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SIGNATURE WILLIAM J. KELLY
TITLE OFFICER
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<NAME> HORACE MANN GROWTH FUND
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<NAME> HORACE MANN SHORT-TERM INVESTMENT FUND
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<TABLE> <S> <C>
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<NAME> HORACE MANN SMALL CAP GROWTH FUND
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<NAME> SMALL CAP
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<S> <C>
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<SHARES-COMMON-PRIOR> 1,412
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<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (3,841)
<ACCUM-APPREC-OR-DEPREC> 6,292
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<GROSS-EXPENSE> 382
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<PER-SHARE-NAV-BEGIN> 11.70
<PER-SHARE-NII> (.07)
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<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0001026708
<NAME> HORACE MANN INTERNATIONAL EQUITY FUND
<SERIES>
<NUMBER> 6
<NAME> INTERNATIONAL
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
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<TOTAL-ASSETS> 10,354
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<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 9,233
<SHARES-COMMON-STOCK> 850
<SHARES-COMMON-PRIOR> 508
<ACCUMULATED-NII-CURRENT> 4
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (23)
<ACCUM-APPREC-OR-DEPREC> 1,097
<NET-ASSETS> 10,311
<DIVIDEND-INCOME> 111
<INTEREST-INCOME> 48
<OTHER-INCOME> 0
<EXPENSES-NET> 81
<NET-INVESTMENT-INCOME> 78
<REALIZED-GAINS-CURRENT> 45
<APPREC-INCREASE-CURRENT> 1,072
<NET-CHANGE-FROM-OPS> 1,195
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 73
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 5,128
<NUMBER-OF-SHARES-REDEEMED> 1,167
<SHARES-REINVESTED> 14
<NET-CHANGE-IN-ASSETS> 5,097
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> (69)
<GROSS-ADVISORY-FEES> 83
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 163
<AVERAGE-NET-ASSETS> 7,910
<PER-SHARE-NAV-BEGIN> 10.27
<PER-SHARE-NII> .11
<PER-SHARE-GAIN-APPREC> 1.84
<PER-SHARE-DIVIDEND> .09
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12.13
<EXPENSE-RATIO> 1.03
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0001026708
<NAME> HORACE MANN SOCIALLY RESPONSIBLE FUND
<SERIES>
<NUMBER> 7
<NAME> SOCIALLY RESPONSIBLE
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 34,119
<INVESTMENTS-AT-VALUE> 35,532
<RECEIVABLES> 121
<ASSETS-OTHER> 1
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 35,654
<PAYABLE-FOR-SECURITIES> 3
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 87
<TOTAL-LIABILITIES> 90
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 34,194
<SHARES-COMMON-STOCK> 2,738
<SHARES-COMMON-PRIOR> 762
<ACCUMULATED-NII-CURRENT> 11
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (54)
<ACCUM-APPREC-OR-DEPREC> 1,413
<NET-ASSETS> 35,564
<DIVIDEND-INCOME> 555
<INTEREST-INCOME> 47
<OTHER-INCOME> 0
<EXPENSES-NET> 140
<NET-INVESTMENT-INCOME> 462
<REALIZED-GAINS-CURRENT> 289
<APPREC-INCREASE-CURRENT> 831
<NET-CHANGE-FROM-OPS> 1,582
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 452
<DISTRIBUTIONS-OF-GAINS> 336
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 27,958
<NUMBER-OF-SHARES-REDEEMED> 2,930
<SHARES-REINVESTED> 529
<NET-CHANGE-IN-ASSETS> 26,351
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> (7)
<GROSS-ADVISORY-FEES> 195
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 247
<AVERAGE-NET-ASSETS> 21,956
<PER-SHARE-NAV-BEGIN> 12.10
<PER-SHARE-NII> .27
<PER-SHARE-GAIN-APPREC> .91
<PER-SHARE-DIVIDEND> .17
<PER-SHARE-DISTRIBUTIONS> .12
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12.99
<EXPENSE-RATIO> .64
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
Independent Auditors' Report on Internal Accounting Control
The Board of Trustees and Shareholders of
Horace Mann Mutual Funds:
In planning and performing our audit of the financial statements of the
Horace Mann Mutual Funds (the Funds), consisting of the Growth Fund, Balanced
Fund, Income Fund, Short-Term Investment Fund, Small Cap Growth Fund,
International Equity Fund and Socially Responsible Fund for the year ended
December 31, 1998, we considered its internal control, including control
activities for safeguarding securities, in order to determine our auditing
procedures for the purpose of expressing our opinion on the financial
statements and to comply with the requirements of Form N-SAR, not to provide
assurance on internal control.
The management of the Funds is responsible for establishing and maintaining
an internal control. In fulfilling this responsibility, estimates and
judgements by management are required to assess the expected benefits and
related costs of controls. Generally, controls that are relevant to an audit
pertain to the entity's objective of preparing financial statements for
external purposes that are fairly presented in conformity with generally
accepted accounting principles. Those controls include the safeguarding of
assets against unauthorized acquisition, use or disposition.
Because of inherent limitations in internal control, error or fraud may occur
and not be detected. Also, projection of any evaluation of internal control
to future periods is subject to the risk that it may become inadequate
because of changes in conditions or that the effectiveness of the design and
operation may deteriorate.
Our consideration of the internal control structure would not necessarily
disclose all matters in internal control that might be material weaknesses
under standards established by the American Institute of Certified Public
Accountants. A material weakness is a condition in which the design or
operation of one or more of the internal control components does not reduce
to a relatively low level the risk that misstatements caused by error or
fraud in amounts that would be material in relation to the financial
statements being audited may occur and not be detected within a timely period
by employees in the normal course of performing their assigned functions.
However, we noted no matters involving internal control and its operation,
including controls for safeguarding securities, that we consider to be
material weaknesses a defined above as of December 31, 1998.
This report is intended solely for the information and use of management, the
Board of Trustees of the Funds and the Securities and Exchange Commission.
KPMG, LLP
January 29, 1999
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) With regard to the election of the 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) With regard to 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) With regard to approving or disapproving an investment advisory agreement
with Wilshire Associates Incorporated, 44,001,819 voted for the proposal,
3,927,531 voted against and 1,829,789 shares abstained.
4) With regard to approving or disapproving a proposal to permit Wilshire
Associates Incorporated to replace sub-advisers or add sub-advisers to the
Funds, and to enter into sub-advisory agreement with those sub-advisers,
without further shareholder approval, 40,471,771 voted for the proposal,
6,517,913 voted against and 2,869,452 shares abstained.
5) With regard to the shareholders of the International Equity Fund and
Socially Responsible Fund voting to approve or disapprove a new sub-advisory
agreement with Scudder Kemper Investments, Inc., 3,156,204 voted for the
proposal, 57,035 voted against and 163,610 abstained.
6a) With regard to the shareholders of the Growth Fund voting to approve or
disapprove a sub-advisory agreement with Mellon Equity Associates, LLP,
21,566,272 voted for the proposal, 160,524 voted against and 1,224,314
abstained.
6b) With regard to the shareholders of the Growth Fund voting to approve or
disapprove a sub-advisory agreement with Brinson Partners, Inc., 20,386,883
voted for the proposal, 1,277,764 voted against and 1,286,463 abstained.
7a) With regard to 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) With regard to 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.
