SCHEDULE 14C INFORMATION
INFORMATION STATEMENT PURSUANT TO SECTION 14(C) OF THE
SECURITIES EXCHANGE ACT OF 1934
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|_| Preliminary information statement. |_| Confidential, for use of the Commissioner
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WILSHIRE MUTUAL FUNDS, INC.
(Name of Registrant as Specified in Its Charter)
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|X| No fee required.
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IMPORTANT NEWS ABOUT WILSHIRE MUTUAL FUNDS, INC.
July 31, 2005
Dear Stockholders of the Large Company Growth Portfolio:
Wilshire Mutual Funds, Inc. (the "Company") has appointed Delaware Management
Company as an additional sub-adviser to the Large Company Growth Portfolio
effective May 2, 2005, in place of Transamerica Investment Management, LLC.
Los Angeles Capital Management and Equity Research, Inc. and Goldman Sachs Asset
Management continue as sub-advisers to portions of the Large Company Growth
Portfolio. Wilshire Associates Incorporated, the Company's investment adviser,
continues to oversee the sub-advisers.
The next few pages of this package feature more information about the new
sub-adviser, including its investment processes and styles. Please take a few
moments to read them and call us at 1-888-200-6796 if you have any questions.
On behalf of the Board of Directors, I thank you for your continued investment
in Wilshire Mutual Funds.
Sincerely,
Lawrence E. Davanzo
President
1
WILSHIRE MUTUAL FUNDS, INC.
INFORMATION STATEMENT
TO STOCKHOLDERS OF THE
LARGE COMPANY GROWTH PORTFOLIO
This document is an Information Statement and is being furnished to stockholders
of the Large Company Growth Portfolio (the "Portfolio"), a series of Wilshire
Mutual Funds, Inc. (the "Company"), in lieu of a proxy statement pursuant to the
terms of an exemptive order issued by the Securities and Exchange Commission
(the "SEC"). Wilshire Associates Incorporated ("Wilshire") serves as the
investment adviser for the Company. The exemptive order permits Wilshire and the
Board of Directors of the Company (the "Board") to employ additional
sub-advisers, terminate sub-advisers, and modify sub-advisory agreements without
prior approval of the Company's stockholders.
Under the SEC order, if Wilshire and the Board retain a new sub-adviser or
materially change an existing sub-advisory agreement between Wilshire and a
sub-adviser, Wilshire is required to provide an Information Statement to
stockholders of the affected portfolios of the Company explaining any changes
and disclosing the aggregate fees paid to the sub-advisers as a result of those
changes. The Board reviews the sub-advisory agreements annually.
This Information Statement is being mailed on or about July 30, 2005 to the
stockholders of the Portfolio of record as of June 30, 2005 (the "Record Date").
The Portfolio will bear the expenses incurred in connection with preparing this
Information Statement. As of the Record Date, 17,289,178.118 shares of the
Portfolio were issued and outstanding. Information on stockholders who owned
beneficially more than 5% of the shares of the Portfolio as of the Record Date
is set forth in Appendix A. To the knowledge of Wilshire, the executive officers
and directors of the Company as a group owned less than 1% of the outstanding
shares of the Portfolio and of the Company as of the Record Date.
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO
SEND US A PROXY.
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APPOINTMENT OF DELAWARE MANAGEMENT COMPANY AS A SUB-ADVISER TO THE PORTFOLIO
On April 27, 2005, the Board approved Delaware Management Company, a series of
Delaware Management Business Trust ("Delaware"), to replace Transamerica
Investment Management, LLC ("TIM") as a sub-adviser to a portion of the Large
Company Growth Portfolio. The Board approved the replacement of TIM as a result
of the resignation from TIM of the portfolio management team previously
responsible for management of TIM's portion of the Portfolio and the subsequent
employment of the team by Delaware. Delaware joins Los Angeles Capital
Management and Equity Research, Inc. ("LA Capital") and Goldman Sachs Asset
Management ("GSAM"), the current sub-advisers of the Large Company Growth
Portfolio, which continue to provide sub-advisory services with respect to
portions of the Portfolio. Wilshire continues to oversee all of the sub-advisers
to all of the series of the Company. Wilshire entered into a sub-advisory
agreement with Delaware (the "Agreement") effective May 2, 2005, to manage a
portion of the Large Company Growth Portfolio, subject to the supervision of
Wilshire and the Board.
No officers or Directors of the Company are officers, employees, directors,
general partners or shareholders of Delaware. In addition, since January 1,
2005, the beginning of the Company's last fiscal year, no Director of the
Company has had, directly or indirectly, a material interest, material
transaction or material proposed transaction to which Delaware, any of its
parents or subsidiaries or any subsidiaries of a parent of any such entities was
or is to be a party.
At its April 27, 2005 meeting, in connection with its review of Wilshire's
proposed sub-advisory agreement with Delaware (the "Agreement"), the Board
evaluated information provided by Wilshire and Delaware in accordance with
Section 15(c) of the Investment Company Act of 1940, as amended (the "1940
Act"). In reviewing the Agreement, the Board noted that the large cap growth
portfolio management team which had previously managed TIM's portion of the
Large Company Growth Portfolio had joined Delaware, and that the same personnel
would continue to manage that portion of the Portfolio on behalf of Delaware.
The Board reviewed the favorable past performance record of the large cap growth
portfolio management team while it had been employed by TIM, noting that TIM's
large cap growth product had outperformed the Russell 1000 Growth Index (the
"Index") every calendar year from 1997 through 2004 and that TIM's portion of
the Portfolio, which TIM began managing on September 30, 2004, had outperformed
the Index for the last quarter in 2004.
The Board also considered information regarding Delaware's investment management
experience, personnel, clients, assets under management, brokerage and soft
dollar practices, regulatory compliance procedures, investment philosophies and
processes, and the overall high quality and depth of its organization. In
addition, it reviewed Delaware's financial statements and observed that
Delaware's resources were adequate to support the investment management
operations of the large cap growth portfolio management team. Because of the
relatively small current asset size of the Large Company Growth Portfolio
($548,669,233 as of June 30, 2005), the Board did not believe Wilshire or
Delaware would realize any economies of scale in the near future in acting as
investment adviser or sub-adviser, respectively, to the Portfolio.
3
The Board also considered the sub-advisory fees to be paid by Wilshire to
Delaware with respect to the Portfolio, which were the same as the fees paid by
Wilshire to TIM. The Directors observed that the fees paid to Delaware with
respect to the Portfolio were significantly less than the fees charged by
Delaware to its separate accounts with large cap growth mandates, as well as the
fees charged by Delaware's affiliate to its proprietary domestic equity mutual
funds and other funds for which Delaware's affiliate serves as investment
adviser.
Based on its review, the Board of Directors as a whole, and the Directors who
are not "interested persons" of the Company as defined in the 1940 Act (the
"Independent Directors") separately, determined that the fees under the
Agreement were fair and reasonable for the services to be provided by Delaware
to the Portfolio and that it would be in the best interest of the Portfolio and
its stockholders for Wilshire to enter into the Agreement. In deciding to
approve the Agreement, the Board did not identify a single factor as
controlling, but concluded that each of the various factors referred to above
favored approval.
DELAWARE
Delaware is located at One Commerce Square, Philadelphia, PA 19103, and as of
March 31, 2005, Delaware and its affiliates managed approximately $98 billion in
assets. Day to day management of Delaware's portion of the Large Company Growth
Portfolio is the responsibility of portfolio managers Jeffery S. Van Harte, CFA,
Christopher J. Bonavico, CFA, Daniel J. Prislin, CFA, Christopher M. Ericksen,
CFA and Patrick G. Fortier, CFA, each of whom joined Delaware in April, 2005.
Prior to joining Delaware, each portfolio manager was a principal and portfolio
manager at TIM.
o Mr. Van Harte is Chief Investment Officer for Delaware. Prior to this,
he was Executive Vice President and Head of Equity Investments at TIM,
where he was the Lead Manager for the Transamerica Premier Equity Fund
and managed sub-advised funds and institutional separate accounts in
TIM's large growth discipline. Prior to portfolio management
responsibilities at TIM, Mr. Van Harte was a securities analyst and
trader for Transamerica Investment Services, which he joined in 1980.
He has 25 years of investment experience.
o Messrs. Bonavico and Prislin are Senior Portfolio Manager/Analysts for
Delaware. Prior to joining Delaware, they had been at TIM since 1993
and 1998, respectively. Before joining TIM, Mr. Bonavico was a
research analyst for Salomon Brothers, and Mr. Prislin was an
assistant portfolio manager with Franklin Templeton. Messrs. Bonavico
and Prislin have 17 years and ten years of investment experience,
respectively.
o Messrs. Ericksen and Fortier are Portfolio Manager/Analysts for
Delaware. Prior to joining Delaware, they had been at TIM since 2004
and 2000, respectively. Before joining TIM, Mr. Ericksen was a Vice
President at Goldman Sachs, and Mr. Fortier was an equity research
analyst for Olde Equity Research. Messrs. Ericksen and Fortier have 11
years and ten years of investment experience, respectively.
4
Delaware believes that superior returns can be realized through holding a
concentrated portfolio of companies with superior business models and
opportunities to generate consistent, long-term growth of intrinsic business
value. Fundamental research plays a central role in Delaware's bottom-up
investment management process, which emphasizes growth in intrinsic business
value rather than accounting earnings. In analyzing potential portfolio
holdings, Delaware seeks attractive absolute valuation based on future cash
generation, and believes that a long-term investment horizon creates
opportunities to exploit under-appreciated change. Delaware's focus on
concentrated portfolios may increase the Portfolio's volatility compared to more
diversified funds.
Delaware may sell a security when the security's fundamental characteristics
change, the issuer experiences an earnings reversal, Delaware believes the
security's valuations have exceeded fair value, as measured by Delaware's
intrinsic valuation model, or as required by portfolio dynamics (i.e., Delaware
finds what it believes to be a better opportunity as a result of its investment
process).
AGGREGATE FEES
Wilshire's annual advisory fee for the Large Company Growth Portfolio is 0.75%
of the Portfolio's average daily net assets. For the fiscal year ended December
31, 2004, the Company paid Wilshire $4,178,860 in advisory fees for the Large
Company Growth Portfolio.
For the fiscal year ended December 31, 2004, the aggregate sub-advisory fees
paid by Wilshire to all sub-advisers with respect to the Large Company Growth
Portfolio were $1,634,912. These aggregate fees represent 0.29% of the average
net assets of the Large Company Growth Portfolio. The replacement of TIM by
Delaware as a sub-adviser to the Portfolio will not change the annual aggregate
fees paid by Wilshire with respect to the Portfolio.
All sub-advisory fees are paid by Wilshire and not the Portfolio. The fees paid
by Wilshire to each sub-adviser, including Delaware, depend on the fee rates
negotiated by Wilshire and on the percentage of the Portfolio's assets allocated
to the sub-adviser by Wilshire. Because Wilshire pays each sub-adviser's fees
out of its own fees received from the Portfolio, there is no "duplication" of
advisory fees paid. THERE WILL BE NO INCREASE IN ADVISORY FEES TO THE PORTFOLIO
AND ITS STOCKHOLDERS IN CONNECTION WITH THE REPLACEMENT OF TIM BY DELAWARE AS A
SUB-ADVISER TO THE PORTFOLIO.
TERMS OF SUB-ADVISORY AGREEMENT
The Agreement will continue in force until March 31, 2006, unless sooner
terminated as provided in certain provisions contained in the Agreement. The
Agreement will continue in force from year to year thereafter with respect to
the Portfolio so long as it is specifically approved for the Portfolio at least
annually in the manner required by the 1940 Act.
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The Agreement will automatically terminate in the event of its assignment (as
defined in the 1940 Act) and may be terminated with respect to the Portfolio at
any time without payment of any penalty by Wilshire or Delaware on sixty days
prior written notice to the other party. The Agreement may also be terminated
with respect to the Portfolio at any time without payment of any penalty by
action of the Board or by a vote of a majority of the outstanding voting
securities of the Portfolio (as defined by the 1940 Act) on sixty days prior
written notice to Delaware by the Company. In addition, the Agreement may be
terminated with respect to the Portfolio at any time upon written notice,
without payment of any penalty, by Wilshire, the Board, or a vote of a majority
of the outstanding voting securities of the Portfolio if Delaware or any of its
officers or directors has breached any representation or warranty in the
Agreement or has taken any action which results in a material breach of
Delaware's covenants under the Agreement. The Agreement will automatically
terminate with respect to the Portfolio if the Investment Advisory Agreement
between Wilshire and the Company with respect to such Portfolio is terminated,
assigned or not renewed.
ADDITIONAL DISCLOSURE REGARDING DELAWARE
DELAWARE. Delaware is located at One Commerce Square, Philadelphia, PA 19103 and
is owned by Delaware Management Company, Inc., located at Centre Square, West
Tower, Philadelphia, PA 19102-2112, which in turn is an indirect subsidiary of
Lincoln National Corp., located at Centre Square, West Tower, Philadelphia, PA
19102-2112.
The names and principal occupations of the principal executive officers and each
director of Delaware, all located at One Commerce Square, Philadelphia, PA
19103, are listed below:
NAME AND POSITION WITH PRINCIPAL OCCUPATION/TITLE
DELAWARE
Jude T. Driscoll Investment Management, President & CEO
John C. E. Campbell Investment Management, President of Global
Institutional Sales
Patrick P. Coyne Investment Management, EVP, Managing Director Head
of Equity Investments
Philip N. Russo Investment Management, EVP, Chief Financial
Officer, Chief Operating Officer
See Yeng Quek Investment Management, EVP, Managing Director,
Chief Investment Officer Fixed Income
Investments
Kevin J. Lucey Investment Management, EVP, Chief of Sales,
Client Services & Marketing
Richelle S. Maestro Investment Management, EVP, General
Counsel/Secretary
Carolyn McIntyre Investment Management, SVP, Head of
Human Resources
Ryan Brist Investment Management, EVP, Managing Director
Fixed Income
Brian Murray Investment Management, SVP, Chief Compliance Officer
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The following information was provided by Delaware regarding the FRIC Select
Growth Fund, SIIT Large Cap Growth Fund, SIMT Tax Managed Large Company Fund,
SEI Investment US Large Company Equity Fund, SGIF Large Company Growth Fund
Ireland, Wilshire Standard Life, Russell Integritas, Lincoln Large
Capitalization Equity Fund and Delaware's U.S. Growth Mutual Fund, for which
Delaware's affiliate acts as investment adviser or sub-adviser and which have
investment objectives similar to that of the Large Company Growth Portfolio:
- --------------------------------------------- --------------------------------------- -----------------------------------
FUND FEE RATE NET ASSETS AS OF 6/30/05
- --------------------------------------------- --------------------------------------- -----------------------------------
0.35% bps on first $500mm; 0.30% bps $24,416,262
FRIC Select Growth on the balance
- --------------------------------------------- --------------------------------------- -----------------------------------
SIIT Large Cap Growth Fund 0.20% bps $1,070,143,072
- --------------------------------------------- --------------------------------------- -----------------------------------
SIMT Tax Managed Large Company Fund 0.20% bps $237,005,921
- --------------------------------------------- --------------------------------------- -----------------------------------
SEI Investment US Large Company Equity Fund 0.20% bps $77,733,456
- --------------------------------------------- --------------------------------------- -----------------------------------
SGIF Large Company Growth Fund Ireland 0.20% bps $164,285,216
- --------------------------------------------- --------------------------------------- -----------------------------------
Wilshire Standard Life 0.325% bps on first (pound)250 mm; $30,072,206
0.300% bps on next (pound)250 mm;
0.250% bps on next (pound)250 mm;
0.200% bps on the balance
- --------------------------------------------- --------------------------------------- -----------------------------------
Russell Integritas 0.35% bps on first $500mm; 0.30% bps $30,072,206
on balance
- --------------------------------------------- --------------------------------------- -----------------------------------
Lincoln Large Capitalization Equity 0.38% bps $310,506,775
- --------------------------------------------- --------------------------------------- -----------------------------------
Delaware's U.S. Growth Mutual Fund 0.65% bps (mgmt fee)/ 1.05% bps (net $260,883,971
expense ratio) 1
- --------------------------------------------- --------------------------------------- -----------------------------------
1 Delaware has contracted to waive fees and pay expenses through April 30,
2005 in order to prevent total operating expenses (excluding any taxes,
interest, brokerage fees, extraordinary expenses, 12b-1 fees and certain
insurance costs) from exceeding 0.75% of average daily net assets.
GENERAL INFORMATION
The principal executive offices of the Company and Wilshire are located at 1299
Ocean Avenue, Suite 700, Santa Monica, CA 90401. The Company's administrator and
transfer and dividend disbursing agent is PFPC Inc., 760 Moore Road, King of
Prussia, Pennsylvania 19406. The Company's distributor is PPPC Distributors,
Inc., located at the same address. The Company's custodian is PFPC Trust
Company, located at 8800 Tinicum Boulevard, 3rd Floor, Philadelphia, PA 19153.
Counsel to Company and the Independent Directors is Paul, Hastings, Janofsky &
Walker LLP, 515 South Flower Street, Los Angeles, California 90071.
THE COMPANY WILL FURNISH, WITHOUT CHARGE, A COPY OF THE MOST RECENT ANNUAL
REPORT AND SEMI-ANNUAL REPORT TO STOCKHOLDERS OF THE COMPANY UPON REQUEST.
REQUESTS FOR SUCH REPORTS SHOULD BE DIRECTED TO WILSHIRE MUTUAL FUNDS, INC., C/O
PFPC INC., P.O. BOX 9807, PROVIDENCE, RHODE ISLAND 02940, OR BY CALLING
1-888-200-6796.
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APPENDIX A
STOCKHOLDERS OWNING BENEFICIALLY OR OF RECORD MORE THAN 5%
OF THE LARGE COMPANY GROWTH PORTFOLIO
INVESTMENT CLASS SHARES
- -------------------------------------------------------------------------------
PERCENTAGE OF SHARES OWNED
STOCKHOLDER NAME AND ADDRESS AS OF JUNE 30, 2005
- -------------------------------------------------------------------------------
Charles Schwab & Co. 69.86%
Attn: Mutual Funds
Reinvest Account
101 Montgomery Street
San Francisco, CA 94104
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STOCKHOLDERS OWNING BENEFICIALLY OR OF RECORD MORE THAN 5%
OF THE LARGE COMPANY GROWTH PORTFOLIO
INSTITUTIONAL CLASS SHARES
- ------------------------------------------------------------------------------
PERCENTAGE OF SHARES OWNED
STOCKHOLDER NAME AND ADDRESS AS OF JUNE 30, 2005
- ------------------------------------------------------------------------------
Charles Schwab & Co. 26.79%
Attn: Mutual Funds
Reinvest Account
101 Montgomery Street
San Francisco, CA 94104
- ------------------------------------------------------------------------------
Horace Mann Life Insurance Company 13.63%
1 Horace Mann Plaza
Springfield, IL 62715
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State Street Bank Trust 5.72%
200 Newport Ave.
North Quincy, MA 02171
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Fireco 5.27%
101 N. Broadway Ave, Suite 300
Oklahoma City, OK 73126
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A-1