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PROSPECTUS
WILSHIRE TARGET FUNDS, INC.
LARGE COMPANY GROWTH PORTFOLIO
WILSHIRE 5000 INDEX PORTFOLIO
HORACE MANN LIFE INSURANCE COMPANY
May 1, 2000
Institutional Shares
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PROSPECTUS W I L S H I R E MAY 1, 2000
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TARGET FUNDS, INC.
INSTITUTIONAL CLASS SHARES
WILSHIRE LARGE COMPANY GROWTH PORTFOLIO
WILSHIRE 5000 INDEX PORTFOLIO
(HTTP://WWW.WILFUNDS.COM)
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TABLE OF CONTENTS PAGE
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Introduction..................................... 2
Investment and Risk Summary...................... 2
Main Investment Strategies..................... 2
Who May Want to Invest in the Portfolios....... 2
Main Investment Risks.......................... 3
Performance Information.......................... 3
More Information about Investments and Risks..... 3
Management of the Portfolios..................... 4
Investment Adviser............................. 4
Purchase and Redemption of Shares.............. 5
Pricing of Shares.............................. 5
Dividend and Distribution Information............ 5
Tax Information.................................. 5
Financial Highlights............................. 6
</TABLE>
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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.
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INTRODUCTION
This prospectus describes the following Portfolios offered as corresponding
subaccounts of the Horace Mann Life Insurance Company ("HMLIC") Separate
Account:
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- - Large Company INVESTMENT OBJECTIVE: to provide
Growth investment results of a portfolio
Portfolio of publicly traded common stocks
of companies in the large company
growth segment of the Wilshire
5000 Index (referred to as the
Index in this prospectus). This
Portfolio is not an index fund and
is called the Style Portfolio in
this prospectus.
- - Wilshire 5000 INVESTMENT OBJECTIVE: to
Index replicate as closely as possible
Portfolio 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.
</TABLE>
HMLIC created the subaccounts to fund combination variable annuity contracts
("Contracts"). As a Contract owner, your premium payments may be allocated to
one or more subaccounts in accordance with your Contract, including the two
Portfolios offered by this prospectus.
Neither Portfolio's investment goal may be changed without approval of the
Portfolio's shareholders in accordance with the Investment Company Act of 1940.
Neither Portfolio is guaranteed to meet its goal.
On the following pages you will find important information about each
Portfolio, 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
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 June 30, 1999.
- 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
The 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. 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.
WHO MAY WANT TO INVEST IN THE PORTFOLIOS
Large Company Growth 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 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.
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Wilshire 5000 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 a traditional 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. Because the Wilshire 5000 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 may be a less volatile investment
than the Large Company Growth Portfolio.
PERFORMANCE 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
Institutional 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.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
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TOTAL
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Return
1997 32.44%
1998 40.84%
1999 34.31%
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During the period shown in the bar chart, the highest return for a quarter
was 25.39% for the quarter ended December 31, 1999 and the lowest return for a
quarter was (7.90%) for the quarter ended September 30, 1999.
AVERAGE ANNUAL TOTAL RETURNS
(FOR THE PERIODS ENDED DECEMBER 31, 1999)
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SINCE
1 YEAR INCEPTION*
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Large Company Growth Portfolio..... 34.31% 37.51%
Wilshire 5000 Index................ 23.43% --
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* Inception date (commencement of investment
operations): Institutional Class - July 15, 1996
WILSHIRE 5000 INDEX PORTFOLIO
There is no performance history for the Index Portfolio since it had been
operating for less than one year as of December 31, 1999.
A NOTE ON FEES
As an investor in the Portfolio, you will incur various operating costs,
including management expenses. You also will incur fees associated with the
Contracts which you purchase. Detailed information about the cost of investing
in a Portfolio is presented in the "Table of Annual Operating Expenses" section
of the accompanying prospectus for the Contracts through which Portfolio shares
are offered to you.
MORE INFORMATION ABOUT INVESTMENTS AND RISKS
LARGE COMPANY GROWTH PORTFOLIO
As a Style Portfolio, the Portfolio offers focused exposure to the large
company growth segment of the U.S. market. The Portfolio owns only securities
which correspond to that style. The Portfolio is described in more detail below.
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.
The remaining companies were less than 3% of the total market value of the
stocks included in the Index.
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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 return on equity and higher price to earnings ratios.
The number of securities eligible for investment by the Portfolio at any
time varies, but generally ranges from 150 to 500 stocks.
To maintain a proper style exposure in the Portfolio, the Adviser changes
the Portfolio's holdings as companies' characteristics change. The Adviser sells
stocks that no longer meet the criteria for the Portfolio.
The Adviser tries to maintain a fully invested position in the Portfolio at
all times. This means that the Portfolio holds little uninvested cash, thus
ensuring that you receive the full benefit of any market advances.
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 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 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 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,
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 Wilshire 5000 Index Portfolio's
performance may not match the Index exactly. Unlike the Index, the Wilshire 5000
Index Portfolio incurs administrative expenses and transaction costs in trading
stocks. The Wilshire 5000 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
Wilshire 5000 Index Portfolio may not track exactly the performance of the
stocks held in the Index.
STYLE RISK. Another risk of investing in the Large Company Growth 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.
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 February 29, 2000, managed approximately
$9.45 billion in assets. Wilshire makes all investment decisions for the
Portfolios.
The Portfolios paid Wilshire the advisory fees shown below during the last
fiscal year. Wilshire has agreed to reimburse expenses for the Wilshire 5000
Index Portfolio to cap its expenses at 0.35% until September 30, 2000. Wilshire
may recoup the amounts of such fee waivers and expense reimbursements for
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any year in the following two-year period but only if the repayment would not
increase the Portfolio's expense ratio in the year paid above 0.35%.
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MANAGEMENT FEE
AS A % OF AVERAGE
DAILY NET ASSETS
PORTFOLIO OF THE PORTFOLIO
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Large Company Growth Portfolio 0.25%
Wilshire 5000 Index Portfolio 0.00%
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Thomas D. Stevens is the primary portfolio manager as well as the President
and Chairman of Wilshire Target Funds, Inc. 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.
PURCHASE AND REDEMPTION OF SHARES
You may invest in a Portfolio only by purchasing a combination fixed and
variable, qualified variable annuity contract (a "Contract") issued by Horace
Mann Life Insurance Company ("HMLIC"). Each Portfolio continuously offers its
shares to HMLIC's separate subaccounts at the net asset value per share next
determined after a proper purchase application has been received by HMLIC Home
Office at P.O. Box 4657, Springfield, Illinois 62708-4657. HMLIC offers to
owners of the Contracts ("Contract Owners") units in its separate subaccount
which directly correspond to shares in a Portfolio. HMLIC submits purchase and
redemption orders to each Portfolio based on allocation instructions for premium
payments, transfer instructions and surrender or partial withdrawal requests
which are furnished to HMLIC by such Contract Owners. A Portfolio redeems shares
from HMLIC's separate subaccounts at the net asset value per share next
determined after receipt of a redemption order from HMLIC.
THE ACCOMPANYING PROSPECTUS FOR HMLIC QUALIFIED VARIABLE ANNUITY CONTRACTS
DESCRIBES THE ALLOCATION, TRANSFER AND WITHDRAWAL PROVISIONS OF SUCH ANNUITY
CONTRACT.
PRICING OF SHARES
We calculate the net asset value per share of the Institutional class of
each Portfolio at the close of business on the New York Stock Exchange on each
business day. Net asset value per share of the Institutional class of shares is
calculated by adding the value of the individual securities held by a Portfolio
and attributable to the Institutional class, subtracting the liabilities of the
Institutional class, and dividing by the total number of the shares of the
Institutional 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, Inc.
DIVIDEND AND DISTRIBUTION INFORMATION
Each Portfolio distributes its dividends from its net investment income to
HMLIC's separate sub-subaccounts once each year and not to you, the Contract
Owner. These distributions are in the form of additional shares of stock and not
cash; the result is that a Portfolio's investment performance, including the
effect of dividends, is reflected in the cash value of the Contracts. Please see
the Contracts' prospectus accompanying this prospectus for more information. All
net realized long- or short-term capital gains of each Portfolio are also
declared once a year and reinvested in the Portfolio. There is no fixed dividend
rate, and there can be no assurance that a Portfolio will pay any dividends or
realize any capital gains.
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.
Federal tax regulations require that mutual funds that are offered through
insurance company separate accounts must meet certain diversification
requirements to preserve the tax-deferral benefits provided by the variable
contracts which are offered in connection with such separate accounts. The
Adviser intends to diversify each Portfolio's investments in accordance with
those requirements. The prospectuses for HMLIC's variable annuities describe the
federal income tax treatment of distributions from such contracts to Contract
Owners.
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FINANCIAL HIGHLIGHTS
The financial highlights tables are intended to help you understand the
financial performance of the Portfolios' Institutional class of shares for the
past five years (or for the period since a particular Portfolio began operations
or the Institutional class of shares was first offered). Information reflects
the financial performance of a single share. The total returns in each table
represent the rate that an investor would have earned or lost on an investment
in a Portfolio (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
Wilshire Target Funds, Inc.'s annual report, which is available on request.
LARGE COMPANY GROWTH PORTFOLIO
FOR A PORTFOLIO SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<TABLE>
<CAPTION>
INSTITUTIONAL CLASS SHARES
-------------------------------------------
YEAR ENDED AUGUST 31, PERIOD
------------------------------ ENDED
1999 1998 1997 8/31/96(1)
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Net asset value, beginning of period........................ $ 26.12 $ 23.91 $ 19.35 $ 18.27
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INCOME FROM INVESTMENT OPERATIONS:
Net investment income....................................... 0.03 0.08 0.05*** 0.01
Net realized and unrealized gain on investments............. 12.31 2.72 7.29 1.07
-------- ------- ------- -------
Total from investment operations............................ 12.34 2.80 7.34 1.08
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LESS DISTRIBUTIONS:
Dividends from net investment income........................ (0.04) (0.07) (0.05) --
Distributions from capital gains............................ (1.95) (0.52) (2.73) --
-------- ------- ------- -------
Total distributions......................................... (1.99) (0.59) (2.78) --
-------- ------- ------- -------
Net asset value, end of period.............................. $ 36.47 $ 26.12 $ 23.91 $ 19.35
======== ======= ======= =======
Total return (a)............................................ 48.81% 11.78% 40.99% 5.91%**
======== ======= ======= =======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's)........................ $ 72,773 $34,993 $41,881 $ 7,763
Operating expenses including reimbursement/waiver/custody
earnings credit............................................ 0.62% 0.60% 0.78% 0.91%*
Operating expenses excluding custody earnings credit........ 0.67% 0.62% 0.87% --%
Operating expenses excluding reimbursement/waiver/custody
earnings credit............................................ 0.67% 0.66% 1.06% 0.94%*
Net investment income including reimbursement/waiver/custody
earnings credit............................................ 0.18% 0.27% 0.23% 0.41%*
Portfolio turnover rate..................................... 35% 57% 43% 44%**
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* Annualized.
** Non-annualized.
*** The selected per share data was calculated using the weighted average shares
outstanding method for the year.
(1) Large Company Growth Portfolio Institutional Class commenced operations on
July 15, 1996.
(a) Total return represents aggregate total return for the period indicated.
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WILSHIRE 5000 INDEX PORTFOLIO
FOR A PORTFOLIO SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
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INSTITUTIONAL
CLASS SHARES
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PERIOD
ENDED
8/31/99(1)
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Net asset value, beginning of period........................ $ 10.00
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INCOME FROM INVESTMENT OPERATIONS:
Net investment income....................................... 0.03
Net realized and unrealized gain on investments............. 0.30
-------
Total from investment operations............................ 0.33
-------
Net asset value, end of period.............................. $ 10.33
=======
Total return (a)............................................ 3.30%**
=======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's)........................ $ 183
Operating expenses including reimbursement/waiver/custody
earnings credit............................................ 0.35%*
Operating expenses excluding custody earnings credit........ 0.48%*
Operating expenses excluding reimbursement/waiver/custody
earnings credit............................................ 1.32%*
Net investment income including reimbursement/waiver/custody
earnings credit............................................ 1.20%*
Portfolio turnover rate..................................... 4%**
</TABLE>
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* Annualized
** Non-annualized.
(1) The Wilshire 5000 Index Portfolio Institutional Class Shares commenced
operations on February 1, 1999.
(a) Total return represents aggregate total return for the period indicated.
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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 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, calling or e-mailing the Public Reference Room
of the Commission, Washington, D.C. 20549-0102, Telephone 1-202-942-8090 and
e-mail address is [email protected]
- - Free from the Commission's Internet web site at http://www.sec.gov.
(Investment Company Act File No. 811-7076)
