<PAGE>
HORACE MANN FAMILY OF FUNDS
[PICTURE]
SEMIANNUAL REPORT, JUNE 30, 1996
<PAGE>
HORACE MANN FAMILY OF FUNDS
HORACE MANN GROWTH FUND, INC.
HORACE MANN INCOME FUND, INC.
HORACE MANN BALANCED FUND, INC.
HORACE MANN SHORT-TERM INVESTMENT FUND, INC.
================================================================================
[Picture] PUT TIME ON YOUR SIDE
Most people have a good
idea of what they need to
do today. Some even plan
a month or year in
advance. But many people
don't take the time to plan
for their long-term financial
needs. The sooner you start
planning for your retirement, the better. By
planning, you can meet your long-term goals while
still taking care of your day-to-day activities.
At Horace Mann, we offer a variety of retirement
planning products designed to meet your needs
now and in the future. By working together, you
and your Horace Mann representatives can map
out a plan that will help you attain your financial
goals for the future.
<PAGE>
DEAR SHAREHOLDER:
Following strong performance in 1995, we are pleased to report that the
Company's family of four funds has continued to produce strong performance
results through the first half of 1996.
Short-term results for the first half of the year were rewarding to investors,
as each of the funds exceeded its market benchmark. More importantly, however,
longer-term results continue to be impressive. The two largest funds, Growth
and Balanced, exceeded their market benchmarks for the five year period ended
June 30, 1996. The Income and Short-Term funds' performance was comparable to
their market benchmarks over the same five years. We recognize that this long-
term success is of particular importance to our customers, who are long-term
investors, many saving for retirement.
MARKET REVIEW
The first half of 1996 was somewhat difficult for the domestic bond markets, but
much better for domestic equity markets. Domestic equity indices rose on
sustained growth in corporate earnings driven by gains in consumer spending and
housing. The increase in consumer spending resulted from better employment
growth and the strong equity market returns of the last year. Bond prices,
however, fell on fears of stronger economic growth and higher inflation. As a
result, most domestic bond market indices produced negative returns.
MARKET AND POLITICAL ISSUES
Economic growth and interest rates remain a dominant influence on both bond and
stock market returns. Wellington Management Company, the Funds' investment
adviser, expects the domestic economy to grow at or close to its long-term
sustainable rate of about 2.5%. U.S. government fiscal policy should remain on
hold until after the November presidential election. However, the budget
deficit continues to improve, despite policy gridlock. With economic activity
expanding modestly and inflation under control, Wellington Management believes
the Fed will keep short-term interest rates stable or raise them only slightly
over the near-term. This environment of moderate growth and constrained
inflation should bode well for both domestic stock and bond markets.
PERSPECTIVE
Once again, it is important to remember that investment market returns should be
viewed with a long-term perspective to achieve the goal of accumulating assets
in excess of inflation. At the Horace Mann Funds, we recognize your commitment
to long-term investing. We remain committed to providing a sound investment
vehicle to achieve your financial objectives. Thank you for your continuing
confidence in the Horace Mann family of funds.
Sincerely,
/s/ George J. Zock
George J. Zock
President
Horace Mann Family of Funds
/s/ Larry K. Becker
Larry K. Becker
Chairman
Horace Mann Family of Funds
3
<PAGE>
4
<PAGE>
[LOGO]
AVERAGE ANNUAL TOTAL RETURN JUNE 30, 1996
HORACE MANN ANNUITY ALTERNATIVES CONTRACTS (Unaudited)
================================================================================
FOR ANNUITY ALTERNATIVES CONTRACT OWNERS
Average annual total returns for the period ended June 30, 1996 for the Annuity
Alternatives contracts are shown in the following table. FOR CONTRIBUTIONS
WHICH REMAINED INVESTED IN AN ANNUITY ALTERNATIVES CONTRACT, RETURNS ARE SHOWN
IN THE "WITHOUT REDEMPTION" COLUMNS. FOR CONTRACTS WHICH WERE SURRENDERED,
RETURNS ARE SHOWN IN THE "WITH REDEMPTION" COLUMNS. REDEMPTION HAS NO AFFECT ON
THE VARIABLE ACCOUNT RATES OF RETURN AFTER THE INITIAL FIVE-YEAR CONTRACT
PERIOD.
<TABLE>
<CAPTION>
1 YEAR 1 YEAR 5 YEARS 10 YEARS SINCE
WITHOUT WITH WITH OR WITH OR INCEPTION /1/
REDEMPTION REDEMPTION WITHOUT WITHOUT WITH OR WITHOUT
REDEMPTION REDEMPTION REDEMPTION
----------- ---------- ----------- ---------- ---------------
<S> <C> <C> <C> <C> <C>
Growth Fund ................. 24.72% 16.22% 14.45% 11.48% 12.54%
Income Fund ................. 3.34 -4.93 5.93 6.05 6.00
Balanced Fund ............... 17.40 8.90 11.47 9.80 10.29
Short-Term Investment Fund .. 3.47 -4.80 2.62 4.08 3.40
</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, and
when redeemed, may be worth more or less than its original cost. Past
performance does not guarantee future results of the subaccounts.
Total returns for the variable portion of the Annuity Alternatives contracts
include a reduction for fund expenses and contract charges of 1.35% annually for
mortality and expense risk. Annuity contracts issued prior to January 1984 have
mortality and expense charges or sales fees that differ from those of the
Annuity Alternatives contracts. Such other charges and fees do not exceed those
reflected in the table above.
During the first five contract years, redemption charges range from 2 to 8% for
the flexible premium contracts and 1 to 5% for single premium contracts. The
average annual total returns with redemption are calculated using flexible
premium redemption charges.
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, reduces total rates of return by
2.5% on a $1,000 investment or .5% on a $5,000 investment.
Commission credits were used to pay certain expenses of the Growth and Balanced
Funds from 1994 through 1996. Certain fund expenses have been subsidized
(assumed and/or waived) since 1983 for the Income and Short-Term Investment
Funds. Certain Balanced Fund expenses were subsidized from 1983 through 1987.
Subsidization and use of credits result in higher returns ranging up to 1%,
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 refers to November 1, 1989, the date Wellington Management
Company became the Funds' investment adviser.
5
<PAGE>
[LOGO]
AVERAGE ANNUAL TOTAL RETURN June 30, 1996
HORACE MANN ANNUITY ALTERNATIVES CONTRACTS (Unaudited)
- --------------------------------------------------------------------------------
FOR GROWTH FUND PUBLIC SHAREHOLDERS AND PARTICIPANTS IN THE HORACE MANN EMPLOYEE
401(k) PLAN
Total average annualized returns for the period ended June 30, 1996 for the
Horace Mann Funds and their comparable benchmark indices are shown in the
following table:
<TABLE>
<CAPTION>
SINCE
1 YEAR 5 YEARS 10 YEARS INCEPTION/1/
------ ------- -------- ------------
<S> <C> <C> <C> <C>
Horace Mann Growth Fund....................... 26.29% 15.90% 12.95% 14.09%
S&P 500 Stock Index........................... 26.00 15.73 13.83 14.04
Horace Mann Income Fund....................... 4.73 7.30 7.43 7.47
Lehman Intermediate Gov't/Corp. Bond Index.. 5.00 7.64 8.00 7.96
Mann Balanced Fund............................ 18.91 12.89 11.23 11.82
Stock/Bond Composite/2/....................... 17.22 12.52 11.74 11.71
Horace Mann Short-Term Investment Fund........ 4.87 3.97 5.46 4.87
90-day Treasury Bills......................... 5.35 4.23 5.66 5.01
</TABLE>
Returns of the Horace Mann Funds in the above table are shown net of fund
expenses. Certain fund expenses have been subsidized (assumed and/or waived)
since 1983 for the Income and Short-Term Investment Funds. Commission credits
were used to pay certain expenses of the Growth and Balanced Funds from 1994
through 1996. Certain Balanced Fund expenses were subsidized from 1983 through
1987. Subsidization and use of credits result in higher returns ranging up to
1%, 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 benchmark indices indicated are unmanaged and have no expenses.
/1/ Since inception refers to November 1, 1989, the date Wellington Management
Company became the Funds' investment adviser.
/2/ 60% S&P 500, 40% Lehman Brothers Intermediate Government/Corporate Bond
Index, rebalanced monthly.
6
<PAGE>
SEMIANNUAL REPORT
JUNE 30, 1996
================================================================================
HORACE MANN FAMILY OF FUNDS
HORACE MANN GROWTH FUND, INC.
HORACE MANN INCOME FUND, INC.
HORACE MANN BALANCED FUND, INC.
HORACE MANN SHORT-TERM INVESTMENT FUND, INC.
DIRECTORS OF THE FUNDS
A. THOMAS ARISMAN LARRY K. BECKER, CHAIRMAN A.L. GALLOP
HARRIET A. RUSSELL GEORGE J. ZOCK
OFFICERS OF THE FUNDS
GEORGE J. ZOCK WILLIAM J. KELLY ROGER FISHER
President Treasurer and Regulatory Controller
Compliance Officer
ANN CAPPARROS LINDA L. SACCO DIANE M. BARNETT
Secretary and Assistant Secretary Tax Compliance Officer
Ethics Compliance Officer
Investment Adviser Business Manager
WELLINGTON MANAGEMENT COMPANY HORACE MANN INVESTORS, INC.
75 State Street One Horace Mann Plaza
Boston, MA 02109 Springfield, IL 62715-0001
Custodian
FIRST NATIONAL BANK OF BOSTON
150 Royall Street
Canton, MA 02021
<PAGE>
[LOGO]
STATEMENT OF INVESTMENTS June 30, 1996
HORACE MANN GROWTH FUND, INC. (Unaudited)
===============================================================================
<TABLE>
<CAPTION>
[PIE CHART APPEARS HERE]
<S> <C> <C>
COMMON STOCK 95%
CASH & SHORT-TERM INVESTMENTS 5%
NUMBER OF MARKET
SHARES (000)
--------- ------
COMMON STOCKS
AEROSPACE/DEFENSE 3.60%
Boeing Co............................. 111,800 $ 9,740
Northrop Grumman Corp................. 44,800 3,052
-------
12,792
AUTO/ACCESSORIES 4.70%
Ford Motor Co......................... 98,600 3,192
Goodyear Tire & Rubber Co. (The)...... 279,300 13,476
-------
16,668
BANKS/FINANCIAL SERVICES 7.84%
BankAmerica Corp...................... 65,500 4,962
Citicorp.............................. 53,365 4,409
Corestates Financial Corp............. 56,500 2,175
Firstar Corp.......................... 43,000 1,983
First Chicago NBD Corp................ 35,500 1,389
First Union Corp...................... 61,000 3,713
Lehman Brothers Holdings Inc.......... 32,900 814
Morgan Stanley Group Inc.............. 145,700 7,157
National City Corp.................... 34,600 1,215
-------
27,817
BUILDING & CONSTRUCTION 0.35%
Ryland Group Inc...................... 81,500 1,222
CHEMICALS 5.55%
Air Products & Chemicals, Inc......... 124,300 7,178
Ferro Corp............................ 98,500 2,610
Geon Co............................... 65,100 1,465
IMC Global Inc........................ 122,900 4,624
Nalco Chemical Co..................... 121,500 3,827
-------
19,704
COMMUNICATION 5.32%
AT & T Corp........................... 135,300 8,389
BCE Inc............................... 76,400 3,018
NYNEX Corp............................ 83,600 3,971
SBC Communications Inc................ 71,000 3,497
-------
18,875
FOOD/GROCERY PRODUCTS 1.99%
Flowers Industries, Inc............... 225,100 3,630
Interstate Bakeries Corp.............. 128,100 3,427
-------
7,057
HEALTH CARE 3.96%
Bristol-Myers Squibb Co............... 42,000 3,780
Mallinckrodt Group, Inc............... 115,600 4,494
Value Health, Inc.*................... 245,200 5,793
-------
14,067
INSURANCE 8.96%
ACE Limited........................... 98,400 4,625
Allstate Corp......................... 198,590 9,061
Cigna Corp............................ 41,700 4,915
Chubb Corp............................ 127,200 6,344
Integon Corp.......................... 146,400 2,946
MBIA Inc.............................. 50,300 3,917
-------
31,808
MANUFACTURING (DIVERSIFIED) 8.92%
Brunswick Corp........................ 117,500 2,350
Caterpillar Inc....................... 38,800 2,629
Cooper Industries Inc................. 72,900 3,025
Deere & Co............................ 159,200 6,368
International Business Machines Corp.. 68,300 6,762
Minnesota Mining & Manufacturing...... 122,100 8,425
UCAR Intl Inc......................... 50,800 2,115
-------
31,674
METALS & MINING 4.63%
Alcan Aluminium Ltd................... 72,000 2,196
Alumax Inc.*.......................... 146,000 4,435
Aluminum Co. of America............... 97,600 5,600
Reynolds Metals Co.................... 44,600 2,325
Titanium Metals Corporation*.......... 73,000 1,889
-------
16,445
</TABLE>
See notes to the financial statements.
8
<PAGE>
[LOGO]
<TABLE>
<CAPTION>
STATEMENT OF INVESTMENTS (CONCLUDED) June 30, 1996
HORACE MANN GROWTH FUND, INC. (Unaudited)
================================================================================
NUMBER OF MARKET
SHARES (000)
--------- -------
<S> <C> <C>
COMMON STOCKS (CONTINUED)
OIL/GAS 16.09%
Amoco Corp....................................... 45,000 $ 3,257
Barrett Resources Corp.*......................... 31,100 925
Burlington Resources Inc......................... 42,100 1,810
Camco International, Inc......................... 63,200 2,141
Enron Oil & Gas Co............................... 139,100 3,877
ENSCO International, Inc.*....................... 97,100 3,156
Equitable Resources, Inc......................... 160,700 4,540
Noble Affiliates, Inc............................ 97,400 3,677
Noble Drilling Corp.*............................ 121,400 1,684
Oryx Energy Co.*................................. 94,600 1,537
Seagull Energy Corp.*............................ 155,000 3,875
Total S.A. ADR................................... 104,100 3,865
Union Texas Petroleum Holdings Inc............... 261,400 5,097
Unocal Corp...................................... 336,800 11,367
USX-Marathon Group............................... 215,200 4,331
Westcoast Energy Inc............................. 132,700 1,991
-------
57,130
PAPER & WOOD PRODUCTS 6.07%
Champion International Corp...................... 128,500 5,365
International Paper Co........................... 9,300 343
Kimberly-Clark Corp.............................. 108,100 8,351
Mead Corp........................................ 144,400 7,491
-------
21,550
PHOTOGRAPHY 1.38%
Eastman Kodak Co................................. 62,900 4,890
RETAIL & FOOD STORES 1.28%
May Department Stores Co......................... 103,900 4,546
SERVICES 1.76%
Browning-Ferris Industries, Inc.................. 167,700 4,863
Red Lion Hotels, Inc.*........................... 66,300 1,392
-------
6,255
TECHNOLOGY 1.17%
Compaq Computer Corp.*........................... 84,600 4,167
TOBACCO 1.11%
Universal Corp.(Va.)............................. 148,800 3,943
TRANSPORTATION 4.93%
America West Airlines B*......................... 225,100 4,952
AMR Corp.*....................................... 42,300 3,849
Canadian National Railway Co..................... 53,000 974
Conrail Inc...................................... 41,400 2,748
CSX Corp......................................... 74,000 3,571
Pittston Burlington Group........................ 64,650 1,398
-------
17,492
UTILITIES/OTHER 5.33%
Central & South West Corp........................ 137,000 3,973
General Public Utilities Corp.................... 144,400 5,090
New England Electric System...................... 79,500 2,892
New York State Electric & Gas Corp............... 107,000 2,608
Pacific Gas & Electric Co........................ 187,000 4,348
-------
18,911
-------
TOTAL COMMON STOCKS ........................ 94.94% 337,013
(Cost $290,102,363)
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MARKET
(000) (000)
-------- ------
SHORT-TERM INVESTMENTS
<S> <C> <C>
REPURCHASE AGREEMENT
J.P. Morgan Securities, Inc.
5.43%, 07/01/96, (secured
by $21,252,882 US Treasury
Bond, 6.50%, 05/15/97)............................... $20,959 $ 20,959
------- --------
TOTAL SHORT-TERM INVESTMENTS ................... 5.90% 20,959 20,959
(Cost $20,959,000)
TOTAL INVESTMENTS ............................ 100.84% 357,972
(Cost $311,061,363)
LIABILITIES IN EXCESS OF CASH
AND OTHER ASSETS ............................. (0.84%) (2,965)
--------
NET ASSETS ................................... 100.00% $355,007
========
</TABLE>
- ------------------------------
* Non-income producing during the six months ended June 30, 1996.
See notes to the financial statements.
The identified cost of investments owned at June 30, 1996 was the same for
federal income tax and book purposes.
9
<PAGE>
[LOGO]
STATEMENT OF INVESTMENTS June 30, 1996
HORACE MANN INCOME FUND, INC. (Unaudited)
================================================================================
[PIE CHART APPEARS HERE]
U.S. & FOREIGN GOVERNMENT
& AGENCY OBLIGATIONS 64%
CORPORATE BONDS/NOTES 30%
CASH & SHORT-TERM INVESTMENTS 6%
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MARKET
(000) (000)
--------- ------
U.S. AND FOREIGN GOVERNMENT
AND AGENCY OBLIGATIONS
FEDERAL HOME LOAN MORTGAGE CORPORATION
(MORTGAGE BACKED SECURITIES)
<S> <C> <C>
9.500%, 03/01/01............................. $ 46 $ 48
9.500%, 06/01/01............................. 21 22
9.500%, 08/01/01............................. 15 15
9.500%, 10/01/01............................. 13 13
7.000%, 11/01/03............................. 53 52
7.000%, 12/01/09............................. 200 196
7.000%, 07/01/10............................. 560 552
7.000%, 12/01/10............................. 49 48
7.000%, 01/11/11............................. 426 421
6.500%, 03/01/11............................. 397 384
7.000%, 03/01/11............................. 757 750
7.000%, 04/01/11............................. 854 843
8.000%, 12/01/11............................. 17 17
FEDERAL NATIONAL MORTGAGE ASSOCIATION
(MORTGAGE BACKED SECURITIES)
6.625%, 04/18/01............................. 2,500 2,493
8.875%, 07/10/01............................. 100 100
8.000%, 11/01/09............................. 23 22
7.500%, 05/01/25............................. 731 722
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
(MORTGAGE BACKED SECURITIES)
11.500%, 03/15/10............................ 14 16
12.500%, 06/15/10............................ 9 10
12.000%, 03/15/14............................ 6 7
12.000%, 04/15/14............................ 5 5
12.000%, 12/15/14............................ 17 19
12.000%, 02/15/15............................ 6 7
12.000%, 03/15/15............................ 15 17
12.000%, 04/15/15............................ 12 14
12.500%, 04/15/15............................ 4 5
12.000%, 06/15/15............................ 15 17
12.000%, 07/15/15............................ 18 20
12.000%, 11/15/15............................ 21 24
COLLATERALIZED MORTGAGE OBLIGATION
(PLANNED AMORTIZATION CLASS)(NOTE 3)
FHLMC 1737-E PAC
6.000%, 12/15/17.......................... 220 213
FOREIGN (U.S.DOLLAR DENOMINATED)
Iceland (Rep. of)
6.125%, 02/01/04.......................... 200 187
------ ------
TOTAL U.S. AND FOREIGN GOVERNMENT AND
AGENCY OBLIGATIONS ................. 64.62% 7,324 7,259
(cost $7,302,141)
CORPORATE BONDS/NOTES
Banponce Corp.
6.75%, 12/15/05............................ 200 188
BankAmerica Corp.
6.85%, 03/01/03............................ 150 148
Boeing Co.
6.35%, 06/15/03............................ 200 194
BP America Inc. Euro
9.75%, 03/01/99............................ 100 107
Citicorp
6.750%, 08/15/05........................... 200 192
Walt Disney Co. B
6.75%, 03/03/06............................ 200 194
duPont (E.I.) de Nemours & Co., Inc.
9.150%, 04/15/00........................... 130 140
Gannett Co.
5.850%, 05/01/00........................... 200 193
</TABLE>
See notes to the financials statements.
10
<PAGE>
[LOGO]
<TABLE>
<CAPTION>
STATEMENT OF INVESTMENTS (CONCLUDED) June 30, 1996
HORACE MANN INCOME FUND, INC. (Unaudited)
================================================================================
<S> <C> <C>
PRINCIPAL
AMOUNT MARKET
(000) (000)
--------- ------
CORPORATE BONDS/NOTES(CONTINUED)
GMAC Grantor Trust 92-D
5.625%, 02/15/01 .................................. $ 200 $ 190
Honeywell Inc.
6.600%, 04/15/01 .................................. 175 173
Penney (J.C.) Co., Inc.
5.375%, 11/15/98 .................................. 200 195
Southwestern Bell Telephone Co.
5.550%, 03/10/98 .................................. 100 98
TCI Communications Inc.
6.875%, 02/15/06 .................................. 200 180
ASSET BACKED
Banc One Auto Grantor Trust 96-B A
6.55%, 02/15/03 ................................... 200 200
Ford Credit Grantor Trust 93-B A
4.30%, 07/15/98 ................................... 32 31
Ford Credit Grantor Trust 95-B A
5.90%, 10/15/00 ................................... 199 198
Government Backed Trust
9.625%, 05/15/02 .................................. 125 135
IBM Credit Trust 93-1 A
4.55%, 11/15/00 ................................... 181 181
Nations Bank Credit Trust 93-2 A
6.00%, 12/15/05 ................................... 200 190
Premier Auto Trust 92-4 A
5.05%, 01/15/98 ................................... 8 8
Premier Auto Trust 93-6 A2
4.65%, 11/02/99 ................................... 76 75
Premier Auto Trust 94-1 A3
4.75%, 02/02/00 ................................... 131 130
----- -----
TOTAL CORPORATE BONDS/NOTES ................... 29.73% 3,407 3,340
(cost $3,383,331)
SHORT-TERM INVESTMENTS
REPURCHASE AGREEMENT
J.P Morgan Securities, Inc.
5.43%, 07/01/96 (secured
by $736,180 US Treasury
Bond, 6.50%, 05/15/97) .............................. $ 726 $ 726
--- ---
TOTAL SHORT-TERM INVESTMENTS ................... 6.46% 726 726
(Cost $726,000)
TOTAL INVESTMENTS ............................ 100.81% 11,325
(Cost $11,411,472) ------
LIABILITIES IN EXCESS OF CASH
AND OTHER ASSETS ............................. (0.81%) (91)
------
NET ASSETS ................................... 100.00% $11,234
======
</TABLE>
See notes to the financial statements.
The identified cost of investments owned at June 30, 1996 was the same for
federal income tax and book purposes.
11
<PAGE>
[LOGO]
STATEMENT OF INVESTMENTS June 30, 1996
HORACE MANN BALANCED FUND, INC. (Unaudited)
================================================================================
[PIE CHART APPEARS HERE]
COMMON STOCK 66%
U.S. & FOREIGN GOVERNMENT
& AGENCY OBLIGATIONS 23%
CORPORATE BONDS/NOTES 8%
CASH & SHORT-TERM INVESTMENTS 3%
<TABLE>
<CAPTION>
NUMBER OF MARKET
SHARES (000)
--------- --------
<S> <C> <C>
COMMON STOCKS
AEROSPACE/DEFENSE 2.52%
Boeing Co.............................. 56,900 $ 4,957
Northrop Grumman Corp.................. 23,900 1,628
--------
6,585
AUTO/ACCESSORIES 3.30%
Ford Motor Co.......................... 51,600 1,671
Goodyear Tire & Rubber Co. (The)....... 143,700 6,934
--------
8,605
BANKS/FINANCIAL SERVICES 5.56%
BankAmerica Corp....................... 33,900 2,568
Citicorp............................... 30,659 2,533
CoreStates Financial Corp.............. 28,600 1,101
Firstar Corp........................... 22,000 1,015
First Chicago NBD Corp................. 18,000 704
First Union Corp....................... 34,000 2,070
Lehman Brothers Holdings Inc........... 15,800 391
Morgan Stanley Group, Inc.............. 72,000 3,537
National City Corp..................... 16,700 587
-------
14,506
BUILDING & CONSTRUCTION 0.22%
Ryland Group Inc....................... 38,900 584
CHEMICALS 3.76%
Air Products & Chemicals, Inc.......... 61,900 3,575
Ferro Corp............................. 49,600 1,314
Geon Co................................ 33,700 758
IMC Global Inc......................... 62,100 2,337
Nalco Chemical Co...................... 58,200 1,833
--------
9,817
COMMUNICATION 3.57%
AT & T Corp............................ 66,900 4,148
BCE Inc................................ 37,800 1,493
NYNEX Corp............................. 41,800 1,985
SBC Communications Inc................. 34,000 1,675
--------
9,301
FOOD/GROCERY PRODUCTS 1.39%
Flowers Industries, Inc................ 123,000 1,983
Interstate Bakeries Corp............... 61,000 1,632
--------
3,615
HEALTH CARE 2.69%
Bristol-Myers Squibb Co................ 20,000 1,800
Mallinckrodt Group, Inc................ 60,700 2,360
Value Health, Inc.*.................... 121,000 2,859
--------
7,019
INSURANCE 6.05%
ACE Limited............................ 51,500 2,420
Allstate Corp.......................... 92,802 4,234
Cigna Corp............................. 20,400 2,405
Chubb Corp............................. 64,800 3,232
Integon Corp........................... 74,700 1,503
MBIA Inc............................... 25,600 1,994
--------
15,788
MANUFACTURING (DIVERSIFIED) 6.10%
Brunswick Corp......................... 58,300 1,166
Caterpillar Inc........................ 20,300 1,375
Cooper Industries Inc.................. 37,400 1,552
Deere & Co............................. 77,600 3,104
International Business Machine Corp.... 33,700 3,336
Minnesota Mining & Manufacturing....... 61,000 4,209
UCAR Intl Inc.......................... 27,800 1,157
--------
15,899
METALS & MINING 3.18%
Alcan Aluminium Ltd.................... 37,000 1,128
Alumax Inc.*........................... 70,900 2,154
Aluminum Co. of America................ 49,700 2,852
Reynolds Metals Co..................... 23,500 1,225
Titanium Metals Corporation*........... 35,800 926
--------
8,285
</TABLE>
See notes to the financial statements.
12
<PAGE>
[LOGO]
STATEMENT OF INVESTMENTS (CONTINUED) June 30, 1996
HORACE MANN BALANCED FUND, INC. (Unaudited)
================================================================================
<TABLE>
<CAPTION>
NUMBER OF MARKET
SHARES (000)
--------- --------
<S> <C> <C>
OIL/GAS 11.19%
Amoco Corp............................. 24,000 $ 1,737
Barrett Resources Corp.*............... 15,900 473
Burlington Resources Inc............... 22,100 950
Camco International, Inc............... 34,100 1,155
Enron Oil & Gas Co..................... 71,300 1,987
ENSCO International, Inc.*............. 52,500 1,706
Equitable Resources, Inc............... 76,600 2,164
Noble Affiliates, Inc.................. 50,000 1,888
Noble Drilling Corp.*.................. 59,100 820
Oryx Energy Co.*....................... 48,200 783
Seagull Energy Corp.*.................. 84,300 2,107
Total S.A. ADR......................... 52,600 1,953
Union Texas Petroleum Holdings Inc..... 132,500 2,584
Unocal Corp............................ 165,400 5,582
USX-Marathon Group..................... 113,400 2,282
Westcoast Energy Inc................... 68,300 1,025
--------
29,196
PAPER & WOOD PRODUCTS 4.29%
Champion International Corp............ 64,100 2,676
International Paper Co................. 4,400 162
Kimberly-Clark Corp.................... 55,700 4,303
Mead Corp.............................. 78,200 4,057
--------
11,198
PHOTOGRAPHY 0.91%
Eastman Kodak Co....................... 30,400 2,364
RETAIL & FOOD STORES 0.93%
May Department Stores Co............... 55,300 2,419
SERVICES 1.20%
Browning-Ferris Industries, Inc........ 83,700 2,427
Red Lion Hotels, Inc.*................. 33,200 697
--------
3,124
TECHNOLOGY 0.75%
Compaq Computer Corp.*................. 39,600 1,950
TOBACCO 0.72%
Universal Corp.(Va).................... 71,200 1,887
TRANSPORTATION 3.38%
America West Airlines B*............... 112,700 2,479
AMR Corp.*............................. 20,800 1,893
Canadian National Railway Co........... 27,100 498
Conrail Inc............................ 22,400 1,487
CSX Corp............................... 36,000 1,737
Pittston Burlington Group.............. 33,600 727
--------
8,821
UTILITIES/OTHER 3.82%
Central & South West Corp.............. 68,000 1,972
General Public Utilities Corp.......... 71,400 2,517
New England Electric System............ 43,200 1,571
New York State Electric & Gas Corp..... 68,700 1,675
Pacific Gas & Electric Co.............. 95,700 2,225
--------
9,960
========
TOTAL COMMON STOCK ...............65.53% 170,923
(cost $146,659,136)
PRINCIPAL
AMOUNT MARKET
(000) (000)
--------- --------
U.S. AND FOREIGN GOVERNMENT
AND AGENCY OBLIGATION
TREASURY BONDS/NOTES
5.250%, 12/31/97...................... $ 6,750 $ 6,680
FEDERAL HOME LOAN BANK
(MORTGAGE BACKED SECURITIES)
6.670%, 04/06/01...................... 1,500 1,499
FEDERAL HOME LOAN MORTGAGE CORPORATION
(MORTGAGE BACKED SECURITIES)
9.500%, 07/01/01...................... 14 14
9.500%, 08/01/01...................... 8 9
</TABLE>
See notes to the financial statements.
13
<PAGE>
[LOGO]
<TABLE>
<CAPTION>
STATEMENT OF INVESTMENTS (CONTINUED) June 30, 1996
HORACE MANN BALANCED FUND, INC. (Unaudited)
- ---------------------------------------------------------------------------
PRINCIPAL
AMOUNT MARKET
(000) (000)
------- -------
<S> <C> <C>
FEDERAL HOME LOAN MORTGAGE
CORPORATION (MORTGAGE BACKED
SECURITIES) (CONTINUED)
9.500%, 09/01/01............................... $ 23 $ 24
9.500%, 10/01/01............................... 29 30
8.500%, 06/01/02............................... 49 50
9.250%, 11/01/02............................... 68 71
8.250%, 10/01/07............................... 74 76
8.250%, 11/01/07............................... 84 85
8.750%, 05/01/08............................... 104 107
8.500%, 08/01/08............................... 113 116
9.000%, 09/01/08............................... 84 87
8.000%, 09/01/09............................... 67 68
7.000%, 12/01/09............................... 1,600 1,567
8.000%, 04/01/10............................... 102 103
7.000%, 07/01/10............................... 86 85
7.000%, 09/01/10............................... 24 24
7.000%, 10/01/10............................... 664 656
7.000%, 11/01/10............................... 318 313
7.000%, 12/01/10............................... 143 141
7.000%, 01/01/11............................... 2,792 2,756
7.000%, 01/11/11............................... 33 33
7.000%, 02/01/11............................... 3,770 3,723
6.500%, 03/01/11............................... 4,959 4,800
7.000%, 03/01/11............................... 6,279 6,198
7.000%, 04/01/11............................... 2,065 2,038
FEDERAL NATIONAL MORTGAGE ASSOCIATION
(MORTGAGE BACKED SECURITIES)
8.000%, 07/01/98............................... 93 94
6.625%, 04/18/01............................... 18,000 17,950
8.875%, 07/10/01............................... 500 500
8.750%, 02/01/10............................... 388 400
10.250%, 07/01/13.............................. 35 38
7.500%, 07/01/23............................... 417 412
7.500%, 04/01/24............................... 632 632
7.500%, 05/01/24............................... 198 196
7.500%, 06/01/24............................... 500 494
7.500%, 08/01/24............................... 655 646
7.500%, 09/01/24............................... 883 872
7.500%, 10/01/24............................... 679 671
7.500%, 02/01/25............................... 171 169
7.500%, 04/01/25............................... 1,267 1,251
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
(MORTGAGE BACKED SECURITIES)
11.000%, 12/15/00.............................. 53 56
9.500%, 08/20/01............................... 63 66
9.500%, 10/20/01............................... 51 54
9.500%, 07/20/02............................... 88 92
9.500%, 12/20/02............................... 73 76
9.500%, 01/20/03............................... 39 41
9.500%, 02/20/03............................... 49 51
9.500%, 05/20/03............................... 88 92
9.500%, 08/20/03............................... 99 104
9.500%, 09/20/03............................... 130 136
9.500%, 11/20/03............................... 52 54
9.500%, 09/20/04............................... 41 43
8.250%, 05/15/06............................... 143 145
12.000%, 03/15/15.............................. 59 65
8.500%, 08/15/20............................... 40 42
8.500%, 02/15/21............................... 250 256
8.500%, 06/15/21............................... 201 206
8.500%, 08/15/21............................... 28 29
8.500%, 04/15/23............................... 288 295
COLLATERALIZED MORTGAGE OBLIGATION
(PLANNED AMORTIZATION CLASS)(NOTE 3)
FHLMC G42-D
8.000%, 08/17/17............................... 1,461 1,505
FOREIGN (U.S. DOLLAR DENOMINATED)
Iceland (Rep. of)
6.125%, 02/01/04............................... 1,000 935
------ ------
TOTAL U.S. AND FOREIGN GOVERNMENT AND
AGENCY OBLIGATIONS ..................... 23.01% 60,516 60,021
(cost $60,493,252)
</TABLE>
See notes to the financial statements.
14
<PAGE>
[LOGO]
<TABLE>
<CAPTION>
STATEMENT OF INVESTMENTS (CONCLUDED) June 30, 1996
HORACE MANN BALANCED FUND, INC. (Unaudited)
===========================================================================================================================
PRINCIPAL
AMOUNT MARKET
(000) (000)
------- --------
<S> <C> <C>
CORPORATE BONDS/NOTES
Associates Corp. NA
5.25%, 09/01/98................................. $ 315 $ 307
Associates Corp. NA
6.00%, 06/15/00................................. 500 487
Bankers Trust
8.25%, 05/01/05................................. 1,500 1,571
Banponce Corp.
5.75%, 12/15/05................................. 1,460 1,374
Beneficial Corp.
12.875%, 08/01/13............................... 261 302
Boeing Co.
6.35%, 06/15/03................................. 750 728
Citicorp
6.75%, 08/15/05................................. 1,000 960
Disney
6.75%, 03/30/06................................. 1,500 1,455
Ford Motor Credit Corp.
5.75%, 01/25/01................................. 1,500 1,429
Gannett Co.
5.85%, 05/01/00................................. 750 725
GMAC
5.62%, 02/15/01................................. 1,000 951
Honeywell Inc.
6.60%, 04/15/01................................. 1,315 1,299
Penney (J.C.) Co., Inc.
5.375%, 11/15/98................................ 1,000 975
Southwestern Bell Telephone Co.
5.55%, 03/10/98................................. 400 394
TCI Communications
6.875%, 02/15/06................................ 1,500 1,350
ASSET BACKED
Banc One Auto Grantor Trust 96-B A
6.55%, 02/15/03................................. 1,500 1,503
Ford Credit Grantor Trust 93-B A
4.30%, 07/15/98................................. 79 78
Ford Credit Grantor Trust 95-B A
5.90%, 10/15/00................................. 1,591 1,585
IBM Credit Trust 93-1 A
4.55%, 11/15/00................................. 1,233 1,230
Nations Bank Credit Trust 93-2 A
6.00%, 12/15/05................................. 1,000 950
Premier Auto Trust 92-4 A
5.05%, 01/15/98................................. 41 41
Premier Auto Trust 93-6 A2
4.65%, 11/02/99................................. 379 373
Premier Auto Trust 94-1 A3
4.75%, 02/02/00................................. 1,311 1,297
Premier Auto Trust 94-2 A3
6.35%, 05/02/00................................. 856 859
------- --------
TOTAL CORPORATE BONDS/NOTES ............... 8.52% 22,741 22,223
(cost $22,499,403)
SHORT-TERM INVESTMENTS
REPURCHASE AGREEMENT
J.P. Morgan Securities, Inc.
5.43%, 07/01/96, (secured
by $9,865,418 US Treasury
Bond, 6.50%, 05/15/97).......................... 9,729 9,729
------- --------
TOTAL SHORT-TERM INVESTMENTS .............. 3.73% 9,729 9,729
(cost $9,729,000)
TOTAL INVESTMENTS ....................... 100.79% 262,896
(Cost $239,380,791)
LIABILITIES IN EXCESS OF CASH
AND OTHER ASSETS ...................... (0.79%) (2,058)
--------
NET ASSETS .............................. 100.00% $260,838
========
</TABLE>
- --------------------
* Non-income producing during the six months ended June 30, 1996.
See notes to the financial statements.
The identified cost of investments owned at June 30, 1996 was the same for
federal income tax and book purposes.
15
<PAGE>
<TABLE>
<CAPTION>
[LOGO]
STATEMENT OF INVESTMENTS June 30, 1996
HORACE MANN SHORT-TERM INVESTMENT FUND, INC. (Unaudited)
================================================================================
[PIE CHART APPEARS HERE]
U.S. GOVERNMENT & AGENCY OBLIGATIONS 97%
CASH 3%
PRINCIPAL
AMOUNT MARKET
(000) (000)
--------- ------
<S> <C> <C>
U.S. GOVERNMENT AND AGENCY OBLIGATIONS
TREASURY NOTE
7.50%, 01/31/97...................................... $ 100 $ 101
FEDERAL FARM CREDIT BANK DISCOUNT NOTES
5.18%, 07/01/96...................................... 65 65
5.31%, 07/24/96...................................... 45 45
5.50%, 09/03/96...................................... 80 79
FEDERAL HOME LOAN MORTGAGE CORP. DISCOUNT NOTES
5.24%, 07/08/96...................................... 50 50
5.28%, 07/15/96...................................... 82 82
5.21%, 07/16/96...................................... 90 90
5.27%, 07/29/96...................................... 100 100
5.52%, 08/08/96...................................... 35 35
5.32%, 08/19/96...................................... 90 89
5.18%, 08/21/96...................................... 146 145
FEDERAL NATIONAL MORTGAGE ASSOCIATION DISCOUNT NOTES
5.36%, 07/08/96...................................... 30 30
4.86%, 07/12/96...................................... 50 50
5.26%, 07/24/96...................................... 10 10
5.16%, 07/30/96...................................... 35 35
5.49%, 09/18/96...................................... 35 34
TENNESSEE VALLEY AUTHORITY DISCOUNT NOTE
5.29%, 07/18/96...................................... 135 134
------ ------
TOTAL INVESTMENTS (COST $1,174,644)...............97.27% 1,178 1,174
CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES.....2.73% 33
------
NET ASSETS.......................................100.00% $ 1,207
=======
</TABLE>
See notes to the financial statements.
The identified cost of investments owned at June 30, 1996 was the same for
federal income tax and book purposes.
16
<PAGE>
[LOGO]
<TABLE>
<CAPTION>
STATEMENTS OF ASSETS AND LIABILITIES June 30, 1996
HORACE MANN FAMILY OF FUNDS (Unaudited)
======================================================================================================================
GROWTH INCOME BALANCED SHORT-TERM
FUND FUND FUND FUND
------ ------ -------- ----------
<S> <C> <C> <C> <C>
ASSETS
Cash............................................. $ 91 $ 682 $ -- $ 113
Investments at market value*..................... 357,972,808 11,325,466 262,895,644 1,174,228
Dividends and interest receivable................ 691,379 111,747 1,299,604 --
Accounts receivable-fund shares sold............. 268,827 5,633 181,643 57,959
Accounts receivable-investments sold............. 3,895,987 3,261 1,996,836 3,132
Prepaid expenses................................. 8,703 645 6,727 24
------------ ----------- ------------ ----------
TOTAL ASSETS..................................... 362,837,795 11,447,434 266,380,454 1,235,456
------------ ----------- ------------ ----------
LIABILITIES
Accounts payable-fund shares redeemed............ 93,515 254 130,800 23,405
Accounts payable-investments purchased........... 7,574,736 195,906 5,272,628 --
Accrued expenses................................. 162,162 17,413 139,078 4,848
------------ ----------- ------------ ----------
TOTAL LIABILITIES............................... 7,830,413 213,573 5,542,506 28,253
------------ ----------- ------------ ----------
NET ASSETS........................................ $355,007,382 $11,233,861 $260,837,948 $1,207,203
============ =========== ============ ==========
NET ASSETS CONSIST OF:
Par value of common shares....................... 14,838,443 86,812 1,357,100 11,808
Paid in surplus.................................. 265,751,779 10,892,327 218,942,943 1,171,081
Accumulated undistributed net investment income 3,164,424 319,065 4,024,926 24,701
Accumulated undistributed net realized gain
on investments................................. 24,341,291 21,663 12,998,126 29
Net unrealized appreciation
(depreciation) on investments.................. 46,911,445 (86,006) 23,514,853 (416)
------------ ----------- ------------ ----------
NET ASSETS........................................ $355,007,382 $11,233,861 $260,837,948 $1,207,203
============ =========== ============ ==========
NUMBER OF SHARES OUTSTANDING:
(Authorized 50,000,000 shares each; $1.00 par
value for Growth Fund; $.10 par value capital
stock for Income Fund, Balanced Fund, and
Short-Term Fund)............................... 14,838,443 868,124 13,571,002 118,081
============ =========== ============ ==========
NET ASSET VALUE PER SHARE......................... $ 23.92 $ 12.94 $ 19.22 $ 10.22
============ =========== ============ ==========
*Cost of Investments.............................. $311,061,363 $11,411,472 $239,380,791 $1,174,644
</TABLE>
See notes to the financial statements.
17
<PAGE>
<TABLE>
<CAPTION>
[LOGO]
For the Six Months Ended
STATEMENTS OF OPERATIONS June 30, 1996
HORACE MANN FAMILY OF FUNDS (Unaudited)
======================================================================================================================
GROWTH INCOME BALANCED SHORT-TERM
FUND FUND FUND FUND
------------ ---------- ------------ ----------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends................................................... $ 3,620,594 $ -- $ 1,867,724 $ --
Interest & amortization..................................... 425,048 350,119 2,750,741 28,490
------------ ---------- ------------ --------
Total investment income..................................... 4,045,642 350,119 4,618,465 28,490
EXPENSES:
Investment advisory and related fees........................ 522,215 13,960 348,676 711
Management fees............................................. 339,110 11,265 266,240 1,111
Fund pricing fees........................................... 13,386 2,985 10,995 2,328
Professional fees........................................... 13,346 10,354 13,346 4,245
Custodian fees.............................................. 22,447 5,824 24,872 2,503
Transfer agent fee (Note 5)................................. 15,106 -- -- --
Shareholder reports......................................... 2,530 -- 843 --
Directors' fees and expenses................................ 1,729 1,729 1,729 1,729
Other expenses.............................................. 14,780 891 10,678 325
Insurance expenses.......................................... 12,934 950 10,243 306
------------ ---------- ------------ --------
Total expenses............................................. 957,583 47,958 687,622 13,258
------------ ---------- ------------ --------
Less management fees waived (Note 5)........................ -- (11,265) -- (1,111)
Less expenses paid by Horace Mann Investors, Inc. (Note 5).. -- -- -- (7,815)
Less expenses paid by commission credits (Note 3)........... (28,155) -- (28,181) --
------------ ---------- ------------ --------
Net expenses............................................... 929,428 36,693 659,441 4,332
------------ ---------- ------------ --------
Net investment income...................................... 3,116,214 313,426 3,959,024 24,158
------------ ---------- ------------ --------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Realized gain on investments:
Proceeds from sales........................................ 118,496,208 8,712,357 117,187,542 986,655
Cost of securities sold.................................... 94,200,930 8,635,286 104,213,224 986,627
------------ ---------- ------------ --------
Net realized gain on investments............................ 24,295,278 77,071 12,974,318 28
Unrealized appreciation (depreciation) on investments:
Beginning of period........................................ 42,242,635 372,389 24,477,490 (157)
End of period.............................................. 46,911,445 (86,006) 23,514,853 (416)
------------ ---------- ------------ --------
Net unrealized appreciation (depreciation) on investments
during the period.......................................... 4,668,810 (458,395) (962,637) (259)
------------ ---------- ------------ --------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS...... 28,964,088 (381,324) 12,011,681 (231)
------------ ---------- ------------ --------
NET INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS............................................. $ 32,080,302 $ (67,898) $ 15,970,705 $ 23,927
============ ========== ============ ========
</TABLE>
See notes to the financial statements.
18
<PAGE>
<TABLE>
<CAPTION>
[LOGO]
For the Six Months Ended
STATEMENTS OF CHANGES IN NET ASSETS June 30, 1996 (Unaudited)
HORACE MANN FAMILY OF FUNDS and the Year Ended December 31, 1995
====================================================================================================================================
GROWTH FUND INCOME FUND BALANCED FUND
------------------------- ------------------------- -----------------------
06/30/96 12/31/95 06/30/96 12/31/95 06/30/96 12/31/95
6 MONTHS 12 MONTHS 6 MONTHS 12 MONTHS 6 MONTHS 12 MONTHS
INCREASE (DECREASE) IN
NET ASSETS
FROM OPERATIONS:
<S> <C> <C> <C> <C> <C> <C>
Net investment income............. $ 3,116,214 $ 6,226,547 $ 313,426 $ 607,806 $ 3,959,024 $ 7,312,902
Net realized short-term gain
(loss) on investments............ 14,836,543 6,813,495 (20,781) 81,252 7,407,267 3,958,147
Net realized long-term gain
on investments................... 9,458,735 11,128,402 97,852 1,736 5,567,051 5,265,350
Net increase (decrease) in
unrealized appreciation.......... 4,668,810 47,518,643 (458,395) 674,487 (962,637) 29,741,138
------------ ------------ ----------- ----------- ------------ ------------
CHANGE IN NET ASSETS
FROM OPERATIONS................... 32,080,302 71,687,087 (67,898) 1,365,281 15,970,705 46,277,537
------------ ------------ ----------- ----------- ------------ ------------
FROM DISTRIBUTIONS
TO SHAREHOLDERS:
Net investment income............. -- (6,197,557) -- (603,044) -- (7,291,835)
Net realized short-term gain
from investment transactions..... -- (6,823,150) -- -- -- (3,955,981)
Net realized long-term gain
from investment transactions..... -- (11,159,155) -- -- -- (5,271,078)
------------ ------------ ----------- ----------- ------------ ------------
TOTAL DISTRIBUTIONS
TO SHAREHOLDERS.................. -- (24,179,862) -- (603,044) -- (16,518,894)
------------ ------------ ----------- ----------- ------------ ------------
FROM FUND SHARE
TRANSACTIONS:
Proceeds from shares sold......... 41,874,834 45,758,350 1,724,581 2,091,642 27,253,957 40,388,246
Net asset value of shares
issued in reinvestment of
dividends and capital gains
distributions.................... -- 21,915,300 -- 487,817 -- 14,186,497
------------ ------------ ----------- ----------- ------------ ------------
41,874,834 67,673,650 1,724,581 2,579,459 27,253,957 54,574,743
Cost of shares redeemed........... (16,047,568) (20,184,351) (954,345) (2,069,527) (10,579,633) (16,955,246)
------------ ------------ ----------- ----------- ------------ ------------
NET INCREASE (DECREASE)
IN NET ASSETS FROM FUND
SHARE TRANSACTIONS............... 25,827,266 47,489,299 770,236 509,932 16,674,324 37,619,497
------------ ------------ ----------- ----------- ------------ ------------
TOTAL INCREASE
(DECREASE) IN NET ASSETS.......... 57,907,568 94,996,524 702,338 1,272,169 32,645,029 67,378,140
NET ASSETS:
BEGINNING OF PERIOD............... 297,099,814 202,103,290 10,531,523 9,259,354 228,192,919 160,814,779
------------ ------------ ----------- ----------- ------------ ------------
END OF PERIOD..................... $355,007,382 $297,099,814 $11,233,861 $10,531,523 $260,837,948 $228,192,919
============ ============ =========== =========== ============ ============
Undistributed net
investment income................. $ 3,164,424 $ 48,210 $ 319,065 $ 5,639 $ 4,024,926 $ 65,902
============ ============ =========== =========== ============ ============
</TABLE>
<TABLE>
<CAPTION>
SHORT-TERM FUND
-------------------------
06/30/96 12/31/95
6 MONTHS 12 MONTHS
INCREASE (DECREASE) IN
NET ASSETS
FROM OPERATIONS:
<S> <C> <C>
Net investment income............. $ 24,158 $ 58,582
Net realized short-term gain
(loss) on investments............ 28 60
Net realized long-term gain
on investments................... -- --
Net increase (decrease) in
unrealized appreciation.......... (259) 127
---------- -----------
CHANGE IN NET ASSETS
FROM OPERATIONS................... 23,927 58,769
---------- -----------
FROM DISTRIBUTIONS
TO SHAREHOLDERS:
Net investment income............. -- (58,578)
Net realized short-term gain
from investment transactions..... -- (39)
Net realized long-term gain
from investment transactions..... -- --
---------- -----------
TOTAL DISTRIBUTIONS
TO SHAREHOLDERS................... -- (58,617)
---------- -----------
FROM FUND SHARE
TRANSACTIONS:
Proceeds from shares sold......... 861,418 7,294,612
Net asset value of shares
issued in reinvestment of
dividends and capital gains
distributions.................... -- 42,523
---------- -----------
861,418 7,337,135
Cost of shares redeemed........... (683,921) (7,445,081)
---------- -----------
NET INCREASE (DECREASE)
IN NET ASSETS FROM FUND
SHARE TRANSACTIONS............... 177,497 (107,946)
---------- -----------
TOTAL INCREASE
(DECREASE) IN NET ASSETS.......... 201,424 (107,794)
NET ASSETS:
BEGINNING OF PERIOD............... 1,005,779 1,113,573
---------- -----------
END OF PERIOD..................... $1,207,203 $ 1,005,779
========== ===========
Undistributed net
investment income................. $ 24,701 $ 543
========== ===========
</TABLE>
See notes to the financial statements.
19
<PAGE>
[LOGO]
NOTES TO THE FINANCIAL STATEMENTS June 30, 1996
HORACE MANN FAMILY OF FUNDS (Unaudited)
================================================================================
1. BUSINESS ORGANIZATION-Horace Mann Growth Fund, Inc. ("Growth Fund"), Horace
Mann Income Fund, Inc. ("Income Fund"), Horace Mann Balanced Fund, Inc.
("Balanced Fund "), and Horace Mann Short-Term Investment Fund, Inc. ("Short-
Term Fund") are open-end, diversified, management investment companies
registered under the Investment Company Act of 1940. On January 31, 1983, Income
Fund, Balanced Fund and Short-Term Fund each sold 10,000 shares of $.10 par
value capital stock to Horace Mann Life Insurance Company ("HMLIC") for
$100,000. The funds listed above collectively are referred to as the "Funds".
FUND INVESTMENT OBJECTIVES:
A. GROWTH FUND-primary, long-term capital growth; secondary, conservation of
principal and production of income.
B. INCOME FUND-primary, maximization of current income consistent with prudent
investment risks; secondary, preservation of capital.
C. BALANCED FUND-realization of high long-term total rate of return consistent
with prudent investment risks.
D. SHORT-TERM FUND-primary, realize maximum current income to the extent
consistent with liquidity; secondary, preservation of principal.
2. SIGNIFICANT ACCOUNTING POLICIES:
A. SECURITY VALUATION- A security listed or traded on an exchange 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. 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. 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 Directors; no such securities were owned by the Funds at
June 30, 1996.
B. SECURITY TRANSACTIONS AND INVESTMENT INCOME- Security transactions are
recorded on the trade date. Dividend income is recorded on the ex-dividend
date. 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.
20
<PAGE>
[LOGO]
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) June 30, 1996
HORACE MANN FAMILY OF FUNDS (Unaudited)
================================================================================
D. USE OF ESTIMATES- The preparation of financial statements in conformity
with generally accepted accounting principals 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 finanical statements and the reported amounts of increase and decrease in
net assets from operations during the period. Actual results could differ from
those estimates.
3. OPERATING POLICIES:
A. REPURCHASE AGREEMENTS-The Funds, through their custodian, receive delivery
of the underlying securities, whose market value is required to be at least
102% of the resale price at the time of purchase. Wellington Management
Company, the Funds' investment adviser, is responsible for assuring that the
value of these underlying securities remains at least equal to the resale
price.
B. ASSET BACKED SECURITIES-These securities are secured by installment loans
or leases or by revolving lines of credit. They usually include credit
enhancements that limit investors exposure to the underlying credit. These
securities are valued on the basis of the timing and certainty of the cash
flows compared to investments with similar durations.
C. COLLATERALIZED MORTGAGE OBLIGATIONS - (PAC), (Planned Amortization Class) -
These securities have a pre-determined schedule for principal repayment
coupled with an enhanced degree of cash-flow certainty. A PAC security is a
specific class of mortgages which usually carry the most stable cash flows and
the lowest amount of prepayment risk. These securities are valued on the basis
of the timing and certainty of the cash flows compared to investments with
similar durations.
D. COMMISSION CREDITS-Wellington Management Company, the Funds' investment
adviser, seeks the best price and execution on each transaction and negotiates
commission rates solely on the execution requirements of each trade.
Occasionally, they place, under a directed brokerage arrangement, common stock
trades with a broker/dealer who credits to the funds part of the commissions
paid. The use of these commission credits is left to the discretion of the
Funds' management.
4. FUND SHARE TRANSACTIONS-The Funds are registered as diversified, open-end
management investment companies under the Investment Company Act of 1940. Shares
are presently offered only to the HMLIC Separate Account and the HMLIC 401K
Separate Account for the Income Fund, Balanced Fund, and Short-Term Fund. The
Growth Fund's shares may be purchased by the separate accounts of HMLIC, by
certain tax-qualified trusteed retirement plans, and by the general public in
the case of reinvestment of dividends and distributions in accordance with
Revenue Ruling 82-55.
21
<PAGE>
[LOGO]
NOTES TO THE FINANCIAL STATEMENTS(CONTINUED) June 30, 1996
HORACE MANN FAMILY OF FUNDS (Unaudited)
================================================================================
Transactions in capital stock for the six months ended June 30, 1996 and the
year ended December 31, 1995 were:
<TABLE>
<CAPTION>
GROWTH FUND INCOME FUND BALANCED FUND SHORT-TERM FUND
--------------------- ------------------ --------------------- ------------------
6/30/96 1995 6/30/96 1995 6/30/96 1995 6/30/96 1995
--------- --------- ------- -------- --------- --------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold....................... 1,818,206 2,225,947 133,401 161,927 1,457,655 2,341,881 85,126 709,737
Shares issued to shareholders in
reinvestment of dividends
and distributions............... --- 1,019,316 --- 37,525 --- 792,542 --- 4,257
Shares redeemed................... (698,373) (985,932) (73,780) (161,458) (566,402) (995,005) (67,667) (723,887)
--------- --------- ------- -------- --------- --------- ------- --------
Net increase(decrease)............ 1,119,833 2,259,331 59,621 37,994 891,253 2,139,418 17,459 (9,893)
========= ========= ======= ======== ========= ========= ======= ========
</TABLE>
5. 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.
Pursuant to management agreements between the Funds and Investors, Investors
receives a monthly management fee based on a pro rata share from each Fund equal
to 0.25% of the aggregate average net assets of the Funds up to $100,000,000 and
0.20% of such assets exceeding that amount. Investors also serves as the
principal underwriter and distributor of the HMLIC Separate Account. Investors'
management fee is reduced by the amount, if any, that the total annual expenses
of any Fund (exclusive of taxes, interest, extraordinary items and brokers'
commissions and other charges related to the purchase and sale of portfolio
securities) exceed 1.5% of the first $30,000,000 of the average daily net assets
and 1% of the average daily net assets in excess of $30,000,000 of that Fund.
The pro rata share is determined by the relative net asset values for each Fund.
For the six months ended June 30, 1996, the Growth Fund paid $339,110 and the
Balanced Fund paid $266,240 for management fees to Investors. During the same
period, Investors waived the management fees for the Income Fund and Short-Term
Fund.
Investors paid expenses for advisory fees, professional fees, insurance fees,
and other taxes and fees for the six months ended June 30, 1996 of $7,815 for
the Short-Term Fund.
22
<PAGE>
[LOGO]
NOTES TO THE FINANCIAL STATEMENTS (CONCLUDED) June 30, 1996
HORACE MANN FAMILY OF FUNDS (Unaudited)
================================================================================
Transfer and dividend disbursing agent services are provided by HMSC on a per
share basis for the Growth Fund and on a per account basis for the Income,
Balanced and Short-Term Funds. The transfer agent fee for the six months ended
June 30, 1996 was $15,106 for the Growth Fund.
Outside directors were compensated $150 per diem for each Board meeting
attended. No compensation is paid to interested officers and directors (those
who are also officers and/or directors of Horace Mann). For the six months ended
June 30, 1996, the per diem fees, excluding travel expenses, for all outside
directors totaled $600 for each Fund.
6. TRANSACTIONS WITH INVESTMENT ADVISER-Pursuant to the investment advisory
agreements with Wellington Management Company (WMC), the adviser receives a fee
based on the Funds' monthly average net assets as follows: Growth Fund, 0.400%
on the initial $100,000,000, 0.300% on the next $100,000,000 and 0.250% over
$200,000,000; Income Fund, 0.250% on the initial $100,000,000, 0.200% on the
next $100,000,000 and 0.150% over $200,000,000; Balanced Fund, 0.325% on the
initial $100,000,000, 0.275% on the next $100,000,000, 0.225% on the next
$300,000,000 and 0.200% over $500,000,000; Short-Term Fund, 0.125% on the
initial $100,000,000, 0.100% on the next $100,000,000 and 0.075% over
$200,000,000.
7. INVESTMENT TRANSACTIONS-Investment transactions, excluding short-term
investments, for the six months ended June 30, 1996 are:
<TABLE>
<CAPTION>
GROWTH INCOME BALANCED SHORT-TERM
FUND FUND FUND FUND
------------- ----------- ------------ ----------
<S> <C> <C> <C> <C>
Purchases................................................ $138,352,670 $10,156,317 $ 68,288,887 $ --
============ =========== ============ ========
Proceeds from sales...................................... $118,496,208 $ 8,712,357 $117,187,542 $986,655
============ =========== ============ ========
</TABLE>
The following table is based on the difference between cost and market value of
securities owned by each Fund at June 30, 1996.
<TABLE>
<CAPTION>
GROWTH INCOME BALANCED SHORT-TERM
FUND FUND FUND FUND
------------ ----------- ------------ ----------
<S> <C> <C> <C> <C>
Aggregate gross unrealized appreciation.................. $ 50,487,423 $ 69,845 $ 26,354,914 $ 4
Aggregate gross unrealized depreciation.................. (3,575,978) (155,851) (2,840,061) (420)
------------ ----------- ------------ ---------
Net unrealized appreciation depreciation................. $ 46,911,445 $ (86,006) $ 23,514,853 $ (416)
============ =========== ============ =========
</TABLE>
23
<PAGE>
[LOGO]
GROWTH FUND
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
====================================================================================================================================
(UNAUDITED)
6 MONTHS ENDED YEAR ENDED DECEMBER 31,
JUNE 30, ---------------------------------------------------------------------------------------------
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
--------------- ------- -------- -------- -------- -------- ------- -------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA
- --------------
NET ASSET VALUE, BEGINNING
OF PERIOD................. $ 21.66 $ 17.64 $ 19.85 $ 19.49 $ 19.15 $ 16.64 $ 18.88 $ 17.30 $ 16.00 $ 21.29 $ 25.85
INCOME FROM INVESTMENT
OPERATIONS:
Net Investment Income.... 0.22 0.52 0.49 0.54 0.53 0.60 0.70 0.56 0.42 0.50 0.49
Net Gains (Losses) on
Securities-realized and
unrealized.............. 2.04 5.41 (0.57) 3.32 1.31 3.76 (1.74) 4.58 1.37 0.74 2.28
-------- -------- -------- -------- -------- -------- ------- -------- ------- ------- -------
Total Income (Loss) From
Investment Operations. 2.26 5.93 (0.08) 3.86 1.84 4.36 (1.04) 5.14 1.79 1.24 2.77
LESS DISTRIBUTIONS:
From net investment
income................. -- 0.49 0.45 0.52 0.51 0.60 0.70 0.62 0.40 0.51 1.17
From net realized gains. -- 1.42 1.68 2.98 0.99 1.25 0.50 2.94 0.09 6.02 6.16
-------- -------- -------- -------- -------- -------- ------- -------- ------- ------- -------
Total Distributions... -- 1.91 2.13 3.50 1.50 1.85 1.20 3.56 0.49 6.53 7.33
NET ASSET VALUE, END OF
PERIOD.................... $ 23.92 $ 21.66 $ 17.64 $ 19.85 $ 19.49 $ 19.15 $ 16.64 $ 18.88 $ 17.30 $ 16.00 $ 21.29
======== ======== ======== ======== ======== ======== ======= ======== ======= ======= =======
TOTAL RETURN............... 10.43% 33.67% (0.35)% 19.74% 9.59% 26.50% (5.48)% 29.88% 11.23% 6.23% 11.68%
RATIOS/SUPPLEMENTAL DATA
- ---------------------------
Net Assets (000's omitted),
End of Period............. $355,007 $297,100 $202,103 $178,379 $140,257 $124,140 $97,610 $102,956 $86,755 $81,159 $77,630
Ratio of Expenses
to Average Net Assets... 0.29% 0.63% 0.69% 0.69% 0.73% 0.76% 0.78% 0.64% 0.64% 0.67% 0.69%
Ratio of Net Investment
Income to Average Net
Assets.................. 0.95% 2.50% 2.36% 2.48% 2.65% 3.13% 3.86% 2.69% 2.41% 2.06% 1.94%
Portfolio Turnover Rate.. 37.99% 64.59% 69.42% 47.39% 31.78% 51.01% 52.97% 71.25% 41.57% 86.50% 52.88%
</TABLE>
The "Net Investment Income" per share and the "Net gains (losses) on Securities-
realized and unrealized" per share represent a proportionate share respective to
the increase in net assets as presented in the Statement of Operations.
The Fund's investment adviser was changed effective November 1, 1989.
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.
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.
Ratios of Expenses and Net Investment Income to Average Net Assets do not
reflect commission credits.
24
<PAGE>
[LOGO]
<TABLE>
<CAPTION>
INCOME FUND
FINANCIAL HIGHLIGHTS
===================================================================================================================================
(Unaudited)
6 Months Ended Year Ended December 31,
June 30, ----------------------------------------------------------------------------------------
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA
- --------------
NET ASSET VALUE, BEGINNING OF
PERIOD...................... $ 13.03 $ 12.02 $ 13.06 $ 12.95 $ 12.92 $ 12.26 $ 12.35 $ 11.64 $ 11.59 $ 13.96 $ 13.04
INCOME FROM INVESTMENT
OPERATIONS:
Net Investment Income....... 0.37 0.80 0.75 0.82 0.94 1.12 1.14 1.04 1.00 1.23 1.44
Net Gains (Losses) on
Securities - realized and
unrealized................ (0.46) 0.99 (1.04) 0.23 (0.01) 0.71 (0.21) 0.75 (0.11) (1.32) 0.71
-------- -------- -------- ------- ------- ------- ------- ------- ------- ------- -------
Total Income (Loss) From
Investment Operations.. (0.09) 1.79 (0.29) 1.05 0.93 1.83 0.93 1.79 0.89 (0.09) 2.15
LESS DISTRIBUTIONS:
From net investment
income................... -- 0.78 0.75 0.75 0.87 1.17 1.02 0.96 0.84 2.28 1.21
From net realized gains..... -- -- -- 0.19 0.03 -- -- 0.12 -- -- 0.02
-------- -------- -------- ------- ------- ------- ------- ------- ------- ------- -------
Total Distributions....... -- 0.78 0.75 0.94 0.90 1.17 1.02 1.08 0.84 2.28 1.23
NET ASSET VALUE, END OF
PERIOD..................... $ 12.94 $ 13.03 $ 12.02 $ 13.06 $ 12.95 $ 12.92 $ 12.26 $ 12.35 $ 11.64 $ 11.59 $ 13.96
======== ======== ======== ======= ======= ======= ======= ======= ======= ======= =======
TOTAL RETURN.................. (0.69)% 14.93% (2.21)% 8.07% 7.20% 14.93% 7.58% 15.43% 7.64% (0.62)% 17.33%
RATIOS/SUPPLEMENTAL DATA
- ------------------------
Net Assets (000's omitted),
End of Period.............. $ 11,234 $ 10,532 $ 9,259 $ 9,409 $ 7,668 $ 6,396 $ 5,552 $ 4,457 $ 3,390 $ 2,567 $ 1,170
Ratio of Expenses
To Average Net Assets...... 0.34% 0.62% 0.61% 0.41% 0.19% 0.17% 0.20% 0.29% 0.24% 0.14% 0.03%
Ratio of Net Investment
Income to Average
Net Assets................. 2.89% 6.16% 5.85% 5.92% 6.94% 8.62% 8.86% 8.13% 7.97% 7.96% 7.65%
Portfolio Turnover Rate.... 91.65% 74.53% 205.35% 74.16% 35.11% 44.82% 62.40% 92.94% 174.32% 53.28% 8.17%
Ratio to Average Net Assets
before waived and
reimbursed expenses:
Ratio of Expenses............. 0.44% 0.88% 0.92% 0.87% 1.21% 1.49% 1.64% 1.52% 0.92% 0.87% 0.60%
Ratio of Net Investment
Income..................... 2.79% 5.89% 5.54% 5.46% 5.92% 7.30% 7.42% 6.90% 7.29% 7.23% 7.08%
Certain expenses for the Income Fund were assumed or waived by Horace Mann Investors, Inc. through June 30, 1996. The investment
advisory expenses for the Income Fund were waived by CIGNA Investments from January 1, 1984 through October 31, 1989.
The "Net Investment Income" per share and the "Net gains (losses) on Securities - realized and unrealized" per share represent a
proportionate share respective to the increase in net assets as presented in the Statement of Operations.
The Fund's investment adviser was changed effective November 1, 1989.
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.
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.
25
</TABLE>
<PAGE>
[LOGO]
<TABLE>
<CAPTION>
BALANCED FUND
FINANCIAL HIGHLIGHTS
====================================================================================================================================
(UNAUDITED)
6 MONTHS ENDED YEAR ENDED DECEMBER 31,
JUNE 30, _________________________________________________________________________________________
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
-------- -------- -------- -------- ------- ------- ------- ------- ------- ------- ------
PER SHARE DATA
- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD....................... $ 18.00 $ 15.26 $ 16.72 $ 16.22 $ 15.91 $ 14.19 $ 15.10 $ 13.48 $ 12.71 $ 14.91 $13.71
INCOME FROM INVESTMENT
OPERATIONS:
Net Investment Income........ 0.30 0.67 0.62 0.65 0.66 0.78 0.86 0.77 0.66 1.05 1.18
Net Gains (Losses) on
Securities - realized and
unrealized................. 0.92 3.46 (0.81) 1.87 0.68 2.25 (0.92) 2.77 0.72 (1.20) 1.05
-------- -------- -------- -------- ------- ------- ------- ------- ------- ------- ------
Total Income (Loss) From
Investment Operations.... 1.22 4.13 (0.19) 2.52 1.34 3.03 (0.06) 3.54 1.38 (0.15) 2.23
LESS DISTRIBUTIONS:
From net investment
income..................... -- 0.61 0.55 0.56 0.59 0.74 0.74 0.70 0.61 2.05 0.63
From net realized gains..... -- 0.78 0.72 1.46 0.44 0.57 0.11 1.22 -- -- 0.40
-------- -------- -------- -------- ------- ------- ------- ------- ------- ------- ------
Total Distributions....... -- 1.39 1.27 2.02 1.03 1.31 0.85 1.92 0.61 2.05 1.03
NET ASSET VALUE, END OF
PERIOD....................... $ 19.22 $ 18.00 $ 15.26 $ 16.72 $ 16.22 $ 15.91 $ 14.19 $ 15.10 $ 13.48 $ 12.71 $14.91
======== ======== ======== ======== ======= ======= ======= ======= ======= ======= ======
TOTAL RETURN.................. 6.78% 27.12% (1.12)% 15.46% 8.37% 21.57% (0.41)% 26.31% 10.57% (0.87)% 16.79%
RATIOS/SUPPLEMENTAL DATA
- ------------------------
Net Assets (000's omitted),
End of Period................ $260,838 $228,193 $160,815 $132,376 $92,463 $72,343 $53,289 $42,214 $29,223 $21,493 $6,974
Ratio of Expenses
to Average Net Assets....... 0.28% 0.59% 0.63% 0.66% 0.71% 0.75% 0.81% 0.72% 0.76% 0.08% 0.03%
Ratio of Net Investment
Income to Average
Net Assets.................. 1.61% 3.79% 3.59% 3.54% 3.94% 4.96% 5.59% 4.85% 4.81% 5.56% 5.12%
Portfolio Turnover Rate..... 50.80% 64.80% 121.82% 52.43% 27.06% 42.09% 47.62% 56.80% 27.68% 84.74% 45.48%
Ratio to Average Net Assets
before waived and
reimbursed expenses:
Ratio of Expenses............ 0.28% 0.59% 0.63% 0.66% 0.71% 0.75% 0.81% 0.72% 0.76% 0.64% 0.61%
Ratio of Net Investment
Income...................... 1.61% 3.79% 3.59% 3.54% 3.94% 4.96% 5.59% 4.85% 4.81% 5.00% 4.54%
</TABLE>
Expenses for the Balanced Fund were assumed or waived by Horace Mann Investors,
Inc. and CIGNA Investments through 1987.
The "Net Investment Income" per share and the "Net gains (losses) on Securities-
realized and unrealized" per share represent a proportionate share respective to
the increase in net assets as presented in the Statement of Operations.
The Fund's investment adviser was changed effective November 1, 1989.
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.
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.
Ratios of Expenses and Net Investment Income to Average Net Assets do not
reflect commission credits.
26
<PAGE>
[LOGO]
SHORT-TERM FUND
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
====================================================================================================================================
(UNAUDITED)
6 MONTHS ENDED YEAR ENDED DECEMBER 31,
JUNE 30,_________________________________________________________________________________________
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
PER SHARE DATA
- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Period......................... $10.00 $10.08 $10.07 $10.09 $10.10 $10.37 $10.73 $10.49 $10.25 $11.17 $11.44
Income From Investment
Operations:
Net Investment Income.......... 0.22 0.53 0.39 0.26 0.33 0.61 0.85 0.85 0.69 0.65 0.68
Net Gains (Losses) on
Securities - realized and
unrealized................... -- -- -- -- -- -- 0.01 -- -- -- --
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total Income (Loss) From
Investment Operations........ 0.22 0.53 0.39 0.26 0.33 0.61 0.86 0.85 0.69 0.65 0.68
LESS DISTRIBUTIONS:
From net investment
income....................... -- 0.61 0.38 0.28 0.34 0.88 1.22 0.60 0.45 1.57 0.95
From net realized gains........ -- -- -- -- -- -- -- 0.01 -- -- --
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total Distributions.......... -- 0.61 0.38 0.28 0.34 0.88 1.22 0.61 0.45 1.57 0.95
NET ASSET VALUE, END OF
PERIOD......................... $10.22 $10.00 $10.08 $10.07 $10.09 $10.10 $10.37 $10.73 $10.49 $10.25 $11.17
====== ====== ====== ====== ====== ====== ====== ====== ====== ====== ======
TOTAL RETURN.................... 2.20% 5.25% 3.89% 2.53% 3.30% 5.93% 7.89% 8.27% 6.74% 5.80% 6.26%
RATIOS/SUPPLEMENTAL DATA
- ------------------------
Net Assets (000's omitted),
End of Period.................. $1,207 $1,006 $1,114 $1,110 $1,131 $1,076 $1,195 $1,175 $1,140 $ 852 $ 356
Ratio of Expenses
to Average Net Assets.......... 0.41% 0.84% 0.49% 0.61% 0.51% 0.43% 0.38% 0.46% 0.37% 0.21% 0.14%
Ratio of Net Investment
Income to Average
Net Assets..................... 2.28% 5.11% 3.78% 2.56% 3.16% 5.88% 7.57% 7.83% 6.50% 5.68% 5.94%
Portfolio Turnover Rate......... 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Ratio to Average Net Assets before
waived and reimbursed expenses:
Ratio of Expenses............... 1.25% 2.35% 2.36% 2.42% 3.44% 4.45% 4.46% 3.29% 1.48% 1.53% 0.61%
Ratio of Net Investment
Income......................... 1.44% 3.60% 1.91% 0.75% 0.23% 1.86% 3.49% 5.00% 5.39% 4.36% 5.47%
</TABLE>
Certain expenses for the Short-Term Fund were assumed or waived by Horace Mann
Investors, Inc. through June 30, 1996. The investment advisory
expenses for the Short-Term Investment Fund were waived by CIGNA Investments
from January 1, 1984 through October 31, 1989.
The "Net Investment Income" per share and the "Net gains (losses) on Securities
- - realized and unrealized" per share represent a proportionate
share respective to the increase in net assets as presented in the Statement of
Operations.
The Fund's investment adviser was changed effective November 1, 1989.
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.
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.
27
<PAGE>
HORACE MANN FUNDS
P.O. Box 4657
Springfield, IL 62708-4657
1-800-999-1030
This report is not to be distributed unless
preceded or accompanied by a current
prospectus.
IA-004359 (8/96)
