<PAGE>
[logo] WM VARIABLE
Trust
SEMI-ANNAUL
Report
[graphic omitted]
----------------------------
THE DIFFERENCE IS EXPERIENCE
----------------------------
for the six months ended June 30, 1999
<PAGE>
FIXED-INCOME fund divisions
money market fund
short term high quality bond fund
U.S. government securities fund
income fund
EQUITY fund divisions
bond & stock fund
growth & income fund
growth fund
northwest fund
emerging growth fund
international growth fund
STRATEGIC ASSET MANAGEMENT portfolio divisions
strategic growth portfolio
conservative growth portfolio
balanced portfolio
flexible income portfolio
income portfolio
<PAGE>
MESSAGE FROM THE PRESIDENT ....................................... 2
MARKET & ECONOMIC OVERVIEW ....................................... 4
INDIVIDUAL FUND REVIEWS .......................................... 8
STATEMENTS OF ASSETS AND LIABILITIES ............................. 38
STATEMENTS OF OPERATIONS ......................................... 42
STATEMENTS OF CHANGES IN NET ASSETS .............................. 44
STATEMENTS OF CHANGES IN NET ASSETS - CAPITAL STOCK ACTIVITY ..... 48
FINANCIAL HIGHLIGHTS ............................................. 50
PORTFOLIO OF INVESTMENTS ......................................... 65
NOTES TO FINANCIAL STATEMENTS .................................... 87
<PAGE>
MESSAGE FROM THE PRESIDENT
[graphic omitted]
[Photo of William G. Papesh]
We are pleased to provide you this WM Variable Trust semi-annual report for the
period ended June 30, 1999.
As I review recent market activity, I am struck by certain similarities between
the current investment environment and that of the 1950s and '60s. As in that
period of American economic expansion, U.S. investors today are enjoying an
extended period of economic abundance, brought about by structural changes in
the global economy, as well as revolutionary technological advances.
Equity investors have benefited from exceptionally strong returns through much
of this decade. The S&P 500 rose nearly 23% in the past 12 months, bringing the
market's five-year cumulative gain through June 30, 1999, to over 240%.(1) Since
1995, the U.S. stock market has created almost $7 trillion in wealth.(2) On the
fixed-income side, the early 1990s brought bond investors significant
opportunities to benefit from declining interest rates. Internationally,
increased opportunities in emerging markets have offered aggressive growth
investors new venues in which to invest.
While this decade has been quite rewarding for many investors, there are aspects
of the economy and financial markets that warrant some caution. For example, the
domestic economy is expanding rapidly due primarily to strong consumer spending,
with GDP growing around 4% on an annualized basis. As a result, there is
increased fear among investors that higher inflation may lead to higher interest
rates. Also, while the Dow Jones Industrial Average continued to post record
highs, only recently has the stock market's strength broadened. Until the second
quarter of 1999, stocks of small- and medium-sized companies had not kept pace
with the mega-cap growth stocks, some of which are trading at more than 100
times earnings. There is also concern that rapid change in the technology sector
has created a speculative environment, particularly with regard to some Internet
stocks.
DEVELOP A STRATEGY TO WEATHER MARKET CYCLES
While no one can precisely predict the future course of the stock market, the
economy and financial markets are often linked in more predictable ways.
Economic growth can fuel inflation and higher interest rates, typically
resulting in reduced consumer spending and slower corporate earnings growth. On
the other hand, when the economy slows, interest rates typically fall, which
helps to spur renewed investment. These cycles are an inherent part of
investing. Fortunately, there are a variety of strategies that individual
investors can employ to lessen the effects of market volatility on their
portfolios.
First and foremost, investors can seek to remain diversified by investing in a
mix of equity and fixed-income investments. Some investors may be tempted to
ignore this strategy when stocks are posting 20%+ returns per year. For example,
over the past five years, the WM VARIABLE TRUST GROWTH FUND posted an average
annual return of 32.45%, not adjusted for the maximum sales charge. For the 12
months ended June 30, 1999, the Fund gained 61.62%.(3) Yet, I would caution
investors to remember that these years have been marked by an exceptionally
strong stock market. Over an investment horizon of 10 or 20 years, a diversified
strategy can provide strong returns with less risk than a pure equity portfolio.
The STRATEGIC ASSET MANAGEMENT PORTFOLIOS are designed to manage risk and
represent a diversified investment solution.
Another strategy investors can use to help reduce risk in their investment
portfolios is known as dollar cost averaging (DCA). With this strategy, a set
amount or percentage is invested automatically from a fixed account or money
market, within the WM VARIABLE TRUST, to a WM FUND or PORTFOLIO on a monthly,
quarterly, semi-annual, or annual basis. The advantage of a DCA program is that
it allows you to take advantage of price fluctuation. For example, if you invest
$250 each month, more shares will be bought when prices are low and fewer shares
when prices are high. It is important to note that DCA does not guarantee a
profit or protect against a loss. You may select either a six-month or a
12-month program, both of which offer attractive rates.
YOUR INVESTMENT REPRESENTATIVE IS A VALUABLE RESOURCE
Whether you are investing for retirement, future college tuition costs, or
short-term goals, your ability to meet your financial goals will require a
well-defined investment strategy. Your Investment Representative can help you in
several ways. First, he or she has the tools and resources available to help you
clearly define your goals. Many individuals today who are saving for retirement,
for example, may be unsure about the amount they actually need to save. Your
Investment Representative can help you evaluate how the rising cost of living,
coupled with today's longer lifespans, will affect your retirement savings goal.
Secondly, your Investment Representative can assist you in determining which
types of investment vehicles are best suited for your goals and objectives.
The WM VARIABLE TRUST FUNDS offer a variety of investment objectives to help you
meet your financial goals. You can choose to combine individual funds, including
stock, bond, and money market funds, to create a diversified portfolio. Or, if
you seek the advantages of a professionally managed asset allocation portfolio,
consider also the STRATEGIC ASSET MANAGEMENT PORTFOLIOS. We suggest you consult
with your Investment Representative to determine which investments are
appropriate for your particular needs.
Thank you for your continued trust in the WM VARIABLE TRUST. We look forward to
continuing to provide you with investment opportunities, today and into the next
century.
Sincerely,
/s/ William G. Papesh
William G. Papesh
President
(1) Source: Ibbotson Associates
(2) Source: YOUR MONEY, June/July 1999
(3) Excludes all annuity expenses charged by American General Life Insurance
Company Separate Account D through which shares of the Fund are purchased.
Please see page 20 for additional performance and explanation. Past
performance is not a guarantee of future results.
<PAGE>
WM VARIABLE TRUST
market & economic overview
STRONG ECONOMIC GROWTH A POSITIVE FOR INVESTORS
As global markets stabilized, U.S. financial markets largely recovered in the
fourth quarter of 1998. Normal price relationships in debt securities had been
restored, and investor confidence was high. This positive environment spilled
into 1999, as the Dow Jones Industrial Average broke through the 10,000-point
barrier on March 29, 1999, and then eclipsed 11,000 in early May.
The first few months of 1999 followed trends of recent periods, as the largest
companies tended to outperform smaller companies. In the first quarter of 1999,
the S&P 500 returned 4.98%. The S&P Mid-Cap 400 posted a -6.38% return, while
the Russell 2000, which represents smaller companies, fell 5.42%. This trend
reversed in the second quarter as market breadth expanded; both the Mid-Cap
(+14.16%) and Small-Cap (+15.55%) indices more than doubled the return of the
S&P 500 (+7.05%). Value stocks also returned to favor after quite a long run of
growth stock dominance. Generally speaking, a growth-oriented stock has the
potential to increase earnings faster than other securities in the market. On
the other hand, a value-oriented stock is currently thought of as having an
undervalued price relative to the market.
STRONG ECONOMY BOLSTERS U.S. MARKETS
The U.S. economy posted surprisingly strong growth in the first quarter of 1999
and continued to expand in the second quarter, which bolstered corporate
earnings growth. In 1998, gross domestic product (GDP) grew 3.9%, with increases
in consumer spending generating a large amount of the results. Continued
strength in economic growth in 1999 raised concerns of potentially higher
inflation, but wage and price pressures did not materialize until the end of the
period. This phenomenon is unique, as inflation pressures normally follow
periods of such strong economic growth.
In the first quarter of 1999, GDP growth of 4.3% was attributed to increases in
consumer spending and business investment in technology. Consumer spending grew
at a 6.7% annual rate in the first quarter, a significant increase over prior
quarters. Rising consumer confidence is due, in part, to falling energy prices
and low interest rates, which has led to a boom in mortgage refinancing.
Business investment in durable equipment also rose, with spending on information
technology up 21% on an annualized basis. Residential construction spending also
posted strong gains in the first quarter. Second quarter results reflected a
slowdown in consumer spending after the sizzling housing market began to lose
steam. The effect of a negative trade balance also reduced overall output during
the period, with GDP growth initially reported below estimates at 2.3%.
Strong economic growth can often negatively impact the stock market, as
investors fear rising inflation will trigger higher interest rates and dampen
corporate earnings. Yet, despite historically low unemployment levels, inflation
has remained relatively subdued, although employment costs have been on the
rise. In a move that they called "pre-emptive", the Federal Reserve raised
interest rates 25 basis points (0.25%) at its June 30, 1999, Federal Open Market
Committee (FOMC) meeting.
DOW JONES INDUSTRIAL AVERAGE
six months ended 6-30-99
- -----------------------------
Dec 98 9,181
Jan 99 9,643
9,340
9,120
9,358
Feb 99 9,304
9,274
9,339
9,306
Mar 99 9,736
9,876
9,903
9,822
Apr 99 9,832
10,173
10,493
10,689
10,789
May 99 11,032
10,913
10,829
10,560
Jun 99 10,800
10,491
10,856
10,553
10,971
10,789
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. stock market performance. Individuals
cannot invest directly in an index.
YIELD ON THE 30-YEAR TREASURY BOND
six months ended 6-30-99
- -----------------------------------
Dec 98 5.100
Jan 99 5.270
5.110
5.080
5.090
Feb 99 5.350
5.420
5.390
5.580
Mar 99 5.600
5.530
5.560
5.660
Apr 99 5.600
5.460
5.570
5.600
5.660
May 99 5.810
5.920
5.750
5.830
Jun 99 5.960
6.160
5.970
6.150
5.960
Source: The Wall Street Journal
Note: Represents yield on the 30-year Treasury bond which is sometimes used to
characterize the overall bond market.
INTEREST RATES INCREASE
Following Russia's debt default last August, investors flocked to U.S. debt
issues, and as a result, rates on lower-quality debt rose dramatically. With
strong demand for U.S. government debt, yields on Treasuries fell while prices
increased significantly. As the financial crisis spread to Latin America, the
Federal Reserve acted to forestall a "liquidity crunch" and to maintain normal
price relationships between short- and long-term debt. By the end of 1998, the
Federal Reserve had dropped the target federal funds rate (the rate which banks
charge each other for excess reserves held at the Federal Reserve Bank to meet
overnight reserve requirements) from 5.5% to 4.8%, and cut the discount rate on
two occasions to 4.5%.
Overall investor confidence continued to strengthen in the first quarter of 1999
and growth accelerated. As a result, the Federal Reserve's interest rate policy
once again focused on inflation. With strong job growth and an unemployment rate
at the lowest point in three decades, inflation remained relatively subdued, but
employment costs are showing signs of increasing. Until recently, a combination
of modest increases in wages and better-than-expected productivity gains had
resulted in flat or lower unit labor costs. The Fed increased rates once and is
poised to do so again if wage pressures are sustained.
Yields on long-term U.S. Treasury bonds climbed to nearly 6% on June 30, from
5.1% at the end of 1998. Since February, long-term interest rates have drifted
upward, amid concerns that the Federal Reserve may be forced to act to forestall
inflation.
ASSET CLASS PERFORMANCE DISPARITY
six months ended 6-30-99
LARGE-CAP STOCKS 12.38%
MID-CAP STOCKS 6.87%
SMALL-CAP STOCKS 9.29%
MORTGAGE BONDS 0.52%
T-BILLS 2.26%
CORPORATE BONDS -2.26%
GOVERNMENT BONDS -2.27%
Source: Ibbotson Associates. Domestic stocks are represented by: S&P 500, S&P
Mid-Cap 400, and the Russell 2000, respectively. Bonds are represented by Lehman
Brothers indices. 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.
INTERNATIONAL MARKETS POST MIXED RESULTS
Several international economies have shown signs of recovery, but many analysts
do not expect economic growth in emerging economies to reach the levels seen
earlier in the decade for some time. The Morgan Stanley Capital International
(MSCI) Europe, Australasia and Far East (EAFE) Index gained over 4% for the
six-month period ended June 30, 1999, with stronger performances by several
Asian and Nordic countries offsetting generally weak results in most of Europe.
The introduction of the Euro on January 1 established a new benchmark indicator
for the direction of European economic growth and import/export activity. The
cooperative framework between the 11 participating countries is being tested as
the European Central Bank seeks to satisfy competing agendas. In one of its
first moves, the bank cut interest rates 50 basis points to stimulate growth and
increase pressure for corporate restructurings and labor market reform.
Japan continues to be mired in a recession. In yet another attempt to jump-start
its economy, the Bank of Japan dropped short-term interest rates to nearly zero
percent in March. However, corporate borrowing remains at very low levels. The
Japanese economy has shown early signs of recovery, and the market responded
very favorably in the second quarter. It still remains to be seen if the growth
is sustainable and how long it will take for Japan to regain economic strength.
Financial stability in emerging economies is gradually being restored and
markets have resoundingly responded. International Finance Corporation's Global
Emerging Composite Index was up over 38% in just six months, as the Asian region
has been very strong. In Latin America, stock markets of both Mexico and Brazil
strengthened considerably in 1999 as global uncertainty eased.
Slower economic growth internationally had a negative effect on U.S. export
growth. Exports have increased from their lows, but have been more than offset
by huge growth in imports. In the near term, the U.S. economy will continue to
rely on domestic consumer demand, but the trade balance could improve in the
coming months.
TEMPERING THE EFFECTS OF MARKET VOLATILITY
While the stock market has continued to reach new highs this year, no one can
predict what direction it is headed next. As an investor, however, one thing you
can count on with certainty is market volatility. Investors should not become
overconfident that the markets will continue to provide the above-average
returns we have witnessed in recent years. Even in a bull market, it is wise to
be prepared for market volatility. Since investment risk and reward go
hand-in-hand, it is essential that you take steps to protect your assets while
striving to meet your long-term goals.
Asset allocation and diversification help to minimize risk. Investing in
different asset classes, such as stocks, bonds and cash equivalents, can help
you minimize the effect a downturn in one market sector may have on your entire
portfolio. While creating a well-diversified portfolio can help smooth out the
effects of market swings on your overall portfolio, it is essential that you
review your investment mix on a regular basis. Allowing your portfolio to become
too heavily weighted in one asset class can reduce diversification and expose
you to unnecessary risk.
INTERNATIONAL MARKET PERFORMANCE
six months ended 6-30-99
WORLD 8.69%
EUROPE -2.27%
PACIFIC REGION 21.95%
JAPAN 29.64%
NORDIC REGION 16.90%
IFCG EMERGING MARKETS 38.27%
Sources: Morgan Stanley Capital International (MSCI). MSCI indices are
maintained and calculated by Morgan Stanley's Capital International group, which
tracks more than 45 equity markets throughout the world. The MSCI indices are
market capitalization weighted and cover both developed and emerging markets. In
addition to the country indices, MSCI also calculates aggregate indices for the
world, Europe, North America, Asia and Latin America. Most international mutual
funds measure their performance against MSCI indices. Each region above is
represented by the corresponding MSCI Index in U.S. Dollars. There are
additional risks associated with international investing, including currency
fluctuations.
INVESTMENT CHOICES OFFERED BY THE WM VARIABLE TRUST
The WM VARIABLE TRUST FUNDS offer an array of professionally managed,
tax-deferred investments that may be appropriate for your portfolio. Depending
on your financial goals, you can choose among a variety of investment options,
including six equity funds, three bond funds, a money market fund, and five
asset allocation portfolios.
To find out how the WM VARIABLE TRUST FUNDS can help you reach your long-term
goals, please contact your Investment Representative for a STRATEGIC ASSET
MANAGER prospectus, which contains more complete information, including charges
and expenses.
<PAGE>
TO OUR CONTRACT OWNERS:
WE ARE PLEASED TO PROVIDE YOU
WITH AN OVERVIEW OF THE FUNDS AND PORTFOLIOS
IN THE WM VARIABLE TRUST
FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 1999.
TO HELP YOU BETTER UNDERSTAND THE
PROFESSIONAL INVESTMENT MANAGEMENT
AVAILABLE TO YOU AS A CONTRACT OWNER
WITH INVESTMENT OPTIONS FROM THE
WM VARIABLE TRUST FUNDS AND PORTFOLIOS,
WE HAVE ALSO INCLUDED
BIOGRAPHIES OF THE INVESTMENT PROFESSIONALS
MANAGING THE UNDERLYING FUNDS AND PORTFOLIOS.
<PAGE>
WM Variable Trust
INDIVIDUAL FUND reviews
- --------------------------------------------------------------------------------
WM ADVISORS, INC. IS THE INVESTMENT ADVISOR TO WM VARIABLE TRUST, AND HAS
GENERAL OVERSIGHT RESPONSIBILITY FOR THE ADVISORY SERVICES PROVIDED TO THE
UNDERLYING FUNDS. THESE SERVICES INCLUDE FORMULATING THE UNDERLYING FUNDS'
INVESTMENT POLICIES, ANALYZING ECONOMIC TRENDS AFFECTING THE FUNDS, AND
DIRECTING AND EVALUATING THE INVESTMENT SERVICES PROVIDED BY THE SUB-ADVISORS
AND THE INDIVIDUAL PORTFOLIO MANAGERS OF EACH FUND. WM ADVISORS, INC. SUPERVISES
THE INDIVIDUAL PORTFOLIO MANAGERS IN THEIR DAY-TO-DAY MANAGEMENT OF THE
UNDERLYING FUNDS IN THE WM VARIABLE TRUST FAMILY TO ENSURE THAT POLICIES AND
GUIDELINES ARE MET, AND TO DETERMINE APPROPRIATE INVESTMENT PERFORMANCE
MEASURES.
UNDERSTANDING THE ENCLOSED CHARTS
In order to help you understand each WM Variable Trust Fund's investment
performance, we have included the following discussions along with graphs that
compare each Fund's 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 unit value of the Fund 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 Fund's unit value and
investment return will vary with market conditions, and the principal value of
an investment when you redeem your units may be more or less than the original
cost.
Where applicable, the total returns of the Funds reflect the Advisors' voluntary
waiver of fees, reimbursement of certain expenses, and credits allowed by the
Custodian. Total returns would have been lower if these fees, expenses, and
credits had not been waived, reimbursed or reduced.
Both the Funds' performance results and the market indices reflect total
reinvestment of income, dividends, and capital gains. The unit values of these
variable options will fluctuate with market conditions.
THE YEAR 2000 PROBLEM
Many computer systems in use today cannot properly process date-related
information in relation to the year 2000. This issue originates in the practice
of abbreviating years to their last two digits. Computer systems may not be able
to decide correctly when a date entered with a year of "00" should be
interpreted as 1900 or 2000. At the turn of the new century, computer systems
may not function properly because they may not be able to recognize or interpret
the year 2000.
Should any of the computer systems employed by the underlying WM Variable Trust
Funds' or Portfolios' major service providers fail to process this type of
information properly, it could have a negative impact on underlying Fund or
Portfolio operations and services that are provided to contract owners.
Similarly, the values of certain of the underlying WM Variable Trust Funds' or
Portfolios' assets may be adversely affected by the inability of their issues or
third parties to properly process date-related information.
The Advisor, Shareholder Servicing Agent and Administrator have advised the
underlying Funds and Portfolios that they are reviewing all of their computer
systems with the goal of modifying or replacing such systems prior to January 1,
2000, to the extent necessary to avoid any such negative impact. Furthermore,
the underlying Funds and Portfolios are seeking assurances from each of their
key service providers that similar replacements or modifications will be
completed to avoid any negative impact from this issue. As of this date, the
underlying Funds and Portfolios have received assurances from their key service
providers. However, there can be no guarantee that the assurances will
ultimately be successful. In the event a key service provider cannot provide
such assurances, the underlying Funds and Portfolios may consider retaining an
alternative 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 underlying Funds, Portfolios, and Advisor have no reason to believe
that these goals will not be achieved.
The Funds of the WM Variable Trust may not be purchased directly but are
currently available only through the WM Strategic Asset Manager and WM Advantage
tax-deferred variable annuities issued by American General Life Insurance
Company. Annuity contract owner values will depend not only on the performance
of the Funds, but also on the mortality and expense risk charges and
administrative charges under the WM Strategic Asset Manager and WM Advantage
tax-deferred variable annuity contracts.
<PAGE>
MONEY MARKET fund
- --------------------------------------------------------------------------------
PORTFOLIO MANAGER:
AUDREY QUAYE
WM ADVISORS, INC.
Audrey Quaye has over six years experience in investment management and
analysis. She is a Certified Public Accountant, holds an MBA, and has been with
WM Advisors, Inc. since 1996.
ECONOMIC OVERVIEW
Economic data released during the last six months indicated stronger-than-
expected growth, led by the housing, manufacturing and retail sectors. Consumer
confidence was high during most of the period, as strength in personal income
supported large increases in spending levels. Labor markets continued to be
tight as the unemployment rate declined to a historically low 4.2% in March of
1999 and closed the period at 4.3%. Conversely, growth was slowed somewhat by
weak export demand in selected sectors. This occurred despite evidence of
improving economic conditions in Southeast Asian countries. Oil prices, an
important factor in overall global inflation, surged in April following an OPEC
agreement on production rates and led to some concern of mounting price
pressures. The Federal Open Market Committee raised its target fed funds rate
(the rate at which banks borrow from each other) from 4.75% to 5% on June 30,
1999. The Fed took this action in response to mounting evidence of inflationary
pressures in the U.S. economy.
The benchmark 90-day U.S. Treasury bill yield averaged 4.53% during the
six-month period ended June 30, 1999. The Treasury bill yield declined from
4.46% on January 1, 1999, to 4.27% on April 13, 1999. The yield then rose to a
high of 4.82% on June 29, 1999, in anticipation of the Fed rate hike. Likewise,
the three-month money market rate rose from 4.85% on April 26, 1999, to 5.32% on
June 30, 1999.
ECONOMIC AND INTEREST RATE OUTLOOK
Our outlook on the bond market has shifted to a more neutral stance, as the
inflation outlook is uncertain. Until conditions warrant a shift, we will
continue to remain neutral relative to our benchmark.
FUND STRATEGY
The MONEY MARKET FUND'S net assets on June 30, 1999, totaled $23.18 million,
down 27% from $31.86 million on December 31, 1998. The Fund's net assets
declined primarily due to the rebalancing of the WM Variable Trust Strategic
Asset Management Portfolios, which invest in the Fund. During the period, we
increased the Fund's exposure to the banking and foreign sectors. We also
reduced the portfolio's weighted average maturity in view of our interest rate
outlook.
Note: Principal is not guaranteed or insured by the U.S. Government, and yields
will fluctuate depending on market conditions. There is no assurance the Fund
will maintain a stable unit value.
money fund
<PAGE>
SHORT TERM HIGH QUALITY BOND fund
PORTFOLIO MANAGER
GARY POKRZYWINSKI
WM ADVISORS, INC.
A fixed-income team led by Senior Portfolio Manager Gary Pokrzywinski, who has
over 14 years of asset management experience and has been with WM Advisors, Inc.
for more than six years, manages the Short Term High Quality Bond Fund.
Mr. Pokrzywinski is a Chartered Financial Analyst and holds a Business Degree
from the University of Wisconsin.
Performance Review(4)
The SHORT TERM HIGH QUALITY BOND FUND advanced 1.20% during the six-month period
ended June 30, 1999, as interest rates generally increased. Long-term results
are very favorable and provide the potential for inflation protection, as the
Fund has averaged 4.96% for the past five years.
GROWTH OF A $10,000 INVESTMENT(2),(3)
Fund Lehman Brothers
(without Mutual Fund Short
annuity Inflation (1-5) Investment
expenses)(4) (CPI)(1) Grade Debt Index(1)
- --------------------------------------------------------------------------------
Inception 1/12/94 $10,000 $10,000 $10,000
10,000 10,000 10,000
9,960 10,028 9,898
Mar 94 9,920 10,049 9,785
9,880 10,090 9,726
9,880 10,097 9,743
Jun 94 9,880 10,097 9,770
9,961 10,125 9,898
10,001 10,159 9,942
Sep 94 9,953 10,194 9,887
9,994 10,208 9,899
9,994 10,215 9,843
Dec 94 9,838 10,250 9,864
9,838 10,277 10,027
9,838 10,318 10,227
Mar 95 9,921 10,346 10,291
9,999 10,354 10,412
10,081 10,367 10,680
Jun 95 10,288 10,367 10,750
10,329 10,409 10,778
10,329 10,450 10,871
Sep 95 10,329 10,485 10,942
10,413 10,519 11,049
10,455 10,540 11,182
Dec 95 10,583 10,561 11,288
10,668 10,561 11,405
10,753 10,589 11,323
Mar 96 10,710 10,610 11,279
10,710 10,645 11,269
10,710 10,638 11,278
Jun 96 10,797 10,630 11,384
10,841 10,693 11,427
10,886 10,727 11,450
Sep 96 10,975 10,783 11,596
11,065 10,825 11,775
11,155 10,845 11,905
Dec 96 11,155 10,852 11,863
11,201 10,873 11,924
11,247 10,893 11,955
Mar 97 11,247 10,928 11,901
11,294 10,963 12,025
11,387 10,984 12,121
Jun 97 11,433 10,984 12,227
11,575 11,019 12,440
11,575 11,053 12,403
Sep 97 11,670 11,081 12,532
11,718 11,094 12,620
11,766 11,087 12,641
Dec 97 11,814 11,101 12,724
11,862 11,122 12,877
11,911 11,143 12,886
Mar 98 11,940 11,164 12,935
11,988 11,184 13,006
12,038 11,204 13,095
Jun 98 12,087 11,218 13,163
12,137 11,231 13,215
12,236 11,245 13,328
Sep 98 12,385 11,258 13,602
12,436 11,285 13,578
12,436 11,285 13,642
Dec 98 12,487 11,299 13,687
12,436 11,326 13,788
12,538 11,340 13,668
Mar 99 12,589 11,375 13,795
12,589 11,457 13,861
12,538 11,457 13,775
Jun 99 12,585 11,499 13,813
(1) Index total returns were calculated from 1/31/94 to 6/30/99. The Lehman
Brothers Mutual Fund Short (1-5) Investment Grade Debt Index includes all
investment-grade corporate debt securities with maturities of one to five
years.
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.
(2) Past investment performance does not guarantee future performance. The
returns for the Fund assume reinvestment of all dividends/distributions.
<TABLE>
<CAPTION>
TOTAL AVERAGE RETURNS AS OF 6/30/99(2), (3) SIX MONTH ONE YEAR FIVE YEAR(8) SINCE INCEPTION(8)
(January 12, 1994)
<S> <C> <C> <C> <C>
Fund (without annuity expenses)(4) 1.20% 4.13% 4.96% 4.30%
Fund (with annuity expenses)(5), (6) 0.49% 2.67% 3.50% 2.84%
Fund (adjusted for the maximum surrender charge)(5), (7) -5.99% -3.08% 2.71% 2.08%
Lehman Brothers Mutual Fund Short (1-5) Investment Grade Debt Index(1) 0.92% 4.94% 7.17% 6.14%
</TABLE>
(3) 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.
(4) Excludes all annuity expenses (which are itemized in footnote #5) charged by
American General Life Insurance Company Separate Account D through which
shares of the Fund are purchased.
(5) Total returns are based on the change in unit value and reflect expenses
such as mortality and expense risk charges and administrative expense
charges of 1.4%. Returns do not account for income taxes due at withdrawal
or for premium taxes. All of the return information shown prior to April 29,
1998 pre-dates the effective date of the Division's first investment in the
Fund. The return information after that date reflects actual annual
historical performance of the Division. The above values relate only to the
WM Strategic Asset Manager Contract. The total return for the WM Advantage
Contract would have been lower due to higher expenses.
(6) Excludes maximum Surrender Charge of 0%-7% and $35 annual contract fee.
(7) Includes maximum Surrender Charge of 0%-7% and $35 annual contract fee.
(8) Annualized.
WHAT WERE THE MOST SIGNIFICANT FACTORS CONTRIBUTING TO THE FUND'S PERFORMANCE
OVER THE SIX-MONTH PERIOD ENDED JUNE 30, 1999, AND WHAT INVESTMENT TECHNIQUES
WERE USED TO ADDRESS THOSE CONDITIONS?
Generally, with a portfolio of short-term securities, the largest contributor to
performance is almost always the income generated by the Fund. Short-term bond
prices are normally relatively stable, as they do not fluctuate with interest
rate changes as much as long-term holdings. In addition, the Fund is highly
concentrated in the highest rated securities. It is managed in an effort to be
more stable and less risky than longer-maturity and lower-rated investment
vehicles.
During the six-month period ended June 30, 1999, interest rates rose
significantly, even for short-term maturities. The yield on the two-year
Treasury rose nearly 100 basis points, (1.00%) from 4.53% in December to 5.52%
in June. Although this had a negative impact on performance because of the
Fund's short-term holdings, the effects were tempered. Relative performance can
be attributed to the low duration (a measure of price sensitivity to interest
rate changes) of the Fund and the strength in mortgages and asset-backed
securities. These securities performed very well in the first quarter, although
they were down slightly in the second quarter. After performing relatively well
during the early part of 1999, corporate bonds underperformed modestly during
the second quarter. Concerns over continued intervention by the Federal Reserve
caused yield differentials to increase relative to Treasuries.
WERE THERE ANY SHIFTS IN THE FUND'S PORTFOLIO HOLDINGS/SECTORS THAT HAVE HAD A
SIGNIFICANT IMPACT ON PERFORMANCE?
As always, we remain very focused on high-quality holdings with an average
weighting of AA++; currently, 77% of assets are invested in bonds rated AA or
higher. Asset-backed securities have provided strong overall results in 1999.
These holdings currently provide a 65 basis point yield advantage over
Treasuries and have a secure structure with very little credit risk. We are in
the process of increasing the position of these types of securities. We feel
that a diversified portfolio of short-term mortgages, asset-backed, corporates
and Treasuries should generate a competitive yield and provide relative
stability.
The overall investment strategy is to modestly shift the holdings between
sectors depending upon historical yield (spread) relationships. Generally, we
think the best approach is to have the highest ratings concentrated in
asset-backed, mortgage, and Treasury securities (equivalent to AAA) and hold
corporate securities for the A and BBB portion. This balance provides good
risk/reward characteristics. Currently, we are looking to add additional income
to the Fund by focusing investments in BBB rated securities.
SHORT TERM HIGH QUALITY BOND fund
portfolio composition(++)
AAA 64%
AA 13%
A 9%
BBB 13%
BB 1%
WHAT IS THE OUTLOOK FOR BOTH THE FUND AND THE OVERALL ECONOMY?
Economic growth has been far greater than predicted by most economists and
analysts. The domestic economy has expanded at an average of nearly 4% for the
past six months -- high relative to historical averages. Following the
higher-than-expected growth were renewed concerns over inflation and the
intervention by the Federal Reserve. This has caused a fairly substantial rise
in interest rates for short-term Treasuries. We feel that the interest rate
increase is a short-term phenomenon, and we see rates falling over the next 12
months. This would create a very positive environment for the Fund -- if growth
slows from current levels and inflation concerns subside, rates could fall,
supporting price performance for fixed-income assets.
(++) Allocation percentages are based on total investment value of the portfolio
as of 6/30/99. Bond ratings are of portfolio holdings and are provided by a
combination of both Moody's and Standard & Poor's. Past performance is not
a guarantee of future results.
fixed-income fund
<PAGE>
U.S. GOVERNMENT SECURITIES fund
PORTFOLIO MANAGER:
CRAIG SOSEY
WM ADVISORS, INC.
A fixed-income team led by Senior Portfolio Manager Craig Sosey, who has over 15
years banking and financial analysis experience and joined WM Advisors, Inc. in
1998, manages the U.S. Government Securities Fund. Mr. Sosey has a BS in Finance
from the University of the Pacific and an MBA from the University of California,
Berkeley. He has extensive experience managing government and mortgage-backed
securities.
PERFORMANCE REVIEW(4)
The U.S. GOVERNMENT SECURITIES FUND returned -0.67%, as interest rates increased
during the six-month period ended June 30, 1999. Long-term results are very
favorable and provide the potential for inflation protection, as the Fund has
averaged 7.16% for the past five years. For additional information, see the
accompanying chart.
GROWTH OF A $10,000 INVESTMENT(2), (3)
Lehman Lehman
Fund Brothers Brothers
(without U.S. U.S.
annuity Inflation Government Mortgage
expenses)(4) (CPI)(1) Index(1) Index(1)
- --------------------------------------------------------------------------------
Inception 5/6/93 $10,000 $10,000 $10,000 $10,000
10,010 10,000 10,000 10,000
Jun 93 10,093 9,993 10,222 10,076
10,153 10,042 10,284 10,116
10,283 10,077 10,514 10,164
Sep 93 10,294 10,112 10,554 10,173
10,305 10,141 10,594 10,202
10,163 10,155 10,477 10,182
Dec 93 10,227 10,169 10,518 10,265
10,359 10,169 10,662 10,366
10,176 10,198 10,436 10,294
Mar 94 9,921 10,219 10,201 10,026
9,829 10,261 10,121 9,952
9,808 10,268 10,108 9,992
Jun 94 9,792 10,268 10,084 9,970
9,928 10,296 10,270 10,169
9,928 10,331 10,272 10,202
Sep 94 9,824 10,366 10,127 10,057
9,803 10,380 10,120 10,051
9,760 10,388 10,102 10,020
Dec 94 9,813 10,423 10,163 10,100
10,017 10,451 10,352 10,316
10,265 10,493 10,575 10,579
Mar 95 10,329 10,521 10,642 10,629
10,460 10,529 10,781 10,779
10,821 10,542 11,216 11,119
Jun 95 10,876 10,542 11,302 11,182
10,853 10,585 11,260 11,201
10,976 10,627 11,392 11,318
Sep 95 11,031 10,662 11,501 11,418
11,211 10,697 11,676 11,519
11,403 10,719 11,858 11,650
Dec 95 11,471 10,740 12,027 11,796
11,574 10,740 12,100 11,885
11,379 10,768 11,853 11,786
Mar 96 11,333 10,789 11,755 11,743
11,263 10,825 11,679 11,711
11,193 10,817 11,660 11,677
Jun 96 11,321 10,810 11,810 11,838
11,298 10,874 11,840 11,882
11,298 10,908 11,813 11,882
Sep 96 11,487 10,965 12,010 12,080
11,750 11,008 12,274 12,317
11,954 11,029 12,487 12,493
Dec 96 11,894 11,035 12,360 12,428
11,931 11,056 12,374 12,520
11,979 11,077 12,391 12,561
Mar 97 11,833 11,113 12,260 12,443
11,982 11,148 12,436 12,641
12,105 11,170 12,544 12,765
Jun 97 12,241 11,170 12,685 12,915
12,556 11,205 13,045 13,158
12,443 11,240 12,916 13,126
Sep 97 12,632 11,268 13,109 13,293
12,862 11,282 13,336 13,440
12,874 11,275 13,404 13,485
Dec 97 13,015 11,288 13,545 13,607
13,183 11,310 13,748 13,742
13,144 11,331 13,711 13,771
Mar 98 13,156 11,353 13,749 13,829
13,235 11,373 13,811 13,908
13,379 11,394 13,953 13,999
Jun 98 13,499 11,408 14,113 14,066
13,552 11,421 14,134 14,138
13,794 11,435 14,501 14,267
Sep 98 13,929 11,449 14,893 14,440
13,997 11,476 14,842 14,421
13,875 11,476 14,847 14,493
Dec 98 13,931 11,490 14,879 14,555
13,999 11,518 14,966 14,659
13,862 11,532 14,609 14,600
Mar 99 13,967 11,567 14,666 14,698
14,023 11,651 14,700 14,765
13,911 11,651 14,571 14,683
Jun 99 13,837 11,694 14,542 14,631
(1) Index total returns were calculated from 5/31/93 to 6/30/99. The Lehman
Brothers U.S. Government Index represents all U.S. Government agency and
Treasury securities. The Lehman Brothers U.S. Mortgage Index includes all
agency mortgage-backed securities. 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.
(2) Past investment performance does not guarantee future performance. The
returns for the Fund assume reinvestment of all dividends/distributions.
<TABLE>
<CAPTION>
TOTAL AVERAGE RETURNS AS OF 6/30/99(2), (3) SIX MONTH ONE YEAR FIVE YEAR(8) SINCE INCEPTION(8)
(May 6, 1993)
<S> <C> <C> <C> <C>
Fund (without annuity expenses)(4) -0.67% 2.49% 7.16% 5.42%
Fund (with annuity expenses)(5), (6) -1.38% 1.04% 5.67% 3.95%
Fund (adjusted for the maximum surrender charge)(5), (7) -7.85% -4.71% 4.94% 3.42%
Lehman Brothers U.S. Government Index(1) -2.27% 3.04% 7.60% 6.35%
Lehman Brothers U.S. Mortgage Index(1) 0.52% 4.01% 7.97% 6.46%
</TABLE>
(3) 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.
(4) Excludes all annuity expenses (which are itemized in footnote #5) charged by
American General Life Insurance Company Separate Account D through which
shares of the Fund are purchased.
(5) Total returns are based on the change in unit value and reflect expenses
such as mortality and expense risk charges and administrative expense
charges of 1.4%. Returns do not account for income taxes due at withdrawal
or for premium taxes. All of the return information shown prior to April 29,
1998 pre-dates the effective date of the Division's first investment in the
Fund. The return information after that date reflects actual annual
historical performance of the Division. The above values relate only to the
WM Strategic Asset Manager Contract. The total return for the WM Advantage
Contract would have been lower due to higher expenses.
(6) Excludes maximum Surrender Charge of 0%-7% and $35 annual contract fee.
(7) Includes maximum Surrender Charge of 0%-7% and $35 annual contract fee.
(8) Annualized.
WHAT WERE THE MOST SIGNIFICANT FACTORS CONTRIBUTING TO THE FUND'S PERFORMANCE
OVER THE SIX-MONTH PERIOD ENDED JUNE 30, 1999, AND WHAT INVESTMENT TECHNIQUES
WERE USED TO ADDRESS THOSE CONDITIONS?
Interest rates rose dramatically over the last six months, as worries about the
global economy receded and the U.S. economy remained remarkably strong. Consumer
spending increased, as strong consumer confidence and rising income levels
supported growth. With the higher-than-expected growth, price pressures
surfaced, and the Federal Reserve increased short-term interest rates at the end
of the period. The rate on the two-year Treasury note increased nearly 100 basis
points, from 4.53% to 5.52%, while the 30-year bond yield rose 88 basis points
to 5.97%. This, of course, had a negative impact on the performance of the Fund,
since bond prices move in the opposite direction of interest rates.
Helping offset the higher interest rates was the improved performance of
mortgage-backed securities during the period. Mortgage spreads tightened in the
past six months, as prepayment fears lessened and refinancing opportunities
diminished. Consequently, mortgage holdings outperformed Treasuries, as the
difference in yields between these two types of bonds got smaller. This allowed
better relative price movement as well as normally higher income levels.
However, near the end of the period, spreads began to widen somewhat, as
investors feared mortgage prepayments would slow more than originally expected,
increasing their sensitivity to changes in interest rates or duration, beyond
desired levels.
Mortgages make up a significant portion of the Fund and have generated good
results relative to many other fixed-income investments for the period. In fact,
the Fund significantly outpaced its benchmark, the Lehman Brothers U.S.
Government Index, which returned -2.27% over the past six months. We will
continue to focus on mortgage-backed securities, as they normally perform very
well in stable interest rate environments, and we feel this strategy will help
us meet our long-term investment goals.
WERE THERE ANY SHIFTS IN THE FUND'S PORTFOLIO HOLDINGS/SECTORS THAT HAVE HAD A
SIGNIFICANT IMPACT ON PERFORMANCE?
We used the back up in rates to purchase higher coupon mortgages near par, which
will balance out the negative effects of fast prepayments if rates should fall
again and prepayments speed up. And with the increase in rates and the spread
widening at the end of the period, these new purchases will potentially add to
the overall level of income in the Fund, without adding to its duration. Our
long-term strategy is to hold approximately 90% of portfolio assets in mortgages
to capitalize on their yield advantage over Treasuries.
U.S. GOVERNMENT SECURITIES fund
portfolio composition(++)
GNMA 19%
FGLMC 13%
U.S. TREASURIES 5%
AGENCY NOTES 15%
CASH EQUIVALENTS 7%
FNMAs 21%
CMOs 20%
WHAT IS THE OUTLOOK FOR BOTH THE FUND AND THE OVERALL ECONOMY?
The economy should continue to grow at a reasonable level, although at a slower
pace than the last few quarters. However, fears of renewed inflation stemming
from strong consumer spending and an improving global economy will keep interest
rates volatile for a period until the market can gain a clearer picture of the
outlook for the economy. We expect the Fund to continue to perform well in this
environment. The high percentage of mortgage securities should generate a
relatively high level of income in any rate scenario, while mitigating price
fluctuations in a volatile market.
(++) Allocation percentages are based on total investment value of the portfolio
as of 6/30/99.
fixed-income fund
<PAGE>
INCOME fund
PORTFOLIO MANAGER:
GARY POKRZYWINSKI
WM ADVISORS, INC.
A fixed-income team led by Senior Portfolio Manager Gary Pokrzywinski, who has
over 14 years of asset management experience and has been with WM Advisors, Inc.
for more than six years, manages the Income Fund. Mr. Pokrzywinski is a
Chartered Financial Analyst and holds a Business Degree from the University of
Wisconsin.
PERFORMANCE REVIEW(4)
The INCOME FUND returned -2.54% during the period, as interest rates increased
throughout the first half of 1999. Long-term results are very favorable and
provide the potential for inflation protection, as the Fund has averaged 7.86%
for the past five years.
GROWTH OF A $10,000 INVESTMENT(2), (3)
Lehman Lehman
Brothers Brothers
Fund Corporate Government/
(without Debt Corporate
annuity Inflation BBB-Rated Bond
expenses)(4) (CPI)(1) Index(1) Index(1)
- --------------------------------------------------------------------------------
Inception 5/7/93 $10,000 $10,000 $10,000 $10,000
9,950 10,000 10,000 10,000
Jun 93 10,224 9,993 10,243 10,227
10,284 10,042 10,317 10,292
10,595 10,077 10,574 10,529
Sep 93 10,590 10,112 10,599 10,566
10,661 10,141 10,652 10,609
10,489 10,155 10,521 10,489
Dec 93 10,562 10,169 10,583 10,536
10,766 10,169 10,788 10,694
10,429 10,198 10,534 10,461
Mar 94 10,010 10,219 10,210 10,204
9,844 10,261 10,112 10,120
9,782 10,268 10,075 10,101
Jun 94 9,735 10,268 10,050 10,078
9,999 10,296 10,304 10,280
9,957 10,331 10,315 10,284
Sep 94 9,735 10,366 10,123 10,128
9,693 10,380 10,100 10,117
9,693 10,388 10,084 10,099
Dec 94 9,703 10,423 10,168 10,166
9,917 10,451 10,383 10,361
10,207 10,493 10,682 10,601
Mar 95 10,271 10,521 10,770 10,672
10,414 10,529 10,952 10,821
11,097 10,542 11,468 11,274
Jun 95 11,141 10,542 11,571 11,364
11,006 10,585 11,520 11,320
11,275 10,627 11,706 11,465
Sep 95 11,432 10,662 11,844 11,582
11,671 10,697 11,998 11,752
11,887 10,719 12,227 11,946
Dec 95 12,138 10,740 12,429 12,122
12,126 10,740 12,509 12,197
11,686 10,768 12,212 11,938
Mar 96 11,559 10,789 12,108 11,838
11,417 10,825 12,007 11,756
11,394 10,817 11,986 11,736
Jun 96 11,559 10,810 12,162 11,893
11,583 10,874 12,185 11,921
11,487 10,908 12,147 11,892
Sep 96 11,739 10,965 12,405 12,104
12,093 11,008 12,743 12,386
12,324 11,029 13,016 12,614
Dec 96 12,190 11,035 12,836 12,474
12,165 11,056 12,854 12,489
12,215 11,077 12,908 12,515
Mar 97 12,016 11,113 12,707 12,366
12,219 11,148 12,900 12,547
12,333 11,170 13,046 12,663
Jun 97 12,522 11,170 13,231 12,815
13,063 11,205 13,715 13,207
12,830 11,240 13,512 13,060
Sep 97 13,075 11,268 13,748 13,265
13,324 11,282 13,923 13,477
13,402 11,275 14,001 13,548
Dec 97 13,573 11,288 14,149 13,690
13,746 11,310 14,318 13,883
13,706 11,331 14,313 13,856
Mar 98 13,746 11,353 14,366 13,899
13,800 11,373 14,457 13,968
14,003 11,394 14,629 14,118
Jun 98 14,152 11,408 14,737 14,262
14,126 11,421 14,724 14,273
14,291 11,435 14,793 14,551
Sep 98 14,707 11,449 15,272 14,968
14,385 11,476 15,037 14,861
14,567 11,476 15,320 14,950
Dec 98 14,583 11,490 15,364 14,986
14,726 11,518 15,516 15,093
14,327 11,532 15,149 14,734
Mar 99 14,465 11,567 15,256 14,807
14,537 11,651 15,300 14,844
14,333 11,651 15,095 14,691
Jun 99 14,213 11,694 15,017 14,646
(1) Index total returns were calculated from 5/31/93 to 6/30/99. The Lehman
Brothers Government/Corporate Bond Index represents all government and
corporate bonds. The Lehman Brothers BBB-Index represents all investment-
grade, corporate debt securities. 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.
(2) Past investment performance does not guarantee future performance. The
returns for the Fund assume reinvestment of all dividends/distributions.
<TABLE>
<CAPTION>
TOTAL AVERAGE RETURNS AS OF 6/30/99(2), (3) SIX MONTH ONE YEAR FIVE YEAR(8) SINCE INCEPTION(8)
(May 7, 1993)
<S> <C> <C> <C> <C>
Fund (without annuity expenses)(4) -2.54% 0.42% 7.86% 5.89%
Fund (with annuity expenses)(5), (6) -3.24% -1.03% 6.35% 4.40%
Fund (adjusted for the maximum surrender charge)(5), (7) -9.72% -6.78% 5.65% 3.88%
Lehman Brothers Corporate Debt BBB-Rated Index(1) -2.26% 1.90% 8.36% 6.91%
Lehman Brothers Government/Corporate Bond Index(1) -2.27% 2.69% 7.76% 6.47%
</TABLE>
(3) 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.
(4) Excludes all annuity expenses (which are itemized in footnote #5) charged by
American General Life Insurance Company Separate Account D through which
shares of the Fund are purchased.
(5) Total returns are based on the change in unit value and reflect expenses
such as mortality and expense risk charges and administrative expense
charges of 1.4%. Returns do not account for income taxes due at withdrawal
or for premium taxes. All of the return information shown prior to April 29,
1998 pre-dates the effective date of the Division's first investment in the
Fund. The return information after that date reflects actual annual
historical performance of the Division. The above values relate only to the
WM Strategic Asset Manager Contract. The total return for the WM Advantage
Contract would have been lower due to higher expenses.
(6) Excludes maximum Surrender Charge of 0%-7% and $35 annual contract fee.
(7) Includes maximum Surrender Charge of 0%-7% and $35 annual contract fee.
(8) Annualized.
WHAT WERE THE MOST SIGNIFICANT FACTORS CONTRIBUTING TO THE FUND'S PERFORMANCE
OVER THE SIX-MONTH PERIOD ENDED JUNE 30, 1999, AND WHAT INVESTMENT TECHNIQUES
WERE USED TO ADDRESS THOSE CONDITIONS?
Interest rates rose fairly significantly over the last six months, especially
for intermediate-term bonds. Stronger-than-expected economic growth instilled
new concerns over accelerating inflation. As a result, the yield of the ten-year
Treasury increased by 113 basis points (1.13%) during the period. Although this
negatively affected the price of the Fund, the competitive levels of income
offset some of the negative performance. Over a long-term investment horizon,
the majority of the overall total return of the Fund will be derived from its
yield.
The performance over the six-month period was helped by a resurgence in the
corporate sector in the first quarter. As the flight-to-quality of last summer
moved past us, our dominant investment sector -- investment-grade corporate
bonds -- outperformed much of the fixed-income market in early 1999. Economic
strength, a surging stock market, and good consumer sentiment supported this
sector. Corporate bonds then underperformed modestly during the second quarter
of 1999. Yield spreads widened slightly over the last three months relative to
Treasuries -- this meant the corporate yields increased more than Treasuries,
causing prices to decrease a bit more. Worries that the Fed will have to
continue to tighten to slow the economy caused the spreads to widen. So far,
this is only a minor worry to the market as evidenced by the modest
underperformance.
Mortgage spreads also widened during the second quarter even with the increase
in rates. This followed a very strong first quarter for mortgage-backed
securities. Normally, mortgages perform well when treasury rates increase, but
the large back up in rates over such a short time caused the duration (a measure
of price sensitivity to changes in interest rates) of mortgage securities to
extend dramatically. This significantly lowered demand for these securities. Our
investment in below investment grade corporate debt provided very strong
performance as the high-yield sector was one of the strongest performing areas
of the fixed-income market.
INCOME fund
portfolio composition(++)
CASH EQUIVALENTS 21%
UTILITIES/TELECOM 4%
INDUSTRIALS 42%
U.S. TREASURIES 5%
CORPORATE BONDS 6%
FOREIGN BONDS 8%
MORTGAGE-BACKED 1%
FINANCIALS 13%
WERE THERE ANY SHIFTS IN THE FUND'S PORTFOLIO HOLDINGS/SECTORS THAT HAVE HAD A
SIGNIFICANT IMPACT ON PERFORMANCE?
We increased our exposure to mortgage-backed securities, which generally provide
strong yields and relative performance during stable interest rate environments.
In addition, credit quality of the Fund remained strong, with an average
securities rating of A-(++). We have focused purchases on businesses in
non-cyclical industries that are less capital intensive, have more free cash
flow, and are less susceptible to changes in the business cycle. For example,
Cendant Corporation, a worldwide provider of consumer and business services, has
performed well. We continue to invest primarily in a diverse portfolio of
intermediate-maturity, investment-grade corporate bonds with some holdings in
mortgages and Treasury notes. These investments work together in an attempt to
produce the stated objectives of a high level of current income with
preservation of capital. Corporate bonds are the primary investment tools used
to accomplish the objectives of the Fund. We focus our efforts on a core
portfolio of liquid, recognizable issuers such as General Motors, United
Airlines, and Time Warner. A smaller percentage of the portfolio is based on
bottom-up research, scouring the market to find issuers that we feel can achieve
a higher level of income and are priced attractively. The Fund moves within
sectors and industries based on the anticipation of the business cycle.
Currently, the Fund is focused on Health Care and Telecommunications. From an
interest rate perspective, the strategy is to skew Fund investments based upon
our secular outlook for interest rates.
WHAT IS THE OUTLOOK FOR BOTH THE FUND AND THE OVERALL ECONOMY?
The economy has been growing above potential in recent periods, and if this
continues, the risk of an acceleration in inflation will become a concern. The
result of this growth has been higher interest rates -- this trend may continue
in the short term. Any rise in prices, however, should be rather short lived
because of the structural deflationary forces remaining in the world economy.
Forces, such as global competition, could offset current price pressures and
hold inflation back. Despite the possibility of higher near-term rates, we
forecast lower interest rates over the course of the next 12 months -- a
potentially positive sign for the Fund.
(++) Allocation percentages are based on total investment value of the portfolio
as of 6/30/99. Bond ratings are of portfolio holdings and are provided by a
combination of both Moody's and Standard & Poor's.
fixed-income fund
<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 its inception. Mr. Huffman is a
Chartered Financial Analyst, holds an MBA, and has over 14 years of investment
management experience.
PERFORMANCE REVIEW(4)
The BOND & STOCK FUND returned 4.15% during the six-month period ended June 30,
1999. Fund performance has been mixed, as positive equity results have been
offset by negative performance in the fixed-income markets. Overall performance
for the second quarter was strong, as value stocks led the market advance.
GROWTH OF A $10,000 INVESTMENT(2), (3)
Lehman
Brothers Standard
Fund Government/ & Poor's
(without Corporate 500
annuity Inflation Bond Composite
expenses)(4) (CPI)(1) Index(1) Index(1)
- --------------------------------------------------------------------------------
Inception 4/28/98 $10,000 $10,000 $10,000 $10,000
May 98 9,800 10,018 10,107 9,828
Jun 98 9,820 10,103 10,210 10,227
Jul 98 9,549 10,042 10,218 10,119
Aug 98 8,777 10,054 10,418 8,655
Sep 98 9,248 10,066 10,715 9,210
Oct 98 9,850 10,090 10,639 9,959
Nov 98 10,221 10,090 10,703 10,563
Dec 98 10,302 10,102 10,729 11,172
Jan 99 10,432 10,127 10,805 11,639
Feb 99 10,171 10,139 10,548 11,277
Mar 99 10,261 10,170 10,601 11,728
Apr 99 10,552 10,244 10,627 12,182
May 99 10,602 10,244 10,518 11,895
Jun 99 10,729 10,281 10,485 12,555
(1) Index total returns were calculated from 4/30/98 to 6/30/99. The Lehman
Brothers Government/Corporate Bond Index represents all government and
corporate bonds. 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 indices assume reinvestment of all
dividends/distributions, and do not reflect any asset-based charges for
investment management or other expenses.
(2) Past investment performance does not guarantee future performance. The
returns for the Fund assume reinvestment of all dividends/distributions.
<TABLE>
TOTAL AVERAGE RETURNS AS OF 6/30/99(2), (3) SIX MONTH ONE YEAR SINCE INCEPTION(8)
(April 28, 1998)
<S> <C> <C> <C>
Fund (without annuity expenses)(4) 4.15% 9.26% 6.19%
Fund (with annuity expenses)(5), (6) 3.44% 7.75% 4.75%
Fund (adjusted for the maximum surrender charge)(5), (7) -3.04% 2.00% -0.21%
Lehman Brothers Government/Corporate Bond Index(1) -2.27% 2.69% 4.14%
Standard & Poor's 500 Composite Index(1) 12.38% 22.76% 21.53%
</TABLE>
(3) 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.
(4) Excludes all annuity expenses (which are itemized in footnote #5) charged by
American General Life Insurance Company Separate Account D through which
shares of the Fund are purchased.
(5) Total returns are based on the change in unit value and reflect expenses
such as mortality and expense risk charges and administrative expense
charges of 1.4%. Returns do not account for income taxes due at withdrawal
or for premium taxes. The above values relate only to the WM Strategic Asset
Manager Contract.
(6) Excludes maximum Surrender Charge of 0%-7% and $35 annual contract fee.
(7) Includes maximum Surrender Charge of 0%-7% and $35 annual contract fee.
(8) Annualized.
WHAT WERE THE MOST SIGNIFICANT FACTORS CONTRIBUTING TO THE FUND'S PERFORMANCE
OVER THE SIX-MONTH PERIOD ENDED JUNE 30, 1999, AND WHAT INVESTMENT TECHNIQUES
WERE USED TO ADDRESS THOSE CONDITIONS?
The domestic economy grew at very high levels during the period, as consumer
spending drove the expansion forward. The levels of growth surpassed most
observers' expectations and after months of nonexistent inflation and even some
deflationary forces, renewed concerns for escalating prices surfaced. This
caused a spike in interest rates in 1999. The Federal Reserve is watching the
inflation front very closely and is poised to tighten rates again if inflation
fears prove true.
Equity performance was very strong for the period. Large-cap stocks have led the
market in recent periods, while small- and mid-cap stocks accelerated during the
second quarter. Value stocks performed very well during the period, and our
long-term strategy was rewarded. Value stocks, in general, had underperformed
growth stocks in recent periods, but large-cap value stocks regained strength in
April and that growth carried through the end of the period. Favorable sectors
within equities were Financial Services, Computer Software, Retailers, and
Telecommunications. The Fund was well represented in these leading sectors and
benefited from holdings such as Citigroup, Inc., Adobe Systems, Inc., Limited
Inc., and Alltel Corp. Two of our mid-cap holdings underperformed the overall
market: Dentsply International, a health care firm, and Conseco, a life
insurance company. Additionally, Crane Co. was flat over the six-month period.
In the fixed-income arena, interest rates generally rose and bonds
underperformed. However, spreads of mortgages tightened relative to comparable
Treasury bonds. This created some good performance in this sector as tightening
yields caused positive relative price performance for these holdings. These
bonds also benefit from higher overall yields and, therefore, normally provide
substantial income to the Fund.
WERE THERE ANY SHIFTS IN THE FUND'S PORTFOLIO HOLDINGS/SECTORS THAT HAVE HAD A
SIGNIFICANT IMPACT ON PERFORMANCE?
We continued to focus on a diversified portfolio that invested in multiple
classes of both equity and fixed-income investments. Investments included
Treasuries, Mortgage-Backed Securities, Corporate Bonds, Convertibles and Common
Stocks. Our asset allocation remained at approximately 60% in bonds and cash,
and 40% in equities.
BOND & STOCK fund
portfolio composition(++)
CASH EQUIVALENTS 33%
U.S. TREASURIES 17%
MORTGAGE-BACKED 2%
CORPORATE BONDS 7%
CONVERTIBLES 6%
COMMON STOCKS 35%
WHAT IS THE OUTLOOK FOR BOTH THE FUND AND THE OVERALL ECONOMY?
Current economic strength is a bit worrisome, as inflation could accelerate and
lead to further tightening by the Federal Reserve. The American consumer has
fueled the domestic economy, driven by strong retail sales, a powerful housing
market, and high confidence levels. Inflation pressures are an important aspect
of overall economic growth and will be watched closely. Both wage increases and
productivity enhancements have allowed corporations to grow their earnings
without inciting inflation. In turn, real (inflation-adjusted) interest
rates in the United States are historically high -- helping to create a positive
backdrop for all financial assets. Higher inflation would adversely affect both
stock and bond investments. In the equity markets, positive earnings growth for
the S&P 500 is forecasted for 1999. We do feel that the current valuation levels
of the largest growth stocks are a bit troubling, but the recent broadening of
the market is a very positive sign. We continue to find value in the mid-cap
sector and remain positive for the relative performance of middle-sized
companies. There is some increased concern over liquidity for the remainder of
the year, as Y2K fears could lead to a flight-to-quality.
This concern stems from the possibility that market psychology could favor
higher-quality liquid assets in both fixed-income and equity markets. Asset
classes, such as U.S. government bond and large-cap stocks, could benefit from
this change. Overall, we will continue to monitor the situation, and we remain
moderately bullish for the remainder of the year.
(++) Allocation percentages are based on total investment value of the portfolio
as of 6/30/99.
equity fund
<PAGE>
GROWTH & INCOME fund
PORTFOLIO MANAGER:
RANDALL L. YOAKUM
WM ADVISORS, INC.
An equity team led by Senior Portfolio Manager Randall Yoakum manages the Growth
& Income Fund. Mr. Yoakum has 16 years experience in investment and financial
analysis including over eight years with WM Advisors, Inc. He holds a BBA in
Economics/Finance from Pacific Lutheran University, an MBA in Finance/ Economics
from Arizona State University, and is a Chartered Financial Analyst. Mr. Yoakum
serves as chair of WM Advisors, Inc. Investment Committee.
PERFORMANCE REVIEW(4)
The GROWTH & INCOME FUND returned 15.38% for the six-month period ended June 30,
1999, outperforming the S&P 500 Index's return of 12.38%. Long-term results
continue to be very favorable, as the Fund has averaged 23.69% for the past five
years.
GROWTH OF A $10,000 INVESTMENT(2), (3)
Standard
Fund & Poor's
(without 500
annuity Inflation Composite
expenses)(4) (CPI)(1) Index(1)
- --------------------------------------------------------------------------------
Inception 1/12/94 $10,000 $10,000 $10,000
10,010 10,000 10,000
9,970 10,028 9,729
Mar 94 9,670 10,049 9,305
9,860 10,090 9,425
9,900 10,097 9,579
Jun 94 9,660 10,097 9,344
9,950 10,125 9,651
10,250 10,159 10,046
Sep 94 10,040 10,194 9,801
10,140 10,208 10,020
9,670 10,215 9,656
Dec 94 9,830 10,250 9,799
10,040 10,277 10,053
10,440 10,318 10,444
Mar 95 10,820 10,346 10,752
11,030 10,354 11,068
11,440 10,367 11,510
Jun 95 11,646 10,367 11,777
12,072 10,409 12,167
12,123 10,450 12,197
Sep 95 12,437 10,485 12,712
12,123 10,519 12,667
12,792 10,540 13,222
Dec 95 13,016 10,561 13,477
13,442 10,561 13,935
13,726 10,589 14,065
Mar 96 13,949 10,610 14,200
14,253 10,645 14,408
14,415 10,638 14,780
Jun 96 14,213 10,630 14,836
13,469 10,693 14,181
13,924 10,727 14,480
Sep 96 14,557 10,783 15,295
14,734 10,825 15,717
15,943 10,845 16,904
Dec 96 15,855 10,852 16,569
16,875 10,873 17,603
16,931 10,893 17,741
Mar 97 16,398 10,928 17,014
17,020 10,963 18,029
18,173 10,984 19,126
Jun 97 18,639 10,984 19,982
20,385 11,019 21,569
19,760 11,053 20,369
Sep 97 20,663 11,081 21,486
19,712 11,094 20,768
20,073 11,087 21,730
Dec 97 20,374 11,101 22,103
20,470 11,122 22,349
22,058 11,143 23,960
Mar 98 22,890 11,164 25,187
23,082 11,184 25,441
22,431 11,204 25,004
Jun 98 23,082 11,218 26,019
22,124 11,231 25,473
18,354 11,245 22,020
Sep 98 19,910 11,258 23,432
21,738 11,285 25,337
23,151 11,285 26,872
Dec 98 24,237 11,299 28,420
24,978 11,326 29,609
24,436 11,340 28,689
Mar 99 25,235 11,375 29,836
26,921 11,457 30,992
26,622 11,457 30,260
Jun 99 27,964 11,499 31,940
(1) Index total returns were calculated from 1/31/94 to 6/30/99. The Standard &
Poor's 500 Composite Index (S&P 500) represents an unmanaged weighted index
of 500 industrial, transportation, utility and financial companies widely
regarded by investors as representative of the stock market. The 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.
(2) Past investment performance does not guarantee future performance. The
returns for the Fund assume reinvestment of all dividends/distributions.
<TABLE>
<CAPTION>
TOTAL AVERAGE RETURNS AS OF 6/30/99(2), (3) SIX MONTH ONE YEAR FIVE YEAR(8) SINCE INCEPTION(8)
(January 12, 1994)
<S> <C> <C> <C> <C>
Fund (without annuity expenses)(4) 15.38% 21.16% 23.69% 20.71%
Fund (with annuity expenses)(5), (6) 14.30% 19.19% 21.89% 18.95%
Fund (adjusted for the maximum surrender charge)(5), (7) 7.83% 13.44% 21.48% 18.56%
Standard & Poor's 500 Composite Index(1) 12.38% 22.76% 27.87% 23.91%
</TABLE>
(3) 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.
(4) Excludes all annuity expenses (which are itemized in footnote #5) charged by
American General Life Insurance Company Separate Account D through which
shares of the Fund are purchased.
(5) Total returns are based on the change in unit value and reflect expenses
such as mortality and expense risk charges and administrative expense
charges of 1.4%. Returns do not account for income taxes due at withdrawal
or for premium taxes. All of the return information shown prior to April 29,
1998 pre-dates the effective date of the Division's first investment in the
Fund. The return information after that date reflects actual annual
historical performance of the Division. The above values relate only to the
WM Strategic Asset Manager Contract. The total return for the WM Advantage
Contract would have been lower due to higher expenses.
(6) Excludes maximum Surrender Charge of 0%-7% and $35 annual contract fee.
(7) Includes maximum Surrender Charge of 0%-7% and $35 annual contract fee.
(8) Annualized.
WHAT WERE THE MOST SIGNIFICANT FACTORS CONTRIBUTING TO THE FUND'S PERFORMANCE
OVER THE SIX-MONTH PERIOD ENDED JUNE 30, 1999, AND WHAT INVESTMENT TECHNIQUES
WERE USED TO ADDRESS THOSE CONDITIONS?
The six-month period ended June 30, 1999 was exceptional for equity investments,
as large-cap stocks advanced significantly. Strong economic fundamentals and a
resurgence of global stability supported strong market performance. Most equity
indices reached their all-time highs during the period, as healthy consumer
spending drove strong domestic economic growth. Corporate profitability and
earnings expanded and stocks responded by appreciating across the board.
While earnings momentum, not value, continued to drive the overall markets
during the early months of 1999, renewed confidence in the strength of the U.S.
economy led to broader sector performance. For 1998, only one-third of industry
groups outperformed the S&P 500 Index. This represents very narrow performance,
as most sectors lagged the overall market, and the strong advance was limited to
the largest growth stocks in the Index. This trend shifted in 1999, as sectors
that had lagged began to lead the market. Broader participation is a positive
force for a well-diversified core portfolio, such as the Growth & Income Fund,
because multiple holdings contribute to overall performance.
WERE THERE ANY SHIFTS IN THE FUND'S PORTFOLIO HOLDINGS/SECTORS THAT HAVE HAD A
SIGNIFICANT IMPACT ON PERFORMANCE?
The Fund's outperformance reflects changes in the portfolio that were initiated
in the stock market correction that began in August and continued into October
of 1998. As stock prices declined, we became more bullish on the overall outlook
for the market. That bullish outlook was the product of our belief that the
market had discounted a severe slowdown in global economic growth. We believed
that a diminished outlook for emerging markets had been fully discounted and
there was evidence to suggest that emerging markets would stabilize. In
addition, the Federal Reserve changed its policy stance from restrictive to
accommodative with three separate interest rate cuts. We saw the potential for a
quick recovery in stock prices and felt financial and consumer cyclical stocks
would likely lead the market advance. Consequently, we initiated or added to our
holdings in Chase Manhattan Bank Corp., Merrill Lynch & Co. Inc., Price (T.
Rowe) Associates, Inc., Dayton Hudson Corp., and Walt Disney Co. These purchases
have benefited Fund performance, as the stocks have proven to be strong
performers.
Strength in Cyclicals, Capital Goods and Technology contributed to the
outperformance. Cyclicals continued to benefit from surprisingly strong economic
fundamentals and a resurgence of global stability. Within the Fund, Cyclicals
advanced, led by Liberty Media Group, Federal-Mogul, and Sony Corp. BMC
Software, IBM, Adobe Systems and Oracle contributed substantially to the Fund's
gains for the period. Boeing, Raytheon and Donaldson, also up for the period,
led Capital Goods stocks within the Fund.
Health Care stocks within the Fund were a disappointment, particularly companies
such as Columbia/HCA, PacifiCare Health Systems and Medpartners, Inc. Although
not large positions, these stocks lagged the overall market, and the industry
continued to experience the pains of health care reform -- both real and
perceived. While comprising only a small percentage of the Fund, we feel Health
Care Services companies do offer compelling long-term value as a result of
turmoil within the industry. Overall, performance was very strong for the
period, especially in recent months, as our commitment to value has rewarded
shareholders.
Finance and Technology weightings are both very near long-term targets, while
Health Care exposure increased slightly. Because valuations remain excessive for
Health Care and Technology companies, we are averaging into these stocks on
price weakness. This has worked well within the Technology sector as evidenced
by timely purchases of Oracle, BMC Software and Micron Technology. Companies
with market capitalizations of less than $5 billion now comprise less than 15%
of the Fund's holdings.
WHAT IS THE OUTLOOK FOR BOTH THE FUND AND THE OVERALL ECONOMY?
Going forward, we expect the continued moderate growth in the domestic economy
in 1999. In the equity markets, careful monitoring of expectations is warranted
at current valuation levels. Several of our long-term holdings in specific
sectors, such as Technology and Telecommunications, are meeting or exceeding our
valuation targets -- prompting us to take some profits. At the same time, we
continue to find stocks that meet our quality standards trading in the market at
very reasonable valuations. It is our intention to maintain our strict
investment discipline to stock selection in an attempt to meet the Fund's
objectives. We focus on owning quality businesses at attractive valuations, with
an emphasis on long-term research. We feel that this style has the potential to
benefit investors over the course of a long-term investment horizon.
GROWTH & INCOME fund
portfolio composition(++)
FINANCIAL SERVICES 18%
HEALTH CARE 10%
CAPITAL GOODS 3%
UTILITIES 7%
OIL & GAS 5%
CASH EQUIVALENTS 4%
OTHER 16%
BASIC INDUSTRY 3%
CONSUMER STOCKS 12%
TRANSPORTATION 3%
CONVERTIBLES 2%
TECHNOLOGY 16%
REITs 1%
(++) Allocation percentages are based on total investment value of the portfolio
as of 6/30/99. Differences from financial statements are a result of a
consolidation of industries or sectors.
<PAGE>
GROWTH fund
PORTFOLIO MANAGER:
WARREN LAMMERT
JANUS CAPITAL CORPORATION
Mr. Lammert is a graduate of Yale University and the London School of Economics.
He first joined Janus in January 1987 and has been Portfolio Manager of the
Growth Fund since its inception. He is a Chartered Financial Analyst.
PERFORMANCE REVIEW(4)
For the six-month period ended June 30, 1999, the GROWTH FUND advanced
significantly, 32.71%, nearly tripling the performance of the S&P 500 Index (see
chart below). Long-term results are also very strong, as the Fund has averaged
over 26% per year since its inception (5/93).
WHAT WERE THE MOST SIGNIFICANT FACTORS CONTRIBUTING TO THE FUND'S PERFORMANCE
OVER THE SIX-MONTH PERIOD ENDED JUNE 30, 1999, AND WHAT INVESTMENT TECHNIQUES
WERE USED TO ADDRESS THOSE CONDITIONS?
Continued strength in the U.S. economy provided mixed results during the first
six months of 1999, first compelling investors to bid up large, growth-oriented
companies, and later forcing a shift in favor of economically sensitive cyclical
shares, as fears of increasing interest rates unnerved investors. The market's
skittishness was perhaps most visible in the retreat of Internet shares during
the last half of the period, and the relative outperformance of cyclical shares,
a segment that had been depressed for some time. Investors cheered, however,
when the Federal Reserve announced a modest 25 basis point increase in
short-term rates and adopted a neutral bias toward future rate increases on June
30 -- sending shares broadly higher and allowing growth stocks to regain some of
their earlier momentum.
WHAT MARKET CONDITIONS AFFECTED THE FUND'S PERFORMANCE DURING THE PERIOD, AND
WHAT WERE THE INVESTMENT TECHNIQUES THAT WERE UTILIZED TO ADDRESS THOSE
CONDITIONS?
Our continued emphasis on dynamic and rapidly growing sectors of the economy
such as Telecommunications, Technology and Cable and Media led the Portfolio to
strong performance during the first six months of 1999. Investors have begun to
recognize the immense value inherent in these themes, a fact illustrated early
in the period by the market's reaction to AT&T's high-priced bid for MediaOne,
a $54 billion deal that favored AT&T over rival bidder Comcast. Excitement
surrounding the deal lifted the shares of all three companies, providing a nice
gain for our position in Comcast while offering a window into the market's
bullish view of the ongoing evolution of the Cable and Telecommunications
industries. The broadband theme gained popularity beyond the cable industry as
well, with investors actively seeking to add positions in various
telecommunications, media content and computer-related networking stocks, as the
march toward true broadband continues. We responded by maintaining our
well-chosen positions in these sectors and by actively seeking new
opportunities.
GROWTH OF A $10,000 INVESTMENT (2),(3)
STANDARD
FUND & POOR'S
(WITHOUT 500
ANNUITY INFLATION COMPOSITE
EXPENSES)(4) (CPI)(1) INDEX(1)
- --------------------------------------------------------------------------------
Inception 5/7/93 $10,000 $10,000 $10,000
10,250 10,000 10,000
Jun 93 10,410 9,993 10,029
10,220 10,042 9,989
10,530 10,077 10,367
Sep 93 10,810 10,112 10,285
10,980 10,141 10,498
10,900 10,155 10,398
Dec 93 11,190 10,169 10,524
11,730 10,169 10,881
11,680 10,198 10,586
Mar 94 11,390 10,219 10,125
11,320 10,261 10,255
10,970 10,268 10,423
Jun 94 10,560 10,268 10,168
10,910 10,296 10,502
11,541 10,331 10,931
Sep 94 11,571 10,366 10,665
11,831 10,380 10,903
11,451 10,388 10,507
Dec 94 11,491 10,423 10,662
11,611 10,451 10,939
11,971 10,493 11,365
Mar 95 12,232 10,521 11,699
12,662 10,529 12,044
13,162 10,542 12,524
Jun 95 13,934 10,542 12,815
14,838 10,585 13,239
14,928 10,627 13,273
Sep 95 15,400 10,662 13,832
14,988 10,697 13,783
15,721 10,719 14,387
Dec 95 15,781 10,740 14,665
16,083 10,740 15,163
16,835 10,768 15,304
Mar 96 16,956 10,789 15,451
17,809 10,825 15,678
18,161 10,817 16,083
Jun 96 17,392 10,810 16,144
16,121 10,874 15,430
17,208 10,908 15,756
Sep 96 18,388 10,965 16,643
17,769 11,008 17,102
18,330 11,029 18,394
Dec 96 18,330 11,035 18,029
19,224 11,056 19,155
18,353 11,077 19,305
Mar 97 17,128 11,113 18,514
17,426 11,148 19,618
18,651 11,170 20,811
Jun 97 19,386 11,170 21,743
21,026 11,205 23,470
19,929 11,240 22,165
Sep 97 21,093 11,268 23,379
20,523 11,282 22,599
20,443 11,275 23,645
Dec 97 20,390 11,288 24,052
21,065 11,310 24,319
23,024 11,331 26,072
Mar 98 24,122 11,353 27,407
25,061 11,373 27,684
24,319 11,394 27,207
Jun 98 26,627 11,408 28,312
26,539 11,421 28,012
22,056 11,435 23,961
Sep 98 24,754 11,449 25,497
25,610 11,476 27,570
27,365 11,476 29,241
Dec 98 32,424 11,490 30,925
36,730 11,518 32,219
35,540 11,532 31,217
Mar 99 40,079 11,567 32,466
42,151 11,651 33,724
39,833 11,651 32,928
Jun 99 43,027 11,694 34,755
(1) Index total returns were calculated from 5/31/93 to 6/30/99. The Standard &
Poor's 500 Composite Index (S&P 500) represents an unmanaged weighted index
of 500 industrial, transportation, utility and financial companies widely
regarded by investors as representative of the stock market.
The 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.
(2) Past investment performance does not guarantee future performance. The
returns for the Fund assume reinvestment of all dividends/distributions.
<TABLE>
<CAPTION>
TOTAL AVERAGE RETURNS AS OF 6/30/99(2),(3) SIX MONTH ONE YEAR FIVE YEAR(8) SINCE INCEPTION(8)
(May 7, 1993)
<S> <C> <C> <C> <C>
Fund (without annuity expenses)(4) 32.71% 61.62% 32.45% 26.79%
Fund (with annuity expenses)(5),(6) 30.91% 58.34% 30.42% 24.89%
Fund (adjusted for the maximum surrender charge)(5) 24.43% 52.59% 30.11% 24.68%
Standard & Poor's 500 Composite Index(1) 12.38% 22.76% 27.87% 22.73%
</TABLE>
(3) 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.
(4) Excludes all annuity expenses (which are itemized in footnote #5) charged by
American General Life Insurance Company Separate Account D through which
shares of the Fund are purchased.
(5) Total returns are based on the change in unit value and reflect expenses
such as mortality and expense risk charges and administrative expense
charges of 1.4%. Returns do not account for income taxes due at withdrawal
or for premium taxes. All of the return information shown prior to April 29,
1998 pre-dates the effective date of the Division's first investment in the
Fund. The return information after that date reflects actual annual
historical performance of the Division. The above values relate only to the
WM Strategic Asset Manager Contract. The total return for the WM Advantage
Contract would have been lower due to higher expenses.
(6) Excludes maximum Surrender Charge of 0%-7% and $35 annual contract fee.
(7) Includes maximum Surrender Charge of 0%-7% and $35 annual contract fee.
(8) Annualized.
Meanwhile, the market's shift into cyclical shares, largely the result of a
persistent rise in interest rates and continued economic growth, worked against
a number of growth-oriented names in the Portfolio. Pharmaceutical stocks and
Internet shares were hit particularly hard in the middle of the period, as many
investors looked toward economically-sensitive shares as a way to take advantage
of continuing expansion in the U.S. economy. We viewed the roll into cyclical
shares as a temporary and ultimately unsustainable short-term shift in market
sentiment, and held to our belief that our role as investors is to develop a
deep understanding of individual firms that is largely independent of their
response to macroeconomic events. We continued to position the Portfolio
accordingly, adding only those shares that we felt were capable of performing
well in any environment.
WERE THERE ANY SHIFTS IN THE FUND'S PORTFOLIO HOLDINGS/SECTORS THAT HAVE HAD A
SIGNIFICANT IMPACT ON PERFORMANCE?
One compelling addition to the Portfolio was Enron, a Houston-based integrated
energy company that is transforming the formerly staid electricity generation
and transmission business as utility markets in the U.S. and abroad rush toward
full-scale retail competition. Enron recently extended its footprint into
Telecommunications, another industry undergoing rapid and long-awaited change,
through the announcement in May of plans to create a nationwide market for
telecommunications bandwidth trading. The market envisioned by Enron will make
the provision of services such as Internet-based video conferencing, streaming
audio and video, and high-quality multimedia graphics much more cost-effective
while simultaneously increasing the efficiency of bandwidth positioning and
deployment across the industry. We are pleased with the ability of Enron's
management to continually find new opportunities where others see little chance
for growth, and we are more optimistic than ever about the position's potential.
Meanwhile, we continued to find new opportunities in Telecommunications. Sprint
PCS, the recently spun-off wireless assets of telecommunications company Sprint,
is well positioned to capitalize on the advent of wireless data. While the
company's all-digital network gives Sprint a significant cost advantage in the
provision of traditional cellular service, it also represents what we feel is
perhaps the best platform for constructing a viable network for two-way wireless
data transmission. The company will soon test a 14.4kbps version of its wireless
data offering, and we look forward to a commercial launch of the service by year
end.
While we were pleased with the strong performances of most of the Portfolio's
holdings, there were a few disappointments. Amazon.com and America Online were
caught in the volatility associated with the Internet sector early in the
period, but we remain committed to these stocks and are extremely impressed by
the successful brand each has built within the rapidly- growing Internet space.
We are confident that our thorough research has identified companies capable of
sustainable growth when the extreme amount of emotion surrounding Internet
investments -- evidenced by the sector's recent volatility -- finally
dissipates. Our confidence in our research process has enabled us to maintain,
and in certain cases even increase, our exposure to these companies.
WHAT IS THE INTERMEDIATE AND LONG-TERM OUTLOOK FOR THE FUND AS WELL AS THE
OVERALL ECONOMY?
Looking forward, we will continue to explore new opportunities in Technology,
Communications and other sectors of the economy. While we were encouraged by the
Federal Reserve's restraint at its June meeting, we believe that further rate
increases are a possibility, and we are monitoring developments closely.
Meanwhile, we remain committed to finding individual companies that are capable
of performing well in any economic environment.
GROWTH fund
portfolio composition(++)
UTILITIES 10%
OIL/GAS 4%
FINANCIAL SERVICES 6%
CAPITAL GOODS 7%
HEALTH CARE 8%
MEDIA 16%
TECHNOLOGY 43%
CASH EQUIVALENTS 1%
CORPORATE BONDS 1%
(++) Allocation percentages are based on total investment value of the portfolio
as of 6/30/99. Differences from financial statements are a result of a
consolidation of industries or sectors.
equity fund
<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 its inception. He is a Chartered Financial Analyst, holds
an MBA, and has over 13 years of continuous investment experience.
PERFORMANCE REVIEW(4)
For the six-month period ended June 30, 1999, the NORTHWEST FUND advanced
17.49%, far outpacing the performance of the S&P 500 Index (see chart below) for
the same period. The Fund has averaged 23.87% per year since its inception
in 1998.
WHAT WERE THE MOST SIGNIFICANT FACTORS CONTRIBUTING TO THE FUND'S PERFORMANCE
OVER THE SIX-MONTH PERIOD ENDED JUNE 30, 1999, AND WHAT INVESTMENT TECHNIQUES
WERE USED TO ADDRESS THOSE CONDITIONS?
Economic strength and strong corporate earnings drove equity markets to new
highs during the first half of 1999. Market leadership shifted during the
period, with large-caps leading the way early in the year, then small-caps
rising to market leadership in the second quarter. Fund performance was very
strong in the second quarter, as its concentration in technology stocks helped
drive performance far above the broad market. In general, market breadth
expanded during the period, as both value stocks and small-cap stocks surged,
reversing trends of recent periods. The Internet sector continued to show very
high valuations, but was also very volatile. We will maintain our focus on
fundamentally strong companies that we feel are attractively priced.
GROWTH OF A $10,000 INVESTMENT(2), (3)
Standard
Fund & Poor's
(without 500
annuity Inflation Composite
expenses)(4) (CPI)(1) Index(1)
- --------------------------------------------------------------------------------
Inception 4/28/98 $10,000 $10,000 $10,000
May 98 9,470 10,018 9,828
Jun 98 9,290 10,030 10,227
Jul 98 8,720 10,042 10,119
Aug 98 7,020 10,054 8,655
Sep 98 7,690 10,066 9,210
Oct 98 8,500 10,090 9,959
Nov 98 9,700 10,090 10,563
Dec 98 10,940 10,102 11,172
Jan 99 11,230 10,127 11,639
Feb 99 10,540 10,139 11,277
Mar 99 10,860 10,170 11,728
Apr 99 11,470 10,244 12,182
May 99 11,990 10,244 11,895
Jun 99 12,853 10,281 12,555
(1) Index total returns were calculated from 4/30/98 to 6/30/99. The Standard &
Poor's 500 Composite Index (S&P 500) represents an unmanaged weighted index
of 500 industrial, transportation, utility and financial companies widely
regarded by investors as representative of the stock market. The 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.
(2) Past investment performance does not guarantee future performance. The
returns for the Fund assume reinvestment of all dividends/distributions.
<TABLE>
<CAPTION>
TOTAL AVERAGE RETURNS AS OF 6/30/99(2), (3) SIX MONTH ONE YEAR SINCE INCEPTION(8)
(April 28, 1998)
<S> <C> <C> <C>
Fund (without annuity expenses)(4) 17.49% 38.35% 23.87%
Fund (with annuity expenses)(5), (6) 16.68% 36.44% 22.22%
Fund (adjusted for the maximum surrender charge)(5), (7) 10.21% 30.69% 17.40%
Standard & Poor's 500 Composite Index(1) 12.38% 22.76% 21.53%
</TABLE>
(3) 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.
(4) Excludes all annuity expenses (which are itemized in footnote #5) charged by
American General Life Insurance Company Separate Account D through which
shares of the Fund are purchased.
(5) Total returns are based on the change in unit value and reflect expenses
such as mortality and expense risk charges and administrative expense
charges of 1.4%. Returns do not account for income taxes due at withdrawal
or for premium taxes. The above values relate only to the WM Strategic Asset
Manager Contract.
(6) Excludes maximum Surrender Charge of 0%-7% and $35 annual contract fee.
(7) Includes maximum Surrender Charge of 0%-7% and $35 annual contract fee.
(8) Annualized.
WERE THERE ANY SHIFTS IN THE FUND'S PORTFOLIO HOLDINGS/SECTORS THAT HAVE HAD A
SIGNIFICANT IMPACT ON PERFORMANCE?
We slightly reduced our exposure to Technology during the period, although the
sector remains our largest allocation. We continue to have heavy exposure to
small-caps, as we see the most compelling values in smaller companies. This is
due to a protracted period of underperformance relative to market
capitalization; as these companies regain favor, we could see a period of strong
relative performance.
We did not make any major changes to the Fund or to our overall investment
strategy during the period. We built a slightly larger than typical cash
position at the end of 1998, and we put much of this to work during the first
quarter. We emphasized purchases of those companies which appeared to have the
best long-term opportunities and offered the most compelling valuations. In the
past, we have been rewarded for buying sectors that are out of favor, but
maintaining a long-term focus is very important. As is characteristic of the
industry, biotechnology stocks were among our best and worst performers in the
period. Immunex rose 103% on enthusiasm for a new arthritis drug, and Corixa was
up 93%, while Pathogenesis lost 78% of its value. Pathogenesis pre-announced a
profound revenue and earnings shortfall. We were sufficiently discouraged by the
revenue issues that we chose to sell the stock. We had similar disparity of
performance in other sectors, with Technology being the most dramatic. Microsoft
was, not surprisingly, one of the largest contributors to portfolio performance
in 1999, rising 30%, while another software company, Wall Data, lost 60%. With
the huge growth potential of communications semiconductors, TriQuint
Semiconductor was up 195% for the period, with most of the gains in the second
quarter.
WHAT IS THE OUTLOOK FOR BOTH THE FUND AND THE OVERALL ECONOMY?
Both the Northwest and national economies are proving to be more resilient than
we previously predicted. The U.S. consumer has shown an unusual willingness to
spend money, supporting a robust domestic economy, yet inflation has remained
tame. However, consumer spending tends to be a coincident indicator, not a
leading indicator, and some of the spending may be a wealth effect tied to the
stock market itself. The global economy is mixed, and corporate capital spending
may be slowing due to both weak export demand and concerns about Y2K. We
continue to believe that large-cap stocks are, in general, overvalued.
The Northwest economy continues its strength despite the slowdown as a result of
Asia and the Boeing layoffs -- Boeing is in the process of significantly
reducing employment in the Puget Sound region. The development of the Technology
sector in the Northwest should continue to drive capital investment into the
region and help maintain its growth. It is important to note that while the Fund
is concentrated in the Northwest, because of the global diversity of many of its
holdings, it is not solely linked to the region. Companies like Boeing,
Microsoft, and Intel, and even many of the smaller companies in the Fund,
generate revenues and earnings from business practices around the globe. The
Fund has done very well, but we are investing in some volatile sectors and are
cautious about valuations over the near term. The Fund has a history of
volatility, so new investors should be aware of the nature of the Fund. We
suggest that investors remain focused on long-term trends rather than short-term
volatility. Overall, we continue to find sound investments in the Northwest
region and maintain a very positive long-term outlook for the companies in the
Fund.
NORTHWEST fund
portfolio composition++
CONSUMER CYCLICALS 11%
HEALTH CARE 12%
FINANCIAL SERVICES 7%
TECHNOLOGY 29%
TRANSPORTATION 4%
BASIC INDUSTRY 6%
CAPITAL GOODS 10%
UTILITIES 2%
OTHER 4%
REITs 2%
CONSUMER STAPLES 3%
CASH EQUIVALENTS 10%
++ Allocation percentages are based on total investment value of the portfolio
as of 6/30/99. Differences from financial statements are a result of a
consolidation of industries or sectors.
equity fund
<PAGE>
EMERGING GROWTH fund
- --------------------------------------------------------------------------------
PORTFOLIO MANAGERS:
DAVID SIMPSON AND LINDA WALK
WM ADVISORS, INC.
Mr. Simpson and Ms. Walk have been managing the Fund since March 23, 1998. David
Simpson, Senior Portfolio Manager of WM Advisors, Inc., is a Chartered Financial
Analyst, holds an MBA and has over 13 years of continuous investment experience.
Linda Walk, Portfolio Manager of WM Advisors, Inc., is a graduate of the
University of Washington and has over 13 years of investment experience. She is
a Chartered Financial Analyst, a Certified Financial Planner, and has
participated in the Wharton Executive Education program.
PERFORMANCE REVIEW(4)
Although small-cap stocks had severely underperformed the market in recent
years, second quarter results were strong as the EMERGING GROWTH FUND reported
overall performance of 7.68% for the six-month period ended June 30, 1999. In
addition, the Fund has averaged 15.82% per year for the past five years.
WHAT WERE THE MOST SIGNIFICANT FACTORS CONTRIBUTING TO THE FUND'S PERFORMANCE
OVER THE SIX-MONTH PERIOD ENDED JUNE 30, 1999, AND WHAT INVESTMENT TECHNIQUES
WERE USED TO ADDRESS THOSE CONDITIONS?
After retreating in the first quarter of 1999, small-cap stocks experienced a
tremendous rally in the last three months. The investment psychology of the
market early in 1999 had been a continuation of a trend that began in the second
half of 1998. Last year, highly valued, large-capitalization stocks outperformed
low P/E (price to earnings) value stocks by nearly 20%. While momentum stocks
have led the market, they became very expensive, giving way to a rally in both
small-cap and value stocks in recent months. Within the small-cap arena, the
Russell 2000 Growth Index outperformed its Value Index counterpart for the
entire period, but the trend shifted significantly in the past three months. The
difference in performance can be partially attributed to the indices' exposure
(or lack thereof) to the Internet. (Internet companies are almost exclusively in
the growth index.) As valuations seemed unjustifiably high for many of these
momentum stocks, particularly Internet-related shares, we have generally chosen
not to hold these stocks given their valuations. Overall, the advance within the
small stocks in the second quarter proved to be consistent and broad-based with
solid participation from both growth and value as well as tech and non-tech
stocks.
GROWTH OF A $10,000 INVESTMENT(2), (3)
Standard
Fund & Poor's
(without 500 Russell
annuity Inflation Composite 2000
expenses)(4) (CPI)(1) Index(1) Index(1)
- --------------------------------------------------------------------------------
Inception 1/12/94 $10,000 $10,000 $10,000 $10,000
10,070 10,000 10,000 10,000
10,160 10,028 9,729 9,964
Mar 94 9,950 10,049 9,305 9,439
9,720 10,090 9,425 9,495
9,800 10,097 9,579 9,388
Jun 94 9,530 10,097 9,344 9,072
9,880 10,125 9,651 9,221
10,350 10,159 10,046 9,734
Sep 94 10,520 10,194 9,801 9,701
11,010 10,208 10,020 9,662
10,240 10,215 9,656 9,272
Dec 94 10,530 10,250 9,799 9,520
10,530 10,277 10,053 9,401
10,830 10,318 10,444 9,792
Mar 95 10,790 10,346 10,752 9,959
10,630 10,354 11,068 10,180
10,630 10,367 11,510 10,355
Jun 95 11,454 10,367 11,777 10,893
12,267 10,409 12,167 11,520
12,659 10,450 12,197 11,759
Sep 95 13,261 10,485 12,712 11,969
12,789 10,519 12,667 11,434
13,010 10,540 13,222 11,914
Dec 95 13,793 10,561 13,477 12,229
13,592 10,561 13,935 12,215
14,375 10,589 14,065 12,596
Mar 96 15,319 10,610 14,200 12,853
15,771 10,645 14,408 13,541
16,423 10,638 14,780 14,075
Jun 96 15,808 10,630 14,836 13,496
13,836 10,693 14,181 12,318
14,951 10,727 14,480 13,034
Sep 96 15,539 10,783 15,295 13,543
15,095 10,825 15,717 13,335
15,240 10,845 16,904 13,884
Dec 96 15,178 10,852 16,569 14,248
14,672 10,873 17,603 14,533
14,311 10,893 17,741 14,180
Mar 97 13,309 10,928 17,014 13,510
13,381 10,963 18,029 13,548
14,920 10,984 19,126 15,055
Jun 97 15,678 10,984 19,982 15,700
15,765 11,019 21,569 16,431
15,929 11,053 20,369 16,807
Sep 97 16,990 11,081 21,486 18,037
16,707 11,094 20,768 17,245
16,860 11,087 21,730 17,133
Dec 97 17,090 11,101 22,103 17,433
16,903 11,122 22,349 17,158
18,379 11,143 23,960 18,427
Mar 98 19,166 11,164 25,187 19,186
19,045 11,184 25,441 19,293
17,668 11,204 25,004 18,253
Jun 98 17,721 11,218 26,019 18,292
16,443 11,231 25,743 16,812
12,937 11,245 22,020 13,547
Sep 98 14,064 11,258 23,432 14,608
15,128 11,285 25,337 15,204
16,748 11,285 26,872 16,001
Dec 98 18,444 11,299 28,420 16,991
18,241 11,326 29,609 17,217
16,532 11,340 28,689 15,822
Mar 99 16,443 11,375 29,836 16,069
17,176 11,457 30,992 17,509
18,391 11,457 30,260 17,765
Jun 99 19,858 11,499 31,940 17,916
(1) Index total returns were calculated from 1/31/94 to 6/30/99. The Standard &
Poor's 500 Composite Index (S&P 500) represents an unmanaged weighted index
of 500 industrial, transportation, utility, and financial companies widely
regarded by investors as representative of the stock market. The Russell
2000 Index represents the smallest 2000 companies followed by Russell and is
used to measure the small-cap market.
The Consumer Price Index is a measurement of inflation for all urban
consumers (CPI-U). The indices assume reinvestment of all
dividends/distributions, and do not reflect any asset-based charges for
investment management or other expenses.
(2) Past investment performance does not guarantee future performance. The
returns for the Fund assume reinvestment of all dividends/distributions.
<TABLE>
<CAPTION>
TOTAL AVERAGE RETURNS AS OF 6/30/99(2), (3) SIX MONTH ONE YEAR FIVE YEAR(8) SINCE INCEPTION(8)
(January 12, 1994)
<S> <C> <C> <C> <C>
Fund (without annuity expenses)4 7.68% 12.07% 15.82% 13.38%
Fund (with annuity expenses)5, 6 5.47% 9.00% 13.85% 11.48%
Fund (adjusted for the maximum surrender charge)5, 7 -1.00% 3.25% 13.32% 10.95%
Standard & Poor's 500 Composite Index 1 12.38% 22.76% 27.87% 23.91%
Russell 2000 Index1 5.44% -2.05% 14.58% 11.37%
</TABLE>
(3) 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.
(4) Excludes all annuity expenses (which are itemized in footnote #5) charged by
American General Life Insurance Company Separate Account D through which
shares of the Fund are purchased.
(5) Total returns are based on the change in unit value and reflect expenses
such as mortality and expense risk charges and administrative expense
charges of 1.4%. Returns do not account for income taxes due at withdrawal
or for premium taxes. All of the return information shown prior to April 29,
1998 pre-dates the effective date of the Division's first investment in the
Fund. The return information after that date reflects actual annual
historical performance of the Division. The above values relate only to the
WM Strategic Asset Manager Contract. The total return for the WM Advantage
Contract would have been lower due to higher expenses.
(6) Excludes maximum Surrender Charge of 0%-7% and $35 annual contract fee.
(7) Includes maximum Surrender Charge of 0%-7% and $35 annual contract fee.
(8) Annualized.
Utilities and energy were strong sectors in the first quarter, both of which we
have underweighted due to the lack of long-term fundamentals for growth. Health
Care was the main source of trouble for small-cap stocks in general, as that
sector dropped significantly during the quarter. The Emerging Growth Fund was
also impacted by the underperformance of health care stocks.
Small-cap software stocks were also under pressure during the first quarter,
turning in negative overall performance. This was due largely to the uncertainty
generated by Y2K issues and the resulting corporate spending over the coming
year. Although software was a drag on performance early in the period, many
software companies were trading at compelling valuations, and we used the
opportunity to add to our positions, which we feel represent strong long-term
opportunities.
As the market rally began, overweight positions in technology hardware and
biotech companies positively contributed to the Fund's performance. Throughout
the second quarter, small cap stocks repeatedly held their own during broader
market declines while fully participating in the periodic advances. After severe
underperformance in early 1999, small-cap stocks (as measured by the Russell
2000) exhibited sharp gains in the second quarter, outperforming the S&P 500 by
over 8% for the quarter.
WERE THERE ANY SHIFTS IN THE FUND'S PORTFOLIO HOLDINGS/SECTORS THAT HAVE HAD A
SIGNIFICANT IMPACT ON PERFORMANCE?
As noted above, we have added to positions which represent compelling valuations
such as software and services. We remain focused on finding strong long-term
investment opportunities in well-managed, high-quality companies that are
attractively priced.
Taking a look at some of the individual issues, underperforming software
positions included Axent Technologies, Onyx Software (which we had trimmed after
a spike in performance last quarter) and Wall Data. On the other hand, some
software stocks, such as Harbinger and AVT, added positively to returns.
Although software stocks overall were a drag on performance for the second
quarter, technology hardware stocks helped the Fund to outperform during that
time period. Those strong performers included Triquint Semiconductor, Credence
Systems, In Focus, and Apex.
Additionally, biotechs such as Corixa, Pharmacyclics and Incyte Pharmaceuticals
(a software/biotech company) also boosted the Fund's performance. The biotech
group has received growing interest, as cash-rich pharmaceutical companies have
been perpetually hungry for unique products and platform technologies that can
generate unique products. This, in turn, has fueled acquisitions in the biotech
industry.
WHAT IS THE OUTLOOK FOR BOTH THE FUND AND THE OVERALL ECONOMY?
As we enter into the second half of 1999, small stocks appear to have excellent
price momentum, broad participation, solid fundamentals and look historically
inexpensive. Despite the recent performance strength of small stocks, they have
only shown a modest shift in valuations with relative valuations still near
40-year lows. We continue to invest in companies with solid growth opportunities
and strong management teams that we feel have the potential to benefit
shareholders over the long term. In keeping with our strategy to emphasize
emerging growth industries, we will continue to overweight the Health Care and
Technology sectors.
EMERGING GROWTH fund
portfolio composition++
HEALTH CARE 16%
FINANCIAL SERVICES 9%
CASH EQUIVALENTS 1%
CAPITAL GOODS 5%
TRANSPORTATION 4%
OTHER 5%
UTILITIES 5%
TECHNOLOGY 41%
CONSUMER CYCLICALS 10%
OIL/GAS 2%
++ Allocation percentages are based on total investment value of the portfolio
as of 6/30/99. Differences from financial statements are a result of a
consolidation of industries or sectors.
equity fund
<PAGE>
INTERNATIONAL GROWTH fund
- --------------------------------------------------------------------------------
PORTFOLIO MANAGER:
CAPITAL GUARDIAN TRUST COMPANY
As of June 24, 1999, the Fund's management was transitioned from Warburg Pincus
to an international equity team at Capital Guardian Trust Company. Nine
portfolio managers and 27 analysts now share the management responsibilities for
the Fund. The managers average over 26 years of investment experience and have
been with the firm for an average of 20 years.
PERFORMANCE REVIEW(4)
For the six months ended June 30, 1999, the INTERNATIONAL GROWTH FUND had a
return of 8.78% versus a gain of 4.11% for the MSCI EAFE Index (see chart
below).
WHAT WERE THE MOST SIGNIFICANT FACTORS CONTRIBUTING TO THE FUND'S PERFORMANCE
OVER THE SIX-MONTH PERIOD ENDED JUNE 30, 1999, AND WHAT INVESTMENT TECHNIQUES
WERE USED TO ADDRESS THOSE CONDITIONS?
The six-month period began with very strong performance from most international
regions, reflecting a worldwide easing of monetary policy in the wake of last
summer's global financial market turmoil. Latin American markets had impressive
gains, fueled by declining fears over Brazil's financial weakness. Asian/Pacific
markets also showed strength, reflecting investor optimism as the region's
financial crisis subsided -- this positive sentiment extended to Japan, whose
market was helped by favorable investor reaction to a wave of corporate
restructuring news. Most European markets, meanwhile, had solid performance,
buoyed by the successful launch of the European Monetary Union on January 1 of
this year and by a continued supportive interest-rate and inflation backdrop.
The second quarter was positive for most foreign stock markets, though results
varied by region. Asian-Pacific markets were the clear standouts, while European
markets were divided nearly equally between winners and losers in local-currency
terms, yet all fared less well in dollar terms, as the Euro and other regional
currencies lost further ground against the U.S. Dollar. Latin American markets
saw healthy gains, as did most of the emerging-market universe.
GROWTH OF A $10,000 INVESTMENT(2), (3)
Morgan Stanley
Fund Capital
(without International
annuity Inflation (MSCI) EAFE
expenses)(4) (CPI)(1) Index(1)
- --------------------------------------------------------------------------------
Inception 5/7/93 $10,000 $10,000 $10,000
10,410 10,000 10,000
Jun 93 10,120 9,993 9,846
10,370 10,042 10,193
11,030 10,077 10,745
Sep 93 11,080 10,112 10,505
11,430 10,141 10,831
10,820 10,155 9,887
Dec 93 11,310 10,169 10,602
12,160 10,169 11,501
11,890 10,198 11,472
Mar 94 11,470 10,219 10,979
11,840 10,261 11,448
11,890 10,268 11,385
Jun 94 11,784 10,268 11,549
12,065 10,296 11,662
12,246 10,331 11,941
Sep 94 11,864 10,366 11,567
12,115 10,380 11,955
11,643 10,388 11,383
Dec 94 11,523 10,423 11,457
11,021 10,451 11,020
10,901 10,493 10,991
Mar 95 11,142 10,521 11,680
11,473 10,529 12,123
11,543 10,542 11,981
Jun 95 11,392 10,542 11,774
11,980 10,585 12,510
11,787 10,627 12,036
Sep 95 11,868 10,662 12,274
11,676 10,697 11,947
11,777 10,719 12,283
Dec 95 12,284 10,740 12,781
12,680 10,740 12,836
12,639 10,768 12,882
Mar 96 12,771 10,789 13,159
12,954 10,825 13,544
12,933 10,817 13,298
Jun 96 13,045 10,810 13,376
12,459 10,874 12,988
12,603 10,908 13,019
Sep 96 12,911 10,965 13,368
12,809 11,008 13,235
13,415 11,029 13,764
Dec 96 13,394 11,035 13,591
13,456 11,056 13,118
13,538 11,077 13,335
Mar 97 13,425 11,113 13,387
13,703 11,148 13,461
14,536 11,170 14,340
Jun 97 15,169 11,170 15,135
15,637 11,205 15,383
14,286 11,240 14,237
Sep 97 15,052 11,268 15,037
13,446 11,282 13,885
13,021 11,275 13,746
Dec 97 13,042 11,288 13,870
13,180 11,310 14,508
14,052 11,331 15,442
Mar 98 14,818 11,353 15,921
15,190 11,373 16,050
15,073 11,394 15,976
Jun 98 14,594 11,408 16,101
14,665 11,421 16,268
12,715 11,435 14,256
Sep 98 12,065 11,449 13,822
12,691 11,476 15,267
13,401 11,476 16,053
Dec 98 13,720 11,490 16,690
13,897 11,518 16,645
13,472 11,532 16,252
Mar 99 14,027 11,567 16,935
14,558 11,651 17,624
13,967 11,651 16,721
Jun 99 14,922 11,694 17,376
<PAGE>
(1) Index total returns were calculated from 5/31/93 to 6/30/99. The Morgan
Stanley Capital International (MSCI) EAFE Index (EAFE) represents the stock
markets of Europe, Australia, New Zealand and the Far East weighted by
capitalization. MSCI 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 indices assume reinvestment of all
dividends/distributions and do not reflect any asset-based charges for
investment management or other expenses.
(2) Past investment performance does not guarantee future performance. The
returns for the Fund assume reinvestment of all dividends/distributions.
<TABLE>
<CAPTION>
TOTAL AVERAGE RETURNS AS OF 6/30/99(2), (3) SIX MONTH ONE YEAR FIVE YEAR(8) SINCE INCEPTION(8)
(May 7, 1993)
<S> <C> <C> <C> <C>
Fund (without annuity expenses)(4) 8.78% 2.26% 4.84% 6.73%
Fund (with annuity expenses)(5), (6) 8.03% 0.84% 3.37% 5.23%
Fund (adjusted for the maximum surrender charge)(5), (7) 1.55% -4.91% 2.58% 4.73%
Morgan Stanley Capital International EAFE Index(1) 4.11% 7.92% 8.51% 9.51%
</TABLE>
(3) 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.
(4) Excludes all annuity expenses (which are itemized in footnote #5) charged by
American General Life Insurance Company Separate Account D through which
shares of the Fund are purchased.
(5) Total returns are based on the change in unit value and reflect expenses
such as mortality and expense risk charges and administrative expense
charges of 1.4%. Returns do not account for income taxes due at withdrawal
or for premium taxes. All of the return information shown prior to April 29,
1998 pre-dates the effective date of the Division's first investment in the
Fund. The return information after that date reflects actual annual
historical performance of the Division. The above values relate only to the
WM Strategic Asset Manager Contract. The total return for the WM Advantage
Contract would have been lower due to higher expenses.
(6) Excludes maximum Surrender Charge of 0%-7% and $35 annual contract fee.
(7) Includes maximum Surrender Charge of 0%-7% and $35 annual contract fee.
(8) Annualized.
Against this backdrop, the portfolio registered a solid gain for the quarter and
modestly outdistanced its benchmark. In terms of attribution, the biggest
contributors to returns were the Asian-Pacific stocks, led by South Korean and
Japanese issues. The Fund also benefited from individually strong showings from
a number of European holdings, particularly cyclical and telecommunications
shares. The single-largest drag on the portfolio in absolute terms was the 4%
slide in the Euro, Europe's single currency, vs. the Dollar. The position was
unhedged, and the currency-translation loss took a toll.
WERE THERE ANY SHIFTS IN THE FUND'S PORTFOLIO HOLDINGS/SECTORS THAT HAD A
SIGNIFICANT IMPACT ON PERFORMANCE?
Warburg Pincus, the prior Fund Manager, made several changes to the Fund's
portfolio during the second quarter. Most noteworthy was a further rotation into
the Asian-Pacific region and out of Europe, a move that had begun in the first
quarter. Reasons included both company-specific and macroeconomic
considerations. Regarding the latter, most, if not all, of the countries in the
Asian-Pacific region (ex-Japan) do appear to have turned the corner
economically, after nearly two years of weakness. Trade deficits have swung to
surpluses, currencies have stabilized, interest rates have fallen substantially
from their heights and, based on the latest gross-domestic-product figures, most
economies are now expanding, several of them (e.g., South Korea) strongly. A
number of countries and individual companies have also taken initial steps
toward restructuring, boding well for a longer-term, sustainable recovery.
Equity valuations are also still, for the most part, reasonable, the markets'
recent rallies notwithstanding.
In Europe, Warburg trimmed proportionately its weightings in defensive issues,
such as utilities and pharmaceuticals. Noteworthy changes in country weightings
included significant reductions in German and Italian weightings (the latter due
largely to profit-taking on two telecommunications stocks involved in a
well-publicized takeover), and the establishment of a small weighting in
Hungary. Other changes elsewhere in the portfolio were modest and largely
stock-specific. Warburg cut their Canadian exposure in half via the sale of a
cable stock that hit its sell target. They also sold their remaining (modest)
Latin American exposure, again on profit taking.
Since assuming responsibility for the Fund on June 24, 1999, Capital Guardian
affected signifi-cant change to the portfolio at the security level, while
country allocations remain somewhat similar after the Fund's transition. These
fund attributes were not arrived at through top-down decision making. Rather,
they were the result of finding attractive opportunities on a company-by-company
basis, which we believe is a more reliable way to add value over the long term.
Probably the most significant change to the portfolio was an increase in
exposure to the solid exporting countries of Latin America and the Pacific Basin
such as Mexico, Taiwan and Japan. On a selective basis, we have found
attractively-valued companies with excellent growth prospects despite generally
weak macro- economic conditions. This shift lowered exposure to some European
countries where we found securities have come to be fully valued and faced with
tough economic times ahead.
WHAT IS THE OUTLOOK FOR BOTH THE FUND AND THE OVERALL ECONOMY?
The low-inflation and low-interest-rate environment present in most developed
markets should be capable of supporting higher valuations. And while economic
growth remains uncertain in both Europe and Japan, we are encouraged by the
recent signs of improvement. We also believe these markets will benefit from the
continuing strength of the U.S. economy and the recovery in emerging markets.
Most importantly, we expect to benefit from investors' renewed focus on the
merits of individual companies. As always, we will continue to identify
investment opportunities one company at a time.
INTERNATIONAL GROWTH fund
portfolio composition++
JAPAN 28%
ASIA 5%
OTHER 8%
CASH EQUIVALENTS 2%
EUROPE 57%
++ Allocation percentages are based on total investment value of the portfolio
as of 6/30/99.
equity fund
<PAGE>
STRATEGIC GROWTH portfolio
- --------------------------------------------------------------------------------
PORTFOLIO MANAGER:
STEVE SCOTT
WM ADVISORS, INC.
The Strategic Asset Manager Portfolios are managed by Senior Portfolio Manager
Steve Scott. Mr. Scott is a pioneer in the asset allocation business, with over
28 years experience. He is the architect and founder of the SAM Portfolios and
holds both a BS and an MBA.
PERFORMANCE REVIEW(5)
The STRATEGIC GROWTH PORTFOLIO returned 18.80% for the six-month period ended
June 30, 1999, significantly outperforming its benchmark index, which returned
12.38% for the same period (see chart below). The Portfolio continues to be
managed in an effort to reduce volatility relative to single asset class equity
investments. Long-term results are favorable and provide a premium over
inflation; since inception, the Portfolio has returned 23.33% above the rate of
inflation.
ECONOMIC/MARKET REVIEW
The U.S. economy grew at a very strong rate over the past six months, advancing
4.3% in the first quarter and 2.3% in the second quarter of 1999. These results
have surprised most market participants, as the effects of a negative trade
balance did not offset the strength of consumer spending as much as expected.
High levels of personal income, large tax refunds, and strong consumer
confidence propelled the economy forward. The high growth rates and tight labor
markets in the U.S. economy created concern that inflation may begin to
accelerate, and the Federal Reserve raised short-term interest rates near the
end of the period. Although higher interest rates may slow growth, they also can
slow inflation, which will help all financial assets.
Equity markets rose substantially throughout the period as the Dow Jones
Industrial Average broke through the 10,000- and 11,000-point barriers for the
first time in history. Stocks in the Technology and Communication sectors led
the way, as investors drove up prices based on the potential for growth in the
future. In addition, a strong economy and higher oil prices helped energy stocks
as well as capital goods and basic materials companies. Productivity accelerated
throughout the period -- if sufficient, this can enable firms to expand their
earnings without raising prices, even with higher wage costs. Early in the
period, the market advance was generally narrow and favored large-cap growth
stocks, yet lately there has been a resurgence in large-cap value stocks and
small-cap growth stocks as market breadth has begun to widen. International
markets bounced back during the period, led by strong performance in the Pacific
region. Equity markets in developing or emerging countries advanced
significantly, as the improving economies of Asia and Latin America helped ease
global unrest. Although these markets have been very strong, we remain cautious
as risk levels for the second half of the year may be on the rise.
GROWTH OF A $10,000 INVESTMENT (3),(4)
Portfolio
(without Capital Russell
annuity Inflation Market 3000
expenses)(5) (CPI)(1) Benchmark(1) Index(2)
- --------------------------------------------------------------------------------
Inception 6/3/97 $10,000 $10,000 $10,000 $10,000
Jun 97 10,320 10,000 10,446 10,416
Jul 97 10,970 10,032 11,275 11,233
Aug 97 10,550 10,063 10,648 10,777
Sep 97 11,040 10,088 11,232 11,388
Oct 97 10,610 10,100 10,857 11,005
Nov 97 10,630 10,094 11,359 11,426
Dec 97 10,700 10,106 11,555 11,655
Jan 98 10,860 10,126 11,683 11,776
Feb 98 11,710 10,145 12,525 12,618
Mar 98 12,170 10,164 13,167 13,244
Apr 98 12,360 10,182 13,299 13,374
May 98 12,060 10,201 13,071 13,044
Jun 98 12,409 10,213 13,602 13,484
Jul 98 12,168 10,225 13,457 13,239
Aug 98 10,423 10,238 11,511 11,211
Sep 98 11,004 10,250 12,249 11,975
Oct 98 11,636 10,274 13,245 12,884
Nov 98 12,389 10,274 14,048 13,672
Dec 98 13,503 10,287 14,857 14,541
Jan 99 14,255 10,312 15,479 15,035
Feb 99 13,793 10,324 14,998 14,503
Mar 99 14,645 10,356 15,598 15,035
Apr 99 15,427 10,431 16,202 15,713
May 99 15,136 10,431 15,819 15,414
Jun 99 16,038 10,469 16,697 15,627
<TABLE>
<CAPTION>
TOTAL AVERAGE RETURNS AS OF 6/30/99(3),(4) SIX MONTH ONE YEAR SINCE INCEPTION(9)
(June 2, 1997)
<S> <C> <C> <C>
Portfolio (without annuity expenses)(5) 18.80% 29.26% 25.55%
Portfolio (with annuity expenses)(6), (7) 17.98% 27.48% 23.82%
Portfolio (adjusted for the maximum surrender charge)(6), (8) 11.51% 21.73% 21.45%
Capital Market Benchmark(1) 12.38% 22.76% 27.90%
</TABLE>
(1) The Strategic Growth Portfolio's benchmark is a capital market index that is
intended to represent a proxy for Portfolio performance. The benchmark
allocation is 100% S&P 500.
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. Index returns begin 6-1-97.
(2) The Russell 3000 Index is a broad-based index and is intended to represent
the equity market as a whole.
(3) Past investment performance does not guarantee future performance. The
returns for the Portfolio assume reinvestment of all
dividends/distributions.
(4) During the period noted, the Advisor waived a portion of its management fee
and absorbed certain other expenses, and the Custodian allowed credits. In
the absence of the waiver, absorption of other expenses or credits, total
return would have been lower.
(5) Excludes all annuity expenses (which are itemized in footnote #6) charged by
American General Life Insurance Company Separate Account D through which
shares of the Fund are purchased.
(6) Total returns are based on the change in unit value and reflect expenses
such as mortality and expense risk charges and administrative expense
charges of 1.4%. Returns do not account for income taxes due at withdrawal
or for premium taxes.
(7) Excludes maximum Surrender Charge of 0%-7% and $35 annual contract fee.
(8) Includes maximum Surrender Charge of 0%-7% and $35 annual contract fee.
(9) Annualized.
INVESTMENT STRATEGY
The STRATEGIC GROWTH PORTFOLIO is diversified in seven funds, representing six
major asset classes. The combination of asset classes increases our ability to
manage risk over a long-term investment horizon. Asset classes ranging in risk
levels from money market instruments to international equities are intended to
shield the Portfolio from drastic swings in any one specific area of the
financial markets.
The overall investment strategy for the period was to:
o Maintain equity focus on large-cap, blue-chip domestic holdings, as prospects
for earnings growth improve.
o Manage risk by increasing domestic diversification levels and adding to the
cash position.
o Reduce exposure to international equities since risk levels appear to be
increasing overseas.
REVIEW OF PORTFOLIO ALLOCATIONS
The Portfolio benefited from its diversified equity holdings and is positioned
to take advantage of market trends that we forecast for the second half of the
year. Overall, we allocated the Portfolio in an effort to manage risk by
concentrating on domestic equities, reduce portfolio valuation levels, and
position the Portfolio to take advantage of favorable prospects for the largest,
most liquid, blue-chip equity holdings. We feel there is an opportunity for
these holdings to produce better relative returns than other capitalization
levels. During the period, the GROWTH and the GROWTH & INCOME FUNDS, which
benefited from their concentration in strong performing large-cap issues,
generated much of the overall return. The GROWTH FUND held large positions in
firms such as AT&T, Liberty Media Group and Nokia, which all appreciated
significantly during the period. The GROWTH & INCOME FUND is concentrated in
large-cap value stocks, which also performed well as market breadth expanded.
International equities appreciated during the period, adding to overall
performance, but we reduced exposure in favor of lower-risk asset classes as the
year progressed.
OUTLOOK
The domestic economy continues to grow at a healthy pace. In the second quarter
of 1999, strong employment and improved business conditions propelled much of
this growth. Although consumer sentiment remains high, spending is expected to
slow from its torrid first-quarter pace of nearly 7%, due primarily to a
slowdown in the housing market. While we see price increases in some commodities
driven by increasing global demand, we think that deeply ingrained deflationary
forces stemming from globalization, new technology, and free market reforms will
continue to hold inflation in check--if growth remains at current levels or
slows somewhat. After raising rates, the Federal Reserve has announced a neutral
bias on interest rates. As we move closer to the end of the year, we could see a
"flight-to-quality," which could result in an increased flow of assets into
high-rated, liquid securities.
In the equity markets, we remain bullish on large-cap stocks because we feel
these holdings should resume market leadership during the second half of the
year. With the rebound in international markets, we expect the trade balance to
improve from its lows of recent quarters, yet we are cautious in the area of
international equities. Improvement in Japan will be slight as structural
problems remain, but the situation will help keep global prices in check. The
Y2K issue is an important area to address. Risk will probably come from investor
psychology rather than a fundamental disruption in business practice. There
could be less liquidity in fixed-income markets as lenders constrict loan
practices, especially overseas. In addition, market fears could incite a
sell-off of higher-growth stocks. While these possibilities demand attention,
our longer-term outlook on global equity markets remains positive.
STRATEGIC GROWTH portfolio
asset class diversification++
U.S. EQUITY LARGE CAP 47%
FOREIGN STOCKS 13%
CASH 9%
BONDS 4%
U.S. EQUITY SMALL CAP 10%
U.S. EQUITY MID CAP 17%
portfolio allocation++
GROWTH FUND (JANUS) 34%
EMERGING GROWTH FUND 3%
HIGH YIELD FUND 4%
INTERNATIONAL GROWTH FUND
(CAPITAL GUARDIAN) 9%
NORTHWEST FUND 10%
MONEY MARKET FUND 5%
GROWTH & INCOME FUND 35%
+ Annual rate of inflation: 2.22%
Source: Ibbotson
++ As of 6/30/99 and may not reflect the current Strategic Growth Portfolio
allocation.
SAM portfolios
<PAGE>
CONSERVATIVE GROWTH portfolio
- --------------------------------------------------------------------------------
PORTFOLIO MANAGER:
STEVE SCOTT
WM ADVISORS, INC.
The Strategic Asset Manager Portfolios are managed by Senior Portfolio Manager
Steve Scott. Mr. Scott is a pioneer in the asset allocation business, with over
28 years experience. He is the architect and founder of the SAM Portfolios and
holds both a BS and an MBA.
PERFORMANCE REVIEW(5)
The CONSERVATIVE GROWTH PORTFOLIO returned 15.81% for the six-month period ended
June 30, 1999. The Portfolio outperformed its benchmark index for all periods.
The Portfolio continues to be managed in an effort to reduce volatility relative
to single asset-class investments. Long-term results are favorable and provide a
premium over inflation; since inception, the Portfolio has returned 17.64% above
the rate of inflation.
ECONOMIC/MARKET REVIEW
The U.S. economy grew at a very strong rate over the past six months, advancing
4.3% in the first quarter and 2.3% in the second quarter of 1999. These results
have surprised most market participants, as the effects of a negative trade
balance did not offset the strength of consumer spending as much as expected.
High levels of personal income, large tax refunds, and strong consumer
confidence propelled the economy forward. The high growth rates and tight labor
markets in the U.S. economy created concern that inflation may begin to
accelerate, and the Federal Reserve raised short-term interest rates near the
end of the period. As a result of the strong growth, all yields have steadily
increased during 1999. With prices moving in the opposite direction as interest
rates, fixed-income investments generally reported weak results for the period.
However, high-yield bonds performed very well relative to other bond classes, as
economic strength positively influenced lower-grade issues.
GROWTH OF A $10,000 INVESTMENT(3), (4)
Portfolio
(without Capital Russell
annuity Inflation Market 3000
expenses)(5) (CPI)(1) Benchmark(1) Index(2)
- --------------------------------------------------------------------------------
Inception 6/2/97 $10,000 $10,000 $10,000 $10,000
Jun 97 10,300 10,000 10,311 10,416
Jul 97 10,860 10,032 10,701 11,233
Aug 97 10,420 10,063 10,347 10,777
Sep 97 10,850 10,088 10,726 11,388
Oct 97 10,420 10,100 10,411 11,005
Nov 97 10,400 10,094 10,556 11,426
Dec 97 10,490 10,106 10,668 11,655
Jan 98 10,620 10,126 10,804 11,776
Feb 98 11,310 10,145 11,279 12,618
Mar 98 11,710 10,164 11,595 13,244
Apr 98 11,880 10,182 11,675 13,374
May 98 11,590 10,201 11,541 13,044
Jun 98 11,856 10,213 11,727 13,484
Jul 98 11,615 10,225 11,684 13,239
Aug 98 10,030 10,238 10,677 11,211
Sep 98 10,522 10,250 10,973 11,975
Oct 98 11,093 10,274 11,558 12,884
Nov 98 11,746 10,274 11,980 13,672
Dec 98 12,578 10,287 12,378 14,541
Jan 99 13,151 10,312 12,599 15,035
Feb 99 12,769 10,324 12,339 14,503
Mar 99 13,461 10,356 12,682 15,035
Apr 99 14,124 10,431 13,049 15,713
May 99 13,813 10,431 12,932 15,414
Jun 99 14,567 10,469 13,335 15,627
(1) The Conservative Growth Portfolio's benchmark is a blended mix of capital
market indices that is intended to represent a proxy for Portfolio
performance. The benchmark allocation is as follows: 35% S&P 500, 20% MSCI
EAFE + Emerging Markets, 20% Lehman Brothers Mutual Fund (1-5) Gov/ Corp
Index, 20% Salomon Bros. 90-day T-Bills, and 5% Russell 2000 Growth.
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. Index returns begin 6-1-97.
(2) The Russell 3000 Index is a broad-based index and is intended to represent
the equity market as a whole.
<TABLE>
<CAPTION>
TOTAL AVERAGE RETURNS AS OF 6/30/99(3), (4) SIX MONTH ONE YEAR SINCE INCEPTION(9)
(June 2, 1997)
<S> <C> <C> <C>
Portfolio (without annuity expenses)(5) 15.81% 22.86% 19.86%
Portfolio (with annuity expenses)(6), (7) 15.01% 21.16% 18.20%
Portfolio (adjusted for the maximum surrender charge)(6), (8) 8.54% 15.41% 15.71%
Capital Market Benchmark(1) 7.73% 13.71% 14.81%
</TABLE>
(3) Past investment performance does not guarantee future performance. The
returns for the Portfolio assume reinvestment of all dividends/distributions
(4) During the period noted, the Advisor waived a portion of its management fee
and absorbed certain other expenses, and the Custodian allowed credits. In
the absence of the waiver, absorption of other expenses or credits, total
return would have been lower.
(5) Excludes all annuity expenses (which are itemized in footnote #6) charged by
American General Life Insurance Company Separate Account D through which
shares of the Fund are purchased.
(6) Total returns are based on the change in unit value and reflect expenses
such as mortality and expense risk charges and administrative expense
charges of 1.4%. Returns do not account for income taxes due at withdrawal
or for premium taxes.
(7) Excludes maximum Surrender Charge of 0%-7% and $35 annual contract fee.
(8) Includes maximum Surrender Charge of 0%-7% and $35 annual contract fee.
(9) Annualized.
Equity markets rose substantially throughout the period as the Dow Jones
Industrial Average broke through the 10,000- and 11,000-point barriers for the
first time in history. Stocks in the Technology and Communication sectors led
the way, as investors drove up prices based on the potential for growth in the
future. In addition, a strong economy and higher oil prices helped energy stocks
as well as capital goods and basic materials companies. Productivity accelerated
throughout the period -- if sufficient, this can enable firms to expand their
earnings without raising prices, even with higher wage costs. Early in the
period, the market advance was generally narrow and favored large-cap growth
stocks, yet lately there has been a resurgence in large-cap value stocks and
small-cap growth stocks as market breadth has begun to widen. International
markets bounced back during the period, led by strong performance in the Pacific
region. Equity markets in developing or emerging countries advanced
significantly as the improving economies of Asia and Latin America helped ease
global unrest. Although these markets have been very strong, we remain cautious
as risk levels for the second half of the year may be on the rise.
INVESTMENT STRATEGY
The CONSERVATIVE GROWTH PORTFOLIO is diversified in nine funds, representing six
major asset classes. The combination of asset classes increases our ability to
manage risk over a long-term investment horizon. Asset classes ranging in risk
levels from money market instruments to international equities are intended to
shield the Portfolio from drastic swings in any one specific area of the
financial markets. The overall investment strategy for the period was to:
o Increase the fixed-income fund exposure to 17%, as interest rates may have
reached their highs.
o Reduce exposure to international equities since risk levels appear to be
increasing overseas.
o Maintain equity focus on large-cap, blue-chip domestic holdings, as prospects
for earnings growth continue.
REVIEW OF PORTFOLIO ALLOCATIONS
Overall, we allocated the Portfolio in an effort to manage risk by concentrating
on domestic equities, reduce portfolio valuation levels, and position the
Portfolio to take advantage of favorable prospects for the largest, most liquid,
blue-chip equity holdings. We feel there is an opportunity for these holdings to
produce better relative returns than other capitalization levels. We slightly
decreased the equity position near the end of the period as strong results
helped boost performance, yet also pushed valuations to relatively high levels.
THE GROWTH and the GROWTH & INCOME FUNDS, which benefited from their
concentration in strong performing large-cap issues, generated much of the
overall return. The GROWTH FUND held large positions in firms such as AT&T,
Liberty Media Group and Nokia, which all appreciated significantly during the
period. International equities also performed well during the period, adding to
overall performance; we reduced exposure near the end of the period to favor
lower-risk asset classes as the year progresses. Because we believe interest
rates will move downward from their recent highs, we positioned the Portfolio to
take advantage of this trend. We increased the ratio of debt-to-equity
investments in an effort to generate yield and reduce overall risk levels of the
Portfolio. We feel that the market for high-quality debt issues should improve
as interest rates move downward and Y2K approaches.
OUTLOOK
The domestic economy continues to grow at a healthy pace. In the second quarter
of 1999, strong employment and improved business conditions propelled much of
this growth. Although consumer sentiment remains high, spending is expected to
slow from its torrid first-quarter pace of nearly 7% due primarily to a slowdown
in the housing market. While we see price increases in some commodities driven
by increasing global demand, we think that deeply ingrained deflationary forces
stemming from globalization, new technology, and free market reforms will
continue to hold inflation in check -- if growth remains at current levels or
slows somewhat. After raising rates, the Federal Reserve has announced a neutral
bias on interest rates. Since we believe interest rates may have peaked in
recent weeks, we moved from neutral to positive on our outlook for intermediate-
to long-term U.S. bonds. As we move closer to the end of the year, we could see
a "flight-to-quality," which could result in an increased flow of assets into
high-rated, liquid securities.
In the equity markets, we remain bullish on large-cap stocks, because we feel
these holdings should resume market leadership during the second half of the
year. With the rebound in international markets, we expect the trade balance to
improve from its lows of recent quarters, yet we are cautious in the area of
international equities. Improvement in Japan will be slight as structural
problems remain, but the situation will help keep global prices in check. The
Y2K issue is an important area to address. Risk will probably come from investor
psychology rather than a fundamental disruption in business practice. There
could be less liquidity in fixed-income markets as lenders constrict loan
practices, especially overseas. In addition, market fears could incite a
sell-off of higher-growth stocks. While these possibilities demand attention,
our longer-term outlook on global equity markets remains positive.
CONSERVATIVE GROWTH portfolio
asset class diversification++
U.S. EQUITY LARGE CAP 44%
MORTGAGE BONDS 4%
FOREIGN STOCKS 17%
CASH 12%
OTHER BONDS 4%
U.S. EQUITY SMALL CAP 4%
U.S. EQUITY MID CAP 15%
portfolio allocation++
GROWTH & INCOME FUND 38%
U.S. GOVERNMENT SECURITIES
FUND 4%
INCOME FUND 1%
INTERNATIONAL GROWTH FUND
(CAPITAL GUARDIAN) 13%
NORTHWEST FUND 4%
MONEY MARKET FUND 8%
SHORT TERM HIGH QUALITY
BOND FUND 1%
GROWTH FUND (JANUS) 28%
HIGH YIELD FUND 3%
+ Annual rate of inflation: 2.22%
Source: Ibbotson
++ As of 6/30/99 and may not reflect the current Conservative Growth Portfolio
allocation.
SAM portfolios
<PAGE>
BALANCED portfolio
- --------------------------------------------------------------------------------
PORTFOLIO MANAGER:
STEVE SCOTT
WM ADVISORS, INC.
The Strategic Asset Manager Portfolios are managed by Senior Portfolio Manager
Steve Scott. Mr. Scott is a pioneer in the asset allocation business, with over
28 years experience. He is the architect and founder of the SAM Portfolios and
holds both a BS and an MBA.
PERFORMANCE REVIEW(6)
The BALANCED PORTFOLIO returned 11.09% for the six-month period ended June 30,
1999. The Portfolio significantly outperformed its benchmark index for all
periods, while managing to reduce volatility relative to single asset-class
investments. Long-term results are favorable and provide a premium over
inflation; since inception, the Portfolio has returned 13.86% above the rate of
inflation.
ECONOMIC/MARKET REVIEW
The U.S. economy grew at a very strong rate over the past six months, advancing
4.3% in the first quarter and 2.3% in the second quarter of 1999. These results
have surprised most market participants, as the effects of a negative trade
balance did not offset the strength of consumer spending as much as expected.
High levels of personal income, large tax refunds, and strong consumer
confidence propelled the economy forward. The high growth rates and tight labor
markets in the U.S. economy created concern that inflation may begin to
accelerate, and the Federal Reserve raised short-term interest rates near the
end of the period. As a result of the strong growth, all yields have steadily
increased during 1999. With prices moving in the opposite direction as interest
rates, fixed-income investments generally reported weak results for the period.
However, high-yield bonds performed very well relative to other bond classes, as
economic strength positively influenced lower-grade issues.
GROWTH OF A $10,000 INVESTMENT(4), (5)
Lehman
Portfolio Brothers
(without Aggregate Russell Capital
annuity Inflation Bond 3000 Market
expenses)(5) (CPI)(1) Index(3) Index(2) Benchmark(1)
- --------------------------------------------------------------------------------
Inception 6/2/97 $10,000 $10,000 $10,000 $10,000 $10,000
Jun 97 10,190 10,000 10,206 10,416 10,119
Jul 97 10,680 10,032 10,442 11,233 10,392
Aug 97 10,350 10,063 10,235 10,777 10,304
Sep 97 10,700 10,088 10,462 11,388 10,456
Oct 97 10,390 10,100 10,332 11,005 10,608
Nov 97 10,390 10,094 10,409 11,426 10,657
Dec 97 10,470 10,106 10,502 11,655 10,764
Jan 98 10,600 10,126 10,632 11,776 10,902
Feb 98 11,110 10,145 10,870 12,618 10,893
Mar 98 11,410 10,164 11,036 13,244 10,931
Apr 98 11,580 10,182 11,101 13,374 10,987
May 98 11,440 10,201 11,083 13,044 11,092
Jun 98 11,655 10,213 11,184 13,484 11,186
Jul 98 11,534 10,225 11,223 13,239 11,210
Aug 98 10,378 10,238 10,818 11,211 11,392
Sep 98 10,719 10,250 10,975 11,975 11,659
Oct 98 11,182 10,274 11,296 12,884 11,597
Nov 98 11,655 10,274 11,510 13,672 11,663
Dec 98 12,268 10,287 11,701 14,541 11,698
Jan 99 12,691 10,312 11,810 15,035 11,781
Feb 99 12,399 10,324 11,693 14,503 11,575
Mar 99 12,929 10,356 11,898 15,035 11,639
Apr 99 13,412 10,431 12,084 15,713 11,676
May 99 13,103 10,431 12,020 15,414 11,573
Jun 99 13,627 10,469 12,220 15,627 11,536
(1) The Balanced Portfolio's benchmark is a blended mix of capital market
indices that is intended to represent a proxy for Portfolio performance.
The benchmark allocation is as follows: 25% Lehman Brothers Mutual Fund
(1-5) Gov/Corp Index, 25% Salomon Bros. 90-day T-Bills, 20% Lehman Brothers
Mortgage Index, 15% S&P 500, and 15% MSCI EAFE + Emerging Markets.
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. Index returns begin 6-1-97.
(2) The Russell 3000 Index is a broad-based index and is intended to represent
the equity market as a whole.
(3) The Lehman Brothers Aggregate Bond Index is a broad-based index intended to
represent the fixed-income market as a whole.
(4) Past investment performance does not guarantee future performance. The
returns for the Portfolio assume reinvestment of all
dividends/distributions.
<TABLE>
<CAPTION>
TOTAL AVERAGE RETURNS AS OF 6/30/99(4), (5) SIX MONTH ONE YEAR SINCE INCEPTION(10)
(June 2, 1997)
<S> <C> <C> <C>
Portfolio (without annuity expenses)(6) 11.09% 16.93% 16.08%
Portfolio (with annuity expenses)(7), (8) 10.32% 15.32% 14.47%
Portfolio (adjusted for the maximum surrender charge)(7), (9) 3.85% 9.57% 11.89%
Capital Market Benchmark(1) 4.43% 9.26% 10.10%
</TABLE>
(5) During the period noted, the Advisor waived its management fee and absorbed
certain other expenses, and the Custodian allowed credits. In the absence
of the waiver, absorption of other expenses or credits, total return would
have been lower.
(6) Excludes all annuity expenses (which are itemized in footnote #7) charged
by American General Life Insurance Company Separate Account D through which
shares of the Fund are purchased.
(7) Total returns are based on the change in unit value and reflect expenses
such as mortality and expense risk charges and administrative expense
charges of 1.4%. Returns do not account for income taxes due at withdrawal
or for premium taxes.
(8) Excludes maximum Surrender Charge of 0%-7% and $35 annual contract fee.
(9) Includes maximum Surrender Charge of 0%-7% and $35 annual contract fee.
(10) Annualized.
Equity markets rose substantially throughout the period as the Dow Jones
Industrial Average broke through the 10,000- and 11,000-point barriers for the
first time in history. Stocks in the Technology and Communication sectors led
the way, as investors drove up prices based on the potential for growth in the
future. In addition, a strong economy and higher oil prices helped energy stocks
as well as capital goods and basic materials companies. Productivity accelerated
throughout the period -- if sufficient, this can enable firms to expand their
earnings without raising prices, even with higher wage costs. Early in the
period, the market advance was generally narrow and favored large-cap growth
stocks, yet lately there has been a resurgence in large-cap value stocks and
small-cap growth stocks as market breadth has begun to widen. International
markets bounced back during the period, led by strong performance in the Pacific
region. Equity markets in developing or emerging countries advanced
significantly as the improving economies of Asia and Latin America helped ease
global unrest. Although these markets have been very strong, we remain cautious
as risk levels for the second half of the year may be on the rise.
INVESTMENT STRATEGY
The BALANCED PORTFOLIO is diversified in seven funds, representing eight major
asset classes. The combination of asset classes increases our ability to manage
risk over a long-term investment horizon. Asset classes ranging in risk levels
from short-term money market instruments to international equities are intended
to shield the Portfolio from drastic swings in any one specific area of the
financial markets.
The overall investment strategy for the period was to:
o Increase the fixed-income fund exposure to 40% and reduce the cash position,
as interest rates may have reached their highs.
o Focus fixed-income holdings on high-quality issues to improve credit risk
during the second half of 1999.
o Reduce exposure to international equities since risk levels appear to be
increasing overseas.
o Maintain equity focus on large-cap domestic holdings, as prospects for
earnings growth improve.
REVIEW OF PORTFOLIO ALLOCATIONS
The Portfolio slightly decreased its equity position near the end of the period
as strong results helped boost performance, yet also pushed valuations to
relatively high levels. The GROWTH and the GROWTH & INCOME FUNDS, which
benefited from their concentration in strong performing large-cap issues,
generated much of the overall return. The GROWTH FUND held large positions in
firms such as AT&T, Liberty Media Group and Nokia, which all appreciated
significantly during the period. International equities also performed well
during the period, adding to overall performance; we reduced exposure near the
end of the period to favor lower-risk asset classes as the year progresses.
Because we believe interest rates will move downward from their recent highs, we
positioned the Portfolio to take advantage of this trend. We increased the ratio
of debt-to-equity investments in an effort to generate yield and reduce overall
risk levels of the Portfolio. We feel that the market for high-quality debt
issues should improve as interest rates move downward and Y2K approaches.
OUTLOOK
The domestic economy continues to grow at a healthy pace. In the second quarter
of 1999, strong employment and improved business conditions propelled much of
this growth. Although consumer sentiment remains high, spending is expected to
slow from its torrid first-quarter pace of nearly 7% due primarily to a slowdown
in the housing market. While we see price increases in some commodities driven
by increasing global demand, we think that deeply ingrained deflationary forces
stemming from globalization, new technology, and free market reforms will
continue to hold inflation in check -- if growth remains at current levels or
slows somewhat. After raising rates, the Federal Reserve has announced a neutral
bias on interest rates. Since we believe interest rates may have peaked in
recent weeks, we moved from neutral to positive on our outlook for intermediate-
to long-term U.S. bonds. As we move closer to the end of the year, we could see
a "flight-to-quality," which could result in an increased flow of assets into
high-rated, liquid securities.
In the equity markets, we remain bullish on large-cap stocks, because we feel
these holdings should resume market leadership during the second half of the
year. With the rebound in international markets, we expect the trade balance to
improve from its lows of recent quarters, yet we are cautious in the area of
international equities.
Improvement in Japan will be slight as structural problems remain, but the
situation will help keep global prices in check. The Y2K issue is an important
area to address. Risk will probably come from investor psychology rather than a
fundamental disruption in business practice. There could be less liquidity in
fixed-income markets as lenders constrict loan practices, especially overseas.
In addition, market fears could incite a sell-off of higher-growth stocks. While
these possibilities demand attention, our longer-term outlook on global equity
markets remains positive.
BALANCED portfolio
asset class diversification++
U.S. EQUITY LARGE CAP 32%
CASH 4%
CORPORATE BONDS 3%
FOREIGN STOCKS 14%
SHORT TERM BONDS 14%
OTHER BONDS 3%
U.S. EQUITY SMALL CAP 2%
MORTGAGES 18%
U.S. EQUITY MID CAP 10%
portfolio allocation++
GROWTH & INCOME FUND 29%
HIGH YIELD FUND 2%
INTERNATIONAL GROWTH FUND
(CAPITAL GUARDIAN) 12%
U.S. GOVERNMENT SECURITIES
FUND 20%
SHORT TERM HIGH QUALITY
BOND FUND 15%
GROWTH FUND (JANUS) 19%
INCOME FUND 3%
+ Annual rate of inflation: 2.22%
Source: Ibbotson
++ As of 6/30/99 and may not reflect the current Balanced Portfolio allocation.
SAM portfolios
<PAGE>
FLEXIBLE INCOME portfolio
- --------------------------------------------------------------------------------
PORTFOLIO MANAGER:
STEVE SCOTT
WM ADVISORS, INC.
The Strategic Asset Manager Portfolios are managed by Senior Portfolio Manager
Steve Scott. Mr. Scott is a pioneer in the asset allocation business, with over
28 years experience. He is the architect and founder of the SAM Portfolios and
holds both a BS and an MBA.
PERFORMANCE REVIEW(5)
The FLEXIBLE INCOME PORTFOLIO returned 4.52% for the six-month period ended June
30, 1999. The Portfolio outperformed its benchmark index for all periods, while
managing to reduce volatility relative to single asset-class investments.
Long-term results are favorable and provide a premium over inflation; since
inception, the Portfolio has returned 8.18% above the rate of inflation.
ECONOMIC/MARKET REVIEW
The U.S. economy grew at a very strong rate over the past six months, advancing
4.3% in the first quarter 2.3% in the second quarter of 1999. These results have
surprised most market participants, as the effects of a negative trade balance
did not offset the strength of consumer spending as much as expected. High
levels of personal income, large tax refunds, and strong consumer confidence
propelled the economy forward. The high growth rates and tight labor markets in
the U.S. economy created concern that inflation may begin to accelerate, and the
Federal Reserve raised short-term interest rates near the end of the period. As
a result of the strong growth, all yields have steadily increased during 1999.
With prices moving in the opposite direction in relation to interest rates,
fixed-income investments generally reported weak results for the period.
However, high-yield bonds performed very well relative to other bond classes, as
economic strength positively influenced lower-grade issues.
GROWTH OF A $10,000 INVESTMENT(3), (4)
Lehman
Portfolio Brothers
(without Capital Agregate
annuity Inflation Market Bond
expenses)(5) (CPI)(1) Benchmark(1) Index(2)
- --------------------------------------------------------------------------------
Inception 9/8/97 $10,000 $10,000 $10,000 $10,000
Sep 97 10,110 10,025 10,122 10,148
Oct 97 10,110 10,037 10,154 10,295
Nov 97 10,140 10,031 10,229 10,343
Dec 97 10,230 10,043 10,303 10,447
Jan 98 10,350 10,062 10,391 10,581
Feb 98 10,540 10,081 10,485 10,572
Mar 98 10,650 10,100 10,576 10,608
Apr 98 10,720 10,119 10,632 10,663
May 98 10,740 10,137 10,665 10,765
Jun 98 10,871 10,149 10,756 10,856
Jul 98 10,831 10,161 10,786 10,879
Aug 98 10,470 10,173 10,719 11,056
Sep 98 10,771 10,186 10,898 11,315
Oct 98 10,961 10,210 11,015 11,255
Nov 98 11,172 10,210 11,100 11,319
Dec 98 11,432 10,222 11,200 11,353
Jan 99 11,623 10,247 11,293 11,434
Feb 99 11,452 10,260 11,231 11,234
Mar 99 11,680 10,291 11,334 11,295
Apr 99 11,924 10,366 11,415 11,332
May 99 11,803 10,366 11,381 11,232
Jun 99 11,950 10,403 11,470 11,196
(1) The Flexible Income Portfolio's benchmark is a blended mix of capital market
indices that are intended to represent a proxy for Portfolio performance.
The benchmark allocation is as follows: 40% Lehman Bros. Mutual Fund Short
(1-5) Gov/Corp Index, 40% Salomon Bros. 90-day T-Bills, 10% Lehman Bros.
Mortgage Index, and 10% S&P 500.
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. Index returns begin 9-1-97.
(2) The Lehman Brothers Aggregate Bond Index is a broad-based index intended to
represent the fixed-income market as a whole.
(3) Past investment performance does not guarantee future performance. The
returns for the Portfolio assume reinvestment of all
dividends/distributions.
<TABLE>
<CAPTION>
TOTAL AVERAGE RETURNS AS OF 6/30/99(3), (4) SIX MONTH ONE YEAR SINCE INCEPTION(9)
(September 8, 1997)
<S> <C> <C> <C>
Portfolio (without annuity expenses)(5) 4.52% 9.91% 10.36%
Portfolio (with annuity expenses)(6), (7) 3.80% 8.39% 8.82%
Portfolio (adjusted for the maximum surrender charge)(6), (8) -2.67% 2.64% 5.67%
Capital Market Benchmark(1) 2.42% 6.65% 7.77%
</TABLE>
(4) During the period noted, the Advisor waived its management fee and absorbed
certain other expenses, and the Custodian allowed credits. In the absence of
the waiver, absorption of other expenses or credits, total return would have
been lower.
(5) Excludes all annuity expenses (which are itemized in footnote #6) charged by
American General Life Insurance Company Separate Account D through which
shares of the Fund are purchased.
(6) Total returns are based on the change in unit value and reflect expenses
such as mortality and expense risk charges and administrative expense
charges of 1.4%. Returns do not account for income taxes due at withdrawal
or for premium taxes.
(7) Excludes maximum Surrender Charge of 0%-7% and $35 annual contract fee.
(8) Includes maximum Surrender Charge of 0%-7% and $35 annual contract fee.
(9) Annualized.
Equity markets rose substantially throughout the period as the Dow Jones
Industrial Average broke through the 10,000- and 11,000-point barriers for the
first time in history. Stocks in the Technology and Communication sectors led
the way, as investors drove up prices based on the potential for growth in the
future. In addition, a strong economy and higher oil prices helped energy stocks
as well as capital goods and basic materials companies. Productivity accelerated
throughout the period -- if sufficient, this can enable firms to expand their
earnings without raising prices, even with higher wage costs. Early in the
period, the market advance was generally narrow and favored large-cap growth
stocks, yet lately there has been a resurgence in large-cap value stocks as
market breadth has begun to widen.
INVESTMENT STRATEGY
The FLEXIBLE INCOME PORTFOLIO is diversified in seven funds, representing eight
major asset classes. The combination of asset classes increases our ability to
manage risk over a long-term investment horizon. Asset classes ranging in risk
levels from short-term money market instruments to equities are intended to
shield the Portfolio from drastic swings in any one specific area of the
financial markets.
The overall investment strategy for the period was to:
o Maintain fixed-income fund exposure at 75%, as interest rates may have reached
their highs.
o Focus the majority of fixed-income holdings in high-quality issues to improve
credit risk during the second half of 1999.
o Continue to generate strong yield with broadly diversified fixed-income
holdings.
o Maintain growth potential with an equity focus on large-cap domestic holdings.
REVIEW OF PORTFOLIO ALLOCATIONS
During the period, equity investments advanced while most fixed-income assets
declined due to higher interest rates. Because we believe interest rates will
move downward from their recent highs, we positioned the Portfolio to take
advantage of this trend (bond prices move in the opposite direction of interest
rates). We anticipate that the market for high-quality issues found in the U.S.
GOVERNMENT FUND and the SHORT TERM HIGH QUALITY BOND FUND will improve as
interest rates move downward and Y2K approaches. In addition, we maintained our
position in both the INCOME FUND and the HIGH YIELD FUND to continue to generate
strong levels of income. In the equity portion of the Portfolio, we kept a high
concentration in large-cap holdings, favoring the blue-chip GROWTH & INCOME
FUND, while providing additional potential for growth with the small allocation
in the GROWTH FUND. We maintained current positions to take advantage of the
favorable prospects for the largest, most liquid, blue-chip equity holdings. We
feel there is an opportunity for these holdings to produce better relative
returns than other capitalization levels.
OUTLOOK
The domestic economy continues to grow at a healthy pace. In the second quarter
of 1999, strong employment and improved business conditions propelled much of
this growth. Although consumer sentiment remains high, spending is expected to
slow from its torrid first-quarter pace of nearly 7% due primarily to a slowdown
in the housing market. While we see price increases in some commodities driven
by increasing global demand, we think that deeply ingrained deflationary forces
stemming from globalization, new technology, and free market reforms will
continue to hold inflation in check -- if growth remains at current levels or
slows somewhat. After raising rates, the Federal Reserve has announced a neutral
bias on interest rates. Since we believe interest rates may have peaked in
recent weeks, we moved from neutral to positive on our outlook for intermediate-
to long-term U.S. bonds. As we move closer to the end of the year, we could see
a "flight-to-quality," which could result in an increased flow of assets into
high-rated, liquid securities.
In the equity markets, we remain bullish on large-cap stocks, because we feel
these holdings should resume market leadership during the second half of the
year. The Y2K issue is an important area to address. Risk will probably come
from investor psychology rather than a fundamental disruption in business
practice. There could be less liquidity in fixed-income markets as lenders
constrict loan practices, especially overseas. In addition, market fears could
incite a sell-off of higher-growth stocks. While these possibilities demand
attention, our longer-term outlook on global equity markets remains positive.
FLEXIBLE INCOME portfolio
asset class diversification++
CORPROATE BONDS 17%
TREASURIES 2%
FOREIGN STOCKS 1%
SHORT-TERM BONDS 19%
FOREIGN BONDS 2%
DOMESTIC STOCKS 23%
CASH 18%
MORTGAGES 18%
portfolio allocation++
GROWTH & INCOME FUND 20%
SHORT TERM HIGH QUALITY
BOND FUND 20%
INCOME FUND 20%
MONEY MARKET FUND 10%
HIGH YIELD FUND 5%
GROWTH FUND (JANUS) 5%
U.S. GOVERNMENT SECURITIES
FUND 20%
+ Annual rate of inflation: 2.18%
Source: Ibbotson
++ As of 6/30/99 and may not reflect the current Flexible Income Portfolio
allocation.
SAM portfolios
<PAGE>
INCOME portfolio
- --------------------------------------------------------------------------------
PORTFOLIO MANAGER:
STEVE SCOTT
WM ADVISORS, INC.
The Strategic Asset Manager Portfolios are managed by Senior Portfolio Manager
Steve Scott. Mr. Scott is a pioneer in the asset allocation business, with over
28 years experience. He is the architect and founder of the SAM Portfolios and
holds both a BS and an MBA.
PERFORMANCE REVIEW(5)
The INCOME PORTFOLIO returned 0.47% for the six-month period ended June 30,
1999.
ECONOMIC/MARKET REVIEW
The U.S. economy grew at a very strong rate over the past six months, advancing
4.3% in the first quarter and 2.3% in the second quarter of 1999. These results
have surprised most market participants, as the effects of a negative trade
balance did not offset the strength of consumer spending as much as expected.
High levels of personal income, large tax refunds, and strong consumer
confidence propelled the economy forward. The high growth rates and tight labor
markets in the U.S. economy created concern that inflation may begin to
accelerate, and the Federal Reserve raised short-term interest rates near the
end of the period. As a result of the strong growth, all yields have steadily
increased during 1999. With bond prices moving in the opposite direction in
relation to interest rates, fixed-income investments generally reported weak
results for the period. Performance in the fixed-income markets for the past six
months reflected market leadership away from long-term Treasuries and into some
of the lower-rated issues and mortgage-backed securities. High-yield bonds
performed very well relative to other bond classes, as economic strength
positively influenced lower-grade issues.
GROWTH OF A $10,000 INVESTMENT(3), (4)
Lehman
Portfolio Brothers
(without Capital Agregate
annuity Inflation Market Bond
expenses)(5) (CPI)(1) Benchmark(1) Index(2)
- --------------------------------------------------------------------------------
Inception 4/23/98 $10,000 $10,000 $10,000 $10,000
Apr 98 10,000 10,000 10,000 10,000
May 98 10,090 10,018 10,063 10,095
Jun 98 10,163 10,030 10,114 10,181
Jul 98 10,183 10,042 10,147 10,202
Aug 98 10,233 10,054 10,213 10,368
Sep 98 10,383 10,066 10,338 10,611
Oct 98 10,323 10,090 10,334 10,555
Nov 98 10,404 10,090 10,394 10,615
Dec 98 10,424 10,102 10,428 10,647
Jan 99 10,493 10,127 10,489 10,722
Feb 99 10,363 10,139 10,444 10,535
Mar 99 10,446 10,170 10,502 10,593
Apr 99 10,538 10,244 10,541 10,627
May 99 10,497 10,244 10,525 10,533
Jun 99 10,472 10,281 10,537 10,499
(1) The Income Portfolio's benchmark is a blended mix of capital market indices
that are intended to represent a proxy for Portfolio performance. The
benchmark allocation is as follows: 50% Salomon Bros. 90-day T-Bills Index,
30% Lehman Bros. Mutual Fund Short (1-5) Gov/Corp Index, 10% Lehman Bros.
Mortgage Index and 10% Lehman Bros BAA LT Corporate Bond Index. 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.
Index returns begin 4/1/98.
(2) The Lehman Brothers Aggregate Bond Index is a broad-based index intended to
represent the fixed-income market as a whole.
(3) Past investment performance does not guarantee future performance. The
returns for the Portfolio assume reinvestment of all dividends/
distributions.
<TABLE>
<CAPTION>
TOTAL AVERAGE RETURNS AS OF 6/30/99(3), (4) SIX MONTH ONE YEAR SINCE INCEPTION(9)
(April 23, 1998)
<S> <C> <C> <C>
Portfolio (without annuity expenses)(5) 0.47% 3.04% 2.77%
Portfolio (with annuity expenses)(6), (7) -0.22% 1.61% 2.52%
Portfolio (adjusted for the maximum surrender charge)(6), (8) -6.70% -4.14% -2.37%
Capital Market Benchmark(1) 1.04% 4.18% 4.59%
</TABLE>
(4) During the period noted, the Advisor waived its management fee and absorbed
certain other expenses, and the Custodian allowed credits. In the absence of
the waiver, absorption of other expenses or credits, total return would have
been lower.
(5) Excludes all annuity expenses (which are itemized in footnote #6) charged by
American General Life Insurance Company Separate Account D through which
shares of the Fund are purchased.
(6) Total returns are based on the change in unit value and reflect expenses
such as mortality and expense risk charges and administrative expense
charges of 1.4%. Returns do not account for income taxes due at withdrawal
or for premium taxes.
(7) Excludes maximum Surrender Charge of 0%-7% and $35 annual contract fee.
(8) Includes maximum Surrender Charge of 0%-7% and $35 annual contract fee.
(9) Annualized.
INVESTMENT STRATEGY
The INCOME PORTFOLIO is diversified in five funds, representing six major asset
classes. The combination of asset classes increases our ability to manage risk
over a long-term investment horizon. Asset classes ranging in risk levels from
short-term bonds to high-yield and international bonds are intended to shield
the Portfolio from drastic swings in any one specific area of the fixed-income
markets.
The overall investment strategy for the period was to:
o Increase overall Portfolio duration as interest rates may have reached their
highs.
o Focus the majority of fixed-income holdings in high-quality issues to improve
credit risk during the second half of 1999.
o Continue to generate strong yield with broadly diversified fixed-income
holdings.
REVIEW OF PORTFOLIO ALLOCATIONS
Because we believe interest rates will move downward from their recent highs, we
positioned the Portfolio to take advantage of this trend (bond prices move in
the opposite direction of interest rates). We increased the duration (a measure
of sensitivity to interest rate changes) of the Portfolio in an effort to
capitalize on the possibility of lower rates as well as to generate additional
income. We feel that the market for high-quality issues found in the U.S.
GOVERNMENT FUND and the SHORT TERM HIGH QUALITY BOND FUND should improve as
interest rates move downward and Y2K approaches. Because of this outlook, we
shifted assets out of both the MONEY MARKET FUND and the HIGH YIELD FUND into
the U.S. GOVERNMENT FUND. In addition, because we reduced exposure to high-yield
securities, we maintained our position in the INCOME FUND to offset the
reduction in yield as well as improve credit quality.
OUTLOOK
The domestic economy continues to grow at a healthy pace. In the second quarter
of 1999, strong employment and improved business conditions propelled much of
this growth. Although consumer sentiment remains high, spending is expected to
slow from its torrid first-quarter pace of nearly 7% due primarily to a slowdown
in the housing market. While we see price increases in some commodities driven
by increasing global demand, we think that deeply ingrained deflationary forces
stemming from globalization, new technology, and free market reforms will
continue to hold inflation in check--if growth remains at current levels or
slows somewhat. After raising rates, the Federal Reserve has announced a neutral
bias on interest rates. Since we believe interest rates may have peaked in
recent weeks, we moved from neutral to positive on our outlook for intermediate-
to long-term U.S. bonds. As we move closer to the end of the year, we could see
a "flight-to-quality," which could result in an increased flow of assets into
high-rated, liquid securities. The Y2K issue is an important area to address.
Risk will probably come from investor psychology rather than a fundamental
disruption in business practice. There could be less liquidity in fixed-income
markets as lenders constrict loan practices, especially overseas. While these
possibilities demand attention, our long-term outlook remains positive.
INCOME portfolio
asset class diversification++
CORPORATE BONDS 27%
TREASURIES 4%
FOREIGN BONDS 3%
SHORT-TERM BONDS 13%
CASH 23%
MORTGAGES 31%
portfolio allocation++
INCOME FUND 29%
U.S. GOVERNMENT SECURITIES
FUND 35%
SHORT TERM HIGH QUALITY
BOND FUND 14%
MONEY MARKET FUND 11%
HIGH YIELD FUND 11%
++ As of 6/30/99 and may not reflect the current Income Portfolio allocation.
SAM portfolios
<PAGE>
STATEMENTS of ASSETS and LIABILITIES
WM VARIABLE TRUST
JUNE 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
SHORT TERM U.S.
MONEY HIGH GOVERNMENT GROWTH &
MARKET QUALITY BOND SECURITIES INCOME INCOME GROWTH
FUND FUND FUND FUND FUND FUND
-------------- -------------- -------------- -------------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Investments, at value
(See portfolios of investments):
Securities ................ $ 19,455,004 $ 43,807,605 $ 63,703,561 $ 43,985,609 $ 156,671,174 $ 229,503,080
Repurchase Agreements ..... 2,326,000 1,812,000 4,338,000 12,032,000 6,981,000 --
------------- ------------- ------------- ------------- -------------- --------------
Total Investments (a) ... 21,781,004 45,619,605 68,041,561 56,017,609 163,652,174 229,503,080
Cash and/or foreign currency(b) 251 14,835 -- 958 -- 745,048
Dividends and/or interest
receivable ................ 126,413 434,536 478,172 934,614 138,810 40,023
Receivable for investment
securities sold ........... 2,399,936 2,303 -- -- -- 3,998,434
Receivable for Fund shares
sold ...................... 6,944 20,668 27,456 4,119 83,941 68,120
Net unrealized appreciation
of forward currency
contracts (See portfolio of
investments) .............. -- -- -- -- -- 1,190,263
Unamortized organization
costs and/or offering
costs ..................... -- -- -- -- -- --
Prepaid expenses and other
assets .................... 928 1,000 1,326 1,439 3,398 3,977
------------- ------------- ------------- ------------- -------------- --------------
Total Assets ............ 24,315,476 46,092,947 68,548,515 56,958,739 163,878,323 235,548,945
------------- ------------- ------------- ------------- -------------- --------------
LIABILITIES:
Payable for investment
securities purchased ...... 1,005,463 -- -- -- 1,561,589 7,502,199
Net unrealized depreciation
of forward foreign
currency contracts (See
portfolio of investments) . -- -- -- -- -- --
Payable for Fund shares
redeemed .................. 93,473 12,937 22,739 6,516 54,333 46,603
Due to custodian ............ -- -- 10,831 -- 46,673 --
Dividends payable ........... 5,330 -- -- -- -- --
Investment advisory fee
payable ................... 9,939 15,884 31,381 26,684 98,760 156,108
Administration fee payable .. 4,209 5,718 9,415 7,389 22,716 31,797
Accrued legal and audit fees 10,388 11,864 10,440 11,530 11,774 12,051
Printing fees payable ....... 6,708 7,206 12,132 10,358 27,740 38,397
Custodian fee payable ....... 113 492 1,094 534 1,147 3,173
Accrued expenses and other
payables .................. 1,956 3,602 3,309 3,159 5,116 6,715
------------- ------------- ------------- ------------- -------------- --------------
Total Liabilities ....... 1,137,579 57,703 101,341 66,170 1,829,848 7,797,043
------------- ------------- ------------- ------------- -------------- --------------
NET ASSETS .................. $ 23,177,897 $ 46,035,244 $ 68,447,174 $ 56,892,569 $ 162,048,475 $ 227,751,902
============= ============= ============= ============= ============== ==============
- ----------------
(a) Investments, at cost .... $ 21,781,004 $ 45,861,375 $ 67,641,750 $ 56,349,524 $ 132,893,479 $ 165,164,554
============= ============= ============= ============= ============== ==============
(b) Cash and/or foreign
currency, at cost ......... $ 251 $ 14,835 $ -- $ 958 $ -- $ 745,729
============= ============= ============= ============= ============== ==============
<CAPTION>
EMERGING INTERNATIONAL STRATEGIC CONSERVATIVE
BOND & STOCK NORTHWEST GROWTH GROWTH GROWTH GROWTH
FUND FUND FUND FUND PORTFOLIO PORTFOLIO
------------ ---------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Investments, at value
(See portfolios of investments):
Securities ................ $5,389,881 $5,218,472 $34,578,181 $39,184,773 $12,830,588 $26,450,864
Repurchase Agreements ..... 2,716,000 561,000 452,000 877,000 -- 179,000
---------- ---------- ----------- ----------- ----------- -----------
Total Investments (a) ... 8,105,881 5,779,472 35,030,181 40,061,773 12,830,588 26,629,864
Cash and/or foreign currency(b) 619 -- -- 587,118 66,099 16,113
Dividends and/or interest
receivable ................ 26,938 2,334 16,961 265,546 -- 251
Receivable for investment
securities sold ........... -- -- 150,038 14,317,486 -- --
Receivable for Fund shares
sold ...................... 7,460 7,925 -- 16,479 18,296 399,666
Net unrealized appreciation
of forward currency
contracts (See portfolio of
investments) .............. -- -- -- -- -- --
Unamortized organization
costs and/or offering
costs ..................... -- -- -- -- 24,033 24,033
Prepaid expenses and other
assets .................... 48 48 1,214 1,739 106 212
---------- ---------- ----------- ----------- ----------- -----------
Total Assets ............ 8,140,946 5,789,779 35,198,394 55,250,141 12,939,122 27,070,139
---------- ---------- ----------- ----------- ----------- -----------
LIABILITIES:
Payable for investment
securities purchased ...... 256,100 31,918 226,551 -- -- --
Net unrealized depreciation
of forward foreign
currency contracts (See
portfolio of investments) . -- -- -- 2,212 -- --
Payable for Fund shares
redeemed .................. -- -- 18,421 14,741 -- --
Due to custodian ............ -- 69,901 16,765 -- -- --
Dividends payable ........... -- -- -- -- -- --
Investment advisory fee
payable ................... 10,688 9,354 24,076 45,120 13,533 15,088
Administration fee payable .. 1,062 835 4,881 8,685 1,439 2,894
Accrued legal and audit fees 10,219 9,415 10,431 15,064 6,933 6,969
Printing fees payable ....... 991 782 6,562 11,609 1,670 3,362
Custodian fee payable ....... -- 956 766 7,116 -- --
Accrued expenses and other
payables .................. 923 387 1,709 3,342 223 456
---------- ---------- ----------- ----------- ----------- -----------
Total Liabilities ....... 279,983 123,548 310,162 107,889 23,798 28,769
---------- ---------- ----------- ----------- ----------- -----------
NET ASSETS .................. $7,860,963 $5,666,231 $34,888,232 $55,142,252 $12,915,324 $27,041,370
========== ========== =========== =========== =========== ===========
- ----------------
(a) Investments, at cost .... $7,928,721 $4,655,164 $30,316,574 $34,243,903 $11,846,932 $25,373,690
========== ========== =========== =========== =========== ===========
(b) Cash and/or foreign
currency, at cost ......... $ 619 $ -- $ -- $ 589,641 $ 66,099 $ 16,113
========== ========== =========== =========== =========== ===========
<CAPTION>
FLEXIBLE
BALANCED INCOME INCOME
PORTFOLIO PORTFOLIO PORTFOLIO
----------- ---------- ----------
<S> <C> <C> <C>
ASSETS:
Investments, at value
(See portfolios of investments):
Securities ................ $35,379,617 $9,863,260 $3,398,860
Repurchase Agreements ..... 235,000 -- --
----------- ---------- ----------
Total Investments (a) ... 35,614,617 9,863,260 3,398,860
Cash and/or foreign currency(b) 5,957 40,162 20,609
Dividends and/or interest
receivable ................ 27 -- 151
Receivable for investment
securities sold ........... -- -- --
Receivable for Fund shares
sold ...................... 72,082 45,569 --
Net unrealized appreciation
of forward currency
contracts (See portfolio of
investments) .............. -- -- --
Unamortized organization
costs and/or offering
costs ..................... 24,033 6,017 --
Prepaid expenses and other
assets .................... 236 18 13
----------- ---------- ----------
Total Assets ............ 35,716,952 9,955,026 3,419,633
----------- ---------- ----------
LIABILITIES:
Payable for investment
securities purchased ...... 135,662 -- --
Net unrealized depreciation
of forward foreign
currency contracts (See
portfolio of investments) . -- -- --
Payable for Fund shares
redeemed .................. -- -- --
Due to custodian ............ -- -- --
Dividends payable ........... -- -- --
Investment advisory fee
payable ................... 19,630 4,379 2,094
Administration fee payable .. 3,917 1,087 384
Accrued legal and audit fees 6,980 6,911 6,907
Printing fees payable ....... 4,418 1,042 409
Custodian fee payable ....... 38 31 46
Accrued expenses and other
payables .................. 545 99 47
----------- ---------- ----------
Total Liabilities ....... 171,190 13,549 9,887
----------- ---------- ----------
NET ASSETS .................. $35,545,762 $9,941,477 $3,409,746
=========== ========== ==========
- ----------------
(a) Investments, at cost .... $34,921,860 $9,968,937 $3,468,747
=========== ========== ==========
(b) Cash and/or foreign
currency, at cost ......... $ 5,957 $ 40,162 $ 20,609
=========== ========== ==========
</TABLE>
See Notes to Financial Statements.
<PAGE>
STATEMENTS of ASSETS and LIABILITIES (continued)
WM VARIABLE TRUST
JUNE 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
SHORT TERM U.S.
MONEY HIGH GOVERNMENT GROWTH &
MARKET QUALITY BOND SECURITIES INCOME INCOME GROWTH
FUND FUND 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) $ 23,539 $ 33,057 $ 37,610 $ 47,725 $ 305,764 $ (721,406)
Accumulated net realized
gain/(loss) from
security transactions,
futures contracts,
forward foreign currency
contracts and foreign
currency transactions ... (893) (573,398) (1,023,143) (2,396,012) 8,075,261 39,434,345
Net unrealized
appreciation/
(depreciation) of
securities, forward
foreign currency
contracts, foreign
currency, and other
assets and liabilities .. -- (241,770) 399,811 (331,915) 30,758,695 65,527,717
Paid-in capital ........... 23,155,251 46,817,355 69,032,896 59,572,771 122,908,755 123,511,246
----------- ----------- ----------- ----------- ------------ ------------
Total Net Assets ...... $23,177,897 $46,035,244 $68,447,174 $56,892,569 $162,048,475 $227,751,902
=========== =========== =========== =========== ============ ============
NET ASSET VALUE, offering
price and redemption price
per share of beneficial
interest outstanding ...... $ 1.00 $ 2.41 $ 9.80 $ 9.65 $ 18.16 $ 25.96
=========== =========== =========== =========== ============ ============
Number of Fund/Portfolio
shares outstanding ...... 23,171,527 19,102,860 6,981,447 5,897,635 8,925,198 8,774,148
=========== =========== =========== =========== ============ ============
<CAPTION>
EMERGING INTERNATIONAL STRATEGIC CONSERVATIVE
BOND & STOCK NORTHWEST GROWTH GROWTH GROWTH GROWTH
FUND FUND FUND FUND PORTFOLIO PORTFOLIO
---------- ---------- ----------- ----------- ----------- -----------
<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) $ 64,866 $ (5,542) $ (99,234) $ 1,193,638 $ 17,519 $ 67,509
Accumulated net realized
gain/(loss) from
security transactions,
futures contracts,
forward foreign currency
contracts and foreign
currency transactions ... 63,945 (10,590) 687,900 (4,685,417) 858,697 1,573,134
Net unrealized
appreciation/
(depreciation) of
securities, forward
foreign currency
contracts, foreign
currency, and other
assets and liabilities .. 177,160 1,124,308 4,713,607 5,756,370 983,656 1,256,174
Paid-in capital ........... 7,554,992 4,558,055 29,585,959 52,877,661 11,055,452 24,144,553
---------- ---------- ----------- ----------- ----------- -----------
Total Net Assets ...... $7,860,963 $5,666,231 $34,888,232 $55,142,252 $12,915,324 $27,041,370
========== ========== =========== =========== =========== ===========
NET ASSET VALUE, offering
price and redemption price
per share of beneficial
interest outstanding ...... $ 10.67 $ 12.68 $ 12.04 $ 12.63 $ 15.73 $ 14.21
========== ========== =========== =========== =========== ===========
Number of Fund/Portfolio
shares outstanding ...... 736,556 446,794 2,896,659 4,366,939 820,870 1,902,818
========== ========== =========== =========== =========== ===========
<CAPTION>
FLEXIBLE
BALANCED INCOME INCOME
PORTFOLIO PORTFOLIO PORTFOLIO
----------- ---------- ----------
<S> <C> <C> <C>
NET ASSETS CONSIST OF:
Undistributed net
investment income/
(accumulated net
investment loss/
distributions in excess
of net investment income) $ (1,831) $ 1,286 $ 3,951
Accumulated net realized
gain/(loss) from
security transactions,
futures contracts,
forward foreign currency
contracts and foreign
currency transactions ... 1,691,482 201,222 (3,448)
Net unrealized
appreciation/
(depreciation) of
securities, forward
foreign currency
contracts, foreign
currency, and other
assets and liabilities .. 692,757 (105,677) (69,887)
Paid-in capital ........... 33,163,354 9,844,646 3,479,130
----------- ---------- ----------
Total Net Assets ...... $35,545,762 $9,941,477 $3,409,746
=========== ========== ==========
NET ASSET VALUE, offering
price and redemption price
per share of beneficial
interest outstanding ...... $ 13.10 $ 11.65 $ 10.07
=========== ========== ==========
Number of Fund/Portfolio
shares outstanding ...... 2,712,640 853,129 338,620
=========== ========== ==========
</TABLE>
STATEMENTS of OPERATIONS
WM VARIABLE TRUST
FOR THE SIX MONTHS ENDED JUNE 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
SHORT TERM U.S.
MONEY HIGH GOVERNMENT GROWTH &
MARKET QUALITY BOND SECURITIES INCOME INCOME GROWTH
FUND FUND FUND FUND FUND FUND
----------- ------------- -------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends .................. $ -- $ -- $ -- $ -- $ 920,163 $ 305,383
Foreign withholding tax on
dividend income .......... -- -- -- -- -- --
Interest ................... 736,070 1,106,550 1,672,825 1,903,500 112,297 105,816
----------- ------------- -------------- ------------- ------------- -------------
Total investment income 736,070 1,106,550 1,672,825 1,903,500 1,032,460 411,199
----------- ------------- -------------- ------------- ------------- -------------
EXPENSES:
Investment advisory fee .... 74,144 92,812 156,414 159,448 538,080 870,611
Administration fee ........ 26,692 33,412 46,924 44,155 123,188 177,184
Trustees' fees and expenses. (3,370) 1,190 (797) 1,203 2,784 3,472
Legal and audit fees ...... 10,550 12,474 11,911 12,218 19,183 22,161
Custodian fees ............ 1,482 3,228 6,451 2,154 8,249 18,308
Registration and filing fees 105 199 38 83 678 1,178
Amortization of organization
costs ................... -- -- -- -- -- --
Printing fees .............. 4,935 6,952 10,085 8,909 25,847 36,647
Other ...................... 2,502 2,322 1,277 1,247 4,106 4,388
Fees waived and/or expenses
reimbursed by investment
advisor .................. (15,919) -- -- -- -- --
----------- ------------- -------------- ------------- ------------- -------------
Subtotal ............... 101,121 152,589 232,303 229,417 722,115 1,133,949
Credits allowed by the
custodian ................ (1,025) (274) (16) (3) (1,010) (1,344
----------- ------------- -------------- ------------- ------------- -------------
Net expenses ........... 100,096 152,315 232,287 229,414 721,105 1,132,605
----------- ------------- -------------- ------------- ------------- -------------
NET INVESTMENT INCOME/(LOSS) 635,974 954,235 1,440,538 1,674,086 311,355 (721,406
----------- ------------- -------------- ------------- ------------- -------------
NET REALIZED AND UNREALIZED
GAIN/(LOSS) ON INVESTMENTS:
Realized gain/(loss) from:
Security transactions .... (468) (45,969) 220,848 (200,960) 8,101,691 39,645,293
Forward foreign currency
contracts and foreign
currency transactions .. -- -- -- -- -- 14,481
Futures contracts ........ -- -- -- -- -- --
Capital gain distributions
received ................. -- -- -- -- -- --
----------- ------------- -------------- ------------- ------------- -------------
Subtotal ............... (468) (45,969) 220,848 (200,960) 8,101,691 39,659,774
----------- ------------- -------------- ------------- ------------- -------------
Change in unrealized
appreciation/(depreciation) of:
Securities ............... -- (465,042) (2,069,976) (2,663,467) 11,806,513 14,093,784
Forward foreign currency
contracts .............. -- -- -- -- -- 1,178,382
Foreign currency, futures
contracts and
other assets and
liabilities ............ -- -- -- -- -- (1,058
----------- ------------- -------------- ------------- ------------- -------------
Subtotal ............... -- (465,042) (2,069,976) (2,663,467) 11,806,513 15,271,108
----------- ------------- -------------- ------------- ------------- -------------
Net realized and unrealized
gain/(loss) on investments (468) (511,011) (1,849,128) (2,864,427) 19,908,204 54,930,882
----------- ------------- -------------- ------------- ------------- -------------
NET INCREASE/(DECREASE) IN
NET ASSETS RESULTING FROM
OPERATIONS ............... $ 635,506 $ 443,224 $ (408,590) $ (1,190,341) $ 20,219,559 $ 54,209,476
=========== ============= ============== ============= ============= =============
<CAPTION>
EMERGING INTERNATIONAL STRATEGIC
BOND & STOCK NORTHWEST GROWTH GROWTH GROWTH
FUND FUND FUND FUND PORTFOLIO
------------ ---------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends .................. $ 13,839 $ 12,778 $ 48,701 $ 897,931 $ 31,310
Foreign withholding tax on
dividend income .......... -- -- -- (88,426) --
Interest ................... 83,514 9,187 66,933 80,304 657
------------- ---------- ------------ ------------ ------------
Total investment income 97,353 21,965 115,634 889,809 31,967
------------- ---------- ------------ ------------ ------------
EXPENSES:
Investment advisory fee .... 14,868 11,600 159,946 272,672 3,933
Administration fee ........ 4,282 3,341 32,558 52,492 5,899
Trustees' fees and expenses. 147 77 (2,281) (81) 223
Legal and audit fees ...... 8,035 7,211 11,335 15,502 4,941
Custodian fees ............ 2,013 6,072 4,820 38,336 612
Registration and filing fees 41 34 233 1,138 61
Amortization of organization
costs ................... -- -- -- -- 4,120
Printing fees .............. 990 794 6,426 10,629 1,661
Other ...................... 1,422 1,195 1,886 6,754 173
Fees waived and/or expenses
reimbursed by investment
advisor .................. -- (2,546) -- -- (7,183)
------------- ---------- ------------ ------------ ------------
Subtotal ............... 31,798 27,778 214,923 397,442 14,440
Credits allowed by the
custodian ................ (23) (12) (55) (35) (612)
------------- ---------- ------------ ------------ ------------
Net expenses ........... 31,775 27,766 214,868 397,407 13,828
------------- ---------- ------------ ------------ ------------
NET INVESTMENT INCOME/(LOSS) 65,578 (5,801) (99,234) 492,402 18,139
------------- ---------- ------------ ------------ ------------
NET REALIZED AND UNREALIZED
GAIN/(LOSS) ON INVESTMENTS:
Realized gain/(loss) from:
Security transactions .... 64,238 (2,125) 1,533,831 2,327,691 (27,187)
Forward foreign currency
contracts and foreign
currency transactions .. -- -- -- (1,206,464) --
Futures contracts ........ -- -- (122,293) -- --
Capital gain distributions
received ................. -- -- -- -- 920,547
------------- ---------- ------------ ------------ ------------
Subtotal ............... 64,238 (2,125) 1,411,538 1,121,227 893,360
------------- ---------- ------------ ------------ ------------
Change in unrealized
appreciation/(depreciation) of:
Securities ............... 112,612 872,108 106,847 2,359,679 520,697
Forward foreign currency
contracts .............. -- -- -- 1,083,739 --
Foreign currency, futures
contracts and
other assets and
liabilities ............ -- -- (157,981) (64,359) --
------------- ---------- ------------ ------------ ------------
Subtotal ............... 112,612 872,108 (51,134) 3,379,059 520,697
------------- ---------- ------------ ------------ ------------
Net realized and unrealized
gain/(loss) on investments 176,850 869,983 1,360,404 4,500,286 1,414,057
------------- ---------- ------------ ------------ ------------
NET INCREASE/(DECREASE) IN
NET ASSETS RESULTING FROM
OPERATIONS ............... $ 242,428 $ 864,182 $ 1,261,170 $ 4,992,688 $ 1,432,196
============= ========== ============ ============ ============
<CAPTION>
CONSERVATIVE FLEXIBLE
GROWTH BALANCED INCOME INCOME
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------ ------------ --------- ---------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends .................. $ 92,944 $ 301,072 $ 129,924 $ 75,194
Foreign withholding tax on
dividend income .......... -- -- -- --
Interest ................... 3,120 4,290 1,084 115
------------ ------------ --------- ---------
Total investment income 96,064 305,362 131,008 75,309
------------ ------------ --------- ---------
EXPENSES:
Investment advisory fee .... 7,946 10,183 2,189 920
Administration fee ........ 11,919 15,274 3,283 1,380
Trustees' fees and expenses. 362 359 (84) 40
Legal and audit fees ...... 5,347 5,482 4,631 4,598
Custodian fees ............ 568 538 511 540
Registration and filing fees 123 159 41 15
Amortization of organization
costs ................... 4,120 4,120 950 --
Printing fees .............. 3,315 4,371 1,055 407
Other ...................... 242 254 117 115
Fees waived and/or expenses
reimbursed by investment
advisor .................. (5,806) (5,101) (4,742) (4,537)
------------ ------------ --------- ---------
Subtotal ............... 28,136 35,639 7,951 3,478
Credits allowed by the
custodian ................ (568) (312) (346) (286)
------------ ------------ --------- ---------
Net expenses ........... 27,568 35,327 7,605 3,192
------------ ------------ --------- ---------
NET INVESTMENT INCOME/(LOSS) 68,496 270,035 123,403 72,117
------------ ------------ --------- ---------
NET REALIZED AND UNREALIZED
GAIN/(LOSS) ON INVESTMENTS:
Realized gain/(loss) from:
Security transactions .... 83,335 260,951 13,913 (2,430)
Forward foreign currency
contracts and foreign
currency transactions .. -- -- -- --
Futures contracts ........ -- -- -- --
Capital gain distributions
received ............... 1,548,689 1,453,326 190,885 --
------------ ------------ --------- ---------
Subtotal ............... 1,632,024 1,714,277 204,798 (2,430)
------------ ------------ --------- ---------
Change in unrealized
appreciation/(depreciation) of:
Securities ............... 778,792 247,089 (127,290) (61,437)
Forward foreign currency
contracts .............. -- -- -- --
Foreign currency, futures
contracts and
other assets and
liabilities ............ -- -- -- --
------------ ------------ --------- ---------
Subtotal ............... 778,792 247,089 (127,290) (61,437)
------------ ------------ --------- ---------
Net realized and unrealized
gain/(loss) on
investments .............. 2,410,816 1,961,366 77,508 (63,867)
------------ ------------ --------- ---------
NET INCREASE/(DECREASE) IN
NET ASSETS RESULTING FROM
OPERATIONS ............... $ 2,479,312 $ 2,231,401 $ 200,911 $ 8,250
============= ============= ========== ==========
</TABLE>
See Notes to Financial Statements.
<PAGE>
STATEMENTS of CHANGES in NET assets
WM VARIABLE TRUST
FOR THE SIX MONTHS ENDED JUNE 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
SHORT TERM U.S.
MONEY HIGH GOVERNMENT
MARKET QUALITY BOND SECURITIES INCOME
FUND FUND FUND FUND
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net investment income/(loss) .................................... $ 635,974 $ 954,235 $ 1,440,538 $ 1,674,086
----------- ----------- ----------- -----------
Net realized gain/(loss) from security transactions, forward
foreign currency contracts, foreign currency transactions and
futures contracts during the period ........................... (468) (45,969) 220,848 (200,960)
Capital gain distributions received ............................. -- -- -- --
Net unrealized appreciation/(depreciation) of securities, forward
foreign currency contracts, foreign currency, futures contracts
and other assets and liabilities during the period ............ -- (465,042) (2,069,976) (2,663,467)
----------- ----------- ----------- -----------
Net increase/(decrease) in net assets resulting from operations . 635,506 443,224 (408,590) (1,190,341)
Distributions to shareholders from:
Net investment income ......................................... (635,974) (931,878) (1,471,993) (1,705,819)
Net realized gains on investments ............................. -- -- -- --
Net increase/(decrease) in net assets from Fund
share transactions ............................................ (8,683,686) 9,124,601 28,413,363 10,134,971
----------- ----------- ----------- -----------
Net increase/(decrease) in net assets .......................... (8,684,154) 8,635,947 26,532,780 7,238,811
NET ASSETS:
Beginning of period ............................................ 31,862,051 37,399,297 41,914,394 49,653,758
----------- ----------- ----------- -----------
End of period .................................................. $23,177,897 $46,035,244 $68,447,174 $56,892,569
=========== =========== =========== ===========
Undistributed net investment income/(accumulated net
investment loss/distributions in excess of net investment
income) at end of period ...................................... $ 23,539 $ 33,057 $ 37,610 $ 47,725
=========== =========== =========== ===========
<CAPTION>
GROWTH &
INCOME GROWTH BOND & STOCK NORTHWEST
FUND FUND FUND FUND
------------ ------------ ------------ -----------
<S> <C> <C> <C> <C>
Net investment income/(loss) .................................... $ 311,355 $ (721,406) $ 65,578 $ (5,801)
Net realized gain/(loss) from security transactions, forward
foreign currency contracts, foreign currency transactions and
futures contracts during the period ........................... 8,101,691 39,659,774 64,238 (2,125)
Capital gain distributions received ............................. -- -- -- --
Net unrealized appreciation/(depreciation) of securities, forward
foreign currency contracts, foreign currency, futures contracts
and other assets and liabilities during the period ............ 11,806,513 15,271,108 112,612 872,108
------------ ------------ ------------ -----------
Net increase/(decrease) in net assets resulting from operations . 20,219,559 54,209,476 242,428 864,182
Distributions to shareholders from:
Net investment income ......................................... (305,700) -- (18,789) --
Net realized gains on investments ............................. (11,096,092) (27,262,135) -- (71,039)
Net increase/(decrease) in net assets from Fund
share transactions ............................................ 27,936,146 37,837,273 5,051,374 2,559,728
------------ ------------ ------------ -----------
Net increase/(decrease) in net assets .......................... 36,753,913 64,784,614 5,275,013 3,352,871
NET ASSETS:
Beginning of period ............................................ 125,294,562 162,967,288 2,585,950 2,313,360
------------ ------------ ------------ -----------
End of period .................................................. $162,048,475 $227,751,902 $7,860,963 $5,666,231
============ ============ ========== ==========
Undistributed net investment income/(accumulated net
investment loss/distributions in excess of net investment
income) at end of period ...................................... $ 305,764 $ (721,406) $ 64,866 $ (5,542)
============ ============ ========== ==========
<CAPTION>
EMERGING INTERNATIONAL STRATEGIC CONSERVATIVE
GROWTH GROWTH GROWTH GROWTH
FUND FUND PORTFOLIO PORTFOLIO
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net investment income/(loss) .................................... $ (99,234) $ 492,402 $ 18,139 $ 68,496
Net realized gain/(loss) from security transactions, forward
foreign currency contracts, foreign currency transactions and
futures contracts during the period ........................... 1,411,538 1,121,227 (27,187) 83,335
Capital gain distributions received ............................. -- -- 920,547 1,548,689
Net unrealized appreciation/(depreciation) of securities, forward
foreign currency contracts, foreign currency, futures contracts
and other assets and liabilities during the period ............ (51,134) 3,379,059 520,697 778,792
------------ ------------ ------------ ------------
Net increase/(decrease) in net assets resulting from operations . 1,261,170 4,992,688 1,432,196 2,479,312
Distributions to shareholders from:
Net investment income ......................................... -- (42,338) (124,988) (284,450)
Net realized gains on investments ............................. (7,665,390) -- (84,670) (288,121)
Net increase/(decrease) in net assets from Fund
share transactions ............................................ (3,087,390) (10,168,165) 6,742,993 15,062,105
------------ ------------ ------------ ------------
Net increase/(decrease) in net assets .......................... (9,491,610) (5,217,815) 7,965,531 16,968,846
NET ASSETS:
Beginning of period ............................................ 44,379,842 60,360,067 4,949,793 10,072,524
------------ ------------ ------------ ------------
End of period .................................................. $ 34,888,232 $ 55,142,252 $ 12,915,324 $ 27,041,370
============ ============ ============ ============
Undistributed net investment income/(accumulated net
investment loss/distributions in excess of net investment
income) at end of period ...................................... $ (99,234) $ 1,193,638 $ 17,519 $ 67,509
============ ============ ============ ============
<CAPTION>
FLEXIBLE
BALANCED INCOME INCOME
PORTFOLIO PORTFOLIO PORTFOLIO
------------ ----------- -----------
<S> <C> <C> <C>
Net investment income/(loss) .................................... $ 270,035 $ 123,403 $ 72,117
Net realized gain/(loss) from security transactions, forward
foreign currency contracts, foreign currency transactions and
futures contracts during the period ........................... 260,951 13,913 (2,430)
Capital gain distributions received ............................. 1,453,326 190,885 --
Net unrealized appreciation/(depreciation) of securities, forward
foreign currency contracts, foreign currency, futures contracts
and other assets and liabilities during the period ............ 247,089 (127,290) (61,437)
----------- ---------- ----------
Net increase/(decrease) in net assets resulting from operations . 2,231,401 200,911 8,250
Distributions to shareholders from:
Net investment income ......................................... (608,532) (139,419) (86,582)
Net realized gains on investments ............................. (245,866) (8,409) (2,003)
Net increase/(decrease) in net assets from Fund
share transactions ............................................ 23,007,196 8,781,033 2,660,937
----------- ---------- ----------
Net increase/(decrease) in net assets .......................... 24,384,199 8,834,116 2,580,602
NET ASSETS:
Beginning of period ............................................ 11,161,563 1,107,361 829,144
----------- ---------- ----------
End of period .................................................. $35,545,762 $9,941,477 $3,409,746
=========== ========== ==========
Undistributed net investment income/(accumulated net
investment loss/distributions in excess of net investment
income) at end of period ...................................... $ (1,831) $ 1,286 $ 3,951
=========== ========== ==========
</TABLE>
See Notes to Financial Statements.
<PAGE>
STATEMENTS of CHANGES in NET assets
WM VARIABLE TRUST
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
SHORT TERM U.S.
MONEY HIGH GOVERNMENT
MARKET QUALITY BOND SECURITIES INCOME
FUND FUND FUND FUND
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net investment income/(loss) .......................... $ 1,713,074 $ 1,544,654 $ 3,160,211 $ 3,353,740
Net realized gain/(loss) from security transactions,
forward foreign currency contracts, foreign
currency transactions and futures contracts
during the year ...................................... (425) (147,154) 932,251 102,179
Capital gain distributions received .................... -- -- -- --
Net unrealized appreciation/(depreciation) of
securities, forward foreign currency contracts,
foreign currency, futures contracts and other
assets and liabilities during the year ............... -- 68,395 (315,062) 161,113
----------- ----------- ----------- -----------
Net increase in net assets resulting from operations ... 1,712,649 1,465,895 3,777,400 3,617,032
Distributions to shareholders from:
Net investment income ................................ (1,713,074) (1,455,360) (3,143,989) (3,316,492)
Net realized gains on investments .................... -- -- -- --
Net increase/(decrease) in net assets from Fund share
transactions ......................................... (1,001,938) 25,444,375 (20,375,426) (2,317,248)
----------- ----------- ----------- -----------
Net increase/(decrease) in net assets .................. (1,002,363) 25,454,910 (19,742,015) (2,016,708)
NET ASSETS:
Beginning of year ..................................... 32,864,414 11,944,387 61,656,409 51,670,466
----------- ----------- ----------- -----------
End of year ........................................... $31,862,051 $37,399,297 $41,914,394 $49,653,758
=========== =========== =========== ===========
Undistributed net investment income at end of year ..... $ 23,539 $ 10,700 $ 69,065 $ 79,458
=========== =========== =========== ===========
<CAPTION>
GROWTH & GROWTH &
INCOME GROWTH INCOME GROWTH
FUND FUND FUND FUND
---------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
Net investment income/(loss) .......................... $ 402,061 $ (729,217) $ 402,061 $ (729,217)
------------ ------------ ------------ ------------
Net realized gain/(loss) from security transactions,
forward foreign currency contracts, foreign
currency transactions and futures contracts
during the year ...................................... 11,137,860 27,795,718 11,137,860 27,795,718
Capital gain distributions received .................... -- -- -- --
Net unrealized appreciation/(depreciation) of
securities, forward foreign currency contracts,
foreign currency, futures contracts and other
assets and liabilities during the year ............... 7,851,129 36,784,952 7,851,129 36,784,952
------------ ------------ ------------ ------------
Net increase in net assets resulting from operations ... 19,391,050 63,851,453 19,391,050 63,851,453
Distributions to shareholders from:
Net investment income ................................ (542,109) (474,575) (542,109) (474,575)
Net realized gains on investments .................... (17,377,595) (11,696,897) (17,377,595) (11,696,897)
Net increase/(decrease) in net assets from Fund share
transactions ......................................... 22,028,748 (10,478,327) 22,028,748 (10,478,327)
------------ ------------ ------------ ------------
Net increase/(decrease) in net assets .................. 23,500,094 41,201,654 23,500,094 41,201,654
NET ASSETS:
Beginning of year ..................................... 101,794,468 121,765,634 101,794,468 121,765,634
------------ ------------ ------------ ------------
End of year ........................................... $125,294,562 $162,967,288 $125,294,562 $162,967,288
============ ============ ============ ============
Undistributed net investment income at end of year ..... $ 300,109 $ -- $ 300,109 $ --
============ ============ ============ ============
<CAPTION>
EMERGING INTERNATIONAL STRATEGIC
BOND & STOCK NORTHWEST GROWTH GROWTH GROWTH
FUND* FUND* FUND FUND PORTFOLIO
---------- ---------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Net investment income/(loss) .......................... $ 21,852 $ 259 $ (198,569) $ 349,662 $ 32,594
Net realized gain/(loss) from security transactions,
forward foreign currency contracts, foreign
currency transactions and futures contracts
during the year ...................................... (293) 62,574 7,278,781 588,160 (72,470)
Capital gain distributions received .................... -- -- -- -- 211,599
Net unrealized appreciation/(depreciation) of
securities, forward foreign currency contracts,
foreign currency, futures contracts and other
assets and liabilities during the year ............... 64,548 252,200 (4,123,547) 537,415 471,041
---------- ---------- ----------- ----------- ----------
Net increase in net assets resulting from operations ... 86,107 315,033 2,956,665 1,475,237 642,764
Distributions to shareholders from:
Net investment income ................................ (3,775) -- -- (3,299,318) (5,989)
Net realized gains on investments .................... -- -- (6,023,693) (2,923,585) (1,797)
Net increase/(decrease) in net assets from Fund share
transactions ......................................... 2,503,618 1,998,327 2,085,243 15,471,751 3,723,432
---------- ---------- ----------- ----------- ----------
Net increase/(decrease) in net assets .................. 2,585,950 2,313,360 (981,785) 10,724,085 4,358,410
NET ASSETS:
Beginning of year ..................................... -- -- 45,361,627 49,635,982 591,383
---------- ---------- ----------- ----------- ----------
End of year ........................................... $2,585,950 $2,313,360 $44,379,842 $60,360,067 $4,949,793
========== ========== =========== =========== ==========
Undistributed net investment income at end of year ..... $ 18,077 $ 259 $ -- $ 743,574 $ 124,368
========== ========== =========== =========== ==========
<CAPTION>
CONSERVATIVE FLEXIBLE
GROWTH BALANCED INCOME INCOME
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO**
----------- ----------- ---------- --------
<S> <C> <C> <C> <C>
Net investment income/(loss) .......................... $ 87,559 $ 156,465 $ 16,132 $ 17,771
Net realized gain/(loss) from security transactions,
forward foreign currency contracts, foreign
currency transactions and futures contracts
during the year ...................................... (22,529) 47,203 909 994
Capital gain distributions received .................... 470,107 365,771 7,505 645
Net unrealized appreciation/(depreciation) of
securities, forward foreign currency contracts,
foreign currency, futures contracts and other
assets and liabilities during the year ............... 487,822 452,159 21,612 (8,450)
----------- ----------- ---------- --------
Net increase in net assets resulting from operations ... 1,022,959 1,021,598 46,158 10,960
Distributions to shareholders from:
Net investment income ................................ (11,420) (31,215) (486) --
Net realized gains on investments .................... (5,023) -- (25) (32)
Net increase/(decrease) in net assets from Fund share
transactions ......................................... 7,692,346 7,817,201 961,361 818,216
----------- ----------- ---------- --------
Net increase/(decrease) in net assets .................. 8,698,862 8,807,584 1,007,008 829,144
NET ASSETS:
Beginning of year ..................................... 1,373,662 2,353,979 100,353 --
----------- ----------- ---------- --------
End of year ........................................... $10,072,524 $11,161,563 $1,107,361 $829,144
=========== =========== ========== ========
Undistributed net investment income at end of year ..... $ 283,463 $ 336,666 $ 17,302 $ 18,416
=========== =========== ========== ========
- --------------
* The Bond and Stock Fund and Northwest Fund commenced operations on April 28, 1998.
** The Income Portfolio commenced operations on October 22, 1997, ceased operations on November 6, 1997, and
re-commenced operations on April 23, 1998.
</TABLE>
See Notes to Financial Statements.
<PAGE>
STATEMENTS of CHANGES in NET assets -- CAPITAL stock ACTIVITY
WM VARIABLE TRUST
<TABLE>
<CAPTION>
SHORT TERM HIGH QUALITY
MONEY MARKET FUND BOND FUND
---------------------------- ----------------------------
SIX MONTHS SIX MONTHS
ENDED ENDED
06/30/99 YEAR ENDED 06/30/99 YEAR ENDED
(UNAUDITED) 12/31/98 (UNAUDITED) 12/31/98
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
AMOUNT
Sold ........................................................ $ 9,762,707 $ 17,046,612 $ 13,078,403 $ 12,846,638
Issued in exchange for shares of the Sierra Short Term Global
Government Fund* .......................................... -- -- -- 16,658,370
Issued as reinvestment of dividends ......................... 630,644 1,713,073 931,878 1,455,360
Redeemed .................................................... (19,077,037) (19,761,623) (4,885,680) (5,515,993)
------------ ------------ ------------ ------------
Net increase/(decrease) ..................................... $ (8,683,686) $ (1,001,938) $ 9,124,601 $ 25,444,375
============ ============ ============ ============
SHARES
Sold ........................................................ 9,762,707 17,046,612 5,404,451 5,220,572
Issued in exchang for shares of the Sierra Short Term Global
Government Fund* .......................................... -- -- -- 6,827,201
Issued as reinvestment of dividends ......................... 630,644 1,713,073 386,728 597,208
Redeemed .................................................... (19,077,037) (19,761,623) (2,003,349) (2,248,595)
------------ ------------ ------------ ------------
Net increase/decrease) ...................................... (8,683,686) (1,001,938) 3,787,830 10,396,386
============ ============ ============ ============
<CAPTION>
GROWTH FUND BOND & STOCK FUND
---------------------------- ----------------------------
SIX MONTHS SIX MONTHS
ENDED ENDED
06/30/99 YEAR ENDED 06/30/99 PERIOD ENDED
(UNAUDITED) 12/31/98 (UNAUDITED) 12/31/98+
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
AMOUNT
Sold ........................................................ $ 26,557,564 $ 7,279,293 $ 5,157,727 $ 2,506,015
Issued as reinvestment of dividends ......................... 27,262,135 12,171,471 18,789 3,775
Redeemed .................................................... (15,982,426) (29,929,091) (125,142) (6,172)
------------ ------------ ------------ ------------
Net increase/(decrease) ..................................... $ 37,837,273 $(10,478,327) $ 5,051,374 $ 2,503,618
============ ============ ============ ============
SHARES
Sold ........................................................ 981,255 401,445 494,943 252,138
Issued as reinvestment of dividends ......................... 1,111,833 661,853 1,791 386
Redeemed .................................................... (608,700) (1,677,237) (12,083) (619)
------------ ------------ ------------ ------------
Net increase/(decrease) ..................................... 1,484,388 (613,939) 484,651 251,905
============ ============ ============ ============
<CAPTION>
STRATEGIC GROWTH PORTFOLIO CONSERVATIVE GROWTH PORTFOLIO
---------------------------- ----------------------------
SIX MONTHS SIX MONTHS
ENDED ENDED
06/30/99 YEAR ENDED 06/30/99 YEAR ENDED
(UNAUDITED) 12/31/98 (UNAUDITED) 12/31/98
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
AMOUNT
Sold ........................................................ $ 6,701,059 $ 4,002,534 $ 14,533,543 $ 8,084,221
Issued as reinvestment of dividends ......................... 209,658 5,990 572,571 16,445
Redeemed .................................................... (167,724) (285,092) (44,009) (408,320)
------------ ------------ ------------ ------------
Net increase ................................................ $ 6,742,993 $ 3,723,432 $ 15,062,105 $ 7,692,346
============ ============ ============ ============
SHARES
Sold ........................................................ 451,531 335,227 1,062,683 707,885
Issued as reinvestment of dividends ......................... 13,329 629 40,294 1,391
Redeemed .................................................... (11,774) (23,364) (3,314) (37,067)
------------ ------------ ------------ ------------
Net increase ................................................ 453,086 312,492 1,099,663 672,209
============ ============ ============ ============
- --------------
* On January 30, 1998 shares were issued in exchange for Sierra Variable Trust Short Term Global Government Fund.
+ The Bond & Stock Fund and Northwest Fund commenced operations on April 28, 1998.
++ The Income Portfolio commenced operations on October 22, 1997, ceased operations on November 6, 1997, and recommenced
operations on April 23, 1998.
</TABLE>
See Notes to Financial Statements.
<PAGE>
STATEMENTS of CHANGES in NET assets -- CAPITAL stock ACTIVITY
WM VARIABLE TRUST
<TABLE>
<CAPTION>
U.S. GOVERNMENT
SECURITIES FUND INCOME FUND
---------------------------- ----------------------------
SIX MONTHS SIX MONTHS
ENDED ENDED
06/30/99 YEAR ENDED 06/30/99 YEAR ENDED
(UNAUDITED) 12/31/98 (UNAUDITED) 12/31/98
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
AMOUNT
Sold ........................................................ $ 30,089,931 $ 3,418,780 $ 12,217,601 $ 2,636,378
Issued in exchange for shares of the Sierra Short Term Global
Government Fund* .......................................... -- -- -- --
Issued as reinvestment of dividends ......................... 1,471,993 3,143,989 1,705,819 3,316,492
Redeemed .................................................... (3,148,561) (26,938,195) (3,788,449) (8,270,118)
------------ ------------ ------------ ------------
Net increase/(decrease) ..................................... $ 28,413,363 $(20,375,426) $ 10,134,971 $ (2,317,248)
============ ============ ============ ============
SHARES
Sold ........................................................ 2,998,680 335,691 1,251,579 256,287
Issued in exchang for shares of the Sierra Short Term Global
Government Fund* .......................................... -- -- -- --
Issued as reinvestment of dividends ......................... 149,513 311,772 174,828 324,373
Redeemed .................................................... (313,602) (2,644,591) (377,393) (802,650)
------------ ------------ ------------ ------------
Net increase/decrease) ...................................... 2,834,591 (1,997,128) 1,049,014 (221,990)
============ ============ ============ ============
<CAPTION>
GROWTH & INCOME FUND
----------------------------
SIX MONTHS
ENDED
06/30/99 YEAR ENDED
(UNAUDITED) 12/31/98
------------ ------------
<S> <C> <C>
AMOUNT
Sold ........................................................ $ 27,083,646 $ 18,158,872
Issued in exchange for shares of the Sierra Short Term Global
Government Fund* .......................................... -- --
Issued as reinvestment of dividends ......................... 11,401,792 17,919,702
Redeemed .................................................... (10,549,292) (14,049,826)
------------ ------------
Net increase/(decrease) ..................................... $ 27,936,146 $ 22,028,748
============ ============
SHARES
Sold ........................................................ 1,481,039 1,106,063
Issued in exchang for shares of the Sierra Short Term Global
Government Fund* .......................................... -- --
Issued as reinvestment of dividends ......................... 650,787 1,122,085
Redeemed .................................................... (590,305) (859,170)
------------ ------------
Net increase/decrease) ...................................... 1,541,521 1,368,978
============ ============
<CAPTION>
NORTHWEST FUND EMERGING GROWTH FUND
---------------------------- ----------------------------
SIX MONTHS SIX MONTHS
ENDED ENDED
06/30/99 PERIOD ENDED 06/30/99 YEAR ENDED
(UNAUDITED) 12/31/98+ (UNAUDITED) 12/31/98
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
AMOUNT
Sold ........................................................ $ 3,184,251 $ 2,102,818 $ 1,318,846 $ 5,833,895
Issued as reinvestment of dividends ......................... 71,039 -- 7,665,390 6,023,693
Redeemed .................................................... (695,562) (104,491) (12,071,626) (9,772,345)
------------ ------------ ------------ ------------
Net increase/(decrease) ..................................... $ 2,559,728 $ 1,998,327 $ (3,087,390) $ 2,085,243
============ ============ ============ ============
SHARES
Sold ........................................................ 285,645 222,987 96,621 431,126
Issued as reinvestment of dividends ......................... 5,837 -- 676,557 436,500
Redeemed .................................................... (56,101) (11,574) (917,950) (728,816)
------------ ------------ ------------ ------------
Net increase/(decrease) ..................................... 235,381 211,413 (144,772) 138,810
============ ============ ============ ============
<CAPTION>
INTERNATIONAL GROWTH FUND
----------------------------
SIX MONTHS
ENDED
06/30/99 YEAR ENDED
(UNAUDITED) 12/31/98
------------ ------------
<S> <C> <C>
AMOUNT
Sold ........................................................ $ 5,306,447 $ 18,869,153
Issued as reinvestment of dividends ......................... 42,338 6,222,873
Redeemed .................................................... (15,516,950) 9,620,275)
------------ ------------
Net increase/(decrease) ..................................... $(10,168,165) $ 15,471,751
============ ============
SHARES
Sold ........................................................ 442,135 1,438,878
Issued as reinvestment of dividends ......................... 3,350 507,578
Redeemed .................................................... (1,276,683) (797,427)
------------ ------------
Net increase/(decrease) ..................................... (831,198) 1,149,029
============ ============
<CAPTION>
BALANCED PORTFOLIO FLEXIBLE INCOME PORTFOLIO
---------------------------- ----------------------------
SIX MONTHS SIX MONTHS
ENDED ENDED
06/30/99 YEAR ENDED 06/30/99 YEAR ENDED
(UNAUDITED) 12/31/98 (UNAUDITED) 12/31/98
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
AMOUNT
Sold ........................................................ $ 22,184,338 $ 8,054,479 $ 8,633,205 $ 1,105,636
Issued as reinvestment of dividends ......................... 854,397 31,215 147,828 510
Redeemed .................................................... (31,539) (268,493) -- (144,785)
------------ ------------ ------------ ------------
Net increase ................................................ $ 23,007,196 $ 7,817,201 $ 8,781,033 $ 961,361
============ ============ ============ ============
SHARES
Sold ........................................................ 1,733,979 710,926 743,114 100,651
Issued as reinvestment of dividends ......................... 66,459 2,693 12,746 47
Redeemed .................................................... (2,473) (23,796) -- (13,236)
------------ ------------ ------------ ------------
Net increase ................................................ 1,797,965 689,823 755,860 87,462
============ ============ ============ ============
<CAPTION>
INCOME PORTFOLIO
----------------------------
SIX MONTHS
ENDED
06/30/99 PERIOD ENDED
(UNAUDITED) 12/31/98++
------------ ------------
<S> <C> <C>
AMOUNT
Sold ........................................................ $ 2,783,152 $ 934,501
Issued as reinvestment of dividends ......................... 88,585 32
Redeemed .................................................... (210,800) (116,317)
------------ ------------
Net increase ................................................ $ 2,660,937 $ 818,216
============ ============
SHARES
Sold ........................................................ 270,510 90,295
Issued as reinvestment of dividends ......................... 8,758 3
Redeemed .................................................... (20,255) (10,691)
------------ ------------
Net increase ................................................ 259,013 79,607
============ ============
</TABLE>
See Notes to Financial Statements.
<PAGE>
FINANCIAL highlights
MONEY MARKET FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR YEAR YEAR YEAR YEAR
06/30/99 ENDED ENDED ENDED ENDED ENDED
(UNAUDITED) 12/31/98 12/31/97 12/31/96 12/31/95 12/31/94
----------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period ....................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------ ------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income .......... 0.022 0.049 0.049 0.049 0.053 0.037
Net realized gain/(loss) on
investments .................. (0.000)# (0.000)# 0.000# 0.000# 0.000# (0.000)#
------ ------ ------ ------ ------ ------
Total from investment operations 0.022 0.049 0.049 0.049 0.053 0.037
------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends from net investment
income ....................... (0.022) (0.049) (0.049) (0.049) (0.053) (0.037)
Distributions from net realized
capital gains ................ -- -- -- (0.000)# -- --
------ ------ ------ ------ ------ ------
Total distributions ............ (0.022) (0.049) (0.049) (0.049) (0.053) (0.037)
------ ------ ------ ------ ------ ------
Net asset value, end of period . $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
====== ====== ====== ====== ====== ======
TOTAL RETURN+ .................. 2.14% 5.01% 4.99% 4.97% 5.46% 3.69%
====== ====== ====== ====== ====== ======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period
(in 000's) ................... $23,178 $31,862 $32,864 $23,266 $20,373 $6,159
Ratio of operating expenses to
average net assets (a) ....... 0.68%* 0.65% 0.75% 0.58% 0.50% 0.49%
Ratio of net investment income
to average net assets ........ 4.29%* 4.90% 4.88% 4.86% 5.30% 3.84%
Ratio of operating expenses to
average net assets without fee
waivers, expenses reimbursed
and/or fees reduced by credits
allowed by the custodian ..... 0.79%* 0.81% 0.85% 0.88% 1.01% 1.25%
- ----------------
* Annualized.
+ Total return is not annualized for periods less than one year. The total return would have been lower if certain fees had not
been waived and/or expenses reimbursed by the investment advisor or if fees had not been reduced by credits allowed by the
custodian.
# Amount represents less than $0.001 per share.
(a) Ratio of operating expenses to average net assets includes expenses paid indirectly beginning in fiscal year 1995.
</TABLE>
See Notes to Financial Statements.
<PAGE>
FINANCIAL highlights
SHORT TERM HIGH QUALITY BOND FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR YEAR YEAR YEAR PERIOD
06/30/99 ENDED ENDED ENDED ENDED ENDED
(UNAUDITED) 12/31/98 12/31/97 12/31/96 12/31/95 12/31/94*
----------- -------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period ....................... $ 2.44 $ 2.43 $ 2.43 $ 2.49 $ 2.39 $ 2.50
------ ------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income .......... 0.06 0.12 0.14 0.15 0.12 0.08
Net realized and unrealized
gain/(loss) on investments ... (0.03) 0.01 0.00# (0.06) 0.10 (0.12)
------ ------ ------ ------ ------ ------
Total from investment operations 0.03 0.13 0.14 0.09 0.22 (0.04)
------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends from net investment
income ....................... (0.06) (0.12) (0.14) (0.15) (0.12) (0.07)
------ ------ ------ ------ ------ ------
Total distributions ............ (0.06) (0.12) (0.14) (0.15) (0.12) (0.07)
------ ------ ------ ------ ------ ------
Net asset value, end of period . $ 2.41 $ 2.44 $ 2.43 $ 2.43 $ 2.49 $ 2.39
====== ====== ====== ====== ====== ======
TOTAL RETURN+ .................. 1.20% 5.28% 5.90% 3.74% 9.30% (1.62)%
====== ====== ====== ====== ====== ======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period
in 000's) .................... $46,035 $37,399 $11,944 $12,402 $12,365 $15,547
Ratio of operating expenses to
average net assets (a) ....... 0.82%** 0.85% 1.00% 0.98% 0.85% 0.77%**
Ratio of net investment income
to average net assets ........ 5.14%** 5.45% 6.04% 6.08% 6.14% 5.63%**
Portfolio turnover rate ........ 22% 27% 43% 125% 188% 80%
Ratio of operating expenses to
average net assets without fee
waivers
and/or fees reduced by credits
allowed by the custodian ..... 0.82%** 0.89% 1.03% 1.06% 1.01% 1.10%**
- ----------------
* The Fund commenced operations on January 12, 1994.
** Annualized.
+ Total return is not annualized for periods less than one year. The total return would have been lower if certain fees had not
been waived by the investment advisor or if fees had not been reduced by credits allowed by the custodian.
# Amount represents less than $0.01 per share.
(a) Ratio of operating expenses to average net assets includes expenses paid indirectly beginning in fiscal year 1995.
</TABLE>
See Notes to Financial Statements.
<PAGE>
FINANCIAL highlights
U.S. GOVERNMENT SECURITIES FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR YEAR YEAR YEAR YEAR
06/30/99 ENDED ENDED ENDED ENDED ENDED
(UNAUDITED) 12/31/98 12/31/97 12/31/96 12/31/95 12/31/94
----------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period ....................... $10.11 $10.04 $ 9.77 $10.00 $ 9.13 $10.04
------ ------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income .......... 0.23 0.63 0.63 0.58 0.64 0.50
Net realized and unrealized
gain/(loss) on investments ... (0.30) 0.06 0.26 (0.23) 0.87# (0.90)#
------ ------ ------ ------ ------ ------
Total from investment operations (0.07) 0.69 0.89 0.35 1.51 (0.40)
------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends from net investment
income ....................... (0.24) (0.62) (0.62) (0.58) (0.64) (0.50)
Distributions from net realized
gains ........................ -- -- -- -- -- (0.01)
------ ------ ------ ------ ------ ------
Total distributions ............ (0.24) (0.62) (0.62) (0.58) (0.64) (0.51)
------ ------ ------ ------ ------ ------
Net asset value, end of period . $ 9.80 $10.11 $10.04 $ 9.77 $10.00 $ 9.13
====== ====== ====== ====== ====== ======
TOTAL RETURN+ .................. (0.67)% 7.03% 9.42% 3.69% 16.89% (4.04)%
====== ====== ====== ====== ====== ======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in
000's) ....................... $68,447 $41,914 $61,656 $66,563 $52,303 $43,582
Ratio of operating expenses to
average net assets (a) ....... 0.89%* 0.89% 0.90% 0.94% 1.00% 0.85%
Ratio of net investment income
to average net assets ........ 5.56%* 5.85% 6.28% 6.18% 6.68% 5.75%
Portfolio turnover rate ........ 10% 22% 194% 282% 273% 74%
Ratio of operating expenses to
average net assets without fee
waivers, expenses reimbursed
and/or fees reduced by credits
allowed by the custodian ..... 0.86%* 1.03% 0.91% 0.94% 1.03% 1.02%
Ratio of operating expenses to
average net assets including
interest expense -- 1.02% 1.54% 1.08% 1.76% 0.86%
- ----------------
* Annualized.
+ Total return is not annualized for periods less than one year. The total return would have been lower if certain fees had not
been waived and/or expenses reimbursed by the investment advisor or if fees had not been reduced by credits allowed by the
custodian.
# The amount shown may not accord with the change in the aggregate gains and losses of portfolio securities due to timing of
sales and redemptions of Fund shares.
(a) Ratio of operating expenses to average net assets includes expenses paid indirectly beginning in fiscal year 1995.
</TABLE>
See Notes to Financial Statements.
<PAGE>
FINANCIAL highlights
INCOME FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR YEAR YEAR YEAR YEAR
06/30/99 ENDED ENDED ENDED ENDED ENDED
(UNAUDITED) 12/31/98 12/31/97 12/31/96 12/31/95 12/31/94
----------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period ....................... $10.24 $10.19 $ 9.82 $10.48 $ 9.06 $10.34
------ ------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income .......... 0.33 0.70 0.70 0.68 0.70 0.47
Net realized and unrealized
gain/(loss) on investments ... (0.58) 0.04 0.37 (0.66) 1.50 (1.30)
------ ------ ------ ------ ------ ------
Total from investment operations (0.25) 0.74 1.07 0.02 2.20 (0.83)
------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends from net investment
income ....................... (0.34) (0.69) (0.70) (0.68) (0.78) (0.40)
Distributions from net realized
gains ........................ -- -- -- -- -- (0.05)
------ ------ ------ ------ ------ ------
Total distributions ............ (0.34) (0.69) (0.70) (0.68) (0.78) (0.45)
------ ------ ------ ------ ------ ------
Net asset value, end of period . $ 9.65 $10.24 $10.19 $ 9.82 $10.48 $ 9.06
====== ====== ====== ====== ====== ======
TOTAL RETURN+ .................. (2.54)% 7.45% 11.35% 0.43% 25.09% (8.13)%
====== ====== ====== ====== ====== ======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in
000's) ....................... $56,893 $49,654 $51,670 $59,883 $60,676 $54,705
Ratio of operating expenses to
average net assets (a) ....... 0.94%* 0.96% 0.96% 0.98% 0.99% 0.93%
Ratio of net investment income
to average net assets ........ 6.82%* 6.69% 6.95% 6.92% 7.00% 7.28%
Portfolio turnover rate ........ 0% 4% 36% 30% 42% 23%
Ratio of operating expenses to
average net assets without fee
waivers, expenses reimbursed
and/or fees reduced by credits
allowed by the custodian ..... 0.94%* 0.96% 0.96% 0.98% 0.99% 1.07%
Ratio of operating expenses to
average net assets including
interest expense -- -- -- -- 0.99% --
- ----------------
* Annualized.
+ Total return is not annualized for periods less than one year. The total return would have been lower if certain fees had not
been waived and/or expenses reimbursed by the investment advisor or if fees had not been reduced by credits allowed by the
custodian.
(a) Ratio of operating expenses to average net assets includes expenses paid indirectly beginning in fiscal year 1995.
</TABLE>
See Notes to Financial Statements.
<PAGE>
FINANCIAL highlights
GROWTH & INCOME FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR YEAR YEAR YEAR PERIOD
06/30/99 ENDED ENDED ENDED ENDED ENDED
(UNAUDITED) 12/31/98 12/31/97 12/31/96 12/31/95 12/31/94*
----------- -------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period .................... $16.97 $16.92 $14.29 $12.83 $ 9.83 $10.00
------ ------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ....... 0.04++ 0.06 0.06 0.12++ 0.12 0.07
Net realized and unrealized
gain/(loss) on investments 2.53 2.97 3.90 2.54 3.05 (0.24)
------ ------ ------ ------ ------ ------
Total from investment
operations ................ 2.57 3.03 3.96 2.66 3.17 (0.17)
------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends from net investment
income .................... (0.04) (0.09) (0.10) (0.12) (0.07) --
Distributions from net
realized gains ............ (1.34) (2.89) (1.23) (1.08) (0.10) --
------ ------ ------ ------ ------ ------
Total distributions ......... (1.38) (2.98) (1.33) (1.20) (0.17) --
------ ------ ------ ------ ------ ------
Net asset value, end of
period .................... $18.16 $16.97 $16.92 $14.29 $12.83 $ 9.83
====== ====== ====== ====== ====== ======
TOTAL RETURN+ ............... 15.38% 18.98% 28.50% 21.81% 32.41% (1.70)%
====== ====== ====== ====== ====== ======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in
000's) .................... $162,048 $125,295 $101,794 $62,445 $46,362 $24,905
Ratio of operating expenses
to average net assets (a) . 1.05%** 1.06% 1.08% 1.13% 1.06% 1.20%**
Ratio of net investment
income to average net
assets .................... 0.45%** 0.37% 0.55% 0.93% 1.31% 1.63%**
Portfolio turnover rate ..... 23% 78% 109% 83% 70% 44%
Ratio of operating expenses
to average net assets
without fee waivers and/or
fees reduced by credits
allowed by the custodian .. 1.06%** 1.06% 1.08% 1.13% 1.16% 1.55%**
- ----------------
* The Fund commenced operations on January 12, 1994.
** Annualized.
+ Total return is not annualized for periods less than one year. The total return would have been lower if certain fees had not
been waived by the investment advisor or if fees had not been reduced by credits allowed by the custodian.
++ Per share numbers have been calculated using the average shares method.
(a) Ratio of operating expenses to average net assets includes expenses paid indirectly beginning in fiscal year 1995.
</TABLE>
See Notes to Financial Statements.
<PAGE>
FINANCIAL highlights
GROWTH FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR YEAR YEAR YEAR YEAR
06/30/99 ENDED ENDED ENDED ENDED ENDED
(UNAUDITED) 12/31/98 12/31/97 12/31/96 12/31/95 12/31/94
----------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of period ................ $22.36 $15.41 $16.01 $15.72 $11.48 $11.19
------ ------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income/(loss)
.......................... (0.08) (0.09) 0.07 0.00++# 0.04++ 0.04
Net realized and unrealized
gain on investments ...... 7.20 8.81 1.60 2.42 4.24 0.26
------ ------ ------ ------ ------ ------
Total from investment
operations ............... 7.12 8.72 1.67 2.42 4.28 0.30
------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends from net
investment income ........ -- (0.07) (0.02) -- (0.04) (0.01)
Distributions from net
realized gains ........... (3.52) (1.70) (2.25) (2.13) (0.00)# --
------ ------ ------ ------ ------ ------
Total distributions ........ (3.52) (1.77) (2.27) (2.13) (0.04) (0.01)
------ ------ ------ ------ ------ ------
Net asset value, end of
period ................... $25.96 $22.36 $15.41 $16.01 $15.72 $11.48
====== ====== ====== ====== ====== ======
TOTAL RETURN+ .............. 32.71% 59.04% 11.24% 16.15% 37.34% 2.69%
====== ====== ====== ====== ====== ======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period
(in 000's) ............... $227,752 $162,967 $121,766 $116,064 $99,699 $62,763
Ratio of operating expenses
to average net assets (a) 1.15%* 1.16% 1.18% 1.22% 1.24% 1.26%
Ratio of net investment
income/(loss) to average
net assets ............... (0.73)%* (0.55)% 0.07% 0.01% 0.29% 0.74%
Portfolio turnover rate .... 65% 112% 158% 169% 187% 257%
Ratio of operating expenses
to average net assets
without fee waivers,
expenses reimbursed and/or
fees reduced by credits
allowed by the custodian . 1.15%* 1.17% 1.19% 1.22% 1.24% 1.32%
- ----------------
* Annualized.
+ Total return is not annualized for periods less than one year. The total return would have been lower if certain fees had not
been waived and/or expenses reimbursed by the investment advisor or if fees had not been reduced by credits allowed by the
custodian.
++ Per share numbers have been calculated using the average shares method.
# Amount represents less than $0.01 per share.
(a) Ratio of operating expenses to average net assets includes expenses paid indirectly beginning in fiscal year 1995.
</TABLE>
See Notes to Financial Statements.
<PAGE>
FINANCIAL highlights
BOND & STOCK FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED PERIOD
06/30/99 ENDED
(UNAUDITED) 12/31/98*
----------- ---------
<S> <C> <C>
Net asset value, beginning of period .............................. $10.27 $10.00
------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ............................................. 0.14++ 0.16++
Net realized and unrealized gain on investments ................... 0.29 0.14
------ ------
Total from investment operations .................................. 0.43 0.30
------ ------
LESS DISTRIBUTIONS:
Dividends from net investment income .............................. (0.03) (0.03)
------ ------
Total distributions ............................................... (0.03) (0.03)
------ ------
Net asset value, end of period .................................... $10.67 $10.27
====== ======
TOTAL RETURN+ ..................................................... 4.15% 3.02%
====== ======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) .............................. $7,861 $2,586
Ratio of operating expenses to average net assets (a) ............. 1.34%** 1.50%**
Ratio of net investment income to average net assets .............. 2.76%** 2.26%**
Portfolio turnover rate ........................................... 12% 28%
Ratio of operating expenses to average net assets without fee
waivers and fees reduced by credits allowed by the custodian .... 1.34%** 2.49%**
- ----------------
* The Fund commenced operations on April 28, 1998.
** Annualized.
+ Total return is not annualized for periods less than one year. The total return would have been lower
if certain fees had not been waived by the investment advisor or if fees had not been reduced by credits
allowed by the custodian.
++ Per share numbers have been calculated using the average shares method.
(a) Ratio of operating expenses to average net assets includes expenses paid indirectly.
</TABLE>
See Notes to Financial Statements.
<PAGE>
FINANCIAL highlights
NORTHWEST FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED PERIOD
06/30/99 ENDED
(UNAUDITED) 12/31/98*
----------- ---------
<S> <C> <C>
Net asset value, beginning of period .............................. $10.94 $10.00
------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income/(loss) ...................................... (0.01) 0.00#
Net realized and unrealized gain on investments ................... 1.92 0.94
------ ------
Total from investment operations .................................. 1.91 0.94
------ ------
LESS DISTRIBUTIONS:
Distributions from net realized gains ............................. (0.17) --
------ ------
Total distributions ............................................... (0.17) --
------ ------
Net asset value, end of period .................................... $12.68 $10.94
====== ======
TOTAL RETURN+ ..................................................... 17.49% 9.40%
====== ======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) .............................. $5,666 $2,313
Ratio of operating expenses to average net assets (a) ............. 1.50%** 1.50%**
Ratio of net investment income/(loss) to average net assets ....... (0.31)%** 0.03%**
Portfolio turnover rate ........................................... 30% 28%
Ratio of operating expenses to average net assets without fee
waivers and fees reduced by credits allowed by the custodian .... 1.63%** 2.76%**
- ----------------
* The Fund commenced operations on April 28, 1998.
** Annualized.
+ Total return is not annualized for periods less than one year. The total return would have been lower if
certain fees had not been waived by the investment advisor or if fees had not been reduced by credits
allowed by the custodian.
# Amount represents less than $0.01 per share.
(a) Ratio of operating expenses to average net assets includes expenses paid indirectly.
</TABLE>
See Notes to Financial Statements.
<PAGE>
FINANCIAL highlights
EMERGING GROWTH FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR YEAR YEAR YEAR PERIOD
06/30/99 ENDED ENDED ENDED ENDED ENDED
(UNAUDITED) 12/31/98 12/31/97 12/31/96 12/31/95 12/31/94*
----------- -------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period ....................... $14.59 $15.63 $14.70 $13.74 $10.53 $10.00
------ ------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income/(loss) ... (0.03) (0.07) (0.03) (0.12)++ (0.01) 0.06
Net realized and unrealized gain
on investments ............... 0.91 1.21 1.80 1.52 3.26 0.47
------ ------ ------ ------ ------ ------
Total from investment operations 0.88 1.14 1.77 1.40 3.25 0.53
------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends from net investment
income ....................... -- -- -- -- (0.04) --
Distributions from net realized
gains ........................ (3.43) (2.18) (0.84) (0.44) (0.00)# --
------ ------ ------ ------ ------ ------
Total distributions ............ (3.43) (2.18) (0.84) (0.44) (0.04) --
------ ------ ------ ------ ------ ------
Net asset value, end of period . $12.04 $14.59 $15.63 $14.70 $13.74 $10.53
====== ====== ====== ====== ====== ======
TOTAL RETURN+ .................. 7.68% 8.09% 12.59% 10.04% 30.99% 5.30%
====== ====== ====== ====== ====== ======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in
000's) ....................... $34,888 $44,380 $45,362 $55,887 $46,058 $19,885
Ratio of operating expenses to
average net assets (a) ....... 1.19%** 1.19% 1.20% 1.20% 1.20% 1.23%**
Ratio of net investment income/
(loss) to average net assets . (0.55)%** (0.48)% (0.58)% (0.82)% (0.35)% 1.03%**
Portfolio turnover rate ........ 20% 108% 116% 97% 135% 192%
Ratio of operating expenses to
average net assets without fee
waivers and/or fees reduced by
credits allowed by the
custodian .................... 1.19%** 1.20% 1.21% 1.21% 1.28% 1.38%**
- ----------------
* The Fund commenced operations on January 12, 1994.
** Annualized.
+ Total return is not annualized for periods less than one year. The total return 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) Ratio of operating expenses to average net assets includes expenses paid indirectly beginning in fiscal year 1995.
</TABLE>
See Notes to Financial Statements.
<PAGE>
FINANCIAL highlights
IINTERNATIONAL GROWTH FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR YEAR YEAR YEAR YEAR
06/30/99 ENDED ENDED ENDED ENDED ENDED
(UNAUDITED) 12/31/98 12/31/97 12/31/96 12/31/95 12/31/94
----------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period ....................... $11.61 $12.26 $13.02 $12.11 $11.47 $11.31
------ ------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income .......... 0.10++ 0.07++ 0.71 0.07++ 0.18 0.01
Net realized and unrealized
gain/(loss) on investments ... 0.93 0.64 (0.97) 1.01 0.58 0.19##
------ ------ ------ ------ ------ ------
Total from investment operations 1.03 0.71 (0.26) 1.08 0.76 0.20
------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends from net investment
income ....................... (0.01) (0.72) (0.26) (0.17) (0.00)# (0.03)
Distributions from net realized
gains ........................ -- (0.64) (0.24) -- (0.12) (0.01)
------ ------ ------ ------ ------ ------
Total distributions ............ (0.01) (1.36) (0.50) (0.17) (0.12) (0.04)
------ ------ ------ ------ ------ ------
Net asset value, end of period . $12.63 $11.61 $12.26 $13.02 $12.11 $11.47
====== ====== ====== ====== ====== ======
TOTAL RETURN+ .................. 8.78% 5.20% (2.64)% 9.04% 6.61% 1.88%
====== ====== ====== ====== ====== ======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in
000's) ....................... $55,142 $60,360 $49,636 $62,355 $45,909 $46,529
Ratio of operating expenses to
average net assets (a) ....... 1.36%* 1.36% 1.35% 1.39% 1.47% 1.34%
Ratio of net investment income
to average net assets ........ 1.69%* 0.61% 0.52% 0.56% 0.91% 0.83%
Portfolio turnover rate ........ 65% 118% 84% 98% 72% 51%
Ratio of operating expenses to
average net assets without fee
waivers, expenses reimbursed
and/or fees reduced by credits
allowed by the custodian ..... 1.36%* 1.48% 1.36% 1.39% 1.48% 1.50%
- ----------------
* Annualized.
+ Total return is not annualized for periods less than one year. The total return would have been lower if certain fees had not
been waived and/or expenses reimbursed by the investment advisor or if fees had not been reduced by credits allowed by the
custodian.
++ Per share numbers have been calculated using the average shares method.
# Amount represents less than $0.01 per share.
## The amount shown may not accord with the change in the aggregate gains and losses of portfolio securities due to timing of
sales and redemptions of Fund shares.
(a) Ratio of operating expenses to average net assets includes expenses paid indirectly beginning in fiscal year 1995.
</TABLE>
See Notes to Financial Statements.
<PAGE>
FINANCIAL highlights
STRATEGIC GROWTH PORTFOLIO
FOR A PORTFOLIO SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR PERIOD
06/30/99 ENDED ENDED
(UNAUDITED) 12/31/98 12/31/97*
----------- -------- ---------
<S> <C> <C> <C>
Net asset value, beginning of period ...................... $13.46 $10.70 $10.00
------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ..................................... 0.03++ 0.17++ 0.10
Net realized and unrealized gain on investments ........... 2.51 2.63 0.60#
------ ------ ------
Total from investment operations .......................... 2.54 2.80 0.70
------ ------ ------
LESS DISTRIBUTIONS:
Dividends from net investment income ...................... (0.16) (0.03) --
Distributions from net realized gains ..................... (0.11) (0.01) --
------ ------ ------
Total distributions ....................................... (0.27) (0.04) --
------ ------ ------
Net asset value, end of period ............................ $15.73 $13.46 $10.70
====== ====== ======
TOTAL RETURN +............................................. 18.80% 26.19% 7.00%
====== ====== ======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) ...................... $12,915 $4,949 $591
Ratio of operating expenses to average net assets (a)(b) .. 0.35%** 0.35% 0.35%**
Ratio of net investment income to average net assets ...... 0.46%** 1.42% 0.51%**
Portfolio turnover rate ................................... 13% 39% 11%
Ratio of operating expenses to average net assets without
fee waivers, expenses reimbursed and fees reduced by
credits allowed by the custodian(b) ..................... 0.55%** 0.80% 15.54%**
- ----------------
* The Portfolio commenced operations on June 3, 1997.
** Annualized.
+ Total return is not annualized for periods less than one year. The total return would have been lower if certain fees had not
been waived and expenses reimbursed by the investment advisor and/or administrator 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 the aggregate gains and losses of portfolio securities due to timing of
sales and redemptions of Portfolio shares.
(a) Ratio of operations expenses to average net assets includes expenses paid indirectly.
(b) The Portfolio will also indirectly bear its prorated share of expenses of the Underlying Funds.
</TABLE>
See Notes to Financial Statements.
<PAGE>
FINANCIAL highlights
CONSERVATIVE GROWTH PORTFOLIO
FOR A PORTFOLIO SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR PERIOD
06/30/99 ENDED ENDED
(UNAUDITED) 12/31/98 12/31/97*
----------- -------- ---------
<S> <C> <C> <C>
Net asset value, beginning of period ...................... $12.54 $10.49 $10.00
------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ..................................... 0.06++ 0.20++ 0.07
Net realized and unrealized gain on investments ........... 1.93 1.89 0.42#
------ ------ ------
Total from investment operations .......................... 1.99 2.09 0.49
------ ------ ------
LESS DISTRIBUTIONS:
Dividends from net investment income ...................... (0.16) (0.03) --
Distributions from net realized gains ..................... (0.16) (0.01) --
------ ------ ------
Total distributions ....................................... (0.32) (0.04) --
------ ------ ------
Net asset value, end of period ............................ $14.21 $12.54 $10.49
====== ====== ======
TOTAL RETURN+ ............................................. 15.81% 19.91% 4.90%
====== ====== ======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) ...................... $27,041 $10,072 $1,374
Ratio of operating expenses to average net assets (a)(b) .. 0.35%** 0.35% 0.35%**
Ratio of net investment income to average net assets ...... 0.86%** 1.79% 1.24%**
Portfolio turnover rate ................................... 18% 35% 42%
Ratio of operating expenses to average net assets without
fee waivers, expenses reimbursed and fees reduced by
credits allowed by the custodian(b) ..................... 0.43%** 0.57% 6.67%**
- ----------------
* The Portfolio commenced operations on June 3, 1997.
** Annualized.
+ Total return is not annualized for periods less than one year. The total return would have been lower if certain fees had not
been waived and/or expenses reimbursed by the investment advisor and/or administrator 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 the aggregate gains and losses of portfolio securities due to timing of
sales and redemptions of Portfolio shares.
(a) Ratio of operating expenses to average net assets includes expenses paid indirectly.
(b) The Portfolio will indirectly bear its prorated share of expenses of the Underlying Funds.
</TABLE>
See Notes to Financial Statements.
<PAGE>
FINANCIAL highlights
BALANCED PORTFOLIO
FOR A PORTFOLIO SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR PERIOD
06/30/99 ENDED ENDED
(UNAUDITED) 12/31/98 12/31/97*
----------- -------- ---------
<S> <C> <C> <C>
Net asset value, beginning of period ...................... $12.20 $10.47 $10.00
------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ..................................... 0.16++ 0.31++ 0.13
Net realized and unrealized gain on investments ........... 1.18 1.49 0.34#
------ ------ ------
Total from investment operations .......................... 1.34 1.80 0.47
------ ------ ------
LESS DISTRIBUTIONS:
Dividends from net investment income ...................... (0.35) (0.07) --
Distributions from net realized gains ..................... (0.09) -- --
------ ------ ------
Total distributions ....................................... (0.44) (0.07) --
------ ------ ------
Net asset value, end of period ............................ $13.10 $12.20 $10.47
====== ====== ======
TOTAL RETURN+ ............................................. 11.09% 17.18% 4.70%
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) ...................... $35,546 $11,161 $2,354
Ratio of operating expenses to average net assets (a)(b) .. 0.35%** 0.35% 0.35%**
Ratio of net investment income to average net assets ...... 2.65%** 2.79% 2.34%**
Portfolio turnover rate ................................... 31% 33% 15%
Ratio of operating expenses to average net assets without
fee waivers, expenses reimbursed and fees reduced by
credits allowed by the custodian(b) ..................... 0.40%** 0.54% 3.97%**
- ----------------
* The Portfolio commenced operations on June 3, 1997.
** Annualized.
+ Total return is not annualized for periods less than one year. The total return would have been lower if certain fees had not
been waived and/or expenses reimbursed by the investment advisor and/or administrator 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 the aggregate gains and losses of portfolio securities due to timing of
sales and redemptions of Portfolio shares.
(a) Ratio of operating expenses to average net assets includes expenses paid indirectly.
(b) The Portfolio will indirectly bear its prorated share of expenses of the Underlying Funds.
</TABLE>
See Notes to Financial Statements.
<PAGE>
FINANCIAL highlights
FLEXIBLE INCOME PORTFOLIO
FOR A PORTFOLIO SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR PERIOD
06/30/99 ENDED ENDED
(UNAUDITED) 12/31/98 12/31/97*
----------- -------- ---------
<S> <C> <C> <C>
Net asset value, beginning of period ...................... $11.38 $10.23 $10.00
------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ..................................... 0.31++ 0.48++ 0.04
Net realized and unrealized gain on investments ........... 0.23 0.69 0.19#
------ ------ ------
Total from investment operations .......................... 0.54 1.17 0.23
------ ------ ------
LESS DISTRIBUTIONS:
Dividends from net investment income ...................... (0.26) (0.02) --
Distributions from net realized gains ..................... (0.01) -- --
------ ------ ------
Total distributions ....................................... (0.27) (0.02) --
------ ------ ------
Net asset value, end of period ............................ $11.65 $11.38 $10.23
====== ====== ======
TOTAL RETURN+ ............................................. 4.52% 11.75% 2.30%
====== ====== ======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) ...................... $9,941 $1,107 $100
Ratio of operating expenses to average net assets (a)(b) .. 0.35%** 0.35% 0.34%**
Ratio of net investment income to average net assets ...... 5.64%** 4.90% 7.04%**
Portfolio turnover rate ................................... 1% 78% 5%
Ratio of operating expenses to average net assets without
fee waivers, expenses reimbursed and fees reduced by
credits allowed by the custodian(b) ..................... 0.58%** 1.51% 116.19%**
- ----------------
* The Portfolio commenced operations on September 9, 1997.
** Annualized.
+ Total return is not annualized for periods less than one year. The total return would have been lower if certain fees had not
beenwaived and expenses reimbursed by the investment advisor and/or administrator 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 the aggregate gains and losses of portfolio securities due to timing of
sales and redemptions of Portfolio shares.
(a) Ratio of operating expenses to average net assets includes expenses paid indirectly.
(b) The Portfolio will also bear its prorated share of expenses of the Underlying Funds.
</TABLE>
See Notes to Financial Statements.
<PAGE>
FINANCIAL highlights
INCOME PORTFOLIO
FOR A PORTFOLIO SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED PERIOD PERIOD
06/30/99 ENDED ENDED
(UNAUDITED) 12/31/98* 12/31/97*
----------- --------- ---------
<S> <C> <C> <C>
Net asset value, beginning of period ...................... $10.42 $10.00 $10.00
------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ..................................... 0.40++ 0.56++ --
Net realized and unrealized loss on investments ........... (0.34) (0.14) --
------ ------ ------
Total from investment operations .......................... 0.06 0.42 --
------ ------ ------
LESS DISTRIBUTIONS:
Dividends from net investment income ...................... (0.40) -- --
Distributions from net realized gains ..................... (0.01) -- --
------ ------ ------
Total distributions ....................................... (0.41) -- --
------ ------ ------
Net asset value, end of period ............................ $10.07 $10.42 $10.00#
====== ====== ======
TOTAL RETURN+ ............................................. 0.47% 4.23% 0.00%
====== ====== ======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) ...................... $3,410 $829 $0
Ratio of operating expenses to average net assets (a)(b) .. 0.35%** 0.35%** 0.35%**
Ratio of net investment income to average net assets ...... 7.84%** 7.39%** 0.00%**
Portfolio turnover rate ................................... 27% 61% 99%
Ratio of operating expenses to average net assets without
fee waivers, expenses reimbursed and fees reduced by
credits allowed by the custodian(b) ..................... 0.87%** 5.37%** 7,567.04%**
- ----------------
* The Income Portfolio commenced operations on October 22, 1997, ceased operations on November 4, 1997, and recommenced
operations on April 23, 1998.
** Annualized.
+ Total return is not annualized for periods less than one year. The total return would have been lower if certain fees had not
been waived and expenses reimbursed by the investment advisor and/or administrator or if fees had not been reduced by credits
allowed by the custodian.
++ Per share numbers have been calculated using the average shares method.
# Represents offering share price.
(a) Ratio of operating expenses to average net assets includes expenses paid indirectly.
(b) The Portfolio will indirectly bear its prorated share of expenses of the Underlying Funds.
</TABLE>
See Notes to Financial Statements.
<PAGE>
PORTFOLIO of INVESTMENTS
MONEY MARKET FUND
JUNE 30, 1999 (UNAUDITED)
PRINCIPAL
AMOUNT VALUE
- --------- -----
COMMERCIAL PAPER (DOMESTIC) - 34.4%
$1,000,000 American Express Credit Corporation,
4.830% due 07/27/1999+ ............................. $ 996,511
1,000,000 Chase Manhattan Corporation,
5.060% due 09/29/1999+ ............................. 987,350
1,000,000 Deere & Company,
4.800% due 07/23/1999+ ............................. 997,067
1,000,000 Ford Motor Credit Company,
4.810% due 07/08/1999+ ............................. 999,065
1,000,000 Merrill Lynch & Company Inc.,
4.800% due 07/16/1999+ ............................. 998,000
1,000,000 Morgan Stanley, Dean Witter, Discover,
4.830% due 08/19/1999+ ............................. 993,426
1,000,000 National Rural Utilities Cooperative
Finance Corporation,
4.820% due 07/22/1999+ ............................. 997,188
1,000,000 Windmill Funding Corporation,
4.810% due 07/20/1999+,++ .......................... 997,461
-----------
Total Commercial Paper (Domestic)
(Cost $7,966,068) .................................. 7,966,068
-----------
COMMERCIAL PAPER (YANKEE) - 8.6%
1,000,000 ABN-AMRO Bank North America Finance Inc.,
5.170% due 09/02/1999 .............................. 990,953
1,000,000 Toyota Credit de Puerto Rico, Inc.,
4.850% due 07/15/1999+ ............................. 998,114
-----------
Total Commercial Paper (Yankee)
(Cost $1,989,067) .................................. 1,989,067
-----------
CERTIFICATES OF DEPOSIT (YANKEE) - 12.9%
1,000,000 Abbey National Treasury Services Plc,
4.920% due 09/20/1999 .............................. 999,450
1,000,000 Commerzbank AG, Euro,
5.650% due 07/30/1999 .............................. 1,000,319
1,000,000 Westdeutsche Landesbank,
4.900% due 07/07/1999 .............................. 1,000,003
-----------
Total Certificates of Deposit (Yankee)
(Cost $2,999,772) .................................. 2,999,772
-----------
MEDIUM-TERM NOTE - 6.5%
(Cost $1,500,097)
1,500,000 US Bank NA Minnesota,
4.980% due 09/15/1999+++ ............................. 1,500,097
-----------
U.S. GOVERNMENT AGENCY OBLIGATIONS - 21.6%
FEDERAL FARM CREDIT BANK (FFCB) - 15.1%
$1,500,000 4.870% due 09/01/1999 ................................ $ 1,500,000
1,000,000 4.875% due 09/01/1999 ................................ 1,000,000
1,000,000 4.770% due 11/01/1999 ................................ 1,000,000
-----------
Total FFCBs (Cost $3,500,000) ........................ 3,500,000
-----------
STUDENT LOAN MORTGAGE ASSOCIATION (SLMA) - 6.5%
(Cost $1,500,000)
1,500,000 4.900% due 10/27/1999 ................................ 1,500,000
-----------
Total U.S. Government Agency Obligations
(Cost $5,000,000) .................................. 5,000,000
-----------
REPURCHASE AGREEMENT - 10.0%
(Cost $2,326,000)
2,326,000 Agreement with Credit Suisse First Boston Corporation,
4.750% dated 06/30/1999, to be repurchased at
$2,326,307 on 07/01/1999, collateralized by
$2,318,115 U.S. Treasury Note, 5.375%
due 01/31/2000
(Market Value $2,373,366) .......................... 2,326,000
-----------
TOTAL INVESTMENTS (Cost $21,781,004*) .................... 94.0% 21,781,004
OTHER ASSETS AND LIABILITIES (NET) ....................... 6.0 1,396,893
---- -----------
NET ASSETS ............................................... 100.0% $23,177,897
===== ===========
- --------------
* Aggregate cost for federal tax purposes.
+ Rate represents disount rate at the date of purchase.
++ Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers.
+++ Floating rate security whose interest rate is reset periodically based on
an index.
See Notes to Financial Statements.
<PAGE>
PORTFOLIO of INVESTMENTS
SHORT TERM HIGH QUALITY BOND FUND
JUNE 30, 1999 (UNAUDITED)
PRINCIPAL
AMOUNT VALUE
- --------- -----
CORPORATE BONDS AND NOTES - 32.8%
FINANCIAL - 12.2%
$ 985,000 Boeing Capital Corporation, MTN,
6.710% due 07/19/2000 ............................... $ 988,440
1,000,000 Citigroup, Inc., Note,
6.125% due 06/15/2000 ............................... 999,437
1,000,000 General Electric Capital Corporation,
Series A, MTN,
5.800% due 04/24/2000 ............................... 999,689
1,000,000 Goldman Sachs Group LP, Note,
7.800% due 07/15/2002++ ............................. 1,035,182
Merrill Lynch & Company,
Series B, Note:
1,000,000 6.100% due 10/04/1999 .............................. 1,001,152
325,000 8.300% due 11/01/2002 ............................... 341,679
250,000 US West Capital Funding, Inc.,
Company Guaranty,
6.125% due 07/15/2002 ............................... 245,045
----------
5,610,624
----------
BANKS - 7.2%
250,000 BB&T Corporation, Sub. Note,
7.050% due 05/23/2003 ............................... 253,287
1,000,000 Chase Manhattan Corporation, Note,
5.500% due 02/15/2001 ............................... 988,556
1,000,000 First Chicago, Bank One Corporation,
Sub. Note,
9.250% due 11/15/2001 ............................... 1,065,242
1,000,000 Wachovia Corporation, Sr. Note,
6.700% due 06/21/2004 ............................... 1,006,718
----------
3,313,803
----------
REAL ESTATE INVESTMENT TRUSTS/PROPERTY - 3.4%
250,000 Camden Property Trust, Note,
6.750% due 11/15/2001 ............................... 247,026
100,000 Colonial Realty LP, Note,
7.500% due 07/15/2001 ............................... 100,153
530,000 Dobie Center Properties, Ltd., Note, Taxable, (MBIA
Insured),
6.010% due 05/01/2000++ ............................. 528,713
600,000 Sun Communities, Inc., Sr. Note,
7.625% due 05/01/2003 ............................... 600,055
100,000 SUSA Partnership LP, Note,
7.125% due 11/01/2003 ............................... 98,118
----------
1,574,065
----------
TRANSPORTATION - 2.2%
1,000,000 CSX Corporation, Deb.,
9.500% due 08/01/2000 ............................... 1,032,335
----------
RETAIL SALES - 2.2%
250,000 Federated Department Stores, Inc., Bond,
6.790% due 07/15/2027 ............................... 250,055
750,000 Wal-Mart Stores, Inc., Note,
5.850% due 06/01/2000 ............................... 750,938
----------
1,000,993
----------
UTILITIES - 2.1%
1,000,000 United Illuminating Company, Note,
6.000% due 12/15/2003 ............................... 954,816
----------
INDUSTRIAL - 1.7%
500,000 Cendant Corporation, Note,
7.500% due 12/01/2000 ............................... 504,428
100,000 Equistar Chemicals LP, Note,
9.125% due 03/15/2002 ............................... 102,724
150,000 Lyondell Petrochemical Company, MTN,
9.750% due 09/04/2003++ ............................. 152,605
----------
759,757
----------
OIL & GAS - 1.1%
500,000 Occidental Petroleum Company, Sr. Note,
6.400% due 04/01/2003 ............................... 487,798
----------
AEROSPACE/DEFENSE - 0.4%
200,000 Lockheed Martin Corporation,
Company Guaranty,
6.850% due 05/15/2001 ............................... 200,985
----------
CONSUMER STAPLES - 0.2%
100,000 Nabisco Inc., Bond,
6.300% due 08/26/1999++ ............................. 100,000
----------
MEDIA - 0.1%
50,000 Time Warner, Inc., Note,
7.950% due 02/01/2000 ............................... 50,507
----------
Total Corporate Bonds and Notes
(Cost $15,192,295) .................................. 15,085,683
----------
U.S. TREASURY NOTES - 37.7%
3,500,000 4.000% due 10/31/2000 ................................ 3,437,658
12,000,000 5.250% due 05/31/2001 ................................ 11,943,755
500,000 5.750% due 08/15/2003 ................................ 500,156
1,500,000 5.625% due 02/15/2006 ................................ 1,477,500
----------
Total U.S. Treasury Notes
(Cost $17,402,706) .................................. 17,359,069
----------
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES - 10.2%
FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA) - 4.6%
954,456 #0252214,
6.500% due 01/01/2014 ............................. 942,142
221,764 #313641,
8.500% due 11/01/2017 ............................. 231,842
949,593 #456445,
6.500% due 01/01/2014 ............................. 937,342
----------
Total FNMA's (Cost $2,164,091) ...................... 2,111,326
----------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (GNMA) - 4.1%
66,003 #001991,
9.000% due 04/20/2025 .............................. 69,494
41,461 #121425,
11.000% due 04/15/2015 ............................. 46,143
45,285 #140834,
11.000% due 12/15/2015 ............................. 50,399
12,603 #144538,
11.000% due 12/15/2015 ............................. 14,025
58,223 #151670,
11.000% due 12/15/2015 ............................. 64,797
169,010 #213862,
10.000% due 09/15/2018 ............................. 184,810
51,714 #225305,
10.000% due 02/15/2018 ............................. 56,548
21,020 #234561,
10.000% due 12/15/2017 ............................. 22,985
20,657 #254937,
10.000% due 06/15/2019 ............................. 22,588
63,428 #257814,
10.000% due 09/15/2018 ............................. 69,358
165,282 #264735,
10.000% due 02/15/2019 ............................. 180,734
115,366 #289333,
10.000% due 05/15/2020 ............................. 126,151
136,405 #291116,
10.000% due 06/15/2020 ............................. 149,157
46,240 #293511,
10.000% due 07/15/2020 ............................. 50,562
161,232 #400224,
8.000% due 06/15/2009 .............................. 167,714
236,524 #453963,
8.000% due 08/15/2012 .............................. 246,032
117,427 #780081,
10.000% due 02/15/2025 ............................. 128,521
26,561 #780121,
10.000% due 04/15/2025 ............................. 29,053
26,769 #780141,
10.000% due 12/15/2020 ............................. 29,290
168,754 #780317,
9.000% due 12/15/2020 .............................. 179,857
-----------
Total GNMAs (Cost $1,882,528) ........................ 1,888,218
-----------
ADJUSTABLE RATE MORTGAGE-BACKED SECURITIES (ARM) - 1.2%
80,021 Federal Home Loan Mortgage Corporation
(FHLMC),
#845988,
7.362% due 11/01/2021+ ............................. 81,804
Federal National Mortgage Association (FNMA):
149,773 #082247,
5.875% due 04/01/2019+ ............................. 147,733
19,082 #124571,
7.410% due 11/01/2022+ ............................. 19,575
90,400 #141461,
6.968% due 11/01/2021+ ............................. 92,815
46,438 #152205,
6.881% due 01/01/2019+ ............................. 47,626
144,875 #313257,
5.886% due 11/01/2035+ ............................. 142,117
-----------
Total ARMs (Cost $534,891) ........................... 531,670
-----------
FEDERAL HOME LOAN MORTGAGE CORPORATION (FHLMC) - 0.3%
(Cost $152,751)
141,849 #A01226,
9.500% due 08/01/2016 .............................. 151,202
-----------
Total U.S. Government Agency Mortgage-Backed
Securities
(Cost $4,734,261) .................................. 4,682,416
-----------
ASSET-BACKED SECURITIES - 8.8%
250,000 Carco Auto Loan Master Trust, 1997-1 A,
6.689% due 08/15/2004 .............................. 250,604
500,000 First USA Credit Card Master Trust, 1997-6 A,
6.420% due 03/17/2005 .............................. 502,637
738,476 General Electric Capital Mortgage Association,
1996-HE3 A3,
7.150% due 09/25/2026 .............................. 740,104
Green Tree Financial Corporation:
250,000 1995-1 B2,
9.200% due 06/15/2025 .............................. 253,548
200,000 1995-6 B1,
7.700% due 09/15/2026 .............................. 202,941
100,000 Green Tree Home Equity Loan Trust,
1997-B A5,
7.150% due 04/15/2027 .............................. 101,162
165,000 Green Tree Home Improvement, 1995-D B2,
7.450% due 09/15/2025 .............................. 159,610
24,716 Green Tree Recreational, Equipment & Consumer,
1996-A A1,
5.550% due 02/15/2018 .............................. 24,499
350,000 MBNA Master Credit Card Trust, 1995-E A,
5.208% due 01/15/2005+ ............................. 350,922
17,522 Merrill Lynch Mortgage Investors, Inc.,
1991-I A,
7.650% due 01/15/2012 .............................. 17,549
246,301 Mid-State Trust, Series 4-A,
8.330% due 04/01/2030 .............................. 257,629
700,000 Standard Credit Card Master Trust, 1994-4 A,
8.250% due 11/07/2003 .............................. 728,978
197,293 The Money Store Home Equity Trust,
1997-C AF3,
6.307% due 08/15/2012 .............................. 197,255
242,113 World Omni Automobile Lease Securitization, 1996-B B,
6.850% due 11/15/2002++ ............................ 242,302
-----------
Total Asset-Backed Securities
(Cost $4,066,346) .................................. 4,029,740
-----------
FOREIGN GOVERNMENT BONDS - 3.8%
1,000,000 Ontario, Province of Canada,
6.125% due 06/28/2000 .............................. 1,005,910
750,000 Province of Alberta, Government Guaranty,
9.250% due 04/01/2000 .............................. 770,963
-----------
Total Foreign Government Bonds
(Cost $1,770,260) .................................. 1,776,873
-----------
COLLATERALIZED MORTGAGE OBLIGATIONS (CMO) - 1.9%
18,766 Countrywide Funding Corporation,
1994-1 A3,
6.250% due 03/25/2024 .............................. $ 18,318
453,385 Federal Home Loan Mortgage Corporation, Class VG,
6.250% due 06/25/2004 .............................. 452,176
6,256 General Electric Capital Mortgage Association,
1994-27 A1,
6.500% due 07/25/2024 .............................. 6,238
45,028 Prudential Home Mortgage Securities,
1993-43 A1,
5.400% due 10/25/2023 .............................. 44,868
350,000 Residential Asset Securitization Trust,
1997-A6 A5,
7.250% due 09/25/2012 .............................. 352,224
-----------
Total CMOs (Cost $883,507) ........................... 873,824
-----------
REPURCHASE AGREEMENT - 3.9%
(Cost $1,812,000)
1,812,000 Agreement with Credit Suisse First Boston Corporation,
4.750% dated 06/30/1999,
to be repurchased at $1,812,239 on
07/01/1999, collateralized by $1,805,857
U.S. Treasury Note, 5.375% due 01/31/2000
(Market Value $1,848,899) .................. 1,812,000
-----------
TOTAL INVESTMENTS (Cost $45,861,375*) ..................... 99.1% 45,619,605
OTHER ASSETS AND LIABILITIES (NET) ........................ 0.9 415,639
---- -----------
NET ASSETS ................................................ 100.0% $46,035,244
===== ===========
- --------------
* 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. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers.
- ------------------------------------------------------------------------------
GLOSSARY OF TERMS
LP --Limited Partnership
MBIA --Municipal Bond Investors Assurance
MTN --Medium Term Note
- ------------------------------------------------------------------------------
See Notes to Financial Statements.
<PAGE>
PORTFOLIO of INVESTMENTS
U.S. GOVERNMENT SECURITIES FUND
JUNE 30, 1999 (UNAUDITED)
PRINCIPAL
AMOUNT VALUE
- ---------- -----
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES - 53.0%
FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA) - 20.7%
$ 6,979,130 6.500% due 11/01/2028 - 04/01/2029 ................. $ 6,759,162
6,849,470 7.000% due 08/01/2028 - 04/01/2029 ................. 6,788,926
418,546 8.000% due 05/01/2022 .............................. 430,037
195,028 8.500% due 02/01/2023 .............................. 203,892
-----------
Total FNMAs (Cost $14,417,653) ..................... 14,182,017
-----------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (GNMA) - 19.2%
992,431 6.000% due 02/20/2029 .............................. 926,957
5,868,540 7.000% due 01/15/2028 - 03/15/2029 ................. 5,806,450
5,603,960 7.500% due 01/15/2023 - 11/15/2023 ................. 5,673,511
656,549 8.000% due 07/15/2026 - 06/15/2027 ................. 675,742
36,774 9.000% due 08/15/2021 .............................. 39,075
-----------
Total GNMAs (Cost $13,254,551) ..................... 13,121,735
-----------
FEDERAL HOME LOAN MORTGAGE CORPORATION (FHLMC) - 13.1%
GOLD:
868,580 5.500% due 12/01/2008 ............................ 822,785
2,183,577 6.000% due 01/01/2013 ............................ 2,113,781
3,384,611 6.500% due 05/01/2023 - 03/01/2029 ............... 3,291,170
2,122,176 7.000% due 04/01/2008 - 01/01/2013 ............... 2,135,534
599,860 8.750% due 01/01/2013 ............................ 632,859
-----------
Total FHLMCs (Cost $9,125,051) ..................... 8,996,129
-----------
Total U.S. Government Agency Mortgage-Backed
Securities
(Cost $36,797,255) ............................... 36,299,881
-----------
COLLATERALIZED MORTGAGE OBLIGATIONS (CMO) - 20.1%
Federal National Mortgage Associaton:
522,445 Series 1989-90, Class E,
8.700% due 12/25/2019 ............................ 545,641
5,454,881 Series 1992-55, Class DZ,
8.000% due 04/25/2022 ............................ 5,648,835
6,519,976 Series 1992-83, Class X,
7.000% due 02/25/2022 ............................ 6,366,020
512,642 Series 1993-159, Class PA, (P/O),
Zero coupon due 01/25/2021 ....................... 498,604
716,880 Residential Funding Mortgage Security,
Series 1992-S39, Class A8,
7.500% due 11/25/2007 ............................ 723,062
-----------
Total CMOs (Cost $12,536,855) ...................... 13,782,162
-----------
U.S. GOVERNMENT AGENCY OBLIGATIONS - 15.0%
2,000,000 Federal Farm Credit Bank,
5.700% due 06/18/2003 ............................ 1,966,384
1,500,000 Federal Farm Credit Bank,
5.730% due 04/14/2003 ............................ 1,466,358
2,000,000 Federal Home Loan Bank, Bond,
5.305% due 03/26/2001 ............................ 1,983,750
$1,000,000 Federal Home Loan Bank, Bond,
6.135% due 02/17/2009 ............................ 944,690
1,000,000 Federal Home Loan Bank, Bond,
6.810% due 08/20/2007 ............................ 986,082
1,000,000 Federal Home Loan Bank, MTN,
5.705% due 03/19/2003 ............................ 988,146
2,000,000 Housing Urban Development, Series 99-A,
Government Guarantee,
6.160% due 08/01/2011 ............................ 1,900,240
-----------
Total U.S. Government Agency Obligations
(Cost $10,591,274) ............................... 10,235,650
-----------
U.S. TREASURY OBLIGATIONS - 5.0%
U.S TREASURY BONDS - 2.5%
300,000 12.750% due 11/15/2010 ............................. 404,344
1,300,000 6.250% due 08/15/2023 .............................. 1,301,625
-----------
Total U.S. Treasury Bonds (Cost $1,708,131) ........ 1,705,969
-----------
U.S. TREASURY NOTES - 2.5%
1,000,000 4.875% due 03/31/2001 .............................. 990,000
325,000 6.625% due 03/31/2002 .............................. 333,227
350,000 6.250% due 02/15/2007 .............................. 356,672
-----------
Total U.S. Treasury Notes (Cost $1,670,235) ........ 1,679,899
-----------
Total U.S. Treasury Obligations
(Cost $3,378,366) ................................ 3,385,868
-----------
REPURCHASE AGREEMENT - 6.3%
(Cost $4,338,000)
4,338,000 Agreement with Credit Suisse First Boston
Corporation, 4.750% dated 06/30/1999, to be
repurchased at $4,338,572 on 07/01/1999,
collateralized by $4,323,294 U.S. Treasury
Note, 5.375% due 01/31/2000
(Market Value $4,426,338) ........................ 4,338,000
-----------
TOTAL INVESTMENTS (Cost $67,641,750*) ................... 99.4% 68,041,561
OTHER ASSETS AND LIABILITIES (NET) ...................... 0.6 405,613
----- -----------
NET ASSETS .............................................. 100.0% $68,447,174
===== ===========
- --------------
* 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
P/O --Principal Only
- ------------------------------------------------------------------------------
See Notes to Financial Statements.
<PAGE>
PORTFOLIO of INVESTMENTS
INCOME FUND
JUNE 30, 1999 (UNAUDITED)
PRINCIPAL
AMOUNT VALUE
- ---------- -----
CORPORATE BONDS AND NOTES - 71.8%
INDUSTRIAL - 41.7%
$ 1,200,000 ANR Pipeline Company, Deb.,
9.625% due 11/01/2021 ........................... $ 1,437,400
1,000,000 Boeing Company, Deb.,
8.750% due 08/15/2021 ........................... 1,133,062
1,750,000 Carnival Corporation, Deb.,
7.200% due 10/01/2023 ........................... 1,684,005
1,500,000 Caterpillar Inc., Sinking Fund Deb.,
9.750% due 06/01/2019 ........................... 1,572,301
500,000 Columbia/HCA Healthcare Corporation,
Sub. Deb.,
6.750% due 10/01/2006 ........................... 431,250
1,000,000 Conrail, Inc., Deb.,
9.750% due 06/15/2020 ........................... 1,228,154
893,733 Continental Airlines, Inc., Pass-through
Certificates, Series 974C,
6.800% due 07/02/2007 ........................... 880,792
1,000,000 Enron Corporation, Note,
6.450% due 11/15/2001 ........................... 998,745
400,000 Ford Holdings, Inc., Deb.,
9.300% due 03/01/2030 ........................... 489,329
Ford Motor Company, Deb.:
600,000 8.875% due 11/15/2022 ........................... 630,017
250,000 8.900% due 01/15/2032 ........................... 289,655
1,000,000 General Motors Corporation, Deb.,
9.400% due 07/15/2021 ........................... 1,199,247
1,500,000 Lockheed Martin Corporation, Note,
7.250% due 05/15/2006 ........................... 1,498,666
150,000 Mariner Post-Acute Network, Sr. Sub. Note,
9.500% due 11/01/2007 ........................... 28,500
1,000,000 Norfolk Southern Corporation, Bond,
7.800% due 05/15/2027 ........................... 1,035,440
1,300,000 Occidental Petroleum Corporation, Sr. Deb.,
11.125% due 08/01/2010 .......................... 1,609,721
200,000 Ogden Corporation, Deb.,
9.250% due 03/01/2022 ........................... 230,000
100,000 P&L Coal Holdings Corporation, Company Guaranty,
8.875% due 05/15/2008 ........................... 100,500
1,000,000 Phillips Petroleum Company, Deb.,
9.180% due 09/15/2021 ........................... 1,044,571
1,800,000 Praxair, Inc., Deb.,
8.700% due 07/15/2022 ........................... 2,008,802
2,000,000 Southwest Airlines Company, Pass-through
Certificates, 94-A, Class A-4,
9.150% due 07/01/2016 ........................... 2,358,760
300,000 Time Warner, Inc., Deb.,
9.150% due 02/01/2023 ........................... 346,688
1,300,000 United Air Lines, Inc., Pass-through
Certificates,
9.560% due 10/19/2018 ........................... 1,499,251
------------
23,734,856
------------
FINANCIAL/BANKS - 12.5%
500,000 American General Corporation,
Sinking Fund Deb.,
7.500% due 07/15/2025 ........................... 505,696
400,000 Banc One Corporation, Sub. Note,
10.000% due 08/15/2010 .......................... 489,564
1,000,000 Barclays North American Capital Corporation,
Capital Note,
9.750% due 05/15/2021 ........................... 1,072,556
82,000 Barnett Banks, Florida, Inc., Sub. Note,
10.875% due 03/15/2003 .......................... 92,371
230,000 Citicorp, Sub. Note,
8.625% due 12/01/2002 ........................... 244,988
First Chicago Corporation, Sub. Note:
600,000 11.250% due 02/20/2001 .......................... 646,284
100,000 9.250% due 11/15/2001 ........................... 106,524
1,040,000 Fleet/Norstar Financial Group, Inc., Sub. Note,
9.900% due 06/15/2001 ........................... 1,103,238
1,000,000 Hartford Life Insurance Company, Deb.,
7.650% due 06/15/2027 ........................... 1,029,931
1,100,000 NCNB Corporation, Sub. Note,
9.375% due 09/15/2009 ........................... 1,288,391
516,000 Security Pacific Corporation, Sub. Note,
11.500% due 11/15/2000 .......................... 549,625
------------
7,129,168
------------
FOREIGN (U.S. DOLLAR DENOMINATED) - 7.6%
1,000,000 Abbey National Plc, Global Note,
6.690% due 10/17/2005 ........................... 982,651
250,000 HIH Capital Ltd., Conv. Note,
7.500% due 09/25/2006 ........................... 170,000
1,700,000 Northern Telecom Capital, Sub. Note,
7.400% due 06/15/2006 ........................... 1,755,901
500,000 Petro-Canada, Deb.,
9.250% due 10/15/2021 ........................... 587,520
350,000 Poland Communications, Inc., Sr. Note,
9.875% due 11/01/2003 ........................... 344,750
500,000 Trans-Canada Pipeline Corporation, Deb.,
8.500% due 03/20/2023 ........................... 509,720
------------
4,350,542
------------
UTILITIES - 4.4%
200,000 Duke Power Company,
First and Refundable Mortgage,
6.875% due 08/01/2023 ........................... 186,531
700,000 Florida Power & Light Company,
First Mortgage,
7.050% due 12/01/2026 ........................... 661,948
Texas Utilities Electric Company:
150,000 First and Collateral Mortgage,
8.500% due 08/01/2024 ........................... 161,215
1,500,000 First Mortgage,
7.875% due 04/01/2024 ........................... 1,467,624
------------
2,477,318
------------
RETAIL - 3.0%
May Department Stores Company, Deb.:
1,000,000 8.375% due 10/01/2022 ........................... 1,061,011
600,000 8.375% due 08/01/2024 ........................... 629,168
------------
1,690,179
------------
MEDIA - 2.2%
1,200,000 News America Holdings Inc., Sr. Deb.,
8.000% due 10/17/2016 ........................... 1,220,166
------------
GAMING - 0.4%
250,000 Riviera Holdings Corporation, Company Guaranty,
10.000% due 08/15/2004 .......................... 235,000
------------
Total Corporate Bonds and Notes
(Cost $41,018,728) .............................. 40,837,229
------------
U.S. TREASURY OBLIGATION - 4.7%
(Cost $2,849,688)
U.S. TREASURY BOND - 4.7%
2,000,000 13.750% due 08/15/2004 ............................ 2,685,626
------------
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES - 0.8%
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (GNMA) - 0.5%
258,808 #386671,
9.000% due 02/15/2025 ........................... 275,008
------------
FEDERAL HOME LOAN MORTGAGE CORPORATION (FHLMC) - 0.3%
176,963 #C00385, GOLD,
9.000% due 01/01/2025 ........................... 187,746
------------
Total U.S. Government Agency Mortgage-Backed
Securities
(Cost $449,108) ................................. 462,754
------------
REPURCHASE AGREEMENT - 21.2%
(Cost $12,032,000)
$12,032,000 Agreement with Credit Suisse First Boston
Corporation, 4.750% dated 06/30/1999,
to be repurchased at $12,033,588 on
07/01/1999, collateralized by $11,991,211
U.S. Treasury Note 5.375% due 01/31/2000
(Market Value $12,277,017) ...................... 12,032,000
------------
TOTAL INVESTMENTS (Cost $56,349,524*) ................... 98.5% 56,017,609
OTHER ASSETS AND LIABILITIES (NET) ...................... 1.5 874,960
---- ------------
NET ASSETS .............................................. 100.0% $56,892,569
===== ===========
- --------------
* 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
- ------------------------------------------------------------------------------
See Notes to Financial Statements.
<PAGE>
PORTFOLIO of INVESTMENTS
GROWTH & INCOME FUND
JUNE 30, 1999 (UNAUDITED)
SHARES VALUE
------ -----
COMMON STOCKS - 94.7%
COMPUTER SOFTWARE/SERVICES - 9.1%
30,000 Adobe Systems, Inc. ............................... $ 2,464,687
30,300 BARRA, Inc.+ ...................................... 765,075
43,000 BMC Software, Inc.+ ............................... 2,322,000
29,000 Computer Associates International, Inc. ........... 1,595,000
45,000 First Data Corporation ............................ 2,202,188
36,000 Microsoft Corporation+ ............................ 3,246,750
59,925 Oracle Corporation+ ............................... 2,224,716
-------------
14,820,416
-------------
BANKS/SAVINGS & LOANS - 8.5%
30,000 Bank of America Corporation ....................... 2,199,375
18,400 Bank of New York Company, Inc. .................... 675,050
22,000 Chase Manhattan Corporation ....................... 1,905,750
59,625 Citigroup, Inc. ................................... 2,832,187
35,000 First Union Corporation ........................... 1,645,000
36,200 Mellon Bank Corporation ........................... 1,316,775
35,000 Prime Bancshares, Inc. ............................ 625,625
14,400 U.S. Bancorp. ..................................... 489,600
50,000 Wells Fargo & Company ............................. 2,137,500
-------------
13,826,862
-------------
HEALTH CARE PRODUCTS - 8.0%
33,000 Abbott Laboratories ............................... 1,501,500
27,000 ALZA Corporation+ ................................. 1,373,625
19,600 American Home Products Corporation ................ 1,127,000
25,000 Bristol-Myers Squibb Company ...................... 1,760,937
10,000 DENTSPLY International, Inc. ...................... 280,000
14,000 Johnson & Johnson ................................. 1,372,000
20,000 Merck & Company, Inc. ............................. 1,480,000
64,000 Mylan Laboratories Inc. ........................... 1,696,000
9,500 Pfizer, Inc. ...................................... 1,042,625
18,800 Warner Lambert Company ............................ 1,304,250
-------------
12,937,937
-------------
CONSUMER STAPLES - 7.3%
39,000 Alberto-Culver Company, Class A ................... 889,688
18,000 Campbell Soup Company ............................. 834,750
4,000 Gillette Company .................................. 164,000
30,000 Kimberly-Clark Corporation ........................ 1,710,000
34,000 Kimberly-Clark de Mexico, ADR ..................... 699,099
25,000 Libbey, Inc. ...................................... 725,000
65,000 PepsiCo, Inc. ..................................... 2,514,688
3,600 Philip Morris Companies, Inc. ..................... 144,675
10,000 Procter & Gamble Company .......................... 892,500
34,800 Ralston-Ralston Purina Company .................... 1,059,225
73,000 Sara Lee Corporation .............................. 1,656,188
8,929 Unilever NV ....................................... 622,768
-------------
11,912,581
-------------
FINANCIAL SERVICES - 6.2%
20,000 Ambac Financial Group, Inc. ....................... 1,142,500
48,500 Federal Home Loan Mortgage Corporation ............ 2,813,000
39,050 Heller Financial, Inc. ............................ 1,086,078
19,000 Legg Mason, Inc. .................................. 731,500
39,190 Liberty Financial Companies, Inc. ................. 1,141,409
22,650 Marsh & McLennan Companies, Inc. .................. 1,710,075
10,500 Merrill Lynch & Company, Inc. ..................... 839,344
13,200 Price (T. Rowe) Associates, Inc. .................. 506,550
-------------
9,970,456
-------------
UTILITIES/TELECOMMUNICATIONS - 5.3%
43,444 AT&T Corporation .................................. 2,424,662
15,000 Comcast Corporation, Special Class A .............. 576,562
17,000 MCI Worldcom+ ..................................... 1,463,063
27,000 SBC Communications, Inc. .......................... 1,566,000
48,400 Sprint Corporation ................................ 2,556,125
-------------
8,586,412
-------------
OIL & GAS - 5.3%
7,097 BP Amoco Plc, Sponsored ADR ....................... 770,025
14,000 Exxon Corporation ................................. 1,079,750
28,200 Halliburton Company ............................... 1,276,050
15,500 Mobil Corporation ................................. 1,534,500
25,100 Royal Dutch Petroleum ............................. 1,512,275
66,300 Tosco Corporation ................................. 1,719,656
17,300 Unocal Corporation ................................ 685,513
-------------
8,577,769
-------------
COMPUTER SYSTEMS - 5.0%
55,500 Compaq Computer Corporation ....................... 1,314,656
40,000 EMC Corporation+ .................................. 2,200,000
23,000 Hewlett-Packard Company ........................... 2,311,500
17,000 International Business Machines Corporation ....... 2,197,250
-------------
8,023,406
-------------
CONSUMER DURABLES - 4.1%
52,000 Federal-Mogul Corporation ......................... 2,704,000
70,000 Mattel, Inc. ...................................... 1,850,625
100,400 Miller Industries, Inc.+ .......................... 395,325
61,000 U.S. Industries, Inc. ............................. 1,037,000
12,700 USG Corporation ................................... 711,200
-------------
6,698,150
-------------
RETAIL SALES - 3.9%
12,100 Dayton Hudson Corporation ......................... 786,500
51,000 Intimate Brands, Inc. ............................. 2,536,931
15,787 Limited, Inc. ..................................... 716,335
20,625 May Department Stores Company ..................... 843,047
7,850 Ross Stores, Inc. ................................. 395,444
22,800 Wal-Mart Stores, Inc. ............................. 1,100,100
-------------
6,378,357
-------------
AEROSPACE/DEFENSE - 3.8%
20,300 AlliedSignal, Inc. ................................ 1,278,900
38,000 Boeing Company .................................... 1,679,125
44,000 Lockheed Martin Corporation ....................... 1,639,000
22,900 Raytheon Company, Class B ......................... 1,611,588
0.600 United Technologies Corporation ................... 43
-------------
6,208,656
-------------
INSURANCE - 3.5%
40,000 Allstate Corporation .............................. 1,435,000
13,650 American International Group, Inc. ................ 1,597,903
75,000 Conseco, Inc. ..................................... 2,282,812
7,500 MGIC Investment Corporation ....................... 364,687
-------------
5,680,402
-------------
MEDIA - 3.5%
97,546 AT&T Corporation - Liberty Media Group, Class A+ .. 3,584,815
30,500 Viacom, Inc., Class A+ ............................ 1,345,815
23,600 Walt Disney Company ............................... 727,175
-------------
5,657,805
-------------
BASIC INDUSTRY - 3.1%
20,200 Albemarle Corporation ............................. 467,125
35,300 Allegheny Teledyne, Inc. .......................... 798,663
4,900 du Pont (E.I.) de Nemours & Company ............... 334,731
5,900 Nucor Corporation ................................. 279,881
19,500 Sigma-Aldrich Corporation+ ........................ 671,531
44,560 Waste Management, Inc. ............................ 2,395,100
-------------
4,947,031
-------------
CAPITAL GOODS - 2.8%
21,275 Crane Company ..................................... 668,833
62,300 Donaldson Company, Inc. ........................... 1,526,350
25,494 Tyco International, Ltd. .......................... 2,415,520
-------------
4,610,703
-------------
TRANSPORTATION - 2.6%
9,500 Airborne Freight Corporation ...................... 263,031
14,800 AMR Corporation+ .................................. 1,010,100
67,000 Expeditors International of Washington, Inc. ...... 1,825,750
19,000 Union Pacific Corporation ......................... 1,107,939
-------------
4,206,820
-------------
ELECTRONICS/SEMICONDUCTORS - 2.1%
36,800 General Semiconductor, Inc.+ ...................... 335,800
38,000 Intel Corporation ................................. 2,261,000
20,000 Micron Technology, Inc.+ .......................... 806,250
-------------
3,403,050
-------------
BUSINESS SERVICES - 2.1%
45,000 ACNielson Corporation+ ............................ 1,361,250
28,000 Cendant Corporation+ .............................. 574,000
40,000 Dun & Bradstreet Corporation ...................... 1,417,500
-------------
3,352,750
-------------
ELECTRICAL EQUIPMENT - 1.9%
11,500 Emerson Electric Company .......................... 723,062
21,000 General Electric Company .......................... 2,373,000
-------------
3,096,062
-------------
HEALTH CARE SERVICES - 1.9%
10,000 Aetna, Inc. ....................................... 894,375
17,750 Columbia/HCA Healthcare Corporation ............... 404,922
2,000 IMS Health, Inc. .................................. 62,500
0.200 Lifepoint Hospitals Inc.+ ......................... 3
23,100 PacifiCare Health Systems, Inc., Class A+ ......... 1,661,756
0.200 Triad Hospital, Inc.+ ............................. 3
-------------
3,023,559
-------------
UTILITIES/GAS & ELECTRIC - 1.4%
27,700 Enron Corporation ................................. 2,264,475
-------------
CONSUMER CYCLICALS - 1.2%
17,500 Sony Corporation, ADR ............................. 1,931,561
-------------
LODGING & RESTAURANTS - 1.1%
29,785 Sunburst Hospitality Corporation+ ................. 174,987
30,000 Tricon Global Restaurants, Inc.+ .................. 1,623,750
-------------
1,798,737
-------------
REAL ESTATE INVESTMENT TRUSTS - 1.0%
31,722 Equity Office Properties Trust .................... 812,875
20,200 Health Care Property Investors, Inc. .............. 583,275
20,000 Prison Realty Trust Inc. .......................... 196,250
-------------
1,592,400
-------------
Total Common Stocks (Cost $123,139,370) ........... 153,506,357
-------------
CONVERTIBLE PREFERRED STOCKS - 1.6%
10,000 Cendant Corporation, Series CD, Conv. Pfd.,
1.300% due 02/16/2001 ........................... 291,250
3,600 Estee Lauder Aces Trust I, Conv. Pfd.,
6.250% due 06/05/2001 ........................... 310,500
6,510 Estee Lauder Aces Trust II, Conv. Pfd.,
6.250% due 02/23/2002 ........................... 613,567
9,000 Lehman Brothers Holdings, Series CSCO, Conv. Pfd.,
5.000% due 02/26/2001 ........................... 798,750
10,000 Loral Space & Communications, Ltd.,
Series C, Conv. Pfd.,
6.000% due 11/01/2006++ ......................... 507,500
-------------
Total Convertible Preferred Stocks
(Cost $2,331,017) ............................... 2,521,567
-------------
CONVERTIBLE BOND - 0.4%
(Cost $442,092)
830,000 At Home Corporation,
0.525% due 12/28/2018++ ......................... 643,250
-------------
REPURCHASE AGREEMENT - 4.3%
(Cost $6,981,000)
6,981,000 Agreement with Credit Suisse First Boston
Corporation, 4.750% dated 06/30/1999,
to be repurchased at $6,981,921 on
07/01/1999, collateralized by $6,957,334
U.S. Treasury Note, 5.375% due 01/31/2000
(Market Value $7,123,160) ....................... 6,981,000
-------------
TOTAL INVESTMENTS (Cost $132,893,479*) ................ 101.0% 163,652,174
OTHER ASSETS AND LIABILITIES (NET) .................... (1.0) (1,603,699)
---- -------------
NET ASSETS ............................................ 100.0% $162,048,475
===== ============
- --------------
* Aggregate cost for federal tax purposes.
+ Non-income producing security.
++ Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers.
- ------------------------------------------------------------------------------
GLOSSARY OF TERMS
ADR --American Depositary Receipt
- ------------------------------------------------------------------------------
See Notes to Financial Statements.
<PAGE>
PORTFOLIO of INVESTMENTS
GROWTH FUND
JUNE 30, 1999 (UNAUDITED)
SHARES VALUE
------ -----
COMMON STOCKS - 99.6%
COMPUTER SOFTWARE/SERVICES - 20.4%
117,740 Amazon.com, Inc.+ .................................. $ 14,732,218
20,951 America Online, Inc.+ .............................. 2,315,086
24,040 CIBER, Inc.+ ....................................... 459,765
37,245 DoubleClick, Inc.+ ................................. 3,417,229
34,275 eBay, Inc.+ ........................................ 5,175,525
7,900 Exodus Communications, Inc.+ ....................... 947,506
18,940 Inktomi Corporation+ ............................... 2,472,854
55,545 Microsoft Corporation+ ............................. 5,009,465
44,080 PSINet, Inc.+ ...................................... 1,928,500
25,050 Tecnost Spa ........................................ 63,751
35,420 Verio, Inc.+ ....................................... 2,461,690
36,640 VeriSign, Inc.+ .................................... 3,160,200
25,600 Yahoo, Inc.+ ....................................... 4,409,600
------------
46,553,389
------------
MEDIA - 16.1%
4,190 Adelphia Communications Corporation+ ............... 266,589
369,164 AT&T Corporation - Liberty Media Group, Class A+ ... 13,566,777
43,040 Cablevision Systems Corporation, Class A+ .......... 3,012,800
73,633 Outdoor Systems, Inc.+ ............................. 2,687,604
38,930 Penton Media, Inc. ................................. 944,052
14,730 TCI Music, Inc., Class A+ .......................... 521,074
127,436 Time Warner, Inc. .................................. 9,366,546
60,390 United International Holdings, Inc., Class A+ ...... 4,083,874
50,620 Viacom, Inc., Class B (Non-Voting)+ ................ 2,227,280
------------
36,676,596
------------
ELECTRONICS/SEMICONDUCTORS - 12.5%
57,915 Conexant Systems, Inc.+ ............................ 3,362,690
23,265 Maxim Integrated Products, Inc.+ ................... 1,547,122
179,590 Nokia Corporation, Class A, Sponsored ADR . 16,443,709
31,565 Texas Instruments, Inc. ............................ 4,576,925
37,320 Vitesse Semiconductor Corporation+ ................. 2,516,768
------------
28,447,214
------------
UTILITIES/TELECOMMUNICATIONS - 10.5%
24,624 At Home Corporation+ ............................... 1,328,157
213,535 Comcast Corporation, Special Class A ............... 8,207,752
64,000 Cox Communications, Inc., Class A+ ................. 2,356,000
87,510 Level 3 Communications, Inc.+ ...................... 5,256,069
27,860 NEXTLINK Communications, Inc.+ ..................... 2,072,088
23,255 NTL, Inc.+ ......................................... 2,004,290
46,490 Sprint Corporation, PCS Group+ ..................... 2,655,741
------------
23,880,097
------------
COMPUTER SYSTEMS - 8.9%
48,060 Apple Computer, Inc.+ .............................. 2,225,779
51,540 ASM Lithography Holding NV+ ........................ 3,060,188
156,100 Cisco Systems, Inc.+ ............................... 10,068,450
41,665 EMC Corporation+ ................................... 2,291,575
36,175 Sun Microsystems, Inc.+ ............................ 2,491,553
------------
20,137,545
------------
HEALTH CARE PRODUCTS - 8.4%
28,795 Boston Scientific Corporation+ ..................... 1,265,180
47,580 Centocor, Inc.+ .................................... 2,218,417
32,635 Eli Lilly and Company .............................. 2,337,482
28,650 Guidant Corporation+ ............................... 1,473,684
110,682 Medtronic, Inc. .................................... 8,619,361
42,610 MiniMed, Inc.+ ..................................... 3,278,307
------------
19,192,431
------------
CAPITAL GOODS - 7.3%
45,010 Applied Materials, Inc.+ ........................... 3,325,114
44,410 Federal-Mogul Corporation .......................... 2,309,320
15,350 Mannesmann AG ...................................... 2,288,557
92,683 Tyco International, Ltd. ........................... 8,781,714
------------
16,704,705
------------
OIL & GAS - 4.4%
121,495 Enron Corporation .................................. 9,932,216
------------
BANKS/SAVINGS & LOANS - 3.1%
31,990 Fifth Third Bancorp ................................ 2,129,334
147,509 Firstar Corporation ................................ 4,130,252
20,940 Telebanc Financial Corporation+ .................... 811,425
------------
7,071,011
------------
FINANCIAL SERVICES - 2.2%
18,220 American Express Company ........................... 2,370,878
29,595 E*TRADE Group, Inc.+ ............................... 1,181,950
56,350 TD Waterhouse Group, Inc.+ ......................... 1,412,272
------------
4,965,100
------------
BUSINESS SERVICES - 1.9%
42,622 Lamar Advertising Company+ ......................... 1,744,838
44,760 Sapient Corporation+ ............................... 2,534,535
------------
4,279,373
------------
RETAIL SALES - 1.8%
26,530 Costco Companies, Inc.+ ............................ 2,124,058
65,922 Staples, Inc.+ ..................................... 2,039,462
------------
4,163,520
------------
TECHNOLOGY - 1.1%
70,390 Pittway Corporation, Class A ....................... 2,406,458
------------
INSURANCE - 1.0%
15,875 Progressive Corporation ............................ 2,301,875
------------
Total Common Stocks (Cost $162,386,704) ............ 226,711,530
------------
COMMERCIAL PAPER - 0.6%
(Cost $1,400,000)
1,400,000 Household Finance Corporation,
5.450% due 07/01/1999++ .......................... 1,400,000
------------
CORPORATE BONDS - 0.6%
1,616,000 Amazon.com, Inc., Step coupon,
Sr. Disc. Note,
Zero coupon to 05/01/2003;
10.000% due 05/01/2008 ........................... 1,062,520
314,650 Tecnost International NV, Company Guaranty,
4.487% due 06/23/2004+++ ......................... 329,030
------------
Total Corporate Bonds (Cost $1,377,850) ............ 1,391,550
------------
TOTAL INVESTMENTS (Cost $165,164,554*) ................. 100.8% 229,503,080
OTHER ASSETS AND LIABILITIES (NET) ..................... (0.8) (1,751,178)
---- ------------
NET ASSETS ............................................. 100.0% $227,751,902
===== ============
- --------------
* Aggregate cost for federal tax purposes.
+ Non-income producing security.
++ Rate represents annualized yield at date of purchase.
+++ Floating rate security whose interest rate is reset periodically based on
an index.
SCHEDULE OF FORWARD FOREIGN CURRENCY CONTRACTS
U.S. FORWARD FOREIGN CURRENCY CONTRACTS TO BUY
CONTRACTS TO RECEIVE NET
----------------------------- UNREALIZED
EXPIRATION LOCAL VALUE IN IN EXCHANGE (DEPRECIATION)
DATE CURRENCY U.S. $ FOR U.S. $ OF CONTRACTS
- -------------- ---------------- ----------- ------------- ----------------
07/22/1999 EMU 1,950,000 2,012,407 2,151,361 $ (138,954)
08/12/1999 EMU 2,650,000 2,739,365 2,854,727 (115,362)
----------
$ (254,316)
----------
U.S. FORWARD FOREIGN CURRENCY CONTRACTS TO SELL
CONTRACTS TO DELIVE NET
----------------------------- UNREALIZED
EXPIRATION LOCAL VALUE IN IN EXCHANGE APPRECIATION
DATE CURRENCY U.S. $ FOR U.S. $ OF CONTRACTS
- -------------- ---------------- ----------- ------------- ----------------
07/22/1999 EMU 7,850,000 8,101,230 9,107,580 $1,006,350
08/12/1999 EMU 7,050,000 7,287,743 7,725,972 438,229
----------
$1,444,579
----------
Net Unrealized Appreciation of Forward Foreign
Currency Contracts ....................................... $1,190,263
==========
- -----------------------------------------------------------------------------
GLOSSARY OF TERMS
ADR --American Depositary Receipt
EMU --European Monetary Unit
- ------------------------------------------------------------------------------
See Notes to Financial Statements.
<PAGE>
PORTFOLIO of INVESTMENTS
BOND & STOCK FUND
JUNE 30, 1999 (UNAUDITED)
SHARES VALUE
------ -----
COMMON STOCKS - 35.8%
BANKS/SAVINGS & LOANS - 4.0%
400 Chase Manhattan Corporation .......................... $ 34,650
1,650 Citigroup, Inc. ...................................... 78,375
1,900 Mellon Bank Corporation .............................. 69,113
2,000 U.S. Bancorp ......................................... 68,000
1,500 Wells Fargo & Company ................................ 64,125
----------
314,263
----------
CONSUMER STAPLES - 3.0%
800 Alberto-Culver Company, Class B ...................... 18,250
641 Albertson's, Inc. ................................... 33,052
600 Libbey, Inc. ......................................... 17,400
1,400 PepsiCo, Inc. ........................................ 54,163
950 Philip Morris Companies, Inc. ........................ 38,178
950 Ralston-Ralston Purina Company ....................... 28,915
950 Sara Lee Corporation ................................. 21,553
900 Supervalu, Inc. ...................................... 23,119
----------
234,630
----------
BASIC INDUSTRY - 2.8%
1,200 Crompton & Knowles Corporation ....................... 23,475
2,450 Fort James Corporation ............................... 92,794
600 Nalco Chemical Company ............................... 31,125
400 Rayonier, Inc. ....................................... 19,925
700 Sonoco Products Company .............................. 20,956
600 Waste Management, Inc. ............................... 32,250
----------
220,525
----------
COMPUTER SOFTWARE/SERVICES - 2.7%
700 Adobe Systems, Inc. .................................. 57,509
2,750 Autodesk, Inc. ....................................... 81,297
1,375 Computer Associates International, Inc. .............. 75,625
----------
214,431
----------
FINANCIAL SERVICES - 2.7%
850 Federal National Mortgage Association ................ 58,119
575 Finova Group Inc. .................................... 30,259
1,100 MGIC Investment Corporation .......................... 53,488
600 Price (T. Rowe) Associates, Inc. ..................... 23,025
500 Providian Financial Corporation ..................... 46,750
----------
211,641
----------
CONSUMER DURABLES - 2.6%
950 Federal-Mogul Corporation ............................ 49,400
3,200 Mattel, Inc. ......................................... 84,600
1,435 U.S. Industries Inc. ................................. 24,395
900 USG Corporation ...................................... 50,400
----------
208,795
----------
HEALTH CARE PRODUCTS - 2.3%
500 Abbott Laboratories .................................. 22,750
350 Baxter International, Inc. ........................... 21,219
1,250 Becton Dickinson & Company ........................... 37,500
500 DENTSPLY International, Inc. ......................... 14,000
400 Johnson & Johnson .................................... 39,200
1,900 Mylan Laboratories Inc. .............................. 50,350
----------
185,019
----------
RETAIL SALES - 2.1%
1,250 Dillards, Inc., Class A .............................. 43,906
1,650 Limited, Inc. ........................................ 74,869
525 May Department Stores Company ........................ 21,459
525 Ross Stores, Inc. .................................... 26,447
----------
166,681
----------
OIL & GAS - 1.9%
800 Ashland, Inc. ........................................ 32,100
2,100 Repsol, Sponsored ADR ................................ 42,656
1,125 Tosco Corporation ................................... 29,180
2,100 Valero Energy Corporation ............................ 45,019
----------
148,955
----------
HEALTH CARE SERVICES - 1.9%
350 Aetna, Inc. .......................................... 31,303
2,400 Columbia/HCA Healthcare Corporation .................. 54,750
850 HEALTHSOUTH Corporation+ ............................. 12,697
79 LifePoint Hospitals, Inc.+ ........................... 1,061
635 PacifiCare Health Systems, Inc., Class B+ ............ 45,680
79 Triad Hospitals, Inc.+ ............................... 1,066
----------
146,557
----------
CONSUMER CYCLICALS - 1.6%
1,300 Liz Claiborne, Inc. .................................. 47,450
300 Sony Corporation, Sponsored ADR ...................... 33,113
1,700 The Warnaco Group, Inc. .............................. 45,475
----------
126,038
----------
COMPUTER SYSTEMS - 1.3%
1,125 Compaq Computer Corporation .......................... 26,648
1,500 Diebold, Inc. ........................................ 43,125
350 Hewlett-Packard Company .............................. 35,175
----------
104,948
----------
UTILITIES/TELECOMMUNICATIONS - 1.2%
420 Alltel Corporation ................................... 30,030
525 SBC Communications, Inc. ............................. 30,450
600 Sprint Corporation ................................... 31,687
----------
92,167
----------
CAPITAL GOODS - 1.1%
125 AlliedSignal Inc. .................................... 7,875
800 Crane Company ........................................ 25,150
350 Grainger (W.W.) Inc. ................................. 18,834
570 Xerox Corporation .................................... 33,666
----------
85,525
----------
AEROSPACE/DEFENSE - 1.1%
450 Boeing Company ....................................... 19,884
700 Raytheon Company, Class B ............................ 49,262
223 United Technologies Corporation ...................... 16,001
----------
85,147
----------
MEDIA - 1.1%
2,500 Sinclair Broadcast Group, Inc. ....................... 40,937
1,000 Viacom, Inc., Class A+ ............................... 44,125
----------
85,062
----------
REAL ESTATE INVESTMENT TRUSTS - 0.9%
300 Arden Realty, Inc. ................................... 7,388
272 Burnham Pacific Properties, Inc. ..................... 3,349
200 Essex Property Trust, Inc. ........................... 7,075
250 Franchise Finance Corporation of America ............. 5,500
200 Health Care Property Investors, Inc. ................. 5,775
800 Hospitality Properties Trust ......................... 21,700
700 Prison Realty Trust Inc. ............................. 6,869
250 Shurgard Storage Centers, Inc. ....................... 6,781
450 Taubman Centers, Inc. ................................ 5,934
----------
70,371
----------
INSURANCE - 0.7%
1,758 Conseco, Inc. ........................................ 53,509
----------
ELECTRICAL EQUIPMENT - 0.4%
120 Emerson Electric Company ............................. 7,545
700 Tektronix, Inc. ...................................... 21,131
----------
28,676
----------
ELECTRONICS/SEMICONDUCTORS - 0.3%
350 Intel Corporation .................................... 20,825
----------
LODGING & RESTAURANTS - 0.1%
55 Interstate Hotels Corporation+ ....................... 227
1,663 Wyndham International, Inc., Class A+ ................ 7,483
----------
7,710
----------
Total Common Stocks (Cost $2,597,978) ................ 2,811,475
----------
CONVERTIBLE PREFERRED STOCKS - 2.4%
750 Cendant Corporation, Series CD, Conv. Pfd.,
1.300% due 02/16/2001 .............................. 21,844
175 Estee Lauder Trust II, Conv. Pfd.,
6.250% due 02/23/2002 .............................. 16,494
800 Loral Space & Communications, Ltd., Series C,
Conv. Pfd.,
6.000% due 11/01/2006++ ............................ 40,600
300 Qwest Trends Trust, Conv. Pfd.,
5.750% due 11/17/2003++ ............................ 17,175
175 TCI Pacific Communications, Inc., Conv. Pfd.,
5.000% due 07/31/2006 .............................. 59,791
35 Winstar Communications, Inc., Conv. Pfd.,
7.250% due 06/22/2002++ ............................ 34,300
----------
Total Convertible Preferred Stocks
(Cost $180,704) .................................... 190,204
----------
PRINCIPAL
AMOUNT
---------
FIXED INCOME SECURITIES - 30.4%
U.S. TREASURY OBLIGATIONS - 17.5%
U.S. TREASURY NOTES - 12.6%
$ 300,000 5.875% due 11/30/2001 ............................... 301,875
380,000 6.500% due 05/15/2005 ................................ 391,756
300,000 5.625% due 05/15/2008 ................................ 293,906
----------
Total U.S. Treasury Notes
(Cost $991,705) .................................... 987,537
----------
U.S. TREASURY BOND - 4.9%
(Cost $397,625)
300,000 9.000% due 11/15/2018 ................................ 389,250
----------
Total U.S. Treasury Obligations
(Cost $1,389,330) .................................. 1,376,787
----------
CORPORATE BONDS AND NOTES - 7.2%
100,000 Aetna Services, Inc., Company Guaranty,
7.125% due 08/15/2006 .............................. 100,066
40,000 Cendant Corporation, Note,
7.750% due 12/01/2003 .............................. 40,438
50,000 CNA Financial Corporation, Note,
6.600% due 12/15/2008 .............................. 47,789
100,000 Merrill Lynch & Company Inc., Note,
6.000% due 02/17/2009 .............................. 92,362
100,000 Philip Morris Companies, Inc., Note,
7.500% due 01/15/2002 .............................. 102,125
100,000 Raytheon Company, Note,
6.150% due 11/01/2008 .............................. 94,234
100,000 Texas-New Mexico Power Company, Sr. Note,
6.250% due 01/15/2009 .............................. 88,288
----------
Total Corporate Bonds and Notes
(Cost $596,930) .................................... 565,302
----------
CONVERTIBLE BONDS - 4.1%
30,000 At Home Corporation,
0.525% due 12/28/2018++ ............................ 23,250
1,000,000 Network Associates Inc.,
Zero coupon due 02/13/2018++ ....................... 296,250
----------
Total Convertible Bonds (Cost $316,931) .............. 319,500
----------
COLLATERALIZED MORTGAGE OBLIGATION (CMO) - 1.6%
(Cost $130,848)
130,000 Federal Home Loan Mortgage Corporation, Series 1638-K,
6.500% due 03/15/2023 .............................. 126,613
----------
Total Fixed Income Securities
(Cost $2,434,039) .................................. 2,388,202
----------
REPURCHASE AGREEMENT - 34.5%
(Cost $2,716,000)
2,716,000 Agreement with Credit Suisse First Boston Corporation,
4.750% dated 06/30/1999, to be repurchased at
$2,716,358 on 07/01/1999, collateralized by
$2,706,794 U.S. Treasury Note, 5.375% due 01/31/2000
(Market Value $2,771,308) .......................... 2,716,000
----------
TOTAL INVESTMENTS (Cost $7,928,721*) ..................... 103.1% 8,105,881
OTHER ASSETS AND LIABILITIES (NET) ....................... (3.1) (244,918)
---- ----------
NET ASSETS ............................................... 100.0% $7,860,963
===== ==========
- --------------
* Aggregate cost for tax purposes.
+ Non-income producing security.
++ Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers.
- ------------------------------------------------------------------------------
GLOSSARY OF TERMS
ADR --American Depositary Receipt
- ------------------------------------------------------------------------------
See Notes to Finanacial Statements.
<PAGE>
PORTFOLIO of INVESTMENTS
NORTHWEST FUND
JUNE 30, 1999 (UNAUDITED)
SHARES VALUE
------ -----
COMMON STOCKS - 92.1%
COMPUTER SOFTWARE/SERVICES - 14.3%
1,625 Adobe Systems, Inc. ................................. $ 133,504
2,500 ARIS Corporation+ ................................... 20,781
785 Asymetrix Learning Systems, Inc.+ ................... 3,238
1,350 Check Point Software Technologies, Ltd.+ ............ 72,394
7,685 Mentor Graphics Corporation+ ........................ 98,464
2,225 Microsoft Corporation+ .............................. 200,667
5,615 Orcad, Inc.+ ........................................ 71,240
3,200 Summit Design, Inc.+ ................................ 9,600
4,145 Visio Corporation+ .................................. 157,769
4,375 Wall Data, Inc.+ .................................... 41,836
----------
809,493
----------
HEALTH CARE PRODUCTS - 10.1%
7,100 Corixa Corporation+ ................................. 126,469
3,780 ICOS Corporation+ ................................... 154,271
1,250 Immunex Corporation+ ................................ 159,297
6,600 NeoRx Corporation+ .................................. 10,106
7,000 SonoSite, Inc.+ ..................................... 119,000
----------
569,143
----------
COMPUTER SYSTEMS - 8.3%
4,005 Apex Inc.+ .......................................... 82,102
9,915 In Focus Systems, Inc.+ ............................. 148,725
3,560 RadiSys Corporation+ ................................ 138,395
5,810 Sequent Computer Systems, Inc.+ ..................... 103,128
----------
472,350
----------
ELECTRICAL EQUIPMENT - 8.3%
2,150 Electro Scientific Industries, Inc.+ ................ 89,830
9,675 FEI Company+ ........................................ 79,819
3,660 Flir Systems, Inc.+ ................................. 55,357
3,665 Microvision, Inc.+ .................................. 82,921
5,400 Tektronix, Inc. ..................................... 163,013
----------
470,940
----------
ELECTRONICS/SEMICONDUCTORS - 6.8%
1,870 Credence Systems Corporation+ ....................... 69,424
815 Intel Corporation ................................... 48,492
1,825 Lattice Semiconductor Corporation+ .................. 113,606
1,515 Micrion Corporation+ ................................ 17,043
2,035 Micron Technology, Inc.+ ............................ 82,036
940 TriQuint Semiconductor, Inc.+ ....................... 53,404
----------
384,005
----------
BASIC INDUSTRY - 6.3%
650 Boise Cascade Corporation ........................... 27,869
3,195 Oregon Steel Mills, Inc. ............................ 42,533
6,385 Schnitzer Steel Industries, Inc., Class A ........... 143,263
1,065 Weyerhaeuser Company ................................ 73,219
1,550 Willamette Industries, Inc. ......................... 71,397
----------
358,281
----------
BANK/SAVINGS & LOANS - 4.7%
2,175 First Washington Bancorp, Inc. ...................... 43,636
1,320 Interwest Bancorp, Inc. ............................. 33,000
1,190 KeyCorp ............................................. 38,229
2,050 Sterling Financial Corporation+ ..................... 28,316
2,035 US Bancorp .......................................... 69,190
2,477 Washington Federal, Inc. ............................ 55,578
----------
267,949
----------
CONSUMER CYCLICALS - 4.6%
9,635 Building Materials Holding Corporation+ ............. 110,802
2,050 Columbia Sportswear Company+ ........................ 31,519
1,600 Cutter & Buck, Inc.+ ................................ 27,000
5,930 K2, Inc. ............................................ 52,999
595 Nike, Inc., Class B ................................. 37,671
----------
259,991
----------
TRANSPORTATION - 4.4%
2,475 Airborne Freight Corporation ........................ 68,527
1,635 Alaska Air Group, Inc.+ ............................. 68,261
4,170 Expeditors International of Washington, Inc. ........ 113,633
----------
250,421
----------
AEROSPACE/DEFENSE - 3.1%
2,685 Boeing Company ...................................... 118,643
1,325 Precision Castparts Corporation ..................... 56,313
----------
174,956
----------
CONSUMER STAPLES - 2.9%
1,540 Albertson's, Inc. ................................... 79,406
3,106 Kroger Company ...................................... 86,774
----------
166,180
----------
INSURANCE - 2.8%
2,250 SAFECO Corporation .................................. 99,281
2,050 StanCorp Financial Group, Inc.+ ..................... 61,500
----------
160,781
----------
LODGING & RESTAURANTS - 2.8%
8,185 Cavanaugh's Hospitality Corporation+ ................ 69,061
2,355 Starbucks Corporation+ .............................. 88,460
----------
157,521
----------
UTILITIES/TELECOMMUNICATIONS - 2.3%
2,515 General Communication, Inc., Class A+ ............... 17,094
135 GST Telecommunications, Inc.+ ....................... 1,780
7,920 Metro One Telecommunications, Inc.+ ................. 108,900
----------
127,774
----------
CONSUMER DURABLES - 2.2%
2,917 Monaco Coach Corporation+ ........................... 123,426
----------
CAPITAL GOODS - 2.1%
6,340 Greenbrier Companies, Inc. .......................... 66,570
975 PACCAR, Inc. ........................................ 52,041
----------
118,611
----------
RETAIL SALES - 2.1%
1,190 Costco Companies, Inc.+ ............................. 95,274
2,280 Multiple Zones International, Inc.+ ................. 16,957
170 Nordstrom, Inc. ..................................... 5,695
----------
117,926
----------
REAL ESTATE INVESTMENT TRUSTS - 2.0%
3,330 Pacific Gulf Properties, Inc. ....................... 75,341
1,420 Shurgard Storage Centers, Inc., Class A ............. 38,517
----------
113,858
----------
HEALTH CARE SERVICES - 1.5%
3,315 Foundation Health Systems, Inc., Class A+ ........... 49,725
515 PacifiCare Health Systems, Inc., Class B+ ........... 37,048
----------
86,773
----------
BUSINESS SERVICES - 0.5%
3,305 Barrett Business Services, Inc.+ .................... 28,093
----------
Total Common Stocks (Cost $4,094,164) ............... 5,218,472
----------
PRINCIPAL
AMOUNT VALUE
--------- -----
REPURCHASE AGREEMENT - 9.9%
(Cost $561,000)
$561,000 Agreement with Credit Suisse First Boston
Corporation, 4.750% dated 06/30/1999, to
be repurchased at $561,074 on 07/01/1999,
collateralized by $559,098 U.S. Treasury
Note, 5.375% due 01/31/2000
(Market Value $572,424) ........................... $ 561,000
----------
TOTAL INVESTMENTS (Cost $4,655,164*) .................... 102.0% 5,779,472
OTHER ASSETS AND LIABILITIES (NET) ...................... (2.0) (113,241)
---- ----------
NET ASSETS .............................................. 100.0% $5,666,231
===== ==========
- --------------
* Aggregate cost for federal tax purposes.
+ Non-income producing security.
See Notes to Financial Statements.
<PAGE>
PORTFOLIO of INVESTMENTS
EMERGING GROWTH FUND
JUNE 30, 1999 (UNAUDITED)
SHARES VALUE
------ -----
COMMON STOCKS - 99.1%
COMPUTER SOFTWARE/SERVICES - 25.8%
75,250 ARIS Corporation+ ................................... $ 625,516
136,412 Asymetrix Learning Systems, Inc.+ ................... 562,699
24,600 AVT Corporation+ .................................... 931,725
23,350 AXENT Technologies, Inc.+ ........................... 259,769
14,450 BARRA, Inc.+ ........................................ 364,863
86,753 Carreker-Antinori, Inc.+ ............................ 759,089
17,500 Check Point Software Technologies, Ltd.+ ............ 938,438
67,511 Harbinger Corporation+ .............................. 843,888
21,900 HNC Software Inc.+ .................................. 674,794
56,548 Made2Manage Systems, Inc.+ .......................... 455,918
27,200 Onyx Software Corporation+ .......................... 588,200
19,950 Sterling Commerce, Inc.+ ............................ 728,175
24,860 Visio Corporation+ .................................. 946,234
34,875 Wall Data, Inc.+ .................................... 333,492
-----------
9,012,800
-----------
HEALTH CARE PRODUCTS - 16.6%
48,650 Corixa Corporation+ ................................. 866,578
48,200 ESC Medical Systems, Ltd.+ .......................... 307,275
10,500 GelTex Pharmaceuticals, Inc.+ ....................... 189,000
22,180 ICOS Corporation+ ................................... 905,221
36,700 Incyte Pharmaceuticals, Inc.+ ....................... 970,256
50,075 NeoRx Corporation+ .................................. 76,677
26,250 Pharmacyclics, Inc.+ ................................ 735,000
40,637 Shire Pharmaceuticals Group, ADR+ ................... 1,056,562
39,409 SonoSite, Inc.+ ..................................... 669,953
-----------
5,776,522
-----------
ELECTRONICS/SEMICONDUTORS - 7.9%
28,505 ATMI, Inc.+ ......................................... 848,024
20,820 Credence Systems Corporation+ ....................... 772,943
11,625 Lattice Semiconductor Corporation+ .................. 723,656
7,440 TriQuint Semiconductor, Inc.+ ....................... 422,685
-----------
2,767,308
-----------
FINANCIAL SERVICES - 7.5%
39,308 American Capital Strategies, Ltd. ................... 717,371
22,034 Hambrecht & Quist Group+ ............................ 818,012
15,295 HealthCare Financial Partners, Inc.+ ................ 523,854
12,125 Profit Recovery Group International, Inc.+ .......... 573,664
-----------
2,632,901
-----------
COMPUTER SYSTEMS - 7.4%
52,000 Apex Inc.+ .......................................... 1,066,000
43,882 In Focus Systems, Inc.+ ............................. 658,230
22,134 RadiSys Corporation+ ................................ 860,459
-----------
2,584,689
-----------
CONSUMER CYCLICALS - 7.2%
44,069 Building Materials Holding Corporation+ ............. 506,794
26,100 Cutter & Buck, Inc.+ ................................ 440,437
31,600 J. Jill Group Inc.+ ................................. 462,150
45,035 K2, Inc. ............................................ 402,500
22,651 Nortek, Inc.+ ....................................... 709,259
-----------
2,521,140
-----------
UTILITIES/TELECOMMUNICATIONS - 5.3%
11,200 Gilat Satellite Networks, Ltd.+ ..................... 588,000
38,400 Metro One Telecommunications, Inc.+ ................. 528,000
12,109 Teligent, Inc.+ ..................................... 724,270
-----------
1,840,270
-----------
ELECTRICAL EQUIPMENT - 4.6%
9,315 Electro Scientific Industries, Inc.+ ................ 389,192
61,020 FEI Company+ ........................................ 503,415
31,265 Microvision, Inc.+ .................................. 707,371
-----------
1,599,978
-----------
BUSINESS SERVICES - 4.1%
27,200 Cognizant Technology Solutions
Corporation+ ...................................... 708,900
66,677 First Consulting Group, Inc.+ ....................... 708,443
-----------
1,417,343
-----------
TRANSPORTATION - 3.7%
19,156 Airborne Freight Corporation ........................ 530,382
27,614 Expeditors International of Washington, Inc. ........ 752,482
-----------
1,282,864
-----------
CONSUMER STAPLES - 2.3%
13,000 Beringer Wine Estates Holding, Inc.,
Class B+ .......................................... 543,156
6,218 U.S. Foodservice+ ................................... 265,042
-----------
808,198
-----------
OIL & GAS - 1.9%
19,964 Hanover Compressor Company+ ......................... 641,343
-----------
CONSUMER DURABLES - 1.8%
14,900 Monaco Coach Corporation ............................ 630,456
-----------
MEDIA - 1.4%
38,650 Bowne & Company, Inc. ............................... 502,450
-----------
LODGING & RESTAURANTS - 1.2%
50,951 Cavanaugh's Hospitality Corporation+ ................ 429,899
-----------
INSURANCE - 0.4%
3,940 Protective Life Corporation ......................... 130,020
-----------
Total Common Stocks (Cost $29,864,574) .............. 34,578,181
-----------
PRINCIPAL
AMOUNT VALUE
--------- -----
REPURCHASE AGREEMENT - 1.3%
(Cost $452,000)
$452,000 Agreement with Credit Suisse First Boston
Corporation, 4.750% dated 06/30/1999 to be
repurchased at $452,060 07/01/1999,
collateralized by $450,468 U.S. Treasury
Note, 5.375% due 01/31/2000
(Market Value $461,204) ........................... $ 452,000
-----------
TOTAL INVESTMENTS (Cost $30,316,574*) ................... 100.4% 35,030,181
OTHER ASSETS AND LIABILITIES (NET) ...................... (0.4) (141,949)
---- -----------
NET ASSETS .............................................. 100.0% $34,888,232
===== ===========
- --------------
* Aggregate cost for federal tax purposes.
+ Non-income producing security.
- ------------------------------------------------------------------------------
GLOSSARY OF TERMS
ADR --American Depositary Receipt
- ------------------------------------------------------------------------------
See Notes to Financial Statements.
<PAGE>
PORTFOLIO of INVESTMENTS
INTERNATIONAL GROWTH FUND
JUNE 30, 1999 (UNAUDITED)
SHARES VALUE
------ -----
COMMON STOCKS - 70.9%
JAPAN - 20.5%
9,700 Advantest Corporation .............................. $ 1,066,639
90,000 Hitachi Ltd. ....................................... 844,564
19,000 Hoya Corporation ................................... 1,072,923
30 NTT Mobile Communications Network,
Inc.++ ........................................... 406,780
120 NTT Mobile Communications Network, Inc., New+ ...... 1,607,276
15,000 Orix Corporation ................................... 1,339,396
2,910 Shohkoh Fund & Company, Ltd. ....................... 2,088,367
8,200 Sony Corporation ................................... 884,746
47,000 Sumitomo Rubber Industries, Ltd. ................... 332,633
7,000 Tokyo Electron Ltd. ................................ 475,155
168,000 Toshiba Corporation ................................ 1,198,710
-----------
11,317,189
-----------
UNITED KINGDOM - 7.8%
14,800 AstraZeneca Group Plc .............................. 572,482
20,700 Barclays Plc ....................................... 602,320
35,200 British Energy Plc ................................. 299,614
195,000 British Steel Plc .................................. 504,853
57,800 FKI Plc ............................................ 178,570
16,700 MEPC Plc ........................................... 136,223
81,600 Orange Plc+ ........................................ 1,196,185
4,400 Perpetual Plc ...................................... 241,355
40,400 Prudential Corporation Plc ......................... 594,776
-----------
4,326,378
-----------
GERMANY - 7.8%
23,300 BHF-Bank AG ........................................ 797,038
9,500 Fresenius Medical Care AG .......................... 566,744
1,152 KSB AG-VORZUG ...................................... 160,834
9,520 Mannesmann AG ...................................... 1,419,352
17,800 Siemens AG ......................................... 1,371,849
300 Telegate AG ........................................ 10,200
-----------
4,326,017
-----------
NETHERLANDS - 4.1%
3,400 IHC Caland NV ...................................... 133,121
50,000 Libertel NV+ ....................................... 978,832
27,746 Vedior NV+ ......................................... 471,704
25,311 Vendex NV .......................................... 675,451
-----------
2,259,108
-----------
FRANCE - 4.0%
13,500 Lagardere S.C.A. ................................... 502,141
3,900 PSA Peugeot Citroen ................................ 614,810
15,200 Rhone-Poulenc Rorer, Inc. .......................... 693,953
2,200 Societe Generale, Class A .......................... 387,391
-----------
2,198,295
-----------
SWITZERLAND - 3.3%
62 Roche Hodings AG Genuss ............................ 636,940
5,700 TAG Heuer International SA ......................... 593,635
1,900 UBS AG ............................................. 566,763
-----------
1,797,338
-----------
ITALY - 3.3%
160,000 Banca Nazionale del Lavoro+ ........................ 502,811
889,700 Seat-Pagine Gialle Spa+ ............................ 756,279
1,199,000 Unione Immobiliare Spa+ ............................ 531,218
-----------
1,790,308
-----------
FINLAND - 3.2%
28,300 Metra Oyj, Class B ................................. 597,758
44,600 Sonera Group Oyj+ .................................. 974,217
21,000 Teleste Oyj+ ....................................... 190,409
-----------
1,762,384
-----------
KOREA - 3.2%
9,600 Hyundai Industrial Development & Construction
Company .......................................... 134,359
10,200 Korea Electric Power Corporation ................... 423,863
14,000 Samsung Corporation ................................ 328,985
7,875 Samsung Electronics ................................ 864,039
-----------
1,751,246
-----------
CANADA - 3.1%
34,500 Research in Motion Ltd.+ ........................... 691,873
61,600 Rogers Communications, Inc.+ ....................... 988,694
2,200 Versus Technologies Inc.+ .......................... 22,694
-----------
1,703,261
-----------
SWEDEN - 1.9%
3,100 Biora AB, Sponsored ADR+ ........................... 26,544
40,711 Electrolux AB, B Shares ............................ 853,716
9,200 Kinnevik AB, B Shares .............................. 173,416
-----------
1,053,676
-----------
ISRAEL - 1.5%
18,200 Blue Square-Israel, Ltd., ADR ...................... 288,925
16,700 ECI Telecommunications, Ltd., ADR .................. 554,231
-----------
843,156
-----------
IRELAND - 1.4%
39,400 Bank of Ireland .................................... 661,711
27,400 Greencore Group Plc ................................ 84,695
-----------
746,406
-----------
AUSTRALIA - 1.2%
93,000 Australia & New Zealand Banking Group Ltd. 682,955
-----------
DENMARK - 1.2%
9,900 Unidanmark A/S, Class A ............................ 658,445
-----------
SPAIN - 1.0%
51,600 Banco Santander Central Hispano, SA ................ 536,977
-----------
TURKEY - 0.7%
4,830,000 Eregli Demir ve Celik Fabrikalari AS ............... 67,511
6,100,000 Haci Omer Sabanci Holding AS ....................... 135,841
13,500,000 Yapi ve Kredi Bankasi AS ........................... 195,091
-----------
398,443
-----------
GREECE - 0.7%
37,000 Hellenic Telecommunications Organization SA
(OTE), GDR ....................................... 396,825
-----------
PORTUGAL - 0.7%
12,483 Banco Mello, SA .................................... 127,847
13,600 Banco Pinto & Sotto Mayor, SA ...................... 241,300
-----------
369,147
-----------
THAILAND - 0.3%
125,000 Siam Commercial Bank Public Company Ltd. ........... 177,966
-----------
Total Common Stocks (Cost $33,366,903) ............. 39,095,520
-----------
WARRANTS - 0.2%
(Cost $0)
125,000 Siam Commercial Bank Public Company Ltd.,
Expires 04/30/2000+ .............................. 80,508
-----------
RIGHTS - 0.0%#
13,600 Portugal Telecom SA, Expires 07/30/1999+ ........... 140
1,509 Hyundai Industrial Development & Construction,
Expires 07/05/1999+ .............................. 8,605
-----------
Total Rights (Cost $0) ............................. 8,745
-----------
PRINCIPAL
AMOUNT
- -----------
REPURCHASE AGREEMENT - 1.6%
(Cost $877,000)
$877,000 Agreement with Credit Suisse First Boston
Corporation, 4.750% dated 06/30/1999, to be
repurchased at $877,116 on 07/01/1999,
collateralized by $874,027 U.S. Treasury
Note, 5.375% due 01/31/2000
(Market Value $894,859) .......................... 877,000
-----------
TOTAL INVESTMENTS (Cost $34,243,903*) ................... 72.7% 40,061,773
OTHER ASSETS AND LIABILITIES (NET) ...................... 27.3 15,080,479
---- -----------
NET ASSETS .............................................. 100.0% $55,142,252
===== ===========
- --------------
* Aggregate cost for federal tax purposes.
+ Non-income producing security.
++ Security sold on when-issued basis (Note 2).
# Amount represents less than 0.1% of net assets.
As of June 30, 1999 sector diversification was as follows:
% OF
SECTOR DIVERSIFICATION NET ASSETS VALUE
---------- ------------
COMMON STOCKS:
Financial Services ............................. 18.1% $ 9,966,268
Telecommunications ............................. 14.4 7,995,522
Producer Durables .............................. 10.7 5,894,326
Technology ..................................... 8.7 4,778,092
Materials & Processing ......................... 4.1 2,244,372
Health Care .................................... 3.3 1,802,710
Retail ......................................... 2.8 1,558,011
Energy ......................................... 1.6 856,598
Autos & Transportation ......................... 1.1 614,810
Consumer Discretionary ......................... 0.9 502,141
Consumer Staples ............................... 0.1 84,695
Other .......................................... 5.1 2,797,975
---- ------------
TOTAL COMMON STOCKS ............................ 70.9 39,095,520
WARRANTS ....................................... 0.2 80,508
RIGHTS ......................................... 0.0# 8,745
REPURCHASE AGREEMENT ........................... 1.6 877,000
---- ------------
TOTAL INVESTMENTS .............................. 72.7 40,061,773
OTHER ASSETS AND LIABILITIES
(NET) ........................................ 27.3 15,080,479
---- ------------
NET ASSETS ..................................... 100.0% $55,142,252
===== ===========
- --------------
# Amount represents less than 0.1% of net assets.
SCHEDULE OF FORWARD FOREIGN CURRENCY CONTRACTS
U.S. FORWARD FOREIGN CURRENCY CONTRACTS TO SELL
CONTRACTS TO DELIVER UNREALIZED
----------------------------- APPRECIATION/
EXPIRATION LOCAL VALUE IN IN EXCHANGE (DEPRECIATION)
DATE CURRENCY U.S. $ FOR U.S. $ OF CONTRACTS
- -------------- ---------------- ----------- ------------- ----------------
07/01/1999 DKK 4,239,170 587,387 589,854 $ 2,467
07/06/1999 GBP 2,687,495 4,236,278 4,231,896 (4,382)
07/06/1999 SGD 572,816 336,702 336,338 (364)
07/07/1999 GBP 89,748 141,470 141,537 67
-------
Net Unrealized Depreciation of Forward Foreign
Currency Contracts ....................................... $(2,212)
=======
- ------------------------------------------------------------------------------
GLOSSARY OF TERMS
ADR --American Depositary Receipt
DKK --Danish Krona
GBP --Great Britain
Pound Sterling
GDR --Global Depositary Receipt
SGD --Singapore Dollar
- ------------------------------------------------------------------------------
See Notes to Financial Statements.
<PAGE>
PORTFOLIO of INVESTMENTS
JUNE 30, 1999 (UNAUDITED)
STRATEGIC GROWTH PORTFOLIO
SHARES VALUE
------ -----
INVESTMENT COMPANY SECURITIES - 99.3%
33,216 WM VT Emerging Growth Fund ........................... $ 399,916
168,688 WM VT Growth Fund .................................... 4,377,461
247,411 WM VT Growth & Income Fund ........................... 4,490,501
55,693 WM High Yield Fund ................................... 509,593
89,543 WM VT International Growth Fund ...................... 1,130,030
632,791 WM VT Money Market Fund .............................. 632,791
101,758 WM VT Northwest Fund ................................. 1,290,296
-----------
TOTAL INVESTMENTS (Cost $11,846,932*) ................... 99.3% 12,830,588
OTHER ASSETS AND LIABILITIES (NET) ...................... 0.7 84,736
---- -----------
NET ASSETS .............................................. 100.0% $12,915,324
===== ===========
- --------------
* Aggregate cost for federal tax purposes.
CONSERVATIVE GROWTH PORTFOLIO
SHARES VALUE
------ -----
INVESTMENT COMPANY SECURITIES - 97.8%
287,997 WM VT Growth Fund ................................... $ 7,473,520
556,250 WM VT Growth & Income Fund .......................... 10,095,935
85,485 WM High Yield Fund .................................. 782,187
27,226 WM VT Income Fund ................................... 262,462
267,545 WM VT International Growth Fund ..................... 3,376,419
2,089,336 WM VT Money Market Fund ............................. 2,089,336
83,671 WM VT Northwest Fund ................................ 1,060,950
108,776 WM VT Short Term High Quality Bond Fund ............. 262,150
106,929 WM VT U.S. Government Securities Fund ............... 1,047,905
------------
Total Investment Company Securities
(Cost $25,194,690) ................................ 26,450,864
------------
PRINCIPAL
AMOUNT
- ----------
REPURCHASE AGREEMENT - 0.7%
(Cost $179,000)
$179,000 Agreement with Boston Safe Deposit & Trust
Company, 4.150% dated 06/30/1999, to be
repurchased at $179,021 on 07/01/1999,
collateralized by $189,591 Federal Home
Loan Mortgage Corporation, 6.000% 12/01/2013
(Market Value $185,874) ........................... 179,000
------------
TOTAL INVESTMENTS (Cost $25,373,690*) ................... 98.5% 26,629,864
OTHER ASSETS AND LIABILITIES (NET) ...................... 1.5 411,506
---- ------------
NET ASSETS .............................................. 100.0% $27,041,370
===== ===========
- --------------
* Aggregate cost for federal tax purposes.
BALANCED PORTFOLIO
SHARES VALUE
------ -----
INVESTMENT COMPANY SECURITIES - 99.5%
261,051 WM VT Growth Fund ................................... $ 6,774,267
569,534 WM VT Growth & Income Fund .......................... 10,337,044
77,704 WM High Yield Fund .................................. 710,991
109,820 WM VT Income Fund ................................... 1,058,664
331,449 WM VT International Growth Fund ..................... 4,182,888
2,191,095 WM VT Short Term High Quality Bond Fund ............. 5,280,540
717,880 WM VT U.S. Government Securities Fund ............... 7,035,223
-----------
Total Investment Company Securities
(Cost $34,686,860) ................................ 35,379,617
-----------
PRINCIPAL
AMOUNT
- ----------
REPURCHASE AGREEMENT - 0.7%
(Cost $235,000)
$235,000 Agreement with Boston Safe Deposit & Trust Company,
4.150% dated 06/30/1999, to be repurchased at
$235,027 on 07/01/1999, collateralized by
$248,905 Federal Home Loan Mortgage
Corporation, 6.000% 12/01/2013
(Market Value $244,024) ........................... 235,000
-----------
TOTAL INVESTMENTS (Cost $34,921,860*) .................. 100.2% 35,614,617
OTHER ASSETS AND LIABILITIES (NET) ..................... (0.2) (68,855)
---- -----------
NET ASSETS ............................................. 100.0% $35,545,762
===== ===========
- --------------
* Aggregate cost for federal tax purposes.
FLEXIBLE INCOME PORTFOLIO
SHARES VALUE
------ -----
INVESTMENT COMPANY SECURITIES - 99.2%
19,233 WM VT Growth Fund ..................................... $ 499,082
109,663 WM VT Growth & Income Fund ............................ 1,990,391
53,906 WM High Yield Fund .................................... 493,240
204,065 WM VT Income Fund ..................................... 1,967,182
982,833 WM VT Money Market Fund ............................... 982,833
816,261 WM VT Short Term High Quality Bond Fund ............... 1,967,190
200,341 WM VT U.S. Government Securities Fund ................. 1,963,342
----------
TOTAL INVESTMENTS (Cost $9,968,937*) ..................... 99.2% 9,863,260
OTHER ASSETS AND LIABILITIES (NET) ....................... 0.8 78,217
---- ----------
NET ASSETS ............................................... 100.0% $9,941,477
===== ==========
- --------------
* Aggregate cost for federal tax purposes.
INCOME PORTFOLIO
SHARES VALUE
------ -----
INVESTMENT COMPANY SECURITIES - 99.7%
40,437 WM High Yield Fund .................................... $ 369,996
102,159 WM VT Income Fund ..................................... 984,813
370,485 WM VT Money Market Fund ............................... 370,485
196,390 WM VT Short Term High Quality Bond Fund ............... 473,300
122,476 WM VT U.S. Government Securities Fund ................. 1,200,266
----------
TOTAL INVESTMENTS (Cost $3,468,747*) ..................... 99.7% 3,398,860
OTHER ASSETS AND LIABILITIES (NET) ....................... 0.3 10,886
---- ----------
NET ASSETS ............................................... 100.0% $3,409,746
===== ==========
- --------------
* Aggregate cost for federal tax purposes.
See Notes to Financial Statements.
<PAGE>
NOTES to FINANCIAL statements (unaudited)
WM VARIABLE TRUST
1. ORGANIZATION AND BUSINESS
The WM Variable Trust (the "Trust") was organized under the laws of the
Commonwealth of Massachusetts on January 29, 1993 as a business entity
commonly known as a "Massachusetts business trust." The Trust is registered
under the Investment Company Act of 1940, as amended (the "1940 Act"), as an
open-end management investment company. The Trust offers fifteen managed
investment funds, consisting of ten funds: the Money Market Fund (the "Money
Fund"); the Short Term High Quality Bond, U.S. Government Securities and
Income Funds (the "Bond Funds"); the Growth & Income, Growth, Bond & Stock,
Northwest, Emerging Growth and International Growth Funds (the "Equity
Funds"); (collectively the "Funds") and five portfolios: Strategic Growth,
Conservative Growth, Balanced, Flexible Income and Income Portfolios
(individually a "Portfolio" and collectively the "Portfolios"), to the public
through certain variable annuity contracts offered by American General Life
Insurance Company ("AG Life"). Through investment in certain of the Funds and
WM High Yield Fund (collectively, the "Underlying Funds"), the Portfolios
offer a range of asset allocation strategies designed to accommodate different
investment philosophies and goals.
WM Advisors, Inc. (the "Advisor" or "WM Advisors"), a wholly-owned subsidiary
of Washington Mutual, Inc. ("Washington Mutual"), a publicly owned financial
services company, serves as investment advisor to the Trust.
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 and
Portfolios in the preparation of their financial statements.
PORTFOLIO VALUATION:
A security that is primarily traded on a U.S. exchange (including securities
traded through the Nasdaq National Market System) is valued at the last sale
price on that exchange or, if there were no sales during the day, at the mean
of the current day's bid and asked prices. Securities traded only on over-the-
counter markets (other than the Nasdaq National Market System and U.S.
Government Securities) are valued at the over-the-counter bid prices, or if no
sale occurred on such day, at the mean of the current bid and asked prices. An
option is generally valued at the last sale price or, in the absence of a last
sale price, at the mean of the current day's bid and asked prices. Short term
debt securities that mature in 60 days or less are valued at amortized cost.
The value of a foreign security is determined in its national currency as of
the close of trading on the foreign exchange on which it is traded or as of
4:00 p.m. Eastern time, if that is earlier, and that value is then converted
into its U.S. dollar equivalent at the foreign exchange rate in effect at
noon, Eastern time, on the day the value of the foreign security is
determined. The value of a futures contract equals the unrealized gain or loss
on the contract, which is determined by marking the contract to the current
settlement price for a like contract acquired on the day on which the futures
contract is being valued.
Debt securities of U.S. issuers (other than U.S. Government Securities and
short-term investments) are valued by one or more independent pricing services
(each a "Pricing Service") retained by the Trust. 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 Trust under the general supervision and responsibility of the Trust's
Board of Trustees (the "Board of Trustees").
MONEY FUND:
The investments of the Money Fund are valued on the basis of amortized cost so
long as the Board of Trustees determines that this method constitutes fair
value. Amortized cost involves valuing a portfolio instrument at its cost
initially, and, thereafter, assuming a constant amortization to maturity of
any discount or premium, regardless of the impact of fluctuating interest
rates on the market value of the instrument. The Money Fund attempts to
maintain a constant net asset value of $1.00 per share.
THE PORTFOLIOS:
Underlying Funds are valued at their net asset value per share determined as
of the close of the New York Stock Exchange on the valuation date.
REPURCHASE AGREEMENTS:
Each Fund or Portfolio may engage in repurchase agreement transactions. A
repurchase agreement is a purchase of an underlying debt obligation subject to
an agreement by the seller to repurchase the obligation at an agreed upon
price and time. The value of the collateral is at all times at least equal to
the total amount of the repurchase obligation. In the event of counterparty
default, the Fund or Portfolio would seek to use the collateral to offset
losses incurred. There is potential loss in the event the Fund or Portfolio is
delayed or prevented from exercising its right to dispose of the collateral
securities, including the risk of a possible decline in the value of the
underlying securities during the period while the Fund or Portfolio seeks to
assert its rights. WM Advisors, acting under the supervision of the Board of
Trustees, reviews the value of the collateral and the creditworthiness of
those banks and dealers with whom each Fund or Portfolio enters into
repurchase agreements.
REVERSE REPURCHASE AGREEMENTS:
Each Fund or Portfolio, except for the Money Fund, may engage in reverse
repurchase agreements. Reverse repurchase agreements are the same as
repurchase agreements except that, in this instance, the Funds or Portfolios
would assume the role of seller/borrower in the transaction. The Funds or
Portfolios may use reverse repurchase agreements to borrow short term funds.
The value of the reverse repurchase agreements that the Funds or Portfolios
have committed to sell are reflected in the Funds' or Portfolios' Statements
of Assets and Liabilities. The Funds or Portfolios require the Trust's
custodian to segregate 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 or Portfolios 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.
OPTIONS CONTRACTS:
All Funds and Portfolios, except the Money Fund, may engage in options
contracts. The Funds and Portfolios 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 June 30, 1999. Writing
puts and buying calls tends to increase the Funds' and/or Portfolios' exposure
to the underlying instrument. Buying puts and writing calls tends to decrease
the Funds' and/or Portfolios' exposure to the underlying instruments or to
hedge other Fund and/or Portfolio investments.
Upon the purchase of a put option or call option by the Funds and/or
Portfolios, the premium paid is recorded as an investment, the value of which
is marked-to-market daily. When a purchased option expires, the Fund or
Portfolio will realize a loss in the amount of the cost of the option. When
the Funds enter into a closing sale transaction, the Funds and/or Portfolios
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 and/or Portfolios 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 and/or
Portfolios exercise a call option, the cost of the security purchased will be
increased by the premium originally paid.
When the Funds and/or Portfolios write a call option or put option, an amount
equal to the premium received by the Funds and/or Portfolios 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 and/or Portfolios enter into a closing purchase transaction,
the Funds and/or Portfolios 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 and/or Portfolios 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 and/or Portfolio 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 and/or Portfolios may forego the opportunity to
profit if the market price of the underlying security increases and the option
is exercised. The risk in writing a covered put option is that the Funds and/
or Portfolios 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 and/or Portfolios may not be able to enter into a closing transaction
because of an illiquid secondary market or, for over-the-counter options,
because of a counterparty's inability to perform.
The Funds and the Portfolios, except the Money Fund, may engage in options on
foreign currency and options on interest rate futures for hedging
transactions. 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' and
Portfolios' hedging strategy unsuccessful and could result in a loss to the
Funds and Portfolios. In addition, there is the risk that the Funds and
Portfolios 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 Funds and/or
Portfolios involve, to varying degrees, risk of loss in excess of the option
value reflected in the Statements of Assets and Liabilities.
FUTURES CONTRACTS:
Except for the Money Fund, all Funds and Portfolios may engage in futures
transactions. The Funds and Portfolios 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 June 30,
1999. Buying futures contracts tends to increase the Fund's or Portfolio's
exposure to the underlying instrument. Selling futures contracts tends to
either decrease the Fund's or Portfolio's exposure to the underlying
instrument, or to hedge other Fund or Portfolio investments.
Upon entering into a futures contract, the Fund or Portfolio 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 or Portfolio 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 or Portfolio 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 or Portfolio 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 and Portfolios 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 arising from
changes in market prices of investments during the period. Accordingly, all
such changes have been reflected as realized and unrealized net gain/(loss)
from security transactions in the Statements of Operations.
Unrealized gains and losses, not relating to securities, which result from
changes in foreign currency exchange rates have been included in unrealized
appreciation/(depreciation) of foreign currency and other assets and
liabilities. Unrealized gains and losses of securities, which result from
changes in foreign currency exchange rates as well as changes in market prices
of securities, have been included in unrealized appreciation/(depreciation) of
securities. Net realized foreign currency gains and losses include foreign
currency gains and losses resulting from changes in exchange rates between
trade date and settlement date on investment securities transactions, gains
and losses on foreign currency transactions and the difference between the
amounts of interest and dividends recorded on the books of the Funds and/or
Portfolios and the amount actually received. The portion of foreign currency
gains and losses related to fluctuation in exchange rates between the initial
purchase trade date and subsequent sale trade date is included in realized
gains/(losses) from security transactions.
FORWARD FOREIGN CURRENCY CONTRACTS:
The Short Term High Quality Bond, Income, Growth & Income, Growth, Emerging
Growth and International Growth Funds may enter into forward foreign currency
contracts. Forward foreign currency contracts are agreements to exchange one
currency for another at a future date and at a specified price. These funds
may use forward foreign currency contracts to facilitate transactions in
foreign securities and to manage the funds' foreign currency exposure. The
U.S. dollar market value, contract value and the foreign currencies the funds
have committed to buy or sell are shown in the Portfolio of Investments under
the caption "Schedule of Forward Foreign Currency Contracts." These amounts
represent the aggregate exposure to each foreign currency the funds have
acquired or hedged through forward foreign currency contracts at June 30,
1999. Forward foreign currency contracts are reflected as both a forward
foreign currency contract to buy and a forward foreign currency contract to
sell. Forward foreign currency contracts to buy generally are used to acquire
exposure to foreign currencies, while forward foreign currency contracts to
sell are used to hedge the funds' investments against currency fluctuations.
Also, a forward foreign currency contract to buy or sell can offset a
previously acquired opposite forward foreign currency contract.
Forward foreign currency contracts are marked-to-market daily using foreign
currency exchange rates supplied by an independent pricing service. The change
in a contract's market value is recorded by the funds as an unrealized gain or
loss. When the contract is closed or delivery is taken, the funds record a
realized gain or loss equal to the difference between the value of the
contract at the time it was opened and the value at the time it was closed.
The use of forward foreign currency contracts does not eliminate fluctuations
in the underlying prices of the fund's securities, but it does establish a
rate of exchange that can be achieved in the future. These forward foreign
currency contracts involve market risk in excess of the unrealized
appreciation/(depreciation) of forward foreign currency contracts reflected in
the funds' Statements of Assets and Liabilities. Although forward foreign
currency contracts used for hedging purposes limit the risk of loss due to a
decline in the value of the hedged currency, they also limit any potential
gain that might result should the value of the currency increase. In addition,
the funds could be exposed to risks if the counterparties to the contracts are
unable to meet the terms of their contracts. The fund's Advisor and/or Sub-
advisor will enter into forward foreign currency contracts only with parties
approved by the Board of Trustees because there is a risk of loss to the Funds
if the counterparties do not complete the transaction.
DOLLAR ROLL TRANSACTIONS:
The Bond Funds, 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, except for the Money Fund, 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 Bond and Equity Fund, and up to 10% of the
assets of the Money 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) except for the Money Fund, futures contracts and options, to the
extent a liquid secondary market does not exist for the instruments, futures
contracts and options thereon; (4) certain over-the-counter options; (5) for
the Money Fund and Growth & Income Fund 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.
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 Money Fund are declared daily and
paid monthly. Dividends from net investment income of the Bond Funds and each
of the Balanced, Flexible Income and Income Portfolios are declared and paid
quarterly. Dividends from net investment income of the Equity Funds and the
Strategic Growth and Conservative Growth Portfolios are declared and paid
annually. Distributions of any net long-term capital gains earned by a Fund or
Portfolio are made annually. Distributions of any net short-term capital gains
earned by a Fund or Portfolio are distributed no less frequently than annually
at the discretion of the Board of Trustees. Additional distributions of net
investment income and capital gains for each 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 or Portfolios, organizational costs, dividends payable,
redesignated distributions and differing characterizations of distributions
made by each Fund or Portfolio as a whole.
FEDERAL INCOME TAXES:
It is each Fund's and Portfolio's policy to qualify as a regulated investment
company by complying with the requirements of the Internal Revenue Code of
1986, as amended, applicable to regulated investment companies by, among other
things, distributing substantially all of its taxable earnings to its
shareholders. Therefore, no Federal income tax provision is required.
EXPENSES:
Expenses that are directly related to one of the Funds or Portfolios are
charged directly to that Fund or Portfolio. General expenses of the Trust are
allocated to all the Funds or Portfolios based upon the relative net assets of
each Fund or Portfolio. In addition, the Portfolios will indirectly bear their
prorated share of expenses of the Underlying Funds.
OTHER:
The Bond Funds may purchase floating rate, inverse floating rate and variable
rate obligations. 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 fund may
purchase floating rate, inverse floating rate and variable rate obligations
that carry a demand feature which would permit the fund to tender them back to
the issuer or remarketing agent at par value prior to maturity. Frequently,
floating rate, inverse floating rate and variable rate obligations are secured
by letters of credit or other credit support arrangements provided by banks.
The Short Term High Quality Bond, U.S. Government Securities, Emerging Growth
and International Growth Funds may purchase mortgage-backed securities that
are floating rate, inverse floating rate and variable rate obligations. The
Money Fund and Growth & Income Fund may purchase variable rate demand notes.
Although variable rate demand notes are
frequently not rated by credit rating agencies, unrated notes purchased by the
funds 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
or Sub-advisor. Moreover, while there may be no active secondary market with
respect to a particular variable rate demand note purchased by a fund, the
fund may, upon the notice specified in the note, demand payment of the
principal and accrued interest on the note at any time and may resell the note
at any time to a third party. The absence of such an active secondary market,
however, could make it difficult for a 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, SUB-ADVISORY, ADMINISTRATION FEES AND OTHER
TRANSACTIONS
WM Advisors serves as investment advisor to the Trust. 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 FEES ON
EQUAL TO OR NET ASSETS
LESS THAN EXCEEDING
NAME OF FUND $500 MILLION $500 MILLION
- --------- --------- ---------
<S> <C> <C>
Money Market Fund .............................................................. .500% .400%
U.S. Government Securities Fund ................................................ .600% .500%
Income Fund .................................................................... .650% .500%
Bond & Stock Fund .............................................................. .625% .500%
Northwest Fund ................................................................. .625% .500%
<CAPTION>
FEES ON NET ASSETS
EXCEEDING
FEES ON NET ASSETS $200 MILLION FEES ON
EQUAL TO AND EQUAL TO NET ASSETS
OR LESS THAN OR LESS THAN EXCEEDING
$200 MILLION $500 MILLION $500 MILLION
--------- --------- ---------
<S> <C> <C> <C>
Short Term High Quality Bond Fund................... .500% .450% .400%
<CAPTION>
FEES ON FEES ON FEES ON
NET ASSETS NET ASSETS NET ASSETS
FEES ON EXCEEDING EXCEEDING EXCEEDING
NET ASSETS $100 MILLION $200 MILLION $400 MILLION FEES ON
EQUAL TO AND EQUAL TO AND EQUAL TO AND EQUAL TO NET ASSET
OR LESS THAN OR LESS THAN OR LESS THAN OR LESS THAN EXCEEDING
$100 MILLION $200 MILLION $400 MILLION $500 MILLION $500 MILLION
------------- ------------ ------------ ------------ -------------
<S> <C> <C> <C> <C> <C>
Growth & Income Fund ............................... .800% .750% .700% .650% .575%
<CAPTION>
FEES ON NET ASSETS
EQUAL TO OR FEES ON NET ASSETS
LESS THAN EXCEEDING
NAME OF FUND $25 MILLION $25 MILLION
- --------- --------- ---------
<S> <C> <C>
Growth Fund .................................................................... .950% .875%
<CAPTION>
FEES ON NET ASSETS
EXCEEDING
FEES ON NET ASSETS $25 MILLION
EQUAL TO AND EQUAL TO FEES ON NET ASSETS
OR LESS THAN OR LESS THAN EXCEEDING
$25 MILLION $500 MILLION $500 MILLION
--------- --------- ---------
<S> <C> <C> <C>
Emerging Growth Fund ............................... .900% .850% .750%
<CAPTION>
FEES ON NET ASSETS
EXCEEDING
FEES ON NET ASSETS $50 MILLION
EQUAL TO AND EQUAL TO FEES ON NET ASSETS
OR LESS THAN OR LESS THAN EXCEEDING
$50 MILLION $125 MILLION $125 MILLION
--------- --------- ---------
<S> <C> <C> <C>
International Growth Fund .......................... .950% .850% .750%
</TABLE>
As investment advisor to the Portfolios, WM Advisors provides its proprietary
asset allocation services to the Portfolios, formulates the Portfolios'
investment policies, analyzes economic and market trends, exercises investment
discretion over the assets of the Portfolios and monitors the allocation of
each Portfolio's assets and each Portfolio's performance. For its investment
advisory services to the Portfolios, WM Advisors is entitled to a fee, which
is calculated daily and paid monthly, at an annual rate of 0.10% of each
Portfolio's average daily net assets.
WM Shareholder Services, Inc. (the "Administrator"), an indirect wholly-owned
subsidiary of Washington Mutual, serves as administrator to each Fund and
Portfolio. For it's services as administrator, each Fund or Portfolio pays the
Administrator a monthly fee of 0.18% and 0.15% respectively, of the value of
each Fund's or Portfolio average daily net assets.
The Advisor has agreed to waive a portion of its management fees and/or
reimburse expenses. Fees waived and/or expenses reimbursed by the Advisor for
the six months ended June 30, 1999 were as follows:
NAME OF FUND FEES WAIVED EXPENSES REIMBURSED
- ------------ ----------- -------------------
Money Market Fund ........................ $15,919 $ --
Northwest Fund ........................... 2,546 --
Strategic Growth Portfolio ............... 3,933 3,250
Conservative Growth Portfolio ............ 5,806 --
Balanced Portfolio ....................... 5,101 --
Flexible Income Portfolio ................ 2,189 2,553
Income Porfolio .......................... 920 3,617
Custodian fees for certain Funds and Portfolios have been reduced by credits
allowed by the custodian for uninvested cash balances. These Funds and
Portfolios could have invested this cash in income producing securities. Fees
reduced by credits allowed by the custodian for the six months ended June 30,
1999 are shown separately in the Statements of Operations.
4. TRUSTEES' FEES
No officer or employee of Washington Mutual or its subsidiaries receives any
compensation from the Trust for serving as an officer or Trustee of the Trust.
The Trust, together with other mutual funds advised by WM Advisors, Inc., pays
each Trustee who is not an officer or employee of Washington Mutual or its
subsidiaries, $18,000 per annum plus $3,000 per board meeting attended or
$1,000 per board meeting attended by telephone. Trustees are also reimbursed
for travel and out-of-pocket expenses. The Chairman of each committee receives
$500 per committee meeting attended.
Pursuant to an exemptive order granted by the Securities and Exchange
Commission, the Trust's eligible Trustees may participate in a deferred
compensation plan (the "Plan") which may be terminated at any time. Under the
Plan, Trustees may elect to defer receipt of all or a portion of their fees
which, in accordance with the Plan, are invested in mutual fund shares. Upon
termination of the Plan, Trustees that have deferred accounts under the Plan
will be paid benefits no later than the time the payments would otherwise have
been made without regard to such termination. All benefits provided under
these Plans are funded and any payments to Plan participants are paid solely
out of the Trusts' assets.
5. 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 six months ended
June 30, 1999 were as follows:
NAME OF FUND PURCHASES SALES
- ------------ --------- -----
Short Term High Quality Bond Fund .............. $ 2,406,043 $ 3,537,538
U.S. Government Securities Fund ................ -- 283,120
Income Fund .................................... -- 1,156,267
Growth & Income Fund ........................... 43,755,662 31,479,259
Growth Fund .................................... 151,293,184 126,246,325
Bond & Stock Fund .............................. 2,769,154 372,116
Northwest Fund ................................. 3,392,133 1,057,095
Emerging Growth Fund ........................... 7,029,172 14,025,965
International Growth Fund ...................... 34,389,847 59,242,467
Strategic Growth Portfolio ..................... 8,459,996 1,050,443
Conservative Growth Portfolio .................. 18,524,822 2,933,899
Balanced Portfolio ............................. 30,272,594 6,495,286
Flexible Income Portfolio ...................... 9,139,590 66,266
Income Portfolio ............................... 3,129,963 498,876
The aggregate cost of purchases and proceeds from sales of U.S. Government
securities, excluding short-term investments, for the six months ended June
30, 1999 were as follows:
NAME OF FUND PURCHASES SALES
- ------------ --------- -----
Short Term High Quality Bond Fund .............. $ 13,913,796 $ 4,426,746
U.S. Government Securities Fund ................ 30,089,365 4,726,360
Income Fund .................................... -- 177,670
Bond & Stock Fund .............................. 992,563 --
At June 30, 1999, aggregate gross unrealized appreciation for all securities
in which there is an excess of value over tax cost and aggregate gross
unrealized depreciation for all securities in which there is an excess of tax
cost over value were as follows:
TAX BASIS TAX BASIS
UNREALIZED UNREALIZED
NAME OF FUND APPRECIATION DEPRECIATION
- ------------ ------------ ------------
Short Term High Quality Bond Fund .............. $ 94,829 $ 336,599
U.S. Government Securities Fund ................ 1,378,694 978,883
Income Fund .................................... 1,114,114 1,446,029
Growth & Income Fund ........................... 35,058,524 4,299,829
Growth Fund .................................... 66,249,466 1,910,940
Bond & Stock Fund .............................. 311,738 134,578
Northwest Fund ................................. 1,204,704 80,396
Emerging Growth Fund ........................... 8,054,048 3,340,441
International Growth Fund ...................... 8,030,019 2,212,149
Strategic Growth Portfolio ..................... 1,005,562 21,906
Conservative Growth Portfolio .................. 1,268,856 12,682
Balanced Portfolio ............................. 895,039 202,282
Flexible Income Portfolio ...................... 34,232 139,909
Income Portfolio ............................... 2,965 72,852
6. SHARES OF BENEFICIAL INTEREST
The Trust may issue an unlimited number of shares of beneficial interest, each
without par value.
7. ORGANIZATION COSTS
Expenses incurred in connection with the organization of the Portfolios,
except for the Income Portfolio, including the fees and expenses of
registering and qualifying each Portfolio's shares for distribution under
Federal and state securities regulations, are being amortized on a straight-
line basis over a period of five years from commencement of operations of each
Portfolio. In the event any of the initial shares of a Portfolio are redeemed
by any holder thereof during the amortization period, the proceeds of such
redemptions will be reduced by an amount equal to the pro-rata portion of
unamortized deferred organizational expenses in the same proportion as the
number of shares being redeemed bears to the number of initial shares of such
Portfolio outstanding at the time of such redemption.
8. GEOGRAPHIC AND INDUSTRY CONCENTRATION AND RISK FACTORS
All Funds, except the U.S. Government Securities Fund, may 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.
In addition, the Money Fund invests at least 25% of its assets in bank
obligations. As a result of this concentration policy, the Fund's investments
may be subject to greater risk than a fund that does not concentrate in the
banking industry. In particular, bank obligations may be subject to the risks
associated with interest rate volatility, changes in Federal and state laws
and regulations governing the banking industry and the inability of borrowers
to pay principal and interest when due. In addition, foreign banks present
risks similar to those investing in foreign securities generally and are not
subject to the same reserve requirements and other regulations as U.S. banks.
Investing in the Underlying Funds through the Portfolios involves certain
additional expenses and tax results that would not be present in a direct
investment in the Underlying Funds. Under certain circumstances, an Underlying
Fund may determine to make payment of a redemption request by a Portfolio
wholly or partly by a distribution in kind of securities from its portfolio,
instead of cash, in accordance with the rules of the Securities and Exchange
Commission. In such cases, the Portfolios may hold securities distributed by
an Underlying Fund until WM Advisors determines that it is appropriate to
dispose of such securities.
Certain Underlying Funds may: invest a portion of their assets in foreign
securities; enter into forward foreign currency transactions; lend their
portfolio securities; enter into stock index, interest rate and currency
futures contracts, and options on such contracts; enter into interest rate
swaps or purchase or sell interest rate caps or floors; engage in other types
of options transactions; make short sales; purchase zero coupon and payment-
in-kind bonds; engage in repurchase or reverse repurchase agreements; purchase
and sell "when-issued" securities and engage in "delayed-delivery"
transactions; and engage in various other investment practices each with
inherent risks.
The 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.
The Strategic Growth Portfolio can invest as much as 50% of its total assets
in the Growth Fund and as much as 50% of its total assets in the Emerging
Growth Fund, each of which Underlying Funds may invest as much as 35% of its
total assets in lower-rated bonds. Securities rated below investment grade
generally involve greater price volatility and risk of principal and income
and may be less liquid than higher rated securities.
Certain Portfolios invest as much as 50% of their total assets in the Growth or
Emerging Growth Funds, each of which may invest up to 25% of its total assets in
foreign equity securities and as much as 5% of its total assets in securities in
developing or emerging markets countries. Certain Portfolios invest as much as
50% of their total assets in the International Growth Fund, which invests
primarily in the foreign equity securities, and may invest as much as 30% of its
total assets in securities in developing or emerging market countries. These
investments will subject such Portfolios to risks associated with investing in
foreign securities including those resulting from future adverse political and
economic developments and the possible imposition of currency exchange blockages
or other foreign governmental laws or restrictions.
The officers and Trustees of the Trust also serve as officers and Trustees of
the Underlying Funds. In addition, WM Advisors serves as the investment
advisor of each underlying fund and Portfolio. Conflicts may arise as the
Advisor seeks to fulfill its fiduciary responsibilities to both the Portfolios
and the Underlying Funds.
From time to time, one or more of the Underlying Funds used for investment by
a Portfolio may experience relatively large investments or redemptions due to
reallocations or rebalancings by the Portfolios as recommended by the Advisor.
These transactions will affect the Underlying Funds, since the Underlying
Funds that experience redemptions as a result of the reallocations or
rebalancings may have to sell portfolio securities and Underlying Funds that
receive additional cash will have to invest such cash. While it is impossible
to predict the overall impact of these transactions over time, there could be
adverse effects on portfolio management to the extent that the Underlying
Funds may be required to sell securities or invest cash at times when they
would not otherwise do so. These transactions could also have tax consequences
if sales of securities resulted in gains and could also increase transaction
costs. The Advisors is committed to minimizing the impact of Portfolio
transactions on the Underlying Funds.
9. SUBSEQUENT EVENT
Effective July 1, 1999, The Advisor reduced its Advisory fee, to a flat rate
of 0.45%, 0.50% and 0.50%, for the Money Market Fund, the U.S. Government
Securities Fund and the Income Fund, respectively.
<PAGE>
[Graphic Omitted]
This material is not an offer to sell nor a solicitation to buy the WM Strategic
Asset Manager Variable Annuity, WM Advantage Variable Annuity, or shares of the
WM Variable Trust. It is not authorized for distribution unless preceded or
accompanied by a current prospectus(es) that includes information regarding the
risk factors, expenses, policies and objectives of the WM Advantage Variable
Annuity and WM Strategic Asset Manager Variable Annuity programs. Please read it
carefully before investing. WM Advantage and WM Strategic Asset Manager may not
be available for sale in all states.
Shares of the WM Variable Trust are not insured by the FDIC. They are not
deposits or obligations of, nor are they guaranteed by, the depository
institution or any other agency. These securities are subject to investment
risk, including possible loss of principal amount invested.
Distributed by WM Funds Distributor, Inc.
Member NASD
[Logo] WM VARIABLE Trust Bulk Rate
U.S. Postage
WM Fund Services, Inc. P A I D
1300 21st Street, 2nd Floor No. Reading, MA
Sacramento CA 95814 Permit #105
VTSAR (8/24/99)
