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Previous: PROVIDIAN SERIES TRUST, N-30D, 1997-09-02 |
Next: CASCO INTERNATIONAL INC, SB-2/A, 1997-09-02 |
<PAGE>
Cover
Picture
Up Close
Semi-Annual Report
June 30, 1997
Now's the time to increase your annuity contribution
Getting a raise?
Give your annuity a raise too!
Take a closer look at how your funds performed
Horace Mann Mutual Funds
<PAGE>
Contents
(Chart)
One year performance ending 6/30/97
<TABLE>
<S> <C>
Growth Fund 28.24%
Balanced Fund 21.54%
Income Fund 6.82%
Short-Term Fund 4.52%
Small Cap Growth Fund* 7.61%
International Equity Fund* 7.49%
Socially Responsible Fund* 11.79%
</TABLE>
For further information see page 5.
* Since inception 3/10/97.
(End of Chart)
EDITOR'S NOTE: Nothing in these articles should be construed as a promise or
guarantee of future performance. Investment decisions are very personal and
should take into account many individual factors. More complete information on
the funds can be found in the current prospectus.
This report must be preceded or accompanied by a current prospectus.
(Table of Contents)
Now's the time to increase your annuity contribution...................3
Pay yourself first.....................................................3
Increasing contributions makes good financial sense....................3
Increasing contributions has other advantages..........................3
It's easy to increase your contributions...............................4
Look at the advantages of a Horace Mann annuity........................4
How the Funds measure up...............................................5
Financial statements...................................................8
<PAGE>
Dear Shareholder:
Horace Mann is pleased to report the addition of three new funds to the
company's Family of Funds, for a total of seven. Horace Mann has added a Small
Cap Growth Fund, Socially Responsible Fund, and an International Equity Fund.
These new additions provide you with increased flexibility to accommodate your
investment planning needs.
All seven funds reported positive returns for the first half of 1997. The
performance of the three domestic equity funds, Growth, Small Cap, and Socially
Responsible, produced returns below their benchmarks in recent periods. However,
in terms of absolute return, performance has far out-paced inflation and has
been well above historical long-term equity return averages. The Income and
Balanced Funds also out-paced inflation during the first six months of the year.
The International Equity Fund provides investors the ability to diversify their
investments away from the United States and has out-paced inflation as well.
MARKET REVIEW
The domestic equity markets have continued to perform well for the first half of
1997, while domestic bonds have out-paced inflation. The performance of the
international equity markets has rebounded relative to recent history. Domestic
equity indices rose as companies reported strong corporate earnings, consumer
spending remained healthy, and unemployment is near 25-year lows. The
performance of domestic bonds has been positive for the first half of the year
even though interest rates have fluctuated. The international equity markets
performed well with Japan leading the way.
MARKET AND POLITICAL ISSUES
The market is in its seventh year of an economic expansion as inflation and
interest rates remained in check. Wellington Management Co., LLP one of the
Funds' investment advisors, expects inflation to remain near 2.5% over the next
12 months, close to its long-term sustainable growth rate. Both short- and
long-term interest rates are expected to remain in an upwardly biased trading
range as the Federal Reserve attempts to control inflation. Scudder, Stevens &
Clark, a new Funds' investment advisor, is expecting stronger growth from Europe
and Japan which should translate to better corporate profitability and upward
earnings revisions.
PERSPECTIVE
It is important to remember to take a long-term perspective when reviewing
investment market returns. Accumulating assets in excess of inflation should be
a component of everyone's retirement objectives. Horace Mann's Family of Funds
remains committed to its customers to provide sound investment vehicles to
assist you in achieving your financial objectives. Thank you for your continuing
confidence and support in the Horace Mann Family of Funds.
Sincerely,
George J. Zock
President & CEO
Horace Mann Mutual Funds
<PAGE>
Now's the time to increase your
annuity contributions
Though your Horace Mann retirement program continues to grow, are you sure your
retirement savings will meet your retirement goals? An increase today might help
put time on your side. You have many good reasons to increase your annuity
contributions now.
Pay yourself first
It may be extremely difficult for you to retire comfortably if you don't save as
much as possible now. A simple rule is to save at least 10 percent of your gross
income. When you receive pay raises, increase the amount you invest.
Additionally, the more money you contribute to a retirement plan now, the more
time your money has to work for you. Through the effects of compounding,
earnings from your investments can build substantially. That's why it's
important to contribute more to your account now - so that compounding and time
can work together to get the most from your investment.
(Graphic)
(Chart)
Increasing your contributions makes good financial sense
<TABLE>
<CAPTION>
Your additional retirement value at age 65
If your current And you increase your contribution at a conservative at an aggressive
age is: each September by:* investment of 6% investment of 10%
<S> <C> <C> <C>
25 $10 per pay $554,530 $1,221,618
30 $10 per pay $371,657 $ 719,459
35 $10 per pay $240,636 $ 412,819
40 $10 per pay $148,362 $ 227,581
45 $10 per pay $ 85,042 $ 117,723
50 $10 per pay $ 43,358 $ 54,671
</TABLE>
* Based on 26 pays per year
** Income taxes are deferred until money is withdrawn from your annuity
Increasing your contributions offers other advantages
- - You'll help offset the effects of inflation on your cost of living at
retirement.
- - Your retirement fund can help offset any changes to Social Security and
rising health care costs.
- - You can reduce your current taxable income.
- - You can diversify your investment by contributing to different funds.
- - You'll be less likely to outlive your retirement funds.
- - You'll have more money to do the things you want to do during your retirement.
(End of Chart)
<PAGE>
It's easy to increase your contributions
Get in the habit of gradually increasing your deposits to make your retirement
fund grow even more rapidly. To increase your annuity contribution, contact your
agent. If you do not have an agent, please call our Customer Service area at
1-800-999-1030 between 7 a.m. and 7 p.m. Central time, Monday through Friday.
We've also made it easy for you to reallocate or transfer money between our
funds. Talk to your agent or call Customer Service. Our annuity customer service
staff will take your request, and within a few days, send written confirmation
showing your changes.
(Chart)
Look at the advantages of a Horace Mann annuity
- - Flexibility with fixed and variable investment options
- - No front-end sales charges
- - TDA's offer a loan provision (not available in all states)
- - No surrender charges after five years (other penalties may apply)
- - Contributions and/or earnings can accumulate tax-deferred
- - Convenient transfers between investment options
- - The financial strength and stability of Horace Mann
(End of chart)
(Picture)
"The secret of getting ahead is getting started. The secret of getting started
is breaking your complex, overwhelming tasks into small, manageable tasks, and
then starting on the first one."
- Mark Twain
<PAGE>
How the Funds measure up
Average Annual Total Return
Horace Mann Annuity Alternatives Contracts
For Annuity Alternatives Contract Owners
Average annual total returns for the period ended June 30, 1997 for the Annuity
Alternatives contracts are shown in the following table. For contributions which
remained invested in an Annuity Alternatives contract, returns are shown in the
"Without Redemption" columns. For contracts which were surrendered, returns are
shown in the "With Redemption" columns. Redemption has no affect on the variable
account rates of return after the initial five-year contract period.
Returns are based on a $1,000 investment.
(Table)
<TABLE>
<CAPTION>
1 Year 1 Year 5 Years 10 Years Since Inception (1)
Without With With or Without With or Without With or Without
Redemption Redemption Redemption Redemption Redemption
<S> <C> <C> <C> <C> <C>
Variable Subaccount
Growth Fund 28.24 18.18 16.01 10.24 12.45
Balanced Fund 21.54 12.02 11.53 9.09 9.70
Income Fund 6.82 -1.53 2.90 4.71 4.10
Short-Term 4.52 -3.64 0.72 1.78 1.36
Investment Fund
</TABLE>
<TABLE>
<CAPTION>
Since Since
Inception(2) Inception(2)
Without With
Redemption Redemption
<S> <C> <C>
Small Cap Growth Fund 7.61 -0.80
International Equity Fund 7.49 -0.91
Socially Responsible Fund 11.79 1.95
(end of table)
</TABLE>
The average annual total rates of return assume contributions were made on the
first business day of the period indicated.
Total return measures the past performance of each fund subaccount and does not
represent the actual experience of investments made by a particular contract
owner. The total return and principal value of an account will fluctuate. The
value of an account may be worth more or less than its original cost, when
redeemed, depending upon market fluctuations.
Past performance does not guarantee future results of the subaccounts.
Total returns for the variable portion of the Annuity Alternatives contracts
include a reduction for fund expenses and contract charges of 1.35% annually for
mortality and expense risk. Annuity contracts issued prior to January 1984 have
mortality and expense charges or sales fees that differ from those of the
Annuity Alternatives contracts. Such other charges and fees do not exceed those
reflected in the table above.
Annuity Alternatives contracts requires a $25 annual maintenance charge on the
contract anniversary when the contract value is less than $10,000. This charge,
which is reflected in the returns above after the first contract year, has
reduced the total rates of return by 2.5% on a $1,000 investment or .5% on a
$5,000 investment.
<PAGE>
(continued from previous page)
During the first five contract years, redemption charges range from 2 to 8% for
the flexible premium contracts and 1 to 5% for single premium contracts. The
average annual total returns with redemption are calculated using flexible
premium redemption charges.
Commission credits were used to pay certain expenses of the Growth and Balanced
Funds from 1994 through June 30, 1997. Certain Balanced Fund expenses were
subsidized (assumed and/or waived) through 1987. Certain Income Fund expenses
have been subsidized (assumed and/or waived) through 1996. Certain Short-Term
Investment Fund expenses have been subsidized (assumed and/or waived) since
1983. Certain fund expenses have been subsidized (assumed and/or waived) for the
Small Cap Growth, International Equity, and Socially Responsible Funds since
their beginning, March 10, 1997. Subsidization and use of credits resulted in
higher actual returns of as much as 1%, depending on the period subsidized for
each fund. There is no guarantee that subsidization and use of credits will
continue in the future.
(Footnotes)
1 Since inception for the Growth, Balanced, Income, and Short-Term Investment
Funds refers to November 1, 1989, the date Wellington Management Company, LLP
became their investment adviser. Effective May 1, 1997, Wellington Management
Company, LLP became the Funds' subadviser.
2 Since inception for the Small Cap Growth, International Equity and Socially
Responsible Funds refers to its beginning date, March 10, 1997. The investment
subadivsers are PNC Equity Advisors Company for the Small Cap Growth Fund and
Scudder, Stevens & Clark, Inc. for the International Equity and Socially
Responsible Funds.
<PAGE>
How the Funds measure up
Average Annual Total Return
Horace Mann Mutual Funds
For Growth Fund Public Shareholders and Participants in the Horace Mann Employee
401(k) Plan
Total average annualized returns for the period ended June 30, 1997 for the
Horace Mann Mutual Funds and their comparable benchmark indices are shown in the
following table:
(table)
<TABLE>
<CAPTION>
1 Year 5 Years 10 Years Since Inception
<S> <C> <C> <C> <C>
Growth Fund 28.92 19.25 13.77 15.91(1)
S&P 500 Stock Index 34.70 19.78 14.66 16.55
Balanced Fund 22.22 14.80 12.47 13.12(1)
Stock/Bond 23.42 14.42 12.30 13.17
Composite(4)
Income Fund 7.50 6.21 8.09 7.47(1)
Lehman Intermediate/ 7.65 6.57 8.21 7.92
Aggregate (5)
Short-Term 5.21 4.12 5.41 4.91(1)
Investment Fund
90-day Treasury Bills 5.17 4.36 5.60 5.03
Small Cap Growth Fund - - - 5.50(2)
Russell 2000 Growth - - - 7.44
International Equity Fund - - - 5.40(3)
MSCI EAFE - - - 12.15
Socially Responsible - - - 9.70(3)
Fund
S&P 500 Stock Index - - - 9.40
(end of table)
</TABLE>
Returns of the Horace Mann Mutual Funds in the above table are shown net of fund
expenses. Commission credits were used to pay certain expenses of the Growth and
Balanced Funds from 1994 through June 30, 1997. Certain Balanced Fund expenses
were subsidized (assumed and/or waived) through 1987. Certain Income Fund
expenses have been subsidized (assumed and/or waived) through 1996. Certain
Short-Term Investment Fund expenses have been subsidized (assumed and/or waived)
since 1983. Certain fund expenses have been subsidized (assumed and/or waived)
for the Small Cap Growth, International Equity, and Socially Responsible Funds
since their beginning, March 10, 1997. Subsidization and use of credits resulted
in higher actual returns of as much as 1%, depending on the period subsidized
for each fund. There is no guarantee that subsidization and use of credits will
continue in the future.
<PAGE>
(continued from previous page)
The performance data quoted represents past performance, and does not guarantee
future results. The investment return and principal value of an investment will
fluctuate, and when redeemed, may be worth more or less than its original cost.
The benchmark indices indicated are unmanaged and have no expenses.
(Footnotes)
1 Since inception for the Growth, Balanced, Income, and Short-Term Investment
Funds refers to November 1, 1989, the date Wellington Management Company, LLP
became their investment adviser. Effective May 1, 1997, Wellington Management
Company, LLP became the Funds' subadviser.
2 Since inception for the Small Cap Growth Fund refers to its beginning date,
March 10, 1997. PNC Equity Advisors Company is the investment subadviser.
3 Since inception for the International Equity and Socially Responsible Funds
refers to their beginning date, March 10, 1997. Scudder, Stevens & Clark, Inc.
is their investment subadivser.
4 60% S&P 500, 40% Lehman Brothers Intermediate Government/Corporate Bond Index
through April 30, 1997, Lehman Brothers Aggregate Bond Index thereafter.
5 Lehman Brothers Intermediate Government/Corporate Bond Index through April 30,
1997, Lehman Brothers Aggregate Bond Index thereafter.
<PAGE>
Semiannual Report
June 30, 1997
Horace Mann Mutual Funds
Growth Fund
Balanced Fund
Income Fund
Short-Term Investment Fund
Small Cap Growth Fund
International Equity Fund
Socially Responsible Fund
Board of Trustees
A. Thomas Arisman
Larry K. Becker, Chairman of the Board
A.L. Gallop
Richard D. Lang
Edward L. Najim
Harriet A. Russell
George J. Zock, President
Officers
Ann Caparros
Secretary and
Ethics Compliance Officer
Roger Fisher
Controller
William J. Kelly
Treasurer and Regulatory
Compliance Officer
Investment Adviser and Manager
Horace Mann Investors, Inc.
#1 Horace Mann Plaza
Springfield, IL 62715
Investment Subadvisers
Wellington Management Company, LLP
75 State Street
Boston, MA 02109
PNC Equity Advisors Company
1600 Market Street
Philadelphia, PA 19103
<PAGE>
(continued from previous page)
Scudder, Stevens & Clark, Inc.
345 Park Avenue
New York, NY 10154-0010
Custodian
State Street Bank and Trust Company
225 Franklin Street
Boston, MA 02110
<PAGE>
HORACE MANN MUTUAL FUNDS 1997 Funds Semiannual Report (Unaudited)
Financial Highlights
June 30, 1997
PER-SHARE DATA
<TABLE>
<CAPTION>
Net Gains Less Distributions From:
Net Asset (Losses) on Total Income
Year Value, Net Securities - (Loss) From Net Net Net Asset
Ended Beginning Investment Realized and Investments Investment Realized Total Value End
12/31 of Period Income Unrealized/1/ Operations/1/ Income Gains Distributions of Period
<S> <C> <C> <C> <C> <C> <C> <C> <C>
GROWTH FUND/8/
06/30/97 $23.76 $0.21 $3.02 $3.23 $-- $-- $-- $26.99
1996 21.66 0.43 5.08 5.51 0.40 3.01 3.41 23.76
1995 17.64 0.52 5.41 5.93 0.49 1.42 1.91 21.66
1994 19.85 0.49 (0.57) (0.08) 0.45 1.68 2.13 17.64
1993 19.49 0.54 3.32 3.86 0.52 2.98 3.50 19.85
1992 19.15 0.53 1.31 1.84 0.51 0.99 1.50 19.49
1991 16.64 0.60 3.76 4.36 0.60 1.25 1.85 19.15
1990 18.88 0.70 (1.74) (1.04) 0.70 0.50 1.20 16.64
1989 17.30 0.56 4.58 5.14 0.62 2.94 3.56 18.88
1988 16.00 0.42 1.37 1.79 0.40 0.09 0.49 17.30
1987 21.29 0.50 0.74 1.24 0.51 6.02 6.53 16.00
BALANCED FUND/7//8/
06/30/97 $18.94 $0.31 $1.65 $1.96 $-- $-- $-- $20.90
1996 18.00 0.60 2.70 3.30 0.57 1.79 2.36 18.94
1995 15.26 0.67 3.46 4.13 0.61 0.78 1.39 18.00
1994 16.72 0.62 (0.81) (0.19) 0.55 0.72 1.27 15.26
1993 16.22 0.65 1.87 2.52 0.56 1.46 2.02 16.72
1992 15.91 0.66 0.68 1.34 0.59 0.44 1.03 16.22
1991 14.19 0.78 2.25 3.03 0.74 0.57 1.31 15.91
1990 15.10 0.86 (0.92) (0.06) 0.74 0.11 0.85 14.19
1989 13.48 0.77 2.77 3.54 0.70 1.22 1.92 15.10
1988 12.71 0.66 0.72 1.38 0.61 -- 0.61 13.48
1987 14.91 1.05 (1.20) (0.15) 2.05 -- 2.05 12.71
INCOME FUND/6//8/
06/30/97 $12.69 $0.39 $0.02 $0.41 $-- $-- $-- $13.10
1996 13.03 0.76 (0.31) 0.45 0.79 -- 0.79 12.69
1995 12.02 0.80 0.99 1.79 0.78 -- 0.78 13.03
1994 13.06 0.75 (1.04) (0.29) 0.75 -- 0.75 12.02
1993 12.95 0.82 0.23 1.05 0.75 0.19 0.94 13.06
1992 12.92 0.94 (0.01) 0.93 0.87 0.03 0.90 12.95
1991 12.26 1.12 0.71 1.83 1.17 -- 1.17 12.92
1990 12.35 1.14 (0.21) 0.93 1.02 -- 1.02 12.26
1989 11.64 1.04 0.75 1.79 0.96 0.12 1.08 12.35
1988 11.59 1.00 (0.11) 0.89 0.84 -- 0.84 11.64
1987 13.96 1.23 (1.32) (0.09) 2.28 -- 2.28 11.59
<CAPTION>
RATIO/SUPPLEMENTAL
DATA Ratio of Ratio of
Net Assets Expenses Net Income Portfolio
Total End of Period to Average to Average Turnover
Return/2//3/ (in millions) Net Assets Net Assets Rate
<C> <C> <C> <C> <C>
13.59% $523,968 0.27% 0.82% 25.22%
25.28 430,556 0.59 1.79 67.63
33.67 297,100 0.63 2.50 64.59
(0.35) 202,103 0.69 2.36 69.42
19.74 178,379 0.69 2.48 47.39
9.59 140,257 0.73 2.65 31.78
26.50 124,140 0.76 3.13 51.01
(5.48) 97,610 0.78 3.86 52.97
29.88 102,956 0.64 2.69 71.25
11.23 86,755 0.64 2.41 41.57
6.23 81,159 0.67 2.06 86.50
10.35% $349,699 0.26% 1.57% 43.50%
18.27 300,551 0.56 3.12 72.10
27.12 228,193 0.59 3.79 64.80
(1.12) 160,815 0.63 3.59 121.82
15.46 132,376 0.66 3.54 52.43
8.37 92,463 0.71 3.94 27.06
21.57 72,343 0.75 4.96 42.09
(0.41) 53,289 0.81 5.59 47.62
26.31 42,214 0.72 4.85 56.80
10.57 29,223 0.76 4.81 27.68
(0.87) 21,493 0.08 5.56 84.74
3.23% $9,893 0.44% 2.99% 55.74%
3.50 10,848 0.70 5.88 112.60
14.93 10,532 0.62 6.16 74.53
(2.21) 9,259 0.61 5.85 205.35
8.07 9,409 0.41 5.92 74.16
7.20 7,668 0.19 6.94 35.11
14.93 6,396 0.17 8.62 44.82
7.58 5,552 0.20 8.86 62.40
15.43 4,457 0.29 8.13 92.94
7.64 3,390 0.24 7.97 174.32
(0.62) 2,567 0.14 7.96 53.28
<CAPTION>
Ratio to Average Net Assets before
Waived and Reimbursed Expenses:
Average
Commissions Ratio of
Paid per Equity Ratio of Net Investment
Shares Traded/4/ Expenses/5/ Income/5/
<C> <C> <C>
$0.0582 -- --
0.0587 -- --
- -- -- --
- -- -- --
- -- -- --
- -- -- --
- -- -- --
- -- -- --
- -- -- --
- -- -- --
- -- -- --
$0.0586 -- --
0.0587 -- --
- -- -- --
- -- -- --
- -- -- --
- -- -- --
- -- -- --
- -- -- --
- -- -- --
- -- -- --
- -- 0.64% 5.00%
- -- 0.44% 2.99%
- -- 0.91 5.67
- -- 0.88 5.89
- -- 0.92 5.54
- -- 0.87 5.46
- -- 1.21 5.92
- -- 1.49 7.30
- -- 1.64 7.42
- -- 1.52 6.90
- -- 0.92 7.29
- -- 0.87 7.23
</TABLE>
<PAGE>
(Financial Highlights continued)
/1/The "Net Investment Income" per share and the "Net gains (losses) on
Securities - realized and unrealized" per share represent a proportionate share
respective to the increase in net assets as presented in the Statement of
Operations.
/2/The total return is determined by the ratio of ending net asset value to
beginning net asset value, adjusted for reinvestment of dividends from net
investment income and net realized capital gains.
/3/If you are an annuity contract owner, the above total return does not reflect
expenses that apply to the separate account or related policies. The inclusion
of these charges would reduce the total return figures for all periods shown.
/4/"Average Commission Paid per Equity Shares Traded" represents the average
brokerage commission paid on equity transactions entered into during the period
for trades where commissions were applicable. This disclosure is not applicable
for years beginning prior to December 31, 1995. The Income and Short-Term Funds
do not have equity transactions.
/5/Ratios of Expenses and Net Investment Income to Average Net Assets do not
reflect commission credits.
/6/Certain expenses for the Income and Short-Term Funds were assumed or waived
by Horace Mann Investors, Inc. through December 31, 1996 and through June 30,
1997, respectively. The investment advisory expenses for the Income and
Short-Term Funds were waived by CIGNA Investments from January 1, 1984 through
October 31, 1989.
/7/Expenses for the Balanced Fund were assumed or waived by Horace Mann
Investors, Inc. and CIGNA Investments through 1987.
/8/The Growth, Balanced, Income and Short-Term Funds' investment adviser was
changed effective November 1, 1989.
<PAGE>
HORACE MANN MUTUAL FUNDS 1997 FUNDS SEMIANNUAL REPORT (UNAUDITED)
Financial Highlights (concluded)
June 30, 1997
PER-SHARE DATA
<TABLE>
<CAPTION>
Net Gains Less Distributions From:
Net Asset (Losses) on Total Income
Year Value, Net Securities - (Loss) From Net Net Net Asset
Ended Beginning Investment Realized and Investments Investment Realized Total Value End
12/31 of Period Income Unrealized/1/ Operations/1/ Income Gains Distributions of Period
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SHORT-TERM FUND/6,8/
06/30/97 $10.03 $0.24 $0.01 $0.25 $-- $-- $-- $10.28
1996 10.00 0.50 (0.01) 0.49 0.46 -- 0.46 10.03
1995 10.08 0.53 -- 0.53 0.61 -- 0.61 10.00
1994 10.07 0.39 -- 0.39 0.38 -- 0.38 10.08
1993 10.09 0.26 -- 0.26 0.28 -- 0.28 10.07
1992 10.10 0.33 -- 0.33 0.34 -- 0.34 10.09
1991 10.37 0.61 -- 0.61 0.88 -- 0.88 10.10
1990 10.73 0.85 0.01 0.86 1.22 -- 1.22 10.37
1989 10.49 0.85 -- 0.85 0.60 0.01 0.61 10.73
1988 10.25 0.69 -- 0.69 0.45 -- 0.45 10.49
1987 11.17 0.65 -- 0.65 1.57 -- 1.57 10.25
SMALL CAP GROWTH FUND/9/
06/30/97 $10.00 $-- $0.55 $0.55 $-- $-- $-- $10.55
INTERNATIONAL EQUITY FUND/9/
06/30/97 $10.00 $0.09 $0.45 $0.54 $-- $-- $-- $10.54
SOCIALLY RESPONSIBLE FUND/9/
06/30/97 $10.00 $0.07 $0.90 $0.97 $-- $-- $-- $10.97
<CAPTION>
RATIO/SUPPLEMENTAL
DATA
Ratio of Ratio of Average
Net Assets Expenses Net Income Portfolio Commissions
Total End of Period to Average to Average Turnover Paid per Equity
Return/2,3/ (in millions) Net Assets Net Assets Rate Shares Traded/4/
<S> <C> <C> <C> <C> <C>
2.49% $1,386 0.26% 2.39% 0.00% --
5.02 1,229 0.53 4.93 0.00 --
5.25 1,006 0.84 5.11 0.00 --
3.89 1,114 0.49 3.78 0.00 --
2.53 1,110 0.61 2.56 0.00 --
3.30 1,131 0.51 3.16 0.00 --
5.93 1,076 0.43 5.88 0.00 --
7.89 1,195 0.38 7.57 0.00 --
8.27 1,175 0.46 7.83 0.00 --
6.74 1,140 0.37 6.50 0.00 --
5.80 852 0.21 5.68 0.00 --
5.50% $3,528 0.35% (0.06)% 15.36% $0.2507
5.40% $2,346 0.24% 0.94% 0.00% $0.3351
9.70% $2,093 0.27% 0.67% 0.50% $0.0299
<CAPTION>
Ratio to Average Net Assets before
Waived and Reimbursed Expenses:
Ratio of
Ratio of Net Investment
Expenses/5/ Income/5/
<C> <C>
1.06% 1.59%
2.44 3.02
2.35 3.60
2.36 1.91
2.42 0.75
3.44 0.23
4.45 1.86
4.46 3.49
3.29 5.00
1.48 5.39
1.53 4.36
0.56% (0.37)%
0.77% 0.41%
0.73% 0.21%
</TABLE>
/1/The "Net Investment Income" per share and the "Net gains (losses) on
Securities - realized and unrealized" per share represent a proportionate share
respective to the increase in net assets as presented in the Statement of
Operations.
/2/The total return is determined by the ratio of ending net asset value to
beginning net asset value, adjusted for reinvestment of dividends from net
investment income and net realized capital gains.
/3/If you are an annuity contract owner, the above total return does not reflect
expenses that apply to the separate account or related policies. The inclusion
of these charges would reduce the total return figures for all periods shown.
/4/"Average Commission Paid per Equity Shares Traded" represents the average
brokerage commission paid on equity transactions entered into during the period
for trades where commissions were applicable. This disclosure is not applicable
for years beginning prior to December 31, 1995. The Income and Short-Term Funds
do not have equity transactions.
/5/Ratios of Expenses and Net Investment Income to Average Net Assets do not
reflect commission credits.
/6/Certain expenses for the Income and Short-Term Funds were assumed or waived
by Horace Mann Investors, Inc. through December 31, 1996 and through June 30,
1997, respectively. The investment advisory expenses for the Income and
Short-Term Funds were waived by CIGNA Investments from January 1, 1984 through
October 31, 1989.
/7/Expenses for the Balanced Fund were assumed or waived by Horace Mann
Investors, Inc. and CIGNA Investments through 1987.
/8/The Growth, Balanced, Income and Short-Term Funds' investment adviser was
changed effective November 1, 1989.
/9/Certain expenses for the Small Cap Growth, International Equity and Socially
Responsible Funds were assumed and/or waived by Horace Mann Investors since
their beginning, March 10, 1997.
11
<PAGE>
HORACE MANN MUTUAL FUNDS 1997 FUNDS SEMIANNUAL REPORT (UNAUDITED)
(pie chart)
Cash & Short-Term Investments 2.6%
Common Stocks 97.4%
<TABLE>
<CAPTION>
Statement of Investments
Horace Mann Growth Fund
June 30, 1997
Number Market
of Shares (000)
<S> <C> <C>
COMMON STOCKS
Aerospace/Defense 8.02%
Boeing Co. 235,600 $12,501
Gulfstream Aerospace Corp.* 97,400 2,873
Northrop Grumman Corp. 215,800 18,950
Precision Castparts Corp. 128,800 7,680
42,004
Auto/Accessories 2.96%
Goodyear Tire & Rubber Co. (The) 245,300 15,531
Banks/Financial Services 6.28%
BankAmerica Corp. 112,800 7,283
Chase Manhattan Corp. 24,000 2,329
Citicorp 67,365 8,122
First Union Corp. 49,900 4,616
MoneyGram Payment Systems, Inc.* 3,200 50
Morgan Stanley, Dean Witter, Discover & Co. 78,800 3,393
National City Corp. 135,400 7,108
32,901
Business Services 2.79%
Fluor Corporation 136,000 7,505
Foster Wheeler Corp. 162,300 6,573
Ikon Office Solutions Inc. 21,600 539
14,617
Chemicals 6.64%
Air Products & Chemicals, Inc. 124,300 10,099
Ferro Corp. 98,500 3,651
Geon Co. 70,100 1,420
IMC Global Inc. 330,900 11,581
Nalco Chemical Co. 207,600 8,019
34,770
Communications 3.94%
AT & T Corp. 170,000 5,961
NYNEX Corp. 102,600 5,912
SBC Communications Inc. 142,000 8,786
20,659
Consumer Staples 4.16%
Flowers Industries, Inc. 439,950 7,397
Kimberly-Clark Corp. 222,600 11,074
Universal Corp. (Va.) 104,000 3,302
21,773
Energy 6.39%
Ashland Inc. 20,000 927
Enron Oil & Gas Co. 210,900 3,822
Noble Drilling Corp.* 332,700 7,507
Seagull Energy Corp.* 212,000 3,710
Union Texas Petroleum Holdings Inc. 322,900 6,761
USX-Marathon Group 371,900 10,739
33,466
Entertainment Products 2.96%
Brunswick Corp. 218,800 6,837
Eastman Kodak Co. 113,200 8,688
15,525
</TABLE>
See notes to the financial statements.
<PAGE>
HORACE MANN MUTUAL FUNDS 1997 FUNDS SEMIANNUAL REPORT (UNAUDITED)
Statement of Investments (continued)
Horace Mann Growth Fund
June 30, 1997
<TABLE>
<CAPTION>
(Common Stocks continued) Number of Market
Shares (000)
<S> <C> <C>
Health Care/Pharmaceuticals 8.56%
Baxter International Inc. 100,400 $5,246
Columbia/HCA Healthcare Corp. 89,600 3,522
DePuy, Inc.* 168,300 3,871
Mallinckrodt, Inc. 292,100 11,100
Pharmacia & Upjohn Inc. 308,800 10,731
Value Health, Inc.* 295,400 5,982
Wellpoint Health Networks, Inc. - A* 96,100 4,409
44,861
Information Technology/Equipment 5.16%
Harris Corp. (Del.) 70,000 5,880
International Business Machines Corp. 186,800 16,847
Seagate Technology, Inc.* 122,700 4,317
27,044
Insurance 7.84%
Aetna Inc. 32,000 3,276
Allstate Corp. 231,890 16,928
Chubb Corp. 131,200 8,774
NAC Re Corp. 115,300 5,578
Travelers Group, Inc. 103,200 6,508
41,064
Manufacturing (Diversified) 6.28%
Caterpillar Inc. 51,100 5,487
Cooper Industries Inc. 86,900 4,323
Deere & Co. 261,200 14,333
JLK Direct Distribution Inc. - A* 1,900 49
Kennametal Inc. 64,700 2,782
Minnesota Mining & Mfg Co. 22,300 2,275
New Holland NV 133,500 3,654
32,903
Metals & Mining 5.86%
Alcan Aluminum Ltd. 137,300 4,762
Alumax Inc.* 168,900 6,408
Aluminum Co. of America 167,000 12,588
Phelps Dodge Corp. 81,800 6,968
30,726
Paper & Forest Products 2.05%
Mead Corp. 145,200 9,039
Sonoco Products Co. 56,200 1,711
10,750
Retail/Apparel 6.36%
May Department Stores Co. 141,900 6,705
Penney (J.C.) Co., Inc. 102,800 5,365
Rite-Aid Corp. 128,000 6,384
The Sports Authority, Inc.* 34,100 658
Tommy Hilfiger Corp.* 157,000 6,309
Toys "R" Us, Inc.* 143,900 5,036
Wal-Mart Stores, Inc. 84,000 2,840
33,297
Transportation/Travel 5.03%
America West Holdings Corp. - B* 308,500 4,473
Canadian National Railway Co. 53,000 2,319
CSX Corp. 123,400 6,849
Delta Air Lines, Inc. 47,300 3,879
Pittston Burlington Group 110,650 3,112
Ryder Systems, Inc. 173,500 5,725
26,357
</TABLE>
See notes to the financial statements.
<PAGE>
HORACE MANN MUTUAL FUNDS 1997 FUNDS SEMIANNUAL REPORT
Statement of Investments (concluded)
Horace Mann Growth Fund
June 30, 1997
<TABLE>
<CAPTION>
(Common Stocks concluded) Number of Market
Shares (000)
<S> <C> <C>
Utilities/Electric & Gas 6.15%
Central & South West Corp. 204,000 $4,335
Equitable Resources, Inc. 170,700 4,844
GPU, Inc. 174,400 6,257
Illinova Corp. 168,400 3,705
MCN Energy Group Inc. 213,900 6,551
New England Electric System 117,100 4,333
New York State Electric & Gas Corp. 107,000 2,234
32,259
Total Common Stocks 97.43% $510,507
(Cost $345,826)
<CAPTION>
SHORT-TERM INVESTMENTS Principal
Amount Market
<S> <C> <C>
Repurchase Agreement (000) (000)
Lehman Brothers
6.00%, 07/01/97, (secured
by $17,877,057 US Treasury
Strip, 08/15/14) $17,179 $17,179
Total Short-Term Investments 3.28% 17,179 17,179
(Cost $17,179)
Total Investments 100.71% 527,686
(Cost $428,051)
Liabilities in Excess of
Cash and Other Assets (0.71)% (3,718)
Net Assets 100.00% $523,968
</TABLE>
* Non-income producing during the six months ended June 30, 1997.
See notes to the financial statements.
<PAGE>
HORACE MANN MUTUAL FUNDS 1997 FUNDS SEMIANNUAL REPORT (UNAUDITED)
(pie chart)
U.S. and Foreign Corporate Bonds/Notes 9.8%
Cash & Short-Term Investments 2.0%
Municipal Bonds 0.7%
U.S. & Foreign Government & Agency Obligations 21.2%
Common Stock 66.3%
<TABLE>
<CAPTION>
Statement of Investments
Horace Mann Balanced Fund
June 30, 1997
Number of Market
Shares (000)
<S> <C> <C>
COMMON STOCKS
Aerospace/Defense 5.28%
Boeing Co. 101,800 $5,402
Gulfstream Aerospace Corp.* 47,500 1,401
Northrop Grumman Corp. 94,600 8,307
Precision Castparts Corp. 56,400 3,363
18,473
Auto/Accessories 2.04%
Goodyear Tire & Rubber Co. (The) 112,500 7,123
Banks/Financial Services 4.43%
BankAmerica Corp. 54,600 3,525
Chase Manhattan Corp. 12,000 1,165
Citicorp 30,659 3,696
First Union Corp. 23,300 2,155
MoneyGram Payment Systems, Inc.* 600 10
Morgan Stanley, Dean Witter, Discover & Co. 38,200 1,645
National City Corp. 62,900 3,302
15,498
Business Services 1.85%
Fluor Corporation 62,800 3,466
Foster Wheeler Corp. 68,200 2,762
Ikon Office Solutions Inc. 9,800 244
6,472
Chemicals 4.62%
Air Products & Chemicals, Inc. 60,900 4,948
Ferro Corp. 49,600 1,838
Geon Co. 33,700 682
IMC Global Inc. 148,600 5,201
Nalco Chemical Co. 90,000 3,476
16,145
Communications 2.57%
AT & T Corp. 77,900 2,731
NYNEX Corp. 45,800 2,639
SBC Communications Inc. 58,300 3,607
8,977
Consumer Staples 3.03%
Flowers Industries, Inc. 226,200 3,803
Kimberly-Clark Corp. 104,800 5,214
Universal Corp. (Va.) 49,100 1,559
10,576
</TABLE>
See notes to the financial statements.
<PAGE>
HORACE MANN MUTUAL FUNDS 1997 FUNDS SEMIANNUAL REPORT (UNAUDITED)
<TABLE>
<CAPTION>
Statement of Investments (continued)
Horace Mann Balanced Fund
June 30, 1997
(Common Stocks continued) Number of Market
Shares (000)
<S> <C> <C>
Energy 4.71%
Ashland Inc. 10,000 $ 464
Enron Oil & Gas Co. 102,100 1,851
Noble Drilling Corp.* 162,200 3,660
Seagull Energy Corp.* 104,300 1,825
Union Texas Petroleum Holdings Inc. 152,900 3,201
USX-Marathon Group 189,100 5,460
16,461
Entertainment Products 1.98%
Brunswick Corp. 100,100 3,128
Eastman Kodak Co. 49,600 3,807
6,935
Health Care/Pharmacueticals 5.87%
Baxter International Inc. 37,800 1,975
Columbia/HCA Healthcare Corp. 44,500 1,749
DePuy, Inc.* 84,300 1,939
Mallinckrodt, Inc. 130,500 4,959
Pharmacia & Upjohn Inc. 142,200 4,942
Value Health, Inc.* 146,600 2,969
Wellpoint Health Networks, Inc. - A* 43,100 1,977
20,510
Information Technology/Equipment 3.16%
Harris Corp. (Del.) 27,800 2,335
International Business Machines Corp. 75,200 6,782
Seagate Technology, Inc.* 55,200 1,942
11,059
Insurance 5.56%
Aetna Inc. 15,800 1,618
Allstate Corp. 108,002 7,884
Chubb Corp. 60,800 4,066
NAC Re Corp. 57,200 2,767
Travelers Group, Inc. 49,400 3,115
19,450
Manufacturing (Diversified) 4.38%
Caterpillar Inc. 23,300 2,502
Cooper Industries Inc. 42,400 2,109
Deere & Co. 117,800 6,464
JLK Direct Distribution Inc. - A* 800 21
Kennametal Inc. 29,400 1,264
Minnesota Mining & Mfg Co. 11,300 1,153
New Holland NV 66,200 1,812
15,325
Metals & Mining 3.99%
Alcan Aluminum Ltd. 63,800 2,213
Alumax Inc.* 77,600 2,944
Aluminum Co. of America 74,600 5,623
Phelps Dodge Corp. 37,400 3,186
13,966
Paper & Forest Products 1.36%
Mead Corp. 64,200 3,997
Sonoco Products Co. 24,700 752
4,749
</TABLE>
See notes to the financial statements.
<PAGE>
HORACE MANN MUTUAL FUNDS 1997 FUNDS SEMIANNUAL REPORT (UNAUDITED)
<TABLE>
<CAPTION>
Statement of Investments (continued)
Horace Mann Balanced Fund
June 30, 1997
(Common Stocks concluded) Number of Market
Shares (000)
<S> <C> <C>
Retail/Apparel 4.26%
May Department Stores Co. 65,300 $3,085
Penney (J.C.) Co., Inc. 43,400 2,265
Rite-Aid Corp. 56,000 2,793
The Sports Authority, Inc.* 15,400 297
Tommy Hilfiger Corp.* 70,300 2,825
Toys "R" Us, Inc.* 65,600 2,296
Wal-Mart Stores, Inc. 40,000 1,353
14,914
Transportation/Travel 3.17%
America West Holdings Corp. - B* 137,200 1,989
Canadian National Railway Co. 27,100 1,186
CSX Corp. 55,400 3,075
Delta Air Lines, Inc. 14,400 1,181
Pittston Burlington Group 38,600 1,086
Ryder Systems, Inc. 77,600 2,561
11,078
Utilities/Electric & Gas 4.08%
Central & South West Corp. 89,000 1,891
Equitable Resources, Inc. 76,600 2,174
GPU, Inc. 74,400 2,669
Illinova Corp. 55,300 1,217
MCN Energy Group Inc. 99,500 3,047
New England Electric System 56,300 2,083
New York State Electric & Gas Corp. 56,700 1,184
14,265
Total Common Stocks 66.34% $231,976
(Cost $184,089)
<CAPTION>
Principal
Amount Market
(000) (000)
<S> <C> <C>
U.S. AND FOREIGN GOVERNMENT
AND AGENCY OBLIGATION
Treasury Bonds/Notes
6.50%, 10/15/06 $3,000 $2,987
10.375%, 11/15/09 5,000 6,077
12.00%, 08/15/13 10,000 14,077
AGENCIES
Federal Home Loan Mortgage Corporation
7.84%, 06/09/06 1,500 1,515
Federal National Mortgage Association
7.850%, 09/10/04 1,000 1,022
7.840%, 06/09/06 300 303
7.790%, 09/27/06 1,000 1,009
Private Export Fdg Corp.
7.30%, 01/31/02 8,000 8,235
Federal Home Loan Mortgage Corporation
(Mortgage Backed Securities)
9.50%, 07/01/01 7 7
9.50%, 08/01/01 5 6
9.50%, 09/01/01 11 11
9.50%, 10/01/01 23 24
8.50%, 06/01/02 17 17
</TABLE>
See notes to the financial statements.
<PAGE>
HORACE MANN MUTUAL FUNDS 1997 FUNDS SEMIANNUAL REPORT (UNAUDITED)
Statement of Investments (continued)
Horace Mann Balanced Fund
June 30, 1997
<TABLE>
<CAPTION>
(U.S. & Foreign Government and Agency Obligations Principal
continued) Amount Market
(000) (000)
<S> <C> <C>
9.25%, 11/01/02 $26 $28
8.25%, 10/01/07 63 65
8.25%, 11/01/07 68 69
8.75%, 05/01/08 63 66
8.50%, 08/01/08 83 86
9.00%, 09/01/08 70 74
8.00%, 09/01/09 58 60
8.00%, 04/01/10 70 72
7.00%, 09/01/10 22 22
7.00%, 10/01/10 131 132
7.00%, 12/01/10 129 130
7.00%, 01/01/11 2,410 2,413
7.00%, 02/01/11 3,106 3,108
6.50%, 03/01/11 4,525 4,443
7.00%, 03/01/11 5,719 5,719
7.00%, 04/01/11 1,803 1,803
7.00%, 07/01/11 1,395 1,394
Federal National Mortgage Association
(Mortgage Backed Securities)
8.00%, 07/01/98 92 93
8.75%, 02/01/10 331 346
10.25%, 07/01/13 34 36
8.00%, 08/01/14 1,413 1,455
8.50%, 09/01/14 735 770
8.50%, 01/01/15 619 648
8.50%, 03/01/15 564 587
7.50%, 10/01/22 979 986
7.50%, 01/01/23 866 874
7.50%, 07/01/23 366 370
7.50%, 04/01/24 577 580
7.50%, 05/01/24 182 184
7.50%, 06/01/24 461 464
7.50%, 08/01/24 618 621
7.50%, 09/01/24 810 814
7.50%, 10/01/24 634 638
7.50%, 02/01/25 157 158
7.50%, 04/01/25 1,174 1,181
Government National Mortgage Association
(Mortgage Backed Securities)
11.00%, 12/15/00 33 35
9.50%, 08/20/01 42 44
9.50%, 10/20/01 39 41
9.50%, 07/20/02 56 59
9.50%, 12/20/02 52 56
9.50%, 01/20/03 29 30
9.50%, 02/20/03 39 41
9.50%, 05/20/03 66 70
9.50%, 08/20/03 64 68
9.50%, 09/20/03 102 108
9.50%, 11/20/03 41 43
9.50%, 09/20/04 28 30
8.25%, 05/15/06 115 119
12.00%, 03/15/15 37 42
8.50%, 01/15/20 40 42
8.50%, 02/15/21 245 258
8.50%, 06/15/21 155 163
</TABLE>
See notes to the financial statements.
<PAGE>
HORACE MANN MUTUAL FUNDS 1997 FUNDS SEMIANNUAL REPORT (UNAUDITED)
Statement of Investments (continued)
Horace Mann Balanced Fund
June 30, 1997
<TABLE>
<CAPTION>
(U.S. & Foreign Government and Agency Obligations Principal
concluded) Amount Market
(000) (000)
<S> <C> <C>
8.50%, 08/15/21 20 21
8.00%, 05/20/22 484 496
8.50%, 04/15/23 254 266
Collateralized Mortgage Obligation
(Planned Amortization Class)(Note 3)
FNMA 1993-182 Class H
5.00%, 09/25/23 1,709 1,540
Foreign (U.S. dollar denominated)
Province of Quebec
7.00%, 01/30/07 1,500 1,486
Republic of Argentina
11.375%, 01/30/17 1,500 1,669
Republic of Columbia
7.625%, 02/15/07 1,500 1,464
Total U.S. and Foreign Government and
Agency Obligations 21.15% $68,366 $73,970
(Cost $73,531)
MUNICIPAL BONDS
Horry Cnty Sc Arpt Rev
7.38%, 07/01/12 1,450 1,451
Oxnard Calif Un High Sch Dist
7.78%, 08/01/17 1,000 1,032
Total Municipal Bonds 0.71% $2,450 $2,483
(Cost $2,481)
U.S. AND FOREIGN
CORPORATE BONDS/NOTES
Advanced Micro Devices Inc.
11.00%, 08/01/03 250 278
AK Steel Corp.
9.125%, 12/15/06 250 255
AMR Corp.
9.00%, 09/15/16 750 824
Amtrol Inc.
10.625%, 12/31/06 140 145
Astor Corp.
10.50%, 10/15/06 150 162
Bankers Trust NY Corp.
8.25%, 05/01/05 1,500 1,591
Banponce Corp.
6.75%, 12/15/05 1,460 1,413
Bell & Howell Co. (New)
0.00%, 03/01/05 250 200
Beneficial Corp.
12.875%, 08/01/13 261 291
Big Flower Press
10.75%, 08/01/03 120 127
Boeing Co.
6.35%, 06/15/03 750 734
BWay Corp.
10.25%, 04/15/07 25 27
Cablevision Systems Corp.
9.25%, 11/01/05 150 154
</TABLE>
See notes to the financial statements.
<PAGE>
HORACE MANN MUTUAL FUNDS 1997 FUNDS SEMIANNUAL REPORT (UNAUDITED)
Statement of Investments (continued)
Horace Mann Balanced Fund
June 30, 1997
<TABLE>
<CAPTION>
(U.S. & Foreign Corporate Bonds/Notes continued) Principal
Amount Market
(000) (000)
<S> <C> <C>
Cabot Safety Corp.
12.50%, 07/15/05 $150 $169
Calmar Inc.
11.50%, 08/15/05 110 119
Chancellor Radio Broadcasting Co.
9.375%, 10/01/04 150 154
Chevy Chase Bank F.S.B.
9.25%, 12/01/08 100 100
Citicorp
6.75%, 08/15/05 1,000 984
Clark-Schwebel Inc.
10.50%, 04/15/06 230 243
CMS Energy Corp.
8.125%, 05/15/02 150 151
Collins & Aikman Products Co.
11.50%, 04/15/06 200 225
Comcast Corp.
9.375%, 05/15/05 100 105
Container Corp of America
9.75%, 04/01/03 170 178
Cross Timbers Oil Co.
9.25%, 04/01/07 250 256
Echostar DBS Corp.
12.50%, 07/01/02 90 89
El Paso Electric Co.
8.90%, 02/01/06 100 106
Essex Group
10.00%, 05/01/03 250 263
Exide Corp.
10.00%, 04/15/05 50 52
Fairchild Semiconductor Corp.
10.125%, 03/15/07 250 265
Falcon Building Products Inc.
9.50%, 06/15/07 45 45
Falcon Drilling Co.
8.875%, 03/15/03 200 202
Farmers Ins. Exch.
8.625%, 05/01/24 1,500 1,533
Federal-Mogul Co.
8.80%, 04/15/07 200 208
First Financial Caribbean
7.84%, 10/10/06 665 671
First Nationwide Hldgs
12.50%, 04/15/03 100 111
First National Bank of Boston
8.00%, 09/15/04 1,000 1,047
Flores & Rucks Inc.
9.75%, 10/01/06 100 104
Fonda Group Inc.
9.50%, 03/01/07 100 96
Granite Broadcasting Corp.
10.375%, 05/15/05 25 25
GS Technologies Inc.
12.25%, 10/01/05 200 218
Hayes Wheels International Inc.
9.125%, 07/15/07 150 150
Howmet Corp.
10.00%, 12/01/03 110 119
</TABLE>
See notes to the financial statements.
<PAGE>
HORACE MANN MUTUAL FUNDS 1997 FUNDS SEMIANNUAL REPORT (UNAUDITED)
Statement of Investments (continued)
Horace Mann Balanced Fund
June 30, 1997
<TABLE>
<CAPTION>
(U.S. & Foreign Corporate Bonds/Notes continued) Principal
Amount Market
(000) (000)
<S> <C> <C>
Husky Oil Ltd.
7.125%, 11/15/06 $1,000 $988
Integrated Health Services Inc.
9.50%, 09/15/07 60 61
International Wire Group Inc.
11.75%, 06/01/05 150 163
Jacor Communications Co.
9.75%, 12/15/06 60 62
Jacor Communications Co.
8.75%, 06/15/07 80 79
Johnstown America Inds Inc.
11.75%, 08/15/05 50 50
K & F Industries Inc.
10.375%, 09/01/04 100 106
Key Plastics Inc.
10.25%, 03/15/07 200 210
Kindercare Learning Centers Inc.
9.50%, 02/15/09 150 146
Korea Telecom
7.625%, 04/15/07 1,500 1,515
LDM Technologies Inc.
10.75%, 01/15/07 100 105
Leiner Health Products Inc.
9.625%, 07/10/07 20 20
Lumbermens Mutual Casualty Co.
9.15%, 07/01/26 2,000 2,194
Marcus Cable Operating Co.
0.00%, 08/01/04 150 130
McDermott J Ray SA
9.375%, 07/15/06 50 51
Muzak LP/Muzak Capital
10.00%, 10/01/03 250 267
Navistar Financial Corp.
9.00%, 06/01/02 145 149
Neenah Corp.
11.125%, 05/01/07 150 159
News America Holdings Inc.
8.00%, 10/17/16 2,000 1,980
NRG Energy Inc.
7.50%, 06/15/07 1,550 1,552
NS Group Inc.
13.50%, 07/15/03 80 90
Olympic Financial LTD
11.50%, 03/15/07 100 102
Owens & Minor Inc.
10.875%, 06/01/06 100 112
Owens-Illinois Inc.
8.10%, 05/15/07 65 66
Packard Bioscience Inc.
9.375%, 03/01/07 200 200
Pierce Leahy Corp.
9.125%, 07/15/07 55 55
Pioneer Americas Acquisition Corp.
9.25%, 06/15/07 80 79
Plains Resources Inc.
10.25%, 03/15/06 250 265
Pride Petroleum Services Inc.
9.375%, 05/01/07 100 105
</TABLE>
See notes to the financial statements.
<PAGE>
HORACE MANN MUTUAL FUNDS 1997 FUNDS SEMIANNUAL REPORT (UNAUDITED)
Statement of Investments (continued)
Horace Mann Balanced Fund
June 30, 1997
<TABLE>
<CAPTION>
(U.S. & Foreign Corporate Bonds/Notes continued) Principal
Amount Market
(000) (000)
<S> <C> <C>
Quorum Health Group Inc.
8.75%, 11/01/05 $100 $104
Republic NY Corp.
9.30%, 06/01/21 1,700 2,009
Rexene Corp.
11.75%, 12/01/04 250 288
Rifkin ACQ Partners LP
11.125%, 01/15/06 50 53
Roller Bearing Co America Inc.
9.625%, 06/15/07 50 51
SD Warren Co.
12.00%, 12/15/04 100 111
Sheffield Steel Corp.
12.00%, 11/01/01 15 14
Silgan Corp.
9.00%, 06/01/09 250 253
Southwestern Bell Telephone Co.
5.55%, 03/10/98 400 399
Standard Pacific Corp.
8.50%, 06/15/07 115 115
Sweetheart Cup Inc.
10.50%, 09/01/03 25 25
Teleport Communications Group
0.00%, 07/01/07 150 108
Terra Industries
10.50%, 06/15/05 35 38
Unisys Corp.
11.75%, 10/15/04 100 109
United Air Lines Inc.
10.67%, 05/01/04 572 671
Weirton Steel Corp.
11.375%, 07/01/04 250 268
Westpoint Stevens Inc.
8.75%, 12/15/01 100 103
World Color Press Inc.
9.125%, 03/15/03 50 51
Asset Backed
Banc One Auto Grantor Trust 96-B A
6.55%, 02/15/03 817 821
Ford Credit Grantor Trust 93-B A
4.30%, 07/15/98 20 20
Ford Credit Grantor Trust 95-B A
5.90%, 10/15/00 961 959
IBM Credit Rec Lease Asset Mas Trust
4.55%, 11/15/00 462 461
Premier Auto Trust 93-6 A2
4.65%, 11/02/99 171 170
Premier Auto Trust 94-1 A3
4.75%, 02/02/00 412 411
Premier Auto Trust 94-2 A3
6.35%, 05/02/00 337 338
</TABLE>
See notes to the financial statements.
<PAGE>
HORACE MANN MUTUAL FUNDS 1997 FUNDS SEMIANNUAL REPORT (UNAUDITED)
Statement of Investments (concluded)
Horace Mann Balanced Fund
June 30, 1997
<TABLE>
<CAPTION>
(U.S. & Foreign Corporate Bonds/Notes concluded) Principal
Amount Market
Collateralized Mortgage Obligation (000) (000)
<S> <C> <C>
(Planned Amortization Class) (Note 3)
GE Capital MTG Services, Inc. 1994-15 Class A5
6.00%, 04/25/09 $1,000 $938
Total U.S. and Foreign Corporate Bonds/Notes 9.76% $33,088 $34,138
(Cost $33,073)
SHORT-TERM INVESTMENTS
Repurchase Agreement
Lehman Brothers
6.00%, 07/01/97, (secured
by $5,559,563 US Treasury
Strip, 11/15/21) 5,346 5,346
Total Short-Term Investments 1.53% $5,346 $5,346
(Cost $5,346)
Total Investments 99.49% 347,913
(Cost $299,297)
Cash and Other Assets in Excess
of Liabilities 0.51% 1,786
Net Assets 100.00% $349,699
</TABLE>
* Non-income producing during the six months ended June 30, 1997.
See notes to the financial statements.
<PAGE>
HORACE MANN MUTUAL FUNDS 1997 FUNDS SEMIANNUAL REPORT (UNAUDITED)
(pie chart)
Cash & Short-Term Investments 2.0%
Municipal Bonds 1.2%
U.S. & Foreign Corporate Bonds/Notes 27.6%
U.S. & Foreign Government & Agency Obligations 69.2%
Statement of Investments
Horace Mann Income Fund
June 30, 1997
<TABLE>
<CAPTION>
Principal
Amount Market
(000) (000)
<S> <C> <C>
U.S. AND FOREIGN GOVERNMENT
AND AGENCY OBLIGATIONS
Treasury Bonds/Notes
6.25%, 10/31/01 $200 $199
7.875%, 11/15/04 650 701
12.00%, 08/15/13 1,000 1,408
AGENCIES
Federal Home Loan Mortgage Corporation
7.84%, 06/09/06 150 151
Government Backed Trust
9.625%, 05/15/02 105 112
Federal Home Loan Mortgage Corporation
(Mortgage Backed Securities)
9.50%, 03/01/01 31 32
9.50%, 06/01/01 13 13
9.50%, 08/01/01 12 13
9.50%, 10/01/01 11 11
7.00%, 11/01/03 44 44
7.00%, 07/01/10 491 492
7.00%, 12/01/10 44 44
7.00%, 01/01/11 352 352
6.50%, 03/01/11 362 355
7.00%, 03/01/11 687 687
7.00%, 04/01/11 773 773
7.00%, 07/01/11 181 181
8.00%, 12/01/11 14 14
Federal National Mortgage Association
(Mortgage Backed Securities)
8.00%, 11/01/09 19 19
8.00%, 10/01/14 97 100
8.00%, 01/01/17 109 113
7.75%, 04/01/17 182 184
Government National Mortgage Association
(Mortgage Backed Securities)
11.50%, 03/15/10 12 14
12.00%, 03/15/14 4 5
12.00%, 04/15/14 4 4
12.00%, 12/15/14 17 20
12.00%, 02/15/15 3 4
12.00%, 03/15/15 14 16
12.00%, 04/15/15 8 10
12.50%, 04/15/15 4 5
12.00%, 06/15/15 11 13
12.00%, 07/15/15 11 12
12.00%, 11/15/15 14 17
9.50%, 08/15/17 142 154
</TABLE>
See notes to the financial statements.
<PAGE>
HORACE MANN MUTUAL FUNDS 1997 FUNDS SEMIANNUAL REPORT (UNAUDITED)
Statement of Investments (continued)
Horace Mann Income Fund
June 30, 1997
<TABLE>
<CAPTION>
(U.S. & Foreign Government and Agency Obligations
concluded) Principal
Collateralized Mortgage Obligation Amount Market
(Planned Amortization Class)(Note 3) (000) (000)
<S> <C> <C>
FHLMC 1737-Class E
6.00%, 12/15/17 $220 $216
Foreign (U.S. dollar denominated)
Republic of Argentina
11.375%, 01/30/17 150 167
Republic of Columbia
7.625%, 02/15/07 200 195
Total U.S. and Foreign Government and
Agency Obligations 69.24% 6,341 6,850
(Cost $6,769)
MUNICIPAL BONDS
Horry Cnty SC Arpt Rev
7.38%, 07/01/12 120 120
Total Municipal Bonds 1.21% $120 $120
(Cost $122)
U.S. AND FOREIGN
CORPORATE BONDS/NOTES
AMR Corp.
9.00%, 09/15/16 126 138
Banponce Corp.
6.75%, 12/15/05 200 194
BankAmerica Corp.
6.85%, 03/01/03 150 150
Farmers Ins. Exch.
8.625%, 05/01/24 150 153
First Financial Caribbean
7.84%, 10/10/06 100 101
Husky Oil Ltd.
7.125%, 11/15/06 200 198
Korea Telecom
7.625%, 04/15/07 200 202
Lumbermens Mutual Casualty Co.
9.15%, 07/01/26 200 219
NCNB Corp.
10.20%, 07/15/15 135 168
News America Holdings Inc.
8.00%, 10/17/16 200 198
NRG Energy Inc.
7.50%, 06/15/07 150 150
Republic NY Corp.
9.30%, 06/01/21 165 195
Time Warner Inc.
9.625%, 05/01/02 150 166
United Air Lines Inc.
10.67%, 05/01/04 100 117
</TABLE>
See notes to the financial statements.
<PAGE>
HORACE MANN MUTUAL FUNDS 1997 FUNDS SEMIANNUAL REPORT (UNAUDITED)
Statement of Investments (concluded)
Horace Mann Income Fund
June 30, 1997
<TABLE>
<CAPTION>
(U.S. & Foreign Corporate Bonds/Notes concluded) Principal
Amount Market
(000) (000)
<S> <C> <C>
Asset Backed
Banc One Auto Grantor Trust 96-B A
6.55%, 02/15/03 $109 $109
Ford Credit Grantor Trust 93-B A
4.30%, 07/15/98 8 8
Ford Credit Grantor Trust 95-B A
5.90%, 10/15/00 120 120
IBM Credit Trust 93-1 A
4.55%, 11/15/00 68 68
Premier Auto Trust 93-6 A2
4.65%, 11/02/99 34 34
Premier Auto Trust 94-1 A3
4.75%, 02/02/00 41 41
Total U.S. and Foreign Corporate
Bonds/Notes 27.59% $2,606 $2,729
(Cost $2,705)
Total Investments 98.04% $9,699
(Cost $9,596)
Cash and Other Assets in Excess
of Liabilities 1.96% 194
Net Assets 100.00% $9,893
</TABLE>
See notes to the financial statements.
<PAGE>
HORACE MANN MUTUAL FUNDS 1997 FUNDS SEMIANNUAL REPORT (UNAUDITED)
(pie chart)
U.S. Agency Obligations 100%
Statement of Investments
Horace Mann Short-Term Investment Fund
June 30, 1997
<TABLE>
<CAPTION>
Principal
Amount Market
(000) (000)
<S> <C> <C>
U.S. AGENCY OBLIGATIONS
Federal Farm Credit Bank Discount Notes
5.45%, 07/18/97 $100 $100
5.45%, 07/21/97 55 55
5.43%, 11/25/97 50 49
Federal Home Loan Bank Discount Notes
5.41%, 08/06/97 145 144
5.43%, 11/17/97 235 230
Federal Home Loan Mortgage Corp. Discount Notes
5.40%, 07/14/97 190 190
5.49%, 08/06/97 105 104
5.46%, 09/04/97 50 49
5.44%, 09/15/97 25 25
5.44%, 11/07/97 115 113
Federal National Mortgage Association Discount Notes
5.45%, 07/21/97 40 40
5.44%, 10/30/97 120 118
Student Loan Marketing Discount Note
5.42%, 07/31/97 170 169
Total Investments 100.00% $1,400 $1,386
(Cost $1,386)
Net Assets 100.00% $1,386
</TABLE>
See notes to the financial statements.
<PAGE>
HORACE MANN MUTUAL FUNDS 1997 FUNDS SEMIANNUAL REPORT (UNAUDITED)
(pie chart)
Common Stock 100%
Statement of Investments
Horace Mann Small Cap Growth Fund
June 30, 1997
<TABLE>
<CAPTION>
Number of Market
Shares (000)
<S> <C> <C>
COMMON STOCKS
Auto/Accessories 1.11%
Keystone Automotive Industries, Inc.* 2,000 $34
Racing Champions Corp.* 300 5
39
Biotechnology 1.39%
Molecular Dynamics, Inc.* 400 5
QIAGEN N.V.* 500 24
Serologicals Corp.* 900 20
49
Building and Construction 0.68%
Oakwood Homes Corp. 1,000 24
Business Services 6.69%
AccuStaff, Inc.* 700 16
Caribiner International, Inc.* 1,000 33
Comfort Systems USA, Inc.* 600 9
Norrell Corp. 1,200 40
Pre-Paid Legal Services, Inc.* 1,400 30
Quintiles Transnational Corp.* 500 35
Robert Half International, Inc.* 1,000 47
Sitel Corp.* 600 12
Staff Leasing, Inc.* 300 6
Whittman-Hart, Inc.* 300 8
236
Educational Services 2.98%
Apollo Group, Inc.- A* 1,600 56
Strayer Education, Inc. 200 8
Sylvan Learning Systems, Inc. 1,200 41
105
Electrical Equipment/Electronics 12.75%
3D Labs Inc., Ltd.* 700 20
Asyst Technologies, Inc.* 300 13
Cymer, Inc.* 400 19
DII Group, Inc.* 600 26
Electronics for Imaging, Inc.* 1,000 47
Jabil Circuit, Inc.* 900 75
Kent Electronics Corp.* 700 26
Level One Communications, Inc.* 500 19
Micrel, Inc.* 300 15
Micro Linear Corp.* 100 1
Orbotech, Ltd.* 800 25
Photronic, Inc.* 400 19
Powerwave Technologies, Inc.* 300 7
QLogic Corp.* 1,000 25
Semtech Corp.* 800 29
Smart Modular Technologies, Inc.* 400 14
Triquint Semiconductor, Inc.* 700 24
Vitesse Semiconductor Corp.* 1,400 46
450
Energy 10.00%
Atwood Oceanics, Inc.* 1,000 66
Core Laboratories N.V.* 1,400 36
Global Industries Ltd.* 2,000 47
Marine Drilling Companies, Inc.* 2,000 39
Patterson Energy, Inc.* 1,000 45
</TABLE>
See notes to the financial statements.
<PAGE>
HORACE MANN MUTUAL FUNDS 1997 FUNDS SEMIANNUAL REPORT (UNAUDITED)
Statement of Investments (continued)
Horace Mann Small Cap Growth Fund
June 30, 1997
<TABLE>
<CAPTION>
(Common Stocks continued) Number Market
of Shares (000)
<S> <C> <C>
Petroleum Geo-Services ASA (ADR)* 800 $39
Reading & Bates Corp.* 600 16
Sawtek Inc.* 400 13
Trico Marine Services, Inc.* 2,400 52
353
Financial Services 2.07%
E*TRADE Group, Inc.* 500 10
The Money Store, Inc. 2,200 63
73
Food Services 3.06%
CKE Restaurants, Inc. 1,500 47
Landry's Seafood Restaurants, Inc.* 300 7
Logan's Roadhouse, Inc.* 400 10
Papa John's International, Inc.* 1,200 44
108
Health Care/Pharmaceuticals 18.91%
Advanced Technology Laboratories, Inc.* 300 13
American Oncology Resources, Inc.* 600 10
Assisted Living Concepts* 300 8
CRA Managed Care, Inc.* 1,500 78
Dura Pharmaceuticals, Inc.* 1,300 52
FPA Medical Management, Inc.* 1,400 33
IMPATH, Inc.* 200 5
Jones Medical Industries, Inc. 1,500 71
Medical Resources, Inc.* 900 15
Medicis Pharmaceutical Corp. - A* 1,550 77
National Surgery Centers, Inc.* 1,000 35
Omnicare, Inc. 1,200 37
Parexel International Corp.* 1,200 38
Pediatrix Medical Group* 800 36
PhyCor, Inc. 1,000 34
RehabCare Group, Inc.* 200 7
Renal Care Group, Inc.* 400 17
Sabratek Corp.* 1,200 34
Safeskin Corp.* 1,500 44
Sunrise Assisted Living, Inc.* 400 14
Theragenics Corp.* 400 9
667
Hotels/Resorts 3.46%
CapStar Hotel Co.* 1,100 35
Doubletree Corp.* 300 12
Signature Resorts, Inc.* 1,500 52
Vistana, Inc.* 1,500 23
122
Household Furnishings 0.34%
O'Sullivan Industries Holdings, Inc.* 700 12
Information Technology/Equipment 18.91%
Apex PC Solutions, Inc.* 700 13
Aspen Technology, Inc.* 1,300 49
Baan Co. N.V.* 500 34
Cambridge Technology Partners, Inc.* 1,100 36
CBT Group PLC (ADR)* 1,000 63
Ciber, Inc.* 800 27
DAOU Systems, Inc.* 500 8
Engineering Animation, Inc.* 300 10
Great Plains Software, Inc.* 300 8
Harbinger Corp.* 500 14
Imnet Systems, Inc.* 600 19
</TABLE>
See notes to the financial statements.
<PAGE>
HORACE MANN MUTUAL FUNDS 1997 FUNDS SEMIANNUAL REPORT (UNAUDITED)
Statement of Investments (continued)
Horace Mann Small Cap Growth Fund
June 30, 1997
<TABLE>
<CAPTION>
(Common Stocks continued) Number Market
of Shares (000)
<S> <C> <C>
Information Management Resources, Inc.* 700 $32
Infinity Financial Technology, Inc.* 1,000 16
JDA Software Group, Inc.* 1,000 34
Manugistics Group, Inc.* 1,700 76
ONTRACK Data International, Inc.* 800 18
Pegasystems Inc.* 500 16
Radiant Systems, Inc.* 700 14
Saville Systems Ireland PLC (ADR)* 900 47
Smallworldwide PLC (ADR)* 500 9
Technology Solutions Co.* 300 12
Transaction Systems Architects, Inc.- A* 200 7
Veritas Software Corp.* 800 40
Visio Corp.* 800 56
Xionics Document Technologies, Inc.* 600 9
667
Insurance 1.96%
HCC Insurance Holdings, Inc. 1,500 40
United Wisconsin Services, Inc. 100 3
Vesta Insurance Group, Inc. 600 26
69
Leisure Time 3.20%
Action Performance Companies, Inc.* 1,400 34
Anchor Gaming* 300 14
Regal Cinemas, Inc.* 1,200 39
Speedway Motorsports, Inc.* 1,200 26
113
Pollution Control 2.35%
American Disposal Services, Inc.* 1,500 33
Superior Services, Inc.* 1,000 23
United Waste Systems, Inc.* 500 20
Waste Industries, Inc.* 400 7
83
Retail/Apparel 7.39%
Burlington Coat Factory Warehouse* 1,500 29
Claire's Stores, Inc. 200 4
Gadzooks, Inc.* 400 8
Linens'N Things, Inc.* 400 12
Pacific Sunwear of California* 1,100 35
Petco Animal Supplies, Inc.* 300 9
Pier 1 Imports, Inc. 900 24
Rexall Sundown, Inc.* 1,000 39
St. John Knits, Inc.* 1,200 65
Stein Mart, Inc.* 1,200 36
261
Telecommunication Services 7.39%
Boston Technology, Inc.* 1,400 41
Comverse Technology, Inc.* 1,500 78
Melita International Corp.* 200 2
Natural Microsystems Corp.* 1,300 47
NICE-Systems Ltd. (ADR)* 1,000 30
Tel-Save Holdings, Inc.* 3,400 51
U.S. Long Distance Corp.* 700 12
261
Tobacco 0.17%
800-JR CIGAR, Inc.* 300 6
</TABLE>
See notes to the financial statements.
<PAGE>
HORACE MANN MUTUAL FUNDS 1997 FUNDS SEMIANNUAL REPORT (UNAUDITED)
Statement of Investments (concluded)
Horace Mann Small Cap Growth Fund
June 30, 1997
<TABLE>
<CAPTION>
(Common Stocks concluded) Number Market
of Shares (000)
<S> <C> <C>
Transportation 2.47%
Expeditores International of Washington, Inc. 1,300 $37
Rural/Metro Corp.* 1,000 29
Swift Transportation Co., Inc.* 700 21
87
Total Common Stocks 107.28% $3,785
(Cost $3,377)
<CAPTION>
SHORT-TERM INVESTMENTS Principal
Amount Market
(000) (000)
<S> <C> <C>
Student Loan Marketing Discount Note
5.75%, 07/01/97 $115 $115
Total Short-Term Investments 3.26% 115 115
(Cost $115)
Total Investments 110.54% 3,900
(Cost $3,492)
Liabilities in Excess of
Cash and Other Assets (10.54%) (372)
Net Assets 100.00% $3,528
</TABLE>
* Non-income producing during the six months ended June 30, 1997.
See notes to the financial statements.
<PAGE>
HORACE MANN MUTUAL FUNDS 1997 FUNDS SEMIANNUAL REPORT (UNAUDITED)
(pie chart)
Cash & Short-Term Investments 17.0%
Latin America 8.1%
Europe 51.0%
Pacific 23.0%
North America 0.9%
Statement of Investments
Horace Mann International Equity Fund
June 30, 1997
<TABLE>
<CAPTION>
Number of Market
Shares (000)
<S> <C> <C>
COMMON AND PREFERRED STOCKS
Argentina 0.85%
YPF S.A. - D (ADR) (Oil Companies) 660 $20
Brazil 7.25%
Centrais Electricas Brasileiras S/A - B pfd. (Electric Utilities) 67,270 40
Companhia Energetica de Minas Gerais pfd. (Electric Utilities) 400,000 21
Companhia Vale Do Rio Doce pfd. (Steel & Metals) 500 11
Petroleo Brasileiro S/A pfd. (Oil Companies) 124,840 35
Telecommunicacoes Brasileiras S.A. pfd. (Telephone Communications) 300,000 45
Usinas Siderurgicas de Minas Gerais S/A pfd. (Steel & Metals) 1,630 18
170
Canada 0.90%
Canadian National Railway Co. (Railroads) 472 21
Finland 1.62%
Nokia AB OY - A (Telecom Equipment) 280 21
PohJola Insurance Co., LTD - B (Insurance) 560 17
38
France 8.27%
Alcatel Alsthom (Telecom Equipment) 150 18
AXA SA (Insurance) 270 17
Carrefour (Food & Beverage) 30 22
Cie Fin Paribas - A (Banking) 260 18
Generale Des Eaux Cie (Water Supply) 125 16
Generale Des Eaux (Water Supply) 125 1
Michelin CGDE - B (Diversified Manufacturer) 280 17
Pinault-Printemps, SA (Department & Chain Stores) 25 12
Rhone-Poulenc Act A (Chemicals) 8 1
Rhone-Poulenc SA - A (Chemicals) 510 21
Schneider SA(Electronic Components/Distribution) 330 18
Total SA - B(Oil & Gas Production) 160 16
Valeo SA(Automobiles) 270 17
194
Germany 12.92%
BASF AG (Chemicals) 475 18
Bayer AG (Chemicals) 420 16
Bayerische Vereinsbank AG (Banking) 465 19
Commerzbank AG (Banking) 680 19
Daimler-Benz AG (Automobiles) 230 19
Hoechst AG (Chemicals) 390 17
Mannesmann AG (Bearer) (Diversified Manufacturer) 68 30
RWE AG pfd. (Diversified Manufacturer) 490 17
SAP AG pfd. (Computer Software) 162 34
Schering AG (Pharmaceuticals) 175 19
Siemens AG (Electrical Products) 610 36
VEBA AG (Electric Utilities) 300 17
Viag AG (Diversified Manufacturer) 40 18
Volkswagen AG (Automobiles) 43 24
303
</TABLE>
See notes to the financial statements.
<PAGE>
HORACE MANN MUTUAL FUNDS 1997 FUNDS SEMIANNUAL REPORT (UNAUDITED)
Statement of Investments (continued)
Horace Mann International Equity Fund
June 30, 1997
<TABLE>
<CAPTION>
(Common and Preferred Stocks continued) Number Market
of shares (000)
<S> <C> <C>
Hong Kong 3.20%
First Pacific Co., Ltd. (Other Financial) 12,000 $15
Great Eagle Holdings Ltd. (Real Estate) 4,000 13
HSBC Holdings Ltd. (Banking) 407 12
Hutchison Whampoa, Ltd. (Diversified Manufacturer) 2,000 17
Television Broadcasts, Ltd. (Broadcasting & Ent.) 4,000 18
75
Italy 1.58%
Gucci Group (Textiles) 315 20
Stet Dirisp-Intl (Telephone Communications) 4,800 17
37
Japan 18.46%
Advantest Corp. (Electronic Compon/Distrib) 500 38
Bridgestone Corp. (Automobiles) 1,000 23
Canon Inc. (Office Equipment & Supplies) 1,000 27
DDI Corp. (Telephone Communications) 3 22
Fujitsu Ltd. (Electronic Compon/Distrib) 3,000 42
Hitachi Ltd. (Electrical Products) 2,000 22
Honda Motor Co., Ltd. (Automobiles) 1,000 30
Jusco Co., Ltd. (Consumer Specialties) 1,000 34
Keyence Corp. (Precision Instruments) 200 30
Kokuyo (Office Equipment & Supplies) 1,000 27
Matsushita Electric Industrial Co., Ltd. (Diverse Electronic Products) 2,000 40
Shiseido Co., Ltd. (Package Goods/Cosmetics) 2,000 33
Sony Corp. (Consumer Electronic & Photo) 200 17
Tokyo Electron (Semiconductors) 1,000 48
433
Malaysia 1.36%
Malayan Banking Berhad (Banking) 1,000 10
Renong Berhad (Construction/Ag Equipment) 10,000 13
United Engineers (Construction/Ag Equipment) 1,300 9
32
Netherlands 4.77%
AEGON Insurance Group NV (Insurance) 395 28
Akzo-Nobel NV (Chemicals) 120 16
Philips Electronics NV (Diversified Manufacturer) 445 32
Unilever NV (Food & Beverage) 95 20
Wolters Kluwer CVA (Print Media) 135 16
112
Spain 1.32%
Compania Telefonica Nacional de Espana SA (ADR) (Tel. Comm.) 1,085 31
Sweden 2.94%
AGA AB - B (Free) (Chemicals) 1,275 17
L.M. Ericsson Telephone Co. - B (ADR) (Telecom Equipment) 500 20
Skandia Group Foersaekrings AB (Free) (Insurance) 880 32
69
Switzerland 6.86%
ABB AG (Electrical Products) 19 29
Credit Suisse Group (Banking) 215 28
Holderbank Financiere (Building Materials) 36 34
Novartis AG (Pharmaceuticals) 27 43
Roche Holdings AG (PC) (Pharmaceuticals) 3 27
161
United Kingdom 10.61%
BAT Industries (Alcohol & Tobacco) 2,900 26
Barclays (Banking) 1,440 29
BOC Group PLC (Chemicals) 1,200 21
Carlton Communications PLC (Broadcasting & Ent) 1,900 16
General Electric Co., PLC (Electrical Products) 2,700 16
</TABLE>
See notes to the financial statements.
<PAGE>
HORACE MANN MUTUAL FUNDS 1997 FUNDS SEMIANNUAL REPORT (UNAUDITED)
Statement of Investments (concluded)
Horace Mann International Equity Fund
June 30, 1997
<TABLE>
<CAPTION>
(Common and Preferred Stocks concluded) Number Market
of Shares (000)
<S> <C> <C>
Glaxo Wellcome PLC (Pharmaceuticals) 964 $20
Granada Group (Miscellaneous Consumer Services) 1,735 23
Pearson PLC (Print Media) 1,300 15
PowerGen PLC (Electric Utilities) 1,600 19
SmithKline Beecham PLC (Pharmaceuticals) 1,100 20
WPP Group PLC (Advertising) 6,400 26
Zeneca Group PLC (Pharmaceuticals) 550 18
249
Total Common and Preferred Stocks 82.91% $1,945
(Cost $1,838)
Principal
Amount Market
(000) (000)
SHORT-TERM INVESTMENTS
Repurchase Agreement
State Street Bank, 5.60%, 07/01/97
(secured by $231,598, US Treasury Note
6.00%, 05/31/98) $223 $223
Federal National Mortgage
Association Discount Note
First Chicago Capital Markets, 5.60%, 07/01/97 150 150
Total Short-Term Investments 15.90% $373 $373
(Cost $373)
Total Investments 98.89% 2,318
(Cost $2,211)
Foreign Currency 0.08% 2
Cash and Other Assets in Excess
of Liabilities 1.11% 26
Net Assets 100.00% $2,346
</TABLE>
* Non-income producing during the six months ended June 30, 1997.
See notes to the financial statements.
<PAGE>
HORACE MANN MUTUAL FUNDS 1997 FUNDS SEMIANNUAL REPORT (UNAUDITED)
(pie chart)
Preferred Stock 1.6%
Cash & Short-Term Investments 2.0%
Common Stock 96.4%
Statement of Investments
Horace Mann Socially Responsible Fund
June 30, 1997
<TABLE>
<CAPTION>
Number of Market
Shares (000)
COMMON STOCKS
<S> <C> <C>
Aerospace/Defense 1.96%
Rockwell International Corp. 700 $41
Auto/Accessories 4.92%
Ford Motor Co. 900 34
Dana Corp. 750 28
Eaton Corp. 150 13
PACCAR Inc. 600 28
103
Banks/Financial Services 11.42%
Banc One Corp. 400 19
Bankers Trust New York Corp. 275 24
Chase Manhattan Corp. 350 34
Corestates Financial Corp. 400 22
Federal National Mortgage Association 500 22
First Bank System, Inc. 300 26
KeyCorp 400 22
J.P. Morgan & Co. Inc. 250 26
Student Loan Marketing Association 350 44
239
Building & Construction 0.48%
Martin Marietta Materials, Inc. 300 10
Chemicals 7.88%
Betzdearborn, Inc. 200 13
Dow Chemical Co. 250 22
Eastman Chemical Co. 350 22
Geon Co. 1,300 26
Imperial Chemical Industries PLC (ADR) 900 51
Lyondell Petrochemical Co. 500 11
Olin Corp. 500 20
165
Communications 7.60%
Alltel Corp. 1,000 33
Bell Atlantic Corp. 275 21
BellSouth Corp. 600 28
Frontier Corp. 400 8
NYNEX Corp. 550 32
Sprint Corp. 700 37
159
Consumer Staples 9.55%
General Mills, Inc. 450 29
Heinz (H.J.) Co. 1,150 53
Kellogg Co. 150 13
Kimberly-Clark Corp. 1,000 50
Unilever NV PLC 250 55
200
</TABLE>
See notes to the financial statements.
<PAGE>
HORACE MANN MUTUAL FUNDS 1997 FUNDS SEMIANNUAL REPORT (UNAUDITED)
Statement of Investments (continued)
Horace Mann Socially Responsible Fund
June 30, 1997
<TABLE>
<CAPTION>
(Common Stocks continued) Number of Market
Shares (000)
<S> <C> <C>
Energy 5.54%
Elf Aquitaine (ADR) 550 $30
Pennzoil Corp. 300 23
Sonat, Inc. 100 5
Total SA (ADR) 600 30
YPF SA Sociedad Anonima (ADR) 900 28
116
Health Care/Pharmacueticals 9.75%
American Home Products Corp. 400 31
Baxter International, Inc. 550 29
Bristol-Myers Squibb Co. 500 41
Schering-Plough Corp. 500 24
SmithKline Beecham PLC - A (ADR) 250 23
Warner-Lambert Co. 250 31
Zeneca Group PLC (ADR) 250 25
204
Information Technology/Equipment 3.92%
AMP, Inc. 350 15
Xerox Corp. 850 67
82
Insurance 4.01%
Exel Limited 450 24
Mid Ocean Limited 250 13
Lincoln National Corp. 400 26
Safeco Corp. 450 21
84
Manufacturing (Diversified) 5.40%
Boise Cascade Corp. 350 12
Emerson Electric Co. 500 27
Thomas & Betts Corp. 500 26
Whirlpool Corp. 600 33
Witco Corp. 400 15
113
Metals & Mining 2.48%
J & L Specialty Steel, Inc. 1,450 17
Oregon Steel Mills, Inc. 1,100 22
Phelps Dodge Corp. 150 13
52
Paper & Forest Products 3.06%
Westvaco Corp. 950 30
Weyerhaeuser Co. 650 34
64
Real Estate 2.68%
Developers Diversified Realty Corp. 150 6
Equity Residential Properties Trust 200 9
Health Care Property Investors, Inc. 250 9
Meditrust Corp. 250 10
Nationwide Health Properties, Inc. 400 9
Security Capital Industrial Trust 600 13
56
Retail/Apparel 5.45%
May Department Stores Co. 300 14
Mercantile Stores Co., Inc. 150 9
Penney (J.C.) Co., Inc. 350 18
Rite Aid Corp. 750 37
Sears, Roebuck and Co. 550 30
VF Corp. 75 6
114
</TABLE>
See notes to the financial statements.
<PAGE>
HORACE MANN MUTUAL FUNDS 1997 FUNDS SEMIANNUAL REPORT (UNAUDITED)
Statement of Investments (concluded)
Horace Mann Socially Responsible Fund
June 30, 1997
<TABLE>
<CAPTION>
(Common Stocks concluded) Number Market
of Shares (000)
<S> <C> <C>
Transportation/Travel 3.15%
CSX Corp. 500 $28
Canadian National Railway Co. 450 20
Union Pacific Corp. 250 18
66
Utilities/Electric & Gas 7.12%
Boston Edison Co. 200 5
CINergy Corp. 300 10
Duke Energy Corp. 777 37
MCN Energy Group Inc. 700 21
National Power PLC (ADR) 250 9
PG & E Corp. 850 21
PowerGen PLC (ADR) 250 12
Southern Co. 450 10
Unicom Corp. 650 14
Wisconsin Energy Corp. 400 10
149
Total Common Stocks 96.37% $2,017
(Cost $1,854)
PREFERRED STOCKS
Energy 0.43%
Atlantic Richfield Co. 400 9
Bank/Financial 0.67%
Kmart Financing 250 14
Manufacturing (Diversified) 0.52%
Boise Cascade Corp. 400 11
Total Preferred Stock 1.62% 34
(Cost $34)
Total Common and Preferred Stock 97.99% $2,051
(Cost $1,888)
<CAPTION>
Principal
Amount Market
SHORT-TERM INVESTMENTS (000) (000)
Repurchase Agreement
State Street Bank, 5.60%, 07/01/97,
(secured by $110,764, US Treasury Note,
6.00%, 05/31/98) $107 $107
Total Short-Term Investments 5.11% $107 $107
(Cost $107)
Total Investments 103.10% 2,158
(Cost $1,995)
Liabilites in Excess of Cash and
Other Assets (3.10%) (65)
Net Assets 100.00% $2,093
</TABLE>
* Non-income producing during the six months ended June 30, 1997.
See notes to the financial statements.
<PAGE>
HORACE MANN MUTUAL FUNDS 1997 FUNDS SEMIANNUAL REPORT (UNAUDITED)
Statements of Assets and Liabilities
June 30, 1997
<TABLE>
<CAPTION>
GROWTH BALANCED INCOME SHORT-TERM
FUND FUND FUND FUND
ASSETS
<S> <C> <C> <C> <C>
Cash $52 $950 $74,334 $1,297
Investments at market value* 527,686,005 347,913,221 9,699,042 1,385,656
Foreign currency at value* -- -- -- --
Dividends and interest receivable 460,309 2,021,115 138,616 --
Receivable-foreign taxes 6,242 3,091 -- --
Receivable-fund shares sold 595,443 326,903 6,478 3,626
Receivable-investments sold 1,559,783 1,037,554 -- --
Prepaid expenses 5,334 4,262 355 --
Other assets 48,786 26,345 2,381 --
Total Assets 530,361,954 351,333,441 9,921,206 1,390,579
LIABILITIES
Payable-fund shares redeemed 149,194 4,584 1,943 --
Payable-investments purchased 5,966,860 1,438,784 -- --
Payable-management and related fees 209,260 133,742 3,195 --
Accrued expenses 68,210 53,906 22,918 4,216
Other liabilities -- 3,147 457 --
Total Liabilities 6,393,524 1,634,163 28,513 4,216
NET ASSETS $523,968,430 $349,699,278 $9,892,693 $1,386,363
NET ASSETS CONSIST OF:
Par value of common shares 19,412,448 1,672,891 75,536 13,488
Paid in surplus 373,390,833 280,037,421 9,442,562 1,341,806
Accumulated undistributed net investment income 4,007,065 5,166,780 314,471 30,955
Accumulated undistributed net realized gain (loss)
on securities and foreign currency transactions 27,523,041 14,205,861 (42,583) 162
Net unrealized appreciation (depreciation)
on securities and foreign currency transactions 99,635,043 48,616,325 102,707 (48)
NET ASSETS $523,968,430 $349,699,278 $9,892,693 $1,386,363
Number of shares outstanding:
(Authorized 50,000,000 shares each) 19,412,448 16,728,906 755,360 134,881
Par Value $1.00 $0.10 $0.10 $0.10
NET ASSET VALUE PER SHARE $26.99 $20.90 $13.10 $10.28
*Cost of Securities:
Investments $428,050,962 $299,296,896 $9,596,335 $1,385,704
Foreign Currency -- -- -- --
<CAPTION>
SMALL CAP INTERNATIONAL SOCIALLY
GROWTH EQUITY RESPONSIBLE
FUND FUND FUND
ASSETS
<S> <C> <C> <C>
Cash $183 $634 $328
Investments at market value* 3,899,885 2,318,132 2,157,668
Foreign currency at value* -- 1,403 --
Dividends and interest receivable 161 2,600 4,989
Receivable-foreign taxes -- 1,703 168
Receivable-fund shares sold 86,929 24,229 19,349
Receivable-investments sold 21,637 -- --
Prepaid expenses -- -- --
Other assets -- -- --
Total Assets 4,008,795 2,348,701 2,182,502
LIABILITIES
Payable-fund shares redeemed -- -- --
Payable-investments purchased 477,789 232 87,805
Payable-management and related fees 2,401 1,179 833
Accrued expenses 1,057 1,057 1,056
Other liabilities -- 302 121
Total Liabilities 481,247 2,770 89,815
NET ASSETS $3,527,548 $2,345,931 $2,092,687
NET ASSETS CONSIST OF:
Par value of common shares -- -- --
Paid in surplus 3,222,780 2,222,976 1,920,381
Accumulated undistributed net investment income (1,271) 16,137 10,110
Accumulated undistributed net realized gain (loss)
on securities and foreign currency transactions (101,446) (1,317) (502)
Net unrealized appreciation (depreciation)
on securities and foreign currency transactions 407,485 108,135 162,698
NET ASSETS $3,527,548 $2,345,931 $2,092,687
Number of shares outstanding:
(Authorized 50,000,000 shares each) 334,302 222,565 190,697
Par Value $0.00 $0.00 $0.00
NET ASSET VALUE PER SHARE $10.55 $10.54 $10.97
*Cost of Securities:
Investments $3,492,400 $2,210,020 $1,994,970
Foreign Currency -- 1,380 --
</TABLE>
The identified cost of investments owned at June 30, 1997 was the same for
federal income tax and book purposes.
See notes to the financial statements.
<PAGE>
HORACE MANN MUTUAL FUNDS 1997 FUNDS SEMIANNUAL FUNDS (UNAUDITED)
Statements of Operations
<TABLE>
<CAPTION>
For the Six Months Ended
June 30, 1997
GROWTH BALANCED INCOME SHORT-TERM
FUND FUND FUND FUND
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends $4,539,933 $2,139,225 $-- $--
Interest & amortization 617,391 3,735,983 352,861 33,209
5,157,324 5,875,208 352,861 33,209
Foreign taxes withheld (19,394) (12,925) (459) --
Total investment income 5,137,930 5,862,283 352,402 33,209
EXPENSES:
Management and related fees (Note 5) 1,184,738 774,226 23,027 2,102
Fund pricing fees 7,951 7,951 5,951 3,869
Professional fees 8,828 8,827 6,596 3,110
Custodian fees 15,496 20,053 5,455 1,428
Transfer agent fee (Note 5) 15,472 24 24 24
Shareholder reports 12,665 4,812 800 --
Trustees' fees and expenses 1,808 1,808 1,808 1,808
Other expenses 12,148 7,266 573 125
Insurance expenses 12,864 10,165 945 810
Total expenses 1,271,970 835,132 45,179 13,276
Less management and related fees waived (Note 5) -- -- -- (1,278)
Less expenses paid by Horace Mann Investors, Inc. (Note 5) -- -- -- (8,738)
Less expenses paid by commission credits (Note 3) (17,852) (21,820) -- --
Net expenses $1,254,118 $813,312 $45,179 $3,260
Net investment income 3,883,812 5,048,971 307,223 29,949
REALIZED AND UNREALIZED GAIN (LOSS) ON SECURITIES:
Realized gain (loss) on securities:
Investments 27,137,139 14,012,190 (42,569) 163
Foreign currency (153) (139) -- --
Net realized gain (loss) on securities 27,136,986 14,012,051 (42,569) 163
Unrealized appreciation on securities:
Investments 30,057,736 12,953,379 41,507 371
Foreign currency -- -- -- --
Net realized and unrealized gain (loss) on securities 57,194,722 26,965,430 (1,062) 534
NET INCREASE IN NET ASSETS FROM OPERATIONS $61,078,534 $32,014,401 $306,161 $30,483
<CAPTION>
For the period from inception of investment
operations through June 30, 1997
SMALL CAP INTERNATIONAL SOCIALLY
GROWTH EQUITY RESPONSIBLE
FUND FUND FUND
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends $350 $15,852 $14,027
Interest & amortization 6,407 6,455 516
6,757 22,307 14,543
Foreign taxes withheld -- (2,081) (269)
Total investment income 6,757 20,226 14,274
EXPENSES:
Management and related fees (Note 5) 8,755 4,841 4,106
Fund pricing fees 250 500 250
Professional fees 3,844 3,844 3,844
Custodian fees 568 2,056 991
Transfer agent fee (Note 5) 17 17 17
Shareholder reports -- -- --
Trustees' fees and expenses 1,808 1,808 1,808
Other expenses -- -- --
Insurance expenses 65 65 65
Total expenses 15,307 13,131 11,081
Less management and related fees waived (Note 5) (2,513) (2,540) (1,733)
Less expenses paid by Horace Mann Investors, Inc. (4,766) (6,502) (5,184)
Less expenses paid by commission credits (Note 3) -- -- --
Net expenses $8,028 $4,089 $4,164
Net investment income (1,271) 16,137 10,110
REALIZED AND UNREALIZED GAIN (LOSS) ON SECURITIES:
Realized gain (loss) on securities:
Investments (101,446) -- (502)
Foreign currency -- (1,317) --
Net realized gain (loss) on securities (101,446) (1,317) (502)
Unrealized appreciation on securities:
Investments 407,485 108,112 162,698
Foreign currency -- 23 --
Net realized and unrealized gain (loss) on securities 306,039 106,818 162,196
NET INCREASE IN NET ASSETS FROM OPERATIONS $304,768 $122,955 $172,306
</TABLE>
See notes to the financial statements.
<PAGE>
HORACE MANN MUTUAL FUNDS 1997 FUNDS SEMIANNUAL REPORT (UNAUDITED)
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
GROWTH FUND BALANCED FUND
06/30/97 12/31/96 06/30/97 12/31/96
6 months 12 months 6 months 12 months
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN
NET ASSETS
FROM OPERATIONS:
Net investment income $3,883,812 $6,452,684 $5,048,971 $8,219,408
Net realized short-term gain
(loss) on securities 9,031,995 27,750,104 4,793,866 13,881,249
Net realized long-term gain
(loss) on securities 18,104,991 20,451,849 9,218,185 11,586,155
Net unrealized appreciation/
depreciation on securities
during the period 30,057,736 27,601,625 12,953,379 11,168,939
Change in net assets
from operations 61,078,534 82,256,262 32,014,401 44,855,751
FROM DISTRIBUTIONS
TO SHAREHOLDERS:
Net investment income -- (6,377,641) -- (8,167,501)
Net realized short-term gain
from security transactions -- (27,699,455) -- (13,856,450)
Net realized long-term gain
from security transactions -- (20,429,320) -- (11,570,771)
Total distributions
to shareholders -- (54,506,416) -- (33,594,722)
FROM FUND SHARE
TRANSACTIONS:
Proceeds from shares sold 55,663,796 88,560,885 32,799,434 55,024,353
Net asset value of shares issued
in reinvestment of
dividends and capital gains
distributions -- 50,813,674 -- 30,441,049
55,663,796 139,374,559 32,799,434 85,465,402
Cost of shares redeemed (23,329,981) (33,668,049) (15,811,927) (24,368,316)
Net increase (decrease) in net
assets from fund
share transactions 32,333,815 105,706,510 16,987,507 61,097,086
TOTAL INCREASE
(DECREASE) IN NET ASSETS 93,412,349 133,456,356 49,001,908 72,358,115
NET ASSETS:
Beginning of period 430,556,081 297,099,814 300,697,370 228,192,919
End of period $523,968,430 $430,556,170 $349,699,278 $300,551,034
Undistributed net
investment income $4,007,065 $123,253 $5,166,780 $117,809
<CAPTION>
INCOME FUND SHORT-TERM FUND
06/30/97 12/31/96 06/30/97 12/31/96
6 months 12 months 6 months 12 months
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN
NET ASSETS
FROM OPERATIONS:
Net investment income $307,223 $641,435 $29,949 $54,797
Net realized short-term gain
(loss) on securities (4,101) (29,132) 163 20
Net realized long-term gain
(loss) on securities (38,468) 87,711 -- --
Net unrealized appreciation/
depreciation on securities
during the period 41,507 (325,363) 371 (328)
Change in net assets
from operations 306,161 374,651 30,483 54,489
FROM DISTRIBUTIONS
TO SHAREHOLDERS:
Net investment income -- (639,826) -- (54,334)
Net realized short-term gain
from security transactions -- -- -- (23)
Net realized long-term gain
from security transactions -- (3,181) -- --
Total distributions
to shareholders -- (643,007) -- (54,357)
FROM FUND SHARE
TRANSACTIONS:
Proceeds from shares sold 1,014,242 2,897,949 1,678,181 4,547,550
Net asset value of shares issued
in reinvestment of
dividends and capital gains
distributions -- 523,445 -- 40,250
1,014,242 3,421,394 1,678,181 4,587,800
Cost of shares redeemed (2,289,983) (2,836,463) (1,551,194) (4,364,884)
Net increase (decrease) in net
assets from fund
share transactions (1,275,741) 584,931 126,987 222,916
TOTAL INCREASE
(DECREASE) IN NET ASSETS (969,580) 316,575 157,470 223,048
NET ASSETS:
Beginning of period 10,862,273 10,531,523 1,228,893 1,005,779
End of period $9,892,693 $10,848,098 $1,386,363 $1,228,827
Undistributed net
investment income $314,467 $7,248 $30,955 $1,006
<CAPTION>
SMALL CAP GROWTH INTERNATIONAL EQUITY SOCIALLY RESPONSIBLE
FUND FUND FUND
06/30/97 06/30/97 06/30/97
Since inception/1/ Since inception/1/ Since inception/1/
<S> <C> <C> <C>
INCREASE (DECREASE) IN
NET ASSETS
FROM OPERATIONS:
Net investment income $(1,271) $16,137 $10,110
Net realized short-term gain
(loss) on securities (101,446) (1,317) (502)
Net realized long-term gain
(loss) on securities -- -- --
Net unrealized appreciation/
depreciation on securities
during the period 407,485 108,135 162,698
Change in net assets
from operations 304,768 122,955 172,306
FROM DISTRIBUTIONS
TO SHAREHOLDERS:
Net investment income -- -- --
Net realized short-term gain
from security transactions -- -- --
Net realized long-term gain
from security transactions -- -- --
Total distributions
to shareholders -- -- --
FROM FUND SHARE
TRANSACTIONS:
Proceeds from shares sold 2,316,024 1,247,153 963,908
Net asset value of shares issued
in reinvestment of
dividends and capital gains
distributions -- -- --
2,316,024 1,247,153 963,908
Cost of shares redeemed (93,244) (24,177) (43,527)
Net increase (decrease) in net
assets from fund
share transactions 2,222,780 1,222,976 920,381
TOTAL INCREASE
(DECREASE) IN NET ASSETS 2,527,548 1,345,931 1,092,687
NET ASSETS:
Beginning of period 1,000,000 1,000,000 1,000,000
End of period $3,527,548 $2,345,931 $2,092,687
Undistributed net
investment income $(1,271) $16,137 $10,110
</TABLE>
/1/ Since inception refers to March 10, 1997, the day investment operations
began.
See notes to the financial statements.
<PAGE>
HORACE MANN MUTUAL FUNDS 1997 FUNDS SEMIANNUAL REPORT (UNAUDITED)
Notes to the Financial Statements
June 30, 1997
1. BUSINESS ORGANIZATION -The Horace Mann Mutual Funds (the "Trust") is an
open-end, diversified management investment company registered under the
Investment Company Act of 1940, which offers units of beneficial ownership
("shares") in seven separate investment portfolios: Growth Fund, Balanced Fund,
Income Fund, Short-Term Investment Fund, Small Cap Growth Fund, International
Equity Fund and Socially Responsible Fund. These funds collectively are referred
to as the "Funds." The Small Cap Growth Fund, International Equity Fund and
Socially Responsible Fund were organized on November 7, 1996 and, on
December 26, 1996, each sold 4,000 shares of capital stock to Horace Mann Life
Insurance Company ("HMLIC") for $40,000. On March 10, 1997, these funds each
sold an additional 96,000 shares to HMLIC for $960,000 and began investment
operations on this date.
FUND INVESTMENT OBJECTIVES:
A. Growth Fund - primary, long-term capital growth; secondary, conservation
of principal and production of income.
B. Balanced Fund - realization of high long-term total rate of return
consistent with prudent investment risks.
C. Income Fund - long-term total rate of return in excess of the U.S. bond
market over a full market cycle.
D. Short-Term Fund - primary, realize maximum current income to the extent
consistent with liquidity; secondary, preservation of principal.
E. Small Cap Growth Fund - long-term capital appreciation through investing
primarily in equity securities of small cap companies.
F. International Equity Fund - long-term growth of capital through a
diversified portfolio of marketable foreign equity securities.
G. Socially Responsible Fund - long-term growth of capital, current income
and growth of income through investing primarily in a
diversified portfolio of equity securities of United States-
based companies, which are determined to be socially
responsible.
2. SIGNIFICANT ACCOUNTING POLICIES:
A. Security valuation - A security listed or traded on U.S. or foreign stock
exchanges is valued at its last sales price on the exchange where it is
principally traded. In the absence of a current quotation, the security is
valued at the mean between the last bid and asked prices on that exchange.
If there are no such bid and ask quotations the most recent bid quotation is
used. Securities quoted on the National Association of Securities Dealers
Automatic Quotation ("NASDAQ") System, for which there have been sales, are
valued at the most recent sale price reported on such system. If there are
no such sales, the value is the high or "inside" bid quotation. Securities
traded over-the-counter are valued at the last current bid price. Debt
securities that have a remaining maturity of 60 days or less are valued at
cost, plus or minus any unamortized premium or discount. Foreign securities
are converted to United States dollars using exchange rates at the close of
the New York Stock Exchange. In the event market quotations would not be
available, securities would be valued at fair value as determined in good
faith by the Board of Trustees; no such securities were owned by the Funds
at June 30, 1997.
B. Security transactions and investment income - Security transactions are
recorded on the trade date. Dividend income is recorded on the ex-dividend
date or, for certain foreign dividends, as soon as they become available.
Interest income including level yield, premium and discount amortization is
recorded on the accrual basis. Securities gains and losses are determined on
the basis of identified cost.
C. Federal income taxes - Since it is the Funds' policy to comply with the
provisions of the Internal Revenue Code applicable to regulated investment
companies and to distribute all taxable income to their shareholders, no
provision has been made for federal income or excise taxes. Dividends and
distributions payable to shareholders are recorded by the Funds on the
record date. Net investment income for federal income tax purposes includes
gains and losses realized on foreign currency transactions. These gains and
losses are included as net realized gains and losses for financial reporting
purposes.
D. Use of estimates - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenue and expenses
during the period. Actual results could differ from those estimates.
<PAGE>
HORACE MANN MUTUAL FUNDS 1997 FUNDS SEMIANNUAL REPORT (UNAUDITED)
Notes to the Financial Statements (continued)
June 30, 1997
3. OPERATING POLICIES:
A. Repurchase Agreements - Securities pledged as collateral for repurchase
agreements are held by State Street Bank and Trust Company and are
designated as being held on each Fund's behalf by its custodian under a
book-entry system. Each Fund monitors the adequacy of the collateral on a
daily basis and can require the seller to provide additional collateral in
the event the market value of the securities pledged falls below the
carrying value of the repurchase agreement, including accrued interest. Each
Fund will only enter into repurchase agreements with banks and other
financial institutions which are deemed by the investment adviser to be
credit worthy pursuant to guidelines established by the Trustees.
B. Asset Backed Securities - These securities are secured by installment
loans or leases or by revolving lines of credit. They often include credit
enhancements that help limit investors exposure to the underlying credit.
These securities are valued on the basis of the timing and certainty of the
cash flows compared to investments with similar durations.
C. Collateralized Mortgage Obligations - (PAC), (Planned Amortization
Class) - These securities have a pre-determined schedule for principal
repayment coupled with an enhanced degree of cash-flow certainty. A PAC
security is a specific class of mortgages which usually carry the most
stable cash flows and the lowest amount of prepayment risk. These securities
are valued on the basis of the timing and certainty of the cash flows
compared to investments with similar durations.
D. Commission Credits - Wellington Management Company, LLP, subadviser for
the Growth and Balanced Funds, seeks the best price and execution on each
transaction and negotiates commission rates solely on the execution
requirements of each trade. Occasionally, they place, under a directed
brokerage arrangement, common stock trades with a broker/dealer who credits
to the Funds part of the commissions paid.
E. Foreign Currency Transactions - The books and records of the Fund are
maintained in U.S. dollars. Foreign currency transactions are translated
into U.S. dollars on the following basis:
.market value of investment securities, other assets and other
liabilities at the daily rates of exchange, and
.purchases and sales of investment securities, dividend and
interest income and certain expenses at the rates of exchange
prevailing on the respective dates of such transactions.
The Funds isolate that portion of gains and losses on investments which is
due to changes in foreign exchange rates from that which is due to changes
in market prices of the investments.
Net realized and unrealized gain (loss) from foreign currency related
transactions includes gains and losses between trade and settlement dates on
securities transactions, gains and losses arising from the sales of foreign
currency, and gains and losses between the ex-dividend and payment dates on
dividends, interest and foreign withholding taxes.
<PAGE>
HORACE MANN MUTUAL FUNDS 1997 FUNDS SEMIANNUAL REPORT (UNAUDITED)
Notes to the Financial Statements (continued)
June 30, 1997
4. FUND SHARE TRANSACTIONS - The Funds are each a series of a diversified,
open-end management investment company registered under the Investment Company
Act of 1940. Shares are presently offered to HMLIC Separate Account and the
HMLIC 401K Separate Account. The Growth Fund shares also may be purchased under
the dividend reinvestment plans by certain shareholders.
Transactions in capital stock for the six months ended June 30, 1997 and the
year ended December 31, 1996 were:
<TABLE>
<CAPTION>
Shares issued
to shareholders
in reinvestment
of dividends and Net increase
Shares sold distribution Shares redeemed (decrease)
<S> <C> <C> <C> <C>
Growth Fund
06/30/97 $2,222,789 $-- $(928,475) $1,294,313
12/31/96 3,682,495 2,117,237 (1,400,207) 4,399,525
Balanced Fund
06/30/97 1,661,373 -- (802,198) 859,175
12/31/96 2,851,756 1,594,607 (1,256,381) 3,189,982
Income Fund
06/30/97 79,300 -- (179,049) (99,749)
12/31/96 222,424 41,119 (216,937) 46,606
Short-Term Fund
06/30/97 165,293 -- (152,934) 12,359
12/31/96 441,345 4,017 (423,462) 21,900
Small Cap Growth Fund
06/30/97 343,876 -- (9,574) 334,302
International Equity Fund
06/30/97 225,065 -- (2,500) 222,565
Socially Responsible Fund
06/30/97 195,054 -- (4,357) 190,697
</TABLE>
<PAGE>
HORACE MANN MUTUAL FUNDS 1997 FUNDS SEMIANNUAL REPORT (UNAUDITED)
Notes to the Financial Statements (continued)
June 30, 1997
5. MANAGEMENT AGREEMENTS AND OTHER TRANSACTIONS WITH AFFILIATES - Horace Mann
Educators Corporation ("HMEC") is the parent company of Horace Mann Investors,
Inc. ("Investors") and Horace Mann Service Corporation ("HMSC") and indirectly
owns HMLIC. Collectively these companies are referred to as Horace Mann.
As of May 1, 1997, Investors acts as the Trust's adviser, manages its
investments, and administers its business affairs pursuant to an investment
advisory and management agreement. Also on this date Wellington Management
Company, LLP, became the subadviser to the Growth, Balanced, Income and
Short-Term Funds. Effective March 10, 1997, PNC Equity Advisors Company became
the subadviser to Small Cap Growth Fund, and Scudder, Stevens & Clark, Inc.
became the subadviser to International Equity Fund and Socially Responsible
Fund. Each subadviser is compensated by Investors (not the Trust) and bears all
of its own expenses in providing subadvisory services.
For the Growth, Balanced, Income and Short-Term Funds, Investors receives
management and advisory fees. The management agreement, the fee which is accrued
daily and paid monthly, is calculated on a pro rata basis by applying the
following annual percentage rates to the aggregate of all four Funds' daily net
assets for the respective month.
<TABLE>
<S> <C>
Net Assets Rate
On initial $100 million .250%
Over $100 million .200%
</TABLE>
Under the advisory agreement the fee is accrued daily and calculated by applying
the following annual percentage rates to the average daily net assets of each
Fund for the respective month:
<TABLE>
<S> <C> <C> <C> <C>
Growth Fund Balanced Fund Income Fund Short-Term Fund Average Net Assets
0.400% 0.325% 0.250% 0.125% initial $100 million
0.300% 0.275% 0.200% 0.100% next $100 million
0.250% 0.225% 0.150% 0.075% next $300 million
0.250% 0.200% 0.150% 0.075% over $500 million
</TABLE>
<PAGE>
HORACE MANN MUTUAL FUNDS 1997 FUNDS SEMIANNUAL REPORT (UNAUDITED)
Notes to the Financial Statements (continued)
June 30, 1997
As compensation for its services, the Small Cap Growth, International Equity and
Socially Responsible Funds each pay Investors a monthly management fee. The
contractual fees are as follows:
<TABLE>
<S> <C>
Small Cap Growth Fund 1.40% of Net Assets
International Equity Fund 1.10% of Net Assets
Socially Responsible Fund 0.95% of Net Assets
</TABLE>
For the first year of operations Investors is voluntarily reducing these
management fees by 0.40%. The actual management fees are accrued daily and paid
monthly based on the following annual percentage rate to the Funds' average
daily net assets for the respective month. The fees during the first year of
operations net of waivers are:
<TABLE>
<S> <C>
Small Cap Growth Fund
1.00% on the first $25 million
0.75% on all assets over $25 million
International Equity Fund
March 3 to September 3, 1997 September 4, 1997 & thereafter
0.35% on the first $40 million 0.525% on the first $40 million
0.25% on the next $60 million 0.375% on the next $60 million
0.225% on all assets over $100 million 0.3375% on all assets over $100 million
Socially Responsible Fund
0.55% on the first $20 million
0.45% on the next $20 million
0.30% on the next $60 million
0.275% on all assets over $100 million
</TABLE>
Transfer and dividend disbursing agent services are provided by HMSC on a per
account basis. The transfer agent fees for the six months ended June 30, 1997
were $15,472 for the Growth Fund, $24 each for the Balanced, Income and
Short-Term Funds, and $17 each for the Small Cap Growth, International Equity
and Socially Responsible Funds.
The Trust pays each independent trustee a $1,000 annual retainer, $1,000 per
Board meeting attended, $200 for each committee meeting and $500 for each
telephonic meeting. Two meetings were held in 1997. For the six months ended
June 30, 1997, the fees, excluding travel expenses, for independent trustees
totaled $7,200. The Trust does not compensate interested officers and trustees
(those who are also officers and/or directors of Horace Mann).
<PAGE>
HORACE MANN MUTUAL FUNDS 1997 FUNDS SEMIANNUAL REPORT (UNAUDITED)
Notes to the Financial Statements (concluded)
June 30, 1997
6. SECURITY TRANSACTIONS - Security transactions, excluding short-term
investments, for the six months ended June 30, 1997 are:
<TABLE>
<CAPTION>
Purchases Proceeds from Sales
<S> <C> <C>
Growth Fund $156,079,499 $113,348,715
Balanced Fund 161,063,521 136,460,258
Income Fund 5,563,775 6,086,550
Short-Term Fund -- 743,127
Small Cap Growth Fund 3,785,947 7,406
International Equity Fund 1,837,042 289,101
Socially Responsible Fund 1,922,752 22
</TABLE>
The following table is based on the difference between cost and market value of
securities owned by each Fund at June 30, 1997.
<TABLE>
<CAPTION>
Aggregate gross Aggregate gross Net unrealized
unrealized unrealized appreciation
appreciation (depreciation) (depreciation)
<S> <C> <C> <C>
Growth Fund $107,631,758 $(7,996,715) $99,635,043
Balanced Fund 52,688,970 (4,072,645) 48,616,325
Income Fund 133,040 (30,333) 102,707
Short-Term Fund -- (48) (48)
Small Cap Growth Fund 449,064 (41,579) 407,485
International Equity Fund 139,351 (31,216) 108,135
Socially Responsible Fund 177,161 (14,463) 162,698
</TABLE>
<PAGE>
(Back Page)
Horace Mann
Insuring America's Educational Community
Underwritten by Horace Mann Life Insurance Company
IA-004359 (8/97)
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