-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, BcWJLxWed4BexuIszGb+mKyRQtDkjb8ea9Em1LmmIO43y4ZxWmnpNw1+z61Sm4c4 nyitlEBA4HDY6xkIe39ArA== 0001068800-04-000010.txt : 20040109 0001068800-04-000010.hdr.sgml : 20040109 20040109173119 ACCESSION NUMBER: 0001068800-04-000010 CONFORMED SUBMISSION TYPE: N-CSR PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20031031 FILED AS OF DATE: 20040109 EFFECTIVENESS DATE: 20040109 FILER: COMPANY DATA: COMPANY CONFORMED NAME: WM STRATEGIC ASSET MANAGEMENT PORTFOLIOS CENTRAL INDEX KEY: 0001011114 IRS NUMBER: 954584965 STATE OF INCORPORATION: MA FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: N-CSR SEC ACT: 1940 Act SEC FILE NUMBER: 811-07577 FILM NUMBER: 04519051 BUSINESS ADDRESS: STREET 1: WM GROUP OF FUNDS STREET 2: 1201 THIRD AVENUE, 22ND FLOOR CITY: SEATTLE STATE: WA ZIP: 98101 BUSINESS PHONE: 206-461-2413 MAIL ADDRESS: STREET 1: WM GROUP OF FUNDS STREET 2: 1201 THIRD AVENUE, 22ND FLOOR CITY: SEATTLE STATE: WA ZIP: 98101 FORMER COMPANY: FORMER CONFORMED NAME: SIERRA ASSET MANAGEMENT PORTFOLIOS DATE OF NAME CHANGE: 19960726 FORMER COMPANY: FORMER CONFORMED NAME: SIERRA ASSET MANAGEMENT TRUST DATE OF NAME CHANGE: 19960322 N-CSR 1 soxsam.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file number 811-07577 WM Strategic Asset Management Portfolios, LLC (Exact name of registrant as specified in charter) 1201 Third Avenue, 22nd Floor, Seattle, WA 98101 (Address of principal executive offices) (Zip code) Jeffrey L. Lunzer 1201 Third Avenue, 22nd Floor, Seattle, WA 98101 (Name and address of agent for service) Registrant's telephone number, including area code: (206) 461-3800 Date of fiscal year end: October 31, 2003 Date of reporting period: October 31, 2003 ITEM 1. REPORTS TO STOCKHOLDERS LOGO: WM GROUP OF FUNDS STRATEGIC ASSET MANAGEMENT PORTFOLIOS Common sense. Uncommon solutions. 1st Photo: Hot Air Balloons Annual Report for the year ended October 31, 2003 WM Strategic Asset Management Portfolios Flexible Income Portfolio Conservative Balanced Portfolio Balanced Portfolio Conservative Growth Portfolio Strategic Growth Portfolio Table of Contents Message from the President.............................. 1 Individual Portfolio Reviews............................ 2 Portfolio of Investments................................ 14 Statements of Assets and Liabilities.................... 19 Statements of Operations................................ 21 Statements of Changes in Net Assets..................... 22 Statements of Changes in Net Assets - Capital Stock Activity......................... 24 Financial Highlights.................................... 26 Notes to Financial Statements........................... 32 Independent Auditors' Report............................ 37 Other Information (unaudited)........................... 38 NOT FDIC INSURED o May Lose Value o No Bank Guarantee [PHOTO] Dear Shareholder, During this fiscal year, equity investments rebounded from three years of down markets while bonds also closed the period with positive performance.(1) We believe these past few years have demonstrated the benefits provided by our fund family's emphasis on diversification and asset allocation. At this strategy's most basic level, a mix of carefully selected stocks and bonds offered not only the ability to help manage risk and limit losses during the recent equity market downturn, but also the potential for performance gains as markets turned the tide. This year's performance also underscored the importance of diversification and allocation at the asset class level. During the twelve-month period ended October 31, 2003, the forefront of the market rebound included asset classes such as high-yield bonds, small-cap stocks, real estate holdings, and foreign equities. Over the last several years, we have made each of these asset classes available through individual funds and as components of the WM Strategic Asset Management Portfolios. Like many of our investment options, these WM Funds and Portfolios offer the potential to build wealth while managing and moderating risk levels--the crux of our investment philosophy at the WM Group of Funds. We introduced the WM REIT Fund in March 2003 and have been very pleased with its results. The Fund, which invests in real estate securities, provides another tool for building diversification. As both an individual fund option and an investment available within our asset allocation portfolios, the WM REIT Fund exemplifies our dedication to improving diversification and thereby better managing risk. Although this year attested to the benefits of active asset allocation in advancing markets, this strategy can actually assist investors during all phases of the market cycle. Active asset allocation can keep portfolios balanced during an equity market run-up, limit the impact of a subsequent downturn, and provide the discipline to stay invested so that an ensuing rebound is not missed. A well-diversified and allocated portfolio can mitigate the effects of short-term market movements and keep investors on track to meet their long-term goals. As always, we encourage you to meet regularly with your Investment Representative to ensure that your investment portfolio remains in line with your long-term goals. Economies and markets are in constant flux and your needs can change over time, so it is prudent to periodically examine your entire financial portfolio. The guidance of an investment professional can assist this process. Our enthusiasm for this year's equity market rebound has been tempered by concerns raised by investigations within the mutual fund industry. Two trading activities, market timing and late trading, have received widespread media coverage in recent months. I would like to take this opportunity to comment on how the WM Group of Funds views these issues. Market timing, which involves the short-term buying and selling of shares, is a practice that the WM Group of Funds opposes. We believe that this type of activity can be detrimental to the long-term interests of shareholders. Late trading is the practice of placing a trade for mutual fund shares after 4 p.m. EST at that day's net asset value. The securities industry strictly prohibits this practice, and the WM Group of Funds endorses and abides by this rule. To ensure that we are effectively addressing these issues, we will continue to review our existing practices and to support appropriate regulations. Although it is impossible to prevent all market timing, the WM Group of Funds utilizes a number of procedures designed to combat this activity. Our redemption fee policy regarding short-term trades in our WM International Growth Fund is one example of these procedures. We also reserve the right to reject any purchase that we suspect involves market timing or other excessive trading activity, and have done so when necessary in the past. As an officer with the company for more than half of its 64-year history, I have been part of our diligent efforts to build a specific company culture and industry reputation. We stress two basic values at the WM Group of Funds: risk-adjusted asset management and customer service. This past year has been a gratifying one in terms of both of these core values. We are pleased with the performance of the Portfolios and Funds, and we have garnered strong industry recognition for these results. By providing a unique structure and mix of investment opportunities, we have been able to grow when some in the industry have struggled. In addition, customer service was the basis for many of this year's initiatives. We worked hard to enhance aspects of it that you see regularly, such as shareholder statements and Web site features, as well as those that are behind the scenes, such as processes and personnel. In each case, our goal has been to streamline and improve operations for both you and your Investment Representative. Thank you for the confidence and trust you have placed in the WM Group of Funds. We look forward to continuing to serve your investment needs. Sincerely, /s/ William G. Papesh William G. Papesh President (1) As measured by the S&P 500 Index and the Lehman Brothers Aggregate Bond Index for the one-year period ended October 31, 2003. Indices are unmanaged, and individuals cannot invest directly in an index. 1 [PHOTO] Individual Portfolio Reviews To Our Asset Allocation Clients WELCOME TO THE STRATEGIC ASSET MANAGEMENT PORTFOLIOS. We are pleased to provide you with an overview of our asset allocation portfolios, each designed to help you meet specific long-term investment objectives. This report includes performance reviews and highlights of the investment strategies for each of our five Portfolios during the twelve-month period ended October 31, 2003. [wm Group of Funds logo] Understanding the Enclosed Charts and Performance In order to help you understand the Strategic Asset Management (SAM) Portfolios' investment performance, we have included portfolio commentary along with graphs that compare the Portfolios' performance with certain capital market benchmarks. The benchmarks are a blended mix of capital market indices intended to help you assess for Portfolio performance. Descriptions of the indices used are as follows: o Inflation is a measurement of the change in domestic prices and is measured by the CONSUMER PRICE INDEX for all urban consumers. o The LEHMAN BROTHERS AGGREGATE BOND INDEX is a broad-based bond index which contains all investment-grade, government, corporate, mortgage and asset-backed securities. o The S&P 500 INDEX is an index of 500 industrial, transportation, utility and financial companies widely regarded by investors as representative of the U.S. stock market. 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, and individuals cannot invest directly in an index. Index results on the following pages include changes in value and the reinvestment of dividends. Total return is used to measure a Portfolio's performance and reflects both changes in the value of the Portfolio's shares as well as any income dividend and/or capital gain distributions made by the Portfolio during the period. Past performance is not a guarantee of future results. A mutual fund's share price and investment return will vary with market conditions, and the principal value of an investment when you sell your shares may be more or less than the original cost. 2 WM Advisors' Asset Allocation Team RANDALL L. YOAKUM, CFA [photo] Senior Portfolio Manager Chief Investment Officer WM Advisors, Inc. RANDALL L. YOAKUM, Co-Portfolio Manager of the SAM Portfolios, has investment management experience dating back to 1984. He currently serves as chairman of the Investment Policy Committee and the Asset Allocation Team. Mr. Yoakum was instrumental in developing the investment policies at WM Advisors from 1987 to 1994, as well as after rejoining the company in 1999. He holds the Chartered Financial Analyst designation and has a B.B.A. from Pacific Lutheran University and an M.B.A. from Arizona State University. GARY J. POKRZYWINSKI, CFA [photo] Senior Portfolio Manager Head of the Fixed-Income Investment Team WM Advisors, Inc. GARY J. POKRZYWINSKI, Senior Portfolio Manager of WM Advisors, Inc., is responsible for helping to develop the outlook and policy for the fixed- income assets within the Portfolios. He joined WM Advisors in 1992 and currently manages the WM INCOME FUND and WM HIGH YIELD FUND. Mr. Pokrzywinski holds the Chartered Financial Analyst designation and has a B.B.A. from the University of Wisconsin. MICHAEL D. MEIGHAN, CFA [photo] Portfolio Manager Vice President WM Advisors, Inc. MICHAEL D. MEIGHAN is the Co-Portfolio Manager of the SAM Portfolios. Mr. Meighan joined WM Advisors in 1999. He holds the Chartered Financial Analyst designation and has a B.S. from Santa Clara University and an M.B.A. from Gonzaga University. CHARLES D. AVERILL, CFA [photo] Senior Quantitative Analyst Assistant Vice President WM Advisors, Inc. CHARLES D. AVERILL is responsible for ongoing analysis of both the current and potential Portfolio holdings, as well as the structural model underlying the asset allocation process. He also develops and maintains performance attribution procedures used in evaluating performance of the Portfolios' holdings. Mr. Averill holds the Chartered Financial Analyst designation, and he has been with WM Advisors since 1990. He has a B.A. in Economics from Reed College and an M.A. in Economics from Princeton University. 3 [PHOTO] Flexible Income Portfolio Value of a $10,000 Investment (Class A shares)(1), (2) [graph]
Capital Market Benchmark NAV Sales(3) Index(4) Inflation(5) LB Agg(4) 07/25/96 $10,000 $9,450 $10,018 $9,567 $10,000 $10,000 $10,000 $10,046 $9,594 $10,029 $10,019 $9,983 $10,266 $9,804 $10,281 $10,051 $10,157 Oct-96 $10,446 $9,976 $10,520 $10,083 $10,382 $10,748 $10,264 $10,824 $10,102 $10,560 $10,690 $10,209 $10,701 $10,102 $10,462 $10,836 $10,348 $10,860 $10,135 $10,494 $10,866 $10,377 $10,899 $10,166 $10,520 $10,711 $10,229 $10,712 $10,192 $10,403 $10,857 $10,369 $10,968 $10,204 $10,559 $11,035 $10,539 $11,186 $10,198 $10,660 $11,161 $10,659 $11,393 $10,210 $10,787 $11,529 $11,011 $11,820 $10,222 $11,078 $11,399 $10,886 $11,608 $10,242 $10,984 $11,598 $11,076 $11,873 $10,267 $11,146 Oct-97 $11,606 $11,083 $11,931 $10,293 $11,308 $11,667 $11,142 $12,085 $10,287 $11,360 $11,790 $11,259 $12,225 $10,274 $11,475 $11,896 $11,360 $12,377 $10,294 $11,622 $12,067 $11,524 $12,547 $10,313 $11,612 $12,211 $11,661 $12,710 $10,333 $11,652 $12,272 $11,719 $12,788 $10,352 $11,712 $12,266 $11,714 $12,842 $10,370 $11,824 $12,397 $11,839 $13,033 $10,383 $11,924 $12,322 $11,768 $13,027 $10,395 $11,949 $11,853 $11,320 $12,820 $10,408 $12,144 $12,169 $11,622 $13,225 $10,420 $12,428 Oct-98 $12,365 $11,809 $13,384 $10,445 $12,362 $12,635 $12,066 $13,607 $10,445 $12,433 $12,891 $12,311 $13,796 $10,439 $12,470 $13,136 $12,545 $13,990 $10,464 $12,558 $12,948 $12,366 $13,707 $10,476 $12,339 $13,169 $12,576 $13,877 $10,508 $12,407 $13,439 $12,834 $14,020 $10,585 $12,446 $13,331 $12,731 $13,855 $10,585 $12,337 $13,470 $12,864 $13,974 $10,585 $12,297 $13,359 $12,758 $13,840 $10,616 $12,246 $13,280 $12,683 $13,820 $10,642 $12,239 $13,335 $12,735 $13,873 $10,693 $12,381 Oct-99 $13,527 $12,918 $14,090 $10,712 $12,427 $13,708 $13,091 $14,146 $10,719 $12,426 $13,992 $13,362 $14,258 $10,719 $12,366 $13,834 $13,211 $14,077 $10,744 $12,326 $13,985 $13,355 $14,160 $10,808 $12,475 $14,343 $13,697 $14,587 $10,896 $12,639 $14,214 $13,574 $14,465 $10,903 $12,603 $14,134 $13,498 $14,400 $10,909 $12,596 $14,367 $13,721 $14,711 $10,973 $12,858 $14,382 $13,734 $14,772 $10,991 $12,975 $14,780 $14,115 $15,126 $11,004 $13,164 $14,699 $14,037 $15,043 $11,062 $13,246 Oct-00 $14,685 $14,025 $15,110 $11,081 $13,334 $14,436 $13,786 $15,070 $11,087 $13,553 $14,706 $14,044 $15,309 $11,081 $13,805 $15,226 $14,541 $15,617 $11,150 $14,030 $14,978 $14,304 $15,441 $11,195 $14,152 $14,758 $14,094 $15,307 $11,221 $14,223 $14,951 $14,278 $15,493 $11,266 $14,163 $15,077 $14,398 $15,588 $11,316 $14,248 $15,102 $14,423 $15,560 $11,335 $14,302 $15,255 $14,568 $15,808 $11,304 $14,622 $15,228 $14,542 $15,756 $11,304 $14,790 $14,943 $14,270 $15,647 $11,355 $14,962 Oct-01 $15,225 $14,540 $15,969 $11,316 $15,275 $15,318 $14,629 $16,037 $11,297 $15,064 $15,338 $14,648 $15,983 $11,253 $14,967 $15,349 $14,658 $16,040 $11,279 $15,089 $15,358 $14,667 $16,103 $11,324 $15,235 $15,427 $14,733 $16,010 $11,387 $14,982 $15,441 $14,746 $16,064 $11,451 $15,273 $15,484 $14,787 $16,150 $11,451 $15,403 $15,263 $14,576 $16,032 $11,458 $15,537 $14,982 $14,308 $15,937 $11,470 $15,725 $15,144 $14,462 $16,174 $11,508 $15,990 $14,956 $14,283 $16,032 $11,534 $16,249 Oct-02 $15,165 $14,483 $16,255 $11,553 $16,175 $15,478 $14,781 $16,442 $11,553 $16,170 $15,496 $14,799 $16,521 $11,527 $16,505 $15,512 $14,814 $16,447 $11,578 $16,519 $15,572 $14,871 $16,579 $11,667 $16,747 $15,617 $14,915 $16,600 $11,737 $16,734 $16,044 $15,322 $16,984 $11,712 $16,873 $16,501 $15,758 $17,416 $11,693 $17,187 $16,575 $15,829 $17,433 $11,706 $17,152 $16,345 $15,609 $17,025 $11,718 $16,576 $16,467 $15,726 $17,182 $11,763 $16,685 $16,705 $15,953 $17,509 $11,801 $17,128 Oct-03 $16,905 $16,144 $17,577 $11,843 $16,968
Average Annual Total Returns as of 10/31/03(1)
CLASS A SHARES 1 Year 5 Year Since Inception (July 25, 1996) Fund (not adjusted for sales charge) 11.49% 6.46% 7.49% Fund (adjusted for maximum sales charge)(3) 6.47% 5.49% 6.81% Capital Market Benchmark(4) 8.14% 5.60% 8.09% CLASS B SHARES 1 Year 5 Year Since Inception (July 25, 1996) Fund (not adjusted for sales charge) 10.60% 5.67% 6.69% Fund (adjusted for maximum sales charge)(3) 5.60% 5.35% 6.69% Capital Market Benchmark(4) 8.14% 5.60% 8.09% CLASS C SHARES 1 Year 5 Year Since Inception (March 1, 2002) Fund (not adjusted for sales charge) 10.63% N/A 5.10% Fund (adjusted for maximum sales charge)(3) 8.55% N/A 4.45% Capital Market Benchmark(4) 8.14% N/A 5.40% (1) The Portfolio's performance through October 31, 1999 benefited from the agreement of WM Advisors and its affiliates to limit the Portfolio's expenses. Performance results assume reinvestment of all capital gains, dividends and other earnings. (2) The performance of Class B and Class C shares was different than what is shown on the graph above for Class A shares, based on the differences in sales loads and fees paid by Class B and Class C shareholders. (3) Accounts for maximum sales charge of 4.5% for Class A shares and maximum contingent deferred sales charge (CDSC) for Class B shares. CDSC represents a declining charge over 5 years as follows: 5-5-4-3-2-0%. Performance for Class C shares includes a 1% upfront sales charge and a 1% CDSC, which applies to redemptions within the first 12 months. (4) The Flexible Income Portfolio's benchmark is a capital market index that is intended to represent a relevant proxy for market and Portfolio performance. The benchmark allocation is: 20% S&P 500 Index and 80% Lehman Brothers Aggregate Bond Index. For comparative purposes, the benchmark's performance is shown for the ten-year period or from the inception of the particular Portfolio's class of shares. The S&P 500 Index is a broad-based index and is intended to represent the U.S. equity market. The Lehman Brothers Aggregate Bond Index is a broad-based index intended to represent the fixed-income market as a whole. The returns shown for the indices assume reinvestment of all dividends and distributions. Indices are unmanaged, and individuals cannot invest directly in an index. (5) Inflation is measured by the Consumer Price Index for all urban consumers.
Note: Past performance is not a guarantee of future results. A mutual fund's share price and investment return will vary with market conditions, and the principal value when you sell your shares may be more or less than your original cost. Performance Review THE SAM FLEXIBLE INCOME PORTFOLIO returned 11.49% for the one-year period ended October 31, 2003. Both equity and bond markets rallied for much of the fiscal year, and the Portfolio posted solid results, outpacing its benchmark index, which returned 8.14%.(4) Longer-term results have also been favorable. The Portfolio outperformed its benchmark index by an average annual rate of 0.86% for the five-year period ended October 31, 2003. (All Portfolio performance described above is for Class A shares not adjusted for sales charge.) Economic/Market Review Equity markets began and ended the fiscal year with separate rallies, but geopolitical conflicts inhibited performance along the way. The period's early rally stalled in December and failed to reignite during the first few months of 2003. This interval was mired in uncertainty and instability as the threat of war took a toll on business and consumer confidence. Once the war in Iraq began, equity markets moved in lock step with perceptions of its progress, duration, and magnitude. As equity markets receded, bond markets benefited, providing a safer haven in the flight to quality. This asset flow helped push interest rates lower. Bond markets rallied for much of the year in response to these declining rates. However, longer-term U.S. Treasury securities suffered in June and July as interest rates reacted to stronger-than-expected economic growth by spiking higher. Corporate bond issues benefited from improving balance sheets, and lower-rated, higher-yielding bonds led the fixed- income market by a wide margin. Mortgage rates also edged higher during the period. Both Treasuries and mortgage-backed securities underperformed corporate bonds for the year ended October 31, 2003. 4 Global equity markets rebounded in the second quarter of 2003 after geopolitical tensions eased and central banks injected significant stimulus into world economies. In June, the Federal Reserve trimmed the federal funds rate to a 45-year low of 1%. It has since released several statements reaffirming plans to keep interest rates low for as long as it takes to stimulate the economy. As a result, short-term rates have remained low, but longer-term bond yields were quite volatile during the period. The Fed's monetary stimulus was coupled with a robust tax reduction package and rampant mortgage refinancing cash-outs, which lined the pockets of consumers and provided significant liquidity. Throughout the summer, record stimulus helped the economic backdrop improve, and equity markets continued to advance. A cyclical rebound now seems to be underway. In fact, third quarter domestic growth levels topped 8%, the largest quarterly economic growth rate in nearly two decades. Despite this liquidity-driven economic growth, several factors continue to impede business confidence levels. Excess capacity built up during the 1990s continues to curtail current business investment. Firms have begun to slowly increase spending on capital equipment, but they remain reluctant to hire new employees. Consumer spending, which has been buoyed by the very strong housing market, could eventually be affected by the absence of job growth. Despite these longer-term secular economic headwinds, the cyclical recovery has built stronger profits and helped to push equity markets higher. Corporate balance sheets continue to be cleansed through productivity and cost-cutting measures, and earnings leverage has certainly improved. Investors' appetite for risk has also reemerged. The sectors and asset classes that suffered the most during the downturn rebounded significantly during the past twelve months. The effects of economic growth were also felt in the fixed-income markets. After rising sharply in early summer, interest rates have settled back a little, but the yield on 10-year Treasury bonds closed the period more than 100 basis points (1%) above its June low. It could move higher at the first sign of inflation. Investment Strategy The FLEXIBLE INCOME PORTFOLIO is diversified among eleven funds, representing eight major asset classes.(6) A combination of asset classes facilitates our ability to manage risk over a long-term investment horizon. Diversification also fueled relative performance with strong results from some nontraditional investment categories during the period. The overall investment strategy for the period was to: o Maintain overweighted positions in corporate and mortgage bonds to generate yield o Take advantage of the higher-yielding segments of the corporate bond market o Take some profits in investment-grade corporate bonds and shift assets to mortgages near the end of the period o Add to equity positions to take advantage of the broad-based market rally Review of Portfolio Allocations During the past twelve months, we shifted the Portfolio's equity weighting from 22% to 24%. Opportunities in stock valuations motivated this move, and the Portfolio benefited from the strong results of its equity allocations. Portfolio performance was also bolstered by its position in the WM SMALL CAP STOCK FUND, which was the best-performing WM Fund during the period. Fixed-income positions were led by the strong results of the WM HIGH YIELD FUND. We have overweighted high-yield corporate bonds since the summer of 2002, and although we may have been a little early, this allocation significantly boosted Portfolio performance this year. The WM INCOME FUND also provided strong results, spurred by falling corporate yield differentials relative to Treasuries, which drove the relative performance of corporate bonds. Mortgage-backed issues suffered through a period of record refinancing and prepayment, causing the WM U.S. GOVERNMENT SECURITIES FUND to underperform. However, we now favor these issues and ended the period by taking some profits in investment-grade corporates in favor of mortgages. The WM SHORT TERM INCOME FUND also provided stable, positive results and has less sensitivity should interest rates increase. In March, we introduced a position in the WM REIT FUND, which invests primarily in real estate investment trust (REIT) securities. These holdings provided diversification benefits as well as additional performance strength throughout the second half of the period. Because REITs are typically more value-oriented positions, we reduced allocations in the WM GROWTH & INCOME FUND and WM EQUITY INCOME FUND. Overall, performance was very strong for many asset classes during the fiscal year, and the wide-reaching diversification of the FLEXIBLE INCOME PORTFOLIO enhanced results. Certain nontraditional asset types led the market during the period, ultimately to the Portfolio's benefit. High-yield bonds, small-cap growth stocks, and real estate securities all contributed significantly to the Portfolio's performance. We believe these results underscore the benefits of active asset allocation, which has the potential not only to manage risk, but also to provide tactical opportunities for building wealth over the long term. Outlook The economy's surging growth is lifting corporate profits up along with it, but this growth also has the potential to put upward pressure on interest rates. We remain vigilant concerning longer-term secular headwinds that could limit the magnitude of the economic rebound, thereby helping to keep inflation in check. We are seeking prudent opportunities to marginally shift assets into more attractively priced market segments. Our long-term discipline, with asset allocation and diversification at its core, remains our investment strategy regardless of short-term market cycles. Portfolio Allocation Asset Class Diversification as of October 31, 2003(6) as of October 31, 2003(6) [pie chart] [pie chart] Income Fund 28% Mortgage-Backed 32% U.S. Govt. Securities Fund 27% Corporate Bonds 28% Short Term Income Fund 13% U.S. Equity Large Cap 12% High Yield Fund 8% U.S. Equity Mid Cap 7% Growth & Income Fund 8% Cash Equivalents 6% Growth Fund 4% U.S. Treasuries 6% Equity Income Fund 3% Convertible Bonds 4% Mid Cap Stock Fund 3% U.S. Equity Small Cap 3% Small Cap Stock Fund 3% Foreign Equity 2% West Coast Equity Fund 2% REIT Fund 1% (6) As of October 31, 2003 and may not reflect current allocations. 5 [PHOTO] Conservative Balanced Portfolio* Value of a $10,000 Investment (Class A shares)(1), (2) [graph]
Capital Market Benchmark NAV Sales(3) Index(4) Inflation(5) S&P 500(4) LB Agg(4) 07/25/96 $10,000 $9,450 $10,041 $9,489 $10,000 $10,000 $10,000 $10,000 $9,994 $9,445 $10,075 $10,019 $10,212 $9,983 $10,144 $9,586 $10,406 $10,051 $10,786 $10,157 Oct-96 $10,368 $9,798 $10,659 $10,083 $11,081 $10,382 $10,529 $9,950 $11,092 $10,102 $11,923 $10,560 $10,462 $9,886 $10,943 $10,102 $11,689 $10,462 $10,467 $9,891 $11,235 $10,135 $12,415 $10,494 $10,519 $9,941 $11,288 $10,166 $12,515 $10,520 $10,407 $9,834 $11,025 $10,192 $11,995 $10,403 $10,522 $9,944 $11,388 $10,204 $12,711 $10,559 $10,617 $10,033 $11,733 $10,198 $13,491 $10,660 $10,733 $10,142 $12,026 $10,210 $14,093 $10,787 $11,009 $10,403 $12,602 $10,222 $15,212 $11,078 $10,913 $10,313 $12,258 $10,242 $14,366 $10,984 $11,051 $10,444 $12,635 $10,267 $15,153 $11,146 Oct-97 $11,192 $10,576 $12,576 $10,293 $14,647 $11,308 $11,224 $10,607 $12,844 $10,287 $15,325 $11,360 $11,324 $10,701 $13,010 $10,274 $15,589 $11,475 $11,442 $10,813 $13,168 $10,294 $15,762 $11,622 $11,434 $10,805 $13,541 $10,313 $16,898 $11,612 $11,461 $10,831 $13,846 $10,333 $17,764 $11,652 $11,511 $10,878 $13,945 $10,352 $17,942 $11,712 $11,595 $10,957 $13,929 $10,370 $17,634 $11,824 $11,668 $11,026 $14,226 $10,383 $18,350 $11,924 $11,685 $11,043 $14,184 $10,395 $18,155 $11,949 $11,718 $11,073 $13,502 $10,408 $15,530 $12,144 $11,850 $11,199 $14,037 $10,420 $16,525 $12,428 Oct-98 $11,779 $11,131 $14,450 $10,445 $17,869 $12,362 $11,915 $11,259 $14,849 $10,445 $18,952 $12,433 $11,922 $11,266 $15,218 $10,439 $20,044 $12,470 $12,014 $11,353 $15,538 $10,464 $20,882 $12,558 $11,883 $11,229 $15,181 $10,476 $20,233 $12,339 $11,962 $11,304 $15,474 $10,508 $21,043 $12,407 $12,075 $11,411 $15,744 $10,585 $21,858 $12,446 $12,024 $11,363 $15,512 $10,585 $21,342 $12,337 $12,008 $11,348 $15,827 $10,585 $22,526 $12,297 $11,995 $11,335 $15,589 $10,616 $21,823 $12,246 $11,986 $11,326 $15,554 $10,642 $21,715 $12,239 $12,102 $11,436 $15,491 $10,693 $21,120 $12,381 Oct-99 $12,121 $11,455 $15,918 $10,712 $22,456 $12,427 $12,155 $11,487 $16,046 $10,719 $22,913 $12,426 $12,159 $11,490 $16,378 $10,719 $24,262 $12,366 $12,145 $11,477 $16,017 $10,744 $23,043 $12,326 $12,241 $11,568 $16,012 $10,808 $22,607 $12,475 $12,350 $11,671 $16,765 $10,896 $24,819 $12,639 $12,331 $11,652 $16,534 $10,903 $24,072 $12,603 $12,286 $11,610 $16,393 $10,909 $23,578 $12,596 $12,496 $11,809 $16,759 $10,973 $24,159 $12,858 $12,582 $11,890 $16,746 $10,991 $23,782 $12,975 $13,013 $12,297 $17,308 $11,004 $25,259 $13,164 $12,851 $12,145 $17,008 $11,062 $23,925 $13,246 Oct-00 $12,792 $12,089 $17,046 $11,081 $23,824 $13,334 $12,389 $11,708 $16,676 $11,087 $21,946 $13,553 $12,643 $11,948 $16,895 $11,081 $22,053 $13,805 $13,160 $12,437 $17,300 $11,150 $22,835 $14,030 $12,776 $12,074 $16,760 $11,195 $20,753 $14,152 $12,498 $11,810 $16,385 $11,221 $19,439 $14,223 $12,796 $12,093 $16,853 $11,266 $20,949 $14,163 $12,924 $12,213 $16,959 $11,316 $21,090 $14,248 $12,932 $12,221 $16,832 $11,335 $20,576 $14,302 $12,981 $12,267 $16,992 $11,304 $20,374 $14,622 $12,859 $12,152 $16,684 $11,304 $19,098 $14,790 $12,414 $11,731 $16,261 $11,355 $17,556 $14,962 Oct-01 $12,666 $11,970 $16,589 $11,316 $17,891 $15,275 $12,874 $12,166 $16,961 $11,297 $19,263 $15,064 $12,920 $12,210 $16,955 $11,253 $19,432 $14,967 $12,861 $12,154 $16,939 $11,279 $19,149 $15,089 $12,815 $12,110 $16,907 $11,324 $18,779 $15,235 $12,980 $12,266 $16,992 $11,387 $19,486 $14,982 $12,884 $12,175 $16,778 $11,451 $18,304 $15,273 $12,898 $12,189 $16,814 $11,451 $18,169 $15,403 $12,594 $11,901 $16,423 $11,458 $16,875 $15,537 $12,221 $11,549 $16,030 $11,470 $15,560 $15,725 $12,331 $11,653 $16,235 $11,508 $15,662 $15,990 $11,984 $11,325 $15,687 $11,534 $13,960 $16,249 Oct-02 $12,277 $11,602 $16,196 $11,553 $15,188 $16,175 $12,638 $11,943 $16,574 $11,553 $16,082 $16,170 $12,534 $11,845 $16,390 $11,527 $15,137 $16,505 $12,507 $11,819 $16,227 $11,578 $14,740 $16,519 $12,507 $11,819 $16,264 $11,667 $14,519 $16,747 $12,543 $11,853 $16,320 $11,737 $14,660 $16,734 $12,982 $12,268 $16,939 $11,712 $15,868 $16,873 $13,462 $12,722 $17,485 $11,693 $16,704 $17,187 $13,546 $12,801 $17,553 $11,706 $16,918 $17,152 $13,445 $12,706 $17,323 $11,718 $17,216 $16,576 $13,588 $12,841 $17,527 $11,763 $17,551 $16,685 $13,755 $12,998 $17,731 $11,801 $17,365 $17,128 Oct-03 $14,041 $13,269 $18,034 $11,843 $18,348 $16,968
Average Annual Total Returns as of 10/31/03(1)
CLASS A SHARES 1 Year 5 Year Since Inception (July 25, 1996) Fund (not adjusted for sales charge) 14.38% 3.57% 4.78% Fund (adjusted for maximum sales charge)(3) 8.14% 2.40% 3.97% Capital Market Benchmark(4) 11.35% 4.53% 8.47% CLASS B SHARES 1 Year 5 Year Since Inception (July 25, 1996) Fund (not adjusted for sales charge) 13.46% 2.79% 3.99% Fund (adjusted for maximum sales charge)(3) 8.46% 2.43% 3.99% Capital Market Benchmark(4) 11.35% 4.53% 8.47% CLASS C SHARES 1 Year 5 Year Since Inception (March 1, 2002) Fund (not adjusted for sales charge) 13.53% N/A 4.83% Fund (adjusted for maximum sales charge)(3) 11.39% N/A 4.23% Capital Market Benchmark(4) 11.35% N/A 3.95% * AS OF 8/1/00, THE INCOME PORTFOLIO BECAME THE CONSERVATIVE BALANCED PORTFOLIO, AND THE PORTFOLIO'S OBJECTIVES AND STRATEGIES CHANGED. THIS INFORMATION SHOULD BE TAKEN INTO CONSIDERATION WHEN REVIEWING PAST PERFORMANCE. (1) The Portfolio's performance through October 31, 2003 benefited from the agreement of WM Advisors and its affiliates to limit the Portfolio's expenses. Performance results assume reinvestment of all capital gains, dividends and other earnings. (2) The performance of Class B and Class C shares was different than what is shown on the graph above for Class A shares, based on the differences in sales loads and fees paid by Class B and Class C shareholders. (3) Accounts for maximum sales charge of 5.5% for Class A shares and maximum contingent deferred sales charge (CDSC) for Class B shares. CDSC represents a declining charge over 5 years as follows: 5-5-4-3-2-0%. Performance for Class C shares includes a 1% upfront sales charge and a 1% CDSC, which applies to redemptions within the first 12 months. (4) The Conservative Balanced Portfolio's benchmark is a capital market index that is intended to represent a relevant proxy for market and Portfolio performance. The benchmark allocation is: 40% S&P 500 Index and 60% Lehman Brothers Aggregate Bond Index. For comparative purposes, the benchmark's performance is shown for the ten-year period or from the inception of the particular Portfolio's class of shares. The S&P 500 Index is a broad-based index and is intended to represent the U.S. equity market. The Lehman Brothers Aggregate Bond Index is a broad- based index intended to represent the fixed-income market as a whole. The returns shown for the indices assume reinvestment of all dividends and distributions. Indices are unmanaged, and individuals cannot invest directly in an index. (5) Inflation is measured by the Consumer Price Index for all urban consumers.
Note: Past performance is not a guarantee of future results. A mutual fund's share price and investment return will vary with market conditions, and the principal value when you sell your shares may be more or less than your original cost. Performance Review The SAM CONSERVATIVE BALANCED PORTFOLIO returned 14.38% for the one-year period ended October 31, 2003. Both equity and bond markets rallied for much of the fiscal year, and the Portfolio posted solid results, outpacing its benchmark index, which returned 11.35%.(4) Please note that due to a significant shift in the Portfolio's investment objective in 2000, long-term performance comparisons may not be relevant. (All Portfolio performance described above is for Class A shares not adjusted for sales charge.) Economic/Market Review Equity markets began and ended the fiscal year with separate rallies, but geopolitical conflicts inhibited performance along the way. The period's early rally stalled in December and failed to reignite during the first few months of 2003. This interval was mired in uncertainty and instability as the threat of war took a toll on business and consumer confidence. Once the war in Iraq began, equity markets moved in lock step with perceptions of its progress, duration, and magnitude. As equity markets receded, bond markets benefited, providing a safer haven in the flight to quality. This asset flow helped push interest rates lower. Bond markets rallied for much of the year in response to these declining rates. However, longer-term U.S. Treasury securities suffered in June and July as interest rates reacted to stronger-than-expected economic growth by spiking higher. Corporate bond issues benefited from improving balance sheets, and lower-rated, higher-yielding bonds led the fixed- income market by a wide margin. Mortgage rates also edged higher during the period. Both Treasuries and mortgage-backed securities underperformed corporate bonds for the year ended October 31, 2003. 6 Global equity markets rebounded in the second quarter of 2003 after geopolitical tensions eased and central banks injected significant stimulus into world economies. In June, the Federal Reserve trimmed the federal funds rate to a 45-year low of 1%. It has since released several statements reaffirming plans to keep interest rates low for as long as it takes to stimulate the economy. This monetary stimulus was coupled with a robust tax reduction package and rampant mortgage refinancing cash-outs, which lined the pockets of consumers and provided significant liquidity. Throughout the summer, record stimulus helped the economic backdrop improve, and equity markets continued to advance. A cyclical rebound now seems to be underway. In fact, third quarter domestic growth levels topped 8%, the largest quarterly economic growth rate in nearly two decades. Despite this liquidity-driven economic growth, several factors continue to impede business confidence levels. Excess capacity built up during the 1990s continues to curtail current business investment. Firms have begun to slowly increase spending on capital equipment, but they remain reluctant to hire new employees. Consumer spending, which has been buoyed by the very strong housing market, could eventually be affected by the absence of job growth. Despite these longer-term secular economic headwinds, the cyclical recovery has built stronger profits and helped to push equity markets higher. Corporate balance sheets continue to be cleansed through productivity and cost-cutting measures, and earnings leverage has certainly improved. Investors' appetite for risk has also reemerged. The sectors and asset classes that suffered the most during the downturn rebounded significantly during the past twelve months. Small-cap and foreign equities, as well as the technology sector, returned to favor in 2003 and led the broad-based rally with very strong results. All major market segments reported positive results, with the S&P 500 closing the period up more than 20%. Investment Strategy The CONSERVATIVE BALANCED PORTFOLIO is diversified among twelve funds, representing eight major asset classes.(6) A combination of asset classes facilitates our ability to manage risk over a long-term investment horizon. Diversification also fueled relative performance with strong results from some nontraditional investment categories during the period. The overall investment strategy for the period was to: o Add to equity positions to take advantage of the broad-based market rally o Heavily weight corporate bonds and take advantage of higher-yielding segments of this market o Broaden equity positions, increasing holdings in smaller-cap stocks, which led the market throughout the recovery, and introducing a position in real estate securities o Take some profits in investment-grade corporate bonds and add to mortgages near the end of the period Review of Portfolio Allocations During the past twelve months, we shifted the Portfolio's equity weighting from 35% to 37%. Opportunities in stock valuations motivated this move, and the Portfolio benefited from the strong results of its equity allocations. Portfolio performance was also bolstered by its position in the WM SMALL CAP STOCK FUND, which was the best-performing WM Fund during the period. Fixed-income positions were led by the strong results of the WM HIGH YIELD FUND. We have overweighted high-yield corporate bonds since the summer of 2002, and although we may have been a little early, this allocation significantly boosted Portfolio performance this year. The WM INCOME FUND also provided strong results, spurred by falling corporate yield differentials relative to Treasuries, which drove the relative performance of corporate bonds. Mortgage-backed issues suffered through a period of record refinancing and prepayment, causing the WM U.S. GOVERNMENT SECURITIES FUND to underperform. However, we now favor these issues and ended the period by taking some profits in investment-grade corporates in favor of mortgages. The WM SHORT TERM INCOME FUND also provided stable, positive results and has less sensitivity should interest rates increase. In March, we introduced a position in the WM REIT FUND, which invests primarily in real estate investment trust (REIT) securities. These holdings provided diversification benefits as well as additional performance strength throughout the second half of the period. Because REITs are typically more value-oriented positions, we reduced allocations in the WM GROWTH & INCOME FUND and WM EQUITY INCOME FUND. Foreign holdings also contributed to the Portfolio's performance as the economic recovery spread globally. Overall, performance was very strong for many asset classes during the fiscal year, and the wide-reaching diversification of the CONSERVATIVE BALANCED PORTFOLIO enhanced results. Certain nontraditional asset types led the market during the period, ultimately to the Portfolio's benefit. High-yield bonds, small-cap growth stocks, international equities, and real estate securities all contributed significantly to the Portfolio's performance. We believe these results underscore the benefits of active asset allocation, which has the potential not only to manage risk, but also to provide tactical opportunities for building wealth over the long term. Outlook We are encouraged by the cyclical, stimulus-driven economic recovery and the subsequent rally in equity markets. Markets have reacted to economic improvements and positive earnings growth. Yet, we remain vigilant concerning longer-term secular headwinds that could limit the magnitude of the economic rebound. This economic growth also has the potential to put upward pressure on interest rates. We are seeking prudent opportunities to marginally shift assets into more attractively priced market segments. Our long-term discipline, with asset allocation and diversification at its core, remains our investment strategy regardless of short-term market cycles. Portfolio Allocation Asset Class Diversification as of October 31, 2003(6) as of October 31, 2003(6) [pie chart] [pie chart] U.S. Govt. Securities Fund 23% Mortgage-Backed 27% Income Fund 23% Corporate Bonds 22% Growth & Income Fund 10% U.S. Equity Large Cap 17% High Yield Fund 8% U.S. Equity Mid Cap 10% Short Term Income Fund 7% Cash Equivalents 6% Growth Fund 7% Foreign Equity 6% Equity Income Fund 6% U.S. Treasuries 5% West Coast Equity Fund 4% U.S. Equity Small Cap 4% Mid Cap Stock Fund 4% Convertible Bonds 3% Small Cap Stock Fund 3% International Growth Fund 3% REIT Fund 2% (6) As of October 31, 2003 and may not reflect current allocations. 7 [PHOTO] Balanced Portfolio Value of a $10,000 Investment (Class A shares)(1), (2) [graph]
Capital Market Benchmark NAV Sales(3) Index(4) Inflation(5) S&P 500(4) LB Agg(4) 07/25/96 $10,000 $9,450 $10,074 $9,520 $10,000 $10,000 $10,000 $10,000 $10,162 $9,604 $10,120 $10,019 $10,212 $9,983 $10,432 $9,858 $10,532 $10,051 $10,786 $10,157 Oct-96 $10,462 $9,886 $10,799 $10,083 $11,081 $10,382 $10,813 $10,218 $11,364 $10,102 $11,923 $10,560 $10,740 $10,150 $11,188 $10,102 $11,689 $10,462 $10,912 $10,312 $11,619 $10,135 $12,415 $10,494 $10,868 $10,271 $11,687 $10,166 $12,515 $10,520 $10,585 $10,003 $11,344 $10,192 $11,995 $10,403 $10,792 $10,199 $11,818 $10,204 $12,711 $10,559 $11,245 $10,627 $12,298 $10,198 $13,491 $10,660 $11,501 $10,868 $12,686 $10,210 $14,093 $10,787 $12,082 $11,417 $13,427 $10,222 $15,212 $11,078 $11,696 $11,053 $12,934 $10,242 $14,366 $10,984 $12,089 $11,424 $13,435 $10,267 $15,153 $11,146 Oct-97 $11,735 $11,090 $13,244 $10,293 $14,647 $11,308 $11,750 $11,104 $13,636 $10,287 $15,325 $11,360 $11,831 $11,181 $13,832 $10,274 $15,589 $11,475 $11,979 $11,320 $13,995 $10,294 $15,762 $11,622 $12,542 $11,852 $14,596 $10,313 $16,898 $11,612 $12,942 $12,230 $15,065 $10,333 $17,764 $11,652 $13,089 $12,369 $15,187 $10,352 $17,942 $11,712 $12,920 $12,209 $15,088 $10,370 $17,634 $11,824 $13,146 $12,423 $15,507 $10,383 $18,350 $11,924 $13,010 $12,295 $15,421 $10,395 $18,155 $11,949 $11,653 $11,012 $14,184 $10,408 $15,530 $12,144 $12,033 $11,371 $14,862 $10,420 $16,525 $12,428 Oct-98 $12,510 $11,822 $15,556 $10,445 $17,869 $12,362 $13,040 $12,323 $16,157 $10,445 $18,952 $12,433 $13,757 $13,001 $16,735 $10,439 $20,044 $12,470 $14,260 $13,475 $17,202 $10,464 $20,882 $12,558 $13,930 $13,164 $16,761 $10,476 $20,233 $12,339 $14,496 $13,698 $17,200 $10,508 $21,043 $12,407 $15,019 $14,193 $17,622 $10,585 $21,858 $12,446 $14,659 $13,852 $17,310 $10,585 $21,342 $12,337 $15,245 $14,406 $17,864 $10,585 $22,526 $12,297 $15,039 $14,212 $17,500 $10,616 $21,823 $12,246 $15,008 $14,182 $17,444 $10,642 $21,715 $12,239 $15,140 $14,307 $17,238 $10,693 $21,120 $12,381 Oct-99 $15,657 $14,796 $17,918 $10,712 $22,456 $12,427 $16,292 $15,395 $18,136 $10,719 $22,913 $12,426 $17,468 $16,507 $18,742 $10,719 $24,262 $12,366 $17,096 $16,155 $18,153 $10,744 $23,043 $12,326 $17,697 $16,724 $18,034 $10,808 $22,607 $12,475 $18,366 $17,356 $19,188 $10,896 $24,819 $12,639 $17,852 $16,870 $18,820 $10,903 $24,072 $12,603 $17,563 $16,597 $18,584 $10,909 $23,578 $12,596 $17,934 $16,947 $19,014 $10,973 $24,159 $12,858 $17,738 $16,762 $18,905 $10,991 $23,782 $12,975 $18,552 $17,532 $19,719 $11,004 $25,259 $13,164 $18,140 $17,143 $19,144 $11,062 $23,925 $13,246 Oct-00 $18,024 $17,033 $19,146 $11,081 $23,824 $13,334 $17,098 $16,157 $18,366 $11,087 $21,946 $13,553 $17,491 $16,529 $18,556 $11,081 $22,053 $13,805 $18,369 $17,359 $19,072 $11,150 $22,835 $14,030 $17,482 $16,520 $18,095 $11,195 $20,753 $14,152 $16,863 $15,936 $17,444 $11,221 $19,439 $14,223 $17,504 $16,541 $18,228 $11,266 $20,949 $14,163 $17,735 $16,759 $18,345 $11,316 $21,090 $14,248 $17,765 $16,788 $18,105 $11,335 $20,576 $14,302 $17,653 $16,682 $18,160 $11,304 $20,374 $14,622 $17,284 $16,334 $17,562 $11,304 $19,098 $14,790 $16,354 $15,455 $16,792 $11,355 $17,556 $14,962 Oct-01 $16,714 $15,795 $17,125 $11,316 $17,891 $15,275 $17,216 $16,269 $17,819 $11,297 $19,263 $15,064 $17,403 $16,446 $17,867 $11,253 $19,432 $14,967 $17,149 $16,206 $17,768 $11,279 $19,149 $15,089 $16,942 $16,010 $17,632 $11,324 $18,779 $15,235 $17,387 $16,431 $17,912 $11,387 $19,486 $14,982 $17,013 $16,078 $17,400 $11,451 $18,304 $15,273 $16,969 $16,036 $17,382 $11,451 $18,169 $15,403 $16,351 $15,452 $16,700 $11,458 $16,875 $15,537 $15,555 $14,700 $15,999 $11,470 $15,560 $15,725 $15,675 $14,813 $16,171 $11,508 $15,662 $15,990 $14,915 $14,094 $15,221 $11,534 $13,960 $16,249 Oct-02 $15,489 $14,637 $15,997 $11,553 $15,188 $16,175 $16,108 $15,222 $16,560 $11,553 $16,082 $16,170 $15,764 $14,897 $16,113 $11,527 $15,137 $16,505 $15,626 $14,767 $15,865 $11,578 $14,740 $16,519 $15,535 $14,680 $15,810 $11,667 $14,519 $16,747 $15,554 $14,698 $15,897 $11,737 $14,660 $16,734 $16,305 $15,408 $16,736 $11,712 $15,868 $16,873 $17,086 $16,146 $17,389 $11,693 $16,704 $17,187 $17,250 $16,301 $17,509 $11,706 $16,918 $17,152 $17,297 $16,345 $17,459 $11,718 $17,216 $16,576 $17,574 $16,607 $17,709 $11,763 $17,551 $16,685 $17,700 $16,727 $17,784 $11,801 $17,365 $17,128 Oct-03 $18,288 $17,282 $18,322 $11,843 $18,348 $16,968
Average Annual Total Returns as of 10/31/03(1)
CLASS A SHARES 1 Year 5 Year Since Inception (July 25, 1996) Fund (not adjusted for sales charge) 18.07% 7.89% 8.66% Fund (adjusted for maximum sales charge)(3) 11.53% 6.68% 7.82% Capital Market Benchmark(4) 14.53% 3.33% 8.71% CLASS B SHARES 1 Year 5 Year Since Inception (July 25, 1996) Fund (not adjusted for sales charge) 17.25% 7.09% 7.85% Fund (adjusted for maximum sales charge)(3) 12.25% 6.78% 7.85% Capital Market Benchmark(4) 14.53% 3.33% 8.71% CLASS C SHARES 1 Year 5 Year Since Inception (March 1, 2002) Fund (not adjusted for sales charge) 17.15% N/A 3.90% Fund (adjusted for maximum sales charge)(3) 15.01% N/A 3.31% Capital Market Benchmark(4) 14.53% N/A 2.33% (1) The Portfolio's performance through October 31, 1998 benefited from the agreement of WM Advisors and its affiliates to limit the Portfolio's expenses. Performance results assume reinvestment of all capital gains, dividends and other earnings. (2) The performance of Class B and Class C shares was different than what is shown on the graph above for Class A shares, based on the differences in sales loads and fees paid by Class B and Class C shareholders. (3) Accounts for maximum sales charge of 5.5% for Class A shares and maximum contingent deferred sales charge (CDSC) for Class B shares. CDSC represents a declining charge over 5 years as follows: 5-5-4-3-2-0%. Performance for Class C shares includes a 1% upfront sales charge and a 1% CDSC, which applies to redemptions within the first 12 months. (4) The Balanced Portfolio's benchmark is a capital market index that is intended to represent a relevant proxy for market and Portfolio performance. The benchmark allocation is: 60% S&P 500 Index and 40% Lehman Brothers Aggregate Bond Index. For comparative purposes, the benchmark's performance is shown for the ten-year period or from the inception of the particular Portfolio's class of shares. The S&P 500 Index is a broad-based index and is intended to represent the U.S. equity market. The Lehman Brothers Aggregate Bond Index is a broad-based index intended to represent the fixed-income market as a whole. The returns shown for the indices assume reinvestment of all dividends and distributions. Indices are unmanaged, and individuals cannot invest directly in an index. (5) Inflation is measured by the Consumer Price Index for all urban consumers.
Note: Past performance is not a guarantee of future results. A mutual fund's share price and investment return will vary with market conditions, and the principal value when you sell your shares may be more or less than your original cost. Performance Review The SAM BALANCED PORTFOLIO returned 18.07% for the one-year period ended October 31, 2003. Both equity and bond markets rallied for much of the fiscal year, and the Portfolio posted solid results, outpacing its benchmark index, which returned 14.53%.(4) Longer-term results have also been favorable. The Portfolio outperformed its benchmark index by an average annual rate of 4.56% for the five-year period ended October 31, 2003. (All Portfolio performance described above is for Class A shares not adjusted for sales charge.) Economic/Market Review Equity markets began and ended the fiscal year with separate rallies, but geopolitical conflicts inhibited performance along the way. The period's early rally stalled in December and failed to reignite during the first few months of 2003. This interval was mired in uncertainty and instability as the threat of war took a toll on business and consumer confidence. Once the war in Iraq began, markets moved in lock step with perceptions of its progress, duration, and magnitude. Global equity markets rebounded in the second quarter of 2003 after geopolitical tensions eased and central banks injected significant stimulus into world economies. In June, the Federal Reserve trimmed the federal funds rate to a 45-year low of 1%. It has since released several statements reaffirming plans to keep interest rates low for as long as it takes to stimulate the economy. This monetary stimulus was coupled with a robust tax reduction package and rampant mortgage refinancing cash-outs, which lined the pockets of consumers and provided significant liquidity. Throughout the summer, record stimulus helped the economic backdrop improve, and equity markets continued to advance. A cyclical rebound 8 now seems to be underway. In fact, third quarter domestic growth levels topped 8%, the largest quarterly economic growth rate in nearly two decades. Despite this liquidity-driven economic growth, several factors continue to impede business confidence levels. Excess capacity built up during the 1990s continues to curtail current business investment. Firms have begun to slowly increase spending on capital equipment, but they remain reluctant to hire new employees. Consumer spending, which has been buoyed by the very strong housing market, could eventually be affected by the absence of job growth. Despite these longer-term secular economic headwinds, the cyclical recovery has built stronger profits and helped to push equity markets higher. Corporate balance sheets continue to be cleansed through productivity and cost-cutting measures, and earnings leverage has certainly improved. Investors' appetite for risk has also reemerged. The sectors and asset classes that suffered the most during the downturn rebounded significantly during the past twelve months. Small-cap and foreign equities, as well as the technology sector, returned to favor in 2003 and led the broad-based rally with very strong results. All major market segments reported positive results, with the S&P 500 closing the period up more than 20%. Bond markets rallied for much of the year in response to declining interest rates. However, longer-term U.S. Treasury securities suffered in June and July as interest rates reacted to stronger-than-expected economic growth by spiking higher. Corporate bond issues benefited from improving balance sheets, and lower-rated, higher-yielding bonds led the fixed-income market by a wide margin. Mortgage rates also edged higher during the period. Both Treasuries and mortgage-backed securities underperformed corporate bonds for the year ended October 31, 2003. Investment Strategy The BALANCED PORTFOLIO is diversified among twelve funds, representing eight major asset classes.(6) A combination of asset classes facilitates our ability to manage risk over a long-term investment horizon. Diversification also fueled relative performance with strong results from some nontraditional investment categories during the period. The overall investment strategy for the period was to: o Add to equity positions to take advantage of the broad-based market rally o Increase positions in smaller-cap stocks, which led the market throughout the recovery o Maintain a balance in growth and value positions, but add slightly to cyclically sensitive growth holdings and sectors o Heavily weight corporate bonds and take advantage of higher-yielding segments of this market Review of Portfolio Allocations During the past twelve months, we shifted the Portfolio's equity weighting from 53% to 57%. Opportunities in stock valuations motivated this move, and the Portfolio benefited from the strong results of its equity allocations. Portfolio performance was also bolstered by its position in the WM SMALL CAP STOCK FUND, which was the best-performing WM Fund during the period. Although we maintained relatively balanced allocations in both growth and value positions, we slightly increased exposure to the WM GROWTH FUND to benefit from the strength in cyclically sensitive sectors. In March, we introduced a position in the WM REIT FUND, which invests primarily in real estate investment trust (REIT) securities. These holdings provided diversification benefits as well as additional performance strength throughout the second half of the period. Because REITs are typically more value-oriented positions, we reduced allocations in the WM GROWTH & INCOME FUND and WM EQUITY INCOME FUND. Foreign holdings also contributed to the Portfolio's performance as the economic recovery spread globally. Fixed-income positions were led by the strong results of the WM HIGH YIELD FUND. We have overweighted high-yield corporate bonds since the summer of 2002, and although we may have been a little early, this allocation significantly boosted Portfolio performance this year. The WM INCOME FUND also provided strong results, spurred by falling corporate yield differentials relative to Treasuries, which drove the relative performance of corporate bonds. Mortgage-backed issues suffered through a period of record refinancing and prepayment, causing the WM U.S. GOVERNMENT SECURITIES FUND to underperform. However, we now favor these issues and ended the period by taking some profits in investment-grade corporates in favor of mortgages. Overall, performance was very strong for many asset classes during the fiscal year, and the wide-reaching diversification of the BALANCED PORTFOLIO enhanced results. Certain nontraditional asset types led the market during the period, ultimately to the Portfolio's benefit. Small-cap growth stocks, high-yield bonds, international equities, and real estate securities all contributed significantly to the Portfolio's performance. We believe these results underscore the benefits of active asset allocation, which has the potential not only to manage risk, but also to provide tactical opportunities for building wealth over the long term. Outlook We are encouraged by the cyclical, stimulus-driven economic recovery and the subsequent rally in equity markets. Markets have reacted to economic improvements and positive earnings growth. Yet, we remain vigilant concerning longer-term secular headwinds that could limit the rebound's magnitude. We are seeking prudent opportunities to marginally shift assets into more attractively priced market segments. Our long-term discipline, with asset allocation and diversification at its core, remains our investment strategy regardless of short-term market cycles. Portfolio Allocation Asset Class Diversification as of October 31, 2003(6) as of October 31, 2003(6) [pie chart] [pie chart] Income Fund 15% U.S. Equity Large Cap 26% U.S. Govt. Securities Fund 15% Mortgage-Backed 16% Growth & Income Fund 14% U.S. Equity Mid Cap 15% Growth Fund 11% Corporate Bonds 14% Equity Income Fund 9% Foreign Equity 10% High Yield Fund 7% Cash Equivalents 8% West Coast Equity Fund 6% U.S. Equity Small Cap 6% Mid Cap Stock Fund 6% Convertible Bonds 3% International Growth Fund 5% U.S. Treasuries 2% Small Cap Stock Fund 5% Cash Equivalents(7) 3% REIT Fund 3% Short Term Income Fund 1% (6) As of October 31, 2003 and may not reflect current allocations. (7) Represents cash holdings outside of the WM Funds approved for use in the Balanced Portfolio. 9 [PHOTO] Conservative Growth Portfolio Value of a $10,000 Investment (Class A shares)(1), (2) [graph]
Capital Market Benchmark NAV Sales(3) Index(4) Inflation(5) S&P 500(4) 07/25/96 $10,000 $9,450 $10,130 $9,573 $10,000 $10,000 $10,000 $10,281 $9,715 $10,166 $10,019 $10,212 $10,592 $10,009 $10,659 $10,051 $10,786 Oct-96 $10,462 $9,886 $10,940 $10,083 $11,081 $10,782 $10,189 $11,641 $10,102 $11,923 $10,725 $10,135 $11,437 $10,102 $11,689 $10,849 $10,252 $12,012 $10,135 $12,415 $10,690 $10,102 $12,096 $10,166 $12,515 $10,258 $9,694 $11,667 $10,192 $11,995 $10,427 $9,853 $12,259 $10,204 $12,711 $11,079 $10,470 $12,884 $10,198 $13,491 $11,437 $10,808 $13,375 $10,210 $14,093 $12,016 $11,355 $14,297 $10,222 $15,212 $11,563 $10,927 $13,636 $10,242 $14,366 $12,099 $11,434 $14,274 $10,267 $15,153 Oct-97 $11,615 $10,977 $13,934 $10,293 $14,647 $11,605 $10,967 $14,463 $10,287 $15,325 $11,648 $11,007 $14,692 $10,274 $15,589 $11,782 $11,134 $14,860 $10,294 $15,762 $12,528 $11,839 $15,715 $10,313 $16,898 $13,040 $12,323 $16,369 $10,333 $17,764 $13,207 $12,481 $16,518 $10,352 $17,942 $12,885 $12,176 $16,322 $10,370 $17,634 $13,175 $12,450 $16,880 $10,383 $18,350 $12,919 $12,208 $16,744 $10,395 $18,155 $11,050 $10,442 $14,862 $10,408 $15,530 $11,594 $10,957 $15,693 $10,420 $16,525 Oct-98 $12,207 $11,535 $16,697 $10,445 $17,869 $12,907 $12,197 $17,526 $10,445 $18,952 $13,843 $13,082 $18,345 $10,439 $20,044 $14,543 $13,744 $18,984 $10,464 $20,882 $14,162 $13,383 $18,446 $10,476 $20,233 $15,009 $14,184 $19,057 $10,508 $21,043 $15,722 $14,858 $19,659 $10,585 $21,858 $15,255 $14,416 $19,253 $10,585 $21,342 $16,078 $15,193 $20,096 $10,585 $22,526 $15,785 $14,917 $19,577 $10,616 $21,823 $15,747 $14,881 $19,498 $10,642 $21,715 $15,897 $15,022 $19,115 $10,693 $21,120 Oct-99 $16,666 $15,749 $20,097 $10,712 $22,456 $17,609 $16,641 $20,423 $10,719 $22,913 $19,420 $18,352 $21,366 $10,719 $24,262 $18,959 $17,917 $20,493 $10,744 $23,043 $19,904 $18,809 $20,233 $10,808 $22,607 $20,809 $19,665 $21,869 $10,896 $24,819 $19,941 $18,845 $21,330 $10,903 $24,072 $19,431 $18,362 $20,978 $10,909 $23,578 $19,891 $18,797 $21,479 $10,973 $24,159 $19,559 $18,483 $21,249 $10,991 $23,782 $20,670 $19,533 $22,367 $11,004 $25,259 $20,031 $18,930 $21,451 $11,062 $23,925 Oct-00 $19,815 $18,725 $21,406 $11,081 $23,824 $18,359 $17,349 $20,127 $11,087 $21,946 $18,843 $17,807 $20,280 $11,081 $22,053 $19,961 $18,863 $20,922 $11,150 $22,835 $18,597 $17,575 $19,432 $11,195 $20,753 $17,643 $16,673 $18,467 $11,221 $19,439 $18,693 $17,665 $19,599 $11,266 $20,949 $18,966 $17,923 $19,728 $11,316 $21,090 $18,974 $17,930 $19,359 $11,335 $20,576 $18,645 $17,620 $19,293 $11,304 $20,374 $17,987 $16,998 $18,371 $11,304 $19,098 $16,566 $15,655 $17,227 $11,355 $17,556 Oct-01 $16,979 $16,045 $17,562 $11,316 $17,891 $17,777 $16,799 $18,591 $11,297 $19,263 $18,052 $17,059 $18,698 $11,253 $19,432 $17,637 $16,667 $18,510 $11,279 $19,149 $17,265 $16,315 $18,260 $11,324 $18,779 $17,950 $16,963 $18,749 $11,387 $19,486 $17,290 $16,339 $17,913 $11,451 $18,304 $17,203 $16,257 $17,837 $11,451 $18,169 $16,307 $15,410 $16,852 $11,458 $16,875 $15,198 $14,362 $15,842 $11,470 $15,560 $15,285 $14,444 $15,979 $11,508 $15,662 $14,238 $13,455 $14,641 $11,534 $13,960 Oct-02 $14,990 $14,165 $15,659 $11,553 $15,188 $15,756 $14,889 $16,395 $11,553 $16,082 $15,218 $14,381 $15,692 $11,527 $15,137 $15,014 $14,189 $15,366 $11,578 $14,740 $14,824 $14,008 $15,224 $11,667 $14,519 $14,840 $14,024 $15,340 $11,737 $14,660 $15,762 $14,895 $16,376 $11,712 $15,868 $16,698 $15,779 $17,128 $11,693 $16,704 $16,908 $15,978 $17,296 $11,706 $16,918 $17,113 $16,172 $17,423 $11,718 $17,216 $17,450 $16,490 $17,718 $11,763 $17,551 $17,509 $16,546 $17,662 $11,801 $17,365 Oct-03 $18,302 $17,296 $18,429 $11,843 $18,348
Average Annual Total Returns as of 10/31/03(1)
CLASS A SHARES 1 Year 5 Year Since Inception (July 25, 1996) Fund (not adjusted for sales charge) 22.12% 8.44% 8.67% Fund (adjusted for maximum sales charge)(3) 15.44% 7.22% 7.83% Capital Market Benchmark(4) 17.69% 1.99% 8.80% CLASS B SHARES 1 Year 5 Year Since Inception (July 25, 1996) Fund (not adjusted for sales charge) 21.24% 7.55% 7.82% Fund (adjusted for maximum sales charge)(3) 16.24% 7.25% 7.82% Capital Market Benchmark(4) 17.69% 1.99% 8.80% CLASS C SHARES 1 Year 5 Year Since Inception (March 1, 2002) Fund (not adjusted for sales charge) 21.41% N/A 2.82% Fund (adjusted for maximum sales charge)(3) 19.22% N/A 2.20% Capital Market Benchmark(4) 17.69% N/A 0.55% (1) The Portfolio's performance through October 31, 1998 benefited from the agreement of WM Advisors and its affiliates to limit the Portfolio's expenses. Performance results assume reinvestment of all capital gains, dividends and other earnings. (2) The performance of Class B and Class C shares was different than what is shown on the graph above for Class A shares, based on the differences in sales loads and fees paid by Class B and Class C shareholders. (3) Accounts for maximum sales charge of 5.5% for Class A shares and maximum contingent deferred sales charge (CDSC) for Class B shares. CDSC represents a declining charge over 5 years as follows: 5-5-4-3-2-0%. Performance for Class C shares includes a 1% upfront sales charge and a 1% CDSC, which applies to redemptions within the first 12 months. (4) The Conservative Growth Portfolio's benchmark is a capital market index that is intended to represent a relevant proxy for market and Portfolio performance. The benchmark allocation is: 80% S&P 500 Index and 20% Lehman Brothers Aggregate Bond Index. For comparative purposes, the benchmark's performance is shown for the ten-year period or from the inception of the particular Portfolio's class of shares. The S&P 500 Index is a broad-based index and is intended to represent the U.S. equity market. The Lehman Brothers Aggregate Bond Index is a broad-based index intended to represent the fixed-income market as a whole. The returns shown for the indices assume reinvestment of all dividends and distributions. Indices are unmanaged, and individuals cannot invest directly in an index. (5) Inflation is measured by the Consumer Price Index for all urban consumers.
Note: Past performance is not a guarantee of future results. A mutual fund's share price and investment return will vary with market conditions, and the principal value when you sell your shares may be more or less than your original cost. Performance Review The SAM CONSERVATIVE GROWTH PORTFOLIO returned 22.12% for the one-year period ended October 31, 2003. Both equity and bond markets rallied for much of the fiscal year, and the Portfolio posted solid results, outpacing its benchmark index, which returned 17.69%.(4) In fact, the Portfolio outpaced the S&P 500 Index (20.80% return) despite having more than 20% in fixed-income investments. Longer-term results have also been favorable. The Portfolio outperformed its benchmark index by an average annual rate of 6.45% for the five-year period ended October 31, 2003. (All Portfolio performance described above is for Class A shares not adjusted for sales charge.) Economic/Market Review Equity markets began and ended the fiscal year with separate rallies, but geopolitical conflicts inhibited performance along the way. The period's early rally stalled in December and failed to reignite during the first few months of 2003. This interval was mired in uncertainty and instability as the threat of war took a toll on business and consumer confidence. Once the war in Iraq began, markets moved in lock step with perceptions of its progress, duration, and magnitude. Global equity markets rebounded in the second quarter of 2003 after geopolitical tensions eased and central banks injected significant stimulus into world economies. In June, the Federal Reserve trimmed the federal funds rate to a 45-year low of 1%. It has since released several statements reaffirming plans to keep interest rates low for as long as it takes to stimulate the economy. This monetary stimulus was coupled with a robust tax reduction package and rampant mortgage refinancing cash-outs, which lined the pockets of consumers and provided significant liquidity. 10 Throughout the summer, record stimulus helped the economic backdrop improve, and equity markets continued to advance. A cyclical rebound now seems to be underway. In fact, third quarter domestic growth levels topped 8%, the largest quarterly economic growth rate in nearly two decades. Despite this liquidity-driven economic growth, several factors continue to impede business confidence levels. Excess capacity built up during the 1990s continues to curtail current business investment. Firms have begun to slowly increase spending on capital equipment, but they remain reluctant to hire new employees. Consumer spending, which has been buoyed by the very strong housing market, could eventually be affected by the absence of job growth. Despite these longer-term secular economic headwinds, the cyclical recovery has built stronger profits and helped to push equity markets higher. Corporate balance sheets continue to be cleansed through productivity and cost-cutting measures, and earnings leverage has certainly improved. Investors' appetite for risk has also reemerged. The sectors and asset classes that suffered the most during the downturn rebounded significantly during the past twelve months. Small-cap and foreign equities, as well as the technology sector, returned to favor in 2003 and led the broad-based rally with very strong results. All major market segments reported positive results, with the S&P 500 closing the period up more than 20%. Bond markets rallied for much of the year in response to declining interest rates. However, longer-term U.S. Treasury securities suffered in June and July as interest rates reacted to stronger-than-expected economic growth by spiking higher. Corporate bond issues benefited from improving balance sheets, and lower-rated, higher-yielding bonds led the fixed-income market by a wide margin. Investment Strategy The CONSERVATIVE GROWTH PORTFOLIO is diversified among eleven funds, representing eight major asset classes.(6) A combination of asset classes facilitates our ability to manage risk over a long-term investment horizon. Diversification also fueled relative performance with strong results from some nontraditional investment categories during the period. The overall investment strategy for the period was to: o Add to equity positions to take advantage of the broad-based market rally o Increase positions in both small- and mid-cap stocks, which led the market throughout the recovery o Maintain a balance in growth and value positions, but add slightly to cyclically sensitive growth holdings and sectors o Build corporate bond positions and take advantage of higher-yielding segments of this market Review of Portfolio Allocations During the past twelve months, we shifted the Portfolio's equity weighting from 73% to 75%. Opportunities in stock valuations motivated this move, and the Portfolio benefited from the strong results of its equity allocations. Portfolio performance was also bolstered by its position in the WM SMALL CAP STOCK FUND, which was the best-performing WM Fund during the period. Although we maintained relatively balanced allocations in both growth and value positions, we slightly increased exposure to the WM GROWTH FUND to benefit from the strength in cyclically sensitive sectors. In March, we introduced a position in the WM REIT FUND, which invests primarily in real estate investment trust (REIT) securities. These holdings provided diversification benefits as well as additional performance strength throughout the second half of the period. Because REITs are typically more value-oriented positions, we reduced allocations in the WM GROWTH & INCOME FUND and WM EQUITY INCOME FUND. Foreign holdings also contributed to the Portfolio's performance as the economic recovery spread globally. The WM INTERNATIONAL GROWTH FUND and the WM WEST COAST EQUITY FUND also added to the year's outcome. Fixed-income positions were led by the strong results of the WM HIGH YIELD FUND. We have overweighted high-yield corporate bonds since the summer of 2002, and although we may have been a little early, this allocation significantly boosted Portfolio performance this year. The WM INCOME FUND also provided strong results, spurred by falling corporate yield differentials relative to Treasuries, which drove the relative performance of corporate bonds. Mortgage-backed issues suffered through a period of record refinancing and prepayment, causing the WM U.S. GOVERNMENT SECURITIES FUND to underperform. However, we now favor these issues and ended the period by taking some profits in investment-grade corporates in favor of mortgages. Overall, performance was very strong for many asset classes during the fiscal year, and the wide-reaching diversification of the CONSERVATIVE GROWTH PORTFOLIO enhanced results. Certain nontraditional asset types led the market during the period, ultimately to the Portfolio's benefit. Small-cap growth stocks, high-yield bonds, international equities, and real estate securities all contributed significantly to the Portfolio's performance. We believe these results underscore the benefits of active asset allocation, which has the potential not only to manage risk, but also to provide tactical opportunities for building wealth over the long term. Outlook We are encouraged by the cyclical, stimulus-driven economic recovery and the subsequent rally in equity markets. Markets have reacted to economic improvements and positive earnings growth. Yet, we remain vigilant concerning longer-term secular headwinds that could limit the rebound's magnitude. We are seeking prudent opportunities to marginally shift assets into more attractively priced market segments. Our long-term discipline, with asset allocation and diversification at its core, remains our investment strategy regardless of short-term market cycles. Portfolio Allocation Asset Class Diversification as of October 31, 2003(6) as of October 31, 2003(6) [pie chart] [pie chart] Growth & Income Fund 19% U.S. Equity Large Cap 34% Growth Fund 15% U.S. Equity Mid Cap 20% Equity Income Fund 12% Foreign Equity 13% Income Fund 8% Corporate Bonds 9% West Coast Equity Fund 8% Mortgage-Backed 8% U.S. Govt. Securities Fund 7% U.S. Equity Small Cap 8% Mid Cap Stock Fund 7% Cash Equivalents 5% Small Cap Stock Fund 7% Convertible Bonds 2% International Growth Fund 7% U.S. Treasuries 1% High Yield Fund 6% REIT Fund 4% (6) As of October 31, 2003 and may not reflect current allocations. 11 [PHOTO] Strategic Growth Portfolio Value of a $10,000 Investment (Class A shares)(1), (2) [graph]
NAV Sales(3) S&P 500(4) Inflation(5) 07/25/96 $10,000 $9,450 $10,110 $9,554 $10,000 $10,000 $10,300 $9,734 $10,212 $10,019 $10,690 $10,102 $10,786 $10,051 Oct-96 $10,560 $9,979 $11,081 $10,083 $11,080 $10,471 $11,923 $10,102 $11,001 $10,396 $11,689 $10,102 $11,308 $10,686 $12,415 $10,135 $11,148 $10,535 $12,515 $10,166 $10,640 $10,055 $11,995 $10,192 $10,852 $10,255 $12,711 $10,204 $11,561 $10,925 $13,491 $10,198 $11,932 $11,276 $14,093 $10,210 $12,716 $12,017 $15,212 $10,222 $12,240 $11,566 $14,366 $10,242 $12,822 $12,117 $15,153 $10,267 Oct-97 $12,282 $11,607 $14,647 $10,293 $12,325 $11,647 $15,325 $10,287 $12,362 $11,682 $15,589 $10,274 $12,509 $11,821 $15,762 $10,294 $13,471 $12,730 $16,898 $10,313 $14,106 $13,330 $17,764 $10,333 $14,298 $13,511 $17,942 $10,352 $13,879 $13,115 $17,634 $10,370 $14,331 $13,543 $18,350 $10,383 $13,992 $13,222 $18,155 $10,395 $11,773 $11,125 $15,530 $10,408 $12,508 $11,820 $16,525 $10,420 Oct-98 $13,210 $12,483 $17,869 $10,445 $13,980 $13,211 $18,952 $10,445 $15,159 $14,325 $20,044 $10,439 $16,068 $15,184 $20,882 $10,464 $15,594 $14,737 $20,233 $10,476 $16,530 $15,621 $21,043 $10,508 $17,365 $16,410 $21,858 $10,585 $16,792 $15,868 $21,342 $10,585 $17,789 $16,811 $22,526 $10,585 $17,337 $16,384 $21,823 $10,616 $17,325 $16,372 $21,715 $10,642 $17,490 $16,528 $21,120 $10,693 Oct-99 $18,436 $17,422 $22,456 $10,712 $19,621 $18,542 $22,913 $10,719 $21,901 $20,697 $24,262 $10,719 $21,446 $20,266 $23,043 $10,744 $22,799 $21,545 $22,607 $10,808 $23,802 $22,493 $24,819 $10,896 $22,552 $21,312 $24,072 $10,903 $21,901 $20,696 $23,578 $10,909 $22,551 $21,311 $24,159 $10,973 $22,057 $20,844 $23,782 $10,991 $23,502 $22,209 $25,259 $11,004 $22,604 $21,361 $23,925 $11,062 Oct-00 $22,279 $21,053 $23,824 $11,081 $20,325 $19,207 $21,946 $11,087 $20,931 $19,779 $22,053 $11,081 $22,320 $21,093 $22,835 $11,150 $20,448 $19,323 $20,753 $11,195 $19,180 $18,125 $19,439 $11,221 $20,666 $19,530 $20,949 $11,266 $21,011 $19,856 $21,090 $11,316 $21,066 $19,907 $20,576 $11,335 $20,459 $19,334 $20,374 $11,304 $19,537 $18,462 $19,098 $11,304 $17,540 $16,575 $17,556 $11,355 Oct-01 $18,036 $17,044 $17,891 $11,316 $19,097 $18,047 $19,263 $11,297 $19,527 $18,453 $19,432 $11,253 $18,908 $17,868 $19,149 $11,279 $18,374 $17,364 $18,779 $11,324 $19,339 $18,275 $19,486 $11,387 $18,432 $17,418 $18,304 $11,451 $18,274 $17,269 $18,169 $11,451 $17,108 $16,167 $16,875 $11,458 $15,638 $14,778 $15,560 $11,470 $15,696 $14,833 $15,662 $11,508 $14,327 $13,539 $13,960 $11,534 Oct-02 $15,249 $14,410 $15,188 $11,553 $16,185 $15,295 $16,082 $11,553 $15,455 $14,605 $15,137 $11,527 $15,180 $14,345 $14,740 $11,578 $14,890 $14,071 $14,519 $11,667 $14,905 $14,085 $14,660 $11,737 $15,965 $15,086 $15,868 $11,712 $17,068 $16,129 $16,704 $11,693 $17,329 $16,376 $16,918 $11,706 $17,691 $16,718 $17,216 $11,718 $18,098 $17,102 $17,551 $11,763 $18,083 $17,089 $17,365 $11,801 Oct-03 $19,100 $18,049 $18,348 $11,843
Average Annual Total Returns as of 10/31/03(1)
CLASS A SHARES 1 Year 5 Year Since Inception (July 25, 1996) Fund (not adjusted for sales charge) 25.24% 7.65% 9.31% Fund (adjusted for maximum sales charge)(3) 18.32% 6.44% 8.47% S&P 500 Index(4) 20.80% 0.53% 8.73% CLASS B SHARES 1 Year 5 Year Since Inception (July 25, 1996) Fund (not adjusted for sales charge) 24.35% 6.87% 8.51% Fund (adjusted for maximum sales charge)(3) 19.34% 6.56% 8.51% S&P 500 Index(4) 20.80% 0.53% 8.73% CLASS C SHARES 1 Year 5 Year Since Inception (March 1, 2002) Fund (not adjusted for sales charge) 24.44% N/A 1.63% Fund (adjusted for maximum sales charge)(3) 22.25% N/A 1.00% S&P 500 Index(4) 20.80% N/A -1.38% (1) The Portfolio's performance through October 31, 1998 benefited from the agreement of WM Advisors and its affiliates to limit the Portfolio's expenses. Performance results assume reinvestment of all capital gains, dividends and other earnings. (2) The performance of Class B and Class C shares was different than what is shown on the graph above for Class A shares, based on the differences in sales loads and fees paid by Class B and Class C shareholders. (3) Accounts for maximum sales charge of 5.5% for Class A shares and maximum contingent deferred sales charge (CDSC) for Class B shares. CDSC represents a declining charge over 5 years as follows: 5-5-4-3-2-0%. Performance for Class C shares includes a 1% upfront sales charge and a 1% CDSC, which applies to redemptions within the first 12 months. (4) The S&P 500 Index is a broad-based index and is intended to represent the U.S. equity market. For comparative purposes, the benchmark's performance is shown from the inception of the particular Portfolio's class of shares. The returns shown for the index assume reinvestment of all dividends and distributions. Indices are unmanaged, and individuals cannot invest directly in an index. (5) Inflation is measured by the Consumer Price Index for all urban consumers.
Note: Past performance is not a guarantee of future results. A mutual fund's share price and investment return will vary with market conditions, and the principal value when you sell your shares may be more or less than your original cost. Performance Review The SAM STRATEGIC GROWTH PORTFOLIO returned 25.24% for the one-year period ended October 31, 2003. Equity markets rallied for much of the fiscal year, and the Portfolio posted solid results. It outpaced the S&P 500, which returned 20.80%.(4) Longer-term results have also been favorable. The Portfolio outperformed the S&P 500 by an average annual rate of 7.12% for the five-year period ended October 31, 2003. (All Portfolio performance described above is for Class A shares not adjusted for sales charge.) Economic/Market Review Equity markets began and ended the fiscal year with separate rallies, but geopolitical conflicts inhibited performance along the way. The period's early rally stalled in December and failed to reignite during the first few months of 2003. This interval was mired in uncertainty and instability as the threat of war took a toll on business and consumer confidence. Once the war in Iraq began, markets moved in lock step with perceptions of its progress, duration, and magnitude. Global equity markets rebounded in the second quarter of 2003 after geopolitical tensions eased and central banks injected significant stimulus into world economies. In June, the Federal Reserve trimmed the federal funds rate to a 45-year low of 1%. It has since released several statements reaffirming plans to keep interest rates low for as long as it takes to stimulate the economy. This monetary stimulus was coupled with a robust tax reduction package and rampant mortgage refinancing cash-outs, which lined the pockets of consumers and provided significant liquidity. 12 Throughout the summer, record stimulus helped the economic backdrop improve, and equity markets continued to advance. A cyclical rebound now seems to be underway. In fact, third quarter domestic growth levels topped 8%, the largest quarterly economic growth rate in nearly two decades. Despite this liquidity-driven economic growth, several factors continue to impede business confidence levels. Excess capacity built up during the 1990s continues to curtail current business investment. Firms have begun to slowly increase spending on capital equipment, but they remain reluctant to hire new employees. Consumer spending, which has been buoyed by the very strong housing market, could eventually be affected by the absence of job growth. Despite these longer-term secular economic headwinds, the cyclical recovery has built stronger profits and helped to push equity markets higher. Corporate balance sheets continue to be cleansed through productivity and cost-cutting measures, and earnings leverage has certainly improved. Investors' appetite for risk has also reemerged. The sectors and asset classes that suffered the most during the downturn rebounded significantly during the past twelve months. Small-cap and foreign equities, as well as the technology sector, returned to favor in 2003 and led the broad-based rally with very strong results. All major market segments reported positive results, with the S&P 500 closing the period up more than 20%. Corporate bond issues also benefited from improving balance sheets, and lower-rated, higher-yielding bonds led the fixed-income market by a wide margin. Investment Strategy The STRATEGIC GROWTH PORTFOLIO is diversified among nine funds, representing six major asset classes.(6) A combination of asset classes facilitates our ability to manage risk over a long-term investment horizon. Diversification also fueled relative performance with strong results from some nontraditional investment categories during the period. The overall investment strategy for the period was to: o Broaden diversification levels by spreading equity assets across multiple classes and introducing an investment in real estate securities o Increase positions in both small- and mid-cap stocks, which led the market throughout the recovery o Maintain a balance in growth and value positions, but add slightly to cyclically sensitive growth holdings and sectors o Take advantage of the strong performance of higher-yielding corporate bonds Review of Portfolio Allocations During the past twelve months, we broadened overall equity diversification levels. We added to small-cap stocks throughout the year, and Portfolio performance was bolstered by its position in the WM SMALL CAP STOCK FUND, which was the best-performing WM Fund during the period. Although we maintained relatively balanced allocations in both growth and value positions, we slightly increased exposure to the WM GROWTH FUND to benefit from the strength in cyclically sensitive sectors. In March, we introduced a position in the WM REIT FUND, which invests primarily in real estate investment trust (REIT) securities. These holdings provided diversification benefits as well as additional performance strength throughout the second half of the period. Because REITs are typically more value-oriented positions, we reduced allocations in the WM GROWTH & INCOME FUND and WM EQUITY INCOME FUND. Foreign holdings also contributed to the Portfolio's performance as the economic recovery spread globally. The WM INTERNATIONAL GROWTH FUND and the WM WEST COAST EQUITY FUND also added to the year's outcome. Fixed- income positions were led by the strong results of the WM HIGH YIELD FUND, and this allocation significantly boosted Portfolio performance. Overall, performance was very strong for many asset classes during the fiscal year, and the wide-reaching equity diversification of the STRATEGIC GROWTH PORTFOLIO enhanced results. Certain nontraditional asset types led the market during the period, ultimately to the Portfolio's benefit. Small-cap growth stocks, high-yield bonds, international equities, and real estate securities all contributed significantly to the Portfolio's performance. We believe these results underscore the benefits of active asset allocation, which has the potential not only to manage risk, but also to provide tactical opportunities for building wealth over the long term. Outlook We are encouraged by the cyclical, stimulus-driven economic recovery and the subsequent rally in equity markets. Markets have reacted to economic improvements and positive earnings growth. Yet, we remain vigilant concerning longer-term secular headwinds that could limit the rebound's magnitude. We are seeking prudent opportunities to marginally shift assets into more attractively priced market segments. Our long-term discipline, with asset allocation and diversification at its core, remains our investment strategy regardless of short-term market cycles. Portfolio Allocation Asset Class Diversification as of October 31, 2003(6) as of October 31, 2003(6) [pie chart] [pie chart] Growth & Income Fund 23% U.S. Equity Large Cap 40% Growth Fund 16% U.S. Equity Mid Cap 24% Equity Income Fund 12% Foreign Equity 15% Mid Cap Stock Fund 11% U.S. Equity Small Cap 10% West Coast Equity Fund 10% Cash Equivalents 5% Small Cap Stock Fund 9% Corporate Bonds 4% International Growth Fund 9% Convertible Bonds 2% High Yield Fund 6% REIT Fund 4% (6) As of October 31, 2003 and may not reflect current allocations. 13 PORTFOLIO OF INVESTMENTS FLEXIBLE INCOME PORTFOLIO OCTOBER 31, 2003 VALUE SHARES (000S) ------ ------ INVESTMENT COMPANY SECURITIES -- 99.3% 1,477,166 WM Equity Income Fund $ 22,822 2,510,703 WM Growth & Income Fund 54,432 2,033,525 WM Growth Fund 28,734 6,595,814 WM High Yield Fund 51,843 19,665,691 WM Income Fund 184,071 1,175,749 WM Mid Cap Stock Fund 18,224 624,131 WM REIT Fund 7,783 34,952,464 WM Short Term Income Fund 83,537 1,232,164 WM Small Cap Stock Fund 16,954 16,493,572 WM U.S. Government Securities Fund 179,615 364,281 WM West Coast Equity Fund 11,799 -------- Total Investment Company Securities (Cost $630,898) 659,814 -------- PRINCIPAL AMOUNT (000s) --------- REPURCHASE AGREEMENT -- 0.4% (Cost $2,512) $2,512 Agreement with Goldman Sachs Group, Inc., 0.960% dated 10/31/2003, to be repurchased at $2,512 on 11/03/2003 (Collateralized by $2,132 U.S. Treasury Bonds, having various interest rates and maturities, Market Value $2,557) 2,512 -------- TOTAL INVESTMENTS (Cost $633,410*) 99.7% 662,326 OTHER ASSETS AND LIABILITIES (NET) 0.3 2,251 ----- -------- NET ASSETS 100.0% $664,577 ===== ======== - -------- * Aggregate cost for federal tax purposes is $635,297. See Notes to Financial Statements. 14 PORTFOLIO OF INVESTMENTS CONSERVATIVE BALANCED PORTFOLIO OCTOBER 31, 2003 VALUE SHARES (000S) ------ ------ INVESTMENT COMPANY SECURITIES -- 99.2% 1,003,655 WM Equity Income Fund $ 15,506 1,181,061 WM Growth & Income Fund 25,605 1,354,390 WM Growth Fund 19,137 2,584,496 WM High Yield Fund 20,314 6,453,762 WM Income Fund 60,407 937,007 WM International Growth Fund 7,899 633,258 WM Mid Cap Stock Fund 9,816 457,179 WM REIT Fund 5,701 7,610,745 WM Short Term Income Fund 18,190 595,028 WM Small Cap Stock Fund 8,188 5,504,789 WM U.S. Government Securities Fund 59,947 285,238 WM West Coast Equity Fund 9,239 -------- Total Investment Company Securities (Cost $245,619) 259,949 -------- PRINCIPAL AMOUNT (000s) --------- REPURCHASE AGREEMENT -- 0.3% (Cost $714) $ 714 Agreement with Goldman Sachs Group, Inc., 0.960% dated 10/31/2003, to be repurchased at $714 on 11/03/2003 (Collateralized by $606 U.S. Treasury Bonds, having various interest rates and maturities, Market Value $727) 714 -------- TOTAL INVESTMENTS (Cost $246,333*) 99.5% 260,663 OTHER ASSETS AND LIABILITIES (NET) 0.5 1,368 ----- -------- NET ASSETS 100.0% $262,031 ===== ======== - -------- * Aggregate cost for federal tax purposes is $249,190. See Notes to Financial Statements. 15 PORTFOLIO OF INVESTMENTS BALANCED PORTFOLIO OCTOBER 31, 2003 VALUE SHARES (000S) ------ ------ INVESTMENT COMPANY SECURITIES -- 96.8% 12,779,232 WM Equity Income Fund $ 197,439 13,719,549 WM Growth & Income Fund 297,440 16,420,036 WM Growth Fund 232,015 17,344,147 WM High Yield Fund 136,325 32,959,482 WM Income Fund 308,501 13,544,869 WM International Growth Fund 114,183 7,712,800 WM Mid Cap Stock Fund 119,548 5,341,637 WM REIT Fund 66,610 11,541,255 WM Short Term Income Fund 27,584 8,092,677 WM Small Cap Stock Fund 111,355 27,902,425 WM U.S. Government Securities Fund 303,858 3,663,912 WM West Coast Equity Fund 118,674 ---------- Total Investment Company Securities (Cost $1,943,256) 2,033,532 ---------- PRINCIPAL AMOUNT (000s) --------- REPURCHASE AGREEMENT -- 2.9% (Cost $61,912) $ 61,912 Agreement with Goldman Sachs Group, Inc., 0.960% dated 10/31/2003, to be repurchased at $61,917 on 11/03/2003 (Collateralized by $52,537 U.S. Treasury Bonds, having various interest rates and maturities, Market Value $63,025) 61,912 ---------- TOTAL INVESTMENTS (Cost $2,005,168*) 99.7% 2,095,444 OTHER ASSETS AND LIABILITIES (NET) 0.3 5,980 ----- ---------- NET ASSETS 100.0% $2,101,424 ===== ========== - -------- * Aggregate cost for federal tax purposes is $2,023,294. See Notes to Financial Statements. 16 PORTFOLIO OF INVESTMENTS CONSERVATIVE GROWTH PORTFOLIO OCTOBER 31, 2003 VALUE SHARES (000S) ------ ------ INVESTMENT COMPANY SECURITIES -- 99.5% 12,287,180 WM Equity Income Fund $ 189,837 14,376,833 WM Growth & Income Fund 311,690 17,036,526 WM Growth Fund 240,726 12,165,693 WM High Yield Fund 95,622 13,442,607 WM Income Fund 125,823 13,785,370 WM International Growth Fund 116,211 7,903,923 WM Mid Cap Stock Fund 122,511 5,360,930 WM REIT Fund 66,851 8,721,008 WM Small Cap Stock Fund 120,001 10,589,587 WM U.S. Government Securities Fund 115,321 3,845,311 WM West Coast Equity Fund 124,549 ---------- Total Investment Company Securities (Cost $1,594,673) 1,629,142 ---------- PRINCIPAL AMOUNT (000s) --------- REPURCHASE AGREEMENT -- 0.2% (Cost $3,597) $ 3,597 Agreement with Goldman Sachs Group, Inc., 0.960% dated 10/31/2003, to be repurchased at $3,597 on 11/03/2003 (Collateralized by $3,052 U.S. Treasury Bonds, having various interest rates and maturities, Market Value $3,662) 3,597 ---------- TOTAL INVESTMENTS (Cost $1,598,270*) 99.7% 1,632,739 OTHER ASSETS AND LIABILITIES (NET) 0.3 5,630 ----- ---------- NET ASSETS 100.0% $1,638,369 ===== ========== - -------- * Aggregate cost for federal tax purposes is $1,613,484. See Notes to Financial Statements. 17 PORTFOLIO OF INVESTMENTS STRATEGIC GROWTH PORTFOLIO OCTOBER 31, 2003 VALUE SHARES (000S) ------ ------ INVESTMENT COMPANY SECURITIES -- 99.2% 6,724,508 WM Equity Income Fund $103,894 9,511,478 WM Growth & Income Fund 206,209 10,187,061 WM Growth Fund 143,943 6,395,824 WM High Yield Fund 50,271 9,375,379 WM International Growth Fund 79,034 6,428,224 WM Mid Cap Stock Fund 99,637 2,818,964 WM REIT Fund 35,152 5,877,994 WM Small Cap Stock Fund 80,882 2,626,387 WM West Coast Equity Fund 85,069 -------- Total Investment Company Securities (Cost $908,055) 884,091 -------- PRINCIPAL AMOUNT (000s) --------- REPURCHASE AGREEMENT -- 0.3% (Cost $2,905) $ 2,905 Agreement with Goldman Sachs Group, Inc., 0.960% dated 10/31/2003, to be repurchased at $2,905 on 11/03/2003 (Collateralized by $2,465 U.S. Treasury Bonds, having various interest rates and maturities, Market Value $2,957) 2,905 -------- TOTAL INVESTMENTS (Cost $910,960*) 99.5% 886,996 OTHER ASSETS AND LIABILITIES (NET) 0.5 4,338 ----- -------- NET ASSETS 100.0% $891,334 ===== ======== - -------- * Aggregate cost for federal tax purposes is $927,078. See Notes to Financial Statements. 18 STATEMENTS OF ASSETS AND LIABILITIES WM STRATEGIC ASSET MANAGEMENT PORTFOLIOS OCTOBER 31, 2003 (IN THOUSANDS)
FLEXIBLE CONSERVATIVE CONSERVATIVE STRATEGIC INCOME BALANCED BALANCED GROWTH GROWTH PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO --------- ------------ ------------ ---------- --------- ASSETS: Investments, at value (a) $662,326 $260,663 $2,095,444 $1,632,739 $886,996 Receivable for Portfolio shares sold 5,422 2,162 14,996 11,170 8,011 Prepaid expenses and other assets 3 1 8 8 5 -------- -------- ---------- ---------- -------- Total Assets 667,751 262,826 2,110,448 1,643,917 895,012 -------- -------- ---------- ---------- -------- LIABILITIES: Payable for Portfolio shares redeemed 1,733 436 2,371 1,281 699 Payable for investment securities purchased 512 -- 3,912 2,097 1,705 Investment advisory fee payable 361 129 1,078 849 473 Shareholder servicing and distribution fees payable 416 157 1,244 967 547 Transfer agent fees payable 36 14 111 101 78 Accrued expenses and other payables 116 59 308 253 176 -------- -------- ---------- ---------- -------- Total Liabilities 3,174 795 9,024 5,548 3,678 -------- -------- ---------- ---------- -------- NET ASSETS $664,577 $262,031 $2,101,424 $1,638,369 $891,334 ======== ======== ========== ========== ======== (a) Investments, at cost $633,410 $246,333 $2,005,168 $1,598,270 $910,960 ======== ======== ========== ========== ======== NET ASSETS CONSIST OF: Undistributed net investment income/ (accumulated net investment loss) $ 1,974 $ 556 $ 1,815 $ (331) $ (4,099) Accumulated net realized loss on investment transactions (6,566) (2,913) (48,508) (48,877) (40,809) Net unrealized appreciation/(depreciation) of investments 28,916 14,331 90,276 34,468 (23,964) Paid-in capital 640,253 250,057 2,057,841 1,653,109 960,206 -------- -------- ---------- ---------- -------- Total Net Assets $664,577 $262,031 $2,101,424 $1,638,369 $891,334 ======== ======== ========== ========== ======== See Notes to Financial Statements. 19 STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED) WM STRATEGIC ASSET MANAGEMENT PORTFOLIOS OCTOBER 31, 2003 (IN THOUSANDS) FLEXIBLE CONSERVATIVE CONSERVATIVE STRATEGIC INCOME BALANCED BALANCED GROWTH GROWTH PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO --------- ------------ ------------ ---------- --------- NET ASSETS: Class A Shares $224,192 $ 94,005 $ 792,423 $ 615,501 $298,852 ======== ======== ========== ========== ======== Class B Shares $371,639 $116,742 $1,074,925 $ 827,312 $484,656 ======== ======== ========== ========== ======== Class C Shares $ 68,746 $ 51,284 $ 234,076 $ 195,556 $107,826 ======== ======== ========== ========== ======== SHARES OUTSTANDING: Class A Shares 20,530 9,584 66,896 49,374 22,701 ======== ======== ========== ========== ======== Class B Shares 34,092 11,923 90,961 67,898 38,071 ======== ======== ========== ========== ======== Class C Shares 6,328 5,253 19,878 16,125 8,464 ======== ======== ========== ========== ======== CLASS A SHARES:** Net asset value per share of beneficial interest outstanding * $ 10.92 $ 9.81 $ 11.85 $ 12.47 $ 13.16 ======== ======== ========== ========== ======== Maximum sales charge 4.50% 5.50% 5.50% 5.50% 5.50% ======== ======== ========== ========== ======== Maximum offering price per share of beneficial interest outstanding $ 11.43 $ 10.38 $ 12.54 $ 13.20 $ 13.93 ======== ======== ========== ========== ======== CLASS B SHARES:** Net asset value and offering price per share of beneficial interest outstanding * $ 10.90 $ 9.79 $ 11.82 $ 12.18 $ 12.73 ======== ======== ========== ========== ======== CLASS C SHARES:** Net asset value per share of beneficial interest outstanding * $ 10.86 $ 9.76 $ 11.78 $ 12.13 $ 12.74 ======== ======== ========== ========== ======== Maximum sales charge 1.00% 1.00% 1.00% 1.00% 1.00% ======== ======== ========== ========== ======== Maximum offering price per share of beneficial interest outstanding $ 10.97 $ 9.86 $ 11.90 $ 12.25 $ 12.87 ======== ======== ========== ========== ======== * Redemption price per share is equal to net asset value per share less any applicable contingent deferred sales charge. ** Net asset value and maximum offering price are not shown in thousands. See Notes to Financial Statements.
20 STATEMENTS OF OPERATIONS WM STRATEGIC ASSET MANAGEMENT PORTFOLIOS FOR THE YEAR ENDED OCTOBER 31, 2003 (IN THOUSANDS)
FLEXIBLE CONSERVATIVE CONSERVATIVE STRATEGIC INCOME BALANCED BALANCED GROWTH GROWTH PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO --------- ------------ ------------ ---------- --------- INVESTMENT INCOME: Dividends from investment company securities $25,303 $ 6,697 $ 46,428 $ 27,901 $ 9,284 Interest 22 12 543 32 22 ------- ------- -------- -------- -------- Total investment income 25,325 6,709 46,971 27,933 9,306 ------- ------- -------- -------- -------- EXPENSES: Investment advisory fee 3,521 1,080 9,728 7,825 4,226 Custodian fees 3 3 3 3 3 Legal and audit fees 37 26 65 56 40 Registration and filing fees 97 82 201 165 114 Other 260 89 761 655 445 Shareholder servicing and distribution fees: Class A Shares 451 136 1,370 1,087 513 Class B Shares 3,155 838 8,682 6,874 3,919 Class C Shares 457 281 1,219 987 529 Transfer agent fees: Class A Shares 112 39 380 377 288 Class B Shares 223 76 724 695 552 Class C Shares 30 19 79 77 52 ------- ------- -------- -------- -------- Total expenses 8,346 2,669 23,212 18,801 10,681 Fees waived by the investment advisor -- (74) -- -- -- Fees reduced by custodian credits --* --* --* --* --* ------- ------- -------- -------- -------- Net expenses 8,346 2,595 23,212 18,801 10,681 ------- ------- -------- -------- -------- NET INVESTMENT INCOME/(LOSS) 16,979 4,114 23,759 9,132 (1,375) ------- ------- -------- -------- -------- NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS: Net realized loss on investment transactions (4,679) (1,915) (23,365) (27,792) (18,516) Net change in unrealized appreciation/depreciation of investments 43,834 19,838 258,639 267,163 170,878 ------- ------- -------- -------- -------- Net realized and unrealized gain on investments 39,155 17,923 235,274 239,371 152,362 ------- ------- -------- -------- -------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $56,134 $22,037 $259,033 $248,503 $150,987 ======= ======= ======== ======== ======== * Amount represents less than $500. See Notes to Financial Statements.
21 STATEMENTS OF CHANGES IN NET ASSETS WM STRATEGIC ASSET MANAGEMENT PORTFOLIOS FOR THE YEAR ENDED OCTOBER 31, 2003 (IN THOUSANDS)
FLEXIBLE CONSERVATIVE CONSERVATIVE STRATEGIC INCOME BALANCED BALANCED GROWTH GROWTH PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO --------- ------------ ------------ ---------- --------- Net investment income/(loss) $ 16,979 $ 4,114 $ 23,759 $ 9,132 $ (1,375) Net realized loss on investment transactions (4,679) (1,915) (23,365) (27,792) (18,516) Net change in unrealized appreciation/depreciation of investments 43,834 19,838 258,639 267,163 170,878 -------- -------- ---------- ---------- -------- Net increase in net assets resulting from operations 56,134 22,037 259,033 248,503 150,987 Distributions to shareholders from: Net investment income: Class A Shares (6,392) (1,486) (10,917) (5,264) -- Class B Shares (8,956) (1,756) (11,375) (3,864) -- Class C Shares (1,284) (605) (1,556) (519) -- Net realized gains on investments: Class A Shares (226) -- -- (1,176) (1,363) Class B Shares (389) -- -- (2,123) (2,912) Class C Shares (37) -- -- (182) (240) Net increase in net assets from Portfolio share transactions: Class A Shares 66,490 56,926 284,390 182,874 84,392 Class B Shares 104,021 49,644 200,435 74,140 48,369 Class C Shares 44,830 37,641 159,237 126,407 68,120 -------- -------- ---------- ---------- -------- Net increase in net assets 254,191 162,401 879,247 618,796 347,353 NET ASSETS: Beginning of year 410,386 99,630 1,222,177 1,019,573 543,981 -------- -------- ---------- ---------- -------- End of year $664,577 $262,031 $2,101,424 $1,638,369 $891,334 ======== ======== ========== ========== ======== Undistributed net investment income/ (accumulated net investment loss) at end of year $ 1,974 $ 556 $ 1,815 $ (331) $ (4,099) ======== ======== ========== ========== ======== See Notes to Financial Statements.
22 STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) WM STRATEGIC ASSET MANAGEMENT PORTFOLIOS FOR THE YEAR ENDED OCTOBER 31, 2002 (IN THOUSANDS)
FLEXIBLE CONSERVATIVE CONSERVATIVE STRATEGIC INCOME BALANCED BALANCED GROWTH GROWTH PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO --------- ------------ ------------ ---------- --------- Net investment income/(loss) $ 12,423 $ 1,990 $ 24,563 $ 9,709 $ (1,763) Net realized loss on investment transactions (2,592) (497) (26,956) (22,355) (19,276) Capital gain distributions received 1,289 324 13,164 16,147 11,335 Net change in unrealized appreciation/depreciation of investments (13,461) (4,350) (118,704) (157,997) (102,508) -------- -------- ---------- ---------- -------- Net decrease in net assets resulting from operations (2,341) (2,533) (107,933) (154,496) (112,212) Distributions to shareholders from: Net investment income: Class A Shares (4,942) (584) (12,177) (6,667) (1,748) Class B Shares (6,338) (1,185) (16,953) (7,958) (1,410) Class C Shares (194) (86) (351) (167) -- Net realized gains on investments: Class A Shares (821) -- (8,666) (10,695) (5,806) Class B Shares (1,134) -- (15,401) (21,728) (14,697) Net increase in net assets from Portfolio share transactions: Class A Shares 40,129 19,944 98,182 95,095 52,002 Class B Shares 107,929 30,513 177,184 117,500 58,618 Class C Shares 20,862 10,751 57,293 52,961 30,811 -------- -------- ---------- ---------- -------- Net increase in net assets 153,150 56,820 171,178 63,845 5,558 NET ASSETS: Beginning of year 257,236 42,810 1,050,999 955,728 538,423 -------- -------- ---------- ---------- -------- End of year $410,386 $ 99,630 $1,222,177 $1,019,573 $543,981 ======== ======== ========== ========== ======== Undistributed net investment income/ (accumulated net investment loss) at end of year $ 1,627 $ 289 $ 1,904 $ 152 $ (3,184) ======== ======== ========== ========== ======== See Notes to Financial Statements.
23 STATEMENTS OF CHANGES IN NET ASSETS -- CAPITAL STOCK ACTIVITY WM STRATEGIC ASSET MANAGEMENT PORTFOLIOS (IN THOUSANDS)
CONSERVATIVE FLEXIBLE INCOME PORTFOLIO BALANCED PORTFOLIO BALANCED PORTFOLIO ------------------------- ---------------------- ------------------------ YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED 10/31/03 10/31/02 10/31/03 10/31/02 10/31/03 10/31/02 ---------- ---------- ---------- ---------- ---------- ---------- AMOUNT CLASS A: Sold $132,626 $ 84,412 $ 77,203 $ 26,562 $ 388,253 $ 208,701 Issued as reinvestment of dividends 6,038 5,430 1,400 545 10,557 20,362 Redeemed (72,174) (49,713) (21,677) (7,163) (114,420) (130,881) -------- -------- -------- -------- --------- --------- Net increase $ 66,490 $ 40,129 $ 56,926 $ 19,944 $ 284,390 $ 98,182 ======== ======== ======== ======== ========= ========= CLASS B: Sold $188,101 $167,150 $ 77,595 $ 47,338 $ 363,002 $ 364,029 Issued as reinvestment of dividends 8,565 6,884 1,659 1,121 11,004 31,579 Redeemed (92,645) (66,105) (29,610) (17,946) (173,571) (218,424) -------- -------- -------- -------- --------- --------- Net increase $104,021 $107,929 $ 49,644 $ 30,513 $ 200,435 $ 177,184 ======== ======== ======== ======== ========= ========= CLASS C: Sold $ 66,013 $ 24,293 $ 48,833 $ 13,028 $ 178,337 $ 61,849 Issued as reinvestment of dividends 1,207 187 574 82 1,494 340 Redeemed (22,390) (3,618) (11,766) (2,359) (20,594) (4,896) -------- -------- -------- -------- --------- --------- Net increase $ 44,830 $ 20,862 $ 37,641 $ 10,751 $ 159,237 $ 57,293 ======== ======== ======== ======== ========= ========= SHARES CLASS A: Sold 12,528 8,155 8,237 2,942 35,203 18,914 Issued as reinvestment of dividends 574 520 150 59 977 1,790 Redeemed (6,804) (4,779) (2,322) (782) (10,622) (12,104) -------- -------- -------- -------- --------- --------- Net increase 6,298 3,896 6,065 2,219 25,558 8,600 ======== ======== ======== ======== ========= ========= CLASS B: Sold 17,920 16,179 8,360 5,217 33,351 32,803 Issued as reinvestment of dividends 816 661 179 122 1,031 2,763 Redeemed (8,770) (6,399) (3,199) (1,995) (16,183) (20,506) -------- -------- -------- -------- --------- --------- Net increase 9,966 10,441 5,340 3,344 18,199 15,060 ======== ======== ======== ======== ========= ========= CLASS C: Sold 6,291 2,381 5,256 1,454 16,269 5,812 Issued as reinvestment of dividends 115 19 62 9 138 33 Redeemed (2,120) (358) (1,258) (270) (1,895) (478) -------- -------- -------- -------- --------- --------- Net increase 4,286 2,042 4,060 1,193 14,512 5,367 ======== ======== ======== ======== ========= ========= See Notes to Financial Statements. 24 CONSERVATIVE GROWTH STRATEGIC PORTFOLIO GROWTH PORTFOLIO ---------------------- ------------------------ YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED 10/31/03 10/31/02 10/31/03 10/31/02 ---------- ---------- ---------- ---------- AMOUNT CLASS A: Sold $ 255,874 $ 176,719 $ 125,879 $ 88,781 Issued as reinvestment of dividends 6,302 17,035 1,345 7,459 Redeemed (79,302) (98,659) (42,832) (44,238) --------- --------- --------- --------- Net increase $ 182,874 $ 95,095 $ 84,392 $ 52,002 ========= ========= ========= ========= CLASS B: Sold $ 209,247 $ 270,723 $ 109,265 $ 153,986 Issued as reinvestment of dividends 5,859 29,090 2,863 15,823 Redeemed (140,966) (182,313) (63,759) (111,191) --------- --------- --------- --------- Net increase $ 74,140 $ 117,500 $ 48,369 $ 58,618 ========= ========= ========= ========= CLASS C: Sold $ 141,969 $ 57,059 $ 75,726 $ 32,858 Issued as reinvestment of dividends 678 163 236 -- Redeemed (16,240) (4,261) (7,842) (2,047) --------- --------- --------- --------- Net increase $ 126,407 $ 52,961 $ 68,120 $ 30,811 ========= ========= ========= ========= SHARES CLASS A: Sold 22,560 15,126 10,682 7,241 Issued as reinvestment of dividends 581 1,389 124 554 Redeemed (7,272) (8,886) (3,815) (3,833) --------- --------- --------- --------- Net increase 15,869 7,629 6,991 3,962 ========= ========= ========= ========= CLASS B: Sold 19,061 23,374 9,686 12,525 Issued as reinvestment of dividends 570 2,392 271 1,203 Redeemed (13,258) (16,829) (5,899) (9,807) --------- --------- --------- --------- Net increase 6,373 8,937 4,058 3,921 ========= ========= ========= ========= CLASS C: Sold 12,791 5,199 6,566 2,779 Issued as reinvestment of dividends 65 15 22 -- Redeemed (1,524) (422) (706) (197) --------- --------- --------- --------- Net increase 11,332 4,792 5,882 2,582 ========= ========= ========= ========= See Notes to Financial Statements.
25 FINANCIAL HIGHLIGHTS FOR A PORTFOLIO SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
INCOME FROM INVESTMENT OPERATIONS LESS DISTRIBUTIONS ------------------------------------- --------------------------------------- NET REALIZED NET ASSET AND DIVIDENDS DISTRIBUTIONS NET ASSET VALUE, NET UNREALIZED TOTAL FROM FROM NET FROM VALUE, BEGINNING INVESTMENT GAIN/(LOSS) ON INVESTMENT INVESTMENT NET REALIZED TOTAL END OF OF PERIOD INCOME INVESTMENTS OPERATIONS INCOME(1) CAPITAL GAINS DISTRIBUTIONS PERIOD --------- ---------- -------------- ---------- ---------- ------------- ------------- --------- FLEXIBLE INCOME PORTFOLIO CLASS A 10/31/03 $10.17 $0.38(6) $ 0.77 $ 1.15 $(0.38) $ (0.02) $(0.40) $10.92 10/31/02 10.71 0.45(6) (0.48) (0.03) (0.43) (0.08) (0.51) 10.17 10/31/01 11.06 0.50(6) (0.04) 0.46 (0.61) (0.20) (0.81) 10.71 10/31/00 10.75 0.47(6) 0.42 0.89 (0.55) (0.03) (0.58) 11.06 10/31/99 10.63 0.40(6) 0.57(7) 0.97 (0.48) (0.37) (0.85) 10.75 CLASS B 10/31/03 10.15 0.30(6) 0.77 1.07 (0.30) (0.02) (0.32) 10.90 10/31/02 10.71 0.38(6) (0.50) (0.12) (0.36) (0.08) (0.44) 10.15 10/31/01 11.06 0.42(6) (0.04) 0.38 (0.53) (0.20) (0.73) 10.71 10/31/00 10.75 0.39(6) 0.42 0.81 (0.47) (0.03) (0.50) 11.06 10/31/99 10.63 0.33(6) 0.56(7) 0.89 (0.40) (0.37) (0.77) 10.75 CLASS C 10/31/03 10.13 0.30(6) 0.76 1.06 (0.31) (0.02) (0.33) 10.86 10/31/02(5) 10.54 0.24(6) (0.43) (0.19) (0.22) -- (0.22) 10.13 CONSERVATIVE BALANCED PORTFOLIO CLASS A 10/31/03 $ 8.83 $0.28(6) $ 0.97 $ 1.25 $(0.27) $ -- $(0.27) $ 9.81 10/31/02 9.43 0.33 (0.61) (0.28) (0.32) -- (0.32) 8.83 10/31/01 9.96 0.34(6) (0.44) (0.10) (0.43) -- (0.43) 9.43 10/31/00 9.94 0.51(6) 0.02(7) 0.53 (0.50) (0.01) (0.51) 9.96 10/31/99 10.25 0.56 (0.27) 0.29 (0.58) (0.02) (0.60) 9.94 CLASS B 10/31/03 8.82 0.21(6) 0.96 1.17 (0.20) -- (0.20) 9.79 10/31/02 9.43 0.27 (0.62) (0.35) (0.26) -- (0.26) 8.82 10/31/01 9.96 0.27(6) (0.44) (0.17) (0.36) -- (0.36) 9.43 10/31/00 9.94 0.44(6) 0.02(7) 0.46 (0.43) (0.01) (0.44) 9.96 10/31/99 10.25 0.50 (0.29) 0.21 (0.50) (0.02) (0.52) 9.94 CLASS C 10/31/03 8.80 0.21(6) 0.97 1.18 (0.22) -- (0.22) 9.76 10/31/02(5) 9.39 0.16 (0.60) (0.44) (0.15) -- (0.15) 8.80 See Notes to Financial Statements. 26 RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA ---------------------------------------------------------------------------------- RATIO OF OPERATING EXPENSES TO AVERAGE NET ASSETS WITHOUT FEE RATIO OF RATIO OF WAIVERS, EXPENSES REIMBURSED OPERATING NET INVESTMENT AND/OR FEES NET ASSETS, EXPENSES TO INCOME TO PORTFOLIO REDUCED BY CREDITS END OF PERIOD AVERAGE NET AVERAGE NET TURNOVER ALLOWED BY THE TOTAL RETURN(2) (IN 000'S) ASSETS(3) ASSETS RATE CUSTODIAN(3)(4) --------------- ------------- ----------- -------------- --------- ---------------------------- FLEXIBLE INCOME PORTFOLIO CLASS A 10/31/03 11.49% $224,192 1.04% 3.64% 3% 1.04% 10/31/02 (0.37)% 144,710 1.06% 4.41% 9% 1.06% 10/31/01 3.67% 110,680 1.06% 4.61% 7% 1.06% 10/31/00 8.56% 129,386 1.06% 4.28% 27% 1.06% 10/31/99 9.39% 194,404 1.00% 3.86% 31% 1.06% CLASS B 10/31/03 10.60% 371,639 1.79% 2.89% 3% 1.79% 10/31/02 (1.08)% 244,999 1.81% 3.66% 9% 1.81% 10/31/01 2.92% 146,555 1.79% 3.88% 7% 1.79% 10/31/00 7.76% 77,238 1.80% 3.54% 27% 1.80% 10/31/99 8.60% 46,821 1.75% 3.11% 31% 1.81% CLASS C 10/31/03 10.63% 68,746 1.79% 2.89% 3% 1.79% 10/31/02(5) (1.78)% 20,677 1.81%(8) 3.66%(8) 9% 1.81%(8) CONSERVATIVE BALANCED PORTFOLIO CLASS A 10/31/03 14.38% $ 94,005 1.05% 2.99% 4% 1.09% 10/31/02 (3.06)% 31,070 1.05% 3.67% 9% 1.17% 10/31/01 (0.99)% 12,257 1.16% 3.65% 18% 1.30% 10/31/00 5.52% 4,557 1.32% 5.16% 59% 1.32% 10/31/99 2.89% 7,297 1.00% 5.57% 51% 1.24% CLASS B 10/31/03 13.46% 116,742 1.82% 2.22% 4% 1.86% 10/31/02 (3.77)% 58,054 1.80% 2.92% 9% 1.92% 10/31/01 (1.71)% 30,554 1.89% 2.92% 18% 2.03% 10/31/00 4.76% 10,947 2.04% 4.44% 59% 2.04% 10/31/99 2.05% 13,443 1.74% 4.83% 51% 1.98% CLASS C 10/31/03 13.53% 51,284 1.80% 2.24% 4% 1.84% 10/31/02(5) (4.70)% 10,505 1.78%(8) 2.94%(8) 9% 1.90%(8) See Notes to Financial Statements.
27 FINANCIAL HIGHLIGHTS FOR A PORTFOLIO SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
INCOME FROM INVESTMENT OPERATIONS LESS DISTRIBUTIONS ------------------------------------- --------------------------------------- NET REALIZED NET ASSET AND DIVIDENDS DISTRIBUTIONS NET ASSET VALUE, NET UNREALIZED TOTAL FROM FROM NET FROM VALUE, BEGINNING INVESTMENT GAIN/(LOSS) ON INVESTMENT INVESTMENT NET REALIZED TOTAL END OF OF PERIOD INCOME/(LOSS) INVESTMENTS OPERATIONS INCOME(1) CAPITAL GAINS DISTRIBUTIONS PERIOD --------- ------------- -------------- ---------- ---------- ------------- ------------- --------- BALANCED PORTFOLIO CLASS A 10/31/03 $10.24 $0.22 $ 1.62 $ 1.84 $(0.23) $ -- $(0.23) $11.85 10/31/02 11.63 0.28 (1.08) (0.80) (0.33) (0.26) (0.59) 10.24 10/31/01 13.55 0.33(6) (1.27) (0.94) (0.51) (0.47) (0.98) 11.63 10/31/00 12.22 0.28(6) 1.53 1.81 (0.48) -- (0.48) 13.55 10/31/99 11.02 0.19(6) 2.39 2.58 (0.44) (0.94) (1.38) 12.22 CLASS B 10/31/03 10.22 0.14 1.61 1.75 (0.15) -- (0.15) 11.82 10/31/02 11.62 0.20 (1.09) (0.89) (0.25) (0.26) (0.51) 10.22 10/31/01 13.54 0.23(6) (1.27) (1.04) (0.41) (0.47) (0.88) 11.62 10/31/00 12.21 0.18(6) 1.55 1.73 (0.40) -- (0.40) 13.54 10/31/99 11.02 0.11(6) 2.38 2.49 (0.36) (0.94) (1.30) 12.21 CLASS C 10/31/03 10.20 0.14 1.60 1.74 (0.16) -- (0.16) 11.78 10/31/02(5) 11.35 0.13 (1.15) (1.02) (0.13) -- (0.13) 10.20 CONSERVATIVE GROWTH PORTFOLIO CLASS A 10/31/03 $10.37 $0.14(6) $ 2.14 $ 2.28 $(0.14) $(0.04) $(0.18) $12.47 10/31/02 12.35 0.16(6) (1.52) (1.36) (0.22) (0.40) (0.62) 10.37 10/31/01 15.52 0.20(6) (2.34) (2.14) (0.58) (0.45) (1.03) 12.35 10/31/00 13.43 0.12(6) 2.40 2.52 (0.43) -- (0.43) 15.52 10/31/99 10.97 0.06(6) 3.70 3.76 (0.42) (0.88) (1.30) 13.43 CLASS B 10/31/03 10.14 0.05(6) 2.09 2.14 (0.06) (0.04) (0.10) 12.18 10/31/02 12.10 0.08(6) (1.50) (1.42) (0.14) (0.40) (0.54) 10.14 10/31/01 15.17 0.09(6) (2.28) (2.19) (0.43) (0.45) (0.88) 12.10 10/31/00 13.21 0.00(6)(9) 2.37 2.37 (0.41) -- (0.41) 15.17 10/31/99 10.85 (0.03)(6) 3.61 3.58 (0.34) (0.88) (1.22) 13.21 CLASS C 10/31/03 10.10 0.06(6) 2.08 2.14 (0.07) (0.04) (0.11) 12.13 10/31/02(5) 11.79 0.05(6) (1.66) (1.61) (0.08) -- (0.08) 10.10 See Notes to Financial Statements. 28 RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA ---------------------------------------------------------------------------------- RATIO OF OPERATING EXPENSES TO AVERAGE NET ASSETS WITHOUT FEE RATIO OF RATIO OF WAIVERS, EXPENSES REIMBURSED OPERATING NET INVESTMENT AND/OR FEES NET ASSETS, EXPENSES TO INCOME TO PORTFOLIO REDUCED BY CREDITS END OF PERIOD AVERAGE NET AVERAGE NET TURNOVER ALLOWED BY THE TOTAL RETURN(2) (IN 000'S) ASSETS(3) ASSETS RATE CUSTODIAN(3)(4) --------------- ------------- ----------- -------------- --------- ---------------------------- BALANCED PORTFOLIO CLASS A 10/31/03 18.07% $ 792,423 1.02% 2.03% 5% 1.02% 10/31/02 (7.32)% 423,478 1.04% 2.55% 19% 1.04% 10/31/01 (7.28)% 380,681 1.02% 2.63% 6% 1.02% 10/31/00 15.11% 391,655 1.03% 2.05% 22% 1.03% 10/31/99 25.16% 333,639 1.03% 1.66% 39% 1.04% CLASS B 10/31/03 17.25% 1,074,925 1.78% 1.27% 5% 1.78% 10/31/02 (8.03)% 743,953 1.80% 1.79% 19% 1.80% 10/31/01 (7.98)% 670,318 1.78% 1.87% 6% 1.78% 10/31/00 14.26% 549,849 1.77% 1.31% 22% 1.77% 10/31/99 24.22% 237,438 1.77% 0.92% 39% 1.78% CLASS C 10/31/03 17.15% 234,076 1.76% 1.29% 5% 1.76% 10/31/02(5) (9.00)% 54,745 1.80%(8) 1.79%(8) 19% 1.80%(8) CONSERVATIVE GROWTH PORTFOLIO CLASS A 10/31/03 22.12% $ 615,501 1.05% 1.24% 7% 1.05% 10/31/02 (11.72)% 347,297 1.06% 1.41% 14% 1.06% 10/31/01 (14.31)% 319,583 1.03% 1.45% 5% 1.03% 10/31/00 18.89% 341,685 1.02% 0.76% 17% 1.02% 10/31/99 36.54% 249,650 1.02% 0.48% 16% 1.03% CLASS B 10/31/03 21.24% 827,312 1.81% 0.48% 7% 1.81% 10/31/02 (12.46)% 623,852 1.82% 0.65% 14% 1.82% 10/31/01 (14.93)% 636,145 1.79% 0.69% 5% 1.79% 10/31/00 18.07% 604,460 1.77% 0.01% 17% 1.77% 10/31/99 34.98% 263,911 1.77% (0.27)% 16% 1.78% CLASS C 10/31/03 21.41% 195,556 1.79% 0.50% 7% 1.79% 10/31/02(5) (13.72)% 48,424 1.82%(8) 0.65%(8) 14% 1.82%(8) See Notes to Financial Statements.
29 FINANCIAL HIGHLIGHTS FOR A PORTFOLIO SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
INCOME FROM INVESTMENT OPERATIONS LESS DISTRIBUTIONS ------------------------------------- --------------------------------------- NET REALIZED NET ASSET AND DIVIDENDS DISTRIBUTIONS NET ASSET VALUE, NET UNREALIZED TOTAL FROM FROM NET FROM VALUE, BEGINNING INVESTMENT GAIN/(LOSS) ON INVESTMENT INVESTMENT NET REALIZED TOTAL END OF OF PERIOD INCOME/(LOSS) INVESTMENTS OPERATIONS INCOME(1) CAPITAL GAINS DISTRIBUTIONS PERIOD --------- ------------- -------------- ---------- ---------- ------------- ------------- --------- STRATEGIC GROWTH PORTFOLIO CLASS A 10/31/03 $10.59 $0.03(6) $2.63 $ 2.66 $ -- $(0.09) $(0.09) $13.16 10/31/02 13.10 0.03(6) (1.92) (1.89) (0.14) (0.48) (0.62) 10.59 10/31/01 17.11 0.05(6) (3.21) (3.16) (0.47) (0.38) (0.85) 13.10 10/31/00 14.61 (0.04)(6) 3.07 3.03 (0.53) -- (0.53) 17.11 10/31/99 11.67 (0.03)(6) 4.36 4.33 (0.41) (0.98) (1.39) 14.61 CLASS B 10/31/03 10.32 (0.05)(6) 2.55 2.50 -- (0.09) (0.09) 12.73 10/31/02 12.78 (0.06)(6) (1.88) (1.94) (0.04) (0.48) (0.52) 10.32 10/31/01 16.75 (0.06)(6) (3.14) (3.20) (0.39) (0.38) (0.77) 12.78 10/31/00 14.40 (0.16)(6) 3.02 2.86 (0.51) -- (0.51) 16.75 10/31/99 11.52 (0.13)(6) 4.31 4.18 (0.32) (0.98) (1.30) 14.40 CLASS C 10/31/03 10.32 (0.05)(6) 2.56 2.51 -- (0.09) (0.09) 12.74 10/31/02(5) 12.50 (0.04)(6) (2.14) (2.18) -- -- -- 10.32 - -------- (1) Includes dividends paid from the short-term portion of capital gain distributions received from the Underlying Funds. (2) Total return is not annualized for periods less than one year and does not reflect any applicable sales charges. The total return would have been lower if certain fees had not been waived and/or expenses reimbursed by the investment advisor or if fees had not been reduced by credits allowed by the custodian. (3) The Portfolio also will indirectly bear its prorated share of expenses of the Underlying Funds. (4) Ratio of operating expenses to average net assets includes expenses paid indirectly. (5) The Portfolios commenced selling Class C shares on March 1, 2002. (6) Per share numbers have been calculated using the average shares method. (7) The amount shown may not agree with the change in the aggregate gains and losses of portfolio securities due to the timing of sales and redemptions of Portfolio shares. (8) Annualized. (9) Amount represents less than $0.01 per share. See Notes to Financial Statements. 30 RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA ---------------------------------------------------------------------------------- RATIO OF OPERATING EXPENSES TO AVERAGE NET ASSETS WITHOUT FEE RATIO OF RATIO OF WAIVERS, EXPENSES REIMBURSED OPERATING NET INVESTMENT AND/OR FEES NET ASSETS, EXPENSES TO INCOME TO PORTFOLIO REDUCED BY CREDITS END OF PERIOD AVERAGE NET AVERAGE NET TURNOVER ALLOWED BY THE TOTAL RETURN(2) (IN 000'S) ASSETS(3) ASSETS RATE CUSTODIAN(3)(4) --------------- ------------- ----------- -------------- --------- ---------------------------- STRATEGIC GROWTH PORTFOLIO CLASS A 10/31/03 25.24% $298,852 1.13% 0.30% 7% 1.13% 10/31/02 (15.45)% 166,354 1.13% 0.23% 10% 1.13% 10/31/01 (19.03)% 153,857 1.08% 0.34% 2% 1.08% 10/31/00 20.84% 142,241 1.06% (0.21)% 15% 1.06% 10/31/99 39.55% 74,678 1.07% (0.21)% 20% 1.09% CLASS B 10/31/03 24.35% 484,656 1.88% (0.45)% 7% 1.88% 10/31/02 (16.04)% 350,982 1.87% (0.51)% 10% 1.87% 10/31/01 (19.70)% 384,566 1.84% (0.42)% 2% 1.84% 10/31/00 19.95% 363,910 1.81% (0.96)% 15% 1.81% 10/31/99 38.60% 130,522 1.83% (0.97)% 20% 1.85% CLASS C 10/31/03 24.44% 107,826 1.84% (0.41)% 7% 1.84% 10/31/02(5) (17.44)% 26,645 1.85%(8) (0.49)%(8) 10% 1.85%(8) See Notes to Financial Statements.
31 NOTES TO FINANCIAL STATEMENTS WM STRATEGIC ASSET MANAGEMENT PORTFOLIOS 1. ORGANIZATION AND BUSINESS WM Strategic Asset Management Portfolios, LLC (the "LLC") was organized under the laws of the Commonwealth of Massachusetts on March 12, 1999 as a limited liability company. The LLC is registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end management investment company. The LLC offers five portfolios: Flexible Income, Conservative Balanced, Balanced, Conservative Growth and Strategic Growth Portfolios (each a "Portfolio" and collectively, the "Portfolios"). The LLC is authorized to issue an unlimited number of shares of beneficial interest, each without par value. Each Portfolio offers three classes of shares: Class A shares, Class B shares and Class C shares. Class A shares are generally subject to an initial sales charge at the time of purchase. Certain Class A shares purchased without an initial sales charge may be subject to a contingent deferred sales charge ("CDSC") if redeemed within eighteen months from the date of purchase. Class B shares are not subject to an initial sales charge although they are generally subject to a CDSC if redeemed within five years from the date of purchase. Class C shares are subject to an initial sales charge at the time of purchase and are subject to a CDSC if redeemed within one year from the date of purchase. Each of the Portfolios invests, within certain percentage ranges, in Class I shares of various funds in the WM Group of Funds (collectively, the "Underlying Funds"). 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 Portfolios. The Advisor may alter these percentage ranges when it deems appropriate. The assets of each Portfolio will be allocated among the Underlying Funds in accordance with its investment objective based on the Advisor's outlook for the economy, the financial markets and the relative market valuations of the Underlying Funds. In addition, in order to meet liquidity needs or for temporary defensive purposes, each Portfolio may invest its assets directly in cash, stock or bond index futures, options, money market securities and certain short- term debt instruments, including repurchase agreements. 2. SIGNIFICANT ACCOUNTING POLICIES The following is a summary of significant accounting policies, in conformity with accounting principles generally accepted in the United States of America ("generally accepted accounting principles"), which are consistently followed by the Portfolios in the preparation of their financial statements. PORTFOLIO VALUATION: Investments in the Underlying Funds are valued at net asset value per Class I share of the respective Underlying Funds determined as of the close of the New York Stock Exchange on each valuation date. Short-term debt securities that mature in 60 days or less are valued at amortized cost which approximates market value. REPURCHASE AGREEMENTS: Each Portfolio may enter into 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 Portfolio would seek to use the collateral to offset losses incurred. There is potential loss to the Portfolio in the event the 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 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 broker-dealers with whom each Portfolio enters into repurchase agreements. SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities transactions are recorded on a trade date basis. Realized gains and losses from securities sold are recorded on the identified cost basis. 32 NOTES TO FINANCIAL STATEMENTS (CONTINUED) WM STRATEGIC ASSET MANAGEMENT PORTFOLIOS Interest income on debt securities is accrued daily. Dividend income is recorded on the ex-dividend date. Each Portfolio's investment income and realized and unrealized gains and losses are allocated among the classes of that Portfolio based upon the relative average net assets of each class. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS: Dividends from net investment income of the Flexible Income, Conservative Balanced, Balanced and Conservative Growth Portfolios are declared and paid quarterly. Dividends from any net investment income of the Strategic Growth Portfolio are declared and paid annually. Distributions of any net capital gains earned by a 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 Portfolio may be made at the discretion of the Board of Trustees in accordance with federal income tax regulations. Distributions from income and capital gains 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 investments held by the Portfolios, redesignated distributions and differing characterization of distributions made by each Portfolio. At October 31, 2003, the following adjustments have been reflected in the components of net assets on the "Statements of Assets and Liabilities" to present these balances on an income tax basis, excluding certain temporary differences:
DECREASE DECREASE UNDISTRIBUTED ACCUMULATED DECREASE NET INVESTMENT NET REALIZED PAID-IN CAPITAL LOSS LOSS (000S) (000S) (000S) --------------- -------------- ------------ Flexible Income Portfolio $(1,678) $ -- $ 1,678 Balanced Portfolio (8,559) -- 8,559 Conservative Growth Portfolio (6,070) 31 6,039 Strategic Growth Portfolio (2,231) 461 1,770
The above adjustments are not reflected in the calculation of net investment income per share presented in the Financial Highlights. FEDERAL INCOME TAXES: It is each 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 and by distributing substantially all of its earnings to its shareholders. Therefore, no federal income or excise tax provision is required. EXPENSES: General expenses of the LLC are allocated to all the Portfolios based upon the relative average net assets of each Portfolio except printing and postage expenses, which are allocated to all the Portfolios based upon the relative number of shareholder accounts of each Portfolio. In addition, the Portfolios will indirectly bear their prorated share of expenses of the Underlying Funds. Operating expenses directly attributable to a class of shares are charged to the operations of that class of shares. Expenses of each Portfolio not directly attributable to the operations of any class of shares are prorated among the classes to which the expenses relate based on the relative average net assets of each class of shares. USE OF ESTIMATES: 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. 33 NOTES TO FINANCIAL STATEMENTS (CONTINUED) WM STRATEGIC ASSET MANAGEMENT PORTFOLIOS 3. INVESTMENT ADVISORY AND OTHER TRANSACTIONS WM Advisors serves as investment advisor to the LLC. As such, 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 monthly fee at an annual rate of 0.65% of each Portfolio's average daily net assets up to $1 billion, 0.60% of the next $2 billion of each Portfolio's average daily net assets and 0.55% of each Portfolio's average daily net assets over $3 billion. The Advisor has voluntarily waived $73,786 of its advisory fees for the Conservative Balanced Portfolio for the year ended October 31, 2003. WM Shareholder Services, Inc. (the "Transfer Agent"), a wholly-owned subsidiary of Washington Mutual, serves as the transfer agent of the Portfolios. Fees were paid to the Transfer Agent for services related to the issuance and transfer of shares, maintaining shareholder lists, and issuing and mailing distributions and reports. The authorized annual shareholder servicing fee is $19.68 for Class A, Class B and Class C shareholder accounts, with the exception of the Flexible Income Portfolio, for which the fee is $20.21. Prior to December 1, 2002, the authorized annual shareholder servicing fee was $20.52 for Class A, Class B and Class C shareholder accounts, with the exception of the Flexible Income Portfolio, for which the fee was $22.70. Custodian fees for certain Portfolios have been reduced by credits allowed by the custodian for uninvested cash balances. The Portfolios could have invested this cash in income producing investments. Fees reduced by credits allowed by the custodian for the year ended October 31, 2003 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 LLC for serving as an officer or Trustee of the LLC. The LLC, together with other mutual funds advised by WM Advisors, pays each Trustee who is not an officer or employee of Washington Mutual or its subsidiaries, a per annum retainer plus attendance fees for each meeting at which they are present. The Lead Trustee, Committee Chairs and Committee Members receive additional remuneration for these services to the LLC. Trustees are also reimbursed for travel and out-of-pocket expenses. Each Trustee serves in the same capacity for all 40 funds within the WM Group of Funds. 5. DISTRIBUTION PLANS WM Funds Distributor, Inc. (the "Distributor"), a registered broker-dealer and a wholly-owned subsidiary of Washington Mutual, serves as distributor for Class A, Class B and Class C shares of the Portfolios. For the year ended October 31, 2003, the Distributor has received $2,904,612 representing commissions (front end sales charges) on Class A and Class C shares and $5,224,345 representing CDSCs on Class A, Class B and Class C shares. Each of the Portfolios has adopted three distribution plans, pursuant to Rule 12b-1 under the 1940 Act, applicable to Class A, Class B and Class C shares of the Portfolio (each, a "Rule 12b-1 Plan"), respectively. Under the applicable Rule 12b-1 Plans, the Distributor may receive a service fee at an annual rate of 0.25% of the average daily net assets of each class. In addition, the Distributor is paid a fee as compensation in connection with the offering and sale of Class B and Class C shares at an annual rate of 0.75% of the average daily net assets of each class. These fees may be used to cover the expenses of the Distributor primarily intended to result in the sale of such shares, including payments to the Distributor's representatives or others for selling shares. The service fee is paid by the Portfolio to the Distributor, which in turn, pays a portion of the service fee to broker/dealers that provide services, such as accepting telephone inquiries and transaction requests and processing correspondences, new account applications and subsequent purchases for the shareholders. Under their terms, each Rule 12b-1 plan shall remain in effect from year to year, provided such continuance is approved annually by vote of the Board of Trustees, including a majority of those Trustees who are not "interested persons" of the LLC, as defined in the 1940 Act, and who have no direct or indirect financial interest in the operation of such distribution plans, or any agreements related to such plans, respectively. 34 NOTES TO FINANCIAL STATEMENTS (CONTINUED) WM STRATEGIC ASSET MANAGEMENT PORTFOLIOS 6. PURCHASES AND SALES OF INVESTMENTS The aggregate cost of purchases and proceeds from sales of Underlying Funds for the year ended October 31, 2003, are as follows:
PURCHASES SALES NAME OF PORTFOLIO (000S) (000S) ----------------- --------- ------ Flexible Income Portfolio $225,669 $ 13,780 Conservative Balanced Portfolio 149,776 6,050 Balanced Portfolio 685,928 71,072 Conservative Growth Portfolio 456,694 85,379 Strategic Growth Portfolio 232,932 43,569
7. CAPITAL LOSS CARRYFORWARDS At October 31, 2003, the following Portfolios have available for federal income tax purposes unused capital losses as follows:
(IN THOUSANDS) -------------------------------------- EXPIRING EXPIRING EXPIRING EXPIRING IN 2008 IN 2009 IN 2010 IN 2011 -------- -------- -------- ------- Conservative Balanced Portfolio $11 $ -- $ -- $45 Balanced Portfolio -- 4,005 2,892 -- Conservative Growth Portfolio -- -- 6,370 -- Strategic Growth Portfolio -- -- 8,026 --
8. COMPONENTS OF DISTRIBUTABLE EARNINGS At October 31, 2003, the components of distributable earnings on a tax basis are as follows:
(IN THOUSANDS) ------------------------------------------------------------------------------ FLEXIBLE CONSERVATIVE CONSERVATIVE STRATEGIC INCOME BALANCED BALANCED GROWTH GROWTH PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO ---------- ---------- ---------- ---------- ---------- Gross tax unrealized appreciation $ 27,124 $ 12,102 $ 75,775 $ 49,550 $ 36,446 Gross tax unrealized depreciation (95) (629) (3,625) (30,295) (76,528) ---------- ---------- ---------- ---------- ---------- Net tax unrealized appreciation/ (depreciation) $ 27,029 $ 11,473 $ 72,150 $ 19,255 $ (40,082) ========== ========== ========== ========== ========== Undistributed ordinary income $ 1,974 $ 556 $ 1,815 $ -- $ -- Undistributed accumulated gains $ -- $ -- $ -- $ -- $ -- Tax Composition of Distributions: Ordinary income $ 16,632 $ 3,847 $ 23,848 $ 9,647 $ -- Long-term capital gain $ 652 $ -- $ -- $ 3,481 $ 4,516
35 NOTES TO FINANCIAL STATEMENTS (CONTINUED) WM STRATEGIC ASSET MANAGEMENT PORTFOLIOS 9. RISK FACTORS OF THE PORTFOLIOS 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. For example, 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 the Advisor 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; enter into other types of options transactions; make short sales; purchase zero coupon and payment-in-kind bonds; enter into repurchase or reverse repurchase agreements; purchase and sell "when-issued" securities and enter into "delayed-delivery" transactions; and enter into various other investment practices, each with inherent risks. In addition, the REIT Fund could be adversely impacted by economic trends in the real estate industry; the West Coast Equity Fund by economic trends in the West Coast region; and the High Yield Fund by conditions affecting issuers of lower rated debt securities. The officers and Trustees, the Advisor, the Distributor and Transfer Agent of the Portfolios serve in the same capacity for the Underlying Funds. Conflicts may arise as these persons and companies seek to fulfill their 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. 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 the 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 Advisor is committed to minimizing such impact on the Underlying Funds to the extent it is consistent with pursuing the investment objectives of the Portfolios. The Advisor may nevertheless face conflicts in fulfilling its responsibilities. The Advisor will, at all times, monitor the impact on the Underlying Funds of transactions by the Portfolios. 36 INDEPENDENT AUDITORS' REPORT To the Trustees and Shareholders of WM Strategic Asset Management Portfolios LLC We have audited the accompanying statements of assets and liabilities, including the portfolios of investments, of WM Strategic Growth Portfolio, WM Conservative Growth Portfolio, WM Balanced Portfolio, WM Conservative Balanced Portfolio and WM Flexible Income Portfolio (collectively, the "Portfolios") as of October 31, 2003, and the related statements of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for the periods presented. These financial statements and financial highlights are the responsibility of the Portfolios' management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned at October 31, 2003, by correspondence with the custodian and transfer agent. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the aforementioned Portfolios as of October 31, 2003, the results of their operations for the year then ended, the changes in their net assets for each of the two years in the period then ended, and their financial highlights for the respective stated periods, in conformity with accounting principles generally accepted in the United States of America. Deloitte & Touche LLP Boston, Massachusetts December 12, 2003 37 OTHER INFORMATION (UNAUDITED) WM STRATEGIC ASSET MANAGEMENT PORTFOLIOS YEAR ENDED OCTOBER 31, 2003 1. TAX INFORMATION The following tax information represents fiscal year end disclosures of various tax benefits passed through to shareholders at calendar year end. Of the distributions made by the Conservative Balanced Portfolio, 9.93% represents the amount of each distribution which may qualify for the dividends received deduction available to corporate shareholders. The following tax information represents fiscal year end percentages and may differ from those provided to shareholders at calendar year end, as dividend income earned by the Portfolios prior to January 1, 2003 does not qualify for the reduced tax rate. Of the distributions made by the following Portfolios, the corresponding percentages represent the amount of each distribution which qualifies for the 15% dividend income tax rate available as of January 1, 2003.
NAME OF FUND ------------ Flexible Income Portfolio 1.76% Conservative Balanced Portfolio 3.64% Balanced Portfolio 8.42% Conservative Growth Portfolio 21.07%
The above percentage may differ from those cited elsewhere in this report due to differences in the calculation of income and capital gains for generally accepted accounting principles (book) purposes and federal income tax (tax) purposes. 2. TRUSTEES AND OFFICERS INFORMATION TRUSTEES AND OFFICERS:
NAME, AGE, AND ADDRESS(1) LENGTH OF PRINCIPAL OCCUPATION(S) DURING OTHER DIRECTORSHIPS OF NON-INTERESTED TRUSTEE TIME SERVED(2) PAST 5 YEARS HELD BY TRUSTEE =================================================================================================================================== David E. Anderson Sierra Funds-8 years Retired President and CEO of GTE Children's Bureau Foundation; Upward Age 76 WM Group of California, Inc. Bound House of Santa Monica Funds-5 years (Retired May 2003) - ----------------------------------------------------------------------------------------------------------------------------------- Wayne L. Attwood, M.D. Composite Funds-11 years Retired doctor of internal Age 74 WM Group of medicine and gastroenterology. Funds-5 years - ----------------------------------------------------------------------------------------------------------------------------------- Kristianne Blake Composite Funds-3 years CPA specializing in personal Frank Russell Investment Company; Age 49 WM Group of financial and tax planning. Russell Insurance Funds; Avista Funds-5 years Corporation; St. George's School - ----------------------------------------------------------------------------------------------------------------------------------- Edmond R. Davis, Esq. Sierra Funds-8 years Partner at the law firm of Davis Braille Institute of America, Inc; Age 75 WM Group of & Whalen LLP. Children's Bureau of Southern Funds-5 years California, Children's Bureau Foundation; Fifield Manors, Inc. - ----------------------------------------------------------------------------------------------------------------------------------- Carrol R. McGinnis Griffin Funds-5 years Founder of McGinnis Investments. Baptist Foundation of Texas; Concord Age 60 WM Group of Prior to 1994, President and Chief Trust Company Funds-5 years Operating Officer of Transamerica Fund Management Company. - ----------------------------------------------------------------------------------------------------------------------------------- Alfred E. Osborne, Jr., Ph.D. Sierra Funds-7 years Senior Associate Dean of the Nordstrom Inc.; K2, Inc.; First Age 58 WM Group of Anderson Graduate School of Pacific Advisors' Capital, Crescent Funds-5 years Management at the University and New Income Funds; Equity of California Los Angeles. Marketing Inc.; Member of Investment Company Institute National Board of Governors. - ----------------------------------------------------------------------------------------------------------------------------------- Daniel L. Pavelich Composite Funds-1 year Retired Chairman and CEO of BDO Wildseed Ltd.; Catalytic, Inc.; Age 59 WM Group of Seidman, LLP. Vaagen Bros. Lumber, Inc. Funds-5 years - ----------------------------------------------------------------------------------------------------------------------------------- Jay Rockey Composite Funds-3 years Founder and Chairman of The Rockey Downtown Seattle Association; The Age 75 WM Group of Company, now Rockey, Hill & Rainier Club; WSU Foundation Funds-5 years Knowlton. - ----------------------------------------------------------------------------------------------------------------------------------- Morton O. Schapiro Griffin Funds-5 years President of Williams College Marsh & McLennan Companies Age 50 WM Group of since 2000. Prior thereto, Dean of Funds-5 years the College of Letters, Arts and (Retired February 2003) Sciences; Professor of Economics and Vice President of Planning, University of Southern California. - ----------------------------------------------------------------------------------------------------------------------------------- 38 OTHER INFORMATION (UNAUDITED) (CONTINUED) WM STRATEGIC ASSET MANAGEMENT PORTFOLIOS YEAR ENDED OCTOBER 31, 2003 NAME, AGE, AND ADDRESS(1) LENGTH OF PRINCIPAL OCCUPATION(S) DURING OTHER DIRECTORSHIPS OF NON-INTERESTED TRUSTEE TIME SERVED(2) PAST 5 YEARS HELD BY TRUSTEE =================================================================================================================================== Richard C. Yancey Composite Funds-23 years Retired Managing Director of AdMedia Partners Inc.; Czech and (Lead Trustee) WM Group of Dillon, Read & Co., an Investment Slovak American Enterprise Fund Age 77 Funds-5 years Bank now part of UBS. - ----------------------------------------------------------------------------------------------------------------------------------- NAME, AGE, AND ADDRESS(1) LENGTH OF PRINCIPAL OCCUPATION(S) DURING OTHER DIRECTORSHIPS OF INTERESTED TRUSTEE TIME SERVED(2) PAST 5 YEARS HELD BY TRUSTEE =================================================================================================================================== Anne V. Farrell Composite Funds-4 years President of the Seattle Washington Mutual, Inc.; REI Age 68 WM Group of Foundation. Funds-5 years - ----------------------------------------------------------------------------------------------------------------------------------- Michael K. Murphy Composite Funds-3 years Chairman of CPM Development Washington Mutual, Inc. Age 66 WM Group of Corporation. Funds-5 years - ----------------------------------------------------------------------------------------------------------------------------------- William G. Papesh, Composite Funds-9 years President, CEO and Director of the President and CEO WM Group of Advisor, Distributor and Transfer Age 60 Funds-5 years Agent. - ----------------------------------------------------------------------------------------------------------------------------------- POSITION(S) HELD WITH REGISTRANT NAME, AGE, AND ADDRESS(1) & PRINCIPAL OCCUPATION(S) DURING OF OFFICER LENGTH OF TIME SERVED PAST 5 YEARS =================================================================================================================================== Wendi B. Bernard Assistant Vice President Assistant Vice President of the Transfer Age 35 and Assistant Secretary since 2003. Agent. - ----------------------------------------------------------------------------------------------------------------------------------- Monte D. Calvin, CPA First Vice President of the Funds since 2002. First Vice President and Director of the Age 59 Prior to 2002, First Vice President, Chief Financial Officer Transfer Agent, Advisor and Distributor. and Treasurer since 2001. Prior to 2001, First Vice President and Chief Financial Officer. Prior to 1998, Vice President and Treasurer since 1988. - ----------------------------------------------------------------------------------------------------------------------------------- Sandy Cavanaugh Senior Vice President since 2000. Senior Vice President and Director of the Age 49 Prior to 2000, First Vice President since 1997. Distributor and Transfer Agent. - ----------------------------------------------------------------------------------------------------------------------------------- Alex Ghazanfari Vice President and Assistant Vice President and Chief Compliance Officer Age 27 Compliance Officer since 2003. of the Distributor. Prior to 2003, senior level positions with the Distributor and WM Financial Services. - ----------------------------------------------------------------------------------------------------------------------------------- Sharon L. Howells First Vice President since 2000. First Vice President, Secretary and Director Age 53 of the Advisor, Distributor, and Transfer Agent. - ----------------------------------------------------------------------------------------------------------------------------------- Jeffrey L. Lunzer, CPA Vice President, Chief Financial Vice President of the Transfer Agent. Prior Age 42 Officer and Treasurer since 2003. to 2003, senior level positions at the Columbia Funds and Columbia Management Co. - ----------------------------------------------------------------------------------------------------------------------------------- Gary Pokrzywinski First Vice President since 2001. First Vice President of the Advisor. Age 42 Prior to 2001, Vice President since 1999. - ----------------------------------------------------------------------------------------------------------------------------------- Stephen Q. Spencer First Vice President since 2001. First Vice President of the Advisor. Prior Age 45 thereto, senior level positions with Smoot, Miller, Cheney & Co. - ----------------------------------------------------------------------------------------------------------------------------------- John T. West First Vice President, Secretary and Compliance First Vice President of the Transfer Agent, Age 48 Officer since 2003. Prior to 2003, First Vice President, Advisor and Distributor. Secretary, Compliance Officer, Chief Financial Officer and Treasurer. Prior to 2002, First Vice President, Secretary and Compliance Officer. Prior to 2001, Vice President, Secretary and Compliance Officer. Prior to 1998, Secretary since 1993. - ----------------------------------------------------------------------------------------------------------------------------------- Randall L. Yoakum Senior Vice President since 2001. Senior Vice President, Director and Chief Age 43 Prior to 2001, First Vice President since 1999. Investment Officer of the Advisor and Director of the Distributor and Transfer Agent. Prior to 1999, senior positions at D.A. Davidson and Boatmen's Trust. - ----------------------------------------------------------------------------------------------------------------------------------- - ------------------ Note: The Statement of Additional Information includes additional information about Fund Trustees and Officers and is available, without charge, upon request by calling 1-800-222-5852. (1) The address for all Trustees and Officers is 1201 Third Avenue, 22nd Floor, Seattle, WA, 98101. (2) The Sierra Funds merged with the Composite Funds on March 23, 1998 to form the WM Group of Funds. The Griffin Funds merged with the WM Group of Funds on March 5, 1999. (3) Trustees are considered interested due to their affiliation with Washington Mutual, Inc. or the Funds.
39 [THIS PAGE INTENTIONALLY LEFT BLANK] This Annual Report is published for the general information of the shareholders of the WM Group of Funds. It is authorized for distribution to prospective investors only when preceded or accompanied by a current WM Group of Funds prospectus. A mutual fund's share price and investment return will vary with market conditions, and the principal value of an investment when you sell your shares may be more or less than the original cost. The WM Group of Funds are not insured by the FDIC. They are not deposits or obligations of, nor are they guaranteed by any bank. These securities are subject to investment risk; including possible loss of principal amount invested. Distributed by: WM Funds Distributor, Inc. Member NASD ITEM 2. CODE OF ETHICS The registrant has adopted a code of ethics that applies to the registrant's principal executive and senior financial officers, a copy of which is attached hereto. ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT The Board of Trustees of the registrant has determined that there is at least one Trustee who is an audit committee financial expert serving on its Audit Committee and has designated Daniel L. Pavelich as an "audit committee financial expert." Mr. Pavelich is "independent," as such term has been defined by the Securities and Exchange Commission (the "SEC") for purposes of implementing Section 407 of the Sarbanes Oxley Act of 2002. The SEC has stated that the designation or identification of a person as an audit committee financial expert pursuant to this Item 3 of Form N-CSR does not impose on such person any duties, obligations or liability that are greater than the duties, obligations and liability imposed on such person as a member of the Audit Committee and the Board of Trustees in the absence of such designation or identification. ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES Not Applicable ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS Not Applicable ITEM 6. [RESERVED] ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES Not Applicable ITEM 8. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANIES AND AFFILIATED PURCHASERS Not Applicable. Item 9. Controls and Procedures: (a) The registrant's principal executive officer and principal financial officer have concluded, based on their evaluation of the effectiveness of the design and operation of the registrant's disclosure controls and procedures as of a date within 90 days of the filing date of this report on Form N-CSR, that the design and operation of such procedures are effective to provide reasonable assurance that information required to be disclosed by the registrant in the reports that it files or submits on Form N-CSR is recorded, processed, summarized, and reported within the time periods specified in the SEC's rules and forms. (b) There have been no changes in the registrant's internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940, as amended) that occurred during the registrant's second fiscal half-year that have materially affected, or are reasonably likely to materially affect, the registrant's internal control over financial reporting. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. WM Strategic Asset Management Portfolios, LLC By: /s/William G. Papesh President and Chief Executive Officer January 8, 2004 Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. /s/Jeffrey L. Lunzer Treasurer and Chief Financial Officer January 8, 2004 /s/William G. Papesh President and Chief Executive Officer January 8, 2004 EX-99.906 CERT 3 ex906s.txt Exhibit 99.906 CERTIFICATION PURSUANT TO SECTION 1350, CHAPTER 63 OF TITLE 18, UNITED STATES CODE, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 I, William G. Papesh, President and Chief Executive Officer of Strategic Asset Management Portfolios, LLP (the "Funds"), certify that to my knowledge: 1. The Form N-CSR of the Funds for the period ended October 31, 2003 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. The information contained in the Form N-CSR of the Funds for the period ended October 31, 2003 fairly presents, in all material respects, the financial condition and results of operations of the Funds. Date: January 8, 2004 /s/William G. Papesh President and Chief Executive Officer Strategic Asset Management Portfolios, LLP CERTIFICATION PURSUANT TO SECTION 1350, CHAPTER 63 OF TITLE 18, UNITED STATES CODE, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 I, Jeffrey L. Lunzer, Treasurer and Chief Financial Officer of Strategic Asset Management Portfolios, LLP (the "Funds"), certify that to my knowledge: 1. The Form N-CSR of the Funds for the period ended October 31, 2003 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. The information contained in the Form N-CSR of the Funds for the period ended October 31, 2003 fairly presents, in all material respects, the financial condition and results of operations of the Funds. Date: January 8, 2004 /s/ Jeffrey L. Lunzer Treasurer and Chief Financial Officer Strategic Asset Management Portfolios, LLP EX-99.CERT 4 excerts.txt Exhibit 99.CERT CERTIFICATIONS -------------- I, William G. Papesh, certify that: 1. I have reviewed this report on Form N-CSR of Strategic Asset Management Portfolios, LLP; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: January 8, 2004 /s/William G. Papesh President and Chief Executive Officer CERTIFICATIONS -------------- I, Jeffrey L. Lunzer, certify that: 1. I have reviewed this report on Form N-CSR of Strategic Asset Management Portfolios, LLP; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: January 8, 2004 /s/Jeffrey L. Lunzer Treasurer and Chief Financial Officer EX-99.CODE ETH 5 ex99coe.txt Exhibit 99.COE THE WM GROUP OF FUNDS CODE OF ETHICS FOR PRINCIPAL EXECUTIVE AND SENIOR FINANCIAL OFFICERS This Code of Ethics ("Code") has been adopted by WM Trust I, WM Trust II, WM Strategic Asset Management Portfolios, LLC and WM Variable Trust (the "Trusts") on behalf of each constituent series of the Trusts (each a "Fund" and collectively, the "Funds") on August 12, 2003. The Funds' code of ethics under Rule 17j-1 under the Investment Company Act of 1940, as amended (the "Investment Company Act"), contains separate requirements for persons covered by this Code and other persons and is not part of this Code. I. COVERED OFFICERS/PURPOSE OF THE CODE This Code applies to the Trusts' President and Principal Financial Officer (the "Covered Officers" each of whom is set forth in Exhibit A) for the purpose of promoting: o honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships; o full, fair, accurate, timely and understandable disclosure in reports and documents that a Trust files with, or submits to, the Securities and Exchange Commission (the "SEC") and in other public communications made by the Trusts; o compliance with applicable laws and governmental rules and regulations; o the prompt internal reporting of violations of the Code to an appropriate person or persons identified in the Code; and o accountability for adherence to the Code. Each Covered Officer should adhere to a high standard of business ethics and should be sensitive to situations that may give rise to actual as well as apparent conflicts of interest. II. COVERED OFFICERS SHOULD HANDLE ETHICALLY ANY ACTUAL OR APPARENT CONFLICTS OF INTEREST OVERVIEW. A "conflict of interest" occurs when a Covered Officer's private interest interferes with the interests of, or his or her service to, the Trusts. For example, a conflict of interest would arise if a Covered Officer, or a member of his or her family, receives improper personal benefits as a result of the Covered Officer's position with the Trusts. Certain conflicts of interest arise out of the relationships between Covered Officers and the Trusts and already are subject to conflict of interest provisions in the Investment Company Act and the Investment Advisers Act of 1940 (the "Investment Advisers Act"). For example, Covered Officers may not individually engage in certain transactions (such as the purchase or sale of securities or other property) with the Trusts because of their status as "affiliated persons" of the Trusts. The compliance programs and procedures of WM Advisors, Inc., the Trusts' sub-advisers, WM Funds Distributor, Inc. and WM Shareholder Services, Inc. (each a "Service Provider" and, collectively, the "Service Providers") and the Trusts are reasonably designed to prevent, or identify and correct, violations of many of those provisions. This Code does not, and is not intended to, repeat or replace these programs and procedures, and such conflicts fall outside of the parameters of this Code. Although typically not presenting an opportunity for improper personal benefit, conflicts arise from, or as a result of, the contractual relationship between the Trusts and its Service Providers of which the Covered Officers are also officers or employees. As a result, this Code recognizes that the Covered Officers will, in the normal course of their duties (whether formally for the Trusts or for a Service Provider or for both), be involved in establishing policies and implementing decisions that will have different effects on the Service Providers and the Trusts. The participation of the Covered Officers in such activities is inherent in the contractual relationship between the Trusts and the Service Providers and is consistent with the performance by the Covered Officers of their duties as officers of the Trusts. Thus, if performed in conformity with the provisions of the Investment Company Act, the Investment Advisers Act, other applicable law and each Trust's organizational documents, such activities will be deemed to have been handled ethically. In addition, it is recognized by the Trusts' Trustees (the "Trustees") that the Covered Officers may also be officers or employees of one or more other investment companies covered by this or other codes. Other conflicts of interest are covered by the Code, even if such conflicts of interest are not subject to provisions in the Investment Company Act and the Investment Advisers Act. The following list provides examples of conflicts of interest under the Code, but Covered Officers should keep in mind that these examples are not exhaustive. The overarching principle is that the personal interest of a Covered Officer should not be placed improperly before the interest of the Trusts, unless the personal interest has been disclosed to and approved by the Audit Committee (the "Committee"). Each Covered Officer must: o not use his or her personal influence or personal relationships improperly to influence investment decisions or financial reporting by the Trusts whereby the Covered Officer would benefit personally to the detriment of the Trusts; o not cause the Trusts to take action, or fail to take action, for the individual personal benefit of the Covered Officer rather than benefit the Trusts; o not use material non-public knowledge of portfolio transactions made or contemplated for the Trusts to trade personally or cause others to trade personally in contemplation of the market effect of such transactions; and o complete any Trustee and Officer Questionnaire provided by the Trusts. There are some conflict of interest situations that should always be subject to approval by the Committee if material. Examples of these include: o service as a director on the board of any company; o the receipt of any non-nominal gifts valued in excess of $100; o the receipt of any entertainment from any company with which the Trusts have current or prospective business dealings unless such entertainment is business-related, reasonable in cost, appropriate as to time and place, and not so frequent as to raise any question of impropriety; 2 o any ownership interest in, or any consulting or employment relationship with, any of the Trusts' service providers, other than a Service Provider or an affiliate of a Service Provider; and o a direct or indirect financial interest in commissions, transaction charges or spreads paid by the Trusts for effecting portfolio transactions or for selling or redeeming shares other than an interest arising from the Covered Officer's employment, such as compensation or equity ownership. III. DISCLOSURE AND COMPLIANCE o No Covered Officer should knowingly misrepresent, or cause others to misrepresent, facts about the Funds to others, whether within or outside the Trusts, including to the Trustees and auditors, and to governmental regulators and self-regulatory organizations; o each Covered Officer should, to the extent appropriate within his or her area of responsibility, consult with other officers and employees of the Trusts and the Service Providers or with counsel to the Trusts with the goal of promoting full, fair, accurate, timely and understandable disclosure in the reports and documents the Funds file with, or submit to, the SEC and in other public communications made by the Funds; and o it is the responsibility of each Covered Officer to promote compliance with the standards and restrictions imposed by applicable laws, rules and regulations. IV. REPORTING AND ACCOUNTABILITY Each Covered Officer must: o upon adoption of the Code (or thereafter as applicable, upon becoming a Covered Officer), affirm in writing to the Committee that he or she has received, read, and understands the Code; o not retaliate against any other Covered Officer or any employee of the Trusts or their affiliated persons for reports of potential violations that are made in good faith; and o notify the Lead Trustee promptly if he or she knows of any violation of this Code. Failure to do so is itself a violation of this Code. The Lead Trustee has the authority to interpret this Code in any particular situation. However, any approvals or waivers sought by a Covered Officer will be considered by the Committee. The Trusts will follow these procedures in investigating and enforcing this Code: o the Lead Trustee will take all appropriate action to investigate any potential material violations reported to him; o if, after such investigation, the Lead Trustee believes that no material violation has occurred, the Lead Trustee is not required to take any further action; o any matter that the Lead Trustee believes is a material violation will be reported to the Committee; 3 o if the Committee concurs that a material violation has occurred, it will consider appropriate action, which may include review of, and appropriate modifications to, applicable policies and procedures; notification to appropriate personnel of a Service Provider or its board; or a recommendation to dismiss the Covered Officer; o the Committee will be responsible for granting waivers, as appropriate; and o any changes to or waivers of this Code will, to the extent required, be disclosed as provided by SEC rules. V. OTHER POLICIES AND PROCEDURES This Code shall be the sole code of ethics adopted by the Trusts for purposes of Section 406 of the Sarbanes-Oxley Act and the rules and forms applicable to registered investment companies thereunder. Insofar as other policies or procedures of the Trusts, Funds, or their Service Providers' govern or purport to govern the behavior or activities of the Covered Officers who are subject to this Code, they are superseded by this Code to the extent that they overlap or conflict with the provisions of this Code. The Trusts' and the Service Providers' codes of ethics under Rule 17j-1 under the Investment Company Act and the more detailed policies and procedures set forth in the Code of Ethics of the WM Group of Funds, WM Advisors, Inc., WM Funds Distributor, Inc. and Selected Employees of WM Shareholder Services, Inc. are separate requirements applying to the Covered Officers and others, and are not part of this Code. VI. AMENDMENTS Any amendments to this Code, other than amendments to Exhibit A, must be approved or ratified by a majority vote of the Trustees. VII. CONFIDENTIALITY All reports and records prepared or maintained pursuant to this Code will be considered confidential and shall be maintained and protected accordingly. Except as otherwise required by law or this Code, such matters shall not be disclosed to anyone other than the Board of Trustees and its counsel. VIII. INTERNAL USE The Code is intended solely for the internal use by the Trusts and does not constitute an admission, by or on behalf of any Fund, as to any fact, circumstance, or legal conclusion. Date: August 12, 2003 4 EXHIBIT A Persons Covered by this Code of Ethics - -------------------------------------- William G. Papesh, President and Chief Executive Officer John T. West, Secretary and Compliance Officer Jeffrey L. Lunzer, Chief Financial Officer and Principal Accounting Officer 5 -----END PRIVACY-ENHANCED MESSAGE-----