As filed with the Securities and Exchange Commission on October 15, 1999
Securities Act File No. 33-50390
Investment Company Act File No. 811-7076
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
-----
Pre-Effective Amendment No.
Post-Effective Amendment No. 17 X
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 X
Amendment No. 18 X
WILSHIRE TARGET FUNDS, INC.
(Exact Name of Registrant as Specified in Charter)
c/o First Data Investor Services Group, Inc.
101 Federal Street
Boston, MA 02110
Registrant's Telephone Number, including Area Code: (617) 535-0534
Name and Address of Agent for Service:
Julie A. Tedesco, Esq.
Wilshire Target Funds, Inc.
c/o First Data Investor Services Group, Inc.
101 Federal Street
Boston, MA 02110
It is proposed that the filing will become effective:
immediately upon filing pursuant to paragraph (b)
on December 8, 1998 pursuant to paragraph (b)
X 60 days after filing pursuant to paragraph (a)(1)
on pursuant to paragraph (a)(1)
75 days after filing pursuant to paragraph (a)(2)
on pursuant to paragraph (a)(2) of Rule 485
<PAGE>
W I L S H I R E
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Prospectus
_________, 1999
Investment and Institutional Class Shares
of
Large Company Growth Portfolio
Large Company Value Portfolio
Small Company Growth Portfolio
Small Company Value Portfolio
Wilshire 5000 Index Portfolio
(http://www.wilfunds.com)
- -------------------------------------------------------------------------------
As with all mutual funds, the Securities and Exchange
Commission has not approved or disapproved any shares of
this fund or determined if this prospectus is accurate or
complete. Anyone who tells you otherwise is committing a
crime.
- -------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
Introduction...................................................................
Investment and Risk Summary....................................................
Main Investment Strategies............................................
Who May Want to Invest in the Portfolios..............................
Main Investment Risks.................................................
Performance and Fee Information.......................................
More Information about Investments and Risks...................................
Management of the Portfolios...................................................
Investment Adviser....................................................
Service and Distribution Plan..........................................
Shareholder Information.........................................................
How to Buy Portfolio Shares............................................
How to Sell Portfolio Shares...........................................
Pricing of Shares......................................................
How to Exchange Portfolio Shares.......................................
Retirement Plans.......................................................
Dividend and Distribution Information...........................................
Tax Information................................................................
Financial Highlights..................................................
<PAGE>
INTRODUCTION
This prospectus describes the following Portfolios offered by the Wilshire
Target Funds, Inc.
Large Company Growth Portfolio
Investment Objective: to provide
investment results of a portfolio
of publicly traded common stocks
of companies in the applicable
sub-category of the Wilshire 5000
Index (referred to as the Index
in this prospectus). These
Portfolios are not index funds
and are called the Style
Portfolios in this prospectus.
Large Company Value Portfolio
Small Company Growth Portfolio
Small Company Value Portfolio
The Wilshire 5000 Index Portfolio Investment Objective: to replicate
as closely as possible the
performance of the Index before the
deduction of fund expenses. This
Portfolio is an index fund and is
called the Index Portfolio in this
prospectus.
Each Portfolio's investment goal may not be changed without approval of the
Portfolio's shareholders in accordance with the Investment Company Act of 1940.
No Portfolio is guaranteed to meet its goal.
On the following pages you will find important information about each Portfolio
and its Institutional and Investment classes of shares, including:
the main investment strategies used by Wilshire Associates Incorporated
(the "Adviser" or "Wilshire") in trying to achieve the Portfolio's
objective,
the main risks of an investment in the Portfolio,
the Portfolio's past performance measured on both a year-by-year and
long-term basis, when available, and fees and expenses that you will pay
as a shareholder.
shapeType202fFlipH0fFlipV0lTxid65536hspNext1026Portfolio shares are not deposits
or obligations of, or guaranteed or endorsed by, any bank. The shares are not
insured or guaranteed by the Federal Deposit Insurance Corporation, the Federal
Reserve Board, or any other government agency. You could lose money by investing
in the Portfolios.
Portfolio shares are not deposits or obligations of, or guaranteed or endorsed
by, any bank. The shares are not insured or guaranteed by the Federal Deposit
Insurance Corporation, the Federal Reserve Board, or any other government
agency. You could lose money by investing in the Portfolios.
INVESTMENT AND RISK SUMMARY
Main Investment Strategies
Large Company Growth Portfolio
Focuses on the large company growth segment of the U.S. equity market
Invests in companies with the largest market capitalizations
greater than $2.1 billion as of the date of this prospectus
Invests in companies that have above average earnings or sales
growth histories and retention of earnings; often such companies
have higher price to earnings ratios
Small Company Growth Portfolio
Focuses on the small company growth segment of the U.S. equity market
Invests in companies with smaller market capitalizations -
between $2.1 billion and $219 million as of the date of this
prospectus
Invests in companies that have above average earnings or sale
growth histories and have higher price to earnings ratios
Less emphasis on a long history of established growth than the Large
Company Growth Portfolio
Large Company Value Portfolio
Focuses on the large company value segment of the U.S. equity market
Invests in companies with the largest market capitalizations
extending down to $2.1 billion as of the date of this prospectus
Invests in companies with relatively low price to book value
ratios, low price to earnings ratios, and higher than average
dividend yield (which means that their price is low relative to
the size of the dividend)
Companies undergoing adverse financial pressures are not considered
Small Company Value Portfolio
Focuses on the small company value segment of the U.S. equity market
Invests in companies with smaller market capitalizations -
between $2.1 billion and $219 million as of the date of this
prospectus
Invests in companies with relatively low price to book value
ratios, low price to earnings ratios, and relatively high dividend
yield (dividend yields for small companies are generally less than
for large companies)
Companies undergoing adverse financial pressures are not considered
Each Style Portfolio attempts to invest virtually all of its assets in common
stock of companies in its category.
Wilshire 5000 Index Portfolio
Invests primarily in the common stock of companies included in the
Index that are representative of the entire Index
Uses a "quantitative" or "indexing" investment approach, which
tries to duplicate the investment composition and performance of
the Index through statistical procedures
Normally holds stocks representing at least 90% of the total market
value of the Index
The Index includes all U.S. stocks regularly traded on the New York and American
Stock Exchanges and the NASDAQ over-the-counter market. It includes over 7,000
stocks, with each stock weighted according to its market value. This means that
companies having a larger stock capitalization will have a larger impact on the
Index. The Index has been computed continuously since 1974, is published daily
in many major newspapers and is the broadest measure of the U.S. equity market.
<PAGE>
Who may want to invest in the Portfolios
A Style Portfolio may appeal to you if: you are a long-term
investor or saver you seek growth of capital
you believe that the market will favor a particular
style, such as large cap growth stocks, over other styles
in the long term and you want a focused exposure to that
style
You own other funds or stocks which provide exposure to
some but not all styles and would like to provide a more
complete exposure to the equity market
The Index Portfolio may appeal to you if:
you are a long-term investor or saver
you seek growth of capital
you seek to capture the returns of the entire U.S.
equity market
you seek the potential risk reduction of broad
diversification across both large and small capitalization
stocks and both value and growth stocks
you seek an index fund which, unlike an S&P 500 index
fund, includes stocks of small- and mid-capitalization, as
well as large capitalization, companies.
Main Investment Risks
Each Portfolio's share price will fluctuate with changes in the market value of
the securities it owns. All securities are subject to market, economic and
business risks that cause their prices to fluctuate. These fluctuations may not
be related to the fundamental characteristics of the companies issuing the
securities. For example, if large capitalization growth stocks fall out of favor
generally with investors, the value of the Large Company Growth Portfolio may
decline. You *may lose money by investing in a Portfolio, particularly if you
choose a Portfolio which follows a particular style that has performed poorly.
Because the Index Portfolio provides a broad exposure to the U.S. stock market
rather than focusing on a distinct segment of the market such as small
capitalization value stocks, it is a less volatile and less risky investment
than any of the Style Portfolios.
Performance and Fee Information
Large Company Growth Portfolio
The bar chart and the performance table below provide an indication of
the risks of investing in the Large Company Growth Portfolio by showing
how Investment Class Shares of the Large Company Growth Portfolio have
performed in the past and by showing how the Portfolio's average annual
total returns compare to those of the Index. The chart and table assume
reinvestment of dividends and distributions. The Portfolio's past
performance does not necessarily indicate how it will perform in the
future.
BAR CHART (GRAPHIC OMITTED)
EDGAR REPRESENTATION OF DATA POINTS
USED IN PRINTED GRAPHIC
<PAGE>
Calendar Year Total Return
------------- ------------
1992 6.88% *
1993 (0.74%)
1994 2.29%
1995 36.65%
1996 25.74%
1997 32.22%
1998 40.72%
* Total return since inception.
During the period shown in the bar chart, the highest return for a quarter was
25.32% for the quarter ended December 31, 1998 and the lowest return for a
quarter was (7.91%) for the quarter ended September 30, 1998. The year-to-date
return for the period from January 1, 1999 through September 30, 1999 is 7.87%.
The returns for the Portfolio's Investment Class Shares were slightly lower than
the Institutional Class Shares because Investment Class Shares pay Rule 12b-1
fees.
Average Annual Total Returns
(for the periods ended December 31, 1998)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Since
1 year 5 years inception*
- ------------------------------------------------------------------------------------------
Investment Class 40.72% 26.74% 22.01%
Institutional Class 40.84% - 38.83%
Wilshire 5000 Index 23.43% 21.78% 20.44%**
</TABLE>
* Inception date (commencement of investment operations): Investment Class
- September 30, 1992 and Institutional Class - July 15, 1996
** Beginning September 30, 1992
Fees and expenses of the Large Company Growth Portfolio
As a benefit of investing in the Portfolio, you do not incur any sales loads,
redemption fees or exchange fees. This table shows the fees and expenses you may
pay when you buy and hold Portfolio shares.
Annual Portfolio Operating Expenses (expenses that are deducted from the
Portfolio's assets):
(as a percentage of average daily net assets)
<TABLE>
<CAPTION>
<S> <C> <C>
Investment Institutional
Class Class
Management Fees.......................................... 0.25% 0.25%
12b-1 Fee ............................................... 0.25% None
Other Expenses........................................... 0.45% 0.42%
----- -----
Total Portfolio Operating Expenses....................... 0.95% 0.67%
</TABLE>
Example:
This example helps you to compare the cost of investing in the Large Company
Growth Portfolio with the cost of investing in other mutual funds. The example
assumes: (i) you invest $10,000 for the periods shown, (ii) you reinvest all
dividends and distributions in the Portfolio, (iii) you redeem all of your
shares at the end of the periods shown, (iv) your investment has a 5% annual
return, and (v) Portfolio operating expenses remain the same.
Investment Institutional
Class Class
1 Year $ 97 $ 68
3 Years $ 303 $ 214
5 Years $ 525 $ 373
10 Year $ 1,166 $ 835
Large Company Value Portfolio
The bar chart and the performance table below provide an indication of the risks
of investing in the Large Company Value Portfolio by showing how Investment
Class Shares of the Large Company Value Portfolio have performed in the past and
by showing how the Portfolio's average annual total returns compare to those of
the Index. The chart and table assume reinvestment of dividends and
distributions. The Portfolio's past performance does not necessarily indicate
how it will perform in the future.
BAR CHART (GRAPHIC OMITTED)
EDGAR REPRESENTATION OF DATA POINTS
USED IN PRINTED GRAPHIC
Calendar Year Total Return
------------- ------------
1992 5.52% *
1993 13.26%
1994 (5.16%)
1995 39.93%
1996 18.08%
1997 30.18%
1998 10.31%
* Total return since inception.
During the period shown in the bar chart, the highest return for a quarter was
13.63% for the quarter ended December 31, 1998 and the lowest return for a
quarter was (11.38%) for the quarter ended September 30, 1998. The year-to-date
return for the period from January 1, 1999 through September 30, 1999 is
(7.86%).
The returns for the Portfolio's Investment Class Shares were slightly lower than
the Institutional Class Shares because Investment Class Shares pay Rule 12b-1
fees.
Average Annual Total Returns
(for the period ended December 31, 1998)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Since
1 year 5 years inception*
- ------------------------------------------------------------------------------------------
Investment Class 10.31% 17.61% 17.14%
Institutional Class 10.45% - 23.57%
Wilshire 5000 Index 23.43% 21.78% 20.44%**
</TABLE>
* Inception date (commencement of investment operations): Investment Class
- September 30, 1992 and
Institutional Class - July 15, 1996
** Beginning September 30, 1992
<PAGE>
Fees and expenses of the Large Company Value Portfolio
As a benefit of investing in the Portfolio, you do not incur any sales loads,
redemption fees or exchange fees. This table shows the fees and expenses you may
pay when you buy and hold Portfolio shares.
Annual Portfolio Operating Expenses (expenses that are deducted from the
Portfolio's assets):
(as a percentage of average daily net assets)
<TABLE>
<CAPTION>
<S> <C> <C>
Investment Institutional
Class Class
Management Fees.......................................... 0.25% 0.25%
12b-1 Fee ............................................... 0.25% None
Other Expenses........................................... 0.56% 0.54%
---- ----
Total Portfolio Operating Expenses....................... 1.06% 0.79%
</TABLE>
Example:
This example helps you to compare the cost of investing in the Large Company
Value Portfolio with the cost of investing in other mutual funds. The example
assumes: (i) you invest $10,000 for the periods shown, (ii) you reinvest all
dividends and distributions in the Portfolio, (iii) you redeem all of your
shares at the end of the periods shown, (iv) your investment has a 5% annual
return, and (v) Portfolio operating expenses remain the same.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Investment Institutional
Class Class
1 Year $ 108 $ 81
3 Years $ 337 $252
5 Years $ 585 $439
10 Years $1,294 $978
</TABLE>
Small Company Growth Portfolio
The bar chart and the performance table below provide an indication of the risks
of investing in the Small Company Growth Portfolio by showing how Investment
Class Shares of the Small Company Growth Portfolio have performed in the past
and by showing how the Portfolio's average annual total returns compare to those
of the Index. The chart and table assume reinvestment of dividends and
distributions. The Portfolio's past performance does not necessarily indicate
how it will perform in the future.
BAR CHART (GRAPHIC OMITTED)
EDGAR REPRESENTATION OF DATA POINTS
USED IN PRINTED GRAPHIC
Calendar Year Total Return
------------- ------------
1992 18.72% *
1993 15.72%
1994 (1.38%)
1995 28.16%
1996 14.01%
1997 11.67%
1998 (3.56%)
* Total return since inception.
<PAGE>
During the period shown in the bar chart, the highest return for a quarter was
19.70% for the quarter ended December 31, 1998 and the lowest return for a
quarter was (22.84%) for the quarter ended September 30, 1998. The year-to-date
return for the period from January 1, 1999 through September 30, 1999 is
(5.23%).
The returns for the Portfolio's Investment Class Shares were slightly lower than
the Institutional Class Shares because Investment Class Shares pay Rule 12b-1
fees.
Average Annual Total Returns
(for the periods ended December 31, 1998)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Since
1 year 5 years inception*
- ------------------------------------------------------------------------------------------
Investment Class (3.56%) 9.19% 12.88%
Institutional Class (3.44%) - 8.29%
Wilshire 5000 Index 23.43% 21.78% 20.44%**
</TABLE>
* Inception date (commencement of investment operations): Investment Class
- September 30, 1992 and
Institutional Class - July 15, 1996
** Beginning September 30, 1992
Fees and expenses of the Small Company Growth Portfolio
As a benefit of investing in the Portfolio, you do not incur any sales loads,
redemption fees or exchange fees. This table shows the fees and expenses you may
pay when you buy and hold Portfolio shares.
Annual Portfolio Operating Expenses (expenses that are deducted from the
Portfolio's assets):
(as a percentage of average daily net assets)
<TABLE>
<CAPTION>
<S> <C> <C>
Investment Institutional
Class Class
Management Fees+......................................... 0.25% 0.25%
12b-1 Fee ............................................... 0.25% None
Other Expenses........................................... 1.24% 1.21%
---- ----
Total Portfolio Operating Expenses+...................... 1.74% 1.46%
</TABLE>
+ The Adviser has agreed to waive a portion of its advisory fees until further
notice. After this waiver, Management Fees are expected to be 0.10% and Total
Portfolio Operating Expenses are expected to be 1.59% and 1.31% for the
Investment Class shares and Institutional Class shares, respectively.
Example:
This example helps you to compare the cost of investing in the Small Company
Growth Portfolio with the cost of investing in other mutual funds. The example
assumes: (i) you invest $10,000 for the periods shown, (ii) reinvest all
dividends and distributions in the Portfolio, (iii) you redeem all of your
shares at the end of the periods shown, (iv) your investment has a 5% annual
return, and (v) Portfolio operating expenses remain the same.
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Investment Institutional
Class Class
1 Year $ 177 $ 149
3 Years $ 548 $ 462
5 Years $ 944 $ 797
10 Years $2,052 $1,746
</TABLE>
Small Company Value Portfolio
The bar chart and the performance table below provides an indication of the
risks of investing in the Small Company Value Portfolio by showing how
Investment Class Shares of the Small Company Value Portfolio have performed in
the past and by showing how the Portfolio's average annual total returns compare
to those of the Index. The Portfolio's past performance does not necessarily
indicate how it will perform in the future.
BAR CHART (GRAPHIC OMITTED)
EDGAR REPRESENTATION OF DATA POINTS
USED IN PRINTED GRAPHIC
Calendar Year Total Return
------------- ------------
1992 7.92% *
1993 11.15%
1994 (4.54%)
1995 25.15%
1996 13.94%
1997 31.20%
1998 (5.57%)
* Total return since inception.
During the period shown in the bar chart, the highest return for a quarter was
12.67% for the quarter ended June 30, 1997 and the lowest return for a quarter
was (16.05%) for the quarter ended September 30, 1998. The year-to-date return
for the period from January 1, 1999 through September 30, 1999 is (9.99%).
The returns for the Portfolio's Investment Class Shares were slightly lower than
the Institutional Class Shares because Investment Class Shares pay Rule 12b-1
fees.
Average Annual Total Returns
(for the period ended December 31, 1998)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Since
1 year 5 years inception*
- ------------------------------------------------------------------------------------------
Investment Class (5.57%) 11.02% 11.93%
Institutional Class (5.45%) - 15.22%
Wilshire 5000 Index 23.43% 21.78% 20.44%**
</TABLE>
* Inception date (commencement of investment operations): Investment Class
- September 30, 1992 and
Institutional Class - July 15, 1996
** Beginning September 30, 1992
<PAGE>
Fees and expenses of the Small Company Value Portfolio
As a benefit of investing in the Portfolio, you do not incur any sales loads,
redemption fees or exchange fees. This table shows the fees and expenses you may
pay when you buy and hold portfolio shares.
Annual Portfolio Operating Expenses (expenses that are deducted from the
Portfolio's assets):
(as a percentage of average daily net assets)
<TABLE>
<CAPTION>
<S> <C> <C>
Investment Institutional
Class Class
Management Fees+......................................... 0.25% 0.25%
12b-1 Fee ............................................... 0.25% None
Other Expenses........................................... 0.73% 0.75%
---- ----
Total Portfolio Operating Expenses+...................... 1.23% 1.00%
</TABLE>
+ The Adviser has agreed to waive a portion of its advisory fees until further
notice. After this waiver, Management Fees are expected to be 0.10%, and
Total Portfolio Operating Expenses are expected to be 1.08% and 0.85% for the
Investment Class shares and Institutional Class shares, respectively.
Example:
This example helps you to compare the cost of investing in the Small Company
Value Portfolio with the cost of investing in other mutual funds. The example
assumes you: (i) you invest $10,000 for the periods shown, (ii) you reinvest all
dividends and distributions in the Portfolio, (iii) you redeem all of your
shares at the end of the periods shown, (iv) your investment has a 5% annual
return, and (v) Portfolio operating expenses remain the same.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Investment Institutional
Class Class
1 Year $ 125 $ 102
3 Years $ 390 $ 318
5 Years $ 676 $ 552
10 Years $1,489 $1,225
</TABLE>
Wilshire 5000 Index Portfolio
There is no performance history for the Index Portfolio since it has been
operating for less than one year.
Fees and expenses of the Wilshire 5000 Index Portfolio
As a benefit of investing in the Portfolio, you do not incur any sales loads,
redemption fees or exchange fees. This table shows the fees and expenses you may
pay when you buy and hold Index Portfolio shares.
<PAGE>
Annual Portfolio Operating Expenses (expenses that are deducted from the
Portfolio's assets):
(as a percentage of average daily net assets)
<TABLE>
<CAPTION>
<S> <C> <C>
Investment Institutional
Class Class
Management Fees*......................................... 0.10% 0.10%
12b-1 Fee ............................................... 0.25% None
Other Expenses*.......................................... 0.25% 0.25%
---- ----
Total Portfolio Operating Expenses (after expense 0.60% 0.35%
reimbursements)*.......................................
</TABLE>
* The Adviser has agreed to completely waive the management fee until
December 31, 1999. The Adviser has also agreed to reimburse expenses to
maintain the Portfolio's total expenses (other than Rule 12b-1 fees) at
.35% of the Portfolio's average daily net assets until at least
September 30, 2000, subject to later possible recoupment. Without this
agreement, Other Expenses would be 0.98% and 0.98%, and Total Portfolio
Operating Expenses would be 1.33% and 1.08% for the Investment Class
Shares and the Institutional Class Shares, respectively.
Example:
This example helps you to compare the cost of investing in the Index Portfolio
with the cost of investing in other mutual funds. The example assumes: (i) you
invest $10,000 for the periods shown, (ii) reinvest all dividends and
distributions in the Portfolio, (iii) you redeem all of your shares at the end
of the periods shown, (iv) your investment has a 5% annual return, and (v)
Portfolio operating expenses remain the same.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Investment Institutional
Class Class
1 Year $ 135 $ 110
3 Years $ 421 $ 343
5 Years $ 729 $ 595
10 Years $1,601 $1,317
</TABLE>
MORE INFORMATION ABOUT INVESTMENTS AND RISKS
Style Portfolios
Wilshire Target Funds offers focused exposure to four distinct segments of the
U.S. market - large company growth, large company value, small company growth
and small company value. Each Style Portfolio owns only securities which
correspond to that style. Each Portfolio is described in more detail below.
Large company and small company criteria. In June of each year, Wilshire
identifies the stocks of the 2,500 companies with the largest market
capitalizations from the Index. It divides those stocks into two groups:
Large companies are the 750 companies with the largest market
capitalizations. These companies were approximately 88% of the
total market value of the stocks included in the Index on June 30,
1999.
Small companies are the 1,750 next largest companies based on
market capitalizations. These companies were approximately 9% of
the total market value of the stocks included in the Index on June
30, 1999.
<PAGE>
The remaining companies were less than 3% of the total market value of the
stocks included in the Index.
Growth and value criteria. From these large and small capitalization universes,
Wilshire then identifies growth stocks and value stocks. To determine whether a
company's stock is a growth stock or a value stock, Wilshire analyzes
fundamental factors such as price to book value ratios, price to earnings
ratios, earnings growth, dividend pay-out ratios, return on equity, and the
issuer's beta (a measure of a company's stock price volatility relative to the
market generally).
Value companies have relatively low price to book value ratios,
low price to earnings ratios, and higher than average dividend
payments in relation to price.
Growth companies have above average earnings or sales growth,
above average retention of earnings, and higher price to earnings
ratios.
The number of securities eligible for investment by a Portfolio at any time
varies, but generally ranges from 150 to 500 stocks.
To maintain a proper style exposure in each Portfolio, the Adviser changes the
Portfolios' holdings as companies' characteristics change. The Adviser sells
stocks that no longer meet the criteria of a particular Style Portfolio. For
example, the Adviser may consider a stock to no longer be a value stock if its
price advances strongly.
The Adviser tries to maintain a fully invested position in the Portfolios at all
times. This means that the Portfolios hold little uninvested cash, thus ensuring
that you receive the full benefit of any market advances.
Index Portfolio
The Index Portfolio provides exposure to the U.S. stock market as a whole by
investing primarily in the common stocks of companies included in the Wilshire
5000 Index. The Index is an unmanaged capitalization weighted index of over
7,000 U.S. equity securities and includes all the U.S. stocks regularly traded
on the New York Stock Exchange, the American Stock Exchange and the NASDAQ
over-the-counter market. The Index Portfolio does not hold all securities
included in the Index; it normally holds stocks securities representing at least
90% of the Index's total market value, which is between 2,000 and 3,000 stocks.
The Adviser manages the Index Portfolio using a "quantitative" or "indexing"
investment approach. It attempts to duplicate the performance of the Index
(before the deduction of Portfolio expenses) through statistical sampling
procedures. Wilshire does not use traditional methods of fund investment
management, such as selecting stocks based on financial analysis of individual
issuers and analysis of economic, industry and market trends. It selects stocks
based primarily on market capitalization and industry weightings.
<PAGE>
Over time, Wilshire expects the correlation between the performance of the Index
and the Index Portfolio to be over 0.95 before the deduction of Portfolio
expenses. A correlation of 1.00 would indicate that the Index Portfolio's
performance exactly matched that of the Index. The Index Portfolio's ability to
track the Index's performance may be affected by factors such as the Portfolio's
expenses, changes in stocks represented in the Index, and the timing and amount
of sales and redemptions of Portfolio shares.
Temporary Investments
During adverse market or economic conditions, or to meet large withdrawals, a
Portfolio temporarily may invest all or a part of its assets in defensive
investments. These investments include U.S. government securities and high
quality U.S. dollar-denominated money market securities, including certificates
of deposit, bankers' acceptances, commercial paper, short-term debt securities
and repurchase agreements. When following a defensive strategy a Portfolio will
be less likely to achieve its goal.
Risk Information
Investing in the Portfolios involves the following principal risks:
Equity Risk. The principal risk of investing in the Portfolios is equity risk.
This is the risk that the prices of stocks held by a Portfolio will change due
to general market and economic conditions, perceptions regarding the industries
in which the companies participate, and each company's particular circumstances.
Index Risk. There is a risk that the Index Portfolio's performance may not match
the Index exactly. Unlike the Index, the Index Portfolio incurs administrative
expenses and transaction costs in trading stocks. The Index Portfolio does not
hold every stock contained in the Index and there is a risk that the performance
of the stocks held in the Index Portfolio may not track exactly the performance
of the stocks held in the Index.
Style Risk. Another risk of investing in a Style Portfolio is the risk that the
style will perform poorly or fall out of favor with investors. For example, at
times the market may favor large capitalization stocks over small capitalization
stocks, value stocks over growth stocks, and vice versa.
Year 2000 Risk. The date related computer issues known as the "Year 2000
problem" could have an adverse impact on the quality of services provided to the
Portfolios and their shareholders. Wilshire does not expect that the Wilshire
Target Funds will incur material costs to be Year 2000 compliant. There can be
no guarantee, however, that all Year 2000 issues will be identified and
corrected by January 1, 2000. The Year 2000 problem also may adversely affect
the companies in which a Portfolio invests. However, because the objectives of
the Portfolios are to provide the investment results of specific portions of the
Index or the Index as a whole, Wilshire does not attempt to monitor the impact
of the problem on individual companies.
MANAGEMENT OF THE PORTFOLIOS
Investment Adviser
Wilshire Associates Incorporated is the investment adviser for the Portfolios.
Wilshire is located at 1299 Ocean Avenue, Santa Monica, California 90401. It was
formed in 1972 and as of September 1, 1999, managed approximately $10 billion in
assets. Wilshire makes all investment decisions for the Portfolios.
<PAGE>
The Portfolios paid Wilshire the advisory fees shown below during the last
fiscal year. Wilshire has agreed to waive its advisory fees and reimburse
expenses for the Index Portfolio to cap its expenses (other than distribution
fees) at 0.35% until September 30, 2000. Wilshire may recoup the amounts of such
fee waivers and expense reimbursements for any year in the following two-year
period , but only if the repayment would not increase the Portfolio's expense
ratio (excluding Rule 12b-1 fees) in the year paid above 0.35%. Wilshire has
also agreed to reduce its advisory fee for the Small Company Growth and Small
Company Value Portfolios to 0.10% until further notice.
Management fee as a % of average
Portfolio daily net assets of the Portfolio
Large Company Growth Portfolio 0.25%
Large Company Value Portfolio 0.25%
Small Company Growth Portfolio 0.10%
Small Company Value Portfolio 0.10%
Wilshire 5000 Index Portfolio 0.10%
Thomas D. Stevens is the primary portfolio manager as well as the President and
Chairman of Wilshire Target Funds. He has been a Senior Vice President and
principal of Wilshire for more than the past five years, and has been employed
by Wilshire since 1980.
Service and Distribution Plan
Each Portfolio has adopted a service and distribution plan for its Investment
Class Shares. The Plan authorizes payments by the Investment Class Shares
annually of up to 0.25% of the average daily net assets attributable to the
Portfolio's Investment Class Shares to finance distribution of those Shares and
services to their shareholders. Payments may be made under the Plan to
securities dealers and other financial intermediaries who provide services such
as answering shareholders' questions regarding their accounts, providing
shareholders with account statements and trade confirmations and forwarding
prospectuses and shareholder reports. Distribution expenses covered by the Plan
include marketing and advertising expenses and the costs of printing
prospectuses for prospective investors.
SHAREHOLDER INFORMATION
How to Buy Portfolio Shares
You may buy shares without a sales charge on any day when the New York Stock
Exchange (NYSE) is open for business (referred to as a business day). We reserve
the right to reject any purchase order if we believe it is in a Portfolio's best
interest to do so. The Portfolios do not issue share certificates.
Minimum Investments
The minimum initial investments in a Portfolio are as follows:
Investment Class Shares. The minimum initial investment in each Style
Portfolio is $2,500, and $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 at least $2,500. The minimum initial investment in
the Index Portfolio is $1,000. Subsequent investments must be at least $100. The
minimum investments do not apply to certain employee benefit plans.
Institutional Class Shares. The minimum initial investment is $250,000.
Subsequent investments must be at least $100,000
Your initial investment must be accompanied by an Account Application. You may
obtain an Account Application by calling 1-888-200-6796. We may waive or change
investment minimum requirements at any time.
You may purchase shares through your financial advisor or brokerage account
simply by telling your advisor or broker that you wish to purchase shares of a
Portfolio. Your advisor or broker will then transmit a purchase order and
payment to the Portfolio on your behalf. Your advisor or broker may require a
different minimum investment or impose additional limitations on buying and
selling shares.
You also may purchase shares directly from us as follows:
(1) Checks. Checks should be made payable to "Wilshire Target Funds, Inc." For
subsequent investments, your Portfolio account number should appear on the
check. Payments should be mailed to:
Wilshire Target Funds, Inc.
P.O. Box 60488
King of Prussia, Pennsylvania
19406-0488
Include your investment slip or, when opening a new account, your Account
Application, indicating the name of the Portfolio. No investments may be made by
third party checks.
(2) Wire payments. You can pay by wire 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. Send immediately available funds by wire
to:
Boston Safe Deposit and Trust Company (ABA #011001234)
[Portfolio Name]
DDA #065-587
(Portfolio Account No. or Taxpayer Identification No.
for new accounts)
Dealer No., 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 us, as no redemptions
will be permitted until the Account Application is received.
(3) Accumulation plan (Investment Class Shares only). The Accumulation Plan
permits you to purchase shares (minimum of $100 per transaction) at regular
intervals. This may be a convenient way for you to invest for long-term and
intermediate financial goals. Shares are purchased by electronically
transferring funds from the bank account you designate. Your bank account will
be debited in a specified amount, and shares will be purchased -- once a month,
on either the first or fifteenth day, or twice a month, on both days, however
you designate. You may only designate an account maintained at a domestic
financial institution which is an Automated Clearing House member. To establish
an Accumulation Plan account, you must file an authorization form with us. You
may obtain the necessary authorization form by calling 1-888-200-6796. You may
cancel your participation in the Accumulation Plan 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. The notification
will be effective three business days after we receive it.
(4) Electronic funds transfer. You may make subsequent investments (minimum of
$100 per transaction) 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 Name]
[Shareholder Account Number]
Account of (Registered Shareholder)
How to Sell Portfolio Shares
You may sell your shares back to a Portfolio (known as redeeming shares) on any
business day without a redemption fee. A Portfolio may temporarily stop
redeeming its shares when the NYSE is closed or trading on the NYSE is
restricted, when an emergency exists and the Portfolio cannot sell its shares or
accurately determine the value of its assets, or if the Securities and Exchange
Commission orders the Portfolio to suspend redemptions. We reserve the right to
impose a redemption fee in the future.
You may redeem your shares in a Portfolio as follows:
(a) By telephone. You may redeem your shares by telephone if you have checked
the appropriate box on your Account Application or you have filed a Shareholder
Services Form with us authorizing telephone redemption. Call 1-888-200-6796 with
your account number, the amount of redemption and instructions as to how you
wish to receive your funds.
1. Telephone Redemption by Check. We will make checks payable to
the name in which the account is registered and normally will
mail the check to you at your address of record within seven
days after we receive your request. Any request for redemption
proceeds to be sent to the address of record must be in
writing with the signature guaranteed if made within 60 days
of changing your address.
2. Telephone Redemption by Wire. We accept telephone requests for
wire redemptions of at least $1,000 per Portfolio. We will
send a wire to either a bank designated on your Account
Application or on a subsequent letter with a guaranteed
signature. Your designated bank must be a member of the
Federal Reserve system or a correspondent bank. We normally
wire proceeds on the next business day after we receive your
request.
(b) By mail. You may also redeem your shares by mailing a request to: Wilshire
Target Funds, Inc., P.O. Box 60488, King of Prussia, Pennsylvania 19406-0488. We
normally will mail a check to you at your address of record within seven days
after we receive your request. Your letter should state the name of the
Portfolio and the share class, the dollar amount or number of shares you are
redeeming, and your account number. You must sign the letter in exactly the same
way the account is registered and if there is more than one owner of shares, all
owners must sign. We require a signature guarantee for each signature on your
redemption letter if you redeem more than $50,000.
Signature Guarantees. If a signature guarantee is required, you can obtain a
signature guarantee from financial institutions such as commercial banks,
brokers, dealers and savings associations. A notary public cannot provide a
signature guarantee.
Involuntary redemption. We may redeem all shares in your account if their value
falls below $500, in the case of Investment Class shares, or $150,000, in the
case of Institutional Class shares, as a result of redemptions (but not as a
result of a decline in their net asset value). We will notify you in writing and
give you 45 days to increase the value of your account to at least $500, in the
case of Investment Class shares, and $150,000, in the case of Institutional
Class shares.
Redemption Proceeds. You cannot redeem shares until we have received your
Account Application. If you purchased your shares by check, you may not redeem
shares until the check clears, which may take up to 15 days following purchase.
Although we will delay the processing of the redemption until the check clears,
your shares will be valued at the next determined net asset value after we
receive your redemption order.
A Portfolio may pay your redemption proceeds wholly or partly in securities.
This would happen only in the rare instance that the Wilshire Target Funds Board
of Directors believes it would be in a Portfolio's best interest not to pay
redemption proceeds in cash. When you sell these securities you will pay
brokerage commissions.
If you choose to receive distributions in cash and distribution checks are
returned as undeliverable, or remain uncashed for six months, we will change
your account so that all future distributions are reinvested in your account.
Checks that remain uncashed for six months will be canceled and the money
reinvested in the Portfolio.
No interest is paid during the time a redemption check is outstanding.
<PAGE>
Telephone Transactions. If you authorize telephone transactions, bear in mind
that you may be responsible for any fraudulent telephone transaction in your
account so long as Wilshire Target Funds and its service providers follow
reasonable procedures to protect against unauthorized transactions. All
telephone calls are recorded for your protection and you will be asked for
information to verify your identification. You may have difficulty reaching us
by telephone to request a redemption of your shares. In that case you may mail
your redemption request to the address stated above.
Pricing of Shares
When you purchase shares of either class of a Portfolio, the price you pay per
share is the "net asset value" of the shares next determined after we receive
your purchase order. Similarly, the price you receive when you redeem your
shares is the net asset value of the shares next determined after we receive
your redemption request. We calculate the net asset value per share of each
class of each Portfolio at the close of business on the NYSE on each business
day. Net asset value of a class of shares is calculated by adding the value of
the individual securities held by a Portfolio and attributable to the class,
subtracting the liabilities of that class, and dividing by the total number of
the shares of that class outstanding. We value each individual security a
Portfolio holds by using market quotations; if a market quotation is not
available a fair value is determined by or under the direction of the Board of
Directors of Wilshire Target Funds.
How to Exchange Portfolio Shares
You may exchange your shares in a Portfolio for shares of the same class of
another Portfolio. You also may exchange shares of one class for shares of
another class of the same Portfolio, provided you meet the eligibility
requirements (including minimum investment amounts) for purchase. You can also
exchange shares of a Portfolio for shares of the American Advantage Money Market
Fund, provided you meet the eligibility requirements for its purchase. Note that
exchanges from one Portfolio to another Portfolio are taxable transactions while
exchanges from one class to another class of the same Portfolio are not taxable
transactions.
You may exchange shares through your financial advisor or broker or directly
through Wilshire Target Funds as follows:
(a) By Mail. You may make an exchange by writing us at Wilshire Target Funds,
Inc., P.O. Box 60488, King of Prussia, Pennsylvania 19406-0488. Your letter
should state the name of the Portfolio and share class you are exchanging, the
number of shares you are exchanging and the name of the Portfolio and share
class you are acquiring, as well as your name, account number and taxpayer
identification or social security number.
(b) By Telephone. Call us at 1-888-200-6796 and give us the information stated
above under "By Mail". To exchange shares by telephone, you must have authorized
telephone exchanges on your Account Application or have filed a Shareholder
Services Form with us authorizing telephone exchanges.
Shares will be exchanged at their net asset value next determined
after we receive your exchange request.
We reserve the right to reject any exchange request in whole or in
part.
We may modify or terminate the availability of exchanges at any time
with notice to shareholders. You should read the prospectus of the
Portfolio whose shares you are acquiring.
Retirement Plans
Wilshire Target Funds 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 please call
1-888-200-6796.
DIVIDEND AND DISTRIBUTION INFORMATION
Each Portfolio intends to pay any dividends and capital gain distributions at
least once a year. You may have dividends or capital gains distributions of a
Portfolio automatically reinvested at net asset value in additional shares of
the Portfolio. You will make an election to receive dividends and distributions
in cash or shares at the time you purchase your shares. You may change this
election by notifying us in writing at any time before the record date for a
particular dividend or distribution. There are no sales or other charges for the
reinvestment of dividends and capital gains distributions. There is no fixed
dividend rate, and there can be no assurance that a Portfolio will pay any
dividends or realize any capital gains. Dividends and distributions may differ
for different classes of a Portfolio.
The value of your shares will be reduced by the amount of any dividends and
distributions. If you purchase shares shortly before the record date for a
dividend or distribution of capital gains, you will pay the full price for the
shares and receive some portion of the price back as a taxable dividend or
distribution.
TAX INFORMATION
We expect that each Portfolio's distributions will consist primarily of net
investment income and capital gains, which may be taxable at different rates
depending on the length of time the Portfolio holds its assets. Dividends out of
net investment income and distributions of realized short-term capital gains are
taxable to you as ordinary income. Distributions of net long-term capital gains
are taxable to you at long-term capital gain rates. A Portfolio's distributions
may be subject to federal, state or local taxes whether you receive them in cash
or reinvest them in additional shares of the Portfolio. An exchange of a
Portfolio's shares for shares of another Portfolio will be treated for tax
purposes as a sale of the Portfolio's shares, and any gain you realize on the
exchange may be taxable. Foreign shareholders may be subject to special
withholding requirements.
This summary of tax consequences is intended for general information only. You
should consult a tax adviser concerning the tax consequences of your investment
in a Portfolio.
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the financial
performance of the Portfolios' shares for the past five years (or for the period
since a particular Portfolio began operations or a particular class of shares
was first offered). Certain information reflects the financial performance of a
single share. The total returns in the table represent the rate that an investor
would have earned or lost on an investment in the Portfolios (assuming
reinvestment of all dividends and distributions). This information has been
audited by PricewaterhouseCoopers LLP, whose report, along with the Portfolios'
financial statements and related notes, are included in the annual report, which
is available on request.
<PAGE>
You will receive semi-annual reports dated
February 28, and annual reports dated
August 31 each year. The annual report contains a discussion of the market
conditions and investment strategies that significantly affected each
Portfolio's performance during its last fiscal year.
Statement of Additional Information (SAI)
The SAI provides more detailed information about the Portfolios and is
incorporated into this prospectus by reference.
How to Obtain Reports
You can get free copies of annual and semi-annual reports and SAIs, request
other information and discuss your questions about the Portfolios by contacting
us at:
Wilshire Target Funds, P.O. Box 60488, King of Prussia, Pennsylvania
19406-0488, or by calling toll free 1-888-200-6796. (http://www.wilfunds.com)
You can review the annual and semi-annual reports and SAIs at the Public
Reference Room of the Securities and Exchange Commission. You can get text only
copies:
For a fee by writing to or calling the Public Reference Room of the Commission,
Washington, D.C. 20549-6009 Telephone 1-800-SEC-0330
Free from the Commission's Internet web site at
http://www._Hlt460130734s_Hlt460130734ec.gov.
WILSHIRE TARGET FUNDS, INC.
Investment and Institutional Class Shares
of the
Large Company Growth Portfolio
Large Company Value Portfolio
Small Company Growth Portfolio
Small Company Value Portfolio
Wilshire 5000 Index Portfolio
(Investment Company Act file No. 811-7076)
<PAGE>
W I L S H I R E
- -----------------------------------------------------------
- -----------------------------------------------------------
Prospectus
____, 1999
Qualified Class Shares
of
Wilshire 5000 Index Portfolio
(http://www.wilfunds.com)
------------------------------------------------------------------------------
As with all mutual funds, the Securities and Exchange
Commission has not approved or disapproved any shares of
this fund or determined if this prospectus is accurate or
complete. Anyone who tells you otherwise is committing a
crime.
-------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
Introduction...................................................................
Investment and Risk Summary....................................................
Main Investment Strategies............................................
Who May Want to Invest in the Portfolio...............................
Main Investment Risks.................................................
Performance and Fee Information.......................................
More Information about Investments and Risks...................................
Management of the Portfolio....................................................
Investment Adviser....................................................
Distribution Plan....................................................
Shareholder Services Plan.............................................
Shareholder Information........................................................
Purchases and Redemptions of Shares...................................
Pricing of Shares.....................................................
Dividend and Distribution Information..........................................
Tax Information................................................................
Financial Highlights..................................................
<PAGE>
INTRODUCTION
This prospectus describes the Qualified Class shares of the Wilshire 5000 Index
Portfolio offered by the Wilshire Target Funds, Inc.
The Wilshire 5000 Index Portfolio Investment Objective: to replicate as
closely as possible the performance of
the Wilshire 5000 Index (referred to
as the Index in this prospectus)before
the deduction of fund expenses. This
Portfolio is an index fund and is
called the Portfolio in this
prospectus.
The Portfolio's investment goal may not be changed without approval of its
shareholders in accordance with the Investment Company Act of 1940, as amended
(the "1940 Act"). The Portfolio is not guaranteed to meet its goal.
On the following pages you will find important information about the Portfolio
and its Qualified Class shares, including:
the main investment strategies used by Wilshire Associates Incorporated
(the "Adviser" or "Wilshire") in trying to achieve the Portfolio's
objective,
the main risks of an investment in the Portfolio, the Portfolio's past
performance, and fees and expenses that you will pay as a shareholder.
shapeType202fFlipH0fFlipV0lTxid131072hspNext1027Portfolio shares are not
deposits or obligations of, or guaranteed or endorsed by, any bank. The shares
are not insured or guaranteed by the Federal Deposit Insurance Corporation, the
Federal Reserve Board, or any other government agency. You could lose money by
investing in the Portfolio.
Portfolio shares are not deposits or obligations of, or guaranteed or endorsed
by, any bank. The shares are not insured or guaranteed by the Federal Deposit
Insurance Corporation, the Federal Reserve Board, or any other government
agency. You could lose money by investing in the Portfolio.
INVESTMENT AND RISK SUMMARY
Main Investment Strategies
Wilshire 5000 Index Portfolio
Invests primarily in the common stock of companies included in
the Index that are representative of the entire Index
Uses a "quantitative" or "indexing" investment approach, which
tries to duplicate the investment composition and performance of
the Index through statistical procedures
Normally holds stocks representing at least 90% of the total
market value of the Index
The Index includes all U. S. stocks regularly traded on the New York and
American Stock Exchanges and the NASDAQ over-the-counter market. It includes
over 7,000 stocks, with each stock weighted according to its market value. This
means that companies having a larger stock capitalization will have a larger
impact on the Index. The Index has been computed continuously since 1974, is
published daily in many major newspapers and is the broadest measure of the U.S.
equity market.
<PAGE>
Who may want to invest in the Portfolio
Individuals cannot invest in Qualified Class shares directly. Qualified
Class shares are available only through a variable annuity contract your
employer bought from an insurance company (an "Insurer").
The Portfolio may appeal to you if:
you are a long-term investor or saver
you seek growth of capital
you seek to capture the returns of the entire U.S.equity
market
you seek the potential risk reduction of broad
diversification across both large and small capitalization
stocks and both value and growth stocks
you seek an index fund which, unlike an S&P 500 index
fund, includes stocks of small- and mid-capitalization, as
well as large capitalization, companies.
Main Investment Risks
The Portfolio's share price will fluctuate with changes in the market value of
the securities it owns. All securities are subject to market, economic and
business risks that cause their prices to fluctuate. These fluctuations may not
be related to the fundamental characteristics of the companies issuing the
securities. Because the Portfolio provides a broad exposure to the U.S. stock
market rather than focusing on a distinct segment of the market such as small
capitalization value stocks, it is less volatile and therefore less risky than a
fund which provides exposure to a particular segment of the U.S. stock market.
Performance and Fee Information
There is no performance history for the Portfolio since it has been operating
for less than one year.
Fees and expenses of the Qualified Class shares
As a benefit of investing in the Portfolio, you do not incur any sales loads,
redemption fees or exchange fees. This table shows the fees and expenses you may
pay when you buy and hold Qualified Class shares of the Portfolio. These fees
and expenses do not reflect expenses imposed by separate accounts of the
Insurers through which an investment in the Portfolio is made. See your
employer's variable annuity contract disclosure document for a description of
those contract charges and expenses.
<PAGE>
Annual Portfolio Operating Expenses (expenses that are deducted from the
Portfolio's assets):
(as a percentage of average daily net assets)
<TABLE>
<CAPTION>
<S> <C>
Qualified
Class
Management Fees*........................................................... 0.10%
12b-1 Fee ................................................................. 0.25%
Other Expenses*............................................................ 0.40%
----
Total Portfolio Operating Expenses (after expense reimbursements)*..... 0.75%
</TABLE>
* The Portfolio maintains a shareholder services plan which allows for
expenditures at an annual rate of 0.15% of the Portfolio's average
daily net assets with respect to the Qualified Class shares. The
Adviser has agreed to completely waive the management fee until
December 31, 1999. The Adviser has also agreed to reimburse expenses to
maintain the Portfolio's total expenses (other than Rule 12b-1 fees and
shareholder services plan fees) at .35% of the Portfolio's average
daily net assets until at least September 30, 2000, subject to later
possible recoupment. Without this agreement, Other Expenses would be
0.98% and Total Portfolio Operating Expenses would be 1.33%.
Example:
This example helps you to compare the cost of investing in the Qualified Class
shares of the Portfolio with the cost of investing in other mutual funds. The
example assumes: (i) you invest $10,000 for the periods shown, (ii) reinvest all
dividends and distributions in the Portfolio, (iii) you redeem all of your
shares at the end of the periods shown, (iv) your investment has a 5% annual
return, and (v) Portfolio operating expenses remain the same.
Qualified
Class
1 Year $135
3 Years $421
More Information About Investments and Risks
Wilshire 5000 Index Portfolio
The Portfolio provides exposure to the U.S. stock market as a whole by investing
primarily in the common stocks of companies included in the Index. The Index is
an unmanaged capitalization weighted index of over 7,000 U.S. equity securities
and includes all the U.S. stocks regularly traded on the New York Stock
Exchange, the American Stock Exchange and the NASDAQ over-the-counter market.
The Portfolio does not hold all securities included in the Index; it normally
holds stocks representing at least 90% of the Index's total market value, which
is between 2,000 and 3,000 stocks.
The Adviser manages the Portfolio using a "quantitative" or "indexing"
investment approach. It attempts to duplicate the performance of the Index
(before the deduction of Portfolio expenses) through statistical sampling
procedures. Wilshire does not use traditional methods of fund investment
management, such as selecting stocks based on financial analysis of individual
issuers and analysis of economic, industry and market trends. It selects stocks
based primarily on market capitalization and industry weightings.
Over time, Wilshire expects the correlation between the performance of the Index
and the Portfolio to be over 0.95 before the deduction of Portfolio expenses. A
correlation of 1.00 would indicate that the Portfolio's performance exactly
matched that of the Index. The Portfolio's ability to track the Index's
performance may be affected by factors such as the Portfolio's expenses, changes
in stocks represented in the Index, and the timing and amount of sales and
redemptions of Portfolio shares.
Temporary Investments
During adverse market or economic conditions, or to meet large withdrawals, the
Portfolio temporarily may invest all or a part of its assets in defensive
investments. These investments include U.S. government securities and high
quality U.S. dollar-denominated money market securities, including certificates
of deposit, bankers' acceptances, commercial paper, short-term debt securities
and repurchase agreements. When following a defensive strategy the Portfolio
will be less likely to achieve its goal.
Risk Information
Investing in the Portfolio involves the following principal risks:
Equity Risk. The principal risk of investing in the Portfolio is equity risk.
This risk is the risk that the prices of stocks held by the Portfolio will
change due to general market and economic conditions, perceptions regarding the
industries in which the companies participate, and each company's particular
circumstances.
Index Risk. There is a risk that the Portfolio's performance may not match the
Index exactly. Unlike the Index, the Portfolio incurs administrative expenses
and transaction costs in trading stocks. The Portfolio does not hold every stock
contained in the Index and there is a risk that the performance of the stocks
held in the Portfolio may not track exactly the performance of the stocks held
in the Index.
Year 2000 Risk. The date related computer issues known as the "Year 2000
problem" could have an adverse impact on the quality of services provided to the
Portfolio and its shareholders. Wilshire does not expect that the Wilshire
Target Funds will incur material costs to be Year 2000 compliant. There can be
no guarantee, however, that all Year 2000 issues will be identified and
corrected by January 1, 2000. The Year 2000 problem also may adversely affect
the companies in which the Portfolio invests. However, because the objective of
the Portfolio is to provide the investment results of the Index, Wilshire does
not attempt to monitor the impact of the problem on individual companies.
MANAGEMENT OF THE PORTFOLIO
Investment Adviser
Wilshire Associates Incorporated is the investment adviser for the Portfolio.
Wilshire is located at 1299 Ocean Avenue, Santa Monica, California 90401. It was
formed in 1972 and as of September 1, 1999, managed approximately $10 billion in
assets. Wilshire makes all investment decisions for the Portfolio.
<PAGE>
The Portfolio paid Wilshire no advisory fee during the last fiscal year,
however; Wilshire is entitled to receive an annual advisory fee equal to 0.10%
of the average daily net assets of the Portfolio. Wilshire has agreed to waive
its advisory fees and reimburse expenses for the Portfolio to cap its expenses
(other than distribution fees and shareholder services plan fees) at 0.35% until
September 30, 2000. Wilshire may recoup the amounts of such fee waivers and
expense reimbursements in the following two year period, but only if the
repayment would not increase the Portfolio's expense ratio (excluding Rule 12b-1
fees) in the year paid above 0.35%.
Thomas D. Stevens is the primary portfolio manager as well as the President and
Chairman of Wilshire Target Funds. He has been a Senior Vice President and
principal of Wilshire for more than the past five years, and has been employed
by Wilshire since 1980.
Service and Distribution Plan
The Portfolio has adopted a Service and Distribution Plan for its Qualified
Class shares. The Plan authorizes payments by the Qualified Class shares
annually of up to 0.25% of the average daily net assets attributable to the
Portfolio's Qualified Class shares to finance distribution of those shares and
services to their shareholders. Payments may be made under the Plan to
securities dealers and other financial intermediaries who provide services such
as answering shareholders' questions regarding their accounts, providing
shareholders with account statements and trade confirmations and forwarding
prospectuses and shareholder reports. Distribution expenses covered by the Plan
include marketing and advertising expenses and the costs of printing
prospectuses for prospective investors.
Shareholder Services Plan
The Qualified Class shares has adopted a shareholder services plan which
authorizes payments by the Qualified Class shares annually of up to 0.15% of the
average daily net assets attributable to the Portfolio's Qualified Class shares
for certain shareholder services provided by Insurers or other financial
intermediaries.
SHAREHOLDER INFORMATION
Purchases and Redemptions of Shares
You cannot invest in Qualified Class shares directly. Instead, you can
participate through a variable annuity contract purchased by your employer from
an Insurer with which the Portfolio has entered into an agreement. The
availability of the Qualified Class shares depends on the provisions of the
variable annuity contract. For more information, see your employer's contract
disclosure document.
Qualified Class shares of the Portfolio are offered to Insurers without a sales
charge. Each Insurer submits purchase and redemption orders to us on a daily
basis. Insurers may purchase shares on any day when the New York Stock Exchange
(NYSE) is open for business (referred to as a business day). We reserve the
right to reject any purchase order if we believe it is in the Portfolio's best
interest to do so. The Portfolio does not issue share certificates.
<PAGE>
When an Insurer purchases Qualified Class shares of the Portfolio, the price it
pays per share is the "net asset value" of the shares next determined after we
receive its purchase order. Similarly, the price an Insurer receives when it
redeems shares is the net asset value of the shares next determined after we
receive its redemption request. We calculate the net asset value per share of
each class of the Portfolio at the close of business on the NYSE on each
business day. Net asset value is calculated by adding the Qualified Class' share
of the value of the individual securities held by the Portfolio, subtracting the
liabilities of that class and dividing by the total number of Qualified Class
shares outstanding. We value each individual security the Portfolio holds by
using market quotations; if a market quotation is not available a fair value is
determined by or under the direction of the Board of Directors of Wilshire
Target Funds.
DIVIDEND AND DISTRIBUTION INFORMATION
The Portfolio intends to pay any dividends and capital gain distributions at
least once a year. Dividends and capital gains distributions of the Portfolio
will be automatically reinvested at net asset value in additional Qualified
Class shares of the Portfolio. There are no sales or other charges for the
reinvestment of dividends and capital gains distributions. There is no fixed
dividend rate, and there can be no assurance that the Portfolio will pay any
dividends or realize any capital gains. Dividends and distributions may differ
for different classes of the Portfolio.
The value of your Qualified Class shares will be reduced by the amount of any
dividends and distributions. If an Insurer purchases shares shortly before the
record date for a dividend or distribution of capital gains, it will pay the
full price for the shares and receive some portion of the price back as a
taxable dividend or distribution.
TAX INFORMATION
The 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 to Insurers from net realized
gains unless capital loss carryovers, if any, have been utilized or have
expired. The Portfolio intends to distribute substantially all of its net
investment income and net realized securities gains on a current basis. All
expenses are accrued daily and deducted before declaration of dividends to
investors.
For a discussion of the impact on you of income taxes an Insurer may owe as a
result of its ownership of shares of the Portfolio, its receipt of dividends and
distributions on those shares, and its gains from the purchase and sale of
shares, see your employer's contract disclosure document.
This summary of tax consequences is intended for general information only. You
should consult a tax adviser concerning the tax consequences of an Insurer's
investment in the Portfolio.
<PAGE>
FINANCIAL HIGHLIGHTS
The Qualified Class shares of the Portfolio have not previously been offered and
therefore do not have previous financial history.
<PAGE>
You will receive semi-annual reports dated February 28, and annual reports dated
August 31 each year. The annual report contains a discussion of the market
conditions and investment strategies that significantly affected the Portfolio's
performance during its last fiscal year.
Statement of Additional Information (SAI)
The SAI provides more detailed information about the Portfolio and is
incorporated into this prospectus by reference.
How to Obtain Reports
You can get free copies of annual and semi-annual reports and SAIs, request
other information and discuss your questions about the Portfolio by contacting
us at:
Wilshire Target Funds, P.O. Box 60488, King of Prussia, Pennsylvania
19406-0488, or by calling toll free 1-888-200-6796. (http://www.wilfunds.com)
You can review the annual and semi-annual reports and SAIs at the Public
Reference Room of the Securities and Exchange Commission. You can get text only
copies:
For a fee by writing to or calling the Public Reference Room of the Commission,
Washington, D.C. 20549-6009 Telephone 1-800-SEC-0330
Free from the Commission's Internet web site at http://www.sec.gov.
WILSHIRE TARGET FUNDS, INC.
Qualified Class Shares
of the
Wilshire 5000 Index Portfolio
(Investment Company Act file No. 811-7076)
<PAGE>
Prospectus
____, 1999
Horace Mann Class of Shares
of
Wilshire 5000 Index Portfolio
Offered by Horace Mann Investors, Inc.
------------------------------------------------------------------------------
As with all mutual funds, the Securities and Exchange
Commission has not approved or disapproved any shares of
this fund or determined if this prospectus is accurate or
complete. Anyone who tells you otherwise is committing a
crime.
------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
Introduction...................................................................
Investment and Risk Summary....................................................
Main Investment Strategies...........................................
Who May Want to Invest in the Portfolio...............................
Main Investment Risks.................................................
Performance and Fee Information........................................
More Information about Investments and Risks....................................
Management of the Portfolio....................................................
Investment Adviser.....................................................
Distribution Plan.....................................................
Shareholder Information.........................................................
How to Purchase Portfolio Shares.......................................
How to Sell Portfolio Shares..........................................
Pricing of Shares .............................................................
Dividend and Distribution Information..........................................
Tax Information................................................................
Financial Highlights..................................................
<PAGE>
INTRODUCTION
This prospectus describes the Horace Mann Class of shares of the Wilshire 5000
Index Portfolio offered by the Wilshire Target Funds, Inc. (the "Company", "we"
or "us").
The Wilshire 5000 Index Portfolio Investment Objective: to replicate as
closely as possible the performance of
the Wilshire 5000 Index (referred to
as the Index in this prospectus)before
the deduction of fund expenses. This
Portfolio is an index fund and is
called the Portfolio in this
prospectus.
The Portfolio's investment goal may not be changed without approval of its
shareholders in accordance with the Investment Company Act of 1940, as amended
(the "1940 Act"). The Portfolio is not guaranteed to meet its goal.
On the following pages you will find important information about the Portfolio
and its Horace Mann Class of shares, including:
the main investment strategies used by Wilshire Associates Incorporated
(the "Adviser" or "Wilshire") in trying to achieve the Portfolio's
objective,
the main risks of an investment in the Portfolio, and
fees and expenses that you will pay as a shareholder.
shapeType202fFlipH0fFlipV0lTxid196608hspNext1028Portfolio shares are not
deposits or obligations of, or guaranteed or endorsed by, any bank. The shares
are not insured or guaranteed by the Federal Deposit Insurance Corporation, the
Federal Reserve Board, or any other government agency. You could lose money by
investing in the Portfolio.
Portfolio shares are not deposits or obligations of, or guaranteed or endorsed
by, any bank. The shares are not insured or guaranteed by the Federal Deposit
Insurance Corporation, the Federal Reserve Board, or any other government
agency. You could lose money by investing in the Portfolio.
INVESTMENT AND RISK SUMMARY
Main Investment Strategies
Wilshire 5000 Index Portfolio
Invests primarily in the common stock of companies included in the
Index that are representative of the entire Index
Uses a "quantitative" or "indexing" investment approach, which
tries to duplicate the investment composition and performance of
the Index through statistical procedures
Normally holds stocks representing at least 90% of the total
market value of the Index
The Index includes all U.S. stocks regularly traded on the New York and American
Stock Exchanges and the NASDAQ over-the-counter market. It includes over 7,000
stocks, with each stock weighted according to its market value. This means that
companies having a larger stock capitalization will have a larger impact on the
Index. The Index has been computed continuously since 1974, is published daily
in many major newspapers and is the broadest measure of the U.S. equity market.
<PAGE>
Who may want to invest in the Portfolio?
The Portfolio may appeal to you if:
you are a long-term investor or saver
you seek growth of capital
you seek to capture the returns of the entire U.S. equity market
you seek the potential risk reduction of broad
diversification across both large and small capitalization
stocks and both value and growth stocks
you seek an index fund which, unlike an S&P 500 index
fund, includes stocks of small- and mid-capitalization, as
well as large capitalization, companies.
Main Investment Risks
The Portfolio's share price will fluctuate with changes in the market value of
the securities it owns. All securities are subject to market, economic and
business risks that cause their prices to fluctuate. These fluctuations may not
be related to the fundamental characteristics of the companies issuing the
securities. Because the Portfolio provides a broad exposure to the U.S. stock
market rather than focusing on a distinct segment of the market such as small
capitalization value stocks, over time it is less volatile and therefore less
risky than a fund which provides exposure to a particular segment of the U.S.
stock market.
Performance and Fee Information
As of the date of this Prospectus, the Portfolio has been operating for less
than one year and, therefore, no performance history is included.
Performance for the Wilshire 5000 Index, the Portfolio's benchmark, has been
included for the one, five, ten, fifteen and twenty years ended December 31,
1998 and the nine months ended September 30, 1999. Note that past performance of
the Index is not indicative of the Portfolio's performance. This is not the
Portfolio's performance.
Average Annual Total Return
Years Ended Wilshire 5000
December 31, 1998 Index
Year to Date 9/30/99 4.47%
1 Year 23.43%
5 Years 21.78%
10 Years 18.11%
15 Years 16.67%
20 Years 17.20%
Fees and expenses of the Horace Mann Class shares
As a benefit of investing in the Portfolio, you do not incur any sales loads or
redemption fees. This table shows the fees and expenses you may pay when you buy
and hold Horace Mann shares of the Portfolio.
Annual Portfolio Operating Expenses (expenses that are deducted from the
Portfolio's assets):
(as a percentage of average daily net assets)
<TABLE>
<CAPTION>
<S> <C>
Horace Mann
Class
Management Fees*........................................................... 0.10%
12b-1 Fee ................................................................. 0.35%
Other Expenses*............................................................ 0.25%
----
Total Portfolio Operating Expenses (after expense reimbursements)*..... 0.70%
</TABLE>
* The Adviser has agreed to completely waive the Management Fee until
December 31, 1999. The Adviser has also agreed to reimburse expenses to
maintain the Portfolio's total expenses (other than Rule 12b-1 fees) at
.35% of the Portfolio's average daily net assets until at least
September 30, 2000, subject to later possible recoupment. Without this
agreement, Other Expenses would be 0.98% and Total Portfolio Operating
Expenses would be 1.43%.
Example:
This example helps you to compare the cost of investing in the Horace Mann Class
shares of the Portfolio with the cost of investing in other mutual funds. The
example assumes: (i) you invest $10,000 for the periods shown, (ii) reinvest all
dividends and distributions in the Portfolio, (iii) you redeem all of your
shares at the end of the periods shown, (iv) your investment has a 5% annual
return, and (v) Portfolio operating expenses remain the same.
Horace Mann
Class
1 Year $146
3 Years $452
More Information About Investments and Risks
Wilshire 5000 Index Portfolio
The Portfolio provides exposure to the U.S. stock market as a whole by investing
primarily in the common stocks of companies included in the Index. The Index is
an unmanaged capitalization weighted index of over 7,000 U.S. equity securities
and includes all the U.S. stocks regularly traded on the New York Stock
Exchange, the American Stock Exchange and the NASDAQ over-the-counter market.
The Portfolio does not hold all securities included in the Index; it normally
holds stocks representing at least 90% of the Index's total market value, which
is between 2,000 and 3,000 stocks.
The Adviser manages the Portfolio using a "quantitative" or "indexing"
investment approach. It attempts to duplicate the performance of the Index
(before the deduction of Portfolio expenses) through statistical sampling
procedures. Wilshire does not use traditional methods of fund investment
management, such as selecting stocks based on financial analysis of individual
issuers and analysis of economic, industry and market trends. It selects stocks
based primarily on market capitalization and industry weightings.
<PAGE>
Over time, Wilshire expects the correlation between the performance of the Index
and the Portfolio to be over 0.95 before the deduction of Portfolio expenses. A
correlation of 1.00 would indicate that the Portfolio's performance exactly
matched that of the Index. The Portfolio's ability to track the Index's
performance may be affected by factors such as the Portfolio's expenses, changes
in stocks represented in the Index, and the timing and amount of sales and
redemptions of Portfolio shares.
Temporary Investments
During adverse market or economic conditions, or to meet large withdrawals, the
Portfolio temporarily may invest all or a part of its assets in defensive
investments. These investments include U.S. government securities and high
quality U.S. dollar-denominated money market securities, including certificates
of deposit, bankers' acceptances, commercial paper, short-term debt securities
and repurchase agreements. When following a defensive strategy the Portfolio
will be less likely to achieve its goal.
Risk Information
Investing in the Portfolio involves the following principal risks:
Equity Risk. The principal risk of investing in the Portfolio is equity risk.
This risk is the risk that the prices of stocks held by the Portfolio will
change due to general market and economic conditions, perceptions regarding the
industries in which the companies participate, and each company's particular
circumstances.
Index Risk. There is a risk that the Portfolio's performance may not match the
Index exactly. Unlike the Index, the Portfolio incurs administrative expenses
and transaction costs in trading stocks. The Portfolio does not hold every stock
contained in the Index and there is a risk that the performance of the stocks
held in the Portfolio may not track exactly the performance of the stocks held
in the Index.
Year 2000 Risk. The date related computer issues known as the "Year 2000
problem" could have an adverse impact on the quality of services provided to the
Portfolio and its shareholders. Wilshire does not expect that the Wilshire
Target Funds will incur material costs to be Year 2000 compliant. There can be
no guarantee, however, that all Year 2000 issues will be identified and
corrected by January 1, 2000. The Year 2000 problem also may adversely affect
the companies in which the Portfolio invests. However, because the objective of
the Portfolio is to provide the investment results of the Index, Wilshire does
not attempt to monitor the impact of the problem on individual companies.
MANAGEMENT OF THE PORTFOLIO
Investment Adviser
Wilshire Associates Incorporated is the investment adviser for the Portfolio.
Wilshire is located at 1299 Ocean Avenue, Santa Monica, California 90401. It was
formed in 1972 and as of September 1, 1999, managed approximately $10 billion in
assets. Wilshire makes all investment decisions for the Portfolio.
The Portfolio paid Wilshire no advisory fee during the last fiscal year;
however, Wilshire is entitled to receive an annual advisory fee equal to 0.10%
of the average daily net assets of the Portfolio. Wilshire has agreed to waive
its advisory fees and reimburse expenses for the Portfolio to cap its expenses
(other than distribution fees) at 0.35% until September 30, 2000. Wilshire may
recoup the amounts of such fee waivers and expense reimbursements in the
following two year period, but only if the repayment would not increase the
Portfolio's expense ratio (excluding Rule 12b-1 fees) in the year paid above
0.35%.
Thomas D. Stevens is the primary portfolio manager as well as the President and
Chairman of the Company. He has been a Senior Vice President and principal of
Wilshire for more than the past five years, and has been employed by Wilshire
since 1980.
Service and Distribution Plan
The Portfolio has adopted a Service and Distribution Plan for its Horace Mann
Class shares. The Plan authorizes payments by the Company's Distributor annually
of 0.35% of the average daily net assets attributable to the Horace Mann Class
shares to finance distribution of those shares and services to their
shareholders. Pursuant to a Dealer's Agreement between the Distributor and
Horace Mann Investors, Inc. ("Horace Mann") the Distributor compensates Horace
Mann for providing services to holders of shares and for maintaining shareholder
accounts, including such as answering shareholder inquiries regarding the
Portfolio and providing shareholder reports and other information. Distribution
expenses covered by the Plan include marketing and advertising expenses and the
costs of printing prospectuses for prospective investors.
SHAREHOLDER INFORMATION
If you have questions about the Portfolio or your account you may call us at
1-888-200-6796 or the Horace Mann home office at 1-800-999-1030.
How to Purchase Portfolio Shares
You may buy Horace Mann Class shares without a sales charge on any day when the
New York Stock Exchange (NYSE) is open for business (referred to as a business
day). To purchase Horace Mann Class shares, contact us at 1-888-200-6796. We
reserve the right to reject any purchase order if we believe it is in the
Portfolio's best interest to do so. The Portfolio does not issue share
certificates.
The minimum initial investment in the Portfolio is $1,000. Subsequent
investments must be at least $100. Lower minimums are available for the
Scheduled Payment Plan. We may change the initial and subsequent minimum
investment requirements at any time.
You may purchase shares as follows:
<PAGE>
(1) Horace Mann Wilshire 5000 Scheduled Payment Plan. Horace Mann Wilshire 5000
Scheduled Payment Plan permits you to purchase shares (minimum of $50 per
transaction) at regular intervals. This service may provide you with a
convenient way to invest for long-term and intermediate financial goals. You may
purchase shares by electronically transferring funds from your bank account. You
may choose to have your bank account debited in a specified amount, and shares
purchased, either (i) once a month on the first or fifteenth day or (ii) twice a
month on both days. Your account must be at a bank which is an Automated
Clearing House member.
You may establish a Scheduled Payment Plan by either checking the appropriate
box on the account application or filing an authorization form with us. You may
obtain the necessary authorization form, cancel your participation in this
privilege or change the amount of purchase at any time (i) by mailing a letter
to Wilshire Target Funds Horace Mann Class shares, P.O. Box 60488, King of
Prussia, Pennsylvania 19406-0488 or (ii) by calling us at 1-888-200-6796. The
Company may modify or terminate this privilege at any time or charge a service
fee. No such fee currently is contemplated.
(2) Wire payments. You can pay by wire if your bank account is maintained at a
commercial bank that is a member of the Federal Reserve System or any other bank
having a correspondent bank in New York City. Send funds by wire to:
Boston Safe Deposit and Trust Company (ABA #011001234)
Wilshire Target Funds, Inc.-Horace Mann Class Shares
DDA #065-587
[(Portfolio Account No. or Your Taxpayer Identification
No. for new accounts)]
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 us, as no redemptions
will be permitted until the Account Application is received.
(3) Checks. Checks should be made payable to "Wilshire Target Funds-Horace Mann
Class Shares."
(4) Electronic Funds Transfer. You may make subsequent investments by electronic
transfer of funds from an account maintained in a bank that is an Automated
Clearing House member. The minimum purchase by electronic fund transfer is $500
and the maximum is $50,000 for any one transfer. You must direct the bank to
send funds through the Automated Clearing House to:
Boston Safe Deposit and Trust Company
Wilshire Target Funds-Horace Mann Class Shares
[Your Shareholder Account Number]
Account of [Your Name]
<PAGE>
How to Sell Portfolio Shares
You may sell your shares back to the Portfolio (known as redeeming shares) on
any business day without a redemption fee. The Portfolio may temporarily stop
redeeming its shares when the NYSE is closed or trading on the NYSE is
restricted, when an emergency exists and the Portfolio cannot sell its shares or
accurately determine the value of its assets, or if the Securities and Exchange
Commission orders the Portfolio to suspend redemptions. We reserve the right to
impose a redemption fee in the future.
(a) By telephone. To sell your shares in the Portfolio by telephone you may call
us at 1-888-200-6796. You may request that redemption proceeds be mailed to you
by check or forwarded to you by bank wire.
1. Telephone Redemption by Check. We will make checks payable to
the name in which the account is registered and normally will
mail the check to you at your address of record within seven
days after we receive your request. Any request for redemption
proceeds must be in writing with the signature guaranteed if
made within 60 days of changing your address of record.
2. Telephone Redemption by Wire. We accept telephone requests for
wire redemptions of at least $1,000 for the Portfolio. We will
send a wire to either a bank designated on your Account
Application or on a subsequent letter with a guaranteed
signature. Your designated bank must be a member of the
Federal Reserve system or a correspondent bank. We normally
wire proceeds on the next business day after we receive your
request.
(b) By mail. You may also sell your shares by mailing a request to: Wilshire
Target Funds, Inc., - Horace Mann Class shares, P.O. Box 60488, King of Prussia,
Pennsylvania 19406-0488. We normally will mail a check to you at your address of
record within seven days after we receive your request. Your letter should state
that you are redeeming Horace Mann Class Shares of the Wilshire 5000 Index
Portfolio, the dollar amount or number of shares you are redeeming, and your
account number. You must sign the letter in exactly the same way the account is
registered and if there is more than one owner of shares, all owners must sign.
We require a signature guarantee for each signature on your redemption letter if
you redeem more than $50,000.
Signature Guarantees. If a signature guarantee is required, you can obtain a
signature guarantee from financial institutions such as commercial banks,
brokers, dealers and savings associations. A notary public cannot provide a
signature guarantee.
Involuntary redemption. We may redeem all shares in your account if their value
falls below $500 (but not as a result of a decline in their net asset value). We
will notify you in writing and give you 45 days to increase the value of your
account to at least $500.
Redemption Proceeds. You cannot redeem shares until we have received your
Account Application. If you purchased your shares by check, you may not redeem
shares until the check clears, which may take up to 15 days following purchase.
Although we will delay the processing of the redemption until the check clears,
your shares will be valued at the next determined net asset value after we
receive your redemption order.
<PAGE>
The Portfolio may pay your redemption proceeds wholly or partly in securities.
This would happen only in the rare instance that the Wilshire Target Funds Board
of Directors believes it would be in the Portfolio's best interest not to pay
redemption proceeds in cash. When you sell these securities you will pay
brokerage commissions.
If you choose to receive distributions in cash and distribution checks are
returned as undeliverable, or remain uncashed for six months, we will change
your account so that all future distributions are reinvested in your account.
Checks that remain uncashed for six months will be canceled and the money
reinvested in the Portfolio.
No interest is paid during the time a redemption check is outstanding.
Telephone Transactions. If you authorize telephone transactions, bear in mind
that you may be responsible for any fraudulent telephone transaction in your
account so long as Wilshire Target Funds and its service providers follow
reasonable procedures to protect against unauthorized transactions. All
telephone calls are recorded for your protection and you will be asked for
information to verify your identification.
Pricing of Shares
When you purchase Horace Mann Class shares of the Portfolio, the price you pay
per share is the "net asset value" of the shares next determined after we
receive your purchase order. Similarly, the price you receive when you redeem
your shares is the net asset value of the shares next determined after we
receive your redemption request. We calculate the net asset value per share at
the close of business on the NYSE on each business day. Net asset value is
calculated by adding the Horace Mann Class' share of the value of the individual
securities held by the Portfolio, subtracting the liabilities of that class, and
dividing by the total number of Horace Mann Class shares outstanding. We value
each individual security the Portfolio holds by using market quotations; if a
market quotation is not available a fair value is determined by or under the
direction of the Board of Directors of Wilshire Target Funds.
DIVIDEND AND DISTRIBUTION INFORMATION
The Portfolio intends to pay any dividends and capital gain distributions at
least once a year. You may have dividends or capital gains distributions of the
Portfolio automatically reinvested at net asset value in additional shares of
the Portfolio. You will make an election to receive dividends and distributions
in cash or shares at the time you purchase your shares. You may change this
election by notifying us in writing at any time before the record date for a
particular dividend or distribution. There are no sales or other charges for the
reinvestment of dividends and capital gains distributions. There is no fixed
dividend rate, and there can be no assurance that the Portfolio will pay any
dividends or realize any capital gains. Dividends and distributions may differ
for different classes of the Portfolio.
<PAGE>
The value of your shares will be reduced by the amount of any dividends and
distributions. If you purchase shares shortly before the record date for a
dividend or distribution of capital gains, you will pay the full price for the
shares and receive some portion of the price back as a taxable dividend or
distribution.
TAX INFORMATION
We expect that the Portfolio's distributions will consist primarily of net
investment income and capital gains, which may be taxable at different rates
depending on the length of time the Portfolio holds its assets. Dividends out of
net investment income and distributions of realized short-term capital gains are
taxable to you as ordinary income. Distributions of net long-term capital gains
are taxable to you at long-term capital gain rates. The Portfolio's
distributions may be subject to federal, state or local taxes whether you
receive them in cash or reinvest them in additional shares of the Portfolio. An
exchange of the Portfolio's shares for shares of another Portfolio will be
treated for tax purposes as a sale of the Portfolio's shares, and any gain you
realize on the exchange may be taxable. Foreign shareholders may be subject to
special withholding requirements.
This summary of tax consequences is intended for general information only. You
should consult a tax adviser concerning the tax consequences of your investment
in the Portfolio.
FINANCIAL HIGHLIGHTS
As of the date of this Prospectus, the Portfolio has been operating for less
than one year and, therefore, financial highlights are not included.
<PAGE>
Shareholder Reports
You will receive semi-annual reports dated February 28, and annual reports dated
August 31 each year. The annual report contains a discussion of the market
conditions and investment strategies that significantly affected the Portfolio's
performance during its last fiscal year.
Statement of Additional Information (SAI)
The SAI provides more detailed information about the Portfolio and is
incorporated into this prospectus by reference.
How to Obtain Reports
You can get free copies of annual and semi-annual reports and SAIs, request
other information and discuss your questions about the Portfolio by contacting
us at:
Wilshire Target Funds, P.O. Box 60488, King of Prussia, Pennsylvania
19406-0488, or by calling toll free 1-888-200-6796.
You can review the annual and semi-annual reports and SAIs at the Public
Reference Room of the Securities and Exchange Commission. You can get text only
copies:
For a fee by writing to or calling the Public Reference Room of the Commission,
Washington, D.C. 20549-6009 Telephone 1-800-SEC-0330
Free from the Commission's Internet web site at http://www.sec.gov.
Horace Mann Class of Shares
of the
Wilshire 5000 Index Portfolio
(Investment Company Act file No. 811-7076)
<PAGE>
WILSHIRE TARGET FUNDS, INC.
LARGE COMPANY GROWTH PORTFOLIO
LARGE COMPANY VALUE PORTFOLIO
SMALL COMPANY GROWTH PORTFOLIO
SMALL COMPANY VALUE PORTFOLIO
WILSHIRE 5000 INDEX PORTFOLIO
INVESTMENT CLASS SHARES
INSTITUTIONAL CLASS SHARES
STATEMENT OF ADDITIONAL INFORMATION
(http://www.wilfunds.com)
________________, 1999
This Statement of Additional Information ("SAI") provides supplementary
information for the investment portfolios of Wilshire Target Funds, Inc.
("Company"): Large Company Growth Portfolio, Large Company Value Portfolio,
Small Company Growth Portfolio, Small Company Value Portfolio and Wilshire 5000
Index Portfolio (each a "Portfolio" and collectively the "Portfolios").
This Statement of Additional Information is not a prospectus, and it should
be read in conjunction with the prospectus for the Portfolios dated [ ]. You can
obtain the Portfolios' prospectus by contacting us at: Wilshire Target Funds,
Inc., P.O. Box 60488, King of Prussia, Pennsylvania 19406-0488, 888-200-6796
TABLE OF CONTENTS
The Portfolios.................................................................
Investment Policies and Risks..................................................
Investment Restrictions.......................................................
Directors and Officers.........................................................
Principal Holders of Securities................................................
Investment Advisory and Other Services.........................................
Code of Ethics..............................................................
Portfolio Transactions.........................................................
Net Asset Value................................................................
Purchase of Portfolio Shares..................................................
Redemption of Portfolio Shares.................................................
Shareholder Services...........................................................
Dividends, Distribution and Taxes.............................................
Performance Information........................................................
Other Information..............................................................
Financial Statements...........................................................
<PAGE>
THE PORTFOLIOS
The Company is a diversified, open-end investment management company that
currently offers shares of a number of series and classes, including Investment
Class Shares and Institutional Class Shares for the following Portfolios: Large
Company Growth Portfolios, Large Company Value Portfolios, Small Company Growth
Portfolios, Small Company Value Portfolio and Wilshire 5000 Index Portfolio. The
Company also offers other classes of shares of the Wilshire 5000 Index Portfolio
in separate prospectuses.
INVESTMENT POLICIES AND RISKS
All Portfolios may invest in the investments described below, except as
otherwise indicated.
U.S. Government Securities. Each Portfolio may purchase securities issued
or guaranteed by the U.S. Government or its agencies or instrumentalities, which
include U.S. Treasury securities of various interest rates, maturities and times
of issuance. Some obligations issued or guaranteed by U.S. Government agencies
and instrumentalities are supported by the full faith and credit of the U.S.
Treasury. Others are supported by the right of the issuer to borrow from the
Treasury, by discretionary authority of the U.S. Government to purchase certain
obligations of the agency or instrumentality, or by the credit of the agency or
instrumentality. These securities bear fixed, floating or variable rates of
interest. While the U.S. Government provides financial support to such U.S.
Government-sponsored agencies or instrumentalities, no assurance can be given
that it will always do so, since it is not so obligated by law.
Money Market Instruments. Each Portfolio may invest in money market instruments,
including certificates of deposit, time deposits, bankers' acceptances and other
short-term obligations issued by domestic banks, foreign subsidiaries or
branches of domestic banks, domestic and foreign branches of foreign banks,
domestic savings and loan associations and other banking institutions.
A certificate of deposit is a negotiable certificate requiring a bank to repay
funds deposited with it for a specified period of time.
A time deposit is a non-negotiable deposit maintained in a banking institution
for a specified period of time at a stated interest rate. A Portfolio will only
invest in time deposits of domestic banks that have total assets in excess of
one billion dollars. Time deposits held by the Portfolios will not benefit from
insurance administered by the Federal Deposit Insurance Corporation.
A bankers' acceptance is a credit instrument requiring a bank to pay a draft
drawn on it by a customer. These instruments reflect the obligation both of the
bank and of the drawer to pay the face amount of the instrument upon maturity.
Other short-term bank obligations in which the Portfolios may invest may include
uninsured, direct obligations bearing fixed, floating or variable interest
rates.
With respect to such securities issued by foreign branches and subsidiaries of
domestic banks, and domestic and foreign branches of foreign banks, a Portfolio
may be subject to additional investment risks that are different in some
respects from those incurred by a Portfolio which invests only in debt
obligations of U.S. domestic issuers. Such risks include possible future
political and economic developments, possible seizure or nationalization of
foreign deposits, the possible imposition of foreign withholding taxes on
interest income, the possible establishment of exchange controls or the adoption
of other foreign governmental restrictions which may adversely affect the
payment of principal and interest on these securities.
Repurchase Agreements. In a repurchase agreement, a Portfolio buys, and the
seller agrees to repurchase, a security at a mutually agreed upon time and price
(usually within seven days). The repurchase agreement thus determines the yield
during the purchaser's holding period, while the seller's obligation to
repurchase is secured by the value of the underlying security. A repurchase
agreement involves risks in the event of a default or insolvency of the other
party to the agreement, including possible delays or restrictions upon the
Portfolio's ability to dispose of the underlying securities. The Company's
custodian or sub-custodian will hold in a segregated account the securities
acquired by a Portfolio under a repurchase agreement. Repurchase agreements are
considered, under the Investment Company Act of 1940, as amended (the "1940
Act"), to be loans by the Portfolios. To try to reduce the risk of loss on a
repurchase agreement, the Portfolios will enter into repurchase agreements only
with domestic banks with total assets in excess of one billion dollars, only
with respect to securities of the type in which the Portfolio may invest, and
will require that additional securities be deposited with the custodian or
sub-custodian if the value of the securities purchased decreases below the
repurchase price.
Lending Portfolio Securities. The Portfolios may seek additional income by
lending their securities on a short-term basis to banks, brokers and dealers
under agreement. A Portfolio may return a portion of the interest earned to the
borrower or a third party which is unaffiliated with the Company and acting as a
"placing broker."
The Securities and Exchange Commission (the "SEC") currently requires that the
following lending conditions must be met: (1) the Portfolio must receive at
least 100% collateral from the borrower (cash, U.S. Government securities, or
irrevocable bank letters of credit); (2) the borrower must increase the
collateral whenever the market value of the loaned securities rises above the
level of such collateral; (3) the Portfolio must be able to terminate the loan
at any time; (4) the Portfolio must receive reasonable interest on the loan, as
well as any dividends, interest or other distributions payable on the loaned
securities, and any increase in market value; (5) the Portfolio may pay only
reasonable custodian fees in connection with the loan; and (6) while voting
rights on the loaned securities may pass to the borrower, the Company's Board of
Directors must be able to terminate the loan and regain the right to vote the
securities if a material event adversely affecting the investment occurs.
Even though loans of portfolio securities are collateralized, a risk of loss
exists if an institution that borrows securities from a Portfolio breaches its
agreement with the Portfolio and the Portfolio is delayed or prevented from
recovering the collateral.
Zero Coupon Securities. Each Portfolio, except the Wilshire 5000 Index
Portfolio, may invest in zero coupon U.S. Treasury securities, which are
Treasury notes and bonds that have been stripped of their unmatured interest
coupons, the coupons themselves, and receipts or certificates representing
interests in such stripped debt obligations and coupons. Each such Portfolio
also may invest in zero coupon securities issued by corporations and financial
institutions which constitute a proportionate ownership of the issuer's pool of
underlying U.S. Treasury securities. A zero coupon security pays no interest to
its holder during its life and is sold at a discount to its face value at
maturity. The amount of the discount fluctuates with the market price of the
security. The market prices of zero coupon securities generally are more
volatile than the market prices of securities that pay interest periodically and
are likely to respond more to changes in interest rates than non-zero coupon
securities with similar maturities and credit qualities.
Commercial Paper And Other Short-term Corporate Obligations. Commercial paper is
a short-term, unsecured promissory note issued to finance short-term credit
needs. The commercial paper purchased by a Portfolio will consist only of direct
obligations which, at the time of their purchase, are (a) rated at least Prime-1
by Moody's Investors Service, Inc., A-1 by Standard & Poor's Ratings Group, F-1
by Fitch Investors Service, L.P. or D-1 by Duff & Phelps Credit Rating Co.; (b)
issued by companies having an outstanding unsecured debt issue rated at least
Aa3 by Moody's Investors Service, Inc. or AA- by Standard & Poor's Ratings
Group, Fitch Investors Service, L.P. or Duff & Phelps Credit Rating Co.; or (c)
if unrated, determined by the Company to be of comparable quality.
These instruments include variable amount master demand notes, which are
obligations that permit a Portfolio to invest at varying rates of interest
pursuant to direct arrangements between the Portfolio, as lender, and the
borrower. These notes permit daily changes in the amounts borrowed. Because they
are direct lending arrangements between the lender and borrower, such
instruments generally will not be traded, and there generally is no established
secondary market for these obligations, although they are redeemable at face
value, plus accrued interest, at any time. If these obligations are not secured
by letters of credit or other credit support arrangements, a Portfolio's right
to redeem its investment depends on the ability of the borrower to pay principal
and interest on demand. In connection with floating and variable rate demand
obligations, Wilshire will consider, on an ongoing basis, earning power, cash
flow and other liquidity ratios of the borrower, and the borrower's ability to
pay principal and interest on demand. Such obligations frequently are not rated
by credit rating agencies, and a Portfolio may invest in them only if at the
time of an investment the borrower meets the criteria set forth above for other
commercial paper issuers.
Derivatives. Each Portfolio may invest, to a limited extent, in "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 use are currently comprised of stock index futures
and options. The Portfolios may invest in derivatives for a variety of reasons,
including to hedge against certain market risks, to provide a substitute for
purchasing or selling particular securities or to increase potential income
gain. Derivatives may provide a cheaper, quicker or more specifically focused
way for the Portfolio to invest than "traditional" securities.
Although the Wilshire 5000 Index Portfolio does not currently intend to invest
in derivatives, it reserves the right to do so in the future. Normally, less
than 5% of the Portfolio's net assets would be invested in derivatives.
Derivatives permit a Portfolio to increase, decrease or change the level of risk
to which its securities are exposed in much the same way as the Portfolio can
increase, decrease or change the risk of its investments by making investments
in specific securities. However, derivatives can be volatile and involve various
types and degrees of risk, depending upon the characteristics of the particular
derivative and the Portfolio as a whole. 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 of the Portfolio's shares.
In addition, derivatives may entail investment exposures that are greater than
their cost would suggest, meaning that a small investment in derivatives could
have a large potential impact on a Portfolio's performance. If a Portfolio
invests in derivatives at inappropriate times or judges market conditions
incorrectly, such investments may lower the Portfolio's return or result in a
loss. A Portfolio also could experience losses if its derivatives were poorly
correlated with its other investments, or if the Portfolio were unable to
liquidate its position because of an illiquid secondary market. The market for
many derivatives is, or suddenly can become, illiquid. Changes in liquidity may
result in significant, rapid and unpredictable changes in the prices for
derivatives.
When required by the SEC, a Portfolio will set aside permissible liquid assets
in a segregated account to cover its obligations relating to its purchase of
derivatives. To maintain this required cover, a Portfolio may have to sell
portfolio securities at disadvantageous prices or times. Derivatives may be
purchased on established exchanges ("exchange-traded" derivatives) or through
privately negotiated transactions ("over-the-counter" derivatives).
Exchange-traded derivatives generally are guaranteed by the clearing agency
which is the issuer or counterparty to such derivatives. This guarantee usually
is supported by a daily payment system operated by the clearing agency in order
to reduce overall credit risk. As a result, unless the clearing agency defaults,
there is relatively little counterparty credit risk associated with derivatives
purchased on an exchange. By contrast, no clearing agency guarantees
over-the-counter derivatives. Therefore, each party to an over-the-counter
derivative bears the risk that the counterparty will default. Accordingly,
Wilshire will consider the creditworthiness of counterparties to
over-the-counter derivatives in the same manner as it would review the credit
quality of a security to be purchased by a Portfolio. Over-the-counter
derivatives are less liquid than exchange-traded derivatives since the other
party to the transaction may be the only investor with sufficient understanding
of the derivative to be interested in bidding for it.
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.
Futures Transactions. A Portfolio may enter into futures contracts on particular
securities or stock indices in U.S. domestic markets, such as the Chicago Board
of Trade and the International Monetary Market of the Chicago Mercantile
Exchange. A futures contract is an agreement in which one party agrees to
deliver to the other an amount of cash equal to a specific dollar amount times
the difference between the value of a specific stock or stock index at the close
of the last trading day of the contract and the price at which the agreement is
made.
No physical delivery of securities is made.
Engaging in these transactions involves risk of loss to a Portfolio which could
affect the value of such Portfolio's net assets adversely. Although each
Portfolio intends to purchase or sell futures contracts only if there is an
active market for such contracts, no assurance exists that a liquid market will
exist for any particular contract at any particular time. Many futures exchanges
and boards of trade limit the amount of fluctuation permitted in futures
contract prices during a single trading day. Once the daily limit has been
reached in a particular contract, no trades may be made that day at a price
beyond that limit or trading may be suspended for specified periods during the
trading day. Futures contract prices could move to the limit for several
consecutive trading days with little or no trading, thereby preventing prompt
liquidation of futures positions and potentially subjecting a Portfolio to
substantial losses.
Successful use of futures by a Portfolio also is subject to the ability of
Wilshire to predict correctly movements in the direction of the relevant market
and, to the extent the transaction is entered into for hedging purposes, to
ascertain the appropriate correlation between the position being hedged and the
price movements of the futures contract. For example, if a Portfolio uses
futures to hedge against the possibility of a decline in the market value of
securities held in its portfolio and the prices of such securities instead
increase, the Portfolio will lose part or all of the benefit of the increased
value of securities which it has hedged because it will have offsetting losses
in its futures positions. Furthermore, if in such circumstances the Portfolio
has insufficient cash, it may have to sell securities to meet daily variation
margin requirements. A Portfolio may have to sell such securities at a time when
it may be disadvantageous to do so.
Pursuant to regulations and published positions of the SEC, a Portfolio may be
required to segregate cash or liquid assets in connection with its futures
transactions in an amount generally equal to the value of the contract. The
segregation of such assets will have the effect of limiting a Portfolio's
ability otherwise to invest those assets.
Options. The Wilshire 5000 Index Portfolio may write covered call options, buy
put options, buy call options and write secured put options on particular
securities or the Wilshire 5000 Index. Options trading is a highly specialized
activity which entails greater than ordinary investment risks. A call option for
a particular security gives the purchaser of the option the right to buy, and a
writer the obligation to sell, the underlying security at the stated exercise
price at any time prior to the expiration of the option, regardless of the
market price of the security. The premium paid to the writer is in consideration
for undertaking the obligations under the option contract. A put option for a
particular security gives the purchaser the right to sell the underlying
security at the stated exercise price at any time prior to the expiration date
of the option, regardless of the market price of the security.
Options on stock indices are similar to options on specific securities, except
that, rather than the right to take or make delivery of the specific security at
a specific price, an option on a stock index gives the holder the right to
receive, upon exercise of the option, an amount of cash if the closing level of
that stock index is greater than, in the case of a call option, or less than, in
the case of a put option, the exercise price of the option. This amount of cash
is equal to the difference between the closing price of the index and the
exercise price of the option expressed in dollars times a specified multiple.
The writer of the option is obligated, in return for the premium received, to
deliver this amount. Unlike options on specific securities, all settlements of
options on stock indices are in cash, and gain or loss depends on general
movements in the stocks included in the index rather than price movements in
particular stock.
Other Derivatives. A Portfolio may take advantage of opportunities in the area
of futures contracts and any other derivatives which presently are not
contemplated for use by the Portfolios or which currently are not available but
which may be developed, to the extent such opportunities are both consistent
with the Portfolio's investment objective and legally permissible for the
Portfolio. Before entering into such transactions or making any such investment,
the Portfolio will provide appropriate disclosure in its prospectus or SAI.
Foreign Securities. Each Portfolio may include securities of the foreign issuers
included in the Wilshire 5000 Index. Investments in foreign securities have
additional risks, including future political and economic developments, possible
imposition of withholding taxes on income payable on the securities, the
possible establishment of currency exchange controls, adoption of other foreign
governmental restrictions and possible seizure or nationalization of foreign
assets.
Preferred Stock. The Wilshire 5000 Index Portfolio may invest up to 5% of its
assets in preferred stock. Preferred Stock, unlike common stock, offers a stated
dividend rate payable from a corporation's earnings. Such preferred stock
dividends may be cumulative or non-cumulative, participating or auction rate. If
interest rates rise, the fixed dividend on preferred stocks may be less
attractive, causing the price of preferred stocks to decline. Preferred stock
may have mandatory sinking fund provisions, as well as call/redemption
provisions prior to maturity, a negative feature when interest rates decline.
Dividends on some preferred stock may be "cumulative," requiring all or a
portion of prior unpaid dividends to be paid before dividends are paid on the
issuer's common stock. Preferred stock also generally has a preference over
common stock on the distribution of a corporation's assets in the event of
liquidation of the corporation, and may be "participating," which means that it
may be entitled to a dividend exceeding the stated dividend in certain cases.
The rights of preferred stocks on the distribution of a corporation's assets in
the event of a liquidation are generally subordinate to the rights associated
with a corporation's debt securities.
Convertible Securities. The Wilshire 5000 Index Portfolio may invest up to 5% of
its assets in convertible securities when its appears to Wilshire that it may
not be prudent to be fully invested in common stocks. In evaluating a
convertible security, Wilshire places primary emphasis on the attractiveness of
the underlying common stock and the potential for capital appreciation through
conversion. Convertible securities may include corporate notes or preferred
stock but are ordinarily long-term debt obligations of the issuers convertible
at stated exchange rates into common stock of the issuers. As with all debt
securities, the market value of convertible securities tends to decline as
interest rates increase and, conversely, to increase as interest rates decline.
Convertible securities generally offer lower interest or dividend yields than
non-convertible securities of similar quality. However, when the market price of
the common stock underlying a convertible security exceeds the conversion price,
the price of the convertible security tends to reflect the value of the
underlying common stock. As the market price of the underlying common stock
declines, the convertible security tends to trade increasingly on a yield basis,
and thus may not depreciate to the same extent as the underlying common stock.
Convertible securities rank senior to common stocks in a issuer's capital
structure and are consequently of higher quality and entail less risk than the
issuer's common stock, although the extent to which such risk is reduced depends
in large measure upon the degree to which the convertible security sells above
its value as a fixed income security.
Warrants and Rights. The Wilshire 5000 Index Portfolio may invest up to 5% of
its assets in warrants and rights. Warrants are options to purchase equity
securities at a specified price valid for a specific period of time. Their
prices do not necessarily move parallel to the prices of the underlying
securities. Rights are similar to warrants, but generally are shorter in
duration and are distributed by the issuer directly to its shareholders.
Warrants and rights have no voting rights, receive no dividends and have no
rights to the assets of the issuer.
INVESTMENT RESTRICTIONS
The investment restrictions described below are fundamental policies of each
Portfolio and cannot be changed without the approval of a majority of the
Portfolio's outstanding voting shares (as defined by the 1940 Act). All
percentage limitations apply only at the time of the transaction. Subsequent
changes in value or in a Portfolio's total assets will not result in a violation
of the percentage limitations. No Portfolio may:
1. Invest in commodities, except that a Portfolio may purchase and sell options,
forward contracts, and futures contracts, including those relating to indices,
and options on futures contracts or indices.
2. Purchase, hold or deal in real estate or oil, gas or other mineral leases or
exploration or development programs, but a Portfolio may purchase and sell
securities that are secured by real estate or issued by companies that invest or
deal in real estate.
3. Borrow money, except for temporary or emergency (not leveraging) purposes in
an amount up to 33 1/3% of the value of the Portfolio's total assets (including
the amount borrowed) based on the lesser of cost or market, less liabilities
(not including the amount borrowed) at the time the borrowing is made. When
borrowings exceed 5% of the value of a Portfolio's total assets, the Portfolio
will not make any additional investments. For purposes of this investment
restriction, the entry into options, forward contracts, or futures contracts,
including those relating to indices and options on futures contracts or indices,
will not constitute borrowing.
4. Make loans to others, except through the purchase of debt obligations and
entry into repurchase agreements. However, each Portfolio may lend its portfolio
securities in an amount not to exceed 33 1/3% of the value of its total assets.
Any loans of portfolio securities will be made according to guidelines
established by the SEC and the Company's Board of Directors.
5. Act as an underwriter of securities of other issuers, except to the extent
the Portfolio may be deemed an underwriter under the Securities Act of 1933, as
amended, by virtue of disposing of portfolio securities.
<PAGE>
6. Invest more than 25% of its assets in the securities of issuers in any single
industry, provided there will be no limitation on the purchase of obligations
issued or guaranteed by the U.S. Government, its agencies or instrumentalities.
7. Invest more than 5% of its assets in the obligations of any single issuer,
except that up to 25% of the value of a Portfolio's total assets may be
invested, and securities issued or guaranteed by the U.S. Government, or its
agencies or instrumentalities may be purchased, without regard to any such
limitation.
8. With respect to 75% of a Portfolio's assets, hold more than 10% of the
outstanding voting securities of any single issuer.
9. Issue any senior security (as defined in Section 18(f) of the 1940 Act),
except to the extent that the activities permitted in investment restrictions
No. 1 and 3 may be deemed to give rise to a senior security.
The following investment restrictions are non-fundamental and may be
changed by a vote of a majority of the Company's Board of Directors. No
Portfolio may:
1. Invest in the securities of a company for the purpose of exercising
management or control, but a Portfolio will vote the securities it owns in its
portfolio as a shareholder in accordance with its views.
2. Enter into repurchase agreements providing for settlement in more than seven
days after notice or purchase securities which are illiquid, if, in the
aggregate, more than 15% of the value of the Portfolio's net assets would be so
invested.
3. Purchase securities of other investment companies, except to the extent
permitted under the 1940 Act or those received as part of a merger or
consolidation.
DIRECTORS AND OFFICERS
Under Maryland law, the business and affairs of the Portfolios and the Company
are managed under the direction of the Board of Directors. Information
pertaining to the Directors and officers is set forth below.
DIRECTORS
* Indicates that the Director is an "interested person" of the Company as
defined in the 1940 Act.
Name: *Thomas D. Stevens
Age: 50
Address: c/o Wilshire Associates Incorporated, 1299 Ocean Avenue,
Santa Monica, California 90401
Position: Chairman of the Board, President and Director
Principal occupation for last five years: Senior Vice President and Principal
of Wilshire for more than the past five years. He is the Chief Investment
Officer of the Wilshire Asset Management division of Wilshire. Wilshire Asset
Management is a provider of index and structured equity and fixed income
applications.
<PAGE>
Name: Dewitt F. Bowman
Age: 69
Address: 79 Eucalyptus Knoll, Mill Valley, CA 94941
Position: Director
Principal occupation for last five years. Since January 1994, Pension Investment
Consultant providing advice on large pension fund investment strategy, new
product evaluation and integration, and large plan investment analysis and
management. Currently a director of the RREEF America REIT, Dresdner RCM Capital
Fund, Inc. and Dresdner RCM Equity Funds, Inc., and trustee of the Pacific Gas &
Electric Nuclear Decommissioning Trust, Brandes Investment Trust and PCG Private
Equity Fund.
Name: *Robert J. Raab, Jr.
Age: 50
Address: c/o Wilshire Associates Incorporated, 1299 Ocean Avenue,
Santa Monica, California 90401
Position: Director
Principal occupation for last five years: Senior Vice President and Principal
of Wilshire for more than the past five years. He is head of Wilshire's
Institutional Services Division and is responsible for Wilshire Equity, Fixed
Income, Index Fund and Portfolio Accounting products.
Name: Anne Wexler
Age: 68
Address: c/o The Wexler Group, 1317 F Street, N.W., Suite 600,
Washington, D.C. 20004
Position: Director
Principal occupation for last five years. Chairman of the Wexler Group,
consultants specializing in government relations and public affairs, for more
than fifteen years. She is also a director of Alumax, The Dreyfus Corporation,
Comcast Corporation, The New England Electric System, Nova Corporation, and
sixteen mutual funds in the Dreyfus mutual fund family. In addition, she is a
member of the Board of the Carter Center of Emory University, the Council of
Foreign Relations, the National Park Foundation, the Visiting Committee of the
John F. Kennedy School of Government at Harvard University and the Board of
Visitors of the University of Maryland School of Public Affairs.
Name: Cynthia A. Hargadon
Age: 44
Address: c/o National Auto Dealers Association, Retirement Trust,
8400 Westpark Drive, McLean, VA 22102
Position: Director Principal occupation for last five years. Since July 1998,
Director of Investments for the National Automobile Dealers Association.
From November 1996 to July 1998, President of Stable Value Investment
Association, Inc., educating the public about stable value as a fixed income
alternative and how to use it in the asset allocation process for defined
contribution plan participants. She is also a project consultant of Johnson
Custom Strategies, Inc. an independent investment services firm providing
specialized asset management strategies to institutional clients. From May 1987
to November 1996, Senior Vice-President and Chief Investment Officer of ICMA
Retirement Corporation, a retirement plan administrator. For so long as the plan
described in "Service and Distribution Plan" remains in effect, the Directors of
the Company who are not "interested persons" of the Company, as defined in the
1940 Act, will be selected and nominated by the Directors who are not
"interested persons" of the Company.
<PAGE>
The Company pays its Directors who are not "interested persons" of the Company
an annual retainer of $3,000 and a fee of $2,500 per meeting. The aggregate
amount of compensation paid to each current Director by the Company for the
fiscal year ended August 31, 1999, is shown below:
NAME OF AGGREGATE
DIRECTORCOMPENSATION
PAID BY WILSHIRE
DeWitt F. Bowman $9,750
Cynthia A. Hargadon $9,750
Robert J. Raab, Jr $0
Thomas D. Stevens $0
Anne L. Wexler $9,750
.
OFFICERS
Name: David R. Borger
Age: 50
Address: c/o Wilshire Associates Incorporated, 1299 Ocean Avenue,
Santa Monica, California 90401
Position: Vice President and Treasurer
Principal occupation for last five years. Vice President and Principal of the
Company and Director of Research for its Wilshire Asset Management division for
more than five years.
Name: Alan L. Manning
Age: 50
Address: c/o Wilshire Associates Incorporated, 1299 Ocean Avenue,
Santa Monica, California 90401
Position: Secretary
Principal occupation for last five years. Since 1990, Vice President, Secretary
and General Counsel of the Company.
Name: Michael J. Napoli, Jr.
Age: 48
Address: c/o Wilshire Associates Incorporated, 1299 Ocean Avenue,
Santa Monica, California 90401
Position: Vice President
Principal occupation for last five years. Vice President and Principal of the
Company for more than five years. Director of Marketing for Wilshire Asset
Management division.
Name: Julie A. Tedesco
Age: 42
Address: c/o First Data Investor Services Group, Inc., 101 Federal
Street, Boston, MA 02110
Position: Vice President and Assistant Secretary of the Company
Principal occupation for last five years. Since May 1994, Counsel to First Data
Investor Services Group, Inc. ("Investor Services Group").
Name: Therese M. Hogan
Age: 37
Address: c/o First Data Investor Services Group, Inc., 101 Federal
Street, Boston, MA 02110
Position: Vice President and Assistant Secretary of the Company
Principal occupation for last five years: Since June 1994, Manager (State
Regulation) of Investor Services Group.
Name: Kenneth J. Kempf
Age: 49
Address: c/o First Data Investor Services Group, Inc., 3200 Horizon
Drive, King of Prussia, Pennsylvania
19406
Position: Assistant Treasurer of the Company
Principal occupation for last five years. Since 1998, Senior Vice-President of
Investor Services Group. From November 1993 to February 1998, President and
Chief Executive Officer of FPS Services, Inc. ("FPS"), King of Prussia,
Pennsylvania.
Name: Gerald J. Holland
Age: 48
Address: c/o First Data Investor Services Group, Inc., 3200 Horizon
Drive, King of Prussia, Pennsylvania
19406
Position: Assistant Treasurer of the Company
Principal occupation for last five years. Since 1997, Vice President of Investor
Services Group's Fund Administration Department. From 1994 to 1997, Vice
President of FPS.
Name: Robert C. Herforth
Age: 30
Address: c/o First Data Investor Services Group, Inc., 3200 Horizon
Drive, King of Prussia, Pennsylvania
19406
Position: Assistant Treasurer of the Company
Principal occupation for last five years. Since 1997, Senior Financial
Administrator of Investor Services Group's Financial Reporting Department. From
1995 to 1997, Financial Administrator of FPS. Prior to 1995, he was a Supervisor
in the Transfer Agent Control Department of FPS.
Name: George Graner
Age: 30
Address: c/o First Data Investor Services Group, Inc., 3200 Horizon
Drive, King of Prussia, Pennsylvania
19406
Position: Assistant Treasurer of the Company
Principal occupation for last five years. Since 1999 Senior Section Manager of
Investor Services Group's Financial Reporting Department. From 1992 to 1999, Mr.
Graner served in various capacities with FPS and Investor Services Group.
<PAGE>
Name: Brian O'Neill
Age: 31
Address: c/o First Data Investor Services Group, Inc., 3200 Horizon
Drive, King of Prussia, Pennsylvania
19406
Position: Assistant Treasurer of the Company
Principal occupation for last five years. Since 1997, Manager of Investor
Services Group's Financial Reporting Department. From 1992 to 1997, Mr. O'Neill
served in various capacities with FPS.
As of September 30, 1999, the Directors and officers of the Company as a group
owned less than 1% of the outstanding shares of each class of the Portfolios.
Wilshire is controlled by its President, Dennis Tito, who owns a majority of its
outstanding voting stock.
PRINCIPAL HOLDERS OF SECURITIES
Listed below are the names and addresses of those shareowners who owned of
record or beneficially 5% or more of each class of shares of the Portfolios as
of September 30, 1999. Shareowners who have the power to vote a large percentage
of shares of a particular Portfolio may be in a position to control the
Portfolio and determine the outcome of a shareholder meeting. A shareowner who
owns, directly or indirectly, 25% or more of a Portfolio's voting securities may
be deemed to be a "control person," as defined by the 1940 Act.
LARGE COMPANY GROWTH PORTFOLIO
Investment Class
<TABLE>
<CAPTION>
<S> <C>
Shareholders Percentage Owned
Charles Schwab & Co. 57.97%
Attn: Mutual Funds
Reinvest Account
101 Montgomery Street
San Francisco, CA 94104
LARGE COMPANY GROWTH PORTFOLIO
Institutional Class
Shareholders Percentage Owned
Charles Schwab & Co. 39.02%
Attn: Mutual Funds
Reinvest Account
101 Montgomery Street
San Francisco, CA 94104
Cincinnati Bell Collectively 18.56%
Bargained Retirees Health Corp. TR.
Mail Location: 102-732
201 E 4th Street
Cincinnati, OH 45202
FTC & Co. 9.96%
Attn: Datalynk #093
P.O. Box 173736
Denver, CO 80217
<PAGE>
LARGE COMPANY VALUE PORTFOLIO
Investment Class
Shareholders Percentage Owned
Charles Schwab & Co. 33.55%
Attn: Mutual Funds Dept.
Reinvest Account
101 Montgomery Street
San Francisco, CA 94104
NFSC FEBO #179-621722 8.03%
Robert Chynowet
R. Chynowet R. Wheeler TTEES
U/A 07/01/1984
P.O. Box 2335
Casper, WY 82602
National Investors Services Corp. 7.14%
Exclusively FBO Our Customers
55 Water St., FL 32
New York, NY 10041
NFSC FEBO #279-048518 5.07%
Bill Hyde
Bill Hyde TTEE
U/A 01/01/89
P.O. Box 797
Addison, TX 75001
LARGE COMPANY VALUE PORTFOLIO
Institutional Class
Shareholders Percentage Owned
Cincinnati Bell Collectively 32.25%
Bargained Retirees Heath Care TR
Mail Location: 102-732
201 E 4th St.
Cincinnati, OH 45202
SMALL COMPANY GROWTH PORTFOLIO
Investment Class
Shareholders Percentage Owned
Charles Schwab & Co. 48.62%
Attn: Mutual Funds
Reinvest Account
101 Montgomery St.
San Francisco, CA 94104
Charles Schwab & Co. 5.45%
Attn: Mutual Funds Dept.
Cash Account
101 Montgomery St.
San Francisco, CA 94104
<PAGE>
SMALL COMPANY GROWTH PORTFOLIO
Institutional Class
Shareholders Percentage Owned
Cincinnati Bell Collectively 97.88%
Bargained Retirees Health Care TR
Mail Location : 102-732
201E 4th St.
Cincinnati, OH 45202
SMALL COMPANY VALUE PORTFOLIO
Investment Class
Shareholders Percentage Owned
Charles Schwab & Co. 18.93%
Mutual Funds Dept.
Reinvest Account
101 Montgomery St.
San Francisco, CA 94104
National Financial Services Corp. 5.99%
Exclusively FBO Our Customers
55 Water St.
32nd Floor
New York, NY 10041
SMALL COMPANY VALUE PORTFOLIO
Institutional Class
Shareholders Percentage Owned
Cincinnati Bell Collectively 96.41%
Bargained Retirees Health Care TR
Mail Location : 102-732
201 E 4th St.
Cincinnati, OH 45202
WILSHIRE 5000 INDEX PORTFOLIO
Investment Class
Shareholder Percentage Owned
Charles Schwab & Co. 87.24%
Attn: Mutual Funds
Reinvest Account
101 Montgomery St.
San Francisco, CA 94104
<PAGE>
WILSHIRE 5000 INDEX PORTFOLIO
Institutional Class
Shareholder Percentage Owned
Donaldson Lufkin Jenrette 22.69%
Securities Corporation Inc.
P.O. Box 2052
Jersey City, NJ 07303
Donaldson Lufkin Jenrette 17.47 %
Securities Corporation Inc.
P.O. Box 2052
Jersey City, NJ 07303
Dain Rauscher Cust. 15.63%
Sandra Spinatsch
Sandra Spinatsch ISERP
Profit Sharing Plan
3410D Northline Ave
Greensboro, NC 27410
Donald Lufkin Jenrette 12.31%
Securities Corporation Inc.
P.O. Box 2052
Jersey City, NJ 07303
Donald Lufkin Jenrette 8.31%
Securities Corporation Inc.
P.O. Box 2052
Jersey City, NJ 07303
Donald Lufkin Jenrette 7.12%
Securities Corporation Inc.
P.O. Box 2052
Jersey City, NJ 07303
Donaldson Lufkin Jenrette 6.91%
Securities Corporation Inc.
P.O. Box 2052
Jersey City, NJ 07303
Donald Lufkin Jenrette 5.55%
Securities Corporation Inc.
P.O. Box 2052
Jersey City, NJ 07303
</TABLE>
INVESTMENT ADVISORY AND OTHER SERVICES
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 Provident Distributors Inc. ("PDI"), 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 PDI, 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 PDI, 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.
Investment Advisory Agreement and Fees. Wilshire provides investment advisory
services to the Portfolios pursuant to an Investment Advisory Agreement dated
July 11, 1996, (the" Advisory Agreement") as amended June 8, 1998. All advisory
fees are accrued daily. For the fiscal years ended August 31, 1997, 1998, and
1999, the advisory fees for each Portfolio payable to Wilshire, the reductions
attributable to voluntary fee waivers, and the net fees paid with respect to the
Portfolios, were as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1997
Advisory Reduction Net
Portfolio Fee Payable in Fee Fee Paid
Large Company Growth Portfolio $156,239 $93,760 $62,479
Large Company Value Portfolio $102,886 $61,731 $41,155
Small Company Growth Portfolio $46,788 $28,073 $18,715
Small Company Value Portfolio $93,963 $56,378 $37,585
1998
Advisory Reduction Net
Portfolio Fee Payable in Fee Fee Paid
Large Company Growth Portfolio $340,667 $59,495 $281,172
Large Company Value Portfolio $165,814 $34,117 $131,697
Small Company Growth Portfolio $ 50,422 $30,253 $ 20,169
Small Company Value Portfolio $122,710 $73,626 $ 49,084
1999
Advisory Reduction Net
Portfolio Fee Payable in Fee Fee Paid
Large Company Growth Portfolio $790,268 $0 $790,268
Large Company Value Portfolio $189,219 $0 $189,219
Small Company Growth Portfolio $ 38,857 $ 23,318 $ 15,539
Small Company Value Portfolio $ 99,467 $ 59,706 $ 39,761
Wilshire 5000 Index Portfolio $ 34,528 $ 34,528 $0
</TABLE>
The Advisory Agreement provides that Wilshire shall exercise its best judgment
in rendering the services to be provided to the Portfolios under the Agreement.
Wilshire is not liable under the Advisory Agreement for any error of judgment or
mistake of law or for any loss suffered by the Portfolios. Wilshire is not
protected, however, against any liability to the Portfolios or its shareholders
to which Wilshire would otherwise be subject by reason of willful misfeasance,
bad faith or gross negligence in the performance of its duties under the
Advisory Agreement or by reason of Wilshire's reckless disregard of its
obligations and duties under the Advisory Agreement.
The Advisory Agreement is terminable with respect to any Portfolio without
penalty on 60 days' notice by the Company's Board of Directors, by vote of a
majority of the Portfolio's outstanding shares (as defined in the 1940 Act), or
on at least 90 days' notice by Wilshire.
The Advisory Agreement terminates in the event of its assignment (as defined in
the 1940 Act).
Services Agreement. Wilshire has entered into a Services Agreement, dated May
31, 1999, with Investor Services Group, 4400 Computer Drive, Westboro, MA 01581.
Investor Services Group furnishes Wilshire with clerical help, accounting, data
processing, internal auditing, legal services and certain other services as may
be required by Wilshire. Investor Services Group also prepares tax returns,
reports to each Portfolios shareholders, reports and filings with the SEC and
state securities authorities and generally assists in all aspect of the
Company's operations, other than providing investment advice.
The Services Agreement has an initial three year term and, upon the expiration
date of the initial term, the Services Agreement will automatically renew for
successive terms of three years each, unless the Company or Investor Services
Group provides written notice to the other of its intent not to renew. Such
notice must be received not less than 90 days and not more than 180 days prior
to the expiration of the initial term or the then current renewal term.
As compensation for Investor Services Group's services under the Services
Agreement, Investor Services Group is entitled to receive from the Company a
monthly administration fee at the annual rate of .15% of the Company's monthly
average net assets up to aggregate assets of $1 billion, .10% of such value on
the next $4 billion, and .08% on the excess net assets. In addition, Wilshire
has agreed to pay Investor Services Group an annual fee of $25,000 for each
Portfolio and $2,000 for each additional class.
For the fiscal years ended August 31, 1997, 1998 and 1999, the administration
fees paid to Investor Services Group for each Portfolio were as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Portfolio Administration Administration Administration
Fee Paid 1997 Fee Paid 1998 Fee Paid 1999
------------- ------------- -------------
Large Company Growth $96,221 $231,401 $501,171
Portfolio
Large Company Value $60,909 $126,488 $140,541
Portfolio
Small Company Growth $42,901 $57,253 $ 50,318
Portfolio
Small Company Value $83,379 $100,626 $ 86,652
Portfolio
Wilshire 5000 Index N/A N/A $0
Portfolio
</TABLE>
Service and Distribution Plan. The Service and Distribution Plan (the "Plan") of
the Company adopted pursuant to Section 12(b) of the 1940 Act and Rule 12b-1
thereunder was approved as to the Investment Class shares of the Portfolios by
vote of the majority of both (a) the Directors of the Company and (b) those
Directors who are not interested persons of the Company (as defined in the 1940
Act) and have no direct or indirect financial interest in the operation of the
Plan or any agreement related to it (the "Independent Directors"), in each case
cast in person at a meeting called for the purpose of voting on the Plan.
The Plan will continue in effect with respect to the Investment Class shares of
a Portfolio only so long as such continuance is specifically approved at least
annually by votes of the majority (or whatever other percentage may, from time
to time, be required by Section 12(b) of the 1940 Act or the rules and
regulations thereunder) of both (a) the Directors of the Company and (b) the
Independent Directors, cast in person at a meeting called for the purpose of
voting on the Plan. The Plan may not be amended in any material respect with
respect to the Investment Class shares of a Portfolio unless such amendment is
approved by votes of the majority (or whatever other percentage may, from time
to time, be required by Section 12(b) of the 1940 Act or the rules and
regulations thereunder) of both (a) the Directors of the Company and (b) the
Independent Directors of the Company, cast in person at a meeting called for the
purpose of voting on the, and may not be amended to increase materially the
amount to be spent thereunder without such approvals and approval by vote of at
least a majority (as defined in the 1940 Act) of the outstanding shares of the
Investment Class of the Portfolio. The Plan may be terminated at any time with
respect to the Investment Class shares of a Portfolio by vote of a majority of
the Independent Directors or by vote of a majority (as defined in the 1940 Act)
of the outstanding shares of the Investment Class of the Portfolio. Amounts
spent on behalf of each Portfolio pursuant to such Plan during the fiscal year
ended August 31, 1999, are set forth below.
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Compensation
to Broker
Portfolio Advertising Printing Dealers
Large Company Growth Portfolio $75,019 $46,226 $518,086
Large Company Value Portfolio $ 6,630 $ 5,021 $ 33,824
Small Company Growth Portfolio $ 3,864 $ 3,721 $ 9,284
Small Company Value Portfolio $ 9,342 $11,751 $ 48,368
Wilshire 5000 Index Portfolio $ 1,470 $19,868 $ 62,314
Compensation
to Sales
Portfolio Personnel Other Total
Large Company Growth Portfolio $0 $8,407 $647,738
Large Company Value Portfolio $0 $ 307 $ 45,782
Small Company Growth Portfolio $0 $ 164 $ 17,033
Small Company Value Portfolio $0 $ 437 $ 69,898
Wilshire 5000 Index Portfolio $0 $2,279 $ 85,931
</TABLE>
Transfer and Dividend Disbursing Agent. Investor Services Group, P.O. Box
5170, Westboro, Massachusetts 01581, serves as the Company's transfer agent and
dividend disbursing agent.
Custodian. The Northern Trust Company, located at 50 South Lasalle Street,
Chicago, Illinois 60675, serves as the Portfolios' custodian.
Counsel. Paul Hastings, Janofsky & Walker LLP., 535 South Flower Street,
Los Angeles, California 90071-2371, serves as counsel for the Company.
Independent Accountants. PricewaterhouseCoopers LLP, One Post Office
Square, Boston, Massachusetts, 02109, serves as auditor for the Company.
CODE OF ETHICS
The Board of Directors of the Company has adopted a Code of Ethics under Rule
17j-1 of the Investment Company Act. The Code of Ethics restricts the investing
activities of Company officers, Directors and advisory persons and, as described
below, imposes additional, more onerous restrictions on Portfolio investment
personnel.
Each person covered by the Code of Ethics is prohibited from purchasing or
selling any security which, to such person's knowledge, is being purchased or
sold (as the case maybe), or is being considered for purchase or sale, by a
Portfolio. Investment personnel are subject to additional restrictions such as a
ban on acquiring securities in an initial public offering, "blackout periods"
which prohibit trading by investment personnel of a Portfolio within periods of
trading by the Portfolio in the same security and a ban on short-term trading in
securities. Investment personnel are required to preclear any personal
securities investment (with limited exceptions, such as government securities)
and must comply with ongoing requirements concerning recordkeeping and
disclosure of personal securities investments. The preclearance requirement and
associated procedures are designed to identify any prohibition or limitation
applicable to a proposed investment.
PORTFOLIO TRANSACTIONS
Wilshire supervises the placement of orders on behalf of each Portfolio for the
purchase or sale of portfolio securities. Portfolio transactions are allocated
among broker-dealers in the best judgment of Wilshire and in a manner deemed
fair and reasonable to shareholders. The primary consideration is prompt
execution of orders at the most favorable net price. Subject to this
consideration, the brokers selected may include those that supplement Wilshire's
research facilities with statistical data, investment information, economic
facts and opinions. Information so received is in addition to and not in lieu of
services required to be performed by Wilshire and its fees are not reduced by
the receipt of such supplemental information. Such information may be useful to
Wilshire in serving both the Portfolios and other clients which it advises and,
conversely, supplemental information obtained by the placement of business of
other clients may be useful to Wilshire in carrying out its obligations to the
Portfolios. Brokers also are selected because of their ability to handle special
executions such as are involved in large block trades or broad distributions,
provided the primary consideration is met. When transactions are executed in the
over-the-counter market, the Portfolios will deal with the primary market makers
unless a more favorable price or execution otherwise is obtainable.
Although Wilshire makes investment decisions for the Portfolios independently
from those of its other accounts, investments of the kind made by the Portfolios
may often also be made by such other accounts. When Wilshire buys or sells the
same security at substantially the same time on behalf of the Portfolios and one
or more other accounts managed by Wilshire, it allocates available investments
by such means as, in its judgment, result in fair treatment. Wilshire aggregates
orders for purchases and sales of securities of the same issuer on the same day
among the Portfolios and their other managed accounts, and the price paid to or
received by the Portfolios and those accounts is the average obtained in those
orders. In some cases, such aggregation and allocation procedures may affect
adversely the price paid or received by the Portfolios or the size of the
position purchased or sold by the Portfolios.
Portfolio turnover may vary from year to year, as well as within a year. Under
normal market conditions, each Portfolio's turnover rate generally will not
exceed 80%. High turnover rates, generally as a result of fluctuating market
conditions, are likely to result in comparatively greater brokerage expenses.
Recognizing this, Wilshire attempts to minimize the cost per share of trading
while at the same time implementing only those trades necessary to maintain the
proper style exposure.
<PAGE>
For the fiscal years ended August 31, 1997, 1998, and 1999, the Portfolios paid
total brokerage commissions as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1997 1998 1999
Large Company Growth Portfolio $54,773 $77,370 $187,845
Large Company Value Portfolio $30,516 $17,486 $ 29,188
Small Company Growth Portfolio $25,811 $19,555 $ 36,855
Small Company Value Portfolio $64,560 $58,188 $ 76,000
Wilshire 5000 Index Portfolio N/A N/A $ 62,049
</TABLE>
As of August 31, 1999, the Portfolios held the following securities of their
regular brokers or dealers:
Large Company Growth Portfolio
<TABLE>
<CAPTION>
<S> <C> <C>
Brokers or Dealers Market Value
Morgan Stanley Dean Whitter
$5,174,493.75
Large Company Value Portfolio
Brokers or Dealers
Market Value
JP Morgan & Co. $1,085,175.00
Small Company Growth Portfolio
Brokers or Dealers Market Value
Investment Tech. Group $72,757.50
Jeffries Group Inc. $50,737.50
Small Company Value Portfolio
Brokers or Dealers Market Value
None N/A
Wilshire 5000 Index Portfolio
Brokers or Dealers Market Value
JP Morgan & Co. $ 167,943.75
Morgan Stanley Dean Whitter $ 377,575.00
Citigroup $2,235,206,25
Jeffries Group Inc. $ 9,900.00
Investment Tech. Group $ 7,057.75
</TABLE>
<PAGE>
No brokerage commissions were paid to the Company's distributor. There were no
spreads or concessions on principal transactions for any such period.
NET ASSET VALUE
The net asset value per share of each class of each Portfolio is calculated as
of the close of regular trading of the NYSE on each day the NYSE is open for
trading.
Each Portfolio's investment securities are valued at the last sale price on the
securities exchange or national securities market on which such securities
primarily are traded. Securities not listed on an exchange or national
securities market, or securities for which there were no transactions, are
valued at the average of the most recent bid and asked prices. Bid price is used
when no asked price is available. Short-term investments are valued at amortized
cost. Any securities or other assets for which recent market quotations are not
readily available are valued at fair value as determined in good faith by or
under the direction of the Board of Directors. Expenses and fees, including the
advisory and administration fees, are accrued daily and taken into account for
the purpose of determining the net asset value of each Portfolio's shares.
PURCHASE OF PORTFOLIO SHARES
The following information supplements and should be read in conjunction with the
section in the Prospectus entitled "How to Buy Portfolio Shares."
The Distributor. Provident Distributors Inc. ("PDI"), Four Falls Corporate
Center, 6th Floor, West Conshohocken, Pennsylvania 19428-2961, serves as the
Company's distributor pursuant to an agreement which is renewable annually by
the Board of Directors. PDI sells each Portfolio's shares on a continuous basis
as agent, but is not obligated to sell any particular amount of shares. The
Distribution Agreement between the Distributor and the Company provides that the
Company shall indemnify the Distributor against any liability arising out of any
untrue statement of a material fact or any omission of a material fact in the
Company's registration statement necessary to make the statements therein
misleading, unless such liability results from the Distributor's willful
misfeasance, bad faith or negligence in the performance of its duties under the
Agreement.
Transactions Through Securities Dealers. Portfolio shares may be purchased and
redeemed through securities dealers, which may charge a transaction fee for such
services. Some dealers will place the Portfolio's shares in an account with
their firm. Dealers also may require that the customer invest more than the
$2,500 minimum investment, the customer not request redemption checks to be
issued in the customer's name, fractional shares not be purchased, or other
conditions.
There is no sales or service charge to individual investors by the Company or by
PDI, although investment dealers, banks and other institutions may make
reasonable charges to investors for their services. The services provided and
the applicable fees are established by each dealer or other institution acting
independently of the Company. The Company understands that these fees may be
charged for customer services including, but not limited to, same-day investment
of client funds; same-day access to client funds; advice to customers about the
status of their accounts, yield currently being paid or income earned to date;
provision of periodic account statements showing security and money market
positions; and assistance with inquiries related to their investment. Any such
fees may be deducted from the investor's account monthly and on smaller accounts
could constitute a substantial portion of any distribution by the Portfolios.
Small, inactive, long-term accounts involving monthly service charges may not be
in the best interest of investors. Investors should be aware that they may
purchase shares of the Portfolios directly through PDI without any maintenance
or service charges, other than those described above.
In-Kind Purchases. Payments for each Portfolio's shares may, at the discretion
of the Company, be made in the form of securities which are permissible
investments for the Portfolio. For further information about this form of
payment, please contact the Transfer Agent. Generally, securities which are
accepted by a Portfolio as payment for the Portfolio's shares will be valued
using the Portfolio's procedures for valuing its own shares at the time the
Portfolio's net asset value is next determined after receipt of a properly
completed order. All dividends, interest, subscription or other rights
pertaining to such securities will become the property of the Portfolio and must
be delivered to the Portfolio upon receipt from the issuer. The Portfolio will
require that (1) it will have good and marketable title to the securities
received by it; (2) the securities are in proper form for transfer to the
Portfolio and are not subject to any restriction on sale by the Portfolio under
the Securities Act of 1933, as amended, or otherwise; and (3) the Portfolio
receives such other documentation as the Company may, in its discretion, deem
necessary or appropriate. Investors who are subject to Federal taxation may
realize a gain or loss for Federal income tax purpose upon such a payment.
REDEMPTION OF PORTFOLIO SHARES
The following information supplements and should be read in conjunction with the
section in the Prospectus entitled "How to Sell Portfolio Shares."
Wire Redemption Privilege. By using this Privilege, the investor authorizes the
Transfer Agent to act on wire or telephone redemption instructions from any
person representing himself or herself to be the investor, and reasonably
believed by the Transfer Agent to be genuine. Ordinarily, the Company will
initiate payment for shares redeemed pursuant to this Privilege on the next
business day after receipt if the Transfer Agent receives the redemption request
in proper form. Redemption proceeds ($2,500 minimum) will be transferred by
Federal Reserve wire only to the commercial bank account specified by the
investor on the Account Application or Shareholder Services Form, or to a
correspondent bank if the investor's bank is not a member of the Federal Reserve
System. Fees ordinarily are imposed by such bank and usually are borne by the
investor. Immediate notification by the correspondent bank to the investor's
bank is necessary to avoid a delay in crediting the funds to the investor's bank
account.
To change the commercial bank or account designated to receive wire redemption
proceeds, a written request must be sent to the Transfer Agent. This request
must be signed by each shareholder, with each signature guaranteed as described
below under "Stock Certificates; Signatures."
Signatures. Written redemption requests must be signed by each shareholder,
including each holder of a joint account, and each signature must be guaranteed
if the amount redeemed exceeds $50,000. The Transfer Agent has adopted standards
and procedures pursuant to which signature guarantees in proper form generally
will be accepted from domestic banks, brokers, dealers, credit unions, national
securities exchanges, registered securities associations, clearing agencies and
savings associations, as well as from participants in the New York Stock
Exchange Medallion Signature Program, the Securities Transfer Agents Medallion
Program ("STAMP") and the Stock Exchanges Medallion Program. Guarantees must be
signed by an authorized signatory of the guarantor and "Signature Guaranteed"
must appear with the signature. The Transfer Agent may request additional
documentation from corporations, executors, administrators, trustees or
guardians, and may accept other suitable verification arrangements from foreign
investors, such as consular verification. For more information with respect to
signature guarantees, please call the telephone number listed on the cover.
Redemption Commitment. The Company has committed itself to pay in cash all
redemption requests by any shareholder of record, limited in amount during any
90-day period to the lesser of $250,000 or 1% of the value of the Portfolios'
net assets at the beginning of such period. Such commitment is irrevocable
without the prior approval of the SEC. For requests for redemption in excess of
such amount, the Board of Directors reserves the right to make payments in whole
or in part in securities or other assets in case of an emergency or any time a
cash distribution would impair the liquidity of the Portfolio to the detriment
of the existing shareholders. In such event, the securities would be readily
marketable, to the extent available, and would be valued in the same manner as
the Portfolio's investment securities are valued. If the recipient sold such
securities, brokerage charges would be incurred.
Suspension of Redemptions. The Company may suspend the right of redemption with
respect to any Portfolio or postpone the date of payment (a) during any period
when the New York Stock Exchange is closed (other than customary weekend and
holiday closings), (b) when trading in the markets the Portfolio ordinarily
utilizes is restricted, or when an emergency exists as determined by the SEC so
that disposal of the investments or determination of its net asset value is not
reasonably practicable, or (c) for such other periods as the SEC by order may
permit to protect the shareholders.
New York Stock Exchange Closings. The holidays (as observed) on which the
New York Stock Exchange is closed currently are: New Year's Day, Presidents'
Day, Rev. Martin Luther King, Jr. Day, Good Friday, Memorial Day, Independence
Day, Labor Day, Thanksgiving and Christmas.
SHAREHOLDER SERVICES
The following information supplements and should be read in conjunction with the
section in the Prospectus entitled "Shareholder Information."
Exchanges. By using the Telephone Exchange Privilege, you authorize the Transfer
Agent to act on telephonic instructions from any person representing himself or
herself to be you and reasonably believed by the Transfer Agent to be genuine.
Telephone exchanges may be subject to limitations as to the amount involved or
the number of telephone exchanges permitted.
To establish a personal retirement plan by exchange, shares of the series being
exchanged must have a value of at least the minimum initial investment required
for the series into which the exchange is being made. For Keogh Plans, IRAs and
IRAs set up under a Simplified Employee Pension Plan ("SEP-IRAs") with only one
participant, the minimum initial investment is $750. To exchange shares held in
corporate plans, 403(b)(7) Plans and SEP-IRAs with more than one participant,
the minimum initial investment is $100 if the plan has at least $2,500 invested
among the series of the Company. To exchange shares held in personal retirement
plans, the shares exchanged must have a current value of at least $100.
The exchange service is available to shareholders resident in any state in which
shares of the series being acquired may legally be sold. Shares may be exchanged
only between accounts having identical names and other identifying designations.
The Company reserves the right to reject any exchange request in whole or in
part. The exchange service may be modified or terminated at any time upon notice
to shareholders.
Corporate Pension/Profit-Sharing And Personal Retirement Plans. The Company
makes available to corporations a variety of prototype pension and
profit-sharing plans. In addition, Wilshire makes available Keogh Plans, IRAs,
including SEP-IRAs and IRA "Rollover Accounts," and 403(b)(7) Plans. Plan
support services also are available. Investors can obtain details on the various
plans by calling toll-free: 1-888-200-6796.
The custodian for Keogh Plans, 403(b)(7) Plans or IRAs may charge a fee, payment
of which could require the liquidation of shares. All fees charged are described
in the appropriate form.
Shares may be purchased in connection with these plans only by direct remittance
to the Plan as custodian. Purchases for these plans may not be made in advance
of receipt of funds.
The minimum initial investment for corporate plans, 403(b)(7) Plans and SEP-IRAs
with more than one participant is $2,500 with no minimum for subsequent
purchases. The minimum initial investment for Keogh Plans, IRAs, SEP-IRAs and
403(b)(7) Plans with only one participant is normally $750, with no minimum for
subsequent purchases. Individuals who open an IRA may also open a non-working
spousal IRA with a minimum investment of $250.
You should read the prototype retirement plan and the appropriate form of
custodial agreement for further details on eligibility, service fees and tax
implications, and should consult a tax adviser.
DIVIDENDS, DISTRIBUTION AND TAXES
Regulated Investment Companies
The Company's management believes that each Portfolio qualified as a "regulated
investment company" under the Internal Revenue Code of 1986, as amended (the
"Code") for the fiscal year ended August 31, 1999. Qualification as a regulated
investment company relieves the Portfolio from any liability for Federal income
taxes to the extent that its earnings are distributed in accordance with the
applicable provisions of the Code. The term "regulated investment company" does
not imply the supervision of management or investment practices or policies by
any government agency.
As a regulated investment company, a Portfolio will not be liable for federal
income tax on its income and gains provided it distributes all of its income and
gains currently. Qualification as a regulated investment company under the Code
requires, among other things, that each Portfolio (a) derive at least 90% of its
gross income from dividends, interest, payments with respect to securities
loans, and gains from the sale or other disposition of securities or foreign
currencies, or other income (including, but not limited to, gains from options,
futures or forward contracts) derived with respect to its business of investing
in such securities or currencies; (b) diversify its holdings so that, at the end
of each fiscal quarter, (i) at least 50% of the market value of the Portfolio's
assets is represented by cash, U.S. Government securities and securities of
other regulated investment companies, and other securities (for purposes of this
calculation generally limited, in respect of any one issuer, to an amount not
greater than 5% of the market value of the Portfolio's assets and 10% of the
outstanding voting securities of such issuer) and (ii) not more than 25% of the
value of its assets is invested in the securities of any one issuer (other than
U.S. Government securities or the securities of other regulated investment
companies), or two or more issuers which the Company controls and which are
determined to be engaged in the same or similar trades or businesses; and (c)
distribute at least 90% of its investment company taxable income (which includes
dividends, interest, and net short-term capital gains in excess of net long-term
capital losses) each taxable year.
Because the Wilshire 5000 Index Portfolio is established in part as an
investment for certain insurance variable annuity contacts, the Code imposes
additional diversification requirements on the Portfolio. Generally, these
requirements are that at each quarter end and for 30 days thereafter no more
than 55% of the Portfolio's total assets may be in any one investment, no more
than 70% in any two investments, nor more than 80% in any three investments, and
no more than 90% in any four investments.
A Portfolio generally will be subject to a nondeductible excise tax of 4% to the
extent that it does not meet certain minimum distribution requirements as of the
end of each calendar year. To avoid the tax, a Portfolio must distribute during
each calendar year an amount equal to the sum of (1) at least 98% of its
ordinary income and net capital gains (not taking into account any capital gains
or losses as an exception) for the calendar year, (2) at lest 98% of its capital
gains in excess of its capital losses (and adjusted for certain ordinary losses)
for the twelve month period ending on October 31 of the calendar year, and (3)
all ordinary income and capital gains for previous years that were not
distributed during such years. A distribution will be treated as paid on
December 31 of the calendar year if it is declared by a Portfolio in October,
November, or December of that year to shareholders of record on a date in such a
month and paid by the Portfolio during January of the following year. Such
distributions will be taxable to shareholders (other than those not subject to
federal income tax) in the calendar year in which the distributions are
declared, rather than the calendar year in which the distributions are received.
To avoid the excise tax, the Portfolios intend to make timely distributions of
their income in compliance with these requirements and anticipate that they will
not be subject to the excise tax.
<PAGE>
Dividends paid by a Portfolio from ordinary income, and distributions of the
Portfolio's net realized short-term capital gains, are taxable to its
shareholders as ordinary income. Distributions to corporate shareholders will be
eligible for the 70% dividends received deduction to the extent that the income
of the Portfolios is derived from dividends on common or preferred stock of
domestic corporations. Dividend income earned by a Portfolio will be eligible
for the dividends received deduction only if the Portfolio has satisfied a
46-day holding period requirement (described below) with respect to the
underlying portfolio security (91 days in the case of dividends derived from
preferred stock). In addition, a corporate shareholder must have held its shares
in the Portfolio for not less than 46 days during the 90-day period that begins
45 days before the stock becomes ex-dividend with respect to the dividend (91
days during the 180-day period that begins 90 days before the stock becomes
ex-dividend with respect to the dividend in the case of dividends derived from
preferred stock) in order to claim the dividend received deduction. Within 60
days after the end of its taxable year, each Portfolio will send to its
shareholders a written notice designating the amount of any distributions made
during such year which may be taken into account by its shareholders for
purposes of such deduction provisions of the Code. Net capital gain
distributions are not eligible for the dividends received deduction.
Under the Code, any distributions designated as being made from net capital
gains are taxable to a Portfolio's shareholders as long-term capital gains,
regardless of the holding period of such shareholders. Such distributions of net
capital gains will be designated by each Portfolio as a capital gains
distribution in a written notice to its shareholders which accompanies the
distribution payment. Any loss on the sale of shares held for less than six
months will be treated as a long-term capital loss for federal tax purposes to
the extent a shareholder receives net capital gain distributions on such shares.
The maximum federal income tax rate applicable to long-term capital gains is
currently 28% (20% on property sold after July 28, 1997 that was held more than
18 months) for individual shareholders and 35% for corporate shareholders.
Dividends and distributions are taxable as such whether received in cash or
reinvested in additional shares of a Portfolio.
Any loss realized on a sale, redemption or exchange of shares of a Portfolio by
a shareholder will be disallowed to the extent the shares are replaced within a
61-day period (beginning 30 days before the disposition of shares). Shares
purchased pursuant to the reinvestment of a dividend will constitute a
replacement of shares.
Hedging Transactions
Ordinarily, gains and losses realized from portfolio transactions will be
treated as a capital gain or loss. All or a portion of the gain realized from
engaging in "conversion transactions" may be treated as ordinary income under
Section 1258. "Conversion transactions" are defined to include certain futures,
option and "straddle" transactions, transactions marketed or sold to produce
capital gains, or transactions described in Treasury regulations to be issued in
the future.
Under Section 1256 of the Code, a gain or loss realized by a Portfolio from
certain financial futures transactions will be treated as 60% long-term capital
gain or loss and 40% short-term capital gain or loss. Gain or loss will arise
upon the exercise or lapse of such futures as well as from closing transactions.
In addition, any such futures remaining unexercised at the end of the
Portfolio's taxable year will be treated as sold for their then fair market
value, resulting in additional gain or loss to the Portfolio characterized in
the manner described above.
<PAGE>
Offsetting positions held by a Portfolio involving financial futures may
constitute "straddles." Straddles are defined to include "offsetting positions"
in actively traded personal property. The tax treatment of straddles is governed
by Sections 1092 and 1258 of the Code, which, in certain circumstances,
overrides or modifies the provisions of Section 1256. As such, all or a portion
of any short- or long-term capital gain from certain "straddle" and/or
conversion transactions may be recharacterized to ordinary income.
If a Portfolio were treated as entering into straddles by reason of its futures
transactions, such straddles could be characterized as "mixed straddles" if the
futures transactions comprising such straddles were governed by Section 1256 of
the Code. A Portfolio may make one or more elections with respect to "mixed
straddles." Depending upon which election is made, if any, the results to the
Portfolio may differ. If no election is made, to the extent the straddle rules
apply to positions established by a Portfolio, losses realized by the Portfolio
will be deferred to the extent of unrealized gain in any offsetting positions.
Moreover, as a result of the straddle rules, short-term capital loss on straddle
positions may be recharacterized as long-term capital loss, and long-term
capital gain on straddle positions may be recharacterized as short-term capital
gain, and as a result of the conversion transaction rules, long-term capital
gain may be recharacterized as ordinary income.
Under Section 1259 of the Code, enacted as part of the Taxpayer Relief Act of
1997, a Portfolio will recognize gain if it enters into a futures contract
relating to an appreciated direct position in any stock or debt instrument, or
if it acquires stock or a debt instrument at a time when the Portfolio has an
offsetting appreciated position in the stock or debt instrument. Such
transactions are considered to be constructive sales for income tax purposes.
Other Tax Information
The Portfolios may be required to withhold for U.S. federal income taxes 31% of
all taxable distributions payable to shareholders who fail to provide the
Company with their correct taxpayer identification number or to make required
certifications, or who have been notified by the Internal Revenue Service that
they are subject to backup withholding. Corporate shareholders and certain other
shareholders specified in the Code generally are exempt from such backup
withholding. Backup withholding is not an additional tax. Any amounts withheld
may be credited against the shareholder's U.S. federal income tax liability.
The Company may also be subject to state or local taxes in certain other states
where it is deemed to be doing business. Further, in those states which have
income tax laws, the tax treatment of the Company and of shareholders of a
Portfolio with respect to distributions by the Portfolio may differ from federal
tax treatment. Distributions to shareholders may be subject to additional state
and local taxes. Shareholders should consult their own tax advisers regarding
specific questions as to federal, state or local taxes.
<PAGE>
Any dividend or distribution paid shortly after an investor's purchase may have
the effect of reducing the aggregate net asset value of his or her shares below
the cost of his or her investment. Such a dividend or distribution would be a
return on investment in an economic sense. In addition, the Code provides that
if a shareholder holds shares of the Portfolios for six months or less and has
received a long-term capital gain distribution with respect to such shares, any
loss incurred on the sale of such shares will be treated as a long-term capital
loss to the extent of the long-term capital gain distribution received.
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.
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.
Average annual total return is calculated by determining the ending redeemable
value of an investment purchased at net asset value per share with a
hypothetical $1,000 payment made at the beginning of the period (assuming the
reinvestment of dividends and distributions), dividing by the amount of the
initial investment, taking the "nth" root of the quotient (where "n" is the
number of years in the period) and subtracting 1 from the result.
Total return is calculated by subtracting the amount of the net asset value per
share at the beginning of a stated period from the net asset value per share at
the end of the period (after giving effect to the reinvestment of dividends and
distributions during the period), and dividing the result by the net asset value
per share at the beginning of the period.
The Wilshire 5000 Index Portfolio commenced operations on February 1, 1999 and
therefore has not been in operation for a full fiscal year.
<PAGE>
<TABLE>
<CAPTION>
Investment Class Shares - Average Annual Total Return
<S> <C> <C> <C> <C>
Since
1 year 5 year inception*
------ ------ ----------
Large Company Growth Portfolio 40.72% 26.74% 22.01%
Large Company Value Portfolio 10.31% 17.61% 17.14%
Small Company Growth Portfolio (3.56%) 9.19% 12.88%
Small Company Value Portfolio (5.57%) 11.02% 11.93%
Investment Class Shares commenced operations on September 30, 1992.
Institutional Class Shares - Average Annual Total Return
Since
1 year inception*
Large Company Growth Portfolio 40.84% 38.83%
Large Company Value Portfolio 10.45% 23.57%
Small Company Growth Portfolio (3.44%) 8.29%
Small Company Value Portfolio (5.45%) 15.22%
</TABLE>
* Institutional Class Shares commenced operations on July 15, 1996.
OTHER INFORMATION
The Company is a Maryland corporation organized on July 30, 1992. It currently
has five Portfolios - Large Company Growth Portfolio, Large Company Value
Portfolio, Small Company Growth Portfolio, Small Company Value Portfolio and
Wilshire 5000 Index Portfolio -- each of which has several classes of shares.
Each share of a Portfolio has one vote and, when issued and paid for in
accordance with the terms of the offering, is fully paid and non-assessable.
Shares of each class of a Portfolio have equal rights as to dividends and in
liquidation. Shares have no preemptive, subscription or conversion rights and
are freely transferable.
Rule 18f-2 under the 1940 Act provides that any matter required to be submitted
under the provisions of the 1940 Act or applicable state law or otherwise to the
holders of the outstanding voting securities of an investment company, such as
the Company, will not be deemed to have been effectively acted upon unless
approved by the holders of the outstanding shares of each series affected by
such matter. Rule 18f-2 further provides that a series shall be deemed to be
affected by a matter unless it is clear that the interests of all series in the
matter are identical or that the matter does not affect any interest of such
series. However, the Rule exempts the selection of independent accountants and
the election of Directors from the separate voting requirements of the Rule.
Rule 18f-3 under the 1940 Act makes further provision for the voting rights of
each class of shares of an investment company which issues more than one class
of voting shares. In particular, Rule 18f-3 provides that each class shall have
exclusive voting rights on any matter submitted to shareholders that relates
solely to the class' arrangement for services and expenses, and shall have
separate voting rights on any matter submitted to shareholders in which the
interests of one class differ from the interests of any other class.
<PAGE>
The Company will send annual and semi-annual financial statements to all its
shareholders.
FINANCIAL STATEMENTS
The Company's audited financial statements for the Portfolios contained in its
annual report for the fiscal year ended August 31, 1999 are incorporated into
this Statement of Additional Information by reference in their entirety. Such
financial statements for the fiscal years ended August 31, 1997, 1998 and 1999
have been audited by the Company's independent auditors, PricewaterhouseCoopers
LLP, whose report thereon appears in such Annual Report. Such financial
statements have been incorporated herein in reliance upon such report given upon
their authority as experts in accounting and auditing.
<PAGE>
WILSHIRE TARGET FUNDS, INC.
WILSHIRE 5000 INDEX PORTFOLIO
HORACE MANN CLASS SHARES
STATEMENT OF ADDITIONAL INFORMATION
(http://www.wilfunds.com)
________________, 1999
This Statement of Additional Information ("SAI") provides supplementary
information for the Horace Mann Class shares of the Wilshire 5000 Index
Portfolio series (the "Portfolio") of Wilshire Target Funds, Inc. (the
"Company").
This Statement of Additional Information is not a prospectus, and it should
be read in conjunction with the prospectus for the Portfolio dated [ ]. You can
obtain the Portfolio's prospectus by contacting us at: Wilshire Target Funds,
Inc., P.O. Box 60488, King of Prussia, Pennsylvania 19406-0488, 888-200-6796
TABLE OF CONTENTS
The Portfolio..................................................................
Investment Policies and Risks..................................................
Investment Restrictions......................................................
Directors and Officers.........................................................
Principal Holders of Securities................................................
Investment Advisory and Other Services.........................................
Code of Ethics..................................................................
Portfolio Transactions..........................................................
Net Asset Value.................................................................
Purchase and Redemption of Shares...............................................
Dividends, Distribution and Taxes..............................................
Performance Information.........................................................
Other Information...............................................................
Financial Statements............................................................
<PAGE>
THE PORTFOLIO
The Company is a diversified, open-end investment management company that
currently offers shares of a number of series and classes, including Horace Mann
Class shares of the Wilshire 5000 Index Portfolio. The Company also offers other
classes of shares of the Wilshire 5000 Index Portfolio in separate prospectuses.
Horace Mann Class shares are available through agents and other sales
representatives of Horace Mann Investors, Inc. ("Horace Mann"). Horace Mann is a
registered broker/dealer with the National Association of Securities Dealers and
a wholly-owned subsidiary of the Horace Mann Educators Corporation.
INVESTMENT POLICIES AND RISKS
The Portfolio may invest in the investments described below:
U.S. Government Securities. The Portfolio may purchase securities issued or
guaranteed by the U.S. Government or its agencies or instrumentalities, which
include U.S. Treasury securities of various interest rates, maturities and times
of issuance. Some obligations issued or guaranteed by U.S. Government agencies
and instrumentalities are supported by the full faith and credit of the U.S.
Treasury. Others are supported by the right of the issuer to borrow from the
Treasury, by discretionary authority of the U.S. Government to purchase certain
obligations of the agency or instrumentality, or by the credit of the agency or
instrumentality. These securities bear fixed, floating or variable rates of
interest. While the U.S. Government provides financial support to such U.S.
Government-sponsored agencies or instrumentalities, no assurance can be given
that it will always do so, since it is not so obligated by law.
Money Market Instruments. The Portfolio may invest in money market instruments,
including certificates of deposit, time deposits, bankers' acceptances and other
short-term obligations issued by domestic banks, foreign subsidiaries or
branches of domestic banks, domestic and foreign branches of foreign banks,
domestic savings and loan associations and other banking institutions.
A certificate of deposit is a negotiable certificate requiring a bank to repay
funds deposited with it for a specified period of time.
A time deposit is a non-negotiable deposit maintained in a banking institution
for a specified period of time at a stated interest rate. The Portfolio will
only invest in time deposits of domestic banks that have total assets in excess
of one billion dollars. Time deposits held by the Portfolio will not benefit
from insurance administered by the Federal Deposit Insurance Corporation.
A bankers' acceptance is a credit instrument requiring a bank to pay a draft
drawn on it by a customer. These instruments reflect the obligation both of the
bank and of the drawer to pay the face amount of the instrument upon maturity.
Other short-term bank obligations in which the Portfolio may invest may include
uninsured, direct obligations bearing fixed, floating or variable interest
rates.
<PAGE>
With respect to such securities issued by foreign branches and subsidiaries of
domestic banks, and domestic and foreign branches of foreign banks, the
Portfolio may be subject to additional investment risks that are different in
some respects from those incurred by the Portfolio which invests only in debt
obligations of U.S. domestic issuers. Such risks include possible future
political and economic developments, possible seizure or nationalization of
foreign deposits, the possible imposition of foreign withholding taxes on
interest income, the possible establishment of exchange controls or the adoption
of other foreign governmental restrictions which may adversely affect the
payment of principal and interest on these securities.
Repurchase Agreements. In a repurchase agreement, the Portfolio buys, and the
seller agrees to repurchase, a security at a mutually agreed upon time and price
(usually within seven days). The repurchase agreement thus determines the yield
during the purchaser's holding period, while the seller's obligation to
repurchase is secured by the value of the underlying security. A repurchase
agreement involves risks in the event of a default or insolvency of the other
party to the agreement, including possible delays or restrictions upon the
Portfolio's ability to dispose of the underlying securities. The Company's
custodian or sub-custodian will hold in a segregated account the securities
acquired by the Portfolio under a repurchase agreement. Repurchase agreements
are considered, under the Investment Company Act of 1940, as amended (the "1940
Act"), to be loans by the Portfolio. To try to reduce the risk of loss on a
repurchase agreement, the Portfolios will enter into repurchase agreements only
with domestic banks with total assets in excess of one billion dollars, only
with respect to securities of the type in which the Portfolio may invest, and
will require that additional securities be deposited with the custodian or
sub-custodian if the value of the securities purchased decreases below the
repurchase price.
Lending Portfolio Securities. The Portfolio may seek additional income by
lending its securities on a short-term basis to banks, brokers and dealers under
agreement. The Portfolio may return a portion of the interest earned to the
borrower or a third party which is unaffiliated with the Company and acting as a
"placing broker."
The Securities and Exchange Commission (the "SEC") currently requires that the
following lending conditions must be met: (1) the Portfolio must receive at
least 100% collateral from the borrower (cash, U.S. Government securities, or
irrevocable bank letters of credit); (2) the borrower must increase the
collateral whenever the market value of the loaned securities rises above the
level of such collateral; (3) the Portfolio must be able to terminate the loan
at any time; (4) the Portfolio must receive reasonable interest on the loan, as
well as any dividends, interest or other distributions payable on the loaned
securities, and any increase in market value; (5) the Portfolio may pay only
reasonable custodian fees in connection with the loan; and (6) while voting
rights on the loaned securities may pass to the borrower, the Company's Board of
Directors must be able to terminate the loan and regain the right to vote the
securities if a material event adversely affecting the investment occurs.
Even though loans of portfolio securities are collateralized, a risk of loss
exists if an institution that borrows securities from the Portfolio breaches its
agreement with the Portfolio and the Portfolio is delayed or prevented from
recovering the collateral.
<PAGE>
Commercial Paper And Other Short-term Corporate Obligations. Commercial paper is
a short-term, unsecured promissory note issued to finance short-term credit
needs. The commercial paper purchased by the Portfolio will consist only of
direct obligations which, at the time of their purchase, are (a) rated at least
Prime-1 by Moody's Investors Service, Inc., A-1 by Standard & Poor's Ratings
Group, F-1 by Fitch Investors Service, L.P. or D-1 by Duff & Phelps Credit
Rating Co.; (b) issued by companies having an outstanding unsecured debt issue
rated at least Aa3 by Moody's Investors Service, Inc. or AA- by Standard &
Poor's Ratings Group, Fitch Investors Service, L.P. or Duff & Phelps Credit
Rating Co.; or (c) if unrated, determined by the Company to be of comparable
quality.
These instruments include variable amount master demand notes, which are
obligations that permit the Portfolio to invest at varying rates of interest
pursuant to direct arrangements between the Portfolio, as lender, and the
borrower. These notes permit daily changes in the amounts borrowed. Because they
are direct lending arrangements between the lender and borrower, such
instruments generally will not be traded, and there generally is no established
secondary market for these obligations, although they are redeemable at face
value, plus accrued interest, at any time. If these obligations are not secured
by letters of credit or other credit support arrangements, the Portfolio's right
to redeem its investment depends on the ability of the borrower to pay principal
and interest on demand. In connection with floating and variable rate demand
obligations, Wilshire will consider, on an ongoing basis, earning power, cash
flow and other liquidity ratios of the borrower, and the borrower's ability to
pay principal and interest on demand. Such obligations frequently are not rated
by credit rating agencies, and the Portfolio may invest in them only if at the
time of an investment the borrower meets the criteria set forth above for other
commercial paper issuers.
Derivatives. The Portfolio may invest, to a limited extent, in "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 Portfolio uses are currently comprised of stock index futures
and options. The Portfolio may invest in derivatives for a variety of reasons,
including to hedge against certain market risks, to provide a substitute for
purchasing or selling particular securities or to increase potential income
gain. Derivatives may provide a cheaper, quicker or more specifically focused
way for the Portfolio to invest than "traditional" securities.
Although the Portfolio does not currently intend to invest in derivatives, it
reserves the right to do so in the future. Normally, less than 5% of the
Portfolio's net assets would be invested in derivatives.
Derivatives permit the Portfolio to increase, decrease or change the level of
risk to which its securities are exposed in much the same way as the Portfolio
can increase, decrease or change the risk of its investments by making
investments in specific securities. However, derivatives can be volatile and
involve various types and degrees of risk, depending upon the characteristics of
the particular derivative and the Portfolio as a whole. 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 of the Portfolio's shares.
<PAGE>
In addition, derivatives may entail investment exposures that are greater than
their cost would suggest, meaning that a small investment in derivatives could
have a large potential impact on the Portfolio's performance. If the Portfolio
invests in derivatives at inappropriate times or judges market conditions
incorrectly, such investments may lower the Portfolio's return or result in a
loss. The Portfolio also could experience losses if its derivatives were poorly
correlated with its other investments, or if the Portfolio were unable to
liquidate its position because of an illiquid secondary market. The market for
many derivatives is, or suddenly can become, illiquid. Changes in liquidity may
result in significant, rapid and unpredictable changes in the prices for
derivatives.
When required by the SEC, the Portfolio will set aside permissible liquid assets
in a segregated account to cover its obligations relating to its purchase of
derivatives. To maintain this required cover, the Portfolio may have to sell
portfolio securities at disadvantageous prices or times. Derivatives may be
purchased on established exchanges ("exchange-traded" derivatives) or through
privately negotiated transactions ("over-the-counter" derivatives).
Exchange-traded derivatives generally are guaranteed by the clearing agency
which is the issuer or counterparty to such derivatives. This guarantee usually
is supported by a daily payment system operated by the clearing agency in order
to reduce overall credit risk. As a result, unless the clearing agency defaults,
there is relatively little counterparty credit risk associated with derivatives
purchased on an exchange. By contrast, no clearing agency guarantees
over-the-counter derivatives. Therefore, each party to an over-the-counter
derivative bears the risk that the counterparty will default. Accordingly,
Wilshire will consider the creditworthiness of counterparties to
over-the-counter derivatives in the same manner as it would review the credit
quality of a security to be purchased by the Portfolio. Over-the-counter
derivatives are less liquid than exchange-traded derivatives since the other
party to the transaction may be the only investor with sufficient understanding
of the derivative to be interested in bidding for it.
Although the Portfolio will not be a commodity pool, derivatives subject the
Portfolio to the rules of the Commodity Futures Trading Commission which limit
the extent to which the Portfolio can invest in certain derivatives. The
Portfolio may invest in stock index futures contracts for hedging purposes
without limit. However, the Portfolio may not 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.
Futures Transactions. The Portfolio may enter into futures contracts on
particular securities or stock indices in U.S. domestic markets, such as the
Chicago Board of Trade and the International Monetary Market of the Chicago
Mercantile Exchange. A futures contract is an agreement in which one party
agrees to deliver to the other an amount of cash equal to a specific dollar
amount times the difference between the value of a specific stock or stock index
at the close of the last trading day of the contract and the price at which the
agreement is made.
No physical delivery of securities is made.
<PAGE>
Engaging in these transactions involves risk of loss to the Portfolio which
could affect the value of the Portfolio's net assets adversely. Although the
Portfolio intends to purchase or sell futures contracts only if there is an
active market for such contracts, no assurance exists that a liquid market will
exist for any particular contract at any particular time. Many futures exchanges
and boards of trade limit the amount of fluctuation permitted in futures
contract prices during a single trading day. Once the daily limit has been
reached in a particular contract, no trades may be made that day at a price
beyond that limit or trading may be suspended for specified periods during the
trading day. Futures contract prices could move to the limit for several
consecutive trading days with little or no trading, thereby preventing prompt
liquidation of futures positions and potentially subjecting the Portfolio to
substantial losses.
Successful use of futures by the Portfolio also is subject to the ability of
Wilshire to predict correctly movements in the direction of the relevant market
and, to the extent the transaction is entered into for hedging purposes, to
ascertain the appropriate correlation between the position being hedged and the
price movements of the futures contract. For example, if the Portfolio uses
futures to hedge against the possibility of a decline in the market value of
securities held in its portfolio and the prices of such securities instead
increase, the Portfolio will lose part or all of the benefit of the increased
value of securities which it has hedged because it will have offsetting losses
in its futures positions. Furthermore, if in such circumstances the Portfolio
has insufficient cash, it may have to sell securities to meet daily variation
margin requirements. The Portfolio may have to sell such securities at a time
when it may be disadvantageous to do so.
Pursuant to regulations and published positions of the SEC, the Portfolio may be
required to segregate cash or liquid assets in connection with its futures
transactions in an amount generally equal to the value of the contract. The
segregation of such assets will have the effect of limiting the Portfolio's
ability otherwise to invest those assets.
Options. The Portfolio may write covered call options, buy put options, buy call
options and write secured put options on particular securities or the Wilshire
5000 Index. Options trading is a highly specialized activity which entails
greater than ordinary investment risks. A call option for a particular security
gives the purchaser of the option the right to buy, and a writer the obligation
to sell, the underlying security at the stated exercise price at any time prior
to the expiration of the option, regardless of the market price of the security.
The premium paid to the writer is in consideration for undertaking the
obligations under the option contract. A put option for a particular security
gives the purchaser the right to sell the underlying security at the stated
exercise price at any time prior to the expiration date of the option,
regardless of the market price of the security.
Options on stock indices are similar to options on specific securities, except
that, rather than the right to take or make delivery of the specific security at
a specific price, an option on a stock index gives the holder the right to
receive, upon exercise of the option, an amount of cash if the closing level of
that stock index is greater than, in the case of a call option, or less than, in
the case of a put option, the exercise price of the option. This amount of cash
is equal to the difference between the closing price of the index and the
exercise price of the option expressed in dollars times a specified multiple.
The writer of the option is obligated, in return for the premium received, to
deliver this amount. Unlike options on specific securities, all settlements of
options on stock indices are in cash, and gain or loss depends on general
movements in the stocks included in the index rather than price movements in
particular stock.
Other Derivatives. The Portfolio may take advantage of opportunities in the area
of futures contracts and any other derivatives which presently are not
contemplated for use by the Portfolio or which currently are not available but
which may be developed, to the extent such opportunities are both consistent
with the Portfolio's investment objective and legally permissible for the
Portfolio. Before entering into such transactions or making any such investment,
the Portfolio will provide appropriate disclosure in its prospectus or SAI.
Foreign Securities. The Portfolio may include securities of the foreign issuers
included in the Wilshire 5000 Index. Investments in foreign securities have
additional risks, including future political and economic developments, possible
imposition of withholding taxes on income payable on the securities, the
possible establishment of currency exchange controls, adoption of other foreign
governmental restrictions and possible seizure or nationalization of foreign
assets.
Preferred Stock. The Portfolio may invest up to 5% of its assets in preferred
stock. Preferred Stock, unlike common stock, offers a stated dividend rate
payable from a corporation's earnings. Such preferred stock dividends may be
cumulative or non-cumulative, participating or auction rate. If interest rates
rise, the fixed dividend on preferred stocks may be less attractive, causing the
price of preferred stocks to decline. Preferred stock may have mandatory sinking
fund provisions, as well as call/redemption provisions prior to maturity, a
negative feature when interest rates decline. Dividends on some preferred stock
may be "cumulative," requiring all or a portion of prior unpaid dividends to be
paid before dividends are paid on the issuer's common stock. Preferred stock
also generally has a preference over common stock on the distribution of a
corporation's assets in the event of liquidation of the corporation, and may be
"participating," which means that it may be entitled to a dividend exceeding the
stated dividend in certain cases. The rights of preferred stocks on the
distribution of a corporation's assets in the event of a liquidation are
generally subordinate to the rights associated with a corporation's debt
securities.
Convertible Securities. The Portfolio may invest up to 5% of its assets in
convertible securities when its appears to Wilshire that it may not be prudent
to be fully invested in common stocks. In evaluating a convertible security,
Wilshire places primary emphasis on the attractiveness of the underlying common
stock and the potential for capital appreciation through conversion. Convertible
securities may include corporate notes or preferred stock but are ordinarily
long-term debt obligations of the issuers convertible at stated exchange rates
into common stock of the issuers. As with all debt securities, the market value
of convertible securities tends to decline as interest rates increase and,
conversely, to increase as interest rates decline. Convertible securities
generally offer lower interest or dividend yields than non-convertible
securities of similar quality. However, when the market price of the common
stock underlying a convertible security exceeds the conversion price, the price
of the convertible security tends to reflect the value of the underlying common
stock. As the market price of the underlying common stock declines, the
convertible security tends to trade increasingly on a yield basis, and thus may
not depreciate to the same extent as the underlying common stock. Convertible
securities rank senior to common stocks in a issuer's capital structure and are
consequently of higher quality and entail less risk than the issuer's common
stock, although the extent to which such risk is reduced depends in large
measure upon the degree to which the convertible security sells above its value
as a fixed income security.
<PAGE>
Warrants and Rights. The Portfolio may invest up to 5% of its assets in warrants
and rights. Warrants are options to purchase equity securities at a specified
price valid for a specific period of time. Their prices do not necessarily move
parallel to the prices of the underlying securities. Rights are similar to
warrants, but generally are shorter in duration and are distributed by the
issuer directly to its shareholders. Warrants and rights have no voting rights,
receive no dividends and have no rights to the assets of the issuer.
INVESTMENT RESTRICTIONS
The investment restrictions described below are fundamental policies of the
Portfolio and cannot be changed without the approval of a majority of the
Portfolio's outstanding voting shares (as defined by the 1940 Act). All
percentage limitations apply only at the time of the transaction. Subsequent
changes in value or in the Portfolio's total assets will not result in a
violation of the percentage limitations. The Portfolio may not:
1. Invest in commodities, except that the Portfolio may purchase and sell
options, forward contracts, and futures contracts, including those relating to
indices, and options on futures contracts or indices.
2. Purchase, hold or deal in real estate or oil, gas or other mineral leases or
exploration or development programs, but the Portfolio may purchase and sell
securities that are secured by real estate or issued by companies that invest or
deal in real estate.
3. Borrow money, except for temporary or emergency (not leveraging) purposes in
an amount up to 33 1/3% of the value of the Portfolio's total assets (including
the amount borrowed) based on the lesser of cost or market, less liabilities
(not including the amount borrowed) at the time the borrowing is made. When
borrowings exceed 5% of the value of the Portfolio's total assets, the Portfolio
will not make any additional investments. For purposes of this investment
restriction, the entry into options, forward contracts, or futures contracts,
including those relating to indices and options on futures contracts or indices,
will not constitute borrowing.
4. Make loans to others, except through the purchase of debt obligations and
entry into repurchase agreements. However, the Portfolio may lend its portfolio
securities in an amount not to exceed 33 1/3% of the value of its total assets.
Any loans of portfolio securities will be made according to guidelines
established by the SEC and the Company's Board of Directors.
5. Act as an underwriter of securities of other issuers, except to the extent
the Portfolio may be deemed an underwriter under the Securities Act of 1933, as
amended, by virtue of disposing of portfolio securities.
6. Invest more than 25% of its assets in the securities of issuers in any single
industry, provided there will be no limitation on the purchase of obligations
issued or guaranteed by the U.S. Government, its agencies or instrumentalities.
7. Invest more than 5% of its assets in the obligations of any single issuer,
except that up to 25% of the value of the Portfolio's total assets may be
invested, and securities issued or guaranteed by the U.S. Government, or its
agencies or instrumentalities may be purchased, without regard to any such
limitation.
8. With respect to 75% of the Portfolio's assets, hold more than 10% of the
outstanding voting securities of any single issuer.
9. Issue any senior security (as defined in Section 18(f) of the 1940 Act),
except to the extent that the activities permitted in investment restrictions
No. 1 and 3 may be deemed to give rise to a senior security.
The following investment restrictions are non-fundamental and may be changed by
a vote of a majority of the Company's Board of Directors. The Portfolio may not:
1. Invest in the securities of a company for the purpose of exercising
management or control, but the Portfolio will vote the securities it owns in its
portfolio as a shareholder in accordance with its views.
2. Enter into repurchase agreements providing for settlement in more than seven
days after notice or purchase securities which are illiquid, if, in the
aggregate, more than 15% of the value of the Portfolio's net assets would be so
invested.
3. Purchase securities of other investment companies, except to the extent
permitted under the 1940 Act or those received as part of a merger or
consolidation.
DIRECTORS AND OFFICERS
Under Maryland law, the business and affairs of the Portfolio and the Company
are managed under the direction of the Board of Directors. Information
pertaining to the Directors and officers is set forth below.
DIRECTORS
* Indicates that the Director is an "interested person" of the Company as
defined in the 1940 Act.
Name: *Thomas D. Stevens
Age: 50
Address: c/o Wilshire Associates Incorporated, 1299 Ocean Avenue,
Santa Monica, California 90401
Position: Chairman of the Board, President and Director
Principal occupation for last five years: Senior Vice President and Principal
of Wilshire for more than the past five years. He is the Chief Investment
Officer of the Wilshire Asset Management division of Wilshire. Wilshire Asset
Management is a provider of index and structured equity and fixed income
applications.
<PAGE>
.........
Name: Dewitt F. Bowman
Age: 69
Address: 79 Eucalyptus Knoll, Mill Valley, CA 94941
Position: Director
Principal occupation for last five years. Since January 1994, Pension Investment
Consultant providing advice on large pension fund investment strategy, new
product evaluation and integration, and large plan investment analysis and
management. Currently a director of the RREEF America REIT, Dresdner RCM Capital
Fund, Inc. and Dresdner RCM Equity Funds, Inc., and trustee of the Pacific Gas &
Electric Nuclear Decommissioning Trust, Brandes Investment Trust and PCG Private
Equity Fund.
Name: *Robert J. Raab, Jr.
Age: 50
Address: c/o Wilshire Associates Incorporated, 1299 Ocean Avenue, Santa
Monica, California 90401
Position: Director
Principal occupation for last five years: Senior Vice President and Principal
of Wilshire for more than the past five years. He is head of Wilshire's
Institutional Services Division and is responsible for Wilshire Equity, Fixed
Income, Index Fund and Portfolio Accounting products.
Name: Anne Wexler
Age: 68
Address: c/o The Wexler Group, 1317 F Street, N.W., Suite 600,
Washington, D.C. 20004
Position: Director
Principal occupation for last five years. Chairman of the Wexler Group,
consultants specializing in government relations and public affairs, for more
than fifteen years. She is also a director of Alumax, The Dreyfus Corporation,
Comcast Corporation, The New England Electric System, Nova Corporation, and
sixteen mutual funds in the Dreyfus mutual fund family. In addition, she is a
member of the Board of the Carter Center of Emory University, the Council of
Foreign Relations, the National Park Foundation, the Visiting Committee of the
John F. Kennedy School of Government at Harvard University and the Board of
Visitors of the University of Maryland School of Public Affairs.
Name: Cynthia A. Hargadon
Age: 44
Address: c/o National Auto Dealers Association, Retirement Trust,
8400 Westpark Drive, McLean, VA 22102
Position: Director Principal occupation for last five years. Since July 1998,
Director of Investments for the National Automobile Dealers Association. From
November 1996 to July 1998, President of Stable Value Investment Association,
Inc., educating the public about stable value as a fixed income alternative and
how to use it in the asset allocation process for defined contribution plan
participants. She is also a project consultant of Johnson Custom Strategies,
Inc. an independent investment services firm providing specialized asset
management strategies to institutional clients. From May 1987 to
November 1996, Senior Vice-President and Chief Investment Officer of ICMA
Retirement Corporation, a retirement plan administrator.
For so long as the plan described in "Service and Distribution Plan" remains in
effect, the Directors of the Company who are not "interested persons" of the
Company, as defined in the 1940 Act, will be selected and nominated by the
Directors who are not "interested persons" of the Company.
The Company pays its Directors who are not "interested persons" of the Company
an annual retainer of $3,000 and a fee of $2,500 per meeting. The aggregate
amount of compensation paid to each current Director by the Company for the
fiscal year ended August 31, 1999, is shown below:
AGGREGATE
NAME OF COMPENSATION
DIRECTORPAID BY THE COMPANY
DeWitt F. Bowman $9,750
Cynthia A. Hargadon $9,750
Robert J. Raab, Jr $0
Thomas D. Stevens $0
Anne L. Wexler $9,750
.
OFFICERS
Name: David R. Borger
Age: 50
Address: c/o Wilshire Associates Incorporated, 1299 Ocean Avenue,
Santa Monica, California 90401
Position: Vice President and Treasurer
Principal occupation for last five years. Vice President and Principal of the
Company and Director of Research for its Wilshire Asset Management division for
more than five years.
Name: Alan L. Manning
Age: 50
Address: c/o Wilshire Associates Incorporated, 1299 Ocean Avenue,
Santa Monica, California 90401
Position: Secretary
Principal occupation for last five years. Since 1990, Vice President, Secretary
and General Counsel of the Company.
Name: Michael J. Napoli, Jr.
Age: 48
Address: c/o Wilshire Associates Incorporated, 1299 Ocean Avenue,
Santa Monica, California 90401
Position: Vice President
Principal occupation for last five years. Vice President and Principal of the
Company for more than five years. Director of Marketing for Wilshire Asset
Management division.
<PAGE>
Name: Julie A. Tedesco
Age: 42
Address: c/o First Data Investor Services Group, Inc., 101 Federal
Street, Boston, MA 02110
Position: Vice President and Assistant Secretary of the Company
Principal occupation for last five years. Since May 1994, Counsel to First Data
Investor Services Group, Inc. ("Investor Services Group").
Name: Therese M. Hogan
Age: 37
Address: c/o First Data Investor Services Group, Inc., 101 Federal
Street, Boston, MA 02110
Position: Vice President and Assistant Secretary of the Company
Principal occupation for last five years: Since June 1994, Manager (State
Regulation) of Investor Services Group.
Name: Kenneth J. Kempf
Age: 49
Address: c/o First Data Investor Services Group, Inc., 3200 Horizon
Drive, King of Prussia, Pennsylvania
19406
Position: Assistant Treasurer of the Company
Principal occupation for last five years. Since 1998, Senior Vice-President of
Investor Services Group. From November 1993 to February 1998, President and
Chief Executive Officer of FPS Services, Inc. ("FPS"), King of Prussia,
Pennsylvania.
Name: Gerald J. Holland
Age: 48
Address: c/o First Data Investor Services Group, Inc., 3200 Horizon
Drive, King of Prussia, Pennsylvania
19406
Position: Assistant Treasurer of the Company
Principal occupation for last five years. Since 1997, Vice President of Investor
Services Group's Fund Administration Department. From 1994 to 1997, Vice
President of FPS.
Name: Robert C. Herforth
Age: 30
Address: c/o First Data Investor Services Group, Inc., 3200 Horizon
Drive, King of Prussia, Pennsylvania
19406
Position: Assistant Treasurer of the Company
Principal occupation for last five years. Since 1997, Senior Financial
Administrator of Investor Services Group's Financial Reporting Department. From
1995 to 1997, Financial Administrator of FPS. Prior to 1995, he was a Supervisor
in the Transfer Agent Control Department of FPS.
<PAGE>
Name: George Graner
Age: 30
Address: c/o First Data Investor Services Group, Inc., 3200 Horizon
Drive, King of Prussia, Pennsylvania
19406
Position: Assistant Treasurer of the Company
Principal occupation for last five years. Since 1999 Senior Section Manager of
Investor Services Group's Financial Reporting Department. From 1992 to 1999, Mr.
Graner served in various capacities with FPS and Investor Services Group.
Name: Brian O'Neill
Age: 31
Address: c/o First Data Investor Services Group, Inc., 3200 Horizon
Drive, King of Prussia, Pennsylvania
19406
Position: Assistant Treasurer of the Company
Principal occupation for last five years. Since 1997, Manager of Investor
Services Group's Financial Reporting Department. From 1992 to 1997, Mr. O'Neill
served in various capacities with FPS.
As of September 30, 1999, the Directors and officers of the Company as a group
owned less than 1% of the outstanding shares of each class of the Portfolio.
Wilshire is controlled by its President, Dennis Tito, who owns a majority of its
outstanding voting stock.
PRINCIPAL HOLDERS OF SECURITIES
As of September 30, 1999, no shareowners owned of record or beneficially 5% or
more of the Horace Mann Class shares of the Portfolio.
INVESTMENT ADVISORY AND OTHER SERVICES
Expenses. From time to time, Wilshire or Investor Services Group may waive
receipt of its fees and/or voluntarily assume certain expenses of the Portfolio
or the Company, which would have the effect of lowering the overall expense
ratio of the Portfolio 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 Provident Distributors Inc. ("PDI"), Wilshire or Investor
Services Group may bear other expenses of distribution of the shares of the
Portfolio or of the provision of shareholder services to the 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 PDI, 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 PDI, 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 all series on the basis determined by the Board of Directors, including,
but not limited to, proportionately in relation to the net assets of the series.
Investment Advisory Agreement and Fees. Wilshire provides investment advisory
services to the Portfolio pursuant to an Investment Advisory Agreement dated
July 11, 1996 (the "Advisory Agreement"), as amended June 8, 1998. All advisory
fees are accrued daily. For the fiscal year ended August 31, 1999, the advisory
fees for the Portfolio payable to Wilshire, the reductions attributable to
voluntary fee waivers, and the net fees paid with respect to the Portfolio, were
as follows:
These fees only reflect six months of operations since the Portfolio commenced
operations on February 1, 1999.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1999
Advisory Reduction Net
Portfolio Fee Payable in Fee Fee Paid
Wilshire 5000 Index Portfolio $34,528 $34,528 $-0-
</TABLE>
The Advisory Agreement provides that Wilshire shall exercise its best judgment
in rendering the services to be provided to the Portfolio under the Agreement.
Wilshire is not liable under the Advisory Agreement for any error of judgment or
mistake of law or for any loss suffered by the Portfolio. Wilshire is not
protected, however, against any liability to the Portfolio or its shareholders
to which Wilshire would otherwise be subject by reason of willful misfeasance,
bad faith or gross negligence in the performance of its duties under the
Advisory Agreement or by reason of Wilshire's reckless disregard of its
obligations and duties under the Advisory Agreement.
The Advisory Agreement is terminable with respect to the Portfolio without
penalty on 60 days' notice by the Company's Board of Directors, by vote of a
majority of the Portfolio's outstanding shares (as defined in the 1940 Act), or
on at least 90 days' notice by Wilshire.
The Advisory Agreement terminates in the event of its assignment (as defined in
the 1940 Act).
Services Agreement. Wilshire has entered into a Services Agreement, dated May
31, 1999, with Investor Services Group, 4400 Computer Drive, Westboro, MA 01581.
Investor Services Group furnishes Wilshire with clerical help, accounting, data
processing, internal auditing, legal services and certain other services as may
be required by Wilshire. Investor Services Group also prepares tax returns,
reports to the Portfolio's shareholders, reports and filings with the SEC and
state securities authorities and generally assists in all aspect of the
Company's operations, other than providing investment advice.
The Services Agreement has an initial three year term and, upon the expiration
date of the initial term, the Services Agreement will automatically renew for
successive terms of three years each, unless the Company or Investor Services
Group provides written notice to the other of its intent not to renew. Such
notice must be received not less than 90 days and not more than 180 days prior
to the expiration of the initial term or the then current renewal term.
As compensation for Investor Services Group's services under the Services
Agreement, Investor Services Group is entitled to receive from the Company a
monthly administration fee at the annual rate of .15% of the Company's monthly
average net assets up to aggregate assets of $1 billion, .10% of such value on
the next $4 billion, and .08% on the excess net assets. In addition, Wilshire
has agreed to pay Investor Services Group an annual fee of $25,000 for each
Portfolio and $2,000 for each additional class.
For the fiscal year ended August 31, 1999, the administration fees paid to
Investor Services Group for the Portfolio was $0.
Service and Distribution Plan. The Service and Distribution Plan (the "Plan") of
the Company adopted pursuant to Section 12(b) of the 1940 Act and Rule 12b-1
thereunder was approved as to the Horace Mann Class shares of the Portfolio by
vote of the majority of both (a) the Directors of the Company and (b) those
Directors who are not interested persons of the Company (as defined in the 1940
Act) and have no direct or indirect financial interest in the operation of the
Plan or any agreement related to it (the "Independent Directors"), in each case
cast in person at a meeting called for the purpose of voting on the Plan.
The Plan will continue in effect with respect to the Horace Mann Class shares of
the Portfolio only so long as such continuance is specifically approved at least
annually by votes of the majority (or whatever other percentage may, from time
to time, be required by Section 12(b) of the 1940 Act or the rules and
regulations thereunder) of both (a) the Directors of the Company and (b) the
Independent Directors, cast in person at a meeting called for the purpose of
voting on the Plan. The Plan may not be amended in any material respect with
respect to the Horace Mann Class shares of the Portfolio unless such amendment
is approved by votes of the majority (or whatever other percentage may, from
time to time, be required by Section 12(b) of the 1940 Act or the rules and
regulations thereunder) of both (a) the Directors of the Company and (b) the
Independent Directors of the Company, cast in person at a meeting called for the
purpose of voting on the, and may not be amended to increase materially the
amount to be spent thereunder without such approvals and approval by vote of at
least a majority (as defined in the 1940 Act) of the outstanding shares of the
Horace Mann Class of the Portfolio. The Plan may be terminated at any time with
respect to the Horace Mann Class shares of the Portfolio by vote of a majority
of the Independent Directors or by vote of a majority (as defined in the 1940
Act) of the outstanding shares of the Horace Mann Class of the Portfolio. As of
August 31, 1999 the Horace Mann Class shares of the Portfolio had not commenced
operations and therefore, there are no payments to report under such Plan.
Transfer and Dividend Disbursing Agent. Investor Services Group, P.O. Box
5170, Westboro, Massachusetts 01581, serves as the Company's transfer agent and
dividend disbursing agent.
Custodian. The Northern Trust Company, located at 50 South Lasalle Street,
Chicago, Illinois 60675, serves as the Portfolio's custodian.
Counsel. Paul Hastings, Janofsky & Walker LLP., 535 South Flower Street,
Los Angeles, California 90071-2371, serves as counsel for the Company.
Independent Accountants. PricewaterhouseCoopers LLP, One Post Office
Square, Boston, Massachusetts, 02109, serves as auditor for the Company.
CODE OF ETHICS
The Board of Directors of the Company has adopted a Code of Ethics under Rule
17j-1 of the Investment Company Act. The Code of Ethics restricts the investing
activities of Company officers, Directors and advisory persons and, as described
below, imposes additional, more onerous restrictions on Portfolio investment
personnel.
Each person covered by the Code of Ethics is prohibited from purchasing or
selling any security which, to such person's knowledge, is being purchased or
sold (as the case maybe), or is being considered for purchase or sale, by the
Portfolio. Investment personnel are subject to additional restrictions such as a
ban on acquiring securities in an initial public offering, "blackout periods"
which prohibit trading by investment personnel of the Portfolio within periods
of trading by the Portfolio in the same security and a ban on short-term trading
in securities. Investment personnel are required to preclear any personal
securities investment (with limited exceptions, such as government securities)
and must comply with ongoing requirements concerning recordkeeping and
disclosure of personal securities investments. The preclearance requirement and
associated procedures are designed to identify any prohibition or limitation
applicable to a proposed investment.
PORTFOLIO TRANSACTIONS
Wilshire supervises the placement of orders on behalf of the Portfolio for the
purchase or sale of portfolio securities. Portfolio transactions are allocated
among broker-dealers in the best judgment of Wilshire and in a manner deemed
fair and reasonable to shareholders. The primary consideration is prompt
execution of orders at the most favorable net price. Subject to this
consideration, the brokers selected may include those that supplement Wilshire's
research facilities with statistical data, investment information, economic
facts and opinions. Information so received is in addition to and not in lieu of
services required to be performed by Wilshire and its fees are not reduced by
the receipt of such supplemental information. Such information may be useful to
Wilshire in serving both the Portfolio and other clients which it advises and,
conversely, supplemental information obtained by the placement of business of
other clients may be useful to Wilshire in carrying out its obligations to the
Portfolio. Brokers also are selected because of their ability to handle special
executions such as are involved in large block trades or broad distributions,
provided the primary consideration is met. When transactions are executed in the
over-the-counter market, the Portfolio will deal with the primary market makers
unless a more favorable price or execution otherwise is obtainable.
Although Wilshire makes investment decisions for the Portfolio independently
from those of its other accounts, investments of the kind made by the Portfolio
may often also be made by such other accounts. When Wilshire buys or sells the
same security at substantially the same time on behalf of the Portfolio and one
or more other accounts managed by Wilshire, it allocates available investments
by such means as, in its judgment, result in fair treatment. Wilshire aggregates
orders for purchases and sales of securities of the same issuer on the same day
among the Portfolio and their other managed accounts, and the price paid to or
received by the Portfolio and those accounts is the average obtained in those
orders. In some cases, such aggregation and allocation procedures may affect
adversely the price paid or received by the Portfolio or the size of the
position purchased or sold by the Portfolio.
Portfolio turnover may vary from year to year, as well as within a year. Under
normal market conditions, the Portfolio's turnover rate generally will not
exceed 80%. High turnover rates, generally as a result of fluctuating market
conditions, are likely to result in comparatively greater brokerage expenses.
Recognizing this, Wilshire attempts to minimize the cost per share of trading
while at the same time implementing only those trades necessary to maintain the
proper style exposure.
For the fiscal year ended August 31, 1999, the Portfolio paid total brokerage
commissions of $62,049.
As of August 31, 1999, the Portfolio held the following securities of its
regular brokers or dealers:
<TABLE>
<CAPTION>
<S> <C>
Brokers or Dealers Market Value
JP Morgan & Co. $ 167,943.75
Morgan Stanley Dean Whitter $ 377,575.00
Citigroup $2,235,206,25
Jeffries Group Inc. $ 9,900.00
Investment Tech. Group $ 7,057.75
</TABLE>
No brokerage commissions were paid to the Company's distributor. There were no
spreads or concessions on principal transactions for any such period.
<PAGE>
NET ASSET VALUE
The net asset value per share of the Horace Mann Class of the Portfolio is
calculated as of the close of regular trading of the NYSE on each day the NYSE
is open for trading.
The Portfolio's investment securities are valued at the last sale price on the
securities exchange or national securities market on which such securities
primarily are traded. Securities not listed on an exchange or national
securities market, or securities for which there were no transactions, are
valued at the average of the most recent bid and asked prices. Bid price is used
when no asked price is available. Short-term investments are valued at amortized
cost. Any securities or other assets for which recent market quotations are not
readily available are valued at fair value as determined in good faith by or
under the direction of the Board of Directors. Expenses and fees, including the
advisory and administration fees, are accrued daily and taken into account for
the purpose of determining the net asset value of the Portfolio's shares.
PURCHASE AND REDEMPTION OF SHARES
The following information supplements and should be read in conjunction with the
sections in the Prospectus entitled "How to Purchase Portfolio Shares" and "How
to Sell Portfolio Shares."
The Distributor. Provident Distributors Inc. ("PDI"), Four Falls Corporate
Center, 6th Floor, West Conshohocken, Pennsylvania 19428-2961, serves as the
Company's distributor pursuant to an agreement which is renewable annually by
the Board of Directors. The Horace Mann Class shares of the Portfolio are
continuously offered at the net asset value per share next determined after a
proper purchase request has been received and accepted by the Company. The
Distribution Agreement between the Distributor and the Company provides that the
Company shall indemnify the Distributor against any liability arising out of any
untrue statement of a material fact or any omission of a material fact in the
Company's registration statement necessary to make the statements therein
misleading, unless such liability results from the Distributor's willful
misfeasance, bad faith or negligence in the performance of its duties under the
Agreement.
In-Kind Purchases. Payments for the Portfolio's shares may, at the discretion of
the Company, be made in the form of securities which are permissible investments
for the Portfolio. For further information about this form of payment, please
contact the Transfer Agent. Generally, securities which are accepted by the
Portfolio as payment for the Portfolio's shares will be valued using the
Portfolio's procedures for valuing its own shares at the time the Portfolio's
net asset value is next determined after receipt of a properly completed order.
All dividends, interest, subscription or other rights pertaining to such
securities will become the property of the Portfolio and must be delivered to
the Portfolio upon receipt from the issuer. The Portfolio will require that (1)
it will have good and marketable title to the securities received by it; (2) the
securities are in proper form for transfer to the Portfolio and are not subject
to any restriction on sale by the Portfolio under the Securities Act of 1933, as
amended, or otherwise; and (3) the Portfolio receives such other documentation
as the Company may, in its discretion, deem necessary or appropriate. Investors
who are subject to Federal taxation may realize a gain or loss for Federal
income tax purpose upon such a payment.
<PAGE>
Signatures. Written redemption requests must be signed by each shareholder,
including each holder of a joint account, and each signature must be guaranteed
if the amount redeemed exceeds $50,000. The Transfer Agent has adopted standards
and procedures pursuant to which signature guarantees in proper form generally
will be accepted from domestic banks, brokers, dealers, credit unions, national
securities exchanges, registered securities associations, clearing agencies and
savings associations, as well as from participants in the New York Stock
Exchange Medallion Signature Program, the Securities Transfer Agents Medallion
Program ("STAMP") and the Stock Exchanges Medallion Program. Guarantees must be
signed by an authorized signatory of the guarantor and "Signature Guaranteed"
must appear with the signature. The Transfer Agent may request additional
documentation from corporations, executors, administrators, trustees or
guardians, and may accept other suitable verification arrangements from foreign
investors, such as consular verification. For more information with respect to
signature guarantees, please call the telephone number listed on the cover.
Redemption Commitment. The Company has committed itself to pay in cash all
redemption requests by any shareholder of record, limited in amount during any
90-day period to the lesser of $250,000 or 1% of the value of the Portfolio's
net assets at the beginning of such period. Such commitment is irrevocable
without the prior approval of the SEC. For requests for redemption in excess of
such amount, the Board of Directors reserves the right to make payments in whole
or in part in securities or other assets in case of an emergency or any time a
cash distribution would impair the liquidity of the Portfolio to the detriment
of the existing shareholders. In such event, the securities would be readily
marketable, to the extent available, and would be valued in the same manner as
the Portfolio's investment securities are valued. If the recipient sold such
securities, brokerage charges would be incurred.
Suspension of Redemptions. The Company may suspend the right of redemption with
respect to the Portfolio or postpone the date of payment (a) during any period
when the New York Stock Exchange is closed (other than customary weekend and
holiday closings), (b) when trading in the markets the Portfolio ordinarily
utilizes is restricted, or when an emergency exists as determined by the SEC so
that disposal of the investments or determination of its net asset value is not
reasonably practicable, or (c) for such other periods as the SEC by order may
permit to protect the shareholders.
New York Stock Exchange Closings. The holidays (as observed) on which the
New York Stock Exchange is closed currently are: New Year's Day, Presidents'
Day, Rev. Martin Luther King, Jr. Day, Good Friday, Memorial Day, Independence
Day, Labor Day, Thanksgiving and Christmas.
DIVIDENDS, DISTRIBUTION AND TAXES
The following information supplements and should be read in conjunction with the
sections in the Prospectus entitled "Dividends and Distribution Information" and
"Tax Information."
Regulated Investment Companies
The Company's management believes that the Portfolio qualified as a "regulated
investment company" under the Internal Revenue Code of 1986, as amended (the
"Code") for the fiscal year ended August 31, 1999. Qualification as a regulated
investment company relieves the Portfolio from any liability for Federal income
taxes to the extent that its earnings are distributed in accordance with the
applicable provisions of the Code. The term "regulated investment company" does
not imply the supervision of management or investment practices or policies by
any government agency.
As a regulated investment company, the Portfolio will not be liable for federal
income tax on its income and gains provided it distributes all of its income and
gains currently. Qualification as a regulated investment company under the Code
requires, among other things, that the Portfolio (a) derive at least 90% of its
gross income from dividends, interest, payments with respect to securities
loans, and gains from the sale or other disposition of securities or foreign
currencies, or other income (including, but not limited to, gains from options,
futures or forward contracts) derived with respect to its business of investing
in such securities or currencies; (b) diversify its holdings so that, at the end
of each fiscal quarter, (i) at least 50% of the market value of the Portfolio's
assets is represented by cash, U.S. Government securities and securities of
other regulated investment companies, and other securities (for purposes of this
calculation generally limited, in respect of any one issuer, to an amount not
greater than 5% of the market value of the Portfolio's assets and 10% of the
outstanding voting securities of such issuer) and (ii) not more than 25% of the
value of its assets is invested in the securities of any one issuer (other than
U.S. Government securities or the securities of other regulated investment
companies), or two or more issuers which the Company controls and which are
determined to be engaged in the same or similar trades or businesses; and (c)
distribute at least 90% of its investment company taxable income (which includes
dividends, interest, and net short-term capital gains in excess of net long-term
capital losses) each taxable year.
Because the Portfolio is established in part as an investment for certain
insurance variable annuity contacts, the Code imposes additional diversification
requirements on the Portfolio. Generally, these requirements are that at each
quarter end and for 30 days thereafter no more than 55% of the Portfolio's total
assets may be in any one investment, no more than 70% in any two investments,
nor more than 80% in any three investments, and no more than 90% in any four
investments.
The Portfolio generally will be subject to a nondeductible excise tax of 4% to
the extent that it does not meet certain minimum distribution requirements as of
the end of each calendar year. To avoid the tax, the Portfolio must distribute
during each calendar year an amount equal to the sum of (1) at least 98% of its
ordinary income and net capital gain (not taking into account any capital gains
or losses as an exception) for the calendar year, (2) at lest 98% of its capital
gains in excess of its capital losses (and adjusted for certain ordinary losses)
for the twelve month period ending on October 31 of the calendar year, and (3)
all ordinary income and capital gains for previous years that were no
distributed during such years. A distribution will be treated as paid on
December 31 of the calendar year if it is declared by the Portfolio in October,
November, or December of that year to shareholders of record on a date in such a
month and paid by the Portfolio during January of the following year. Such
distributions will be taxable to shareholders (other than those not subject to
federal income tax) in the calendar year in which the distributions are
declared, rather than the calendar year in which the distributions are received.
To avoid the excise tax, the Portfolio intends to make timely distributions of
their income in compliance with these requirements and anticipate that it will
not be subject to the excise tax.
<PAGE>
Dividends paid by the Portfolio from ordinary income, and distributions of the
Portfolio's net realized short-term capital gains, are taxable to its
shareholders as ordinary income. Distributions to corporate shareholders will be
eligible for the 70% dividends received deduction to the extent that the income
of the Portfolio is derived from dividends on common or preferred stock of
domestic corporations. Dividend income earned by the Portfolio will be eligible
for the dividends received deduction only if the Portfolio has satisfied a
46-day holding period requirement (described below) with respect to the
underlying portfolio security (91 days in the case of dividends derived from
preferred stock). In addition, a corporate shareholder must have held its shares
in the Portfolio for not less than 46 days during the 90-day period that begins
45 days before the stock becomes ex-dividend with respect to the dividend (91
days during the 180-day period that begins 90 days before the stock becomes
ex-dividend with respect to the dividend in the case of dividends derived from
preferred stock) in order to claim the dividend received deduction. Within 60
days after the end of its taxable year, the Portfolio will send to its
shareholders a written notice designating the amount of any distributions made
during such year which may be taken into account by its shareholders for
purposes of such deduction provisions of the Code. Net capital gain
distributions are not eligible for the dividends received deduction.
Under the Code, any distributions designated as being made from net capital
gains are taxable to the Portfolio's shareholders as long-term capital gains,
regardless of the holding period of such shareholders. Such distributions of net
capital gains will be designated by the Portfolio as a capital gains
distribution in a written notice to its shareholders which accompanies the
distribution payment. Any loss on the sale of shares held for less than six
months will be treated as a long-term capital loss for federal tax purposes to
the extent a shareholder receives net capital gain distributions on such shares.
The maximum federal income tax rate applicable to long-term capital gains is
currently 28% (20% on property sold after July 28, 1997 that was held more than
18 months) for individual shareholders and 35% for corporate shareholders.
Dividends and distributions are taxable as such whether received in cash or
reinvested in additional shares of the Portfolio.
Any loss realized on a sale, redemption or exchange of shares of the Portfolio
by a shareholder will be disallowed to the extent the shares are replaced within
a 61-day period (beginning 30 days before the disposition of shares). Shares
purchased pursuant to the reinvestment of a dividend will constitute a
replacement of shares.
Hedging Transactions
Ordinarily, gains and losses realized from portfolio transactions will be
treated as a capital gain or loss. All or a portion of the gain realized from
engaging in "conversion transactions" may be treated as ordinary income under
Section 1258. "Conversion transactions" are defined to include certain futures,
option and "straddle" transactions, transactions marketed or sold to produce
capital gains, or transactions described in Treasury regulations to be issued in
the future.
Under Section 1256 of the Code, a gain or loss realized by the Portfolio from
certain financial futures transactions will be treated as 60% long-term capital
gain or loss and 40% short-term capital gain or loss. Gain or loss will arise
upon the exercise or lapse of such futures as well as from closing transactions.
In addition, any such futures remaining unexercised at the end of the
Portfolio's taxable year will be treated as sold for their then fair market
value, resulting in additional gain or loss to the Portfolio characterized in
the manner described above.
<PAGE>
Offsetting positions held by the Portfolio involving financial futures may
constitute "straddles." Straddles are defined to include "offsetting positions"
in actively traded personal property. The tax treatment of straddles is governed
by Sections 1092 and 1258 of the Code, which, in certain circumstances,
overrides or modifies the provisions of Section 1256. As such, all or a portion
of any short- or long-term capital gain from certain "straddle" and/or
conversion transactions may be recharacterized to ordinary income.
If the Portfolio were treated as entering into straddles by reason of its
futures transactions, such straddles could be characterized as "mixed straddles"
if the futures transactions comprising such straddles were governed by Section
1256 of the Code. The Portfolio may make one or more elections with respect to
"mixed straddles." Depending upon which election is made, if any, the results to
the Portfolio may differ. If no election is made, to the extent the straddle
rules apply to positions established by the Portfolio, losses realized by the
Portfolio will be deferred to the extent of unrealized gain in any offsetting
positions. Moreover, as a result of the straddle rules, short-term capital loss
on straddle positions may be recharacterized as long-term capital loss, and
long-term capital gain on straddle positions may be recharacterized as
short-term capital gain, and as a result of the conversion transaction rules,
long-term capital gain may be recharacterized as ordinary income.
Under Section 1259 of the Code, enacted as part of the Taxpayer Relief Act of
1997, the Portfolio will recognize gain if it enters into a futures contract
relating to an appreciated direct position in any stock or debt instrument, or
if it acquires stock or a debt instrument at a time when the Portfolio has an
offsetting appreciated position in the stock or debt instrument. Such
transactions are considered to be constructive sales for income tax purposes.
Other Tax Information
The Portfolio may be required to withhold for U.S. federal income taxes 31% of
all taxable distributions payable to shareholders who fail to provide the
Company with their correct taxpayer identification number or to make required
certifications, or who have been notified by the Internal Revenue Service that
they are subject to backup withholding. Corporate shareholders and certain other
shareholders specified in the Code generally are exempt from such backup
withholding. Backup withholding is not an additional tax. Any amounts withheld
may be credited against the shareholder's U.S. federal income tax liability.
The Company may also be subject to state or local taxes in certain other states
where it is deemed to be doing business. Further, in those states which have
income tax laws, the tax treatment of the Company and of shareholders of the
Portfolio with respect to distributions by the Portfolio may differ from federal
tax treatment. Distributions to shareholders may be subject to additional state
and local taxes. Shareholders should consult their own tax advisers regarding
specific questions as to federal, state or local taxes.
Any dividend or distribution paid shortly after an investor's purchase may have
the effect of reducing the aggregate net asset value of his or her shares below
the cost of his or her investment. Such a dividend or distribution would be a
return on investment in an economic sense. In addition, the Code provides that
if a shareholder holds shares of the Portfolio for six months or less and has
received a long-term capital gain distribution with respect to such shares, any
loss incurred on the sale of such shares will be treated as a long-term capital
loss to the extent of the long-term capital gain distribution received.
PERFORMANCE INFORMATION
For purposes of advertising, performance may be calculated on the basis of
average annual total returns and/or total returns of the Portfolio. "Total
return" is the change in value of an investment in the Portfolio for a specified
period. The "average annual total return" of the 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 of the Portfolio, 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.
Average annual total return is calculated by determining the ending redeemable
value of an investment purchased at net asset value per share with a
hypothetical $1,000 payment made at the beginning of the period (assuming the
reinvestment of dividends and distributions), dividing by the amount of the
initial investment, taking the "nth" root of the quotient (where "n" is the
number of years in the period) and subtracting 1 from the result.
Total return is calculated by subtracting the amount of the net asset value per
share at the beginning of a stated period from the net asset value per share at
the end of the period (after giving effect to the reinvestment of dividends and
distributions during the period), and dividing the result by the net asset value
per share at the beginning of the period.
The Wilshire 5000 Index Portfolio commenced operations on February 1, 1999 and
therefore has not been in operation for a full fiscal year.
OTHER INFORMATION
The Company is a Maryland corporation organized on July 30, 1992. It currently
has five Portfolios - Large Company Growth Portfolio, Large Company Value
Portfolio, Small Company Growth Portfolio, Small Company Value Portfolio and
Wilshire 5000 Index Portfolio -- each of which has several classes of shares.
<PAGE>
Each share of the Portfolio has one vote and, when issued and paid for in
accordance with the terms of the offering, is fully paid and non-assessable.
Shares of each class of the Portfolio have equal rights as to dividends and in
liquidation. Shares have no preemptive, subscription or conversion rights and
are freely transferable.
Rule 18f-2 under the 1940 Act provides that any matter required to be submitted
under the provisions of the 1940 Act or applicable state law or otherwise to the
holders of the outstanding voting securities of an investment company, such as
the Company, will not be deemed to have been effectively acted upon unless
approved by the holders of the outstanding shares of each series affected by
such matter. Rule 18f-2 further provides that a series shall be deemed to be
affected by a matter unless it is clear that the interests of all series in the
matter are identical or that the matter does not affect any interest of such
series. However, the Rule exempts the selection of independent accountants and
the election of Directors from the separate voting requirements of the Rule.
Rule 18f-3 under the 1940 Act makes further provision for the voting rights of
each class of shares of an investment company which issues more than one class
of voting shares. In particular, Rule 18f-3 provides that each class shall have
exclusive voting rights on any matter submitted to shareholders that relates
solely to the class' arrangement for services and expenses, and shall have
separate voting rights on any matter submitted to shareholders in which the
interests of one class differ from the interests of any other class.
The Company will send annual and semi-annual financial statements to all its
shareholders.
FINANCIAL STATEMENTS
The Company's audited financial statements for the Portfolio contained in its
annual report for the fiscal year ended August 31, 1999 is incorporated into
this Statement of Additional Information by reference in their entirety. Such
financial statements for the fiscal year ended August 31, 1999 has been audited
by the Company's independent auditors, PricewaterhouseCoopers LLP, whose report
thereon appears in such Annual Report. Such financial statements have been
incorporated herein in reliance upon such report given upon their authority as
experts in accounting and auditing.
<PAGE>
WILSHIRE TARGET FUNDS, INC.
WILSHIRE 5000 INDEX PORTFOLIO
QUALIFIED CLASS SHARES
STATEMENT OF ADDITIONAL INFORMATION
(http://www.wilfunds.com)
________________, 1999
This Statement of Additional Information ("SAI") provides supplementary
information for the Qualified Class shares of the Wilshire 5000 Index Portfolio
series (the "Portfolio") of Wilshire Target Funds, Inc. (the "Company").
This Statement of Additional Information is not a prospectus, and it should
be read in conjunction with the prospectus for the Portfolio dated [ ]. You can
obtain the Portfolio's prospectus by contacting us at: Wilshire Target Funds,
Inc., P.O. Box 60488, King of Prussia, Pennsylvania 19406-0488, 888-200-6796
TABLE OF CONTENTS
The Portfolio.................................................................
Investment Policies and Risks.................................................
Investment Restrictions.......................................................
Directors and Officers.........................................................
Principal Holders of Securities................................................
Investment Advisory and Other Services.........................................
Code of Ethics.................................................................
Portfolio Transactions.........................................................
Net Asset Value................................................................
Purchase and Redemption of Shares..............................................
Shareholder Services............................................................
Dividends, Distribution and Taxes..............................................
Performance Information.......................................................
Other Information...............................................................
Financial Statements...........................................................
<PAGE>
THE PORTFOLIO
The Company is a diversified, open-end investment management company that
currently offers shares of a number of series and classes, including Qualified
Class shares for the Wilshire 5000 Index Portfolio. The Company also offers
other classes of shares of the Wilshire 5000 Index Portfolio in separate
prospectuses.
You cannot invest in Qualified Class shares directly. Instead, you can
participate through a variable annuity contract ("Contract") purchased by your
employer from an insurance company ("Insurer") with which the Portfolio has
entered into an agreement. Most often employers enter into these Contracts so
they can offer their employees a way to save for retirement. Retirement Plans
sponsored by employers may be entitled to tax benefits to which individual
retirement plans may not be entitled. These tax benefits are fully explained
your employer's Contract disclosure document. Once you are invested in Qualified
Class shares of the Portfolio, you participate in Portfolio earnings or losses
in proportion to the amount of money you invest. Depending on your employer's
Contract, if you withdraw your money before retirement, you may incur charges
and additional tax liabilities. However, to save for retirement, you generally
should let your investments and their earnings build. At retirement, you may
withdraw all or a portion of your money, leave it in the account until you need
it, or start receiving annuity payments. At a certain age you may be required to
begin withdrawals. Holders of Contracts ("Contract Owners") should consider
their investment objectives and tolerance for risk when making an investment
decision. The Portfolio's net asset value is not fixed and should be expected to
fluctuate. You should consider the Portfolio as a supplement to an overall
investment program and should invest only if you are willing to undertake the
risks involved.
INVESTMENT POLICIES AND RISKS
The Portfolio may invest in the investments described below:
U.S. Government Securities. The Portfolio may purchase securities issued or
guaranteed by the U.S. Government or its agencies or instrumentalities, which
include U.S. Treasury securities of various interest rates, maturities and times
of issuance. Some obligations issued or guaranteed by U.S. Government agencies
and instrumentalities are supported by the full faith and credit of the U.S.
Treasury. Others are supported by the right of the issuer to borrow from the
Treasury, by discretionary authority of the U.S. Government to purchase certain
obligations of the agency or instrumentality, or by the credit of the agency or
instrumentality. These securities bear fixed, floating or variable rates of
interest. While the U.S. Government provides financial support to such U.S.
Government-sponsored agencies or instrumentalities, no assurance can be given
that it will always do so, since it is not so obligated by law.
Money Market Instruments. The Portfolio may invest in money market instruments,
including certificates of deposit, time deposits, bankers' acceptances and other
short-term obligations issued by domestic banks, foreign subsidiaries or
branches of domestic banks, domestic and foreign branches of foreign banks,
domestic savings and loan associations and other banking institutions.
A certificate of deposit is a negotiable certificate requiring a bank to repay
funds deposited with it for a specified period of time.
A time deposit is a non-negotiable deposit maintained in a banking institution
for a specified period of time at a stated interest rate. The Portfolio will
only invest in time deposits of domestic banks that have total assets in excess
of one billion dollars. Time deposits held by the Portfolio will not benefit
from insurance administered by the Federal Deposit Insurance Corporation.
A bankers' acceptance is a credit instrument requiring a bank to pay a draft
drawn on it by a customer. These instruments reflect the obligation both of the
bank and of the drawer to pay the face amount of the instrument upon maturity.
Other short-term bank obligations in which the Portfolio may invest may include
uninsured, direct obligations bearing fixed, floating or variable interest
rates.
With respect to such securities issued by foreign branches and subsidiaries of
domestic banks, and domestic and foreign branches of foreign banks, the
Portfolio may be subject to additional investment risks that are different in
some respects from those incurred by the Portfolio which invests only in debt
obligations of U.S. domestic issuers. Such risks include possible future
political and economic developments, possible seizure or nationalization of
foreign deposits, the possible imposition of foreign withholding taxes on
interest income, the possible establishment of exchange controls or the adoption
of other foreign governmental restrictions which may adversely affect the
payment of principal and interest on these securities.
Repurchase Agreements. In a repurchase agreement, the Portfolio buys, and the
seller agrees to repurchase, a security at a mutually agreed upon time and price
(usually within seven days). The repurchase agreement thus determines the yield
during the purchaser's holding period, while the seller's obligation to
repurchase is secured by the value of the underlying security. A repurchase
agreement involves risks in the event of a default or insolvency of the other
party to the agreement, including possible delays or restrictions upon the
Portfolio's ability to dispose of the underlying securities. The Company's
custodian or sub-custodian will hold in a segregated account the securities
acquired by the Portfolio under a repurchase agreement. Repurchase agreements
are considered, under the Investment Company Act of 1940, as amended (the "1940
Act"), to be loans by the Portfolio. To try to reduce the risk of loss on a
repurchase agreement, the Portfolios will enter into repurchase agreements only
with domestic banks with total assets in excess of one billion dollars, only
with respect to securities of the type in which the Portfolio may invest, and
will require that additional securities be deposited with the custodian or
sub-custodian if the value of the securities purchased decreases below the
repurchase price.
Lending Portfolio Securities. The Portfolio may seek additional income by
lending its securities on a short-term basis to banks, brokers and dealers under
agreement. The Portfolio may return a portion of the interest earned to the
borrower or a third party which is unaffiliated with the Company and acting as a
"placing broker."
The Securities and Exchange Commission (the "SEC") currently requires that the
following lending conditions must be met: (1) the Portfolio must receive at
least 100% collateral from the borrower (cash, U.S. Government securities, or
irrevocable bank letters of credit); (2) the borrower must increase the
collateral whenever the market value of the loaned securities rises above the
level of such collateral; (3) the Portfolio must be able to terminate the loan
at any time; (4) the Portfolio must receive reasonable interest on the loan, as
well as any dividends, interest or other distributions payable on the loaned
securities, and any increase in market value; (5) the Portfolio may pay only
reasonable custodian fees in connection with the loan; and (6) while voting
rights on the loaned securities may pass to the borrower, the Company's Board of
Directors must be able to terminate the loan and regain the right to vote the
securities if a material event adversely affecting the investment occurs.
Even though loans of portfolio securities are collateralized, a risk of loss
exists if an institution that borrows securities from the Portfolio breaches its
agreement with the Portfolio and the Portfolio is delayed or prevented from
recovering the collateral.
Commercial Paper And Other Short-term Corporate Obligations. Commercial paper is
a short-term, unsecured promissory note issued to finance short-term credit
needs. The commercial paper purchased by the Portfolio will consist only of
direct obligations which, at the time of their purchase, are (a) rated at least
Prime-1 by Moody's Investors Service, Inc., A-1 by Standard & Poor's Ratings
Group, F-1 by Fitch Investors Service, L.P. or D-1 by Duff & Phelps Credit
Rating Co.; (b) issued by companies having an outstanding unsecured debt issue
rated at least Aa3 by Moody's Investors Service, Inc. or AA- by Standard &
Poor's Ratings Group, Fitch Investors Service, L.P. or Duff & Phelps Credit
Rating Co.; or (c) if unrated, determined by the Company to be of comparable
quality.
These instruments include variable amount master demand notes, which are
obligations that permit the Portfolio to invest at varying rates of interest
pursuant to direct arrangements between the Portfolio, as lender, and the
borrower. These notes permit daily changes in the amounts borrowed. Because they
are direct lending arrangements between the lender and borrower, such
instruments generally will not be traded, and there generally is no established
secondary market for these obligations, although they are redeemable at face
value, plus accrued interest, at any time. If these obligations are not secured
by letters of credit or other credit support arrangements, the Portfolio's right
to redeem its investment depends on the ability of the borrower to pay principal
and interest on demand. In connection with floating and variable rate demand
obligations, Wilshire will consider, on an ongoing basis, earning power, cash
flow and other liquidity ratios of the borrower, and the borrower's ability to
pay principal and interest on demand. Such obligations frequently are not rated
by credit rating agencies, and the Portfolio may invest in them only if at the
time of an investment the borrower meets the criteria set forth above for other
commercial paper issuers.
Derivatives. The Portfolio may invest, to a limited extent, in "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 Portfolio uses are currently comprised of stock index futures
and options. The Portfolio may invest in derivatives for a variety of reasons,
including to hedge against certain market risks, to provide a substitute for
purchasing or selling particular securities or to increase potential income
gain. Derivatives may provide a cheaper, quicker or more specifically focused
way for the Portfolio to invest than "traditional" securities.
Although the Portfolio does not currently intend to invest in derivatives, it
reserves the right to do so in the future. Normally, less than 5% of the
Portfolio's net assets would be invested in derivatives.
<PAGE>
Derivatives permit the Portfolio to increase, decrease or change the level of
risk to which its securities are exposed in much the same way as the Portfolio
can increase, decrease or change the risk of its investments by making
investments in specific securities. However, derivatives can be volatile and
involve various types and degrees of risk, depending upon the characteristics of
the particular derivative and the Portfolio as a whole. 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 of the Portfolio's shares.
In addition, derivatives may entail investment exposures that are greater than
their cost would suggest, meaning that a small investment in derivatives could
have a large potential impact on the Portfolio's performance. If the Portfolio
invests in derivatives at inappropriate times or judges market conditions
incorrectly, such investments may lower the Portfolio's return or result in a
loss. The Portfolio also could experience losses if its derivatives were poorly
correlated with its other investments, or if the Portfolio were unable to
liquidate its position because of an illiquid secondary market. The market for
many derivatives is, or suddenly can become, illiquid. Changes in liquidity may
result in significant, rapid and unpredictable changes in the prices for
derivatives.
When required by the SEC, the Portfolio will set aside permissible liquid assets
in a segregated account to cover its obligations relating to its purchase of
derivatives. To maintain this required cover, the Portfolio may have to sell
portfolio securities at disadvantageous prices or times. Derivatives may be
purchased on established exchanges ("exchange-traded" derivatives) or through
privately negotiated transactions ("over-the-counter" derivatives).
Exchange-traded derivatives generally are guaranteed by the clearing agency
which is the issuer or counterparty to such derivatives. This guarantee usually
is supported by a daily payment system operated by the clearing agency in order
to reduce overall credit risk. As a result, unless the clearing agency defaults,
there is relatively little counterparty credit risk associated with derivatives
purchased on an exchange. By contrast, no clearing agency guarantees
over-the-counter derivatives. Therefore, each party to an over-the-counter
derivative bears the risk that the counterparty will default. Accordingly,
Wilshire will consider the creditworthiness of counterparties to
over-the-counter derivatives in the same manner as it would review the credit
quality of a security to be purchased by the Portfolio. Over-the-counter
derivatives are less liquid than exchange-traded derivatives since the other
party to the transaction may be the only investor with sufficient understanding
of the derivative to be interested in bidding for it.
Although the Portfolio will not be a commodity pool, derivatives subject the
Portfolio to the rules of the Commodity Futures Trading Commission which limit
the extent to which the Portfolio can invest in certain derivatives. The
Portfolio may invest in stock index futures contracts for hedging purposes
without limit. However, the Portfolio may not 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.
<PAGE>
Futures Transactions. The Portfolio may enter into futures contracts on
particular securities or stock indices in U.S. domestic markets, such as the
Chicago Board of Trade and the International Monetary Market of the Chicago
Mercantile Exchange. A futures contract is an agreement in which one party
agrees to deliver to the other an amount of cash equal to a specific dollar
amount times the difference between the value of a specific stock or stock index
at the close of the last trading day of the contract and the price at which the
agreement is made.
No physical delivery of securities is made.
Engaging in these transactions involves risk of loss to the Portfolio which
could affect the value of the Portfolio's net assets adversely. Although the
Portfolio intends to purchase or sell futures contracts only if there is an
active market for such contracts, no assurance exists that a liquid market will
exist for any particular contract at any particular time. Many futures exchanges
and boards of trade limit the amount of fluctuation permitted in futures
contract prices during a single trading day. Once the daily limit has been
reached in a particular contract, no trades may be made that day at a price
beyond that limit or trading may be suspended for specified periods during the
trading day. Futures contract prices could move to the limit for several
consecutive trading days with little or no trading, thereby preventing prompt
liquidation of futures positions and potentially subjecting the Portfolio to
substantial losses.
Successful use of futures by the Portfolio also is subject to the ability of
Wilshire to predict correctly movements in the direction of the relevant market
and, to the extent the transaction is entered into for hedging purposes, to
ascertain the appropriate correlation between the position being hedged and the
price movements of the futures contract. For example, if the Portfolio uses
futures to hedge against the possibility of a decline in the market value of
securities held in its portfolio and the prices of such securities instead
increase, the Portfolio will lose part or all of the benefit of the increased
value of securities which it has hedged because it will have offsetting losses
in its futures positions. Furthermore, if in such circumstances the Portfolio
has insufficient cash, it may have to sell securities to meet daily variation
margin requirements. The Portfolio may have to sell such securities at a time
when it may be disadvantageous to do so.
Pursuant to regulations and published positions of the SEC, the Portfolio may be
required to segregate cash or liquid assets in connection with its futures
transactions in an amount generally equal to the value of the contract. The
segregation of such assets will have the effect of limiting the Portfolio's
ability otherwise to invest those assets.
Options. The Portfolio may write covered call options, buy put options, buy call
options and write secured put options on particular securities or the Wilshire
5000 Index. Options trading is a highly specialized activity which entails
greater than ordinary investment risks. A call option for a particular security
gives the purchaser of the option the right to buy, and a writer the obligation
to sell, the underlying security at the stated exercise price at any time prior
to the expiration of the option, regardless of the market price of the security.
The premium paid to the writer is in consideration for undertaking the
obligations under the option contract. A put option for a particular security
gives the purchaser the right to sell the underlying security at the stated
exercise price at any time prior to the expiration date of the option,
regardless of the market price of the security.
Options on stock indices are similar to options on specific securities, except
that, rather than the right to take or make delivery of the specific security at
a specific price, an option on a stock index gives the holder the right to
receive, upon exercise of the option, an amount of cash if the closing level of
that stock index is greater than, in the case of a call option, or less than, in
the case of a put option, the exercise price of the option. This amount of cash
is equal to the difference between the closing price of the index and the
exercise price of the option expressed in dollars times a specified multiple.
The writer of the option is obligated, in return for the premium received, to
deliver this amount. Unlike options on specific securities, all settlements of
options on stock indices are in cash, and gain or loss depends on general
movements in the stocks included in the index rather than price movements in
particular stock.
Other Derivatives. The Portfolio may take advantage of opportunities in the area
of futures contracts and any other derivatives which presently are not
contemplated for use by the Portfolio or which currently are not available but
which may be developed, to the extent such opportunities are both consistent
with the Portfolio's investment objective and legally permissible for the
Portfolio. Before entering into such transactions or making any such investment,
the Portfolio will provide appropriate disclosure in its prospectus or SAI.
Foreign Securities. The Portfolio may include securities of the foreign issuers
included in the Wilshire 5000 Index. Investments in foreign securities have
additional risks, including future political and economic developments, possible
imposition of withholding taxes on income payable on the securities, the
possible establishment of currency exchange controls, adoption of other foreign
governmental restrictions and possible seizure or nationalization of foreign
assets.
Preferred Stock. The Portfolio may invest up to 5% of its assets in preferred
stock. Preferred Stock, unlike common stock, offers a stated dividend rate
payable from a corporation's earnings. Such preferred stock dividends may be
cumulative or non-cumulative, participating or auction rate. If interest rates
rise, the fixed dividend on preferred stocks may be less attractive, causing the
price of preferred stocks to decline. Preferred stock may have mandatory sinking
fund provisions, as well as call/redemption provisions prior to maturity, a
negative feature when interest rates decline. Dividends on some preferred stock
may be "cumulative," requiring all or a portion of prior unpaid dividends to be
paid before dividends are paid on the issuer's common stock. Preferred stock
also generally has a preference over common stock on the distribution of a
corporation's assets in the event of liquidation of the corporation, and may be
"participating," which means that it may be entitled to a dividend exceeding the
stated dividend in certain cases. The rights of preferred stocks on the
distribution of a corporation's assets in the event of a liquidation are
generally subordinate to the rights associated with a corporation's debt
securities.
Convertible Securities. The Portfolio may invest up to 5% of its assets in
convertible securities when its appears to Wilshire that it may not be prudent
to be fully invested in common stocks. In evaluating a convertible security,
Wilshire places primary emphasis on the attractiveness of the underlying common
stock and the potential for capital appreciation through conversion. Convertible
securities may include corporate notes or preferred stock but are ordinarily
long-term debt obligations of the issuers convertible at stated exchange rates
into common stock of the issuers. As with all debt securities, the market value
of convertible securities tends to decline as interest rates increase and,
conversely, to increase as interest rates decline. Convertible securities
generally offer lower interest or dividend yields than non-convertible
securities of similar quality. However, when the market price of the common
stock underlying a convertible security exceeds the conversion price, the price
of the convertible security tends to reflect the value of the underlying common
stock. As the market price of the underlying common stock declines, the
convertible security tends to trade increasingly on a yield basis, and thus may
not depreciate to the same extent as the underlying common stock. Convertible
securities rank senior to common stocks in a issuer's capital structure and are
consequently of higher quality and entail less risk than the issuer's common
stock, although the extent to which such risk is reduced depends in large
measure upon the degree to which the convertible security sells above its value
as a fixed income security.
Warrants and Rights. The Portfolio may invest up to 5% of its assets in warrants
and rights. Warrants are options to purchase equity securities at a specified
price valid for a specific period of time. Their prices do not necessarily move
parallel to the prices of the underlying securities. Rights are similar to
warrants, but generally are shorter in duration and are distributed by the
issuer directly to its shareholders. Warrants and rights have no voting rights,
receive no dividends and have no rights to the assets of the issuer.
INVESTMENT RESTRICTIONS
The investment restrictions described below are fundamental policies of the
Portfolio and cannot be changed without the approval of a majority of the
Portfolio's outstanding voting shares (as defined by the 1940 Act). All
percentage limitations apply only at the time of the transaction. Subsequent
changes in value or in the Portfolio's total assets will not result in a
violation of the percentage limitations. The Portfolio may not:
1. Invest in commodities, except that the Portfolio may purchase and sell
options, forward contracts, and futures contracts, including those relating to
indices, and options on futures contracts or indices.
2. Purchase, hold or deal in real estate or oil, gas or other mineral leases or
exploration or development programs, but the Portfolio may purchase and sell
securities that are secured by real estate or issued by companies that invest or
deal in real estate.
3. Borrow money, except for temporary or emergency (not leveraging) purposes in
an amount up to 33 1/3% of the value of the Portfolio's total assets (including
the amount borrowed) based on the lesser of cost or market, less liabilities
(not including the amount borrowed) at the time the borrowing is made. When
borrowings exceed 5% of the value of the Portfolio's total assets, the Portfolio
will not make any additional investments. For purposes of this investment
restriction, the entry into options, forward contracts, or futures contracts,
including those relating to indices and options on futures contracts or indices,
will not constitute borrowing.
4. Make loans to others, except through the purchase of debt obligations and
entry into repurchase agreements. However, the Portfolio may lend its portfolio
securities in an amount not to exceed 33 1/3% of the value of its total assets.
Any loans of portfolio securities will be made according to guidelines
established by the SEC and the Company's Board of Directors.
5. Act as an underwriter of securities of other issuers, except to the extent
the Portfolio may be deemed an underwriter under the Securities Act of 1933, as
amended, by virtue of disposing of portfolio securities.
<PAGE>
6. Invest more than 25% of its assets in the securities of issuers in any single
industry, provided there will be no limitation on the purchase of obligations
issued or guaranteed by the U.S. Government, its agencies or instrumentalities.
7. Invest more than 5% of its assets in the obligations of any single issuer,
except that up to 25% of the value of the Portfolio's total assets may be
invested, and securities issued or guaranteed by the U.S. Government, or its
agencies or instrumentalities may be purchased, without regard to any such
limitation.
8. With respect to 75% of the Portfolio's assets, hold more than 10% of the
outstanding voting securities of any single issuer.
9. Issue any senior security (as defined in Section 18(f) of the 1940 Act),
except to the extent that the activities permitted in investment restrictions
No. 1 and 3 may be deemed to give rise to a senior security.
The following investment restrictions are non-fundamental and may be changed by
a vote of a majority of the Company's Board of Directors. The Portfolio may not:
1. Invest in the securities of a company for the purpose of exercising
management or control, but the Portfolio will vote the securities it owns in its
portfolio as a shareholder in accordance with its views.
2. Enter into repurchase agreements providing for settlement in more than seven
days after notice or purchase securities which are illiquid, if, in the
aggregate, more than 15% of the value of the Portfolio's net assets would be so
invested.
3. Purchase securities of other investment companies, except to the extent
permitted under the 1940 Act or those received as part of a merger or
consolidation.
DIRECTORS AND OFFICERS
Under Maryland law, the business and affairs of the Portfolio and the Company
are managed under the direction of the Board of Directors. Information
pertaining to the Directors and officers is set forth below.
DIRECTORS
* Indicates that the Director is an "interested person" of the Company as
defined in the 1940 Act.
Name: *Thomas D. Stevens
Age: 50
Address: c/o Wilshire Associates Incorporated, 1299 Ocean Avenue,
Santa Monica, California 90401
Position: Chairman of the Board, President and Director
Principal occupation for last five years: Senior Vice President and Principal
of Wilshire for more than the past five years. He is the Chief Investment
Officer of the Wilshire Asset Management division of Wilshire. Wilshire Asset
Management is a provider of index and structured equity and fixed income
applications.
<PAGE>
.........
Name: Dewitt F. Bowman
Age: 69
Address: 79 Eucalyptus Knoll, Mill Valley, CA 94941
Position: Director
Principal occupation for last five years. Since January 1994, Pension Investment
Consultant providing advice on large pension fund investment strategy, new
product evaluation and integration, and large plan investment analysis and
management. Currently a director of the RREEF America REIT, Dresdner RCM Capital
Fund, Inc. and Dresdner RCM Equity Funds, Inc., and trustee of the Pacific Gas &
Electric Nuclear Decommissioning Trust, Brandes Investment Trust and PCG Private
Equity Fund.
Name: *Robert J. Raab, Jr.
Age: 50
Address: c/o Wilshire Associates Incorporated, 1299 Ocean Avenue,
Santa Monica, California 90401
Position: Director
Principal occupation for last five years: Senior Vice President and Principal
of Wilshire for more than the past five years. He is head of Wilshire's
Institutional Services Division and is responsible for Wilshire Equity, Fixed
Income, Index Fund and Portfolio Accounting products.
Name: Anne Wexler
Age: 68
Address: c/o The Wexler Group, 1317 F Street, N.W., Suite 600,
Washington, D.C. 20004
Position: Director
Principal occupation for last five years. Chairman of the Wexler Group,
consultants specializing in government relations and public affairs, for more
than fifteen years. She is also a director of Alumax, The Dreyfus Corporation,
Comcast Corporation, The New England Electric System, Nova Corporation, and
sixteen mutual funds in the Dreyfus mutual fund family. In addition, she is a
member of the Board of the Carter Center of Emory University, the Council of
Foreign Relations, the National Park Foundation, the Visiting Committee of the
John F. Kennedy School of Government at Harvard University and the Board of
Visitors of the University of Maryland School of Public Affairs.
Name: Cynthia A. Hargadon
Age: 44
Address: c/o National Auto Dealers Association, Retirement Trust,
8400 Westpark Drive, McLean, VA 22102
Position: Director Principal occupation for last five years. Since July 1998,
Director of Investments for the National Automobile Dealers Association. From
November 1996 to July 1998, President of Stable Value Investment Association,
Inc., educating the public about stable value as a fixed income alternative and
how to use it in the asset allocation process for defined contribution plan
participants. She is also a project consultant of Johnson Custom Strategies,
Inc. an independent investment services firm providing specialized asset
management strategies to institutional clients. From May 1987 to November 1996,
Senior Vice-President and Chief Investment Officer of ICMA Retirement
Corporation, a retirement plan administrator. For so long as the plan described
in "Service and Distribution Plan" remains in effect, the Directors of the
Company who are not "interested persons" of the Company, as defined in the
1940 Act, will be selected and nominated by the Directors who are not
"interested persons" of the Company.
The Company pays its Directors who are not "interested persons" of the Company
an annual retainer of $3,000 and a fee of $2,500 per meeting. The aggregate
amount of compensation paid to each current Director by the Company for the
fiscal year ended August 31, 1999, is shown below:
NAME OF AGGREGATE
DIRECTORCOMPENSATION
PAID BY WILSHIRE
DeWitt F. Bowman $9,750
Cynthia A. Hargadon $9,750
Robert J. Raab, Jr $0
Thomas D. Stevens $0
Anne L. Wexler $9,750
.
OFFICERS
Name: David R. Borger
Age: 50
Address: c/o Wilshire Associates Incorporated, 1299 Ocean Avenue,
Santa Monica, California 90401
Position: Vice President and Treasurer
Principal occupation for last five years. Vice President and Principal of the
Company and Director of Research for its Wilshire Asset Management division for
more than five years.
Name: Alan L. Manning
Age: 50
Address: c/o Wilshire Associates Incorporated, 1299 Ocean Avenue,
Santa Monica, California 90401
Position: Secretary
Principal occupation for last five years. Since 1990, Vice President, Secretary
and General Counsel of the Company.
Name: Michael J. Napoli, Jr.
Age: 48
Address: c/o Wilshire Associates Incorporated, 1299 Ocean Avenue,
Santa Monica, California 90401
Position: Vice President
Principal occupation for last five years. Vice President and Principal of the
Company for more than five years. Director of Marketing for Wilshire Asset
Management division.
<PAGE>
Name: Julie A. Tedesco
Age: 42
Address: c/o First Data Investor Services Group, Inc., 101 Federal
Street, Boston, MA 02110
Position: Vice President and Assistant Secretary of the Company
Principal occupation for last five years. Since May 1994, Counsel to First
Data Investor Services Group, Inc. ("Investor Services Group").
Name: Therese M. Hogan
Age: 37
Address: c/o First Data Investor Services Group, Inc., 101 Federal
Street, Boston, MA 02110
Position: Vice President and Assistant Secretary of the Company
Principal occupation for last five years: Since June 1994, Manager (State
Regulation) of Investor Services Group.
Name: Kenneth J. Kempf
Age: 49
Address: c/o First Data Investor Services Group, Inc., 3200 Horizon
Drive, King of Prussia, Pennsylvania
19406
Position: Assistant Treasurer of the Company
Principal occupation for last five years. Since 1998, Senior Vice-President of
Investor Services Group. From November 1993 to February 1998, President and
Chief Executive Officer of FPS Services, Inc. ("FPS"), King of Prussia,
Pennsylvania.
Name: Gerald J. Holland
Age: 48
Address: c/o First Data Investor Services Group, Inc., 3200 Horizon
Drive, King of Prussia, Pennsylvania
19406
Position: Assistant Treasurer of the Company
Principal occupation for last five years. Since 1997, Vice President of Investor
Services Group's Fund Administration Department. From 1994 to 1997, Vice
President of FPS.
Name: Robert C. Herforth
Age: 30
Address: c/o First Data Investor Services Group, Inc., 3200 Horizon
Drive, King of Prussia, Pennsylvania
19406
Position: Assistant Treasurer of the Company
Principal occupation for last five years. Since 1997, Senior Financial
Administrator of Investor Services Group's Financial Reporting Department. From
1995 to 1997, Financial Administrator of FPS. Prior to 1995, he was a Supervisor
in the Transfer Agent Control Department of FPS.
<PAGE>
Name: George Graner
Age: 30
Address: c/o First Data Investor Services Group, Inc., 3200 Horizon
Drive, King of Prussia, Pennsylvania
19406
Position: Assistant Treasurer of the Company
Principal occupation for last five years. Since 1999 Senior Section Manager of
Investor Services Group's Financial Reporting Department. From 1992 to 1999, Mr.
Graner served in various capacities with FPS and Investor Services Group.
Name: Brian O'Neill
Age: 31
Address: c/o First Data Investor Services Group, Inc., 3200 Horizon
Drive, King of Prussia, Pennsylvania
19406
Position: Assistant Treasurer of the Company
Principal occupation for last five years. Since 1997, Manager of Investor
Services Group's Financial Reporting Department. From 1992 to 1997, Mr. O'Neill
served in various capacities with FPS.
As of September 30, 1999, the Directors and officers of the Company as a group
owned less than 1% of the outstanding shares of each class of the Portfolio.
Wilshire is controlled by its President, Dennis Tito, who owns a majority of its
outstanding voting stock.
PRINCIPAL HOLDERS OF SECURITIES
As of September 30, 1999, no shareowners owned of record or beneficially 5% or
more of the Qualified Class of shares of the Portfolio.
INVESTMENT ADVISORY AND OTHER SERVICES
Expenses. From time to time, Wilshire or Investor Services Group may waive
receipt of its fees and/or voluntarily assume certain expenses of the Portfolio
or the Company, which would have the effect of lowering the overall expense
ratio of the Portfolio 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 Provident Distributors Inc. ("PDI"), Wilshire or Investor
Services Group may bear other expenses of distribution of the shares of the
Portfolio or of the provision of shareholder services to the 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 PDI, 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 PDI, 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 all series on the basis determined by the Board of Directors, including,
but not limited to, proportionately in relation to the net assets of the series.
Investment Advisory Agreement and Fees. Wilshire provides investment advisory
services to the Portfolio pursuant to an Investment Advisory Agreement dated
July 11, 1996, as amended on June 8, 1998. All advisory fees are accrued daily.
For the fiscal years ended August 31, 1999, the advisory fees for the Portfolio
payable to Wilshire, the reductions attributable to voluntary fee waivers, and
the net fees paid with respect to the Portfolio, were as follows:
Advisory Reduction Net
Fee Payable in Fee Fee Paid
$34,528 $34,528 $-0-
The Advisory Agreement provides that Wilshire shall exercise its best judgment
in rendering the services to be provided to the Portfolio under the Agreement.
Wilshire is not liable under the Advisory Agreement for any error of judgment or
mistake of law or for any loss suffered by the Portfolio. Wilshire is not
protected, however, against any liability to the Portfolio or its shareholders
to which Wilshire would otherwise be subject by reason of willful misfeasance,
bad faith or gross negligence in the performance of its duties under the
Advisory Agreement or by reason of Wilshire's reckless disregard of its
obligations and duties under the Advisory Agreement.
The Advisory Agreement is terminable with respect to the Portfolio without
penalty on 60 days' notice by the Company's Board of Directors, by vote of a
majority of the Portfolio's outstanding shares (as defined in the 1940 Act), or
on at least 90 days' notice by Wilshire.
The Advisory Agreement terminates in the event of its assignment (as defined in
the 1940 Act).
Services Agreement. Wilshire has entered into a Services Agreement, dated May
31, 1999, with Investor Services Group, 4400 Computer Drive, Westboro, MA 01581.
Investor Services Group furnishes Wilshire with clerical help, accounting, data
processing, internal auditing, legal services and certain other services as may
be required by Wilshire. Investor Services Group also prepares tax returns,
reports to the Portfolio's shareholders, reports and filings with the SEC and
state securities authorities and generally assists in all aspect of the
Company's operations, other than providing investment advice.
<PAGE>
The Services Agreement has an initial three year term and, upon the expiration
date of the initial term, the Services Agreement will automatically renew for
successive terms of three years each, unless the Company or Investor Services
Group provides written notice to the other of its intent not to renew. Such
notice must be received not less than 90 days and not more than 180 days prior
to the expiration of the initial term or the then current renewal term.
As compensation for Investor Services Group's services under the Services
Agreement, Investor Services Group is entitled to receive from the Company a
monthly administration fee at the annual rate of .15% of the Company's monthly
average net assets up to aggregate assets of $1 billion, .10% of such value on
the next $4 billion, and .08% on the excess net assets. In addition, Wilshire
has agreed to pay Investor Services Group an annual fee of $25,000 for each
Portfolio and $2,000 for each additional class.
For the fiscal year ended August 31, 1999, the administration fees paid to
Investor Services Group for the Portfolio was $0.
Service and Distribution Plan. The Service and Distribution Plan (the "Plan") of
the Company adopted pursuant to Section 12(b) of the 1940 Act and Rule 12b-1
thereunder was approved as to the Qualified Class shares of the Portfolio by
vote of the majority of both (a) the Directors of the Company and (b) those
Directors who are not interested persons of the Company (as defined in the 1940
Act) and have no direct or indirect financial interest in the operation of the
Plan or any agreement related to it (the "Independent Directors"), in each case
cast in person at a meeting called for the purpose of voting on the Plan.
The Plan will continue in effect with respect to the Qualified Class shares of
the Portfolio only so long as such continuance is specifically approved at least
annually by votes of the majority (or whatever other percentage may, from time
to time, be required by Section 12(b) of the 1940 Act or the rules and
regulations thereunder) of both (a) the Directors of the Company and (b) the
Independent Directors, cast in person at a meeting called for the purpose of
voting on the Plan. The Plan may not be amended in any material respect with
respect to the Qualified Class shares of the Portfolio unless such amendment is
approved by votes of the majority (or whatever other percentage may, from time
to time, be required by Section 12(b) of the 1940 Act or the rules and
regulations thereunder) of both (a) the Directors of the Company and (b) the
Independent Directors of the Company, cast in person at a meeting called for the
purpose of voting on the, and may not be amended to increase materially the
amount to be spent thereunder without such approvals and approval by vote of at
least a majority (as defined in the 1940 Act) of the outstanding shares of the
Qualified Class of the Portfolio. The Plan may be terminated at any time with
respect to the Qualified Class shares of the Portfolio by vote of a majority of
the Independent Directors or by vote of a majority (as defined in the 1940 Act)
of the outstanding shares of the Qualified Class of the Portfolio. As of August
31, 1999, the Qualified Class shares of the Portfolio has not commenced
operations and therefore there are no payments to report under such Plan.
Transfer and Dividend Disbursing Agent. Investor Services Group, P.O. Box
5170, Westboro, Massachusetts 01581, serves as the Company's transfer agent and
dividend disbursing agent.
Custodian. The Northern Trust Company, located at 50 South Lasalle Street,
Chicago, Illinois 60675, serves as the Portfolio's custodian.
Counsel. Paul Hastings, Janofsky & Walker LLP., 535 South Flower Street,
Los Angeles, California 90071-2371, serves as counsel for the Company.
Independent Accountants. PricewaterhouseCoopers LLP, One Post Office
Square, Boston, Massachusetts, 02109, serves as auditor for the Company.
CODE OF ETHICS
The Board of Directors of the Company has adopted a Code of Ethics under Rule
17j-1 of the Investment Company Act. The Code of Ethics restricts the investing
activities of Company officers, Directors and advisory persons and, as described
below, imposes additional, more onerous restrictions on Portfolio investment
personnel.
Each person covered by the Code of Ethics is prohibited from purchasing or
selling any security which, to such person's knowledge, is being purchased or
sold (as the case maybe), or is being considered for purchase or sale, by the
Portfolio. Investment personnel are subject to additional restrictions such as a
ban on acquiring securities in an initial public offering, "blackout periods"
which prohibit trading by investment personnel of the Portfolio within periods
of trading by the Portfolio in the same security and a ban on short-term trading
in securities. Investment personnel are required to preclear any personal
securities investment (with limited exceptions, such as government securities)
and must comply with ongoing requirements concerning recordkeeping and
disclosure of personal securities investments. The preclearance requirement and
associated procedures are designed to identify any prohibition or limitation
applicable to a proposed investment.
PORTFOLIO TRANSACTIONS
Wilshire supervises the placement of orders on behalf of the Portfolio for the
purchase or sale of portfolio securities. Portfolio transactions are allocated
among broker-dealers in the best judgment of Wilshire and in a manner deemed
fair and reasonable to shareholders. The primary consideration is prompt
execution of orders at the most favorable net price. Subject to this
consideration, the brokers selected may include those that supplement Wilshire's
research facilities with statistical data, investment information, economic
facts and opinions. Information so received is in addition to and not in lieu of
services required to be performed by Wilshire and its fees are not reduced by
the receipt of such supplemental information. Such information may be useful to
Wilshire in serving both the Portfolio and other clients which it advises and,
conversely, supplemental information obtained by the placement of business of
other clients may be useful to Wilshire in carrying out its obligations to the
Portfolio. Brokers also are selected because of their ability to handle special
executions such as are involved in large block trades or broad distributions,
provided the primary consideration is met. When transactions are executed in the
over-the-counter market, the Portfolio will deal with the primary market makers
unless a more favorable price or execution otherwise is obtainable.
<PAGE>
Although Wilshire makes investment decisions for the Portfolio independently
from those of its other accounts, investments of the kind made by the Portfolio
may often also be made by such other accounts. When Wilshire buys or sells the
same security at substantially the same time on behalf of the Portfolio and one
or more other accounts managed by Wilshire, it allocates available investments
by such means as, in its judgment, result in fair treatment. Wilshire aggregates
orders for purchases and sales of securities of the same issuer on the same day
among the Portfolio and their other managed accounts, and the price paid to or
received by the Portfolio and those accounts is the average obtained in those
orders. In some cases, such aggregation and allocation procedures may affect
adversely the price paid or received by the Portfolio or the size of the
position purchased or sold by the Portfolio.
Portfolio turnover may vary from year to year, as well as within a year. Under
normal market conditions, the Portfolio's turnover rate generally will not
exceed 80%. High turnover rates, generally as a result of fluctuating market
conditions, are likely to result in comparatively greater brokerage expenses.
Recognizing this, Wilshire attempts to minimize the cost per share of trading
while at the same time implementing only those trades necessary to maintain the
proper style exposure.
For the fiscal year ended August 31, 1999, the Portfolio paid total brokerage
commissions of $62,049.
As of August 31, 1999, the Portfolio held the following securities of its
regular brokers or dealers:
<TABLE>
<CAPTION>
<S> <C>
Brokers or Dealers Market Value
JP Morgan & Co. $ 167,943.75
Morgan Stanley Dean Whitter $ 377,575.00
Citigroup $2,235,206,25
Jeffries Group Inc. $ 9,900.00
Investment Tech. Group $ 7,057.75
</TABLE>
No brokerage commissions were paid to the Company's distributor. There were no
spreads or concessions on principal transactions for any such period.
NET ASSET VALUE
The net asset value per share of the Qualified Class of the Portfolio is
calculated as of the close of regular trading of the NYSE on each day the NYSE
is open for trading.
The Portfolio's investment securities are valued at the last sale price on the
securities exchange or national securities market on which such securities
primarily are traded. Securities not listed on an exchange or national
securities market, or securities for which there were no transactions, are
valued at the average of the most recent bid and asked prices. Bid price is used
when no asked price is available. Short-term investments are valued at amortized
cost. Any securities or other assets for which recent market quotations are not
readily available are valued at fair value as determined in good faith by or
under the direction of the Board of Directors. Expenses and fees, including the
advisory and administration fees, are accrued daily and taken into account for
the purpose of determining the net asset value of the Portfolio's shares.
PURCHASE AND REDEMPTION OF SHARES
The following information supplements and should be read in conjunction with the
section in the Prospectus entitled "Purchase and Redemption of Shares."
The Distributor. Provident Distributors Inc. ("PDI"), Four Falls Corporate
Center, 6th Floor, West Conshohocken, Pennsylvania 19428-2961, serves as the
Company's distributor pursuant to an agreement which is renewable annually by
the Board of Directors. The Qualified Class shares of the Portfolio are
continuously offered to Insurers at the net asset value per share next
determined after a proper purchase request has been received and accepted by the
Company. The Distribution Agreement between the Distributor and the Company
provides that the Company shall indemnify the Distributor against any liability
arising out of any untrue statement of a material fact or any omission of a
material fact in the Company's registration statement necessary to make the
statements therein misleading, unless such liability results from the
Distributor's willful misfeasance, bad faith or negligence in the performance of
its duties under the Agreement.
In-Kind Purchases. Payments for the Portfolio's shares may, at the discretion of
the Company, be made in the form of securities which are permissible investments
for the Portfolio. For further information about this form of payment, please
contact the Transfer Agent. Generally, securities which are accepted by the
Portfolio as payment for the Portfolio's shares will be valued using the
Portfolio's procedures for valuing its own shares at the time the Portfolio's
net asset value is next determined after receipt of a properly completed order.
All dividends, interest, subscription or other rights pertaining to such
securities will become the property of the Portfolio and must be delivered to
the Portfolio upon receipt from the issuer. The Portfolio will require that (1)
it will have good and marketable title to the securities received by it; (2) the
securities are in proper form for transfer to the Portfolio and are not subject
to any restriction on sale by the Portfolio under the Securities Act of 1933, as
amended, or otherwise; and (3) the Portfolio receives such other documentation
as the Company may, in its discretion, deem necessary or appropriate. Investors
who are subject to Federal taxation may realize a gain or loss for Federal
income tax purpose upon such a payment.
Redemption Commitment. The Company has committed itself to pay in cash all
redemption requests by any shareholder of record, limited in amount during any
90-day period to the lesser of $250,000 or 1% of the value of the Portfolio's
net assets at the beginning of such period. Such commitment is irrevocable
without the prior approval of the SEC. For requests for redemption in excess of
such amount, the Board of Directors reserves the right to make payments in whole
or in part in securities or other assets in case of an emergency or any time a
cash distribution would impair the liquidity of the Portfolio to the detriment
of the existing shareholders. In such event, the securities would be readily
marketable, to the extent available, and would be valued in the same manner as
the Portfolio's investment securities are valued. If the recipient sold such
securities, brokerage charges would be incurred.
Suspension of Redemptions. The Company may suspend the right of redemption with
respect to the Portfolio or postpone the date of payment (a) during any period
when the New York Stock Exchange is closed (other than customary weekend and
holiday closings), (b) when trading in the markets the Portfolio ordinarily
utilizes is restricted, or when an emergency exists as determined by the SEC so
that disposal of the investments or determination of its net asset value is not
reasonably practicable, or (c) for such other periods as the SEC by order may
permit to protect the shareholders.
New York Stock Exchange Closings. The holidays (as observed) on which the
New York Stock Exchange is closed currently are: New Year's Day, Presidents'
Day, Rev. Martin Luther King, Jr. Day, Good Friday, Memorial Day, Independence
Day, Labor Day, Thanksgiving and Christmas.
DIVIDENDS, DISTRIBUTION AND TAXES
The following information supplements and should be read in conjunction with the
section in the Prospectus entitled "Dividends, Distributions and Taxes." For a
discussion of the impact on Contract Owners of income taxes an Insurer may owe
as a result of its ownership of shares of the Portfolio, its receipt of
dividends and distributions thereon, and its gains from the purchase and sale
thereof, reference should be made to your employer's Contract disclosure
statement.
Regulated Investment Companies
The Company's management believes that the Portfolio qualified as a "regulated
investment company" under the Internal Revenue Code of 1986, as amended (the
"Code") for the fiscal year ended August 31, 1999. Qualification as a regulated
investment company relieves the Portfolio from any liability for Federal income
taxes to the extent that its earnings are distributed in accordance with the
applicable provisions of the Code. The term "regulated investment company" does
not imply the supervision of management or investment practices or policies by
any government agency.
As a regulated investment company, the Portfolio will not be liable for federal
income tax on its income and gains provided it distributes all of its income and
gains currently. Qualification as a regulated investment company under the Code
requires, among other things, that the Portfolio (a) derive at least 90% of its
gross income from dividends, interest, payments with respect to securities
loans, and gains from the sale or other disposition of securities or foreign
currencies, or other income (including, but not limited to, gains from options,
futures or forward contracts) derived with respect to its business of investing
in such securities or currencies; (b) diversify its holdings so that, at the end
of each fiscal quarter, (i) at least 50% of the market value of the Portfolio's
assets is represented by cash, U.S. Government securities and securities of
other regulated investment companies, and other securities (for purposes of this
calculation generally limited, in respect of any one issuer, to an amount not
greater than 5% of the market value of the Portfolio's assets and 10% of the
outstanding voting securities of such issuer) and (ii) not more than 25% of the
value of its assets is invested in the securities of any one issuer (other than
U.S. Government securities or the securities of other regulated investment
companies), or two or more issuers which the Company controls and which are
determined to be engaged in the same or similar trades or businesses; and (c)
distribute at least 90% of its investment company taxable income (which includes
dividends, interest, and net short-term capital gains in excess of net long-term
capital losses) each taxable year.
<PAGE>
Because the Portfolio is established in part as an investment for certain
variable annuity contracts, the Code imposes additional diversification
requirements on the Portfolio. Generally, these requirements are that at each
quarter end and for 30 days thereafter no more than 55% of the Portfolio's total
assets may be in any one investment, no more than 70% in any two investments, no
more than 80% in any three investments, and no more than 90% in any four
investments.
The Portfolio generally will be subject to a nondeductible excise tax of 4% to
the extent that it does not meet certain minimum distribution requirements as of
the end of each calendar year. To avoid the tax, the Portfolio must distribute
during each calendar year an amount equal to the sum of (1) at least 98% of its
ordinary income and net capital gain (not taking into account any capital gains
or losses as an exception) for the calendar year, (2) at lest 98% of its capital
gains in excess of its capital losses (and adjusted for certain ordinary losses)
for the twelve month period ending on October 31 of the calendar year, and (3)
all ordinary income and capital gains for previous years that were no
distributed during such years. A distribution will be treated as paid on
December 31 of the calendar year if it is declared by the Portfolio in October,
November, or December of that year to shareholders of record on a date in such a
month and paid by the Portfolio during January of the following year. To avoid
the excise tax, the Portfolio intends to make timely distributions of their
income in compliance with these requirements and anticipate that it will not be
subject to the excise tax.
Any dividend or distribution paid shortly after an Insurer's purchase may have
the effect of reducing the aggregate net asset value of shares below the cost of
investment. Such a dividend or distribution would be a return on investment in
an economic sense.
Hedging Transactions
If an Insurer holds shares of the Portfolio while holding a short position in a
regulated futures contract or an option in such regulated futures contract that
substantially diminishes the Insurer's risk of loss in its Portfolio shares (an
"offsetting position"), Internal Revenue Service regulations clarify that (i)
any losses on the disposition of Portfolio shares will be required to be
deferred to the extent of any unrealized appreciation in the short position and
(ii) such holding will limit the Insurer's ability to claim the corporate
dividends received deduction in respect of Portfolio dividends.
Ordinarily, gains and losses realized from portfolio transactions will be
treated as a capital gain or loss. All or a portion of the gain realized from
engaging in "conversion transactions" may be treated as ordinary income under
Section 1258. "Conversion transactions" are defined to include certain futures,
option and "straddle" transactions, transactions marketed or sold to produce
capital gains, or transactions described in Treasury regulations to be issued in
the future.
Under Section 1256 of the Code, a gain or loss realized by the Portfolio from
certain financial futures transactions will be treated as 60% long-term capital
gain or loss and 40% short-term capital gain or loss. Gain or loss will arise
upon the exercise or lapse of such futures as well as from closing transactions.
In addition, any such futures remaining unexercised at the end of the
Portfolio's taxable year will be treated as sold for their then fair market
value, resulting in additional gain or loss to the Portfolio characterized in
the manner described above.
<PAGE>
Offsetting positions held by the Portfolio involving financial futures may
constitute "straddles." Straddles are defined to include "offsetting positions"
in actively traded personal property. The tax treatment of straddles is governed
by Sections 1092 and 1258 of the Code, which, in certain circumstances,
overrides or modifies the provisions of Section 1256. As such, all or a portion
of any short- or long-term capital gain from certain "straddle" and/or
conversion transactions may be recharacterized as ordinary income.
If the Portfolio were treated as entering into straddles by reason of its
futures transactions, such straddles could be characterized as "mixed straddles"
if the futures transactions comprising such straddles were governed by Section
1256 of the Code. The Portfolio may make one or more elections with respect to
"mixed straddles." Depending upon which election is made, if any, the results to
the Portfolio may differ. If no election is made, to the extent the straddle
rules apply to positions established by the Portfolio, losses realized by the
Portfolio will be deferred to the extent of unrealized gain in any offsetting
positions. Moreover, as a result of the straddle rules, short-term capital loss
on straddle positions may be recharacterized as long-term capital loss, and
long-term capital gain on straddle positions may be recharacterized as
short-term capital gain, and as a result of the conversion transaction rules,
long-term capital gain may be recharacterized as ordinary income.
Under Section 1259 of the Code, enacted as part of the Taxpayer Relief Act of
1997, the Portfolio will recognize gain if it enters into a futures contract
relating to an appreciated direct position in any stock or debt instrument, or
if it acquires stock or a debt instrument at a time when the Portfolio has an
offsetting appreciated position in the stock or debt instrument. Such
transactions are considered to be constructive sales for income tax purposes.
PERFORMANCE INFORMATION
The following information supplements and should be read in conjunction with the
section in the Prospectus entitled "Performance Information."
For purposes of advertising, performance may be calculated on the basis of
average annual total returns and/or total returns of the Portfolio. "Total
return" is the change in value of an investment in the Portfolio for a specified
period. The "average annual total return" of the 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 the 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 of the Portfolio, 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.
<PAGE>
Average annual total return is calculated by determining the ending redeemable
value of an investment purchased at net asset value per share with a
hypothetical $1,000 payment made at the beginning of the period (assuming the
reinvestment of dividends and distributions), dividing by the amount of the
initial investment, taking the "nth" root of the quotient (where "n" is the
number of years in the period) and subtracting 1 from the result.
Total return is calculated by subtracting the amount of the net asset value per
share at the beginning of a stated period from the net asset value per share at
the end of the period (after giving effect to the reinvestment of dividends and
distributions during the period), and dividing the result by the net asset value
per share at the beginning of the period.
Quotations of Portfolio total returns and yields will not reflect Contract
charges and expenses. The Contract disclosure document will contain information
about performance of the relevant separate account and Contract.
The Wilshire 5000 Index Portfolio commenced operations on February 1, 1999 and
therefore has not been in operation for a full fiscal year.
OTHER INFORMATION
The Company is a Maryland corporation organized on July 30, 1992. It currently
has five Portfolios - Large Company Growth Portfolio, Large Company Value
Portfolio, Small Company Growth Portfolio, Small Company Value Portfolio and
Wilshire 5000 Index Portfolio -- each of which has several classes of shares.
Each share of a Portfolio has one vote and, when issued and paid for in
accordance with the terms of the offering, is fully paid and non-assessable.
Shares of each class of a Portfolio have equal rights as to dividends and in
liquidation. Shares have no preemptive, subscription or conversion rights and
are freely transferable.
Rule 18f-2 under the 1940 Act provides that any matter required to be submitted
under the provisions of the 1940 Act or applicable state law or otherwise to the
holders of the outstanding voting securities of an investment company, such as
the Company, will not be deemed to have been effectively acted upon unless
approved by the holders of the outstanding shares of each series affected by
such matter. Rule 18f-2 further provides that a series shall be deemed to be
affected by a matter unless it is clear that the interests of all series in the
matter are identical or that the matter does not affect any interest of such
series. However, the Rule exempts the selection of independent accountants and
the election of Directors from the separate voting requirements of the Rule.
Rule 18f-3 under the 1940 Act makes further provision for the voting rights of
each class of shares of an investment company which issues more than one class
of voting shares. In particular, Rule 18f-3 provides that each class shall have
exclusive voting rights on any matter submitted to shareholders that relates
solely to the class' arrangement for services and expenses, and shall have
separate voting rights on any matter submitted to shareholders in which the
interests of one class differ from the interests of any other class.
<PAGE>
Shareholders and Contract Owners will receive annual and semi-annual reports
that include the Portfolio's financial statements.
FINANCIAL STATEMENTS
The Company's audited financial statements for the Portfolio contained in its
annual report for the fiscal year ended August 31, 1999 is incorporated into
this Statement of Additional Information by reference in their entirety. Such
financial statements for the fiscal year ended August 31, 1999 has been audited
by the Company's independent auditors, PricewaterhouseCoopers LLP, whose report
thereon appears in such Annual Report. Such financial statements have been
incorporated herein in reliance upon such report given upon their authority as
experts in accounting and auditing.
<PAGE>
WILSHIRE TARGET FUNDS, INC.
PART C - OTHER INFORMATION
Item 23.
Exhibits:
(a) Articles of Incorporation dated July 30, 1992 is
incorporated by reference to Exhibit (1)(a) of
Post-Effective Amendment No. 3 to the Registration
Statement on Form N-1A which was filed on November
12, 1993 ("Post-Effective Amendment No. 3").
Articles of Amendment dated August 20, 1992 to the
Articles of Incorporation is incorporated by
reference to Exhibit (1)(b) of Post-Effective
Amendment No.
3.
Articles Supplementary to the Articles of
Incorporation classifying shares of each Series of
the Fund is incorporated by reference to Exhibit
(1)(d) of Post-Effective Amendment No. 8 to the
Registration Statement on Form N-1A which was filed
on April 2, 1996 ("Post-Effective Amendment No. 8").
Articles of Amendment to the Articles of
Incorporation amending the name of the Fund and the
name of a class of shares of each Series of the Fund
is incorporated by reference to Post-Effective
Amendment No. 8.
Articles Supplementary dated June 24, 1997 to the
Articles of Incorporation establishing and
classifying shares of the Intermediate Portfolio
Corporate Bond and Long-Term Corporate Bond Portfolio
of the Fund is incorporated by reference to
Post-Effective Amendment No. 11 to the Registration
Statement on Form N-1A which was filed on July 10,
1997 ("Post-Effective Amendment No. 11").
Articles Supplementary dated June 8, 1998 to the
Articles of Incorporation establishing and
classifying shares of the Wilshire 5000 Index
Portfolio is incorporated by reference to
Post-Effective Amendment No. 13 to the Registration
Statement on Form N-1A which was filed on November 2,
1998 ("Post-Effective Amendment No. 13").
Articles Supplementary dated June 7, 1999 to the
Articles of Incorporation reclassifying shares of the
Wilshire 5000 Index Portfolio is incorporated by
reference to Post-Effective Amendment No. 16 to the
Registration Statement on Form N-1A which was filed
on July 2, 1999 ("Post-Effective Amendment No.
16").
(b) By-Laws dated July 30, 1992, as revised September 17,
1992, are incorporated by reference to Exhibit (2) of
Post-Effective Amendment No. 3.
Amended By-Laws dated September 9, 1996, as
subsequently amended October 1, 1996, are
incorporated by reference to Exhibit (2)(b) of
Post-Effective Amendment No. 10 to the Registration
Statement on Form N-1A which was filed on October 30,
1996 ("Post-Effective Amendment No. 10").
(c) Not Applicable.
(d) Investment Advisory Agreement between the Fund and
Wilshire Associates Incorporated relating to the
Large Company Growth, Large Company Value, Small
Company Growth and Small Company Value Portfolios
dated July 11, 1996 is incorporated by reference to
Exhibit (5)(a) of Post-Effective Amendment No. 10.
Letter Amendment to the Investment Advisory Agreement
between the Fund and Wilshire Associates Incorporated
dated June 8, 1998 relating to the Wilshire 5000
Index Portfolio is incorporated herein by reference
to Post-Effective Amendment No. 13.
(e) Distribution Agreement between the Fund and First
Data Distributors, Inc. dated March 3, 1997 is
incorporated herein by reference to Post-Effective
Amendment No. 11.
(f) Not Applicable.
(g) Custody Agreement between the Fund and The Northern
Trust Company dated June 3, 1996 is incorporated
herein by reference to Post-Effective Amendment No.
11.
Letter Agreement between the Fund and The Northern
Trust Company dated November 5, 1996 is incorporated
herein by reference to Post-Effective Amendment No.
11.
(h) Services Agreement between the Fund and First Data
Investor Services Group, Inc. dated May 31, 1999,
is filed herein.
(i) Not Applicable.
(j) Powers of Attorney of the Directors and officers are
incorporated by reference to Exhibit (11)(b) of Post-
Effective Amendment No. 8.
Powers of Attorney of Directors and officers are
incorporated by reference to Exhibit (11)(c) of
Post-Effective Amendment No. 9 to the Registration
Statement on Form N-1A which was filed on May 31,
1996 ("Post-Effective
Amendment No. 9").
Power of Attorney of Cynthia A. Hargardon is
incorporated herein by reference
to Post-Effective Amendment No. 13. to the
Registration Statement on Form N-1A which was filed
on November 2, 1998.
(k) Not Applicable.
(l) Purchase Agreement between the Company and Wilshire
Associates Incorporated dated November 6, 1998
relating to the Wilshire 5000 Index Portfolio is
incorporated herein by reference to Post-Effective
Amendment No. 13 to the Registration Statement on
Form N-1A which was filed on November 2, 1998.
(m) Service and Distribution Plan under Rule 12b-1, for
Qualified Class shares, adopted as of June 7, 1999
is incorporated herein by reference to Post-
Effective Amendment No. 16.
Service and Distribution Plan under Rule 12b-1, for
Horace Mann Class shares, adopted as of June 7,
1999 is incorporated herein by reference to
Post-Effective Amendment No. 16.
Amended and Restated Service and Distribution Plan
under Rule 12b-1, adopted as of June 3, 1997 is
incorporated herein by reference to Post-Effective
Amendment No. 11.
(n) Not Applicable.
(o) Amended and Restated Rule 18f-3(d) Plan, adopted
as of June 7, 1999 is
incorporated herein by reference to Post-Effective
Amendment No. 16.
Item 24. Persons Controlled by or under Common Control with Registrant
Not Applicable.
<PAGE>
Item 25. Indemnification
The statement as to the general effect of any contract, arrangements, or statute
under which a Director, officer, underwriter, or affiliated person of the
Registrant is insured or indemnified in any manner against any liability which
may be incurred in such capacity, other than insurance provided by any director,
officer, affiliated person, or underwriter for his/her own protection, is
incorporated by reference to Item 27 of Part C of Pre-Effective Amendment No. 1
to the Registration Statement on Form N-1A which was filed on September 23,
1992.
Reference is also made to the Distribution Agreement filed as Exhibit (e).
Item 26. Business and Other Connections of Investment Adviser
The list required by this Item 26 of officers and directors of Wilshire
Associates Incorporated, together with the information as to any other business,
profession, vocation, or employment of substantial nature engaged in by such
officers and directors during the past two years, is incorporated by reference
to Schedules A and D of Form ADV filed by Wilshire Associates Incorporated
pursuant to the Investment Advisers Act of 1940 (SEC File No.
801-36233).
Item 27. Principal Underwriters
(a) First Data Distributors, Inc. ("FDDI"), currently acts as distributor
for ABN AMRO Funds, BT Insurance Funds Trust, Alleghany Funds, First Choice
Funds Trust, LKCM Funds, The Galaxy Fund, The Galaxy VIP Fund, Galaxy Fund II,
IBJ Funds Trust, Panorama Trust, Undiscovered Managers Fund, New Covenant Funds,
Forward Funds, Inc., Northern Institutional Funds, Light Index Funds, Inc. Weiss
Peck & Greer Funds Trust, Weiss Peck & Greer International Fund, WPG Growth
Fund, WPG Growth & Income Fund, WPG Tudor Fund, RWB/WPG U..S. Large Stock Fund,
Tomorrow Funds Retirement Trust, The Govett Funds, Inc., IAA Trust Growth Fund,
Inc., IAA Trust Asset Allocation Fund, Inc., IAA Trust Tax Exempt Bond Fund,
Inc., IAA Trust Taxable Fixed Income Series Fund, Inc., Matthews International
Funds, MCM Funds, Metropolitan West Funds, Smith Breeden Series Fund, Smith
Breeden Trust, Stratton Growth Fund, Inc., Stratton Monthly Dividend REIT
Shares, Inc., The Stratton Funds, Inc., Trainer, Wortham First Mutual Funds and
Worldwide Index Funds. FDDI is registered with the Securities and Exchange
Commission (the "SEC") as a broker-dealer and is a member of the National
Association of Securities Dealers. FDDI, a wholly-owned subsidiary of First Data
Investor Services Group, Inc., is located at 4400 Computer Drive, Westborough,
Massachusetts 01581.
<PAGE>
(b) The information required by this Item 27(b) with
respect to each director, officer or partner of FDDI
is incorporated by reference to Schedule A of Form BD
filed by FDDI with the SEC pursuant to the Securities
Act of 1934 (File No. 8-45467). No director, officer,
or partner of FDDI holds a position or office with
the Registrant.
Item 28. Location of Accounts and Records
1. First Data Investor Services Group, Inc.
3200 Horizon Drive
King of Prussia, PA 19406-0903
(records relating to its function as fund accounting and
transfer agent)
2. First Data Investor Services Group, Inc.
101 Federal Street
Boston, Massachusetts 02110
(records relating to it functions as administrator)
3. First Data Investor Services Group, Inc. and
First Data Distributors, Inc.
4400 Computer Drive
Westborough, Massachusetts 01581
(records relating to its functions as administrator and
distributor)
4.The Northern Trust Company 50 LaSalle Street Chicago,
Illinois 60675 (records relating to its function as custodian)
5. Wilshire Associates Incorporated
1299 Ocean Avenue
Suite 700
Santa Monica, CA 90401
(records relating to its function as investment adviser)
Item 29. Management Services
Not Applicable.
Item 30. Undertakings
Not Applicable.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, as amended, the Registrant has duly caused this
Post-Effective Amendment No. 17 to be signed on its behalf by the undersigned,
thereto duly authorized in the City of Boston, and Commonwealth of Massachusetts
on the 15th day of October, 1999.
WILSHIRE TARGET FUNDS, INC.
BY: /s/ Thomas D. Stevens
Thomas D. Stevens
PRESIDENT
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, as amended, this Amendment to the Registration Statement
has been signed below by the following persons in the capacities and on the
dates indicated.
<TABLE>
<CAPTION>
<S> <C> <C>
Signatures Title Date
/s/ Thomas D. Stevens President, October 15, 1999
- --------------------------------
Thomas D. Stevens Chairman of the Board,
and Director
(Principal Executive Officer)
/s/ David D. Borger Treasurer October 15, 1999
- ---------------------------------
David R. Borger (Principal Financial Officer)
* Director October 15, 1999
- --------------------------------
DeWitt F. Bowman
* Director October 15, 1999
- --------------------------------
Cynthia A. Hargardon
* Director October 15, 1999
- --------------------------------
Robert J. Raab, Jr.
* Director October 15, 1999
- --------------------------------
Anne Wexler
*BY: /s/ JULIE A. TEDESCO October 15, 1999
Julie A. Tedesco
Attorney-in-Fact
</TABLE>
<PAGE>
EXHIBIT INDEX
Item Exhibit
(h) Services Agreement
Exhibit (h)
SERVICES AGREEMENT
THIS AGREEMENT, dated as of this 31st day of May, 1999 between WILSHIRE
TARGET FUNDS, INC. (the "Fund"), a Maryland corporation having its principal
place of business at 53 State Street Boston, Massachusetts and FIRST DATA
INVESTOR SERVICES GROUP, INC. ("Investor Services Group"), a Massachusetts
corporation with principal offices at 4400 Computer Drive, Westborough,
Massachusetts 01581.
WITNESSETH
WHEREAS, the Fund is authorized to issue Shares in separate series,
with each such series representing interests in a separate portfolio of
securities and other assets;
WHEREAS, the Fund intends to offer shares in those Portfolios
identified in the attached Exhibit 1, as the same may be amended from time to
time in accordance with Article 14;
WHEREAS, the Fund on behalf of the Portfolios, desires to appoint
Investor Services Group as its administrator, fund accounting agent, transfer
agent, dividend disbursing agent and agent in connection with certain other
activities and Investor Services Group desires to accept such appointment;
NOW, THEREFORE, in consideration of the mutual covenants and promises
hereinafter set forth, the Fund and Investor Services Group agree as follows:
Article 1 Definitions.
1.1 Whenever used in this Agreement, the following words and phrases,
unless the context otherwise requires, shall have the following meanings:
(a) "Articles of Incorporation" shall mean the Articles of
Incorporation, Declaration of Trust, or other similar organizational
document as the case may be, of the Fund as the same may be amended
from time to time.
(b) "Authorized Person" shall be deemed to include (i) any
authorized officer of the Fund, or (ii) any person, whether or not such
person is an officer or employee of the Fund, duly authorized to give
Oral Instructions or Written Instructions on behalf of the Fund as
indicated in writing to Investor Services Group from time to time.
(c) "Board of Directors" shall mean the Board of Directors or
Board of Trustees of the Fund, as the case may be.
(d) "Commission" shall mean the Securities and Exchange
Commission.
<PAGE>
(e) "Custodian" refers to any custodian or subcustodian of
securities and other property which the Fund may from time to time
deposit, or cause to be deposited or held under the name or account of
such a custodian pursuant to a Custodian Agreement.
(f) "1934 Act" shall mean the Securities Exchange Act of 1934
and the rules and regulations promulgated thereunder, all as amended
from time to time.
(g) "1940 Act" shall mean the Investment Company Act of 1940
and the rules and regulations promulgated thereunder, all as amended
from time to time.
(h) "Oral Instructions" shall mean instructions, other than
Written Instructions, actually received by Investor Services Group from
a person reasonably believed by Investor Services Group to be an
Authorized Person;
(i) "Portfolio" shall mean each separate series of shares
offered by the Fund representing interest in a separate portfolio of
securities and other assets;
(j) "Prospectus" shall mean the most recently dated Fund
Prospectus and Statement of Additional Information, including any
supplements thereto if any, which has become effective under the
Securities Act of 1933 and the 1940 Act.
(k) "Shares" refers collectively to such shares of capital
stock or beneficial interest, as the case may be, or class thereof, of
each respective Portfolio of the Fund as may be issued from time to
time.
(l) "Shareholder" shall mean a record owner of Shares of each
respective Portfolio of the Fund.
(m) "Written Instructions" shall mean a written communication
signed by a person reasonably believed by Investor Services Group to be
an Authorized Person and actually received by Investor Services Group.
Written Instructions shall include manually executed originals and
authorized electronic transmissions, including telefacsimile of a
manually executed original or other process.
Article 2 Appointment of Investor Services Group.
The Fund, on behalf of the Portfolios, hereby appoints and constitutes
Investor Services Group as transfer agent and dividend disbursing agent for
Shares of each respective Portfolio of the Fund and as administrator, fund
accounting agent, and shareholder servicing agent for the Fund and Investor
Services Group hereby accepts such appointments and agrees to perform the duties
hereinafter set forth.
Article 3 Duties of Investor Services Group.
3.1 Investor Services Group shall be responsible for:
(a) Administering and/or performing the customary services of
a transfer agent; acting as service agent in connection with dividend
and distribution functions; and for performing shareholder account and
administrative agent functions in connection with the issuance,
transfer and redemption or repurchase (including coordination with the
Custodian) of Shares of each Portfolio, as more fully described in the
written schedule of Duties of Investor Services Group annexed hereto as
Schedule A and incorporated herein, and in accordance with the terms of
the Prospectus of the Fund on behalf of the applicable Portfolio,
applicable law and the procedures established from time to time between
Investor Services Group and the Fund.
(b) Recording the issuance of Shares and maintaining pursuant
to Rule 17Ad-10(e) of the 1934 Act a record of the total number of
Shares of each Portfolio which are authorized, based upon data provided
to it by the Fund, and issued and outstanding. Investor Services Group
shall provide the Fund on a regular basis with the total number of
Shares of each Portfolio which are authorized and issued and
outstanding and shall have no obligation, when recording the issuance
of Shares, to monitor the issuance of such Shares or to take cognizance
of any laws relating to the issue or sale of such Shares, which
functions shall be the sole responsibility of the Fund.
(c) Investor Services Group shall be responsible for the
following: performing the customary services of an administrator,
including corporate secretarial, treasury and blue sky services, and
fund accounting agent for the Fund, as more fully described in the
written schedule of Duties of Investor Services Group annexed hereto as
Schedule B and incorporated herein, and subject to the supervision and
direction of the Board of Directors of the Fund.
(d) Notwithstanding any of the foregoing provisions of this
Agreement, Investor Services Group shall be under no duty or obligation
to inquire into, and shall not be liable for: (i) the legality of the
issuance or sale of any Shares or the sufficiency of the amount to be
received therefor; (ii) the legality of the redemption of any Shares,
or the propriety of the amount to be paid therefor; (iii) the legality
of the declaration of any dividend by the Board of Directors, or the
legality of the issuance of any Shares in payment of any dividend; or
(iv) the legality of any recapitalization or readjustment of the
Shares.
3.2 In addition, Investor Services Group shall have no responsibility
under this Agreement to (i) identify those transactions and assets to be treated
as exempt from blue sky reporting for each State or (ii) verify the
establishment of transactions for each State on the system prior to activation
and thereafter monitor the daily activity for each State which shall be the
responsibility of the Fund's blue sky service agent (which may be Investor
Services Group under separate agreement). The responsibility of Investor
Services Group under this Agreement for the Fund's blue sky State registration
status is solely limited to the initial establishment of transactions subject to
blue sky compliance by the Fund and the reporting of such transactions to the
Fund as provided above.
<PAGE>
3.3 In performing its duties under this Agreement, Investor Services
Group: (a) will act in accordance with the Articles of Incorporation, By-Laws,
Prospectuses and with the Oral Instructions and Written Instructions of the Fund
and will conform to and comply with the requirements of the 1940 Act and all
other applicable federal or state laws and regulations; and (b) will consult
with legal counsel to the Fund, as necessary and appropriate. Furthermore,
Investor Services Group shall not have or be required to have any authority to
supervise the investment or reinvestment of the securities or other properties
which comprise the assets of the Fund or any of its Portfolios and shall not
provide any investment advisory services to the Fund or any of its Portfolios.
3.4 In addition to the duties set forth herein, Investor Services Group
shall perform such other duties and functions, and shall be paid such amounts
therefor, as may from time to time be agreed upon in writing between the Fund
and Investor Services Group.
Article 4 Recordkeeping and Other Information.
4.1 Investor Services Group shall create and maintain all records
required of it pursuant to its duties hereunder and as set forth in Schedule A
in accordance with all applicable laws, rules and regulations, including records
required by Section 31 (a) of the 1940 Act. Where applicable, such records shall
be maintained by Investor Services Group for the periods and in the places
required by Rule 31 a-2 under the 1940 Act.
4.2 To the extent required by Section 31 of the 1940 Act, Investor
Services Group agrees that all such records prepared or maintained by Investor
Services Group relating to the services to be performed by Investor Services
Group hereunder are the property of the Fund and will be preserved, maintained
and made available in accordance with such section, and will be surrendered
promptly to the Fund on and in accordance with the Fund's request.
4.3 In case of any requests or demands for the inspection of
Shareholder records of the Fund, Investor Services Group will endeavor to notify
the Fund of such request and secure Written Instructions as to the handling of
such request. Investor Services Group reserves the right, however, to exhibit
the Shareholder records to any person whenever it is advised by its counsel that
it may be held liable for the failure to comply with such request.
Article 5 Fund Instructions.
5.1 Investor Services Group will have no liability when acting upon
Written or Oral Instructions reasonably believed to have been executed or orally
communicated by an Authorized Person and will not be held to have any notice of
any change of authority of any person until receipt of a Written Instruction
thereof from the Fund. Investor Services Group will also have no liability when
processing Share certificates which it reasonably believes to bear the proper
manual or facsimile signatures of the officers of the Fund and the proper
countersignature of Investor Services Group.
<PAGE>
5.2 At any time, Investor Services Group may request Written
Instructions from the Fund and may seek advice from legal counsel for the Fund,
or its own legal counsel, with respect to any matter arising in connection with
this Agreement, and it shall not be liable for any action taken or not taken or
suffered by it in good faith in accordance with such Written Instructions or in
accordance with the opinion of counsel for the Fund or for Investor Services
Group. Written Instructions requested by Investor Services Group will be
provided by the Fund within a reasonable period of time.
5.3 Investor Services Group, its officers, agents or employees, shall
accept Oral Instructions or Written Instructions given to them by any person
representing or acting on behalf of the Fund only if said representative is an
Authorized Person. The Fund agrees that all Oral Instructions shall be followed
within one business day by confirming Written Instructions, and that the Fund's
failure to so confirm shall not impair in any respect Investor Services Group's
right to rely on Oral Instructions.
Article 6 Compensation.
6.1 The Fund on behalf of each of the Portfolios will compensate
Investor Services Group for the performance of its obligations hereunder in
accordance with the fees and other charges set forth in the written Fee Schedule
annexed hereto as Schedule B and incorporated herein.
6.2 In addition to those fees set forth in Section 6.1 above, the Fund
on behalf of each of the Portfolios agrees to pay, and will be billed separately
for, out-of-pocket expenses incurred by Investor Services Group in the
performance of its duties hereunder. Out-of-pocket expenses shall include the
items specified in the written schedule of out-of-pocket charges annexed hereto
as Schedule C and incorporated herein. Schedule C may be modified by written
agreement between the parties. Unspecified out-of-pocket expenses shall be
limited to those out-of-pocket expenses reasonably incurred by Investor Services
Group in the performance of its obligations hereunder and authorized in advance
by an officer of the Fund who is not an affiliate of Investor Services Group.
6.3 The Fund on behalf of each of the Portfolios agrees to pay all fees
and out-of-pocket expenses within fifteen (15) days following the receipt of the
respective invoice.
6.4 Any compensation agreed to hereunder may be adjusted from time to
time by attaching to Schedule B, a revised Fee Schedule executed and dated by
the parties hereto.
6.5 The Fund acknowledges that the fees that Investor Services Group
charges the Fund under this Agreement reflect the allocation of risk between the
parties, including the disclaimer of warranties in Section 9.3 and the
limitations on liability and exclusion of remedies in Section 11.2 and Article
12. Modifying the allocation of risk from what is stated here would affect the
fees that Investor Services Group charges, and in consideration of those fees,
the Fund agrees to the stated allocation of risk.
<PAGE>
6.6 Investor Services Group will from time to time employ or associate
with itself such person or persons as Investor Services Group may believe to be
particularly suited to assist it in performing services under this Agreement.
Such person or persons may be officers and employees who are employed by both
Investor Services Group and the Fund. The compensation of such person or persons
shall be paid by Investor Services Group and no obligation shall be incurred on
behalf of the Fund in such respect.
6.7 Investor Services Group shall not be required to pay any of the
following expenses incurred by the Fund: membership dues in the Investment
Company Institute or any similar organization; investment advisory expenses;
costs of printing and mailing stock certificates, prospectuses, reports and
notices; interest on borrowed money; brokerage commissions; stock exchange
listing fees; taxes and fees payable to Federal, state and other governmental
agencies; fees of Board Members of the Fund who are not affiliated with Investor
Services Group; outside auditing expenses; outside legal expenses; Blue Sky
registration or filing fees; or other expenses not specified in this Section 6.7
which may be properly payable by the Fund. Investor Services Group shall not be
required to pay any Blue Sky registration or filing fees unless and until it has
received the amount of such fees from the Fund.
Article 7 Documents.
In connection with the appointment of Investor Services Group, the Fund
shall, on or before the date this Agreement goes into effect, but in any case
within a reasonable period of time for Investor Services Group to prepare to
perform its duties hereunder, deliver or caused to be delivered to Investor
Services Group the documents set forth in the written schedule of Fund Documents
annexed hereto as Schedule D.
Article 8 Investor Services Group System.
8.1 Investor Services Group shall retain title to and ownership of any
and all data bases, computer programs, screen formats, report formats,
interactive design techniques, derivative works, inventions, discoveries,
patentable or copyrightable matters, concepts, expertise, patents, copyrights,
trade secrets, and other related legal rights utilized by Investor Services
Group in connection with the services provided by Investor Services Group to the
Fund herein (the "Investor Services Group System").
8.2 Investor Services Group hereby grants to the Fund a limited license
to the Investor Services Group System for the sole and limited purpose of having
Investor Services Group provide the services contemplated hereunder and nothing
contained in this Agreement shall be construed or interpreted otherwise and such
license shall immediately terminate with the termination of this Agreement.
Article 9 Representations and Warranties.
9.1 Investor Services Group represents and warrants to the Fund that:
<PAGE>
(a) it is a corporation duly organize and existing and in good standing
under the laws of the Commonwealth of Massachusetts;
(b) it is empowered under applicable laws and by its Articles
of Incorporation and By-Laws to enter into and perform this Agreement;
(c) all requisite corporate proceedings have been taken to
authorize it to enter into this Agreement;
(d) it is duly registered with its appropriate regulatory
agency as a transfer agent and such registration will remain in effect
for the duration of this Agreement; and
(e) it has and will continue to have access to the necessary
facilities, equipment and personnel to perform its duties and
obligations under this Agreement.
9.2 The Fund represents and warrants to Investor Services Group that:
(a) it is duly organized and existing and in good standing under the laws
of the jurisdiction in which it is organized;
(b) it is empowered under applicable laws and by its Article
of Incorporation and By-Laws to enter into this Agreement;
(c) all corporate proceedings required by said Articles of
Incorporation, By-Laws and applicable laws have been taken to authorize
it to enter into this Agreement;
(d) a registration statement under the Securities Act of 1933,
as amended, and the 1940 Act relating to each of the Portfolios is
currently effective and will remain effective, and all appropriate
state securities law filings have been made and will continue to be
made, with respect to all Shares of the Fund being offered for sale;
and
(e) all outstanding Shares are validly issued, fully paid and
non-assessable and when Shares are hereafter issued in accordance with
the terms of the Fund's Articles of Incorporation and its Prospectus
with respect to each Portfolio, such Shares shall be validly issued,
fully paid and non-assessable.
9.3 THIS IS A SERVICE AGREEMENT. EXCEPT AS EXPRESSLY PROVIDED IN THIS
AGREEMENT, INVESTOR SERVICES GROUP DISCLAIMS ALL OTHER REPRESENTATIONS OR
WARR~NTIES, EXPRESS OR IMPLIED, MADE TO THE FUND OR ANY OTHER PERSON, INCLUDING,
WITHOUT LIMITATION, ANY ~7AI~ANTIES REGARDING QUALITY, SUITABILITY,
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE OR OTHERWISE (IRRESPECTIVE OF
ANY COURSE OF DEALING, CUSTOM OR USAGE OF TRADE) OF ANY SERVICES OR ANY GOODS
PROVIDED INCIDENTAL TO SERVICES PROVIDED UNDER THIS AGREEMENT. INVESTOR SERVICES
GROUP DISCLAIMS ANY WARRANTY OF TITLE OR NON-INFRINGEMENT EXCEPT AS OTHERWISE
SET FORTH IN THIS AGREEMENT.
Article 10 Indemnification.
10.1 Investor Services Group shall not be responsible for and the Fund
on behalf of each Portfolio shall indemnify and hold Investor Services Group
harmless from and against any and all claims, costs, expenses (including
reasonable attorneys' fees), losses, damages, charges, payments and liabilities
of any sort or kind which may be asserted against Investor Services Group or for
which Investor Services Group may be held to be liable (a "Claim") arising out
of or attributable to any of the following:
(a) any actions of Investor Services Group required to be
taken pursuant to this Agreement unless such Claim resulted from a
negligent act or omission to act, willful misfeasance or bad faith by
Investor Services Group in the performance of its duties hereunder;
(b) Investor Services Group's reasonable reliance on, or
reasonable use of information, data, records and documents (including
but not limited to magnetic tapes, computer printouts, hard copies and
microfilm copies) received by Investor Services Group from the Fund, or
any authorized third party acting on behalf of the Fund, including but
not limited the prior transfer agent for the Fund, in the performance
of Investor Services Group's duties and obligations hereunder;
(c) the reliance on, or the implementation of, any Written or Oral
Instructions;
(d) except to the extent that Investor Services Group serves
as the Fund's Administrator under separate agreement, the offer or
sales of shares in violation of any requirement under the securities
laws or regulations of any state that such shares be registered in such
state or in violation of any stop order or other determination or
ruling by any state with respect to the offer or sale of such shares in
such state; and
(e) the Fund's refusal or failure to comply with the terms of
this Agreement, or any Claim which arises out of the Fund's negligent
acts or omission to act, willful misfeasance or bad faith or the breach
of any representation or warranty of the Fund made herein.
10.2 Investor Services Group shall indemnify and hold harmless the Fund
from and against any and all claims, costs, expenses (including reasonable
attorneys' fees), losses, damages, charges, payments and liabilities of any sort
or kind which may be asserted against the Fund or for which the Fund may be held
to be liable in connection with this Agreement or Investor Services Group's
performance hereunder (also a "Claim"), if such Claim arises by reason of
Investor Services Group's refusal to comply with the terms of this Agreement, or
any Claim which arises out of Investor Services Group's negligent acts or
omission to act, willful misfeasance or bad faith hereunder or the breach of any
representation or warranty of Investor Services Group made herein.
<PAGE>
10.3 In any case in which the one party hereto may be asked to
indemnify or hold the other harmless pursuant to the provisions of Sections 10.1
or 10.2 hereof, the party seeking indemnification will notify the other party
promptly after identifying any situation which it believes presents or appears
likely to present a claim for indemnification hereunder, although the failure to
do so shall not prevent recovery by the party seeking indemnification except to
the extent that such failure prejudices the other party in its defense of any
such claim, and shall keep the other party advised with respect to all
developments concerning such situation. The party from whom indemnification is
sought shall have the option to defend the other party against any Claim which
may be the subject of this indemnification, and, in the event that the party
from whom the indemnification is sought so elects, such defense shall be
conducted by counsel chosen by the party from whom the indemnification is sought
and satisfactory to the other party, and thereupon the party from whom the
indemnification is sought shall take over complete defense of the Claim and the
other party shall sustain no further legal or other expenses in respect of such
Claim. The party seeking indemnification will not confess any Claim or make any
compromise in any case in which the other party will be asked to provide
indemnification, except with the other party's prior written consent. The
obligations of the parties hereto under this Article 10.3 shall survive the
termination of this Agreement.
10.4 Any claim for indemnification under this Agreement must be made
prior to the earlier of:
(a) one year after the party seeking indemnification becomes aware of the
event for which indemnification is claimed; or
(b) one year after the earlier of the termination of this Agreement or the
expiration of the term of this Agreement.
10.5 Except for remedies that cannot be waived as a matter of law (and
injunctive or provisional relief), the provisions of this Article 10 shall be
Investor Services Group's sole and exclusive remedy for claims or other actions
or proceedings to which the Fund's indemnification obligations pursuant to this
Article 10 may apply.
Article 11 Standard of Care.
11.1 Investor Services Group shall at all times act in good faith and
agrees to use its best efforts within commercially reasonable limits to ensure
the accuracy of all services performed under this Agreement, but assumes no
responsibility for loss or damage to the Fund unless said errors are caused by
Investor Services Group's own negligence, bad faith or willful misconduct or
that of its employees.
11.2 Notwithstanding any provision in this Agreement to the contrary,
Investor Services Group's cumulative liability (to the Fund) for all Claims
arising out of or related to this Agreement and regardless of the form of action
or legal theory shall not exceed one million ($1,000,000) dollars plus any and
all amounts available to Investor Services Group or the Fund in respect of such
Claims under Investor Services Group's liability insurance, which Investor
Services Group agrees continuously to maintain in principal coverage amounts of
at least five million dollars ($5,000,000)
<PAGE>
at all times during the term of this Agreement and for at least one (1) year
thereafter. Investor Services Group agrees to furnish initial certification of
such insurance coverage upon the execution of this Agreement and subsequent
certification of such coverage upon the request of the Fund and immediately
notify the Fund of any modification or termination thereof. Fund understands the
limitation on Investor Services Group's damages to be a reasonable allocation of
risk and Fund expressly consents with respect to such allocation of risk. In
allocating risk under the Agreement, the parties agree that the damage
limitation set forth above shall apply to any alternative remedy ordered by a
court in the event such court determines that sole and exclusive remedy provided
for in the Agreement fails of its essential purpose.
11.3 Each party shall have the duty to mitigate damages for which the
other party may become responsible.
Article 12 Consequential Damages.
NOTWITHSTANDING ANYTHING IN THIS AGREEMENT TO THE CONTRARY, IN NO EVENT
SHALL EITHER PARTY, THEIR AFFILIATES OR ANY OF THEIR DIRECTORS, OFFICERS,
EMPLOYEES, AGENTS OR SUBCONTRACTORS BE LIABLE TO THE OTHER PARTY FOR EXEMPLARY,
PUNITIVE, SPECIAL, INDIRECT OR CONSEOUENTIAL DAMAGES.
Article 13 Term and Termination.
13.1 This Agreement shall be effective on the date first written above
and shall continue for a period of three (3) years (the "Initial Term").
13.2 Upon the expiration of the Initial Term, this Agreement shall
automatically renew for successive terms of three (3) years ("Renewal Terms")
each, unless the Fund or Investor Services Group provides written notice to the
other of its intent not to renew. Such notice must be received not less than
ninety (90) days and not more than one-hundred eighty (180) days prior to the
expiration of the Initial Term or the then current Renewal Term.
13.3 Upon termination, for whatever reason, Investor Services Group
shall cooperate fully with the Fund and with any successor administrator,
transfer and dividend disbursing or shareholder services agent for the Fund in
connection with the administration of the Fund's business affairs or the
transfer of the transfer, dividend disbursing or shareholder services functions
to such successor agent, and shall act promptly and expeditiously in all matters
relating thereto, including the transfer of all records, data and information
reasonable necessary or appropriate to such transfer of functions, with a view
toward achieving an orderly, efficient and cost-effective transition on any
reasonable schedule which may be established therefor by the Fund, in good
faith, taking into account the circumstances of Investor Services Group,
including the time of year, other operational demands made on Investor Services
Group at the time and any other factors which Investor Services Group may
communicate to the Fund as being relevant to the establishment of such schedule.
The parties agree that any transition schedule allowing for a period of sixty
(60) days or more to complete the transition shall be deemed a "reasonable
schedule" for purposes of this Section 13.3. The Fund agrees to reimburse
Investor Services Group for all reasonable costs and expenses incurred in
connection with the aforementioned transfer to a successor agent.
<PAGE>
13.4 A party may terminate this Agreement by giving thirty (30) days
written notice of such termination to the other party in the event that the
other party has become insolvent or made a general assignment for the benefit of
creditors, or a petition under the Bankruptcy Code is filed by or against the
other party and the other party has not discharged said petition within thirty
(30) days after such filing.
13.5 If a party hereto is guilty of a material failure to perform its
duties and obligations hereunder (a "Defaulting Party") the other party (the
"Non-Defaulting Party") may give written notice thereof to the Defaulting Party,
and if such material breach shall not have been remedied within thirty (30) days
after such written notice is given, then the Non-Defaulting Party may terminate
this Agreement by giving thirty (30) days written notice of such termination to
the Defaulting Party. The termination of this Agreement by a non-defaulting
party shall not constitute a waiver of any other rights or remedies of such
party with respect to services performed prior to such termination or rights of
such party to be reimbursed for out-of-pocket expenses hereunder. In all cases,
termination by the Non-Defaulting Party shall not constitute a waiver by the
Non-Defaulting Party of any other rights it might have under this Agreement or
otherwise against the Defaulting Party.
13.6 Notwithstanding anything contained in this Agreement to the
contrary and except as provided in Sections 13.4 and 13.5 hereof, should the
Fund desire to move any of the services provided by Investor Services Group
hereunder to a successor service provider prior to the expiration of the then
current Initial or Renewal Term, or should the Fund or any of its affiliates
take any action which would result in Investor Services Group ceasing to provide
transfer agency, administration or fund accounting services to the Fund prior to
the expiration of the Initial or any Renewal Term, Investor Services Group shall
make a good faith effort to facilitate the conversion on such prior date,
however, there can be no guarantee that Investor Services Group will be able to
facilitate a conversion of services on such prior date. In connection with the
foregoing, should services be converted to a successor service provider or
should the Fund or any of its affiliates take any action which would result in
Investor Services Group ceasing to provide transfer agency, administration or
fund accounting services to the Fund prior to the expiration of the Initial or
any Renewal Term, the payment of fees to Investor Services Group as set forth
herein shall be accelerated to a date prior to the conversion or termination of
services and calculated as if the services had remained with Investor Services
Group until the expiration of the then current Initial or Renewal Term and
calculated at the asset and/or Shareholder account levels, as the case may be,
on the date notice of termination was given to Investor Services Group.
Article 14 Additional Portfolios.
In the event that the Fund establishes one or more Portfolios in
addition to those identified in Exhibit 1, with respect to which the Fund
desires to have Investor Services Group render services as transfer agent under
the terms hereof, the Fund shall so notify Investor Services Group in writing,
and if Investor Services Group agrees in writing to provide such services,
Exhibit 1 shall be amended to include such additional Portfolios.
<PAGE>
Article 15 Confidentiality.
15.1 The parties agree that the Proprietary Information (defined below)
(collectively "Confidential Information") are confidential information of the
parties and their respective licensors. The Fund and Investor Services Group
shall exercise at least the same degree of care, but not less than reasonable
care, to safeguard the confidentiality of the Confidential Information of the
other as it would exercise to protect it's own confidential information of a
similar nature. The Fund and Investor Services Group may use the Confidential
Information only to exercise its rights under this Agreement. The Fund and
Investor Services Group shall not duplicate, sell or disclose to others the
Confidential Information of the other, in whole or in part, without the prior
written permission of the other party. The Fund and Investor Services Group may,
however, disclose Confidential Information to its employees who have a need to
know the Confidential Information to perform work for the other, provided that
each shall use reasonable efforts to ensure that the Confidential Information is
not duplicated or disclosed by its employees in breach of this Agreement. The
Fund and Investor Services Group may also disclose the Confidential Information
to independent contractors, auditors, and professional advisors, provided they
first agree in writing to be bound by the confidentiality obligations
substantially similar to this Section 15.1. Notwithstanding the previous
sentence, in no event shall either the Fund or Investor Services Group disclose
the Confidential Information to any competitor of the other without specific,
prior written consent.
15.2 Proprietary Information means:
(a) any data or information that is competitively sensitive
material, and not generally known to the public, including, but not
limited to, information about product plans, marketing strategies,
finance, operations, customer relationships, customer profiles, sales
estimates, business plans, and internal performance results relating to
the past, present or future business activities of the Fund or Investor
Services Group, their respective subsidiaries and affiliated companies
and the customers, clients and suppliers of any of them;
(b) any scientific or technical information, design, process,
procedure, formula, or improvement that is commercially valuable and
secret in the sense that its confidentiality affords the Fund or
Investor Services Group a competitive advantage over its competitors;
and
(c) all confidential or proprietary concepts, documentation,
reports, data, specifications, computer software, source code, object
code, flow charts, databases, inventions, know-how, show-how and trade
secrets, whether or not patentable or copyrightable.
15.3 Confidential Information includes, without limitation, all
documents, inventions, substances, engineering and laboratory notebooks,
drawings, diagrams, specifications, bills of material, equipment, prototypes and
models, and any other tangible manifestation of the foregoing of either party
which now exist or come into the control or possession of the other.
Article 16 Force Majeure: Excused Non-Performance.
No party shall be liable for any default or delay in the performance of
its obligations under this Agreement if and to the extent such default or delay
is caused, directly or indirectly, by (i) fire, flood, elements of nature or
other acts of God; (ii) any outbreak or escalation of hostilities, war, riots or
civil disorders in any country, (iii) any act or omission of any governmental
authority; (iv) any labor disputes (whether or not the employees' demands are
reasonable or within the party's power to satisfy); or (v) nonperformance by a
third party or any similar cause beyond the reasonable control of such party,
including without limitation, failures or fluctuations in telecommunications or
other equipment. In addition, no party shall be liable for any default or delay
in the performance of its obligations under this Agreement if and to the extent
that such default or delay is caused, directly or indirectly, by the actions or
inactions of the other party. In any such event, the non-performing party shall
be excused from any further performance and observance of the obligations so
affected only for as long as such circumstances prevail and such party continues
to use commercially reasonable efforts to recommence performance or observance
as soon as practicable.
Article 17 Assignment and Subcontracting.
This Agreement, its benefits and obligations shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns. This Agreement may not be assigned or otherwise transferred
by either party hereto, without the prior written consent of the other party,
which consent shall not be unreasonably withheld; provided, however, that
Investor Services Group may, in its sole discretion, assign all its right, title
and interest in this Agreement to an affiliate, parent or subsidiary, provided
that (i) the financial capacity of such assignee is not materially less than
Investor Services Group's; (ii) the nature and quality of the services to be
provided hereunder are not materially adversely affected by such assignment; and
(iii) the quality and capabilities of the personnel and facilities of the
assignee are not materially less than Investor Services Group's. Investor
Services Group may, in its sole discretion, engage subcontractors to perform any
of the obligations contained in this Agreement to be performed by Investor
Services Group, provided, however, that Investor Services Group shall at all
times remain fully responsible for the acts or omissions of such sub-contractors
as if it were providing such services directly.
Article 18 Arbitration.
18.1 Any claim or controversy arising out of or relating to this
Agreement, or breach hereof, shall be settled by arbitration administered by the
American Arbitration Association in Boston, Massachusetts in accordance with its
applicable rules, except that the Federal Rules of Evidence and the Federal
Rules of Civil Procedure with respect to the discovery process shall apply.
18.2 The parties hereby agree that judgment upon the award rendered by
the arbitrator may be entered in any court having jurisdiction.
<PAGE>
18.3 The parties acknowledge and agree that the performance of the
obligations under this Agreement necessitates the use of instrumentalities of
interstate commerce and, notwithstanding other general choice of law provisions
in this Agreement, the parties agree that the Federal Arbitration Act shall
govern and control with respect to the provisions of this Article 18.
Article 19 Notice.
Any notice or other instrument authorized or required by this Agreement
to be given in writing to the Fund or Investor Services Group, shall be
suff1ciently given if addressed to that party and received by it at its office
set forth below or at such other place as it may from time to time designate in
writing;
To the Fund:
Wilshire Target Funds, Inc.
c/o Wilshire Associates Incorporated
1299 Ocean Avenue - Suite 700
Santa Monica, CA 90401
Attention: Alan L. Manning
Vice President and General Counsel
To Investor Services Group:
First Data Investor Services Group, Inc.
4400 Computer Drive
Westborough, Massachusetts 01581
Attention: President
with a copy to Investor Services Group's General Counsel
Article 20 Governing Law/Venue.
The laws of the Commonwealth of Massachusetts, excluding the laws on
conflicts of laws, shall govern the interpretation, validity, and enforcement of
this agreement. All actions arising from or related to this Agreement shall be
brought in the state and federal courts sitting in the City of Boston, and
Investor Services Group and Client hereby submit themselves to the exclusive
jurisdiction of those courts.
Article 21 Counterparts.
This Agreement may be executed in any number of counterparts, each of
which shall be deemed to be an original; but such counterparts shall, together,
constitute only one instrument.
<PAGE>
Article 22 Captions.
The captions of this Agreement are included for convenience of
reference only and in no way define or limit any of the provisions hereof or
otherwise affect their construction or effect.
Article 23 Publicity.
Neither Investor Services Group nor the Fund shall release or publish
news releases, public announcements, advertising or other publicity relating to
this Agreement or to the transactions contemplated by it without the prior
review and written approval of the other party; provided, however, that either
party may make such disclosures as are required by legal, accounting or
regulatory requirements after making reasonable efforts in the circumstances to
consult in advance with the other party.
Article 24 Relationship of Parties.
The parties agree that they are independent contractors and not
partners or co-venturers and nothing contained herein shall be interpreted or
construed otherwise.
Article 25 Entire Agreement: Severability.
25.1 This Agreement, including Schedules, Addenda1 and Exhibits hereto,
constitutes the entire Agreement between the parties with respect to the subject
matter hereof and supersedes all prior and contemporaneous proposals,
agreements, contracts, representations, and understandings, whether written or
oral, between the parties with respect to the subject matter hereof. No change,
termination, modification, or waiver of any term or condition of the Agreement
shall be valid unless in writing signed by each party. No such writing shall be
effective as against Investor Services Group unless said writing is executed by
an Executive Vice President, or President of Investor Services Group. A party's
waiver of a breach of any term or condition in the Agreement shall not be deemed
a waiver of any subsequent breach of the same or another term or condition.
25.2 The parties intend every provision of this Agreement to be
severable. If a court of competent jurisdiction determines that any term or
provision is illegal or invalid for any reason, the illegality or invalidity
shall not affect the validity of the remainder of this Agreement. In such case,
the parties shall in good faith modify or substitute such provision consistent
with the original intent of the parties. Without limiting the generality of this
paragraph, if a court determines that any remedy stated in this Agreement has
failed of its essential purpose, then all other provisions of this Agreement,
including the limitations on liability and exclusion of warranties, shall remain
fully effective.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers, as of the day and year first above
written.
WILSHIRE TARGET FUNDS, INC.
By:/s/ Thomas D. Stevens
Title: President
FIRST DATA INVESTOR SERVICES GROUP, INC.
By: /s/ Kenneth J. Kempf
Title: Senior Vice President
<PAGE>
Exhibit 1
List of Portfolios
Large Company Growth Portfolio
Large Company Value Portfolio Small
Company Growth Portfolio Small Company
Value Portfolio Wilshire 5000 Index
Portfolio
<PAGE>
Schedule A
DUTIES OF INVESTOR SERVICES GROUP
TRANSFER AGENCY SERVICES
1. Shareholder Information. Investor Services Group shall maintain a
record of the number of Shares held by each Shareholder of record which shall
include name, address, taxpayer identification and which shall indicate whether
such Shares are held in certificates or uncertificated form.
2. Shareholder Services. Investor Services Group shall respond as
appropriate to all inquiries and communications from Shareholders relating to
Shareholder accounts with respect to its duties hereunder and as may be from
time to time mutually agreed upon between Investor Services Group and the Fund.
3. Share Certificates.
(a) At the expense of the Fund, the Fund shall supply Investor Services
Group with an adequate supply of blank share certificates to meet Investor
Services Group requirements therefor. Such Share certificates shall be properly
signed by facsimile. The Fund agrees that, notwithstanding the death,
resignation, or removal of any officer of the Fund whose signature appears on
such certificates, Investor Services Group or its agent may continue to
countersign certificates which bear such signatures until otherwise directed by
Written Instructions.
(b) Investor Services Group shall issue replacement Share certificates
in lieu of certificates which have been lost, stolen or destroyed, upon receipt
by Investor Services Group of properly executed affidavits and lost certificate
bonds, in form satisfactory to Investor Services Group, with the Fund and
Investor Services Group as obligees under the bond.
(c) Investor Services Group shall also maintain a record of each
certificate issued, the number of Shares represented thereby and the Shareholder
of record. With respect to Shares held in open accounts or uncertificated form
(i.e., no certificate being issued with respect thereto) Investor Services Group
shall maintain comparable records of the Shareholders thereof, including their
names, addresses and taxpayer identification. Investor Services Group shall
further maintain a stop transfer record on lost and/or replaced certificates.
4. Mailing Communications to Shareholders: Proxy Materials. Investor
Services Group will address and mail to Shareholders of the Fund, all reports to
Shareholders, dividend and distribution notices and proxy material for the
Fund's meetings of Shareholders. In connection with meetings of Shareholders,
Investor Services Group will prepare Shareholder lists, mail and certify as to
the mailing of proxy materials, process and tabulate returned proxy cards,
report on proxies voted prior to meetings, act as inspector of election at
meetings and certify Shares voted at meetings.
<PAGE>
5. Sales of Shares.
(a) Investor Services Group shall not be required to issue any Shares
of the Fund where it has received a Written Instruction from the Fund or
official notice from any appropriate authority that the sale of the Shares of
the Fund has been suspended or discontinued. The existence of such Written
Instructions or such official notice shall be conclusive evidence of the right
of Investor Services Group to rely on such Written Instructions or official
notice.
(b) In the event that any check or other order for the payment of money
is returned unpaid for any reason, Investor Services Group will endeavor to: (i)
give prompt notice of such return to the Fund or its designee; (ii) place a stop
transfer order against all Shares issued as a result of such check or order; and
(iii) take such actions as Investor Services Group may from time to time deem
appropriate.
6. Transfer and Repurchase
(a) Investor Services Group shall process all requests to transfer or
redeem Shares in accordance with the transfer or repurchase procedures set forth
in the Fund's Prospectus.
(b) Investor Services Group will transfer or repurchase Shares upon
receipt of Oral or Written Instructions or otherwise pursuant to the Prospectus
and Share certificates, if any, properly endorsed for transfer or redemption,
accompanied by such documents as Investor Services Group reasonably may deem
necessary.
(c) Investor Services Group reserves the right to refuse to transfer or
repurchase Shares until it is satisfied that the endorsement on the instructions
is valid and genuine. Investor Services Group also reserves the ri8ht to refuse
to transfer or repurchase Shares until it is satisfied that the requested
transfer or repurchase is legally authorized, and it shall incur no liability
for the refusal, in good faith, to make transfers or repurchases which Investor
Services Group, in its good judgement, deems improper or unauthorized, or until
it is reasonably satisfied that there is no basis to any claims adverse to such
transfer or repurchase.
(d) When Shares are redeemed, Investor Services Group shall, upon
receipt of the instructions and documents in proper form, deliver to the
Custodian and the Fund or its designee a notification setting forth the number
of Shares to be repurchased. Such repurchased shares shall be reflected on
appropriate accounts maintained by Investor Services Group reflecting
outstanding Shares of the Fund and Shares attributed to individual accounts.
(e) Investor Services Group, upon receipt of the monies paid to it by
the Custodian for the repurchase of Shares, pay such monies as are received from
the Custodian, all in accordance with the procedures described in the written
instruction received by Investor Services Group from the Fund.
(f) Investor Services Group shall not process or effect any repurchase
with respect to Shares of the Fund after receipt by Investor Services Group or
its agent of notification of the suspension of the determination of the net
asset value of the Fund.
7. Dividends.
(a) Upon the declaration of each dividend and each capital gains
distribution by the Board of Directors of the Fund with respect to Shares of the
Fund, the Fund shall furnish or cause to be furnished to Investor Services Group
Written Instructions setting forth the date of the declaration of such dividend
or distribution, the ex-dividend date, the date of payment thereof, the record
date as of which Shareholders entitled to payment shall be determined, the
amount payable per Share to the Shareholders of record as of that date, the
total amount payable on the payment date and whether such dividend or
distribution is to be paid in Shares at net asset value.
(b) On or before the payment date specified in such resolution of the
Board of Directors, the Fund will pay to Investor Services Group sufficient cash
to make payment to the Shareholders of record as of such payment date.
(c) If Investor Services Group does not receive sufficient cash from
the Fund to make total dividend and/or distribution payments to all Shareholders
of the Fund as of the record date, Investor Services Group will, upon notifying
the Fund, withhold payment to all Shareholders of record as of the record date
until sufficient cash is provided to Investor Services Group.
8. Retirement Plans. In connection with the individual retirement
account, simplified employee pension plan, rollover individual retirement plan,
educational IRA and ROTH individual retirement account (each hereinafter
referred to as an "IRA" and, collectively, the "IRAs") within the meaning of
Section 408 of the Internal Revenue Code of 1986, as amended (the "Code")
offered by the Fund for which contributions of the Funds shareholders (the
"Participants") in the IRA's are invested in shares of the Fund, Investor
Services Group shall provide the following administrative services in addition
to those services described herein:
o Establish a record of types and reasons for distributions (i.e.,
attainment of age 59-1/2, disability, death, return of excess
contributions, etc.);
o Record method of distribution requested and/or made;
o Receive and process designation of the beneficiary forms;
o Examine and process requests for direct transfers between
custodians/trustees, transfer and pay over to the successor assets in
the account and records pertaining thereto as requested;
o Prepare any annual reports or returns required to be prepared and/or
filed by a custodian of an IRA, including, but not limited to, an
annual fair market value report, Forms 1099R and 5498 and file with the
IRS and provide to Participant/Beneficiary; and
o Perform applicable federal withholding and send
Participants/Beneficiaries an annual TEFRA notice regarding required
federal tax withholding.
9. Cash Management Services. Funds received by Investor Services Group
in the course of performing its services hereunder will be held in bank accounts
and/or money market fund accounts (or other investments with at least a AA, or
similar rating). With respect to funds maintained in money market fund accounts
and other investments, Investor Services Group shall retain any interest
generated or earned. With respect to funds maintained in bank accounts, Investor
Services Group shall retain any excess balance credits or excess benefits earned
or generated by or associated with such bank accounts or made available by the
institution at which such bank accounts are maintained after such balance
credits or benefits are first applied towards banking service fees charged by
such institution in connection with banking services provided on behalf of the
Fund.
10. Lost Shareholders. Investor Services Group shall perform such
services as are required in order to comply with Rules 17a-24 and 17Ad-17 of the
34 Act (the Lost Shareholder Rules"), including, but not limited to those set
forth below. Investor Services Group may, in its sole discretion, use the
services of a third party to perform the some or all such services.
o documentation of electronic search policies and procedures; o execution
of required searches; o creation and mailing of confirmation letters; o
taking receipt of returned verification forms; o providing confirmed
address corrections in batch via electronic media;;
o tracking results and maintaining data sufficient to comply with the Lost
Shareholder Rules; and o preparation and submission of data required under
the Lost Shareholder Rules.
11. DCXchange Services. Investor Services Group agrees to perform
recordkeeping and related services for the benefit of participants in employee
benefit plans under Section 401 (k) of the Internal Revenue Code ("Plans")
("Plan Participants") that maintain Shares of the Fund through Plans
administered by certain benefit plan consultants ("Recordkeepers"). Investor
Services Group shall subcontract with Recordkeepers to link the Investor
Services Group recordkeeping system with the Recordkeepers, in order for the
recordkeepers to maintain Fund Share positions for each Participant. Fund
positions of the Participants shall constitute open accounts for which the Fund
shall pay to Investor Services Group the annual fee specified in the schedule of
fees attached hereto as Schedule B.
12. Miscellaneous. In addition to and neither in lieu nor in
contravention of the services set forth above, Investor Services Group shall:
(i) perform all the customary services of a transfer agent, registrar, dividend
disbursing agent and agent of the dividend reinvestment and cash purchase plan
as described herein consistent with those requirements in effect as at the date
of this Agreement. The detailed definition, frequency, limitations and
associated costs (if any) set out in the attached fee schedule, include but are
not limited to: maintaining all Shareholder accounts, preparing Shareholder
meeting lists, mailing proxies, tabulating proxies, mailing Shareholder reports
to current Shareholders, withholding taxes on U.S. resident and non-resident
alien accounts where applicable, preparing and filing U.S. Treasury Department
Forms 1099 and other appropriate forms required with respect to dividends and
distributions by federal authorities for all Shareholders.
II. ADMINISTRATION SERVICES
(a) Maintaining office facilities (which may be in the offices of
Investor Services Group or a corporate affiliate) and furnishing corporate
officers for the Fund;
(b) Furnishing data processing services, clerical services, and
executive and administrative services and standard stationery and office
supplies;
(c) Performing all functions ordinarily performed by the office of a
corporate treasurer, and furnishing the services and facilities ordinarily
incident thereto, as follows:
o Expense Accrual Monitoring
o Determination of Dividends
o Preparation materials for review by the Board, e.g., Rules2a-7,10f-3,
17a-7, 17e-1 and 144A
o Tax and Financial Counsel
o Creation of expense pro formas for new Portfolios/classes
o Reporting to investment company reporting agencies (i.e., Lipper)
o Compliance Testing including Section 81 7(h) (daily, weekly or
monthly)
(d) Preparing reports to the Fund's Shareholders and the SEC including,
but not necessarily limited to, Annual Reports and Semi-Annual Reports on Form
N-SAR;
(e) Preparing and filing the Fund's tax returns and providing
shareholder tax information to the Fund's transfer agent;
(f) Assisting the Adviser, at the Adviser's request, in monitoring and
developing compliance procedures for the Fund which will include, among other
matters, procedures to assist the Adviser in monitoring compliance with each
Portfolio's investment objective, policies, restrictions, tax matters and
applicable laws and regulations;
(g) Performing "Blue Sky" compliance functions, as follows:
o Effecting and maintaining, as the case may be, the registration of
Shares of the Fund for sale under the securities laws of the
jurisdictions listed in the Written Instructions of the Fund, which
instructions will include the amount of Shares to be registered as well
as the warning threshold to be maintained. Any Written Instructions not
received at least 45 days prior to the date the Fund intends to offer
or sell its Shares cannot be guaranteed a timely notification to the
states. In addition, Investor Services Group shall not be responsible
for providing to any other service provider of the Fund a list of the
states in which the Fund may offer and sell its Shares.
<PAGE>
o Filing with each appropriate jurisdiction the appropriate materials
relating to the Fund. The Fund shall be responsible for providing such
materials to Investor Services Group, and Investor Services Group shall
make such filings promptly after receiving such materials.
o Providing to the Fund quarterly reports of sales activity in each
jurisdiction in accordance with the Written Instructions of the Fund.
Sales will be reported by shareholder residence. NSCC trades and order
clearance will be reported by the state provided by the dealer at the
point of sale. Trades by omnibus accounts will be reported by trustee
state of residence in accordance with the Written Instructions of the
Fund outlining the entities which are permitted to maintain omnibus
positions with the Fund.
o In the event sales of Shares in a particular jurisdiction reach or
exceed the warning levels provided in the Written Instructions of the
Fund, Investor Services Group will promptly notify the Fund with a
recommendation of the amount of Shares to be registered in such
jurisdiction and the fee for such registration. Investor Services Group
will not register additional Shares in such jurisdiction unless and
until Investor Services Group shall have received written instructions
from the Fund to do so.
o If Investor Services Group is instructed by the Fund not to register
Shares in a particular jurisdiction, Investor Services Group will use
its best efforts to cause any sales in such jurisdictions to be
blocked, and such sales will not be reported to Investor Services Group
as sales of Shares of the Fund.
(h) Performing corporate secretarial services including the following:
o Assist in maintaining corporate records and good standing status of
Fund in its state of organization
o Develop and maintain calendar of annual and quarterly board approvals
and regulatory filings
o Prepare notice, agenda, memoranda, resolutions and background materials
for legal approvals at quarterly board meetings and committee meetings;
attend meetings; make presentations where appropriate; prepare minutes;
follow up on issues
o Provide support for one special in person board meeting per year and
written consent votes where needed
(i) Performing the following legal services:
o Prepare and file annual Post-Effective Amendment
o Prepare and file Rule 24f-2 Notice
o Review and file Form N-SAR
o Review, Edgarize and file Annual and Semi-Annual Financial Reports
o Communicate significant regulatory or legislative developments to Fund
management and directors and provide related planning assistance where
needed
o Consult with Fund management regarding portfolio compliance and Fund
corporate and regulatory issues as needed
o Maintain effective communication with outside counsel and review legal
bills of outside counsel
o Coordinate the printing and mailing process with outside printers for
all shareholder publications
o Arrange D&O/E&O insurance and fidelity bond coverage for Fund
o Assist in monitoring Fund Code of Ethics reporting and provide such
reports to the person designated under the Fund's Code
(j) Performing, in accordance with the Written Instructions of the
Fund, the following Special Legal Services in accordance with the pricing
structure listed on the Fee Schedule attached to this Agreement as Schedule C:
o Assist in managing SEC audit of the Fund at the Adviser's principal
place of business
o Review sales material and advertising for Fund Prospectus compliance
o Assist in new Portfolio start-up (to the extent requested)
Coordinate time and responsibility schedules Prepare Fund
corporate documents (MTA/by-laws)
Draft/file registration statement (including investment
objectives/policies and prospectuses) Respond to and negotiate
SEC comments Draft notice, agenda and resolutions for
organizational meeting; attend board meeting; make
presentations where appropriate; prepare minutes and follow up
on issues
o Assist in developing compliance guidelines and procedures to improve
overall compliance by Fund and service providers
o Prepare notice, agenda, memoranda and background materials for special
board meetings, make presentations where appropriate, prepare minutes
and follow up on issues
o Prepare proxy material for special meetings (including fund merger
documents)
<PAGE>
o Prepare Post-Effective Amendments for special purposes (e.g., new funds
or classes, changes in advisory relationships, mergers, restructurings)
o Prepare special Prospectus supplements where needed
o Assist in extraordinary non-recurring projects,
including providing consultative legal services,
e.g., Arrange CDSC financial programs Prospectus
simplification Profile prospectuses Exemptive order
applications
III. FUND ACCOUNTING SERVICES
Performing fund accounting and bookkeeping services (including the
maintenance of such accounts, books and records of the Fund as may be required
by Section 31(a) of the 1940 Act) as follows:
o Daily, Weekly, and Monthly Reporting
o Portfolio and General Ledger Accounting
o Daily Valuation of all Portfolio Securities
o Daily Valuation and NAV Calculation
o Comparison of NAV to market movement
o Review research of price tolerance/fluctuation report to market
movements and events
o Research of items appearing on the price exception report
o Weekly cost monitoring along with market-to-market valuations in
accordance with Rule 2a-7
o Security trade processing
o Daily cash and position reconciliation with the custodian bank
o Daily updating of price and distribution rate information to the
Transfer Agent/Insurance Agent
o Daily support and report delivery to Portfolio Management
o Daily calculation of Portfolio adviser fees and waivers
o Daily calculation of distribution rates
o Daily investable cash call
o Monitor and research aged receivables
o Collect aged income items and perform reclaims
o Update NASDAQ reporting
o Daily maintenance of each Portfolio's general ledger including expense
accruals
o Daily NAV per share notification to other vendors as required
o Calculation of 30-day SEC yields and total returns
o Preparation of month-end reconciliation package
o Monthly reconciliation of Portfolio expense records
o Application of monthly pay down gain/loss
o Preparation of all annual and semi-annual audit work papers
<PAGE>
Schedule B
Fee Schedule
TRANSFER AGENCY FEES:
Annual Fees:
Open Account Fees: $17.50 Per Open Account
Closed Account Fees: $3.60 Per Closed Account
Fund Minimums: $24,000 Per Portfolio Per Year
Each Additional Class: $18,000 Per Portfolio Per Year
Conversion Costs: Free Set-Up Fee
Value Added Services:
Cost Basis Accounting: Free Set-up Fee
$.35 Per Eligible
Account Per Month
AVR Solution: $7,500 Set-Up Fee
$300.00 Monthly
Minimum Or
--
$.2125 Per Minute
Charge
$.0775 Per Minute
Telecom Charge
$.10 per Call
FundServ: $5,000 Set-Up Fee
$.15 Per Trade
Plus $.10 Same
Day Trades
Asset Allocation/Reallocation: Free Set-Up Fee
$.25 Per Trade
Via NSCC
Direct Access Zip Link: $5,000 Set-Up Fee
$1,000 Per Month
$.03/Record Plus
$.015/Price Record
DCXchange Program: 25 bp based on
the assets for all
Plan Participant
Accounts in the
Fund
Lost Shareholder Search/Reporting: $2.75 per account search*
* The per account search fee shall be waived until June 2000 so long as the
Fund retains Keane Tracers. Inc. ("KTI") to provide the Fund with KTI's
"In-Depth Research Program" services.
<PAGE>
Print/Mail Fees.
(a) Standard Pricing:
Testing Application or Data Requirements: $3.00/fax
Work Order: $15.00 per work order
Daily Work (Confirms):
Hand: $71/K with $20.00 minimum (includes BRE or CRE)
$0.07/each additional insert
Machine: $42/K with S15.00 minimum (includes BRE or CRE)
$0.01/each additional insert
Daily Checks*:
Hand: $91/K with $30.00 minimum daily (includes 1 insert)
$0.08/each additional insert
Machine: $52/K with $20.00 minimum (includes 1 insert)
$0.01/each additional insert
*There is a $3.00 charge for each 3606 Form sent.
Statements:
Hand: $78/K with $20.00 minimum (includes BRE or CRE)
$0.08/each additional insert
$125/K for intelligent inserting
Machine: $52/K with $20.00 minimum (includes BRE or CRE)
$0.01 each additional insert
$58/K for intelligent inserting
Periodic Checks:
Hand: $91/K with $30.00 minimum (includes 1 insert)
$0.08/each additional insert
Machine: $52/K with $30.00 minimum (includes 1 insert)
$0.01/each additional insert
12B1/Dealer Commission Checks/Statements: $0.78/each envelope with
$30.00 minimum
-----------------------------------------
Spac Reports/Group Statements: $78/K with $20.00 minimum
------------------------------
Listbills: $0.78 per envelope with $20.00 minimum
----------
Printing Charges: (price ranges dependent on volumes)
$0.08/per confirm/statement/page
$0.10/per check
Folding (Machine): $18/K
Folding (Hand): $.12 each
<PAGE>
Presort Charge: postage rate
$0.035 per piece
Courier Charge: $15.00 for each on call courier trip/or
actual cost for on demand
---------------
Overnight Charge: $3.50 per package service charge plus Federal
Express/Airborne charge
Inventory Storage: $20.00 for each inventory location as of
the 15th of the month
Inventory Receipt: $20.00 for each SKU / Shipment
Hourly work; special projects. opening envelopes. etc...: $24.00 per hour
---------------------------------------------------------
Special Pulls: $2.50 per account pull
Boxes/Envelopes: Shipping boxes $0.85 each
Oversized Envelopes $0.45 each
Forms Development/Programming Fee: $100/hr
Systems Testing: $85/hr
Cutting Charges: $10.00/K
(b) Special Mailings:
Special mailing pricing is based on appropriate notification
(standard of 30 day notification) and scheduling for special
mailings. Scheduling requirements include having collateral
arrive at agreed upon times in advance of deadlines. Mailings
which arise with shorter time frames and turns will be billed
at a premium based on turn around requirements.
Work Order: $30.00 per Workorder
Daily Work (Confirms):
Hand: $135.00 to create an admark tape
$10.00/K to zip + 4 data enhance/$125.00 minimum
$80.00/hr for any data manipulation
$10.00/K combo charge
Admark & Machine Insert:
#10, #11, 6x9: $62/K to admark envelope and machine insert
1 piece/$125.00 min
$2.50/K for each additional insert
$38/K to admark only with $75S.00 minimum
$25.00/K hand sort
9xl2: $135/K to admark envelope and machine insert
1 piece/$125.00 min
$5.00/K for each additional insert
$38/K to admark only/$75.00 minimum
$0.08 for each hand insert
Admark & Hand Insert:
#10, #11, 6x9: $0.08 for each hand insert
$25.00/K hand sort
9x12 $0.09 for each hand insert
$35.00/K hand sort
Pressure/Sensitive Labels:
$0.32 each to create, affix and hand insert
1 piece/$75.00 minimum $0.08 for each hand
insert $0.10 to affix labels only $0.10 to
create labels only
Legal Drop: $150.00 / compliant legal drop per job and
processing fees
-----------
Create Mailing List: $0.40 per entry with $75.00 minimum
Presort Fee: $0.035 per piece
FUND ACCOUNIING AND ADMINISTRATION FEES:
Annual Fees:
Administration Fees:
First $1 billion in aggregate assets 0.15% of monthly average net
assets Next $4 billion in aggregate assets 0.10% of monthly average net
assets Aggregate assets in excess of $4 billion 0.08% of monthly
average net assets Minimum fee: $125,000 per annum (assuming five
Portfolios)
Fund Accounting Fees:
Flat Fee: $25,000 per Portfolio
Additional charge: $2,000 per additional class
FEE WAIVERS: (Applicable to the Wilshire 5000 Index Portfolio only)
Transfer Agency Fee Waivers:
$24,000 per Investment Class per annum
$18,000 per Institutional Class per annum
$42,000 Total Waiver per annum
Once the per account fees exceed the waiver amount, the Fund will receive a
credit equal to the foregoing waiver.
Fund Accounting Fee Waivers:
$25,000 per Portfolio per annum
$ 2,000 per additional class per annum
$27,000 Total Waiver per annum
<PAGE>
Administration Fee Waivers:
<TABLE>
<CAPTION>
<S> <C> <C>
Assets less than $500 MM 100% of annual administration fee
Assets equal to or greater than $500 MM
But less than $1,000 MM 85% of annual administration fee
Assets equal to or greater than $1,000 MM
But less than $2,000 MM 75% of annual administration fee
Assets equal to or greater than $2,000 MM 50% of annual administration fee
</TABLE>
In addition, the amount of the Transfer Agency Fee Waiver (or corresponding
credit) and Fund Accounting Fee Waiver will be determined in accordance with the
foregoing schedule. For example, if the assets of the Wilshire 5000 Index
Portfolio are $750 MM, the Portfolio shall be entitled to a Transfer Agency Fee
Waiver (or credit) equal to $35,700 (85% of $42,000), a Fund Accounting Fee
Waiver equal to $22,950 (85% of $27,000) and an Administration Fee Waiver equal
to $956,250 (85% of $1,125,000).
GENERAL:
1.1 First Data may charge a service fee equal to the lesser of (1) one and
one-half percent (1 1/2%) per month of (ii) the highest interest rate
legally permitted on any unpaid amounts, unless such amounts are
ultimately determined not due in accordance with the Payment Dispute
Procedure. Client shall also reimburse First Data for all reasonable
expenses to collect delinquent amounts, including reasonable attorneys'
fees and court costs.
1.2 First Data may adjust any annual or monthly fees once per calendar
year, upon thirty (30) days prior written notice in an amount not to
exceed the cumulative percentage increase in the Consumer Price Index
for All Urban Consumers (CPI-U) U.S. City Average, All items
(unadjusted) - (1982-84=100), published by the U.S. Department of Labor
since the last such adjustment in the Client's monthly fees (or the
Effective Date absent a prior such adjustment).
1.3 Miscellaneous Charges. The Fund shall be charged for the following
products and services as applicable:
o Ad hoc reports
o Ad hoc SQL time
o COLD Storage
o Digital Recording
o Banking Services, including incoming and outgoing wire charges
o Microfiche/microfilm production
o Magnetic media tapes and freight
o Manual Pricing
o Materials for Rule 15c-3 Presentations
o Pre-Printed Stock, including business forms, certificates,
envelopes, checks and stationary
<PAGE>
1.4 Programming Costs. The following programming rates are subject to
an annual 5% increase after the one year anniversary of the effective
date of this Agreement.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
(a) Dedicated Team: Programmer: $100,000 per annum
BSA: $ 85,000 per annum
Tester: $ 65,000 per annum
(b) System Enhancements (Non Dedicated Team): $150.00 per/hr per programmer
</TABLE>
<PAGE>
Schedule C
OUT-OF-POCKET EXPENSES
The Fund shall reimburse Investor Services Group monthly for applicable
out-of-pocket expenses, including, but not limited to the following items:
o Postage - direct pass through to the Fund
o Telephone and telecommunication costs, including all lease,
maintenance and line costs
o Proxy solicitations, mailings and tabulations
o Shipping, Certified and Overnight mail and insurance
o Terminals, communication lines, printers and other equipment and
any expenses incurred in
connection with such terminals and lines
o Duplicating services
o Distribution and Redemption Check Issuance
o Courier services
o Federal Reserve charges for check clearance
o Overtime, as approved by the Fund
o Temporary staff, as approved by the Fund
o Travel and entertainment, as approved by the Fund
o Record retention, retrieval and destruction costs, including,
but not limited to exit fees charged by third party record
keeping vendors
o Third party audit reviews
o Insurance
o Pricing services (or services used to determine Fund NAV) o Vendor
set-up charges for Blue Sky and other services o Blue Sky filing or
registration fees o EDGAR filing fees o Vendor pricing comparison o
Such other expenses as are agreed to by Investor Services Group and the
Fund
The Fund agrees that postage and mailing expenses will be paid on the
day of or prior to mailing as agreed with Investor Services Group. In addition,
the Fund will promptly reimburse Investor Services Group for any other
unscheduled expenses incurred by Investor Services Group whenever the Fund and
Investor Services Group mutually agree that such expenses are not otherwise
properly borne by Investor Services Group as part of its duties and obligations
under the Agreement.
<PAGE>
Schedule D
Fund Documents
- Certified copy of the Articles of Incorporation of the Fund,
as amended
- Certified copy of the By-laws of the Fund, as amended,
- Copy of the resolution of the Board of Directors authorizing
the execution and delivery of this
Agreement
- Specimens of the certificates for Shares of the Fund, if
applicable, in the form approved by the Board of Directors of
the Fund, with a certificate of the Secretary of the Fund as
to such approval
- All account application forms and other documents relating to
Shareholder accounts or to any plan, program or service
offered by the Fund
- Certified list of Shareholders of the Fund with the name,
address and taxpayer identification number of each
Shareholder, and the number of Shares of the Fund held by
each, certificate numbers and denominations (if any
certificates have been issued), lists of any accounts against
which stop transfer orders have been placed, together with the
reasons therefore, and the number of Shares redeemed by the
Fund
- All notices issued by the Fund with respect to the Shares in
accordance with and pursuant to the Articles of Incorporation
or By-laws of the Fund or as required b law and shall perform
such other specific duties as are set forth in the Articles of
Incorporation including the giving of notice of any special or
annual meetings of shareholders and any other notices required
thereby.
- Copies of all agreements between the Fund and its service
providers
- A listing of all jurisdictions in which each Portfolio is
registered and lawfully available for sale as of the date of
this Agreement and all information relative to the monitoring
of sales and registrations of Fund shares in such
jurisdictions
- Each Fund's most recent post-effective amendment to its
Registration Statement
- Each Fund's most recent prospectus and statement of additional
information, if applicable, and all amendments and
supplements thereto