Up Close
HORACE MANN MUTUAL FUNDS
SEMI-ANNUAL REPORT
JUNE 30, 1999
GRAPHIC OMITTED
Investing's not rocket science
(but it's close)
Back to school
means time to
plan ahead
Don't put all your eggs
in one basket
- --------------------------------------------------------------------------------
Horace Mann
<PAGE>
Contents
1 year performance ending 6/30/99
Growth Fund 7.06%
Balanced Fund 5.05%
Income Fund 0.45%
Short-term
Investment Fund 3.33%
Small Cap
Growth Fund 8.49%
International
Equity Fund 6.09%
Socially
Responsible Fund 9.81%
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 prospectuses.
This report must be preceded
or accompanied by a current
prospectus.
Focus on
funds adviser
PHOTO OF LIGHTHOUSE
In this issue, we focus on the role of
Wilshire Associates, as adviser to Horace
Mann's funds. We'll also take a look at
how diversifying your investment choices
can mean less risk to your portfolio.
FEATURES
Investing's not rocket science
(but it's close) 3
Back to school means
time to plan ahead 7
Don't put all your eggs in one basket 8
How the funds measure up 10
Take a closer look at your funds 14
DEPARTMENTS
Investment adviser letter 12
Financial statements 15
<PAGE>
HORACE MANN MUTUAL FUNDS LOGO
P.O. Box 4657
Springfield, IL 62708-4657
(217) 789-2500
Fellow Shareholders:
Thank you for your investment in the Horace Mann Family of Funds. At Horace
Mann, we recognize your commitment to long-term investing, and seek to provide
you with a range of products to assist you in reaching your financial
objectives.
Significant actions are under way at the Horace Mann Funds. With overwhelming
shareholder approval, Horace Mann retained Wilshire Associates as Adviser to the
Funds. A long-time strategic investment consultant to Horace Mann, Wilshire is a
globally prominent firm providing investment expertise to the largest and most
sophisticated institutions in the world -- and you!
Also with broad shareholder approval, the Board and Wilshire have elected to
implement a multiple-manager strategy in the Growth Fund and the equity portion
of the Balanced Fund. To that end, a very capable group of investment managers
have been selected as equity subadvisers for these two funds: Brinson Partners,
Mellon Equity Associates, and a new team at Wellington Management. Since the
transition, results have been very positive, and the Board strongly believes
these subadvisers will continue to add value for your portfolio over the long
term.
The other Horace Mann funds join the Growth and Balanced funds with good news by
providing competitive results over long time periods relative to their
respective benchmarks and peer universes. Regardless of the good news, Horace
Mann will not rest. Be assured the officers and trustees of the Funds continue
their diligent efforts to provide you with well-structured investment options
worthy of your investments for retirement. Through this continued work, we seek
to maintain your confidence in the Horace Mann Family of Funds.
MARKET OVERVIEW
So far in 1999, equity investors have continued to gain while the bond market
has moderately declined. Fueled by a strong economy with low inflation, the U.S.
equity market has continued to post new highs. Bond investors have been subject
to a rising interest rate environment, punctuated by Federal Open Market
Committee action on June 30 to raise the target Federal Funds rate by 25 basis
points. International markets advanced as Asia and the emerging markets
rebounded from turmoil in 1998.
PERSPECTIVE
As we near the dawn of a new millennium, we at the Horace Mann Family of Funds
appreciate your continued confidence. We recognize your commitment to investing
for the long term and seek to provide investment options echoing your resolve.
Thank you for selecting the Horace Mann Funds.
Sincerely,
/s/George Zock
George Zock
Chairman and President
Horace Mann Mutual Funds
<PAGE>
Investing's
not rocket science
(but it's close)
Photo of rocket
Wilshire's expertise helps
our funds take flight
With Wilshire Associates as the investment adviser to Horace Mann's funds,
Wilshire's analysis and perspective on the investment markets and our family of
funds in particular has become especially important to our clients. We recently
asked several Wilshire representatives about their firm's history, their work
for Horace Mann, and their analysis of the current market and Horace Mann's
funds during the first half of 1999.
"THE MATHEMATICS
OF ASTROPHYSICS
USED TO CALCULATE
ROCKET TRAJECTORIES
WERE APPLICABLE TO
NEW FINANCIAL
MATHEMATICS."
Wilshire tracks the investment market
Wilshire's history of going above and beyond began when the company was founded
in the early '70s, according to Senior Vice President and Principal Stephen
Nesbitt. "Dennis Tito, a scientist at NASA's Jet Propulsion Laboratory in
Pasadena, Cal., saw an opportunity to apply his mathematical skills to the
financial industry," Nesbitt says. "The mathematics of astrophysics used to
calculate rocket trajectories were applicable to new financial mathematics, like
beta, which measures the relative volatility of a stock when compared to the
market. So Tito founded Wilshire Associates, and Wilshire has maintained its
position as a leader in both financial technology and academic theory.
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<PAGE>
"One example is the Wilshire 5000 Index," Nesbitt explains. "In the mid '70s,
Wilshire analysts observed that the Dow Jones and S&P 500, although good
measures, were too narrow to represent the movement of the broad stock market.
To remedy this, Wilshire began calculating the Wilshire 5000 Total Market Index,
and today the Wilshire 5000 is the broadest measure of stock market activity
available. Many institutions now consider the Wilshire 5000 as the best
benchmark for U.S. market returns."
Wilshire now in the driver's seat
Wilshire's Vice President and Principal Michael O'Keeffe thinks his company's
expertise and new responsibilities regarding Horace Mann's funds will be an
advantage to Horace Mann's annuity clients. "We've already made changes as a
result of our new responsibilities," O'Keeffe says. "The shareholders provided
broad approval for these adjustments earlier this year. For the Growth Fund and
the equity portion of the Balanced Fund, we determined a multiple-manager
framework would serve as a viable approach to providing better performance in
all types of markets. We recommended the selection of two new managers to
complement a new team at Wellington Management for overseeing the portfolios.
Photo of man at computer terminal.
"WE'VE ALREADY MADE CHANGES
AS A RESULT OF
OUR NEW RESPONSIBILITIES."
Photo of people crossing street.
"It's important to understand that while these structural changes are
significant, the long-term strategy in place for the Growth Fund and the equity
portion of the Balanced Fund has not changed. The funds continue to be managed
in a long-term oriented, large capitalization "value" strategy. They are not
being made more aggressive than they have been
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in the past, but the managers will seek to invest in companies that provide
appropriate risk-adjusted returns," O'Keeffe explains.
Photo of people crossing street.
"IN OUR OPINION, THE
HORACE MANN FUNDS ARE
PROGRESSING WELL."
O'Keeffe also says Wilshire's new advisory role has given his company a higher
level of risk management responsibility for the funds. "There are risks to
investing, and market risk is unavoidable. It's important for Wilshire to
identify and understand the risks being taken by the subadvisers of your funds
and ensure unintended risks are avoided. We'll continually monitor the
portfolios from both a quantitative and qualitative perspective to be sure the
funds are performing as expected."
Performance over the long haul
What's important to investors is performance over the long haul. And while
Wilshire's analysts don't try to predict the future, they like how Horace Mann's
funds are positioned for the long term.
"Looking at the market environment in general terms, we've just been through an
interesting period," says Senior Associate Tom Goodrum. "International markets
are recovering from turmoil in 1998. The U.S. stock market advanced as the
American economy continues its long expansion, and consumers remain confident.
The stock market advance has broadened to include small-cap and value stocks --
both had previously been overlooked in what had become a large-cap growth
market. Despite little or no signs of inflation, investors have pushed yields on
bonds higher this year, to the point that the bellwether
PHOTO OF WILSHIRE'S TOM GOODRUM, STEPHEN NESBITT, AND MICHAEL O'KEEFFE.
5
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30-year Treasury Bond surpassed the psychologically important 6 percent level in
June.
"In our opinion, the Horace Mann funds are progressing well," Goodrum continues.
"The transition of the Growth Fund and equity portion of the Balanced Fund to a
multiple-manager format went smoothly, and the new subadvisers are energized by
the opportunity to serve Horace Mann and its clients. Under the new structure,
the funds performed admirably relative to the S&P 500 in the second quarter. The
Socially Responsible, Small Cap Growth, and International Equity funds also
performed well in the first half of 1999.
A LONG-TERM INVESTOR NEEDS TO HAVE A PRUDENT MIX OF STOCKS AND BONDS BASED
UPON THE INDIVIDUAL'S RISK TOLERANCE AND TIME HORIZON.
Photo of dart in bullseye.
"In the fixed income area, the Income Fund and the fixed income portion of the
Balanced Fund underperformed slightly in a bond market that encountered negative
results. Recognizing there are always periods of outperformance and
underperformance for any investment strategy, the subadvisers continue to
position the portfolios for long-term appreciation. We are confident, with this
long-term approach, the funds will assist clients in reaching their retirement
goals," Goodrum says.
Nesbitt cautions investors to remember the long-term perspective on investing. A
long-term investor needs to have a prudent mix of stocks and bonds based upon
the individual's risk tolerance and time horizon, he says.
"Our view is that investors will continue to be compensated over the long term
for taking risk in the equity markets, but we have to remember there will be
bumps along the way," Nesbitt cautions. "More risk-averse investors, or those
with shorter time horizons, may wish to consider fixed income alternatives like
the Income Fund. Investors seeking diversification may wish to invest in the
International Equity Fund. An investor in Horace Mann's funds can employ many
combinations in their investment mix. With the capable assistance of Horace
Mann's agents, individuals can structure the best investment program for their
futures."
6
<PAGE>
Back to school means TIME TO PLAN AHEAD
Photo of escalator.
As you head back to school, don't just think about lesson plans -- think about
retirement. Even if you're years away from retirement, you should be planning
for it now. Are you saving enough for retirement?
CHANGES IN YOUR LIFE ALSO
PROVIDE GOOD REASONS TO
CONSIDER INCREASING YOUR
TDA CONTRIBUTIONS.
If you already have a tax-deferred annuity (TDA), take full advantage of it. If
you're not already saving as much as the tax laws allow, now's a great time to
increase your TDA contribution.
Changes in your life also provide good reasons to consider increasing your TDA
contributions. A raise at work, an inheritance, or a reduction in your expenses
(like paying off a car or your children's college tuition) are all good reasons
to increase the amount you're currently setting aside.
Now is the best time to plan for the future. Call your Horace Mann agent today
to start a TDA or increase your current contribution.
7
<PAGE>
Don't put all your eggs IN ONE BASKET
When the talk turns to investments, you've probably heard the term "diversify."
What does it mean, and why would you want to do it?
Simply put, diversifying your investments means spreading your contributions
among a variety of investment choices. If one type of investment is not doing
well (for example, growth stocks), chances are another type (like small cap
stocks or bonds) is. And if your investments are spread among different
investment options, a downturn in one area doesn't necessarily mean you'll lose
money -- it may be offset by an upturn in one of your other investments.
HORACE MANN'S
ANNUITY
ALTERNATIVES
GIVES YOU A
VARIETY OF
INVESTMENT
CHOICES.
Photo of eggs.
That's why Horace Mann's Annuity Alternatives gives you a variety of investment
choices. Depending on your goals, your attitude toward investments and
investment strategies, you'll find clear choices within our family of funds to
meet your needs.
You can choose an investment with more risk, but also with more growth
potential. If you want less risk, we have several choices for you as well. By
choosing several different funds with varying degrees of risk, you can diversify
your investments and lessen the possibility that a market downturn will
adversely affect your returns.
Here is a brief description of each fund and its investment strategy. For
information on diversifying your investments with Annuity Alternatives, you may
obtain a prospectus by calling your agent or our Customer Service Department at
1-800-999-1030. The prospectus will provide complete information on Annuity
Alternatives, including charges
Photo of eraser.
8
<PAGE>
and expenses. You should read the prospectus carefully before you invest. Our
annuities are underwritten by Horace Mann Life Insurance Company and distributed
by the broker/dealer, Horace Mann Investors.
SMALL CAP GROWTH FUND (high risk) -- Seeks long-term capital appreciation.
Invests in small cap equity securities with earnings growth potential. Smaller
growth companies usually have the potential for faster growth in sales and
earnings than their large counterparts. Accordingly, their stock prices may rise
faster, but can also decline more in unfavorable business climates. As a result
of these "higher highs" and "lower lows," they are more volatile.
DEPENDING ON YOUR GOALS, YOUR
ATTITUDE TOWARD
INVESTMENTS AND
INVESTMENT STRATEGIES,
YOU'LL FIND CLEAR CHOICES
WITHIN OUR FAMILY OF
FUNDS TO MEET YOUR NEEDS.
INTERNATIONAL EQUITY FUND (moderately high risk) -- Seeks long-term growth of
capital primarily through diversified holdings of marketable foreign equity
investments. Invests in companies, wherever organized, which do business
primarily outside the United States. Investing in foreign securities may involve
a greater degree of risk than investing in domestic securities due to the
possibility of currency fluctuations, more volatile markets, less securities
regulation and political instability.
GROWTH FUND (moderately high risk) -- Deposits are invested in a diversified
portfolio of the stock of large, well-managed U.S. companies.
Photo of eggs in hands.
SOCIALLY RESPONSIBLE FUND (moderate risk) -- Seeks long-term growth of capital,
current income and growth of income. Invests in stocks of large, well-managed
U.S. companies exhibiting socially responsible business practices. Because this
fund invests in companies with socially responsible business practices, it has
limitations that may have an impact on performance.
BALANCED FUND (moderate risk) -- Deposits are invested in a combination of large
company stocks and high-quality bonds.
INCOME FUND (low to moderate risk) -- Deposits are invested in a diversified
portfolio of corporate and government bonds and other debt-type investments that
pay interest.
SHORT-TERM INVESTMENT FUND (low risk) -- Deposits are invested in a short-term
investments that typically provide modest growth.
9
<PAGE>
FUND PERFORMANCE
HOW THE FUNDS
FOR ANNUITY ALTERNATIVES CONTRACT OWNERS
Average annual total returns for the six months ended June 30, 1999 for the
Annuity Alternatives contracts are shown in the following table. For
contributions which remained invested in an Annuity Alternatives contract,
returns are shown first. For contracts which were surrendered, returns are shown
second. Redemption has no affect on the variable account rates of return after
the initial five-year contract period.
<TABLE>
<CAPTION>
RETURNS IF MONEY REMAINED INVESTED, BASED ON A $1,000 INVESTMENT.
<S> <C> <C> <C> <C>
VARIABLE ACCOUNT 1 YEAR 5 YEARS 10 YEARS SINCE INCEPTION
Growth Fund(3) 7.06 17.37 14.12 13.59(1)
Balanced Fund(3) 5.05 13.51 11.42 11.03(1)
Income Fund 0.45 5.50 5.94 5.83(1)
Short-Term Investment Fund 3.33 3.59 3.65 3.54(1)
Small Cap Growth Fund 8.49 -- -- 12.62(2)
International Equity Fund 6.09 -- -- 11.59(2)
Socially Responsible Fund 9.81 -- -- 18.14(2)
RETURNS IF MONEY WAS WITHDRAWN EARLY, BASED ON A $1,000 INVESTMENT.
VARIABLE ACCOUNT 1 YEAR 5 YEARS 10 YEARS SINCE INCEPTION
Growth Fund(3) -1.44 17.37 14.12 13.59(1)
Balanced Fund(3) -3.35 13.51 11.42 11.03(1)
Income Fund -7.59 5.50 5.94 5.83(1)
Short-Term Investment Fund -4.94 3.59 3.65 3.54(1)
Small Cap Growth Fund -0.01 -- -- 9.67(2)
International Equity Fund -2.40 -- -- 8.67(2)
Socially Responsible Fund 1.31 -- -- 15.18(2)
</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.
The average annual rates of return of each variable subaccount of the Annuity
Alternatives contracts were adjusted for a 1.35 perecent mortality and expense
fee until March 1, 1999, when the fee was reduced to 1.25 percent. 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 require a $25 annual maintenance charge on the
contract anniversary when the contract value is less than $10,000. This charge,
which is not reflected in the returns above, after the first contract year would
reduce the total rates of return by 2.5 percent on a $1,000 investment or .5
percent on a $5,000 investment.
During the first five contract years, surrender charges range from 2 to 8
percent for the flexible premium contracts and 1 to 5 percent for single premium
contracts. The average annual total returns with redemption are calculated using
flexible premium redemption charges. Distributions from an annuity may be
subject to federal taxes and a 10 percent IRS penalty if withdrawn before age
591/2.
Commission credits were used to pay certain expenses of the Growth and Balanced
Funds from 1994 through June 30, 1999. Certain Balanced and Income Fund expenses
were subsidized (assumed and/or waived) through 1987 and 1996, respectively.
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 inception, March 10, 1997. Subsidization and use of credits
resulted in higher actual returns and for some funds exceeded 1 percent,
depending on the period subsidized for each fund. There is no guarantee that
subsidization and use of credits will continue in the future.
1 Since inception for the Growth, Balanced, Income, and Short-Term Investment
funds refers to Nov. 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 their beginning date, March 10, 1997. The investment
subadvisers are BlackRock Financial Management, Inc. for the Small Cap Growth
Fund and, Scudder Kemper Investments, Inc. for the International Equity and
Socially Responsible Funds.
3 Wilshire Associates became the investment adviser for all variable investment
options for Horace Mann's Annuity Alternative contracts on March 1, 1999.
Subadvisers for each variable investment option, except the Growth Fund and the
stock portfolio of the Balanced Fund, remain the same. The Growth Fund and the
stock portfolio of the Balanced Fund now employ a multi-manager strategy using
three subadvisers to manage their assets. The two new subadvisers -- Brinson
Partners, Inc. and Mellon Equity Associates -along with a new team of fund
managers at Wellington Management Co., LLP now manage these assets.
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MEASURE UP
FOR GROWTH FUND PUBLIC SHAREHOLDERS AND PARTICIPANTS IN THE HORACE MANN EMPLOYEE
401(K) PLAN
Total average annualized returns for the six months ended June 30, 1999, for the
Horace Mann Mutual Funds and their comparable benchmark indices are shown in the
following table:
<TABLE>
<CAPTION>
1 YEAR 5 YEARS 10 YEARS SINCE INCEPTION
------ ------- -------- ----------------
<S> <C> <C> <C> <C>
Growth Fund7 8.39 18.84 15.56 15.03(1)
S&P 500 Stock Index 22.76 27.86 18.76 18.51
Balanced Fund7 6.38 14.94 12.83 12.45(1)
Stock/Bond Composite4 15.40 19.50 14.50 14.30
Income Fund 1.75 6.86 7.31 7.19(1)
Lehman Intermediate/Aggregate5 3.13 7.54 7.92 7.82
Short-Term Investment Fund 4.66 4.95 5.01 4.90(1)
90-day Treasury Bills 4.89 5.42 5.49 5.38
Small Cap Growth Fund 9.55 - - 13.87(2)
Russell 2000 Growth 8.31 - - 12.69
International Equity Fund 7.35 - - 12.96(3)
MSCI EAFE 7.59 - - 11.72(6)
Socially Responsible Fund 11.19 - - 19.62(3)
S&P 500 Stock Index 22.76 - - 32.30
</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, 1999. Certain Balanced and Income Fund
expenses were subsidized (assumed and/or waived) through 1987 and 1996,
respectively. 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 inception March 10, 1997. Subsidization
and use of credits resulted in higher actual returns and for some funds exceeded
1 percent depending on the period subsidized for each fund. There is no
guarantee that subsidization and use of credits will continue in the future.
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 indices listed are unmanaged industry benchmarks, not funds, and as such
they have no expenses.
1 Since inception for the Growth, Balanced, Income, and Short-Term Investment
funds refers to Nov. 1, 1989, the date Wellington Management Company, LLP became
their investment adviser. Effective May 1, 1997, Wellington became the
subadviser for these funds.
2 Since inception for the Small Cap Growth Fund refers to its beginning date,
Mar. 10, 1997. BlackRock Financial Management, Inc. is this fund's investment
subadviser.
3 Since inception for the International Equity and Socially Responsible funds
refers to their beginning date, Mar. 10, 1997. Scudder Kemper Investments, Inc.
is investment subadviser for these funds.
4 60% S&P 500, 40% Lehman Brothers Intermediate Government/Corporate Bond Index
through Apr. 30, 1997, Lehman Brothers Aggregate thereafter.
5 Lehman Brothers Intermediate Government/Corporate Bond Index through Apr. 30,
1997, Lehman Brothers Aggregate Bond Index thereafter.
6 The index reflects performance from Feb. 28, 1997 through June 30, 1999.
7 Wilshire Associates became the investment adviser for all the funds on Mar. 1,
1999. Subadvisers for each fund, except the Growth Fund and the stock portfolio
of the Balanced Fund, remain the same. The Growth Fund and the stock portfolio
of the Balanced Fund now employ a multiline manager strategy using three
subadvisers to manage their assets. The two new subadvisers -- Brinson Partners,
Inc. and Mellon Equity Associates -- along with a new team of fund managers at
Wellington Management Co., LLP now manage these assets.
RATES OF RETURN
11
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WILSHIRE
WILSHIRE ASSOCIATES
1299 OCEAN AVENUE, SUITE 700 SANTA MONICA, CA 90401-1085
TEL 310.451.3051 FAX 310.458.0520 WWW.WILSHIRE.COM
DEAR SHAREHOLDERS:
After assuming our role as adviser to the Funds, we at Wilshire are working
diligently to provide you with investment products that assist you in achieving
your retirement savings goals.
In our view, the first half of 1999 provided mixed results for long-term
investors. Domestic equity investors generally enjoyed positive results as the
Wilshire 5000 Index, a broad measure of stock market performance, advanced 11.9
percent during the first six months of 1999. Technology and energy stocks
performed particularly well during the period, while consumer stocks lagged
behind. International investors gained as well, but these gains were tempered by
a strengthening dollar. Japanese stocks have enjoyed a recovery in prices since
the beginning of the year.
On the other hand, domestic fixed income investors generally suffered negative
returns as interest rates rose in the United States. This decline was led by
both treasury and corporate issues. Mortgage investors generally posted slight
advances as fears of prepayment risk, caused by refinancing activity, lessened
due to higher interest rates.
THE GROWTH FUND AND THE EQUITY PORTION OF THE BALANCED FUND
Sweeping changes occurred in the Growth Fund and the equity portion of the
Balanced Fund during the first half of 1999 as shareholders overwhelmingly
approved a new investment management structure. Horace Mann and Wilshire are
continuing to work to ensure these funds will serve as competitive vehicles you
can use to prepare for retirement.
The transition to the new multi-manager structure was completed in the first
quarter of 1999. The new team of managers includes Brinson Partners, Mellon
Equity Associates, and a new team at Wellington Management Company. The
objective for creating this new structure is to provide the shareholders with a
more diversified approach to equity investment, but one that maintains the
long-term philosophy that has been in place for this fund since its inception.
That philosophy is one of conservative growth through investment in companies
priced at a discount in the marketplace relative to their intrinsic value. The
Growth Fund and the equity portion of the Balanced Fund are now comprised of
well-established, high-quality companies, and they are postured to provide good
performance on a prospective basis.
Performance over the last six months overall has been below expectations, but
with a silver lining. Value-oriented strategies began a strong comeback in the
second quarter, and the Growth Fund and the equity portion of the Balanced Fund
participated in this advance, outpacing the S&P 500 handily during the period.
While three-month results are not necessarily of consequence or relief to
long-term investors, we see this as an extremely positive development for the
funds, and a good start for the new structure. Conservative, patient investors
are finally being rewarded in the current market environment.
THE INCOME FUND AND THE FIXED INCOME PORTION OF THE BALANCED FUND
In a difficult environment for fixed income investors generally, the Income Fund
and the fixed income portion of the Balanced Fund encountered moderate
difficulty relative to the Lehman Brothers Aggregate Index. This
underperformance was driven by the fund maintaining a slightly higher-than-index
sensitivity
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<PAGE>
to changes in interest rates and an overallocation to corporate issues, which
performed poorly in the first half of 1999. While there were few bright spots in
the fixed income markets, Wellington did maintain a generous, well-diversified
allocation to high-yield securities, which performed well.
SOCIALLY RESPONSIBLE FUND
Subadvised by Scudder Kemper Investments Inc., the Horace Mann Socially
Responsible Fund provided a return consistent with the large-capitalization
market as measured by the S&P 500 Index. The fund benefited from the resurgence
of value strategies in the second quarter of 1999. Rebounds in the energy sector
and companies such as the international integrated oil producers, as well as
renewed interest in cyclical issues, helped performance.
SMALL-CAP GROWTH FUND
This fund provided a return consistent with the small-capitalization market over
the first six months of the year. The small cap market has experienced a great
deal of volatility over recent periods, and only recently has the market advance
broadened to include smaller companies. BlackRock's portfolio identified many of
the market's winners early, and over the course of the first half of the year,
held its own as some of these winners slowed. The Small-Cap Growth Fund's
longer-term results look very attractive.
INTERNATIONAL FUND
For the year-to-date, the International Fund added value relative to the MSCI
EAFE (Europe, Asia, Far East) Index. Results were driven by substantial exposure
to technology and telecommunications companies and favorable exposure in Japan.
Particularly good performers included Nikko (+131 percent), Tokyo Electron (+78
percent) and luxury goods company LVMH (+63 percent). Some softness was observed
in the European portion of the portfolio. Long-term results for this fund are
solid.
SHORT-TERM INVESTMENT FUND
The Short-Term Investment Fund, with Wellington Management as subadviser,
performed consistent with its benchmark. The fund provided a return in excess of
inflation, and this portfolio is positioned largely in high-quality, short-term
government agency notes.
CONCLUSION
We believe each of the Horace Mann Funds is well positioned in the current
market environment. Each subadviser is keenly aware of your retirement savings
mission and is constantly seeking productive investment opportunities. Horace
Mann and Wilshire are working diligently to ensure the Funds serve as
appropriate and successful vehicles to assist you in achieving your long-term
financial goals.
We look forward to the challenge, and appreciate your confidence.
Sincerely,
/s/Michael P. O'Keeffe, CFA /s/Thomas M. Goodrum, Jr., CFA
Michael P. O'Keeffe, CFA Thomas M. Goodrum, Jr., CFA
Vice President and Principal Senior Associate
Wilshire Associates Wilshire Associates
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Take a CLOSER LOOK AT HOW
YOUR FUNDS PERFORMED
The following pages give you an overview of how your funds performed.
By having a Horace Mann annuity, you've already taken the first step toward your
investment goals. But if you have questions about your retirement plan or other
investment options, you should talk to your Horace Mann agent. He or she can
help you determine if you're saving enough to meet your goals.
CUSTOMER SERVICE
If your agent is unavailable, contact Horace Mann's customer service area at
1-800-999-1030. Or visit our website at WWW.HORACEMANN.COM for more information
about our funds and fund prices and insurance products. We also offer special
information just for educators.
HEADING TOWARD 2000. . .
Everyone who relies on computers for business or pleasure should be aware
programs that use the date for processing may fail if they misinterpret "00" as
the year 1900 instead of the year 2000. As 1998 came to a close, Horace Mann was
in the final stages of changing its internal computer systems to make them Year
2000 compliant. And as of Jan. 1, 1999, 93% of Horace Mann's 60 computer systems
were compliant. The remaining 7% of the systems are pending implementation or
are in final testing.
Horace Mann initiated its millennium plan to fix 13 million lines of code in
1995. The company will spend 1999 conducting additional tests on its systems and
continuing to work with suppliers and other service providers it does business
with to make sure they are ready for Y2K. In addition, the company will continue
developing contingency plans in the event of outside service interruptions.
14
<PAGE>
SEMI-ANNUAL REPORT
JUNE 30, 1999
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
A.L. Gallop
Richard A. Holt
Richard D. Lang
Harriet A. Russell
George J. Zock
OFFICERS OF THE FUNDS
GEORGE J. ZOCK
President and Chairman
A. THOMAS ARISMAN
Vice President
ANN CAPARROS
Secretary and
Ethics Compliance Officer
WILLIAM KELLY
Treasurer and Regulatory
Compliance Officer
LINDA L. SACCO
Assistant Secretary
ROGER FISHER
Controller
DIANE M. BARNETT
Tax Compliance Officer
- --------------------------------------------------------------------------------
ADMINISTRATOR
HORACE MANN INVESTORS, INC.
#1 Horace Mann Plaza
Springfield, IL 62715
INVESTMENT ADVISER
WILSHIRE ASSOCIATES INCORPORATED
1299 Ocean Avenue
Santa Monica, CA 90401-1085
CUSTODIAN
STATE STREET BANK AND TRUST COMPANY
801 Pennsylvania Avenue
Kansas City, MO 64105
INVESTMENT SUBADVISERS
BLACKROCK FINANCIAL MANAGEMENT, INC.
345 Park Avenue
New York, NY 10154-0010
BRINSON PARTNERS, INC.
209 South LaSalle Street
Chicago, IL 60604
MELLON EQUITY ASSOCIATES, LLP
500 Grant Street, Suite 4200
Pittsburgh, PA 15258
SCUDDER KEMPER INVESTMENTS, INC.
345 Park Avenue
New York, NY 10154-0010
WELLINGTON MANAGEMENT COMPANY, LLP
75 State Street
Boston, MA 02109
15
<PAGE>
HORACE MANN MUTUAL FUNDS
1999 FUNDS SEMI-ANNUAL REPORT
(UNAUDITED)
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
JUNE 30, 1999
PER SHARE DATA
LESS DISTRIBUTION FROM:
NET ASSET TOTAL INCOME
YEAR VALUE NET NET REALIZED (LOSS) FROM NET NET
ENDED BEGINNING INVESTMENT AND UNREALIZED INVESTMENTS INVESTMENT REALIZED TOTAL
12/31 OF PERIOD INCOME1 GAINS (LOSSES)1 OPERATIONS1 INCOME GAINS DISTRIBUTIONS
GROWTH FUND
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
6/30/1999 $24.34 $0.14 $1.49 $1.63 $ -- $ -- $ --
1998 25.66 0.41 1.51 1.92 0.41 2.83 3.24
1997 23.76 0.40 5.09 5.49 0.39 3.20 3.59
1996 21.66 0.43 5.08 5.51 0.40 3.01 3.41
1995 17.64 0.52 5.41 5.93 0.49 1.42 1.91
1994 19.85 0.49 (0.57) (0.08) 0.45 1.68 2.13
BALANCED FUND
- ---------------------------------------------------------------------------------------------------------------------------
6/30/1999 $18.90 $0.31 $0.46 $0.77 $ -- $ -- $ --
1998 19.82 0.73 0.77 1.50 0.74 1.68 2.42
1997 18.94 0.65 2.92 3.57 0.62 2.07 2.69
1996 18.00 0.60 2.70 3.30 0.57 1.79 2.36
1995 15.26 0.67 3.46 4.13 0.61 0.78 1.39
1994 16.72 0.62 (0.81) (0.19) 0.55 0.72 1.27
INCOME FUND5
- ---------------------------------------------------------------------------------------------------------------------------
6/30/1999 $13.24 $0.37 $(0.59) $(0.22) $ -- $ -- $ --
1998 13.00 0.78 0.27 1.05 0.69 0.12 0.81
1997 12.69 0.81 0.39 1.20 0.85 0.04 0.89
1996 13.03 0.76 (0.31) 0.45 0.79 -- 0.79
1995 12.02 0.80 0.99 1.79 0.78 -- 0.78
1994 13.06 0.75 (1.04) (0.29) 0.75 -- 0.75
</TABLE>
1 The "Net Investment Income" per share and the "Net realized and unrealized
gains (losses)" 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.
See notes to the financial statements.
16
<PAGE>
HORACE MANN MUTUAL FUNDS 1999 FUNDS SEMI-ANNUAL REPORT
(UNAUDITED)
<TABLE>
<CAPTION>
RATIO/SUPPLEMENTAL DATA
RATIO TO AVERAGE NET
ASSETS BEFORE WAIVED &
REIMBURSED EXPENSES
RATIO OF RATIO OF
NET ASSET NET ASSETS EXPENSES NET INCOME PORTFOLIO RATIO OF
VALUE END TOTAL END OF PERIOD TO AVERAGE TO AVERAGE TURNOVER RATIO OF NET INVESTMENT
OF PERIOD RETURN2,3 (IN THOUSANDS) NET ASSETS4 NET ASSETS4 RATE EXPENSES INCOME
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$25.97 6.70% $706,578 0.34% 0.57% 172.23% -- --
24.34 7.64 670,731 0.51 1.57 59.63 -- --
25.66 23.45 598,502 0.53 1.50 54.56 -- --
23.76 25.28 430,556 0.59 1.79 67.63 -- --
21.66 33.67 297,100 0.63 2.50 64.59 -- --
17.64 (0.35) 202,103 0.69 2.36 69.42 -- --
- --------------------------------------------------------------------------------------------------------------------------------
$19.67 4.07% $443,562 0.34% 1.64% 127.03% -- --
18.90 7.68 427,920 0.50 3.60 63.69 -- --
19.82 19.04 387,110 0.51 3.12 77.54 -- --
18.94 18.27 300,551 0.56 3.12 72.10 -- --
18.00 27.12 228,193 0.59 3.79 64.80 -- --
15.26 (1.12) 160,815 0.63 3.59 121.82 -- --
- --------------------------------------------------------------------------------------------------------------------------------
$13.02 1.66% $14,677 0.45% 2.84% 17.65% -- --
13.24 8.09 13,959 0.88 5.85 46.60 -- --
13.00 9.42 9,658 0.92 6.09 96.80 -- --
12.69 3.50 10,848 0.70 5.88 112.60 0.91% 5.67%
13.03 14.93 10,532 0.61 6.16 74.53 0.88 5.89
12.02 (2.21) 9,259 0.61 5.85 205.35 0.92 5.54
</TABLE>
4 Ratios of Expenses and Net Investment Income to Average Net Assets do not
reflect commission credits.
5 Certain expenses for the Income Fund were assumed or waived by Horace Mann
Investors, Inc. through December 31, 1996.
17
<PAGE>
HORACE MANN MUTUAL FUNDS 1999 FUNDS SEMI-ANNUAL REPORT
(UNAUDITED)
FINANCIAL HIGHLIGHTS (CONCLUDED)
<TABLE>
<CAPTION>
JUNE 30, 1999
PER SHARE DATA
LESS DISTRIBUTION FROM:
NET ASSET TOTAL INCOME
YEAR VALUE NET NET REALIZED (LOSS) FROM NET NET
ENDED BEGINNING INVESTMENT AND UNREALIZED INVESTMENTS INVESTMENT REALIZED TOTAL
12/31 OF PERIOD INCOME1 GAINS (LOSSES)1 OPERATIONS1 INCOME GAINS DISTRIBUTIONS
SHORT-TERM FUND4
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
6/30/1999 $ 9.98 $ 0.22 $ -- $0.22 $ -- $ -- $ --
1998 9.99 0.49 0.01 0.50 0.51 -- 0.51
1997 10.03 0.51 -- 0.51 0.55 -- 0.55
1996 10.00 0.50 (0.01) 0.49 0.46 -- 0.46
1995 10.08 0.53 -- 0.53 0.61 -- 0.61
1994 10.07 0.39 -- 0.39 0.38 -- 0.38
SMALL CAP
GROWTH FUND5
- -----------------------------------------------------------------------------------------------------------------------
6/30/1999 $12.38 $(0.07) $ 1.23 $1.16 $ -- $ -- $ --
1998 11.70 (0.07) 0.75 0.68 -- -- --
1997 10.00 (0.02) 1.72 1.70 -- -- --
INTERNATIONAL
EQUITY FUND5
- -----------------------------------------------------------------------------------------------------------------------
6/30/1999 $12.13 $ 0.10 $ 0.85 $0.95 $ -- $ -- $ --
1998 10.27 0.11 1.84 1.95 0.09 -- 0.09
1997 10.00 0.08 0.27 0.35 0.08 -- 0.08
SOCIALLY
RESPONSIBLE FUND5
- -----------------------------------------------------------------------------------------------------------------------
6/30/1999 $12.99 $ 0.27 $ 1.34 $1.61 $ -- $ -- $ --
1998 12.10 0.27 0.91 1.18 0.17 0.12 0.29
1997 10.00 0.10 2.20 2.30 0.10 0.10 0.20
</TABLE>
1 The "Net Investment Income" per share and the "Net realized and unrealized
gains (losses)" 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.
See notes to the financial statements.
18
<PAGE>
HORACE MANN MUTUAL FUNDS 1999 FUNDS SEMI-ANNUAL REPORT
(UNAUDITED)
<TABLE>
<CAPTION>
RATIO/SUPPLEMENTAL DATA
RATIO TO AVERAGE NET
ASSETS BEFORE WAIVED &
REIMBURSED EXPENSES
RATIO OF RATIO OF
NET ASSET NET ASSETS EXPENSES NET INCOME PORTFOLIO RATIO OF
VALUE END TOTAL END OF PERIOD TO AVERAGE TO AVERAGE TURNOVER RATIO OF NET INVESTMENT
OF PERIOD RETURN2,3 (IN THOUSANDS) NET ASSETS NET ASSETS RATE EXPENSES INCOME
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$10.20 2.20% $1,785 0.15% 2.30% 0.00% 0.96% 1.49%
9.98 4.97 1,331 0.69 4.78 0.00 2.59 2.88
9.99 5.09 1,151 0.50 4.98 0.00 2.52 2.96
10.03 5.02 1,229 0.53 4.93 0.00 2.44 3.02
10.00 5.25 1,006 0.84 5.11 0.00 2.35 3.60
10.08 3.89 1,114 0.49 3.78 0.00 2.36 1.91
- --------------------------------------------------------------------------------------------------------------------------------
$13.54 9.37% $33,369 0.70% (0.52)% 92.23% 0.81% (0.63)%
12.38 5.81 28,655 1.11 (0.59) 168.31 1.75 (1.23)
11.70 17.016 16,525 0.78 (0.19) 91.49 1.44 (0.85)
- --------------------------------------------------------------------------------------------------------------------------------
$13.08 7.83% $14,431 0.62% 0.80% 41.93% 0.96% 0.46%
12.13 18.95 10,311 1.03 0.99 57.71 2.06 (0.04)
10.27 3.466 5,214 0.46 1.29 31.99 1.82 (0.07)
- --------------------------------------------------------------------------------------------------------------------------------
$14.60 12.39% $51,277 0.47% 0.69% 24.79% 0.53% 0.63%
12.99 9.80 35,564 0.64 2.10 41.63 1.12 1.62
12.10 23.046 9,213 0.49 1.65 20.85 1.16 0.98
</TABLE>
4 Certain expenses for the Short-Term Fund were assumed or waived by Horace Mann
Investors, Inc. through through June 30, 1999.
5 Certain expenses for the Small Cap Growth, International Equity and Socially
Responsible funds were assumed and/or waived by Horace Mann Investors since
inception, Mar. 10, 1997.
6 The returns are not annualized.
19
<PAGE>
HORACE MANN MUTUAL FUNDS 1999 FUNDS SEMI-ANNUAL REPORT
(UNAUDITED)
STATEMENT OF INVESTMENTS
GROWTH FUND
JUNE 30, 1999
PIE CHART:
CASH AND OTHER NET ASSETS 2.3%
COMMON & PREFERRED STOCK 97.7%
<TABLE>
<CAPTION>
COMMON STOCK
AEROSPACE/DEFENSE 4.67%
NUMBER OF MARKET
SHARES (000)
<S> <C> <C>
AlliedSignal, Inc. 59,900 $ 3,774
Lockheed Martin Corp. 309,500 11,529
Raytheon Co.- B 196,700 13,843
United Technologies Corp. 54,200 3,885
- ----------------------------------------------------------------------------------------
33,031
AUTOMOTIVE 2.01%
Dana Corp. 45,200 2,082
Delphi Automotive Systems Corp. 137,200 2,547
Eaton Corp. 24,500 2,254
Ford Motor Co. 130,100 7,343
- ----------------------------------------------------------------------------------------
14,226
BANKS/FINANCIAL SERVICES 18.26%
Associates First Capital Corp.- A 67,100 2,973
Bank of America Corp. 126,400 9,267
BankBoston Corp. 52,900 2,705
Bear Stearns Cos., Inc. 23,100 1,080
Chase Manhattan Corp. 182,200 15,783
Citigroup, Inc. 282,000 13,395
Comerica, Inc. 69,500 4,131
Federal National Mortgage Association 85,200 5,826
Financial Security Assurance Hldgs Ltd. 43,900 2,283
First Union Corp. 80,700 3,793
Firstar Corp. 145,400 4,071
Fleet Financial Group 237,200 10,526
Golden West Financial Corp. 23,100 2,264
Household Int'l, Inc. 157,200 7,447
KeyCorp 101,300 3,254
MBNA Corp. 76,200 2,334
Merrill Lynch & Co., Inc. 8,000 639
Morgan Stanley Dean Witter Co. 48,200 4,940
National City Corp. 77,700 5,089
PNC Bank Corp. 115,300 6,644
Providian Financial Corp. 12,500 1,169
Schwab (Charles) Corp. 14,100 1,549
Southtrust Corp. 65,300 2,502
US Bancorp 179,000 6,086
Wachovia Corp. 23,900 2,045
Wells Fargo & Co. 169,500 7,246
- ----------------------------------------------------------------------------------------
129,041
BROADCASTING & MEDIA 0.85%
AT&T Corp. - Liberty Media Group - A* 20,800 764
CBS Corp.* 46,100 2,002
Disney (Walt) Co. 42,500 1,310
Fox Entertainment Group* 70,400 1,896
- ----------------------------------------------------------------------------------------
5,972
BUILDING & CONSTRUCTION 1.72%
Lafarge Corp. 46,500 1,648
Masco Corp. 303,000 8,749
Vulcan Materials Co. 36,200 1,747
- ----------------------------------------------------------------------------------------
12,144
</TABLE>
See notes to the financial statements.
20
<PAGE>
HORACE MANN MUTUAL FUNDS 1999 FUNDS SEMI-ANNUAL REPORT
(UNAUDITED)
STATEMENT OF INVESTMENTS (CONTINUED)
GROWTH FUND
JUNE 30, 1999
<TABLE>
<CAPTION>
COMMON STOCK
(CONTINUED)
BUSINESS SERVICES 0.39%
<S> <C> <C>
NUMBER OF MARKET
SHARES (000)
Automatic Data Processing, Inc. 33,400 $ 1,470
Dun & Bradstreet Corp. 36,200 1,283
- -----------------------------------------------------------------------------------------
2,753
CHEMICALS 1.63%
Dow Chemical Co. 19,500 2,474
DuPont (E.I.) de Nemours & Co. 49,700 3,395
Praxair, Inc. 83,300 4,076
Rohm & Haas Co. 36,300 1,556
- -----------------------------------------------------------------------------------------
11,501
COMMUNICATION SERVICES/EQUIPMENT 8.55%
Ameritech Corp. 76,900 5,652
AT&T Corp. 114,600 6,396
Bell Atlantic Corp. 114,500 7,485
BellSouth Corp. 104,500 4,898
Corning Inc. 190,400 13,352
Lucent Technologies, Inc. 68,500 4,619
MCI WorldCom, Inc.* 126,600 10,888
Motorola, Inc. 9,700 919
SBC Communications, Inc. 51,200 2,970
Tellabs, Inc.* 37,200 2,513
U S West, Inc. 12,300 723
- -----------------------------------------------------------------------------------------
60,415
COMPUTER SOFTWARE/SERVICES 14.37%
Ceridian Corp.* 38,600 1,262
Cisco Systems, Inc.* 44,600 2,874
Compaq Computer Corp. 27,300 637
Computer Sciences Corp.* 53,200 3,681
Compuware Corp.* 298,000 9,461
DST Systems, Inc.* 36,200 2,276
Electronic Data Systems Corp. 241,100 13,637
EMC Corp.* 11,000 605
First Data Corp. 244,400 11,960
Hewlett-Packard Co. 76,700 7,708
Internationl Business Machines Corp. 112,000 14,476
Lexmark Int'l Group, Inc.- A* 20,600 1,361
Microsoft Corp.* 71,400 6,435
NCR Corp.* 27,300 1,333
Siebel Systems, Inc.* 36,900 2,445
Xerox Corp. 361,800 21,369
- -----------------------------------------------------------------------------------------
101,520
CONSUMER PRODUCTS 2.96%
Colgate-Palmolive Co. 7,000 691
Fortune Brands, Inc. 27,900 1,154
Newell Rubbermaid, Inc. 102,100 4,748
Phillip Morris Cos., Inc. 282,000 11,333
Procter & Gamble Co. (The) 22,100 1,972
Ralston Purina Co. 35,300 1,074
- -----------------------------------------------------------------------------------------
20,972
ELECTRONIC EQUIPMENT/SERVICES 1.93%
Analog Devices, Inc.* 20,100 1,009
Eastman Kodak Co. 16,900 1,145
Intel Corp. 134,800 8,012
</TABLE>
See notes to the financial statements.
21
<PAGE>
HORACE MANN MUTUAL FUNDS 1999 FUNDS SEMI-ANNUAL REPORT
(UNAUDITED)
STATEMENT OF INVESTMENTS (CONTINUED)
GROWTH FUND
JUNE 30, 1999
<TABLE>
<CAPTION>
COMMON STOCK
(CONTINUED)
<S> <C> <C>
NUMBER OF MARKET
SHARES (000)
Lam Research Corp.* 29,900 $ 1,394
Micron Technology, Inc.* 14,100 568
Texas Instruments, Inc. 10,300 1,494
- ----------------------------------------------------------------------------------------
13,622
ENERGY 5.15%
BP Amoco PLC (ADR) 14,500 1,573
Chevron Corp. 58,300 5,549
Enron Oil & Gas Corp. 26,200 2,142
Exxon Corp. 177,400 13,682
Halliburton Co. 34,100 1,543
Mobil Corp. 32,900 3,257
Royal Dutch Petroleum Co. 142,900 8,610
- ----------------------------------------------------------------------------------------
36,356
ENTERTAINMENT 0.53%
Mattel, Inc. 141,100 3,730
FOOD & BEVERAGE 0.89%
Anheuser- Busch Cos., Inc. 15,000 1,064
Coca-Cola Co. (The) 12,000 750
IBP, Inc. 31,500 748
McDonald's Corp. 18,600 768
PepsiCo, Inc. 16,500 638
Sara Lee Corp. 65,900 1,495
Tyson Foods, Inc.- A 35,200 792
- ----------------------------------------------------------------------------------------
6,255
HEALTH CARE/PHARMACEUTICALS 5.67%
Abbott Laboratories 35,800 1,629
American Home Products Corp. 42,000 2,415
Amgen, Inc.* 26,900 1,636
Baxter International, Inc. 136,300 8,263
Bristol-Myers Squibb Co. 23,000 1,620
Cardinal Health, Inc. 12,000 769
Columbia/HCA Healthcare Corp. 54,100 1,234
Convance, Inc.* 76,200 1,824
Johnson & Johnson 15,000 1,470
Lilly (Eli) & Co. 52,700 3,775
Merck & Co., Inc. 27,900 2,065
Pfizer, Inc. 11,100 1,218
Pharmacia & Upjohn, Inc. 44,000 2,500
Schering-Plough Corp. 27,500 1,458
United Healthcare Corp. 97,100 6,081
Warner-Lambert Co. 30,600 2,123
- ----------------------------------------------------------------------------------------
40,080
INSURANCE 8.34%
ACE Ltd. 40,000 1,130
Aetna, Inc. 144,500 12,924
Allstate Corp. 131,900 4,732
AMBAC Financial Group 72,500 4,142
American Int'l Group, Inc. 19,500 2,283
Aon Corp. 245,700 10,135
CIGNA Corp. 117,900 10,493
Jefferson Pilot Corp. 45,000 2,978
Lincoln National Corp. 32,800 1,716
Marsh & McLennan Cos., Inc. 35,000 2,642
</TABLE>
See notes to the financial statements.
22
<PAGE>
HORACE MANN MUTUAL FUNDS 1999 FUNDS SEMI-ANNUAL REPORT
(UNAUDITED)
STATEMENT OF INVESTMENTS (CONTINUED)
GROWTH FUND
JUNE 30, 1999
<TABLE>
<CAPTION>
COMMON STOCK
(CONTINUED)
<S> <C> <C>
NUMBER OF MARKET
SHARES (000)
MGIC Investment Corp. 36,800 $ 1,789
Old Republic Int'l Corp. 126,400 2,188
XL Capital Ltd.- A 31,800 1,797
- ----------------------------------------------------------------------------------------
58,949
MANUFACTURING 2.60%
Caterpillar, Inc. 30,300 1,818
Deere & Co. 29,600 1,173
General Electric Co. 40,900 4,622
Illinois Tool Works, Inc. 33,700 2,763
Ingersoll-Rand Co. 24,000 1,551
Maytag Corp. 23,100 1,610
Tyco Int'l Ltd. 50,900 4,823
- ----------------------------------------------------------------------------------------
18,360
METALS & MINING 0.57%
Aluminum Co. of America 48,500 3,001
AK Steel Holding Corp. 45,600 1,026
- ----------------------------------------------------------------------------------------
4,027
PAPER & FOREST PRODUCTS 2.07%
Champion Int'l Corp. 35,300 1,690
Georgia-Pacific Corp. 50,000 2,369
International Paper Co. 25,800 1,303
Kimberly-Clark Corp. 141,400 8,060
Louisana-Pacific Corp. 51,900 1,233
- ----------------------------------------------------------------------------------------
14,655
PRINTING/PUBLISHING 0.98%
Gannett, Inc. 74,300 5,303
Tribune Co. 18,700 1,629
- ----------------------------------------------------------------------------------------
6,932
RETAIL/SPECIALTY 2.46%
Dayton Hudson Corp. 26,600 1,729
Federated Department Stores, Inc.* 32,900 1,742
Limited, Inc. (The) 54,900 2,491
May Department Stores Co. (The) 80,700 3,299
Safeway, Inc.* 19,600 970
TJX Cos., Inc. 75,600 2,518
Wal-Mart Stores, Inc. 69,000 3,329
VF Corp. 29,700 1,270
- ----------------------------------------------------------------------------------------
17,348
TRANSPORTATION 6.14%
AMR Corp.* 22,500 1,536
Alaska Air Group, Inc.* 27,200 1,136
Burlington Northern Santa Fe 486,000 15,066
CSX Corp. 8,600 390
Delta Air Lines, Inc. 22,800 1,314
FDX Corp.* 296,700 16,096
Norfolk Southern Corp. 164,500 4,956
Union Pacific Corp. 49,900 2,910
- ----------------------------------------------------------------------------------------
43,404
UTILITIES 4.85%
Central & South West Corp. 39,700 928
Coastal Corp. 94,300 3,772
</TABLE>
See notes to the financial statements.
23
<PAGE>
HORACE MANN MUTUAL FUNDS 1999 FUNDS SEMI-ANNUAL REPORT
(UNAUDITED)
STATEMENT OF INVESTMENTS (CONCLUDED)
GROWTH FUND
JUNE 30, 1999
<TABLE>
<CAPTION>
COMMON STOCK
(CONCLUDED)
<S> <C> <C>
NUMBER OF MARKET
SHARES (000)
Consolidated Edison, Inc. 42,700 $ 1,932
Dominion Resources, Inc. (Va) 24,400 1,057
DTE Energy Co. 41,400 1,656
El Paso Energy Corp. 36,900 1,298
Energy East Corp. 50,400 1,310
Entergy Corp. 254,300 7,947
FPL Group, Inc. 40,600 2,218
GPU, Inc. 78,900 3,329
National Fuel Gas Co. 45,300 2,197
Pinnacle West Capital Corp. 80,900 3,256
Southern Co. 91,300 2,419
Texas Utilities Co. 23,700 978
- ----------------------------------------------------------------------------------------
34,297
- ----------------------------------------------------------------------------------------
TOTAL COMMON STOCK 97.59% 689,590
(Cost $617,229)
- ----------------------------------------------------------------------------------------
PREFERRED STOCK
CHEMICALS 0.07%
Monsanto Co. 11,600 465
(Cost $549)
- ----------------------------------------------------------------------------------------
TOTAL COMMON AND PREFERRED STOCK 97.66% 690,055
(Cost $617,778)
- ----------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT MARKET
(000) (000)
SHORT-TERM
INVESTMENTS
State Street Bank and Trust - Repurchase Agreement
4.25%, 07/01/99, (secured by $8,703
US Treasury Bond, 6.75%, 08/15/26) $ 8,528 $ 8,528
Swiss Bank - Repurchase Agreement
4.80%, 07/01/99, (secured by $261
US Treasury Bond, 6.00%, 02/15/26) 255 255
State Street Global Advisers - Money Market
4.563% 2,582 2,582
- ----------------------------------------------------------------------------------------
TOTAL SHORT-TERM INVESTMENTS 1.61% 11,365 11,365
(Cost $11,365)
- ----------------------------------------------------------------------------------------
TOTAL INVESTMENTS 99.27% 701,420
(Cost $629,143)
CASH AND OTHER ASSETS IN
EXCESS OF LIABILITIES 0.73% 5,158
- ----------------------------------------------------------------------------------------
NET ASSETS 100.00% $706,578
========================================================================================
</TABLE>
* Non-income producing during the six months ended June 30, 1999 as this
security did not pay dividends. See notes to the financial statements.
24
<PAGE>
HORACE MANN MUTUAL FUNDS 1999 FUNDS SEMI-ANNUAL REPORT
(UNAUDITED)
PIE CHART:
MUNICIPAL BONDS 1.6%
U.S. & FOREIGN CORPORATE BOND/NOTES 17.9%
U.S. & FOREIGN GOVERNMENT & AGENCY OBLIGATIONS 17.8%
COMMON STOCK 59.5%
CASH & OTHER NET ASSETS 3.2%
STATEMENT OF INVESTMENTS
BALANCED FUND
JUNE 30, 1999
<TABLE>
<CAPTION>
COMMON STOCK
NUMBER OF MARKET
SHARES (000)
AEROSPACE/DEFENSE 2.82%
<S> <C> <C>
AlliedSignal, Inc. 23,000 $ 1,449
Lockheed Martin Corp. 116,000 4,321
Raytheon Co.- B 74,800 5,264
United Technologies Corp. 20,600 1,477
- ----------------------------------------------------------------------------------------
12,511
AUTOMOTIVE 1.25%
Dana Corp. 17,600 811
Delphi Automotive Systems Corp. 52,100 967
Eaton Corp. 9,300 856
Ford Motor Co. 51,700 2,918
- ----------------------------------------------------------------------------------------
5,552
BANKS/FINANCIAL SERVICES 11.13%
Associates First Capital Corp.- A 21,200 939
Bank of America Corp. 48,700 3,570
BankBoston Corp. 20,100 1,028
Bear Stearns Cos., Inc. 8,900 416
Chase Manhattan Corp. 69,700 6,038
Citigroup, Inc. 110,720 5,259
Comerica, Inc. 26,800 1,593
Federal National Mortgage Association 32,200 2,202
Financial Security Assurance Hldgs Ltd. 16,900 879
First Union Corp. 30,700 1,443
Firstar Corp. 56,100 1,571
Fleet Financial Group, Inc. 90,900 4,034
Golden West Financial Corp. 8,900 872
Household Int'l, Inc. 59,800 2,833
KeyCorp 39,400 1,266
MBNA Corp. 29,600 906
Merrill Lynch & Co., Inc. 2,800 224
Morgan Stanley Dean Witter Co. 18,600 1,907
National City Corp. 31,800 2,083
PNC Bank Corp. 44,100 2,541
Providian Financial Corp. 4,900 458
Schwab (Charles) Corp. 5,500 604
Southtrust Corp. 25,200 965
US Bancorp 67,600 2,298
Wachovia Corp. 8,200 702
Wells Fargo & Co. 64,400 2,753
- ----------------------------------------------------------------------------------------
49,384
BROADCASTING & MEDIA 0.51%
AT&T Corp. - Liberty Media Group- A* 7,600 279
CBS Corp.* 17,800 773
Disney (Walt) Co. 15,000 462
Fox Entertainment Group* 27,100 730
- ----------------------------------------------------------------------------------------
2,244
BUILDING & CONSTRUCTION 1.04%
Lafarge Corp. 17,900 634
Masco Corp. 115,200 3,326
Vulcan Materials Co. 14,000 676
- ----------------------------------------------------------------------------------------
4,636
BUSINESS SERVICES 0.24%
Automatic Data Processing, Inc. 12,700 559
Dun & Bradstreet Corp. 14,000 496
- ----------------------------------------------------------------------------------------
1,055
</TABLE>
See notes to the financial statements.
25
<PAGE>
HORACE MANN MUTUAL FUNDS 1999 FUNDS SEMI-ANNUAL REPORT
(UNAUDITED)
STATEMENT OF INVESTMENTS (CONTINUED)
BALANCED FUND
JUNE 30, 1999
<TABLE>
<CAPTION>
COMMON STOCK
(CONTINUED)
NUMBER OF MARKET
SHARES (000)
CHEMICALS 0.99%
<S> <C> <C>
Dow Chemical Co. 7,500 $ 952
DuPont (E.I.) de Nemours & Co. 18,800 1,284
Praxair, Inc. 31,700 1,551
Rohm & Haas Co. 14,000 600
- ----------------------------------------------------------------------------------------
4,387
COMMUNICATION SERVICES/EQUIPMENT 5.19%
American Mobile Satellite Corp. (warrants) 25 1
Ameritech Corp. 29,600 2,176
AT&T Corp. 41,800 2,333
Bell Atlantic Corp. 48,548 3,174
BellSouth Corp. 40,300 1,889
Corning, Inc. 72,400 5,077
Lucent Technologies, Inc. 23,800 1,605
KMC Telecom Holdings, Inc. (warrants) 475 1
MCI WorldCom, Inc.* 47,900 4,119
Motorola, Inc. 3,600 341
SBC Communications, Inc. 17,900 1,038
Tellabs, Inc.* 14,500 980
U S West, Inc. 4,800 282
- ----------------------------------------------------------------------------------------
23,016
COMPUTER SOFTWARE/SERVICES 8.80%
Ceridian Corp.* 14,900 487
Cisco Systems, Inc.* 16,400 1,057
Compaq Computer Corp. 10,400 242
Computer Sciences Corp.* 20,700 1,432
Compuware Corp.* 119,800 3,804
DST Systems, Inc.* 14,000 880
Electronic Data Systems Corp. 91,700 5,187
EMC Corp.* 4,400 242
First Data Corp. 92,100 4,507
Hewlett-Packard Co. 29,200 2,935
International Business Machines Corp. 43,300 5,597
Lexmark Int'l Group, Inc.- A* 8,000 529
Microsoft Corp.* 27,500 2,478
NCR Corp.* 10,600 517
Siebel Systems, Inc.* 14,200 941
Xerox Corp. 138,700 8,192
- ----------------------------------------------------------------------------------------
39,027
CONSUMER PRODUCTS 1.80%
Colgate-Palmolive Co. 3,400 336
Fortune Brands, Inc. 10,800 447
Newell Rubbermaid, Inc. 37,900 1,762
Phillip Morris Cos., Inc. 104,900 4,216
Procter & Gamble Co. (The) 9,200 821
Ralston Purina Co. 13,600 414
- ----------------------------------------------------------------------------------------
7,996
ELECTRONIC EQUIPMENT/SERVICES 1.25%
Analog Devices, Inc.* 7,600 381
Eastman Kodak Co. 6,600 447
Intel Corp. 52,600 3,126
Lam Research Corp.* 11,500 536
Micron Technology, Inc.* 5,300 214
Texas Instruments, Inc. 5,800 841
- ----------------------------------------------------------------------------------------
5,545
</TABLE>
See notes to the financial statements.
26
<PAGE>
HORACE MANN MUTUAL FUNDS 1999 FUNDS SEMI-ANNUAL REPORT
(UNAUDITED)
STATEMENT OF INVESTMENTS (CONTINUED)
BALANCED FUND
JUNE 30, 1999
<TABLE>
<CAPTION>
COMMON STOCK
(CONTINUED)
ENERGY 3.15%
<S> <C> <C>
NUMBER OF MARKET
SHARES (000)
BP Amoco PLC (ADR) 5,600 $ 608
Chevron Corp. 22,200 2,113
Enron Oil & Gas Corp. 10,100 826
Exxon Corp. 68,900 5,314
Halliburton Co. 12,200 552
Mobil Corp. 12,700 1,257
Royal Dutch Petroleum Co. 54,700 3,296
- ----------------------------------------------------------------------------------------
13,966
ENTERTAINMENT 0.32%
Mattel, Inc. 53,600 1,417
FOOD & BEVERAGE 0.57%
Anheuser-Busch Cos., Inc. 7,000 497
Coca-Cola Co. (The) 4,600 288
IBP, Inc. 12,200 290
McDonald's Corp. 7,000 289
PepsiCo, Inc. 7,800 302
Sara Lee Corp. 25,100 569
Tyson Foods, Inc.- A 13,600 306
- ----------------------------------------------------------------------------------------
2,541
HEALTH CARE/PHARMACEUTICALS 3.44%
Abbott Laboratories 14,100 642
American Home Products Corp. 16,600 955
Amgen, Inc.* 10,400 632
Baxter International, Inc. 52,600 3,189
Bristol-Myers Squibb Co. 8,300 585
Cardinal Health, Inc. 4,500 289
Columbia/HCA Healthcare Corp. 29,900 682
Covance, Inc.* 29,000 694
Johnson & Johnson 5,000 490
Lilly (Eli) & Co. 20,000 1,433
Merck & Co., Inc. 10,200 755
Pfizer, Inc. 4,000 439
Pharmacia & Upjohn, Inc. 15,600 886
Schering-Plough Corp. 10,700 567
United Healthcare Corp. 36,900 2,311
Warner-Lambert Co. 10,100 701
- ----------------------------------------------------------------------------------------
15,250
INSURANCE 4.97%
ACE Ltd. 16,100 455
Aetna, Inc. 54,900 4,910
Allstate Corp. 50,900 1,826
AMBAC Financial Group 28,100 1,605
American Int'l Group, Inc. 7,100 831
Aon Corp. 93,450 3,855
CIGNA Corp. 48,800 3,987
Jefferson Pilot Corp. 17,300 1,145
Lincoln National Corp. 12,800 670
Marsh & McLennan Cos., Inc. 6,800 513
MGIC Investment Corp. 14,200 690
Old Republic Int'l Corp. 48,700 843
XL Capital Ltd.- A 12,300 695
- ----------------------------------------------------------------------------------------
22,025
</TABLE>
See notes to the financial statements.
27
<PAGE>
HORACE MANN MUTUAL FUNDS 1999 FUNDS SEMI-ANNUAL REPORT
(UNAUDITED)
STATEMENT OF INVESTMENTS (CONTINUED)
BALANCED FUND
JUNE 30, 1999
<TABLE>
<CAPTION>
COMMON STOCK
(CONTINUED)
NUMBER OF MARKET
SHARES (000)
MANUFACTURING 1.58%
<S> <C> <C>
Caterpillar, Inc. 11,700 $ 702
Deere & Co. 10,300 408
General Electric Co. 15,400 1,740
Illinois Tool Works, Inc. 12,800 1,050
Ingersoll-Rand Co. 9,300 601
Maytag Corp. 8,900 620
Tyco Int'l Ltd. 19,700 1,867
- ----------------------------------------------------------------------------------------
6,988
METALS & MINING 0.35%
Aluminum Co. of America 18,800 1,163
AK Steel Holding Corp. 17,600 396
- ----------------------------------------------------------------------------------------
1,559
PAPER & FOREST PRODUCTS 1.26%
Champion Int'l Corp. 13,600 651
Georgia-Pacific Corp. 19,200 910
International Paper Co. 9,900 500
Kimberly-Clark Corp. 53,700 3,061
Louisana-Pacific Corp. 20,100 477
- ----------------------------------------------------------------------------------------
5,599
PRINTING/PUBLISHING 0.60%
Gannett, Inc. 28,700 2,048
Tribune Co. 7,200 627
- ----------------------------------------------------------------------------------------
2,675
RETAIL/SPECIALTY 1.53%
Dayton Hudson Corp. 11,300 735
Federated Department Stores, Inc.* 12,700 672
Limited, Inc. (The) 21,200 962
May Department Stores Co. (The) 33,300 1,361
Safeway, Inc.* 7,500 371
TJX Cos., Inc. 29,100 969
Wal-Mart Stores, Inc. 25,200 1,216
VF Corp. 11,400 487
- ----------------------------------------------------------------------------------------
6,773
TRANSPORTATION 3.74%
AMR Corp.* 8,000 546
Alaska Air Group, Inc.* 10,500 438
Burlington Northern Santa Fe 184,800 5,729
CSX Corp. 5,400 245
Delta Air Lines, Inc. 8,800 507
FDX Corp.* 112,800 6,119
Norfolk Southern Corp. 63,100 1,901
Union Pacific Corp. 19,300 1,125
- ----------------------------------------------------------------------------------------
16,610
UTILITIES 2.98%
Central & South West Corp. 15,300 358
Coastal Corp. 36,400 1,456
Consolidated Edison, Inc. 16,600 751
Dominion Resources, Inc. (Va) 8,700 377
DTE Energy Co. 15,900 636
El Paso Energy Corp. 14,300 503
Energy East Corp. 19,500 507
Entergy Corp. 96,700 3,022
</TABLE>
See notes to the financial statements.
28
<PAGE>
HORACE MANN MUTUAL FUNDS 1999 FUNDS SEMI-ANNUAL REPORT
(UNAUDITED)
STATEMENT OF INVESTMENTS (CONTINUED)
BALANCED FUND
JUNE 30, 1999
<TABLE>
<CAPTION>
NUMBER OF MARKET
SHARES (000)
COMMON STOCK
(CONCLUDED)
<S> <C> <C>
FPL Group, Inc. 15,600 $ 852
GPU, Inc. 30,200 1,274
National Fuel Gas Co. 17,700 858
Pinnacle West Capital Corp. 33,000 1,328
Southern Co. 35,200 933
Texas Utilities Co. 8,900 367
- ----------------------------------------------------------------------------------------
13,222
TOTAL COMMON STOCK 59.51% 263,978
(Cost $235,797)
- ----------------------------------------------------------------------------------------
PREFERRED STOCK
CHEMICAL 0.04%
Monsanto Co. 4,300 173
(Cost $203)
- ----------------------------------------------------------------------------------------
TOTAL COMMON AND PREFERRED STOCK 59.55% 264,151
(Cost $236,000)
PRINCIPAL
AMOUNT MARKET
(000) (000)
- ----------------------------------------------------------------------------------------
U.S. AND FOREIGN
GOVERNMENT AND
AGENCY OBLIGATIONS
TREASURY BONDS/NOTES
10.375%, 11/15/09 $ 6,000 $ 7,166
12.00%, 08/15/13 10,000 14,041
FEDERAL HOME LOAN BANKS
5.905%, 03/27/08 1,000 961
FEDERAL NATIONAL MORTGAGE ASSOCIATION
6.42%, 02/27/08 1,500 1,446
6.50%, 04/25/08 1,800 1,740
6.60%, 05/01/08 1,500 1,456
6.46%, 06/26/08 1,000 964
6.36%, 08/14/08 1,215 1,165
FEDERAL HOME LOAN MORTGAGE CORPORATION
(MORTGAGE BACKED SECURITIES)
9.50%, 08/01/01 3 3
9.50%, 09/01/01 2 2
9.50%, 10/01/01 9 9
9.25%, 11/01/02 18 19
8.25%, 10/01/07 40 41
8.25%, 11/01/07 39 40
8.75%, 05/01/08 27 28
8.50%, 08/01/08 30 31
9.00%, 09/01/08 42 44
8.00%, 09/01/09 35 36
8.00%, 04/01/10 42 43
7.00%, 09/01/10 12 12
7.00%, 10/01/10 75 76
7.00%, 12/01/10 69 70
7.00%, 01/01/11 1,353 1,362
7.00%, 02/01/11 1,813 1,823
7.00%, 03/01/11 3,141 3,155
7.00%, 04/01/11 1,116 1,121
7.00%, 07/01/11 770 773
6.00%, 08/01/12 88 85
</TABLE>
See notes to the financial statements.
29
<PAGE>
HORACE MANN MUTUAL FUNDS 1999 FUNDS SEMI-ANNUAL REPORT
(UNAUDITED)
STATEMENT OF INVESTMENTS (CONTINUED)
BALANCED FUND
JUNE 30, 1999
<TABLE>
<CAPTION>
U.S. AND FOREIGN
GOVERNMENT AND
AGENCY OBLIGATIONS
(CONTINUED)
<S> <C> <C>
PRINCIPAL
AMOUNT MARKET
(000) (000)
6.00%, 09/01/12 $ 73 $ 70
6.00%, 01/01/13 33 32
6.00%, 02/01/13 822 795
6.00%, 06/01/13 120 116
6.00%, 10/01/13 810 783
6.00%, 11/01/13 888 859
6.50%, 05/01/14 2,486 2,455
6.50%, 06/01/14 997 984
FEDERAL NATIONAL MORTGAGE ASSOCIATION
(MORTGAGE BACKED SECURITIES)
7.043%, 07/01/06 872 893
6.85%, 10/01/07 1,693 1,707
6.62%, 12/01/07 404 402
6.44%, 01/01/08 591 582
6.50%, 01/01/08 123 122
6.51%, 01/01/08 84 83
6.58%, 01/01/08 103 102
6.62%, 01/01/08 59 59
6.47%, 02/01/08 444 438
6.265%, 06/01/08 198 193
6.34%, 06/01/08 238 232
6.42%, 06/01/08 297 292
6.23%, 07/01/08 198 192
6.25%, 07/01/08 990 963
6.31%, 07/01/08 139 135
6.21%, 08/01/08 962 934
5.845%, 01/01/09 403 381
5.98%, 01/01/09 337 321
8.75%, 02/01/10 222 233
6.50%, 11/01/12 1,390 1,371
10.25%, 07/01/13 6 7
8.00%, 08/01/14 772 797
8.50%, 09/01/14 287 301
8.50%, 01/01/15 171 179
8.50%, 03/01/15 251 263
6.00%, 06/01/18 1,892 1,801
6.00%, 12/01/18 296 281
6.00%, 01/01/19 296 282
7.50%, 10/01/22 522 528
7.50%, 07/01/23 225 228
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
(MORTGAGE BACKED SECURITIES)
11.00%, 12/15/00 10 10
9.50%, 08/20/01 11 11
9.50%, 10/20/01 15 16
9.50%, 07/20/02 16 17
9.50%, 12/20/02 17 17
9.50%, 01/20/03 14 14
9.50%, 02/20/03 17 18
9.50%, 05/20/03 28 29
9.50%, 08/20/03 16 17
9.50%, 09/20/03 48 50
9.50%, 11/20/03 20 21
9.50%, 09/20/04 10 10
</TABLE>
See notes to the financial statements.
30
<PAGE>
HORACE MANN MUTUAL FUNDS 1999 FUNDS SEMI-ANNUAL REPORT
(UNAUDITED)
STATEMENT OF INVESTMENTS (CONTINUED)
BALANCED FUND
JUNE 30, 1999
<TABLE>
<CAPTION>
U.S. AND FOREIGN
GOVERNMENT AND
AGENCY OBLIGATIONS
(CONCLUDED)
<S> <C> <C>
PRINCIPAL
AMOUNT MARKET
(000) (000)
8.25%, 05/15/06 $ 70 $ 72
8.50%, 01/15/20 26 27
8.50%, 02/15/21 104 109
8.50%, 06/15/21 73 77
8.50%, 08/15/21 14 15
8.00%, 05/20/22 262 269
7.50%, 01/15/23 906 916
7.50%, 02/15/23 36 37
8.50%, 04/15/23 141 148
7.50%, 05/15/23 1,199 1,213
7.50%, 06/15/23 1,222 1,235
7.50%, 08/15/23 603 609
7.50%, 09/15/23 283 286
7.50%, 11/15/23 844 853
7.50%, 12/15/23 3,579 3,626
7.50%, 03/15/28 69 66
6.50%, 04/15/28 1,119 1,077
6.50%, 06/15/28 517 493
6.50%, 07/15/28 300 288
6.50%, 08/15/28 717 691
6.50%, 10/15/28 672 646
6.50%, 01/15/29 2,342 2,269
6.50%, 02/15/29 302 290
COLLATERALIZED MORTGAGE OBLIGATION
(PLANNED AMORTIZATION CLASS)(NOTE 3)
GE Cap Mortgage Services Inc.
6.00%, 04/25/09 1,000 971
FNMA 1993-182 Class H
5.00%, 09/25/23 1,709 1,616
FNMA 1994-19 Class B
5.00%, 01/25/24 1,538 1,458
FOREIGN (U.S. DOLLAR DENOMINATED)
SCL Term Aereo Santiago**
6.95%, 07/01/12 1,500 1,397
- ----------------------------------------------------------------------------------------
TOTAL U.S. AND FOREIGN GOVERNMENT AND
AGENCY OBLIGATIONS 17.83%
(Cost $80,982) 74,802 79,092
- ----------------------------------------------------------------------------------------
MUNICIPAL BONDS
California Hsg Fin Agy Rev
8.16%, 02/01/28 1,105 1,142
Denver CO City & County Sch. Dist.
6.79%, 12/15/08 930 934
Horry Cnty SC Arpt Rev
7.38%, 07/01/12 1,450 1,477
Ohio State Taxable Dev Assistance
7.60%, 10/01/16 1,250 1,269
Oxnard CA Un High Sch Dist
7.78%, 08/01/17 1,000 1,020
San Bernardino County
7.09%, 08/01/11 1,000 1,014
- ----------------------------------------------------------------------------------------
TOTAL MUNICIPAL BONDS 1.55%
(Cost $7,020) $6,735 $6,856
</TABLE>
See notes to the financial statements.
31
<PAGE>
HORACE MANN MUTUAL FUNDS 1999 FUNDS SEMI-ANNUAL REPORT
(UNAUDITED)
<TABLE>
<CAPTION>
STATEMENT OF INVESTMENTS (CONTINUED)
BALANCED FUND
JUNE 30, 1999
PRINCIPAL
AMOUNT MARKET
(000) (000)
- ----------------------------------------------------------------------------------------
U.S. AND FOREIGN
CORPORATE
BONDS/NOTES
Advanced Micro Devices, Inc.
<S> <C> <C>
11.00%, 08/01/03 $ 435 $ 439
Abraxas Petrolem Corp.
11.50%, 11/01/04 200 127
Accuride Corp.
9.25%, 02/01/08 300 292
AK Steel Corp.
9.125%, 12/15/06 250 256
AK Steel Corp.**
7.875%, 2/15/09 80 77
Akzo Nobel N.V.**
6.00%, 11/15/03 1,430 1,386
Alaris Med Inc. =
0.00%, 08/01/08 375 203
Allbritton Communication Co.
9.75%, 11/30/07 200 202
Allbritton Communication Co.
8.875%, 02/01/08 325 313
Allied Waste
7.625%, 01/01/06 45 134
AMC Entertainment, Inc.**
9.50%, 03/15/09 300 285
AMC Entertainment, Inc.
9.50%, 02/01/11 100 94
American Media Operations, Inc.**
10.25%, 05/01/09 150 151
American Pad & Paper Co.
13.00%, 11/15/05 160 100
American Standard, Inc.
7.625%, 02/15/10 70 65
Amphenol Corp.
9.875%, 05/15/07 250 259
AMR Corp.
9.00%, 09/15/16 1,550 1,723
Amresco, Inc.
9.875%, 06/17/29 300 231
AMSC Acquistion, Inc.
12.25%, 03/31/08 75 57
Arcadia Financial Ltd.
11.50%, 03/15/07 25 22
ARCO Chemical Co.
9.80%, 02/01/20 200 195
Armco, Inc.
9.00%, 09/15/07 275 284
Armco, Inc.
8.875%, 12/01/08 100 102
Associates Corp. North America
7.95%, 02/15/10 1,500 1,610
Aurora Foods, Inc.
9.875%, 02/15/07 100 103
Aztar Corp.**
8.875%, 05/15/07 275 263
B & G Foods Incications Corp.
9.625%, 08/01/07 225 212
</TABLE>
See notes to the financial statements.
32
<PAGE>
HORACE MANN MUTUAL FUNDS 1999 FUNDS SEMI-ANNUAL REPORT
(UNAUDITED)
<TABLE>
<CAPTION>
STATEMENT OF INVESTMENTS (CONTINUED)
BALANCED FUND
JUNE 30, 1999
PRINCIPAL
AMOUNT MARKET
(000) (000)
U.S. AND FOREIGN
CORPORATE
BONDS/NOTES
(CONTINUED)
Banponce Corp.
<S> <C> <C>
6.75%, 12/15/05 $ 1,760 $ 1,697
Bayou Steel Corp.
9.50%, 05/15/08 100 97
Bell Sports, Inc.
11.00%, 08/15/08 250 249
Benedek Communications Corp. =
0.00%, 05/15/06 185 154
Beverly Enterprises
9.00%, 02/15/06 100 100
Big Flower Press Holding, Inc.
8.875%, 07/01/07 50 48
Boise Cascade Office Products Co.
7.05%, 05/15/05 1,600 1,523
Bresnan Communications Group** =
0.00%, 02/01/09 100 65
BTI Telecom Corp.
10.50%, 09/15/07 400 344
Century Communications Corp. =
0.00%, 01/15/08 800 352
Chancellor Media Corp.
9.375%, 10/01/04 170 173
Charter Communications Holdings**
8.625%, 04/01/09 400 384
Chevy Chase Bank F.S.B.
9.25%, 12/01/08 150 152
Chiquita Brands Int'l, Inc.
10.00%, 06/15/09 200 199
Classic Cable, Inc.**
9.875%, 08/01/08 175 181
Columbia/HCA Healthcare Corp.
7.25%, 05/20/08 175 159
Comcast Corp.
9.375%, 05/15/05 100 106
Commercial Credit Group, Inc.
10.00%, 05/15/09 1,021 1,230
Computer Association Int'l, Inc.
6.50%, 04/15/08 2,000 1,856
Concentric Network Corp.
12.75%, 12/15/07 325 340
Conseco, Inc.
6.80%, 06/15/05 1,300 1,223
Container Corp. of America
9.75%, 04/01/03 170 176
Cross Timbers Oil Co.
9.25%, 04/01/07 150 148
Crown Castle Int'l Corp. =
0.00%, 11/15/07 150 104
CSC Holdings, Inc.
9.25%, 11/01/05 150 157
Decision One Holdings Corp.
9.75%, 08/01/07 200 10
Del Monte Foods Co. =
0.00%, 12/15/07 163 120
Delta Air Lines, Inc.
10.125%, 05/15/10 886 1,051
</TABLE>
See notes to the financial statements.
33
<PAGE>
HORACE MANN MUTUAL FUNDS 1999 FUNDS SEMI-ANNUAL REPORT
(UNAUDITED)
<TABLE>
<CAPTION>
STATEMENT OF INVESTMENTS (CONTINUED)
BALANCED FUND
JUNE 30, 1999
PRINCIPAL
AMOUNT MARKET
(000) (000)
U.S. AND FOREIGN
CORPORATE
BONDS/NOTES
(CONTINUED)
Delta Air Lines, Inc.
<S> <C> <C>
9.75%, 05/15/21 $ 412 $ 488
Dime Capital Trust
9.33%, 05/06/27 1,500 1,560
Duane Reade, Inc.
9.25%, 12/15/08 500 519
Dura Operating Corp.**
9.00%, 05/01/09 85 81
e. spire Communications, Inc. =
0.00%, 04/01/06 250 130
e. spire Communications, Inc. =
0.00%, 07/01/08 400 152
EchoStar DBS Corp.**
9.375%, 02/01/09 725 738
El Paso Energy Corp.
6.75%, 05/15/09 1,500 1,441
Emmis Communications Corp.**
8.125%, 03/15/09 135 128
Empresa Nacional de Electricid**
8.50%, 04/01/09 650 637
Exodus Communications, Inc.
11.25%, 07/01/08 250 262
Energy Corp of America
9.50%, 05/15/07 425 389
Engle Homes, Inc.
9.25%, 02/01/08 285 265
Fairchild Semiconductor Corp.
10.125%, 03/15/07 450 436
Falcon Building Products, Inc. =
0.00%, 06/15/07 500 335
Falcon Holdings Group LP =
0.00%, 04/15/10 255 178
Falcon Holdings Group LP
8.375%, 04/15/10 250 247
Farmers Ins. Exch.**
8.625%, 05/01/24 1,500 1,629
Federal-Mogul Co.
8.80%, 04/15/07 200 202
First Republic Bank
7.75%, 09/15/12 1,500 1,364
Fisher Scientific Int'l, Inc.
9.00%, 02/01/08 250 237
Fonda Group, Inc.
9.50%, 03/01/07 250 217
Frontiervision Holding LP=
0.00%, 09/15/07 225 195
Gaylord Container Corp.
9.375%, 06/15/07 150 140
GCI, Inc.
9.75%, 08/01/07 550 550
Globalstar Capital Corp.
10.75%, 11/01/04 350 231
Granite Broadcasting Corp.
10.375%, 05/15/05 150 152
Granite Broadcasting Corp.
8.875%, 05/15/08 300 291
</TABLE>
See notes to the financial statements.
34
<PAGE>
HORACE MANN MUTUAL FUNDS 1999 FUNDS SEMI-ANNUAL REPORT
(UNAUDITED)
<TABLE>
<CAPTION>
STATEMENT OF INVESTMENTS (CONTINUED)
BALANCED FUND
JUNE 30, 1999
PRINCIPAL
AMOUNT MARKET
(000) (000)
U.S. AND FOREIGN
CORPORATE
BONDS/NOTES
(CONTINUED)
Grove Worldwide LLC
<S> <C> <C>
9.25%, 05/01/08 $ 210 $ 153
GST Networks FDG, Inc.**=
0.00%, 05/01/08 250 141
GST Telecommunications, Inc.=
0.00%, 11/15/07 60 64
Hammon, John Q Hotels
8.875%, 02/15/04 250 232
Hayes Wheels Int'l, Inc.
9.125%, 07/15/07 150 151
Heller Financial, Inc.
5.625%, 03/15/00 730 728
Hollywood Casino Corp.**
11.25%, 05/01/07 300 302
Hyperion Telecommunications, Inc.=
13.00%, 04/15/03 120 99
Hyperion Telecommunications, Inc.
12.25%, 09/01/04 200 210
ICI Wilmington, Inc.
6.75%, 09/15/02 1,500 1,499
Intermedia Communications, Inc.
8.875%, 11/01/07 200 187
Intermedia Communications, Inc.
8.50%, 01/15/08 350 321
Intermedia Communications, Inc.
8.60%, 06/01/08 150 138
International Wire Group, Inc.
11.75%, 06/01/05 100 104
Interpool, Inc.
7.35%, 08/01/07 1,800 1,695
Iridium Cap Corp.
11.25%, 07/15/05 400 78
Iron Mountain, Inc.
8.75%, 09/30/09 240 233
ITC Deltacom, Inc.
8.875%, 03/01/08 100 99
ITC Deltacom, Inc.
9.75%, 11/15/08 45 46
IXC Communications, Inc.
9.00%, 04/15/08 275 263
JCAC, Inc.
10.125%, 06/15/06 100 109
Johnstown America Inds., Inc.
11.75%, 08/15/05 235 249
K & F Industries, Inc.
9.25%, 10/15/07 425 419
Kaufman & Broad Home Corp.
9.625%, 11/15/06 132 137
KMC Telecom Holdings, Inc.**=
0.00%, 02/15/08 475 261
L-3 Communications Corp.
8.50%, 05/15/08 50 49
L-3 Communications Corp.
8.00%, 08/01/08 90 85
LDM Technologies, Inc.
10.75%, 01/15/07 210 208
</TABLE>
See notes to the financial statements.
35
<PAGE>
HORACE MANN MUTUAL FUNDS 1999 FUNDS SEMI-ANNUAL REPORT
(UNAUDITED)
<TABLE>
<CAPTION>
STATEMENT OF INVESTMENTS (CONTINUED)
BALANCED FUND
JUNE 30, 1999
PRINCIPAL
AMOUNT MARKET
(000) (000)
U.S. AND FOREIGN
CORPORATE
BONDS/NOTES
(CONTINUED)
Level 3 Communications, Inc.
<S> <C> <C>
9.125%, 05/01/08 $ 175 $ 172
Liberty Financial Cos., Inc.
6.75%, 11/15/08 1,205 1,168
Life Point Hospital Holdings, Inc.**
10.75%, 05/15/09 125 127
Lin Holdings Corp.=
0.00%, 03/01/08 850 561
Loews Ciniplex Entertainment Corp.
8.875%, 08/01/08 230 220
Lumberman's Mutual Casualty Co.**
9.15%, 07/01/26 1,000 1,084
Lyondell Chemical Co.**
9.875%, 05/01/07 495 504
McLeodUSA, Inc.
9.25%, 07/15/07 50 50
McLeodUSA, Inc.
8.375%, 03/15/08 100 94
Mediq PRN Life Support Services
11.00%, 05/01/06 250 194
MGC Communications, Inc.
13.00%, 10/01/04 100 93
MJD Communications, Inc.
9.50%, 05/01/08 100 99
Moog Inc.
10.00%, 05/01/16 120 125
Morgan Stanley Group Inc.
8.33%, 01/15/07 1,500 1,609
Nash Finch Corp.
8.50%, 05/01/08 250 225
NCNB Corp.
10.20%, 07/15/15 350 441
Neenah Corp.**
11.125%, 05/01/07 220 216
Newfield Exploration Co.
7.45%, 10/15/07 1,550 1,458
New World Pasta Co.**
9.25%, 02/15/09 40 39
News America Holdings, Inc.
8.00%, 10/17/16 2,000 2,031
Nextel Communications, Inc.=
0.00%, 10/31/07 1,100 767
NEXTLINK Communications, Inc.=
0.00%, 04/15/08 615 369
NEXTLINK Communications, Inc.=
0.00%, 06/01/09 185 108
Nortek, Inc.
9.125%, 09/01/07 250 247
Nortek, Inc.**
8.875%, 08/01/08 55 54
NRG Energy, Inc.
7.50%, 06/15/07 1,550 1,535
Numatics, Inc.
9.625%, 04/01/08 200 162
Olympic Financial Ltd.
11.50%, 03/15/07 100 88
</TABLE>
See notes to the financial statements.
36
<PAGE>
HORACE MANN MUTUAL FUNDS 1999 FUNDS SEMI-ANNUAL REPORT
(UNAUDITED)
<TABLE>
<CAPTION>
STATEMENT OF INVESTMENTS (CONTINUED)
BALANCED FUND
JUNE 30, 1999
PRINCIPAL
AMOUNT MARKET
(000) (000)
U.S. AND FOREIGN
CORPORATE
BONDS/NOTES
(CONTINUED)
Olympic Financial Ltd.
<S> <C> <C>
11.50%, 03/15/07 $ 100 $ 86
Owens & Minor, Inc.
10.875%, 06/01/06 415 445
Packaging Corp. of America**
9.625%, 04/01/09 125 127
Paging Network, Inc.
10.125%, 08/01/07 375 274
Pierce Leahy Corp.
9.125%, 07/15/07 250 250
Pioneer Americas Acquisition Corp.
9.25%, 06/15/07 200 164
Plains Resources, Inc.
10.25%, 03/15/06 200 202
P & L Coal Holdings Corp.
9.625%, 05/15/08 650 645
PP & L Capital Funding, Inc.
6.79%, 11/22/04 1,510 1,477
Price Communications Wireless, Inc.
9.125%, 12/15/06 150 152
Pride Petroleum Services, Inc.
9.375%, 05/01/07 100 99
Primedia, Inc.
7.625%, 04/01/08 200 191
PSINet, Inc.
10.00%, 02/15/05 400 402
PSINet, Inc.
11.50%, 11/01/08 125 132
Purina Mills, Inc.
9.00%, 03/15/10 250 188
RBF Finance Co.**
11.375%, 03/15/09 210 217
RCN Corp. =
0.00%, 07/01/09 300 185
Republic NY Corp.
9.30%, 06/01/21 1,700 1,980
Resource America, Inc.
12.00%, 08/01/04 120 108
Revlon Consumer Products Corp.
8.625%, 02/01/08 50 47
Revlon Worldwide Parent =
0.00%, 03/15/01 250 167
Rifkin ACQ Partners LP
11.125%, 01/15/06 50 55
Royster Clark, Inc.**
10.25%, 04/01/09 175 172
Scotsman Group, Inc.
8.625%, 12/15/07 110 111
Scotts Co.**
8.625%, 01/15/09 50 49
Seagram Joseph E & Sons, Inc.
8.875%, 09/15/11 1,500 1,627
Silgan Corp.
9.00%, 06/01/09 200 198
Sovereign Specialty Chemicals
9.50%, 08/01/07 430 431
</TABLE>
See notes to the financial statements.
37
<PAGE>
HORACE MANN MUTUAL FUNDS 1999 FUNDS SEMI-ANNUAL REPORT
(UNAUDITED)
<TABLE>
<CAPTION>
STATEMENT OF INVESTMENTS (CONTINUED)
BALANCED FUND
JUNE 30, 1999
PRINCIPAL
AMOUNT MARKET
(000) (000)
U.S. AND FOREIGN
CORPORATE
BONDS/NOTES
(CONTINUED)
Standard PAC Corp.
<S> <C> <C>
8.50%, 06/15/07 $ 450 $ 450
Staples, Inc.
7.125%, 08/15/07 1,000 960
Stater Brothers Holdings, Inc.
9.00%, 07/01/04 55 53
Station Casinos, Inc.
8.875%, 12/01/08 300 291
Sullivan Graphics, Inc.
12.75%, 08/01/05 295 304
Telecommunications Tech. Co.
9.75%, 05/15/08 280 283
Terra Industries
10.50%, 06/15/05 150 149
Texas Petrochemicals Corp.
11.125%, 07/01/06 275 248
Time Warner Telecom LLC
9.75%, 07/15/08 375 384
Toll Corp.
7.75%, 09/15/07 100 94
Triad Hospitals Holdings, Inc.**
11.00%, 05/15/09 190 193
Tricon Global Restraurants, Inc.
7.65%, 05/15/08 150 149
True Temper Sports, Inc.**
10.875%, 12/01/08 400 336
Tuboscope Vetco Int'l, Inc.
7.50%, 02/15/08 250 218
TV Guide, Inc.**
8.125%, 03/01/09 150 142
Unisys Corp.
11.75%, 10/15/04 100 111
United Air Lines, Inc.
10.67%, 05/01/04 672 759
United Air Lines, Inc.
9.125%, 01/15/12 843 931
Universal Hospital Services
10.25%, 03/01/08 150 134
USA Networks, Inc.
6.75%, 11/15/05 1,500 1,439
USX Marathon Group
6.65%, 02/01/06 1,500 1,444
Verio, Inc.
10.375%, 04/01/05 250 253
Verio, Inc.
11.25%, 12/01/08 150 157
Viatel, Inc.
11.25%, 04/15/08 231 236
Vlasic Foods Int'l, Inc.**
10.25%, 07/01/09 325 325
Webb Del Corp.
10.25%, 02/15/10 150 149
Weirton Steel Corp.
11.375%, 07/01/04 265 260
Werner Holding Del, Inc.
10.00%, 11/15/07 80 79
</TABLE>
See notes to the financial statements.
38
<PAGE>
HORACE MANN MUTUAL FUNDS 1999 FUNDS SEMI-ANNUAL REPORT
(UNAUDITED)
<TABLE>
<CAPTION>
STATEMENT OF INVESTMENTS (CONCLUDED)
BALANCED FUND
JUNE 30, 1999
PRINCIPAL
AMOUNT MARKET
(000) (000)
U.S. AND FOREIGN
CORPORATE
BONDS/NOTES
(CONCLUDED)
WESCO Distribution, Inc.
<S> <C> <C>
9.125%, 06/01/08 $ 350 $ 339
Western Financial BK-FSB
8.875%, 08/01/07 425 361
ASSET BACKED
AESOP Funding II LLC**
6.14%, 05/20/06 825 809
Banc One Auto Grantor Trust 96-B A
6.55%, 02/15/03 163 164
- ----------------------------------------------------------------------------------------
TOTAL U.S. AND FOREIGN CORPORATE
BONDS/NOTES 17.87%
(Cost $81,983) 83,129 79,262
- ----------------------------------------------------------------------------------------
SHORT-TERM
INVESTMENTS
Lehman Brothers - Repurchase Agreement
4.85%, 07/01/99, (secured by $821
US Treasury Strip, 05/15/12) 779 779
Lehman Brothers - Repurchase Agreement
4.85%, 07/01/99, (secured by $6,317
US Treasury Strip, 08/15/13) 6,004 6,004
State Street Bank and Trust - Repurchase Agreement
3.25%, 07/01/99, (secured by $2,547
US Treasury Bond, 6.75%, 08/15/26) 2,495 2,495
State Street Global Advisers - Money Market
4.563% 423 423
- ----------------------------------------------------------------------------------------
TOTAL SHORT-TERM INVESTMENTS 2.19%
(Cost $9,701) 9,701 9,701
- ----------------------------------------------------------------------------------------
TOTAL INVESTMENTS 98.99%
(Cost $415,686) 439,062
CASH AND OTHER ASSETS IN
EXCESS OF LIABILITIES 1.01% 4,500
- ----------------------------------------------------------------------------------------
NET ASSETS 100.00% $443,562
========================================================================================
</TABLE>
* Non-income producing during the six months ended June 30, 1999 as this
security did not pay dividends.
** Securities are exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold, in transactions exempt from
registration to qualified institutional buyers. At June 30, 1999 these
securities amounted to $12,500 or 2.8 percent of net assets
= Denotes a step bond: A zero coupon bond that converts to a fixed or variable
rate at a future date.
See notes to the financial statements.
39
<PAGE>
HORACE MANN MUTUAL FUNDS 1999 FUNDS SEMI-ANNUAL REPORT
(UNAUDITED)
PIECHART:
MUNICIPAL BONDS 5.5%
U.S. & FOREIGN CORPORATE BONDS/NOTES 43.0%
U.S. & FOREIGN GOVERNMENT & AGENCY OBLIGATIONS 46.8%
CASH & OTHER NET ASSETS 4.7%
<TABLE>
<CAPTION>
STATEMENT OF INVESTMENTS
INCOME FUND
JUNE 30, 1999
PRINCIPAL
AMOUNT MARKET
(000) (000)
U.S. AND FOREIGN
GOVERNMENT
AND AGENCY
OBLIGATIONS
TREASURY BONDS/NOTES
<S> <C> <C>
11.875%, 11/15/03 $ 400 $ 492
10.375%, 11/15/09 300 358
12.00%, 08/15/13 600 842
FEDERAL NATIONAL MORTGAGE ASSOCIATION
6.56%, 02/05/08 100 97
6.50%, 04/25/08 100 97
6.60%, 05/01/08 100 97
6.59%, 05/21/08 120 116
6.29%, 06/20/08 100 96
6.36%, 08/14/08 150 144
6.32%, 03/16/09 150 144
FEDERAL HOME LOAN MORTGAGE CORPORATION
(MORTGAGE BACKED SECURITIES)
9.50%, 03/01/01 9 9
9.50%, 06/01/01 5 6
9.50%, 08/01/01 6 6
9.50%, 10/01/01 3 3
7.00%, 11/01/03 21 21
5.925%, 04/09/08 100 96
7.00%, 01/01/11 234 235
7.00%, 03/01/11 449 451
7.00%, 04/01/11 437 439
7.00%, 07/01/11 30 30
8.00%, 12/01/11 7 7
6.00%, 01/01/14 121 116
FEDERAL NATIONAL MORTGAGE ASSOCIATION
(MORTGAGE BACKED SECURITIES)
7.043%, 07/01/06 194 198
6.85%, 10/01/07 222 223
6.44%, 01/01/08 89 87
6.47%, 02/01/08 69 68
6.25%, 07/01/08 139 135
6.21%, 08/01/08 138 134
8.00%, 11/01/09 7 7
6.50%, 11/01/12 93 91
8.00%, 10/01/14 30 31
8.00%, 01/01/17 66 68
7.75%, 04/01/17 171 175
6.00%, 06/01/18 95 90
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
(MORTGAGE BACKED SECURITIES)
11.50%, 03/15/10 6 7
12.00%, 03/15/14 1 1
12.00%, 04/15/14 1 1
12.00%, 12/15/14 4 5
12.00%, 03/15/15 6 6
12.00%, 04/15/15 3 4
12.50%, 04/15/15 1 1
12.00%, 06/15/15 5 5
12.00%, 07/15/15 2 2
12.00%, 11/15/15 14 16
9.50%, 08/15/17 52 56
</TABLE>
See notes to the financial statements.
40
<PAGE>
HORACE MANN MUTUAL FUNDS 1999 FUNDS SEMI-ANNUAL REPORT
(UNAUDITED)
<TABLE>
<CAPTION>
STATEMENT OF INVESTMENTS (CONTINUED)
INCOME FUND
JUNE 30, 1999
PRINCIPAL
AMOUNT MARKET
(000) (000)
U.S. AND FOREIGN
GOVERNMENT
AND AGENCY
OBLIGATIONS
(CONCLUDED)
<S> <C> <C>
7.50%, 09/15/23 $ 388 $ 393
7.50%, 01/15/23 181 183
6.50%, 07/15/28 197 190
6.50%, 03/15/28 320 308
COLLATERALIZED MORTGAGE OBLIGATION
(PLANNED AMORTIZATION CLASS)(NOTE 3)
FHLMC 1737-Class E
6.00%, 12/15/17 193 194
FNMA 1993 119-Class H
6.50%, 07/25/23 145 141
FOREIGN (U.S. DOLLAR DENOMINATED)
SCL Term Aereo Santiago**
6.95%, 07/01/12 150 140
TOTAL U.S. AND FOREIGN GOVERNMENT AND
AGENCY OBLIGATIONS 46.79% 6,524 6,862
(Cost $7,001)
- ----------------------------------------------------------------------------------------
MUNICIPAL BONDS
Baltimore MD Taxable Cons Public Series B
7.25%, 10/15/17 125 125
California Hsg Fin Agy Rev
8.16%, 02/01/28 125 129
Horry Cnty SC Arpt Rev
7.38%, 07/01/12 120 122
Ohio State Taxable Dev Assistance
7.60%,10/01/16 100 102
Orange Cnty CA Pension Oblg Taxable Ref-A
7.16%, 09/01/06 100 103
San Bernardino County
7.09%, 08/01/11 100 101
San Diego Cnty CA Pension Taxable Series A
6.59%,08/15/07 125 124
- ----------------------------------------------------------------------------------------
TOTAL MUNICIPAL BONDS 5.49% 795 806
(Cost $829)
- ----------------------------------------------------------------------------------------
U.S. AND FOREIGN
CORPORATE
BONDS/NOTES
AAG Holding Inc.
6.875%, 06/01/08 150 140
AMR Corp.
9.00%, 09/15/16 126 140
Associates Corp. North America
8.15%, 08/01/09 100 107
Associates Corp. North America
7.95%, 02/15/10 110 118
Banc One Corp.
9.875%, 03/01/09 150 179
Banponce Corp.
6.75%, 12/15/05 200 193
Beckman Industries Inc.
7.45%, 03/04/08 100 94
</TABLE>
See notes to the financial statements.
41
<PAGE>
HORACE MANN MUTUAL FUNDS 1999 FUNDS SEMI-ANNUAL REPORT
(UNAUDITED)
<TABLE>
<CAPTION>
STATEMENT OF INVESTMENTS (CONTINUED)
INCOME FUND
JUNE 30, 1999
PRINCIPAL
AMOUNT MARKET
(000) (000)
U.S. AND FOREIGN
CORPORATE
BONDS/NOTES
(CONTINUED)
Boise Cascade Office Products Co.
<S> <C> <C>
7.05%, 05/15/05 $ 100 $ 95
Citicorp
8.625%, 12/01/02 119 127
Coltec Industries Inc.
7.50%, 04/15/08 100 99
Commercial Credit Group
10.00%, 05/15/09 100 121
Computer Association Int'l Inc.
6.50%, 04/15/08 100 93
Conseco Inc.
6.80%, 06/15/05 130 122
CSC Holdings Inc.
7.25%, 07/15/08 150 143
Delta Air Lines Inc.
9.75%, 05/15/21 150 178
Dime Capital Trust
9.33%, 05/06/27 160 166
Donaldson Lufkin and Jenrette, Inc.
6.90%, 10/01/07 130 127
Du Pont E I De Nemours & Co.
8.125%, 03/15/04 150 161
El Paso Energy Corp.
6.75%, 05/15/09 150 144
Farmers Ins. Exch.**
8.625%, 05/01/24 150 163
First Union Corp.
8.125%, 06/24/02 150 157
First Republic Bank
7.75%, 09/15/12 150 136
Freemont General Corp.**
7.70%, 03/17/04 100 100
General Electric Cap Corp.
8.70%, 05/21/07 100 112
General Motors Acceptance Corp.
8.75%, 07/15/05 150 162
ICI Wilmington Inc.
6.75%, 09/15/02 150 150
Interpool Inc.
7.35%, 08/01/07 150 141
Lyondell Chemical Co.**
9.875%, 05/01/07 150 153
Morgan Stanley Group Inc.
6.375%, 08/01/02 150 150
NCNB Corp.
10.20%, 07/15/15 135 169
Newfield Exploration Co.
7.45%, 10/15/07 150 141
News America Holdings Inc.
8.00%, 10/17/16 200 203
NRG Energy Inc.
7.50%, 06/15/07 150 149
Pitney Bowes Credit Corp.
8.55%, 09/15/09 91 102
</TABLE>
See notes to the financial statements.
42
<PAGE>
HORACE MANN MUTUAL FUNDS 1999 FUNDS SEMI-ANNUAL REPORT
(UNAUDITED)
<TABLE>
<CAPTION>
STATEMENT OF INVESTMENTS (CONCLUDED)
INCOME FUND
JUNE 30, 1999
PRINCIPAL
AMOUNT MARKET
(000) (000)
U.S. AND FOREIGN
CORPORATE
BONDS/NOTES
(CONCLUDED)
PP & L Capital Funding Inc.
<S> <C> <C>
6.79%, 11/22/04 $ 150 $ 147
Praxair Inc.
6.75%, 03/01/03 150 149
Quaker Oats Co.
7.51%, 05/02/05 160 163
Republic NY Corp.
9.30%, 06/01/21 165 192
Seagram Joseph E & Sons Inc.
8.875%, 09/15/11 147 160
Sprint Capital Corp.
5.70%, 11/15/03 100 96
Staples Inc.
7.125%, 08/15/07 100 96
Transamerica Financial Corp.
6.125%, 11/01/01 150 149
USX Marathon Group
6.650%, 02/01/06 150 145
United Air Lines Inc.
10.67%, 05/01/04 100 113
USA Networks Inc.
6.75%, 11/15/05 150 144
ASSET BACKED
Banc One Auto Grantor Trust 96-B A
6.55%, 02/15/03 22 22
- ----------------------------------------------------------------------------------------
TOTAL U.S. AND FOREIGN CORPORATE
BONDS/NOTES 43.03% 6,145 6,311
(Cost $6,456)
- ----------------------------------------------------------------------------------------
SHORT-TERM
INVESTMENT
Swiss Bank -- Repurchase Agreement
4.80%, 07/01/99 (secured by $427
US Treasury Bond, 6.00%, 02/15/26) 414 414
- ----------------------------------------------------------------------------------------
TOTAL SHORT-TERM INVESTMENT 2.82% 414 414
(Cost $414)
- ----------------------------------------------------------------------------------------
TOTAL INVESTMENTS 98.13% 14,393
(Cost $14,700)
CASH AND OTHER ASSETS IN
EXCESS OF LIABILITIES 1.87% 274
- ----------------------------------------------------------------------------------------
NET ASSETS 100.00% $14,667
========================================================================================
</TABLE>
** Securities exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold, in transactions exempt from registration
to qualified institutional buyers. At June 30, 1999 these securities amounted to
$556 or 3.8 percent of net assets.
See notes to the financial statements.
43
<PAGE>
HORACE MANN MUTUAL FUNDS 1999 FUNDS SEMI-ANNUAL REPORT
(UNAUDITED)
PIECHART:
COMMERCIAL PAPER 14.0%
U.S. AGENCY OBLIGATIONS, CASH & OTHER NET ASSETS 86.0%
<TABLE>
<CAPTION>
STATEMENT OF INVESTMENTS
SHORT-TERM INVESTMENT FUND
JUNE 30, 1999
PRINCIPAL
AMOUNT MARKET
(000) (000)
COMMERCIAL PAPER
Prudential Funding Corp.
<S> <C> <C>
4.75%, 07/06/99 $ 50 $ 50
General Electric Capital Corp.
4.81%, 07/20/99 50 50
American Express Credit Corp.
4.79%, 07/26/99 50 50
Ford Motor Credit Corp.
4.79%, 07/26/99 50 50
General Motors Acceptance Corp.
4.80%, 07/29/99 50 50
- ----------------------------------------------------------------------------------------
TOTAL COMMERICAL PAPER 14.00% 250 250
(Cost $249)
- ----------------------------------------------------------------------------------------
U.S. AGENCY
OBLIGATI0NS
FEDERAL FARM CREDIT BANK DISCOUNT NOTES
4.74%, 08/04/99 63 62
4.75%, 09/08/99 147 145
4.71%, 10/29/99 60 59
FEDERAL HOME LOAN BANK DISCOUNT NOTES
4.60%, 07/01/99 300 300
FEDERAL HOME LOAN MORTGAGE CORP. DISCOUNT NOTES
5.02%, 07/13/99 165 165
4.73%, 09/08/99 129 128
4.69%, 10/13/99 56 55
FEDERAL NATIONAL MORTGAGE ASSOCIATION DISCOUNT NOTES
4.63%, 07/01/99 10 10
4.77%, 07/15/99 13 13
4.71%, 09/13/99 180 178
4.72%, 09/22/99 19 19
4.73%, 10/08/99 95 94
STUDENT LOAN MARKETING DISCOUNT NOTE
4.960%, 07/12/99 300 299
- ----------------------------------------------------------------------------------------
TOTAL U.S. AGENCY OBLIGATIONS 85.55% 1,537 1,527
(Cost $1,529)
TOTAL INVESTMENTS 99.55% 1,787 1,777
(Cost $1,778)
CASH AND OTHER ASSETS IN
EXCESS OF LIABILITES 0.45% 8
- ----------------------------------------------------------------------------------------
NET ASSETS 100.00% $1,785
========================================================================================
</TABLE>
See notes to the financial statements.
44
<PAGE>
HORACE MANN MUTUAL FUNDS 1999 FUNDS SEMI-ANNUAL REPORT
(UNAUDITED)
<TABLE>
<CAPTION>
STATEMENT OF INVESTMENTS
SMALL CAP GROWTH FUND
JUNE 30, 1999
PIE CHART:
CASH & OTHER NET ASSETS 4.9%
COMMON STOCK 95.1%
NUMBER OF MARKET
SHARES (000)
COMMON STOCK
AUTO/ACCESSORIES 1.46%
<S> <C> <C>
Gentex Corp.* 17,400 $ 487
BIOTECHNOLOGY/PHARMACEUTICALS 7.65%
Alkermes, Inc.* 12,500 286
Catalytica, Inc.* 12,700 177
Chirex Inc.* 4,400 141
Coulter Pharmaceutical, Inc.* 8,000 180
Millennium Pharmaceuticals, Inc.* 10,500 377
MiniMed, Inc.* 6,900 531
Priority Healthcare Corp. - B* 4,000 138
QLT Phototherapeutics* 6,300 345
Shire Pharmaceuticals Group PLC (ADR)* 14,700 379
- ----------------------------------------------------------------------------------------
2,554
BUILDING/CONSTRUCTION 2.95%
Quanta Services, Inc.* 14,900 656
Trex, Inc.* 13,000 330
- ----------------------------------------------------------------------------------------
986
BROADCASTING/RADIO 1.56%
Entercom Communications Corp.* 10,900 466
Radio One, Inc.* 1,200 56
- ----------------------------------------------------------------------------------------
522
BUSINESS SERVICES 5.95%
Avis Rent A Car* 4,200 122
Catalina Marketing Corp.* 7,200 662
MapQuest Com, Inc.* 6,800 111
NCO Group, Inc.* 7,950 300
Nielsen Media Research, Inc. 18,100 529
Realty Information Group, Inc.* 1,600 69
TMP Worldwide, Inc.* 3,000 191
- ----------------------------------------------------------------------------------------
1,984
COMMUNICATION SERVICES/EQUIPMENT 15.18%
Allegiance Telecom, Inc.* 9,100 499
Applied Micro Circuits Corp.* 7,900 658
Concord Communications, Inc.* 3,400 150
Copper Mountain Networks, Inc.* 1,000 77
Digital Microwave Corp.* 8,600 109
Emulex Corp.* 2,600 289
Extreme Networks, Inc.* 200 12
GST Telecommunications, Inc.* 4,700 62
Harmonic, Inc.* 6,200 356
ITC DeltaCom, Inc.* 17,700 494
Pegasus Communications Corp.* 7,600 299
Pinnacle Holdings, Inc.* 27,400 668
Polycom, Inc.* 5,500 213
Primus Telecom Group, Inc.* 4,700 105
Proxim, Inc.* 3,600 209
Terayon Communication System* 7,000 391
Time Warner Telecom, Inc. - A* 1,500 43
Viatel, Inc.* 7,700 430
- ----------------------------------------------------------------------------------------
5,064
</TABLE>
See notes to the financial statements.
45
<PAGE>
HORACE MANN MUTUAL FUNDS 1999 FUNDS SEMI-ANNUAL REPORT
(UNAUDITED)
<TABLE>
<CAPTION>
STATEMENT OF INVESTMENTS (CONTINUED)
SMALL CAP GROWTH FUND
JUNE 30, 1999
NUMBER OF MARKET
SHARES (000)
COMMON STOCK
(CONTINUED)
COMPUTER SERVICES/EQUIPMENT 6.64%
<S> <C> <C>
Affiliated Computer Services, Inc. - A* 5,600 $ 284
CNET, Inc.* 1,400 81
International Network Services * 10,106 407
MedQuist, Inc.* 17,300 756
Metromedia Fiber Network, Inc. - A* 8,500 305
Mips Technologies, Inc.* 7,839 375
Verio, Inc.* 100 7
- ----------------------------------------------------------------------------------------
2,215
COMPUTER SOFTWARE 6.78%
Clarent Corp.* 400 6
Clarify, Inc.* 6,500 268
Dendrite International, Inc.* 7,000 253
Exchange Applications, Inc.* 1,700 69
Factset Research Systems, Inc.* 2,850 161
Macromedia, Inc.* 11,800 419
Mercury Interactive Corp.* 6,800 240
Peregrine Systems, Inc.* 9,900 254
Sanchez Computer Assoc., Inc.* 3,000 104
Tenfold Corp.* 900 28
VERITAS Software Corp.* 4,850 460
- ----------------------------------------------------------------------------------------
2,262
ELECTRICAL EQUIPMENT/ELECTRONICS 18.50%
Advanced Digital Information Corp.* 1,300 53
Advanced Energy Inds., Inc. * 6,300 255
Alpha Inds., Inc.* 2,700 129
Brooks Automation, Inc.* 1,800 49
Cypress Semiconducter Corp.* 13,100 216
DII Group, Inc.* 5,800 215
DSP Communications, Inc.* 3,561 103
Flextronics International Ltd.* 10,900 602
Helix Technology Corp. 6,180 148
Kemet Corp.* 3,500 80
Micrel, Inc.* 4,600 340
Pinnacle Systems, Inc.* 6,200 208
PMC-Sierra, Inc.* 12,600 743
Power Integrations, Inc.* 5,600 409
Qlogic Corp.* 4,600 607
RF Micro Devices, Inc.* 3,100 231
SanDisk Corp.* 2,400 108
SDL, Inc.* 5,100 260
Semtech Corp.* 2,700 140
TranSwitch Corp.* 16,350 774
Vitesse Semiconductor Corp.* 7,397 502
- ----------------------------------------------------------------------------------------
2,704 6,172
ENERGY 2.61%
Atwood Oceanics, Inc.* 6,100 191
Cal Dive Int'l, Inc.* 6,200 185
Forrest Oil Corp.* 4,300 54
Global Industries, Inc.* 6,900 88
Louis Dreyfuss Natural Gas Corp.* 3,900 84
Rowan Cos., Inc.* 5,900 109
Stone Energy Corp.* 3,800 161
- ----------------------------------------------------------------------------------------
872
</TABLE>
See notes to the financial statements.
46
<PAGE>
HORACE MANN MUTUAL FUNDS 1999 FUNDS SEMI-ANNUAL REPORT
(UNAUDITED)
<TABLE>
<CAPTION>
STATEMENT OF INVESTMENTS (CONTINUED)
SMALL CAP GROWTH FUND
JUNE 30, 1999
NUMBER OF MARKET
SHARES (000)
COMMON STOCK
(CONTINUED)
FINANCIAL SERVICES 1.42%
<S> <C> <C>
Investors Financial Services Corp. 10,300 $ 411
National Discount Brokers Group* 1,100 63
- ----------------------------------------------------------------------------------------
474
FOOD SERVICES 1.35%
Buca, Inc.* 4,600 76
Papa John's International, Inc.* 5,400 241
Rare Hospitality Int'l, Inc.* 5,200 133
- ----------------------------------------------------------------------------------------
450
HEALTH CARE/SERVICES 2.30%
CareInsite, Inc.* 1,100 52
Healtheon Corp*. 1,000 77
IDX System Corp.* 5,800 130
Osteotech, Inc.* 7,300 210
Renal Care Group, Inc.* 11,575 299
- ----------------------------------------------------------------------------------------
768
INSURANCE 0.09%
Insurance Management Solutions Group, Inc.* 3,645 31
INTERNET SERVICES 1.81%
Ariba, Inc.* 300 29
Concentric Network Corp.* 400 16
Inktomi Corp.* 600 79
iTurf, Inc.* 1,700 31
Mpath Interactive, Inc.* 4,500 99
Net Perceptions, Inc.* 6,400 140
PSINet, Inc.* 4,800 210
- ----------------------------------------------------------------------------------------
604
MANUFACTURING 0.11%
K-Swiss, Inc. 800 37
RECREATIONAL/ENTERTAINMENT 5.00%
Action Performance Companies, Inc.* 6,600 217
Championship Auto Racing Teams, Inc.* 11,500 344
Cinar Films, Inc. - B* 21,500 524
Speedway Motorsports, Inc.* 14,800 582
- ----------------------------------------------------------------------------------------
1,667
RETAIL/SPECIALITY 11.35%
AnnTaylor Stores Corp.* 13,200 594
Children's Place Retail Stores, Inc. (The)* 14,900 602
Claire's Stores, Inc. 9,500 243
Cost Plus, Inc.* 8,600 390
CSK Auto Corp*. 5,600 151
eToys, Inc.* 4,700 192
Footstar, Inc.* 1,000 37
Linens' N Things, Inc.* 20,300 888
Pacific Sunwear of California, Inc.* 27,150 662
Zany Brainy, Inc.* 2,800 27
- ----------------------------------------------------------------------------------------
3,786
</TABLE>
See notes to the financial statements.
47
<PAGE>
HORACE MANN MUTUAL FUNDS 1999 FUNDS SEMI-ANNUAL REPORT
(UNAUDITED)
<TABLE>
<CAPTION>
STATEMENT OF INVESTMENTS (CONCLUDED)
SMALL CAP GROWTH FUND
JUNE 30, 1999
NUMBER OF MARKET
SHARES (000)
COMMON STOCK
(CONCLUDED)
TRANSPORATION 1.48%
<S> <C> <C>
Circle Int'l Group, Inc.* 2,000 $ 44
Eagle USA Airfreight, Inc.* 6,500 275
Forward Air Corp.* 6,200 174
- ----------------------------------------------------------------------------------------
493
UTILITY 0.94%
Calpine Corp.* 5,800 313
- ----------------------------------------------------------------------------------------
TOTAL COMMON STOCK 95.13% 31,741
(Cost $25,339)
- ----------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT MARKET
(000) (000)
SHORT-TERM
INVESTMENT
FEDERAL HOME LOAN BANK DISCOUNT NOTE
4.60%, 07/01/99 $1,820 $ 1,820
- ----------------------------------------------------------------------------------------
TOTAL SHORT-TERM INVESTMENT 5.45% 1,820 1,820
(Cost $1,820)
- ----------------------------------------------------------------------------------------
TOTAL INVESTMENTS 100.58% 33,561
(Cost $27,159)
LIABILITIES IN EXCESS OF
CASH AND OTHER ASSETS (0.58%) (192)
- ----------------------------------------------------------------------------------------
NET ASSETS 100.00% $33,369
========================================================================================
</TABLE>
* Non-income producing during the six months ended June 30, 1999 as this
security did not pay divdends.
See notes to the financial statements.
48
<PAGE>
HORACE MANN MUTUAL FUNDS 1999 FUNDS SEMI-ANNUAL REPORT
(UNAUDITED)
PIE CHART:
CASH & OTHER NET ASSETS 6.5%
PACIFIC 29.4%
EUROPE 62.7%
NORTH AMERICA 1.4%
<TABLE>
<CAPTION>
STATEMENT OF INVESTMENTS
INTERNATIONAL EQUITY FUND
JUNE 30, 1999
NUMBER OF MARKET
SHARES (000)
COMMON AND
PREFERRED STOCK
AUSTRALIA 2.03%
<S> <C> <C>
Broken Hill Proprietary Co. Ltd. (Steel & Metals) 12,800 $ 148
WMC Ltd. (Steel & Metals) 20,600 89
Woodside Petro Ltd. (Oil Companies) 8,300 56
- ----------------------------------------------------------------------------------------
293
CANADA 1.44%
Canadian National Railway Co. (Railroads) 3,087 207
CHINA 0.67%
Anhui Expressway Co. Ltd. - H (Trucking) 45,000 6
GZI Transport Ltd. (Trucking) 18,000 4
Jiangsu Expressway (Trucking) 48,000 10
Shenzhen Expressway (Trucking) 47,000 10
Sichuan Expressway (Trucking) 26,000 3
Zhejiang Expressway (Trucking) 324,000 64
- ----------------------------------------------------------------------------------------
97
FINLAND 1.89%
Nokia AB - A (Telecommunication) 3,110 273
FRANCE 14.34%
Accor SA (Hotels & Casinos) 573 144
Alstom (Diversified Manufacturer) 1,079 34
AXA UAP (Insurance) 678 83
Bic SA (Office Supplies) 2,640 139
Carrefour Supermarche SA (Food & Beverage)492 72
Casino Guichardo Perrach pfd. (Retail) 1,743 95
Christian Dior (Apparel) 752 122
Club Mediterranee (Hotels & Casinos)* 226 24
Eurotunnel EPLC (Construction)* 84,871 125
Lagardere Groupe (Diversified Manufacturer) 3,321 124
Louis Vuitton Moet-Hennessy (rights) (Retail) 309 9
Louis Vuitton Moet-Hennessy (Retail) 309 90
Pinault Printemps (Retail) 448 77
Renault SA (Automobiles) 1,600 70
Rhone-Poulenc SA - A (Chemicals) 3,828 175
Societe Elf Aquitane SA (Oil Companies) 1,978 290
Suez Lyonnaise des Eaux (Water Supply) 811 146
Stmicroelectronics (Electronic Components)* 1,639 109
Total Francaise Des Petroles - B (Oil Companies) 503 65
Union Assurance Federales (Insurance) 637 76
- ----------------------------------------------------------------------------------------
2,069
GERMANY 10.06%
BASF AG (Chemicals) 3,731 165
Heidelberger Druckmaschinen (Printing & Publishing) 282 16
Hoechst AG (Chemicals) 4,020 182
Hypovereinsbank (Banking) 1,164 76
Karstadt AG (Retail) 188 90
Mannesmann AG (Diversified Manufacturer) 1,410 211
Metro AG (Retail) 2,260 140
SAP AG pfd. (Computer Software) 353 141
</TABLE>
See notes to the financial statements.
49
<PAGE>
HORACE MANN MUTUAL FUNDS 1999 FUNDS SEMI-ANNUAL REPORT
(UNAUDITED)
<TABLE>
<CAPTION>
STATEMENT OF INVESTMENTS (CONTINUED)
INTERNATIONAL EQUITY FUND
JUNE 30, 1999
NUMBER OF MARKET
SHARES (000)
COMMON AND
PREFERRED STOCK
(CONTINUED)
<S> <C> <C>
Siemens AG (Electrical Products) 2,398 $ 185
Veba AG (Electric Utilities) 2,830 166
Viag AG (Diversified Manufacturer) 170 80
- ----------------------------------------------------------------------------------------
1,452
HONG KONG 3.56%
Cheung Kong Hldgs Ltd. (Real Estate) 14,000 125
Citic Pacific (Financial) 33,000 105
Dao Heng Bank Group Ltd. (Banking) 2,000 9
Hutchison Whampoa Ltd. (Diversified Manufacturer) 8,000 72
Kerry Properties (Real Estate) 16,405 22
New World Development (Real Estate) 31,647 95
New World Infrastructure (Diversified Manufacturer)* 16,400 31
Sun Hung Kai Properties (Real Estate) 6,000 55
- ----------------------------------------------------------------------------------------
514
ITALY 6.96%
Arnoldo Mondadori Editore (Printing & Publishing) 3,170 55
Assicurazioni Generali Spa (Insurance) 1,400 48
Banca Nazionale del Lavora (Banking) 11,500 36
Class Editori Spa (Printing & Publishing) 3,500 28
Finmeccanica Spa (Diversified Manufacturing)* 96,200 89
Gruppo Editoriale L'espresso (Printing & Publishing) 2,900 47
Gucci Group (Retail) 2,000 140
Istituto Nazionale (Insurance) 15,600 36
Mediaset Spa (Broadcasting & Entertainment) 8,020 71
Rinascente (Retail) 4,000 30
Seat-Pagine Gialle Spa (Printing & Publishing)* 103,300 141
Telecom Italia Spa (Telecommunications) 27,200 283
- ----------------------------------------------------------------------------------------
1,004
JAPAN 22.66%
Advantest (Electronic Components) 700 77
Asahi Glass Co. (Building Materials) 11,000 71
Benesse Corp. (Computer Software) 800 87
Canon, Inc. (Office Equipment & Supplies) 3,000 86
Daiwa Securities Co. Ltd. (Financial) 23,000 152
Fuji Bank (Banking) 15,000 105
Fujitsu Ltd. (Electronic Components) 8,000 161
Hitachi Ltd. (Electronic Componets) 9,000 84
Kawasaki Steel (Steel & Metal)* 30,000 56
Komatsu Ltd. (Diversified Manufacturing) 8,000 51
Matsushita Electric Ind. Co. (Electronic Components) 7,000 136
Mitsubishi Estate Ltd. (Real Estate) 6,000 59
Mitsui Fudosan Co. Ltd. (Real Estate) 6,000 49
Murata Mfg. Co. (Electronic Components) 2,000 132
NECCorp. (Electronic Components) 12,000 149
Nikko Securites (Financial) 26,000 168
Nippon Telephone & Telegraph Corp.
(Telecommunications) 16 187
Nissan Motor Co. Ltd. (Automobilies) 17,000 81
NSK (Diversified Manufacturing) 14,000 77
NTT Mobile Communications Network, Inc.
(Telecommunications)* 16 214
</TABLE>
See notes to the financial statements.
50
<PAGE>
HORACE MANN MUTUAL FUNDS 1999 FUNDS SEMI-ANNUAL REPORT
(UNAUDITED)
<TABLE>
<CAPTION>
STATEMENT OF INVESTMENTS (CONTINUED)
INTERNATIONAL EQUITY FUND
JUNE 30, 1999
NUMBER OF MARKET
SHARES (000)
COMMON AND
PREFERRED STOCK
(CONTINUED)
<S> <C> <C>
Sakura Bank (Banking) 27,000 $ 102
Sanwa Bank (Banking) 10,000 98
Shinetsu Chemical Co. (Chemicals) 3,000 100
Sony Corp. (Consumer Electronics) 1,200 130
Sony Corp. (ADR) (Consumer Electronics) 300 33
Sumitomo Trust & Banking (Banking) 22,000 106
TDK Corp. (Electronic Components) 1,000 92
Teijin Ltd. (Textiles) 14,000 57
Tokyo Electron (Semiconductors) 2,000 136
Toshiba Corp. (Electronic Components) 22,000 157
Yamanouchi Pharmacy Co. LTD (Pharmaceuticals) 2,000 77
- -----------------------------------------------------------------------------------------
3,270
NETHERLANDS 5.00%
Aegon N.V. (Insurance) 995 72
Ahold Koninlijke N.V. (Retail) 2,090 72
Akzo-Nobel N.V. (Chemicals) 2,360 99
DSM N.V. (Chemicals) 470 50
Elsevier (Printing & Publishing) 5,136 60
Equant N.V. (Telecommunications)* 1,515 140
Heineken Hldgs - A (Alcohol & Tobacco) 2,752 104
United Pan-Europe Communications N.V.
(Cable Television)* 949 51
Vnu-Ver Ned Uitgev Ver Beezit (Printing & Publishing) 1,840 74
- -----------------------------------------------------------------------------------------
722
PORTUGAL 0.35%
Jeronimo Martins E Filho (Food & Beverage) 1,533 51
SINGAPORE 0.49%
Development Bank Singapore Ltd. (Banking) 3,000 37
Overseas Chinese Bank (Banking) 4,000 33
- -----------------------------------------------------------------------------------------
70
SPAIN 0.60%
Telefonica SA (Telecommunications) 1,779 86
Telefonica Publicidad E Informacion (Advertising)* 17 --
- -----------------------------------------------------------------------------------------
86
SWITZERLAND 3.67%
Nestle SA (Food & Beverage) 78 140
Novartis AG (Pharmaceuticals) 63 92
Roche Hldgs Basel AG (Pharmaceuticals) 8 82
Swisscom AG (Telecommunications) 275 103
UBS AG (Banking) 379 113
- -----------------------------------------------------------------------------------------
530
UNITED KINGDOM 19.84%
Barclays (Banking) 2,709 79
BOC Group PLC (Chemicals) 12,120 237
BP Amoco PLC (Oil Companies) 8,940 160
Carlton Communications PLC (Broadcasting & Ent) 9,623 80
Enterprise Oil (Oil Companies) 5,920 38
General Electric Co. PLC (Electrical Products) 15,942 162
Glaxo Wellcome PLC (Pharmaceuticals) 3,546 99
</TABLE>
See notes to the financial statements.
51
<PAGE>
HORACE MANN MUTUAL FUNDS 1999 FUNDS SEMI-ANNUAL REPORT
(UNAUDITED)
<TABLE>
<CAPTION>
STATEMENT OF INVESTMENTS (CONCLUDED)
INTERNATIONAL EQUITY FUND
JUNE 30, 1999
NUMBER OF MARKET
SHARES (000)
COMMON AND
PREFERRED STOCK
(CONCLUDED)
<S> <C> <C>
Granada Group PLC (Consumer Services) 1,735 $ 32
Lasmo PLC (Oil Companies) 20,539 46
Marks & Spencer (Retail) 29,720 171
Orange PLC (Telecommunications)* 11,453 168
Pearson PLC (Printing & Publishing) 4,599 93
Prudential Corp. (Insurance) 9,502 140
Reed International (Printing & Publishing) 16,916 113
Rentokil Group (Environmental Services) 14,474 56
Reuters Group PLC (Printing & Publishing) 18,750 247
Rio Tinto-Zinc Corp. PLC (Steel & Metals) 14,440 242
Royal & Sun Alliance Insurance Group (Insurance) 10,846 97
Sainsbury (J) (Retail) 7,634 48
Select Appointments (Consumer Services)* 4,194 50
Shell Transportation & Trading Co. PLC (Steel & Metals)25,985 195
SmithKline Beecham PLC (Pharmaceuticals) 8,241 107
United News & Media PLC (Printing & Publishing) 5,600 54
Vodafone Airtouch Public Ltd. (Telecommunications) 7,563 149
- ----------------------------------------------------------------------------------------
2,863
TOTAL COMMON AND PREFERRED STOCK 93.56% 13,501
(Cost $11,872)
- ----------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT MARKET
(000) (000)
PARTICIPATING LOAN NOTE
FRANCE
Eurotunnel (Construction)
1.00%, 04/30/40 $ 100 $ 140
- ----------------------------------------------------------------------------------------
TOTAL PARTICIPATING LOAN NOTES 0.97% 100 140
(Cost $149)
- ----------------------------------------------------------------------------------------
SHORT-TERM
INVESTMENT
State Street Bank and Trust -- Repurchase Agreement
4.75%, 07/01/99 (secured by $1,207 1,179 1,179
US Treasury Note, 6.125%, 07/31/00)
- ----------------------------------------------------------------------------------------
TOTAL SHORT-TERM INVESTMENT 8.17% 1,179 1,179
(Cost $1,179)
- ----------------------------------------------------------------------------------------
TOTAL INVESTMENTS 102.70% 14,820
(Cost $13,200)
LIABILITIES IN EXCESS OF
CASH AND OTHER ASSETS (2.70%) (389)
- ----------------------------------------------------------------------------------------
NET ASSETS 100.00% $14,431
========================================================================================
</TABLE>
* Non-income producing during the six months ended June 30, 1999 as this
security did not pay dividends.
See notes to the financial statements.
52
<PAGE>
HORACE MANN MUTUAL FUNDS 1999 FUNDS SEMI-ANNUAL REPORT
(UNAUDITED)
PIECHART:
CASH & OTHER NET ASSETS 3.4%
COMMON & PREFERRED STOCK 96.6%
<TABLE>
<CAPTION>
STATEMENT OF INVESTMENTS
SOCIALLY RESPONSIBLE FUND
JUNE 30, 1999
NUMBER OF MARKET
SHARES (000)
COMMON STOCK
AEROSPACE/DEFENSE 1.36%
<S> <C> <C>
Rockwell International Corp. 11,450 $ 696
AUTOMOTIVE 3.76%
Ford Motor Co. 19,800 1,117
Meritor Automotive, Inc. 19,516 498
PACCAR, Inc. 5,900 315
- ----------------------------------------------------------------------------------------
1,930
BANKS/FINANCIAL SERVICES 11.28%
Bank of America Corp. 17,450 1,279
Bank One Corp. 11,790 702
Chase Manhattan Corp. 10,500 909
Federal National Mortgage Association 12,750 872
First Union Corp. 10,611 499
Fleet Financial Group, Inc. 12,900 572
Morgan (J.P.) & Co., Inc. 1,600 225
KeyCorp 14,700 472
US Bancorp 7,500 255
- ----------------------------------------------------------------------------------------
5,785
CHEMICALS 5.11%
Akzo Nobel N.V. (ADR) 7,400 314
Dow Chemical Co. 4,900 622
DuPont (E.I.) de Nemours & Co. 12,700 868
Eastman Chemical Co. 3,700 191
Lyondell Petrochemical Co. 30,396 627
- ----------------------------------------------------------------------------------------
2,622
COMMUNICATION SERVICES 22.12%
Alltel Corp. 10,700 765
Ameritech Corp. 7,100 522
Bell Atlantic Corp. 41,722 2,728
BellSouth Corp. 21,700 1,017
Corning Inc. 39,900 2,798
Frontier Corp. 19,900 1,174
SBC Communications, Inc. 18,100 1,050
Sprint Corp. 198,200 1,014
Telesp Participacpoes SA (ADR) 12,000 275
- ----------------------------------------------------------------------------------------
11,343
COMPUTER SERVICES/EQUIPMENT 4.48%
Xerox Corp. 38,900 2,298
CONSUMER PRODUCTS 5.17%
Avon Products, Inc. 17,900 993
Colgate-Palmolive Co. 10,600 1,047
Heinz (H.J.) Co. 12,100 607
- ----------------------------------------------------------------------------------------
2,647
ENERGY 9.66%
BP Amoco PLC (ADR)* 3 --
Conoco, Inc.- A 17,100 477
</TABLE>
See notes to the financial statements.
53
<PAGE>
HORACE MANN MUTUAL FUNDS 1999 FUNDS SEMI-ANNUAL REPORT
(UNAUDITED)
<TABLE>
<CAPTION>
STATEMENT OF INVESTMENTS (CONTINUED)
SOCIALLY RESPONSIBLE FUND
JUNE 30, 1999
NUMBER OF MARKET
SHARES (000)
COMMON STOCK
(CONTINUED)
<S> <C> <C>
Elf Aquitaine (ADR) 8,550 $ 629
Mobil Corp. 15,200 1,505
Royal Dutch Petroleum Co. 16,700 1,006
Texaco, Inc. 12,000 750
Williams Companies, Inc. (The) 13,800 587
- ----------------------------------------------------------------------------------------
4,954
FOOD & BEVERAGE 1.56%
PepsiCo, Inc. 20,600 797
HEALTH CARE/PHARMACEUTICALS 6.35%
Albertson's, Inc. 1,763 91
American Home Products Corp. 25,100 1,443
Bristol-Myers Squibb Co. 9,600 676
Glaxo Wellcome PLC (ADR) 8,000 453
SmithKline Beecham PLC - A (ADR) 9,000 595
- ----------------------------------------------------------------------------------------
3,258
INDEX SECURITY 1.50%
Standard & Poor's Depository Receipts 5,600 767
INSURANCE 4.44%
Lincoln National Corp. 4,400 230
Marsh & McLennan Cos., Inc. 5,100 385
SAFECO Corp. 3,750 165
St. Paul Cos., Inc. 17,900 569
XL Capital Ltd. - A 16,391 926
- ----------------------------------------------------------------------------------------
2,275
MANUFACTURING (DIVERSIFIED) 2.57%
Emerson Electric Co. 4,000 251
Parker Hannafin Corp. 15,800 723
Thomas & Betts Corp. 7,300 345
- ----------------------------------------------------------------------------------------
1,319
METALS & MINING 0.77%
Oregon Steel Mills, Inc. 29,700 395
PAPER & FOREST PRODUCTS 4.29%
Georgia-Pacific Corp. 16,200 767
Georgia-Pacific Corp. (Timber Group) 7,600 192
Temple-Inland, Inc. 6,600 450
Weyerhaeuser Co. 11,500 791
- ----------------------------------------------------------------------------------------
2,200
PRINTING/PUBLISHING 0.47%
McGraw Hill Cos., Inc. 4,500 243
REAL ESTATE 1.65%
Boston Properties, Inc. 10,400 373
Equity Office Properties Trust 18,400 472
- ----------------------------------------------------------------------------------------
845
</TABLE>
See notes to the financial statements.
54
<PAGE>
HORACE MANN MUTUAL FUNDS 1999 FUNDS SEMI-ANNUAL REPORT
(UNAUDITED)
<TABLE>
<CAPTION>
STATEMENT OF INVESTMENTS (CONCLUDED)
SOCIALLY RESPONSIBLE FUND
JUNE 30, 1999
NUMBER OF MARKET
SHARES (000)
COMMON STOCK
(CONCLUDED)
RETAIL/SPECIALTY 1.87%
<S> <C> <C>
Rite Aid Corp. 31,000 $ 763
Sears, Roebuck and Co. 4,450 198
- ----------------------------------------------------------------------------------------
961
TRANSPORTATION 5.06%
Canadian National Railway Co. 6,600 442
CSX Corp. 28,150 1,275
Norfolk Southern Corp. 29,100 877
- ----------------------------------------------------------------------------------------
2,594
UTILITIES 2.58%
CINergy Corp. 10,900 349
Pacificorp 32,300 594
Unicom Corp. 9,850 380
- ----------------------------------------------------------------------------------------
1,323
TOTAL COMMON STOCK 96.05% 49,252
(Cost $42,670)
- ----------------------------------------------------------------------------------------
PREFERRED STOCK
CHEMICALS 0.59%
Monsanto Co.* 7,600 305
(Cost $334)
- ----------------------------------------------------------------------------------------
TOTAL COMMON AND PREFERRED STOCK 96.64% 49,557
(Cost $43,004)
- ----------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT MARKET
(000) (000)
SHORT-TERM
INVESTMENT
State Street Bank and Trust -- Repurchase Agreement
4.75%, 07/01/99, (secured by $1,473
US Treasury Note, 8.75%, 08/15/00) $ 1,439 $ 1,439
- ----------------------------------------------------------------------------------------
TOTAL SHORT-TERM INVESTMENT 2.81% 1,439 1,439
(Cost $1,439)
- ----------------------------------------------------------------------------------------
TOTAL INVESTMENTS 99.45% 50,996
(Cost $44,443)
CASH AND OTHER ASSETS IN
EXCESS OF LIABILITIES 0.55% 281
- ----------------------------------------------------------------------------------------
NET ASSETS 100.00% $51,277
========================================================================================
</TABLE>
* Non-income producing during the six months ended June 30, 1999 as this
security did not pay dividends.
See notes to the financial statements.
55
<PAGE>
HORACE MANN MUTUAL FUNDS 1999 FUNDS SEMI-ANNUAL REPORT
(UNAUDITED)
<TABLE>
<CAPTION>
STATEMENTS OF ASSETS AND LIABILITIES
JUNE 30, 1999
SMALL CAP INTERNATIONAL SOCIALLY
GROWTH BALANCED INCOME SHORT-TERM GROWTH EQUITY RESPONSIBLE
FUND FUND FUND FUND FUND FUND FUND
ASSETS
<S> <C> <C> <C> <C> <C> <C> <C>
Cash $ 1,075 $ 2,124 $ 665 $ 4,983 $ 20,529 $ 918 $ 1,000
Investments at market value* 701,419,833 439,062,370 14,392,745 1,777,041 33,561,081 14,820,069 50,996,404
Forward currency contract -- -- -- -- -- 7,503 --
Dividends and interest receivable 836,121 3,099,136 218,152 -- 21 7,830 84,597
Receivable-foreign taxes 3 1 -- -- -- 24,851 4,246
Receivable-fund shares sold 385,475 226,001 93,146 5,743 68,119 31,587 169,392
Receivable-investments sold 5,808,434 2,945,203 100,141 -- 169,784 303,916 177,793
TOTAL ASSETS 708,450,941 445,334,835 14,804,849 1,787,767 33,819,534 15,196,674 51,433,432
- -----------------------------------------------------------------------------------------------------------------------------
LIABILITIES
Forward currency contract -- -- -- -- -- 924 --
Payable-fund
shares redeemed 397,442 235,476 406 -- 50,861 26,740 70,177
Payable-investments
purchased 1,026,239 1,213,174 99,964 -- 353,523 693,242 25,044
Payable-management, advisor
and related fees 449,604 311,269 10,849 -- 39,232 16,094 53,207
Accrued expenses** -- 13,142 26,291 2,522 6,873 29,124 8,373
TOTAL LIABILITIES 1,873,285 1,773,061 137,510 2,522 450,489 766,124 156,801
- -----------------------------------------------------------------------------------------------------------------------------
NET ASSETS $706,577,656 $443,561,774 $14,667,339 $1,785,245 $33,369,045 $14,430,550 $51,276,631
- -----------------------------------------------------------------------------------------------------------------------------
NET ASSETS CONSIST OF:
Par value of common shares 27,205,404 2,255,214 112,667 17,509 -- -- --
Paid in surplus 565,538,347 394,077,741 14,410,799 1,724,119 28,063,605 12,385,603 44,661,219
Accumulated undistributed
net investment income 3,841,760 7,251,810 412,394 44,192 (159,744) 99,024 312,696
Accumulated undistributed
net realized gain (loss)
from investments and foreign
currency transactions 37,715,223 16,600,933 38,765 (41) (937,101) 320,348 (251,022)
Net unrealized appreciation
(depreciation) on investments
and translation of assets and
liabilities in foreign currency72,276,922 23,376,076 (307,286) (534) 6,402,285 1,625,575 6,553,738
- -----------------------------------------------------------------------------------------------------------------------------
NET ASSETS $706,577,656 $443,561,774 $14,667,339 $1,785,245 $33,369,045 $14,430,550 $51,276,631
- -----------------------------------------------------------------------------------------------------------------------------
Number of shares outstanding: 27,205,404 22,552,142 1,126,671 175,089 2,464,433 1,103,106 3,512,412
(Authorized 50,000,000
shares each)
Par Value 1.00 0.10 0.10 0.10 0.00 0.00 0.00
- -----------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE
PER SHARE $ 25.97 $ 19.67 $ 13.02 $ 10.20 $ 13.54 $ 13.08 $ 14.60
- -----------------------------------------------------------------------------------------------------------------------------
*Cost of Securities:
Investments $629,142,911 $415,686,294 $14,700,031 $1,777,575 $27,158,796 $13,199,896 $44,442,666
Foreign Currency -- -- -- -- -- -- --
</TABLE>
** Accrued expenses for the Income Fund include $12,298 for custody fees, $5,145
for accounting fees and $7,085 for legal fees. For the Short-Term Investment
Fund accrued expenses include $1,735 for custody fees and $787 for trustee fees.
See notes to the financial statements.
56
<PAGE>
HORACE MANN MUTUAL FUNDS 1999 FUNDS SEMI-ANNUAL REPORT
(UNAUDITED)
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1999
SMALL CAP INTERNATIONAL SOCIALLY
GROWTH BALANCED INCOME SHORT-TERM GROWTH EQUITY RESPONSIBLE
FUND FUND FUND FUND FUND FUND FUND
- --------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME:
<S> <C> <C> <C> <C> <C> <C> <C>
Dividends $ 5,913,063 $ 2,302,798 $ -- $ --$ 3,629 $ 169,002 $ 491,726
Interest & amortization 233,825 6,263,517 472,392 46,484 52,078 26,957 21,634
- --------------------------------------------------------------------------------------------------------------------------
6,146,888 8,566,315 472,392 46,484 55,707 195,959 513,360
Foreign taxes withheld (20,232) (10,277) -- -- -- (18,476) (3,812)
- --------------------------------------------------------------------------------------------------------------------------
Total investment income 6,126,656 8,556,038 472,392 46,484 55,707 177,483 509,548
EXPENSES:
Management, adviser and
related fees (Note 5) 2,252,929 1,458,999 48,278 4,339 217,413 72,422 220,792
Fund pricing fees 13,901 17,855 5,927 6,000 3,960 7,927 6,960
Professional fees 3,835 5,068 3,512 4,920 849 2,162 849
Custodian fees 27,492 24,863 5,366 1,800 22,698 36,000 3,396
Transfer agent fee (Note 5) 15,633 24 24 24 24 24 24
Shareholder reports 8,890 4,849 522 -- 1,293 648 1,456
Trustees' fees and expenses 1,092 1,092 1,092 1,092 1,383 1,383 1,383
Other expenses 2,419 413 118 -- -- -- --
- --------------------------------------------------------------------------------------------------------------------------
TOTAL EXPENSES 2,326,191 1,513,163 64,839 18,175 247,620 120,566 234,860
Less management and related
fees waived (Note 5) -- -- -- (3,220) (18,669) (7,045) (24,040)
Less expenses paid by Horace Mann
Investors, Inc. (Note 5) -- -- -- (12,040) (13,500) (36,000) (3,000)
Less expenses paid by commission
credits (Note 3) (41,295) (42,834) -- -- -- -- --
- --------------------------------------------------------------------------------------------------------------------------
Net expenses 2,284,896 1,470,329 64,839 2,915 215,451 77,521 207,820
- --------------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME(LOSS) 3,841,760 7,085,709 407,553 43,569 (159,744) 99,962 301,728
- --------------------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS):
Realized gain (loss) from:
Investments 37,658,468 16,673,004 39,024 (39) 2,904,105 364,826 (196,877)
Foreign currency transactions (9) (4,439) (303) -- -- (26,888) --
- --------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss)
on investments and foreign
currency transactions 37,658,459 16,668,565 38,721 (39) 2,904,105 337,938 (196,877)
Change in unrealized
appreciation or
(depreciation) on:
Investments 3,215,329 (6,440,428) (694,542) (852) 110,837 524,289 5,140,594
Translation of assets
and liabilities in
foreign currencies -- (3,587) (249) -- -- 4,553 --
NET REALIZED AND UNREALIZED
GAIN (LOSS) FROM INVESTMENTS
AND FOREIGN
CURRENCY TRANSACTIONS 40,873,788 10,224,550 (656,070) (891) 3,014,942 866,780 4,943,717
- --------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE)
IN NET ASSETS
FROM OPERATIONS $44,715,548 $17,310,259 $(248,517) $42,678 $2,855,198 $966,742 $5,245,445
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to the financial statements.
57
<PAGE>
HORACE MANN MUTUAL FUNDS 1999 FUNDS SEMI-ANNUAL REPORT
(UNAUDITED)
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIODS ENDED JUNE 30, 1999 AND DECEMBER 31, 1998
GROWTH FUND BALANCED FUND INCOME FUND
1999 1998 1999 1998 1999 1998
- -----------------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN
NET ASSETS
FROM OPERATIONS:
<S> <C> <C> <C> <C> <C> <C>
Net investment income (loss) $ 3,841,760 $ 10,007,420 $ 7,085,709 $ 14,764,905 $ 407,553 $ 666,683
Net realized short-term gain
(loss) on investments and
foreign currency transactions 22,284,249 14,562,659 10,742,626 8,676,359 (23,100) 99,971
Net realized long-term gain
on investments and
foreign currency transactions 15,374,210 54,561,961 5,925,939 25,140,067 61,821 20,410
Net unrealized appreciation
(depreciation) on investments and
translation of assets and liabilities
in foreign currency 3,215,329 (33,476,219) (6,444,015) (18,716,891) (694,791) 88,631
- -----------------------------------------------------------------------------------------------------------------------------
CHANGE IN NET ASSETS
FROM OPERATIONS 44,715,548 45,655,821 17,310,259 29,864,440 (248,517) 875,695
- -----------------------------------------------------------------------------------------------------------------------------
FROM DISTRIBUTIONS
TO SHAREHOLDERS:
Net investment income -- (10,018,267) -- (15,358,192) -- (687,301)
Net realized short-term gain
from investments and
foreign currency transactions -- (14,547,126) -- (8,675,538) -- (101,781)
Net realized long-term gain
from investments and
foreign currency transactions -- (54,910,150) -- (24,989,848) -- (20,356)
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS
TO SHAREHOLDERS -- (79,475,543) -- (49,023,578) -- (809,438)
- -----------------------------------------------------------------------------------------------------------------------------
FROM FUND SHARE
TRANSACTIONS:
Proceeds from shares sold 47,522,315 115,739,024 30,295,843 69,434,528 3,846,316 7,592,036
Net asset value of shares issued
in reinvestment of dividends and
capital gains distributions -- 72,586,255 -- 44,166,154 -- 683,334
- -----------------------------------------------------------------------------------------------------------------------------
47,522,315 188,325,279 30,295,843 113,600,682 3,846,316 8,275,370
Cost of shares redeemed (56,390,715) (82,277,370) (31,963,978) (53,631,448) (2,889,345) (4,041,073)
- -----------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET
ASSETS FROM FUND
SHARE TRANSACTIONS (8,868,400) 106,047,909 (1,668,135) 59,969,234 956,971 4,234,297
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL INCREASE
IN NET ASSETS 35,847,148 72,228,187 15,642,124 40,810,096 708,454 4,300,554
NET ASSETS:
BEGINNING OF PERIOD 670,730,508 598,502,321 427,919,650 387,109,554 13,958,885 9,658,331
- -----------------------------------------------------------------------------------------------------------------------------
END OF PERIOD $706,577,656 $670,730,508 $443,561,774 $427,919,650 $14,667,339 $13,958,885
- -----------------------------------------------------------------------------------------------------------------------------
Undistributed net
investment income $ 3,841,760 $ -- $ 7,251,810 $ 166,101 $ 412,394 $ 4,841
</TABLE>
See notes to the financial statements.
58
<PAGE>
<TABLE>
<CAPTION>
HORACE MANN MUTUAL FUNDS 1999 FUNDS SEMI-ANNUAL REPORT
(UNAUDITED)
SMALL CAP INTERNATIONAL SOCIALLY
SHORT-TERM FUND GROWTH FUND EQUITY FUND RESPONSIBLE FUND
1999 1998 1999 1998 1999 1998 1999 1998
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 43,569 $ 64,925 $ (159,744) $ (127,182) $ 99,962 $ 77,849 $ 301,728 $ 462,240
(39) 76 2,775,533 (3,685,694) 3,184 (168,371) (452,752) 34,007
-- -- 128,572 340,349 334,754 213,770 255,875 254,639
(852) 318 110,837 5,176,382 528,842 1,072,261 5,140,594 831,361
- ------------------------------------------------------------------------------------------------------------------------------
42,678 65,319 2,855,198 1,703,855 966,742 1,195,509 5,245,445 1,582,247
- ------------------------------------------------------------------------------------------------------------------------------
-- (64,809) -- -- -- (73,256) -- (451,693)
-- (76) -- -- -- -- -- (54,547)
-- -- -- -- -- -- -- (281,334)
- ------------------------------------------------------------------------------------------------------------------------------
-- (64,885) -- -- -- (73,256) -- (787,574)
- ------------------------------------------------------------------------------------------------------------------------------
3,689,333 3,937,144 5,582,718 14,868,359 4,313,433 5,127,635 13,908,252 27,958,456
-- 48,742 -- -- -- 14,646 -- 528,490
- ------------------------------------------------------------------------------------------------------------------------------
3,689,333 3,985,886 5,582,718 14,868,359 4,313,433 5,142,281 13,908,252 28,486,946
(3,277,781) (3,806,298) (3,723,407) (4,442,570) (1,160,775) (1,167,294) (3,440,897) (2,930,660)
- ------------------------------------------------------------------------------------------------------------------------------
411,552 179,588 1,859,311 10,425,789 3,152,658 3,974,987 10,467,355 25,556,286
- ------------------------------------------------------------------------------------------------------------------------------
454,230 180,022 4,714,509 12,129,644 4,119,400 5,097,240 15,712,800 26,350,959
1,331,015 1,150,993 28,654,536 16,524,892 10,311,150 5,213,910 35,563,831 9,212,872
- ------------------------------------------------------------------------------------------------------------------------------
$1,785,245 $1,331,015 $33,369,045 $28,654,536 $14,430,550 $10,311,150 $51,276,631 $35,563,831
- ------------------------------------------------------------------------------------------------------------------------------
$ 44,192 $ 623 $ (159,744) $ -- $ 99,024 $ (938) $ 312,696 $ 10,968
</TABLE>
59
<PAGE>
HORACE MANN MUTUAL FUNDS 1999 FUNDS SEMI-ANNUAL REPORT
(UNAUDITED)
NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 1999
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." Shares are presently offered to Horace Mann Life Insurance
Company (HMLIC) Separate Account and the HMLIC 401(k) Separate Account. The
Growth Fund shares also may be purchased under the dividend reinvestment plans
by certain shareholders.
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 INVESTMENT 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 with earnings
growth potential.
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, 1999.
60
<PAGE>
HORACE MANN MUTUAL FUNDS 1999 FUNDS SEMI-ANNUAL REPORT
(UNAUDITED)
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1999
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 paydown
gains and losses on mortgage backed securities and gains and losses realized on
foreign currency transactions. These gains and losses are included as net
realized gains and losses for financial reporting purposes.
The International Equity Fund and Small Cap Growth Fund intend to utilize
provisions of the federal income tax laws which allow them to carry a realized
capital loss forward for eight years following the year of the loss and offset
such losses against any future realized capital gains. At Dec. 31, 1998, the
International Equity Fund and Small Cap Growth Fund had an accumulated capital
loss carryforward for tax purposes of $15,284, and $3,772,187, respectively,
which will expire in fiscal year ending Dec. 31, 2005 and Dec. 31, 2006.
Net realized gains or losses differ for financial reporting and tax
purposes as a result of losses from wash sales.
D. DIVIDENDS AND DISTRIBUTIONS -- Dividends and distributions from net
investment income and net realized gains are paid out annually and are recorded
on the ex-dividend date. Distributions from net realized gains for book purposes
may include short-term capital gains, which are included as ordinary income for
tax purposes.
For federal income tax purposes, a net operating loss recognized in the
current year cannot be used to offset future years' net investment income.
Therefore, $127,182 of net operating loss generated by Small Cap Growth Fund has
been reclassified from accumulated net investment loss to paid in surplus. For
the year ended December 31, 1998, the Growth, Balanced, Income and Socially
Responsible funds paid long-term capital gains of $54,910,150, $24,989,848,
$20,356 and $281,334, respectively.
E. 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.
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.
61
<PAGE>
HORACE MANN MUTUAL FUNDS 1999 FUNDS SEMI-ANNUAL REPORT
(UNAUDITED)
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1999
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 -- Planned Amortization Class (PAC),
- -- 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. AMERICAN DEPOSITORY RECEIPTS (ADR) -- A certificate issued by an American
bank to evidence ownership of original foreign shares. The certificate is
transferable and can be traded. The original foreign stock certificate is
deposited with a foreign branch or correspondent bank of the issuing American
bank.
E. COMMISSION CREDITS -- Brinson Partners, Inc., Mellon Equity Associates,
LLP and Wellington Management Company, LLP, subadvisers for the Growth and
Balanced funds, seek 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.
F. FOREIGN CURRENCY TRANSACTIONS -- The books and records of the Funds are
maintained in U.S. dollars. Foreign currency transactions are translated into
U.S. dollars on the following basis:
o market value of investment securities, other assets and other
liabilities at the daily rates of exchange, and
o 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.
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. The effect of changes in
foreign exchange rates on realized and unrealized gains or losses is reflected
as a component of such gains or losses.
G. FORWARD CURRENCY CONTRACTS -- The Balanced Fund, Income Fund and
International Equity Fund may enter into forward currency contracts in order to
reduce their exposure to changes in foreign currency exchange rates on their
foreign portfolio holdings and to lock in the U.S. dollar cost of assets and
liabilities denominated in foreign currencies. A forward currency exchange
contract is a commitment to purchase or sell a foreign currency at a future date
at a negotiated forward rate. The gain or loss arising from the differences
between the U.S. dollar cost of the original contract and the value of the
foreign currency in U.S. dollars upon closing of such contract is included in
net realized gain or loss from foreign currency transactions.
62
<PAGE>
HORACE MANN MUTUAL FUNDS 1999 FUNDS SEMI-ANNUAL REPORT
(UNAUDITED)
<TABLE>
<CAPTION>
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1999
At June 30, 1999 the Funds have the following open forward currency contracts:
CURRENT UNREALIZED
FOREIGN VALUE APPRECIATION
CURRENCY U.S. DOLLAR (DEPRECIATION)
- ------------------------------------------------------------------------------------------------------------------------------------
INTERNATIONAL EQUITY FUND
LONG CONTRACTS:
<S> <C> <C>
Australian Dollar,
38,344 expiring 07/02/99 $ 25,347 $ (40)
British Pound,
110,210 expiring 07/01/99 - 07/07/99 $173,719 $ (172)
Canadian Dollar,
19,290 expiring 07/02/99 $ 13,100 $ 38
Euro Dollar,
196,520 expiring 07/02/99 - 07/30/99 $202,583 $ (528)
Hong Kong Dollar,
172,938 expiring 07/02/99 $ 22,290 --
Japanese Yen,
25,585,123 expiring 07/01/99 - 07/02/99 $211,500 $ (108)
Swiss Franc,
50,156 expiring 07/02/99 $ 32,253 $ (114)
------
$ (924)
======
SHORT CONTRACTS:
Britsh Pound,
23,390 expiring 07/01/99 $ 36,868 $ 258
Euro Dollar,
121,978 expiring 07/01/99 - 07/30/99 $125,741 $ 851
Hong Kong Dollar,
104,987 expiring 07/02/99 - 07/07/99 $ 13,532 $ --
Japanese Yen,
40,143,824 expiring 07/01/99 - 09/07/99 $334,228 $6,394
------
$7,503
======
</TABLE>
63
<PAGE>
HORACE MANN MUTUAL FUNDS 1999 FUNDS SEMI-ANNUAL REPORT
(UNAUDITED)
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1999
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 plan by certain shareholders.
Transactions in capital stock for the six months ended June 30, 1999 and the
year ended December 31, 1998 were:
<TABLE>
<CAPTION>
Shares issued
to shareholders
in reinvestment Net increase
Shares sold of dividends Shares redeemed (decrease)
- ------------------------------------------------------------------------------------------------------------------------------------
Growth Fund
<S> <C> <C> <C> <C>
06/30/99 1,935,664 -- (2,287,148) (351,484)
12/31/98 4,347,997 3,020,651 (3,139,417) 4,229,231
Balanced Fund
06/30/99 1,590,017 -- (1,673,448) (83,431)
12/31/98 3,374,120 2,359,303 (2,626,417) 3,107,006
Income Fund
06/30/99 292,081 -- (219,436) 72,645
12/31/98 555,983 51,885 (296,718) 311,150
Short-Term Fund
06/30/99 366,907 -- (325,248) 41,659
12/31/98 386,446 4,889 (373,069) 18,266
Small Cap Growth Fund
06/30/99 447,199 -- (297,624) 149,575
12/31/98 1,300,098 -- (397,477) 902,621
International Equity Fund
06/30/99 345,404 -- (92,558) 252,846
12/31/98 443,238 1,217 (102,098) 342,357
Socially Responsible Fund
06/30/99 1,025,440 -- (251,454) 773,986
12/31/98 2,167,784 41,128 (232,154) 1,976,758
64
</TABLE>
<PAGE>
HORACE MANN MUTUAL FUNDS 1999 FUNDS SEMI-ANNUAL REPORT
(UNAUDITED)
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1999
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.
From May 1, 1997 to Mar. 1, 1999, Investors acted as the Trust's adviser,
managing its investments, and administering its business affairs pursuant to a
management agreement. Also on May 1, 1997, Wellington Management Company, LLP,
became the subadviser to the Growth, Balanced, Income and Short-Term funds.
Effective Mar. 10, 1997, BlackRock Financial Management, Inc. (formerly PNC
Equity Advisors Company) became the subadviser to the Small Cap Growth Fund, and
Scudder Kemper Investments, Inc. became the subadviser to the International
Equity and Socially Responsible funds. Each subadviser was compensated by
Investors (not the Trust) and beared all of its own expenses in providing
subadvisory services.
For the Growth, Balanced, Income and Short-Term funds, Investors received
separate management and advisory fees. For management services, the fee accrued
daily and paid monthly, was 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.
NET ASSETS RATE
On initial $100 million .250%
Over $100 million .200%
For advisory services, the fee was 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>
<CAPTION>
GROWTH FUND BALANCED FUND INCOME FUND SHORT-TERM FUND AVERAGE NET ASSETS
<S> <C> <C> <C> <C> <C>
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>
As compensation for its services, the Small Cap Growth, International Equity and
Socially Responsible funds each pay Investors a combined monthly management and
advisory fee. The contractual fees are as follows:
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
During 1998 and the first two months of 1999, Investors voluntarily reduced
these management fees by 0.40%. The actual management fees accrued daily and
were paid monthly based on the following annual percentage rate to the Funds'
average daily net assets for the respective month. The fees net of waivers were:
SMALL CAP GROWTH FUND
1.00% on the first $25 million
0.75% on all assets over $25 million
INTERNATIONAL EQUITY FUND
0.70% on the first $40 million
0.50% on the next $60 million
0.45% 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
65
<PAGE>
HORACE MANN MUTUAL FUNDS 1999 FUNDS SEMI-ANNUAL REPORT
(UNAUDITED)
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1999
On Mar. 1, 1999, Wilshire Associates became the investment adviser for all
variable investment options for Horace Mann's Annuity Alternatives contracts.
Subadvisers for each variable investment option, except the Growth Fund and the
stock portfolio of the Balanced Fund, remain the same. The Growth Fund and the
stock portfolio of the Balanced Fund now employ a multi-manager strategy using
three subadvisers to manage their assets. The two new subadvisers -- Brinson
Partners, Inc. and Mellon Equity Associates -along with a new team of fund
managers at Wellington Management Co., LLP now manage these assets.
Each subadviser's fees are paid by the adviser out of the advisory fees that it
receives from each of the funds. Fees paid to a subadviser of a fund with
multiple subadvisers depends upon the fee rate negotiated with the adviser and
upon the percentage of the fund's assets allocated to that subadvisers by the
adviser, which may vary from time to time. Thus, the basis for fees paid to any
such subadviser is not constant, and the relative amounts of fees paid to the
various subadvisers of a fund will fluctuate. These internal fluctuations,
however, will not affect the total advisory fees paid by a fund, which will
remain fixed on the terms described above. The adviser may, however, determine
in its discretion to waive a portion of its fee if internal fluctuations in the
fee to be paid to the subadvisers results in excess profit to the adviser.
Because the adviser will pay each subadviser's fees out of its own fees from the
Funds, there will not be any "duplication" of advisory fees paid by the Funds.
For the services provided and expenses assumed pursuant to the Investment
Advisory Agreement, the Adviser receives a fee based on each fund's average
daily net assets, computed daily and payable monthly, at the following annual
rates:
FUND RATE
Growth Fund 0.400%
Balanced Fund 0.400%
Income Fund 0.400%
Short-Term Investment Fund 0.125%
Small Cap Growth Fund 1.150%
International Equity Fund 0.850%
Socially Responsible Fund 0.700%
Transfer and dividend disbursing agent services are provided by HMSC on a per
account basis. The transfer agent fees for the six month ended June 30, 1999
were $15,633 for the Growth Fund, $24 each for the Balanced, Income, Short-Term,
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 1999. For the six months ended
June 30, 1999, the fees, excluding travel expenses, for independent trustees
totaled $13,600. The Trust does not compensate interested officers and trustees
(those who are also officers and/or directors of Horace Mann).
66
<PAGE>
HORACE MANN MUTUAL FUNDS 1999 FUNDS SEMI-ANNUAL REPORT
(UNAUDITED)
NOTES TO THE FINANCIAL STATEMENTS (CONCLUDED)
JUNE 30, 1999
6. SECURITY TRANSACTIONS -- Security transactions, excluding short-term
investments, for the six months ended June 30, 1999 were:
<TABLE>
<CAPTION>
PURCHASES PROCEEDS FROM SALES
<S> <C> <C>
Growth Fund $1,139,565,556 $1,155,285,282
Balanced Fund 536,596,842 535,675,839
Income Fund 4,043,701 2,447,559
Short-Term Fund -- 2,228,594
Small Cap Growth Fund 27,750,027 26,168,738
International Equity Fund 8,297,492 4,790,663
Socially Responsible Fund 21,068,694 9,314,741
</TABLE>
The following table shows investments, excluding foreign currency and unrealized
appreciation (depreciation) at June 30, 1999.
<TABLE>
<CAPTION>
AGGREGATE GROSS AGGREGATE GROSS
UNREALIZED UNREALIZED NET UNREALIZED
APPRECIATION (DEPRECIATION) APPRECIATION (DEPRECIATION)
<S> <C> <C> <C>
Growth Fund $82,979,476 $(10,702,554) $72,276,922
Balanced Fund 32,986,207 (9,610,131) 23,376,076
Income Fund 74,513 (381,799) (307,286)
Short-Term Fund -- (534) (534)
Small Cap Growth Fund 7,065,015 (662,730) 6,402,285
International Equity Fund 2,059,746 (439,572) 1,620,174
Socially Responsible Fund 7,429,145 (875,407) 6,553,738
</TABLE>
67
<PAGE>
RESULTS OF THE SHAREHOLDER VOTES
A special meeting of the shareholders of the Trust was held January 13, 1999,
where shareholders voted on the following items:
1) The election for the following trustees by the shareholders:
# of Shares
In Favor Withheld
A. Thomas Arisman 48,448,652 1,410,486
A. L. Gallop 48,302,854 1,556,283
Richard A. Holt 48,422,216 1,436,922
Richard D. Lang 48,438,311 1,420,827
Harriet A. Russell 48,456,155 1,302,983
George J. Zock 48,422,183 1,416,954
2) The ratification of KPMG LLP as independent public accountants for its
current fiscal year, 48,140,153 shares voted for the proposal, 629,715 voted
against and 1,089,269 shares abstained.
3) Approving or disapproving an investment advisory agreement with Wilshire
Associates, Inc., 44,001,819 voted for the proposal, 3,927,531 voted against and
1,829,789 shares abstained.
4) Approving or disapproving a proposal to permit Wilshire Associates, Inc. to
replace subadvisers or add subadvisers to the Funds, and to enter into
subadvisory agreement with those subadvisers without further shareholder
approval, 40,471,771 voted for the proposal, 6,517,913 voted against and
2,869,452 shares abstained.
5) The shareholders of the International Equity Fund and Socially Responsible
Fund voting to approve or disapprove a new subadvisory agreement with Scudder
Kemper Investments, Inc., 3,156,204 voted for the proposal, 57,035 voted against
and 163,610 abstained.
6a) The shareholders of the Growth Fund voting to approve or disapprove a
subadvisory agreement with Mellon Equity Associates, LLP, 21,566,272 voted for
the proposal, 160,524 voted against and 1,224,314 abstained.
6b) The shareholders of the Growth Fund voting to approve or disapprove a
subadvisory agreement with Brinson Partners, Inc., 20,386,883 voted for the
proposal, 1,277,764 voted against and 1,286,463 abstained.
7a) The shareholders of the Balanced Fund voting to approve or disapprove a
change to the fund's fundamental investment restriction with respect to allowing
the fund to hold larger investments in fewer companies, 19,504,569 voted for the
proposal, 0 voted against and 672,240 abstained.
7b) The shareholders of the Balanced Fund voting to approve or disapprove a
change to the fund's fundamental investment restriction with respect to allowing
the fund to invest in other investment companies, 17,768,682 voted for the
proposal, 1,735,867 voted against and 672,240 abstained.
68
<PAGE>
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SPRINGFIELD, IL62708-4657
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