As filed with the Securities and Exchange Commission on July
2, 1997
Securities Act File No. 33-50390
Investment Company Act File No. 811-7076
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
X
Pre-Effective Amendment No.
Post-Effective Amendment No. 11 X
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 X
Amendment No. 11 X
WILSHIRE TARGET FUNDS, INC.
(Exact Name of Registrant as Specified in Charter)
c/o First Data Investor Services Group, Inc.
53 State Street
One Exchange Place
Boston, MA 02109
Registrant's Telephone Number, including Area Code: (617)
573-1575
Name and Address of Agent for Service:
Julie A. Tedesco, Esq.
Wilshire Target Funds, Inc.
c/o First Data Investor Services Group, Inc.
53 State Street
One Exchange Place
Boston, MA. 02109
It is proposed that the filing will become effective:
immediately upon filing pursuant to paragraph (b)
on __________ pursuant to paragraph (b)
60 days after filing pursuant to paragraph (a)(1)
on pursuant to paragraph (a)(1)
X 75 days after filing pursuant to paragraph (a)(2)
on pursuant to paragraph (a)(2) of Rule
485
The Registrant previously has filed a declaration of
indefinite registration of its shares pursuant to Rule 24f-2
under the Investment Company Act of 1940, as amended. The
Registrant's Rule 24f-2 Notice for the fiscal year ended
August 31, 1996 was filed on October 30, 1996.
EXPLANATORY NOTE
This Post-Effective Amendment relates only to the
establishment of the Wilshire Target Intermediate Corporate
Bond Fund and Wilshire Target Long-Term Bond Fund, series of
the Wilshire Target Funds, Inc. (the "Fund"). The
prospectuses and statements of additional information of the
Large Company Growth Portfolio, Large Company Value
Portfolio, Small Company Growth Portfolio, and Small Company
Value Portfolio, the other series of the Fund, are
incorporated by reference to Post-Effective Amendment No. 10
and are not affected by this Post-Effective Amendment.
WILSHIRE TARGET FUNDS, INC.
Wilshire Target Intermediate Corporate Bond Fund
Wilshire Target Long-Term Bond Fund
Cross-Reference Sheet Pursuant to Rule 485(a)
Part A
Item No. Prospectus Caption
1. Cover Page Cover Page
2. Synopsis Fee Table
3. Condensed Financial Information Not
Applicable
4. General Description of Registrant Description
of the Fund; Investment
Considerations and
Risks; General
Information
5. Management of the Fund Management of the
Fund
5A. Management's Discussion of Not
Applicable
Fund Performance
6. Capital Stock and Other Securities How to Buy
Fund Shares;
Shareholder
Services;
How to Redeem Fund
Shares;
Service and
Distribution Plan;
Dividends,
Distributions and
Taxes; General
Information
7. Purchase of Securities How to Buy
Fund Shares Being Offered
8. Redemption or Repurchase How to
Redeem Fund Shares
9. Pending Legal Proceedings Not
Applicable
Part B.
Item No. Statement of
Additional Information Caption
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information and History
General Information and History
13. Investment Objectives and Policies Investment
Objective and
Management
Policies
14. Management of the Registrant Management
of the Fund
15. Control Persons and Principal Management
of the Fund;
Holders of Securities Investment
Advisory and
Administration
Agreements
16. Investment Advisory and Other Investment
Advisory and
Services Administration
Agreements;
Service and
Distribution Plan;
Custodian,
Transfer and Dividend
Disbursing Agent,
Counsel and
Independent
Accountants
17. Brokerage Allocation Portfolio
Transactions
18. Capital Stock and Other Securities Information
about the Fund
19. Purchase, Redemption and Pricing Purchase of
Fund Shares;
of Purchase, Redemption and Redemption
of Fund Shares;
Securities Being Offered
Shareholder Services;
Determination of
Net Asset Value;
20. Tax Status Dividends,
Distributions and Taxes
21. Underwriters Management
of the Fund
22. Calculation of Performance Data Performance
Information
23. Financial Statements Not
Applicable
PROSPECTUS ___________________, 1997
WILSHIRE TARGET FUNDS, INC.
Wilshire Target Intermediate Corporate Bond Portfolio
Wilshire Target Long-Term Corporate Bond Portfolio
(Institutional Class Shares)
(http:/www.wilfunds.com)
Wilshire Target Funds, Inc. (the "Fund") is an open-
end investment company, known as a mutual fund. This
prospectus offers Institutional Class shares ("Shares") in
each of two separate diversified portfolios (each, a
"Portfolio"): Intermediate Corporate Bond Portfolio
("Intermediate Bond Portfolio") and Long-Term Corporate Bond
Portfolio ("Long-Term Bond Portfolio"). The goal of each
Portfolio is to provide as high a level of current income as
is consistent with prudent risk of capital. See
"Description of the Fund-Investment Approach."
Wilshire Associates Incorporated ("Wilshire") serves
as the Fund's investment adviser. First Data Investor
Services Group, Inc. ("Investor Services Group") serves as
the Fund's administrator and transfer agent. First Data
Distributors, Inc. ("FDDI") serves as the Fund's
distributor.
This prospectus sets forth concisely information about
the Fund that you should know before investing. It should
be read and retained for future reference.
The Statement of Additional Information dated
_________, 1997 which may be revised from time to time,
provides a further discussion of certain areas in this
prospectus and other matters which may be of interest to
some investors. It has been filed with the Securities and
Exchange Commission ("SEC") and is incorporated herein by
reference. For a free copy, write to the Fund at P.O. Box
5170, Westborough, Massachusetts 01581-5120, or call 1-888-
200-6796. In addition, the SEC maintains a web site
(http://www.sec.gov) that contains the Statement of
Additional Information and other information regarding the
Fund.
Shares of the Fund are not deposits or obligations of,
or guaranteed or endorsed by, any financial institution, are
not insured by the Federal Deposit Insurance Corporation,
the Federal Reserve Board, or any other agency, and involve
risk, including the possible loss of principal amount
invested.
TABLE OF CONTENTS PAGE
Fee Table 2
Description of the Fund 3
Investment Considerations and Risks 3
Management of the Fund 5
How to Buy Fund Shares 6
Shareholder Services 7
How to Redeem Fund Shares 8
Dividends, Distributions and Taxes 10
Performance Information 11
General Information 11
Appendix A 13
Appendix B 16
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The following table illustrates the expenses and fees expected to be
incurred by the Portfolios for the current fiscal year.
FEE TABLE
I
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a
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B
o
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d
P
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f
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- -
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B
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P
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f
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Annual Fund
Operating
Expenses:
(as a percentage
of average daily
net assets)
Management
Fees (after
waivers)*
0
%
0
%
Other
Expenses**
.
3
6
%
.
6
0
%
=
=
=
=
=
=
=
=
Total Fund
Operating
Expenses***
.
3
6
%
.
6
0
%
* Reflects voluntary waivers of advisory fees which are expected to
continue in effect until at least one year from the date of this Prospectus.
Absent such voluntary waivers, the ratio of advisory fees to average net
assets would be 0.25% for both the Intermediate Bond Portfolio and the Long-
Term Bond Portfolio.
** Reflects voluntary waivers of accounting and administration fees which
are expected to continue in effect until at least one year from the date of
this Prospectus. Absent such voluntary waivers, the ratio of other expenses
to average net assets would be .51% and .81% for the Intermediate Bond
Portfolio and the Long-Term Bond Portfolio, respectively.
*** Absent the voluntary waivers referred to above, the ratio of total
fund operating expenses to average net assets would be .76% and 1.06% for
the Intermediate Bond Portfolio and the Long-Term Bond Portfolio,
respectively.
The purpose of the foregoing table is to assist you in understanding
the various estimated costs and expenses that the Fund and investors will
bear, the payment of which will reduce investors' annual return. "Other
Expenses" is based on estimated amounts for the current fiscal year. Actual
expenses may be greater or less than such estimates. See "Management of the
Fund - Investment Adviser."
The following example illustrates the estimated expenses that an
investor in a Portfolio would pay on a $1,000 investment over various time
periods assuming (1) a 5% annual rate of return and (2) redemption at the
end of each time period.
Example:
I
n
t
e
r
m
e
d
i
a
t
e
L
o
n
g
- -
T
e
r
m
B
o
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d
P
o
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t
f
o
l
i
o
B
o
n
d
P
o
r
t
f
o
l
i
o
1 Year
$
4
$
6
3 Years
$
1
2
$
1
9
The amounts listed in the example should not be considered as
representative of past or future expenses and actual expenses may be greater
or less than those indicated. Moreover, while the example assumes a 5%
annual return, each Portfolio's performance will vary and may result in an
actual return greater or less than 5%.
You can purchase Shares without charge directly from FDDI; you may be
charged a nominal fee if you effect transactions in Fund Shares through a
securities dealer, bank or other financial institution. See "Management of
the Fund."
DESCRIPTION OF THE FUND
Investment Objective - The goal of each Portfolio is to provide as high a
level of current income as Wilshire believes is consistent with prudent risk
of capital. There can be no assurance that a Portfolio's investment
objective will be achieved.
Management Policies
Wilshire will consider the total rate of return on the securities in
managing each Portfolio. Each Portfolio may invest in corporate debt
obligations, such as bonds and debentures, obligations convertible into
common stock and taxable municipal securities. Neither Portfolio will
invest in common stock, and any common stock received through the conversion
of convertible debt obligations will be sold in an orderly manner as soon as
practicable. Under normal market and economic conditions, the Intermediate
Bond Portfolio will maintain a dollar-weighted average portfolio maturity
between five and ten years and the Long-Term Bond Portfolio will maintain a
dollar-weighted average portfolio maturity greater than ten years.
Each Portfolio will invest, under normal market and economic
conditions, at least 80% of its assets in corporate debt obligations rated,
at the time of purchase, "BB" or better by Standard's & Poor's Ratings
Group, a division of McGraw-Hill Companies ("S&P") or "Ba" or better by
Moody's Investors Service, Inc. ("Moody's") (or which, if unrated, are
determined by Wilshire to be of comparable quality). Unrated securities
will be determined to be of comparable quality to rated debt obligations if,
among other things, other outstanding obligations of the issuers of such
securities are rated BB or Ba or better.
Securities rated "BB" by S&P or "Ba" by Moody's are below investment-
grade securities, sometimes referred to as "high yield" or "junk" bonds.
These securities are considered speculative investments by the major credit
rating agencies. High yield bonds involve a greater risk of default and
price volatility than U.S. Government bonds and other high quality fixed-
income securities. Please refer to "Investment Considerations and Risks"
for further information.
In addition to corporate bonds, debentures and convertible
obligations, and taxable municipals, each Portfolio may invest in a variety
of other securities consistent with its investment objective and the
policies described above. These other investments may include variable and
floating rate securities, asset-backed securities, stripped securities,
zero-coupon bonds and when-issued, forward commitments and delayed
settlement transactions.
Notwithstanding the foregoing, for temporary defensive purposes, each
Portfolio may invest up to 100% of its assets in cash or "money market"
instruments or invest all or a substantial portion of its assets in
obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities. In addition, each Portfolio may lend its portfolio
securities. See also "Investment Considerations and Risks" below and
"Investment Objective and Management Policies" in the Statement of
Additional Information.
INVESTMENT CONSIDERATIONS AND RISKS
General - Each Portfolio's net asset value is not fixed and should be
expected to fluctuate. You should consider a Portfolio as a supplement to
or single component of an overall investment program and should invest only
if you are willing to undertake the risks involved. See "Investment
Objective and Policies - Management Policies" in the Statement of Additional
Information for a further discussion of certain risks.
Except as otherwise indicated, each Portfolio's investment objectives
and policies are not fundamental and may be changed without a vote of
shareholders. There can be no assurance that the Portfolios' objectives
will be met.
Debt securities fluctuate in value and such fluctuations can be
pronounced. Changes in the value of a Portfolio's investment securities
will result in changes in the value of such Portfolio's Shares and thus the
Portfolio's total return to investors.
Investments by a Portfolio in debt securities are subject to interest
rate risk, which is the risk that increases in market interest rates will
adversely affect a Portfolio's investments in debt securities. The value of
a Portfolio's investments in debt securities will tend to decrease when
interest rates rise and increase when interest rates fall. In general,
longer-term debt instruments tend to fluctuate in value more than shorter-
term debt instruments in response to interest rate movements. In addition,
debt securities which are not backed by the United States Government are
subject to credit risk, which is the risk that the issuer may not be able to
pay principal and/or interest when due.
Lower Rated Securities - Debt securities which are rated below investment-
grade (hereinafter referred to as "lower rated securities") or which are
unrated, but deemed equivalent to those rated below investment-grade by
Wilshire, generally offer a higher current yield than that available from
higher grade issues, but typically involve greater risk. The lower the
ratings of such debt securities, the greater their risks. The yields on
high yield/high risk bonds will fluctuate over time. Lower rated and
unrated securities are especially subject to adverse changes in general
economic conditions and to changes in the financial condition of their
issuers. During the periods of economic downturn or rising interest rates,
issuers of these instruments may experience financial stress that could
adversely affect their ability to make payments of principal and interest
and increase the possibility of default.
Adverse publicity and investor perceptions, whether or not based on
fundamental analysis, may also decrease the values and liquidity of these
securities especially in a market characterized by only a small amount of
trading. In cases where market quotations are not available, lower rated
securities are valued using guidelines established by the Fund's Board of
Directors. Perceived credit quality in this market can change suddenly and
unexpectedly, and may not fully reflect the actual risk posed by a
particular lower rated or unrated security.
Credit quality in the high yield securities market can change suddenly
and unexpectedly, and even recently issued credit ratings may not fully
reflect the actual risks posed by a particular high-yield security. For
these reasons, Wilshire does not exclusively rely on the ratings issued by
established credit rating agencies, but supplements such ratings with its
own independent and on-going review of credit quality. The achievement of a
Portfolio's investment objective by investment in such securities may be
more dependent on Wilshire's credit analysis than is the case for higher
quality bonds. Should the rating of a portfolio security be downgraded,
Wilshire will determine whether it is in the best interest of the Portfolio
to retain or depose of such security.
For a more complete description of the risks of high yield/high risk
securities and for further information concerning debt securities ratings
please refer to Appendix B of this Prospectus.
Simultaneous Investments - Investment decisions for each Portfolio are made
independently from those of other investment companies and accounts advised
by Wilshire. However, if such other investment companies or accounts are
prepared to invest in, or desire to dispose of, securities of the type in
which a Portfolio invests at the same time as such Portfolio, available
investments or opportunities for sales will be allocated equitably to each.
In some cases, this procedure may adversely affect the size of the position
obtained for or disposed of by the Portfolio or the price paid or received
by the Portfolio.
MANAGEMENT OF THE FUND
Investment Adviser - Wilshire, located at 1299 Ocean Avenue, Santa Monica,
California 90401-1085, was formed in 1972 and serves as the Fund's
investment adviser. As of May 31, 1997, Wilshire managed approximately $7.8
billion in assets. Under the terms of an Investment Advisory Agreement with
the Fund, Wilshire, subject to the overall authority of the Fund's Board of
Directors in accordance with Maryland law, manages the investment of the
assets of each Portfolio. The Portfolios' primary portfolio manager is
Edgar A. Robie, Jr. a Director of Fixed Income Management and Principal at
Wilshire. Mr. Robie has been employed by Wilshire since October, 1994. Mr.
Robie is directly involved in the design and management of various fixed
income products and his diverse background includes over 24 years of
investment experience. Wilshire also provides research services for the
Portfolios through a professional staff of portfolio managers and securities
analysts. Prior to October, 1994, Mr. Robie was a consultant for plan
sponsors concerning the management of ERISA and operating assets with Callan
Associates, a consultant for the management of a large pension plan with LTV
Corporation, and Chief Strategist with Western Asset Management Company, a
leading fixed-income manager. Wilshire is controlled by its President, Mr.
Dennis Tito, who owned a majority of its outstanding voting stock as of May
31, 1997.
Pursuant to the terms of the Investment Advisory Agreement, dated
_________, 1997 (the "Advisory Agreement"), Wilshire is entitled to receive
from the Fund a monthly fee at the annual rate of .25 of 1% of the value of
each Portfolio's average daily net assets. Wilshire has agreed to waive its
fee, however, until at least one year from the date of this Prospectus.
Administrator - Investor Services Group, a subsidiary of First Data
Corporation, 53 State Street, Boston, Massachusetts 02109, serves as the
Fund's administrator pursuant to an Administration Agreement with the Fund.
Under the terms of the Administration Agreement, Investor Services Group
generally assists in all aspects of the Fund's operations, other than
providing investment advice, subject to the overall authority of the Fund's
Board of Directors in accordance with Maryland law. Pursuant to the terms
of the Administration Agreement, dated May 31, 1996, Investor Services Group
is entitled to receive from the Fund a fee, computed daily and paid monthly,
at the annual rate of .15% of 1% of the Fund's monthly average net assets up
to aggregate net assets of $1 billion, .10% of 1% of such value on the next
$4 billion and .08% of 1% on excess net assets. In addition, Investor
Services Group is entitled to receive from the Fund an annual fee of $25,000
per each Portfolio and $2,000 for each additional class.
Custodian and Transfer and Dividend Disbursing Agent - The Northern Trust
Company, an Illinois trust company located at 50 South LaSalle Street,
Chicago, Illinois 60675, is the custodian of the Fund's investments.
Investor Services Group is also the Fund's Transfer and Dividend Disbursing
Agent (the "Transfer Agent").
Distributor - FDDI, 4400 Computer Drive, Westborough, Massachusetts 01581,
serves as the distributor of the Shares. FDDI is an indirect wholly-owned
subsidiary of First Data Corporation. FDDI is not compensated for its
services as distributor.
Expenses - From time to time, Wilshire or Investor Services Group may waive
receipt of its fees and/or voluntarily assume certain expenses of the Fund
or a Portfolio, which would have the effect of lowering the overall expense
ratio of the Fund or Portfolio and increasing yield to investors at the time
such amounts are waived or assumed, as the case may be. The Fund will not
pay Wilshire or Investor Services Group for any amounts which may be waived,
nor will the Fund reimburse Wilshire or Investor Services Group for any
amounts which may be assumed. FDDI, Wilshire or Investor Services Group may
bear expenses of distribution of the shares of a Portfolio or of the
provision of shareholder services to a Portfolio's shareholders, including
payments to securities dealers or other financial intermediaries or service
providers, out of its profits and available resources other than the
advisory and administration fees paid by the Fund.
All expenses incurred in the operation of the Fund are borne by the
Fund, except to the extent specifically assumed by FDDI, Wilshire or
Investor Services Group. The expenses borne by the Fund include:
organizational costs, taxes, interest, brokerage fees and commissions, if
any, fees of Directors who are not officers, directors, employees or holders
of 5% or more of the outstanding voting securities of FDDI, Wilshire or
Investor Services Group or any of their affiliates, SEC fees, state Blue Sky
qualification fees, advisory and administration fees, charges of custodians,
transfer and dividend disbursing agents' fees, certain insurance premiums,
industry association fees, outside auditing and legal expenses, costs of
maintaining the Fund's existence, costs of independent pricing services,
costs attributable to investor services (including, without limitation,
telephone and personnel expenses), costs of shareholders' reports and
meetings, costs of preparing and printing prospectuses and statements of
additional information for regulatory purposes and for distribution to
existing shareholders, and any extraordinary expenses. Expenses
attributable to a particular class of shares or Portfolio are charged
against the assets of that class or Portfolio. Other expenses of the Fund
are allocated between the Portfolios on the basis determined by the Board of
Directors, including, but not limited to, proportionately in relation to the
net assets of each Portfolio.
HOW TO BUY FUND SHARES
Shares are offered exclusively to institutional investors, such as
employee benefit plans, other tax-exempt institutions, corporations and
other institutional buyers. Shares are sold without a sales charge. You
may be charged a nominal fee if you effect transactions in Portfolio Shares
through a securities dealer, bank or other financial institution. Share
certificates are issued only upon your written request. No certificates are
issued for fractional Shares. The Fund reserves the right to reject any
purchase order.
The minimum initial investment in the Shares of a Portfolio is
$5,000,000. Subsequent investments must be at least $100,000. The initial
investment must be accompanied or preceded by the Fund's Account
Application. The Fund reserves the right to vary the initial and subsequent
investment minimum requirements at any time.
You may purchase Shares by check or wire. Checks should be made
payable to "Wilshire Target Funds, Inc." For subsequent investments, your
Fund account number should appear on the check. Payments which are mailed
should be sent to Wilshire Target Funds, Inc., P.O. Box 5170, Westborough,
Massachusetts 01581-5120, together with your investment slip or, when
opening a new account, your Institutional Class shares Account Application,
indicating the name of the Portfolio being purchased. Neither initial nor
subsequent investments may be made by third party check.
Wire payments may be made if your bank account is in a commercial bank
that is a member of the Federal Reserve System or any other bank having a
correspondent bank in New York City. Immediately available funds may be
transmitted by wire to Boston Safe Deposit and Trust Company (ABA
#011001234), together with the name of the Fund and the Fund's DDA number,
065-587, for purchase of Shares in your name. The wire must include your
Fund account number (for new accounts, your Taxpayer Identification Number
("TIN") should be included instead), account registration and dealer number,
if applicable. If your initial purchase of Fund Shares is by wire, please
call 1-888-200-6796 after completing your wire payment to obtain your Fund
account number. Please include your Fund account number on the Fund's
Account Application and promptly mail the Account Application to the Fund,
as no redemptions will be permitted until the Account Application is
received. You may obtain further information about remitting funds in this
manner from your bank. All payments should be made in U.S. dollars and, to
avoid fees and delays, should be drawn only on U.S. banks. A charge will be
imposed if any check used for investment in your account does not clear.
The Fund makes available to certain large institutions the ability to issue
purchase instructions through compatible computer facilities.
Subsequent investments also may be made by electronic transfer of
funds from an account maintained in a bank or other domestic financial
institution that is an Automated Clearing House member. You must direct the
institution to transmit immediately available funds through the Automated
Clearing House to Boston Safe and Trust Deposit Company with instructions to
credit your Fund account. The instructions must specify your Fund account
registration and your Fund account number preceded by the digits "___" or
"___" for Intermediate Bond Portfolio or Long-Term Bond Portfolio,
respectively.
Shares of each Portfolio are sold on a continuous basis at the net
asset value per share next determined after an order in proper form is
received by the Transfer Agent. Net asset value per share of each class of
shares is determined as of the close of trading on the floor of the New York
Stock Exchange (currently 4:00 p.m., New York time), on each day the New
York Stock Exchange is open for business. Net asset value per share of a
class of shares of a Portfolio is computed by dividing the value of the net
assets attributable to that class of shares (i.e., the value of the assets
attributable to that class less liabilities attributable to that class) by
the total number of shares of that class outstanding. Each Portfolio's
investments are valued based on market value or, where market quotations are
not readily available, based on fair value as determined in good faith by
the Board of Directors. For further information regarding the methods
employed in valuing Fund investments, see "Determination of Net Asset Value"
in the Statement of Additional Information.
Federal regulations require that you provide a certified TIN upon
opening or reopening an account. See "Dividends, Distributions and Taxes"
and the Fund's Account Application for further information concerning this
requirement. Failure to furnish a certified TIN to the Fund could subject
you to a $50 penalty imposed by the Internal Revenue Service (the "IRS").
SHAREHOLDER SERVICES
Portfolio Exchanges - You may purchase, in exchange for shares of a
Portfolio, shares of the same class of the other Portfolio or one of the
other portfolios offered by the Fund, to the extent such shares are offered
for sale in your state of residence. If you desire to use this service,
please call 1-888-200-6796 to determine if it is available and whether any
conditions are imposed on its use.
To request an exchange, you must give exchange instructions to the
Transfer Agent in writing. Except in the case of personal retirement plans,
the shares being exchanged must have a current value of at least $100,000;
furthermore, when establishing a new account by exchange, the shares being
exchanged must have a value of at least the minimum initial investment
required for the Portfolio into which the exchange is being made (currently,
$5,000,000). The ability to issue exchange instructions by telephone is
given to all Fund shareholders automatically, unless you check the
applicable "No" box on the Account Application, indicating that you
specifically refuse this privilege. The Telephone Exchange Privilege may be
established for an existing account by written request, signed by all
shareholders on the account, or by a separate signed Shareholder Services
Form, also available by calling 1-888-200-6796. If you have established the
Telephone Exchange Privilege, you may telephone exchange instructions by
calling 1-888-200-6796. See "How to Redeem Fund Shares - Procedures." Upon
an exchange into a new account, the following shareholder services and
privileges, as applicable and where available, will be automatically carried
over to the Portfolio into which the exchange is made: Telephone Exchange
Privilege, Wire Redemption Privilege, Telephone Redemption Privilege, and
the dividend and capital gain distribution option selected by the investor.
Shares will be exchanged at their next determined net asset value. No
fees currently are charged to shareholders directly in connection with
exchanges, although the Fund reserves the right, upon not less than 60 days'
written notice, to charge shareholders a nominal fee in accordance with
rules promulgated by the SEC. The Fund reserves the right to reject any
exchange request in whole or in part. The availability of exchanges may be
modified or terminated at any time upon notice to shareholders.
The exchange of Shares of one Portfolio for Shares of another is
treated for Federal income tax purposes as a sale of the Shares given in
exchange by the shareholder and, therefore, an exchanging shareholder may
realize a taxable gain or loss.
Retirement Plans - The Fund offers a variety of pension and profit-sharing
plans. Plan support services also are available. To obtain details on
available plans, please call the following toll-free number: 1-888-200-6796.
HOW TO REDEEM FUND SHARES
General - You may request redemption of your Shares at any time.
Redemption requests should be transmitted in accordance with the procedures
described below. When a request is received in proper form, the Fund will
redeem the Shares at the next determined net asset value.
Securities dealers, banks and other financial institutions may charge
a nominal fee for effecting redemptions of a Portfolio's Shares. Any
certificates representing a Portfolio's Shares being redeemed must be
submitted with the redemption request. The value of the Shares redeemed may
be more or less than their original cost, depending upon the Portfolio's
then-current net asset value.
The Fund ordinarily will make payment for all Shares redeemed within
seven days after receipt by the Transfer Agent of a redemption request in
proper form, except as provided by the rules of the SEC.
However, if you have purchased a Portfolio's shares by check and
subsequently submit a written redemption request to the Transfer Agent, the
redemption proceeds will be transmitted to you promptly upon bank clearance
of your purchase check, which may take up to eight business days or more.
In addition, the Fund will reject requests to redeem shares by wire or
telephone for a period of eight business days after receipt by the Transfer
Agent of the purchase check against which such redemption is requested.
These procedures will not apply if your shares were purchased by wire
payment, or if you otherwise have a sufficient collected balance in your
account to cover the redemption request. Prior to the time any redemption
is effective, dividends on such shares will accrue and be payable, and you
will be entitled to exercise all other rights of beneficial ownership.
Fund Shares will not be redeemed until the Transfer Agent has received
your Account Application.
The Fund reserves the right to redeem your account(s) at its option
upon not less than 45 days' written notice if the aggregate net asset value
of all of your accounts in the Portfolios is $2,000,000 or less and remains
so during the notice period.
Procedures - You may redeem Shares by using the regular redemption procedure
through the Transfer Agent, or, if you have checked the appropriate box and
supplied the necessary information on the Account Application or have filed
a Shareholder Services Form with the Transfer Agent, through the Wire
Redemption Privilege or the Telephone Redemption Privilege. The Fund
reserves the right to refuse any request made by wire or telephone,
including requests made shortly after a change of address, and may limit the
amount involved or the number of such requests. The Fund may modify or
terminate any redemption privilege at any time or charge a service fee upon
notice to shareholders. No such fee currently is contemplated.
You may redeem Shares by telephone if you have checked the appropriate
box on the Fund's Account Application or have filed a Shareholder Services
Form with the Transfer Agent. If you select a Telephone Redemption
Privilege or Telephone Exchange Privilege (which is granted automatically
unless you refuse it), you authorize the Transfer Agent to act on telephone
instructions from any person representing himself or herself to be you and
reasonably believed by the Transfer Agent to be genuine. The Fund will
require the Transfer Agent to employ reasonable procedures, such as
requiring a form of personal identification, to confirm that instructions
are genuine and, if it does not follow such procedures, the Fund or the
Transfer Agent may be liable for any losses due to unauthorized or
fraudulent instructions. Neither the Fund nor the Transfer Agent will be
liable for following telephone instructions reasonably believed to be
genuine.
During times of drastic economic or market conditions, you may
experience difficulty in contacting the Transfer Agent by telephone to
request a redemption or exchange of a Portfolio's Shares. In such cases, you
should consider using the other redemption procedures described herein. Use
of these other redemption procedures may result in your redemption request
being processed at a later time than it would have been if telephone
redemption had been used. During the delay, such Portfolio's net asset
value may fluctuate.
Regular Redemption - Under the regular redemption procedure, you may redeem
your Shares by written request mailed to Wilshire Target Funds, Inc., P.O.
Box 5170, Westborough, Massachusetts 01581-5120. Redemption requests must
be signed by each shareholder, including each owner of a joint account, and
each signature must be guaranteed. The Transfer Agent has adopted standards
and procedures pursuant to which signature-guarantees in proper form
generally will be accepted from domestic banks, brokers, dealers, credit
unions, national securities exchanges, registered securities associations,
clearing agencies and savings associations, as well as from participants in
the New York Stock Exchange Medallion Signature Program, the Securities
Transfer Agents Medallion Program ("STAMP"), and the Stock Exchanges
Medallion Program. If you have any questions with respect to signature-
guarantees, please call one of the telephone numbers listed under "General
Information."
Redemption proceeds of at least $1,000 will be wired to any member
bank of the Federal Reserve System in accordance with a written signature-
guaranteed request.
Wire Redemption Privilege - You may request by wire or telephone that
redemption proceeds (minimum $1,000) be wired to your account at a bank
which is a member of the Federal Reserve System, or a correspondent bank if
your bank is not a member. You also may direct that redemption proceeds be
paid by check (maximum $150,000 per day) made out to the owners of record
and mailed to your address. Redemption proceeds of less than $1,000 will be
paid automatically by check. Holders of jointly registered Fund or bank
accounts may have redemption proceeds of only up to $250,000 wired within
any 30-day period. You may telephone redemption requests by calling 1-888-
200-6796. The Statement of Additional Information sets forth instructions
for transmitting redemption requests by wire. Shares held under Keogh
Plans, IRAs or other retirement plans, and Shares for which certificates
have been issued, are not eligible for this privilege.
Telephone Redemption Privilege - You may request by telephone that
redemption proceeds (maximum $150,000 per day) be paid by check and mailed
to your address. You may telephone redemption instructions by calling 1-888-
200-6796. Shares held under Keogh Plans, IRAs or other retirement plans, and
Shares for which certificates have been issued, are not eligible for this
privilege.
DIVIDENDS, DISTRIBUTIONS AND TAXES
Each Portfolio ordinarily declares and pays dividends from its net
investment income monthly and distributes net realized capital gains, if
any, once a year, but it may make distributions on a more frequent basis to
comply with the distribution requirements of the Internal Revenue Code of
1986, as amended (the "Code"), in all events in a manner consistent with the
provisions of the 1940 Act. The Fund will not make distributions from net
realized capital gains unless capital loss carryovers, if any, have been
utilized or have expired. You may choose whether to receive dividends and
distributions in cash or to reinvest in additional Shares at net asset
value. All expenses are accrued daily and deducted before declaration of
dividends to investors.
The Fund intends to distribute substantially all of its net investment
income and net realized securities gains on a current basis. Dividends paid
by a Portfolio derived from net investment income and distributions from net
realized short-term securities gains of the Portfolio will be taxable to
U.S. shareholders as ordinary income for federal income tax purposes whether
received in cash or reinvested in additional Shares. Depending upon the
composition of a Portfolio's income, all or a portion of the dividends
derived from net investment income may qualify for the dividends received
deduction allowable to certain U.S. corporations. Distributions from net
realized long-term securities gains of a Portfolio will be taxable to U.S.
shareholders as long-term capital gains for Federal income tax purposes,
regardless of how long shareholders have held their Portfolio Shares and
whether such distributions are received in cash or reinvested in Shares.
The Code currently provides that the net capital gain of an individual
generally will not be subject to Federal income tax at a rate in excess of
28%. Dividends and distributions will generally be subject to state and
local taxes.
Dividends from net investment income and distributions from net
realized short-term securities gains paid by a Portfolio to a foreign
investor generally are subject to U.S. nonresident withholding taxes at the
rate of 30%, unless the foreign investor claims the benefit of a lower rate
specified in a tax treaty. Distributions from net realized long-term
securities gains paid by a Portfolio to a foreign investor as well as the
proceeds of any redemptions from a foreign investor's account, regardless of
the extent to which gain or loss may be realized, generally will not be
subject to any U.S. withholding tax. However, such distributions and
redemption proceeds may be subject to backup withholding, as described
below, unless the foreign investor certifies his non-U.S. residency status.
The tax consequences to foreign investors engaged in a trade or business
that is effectively connected with the United States may differ from the
foregoing.
Notice as to the tax status of your dividends and distributions will
be mailed to you annually. You also will receive periodic summaries of your
account which will include information as to dividends and distributions
from securities gains, if any, paid during the year.
Federal regulations generally require the Fund to withhold ("backup
withholding") and remit to the U.S. Treasury 31% of dividends, distributions
from net realized securities gains and the proceeds of any redemption,
regardless of the extent to which gain or loss may be realized, paid to a
shareholder if such shareholder fails to certify either that the TIN
furnished in connection with opening an account is correct or that such
shareholder has not received notice from the IRS of being subject to backup
withholding as a result of a failure to properly report taxable dividend or
interest income on a Federal income tax return. Furthermore, the IRS may
notify the Fund to institute backup withholding if the IRS determines a
shareholder's TIN is incorrect or if a shareholder has failed to properly
report taxable dividend and interest income on a Federal income tax return.
A TIN is either the Social Security number or employer identification
number of the record owner of the account. Any tax withheld as a result of
backup withholding does not constitute an additional tax imposed on the
record owner of the account, and may be claimed as a credit on the record
owner's Federal income tax return.
Each Portfolio intends to qualify as a "regulated investment company"
under the Code. Such qualification relieves a Portfolio of any liability
for Federal income tax to the extent its earnings are distributed in
accordance with applicable provisions of the Code. In addition, each
Portfolio is subject to a non-deductible 4% excise tax imposed on regulated
investment companies that fail to distribute specified percentages of their
ordinary income and capital gains net income (excess of capital gains over
capital losses). Each Portfolio intends to make sufficient distributions or
deemed distributions of its ordinary income and any capital gain net income
with respect to each year to avoid liability for this excise tax.
The foregoing is a general summary of the U.S. Federal income tax
consequences of investing in the Fund. You should consult your tax adviser
regarding specific questions as to Federal, state or local taxes.
PERFORMANCE INFORMATION
For purposes of advertising, performance may be calculated on the
basis of yield, average annual total return and/or total returns of the
Portfolios.
The "SEC yield" of each Portfolio is an annualized expression of the
net income generated by the Portfolio over a specified 30-day (one month)
period as a percentage of the Portfolio's share price on the last day of
that period. This yield is calculated according to methods required by the
SEC, and therefore may not equate to the level of income paid to
shareholders. "Total return" is the change in value of an investment in a
Portfolio for a specified period. The "average annual total return" of a
Portfolio is the average annual compound rate of return in an investment in
the Portfolio assuming the investment has been held for one-, five- and ten-
year periods (or the life of the Portfolio if shorter). "Aggregate total
return" represents the cumulative change in value of an investment in the
Portfolio for various periods. All types of total return calculations
assume that all dividends and capital gains distributions during the period
were reinvested.
Performance will vary from time to time and past results are not
necessarily representative of future results. You should remember that
performance is a function of portfolio management in selecting the type and
quality of portfolio securities and is affected by operating expenses,
market conditions and the risks associated with a Portfolio's objectives and
investment policies. Performance information, such as that described above,
may not provide a basis for comparison with other investments or other
investment companies using a different method of calculating performance.
Comparative performance information may be used from time to time in
advertising or marketing the Portfolio's Shares, including data from Lipper
Analytical Services, Inc., the Dow Jones Industrial Average, Morningstar,
Inc. and other industry publications. In addition, the Portfolios'
performance may also be compared to the performance of broad groups of
comparable mutual funds. Unmanaged indices with which the Portfolios'
performance may be compared include, but are not limited to, Lehman
Corporate Bond Index and Lehman High Yield Bond Index.
GENERAL INFORMATION
The Fund was incorporated under Maryland law on July 30, 1992, and
commenced operations on September 30, 1992. The Fund is authorized to issue
600 million shares of Common Stock with 100 million allocated to each
Portfolio and 50 million allocated to each of two classes of each Portfolio,
par value $.001 per share.
The Fund is a "series fund," which is a mutual fund divided into
separate portfolios. Each Portfolio of the Fund is treated as a separate
entity for certain matters under the 1940 Act and for other purposes, and a
shareholder of one Portfolio is not deemed to be a shareholder of any other
Portfolio. As described below, for certain matters Fund shareholders vote
together as a group; as to others they vote separately by Portfolio or by
class.
To date, the Board of Directors has authorized the creation of six
series of shares and an "Investment Class" and "Institutional Class" of
shares for each Portfolio. All consideration received by the Fund for shares
of one of the Portfolios and all assets in which such consideration is
invested will belong to that Portfolio (subject only to the rights of
creditors of the Fund) and will be subject to the liabilities related
thereto. Each share of a class of a Portfolio represents an equal
proportionate interest in the Portfolio with each other class share, subject
to the liabilities of the particular class. Each class of shares of a
Portfolio participates equally in the earnings, dividends and assets
attributable to that class. The income attributable to, and the expenses of,
one class are treated separately from those of the other classes. Shares
are fully paid and non-assessable. Should a Portfolio be liquidated, the
holders of each class are entitled to share pro rata in the net assets
attributable to that class available for distribution to shareholders. The
Board of Directors has the ability to create, from time to time, new
portfolios and additional classes without shareholder approval. Shares have
no pre-emptive or conversion rights.
Unless otherwise required by the Investment Company Act of 1940, as
amended, ordinarily it will not be necessary for the Fund to hold annual
meetings of shareholders. As a result, Fund shareholders may not consider
each year the election of Directors or the appointment of auditors.
However, pursuant to the Fund's By-Laws, the holders of at least 10% of the
shares outstanding and entitled to vote may require the Fund to hold a
special meeting of shareholders for the purpose of considering the removal
of a Director from office or for any other purpose. Fund shareholders may
remove a Director by the affirmative vote of a majority of the Fund's
outstanding voting shares. In addition, the Board of Directors will call a
meeting of shareholders for the purpose of electing Directors if, at any
time, less than a majority of the Directors then holding office have been
elected by shareholders. Each share has one vote and shares of each
Portfolio would be entitled to vote separately to approve investment
advisory agreements or changes in investment restrictions, but shares of all
Portfolios would vote together in the election of Directors or selection of
accountants. Each class of a Portfolio is also entitled to vote separately
on any matter that affects solely that class of shares, but will otherwise
vote together with all other classes of shares of the Portfolio on all other
matters on which stockholders are entitled to vote.
The Transfer Agent maintains a record of your ownership and sends
confirmations and statements of account. Certificates for shares will not
be issued unless specifically requested.
Shareholder inquiries may be made by writing to the Fund at P.O. Box
5170, Westborough, Massachusetts 01581-5120, or by calling toll free 1-888-
200-6796.
APPENDIX A
INVESTMENT TECHNIQUES
Municipal Obligations - The two principal classifications of municipal
obligations which may be held by the Portfolios are "general obligation"
securities and "revenue" securities. General obligation securities are
secured by the issuer's pledge of its full faith, credit and taxing power
for the payment of principal and interest. Revenue securities are payable
only from the revenues derived from a particular facility or class of
facilities or, in some cases, from the proceeds of a special excise tax or
other specific revenue source such as the user of the facility being
financed. Revenue securities include private activity bonds which are not
payable from the unrestricted revenues of the issuer. Consequently, the
credit quality of private activity bonds is usually directly related to the
credit standing of the corporate user of the facility involved.
Municipal obligations may also include "moral obligation" bonds, which are
normally issued by special purpose public authorities. If the issuer of
moral obligation bonds is unable to meet its debt service obligations from
current revenues, it may draw on a reserve fund, the restoration of which is
a moral commitment but not a legal obligation of the state or municipality
which created the issuer.
Opinions relating to the validity of municipal obligations and to the
exemption of interest thereon from regular Federal income tax are rendered
by bond counsel to the respective issuers at the time of issuance. Neither
the Portfolios nor Wilshire will review the proceedings relating to the
issuance of municipal obligations or the bases for such opinions.
Variable and Floating Rate Securities - The Portfolios may purchase rated
and unrated variable and floating rate instruments. These instruments may
include variable amount master demand notes that permit the indebtedness to
vary in addition to providing for periodic adjustments in the interest rate.
A Portfolio may purchase variable and floating rate instruments with stated
maturities in excess of its maturity limitations provided that the Portfolio
may demand payment of the principal of the instrument at least once within
the applicable maturity limitation on not more than thirty days' notice
(unless the instrument is issued or guaranteed by the U.S. Government or an
agency or instrumentality thereof). Unrated instruments will be determined
by Wilshire to be of comparable quality at the time of purchase to rated
instruments eligible for purchase by the Portfolios.
The absence of an active secondary market with respect to particular
variable and floating rate instruments could make it difficult for a
Portfolio to dispose of the instruments if the issuer defaulted on its
payment obligation or during periods that the Portfolio is not entitled to
exercise demand rights, and a Portfolio could, for these or other reasons,
suffer a loss with respect to such instruments. Variable and floating rate
instruments (including inverse floaters) will be subject to a Portfolio's
limitation on illiquid investments when the Portfolio may not demand payment
of the principal amount within seven days and a reliable trading market is
absent.
Mortgage-Backed and Asset-Backed Securities - The Portfolios may purchase
mortgage-backed and asset-backed securities (i.e., securities backed by
credit card receivables, automobile loans or other assets). The average
life of these securities varies with the maturities of the underlying
instruments which, in the case of mortgages, have maximum maturities of
forty years. The average life of a mortgage-backed instrument is likely to
be substantially less than the original maturity of the mortgages underlying
the securities as the result of scheduled principal payments and mortgage
prepayments. The rate of such mortgage prepayments, and hence the life of
the certificates, will be a function of current market rates and current
conditions in the relevant housing markets. In periods of falling interest
rates, the rate of mortgage prepayments tends to increase. During such
periods, the reinvestment of prepayment proceeds by a Portfolio will
generally be at lower rates than the rates that were carried by the
obligations that have been prepaid. As a result, the relationship between
mortgage prepayments and interest rates may give some high-yielding
mortgage-related securities less potential for growth in value than
conventional bonds with comparable maturities. In calculating the average
weighted maturity of each Portfolio, the maturity of mortgage-backed and
asset-backed securities will be based on estimates of average life.
The Portfolios may acquire several types of mortgage-backed
securities, including guaranteed mortgage pass-through certificates, which
provide the holder with a pro rata interest in the underlying mortgages, and
collateralized mortgage obligations ("CMOs"), which provide the holder with
a specified interest in the cash flow of a pool of underlying mortgages or
other mortgage-backed securities. Issuers of CMOs ordinarily elect to be
taxed as pass-through entities known as real estate mortgage investment
conduits ("REMICs"). CMOs are issued in multiple classes, each with a
specified fixed or floating interest rate and a final distribution date.
The relative payment rights of the various CMO classes may be structured in
a variety of ways.
Non-mortgage asset-backed securities invoke certain risks that are not
presented by mortgage-backed securities. Primarily, these securities do not
have the benefit of a security interest in the underlying collateral.
Credit card receivables are generally unsecured and the debtors are entitled
to the protection of a number of state and federal consumer credit laws,
many of which have given debtors the right to set off certain amounts owed
on the credit cards, thereby reducing the balance due.
Stripped Securities - Each Portfolio may purchase participations in trusts
that hold U.S. Treasury and agency securities (such as TIGRs and CATS) and
also may purchase Treasury receipts and other stripped securities, which
represent beneficial ownership interests in either future interest payments
or the future principal payments on U.S. Government obligations. These
instruments are issued at a discount to their "face value" and may
(particularly in the case of stripped mortgage-backed securities) exhibit
greater price volatility than ordinary debt securities because of the manner
in which their principal and interest are returned to investors.
Prepayment Risks - Mortgage-backed and asset-backed securities have yield
and maturity characteristics corresponding to the underlying assets. Unlike
traditional debt securities, which may pay a fixed rate of interest until
maturity when the entire principal amount comes due, payments on certain
mortgage-backed and asset-backed securities include both interest and a
partial payment of principal. Besides the scheduled repayment of principal,
payments of principal may result from the voluntary prepayment, refinancing,
or foreclosure of the underlying mortgage loans.
Mortgage-backed and asset-backed securities are less effective than
other types of securities as a means of "locking in" attractive long-term
interest rates. One reason is the need to reinvest prepayments of
principal; another is the possibility of significant unscheduled prepayments
resulting from declines in interest rates. These prepayments would have to
be reinvested at lower rates. As a result, these securities may have less
potential for capital appreciation during periods of declining interest
rates than other securities of comparable maturities, although they may have
a similar risk of decline in market value during periods of rising interest
rates. Prepayments may also significantly shorten the effective maturities
of these securities, especially during periods of declining interest rates.
Conversely, during periods of rising interest rates, a reduction in
prepayment may increase the effective maturities of these securities,
subjecting them to a greater risk of decline in market value in response to
rising interest rates than traditional debt securities; and, therefore,
potentially increasing the volatility of the portfolio.
At times, some of the mortgage-backed and asset-backed securities in
which a Portfolio may invest will have higher than market interest rates and
therefore will be purchased at a premium above their par value. Prepayments
may cause losses in securities purchased at a premium, as unscheduled
prepayments, which are made at par, will cause the Portfolio to experience a
loss equal to any unamortized premium.
Convertible Securities - Each Portfolio may invest in convertible
securities, which may offer higher income than the common stocks into which
they are convertible. The convertible securities into which each Portfolio
may invest consist of bonds, notes, debentures and preferred stocks, which
may be converted or exchanged at a stated or determinable exchange ratio
into underlying common stock. While convertible securities generally offer
lower yields than non-convertible debt securities of similar quality, their
prices may reflect changes in the value of the underlying common stock.
Convertible securities generally entail less credit risk than the issuer's
common stock. Each Portfolio may be required to permit the issuer of a
convertible security to redeem the security and convert it into the
underlying common stock or the cash value of the underlying common stock.
Therefore, the Portfolio may not be able to control whether the issuer of a
convertible security chooses to convert that security. If the issuer
chooses to do so, this action could have an adverse effect on the
Portfolio's ability to achieve its investment objectives. Any common stock
received through conversion of convertible debt obligations will be sold as
soon as practicable after receipt.
Zero Coupon Securities - Each Portfolio may invest in zero coupon U.S.
Treasury securities, which are Treasury Notes and Bonds that have been
stripped of their unmatured interest coupons, the coupons themselves and
receipts or certificates representing interests in such stripped debt
obligations and coupons. Each Portfolio also may invest in zero coupon
securities issued by corporations and financial institutions which
constitute a proportionate ownership of the issuer's pool of underlying U.S.
Treasury securities. A zero coupon security pays no interest to its holder
during its life and is sold at a discount to its face value at maturity.
The amount of the discount fluctuates with the market price of the security.
The market prices of zero coupon securities generally are more volatile than
the market prices of securities that pay interest periodically and are
likely to respond to a greater degree to changes in interest rates than
non-zero coupon securities having similar maturities and credit qualities.
The Portfolios will accrue income on such investments for tax and accounting
purposes, as required, and such income must be distributed to shareholders.
Because no cash is received at the time of such accruals, a Portfolio may be
required to liquidate other portfolio securities to satisfy its distribution
obligations.
When-Issued, Forward Commitment and Delayed Settlement Transactions - Each
Portfolio may purchase eligible securities on a "when-issued" basis and may
purchase or sell securities on a "forward commitment" basis. Each Portfolio
may also purchase or sell eligible securities on a "delayed settlement"
basis. When-issued and forward commitment transactions, which involve a
commitment by a Portfolio to purchase or sell particular securities with
payment and delivery taking place at a future date (perhaps one or two
months later), permit a Portfolio to lock in a price or yield on a security
it owns or intends to purchase, regardless of future changes in interest
rates. Delayed settlement describes settlement of a securities transaction
in the secondary market which will occur sometime in the future. When-
issued, forward commitment and delayed settlement transactions involve a
risk of loss if the value of the security to be purchased declines, or the
value of the security to be sold increases, before the settlement date.
Although the Portfolios will generally purchase securities with the
intention of acquiring them, the Portfolios may dispose of securities
purchased on a when-issued, forward commitment or a delayed delivery basis
before settlement when deemed appropriate by Wilshire. The Portfolios do
not intend to engage in when-issued purchases, forward commitments and
delayed settlements for speculative purposes, but only in furtherance of
their investment objectives.
No person has been authorized to give any information or to make any
representations other than those contained in this prospectus and in the
Fund's official sales literature in connection with the offer of the
Portfolios' shares, and, if given or made, such other information or
representations must not be relied upon as having been authorized by the
Fund. This prospectus does not constitute an offer in any state in which, or
to any person to whom, such offering may not lawfully be made.
APPENDIX B
Rating Information. The following is a description of the ratings
given by S&P and Moody's to corporate and municipal bonds.
S&P:
Debt rated AAA has the highest rating assigned by S&P. Capacity to
pay interest and repay principal is extremely strong. Debt rated AA has a
very strong capacity to pay interest and repay principal and differs from
the highest rated issues only in small degree. Debt rated A has a strong
capacity to pay interest and repay principal although it is somewhat more
susceptible to the adverse effects of changes in circumstances and economic
conditions than debt in higher rated categories. Debt rated BBB is regarded
as having an adequate capacity to pay interest and repay principal. Whereas
it normally exhibits adequate protection parameters, adverse economic
conditions or changing circumstances are more likely to lead to a weakened
capacity to pay interest and repay principal for debt in this category than
in higher rated categories.
Debt rated BB, B, CCC, CC and C is regarded as having predominantly
speculative characteristics with respect to capacity to pay interest and
repay principal. BB indicates the least degree of speculation and C the
highest. While such debt will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major
exposures to adverse conditions.
Debt rated BB has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or
exposure to adverse business, financial, or economic conditions which could
lead to inadequate capacity to meet timely interest and principal payments.
The BB rating category is also used for debt subordinated to senior debt
that is assigned an actual or implied BBB- rating. Debt rated B has a
greater vulnerability to default but currently has the capacity to meet
interest payments and principal repayments. Adverse business, financial, or
economic conditions will likely impair capacity or willingness to pay
interest and repay principal. The B rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied BB or BB-
rating.
Debt rated CCC has a currently identifiable vulnerability to default,
and is dependent upon favorable business, financial, and economic conditions
to meet timely payment of interest and repayment of principal. In the event
of adverse business, financial, or economic conditions, it is not likely to
have the capacity to pay interest and repay principal. The CCC rating
category is also used for debt subordinated to senior debt that is assigned
an actual or implied B or B- rating. The rating CC typically is applied to
debt subordinated to senior debt that is assigned an actual or implied CCC
rating. The rating C typically is applied to debt subordinated to senior
debt which is assigned an actual or implied CCC- rating. The C rating may
be used to cover a situation where a bankruptcy petition has been filed, but
debt service payments are continued. The rating C1 is reserved for income
bonds on which no interest is being paid. Debt rated D is in payment
default. The D rating category is used when interest payments or principal
payments are not made on the date due even if the applicable grace period
had not expired, unless S&P believes that such payments will be made during
such grace period. The D rating also will be used upon the filing of a
bankruptcy petition if debt service payments are jeopardized.
Moody's:
Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to
as "gilt edge." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized
are most unlikely to impair the fundamentally strong position of such
issues. Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally
known as high grade bonds. They are rated lower than the best bonds because
margins of protection may not be as large as in Aaa securities or
fluctuation of protective elements may be of greater amplitude or there may
be other elements present which make the long term risks appear somewhat
larger than in Aaa securities. Bonds which are rated A possess many
favorable investment attributes and are to be considered as upper medium
grade obligations. Factors giving security to principal and interest are
considered adequate but elements may be present which suggest a
susceptibility to impairment sometime in the future.
Bonds which are rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest
payments and principal security appear adequate for the present but certain
protective elements may be lacking or may be characteristically unreliable
over any great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well. Bonds
which are rated Ba are judged to have speculative elements; their future
cannot be considered as well assured. Often the protection of interest and
principal payments may be very moderate and thereby not well safeguarded
during other good and bad times over the future. Uncertainty of position
characterizes bonds in this class. Bonds which are rated B generally lack
characteristics of the desirable investment. Assurance of interest and
principal payments or of maintenance of other terms of the contract over any
long period of time may be small.
Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal
or interest. Bonds which are rated Ca represent obligations which are
speculative in a high degree. Such issues are often in default or have
other marked shortcomings. Bonds which are rated C are the lowest rated
class of bonds and issues so rated can be regarded as having extremely poor
prospects of ever attaining any real investment standing.
PROSPECTUS _______________, 1997
WILSHIRE TARGET FUNDS, INC.
Wilshire Target Intermediate Corporate Bond Portfolio
Wilshire Target Long-Term Corporate Bond Portfolio
(Investment Class Shares)
(http:/www.wilfunds.com)
Wilshire Target Funds, Inc. (the "Fund") is an open-end investment
company, known as a mutual fund. This prospectus offers Investment Class
shares ("Shares") in each of two separate diversified portfolios (each, a
"Portfolio"): Intermediate Corporate Bond Portfolio ("Intermediate Bond
Portfolio") and Long-Term Corporate Bond Portfolio ("Long-Term Bond
Portfolio"). The goal of each Portfolio is to provide as high a level of
current income as is consistent with prudent risk of capital. See
"Description of the Fund-Investment Approach."
Wilshire Associates Incorporated ("Wilshire") serves as the Fund's
investment adviser. First Data Investor Services Group, Inc. ("Investor
Services Group") serves as the Fund's administrator and transfer agent.
First Data Distributors, Inc. ("FDDI") serves as the Fund's distributor.
This prospectus sets forth concisely information about the Fund that
you should know before investing. It should be read and retained for future
reference.
The Statement of Additional Information dated _________, 1997 which
may be revised from time to time, provides a further discussion of certain
areas in this prospectus and other matters which may be of interest to some
investors. It has been filed with the Securities and Exchange Commission
("SEC") and is incorporated herein by reference. For a free copy, write to
the Fund at P.O. Box 5170, Westborough, Massachusetts 01581-5120, or call 1-
888-200-6796. In addition, the SEC maintains a web site
(http://www.sec.gov) that contains the Statement of Additional Information
and other information regarding the Fund.
Shares of the Fund are not deposits or obligations of, or guaranteed
or endorsed by, any financial institution, are not insured by the Federal
Deposit Insurance Corporation, the Federal Reserve Board, or any other
agency, and involve risk, including the possible loss of principal amount
invested.
TABLE OF CONTENTS PAGE
Fee Table 2
Description of the Fund 3
Investment Considerations and Risks 4
Management of the Fund 5
How to Buy Fund Shares 7
Shareholder Services 9
How to Redeem Fund Shares 10
Service and Distribution Plan 12
Dividends, Distributions and Taxes 13
Performance Information 14
General Information 15
Appendix A 17
Appendix B 21
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
The following table illustrates the expenses and fees
expected to be incurred by the Portfolios for the current
fiscal year.
FEE TABLE
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Annual Fund
Operating
Expenses:
(as a percentage
of average daily
net assets)
Management
Fees (after
waivers)*
0
%
0
%
12b-1 Fee
.
2
5
%
.
2
5
%
Other
Expenses**
.
3
6
%
.
6
0
%
=
=
=
=
=
=
=
=
Total Fund
Operating
Expenses***
.
6
1
%
.
8
5
%
* Reflects voluntary waivers of advisory fees which are
expected to continue in effect until at least one year from
the date of this Prospectus. Absent such voluntary waivers,
the ratio of advisory fees to average net assets would be
0.25% for both the Intermediate Bond Portfolio and Long-Term
Bond Portfolio.
** Reflects voluntary waivers of accounting and
administration fees which are expected to continue in effect
until at least one year from the date of this Prospectus.
Absent such voluntary waivers, the ratio of other expenses
to average net assets would be .76% and 1.06% for the
Intermediate Bond Portfolio and the Long-Term Bond
Portfolio, respectively.
*** Absent the voluntary waivers referred to above, the
ratio of total fund operating expenses to average net assets
would be 1.01% and 1.31% for the Intermediate Bond Portfolio
and the Long-Term Bond Portfolio, respectively.
The purpose of the foregoing table is to assist you in
understanding the various estimated costs and expenses that
the Fund and investors will bear, the payment of which will
reduce investors' annual return. "Other Expenses" is based
on estimated amounts for the current fiscal year. Actual
expenses may be greater or less than such estimates. See
"Management of the Fund - Investment Adviser."
The following example illustrates the estimated
expenses that an investor in a Portfolio would pay on a
$1,000 investment over various time periods assuming (1) a
5% annual rate of return and (2) redemption at the end of
each time period.
Example:
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B
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P
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1 Year
$
6
$
9
3 Years
$
2
0
$
2
7
The amounts listed in the example should not be
considered as representative of past or future expenses and
actual expenses may be greater or less than those indicated.
Moreover, while the example assumes a 5% annual return, each
portfolio's performance will vary and may result in an
actual return greater or less than 5%.
You can purchase Shares without charge directly from
FDDI; you may be charged a nominal fee if you effect
transactions in Fund Shares through a securities dealer,
bank or other financial institution. See "Management of the
Fund."
DESCRIPTION OF THE FUND
Investment Objective - The goal of each Portfolio is to
provide as high a level of current income as Wilshire
believes is consistent with prudent risk of capital. There
can be no assurance that a Portfolio's investment objective
will be achieved.
Management Policies
Wilshire will consider the total rate of return on the
securities in managing each Portfolio. Each Portfolio may
invest in corporate debt obligations, such as bonds and
debentures, obligations convertible into common stock and
taxable municipal securities. Neither Portfolio will invest
in common stock, and any common stock received through the
conversion of convertible debt obligations will be sold in
an orderly manner as soon as practicable. Under normal
market and economic conditions, the Intermediate Bond
Portfolio will maintain a dollar-weighted average portfolio
maturity between five and ten years and the Long-Term Bond
Portfolio will maintain a dollar-weighted average portfolio
maturity greater than ten years.
Each Portfolio will invest, under normal market and
economic conditions, at least 80% of its assets in corporate
debt obligations rated, at the time of purchase, "BB" or
better by Standard's & Poor's Ratings Group, a division of
McGraw-Hill Companies ("S&P") or "Ba" or better by Moody's
Investors Service, Inc. ("Moody's") (or which, if unrated,
are determined by Wilshire to be of comparable quality).
Unrated securities will be determined to be of comparable
quality to rated debt obligations if, among other things,
other outstanding obligations of the issuers of such
securities are rated BB or Ba or better.
Securities rated "BB" by S&P or "Ba" by Moody's are
below investment-grade securities, sometimes referred to as
"high yield" or "junk" bonds. These securities are
considered speculative investments by the major credit
rating agencies. High yield bonds involve a greater risk of
default and price volatility than U.S. Government bonds and
other high quality fixed-income securities. Please refer to
"Investment Considerations and Risks" for further
information.
In addition to corporate bonds, debentures and
convertible obligations, and taxable municipals, each
Portfolio may invest in a variety of other securities
consistent with its investment objective and the policies
described above. These other investments may include
variable and floating rate securities, asset-backed
securities, stripped securities, zero-coupon bonds and when-
issued, forward commitments and delayed settlement
transactions.
Notwithstanding the foregoing, for temporary defensive
purposes, each Portfolio may invest up to 100% of its assets
in cash or "money market" instruments or invest all or a
substantial portion of its assets in obligations issued or
guaranteed by the U.S. Government, its agencies or
instrumentalities. In addition, each Portfolio may lend its
portfolio securities. See also "Investment Considerations
and Risks" below and "Investment Objective and Management
Policies" in the Statement of Additional Information.
INVESTMENT CONSIDERATIONS AND RISKS
General - Each Portfolio's net asset value is not fixed and
should be expected to fluctuate. You should consider a
Portfolio as a supplement to or single component of an
overall investment program and should invest only if you are
willing to undertake the risks involved. See "Investment
Objective and Policies - Management Policies" in the
Statement of Additional Information for a further discussion
of certain risks.
Except as otherwise indicated, each Portfolio's
investment objectives and policies are not fundamental and
may be changed without a vote of shareholders. Shareholders
will receive written notice of any change in a Portfolio's
objectives. There can be no assurance that the Portfolios'
objectives will be met.
Debt securities fluctuate in value and such
fluctuations can be pronounced. Changes in the value of a
Portfolio's investment securities will result in changes in
the value of such Portfolio's Shares and thus the
Portfolio's total return to investors.
Investments by a Portfolio in debt securities are
subject to interest rate risk, which is the risk that
increases in market interest rates will adversely affect a
Portfolio's investments in debt securities. The value of a
Portfolio's investments in debt securities will tend to
decrease when interest rates rise and increase when interest
rates fall. In general, longer-term debt instruments tend
to fluctuate in value more than shorter-term debt
instruments in response to interest rate movements. In
addition, debt securities which are not backed by the United
States Government are subject to credit risk, which is the
risk that the issuer may not be able to pay principal and/or
interest when due.
Lower Rated Securities - Debt securities which are rated
below investment-grade (hereinafter referred to as "lower
rated securities") or which are unrated, but deemed
equivalent to those rated below investment-grade by
Wilshire, generally offer a higher current yield than that
available from higher grade issues, but typically involve
greater risk. The lower the ratings of such debt
securities, the greater their risks. The yields on high
yield/high risk bonds will fluctuate over time. Lower rated
and unrated securities are especially subject to adverse
changes in general economic conditions and to changes in the
financial condition of their issuers. During the periods of
economic downturn or rising interest rates, issuers of these
instruments may experience financial stress that could
adversely affect their ability to make payments of principal
and interest and increase the possibility of default.
Adverse publicity and investor perceptions, whether or
not based on fundamental analysis, may also decrease the
values and liquidity of these securities especially in a
market characterized by only a small amount of trading. In
cases where market quotations are not available, lower rated
securities are valued using guidelines established by the
Fund's Board of Directors. Perceived credit quality in this
market can change suddenly and unexpectedly, and may not
fully reflect the actual risk posed by a particular lower
rated or unrated security.
Credit quality in the high yield securities market can
change suddenly and unexpectedly, and even recently issued
credit ratings may not fully reflect the actual risks posed
by a particular high-yield security. For these reasons,
Wilshire does not exclusively rely on the ratings issued by
established credit rating agencies, but supplements such
ratings with its own independent and on-going review of
credit quality. The achievement of a Portfolio's investment
objective by investment in such securities may be more
dependent on Wilshire's credit analysis than is the case for
higher quality bonds. Should the rating of a portfolio
security be downgraded, Wilshire will determine whether it
is in the best interest of the Portfolio to retain or depose
of such security.
For a more complete description of the risks of high
yield/high risk securities and for further information
concerning debt securities ratings please refer to Appendix
B of this Prospectus.
Simultaneous Investments - Investment decisions for each
Portfolio are made independently from those of other
investment companies and accounts advised by Wilshire.
However, if such other investment companies or accounts are
prepared to invest in, or desire to dispose of, securities
of the type in which a Portfolio invests at the same time as
such Portfolio, available investments or opportunities for
sales will be allocated equitably to each. In some cases,
this procedure may adversely affect the size of the position
obtained for or disposed of by the Portfolio or the price
paid or received by the Portfolio.
MANAGEMENT OF THE FUND
Investment Adviser - Wilshire, located at 1299 Ocean Avenue,
Santa Monica, California 90401-1085, was formed in 1972 and
serves as the Fund's investment adviser. As of May 31,
1997, Wilshire managed approximately $7.8 billion in assets.
Under the terms of an Investment Advisory Agreement with the
Fund, Wilshire, subject to the overall authority of the
Fund's Board of Directors in accordance with Maryland law,
manages the investment of the assets of each Portfolio. The
Portfolios' primary portfolio manager is Edgar A. Robie, Jr.
a Director of Fixed Income Management and Principal at
Wilshire. Mr. Robie has been employed by Wilshire since
October, 1994. Mr. Robie is directly involved in the design
and management of various fixed income products and his
diverse background includes over 24 years of investment
experience. Wilshire also provides research services for
the Portfolios through a professional staff of portfolio
managers and securities analysts. Prior to October, 1994,
Mr. Robie was a consultant for plan sponsors concerning the
management of ERISA and operating assets with Callan
Associates, a consultant for the management of a large
pension plan with LTV Corporation, and Chief Strategist with
Western Asset Management Company, a leading fixed-income
manager. Wilshire is controlled by its President, Mr.
Dennis Tito, who owned a majority of its outstanding voting
stock as of May 31, 1997.
Pursuant to the terms of the Investment Advisory
Agreement, dated _________, 1997 (the "Advisory Agreement"),
Wilshire is entitled to receive from the Fund a monthly fee
at the annual rate of .25 of 1% of the value of each
Portfolio's average daily net assets. Wilshire has agreed
to waive its fee, however, until at least one year from the
date of this Prospectus.
Administrator - Investor Services Group, a subsidiary of
First Data Corporation, 53 State Street, Boston,
Massachusetts 02109, serves as the Fund's administrator
pursuant to an Administration Agreement with the Fund.
Under the terms of the Administration Agreement, Investor
Services Group generally assists in all aspects of the
Fund's operations, other than providing investment advice,
subject to the overall authority of the Fund's Board of
Directors in accordance with Maryland law. Pursuant to the
terms of the Administration Agreement, dated May 31, 1996,
Investor Services Group is entitled to receive from the Fund
a fee, computed daily and paid monthly, at the annual rate
of .15% of 1% of the Fund's monthly average net assets up to
aggregate net assets of $1 billion, .10% of 1% of such value
on the next $4 billion and .08% of 1% on excess net assets.
In addition, Investor Services Group is entitled to receive
from the Fund an annual fee of $25,000 per each Portfolio
and $2,000 for each additional class.
Custodian and Transfer and Dividend Disbursing Agent - The
Northern Trust Company, an Illinois trust company located at
50 South LaSalle Street, Chicago, Illinois 60675, is the
custodian of the Fund's investments. Investor Services
Group is also the Fund's Transfer and Dividend Disbursing
Agent (the "Transfer Agent").
Distributor - FDDI, 4400 Computer Drive, Westborough,
Massachusetts 01581, serves as the distributor of the
Shares. FDDI is an indirect wholly-owned subsidiary of
First Data Corporation. FDDI is not compensated for its
services as distributor.
Expenses - From time to time, Wilshire or Investor Services
Group may waive receipt of its fees and/or voluntarily
assume certain expenses of the Fund or a Portfolio, which
would have the effect of lowering the overall expense ratio
of the Fund or Portfolio and increasing yield to investors
at the time such amounts are waived or assumed, as the case
may be. The Fund will not pay Wilshire or Investor Services
Group for any amounts which may be waived, nor will the Fund
reimburse Wilshire or Investor Services Group for any
amounts which may be assumed. FDDI, Wilshire or Investor
Services Group may bear expenses of distribution of the
shares of a Portfolio or of the provision of shareholder
services to a Portfolio's shareholders, including payments
to securities dealers or other financial intermediaries or
service providers, out of its profits and available
resources other than the advisory and administration fees
paid by the Fund.
All expenses incurred in the operation of the Fund are
borne by the Fund, except to the extent specifically assumed
by FDDI, Wilshire or Investor Services Group. The expenses
borne by the Fund include: organizational costs, taxes,
interest, brokerage fees and commissions, if any, fees of
Directors who are not officers, directors, employees or
holders of 5% or more of the outstanding voting securities
of FDDI, Wilshire or Investor Services Group or any of their
affiliates, SEC fees, state Blue Sky qualification fees,
advisory and administration fees, distribution and
shareholder services plan fees, charges of custodians,
transfer and dividend disbursing agents' fees, certain
insurance premiums, industry association fees, outside
auditing and legal expenses, costs of maintaining the Fund's
existence, costs of independent pricing services, costs
attributable to investor services (including, without
limitation, telephone and personnel expenses), costs of
shareholders' reports and meetings, costs of preparing and
printing prospectuses and statements of additional
information for regulatory purposes and for distribution to
existing shareholders, and any extraordinary expenses.
Expenses attributable to a particular class of shares or
Portfolio are charged against the assets of that class or
Portfolio. Other expenses of the Fund are allocated between
the Portfolios on the basis determined by the Board of
Directors, including, but not limited to, proportionately in
relation to the net assets of each Portfolio.
HOW TO BUY FUND SHARES
Shares are sold without a sales charge. You may be
charged a nominal fee if you effect transactions in Shares
through a securities dealer, bank or other financial
institution. Share certificates are issued only upon your
written request. No certificates are issued for fractional
Shares. The Fund reserves the right to reject any purchase
order.
The minimum initial investment in the Shares of a
Portfolio is $2,500, or $1,000 if you are a client of a
securities dealer, bank or other financial institution which
has made an aggregate minimum initial purchase for its
customers of $2,500. Subsequent investments must be at least
$100. The initial investment must be accompanied by the
Fund's Account Application. The Fund reserves the right to
offer a Portfolio's Shares without regard to minimum
purchase requirements to employees participating in certain
qualified or non-qualified employee benefit plans or other
programs where contributions or account information can be
transmitted in a manner and form acceptable to the Fund. The
Fund reserves the right to vary further the initial and
subsequent investment minimum requirements at any time.
You may purchase Shares by check or wire. Checks
should be made payable to "Wilshire Target Funds, Inc." For
subsequent investments, your Fund account number should
appear on the check. Payments which are mailed should be
sent to Wilshire Target Funds, Inc., P.O. Box 5170,
Westborough, Massachusetts 01581-5120, together with your
investment slip or, when opening a new account, your Account
Application, indicating the name of the Portfolio being
purchased. Neither initial nor subsequent investments may be
made by third party check.
Wire payments may be made if your bank account is in a
commercial bank that is a member of the Federal Reserve
System or any other bank having a correspondent bank in New
York City. Immediately available funds may be transmitted by
wire to Boston Safe Deposit and Trust Company (ABA
#011001234), together with the name of the Fund and the
Fund's DDA number, 065-587, for purchase of Shares in your
name. The wire must include your Fund account number (for
new accounts, your Taxpayer Identification Number ("TIN")
should be included instead), account registration and dealer
number, if applicable. If your initial purchase of Fund
Shares is by wire, please call 1-888-200-6796 after
completing your wire payment to obtain your Fund account
number. Please include your Fund account number on the
Fund's Account Application and promptly mail the Account
Application to the Fund, as no redemptions will be permitted
until the Account Application is received. You may obtain
further information about remitting funds in this manner
from your bank. All payments should be made in U.S. dollars
and, to avoid fees and delays, should be drawn only on U.S.
banks. A charge will be imposed if any check used for
investment in your account does not clear. The Fund makes
available to certain large institutions the ability to issue
purchase instructions through compatible computer
facilities.
Shares also may be purchased through the Wilshire
Target Funds Accumulation Plan, described under "Shareholder
Services." This service enables you to make regularly
scheduled investments and may provide you with a convenient
way to invest for long-term financial goals. You should be
aware, however, that periodic investment plans do not
guarantee a profit and will not protect an investor against
loss in a declining market.
Subsequent investments also may be made by electronic
transfer of funds from an account maintained in a bank or
other domestic financial institution that is an Automated
Clearing House member. You must direct the institution to
transmit immediately available funds through the Automated
Clearing House to Boston Safe and Trust Deposit Company with
instructions to credit your Fund account. The instructions
must specify your Fund account registration and your Fund
account number preceded by the digits "___" or "___" for
Intermediate Bond Portfolio or Long-Term Bond Portfolio,
respectively.
Shares of each Portfolio are sold on a continuous
basis at the net asset value per share next determined after
an order in proper form is received by the Transfer Agent.
Net asset value per share of each class of shares is
determined as of the close of trading on the floor of the
New York Stock Exchange (currently 4:00 p.m., New York
time), on each day the New York Stock Exchange is open for
business. For purposes of determining net asset value,
futures contracts will be valued 15 minutes after the close
of trading on the floor of the New York Stock Exchange. Net
asset value per share of a class of shares of a Portfolio is
computed by dividing the value of the net assets
attributable to that class of shares (i.e., the value of the
assets attributable to that class less liabilities
attributable to that class) by the total number of shares of
that class outstanding. Each Portfolio's investments are
valued based on market value or, where market quotations are
not readily available, based on fair value as determined in
good faith by the Board of Directors. For further
information regarding the methods employed in valuing Fund
investments, see "Determination of Net Asset Value" in the
Statement of Additional Information.
Federal regulations require that you provide a
certified TIN upon opening or reopening an account. See
"Dividends, Distributions and Taxes" and the Fund's Account
Application for further information concerning this
requirement. Failure to furnish a certified TIN to the Fund
could subject you to a $50 penalty imposed by the Internal
Revenue Service (the "IRS").
SHAREHOLDER SERVICES
Portfolio Exchanges - You may purchase, in exchange for
shares of a Portfolio, shares of the same class of the other
Portfolio or one of the other portfolios offered by the
Fund, to the extent such shares are offered for sale in your
state of residence. If you desire to use this service,
please call 1-888-200-6796 to determine if it is available
and whether any conditions are imposed on its use.
To request an exchange, you must give exchange
instructions to the Transfer Agent in writing. Except in
the case of personal retirement plans, the shares being
exchanged must have a current value of at least $500;
furthermore, when establishing a new account by exchange,
the shares being exchanged must have a value of at least the
minimum initial investment required for the Portfolio into
which the exchange is being made. The ability to issue
exchange instructions by telephone is given to all Fund
shareholders automatically, unless you check the applicable
"No" box on the Account Application, indicating that you
specifically refuse this privilege. The Telephone Exchange
Privilege may be established for an existing account by
written request, signed by all shareholders on the account,
or by a separate signed Shareholder Services Form, also
available by calling 1-888-200-6796. If you have
established the Telephone Exchange Privilege, you may
telephone exchange instructions by calling 1-888-200-6796.
See "How to Redeem Fund Shares - Procedures." Upon an
exchange into a new account, the following shareholder
services and privileges, as applicable and where available,
will be automatically carried over to the Portfolio into
which the exchange is made: Telephone Exchange Privilege,
Wire Redemption Privilege, Telephone Redemption Privilege,
and the dividend and capital gain distribution option
selected by the investor.
Shares will be exchanged at their next determined net
asset value. No fees currently are charged to shareholders
directly in connection with exchanges, although the Fund
reserves the right, upon not less than 60 days' written
notice, to charge shareholders a nominal fee in accordance
with rules promulgated by the SEC. The Fund reserves the
right to reject any exchange request in whole or in part.
The availability of Exchanges may be modified or terminated
at any time upon notice to shareholders.
The exchange of Shares of one Portfolio for Shares of
another is treated for Federal income tax purposes as a sale
of the Shares given in exchange by the shareholder and,
therefore, an exchanging shareholder may realize a taxable
gain or loss.
Wilshire Target Funds Accumulation Plan - Wilshire Target
Funds Accumulation Plan permits you to purchase Portfolio
Shares (minimum of $100 and maximum of $150,000 per
transaction) at regular intervals selected by you. Shares
are purchased by transferring funds from the bank account
designated by you. At your option, the bank account
designated by you will be debited in the specified amount,
and Shares will be purchased, once a month, on either the
first or fifteenth day, or twice a month, on both days.
Only an account maintained at a domestic financial
institution which is an Automated Clearing House member may
be so designated. To establish a Wilshire Target Funds
Accumulation Plan account, you must file an authorization
form with the Transfer Agent. You may obtain the necessary
authorization form by calling 1-888-200-6796. You may cancel
your participation in this Privilege or change the amount of
purchase at any time by mailing written notification to
Wilshire Target Funds, Inc., P.O. Box 5170, Westborough,
Massachusetts 01581-5120, and the notification will be
effective three business days following receipt. The Fund
may modify or terminate this Privilege at any time or charge
a service fee. No such fee currently is contemplated.
Retirement Plans - The Fund offers a variety of pension and
profit-sharing plans, including Keogh Plans, IRAs, SEP-IRAs
and IRA "Rollover Accounts" and 403(b)(7) Plans. Plan
support services also are available. To obtain details on
Keogh Plans, IRAs and IRA "Rollover Accounts," SEP-IRAs and
403(b)(7) Plans, please call the following toll-free number:
1-888-200-6796.
HOW TO REDEEM FUND SHARES
General - You may request redemption of your Shares at
any time. Redemption requests should be transmitted in
accordance with the procedures described below. When a
request is received in proper form, the Fund will redeem the
Shares at the next determined net asset value.
Securities dealers, banks and other financial
institutions may charge a nominal fee for effecting
redemptions of a Portfolio's Shares. Any certificates
representing a Portfolio's Shares being redeemed must be
submitted with the redemption request. The value of the
Shares redeemed may be more or less than their original
cost, depending upon the Portfolio's then-current net asset
value.
The Fund ordinarily will make payment for all Shares
redeemed within seven days after receipt by the Transfer
Agent of a redemption request in proper form, except as
provided by the rules of the SEC.
However, if you have purchased a Portfolio's shares by
check or through Wilshire Target Funds Accumulation Plan and
subsequently submit a written redemption request to the
Transfer Agent, the redemption proceeds will be transmitted
to you promptly upon bank clearance of your purchase check
or Wilshire Target Funds Accumulation Plan order, which may
take up to eight business days or more. In addition, the
Fund will reject requests to redeem shares by wire or
telephone for a period of eight business days after receipt
by the Transfer Agent of the purchase check or the Wilshire
Target Funds Accumulation Plan order against which such
redemption is requested. These procedures will not apply if
your shares were purchased by wire payment, or if you
otherwise have a sufficient collected balance in your
account to cover the redemption request. Prior to the time
any redemption is effective, dividends on such shares will
accrue and be payable, and you will be entitled to exercise
all other rights of beneficial ownership.
Fund Shares will not be redeemed until the Transfer
Agent has received your Account Application.
The Fund reserves the right to redeem your account at
its option upon not less than 45 days' written notice if
your account's net asset value is $500 or less and remains
so during the notice period.
Procedures - You may redeem Shares by using the regular
redemption procedure through the Transfer Agent, or, if you
have checked the appropriate box and supplied the necessary
information on the Account Application or have filed a
Shareholder Services Form with the Transfer Agent, through
the Wire Redemption Privilege or the Telephone Redemption
Privilege. The Fund reserves the right to refuse any
request made by wire or telephone, including requests made
shortly after a change of address, and may limit the amount
involved or the number of such requests. The Fund may modify
or terminate any redemption privilege at any time or charge
a service fee upon notice to shareholders. No such fee
currently is contemplated.
You may redeem Shares by telephone if you have checked
the appropriate box on the Fund's Account Application or
have filed a Shareholder Services Form with the Transfer
Agent. If you select a Telephone Redemption Privilege or
Telephone Exchange Privilege (which is granted automatically
unless you refuse it), you authorize the Transfer Agent to
act on telephone instructions from any person representing
himself or herself to be you and reasonably believed by the
Transfer Agent to be genuine. The Fund will require the
Transfer Agent to employ reasonable procedures, such as
requiring a form of personal identification, to confirm that
instructions are genuine and, if it does not follow such
procedures, the Fund or the Transfer Agent may be liable for
any losses due to unauthorized or fraudulent instructions.
Neither the Fund nor the Transfer Agent will be liable for
following telephone instructions reasonably believed to be
genuine.
During times of drastic economic or market conditions,
you may experience difficulty in contacting the Transfer
Agent by telephone to request a redemption or exchange of a
Portfolio's Shares. In such cases, you should consider
using the other redemption procedures described herein. Use
of these other redemption procedures may result in your
redemption request being processed at a later time than it
would have been if telephone redemption had been used.
During the delay, such Portfolio's net asset value may
fluctuate.
Regular Redemption - Under the regular redemption procedure,
you may redeem your Shares by written request mailed to
Wilshire Target Funds, Inc., P.O. Box 5170, Westborough,
Massachusetts 01581-5120. Redemption requests must be
signed by each shareholder, including each owner of a joint
account, and each signature must be guaranteed. The Transfer
Agent has adopted standards and procedures pursuant to which
signature-guarantees in proper form generally will be
accepted from domestic banks, brokers, dealers, credit
unions, national securities exchanges, registered securities
associations, clearing agencies and savings associations, as
well as from participants in the New York Stock Exchange
Medallion Signature Program, the Securities Transfer Agents
Medallion Program ("STAMP"), and the Stock Exchanges
Medallion Program. If you have any questions with respect to
signature-guarantees, please call one of the telephone
numbers listed under "General Information."
Redemption proceeds of at least $1,000 will be wired
to any member bank of the Federal Reserve System in
accordance with a written signature-guaranteed request.
Wire Redemption Privilege - You may request by wire or
telephone that redemption proceeds (minimum $1,000) be wired
to your account at a bank which is a member of the Federal
Reserve System, or a correspondent bank if your bank is not
a member. You also may direct that redemption proceeds be
paid by check (maximum $150,000 per day) made out to the
owners of record and mailed to your address. Redemption
proceeds of less than $1,000 will be paid automatically by
check. Holders of jointly registered Fund or bank accounts
may have redemption proceeds of only up to $250,000 wired
within any 30-day period. You may telephone redemption
requests by calling 1-888-200-6796. The Statement of
Additional Information sets forth instructions for
transmitting redemption requests by wire. Shares held under
Keogh Plans, IRAs or other retirement plans, and Shares for
which certificates have been issued, are not eligible for
this privilege.
Telephone Redemption Privilege - You may request by
telephone that redemption proceeds (maximum $150,000 per
day) be paid by check and mailed to your address. You may
telephone redemption instructions by calling 1-888-200-6796.
Shares held under Keogh Plans, IRAs or other retirement
plans, and Shares for which certificates have been issued,
are not eligible for this privilege.
SERVICE AND DISTRIBUTION PLAN
The Directors of the Fund have adopted a separate
service and distribution plan (the "Service and Distribution
Plan") with respect to the Shares of each Portfolio pursuant
to Section 12(b) of the 1940 Act and Rule 12b-1 thereunder.
Under the Service and Distribution Plan, the Fund reimburses
FDDI, distributor of the Fund, at an annual rate of up to
.25 of 1% of the value of the average daily net assets
attributable to the Shares of each Portfolio for certain
service and distribution expenses borne, or paid to others,
by FDDI. Generally, the service fees covered under the
Service and Distribution Plan are fees paid to securities
dealers and other financial intermediaries for personal
services to holders of the Shares of a Portfolio and/or for
the maintenance of the accounts of the holders of the
Shares. The services provided may include personal services
relating to shareholder accounts, such as answering
shareholder inquiries regarding the Fund and providing
reports and other information, and services related to the
maintenance of shareholder accounts. To the extent that
such service fees do not aggregate .25 of 1% of the value of
the average daily net assets attributable to the Shares of a
Portfolio, the Service and Distribution Plan also permits
reimbursement for distribution expenses borne, or paid to
others, by FDDI for the purpose of financing or assisting in
the financing of any activity which is primarily intended to
result in the sale of the Shares of the Portfolio. The
types of distribution expenses covered include, but are not
limited to, the costs and expenses of direct marketing
activities (including related travel, meals and lodging);
the design, preparation, printing and distribution of
promotional materials, advertising and offering materials,
and shareholder materials; the compensation of securities
dealers and other financial intermediaries for sales
activities; and related capital, overhead and interest
expenses. Amounts payable under the Service and
Distribution Plan relating to a Portfolio are charged to,
and therefore reduce, income allocated to the Shares of that
Portfolio.
DIVIDENDS, DISTRIBUTIONS AND TAXES
Each Portfolio ordinarily declares and pays dividends
from its net investment income monthly and distributes net
realized capital gains, if any, once a year, but it may make
distributions on a more frequent basis to comply with the
distribution requirements of the Internal Revenue Code of
1986, as amended (the "Code"), in all events in a manner
consistent with the provisions of the 1940 Act. The Fund
will not make distributions from net realized capital gains
unless capital loss carryovers, if any, have been utilized
or have expired. You may choose whether to receive
dividends and distributions in cash or to reinvest in
additional Shares at net asset value. All expenses are
accrued daily and deducted before declaration of dividends
to investors.
The Fund intends to distribute substantially all of
its net investment income and net realized securities gains
on a current basis. Dividends paid by a Portfolio derived
from net investment income and distributions from net
realized short-term securities gains of the Portfolio will
be taxable to U.S. shareholders as ordinary income for
federal income tax purposes whether received in cash or
reinvested in additional Shares. Depending upon the
composition of a Portfolio's income, all or a portion of the
dividends derived from net investment income may qualify for
the dividends received deduction allowable to certain U.S.
corporations. Distributions from net realized long-term
securities gains of a Portfolio will be taxable to U.S.
shareholders as long-term capital gains for Federal income
tax purposes, regardless of how long shareholders have held
their Portfolio Shares and whether such distributions are
received in cash or reinvested in Shares. The Code
currently provides that the net capital gain of an
individual generally will not be subject to Federal income
tax at a rate in excess of 28%. Dividends and distributions
will generally be subject to state and local taxes.
Dividends from net investment income and distributions
from net realized short-term securities gains paid by a
Portfolio to a foreign investor generally are subject to
U.S. nonresident withholding taxes at the rate of 30%,
unless the foreign investor claims the benefit of a lower
rate specified in a tax treaty. Distributions from net
realized long-term securities gains paid by a Portfolio to a
foreign investor as well as the proceeds of any redemptions
from a foreign investor's account, regardless of the extent
to which gain or loss may be realized, generally will not be
subject to any U.S. withholding tax. However, such
distributions and redemption proceeds may be subject to
backup withholding, as described below, unless the foreign
investor certifies his non-U.S. residency status. The tax
consequences to foreign investors engaged in a trade or
business that is effectively connected with the United
States may differ from the foregoing.
Notice as to the tax status of your dividends and
distributions will be mailed to you annually. You also will
receive periodic summaries of your account which will
include information as to dividends and distributions from
securities gains, if any, paid during the year.
Federal regulations generally require the Fund to
withhold ("backup withholding") and remit to the U.S.
Treasury 31% of dividends, distributions from net realized
securities gains and the proceeds of any redemption,
regardless of the extent to which gain or loss may be
realized, paid to a shareholder if such shareholder fails to
certify either that the TIN furnished in connection with
opening an account is correct or that such shareholder has
not received notice from the IRS of being subject to backup
withholding as a result of a failure to properly report
taxable dividend or interest income on a Federal income tax
return. Furthermore, the IRS may notify the Fund to
institute backup withholding if the IRS determines a
shareholder's TIN is incorrect or if a shareholder has
failed to properly report taxable dividend and interest
income on a Federal income tax return.
A TIN is either the Social Security number or employer
identification number of the record owner of the account.
Any tax withheld as a result of backup withholding does not
constitute an additional tax imposed on the record owner of
the account, and may be claimed as a credit on the record
owner's Federal income tax return.
Each Portfolio intends to qualify as a "regulated
investment company" under the Code. Such qualification
relieves a Portfolio of any liability for Federal income tax
to the extent its earnings are distributed in accordance
with applicable provisions of the Code. In addition, each
Portfolio is subject to a non-deductible 4% excise tax
imposed on regulated investment companies that fail to
distribute specified percentages of their ordinary income
and capital gains net income (excess of capital gains over
capital losses). Each Portfolio intends to make sufficient
distributions or deemed distributions of its ordinary income
and any capital gain net income with respect to each year to
avoid liability for this excise tax.
The foregoing is a general summary of the U.S. Federal
income tax consequences of investing in the Fund. You should
consult your tax adviser regarding specific questions as to
Federal, state or local taxes.
PERFORMANCE INFORMATION
For purposes of advertising, performance may be
calculated on the basis of yield, average annual total
return and/or total returns of the Portfolios.
The "SEC yield" of each Portfolio is an annualized
expression of the net income generated by the Portfolio over
a specified 30-day (one month) period as a percentage of the
Portfolio's share price on the last day of that period.
This yield is calculated according to methods required by
the SEC, and therefore may not equate to the level of income
paid to shareholders. "Total return" is the change in value
of an investment in a Portfolio for a specified period. The
"average annual total return" of a Portfolio is the average
annual compound rate of return in an investment in the
Portfolio assuming the investment has been held for one-,
five- and ten year periods (or the life of the Portfolio if
shorter). "Aggregate total return" represents the
cumulative change in value of an investment in the Portfolio
for various periods. All types of total return calculations
assume that all dividends and capital gains distributions
during the period were reinvested.
Performance will vary from time to time and past
results are not necessarily representative of future
results. You should remember that performance is a function
of portfolio management in selecting the type and quality of
portfolio securities and is affected by operating expenses,
market conditions and the risks associated with a
Portfolio's objectives and investment policies. Performance
information, such as that described above, may not provide a
basis for comparison with other investments or other
investment companies using a different method of calculating
performance.
Comparative performance information may be used from
time to time in advertising or marketing the Portfolio's
Shares, including data from Lipper Analytical Services,
Inc., the Dow Jones Industrial Average, Morningstar, Inc.
and other industry publications. In addition, the
Portfolios' performance may also be compared to the
performance of broad groups of comparable mutual funds.
Unmanaged indices with which the Portfolios' performance may
be compared include, but are not limited to, Lehman
Corporate Bond Index and Lehman High Yield Bond Index.
GENERAL INFORMATION
The Fund was incorporated under Maryland law on July
30, 1992, and commenced operations on September 30, 1992.
The Fund is authorized to issue 600 million shares of Common
Stock (with 100 million allocated to each Portfolio and 50
million allocated to each of two classes of each Portfolio),
par value $.001 per share.
The Fund is a "series fund," which is a mutual fund
divided into separate portfolios. Each Portfolio of the Fund
is treated as a separate entity for certain matters under
the 1940 Act and for other purposes, and a shareholder of
one Portfolio is not deemed to be a shareholder of any other
Portfolio. As described below, for certain matters Fund
shareholders vote together as a group; as to others they
vote separately by Portfolio or by class.
To date, the Board of Directors has authorized the
creation of six series of shares and an "Investment Class"
and "Institutional Class" of shares for each Portfolio. All
consideration received by the Fund for shares of one of the
Portfolios and all assets in which such consideration is
invested will belong to that Portfolio (subject only to the
rights of creditors of the Fund) and will be subject to the
liabilities related thereto. Each share of a class of a
Portfolio represents an equal proportionate interest in the
Portfolio with each other class share, subject to the
liabilities of the particular class. Each class of shares
of a Portfolio participates equally in the earnings,
dividends and assets attributable to that class. The income
attributable to, and the expenses of, one class are treated
separately from those of the other classes. Shares are
fully paid and non-assessable. Should a Portfolio be
liquidated, the holders of each class are entitled to share
pro rata in the net assets attributable to that class
available for distribution to shareholders. The Board of
Directors has the ability to create, from time to time, new
portfolios and additional classes without shareholder
approval. Shares have no pre-emptive or conversion rights.
Unless otherwise required by the Investment Company
Act of 1940, as amended, ordinarily it will not be necessary
for the Fund to hold annual meetings of shareholders. As a
result, Fund shareholders may not consider each year the
election of Directors or the appointment of auditors.
However, pursuant to the Fund's By-Laws, the holders of at
least 10% of the shares outstanding and entitled to vote may
require the Fund to hold a special meeting of shareholders
for the purpose of considering the removal of a Director
from office or for any other purpose. Fund shareholders may
remove a Director by the affirmative vote of a majority of
the Fund's outstanding voting shares. In addition, the Board
of Directors will call a meeting of shareholders for the
purpose of electing Directors if, at any time, less than a
majority of the Directors then holding office have been
elected by shareholders. Each share has one vote and shares
of each Portfolio would be entitled to vote separately to
approve investment advisory agreements or changes in
investment restrictions, but shares of all Portfolios would
vote together in the election of Directors or selection of
accountants. Each class of a Portfolio is also entitled to
vote separately on any material increases in the fees under
its Shareholder Services Plan or on any other matter that
affects solely that class of shares, but will otherwise vote
together with all other classes of shares of the Portfolio
on all other matters on which stockholders are entitled to
vote.
The Transfer Agent maintains a record of your
ownership and sends confirmations and statements of account.
Certificates for shares will not be issued unless
specifically requested.
Shareholder inquiries may be made by writing to the
Fund at P.O. Box 5170, Westborough, Massachusetts 01581-
5120, or by calling toll free 1-888-200-6796.
APPENDIX A
INVESTMENT TECHNIQUES
Municipal Obligations - The two principal classifications of
municipal obligations which may be held by the Portfolios
are "general obligation" securities and "revenue"
securities. General obligation securities are secured by
the issuer's pledge of its full faith, credit and taxing
power for the payment of principal and interest. Revenue
securities are payable only from the revenues derived from a
particular facility or class of facilities or, in some
cases, from the proceeds of a special excise tax or other
specific revenue source such as the user of the facility
being financed. Revenue securities include private activity
bonds which are not payable from the unrestricted revenues
of the issuer. Consequently, the credit quality of private
activity bonds is usually directly related to the credit
standing of the corporate user of the facility involved.
Municipal obligations may also include "moral obligation"
bonds, which are normally issued by special purpose public
authorities. If the issuer of moral obligation bonds is
unable to meet its debt service obligations from current
revenues, it may draw on a reserve fund, the restoration of
which is a moral commitment but not a legal obligation of
the state or municipality which created the issuer.
Opinions relating to the validity of municipal obligations
and to the exemption of interest thereon from regular
Federal income tax are rendered by bond counsel to the
respective issuers at the time of issuance. Neither the
Portfolios nor Wilshire will review the proceedings relating
to the issuance of municipal obligations or the bases for
such opinions.
Variable and Floating Rate Securities - The Portfolios may
purchase rated and unrated variable and floating rate
instruments. These instruments may include variable amount
master demand notes that permit the indebtedness to vary in
addition to providing for periodic adjustments in the
interest rate. A Portfolio may purchase variable and
floating rate instruments with stated maturities in excess
of its maturity limitations provided that the Portfolio may
demand payment of the principal of the instrument at least
once within the applicable maturity limitation on not more
than thirty days' notice (unless the instrument is issued or
guaranteed by the U.S. Government or an agency or
instrumentality thereof). Unrated instruments will be
determined by Wilshire to be of comparable quality at the
time of purchase to rated instruments eligible for purchase
by the Portfolios.
The absence of an active secondary market with respect to
particular variable and floating rate instruments could make
it difficult for a Portfolio to dispose of the instruments
if the issuer defaulted on its payment obligation or during
periods that the Portfolio is not entitled to exercise
demand rights, and a Portfolio could, for these or other
reasons, suffer a loss with respect to such instruments.
Variable and floating rate instruments (including inverse
floaters) will be subject to a Portfolio's limitation on
illiquid investments when the Portfolio may not demand
payment of the principal amount within seven days and a
reliable trading market is absent.
Mortgage-Backed and Asset-Backed Securities - The Portfolios
may purchase mortgage-backed and asset-backed securities
(i.e., securities backed by credit card receivables,
automobile loans or other assets). The average life of
these securities varies with the maturities of the
underlying instruments which, in the case of mortgages, have
maximum maturities of forty years. The average life of a
mortgage-backed instrument is likely to be substantially
less than the original maturity of the mortgages underlying
the securities as the result of scheduled principal payments
and mortgage prepayments. The rate of such mortgage
prepayments, and hence the life of the certificates, will be
a function of current market rates and current conditions in
the relevant housing markets. In periods of falling
interest rates, the rate of mortgage prepayments tends to
increase. During such periods, the reinvestment of
prepayment proceeds by a Portfolio will generally be at
lower rates than the rates that were carried by the
obligations that have been prepaid. As a result, the
relationship between mortgage prepayments and interest rates
may give some high-yielding mortgage-related securities less
potential for growth in value than conventional bonds with
comparable maturities. In calculating the average weighted
maturity of each Portfolio, the maturity of mortgage-backed
and asset-backed securities will be based on estimates of
average life.
The Portfolios may acquire several types of mortgage-
backed securities, including guaranteed mortgage pass-
through certificates, which provide the holder with a pro
rata interest in the underlying mortgages, and
collateralized mortgage obligations ("CMOs"), which provide
the holder with a specified interest in the cash flow of a
pool of underlying mortgages or other mortgage-backed
securities. Issuers of CMOs ordinarily elect to be taxed as
pass-through entities known as real estate mortgage
investment conduits ("REMICs"). CMOs are issued in multiple
classes, each with a specified fixed or floating interest
rate and a final distribution date. The relative payment
rights of the various CMO classes may be structured in a
variety of ways.
Non-mortgage asset-backed securities invoke certain
risks that are not presented by mortgage-backed securities.
Primarily, these securities do not have the benefit of a
security interest in the underlying collateral. Credit card
receivables are generally unsecured and the debtors are
entitled to the protection of a number of state and federal
consumer credit laws, many of which have given debtors the
right to set off certain amounts owed on the credit cards,
thereby reducing the balance due.
Stripped Securities - Each Portfolio may purchase
participations in trusts that hold U.S. Treasury and agency
securities (such as TIGRs and CATS) and also may purchase
Treasury receipts and other stripped securities, which
represent beneficial ownership interests in either future
interest payments or the future principal payments on U.S.
Government obligations. These instruments are issued at a
discount to their "face value" and may (particularly in the
case of stripped mortgage-backed securities) exhibit greater
price volatility than ordinary debt securities because of
the manner in which their principal and interest are
returned to investors.
Prepayment Risks - Mortgage-backed and asset-backed
securities have yield and maturity characteristics
corresponding to the underlying assets. Unlike traditional
debt securities, which may pay a fixed rate of interest
until maturity when the entire principal amount comes due,
payments on certain mortgage-backed and asset-backed
securities include both interest and a partial payment of
principal. Besides the scheduled repayment of principal,
payments of principal may result from the voluntary
prepayment, refinancing, or foreclosure of the underlying
mortgage loans.
Mortgage-backed and asset-backed securities are less
effective than other types of securities as a means of
"locking in" attractive long-term interest rates. One
reason is the need to reinvest prepayments of principal;
another is the possibility of significant unscheduled
prepayments resulting from declines in interest rates.
These prepayments would have to be reinvested at lower
rates. As a result, these securities may have less
potential for capital appreciation during periods of
declining interest rates than other securities of comparable
maturities, although they may have a similar risk of decline
in market value during periods of rising interest rates.
Prepayments may also significantly shorten the effective
maturities of these securities, especially during periods of
declining interest rates. Conversely, during periods of
rising interest rates, a reduction in prepayment may
increase the effective maturities of these securities,
subjecting them to a greater risk of decline in market value
in response to rising interest rates than traditional debt
securities; and, therefore, potentially increasing the
volatility of the Portfolio.
At times, some of the mortgage-backed and asset-backed
securities in which a Portfolio may invest will have higher
than market interest rates and therefore will be purchased
at a premium above their par value. Prepayments may cause
losses in securities purchased at a premium, as unscheduled
prepayments, which are made at par, will cause the Portfolio
to experience a loss equal to any unamortized premium.
Convertible Securities - Each Portfolio may invest in
convertible securities, which may offer higher income than
the common stocks into which they are convertible. The
convertible securities into which each Portfolio may invest
consist of bonds, notes, debentures and preferred stocks,
which may be converted or exchanged at a stated or
determinable exchange ratio into underlying common stock.
While convertible securities generally offer lower yields
than non-convertible debt securities of similar quality,
their prices may reflect changes in the value of the
underlying common stock. Convertible securities generally
entail less credit risk than the issuer's common stock.
Each Portfolio may be required to permit the issuer of a
convertible security to redeem the security and convert it
into the underlying common stock or the cash value of the
underlying common stock. Therefore, the Portfolio may not
be able to control whether the issuer of a convertible
security chooses to convert that security. If the issuer
chooses to do so, this action could have an adverse effect
on the Portfolio's ability to achieve its investment
objectives. Any common stock received through conversion of
convertible debt obligations will be sold as soon as
practicable after receipt.
Zero Coupon Securities - Each Portfolio may invest in zero
coupon U.S. Treasury securities, which are Treasury Notes
and Bonds that have been stripped of their unmatured
interest coupons, the coupons themselves and receipts or
certificates representing interests in such stripped debt
obligations and coupons. Each Portfolio also may invest in
zero coupon securities issued by corporations and financial
institutions which constitute a proportionate ownership of
the issuer's pool of underlying U.S. Treasury securities. A
zero coupon security pays no interest to its holder during
its life and is sold at a discount to its face value at
maturity. The amount of the discount fluctuates with the
market price of the security. The market prices of zero
coupon securities generally are more volatile than the
market prices of securities that pay interest periodically
and are likely to respond to a greater degree to changes in
interest rates than non-zero coupon securities having
similar maturities and credit qualities. The Portfolios
will accrue income on such investments for tax and
accounting purposes, as required, and such income must be
distributed to shareholders. Because no cash is received at
the time of such accruals, a Portfolio may be required to
liquidate other portfolio securities to satisfy its
distribution obligations.
When-Issued, Forward Commitment and Delayed Settlement
Transactions - Each Portfolio may purchase eligible
securities on a "when-issued" basis and may purchase or sell
securities on a "forward commitment" basis. Each Portfolio
may also purchase or sell eligible securities on a "delayed
settlement" basis. When-issued and forward commitment
transactions, which involve a commitment by a Portfolio to
purchase or sell particular securities with payment and
delivery taking place at a future date (perhaps one or two
months later), permit a Portfolio to lock in a price or
yield on a security it owns or intends to purchase,
regardless of future changes in interest rates. Delayed
settlement describes settlement of a securities transaction
in the secondary market which will occur sometime in the
future. When-issued, forward commitment and delayed
settlement transactions involve a risk of loss if the value
of the security to be purchased declines, or the value of
the security to be sold increases, before the settlement
date. Although the Portfolios will generally purchase
securities with the intention of acquiring them, the
Portfolios may dispose of securities purchased on a when-
issued, forward commitment or a delayed delivery basis
before settlement when deemed appropriate by Wilshire. The
Portfolios do not intend to engage in when-issued purchases,
forward commitments and delayed settlements for speculative
purposes, but only in furtherance of their investment
objectives.
No person has been authorized to give any information or to
make any representations other than those contained in this
prospectus and in the Fund's official sales literature in
connection with the offer of the Portfolios' shares, and, if
given or made, such other information or representations
must not be relied upon as having been authorized by the
Fund. This prospectus does not constitute an offer in any
state in which, or to any person to whom, such offering may
not lawfully be made.
APPENDIX B
Rating Information. The following is a description of
the ratings given by S&P and Moody's to corporate and
municipal bonds.
S&P:
Debt rated AAA has the highest rating assigned by S&P.
Capacity to pay interest and repay principal is extremely
strong. Debt rated AA has a very strong capacity to pay
interest and repay principal and differs from the highest
rated issues only in small degree. Debt rated A has a
strong capacity to pay interest and repay principal although
it is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than debt
in higher rated categories. Debt rated BBB is regarded as
having an adequate capacity to pay interest and repay
principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity
to pay interest and repay principal for debt in this
category than in higher rated categories.
Debt rated BB, B, CCC, CC and C is regarded as having
predominantly speculative characteristics with respect to
capacity to pay interest and repay principal. BB indicates
the least degree of speculation and C the highest. While
such debt will likely have some quality and protective
characteristics, these are outweighed by large uncertainties
or major exposures to adverse conditions.
Debt rated BB has less near-term vulnerability to
default than other speculative issues. However, it faces
major ongoing uncertainties or exposure to adverse business,
financial, or economic conditions which could lead to
inadequate capacity to meet timely interest and principal
payments. The BB rating category is also used for debt
subordinated to senior debt that is assigned an actual or
implied BBB- rating. Debt rated B has a greater
vulnerability to default but currently has the capacity to
meet interest payments and principal repayments. Adverse
business, financial, or economic conditions will likely
impair capacity or willingness to pay interest and repay
principal. The B rating category is also used for debt
subordinated to senior debt that is assigned an actual or
implied BB or BB- rating.
Debt rated CCC has a currently identifiable
vulnerability to default, and is dependent upon favorable
business, financial, and economic conditions to meet timely
payment of interest and repayment of principal. In the
event of adverse business, financial, or economic
conditions, it is not likely to have the capacity to pay
interest and repay principal. The CCC rating category is
also used for debt subordinated to senior debt that is
assigned an actual or implied B or B- rating. The rating CC
typically is applied to debt subordinated to senior debt
that is assigned an actual or implied CCC rating. The
rating C typically is applied to debt subordinated to senior
debt which is assigned an actual or implied CCC- rating.
The C rating may be used to cover a situation where a
bankruptcy petition has been filed, but debt service
payments are continued. The rating C1 is reserved for
income bonds on which no interest is being paid. Debt rated
D is in payment default. The D rating category is used when
interest payments or principal payments are not made on the
date due even if the applicable grace period had not
expired, unless S&P believes that such payments will be made
during such grace period. The D rating also will be used
upon the filing of a bankruptcy petition if debt service
payments are jeopardized.
Moody's:
Bonds which are rated Aaa are judged to be of the best
quality. They carry the smallest degree of investment risk
and are generally referred to as "gilt edge." Interest
payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various
protective elements are likely to change, such changes as
can be visualized are most unlikely to impair the
fundamentally strong position of such issues. Bonds which
are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what
are generally known as high grade bonds. They are rated
lower than the best bonds because margins of protection may
not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may
be other elements present which make the long term risks
appear somewhat larger than in Aaa securities. Bonds which
are rated A possess many favorable investment attributes and
are to be considered as upper medium grade obligations.
Factors giving security to principal and interest are
considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the
future.
Bonds which are rated Baa are considered as medium
grade obligations, i.e., they are neither highly protected
nor poorly secured. Interest payments and principal
security appear adequate for the present but certain
protective elements may be lacking or may be
characteristically unreliable over any great length of time.
Such bonds lack outstanding investment characteristics and
in fact have speculative characteristics as well. Bonds
which are rated Ba are judged to have speculative elements;
their future cannot be considered as well assured. Often
the protection of interest and principal payments may be
very moderate and thereby not well safeguarded during other
good and bad times over the future. Uncertainty of position
characterizes bonds in this class. Bonds which are rated B
generally lack characteristics of the desirable investment.
Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long
period of time may be small.
Bonds which are rated Caa are of poor standing. Such
issues may be in default or there may be present elements of
danger with respect to principal or interest. Bonds which
are rated Ca represent obligations which are speculative in
a high degree. Such issues are often in default or have
other marked shortcomings. Bonds which are rated C are the
lowest rated class of bonds and issues so rated can be
regarded as having extremely poor prospects of ever
attaining any real investment standing.
WILSHIRE TARGET FUNDS, INC.
Wilshire Target Intermediate Corporate Bond Portfolio
Wilshire Target Long-Term Corporate Bond Portfolio
(INSTITUTIONAL CLASS SHARES)
STATEMENT OF ADDITIONAL INFORMATION
____________________, 1997
This Statement of Additional Information ("SAI"),
which is not a prospectus, supplements and should be read in
conjunction with the current Prospectus which offers
Institutional Class Shares of the Intermediate Corporate
Bond Portfolio ("Intermediate Bond Portfolio") and Long-Term
Corporate Bond Portfolio ("Long-Term Bond Portfolio") of
Wilshire Target Funds, Inc., dated ___________, 1997, as it
may be revised from time to time. To obtain a copy of the
Prospectus, please write to Wilshire Target Funds, Inc. (the
"Fund") at P.O. Box 5170, Westborough, Massachusetts 01581-
5120, or call 1-888-200-6796. Capitalized terms not
otherwise defined herein have the same meaning as in the
Prospectus.
Wilshire Associates Incorporated ("Wilshire") serves
as the Fund's investment adviser.
First Data Investor Services Group, Inc. ("Investor
Services Group") serves as the Fund's administrator and
transfer agent.
First Data Distributors, Inc. ("FDDI") serves as the
Fund's distributor.
TABLE OF CONTENTS
GENERAL INFORMATION AND HISTORY 2
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES 2
MANAGEMENT OF THE FUND 10
INVESTMENT ADVISORY AND ADMINISTRATION AGREEMENTS 13
PURCHASE OF FUND SHARES 16
REDEMPTION OF FUND SHARES 17
SHAREHOLDER SERVICES 18
DETERMINATION OF NET ASSET VALUE 19
DIVIDENDS, DISTRIBUTION AND TAXES 19
PERFORMANCE INFORMATION 20
PORTFOLIO TRANSACTIONS 21
INFORMATION ABOUT THE FUND 22
CUSTODIAN, TRANSFER AND DIVIDEND DISBURSING AGENT,
COUNSEL AND INDEPENDENT ACCOUNTANTS 22
GENERAL INFORMATION AND HISTORY
On August 28, 1992, Dreyfus-Wilshire Series Fund, Inc.
changed its name to Dreyfus-Wilshire Target Funds, Inc.
On May 31, 1996, Dreyfus-Wilshire Target Funds, Inc.
changed its name to Wilshire Target Funds, Inc.
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES
The following information supplements and should be
read in conjunction with the section in the Fund's
Prospectus (Institutional Class shares) entitled
"Description of the Fund."
Other Portfolio Securities
Lower Rated Securities. Each Portfolio may invest in
lower-rated fixed-income securities (commonly known as "junk
bonds"), to the extent described in the Prospectus. The
lower ratings of certain securities held by a Portfolio
reflect a greater possibility that adverse changes in the
financial condition of the issuer may cause it to fail to
make timely payments of interest and principal. The
inability (or perceived inability) of issuers to make timely
payment of interest and principal would likely make the
values of securities held by a Portfolio more volatile and
could limit the Portfolio's ability to sell its securities
at prices approximating the values the Portfolio had placed
on such securities. In the absence of a liquid trading
market for securities held by it, the Portfolio at times may
be unable to establish the fair value of such securities.
Securities ratings are based largely on the issuer's
historical financial condition and the rating agencies'
analysis at the time of rating. Consequently, the rating
assigned to any particular security is not necessarily a
reflection of the issuer's current financial condition,
which may be better or worse than the rating would indicate.
In addition, the rating assigned to a security by Moody's or
S&P (or by any other Nationally Recognized Securities
Ratings Organization ("NRSROs")) does not reflect an
assessment of the volatility of the security's market value
or the liquidity of an investment in the security. See the
Appendix - Rating Information of this SAI for a description
of security ratings.
Like those of other fixed-income securities, the
values of lower-rated securities fluctuate in response to
changes in interest rates. A decrease in interest rates
will generally result in an increase in the value of the
Portfolio's assets. Conversely, during periods of rising
interest rates, the value of the Portfolio's assets will
generally decline. The values of lower-rated securities may
often be affected to a greater extent by changes in general
economic conditions and business conditions affecting the
issuers of such securities and their industries. Negative
publicity or investor perceptions may also adversely affect
the values of lower-rated securities. Changes by NRSROs in
their ratings of any fixed-income security and changes in
the ability of an issuer to make payments of interest and
principal may also affect the value of these investments.
Changes in the value of portfolio securities generally will
not affect income derived from these securities, but will
affect the Portfolio's net asset value. A Portfolio will
not necessarily dispose of a security when its rating is
reduced below its rating at the time of purchase. However,
Wilshire will monitor the investment to determine whether
its retention will assist in meeting the Portfolio's
investment objective.
Issuers of lower rated securities are often highly
leveraged, so that their ability to service their debt
obligations during an economic downturn or during sustained
periods of rising interest rates may be impaired. Such
issuers may not have more traditional methods of financing
available to them and may be unable to repay outstanding
obligations at maturity by refinancing. The risk of loss
due to default in payment of interest or repayment of
principal by such issuers is significantly greater because
such securities frequently are unsecured and subordinated to
the prior payment of senior indebtedness.
When-Issued, Forward Commitment and Delayed Settlement
Transactions. Each Portfolio may purchase securities on a
when-issued basis or purchase or sell securities on a
forward commitment (sometimes called delayed delivery)
basis. These transactions involve a commitment by the
Portfolio to purchase or sell securities at a future date.
The price of the underlying securities (usually expressed in
terms of yield) and the date when the securities will be
delivered and paid for (the settlement date) are fixed at
the time the transaction is negotiated. When-issued
purchases and forward commitment transactions are normally
negotiated directly with the other party.
A Portfolio will purchase securities on a when-issued
basis or purchase or sell securities on a forward commitment
basis only with the intention of completing the transaction
and actually purchasing or selling the securities. If
deemed advisable as a matter of investment strategy,
however, a Portfolio may dispose of or negotiate a
commitment after entering into it. A Portfolio also may
sell securities it has committed to purchase before those
securities are delivered to the Portfolio on the settlement
date.
When a Portfolio engages in when-issued, delayed-
delivery and forward commitment transactions, it relies on
the other party to consummate the trade. Failure of such
party to do so may result in the Portfolio's incurring a
loss or missing an opportunity to obtain a price considered
to be advantageous.
When a Portfolio purchases securities on a when-
issued, delayed-delivery or forward commitment basis, the
Fund's custodian will maintain in a segregated account cash,
U.S. Government securities or other liquid high-grade debt
securities having a value (determined daily) at least equal
to the amount of the Portfolio's purchase commitments. In
the case of a forward commitment to sell portfolio
securities, the custodian will hold the portfolio securities
themselves in a segregated account while the commitment is
outstanding. These procedures are designed to ensure that
the Portfolio will maintain sufficient assets at all time to
cover its obligations under when-issued purchases, forward
commitments and delayed-delivery transaction.
Stripped Government Obligations. Within the past
several years, the Treasury Department has facilitated
transfers of ownership of zero coupon securities by
accounting separately for the beneficial ownership of
particular interest coupon and principal payments on
Treasury securities through the Federal Reserve book-entry
record-keeping system. The Federal Reserve program as
established by the Treasury Department is known as "STRIPS"
or "Separate Trading of Registered Interest and Principal of
Securities." The Portfolios may purchase securities
registered in the STRIPS program. Under the STRIPS program,
the Funds will be able to have their beneficial ownership of
zero coupon securities recorded directly in the book-entry
record-keeping system in lieu of having to hold certificates
or other evidences of ownership of the underlying U.S.
Treasury securities.
In addition, the Portfolios may acquire U.S.
Government obligations and their unmatured interest coupons
that have been separated ("stripped") by their holder,
typically a custodian bank or investment brokerage firm.
Having separated the interest coupons from the underlying
principal of the U.S. Government obligations, the holder
will resell the stripped securities in custodial receipt
programs with a number of different names, including
"Treasury Income Growth Receipts" ("TIGRs") and "Certificate
of Accrual on Treasury Securities" ("CATS"). The stripped
coupons are sold separately from the underlying principal,
which is usually sold at a deep discount because the buyer
receives only the right to receive a future fixed payment on
the security and does not receive any rights to periodic
interest (cash) payments. The underlying U.S. Treasury
bonds and notes themselves are held in book-entry form at
the Federal Reserve Bank or, in the case of bearer
securities (i.e., unregistered securities which are
ostensibly owned by the bearer or holder), in trust on
behalf of the owners. Counsel to the underwriters of these
certificates or other evidences of ownership of U.S.
Treasury securities have stated that, in their opinion,
purchasers of the stripped securities most likely will be
deemed the beneficial holders of the underlying U.S.
Government obligations for federal tax purposes. The Fund
is unaware of any binding legislative, judicial or
administrative authority on this issue.
Mortgage-Backed Securities. The Portfolios may invest
in mortgage-backed securities, including those representing
an undivided ownership interest in a pool of mortgages, such
as certificates of the GNMA and the FHLMC. These
certificates are in most cases pass-through instruments,
through which the holder receives a share of all interest
and principal payments from the mortgages underlying the
certificate, net of certain fees. The average life of a
mortgage-backed security varies with the underlying mortgage
instruments, which have maximum maturities of 40 years. The
average life is likely to be substantially less than the
original maturity of the mortgage pools underlying the
securities as the result of prepayments, mortgage
refinancings or foreclosure. Mortgage prepayment rates are
affected by factor including the level of interest rates,
general economic conditions, the location and age of the
mortgage and other social and demographic conditions. Such
prepayments are passed through to the registered holder with
the regular monthly payments of principal and interest and
have the effect of reducing future payments.
There are a number of important differences among the
agencies and instrumentalities of the U.S. Government that
issue mortgage-related securities and among the securities
that they issue. Mortgage-related securities guaranteed by
the GNMA include GNMA Mortgage Pass-Through Certificates
(also known as "Ginnie Maes") which are guaranteed as to the
timely payment of principal and interest by GNMA and backed
by the full faith and credit of the United States. GNMA is
a wholly-owned U.S. Government corporation within the
Department of Housing and Urban Development. GNMA
certificates also are supported by the authority of GNMA to
borrow funds from the U.S. Treasury to make payments under
its guarantee. Mortgage-backed securities issued by the
FNMA include FNMA Guaranteed Mortgage Pass-Through
Certificates (also known as "Fannie Maes") which are solely
the obligations of the FNMA and are not backed by or
entitled to the full faith and credit of the United States,
but are supported by the right of the issuer to borrow from
the Treasury. FNMA is a government-sponsored organization
owned entirely by private stockholders. Fannie Maes are
guaranteed as to timely payment of the principal and
interest by FNMA. Mortgage-related securities issued by the
FHLMC include FHLMC Mortgage Participation Certificates
(also known as "Freddie Macs" or "Pcs"). FHLMC is a
corporate instrumentality of the United States, created
pursuant to an Act of Congress, which is owned entirely by
Federal Home Loan Banks. Freddie Macs are not guaranteed
and do not constitute a debt or obligation of the United
States or of any Federal Home Loan Bank. Freddie Macs
entitle the holder to timely payment of interest, which is
guaranteed by FHLMC. FHLMC guarantees either ultimate
collection or timely payment of all principal payments on
the underlying mortgage loans. When FHLMC does not
guarantee timely payment of principal at any time after
default on an underlying mortgage, but in no event later
than one year after it becomes payable.
There are risks inherent in the purchase of mortgage-
backed securities. For example, these securities are
subject to a risk that default in payment will occur on the
underlying mortgages. In addition to default risk, these
securities are subject to the risk that prepayment on the
underlying mortgages will occur earlier or later or at a
lessor or greater rate than expected. To the extent that
Wilshire's assumptions about prepayments are inaccurate,
these securities may expose the Funds to significantly
greater market risks than expected.
Asset-Backed Securities. To the extent described in
the prospectuses, the Portfolios may purchase asset-backed
securities, which are securities backed by installment
contracts, credit card receivables or other assets. Asset-
backed securities represent interests in "pools" of assets
in which payments of both interest and principal on the
securities are made monthly, thus in effect "passing
through" monthly payments made by the individual borrowers
on the assets that underlie the securities, net of any fees
paid to the issuer or guarantor of the securities. The
average life of asset-backed securities varies with the
maturities of the underlying instruments, and is likely to
be substantially less than the original maturity of the
assets underlying the securities as a result of prepayments.
For this and other reasons, an asset-backed security's
stated maturity may be shortened, and the security's total
return may be difficult to predict precisely.
Municipal Obligations. An issuer's obligations under
its municipal obligations are subject to the provisions of
bankruptcy, insolvency and other laws affecting the rights
and remedies of creditors, such as the Federal Bankruptcy
Code, and laws, if any, which may enacted by federal or
state legislatures extending the time for payment of
principal or interest, or both, or imposing other
constraints upon enforcement of such obligations or upon the
ability of municipalities to levy taxes. The power or
ability of an issuer to meet its obligations for the payment
of interest on and principal of its municipal obligations
may be materially adversely affected by litigation or other
conditions.
Certain of the municipal obligations held by a
Portfolio may be insured as to the timely payment of
principal and interest. The insurance policies will usually
be obtained by the issuers of the municipal obligations at
the time of its original issuance. In the event that the
issuer defaults on an interest or principal payment, the
insurer will be notified and will be required to make
payment to the bondholders. There is, however, no guarantee
that the insurer will meet its obligations. In addition,
such insurance will not protect against market fluctuations
caused by changes in interest rates and other factors.
Information about the financial condition of issuers
of municipal obligations may be less available than
information about corporations that have class of securities
registered under the Securities Exchange Act of 1934.
Convertible Securities. Convertible securities
entitle the holder to receive interest paid or accrued on
debt or the dividend paid on preferred stock until the
convertible securities mature or are redeemed, converted or
exchanged. Prior to conversion, convertible securities have
characteristics similar to ordinary debt securities in that
they normally provide a stable stream of income with
generally higher yields than those of common stock of the
same or similar issuers. Convertible securities rank senior
to common stock in a corporation's capital structure and
therefore generally entail less risk than the corporation's
common stock, although the extent to which such risk is
reduced depends in large measure upon the degree to which
the convertible security sells above its value as a fixed
income security.
In selecting convertible securities for the
Portfolios, Wilshire will consider, among other factors, its
evaluation of the creditworthiness of the issuers of the
securities; the interest or dividend income generated by the
securities; the potential for capital appreciation of the
securities and the underlying common stocks; the prices of
the securities relative to other comparable securities and
to the underlying common stocks; whether the securities are
entitled to the benefits of sinking funds or other
protective conditions; diversification of the Portfolio's
holdings as to issuers; and whether the securities are rated
by a rating agency and, if so, the ratings assigned.
The value of convertible securities is a function of
their investment value (determined by yield in comparison
with the yields of other securities of comparable maturity
and quality that do not have a conversion privilege) and
their conversion value (their worth, at market value, if
converted into the underlying common stock). The investment
value of convertible securities is influenced by changes in
interest rates, with investment value declining as interest
rates increase and increasing as interest rates decline, and
by the credit standing of the issuer and other factors. The
conversion value of convertible securities is determined by
the market price of the underlying common stock. If the
conversion value is low relative to the investment value,
the price of the convertible securities is governed
principally by their investment value. To the extent the
market price of the underlying common stock approaches or
exceeds the conversion price, the price of the convertible
securities will be increasingly influenced by their
conversion value. In addition, convertible securities
generally sell at a premium over their conversion value
determined by the extent to which investors place value on
the right to acquire the underlying common stock while
holding fixed income securities.
Capital appreciation for the Portfolio may result from
an improvement in the credit standing of an issuer whose
securities are held in the Portfolio or from a general
lowering of interest rates, or a combination of both.
Conversely, a reduction in the credit standing of an issuer
whose securities are held by the Portfolio or a general
increase in interest rates may be expected to result in
capital depreciation to the Portfolio.
U.S. Government Securities. Each Portfolio may
purchase securities issued or guaranteed by the U.S.
Government or its agencies or instrumentalities, which
include U.S. Treasury securities that differ in their
interest rates, maturities and times of issuance. Some
obligations issued or guaranteed by U.S. Government agencies
and instrumentalities, for example, Government National
Mortgage Association pass-through certificates, are
supported by the full faith and credit of the U.S. Treasury;
others, such as those of the Federal Home Loan Banks, by the
right of the issuer to borrow from the Treasury; others,
such as those issued by the Federal National Mortgage
Association, by discretionary authority of the U.S.
Government to purchase certain obligations of the agency or
instrumentality; and others, such as those issued by the
Student Loan Marketing Association, only by the credit of
the agency or instrumentality. These securities bear fixed,
floating or variable rates of interest. While the U.S.
Government provides financial support to such U.S.
Government-sponsored agencies or instrumentalities, no
assurance can be given that it will always do so, since it
is not so obligated by law.
Bank Obligations. Each Portfolio may purchase
certificates of deposit, time deposits, bankers' acceptances
and other short-term obligations issued by domestic banks,
foreign subsidiaries of domestic banks, foreign branches of
domestic banks, and domestic and foreign branches of foreign
banks, domestic savings and loan associations and other
banking institutions. With respect to such securities issued
by foreign branches of domestic banks, foreign subsidiaries
of domestic banks, and domestic and foreign branches of
foreign banks, the Portfolio may be subject to additional
investment risks that are different in some respects from
those incurred by a fund which invests only in debt
obligations of U.S. domestic issuers. Such risks include
possible future political and economic developments, the
possible imposition of foreign withholding taxes on interest
income payable on the securities, the possible establishment
of exchange controls or the adoption of other foreign
governmental restrictions which might adversely affect the
payment of principal and interest on these securities and
the possible seizure or nationalization of foreign deposits.
Certificates of deposit are negotiable certificates
evidencing the obligation of a bank to repay funds deposited
with it for a specified period of time.
Time deposits are non-negotiable deposits maintained
in a banking institution for a specified period of time at a
stated interest rate. Each Portfolio will invest in time
deposits of domestic banks that have total assets in excess
of one billion dollars. Time deposits which may be held by
the Portfolios will not benefit from insurance from the Bank
Insurance Fund or the Savings Association Insurance Fund
administered by the Federal Deposit Insurance Corporation.
Bankers' acceptances are credit instruments evidencing
the obligation of a bank to pay a draft drawn on it by a
customer. These instruments reflect the obligation both of
the bank and of the drawer to pay the face amount of the
instrument upon maturity. The other short-term obligations
may include uninsured, direct obligations bearing fixed,
floating or variable interest rates.
Repurchase Agreements. In a repurchase agreement, the
Portfolio buys, and the seller agrees to repurchase a
security at a mutually agreed upon time and price (usually
within seven days). The repurchase agreement thereby
determines the yield during the purchaser's holding period,
while the seller's obligation to repurchase is secured by
the value of the underlying security. Repurchase agreements
could involve risks in the event of a default or insolvency
of the other party to the agreement, including possible
delays or restrictions upon the Portfolio's ability to
dispose of the underlying securities. The Fund's custodian
or sub-custodian will have custody of, and will hold in a
segregated account, securities acquired by a Portfolio under
a repurchase agreement. Repurchase agreements are
considered by the staff of the Securities and Exchange
Commission to be loans by the Portfolio entering into them.
In an attempt to reduce the risk of incurring a loss on a
repurchase agreement, the Portfolios will enter into
repurchase agreements only with domestic banks with total
assets in excess of one billion dollars, or primary
government securities dealers reporting to the Federal
Reserve Bank of New York, with respect to securities of the
type in which such Portfolio may invest, and will require
that additional securities be deposited with it if the value
of the securities purchased should decrease below resale
price.
Lending Portfolio Securities. Each Portfolio may lend
securities from its portfolio to brokers, dealers and other
financial institutions needing to borrow securities to
complete certain transactions. In connection with such
loans, the Portfolio continues to be entitled to payments in
amounts equal to the interest, dividends or other
distributions payable on the loaned securities. Loans of
portfolio securities afford the Portfolio an opportunity to
earn interest on the amount of the loan and at the same time
to earn income on the loaned securities' collateral. Loans
of portfolio securities may not exceed 33 1/3% of the value
of the Portfolio's total assets. In connection with such
loans, the Portfolio will receive collateral consisting of
cash, U.S. Government securities or irrevocable letters of
credit which will be maintained at all times in an amount
equal to at least 100% of the current market value of the
loaned securities. Such loans are terminable by the Fund at
any time upon specified notice. A Portfolio might
experience risk of loss if the institution with which it has
engaged in a portfolio loan transaction breaches its
agreement with the Portfolio.
In connection with its securities lending
transactions, a Portfolio may return to the borrower or a
third party which is unaffiliated with the Fund, and which
is acting as a "placing broker," a part of the interest
earned from the investment of collateral received for
securities loaned.
The Securities and Exchange Commission currently
requires that the following conditions must be met whenever
portfolio securities are loaned: (1) the Portfolio must
receive at least 100% cash collateral from the borrower; (2)
the borrower must increase such collateral whenever the
market value of the securities rises above the level of such
collateral; (3) the Portfolio must be able to terminate the
loan at any time; (4) the Portfolio must receive reasonable
interest on the loan, as well as any dividends, interest or
other distributions payable on the loaned securities, and
any increase in market value; (5) the Portfolio may pay only
reasonable custodian fees in connection with the loan; and
(6) while voting rights on the loaned securities may pass to
the borrower, the Fund's Board of Directors must terminate
the loan and regain the right to vote the securities if a
material event adversely affecting the investment occurs.
These conditions may be subject to future modification.
Management Policies
Investment Restrictions. Each Portfolio has adopted
investment restrictions numbered 1 through 9 as fundamental
policies, which cannot be changed, as to a Portfolio,
without approval by the holders of a majority (as defined in
the Investment Company Act of 1940, as amended (the "1940
Act")) of such Portfolio's outstanding voting shares. The
investment objectives of the Portfolios and investment
restrictions numbered 10 through 12 are not fundamental
policies and may be changed by vote of a majority of the
Directors at any time. No Portfolio may:
1. Invest in commodities.
2. Purchase, hold or deal in real estate, or oil,
gas or other mineral leases or exploration or development
programs, but the Portfolio may purchase and sell securities
that are secured by real estate or issued by companies that
invest or deal in real estate and it may acquire and dispose
of real estate or interest in real estate acquired through
the exercise of its rights as a holder of debt obligations
secured by real estate or interests therein.
3. Borrow money, except for temporary or emergency
(not leveraging) purposes in an amount up to 33 1/3% of the
value of the Portfolio's total assets (including the amount
borrowed) based on the lesser of cost or market, less
liabilities (not including the amount borrowed) at the time
the borrowing is made. While borrowings exceed 5% of the
value of the Portfolio's total assets, the Portfolio will
not make any additional investments.
4. Make loans to others, except through the
purchase of debt obligations and the entry into repurchase
agreements. However, the Portfolio may lend its portfolio
securities in an amount not to exceed 33 1/3% of the value
of its total assets. Any loans of portfolio securities will
be made according to guidelines established by the
Securities and Exchange Commission and the Fund's Board of
Directors.
5. Act as an underwriter of securities of other
issuers, except to the extent the Portfolio may be deemed an
underwriter under the Securities Act of 1933, as amended, by
virtue of disposing of portfolio securities.
6. Invest more than 25% of its assets in the
securities of issuers in any single industry, provided there
shall be no limitation on the purchase of obligations issued
or guaranteed by the U.S. Government, its agencies or
instrumentalities.
7. Invest more than 5% of its assets in the
obligations of any single issuer, except that up to 25% of
the value of the Portfolio's total assets may be invested,
and securities issued or guaranteed by the U.S. Government,
or its agencies or instrumentalities may be purchased,
without regard to any such limitation.
8. Hold more than 10% of the outstanding voting
securities of any single issuer. This Investment
Restriction applies only with respect to 75% of the
Portfolio's total assets.
9. Issue any senior security (as such term is
defined in Section 18(f) of the 1940 Act), except to the
extent that any of the following activities may be deemed to
give rise to a senior security: (i) any of the activities
permitted in Investment Restriction Nos. 1 and 3; (ii) any
permitted pledge, mortgage or hypothecation of its assets;
or (iii) any purchase of securities on a when-issued,
forward commitment or delayed-settlement basis.
10. Invest in the securities of a company for the
purpose of exercising management or control, but the
Portfolio will vote the securities it owns in its portfolio
as a shareholder in accordance with its views.
11. Invest more than 15% of its net assets (taken at
market value at the time of purchase) in securities which
cannot be readily resold because of legal or contractual
restrictions or which are not otherwise marketable.
12. Purchase securities of other investment
companies, except to the extent permitted under the 1940 Act
or those received as part of a merger or consolidation.
If a percentage restriction is adhered to at the time
of investment, a later change in percentage resulting from a
change in values or assets will not constitute a violation
of such restriction.
MANAGEMENT OF THE FUND
Directors and officers of the Fund, together with
information as to their principal business occupations
during at least the last five years, are shown below. Each
Director who is deemed to be an "interested person" of the
Fund, as defined in the 1940 Act, is indicated by an
asterisk.
Directors of the Fund
*THOMAS D. STEVENS, Chairman of the Board, President and
Director. Senior Vice President and Principal of Wilshire
Associates Incorporated for more than the past five years.
He is the Chief Investment Officer of the Wilshire Asset
Management division. Wilshire Asset Management is a
provider of index and structured equity and fixed income
applications. He is 48 years old and his address is c/o
Wilshire Associates Incorporated, 1299 Ocean Avenue, Santa
Monica, California 90401-1085.
DEWITT F. BOWMAN, Director. Since January 1994, Pension
Investment Consultant providing advice on large pension fund
investment strategy, new product evaluation and integration,
and large plan investment analysis and management. For five
years prior thereto, he was Chief Investment Officer of the
California Public Employees Retirement System. He currently
serves as a director of the RREEF America REIT, RCM Equity
Funds, Inc., Brandes Investment Trust, and as a trustee of
the Pacific Gas and Electric Nuclear Decommissioning Trust.
He is 66 years old and his address is 79 Eucalyptus Knoll,
Mill Valley, California 94941.
*ROBERT J. RAAB, JR., Director. Senior Vice President and
Principal of Wilshire Associates Incorporated for more than
the past five years. He is head of Wilshire's Institutional
Services Division and is responsible for Wilshire Equity,
Fixed Income, Index Fund and Portfolio Accounting products.
He is 47 years old and his address is c/o Wilshire
Associates Incorporated, 1299 Ocean Avenue, Santa Monica,
California 90401-1085.
PETER J. CARRE, Director. Attorney, Peter Carre and
Associates, Law Offices, since 1982. He practices law in
the areas of ERISA and investment law. He is 49 years old
and his address is c/o Peter Carre and Associates, Law
Offices, 815 Connecticut Avenue, N.W., Washington, D.C.
20006.
ANNE WEXLER, Director. Chairman of the Wexler Group,
consultants specializing in government relations and public
affairs for more than fifteen years. She is also a director
of Alumax, Comcast Corporation, The New England Electric
System, Nova Corporation, and sixteen (16) mutual funds in
the Dreyfus mutual fund family as well as a member of the
Board of the Carter Center of Emory University, the Council
of Foreign Relations, the National Park Foundation, Visiting
Committee of the John F. Kennedy School of Government at
Harvard University and the Board of Visitors of the
University of Maryland School of Public Affairs. She is 67
years old and her address is c/o The Wexler Group, 1317 F
Street, N.W., Suite 600, Washington, D.C. 20004.
The Fund typically pays its Directors an annual
retainer and a per meeting fee and reimburses them for their
expenses. The aggregate amount of compensation paid to each
current Director by the Fund for the fiscal year ended
August 31, 1996, was as follows:
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* Amount does not include reimbursed expenses for
attending Board meetings, which amounted to $1,611.00 for
all Directors as a group.
Officers of the Fund
THOMAS D. STEVENS (see "Directors of the Fund" above).
DAVID R. BORGER, Vice President and Treasurer. Vice
President and Principal of Wilshire and Director of Research
for its Wilshire Asset Management division for more than
five years. He is 47 years old and his address is c/o
Wilshire Associates Incorporated, 1299 Ocean Avenue, Santa
Monica, California 90401-1085.
ALAN L. MANNING, Secretary. Since 1990, Vice President,
Secretary and General Counsel of Wilshire. He is 47 years
old and his address is c/o Wilshire Associates Incorporated,
1299 Ocean Avenue, Santa Monica, California 90401-1085.
MICHAEL J. NAPOLI, JR., Vice President. Vice President and
Principal of Wilshire for more than five years. He is
Director of Marketing for its Wilshire Asset Management
division. He is 45 years old and his address is c/o
Wilshire Associates Incorporated, 1299 Ocean Avenue, Santa
Monica, California 90401-1085.
JULIE A. TEDESCO, Vice President and Assistant Secretary.
Since May 1994, Counsel to Investor Services Group. From
July 1992 to May 1994, Assistant Vice President and Counsel
of The Boston Company Advisors, Inc. From 1988 to 1992, Ms.
Tedesco was an associate in the Boston law firm of Hutchins,
Wheeler & Dittmar. She is 39 years old and her address is
c/o First Data Investor Services Group, Inc., 53 State
Street, Boston, Massachusetts 02109.
THERESE M. HOGAN, Vice President and Assistant Secretary.
Since June 1994, Manager (State Regulation) of Investor
Services Group. From October 1993 to June 1994, Senior
Legal Assistant at Palmer & Dodge, Boston, Massachusetts.
For more than eight years prior thereto, a paralegal at
Robinson & Cole in Hartford, Connecticut. She is 35 years
old and her address is c/o First Data Investor Services
Group, Inc., 53 State Street, Boston, Massachusetts 02109.
NEIL FORREST, Assistant Treasurer. Since 1995, Vice
President and Division Manager of Client Services of
Investor Services Group. From 1992 through March, 1995, Mr.
Forrest was Vice President of 440 Financial, Inc. Prior to
that time, he was a vice president with Manufacturers and
Traders Company ("M&T"). He was also product manager of
M&T's proprietary mutual funds. He is 36 years old and his
address is c/o First Data Investor Services Group, Inc. 4400
Computer Drive, Westborough, Massachusetts 01581.
TERESA M.R. HAMLIN, Assistant Secretary. Since 1995,
Counsel to Investor Services Group. Prior to that time, she
was a paralegal manager with The Boston Company Advisors,
Inc. She is 33 years old and her address is c/o First Data
Investor Services Group, Inc., 53 State Street, Boston,
Massachusetts 02109.
DIANA TARNOW, Assistant Treasurer. Since 1997, Vice
President for Investor Services Group's Treasury Department.
Prior to that time, she was Vice President of Financial
Reporting and Tax. From 1989 to 1994, Ms. Tarnow served as
Vice President of Financial Reporting and Tax with The
Boston Company Advisors, Inc. She is 34 years old and her
address is c/o First Data Investor Services Group, Inc. 4400
Computer Drive, Westborough, Massachusetts 01581.
JOHN J. BURKE, III, Assistant Treasurer. Since December,
1991, Mr. Burke is Vice President of Fund Accounting and
Portfolio Valuation Group. Prior to 1991, Mr. Burke was a
management associate with Fidelity Investments. He is 32
years old and his address is 4400 Computer Drive,
Westborough, Massachusetts 01581.
Directors and officers of the Fund, as a group, owned
less than 1% of the Fund's shares of Common Stock
outstanding on May 31, 1997.
As of May 31, 1997, no persons are known by the
Fund to own of record 5% or more of a Portfolio's
outstanding voting securities.
A shareholder that owns, directly or indirectly, 25%
or more of a Portfolio's voting securities may be deemed to
be a "control person" (as defined in the 1940 Act) of such
Portfolio.
INVESTMENT ADVISORY AND ADMINISTRATION AGREEMENTS
The following information supplements and should be
read in conjunction with the section in the Fund's
Prospectus (Institutional Class shares) entitled "Management
of the Fund."
Investment Advisory Agreement. Wilshire provides
investment advisory services to each Portfolio pursuant to
the Investment Advisory Agreement (the "Advisory Agreement")
dated __________, 1997, with the Fund. As to each
Portfolio, the Advisory Agreement has an initial term of two
years and thereafter is subject to annual approval by (i)
the Fund's Board of Directors or (ii) vote of a majority (as
defined in the 1940 Act) of the outstanding voting
securities of such Portfolio, provided that in either event
the continuance also is approved by a majority of the
Directors who are not "interested persons" (as defined in
the 1940 Act) of the Fund or Wilshire, by vote cast in
person at a meeting called for the purpose of voting on such
approval. As to each Portfolio, the Advisory Agreement is
terminable without penalty, on 60 days' notice, by the
Fund's Board of Directors or by vote of the holders of a
majority of such Portfolio's shares, or, on not less than 90
days' notice, by Wilshire. The Advisory Agreement will
terminate automatically, as to the relevant Portfolio, in
the event of its assignment (as defined in the 1940 Act).
The following persons are officers and directors of
Wilshire: Dennis A. Tito, Chairman of the Board of
Directors, President and Chief Executive Officer; Gilbert
Hammer, Director and Senior Vice President; Robert J. Raab,
Jr., Director and Senior Vice President; Thomas D. Stevens,
Director and Senior Vice President; Stephen L. Nesbitt,
Director and Senior Vice President; Rosalind M. Hewsenian,
Director and Vice President; Robert C. Kuberek, Director and
Vice President; Howard M. Yata, Director and Vice President;
Cecilia I. Loo, Director and Vice President; Alan L.
Manning, Vice President, General Counsel and Secretary; and
San Slawson, Vice President and Treasurer.
Wilshire is controlled by Mr. Dennis Tito, who owned a
majority of its outstanding stock as of May 31, 1997.
Wilshire provides day-to-day management of each
Portfolio's investments in accordance with the stated
policies of the Portfolio, subject to the approval of the
Fund's Board of Directors. Wilshire provides the Fund with
portfolio managers who are authorized by the Board of
Directors to execute purchases and sales of securities. The
Fund's primary Portfolio Manager is Edgar A. Robie, Jr. and
he is assisted by Thomas D. Stevens. Wilshire maintains a
research department with a professional staff of portfolio
managers and securities analysts who provide research
services for the Fund.
As compensation for Wilshire's services, Wilshire is
entitled to received from the Fund a monthly advisory fee at
the annual rate of .25 of 1% of the value of each
Portfolio's average daily net assets. The aggregate of the
fees payable to Wilshire is not subject to reduction as the
value of a Portfolios net assets increases.
All fees and expenses are accrued daily and deducted
before declaration of dividends to investors.
Administration Agreement. Pursuant to the
Administration Agreement (the "Administration Agreement")
dated May 31, 1996 with the Fund, Investor Services Group, a
subsidiary of First Data Corporation, 53 State Street,
Boston, Massachusetts 02109, furnishes the Fund clerical
help and accounting, data processing, internal auditing and
legal services and certain other services required by the
Fund, prepares reports to each Portfolio's shareholders, tax
returns, reports to and filings with the Securities and
Exchange Commission and state Blue Sky authorities, and
generally assists in all aspects of the Fund's operations,
other than providing investment advice.
As to each Portfolio, the Administration Agreement has
an initial term of two years and will be extended for a
third year automatically unless the Fund elects to terminate
it on the second anniversary by six months written notice of
termination. Thereafter, the Agreement would continue in
effect from year to year subject to annual approval by (i)
the Fund's Board of Directors or (ii) vote of a majority (as
defined in the 1940 Act) of such Portfolio's outstanding
voting securities, provided that in either event the
continuance also is approved by a majority of the Directors
who are not "interested persons" (as defined in the 1940
Act) of the Fund or Investor Services Group, by vote cast in
person at a meeting called for the purpose of voting on such
approval. As to each Portfolio, the Administration
Agreement is terminable without penalty, on six months
notice prior to its second anniversary, and 60 days' notice
at any time after its third anniversary, by the Fund's Board
of Directors or by vote of the holders of a majority of such
Portfolio's shares, or, on not less than 90 days' notice at
any time after its third anniversary by Investor Services
Group. The Administration Agreement will terminate
automatically, as to the relevant Portfolio, in the event of
its assignment (as defined in the 1940 Act).
As compensation for Investor Services Group's services
under the Administration Agreement, Investor Services Group
is entitled to receive from the Fund a monthly
administration fee at the annual rate of .15 of 1% of each
Portfolio's monthly average net assets up to aggregate net
assets of $1 billion, .10 of 1% of such value on the next $4
billion, and .08 of 1% on excess net assets.
Expenses and Expense Information. From time to time,
Wilshire or Investor Services Group may waive receipt of its
fees and/or voluntarily assume certain expenses of the Fund
or a Portfolio, which would have the effect of lowering the
overall expense ratio of the Fund or a Portfolio and
increasing yield to investors at the time such amounts are
waived or assumed, as the case may be. The Fund will not
pay Wilshire or Investor Services Group for any amounts
which may be waived, nor will the Fund reimburse Wilshire or
Investor Services Group for any amounts which may be
assumed. FDDI, Wilshire or Investor Services Group may bear
expenses of distribution of the shares of a Portfolio or of
the provision of shareholder services to a Portfolio's
shareholders, including payments to securities dealers or
other financial intermediaries or service providers, out of
its profits and available resources other than the advisory
and administration fees paid by the Fund.
All expenses incurred in the operation of the Fund are
borne by the Fund, except to the extent specifically assumed
by FDDI, Wilshire or Investor Services Group. The expenses
borne by the Fund include: organizational costs, taxes,
interest, brokerage fees and commissions, if any, fees of
Directors who are not officers, directors, employees or
holders of 5% or more of the outstanding voting securities
of FDDI, Wilshire or Investor Services Group or any of their
affiliates, SEC fees, state Blue Sky qualification fees,
advisory and administration fees, Rule 12b-1 plan fees, if
applicable, charges of custodians, transfer and dividend
disbursing agents' fees, certain insurance premiums,
industry association fees, outside auditing and legal
expenses, costs of maintaining the Fund's existence, costs
of independent pricing services, costs attributable to
investor services (including, without limitation, telephone
and personnel expenses), costs of shareholders' reports and
meetings, costs of preparing and printing prospectuses and
statements of additional information for regulatory purposes
and for distribution to existing shareholders, and any
extraordinary expenses. Expenses attributable to a
particular class of shares or Portfolio are charged against
the assets of that class or Portfolio. Other expenses of
the Fund are allocated between the Portfolios on the basis
determined by the Board of Directors, including, but not
limited to, proportionately in relation to the net assets of
each Portfolio.
PURCHASE OF FUND SHARES
The following information supplements and should be
read in conjunction with the section in the Fund's
Prospectus (Institutional Class shares) entitled "How to Buy
Fund Shares."
The Distributor. FDDI, a subsidiary of Investor
Services Group, 4400 Computer Drive, Westborough,
Massachusetts 01581, serves as the Fund's distributor
pursuant to an agreement which is renewable annually. Each
Portfolio's shares are sold on a continuous basis by FDDI as
agent, although FDDI is not obligated to sell any particular
amount of securities.
Transactions Through Securities Dealers. Fund shares
may be purchased and redeemed through securities dealers
which may charge a nominal transaction fee for such
services. Some dealers will place the Fund's shares in an
account with their firm. Dealers also may require that the
customer not take physical delivery of share certificates;
the customer not request redemption checks to be issued in
the customer's name; fractional shares not be purchased; or
other conditions.
There is no sales or service charge to individual
investors by the Fund or by FDDI, although investment
dealers, banks and other institutions may make reasonable
charges to investors for their services. The services
provided and the applicable fees are established by each
dealer or other institution acting independently of the
Fund. The Fund has been given to understand that these fees
may be charged for customer services including, but not
limited to, same-day investment of client funds; same-day
access to client funds; advice to customers about the status
of their accounts, yield currently being paid or income
earned to date; provision of periodic account statements
showing security and money market positions; other services
available from the dealer, bank or other institution; and
assistance with inquiries related to their investment. Any
such fees will be deducted from the investor's account
monthly and on smaller accounts could constitute a
substantial portion of the distribution. Investors should
be aware that they may purchase shares of the Fund directly
from the Fund through FDDI without imposition of any
maintenance or service charges, other than those already
described herein. In some states, banks or other financial
institutions effecting transactions in Fund shares may be
required to register as dealers pursuant to state law.
In-Kind Purchases. Payments for each Portfolio's
shares may, at the discretion of Wilshire, be made in the
form of securities which are permissible investments for the
Portfolio. For further information about this form of
payment, please contact the Transfer Agent. Generally,
securities which are accepted by a Portfolio as payment for
the Portfolio's shares will be valued using the Portfolio's
procedures for valuing its own shares at the time the
Portfolio's net asset value is next determined after receipt
of a properly completed order. All dividends, interest,
subscription or other rights pertaining to such securities
shall become the property of the Portfolio and must be
delivered to the Portfolio upon receipt from the issuer.
The Portfolio will require that (1) it will have good and
marketable title to the securities received by it; (2) the
securities are in proper form for transfer to the Portfolio
and are not subject to any restriction on sale by the
Portfolio under the Securities Act of 1933, as amended, or
otherwise; and (3) such other documentation as Wilshire may,
in its discretion, deem necessary or appropriate. Investors
who are subject to Federal taxation may realize a gain or
loss for Federal income tax purposes.
REDEMPTION OF FUND SHARES
The following information supplements and should be
read in conjunction with the section in the Fund's
Prospectus (Institutional Class shares) entitled "How to
Redeem Fund Shares."
Wire Redemption Privilege. By using this Privilege,
the investor authorizes Investor Services Group (the
"Transfer Agent") to act on wire or telephone redemption
instructions from any person representing himself or herself
to be the investor, and reasonably believed by the Transfer
Agent to be genuine. Ordinarily, the Fund will initiate
payment for shares redeemed pursuant to this Privilege on
the next business day after receipt if the Transfer Agent
receives the redemption request in proper form. Redemption
proceeds ($1,000 minimum) will be transferred by Federal
Reserve wire only to the commercial bank account specified
by the investor on the Account Application or Shareholder
Services Form, or to a correspondent bank if the investor's
bank is not a member of the Federal Reserve System. Fees
ordinarily are imposed by such bank and usually are borne by
the investor. Immediate notification by the correspondent
bank to the investor's bank is necessary to avoid a delay in
crediting the funds to the investor's bank account.
To change the commercial bank or account designated to
receive wire redemption proceeds, a written request must be
sent to the Transfer Agent. This request must be signed by
each shareholder, with each signature guaranteed as
described below under "Stock Certificates; Signatures."
Stock Certificates; Signatures. Any certificates
representing Fund shares to be redeemed must be submitted
with the redemption request. Written redemption requests
must be signed by each shareholder, including each holder of
a joint account, and each signature must be guaranteed.
Signatures on endorsed certificates submitted for redemption
also must be guaranteed. The Transfer Agent has adopted
standards and procedures pursuant to which
signature-guarantees in proper form generally will be
accepted from domestic banks, brokers, dealers, credit
unions, national securities exchanges, registered securities
associations, clearing agencies and savings associations, as
well as from participants in the New York Stock Exchange
Medallion Signature Program, the Securities Transfer Agents
Medallion Program ("STAMP") and the Stock Exchanges
Medallion Program. Guarantees must be signed by an
authorized signatory of the guarantor and
"Signature-Guaranteed" must appear with the signature. The
Transfer Agent may request additional documentation from
corporations, executors, administrators, trustees or
guardians, and may accept other suitable verification
arrangements from foreign investors, such as consular
verification. For more information with respect to
signature-guarantees, please call the telephone number
listed on the cover.
Redemption Commitment. The Fund has committed itself
to pay in cash all redemption requests by any shareholder of
record, limited in amount during any 90-day period to the
lesser of $250,000 or 1% of the value of the Portfolio's net
assets at the beginning of such period. Such commitment is
irrevocable without the prior approval of the SEC. In the
case of requests for redemption in excess of such amount,
the Board of Directors reserves the right to make payments
in whole or in part in securities or other assets in case of
an emergency or any time a cash distribution would impair
the liquidity of the Fund to the detriment of the existing
shareholders. In such event, the securities would be
readily marketable, to the extent available, and would be
valued in the same manner as the Portfolio's investment
securities are valued. If the recipient sold such
securities, brokerage charges would be incurred.
Suspension of Redemptions. The right of redemption
may be suspended or the date of payment postponed (a) during
any period when the New York Stock Exchange is closed (other
than customary weekend and holiday closings), (b) when
trading in the markets the Fund ordinarily utilizes is
restricted, or when an emergency exists as determined by the
SEC so that disposal of the Fund's investments or
determination of its net asset value is not reasonably
practicable, or (c) for such other periods as the SEC by
order may permit to protect the Fund's shareholders.
SHAREHOLDER SERVICES
The following information supplements and should be
read in conjunction with the section in the Fund's
Prospectus (Institutional Class shares) entitled
"Shareholder Services."
Portfolio Exchanges. You may purchase, in exchange
for shares of a Portfolio, shares of the same class of one
of the other Portfolios offered by the Fund, to the extent
such shares are offered for sale in your state of residence.
Shares of other Portfolios purchased by exchange will be
purchased on the basis of relative net asset value per
share.
To request an exchange, the investor must give
exchange instructions to the Transfer Agent in writing or by
telephone. The ability to issue exchange instructions by
telephone is given to all Fund shareholders automatically,
unless the investor checks the applicable "No" box on the
Account Application, indicating that the investor
specifically refuses this privilege. By using the Telephone
Exchange Privilege, the investor authorizes the Transfer
Agent to act on telephonic instructions from any person
representing himself or herself to be the investor and
reasonably believed by the Transfer Agent to be genuine.
Telephone exchanges may be subject to limitations as to the
amount involved or the number of telephone exchanges
permitted. Shares issued in certificate form are not
eligible for telephone exchange.
The Portfolio Exchanges service is available to
shareholders resident in any state in which shares of the
Portfolio being acquired may legally be sold. Shares may be
exchanged only between accounts having identical names and
other identifying designations.
The Fund reserves the right to reject any exchange
request in whole or in part. The Portfolio Exchanges
service may be modified or terminated at any time upon
notice to shareholders.
Corporate Pension/Profit-Sharing and Personal
Retirement Plans. The Fund makes available to corporations
a variety of prototype pension and profit-sharing plans. To
obtain details on available plans, please call the following
toll-free number: 1-888-200-6796.
The investor should read the prototype retirement plan
and the appropriate form of custodial agreement for further
details on eligibility, service fees and tax implications,
and should consult a tax adviser.
DETERMINATION OF NET ASSET VALUE
The following information supplements and should be
read in conjunction with the section in the Fund's
Prospectus (Institutional Class shares) entitled "How to Buy
Fund Shares."
Valuation of Portfolio Securities. Each Portfolio's
investment securities are valued at the last sale price on
the securities exchange or national securities market on
which such securities primarily are traded. Securities not
listed on an exchange or national securities market, or
securities in which there were no transactions, are valued
at the average of the most recent bid and asked prices. Bid
price is used when no asked price is available. Short-term
investments are carried at amortized cost, which
approximates value. Any securities or other assets for
which recent market quotations are not readily available are
valued at fair value as determined in good faith by the
Board of Directors. Expenses and fees, including the
advisory and administration fees, are accrued daily and
taken into account for the purpose of determining the net
asset value of each Portfolio's shares.
New York Stock Exchange Closings. The holidays (as
observed) on which the New York Stock Exchange is closed
currently are: New Year's Day, Presidents' Day, Good
Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving and Christmas.
DIVIDENDS, DISTRIBUTION AND TAXES
The following information supplements and should be
read in conjunction with the section in the Fund's
Prospectus (Institutional Class shares) entitled "Dividends,
Distributions and Taxes."
Management of the Fund intends to qualify each year as
a "regulated investment company" under the Internal Revenue
Code of 1986, as amended (the "Code"). Each Portfolio also
intends to qualify. Qualification as a regulated investment
company relieves the Portfolio from any liability for
Federal income taxes to the extent its earnings are
distributed in accordance with the applicable provisions of
the Code. The term "regulated investment company" does not
imply the supervision of management or investment practices
or policies by any government agency.
Depending on the composition of a Portfolio's income,
all or a portion of the dividends paid by such Portfolio
from net investment income may qualify for the dividends
received deduction allowable to certain U.S. corporate
shareholders ("dividends received deduction"). In general,
dividend income of a Portfolio distributed to qualifying
corporate shareholders will be eligible for the dividends
received deduction only to the extent that (i) such
Portfolio's income consists of dividends paid by U.S.
corporations and (ii) the Portfolio would have been entitled
to the dividends received deduction with respect to such
dividend income if the Portfolio were not a regulated
investment company. The dividends received deduction for
qualifying corporate shareholders may be reduced if the
shares of the Portfolio held by them with respect to which
dividends are received are treated as debt-financed or
deemed to have been held for less than 46 days. In
addition, the Code provides other limitations with respect
to the ability of a qualifying corporate shareholder to
claim the dividends received deduction in connection with
holding a Portfolio's shares.
Any dividend or distribution paid shortly after an
investor's purchase may have the effect of reducing the
aggregate net asset value of his shares below the cost of
his investment. Such a dividend or distribution would be a
return on investment in an economic sense, although taxable
as stated in the Portfolios' Prospectus. In addition, the
Code provides that if a shareholder holds shares of the
Portfolios for six months or less and has received a capital
gain distribution with respect to such shares, any loss
incurred on the sale of such shares will be treated as a
long-term capital loss to the extent of the capital gain
distribution received.
Investment by a Portfolio in securities issued or
acquired at a discount, or providing for deferred interest
or for payment of interest in the form of additional
obligations could under special tax rules affect the amount,
timing and character of distributions to shareholders by
causing such Portfolio to recognize income prior to the
receipt of cash payments. For example, the Portfolio could
be required to accrue a portion of the discount (or deemed
discount) at which the securities were issued each year and
to distribute such income in order to maintain its
qualification as a regulated investment company. In such
case, such Portfolio may have to dispose of securities which
it might otherwise have continued to hold in order to
generate cash to satisfy these distribution requirements.
PERFORMANCE INFORMATION
The following information supplements and should be
read in conjunction with the section in the Fund's
Prospectus (Institutional Class shares) entitled
"Performance Information."
From time to time, quotations of the Portfolios'
performance may be presented in advertisements, sales
literature or reports to shareholders or prospective
investors. In the case of Portfolios with more than one
class of shares, all performance information is calculated
separately for each class. The data is calculated as
follows.
The Portfolio's yield is presented for a specified
thirty-day period (the "base period"). Yield is based on
the amount determined by (i) calculating the aggregate
amount of dividends and interest earned by the Portfolio
during the base period less expenses for that periods, and
(ii) dividing that amount by the product of (A) the average
daily number of shares of the Portfolio outstanding during
the base period and entitled to receive dividends and (B)
the per share maximum public offering price for
Institutional shares and net asset value for other classes
of shares on the last day of the base period. The result is
annualized on a compounding basis to determine the yield.
For this calculation, interest earned on debt obligations
held by the Portfolio is generally calculated using the
yield to maturity (or first expected call date) of such
obligations based on their market values.
Average annual total return is calculated by
determining the ending redeemable value of an investment
purchased at net asset value per share with a hypothetical
$1,000 payment made at the beginning of the period (assuming
the reinvestment of dividends and distributions), dividing
by the amount of the initial investment, taking the "nth"
root of the quotient (where "n" is the number of years in
the period) and subtracting 1 from the result.
Total return is calculated by subtracting the amount
of the net asset value per share at the beginning of a
stated period from the net asset value per share at the end
of the period (after giving effect to the reinvestment of
dividends and distributions during the period), and dividing
the result by the net asset value per share at the beginning
of the period.
PORTFOLIO TRANSACTIONS
Wilshire supervises the placement of orders on behalf
of each Portfolio for the purchase or sale of portfolio
securities. Allocation of brokerage transactions, including
their frequency, is made in the best judgment of Wilshire
and in a manner deemed fair and reasonable to shareholders.
The primary consideration is prompt execution of orders at
the most favorable net price. Subject to this
consideration, the brokers selected may include those that
supplement Wilshire's research facilities with statistical
data, investment information, economic facts and opinions.
Information so received is in addition to and not in lieu of
services required to be performed by Wilshire and its fees
are not reduced as a consequence of the receipt of such
supplemental information. Such information may be useful to
Wilshire in serving both the Fund and other clients which it
advises and, conversely, supplemental information obtained
by the placement of business of other clients may be useful
to Wilshire in carrying out its obligations to the Fund.
Brokers also are selected because of their ability to handle
special executions such as are involved in large block
trades or broad distributions, provided the primary
consideration is met. Large block trades, in certain cases,
may result from two or more clients Wilshire might advise
being engaged simultaneously in the purchase or sale of the
same security. When transactions are executed in the
over-the-counter market, the Fund will deal with the primary
market makers unless a more favorable price or execution
otherwise is obtainable.
Portfolio turnover may vary from year to year, as well
as within a year. The Portfolios may experience greater
portfolio turnover than would be expected for a portfolio of
higher rated securities. High turnover rates are likely to
result in increased transaction costs to the Portfolios.
The Portfolios will not attempt to set or meet a portfolio
turnover rate since any turnover would be incidental to
transactions undertaken in an attempt to achieve the
Portfolios' investment objectives. The overall
reasonableness of brokerage commissions paid is evaluated by
the Adviser based upon its knowledge of available
information as to the general level of commissions paid by
other institutional investors for comparable services.
INFORMATION ABOUT THE FUND
The following information supplements and should be
read in conjunction with the section in the Portfolios'
Prospectus (Institutional Class shares) entitled "General
Information."
Each share of a Portfolio has one vote and, when
issued and paid for in accordance with the terms of the
offering, is fully paid and non-assessable. Shares of each
class of a Portfolio have equal rights as to dividends and
in liquidation. Shares have no preemptive, subscription or
conversion rights and are freely transferable.
Rule 18f-2 under the 1940 Act provides that any matter
required to be submitted under the provisions of the 1940
Act or applicable state law or otherwise to the holders of
the outstanding voting securities of an investment company,
such as the Fund, will not be deemed to have been
effectively acted upon unless approved by the holders of a
majority of the outstanding shares of each Portfolio
affected by such matter. Rule 18f-2 further provides that a
Portfolio shall be deemed to be affected by a matter unless
it is clear that the interests of each Portfolio in the
matter are identical or that the matter does not affect any
interest of such Portfolio. However, the Rule exempts the
selection of independent accountants and the election of
Directors from the separate voting requirements of the Rule.
Rule 18f-3 under the 1940 Act makes further provision for
the voting rights of each class of Shares, such as the
Institutional Class shares, of an investment company which
issues more than one class of voting shares. In particular,
Rule 18f-3 provides that each class shall have exclusive
voting rights on any matter submitted to shareholders that
relates solely to the class' arrangement for services and
expenses, and shall have separate voting rights on any
matter submitted to shareholders in which the interests of
one class differ from the interests of any other class.
The Fund will send annual and semi-annual financial
statements to all its shareholders.
CUSTODIAN, TRANSFER AND DIVIDEND DISBURSING AGENT,
COUNSEL AND INDEPENDENT ACCOUNTANTS
The Northern Trust Company, an Illinois trust company
located at 50 South LaSalle Street, Chicago, Illinois 60675,
acts as custodian of the Fund's investments. First Data
Investor Services Group, Inc., a subsidiary of First Data
Corporation, P.O. Box 5170, Westborough, Massachusetts
01581-5120, is the Fund's transfer and dividend disbursing
agent. Neither The Northern Trust Company nor Investor
Services Group has any part in determining the investment
policies of the Fund or which securities are to be purchased
or sold by the Fund.
Ropes & Gray, One International Place, Boston,
Massachusetts 02110-2624, is counsel for the Fund.
Coopers & Lybrand L.L.P., 1301 Avenue of the Americas,
New York, New York 10019, independent accountants, have been
selected as auditors of the Fund.
WILSHIRE TARGET FUNDS, INC.
Wilshire Target Intermediate Corporate Bond Portfolio
Wilshire Target Long-Term Corporate Bond Portfolio
(INVESTMENT CLASS SHARES)
STATEMENT OF ADDITIONAL INFORMATION
____________________, 1997
This Statement of Additional Information ("SAI"),
which is not a prospectus, supplements and should be read in
conjunction with the current Prospectus which offers
Investment Class Shares of the Intermediate Corporate Bond
Portfolio ("Intermediate Bond Portfolio") and Long-Term
Corporate Bond Portfolio ("Long-Term Bond Portfolio") of
Wilshire Target Funds, Inc., dated ___________, 1997, as it
may be revised from time to time. To obtain a copy of the
Prospectus, please write to Wilshire Target Funds, Inc. (the
"Fund") at P.O. Box 5170, Westborough, Massachusetts 01581-
5120, or call 1-888-200-6796. Capitalized terms not
otherwise defined herein have the same meaning as in the
Prospectus.
Wilshire Associates Incorporated ("Wilshire") serves
as the Fund's investment adviser.
First Data Investor Services Group, Inc. ("Investor
Services Group") serves as the Fund's administrator and
transfer agent.
First Data Distributors, Inc. ("FDDI") serves as the
Fund's distributor.
TABLE OF CONTENTS
GENERAL INFORMATION AND HISTORY 2
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES 2
MANAGEMENT OF THE FUND 10
INVESTMENT ADVISORY AND ADMINISTRATION AGREEMENTS 13
SERVICE AND DISTRIBUTION PLAN 16
PURCHASE OF FUND SHARES 17
REDEMPTION OF FUND SHARES 18
SHAREHOLDER SERVICES 19
DETERMINATION OF NET ASSET VALUE 21
DIVIDENDS, DISTRIBUTION AND TAXES 21
PERFORMANCE INFORMATION 22
PORTFOLIO TRANSACTIONS 23
INFORMATION ABOUT THE FUND 23
CUSTODIAN, TRANSFER AND DIVIDEND DISBURSING AGENT,
COUNSEL AND INDEPENDENT ACCOUNTANTS 24
GENERAL INFORMATION AND HISTORY
On August 28, 1992, Dreyfus-Wilshire Series Fund, Inc.
changed its name to Dreyfus-Wilshire Target Funds, Inc.
On May 31, 1996, Dreyfus-Wilshire Target Funds, Inc.
changed its name to Wilshire Target Funds, Inc.
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES
The following information supplements and should be
read in conjunction with the section in the Fund's
Prospectus (Investment Class shares) entitled "Description
of the Fund."
Other Portfolio Securities
Lower Rated Securities. Each Portfolio may invest in
lower-rated fixed-income securities (commonly known as "junk
bonds"), to the extent described in the Prospectus. The
lower ratings of certain securities held by a Portfolio
reflect a greater possibility that adverse changes in the
financial condition of the issuer may cause it to fail to
make timely payments of interest and principal. The
inability (or perceived inability) of issuers to make timely
payment of interest and principal would likely make the
values of securities held by a Portfolio more volatile and
could limit the Portfolio's ability to sell its securities
at prices approximating the values the Portfolio had placed
on such securities. In the absence of a liquid trading
market for securities held by it, the Portfolio at times may
be unable to establish the fair value of such securities.
Securities ratings are based largely on the issuer's
historical financial condition and the rating agencies'
analysis at the time of rating. Consequently, the rating
assigned to any particular security is not necessarily a
reflection of the issuer's current financial condition,
which may be better or worse than the rating would indicate.
In addition, the rating assigned to a security by Moody's or
S&P (or by any other Nationally Recognized Securities
Ratings Organization ("NRSROs")) does not reflect an
assessment of the volatility of the security's market value
or the liquidity of an investment in the security. See the
Appendix - Rating Information of this SAI for a description
of security ratings.
Like those of other fixed-income securities, the
values of lower-rated securities fluctuate in response to
changes in interest rates. A decrease in interest rates
will generally result in an increase in the value of the
Portfolio's assets. Conversely, during periods of rising
interest rates, the value of the Portfolio's assets will
generally decline. The values of lower-rated securities may
often be affected to a greater extent by changes in general
economic conditions and business conditions affecting the
issuers of such securities and their industries. Negative
publicity or investor perceptions may also adversely affect
the values of lower-rated securities. Changes by NRSROs in
their ratings of any fixed-income security and changes in
the ability of an issuer to make payments of interest and
principal may also affect the value of these investments.
Changes in the value of portfolio securities generally will
not affect income derived from these securities, but will
affect the Portfolio's net asset value. A Portfolio will
not necessarily dispose of a security when its rating is
reduced below its rating at the time of purchase. However,
Wilshire will monitor the investment to determine whether
its retention will assist in meeting the Portfolio's
investment objective.
Issuers of lower rated securities are often highly
leveraged, so that their ability to service their debt
obligations during an economic downturn or during sustained
periods of rising interest rates may be impaired. Such
issuers may not have more traditional methods of financing
available to them and may be unable to repay outstanding
obligations at maturity by refinancing. The risk of loss
due to default in payment of interest or repayment of
principal by such issuers is significantly greater because
such securities frequently are unsecured and subordinated to
the prior payment of senior indebtedness.
When-Issued, Forward Commitment and Delayed Settlement
Transactions. Each Portfolio may purchase securities on a
when-issued basis or purchase or sell securities on a
forward commitment (sometimes called delayed delivery)
basis. These transactions involve a commitment by the
Portfolio to purchase or sell securities at a future date.
The price of the underlying securities (usually expressed in
terms of yield) and the date when the securities will be
delivered and paid for (the settlement date) are fixed at
the time the transaction is negotiated. When-issued
purchases and forward commitment transactions are normally
negotiated directly with the other party.
A Portfolio will purchase securities on a when-issued
basis or purchase or sell securities on a forward commitment
basis only with the intention of completing the transaction
and actually purchasing or selling the securities. If
deemed advisable as a matter of investment strategy,
however, a Portfolio may dispose of or negotiate a
commitment after entering into it. A Portfolio also may
sell securities it has committed to purchase before those
securities are delivered to the Portfolio on the settlement
date.
When a Portfolio engages in when-issued, delayed-
delivery and forward commitment transactions, it relies on
the other party to consummate the trade. Failure of such
party to do so may result in the Portfolio's incurring a
loss or missing an opportunity to obtain a price considered
to be advantageous.
When a Portfolio purchases securities on a when-
issued, delayed-delivery or forward commitment basis, the
Fund's custodian will maintain in a segregated account cash,
U.S. Government securities or other liquid high-grade debt
securities having a value (determined daily) at least equal
to the amount of the Portfolio's purchase commitments. In
the case of a forward commitment to sell portfolio
securities, the custodian will hold the portfolio securities
themselves in a segregated account while the commitment is
outstanding. These procedures are designed to ensure that
the Portfolio will maintain sufficient assets at all time to
cover its obligations under when-issued purchases, forward
commitments and delayed-delivery transaction.
Stripped Government Obligations. Within the past
several years, the Treasury Department has facilitated
transfers of ownership of zero coupon securities by
accounting separately for the beneficial ownership of
particular interest coupon and principal payments on
Treasury securities through the Federal Reserve book-entry
record-keeping system. The Federal Reserve program as
established by the Treasury Department is known as "STRIPS"
or "Separate Trading of Registered Interest and Principal of
Securities." The Portfolios may purchase securities
registered in the STRIPS program. Under the STRIPS program,
the Funds will be able to have their beneficial ownership of
zero coupon securities recorded directly in the book-entry
record-keeping system in lieu of having to hold certificates
or other evidences of ownership of the underlying U.S.
Treasury securities.
In addition, the Portfolios may acquire U.S.
Government obligations and their unmatured interest coupons
that have been separated ("stripped") by their holder,
typically a custodian bank or investment brokerage firm.
Having separated the interest coupons from the underlying
principal of the U.S. Government obligations, the holder
will resell the stripped securities in custodial receipt
programs with a number of different names, including
"Treasury Income Growth Receipts" ("TIGRs") and "Certificate
of Accrual on Treasury Securities" ("CATS"). The stripped
coupons are sold separately from the underlying principal,
which is usually sold at a deep discount because the buyer
receives only the right to receive a future fixed payment on
the security and does not receive any rights to periodic
interest (cash) payments. The underlying U.S. Treasury
bonds and notes themselves are held in book-entry form at
the Federal Reserve Bank or, in the case of bearer
securities (i.e., unregistered securities which are
ostensibly owned by the bearer or holder), in trust on
behalf of the owners. Counsel to the underwriters of these
certificates or other evidences of ownership of U.S.
Treasury securities have stated that, in their opinion,
purchasers of the stripped securities most likely will be
deemed the beneficial holders of the underlying U.S.
Government obligations for federal tax purposes. The Fund
is unaware of any binding legislative, judicial or
administrative authority on this issue.
Mortgage-Backed Securities. The Portfolios may invest
in mortgage-backed securities, including those representing
an undivided ownership interest in a pool of mortgages, such
as certificates of the GNMA and the FHLMC. These
certificates are in most cases pass-through instruments,
through which the holder receives a share of all interest
and principal payments from the mortgages underlying the
certificate, net of certain fees. The average life of a
mortgage-backed security varies with the underlying mortgage
instruments, which have maximum maturities of 40 years. The
average life is likely to be substantially less than the
original maturity of the mortgage pools underlying the
securities as the result of prepayments, mortgage
refinancings or foreclosure. Mortgage prepayment rates are
affected by factor including the level of interest rates,
general economic conditions, the location and age of the
mortgage and other social and demographic conditions. Such
prepayments are passed through to the registered holder with
the regular monthly payments of principal and interest and
have the effect of reducing future payments.
There are a number of important differences among the
agencies and instrumentalities of the U.S. Government that
issue mortgage-related securities and among the securities
that they issue. Mortgage-related securities guaranteed by
the GNMA include GNMA Mortgage Pass-Through Certificates
(also known as "Ginnie Maes") which are guaranteed as to the
timely payment of principal and interest by GNMA and backed
by the full faith and credit of the United States. GNMA is
a wholly-owned U.S. Government corporation within the
Department of Housing and Urban Development. GNMA
certificates also are supported by the authority of GNMA to
borrow funds from the U.S. Treasury to make payments under
its guarantee. Mortgage-backed securities issued by the
FNMA include FNMA Guaranteed Mortgage Pass-Through
Certificates (also known as "Fannie Maes") which are solely
the obligations of the FNMA and are not backed by or
entitled to the full faith and credit of the United States,
but are supported by the right of the issuer to borrow from
the Treasury. FNMA is a government-sponsored organization
owned entirely by private stockholders. Fannie Maes are
guaranteed as to timely payment of the principal and
interest by FNMA. Mortgage-related securities issued by the
FHLMC include FHLMC Mortgage Participation Certificates
(also known as "Freddie Macs" or "Pcs"). FHLMC is a
corporate instrumentality of the United States, created
pursuant to an Act of Congress, which is owned entirely by
Federal Home Loan Banks. Freddie Macs are not guaranteed
and do not constitute a debt or obligation of the United
States or of any Federal Home Loan Bank. Freddie Macs
entitle the holder to timely payment of interest, which is
guaranteed by FHLMC. FHLMC guarantees either ultimate
collection or timely payment of all principal payments on
the underlying mortgage loans. When FHLMC does not
guarantee timely payment of principal at any time after
default on an underlying mortgage, but in no event later
than one year after it becomes payable.
There are risks inherent in the purchase of mortgage-
backed securities. For example, these securities are
subject to a risk that default in payment will occur on the
underlying mortgages. In addition to default risk, these
securities are subject to the risk that prepayment on the
underlying mortgages will occur earlier or later or at a
lessor or greater rate than expected. To the extent that
Wilshire's assumptions about prepayments are inaccurate,
these securities may expose the Funds to significantly
greater market risks than expected.
Asset-Backed Securities. To the extent described in
the prospectuses, the Portfolios may purchase asset-backed
securities, which are securities backed by installment
contracts, credit card receivables or other assets. Asset-
backed securities represent interests in "pools" of assets
in which payments of both interest and principal on the
securities are made monthly, thus in effect "passing
through" monthly payments made by the individual borrowers
on the assets that underlie the securities, net of any fees
paid to the issuer or guarantor of the securities. The
average life of asset-backed securities varies with the
maturities of the underlying instruments, and is likely to
be substantially less than the original maturity of the
assets underlying the securities as a result of prepayments.
For this and other reasons, an asset-backed security's
stated maturity may be shortened, and the security's total
return may be difficult to predict precisely.
Municipal Obligations. An issuer's obligations under
its municipal obligations are subject to the provisions of
bankruptcy, insolvency and other laws affecting the rights
and remedies of creditors, such as the Federal Bankruptcy
Code, and laws, if any, which may enacted by federal or
state legislatures extending the time for payment of
principal or interest, or both, or imposing other
constraints upon enforcement of such obligations or upon the
ability of municipalities to levy taxes. The power or
ability of an issuer to meet its obligations for the payment
of interest on and principal of its municipal obligations
may be materially adversely affected by litigation or other
conditions.
Certain of the municipal obligations held by a
Portfolio may be insured as to the timely payment of
principal and interest. The insurance policies will usually
be obtained by the issuers of the municipal obligations at
the time of its original issuance. In the event that the
issuer defaults on an interest or principal payment, the
insurer will be notified and will be required to make
payment to the bondholders. There is, however, no guarantee
that the insurer will meet its obligations. In addition,
such insurance will not protect against market fluctuations
caused by changes in interest rates and other factors.
Information about the financial condition of issuers
of municipal obligations may be less available than
information about corporations that have class of securities
registered under the Securities Exchange Act of 1934.
Convertible Securities. Convertible securities
entitle the holder to receive interest paid or accrued on
debt or the dividend paid on preferred stock until the
convertible securities mature or are redeemed, converted or
exchanged. Prior to conversion, convertible securities have
characteristics similar to ordinary debt securities in that
they normally provide a stable stream of income with
generally higher yields than those of common stock of the
same or similar issuers. Convertible securities rank senior
to common stock in a corporation's capital structure and
therefore generally entail less risk than the corporation's
common stock, although the extent to which such risk is
reduced depends in large measure upon the degree to which
the convertible security sells above its value as a fixed
income security.
In selecting convertible securities for the
Portfolios, Wilshire will consider, among other factors, its
evaluation of the creditworthiness of the issuers of the
securities; the interest or dividend income generated by the
securities; the potential for capital appreciation of the
securities and the underlying common stocks; the prices of
the securities relative to other comparable securities and
to the underlying common stocks; whether the securities are
entitled to the benefits of sinking funds or other
protective conditions; diversification of the Portfolio's
holdings as to issuers; and whether the securities are rated
by a rating agency and, if so, the ratings assigned.
The value of convertible securities is a function of
their investment value (determined by yield in comparison
with the yields of other securities of comparable maturity
and quality that do not have a conversion privilege) and
their conversion value (their worth, at market value, if
converted into the underlying common stock). The investment
value of convertible securities is influenced by changes in
interest rates, with investment value declining as interest
rates increase and increasing as interest rates decline, and
by the credit standing of the issuer and other factors. The
conversion value of convertible securities is determined by
the market price of the underlying common stock. If the
conversion value is low relative to the investment value,
the price of the convertible securities is governed
principally by their investment value. To the extent the
market price of the underlying common stock approaches or
exceeds the conversion price, the price of the convertible
securities will be increasingly influenced by their
conversion value. In addition, convertible securities
generally sell at a premium over their conversion value
determined by the extent to which investors place value on
the right to acquire the underlying common stock while
holding fixed income securities.
Capital appreciation for the Portfolio may result from
an improvement in the credit standing of an issuer whose
securities are held in the Portfolio or from a general
lowering of interest rates, or a combination of both.
Conversely, a reduction in the credit standing of an issuer
whose securities are held by the Portfolio or a general
increase in interest rates may be expected to result in
capital depreciation to the Portfolio.
U.S. Government Securities. Each Portfolio may
purchase securities issued or guaranteed by the U.S.
Government or its agencies or instrumentalities, which
include U.S. Treasury securities that differ in their
interest rates, maturities and times of issuance. Some
obligations issued or guaranteed by U.S. Government agencies
and instrumentalities, for example, Government National
Mortgage Association pass-through certificates, are
supported by the full faith and credit of the U.S. Treasury;
others, such as those of the Federal Home Loan Banks, by the
right of the issuer to borrow from the Treasury; others,
such as those issued by the Federal National Mortgage
Association, by discretionary authority of the U.S.
Government to purchase certain obligations of the agency or
instrumentality; and others, such as those issued by the
Student Loan Marketing Association, only by the credit of
the agency or instrumentality. These securities bear fixed,
floating or variable rates of interest. While the U.S.
Government provides financial support to such U.S.
Government-sponsored agencies or instrumentalities, no
assurance can be given that it will always do so, since it
is not so obligated by law.
Bank Obligations. Each Portfolio may purchase
certificates of deposit, time deposits, bankers' acceptances
and other short-term obligations issued by domestic banks,
foreign subsidiaries of domestic banks, foreign branches of
domestic banks, and domestic and foreign branches of foreign
banks, domestic savings and loan associations and other
banking institutions. With respect to such securities issued
by foreign branches of domestic banks, foreign subsidiaries
of domestic banks, and domestic and foreign branches of
foreign banks, the Portfolio may be subject to additional
investment risks that are different in some respects from
those incurred by a fund which invests only in debt
obligations of U.S. domestic issuers. Such risks include
possible future political and economic developments, the
possible imposition of foreign withholding taxes on interest
income payable on the securities, the possible establishment
of exchange controls or the adoption of other foreign
governmental restrictions which might adversely affect the
payment of principal and interest on these securities and
the possible seizure or nationalization of foreign deposits.
Certificates of deposit are negotiable certificates
evidencing the obligation of a bank to repay funds deposited
with it for a specified period of time.
Time deposits are non-negotiable deposits maintained
in a banking institution for a specified period of time at a
stated interest rate. Each Portfolio will invest in time
deposits of domestic banks that have total assets in excess
of one billion dollars. Time deposits which may be held by
the Portfolios will not benefit from insurance from the Bank
Insurance Fund or the Savings Association Insurance Fund
administered by the Federal Deposit Insurance Corporation.
Bankers' acceptances are credit instruments evidencing
the obligation of a bank to pay a draft drawn on it by a
customer. These instruments reflect the obligation both of
the bank and of the drawer to pay the face amount of the
instrument upon maturity. The other short-term obligations
may include uninsured, direct obligations bearing fixed,
floating or variable interest rates.
Repurchase Agreements. In a repurchase agreement, the
Portfolio buys, and the seller agrees to repurchase a
security at a mutually agreed upon time and price (usually
within seven days). The repurchase agreement thereby
determines the yield during the purchaser's holding period,
while the seller's obligation to repurchase is secured by
the value of the underlying security. Repurchase agreements
could involve risks in the event of a default or insolvency
of the other party to the agreement, including possible
delays or restrictions upon the Portfolio's ability to
dispose of the underlying securities. The Fund's custodian
or sub-custodian will have custody of, and will hold in a
segregated account, securities acquired by a Portfolio under
a repurchase agreement. Repurchase agreements are
considered by the staff of the Securities and Exchange
Commission to be loans by the Portfolio entering into them.
In an attempt to reduce the risk of incurring a loss on a
repurchase agreement, the Portfolios will enter into
repurchase agreements only with domestic banks with total
assets in excess of one billion dollars, or primary
government securities dealers reporting to the Federal
Reserve Bank of New York, with respect to securities of the
type in which such Portfolio may invest, and will require
that additional securities be deposited with it if the value
of the securities purchased should decrease below resale
price.
Lending Portfolio Securities. Each Portfolio may lend
securities from its portfolio to brokers, dealers and other
financial institutions needing to borrow securities to
complete certain transactions. In connection with such
loans, the Portfolio continues to be entitled to payments in
amounts equal to the interest, dividends or other
distributions payable on the loaned securities. Loans of
portfolio securities afford the Portfolio an opportunity to
earn interest on the amount of the loan and at the same time
to earn income on the loaned securities' collateral. Loans
of portfolio securities may not exceed 33 1/3% of the value
of the Portfolio's total assets. In connection with such
loans, the Portfolio will receive collateral consisting of
cash, U.S. Government securities or irrevocable letters of
credit which will be maintained at all times in an amount
equal to at least 100% of the current market value of the
loaned securities. Such loans are terminable by the Fund at
any time upon specified notice. A Portfolio might
experience risk of loss if the institution with which it has
engaged in a portfolio loan transaction breaches its
agreement with the Portfolio.
In connection with its securities lending
transactions, a Portfolio may return to the borrower or a
third party which is unaffiliated with the Fund, and which
is acting as a "placing broker," a part of the interest
earned from the investment of collateral received for
securities loaned.
The Securities and Exchange Commission currently
requires that the following conditions must be met whenever
portfolio securities are loaned: (1) the Portfolio must
receive at least 100% cash collateral from the borrower; (2)
the borrower must increase such collateral whenever the
market value of the securities rises above the level of such
collateral; (3) the Portfolio must be able to terminate the
loan at any time; (4) the Portfolio must receive reasonable
interest on the loan, as well as any dividends, interest or
other distributions payable on the loaned securities, and
any increase in market value; (5) the Portfolio may pay only
reasonable custodian fees in connection with the loan; and
(6) while voting rights on the loaned securities may pass to
the borrower, the Fund's Board of Directors must terminate
the loan and regain the right to vote the securities if a
material event adversely affecting the investment occurs.
These conditions may be subject to future modification.
Management Policies
Investment Restrictions. Each Portfolio has adopted
investment restrictions numbered 1 through 9 as fundamental
policies, which cannot be changed, as to a Portfolio,
without approval by the holders of a majority (as defined in
the Investment Company Act of 1940, as amended (the "1940
Act")) of such Portfolio's outstanding voting shares. The
investment objectives of the Portfolios and investment
restrictions numbered 10 through 12 are not fundamental
policies and may be changed by vote of a majority of the
Directors at any time. No Portfolio may:
1. Invest in commodities.
2. Purchase, hold or deal in real estate, or oil,
gas or other mineral leases or exploration or development
programs, but the Portfolio may purchase and sell securities
that are secured by real estate or issued by companies that
invest or deal in real estate and it may acquire and dispose
of real estate or interest in real estate acquired through
the exercise of its rights as a holder of debt obligations
secured by real estate or interests therein.
3. Borrow money, except for temporary or emergency
(not leveraging) purposes in an amount up to 33 1/3 of the
value of the Portfolio's total assets (including the amount
borrowed) based on the lesser of cost or market, less
liabilities (not including the amount borrowed) at the time
the borrowing is made. While borrowings exceed 5% of the
value of the Portfolio's total assets, the Portfolio will
not make any additional investments.
4. Make loans to others, except through the
purchase of debt obligations and the entry into repurchase
agreements. However, the Portfolio may lend its portfolio
securities in an amount not to exceed 33 1/3% of the value
of its total assets. Any loans of portfolio securities will
be made according to guidelines established by the
Securities and Exchange Commission and the Fund's Board of
Directors.
5. Act as an underwriter of securities of other
issuers, except to the extent the Portfolio may be deemed an
underwriter under the Securities Act of 1933, as amended, by
virtue of disposing of portfolio securities.
6. Invest more than 25% of its assets in the
securities of issuers in any single industry, provided there
shall be no limitation on the purchase of obligations issued
or guaranteed by the U.S. Government, its agencies or
instrumentalities.
7. Invest more than 5% of its assets in the
obligations of any single issuer, except that up to 25% of
the value of the Portfolio's total assets may be invested,
and securities issued or guaranteed by the U.S. Government,
or its agencies or instrumentalities may be purchased,
without regard to any such limitation.
8. Hold more than 10% of the outstanding voting
securities of any single issuer. This Investment
Restriction applies only with respect to 75% of the
Portfolio's total assets.
9. Issue any senior security (as such term is
defined in Section 18(f) of the 1940 Act), except to the
extent that any of the following activities may be deemed to
give rise to a senior security: (i) any of the activities
permitted in Investment Restriction Nos. 1 and 3; (ii) any
permitted pledge, mortgage or hypothecation of its assets;
or (iii) any purchase of securities on a when-issued,
forward commitment or delayed-settlement basis.
10. Invest in the securities of a company for the
purpose of exercising management or control, but the
Portfolio will vote the securities it owns in its portfolio
as a shareholder in accordance with its views.
11. Invest more than 15% of its net assets (taken at
market value at the time of purchase) in securities which
cannot be readily resold because of legal or contractual
restrictions or which are not otherwise marketable.
12. Purchase securities of other investment
companies, except to the extent permitted under the 1940 Act
or those received as part of a merger or consolidation.
If a percentage restriction is adhered to at the time
of investment, a later change in percentage resulting from a
change in values or assets will not constitute a violation
of such restriction.
MANAGEMENT OF THE FUND
Directors and officers of the Fund, together with
information as to their principal business occupations
during at least the last five years, are shown below. Each
Director who is deemed to be an "interested person" of the
Fund, as defined in the 1940 Act, is indicated by an
asterisk.
Directors of the Fund
*THOMAS D. STEVENS, Chairman of the Board, President and
Director. Senior Vice President and Principal of Wilshire
Associates Incorporated for more than the past five years.
He is the Chief Investment Officer of the Wilshire Asset
Management division. Wilshire Asset Management is a
provider of index and structured equity and fixed income
applications. He is 48 years old and his address is c/o
Wilshire Associates Incorporated, 1299 Ocean Avenue, Santa
Monica, California 90401-1085.
DEWITT F. BOWMAN, Director. Since January 1994, Pension
Investment Consultant providing advice on large pension fund
investment strategy, new product evaluation and integration,
and large plan investment analysis and management. For five
years prior thereto, he was Chief Investment Officer of the
California Public Employees Retirement System. He currently
serves as a director of the RREEF America REIT, RCM Equity
Funds, Inc., Brandes Investment Trust, and as a trustee of
the Pacific Gas and Electric Nuclear Decommissioning Trust.
He is 66 years old and his address is 79 Eucalyptus Knoll,
Mill Valley, California 94941.
*ROBERT J. RAAB, JR., Director. Senior Vice President and
Principal of Wilshire Associates Incorporated for more than
the past five years. He is head of Wilshire's Institutional
Services Division and is responsible for Wilshire Equity,
Fixed Income, Index Fund and Portfolio Accounting products.
He is 47 years old and his address is c/o Wilshire
Associates Incorporated, 1299 Ocean Avenue, Santa Monica,
California 90401-1085.
PETER J. CARRE, Director. Attorney, Peter Carre and
Associates, Law Offices, since 1982. He practices law in
the areas of ERISA and investment law. He is 49 years old
and his address is c/o Peter Carre and Associates, Law
Offices, 815 Connecticut Avenue, N.W., Washington, D.C.
20006.
ANNE WEXLER, Director. Chairman of the Wexler Group,
consultants specializing in government relations and public
affairs for more than fifteen years. She is also a director
of Alumax, Comcast Corporation, The New England Electric
System, Nova Corporation, and sixteen (16) mutual funds in
the Dreyfus mutual fund family as well as a member of the
Board of the Carter Center of Emory University, the Council
of Foreign Relations, the National Park Foundation, Visiting
Committee of the John F. Kennedy School of Government at
Harvard University and the Board of Visitors of the
University of Maryland School of Public Affairs. She is 67
years old and her address is c/o The Wexler Group, 1317 F
Street, N.W., Suite 600, Washington, D.C. 20004.
The Fund typically pays its Directors an annual
retainer and a per meeting fee and reimburses them for their
expenses. The aggregate amount of compensation paid to each
current Director by the Fund for the fiscal year ended
August 31, 1996, was as follows:
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* Amount does not include reimbursed expenses for
attending Board meetings, which amounted to $1,611.00 for
all Directors as a group.
Officers of the Fund
THOMAS D. STEVENS (see "Directors of the Fund" above).
DAVID R. BORGER, Vice President and Treasurer. Vice
President and Principal of Wilshire and Director of Research
for its Wilshire Asset Management division for more than
five years. He is 47 years old and his address is c/o
Wilshire Associates Incorporated, 1299 Ocean Avenue, Santa
Monica, California 90401-1085.
ALAN L. MANNING, Secretary. Since 1990, Vice President,
Secretary and General Counsel of Wilshire. He is 47 years
old and his address is c/o Wilshire Associates Incorporated,
1299 Ocean Avenue, Santa Monica, California 90401-1085.
MICHAEL J. NAPOLI, JR., Vice President. Vice President and
Principal of Wilshire for more than five years. He is
Director of Marketing for its Wilshire Asset Management
division. He is 45 years old and his address is c/o
Wilshire Associates Incorporated, 1299 Ocean Avenue, Santa
Monica, California 90401-1085.
JULIE A. TEDESCO, Vice President and Assistant Secretary.
Since May 1994, Counsel to Investor Services Group. From
July 1992 to May 1994, Assistant Vice President and Counsel
of The Boston Company Advisors, Inc. From 1988 to 1992, Ms.
Tedesco was an associate in the Boston law firm of Hutchins,
Wheeler & Dittmar. She is 39 years old and her address is
c/o First Data Investor Services Group, Inc., 53 State
Street, Boston, Massachusetts 02109.
THERESE M. HOGAN, Vice President and Assistant Secretary.
Since June 1994, Manager (State Regulation) of Investor
Services Group. From October 1993 to June 1994, Senior
Legal Assistant at Palmer & Dodge, Boston, Massachusetts.
For more than eight years prior thereto, a paralegal at
Robinson & Cole in Hartford, Connecticut. She is 35 years
old and her address is c/o First Data Investor Services
Group, Inc., 53 State Street, Boston, Massachusetts 02109.
NEIL FORREST, Assistant Treasurer. Since 1995, Vice
President and Division Manager of Client Services of
Investor Services Group. From 1992 through March, 1995, Mr.
Forrest was Vice President of 440 Financial, Inc. Prior to
that time, he was a vice president with Manufacturers and
Traders Company ("M&T"). He was also product manager of
M&T's proprietary mutual funds. He is 36 years old and his
address is c/o First Data Investor Services Group, Inc. 4400
Computer Drive, Westborough, Massachusetts 01581.
TERESA M.R. HAMLIN, Assistant Secretary. Since 1995,
Counsel to Investor Services Group. Prior to that time, she
was a paralegal manager with The Boston Company Advisors,
Inc. She is 33 years old and her address is c/o First Data
Investor Services Group, Inc., 53 State Street, Boston,
Massachusetts 02109.
DIANA TARNOW, Assistant Treasurer. Since 1997, Vice
President for Investor Services Group's Treasury Department.
Prior to that time, she was Vice President of Financial
Reporting and Tax. From 1989 to 1994, Ms. Tarnow served as
Vice President of Financial Reporting and Tax with The
Boston Company Advisors, Inc. She is 34 years old and her
address is c/o First Data Investor Services Group, Inc. 4400
Computer Drive, Westborough, Massachusetts 01581.
JOHN J. BURKE, III, Assistant Treasurer. Since December,
1991, Mr. Burke is Vice President of Fund Accounting and
Portfolio Valuation Group. Prior to 1991, Mr. Burke was a
management associate with Fidelity Investments. He is 32
years old and his address is 4400 Computer Drive,
Westborough, Massachusetts 01581.
Directors and officers of the Fund, as a group, owned
less than 1% of the Fund's shares of Common Stock
outstanding on May 31, 1997.
As of May 31, 1997, no persons are known by the
Fund to own of record 5% or more of a Portfolio's
outstanding voting securities.
A shareholder that owns, directly or indirectly, 25%
or more of a Portfolio's voting securities may be deemed to
be a "control person" (as defined in the 1940 Act) of such
Portfolio.
INVESTMENT ADVISORY AND ADMINISTRATION AGREEMENTS
The following information supplements and should be
read in conjunction with the section in the Fund's
Prospectus (Investment Class shares) entitled "Management of
the Fund."
Investment Advisory Agreement. Wilshire provides
investment advisory services to each Portfolio pursuant to
the Investment Advisory Agreement (the "Advisory Agreement")
dated __________, 1997, with the Fund. As to each
Portfolio, the Advisory Agreement has an initial term of two
years and thereafter is subject to annual approval by (i)
the Fund's Board of Directors or (ii) vote of a majority (as
defined in the 1940 Act) of the outstanding voting
securities of such Portfolio, provided that in either event
the continuance also is approved by a majority of the
Directors who are not "interested persons" (as defined in
the 1940 Act) of the Fund or Wilshire, by vote cast in
person at a meeting called for the purpose of voting on such
approval. As to each Portfolio, the Advisory Agreement is
terminable without penalty, on 60 days' notice, by the
Fund's Board of Directors or by vote of the holders of a
majority of such Portfolio's shares, or, on not less than 90
days' notice, by Wilshire. The Advisory Agreement will
terminate automatically, as to the relevant Portfolio, in
the event of its assignment (as defined in the 1940 Act).
The following persons are officers and directors of
Wilshire: Dennis A. Tito, Chairman of the Board of
Directors, President and Chief Executive Officer; Gilbert
Hammer, Director and Senior Vice President; Robert J. Raab,
Jr., Director and Senior Vice President; Thomas D. Stevens,
Director and Senior Vice President; Stephen L. Nesbitt,
Director and Senior Vice President; Rosalind M. Hewsenian,
Director and Vice President; Robert C. Kuberek, Director and
Vice President; Howard M. Yata, Director and Vice President;
Cecilia I. Loo, Director and Vice President; Alan L.
Manning, Vice President, General Counsel and Secretary; and
San Slawson, Vice President and Treasurer.
Wilshire is controlled by Mr. Dennis Tito, who owned a
majority of its outstanding stock as of May 31, 1997.
Wilshire provides day-to-day management of each
Portfolio's investments in accordance with the stated
policies of the Portfolio, subject to the approval of the
Fund's Board of Directors. Wilshire provides the Fund with
portfolio managers who are authorized by the Board of
Directors to execute purchases and sales of securities. The
Fund's primary Portfolio Manager is Edgar A. Robie, Jr. and
he is assisted by Thomas D. Stevens. Wilshire maintains a
research department with a professional staff of portfolio
managers and securities analysts who provide research
services for the Fund.
As compensation for Wilshire's services, Wilshire is
entitled to receive from the Fund a monthly advisory fee at
the annual rate of .25 of 1% of the value of each
Portfolio's average daily net assets. The aggregate of the
fees payable to Wilshire is not subject to reduction as the
value of a Portfolios net assets increases.
All fees and expenses are accrued daily and deducted
before declaration of dividends to investors.
Administration Agreement. Pursuant to the
Administration Agreement (the "Administration Agreement")
dated May 31, 1996 with the Fund, Investor Services Group, a
subsidiary of First Data Corporation, 53 State Street,
Boston, Massachusetts 02109, furnishes the Fund clerical
help and accounting, data processing, internal auditing and
legal services and certain other services required by the
Fund, prepares reports to each Portfolio's shareholders, tax
returns, reports to and filings with the SEC and state Blue
Sky authorities, and generally assists in all aspects of the
Fund's operations, other than providing investment advice.
As to each Portfolio, the Administration Agreement has
an initial term of two years and will be extended for a
third year automatically unless the Fund elects to terminate
it on the second anniversary by six months written notice of
termination. Thereafter, the Agreement would continue in
effect from year to year subject to annual approval by (i)
the Fund's Board of Directors or (ii) vote of a majority (as
defined in the 1940 Act) of such Portfolio's outstanding
voting securities, provided that in either event the
continuance also is approved by a majority of the Directors
who are not "interested persons" (as defined in the 1940
Act) of the Fund or Investor Services Group, by vote cast in
person at a meeting called for the purpose of voting on such
approval. As to each Portfolio, the Administration
Agreement is terminable without penalty, on six months
notice prior to its second anniversary, and 60 days' notice
at any time after its third anniversary, by the Fund's Board
of Directors or by vote of the holders of a majority of such
Portfolio's shares, or, on not less than 90 days' notice at
any time after its third anniversary by Investor Services
Group. The Administration Agreement will terminate
automatically, as to the relevant Portfolio, in the event of
its assignment (as defined in the 1940 Act).
As compensation for Investor Services Group's services
under the Administration Agreement, Investor Services Group
is entitled to receive from the Fund a monthly
administration fee at the annual rate of .15 of 1% of each
Portfolio's monthly average net assets up to aggregate net
assets of $1 billion, .10 of 1% of such value on the next $4
billion, and .08 of 1% on excess net assets.
Expenses and Expense Information. From time to time,
Wilshire or Investor Services Group may waive receipt of its
fees and/or voluntarily assume certain expenses of the Fund
or a Portfolio, which would have the effect of lowering the
overall expense ratio of the Fund or a Portfolio and
increasing yield to investors at the time such amounts are
waived or assumed, as the case may be. The Fund will not
pay Wilshire or Investor Services Group for any amounts
which may be waived, nor will the Fund reimburse Wilshire or
Investor Services Group for any amounts which may be
assumed. In addition to service and distribution fees which
may be paid by FDDI out of amounts which it receives under
the Fund's Service and Distribution Plan, FDDI, Wilshire or
Investor Services Group may bear other expenses of
distribution of the shares of a Portfolio or of the
provision of shareholder services to a Portfolio's
shareholders, including payments to securities dealers or
other financial intermediaries or service providers, out of
its profits and available resources other than the advisory
and administration fees paid by the Fund.
All expenses incurred in the operation of the Fund are
borne by the Fund, except to the extent specifically assumed
by FDDI, Wilshire or Investor Services Group. The expenses
borne by the Fund include: organizational costs, taxes,
interest, brokerage fees and commissions, if any, fees of
Directors who are not officers, directors, employees or
holders of 5% or more of the outstanding voting securities
of FDDI, Wilshire or Investor Services Group or any of their
affiliates, SEC fees, state Blue Sky qualification fees,
advisory and administration fees, Rule 12b-1 plan fees, if
applicable, charges of custodians, transfer and dividend
disbursing agents' fees, certain insurance premiums,
industry association fees, outside auditing and legal
expenses, costs of maintaining the Fund's existence, costs
of independent pricing services, costs attributable to
investor services (including, without limitation, telephone
and personnel expenses), costs of shareholders' reports and
meetings, costs of preparing and printing prospectuses and
statements of additional information for regulatory purposes
and for distribution to existing shareholders, and any
extraordinary expenses. Expenses attributable to a
particular class of shares or Portfolio are charged against
the assets of that class or Portfolio. Other expenses of
the Fund are allocated between the Portfolios on the basis
determined by the Board of Directors, including, but not
limited to, proportionately in relation to the net assets of
each Portfolio.
SERVICE AND DISTRIBUTION PLAN
The Fund has adopted a Service and Distribution Plan
(the "Service and Distribution Plan") with respect to the
Investment Class shares of each Portfolio pursuant to
Section 12(b) of the 1940 Act and Rule 12b-1 thereunder.
Under the Service and Distribution Plan, the Fund reimburses
FDDI, distributor of the Fund, at an annual rate of up to
.25 of 1% of the value of the average daily net assets
attributable to the Shares of each Portfolio for certain
service and distribution expenses borne, or paid to others,
by FDDI. Generally, the service fees covered under the
Service and Distribution Plan are fees paid to securities
dealers and other financial intermediaries for personal
services to holders of the Shares of a Portfolio and/or for
the maintenance of the accounts of the holders of the
Shares. The services provided may include personal services
relating to shareholder accounts, such as answering
shareholder inquiries regarding the Fund and providing
reports and other information, and services related to the
maintenance of shareholder accounts. To the extent that
such service fees do not aggregate .25 of 1% of the value of
the average daily net assets attributable to the Shares of a
Portfolio, the Service and Distribution Plan also permits
reimbursement for distribution expenses borne, or paid to
others, by FDDI for the purpose of financing or assisting in
the financing of any activity which is primarily intended to
result in the sale of the Shares of the Portfolio. The
types of distribution expenses covered by the Service and
Distribution Plan include, but are not limited to, the costs
and expenses of direct marketing activities (including
related travel, meals and lodging); the design, preparation,
printing and distribution of promotional materials,
advertising and offering materials, and shareholder
materials; the compensation of securities dealers and other
financial intermediaries for sales activities; and related
capital, overhead and interest expenses. Amounts payable
under the Service and Distribution Plan relating to a
Portfolio are charged to, and therefore reduce, income
allocated to the Shares of that Portfolio.
The original Shareholder Services Plan (the "Services
Plan") of the Fund adopted pursuant to Section 12(b) of the
1940 Act and Rule 12b-1 thereunder was approved (i) by votes
of the majority of both (a) the Directors of the Fund, and
(b) those Directors of the Fund who are not interested
persons of the Fund, and have no direct or indirect
financial interest in the operation of the Service and
Distribution Plan or any agreements related to it (the
"Independent Directors"), in each case cast in person at a
meeting called for the purpose of voting on the Services
Plan, and (ii) by vote of a majority of the outstanding
Investment Class shares. Subsequently, an amendment to the
Services Plan to include distribution expenses, as well as
service fees, as covered expenses under the plan, and to
rename the plan as the Service and Distribution Plan, was
approved on June 3, 1997 by vote of the majority of both (a)
the Directors of the Fund, and (b) the Independent Directors
of the Fund, cast in person at a meeting called for the
purpose of voting on the Plan. The amendment did not
increase the maximum amount of payments permissible under
the Plan.
Under the Service and Distribution Plan, FDDI is
required to provide to the Directors of the Fund for their
review, at least quarterly, a written report of the amounts
so expended and the purposes for which such expenditures
were made.
The Service and Distribution Plan shall continue in
effect for a period of more than one year after July 3, 1996
only so long as such continuance is specifically approved at
least annually by votes of the majority (or whatever other
percentage may, from time to time, be required by Section
12(b) of the Investment Company Act of 1940 or the rules and
regulations thereunder) of both (a) the Directors of the
Fund, and (b) the Independent Directors of the Fund, cast in
person at a meeting called for the purpose of voting on the
Service and Distribution Plan. The Service and Distribution
Plan may not be amended in any material respect unless such
amendment is approved by votes of the majority (or whatever
other percentage may, from time to time, be required by
Section 12(b) of the Investment Company Act of 1940 or the
rules and regulations thereunder) of both (a) the Directors
of the Fund, and (b) the Independent Directors of the Fund,
cast in person at a meeting called for the purpose of voting
on the Service and Distribution Plan, and may not be amended
to increase materially the amount to be spent thereunder
without such approvals and approval by vote of at least a
majority of the outstanding Shares of the affected
Investment Class. The Plan may be terminated at any time by
vote of a majority of the Independent Directors or by vote
of a majority of the outstanding Shares.
PURCHASE OF FUND SHARES
The following information supplements and should be
read in conjunction with the section in the Fund's
Prospectus (Investment Class shares) entitled "How to Buy
Fund Shares."
The Distributor. FDDI, a subsidiary of Investor
Services Group, 4400 Computer Drive, Westborough,
Massachusetts 01581, serves as the Fund's distributor
pursuant to an agreement which is renewable annually. Each
Portfolio's shares are sold on a continuous basis by FDDI as
agent, although FDDI is not obligated to sell any particular
amount of securities.
Transactions Through Securities Dealers. Fund shares
may be purchased and redeemed through securities dealers
which may charge a nominal transaction fee for such
services. Some dealers will place the Fund's shares in an
account with their firm. Dealers also may require that the
customer not take physical delivery of share certificates;
the customer not request redemption checks to be issued in
the customer's name; fractional shares not be purchased; or
other conditions.
There is no sales or service charge to individual
investors by the Fund or by FDDI, although investment
dealers, banks and other institutions may make reasonable
charges to investors for their services. The services
provided and the applicable fees are established by each
dealer or other institution acting independently of the
Fund. The Fund has been given to understand that these fees
may be charged for customer services including, but not
limited to, same-day investment of client funds; same-day
access to client funds; advice to customers about the status
of their accounts, yield currently being paid or income
earned to date; provision of periodic account statements
showing security and money market positions; other services
available from the dealer, bank or other institution; and
assistance with inquiries related to their investment. Any
such fees will be deducted from the investor's account
monthly and on smaller accounts could constitute a
substantial portion of the distribution. Investors should
be aware that they may purchase shares of the Fund directly
from the Fund through FDDI without imposition of any
maintenance or service charges, other than those already
described herein. In some states, banks or other financial
institutions effecting transactions in Fund shares may be
required to register as dealers pursuant to state law.
In-Kind Purchases. Payments for each Portfolio's
shares may, at the discretion of Wilshire, be made in the
form of securities which are permissible investments for the
Portfolio. For further information about this form of
payment, please contact the Transfer Agent. Generally,
securities which are accepted by a Portfolio as payment for
the Portfolio's shares will be valued using the Portfolio's
procedures for valuing its own shares at the time the
Portfolio's net asset value is next determined after receipt
of a properly completed order. All dividends, interest,
subscription or other rights pertaining to such securities
shall become the property of the Portfolio and must be
delivered to the Portfolio upon receipt from the issuer.
The Portfolio will require that (1) it will have good and
marketable title to the securities received by it; (2) the
securities are in proper form for transfer to the Portfolio
and are not subject to any restriction on sale by the
Portfolio under the Securities Act of 1933, as amended, or
otherwise; and (3) such other documentation as Wilshire may,
in its discretion, deem necessary or appropriate. Investors
who are subject to Federal taxation may realize a gain or
loss for Federal income tax purposes.
REDEMPTION OF FUND SHARES
The following information supplements and should be
read in conjunction with the section in the Fund's
Prospectus (Investment Class shares) entitled "How to Redeem
Fund Shares."
Wire Redemption Privilege. By using this Privilege,
the investor authorizes Investor Services Group (the
"Transfer Agent") to act on wire or telephone redemption
instructions from any person representing himself or herself
to be the investor, and reasonably believed by the Transfer
Agent to be genuine. Ordinarily, the Fund will initiate
payment for shares redeemed pursuant to this Privilege on
the next business day after receipt if the Transfer Agent
receives the redemption request in proper form. Redemption
proceeds ($1,000 minimum) will be transferred by Federal
Reserve wire only to the commercial bank account specified
by the investor on the Account Application or Shareholder
Services Form, or to a correspondent bank if the investor's
bank is not a member of the Federal Reserve System. Fees
ordinarily are imposed by such bank and usually are borne by
the investor. Immediate notification by the correspondent
bank to the investor's bank is necessary to avoid a delay in
crediting the funds to the investor's bank account.
To change the commercial bank or account designated to
receive wire redemption proceeds, a written request must be
sent to the Transfer Agent. This request must be signed by
each shareholder, with each signature guaranteed as
described below under "Stock Certificates; Signatures."
Stock Certificates; Signatures. Any certificates
representing Fund shares to be redeemed must be submitted
with the redemption request. Written redemption requests
must be signed by each shareholder, including each holder of
a joint account, and each signature must be guaranteed.
Signatures on endorsed certificates submitted for redemption
also must be guaranteed. The Transfer Agent has adopted
standards and procedures pursuant to which
signature-guarantees in proper form generally will be
accepted from domestic banks, brokers, dealers, credit
unions, national securities exchanges, registered securities
associations, clearing agencies and savings associations, as
well as from participants in the New York Stock Exchange
Medallion Signature Program, the Securities Transfer Agents
Medallion Program ("STAMP") and the Stock Exchanges
Medallion Program. Guarantees must be signed by an
authorized signatory of the guarantor and
"Signature-Guaranteed" must appear with the signature. The
Transfer Agent may request additional documentation from
corporations, executors, administrators, trustees or
guardians, and may accept other suitable verification
arrangements from foreign investors, such as consular
verification. For more information with respect to
signature-guarantees, please call the telephone number
listed on the cover.
Redemption Commitment. The Fund has committed itself
to pay in cash all redemption requests by any shareholder of
record, limited in amount during any 90-day period to the
lesser of $250,000 or 1% of the value of the Portfolio's net
assets at the beginning of such period. Such commitment is
irrevocable without the prior approval of the SEC. In the
case of requests for redemption in excess of such amount,
the Board of Directors reserves the right to make payments
in whole or in part in securities or other assets in case of
an emergency or any time a cash distribution would impair
the liquidity of the Fund to the detriment of the existing
shareholders. In such event, the securities would be
readily marketable, to the extent available, and would be
valued in the same manner as the Portfolio's investment
securities are valued. If the recipient sold such
securities, brokerage charges would be incurred.
Suspension of Redemptions. The right of redemption
may be suspended or the date of payment postponed (a) during
any period when the New York Stock Exchange is closed (other
than customary weekend and holiday closings), (b) when
trading in the markets the Fund ordinarily utilizes is
restricted, or when an emergency exists as determined by the
SEC so that disposal of the Fund's investments or
determination of its net asset value is not reasonably
practicable, or (c) for such other periods as the SEC by
order may permit to protect the Fund's shareholders.
SHAREHOLDER SERVICES
The following information supplements and should be
read in conjunction with the section in the Fund's
Prospectus (Investment Class shares) entitled "Shareholder
Services."
Portfolio Exchanges. You may purchase, in exchange
for shares of a Portfolio, shares of the same class of one
of the other Portfolios offered by the Fund, to the extent
such shares are offered for sale in your state of residence.
Shares of other Portfolios purchased by exchange will be
purchased on the basis of relative net asset value per
share.
To request an exchange, the investor must give
exchange instructions to the Transfer Agent in writing or by
telephone. The ability to issue exchange instructions by
telephone is given to all Fund shareholders automatically,
unless the investor checks the applicable "No" box on the
Account Application, indicating that the investor
specifically refuses this privilege. By using the Telephone
Exchange Privilege, the investor authorizes the Transfer
Agent to act on telephonic instructions from any person
representing himself or herself to be the investor and
reasonably believed by the Transfer Agent to be genuine.
Telephone exchanges may be subject to limitations as to the
amount involved or the number of telephone exchanges
permitted. Shares issued in certificate form are not
eligible for telephone exchange.
To establish a personal retirement plan by exchange,
shares of the Portfolio being exchanged must have a value of
at least the minimum initial investment required for the
Portfolio into which the exchange is being made. For Keogh
Plans, IRAs and IRAs set up under a Simplified Employee
Pension Plan ("SEP-IRAs") with only one participant, the
minimum initial investment is $750. To exchange shares held
in corporate plans, 403(b)(7) Plans and SEP-IRAs with more
than one participant, the minimum initial investment is $100
if the plan has at least $2,500 invested among the
portfolios in Wilshire Target Funds, Inc. To exchange
shares held in personal retirement plans, the shares
exchanged must have a current value of at least $100.
The Portfolio Exchanges service is available to
shareholders resident in any state in which shares of the
Portfolio being acquired may legally be sold. Shares may be
exchanged only between accounts having identical names and
other identifying designations.
The Fund reserves the right to reject any exchange
request in whole or in part. The Portfolio Exchanges
service may be modified or terminated at any time upon
notice to shareholders.
Corporate Pension/Profit-Sharing and Personal
Retirement Plans. The Fund makes available to corporations
a variety of prototype pension and profit-sharing plans. In
addition, the Fund makes available Keogh Plans, IRAs,
including SEP-IRAs and IRA "Rollover Accounts," and
403(b)(7) Plans. Plan support services also are available.
Investors can obtain details on the various plans by calling
the following toll-free number: 1-888-200-6796.
Investors who wish to purchase a Portfolio's shares in
conjunction with a Keogh Plan, a 403(b)(7) Plan or an IRA,
including an SEP-IRA, may request from the Transfer Agent
forms for adoption of such plans.
The entity acting as custodian for Keogh Plans,
403(b)(7) Plans or IRAs may charge a fee, payment of which
could require the liquidation of shares. All fees charged
are described in the appropriate form.
Shares may be purchased in connection with these plans
only by direct remittance to the entity acting as custodian.
Purchases for these plans may not be made in advance of
receipt of funds.
The minimum initial investment for corporate plans,
403(b)(7) Plans and SEP-IRAs with more than one participant,
is $2,500 with no minimum or subsequent purchases. The
minimum initial investment for Keogh Plans, IRAs, SEP-IRAs
and 403(b)(7) Plans with only one participant, is normally
$750, with no minimum on subsequent purchases. Individuals
who open an IRA may also open a non-working spousal IRA with
a minimum investment of $250.
The investor should read the prototype retirement plan
and the appropriate form of custodial agreement for further
details on eligibility, service fees and tax implications,
and should consult a tax adviser.
DETERMINATION OF NET ASSET VALUE
The following information supplements and should be
read in conjunction with the section in the Fund's
Prospectus (Investment Class shares) entitled "How to Buy
Fund Shares."
Valuation of Portfolio Securities. Each Portfolio's
investment securities are valued at the last sale price on
the securities exchange or national securities market on
which such securities primarily are traded. Securities not
listed on an exchange or national securities market, or
securities in which there were no transactions, are valued
at the average of the most recent bid and asked prices. Bid
price is used when no asked price is available. Short-term
investments are carried at amortized cost, which
approximates value. Any securities or other assets for
which recent market quotations are not readily available are
valued at fair value as determined in good faith by the
Board of Directors. Expenses and fees, including the
advisory and administration fees, are accrued daily and
taken into account for the purpose of determining the net
asset value of each Portfolio's shares.
New York Stock Exchange Closings. The holidays (as
observed) on which the New York Stock Exchange is closed
currently are: New Year's Day, Presidents' Day, Good
Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving and Christmas.
DIVIDENDS, DISTRIBUTION AND TAXES
The following information supplements and should be
read in conjunction with the section in the Fund's
Prospectus (Investment Class shares) entitled "Dividends,
Distributions and Taxes."
Management of the Fund intends to qualify each year as
a "regulated investment company" under the Internal Revenue
Code of 1986, as amended (the "Code"). Each Portfolio also
intends to qualify. Qualification as a regulated investment
company relieves the Portfolio from any liability for
Federal income taxes to the extent its earnings are
distributed in accordance with the applicable provisions of
the Code. The term "regulated investment company" does not
imply the supervision of management or investment practices
or policies by any government agency.
Depending on the composition of a Portfolio's income,
all or a portion of the dividends paid by such Portfolio
from net investment income may qualify for the dividends
received deduction allowable to certain U.S. corporate
shareholders ("dividends received deduction"). In general,
dividend income of a Portfolio distributed to qualifying
corporate shareholders will be eligible for the dividends
received deduction only to the extent that (i) such
Portfolio's income consists of dividends paid by U.S.
corporations and (ii) the Portfolio would have been entitled
to the dividends received deduction with respect to such
dividend income if the Portfolio were not a regulated
investment company. The dividends received deduction for
qualifying corporate shareholders may be reduced if the
shares of the Portfolio held by them with respect to which
dividends are received are treated as debt-financed or
deemed to have been held for less than 46 days. In
addition, the Code provides other limitations with respect
to the ability of a qualifying corporate shareholder to
claim the dividends received deduction in connection with
holding a Portfolio's shares.
Any dividend or distribution paid shortly after an
investor's purchase may have the effect of reducing the
aggregate net asset value of his shares below the cost of
his investment. Such a dividend or distribution would be a
return on investment in an economic sense, although taxable
as stated in the Portfolios' Prospectus. In addition, the
Code provides that if a shareholder holds shares of the
Portfolios for six months or less and has received a capital
gain distribution with respect to such shares, any loss
incurred on the sale of such shares will be treated as a
long-term capital loss to the extent of the capital gain
distribution received.
Investment by a Portfolio in securities issued or
acquired at a discount, or providing for deferred interest
or for payment of interest in the form of additional
obligations could under special tax rules affect the amount,
timing and character of distributions to shareholders by
causing such Portfolio to recognize income prior to the
receipt of cash payments. For example, the Portfolio could
be required to accrue a portion of the discount (or deemed
discount) at which the securities were issued each year and
to distribute such income in order to maintain its
qualification as a regulated investment company. In such
case, such Portfolio may have to dispose of securities which
it might otherwise have continued to hold in order to
generate cash to satisfy these distribution requirements.
PERFORMANCE INFORMATION
The following information supplements and should be
read in conjunction with the section in the Fund's
Prospectus (Investment Class shares) entitled "Performance
Information."
From time to time, quotations of the Portfolios'
performance may be presented in advertisements, sales
literature or reports to shareholders or prospective
investors. In the case of Portfolios with more than one
class of shares, all performance information is calculated
separately for each class. The data is calculated as
follows.
The Portfolio's yield is presented for a specified
thirty-day period (the "base period"). Yield is based on
the amount determined by (i) calculating the aggregate
amount of dividends and interest earned by the Portfolio
during the base period less expenses for that periods, and
(ii) dividing that amount by the product of (A) the average
daily number of shares of the Portfolio outstanding during
the base period and entitled to receive dividends and (B)
the per share maximum public offering price for
Institutional shares and net asset value for other classes
of shares on the last day of the base period. The result is
annualized on a compounding basis to determine the yield.
For this calculation, interest earned on debt obligations
held by the Portfolio is generally calculated using the
yield to maturity (or first expected call date) of such
obligations based on their market values.
Average annual total return is calculated by
determining the ending redeemable value of an investment
purchased at net asset value per share with a hypothetical
$1,000 payment made at the beginning of the period (assuming
the reinvestment of dividends and distributions), dividing
by the amount of the initial investment, taking the "nth"
root of the quotient (where "n" is the number of years in
the period) and subtracting 1 from the result.
Total return is calculated by subtracting the amount
of the net asset value per share at the beginning of a
stated period from the net asset value per share at the end
of the period (after giving effect to the reinvestment of
dividends and distributions during the period), and dividing
the result by the net asset value per share at the beginning
of the period.
PORTFOLIO TRANSACTIONS
Wilshire supervises the placement of orders on behalf
of each Portfolio for the purchase or sale of portfolio
securities. Allocation of brokerage transactions, including
their frequency, is made in the best judgment of Wilshire
and in a manner deemed fair and reasonable to shareholders.
The primary consideration is prompt execution of orders at
the most favorable net price. Subject to this
consideration, the brokers selected may include those that
supplement Wilshire's research facilities with statistical
data, investment information, economic facts and opinions.
Information so received is in addition to and not in lieu of
services required to be performed by Wilshire and its fees
are not reduced as a consequence of the receipt of such
supplemental information. Such information may be useful to
Wilshire in serving both the Fund and other clients which it
advises and, conversely, supplemental information obtained
by the placement of business of other clients may be useful
to Wilshire in carrying out its obligations to the Fund.
Brokers also are selected because of their ability to handle
special executions such as are involved in large block
trades or broad distributions, provided the primary
consideration is met. Large block trades, in certain cases,
may result from two or more clients Wilshire might advise
being engaged simultaneously in the purchase or sale of the
same security. When transactions are executed in the
over-the-counter market, the Fund will deal with the primary
market makers unless a more favorable price or execution
otherwise is obtainable.
Portfolio turnover may vary from year to year, as well
as within a year. The Portfolios may experience greater
portfolio turnover than would be expected for a portfolio of
higher rated securities. High turnover rates are likely to
result in increased transaction costs to the Portfolios.
The Portfolios will not attempt to set or meet a portfolio
turnover rate since any turnover would be incidental to
transactions undertaken in an attempt to achieve the
Portfolios' investment objectives. The overall
reasonableness of brokerage commissions paid is evaluated by
the Adviser based upon its knowledge of available
information as to the general level of commissions paid by
other institutional investors for comparable services.
INFORMATION ABOUT THE FUND
The following information supplements and should be
read in conjunction with the section in the Portfolios'
Prospectus (Investment Class shares) entitled "General
Information."
Each share of a Portfolio has one vote and, when
issued and paid for in accordance with the terms of the
offering, is fully paid and non-assessable. Shares of each
class of a Portfolio have equal rights as to dividends and
in liquidation. Shares have no preemptive, subscription or
conversion rights and are freely transferable.
Rule 18f-2 under the 1940 Act provides that any matter
required to be submitted under the provisions of the 1940
Act or applicable state law or otherwise to the holders of
the outstanding voting securities of an investment company,
such as the Fund, will not be deemed to have been
effectively acted upon unless approved by the holders of a
majority of the outstanding shares of each Portfolio
affected by such matter. Rule 18f-2 further provides that a
Portfolio shall be deemed to be affected by a matter unless
it is clear that the interests of each Portfolio in the
matter are identical or that the matter does not affect any
interest of such Portfolio. However, the Rule exempts the
selection of independent accountants and the election of
Directors from the separate voting requirements of the Rule.
Rule 18f-3 under the 1940 Act makes further provision for
the voting rights of each class of Shares, such as the
Institutional Class shares, of an investment company which
issues more than one class of voting shares. In particular,
Rule 18f-3 provides that each class shall have exclusive
voting rights on any matter submitted to shareholders that
relates solely to the class' arrangement for services and
expenses, and shall have separate voting rights on any
matter submitted to shareholders in which the interests of
one class differ from the interests of any other class.
The Fund will send annual and semi-annual financial
statements to all its shareholders.
CUSTODIAN, TRANSFER AND DIVIDEND DISBURSING AGENT,
COUNSEL AND INDEPENDENT ACCOUNTANTS
The Northern Trust Company, an Illinois trust company
located at 50 South LaSalle Street, Chicago, Illinois 60675,
acts as custodian of the Fund's investments. First Data
Investor Services Group, Inc., a subsidiary of First Data
Corporation, P.O. Box 5170, Westborough, Massachusetts
01581-5120, is the Fund's transfer and dividend disbursing
agent. Neither The Northern Trust Company nor Investor
Services Group has any part in determining the investment
policies of the Fund or which securities are to be purchased
or sold by the Fund.
Ropes & Gray, One International Place, Boston,
Massachusetts 02110-2624, is counsel for the Fund.
Coopers & Lybrand L.L.P., 1301 Avenue of the Americas,
New York, New York 10019, independent accountants, have been
selected as auditors of the Fund.
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EXHIBIT (1)(e)
WILSHIRE TARGET FUNDS, INC.
ARTICLES SUPPLEMENTARY
WILSHIRE TARGET FUNDS, INC., a Maryland corporation
registered as an open-end investment company under the
Investment Company Act of 1940, as amended (the "1940 Act"),
and having its principal office in the State of Maryland in
Baltimore City, Maryland (hereinafter called the
"Corporation"), hereby certifies to the State Department of
Assessments and Taxation of Maryland that:
FIRST: In accordance with procedures established in
the Corporation's Charter and pursuant to Section 2-208.1 of
Maryland General Corporate Law, the Board of Directors of
the Corporation, by resolution dated June 3, 1997, duly
authorized the increase in the aggregate number of shares of
stock that the Corporation shall have the authority to issue
from four hundred million (400,000,000) shares to six
hundred million (600,000,000) shares, all designated as
common stock.
SECOND: In accordance with procedures established in
the Corporation's Charter and pursuant to Section 2-208 of
Maryland General Corporate Law, the Board of Directors of
the Corporation, by resolution dated June 3, 1997, duly
classified two hundred million (200,000,000) shares of the
authorized common stock of the Corporation into the
following additional portfolios and classes, designated as
follows:
Name of
Portfolio
C
l
a
s
s
D
e
s
i
g
n
a
t
i
o
n
N
u
m
b
e
r
o
f
A
u
t
h
o
r
i
z
e
d
S
h
a
r
e
s
A
l
l
o
c
a
t
e
d
Intermediate
Corporate Bond
Funds
I
n
v
e
s
t
m
e
n
t
C
l
a
s
s
5
0
,
0
0
0
,
0
0
0
I
n
s
t
i
t
u
t
i
o
n
a
l
C
l
a
s
s
5
0
,
0
0
0
,
0
0
0
Long Term
Corporate Bond
Funds
I
n
v
e
s
t
m
e
n
t
C
l
a
s
s
5
0
,
0
0
0
,
0
0
0
I
n
s
t
i
t
u
t
i
o
n
a
l
C
l
a
s
s
5
0
,
0
0
0
,
0
0
0
THIRD: The increase in the shares of common stock
which the Corporation shall have the authority to issue
pursuant to Article First of these Articles Supplementary
has been so authorized under the authority contained in the
Charter of the Corporation. The total number of shares of
common stock that the Corporation has authority to issue has
been increased by the Board of Directors in accordance with
Section 2-105(c) of Maryland General Corporate Law.
FOURTH: The shares of the Corporation classified
pursuant to Article Second of these Articles Supplementary
have been so classified by the Board of Directors under the
authority contained in the Charter of the Corporation. The
number of shares of common stock of the various series that
the Corporation has authority to issue has been established
by the Board of Directors in accordance with Section 2-
105(c) of the Maryland General Corporation Law.
FIFTH: Immediately prior to the effectiveness of the
Articles Supplementary of the Corporation as herein above
set forth, the Corporation had the authority to issue four
hundred million (400,000,000) shares of common stock of the
par value of $0.001 per share and of the aggregate par value
of four hundred thousand dollars ($400,000), of which the
Board of Directors had designated four hundred million
shares into portfolios and classes and classified the shares
of each portfolio and class as follows:
Previous Classification of Shares
Name of
Portfolio
Cl
as
s
De
si
gn
at
io
n
N
u
m
b
e
r
o
f
A
u
t
h
o
r
i
z
e
d
S
h
a
r
e
s
A
l
l
o
c
a
t
e
d
Large
Company
Growth
Portfolio
In
ve
st
me
nt
Cl
as
s
Sh
ar
es
5
0
,
0
0
0
,
0
0
0
In
st
it
ut
io
na
l
Cl
as
s
Sh
ar
es
5
0
,
0
0
0
,
0
0
0
Large
Company
Value
Portfolio
In
ve
st
me
nt
Cl
as
s
Sh
ar
es
5
0
,
0
0
0
,
0
0
0
In
st
it
ut
io
na
l
Cl
as
s
Sh
ar
es
5
0
,
0
0
0
,
0
0
0
Small
Company
Growth
Portfolio
In
ve
st
me
nt
Cl
as
s
Sh
ar
es
5
0
,
0
0
0
,
0
0
0
In
st
it
ut
io
na
l
Cl
as
s
Sh
ar
es
5
0
,
0
0
0
,
0
0
0
Small
Company
Value
Portfolio
In
ve
st
me
nt
Cl
as
s
Sh
ar
es
5
0
,
0
0
0
,
0
0
0
In
st
it
ut
io
na
l
Cl
as
s
Sh
ar
es
5
0
,
0
0
0
,
0
0
0
As amended hereby, the Corporation's Articles of
Incorporation authorize the issuance of six hundred million
(600,000,000) shares of common stock of the par value of
$0.001 per share and of the aggregate par value of six
hundred thousand dollars ($600,000), of which the Board of
Directors has designated six hundred million (600,000,000)
common shares into portfolios and classes and classified the
shares of each portfolio and class as follows:
Current Classification of Shares
Name of
Portfolio
Cl
as
s
De
si
gn
at
io
n
N
u
m
b
e
r
o
f
S
h
a
r
e
s
A
l
l
o
c
a
t
e
d
Large
Company
Growth
Portfolio
In
ve
st
me
nt
Cl
as
s
Sh
ar
es
5
0
,
0
0
0
,
0
0
0
In
st
it
ut
io
na
l
Cl
as
s
Sh
ar
es
5
0
,
0
0
0
,
0
0
0
Large
Company
Value
Portfolio
In
ve
st
me
nt
Cl
as
s
Sh
ar
es
5
0
,
0
0
0
,
0
0
0
In
st
it
ut
io
na
l
Cl
as
s
Sh
ar
es
5
0
,
0
0
0
,
0
0
0
Small
Company
Growth
Portfolio
In
ve
st
me
nt
Cl
as
s
Sh
ar
es
5
0
,
0
0
0
,
0
0
0
In
st
it
ut
io
na
l
Cl
as
s
Sh
ar
es
5
0
,
0
0
0
,
0
0
0
Small
Company
Value
Portfolio
In
ve
st
me
nt
Cl
as
s
Sh
ar
es
5
0
,
0
0
0
,
0
0
0
In
st
it
ut
io
na
l
Cl
as
s
Sh
ar
es
5
0
,
0
0
0
,
0
0
0
Intermedia
te
Corporate
Bond Fund
In
ve
st
me
nt
Cl
as
s
Sh
ar
es
5
0
,
0
0
0
,
0
0
0
In
st
it
ut
io
na
l
Cl
as
s
Sh
ar
es
5
0
,
0
0
0
,
0
0
0
Long Term
Corporate
Bond Fund
In
ve
st
me
nt
Cl
as
s
Sh
ar
es
5
0
,
0
0
0
,
0
0
0
In
st
it
ut
io
na
l
Cl
as
s
Sh
ar
es
5
0
,
0
0
0
,
0
0
0
SIXTH: The preferences, rights, voting powers,
restrictions, limitations as to dividends, qualifications
and terms and conditions of redemption of each share of the
Intermediate Corporate Bond Fund and the Long Term Corporate
Bond Fund shall be as set forth in the Corporation's
Articles of Incorporation, as supplemented, and shall be
subject to all provisions of the Articles of Incorporation,
as supplemented, relating to shares of the Corporation
generally.
IN WITNESS WHEREOF, Wilshire Target Funds, Inc. has
caused these Articles Supplementary to be signed in its name
and on its behalf by its authorized officers who acknowledge
that these Articles Supplementary are the act of the
Corporation; that to the best of their knowledge,
information, and belief, all matters and facts set forth
herein relating to the authorization and approval of these
Articles Supplementary are true in all material respects;
and that this statement is made under the penalties of
perjury.
Date: June 24, 1997
WILSHIRE TARGET FUNDS, INC.
[CORPORATE SEAL]
By: /s/ Julie A. Tedesco
Name: Julie A. Tedesco
Title: Vice President
Attest:
By: /s/ Theresa M.R. Hamlin
Name: Theresa M. R. Hamlin
Title: Assistant Secretary
EXHIBIT (6)(a)
DISTRIBUTION AGREEMENT
WILSHIRE TARGET FUNDS, INC.
Providence, Rhode Island
March 3, 1996
First Data Distributors, Inc.
4400 Computer Drive
Westborough, MA 01581
Ladies and Gentlemen:
This is to confirm that, in consideration of the
agreements hereinafter contained, the Wilshire Target Funds,
Inc. (the "Fund") has agreed that you shall be, for the
period of this agreement, the distributor of shares of each
Class of each Series of the Fund set forth on Exhibit A
hereto, as such Exhibit may be revised from time to time
(each, a "Series"). For purposes of this agreement the term
"Shares" shall mean the authorized shares of the relevant
Classes and Series.
1. Services as Distributor
1.1 You will act as agent for the distribution of Shares
covered by, and in accordance with, the registration
statement and prospectus then in effect under the Securities
Act of 1933, as amended, and will transmit promptly any
orders received by you for purchase or redemption of Shares
to the Transfer and Dividend Disbursing Agent for the Fund.
1.2 You agree to use your best efforts to solicit orders
for, and otherwise to promote, the sale of Shares. To the
extent that you receive shareholder services fees under any
shareholder services plan adopted by the Fund, you agree to
furnish, and/or enter into arrangements with others for the
furnishing of, personal and/or account maintenance services
with respect to the relevant shareholders of the Fund as may
be required pursuant to such plan. It is contemplated that
you will enter into sales or servicing agreements with
securities dealers, financial institutions and other
industry professionals, such as investment advisers,
accountants and estate planning firms, and in so doing you
may act as agent for the Fund or on your own behalf as
principal.
1.3 You shall act as distributor of Shares in compliance
with all applicable laws, rules and regulations, including
without limitation, all rules and regulations made or
adopted pursuant to the Investment Company Act of 1940, as
amended, by the Securities and Exchange Commission or any
securities association registered under the Securities
Exchange Act of 1934, as amended.
1.4 Whenever in their judgment such action is warranted by
market, economic or political conditions, or by abnormal
circumstances of any kind, the Fund's officers may decline
to accept any orders for, or make any sales of, any Shares
until such time as they deem it advisable to accept such
orders and to make such sales and the Fund shall advise you
promptly of such determination.
1.5 The Fund agrees to pay all costs and expenses in
connection with the registration of Shares under the
Securities Act of 1933, as amended, and all expenses in
connection with maintaining facilities for the issue and
transfer of Shares and for supplying information, prices and
other data to be furnished by the Fund hereunder, and all
expenses in connection with the preparation and printing of
the Fund's prospectuses and statements of additional
information for regulatory purposes and for distribution to
shareholders; provided, however, that nothing contained
herein shall be deemed to require the Fund to pay any of the
costs of advertising the sale of Shares.
1.6 The Fund agrees to execute any and all documents and
to furnish any and all information and otherwise to take all
actions which may be reasonably necessary in the discretion
of the Fund's officers in connection with the qualification
of Shares for sale in such states as you may designate to
the Fund and the Fund may approve, and the Fund agrees to
pay all expenses which may be incurred in connection with
such qualification. The Fund shall notify you in writing of
the states in which the Shares may be sold and shall notify
you in writing of any changes to the information contained
in the previous notification. You shall pay all expenses
connected with your own qualification as a dealer under
state and Federal laws and, except as otherwise specifically
provided in this agreement, all other expenses incurred by
you in connection with the sale of Shares as contemplated in
this agreement.
1.7 The Fund shall furnish you from time to time, for use
in connection with the sale of Shares, such information with
respect to the Fund or any relevant Series and the Shares as
you may reasonably request, all of which shall be signed by
one or more of the Fund's duly authorized officers; and the
Fund warrants that the statements contained in any such
information, when so signed by the Fund's officers, shall be
true and correct. The Fund also shall furnish you upon
request with: (a) semi-annual reports and annual audited
reports of the Fund's books and accounts made by independent
public accountants regularly retained by the Fund,
(b) quarterly earnings statements prepared by the Fund,
(c) a monthly itemized list of the securities in each
Series' portfolio, (d) monthly balance sheets as soon as
practicable after the end of each month, and (e) from time
to time such additional information regarding the Fund's
financial condition as you may reasonably request.
1.8 The Fund represents to you that all registration
statements and prospectuses filed by the Fund with the
Securities and Exchange Commission under the Securities Act
of 1933, as amended, and under the Investment Company Act of
1940, as amended, with respect to the Shares have been
carefully prepared in conformity with the requirements of
said Acts and rules and regulations of the Securities and
Exchange Commission thereunder. As used in this agreement
the terms "registration statement" and "prospectus" shall
mean any registration statement and prospectus, including
the statement of additional information incorporated by
reference therein, filed with the Securities and Exchange
Commission and any amendments and supplements thereto which
at any time shall have been filed with said Commission. The
Fund represents and warrants to you that any registration
statement and prospectus, when such registration statement
becomes effective, will contain all statements required to
be stated therein in conformity with said Acts and the rules
and regulations of said Commission; that all statements of
fact contained in any such registration statement and
prospectus will be true and correct when such registration
statement becomes effective; and that neither any
registration statement nor any prospectus when such
registration statement becomes effective will include an
untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to
make the statements therein not misleading. The Fund may
but shall not be obligated to propose from time to time such
amendment or amendments to any registration statement and
such supplement or supplements to any prospectus as, in the
light of future developments, may, in the opinion of the
Fund's counsel, be necessary or advisable. If the Fund
shall not propose such amendment or amendments and/or
supplement or supplements within fifteen days after receipt
by the Fund of a written request from you to do so, you may,
at your option, terminate this agreement or decline to make
offers of the Fund's securities until such amendments are
made. The Fund shall not file any amendment to any
registration statement or supplement to any prospectus
without giving you reasonable notice thereof in advance;
provided, however, that nothing contained in this agreement
shall in any way limit the Fund's right to file at any time
such amendments to any registration statement and/or
supplements to any prospectus, of whatever character, as the
Fund may deem advisable, such right being in all respects
absolute and unconditional.
1.9 The Fund authorizes you to use any prospectus in the
form furnished to you time to time, in connection with the
sale of Shares. The Fund agrees to indemnify, defend and
hold you, your several officers and directors, and any
person who controls you within the meaning of Section 15 of
the Securities Act of 1933, as amended, free and harmless
(i) from and against any and all claims, demands,
liabilities and expenses (including the cost of
investigating or defending such claims, demands or
liabilities and any counsel fees incurred in connection
therewith) which you, your officers and directors, or such
controlling person, may incur, directly or indirectly, under
the Securities Act of 1933, as amended, or under common law
or otherwise, arising out of or based upon any untrue
statement, or alleged untrue statement, of a material fact
contained in any registration statement or any prospectus or
arising out of or based upon any omission, or alleged
omission, to state a material fact required to be stated in
either any registration statement or any prospectus or
necessary to make the statements in either thereof not
misleading; provided, however, that the Fund's agreement to
indemnify you, your officers or directors, and any such
controlling person shall not be deemed to cover any claims,
demands, liabilities or expenses arising out of any untrue
statement or alleged untrue statement or omission or alleged
omission made in any registration statement or prospectus in
reliance upon and in conformity with written information
furnished to the Fund by you specifically for use in the
preparation thereof; and (ii) from and against any and all
such claims, demands, liabilities and expenses (including
such costs and counsel fees) which you, your officers and
directors, or such controlling person, may incur in
connection with this Agreement or your performance hereunder
(but excluding such claims, demands, liabilities and
expenses (including such costs and counsel fees) arising out
of or based upon any untrue statement, or alleged untrue
statement, of a material fact contained in any registration
statement or any prospectus or arising out of or based upon
any omission, or alleged omission, to state a material fact
required to be stated in either any registration statement
or any prospectus or necessary to make the statements in
either therof not misleading, unless such claims, demands,
liabilities and expenses (including such costs and counsel
fees) arise by reason of your willful misfeasance, bad faith
or negligence in the performance of your duties hereunder.
The Fund acknowledges and agrees that in the event that you,
at the request of the Fund, are required to give an
indemnification comparable to that set forth in clause (i)
of Section 1.9 of this Agreement to any broker-dealer
selling Shares of the Fund and such broker-dealer shall make
a claim for indemnification against you, you will make a
similar claim for indemnification against the Fund. The
Fund's agreement to indemnify you, your officers and
directors, and any such controlling person, as aforesaid, is
expressly conditioned upon the Fund's being notified of any
action brought against you, your officers or directors, or
any such controlling person, such notification to be given
by letter or by telegram addressed to the Fund at its
address set forth above within ten days after the summons or
other first legal process shall have been served. The
failure so to notify the Fund of any such action shall not
relieve the Fund from any liability which the Fund may have
to the person against whom such action is brought by reason
of any such untrue, or alleged untrue, statement or
omission, or alleged omission, otherwise than on account of
the Fund's indemnity agreement contained in this paragraph
1.9. The Fund will be entitled to assume the defense of any
suit brought to enforce any such claim, demand or liability,
but, in such case, such defense shall be conducted by
counsel of good standing chosen by the Fund and approved by
you. In the event the Fund elects to assume the defense of
any such suit and retain counsel of good standing approved
by you, the defendant or defendants in such suit shall bear
the fees and expenses of any additional counsel retained by
any of them; but in case the Fund does not elect to assume
the defense of any such suit, or in case you do not approve
of counsel chosen by the Fund, the Fund will reimburse you,
your officers and directors, or the controlling person or
persons named as defendant or defendants in such suit, for
the fees and expenses of any counsel retained by you or
them. The Fund's indemnification agreement contained in
this paragraph 1.9 and the Fund's representations and
warranties in this agreement shall remain operative and in
full force and effect regardless of any investigation made
by or on behalf of you, your officers and directors, or any
controlling person, and shall survive the delivery of any
Shares. This agreement of indemnity will inure exclusively
to your benefit, to the benefit of your several officers and
directors, and their respective estates, and to the benefit
of any controlling persons and their successors. The Fund
agrees promptly to notify you of the commencement of any
litigation or proceedings against the Fund or any of its
officers or Board members in connection with the issue and
sale of Shares.
1.10 You agree to indemnify, defend and hold the Fund, its
several officers and Board members, and any person who
controls the Fund within the meaning of Section 15 of the
Securities Act of 1933, as amended, free and harmless from
and against any and all claims, demands, liabilities and
expenses (including the cost of investigating or defending
such claims, demands or liabilities and any counsel fees
incurred in connection therewith) which the Fund, its
officers or Board members, or any such controlling person,
may incur directly or indirectly under the Securities Act of
1933, as amended, or under state securities law, federal or
state common law or otherwise, but only to the extent that
such liability or expense incurred by the Fund, its officers
or Board members, or such controlling person resulting from
such claims or demands, (i) shall arise out of or be based
upon any untrue, or alleged untrue, statement of a material
fact contained in information furnished in writing by you to
the Fund specifically for use in the Fund's registration
statement and used in the answers to any of the items of the
registration statement or in the corresponding statements
made in the prospectus, (ii) shall arise out of or be based
upon any omission, or alleged omission, to state a material
fact in connection with such information furnished in
writing by you to the Fund and required to be stated in such
answers or necessary to make such information not
misleading, or (iii) shall arise out of any violation by you
of any provision of this agreement or any provision of
applicable law, (iv) shall arise out of or be based upon
your willful misfeasance, bad faith, or negligence in the
performance of your duties hereunder. Your agreement to
indemnify the Fund, its officers and Board members, and any
such controlling person, as aforesaid, is expressly
conditioned upon your being notified of any action brought
against the Fund, its officers or Board members, or any such
controlling person, such notification to be given by letter
or telegram addressed to you at your address set forth above
within ten days after the summons or other first legal
process shall have been served. You shall have the right to
control the defense of such action, with counsel of your own
choosing, satisfactory to the Fund, if such action is based
solely upon such alleged misstatement or omission on your
part, and in any other event the Fund, its officers or Board
members, or such controlling person shall each have the
right to participate in the defense or preparation of the
defense of any such action. The failure so to notify you of
any such action shall not relieve you from any liability
which you may have to the Fund, its officers or Board
members, or to such controlling person by reason of any such
untrue, or alleged untrue, statement or omission, or alleged
omission, otherwise than on account of your indemnity
agreement contained in this paragraph 1.10. This agreement
of indemnity will inure exclusively to the Fund's benefit,
to the benefit of the Fund's officers and Board members, and
their respective estates, and to the benefit of any
controlling persons and their successors. You agree
promptly to notify the Fund of the commencement of any
litigation or proceedings against you or any of your
officers or directors in connection with the issue and sale
of Shares.
1.11 No Shares shall be offered by either you or the Fund
under any of the provisions of this agreement and no orders
for the purchase or sale of such Shares hereunder shall be
accepted by the Fund if and so long as the effectiveness of
the registration statement then in effect or any necessary
amendments thereto shall be suspended under any of the
provisions of the Securities Act of 1933, as amended, or if
and so long as a current prospectus as required by
Section 10 of said Act, as amended, is not on file with the
Securities and Exchange Commission; provided, however, that
nothing contained in this paragraph 1.11 shall in any way
restrict or have an application to or bearing upon the
Fund's obligation to repurchase any Shares from any
shareholder in accordance with the provisions of the Fund's
prospectus or charter documents.
1.12 The Fund agrees to advise you immediately in writing:
(a) of any request by the Securities and Exchange
Commission for amendments to the registration statement or
prospectus then in effect or for additional information;
(b) in the event of the issuance by the Securities and
Exchange Commission of any stop order suspending the
effectiveness of the registration statement or prospectus
then in effect or the initiation of any proceeding for that
purpose;
(c) of the happening of any event which makes untrue any
statement of a material fact made in the registration
statement or prospectus then in effect or which requires the
making of a change in such registration statement or
prospectus in order to make the statements therein not
misleading; and
(d) of all actions of the Securities and Exchange
Commission with respect to any amendments to any
registration statement or prospectus which may from time to
time be filed with the Securities and Exchange Commission.
1.13 Each party shall have the duty to mitigate damages for
which the other party may become responsible.
NOTWITHSTANDING ANYTHING IN THIS AGREEMENT TO THE CONTRARY,
IN NO EVENT SHALL EITHER PARTY, THEIR AFFILIATES OR ANY OF
THEIR DIRECTORS, OFFICERS, EMPLOYEES, AGENTS OR
SUBCONTRACTORS BE LIABLE FOR EXEMPLARY, PUNITIVE, SPECIAL,
INDIRECT OR CONSEQUENTIAL DAMAGES.
2. Offering Price
Shares of any class of the Fund offered for sale by
you shall be offered for sale at a price per share (the
"offering price") approximately equal to (a) their net asset
value (determined in the manner set forth in the Fund's
charter documents) plus (b) a sales charge, if any (except
with respect to sales to those persons set forth in the
then-current prospectus to whom sales may be made without
sales charge), which shall be the percentage of the offering
price of such Shares as set forth in the Fund's then-current
prospectus. The offering price, if not an exact multiple of
one cent, shall be adjusted to the nearest cent. In
addition, Shares of any class of the Fund offered for sale
by you may be subject to a contingent deferred sales charge
as set forth in the Fund's then-current prospectus. You
shall be entitled to receive any sales charge or contingent
deferred sales charge in respect of the Shares. Any
payments to dealers shall be governed by a separate
agreement between you and such dealer and the Fund's then-
current prospectus.
3. Term
As to each Series, this agreement shall continue until
the date (the "Reapproval Date") set forth opposite such
Series name on Exhibit A hereto, and thereafter shall
continue automatically for successive annual periods ending
on the day (the "Reapproval Day") of each year set forth on
Exhibit A hereto, provided such continuance is specifically
approved at least annually by (i) the Fund's Board or
(ii) vote of a majority (as defined in the Investment
Company Act of 1940) of the Shares of the Fund or the
relevant Series, as the case may be, provided that in either
event its continuance also is approved by a majority of the
Board members who are not "interested persons" (as defined
in said Act) of any party to this agreement (the
"Independent Directors"), by vote cast in person at a
meeting called for the purpose of voting on such approval.
This agreement is terminable without penalty, on 60 days'
notice, by vote of holders of a majority of the Fund's or,
as to any relevant Series, such Series' outstanding voting
securities or by a majority of such Independent Directors as
to the Fund or the relevant Series, as the case may be, or
by you. This agreement also will terminate automatically,
as to the Fund or relevant Series, as the case may be, in
the event of its assignment (as defined in said Act). If
the Fund has adopted a multiple class plan or a distribution
plan, you agree to furnish such information as may be
reasonably necessary to assist the Directors of the Fund in
their periodic evaluation of such plan or plans.
4. Non-exclusivity
The Fund recognizes that you may act as the
distributor of securities of other persons (including other
investment companies) and that you and your affiliates may
furnish brokerage, distribution and other services to other
persons (including other investment companies), and the Fund
has no objection to your so acting. The Fund acknowledges
that the persons employed by you to assist in the
performance of your duties under this agreement may not
devote their full time to such service and nothing contained
in the agreement shall be deemed to limit or restrict your
or any of your affiliates right to engage in and devote time
and attention to other businesses or to render services of
whatever kind or nature.
5. Exclusion of Warranties
THIS IS A SERVICE AGREEMENT. EXCEPT AS EXPRESSLY
PROVIDED IN THIS AGREEMENT, YOU DISCLAIM ALL OTHER
REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED, MADE TO
THE FUND OR ANY OTHER PERSON, INCLUDING WITHOUT LIMITATION,
ANY WARRANTIES REGARDING QUALITY, SUITABILITY,
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE OF
OTHERWISE (IRRESPECTIVE OF ANY COURSE OF DEALING, CUSTOM OR
USAGE OF TRADE) OF ANY SERVICES OR ANY GOODS PROVIDED
INCIDENTAL TO SERVICES PROVIDED UNDER THIS AGREEMENT. YOU
DISCLAIM ANY WARRANTY OF TITLE OR NON-INFRINGEMENT EXCEPT AS
OTHERWISE SET FORTH IN THIS AGREEMENT.
Please confirm that the foregoing is in accordance
with your understanding and indicate your acceptance hereof
by signing below, whereupon it shall become a binding
agreement between us.
Very truly yours,
WILSHIRE TARGET FUNDS, INC.
By /s/ Thomas D. Stevens
Accepted:
FIRST DATA DISTRIBUTORS, INC.
By: /s/ Tammy Hal
EXHIBIT A
The Institutional Class shares and the
Investment Class shares of each of the following
Series of the Fund:
Name of Series Reapproval Date
Reapproval Day
Large Company Growth Portfolio March 31, 1997
March 31
Large Company Value Portfolio March 31, 1997 March
31
Small Company Growth Portfolio March 31, 1997
March 31
Small Company Value Portfolio March 31, 1997 March
31
- -13-
G:\SHARED\3RDPARTY\WILSHIRE\AGMTS\DIST2.DOC
EXHIBIT (8)(a)
CUSTODY AGREEMENT
AGREEMENT dated as of June 3, 1996, between WILSHIRE TARGET
FUNDS, INC., a corporation organized under the laws of the
State of Maryland, having its principal office and place of
business at Providence, Rhode Island (the "Company"), and
THE NORTHERN TRUST COMPANY (the "Custodian"), an Illinois
Company with its principal place of business at 50 South
LaSalle Street, Chicago, Illinois 60675.
W I T N E S S E T H:
That for and in consideration of the mutual promises
hereinafter set forth, the Company and the Custodian agree
as follows:
1. Definitions.
Whenever used in this Agreement or in any Schedules to
this Agreement, the following words and phrases, unless the
context otherwise requires, shall have the following
meanings:
(a) The "1940 Act" shall mean the Investment Company Act
of 1940, and the Rules and Regulations thereunder, all as
amended from time to time.
(b) "Administrator" shall mean the person which performs
the administration functions for the Company.
(c) "Authorized Person" shall be deemed to include the
Chairman of the Board of Directors, the President, and any
Vice President, the Secretary, the Treasurer or any other
person, whether or not any such person is an officer or
employee of the Company, duly authorized by the Board of
Directors to give Oral Instructions and Written Instructions
on behalf of the Company and listed in the certification
annexed hereto as Schedule A or such other certification as
may be received by the Custodian from time to time.
(d) "Board of Directors" shall mean the Board of Directors
of the Company.
(e) "Book-Entry System" shall mean the Federal Reserve/
Treasury book-entry system for United States and federal
agency Securities, its successor or successors and its
nominee or nominees.
(f) "Certificate" shall mean any notice, instruction or
other instrument in writing, authorized or required by this
Agreement to be given to the Custodian, which is actually
received by the Custodian and signed on behalf of the
Company by any two Authorized Persons.
(g) "Articles of Incorporation" shall mean the Articles of
Incorporation of the Company dated July 30, 1992, as
amended.
(h) "Depository" shall mean The Depository Trust Company,
a clearing agency registered with the Securities and
Exchange Commission under Section 17(a) of the Securities
Exchange Act of 1934, as amended, its successor or
successors and its nominee or nominees, in which the
Custodian is hereby specifically authorized to make
deposits. The term "Depository" shall further mean and
include any other person to be named in a Certificate
authorized to act as a depository under the 1940 Act, its
successor or successors and its nominee or nominees.
(i) "Money Market Security" shall be deemed to include,
without limitation, debt obligations issued or guaranteed as
to interest and principal by the Government of the United
States or agencies or instrumentalities thereof, commercial
paper, bank certificates of deposit, bankers' acceptances
and short-term corporate obligations, where the purchase or
sale of such securities normally requires settlement in
federal funds on the same day as such purchase or sale, and
repurchase agreements with respect to any of the foregoing
types of securities.
(j) "Oral Instructions" shall mean an oral
communication actually received by the Custodian from a
person reasonably believed by the Custodian to be an
Authorized Person.
(k) "Portfolio" refers to each of the Large Company Growth
Portfolio, the Large Company Value Portfolio, the Small
Company Growth Portfolio, and the Small Company Value
Portfolio, or any such other separate and distinct
investment portfolio as may from time to time be created and
designated by the Company in accordance with the provisions
of the Articles of Incorporation which the Company and the
Custodian agree in writing shall be subject to this
Agreement pursuant to the provisions of Section 5(b).
(l) "Prospectus" shall mean the Company's current
prospectus and statement of additional information relating
to the registration of the Portfolio's Shares under the
Securities Act of 1933, as amended.
(m) "Shares" refers to the shares of beneficial interest
of the Portfolio.
(n) "Security" or "Securities" shall be deemed to include
bonds, debentures, notes, stocks, shares, evidences of
indebtedness, and other securities, commodity interests and
investments from time to time owned by the Portfolio.
(o) "Sub-Custodian" shall mean and include (i) any
branch of the Custodian, (ii) any branch of a "qualified
U.S. bank," as that term is defined in Rule 17f-5 under the
1940 Act, approved by the Board of Directors and having a
contract with the Custodian which contract has been approved
by the Board of Directors, (iii) any "eligible foreign
custodian," as that term is defined in Rule 17f-5 under the
1940 Act, approved by the Board of Directors and having a
contract with the Custodian which contract has been approved
by the Board of Directors, and (iv) any securities
depository or clearing agency, incorporated or organized
under the laws of a country other than the United States,
which operates the central system for handling of securities
or equivalent book-entries in that country or a
transnational system for the central handling of securities
or equivalent book-entries, which securities depository or
clearing agency has been approved by the Board of Directors;
provided, that the Custodian or a Sub-Custodian has entered
into an agreement with such securities depository or
clearing agency.
(p) "Transfer Agent" shall mean the person which performs
as the transfer agent, dividend disbursing agent and
shareholder servicing agent for the Company.
(q) "Written Instructions" shall mean a written
communication actually received by the Custodian from a
person reasonably believed by the Custodian to be an
Authorized Person by any system whereby the receiver of such
communication is able to verify through codes or otherwise
with a reasonable degree of certainty the authenticity of
the sender of such communication; however, "Written
Instructions" from the Administrator to the Custodian shall
mean electronic communications transmitted by fund
accountants and their managers acting in accordance with
procedures (including appropriate security procedures
incorporating such safeguards as access codes furnished to,
and user identification numbers established by, Authorized
Persons in the employ of the Administrator) as may be
established by the Custodian and the Administrator with the
written consent of the Company. Except as otherwise
provided in this Agreement, "Written Instructions" may
include instructions given on a standing basis.
2. Appointment of Custodian.
(a) The Company hereby constitutes and appoints the
Custodian as custodian of all the Securities and monies
owned by or in the possession of the Portfolio during the
period of this Agreement.
(b) The Custodian hereby accepts appointment as such
custodian and agrees to perform the duties thereof as
hereinafter set forth.
3. Appointment and Removal of Sub-Custodians.
(a) The Custodian may appoint one or more Sub-Custodians
to act as Depository or Depositories or as sub-custodian or
sub-custodians of Securities and moneys at any time owned by
any Portfolio, upon terms and conditions as are specified in
this Agreement. The Custodian shall oversee the maintenance
of any Securities or moneys of any Portfolio by any Sub-
Custodian.
(b) If, after the initial approval of Sub-Custodians
by the Board of Directors in connection with this Agreement,
the Custodian wishes to appoint other Sub-Custodians to hold
property of the Portfolios, it will so notify the Company
and provide it with information reasonably necessary to
determine any such new Sub-Custodian's eligibility under
Rule 17f-5 under the 1940 Act, including a copy of the
proposed agreement with such Sub-Custodian. The Company
shall with reasonable promptness following receipt of such
notice and information inform the Custodian in writing of
its approval or disapproval of the proposed action.
(c) The Agreement between the Custodian and each
Sub-Custodian acting hereunder shall contain the required
provisions set forth in Rule 17f-5(a)(1)(iii).
(d) If the Custodian intends to remove any Sub-
Custodian previously approved by the Board of Directors, it
shall so notify the Company and move the property of the
Portfolio(s) deposited with such Sub-Custodian to another
Sub-Custodian previously approved by the Board of Directors.
The Custodian shall promptly take such steps as may be
required to remove any Sub-Custodian that has ceased to meet
the requirements of Rule 17f-5 under the 1940 Act.
(e) The Custodian hereby warrants to the Company that in
its opinion, after due inquiry, the established procedures
to be followed by each Sub-Custodian (that is not being used
as a foreign securities depository or clearing agency) in
connection with the safekeeping of property of the Portfolio
pursuant to this Agreement afford protection for such
property not materially different from that afforded by the
Custodian's established safekeeping procedures with respect
to similar property held by it (and its securities
depositories) in Chicago, Illinois.
4. Use of Sub-Custodians.
With respect to property of a Portfolio which is maintained
by the Custodian in the custody of a Sub-Custodian pursuant
to Section 3:
(a) The Custodian will identify on its books as belonging
to the particular Portfolio any property held by such Sub-
Custodian.
(b) In the event that a Sub-Custodian permits any of the
Securities placed in its care to be held in an eligible
foreign securities depository, such Sub-Custodian will be
required by its agreement with the Custodian to identify on
its books such Securities as being held for the account of
the Custodian as a custodian for its customers.
(c) Any Securities held by a Sub-Custodian will be subject
only to the instructions of the Custodian or its agents; and
any Securities held in an eligible foreign securities
depository for the account of a Sub-Custodian will be
subject only to the instructions of such Sub-Custodian.
(d) The Custodian will only deposit property of a
Portfolio in an account with a Sub-Custodian which includes
exclusively the assets held by the Custodian for its
customers, and will cause such account to be designated by
such Sub-Custodian as a special custody account for the
exclusive benefit of customers of the Custodian, and will
identify by book-entry on its records with respect to each
Portfolios property that property of each Portfolio held in
such account.
5. Compensation.
(a) The Company will compensate the Custodian for its
services rendered under this Agreement in accordance with
the fees set forth in the Fee Schedule annexed hereto as
Schedule B and incorporated herein for the existing
Portfolios. Such Fee Schedule does not include out-of-
pocket disbursements of the Custodian for which the
Custodian shall be entitled to bill separately. Out-of-
pocket disbursements may include only the items specified in
Schedule B and which may be modified by the Custodian if the
Company consents in writing to the modification.
(b) The parties hereto may agree to the appointment of the
Custodian as Custodian for any Portfolio hereafter
established and designated, and upon the compensation of the
Custodian for acting pursuant to such appointment, and at
the time that the Custodian commences serving as such for
said Portfolio, such agreement shall be reflected in a Fee
Schedule for that Portfolio, dated and signed by an officer
of each party hereto, which shall be attached to Schedule B
of this Agreement.
(c) Any compensation agreed to hereunder may be adjusted
from time to time by attaching to Schedule B of this
Agreement a revised Fee Schedule, dated and signed by an
officer of each party hereto.
(d) The Custodian will bill the Company for its services
to each Portfolio hereunder as soon as practicable after the
end of each calendar quarter, and said billings will be
detailed in accordance with the Fee Schedule for the
Company. The Company will promptly pay to the Custodian the
amount of such billing. The Custodian shall have a claim of
payment against the property in each Portfolio for any
compensation or expense amount owing to the Custodian in
connection with such Portfolio from time to time under this
Agreement.
(e) The Custodian (not the Company) will be responsible
for the payment of the compensation of each Sub-Custodian.
6. Custody of Cash and Securities
(a) Receipt and Holding of Assets. The Company will
deliver or cause to be delivered to the Custodian and the
Sub-Custodians all Securities and monies owned by the
Portfolio at any time during the period of this Agreement
and shall specify the Portfolio to which the Securities and
monies are to be specifically allocated. The Custodian will
not be responsible for such Securities and monies until
actually received by it or by a Sub-Custodian. The Company
shall instruct the Custodian from time to time in its sole
discretion, by means of Written Instructions, as to the
manner in which and in what amounts Securities, and monies
of a Portfolio are to be deposited on behalf of such
Portfolio in the Book-Entry System or a Depository;
provided, however, that prior to the deposit of Securities
of a Portfolio in the Book-Entry System or a Depository,
including a deposit in connection with the settlement of a
purchase or sale, the Custodian shall have received a
Certificate specifically approving such deposits by the
Custodian or a Sub-Custodian in the Book-Entry System or a
Depository. Securities and monies of a Portfolio deposited
in the Book-Entry System or a Depository will be deposited
in accounts which include only assets held by the Custodian
for its customers.
(b) Accounts and Disbursements. The Custodian shall
establish and maintain a separate account for each Portfolio
and shall credit to the separate account all monies received
by it or a Sub-Custodian for the account of such Portfolio
and shall disburse, or cause a Sub-Custodian to disburse,
the same only:
1. In payment for Securities purchased for the Portfolio,
as provided in Section 7 hereof;
2. In payment of dividends or distributions with respect
to the Shares of such Portfolio, as provided in Section 9
hereof;
3. In payment of original issue or other taxes with
respect to the Shares of such Portfolio, as provided in
Section 10(c) hereof;
4. In payment for Shares which have been redeemed by such
Portfolio, as provided in Section 10 hereof;
5. In payment of fees and in reimbursement of the
expenses and liabilities of the Custodian attributable to
the Company, as provided in Sections 5 and 14(h) hereof;
6. Pursuant to Written Instructions setting forth the
name of the Portfolio and the name and address of the person
to whom the payment is to be made, the amount to be paid and
the purpose for which payment is to be made.
(c) Fail Float. In the event that any payment made for a
Portfolio under this Section 6 exceeds the funds available
in that Portfolio's account, the Custodian or relevant Sub-
Custodian, as the case may be, may, in its discretion,
advance the Company on behalf of that Portfolio an amount
equal to such excess and such advance shall be deemed an
overdraft from the Custodian or such Sub-Custodian to that
Portfolio payable on demand, bearing interest at the rate of
interest customarily charged by the Custodian or such Sub-
Custodian on similar overdrafts.
(d) Confirmation and Statements. Promptly after the close
of business on each business day, the Custodian shall
furnish the Company with confirmations and a summary of all
transfers to or from the account of each Portfolio during
said day. Such summary shall include without limitation, as
to property acquired for a Portfolio, the identity of the
entity having physical possession of such property. Where
securities purchased by a Portfolio are in a fungible bulk
of securities registered in the name of the Custodian (or
its nominee) or shown on the Custodian's account on the
books of a Depository, the Book-Entry System or a Sub-
Custodian, the Custodian shall by book entry or otherwise
identify the quantity of those securities belonging to such
Portfolio. At least monthly, the Custodian shall furnish
the Company with a detailed statement of the Securities and
monies held by it and all Sub-Custodians for each Portfolio.
(e) Registration of Securities and Physical Separation.
All Securities held for a Portfolio which are issued or
issuable only in bearer form, except such Securities as are
held in the Book-Entry System, shall be held by the
Custodian or a Sub-Custodian in that form; all other
Securities held for a Portfolio may be registered in the
name of that Portfolio, in the name of any duly appointed
registered nominee of the Custodian or a Sub-Custodian as
the Custodian or such Sub-Custodian may from time to time
determine, or in the name of the Book-Entry System or a
Depository or their successor or successors, or their
nominee or nominees. The Company reserves the right to
instruct the Custodian as to the method of registration and
safekeeping of the Securities. The Company agrees to
furnish to the Custodian appropriate instruments to enable
the Custodian or any Sub-Custodian to hold or deliver in
proper form for transfer, or to register in the name of its
registered nominee or in the name of the Book-Entry System
or a Depository, any Securities which the Custodian of a
Sub-Custodian may hold for the account of a Portfolio and
which may from time to time be registered in the name of a
Portfolio. The Custodian shall hold all such Securities
specifically allocated to a Portfolio which are not held in
the Book-Entry System or a Depository in a separate account
for such Portfolio in the name of such Portfolio physically
segregated at all times from those of any other person or
persons.
(f) Segregated Accounts. Upon receipt of a Written
Instruction, the Custodian will establish segregated
accounts on behalf of a Portfolio to hold liquid or other
assets as it shall be directed by a Written Instruction and
shall increase or decrease the assets in such Segregated
Accounts only as it shall be directed by subsequent Written
Instruction.
(g) Collection of Income and Other Matters Affecting
Securities. Unless otherwise instructed to the contrary by
a Written Instruction, the Custodian, by itself or through
the use of the Book-Entry System or a Depository with
respect to Securities therein deposited, shall, or shall
instruct the relevant Sub-Custodian to:
1. Collect all income due or payable with respect to
Securities held
for a Portfolio in accordance with this Agreement;
2. Present for payment and collect the amount payable
upon all Securities which may mature or be called, redeemed
or retired, or otherwise become payable;
3. Surrender Securities in temporary form for derivative
Securities;
4. Execute any necessary declarations or certificates of
ownership under the federal income tax laws or the laws or
regulations of any other taxing authority now or hereafter
in effect; and
5. Hold directly, or through the Book-Entry System or a
Depository with respect to Securities therein deposited, for
the account of each Portfolio all rights and similar
Securities issued with respect to any Securities held by the
Custodian or relevant Sub-Custodian for each Portfolio.
If the Custodian or any Sub-Custodian causes the
account of a Portfolio to be credited on the payable date
for interest, dividends or redemptions, the particular
Portfolio involved will promptly return to the Custodian any
such amount or property so credited upon oral or written
notification that neither the custodian nor the relevant
Sub-Custodian can collect such amount or property in the
ordinary course of business. The Custodian or such Sub-
Custodian, as the case may be, shall have no duty or
obligation to institute legal proceedings, file a claim or
proof of claim in any insolvency proceeding or take any
other action with respect to the collection of such amount
or property beyond its ordinary collection procedures unless
it is specifically requested to do so by the Company and
indemnified to its satisfaction for any liability, cost or
expense arising therefrom.
(h) Delivery of Securities and Evidence of Authority.
Upon receipt of a Written Instruction and not otherwise,
except for subparagraphs 5, 6, 7, and 8 of this section 6(h)
which may be effected by Oral or Written Instructions, the
Custodian, directly or through the use of the Book-Entry
System or a Depository, shall, or shall instruct the
relevant Sub-Custodian to:
1. Execute and deliver or cause to be executed and
delivered to such persons as may be designated in such
Written Instructions, proxies, consents, authorizations, and
any other instruments whereby the authority of the Company
as owner of any Securities may be exercised;
2. Deliver or cause to be delivered any Securities held
for a Portfolio in exchange for other Securities or cash
issued or paid in connection with the liquidation,
reorganization, refinancing, merger, consolidation or
recapitalization of any corporation, or the exercise of any
conversion privilege;
3. Deliver or cause to be delivered any Securities held
for a Portfolio to any protective committee, reorganization
committee or other person in connection with the
reorganization, refinancing, merger, consolidation or
recapitalization or sale of assets of any corporation, and
receive and hold under the terms of this Agreement in the
separate account for each such Portfolio certificates of
deposit, interim receipts or other instruments or documents
as may be issued to it to evidence such delivery;
4. Make or cause to be made such transfers or exchanges
of the assets specifically allocated to the separate account
of a Portfolio and take such other steps as shall be stated
in Written Instructions to be for the purpose of
effectuating any duly authorized plan of liquidation,
reorganization, merger, consolidation or recapitalization of
the Company;
5. Deliver Securities upon sale of such Securities for
the account of a Portfolio pursuant to Section 7;
6. Deliver Securities upon the receipt of
payment in connection with any repurchase agreement related
to such Securities entered into by a Portfolio;
7. Deliver Securities owned by a Portfolio to
the issuer thereof or its agent when such Securities are
called, redeemed, retired or otherwise become payable;
provided, however, that in any such case the cash or other
consideration is to be delivered to the Custodian or Sub-
Custodian, as the case may be;
8. Deliver Securities for delivery in connection with any
loans of securities made by a Portfolio but only against
receipt of adequate collateral as agreed upon from time to
time by the Custodian and the Company which may be in the
form of cash or obligations issued by the United States
Government, its agencies or instrumentalities;
9. Deliver Securities for delivery as security in
connection with any borrowings by a Portfolio requiring a
pledge of Portfolio assets, but only against receipt of the
amounts borrowed;
10. Deliver Securities to the Transfer Agent or to the
holders of Shares in connection with distributions in kind,
as may be described from time to time in the Prospectus, in
satisfaction of requests by holders of Shares for repurchase
or redemption;
11. Deliver Securities owned by any Portfolio for any
purpose expressly permitted by and in accordance with
procedures described in the Prospectus; and
12. Deliver Securities owned by any Portfolio for any
other proper business purpose, but only upon receipt of, in
addition to Written Instructions, a certified copy of a
resolution of the Board of Directors signed by an Authorized
Person and certified by the Secretary of the Company,
specifying the Securities to be delivered, setting forth the
purpose for which such delivery is to be made, declaring
such purpose to be a proper business purpose, and naming the
person or persons to whom delivery of such Securities shall
be made.
(i) Endorsement and Collection of Checks, Etc. The
Custodian is hereby authorized to endorse and collect all
checks, drafts or other orders for the payment of money
received by the Custodian for the account of a Portfolio.
7. Purchase and Sale of Investments of a Portfolio.
(a) Promptly after each purchase of Securities for a
Portfolio, the Company shall deliver to the Custodian (i)
with respect to each purchase of Securities which are not
Money Market Securities, a Written Instruction and (ii) with
respect to each purchase of Money Market Securities, either
a Written Instruction or Oral Instruction, in either case
specifying with respect to each purchase: (1) the name of
the Portfolio to which such Securities are to be
specifically allocated; (2) the name of the issuer and the
title of the Securities; (3) the number of shares or the
principal amount purchased and accrued interest, if any; (4)
the date of purchase and settlement; (5) the purchase price
per unit; (6) the total amount payable upon such purchase;
and (7) the name of the person from whom or the broker
through whom the purchase was made, if any. The Custodian
or specified Sub-Custodian shall receive the Securities
purchased by or for a Portfolio and upon receipt thereof
shall pay to the broker or other person designated by the
Company out of the monies held for the account of such
Portfolio the total amount payable upon such purchase,
provided that the same conforms to the total amount payable
as set forth in such Written or Oral Instruction.
(b) Promptly after each sale of Securities of a Portfolio,
the Company shall deliver to the Custodian (i) with respect
to each sale of Securities which are not Money Market
Securities, a Written Instruction, and (ii) with respect to
each sale of Money Market Securities, either Written
Instructions or Oral Instructions, in either case specifying
with respect to such sale: (1) the name of the Portfolio to
which the Securities sold were specifically allocated; (2)
the name of the issuer and the title of the Securities; (3)
the number of shares or principal amount sold, and accrued
interest, if any; (4) the date of sale; (5) the sale price
per unit; (6) the total amount payable to the Portfolio upon
such sale; and (7) the name of the broker through whom or
the person to whom the sale was made. The Custodian or
relevant Sub-Custodian shall deliver or cause to be
delivered the Securities to the broker or other person
designated by the Company upon receipt of the total amount
payable to such Portfolio upon such sale, provided that the
same conforms to the total amount payable to such Portfolio
as set forth in such Written or Oral Instruction. Subject
to the foregoing, the Custodian or relevant Sub-Custodian
may accept payment in such form as shall be satisfactory to
it, and may deliver Securities and arrange for payment in
accordance with the customs prevailing among dealers in
Securities.
(c) Notwithstanding (a) and (b) above, cash in any of the
Portfolios may be invested by the Custodian for short term
purposes pursuant to standing Written Instructions from the
Company.
8. Lending of Securities.
If any Portfolio is permitted by the terms of
the Articles of Incorporation and the Prospectus to lend
Securities, then the Board of Directors may approve a
separate written agreement between the Company and the
Custodian authorizing the Custodian to lend such Securities.
Such agreement may provide for the payment of additional
reasonable compensation to the Custodian.
9. Payment of Dividends or Distributions.
(a) The Company shall furnish to the Custodian the vote of
the Board of Directors certified by the Secretary or the
Assistant Secretary of the Company (i) authorizing the
declaration of distributions with respect to a Portfolio on
a specified periodic basis and authorizing the Custodian to
rely on Oral or Written Instructions specifying the date of
the declaration of such distribution, the date of payment
thereof, the record date as of which shareholders entitled
to payment shall be determined, the amount payable per Share
to the shareholders of record as of the record date and the
total amount payable to the Transfer Agent on the payment
date, or (ii) setting forth the date of declaration of any
distribution by a Portfolio, the date of payment thereof,
the record date as of which shareholders entitled to payment
shall be determined and the amount payable per share to the
shareholders of record as of the record date.
(b) Upon the payment date specified in such vote, Oral
Instructions, or Written Instructions, as the case may be,
the Custodian shall pay the total amount payable to the
Transfer Agent out of the monies specifically allocated to
and held for the account of the appropriate Portfolio.
10. Sale and Redemption of Shares of the Company.
(a) Whenever the Company shall sell any Shares of a
Portfolio, the Company shall deliver or cause to be
delivered to the Custodian a Written Instruction duly
specifying:
1. The name of the Portfolio whose Shares were sold;
2. The number of Shares sold, trade date, and price; and
3. The amount of money to be received by the Custodian
for the sale of such Shares.
The Custodian understands and agrees that Written
Instructions may be furnished subsequent to the purchase of
Shares of a Portfolio and that the information contained
therein will be derived from the sales of Shares as reported
to the Company by the Transfer Agent.
(b) Upon receipt of such money from the Transfer Agent,
the Custodian shall credit such money to the separate
account of the Portfolio specified in (a)(1) above.
(c) Upon issuance of any Shares of a Portfolio in
accordance with the foregoing provisions of this Section 10,
the Custodian shall pay all original issue or other taxes
required to be paid in connection with such issuance upon
the receipt of a Written Instruction specifying the amount
to be paid.
(d) Except as provided hereafter, whenever any Shares of a
Portfolio are redeemed, the Company shall cause the Transfer
Agent to promptly furnish to the Custodian Written
Instructions specifying:
1. The name of the Portfolio whose Shares were redeemed;
2. The number of Shares redeemed; and
3. The amount to be paid for the Shares redeemed.
The Custodian further understands that the information
contained in such Written Instructions will be derived from
the redemption of Shares as reported to the Company by the
Transfer Agent.
(e) Upon receipt from the Transfer Agent of advice setting
forth the number of Shares of a Portfolio being redeemed
pursuant to valid instructions as described in the
Prospectus, the Custodian shall make payment to the Transfer
Agent out of the monies specifically allocated to and held
for the account of the Portfolio specified in (d)(1) above
of the total amount specified in a Written Instruction
issued pursuant to paragraph (d) of this Section 10.
11. Indebtedness.
(a) The Company will cause to be delivered to the
Custodian by any bank (excluding the Custodian) from which
the Company borrows money, using Securities as collateral, a
notice or undertaking in the form currently employed by any
such bank setting forth the amount which such bank will loan
to the Company against delivery of a stated amount of
collateral. The Company shall promptly deliver to the
Custodian Written Instructions stating with respect to each
such borrowing: (1) the name of the Portfolio for which the
borrowing is to be made; (2) the name of the bank; (3) the
amount and terms of the borrowing, which may be set forth by
incorporating by reference an attached promissory note, duly
endorsed by the Company, or other loan agreement; (4) the
time and date, if known, on which the loan is to be entered
into (the "borrowing date"); (5) the date on which the loan
becomes due and payable; (6) the total amount payable to the
Company for the separate account of the Portfolio on the
borrowing date; (7) the market value of Securities to be
delivered as collateral for such loan, including the name of
the issuer, the title and the number of shares or the
principal amount of any particular Securities; (8) whether
the Custodian is to deliver such collateral through the
Book-Entry System or a Depository; and (9) a statement that
such loan is in conformance with the 1940 Act and the
Prospectus.
(b) Upon receipt of the Written Instruction referred to in
paragraph (a) above, the Custodian shall deliver on the
borrowing date the specified collateral and the executed
promissory note, if any, against delivery by the lending
bank of the total amount of the loan payable, provided that
the same conforms to the total amount payable as set forth
in the Written Instruction. The Custodian may, at the
option of the lending bank, keep such collateral in its
possession, but such collateral shall be subject to all
rights therein given the lending bank by virtue of any
promissory note or loan agreement. The Custodian shall
deliver as additional collateral in the manner directed by
the Company from time to time such Securities specifically
allocated to such Portfolio as may be specified in Written
Instruction to collateralize further any transaction
described in this Section 11. The Company shall cause all
Securities released from collateral status to be returned
directly to the Custodian, and the Custodian shall receive
from time to time such return of collateral as may be
tendered to it. In the event that the Company fails to
specify in Written Instruction all of the information
required by this Section 11, the Custodian shall not be
under any obligation to deliver any Securities. Collateral
returned to the Custodian shall be held hereunder as it was
prior to being used as collateral.
12. Corporate Action
Whenever the Custodian or any Sub-Custodian (other than a
foreign securities depository or clearing agency) receives
information concerning Securities held for a Portfolio which
requires discretionary action by the beneficial owner of the
Securities (other than a proxy), such as subscription
rights, bond issues, stock repurchase plans and rights
offerings, or legal notices or other material intended to be
transmitted to Securities holders ("Corporate Actions"), the
Custodian will give the Company notice of such Corporate
Actions to the extent that the Custodian's central corporate
actions department has actual knowledge of a Corporate
Action in time to notify its customers.
When a rights entitlement or a fractional interest resulting
from a rights issue, stock dividend, stock split or similar
Corporate Action is received which bears an expiration date,
the Custodian will endeavor to obtain Written or Oral
Instructions from the Company, but if such Instructions are
not received in time for the Custodian to take timely
action, or actual notice of such Corporate Action was
received too late to seek such Instructions, the Custodian
is authorized to sell, or cause a Sub-Custodian to sell,
such rights entitlement or fractional interest and to credit
the applicable account with the proceeds and to take any
other action it deems, in good faith, to be appropriate, in
which case, provided it has met the standard of care in
Section 14 hereof, it shall be held harmless by the
particular Portfolio involved for any such action.
The Custodian will deliver proxies to the Company or its
designated agent pursuant to special arrangements which may
have been agreed to in writing between the parties hereto.
Such proxies shall be executed in the appropriate nominee
name relating to Securities registered in the name of such
nominee but without indicating the manner in which such
proxies are to be voted; and where bearer Securities are
involved, proxies will be delivered in accordance with
Written or Oral Instructions from Authorized Persons.
13. Persons Having Access of the Portfolios.
(a) No Company or agent of the Company, and no officer,
director, employee or agent of the Company's investment
adviser, of any sub-investment adviser of the Company, or of
the Administrator, shall have physical access to the assets
of any Portfolio held by the Custodian or any Sub-Custodian
or be authorized or permitted to withdraw any investments of
a Portfolio, nor shall the Custodian or any Sub-Custodian
deliver any assets of a Portfolio to any such person. No
officer, director, employee or agent of the Custodian who
holds any similar position with the Company's investment
adviser, with any sub-investment adviser of the Company or
with the Administrator shall have access to the assets of
any Portfolio.
(b) Nothing in this Section 13 shall prohibit any officer,
employee or agent of the Company, or any officer, director,
employee or agent of the investment adviser, of any sub
investment adviser of the Company or of the Administrator,
from giving Oral Instructions or Written Instructions to the
Custodian or executing a Certificate so long as it does not
result in delivery of or access to assets of a Portfolio
prohibited by paragraph (a) of this Section 13.
(c) The Custodian represents that it maintains a system
that is reasonably designed to prevent unauthorized persons
from having access to the assets that it holds (by any
means) for its customers.
14. Concerning the Custodian.
(a) Scope of Services. The Custodian shall be obligated
to perform only such services as are set forth in this
Agreement or expressly contained in a Certificate, Written
Instructions or Oral Instructions given to the Custodian
which are not contrary to the provisions of this Agreement.
(b) Standard of Care.
1. The Custodian will use reasonable care with respect to
its obligations under this Agreement and the safekeeping of
property of the Portfolios. The Custodian shall be liable
to, and shall indemnify and hold harmless the Company from
and against any loss, cost, charge, assessment, claim,
liability and expense (including reasonable attorney fees
and disbursements) which shall occur as the result of the
failure of the Custodian or a Sub-Custodian (other than a
foreign securities depository or clearing agency) to
exercise reasonable care with respect to their respective
obligations under this Agreement and the safekeeping of such
property. The determination of whether the Custodian or
Sub-Custodian has exercised reasonable care in connection
with the safekeeping of Portfolio property shall be made in
light of the standards applicable to the Custodian with
respect to similar property held by it in Chicago, Illinois.
The determination of whether the Custodian or Sub-Custodian
has exercised reasonable care in connection with their other
obligations under this Agreement shall be made in light of
prevailing standards applicable to professional custodians
in the jurisdiction in which such custodial services are
performed. In the event of any loss to the Company by
reason of the failure of the Custodian or a Sub-Custodian
(other than a foreign securities depository or clearing
agency) to exercise reasonable care, the Custodian shall be
liable to the Company only to the extent of the Company's
direct damages and expenses, which damages, for purposes of
property only, shall be determined based on the market value
of the property which is the subject of the loss at the date
of discovery of such loss and without reference to any
special condition or circumstances.
2. The Custodian will not be responsible for any act,
omission, default or for the solvency of any foreign
securities depository or clearing agency approved by the
Board of Directors pursuant to Section (1)(n) or Section 3
hereof.
3. The Custodian will not be responsible for any act,
omission, default or for the solvency of any broker or agent
(not referred to in paragraph (b)(2) above) which it or a
Sub-Custodian appoints and uses unless such appointment and
use is made or done negligently or in bad faith. In the
event such an appointment and use is made or done
negligently or in bad faith, the Custodian shall be liable
to the Company only for direct damages and expenses
(determined in the manner described in paragraph (b)(1)
above) resulting from such appointment and use and, in the
case of any loss due to an act, omission or default of such
agent or broker, only to the extent that such loss occurs as
a result of the failure of the agent or broker to exercise
reasonable care ("reasonable care" for this purpose to be
determined in light of the prevailing standards applicable
to agents or brokers, as appropriate, in the jurisdiction
where services are performed).
4. The Custodian shall be entitled to rely, and may act
upon the advice of counsel (who may be counsel for the
Company) on all matters and shall be without liability for
any action reasonably taken or omitted in good faith and
without negligence pursuant to such advice.
5. The Custodian shall be entitled to rely upon any
Certificate, notice or other instrument in writing received
by the Custodian and reasonably believed by the Custodian to
be genuine and to be signed by two officers of the Company.
The Custodian shall be entitled to rely upon any Written
Instructions or Oral Instructions actually received by the
Custodian pursuant to the applicable Sections of this
Agreement and reasonably believed by the Custodian to be
genuine and to be given by an Authorized Person. The
Company agrees to forward to the Custodian Written
Instructions from an Authorized Person confirming such Oral
Instructions in such manner so that such Written
Instructions are received by the Custodian, whether by hand
delivery, telex or otherwise, by the close of business on
the same day that such Oral Instructions are given to the
Custodian. The Company agrees that the fact that such
confirming instructions are not received by the Custodian
shall in no way affect the validity of the transactions or
enforceability of the transactions hereby authorized by the
Company. The Company agrees that the Custodian shall incur
no liability to the Company in (i) acting upon Oral
Instructions given to the Custodian hereunder concerning
such transactions provided such instructions reasonably
appear to have been received from a duly Authorized Person
or (ii) deciding not to act solely upon Oral Instructions,
provided that the Custodian shall be required to contact the
giver of such Oral Instructions and request written
confirmation immediately following any such decision not to
act.
6. The Custodian shall supply the Administrator with such
daily information regarding the cash and securities
positions and activity of each Portfolio as the Custodian
and the Administrator shall from time to time agree. It is
understood that such information will not be audited by
Custodian and Custodian represents that such information
will be the best information then available to the
Custodian. The Custodian shall have no responsibility
whatsoever for the pricing of Portfolio Securities or for
the failure of the Administrator to reconcile differences
between the information supplied by the Custodian and
information obtained by the Administrator from other
sources, including but not limited to pricing vendors and
the Company's investment adviser. Subject to the foregoing,
to the extent that any miscalculation by the Administrator
of a Portfolio's net asset value is attributable to the
willful misfeasance, bad faith or negligence of the
Custodian (including any Sub-Custodian other than a foreign
securities depository or clearing agency) in supplying or
omitting to supply the Administrator with information as
aforesaid, the Custodian shall be liable to the Company for
any resulting loss (subject to such de minims rule of change
in value as the Board of Directors may from time to time
adopt).
(c) Limit of Duties. Without limiting the generality of
the foregoing, the Custodian shall be under no duty or
obligation to inquire into, and shall not be liable for:
1. The validity of the issue of any Securities purchased
by any Portfolio, the legality of the purchase thereof, or
the propriety of the amount specified by the Company for
payment therefor;
2. The legality of the sale of any Securities by any
Portfolio or the propriety of the amount of consideration
for which the same are sold;
3. The legality of the issue or sale of any Shares, or
the sufficiency of the amount to be received therefor;
4. The legality of the redemption of any Shares, or the
propriety of the amount to be paid therefor;
5. The legality of the declaration or payment of any
distribution of any Portfolio;
6. The legality of any borrowing.
(d) The Custodian need not maintain any insurance for the
exclusive benefit of the Company, but hereby warrants that
as of the date of this Agreement it is maintaining a bankers
Blanket Bond and hereby agrees to notify the Company in the
event that such bond is canceled or otherwise lapses.
(e) Consistent with and without limiting the language
contained in Section 14(b), it is specifically acknowledged
that the Custodian shall have no duty or responsibility to:
1. Question Written Instructions or Oral Instructions or
make any suggestions to the Company or an Authorized Person
regarding such Instructions;
2. Supervise or make recommendations with respect to
investments or the retention of Securities;
3. Subject to Section 14(b)(3) hereof, evaluate or report
to the Company or an Authorized Person regarding the
financial condition of any broker, agent or other party to
which Securities are delivered or payments are made pursuant
to this Agreement; or
4. Review or reconcile trade confirmations received from
brokers.
(f) Amounts Due for Transfer Agent. The Custodian shall
not be under any duty or obligation to take action to effect
collection of any amount due to any Portfolio from the
Transfer Agent nor to take any action to effect payment or
distribution by the Transfer Agent of any amount paid by the
Custodian to the Transfer Agent in accordance with this
Agreement.
(g) No Duty to Ascertain Authority. The Custodian shall
not be under any duty or obligation to ascertain whether any
Securities at any time delivered to or held by it for the
Company and specifically allocated to a Portfolio are such
as may properly be held by the Company under the provisions
of the Articles of Incorporation and the Prospectus.
(h) Indemnification. The Company agrees to indemnify and
hold the Custodian harmless from all loss, cost, taxes,
charges, assessments, claims, and liabilities (including,
without limitation, liabilities arising under the Securities
Act of 1933, the Securities Exchange Act of 1934 and the
1940 Act and state or foreign securities laws) and expenses
(including reasonable attorneys fees and disbursements)
arising directly or indirectly from any action taken or
omitted by the Custodian (i) at the request or on the
direction of or in reliance on the advice of the Company or
in reasonable reliance upon the Prospectus or (ii) upon a
Certificate or Oral or Written Instructions; provided, that
the aforegoing indemnity shall not apply to any loss, cost,
tax, charge, assessment, claim, liability or expense to the
extent the same is attributable to the Custodian's or any
Sub-Custodian's (other than a foreign securities depository
or clearing agency) negligence, willful misconduct, bad
faith or reckless disregard of duties and obligations under
this Agreement or any other agreement relating to the
custody of Company property.
(i) The Company on behalf of the particular Portfolio
involved agrees to hold the Custodian harmless from any
liability or loss resulting from the imposition or
assessment of any taxes or other governmental charges on a
Portfolio.
(j) Without limiting the foregoing, the Custodian shall
not be liable for any loss which results from:
1. the general risk of investing, or
2. subject to Section 14(b) hereof, investing or holding
property in a particular country including, but not limited
to, losses resulting from nationalization, expropriation or
other governmental actions; regulation of the banking or
securities industry; currency restrictions, devaluations or
fluctuations; and market conditions which prevent the
orderly execution of securities transactions or affect the
value of property held pursuant to this Agreement.
(k) No party shall be liable to the other for any loss due
to forces beyond their control including but not limited to
strikes or work stoppages, acts of war or terrorism,
insurrection, revolution, nuclear fusion, fission or
radiation, or acts of God.
(1) Inspection of Books and Records. The books and
records of the Custodian shall be open to inspection and
audit at reasonable times by officers and auditors employed
by the Company and by the appropriate employees of the
Securities and Exchange Commission.
(m) Accounting Control Reports. The Custodian shall
provide the Company with any report obtained by the
Custodian on the system of internal accounting control of
the Book-Entry System, each Depository, and each Sub-
Custodian and with an annual report on its own systems of
internal accounting control.
15. Term and Termination.
(a) This Agreement shall become effective on the date
first set forth above (the "Effective Date") and shall
continue in effect thereafter as the parties may, mutually
agree.
(b) Either of the parties hereto may terminate this
Agreement with respect to any Portfolio by giving to the
other party a notice in writing specifying the date of such
termination, which, in case the Company is the terminating
party, shall be not less than 60 days after the date of
receipt of such notice or, in case the Custodian is the
terminating party, shall be not less than 90 days after the
date of receipt of such notice. In the event such notice is
given by the Company, it shall be accompanied by a certified
vote of the Board of Directors, electing to terminate this
Agreement with respect to any Portfolio and designating a
successor custodian or custodians, which shall be a person
qualified to so act under the 1940 Act.
In the event such notice is given by the Custodian, the
Company shall, on or before the termination date, deliver to
the Custodian a certified vote of the Board of Directors,
designating a successor custodian or custodians. In the
absence of such designation by the Company, the Custodian
may designate a successor custodian, which shall be a person
qualified to so act under the 1940 Act. If the Company
fails to designate a successor custodian with respect to any
Portfolio, the Company shall upon the date specified in the
notice of termination of this Agreement and upon the
delivery by the Custodian of all Securities (other than
Securities held in the Book-Entry System which cannot be
delivered to the Company) and monies then owned by such
Portfolio, be deemed to be its own custodian and the
Custodian shall thereby be relieved of all duties and
responsibilities pursuant to this Agreement, other than the
duty with respect to Securities held in the Book-Entry
System which cannot be delivered to the Company.
(c) Upon the date set forth in such notice under paragraph
(b) of this Section
15, this Agreement shall terminate to the extent specified
in such notice, and the Custodian shall upon receipt of a
notice of acceptance by the successor custodian on that date
deliver directly to the successor custodian all Securities
and monies then held by the Custodian and specifically
allocated to the Portfolio or Portfolios specified, after
deducting all fees, expenses and other amounts for the
payment or reimbursement of which it shall then be entitled
with respect to such Portfolio or Portfolios.
16. Limitation of Liability.
The execution and delivery of this Agreement have been
authorized by the Board of Directors of the Company, and
signed by an authorized officer of the Company, acting as
such, and neither such authorization by such the Board of
Directors nor such execution and delivery by such officer
shall be deemed to have been made by any of them or any
shareholder of the Company individually or to impose any
liability on any of them or any shareholder of the Company
personally, but shall bind only the assets and property of
the Company or of the appropriate Portfolio(s) thereof as
provided in the Articles of Incorporation.
17. Miscellaneous.
(a) Annexed hereto as Schedule A is a certification signed
by two of the present officers of the Company setting forth
the names and the signatures of the present Authorized
Persons. The Company agrees to furnish to the Custodian a
new certification in similar form in the event that any such
present Authorized Person ceases to be such an Authorized
Person or in the event that other or additional Authorized
Persons are elected or appointed. Until such new
certification shall be received, the Custodian shall be
fully protected in acting under the provisions of this
Agreement upon Oral Instructions or signatures of the
present Authorized Persons as set forth in the last
delivered certification.
(b) Any notice or other instrument in writing, authorized
or required by this Agreement to be given to the Custodian,
shall be sufficiently given if addressed to the Custodian
and mailed or delivered to it at its offices at its address
stated on the first page hereof or at such other place as
the Custodian may from time to time designate in writing.
(c) Any notice or other instrument in writing, authorized
or required by this Agreement to be given to the Company,
shall be sufficiently given if addressed to the Company and
mailed or delivered to it at its offices at its address
shown on the first page hereof or at such other place as the
Company may from time to time designate in writing, with a
copy to: Wilshire Target Funds, Inc. c/o Wilshire
Associates, Incorporated, 1299 Ocean Avenue, Suite 700,
Santa Monica, CA 90401-1085 Attention: Thomas D. Stevens,
President.
(d) This Agreement may not be amended or modified in any
manner except by a written agreement executed by both
parties with the same formality as this Agreement, (i)
authorized and approved by a vote of the Board of Directors,
or (ii) authorized and approved by such other procedures as
may be permitted or required by the 1940 Act.
(e) This Agreement shall extend to and shall be binding
upon the parties hereto, and their respective successors and
assigns; provided, however, that this Agreement shall not be
assignable by the Company without the written consent of the
Custodian, or by the Custodian without the written consent
of the Company authorized or approved by a vote of the Board
of Directors, and any attempted assignment without such
written consent shall be null and void.
(f) This Agreement shall be construed in accordance with
the laws of the State of Illinois.
(g) The captions of the Agreement are included for
convenience of reference only and in no way define or
delimit any of the provisions hereof or otherwise affect
their construction or effect.
(h) This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an
original, but such counterparts shall, together, constitute
only one instrument.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective representatives
duly authorized as of the day and year first above written.
WILSHIRE TARGET FUNDS, INC.
By: s/s/ Thomas D. Stevens
Name: Thomas D. Stevens
Title: President
THE NORTHERN TRUST COMPANY
By: /s/ Peggy OLeary
Name: Peggy OLeary
Title: Vice President
EXHIBIT (8)(b)
The Northern Trust Company
50 South LaSalle Street
Chicago, Illinois 60675
Telephone: (312)-630--6000
November 5, 1996
Mr. Thomas Stevens
Wilshire Target Funds, Inc.
1299 Ocean Avenue, Suite 700
Santa Monica, CA 90401
Dear Tom:
Per our conversation with Wilshire on November 4, 1996
regarding Northern Trusts process for handling both excess
cash balances and overdrafts for the Wilshire Funds, the
following procedures will be put into effect for all
balances and activities as of 11/1/96:
* Excess Balances will earn an Earnings Credit Rate
(ECR) based on the average daily collected balances
(aggregate of all accounts) in the Wilshire funds. The ECR
is based upon the average 90 day T-Bill rate of the previous
month. The ECR is calculated monthly and will be reflected
on your quarterly invoice as an offset to the respective
quarterly Custody fees.
* Overdrafts will be charged a per-day rate of Fed Funds
+ 100 basis points. Overdrafts charges are calculated daily
and included on the quarterly invoice. If the monthly
overdrafts charges are less than any Earnings Credits, the
overdraft charges will be reflected on the bill for
reporting purposes, but will not be an actual hard dollar
charge.
Please indicate your authorization of the stated procedure
by signing below. Please return one signed copy to my
attention for our files. Thank you again for your help and
cooperation.
Sincerely,
/s/Peggy O'Leary
Peggy OLeary
Vice President
cc: G. Lorenzo
M. Lies
The Northern Trust Company Wilshire Target
Funds, Inc.
/s/Peggy O'Leary /s/Thomas Stevens
Peggy OLeary Thomas Stevens
EXHIBIT (9)(a)
TRANSFER AGENCY AND SERVICES AGREEMENT
THIS AGREEMENT, dated as of this 31st day of May,
1996 between Wilshire Target Funds, Inc. (the "Fund"), a
Maryland corporation having its principal place of business
at 53 State Street Boston, Massachusetts and FIRST DATA
INVESTOR SERVICES GROUP, INC. ("FDISG"), a Massachusetts
corporation with principal offices at One Exchange Place,
53 State Street, Boston, Massachusetts 02109.
WITNESSETH
WHEREAS, the Fund is authorized to issue Shares in separate
series, with each such series representing interests in a
separate portfolio of securities and other assets;
WHEREAS, the Fund intends to offer shares in those
Portfolios identified in the attached Exhibit 1, as the
same may be amended from time to time in accordance with
Article 14;
WHEREAS, the Fund on behalf of the Portfolios, desires to
appoint FDISG as its transfer agent, dividend disbursing
agent and agent in connection with certain other activities
and FDISG desires to accept such appointment;
NOW, THEREFORE, in consideration of the mutual covenants
and promises hereinafter set forth, the Fund and FDISG
agree as follows:
Article 1 Definitions.
1.1 Whenever used in this Agreement, the following words
and phrases, unless the context otherwise requires, shall
have the following meanings:
(a) "Articles of Incorporation" shall mean the Articles
of Incorporation, Declaration of Trust, or other similar
organizational document as the case may be, of the Fund as
the same may be amended from time to time.
(b) "Authorized Person" shall be deemed to include (i)
any authorized officer of the Fund; or (ii) any person,
whether or not such person is an officer or employee of the
Fund, duly authorized to give Oral Instructions or Written
Instructions on behalf of the Fund as indicated in writing
to FDISG from time to time.
(c) "Board of Directors" shall mean the Board of
Directors or Board of Trustees of the Fund, as the case may
be.
(d) "Commission" shall mean the Securities and Exchange
Commission.
(e) "Custodian" refers to any custodian or subcustodian
of securities and other property which the Fund may from
time to time deposit, or cause to be deposited or held
under the name or account of such a custodian pursuant to a
Custodian Agreement.
(f) "1934 Act" shall mean the Securities Exchange Act of
1934 and the rules and regulations promulgated
thereunder, all as amended from time to time.
(g) "1940 Act" shall mean the Investment Company Act of
1940 and the rules and regulations promulgated thereunder,
all as amended from time to time.
(h) "Oral Instructions" shall mean instructions, other
than Written Instructions, actually received by FDISG from
a person reasonably believed by FDISG to be an Authorized
Person;
(i) "Portfolio" shall mean each separate series of shares
offered by the Fund representing interest in a separate
portfolio of securities and other assets;
(j) "Prospectus" shall mean the most recently dated Fund
Prospectus and Statement of Additional Information,
including any supplements thereto if any, which has become
effective under the Securities Act of 1933 and the 1940
Act.
(k) "Shares" refers collectively to such shares of
capital stock or beneficial interest, as the case may be,
or class thereof, of each respective Portfolio of the Fund
as may be issued from time to time.
(l) "Shareholder" shall mean a record owner of Shares of
each respective Portfolio of the Fund.
(m) "Written Instructions" shall mean a written
communication signed by a person reasonably believed by
FDISG to be an Authorized Person and actually received by
FDISG. Written Instructions shall include manually
executed originals and authorized electronic transmissions,
including telefacsimile of a manually executed original or
other process.
Article 2 Appointment of FDISG.
The Fund, on behalf of the Portfolios, hereby appoints and
constitutes FDISG as transfer agent and dividend disbursing
agent for Shares of each respective Portfolio of the Fund
and as shareholder servicing agent for the Fund and FDISG
hereby accepts such appointments and agrees to perform the
duties hereinafter set forth.
Article 3 Duties of FDISG.
3.1 FDISG shall be responsible for:
(a) Administering and/or performing the customary
services of a transfer agent; acting as service agent in
connection with dividend and distribution functions; and
for performing shareholder account and administrative agent
functions in connection with the issuance, transfer and
redemption or repurchase (including coordination with the
Custodian) of Shares of each Portfolio, as more fully
described in the written schedule of Duties of FDISG
annexed hereto as Schedule A and incorporated herein, and
in accordance with the terms of the Prospectus of the Fund
on behalf of the applicable Portfolio, applicable law and
the procedures established from time to time between FDISG
and the Fund.
(b) Recording the issuance of Shares and maintaining
pursuant to Rule 17Ad-10(e) of the 1934 Act a record of the
total number of Shares of each Portfolio which are
authorized, based upon data provided to it by the Fund, and
issued and outstanding. FDISG shall provide the Fund on a
regular basis with the total number of Shares of each
Portfolio which are authorized and issued and outstanding
and shall have no obligation, when recording the issuance
of Shares, to monitor the issuance of such Shares or to
take cognizance of any laws relating to the issue or sale
of such Shares, which functions shall be the sole
responsibility of the Fund.
(c) Notwithstanding any of the foregoing provisions of
this Agreement, FDISG shall be under no duty or obligation
to inquire into, and shall not be liable for: (i) the
legality of the issuance or sale of any Shares or the
sufficiency of the amount to be received therefor; (ii) the
legality of the redemption of any Shares, or the propriety
of the amount to be paid therefor; (iii) the legality of
the declaration of any dividend by the Board of Directors,
or the legality of the issuance of any Shares in payment of
any dividend; or (iv) the legality of any recapitalization
or readjustment of the Shares.
3.2 In addition, FDISG shall have no responsibility under
this Agreement to (i) identify those transactions and
assets to be treated as exempt from blue sky reporting for
each State or (ii) verify the establishment of transactions
for each State on the system prior to activation and
thereafter monitor the daily activity for each State which
shall be the responsibility of the Fund's blue sky service
agent (which may be FDISG under separate agreement). The
responsibility of FDISG under this Agreement for the Fund's
blue sky State registration status is solely limited to the
initial establishment of transactions subject to blue sky
compliance by the Fund and the reporting of such
transactions to the Fund as provided above.
3.3 In addition to the duties set forth herein, FDISG
shall perform such other duties and functions, and shall be
paid such amounts therefor, as may from time to time be
agreed upon in writing between the Fund and FDISG.
Article 4 Recordkeeping and Other Information.
4.1 FDISG shall create and maintain all records required
of it pursuant to its duties hereunder and as set forth in
Schedule A in accordance with all applicable laws, rules
and regulations, including records required by Section
31(a) of the 1940 Act. Where applicable, such records
shall be maintained by FDISG for the periods and in the
places required by Rule 31a-2 under the 1940 Act.
4.2 To the extent required by Section 31 of the 1940 Act,
FDISG agrees that all such records prepared or maintained
by FDISG relating to the services to be performed by FDISG
hereunder are the property of the Fund and will be
preserved, maintained and made available in accordance with
such section, and will be surrendered promptly to the Fund
on and in accordance with the Fund's request.
4.3 In case of any requests or demands for the inspection
of Shareholder records of the Fund, FDISG will endeavor to
notify the Fund of such request and secure Written
Instructions as to the handling of such request. FDISG
reserves the right, however, to exhibit the Shareholder
records to any person whenever it is advised by its counsel
that it may be held liable for the failure to comply with
such request.
Article 5 Fund Instructions.
5.1 FDISG will have no liability when acting upon Written
or Oral Instructions reasonably believed to have been
executed or orally communicated by an Authorized Person and
will not be held to have any notice of any change of
authority of any person until receipt of a Written
Instruction thereof from the Fund. FDISG will also have no
liability when processing Share certificates which it
reasonably believes to bear the proper manual or facsimile
signatures of the officers of the Fund and the proper
countersignature of FDISG.
5.2 At any time, FDISG may request Written Instructions
from the Fund and may seek advice from legal counsel for
the Fund, or its own legal counsel, with respect to any
matter arising in connection with this Agreement, and it
shall not be liable for any action taken or not taken or
suffered by it in good faith in accordance with such
Written Instructions or in accordance with the opinion of
counsel for the Fund or for FDISG. Written Instructions
requested by FDISG will be provided by the Fund within a
reasonable period of time.
5.3 FDISG, its officers, agents or employees, shall
accept Oral Instructions or Written Instructions given to
them by any person representing or acting on behalf of the
Fund only if said representative is an Authorized Person.
The Fund agrees that all Oral Instructions shall be
followed within one business day by confirming Written
Instructions, and that the Fund's failure to so confirm
shall not impair in any respect FDISG's right to rely on
Oral Instructions.
Article 6 Compensation.
6.1 The Fund on behalf of each of the Portfolios will
compensate FDISG for the performance of its obligations
hereunder in accordance with the fees set forth in the
written Fee Schedule annexed hereto as Schedule B and
incorporated herein.
6.2 In addition to those fees set forth in Section 6.1
above, the Fund on behalf of each of the Portfolios agrees
to pay, and will be billed separately for, out-of-pocket
expenses incurred by FDISG in the performance of its duties
hereunder. Out-of-pocket expenses shall include the items
specified in the written schedule of out-of-pocket charges
annexed hereto as Schedule C and incorporated herein.
Schedule C may be modified by written agreement between the
parties. Unspecified out-of-pocket expenses shall be
limited to those out-of-pocket expenses reasonably incurred
by FDISG in the performance of its obligations hereunder
and authorized in advance by an officer of the Fund who is
not an affiliate of FDISG.
6.3 The Fund on behalf of each of the Portfolios agrees
to pay all fees and out-of-pocket expenses within fifteen
(15) days following the receipt of the respective invoice.
6.4 Any compensation agreed to hereunder may be adjusted
from time to time by attaching to Schedule B, a revised Fee
Schedule executed and dated by the parties hereto.
6.5 The Fund acknowledges that the fees that FDISG
charges the Fund under this Agreement reflect the
allocation of risk between the parties, including the
disclaimer of warranties in Section 9.3 and the limitations
on liability and exclusion of remedies in Section 11.2 and
Article 12. Modifying the allocation of risk from what is
stated here would affect the fees that FDISG charges, and
in consideration of those fees, the Fund agrees to the
stated allocation of risk.
Article 7 Documents.
In connection with the appointment of FDISG, the Fund
shall, on or before the date this Agreement goes into
effect, but in any case within a reasonable period of time
for FDISG to prepare to perform its duties hereunder,
deliver or caused to be delivered to FDISG the documents
set forth in the written schedule of Fund Documents annexed
hereto as Schedule D.
Article 8 Transfer Agent System.
8.1 FDISG shall retain title to and ownership of any and
all data bases, computer programs, screen formats, report
formats, interactive design techniques, derivative works,
inventions, discoveries, patentable or copyrightable
matters, concepts, expertise, patents, copyrights, trade
secrets, and other related legal rights utilized by FDISG
in connection with the services provided by FDISG to the
Fund herein (the "FDISG System").
8.2 FDISG hereby grants to the Fund a limited license to
the FDISG System for the sole and limited purpose of having
FDISG provide the services contemplated hereunder and
nothing contained in this Agreement shall be construed or
interpreted otherwise and such license shall immediately
terminate with the termination of this Agreement.
Article 9 Representations and Warranties.
9.1 FDISG represents and warrants to the Fund that:
(a) it is a corporation duly organize and existing and in
good standing under the laws of the Commonwealth of
Massachusetts;
(b) it is empowered under applicable laws and by its
Articles of Incorporation and By-Laws to enter into and
perform this Agreement;
(c) all requisite corporate proceedings have been taken
to authorize it to enter into this Agreement;
(d) it is duly registered with its appropriate regulatory
agency as a transfer agent and such registration will
remain in effect for the duration of this Agreement; and
(e) it has and will continue to have access to the
necessary facilities, equipment and personnel to perform
its duties and obligations under this Agreement.
9.2 The Fund represents and warrants to FDISG that:
(a) it is duly organized and existing and in good
standing under the laws of the jurisdiction in which it is
organized;
(b) it is empowered under applicable laws and by its
Article of Incorporation and By-Laws to enter into this
Agreement;
(c) all corporate proceedings required by said Articles
of Incorporation, By-Laws and applicable laws have been
taken to authorize it to enter into this Agreement;
(d) a registration statement under the Securities Act of
1933, as amended, and the 1940 Act relating to each of the
Portfolios is currently effective and will remain
effective, and all appropriate state securities law filings
have been made and will continue to be made, with respect
to all Shares of the Fund being offered for sale; and
(e) all outstanding Shares are validly issued, fully paid
and non-assessable and when Shares are hereafter issued in
accordance with the terms of the Fund's Articles of
Incorporation and its Prospectus with respect to each
Portfolio, such Shares shall be validly issued, fully paid
and non-assessable.
9.3 THIS IS A SERVICE AGREEMENT. EXCEPT AS EXPRESSLY
PROVIDED IN THIS AGREEMENT, FDISG DISCLAIMS ALL OTHER
REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED, MADE TO
THE FUND OR ANY OTHER PERSON, INCLUDING, WITHOUT
LIMITATION, ANY WARRANTIES REGARDING QUALITY, SUITABILITY,
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE OR
OTHERWISE (IRRESPECTIVE OF ANY COURSE OF DEALING, CUSTOM OR
USAGE OF TRADE) OF ANY SERVICES OR ANY GOODS PROVIDED
INCIDENTAL TO SERVICES PROVIDED UNDER THIS AGREEMENT.
FDISG DISCLAIMS ANY WARRANTY OF TITLE OR NON-INFRINGEMENT
EXCEPT AS OTHERWISE SET FORTH IN THIS AGREEMENT.
Article 10 Indemnification.
10.1 FDISG shall not be responsible for and the Fund on
behalf of each Portfolio shall indemnify and hold FDISG
harmless from and against any and all claims, costs,
expenses (including reasonable attorneys' fees), losses,
damages, charges, payments and liabilities of any sort or
kind which may be asserted against FDISG or for which FDISG
may be held to be liable (a "Claim") arising out of or
attributable to any of the following:
(a) any actions of FDISG required to be taken pursuant to
this Agreement unless such Claim resulted from a negligent
act or omission to act or bad faith by FDISG in the
performance of its duties hereunder;
(b) FDISG's reasonable reliance on, or reasonable use of
information, data, records and documents (including but not
limited to magnetic tapes, computer printouts, hard copies
and microfilm copies) received by FDISG from the Fund, or
any authorized third party acting on behalf of the Fund,
including but not limited the prior transfer agent for the
Fund, in the performance of FDISG's duties and obligations
hereunder;
(c) the reliance on, or the implementation of, any
Written or Oral Instructions;
(d) except to the extent that FDISG serves as the Fund's
Administrator under separate agreement, the offer or sales
of shares in violation of any requirement under the
securities laws or regulations of any state that such
shares be registered in such state or in violation of any
stop order or other determination or ruling by any state
with respect to the offer or sale of such shares in such
state; and
(e) the Fund's refusal or failure to comply with the
terms of this Agreement, or any Claim which arises out of
the Fund's negligence or misconduct or the breach of any
representation or warranty of the Fund made herein.
10.2 FDISG shall indemnify and hold harmless the Fund from
and against any and all claims, costs, expenses (including
reasonable attorneys' fees), losses, damages, charges,
payments and liabilities of any sort or kind which may be
asserted against the Fund or for which the Fund may be held
to be liable in connection with this Agreement or FDISG's
performance hereunder (also a "Claim"), if such Claim
arises by reason of FDISG's refusal to comply with the
terms of this Agreement, or any Claim which arises out of
FDISG's negligence or misconduct hereunder or the breach of
any representation or warranty of FDISG made herein.
10.3 In any case in which the one party hereto may be
asked to indemnify or hold the other harmless pursuant to
the provisions of Sections 10.1 or 10.2 hereof, the party
seeking indemnification will notify the other party
promptly after identifying any situation which it believes
presents or appears likely to present a claim for
indemnification hereunder, although the failure to do so
shall not prevent recovery by the party seeking
indemnification except to the extent that such failure
prejudices the other party in its defense of any such
claim, and shall keep the other party advised with respect
to all developments concerning such situation. The party
from whom indemnification is sought shall have the option
to defend the other party against any Claim which may be
the subject of this indemnification, and, in the event that
the party from whom the indemnification is sought so
elects, such defense shall be conducted by counsel chosen
by the party from whom the indemnification is sought and
satisfactory to the other party, and thereupon the party
from whom the indemnification is sought shall take over
complete defense of the Claim and the other party shall
sustain no further legal or other expenses in respect of
such Claim. The party seeking indemnification will not
confess any Claim or make any compromise in any case in
which the other party will be asked to provide
indemnification, except with the other party's prior
written consent. The obligations of the parties hereto
under this Article 10.3 shall survive the termination of
this Agreement.
10.4 Any claim for indemnification under this Agreement
must be made prior to the earlier of:
(a) one year after the party seeking indemnification
becomes aware of the event for which indemnification is
claimed; or
(b) one year after the earlier of the termination of this
Agreement or the expiration of the term of this Agreement.
10.5 Except for remedies that cannot be waived as a matter
of law (and injunctive or provisional relief), the
provisions of this Article 10 shall be FDISGs sole and
exclusive remedy for claims or other actions or proceedings
to which the Funds indemnification obligations pursuant to
this Article 10 may apply.
Article 11 Standard of Care.
11.1 FDISG shall at all times act in good faith and agrees
to use its best efforts within commercially reasonable
limits to ensure the accuracy of all services performed
under this Agreement, but assumes no responsibility for
loss or damage to the Fund unless said errors are caused by
FDISG's own negligence, bad faith or willful misconduct or
that of its employees.
11.2 Notwithstanding any provision in this Agreement to
the contrary, FDISG's cumulative liability (to the Fund)
for all Claims arising out of or related to this Agreement
and regardless of the form of action or legal theory shall
not exceed one million ($1,000,000) dollars plus any and
all amounts available to FDISG or the Fund in respect of
such Claims under FDISG's liability insurance, which FDISG
agrees continuously to maintain in principal coverage
amounts of at least five million dollars ($5,000,000) at
all times during the term of this Agreement and for at
least one (1) year thereafter. FDISG agrees to furnish
initial certification of such insurance coverage upon the
execution of this Agreement and subsequent certification of
such coverage upon the request of the Fund. Fund
understands the limitation on FDISG's damages to be a
reasonable allocation of risk and Fund expressly consents
with respect to such allocation of risk. In allocating
risk under the Agreement, the parties agree that the damage
limitation set forth above shall apply to any alternative
remedy ordered by a court in the event such court
determines that sole and exclusive remedy provided for in
the Agreement fails of its essential purpose.
11.3 Each party shall have the duty to mitigate damages
for which the other party may become responsible.
Article 12 Consequential Damages.
NOTWITHSTANDING ANYTHING IN THIS AGREEMENT TO THE CONTRARY,
IN NO EVENT SHALL EITHER PARTY, THEIR AFFILIATES OR ANY OF
THEIR DIRECTORS, OFFICERS, EMPLOYEES, AGENTS OR
SUBCONTRACTORS BE LIABLE TO THE OTHER PARTY FOR EXEMPLARY,
PUNITIVE, SPECIAL, INDIRECT OR CONSEQUENTIAL DAMAGES.
Article 13 Term and Termination.
13.1 This Agreement shall be effective on the date first
written above and shall continue for a period of three five
(3) years (the "Initial Term").
13.2 Upon the expiration of the Initial Term, this
Agreement shall automatically renew for successive terms of
one (1) year ("Renewal Terms") each, unless the Fund or
FDISG provides written notice to the other of its intent
not to renew. Such notice must be received not less than
ninety (90) days and not more than one-hundred eighty (180)
days prior to the expiration of the Initial Term or the
then current Renewal Term.
13.3 Upon termination, for whatever reason, FDISG shall
cooperate fully with the Fund and with any successor
transfer and dividend disbursing or shareholder services
agent for the Fund in connection with the transfer of the
transfer, dividend disbursing or shareholder services
functions to such successor agent, and shall act promptly
and expeditiously in all matters relating thereto,
including the transfer of all records, data and information
reasonable necessary or appropriate to such transfer of
functions, with a view toward achieving an orderly,
efficient and cost-effective transition on any reasonable
schedule which may be established therefor by the Fund, in
good faith, taking into account the circumstances of FDISG,
including the time of year, other operational demands made
on FDISG at the time and any other factors which FDISG may
communicate to the Fund as being relevant to the
establishment of such schedule. The Fund agrees to
reimburse FDISG for all reasonable costs and expenses
incurred in connection with the aforementioned transfer to
a successor agent.
13.4 A party may terminate this Agreement by giving thirty
(30) days written notice of such termination to the other
party in the event that the other party has become
insolvent or made a general assignment for the benefit of
creditors, or a petition under the Bankruptcy Code is filed
by or against the other party and the other party has not
discharged said petition within thirty (30) days after such
filing.
13.5 If a party hereto is guilty of a material failure to
perform its duties and obligations hereunder (a "Defaulting
Party") the other party (the "Non-Defaulting Party") may
give written notice thereof to the Defaulting Party, and if
such material breach shall not have been remedied within
thirty (30) days after such written notice is given, then
the Non-Defaulting Party may terminate this Agreement by
giving thirty (30) days written notice of such termination
to the Defaulting Party. The termination of this Agreement
by a non-defaulting party shall not constitute a waiver of
any other rights or remedies of such party with respect to
services performed prior to such termination or rights of
such party to be reimbursed for out-of-pocket expenses
hereunder. In all cases, termination by the Non-Defaulting
Party shall not constitute a waiver by the Non-Defaulting
Party of any other rights it might have under this
Agreement or otherwise against the Defaulting Party.
Article 14 Additional Portfolios.
In the event that the Fund establishes one or more
Portfolios in addition to those identified in Exhibit 1,
with respect to which the Fund desires to have FDISG render
services as transfer agent under the terms hereof, the Fund
shall so notify FDISG in writing, and if FDISG agrees in
writing to provide such services, Exhibit 1 shall be
amended to include such additional Portfolios.
Article 15 Confidentiality.
15.1 The parties agree that the Proprietary Information
(defined below) (collectively "Confidential Information")
are confidential information of the parties and their
respective licensers. The Fund and FDISG shall exercise at
least the same degree of care, but not less than reasonable
care, to safeguard the confidentiality of the Confidential
Information of the other as it would exercise to protect
it's own confidential information of a similar nature. The
Fund and FDISG may use the Confidential Information only to
exercise its rights under this Agreement. The Fund and
FDISG shall not duplicate, sell or disclose to others the
Confidential Information of the other, in whole or in part,
without the prior written permission of the other party.
The Fund and FDISG may, however, disclose Confidential
Information to its employees who have a need to know the
Confidential Information to perform work for the other,
provided that each shall use reasonable efforts to ensure
that the Confidential Information is not duplicated or
disclosed by its employees in breach of this Agreement.
The Fund and FDISG may also disclose the Confidential
Information to independent contractors, auditors, and
professional advisors, provided they first agree in writing
to be bound by the confidentiality obligations
substantially similar to this Section 15.1.
Notwithstanding the previous sentence, in no event shall
either the Fund or FDISG disclose the Confidential
Information to any competitor of the other without
specific, prior written consent.
15.2 Proprietary Information means:
(a) any data or information that is competitively
sensitive material, and not generally known to the public,
including, but not limited to, information about product
plans, marketing strategies, finance, operations, customer
relationships, customer profiles, sales estimates, business
plans, and internal performance results relating to the
past, present or future business activities of the Fund or
FDISG, their respective subsidiaries and affiliated com-
panies and the customers, clients and suppliers of any of
them;
(b) any scientific or technical information, design,
process, procedure, formula, or improvement that is commer-
cially valuable and secret in the sense that its confiden-
tiality affords the Fund or FDISG a competitive advantage
over its competitors; and
(c) all confidential or proprietary concepts, documen-
tation, reports, data, specifications, computer software,
source code, object code, flow charts, databases, inven-
tions, know-how, show-how and trade secrets, whether or not
patentable or copyrightable.
15.3 Confidential Information includes, without
limitation, all documents, inventions, substances,
engineering and laboratory notebooks, drawings, diagrams,
specifications, bills of material, equipment, prototypes
and models, and any other tangible manifestation of the
foregoing of either party which now exist or come into the
control or possession of the other.
Article 16 Force Majeure.
No party shall be liable for any default or delay in the
performance of its obligations under this Agreement if and
to the extent such default or delay is caused, directly or
indirectly, by (i) fire, flood, elements of nature or other
acts of God; (ii) any outbreak or escalation of
hostilities, war, riots or civil disorders in any country,
(iii) any act or omission of any governmental authority;
(iv) any labor disputes (whether or not the employees'
demands are reasonable or within the party's power to
satisfy); or (v) nonperformance by a third party or any
similar cause beyond the reasonable control of such party,
including without limitation, failures or fluctuations in
telecommunications or other equipment. In any such event,
the non-performing party shall be excused from any further
performance and observance of the obligations so affected
only for as long as such circumstances prevail and such
party continues to use commercially reasonable efforts to
recommence performance or observance as soon as
practicable.
Article 17 Assignment and Subcontracting.
This Agreement, its benefits and obligations shall be
binding upon and inure to the benefit of the parties hereto
and their respective successors and permitted assigns.
This Agreement may not be assigned or otherwise transferred
by either party hereto, without the prior written consent
of the other party, which consent shall not be unreasonably
withheld; provided, however, that FDISG may, in its sole
discretion, assign all its right, title and interest in
this Agreement to an affiliate, parent or subsidiary,
provided that (i) the financial capacity of such assignee
is not materially less than FDISG's; (ii) the nature and
quality of the services to be provided hereunder are not
materially adversely affected by such assignment ; and
(iii) the quality and capabilities of the personnel and
facilities of the assignee are not materially less than
FDISG's. FDISG may, in its sole discretion, engage
subcontractors to perform any of the obligations contained
in this Agreement to be performed by FDISG, provided,
however, that FDISG shall at all times remain fully
responsible for the acts or omissions of such sub-
contractors as if it were providing such services directly.
Article 18 Arbitration.
18.1 Any claim or controversy arising out of or relating
to this Agreement, or breach hereof, shall be settled by
arbitration administered by the American Arbitration
Association in Boston, Massachusetts in accordance with its
applicable rules, except that the Federal Rules of Evidence
and the Federal Rules of Civil Procedure with respect to
the discovery process shall apply.
18.2 The parties hereby agree that judgment upon the award
rendered by the arbitrator may be entered in any court
having jurisdiction.
18.3 The parties acknowledge and agree that the
performance of the obligations under this Agreement
necessitates the use of instrumentalities of interstate
commerce and, notwithstanding other general choice of law
provisions in this Agreement, the parties agree that the
Federal Arbitration Act shall govern and control with
respect to the provisions of this Article 18.
Article 19 Notice.
Any notice or other instrument authorized or required by
this Agreement to be given in writing to the Fund or FDISG,
shall be sufficiently given if addressed to that party and
received by it at its office set forth below or at such
other place as it may from time to time designate in
writing.
To the Fund:
Wilshire Target Funds, Inc.
c/o Wilshire Associates Incorporated
1299 Ocean Avenue - Suite 700
Santa Monica, CA 90401
Attention: Alan L. Manning
Vice President and General Counsel
To FDISG:
First Data Investor Services Group, Inc.
One Exchange Place
53 State Street
Boston, Massachusetts 02109
Attention: President
with a copy to FDISG's General Counsel
Article 20 Governing Law/Venue.
The laws of the Commonwealth of Massachusetts, excluding
the laws on conflicts of laws, shall govern the
interpretation, validity, and enforcement of this
agreement. All actions arising from or related to this
Agreement shall be brought in the state and federal courts
sitting in the City of Boston, and FDISG and Client hereby
submit themselves to the exclusive jurisdiction of those
courts.
Article 21 Counterparts.
This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an
original; but such counterparts shall, together, constitute
only one instrument.
Article 22 Captions.
The captions of this Agreement are included for convenience
of reference only and in no way define or limit any of the
provisions hereof or otherwise affect their construction or
effect.
Article 23 Publicity.
Neither FDISG nor the Fund shall release or publish news
releases, public announcements, advertising or other
publicity relating to this Agreement or to the transactions
contemplated by it without the prior review and written
approval of the other party; provided, however, that either
party may make such disclosures as are required by legal,
accounting or regulatory requirements after making
reasonable efforts in the circumstances to consult in
advance with the other party.
Article 24 Relationship of Parties.
The parties agree that they are independent contractors and
not partners or co-venturers and nothing contained herein
shall be interpreted or construed otherwise.
Article 25 Entire Agreement; Severability.
25.1 This Agreement, including Schedules, Addenda, and
Exhibits hereto, constitutes the entire Agreement between
the parties with respect to the subject matter hereof and
supersedes all prior and contemporaneous proposals,
agreements, contracts, representations, and understandings,
whether written or oral, between the parties with respect
to the subject matter hereof. No change, termination,
modification, or waiver of any term or condition of the
Agreement shall be valid unless in writing signed by each
party. No such writing shall be effective as against FDISG
unless said writing is executed by an Executive Vice
President, or President of FDISG. A partys waiver of a
breach of any term or condition in the Agreement shall not
be deemed a waiver of any subsequent breach of the same or
another term or condition.
25.2 The parties intend every provision of this Agreement
to be severable. If a court of competent jurisdiction
determines that any term or provision is illegal or invalid
for any reason, the illegality or invalidity shall not
affect the validity of the remainder of this Agreement. In
such case, the parties shall in good faith modify or
substitute such provision consistent with the original
intent of the parties. Without limiting the generality of
this paragraph, if a court determines that any remedy
stated in this Agreement has failed of its essential
purpose, then all other provisions of this Agreement,
including the limitations on liability and exclusion of
warranties, shall remain fully effective.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their duly authorized officers,
as of the day and year first above written.
WILSHIRE TARGET FUNDS, INC.
By: /s/ Thomas Stevens
Title: President
FIRST DATA INVESTOR SERVICES GROUP, INC.
By: /s/Jerry Kokos
Title: Executive VP
Exhibit 1
List of Portfolios
Large Company Growth Portfolio
Large Company Value Portfolio
Small Company Growth Portfolio
Small Company Value Portfolio
Schedule A
DUTIES OF FDISG
1. Shareholder Information. FDISG shall maintain a
record of the number of Shares held by each Shareholder of
record which shall include name, address, taxpayer
identification and which shall indicate whether such Shares
are held in certificates or uncertificated form.
2. Shareholder Services. FDISG shall respond as
appropriate to all inquiries and communications from
Shareholders relating to Shareholder accounts with respect
to its duties hereunder and as may be from time to time
mutually agreed upon between FDISG and the Fund.
3. Share Certificates.
(a) At the expense of the Fund, the Fund shall supply
FDISG with an adequate supply of blank share certificates
to meet FDISG requirements therefor. Such Share
certificates shall be properly signed by facsimile. The
Fund agrees that, notwithstanding the death, resignation,
or removal of any officer of the Fund whose signature
appears on such certificates, FDISG or its agent may
continue to countersign certificates which bear such
signatures until otherwise directed by Written
Instructions.
(b) FDISG shall issue replacement Share certificates in
lieu of certificates which have been lost, stolen or
destroyed, upon receipt by FDISG of properly executed
affidavits and lost certificate bonds, in form satisfactory
to FDISG, with the Fund and FDISG as obligees under the
bond.
(c) FDISG shall also maintain a record of each certificate
issued, the number of Shares represented thereby and the
Shareholder of record. With respect to Shares held in open
accounts or uncertificated form (i.e., no certificate being
issued with respect thereto) FDISG shall maintain
comparable records of the Shareholders thereof, including
their names, addresses and taxpayer identification. FDISG
shall further maintain a stop transfer record on lost
and/or replaced certificates.
4. Mailing Communications to Shareholders; Proxy
Materials. FDISG will address and mail to Shareholders of
the Fund, all reports to Shareholders, dividend and
distribution notices and proxy material for the Fund's
meetings of Shareholders. In connection with meetings of
Shareholders, FDISG will prepare Shareholder lists, mail
and certify as to the mailing of proxy materials, process
and tabulate returned proxy cards, report on proxies voted
prior to meetings, act as inspector of election at meetings
and certify Shares voted at meetings.
5. Sales of Shares
(a) FDISG shall not be required to issue any Shares of the
Fund where it has received a Written Instruction from the
Fund or official notice from any appropriate authority that
the sale of the Shares of the Fund has been suspended or
discontinued. The existence of such Written Instructions
or such official notice shall be conclusive evidence of the
right of FDISG to rely on such Written Instructions or
official notice.
(b) In the event that any check or other order for the
payment of money is returned unpaid for any reason, FDISG
will endeavor to: (i) give prompt notice of such return to
the Fund or its designee; (ii) place a stop transfer order
against all Shares issued as a result of such check or
order; and (iii) take such actions as FDISG may from time
to time deem appropriate.
6. Transfer and Repurchase
(a) FDISG shall process all requests to transfer or redeem
Shares in accordance with the transfer or repurchase
procedures set forth in the Fund's Prospectus.
(b) FDISG will transfer or repurchase Shares upon receipt
of Oral or Written Instructions or otherwise pursuant to
the Prospectus and Share certificates, if any, properly
endorsed for transfer or redemption, accompanied by such
documents as FDISG reasonably may deem necessary.
(c) FDISG reserves the right to refuse to transfer or
repurchase Shares until it is satisfied that the
endorsement on the instructions is valid and genuine.
FDISG also reserves the right to refuse to transfer or
repurchase Shares until it is satisfied that the requested
transfer or repurchase is legally authorized, and it shall
incur no liability for the refusal, in good faith, to make
transfers or repurchases which FDISG, in its good judgment,
deems improper or unauthorized, or until it is reasonably
satisfied that there is no basis to any claims adverse to
such transfer or repurchase.
(d) When Shares are redeemed, FDISG shall, upon receipt of
the instructions and documents in proper form, deliver to
the Custodian and the Fund or its designee a notification
setting forth the number of Shares to be repurchased. Such
repurchased shares shall be reflected on appropriate
accounts maintained by FDISG reflecting outstanding Shares
of the Fund and Shares attributed to individual accounts.
(e) FDISG, upon receipt of the monies paid to it by the
Custodian for the repurchase of Shares, pay such monies as
are received from the Custodian, all in accordance with the
procedures described in the written instruction received by
FDISG from the Fund.
(f) FDISG shall not process or effect any repurchase with
respect to Shares of the Fund after receipt by FDISG or its
agent of notification of the suspension of the
determination of the net asset value of the Fund.
7. Dividends
(a) Upon the declaration of each dividend and each capital
gains distribution by the Board of Directors of the Fund
with respect to Shares of the Fund, the Fund shall furnish
or cause to be furnished to FDISG Written Instructions
setting forth the date of the declaration of such dividend
or distribution, the ex-dividend date, the date of payment
thereof, the record date as of which Shareholders entitled
to payment shall be determined, the amount payable per
Share to the Shareholders of record as of that date, the
total amount payable on the payment date and whether such
dividend or distribution is to be paid in Shares at net
asset value.
(b) On or before the payment date specified in such
resolution of the Board of Directors, the Fund will pay to
FDISG sufficient cash to make payment to the Shareholders
of record as of such payment date.
(c) If FDISG does not receive sufficient cash from the
Fund to make total dividend and/or distribution payments to
all Shareholders of the Fund as of the record date, FDISG
will, upon notifying the Fund, withhold payment to all
Shareholders of record as of the record date until
sufficient cash is provided to FDISG.
8. In addition to and neither in lieu nor in
contravention of the services set forth above, FDISG shall:
(i) perform all the customary services of a transfer agent,
registrar, dividend disbursing agent and agent of the
dividend reinvestment and cash purchase plan as described
herein consistent with those requirements in effect as at
the date of this Agreement. The detailed definition,
frequency, limitations and associated costs (if any) set
out in the attached fee schedule, include but are not
limited to: maintaining all Shareholder accounts, preparing
Shareholder meeting lists, mailing proxies, tabulating
proxies, mailing Shareholder reports to current
Shareholders, withholding taxes on U.S. resident and
non-resident alien accounts where applicable, preparing and
filing U.S. Treasury Department Forms 1099 and other
appropriate forms required with respect to dividends and
distributions by federal authorities for all Shareholders.
Schedule B
Fee Schedule
Effective as of May 31, 1997
1. ANNUAL FEES
A. Open Account Fees: $17.50 per open account
B. Closed Account Fees: $3.60 per closed
account
C. Fund Minimums: $24,000 per
Portfolio per year
for first 4 Portfolios
$18,000 per Portfolio
per year for each
additional Portfolio
D. Additioanl Classes of Shares: The Fund minimums
in Section C apply with
respect to the first class of shares for
each Portfolio.
There will be a fee of $18,000 per
class for each additional class per
portfolio.
E. Conversion Costs: Free Set-Up Fee
2. VALUE ADDED SERVICES
Cost Basis Accounting: Free Set-up Fee
$.35 Per Eligible Account Per Month
AVR Solution: $7,500 Set-Up Fee
$300.00 Monthly Minimum Or
$.2125 Per Minute Charge
$.0775 Per Minute Telecom Charge
$.10 per Call
FundServ: $5,000 Set-Up Fee
$.15 Per Trade Plus $.10 Same Day Trades
Asset Allocation/Reallocation: Free Set-Up Fee
$.25 Per Trade Via NSCC
Direct Access Zip Link: $5,000 Set-Up Fee
$1,000 Per Month
$.03/Record Plus $.015/Price Record
GENERAL
1.1 First Data may charge a service fee equal to the
lesser of (1) one and one-half percent (1 1/2%) per month
of (ii) the highest interest rate legally permitted on any
unpaid amounts, unless such amounts are ultimately
determined not due in accordance with the Payment Dispute
Procedure. Client shall also reimburse First Data for all
reasonable expenses to collect delinquent amounts,
including reasonable attorneys' fees and court costs.
1.2 First Data may adjust any annual or monthly fees once
per calendar year, upon thirty (30) days prior written
notice in an amount not to exceed the cumulative percentage
increase in the Consumer Price Index for All Urban
Consumers (CPI-U) U.S. City Average, All items
(unadjusted) - (1982-84=100), published by the U.S
Department of Labor since the last such adjustment in
the Client's monthly fees (or the Effective Date
absent a prior such adjustment).
WILSHIRE TARGET FUNDS, INC. FIRST DATA INVESTOR SERVICES
GROUP, INC.
By: /s/ Thomas Stevens By: /s/Jerry Kokos
Title: Chairman & President Title: Executive
VP
Schedule C
OUT-OF-POCKET EXPENSES
The Fund shall reimburse FDISG monthly for applicable
out-of-pocket expenses, including, but not limited to the
following items:
- - Microfiche/microfilm production
- - Magnetic media tapes and freight
- - Printing costs, including certificates, envelopes,
checks and stationery
- - Postage (bulk, pre-sort, ZIP+4, barcoding, first
class) direct pass through to the Fund
- - Due diligence mailings
- - Telephone and telecommunication costs, including
lease, maintenance and line costs
- - Ad hoc reports
- - Proxy solicitations, mailings and tabulations
- - Daily & Distribution advice mailings
- - Shipping, Certified and Overnight mail and insurance
- - Year-end form production and mailings
- - Terminals, communication lines, printers and other
equipment and any expenses incurred in connection with such
terminals and lines
- - Duplicating services
- - Courier services
- - Incoming and outgoing wire charges
- - Federal Reserve charges for check clearance
- - Overtime, as approved by the Fund
- - Temporary staff, as approved by the Fund
- - Travel and entertainment, as approved by the Fund
- - Record retention, retrieval and destruction costs,
including, but not limited to exit fees charged by third
party record keeping vendors
- - Third party audit reviews
- - All Systems enhancements after the conversion at the
rate of $100.00 per hour
- - Insurance
- - Such other miscellaneous expenses similar in nature
to those set forth above and reasonably incurred by FDISG
in performing its duties and responsibilities under this
Agreement.
The Fund agrees that postage and mailing expenses will be
paid on the day of or prior to mailing as agreed with
FDISG. In addition, the Fund will promptly reimburse FDISG
for any other unscheduled expenses incurred by FDISG
whenever the Fund and FDISG mutually agree that such
expenses are not otherwise properly borne by FDISG as part
of its duties and obligations under the Agreement.
Schedule D
Fund Documents
- - Certified copy of the Articles of Incorporation
of the Fund, as amended
- - Certified copy of the By-laws of the Fund, as
amended,
- - Copy of the resolution of the Board of
Directors authorizing the execution and delivery of
this Agreement
- - Specimens of the certificates for Shares of the
Fund, if applicable, in the form approved by the
Board of Directors of the Fund, with a certificate of
the Secretary of the Fund as to such approval
- - All account application forms and other
documents relating to Shareholder accounts or to any
plan, program or service offered by the Fund
- - Certified list of Shareholders of the Fund with
the name, address and taxpayer identification number
of each Shareholder, and the number of Shares of the
Fund held by each, certificate numbers and
denominations (if any certificates have been issued),
lists of any accounts against which stop transfer
orders have been placed, together with the reasons
therefore, and the number of Shares redeemed by the
Fund
- - All notices issued by the Fund with respect to
the Shares in accordance with and pursuant to the
Articles of Incorporation or By-laws of the Fund or
as required by law and shall perform such other
specific duties as are set forth in the Articles of
Incorporation including the giving of notice of any
special or annual meetings of shareholders and any
other notices required thereby.
58
contract\ta\openend\wilshire\agr4
Rev. 11/95
EXHIBIT (9)(b)
ADMINISTRATION AGREEMENT
THIS ADMINISTRATION AGREEMENT is made as of May 31,
1996, by and between FIRST DATA INVESTOR SERVICES GROUP,
INC., a Massachusetts corporation ("FDISG"), and WILSHIRE
TARGET FUNDS, INC. (the "Company").
In consideration of the premises and mutual covenants
herein contained, it is agreed between the parties hereto as
follows:
1. Appointment. The Company hereby appoints FDISG
to act as Administrator on the terms set forth in this
Agreement. FDISG accepts such appointment and agrees to
render the services herein set forth for the compensation
herein provided. In the event that the Company decides to
retain FDISG to act as Administrator hereunder with respect
to one or more portfolios other than the Funds, the Company
shall notify FDISG in writing. If FDISG is willing to
render such services, it shall notify the Company in writing
whereupon such portfolio shall become a Fund hereunder.
2. Delivery of Documents. The Company has
furnished FDISG with copies properly certified or
authenticated of each of the following:
(a) The Company's Articles of Incorporation
(the "Articles") filed with the state of Maryland and all
amendments thereto;
(b) The Company's Registration Statement on
Form N-1A (the "Registration Statement") under the
Securities Act of 1933 and under the 1940 Act, as filed with
the Securities and Exchange Commission (the "SEC") on April
2, 1996, relating to shares of the Company's Common Stock,
$0.001 par value per share, and all amendments thereto; and
(c) Each Fund's most recent prospectus and
statement of additional information, and all amendments and
supplements thereto (collectively, the "Prospectuses").
The Company will furnish FDISG from time to time with
copies, properly certified or authenticated, of all
amendments of or supplements to the foregoing. Furthermore,
the Company will provide FDISG with any other documents that
FDISG may reasonably request and will notify FDISG as soon
as possible of any matter materially affecting the
performance by FDISG of its services under this Agreement.
3. Duties as Administrator. FDISG, as
Administrator, will assist in supervising all aspects of the
Company's administrative operations and undertakes to
perform all services and to furnish all personnel and
facilities ordinarily incident to the administration of a
mutual fund, including but not limited to the following
specific services:
(a) Maintaining office facilities (which may
be in the offices of FDISG or a corporate affiliate) and
furnishing corporate officers for the Company at its
request;
(b) Furnishing data processing services,
clerical services, and internal legal, executive and
administrative services and stationery and office supplies
in connection with the foregoing;
(c) Accounting and bookkeeping services
(including maintenance of such accounts, books and records
of the Company as may be required by Section 31(a) of the
1940 Act and the rules thereunder);
(d) Internal auditing;
(e) Performing all functions ordinarily
performed by the office of a corporate treasurer, and
furnishing the services and facilities ordinarily incident
thereto, including calculating the net asset value of the
shares of each Fund at the close of trading on the New York
Stock Exchange (the "NYSE") on each day on which the NYSE is
open for trading and at such other times as the Board of
Directors may reasonably request;
(f) Preparing reports to the Company's
shareholders of record and the SEC including, but not
necessarily limited to, Annual Reports and Semi-Annual
Reports on Form N-SAR;
(g) Preparing and filing various applications,
registration statements, reports or other documents required
by federal, and state laws and regulations, other than those
filed or required to be filed by the Adviser or Transfer
Agent;
(h) Preparing and filing the Company's tax
returns;
(i) At the Adviser's request, monitoring and
developing compliance procedures for the Company which will
include, among other matters, monitoring compliance with
each Fund's investment objective, policies, restrictions,
tax matters and applicable laws and regulations;
(j) Performing all functions ordinarily
performed by the office of a corporate secretary, and
furnishing the services and facilities incident thereto,
including all functions pertaining to matters organic to the
organization, existence and maintenance of the corporate
franchise of the Company, including preparation for, conduct
of, and recording directors' meeting and shareholder
meetings. Directors' meetings in excess of five in any
calendar year and shareholder meetings in excess of one in
any two year period shall be for an additional reasonable
charge as may be agreed upon by the Administrator and FDISG;
(k) Performing "Blue Sky" compliance
functions, including maintaining registrations or "Blue
Chip" exemptions (if available) in all U.S. jurisdictions
requested by the Company, monitoring sales of shares in all
such jurisdictions and applying for such additional or
amended registrations as may be reasonably anticipated to be
necessary to permit continuous sales of the shares of the
Funds in all such jurisdictions, filing sales literature and
advertising materials to the extent required, with such Blue
Sky authorities, and making and filing all other
applications, reports, notices, documents and exhibits in
connection with the foregoing; and
(l) Furnishing all other services identified
on Schedule D annexed hereto and incorporated herein which
are not otherwise specifically set forth above.
In performing all services under this Agreement,
FDISG: (a) shall act in conformity with the Articles, the
Prospectuses and the instructions and directions of the
Administrator, and will conform to and comply with the
requirements of the 1940 Act and all other applicable
federal or state laws and regulations; and (b) will consult
with legal counsel to the Fund, as necessary or appropriate.
Furthermore, FDISG shall not have or be required to have any
authority to supervise the investment or reinvestment of the
securities or other properties which comprise the assets of
the Company or any of its Funds and shall not provide any
investment advisory services to the Company or any of its
Funds.
4. Compensation and Allocation of Expenses. FDISG
shall bear all expenses in connection with the performance
of its services under this Agreement, except as indicated
below.
(a) FDISG may from time to time employ or
associate with itself such person or persons as FDISG may
believe to be particularly suited to assist it in performing
services under this Agreement. Such person or persons may
be officers or employees of FDISG. The compensation of such
person or persons shall be paid by FDISG and no obligation
shall be incurred on behalf of the Company in such respect.
(b) FDISG shall not be required to pay any of
the following expenses which may be incurred by the Company:
membership dues in the Investment Company Institute or any
similar organization; investment advisory expenses; costs of
printing and mailing stock certificates, prospectuses,
reports and notices; interest on borrowed money; brokerage
commissions; stock exchange listing fees; taxes and fees
payable to Federal, state and other governmental agencies;
salaries or fees of Officers or Directors of the Company who
are not affiliated with FDISG; outside auditing expenses;
outside legal expenses; or other expenses not specified in
this Section 4 which may be properly payable by the Company.
(c) For the services to be rendered, the
facilities to be furnished and the payments to be made by
FDISG, as provided for in this Agreement, the Company will
pay FDISG on the first business day of each month a fee for
the previous month as set forth on Schedule B annexed hereto
and incorporated herein. Upon any termination of this
Agreement before the end of any month, the fee for such part
of a month shall be prorated according to the proportion
which such period bears to the full monthly period and shall
be payable upon the date of termination of this Agreement.
For the purpose of determining fees payable to FDISG, the
value of each Fund's net assets shall be computed at the
times and in the manner specified in the Registration
Statement.
(d) The Company shall compensate FDISG for its
services rendered pursuant to this Agreement in accordance
with the fees set forth on Schedule B. Such fees do not
include out-of-pocket disbursements of FDISG for which FDISG
shall be entitled to bill separately. Out-of-pocket
disbursements shall include the items specified on Schedule
C annexed hereto and incorporated herein and such other
items upon which the Administrator and FDISG may agree from
time to time.
(e) FDISG will bill the Company as soon as
practicable after the end of each calendar month, and such
billings will be detailed in accordance with the out-of-
pocket schedule. The Company will pay to FDISG the amount
of such billing within thirty (30) days of receipt.
(f) As to each Fund, if in any fiscal year the
aggregate annual expenses of the Fund (including fees
pursuant to this Agreement and the Company's Investment
Advisory Agreement, but excluding interest, taxes,
brokerage, Rule 12b-1 plan expenses and extraordinary
expenses) exceed the expense limitation of any state in
which shares of the Fund are qualified for offer and sale,
the Company may deduct from the portion of the fees to be
paid hereunder (for such fiscal year) which are chargeable
to such Fund (hereinafter, the "Fund's share of FDISG's
fee"), or FDISG will bear, to the extent required by state
law, that portion of such excess expense which bears the
same relation to such excess expense as the Fund's share of
FDISG's fee bears to the total of (i) the Fund's share of
FDISG's fee, plus (ii) the Fund's share of the advisory fee
payable for such fiscal year (before giving effect to any
similar state expenses reimbursement provision) pursuant to
the Company's Investment Advisory Agreement. Such deduction
or payment, if any, will be estimated daily, and reconciled
and deducted or paid, as the case may be, on a monthly
basis.
5. Limitation of Liability.
(a) FDISG shall at all times act in good faith
and agrees to use its best efforts within commercially
reasonable limits to ensure the accuracy of all services
performed under this Agreement, but assumes no
responsibility for loss or damage to the Company unless said
errors are caused by FDISG's own negligence, bad faith or
willful misconduct or that of its employees.
(b) Notwithstanding any provision in this
Agreement to the contrary, FDISG's cumulative liability (to
the Fund) for all losses, claims, suits, controversies,
breaches, or damages ("Claims") for any cause whatsoever
arising out of or related to this Agreement and regardless
of the form of action or legal theory, shall not exceed one
million ($1,000,000) dollars, plus any and all amounts
available to FDISG or to the Company in respect of such
Claims under FDISG's liability insurance, which FDISG agrees
continuously to maintain in principal coverage amounts of at
least Five Million Dollars ($5,000,000) at all times during
the term of this Agreement and for at least one (1) year
thereafter. FDISG agrees to furnish initial certification
of such insurance coverage and immediate notification of any
modification or termination of such coverage thereafter.
The Company understands the limitation on FDISG's damages to
be a reasonable allocation of risk and the Company expressly
consents with respect to such allocation of risk. In
allocating risk under the Agreement, the parties agree that
the damage limitation set forth above shall apply to any
alternative remedy ordered by a court in the event such
court determines that sole and exclusive remedy provided for
in the Agreement fails of its essential purpose.
(c) Each party shall have the duty to mitigate
damages for which the other party may become responsible.
(d) NOTWITHSTANDING ANYTHING IN THIS AGREEMENT
TO THE CONTRARY, IN NO EVENT SHALL EITHER PARTY, THEIR
AFFILIATES OR ANY OF THEIR DIRECTORS, OFFICERS, EMPLOYEES,
AGENTS OR SUBCONTRACTORS BE LIABLE TO THE OTHER PARTY FOR
EXEMPLARY, PUNITIVE, SPECIAL, INDIRECT OR CONSEQUENTIAL
DAMAGES.
6. Indemnification.
(a) The Company shall indemnify and hold FDISG
harmless from and against any and all claims, costs,
expenses (including reasonable attorneys' fees), losses,
damages, charges, payments and liabilities of any sort or
kind which may be asserted against FDISG or for which FDISG
may be held to be liable in connection with this Agreement
or FDISG's performance hereunder (a "Claim"), unless such
Claim arose by reason of FDISG's willful misfeasance, bad
faith or negligence in the performance of its duties
hereunder. FDISG shall indemnify and hold the Company
harmless from and against any and all claims, costs,
expenses (including reasonable attorney's fees), losses,
damages, charges, payments and liabilities of any sort or
kind which may be asserted against the Company or for which
the Company may be liable in connection with this Agreement
or FDISG's performance hereunder (also, a "Claim"), if such
Claim arises by reason of FDISG's willful misfeasance, bad
faith, or negligence in the performance of its duties
hereunder.
(b) In any case in which one party hereto may
be asked to indemnify or hold the other harmless pursuant to
the provision of Section 6(a) hereof, the party seeking
indemnification will notify the other promptly after
identifying any situation which it believes presents or
appears likely to present a claim for indemnification
hereunder, although the failure to do so shall not prevent
recovery by the party seeking indemnification except to the
extent that such failure prejudices the other party in its
defense of any such claim, and shall keep the other advised
with respect to all developments concerning such situation.
The party from which indemnification is sought shall have
the option to defend the other against any Claim which may
be the subject of this indemnification, and, in the event
that the party from which indemnification is sought so
elects, such defense shall be conducted by counsel chosen by
the party from which indemnification is sought and
satisfactory to the other, and thereupon the party from
which indemnification is sought shall take over complete
defense of the Claim and the other shall sustain no further
legal or other expenses in respect of such Claim. The party
seeking indemnification will not confess any Claim or make
any compromise in any case in which the other will be asked
to provide indemnification, except with the party's from
which indemnification is sought prior written consent. The
obligations of the parties hereto under this Section 6 shall
survive the termination of this Agreement.
7. EXCLUSION OF WARRANTIES. THIS IS A SERVICE
AGREEMENT. EXCEPT AS EXPRESSLY PROVIDED IN THIS AGREEMENT,
FDISG DISCLAIMS ALL OTHER REPRESENTATIONS OR WARRANTIES,
EXPRESS OR IMPLIED, MADE TO THE ADMINISTRATOR OR ANY OTHER
PERSON, INCLUDING, WITHOUT LIMITATION, ANY WARRANTIES
REGARDING QUALITY, SUITABILITY, MERCHANTABILITY, FITNESS FOR
A PARTICULAR PURPOSE OR OTHERWISE (IRRESPECTIVE OF ANY
COURSE OF DEALING, CUSTOM OR USAGE OF TRADE) OF ANY
SERVICES OR ANY GOODS PROVIDED INCIDENTAL TO SERVICES
PROVIDED UNDER THIS AGREEMENT. FDISG DISCLAIMS ANY
WARRANTY OF TITLE OR NON-INFRINGEMENT EXCEPT AS OTHERWISE
SET FORTH IN THIS AGREEMENT.
8. Term and Termination of Agreement.
(a) This Agreement shall be effective on the
date first written above and shall continue for a period of
two (2) years (the "Initial Term"), unless earlier
terminated pursuant to the terms of this Agreement. In
addition, the term of this Agreement shall automatically be
extended for a third year unless the Company notifies FDISG
to the contrary in writing at least six (6) months prior to
the second anniversary of the effective date. Thereafter,
the term of this Agreement shall continue for successive
annual periods, provided such continuance is specifically
approved at least annually by (i) the Company's Board of
Directors or (ii) a vote of a "majority" (as defined in the
1940 Act) of the Company's outstanding voting securities,
provided that in either event the continuance is also
approved by a majority of the Board of Directors who are not
"interested persons" (as defined in the 1940 Act) of any
party to this Agreement, by vote cast in person at a meeting
called for the purpose of voting on such approval.
(b) Upon termination, for whatever reason, the
Company and FDISG shall cooperate fully with each other and
with any new administrator in the transfer of the
administration of the Company's business and affairs to such
new administrator, and shall act promptly and expeditiously
in all matters relating thereto, including the transfer of
all records, data and information reasonably necessary or
appropriate to the conversion and/or the continuation of the
administration of the Company thereafter, with a view toward
achieving an orderly, efficient and cost-effective
transition on any reasonable schedule which may be
established therefor by the Company. The parties agree that
any transition schedule allowing for a period of sixty (60)
days or more to complete the transition shall be deemed a
"reasonable schedule" for purposes of this Section 8(b). In
the event that such termination occurs prior to the third
anniversary of the effective date of this Agreement, the
Company agrees to reimburse FDISG for its reasonable
itemized costs and expenses incurred in connection with the
transfer of administration, not to exceed in any event
$15,000. In the event of termination on or after the third
anniversary of the effective date of this Agreement, each
party hereto shall bear its own costs and expenses in
connection with the transfer of administration.
(c) If a party hereto is guilty of a material
failure to perform its duties and obligations hereunder (a
"Defaulting Party") resulting in a material loss to the
other party, such other party (the "Non-Defaulting Party")
may give written notice thereof to the Defaulting Party, and
if such material breach shall not have been remedied within
thirty (30) days after such written notice is given, then
the Non-Defaulting Party may terminate this Agreement by
giving thirty (30) days written notice of such termination
to the Defaulting Party. The termination of this Agreement
by a Non-Defaulting Party under this Section 8(c) shall not
constitute a waiver of any other rights or remedies of such
Party with respect to services performed prior to such
termination or rights of FDISG to be reimbursed for out-of-
pocket expenses hereunder. In all cases, termination by the
Non-Defaulting Party shall not constitute a waiver by the
Non-Defaulting Party of any other rights it might have under
this Agreement or otherwise against the Defaulting Party.
(d) A party hereto may terminate this
Agreement by giving thirty (30) days written notice of such
termination to the other party in the event that the other
party has become insolvent or made a general assignment for
the benefit of creditors, or a petition under the Bankruptcy
Code is filed by or against the other party and the other
party has not discharged said petition within thirty (30)
days after such filing.
9. Modifications and Waivers. No change,
termination, modification, or waiver of any term or
condition of the Agreement shall be valid unless in writing
signed by each party. No such writing shall be effective as
against FDISG unless said writing is executed by a Senior
Vice President, Executive Vice President or President of
FDISG. A party's waiver of a breach of any term or
condition in the Agreement shall not be deemed a waiver of
any subsequent breach of the same or another term or
condition.
10. No Presumption Against Drafter. FDISG and the
Company have jointly participated in the negotiation and
drafting of this Agreement. The Agreement shall be
construed as if drafted jointly by the Company and FDISG,
and no presumptions arise favoring any party by virtue of
the authorship of any provision of this Agreement.
11. Publicity. Neither FDISG nor the Company shall
release or publish news releases, public announcements,
advertising or other publicity relating to this Agreement or
to the transactions contemplated by it without prior review
and written approval of the other party; provided, however,
that either party may make such disclosures as are required
by legal, accounting or regulatory requirements after making
reasonable efforts in the circumstances to consult in
advance with the other party.
12. Severability. The parties intend every
provision of this Agreement to be severable. If a court of
competent jurisdiction determines that any term or provision
is illegal or invalid for any reason, the illegality or
invalidity shall not affect the validity of the remainder of
this Agreement. In such case, the parties shall in good
faith modify or substitute such provision consistent with
the original intent of the parties. Without limiting the
generality of this paragraph, if a court determines that any
remedy stated in this Agreement has failed of its essential
purpose, then all other provisions of this Agreement,
including the limitations on liability and exclusion of
warranties, shall remain fully effective.
13. Miscellaneous.
(a) Any notice or other instrument authorized
or required by this Agreement to be given in writing to the
Company or FDISG shall be sufficiently given if addressed to
the party and received by it at its office set forth below
or at such other place as it may from time to time designate
in writing.
To the Company:
c/o Wilshire Associates, Incorporated
1299 Ocean Avenue, Suite 700
Santa Monica, California 90401
Attention: Alan L. Manning, Esq.
Vice President and General Counsel
To FDISG:
First Data Investor Services Group, Inc.
53 State Street
Boston, Massachusetts 02109-2873
Attention: Vincent Fabiani
(b) This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective
successors and permitted assigns and is not intended to
confer upon any other person any rights or remedies
hereunder. This Agreement may not be assigned or otherwise
transferred by either party hereto, without the prior
written consent of the other party, which consent shall not
be unreasonably withheld; provided, however, that FDISG
may, in its sole discretion, assign all its right, title and
interest in this Agreement to an affiliate, parent or
subsidiary, provided that (i) the financial capacity of such
assignee is not materially less than FDISG's, (ii) the
nature and quality of the services to be provided hereunder
are not materially and adversely affected by such
assignment, and (iii) the quality and capabilities of the
personnel and facilities of the assignee are not materially
less than FDISG's. FDISG may, in it sole discretion, engage
subcontractors to perform any of the obligations contained
in this Agreement to be performed by FDISG, provided,
however, that FDISG shall at all times remain fully
responsible for the acts or omissions of such sub-
contractors as if it were providing such services directly.
(c) The laws of the Commonwealth of
Massachusetts, excluding the laws on conflicts of laws,
shall govern the interpretation, validity, and enforcement
of this Agreement. All actions arising from or related to
this Agreement shall be brought in the state and federal
courts sitting in the City of Boston, and FDISG and the
Company hereby submit themselves to the exclusive
jurisdiction of those courts.
(d) This Agreement may be executed in any
number of counterparts, each of which shall be deemed to be
an original and which collectively shall be deemed to
constitute only one instrument.
(e) The captions of this Agreement are
included for convenience of reference only and in no way
define or delimit any of the provisions hereof or otherwise
affect their construction or effect.
14. Confidentiality.
(a) The parties agree that the Proprietary
Information (defined below) (collectively "Confidential
Information") is confidential information of the parties and
their respective licensers. The Company and FDISG shall
exercise reasonable care to safeguard the confidentiality of
the Confidential Information of the other. The Company and
FDISG may each use the Confidential Information only to
exercise its rights or perform its duties under this
Agreement. The Company and FDISG shall not duplicate, sell
or disclose to others the Confidential Information of the
other, in whole or in part, without the prior written
permission of the other party. The Company and FDISG may,
however, disclose Confidential Information to its employees
who have a need to know the Confidential Information to
perform work for the other, provided that each shall use
reasonable efforts to ensure that the Confidential
Information is not duplicated or disclosed by its employees
in breach of this Agreement. The Company and FDISG may also
disclose the Confidential Information to independent
contractors, auditors and professional advisors, provided
they first agree in writing to be bound by the
confidentiality obligations substantially similar to this
Section 14. Notwithstanding the previous sentence, in no
event shall either the Company or FDISG disclose the
Confidential Information to any competitor of the other
without specific, prior written consent.
(b) Proprietary Information means:
(i) any data or information that is
completely sensitive material, and not generally known to
the public, including, but not limited to, information about
product plans, marketing strategies, finance, operations,
customer relationships, customer profiles, sales estimates,
business plans, and internal performance results relating to
the past, present or future business activities of the
Company or FDISG, their respective subsidiaries and
affiliated companies and the customers, clients and
suppliers of any of them;
(ii) any scientific or technical
information, design, process, procedure, formula, or
improvement that is commercially valuable and secret in the
sense that its confidentiality affords the Company, or FDISG
a competitive advantage over its competitors; and
(iii) all confidential or proprietary
concepts, documentation, reports, data, specifications,
computer software, source code, object code, flow charts,
databases, inventions, know-how, show-how and trade secrets,
whether or not patentable or copyrightable.
(c) Confidential Information includes, without
limitation, all documents, inventions, substances,
engineering and laboratory notebooks, drawings, diagrams,
specifications, bills of material, equipment, prototypes and
models, and any other tangible manifestation of the
foregoing of either party hereto which now exist or come
into the control or possession of the other party hereto.
(d) The Company acknowledges that breach of
the restrictions on use, dissemination or disclosure of any
Confidential Information would result in immediate and
irreparable harm, and money damages would be inadequate to
compensate FDISG for that harm. FDISG shall be entitled to
equitable relief, in addition to all other available
remedies, to redress any such breach.
15. Force Majeure. No party shall be liable for any
default or delay in the performance of its obligations under
this Agreement if and to the extent such default or delay is
caused, directly or indirectly, by (i) fire, flood, elements
of nature or other acts of God; (ii) any outbreak or
escalation of hostilities, war, riots or civil disorders in
any country, (iii) any act or omission of any governmental
authority; (iv) any labor disputes (whether or not the
employees' demands are reasonable or within the party's
power to satisfy); or (v) nonperformance by a third party or
any similar cause beyond the reasonable control of such
party, including without limitation, failures or
fluctuations in telecommunications or other equipment. In
any such event, the non-performing party shall be excused
from any further performance and observance of the
obligations so affected only for so long as such
circumstances prevail and such party continues to use
commercially reasonable efforts to recommence performance or
observance as soon as practicable.
16. Entire Agreement. This Agreement, including all
Schedules hereto, constitutes the entire agreement between
the parties with respect to the subject matter hereof and
supersedes all prior and contemporaneous proposals,
agreements, contracts, representations, and understandings,
whether written or oral, between the parties with respect to
the subject matter hereof.
IN WITNESS WHEREOF, the parties hereto have caused
this instrument to be duly executed and delivered by their
duly authorized officers as of the date first written above.
FIRST DATA INVESTOR SERVICES GROUP, INC.
By: /s/ Vincent J. Fabiani
Name: Vincent J. Fabiani
Title:Vice President
WILSHIRE TARGET FUNDS, INC.
By: /s/Thomas D. Stevens
Name: Thomans D. Stevens
Title: Senior Vice President - WA
President - WTF
SCHEDULE A
NAMES OF FUNDS
Large Company Growth Portfolio
Large Company Value Portfolio
Small Company Growth Portfolio
Small Company Value Portfoli
SCHEDULE B
FEES (ON AN ANNUAL BASIS)
First $1 billion in aggregate assets .15% of monthly
average net assets
Next $4 billion in aggregate assets .10% of monthly average
net assets
Excess .08% of monthly average net assets
Minimum of $100,000 per year for four Funds
Plus: Flat fee of $25,000 per Fund per annum
Additional charge of $2,000 per annum per additional class
FDISG reserves the right to renegotiate the fees set forth
on this Schedule B and in Section 4 of the Agreement should
the actual services required vary materially from the
assumptions provided. It is specifically understood by the
parties that fees for those services provided by FDISG which
are not described in Section 3 of the Agreement or included
on Schedule D under "Routine Projects", will be charged
separately by FDISG and are not included in the fees
referenced above.
SCHEDULE C
OUT-OF-POCKET EXPENSES
Out-of-pocket expenses include, but are not limited to, the
following:
- - Postage of Board meeting materials and other materials
to the Company's
Board members and service providers (including
overnight or other courier
services)
- - Telecommunications charges (including FAX) with
respect to
communications with the Company's directors, officers
and service
providers
- - Duplicating charges with respect to filings with
federal and state authorities
and Board meeting materials
- - Pricing services
- - Forms and supplies for the preparation of Board
meetings and other
materials for the Company
- - Vendor set-up charges for Blue Sky services
- - Such other expenses as are agreed to by FDISG and the
Administrator
SCHEDULE D
Fund Accounting and Administrative Services
Routine Projects
o Daily, Weekly, and Monthly Reporting
o Portfolio and General Ledger Accounting
o Daily Pricing of all Securities
o Daily Valuation and NAV Calculation
o Comparison of NAV to market movement
o Review of price tolerance/fluctuation report
o Research items appearing on the price exception report
o Weekly cost monitoring along with market-to-market
valuations in accordance with Rule 2a7
o Preparation of monthly ex-dividend monitor
o Daily cash reconciliation with the custodian bank
o Daily updating of price and rate information to the
Transfer Agent/Insurance Agent
o Daily support and report delivery to Portfolio
Management
o Daily calculation of fund advisor fees and waivers
o Daily calculation of distribution rates
o Daily maintenance of each fund's general ledger
including expense accruals
o Daily price notification to other vendors as required
o Calculation of 30-day adjusted SEC yields
o Preparation of month-end reconciliation package
o Monthly reconciliation of fund expense records
o Preparation of monthly pay down gain/loss summaries
o Preparation of all annual and semi-annual audit work
papers
o Preparation and Printing of Financial Statements
o Providing Shareholder Tax Information to Transfer
Agent
o Producing Drafts of IRS and State Tax Returns
o Treasury Services including:
Provide Officer for the fund
Expense Accrual Monitoring
Determination of Dividends
Prepare materials for review by the board, e.g.,
2a-7,10f-3, 17a-7, 17e-1
Tax and Financial Counsel
o Monthly Compliance Testing including section 817H
D-1
Distribution and Legal, Regulatory and Board of Directors
Support
Routine Projects
o Provide 1940 Act Attorney to assist in organization
o Prepare agenda and background materials for legal
approval at Board Meetings; make
presentations where appropriate; prepare minutes;
follow up on issues
o Review and filing of Form N-SAR
o Review and filing of Annual and Semi-Annual Financial
Reports
o Assistance in Preparation of Fund Registration
Statements
o Review of all Sales Material and Advertising
o Coordinate all aspects of the printing and mailing
process with outside printers for all
shareholder publications
o Support for all quarterly board meetings
o Preparation of proxy materials for one meeting per
year
o Annual update Post-Effective Amendment (PEA)
o Prospectus supplements as needed
o Consultations regarding legal issues as needed
o SEC audit report
o Arrange insurance coverage
o Support for one special board meeting per year and
consent votes where needed
o One additional PEA (other than annual update)
o One exemptive order application
o Assist with marketing strategy and product development
Special Projects*
o Proxy material preparation for additional meetings
beyond one per year
o N-14 preparation (merger document)
o Additional PEAs beyond two per year
o Prospectus simplification
o Additional exemptive order applications beyond one per
year
o Extraordinary non-recurring projects - e.g., arranging
CDSC financing programs
o Basic sales, mutual funds, and product training to
branch and sales representatives
*Charged on a project-by-project basis.
D-2
EXHIBIT (15)(a)
WILSHIRE TARGET FUNDS, INC.
Investment Class Shares
Shareholder Services Plan
Under Rule 12b-1
This Plan (the "Plan") constitutes the Shareholder
Services Plan relating to the Investment Class shares of
each of the Portfolios of Wilshire Target Funds, Inc. (the
"Fund") identified in Appendix A hereto. Appendix A may be
amended from time to time as provided herein.
Section 1. The Fund will reimburse the distributor of
the Investment Class shares of each Portfolio (the
"Distributor"), for its shareholder services expenses (the
"Shareholder Services Fee") at an annual rate of up to 0.25
of 1% of the average daily net assets of such Portfolio
attributable to its Investment Class shares. The
Shareholder Services Fee shall be accrued daily and paid
monthly or at such other intervals as the Directors shall
determine. The Distributor may be reimbursed for payments
to securities dealers or other organizations as service fees
pursuant to agreements with such organizations for providing
personal services to investors in Investment Class shares
and/or the maintenance of shareholder accounts. It is
intended that payments under this Plan shall qualify as
"service fees" as defined in Section 26 of the Rules of Fair
Practice of the National Association of Securities Dealers,
Inc. (or any successor provision) as in effect from time to
time (the "NASD Rule").
Section 2. This Plan shall not take effect until it
has been approved (i) by votes of the majority of both (a)
the Directors of the Fund, and (b) the Independent Directors
of the Fund, in each case cast in person at a meeting called
for the purpose of voting on this Plan, and (ii) and by vote
of a majority of the outstanding Investment Class shares,
and shall in no event take effect before May 31, 1996. This
Plan shall continue in effect for a period of more than one
year after May 31, 1996 only so long as such continuance is
specifically approved at least annually by votes of the
majority (or whatever other percentage may, from time to
time, be required by Section 12(b) of the Investment Company
Act of 1940 (the "Act") or the rules and regulations
thereunder) of both (a) the Directors of the Fund, and (b)
the Independent Directors of the Fund, cast in person at a
meeting called for the purpose of voting on this Plan or
such agreement.
Section 3. Any person authorized to direct the
disposition of monies paid or payable by the Fund pursuant
to this Plan or any related agreement shall provide to the
Directors of the Fund, and the Directors shall review, at
least quarterly, a written report of the amounts so expended
and the purposes for which such expenditures were made.
Section 4. This Plan may be terminated at any time by
vote of a majority of the Independent Directors, or by vote
of a majority of the outstanding Investment Class shares.
Section 5. All agreements with any person relating to
implementation of this Plan shall be in writing, and any
agreement related to this Plan shall provide:
A. That such agreement may be terminated at any time,
without payment of any penalty, by vote of a majority of the
Independent Directors or by vote of a majority of the
outstanding Investment Class shares, on not more than 60
days' written notice to any other party to the agreement;
and
B. That such agreement shall terminate automatically in
the event of its assignment.
Section 6. This Plan may not be amended to increase
materially the amount of expenses permitted pursuant to
Section 1 hereof without approval by a vote of at least a
majority of the outstanding Investment Class shares, and all
material amendments of this Plan (including any amendment to
add a Portfolio to Appendix A) shall be approved in the
manner prescribed in Section 2(i).
Section 7. As used in this Plan, (a) the term
"Independent Directors" shall mean those Directors of the
Fund who are not interested persons of the Fund, and have no
direct or indirect financial interest in the operation of
this Plan or any agreements related to it, and (b) the terms
"assignment" and "interested person" shall have the
respective meanings specified in the Act and the rules and
regulations thereunder, and the term "majority of the
outstanding Investment Class shares" shall mean the lesser
of the 67% or the 50% voting requirements specified in
clauses (A) and (B), respectively, of the third sentence of
Section 2(a)(42) of the Act, all subject to such exemptions
as may be granted by the Securities and Exchange Commission.
APPENDIX A
Large Company Growth Portfolio
Large Company Value Portfolio
Small Company Growth Portfolio
Small Company Value Portfolio
WILSHIRE TARGET FUNDS, INC.
Investment Class Shares
Shareholder Services Plan
Under Rule 12b-1
This Plan (the "Plan") constitutes the Shareholder
Services Plan relating to the Investment Class shares of
each of the Portfolios of Wilshire Target Funds, Inc. (the
"Fund") identified in Appendix A hereto. Appendix A may be
amended from time to time as provided herein.
Section 1. The Fund will reimburse the distributor of
the Investment Class shares of each Portfolio (the
"Distributor"), for its shareholder services expenses (the
"Shareholder Services Fee") at an annual rate of up to 0.25
of 1% of the average daily net assets of such Portfolio
attributable to its Investment Class shares. The
Shareholder Services Fee shall be accrued daily and paid
monthly or at such other intervals as the Directors shall
determine. The Distributor may be reimbursed for payments
to securities dealers or other organizations as service fees
pursuant to agreements with such organizations for providing
personal services to investors in Investment Class shares
and/or the maintenance of shareholder accounts. It is
intended that payments under this Plan shall qualify as
"service fees" as defined in Section 26 of the Rules of Fair
Practice of the National Association of Securities Dealers,
Inc. (or any successor provision) as in effect from time to
time (the "NASD Rule").
Section 2. This Plan shall not take effect until it
has been approved (i) by votes of the majority of both (a)
the Directors of the Fund, and (b) the Independent Directors
of the Fund, in each case cast in person at a meeting called
for the purpose of voting on this Plan, and (ii) and by vote
of a majority of the outstanding Investment Class shares,
and shall in no event take effect before May 31, 1996. This
Plan shall continue in effect for a period of more than one
year after May 31, 1996 only so long as such continuance is
specifically approved at least annually by votes of the
majority (or whatever other percentage may, from time to
time, be required by Section 12(b) of the Investment Company
Act of 1940 (the "Act") or the rules and regulations
thereunder) of both (a) the Directors of the Fund, and (b)
the Independent Directors of the Fund, cast in person at a
meeting called for the purpose of voting on this Plan or
such agreement.
Section 3. Any person authorized to direct the
disposition of monies paid or payable by the Fund pursuant
to this Plan or any related agreement shall provide to the
Directors of the Fund, and the Directors shall review, at
least quarterly, a written report of the amounts so expended
and the purposes for which such expenditures were made.
Section 4. This Plan may be terminated at any time by
vote of a majority of the Independent Directors, or by vote
of a majority of the outstanding Investment Class shares.
Section 5. All agreements with any person relating to
implementation of this Plan shall be in writing, and any
agreement related to this Plan shall provide:
A. That such agreement may be terminated at any time,
without payment of any penalty, by vote of a majority of the
Independent Directors or by vote of a majority of the
outstanding Investment Class shares, on not more than 60
days' written notice to any other party to the agreement;
and
B. That such agreement shall terminate automatically in
the event of its assignment.
Section 6. This Plan may not be amended to increase
materially the amount of expenses permitted pursuant to
Section 1 hereof without approval by a vote of at least a
majority of the outstanding Investment Class shares, and all
material amendments of this Plan (including any amendment to
add a Portfolio to Appendix A) shall be approved in the
manner prescribed in Section 2(i).
Section 7. As used in this Plan, (a) the term
"Independent Directors" shall mean those Directors of the
Fund who are not interested persons of the Fund, and have no
direct or indirect financial interest in the operation of
this Plan or any agreements related to it, and (b) the terms
"assignment" and "interested person" shall have the
respective meanings specified in the Act and the rules and
regulations thereunder, and the term "majority of the
outstanding Investment Class shares" shall mean the lesser
of the 67% or the 50% voting requirements specified in
clauses (A) and (B), respectively, of the third sentence of
Section 2(a)(42) of the Act, all subject to such exemptions
as may be granted by the Securities and Exchange Commission.
APPENDIX A
Large Company Growth Portfolio
Large Company Value Portfolio
Small Company Growth Portfolio
Small Company Value Portfolio
EXHIBIT (15)(b)
WILSHIRE TARGET FUNDS, INC.
INVESTMENT CLASS SHARES
AMENDED AND RESTATED
SERVICE AND DISTRIBUTION PLAN UNDER RULE 12b-1
Wilshire Target Funds, Inc. (the "Fund") is an
open-end management investment company registered as such
under the Investment Company Act of 1940 (the "Act"). This
Plan as amended and restated as of June 3, 1997 (the "Plan")
relates to the Investment Class Shares ("Investment Class
Shares") of each of the portfolios of the Fund identified in
Appendix A hereto (each, a "Portfolio"). Appendix A may be
amended from time to time as provided herein.
Section 1. The Fund will reimburse the
Distributor for its shareholder service and distribution
payments (the "Payments") in connection with the service and
distribution of shares of the Fund payments at an annual
rate of up to 0.25% of 1% of the average daily net assets of
such Portfolio attributable to its Investment Class Shares.
Such Payments shall be accrued daily and paid monthly or at
such other intervals as the Board shall determine, subject
to any applicable restriction imposed by the rules of the
National Association of Securities Dealers, Inc. ("NASD").
Payments hereunder shall be limited to the assets of the
Investment Class Shares of the Portfolios.
Section 2. Payments may be made by the Fund
under this Plan for the purpose of financing or assisting in
the financing of any activity which is primarily intended to
result in the sale of Investment Class Shares of the Fund
and for servicing accounts of holders of Investment Class
Shares. The scope of the foregoing shall be interpreted by
the Board, whose decision shall be conclusive except to the
extent it contravenes established legal authority. Without
in any way limiting the discretion of the Board, the
following activities are hereby declared to be primarily
intended to result in the sale of Investment Class Shares of
the Fund: advertising or promoting the Fund or the Fund's
investment advisor's mutual fund activities; compensating
underwriters, dealers, brokers, banks and other selling
entities and sales and marketing personnel of any of them
for sales of Investment Class Shares of the Fund, whether in
a lump sum or on a continuous, periodic, contingent,
deferred or other basis; compensating underwriters, dealers,
brokers, banks and other servicing entities and servicing
personnel (including the Fund's investment adviser and its
personnel, and its transfer agent and its personnel) or any
of them for providing services to shareholders of the Fund
relating to their investment in the Fund, including
assistance in connection with inquiries relating to
shareholder accounts; the production and dissemination of
prospectuses (including statements of additional
information) of the Fund and the preparation, production and
dissemination of sales, marketing and shareholder servicing
materials; and the ordinary or capital expenses, such as
equipment, rent, fixtures, salaries, bonuses, reporting and
recordkeeping and third party consultancy or similar
expenses relating to any activity for which Payment is
authorized by the Board.
Section 3. Each agreement relating to the
implementation of the Plan must contain the provisions
required by Rule 12b-1 under the Act and must be approved by
a majority of the Board ("Board Approval") and by a majority
of the Directors ("Disinterested Director Approval") who are
not interested persons of the Fund and have no direct or
indirect financial interest in the operation of the Plan or
any such agreement, by vote cast in person at a meeting
called for the purposes of voting on such agreement. All
determinations or authorizations of the Board hereunder
shall be made by Board Approval and Disinterested Director
Approval.
Section 4. The officers, investment adviser or
Distributor of the Fund, as appropriate, shall provide to
the Board and the Board shall review, at least quarterly, a
written report of the amounts expended pursuant to this Plan
and the purposes for which such Payments were made.
Section 5. To the extent any activity is
covered by Section 2 and is also an activity which the Fund
may pay for on behalf of a Portfolio without regard to the
existence or terms and conditions of a plan of distribution
under Rule 12b-1 of the Act, this Plan shall not be
construed to prevent or restrict the Fund from paying such
amounts outside of this Plan and without limitation hereby
and without such payments being included in calculation of
Payments subject to the limitation set forth in Section 1.
Section 6. This Plan has been approved by (i)
Board Approval and Disinterested Director Approval and (ii)
a vote of at least a majority of the outstanding Investment
Class Shares of the Fund. This Plan may not be amended in
any material respect (including any amendment to add a
Portfolio to Appendix A) without Board Approval and
Disinterested Director Approval and may not be amended to
increase materially the amount to be spent for distribution
hereunder without such approvals and further approval by a
vote of at least a majority of the outstanding Investment
Class Shares of the Fund. This Plan may continue in effect
for longer than one year after its approval by the
shareholders of the Fund only as long as such continuance is
specifically approved at least annually by Board Approval
and by Disinterested Director Approval, cast in person at a
meeting called for the purpose of voting on this Plan.
Section 7. This Plan may be terminated at any
time by a vote of the Directors who are not interested
persons of the Fund and have no direct or indirect financial
interest in the operation of the Plan or any agreement
related to the implementation of the Plan, cast in person at
a meeting called for the purposes of voting on such
termination, or by a vote of at least a majority of the
outstanding Investment Class Shares of the Fund.
Section 8. While this Plan is in effect, the
selection and nomination of Directors who are not interested
persons of the Fund shall be committed to the discretion of
the Directors who are not such interested persons.
Section 9. As used in this Plan, the terms "in-
terested person" and "related agreement" shall have the
meanings ascribed to them in the Act and the rules adopted
by the Securities and Exchange Commission ("SEC") thereunder
and the term "vote of a majority of the outstanding
Investment Class Shares" of the Fund shall mean the lesser
of the 67% or the 50% voting requirements specified in
clauses (A) and (B), respectively, of the third sentence of
Section 2(a)(42) of the Act, all subject to such exemptions
as may be granted by the SEC.
Adopted effective July 15, 1996, as amended by the Board of
Directors on June 3, 1997
APPENDIX A
Large Company Growth Portfolio
Large Company Value Portfolio
Small Company Growth Portfolio
Small Company Value Portfolio
EXHIBIT (18)(a)
WILSHIRE TARGET FUNDS, INC.
Plan pursuant to Rule 18f-3(d) under the Investment Company
Act of 1940
Effective May 31, 1996
WHEREAS, the Board of Directors of the Wilshire Target
Funds, Inc. (the "Fund") have considered the following
multi-class plan (the "Plan") under which the Fund may offer
multiple classes of shares of its now existing and hereafter
created series pursuant to Rule 18f-3 under the Investment
Company Act of 1940 (the "1940 Act"); and
WHEREAS, a majority of the Directors of the Fund and a
majority of the Directors who are not interested persons of
the Fund have found the Plan, as proposed, to be in the best
interests of each class of the Fund individually and the
Fund as a whole;
NOW, THEREFORE, the Fund hereby approves and adopts
the following Plan pursuant to Rule 18f-3(d) of the 1940
Act.
The Plan
Each now existing and hereafter created series
("Portfolio") of the Fund may from time to time issue one or
more of the following classes of shares: Investment Class
shares and Institutional Class shares1. Each class is
subject to such investment minimums and other conditions of
eligibility as are set forth in the Fund's prospectus as
from time to time in effect with respect to such class (the
"Prospectus"). The differences in expenses among these
classes of shares, and the exchange features of each class
of shares, are set forth below in this Plan, which is
subject to change, to the extent permitted by law and by the
Articles of Incorporation and By-laws of the Fund, by action
of the Board of Directors of the Fund.
1 Prior to May 31, 1996, each Portfolio of the Fund has
issued, and may issue, shares of a single class identified
as shares of Common Stock, $.001 par value per share. The
Board of Directors has authorized the classification of all
shares of each Portfolio issued and outstanding at the close
of business on May 31, 1996 as "Investment Class" shares of
the Common Stock, $.001 par value per share, of such
Portfolio, and has authorized the offer, sale, and issuance
after that date of additional Investment Class shares and of
"Institutional Class" shares of the Common Stock, $.001 par
value per share, of each such Portfolio.
Initial Sales Charge
Investment Class and Institutional Class shares of the
Portfolios are offered at their per share net asset value,
without an initial sales charge.
Redemption Fee
No redemption fee will be imposed upon redemptions of
shares of either Class.
Separate Arrangements and Expense Allocations of Each Class
Investment Class and Institutional Class shares will
pay the expenses associated with their different
distribution and shareholder servicing arrangements. The
Investment Class will reimburse its distributor for payments
to securities dealers or other organizations as service fees
pursuant to agreements with such organizations for the
provision of personal services rendered to shareholders of
that class and the maintenance of shareholder accounts
("Shareholder Services Fees"). Shareholder Services Fees
are paid pursuant to a plan adopted for the Investment Class
pursuant to Rule 12b-1 under the 1940 Act (the "12b-1
Plan"). Shares of the Investment Class of a Portfolio pay,
pursuant to the 12b-1 Plan, a Shareholder Services Fee of up
to 0.25% per annum of the average daily net assets of such
Portfolio attributable to such class, as described in the
Prospectus for that class. The Institutional Class has not
adopted a 12b-1 Plan.
Each class may, at the Directors' discretion, also pay
a different share of other expenses, not including advisory
or custodial fees or other expenses related to the
management of the Portfolios assets, if these expenses are
actually incurred in a different amount by that class, or if
the class receives services of a different kind or to a
different degree than other classes. All other expenses
will be allocated to each class on the basis of the net
asset value of that class in relation to the net asset value
of the particular Portfolio. However, any Portfolio which
may hereafter be established to operate as a money market
fund in reliance on Rule 2a-7 under the 1940 Act and which
will make daily distributions of its net investment income,
may allocate such other expenses to each share regardless of
class, or based on relative net assets (i.e., settled
shares), as permitted by Rule 18f-3(c)(2) under the 1940
Act.
Exchange and Conversion Features
Exchange Features
A shareholder may exchange shares of any class of a
Portfolio for shares of the same class of any other
Portfolio in an account with identical registration on the
basis of their respective net asset values.
Conversion Features
Shares of one class do not convert into shares of
another class.
Dividends/Distributions
Each Portfolio pays out as dividends substantially all
of its net investment income (which comes from dividends and
interest it receives from its investments) and net realized
short-term capital gains.
All dividends and/or distributions will be paid, at
the election of the shareholder, either in the form of
additional shares of the class of shares of the Portfolio to
which the dividends and/or distributions relate or in cash.
Dividends paid with respect to each class of a Portfolio
are calculated in the same manner and at the same time as
dividends paid with respect to each other class of that
Portfolio.
Voting Rights
Each share entitles the shareholder of record to one
vote. Each Portfolio will vote separately on matters which
require a shareholder vote and which relate solely to that
Portfolio. In addition, each class of shares of a Portfolio
shall have exclusive voting rights on any matter submitted
to shareholders that relates solely to that class, and shall
have separate voting rights on any matter submitted to
shareholders in which the interests of one class differ from
the interests of any other class. However, all Portfolio
shareholders will have equal voting rights on matters that
affect all Portfolio shareholders equally. Under the
current terms of this Plan and of the 12b-1 Plan, the
Portfolios' Investment Class will vote separately only with
respect to their 12b-1 Plan.
WILSHIRE TARGET FUNDS, INC.
/s/Thomas D. Stevens
President
May 31, 1996
EXHIBIT (18)(b)
WILSHIRE TARGET FUNDS, INC.
Plan pursuant to Rule 18f-3(d) under the Investment Company
Act of 1940
Effective May 31, 1996, as amended June 3, 1997
WHEREAS, the Board of Directors of the Wilshire Target
Funds, Inc. (the "Fund") have considered the following
multi-class plan (the "Plan") under which the Fund may offer
multiple classes of shares of its now existing and hereafter
created series pursuant to Rule 18f-3 under the Investment
Company Act of 1940 (the "1940 Act"); and
WHEREAS, a majority of the Directors of the Fund and a
majority of the Directors who are not interested persons of
the Fund have found the Plan, as proposed, to be in the best
interests of each class of the Fund individually and the
Fund as a whole;
NOW, THEREFORE, the Fund hereby approves and adopts
the following Plan pursuant to Rule 18f-3(d) of the 1940
Act.
The Plan
Each now existing and hereafter created series
("Portfolio") of the Fund may from time to time issue one or
more of the following classes of shares: Investment Class
shares and Institutional Class shares. Each class is
subject to such investment minimums and other conditions of
eligibility as are set forth in the Fund's prospectus as
from time to time in effect with respect to such class (the
"Prospectus"). The differences in expenses among these
classes of shares, and the exchange features of each class
of shares, are set forth below in this Plan, which is
subject to change, to the extent permitted by law and by the
Articles of Incorporation and By-laws of the Fund, by action
of the Board of Directors of the Fund.
Initial Sales Charge
Investment Class and Institutional Class shares of the
Portfolios are offered at their per share net asset value,
without an initial sales charge.
Redemption Fee
No redemption fee will be imposed upon redemptions of
shares of either Class.
Separate Arrangements and Expense Allocations of Each Class
Investment Class and Institutional Class shares will
pay the expenses associated with their different
distribution and shareholder servicing arrangements. The
Investment Class will reimburse its distributor for payments
for the purpose of financing or assisting in the financing
of any activity which is primarily intended to result in the
sale of Investment Class shares of the Fund and for
servicing accounts of holders of Investment Class shares
("Service and Distribution Fees"). Service and Distribution
Fees are paid pursuant to a plan adopted for the Investment
Class pursuant to Rule 12b-1 under the 1940 Act (the "12b-1
Plan"). Shares of the Investment Class of a Portfolio pay,
pursuant to the 12b-1 Plan, a Service and Distribution Fee
of up to 0.25% per annum of the average daily net assets of
such Portfolio attributable to such class, as described in
the Prospectus for that class. The Institutional Class has
not adopted a 12b-1 Plan.
Each class may, at the Directors' discretion, also pay
a different share of other expenses, not including advisory
or custodial fees or other expenses related to the
management of the Portfolio's assets, if these expenses are
actually incurred in a different amount by that class, or if
the class receives services of a different kind or to a
different degree than other classes. All other expenses
will be allocated to each class on the basis of the net
asset value of that class in relation to the net asset value
of the particular Portfolio. However, any Portfolio which
may hereafter be established to operate as a money market
fund in reliance on Rule 2a-7 under the 1940 Act and which
will make daily distributions of its net investment income,
may allocate such other expenses to each share regardless of
class, or based on relative net assets (i.e., settled
shares), as permitted by Rule 18f-3(c)(2) under the 1940
Act.
Exchange and Conversion Features
Exchange Features
A shareholder may exchange shares of any class of a
Portfolio for shares of the same class of any other
Portfolio in an account with identical registration on the
basis of their respective net asset values.
Conversion Features
Shares of one class do not convert into shares of
another class.
Dividends/Distributions
Each Portfolio pays out as dividends substantially all
of its net investment income (which comes from dividends and
interest it receives from its investments) and net realized
short-term capital gains.
All dividends and/or distributions will be paid, at
the election of the shareholder, either in the form of
additional shares of the class of shares of the Portfolio to
which the dividends and/or distributions relate or in cash.
Dividends paid with respect to each class of a Portfolio are
calculated in the same manner and at the same time as
dividends paid with respect to each other class of that
Portfolio.
Voting Rights
Each share entitles the shareholder of record to one
vote. Each Portfolio will vote separately on matters which
require a shareholder vote and which relate solely to that
Portfolio. In addition, each class of shares of a Portfolio
shall have exclusive voting rights on any matter submitted
to shareholders that relates solely to that class, and shall
have separate voting rights on any matter submitted to
shareholders in which the interests of one class differ from
the interests of any other class. However, all Portfolio
shareholders will have equal voting rights on matters that
affect all Portfolio shareholders equally. Under the
current terms of this Plan and of the 12b-1 Plan, the
Portfolios' Investment Class will vote separately only with
respect to their 12b-1 Plan.
WILSHIRE TARGET FUNDS, INC.
/s/ Thomas D. Stevens
Thomas D. Stevens
President
May 31, 1996, as amended June 3, 1997
Prior to May 31, 1996, each Portfolio of the Fund has
issued, and may issue, shares of a single class identified as
shares of Common Stock, $.001 par value per share. The Board of
Directors has authorized the classification of all shares of each
Portfolio issued and outstanding at the close of business on
May 13, 1996 as "Investment Class" shares of the Common Stock,
$.001 par value per share, of such Portfolio, and has authorized
the offer, sale and issuance after that date of additional
Investment Class shares and of "Institutional Class" shares of
the Common Stock, $.001 par value per share, of each such
Portfolio.
