PROSPECTUS W I L S H I R E December 8, 1998
----------------------------------
TARGET FUNDS, INC.
----------------------------------
(Investment Class Shares)
(http://www.wilfunds.com)
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Wilshire Target Funds, Inc. (the "Company") is an open-end investment company,
known as a mutual fund. This prospectus offers Investment Class shares in each
of four separate diversified portfolios (each, a "Portfolio" and collectively
the "Portfolios"): Large Company Growth Portfolio, Large Company Value
Portfolio, Small Company Growth Portfolio and Small Company Value Portfolio. The
goal of each Portfolio is to provide the investment results of a portfolio of
publicly-traded common stocks in one of four sub-categories of companies from
the Wilshire 5000 Index which meet certain criteria established by the Company's
investment adviser. See "Description of the Portfolios." No Portfolio is an
index fund.
Wilshire Associates Incorporated ("Wilshire") serves as the Company's
investment adviser. First Data Investor Services Group, Inc. ("Investor Services
Group") serves as the Company's administrator and transfer agent. First Data
Distributors, Inc. ("FDDI") serves as the Company's distributor.
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This prospectus sets forth concisely information about the Company that you
should know before investing. It should be read and retained for future
reference.
The Statement of Additional Information dated December 8, 1998, which may be
further revised from time to time, provides a further discussion of certain
topics 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 Company
at P.O. Box 60488, King of Prussia, Pennsylvania 19406-0488, 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, information incorporated
by reference to this Prospectus and the Statement of Additional Information and
other information regarding registrants that file electronically with the SEC.
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Shares of the Company 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.
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TABLE OF CONTENTS PAGE
Fee Table...................................................... 2
Condensed Financial Information................................ 3
Description of the Portfolios.................................. 7
Investment Considerations and Risks............................ 8
Management of the Portfolios................................... 10
How to Buy Portfolio Shares.................................... 11
Shareholder Services........................................... 13
How to Redeem Portfolio Shares................................. 14
Service and Distribution Plan.................................. 16
Dividends, Distributions and Taxes............................. 16
Performance Information........................................ 18
General Information............................................ 18
<PAGE>
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
FEE TABLE
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The purpose of the following table is to assist you in understanding the costs
and expenses that the Company and investors will bear, the payment of which will
reduce investors' annual return. The information in the foregoing table is based
on expenses incurred during the fiscal year ended August 31, 1998 for the
Portfolios, except that the management fees for the Large Company Growth and
Large Company Value Portfolios were restated to reflect the elimination of a
waiver of management fees. See "Management of the Portfolios -- Investment
Adviser."
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<TABLE>
<CAPTION>
<S> <C> <C>
<C> <C> <C>
Large
Large Small Small
Company
Company Company Company
Growth
Value Growth Value
Portfolio
Portfolio Portfolio Portfolio
Shareholder Transaction Expenses:
Maximum sales load imposed on purchases or
reinvestments of dividends............................... None
None None None
Contingent deferred sales load upon redemption
of investments........................................... None
None None None
Redemption Fees.......................................... None
None None None
Exchange Fees............................................ None
None None None
Annual Fund Operating Expenses:
(as a percentage of average daily net assets)
Management Fees.......................................... 0.25%
0.25% 0.10%* 0.10%*
12b-1 Fee **............................................. 0.11%
0.10% 0.07% 0.09%
Other Expenses........................................... 0.35%
0.48% 1.07% 0.64%
----- -
- ---- ----- -----
Total Fund Operating Expenses............................ 0.71%
0.83% 1.26%* 0.83%*
<FN>
* Reflects voluntary waivers which will remain in effect until notice to the
Board of Directors by Wilshire. See "Management of the Portfolios --
Investment Adviser." Absent such fee waivers, the ratio of advisory fees to
average net assets for each Portfolio would be 0.25% and the ratio of total
fund operating expenses to average net assets would be 1.41% for the Small
Company Growth Portfolio and .98% for the Small Company Value Portfolio. **
Each Portfolio may pay annually up to 0.25% of its average daily net assets
as reimbursement for expenses incurred under its Rule 12b-1 Plan.
</FN>
</TABLE>
Example: You would pay the following expenses on a $1,000 investment,
assuming (1) 5% annual return and (2) redemption at the end of each time period:
1 Year $ 7 $ 8 $ 13 $ 8
3 Years $ 23 $ 26 $ 40 $ 26
5 Years $ 40 $ 46 $ 69 $ 46
10 Years $ 88 $ 103 $ 152 $103
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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%.
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You can purchase shares without charge directly from FDDI; you may be
charged a nominal fee if you effect transactions in shares through a securities
dealer, bank or other financial institution. See "Management of the Portfolios"
and "Service and Distribution Plan."
<PAGE>
CONDENSED FINANCIAL INFORMATION
The information in the following table has been audited by
PricewaterhouseCoopers LLP, the Company's independent accountants, whose report
is incorporated by reference in the Statement of Additional Information. Further
financial data and related notes are included in the Statement of Additional
Information, which is available upon request.
FINANCIAL HIGHLIGHTS
Contained below is per share operating performance data for an Investment Class
share outstanding throughout the period, total investment return, ratios to
average net assets and other supplemental data for each Portfolio for each
period indicated. This information has been derived from each Portfolio's
financial statements.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
<C>
Period
Large Company Growth Portfolio
Ended
Year Ended August 31,
August 31,
1998 1997 1996 1995 1994
1993*
---- ---- ---- ---- ----
- -----
Net asset value,
beginning of period....... $23.92 $19.35 $16.34 $13.31 12.74
$12.50
------ ------ ------ ------ ------
- ------
Income from investment
operations:
Net investment income...... 0.04 0.04*** 0.07 0.10 0.15
0.21
Net realized and
unrealized gain
on investments....... 2.71 7.29 3.45 3.03 0.65
0.10
---- ---- ---- ---- ----
- ----
Total from investment
operations........... 2.75 7.33 3.52 3.13 0.80
0.31
---- ---- ---- ---- ----
- ----
Less Distributions:
Dividends from net
investment income.... (0.06) (0.03) (0.12) (0.10) (0.23)
(0.07)
Distributions from
capital gains........ (0.52) (2.73) (0.39) -- --
- --
------ ------ -- --
- --
Total distributions (0.58) (2.76) (0.51) (0.10) (0.23)
(0.07)
------ ------ ------ ------ ------
- ------
Net asset value, end of
period.................... $26.09 $23.92 $19.35 $16.34
$13.31 $12.74
====== ====== ====== ====== ======
======
Total return (a)........ 11.61% 40.91% 21.90% 23.67% 6.34%
2.46%**
====== ====== ====== ====== =====
=====
Ratios to average net assets/
supplemental data:
Net assets, end of period
(in 000's)................. $81,569 $73,480 $19,035 $21,348 $8,424
$8,061
Operating expenses
including reimburse-
ment/waiver/custody
earnings credit...... 0.71% 0.81% 0.93% 0.84% 0.68%
Operating expenses
excluding custody
earnings credit...... 0.73% 0.91% -- -- --
- --
Operating expenses
excluding reimburse-
ment/waiver/custody
earnings credit...... 0.77% 1.09% 0.96% 1.05% 1.39%
1.14%**
Net investment income
including reimburse-
ment/waiver/custody
earnings credit...... 0.16% 0.20% 0.39% 0.94% 1.18%
1.66%**
Portfolio turnover rate 57% 43% 44% 30% 22%
12%**
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<FN>
* Large Company Growth Portfolio Investment Class Shares commenced
operations on September 30, 1992.
** Non-annualized
*** The selected per share data was calculated using the weighted average
shares outstanding method for the year. (a) Total return represents aggregate
total return for the period indicated.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
<C>
Period
Large Company Value Portfolio
Ended
Year Ended August 31,
August 31,
1998 1997 1996 1995 1994
1993*
---- ---- ---- ---- ----
- -----
Net asset value,
beginning of period....... $20.49 $17.80 $16.02 $13.99 $15.18
$12.50
------ ------ ------ ------ ------
- ------
Income from investment
operations:
Net investment income...... 0.38 0.47*** 0.85 0.34 0.36
0.54
Net realized and
unrealized gain/
(loss) on investments 0.01 5.13 1.91 2.19
(0.90) 2.30
---- ---- ---- ----
- ------ ----
Total from investment
operations........... 0.39 5.60 2.76 2.53 (0.54)
2.84
---- ---- ---- ---- ------
- ---
Less Distributions:
Dividends from net
investment income.... (0.38) (0.60) (0.47) (0.40) (0.36)
(0.16)
Distributions from
capital gains........ (1.21) (2.31) (0.51) (0.10) (0.29)
- --
------ ------ ------ ------
- -----
Total distributions (1.59) (2.91) (0.98) (0.50) (0.65)
(0.16)
------ ------ ------ ------
- ------
Net asset value, end of
period.................... $19.29 $20.49 $17.80 $16.02
$13.99 $15.18
====== ====== ====== ====== ======
======
Total return (a)........ 1.34% 34.27% 17.52% 18.97%
(3.61)% 22.93%**
===== ====== ====== ======
======= ======
Ratios to average net assets/
supplemental data:
Net assets, end of period
(in 000's)................. $13,055 $13,989 $17,960 $22,926 $12,158
$8,116
Operating expenses
including reimburse-
ment/waiver/custody
earnings credit...... 0.83% 0.91% 0.89% 0.81% 0.58%
- --**
Operating expenses
excluding custody
earnings credit...... 0.86% 0.96% -- -- --
- --
Operating expenses
excluding reimburse-
ment/waiver/custody
earnings credit...... 0.91% 1.18% 0.92% 1.02% 1.18%
1.32%**
Net investment income
including reimburse-
ment/waiver/custody
earnings credit...... 1.88% 2.51% 3.12% 3.77% 4.02%
4.27%**
Portfolio turnover rate 56% 65% 56% 58% 47%
22%**
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<FN>
* Large Company Value Portfolio Investment Class Shares commenced
operations on September 30, 1992.
** Non-annualized
*** The selected per share data was calculated using the weighted average
shares outstanding method for the year. (a) Total return represents aggregate
total return for the period indicated.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
<C>
Period
Small Company Growth Portfolio
Ended
Year Ended August 31,
August 31,
1998 1997 1996 1995 1994
1993*
---- ---- ---- ---- ----
- -----
Net asset value, beginning
of period.............. $16.61 $18.56 $18.55 $15.39 $16.03
$12.50
------ ------ ------ ------ ------ --
- ----
Income from investment
operations:
Net investment income/
(loss)............... (0.18) (0.17)*** (0.19) (0.07) (0.04)
0.08
Net realized and
unrealized gain/(loss)
on investments....... (3.98) 2.38 3.06 3.54 0.90
3.48
------ ---- ---- ---- ----
- ----
Total from investment
operations........... (4.16) 2.21 2.87 3.47 0.86
3.56
------ ---- ---- ---- ----
- ----
Less Distributions:
Dividends from net
investment income.... -- -- -- -- --
(0.03)
Distributions in excess
of net investment income -- -- -- --
(0.07) --
Distributions from
capital gains........ (0.67) (4.16) (2.86) (0.31) (1.43)
- --
------ ------ ------ ------ ------
- --
Total distributions (0.67) (4.16) (2.86) (0.31) (1.50)
(0.03)
------ ------ ------ ------ ------
- ------
Net asset value, end of
period................. $11.78 $16.61 $18.56 $18.55 $15.39
$16.03
====== ====== ====== ====== ======
======
Total return (a)........ (26.02)% 15.16% 17.50% 23.04% 5.20%
28.50%**
======== ====== ====== ====== =====
======
Ratios to average net assets/
supplemental data:
Net assets, end of period
(in 000's)........... $9,659 $14,471 $18,049 $21,882 $11,188
$7,527
Operating expenses
including
reimbursement/waiver/
custody earnings credit 1.26% 1.22% 1.01% 0.95%
0.74% --
Operating expenses
excluding custody
earnings credit...... 1.28% 1.24% -- -- --
- --
Operating expenses
excluding
reimbursement/waiver/
custody earnings credit 1.43% 1.45% 1.05% 1.16%
1.47% 1.40%**
Net investment income/
(loss) including
reimbursement/
waiver/custody
earnings credit...... (1.05)% (1.05)% (0.78)% (0.54)% (0.40)%
0.53%**
Portfolio turnover rate.... 74% 97% 87% 111% 46%
55%**
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- ----------------------------------------------------
<FN>
* Small Company Growth Portfolio Investment Class Shares commenced
operations on September 30, 1992.
** Non-annualized
*** The selected per share data was calculated using the weighted average
shares outstanding method for the year. (a) Total return represents aggregate
total return for the period indicated.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
<C>
Period
Small Company Value Portfolio
Ended
Year Ended August 31,
August 31,
1998 1997 1996 1995 1994
1993*
---- ---- ---- ---- ----
- -----
Net asset value, beginning
of period.............. $17.25 $15.92 $15.41 $14.32 $14.81
$12.50
------ ------ ------ ------ ------
- ------
Income from investment
operations:
Net investment income...... 0.36 0.40*** 0.56 0.55 0.45
0.35
Net realized and
unrealized gain/(loss)
on investments....... (1.50) 4.27 0.95 1.06 (0.45)
2.10
------ ---- ---- ---- -----
- ----
Total from investment
operations........... (1.14) 4.67 1.51 1.61 0.00
2.45
------ ---- ---- ---- ----
- ----
Less Distributions:
Dividends from net
investment income.... (0.37) (0.75) (0.56) (0.45) (0.33)
(0.14)
Distributions from
capital gains........ (1.97) (2.59) (0.44) (0.07) (0.16)
- --
------ ------ ------ ------ ------
- --
Total distributions (2.34) (3.34) (1.00) (0.52) (0.49)
(0.14)
------ ------ ------ ------ ------
- ------
Net asset value, end of
period................. $13.77 $17.25 $15.92 $15.41 $14.32
$14.81
====== ====== ====== ====== ======
======
Total return (a)........ (8.79)% 33.73% 10.01% 11.84% (0.01)%
(19.72)%**
======= ====== ====== ====== ======
=======
Ratios to average net assets/
supplemental data:
Net assets, end of period
(in 000's)........... $17,602 $20,299 $27,329 $25,978 $23,438
$15,155
Operating expenses
including
reimbursement/waiver/
custody earnings credit 0.83% 0.86% 0.88% 0.69%
0.50% --
Operating expenses
excluding custody
earnings credit...... 0.85% 0.90% -- -- --
- --
Operating expenses
excluding
reimbursement/waiver/
custody earnings credit 1.00% 1.15% 0.92% 0.91%
1.06%1.32%**
Net investment income/
(loss) including
reimbursement/
waiver/custody
earnings credit...... 1.61% 2.58% 3.13% 4.12% 3.64%
3.65%**
Portfolio turnover rate.... 74% 105% 81% 86% 49%
27%**
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- ----------------------------------------------------
<FN>
* Small Company Value Portfolio Investment Class Shares commenced
operations on September 30, 1992.
** Non-annualized
*** The selected per share data was calculated using the weighted average
shares outstanding method for the year. (a) Total return represents aggregate
total return for the period indicated.
</FN>
</TABLE>
<PAGE>
Further information about each Portfolio's performance is contained in the
Company's annual and semi-annual reports, which may be obtained without charge
by writing to the address or calling the number set forth on the cover page of
this Prospectus.
DESCRIPTION OF THE PORTFOLIOS
Investment Objective -- The goal of each Portfolio is to provide the investment
results of a portfolio of publicly-traded common stocks in one of four
sub-categories of companies from the Wilshire 5000 Index which meet certain
criteria established by Wilshire as described herein. Each Portfolio's
investment objective cannot be changed 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. There can be no
assurance that a Portfolio's investment objective will be achieved.
Investment Approach -- In June of each year, Wilshire identifies from the
Wilshire 5000 Index, an index consisting of all publicly-traded common stocks in
the United States, the stocks of the 2,500 companies with the largest market
capitalizations (ranging between $296 billion and $190 million on the date of
this prospectus). It then divides that universe of stocks, first, into those of
the 750 companies with the largest capitalizations (ranging between $296 billion
and $1.9 billion on the date of this prospectus), which constitute approximately
84% of the total market value of the stocks included in the Wilshire 5000 Index,
and, second, into those of the 1,750 next largest companies based on
capitalization (ranging between $1.9 billion and $190 million on the date of
this prospectus), which constitute approximately 12% of the total market value
of the stocks included in the Wilshire 5000 Index (the stocks of the remaining
companies constituted less than 5% of the total market value of the stocks
included in the Wilshire 5000 Index on the date of this prospectus). From these
large and small capitalization universes, Wilshire selects the stocks of those
companies it believes to possess the characteristics of growth stocks and of
value stocks, based on criteria discussed below. In this manner, Wilshire
identifies from the four potential universes of companies the stocks which it
may purchase for the Portfolios. Wilshire periodically reviews these selections
and updates each potential universe of companies. The number of securities
eligible for investment by a Portfolio at any time will vary, but is expected to
range between 150 to 500 stocks.
To determine whether a company's stock falls within the growth or value
classification, Wilshire analyzes each company based on fundamental factors such
as price to book value ratios, price to earnings ratios, earnings growth,
dividend payout ratios, return on equity, and the company's beta (a measure of
stock price volatility relative to the market generally). In general, Wilshire
believes that companies with relatively low price to book ratios, low price to
earnings ratios and higher than average dividend payments in relation to price
should be classified as value companies. Alternatively, companies which have
above average earnings or sales growth and retention of earnings and command
higher price to earnings ratios fit the more classic growth description.
By dividing companies into these four sub-categories, Wilshire attempts to offer
investors market exposure to these types of companies. As described under
"Investment Considerations and Risks" below, you should purchase a Portfolio's
shares only as a supplement to an overall investment program. To provide varying
degrees of market exposure to these types of securities, various combinations of
each Portfolio's shares might be purchased.
<PAGE>
Management Policies
Large Company Growth Portfolio invests substantially all of its assets in equity
securities of issuers within the universe of companies identified by Wilshire as
large capitalization, growth companies.
Large Company Value Portfolio invests substantially all of its assets in equity
securities of issuers within the universe of companies identified by Wilshire as
large capitalization, value companies.
Small Company Growth Portfolio invests substantially all of its assets in equity
securities of issuers within the universe of companies identified by Wilshire as
small capitalization, growth companies.
Small Company Value Portfolio invests substantially all of its assets in equity
securities of issuers within the universe of companies identified by Wilshire as
small capitalization, value companies.
Each Portfolio attempts to remain fully invested in equity securities of
companies which comprise its relative universe. When a Portfolio has cash
pending investment or needs to meet potential redemptions, it may invest in
money market instruments consisting of U.S. Government securities, certificates
of deposit, time deposits, bankers' acceptances, short-term investment grade
corporate bonds and other short-term debt instruments, and repurchase
agreements. Under normal circumstances, the Company anticipates that not more
than 5% of the value of a Portfolio's total assets will be invested in any one
category of such instruments, and that not more than 20% of the value of a
Portfolio's total assets will be invested in all money market instruments. No
Portfolio intends to invest in money market instruments or any other securities
for defensive purposes. See the Statement of Additional Information for a
description of these instruments. Each Portfolio may purchase stock index
futures in anticipation of taking a market position when, in Wilshire's opinion,
available cash balances do not permit an economically efficient trade in the
cash market. Each Portfolio may sell stock index futures to terminate existing
positions it may hold as a result of its purchase of stock index futures. To the
extent the Company, on behalf of a Portfolio, purchases or sells futures
contracts, the Company currently intends to use the New York Stock Exchange
Composite Index, Value Line Composite Index or Standard & Poor's 500 Composite
Stock Price Index. The performance of the futures should not be expected to
correlate identically with that of the particular index. 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 an overall
investment program and should invest only if you are willing to undertake the
risks involved. See "Investment Objective and Management Policies" in the
Statement of Additional Information for a further discussion of certain risks.
<PAGE>
Equity securities fluctuate in value, often based on factors unrelated to the
value of the issuer of the securities, 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. Moreover, the net asset value of one or more Portfolios
could be adversely affected by adverse changes, real or anticipated, in
companies that are generally characterized in the same manner as the companies
the securities of which are held by the relevant Portfolio. For example, if
large capitalization growth stocks fall out of favor with investors widely,
irrespective of fundamentals, the net asset value of the Large Company Growth
Portfolio should be expected to be adversely affected. Similar risks exist for
the other Portfolios.
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 a Portfolios' objectives will be met. See
"Investment Objective and Management Policies -- Management Policies" in the
Statement of Additional Information for a further discussion of certain risks.
Borrowing Money -- Each Portfolio is permitted to borrow money only for
temporary or emergency (not leveraging) purposes, in an amount up to 15% of the
value of its total assets (including the amount borrowed) valued at 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 a Portfolio's total
assets, the Portfolio will not purchase any additional securities.
Use of Derivatives -- Each Portfolio may invest, to a limited extent, in
derivatives ("Derivatives"). These are financial instruments which derive their
performance, at least in part, from the performance of an underlying asset,
index or interest rate. The Derivatives the Portfolios may use are currently
comprised of stock index futures. While Derivatives can be used effectively in
furtherance of a Portfolio's investment objective, under certain market
conditions, they can increase the volatility of the Portfolio's net asset value,
can decrease the liquidity of the Portfolio's investments and make more
difficult the accurate pricing of the Portfolio's shares. Although no Portfolio
will be a commodity pool, Derivatives subject a Portfolio to the rules of the
Commodity Futures Trading Commission which limit the extent to which a Portfolio
can invest in certain Derivatives. Each Portfolio may invest in stock index
futures contracts for hedging purposes without limit. However, no Portfolio may
invest in such contracts for other purposes if the sum of the amount of initial
margin deposits and the premiums paid for unexpired commodity options, other
than for bona fide hedging purposes, exceeds 5% of the liquidation value of the
Portfolio's assets, after taking into account unrealized profits and unrealized
losses on such contracts it has entered into; provided, however, that in the
case of an option that is in-the-money at the time of purchase, the in-the-money
amount may be excluded in calculating the 5% limitation. See "Investment
Objectives and Management Policies -- Management Policies -- Derivatives" in the
Statement of Additional Information.
Simultaneous Investments -- Investment decisions for each Portfolio are made
independently from those of other series of the Company, other investment
companies and other 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 approximately the
same time as the 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.
<PAGE>
39
Lending Portfolio Securities -- Each Portfolio may lend securities from its
portfolio to brokers, dealers and other financial institutions. 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 a Portfolio an opportunity to
earn interest on the amount of the loan and at the same time to earn income on
the loan collateral. Loans of portfolio securities may not exceed 33 1/3% of the
value of a 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 Company 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 and such Portfolio is delayed or prevented from recovering the
collateral or completing the transaction.
Foreign Securities -- Since the stocks of some foreign issuers are included in
the Wilshire 5000 Index, each Portfolio's investments may include securities of
such foreign issuers, which may subject such Portfolio to additional investment
risks that are different in some respects from those incurred by a fund which
invests only in securities of domestic issuers. Such risks include future
political and economic developments, the possible imposition of withholding
taxes on income payable on the securities, the possible establishment of
exchange controls or the adoption of other foreign governmental restrictions
which might adversely affect an investment in these securities, and the possible
seizure or nationalization of foreign assets.
Year 2000 -- The date related computer issues known as the "Year 2000 problem"
could have an adverse impact on the quality of services provided to the Company
and its shareholders. However, the Company understands that its key service
providers, including Wilshire, are taking steps to address the issue. In
addition, the Year 2000 problem may adversely affect the issuers in which a
Portfolio invests. However, because the objectives of the Portfolios are to
provide the investment results of a portfolio of publicly traded common stock in
one of four sub-categories of issuers from the Wilshire 5000 Index, Wilshire
does not perform fundamental analyses of the issuers in which the Portfolios
invests, and does not attempt to monitor the impact of the problem on individual
issuers.
MANAGEMENT OF THE PORTFOLIOS
Investment Adviser -- Wilshire, located at 1299 Ocean Avenue, Santa Monica,
California 90401-1085, was formed in 1972 and serves as the Company's investment
adviser. As of October 1, 1998, Wilshire managed approximately $7.4 billion in
assets. Under the terms of the Investment Advisory Agreement described below,
Wilshire, subject to the overall authority of the Company's Board of Directors
in accordance with Maryland law, manages the investment of the assets of each
Portfolio. The Portfolios' primary portfolio manager is Thomas D. Stevens, the
President and Chairman of the Board of Directors of the Company and a Senior
Vice President of Wilshire. He has been employed by Wilshire since 1980. The
Portfolios' other portfolio manager is identified in the Statement of Additional
Information. Wilshire also provides research services for the Company through a
professional staff of portfolio managers and securities analysts. Wilshire is
controlled by its President, Dennis Tito, who owns a majority of its outstanding
voting stock.
<PAGE>
Pursuant to the terms of an Investment Advisory Agreement with Wilshire dated
July 11, 1996 (the "Advisory Agreement"), the Company has agreed to pay Wilshire
a fee computed daily and paid monthly at the annual rate of .25 of 1% of the
value of each Portfolio's average daily net assets.
Wilshire has voluntarily undertaken to waive a portion of its fee otherwise
payable under the Advisory Agreement to .10 of 1% of the Small Company Growth
Portfolio's and Small Company Value Portfolio's average daily net assets. The
voluntary waiver may be terminated at any time by Wilshire by notice to the
Directors of the Company.
For the fiscal year ended August 31, 1998, the Company paid Wilshire an
investment advisory fee at the effective annual rates of .21%, .20%, .10% and
.10% of the value of the average daily net assets of the Large Company Growth
Portfolio, the Large Company Value Portfolio, the Small Company Growth Portfolio
and the Small Company Value Portfolio, respectively, in each case after giving
effect to an expense limitation set forth in the Advisory Agreement, which was
in effect from July 11, 1996 through October 11, 1997, and voluntary waivers by
Wilshire.
Administrator -- Investor Services Group, a subsidiary of First Data
Corporation, 4400 Computer Drive, Westborough, Massachusetts 01581, serves as
the Company's administrator pursuant to an Administration Agreement with the
Company. Under the terms of the Administration Agreement, Investor Services
Group generally assists in all aspects of the Company's operations, other than
providing investment advice, subject to the overall authority of the Company's
Board of Directors in accordance with Maryland law. Pursuant to the terms of the
Administration Agreement, the Company has agreed to pay Investor Services Group
a fee, computed daily and paid monthly, at the annual rate of .15 of 1% of the
value of the Company's monthly average net assets up to aggregate assets of $1
billion, .10 of 1% of the Company's monthly average net assets on the next $4
billion, and .08 of 1% the Company's monthly average net assets on the excess
net assets. In addition, the Company has agreed to pay Investor Services Group
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, is the custodian of the Company's investments. Investor Services Group
is also the Company's Transfer and Dividend Disbursing Agent (the "Transfer
Agent").
Distributor -- FDDI, 4400 Computer Drive, Westborough, Massachusetts 01581,
serves as the distributor of the Company's 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 Portfolios
or the Company, which would have the effect of lowering the overall expense
ratio of the Portfolios and increasing the return to investors at the time such
amounts are waived or assumed, as the case may be. The Company will not pay
Wilshire or Investor Services Group for any amounts which may be waived or
assumed. Each of 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 Company.
All expenses incurred in the operation of the Company are borne by the Company,
except to the extent specifically assumed by FDDI, Wilshire or Investor Services
Group. The expenses borne by the Company 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 Company'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 series or class of shares are charged against the
assets of that series or class. Other expenses of the Company are allocated
among 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 PORTFOLIO SHARES
Shares are sold without a sales charge. You may be charged a 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 Company reserves the right to
reject any purchase order.
The minimum initial investment in 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 Account Application. The Company 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 Company. The Company reserves
the right to vary further the initial and subsequent investment minimum
requirements at any time. For investors who purchase through a financial
intermediary and hold their shares through an omnibus account with that
financial intermediary, the minimum initial investment applies to the omnibus
account, and not to the investors individually.
You may purchase shares by check or wire. Checks should be made payable to
"Wilshire Target Funds, Inc." For subsequent investments, your Portfolio account
number should appear on the check. Payments which are mailed should be sent to
Wilshire Target Funds, Inc., P.O. Box 60488, King of Prussia, Pennsylvania
19406-0488, together with your investment slip or, when opening a new account,
your Investment Class shares Account Application, indicating the name of the
Portfolio. 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 Portfolio and the Portfolio's DDA number, 065-587, for purchase of shares
in your name. The wire must include your Portfolio 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 Portfolio shares is by wire, please call 1-888-200-6796 after
completing your wire payment to obtain your Portfolio account number. Please
include your Portfolio account number on the Account Application and promptly
mail the Account Application to the Portfolio, 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 Portfolio 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 Deposit and Trust Company
Fund Number ("160, 161, 162 or 163" for Large Company Growth Portfolio,
Large Company Value Portfolio, Small
Company Growth Portfolio, Small Company Value Portfolio, respectively)
Shareholder Account Number
Account of (Registered Shareholder)
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 (normally
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 of the Portfolios, 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 Portfolios' 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
Account Application for further information concerning this requirement.
Failure to furnish a certified TIN could subject you to a $50 penalty imposed
by the Internal Revenue Service (the "IRS").
SHAREHOLDER SERVICES
Exchanges -- You may purchase, in exchange for shares of a Portfolio, shares of
the same class of one of the other series offered by the Company or shares of
another class of the Portfolio or any other series, to the extent such shares
are offered for sale in your state of residence and you meet the eligibility
requirements (including minimum investment amounts) for the purchase of such
shares. If you want 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. The shares being exchanged must have a value of at least the
applicable minimum initial investment, if any, required for the Portfolio and
class into which the exchange is being made. The ability to issue exchange
instructions by telephone is given to all shareholders automatically, unless you
check the applicable "No" box on the Account Application, indicating that you
specifically refuse this privilege. You may establish the Telephone Exchange
Privilege 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 Portfolio 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
series into which the exchange is made: Telephone Exchange Privilege, Wire
Redemption Privilege, Telephone Redemption Privilege, and the dividend and
capital gain distribution option you have selected.
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 Company 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 Company 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 series is treated
for Federal income tax purposes as a sale of the Portfolio shares exchanged by
the shareholder and, therefore, you may realize a taxable gain or loss.
Money Market Fund -- You may exchange shares of a Wilshire Target Fund
Portfolio for shares of a money market fund. Please call 1-888-200-6796 to
obtain a prospectus and more information on how to exchange into the money
market fund.
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 you select. Shares are purchased
by transferring funds from the bank account you designate. At your option, the
bank account 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. You may only designate an account maintained at a domestic
financial institution which is an Automated Clearing House member. 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 60488, King of
Prussia, Pennsylvania 19406-0488, and the notification will be effective three
business days following receipt. The Company may modify or terminate this
Privilege at any time or charge a service fee. No such fee currently is
contemplated.
Retirement Plans -- The Company 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 PORTFOLIO 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 Portfolio 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.
Each Portfolio 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 the
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 eight business
days or more. In addition, the Portfolio 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.
<PAGE>
The Transfer Agent will not redeem your shares until it has received your
Account Application.
Each Portfolio 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 as a result of redemptions 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 Company 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 Company 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 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 Company 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 Company or the Transfer Agent may be liable for any
losses due to unauthorized or fraudulent instructions. Neither the Company 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
60488, King of Prussia, Pennsylvania 19406-0488. 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."
<PAGE>
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 accounts may have redemption proceeds of up
to $250,000 wired within any 30-day period. You may make 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 Company have 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 Company reimburses
FDDI, distributor of the Company, at an annual rate of up to.25 of 1% of the
value of the average daily net assets attributable to the Investment Class
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 Investment Class shares
of a Portfolio and/or for the maintenance of the accounts of the holders of the
Investment Class shares. The services provided may include personal services
relating to shareholder accounts, such as answering shareholder inquiries
regarding the Company 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 Investment Class 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 Investment Class 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 Investment Class shares of that
Portfolio.
DIVIDENDS, DISTRIBUTIONS AND TAXES
Each Portfolio ordinarily declares and distributes net realized gains, if any,
once a year, but 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 Company will not make distributions from net realized 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 Company intends to distribute substantially all of each Portfolio's 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 shares and whether such
distributions are received in cash or reinvested in shares. The maximum federal
capital gains rate for individuals is 28% with respect to capital assets held
for more than 12 months, but not more than 18 months, and 20% with respect to
capital assets held for more than 18 months. The maximum capital gains rate for
corporate shareholders is the same as the maximum tax rate for ordinary income.
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 is entitled to claim 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 or her 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.
<PAGE>
Federal regulations generally require the Company 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 you if
you fail to certify either that the TIN furnished in connection with opening an
account is correct or that you have 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 a Portfolio to institute backup withholding if the IRS
determines your TIN is incorrect or if you have 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.
Management of the Company believes that each Portfolio has qualified for the
fiscal year ended August 31, 1998 as a "regulated investment company" under the
Code. Each Portfolio intends to continue to so qualify. 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, a 4% non-deductible excise tax is imposed on regulated investment
companies that fail to currently distribute specified percentages of their
ordinary income and capital gain 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 Portfolios. 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
average annual total returns and/or total returns of the Portfolios. "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).
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 and is also affected by operating expenses,
market conditions and the risks associated with a Portfolio's objective 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.
<PAGE>
Comparative performance information may be used from time to time in advertising
or marketing the shares of the Portfolios, including data from the Wilshire 5000
Index, Lipper Analytical Services, Inc., the Standard & Poor's 500 Composite
Stock Price Index, the Dow Jones Industrial Average, Morningstar, Inc. and other
industry publications.
GENERAL INFORMATION
The Company was incorporated under Maryland law on July 30, 1992, and commenced
operations on September 30, 1992. The Company is authorized to issue 600 million
shares of Common Stock (with 100 million allocated to each Portfolio and 50
million allocated to each of class of each Portfolio), par value $.001 per
Share.
The Company is a "series fund," which is a mutual fund divided into separate
portfolios. Each Portfolio of the Company is treated as a separate entity for
certain matters under the 1940 Act and for other purposes. A shareholder of one
Portfolio is not deemed to be a shareholder of any other Portfolio. As described
below, for certain matters 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 five series of
shares and an "Investment Class" and "Institutional Class" of shares for each
Portfolio. All consideration received by the Company for shares of one of the
Portfolios and all assets in which such consideration is invested will belong to
that Portfolio 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.
Institutional Class shares, which are generally available only to institutions
investing at least $5 million in a Portfolio, bear no 12b-1 (Shareholder Service
Plan) fee and, consequently, the company expects the investment returns of
Institutional Class shares to exceed those of Investment Class shares. For more
information regarding eligibility to purchase Institutional Class shares, call
1-888-200-6796 or contact your investment representative.
Unless otherwise required by the 1940 Act, ordinarily it will not be necessary
for the Company to hold annual meetings of shareholders. As a result, Company
shareholders may not consider each year the election of Directors or the
appointment of auditors. However, pursuant to the Company's By-Laws, the holders
of at least 10% of the shares outstanding and entitled to vote may require the
Company to hold a special meeting of shareholders for the purpose of considering
the removal of a Director from office or for any other purpose. Shareholders may
remove a Director by the affirmative vote of a majority of the Company'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 are entitled
to vote separately to approve investment advisory agreements or changes in
investment restrictions, but shares of all Portfolios 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
Services and Distribution 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 a Portfolio on all other matters on which shareholders 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 60488, King
of Prussia, Pennsylvania 19406-0488, or by calling toll free 1-888-200-6796.
No person has been authorized to give any information or to make any
representations other than those contained in this prospectus and in the
Company'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
Company. 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.
<PAGE>
PROSPECTUS W I L S H I R E December 8, 1998
----------------------------------------------
TARGET FUNDS, INC.
------------------------------------------------
(Institutional Class Shares)
(http://www.wilfunds.com)
Wilshire Target Funds, Inc. (the "Company") is an open-end investment company,
known as a mutual fund. This prospectus offers Institutional Class shares in
each of four separate diversified portfolios (each, a "Portfolio" and
collectively, the "Portfolios"): Large Company Growth Portfolio, Large Company
Value Portfolio, Small Company Growth Portfolio and Small Company Value
Portfolio. The goal of each Portfolio is to provide the investment results of a
portfolio of publicly-traded common stocks in one of four sub-categories of
companies from the Wilshire 5000 Index which meet certain criteria established
by the Company's investment adviser. See "Description of the Portfolios." No
Portfolio is an index fund.
Wilshire Associates Incorporated ("Wilshire") serves as the Company's
investment adviser. First Data Investor Services Group, Inc. ("Investor Services
Group") serves as the Company's administrator and transfer agent. First Data
Distributors, Inc. ("FDDI") serves as the Company's distributor.
- -------------------------------------------------------------------------------
This prospectus sets forth concisely information about the Company that you
should know before investing. It should be read and retained for future
reference.
The Statement of Additional Information dated December 8, 1998, which may be
further revised from time to time, provides a further discussion of certain
topics 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 Company
at P.O. Box 60488, King of Prussia, Pennsylvania 19406-0488, 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, information incorporated
by reference to this Prospectus and the Statement of Additional Information and
other information regarding registrants that file electronically with the SEC.
- --------------------------------------------------------------------------------
Shares of the Company 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
Condensed Financial Information............................... 3
Description of the Portfolios................................. 5
Investment Considerations and Risks........................... 6
Management of the Portfolios.................................. 8
How to Buy Portfolio Shares................................... 9
Shareholder Services.......................................... 11
How to Redeem Portfolio Shares................................ 11
Dividends, Distributions and Taxes............................ 13
Performance Information....................................... 14
General Information........................................... 15
<PAGE>
- -------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
FEE TABLE
- -------------------------------------------------------------------------------
The purpose of the following table is to assist you in understanding the
costs and expenses that the Company and investors will bear, the payment of
which will reduce investors' annual return. The information in the foregoing
table is based on expenses incurred during the fiscal year ended August 31, 1998
for the Portfolios, except that the management fees for the Large Company Growth
and Large Company Value Portfolios were restated to reflect the elimination of a
waiver of management fees.
<TABLE>
<CAPTION>
<S> <C> <C>
<C>
Large Large
Small Small
Company Company
Company Company
Growth Value
Growth Value
Portfolio Portfolio
Portfolio Portfolio
Shareholder Transaction Expenses:
Maximum sales load imposed on purchases
or reinvestments of dividends.................. None None
None None
Contingent deferred sales load upon
redemption of investments...................... None None
None None
Redemption Fees................................ None None
None None
Exchange Fees.................................. None None
None None
Annual Portfolio Operating Expenses:
(as a percentage of average daily net assets)
Management Fees................................ 0.25% 0.25%
0.10%* 0.10%*
Other Expenses................................. 0.35% 0.48%
1.07% 0.64%
----- -----
- ----- -----
Total Fund Operating Expenses.................. 0.60% 0.73%
1.17%* 0.74%*
<FN>
* Reflects voluntary waivers which will remain in effect until notice to
the Board of Directors by Wilshire. See "Management of the Portfolios --
Investment Adviser." Absent such fee waivers, the ratio of advisory fees
to average net assets for each Portfolio would be 0.25% and the ratio of
total fund operating expenses to average net assets would be 1.32% for
the Small Company Growth Portfolio and .89% for the Small Company Value
Portfolio.
</FN>
</TABLE>
Example: You would pay the following expenses on a $1,000 investment,
assuming (1) 5% annual return and (2) redemption at the end of each time period:
1 Year $ 6 $ 7 $ 12 $ 8
3 Years $ 19 $ 23 $ 37 $ 24
5 Years $ 33 $ 41 $ 64 $ 41
10 Years $ 75 $ 91 $ 142 $ 92
<PAGE>
- -------------------------------------------------------------------------------
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 shares through a securities
dealer, bank or other financial institution. See "Management of the Portfolios."
<PAGE>
CONDENSED FINANCIAL INFORMATION
- -------------------------------------------------------------------------------
The information in the following table has been audited by
PricewaterhouseCoopers LLP, the Company's independent accountants, whose report
is incorporated by reference in the Statement of Additional Information. Further
financial data and related notes are included in the Statement of Additional
Information, which is available upon request.
FINANCIAL HIGHLIGHTS
Contained below is per share operating performance data for an Institutional
Class share outstanding throughout the period, total investment return, ratios
to average net assets and other supplemental data for each Portfolio for each
period indicated. This information has been derived from each Portfolio's
financial statements.
<TABLE>
<CAPTION>
<S> <C> <C>
<C> <C> <C> <C>
Large Company Growth
Portfolio Large Company Value Portfolio
Period Period
Ended Ended
Year Ended August 31,
August 31, Year Ended August 31, August 31,
1998 1997
1996* 1998 1997 1996*
Net asset value, beginning of period............... $23.91 $19.35
$18.27 $20.47 $17.80 $17.19
------
- ------ ------ ------ ------
Income from investment operations:
Net investment income.............................. 0.08 0.05***
0.01 0.41 0.47*** 0.07
Net realized and unrealized gain on
investments....................................... 2.72 7.29
1.07 0.01 5.13 0.54
---- ----
- ---- ---- ---- ----
Total from investment operations................... 2.80 7.34
1.08 0.42 5.60 0.61
---- ----
- ---- ---- ---- ----
Less Distributions:
Dividends from net investment income............... (0.07) (0.05)
- -- (0.39) (0.62) --
Distributions from capital gains................... (0.52) (2.73)
- -- (1.21) (2.31) --
------ ------
- -- ------ ------ --
Total distributions................................ (0.59) (2.78)
- -- (1.60) (2.93) --
------ ------
- -- ------ ------ --
Net asset value, end of period..................... $26.12 $23.91
$19.35 $19.29 $20.47 $17.80
====== ======
====== ====== ====== ======
Total return+...................................... 11.78% 40.99%
5.91%++ 1.47% 34.26% 3.55%++
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's)............... $34,993 $41,881
$7,763 $46,017 $49,334 $17,425
Operating expenses including reimbursement/
waiver/custody earnings credit.................... 0.60% 0.78%
0.91%** 0.73% 0.91% 0.87%**
Operating expenses excluding custody earnings
credit............................................. 0.62% 0.87%
- -- 0.76% 0.96% --
Operating expenses excluding reimbursement/
waiver/custody earnings credit..................... 0.66% 1.06%
0.94%** 0.81% 1.18% 0.90%**
Net investment income including reimbursement/
waiver/custody earnings credit..................... 0.27% 0.23%
0.41%** 1.98% 2.51% 3.14%**
Portfolio turnover rate............................ 57% 43%
44%++ 56% 65% 56%++
<FN>
* Large Company Growth Portfolio and Large Company Value Portfolio Institutional
Class Shares commenced operations on July 15, 1996.
** Annualized
*** The selected per share data was calculated using the weighted average shares
outstanding method for the year. + Total return represents aggregate total
return for the period indicated.
++ Non-annualized.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
<C> <C> <C> <C>
Small Company
Growth Portfolio Small Company Value Portfolio
Period Period
Ended Ended
Year Ended August
31, August 31, Year Ended August 31, August 31,
1998 1997
1996* 1998 1997 1996*
Net asset value, beginning of period................. $16.61 $18.56
$16.66 $17.23 $15.92 $15.45
------ ------
- ------ ------ ------
Income from investment operations:
Net investment income/(loss)......................... (0.17)
(0.17)** (0.02) 0.38 0.40** 0.06
Net realized and unrealized gain/(loss) on
investments.......................................... (3.98) 2.38
1.92 (1.50) 4.27 0.41
------ ----
- ---- ------ ---- ----
Total from investment operations..................... (4.15) 2.21
1.90 (1.12) 0.47
------ ---
- ---- ------ ----
Less Distributions:
Dividends from net investment income................. -- --
- -- (0.38) (0.77) --
Distributions from capital gains..................... (0.67) (4.16)
- -- (1.97) (2.59) --
------ ------
- -- ------ ------ --
Total distributions.................................. (0.67) (4.16)
- -- (2.35) (3.36) --
------ ------
- -- ------ ------ --
Net asset value, end of period....................... $11.79 $16.61
$18.56 $13.76 $17.23 $15.92
====== ======
====== ====== ====== ======
Total return+........................................ (25.95)% 15.14%
11.40%++ (8.72)% 33.74% 3.04%++
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's)................. $4,054 $4,599
$3,577 $10,454 $26,412 $7,335
Operating expenses including reimbursement/
waiver/custody earnings credit...................... 1.17% 1.22%
0.98%** 0.74% 0.86% 0.85%**
Operating expenses excluding custody earnings credit 1.19%
1.24% -- 0.76% 0.90%
- --
Operating expenses excluding reimbursement/
waiver/custody earnings credit...................... 1.34% 1.45%
1.02%** 0.91% 1.15% 0.89%**
Net investment income (loss) including
reimbursement/waiver/custody earnings credit...... (0.96)%
(1.05)% (0.75)%** 1.70% 2.58% 3.16%**
Portfolio turnover rate.............................. 74% 97%
87%++ 74% 105% 81%++
<FN>
* Small Company Growth Portfolio and Small Company Value Portfolio
Institutional Class Shares commenced operations on July 15, 1996.
** Annualized
*** The selected per share data was calculated using the average shares
outstanding method for the year. + Total return represents aggregate total
return for the period indicated.
++ Non-annualized.
</FN>
</TABLE>
Further information about each Portfolio's performance is
contained in the Company's annual and semi-annual reports, which may be obtained
without charge by writing to the address or calling the number set forth on the
cover page of this Prospectus.
<PAGE>
- -------------------------------------------------------------------------------
DESCRIPTION OF THE PORTFOLIOS
- -------------------------------------------------------------------------------
Investment Objective -- The goal of each Portfolio is to provide the investment
results of a portfolio of publicly-traded common stocks in one of four
sub-categories of companies from the Wilshire 5000 Index which meet certain
criteria established by Wilshire as described herein. Each Portfolio's
investment objective cannot be changed 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. There can be no
assurance that a Portfolio's investment objective will be achieved.
Investment Approach -- In June of each year, Wilshire identifies from the
Wilshire 5000 Index, an index consisting of all publicly-traded common stocks in
the United States, the stocks of the 2,500 companies with the largest market
capitalizations (ranging between $296 billion and $190 million on the date of
this prospectus). It then divides that universe of stocks, first, into those of
the 750 companies with the largest capitalizations (ranging between $296 billion
and $1.9 billion on the date of this prospectus), which constitute approximately
84% of the total market value of the stocks included in the Wilshire 5000 Index,
and, second, into those of the 1,750 next largest companies based on
capitalization (ranging between $1.9 billion and $190 million on the date of
this prospectus), which constitute approximately 12% of the total market value
of the stocks included in the Wilshire 5000 Index (the stocks of the remaining
companies constituted less than 5% of the total market value of the stocks
included in the Wilshire 5000 Index on the date of this prospectus). From these
large and small capitalization universes, Wilshire selects the stocks of those
companies it believes to possess the characteristics of growth stocks and of
value stocks, based on criteria discussed below. In this manner, Wilshire
identifies from the four potential universes of companies the stocks which it
may purchase for the Portfolios. Wilshire periodically reviews these selections
and updates each potential universe of companies. The number of securities
eligible for investment by a Portfolio at any time will vary, but is expected to
range between 150 to 550 stocks.
To determine whether a company's stock falls within the growth or value
classification, Wilshire analyzes each company based on fundamental factors such
as price to book value ratios, price to earnings ratios, earnings growth,
dividend payout ratios, return on equity, and the company's beta (a measure of
stock price volatility relative to the market generally). In general, Wilshire
believes that companies with relatively low price to book ratios, low price to
earnings ratios and higher than average dividend payments in relation to price
should be classified as value companies. Alternatively, companies which have
above average earnings or sales growth and retention of earnings and command
higher price to earnings ratios fit the more classic growth description.
By dividing companies into these four sub-categories, Wilshire attempts to offer
investors market exposure to these types of companies. As described under
"Investment Considerations and Risks" below, you should purchase a Portfolio's
shares only as a supplement to an overall investment program. To provide varying
degrees of market exposure to these types of securities, various combinations of
each Portfolio's shares might be purchased.
Management Policies
Large Company Growth Portfolio invests substantially all of its assets in equity
securities of issuers within the universe of companies identified by Wilshire as
large capitalization, growth companies.
Large Company Value Portfolio invests substantially all of its assets in equity
securities of issuers within the universe of companies identified by Wilshire as
large capitalization, value companies.
Small Company Growth Portfolio invests substantially all of its assets in equity
securities of issuers within the universe of companies identified by Wilshire as
small capitalization, growth companies.
Small Company Value Portfolio invests substantially all of its assets in equity
securities of issuers within the universe of companies identified by Wilshire as
small capitalization, value companies.
Each Portfolio attempts to remain fully invested in equity securities of
companies which comprise its relative universe. When a Portfolio has cash
pending investment or needs to meet potential redemptions, it may invest in
money market instruments consisting of U.S. Government securities, certificates
of deposit, time deposits, bankers' acceptances, short-term investment grade
corporate bonds and other short-term debt instruments, and repurchase
agreements. Under normal circumstances, the Company anticipates that not more
than 5% of the value of a Portfolio's total assets will be invested in any one
category of such instruments, and that not more than 20% of the value of a
Portfolio's total assets will be invested in all money market instruments. No
Portfolio intends to invest in money market instruments or any other securities
for defensive purposes. See the Statement of Additional Information for a
description of these instruments. Each Portfolio may purchase stock index
futures in anticipation of taking a market position when, in Wilshire's opinion,
available cash balances do not permit an economically efficient trade in the
cash market. Each Portfolio may sell stock index futures to terminate existing
positions it may hold as a result of its purchase of stock index futures. To the
extent the Company, on behalf of a Portfolio, purchases or sells futures
contracts, the Company currently intends to use the New York Stock Exchange
Composite Index, Value Line Composite Index or Standard & Poor's 500 Composite
Stock Price Index. The performance of the futures should not be expected to
correlate identically with that of the particular index. 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 an overall
investment program and should invest only if you are willing to undertake the
risks involved. See "Investment Objective and Management Policies -- Management
Policies" in the Statement of Additional Information for a further discussion of
certain risks.
Equity securities fluctuate in value, often based on factors unrelated to the
value of the issuer of the securities, 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. Moreover, the net asset value of one or more Portfolios
could be adversely affected by adverse changes, real or anticipated, in
companies that are generally characterized in the same manner as the companies
the securities of which are held by the relevant Portfolio. For example, if
large capitalization growth stocks fall out of favor with investors widely,
irrespective of fundamentals, the net asset value of the Large Company Growth
Portfolio should be expected to be adversely affected. Similar risks exist for
the other Portfolios.
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 a Portfolios' objectives will be met. See
"Investment Objective and Management Policies -- Management Policies" in the
Statement of Additional Information for further discussion of certain risks.
Borrowing Money -- Each Portfolio is permitted to borrow money only for
temporary or emergency (not leveraging) purposes, in an amount up to 15% of the
value of its total assets (including the amount borrowed) valued at 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 a Portfolio's total
assets, the Portfolio will not purchase any additional securities.
Use Of Derivatives -- Each Portfolio may invest, to a limited extent, in
derivatives ("Derivatives"). These are financial instruments which derive their
performance, at least in part, from the performance of an underlying asset,
index or interest rate. The Derivatives the Portfolios may use are currently
comprised of stock index futures. While Derivatives can be used effectively in
furtherance of an Portfolio's investment objective, under certain market
conditions, they can increase the volatility of the Portfolio's net asset value,
can decrease the liquidity of the Portfolio's investments and make more
difficult the accurate pricing of the Portfolio's shares. Although no Portfolio
will be a commodity pool, Derivatives subject a Portfolio to the rules of the
Commodity Futures Trading Commission which limit the extent to which a Portfolio
can invest in certain Derivatives. Each Portfolio may invest in stock index
futures contracts for hedging purposes without limit. However, no Portfolio may
invest in such contracts for other purposes if the sum of the amount of initial
margin deposits and the premiums paid for unexpired commodity options, other
than for bona fide hedging purposes, exceed 5% of the liquidation value of the
Portfolio's assets, after taking into account unrealized profits and unrealized
losses on such contracts it has entered into; provided, however, that in the
case of an option that is in-the-money at the time of purchase, the in-the-money
amount may be excluded in calculating the 5% limitation. "Investment Objectives
and Management Policies -- Management Policies -- Derivatives" in the Statement
of Additional Information.
Simultaneous Investments -- Investment decisions for each Portfolio are made
independently from those of other series of the Company, other investment
companies and other 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 approximately the
same time as the 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.
Lending Portfolio Securities -- Each Portfolio may lend securities from its
portfolio to brokers, dealers and other financial institutions. 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 a Portfolio an opportunity to
earn interest on the amount of the loan and at the same time to earn income on
the loan collateral. Loans of portfolio securities may not exceed 33 1/3% of the
value of a 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 Company 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 and such Portfolio is delayed or prevented from recovering the
collateral or completing the transaction.
Foreign Securities -- Since the stocks of some foreign issuers are included in
the Wilshire 5000 Index, each Portfolio's investments may include securities of
such foreign issuers, which may subject such Portfolio to additional investment
risks that are different in some respects from those incurred by a fund which
invests only in securities of domestic issuers. Such risks include future
political and economic developments, the possible imposition of withholding
taxes on income payable on the securities, the possible establishment of
exchange controls or the adoption of other foreign governmental restrictions
which might adversely affect an investment in these securities, and the possible
seizure or nationalization of foreign deposits.
Year 2000 -- The date related computer issues known as the "Year 2000 problem"
could have an adverse impact on the quality of services provided to the Company
and its shareholders. However, the Company understands that its key service
providers, including Wilshire, are taking steps to address the issue. In
addition, the Year 2000 problem may adversely affect the issuers in which a
Portfolio invests. However, because the objectives of the Portfolios are to
provide the investment results of a Portfolio of publicly traded common stock in
one of four sub-categories of issuers from the Wilshire 5000 Index, Wilshire
does not perform fundamental analyses of the issuers in which the Portfolios
invests, and does not attempt to monitor the impact of the problem on individual
issuers.
MANAGEMENT OF THE PORTFOLIOS
- -------------------------------------------------------------------------------
Investment Adviser -- Wilshire, located at 1299 Ocean Avenue, Santa Monica,
California 90401-1085, was formed in 1972 and serves as the Company's investment
adviser. As of October 1, 1998, Wilshire managed approximately $7.4 billion in
assets. Under the terms of the Investment Advisory Agreement described below,
Wilshire, subject to the overall authority of the Company's Board of Directors
in accordance with Maryland law, manages the investment of the assets of each
Portfolio. The Portfolios' primary portfolio manager is Thomas D. Stevens, the
President and Chairman of the Board of Directors of the Company and a Senior
Vice President of Wilshire. He has been employed by Wilshire since 1980. The
Portfolios' other portfolio manager is identified in the Statement of Additional
Information. Wilshire also provides research services for the Company through a
professional staff of portfolio managers and securities analysts. Wilshire is
controlled by its President, Dennis Tito, who owns a majority of its outstanding
voting stock.
Pursuant to the terms of an Investment Advisory Agreement with Wilshire dated
July 11, 1996 (the "Advisory Agreement"), the Company has agreed to pay Wilshire
a fee computed daily and paid monthly at the annual rate of .25 of 1% of the
value of each Portfolio's average daily net assets. Wilshire has voluntarily
undertaken to waive a portion of its fee otherwise payable under the Advisory
Agreement to .10 of 1% of each of the Small Company Value Portfolio's and Small
Company Growth Portfolio's average daily net assets. The voluntary waiver may be
terminated at any time by Wilshire by notice to the Directors of the Company.
For the fiscal year ended August 31, 1998, the Company paid Wilshire an
investment advisory fee at the effective annual rates of .21%, .20%, .10% and
.10% of the value of the average daily net assets of the Large Company Growth
Portfolio, the Large Company Value Portfolio, the Small Company Growth Portfolio
and the Small Company Value Portfolio, respectively, in each case after giving
effect to an expense limitation set forth in the Advisory Agreement, which was
in effect from July 11, 1996 through October 11, 1997, and voluntary waivers by
Wilshire.
Administrator -- Investor Services Group, a subsidiary of First Data
Corporation, 4400 Computer Drive, Westborough, Massachusetts 01581, serves as
the Company's administrator pursuant to an Administration Agreement with the
Company. Under the terms of the Administration Agreement, Investor Services
Group generally assists in all aspects of the Company's operations, other than
providing investment advice, subject to the overall authority of the Company's
Board of Directors in accordance with Maryland law. Pursuant to the terms of the
Administration Agreement, the Company has agreed to pay Investor Services Group
a fee, computed daily and paid monthly, at the annual rate of .15 of 1% of the
value of the Company's monthly average net assets up to aggregate assets of $1
billion, .10 of 1% of the Company's monthly average net assets on the next $4
billion, and .08 of 1% the Company's monthly average net assets on the excess
net assets. In addition, the Company has agreed to pay Investor Services Group
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 is the custodian of the Company's investments. Investor Services Group
is also the Company'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 by the Company or
its shareholders 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 Portfolios
or the Company, which would have the effect of lowering the overall expense
ratio of the Portfolios and increasing the return to investors at the time such
amounts are waived or assumed, as the case may be. The Company will not pay
Wilshire or Investor Services Group for any amounts which may be waived or
assumed. Each of 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
Company.
All expenses incurred in the operation of the Company are borne by the Company,
except to the extent specifically assumed by FDDI, Wilshire or Investor Services
Group. The expenses borne by the Company 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 Company'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 series or class of shares are charged against the
assets of that series or class. Other expenses of the Company are allocated
among 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 PORTFOLIO SHARES
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Shares are sold without a sales charge. You may be charged a 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 Company 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 Account Application. The Company reserves the
right to vary the initial and subsequent investment minimum requirements at any
time. For investors who purchase through a financial intermediary and hold their
shares through an omnibus account with that financial intermediary, the minimum
initial investment applies to the omnibus account, and not to the investors
individually.
You may purchase shares by check or wire. Checks should be made payable to
"Wilshire Target Funds, Inc." For subsequent investments, your Portfolio account
number should appear on the check. Payments which are mailed should be sent to
Wilshire Target Funds, Inc., P.O. Box 60488, King of Prussia, Pennsylvania
19406-0488, together with your investment slip or, when opening a new account,
your Institutional Class shares Account Application, indicating the name of the
Portfolio. 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 Portfolio and the Portfolio's DDA number, 065-587, for purchase of shares
in your name. The wire must include your Portfolio 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 Portfolio shares is by wire, please call 1-888-200-6796 after
completing your wire payment to obtain your Portfolio account number. Please
include your Portfolio account number on the Account Application and promptly
mail the Account Application to the Portfolio, 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 Portfolio makes available to certain large
institutions the ability to issue purchase instructions through compatible
computer facilities.
<PAGE>
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 Deposit and Trust Company
Fund Number ("260, 261, 262 or 263" for Large Company Growth Portfolio,
Large Company Value Portfolio, Small Company Growth Portfolio,
Small Company Value Portfolio, respectively)
Shareholder Account Number
Account of (Registered Shareholder)
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 (normally
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 of the Portfolios, 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 Portfolio 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
Account Application for further information concerning this requirement. Failure
to furnish a certified TIN could subject you to a $50 penalty imposed by the
Internal Revenue Service (the "IRS").
SHAREHOLDER SERVICES
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Exchanges -- You may purchase, in exchange for shares of a Portfolio, shares of
the same class of one of the other series offered by the Company or shares of
another class of the Portfolio or any other series to the extent such shares are
offered for sale in your state of residence. You must meet the eligibility
requirements (including minimum investment amounts) for the purchase of such
shares. If you want 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. The shares being exchanged must have a value of at least the
applicable minimum initial investment, if any, required for the series and class
into which the exchange is being made. The ability to issue exchange
instructions by telephone is given to all shareholders automatically, unless you
check the applicable "No" box on the Account Application, indicating that you
specifically refuse this privilege. You may establish the Telephone Exchange
Privilege 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 Portfolio 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
series into which the exchange is made: Telephone Exchange Privilege, Wire
Redemption Privilege, Telephone Redemption Privilege, and the dividend and
capital gain distribution option you have selected.
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 Company 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 Company 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 series is treated
for Federal income tax purposes as a sale of the Portfolio shares exchanged by
the shareholder and, therefore, may realize a taxable gain or loss.
Money Market Fund -- You may also exchange shares of a Wilshire Target Fund
Portfolio for shares of a money market fund. Please call 1-888-200-6796 to
obtain a prospectus and more information on how to exchange into the money
market fund.
Retirement Plans -- The Company offers a variety of pension and profit-sharing
plans, including Keogh Plans, IRAs, SEP-IRAs, Roth IRAs and IRA "Rollover
Accounts" and 403(b)(7) Plans. Plan support services also are available. To
obtain details on such Plans, please call the following toll-free number:
1-888-200-6796.
HOW TO REDEEM PORTFOLIO SHARES
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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 Portfolio 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 the Portfolio's shares. Any certificates
representing the 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.
Each Portfolio 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 eight business days or more. In addition,
the Portfolio 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.
The Transfer Agent will not redeem your shares until it has received your
Account Application.
Each Portfolio 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 as a result of redemptions
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 Company 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 Company 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 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 Company 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 Company or the Transfer Agent may be liable for any
losses due to unauthorized or fraudulent instructions. Neither the Company 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
60488, King of Prussia, Pennsylvania 19406-0488. 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 accounts may have redemption proceeds of up
to $250,000 wired within any 30-day period. You may make 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
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Each Portfolio ordinarily declares and distributes net realized gains, if any,
once a year, but 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 Company will not make distributions from net realized 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 Company intends to distribute substantially all of each Portfolio's 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 shares and whether such
distributions are received in cash or reinvested in shares. The maximum federal
capital gains rate for individuals is 28% with respect to capital assets held
for more than 12 months, but not more than 18 months, and 20% with respect to
capital assets held for more than 18 months. The maximum capital gains rate for
corporate shareholders is the same as the maximum tax rate for ordinary income.
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 is entitled to claim 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 Company 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 you if
you fail to certify either that the TIN furnished in connection with opening an
account is correct or that you have 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 Portfolio to institute backup withholding if the IRS
determines your TIN is incorrect or if you have 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.
Management of the Company believes that each Portfolio has qualified for the
fiscal year ended August 31, 1998 as a "regulated investment company" under the
Code. Each Portfolio intends to continue to so qualify. 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, a 4% non-deductible excise tax is imposed on regulated investment
companies that fail to currently distribute specified percentages of their
ordinary income and capital gain 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
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For purposes of advertising, performance may be calculated on the basis of
average annual total return and/or total returns of the Portfolios.
"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).
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 and is also affected by operating expenses,
market conditions and the risks associated with a Portfolio's objective 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 Shares, including data from the Wilshire 5000 Index, Lipper
Analytical Services, Inc., the Standard & Poor's 500 Composite Stock Price
Index, the Dow Jones Industrial Average, Morningstar, Inc. and other industry
publications.
GENERAL INFORMATION
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The Company was incorporated under Maryland law on July 30, 1992, and commenced
operations on September 30, 1992. The Company is authorized to issue 600 million
shares of Common Stock (with 100 million allocated to each Portfolio and 50
million allocated to each class of each Portfolio), par value $.001 per share.
The Company is a "series fund," which is a mutual fund divided into separate
portfolios. Each Portfolio of the Company is treated as a separate entity for
certain matters under the 1940 Act and for other purposes. A shareholder of one
Portfolio is not deemed to be a shareholder of any other Portfolio. As described
below, for certain matters Company 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 five series of
shares and an "Investment Class" and "Institutional Class" of shares for each
Portfolio. All consideration received by the Company for shares of one of the
Portfolios and all assets in which such consideration is invested will belong to
that Portfolio 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.
Investment Class shares, which are generally available to the public, bear a
Rule 12b-1 fee of up to .25% of the average daily net assets of the Portfolio's
Investment Class shares. For information regarding the Investment Class shares
call 1-888-200-6796 or contact your investment representative.
Unless otherwise required by the 1940 Act, ordinarily it will not be necessary
for the Company to hold annual meetings of shareholders. As a result, Company
shareholders may not consider each year the election of Directors or the
appointment of auditors. However, pursuant to the Company's By-Laws, the holders
of at least 10% of the shares outstanding and entitled to vote may require the
Company to hold a special meeting of shareholders for the purpose of considering
the removal of a Director from office or for any other purpose. Shareholders may
remove a Director by the affirmative vote of a majority of the Company'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 are entitled
to vote separately to approve investment advisory agreements or changes in
investment restrictions, but shares of all Portfolios 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 shareholders 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 Company at P.O. Box 60488,
King of Prussia, Pennsylvania 19406-0488, or by calling toll free
1-888-200-6796.
No person has been authorized to give any information or to make any
representations other than those contained in this prospectus and in the
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 Company. 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.
