 Physician Resource Group Inc.,
Conv. Sub. Deb.,
6.000% due 12/01/2001+ ........................ 106,594
300,000 Sun Healthcare Group Inc., Sub. Note,
9.500% due 07/01/2007 ......................... 223,500
500,000 Wright Medical Technology, Series D, Sr. Note,
12.250% due 07/01/2000 ........................ 375,000
------------
3,030,311
------------
INFORMATION TECHNOLOGY - 7.3%
650,000 Adaptec Inc., Conv. Sub. Note,
4.750% due 02/01/2004 .......................... 502,938
500,000 Credence Systems Corporation,
Conv. Sub. Note,
5.250% due 09/15/2002 .......................... 372,500
350,000 Integrated Device Technology Inc.,
Conv. Sub. Note,
5.500% due 06/01/2002 .......................... 222,688
------------
1,098,126
------------
SERVICE - 4.6%
550,000 Corporate Express Inc., Conv. Note,
4.500% due 07/01/2000 ....................... 488,125
250,000 Veterinary Centers of America, Conv. Sub. Deb.,
5.250% due 05/01/2006 ....................... 196,875
------------
685,000
------------
FOREIGN (U.S. NON-DOLLAR DENOMINATED) - 3.8%
450,000 IPC Magazines, Plc, Bond,
9.625% due 03/15/2008 ......................... 568,775
---------------
MANUFACTURING - 3.2%
500,000 Jackson Products Inc., Gtd. Deb.,
9.500% due 04/15/2005 ....................... 477,500
---------------
GAMING - 2.8%
500,000 Riviera Holdings Corporation, Gtd. Deb.,
10.000% 08/15/2004 .......................... 420,000
------------
METALS/MINING - 2.7%
400,000 Peabody Coal (P&L Coal Holdings Corporation)
Sr. Note,
8.875% due 05/15/2008+ ...................... 405,000
------------
TRANSPORTATION - 2.1%
400,000 Equimar Shipholdings Ltd., Gtd. Deb.,
9.875% due 07/01/2007 ....................... 310,000
------------
CONSUMER STAPLES - 1.7%
250,000 Fleming Companies, Inc., Sr. Note,
10.675% due 12/15/2001 ...................... 254,375
------------
REAL ESTATE INVESTMENT TRUST - 1.6%
325,000 Rockefeller Center Property Trust, Conv. Deb.,
Zero coupon due 12/31/2000 ................... 245,375
------------
MEDIA - 1.6%
250,000 Sinclair Broadcast Group, Sr. Sub. Note,
8.750% due 12/15/2007 ........................ 240,000
------------
CONSUMER NON-DURABLES - 0.5%
650,000 Sunbeam Corporation, Sr. Sub. Deb.,
Zero coupon due 03/25/2018+ .................. 76,375
------------
Total Corporate Bonds and Notes
(Cost $13,273,805) ...................... 11,904,283
------------
U.S. TREASURY NOTE - 5.2%
(Cost $746,959)
750,000 5.550% due 03/31/2003 .......................... 785,157
------------
PREFERRED STOCKS - 3.9%
7,000 California Federal Bank, Series A .............. 179,375
8,200 Cendant Corporation, Conv. Pfd.,
7.500% due 02/16/2001 ........................ 203,463
1,300 First Industrial Realty Trust, Inc.,
Series A, Conv. Pfd.,
9.500% due 11/17/2000 ........................ 33,313
1,000 Microsoft Corporation, Series A, Conv. Pfd.,
$2.196 due 12/15/1999 ........................ 97,750
5,000 PennCorp Financial Group, Conv. Pfd.,
$3.375 due 12/31/2049 ........................ 74,688
------------
Total Preferred Stocks (Cost $903,725) ......... 588,589
------------
PRINCIPAL
AMOUNT
---------
COLLATERALIZED MORTGAGE OBLIGATION - 2.6%
(Cost $399,456)
$ 427,226 Donaldson, Lufkin & Jenrette, Acceptance
Corporation, 1995-Q10-B1,
8.190% due 01/25/2026 ....................... 384,770
------------
REPURCHASE AGREEMENT - 4.6%
(Cost $695,000)
695,000 Agreement with Credit Suisse First Boston
Corporation, 5.300%, dated 10/30/1998,
to be repurchased at $695,307 on
11/02/1998, collateralized by $708,900
U.S. Treasury Note, 5.875% due 01/31/1999
(Market Value $709,543) ..................... 695,000
------------
TOTAL INVESTMENTS (Cost $16,018,945*) ........... 95.6% 14,357,799
OTHER ASSETS AND LIABILITIES (Net) .............. 4.4 665,892
----- ------------
NET ASSETS ...................................... 100.0% $ 15,023,691
===== ============
- --------------
* Aggregate cost for federal tax purposes is $16,018,952.
+ Security exempt from registration under Rule 144A of the
Securities Act of 1933. This security may be resold in
transactions exempt from registration, normally to qualified
institutional buyers.
SCHEDULE OF FOREIGN CURRENCY CONTRACTS
U.S. FORWARD FOREIGN CURRENCY CONTRACTS TO SELL
CONTRACTS TO DELIVER
---------------------------------------------- NET
IN UNREALIZED
EXPIRATION LOCAL VALUE IN EXCHANGE DEPRECIATION
DATE CURRENCY U.S. $ FOR U.S. $ OF CONTRACTS
- ---------------- ------------- ----------- ------------- --------------
07/28/2000 GBP 300,000 490,256 483,300 $(6,956)
=======
- ------------------------------------------------------------------------------
GLOSSARY OF TERMS
GBP --Great Britain Pound Sterling
- ------------------------------------------------------------------------------
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
PORTFOLIO OF INVESTMENTS
SHORT TERM HIGH QUALITY BOND FUND
OCTOBER 31, 1998
<CAPTION>
PRINCIPAL
AMOUNT VALUE
--------- -----
CORPORATE BONDS AND NOTES - 39.9%
<S> <C> <C>
$ 1,500,000 Citigroup, Inc., Note,
6.125% due 06/15/2000 ....................... $ 1,515,015
400,000 Colonial Realty LP, Note
7.500% due 07/15/2001 ....................... 423,500
1,000,000 Crane Company, Note,
7.250% due 06/15/1999 ....................... 1,013,540
1,220,000 CSX Corporation, Deb.,
9.500% due 08/01/2000 ....................... 1,298,995
1,500,000 Chase Manhattan Corporation, Note,
5.500% due 02/15/2001 ....................... 1,496,280
565,000 Dobie Center Properties, Ltd., Note, Taxable,
6.060% due 05/01/2001++ ..................... 575,750
400,000 ERP Operating LP, Note,
8.500% due 05/15/1999++ ..................... 406,992
500,000 Federated Department Stores, Inc., Bond,
6.790% due 07/15/2027 ....................... 501,395
1,500,000 General Electric Capital Corporation,
Series A, MTN,
5.800% due 04/24/2000 ....................... 1,518,750
1,500,000 McDonald Douglas Finance Corporation,
Series X, Sub. Note,
6.710% due 07/19/2000 ....................... 1,543,425
1,500,000 Merrill Lynch and Company,
Series B, Note,
6.100% due 10/04/1999 ....................... 1,517,355
200,000 Nabisco Inc., Bond,
6.300% due 08/26/1999++ ..................... 199,840
1,500,000 Sun Communities, Inc., Sr. Note,
7.625% due 05/01/2003 ....................... 1,616,055
100,000 Time Warner, Inc., Note,
7.950% due 02/01/2000 ....................... 102,772
500,000 US West Capital Funding, Inc., Company Guaranty,
6.125% due 07/15/2002 ....................... 515,175
1,250,000 Wal-Mart Stores, Inc., Note,
5.850% due 06/01/2000 ....................... 1,264,963
------------
Total Corporate Bonds and Notes
(Cost $15,281,548) .......................... 15,509,802
------------
ASSET-BACKED SECURITIES - 22.6%
300,000 Conti-Mortgage Home Equity Loan Trust, 1996-4-A6,
6.710% due 06/15/2014 ....................... 302,718
300,000 Green Tree Financial Corporation, 1995-6-B1,
7.700% due 09/15/2026 ....................... 301,857
1,850,000 General Electric Management Services,
1996-HE3-A3, 7.150% due 09/25/2026 .......... 1,942,578
300,000 Green Tree Home Equity Loan Trust,
1997-B-A5, 7.150% due 04/15/2027 ............ 304,772
1,807,485 Green Tree Security Mortgage Trust, 1994-A,
6.900% due 02/15/2004 ....................... 1,824,995
300,000 H & T Master Trust 1996-1,
8.430% due 08/15/2002++ ..................... 301,969
600,000 MBNA Master Credit Card Trust, 1995-E-A,
5.498% due 01/15/2005+ ...................... 598,122
157,584 Merrill Lynch Mortgage Investors, Inc.,
1992-B-A4, 7.850% due 04/15/2012 ............ 161,903
63,208 Old Stone Credit Corporation, 1992-4-A,
6.550% due 11/25/2007 ....................... 64,822
1,000,000 Standard Credit Card Master Trust, 1994-4A,
8.250% due 11/07/2003 ....................... 1,076,560
1,200,000 The Money Store Home Equity Trust,
1997-C-AF,
6.307% due 08/15/2012 ....................... 1,200,000
694,869 World Omni Automobile Lease Securitization,
1996-B, 6.850% due 11/15/2002++ ............. 698,127
------------
Total Asset-Backed Securities (Cost $8,668,767) 8,778,423
------------
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES - 13.7%
ADJUSTABLE RATE MORTGAGE-BACKED SECURITIES (ARM) - 4.8%
364,851 Federal Home Loan Mortgage Corporation (FHLMC),
#845988, 7.483% due 11/01/2021+ ............. 372,319
Federal National Mortgage Association (FNMA):
245,036 #141461,
7.757% due 11/01/2021+ ...................... 247,038
131,108 #124571,
7.410% due 11/01/2022+ ...................... 133,321
203,159 #152205,
7.187% due 01/01/2019+ ...................... 206,905
543,054 #313257,
6.173% due 11/01/2035+ ...................... 548,317
369,245 #82247,
6.125% due 04/01/2019+ .................... 372,823
------------
Total ARMs (Cost $1,874,077) ................ 1,880,723
------------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (GNMA) - 4.7%
151,618 #291375, Seasoned,
11.000% due 08/15/2020 ...................... 168,153
64,333 #189482, Seasoned,
11.000% due 04/15/2020 ...................... 71,300
164,160 #140835, Seasoned,
11.000% due 11/15/2015 ...................... 180,967
53,921 #139704, Seasoned,
11.000% due 11/15/2015 ...................... 59,597
169,831 #131917, Seasoned,
11.000% due 10/15/2015 ...................... 187,707
52,298 #130183, Seasoned,
11.000% due 05/15/2015 ...................... 57,803
167,224 #038720, Seasoned,
11.000% due 02/15/2010 ...................... 184,344
116,320 #153965, Seasoned,
10.000% due 02/15/2019 ...................... 125,320
639,434 #262996, Seasoned,
10.000% due 01/15/2019 ...................... 688,907
83,540 #377550, Seasoned,
8.000% due 03/15/2012 ....................... 86,397
------------
Total GNMAs (Cost $1,829,653) ............... 1,810,495
------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA) - 2.8%
229,219 #250235, 7 Year Balloon,
8.500% due 02/01/2002 ....................... 234,198
280,688 #313030, Seasoned,
10.000% due 05/01/2022 ...................... 304,047
509,013 #313641, Seasoned,
8.500% due 11/01/2017 ....................... 532,972
------------
Total FNMAs (Cost $1,071,255) ............... 1,071,217
------------
FEDERAL HOME LOAN MORTGAGE CORPORATION (FHLMC) - 0.8%
(Cost $316,327)
292,941 #A01226, Seasoned,
9.500% due 08/01/2016 ....................... 317,153
------------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION II
(GNMA II) - 0.6% (Cost $223,101)
208,942 9.000% due 04/20/2025 ......................... 221,781
------------
Total U.S. Government Agency Mortgage-Backed Securities
(Cost $5,314,413) ........................... 5,301,369
------------
U.S. TREASURY NOTES - 8.1%
2,000,000 5.625% due 02/15/2006 ......................... 2,140,320
1,000,000 5.750% due 11/15/2000 ......................... 1,027,660
------------
Total U.S. Treasury Notes (Cost $3,013,931) . 3,167,980
------------
COLLATERALIZED MORTGAGE OBLIGATIONS - 7.8%
7,642 Chemical Mortgage Securities, Inc., 1993-1-A4,
7.450% due 02/25/2023 ............................. 7,613
Countrywide Funding Corporation:
85,851 1994-1-A3,
6.250% due 03/25/2024 ....................... 85,904
170,000 1994-C-A5,
6.375% due 03/25/2024 ....................... 170,478
1,500,000 Federal Home Loan Mortgage Corporation -
Government National Mortgage Corporation,
Class VG, Series 24, REMIC,
6.250% due 06/25/2004 ....................... 1,530,465
163,179 Federal Home Loan Mortgage Corporation,
P/O, REMIC, #1719-C,
Zero coupon due 04/15/1999 .................. 160,221
208,373 General Electric Capital Mortgage Association,
1994-27-A1, 6.500% due 07/25/2024 ........... 207,718
554,330 Norwest Asset Securities Corporation,
1996-5-A13,
7.500% due 11/25/2026 ....................... 553,637
333,130 Prudential Home Mortgage Securities,
1993-43-A1,
5.400% due 10/25/2023 ....................... 331,984
------------
Total Collateralized Mortgage Obligations
(Cost $3,020,652) ........................... 3,048,020
------------
FOREIGN GOVERNMENT BONDS - 6.0%
1,000,000 Ontario, Province of Canada,
6.125% due 06/28/2000 ....................... 1,022,190
1,250,000 Province of Alberta, Government Guaranty,
9.250% due 04/01/2000 ....................... 1,320,239
------------
Total Foreign Government Bonds
(Cost $2,310,447) ........................... 2,342,429
------------
TOTAL INVESTMENTS (Cost $37,609,758*) ........... 98.1% 38,148,023
OTHER ASSETS AND LIABILITIES (Net) .............. 1.9 739,985
----- ------------
NET ASSETS ...................................... 100.0% $ 38,888,008
===== ============
- --------
* Aggregate cost for federal tax purposes.
+ Variable rate security. The interest rate shown reflects the rate currently
in effect.
++ Security exempt from registration under Rule 144A of the Securities Act of
1933. This security may be resold in transactions exempt from registration,
normally to qualified institutional buyers.
- -------------------------------------------------------------------------------
GLOSSARY OF TERMS
BALLOON -- Five- and seven-year mortgages with larger dollar amounts of
payments falling due in the later years of the obligation.
LP -- Limited Partnership
MTN -- Medium Term Note
P/O -- Principal Only
REMIC -- Real Estate Mortgage Investment Conduit
- -------------------------------------------------------------------------------
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
PORTFOLIO OF INVESTMENTS
U.S. GOVERNMENT SECURITIES FUND
OCTOBER 31, 1998
<CAPTION>
PRINCIPAL
AMOUNT VALUE
--------- -----
U.S. GOVERNMENT AGENCY MORTAGE-BACKED
SECURITIES - 74.5%
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
(GNMA) - 34.7%
<S> <C> <C>
$ 4,553,169 6.000% due 04/20/2026 ......................... $ 4,516,175
12,728,108 6.500% due 08/15/2023 - 03/15/2024 ............ 12,883,263
3,225,696 6.800% due 04/20/2025 ......................... 3,253,502
20,175,750 7.000% due 07/15/2008 - 06/15/2028 ............ 20,665,977
59,479,363 7.500% due 12/15/2022 - 12/15/2023 ............ 61,356,310
1,080,460 8.000% due 04/15/2022 ......................... 1,120,643
1,340,464 8.500% due 05/15/2022 ......................... 1,417,541
5,789,768 9.000% due 10/15/2008 - 06/15/2022 ............ 6,173,341
6,076,610 9.500% due 04/15/2016 - 03/20/2021 ............ 6,554,497
15,496 11.500% due 07/15/2015 ........................ 17,428
35,267 13.500% due 09/15/2014 - 12/15/2014 ........... 40,865
16,694 14.000% due 06/15/2011 ........................ 19,386
------------
Total GNMAs (Cost $113,046,641) .............. 118,018,928
------------
FEDERAL HOME LOAN MORTGAGE CORPORATION (FHLMC) - 32.7%
19,489,882 6.500% due 02/01/2011 - 02/01/2028 ............ 19,769,143
1,652,429 7.000% due 07/01/2024 - 02/01/2026 ............ 1,688,061
81,922,771 7.500% due 01/01/2007 - 03/01/2013 ............ 84,128,198
838,755 8.750% due 01/01/2013 ......................... 882,848
1,372,643 9.000% due 12/01/2008 - 08/01/2022 ............ 1,444,278
583,067 9.500% due 06/01/2016 - 05/01/2017 ............ 620,602
2,632,332 8.500% due 04/01/2019 ......................... 2,743,385
------------
Total FHLMCs (Cost $110,805,268) ............ 111,276,515
------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA) - 7.1%
31,133 5.500% due 02/01/2009 ......................... 30,812
2,230,000 6.000% due 08/25/2007 ......................... 2,259,492
10,893,456 6.500% due 08/01/2028 - 09/01/2028 ............ 10,985,374
3,871,945 7.000% due 06/01/2010 - 05/01/2012 ............ 3,953,016
1,950,000 7.500% due 08/25/2001 ......................... 2,010,029
3,877,579 8.000% due 05/01/2022 - 01/01/2025 ............ 4,013,294
577,782 8.500% due 02/01/2023 - 09/01/2025 ............ 602,157
404,282 9.000% due 06/01/2016 - 06/01/2021 ............ 426,265
------------
Total FNMAs (Cost $26,040,622) .............. 24,280,439
------------
Total U.S. Government Agency Mortgage-Backed
Securities (Cost $249,892,531) .............. 253,575,882
------------
U.S. TREASURY BONDS - 13.9%
7,000,000 7.250% due 05/15/2016 ......................... 8,533,440
6,500,000 7.500% due 11/15/2016 ......................... 8,110,784
3,250,000 7.250% due 08/15/2022 ......................... 4,053,361
20,195,000 6.250% due 08/15/2023 ......................... 22,624,719
1,500,000 6.000% due 02/15/2026 ......................... 1,638,751
1,888,000 6.625% due 02/15/2027 ......................... 2,235,511
------------
Total U.S. Treasury Bonds
(Cost $43,061,128) ........................ 47,196,566
------------
COLLATERALIZED MORTGAGE OBLIGATIONS - 9.5%
Federal National Mortgage Association, REMIC,
Pass-through certificates:
750,406 6.783% due 01/17/2003 ....................... 768,698
4,000,000 Trust 89-18, Class-C,
9.500% due 04/25/2004 ....................... 4,209,740
1,555,886 Trust 92-83, Class X,
7.000% due 02/25/2022 ....................... 1,647,332
4,302,489 Trust 93-162, Class E,
6.000% due 08/25/2023 ....................... 4,295,919
5,000,000 Trust 93-163, Class BE,
7.000% due 10/25/2021 ....................... 5,178,880
2,106,203 Federal Home Loan Mortgage Corporation,
Series 1288, Class HA,
5.500% due 11/15/2020 ....................... 2,100,527
7,572,987 Federal Home Loan Mortgage Corporation,
6.850% due 07/25/2018 ....................... 7,606,573
8,090,639 Federal National Mortgage Association, Strip,
7.000% due 04/01/2024 ....................... 1,148,588
4,794,982 Merrill Lynch Trust,
6.500% due 08/25/2015 ....................... 5,021,727
398,015 Mortgage Capital Trust,
9.250% due 06/01/2017 ....................... 398,066
------------
Total Collateralized Mortgage Obligations (Cost
$30,212,310) ................................ 32,376,050
------------
U.S. GOVERNMENT AGENCY OBLIGATION - 0.6%
(Cost $2,041,250)
2,000,000 Federal National Mortgage Association, MTN,
6.000% due 01/14/2005 ....................... 2,049,942
------------
REPURCHASE AGREEMENT - 1.9%
(Cost $6,469,000)
6,469,000 Agreement with Credit Suisse First Boston
Corporation, 5.300% dated 10/30/1998, to be
repurchased at $6,471,857 on 11/02/1998,
collateralized by $6,598,380 U.S. Treasury
Note, 5.875% due 01/31/1999
(Market Value $6,604,367) ................... 6,469,000
------------
TOTAL INVESTMENTS (Cost $331,676,219*) .............. 100.4% 341,667,440
OTHER ASSETS AND LIABILITIES (Net) .................. (0.4) (1,290,277)
----- ------------
NET ASSETS .......................................... 100.0% $ 340,377,163
===== =============
- --------------
* Aggregate cost for federal tax purposes.
- -------------------------------------------------------------------------------
GLOSSARY OF TERMS
MTN --Medium Term Note
REMIC --Real Estate Mortgage Investment Conduit
STRIP --Seperate trading of registered interest and principal of securities
- -------------------------------------------------------------------------------
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
PORTFOLIO OF INVESTMENTS
INCOME FUND
OCTOBER 31, 1998
<CAPTION>
PRINCIPAL
AMOUNT VALUE
--------- -----
CORPORATE BONDS AND NOTES - 80.0%
INDUSTRIAL - 47.1%
<S> <C> <C>
$ 1,500,000 Aetna Services Inc.,
7.625% due 08/15/2026 ....................... $ 1,512,054
1,500,000 American Home Products Corporation, Deb., 7.250%
due 03/01/2023 .............................. 1,633,965
1,000,000 AMR Corporation, Deb.,
9.750% due 03/15/2000 ....................... 1,048,676
250,000 Battle Mountain Gold Company,
6.000% due 01/04/2005 ....................... 181,250
1,500,000 Burlington Northern, Note,
8.750% due 02/25/2022 ....................... 1,855,783
1,600,000 Burlington Resources, Deb.,
9.125% due 10/01/2021 ....................... 1,993,645
1,047,000 CII Financial, Conv.,
7.500% due 09/15/2001 ....................... 1,016,899
1,800,000 Columbia/HCA Healthcare, Sub. Deb., 6.750% due
10/01/2006 .................................. 1,534,500
Conagra, Inc., Sr. Note:
750,000 9.750% due 03/01/2021 ....................... 970,885
500,000 6.700% due 08/01/2027 ....................... 530,614
3,030,000 Conrail, Inc., Deb.,
9.750% due 06/15/2020 ....................... 3,919,841
2,000,000 Corporate Express Inc.,
4.500% due 07/01/2000 ....................... 1,775,000
Crane Company, Note:
1,000,000 7.250% due 06/15/1999 ....................... 1,011,861
500,000 8.500% due 03/15/2004 ....................... 570,872
2,000,000 Dart & Kraft Finance NV,
7.750% due 11/30/1998 ....................... 2,003,728
200,000 Dura Pharmaceuticals, Sub. Note,
3.500% due 07/15/2002 ....................... 142,000
250,000 Equimar Shipholdings,
9.875% due 07/01/2007 ....................... 193,750
2,000,000 Ford Holdings, Inc., Deb.,
9.375% due 03/01/2020 ....................... 2,591,142
3,750,000 Ford Motor Company, Deb.,
8.900% due 01/15/2032 ....................... 4,765,076
8,000,000 General Motors Corporation, Deb.,
9.400% due 07/15/2021 ....................... 10,387,847
850,000 Golden Books Publishing, Sr. Note,
Zero coupon due 09/15/2002 .................. 191,250
1,400,000 Integrated Device Technology Inc.,
Conv. Sub. Note,
5.500% due 06/01/2002 ....................... 890,750
6,000,000 James River Corporation, Deb.,
9.250% due 11/15/2021 ....................... 7,519,073
1,000,000 Jackson Products, Inc.,
9.500% due 04/15/2005 ....................... 952,500
Loral Corporation, Deb.:
1,000,000 8.375% due 06/15/2024 ....................... 1,183,218
1,000,000 7.625% due 06/15/2025 ....................... 1,094,280
8,700,000 Occidental Petroleum Corporation, Sr. Deb.,
11.125% due 08/01/2010 ...................... 11,606,634
6,500,000 Ogden Corporation, Deb.,
9.250% due 03/01/2022 ....................... 8,157,395
5,950,000 Phillips Petroleum Company, Deb.,
9.180% due 09/15/2021 ....................... 6,731,418
6,860,000 Praxair, Inc., Deb.,
8.700% due 07/15/2022 ....................... 7,143,894
750,000 Raytheon Company, First Mortgage, Deb., 7.200%
due 8/15/2027 ............................... 797,138
750,000 Riviera Holdings Corporation,
10.000% 8/15/2004 ........................... 630,000
7,800,000 Textron, Inc., Deb.,
8.750% due 07/01/2022 ....................... 8,675,720
5,260,000 Time Warner, Inc., Deb.,
9.150% due 02/01/2023 ....................... 6,650,665
United Air Lines, Inc.:
5,000,000 Equipment Trust Certificates,
10.850% due 07/05/2014 ...................... 6,722,855
Pass-through Certificates:
3,000,000 9.080% due 10/26/2015 ....................... 3,575,790
5,500,000 9.560% due 10/19/2018 ....................... 6,786,560
1,200,000 Veterinary Centers of America,
Conv. Sub. Deb., 5.250% due 05/01/2006 ...... 945,000
1,000,000 V.F. Corporation, Note,
9.500% due 05/01/2001 ....................... 1,105,865
------------
120,999,393
------------
FOREIGN (U.S. DOLLAR DENOMINATED) - 12.0%
1,000,000 Alberta Province,
9.250% due 04/01/2000 ....................... 1,060,990
2,500,000 HIH Capital Ltd., Conv.,
7.500% due 09/25/2006 ....................... 1,600,000
3,750,000 MBI Metrobank Finance Ltd., Conv. Bond, Zero
coupon due 12/18/2001 ....................... 2,325,000
250,000 Metro Pacific Capital,
2.500% due 04/11/2001 ....................... 186,250
8,500,000 Petro-Canada, Deb.,
9.250% due 10/15/2021 ....................... 10,166,424
500,000 Peregrine Investment Finance,
4.500% due 12/01/2000 ....................... 67,500
2,300,000 Poland Communications, Inc., Sr. Note, 9.875%
due 11/01/2003 .............................. 1,759,500
1,650,000 Republic of Korea, Unsub. Note,
8.875% due 04/15/2008 ....................... 1,503,478
1,750,000 SB Treasury Company,
9.400% due 12/29/2049 ....................... 1,577,856
2,290,000 Ssangyong Oil Refining, Conv. Deb., 3.750% due
12/31/2008 .................................. 2,003,750
2,500,000 Tatneft Finance,
9.000% due 10/29/2002 ....................... 381,250
1,500,000 Tokai PFD Capital Company,
9.980% due 12/29/2049 ....................... 1,187,824
500,000 Total Access Communications,
2.000% due 05/31/2006 ....................... 332,500
5,750,000 Trans-Canada Pipeline Corporation, Deb., 8.500%
due 03/20/2023 .............................. 6,636,477
------------
30,788,799
------------
FINANCIAL - 10.9%
9,000,000 Barclays North American Capital Corporation, Capital
Note, 9.750% due 05/15/2021 ................ 10,298,177
2,000,000 Continental Corporation,
7.250% due 03/01/2003 ....................... 2,107,430
500,000 Developers Diversified Realty, MTN,
Sr. Note,
6.580% due 02/06/2001 ....................... 497,166
Franchise Finance Corporation:
900,000 Sr. Note, 7.000% due 11/30/2000 ............. 899,871
1,100,000 Sr. Note, 7.875% due 11/30/2005 ............. 1,085,012
3,000,000 MTN, 7.070% due 01/15/2008 .................. 2,830,034
1,000,000 GATX Leasing Corporation, MTN, 10.000%
due 03/21/2001 .............................. 1,103,378
1,250,000 Kemper Corporation, Note,
6.875% due 09/15/2003 ....................... 1,325,417
2,000,000 Merrill Lynch & Company, Note,
6.750% due 06/01/2028 ....................... 1,942,884
3,000,000 Pacificare Health Systems, Sr. Note,
7.000% due 09/15/2003 ....................... 3,190,256
2,500,000 Superior Financial Acquisition Corporation, Sr. Note,
8.650% due 04/01/2003 ....................... 2,574,890
------------
27,854,515
------------
ELECTRIC - 6.3%
5,000,000 Mississippi Power & Light Company,
First and Refundable Mortgage,
8.650% due 01/15/2023 ....................... 5,325,369
Niagara Mohawk Power, Deb.:
1,000,000 9.750% due 11/01/2005 ....................... 1,211,901
1,414,000 8.770% due 01/01/2008 ....................... 1,509,120
2,000,000 Philadelphia Electric Company,
First and Refundable Mortgage,
8.250% due 09/01/2022 ....................... 2,125,768
Texas Utilities Electric Company,
First Mortgage:
1,200,000 9.500% due 08/01/1999 ....................... 1,232,739
1,200,000 8.875% due 02/01/2022 ....................... 1,346,382
3,000,000 8.750% due 11/01/2023 ....................... 3,333,764
------------
16,085,043
------------
BANKS - 3.7%
400,000 Banc One Corporation, Sub. Note,
10.000% due 08/15/2010 ...................... 533,138
1,000,000 Bank of New York, Sub. Note,
7.875% due 11/15/2002 ....................... 1,092,713
1,000,000 Barnett Banks, Florida, Inc., Sub. Note,
10.875% due 03/15/2003 ...................... 1,205,113
1,100,000 First Interstate Bancorp, Sub. Note,
9.125% due 02/01/2004 ....................... 1,283,045
1,000,000 First Nationwide Bank, Sub. Deb.,
10.000% due 10/01/2006 ...................... 1,164,516
1,000,000 Manufacturers and Trade Trust Company, Sub. Note,
8.125% due 12/01/2002 ....................... 1,092,789
1,000,000 Mellon Financial Company, Sub. Deb., 9.750%
due 06/15/2001 .............................. 1,110,964
500,000 Mercantile Bank, Sub. Note,
7.625% due 10/15/2002 ....................... 538,620
1,000,000 Norwest Bancorp, Sub. Deb.,
6.650% due 10/15/2023 ....................... 986,349
500,000 Summit Bancorp, Sub. Note,
8.625% due 12/10/2002 ....................... 557,304
------------
9,564,551
------------
Total Corporate Bonds and Notes
(Cost $193,405,498) ......................... 205,292,301
------------
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED
SECURITIES - 8.9%
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
(GNMA) - 3.8%
149,318 9.000% due 12/01/2004 ......................... 156,084
1,280,850 7.000% due 07/15/2023 ......................... 1,311,668
673,017 6.500% due 08/15/2023 ......................... 681,221
1,857,942 6.500% due 12/15/2023 ......................... 1,880,591
2,275,163 6.000% due 02/15/2024 ......................... 2,257,394
1,852,168 6.500% due 03/15/2024 ......................... 1,874,745
1,623,926 6.500% due 07/15/2024 ......................... 1,644,300
------------
Total GNMAs (Cost $9,469,524) ................. 9,806,003
------------
COLLATERALIZED MORTGAGE OBLIGATIONS (CMO) - 2.6%
1,750,000 Donaldson, Lufkin & Jenrette, Acceptance
Corporation, 1993-MF17-A2,
7.350% due 12/18/2003 ....................... 1,838,419
1,388,022 Donaldson, Lufkin & Jenrette, Acceptance Corporation,
1995-Q10-B1,
8.190% due 01/25/2026 ....................... 1,250,088
646,207 Resolution Trust Corporation-1991-M2 - A-2,
7.122% due 09/25/2020 ....................... 572,290
2,862,296 Weyerhauser 1982-C FHA Putable,
7.430% due 06/01/2022 ..................... 3,061,355
------------
Total CMOs (Cost $6,324,280) ................ 6,722,152
------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA) - 1.5%
(Cost $3,461,114)
3,605,230 .250% due 03/18/2026 ......................... 3,675,929
------------
FEDERAL HOME LOAN MORTGAGE CORPORATION
(FHLMC) - 1.0%
171,824 8.750% due 06/15/2005 ......................... 172,672
743,974 7.500% due 07/15/2020 ......................... 749,302
GOLD:
1,141,917 #C00362,
9.000% due 06/01/2024 ....................... 1,201,511
526,356 #C80253,
9.000% due 01/01/2025 ....................... 553,825
------------
Total FHLMCs (Cost $2,677,452) .............. 2,677,310
============
Total U.S. Government Agency Mortgage-Backed
Securities
(Cost $21,932,370) .......................... 22,881,394
------------
U.S. TREASURY OBLIGATIONS - 3.0%
U.S. TREASURY BONDS - 2.8%
2,500,000 6.250% due 08/15/2023 ......................... 2,800,782
4,000,000 6.125% due 11/15/2027 ......................... 4,500,004
------------
7,300,786
------------
U.S. TREASURY NOTE - 0.2%
500,000 6.375% due 03/31/2001 ......................... 523,125
------------
Total U.S. Treasury Obligations
(Cost $6,895,115) ........................... 7,823,911
------------
SHARES
------
PREFERRED STOCKS - 1.4%
2,000 California Federal Bank, Series B ............. 215,312
15,100 First Industrial Realty Trust, Series A ....... 386,937
28,000 Microsoft Corporation, Series A,
Conv. Pfd., $2.196 due 12/15/2009 ........... 2,737,000
15,000 Penncorp Financial Group ...................... 224,062
------------
Total Preferred Stocks
(Cost $4,038,232) ........................... 3,563,311
------------
COMMON STOCK - 0.1% (Cost $201,417)
11,940 First State Bancorporation .................... 232,830
------------
PRINCIPAL
AMOUNT
--------
REPURCHASE AGREEMENT - 4.6%
(Cost $11,842,000)
$ 11,842,000 Agreement with Credit Suisse First Boston
Corporation, 5.300% dated 10/30/1998, to
be repurchased at $11,847,230 on 11/02/1998,
collateralized by $12,078,840 U.S. Treasury
Note, 5.875% due 01/31/1999
(Market Value $12,089,800) .................. 11,842,000
------------
TOTAL INVESTMENTS (Cost $238,314,632*)................ 98.0% 251,635,747
OTHER ASSETS AND LIABILITES (Net) .................... 2.0 5,047,743
----- ------------
NET ASSETS ........................................... 100.0% $256,683,490
===== ============
- --------------
* Aggregate cost for federal tax purposes.
- ------------------------------------------------------------------------------
GLOSSARY OF TERMS
GOLD --
Payments are on an accelerated 45-day payment cycle instead of 75-day
payment cycle
MTN --Medium Term Note
- ------------------------------------------------------------------------------
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
PORTFOLIO OF INVESTMENTS
CALIFORNIA INSURED INTERMEDIATE MUNICIPAL FUND
OCTOBER 31, 1998
<CAPTION>
PRINCIPAL
AMOUNT VALUE
---------- ------
MUNICIPAL BONDS AND NOTES - 106.4%
CALIFORNIA - 103.3%
<S> <C> <C>
$ 1,000,000 Alameda County:
COP, (Santa Rita Jail Project), (MBIA Insured),
5.375% due 06/01/2009 ....................... $ 1,095,000
1,000,000 Public Financing Authority Revenue,
Marina Village Assessment District,
5.950% due 09/02/2007 ....................... 1,055,000
1,000,000 California Health Facilities, Financing
Authority Revenue, (Catholic Health
Corporation), Series A, (AMBAC Insured),
5.875% due 07/01/2009 ....................... 1,123,750
California Housing Finance Agency Revenue:
2,165,000 Home Mortgage, Series B1, AMT,
(AMBAC Insured),
6.200% due 02/01/2007 ....................... 2,338,200
445,000 Series E, (MBIA Insured),
6.050% due 08/01/2006 ....................... 475,594
California State, GO:
1,240,000 County Jail and School Building,
(AMBAC Insured),
7.250% due 08/01/2003** ..................... 1,427,550
1,000,000 (FGIC Insured),
6.200% due 09/01/2005 ....................... 1,137,500
1,500,000 California State, Public Works Board,
(Various California University Projects),
Series A, (AMBAC Insured),
5.900% due 12/01/2003 ....................... 1,663,125
1,495,000 California State University Revenue, Series
AJ, AL, AM, AN, AP, AQ, AR,
(AMBAC Insured),
6.750% due 11/01/2007 ....................... 1,608,994
1,600,000 California Statewide Communities Development
Authority, (Children's Hospital),
(MBIA Insured),
6.000% due 06/01/2007 ....................... 1,822,000
1,000,000 Castaic Lake, Water Agency, COP, (Water Systems
Improvement Project), Series A, (MBIA Insured),
5.600% due 08/01/2005 ....................... 1,105,000
1,000,000 Central Valley, School Districts Financing
Authority, Capital Appreciation, School
District, GO, Series A, (MBIA Insured),
Zero coupon due 02/01/2008 .................. 678,750
500,000 Fontana, Special Tax, Senior Community
Facilities District No. 2, Series A,
(MBIA Insured),
4.300% due 09/01/2007 ....................... 513,750
1,000,000 Foothill Eastern Transportation Corridor Agency,
Toll Road Revenue, Capital Appreciation,
Sr. Lien, Series A, Zero coupon
due 01/01/2004 .............................. 790,000
Gilroy, Unified School District, COP,
(FSA Insured):
1,390,000 5.600% due 09/01/2003 ....................... 1,504,675
1,400,000 5.625% due 09/01/2004 ....................... 1,531,250
1,000,000 Inland Empire Solid Waste Financing Authority
Revenue, (Landfill Improvement Financing
Project), Series B, AMT, (FSA Insured),
6.000% due 02/01/2006 ....................... 1,123,750
1,200,000 Los Angeles, COP,
5.000% due 02/01/2008 ....................... 1,240,500
Los Angeles, Community Redevelopment Agency,
MFHR, (AMBAC Insured):
375,000 5.650% due 07/01/2000 ....................... 384,844
930,000 6.000% due 07/01/2004 ....................... 1,003,237
Los Angeles, Department of Water and Power,
Electric Revenue Bond, (MBIA Insured):
1,500,000 8.500% due 01/15/2002** ..................... 1,719,375
1,000,000 5.400% due 09/01/2006 ....................... 1,083,750
1,500,000 Los Angeles, Unified School District, COP,
Series B, (AMBAC Insured),
6.000% due 12/01/2001 ....................... 1,606,875
1,500,000 Los Angeles County, Capital Asset Leasing
Corporation, Leasehold Revenue,
(AMBAC Insured),
6.000% due 12/01/2006 ....................... 1,713,750
Los Angeles County, Metropolitan Transportation
Authority, Sales Tax Revenue, 1st Tier,
Series A, (FSA Insured):
2,000,000 5.250% due 07/01/2008# ...................... 2,167,500
1,800,000 5.250% due 07/01/2009# ...................... 1,948,500
2,000,000 5.250% due 07/01/2010# ...................... 2,150,000
1,060,000 Madera County, COP, Valley Children's Hospital,
(MBIA Insured),
6.250% due 03/15/2007 ....................... 1,226,950
564,000 Modesto, Mortgage Revenue Bond,
(GNMA Insured),
5.875% due 12/01/2004 ....................... 599,250
250,000 Oakland, Improvement Board Act of 1915, Medical
Hill Parking, Assessment District #3, (MBIA
Insured), 6.000% due 09/02/2004 ............. 259,565
600,000 Oakland, Revenue Bonds,
(YMCA East Bay Project),
6.250% due 06/01/2000 ....................... 618,000
500,000 Orange County, Recovery COP, Series A,
(MBIA Insured),
6.000% due 07/01/2008 ....................... 573,125
1,395,000 Oroville, Hospital Revenue, Series A,
(MBIA Insured),
5.000% due 12/01/2009 ....................... 1,473,469
Oxnard, Harbor District Revenue,
(FSA Insured):
1,075,000 7.000% due 08/01/2001** ..................... 1,171,750
1,155,000 7.000% due 08/01/2002** ..................... 1,290,712
1,240,000 7.000% due 08/01/2003** ..................... 1,415,150
Paramount, Redevelopment Agency Tax Allocation,
(Redevelopment Project
Area #1), (MBIA Insured):
1,610,000 6.100% due 08/01/2006 ........................ 1,809,238
1,700,000 6.100% due 08/01/2007 ........................ 1,906,125
1,280,000 Redondo Beach, Public Financing Authority
Revenue, (South BayCenter
Redevelopment Project),
6.750% due 07/01/2006 ....................... 1,432,000
1,300,000 Sacramento, Municipal Utility District, Electric
Revenue, (AMBAC Insured),
5.500% due 05/15/2007** ..................... 1,408,875
1,450,000 San Diego County, COP, (MBIA Insurerd),
5.250% due 08/15/2009 ....................... 1,575,062
1,050,000 Santa Ana, COP, (Santa Ana Recycling Project),
Series A, AMT, (AMBAC Insured),
5.400% due 05/01/2007 ....................... 1,144,500
650,000 Santa Clara, Redevelopment Agency, Tax
Allocation, (Bay Shore North Project),
(AMBAC Insured),
7.000% due 07/01/2010 ....................... 799,500
1,350,000 Solano County, (Solano Park Hospital Project),
COP, (FSA Insured),
6.500% due 08/01/2006 ....................... 1,557,562
1,000,000 Southern California, Home Financing Authority,
MFHR, (The Fountains Project), Series A, AMT,
(FNMA Collateral),
5.400% due 01/01/2027 ....................... 1,046,250
1,000,000 Stanton, MFHR, (Continental Gardens Apartments),
(FNMA Collateral),
5.625% due 08/01/2029 ....................... 1,066,250
1,305,000 Stockton, Community Facilities Supplemental Tax,
(Mello Roos-Weston Ranch), Series A,
5.500% due 09/01/2009 ....................... 1,306,631
University of California:
1,000,000 (Multiple Purpose Review Projects),
(MBIA Insured),
10.000% due 09/01/2001 ...................... 1,171,250
1,070,000 Series A, (CONNIE LEE Insured),
5.500% due 09/01/2006 ....................... 1,134,200
435,000 Upland, Redevelopment Agency, Tax Allocation,
(A Merged Project), (AMBAC Insured),
4.100% due 09/01/2008 ....................... 435,000
1,000,000 Valley Health Systems, California Hospital
Revenue, (Hospital Revenue Refunding &
Improvement Project), Series A, (ACA Insured),
6.125% due 05/15/2005 ....................... 1,105,000
------------
63,537,633
------------
GUAM - 1.8%
1,000,000 Government of Guam, Airport Authority
Revenue, Series B,
6.700% due 10/01/2023 ....................... 1,093,750
------------
PUERTO RICO - 1.3%
760,604 Centro de Recaudaciones de Ingresos Municipales, COP,
6.850% due 10/17/2003 ....................... 803,388
------------
Total Municipal Bonds and Notes
(Cost $61,064,042) .......................... 65,434,771
------------
SHORT-TERM MUNICIPAL BONDS - 1.8%
900,000 California, Pollution Control Financing
Authority, PCR, (Southern California
Edison Company)
3.650% due 02/28/2008+ ...................... 900,000
100,000 Irvine Ranch, Water District,
3.650% due 10/01/2005+ ...................... 100,000
100,000 Los Angeles, Regional Airport Improvement Corporation,
Lease Revenue Bond, (American Airlines Inc.),
3.650% due 12/01/2024+ ...................... 100,000
------------
Total Short-Term Municipal Bonds
(Cost $1,100,000) ........................... 1,100,000
------------
TOTAL INVESTMENTS (Cost $62,164,042*) 108.2% 66,534,771
OTHER ASSETS AND LIABILITIES (Net)............. (8.2) (5,042,158)
----- ------------
NET ASSETS .................................... 100.0% $ 61,492,613
===== ============
- --------------
* Aggregate cost for federal tax purposes.
**Securities are pledged as collateral for when-issued securities.
+ Variable rate daily demand notes are payable upon not more than one business
day's notice. The interest rate shown reflects the rate currently in effect.
# Security purchased on a when-issued basis (Note 2).
California Insured Intermediate Municipal Fund had the following industry
concentrations greater than 10% at October 31, 1998 (as a percentage of net
assets): (Unaudited)
Transportation 17.8% Health Care 13.5%
Tax District 13.2% General Purpose 11.5%
Public Education 10.7%
California Insured Intermediate Municipal Fund had the following insurance
concentrations greater than 10% at October 31, 1998 (as a percentage of net
assets): (Unaudited)
AMBAC 27.1%
MBIA 30.1%
FSA 25.8%
- -------------------------------------------------------------------------------
GLOSSARY OF TERMS
ACA -- American Capital Access
AMBAC -- American Municipal Bond Assurance
Corporation
AMT -- Alternative Minimum Tax
CONNIE LEE -- College Construction Loan Association
COP -- Certificates of Participation
FGIC -- Federated Guaranty Insurance Corporation
FNMA -- Federal National Mortgage Association
FSA -- Financial Security Assurance
GNMA -- Government National Mortgage Association
GO -- General Obligation Bonds
MBIA -- Municipal Bond Investors Assurance
MFHR -- Multi-family Housing Revenue
PCR -- Pollution Control Revenue
- -------------------------------------------------------------------------------
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
PORTFOLIO of INVESTMENTS
CALIFORNIA MUNICIPAL FUND
OCTOBER 31, 1998
<CAPTION>
PRINCIPAL
AMOUNT VALUE
---------- ------
MUNICIPAL BONDS AND NOTES - 101.5%
CALIFORNIA - 100.4%
<S> <C> <C>
$ 5,360,000 Alhambra, Improvement Board Act of 1915,
Assessment District No. 1, Public Works,
(MBIA Insured),
6.125% due 09/02/2018 ....................... $ 5,822,300
2,000,000 Anaheim, Public Financing Authority Revenue,
Residual Interest Bond, (MBIA Insured),
6,450% due 12/28/2018+ ...................... 2,605,000
1,000,000 Arcadia, Hospital Revenue Authority,
(Methodist Hospital),
6.500% due 11/15/2012 ....................... 1,088,750
2,000,000 Barstow Redevelopment Agency, Central
Redevelopment Project, Tax Allocation,
Series A, (MBIA Insured),
7.000% due 09/01/2014 ....................... 2,527,500
1,000,000 Brawley, Wastewater Treatment Facility,
(AMBAC Insured),
5.000% due 07/01/2016 ....................... 1,030,000
1,000,000 Brea & Olinda, Unified School District,
(High School Refinancing Project), COP,
Series A, (FSA Insured),
6.000% due 08/01/2009 ....................... 1,085,000
1,480,000 Calexico, Financing Authority Revenue, Water
System and Transportation Improvement Projects,
(AMBAC Insured),
4.750% due 11/01/2018# ...................... 1,448,550
4,715,000 California Educational Facilities Authority
Revenue, (College of Osteopathic Medicine),
(Pre-refunded to 06/01/2003),
7.500% due 06/01/2018 ....................... 5,434,038
1,000,000 California Health Facilities Authority Revenue,
(Kaiser Permanente), Series A, (FSA Insured),
7.000% due 12/01/2010 ....................... 1,077,500
California Housing Finance Agency, Home
Mortgage, AMT:
(Multi-family Housing III), Series A (MBIA
Insured):
1,000,000 5.850% due 08/01/2017 ....................... 1,062,500
3,000,000 5.950% due 08/01/2028 ....................... 3,172,500
Series B, (MBIA Insured):
1,000,000 6.000% due 08/01/2016 ....................... 1,060,000
2,000,000 6.100% due 02/01/2028 ....................... 2,112,500
990,000 Series N, (FHA/VA Insured),
6.375% due 02/01/2027 ....................... 1,060,537
California Housing Finance Agency, Home
Ownership & Improvement Revenue:
1,500,000 Series 1988G, AMT, (FHA Insured),
8.150% due 08/01/2019 ....................... 1,528,125
2,150,000 Series 1989D, AMT, (FHA Insured),
7.500% due 08/01/2020 ....................... 2,217,101
5,010,000 Series C, AMT, (FHA Insured),
6.650% due 08/01/2014 ....................... 5,392,013
665,000 Series D, AMT, (MBIA Insured),
6.300% due 08/01/2014 ....................... 706,562
2,630,000 Series F, AMT, (MBIA Insured),
6.800% due 08/01/2014 ....................... 2,893,000
California, Pollution Control Financing
Authority, PCR:
1,000,000 (Keller Canyon Landfill Company Project), AMT,
6.875% due 11/01/2027 ....................... 1,090,000
2,890,000 (Mobil Oil Corporation Project),
5.500% due 12/01/2029 ....................... 2,969,475
2,500,000 (San Diego Gas and Electric), Series A, AMT,
(AMBAC Insured),
5.850% due 06/01/2021 ....................... 2,665,625
(Southern California Edison Company):
13,250,000 Series B, AMT, (AMBAC Insured),
6.400% due 12/01/2024 ....................... 14,624,688
5,000,000 Series B, AMT, (FGIC Insured),
6.400% due 12/01/2024 ....................... 5,518,750
6,565,000 (Tracy Material Recovery Project), Series A, AMT,
6.600% due 08/01/2014** ..................... 6,640,629
5,000,000 (Waste Management), Series A, AMT,
7.150% due 02/01/2011 ....................... 5,381,250
3,100,000 (Waste Removal Systems), Series A, AMT,
7.100% due 11/01/2009 ....................... 3,244,987
2,250,000 California Residential Efficiency Financing
Authority, (First Resource Efficiency),
(AMBAC Insured),
6.000% due 07/01/2017 ....................... 2,475,000
1,420,000 California Rural Home Mortgage Finance
Authority, SFMR, Mortgage-Backed Securities
Project, Series A-2, AMT, (GNMA Insured),
7.950% due 12/01/2024 ....................... 1,611,700
415,000 California State, GO, (MBIA Insured),
6.000% due 10/01/2014** ..................... 452,869
California Statewide Communities Development
Authority, COP:
3,000,000 (Cedars-Sinai Medical Center), (MBIA Insured),
6.500% due 08/01/2012 ....................... 3,618,750
735,000 (Childrens Campus),
6.500% due 09/01/2022 ....................... 799,312
2,000,000 (Student Residence, Series A), (MBIA Insured),
5.000% due 06/01/2029 ....................... 1,992,500
14,800,000 California Statewide Communities Development
Authority Revenue, (Sherman Oaks Project),
Series A, (AMBAC Insured),
5.000% due 08/01/2022 ....................... 15,003,500
5,630,000 Carson, Improvement Board Act of 1915, GO,
7.375% due 09/02/2022 ....................... 6,066,325
Central Valley School District, Financing
Authority, GO:
School District Refinancing, Series A,
(MBIA Insured):
4,225,000 Zero coupon due 02/01/2008 .................. 2,867,719
5,940,000 Zero coupon due 08/01/2008 .................. 3,950,100
5,925,000 Zero coupon due 02/01/2009 .................. 3,821,625
4,675,000 Chula Vista, IDR, (San Diego Gas and Electric),
Series A, AMT, (AMBAC Insured),
6.400% due 12/01/2027 ....................... 5,160,031
2,920,000 Chula Vista, Redevelopment Agency, Tax
Allocation Revenue,
8.625% due 09/01/2024 ....................... 3,617,150
Contra Costa County, Finance Authority,
Tax Allocation Revenue, Series A:
1,595,000 7.000% due 08/01/2009 ....................... 1,764,469
1,000,000 7.100% due 08/01/2022 ....................... 1,098,750
2,500,000 Davis, Public Facilities Finance Authority,
Mace Ranch Area, Series A,
6.600% due 09/01/2025 ....................... 2,637,500
Delano, COP:
1,720,000 Regional Medical Center,
5.250% due 01/01/2018 ....................... 1,670,550
3,215,000 Series A,
9.250% due 01/01/2022 ....................... 3,926,319
1,985,000 El Cajon, COP, (Helix View Nursing Hospital),
Limited Obligation, Series 1990, AMT,
(FHA Insured),
7.750% due 02/01/2029 ....................... 2,020,214
4,720,000 Fairfield Housing Authority Revenue, Mortgage
Revenue, (Creekside Estates Project),
7.875% due 02/01/2015 ....................... 4,908,800
5,000,000 Foothill Eastern Transportation Corridor Agency,
Series A, Zero coupon due 01/01/2008 ........ 3,975,000
2,800,000 Fontana Redevelopment Agency, Tax Allocation,
Southwest Industrial Park Project,
(MBIA Insured),
5.000% due 09/01/2022 ....................... 2,772,000
2,800,000 Fresno Joint Powers, Financing Authority,
Lease Revenue, (AMBAC Insured),
4.750% due 09/01/2028 ....................... 2,695,000
2,000,000 Gilroy, Unified School District, COP, (Measure
J Capital Projects), (FSA Insured),
6.250% due 09/01/2012 ....................... 2,275,000
Golden West Schools Financing Authority:
(School District Refinancing Program, Series A,
MBIA Insured):
1,215,000 Zero coupon due 08/01/2016 .................. 499,669
1,580,000 Zero coupon due 02/01/2017 .................. 624,100
2,000,000 Huntington Park, Public Financing Authority Lease
Revenue, (Waste Water System Project),
6.200% due 10/01/2025 ....................... $ 2,050,000
2,000,000 Irvine, Meadows Mobile Home Park Revenue, Series A, (GNMA
Collateral),
5.700% due 03/01/2018 ....................... 2,057,500
2,500,000 Kern, Community College District, COP,
5.000% due 01/01/2018 ....................... 2,509,375
1,250,000 Kings County, Waste Management Authority,
Solid Waste Revenue, AMT,
7.200% due 10/01/2014 ....................... 1,460,937
3,625,000 La Habra, COP, Park and Viewpark, Series A,
(FSA Insured),
4.800% due 09/01/2022 ....................... 3,529,844
1,500,000 La Verne, Public Financing Authority, Capital
Improvement,
7.250% due 09/01/2026 ....................... 1,668,750
Los Angeles, Community Redevelopment Agency, AMT:
1,425,000 5.850% due 12/01/2026 ....................... 1,432,125
3,490,000 Series C, (AMBAC Insured),
6.750% due 07/01/2014 ....................... 3,808,462
1,000,000 Los Angeles County, Master Refunding Project,
(Inverse Floater),
6.708% due 06/01/2015 ....................... 1,186,250
Los Angeles County, MFHR, AMT, (GNMA Insured):
3,000,000 (Park Parthenia Project),
7.400% due 01/20/2022 ....................... 3,065,610
1,000,000 (Ridgecroft Apartments Project), Series E,
(GNMA Collateral),
6.250% due 09/20/2039 ....................... 1,065,000
3,500,000 Los Angeles County, Metropolitan Transportation
Authority, Sales Tax Revenue, First Tier
Properties, Series A, (FSA Insured),
5.000% due 07/01/2019# ...................... 3,447,500
Los Angeles County, Residual Interest Bond:
3,740,000 (Edmund D. Edelman Children's Center), COP,
(AMBAC Insured),
6.000% due 04/01/2012 ....................... 4,053,225
6,110,000 (Pension Obligation), COP, (MBIA Insured),
6.900% due 06/30/2008 ....................... 7,461,838
1,180,000 Los Angeles County, Single Family Housing
Revenue, Series B, (GNMA Insured),
7.600% due 08/01/2016 ....................... 1,283,250
395,000 Los Angeles Home Mortgage Revenue,
Mortgage-Backed Securities Project,
(GNMA Insured),
8.100% due 05/01/2017 ....................... 435,981
415,000 Los Angeles, SFMR, Program 1990, Issue A, AMT,
GNMA collateralized,
7.550% due 12/01/2023 ....................... 431,081
2,785,000 Needles, Public Utilities Authority Revenue,
(Utilities System Aquisition Project),
Series A,
6.500% due 02/01/2022 ....................... 2,976,469
3,500,000 Novato, Special Tax Revenue, (Community
Facilities District),
7.200% due 08/01/2015 ....................... 3,788,750
2,000,000 Oakland, Revenue Bonds, (YMCA East Bay Project),
7.100% due 06/01/2010 ....................... 2,255,000
Oakland, Unified School District:
2,645,000 7.000% due 11/15/2011 ....................... 2,959,094
3,445,000 COP, Energy Retrofit,
6.750% due 11/15/2014 ....................... 3,806,725
4,500,000 Palm Desert, Financing Authority, Tax Allocation
Revenue, (MBIA Insured), (Inverse Floater),
6.368% due 04/01/2022+ ...................... 5,332,500
1,150,000 Palm Springs, Financing Authority, (Convention
Center Project), Series A, (MBIA Insured),
6.750% due 11/01/2021 ....................... 1,262,125
3,000,000 Pasadena Electric Revenue, (MBIA Insured),
4.750% due 08/01/2024 ....................... 2,895,000
Port Oakland, AMT, (Mitsu Osk Lines Ltd.),
Series A:
3,030,000 6.750% due 01/01/2012 ....................... 3,257,250
2,300,000 6.800% due 01/01/2019 ....................... 2,475,375
3,000,000 Rancho, Water District Financing Authority,
Residual Interest Bond, (AMBAC Insured),
(Pre-refunded to 09/11/2001),
6.427% due 08/17/2021+ ...................... 3,555,000
2,750,000 Redding, Electrical Systems Revenue, COP,
(Inverse Floater), (MBIA Insured),
6.368% due 07/08/2022+ ...................... 3,757,188
1,000,000 Redondo Beach, Public Financing Authority
Revenue, (South Bay Center Redevelopment
Project),
7.125% due 07/01/2026 ....................... 1,133,750
1,500,000 Riverside, School District, Special Project,
7.250% due 09/01/2018 ....................... 1,621,875
Rocklin, Unified School District, (FGIC Insured):
1,030,000 Zero coupon due 08/01/2014 .................. 464,787
1,210,000 Zero coupon due 08/01/2016 .................. 487,025
1,255,000 Zero coupon due 08/01/2017 .................. 475,331
1,310,000 Zero coupon due 08/01/2018 .................. 468,325
1,360,000 Zero coupon due 08/01/2019 .................. 460,700
1,415,000 Zero coupon due 08/01/2020 .................. 454,569
1,225,000 Zero coupon due 08/01/2023 .................. 335,344
6,500,000 Sacramento County, Airport System Revenue,
Series 1989, AMT, (AMBAC Insured),
7.000% due 07/01/2020 ....................... 6,764,290
2,000,000 Sacramento County, Financing Authority,
Lease Revenue, Environmental Protection
Agency, Series A,
4.750% due 05/01/2023# ...................... 1,932,500
1,000,000 Salinas, California Improvement Board, Act
1915, Special Assesment District #90-1,
Series C-185,
5.400% due 09/02/2012 ....................... 1,003,750
10,000,000 San Bernardino County, COP, (MBIA Insured),
Residual Interest Bond,
5.500% due 07/01/2016+ ...................... 10,750,000
6,000,000 San Bernardino County, SFMR, Home
Mortgage-Backed
Securities Program, Series B,
5.400% due 05/01/2025 ....................... 6,082,500
4,000,000 San Diego County, Residual Interest Bond, COP,
Series B, (MBIA Insured), (Pre-refunded to
04/27/2006),
6.300% due 04/08/2021+ ...................... 5,290,000
15,000,000 San Diego County, Water Authority Revenue, COP,
Series A,
4.750% due 05/01/2028 ....................... 14,456,250
1,000,000 San Dimas, Housing Authority Revenue,
(Charter Oak Mobile Home Project), Series A,
(FNMA Collateral),
5.700% due 07/01/2028 ....................... 967,500
San Francisco, City and County, Multi-family
Mortgage Revenue, Series A, (FNMA Insured):
1,000,000 6.350% due 02/15/2012 ....................... 1,046,250
1,250,000 6.450% due 02/15/2024 ....................... 1,303,125
San Francisco, City and County, Redevelopment
Agency, Lease Revenue, Capital Appreciation,
(George R. Moscone Project):
3,750,000 Zero coupon due 07/01/2011 .................. 2,100,000
4,250,000 Zero coupon due 07/01/2013 .................. 2,093,125
270,000 San Francisco, City and County, SFMR, AMT, GNMA
and FNMA Mortgage-Backed Securities Program,
7.450% due 01/01/2024 ....................... 281,137
2,000,000 San Macros, Public Facilities Authority Revenue,
5.800% due 09/01/2018 ....................... 2,052,500
3,000,000 Santa Clarita, Community Development Authority,
7.500% due 11/15/2012 ....................... 3,202,500
4,765,000 Santa Rosa, Mortgage Revenue, (Channate Lodge),
(FHA Insured),
6.700% due 12/01/2024 ....................... 5,128,331
2,000,000 Shasta Lake, COP, (FSA Insured),
6.000% due 04/01/2016 ....................... 2,225,000
4,750,000 Sierra View, Healthcare District Revenue,
(ACA Insured),
5.250% due 07/01/2018 ....................... 4,773,750
2,500,000 Simi Valley, Community Development Agency,
Commonwealth Mortgage Revenue, Sycamore
Plaza II,
6.000% due 09/01/2012 ....................... 2,503,125
5,000,000 South Orange County, Public Financing Authority,
Special Tax Revenue, Sr. Lien, Series A,
(MBIA Insured),
6.200% due 09/01/2013 ....................... 5,568,750
Southern California, Housing Finance Agency,
SFMR, GNMA and FNMA Mortgage-Backed Securities
Program:
820,000 Series 1988A, AMT, GNMA collateralized,
8.125% due 02/01/2021 ....................... 893,800
1,480,000 Series A, (GNMA Collateral),
7.350% due 09/01/2024 ....................... 1,548,450
185,000 Series B, (GNMA Collateral),
6.900% due 10/01/2024 ....................... 195,637
45,000 Stockton, Community Facilities Supplemental
Tax #90-2, SFMR, GNMA Mortgage-Backed
Securities Program, (Brookside Estates), AMT,
7.450% due 08/01/2010 ....................... 49,669
1,305,000 Stockton, Community Facilities Supplemental
Tax #90-1, (Mello Roos-Weston Ranch),
Series A,
6.000% due 09/01/2018 ....................... 1,318,050
2,025,000 Vallejo, Public Financing Authority Revenue,
(Fairgrounds Drive Assessment District),
5.700% due 09/02/2011 ....................... 2,030,063
------------
338,491,794
------------
GUAM - 0.6%
2,000,000 Guam Airport Authority Revenue, Series B,
6.700% due 10/01/2023 ....................... 2,187,500
------------
PUERTO RICO - 0.5%
1,521,207 Centro de Recaudaciones de Ingresos Municipales,
6.850% due 10/17/2003 ....................... 1,606,775
------------
Total Municipal Bonds and Notes
(Cost $315,108,410) ......................... 342,286,069
------------
SHORT-TERM MUNICIPAL BONDS - 3.2%
California PCR, Financing Authority:
2,000,000 Pacific Gas and Electric, Series 1996C,
2.850% due 11/01/2026+ ...................... 2,000,000
4,500,000 Southern California Edison, Series 1986A,
3.050% due 02/28/2008+ ...................... 4,500,000
Los Angeles, Regional Airports Improvement, Corporate
Lease Revenue, (Los Angeles International Airport):
1,600,000 Series 1984B,
3.650% due 12/01/2024+ ...................... 1,600,000
800,000 Series 1984F,
3.650% due 12/01/2024+ ...................... 800,000
5,000 Sub Lease,
3.650% due 12/01/2025+ ...................... 5,000
Orange County, Sanitation Districts, COP:
1,100,000 3.550% due 08/01/2015+ ...................... 1,100,000
700,000 2.750% due 08/01/2016+ ...................... 700,000
-------------
Total Short-Term Municipal Bonds
(Cost $10,705,000) .......................... 10,705,000
------------
TOTAL INVESTMENTS (Cost $325,813,410*)................ 104.7% 352,991,069
OTHER ASSETS AND LIABILITES (Net) .................... (4.7) (15,709,990)
----- ------------
NET ASSETS ........................................... 100.0% $337,281,079
===== ============
- --------------
* Aggregate cost for federal tax purposes.
**Securities are pledged as collateral for when-issued securities.
+ Variable rate demand notes are payable upon not more than one business day's
notice. The interest rate shown reflects the rate currently in effect.
# Security purchased on a when-issued basis (Note 2).
California Municipal Fund had the following industry concentrations greater
than 10% at October 31, 1998 (as a percentage of net assets): (Unaudited)
Tax District 12.7% Single-family Housing 11.0%
Retail Utility 10.3%
California Municipal Fund had the following insurance concentrations greater
than 10% At October 31, 1998 (as a percentage of net assets): (Unaudited)
MBIA 25.2% AMBAC 18.8%
- -------------------------------------------------------------------------------
GLOSSARY OF TERMS
ACA -- American Capital Access
AMBAC -- American Municipal Bond Assurance
Corporation
AMT -- Alternative Minimum Tax
COP -- Certificates of Participation
FGIC -- Federal Guaranty Insurance Corporation
FHA -- Federal Housing Authority
FNMA -- Federal National Mortgage Association
FSA -- Financial Security Assurance
GNMA -- Government National Mortgage
Association
GO -- General Obligation Bonds
IDR -- Industrial Development Revenue
MBIA -- Municipal Bond Investors Assurance
MFHR -- Multi-family Housing Revenue
PCR -- Pollution Control Revenue
SFMR -- Single Family Mortgage Revenue
VA -- Veterans' Administration
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
PORTFOLIO OF INVESTMENTS
FLORIDA INSURED MUNICIPAL FUND
OCTOBER 31, 1998
<CAPTION>
PRINCIPAL
AMOUNT VALUE
---------- ------
MUNICIPAL BONDS AND NOTES - 111.5%
FLORIDA - 111.5%
<S> <C> <C>
$ 1,000,000 Brevard County, School Board Authority, COP,
Series B, (AMBAC Insured),
5.500% due 07/01/2021 ....................... $ 1,056,350
1,000,000 Broward County, Educational Facilities
Authority Revenue, (Nova Southeastern
University Project), (CONNIE LEE Insured),
6.000% due 04/01/2008 ....................... 1,099,550
435,000 Clay County, Housing Finance Authority Revenue,
SFMR, Multi-County Program, (GNMA/FNMA
Collateral),
5.950% due 10/01/2019 ....................... 461,326
1,000,000 Collier County, Industrial Development Authority,
IDR, (Southern States Utilities Project), AMT,
6.500% due 10/01/2025 ....................... 1,061,920
1,100,000 Dade County, Aviation Revenue, Series B, AMT,
(MBIA Insured),
6.600% due 10/01/2022 ....................... 1,216,303
950,000 Escambia County, Health Facilities Revenue,
Baptist Hospital, Series B,
6.000% due 10/01/2014 ....................... 999,278
1,000,000 Escambia County, PCR, (Champion International
Corporation Project), AMT,
6.900% due 08/01/2022 ....................... 1,100,210
Florida Housing Finance Agency, AMT:
705,000 SFMR, Series A, (GNMA Collateralized),
6.650% due 01/01/2024 ....................... 758,876
1,000,000 Spinnaker Cove Apartments, Series G,
(AMBAC Insured),
6.500% due 07/01/2036 ....................... 1,093,430
1,000,000 Florida State Turnpike Authority, Turnpike
Revenue, Department of Transportation,
Series A, (FGIC Insured),
5.000% due 07/01/2016 ....................... 1,008,110
1,445,000 Hillsborough County, Capital Improvement
Revenue, Criminal Justice Facilities,
(FGIC Insured),
5.250% due 08/01/2016** ..................... 1,476,140
1,300,000 Hillsborough County, School Board Authority,
COP, (MBIA Insured),
6.000% due 07/01/2012
(Prerefunded 07/01/2004) .................... 1,461,655
1,250,000 Jacksonville, Water & Sewer Revenue,
(United Water Project), AMT, (AMBAC Insured),
6.350% due 08/01/2025 ....................... 1,412,337
960,000 Manatee County, Housing Finance Authority,
SFMR, Sub. Series 4, AMT,
(GNMA/FNMA Collateral),
6.875% due 11/01/2026 ....................... 1,079,424
1,000,000 Orange County, Housing Finance Authority, MFHR,
(Hands Inc. Project), Series A,
8.000% due 10/01/2025 ....................... 1,115,460
1,000,000 Orlando & Orange County, Expressway Authority,
Expressway Revenue, Jr. Lien, (FSA Insured),
5.950% due 07/01/2023 ....................... 1,068,810
1,000,000 Pasco County, Solid Waste Disposal & Resource
Recovery System, AMT,
6.000% due 04/01/2011 ....................... 1,136,880
1,000,000 Pinellas County, Housing Finance Authority
Revenue, SFMR, Series A, AMT,
6.000% due 09/01/2018 ....................... 1,063,260
Port Orange, Water and Sewer Refunding Revenue,
(AMBAC Insured):
1,000,000 5.000% due 10/01/2012# ...................... 1,030,130
500,000 5.000% due 10/01/2016# ...................... 504,550
500,000 Reedy Creek Improvement, District Florida,
Series A,
5.250% due 06/01/2015 ....................... 519,635
1,050,000 Seminole County, School Board Authority, COP,
Series A, (MBIA Insured),
6.125% due 07/01/2014 ....................... 1,187,193
1,500,000 South Miami Florida Health Facility Authority
Hospital Revenue, Baptist Health System Group,
5.000% due 11/15/2028 ....................... 1,480,440
------------
Total Municipal Bonds and Notes
(Cost $22,307,217) .......................... 24,391,267
------------
TOTAL INVESTMENTS (Cost $22,307,217*) 111.5% 24,391,267
OTHER ASSETS AND LIABILITIES (Net)................. (11.5) (2,521,097)
----- ------------
NET ASSETS ......................................... 100.0% $ 21,870,170
===== ============
- --------------
* Aggregate cost for federal tax purposes.
**Security pledged as collateral for when-issued securities
#Security purchased on a when-issued basis (Note 2).
Florida Insured Municipal Fund has the following industry concentrations
greater than 10% at October 31, 1998 (as a percentage of net assets):
(Unaudited)
Water & Sewage 18.7% Public Education 16.9%
Single-family Housing 15.4% Multi-family Housing 10.1%
Florida Insured Municipal Fund had the following insurance concentrations
greater than 10% at October 31, 1998 (as a percentage of net assets):
(Unaudited)
AMBAC 23.3% FGIC 11.4% MBIA 17.7%
- ------------------------------------------------------------------------------
GLOSSARY OF TERMS
AMBAC --American Municipal Bond Assurance Corporation
AMT --Alternative Minimum Tax
CONNIE --College Construction
LEE --Loan Association
COP --Certificates of Participation
FGIC --Federal Guaranty Insurance Corporation
FNMA --Federal National Mortgage Association
FSA --Financial Security Assurance
GNMA --Government National Mortgage Association
IDR --Industrial Development Revenue
MBIA --Municipal Bond Investors Assurance
MFHR --Multi-family Housing Revenue
PCR --Pollution Control Revenue
SFMR --Single Family Mortgage Revenue
- ------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
PORTFOLIO of INVESTMENTS
TAX-EXEMPT BOND FUND
October 31, 1998
<CAPTION>
PRINCIPAL
AMOUNT VALUE
------ -----
MUNICIPAL BONDS AND NOTES - 96.7%
ALABAMA - 1.3%
<S> <C> <C>
$ 4,000,000 Courtland, Industrial Development Board of Solid Waste,
(Champion International Corporation Project), Disposal
Revenue, AMT, 7.750% due 01/01/2020 .................. $ 4,201,600
------------
ALASKA - 1.1%
1,235,000 Anchorage, Electric Utility, (MBIA Insured),
6.500% due 12/01/2013 ................................ 1,493,461
2,000,000 Anchorage, Ice Rink Revenue, 6.375% due 01/01/2020 ..... 2,007,940
------------
3,501,401
------------
ARIZONA - 3.0%
Salt River Project Agricultural Improvement & Power
District:
3,000,000 Series A, 5.750% due 01/01/2009 ...................... 3,372,210
5,000,000 Series C, 6.250% due 01/01/2019 ...................... 5,373,800
740,000 Tucson, Airport Authority Inc., Supplemental Facilities
Revenue, AMT, 8.700% due 09/01/2019 .................. 812,579
------------
9,558,589
------------
CALIFORNIA - 9.8%
15,000,000 Anaheim California Public Financing Authority Lease,
Capital Appreciation Subordinated Public Improvements,
Project-C, (FSA Insured), Zero coupon due 09/01/2034 . 2,420,850
5,000,000 California State, GO, (FGIC Insured),
5.625% due 10/01/2023 ................................ 5,321,950
1,250,000 California State Public Works Board Lease, Department of
Corrections, State Prison, Series E,
5.500% due 06/01/2015 ................................ 1,349,975
2,000,000 Center Unified School District California, Capital
Appreciation, Series C, GO, (MBIA Insured),
Zero coupon, due 09/01/2018 .......................... 744,400
2,000,000 Foothill/Eastern Corridor Agency, California Toll Road,
Sr. Lien, Series A, 5.000% due 01/01/2035 ............ 1,927,060
550,000 Los Angeles, Regional Airport Improvement, Series A, AMT,
6.700% due 01/01/2022 ................................ 589,386
3,000,000 Orange County Recovery, COP, Series A, (MBIA Insured),
6.000% due 07/01/2026 ................................ 3,368,040
1,173,000 Sacramento, COP, Centrex System Lease, Series A,
5.550% due 09/15/2004 ................................ 1,192,237
5,000,000 San Francisco, City & County Airport Commission,
International Airport, Second Series-Issue 12-B, (FGIC
Insured), 5.625% due 05/01/2021 ...................... 5,605,900
5,000,000 San Joaquin Hills, California Transportation Corridor,
Agency Toll Road, 5.000% due 01/01/2033 .............. 4,813,600
800,000 Simi Valley, Unified School District, COP, Refunding &
Capital Improvement Projects, (AMBAC Insured),
5.250% due 08/01/2022 ................................ 843,032
3,000,000 Student Education Loan Marketing Corporation, California
Student Loan Revenue, Series IV-D-1, AMT,
5.875% due 01/01/2018 ................................ 2,919,060
------------
31,095,490
------------
COLORADO - 5.8%
2,225,000 Colorado Springs Utilities System Revenue, Pre-refunded,
6.750% due 11/15/2021 ................................ 2,466,456
2,775,000 Colorado Springs Utilities System, Series C, Unrefunded,
6.750% due 11/15/2021 ................................ 3,038,570
Denver City and County, Airport Revenue, AMT:
Series A, Pre-refunded:
530,000 8.875% due 11/15/2012 ................................ 618,356
95,000 8.500% due 11/15/2023 ................................ 106,089
165,000 8.000% due 11/15/2025 ................................ 182,648
Series A, Unrefunded:
1,470,000 8.875% due 11/15/2012 ................................ 1,683,121
1,045,000 8.500% due 11/15/2023 ................................ 1,148,936
1,835,000 8.000% due 11/15/2025 ................................ 1,995,985
1,920,000 Series C, 6.600% due 11/15/2004 ...................... 2,101,766
4,500,000 Meridian Metropolitan District, GO, 7.500% due 12/01/2011 4,941,000
------------
18,282,927
------------
CONNECTICUT - 0.7%
995,000 Mashantucket Western Pequot Tribe, Special Revenue, Series
A, Pre-refunded, 6.500% due 09/01/2005 ............... 1,140,827
1,005,000 Mashantucket Western Pequot Tribe, Special Revenue, Series
A, Unrefunded, 6.500% due 09/01/2005 ................. 1,133,419
------------
2,274,246
------------
DISTRICT OF COLUMBIA - 0.9%
990,000 District of Columbia, COP, 6.875% due 01/01/2003 ....... 1,038,876
1,500,000 Metropolitan District, Washington D.C., Airport Authority,
General Airport Revenue, Series A, AMT, (MBIA Insured),
6.625% due 10/01/2019 ................................ 1,659,930
------------
2,698,806
------------
FLORIDA - 4.4%
22,520,000 Dade County, Guaranteed Entitlement Revenue, Capital
Appreciation, Series A, (MBIA Insured),
Zero coupon due 02/01/2018 ........................... 7,766,698
425,000 Dade County, Seaport Authority, Refunding, (MBIA Insured),
6.500% due 10/01/2008 ................................ 504,569
5,000,000 Orlando Utilities Commission Water & Electric,
6.000% due 10/01/2010 ................................ 5,773,400
------------
14,044,667
------------
GEORGIA - 7.3%
1,000,000 Atlanta, Airport Facilities Revenue, AMT,
7.250% due 01/01/2017 ................................ 1,079,610
6,000,000 Georgia Municipal Electric Authority Power, Series Z,
(MBIA Insured), 5.500% due 01/01/2020 ................ 6,425,340
5,000,000 Georgia State, GO, Series B,
6.300% due 03/01/2009 ................................ 5,893,450
Monroe, PCR, (Oglethorpe Power Company):
5,000,000 6.700% due 01/01/2009 ................................ 5,909,550
3,410,000 6.750% due 01/01/2010 ................................ 4,085,828
------------
23,393,778
------------
HAWAII - 2.7%
5,555,000 Hawaii State, GO, Series BW, 6.400% due 03/01/2009 ..... 6,471,853
2,000,000 Honolulu, City & County, GO, Series A,
6.000% due 01/01/2012 ................................ 2,266,700
------------
8,738,553
------------
IDAHO - 0.8%
2,000,000 Idaho Health Facilities Authority Revenue, (Inverse
Floater), ETM, 8.750% due 02/15/2021+ ................ 2,470,340
------------
ILLINOIS - 13.4%
3,665,000 Chicago Gas Supply, (People Gas),
6.875% due 03/01/2015 ................................ 4,019,332
Chicago, O'Hare Airport Supplemental Facilities, AMT:
700,000 American Airlines, Special Series A,
7.875% due 11/01/2025 ................................ 754,488
6,000,000 International Terminal, (MBIA Insured),
6.750% due 01/01/2012 ................................ 6,529,080
United Air Lines:
615,000 8.400% due 05/01/2004 ................................ 655,621
760,000 8.950% due 05/01/2018 ................................ 841,677
150,000 Special Series B, 8.500% due 05/01/2018 .............. 160,931
Cook County, Community High School, Number 217, (AMBAC
Insured):
1,090,000 6.400% due 12/01/2003 ................................ 1,171,848
1,130,000 6.500% due 12/01/2004 ................................ 1,218,117
1,370,000 6.600% due 12/01/2005 ................................ 1,480,778
Cook County, School District, Number 026, ETM, (MBIA
Insured), Escrowed to Maturity:
1,445,000 Zero coupon due 12/01/2003 ........................... 1,180,781
1,020,000 Zero coupon due 12/01/2004 ........................... 796,283
Illinois Health Facilities Authority Revenue:
210,000 Glenoak Medical Center, Series D,
Pre-refunded, 9.500% due 11/15/2015 .................. 238,594
260,000 Glenoak Medical Center, Series D, ETM,
9.500% due 11/15/2015 ................................ 295,578
4,570,000 Hindsdale Hospital, Series B, ETM,
9.000% due 11/15/2015 ................................ 5,150,710
300,000 Riverside Senior Living Center Project, Pre-refunded,
7.500% due 11/01/2020 ................................ 328,317
3,000,000 Rush Presbyterian - St. Luke's Medical, Residual
Interest Bond, (MBIA Insured),
9.939% due 10/01/2024+ ............................... 3,543,750
1,230,000 Servantcor, Series A, Pre-refunded,
8.000% due 08/15/2021 ................................ 1,389,051
5,000,000 Sister Services Hospital, Residual Interest Bond, (MBIA
Insured), Pre-refunded,
9.4672% due 06/19/2015+ .............................. 5,981,250
365,000 Illinois Housing Development Authority, Series A, AMT,
7.350% due 08/01/2010 ................................ 384,725
Metropolitan Pier and Exposition Authority Dedicated State
Tax, (FGIC Insured):
4,000,000 Zero coupon due 06/15/2008 ........................... 2,628,600
815,000 Zero coupon due 06/15/2009, ETM ...................... 507,411
5,185,000 Zero coupon due 06/15/2009 ........................... 3,228,129
------------
42,485,051
------------
INDIANA - 2.8%
6,000,000 Indiana Municipal Power Agency, Series A, (MBIA Insured),
6.125% due 01/01/2013 ................................ 6,968,280
2,000,000 Indianapolis, Public Improvement Board, Series D,
6.500% due 02/01/2022 ................................ 2,003,920
------------
8,972,200
------------
KENTUCKY - 1.1%
3,000,000 Jefferson County, Hospital Revenue, Residual Interest
Bond, (MBIA Insured), 8.125% due 10/09/2008+ ......... 3,600,000
------------
LOUISIANA - 0.2%
1,500,000 Louisiana Public Facility Authority Revenue, Series B,
ETM,
Zero coupon due 12/01/2019 ........................... 526,215
------------
MARYLAND - 2.0%
5,000,000 Baltimore, Port Facilities Revenue, Consolidated Coal
Sales, Series B,
6.500% due 10/01/2011+ ............................... 5,513,849
930,000 State of Maryland, Community Development Administration,
Department of Housing Revenue, Single Family Project,
AMT,
7.450% due 04/01/2032 ................................ 979,876
------------
6,493,725
------------
MASSACHUSETTS - 1.5%
Commonwealth of Massachusetts, GO, Consolidated Loan,
Series A,
Pre-refunded:
250,000 7.500% due 12/01/2007 ................................ 274,845
750,000 7.625% due 06/01/2008 ................................ 837,653
Commonwealth of Massachusetts, Health and Educational
Facilities Authority Revenue:
480,000 Framingham Union Hospital, Series B, Pre-refunded,
8.500% due 07/01/2010 ................................ 527,323
2,000,000 Saint Memorial Medical Center, Series A,
6.000% due 10/01/2023 ................................ 2,021,280
1,000,000 Plymouth County, COP, Series A,
7.000% due 04/01/2022 ................................ 1,116,970
----------------
4,778,071
----------------
MICHIGAN - 0.5%
1,500,000 Michigan State Hospital Finance Authority Revenue, Detroit
Medical, Series A, Pre-refunded, 7.500% due 08/15/2011 1,680,150
------------
MISSISSIPPI - 3.5%
Lowndes County, Solid Waste Disposal, PCR, (Weyerhauser
Company):
4,000,000 Series A, 6.800% due 04/01/2022 ...................... 4,920,000
5,000,000 Residual Interest Bond, Series B,
8.750% due 04/01/2022+ ............................... 6,011,600
200,000 Warren County, Solid Waste Disposal Revenue,
(International Paper Project), Series A, AMT,
7.700% due 11/15/2009 ................................ 209,998
------------
11,141,598
------------
MISSOURI - 1.4%
1,000,000 Missouri State, Health and Educational Facilities
Authority Revenue, Bethesda Eye Institute, Pre-refunded,
6.800% due 11/01/2016 ................................ 1,106,760
3,000,000 St. Louis, Parking Facilities Revenue,
Pre-refunded, 6.625% due 12/15/2021 .................. 3,366,360
------------
4,473,120
------------
MONTANA - 0.3%
1,000,000 Forsyth, PCR, Puget Sound Power & Light, Series B, AMT,
(AMBAC Insured), 7.250% due 08/01/2021 ............... 1,098,900
------------
NEBRASKA - 3.7%
1,000,000 Douglas County, Hospital Authority Revenue, Alegent
Health, Immanuel Medical Center, (AMBAC Insured),
5.250% due 09/01/2021 ................................ 1,011,880
550,000 Nebraska Investment Finance Authority, Single Family
Housing Revenue, Residual Interest Bond, AMT, (GNMA
Collateral), 9.413% due 09/15/2024+ .................. 619,438
Omaha Public Power District Electric:
7,000,000 Series B, ETM, 6.150% due 02/01/2012 ................. 8,084,929
2,000,000 Series C, 5.500% due 02/01/2014 ...................... 2,187,540
------------
11,903,787
------------
NEVADA - 1.4%
4,000,000 Clark County, IDR, Nevada Power Company, Series A, AMT,
(FGIC Insured), 6.700% due 06/01/2022 ................ 4,386,480
------------
NEW MEXICO - 1.4%
1,000,000 Bernalillo County New Mexico, Gross Receipts of Tax
Revenue, 5.250% due 04/01/2027 ....................... 1,062,110
1,500,000 Lordsburg PCR, (Phelps Dodge),
6.500% due 04/01/2013 ................................ 1,657,935
1,500,000 Santa Fe County, New Mexico Correctional System, (FSA
Insured), 6.000% due 02/01/2027 ...................... 1,747,005
------------
4,467,050
------------
NEW YORK - 1.9%
1,265,000 Metropolitan Transportation Authority, Service Contract
Transportation Facilities, Series 7,
4.750% due 07/01/2019 ................................ 1,197,157
1,000,000 New York, GO, Unrefunded, Series B,
(FSA Insured), ETM, 7.000% due 06/01/2014 ............ 1,089,730
New York, GO, Series B:
75,000 Pre-refunded, 8.250% due 11/15/2018 .................. 85,970
85,000 Unrefunded,
8.250% due 11/15/2018 ................................ 97,274
1,000,000 New York, NY, Series B, (FGIC Insured),
6.000% due 08/01/2007 ................................ 1,132,580
New York State Medical Care Facilities Finance Agency
Revenue:
170,000 Pre-refunded, 7.750% due 08/15/2011 .................. 188,525
105,000 Refunded, 7.750% due 08/15/2011 ...................... 115,535
2,000,000 New York State Housing Finance Agency Revenue, MFH, Second
Mortgage, Series F, AMT, Sonyma Program Insured,
6.625% due 08/15/2012 ................................ 2,133,880
------------
6,040,651
------------
NORTH CAROLINA - 1.8%
5,000,000 North Carolina Eastern Municipal Power Agency, Power
Systems Revenue, Series B, 7.000% due 01/01/2008 ..... 5,832,050
------------
NORTH DAKOTA - 1.5%
4,370,000 Mercer County PCR, (Otter Trail Power),
6.900% due 02/01/2019 ................................ 4,707,277
------------
OHIO - 0.4%
1,240,000 Lorain County, Hospital Revenue, Humility of Mary Health
Care, Series B, ETM, 7.200% due 12/15/2011 ........... 1,388,589
------------
OKLAHOMA - 0.7%
1,630,000 Oklahoma Housing and Finance Authority, Single Family
Revenue, Series B, AMT, (GNMA Collateral),
7.997% due 08/01/2018 ................................ 1,919,407
200,000 Tulsa, Municipal Airport Revenue, American Airlines
Project, AMT, 7.600% due 12/01/2030 .................. 216,942
------------
2,136,349
------------
PENNSYLVANIA - 4.3%
Allegheny County, Hospital Development Revenue, (Ohio
Valley General Hospital):
700,000 5.100% due 04/01/2001 ................................ 718,298
735,000 5.300% due 04/01/2002 ................................ 763,680
625,000 5.400% due 04/01/2003 ................................ 656,356
Beaver County, IDR, PCR, (Edison Project), Series A:
300,000 7.750% due 09/01/2024 ................................ 313,095
3,675,000 (FGIC Insured), 7.000% due 06/01/2021 ................ 4,005,125
600,000 Lehigh County, General Purpose Authority, Muhlenberg
Hospital Center, Series A, Pre-refunded,
8.100% due 07/15/2010 ................................ 632,988
500,000 McKean County, Hospital Authority Revenue, Bradford
Hospital, Pottstown Memorial Medical Center,
8.875% due 10/01/2020 ................................ 556,715
1,250,000 Montgomery County, Higher Education Revenue, Pre-refunded,
6.875% due 11/15/2020 ................................ 1,388,775
3,000,000 Pennsylvania State Higher Education Revenue, Assistance
Agency, Student Loan, Residual Interest Bond, AMT,
(AMBAC Insured), 9.693% due 09/01/2026+ .............. 3,483,750
1,000,000 Philadelphia, Water and Sewer Revenue,
Pre-refunded, 7.500% due 08/01/2010 .................. 1,119,450
------------
13,638,232
------------
RHODE ISLAND - 0.8%
2,000,000 Rhode Island State Health and Education Building
Corporation Revenue, (Rhode Island Hospital), Residual
Interest Bond, (FGIC Insured), ETM,
10.120% due 08/15/2021+ .............................. 2,400,000
------------
TEXAS - 2.3%
415,000 Brazos, Higher Educational Facilities Authority, Series
C-2, AMT, 7.100% due 11/01/2004 ...................... 468,535
1,290,000 Crowley Texas Independent School District, GO, (FGIC
Insured), Zero coupon, due 08/01/2016 ................ 536,821
5,000,000 Dallas-Fort Worth International Airport, (Facility
Improvement Corporate Revenue), (American Airlines,
Inc.), AMT, 7.500% due 11/01/2025 .................... 5,353,750
529,000 Texas State, Higher Education Coordinating Board, Student
Loan, AMT, 7.700% due 10/01/2025 ..................... 566,400
500,000 West Side Calhoun County, Solid Waste Revenue Bond, (Union
Carbide Project), AMT, 8.200% due 03/15/2021 ......... 547,985
------------
7,473,491
------------
VERMONT - 0.1%
Vermont Housing Finance Agency, Single Family, Series 1,
AMT:
140,000 6.800% due 05/01/2025 ................................ 145,865
220,000 (FHA/VA Insured), 8.150% due 05/01/2025 .............. 231,900
------------
377,765
------------
WASHINGTON - 10.0%
4,500,000 King County Washington School District #415 Kent, GO,
Series C, 6.300% due 12/01/2008 ...................... 5,256,180
950,000 Port of Anacortes, Washington, Revenue,
Series A, 5.125% due 09/01/2009 ...................... 970,710
University of Washington Revenue Bond, (MBIA Insured):
3,400,000 Pre-refunded, 7.000% due 12/01/2021 .................. 3,794,297
785,000 Unrefunded, 7.000% due 12/01/2021 .................... 867,197
3,500,000 Washington Public Power Supply System Nuclear Project #2
Revenue, Series C, Pre-refunded,
7.625% due 07/01/2010 ................................ 3,855,600
7,570,000 Washington State, GO, Series B,
5.000% due 05/01/2017 ................................ 7,597,101
4,900,000 Washington State, GO, Series B & AT-7,
6.400% due 06/01/2017 ................................ 5,833,107
Washington State Health Care Facilities Authority, Fred
Hutchinson Cancer Center, LOC Morgan Guaranty Trust:
1,750,000 7.200% due 01/01/2007 ................................ 1,899,153
1,750,000 7.375% due 01/01/2018 ................................ 1,904,509
------------
31,977,854
------------
WEST VIRGINIA - 1.2%
2,500,000 Harrison County, Solid Waste Disposal, (Monongahela
Power), Series A, AMT, 6.875% due 04/15/2022 ......... 2,708,375
150,000 Kanawha County, IDR, (Union Carbide Project), Series A,
AMT, 8.000% due 08/01/2020 ........................... 160,493
750,000 South Charleston, IDR, (Union Carbide Project), Series A,
AMT, 8.000% due 08/01/2020 ........................... 800,753
------------
3,669,621
------------
WISCONSIN - 0.7%
1,000,000 Madison, IDR, (Madison Gas & Electric Company), (Project
A), AMT, 6.750% due 04/01/2027 ....................... 1,084,880
1,000,000 Wisconsin Health & Education Facility Authority, Refunding
Waukesha Memorial Hospital, Series A, (AMBAC Insured),
7.125% due 08/15/2007 ................................ 1,078,860
------------
2,163,740
------------
Total Municipal Bonds and Notes
(Cost $273,956,960) .................................... 308,072,363
------------
SHARES
------
INVESTMENT COMPANY SECURITY - 1.9%
(Cost $6,060,523)
6,060,523 Dreyfus Tax Exempt Cash Management Fund ................ 6,060,523
------------
TOTAL INVESTMENTS (Cost $280,017,483*) ......................... 98.6% 314,132,886
OTHER ASSETS AND LIABILITIES (Net) ............................. 1.4 4,376,416
----- ------------
NET ASSETS ..................................................... 100.0% $318,509,302
===== ============
- --------------
* Aggregate cost for federal tax purposes is $280,030,717.
+ Floating rate note. The interest rate shown reflects the rate currently in effect.
Tax-Exempt Bond Fund had the following industry concentrations greater than 10% at October
31, 1998 (as a percentage of net assets): (Unaudited)
General Purpose 16.1%
IDR/PCR 15.5%
Electric/Utility 12.9%
MBIA 17.3%
- ------------------------------------------------------------------------------------------
GLOSSARY OF TERMS
AMBAC -- American Municipal Bond Assurance Corporation
AMT -- Alternative Minimum Tax COP -- Certificates of Participation
ETM -- Escrowed to Maturity
FHA -- Federal Housing Authority
FGIC -- Federal Guaranty Insurance Corporation
FSA -- Financial Security Assurance
GO -- General Obligation Bonds
IDR -- Industrial Development Revenue
LOC -- Letter of Credit
MBIA -- Municipal Bond Investors Assurance
MFH -- Multi-family Housing
PCR -- Pollution Control Revenue
VA -- Veteran's Administration
- ------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements
<PAGE>
<TABLE>
PORTFOLIO of INVESTMENTS
BOND & STOCK FUND
OCTOBER 31, 1998
PRINCIPAL
AMOUNT VALUE
------ -----
<S> <C> <C>
FIXED INCOME SECURITIES - 29.9%
U.S. TREASURY AND AGENCY OBLIGATIONS - 13.7%
Federal National Mortgage Association:
$ 2,000,000 8.250% due 12/18/2000 ................................... $ 2,142,925
2,000,000 6.000% due 05/15/2008 ................................... 2,120,558
U.S. Treasury Bonds:
4,000,000 Zero coupon due 08/15/2012 .............................. 1,926,664
4,000,000 11.875% due 11/15/2003 .................................. 5,315,004
4,000,000 7.500% due 11/15/2016 ................................... 4,991,252
4,000,000 9.000% due 11/15/2018 ................................... 5,771,252
5,000,000 8.750% due 08/15/2020 ................................... 7,134,380
5,000,000 6.250% due 08/15/2023 ................................... 5,601,564
U.S. Treasury Notes:
5,000,000 5.875% due 11/30/2001 ................................... 5,218,754
5,000,000 6.375% due 08/15/2002 ................................... 5,342,189
5,000,000 6.500% due 10/15/2006 ................................... 5,604,689
------------
Total U.S. Treasury and Agency Obligations
(Cost $48,162,162) ...................................... 51,169,231
------------
MORTGAGE-BACKED SECURITIES - 6.4%
GOVERNMENT AGENCY - 4.8%
884,324 Federal National Mortgage Association,
8.000% due 12/01/2026 ................................... 915,276
Government National Mortgage Association:
388,311 10.000% due 08/15/2019 .................................. 428,280
8,481,597 6.500% due 01/15/2024 - 05/15/2026 ...................... 8,584,986
4,756,351 7.000% due 12/15/2025 - 03/15/2028 ...................... 4,873,302
909,761 6.000% due 01/15/2026 - 02/15/2026 ...................... 902,655
1,979,255 Government National Mortgage
Association - II ARM, 7.000% due 01/20/2023 ............. 2,008,591
------------
17,713,090
------------
GOVERNMENT AGENCY BACKED - 1.1%
743,974 Federal Home Loan Mortgage Corporation - CMO PAC-1(11)
1311H, 7.500% due 07/15/2020 ............................ 749,767
1,781,879 Federal Home Loan Mortgage Corporation - GNMA PAC-1(11) 2E,
6.850% due 07/25/2018 ................................... 1,790,896
1,502,442 Weyerhaeuser 1982-C FHA Putable,
7.430% due 06/01/2022 ................................... 1,606,929
------------
4,147,592
------------
COLLATERALIZED MORTGAGE OBLIGATIONS - 0.5%
1,250,000 DLJ Mortgage Acceptance Corporation,
1993-M17, 7.350% due 12/18/2003 ......................... 1,313,938
88,662 Merrill Lynch Mortgage Investors Inc.,
1998-P, 10.050% due 12/15/2008 .......................... 94,285
646,427 Resolution Trust Corporation, 1991-M2, A-2,
7.655% due 09/25/2020 ................................... 572,890
------------
1,981,113
------------
Total Mortgage-Backed Securities
(Cost $22,782,003) ...................................... 23,841,795
------------
CORPORATE BONDS AND NOTES - 9.8%
1,500,000 Aetna Services Inc.,
7.625% due 08/15/2026 ................................... 1,512,054
1,250,000 American Home Products Corporation, Deb.,
7.250% due 03/01/2023 ................................... 1,361,637
1,000,000 Bank of New York, Sub. Note,
7.875% due 11/15/2002 ................................... 1,092,713
1,000,000 CBS Corporation,
7.875% due 09/01/2023 ................................... 1,024,301
2,500,000 Citicorp, Sub. Notes,
7.200% due 06/15/2007 ................................... 2,672,380
1,000,000 Coastal Corporation, Note,
9.625% due 05/15/2012 ................................... 1,274,102
Conagra Inc., Sr. Note:
750,000 9.750% due 03/01/2021 ................................... 970,885
1,000,000 6.700% due 08/01/2027 ................................... 1,061,229
1,000,000 Continental Corporation, 7.250% due 03/01/2003 ............ 1,053,715
1,000,000 Dart & Kraft Finance NV, 7.750% due 11/30/1998 ............ 1,001,864
500,000 Developers Diversified Reality, MTN, Sr. Note,
6.580% due 02/06/2001 ................................... 497,166
Franchise Finance Corporation, Sr. Note:
1,000,000 7.000% due 11/30/2000 ................................... 999,857
1,000,000 7.875% due 11/30/2005 ................................... 986,375
1,250,000 Golden State Bancorp, Sub. Deb., 10.000% due 10/01/2006 ... 1,455,645
2,000,000 Loral Corporation, Deb., 7.625% due 06/15/2025 ............ 2,188,560
1,000,000 Medpartners, Inc., Sr. Note, 7.375% due 10/01/2006 ........ 805,000
1,000,000 Mercantile Bank, Sub. Note, 7.625% due 10/15/2002 ......... 1,077,240
2,500,000 Merrill Lynch & Company Inc., Note, 6.375% due 10/15/2008 . 2,527,903
Niagara Mohawk Power, Deb.:
1,100,000 9.500% due 06/01/2000 ................................... 1,163,593
973,000 8.770% due 10/01/2018 ................................... 1,038,453
2,000,000 Pacific Health Systems, Sr. Note, 7.000% due 09/15/2003 ... 2,126,838
1,000,000 Price/Costco, Inc., Sr. Note, 7.125% due 06/15/2005 ....... 1,079,220
1,750,000 Raytheon Company, First Mortgage, Deb.,
7.200% due 08/15/2027 ................................... 1,859,989
1,500,000 Superior Financial Acquisition Corporation, Sr. Note,
8.650% due 04/01/2003 ................................... 1,544,934
500,000 Summit Bancorp, Sub. Note, 8.625% due 12/10/2002 .......... 557,304
1,000,000 Tenet Healthcare, Sr. Note, 7.875% due 01/15/2003 ......... 1,014,551
2,000,000 Time Warner Inc., Deb., 9.150% due 02/01/2023 ............. 2,528,770
------------
Total Corporate Bonds and Notes (Cost $34,831,282) ........ 36,476,278
------------
Total Fixed Income Securities (Cost $105,775,447) ......... 111,487,304
------------
SHARES
------
COMMON STOCKS - 61.1%
CONSUMER STAPLES - 7.4%
80,309 Alberto-Culver Company, Class A ........................... 1,937,455
112,300 Libbey, Inc. .............................................. 3,481,300
110,000 PepsiCo, Inc. ............................................. 3,712,500
110,000 Phillip Morris Companies, Inc. ............................ 5,623,750
126,000 Ralston Purina Company .................................... 4,205,250
40,000 Sara Lee Corporation ...................................... 2,387,500
221,900 Supervalu, Inc. ........................................... 5,325,600
30,000 UST, Inc. ................................................. 1,020,000
------------
27,693,355
------------
HEALTH CARE PRODUCTS - 5.4%
92,000 Abbott Laboratories ....................................... 4,318,250
75,000 Baxter International, Inc. ................................ 4,495,312
80,000 Becton Dickinson & Company ................................ 3,370,000
169,400 DENTSPLY International Inc. ............................... 4,362,050
45,000 Johnson & Johnson ......................................... 3,667,500
------------
20,213,112
------------
BANKS/SAVINGS & LOANS - 5.0%
100,000 Chase Manhattan Corporation ............................... 5,681,250
77,500 Citigroup Inc. ............................................ 3,647,344
59,701 First State Bancorporation ................................ 1,164,170
67,500 Mellon Bank Corporation ................................... 4,058,437
11,000 Wells Fargo & Company ..................................... 4,070,000
------------
18,621,201
------------
REAL ESTATE INVESTMENT TRUSTS - 4.7%
75,000 Arden Realty, Inc. ........................................ 1,621,875
92,000 CCA Prison Realty Trust ................................... 2,162,000
63,000 Essex Property Trust, Inc. ................................ 1,976,625
80,400 Franchise Finance Corporation of America .................. 1,999,950
62,500 Health Care Property Investors, Inc. ...................... 2,101,562
96,000 New Plan Excel Realty Trust ............................... 2,184,000
141,500 Patriot American Hospitality, Inc. ........................ 1,255,812
75,000 Shurgard Storage Centers, Inc. ............................ 2,020,313
145,000 Taubman Centers, Inc. ..................................... 1,984,688
------------
17,306,825
------------
COMPUTER SYSTEMS - 4.1%
200,000 Cabletron Systems, Inc.+ .................................. 2,275,000
166,000 Diebold, Inc. ............................................. 5,177,125
80,000 Hewlett-Packard Company ................................... 4,815,000
55,000 Sun Microsystems, Inc.+ ................................... 3,203,750
------------
15,470,875
------------
HEALTH CARE SERVICES - 3.4%
55,000 Aetna, Inc. ............................................... 4,104,375
215,000 Columbia/HCA Healthcare Corporation ....................... 4,515,000
150,000 HEALTHSOUTH Corporation+ .................................. 1,818,750
29,000 PacifiCare Health Systems, Inc., Class B .................. 2,283,746
------------
12,721,871
------------
COMPUTER SOFTWARE - 3.6%
112,800 Adobe Systems, Inc. ....................................... 4,187,700
140,000 Autodesk, Inc. ............................................ 4,366,250
125,300 Computer Associates International, Inc. ................... 4,933,687
------------
13,487,637
------------
UTILITIES/TELECOMMUNICATIONS - 3.5%
79,900 Alltel Corporation ........................................ 3,740,319
65,000 Sprint Coporation ......................................... 4,988,750
90,000 SBC Communications, Inc. ................................. 4,168,125
------------
12,897,194
------------
FINANCIAL SERVICES - 3.3%
48,000 Federal National Mortgage Association ..................... 3,399,000
65,000 Merrill Lynch & Company, Inc. ............................. 3,851,250
140,000 Price (T. Rowe) Associates, Inc. .......................... 4,978,750
------------
12,229,000
------------
INSURANCE - 3.2%
24,500 American International Group, Inc. ........................ 2,088,625
119,145 Conseco, Inc. ............................................. 4,132,842
15,000 General Re Corporation .................................... 3,295,312
60,000 MGIC Investment Corporation ............................... 2,340,000
115,915 Penncorp Financial Group .................................. 195,606
------------
12,052,385
------------
CAPITAL GOODS - 2.8%
116,250 Crane Company ............................................. 3,349,453
83,500 Sundstrand Corporation .................................... 3,919,281
32,500 Xerox Corporation ......................................... 3,148,438
------------
10,417,172
------------
RETAIL SALES - 2.7%
110,000 Dillards, Inc., Class A ................................... 3,416,875
58,509 Federated Department Stores, Inc.+ ........................ 2,248,940
170,200 Limited, Inc. ............................................. 4,361,375
------------
10,027,190
------------
BASIC INDUSTRY - 2.5%
126,000 Fort James Corporation .................................... 5,079,375
146,400 Sonoco Products Company ................................... 4,154,100
------------
9,233,475
------------
ELECTRICAL EQUIPMENT - 1.9%
96,384 AMP, Inc. ................................................. 3,957,768
188,750 Tektronix, Inc. ........................................... 3,373,906
------------
7,331,674
------------
OIL & GAS - 1.9%
71,100 Ashland, Inc. ............................................. 3,421,687
128,000 YPF S.A., Sponsored ADR ................................... 3,704,000
------------
7,125,687
------------
MEDIA - 1.6%
45,000 Seagram Company, Ltd. ..................................... 1,479,375
71,000 Viacom, Inc., Class A+ .................................... 4,215,625
------------
5,695,000
------------
AEROSPACE/DEFENSE - 1.3%
85,700 Raytheon Company, Class B ................................. 4,975,956
------------
CONSUMER CYCLICALS - 1.3%
108,000 Carnival Corporation ...................................... 3,496,500
30,000 Nike, Inc., Class B ....................................... 1,310,625
------------
4,807,125
------------
CONSUMER DURABLES - 1.2%
122,200 Mattel, Inc. .............................................. 4,383,925
------------
Total Common Stocks
(Cost $193,924,046) ..................................... 226,690,659
------------
CONVERTIBLE PREFERRED STOCKS - 5.9%
115,000 Cendant Corporation, Series CD, Conv. Pfd.,
1.300% due 02/16/2001 ................................... 2,249,687
47,050 Estee Lauder Companies Inc., Conv. Pfd., $3.80 2,999,437
45,000 Loral Space & Communications, Ltd.,
Series C, Conv. Pfd., 6.000% due 11/01/2006++ ........... 2,373,750
175,000 MedPartners, Inc., TAPS, Conv. Pfd., 6.500% due 08/31/2000 1,225,000
62,500 Owens-Illinois Inc., Conv. Pfd., 4.750% due 12/31/2049 .... 2,507,812
55,000 Qualcomm Financial Trust, Conv. Pfd.,
5.750% due 03/01/2012++ ................................. 2,481,875
46,000 Sinclair Broadcasting Group, Inc., Conv. Pfd. ............. 1,828,500
16,100 TCI Pacific Communications, Inc., Conv. Pfd.,
5.00% due 07/31/2006 .................................... 3,542,000
60,000 Tosco Financial Trust, Conv. Pfd., 5.750% due 12/15/2006++ 2,955,000
------------
Total Convertible Preferred Stocks (Cost $21,389,144) ..... 22,163,061
------------
PRINCIPAL
AMOUNT
------
CONVERTIBLE BONDS - 1.7%
$ 1,080,000 CII Financial, 7.500% due 09/15/2001 ...................... 1,048,950
2,000,000 Corporate Express, Inc., 4.500% due 07/01/2000 ............ 1,775,000
2,700,000 Healthsouth Company, 3.250% due 04/01/2003 ................ 2,220,750
1,750,000 Rockefeller Center Properties Trust,
Zero coupon due 12/31/2000 .............................. 1,321,250
------------
Total Convertible Bonds (Cost $6,952,150) ................. 6,365,950
------------
REPURCHASE AGREEMENT - 0.1%
(Cost $423,000)
423,000 Agreement with Credit Suisse First Boston Corporation,
5.300% dated 10/31/1998, to be repurchased at $423,187 on
11/02/1998, collateralized by $431,460 U.S. Treasury
Note, 5.875% due 01/31/1999 (value $431,851) .............. 423,000
------------
TOTAL INVESTMENTS (Cost $328,463,787*).......................... 98.4% 367,129,974
OTHER ASSETS AND LIABILITES (Net) .............................. 1.6 6,098,465
----- ------------
NET ASSETS ..................................................... 100.0% $373,228,439
===== ============
- --------------
* Aggregate cost for federal tax purposes is $330,009,655.
+ Non-income producing security.
++ Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration, normally qualified institutional buyers.
- ------------------------------------------------------------------------------------------
GLOSSARY OF TERMS
ADR -- American Depositary Receipt
ARM -- Adjustable Rate Mortgage
FHA -- Federal Housing Authority
MTN -- Medium Term Note
TAPS -- Treshold Appreciation Price Securities
- ------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements
<PAGE>
<TABLE>
PORTFOLIO of INVESTMENTS
GROWTH & INCOME FUND
OCTOBER 31, 1998
SHARES VALUE
------ -----
COMMON STOCKS - 97.0%
CONSUMER STAPLES - 10.5%
<S> <C> <C>
84,980 Alberto-Culver Company, Class A ........................... $ 2,050,142
142,300 Anheuser-Busch Companies, Inc. ............................ 8,457,956
153,100 Campbell Soup Company ..................................... 8,162,143
84,000 Gillette Company .......................................... 3,774,750
97,900 Kimberly-Clark Corporation ................................ 4,723,675
481,600 Kimberly-Clark de Mexico, ADR ............................. 7,051,315
269,700 Libbey, Inc. .............................................. 8,360,700
227,000 PepsiCo, Inc. ............................................. 7,661,250
103,000 Philip Morris Companies, Inc. ............................. 5,265,875
82,000 Procter & Gamble Company .................................. 7,287,750
280,700 Ralston-Ralston Purina Company ............................ 9,368,362
110,500 Sara Lee Corporation ...................................... 6,595,469
93,000 Unilever NV ............................................... 6,998,250
------------
85,757,637
------------
HEALTH CARE PRODUCTS - 10.0%
224,200 Abbott Laboratories ....................................... 10,523,387
87,000 ALZA Corporation+ ......................................... 4,165,125
135,500 American Home Products Corporation ........................ 6,605,625
88,000 Bristol-Myers Squibb Company .............................. 9,729,500
101,000 DENTSPLY International Inc. ............................... 2,600,750
157,100 Johnson & Johnson ......................................... 12,803,650
103,000 Merck & Company, Inc. ..................................... 13,930,750
102,200 Perkin Elmer Corporation .................................. 8,616,738
35,000 Pfizer, Inc.+ ............................................. 3,777,813
117,500 Warner Lambert Company .................................... 9,209,063
------------
81,962,401
------------
COMPUTER SOFTWARE/SERVICES - 7.9%
246,400 Adobe Systems, Inc. ....................................... 9,147,600
469,250 Barra, Inc. ............................................... 12,376,469
259,700 Computer Associates International, Inc. ................... 10,225,688
267,000 First Data Corporation .................................... 7,075,500
169,000 Microsoft Corporation+ .................................... 17,892,875
272,000 Oracle Corporation ........................................ 8,041,000
------------
64,759,132
------------
BANKS/SAVING & LOANS - 7.0%
31,000 BankAmerica Corporation ................................... 1,780,563
134,600 Bank of New York Company, Inc. ............................ 4,248,313
260,499 Citigroup, Inc. ........................................... 12,259,734
41,000 Chase Manhattan Corporation ............................... 2,329,313
220,000 First Union Corporation ................................... 12,760,000
54,000 Mellon Bank Corporation ................................... 3,246,750
164,924 Norwest Corporation ....................................... 6,133,111
248,000 Prime Bancshares, Inc. .................................... 4,278,000
27,325 Wells Fargo & Company ..................................... 10,110,250
------------
57,146,034
------------
CAPITAL GOODS - 6.9%
137,700 AlliedSignal, Inc. ........................................ 5,361,694
78,800 Caterpillar, Inc. ......................................... 3,546,000
91,000 Cooper Industries, Inc. ................................... 4,015,375
126,675 Crane Company ............................................. 3,649,823
388,448 Donaldson Company, Inc. ................................... 7,064,898
153,000 International Game Technology ............................. 3,452,063
162,002 Tyco International, Ltd. .................................. 10,033,999
422,400 Waste Management, Inc. .................................... 19,060,800
------------
56,184,652
------------
FINANCIAL SERVICES - 6.6%
63,900 AMBAC, Inc. ............................................... 3,718,181
16,300 Capital One Financial Corporation ......................... 1,658,525
208,000 Federal Home Loan Mortgage Corporation .................... 11,960,000
142,400 Federal National Mortgage Association ..................... 10,083,700
40,000 Franklin Resources, Inc. .................................. 1,512,500
226,250 Liberty Financial Companies ............................... 5,684,531
10,500 Legg Mason, Inc. .......................................... 278,906
110,400 Marsh & McLennan Companies, Inc. .......................... 6,127,200
49,400 Merrill Lynch & Company, Inc. ............................. 2,926,950
113,500 Price (T. Rowe) Associates, Inc. .......................... 4,036,344
76,300 Providian Financial Corporation ........................... 6,056,313
------------
54,043,150
------------
UTILITIES/TELECOMMUNICATIONS - 6.4%
150,900 Comcast Corporation, Special Class A ...................... 7,450,688
210,000 MCI Worldcom, Inc.+ ....................................... 11,602,500
138,480 Northern Telecom, Ltd. .................................... 5,928,675
149,000 SBC Communications, Inc. .................................. 6,900,562
263,500 Sprint Corporation ........................................ 20,223,625
------------
52,106,050
------------
OIL & GAS - 5.9%
58,000 British Petroleum, ADR .................................... 5,129,375
227,900 Enron Corporation ......................................... 12,021,725
105,560 Exxon Corporation ......................................... 7,521,150
52,400 Mobil Corporation ......................................... 3,966,025
151,600 Royal Dutch Petroleum ..................................... 7,466,300
425,200 Tosco Corporation ......................................... 11,932,175
------------
48,036,750
------------
COMPUTER SYSTEMS - 4.8%
341,100 Cabletron Systems, Inc.+ .................................. 3,880,012
126,375 Cisco Systems, Inc.+ ...................................... 7,961,625
111,000 Compaq Computer Corporation ............................... 3,510,375
175,500 EMC Corporation+ .......................................... 11,297,813
60,000 Hewlett-Packard Company ................................... 3,611,250
59,600 International Business Machines Corporation ............... 8,846,875
------------
39,107,950
------------
MEDIA - 3.7%
69,500 Seagram Company, Ltd. ..................................... 2,284,813
800,602 Tele-Communications TCI Ventures Group .................... 14,911,212
159,575 Viacom, Inc., Class A+ .................................... 9,474,766
130,100 Walt Disney Company ....................................... 3,504,569
------------
30,175,360
------------
HEALTH CARE SERVICES - 3.2%
33,750 Columbia/HCA Healthcare Corporation ....................... 708,750
321,500 Humana, Inc.+ ............................................. 6,088,406
103,000 IMS Health, Inc. .......................................... 6,849,500
477,500 MedPartners, Inc. ......................................... 1,701,094
130,733 PacifiCare Health Systems, Inc., Class A .................. 9,494,484
30,000 United Healthcare Corporation ............................. 1,306,875
------------
26,149,109
------------
CONSUMER DURABLES - 3.1%
54,625 Mattel, Inc. .............................................. 1,959,672
199,400 Sony Corporation, ADR ..................................... 13,135,475
605,400 U.S. Industries, Inc. ..................................... 9,875,588
------------
24,970,735
------------
ELECTRICAL EQUIPMENT - 2.4%
95,000 Emerson Electric Company .................................. 6,270,000
157,900 General Electric Company .................................. 13,816,250
------------
20,086,250
------------
ELECTRONICS/SEMICONDUCTORS - 2.4%
564,625 General Semiconductor, Inc.+ .............................. 4,481,711
172,800 Intel Corporation ......................................... 15,411,600
------------
19,893,311
------------
BASIC INDUSTRY - 2.4%
113,900 Albemarle Corporation ..................................... 2,171,219
292,700 Allegheny Teledyne, Inc. .................................. 6,018,644
94,166 Commscope, Inc.+ .......................................... 1,312,439
40,300 du Pont (E.I.) de Nemours & Company ....................... 2,317,250
24,900 Nucor Corporation ......................................... 1,128,281
79,800 Sealed Air Corporation+ ................................... 2,827,913
48,000 Sigma-Aldrich Corporation+ ................................ 1,483,500
48,000 Weyerhaeuser Company ...................................... 2,247,000
------------
19,506,246
------------
AEROSPACE/DEFENSE - 2.3%
153,900 Boeing Company ............................................ 5,771,250
51,819 Lockheed Martin Corporation ............................... 5,771,341
87,000 Northrop Grumman Corporation .............................. 6,938,250
------------
18,480,841
------------
REAL ESTATE INVESTMENT TRUSTS - 2.2%
222,200 Corrections Corporation of American ....................... 4,277,350
123,200 Equity Office Properties Trust ............................ 2,956,800
153,700 Health Care Property Investors, Inc. ...................... 5,168,163
183,350 Starwood Hotel & Resort ................................... 5,191,097
------------
17,593,410
------------
BUSINESS SERVICES - 2.1%
257,733 AC Nielson Corporation .................................... 6,894,358
257,829 Cendant Corporation ....................................... 2,948,919
251,800 Dun & Bradstreet Corporation .............................. 7,144,825
36,960 R.H. Donnelley Corporation ................................ 517,440
------------
17,505,542
------------
RETAIL SALES - 2.1%
34,000 Dayton Hudson Corporation ................................. 1,440,750
84,600 Federated Department Stores, Inc.+ ........................ 3,251,813
25,900 Home Depot, Inc. .......................................... 1,126,650
317,500 Intimate Brands, Inc. ..................................... 7,104,062
66,000 Wal-Mart Stores, Inc. ..................................... 4,554,000
------------
17,477,275
------------
INSURANCE - 1.9%
89,397 American International Group, Inc. ........................ 7,621,094
237,154 Conseco, Inc. ............................................. 8,226,279
------------
15,847,373
------------
TRANSPORTATION - 1.9%
49,200 Airborne Freight Corporation .............................. 1,153,125
215,000 Expeditors International of Washington, Inc. .............. 7,283,125
824,350 Miller Industries, Inc. ................................... 4,327,838
58,100 Union Pacific Corporation ................................. 2,767,013
------------
15,531,101
------------
LODGING & RESTAURANTS - 1.2%
656,715 Choice Hotels International, Inc.+ ........................ 8,167,891
400,205 Sunburst Hospitality Corporation .......................... 1,550,794
------------
9,718,685
------------
AUTOMOTIVE - 0.1%
6,300 Honda Motor Company Ltd., Sponsored ADR 386,663
------------
Total Common Stocks (Cost $654,943,853) ................... 792,425,657
------------
PREFERRED STOCKS - 2.6%
109,300 Cendant Corporation, Conv. Pfd., 7.500% due 02/16/2001 .... 2,712,003
80,000 Loral Space & Communications, Ltd., Series C, Conv. Pfd.,
6.000% due 11/01/2006++ ................................. 4,220,000
877,800 MedPartners, Inc., Conv. Pfd., 6.500% due 08/31/2000 ...... 6,144,600
95,000 Nextlink Communications Corporation, Conv. Pfd.,
6.500% due 03/31/2010++ ................................. 3,515,000
110,000 Union Pacific Capital Trust Corporation, Conv. Pfd.,
6.250% due 04/01/2028++ ................................. 5,060,000
------------
Total Preferred Stocks (Cost $26,733,437) ................. 21,651,603
------------
PRINCIPAL
AMOUNT
------
CONVERTIBLE NOTE - 0.5%
(Cost $2,914,914)
$ 2,662,000 Berkshire Hathaway Company, Conv. Sr. Note,
1.000% due 12/02/2001 ................................. 3,780,040
------------
TOTAL INVESTMENTS (Cost $684,592,204*) ......................... 100.1 % 817,857,300
OTHER ASSETS AND LIABILITIES (Net) ............................. (0.1) (906,105)
----- ------------
NET ASSETS ..................................................... 100.0 % $816,951,195
===== ============
- --------------
* Aggregate cost for federal tax purposes $687,720,085.
+ Non-income producing security.
++ Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration, normally qualified institutional buyers.
- ------------------------------------------------------------------------------------------
GLOSSARY OF TERMS
ADR -- American Depositary Receipt
- ------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements
<PAGE>
<TABLE>
PORTFOLIO of INVESTMENTS
GROWTH FUND
OCTOBER 31, 1998
<CAPTION>
SHARES VALUE
------ -----
COMMON STOCKS - 90.6%
HEALTH CARE PRODUCTS - 18.3%
<S> <C> <C>
151,135 ALZA Corporation+ ........................................ $ 7,235,588
121,935 Centocor, Inc.+ .......................................... 5,426,107
65,135 Eli Lilly and Company+ ................................... 5,271,864
56,604 Omnicare, Inc. ........................................... 1,956,376
80,620 Pfizer, Inc.+ ............................................ 8,651,534
61,755 Pharmacy & Upjohn Inc.+ .................................. 3,269,155
53,825 Sofamor Danek Group, Inc.+ ............................... 5,469,966
167,165 Warner Lambert Company ................................... 13,101,557
------------
50,382,147
------------
UTILITIES/TELECOMMUNICATIONS - 18.2%
61,670 At Home Corporation+ ..................................... 2,728,897
296,740 Comcast Corporation, Class A ............................. 14,651,537
70,825 Cox Communications, Inc., Class A+ ....................... 3,886,522
258,070 MediaOne Group Inc.+ ..................................... 10,919,587
312,380 Tele-Communications, Inc., Class A+ ...................... 13,159,008
362,722 Telecom Italia SPA ....................................... 2,621,927
99,875 Western Wireless Corporation+ ............................ 2,022,469
------------
49,989,947
------------
MEDIA - 12.5%
9,330 Capstar Broadcasting Corporation+ ........................ 162,109
71,870 Chancellor Media Corporation+ ............................ 2,758,011
107,729 Outdoor Systems, Inc.+ ................................... 2,376,771
80,570 Penton Media, Inc. ....................................... 1,208,550
550,582 Tele-Communications TCI Ventures Group+ .................. 10,254,590
170,780 Time Warner, Inc. ........................................ 15,850,519
129,900 United International Holdings, Inc.+ ..................... 1,688,700
------------
34,299,250
------------
COMPUTER SOFTWARE/SERVICES - 10.7%
14,730 Amazon.com, Inc.+ ........................................ 1,862,424
64,055 America Online, Inc.+ .................................... 8,138,988
53,020 Intuit, Inc.+ ............................................ 2,677,510
80,560 IMS Health, Inc. ......................................... 5,357,240
84,330 Microsoft Corporation+ ................................... 8,928,438
48 Structural Dynamics Research Corporation+ ................ 690
54,780 Technology Solutions Company ............................. 657,360
43,587 Wind River Systems, Inc.+ ................................ 1,909,655
------------
29,532,305
------------
COMPUTER SYSTEMS - 6.3%
175,958 Cisco Systems, Inc.+ ..................................... 11,085,322
39,060 Dell Computer Corporation+ ............................... 2,563,312
40,340 General Instrument Corporation+ .......................... 1,036,234
70,670 Tele-Comm Liberty Media Group, Class A+ .................. 2,689,877
------------
17,374,745
------------
ELECTRONICS/SEMICONDUCTORS - 6.3%
71,865 Maxim Integrated Products, Inc.+ ......................... 2,564,682
129,445 Nokia Corporation, Class A, Sponsored ADR ................ 12,046,475
85,250 Vitesse Semiconductor Corporation+ ....................... 2,749,313
------------
17,360,470
------------
CAPITAL GOODS - 4.8%
28,090 Federal-Mogul Corporation ................................ 1,522,127
140,620 Monsanto Company ......................................... 5,712,688
98,324 Tyco International, Ltd. ................................. 6,089,970
------------
13,324,785
------------
BANKS/SAVINGS & LOANS - 4.8%
12,690 Ambanc Holding Company, Inc. ............................. 196,695
179,665 Bank of New York Company, Inc. ........................... 5,670,677
26,005 Firststar Corporation .................................... 1,475,784
30,385 Newcourt Credit Corporation .............................. 998,907
33,220 Star Banc Corporation .................................... 2,512,263
66,255 U.S. Bancorp ............................................. 2,418,308
------------
13,272,634
------------
BUSINESS SERVICES - 2.7%
36,910 Apollo Group, Inc.+ ...................................... 1,185,734
7,765 Global Crossing Ltd. ..................................... 223,244
60,825 Lamar Advertising Company+ ............................... 1,898,880
92,275 Sapient Corporation+ ..................................... 4,158,142
------------
7,466,000
------------
TECHNOLOGY - 1.9%
43,730 Orbital Sciences Corporation+ ............................ 1,443,090
162,290 Pittway Corporation, Class A ............................. 3,722,527
------------
5,165,617
------------
OIL & GAS - 1.5%
1,731,236 Ocean Rig ASA+ ........................................... 775,917
88,470 Transocean Offshore Inc. ................................. 3,267,861
------------
4,043,778
------------
CONSUMER STAPLES - 0.9%
186,918 Raisio Group Plc ......................................... 2,511,780
------------
RETAIL SALES - 0.9%
41,030 Costco Companies, Inc.+ .................................. 2,328,452
------------
FINANCIAL SERVICES - 0.4%
32,810 Household International, Inc. ............................ 1,199,616
------------
INSURANCE - 0.4%
24,935 UNUM Corporation ......................................... 1,108,049
------------
Total Common Stocks (Cost $192,237,887) .................. 249,359,575
------------
COMMERCIAL PAPER - 4.0%
(Cost $11,223,564)
11,000,000 Household Finance Corporation, 5.720% due 11/02/1998++ ... 10,998,252
------------
CORPORATE BOND - 0.7%
(Cost $1,965,810)
3,323,000 Amazon.com, Inc., Step coupon, Sr. Disc. Note, Zero coupon
to 05/01/2003;
10.000% due 05/01/2008 .................................. 1,827,650
U.S. GOVERNMENT AGENCY DISCOUNT NOTES - 4.6%
Federal Home Loan Mortgage Corporation (FHLMC):
10,000,000 4.860% due 01/22/1999++ .................................. 9,889,300
2,900,000 5.400% due 11/02/1998++ .................................. 2,899,565
------------
Total U.S. Government Agency Discount Notes
(Cost $12,788,865) ..................................... 12,788,865
------------
TOTAL INVESTMENTS (Cost $218,216,126*) 99.9% 274,974,342
OTHER ASSETS AND LIABILITIES (Net) ........................ 0.1 175,875
----- ------------
NET ASSETS ................................................ 100.0% $275,150,217
===== ============
- --------------
* Aggregate cost for federal tax purposes is $218,520,789.
+ Non-income producing security.
++ Rate represents annualized yield at date of purchase
</TABLE>
SCHEDULE OF FOREIGN CURRENCY CONTRACTS
U.S. FORWARD FOREIGN CURRENCY CONTRACTS TO BUY
CONTRACTS TO RECEIVE
---------------------------------------------- NET
IN UNREALIZED
EXPIRATION LOCAL VALUE IN EXCHANGE APPRECIATION
DATE CURRENCY U.S. $ FOR U.S. $ OF CONTRACTS
- -------------- ------------------ ----------- ------------- --------------
11/12/1998 FIM 14,000,000 2,780,389 2,701,248 $ 79,141
11/12/1998 ITL 2,670,000,000 1,628,729 1,554,523 74,206
11/04/1998 FIM 7,500,000 1,489,494 1,369,663 119,831
---------
$ 273,178
---------
U.S. FORWARD FOREIGN CURRENCY CONTRACTS TO SELL
CONTRACTS TO DELIVER NET
---------------------------------------------- UNREALIZED
IN APPRECIATION/
EXPIRATION LOCAL VALUE IN EXCHANGE (DEPRECIATION)
DATE CURRENCY U.S. $ FOR U.S. $ OF CONTRACTS
- -------------- ------------------ ----------- ------------- --------------
11/04/1998 FIM 10,500,000 2,085,291 2,017,698 $ (67,593)
11/06/1998 FIM 6,000,000 1,191,243 1,162,587 (28,656)
11/12/1998 FIM 45,000,000 8,936,963 8,499,638 (437,325)
01/26/1999 ITL 680,000,000 415,767 424,019 8,252
11/12/1998 ITL 4,820,000,000 2,940,252 2,734,736 (205,516)
---------
$(730,838)
---------
Net Unrealized Depreciation of Forward Foreign
Currency Contracts ......................................... $(457,660)
=========
- --------------------------------------------------------------------------------
GLOSSARY OF TERMS
ADR -- American Depositary Receipt
FIM -- Finnish Markka
ITL -- Italian Lira
- --------------------------------------------------------------------------------
See Notes to Financial Statements
<PAGE>
<TABLE>
PORTFOLIO of INVESTMENTS
NORTHWEST FUND
OCTOBER 31, 1998
<CAPTION>
SHARES VALUE
------ -----
<S> <C> <C>
COMMON STOCKS - 99.3%
COMPUTER SOFTWARE - 13.7%
132,415 Adobe Systems, Inc. ....................................... $ 4,915,907
668,790 Mentor Graphics Corporation+ .............................. 5,392,119
154,675 Microsoft Corporation+ .................................... 16,376,215
243,900 Orcad, Inc.+ .............................................. 1,966,444
250,465 Visio Corporation+ ........................................ 6,668,630
299,655 Wall Data, Inc.+ .......................................... 4,457,368
------------
39,776,683
------------
HEALTH CARE PRODUCTS - 11.0%
556,200 Corixa Corporation+ ....................................... 2,989,575
427,250 Icos Corporation+ ......................................... 7,904,125
103,300 Immunex Corporation+ ...................................... 7,134,156
511,800 NeoRx Corporation+ ........................................ 767,700
263,070 PathoGenesis Corporation+ ................................. 10,522,800
358,283 SonoSight, Inc.+ .......................................... 2,463,196
------------
31,781,552
------------
ELECTRONICS/SEMICONDUCTORS - 10.0%
130,070 Credence Systems Corporation+ ............................. 1,934,791
435,500 FEI Company+ .............................................. 3,538,437
57,245 Intel Corporation ......................................... 5,105,538
136,470 Lattice Semiconductor Corporation+ ........................ 4,639,980
258,645 Micron Technology, Inc.+ .................................. 9,828,510
209,750 TriQuint Semiconductor, Inc.+ ............................. 4,037,687
------------
29,084,943
------------
BANKS/SAVINGS & LOANS - 8.0%
180,180 First Savings Bank of Washington
Bancorp, Inc. ........................................... 3,963,960
27,947 Horizon Financial Corporation ............................. 391,258
104,850 Interwest Bancorp, Inc. ................................... 2,785,078
93,600 KeyCorp ................................................... 2,837,250
159,300 Sterling Financial Corporation+ ........................... 2,608,538
161,168 US Bancorp ................................................ 5,882,632
176,206 Washington Federal, Inc. .................................. 4,702,498
------------
23,171,214
------------
ELECTRICAL EQUIPMENT - 6.7%
239,925 Electro Scientific Industries, Inc.+ ...................... 6,028,115
156,800 Flir Systems, Inc.+ ....................................... 2,646,000
605,410 Tektronix, Inc. ........................................... 10,821,704
------------
19,495,819
------------
BASIC INDUSTRY - 6.5%
45,633 Boise Cascade Corporation ................................. 1,277,724
361,470 Oregon Steel Mills, Inc. .................................. 4,428,007
335,540 Schnitzer Steel Industries Inc., Class A .................. 5,200,870
89,800 Weyerhaeuser Company ...................................... 4,203,763
121,600 Willamette Industries, Inc. ............................... 3,769,600
------------
18,879,964
------------
CONSUMER STAPLES - 6.2%
168,800 Albertson's, Inc. ......................................... 9,378,950
161,987 Fred Meyer Inc., Class A+ ................................. 8,635,932
------------
18,014,882
------------
COMPUTER SYSTEMS - 5.7%
769,130 In Focus Systems, Inc.+ ................................... 4,807,062
352,450 Radisys Corporation+ ...................................... 6,784,662
512,490 Sequent Computer Systems, Inc.+ ........................... 5,060,839
------------
16,652,563
------------
TRANSPORTATION - 5.1%
193,150 Airborne Freight Corporation .............................. 4,526,953
113,860 Alaska Air Group, Inc.+ ................................... 4,091,844
180,100 Expeditors International of Washington, Inc. .............. 6,100,887
------------
14,719,684
------------
RETAIL SALES - 3.8%
132,470 Costco Companies, Inc.+ ................................... 7,517,672
700,800 Multiple Zones International, Inc.+ ....................... 2,715,600
29,400 Nordstrom, Inc. ........................................... 802,988
------------
11,036,260
------------
AEROSPACE & DEFENSE - 3.4%
182,064 Boeing Company ............................................ 6,827,400
66,075 Precision Castparts Corporation ........................... 2,907,300
------------
9,734,700
------------
CONSUMER CYCLICALS - 3.2%
358,200 Building Materials Holding Corporation+ ................... 3,984,975
216,570 K2, Inc. .................................................. 2,382,270
67,100 Nike, Inc. Class B ........................................ 2,931,431
------------
9,298,676
------------
UTILITIES/TELECOMMUNICATIONS - 3.1%
202,200 General Communication, Inc.+ .............................. 606,600
28,250 GST Telecommunications, Inc.+ ............................. 195,984
540,695 Metro One Telecommunications, Inc.+ ....................... 4,866,255
163,700 Western Wireless Corporation, Class A+ .................... 3,314,926
------------
8,983,765
------------
LODGING & RESTAURANTS - 2.9%
309,485 Cavanaugh's Hospitality Corporation+ ...................... 3,617,106
112,420 Starbucks Corporation+ .................................... 4,876,218
------------
8,493,324
------------
REAL ESTATE INVESTMENT TRUSTS - 2.3%
206,215 Pacific Gulf Properties, Inc. ............................. 4,085,635
95,980 Shurgard Storage Centers, Inc., Class A ................... 2,585,461
------------
6,671,096
------------
CAPITAL GOODS - 1.9%
183,300 Greenbrier Companies, Inc. ................................ 2,886,975
62,320 PACCAR, Inc. .............................................. 2,718,710
------------
5,605,685
------------
INSURANCE - 1.9%
124,800 Safeco Corporation ........................................ 5,405,403
------------
HEALTH CARE SERVICES - 1.7%
165,260 Foundation Health Systems, Inc., Class A+ ................. 1,941,805
36,500 PacifiCare Health Systems, Inc., Class B+ ................. 2,874,375
------------
4,816,180
------------
CONSUMER DURABLES - 1.5%
147,050 Monaco Coach Corporation+ ................................. 4,466,644
------------
BUSINESS SERVICES - 0.6%
258,600 Barrett Business Services, Inc.+ .......................... 1,842,525
------------
MEDIA - 0.1%
11,100 Lee Enterprises, Inc. ..................................... 301,781
------------
Total Common Stocks (Cost $214,744,961) ................... 288,233,343
------------
PRINCIPAL
AMOUNT
------
REPURCHASE AGREEMENT - 1.8%
(Cost $5,336,000)
$ 5,336,000 Repurchase agreement with Credit Suisse First Boston
Corporation, 5.300% dated 10/30/1998 to be repurchased
at $5,338,357 on 11/02/1998, collateralized by $5,442,720
U.S. Treasury Note, 5.875% due 01/13/1999
(Market Value of $5,447,658) .............................. 5,336,000
------------
TOTAL INVESTMENTS (Cost $220,080,961*) ......................... 101.1 % 293,569,343
OTHER ASSETS AND LIABILITIES (Net) ............................. (1.1) (3,336,602)
----- ------------
NET ASSETS ..................................................... 100.0 % $290,232,741
===== ============
- --------------
* Aggregate cost for federal tax purposes is $220,265,418.
+ Non-income producing security.
</TABLE>
See Notes to Financial Statements
<PAGE>
<TABLE>
PORTFOLIO of INVESTMENTS
EMERGING GROWTH FUND
OCTOBER 31, 1998
<CAPTION>
SHARES VALUE
------ -----
<S> <C> <C>
COMMON STOCKS - 99.3%
COMPUTER SOFTWARE/SERVICES - 16.4%
113,850 ARIS Corporation+ ........................................ $ 1,793,137
95,300 AVT Corporation+ ........................................ 2,084,688
65,950 Cadence Design Systems, Inc.+ ........................... 1,409,681
298,050 Carreker-Antinori, Inc.+ ................................. 1,974,581
102,000 Check Point Software Technologies Ltd.+ .................. 2,320,500
181,350 Harbinger Corporation+ ................................... 1,201,444
174,550 Made2Manage Systems, Inc.+ .............................. 1,407,309
68,050 Sterling Commerce, Inc.+ ................................ 2,398,762
76,625 Tier Technologies, Inc.+ ................................ 996,125
97,500 Visio Corporation+ ....................................... 2,595,937
179,190 Wall Data, Inc.+ ......................................... 2,665,451
------------
20,847,615
------------
HEALTH CARE PRODUCTS - 12.9%
219,900 Corixa Corporation+ ...................................... 1,181,963
171,300 ESC Medical Systems Ltd.+ ................................ 1,391,812
174,100 ICOS Corporation+ ........................................ 3,220,850
95,400 Incyte Pharmaceuticals, Inc.+ ........................... 2,909,700
204,825 NeoRx Corporation+ ....................................... 307,238
93,700 PathoGenesis Corporation+ ................................ 3,748,000
120,300 Shire Pharmaceuticals Group Plc+ ........................ 2,616,525
8,532 Sofamor Danek Group, Inc.+ ............................... 867,064
25,466 SonoSight, Inc.+ ......................................... 175,079
------------
16,418,231
------------
ELECTRONICS/SEMICONDUCTORS - 10.0%
127,510 ATMI, Inc.+ ............................................. 1,753,263
143,875 Credence Systems Corporation+ ............................ 2,140,141
174,150 FEI Company+ ............................................. 1,414,969
210,176 General Semiconductor, Inc.+ ............................. 1,668,272
70,350 Lattice Semiconductor Corporation+ ....................... 2,391,900
31,250 Maxim Integrated Products, Inc.+ ......................... 1,115,234
113,060 TriQuint Semiconductor, Inc.+ ............................ 2,176,405
------------
12,660,184
------------
FINANCIAL SERVICES - 9.0%
167,937 American Capital Strategies, Ltd. ........................ 2,225,165
31,700 Hambrecht & Quist Group+ ................................. 608,244
68,210 HealthCare Financial Partners, Inc.+ ..................... 2,088,931
29,746 Medallion Financial Corporation ......................... 527,992
53,140 Paychex, Inc. ............................................ 2,643,715
83,375 Profit Recovery Group International, Inc.+ ............... 2,558,570
53,350 Richmond County Financial Corporation ................... 780,244
------------
11,432,861
------------
COMPUTER SYSTEMS - 7.0%
125,000 Apex PC Solutions, Inc.+ ................................. 3,265,625
314,200 In Focus Systems, Inc.+ .................................. 1,963,750
192,500 RadiSys Corporation+ ..................................... 3,705,625
------------
8,935,000
------------
CONSUMER CYCLICALS - 7.0%
136,600 Building Materials Holding Corporation+ .................. 1,519,675
71,400 Cutter & Buck, Inc.+ ..................................... 1,856,400
53,987 Family Golf Centers, Inc.+ ............................... 1,137,101
99,250 Nortek, Inc.+ ............................................ 2,685,953
69,749 Renters Choice, Inc.+ .................................... 1,730,647
------------
8,929,776
------------
BUSINESS SERVICES - 6.9%
83,574 Apollo Group, Inc., Class A+ ............................. 2,684,815
349,750 Asymetrix Learning Systems, Inc.+ ....................... 2,120,359
101,200 Cognizant Technology Solutions Corporation+ ............. 2,258,025
105,195 First Consulting Group, Inc.+ ............................ 1,729,143
------------
8,792,342
------------
HEALTH CARE SERVICES - 4.4%
35,359 Pediatrix Medical Group, Inc.+ .......................... 1,648,613
114,310 Omnicare, Inc. ........................................... 3,950,839
------------
5,599,452
------------
TRANSPORTATION - 4.4%
89,400 Airborne Freight Corporation ............................ 2,095,313
52,300 Expeditors International of Washington, Inc. 1,771,663
56,975 Ryanair Holdings PLC, Sponsored ADR+ .................... 1,673,641
------------
5,540,617
------------
MEDIA - 4.1%
115,950 Bowne & Company, Inc. .................................... 1,558,078
18,981 Chancellor Media Corporation ............................ 728,396
36,741 Lamar Advertising Company+ ............................... 1,147,008
77,980 Outdoor Systems, Inc.+ ................................... 1,720,434
------------
5,153,916
------------
RETAIL SALES - 3.5%
46,907 Duane Reade, Inc.+ ....................................... 1,811,783
42,814 Fastenal Company ........................................ 1,546,656
52,820 MSC Industrial Direct Company, Inc.,
Class A+ ............................................... 1,122,425
------------
4,480,864
------------
LODGING & RESTAURANTS - 2.8%
178,940 Cavanaugh's Hospitality Corporation+ ..................... 2,091,361
83,150 PJ America, Inc.+ ........................................ 1,475,913
------------
3,567,274
------------
CONSUMER STAPLES - 2.0%
51,946 U.S. Foodservice+ ........................................ 2,467,435
------------
UTILITIES/TELECOMMUNICATIONS - 1.9%
65,100 Teligent, Inc.+ .......................................... 2,001,825
29,100 US LEC Corporation+ ...................................... 380,119
------------
2,381,944
------------
UTILITIES/ELECTRICAL - 1.8%
156,852 Trigen Energy Corporation ............................... 2,284,157
------------
ELECTRICAL EQUIPMENT - 1.8%
90,100 Electro Scientific Industries, Inc.+ ..................... 2,263,763
------------
OIL & GAS - 1.5%
77,731 Hanover Compressor Company+ ............................. 1,962,708
------------
INSURANCE - 1.2%
42,280 Protective Life Corporation ............................. 1,567,002
------------
BASIC INDUSTRY - 0.7%
26,410 Sealed Air Corporation+ .................................. 935,904
------------
Total Common Stocks (Cost $127,735,166) .................. 126,221,045
------------
PRINCIPAL
AMOUNT
------
REPURCHASE AGREEMENT - 1.4%
(Cost $1,717,000)
$ 1,717,000 Agreement with Credit Suisse First Boston Corporation,
5.300% dated 10/31/1998, to be repurchased at $1,717,758 on
11/02/1998, collateralized by $1,751,340 U.S. Treasury
Note, 5.875% due 01/31/1999 (Market Value $1,752,929) ..... $ 1,717,000
------------
TOTAL INVESTMENTS (Cost $129,452,166*) 100.7% 127,938,045
OTHER ASSETS AND LIABILITIES (Net) ........................ (0.7) (860,167)
----- ------------
NET ASSETS ................................................ 100.0% $127,077,878
===== ============
- --------------
* Aggregate cost for federal tax purposes is $129,948,999.
+ Non-income producing security.
</TABLE>
- --------------------------------------------------------------------------------
GLOSSARY OF TERMS
ADR -- American Depositary Receipt
- --------------------------------------------------------------------------------
See Notes to Financial Statements
<PAGE>
<TABLE>
PORTFOLIO of INVESTMENTS
INTERNATIONAL GROWTH FUND
OCTOBER 31, 1998
<CAPTION>
SHARES VALUE
------ -----
<S> <C> <C>
COMMON STOCKS - 89.6%
UNITED KINGDOM - 13.8%
95,800 Barclays Plc ............................................. $ 2,064,074
88,100 Bass Plc ................................................. 1,069,289
35,200 Biocompatibles International Plc+ ........................ 44,491
4,900 British Aerospace Plc .................................... 36,463
304,800 British Energy Plc ....................................... 2,979,951
71,900 Glaxo Wellcome Plc ....................................... 2,234,026
256,176 Guardian Royal Exchange Plc .............................. 1,241,563
35,500 Lloyds TSB Group Plc ..................................... 438,300
319,200 Medeva Plc ............................................... 646,591
291,800 Orange Plc + ............................................. 2,713,630
10,700 Perpetual Plc ............................................ 492,604
180,600 Reed International Plc ................................... 1,528,341
155,100 Royal & Sun Alliance Insurance Group Plc ................. 1,420,301
58,500 Safeway, Inc. ............................................ 293,804
79,700 Standard Chartered Plc ................................... 857,260
205,008 Williams Holdings Plc .................................... 1,279,290
------------
19,339,978
------------
FRANCE - 12.2%
10,500 Banque Nationale de Paris ................................ 665,134
18,300 Etablissements Economiques du Casino Guichard-Perrachon SA 1,821,699
4,590 Copagnie de St. Gobain ................................... 679,180
13,900 Elf Aquitaine SA ......................................... 1,608,889
35,063 Lagardere Groupe ......................................... 1,411,306
10,600 PSA Peugeot Citroen ...................................... 1,768,829
28,900 Rhone-Poulenc Rorer, Inc. ................................ 1,321,393
21,300 SCOR ..................................................... 1,221,591
45,000 Societe Generale D'Enterprises Ord. ...................... 2,162,838
11,400 Suez Lyonnaise Des Eaux .................................. 2,041,871
14,400 Total SA, Class B ........................................ 1,661,578
46,200 TRANSGENE SA, Sponsored ADR+ ............................. 675,675
------------
17,039,983
------------
JAPAN - 12.2%
13,410 Advantest Corporation .................................... 845,676
86,000 Hankyu Realty ............................................ 354,183
33,000 Matsushita Communication Industrial Company Ltd. ......... 1,526,126
169,000 Minibea Company Ltd. ..................................... 1,587,774
13,630 Nichiei Company Ltd. ..................................... 1,101,627
25 Ntt Mobile Communications ................................ 903,046
38,900 Orix Corporation ......................................... 2,786,915
17,000 Rohm Company ............................................. 1,502,360
6,500 Shohkoh Fund & Company Ltd. .............................. 1,977,048
23,200 Sony Corporation ......................................... 1,473,016
20,100 Takefuji Corporation++ ................................... 1,070,965
28,000 TDK Corporation .......................................... 1,845,045
------------
16,973,781
------------
GERMANY - 11.2%
60,100 BHF-Bank AG .............................................. 2,312,655
30,900 Degussa AG ............................................... 1,482,797
14,000 Fresenius Medical Care AG ................................ 646,466
14,100 Hannover Rueckversicherungs AG ........................... 1,625,581
43,800 Hoechst AG ............................................... 1,829,517
3,041 KSB AG ................................................... 488,263
9,000 Mannesmann AG ............................................ 885,495
3,200 Muenchener Rueckversicherungs - Gesellschaft AG .......... 1,464,115
581 Preussag AG .............................................. 214,276
20,600 Schering AG .............................................. 2,427,187
3,291 Viag AG .................................................. 2,234,789
------------
15,611,141
------------
NETHERLANDS - 6.9%
57,700 CSM NV ................................................... 2,841,224
28,648 ING Groep NV ............................................. 1,386,132
42,600 KPN NV ................................................... 1,048,840
36,400 Laurus NV ................................................ 915,674
18,500 Philips Electronics NV ................................... 984,237
44,004 Vedior NV ................................................ 1,121,091
52,000 Vendex NV ................................................ 1,322,022
------------
9,619,220
------------
ITALY - 6.2%
93,500 Assicurazioni Generali, Spa+ ............................. 1,152,103
143,895 Istituto Banc San Paolo di Torino Spa+ ................... 2,115,393
3,538,000 Seat-Pagine Gialle Spa+ .................................. 2,212,127
438,100 Telecom Italia Spa ....................................... 3,166,795
------------
8,646,418
------------
SWITZERLAND - 5.8%
1,080 Novartis AG .............................................. 1,944,223
159 Roche Holdings AG ........................................ 1,853,475
1,249 SIG Schweizerische Industrie-Gesellschaft Holding AG ..... 838,564
1,531 Sulzer AG ................................................ 881,054
4,600 Swisscom AG+ ............................................. 1,557,769
15,700 TAG Heuer International SA ............................... 1,025,122
------------
8,100,207
------------
DENMARK - 4.7%
26,500 International Service Systems A/S, Class B ............... 1,788,408
15,000 Novo-Nordisk A/S Class B ................................. 1,750,695
10,500 Tele Danmark A/S, Class B ................................ 1,143,787
25,700 Unidanmark A/S ........................................... 1,958,873
------------
6,641,763
------------
SPAIN - 3.5%
84,710 Argentaria, Caja Postal y Banco Hipotecario de Espana SA . 1,843,221
124,600 Endesa S.A. .............................................. 3,140,210
------------
4,983,431
------------
SWEDEN - 3.0%
28,200 Biora AB, ADR+ ........................................... 516,413
98,837 Electrolux AB, B Shares .................................. 1,488,604
23,700 Kinnevik AB, B Shares .................................... 613,651
68,300 Telefonaktiebolaget LM Ericsson .......................... 1,540,832
------------
4,159,500
------------
ISRAEL - 2.1%
46,600 Blue Square-Israel Ltd., ADR ............................. 599,975
31,000 ECI Telecommunications Ltd. .............................. 1,026,875
37,200 Orbotech, Ltd.+ .......................................... 1,302,000
------------
2,928,850
------------
IRELAND - 1.9%
82,100 Bank of Ireland Plc+ ..................................... 1,517,271
73,800 Greencore Group Plc ...................................... 288,300
63,200 Kerry Group Plc, Class A ................................. 797,648
------------
2,603,219
------------
ARGENTINA - 1.5%
20,500 Telefonica de Argentina, ADR ............................. 677,781
52,200 YPF Sociedad Anonima, Sponsored ADR ...................... 1,510,538
------------
2,188,319
------------
AUSTRIA - 1.3%
7,100 Erste Bank Der Oester .................................... 415,550
3,923 VA Technologie AG ........................................ 363,599
4,753 Wienerberger Baustoffindustrie AG ........................ 991,981
------------
1,771,130
------------
HONG KONG - 0.9%
114,000 New World Development .................................... 264,945
364,500 Smartone Telecommunications .............................. 1,035,378
------------
1,300,323
------------
PORTUGAL - 0.7%
91,466 Banco Mello, SA .......................................... 1,006,625
------------
MEXICO - 0.7%
36,600 Fomento Economico Mexico SA, Sponsored ADR ............... 953,888
------------
SOUTH AFRICA - 0.4%
107,500 Sappi Ltd. ............................................... 537,740
------------
NORWAY - 0.3%
2,500 Smedvig ASA, B Shares, Sponsored ADR ..................... 21,250
18,540 Sparebanken NOR .......................................... 352,519
------------
373,769
------------
FINLAND - 0.2%
3,950 Huhtamaki Group, I Shares ................................ 132,503
7,375 Rauma Group .............................................. 87,101
------------
219,604
------------
SINGAPORE - 0.1%
27,000 Overseas Chinese Bank .................................... 117,788
------------
BRAZIL - 0.0%#
390,000 Telecomunicacoes de Sao Paulo ............................ 65,387
------------
Total Common Stocks (Cost $129,251,371) .................. 125,182,064
------------
PREFERRED STOCKS - 0.7%
26,000 GEA AG ................................................... 663,850
10,800 Moebel Walther AG ........................................ 352,025
------------
Total Preferred Stocks (Cost $1,427,512) ................. 1,015,875
------------
RIGHTS - 0.1%
52,000 Vendex NV .5 Stock Option ................................ 0
23,000 Societe Europeene de Communication SA .................... 111,794
------------
Total Rights (Cost $0) ................................... 111,794
------------
PRINCIPAL
AMOUNT
------
REPURCHASE AGREEMENT - 11.4%
(Cost $15,919,000)
$15,919,000 Repurchase agreement with State Street Corporation 5.400%
dated 10/30/1998 to be repurchased at $15,926,164 on
11/02/1998, collateralized by $15,900,000 U.S. Treasury
Note, 3.625% due 01/15/2008 (Market Value $16,237,875) .... 15,919,000
------------
TOTAL INVESTMENTS (Cost $146,597,883*) ......................... 101.8 % 142,228,733
OTHER ASSETS AND LIABILITIES (Net) ............................. (1.8) (2,551,107)
----- ------------
NET ASSETS ..................................................... 100.0 % $139,677,626
===== ============
- --------------
* Aggregate cost for federal tax purposes is $146,720,940.
+ Non-income producing security.
++ Security exempt form registration under Rule 144A of the Securities Act of
1933. This security may be resold in transactions exempt from registration,
normally to qualified institutional buyers.
# Amount represents less than 0.1% of net assets.
</TABLE>
See Notes to Financial Statements
<PAGE>
<TABLE>
PORTFOLIO of INVESTMENTS (continued)
INTERNATIONAL GROWTH FUND
OCTOBER 31, 1998
AS OF OCTOBER 31, 1998, SECTOR DIVERSIFICATION WAS AS FOLLOWS:
% OF
SECTOR DIVERSIFICATION NET ASSETS VALUE
---------------------- ---------- -----
<S> <C> <C>
COMMON STOCKS:
Financial Services ............................................ 21.3 % $ 29,748,857
Material & Processing ......................................... 12.3 17,207,952
Energy ........................................................ 9.1 12,765,637
Producer Durables ............................................. 8.5 11,849,589
Telecommunications ............................................ 8.1 11,275,518
Consumer Discretionary ........................................ 5.2 7,213,668
Technology .................................................... 4.7 6,577,396
Health Care ................................................... 4.5 6,241,154
Autos & Transportation ........................................ 3.6 5,084,328
Consumer Staples .............................................. 3.3 4,626,396
Retail ........................................................ 2.9 4,037,500
Consumer Durables ............................................. 2.0 2,841,224
Other ......................................................... 4.1 5,712,845
----- ------------
TOTAL COMMON STOCKS ........................................... 89.6 125,182,064
PREFERRED STOCKS .............................................. 0.7 1,015,875
RIGHTS ........................................................ 0.1 111,794
OTHER INVESTMENTS ............................................. 11.4 15,919,000
----- ------------
TOTAL INVESTMENTS ............................................. 101.8 142,228,733
OTHER ASSETS AND LIABILITIES (Net) (1.8) (2,551,107)
----- ------------
NET ASSETS .................................................... 100.0 % $139,677,626
===== ============
<CAPTION>
SCHEDULE OF FORWARD FOREIGN CURRENCY CONTRACTS
U.S. FORWARD FOREIGN CURRENCY CONTRACTS TO BUY
NET
CONTRACTS TO RECEIVE UNREALIZED
--------------------------------------------------- APPRECIATION/
EXPIRATION LOCAL VALUE IN IN EXCHANGE (DEPRECIATION)
DATE CURRENCY U.S. $ FOR U.S. $ OF CONTRACTS
- ------------------ ----------------------------------- -------------- --------------- ------------------
<S> <C> <C> <C> <C> <C>
11/02/1998 ITL 146,497,800 89,365 89,251 $ 114
11/03/1998 ITL 398,736,000 243,230 244,024 (794)
11/04/1998 ITL 364,246,400 222,193 223,335 (1,142)
11/05/1998 ITL 182,118,300 111,094 111,121 (27)
02/26/1999 JPY 798,300,000 6,972,064 6,773,200 198,864
----------
$ 197,015
----------
<CAPTION>
U.S. FORWARD FOREIGN CURRENCY CONTRACTS TO SELL
CONTRACTS TO DELIVER NET
UNREALIZED
--------------------------------------------------- APPRECIATION/
EXPIRATION LOCAL VALUE IN IN EXCHANGE (DEPRECIATION)
DATE CURRENCY U.S. $ FOR U.S. $ OF CONTRACTS
- ------------------ ----------------------------------- -------------- --------------- ------------------
<S> <C> <C> <C> <C> <C>
11/03/1998 ATS 1,855 159 159 $ 0
11/03/1998 DEM 141,663 85,509 85,509 0
11/03/1998 FIM 77,766 15,436 15,467 31
11/03/1998 GBP 4,981 8,339 8,360 21
02/26/1999 JPY 2,275,000,000 19,869,029 17,371,648 (2,497,381)
-----------
$(2,497,329)
-----------
Net Unrealized Depreciation of Forward Foreign Currency Contracts ...................... $(2,300,314)
===========
</TABLE>
- --------------------------------------------------------------------------------
GLOSSARY OF TERMS
ADR -- American Depositary Receipt
ATS -- Austrian Schilling
DEM -- German Deutsche Mark
FIM -- Finnish Markka
GBP -- Great Britain Pound Sterling
ITL -- Italian Lira
JPY -- Japanese Yen
NLG -- Netherlands Guilder
- --------------------------------------------------------------------------------
See Notes to Financial Statements
<PAGE>
NOTES to FINANCIAL statements
WM GROUP OF FUNDS
1. ORGANIZATION AND BUSINESS
WM Trust I ("Trust I") was organized under the laws of the Commonwealth of
Massachusetts on September 19, 1997 as a business entity commonly known as a
"Massachusetts business trust." Trust I is registered under the Investment
Company Act of 1940, as amended (the "1940 Act"), as an open-end management
investment company. WM Trust II ("Trust II") was organized as a Massachusetts
business trust under the laws of the Commonwealth of Massachusetts on February
22, 1989 and is registered under the 1940 Act, as an open-end management
investment company. Trust I and Trust II (together the "Trusts") consist of 18
funds as follows:
TRUST I TRUST II
- ------- --------
EQUITY FUNDS EQUITY FUNDS
Bond & Stock Fund Growth Fund
Growth & Income Fund Emerging Growth Fund
Northwest Fund International Growth Fund
FIXED INCOME FUNDS FIXED INCOME FUNDS
Tax-Exempt Bond Fund Short Term High Quality Bond Fund
U.S. Government Securities Fund Target Maturity 2002 Fund
Income Fund
High Yield Fund MUNICIPAL FUNDS
California Municipal Fund
MONEY MARKET FUNDS California Insured Intermediate Municipal Fund
Money Market Fund Florida Insured Municipal Fund
Tax-Exempt Money Market Fund
MONEY MARKET FUND
California Money Fund
Trust I and Trust II (with the exception of the Money Market Funds) consist of
15 funds (each a "Fund" collectively, the "Funds") The financial statements
for the Money Market Funds are presented in a separate report.
WM Advisors, Inc. (the "Advisor" or "WM Advisors") (formerly Composite
Research & Management Co.), a wholly-owned subsidiary of Washington Mutual,
Inc. ("Washington Mutual"), a publicly owned financial services company,
serves as investment advisor to the Trusts. Sierra Investment Advisors
Corporation ("Sierra Advisors") served as investment advisor to Trust II prior
to March 23, 1998. Sierra Advisors became an indirect wholly-owned subsidiary
of Washington Mutual as a result of a merger between its parent, Great Western
Financial Corporation ("GWFC"), and Washington Mutual.
Each of the Funds, except the Target Maturity 2002 Fund, offers four classes
of shares: Class A shares, Class B shares, Class S shares and Class I shares.
The Target Maturity 2002 Fund offers only Class A shares. Class A shares of
the Funds are subject to an initial sales charge at the time of purchase.
Certain Class A shares purchased by exchange from another Fund within Trust I
or Trust II may be subject to a contingent deferred sales charge ("CDSC") if
redeemed within two years of purchase. Class B shares and Class S shares are
not subject to an initial sales charge. Class B shares and Class S shares are
generally subject to a CDSC if redeemed within five years of purchase. Class I
shares are sold exclusively to the various investment portfolios of the WM
Strategic Asset Management Portfolios, an open-end management investment
company, and are not available for direct purchase by investors. Class I
shares are not subject to an initial sales charge or CDSC.
2. SIGNIFICANT ACCOUNTING POLICIES
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts and disclosures in the financial statements.
Actual results could differ from those estimates. The following is a summary
of significant accounting policies consistently followed by the Funds in the
preparation of their financial statements.
PORTFOLIO VALUATION:
A security that is primarily traded on a U.S. exchange (including securities
traded through the Nasdaq National Market System) is valued at the last sale
price on that exchange or, if there were no sales during the day, at the mean
of the current day's bid and asked prices. Securities traded only on over-the-
counter markets (other than the Nasdaq National Market System and U.S.
Government Securities) are valued at the closing over-the-counter bid prices
or, if no sale occurred on such day, at the mean of the current bid and asked
prices. An option is generally valued at the last sale price or, in the
absence of a last sale price, at the mean of the current day's bid and asked
prices. Short term debt securities that mature in 60 days or less are valued
at amortized cost. The value of a foreign security is determined in its
national currency as of the close of trading on the foreign exchange on which
it is traded or as of 4:00 p.m. Eastern Standard time, if that is earlier, and
that value is then converted into its U.S. dollar equivalent at the foreign
exchange rate in effect at noon, Eastern Standard time, on the day the value
of the foreign security is determined. The value of a futures contract equals
the unrealized gain or loss on the contract, which is determined by marking
the contract to the current settlement price for a like contract acquired on
the day on which the futures contract is being valued. If the market makes a
limit move with respect to the security or index underlying the futures
contract, the futures contract will be valued at a fair market valued as
determined by or under the direction of the Board of Trustees.
Debt securities of U.S. issuers (other than U.S. Government securities and
short-term investments), including municipal securities, are valued by one or
more independent pricing services (each a "Pricing Service") retained by Trust
I and Trust II. When, in the judgment of a Pricing Service, market quotations
for these securities are readily available, they are valued at the mean
between the quoted bid prices and asked prices. Securities for which market
quotations are not readily available are valued at fair value as determined by
or under the direction of the Board of Trustees, which may rely on the
assistance of one or more Pricing Services. The procedures of each Pricing
Service are reviewed periodically by the officers of the Trusts under the
general supervision and responsibility of the Board of Trustees.
REPURCHASE AGREEMENTS:
Each Fund may engage in repurchase agreement transactions. Under the terms of
a typical repurchase agreement, the Fund, through its custodian, takes
possession of an underlying debt obligation subject to an obligation of the
seller to repurchase, and the Fund subject to an obligation to resell the
obligation at an agreed upon price and time, thereby determining the yield
during the Fund's holding period. The value of the collateral is at all times
at least equal to the total amount of the repurchase obligation, including
interest. In the event of counterparty default, the Fund would seek to use the
collateral to offset losses incurred. There is potential loss to the Fund in
the event that the Fund is delayed or prevented from exercising its right to
dispose of the collateral securities, including the risk of a possible decline
in the value of the underlying securities during the period while the Fund
seeks to assert its rights. WM Advisors, acting under the supervision of the
Board of Trustees, reviews the value of the collateral and the credit
worthiness of those banks and dealers with whom each Fund enters into
repurchase agreements.
REVERSE REPURCHASE AGREEMENTS:
Each Fund, except the Target Maturity 2002 Fund, may engage in reverse
repurchase agreements. Reverse repurchase agreements are the same as
repurchase agreements except that, in this instance, the Funds would assume
the role of seller/borrower in the transaction. The Funds may use reverse
repurchase agreements to borrow short term funds. The value of the reverse
repurchase agreements that the Funds have committed to sell are reflected in
the Funds' Statements of Assets and Liabilities. The Funds will segregate with
the Trusts' custodian liquid assets that at all times are in an amount equal
to their obligations under reverse repurchase agreements. Reverse repurchase
agreements involve the risks that the market value of the securities sold by
the Funds may decline below the repurchase price of the securities and, if the
proceeds from the reverse repurchase agreement are invested in securities,
that the market value of the securities bought may decline below the
repurchase price of the securities sold.
OPTION CONTRACTS:
The Equity Funds, Fixed Income Funds and the Municipal Funds may engage in
option contracts. The Funds may use option contracts to manage their exposure
to the stock and bond markets and to fluctuations in interest rates and
currency values. The underlying principal amounts and option values are shown
in the Portfolio of Investments under the captions "Put Options Purchased on
Foreign Currency," "Call Options Written on Foreign Currency" and "Call
Options Purchased on Stock Indices." These amounts reflect each contract's
exposure to the underlying instrument at October 31, 1998. Writing puts and
buying calls tends to increase the Funds' exposure to the underlying
instrument. Buying puts and writing calls tends to decrease the Funds'
exposure to the underlying instruments or to hedge other Fund investments.
Upon the purchase of a put option or a call option by the Funds, the premium
paid is recorded as an investment, the value of which is marked-to-market
daily. When a purchased option expires, the Funds will realize a loss in the
amount of the cost of the option. When the Funds enter into a closing sale
transaction, the Funds will realize a gain or loss depending on whether the
sales proceeds from the closing sale transaction are greater or less than the
cost of the option. When the Funds exercise a put option, they will realize a
gain or loss from the sale of the underlying security and the proceeds from
such sale will be decreased by the premium originally paid. When the Funds
exercise a call option, the cost of the security which the Funds purchase upon
exercise will be increased by the premium originally paid.
When the Funds write a call option or a put option, an amount equal to the
premium received by the Funds is recorded as a liability, the value of which
is marked-to-market daily. When a written option expires, the Funds realize a
gain equal to the amount of the premium received. When the Funds enter into a
closing purchase transaction, the Funds realize a gain (or loss if the cost of
the closing purchase transaction exceeds the premium received when the option
was sold) without regard to any unrealized gain or loss on the underlying
security, and the liability related to such option is eliminated. When a
written call option is exercised, the Funds realize a gain or loss from the
sale of the underlying security and the proceeds from such sale are increased
by the premium originally received. When a written put option is exercised,
the amount of the premium originally received will reduce the cost of the
security that the Funds purchased upon exercise.
The risk associated with purchasing options is limited to the premium
originally paid. Options written by a Fund involve, to varying degrees, risk
of loss in excess of the option value reflected in the Statements of Assets
and Liabilities. The risk in writing a covered call option is that the Funds
may forego the opportunity of profit if the market price of the underlying
security increases and the option is exercised. The risk in writing a covered
put option is that the Funds may incur a loss if the market price of the
underlying security decreases and the option is exercised. In addition, there
is the risk the Funds may not be able to enter into a closing transaction
because of an illiquid secondary market or, for over-the-counter options,
because of the counterparty's inability to perform.
The Equity Funds, Fixed Income Funds (except the Target Maturity 2002 Fund)
and the Municipal Funds may engage in options on foreign currency and options
on interest rate futures. Options on foreign currency and options on interest
rate futures act as a hedge to provide protection against adverse movements in
the value of foreign securities in the portfolio.
Certain risks are associated with the use of options on foreign currency and
options on interest rate futures contracts as hedging devices. The predominant
risk is that the movement in the price of the instrument underlying such
options may not correlate perfectly with the movement in the prices of the
assets being hedged. The lack of correlation could render the Funds' hedging
strategy unsuccessful and could result in a loss to the Funds. In addition,
there is the risk the Funds may not be able to enter into a closing
transaction because of an illiquid secondary market or, for over-the-counter
options, because of the counterparty's inability to perform. Options written
by a Fund involve, to varying degrees, risk of loss in excess of the option
value reflected in the Statements of Assets and Liabilities.
FUTURES CONTRACTS:
Each Fund may engage in futures transactions. The Funds may use futures
contracts to manage their exposure to the stock and bond markets and to
fluctuations in interest rates and currency values. The underlying value of a
futures contract is incorporated within the unrealized appreciation/
(depreciation) shown in the Portfolio of Investments under the caption
"Futures Contracts." This amount reflects each contract's exposure to the
underlying instrument at October 31, 1998. Buying futures contracts tends to
increase the Fund's exposure to the underlying instrument. Selling futures
contracts tends to either decrease the Fund's exposure to the underlying
instrument, or to hedge other Fund investments.
Upon entering into a futures contract, the Fund is required to deposit with
the broker an amount of cash or cash equivalents equal to a certain percentage
of the contract amount. This is known as the "initial margin." Subsequent
payments ("variation margin") are made or received by the Fund each day,
depending on the daily fluctuation of the value of the contract. The daily
changes in contract value are recorded as unrealized gains or losses and the
Fund recognizes a realized gain or loss when the contract is closed.
There are several risks in connection with the use of futures contracts as a
hedging device. Futures contracts involve, to varying degrees, risk of loss in
excess of the futures variation margin reflected in the Statements of Assets
and Liabilities. The change in the value of futures contracts primarily
corresponds with the value of their underlying instruments, which may not
correlate with the change in the value of the hedged instruments. In addition,
there is the risk that the Fund may not be able to enter into a closing
transaction because of an illiquid secondary market.
FOREIGN CURRENCY:
The books and records of the Funds are maintained in U.S. dollars. Foreign
currencies, investments and other assets and liabilities are translated into
U.S. dollars at the exchange rates prevailing at the end of the period.
Purchases and sales of investment securities, income and expenses are
translated on the respective dates of such transactions. It is not practicable
to isolate that portion of the results of operations arising as a result of
changes in the foreign exchange rates from the portion that arises from
changes in market prices of investments during the period. Accordingly, all
such changes have been reflected as realized and unrealized net gain/(loss)
from security transactions in the Statements of Operations.
Unrealized gains and losses, not relating to securities, which result from
changes in foreign currency exchange rates have been included in unrealized
appreciation/(depreciation) of foreign currency and other assets and
liabilities. Unrealized gains and losses of securities, which result from
changes in foreign currency exchange rates as well as changes in market prices
of securities, have been included in unrealized appreciation/(depreciation) of
securities. Net realized foreign currency gains and losses include foreign
currency gains and losses resulting from changes in exchange rates between
trade date and settlement date on investment securities transactions, gains
and losses on foreign currency transactions and the difference between the
amounts of interest and dividends recorded on the books of the Funds and the
amount actually received. The portion of foreign currency gains and losses
related to fluctuation in exchange rates between the initial purchase trade
date and subsequent sale trade date is included in realized gain/(loss) from
security transactions.
FORWARD FOREIGN CURRENCY CONTRACTS:
The Equity Funds and Fixed Income Funds (with the exception of the Target
Maturity 2002, U.S. Government Securities, Bond & Stock, Growth & Income and
Northwest Funds) may enter into forward foreign currency contracts. Forward
foreign currency contracts are agreements to exchange one currency for another
at a future date and at a specified price. The Funds may use forward foreign
currency contracts to facilitate transactions in foreign securities and to
manage the Funds' foreign currency exposure. The U.S. dollar market value,
contract value and the foreign currencies the Funds have committed to buy or
sell are shown in the Portfolio of Investments under the caption "Schedule of
Forward Foreign Currency Contracts." These amounts represent the aggregate
exposure to each foreign currency the Funds have acquired or hedged through
forward foreign currency contracts at October 31, 1998. Forward foreign
currency contracts are reflected as both a forward foreign currency contract
to buy and a forward foreign currency contract to sell. Forward foreign
currency contracts to buy generally are used to acquire exposure to foreign
currencies, while forward foreign currency contracts to sell are used to hedge
the Funds' investments against currency fluctuations. Also, a forward foreign
currency contract to buy or sell can offset a previously acquired opposite
forward foreign currency contract.
Forward foreign currency contracts are marked-to-market daily using foreign
currency exchange rates supplied by an independent pricing service. The change
in a contract's market value is recorded by the Funds as an unrealized gain or
loss. When the contract is closed or delivery is taken, the Funds record a
realized gain or loss equal to the difference between the value of the
contract at the time it was opened and the value at the time it was closed.
The use of forward foreign currency contracts does not eliminate fluctuations
in the underlying prices of the Fund's securities, but it does establish a
rate of exchange that can be achieved in the future. These forward foreign
currency contracts involve market risk in excess of the unrealized
appreciation/(depreciation) of forward foreign currency contracts reflected in
the Funds' Statements of Assets and Liabilities. Although forward foreign
currency contracts used for hedging purposes limit the risk of loss due to a
decline in the value of the hedged currency, they also limit any potential
gain that might result should the value of the currency increase. In addition,
the Funds could be exposed to risks if the counterparties to the contracts are
unable to meet the terms of their contracts. The Fund's Advisor and/or Sub-
advisor will enter into forward foreign currency contracts only with parties
approved by the Board of Trustees because there is a risk of loss to the Funds
if the counterparties do not complete the transaction.
DOLLAR ROLL TRANSACTIONS:
The Income Fund, Short Term High Quality Bond Fund and U.S. Government
Securities Fund, in order to seek a high level of current income, may enter
into dollar roll transactions with financial institutions to take advantage of
opportunities in the mortgage market. The value of the dollar roll
transactions are reflected in the Funds' Statements of Assets and Liabilities.
A dollar roll transaction involves a sale by the Funds of securities that they
hold with an agreement by the Funds to repurchase similar securities at an
agreed upon price and date. The securities repurchased will bear the same
interest as those sold, but generally will be collateralized at time of
delivery by different pools of mortgages with different prepayment histories
than those securities sold. The Funds are paid a fee for entering into a
dollar roll transaction, that is accrued as income over the life of the dollar
roll contract. During the period between the sale and repurchase, the Funds
will not be entitled to receive interest and principal payments on the
securities sold. Management anticipates that the proceeds of the sale will be
invested in additional instruments for the Funds, and the income from these
investments, together with any additional fee income received on the dollar
roll transaction will generate income for the Funds exceeding the interest
that would have been earned on the securities sold. Dollar roll transactions
involve the risk that the market value of the securities sold by the Funds may
decline below the repurchase price of those similar securities which the Fund
is obligated to purchase or that the return earned by the Fund with the
proceeds of a dollar roll may not exceed transaction costs.
INDEXED SECURITIES:
Each of the Funds may invest in indexed securities whose value is linked
either directly or inversely to changes in foreign currencies, interest rates,
commodities, inflation, indices, or other reference instruments. Indexed
securities may be more volatile than the reference instrument itself, but any
loss is limited to the amount of the original investment.
ILLIQUID INVESTMENTS:
Up to 15% of the assets of each Fund may be invested in securities that are
not readily marketable, including: (1) repurchase agreements with maturities
greater than seven calendar days; (2) time deposits maturing in more than
seven calendar days; (3) futures contracts and options to the extent a liquid
secondary market does not exist for the instruments; (4) certain over-the-
counter options; (5) certain variable rate demand notes having a demand period
of more than seven days; and (6) securities, the disposition of which are
restricted under Federal securities laws, excluding certain Rule 144A
securities, as defined below.
Illiquid securities generally cannot be sold or disposed of in the ordinary
course of business (within seven days) at approximately the value at which the
Funds have valued the investments. This may have an adverse effect on the
Fund's ability to dispose of particular illiquid securities at fair market
value and may limit the Fund's ability to obtain accurate market quotations
for purposes of valuing the securities and calculating the net asset value of
shares of the Fund. The Funds may also purchase securities that are not
registered under the Securities Act of 1933, as amended (the "Act"), but that
can be sold to qualified institutional buyers in accordance with Rule 144A
under the Act ("Rule 144A Securities"). Rule 144A Securities generally may be
resold only to other qualified institutional buyers. If a particular
investment in Rule 144A Securities is not determined to be liquid under the
guidelines established by the Board of Trustees, that investment will be
included within the 15%/10% limitation, as applicable, on investments in
illiquid securities.
SECURITIES TRANSACTIONS AND INVESTMENT INCOME:
Securities transactions are recorded as of the trade date (the date the order
to buy or sell is executed). Realized gains and losses from securities sold
are recorded on the identified cost basis. Interest income is recorded on the
accrual basis and consists of interest accrued and, if applicable, discount
accreted less premiums amortized. Premiums on bonds can be amortized on the
basis of any of the following methods: yield-to-maturity, straight-line, or
yield-to-call. Discounts can be accreted using yield-to-maturity or straight-
line methods. Premiums and discount on mortgage-backed securities are
amortized or accreted using only the straight-line method. Dividend income is
recorded on the ex-dividend date, except certain dividends from foreign
securities are recorded as soon as the Funds are informed of the ex-dividend
date. Each Fund's investment income and realized and unrealized gains and
losses are allocated among the classes of that Fund based upon the relative
average net assets of each class.
Securities purchased or sold on a when-issued or delayed-delivery basis may be
settled a month or more after the trade date; interest income is not accrued
until settlement date. Each Fund instructs the custodian to segregate assets
of the Fund with a current value at least equal to the amount of its when-
issued purchase commitments.
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS:
Dividends from net investment income of the Fixed Income Funds (except the
Target Maturity 2002 Fund), and the Municipal Funds are declared daily and
paid monthly. Dividends from the net investment income of the Bond & Stock and
Growth & Income Funds are declared and paid quarterly. Dividends from the net
investment income of the Growth Fund are declared and paid semiannually.
Dividends from the net investment income of the Target Maturity 2002, Emerging
Growth, International Growth and Northwest Funds are declared and paid
annually. Distributions of any net long-term capital gains earned by a Fund
are made annually. Distributions of any net short-term capital gains earned by
a Fund are distributed no less frequently than annually at the discretion of
the Board of Trustees. Additional distributions of net investment income and
capital gains for each Fund may be made at the discretion of the Board of
Trustees in order to avoid the application of a 4% non-deductible excise tax
on certain undistributed amounts of ordinary income and capital gains. Income
distributions and capital gain distributions are determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles. These differences are primarily due to differing treatments of
income and gains on various investment securities held by the Funds,
organizational costs, dividends payable, redesignated distributions and
differing characterization of distributions made by each Fund as a whole. Net
investment income per share calculations in the financial highlights for the
year ended October 31, 1998 excludes these adjustments:
<TABLE>
<CAPTION>
INCREASE/(DECREASE)
INCREASE/ UNDISTRIBUTED INCREASE/(DECREASE)
(DECREASE) NET INVESTMENT ACCUMULATED NET
PAID-IN CAPITAL INCOME/(LOSS) REALIZED GAIN/(LOSS)
--------------- ------------------- --------------------
<S> <C> <C> <C>
Target Maturity 2002 Fund .......................... $ (3,919) $ 3,919 $ --
High Yield Fund .................................... -- (6,976) 6,976
Short Term High Quality Bond ....................... -- 30,180 (30,180)
U.S. Government Securities Fund .................... 67,297,015 (692,853) (66,604,162)
Income Fund ........................................ 23,510,631 (16,407) (23,494,224)
California Municipal Fund .......................... -- (3,562) 3,562
Florida Insured Municipal Fund ..................... 3,481 2,806 (6,287)
Tax-Exempt Bond Fund ............................... 3,928,429 79,147 (4,007,576)
Bond & Stock Fund .................................. -- (2,310) 2,310
Growth & Income Fund ............................... 1,098,160 (4,447) (1,093,713)
Growth Fund ........................................ 15,462,963 1,072,557 (16,535,520)
Northwest Fund ..................................... (1,162,904) 1,109,810 53,094
Emerging Growth Fund ............................... 32,149,639 561,513 (32,711,152)
International Growth Fund .......................... (1,995,081) 2,518,142 (523,061)
</TABLE>
FEDERAL INCOME TAXES:
It is each Fund's policy to qualify as a regulated investment company by
complying with the requirements of the Internal Revenue Code of 1986, as
amended, applicable to regulated investment companies and by, among other
things, distributing substantially all of its taxable and tax-exempt earnings
to its shareholders. Therefore, no Federal income tax provision is required.
EXPENSES:
General expenses of the Trusts are allocated to all the Funds based upon the
relative net assets of each Fund. Operating expenses directly attributable to
a class of shares are charged to the operations of that class of shares.
Expenses of each Fund not directly attributable to the operations of any class
of shares are prorated among the classes to which the expenses relate based on
the relative net assets of each class of shares.
OTHER:
The Municipal Funds and the Fixed Income Funds may purchase floating rate,
inverse floating rate and variable rate obligations, including municipal
securities and participation interests therein. Floating rate obligations have
an interest rate that changes whenever there is a change in the external
interest rate, while variable rate obligations provide for a specified
periodic adjustment in the interest rate. The interest rate on an inverse
floating rate obligation (an "inverse floater") can be expected to move in the
opposite direction from the market rate of interest to which the inverse
floater is indexed. The Fixed Income Funds may also purchase mortgage-backed
securities that are floating rate, inverse floating rate and variable rate
obligations. Although variable rate demand notes are frequently not rated by
credit rating agencies, unrated notes purchased by the Fund will be of
comparable quality at the time of purchase to rated instruments that may be
purchased by such Fund, as determined by the Advisor. The absence of such an
active secondary market, however, could make it difficult for the Fund to
dispose of a particular variable rate demand note in the event the issuer of
the note defaulted on its payment obligations, and the Fund could, for this or
other reasons, suffer a loss to the extent of the default.
An inverse floater may be considered to be leveraged to the extent that its
interest rate varies by a magnitude that exceeds the magnitude of the change
in the index rate of interest. The higher degree of leverage inherent in
inverse floaters is associated with greater volatility in their market values.
Accordingly, the duration of an inverse floater may exceed its stated final
maturity.
3. INVESTMENT ADVISORY AND OTHER TRANSACTIONS
WM Advisors serves as investment advisor to the Trusts. Sierra Advisors served
as investment advisor to Trust II prior to March 23, 1998. The Advisor is
entitled to a monthly fee based upon a percentage of the average daily net
assets of each Fund at the following rates:
<TABLE>
<CAPTION>
FEES ON NET ASSETS
EXCEEDING
FEES ON NET ASSETS $200 MILLION
EQUAL TO AND EQUAL TO FEES ON NET ASSETS
OR LESS THAN OR LESS THAN EXCEEDING
NAME OF FUND $200 MILLION $500 MILLION $500 MILLION
------------ ------------ ------------ ------------
<S> <C> <C> <C>
Short Term High Quality Bond Fund............ .500% .450% .400%
</TABLE>
<TABLE>
<CAPTION>
FEES ON NET ASSETS FEES ON NET ASSETS
UP TO EXCEEDING
$500 MILLION $500 MILLION
------------ ------------
<S> <C> <C>
The Municipal Funds (03/23/1998 - 10/31/1998) ........................... .700% .550%
California Municipal Fund (11/01/1997 - 03/22/1998) ..................... .650% .500%
California Insured Intermediate Municipal Fund
(11/01/1997 - 03/22/1998) ............................................. .650% .500%
Florida Insured Municipal Fund (11/01/1997 - 03/22/1998) ................ .600% .450%
</TABLE>
<TABLE>
<CAPTION>
FEES ON NET ASSETS FEES ON NET ASSETS
UP TO EXCEEDING
$250 MILLION $250 MILLION
------------ ------------
<S> <C> <C>
Tax-Exempt Bond Fund .................................................... .500% .400%
U.S. Government Securities Fund ......................................... .625% .500%
Income Fund ............................................................. .625% .500%
High Yield Fund ......................................................... .625% .500%
Growth & Income Fund .................................................... .625% .500%
Bond & Stock Fund ....................................................... .625% .500%
</TABLE>
<TABLE>
<CAPTION>
FEES ON NET ASSETS
EXCEEDING
FEES ON NET ASSETS $100 MILLION
EQUAL TO AND EQUAL TO FEES ON NET ASSETS
OR LESS THAN OR LESS THAN EXCEEDING
$100 MILLION $200 MILLION $200 MILLION
------------ ------------ -------------
<S> <C> <C> <C>
Growth Fund (03/23/1998 - 10/31/1998) 1.100% 1.050% 1.025%
Growth Fund (07/01/1997 - 03/22/1998) .950% .900% .875%
</TABLE>
<TABLE>
<CAPTION>
FEES ON NET ASSETS
EXCEEDING
FEES ON NET ASSETS $500 MILLION
EQUAL TO AND EQUAL TO FEES ON NET ASSETS
OR LESS THAN OR LESS THAN EXCEEDING
$500 MILLION $1 BILLION $1 BILLION
------------ ------------- -------------
<S> <C> <C> <C>
Northwest Fund ..................................... .625% .500% .375%
</TABLE>
<TABLE>
<CAPTION>
FEES ON NET ASSETS
EXCEEDING
FEES ON NET ASSETS $50 MILLION
EQUAL TO AND EQUAL TO FEES ON NET ASSETS
OR LESS THAN OR LESS THAN EXCEEDING
NAME OF FUND $50 MILLION $125 MILLION $125 MILLION
- ------------ ----------- ------------ -------------
<S> <C> <C> <C>
International Growth Fund
(03/23/1998 - 10/31/1998) ................. 1.100% 1.000% .800%
International Growth Fund
(07/01/1997 - 03/22/1998) ................. .950% .850% .650%
</TABLE>
<TABLE>
<CAPTION>
FEES ON NET ASSETS
EXCEEDING
FEES ON NET ASSETS $100 MILLION
EQUAL TO AND EQUAL TO FEES ON NET ASSETS
OR LESS THAN OR LESS THAN EXCEEDING
$100 MILLION $500 MILLION $500 MILLION
------------ -------------- -------------
<S> <C> <C> <C>
Emerging Growth Fund
(03/23/1998 - 10/31/1998) ................. 1.050% 1.000% .900%
Emerging Growth Fund
(07/01/1997 - 03/22/1998) ................. .900% .850% .750%
</TABLE>
<TABLE>
<CAPTION>
FEES ON
AVERAGE DAILY
NET ASSETS
-------------
<S> <C>
Target Maturity 2002 Fund ......................................................................... .250%
</TABLE>
WM Advisors provides administration services to the Trusts at no additional
fee. Prior to March 23, 1998, a fee of 0.35% of average daily net assets of
each Trust II Fund was assessed for administration and transfer agent services
in addition to the fees shown for Sierra Advisors.
The Advisor has agreed to waive a portion of its management fees and/or
reimburse expenses. Fees waived and/or expenses absorbed by the Advisor are as
follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
OCTOBER 31, 1998 OCTOBER 31, 1998 JUNE 30, 1998 JUNE 30, 1998 OCTOBER 31, 1997
NAME OF FUND FEES WAIVED EXPENSES ABSORBED FEES WAIVED EXPENSES ABSORBED EXPENSES ABSORBED
- ------------ ----------- ----------------- ----------- ----------------- -----------------
<S> <C> <C> <C> <C> <C>
Target Maturity 2002 Fund .......... $ 2,065 $4,769 $ 33,075 $17,651 $ --
High Yield Fund .................... 29,768 -- -- -- --
Short Term High Quality Bond ....... 67,678 9,467 133,982 -- --
U.S. Government Securities
Fund ............................. 202,160 -- -- -- --
California Insured Intermediate
Municipal Fund ................... 66,654 -- 246,808 -- --
California Municipal Fund .......... 76,222 -- 656,426 -- --
Florida Insured Municipal Fund ..... 41,923 -- 140,651 396 --
Northwest Fund ..................... -- -- -- -- 137,944
Emerging Growth Fund ............... -- -- 3,472 -- --
International Growth Fund .......... -- -- -- 29,113 --
</TABLE>
As of March 23, 1998, WM Shareholder Services, Inc. (the "Transfer Agent")
serves as the transfer and shareholder servicing agent of the Funds. Prior to
March 23, 1998, Sierra Fund Administration Corporation, an indirect wholly-
owned subsidiary of GWFC, paid transfer agent fees from its administration fee
and did not charge Trust II Funds a separate transfer agent fee, and Murphey
Favre Securities Services, Inc. served as the transfer and shareholder
servicing agent for Trust I Funds. Shareholder servicing fees were paid to the
Transfer Agent for services incidental to issuance and transfer of shares,
maintaining shareholder lists, and issuing and mailing distributions and
reports. The authorized monthly shareholder servicing fees are as follows:
NAME OF FUND CLASS A CLASS B & S
------------ ------- -----------
The Fixed Income Funds ................... $1.45 $1.55
The Equity Funds ......................... 1.25 1.35
The Municipal Funds ...................... 1.45 1.55
Class I shares are not subject to shareholder servicing fees.
Custodian fees for certain Funds have been reduced by credits allowed by the
custodian for uninvested cash balances. These Funds could have invested this
cash in income producing securities. Fees reduced by credits allowed by the
custodian are as follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
NAME OF FUND OCTOBER 31, 1998 JUNE 30, 1998 DECEMBER 31, 1997 OCTOBER 31, 1997
------------ ---------------- ------------- ----------------- ----------------
<S> <C> <C> <C> <C>
Target Maturity 2002 Fund .................. -- $ 2,162 -- $ --
High Yield Fund ............................ 842 -- -- --
Short Term High Quality Bond Fund .......... -- 428 -- --
U.S. Government Securities Fund ............ 867 -- 2,671 --
Income Fund ................................ 2,042 -- 2,840 --
California Insured Intermediate
Municipal Fund ........................... 1,729 3,433 -- --
California Municipal Fund .................. 11,142 13,157 -- --
Florida Insured Municipal Fund ............. 370 1,636 -- --
Tax-Exempt Bond Fund ....................... 1,115 -- 3,033 --
Bond & Stock Fund .......................... 5,244 -- -- 9,658
Growth & Income Fund ....................... 3,489 -- -- 10,113
Growth Fund ................................ 1,653 6,149 -- --
Northwest Fund ............................. 3,133 -- -- 7,353
Emerging Growth Fund ....................... 3,974 8,703 -- --
International Growth Fund .................. 175 1,024 -- --
</TABLE>
4. TRUSTEES' FEES
On March 23, 1998, the boards of trustees of the Trusts combined to form the
board of trustees of the WM Group of Funds.
No director, officer or employee of Washington Mutual or its subsidiaries
receives any compensation from the Trusts for serving as an officer or Trustee
of the Trusts, together with other mutual funds advised by WM Advisors, Inc.,
pays each Trustee who is not a director, officer or employee of Washington
Mutual or its subsidiaries, $18,000 per annum plus $3,000 per board meeting
attended or $1,000 per board meeting attended by telephone. Trustees are also
reimbursed for travel and out-of-pocket expenses. The Chairman of each
committee receives $500 per committee meeting attended.
Pursuant to an exemptive order granted by the Securities and Exchange
Commission ("SEC"), the Trusts' eligible Trustees may participate in a
deferred compensation plan (the "Plan") which may be terminated at any time.
Under the Plan, Trustees may elect to defer receipt of all or a portion of
their fees which, in accordance with the Plan, are invested in mutual fund
shares. Upon termination of the Plan, Trustees that have deferred compensation
accounts under the Plan will be paid benefits no later than the time the
payments would otherwise have been made without regard to such termination.
All benefits provided under these Plans are funded and any payments to Plan
participants are paid solely out of the Trusts' assets.
5. DISTRIBUTION PLANS
As of March 23, 1998, WM Funds Distributor, Inc. (the "Distributor"), a
registered broker-dealer and an indirect wholly-owned subsidiary of Washington
Mutual, serves as distributor for Class A, Class B and Class S shares of the
Funds. For the year ended October 31, 1998, the Distributor received
$3,010,621 representing commissions (front-end sales charges) on Class A
shares. In addition, the Distributor received $1,031,116 representing CDSC
fees from Class B and S shares. On May 1, 1998 Great Western Financial
Securities Corporation ("GW Securities"), a registered broker-dealer, merged
with WM Financial Services, Inc. ("WM Securities"), also a registered broker-
dealer. For the year ended October 31, 1998, GW Securities and WM Securities
received $657,642 representing commissions on Class A shares. In addition, GW
Securities and WM Securities received $559,375 representing CDSC fees from
Class B and S shares.
Each of the Funds has adopted three distribution plans, pursuant to Rule 12b-1
under the 1940 Act, applicable to Class A, Class B and Class S shares of the
Fund (each, a "Rule 12b-1 Plan"), respectively. There are no 12b-1 Plans
applicable to Class I shares of the Funds. Under the applicable Rule 12b-1
Plans, the Distributor may receive a service fee at an annual rate of 0.25% of
the average daily net assets of each class. The Trustees have not authorized,
and the Funds do not currently pay service fees with respect to Class A
shares. In addition, the Distributor is paid a fee as compensation in
connection with the offering and sale of Class B and Class S shares at an
annual rate of 0.75% of the average daily net assets of such shares. These
fees may be used to cover the expenses of the Distributor primarily intended
to result in the sale of such shares, including payments to the Distributor's
representatives or others for selling shares. Because the Distributor may
retain any amount of its fee that is not so expended, the Rule 12b-1 Plans are
characterized by the SEC as "compensation-type" plans. The service fee is paid
by the Fund to the Distributor, which in turn, pays a portion of the service
fee to broker/dealers that provide services, such as accepting telephone
inquiries and transaction requests and processing correspondences, new account
applications and subsequent purchases by check for the shareholders. Under
their terms, each of the Class A Plan, Class B Plan and Class S Plan shall
remain in effect from year to year, provided such continuance is approved
annually by vote of the Board of Trustees, including a majority of those
Trustees who are not "interested persons" of the Trust, as defined in the 1940
Act, and who have no direct or indirect financial interest in the operation of
such distribution plans, or any agreements related to such plans,
respectively.
6. PURCHASES AND SALES OF SECURITIES
The aggregate cost of purchases and proceeds from sales of securities,
excluding U.S. Government and short-term investments, for the year ended
October 31, 1998 were as follows:
NAME OF FUND PURCHASES SALES
------------ --------- ------
High Yield Fund .......................... $ 16,985,639 $ 2,676,200
Short Term High Quality Bond ............. 7,658,671 2,924,866
Income Fund .............................. 204,706,192 60,381,189
California Insured Intermediate
Municipal Fund .......................... 5,671,644 4,560,495
California Municipal Fund ................ 100,095,282 92,969,023
Florida Insured Municipal Fund ........... 9,811,328 10,078,368
Tax-Exempt Bond Fund ..................... 8,648,650 44,109,742
Bond & Stock Fund ........................ 252,999,938 228,898,099
Growth & Income Fund ..................... 551,120,108 505,385,311
Growth Fund .............................. 62,729,102 80,486,370
Northwest Fund ........................... 132,587,985 114,354,571
Emerging Growth Fund ..................... 27,675,901 44,928,310
International Growth Fund ................ 56,058,799 67,742,499
The aggregate cost of purchases and proceeds from sales of U.S. Government
securities, excluding short-term investments, for the period ended October 31,
1998 were as follows:
NAME OF FUND PURCHASES SALES
------------ --------- -----
Target Maturity 2002 Fund .................. -- $ 370,870
High Yield Fund ............................ 3,430,891 2,681,406
Short Term High Quality Bond ............... -- 9,562,096
U.S. Government Securities Fund ............ 37,586,706 211,285,295
Income Fund ................................ 11,582,317 17,334,989
Bond & Stock Fund .......................... 63,594,377 63,523,010
At October 31, 1998, aggregate gross unrealized appreciation for all
securities in which there is an excess of value over tax cost and aggregate
gross unrealized depreciation for all securities in which there is an excess
of tax cost over value were as follows:
TAX BASIS TAX BASIS
UNREALIZED UNREALIZED
NAME OF FUND APPRECIATION DEPRECIATION
------------ ------------ ------------
Target Maturity 2002 Fund .................. $ 183,641 --
High Yield Fund ............................ 101,268 1,762,414
Short Term High Quality Bond ............... 594,176 55,911
U.S. Government Securities Fund ............ 10,302,455 311,234
Income Fund ................................ 19,704,895 6,383,780
California Insured Intermediate
Municipal Fund ........................... 4,371,837 1,108
California Municipal Fund .................. 27,322,909 145,250
Florida Insured Municipal Fund ............. 2,084,050 --
Tax-Exempt Bond Fund ....................... 34,102,169 --
Bond & Stock Fund .......................... 52,504,800 15,384,481
Growth & Income Fund ....................... 179,853,019 49,715,804
Growth Fund ................................ 60,414,101 3,960,548
Northwest Fund ............................. 99,265,399 25,961,474
Emerging Growth Fund ....................... 21,379,517 23,390,471
International Growth Fund .................. 9,793,314 14,285,521
Information regarding dollar roll transactions by the U.S. Government
Securities Fund is as follows:
U.S. GOVERNMENT
DOLLAR ROLL TRANSACTIONS: SECURITIES FUND
- ------------------------ ---------------
Maximum amount outstanding during the year ........... $ 6,091,875
Average amount outstanding during the year* .......... $ 1,080,215
Average monthly shares outstanding during the year ... 28,519,784
Average debt per share outstanding during the year ... $0.04
- ---------
*The average amount outstanding during the year was calculated by adding the
borrowings at the end of each day and dividing the sum by the number of days
in the year ended October 31, 1998.
Fee income earned for the year ended October 31, 1998 by the U.S. Government
Securities Fund for dollar roll transactions aggregated $79,607.
Information regarding reverse repurchase agreement transactions by the U.S.
Government Securities Fund is as follows:
U.S. GOVERNMENT
REVERSE REPURCHASE AGREEMENTS: SECURITIES FUND
- ----------------------------- ---------------
Maximum amount outstanding during the year ........... $80,309,997
Average amount outstanding during the year* .......... $23,688,353
Average monthly shares outstanding during the year ... 28,519,784
Average debt per share outstanding during the year ... $0.83
- ---------
*The average amount outstanding during the year was calculated by summing
borrowings at the end of each day and dividing the sum by the number of days
in the year ended October 31, 1998.
Interest rates ranged from 5.63% to 5.66% during the year. Interest paid for
the year ended October 31, 1998, on borrowings by the U.S. Government
Securities Fund under reverse repurchase agreements, aggregated $1,102,300.
7. Shares of Beneficial Interest
The Trust may issue an unlimited number of shares of beneficial interest, each
without par value.
As of October 31, 1998, WM Shareholder Services, Inc. owned greater than five
percent of the respective share classes:
<TABLE>
<CAPTION>
NUMBER OF PERCENTAGE OF
FUND SHARES TOTAL FUND SHARES
------------------------ -----------------------
NAME OF FUND CLASS S CLASS I CLASS S CLASS I
- ------------ ------- ------- ------- -------
<S> <C> <C> <C> <C>
California Insured Intermediate Municipal Fund ............ 81 107 49.62% 100.00%
California Municipal Fund ................................. 80 107 12.75% 100.00%
Florida Insured Municipal Fund ............................ 84 116 49.62% 100.00%
Tax-Exempt Bond Fund ...................................... 89 149 49.48% 100.00%
</TABLE>
8. ORGANIZATION COSTS
Expenses incurred in connection with the organization of the Funds, including
the fees and expenses of registering and qualifying its shares for
distribution under Federal and state securities regulations, are being
amortized on a straight-line basis over a period of five years from
commencement of operations of each Fund, respectively. In the event any of the
initial shares of a Fund are redeemed by any holder thereof during the
amortization period, the proceeds of such redemptions will be reduced by an
amount equal to the pro-rata portion of unamortized deferred organizational
expenses in the same proportion as the number of shares being redeemed bears
to the number of initial shares of such Fund outstanding at the time of such
redemption.
9. CAPITAL LOSS CARRYFORWARDS
At October 31, 1998, the following Funds had available for Federal income tax
purposes unused capital losses as follows:
<TABLE>
<CAPTION>
EXPIRING EXPIRING EXPIRING EXPIRING EXPIRING
IN 2002 IN 2003 IN 2004 IN 2005 IN 2006
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Short Term High Quality Bond............................ $ 206,653 $ 672,111 $ 773,684 $ 54,561 $ 20,454
U.S. Government Securities Fund......................... 31,268,228 33,964,115 3,198,017 503,754 --
Income Fund............................................. -- 20,060,605 9,833,025 676,598 --
Florida Insured Municipal Fund.......................... -- 681,503 1,462,695 -- --
Tax-Exempt Bond Fund.................................... -- -- 1,231,573 -- --
Growth Fund ............................................ -- -- -- -- 297,903
Emerging Growth Fund.................................... -- -- -- -- 678,535
International Growth Fund............................... -- -- -- -- 15,095,692
</TABLE>
10. GEOGRAPHIC AND INDUSTRY CONCENTRATION AND RISK FACTORS
There are certain risks arising from the California Municipal and California
Insured Intermediate Municipal Funds' investments in California municipal
securities. The California Municipal and California Insured Intermediate
Municipal Funds' are more susceptible to factors adversely affecting issuers
of California municipal securities than is a municipal bond fund that is not
concentrated in these issuers to the same extent. Uncertain economic
conditions or governmental developments may affect the ability of California
municipal securities issuers to meet their financial obligations.
The Florida Insured Municipal Fund primarily invests in debt obligations
issued by the State of Florida and its political subdivisions, agencies and
public authorities to obtain funds for various public purposes. The Florida
Insured Municipal Fund is more susceptible to factors adversely affecting
issuers of Florida municipal securities than is a municipal bond fund that is
not concentrated in these issuers to the same extent. Uncertain economic
conditions may affect the ability of Florida municipal securities issuers to
meet their financial obligations.
The Short Term High Quality Bond Fund and the Equity Funds invest in
securities of foreign companies and foreign governments. There are certain
risks involved in investing in foreign securities. These risks include those
resulting from future adverse political and economic developments and the
possible imposition of currency exchange restrictions or other foreign laws or
restrictions.
The Northwest Fund concentrates its investments in companies located or doing
business in the Northwest region of the United States. The Northwest Fund is
not intended as a complete investment program and could be adversely impacted
by economic trends within the region.
Certain Funds may invest a portion of their assets in foreign securities;
enter into forward foreign currency transactions; lend their portfolio
securities; enter into stock index, interest rate and currency futures
contracts, and options on such contracts; enter into interest rate swaps or
purchase or sell interest rate caps or floors; engage in other types of
options transactions; make short sales; purchase zero coupon and payment-in-
kind bonds; engage in repurchase or reverse repurchase agreements; purchase
and sell "when-issued" securities and engage in "delayed-delivery"
transactions; and engage in various other investment practices each with
inherent risks.
11. REORGANIZATION
Each Acquiring Fund, as listed below acquired the assets and certain
liabilities of the Acquired Fund, also listed below, in a tax-free exchange
for shares of the Acquiring Fund, pursuant to a plan of reorganization
approved by the Acquired Fund's shareholders. Total shares issued by the
Acquiring Fund, the value of the shares issued by the Acquiring Fund, the
total net assets of the Acquired Fund and the Acquiring Fund and any
unrealized appreciation/(depreciation) included in the Acquired Fund's total
net assets at the acquisition date are as follows:
<TABLE>
<CAPTION>
TOTAL NET
SHARES VALUE OF TOTAL NET TOTAL NET ASSETS OF ACQUIRED
ISSUED BY SHARES ISSUED ASSETS OF ASSETS OF ACQUIRING FUND
ACQUIRING BY ACQUIRING ACQUIRED ACQUIRING FUND AFTER UNREALIZED
ACQUIRING FUND ACQUIRED FUND DATE FUND FUND FUND FUND ACQUISITION APPRECIATION
- -------------- -------------- ---- --------- ------------- ----------- ---------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
WM U.S. Sierra Trust
Government U.S. Government
Securities Fund Fund 03/23/1998 28,476,673 $301,974,738 $301,974,738 $106,773,157 $408,747,895 $ 7,854,832
WM Income Fund Sierra Trust
Corporate Income
Fund 03/23/1998 19,464,376 $167,602,994 $167,602,994 $ 88,584,176 $256,187,100 $18,713,298
WM Tax-Exempt Sierra Trust
Bond Fund Corporate National
Municipal Fund 03/23/1998 19,061,027 $137,168,435 $137,168,435 $192,595,001 $329,763,436 $16,463,451
WM Growth & Sierra Trust
Income Fund Growth and
Income Fund 03/23/1998 20,660,832 $367,723,328 $367,723,328 $393,036,999 $760,760,327 $74,885,030
</TABLE>
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Trustees and Shareholders of
WM Trust I and WM Trust II:
We have audited the accompanying statements of assets and liabilities,
including the portfolios of investments, of WM High Yield Fund, WM Income
Fund, WM U.S. Government Securities Fund, WM Tax-Exempt Bond Fund, WM Bond &
Stock Fund, WM Growth & Income Fund and WM Northwest Fund (all funds of WM
Trust I) and WM Short Term High Quality Bond Fund, WM California Insured
Intermediate Municipal Fund, WM California Municipal Fund, WM Florida Insured
Municipal Fund, WM Growth Fund, WM International Growth Fund, WM Emerging
Growth Fund, and WM Target Maturity 2002 Fund (all funds of WM Trust II)
(collectively the "Funds") as of October 31, 1998, and the related statements
of operations, changes in net assets and financial highlights for the periods
ended October 31, 1998. These financial statements and financial highlights
are the responsibility of the Funds' management. Our responsibility is to
express an opinion on these financial statements and financial highlights
based on our audits. The financial statements of WM Short Term High Quality
Bond Fund, WM California Insured Intermediate Municipal Fund, WM California
Municipal Fund, WM Florida Insured Municipal Fund, WM Growth Fund, WM
International Growth Fund, WM Emerging Growth Fund, and WM Target Maturity
2002 Fund for the years ended June 30, 1998 and 1997 and financial highlights
for the period June 30, 1998 and prior were audited by other auditors whose
report, dated August 14, 1998, expressed an unqualified opinion on those
statements. The financial statements of WM Income Fund, WM U.S. Government
Securities Fund and WM Tax-Exempt Bond Fund for the years ended December 31,
1997 and 1996 and financial highlights for the five years ended December 31,
1997 were audited by other auditors whose report, dated January 20, 1998,
expressed an unqualified opinion on those statements. The financial statements
of WM Bond & Stock Fund, WM Growth & Income Fund and WM Northwest Fund for the
year ended October 31, 1997 and financial highlights for the four years ended
October 31, 1997 were audited by other auditors whose report, dated November
24, 1997, expressed an unqualified opinion on those statements.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements and financial highlights. Our procedures included
confirmation of securities owned at October 31, 1998, by correspondence with
the custodian and brokers; where replies were not received from brokers, we
performed other auditing procedures. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe
that our audit provides a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of the aforementioned
Funds at October 31, 1998, the results of their operations, the changes in
their net assets and their financial highlights for the periods ended October
31, 1998 in conformity with generally accepted accounting principles.
Deloitte & Touche LLP
San Francisco, California
December 11, 1998
<PAGE>
TAX INFORMATION (UNAUDITED)
WM GROUP OF FUNDS
PERIOD ENDED OCTOBER 31, 1998
The following tax information represents fiscal year end disclosures of
various tax benefits passed through to shareholders at calendar year end.
The amounts of long term capital gain paid as follows:
NAME OF FUND
------------
Bond & Stock Fund ....................................... $48,051,411
Growth & Income Fund .................................... 32,234,108
Northwest Fund .......................................... 50,164,372
Of the distributions made from investment income the following percentages are
tax exempt for regular Federal income tax purposes.
NAME OF FUND
-------------
California Insured Intermediate Municipal Fund .............. 100.00%
California Municipal Fund ................................... 100.00%
Florida Insured Municipal Fund .............................. 98.44%
Tax-Exempt Bond Fund ........................................ 99.45%
Of the distributions made by the following Funds, the corresponding
percentages represent the amount of each distribution which will qualify for
the dividends received deduction available to corporate shareholders.
NAME OF PORTFOLIO
------------------
Bond & Stock Fund ........................................... 19.51%
Growth & Income Fund ........................................ 64.62%
The total amount of income received by the International Growth Fund from
sources within foreign countries and possessions of the United States was
$0.0328 per share (representing a total of $519,083). The total amount of
taxes paid to such countries was $0.0051 per share (representing a total of
$57,586).
The above figures may differ from those cited elsewhere in this report due to
differences in the calculation of income and capital gains for Securities and
Exchange Commission (book) purposes and Internal Revenue Service (tax)
purposes.
<PAGE>
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This Annual Report is published for the
general information of the shareholders
of the WM Group of Funds. It is
authorized for distribution to
prospective investors only when preceded
or accompanied by a current WM Group of
Funds prospectus. A mutual fundshare
[Graphic Omitted] price and investment return will vary
with market conditions, and the
principal value of an investment when
you sell your shares may be more or less
than the original cost.
The WM Group of Funds are not insured by
the FDIC. They are not deposits or
obligations of, nor are they guaranteed
by any bank. These securities are
subject to investment risks, including
possible loss of principal amount
invested.
Distributed by
WM Funds Distributor, Inc.
Member NASD
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[logo] WM
GROUPofFUNDS Bulk Rate
U.S. Postage
P.O. Box 5118 PAID
Westborough, MA 01581-5118 No. Reading, MA
Permit #105
[recycle symbol] Printed on recycled paper
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WMGA 130M (12/24/98)
