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As filed with the Securities and Exchange Commission
on November 8, 1996
Registration No. 333-_____ 811-_____
____________________________________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. __ [_]
Post-Effective Amendment No. __ [_]
and/or
REGISTRATION STATEMENT
UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. __ [_]
(Check appropriate box or boxes)
HORACE MANN MUTUAL FUNDS
(Exact Name of Registrant as Specified in Charter)
ONE HORACE MANN PLAZA
SPRINGFIELD, ILLINOIS 62715
(Address of Principal Executive Offices, including Zip Code)
Ann M. Caparros
ONE HORACE MANN PLAZA
SPRINGFIELD, ILLINOIS 62715
(Name and Address of Agent for Service)
(217) 789-2500
(Registrant's Telephone Number, including Area Code)
COPY TO:
CATHY G. O'KELLY
VEDDER, PRICE, KAUFMAN & KAMMHOLZ
222 N. LASALLE
CHICAGO, ILLINOIS 60601
APPROXIMATE DATE OF PROPOSED OFFERING: As soon as practicable after the
effective date of this Registration Statement.
Pursuant to Reg. (S)270.24f-2 under the Investment Company Act of 1940,
Registrant hereby declares that an indefinite number or amount of shares are
being registered under the Securities Act of 1933.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933 ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS
EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH
SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME
EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL
THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE
COMMISSION, ACTING PURSUANT TO SECTION 8(A), MAY DETERMINE.
<PAGE>
HORACE MANN MUTUAL FUNDS
Cross Reference Sheet
(As Required by Rule 495)
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Item Number in Form N-1A Caption
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PART A - PROSPECTUS
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1. Cover Page Cover Page
2. Synopsis Cover Page
3. Condensed Financial Information Investment Return
4. General Description of the Registrant The Funds, their Investment Objectives and Policies;
Types of Investments and Associated Risks
5. Management of the Fund Management
5A. Management's Discussion of Fund Performance Not Applicable
6. Capital Stock and other Securities Voting Rights, Purchases and Redemptions; Shareholder
Inquiries; Dividends, Distributions and Federal Taxes
7. Purchase of Securities Being Offered Purchases and Redemptions
Dividends, Distributions and Federal Taxes
8. Redemption or Repurchase Purchases and Redemptions
9. Pending Legal Proceedings Not Applicable
</TABLE>
<PAGE>
Horace Mann Mutual Funds
Cross Reference Sheet (continued)
<TABLE>
<CAPTION>
Item Number in Form N-1A Caption
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PART B - STATEMENT OF ADDITIONAL INFORMATION
--------------------------------------------
<S> <C>
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information and History General Information
13. Investment Objectives and Policies Investment Restrictions
14. Management of the Fund Management of the Funds
15. Control Persons and Principal Holders of Securities Control Persons and Principal Holders of Securities
Management of the Funds
16. Investment Advisory and Other Securities Investment Advisory Agreement; Investment Sub-Advisory
Agreements; Other Services
17. Brokerage Allocation Brokerage Allocation
18. Capital Stock and Other Securities Control Persons and Principal Holders of Securities
19. Purchase, Redemption and Pricing of Securities Being Purchase, Redemption and Pricing of Fund Shares
Offered
20. Tax Status Tax Status
21. Underwriters Not applicable
22. Calculations of Performance Data Investment Performance
23. Financial Statements Report of Independent Auditors, Statement of Net Assets
</TABLE>
PART C
------
Information required to be included in Part C is set forth under the appropriate
item, so numbered, in Part C of this Registration Statement.
<PAGE>
TABLE OF CONTENTS
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Page
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THE TRUST, THE FUNDS, AND THEIR
INVESTMENT OBJECTIVES AND POLICIES................................. 1
Small Cap Growth Fund......................................... 1
International Equity Fund..................................... 1
Socially Responsible Fund..................................... 2
FUNDAMENTAL INVESTMENT LIMITATIONS................................. 3
TYPES OF INVESTMENTS AND ASSOCIATED
RISKS.............................................................. 3
INVESTMENT RETURN.................................................. 7
MANAGEMENT......................................................... 7
Investment Adviser and Manager, Horace Mann Investors, Inc.... 7
The Sub-Advisers.............................................. 8
Small Cap Growth Fund.................................... 8
International Equity Fund................................ 8
Socially Responsible Fund................................ 8
General.................................................. 8
Custodian and Fund Accounting Agent:.......................... 8
PURCHASES AND REDEMPTIONS.......................................... 8
DIVIDENDS, DISTRIBUTIONS AND
FEDERAL TAXES...................................................... 9
VOTING RIGHTS...................................................... 9
SHAREHOLDERS INQUIRIES............................................. 9
ADDITIONAL INFORMATION............................................. 9
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THE TRUST, THE FUNDS, AND THEIR INVESTMENT OBJECTIVES AND POLICIES
The Trust was organized as a Delaware business trust under a Declaration of
Trust dated November 7, 1996. The Declaration of Trust permits the Trust to
offer shares of separate funds. All consideration received by the Trust for
shares of any fund and all assets of such fund belong to that fund and would be
subject to liabilities elated thereto. The Trust reserves the right to create
and issue shares of funds in addition to the Funds described herein.
The investment objectives and policies of each Fund are described below.
Prospective purchasers should recognize that there are risks in the ownership of
any security and that there can be no assurance that the objectives of the Funds
will be realized.
Each Fund seeks to attain its objectives by pursuing investment policies
that call for investments in certain types of securities and by employing
various investment strategies. These investment policies and strategies may be
changed without shareholder approval. However, each Fund will not, as a matter
of policy, change its investment policies without notice to its shareholders.
Supplemental information on the investment policies as well as a
description of the investment restrictions of each Fund are contained in the
Statement of Additional Information.
SMALL CAP GROWTH FUND
The investment objective of the Small Cap Growth Fund is long-term capital
appreciation. The Fund ordinarily invests substantially all of its assets in
small cap equity securities with earnings growth potential. Such securities
would be considered by the sub-adviser to have favorable and above-average
earnings growth prospects, that is, securities with growth rate estimates in
excess of average for the Fund's benchmark (Russell 2000 Growth Index) and
capitalization below $1 billion.
The Small Cap Growth Fund may make interim investments in short-term debt
instruments in order to generate a return on otherwise idle cash. If a market
decline is expected, the Fund may sell its portfolio securities and invest all
or part of the proceeds in investment grade corporate bonds, debentures,
preferred stock and U.S. Government securities; or it may retain funds in the
form of cash or cash equivalents.
INTERNATIONAL EQUITY FUND
The International Equity Fund seeks long-term growth of capital. The
International Equity Fund pursues this objective through diversified holdings of
marketable foreign equity investments. The Fund invests in companies, wherever
organized, which do business primarily outside the United States. The Fund
intends to diversify investments among several countries and to have represented
in its holdings business activities in not less than three different countries.
The Fund does not intend to concentrate investments in any particular industry.
The International Equity Fund invests primarily in equity securities of
established companies, listed on foreign exchanges, which the sub-adviser
believes have favorable characteristics. It may also invest in fixed income
securities of foreign governments and companies. However, management intends to
maintain a portfolio consisting primarily of equity securities. Investing in
foreign securities may involve a greater degree of risk than investing in
domestic securities due to the possibility of exchange rate fluctuations and
exchange controls, less publicly available information, more volatile markets,
less securities regulation, less favorable tax provisions, war and expropriation
The net asset value of the shares of the Fund will increase or decrease with
changes in the market price of the Fund's investments and changes in foreign
currency exchange rates. (See "Types of Investments and Associated Risks --
Foreign Securities").
The International Equity Fund has no present intention of altering its
general policy of being primarily invested under normal conditions in foreign
securities. However, in the event of exceptional conditions abroad, the Fund
may temporarily invest all or a portion of its assets in Canadian or U.S.
Government obligations or currencies, or securities of companies incorporated in
and having their principal activities in Canada or the United States.
The International Equity Fund may, for hedging purposes, purchase forward
foreign currency exchange contracts, foreign currency options and futures
contracts and foreign currencies in the form
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of bank deposits. The Fund may also purchase other foreign money market
instruments, including, but not limited to, bankers' acceptances, certificates
of deposit, commercial paper, short-term government and corporate obligations
and repurchase agreements.
SOCIALLY RESPONSIBLE FUND
The Socially Responsible Fund seeks to achieve long term growth of capital,
above-average current income and growth of income. It pursues these objectives
through a diversified portfolio composed primarily of marketable equity
securities. The Socially Responsible Fund seeks to achieve these objectives by
investing in socially responsive companies which the sub-adviser determines:
(a) Do not produce tobacco products;
(b) Do not produce alcoholic beverages;
(c) Do not own and/or operate casinos or manufacture gaming devices;
(d) Do not produce pornographic materials;
(e) Do not produce nuclear weapons or guidance and/or delivery systems
specifically for nuclear weapons;
(f) By popular standards, maintain non-discriminatory employment practices
throughout a company's facilities; and
(g) By popular standards, maintain environmental policies, practices and
procedures which are currently acceptable, or which are exhibiting
improvement.
In addition, except during the initial start-up period or pending the
reinvestment of proceeds from the sale or disposition of the Fund's portfolio
securities or the distribution of assets upon termination of the Fund,
substantially all and at least 85% of the Fund's total assets will, under normal
circumstances, be invested in equity securities of companies which are of at
least average financial quality but which are currently undervalued relative to
either their peer group, the markets or their fundamental outlook, and whose
dividend yields are at least 20% higher than the dividend yield of the S&P 500
Index.
While the Fund emphasizes investments in U.S. chartered companies, it can
commit up to 25% of the Fund's total assets to equity securities issued by non-
U.S. chartered companies which meet the criteria applicable to domestic
investments.
The above investment limitations or policies are applied at the time
investment securities are purchased.
In the course of pursuing its investment objectives, the Socially
Responsible Fund may engage in so-called "strategic transactions," and in this
regard, the Fund may purchase and sell exchange-listed and over-the-counter put
and call options on securities, on securities indices and on other financial
instruments, purchase and sell financial futures contracts and options thereon,
enter into various interest rate transactions such as swaps, caps, floors or
collars, enter into various currency transactions such as currency forward
contracts, currency futures contracts, currency swaps or options on currencies
or currency futures, purchase and sell derivatives and other similar
instruments, and engage in other similar or related investment techniques or
strategies. Any or all of these investment techniques or strategies may be used
at any time and there is no particular technique or strategy that dictates the
use of one technique or strategy rather than another, as use of any "strategic
transaction" is a function of numerous variables including market conditions.
Although certain "strategic transactions" may be used to enhance potential
gain, the Socially Responsible Fund will not enter into any "strategic
transactions" for non-hedging purposes, if, as a result of entering into any
such transactions, more than 5% of the Fund's total assets would then be
committed for such purposes. "Strategic transactions" involving financial
futures and options thereon will be purchased, sold or entered into only for
bona fide hedging, risk management or portfolio management purposes and not for
speculative purposes, and with respect to transactions which do not qualify as
hedging transactions within the meaning of applicable regulations of the
Commodity Futures Trading Commission, the Fund will not enter into futures
contracts or related options, if, as a result of entering into such futures
contracts or related options, the
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aggregate initial margin and premiums for establishing all such positions exceed
5% of the fair market value of the Fund's net assets, not including any in-the-
money amount on any such options in computing such 5%. The Fund will comply
with applicable regulatory requirements when implementing these "strategic
transactions."
FUNDAMENTAL INVESTMENT LIMITATIONS
A Fund's investment objective and policies may be changed by the Fund's
Board of Trustees without shareholder approval. However, shareholders will be
given at least 30 days' notice before any such change. No assurance can be
provided that a Fund will achieve its investment objective.
Each Fund has also adopted certain fundamental investment limitations that
may be changed only with the approval of a "majority of the outstanding shares
of a Fund" which are set forth in the Statement of Additional Information.
TYPES OF INVESTMENTS AND ASSOCIATED RISKS
Investments in any type of security are subject to varying degrees of
market risk, financial risk, and in some cases, reinvestment risk. Although the
Funds are subject to these risks, their investment policies and restrictions are
designed to reduce such risk. Further, each Fund exercises due care in the
selection of its portfolio securities.
MARKET RISK is the potential for fluctuations in the price of the security
because of market factors. For equity securities, market risk is the
possibility of change in price caused by stock market price changes; for debt
securities, market risk is the possibility that the price will fall because of
changing interest rates. In general, debt securities' prices vary inversely
with changes in interest rates. If interest rates rise, bond prices generally
fall; if interest rates fall, bond prices generally rise. In addition, for a
given change in interest rates, longer-maturity bonds fluctuate more in price
(gaining or losing more in value) than shorter-maturity bonds.
FINANCIAL RISK is based on the financial situation of the issuer. For
equity securities, financial risk is the possibility that the price of the
security will fall because of poor earnings performance by the issuer. For debt
securities, financial risk is the possibility that a bond issuer will fail to
make timely payments of interest or principal to a fund. The financial risk of a
fund depends on the credit quality of its underlying securities. In general, the
lower the credit quality of a fund's securities, the higher a fund's yield, all
other factors such as maturity being equal.
REINVESTMENT RISK is the possibility that, during periods of falling
interest rates, a debt security with a high stated interest rate will be prepaid
(or "called") prior to its expected maturity date. If during periods of falling
interest rates a debt security with a high stated interest rate is called away,
the unanticipated proceeds would likely be invested at lower interest rates, and
the fund's income may decline. Call provisions, which may lead to reinvestment
risk, are most common for intermediate and long-term municipal, corporate and
mortgage-backed securities. To the extent securities subject to call were
acquired at a premium, the potential for appreciation in the event of a decline
in interest rates may be limited and may even result in losses.
In addition to the risks generally associated with investing, there are
risks particular to certain types of investments. The following provides
additional information on various types of instruments in which the Funds may
invest and their associated risks. A Fund may not buy all these instruments to
the extent permitted unless it believes that doing so will help the Fund achieve
its objectives.
EQUITY SECURITIES -- During normal market conditions each Fund will invest
primarily in equity securities. Normally the Small Cap Growth Fund will invest
at least 80% and the Socially Responsible Fund will invest at least 85% of the
value of their total assets in equity securities. The Funds will invest
primarily in equity securities of U.S. issuers, except the International Equity
Fund, which will invest primarily in foreign issuers. Equity securities include
common stock and preferred stock (including convertible preferred stock); bonds,
notes and debentures convertible into common or preferred stock; stock purchase
warrants and rights; equity interests in trusts and partnerships; and depositary
receipts of companies. Under normal market conditions the Small Cap Growth Fund
will invest at least 90% (in any event at least 65%) of its assets in equity
securities of smaller-capitalized organizations
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(less than $1 billion at the time of investment). These organizations will
normally have limited product lines, market and financial resources and will be
dependent upon a limited management group.
U.S. GOVERNMENT OBLIGATIONS -- U.S. Government obligations are direct
obligations of the U.S. Government and are supported by the full faith and
credit of the U.S. Government. U.S. Government agency securities are issued or
guaranteed by U.S. Government sponsored enterprises and federal agencies. Some
of these securities are backed by the full faith and credit of the U.S.
Government; others are backed by the agency's right to borrow a specified amount
from the U.S. Treasury; and still others, while not guaranteed directly or
indirectly by the U.S. Government, are backed with collateral in the form of
cash, Treasury securities or debt instruments that the lending institution has
acquired through its lending activities.
ADRS, EDRS, AND GDRS -- Each Fund may invest in both sponsored and
unsponsored American Depository Receipts ("ADRs"), European Depository Receipts
("EDRs"), Global Depository Receipts ("GDRs") and other similar global
instruments. ADRs typically are issued by an American bank or trust company and
evidence ownership of underlying securities issued by a foreign corporation.
EDRs, which are sometimes referred to as Continental Depository Receipts, are
receipts issued in Europe, typically by foreign banks and trust companies, that
evidence ownership of either foreign or domestic underlying securities. GDRs
are depository receipts structured like global debt issues to facilitate trading
on an international basis. Unsponsored ADR, EDR and GDR programs are organized
independently and without the cooperation of the issuer of the underlying
securities. As a result, available information concerning the issuer may not be
as current as for sponsored ADRs, EDRs and GDRs, and the prices of unsponsored
ADRs, EDRs and GDRs may be more volatile than if such instruments were sponsored
by the issuer. Investments in ADRs, EDRs and GDRs present additional investment
considerations as described below under "Foreign Investments."
OPTIONS AND FUTURES CONTRACTS -- To the extent consistent with its
investment objective, each Fund may write covered call options, buy put options,
buy call options and write secured put options for the purpose of hedging or
earning additional income, which may be deemed speculative or, with respect to
the International Equity Fund, cross-hedging. These options may relate to
particular securities, financial instruments, foreign currencies, stock or bond
indices or the yield differential between two securities, and may or may not be
listed on a securities exchange and may or may not be issued by the Options
Clearing Corporation. A Fund will not purchase put and call options where the
aggregate premiums on outstanding options exceed 5% of its net assets at the
time of purchase, and will not write options on more than 25% of the value of
its net assets (measured at the time an option is written). Options trading is a
highly specialized activity that entails greater than ordinary investment risks.
In addition, unlisted options are not subject to the protections afforded
purchasers of listed options issued by the Options Clearing Corporation, which
performs the obligations of its members if they default.
To the extent consistent with its investment objective, each Fund may also
invest in futures contracts and options on futures contracts to commit funds
awaiting investment in stocks or maintain cash liquidity or for other hedging
purposes. The value of a Fund's contracts may equal or exceed 100% of the
Fund's total assets, although a Fund will not purchase or sell a futures
contract unless immediately afterwards the aggregate amount of margin deposits
on its existing futures positions plus the amount of premiums paid for related
futures options entered into for other than bona fide hedging purposes is 5% or
less of its net assets.
Futures contracts obligate a Fund, at maturity, to take or make delivery of
securities, the cash value of a securities index or a stated quantity of a
foreign currency. A Fund may sell a futures contract in order to offset an
expected decrease in the value of its portfolio positions that might otherwise
result from a market decline or currency exchange fluctuation. A Fund may do so
either to hedge the value of its securities portfolio as a whole, or to protect
against declines occurring prior to sales of securities in the value of the
securities to be sold. In addition, a Fund may utilize futures contracts in
anticipation of changes in the composition of its holdings or in currency
exchange rates.
A Fund may purchase and sell call and put options on futures contracts
traded on an exchange or board of trade. When a Fund purchases an option on
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a futures contract, it has the right to assume a position as a purchaser or a
seller of a futures contract at a specified exercise price during the option
period. When a Fund sells an option on a futures contract, it becomes obligated
to sell or buy a futures contract if the option is exercised. In connection
with a Fund's position in a futures contract or related option, the Fund will
create a segregated account of liquid high grade assets or will otherwise cover
its position in accordance with applicable SEC requirements.
The primary risks associated with the use of futures contracts and options
are (a) the imperfect correlation between the change in market value of the
instruments held by a Portfolio and the price of the futures contract or option;
(b) possible lack of liquid secondary market for a futures contract and the
resulting inability to close a futures contract when desired; (c) losses caused
by unanticipated market movements, which are potentially unlimited; and (d) a
sub-adviser's inability to predict correctly the direction of securities prices,
interest rates, currency exchange rages and other economic factors.
The Funds intend to comply with the regulations of the Commodity Futures
Trading Commission exempting the Funds from registration as a "commodity pool
operator."
LIQUIDITY MANAGEMENT -- Pending investment, to meet anticipated redemption
requests, or as a temporary defensive measure if its sub-adviser determines that
market conditions warrant, a Fund may also invest without limitation in high
quality money market instruments.
High quality money market instruments include U.S. government obligations,
U.S. government agency obligations, dollar denominated obligations of foreign
issuers issued in the U.S., bank obligations, including U.S. subsidiaries and
branches of foreign banks, corporate obligations, commercial paper, repurchase
agreements and obligations of supranational organizations. Generally, such
obligations will mature within one year from the date of settlement, but may
mature within two years from the date of settlement.
WHEN-ISSUED PURCHASES AND FORWARD COMMITMENTS -- Each Fund may purchase
securities on a "when-issued" basis and may purchase or sell securities on a
"forward commitment" basis. These transactions involve a commitment by a Fund
to purchase or sell particular securities with payment and delivery taking place
at a future date (perhaps one or two months later), and permit a Fund to lock in
a price or yield on a security it owns or intends to purchase, regardless of
future changes in interest rates. When-issued and forward commitment
transactions involve the risk, however, that the price or yield obtained in a
transaction may be less favorable than the price or yield available in the
market when the securities delivery takes place. Each Fund's when-issued
purchases and forward commitments are not expected to exceed 25% of the value of
its total assets absent unusual market conditions. The Funds do not intend to
engage in when-issued purchases and forward commitments for speculative purposes
but only in furtherance of their investment objectives.
REPURCHASE AGREEMENTS -- Repurchase agreements are instruments under which
a fund acquires ownership of a security and the seller agrees, at the time of
the sale, to repurchase the security at a mutually agreed upon time and price,
thereby determining the yield during a fund's holding period. A fund entering
into a repurchase agreement is exposed to the risk that the other party to the
agreement may be unable to keep its commitment to repurchase. In that event, a
fund may incur disposition costs in connection with liquidating the collateral
(i.e., the underlying security). Moreover, if bankruptcy proceedings are
commenced with respect to the selling party, receipt of the value of the
collateral may be delayed or substantially limited and a loss may be incurred if
the collateral securing the repurchase agreement declines in value during the
bankruptcy proceedings. The Funds believe that these risks are not material
inasmuch as each Fund will evaluate the credit worthiness of all entities with
which it proposes to enter into repurchase agreements, and will seek to assure
that each arrangement is adequately collateralized.
REVERSE REPURCHASE AGREEMENTS AND OTHER BORROWINGS -- The Small Cap Growth
Fund is authorized to make limited borrowings. If the securities held by the
Fund should decline in value while borrowings are outstanding, the net asset
value of the Fund's outstanding shares will decline in value
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by proportionately more than the decline in value suffered by the Fund's
securities. This use of reverse repurchase agreements may be regarded as
leveraging and, therefore, speculative. Reverse repurchase agreements involve
the risks that the interest income earned in the investment of the proceeds will
be less than the interest expense, that the market value of the securities sold
by the Fund may decline below the price of the securities the Fund is obligated
to repurchase and that the securities may not be returned to the Fund. During
the time a reverse repurchase agreement is outstanding, the Fund will maintain a
segregated account with the Fund's custodian containing cash, U.S. Government or
other appropriate liquid high-grade debt securities having a value at least
equal to the repurchase price. The Fund's reverse repurchase agreements,
together with any other borrowings, will not exceed, in the aggregate, 33 1/3%
of the value of its total assets. In addition, whenever borrowings exceed 5% of
the Fund's total assets, the Fund will not make any investments.
INVESTMENT COMPANIES -- In connection with the management of its daily cash
position, the Small Cap Growth Fund may invest in securities issued by other
investment companies which invest in short-term debt securities and which seek
to maintain a $1.00 net asset value per share. The International Equity Fund
may purchase shares of investment companies investing primarily in foreign
securities, including so-called "country funds." Country funds have portfolios
consisting exclusively of securities of issuers located in one foreign country.
As a shareholder of another investment company, a Fund would bear, along with
other shareholders, its pro rata portion of the other company's expenses,
including advisory fees. These expenses would be in addition to the expenses
each bears directly in connection with its own operations.
SECURITIES LENDING -- A Fund may seek additional income by lending
securities on a short-term basis. The securities lending agreements will require
that the loans be secured by collateral in cash, U.S. Government securities or
irrevocable bank letters of credit maintained on a current basis equal in value
to at least the market value of the loaned securities. A Fund may not make such
loans in excess of 33 1/3% of the value of its total assets. Securities loans
involve risks of delay in receiving additional collateral or in recovering the
loaned securities, or possibly loss of rights in the collateral if the borrower
of the securities becomes insolvent.
ILLIQUID SECURITIES -- No Fund will knowingly invest more than 15% of the
value of its net assets in securities that are illiquid. Variable and floating
rate instruments that cannot be disposed of within seven days, and repurchase
agreements and time deposits that do not provide for payment within seven days
after notice, without taking a reduced price, are subject to these limits. Each
Fund may purchase securities which are not registered under the Securities Act
of 1933 (the "1933 Act") but which can be sold to "qualified institutional
buyers" in accordance with Rule 144A under the 1933 Act. Any such security will
not be considered illiquid so long as it is determined by the sub-adviser,
acting under guidelines approved and monitored by the Board, that an adequate
trading market exists for that security. This investment practice could have
the effect of increasing the level of illiquidity in a Fund during any period
that qualified institutional buyers become uninterested in purchasing these
restricted securities.
FOREIGN SECURITIES -- Global investing involves economic and political
considerations not typically found in U.S. markets. These considerations, which
may favorably or unfavorably affect the International Fund's performance,
include changes in exchange rates and exchange rate controls (which may include
suspension of the ability to transfer currency from a given country), costs
incurred in conversions between currencies, non-negotiable brokerage
commissions, different accounting standards, lower trading volume and greater
market volatility, the difficulty of enforcing obligations in other countries,
less securities regulation, different tax provisions (including withholding on
interest and dividends paid to the Fund), war, expropriation, political and
social instability, and diplomatic developments. Further, the settlement period
of securities transactions in foreign markets may be longer than in domestic
markets. These considerations generally are more of a concern in developing
countries. For example, the possibility of political upheaval and the
dependence on foreign economic assistance may be greater in these countries than
in developed countries. The Adviser seeks to mitigate the risks associated with
these considerations through diversification and active professional management.
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FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS -- The International Equity
Fund may enter into forward foreign currency exchange contracts ("forward
contracts") to the extent of 15% of the value of its total assets, for hedging
purposes. A forward contract is a contract individually negotiated and
privately traded by currency traders and their customers. A forward contract
involves an obligation to purchase or sell a specific currency for an agreed
price at a future date, which may be any fixed number of days from the date of
the contract. The agreed price may be fixed or with a specified range of
prices.
The International Equity Fund may also enter into foreign currency futures
contracts and foreign currency options to the extent of 15% of the value of its
total assets, for hedging purposes. Foreign currency futures contracts are
standardized contracts traded on commodities exchanges which involve an
obligation to purchase or sell a predetermined amount of currency at a
predetermined date at a specified price. The purpose of entering into these
contracts is to minimize the risk to the Fund from adverse changes in the
relationship between the U.S. dollar and foreign currencies. The Fund may
purchase and sell options on foreign currencies for hedging purposes in a manner
similar to that of transactions in forward contracts. Unanticipated changes in
currency prices may result in poorer overall performance for the Fund than if it
had not engaged in forward contracts, foreign currency futures contracts and
foreign currency options.
PORTFOLIO TURNOVER RATES -- Under normal market conditions, it is expected
that the annual portfolio turnover rate for each Fund will not exceed 150%. A
Fund's annual portfolio turnover rate will not, however, be a factor preventing
a sale or purchase when the adviser or sub-adviser believes investment
considerations warrant such sale or purchase. A Fund's portfolio turnover may
vary greatly from year to year as well as within a particular year. High
portfolio turnover rates (i.e., over 100%) will generally result in higher
transaction costs to a Fund.
INVESTMENT RETURN
The total return from an investment in a Fund is measured by the distributions
received (assuming reinvestment), plus or minus the change in the net asset
value per share for a given period. A total return percentage may be calculated
by dividing the value of a share at the end of the period (including
reinvestment of distributions) by the value of the share at the beginning of the
period and subtracting one. For a give period, an average annual total return
may be calculated by finding the average annual compounded rate that would
equate a hypothetical $1,000 investment to the ending redeemable value.
Comparison of a Fund's total return with alternative investments should consider
differences between the Fund and the alternative investments, the periods and
methods used in calculation of the return being compared, and the impact of
taxes on alternative investments. Of course, past performance is not
necessarily indicative of future results.
MANAGEMENT
The overall responsibility for the supervision of the affairs of the Funds
vests in the Board of Trustees. As described below, the Board has contracted
with others to provide certain services to the Funds.
INVESTMENT ADVISER AND MANAGER, HORACE MANN INVESTORS, INC.
The Trust employs Horace Mann Investors, Inc. ("Investors") to manage the
investment and reinvestment of the assets of the Funds and to continuously
review, supervise and administer the Funds' investment programs. Additionally,
Investors provides for the management of the business affairs of each Fund
including, but not limited to, office space, secretarial and clerical services,
bookkeeping services, wire and telephone communications services and other
services of this nature necessary for the proper management of each Fund's
business affairs.
Investors, located at One Horace Mann Plaza, Springfield, Illinois 62715-
0001, is registered with the Securities and Exchange Commission as a broker-
dealer and is a member of the National Association of Securities Dealers, Inc.
(NASD). Investors and Allegiance Life Insurance Company ("ALIC") are wholly-
owned subsidiaries of Horace Mann Educators Corporation ("HMEC"). Horace Mann
Life Insurance Company ("HMLIC"), which
7
<PAGE>
sponsors HMLIC's separate accounts, is a wholly-owned subsidiary of ALIC.
Investors is a newly registered investment adviser and has not previously
advised a registered investment company, however, its personnel are responsible
for overseeing the investment of Horace Mann Life Insurance Company's $________
of assets. Further, each Fund is advised by a sub-adviser that, as noted below,
has substantial experience in managing the assets of registered investment
companies.
Each Fund pays Investors advisory fees at the end of each month. These
fees are accrued daily and are calculated by applying the following annual
percentage rate to the Fund's average daily net assets for the respective month.
Small Cap Growth Fund 1.4% of Net Assets
International Equity Fund 1.1% of Net Assets
Socially Responsible Fund .95% of Net Assets
These advisory fees are higher than the fees charged by most mutual funds.
The Investment Advisory Agreement authorizes Investors (subject to the
discretion and control of the Funds' Board of Trustees) to select the brokers or
dealers that will execute the purchases and sales of portfolio securities and
requires Investors to use its best efforts to obtain the best available price
and most favorable execution.
The Advisory Agreement with Investors does not cover the Funds' expenses
related to legal, custodial, independent accounting and auditing, transfer
agent, registrars' and other agents' services; costs related to reports, notices
and proxy material; compensation and expenses of independent directors; stock
issuance expenses; brokers' commissions; taxes and fees payable to governmental
agencies; and expenses of shareholders' and directors' meetings.
THE SUB-ADVISERS
SMALL CAP GROWTH FUND. PNC Equity Advisers Company ("PNC"), a registered
---------------------
investment adviser, serves as the investment sub-adviser of the Small Cap Growth
Fund pursuant to a Sub-Advisory Agreement with Investors. PNC is responsible
for managing the Fund, subject to the direction of the Board of Trustees and
the Adviser. PNC has approximately $__________ billion under management and
manages __________ investment companies.
For such services, Investors pays PNC at the annual rate of 1.00% of the
Fund's average daily net assets for the respective month.
INTERNATIONAL EQUITY FUND. Scudder, Stevens & Clark, Inc. ("SSC"), a
--------------------------
registered investment adviser, serves as the investment sub-adviser of the
International Equity Fund pursuant to a Sub-Advisory Agreement with Investors.
SSC is responsible for managing the Fund, subject to the direction of the Board
of Trustees and the Adviser. SSC has approximately $_____ billion under
management and manages _____ investment companies including _____ non-U.S.
investment companies.
For such services, Investors pays SSC at the annual rate of .70% of the
Fund's average daily net assets for the respective month.
SOCIALLY RESPONSIBLE FUND. SSC also serves as the investment sub-adviser of
--------------------------
the Socially Responsible Fund. For such services, Investors pays SSC at the
annual rate of .55% of the Fund's average daily net assets for the respective
month.
GENERAL. Under the terms of each Sub-Advisory Agreement, the sub-adviser
-------
manages its respective Funds, selects investments and places all orders for
purchases and sales of the Fund's securities, subject to the general supervision
of the Board of Trustees and Investors.
CUSTODIAN AND FUND ACCOUNTING AGENT:
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
PURCHASES AND REDEMPTIONS
Shares of each Fund are currently sold only to HMLIC separate accounts. In
the event that HMLIC establishes additional separate accounts, shares of these
Funds may be made available for purchase by such additional separate accounts.
Each Fund sells and redeems its shares at net asset value per share,
without a sales or redemption charge. The net asset value of each Fund's shares
is determined on each day the New York Stock Exchange ("NYSE") is open for
trading at the close of the NYSE (normally 3:00 p.m. Central Time). The
computation is made by dividing the net assets by the number of outstanding
shares. Net assets are equal to the total assets of the Fund less its
liabilities. A purchase is effected at the price based on the next calculation
of net asset value per share after receipt of a request. A security listed or
traded on an
8
<PAGE>
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 the 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 amortized discount or premium. When market quotations
are not available, securities are valued at fair value as determined in good
faith by the Board of Trustees.
Except in extraordinary circumstances and as permissible under the
Investment Company Act of 1940, redemption proceeds are paid on or before the
fifth business day following the date the request for redemption is received.
DIVIDENDS, DISTRIBUTIONS AND
FEDERAL TAXES
It is intended that the Trust (and each of the Funds) will qualify as
regulated investment companies under the Internal Revenue Code and, therefore,
will not be subject to federal income taxes to the extent earnings are
distributed to shareholders. All dividends or distributions paid on Fund shares
held by a separate account, net of separate account contract charges, are
automatically reinvested in shares of the respective Fund at the net asset value
determined on the dividend payment date.
Effective in December of each year, each Fund intends to declare and make
distributions representing not less than 98% of its net investment income and
98% of its net realized capital gains.
VOTING RIGHTS
Each Fund is authorized by the Declaration of Trust to issue an unlimited
number of shares. Shares of each Fund are of the same class with equal rights
and privileges. Each share is entitled to vote on all matters submitted to a
vote of shareholders. The shares of each Fund are fully paid and non-assessable
and have no preference as to conversion, exchange, dividends, retirement or
other features. The shares of each Fund have no pre-exemptive rights. The
shares of each Fund have noncumulative voting rights, which means that the
holders of more than 50% of the shares voting for the election of directors can
elect 100% of the directors if they choose to do so.
Each person with voting rights will be provided with reports and proxy
materials relating to the applicable Fund(s). To be entitled to vote, a
shareholder (an insurance company separate account) must have been a shareholder
on the record date. The number of Fund shares for which a shareholder may vote
is determined by dividing the value of an interest in a Fund by the net asset
value of one share of the Fund, as of the same date.
As of __________, 1996, Horace Mann Life Insurance Company Separate
Account owned approximately _____%, _____% and _____% of the outstanding shares
of the Small Cap Growth Fund, International Equity Fund, and Socially
Responsible Fund, respectively. Since these separate accounts' voting rights
are passed through to contract owners and participants, HMLIC itself does not
exercise voting control.
SHAREHOLDERS INQUIRIES
For questions concerning investments in the Funds through HMLIC's annuity
contracts, call HMLIC's toll free customer service number, (800) 999-1030.
Written questions should be sent by mail to Horace Mann Life Insurance Company
at P.O. Box 4657, Springfield, Illinois 62708-4657 or by telefacsimile (FAX)
transmission to (217) 527-2307.
ADDITIONAL INFORMATION
A copy of the Statement of Additional Information providing more detailed
information about the Funds is available, without charge, upon request. The
Table of Contents of this Statement follows:
TOPIC PAGE
- ----- ----
Investment Restrictions..........................
Management of the Funds..........................
Board of Trustees..............................
Officers.......................................
Investment Advisory Agreements...................
Investment Subadvisory Agreements................
Brokerage Allocation.............................
Other Services...................................
9
<PAGE>
Purchase, Redemption and Pricing of Fund Shares
Tax Status
Control Persons and Principal Holders of Securities
General Information
Report of Independent Auditors, Statement of Net Assets
Appendix A -- Description of Securities
To receive, without charge, a copy of the 1995 Annual Report of the Horace
Mann Life Insurance Company Separate Account and/or a copy of the Statement of
Additional Information for Horace Mann Life Insurance Company Separate Account,
please complete the following request form and mail it to the address indicated
below, or send it by telefacsimile (FAX) transmission to (217) 527-2307 or
telephone (217) 789-2500 or (800) 999-1030 (toll-free).
HORACE MANN LIFE INSURANCE COMPANY
P.O. BOX 4657
SPRINGFIELD, ILLINOIS 62708-4657
Please provide free of charge the following information:
_____ 1996 Annual Report of the Horace Mann Life Insurance Company Separate
Account.
_____ Statement of Additional Information dated January ___, 1997 for the
Horace Mann Mutual Funds.
_____ Statement of Additional Information dated January ___, 1997 for the
Horace Mann Life Insurance Company Separate Account.
Please mail the above documents to:
- --------------------------------------------------------------------------------
(Name)
- --------------------------------------------------------------------------------
Address)
- --------------------------------------------------------------------------------
(City/State/Zip)
10
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
HORACE MANN MUTUAL FUNDS
This Statement of Additional Information is not a prospectus, but should be read
in conjunction with the current Prospectus, dated January ___, 1997. A copy of
the Prospectus may be obtained by writing to the Horace Mann Mutual Funds, P.O.
Box 4657, Springfield, Illinois 62708-4657, by sending a telefacsimile (FAX)
transmission to (217) 527-2307, or by telephoning (217) 789-2500 or (800) 999-
1030 (toll-free).
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Investment Restrictions.........................................................
Management of the Funds.........................................................
Board of Trustees.............................................................
Officers......................................................................
Investment Advisory Agreements..................................................
Investment Sub-Advisory Agreements
Brokerage Allocation............................................................
Other Services..................................................................
Purchase, Redemption and Pricing of Fund Shares.................................
Tax Status......................................................................
General Information
Control Persons and Principal Holders of Securities.............................
Report of Independent Auditors..................................................
Statement of Net Assets.........................................................
Appendix A - Description of Securities..........................................
</TABLE>
January __, 1997
1
<PAGE>
INVESTMENT RESTRICTIONS
Each Fund operates under the following fundamental investment restrictions
which cannot be changed without the approval of a "majority of the outstanding
voting securities," which is defined in the Investment Company Act of 1940 to
mean the lesser of (i) 67% of the Fund's shares present at a meeting where more
than 50% of the outstanding shares are present in person or by proxy or (2) more
than 50% of the Fund's outstanding shares. A Fund may not:
(1) act as an underwriter of securities, except insofar as it may be
deemed an underwriter for purposes of the Securities Act of 1933 on
disposition of securities acquired subject to legal or contractual
restrictions on resale;
(2) purchase or sell real estate (although it may purchase securities
secured by real estate or interests therein, or securities issued by
companies which invest in real estate or interests therein), commodities,
or commodity contracts, except that it may enter into (a) futures and
options on futures and (b) forward currency contracts;
(3) make loans, but this restriction shall not prevent the Fund from
(a) buying a part of an issue of bonds, debentures, or other obligations,
(b) investing in repurchase agreements, or (c) lending portfolio
securities, provided that it may not lend securities if, as a result, the
aggregate value of all securities loaned would exceed 33 1/3% of its total
assets (taken at market value at the time of such loan);
(4) borrow, except that it may (a) borrow up to 33 1/3% of its total
assets, taken at market value at the time of such borrowing, as a temporary
measure for extraordinary or emergency purposes, but not to increase
portfolio income (the total of reverse repurchase agreements and such
borrowings will not exceed 33 1/3% of its total assets, and the Fund will
not purchase additional securities when its borrowings, less proceeds
receivable from sales of portfolio securities, exceed 5% of its total
assets) and (b) enter into transactions in options, futures, and options on
futures;
(5) invest in a security if 25% or more of its total assets (taken at
market value at the time of a particular purchase) would be invested in the
securities of issuers in any particular industry, except that this
restriction does not apply to securities issued or guaranteed by the U.S.
Government or its agencies or instrumentalities; or
(6) issue any senior security except to the extent permitted under the
Investment Company Act of 1940.
Each Fund is also subject to the following non-fundamental restrictions and
policies, which may be changed by the Board of Trustees. The Fund may not:
(a) invest in companies for the purpose of exercising control or
management;
(b) purchase, except for securities acquired as part of a merger,
consolidation or acquisition of assets more than 3% of the stock of another
investment company or purchase stock of other investment companies equal to
more than 5% of the Fund's total assets (valued at time of purchase) in the
case of any one other investment company and 10% of such assets (valued at
time of purchase) in the case of all other investment companies in the
aggregate;
(c) mortgage, pledge, or hypothecate its assets, except as may be
necessary in connection with permitted borrowings or in connection with
options, futures, and options on futures;
(d) purchase securities on margin (except for use of short-term
credits as are necessary for the clearance of transactions), or sell
securities short unless (i) the Fund owns or has the right to obtain
2
<PAGE>
securities equivalent in kind and amount to those sold short at no added
cost or (ii) the securities sold are "when issued" or "when distributed"
securities which the Fund expects to receive in a recapitalization,
reorganization, or other exchange for securities the Fund contemporaneously
owns or has the right to obtain and provided that transactions in options,
futures, and options on futures are not treated as short sales; and
(e) invest more than 15% of its net assets (taken at market value at
the time of a particular investment) in illiquid securities, including
repurchase agreements maturing in more than seven days.
MANAGEMENT OF THE FUNDS
A listing of the Trustees and Officers of the Trust, their age, principal
occupations for the past five years and their affiliation with other companies
affiliated with Horace Mann Life Insurance Company is presented below.
Correspondence with any Trustee or Officer may be addressed to the offices of
the Funds at P.O. Box 4657, Springfield, Illinois 62708-4657.
BOARD OF TRUSTEES
*A. THOMAS ARISMAN (Age 50) (1, 2, 3), -- Trustee; Senior Vice President,
Allegiance Life Insurance Company, Educators Life Insurance Company of America,
Horace Mann Life Insurance Company, and Horace Mann Service Corporation;
Director and President, Horace Mann Investors, Inc.; formerly held other officer
and Director positions of various subsidiaries of Horace Mann Educators
Corporation.
*LARRY K. BECKER (Age 48) (1, 3, 4), -- Trustee and Chairman of the Board;
Director, Vice Executive President, and Chief Financial Officer, AIC Acquisition
Corporation, Allegiance Insurance Company, Allegiance Life Insurance Company,
Association & Consumer Marketing Services Corp., Educators Life Insurance
Company of America, Horace Mann Insurance Company, Horace Mann Life Insurance
Company, Horace Mann Service Corporation, Insuror Management Company, Senior
Marketing Insurance Service Corporation, Teachers Insurance Company, and Well-
Care, Inc.; Executive Vice President and Chief Financial Officer, Horace Mann
Educators Corporation; Director, Horace Mann Investors, Inc.; formerly held
other officer and Director positions of various subsidiaries of Horace Mann
Educators Corporation.
A.L. GALLOP (Age 71) (2), -- Trustee; Executive Director (Retired), Minnesota
Education Association; formerly Director, Horace Mann Educators Corporation
(1968-1983).
HARRIET A. RUSSELL (Age 55) (4), -- Trustee; member, Cincinnati Board of
Education; Director and Vice President, Greater Cincinnati School Employer
Credit Union; teacher (Retired), Walnut Hills High School; former Director,
Horace Mann Growth Fund, 1974 to 1983.
*GEORGE J. ZOCK (Age 46) (1, 2, 3), -- Trustee and President; Director, Senior
Vice President and Treasurer, AIC Acquisition Corporation, Allegiance Insurance
Company, Allegiance Life Insurance Company, Association & Consumer Marketing
Services Corp., Educators Life Insurance Company of America, Horace Mann
Insurance Company, Horace Mann Life Insurance Company, Horace Mann Service
Corporation, Senior Marketing Insurance Service Corporation, Teachers Insurance
Company and Well-Care, Inc.; Senior Vice President and Treasurer, Horace Mann
Educators Corporation and Insuror Management Company; formerly held other
officer and Director positions of various subsidiaries of Horace Mann Educators
Corporation.
______________
* Trustee is considered an "interested person" as that term is defined in the
Investment Company Act of 1940.
3
<PAGE>
(1) Member of Executive Committee - Unless otherwise provided by resolution of
the Board, this committee may exercise all of the powers of the Board when
the Board is not in session, except as otherwise stated in the Trust's By-
Laws.
(2) Member of Audit/Insurance Committee - This committee serves as the Board's
liaison with the Trust's independent auditors, reviews the financial
operation of the Trust, and makes periodic reports of these reviews to the
Board, along with appropriate recommendations regarding the proper and
efficient financial operation of the Trust. Additional responsibilities
include the review and assurance of the adequacy of insurance coverage for
the Trust.
(3) Member of Securities Committee - This committee coordinates and
communicates with the Trust's investment adviser and sub-advisers on behalf
of the Board, reviews and oversees investment management activities, makes
recommendations to the Board on changes in the investment guidelines,
recommends changes or adjustments to the investment advisory agreement,
creates and revises standards of investment performance, and advises the
Board on investment issues.
(4) Member of Nominating Committee - This committee is responsible for the
selection of appropriate, qualified persons as nominees to be presented to
Trust shareholders for their consideration. The committee has no formal
policy with respect to prospective director nominees recommended by
shareholders, but shareholders are free to make recommendations.
4
<PAGE>
OFFICERS
ANN M. CAPARROS (Age 44), -- Secretary and Ethics Compliance Officer, Director,
Vice President, General Counsel and Corporate Secretary, AIC Acquisition
Corporation, Allegiance Insurance Company, Allegiance life Insurance Company,
Association & Consumer Marketing Services Corp., Educators Life Insurance
Company of America, Horace Mann Insurance Company, Horace Mann Life Insurance
Company, Horace Mann Service Corporation, Senior Marketing Insurance Service
Corporation, Teachers Insurance Company, and Well-Care, Inc.; Vice President,
General Counsel and Corporate Secretary, Horace Mann Educators Corporation and
Insuror Management Company; Secretary, Horace Mann Investors; prior to March
1994, was associated with John Deere Insurance Group and Affiliates serving as
Assistant Vice President, Vice President, General Counsel, Corporate Secretary
and Claims Manager.
ROGER W. FISHER (Age 44), -- Controller; Vice President and Controller, AIC
Acquisition Corporation, Allegiance Insurance Company, Allegiance Life Insurance
Company, Association & Consumer Marketing Services Corp., Educators Life
Insurance Company of America, Horace Mann Educators Corporation, Horace Mann
Insurance Company, Horace Mann Service Corporation, Horace Mann Life Insurance
Company, Insuror Management Company, Senior Marketing Insurance Service
Corporation, Teachers Insurance Company, and Well-Care, Inc.; Controller, Horace
Mann Investors, Inc.
WILLIAM J. KELLY (Age 50), -- Treasurer and Regulatory Compliance Officer;
Treasurer, Horace Mann Investors, Inc.; Vice President, Horace Mann Life
Insurance Company; Vice President-Transfer Agent, Horace Mann Service
Corporation; formerly held other officer and Director positions of various
subsidiaries of Horace Mann Educators Corporation.
The Officers of the Trust receive remuneration from Horace Mann Service
Corporation. The Trust does not pay any remuneration to officers. Independent
Trustees are paid [a $____ per diem fee by the Trust for attendance at Board
meetings and receive reimbursement for travel expenses.]
INVESTMENT ADVISORY AGREEMENT
The Adviser provides office space and executive and other personnel to the
Trust. The Trust pays all expenses other than those paid by the Adviser
including, but not limited to, printing and postage charges, custodian fees,
fees for pricing and accounting services, legal and auditing.
The Advisory Agreement provides that neither the Adviser nor any of its
directors, officers, stockholders, agents or employees shall have any liability
to the Trust or any Shareholder of the Trust for any error of judgment, mistake
of law, or any loss arising out of any investment, or for any other act or
omission in the performance by the Adviser of its duties under the Agreement
except for liability resulting from willful misfeasance, bad faith, or
negligence on their part in the performance of its duties or from reckless
disregard by it of its obligations and duties under the Agreement.
INVESTMENT SUB-ADVISORY AGREEMENTS
Each of the Investment Sub-Advisory Agreements provide that neither the Sub-
Adviser nor any of its directors, officers, stockholders, agents or employees
shall have any liability to the Trust or any shareholder of the Trust for any
error of judgment, mistake of law, or any loss arising out of any investment, or
for any other act or omission in the performance by the Sub-Advisor of its
duties under the Agreement except for liability resulting from willful
misfeasance, bad faith, or negligence on their part in the performance of its
duties or from reckless disregard by it of its obligations and duties under the
Agreement.
BROKERAGE ALLOCATION
The Investment Advisory Agreement and the Investment Sub-Advisory Agreements
authorize Investors and the Sub-Advisers, respectively (collectively the
"Advisers") (subject to the discretion and control of the Trust's Board of
Trustees) to select the brokers or dealers that will execute the purchases and
sales of portfolio securities and direct the Advisers to use their best efforts
to obtain the best available price and most favorable execution. Subject to
5
<PAGE>
policies established by the Trustees of the Trust, the Advisers may also be
authorized to effect individual securities transactions at commission rates in
excess of the minimum commission rates available, if the Adviser determines in
good faith that such amount of commission is reasonable in relation to the value
of the brokerage or research services provided, viewed in terms of either the
particular transaction or the Adviser's overall responsibilities with respect to
the Fund and other clients.
In placing portfolio transactions, each of the Advisers will use its best
judgment to choose the broker most capable of providing the brokerage services
necessary to obtain best available price and most favorable execution. The full
range and quality of brokerage services available will be considered in making
these determinations. In those instances where it is reasonably determined that
more than one broker can offer the brokerage services needed to obtain the best
available price and most favorable execution, consideration may be given to
those brokers which supply investment research and other services in addition to
execution services. Such services may include factual and statistical
information or other items of supplementary research assistance. Each of the
Advisers considered such information useful in the performance of its
obligations under the Advisory Agreements, but is unable to determine the amount
by which such services may reduce the expenses. In addition, within the
parameters of achieving best price and execution, brokerage services may be used
to generate commission credits which are used to pay for pricing agent and
custodial services. [See, Other Services -- Fund Pricing Agreements and
Custodial Agreement."]
Some securities considered for investment by a Fund may also be appropriate for
other funds and/or clients served by an Adviser. To assure fair treatment of
each Fund and all clients of the Adviser in situations in which two or more
clients' accounts participate simultaneously in a buy or sell program involving
the same security, such transactions will be allocated among the funds and
clients in a manner deemed equitable by the Adviser.
OTHER SERVICES
FUND PRICING AGREEMENTS -- The Trust has entered into an agreement with State
Street Bank and Trust Company ("State Street"), a national banking association
located at 225 Franklin Street, Boston, Massachusetts 02110, to calculate the
daily net asset value per share for each Fund and to maintain certain required
accounting records. The Funds pay State Street __________ annually for these
services. This fee accrues daily and is paid monthly to State Street.
CUSTODIAL AGREEMENT -- State Street also serves as custodian of the assets of
the Trust, including foreign securities through a sub-custodian relationship.
Under the Custodial Agreement, State Street maintains the Funds' portfolio
securities, administers the purchases and sales of portfolio securities,
collects interest and dividends and other distributions made on portfolio
securities, and performs such other ministerial duties outlined in the Custodial
Agreement.
State Street charges the Fund an annual minimum administrative fee of _________
for serving as custodian.
TRANSFER AND DIVIDEND PAYING AGENT -- Horace Mann Service Corporation ("HMSC"),
One Horace Mann Plaza, Springfield, Illinois 62715-0001, acts as the transfer
agent and dividend disbursing agent for and is paid a fee based on the number of
accounts outstanding. HMSC is a wholly-owned subsidiary of Horace Mann
Educators Corporation ("HMEC"). "Horace Mann" is a registered service mark of
HMEC. The Trust has been given limited permission to use that service mark in
their names, subject to HMEC's right to revoke that permission.
INDEPENDENT AUDITORS -- KPMG Peat Marwick LLP, 303 East Wacker Drive, Chicago,
Illinois 60601, serves as the Trust's independent auditors. KPMG Peat Marwick
LLP performs an annual audit of the financial statements of the Fund and
provides accounting advice and services related to Securities and Exchange
Commission filings throughout the year.
6
<PAGE>
PURCHASE, REDEMPTION AND PRICING OF FUND SHARES
Each Fund sells and redeems its shares at net asset value per share, without a
sales or redemption charge. No minimum purchase or redemption amounts apply. The
daily net asset value of Fund's shares is determined by dividing the net assets
by the number of outstanding shares. Net assets are equal to the total assets of
the Fund less its liabilities. The price at which a purchase is effected is
based on the next calculated net asset value after the order is received at the
home office, One Horace Mann Plaza, Springfield, Illinois 62751-0001. 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 the
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 amortized discount or premium. Under the
amortized cost method of valuation, the security is initially valued at cost.
Then, the Fund assumes a constant proportionate amortization in value until
maturity of any discount or premium, regardless of the impact of fluctuating
interest rates on the market value of the security. While this method provides
certainty in valuation, it may result in periods during which value, as
determined by amortized cost, is higher or lower than the price that would be
received upon the sale of the security. When market quotations are not
available, securities are valued at fair value as determined in good faith by
the Board of Trustees.
TAX STATUS
It is intended that the Trust (and each of the Funds) will qualify as regulated
investment companies under the Internal Revenue Code ("IRC"). In order to
qualify as a regulated investment company under the IRC, each of the Funds must,
among other things, (a) derive at least 90% of its gross income from dividends,
interest, payments with respect to securities loans, gains from the sale or
other disposition of stocks, securities, or foreign currencies, or other income
(including but not limited to gains from options, futures or forward contracts)
derived with respect to its business of investing in these stocks, securities or
foreign currencies; (b) derive less than 30% of their gross income from the sale
or other disposition of stocks, securities or certain options, futures, or
forward contracts held less than three months, (c) distribute at least 90% of
its net investment income which includes short-term capital gains and (d)
diversify its holdings so that, at the end of each fiscal quarter, (i) at least
50% of the market value of the Fund's assets is represented by cash and cash
items, Government securities, the securities of other regulated investment
companies, and other securities limited in respect of any one issuer to 5% of
the Fund's total assets and to not more than 10% of the voting securities of
that issuer, and (ii) not more than 25% of the value of its total assets is
invested in the securities of any one issuer (other than Government securities
or the securities of other regulated investment companies).
As a regulated investment company, a Fund is not subject to federal income tax
on its net investment income (including short-term capital gains) if it
distributes all net investment income to its shareholders. A Fund will not be
subject to federal income tax on any net capital gains (the excess of net long-
term capital gains or net short-term capital losses) that are distributed as
capital gain dividends. The IRC imposes a 4% nondeductible excise tax on a
publicly-held mutual fund to the extent such mutual fund does not distribute at
least 98% of its ordinary income and 98% of its capital gains (both long-term
and short-term) each year by the end of such year.
The Funds are an investment vehicle for the variable contracts of Horace Mann
Life Insurance Company. The separate accounts which maintain the variable
contracts must satisfy quarterly diversification requirements under IRC 817(h).
These diversification requirements, which apply in addition to the
diversification requirements imposed on the Funds by the Investment Company Act
of 1940, place limitations on the investments of each Fund that can be made in
the securities of certain issuers. If Fund investments are not adequately
diversified under Section 817(h), the earnings of all variable contracts
invested, in whole or in part, in the Fund will be currently taxable to the
variable contract owners.
The above discussion is only an abbreviated summary of the applicable provisions
of the IRC and is not intended as tax advice.
7
<PAGE>
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
The following table sets forth, as of __________, 19__, the holdings of the
shares of each of the Funds known by the respective Fund to own, control or hold
with power to vote 5% or more of its outstanding securities. Since the listed
insurance company registered separate accounts' voting rights are passed through
to contract owners, the insurance companies themselves do not exercise voting
control over the shares held in those accounts.
<TABLE>
<CAPTION>
Small Cap Growth Fund: Type of Ownership Shares Owned % of Shares Outstanding
- --------------------- ----------------- ------------ -----------------------
<S> <C> <C> <C>
Horace Mann Life Insurance Company
One Horace Mann Plaza
Springfield, Illinois 62715
Horace Mann Life Insurance
Company Separate Account Record
International Equity Fund:
- --------------------------
Horace Mann Life Insurance Company
One Horace Mann Plaza
Springfield, Illinois 62715
Horace Mann Life Insurance
Company Separate Account..... Record
Socially Responsible Fund:
- --------------------------
Horace Mann Life Insurance Company
One Horace Mann Plaza
Springfield, Illinois 62715
Horace Mann Life Insurance
Company Separate Account..... Record
</TABLE>
Horace Mann Life Insurance Company is organized under the laws of the State of
Illinois and is a wholly-owned subsidiary of Allegiance Life Insurance Company,
and Illinois-domiciled life insurance company. One hundred percent of the stock
of Allegiance Life Insurance Company is held by Horace Mann Educators
Corporation, an insurance holding company in Delaware.
GENERAL INFORMATION
As a business trust, the Trust is not required to hold annual shareholder
meetings. However, special meetings may be called for purposes such as electing
or removing trustees, changing fundamental policies, or approving an investment
advisory contract. If requested to do so by the holders of at least 10% of the
Trust's outstanding shares, the Trust will call a special meeting for the
purpose of voting upon the question of removal of a trustee or trustees and will
assist in the communications with other shareholders as if the Trust were
subject to Section 16(c) of the Investment Company Act of 1940. All shares of
all series of the Trust are voted together in the election of trustees. On any
other matter submitted to a vote of shareholders, shares are voted in the
aggregate and not by individual series, except that shares are voted by
individual series when required by the Investment Company Act of 1940 or other
applicable law, or when the Board of Trustees determines that the matter affects
only the interests of one or more series, in which case shareholders of the
unaffected series are not entitled to vote on such matters.
8
<PAGE>
REPORT OF INDEPENDENT AUDITORS
------------------------------
[To Be Filed By Pre-Effective Amendment]
9
<PAGE>
STATEMENT OF NET ASSETS, ______________, 1996
HORACE MANN MUTUAL FUNDS
[To Be Filed By Pre-Effective Amendment]
10
<PAGE>
APPENDIX A
DESCRIPTION OF SECURITIES
REPURCHASE AGREEMENTS - Repurchase agreements are agreements under which the
purchaser (i.e., a Fund) acquires ownership of an obligation (debt instrument or
----
time deposit) and the seller agrees, at the time of the sale, to repurchase the
obligation at a mutually agreed upon time and price, thereby determining the
yield during the purchaser's holding period. This results in a fixed rate of
return insulated from market fluctuations during such period. If the seller of a
repurchase agreement fails to repurchase this obligation in accordance with the
terms of the agreement, the investing Fund will incur a loss to the extent that
the proceeds on the sale are less than the repurchase price. Repurchase
agreements usually involve United States Government or federal agency securities
and, as utilized by the Funds, include only those securities in which the Funds
may otherwise invest. Repurchase agreements are for short periods, most often
less than 30 days and usually less than one week. The Funds intend to enter into
repurchase agreements only with domestic commercial and savings bank and savings
and loan associations with total assets of at least one billion dollars, or with
primary dealers in United States Government securities. In addition, the Funds
will not enter into repurchase agreements unless (a) the agreement specifies
that the securities purchased, and interest accrued thereon, will have an
aggregate value in excess of the price paid; and (b) the Funds take delivery of
the underlying instruments pending repurchase. In entering into a repurchase
agreement, a Fund is exposed to the risk that the other party to the agreement
may be unable to keep its commitment to repurchase. In that event, the Fund may
incur disposition costs in connection with liquidating the collateral (i.e., the
----
underlying security). Moreover, if bankruptcy proceedings are commenced with
respect to the selling party, receipt of the value of the collateral may be
delayed or substantially limited. The Funds believe that these risks are not
material inasmuch as the Funds will evaluate the credit worthiness of all
entities with which it proposes to enter into repurchase agreements, and will
seek to assure that each such arrangement is adequately collateralized.
REVERSE REPURCHASE AGREEMENTS - Reverse repurchase agreements involve the sale
of money market securities held by a Fund, with an agreement to repurchase the
securities at an agreed upon price, date and interest payment. If it employs
reverse repurchase agreements, a Fund will use the proceeds to purchase other
money market securities and instruments eligible for purchase by that Fund
either maturing, or under an agreement to resell, at a date simultaneous with or
prior to the expiration of the reverse repurchase agreement. At the time it
enters into a reverse repurchase agreement, a Fund will place in a segregated
custodial account securities having a value equal to the repurchase price. A
Fund will generally utilize reverse repurchase agreements when the interest
income to be earned from the investment of the proceeds of the transactions is
greater than the interest expense incurred as a result of the reverse repurchase
transactions. Reverse repurchase agreements involve the risk that the market
value of securities purchased by the Fund with the proceeds of the transaction
may decline below the repurchase price of the securities by the Fund which it is
obligated to repurchase. As a matter of operating policy, the aggregate amount
of illiquid repurchase and reverse repurchase agreements will not exceed 10% of
any of the Fund's total net assets at the time of initiation.
WARRANTS - Warrants are instruments that provide the owner with the right to
purchase a specified security, usually an equity security such as common stock,
at a specified price (usually representing a premium over the applicable market
value of the underlying equity security at the time of the warrant's issuance)
and usually during a specified period of time. Moreover, they are usually issued
by the issuer of the security to which they relate. While warrants may be
traded, there is often no secondary market for them. The Funds will invest in
publicly traded warrants only. Warrants do not have any inherent value. To the
extent that the market value of the security that may be purchased upon exercise
of the warrant rises above the exercise price, the value of the warrant will
tend to rise. To the extent that the exercise price equals or exceeds the market
value of such security the warrants will have little or no market value. If
warrants remain unexercised at the end of the specified exercise period, they
lapse and the investing Fund's investment in them will be lost. In view of the
highly speculative nature of warrants, as a matter of operating policy, no Fund
will invest more than 5% of its total net assets in warrants.
A-1
<PAGE>
CONVERTIBLE PREFERRED STOCKS AND DEBT SECURITIES - Certain preferred stocks and
debt securities include conversion features allowing the holder to convert
securities into another specified security (usually common stock) of the same
issuer at a specified conversion ratio (e.g., two shares of preferred for one
----
share of common stock) at some specified future date or period. The market value
of convertible securities generally includes a premium that reflects the
conversion right. That premium may be negligible or substantial. To the extent
that any preferred stock or debt security remains unconverted after the
expiration of the conversion period, the market value will fail to the extent
represented by that premium.
PREFERRED EQUITY REDEMPTION CUMULATIVE STOCK - Preferred Equity Redemption
Cumulative Stock (PERCS) are a form of convertible preferred stock which
automatically convert into shares of common stock on a predetermined conversion
date. PERCS pay a fixed annual dividend rate which is higher than the annual
dividend rate of the issuing company's common stock. However, the terms of PERCS
limit an investor's ability to participate in the appreciation of the common
stock (usually capped at approximately 40%). Predetermined redemption dates and
prices set by the company upon the issuance of the securities provide the
mechanism for limiting the price appreciation of PERCS.
A-2
<PAGE>
HORACE MANN MUTUAL FUNDS
FORM N-1A
PART C: OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS.
A. FINANCIAL STATEMENTS:
(i) Financial Statements included in Part A of the Registration
Statement: None
(ii) Financial Statements included in Part B of the Registration
Statement:
Statement of Net Assets*
Report of Independent Auditors*
Schedules I, II, III, IV and V have been omitted as the required
information is not present.
B. EXHIBITS:
(1) Declaration of Trust and Certificate of Trust of Registrant.
(2) Bylaws of Registrant.
(3) None.
(4) None.
(5) (a) Investment Advisory Agreement*
(b) Investment Sub-Advisory Agreement between Horace Mann
Investors, Inc. and Scudder, Stevens & Clark, Inc.*
(c) Investment Sub-Advisory Agreement between Horace Mann
Investors, Inc. and PNC Equity Advisers Company*
(6) None
(7) None
(8) Custodian Services Agreement*
(9) Fund Accounting Services Agreement*
(10) Legal Opinion and consent of Vedder, Price, Kaufman &
Kammholz*
(11) Consent of independent accountants.*
(12) Not applicable.
(13) Investment Letter of initial investor in Registrant.*
(14) None.
(15) None
(16) Not applicable.
(18) Not applicable.
(19) Horace Mann Educators Corporation and Its Subsidiaries.*
(27) Financial Data Schedule*
*To be filed before the effective date of the Registrant.
C-1
<PAGE>
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
No person is directly controlled by Horace Mann Mutual Funds. Companies
under common control include Horace Mann Educators Corporation, its subsidiaries
and Horace Mann Balanced Fund, Inc., Horace Mann Growth Fund, Inc., Horace Mann
Income Fund, Inc., and Horace Mann Short-Term Investment Fund, Inc. See Exhibit
#19.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES.
As of November 1, 1996, there were no holders of record of any Shares
of Registrant.
ITEM 27. INDEMNIFICATION.
Article V of Registrant's Declaration of Trust, filed herewith as
Exhibit 1, provides for the indemnification of Registrant's trustees, officers,
employees and agents against liabilities incurred by them in connection with the
defense or disposition of any action or proceeding in which they may be involved
or with which they may be threatened, while in office or thereafter, by reason
of being or having been in such office, except with respect to matters as to
which it has been determined that they acted with willful misfeasance, bad
faith, gross negligence or reckless disregard of he duties involved in the
conduct of their office ("Disabling Conduct").
Registrant will obtain from a major insurance carrier a trustees' and
officers' liability policy covering certain types of errors and omissions.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to trustees, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a trustee, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such trustee, officer, or controlling person in the
opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
C-2
<PAGE>
ITEM 29. PRINCIPAL UNDERWRITERS.
Not applicable.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS.
All such accounts, books and other documents are maintained (i) at the
offices of the Registrant, (ii) at the offices of Registrant's investment
adviser, Horace Mann Investors, Inc., One Horace Mann Plaza, Springfield,
Illinois 62715, (iii) at the offices of Registrant's investment sub-advisers,
Scudder, Stevens & Clark, Inc., Two International Place, Boston, Massachusetts
02110 and PNC Equity Advisors Company, 1835 Market Street, 15th Floor,
Philadelphia, Pennsylvania 19103, or (iv) at the offices of Registrant's
custodian, State Street Bank and Trust Company, 225 Franklin Street, Boston,
Massachusetts 02110.
ITEM 31. MANAGEMENT SERVICES.
Not Applicable.
ITEM 32. UNDERTAKINGS.
(a) Not applicable.
(b) The Registrant undertakes to file a Post-Effective Amendment
using financial statements of Registrant, which need not be certified, within
four to six months from the effective date of the Registration Statement.
(c) Registrant hereby undertakes to furnish each person to whom a
prospectus is delivered with a copy of Registrant's latest annual report to
shareholders, upon request and without charge.
C-3
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Springfield, State of Illinois, on the 8th day of
November, 1996.
HORACE MANN MUTUAL FUNDS
By: /s/ George J. Zock
------------------------------------
George J. Zock, President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
/s/ George J. Zock President (Principal Executive November 8, 1996
- --------------------
George J. Zock Officer) and Trustee
/s/ William J. Kelly Treasurer (Principal Financial November 8, 1996
- ----------------------
William J. Kelly and Accounting Officer)
<PAGE>
EXHIBIT INDEX
-------------
<TABLE>
<CAPTION>
Sequential
Exhibit Page
- ------- ----------
<C> <S> <C>
B. EXHIBITS:
1 Declaration of Trust and Certificate of Trust of Registrant.
2 Bylaws of Registrant.
3 None.
4 None.
5 (a) Investment Advisory Agreement*
(b) Investment Sub-Advisory Agreement between Horace Mann
Investors, Inc. and Scudder, Stevens & Clark, Inc.*
(c) Investment Sub-Advisory Agreement between Horace Mann
Investors, Inc. and PNC Equity Advisers Company*
6 None
7 None
8 Custodian Services Agreement*
9 Fund Accounting Services Agreement*
10 Legal Opinion and consent of Vedder, Price, Kaufman &
Kammholz*
11 Consent of independent accountants.*
12 Not applicable.
13 Investment Letter of initial investor in Registrant.*
14 None.
15 None
16 Not applicable.
18 Not applicable.
19 Horace Mann Educators Corporation and Its Subsidiaries.*
27 Financial Data Schedule*
</TABLE>
*To be filed before the effective date of the Registrant.
<PAGE>
EXHIBIT 1
DECLARATION OF TRUST
OF
HORACE MANN MUTUAL FUNDS
A Delaware Business Trust
November 7, 1996
<PAGE>
DECLARATION OF TRUST
OF
HORACE MANN MUTUAL FUNDS
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I
The Trust................................................................... 1
1.1 Name.............................................................. 1
1.2 Trust Purpose..................................................... 1
1.3 Definitions....................................................... 2
ARTICLE II
Trustees.................................................................... 4
2.1 Number and Qualification.......................................... 4
2.2 Term and Election................................................. 4
2.3 Resignation and Removal........................................... 4
2.4 Vacancies......................................................... 5
2.5 Meetings.......................................................... 5
2.6 Officers; Chairperson of the Board................................ 6
2.7 By-Laws........................................................... 6
ARTICLE III
Powers of Trustees.......................................................... 7
3.1 General........................................................... 7
3.2 Investments....................................................... 7
3.3 Legal Title....................................................... 8
3.4 Sale of Interests................................................. 8
3.5 Borrow Money...................................................... 8
3.6 Delegation; Committee............................................. 8
3.7 Collection and Payment............................................ 8
3.8 Expenses.......................................................... 9
3.9 Miscellaneous Powers.............................................. 9
3.10 Further Powers.................................................... 9
ARTICLE IV
Investment Advisory, Administrative, and Transfer Agent Services............ 10
4.1 Investment Advisory and Other Services............................ 10
4.2 Parties to Contract............................................... 10
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
ARTICLE V
Limitations of Liability.................................................... 11
5.1 No Personal Liability of Trustees, Officers, Employees or Agents.. 11
5.2 Indemnification of Trustees, Officers, Employees and Agents....... 11
5.3 Liability of Holders; Indemnification............................. 12
5.4 No Bond Required of Trustees...................................... 12
5.5 No Duty of Investigation; Notice in Trust Instruments, Etc........ 12
5.6 Reliance on Experts, Etc.......................................... 13
5.7 Assent to Declaration............................................. 13
ARTICLE VI
Interests in the Trust...................................................... 13
6.1 General Characteristics........................................... 13
6.2 Establishment of Series of Interests.............................. 14
6.3 Establishment of Classes.......................................... 14
6.4 Assets of Series.................................................. 15
6.5 Liabilities of Series............................................. 15
6.6 Dividends and Distributions....................................... 16
6.7 Voting Rights..................................................... 17
6.8 Record Dates...................................................... 17
6.9 Transfer.......................................................... 17
6.10 Equality.......................................................... 17
6.11 Fractions......................................................... 18
6.12 Class Differences................................................. 18
6.13 Conversion of Interests........................................... 18
6.14 Investments in the Trust.......................................... 18
6.15 Trustees and Officers as Holders.................................. 18
6.16 No Preemptive Rights; Derivative Suits............................ 18
6.17 No Appraisal Rights............................................... 19
6.18 Status of Interests and Limitation of Personal Liability.......... 19
ARTICLE VII
Purchases and Redemptions................................................... 19
7.1 Purchases......................................................... 19
7.2 Redemption by Holder.............................................. 20
7.3 Redemption by Trust............................................... 20
7.4 Net Asset Value................................................... 20
ARTICLE VIII
Holders..................................................................... 21
8.1 Rights of Holders................................................. 21
8.2 Register of Interests............................................. 21
8.3 Notices........................................................... 21
8.4 Meetings of Holders............................................... 22
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
8.5 Notice of Meetings................................................ 22
8.6 Record Date....................................................... 22
8.7 Proxies, Etc...................................................... 23
8.8 Reports........................................................... 23
8.9 Inspection of Records............................................. 24
8.10 Voting Powers..................................................... 24
8.11 Holder Action by Written Consent.................................. 24
8.12 Holder Communications............................................. 24
ARTICLE IX
Duration; Termination of Trust; Amendment; Mergers; Etc..................... 25
9.1 Duration.......................................................... 25
9.2 Termination of Trust.............................................. 25
9.3 Amendment Procedure............................................... 26
9.4 Merger, Consolidation and Sale of Assets.......................... 27
9.5 Incorporation..................................................... 27
ARTICLE X
Miscellaneous............................................................... 28
10.1 Certificate of Designation; Agent for Service of Process.......... 28
10.2 Governing Law..................................................... 28
10.3 Counterparts...................................................... 28
10.4 Reliance by Third Parties......................................... 28
10.5 Provisions in Conflict With Law or Regulations.................... 29
10.6 Trust Only........................................................ 29
10.7 Withholding....................................................... 29
10.8 Headings and Construction......................................... 29
</TABLE>
iii
<PAGE>
DECLARATION OF TRUST
OF
HORACE MANN MUTUAL FUNDS
This DECLARATION OF TRUST OF HORACE MANN MUTUAL FUNDS is made on the
7th day of November, 1996 by the party signatory hereto, as Trustee.
WHEREAS, the Trustee desires to form a business trust under the law of
Delaware for the investment and reinvestment of its assets; and
WHEREAS, it is proposed that the Trust assets be composed of cash,
securities and other assets contributed to the Trust by the Holders of Interests
in the Trust entitled to ownership rights in the Trust;
NOW, THEREFORE, the Trustee hereby declares that the Trustees will
hold in trust all cash, securities and other assets which they may from time to
time acquire in any manner as Trustees hereunder, and manage and dispose of the
same for the benefit of the Holders of Interests in the Trust, and subject to
the following terms and conditions.
ARTICLE I
The Trust
---------
1.1 Name. The name of the Trust created hereby (the "Trust") shall
----
be "HORACE MANN MUTUAL FUNDS," and so far as may be practicable the Trustees
shall conduct the Trust's activities, execute all documents and sue or be sued
under that name, which name (and the word "Trust" wherever hereinafter used)
shall not refer to the Trustees in their individual capacities or to the
officers, agents, employees or Holders of Interest in the Trust. However, should
the Trustees determine that the use of the name of the Trust is not advisable,
they may select such other name for the Trust as they deem proper and the Trust
may hold its property and conduct its activities under such other name. Any name
change shall become effective upon the execution by a majority of the then
Trustees of an instrument setting forth the new name and the filing of a
certificate of amendment pursuant to Section 3810(b) of the DBTA. Any such
instrument shall not require the approval of the Holders of Interests in the
Trust, but shall have the status of an amendment to this Declaration.
1.2 Trust Purpose. The purpose of the Trust is to conduct, operate
-------------
and carry on the business of an open-end management investment company
registered under the 1940 Act. In furtherance of the foregoing, it shall be the
purpose of the Trust to do everything necessary, suitable, convenient or proper
for the conduct,
<PAGE>
promotion and attainment of any businesses and purposes which at any time may be
incidental or may appear conducive or expedient for the accomplishment of the
business of an open-end management investment company registered under the 1940
Act and which may be engaged in or carried on by a trust organized under the
DBTA, and in connection therewith, the Trust shall have and may exercise all of
the powers conferred by the laws of the State of Delaware upon a Delaware
business trust.
1.3 Definitions. As used in this Declaration, the following terms
-----------
shall have the following meanings:
(a) "1940 Act" shall mean the Investment Company Act of 1940, as
amended from time to time, and the rules and regulations thereunder, as adopted
or amended from time to time.
(b) "Affiliated Person," "Assignment" and "Interested Person"
shall have the meanings given such terms in the 1940 Act.
(c) "Administrator" shall mean any party furnishing services to
the Trust pursuant to any administrative services contract described in Section
4.1.
(d) "By-Laws" shall mean the By-Laws of the Trust as amended
from time to time.
(e) "Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time, and the rules and regulations thereunder, as adopted
or amended from time to time.
(f) "Commission" shall mean the Securities and Exchange
Commission.
(g) "Declaration" shall mean this Declaration of Trust, as
amended from time to time. References in this Declaration to "Declaration,"
"hereof," "herein" and "hereunder" shall be deemed to refer to the Declaration
rather than the article or section in which such words appear. This Declaration
shall, together with the By-Laws, constitute the governing instrument of the
Trust under the DBTA.
(h) "DBTA" shall mean the Delaware Business Trust Act, Delaware
Code Annotated Title 12, Sections 3801, et seq., as amended from time to time.
-- ---
(i) "Fiscal Year" shall mean an annual period as determined by
the Trustees unless otherwise provided by the Code or applicable regulations.
2
<PAGE>
(j) "Holders" shall mean as of any particular time any or all
holders of record of Interests in the Trust or in Trust Property, as the case
may be, at such time.
(k) "Interest" shall mean a Holder's units of interest into
which the beneficial interest in the Trust and each series and class of the
Trust shall be divided from time to time.
(l) "Investment Adviser" shall mean any party furnishing
services to the Trust pursuant to any investment advisory contract described in
Section 4.1 hereof.
(m) "Majority Interests Vote" shall mean the vote, at a meeting
of the Holders of Interests, of the lesser of (i) 67% or more of the Interests
present or represented at such meeting, provided the Holders of more than 50% of
the Interests are present or represented by proxy or (ii) more than 50% of the
Interests.
(n) "Person" shall mean and include an individual, corporation,
partnership, trust, association, joint venture and other entity, whether or not
a legal entity, and a government and agencies and political subdivisions
thereof.
(o) "Registration Statement" as of any particular time shall
mean the Registration Statement of the Trust which is effective at such time
under the 1940 Act.
(p) "Trust Property" shall mean as of any particular time any
and all property, real or personal, tangible or intangible, which at such time
is owned or held by or for the account of the Trust or the Trustees or any
series of the Trust established in accordance with Section 6.2.
(q) "Trustees" shall mean such persons who are indemnified as
trustees of the Trust on the signature page of this Declaration, so long as they
shall continue in office in accordance with the terms of this Declaration of
Trust, and all other persons who at the time in question have been duly elected
or appointed as trustees in accordance with the provisions of this Declaration
of Trust and are then in office, in their capacity as trustees hereunder.
3
<PAGE>
ARTICLE II
Trustees
--------
2.1 Number and Qualification. The number of Trustees shall initially
------------------------
be one and shall thereafter be fixed from time to time by written instrument
signed by a majority of the Trustees so fixed, then in office, provided,
however, that the number of Trustees shall in no event be less than one. A
Trustee shall be an individual at least 21 years of age who is not under a legal
disability.
(a) Any vacancy created by an increase in Trustees shall be
filled by the appointment or election of an individual having the qualifications
described in this Article as provided in Section 2.4. Any such appointment shall
not become effective, however, until the individual appointed or elected shall
have accepted in writing such appointment or election and agreed in writing to
be bound by the terms of the Declaration. No reduction in the number of Trustees
shall have the effect of removing any Trustee from office.
(b) Whenever a vacancy in the number of Trustees shall occur,
until such vacancy is filled as provided in Section 2.4 hereof, the Trustees in
office, regardless of their number, shall have all the powers granted to the
Trustees and shall discharge all the duties imposed upon the Trustees by this
Declaration.
2.2 Term and Election. Each Trustee named herein, or elected or
-----------------
appointed prior to the first meeting of the Holders, shall (except in the event
of resignations or removals or vacancies pursuant to Section 2.3 or 2.4 hereof)
hold office until his or her successor has been elected at such meeting and has
qualified to serve as Trustee. Beginning with the Trustees elected at the first
meeting of Holders, each Trustee shall hold office during the lifetime of this
Trust and until its termination as hereinafter provided unless such Trustee
resigns or is removed as provided in Section 2.3 below or his term expires
pursuant to Section 2.4 hereof.
2.3 Resignation and Removal. Any Trustee may resign (without need
-----------------------
for prior or subsequent accounting) by an instrument in writing signed by him or
her and delivered or mailed to the Chairperson, if any, the President or the
Secretary and such resignation shall be effective upon such delivery, or at a
later date according to the terms of the instrument.
(a) Any of the Trustees may be removed with or without cause by
the affirmative vote of the Holders of two-thirds (2/3) of the Interests or
(provided the aggregate number of Trustees, after such removal and after giving
effect to any appointment made to fill the vacancy created by such removal,
shall not be less than the number required by Section 2.1 hereof) with cause, by
the action of two-thirds (2/3) of the remaining Trustees, or without cause, by
the action of eighty percent
4
<PAGE>
(80%) of the remaining Trustees. Removal with cause shall include, but not be
limited to, the removal of a Trustee due to physical or mental incapacity.
(b) Upon the resignation or removal of a Trustee, or his or her
otherwise ceasing to be a Trustee, he or she shall execute and deliver such
documents as the remaining Trustees shall require for the purpose of conveying
to the Trust or the remaining Trustees any Trust Property held in the name of
the resigning or removed Trustee. Upon the death of any Trustee or upon removal
or resignation due to any Trustee's incapacity to serve as trustee, his or her
legal representative shall execute and deliver on his or her behalf such
documents as the remaining Trustees shall require as provided in the preceding
sentence.
2.4 Vacancies. The term of office of a Trustee shall terminate and a
---------
vacancy shall occur in the event of the earliest to occur of the following: the
Trustee's death, resignation, adjudicated incompetence or other incapacity to
perform the duties of the office, or the removal of the Trustee. A vacancy shall
also occur in the event of an increase in the number of Trustees as provided in
Section 2.1. No such vacancy shall operate to annul this Declaration or to
revoke any existing trust created pursuant to the terms of this Declaration. In
the case of a vacancy, the Holders of a plurality of the Interests entitled to
vote, acting at any meeting of the Holders held in accordance with Article VIII
hereof, or, to the extent permitted by the 1940 Act, a majority vote of the
Trustees continuing in office acting by written instrument or instruments, may
fill such vacancy, and any Trustee so elected by the Trustees or the Holders
shall hold office as provided in this Declaration. There shall be no cumulative
voting by the Holders in the election of Trustees.
2.5 Meetings. Meetings of the Trustees shall be held from time to
--------
time within or without the State of Delaware upon the call of the Chairperson,
if any, the President, the Chief Operating Officer, the Secretary, an Assistant
Secretary or any two Trustees.
(a) Regular meetings of the Trustees may be held without call or
notice at a time and place fixed by the By-Laws or by resolution of the
Trustees. Notice of any other meeting shall be given not later than 72 hours
preceding the meeting by United States mail or by electronic transmission to
each Trustee at his or her business address as set forth in the records of the
Trust or otherwise given personally not less than 24 hours before the meeting
but may be waived in writing by any Trustee either before or after such meeting.
The attendance of a Trustee at a meeting shall constitute a waiver of notice of
such meeting except where a Trustee attends a meeting for the express purpose of
objecting to the transaction of any business on the ground that the meeting has
not been lawfully called or convened.
(b) A quorum for all meetings of the Trustees shall be one-third
of the total number of Trustees, but (except at such time as there is only one
Trustee) no less than two Trustees. Unless provided otherwise in this
Declaration, any action
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of the Trustees may be taken at a meeting by vote of a majority of the Trustees
present (a quorum being present) or without a meeting by written consent of a
majority of the Trustees, which written consent shall be filed with the minutes
of proceedings of the Trustees or any such committee. If there be less than a
quorum present at any meeting of the Trustees, a majority of those present may
adjourn the meeting until a quorum shall have been obtained.
(c) Any committee of the Trustees, including an executive
committee, if any, may act with or without a meeting. A quorum for all meetings
of any such committee shall be two or more of the members thereof, unless the
Board shall provide otherwise. Unless provided otherwise in this Declaration,
any action of any such committee may be taken at a meeting by vote of a majority
of the members present (a quorum being present) or without a meeting by written
consent of a majority of the members, which written consent shall be filed with
the minutes of proceedings of the Trustees or any such committee.
(d) With respect to actions of the Trustees and any committee of
the Trustees, Trustees who are Interested Persons of the Trust or are otherwise
interested in any action to be taken may be counted for quorum purposes under
this Section 2.5 and shall be entitled to vote to the extent permitted by the
1940 Act.
(e) All or any one or more Trustees may participate in a meeting
of the Trustees or any committee thereof by means of a conference telephone or
similar communications equipment by means of which all persons participating in
the meeting can hear each other, and participation in a meeting pursuant to such
communications system shall constitute presence in person at such meeting,
unless the 1940 Act specifically requires the Trustees to act "in person," in
which case such term shall be construed consistent with Commission or staff
releases or interpretations.
2.6 Officers; Chairperson of the Board. The Trustees shall, from
----------------------------------
time to time, elect officers of the Trust, including a President, a Secretary
and a Treasurer. The Trustees shall elect or appoint, from time to time, a
Trustee to act as Chairperson of the Board who shall preside at all meetings of
the Trustees and carry out such other duties as the Trustees shall designate.
The Trustees may elect or appoint or authorize the President to appoint such
other officers or agents with such powers as the Trustees may deem to be
advisable. The President, Secretary and Treasurer may, but need not, be a
Trustee. The Chairperson of the Board and such officers of the Trust shall serve
in such capacity for such time and with such authority as the Trustees may, in
their discretion, so designate or as provided for in the By-Laws.
2.7 By-Laws. The Trustees may adopt and, from time to time, amend or
-------
repeal the By-Laws for the conduct of the business of the Trust not inconsistent
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with this Declaration, and such By-Laws are hereby incorporated in this
Declaration by reference thereto.
ARTICLE III
Powers of Trustees
------------------
3.1 General. The Trustees shall have exclusive and absolute control
-------
over management of the business and affairs of the Trust, but with such powers
of delegation as may be permitted by this Declaration and the DBTA. The Trustees
may perform such acts as in their sole discretion are proper for conducting the
business and affairs of the Trust. The enumeration of any specific power herein
shall not be construed as limiting the aforesaid power. Such powers of the
Trustee may be exercised without order of, or recourse to, any court.
3.2 Investments. The Trustees shall have power to:
-----------
(a) conduct, operate and carry on the business of an investment
company; and
(b) subscribe for, invest in, reinvest in, purchase or otherwise
acquire, hold, pledge, sell, assign, transfer, exchange, distribute or otherwise
deal in or dispose of United States and foreign currencies and related
instruments including forward contracts, and securities, including common and
preferred stock, warrants, bonds, debentures, time notes and all other evidences
of indebtedness, negotiable or non-negotiable instruments, obligations,
certificates of deposit or indebtedness, commercial paper, repurchase
agreements, reverse repurchase agreements, convertible securities, forward
contracts, options, futures contracts, and other securities, including, without
limitation, those issued, guaranteed or sponsored by any state, territory or
possession of the United States and the District of Columbia and their political
subdivisions, agencies and instrumentalities, or by the United States
Government, any foreign government, or any agency, instrumentality or political
subdivision of the United States Government or any foreign government, or
international instrumentalities, or by any bank, savings institution,
corporation or other business entity organized under the laws of the United
States or under foreign laws; and to exercise any and all rights, powers and
privileges of ownership or interest in respect of any and all such investments
of every kind and description, including, without limitation, the right to
consent and otherwise act with respect thereto, with power to designate one or
more persons, firms, associations, or corporations to exercise any of said
rights, powers and privileges in respect of any of said instruments; and the
Trustees shall be deemed to have the foregoing powers with respect to any
additional securities in which the Trustees may determine to invest.
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The Trustees shall not be limited to investing in obligations maturing
before the possible termination of the Trust, nor shall the Trustees be limited
by any law limiting the investments which may be made by fiduciaries.
3.3 Legal Title. Legal title to all the Trust Property shall be
-----------
vested in the Trust as a separate legal entity under the DBTA, except that the
Trustees shall have the power to cause legal title to any Trust Property to be
held by or in the name of one or more of the Trustees or in the name of any
other Person on behalf of the Trust on such terms as the Trustees may determine.
In the event that title to any part of the Trust Property is vested in
one or more Trustees, the right, title and interest of the Trustees in the Trust
Property shall vest automatically in each person who may hereafter become a
Trustee upon his or her due election and qualification. Upon the resignation,
removal or death of a Trustee he or she shall automatically cease to have any
right, title or interest in any of the Trust Property, and the right, title and
interest of such Trustee in the Trust Property shall vest automatically in the
remaining Trustees. To the extent permitted by law, such vesting and cessation
of title shall be effective whether or not conveyancing documents have been
executed and delivered.
3.4 Sale of Interests. Subject to the more detailed provisions set
-----------------
forth in Article VII, the Trustees shall have the power to permit persons to
purchase Interests and to add or reduce, in whole or in part, their Interest in
the Trust.
3.5 Borrow Money. The Trustees shall have power to borrow money or
------------
otherwise obtain credit and to secure the same by mortgaging, pledging or
otherwise subjecting as security the assets of the Trust, including the lending
of portfolio securities, and to endorse, guarantee or undertake the performance
of any obligation, contract or engagement of any other person, firm, association
or corporation.
3.6 Delegation; Committee. The Trustees shall have the power,
---------------------
consistent with their continuing exclusive authority over the management of the
Trust and the Trust Property, to delegate from time to time to such of their
number or to officers, employees or agents of the Trust the doing of such things
and the execution of such instruments, either in the name of the Trust or the
names of the Trustees or otherwise, as the Trustees may deem expedient.
3.7 Collection and Payment. The Trustees shall have the power to
----------------------
collect all property due to the Trust; to pay all claims, including taxes,
against the Trust Property; to prosecute, defend, compromise or abandon any
claims relating to the Trust Property; to foreclose any security interest
securing any obligations, by virtue of which any property is owed to the Trust;
and to enter into releases, agreements and other instruments.
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3.8 Expenses. The Trustees shall have the power to incur and pay any
--------
expenses which in the opinion of the Trustees are necessary or incidental to
carry out any of the purposes of this Declaration, and to pay reasonable
compensation from the funds of the Trust to themselves as Trustees. The Trustees
shall fix the compensation of all officers, employees and Trustees. The Trustees
may pay themselves such compensation for special services, including legal and
brokerage services, as they in good faith may deem reasonable (subject to any
limitations in the 1940 Act), and reimbursement for expenses reasonably incurred
by themselves on behalf of the Trust. There shall be no retirement compensation
plan for the Trustees; provided, however, that the Trustees may adopt a deferred
compensation plan consistent with industry and regulatory standards.
3.9 Miscellaneous Powers. The Trustees shall have the power to: (a)
--------------------
employ or contract with such Persons as the Trustees may deem desirable for the
transaction of the business of the Trust and terminate such employees or
contractual relationships as they consider appropriate; (b) enter into joint
ventures, partnerships and any other combinations or associations; (c) purchase,
and pay for out of Trust Property, insurance policies (including, but not
limited to, fidelity bonding and errors and omission policies) insuring the
Investment Adviser, Administrator, distributor, Holders, Trustees, officers,
employees, agents, or independent contractors of the Trust against all claims
arising by reason of holding any such position or by reason of any action taken
or omitted by any such Person in such capacity, whether or not the Trust would
have the power to indemnify such Person against liability; (d) establish
pension, profit-sharing and other retirement, incentive and benefit plans for
any officers, employees and agents of the Trust; (e) to the extent permitted by
law, indemnify any Person with whom the Trust has dealings, including the
Investment Adviser, Administrator, distributor, Holders, Trustees, officers,
employees, agents or independent contractors of the Trust, to such extent as the
Trustees shall determine; (f) guarantee indebtedness or contractual obligations
of others; (g) determine and change the Fiscal Year of the Trust and the method
by which its accounts shall be kept; and (h) adopt a seal for the Trust, but the
absence of such seal shall not impair the validity of any instrument executed on
behalf of the Trust.
3.10 Further Powers. The Trustees shall have power to conduct the
--------------
business of the Trust and carry on its operations in any and all of its branches
and maintain offices, whether within or without the State of Delaware, in any
and all states of the United States of America, in the District of Columbia, in
any foreign countries, and in any and all commonwealths, territories,
dependencies, colonies, possessions, agencies or instrumentalities of the United
States of America and of foreign countries, and to do all such other things and
execute all such instruments as they deem necessary, proper or desirable in
order to promote the interests of the Trust although such things are not herein
specifically mentioned. Any determination as to what is in the interests of the
Trust made by the Trustees in good faith shall be conclusive and shall be
binding upon the Trust and the Holders, past, present and
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future. In construing the provisions of this Declaration, the presumption shall
be in favor of a grant of power to the Trustees. The Trustees shall not be
required to obtain any court order to deal with Trust Property.
ARTICLE IV
Investment Advisory, Administrative,
and Transfer Agent Services
---------------------------
4.1 Investment Advisory and Other Services. The Trustees may in
--------------------------------------
their discretion, from time to time, enter into contracts or agreements for
investment advisory services, administrative services (including transfer and
dividend disbursing agency services), distribution services, fiduciary
(including custodian) services, transfer agent services, Holder servicing and
distribution services, or other services, whereby the other party to such
contract or agreement shall undertake to furnish the Trustees such services as
the Trustees shall, from time to time, consider desirable and all upon such
terms and conditions as the Trustees may in their discretion determine.
Notwithstanding any other provisions of this Declaration to the contrary, the
Trustees may authorize any Investment Adviser (subject to such general or
specific instructions as the Trustees may, from time to time, adopt) to effect
purchases, sales, loans or exchanges of Trust Property on behalf of the Trustees
or may authorize any officer, employee or Trustee to effect such purchases,
sales, loans or exchanges pursuant to recommendations of any such Investment
Adviser (all without further action by the Trustees). Any such purchases,
sales, loans or exchanges shall be binding upon the Trust.
4.2 Parties to Contract. Any contract or agreement of the character
-------------------
described in Section 4.1 of this Article IV or in the By-Laws of the Trust may
be entered into with any Person, although one or more of the Trustees or
officers of the Trust or any Holder may be an officer, director, trustee,
shareholder, or member of such other party to the contract or agreement, and no
such contract or agreement shall be invalidated or rendered voidable by reason
of the existence of any such relationship, nor shall any person holding such
relationship be liable merely by reason of such relationship for any loss or
expense to the Trust under or by reason of such contract or agreement or held
accountable for any profit realized directly or indirectly therefrom, provided
that the contract or agreement when entered into was reasonable and fair and not
inconsistent with the provisions of this Article IV or the By-Laws. Any Trustee
or officer of the Trust or any Holder may be the other party to contracts or
agreements entered into pursuant to Section 4.1 hereof or the By-Laws of the
Trust, and any Trustee or officer of the Trust or any Holder may be financially
interested or otherwise affiliated with Persons who are parties to any or all of
the contracts or agreements mentioned in this Section 4.2.
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ARTICLE V
Limitations of Liability
------------------------
5.1 No Personal Liability of Trustees, Officers, Employees or Agents.
----------------------------------------------------------------
No Trustee, officer, employee or agent of the Trust when acting in such capacity
shall be subject to any personal liability whatsoever, in his or her individual
capacity, to any Person, other than the Trust or its Holders, in connection with
Trust Property or the affairs of the Trust; and all such Persons shall look
solely to the Trust Property for satisfaction of claims of any nature against a
Trustee, officer, employee or agent of the Trust arising in connection with the
affairs of the Trust. No Trustee, officer, employee or agent of the Trust shall
be liable to the Trust, Holders of Interests therein, or to any Trustee,
officer, employee, or agent thereof for any action or failure to act (including,
without limitation, the failure to compel in any way any former or acting
Trustee to redress any breach of trust), except for his or her own bad faith,
willful misfeasance, gross negligence or reckless disregard of his or her
duties.
5.2 Indemnification of Trustees, Officers, Employees and Agents. The
-----------------------------------------------------------
Trust shall indemnify each of its Trustees, officers, employees, and agents
(including Persons who serve at its request as directors, officers or trustees
of another organization in which it has any interest, as a shareholder, creditor
or otherwise) against all liabilities and expenses (including amounts paid in
satisfaction of judgments, in compromise, as fines and penalties, and as counsel
fees) reasonably incurred by him or her in connection with the defense or
disposition of any action, suit or other proceeding, whether civil or criminal,
in which he or she may be involved or with which he or she may be threatened,
while in office or thereafter, by reason of his or her being or having been such
a Trustee, officer, employee or agent, except with respect to any matter as to
which he or she shall have been adjudicated to have acted in bad faith, willful
misfeasance, gross negligence or reckless disregard of his or her duties;
provided, however, that as to any matter disposed of by a compromise payment by
such Person, pursuant to a consent decree or otherwise, no indemnification
either for said payment or for any other expenses shall be provided unless there
has been a determination that such Person did not engage in willful misfeasance,
bad faith, gross negligence or reckless disregard of the duties involved in the
conduct of his or her office by the court or other body approving the settlement
or other disposition or by a reasonable determination, based upon review of
readily available facts (as opposed to a full trial-type inquiry), that he or
she did not engage in such conduct or by a reasonable determination, based upon
a review of the facts, that such Person was not liable by reason of such
conduct, by (a) the vote of a majority of a quorum of Trustees who are neither
"interested persons" of the Trust as defined in Section 2(a)(19) of the 1940 Act
nor parties to the proceeding, or (b) a written opinion from independent legal
counsel approved by the Trustees. The rights accruing to any Person under these
provisions shall not exclude any other right to which he or she may be lawfully
entitled; provided that no Person may satisfy any
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right of indemnity or reimbursement granted herein or in Section 5.1 or to which
he or she may be otherwise entitled except out of the Trust Property. The
Trustees may make advance payments in connection with indemnification under this
Section 5.2, provided that the indemnified Person shall have given a written
undertaking to reimburse the Trust in the event it is subsequently determined
that he or she is not entitled to such indemnification.
5.3 Liability of Holders; Indemnification. The Trust shall indemnify
-------------------------------------
and hold each Holder harmless from and against any claim or liability to which
such Holder may become subject solely by reason of his or her being or having
been a Holder and not because of such Holder's acts or omissions or for some
other reason, and shall reimburse such Holder for all legal and other expenses
reasonably incurred by him or her in connection with any such claim or liability
(upon proper and timely request by the Holder); provided, however, that no
Holder shall be entitled to indemnification by any series established in
accordance with Section 8.8 unless such Holder is a Holder of Interests of such
series. The rights accruing to a Holder under this Section 5.3 shall not
exclude any other right to which such Holder may be lawfully entitled, nor shall
anything herein contained restrict the right of the Trust to indemnify or
reimburse a Holder in any appropriate situation even though not specifically
provided herein.
5.4 No Bond Required of Trustees. No Trustee shall, as such, be
----------------------------
obligated to give any bond or surety or other security for the performance of
any of his or her duties hereunder.
5.5 No Duty of Investigation; Notice in Trust Instruments, Etc. No
-----------------------------------------------------------
purchaser, lender, or other Person dealing with the Trustees or any officer,
employee or agent of the Trust shall be bound to make any inquiry concerning the
validity of any transaction purporting to be made by the Trustees or by said
officer, employee or agent or be liable for the application of money or property
paid, loaned, or delivered to or on the order of the Trustees or of said
officer, employee or agent. Every obligation, contract, instrument, certificate
or other interest or undertaking of the Trust, and every other act or thing
whatsoever executed in connection with the Trust, shall be conclusively relied
upon as having been executed or done by the executors thereof only in their
capacities as Trustees, officers, employees or agents of the Trust. Every
written obligation, contract, instrument, certificate or other interest or
undertaking of the Trust made by the Trustees or by any officer, employee or
agent of the Trust, in his or her capacity as such, shall contain an appropriate
recital to the effect that the Trustee, officer, employee or agent of the Trust
shall not personally be bound by or liable thereunder, nor shall resort be had
to their private property or the private property of the Holders for the
satisfaction of any obligation or claim thereunder, and appropriate references
shall be made therein to the Declaration, and may contain any further recital
which they may deem appropriate, but the omission of such recital shall not
operate to impose personal liability on any of the Trustees, officers, employees
or agents of the Trust. The Trustees may maintain insurance for
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the protection of the Trust Property, Holders, Trustees, officers, employees and
agents in such amount as the Trustees shall deem advisable.
5.6 Reliance on Experts, Etc. Each Trustee and officer or employee
-------------------------
of the Trust shall, in the performance of his or her duties, be fully and
completely justified and protected with regard to any act or any failure to act
resulting from reliance in good faith upon the books of account or other records
of the Trust, upon an opinion of counsel, or upon reports made to the Trust by
any of its officers or employees or by any Investment Adviser, Administrator,
accountant, appraiser or other experts or consultants selected with reasonable
care by the Trustees, officers or employees of the Trust, regardless of whether
such counsel or expert may also be a Trustee.
5.7 Assent to Declaration. Every Holder, by virtue of having become
---------------------
a Holder in accordance with the terms of this Declaration, shall be held to have
expressly assented and agreed to the terms hereof and to have become a party
hereto.
ARTICLE VI
Interests in the Trust
----------------------
6.1 General Characteristics. (a) The Trustees shall have the power
-----------------------
and authority, without Holder approval, to issue Interests in one or more series
from time to time as they deem necessary or desirable. Each series shall be
separate from all other series in respect to the assets and liabilities
allocated to that series and shall represent a separate investment portfolio of
the Trust. The Trustees shall have exclusive power, without Holder approval, to
establish and designate such separate and distinct series, as set forth in
Section 6.2, and to fix and determine the relative rights and preferences as
between the Interests of the separate series as to right of redemption, special
and relative rights as to dividends and other distributions and on liquidation,
conversion rights, and conditions under which the series shall have separate
voting rights or no voting rights.
(b) The Trustees may, without Holder approval, divide Interests of
any series into two or more classes, Interests of each such class having such
preferences and special or relative rights and privileges (including conversion
rights, if any) as the Trustees may determine as provided in Section 6.3. The
fact that a series shall have been initially established and designated without
any specific establishment or designation of classes, shall not limit the
authority of the Trustees to divide a series and establish and designate
separate classes thereof.
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(c) The number of Interests authorized shall be unlimited, and the
Interests so authorized may be represented in part by fractional Interests.
From time to time, the Trustees may divide or combine the Interests of any
series or class into a greater or lesser number without thereby changing the
proportionate beneficial interests in the series or class. The Trustees may
issue Interests of any series or class thereof for such consideration and on
such terms as they may determine (or for no consideration if pursuant to an
Interest dividend or split-up), all without action or approval of the Holders.
All Interests when so issued on the terms determined by the Trustees shall be
fully paid and non-assessable. The Trustees may classify or reclassify any
unissued Interests or any Interests previously issued and reacquired of any
series or class thereof into one or more series or classes thereof that may be
established and designated from time to time. The Trustees may hold as treasury
Interests, reissue for such consideration and on such terms as they may
determine, or cancel, at their discretion from time to time, any Interests of
any series or class thereof reacquired by the Trust.
6.2 Establishment of Series of Interests. (a) Without limiting the
------------------------------------
authority of the Trustees set forth in Section 6.2(b) to establish and designate
any further series, the Trustees hereby establish and designate three series, as
follows:
International Equity Fund
Small Cap Growth Fund
Socially Responsible Fund
The provisions of this Article VI shall be applicable to the above
designated series and any further series that may from time to time be
established and designated by the Trustees as provided in Section 6.2(b).
(b) The establishment and designation of any series of Interests
other than the one set forth above shall be effective upon the execution, by a
majority of the Trustees, of an instrument setting forth such establishment and
designation and the relative rights and preferences of such series, or as
otherwise provided in such instrument. At any time that there are no Interests
outstanding of any particular series previously established and designated, the
Trustees may by an instrument executed by a majority of their number abolish
that series and the establishment and designation thereof. Each instrument
referred to in this paragraph shall have the status of an amendment of this
Declaration.
(c) Section 9.2 of this Agreement shall apply also with respect to
each such series as if such series were a separate trust.
6.3 Establishment of Classes. The division of any series into two or
------------------------
more classes and the establishment and designation of such classes shall be
effective upon the execution by a majority of the Trustees of an instrument
setting forth such
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division, and the establishment, designation, and relative rights and
preferences of such classes, or as otherwise provided in such instrument. The
relative rights and preferences of the classes of any series may differ in such
respects as the Trustees may determine to be appropriate, provided that such
differences are set forth in the aforementioned instrument. At any time that
there are no Interests outstanding of any particular class previously
established and designated, the Trustees may by an instrument executed by a
majority of their number abolish that class and the establishment and
designation thereof. Each instrument referred to in this paragraph shall have
the status of an amendment to this Declaration.
6.4 Assets of Series. All consideration received by the Trust for
----------------
the issue or sale of Interests of a particular series together with all Trust
Property in which such consideration is invested or reinvested, all income,
earnings, profits, and proceeds thereof, including any proceeds derived from the
sale, exchange or liquidation of such assets, and any funds or payments derived
from any reinvestment of such proceeds in whatever form the same may be, shall
irrevocably belong to that series for all purposes, subject only to the rights
of creditors of such series and except as may otherwise be required by
applicable tax laws, and shall be so recorded upon the books of account of the
Trust. Separate and distinct records shall be maintained for each series and
the assets associated with a series shall be held and accounted for separately
from the other assets of the Trust, or any other series. In the event that
there is any Trust Property, or any income, earnings, profits, and proceeds
thereof, funds, or payments which are not readily identifiable as belonging to
any particular series, the Trustees shall allocate them among any one or more of
the series established and designated from time to time in such manner and on
such basis as they, in their sole discretion, deem fair and equitable. Each
such allocation by the Trustees shall be conclusive and binding upon the Holders
of all Interests for all purposes.
6.5 Liabilities of Series. (a) The Trust Property belonging to each
---------------------
particular series shall be charged with the liabilities of the Trust in respect
to that series and all expenses, costs, charges and reserves attributable to
that series, and any general liabilities, expenses, costs, charges or reserves
of the Trust which are not readily identifiable as belonging to any particular
series shall be allocated and charged by the Trustees to and among any one or
more of the series established and designated from time to time in such manner
and on such basis as the Trustees in their sole discretion deem fair and
equitable. Each allocation of liabilities, expenses, costs, charges and
reserves by the Trustees shall be conclusive and binding upon the Holders of all
Interests for all purposes. The Trustees shall have full discretion, to the
extent not inconsistent with the 1940 Act, to determine which items shall be
treated as income and which items as capital, and each such determination and
allocation shall be conclusive and binding upon the Holders.
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(b) Without limitation of the foregoing provisions of this Section,
but subject to the right of the Trustees in their discretion to allocate general
liabilities, expenses, costs, charges or reserves as herein provided, the debts,
liabilities, obligations and expenses incurred, contracted for or otherwise
existing with respect to a particular series shall be enforceable against the
assets of such series only, and not against the assets of any other series.
Notice of this limitation on interseries liabilities shall be set forth in the
certificate of trust of the Trust (whether originally or by amendment) as filed
or to be filed in the Office of the Secretary of State of the State of Delaware
pursuant to the DBTA, and upon the giving of such notice in the certificate of
trust, the statutory provisions of Section 3804 of the DBTA relating to
limitations on interseries liabilities (and the statutory effect under Section
3804 of setting forth such notice in the certificate of trust) shall become
applicable to the Trust and each series. Every note, bond, contract or other
undertaking issued by or on behalf of a particular series shall include a
recitation limiting the obligation represented thereby to that series and its
assets.
6.6 Dividends and Distributions. (a) Dividends and distributions on
---------------------------
Interests of a particular series or any class thereof may be paid with such
frequency as the Trustees may determine, which may be daily or otherwise,
pursuant to a standing resolution or a resolution adopted only once or with such
frequency as the Trustees may determine, to the Holders of Interests in that
series or class, from such of the income and capital gains, accrued or realized,
from the Trust Property belonging to that series, or in the case of a class,
belonging to that series and allocable to that class, as the Trustees may
determine, after providing for actual and accrued liabilities belonging to that
series. All dividends and distributions on Interests in a particular series or
class thereof shall be distributed pro rata to the Holders of Interests in that
series or class in proportion to the total outstanding Interests in that series
or class held by such Holders at the date and time of record established for the
payment of such dividends or distribution, except to the extent otherwise
required or permitted by the preferences and special or relative rights and
privileges of any series or class. Such dividends and distributions may be made
in cash or Interests of that series or class or a combination thereof as
determined by the Trustees or pursuant to any program that the Trustees may have
in effect at the time for the election by each Holder of the mode of the paying
of such dividend or distribution to that Holder. Any such dividend or
distribution paid in Interests will be paid at the net asset value thereof as
determined in accordance with Section 7.4.
(b) The Interests in a series or a class of the Trust shall represent
beneficial interests in the Trust Property belonging to such series or in the
case of a class, belonging to such series and allocable to such class. Each
Holder of Interests in a series or a class shall be entitled to receive its pro
rata share of distributions of income and capital gains made with respect to
such series or such class. Upon reduction or withdrawal of its Interests or
indemnification for liabilities incurred by reason of being or having been a
Holder of Interests in a series or a class,
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such Holder shall be paid solely out of the funds and property of such series or
in the case of a class, the funds and property of such series and allocable to
such class of the Trust. Upon liquidation or termination of a series or class
of the Trust, Holders of Interests in such series or class shall be entitled to
receive a pro rata share of the Trust Property belonging to such series or in
the case of a class, belonging to such series and allocable to such class.
6.7 Voting Rights. Notwithstanding any other provision hereof, on
-------------
each matter submitted to a vote of the Holders, each Holder shall be entitled to
one vote for each whole Interest standing in his name on the books of the Trust,
and each fractional Interest shall be entitled to a proportionate fractional
vote, irrespective of the series thereof or class thereof, and all Interests of
all series and classes thereof shall vote together as a single class; provided,
however, that (a) as to any matter with respect to which a separate vote of one
or more series or classes thereof is permitted or required by the 1940 Act or
the provisions of the instrument establishing and designating the series or
class, such requirements as to a separate vote by such series or class thereof
shall apply in lieu of all Interests of all series and classes thereof voting
together; and (b) as to any matter which affects only the interests of one or
more particular series or classes thereof, only the Holders of the one or more
affected series or classes shall be entitled to vote, and each such series or
class shall vote as a separate series or class.
6.8 Record Dates. The Trustees may from time to time close the
------------
transfer books or establish record dates and times for the purposes of
determining the Holders entitled to be treated as such, to the extent provided
or referred to in Section 8.6.
6.9 Transfer. All Interests of each particular series or class
--------
thereof shall be transferable, but transfers of Interests of a particular series
or class thereof will be recorded on the Interest transfer records of the Trust
applicable to that series or class only at such times as Holders shall have the
right to require the Trust to redeem Interests of that series or class and at
such other times as may be permitted by the Trustees.
6.10 Equality. Except as provided herein or in the instrument
--------
designating and establishing any class or series, all Interests of each
particular series or class thereof shall represent an equal proportionate
interest in the assets belonging to that series, or in the case of a class,
belonging to that series and allocable to that class, subject to the liabilities
belonging to that series, and each Interest of any particular series or class
shall be equal to each other Interest of that series or class; but the
provisions of this sentence shall not restrict any distinctions permissible
under Section 6.6 that may exist with respect to dividends and distributions on
Interests of the same series or class. The Trustees may from time to time
divide or combine the Interests of any particular series or class into a greater
or lesser number of Interests
17
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of that series or class without thereby changing the proportionate beneficial
interest in the assets belonging to that series or class or in any way affecting
the rights or Interests of any other series or class.
6.11 Fractions. Any fractional Interest of any series or class, if
---------
any such fractional Interest is outstanding, shall carry proportionately all the
rights and obligations of a whole Interest of that series or class, including
rights and obligations with respect to voting, receipt of dividends and
distributions, redemption of Interests, and liquidation of the Trust.
6.12 Class Differences. Subject to Section 6.3, the relative rights
-----------------
and preferences of the classes of any series may differ in such other respects
as the Trustees may determine to be appropriate in their sole discretion,
provided that such differences are set forth in the instrument establishing and
designating such classes and executed by a majority of the Trustees.
6.13 Conversion of Interests. Subject to compliance with the
-----------------------
requirements of the 1940 Act, the Trustees shall have the authority to provide
that Holders of Interests of any series shall have the right to convert said
Interests into one or more other series in accordance with such requirements and
procedures as may be established by the Trustees. The Trustees shall also have
the authority to provide that Holders of Interests of any class of a particular
series shall have the right to convert said Interests into one or more other
classes of that particular series or any other series in accordance with such
requirements and procedures as may be established by the Trustees.
6.14 Investments in the Trust. The Trustees may accept investments
------------------------
in the Trust from such persons and on such terms and for such consideration, not
inconsistent with the provisions of the 1940 Act, as they from time to time
authorize. The Trustees may authorize any distributor, principal underwriter,
custodian, transfer agent or other person to accept orders for the purchase of
Interests that conform to such authorized terms and to reject any purchase
orders for Interests whether or not conforming to such authorized terms.
6.15 Trustees and Officers as Holders. Any Trustee, officer or other
--------------------------------
agent of the Trust, and any organization in which any such person is interested,
may acquire, own, hold and dispose of Interests of the Trust to the same extent
as if such person were not a Trustee, officer or other agent of the Trust; and
the Trust may issue and sell or cause to be issued and sold and may purchase
Interests from any such person or any such organization subject only to the
general limitations, restrictions or other provisions applicable to the sale or
purchase of Interests generally.
6.16 No Preemptive Rights; Derivative Suits. Holders shall have no
--------------------------------------
preemptive or other right to subscribe to any additional Interests or other
securities
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issued by the Trust. No action may be brought by a Holder on behalf of the
Trust unless Holders owning no less than 10% of the then outstanding Interests,
or series or class thereof, join in the bringing of such action. A Holder of
Interests in a particular series or a particular class of the Trust shall not be
entitled to participate in a derivative or class action lawsuit on behalf of any
other series or any other class or on behalf of the Holders of Interests in any
other series or any other class of the Trust.
6.17 No Appraisal Rights. Holders shall have no right to demand
-------------------
payment for their Interests or to any other rights of dissenting Holders in the
event the Trust participates in any transaction which would give rise to
appraisal or dissenters' rights by a stockholder of a corporation organized
under the General Corporation Law of Delaware, or otherwise.
6.18 Status of Interests and Limitation of Personal Liability.
--------------------------------------------------------
Interests shall be deemed to be personal property giving only the rights
provided in this Amended and Restated Declaration of Trust. Every Holder by
virtue of acquiring Interests shall be held to have expressly assented and
agreed to the terms hereof and to be bound hereby. The death, incapacity,
dissolution, termination or bankruptcy of a Holder during the continuance of the
Trust shall not operate to dissolve or terminate the Trust or any series thereof
nor entitle the representative of such Holder to an accounting or to take any
action in court or elsewhere against the Trust or the Trustees, but shall
entitle the representative of such Holder only to the rights of such Holder
under this Trust. Ownership of Interests shall not entitle the Holder to any
title in or to the whole or any part of the Trust Property or right to call for
a partition or division of the same or for an accounting, nor shall the
ownership of Interests constitute the Holders as partners. Neither the Trust
nor the Trustees, nor any officer, employee or agent of the Trust, shall have
any power to bind personally any Holder, nor except as specifically provided
herein to call upon any Holder for the payment of any sum of money or assessment
whatsoever other than such as the Holder may at any time personally agree to
pay.
ARTICLE VII
Purchases and Redemptions
-------------------------
7.1 Purchases. The Trustees, in their discretion, may, from time to
---------
time, without a vote of the Holders, permit the purchase of Interests by such
party or parties (or increase in the Interests of a Holder), for such type of
consideration, including, without limitation, cash or property, at such time or
times (including, without limitation, each business day), and on such terms as
the Trustees may deem best, and may in such manner acquire other assets
(including, without limitation, the acquisition of assets subject to, and in
connection with the assumption of, liabilities) and businesses.
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7.2 Redemption by Holder. Each Holder of Interests of the Trust or
--------------------
any series or class thereof shall have the right at such times as may be
permitted by the Trust to require the Trust to redeem all or any part of his or
her Interests of the Trust, or series or class thereof, at a redemption price
equal to the net asset value per Interest of the Trust or series or class
thereof, next determined in accordance with Section 7.4 hereof after the
Interests are properly tendered for redemption, subject to any contingent
deferred sales charge or redemption charge in effect at the time of redemption.
Payment of the redemption price shall be in cash; provided, however, that if the
Trustees determine, which determination shall be conclusive, that conditions
exist which make payment wholly in cash unwise or undesirable, the Trust may,
subject to the requirements of the 1940 Act, make payment wholly or partly in
securities or other assets belonging to the Trust or series or class thereof of
which the Interests being redeemed are part of the value of such securities or
assets used in such determination of the net asset value.
Notwithstanding the foregoing, the Trust may postpone payment of the
redemption price and may suspend the right of the Holders of Interests of the
Trust, or series or class thereof, to require the Trust to redeem Interests of
the Trust, or of any series or class thereof, during any period or at any time
when and to the extent permissible under the 1940 Act.
7.3 Redemption by Trust. Each Interest of the Trust, or series or
-------------------
class thereof that has been established and designated is subject to redemption
by the Trust at the redemption price which would be applicable if such Interest
was then being redeemed by the Holder pursuant to Section 7.2 hereof: (a) at any
time, if the Trustees determine in their sole discretion and by majority vote
that it is in the best interest of the Trust, or any series or class thereof, to
so redeem, or (b) upon such other conditions as may from time to time be
determined by the Trustees and set forth in the then current Prospectus of the
Trust with respect to maintenance of Holder accounts of a minimum amount. Upon
such redemption the Holders of the Interests so redeemed shall have no further
right with respect thereto other than to receive payment of such redemption
price.
7.4 Net Asset Value. The net asset value per Interest of any series
---------------
shall be (a) in the case of a series whose Interests are not divided into
classes, the quotient obtained by dividing the value of the net assets of that
series (being the value of the assets belonging to that series less the
liabilities belonging to that series) by the total number of Interests of that
series outstanding, and (b) in the case of a class of Interests of a series
whose Interests are divided into classes, the quotient obtained by dividing the
value of the net assets of that series allocable to such class (being the value
of the assets belonging to that series allocable to such class less the
liabilities belonging to such class) by the total number of Interests of such
class outstanding; all determined in accordance with the methods and procedures,
including without
20
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limitation those with respect to rounding, established by the Trustees from time
to time.
The Trustees may determine to maintain the net asset value per
Interest of any series or any class at a designated constant dollar amount and
in connection therewith may adopt procedures consistent with the 1940 Act for
continuing declarations of income attributable to that series or that class as
dividends payable in additional Interests of that series at the designated
constant dollar amount and for the handling of any losses attributable to that
series or that class. Such procedures may provide that in the event of any loss
each Holder shall be deemed to have contributed to the capital of the Trust
attributable to that series his or her pro rata portion of the total number of
Interests required to be cancelled in order to permit the net asset value per
Interest of that series or class to be maintained, after reflecting such loss,
at the designated constant dollar amount. Each Holder of the Trust shall be
deemed to have agreed, by his or her investment in any series or class with
respect to which the Trustees shall have adopted any such procedure, to make the
contribution referred to in the preceding sentence in the event of any such
loss.
ARTICLE VIII
Holders
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8.1 Rights of Holders. The right to conduct any business
-----------------
hereinbefore described is vested exclusively in the Trustees, and the Holders
shall have no rights under this Declaration or with respect to the Trust
Property other than the beneficial interest conferred by their Interests and the
voting rights accorded to them under this Declaration.
8.2 Register of Interests. A register shall be kept by the Trust
---------------------
under the direction of the Trustees which shall contain the names and addresses
of the Holders and the number of Interests held by each Holder. Each such
register shall be conclusive as to the identity of the Holders of the Trust and
the Persons who shall be entitled to payments of distributions or otherwise to
exercise or enjoy the rights of Holders. No Holder shall be entitled to receive
payment of any distribution, nor to have notice given to it as herein provided,
until it has given its address to such officer or agent of the Trustees as shall
keep the said register for entry thereon. No certificates certifying the
ownership of interests need be issued except as the Trustees may otherwise
determine from time to time.
8.3 Notices. Any and all notices to which any Holder hereunder may
-------
be entitled and any and all communications shall be deemed duly served or given
if presented personally to a Holder, left at his or her residence or usual place
of business, or sent via United States mail or by electronic transmission to a
Holder at
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his or her address as it is registered with the Trust, as provided in Section
8.2. If mailed, such notice shall be deemed to be given when deposited in the
United States mail addressed to the Holder at his or her address as it is
registered with the Trust, as provided in Section 8.2, with postage thereon
prepaid.
8.4 Meetings of Holders. Meetings of the Holders may be called at
-------------------
any time by a majority of the Trustees and shall be called by any Trustee upon
written request of Holders holding, in the aggregate, not less than 10% of the
Interests (or series or class thereof), such request specifying the purpose or
purposes for which such meeting is to be called. Any such meeting shall be held
within or without the State of Delaware on such day and at such time as the
Trustees shall designate. Holders of one-third of the Interests in the Trust,
present in person or by proxy, shall constitute a quorum for the transaction of
any business, except as may otherwise be required by the 1940 Act or other
applicable law or by this Declaration or the By-Laws of the Trust. If a quorum
is present at a meeting, an affirmative vote by the Holders present, in person
or by proxy, holding more than 50% of the total Interests (or series or class
thereof) of the Holders present, either in person or by proxy, at such meeting
constitutes the action of the Holders, unless the 1940 Act, other applicable
law, this Declaration or the By-Laws of the Trust require a greater number of
affirmative votes. Notwithstanding the foregoing, the affirmative vote by the
Holders present, in person or by proxy, holding less than 50% of the Interests
(or class or series thereof) of the Holders present, in person or by proxy, at
such meeting shall be sufficient for adjournments. Any meeting of Holders,
whether or not a quorum is present, may be adjourned for any lawful purpose
provided that no meeting shall be adjourned for more than six months beyond the
originally scheduled meeting date. Any adjourned session or sessions may be
held, within a reasonable time after the date set for the original meeting
without the necessity of further notice.
8.5 Notice of Meetings. Written or printed notice of all meetings of
------------------
the Holders, stating the time, place and purposes of the meeting, shall be given
as provided in Section 8.3. At any such meeting, any business properly before
the meeting may be considered, whether or not stated in the notice of the
meeting. Any adjourned meeting held as provided in Section 8.4 shall not
require the giving of additional notice.
8.6 Record Date. For the purpose of determining the Holders who are
-----------
entitled to notice of any meeting, to vote at any meeting, to participate in any
distribution, or for the purpose of any other action, the Trustees may from time
to time fix a date, not more than 90 calendar days prior to the date of any
meeting of the Holders or payment of distributions or other action, as the case
may be, as a record date for the determination of the persons to be treated as
Holders of record for such purposes, and any Holder who was a Holder at the date
and time so fixed shall be entitled to vote at such meeting or to be treated as
a Holder of record for purposes of such other action, even though he or she has
since that date and time disposed of his
22
<PAGE>
or her Interests, and no Holder becoming such after that date and time shall be
so entitled to vote at such meeting or to be treated as a Holder of record for
purposes of such other action. If the Trustees shall divide the Interests into
two or more series in accordance with Section 6.2 herein, nothing in this
Section shall be construed as precluding the Trustees from setting different
record dates for different series and if the Trustees shall divide any series
into two or more classes in accordance with Section 6.3 herein, nothing in this
Section 8.6 shall be construed as precluding the Trustees from setting different
record dates for different classes.
8.7 Proxies, Etc. At any meeting of Holders, any Holder entitled to
-------------
vote thereat may vote by proxy, provided that no proxy shall be voted at any
meeting unless it shall have been placed on file with the Secretary, or with
such other officer or agent of the Trust as the Secretary may direct, for
verification prior to the time at which such vote shall be taken.
(a) Pursuant to a resolution of a majority of the Trustees,
proxies may be solicited in the name of one or more Trustees or one or more of
the officers of the Trust. Only Holders of record shall be entitled to vote.
Each Holder shall be entitled to a vote proportionate to its Interest in the
Trust.
(b) When Interests are held jointly by several persons, any one
of them may vote at any meeting in person or by proxy in respect to such
Interest, but if more than one of them shall be present at such meeting in
person or by proxy, and such joint owners or their proxies so present disagree
as to any vote to be cast, such vote shall not be received in respect to such
Interest.
(c) A proxy purporting to be executed by or on behalf of a
Holder shall be deemed valid unless challenged at or prior to its exercise, and
the burden of proving invalidity shall rest on the challenger. If the Holder is
a minor or a person of unsound mind, and subject to guardianship or to the legal
control of any other person regarding the charge or management of his or her
Interest, he or she may vote by his or her guardian or such other person
appointed or having such control, and such vote may be given in person or by
proxy.
8.8 Reports. The Trustees shall cause to be prepared, at least
-------
annually, a report of operations containing a balance sheet and statement of
income and undistributed income of the Trust prepared in conformity with
generally accepted accounting principles and an opinion of an independent public
accountant on such financial statements. The Trustees shall, in addition,
furnish to the Holders at least semi-annually an interim report containing an
unaudited balance sheet as of the end of such period and an unaudited statement
of income and surplus for the period from the beginning of the current Fiscal
Year to the end of such period.
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8.9 Inspection of Records. The records of the Trust shall be open
---------------------
to inspection by Holders during normal business hours and for any purpose not
harmful to the Trust.
8.10 Voting Powers. (a) The Holders shall have power to vote only
-------------
(i) for the election of Trustees as contemplated by Section 2.2 hereof, (ii)
with respect to any investment advisory contract as contemplated by Section 4.1
hereof, (iii) with respect to termination of the Trust as provided in Section
9.2 hereof, (iv) with respect to amendments to the Declaration of Trust as
provided in Section 9.3 hereof, (v) with respect to any merger, consolidation or
sale of assets as provided in Section 9.4 hereof, (vi) with respect to
incorporation of the Trust to the extent and as provided in Section 9.5 hereof,
and (vii) with respect to such additional matters relating to the Trust as may
be required by the 1940 Act, DBTA, or any other applicable law, the Declaration,
the By-Laws or any registration of the Trust with the Commission (or any
successor agency) or any state, or as and when the Trustees may consider
necessary or desirable.
(b) Each Holder shall be entitled to vote based on the ratio
his or her Interest bears to the Interests of all Holders entitled to vote.
Until Interests are issued, the Trustees may exercise all rights of Holders and
may take any action required by law, the Declaration or the By-Laws to be taken
by Holders. The By-Laws may include further provisions for Holders' votes and
meetings and related matters not inconsistent with this Declaration.
8.11 Holder Action by Written Consent. Any action which may be taken
--------------------------------
by the Holders may be taken without notice and without a meeting if Holders
holding more than 50% of the total Interests entitled to vote (or such larger
proportion thereof as shall be required by any express provision of this
Declaration) shall consent to the action in writing and the written consents
shall be filed with the records of the meetings of Holders. Such consents shall
be treated for all purposes as votes taken at a meeting of the Holders.
8.12 Holder Communications. (a) Whenever ten or more Holders who
---------------------
have been such for at least six months preceding the date of application, and
who hold in the aggregate at least 1% of the total Interests, shall apply to the
Trustees in writing, stating that they wish to communicate with other Holders
with a view to obtaining signatures for a request for a meeting of Holders and
accompanied by a form of communication and request which they wish to transmit,
the Trustees shall within five business days after receipt of such application
either (i) afford to such applicants access to a list of the names and addresses
of all Holders as recorded on the books of the Trust; or (ii) inform such
applicants as to the approximate number of Holders, and the approximate cost of
transmitting to them the proposed communication and form of request.
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(b) If the Trustees elect to follow the course specified in
clause (ii) above, the Trustees, upon the written request of such applicants,
accompanied by a tender of the material to be transmitted and of the reasonable
expenses of transmission, shall, with reasonable promptness, transmit, by United
States mail or by electronic transmission, such material to all Holders at their
addresses as recorded on the books, unless within five business days after such
tender the Trustees shall transmit, by United States mail or by electronic
transmission, to such applicants and file with the Commission, together with a
copy of the material to be transmitted, a written statement signed by at least a
majority of the Trustees to the effect that in their opinion either such
material contains untrue statements of fact or omits to state facts necessary to
make the statements contained therein not misleading, or would be in violation
of applicable law, and specifying the basis of such opinion. The Trustees shall
thereafter comply with any order entered by the Commission and the requirements
of the 1940 Act and the Securities Exchange Act of 1934.
ARTICLE IX
Duration; Termination of Trust;
Amendment; Mergers; Etc.
------------------------
9.1 Duration. Subject to possible termination in accordance with the
--------
provisions of Section 9.2, the Trust created hereby shall continue perpetually
pursuant to Section 3808 of DBTA.
9.2 Termination of Trust. (a) The Trust may be terminated (i) by
--------------------
the affirmative vote of the Holders of not less than two-thirds of the Interests
in the Trust at any meeting of the Holders, or (ii) by an instrument in writing,
without a meeting, signed by a majority of the Trustees and consented to by the
Holders of not less than two-thirds of such Interests, or (iii) by the Trustees
by written notice to the Holders. Upon any such termination,
(i) The Trust shall carry on no business except for the
purpose of winding up its affairs.
(ii) The Trustees shall proceed to wind up the affairs of
the Trust and all of the powers of the Trustees under this Declaration
shall continue until the affairs of the Trust shall have been wound up,
including the power to fulfill or discharge the contracts of the Trust,
collect its assets, sell, convey, assign, exchange, or otherwise dispose of
all or any part of the remaining Trust Property to one or more Persons at
public or private sale for consideration which may consist in whole or in
part of cash, securities or other property of any kind, discharge or pay
its liabilities, and do all other acts appropriate to liquidate its
business; provided that any sale, conveyance,
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<PAGE>
assignment, exchange, or other disposition of all or substantially all of
the Trust Property shall require approval of the principal terms of the
transaction and the nature and amount of the consideration by the Holders
with a Majority Interests Vote.
(iii) After paying or adequately providing for the payment
of all liabilities, and upon receipt of such releases, indemnities and
refunding agreements, as they deem necessary for their protection, the
Trustees may distribute the remaining Trust Property, in cash or in kind or
partly each, among the Holders according to their respective rights.
(b) Upon termination of the Trust and distribution to the
Holders as herein provided, a majority of the Trustees shall execute and lodge
among the records of the Trust an instrument in writing setting forth the fact
of such termination and file a certificate of cancellation in accordance with
Section 3810 of the DBTA. Upon termination of the Trust, the Trustees shall
thereon be discharged from all further liabilities and duties hereunder, and the
rights and interests of all Holders shall thereupon cease.
9.3 Amendment Procedure.
-------------------
(a) All rights granted to the Holders under this Declaration of
Trust are granted subject to the reservation of the right of the Trustees to
amend this Declaration of Trust as herein provided, except as set forth herein
to the contrary. Subject to the foregoing, the provisions of this Declaration of
Trust (whether or not related to the rights of Holders) may be amended at any
time, so long as such amendment is not in contravention of applicable law,
including the 1940 Act, by an instrument in writing signed by a majority of the
Trustees (or by an officer of the Trust pursuant to the vote of a majority of
such Trustees). Any such amendment shall be effective as provided in the
instrument containing the terms of such amendment or, if there is no provision
therein with respect to effectiveness, upon the execution of such instrument and
of a certificate (which may be a part of such instrument) executed by a Trustee
or officer of the Trust to the effect that such amendment has been duly adopted.
(b) No amendment may be made, under Section 9.3(a) above, which
would change any rights with respect to any Interest in the Trust by reducing
the amount payable thereon upon liquidation of the Trust, by repealing the
limitations on personal liability of any Holder or Trustee, or by diminishing or
eliminating any voting rights pertaining thereto, except with a Majority
Interests Vote.
(c) A certification signed by a majority of the Trustees setting
forth an amendment and reciting that it was duly adopted by the Holders or by
the Trustees as aforesaid or a copy of the Declaration, as amended, and executed
by a
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majority of the Trustees, shall be conclusive evidence of such amendment when
lodged among the records of the Trust.
(d) Notwithstanding any other provision hereof, until such time as
Interests are first sold, this Declaration may be terminated or amended in any
respect by the affirmative vote of a majority of the Trustees or by an
instrument signed by a majority of the Trustees.
9.4 Merger, Consolidation and Sale of Assets. The Trust may merge or
----------------------------------------
consolidate with any other corporation, association, trust or other organization
or may sell, lease or exchange all or substantially all of its property,
including its good will, upon such terms and conditions and for such
consideration when and as authorized by no less than a majority of the Trustees
and by a Majority Interests Vote of the Trust or by an instrument or instruments
in writing without a meeting, consented to by the Holders of not less than 50%
of the total Interests of the Trust or such series, as the case may be, and any
such merger, consolidation, sale, lease or exchange shall be deemed for all
purposes to have been accomplished under and pursuant to the statutes of the
State of Delaware. In accordance with Section 3815(f) of DBTA, an agreement of
merger or consolidation may effect any amendment to the Declaration or By-Laws
or effect the adoption of a new declaration of trust or by-laws of the Trust if
the Trust is the surviving or resulting business trust. A certificate of merger
or consolidation of the Trust shall be signed by a majority of the Trustees.
9.5 Incorporation. Upon a Majority Interests Vote, the Trustees may
-------------
cause to be organized or assist in organizing a corporation or corporations
under the laws of any jurisdiction or any other trust, partnership, association
or other organization to take over all of the Trust Property or to carry on any
business in which the Trust shall directly or indirectly have any interest, and
to sell, convey and transfer the Trust Property to any such corporation, trust,
association or organization in exchange for the equity interests thereof or
otherwise, and to lend money to, subscribe for the equity interests of, and
enter into any contracts with any such corporation, trust, partnership,
association or organization, or any corporation, partnership, trust, association
or organization in which the Trust holds or is about to acquire equity
interests. The Trustees may also cause a merger or consolidation between the
Trust or any successor thereto and any such corporation, trust, partnership,
association or other organization if and to the extent permitted by law, as
provided under the law then in effect. Nothing contained herein shall be
construed as requiring approval of the Holders for the Trustees to organize or
assist in organizing one or more corporations, trusts, partnerships,
associations or other organizations and selling, conveying or transferring a
portion of the Trust Property to such organizations or entities.
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ARTICLE X
Miscellaneous
-------------
10.1 Certificate of Designation; Agent for Service of Process. The
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Trust shall file, in accordance with Section 3812 of DBTA, in the office of the
Secretary of State of Delaware, a certificate of trust, in the form and with
such information required by Section 3810 of DBTA and executed in the manner
specified in Section 3811 of DBTA. In the event the Trust does not have at
least one Trustee qualified under Section 3807(a) of DBTA, then the Trust shall
comply with Section 3807(b) of DBTA by having and maintaining a registered
office in Delaware and by designating a registered agent for service of process
on the Trust, which agent shall have the same business office as the Trust's
registered office. The failure to file any such certificate, to maintain a
registered office, to designate a registered agent for service of process, or to
include such other information shall not affect the validity of the
establishment of the Trust, the Declaration, the By-Laws or any action taken by
the Trustees, the Trust officers or any other Person with respect to the Trust
except insofar as a provision of the DBTA would have governed, in which case the
Delaware common law governs.
10.2 Governing Law. This Declaration is executed by all of the
-------------
Trustees and delivered with reference to DBTA and the laws of the State of
Delaware, and the rights of all parties and the validity and construction of
every provision hereof shall be subject to and construed according to DBTA and
the laws of the State of Delaware (unless and to the extent otherwise provided
for and/or preempted by the 1940 Act or other applicable federal securities
laws); provided, however, that there shall not be applicable to the Trust, the
Trustees or this Declaration (a) the provisions of Section 3540 of Title 12 of
the Delaware Code, or (b) any provisions of the laws (statutory or common) of
the State of Delaware (other than the DBTA) pertaining to trusts which are
inconsistent with the rights, duties, powers, limitations or liabilities of the
Trustees set forth or referenced in this Declaration.
10.3 Counterparts. This Declaration may be simultaneously executed
------------
in several counterparts, each of which shall be deemed to be an original, and
such counterparts, together, shall constitute one and the same instrument, which
shall be sufficiently evidenced by any such original counterpart.
10.4 Reliance by Third Parties. Any certificate executed by an
-------------------------
individual who, according to the records of the Trust or of any recording office
in which this Declaration may be recorded, appears to be a Trustee hereunder,
certifying to (a) the number or identity of Trustees or Holders, (b) the due
authorization of the execution of any instrument or writing, (c) the form of any
vote passed at a meeting of Trustees or Holders, (d) the fact that the number of
Trustees or Holders present at any meeting or executing any written instrument
satisfies the requirements of this Declaration, (e)
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the form of any By-Laws adopted by or the identity of any officers elected by
the Trustees, or (f) the existence of any fact or facts which in any manner
relate to the affairs of the Trust, shall be conclusive evidence as to the
matters so certified in favor of any person dealing with the Trustees and their
successors.
10.5 Provisions in Conflict With Law or Regulations. (a) The
----------------------------------------------
provisions of this Declaration are severable, and if the Trustees shall
determine, with the advice of counsel, that any of such provisions is in
conflict with the 1940 Act, the DBTA, or with other applicable laws and
regulations, the conflicting provisions shall be deemed never to have
constituted a part of this Declaration; provided, however, that such
determination shall not affect any of the remaining provisions of this
Declaration or render invalid or improper any action taken or omitted prior to
such determination.
(b) If any provision of this Declaration shall be held invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall
attach only to such provision in such jurisdiction and shall not in any manner
affect such provision in any other jurisdiction or any other provision of this
Declaration in any jurisdiction.
10.6 Trust Only. It is the intention of the Trustees to create only
----------
a business trust under DBTA with the relationship of trustee and beneficiary
between the Trustees and each Holder from time to time. It is not the intention
of the Trustees to create a general partnership, limited partnership, joint
stock association, corporation, bailment, or any form of legal relationship
other than a Delaware business trust except to the extent such trust is deemed
to constitute a corporation under the Code and applicable state tax laws.
Nothing in this Declaration of Trust shall be construed to make the Holders,
either by themselves or with the Trustees, partners or members of a joint stock
association.
10.7 Withholding. Should any Holder be subject to withholding
-----------
pursuant to the Code or any other provision of law, the Trust shall withhold all
amounts otherwise distributable to such Holder as shall be required by law and
any amounts so withheld shall be deemed to have been distributed to such Holder
under this Declaration of Trust. If any sums are withheld pursuant to this
provision, the Trust shall remit the sums so withheld to and file the required
forms with the Internal Revenue Service, or other applicable government agency.
10.8 Headings and Construction. Headings are placed herein for
-------------------------
convenience of reference only and shall not be taken as a part hereof or control
or affect the meaning, construction or effect of this instrument. Whenever the
singular number is used herein, the same shall include the plural; and the
neuter, masculine and feminine genders shall include each other, as applicable.
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IN WITNESS WHEREOF, the undersigned have caused these presents to be
executed as of the day and year first above written.
/s/ George J. Zock November 7, 1996
- ---------------------------------------
George J. Zock
Trustee
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<PAGE>
CERTIFICATE OF TRUST
OF
HORACE MANN MUTUAL FUNDS
The undersigned, constituting the sole member of the Board of Trustees
of HORACE MANN MUTUAL FUNDS (the "Trust"), in order to form a Delaware business
trust pursuant to Section 3810 of the Delaware Business Trust Act, does hereby
certify the following:
1. The name of the Delaware business trust is HORACE MANN MUTUAL
FUNDS.
2. Prior to the issuance of beneficial interests, the Trust will
become a registered investment company under the Investment Company Act of 1940,
as amended.
3. Notice is hereby given that pursuant to Section 3804 of the
Delaware Business Trust Act, the debts, liabilities, obligations and expenses
incurred, contracted for or otherwise existing with respect to a particular
series of the Trust shall be enforceable against the assets of such series only
and not against the assets of the Trust generally.
4. The registered office of the Trust in Delaware is HORACE MANN
MUTUAL FUNDS, c/o Corporation Service Company, 1013 Centre Road, Wilmington,
Delaware 19805.
5. The registered agent for service of process on the Trust is
Corporation Service Company, 1013 Centre Road, Wilmington, Delaware 19805.
6. This Certificate of Trust shall be effective on the date it is
filed with the Office of the Delaware Secretary of State.
IN WITNESS WHEREOF, the undersigned Trustee of HORACE MANN MUTUAL
FUNDS has executed this Certificate as of the 7th day of November, 1996.
/s/ George J. Zock
-----------------------------
George J. Zock
Trustee
<PAGE>
EXHIBIT 2
BY-LAWS
-------
OF
--
Horace Mann Mutual Funds
------------------------
Section 1. Agreement and Declaration of Trust and Principal Office
-------------------------------------------------------------------
1.1 Agreement and Declaration of Trust. These By-Laws shall be subject to the
----------------------------------
Agreement and Declaration of Trust, as from time to time in effect (the
"Declaration of Trust"), of Horace Mann Mutual Funds, a Delaware business trust
established by the Declaration of Trust (the "Trust").
1.2 Principal Office of the Trust. The principal office of the Trust shall be
-----------------------------
located at 1 Horace Mann Plaza, Springfield, Illinois 62715.
Section 2. Shareholders
------------------------
2.1 Shareholder Meetings. A meeting of the shareholders of the Trust or of any
--------------------
one or more series of shares may be called at any time by the Trustees, by the
president or, if the Trustees and the president shall fail to call any meeting
of shareholders for a period of 30 days after written application of one or more
shareholders who hold at least 10% of all outstanding shares of the Trust, if
shareholders of all series are required under the Declaration of Trust to vote
in the aggregate and not by individual series at such meeting, or of any series,
if shareholders of such series are entitled under the Declaration of Trust to
vote by individual series at such meeting, then such shareholders may call such
meeting. If the meeting is a meeting of the shareholders of one or more series,
but not a meeting of all shareholders of the Trust, then only the shareholders
of such one or more series shall be entitled to notice of and to vote at the
meeting. Each call of a meeting shall state the place, date, hour and purposes
of the meeting.
2.2 Place of Meetings. All meetings of the shareholders shall be held at the
-----------------
principal office of the Trust or at such other place within the United States as
shall be designated by the Trustees or the president of the Trust.
2.3 Notice of Meetings. A written notice of each meeting of shareholders,
------------------
stating the place, date and hour and the purposes of the meeting, shall be given
at least seven days before the meeting to each shareholder entitled to vote
thereat by leaving such notice with him or her or at his or her residence or
usual place of business or by mailing it, postage prepaid, and addressed to such
shareholder at his or her address as it appears in the records of the Trust.
Such notice shall be given by the secretary or an assistant secretary or by an
officer designated by the Trustees. No notice of any meeting of shareholders
need be given to a shareholder if a written waiver of notice, executed
<PAGE>
before or after the meeting by such shareholder or his or her attorney thereunto
duly authorized, is filed with the records of the meeting.
2.4 Ballots. No ballot shall be required for any election unless requested by
-------
a shareholder present or represented at the meeting and entitled to vote in the
election.
2.5 Proxies. Shareholders entitled to vote may vote either in person or by
-------
proxy in writing dated not more than six months before the meeting named
therein, which proxies shall be filed with the secretary or other person
responsible to record the proceedings of the meeting before being voted. Unless
otherwise specifically limited by their terms, such proxies shall entitle the
holders thereof to vote at any adjournment of such meeting but shall not be
valid after the final adjournment of such meeting.
Section 3. Trustees
--------------------
3.1 Committees and Advisory Board. The Trustees may appoint from their number
-----------------------------
an executive committee and other committees. Except as the Trustees may
otherwise determine, and subject to the provisions of the Declaration of Trust,
any such committee may make rules for conduct of its business. The Trustees may
appoint an advisory board to consist of not less than two nor more than five
members. The members of the advisory board shall be compensated in such manner
as the Trustees may determine and shall confer with and advise the Trustees
regarding the investments and other affairs of the Trust. Each member of the
advisory board shall hold office until the first meeting of the Trustees
following the next meeting of the shareholders and until his or her successor is
elected and qualified, or until he or she sooner dies, resigns, is removed or
becomes disqualified, or until the advisory board is sooner abolished by the
Trustees.
3.2 Regular Meetings. Regular meetings of the Trustees may be held without
----------------
call or notice at such places and at such times as the trustees may from time to
time determine, provided that notice of the first regular meeting following any
such determination shall be given to absent Trustees.
3.3 Special Meetings. Special meetings of the Trustees may be held at any time
----------------
and at any place designated in the call of the meeting, when called by the
president or the treasurer or by two or more Trustees, sufficient notice thereof
being given to each Trustee by the secretary or an assistant secretary or by the
officer or one of the Trustees calling the meeting.
3.4 Notice. It shall be sufficient notice to a Trustee to send notice by mail
------
or electronic transmission at least seventy-two hours before the meeting
addressed to the Trustee at his or her usual or last known business or residence
address or to give notice to him or her in person or by telephone at least
twenty-four hours before the meeting. Notice of a meeting need not be given to
any Trustee if a written waiver of notice,
2
<PAGE>
executed by him or her before or after the meeting, is filed with the records of
the meeting, or to any Trustee who attends the meeting without protesting prior
thereto or at its commencement the lack of notice to him or her. Neither notice
of a meeting nor a waiver of a notice need specify the purposes of the meeting.
3.5 Quorum. At any meeting of the Trustees one-third of the Trustees then in
------
office shall constitute a quorum; provided, however, a quorum shall not be less
than two (except at such time as there is only one Trustee). Any meeting may be
adjourned from time to time by a majority of the votes cast upon the question,
whether or not a quorum is present, and the meeting may be held as adjourned
without further notice.
Section 4. Officers and Agents
-------------------------------
4.1 Enumeration; Qualification. The officers of the Trust shall be a
--------------------------
president, a vice president, a treasurer, a secretary and such other officers,
if any, as the Trustees from time to time may in their discretion elect or
appoint. The Trust may also have such agents, if any, as the Trustees from time
to time may in their discretion appoint. Any officer may be but none need be a
Trustee or shareholder. Any two or more offices may be held by the same person.
4.2 Powers. Subject to the other provisions of these By-Laws, each officer
------
shall have, in addition to the duties and powers herein and in the Declaration
of Trust set forth, such duties and powers as are commonly incident to his or
her office as if the Trust were organized as a Delaware business corporation and
such other duties and powers as the Trustees may from time to time designate,
including without limitation the power to make purchases and sales of portfolio
securities of the Trust pursuant to recommendations of the Trust's investment
adviser in accordance with the policies and objectives of the Trust set forth in
its prospectus and with such general or specific instructions as the Trustees
may from time to time have issued.
4.3 Election. The president, the vice president, the treasurer and the
--------
secretary shall be elected annually by the Trustees. Other officers, if any, may
be elected or appointed by the Trustees at any time.
4.4 Tenure. The president, the vice president, the treasurer and the secretary
------
shall hold office until their respective successors are chosen and qualified, or
in each case until he or she sooner dies, resigns, is removed or becomes
disqualified. Each other officer shall hold office at the pleasure of the
Trustee. Each agent shall retain his or her authority at the pleasure of the
Trustees.
4.5 President. The president shall be the chief executive officer of the
---------
Trust. Subject to the control of the Board of Trustees, the president shall in
general supervise the business and affairs of the Trust and shall see that the
resolutions and directions of the
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<PAGE>
Board of Trustees are carried into effect except when that responsibility is
specifically assigned to some other person by the Board of Trustees. In general,
the president shall perform all duties incident to the office of President and
such other duties as from time to time may be prescribed by the Board of
Trustees. The president shall preside at all meetings of the shareholders and of
the Trustees at which he or she is present, except as otherwise voted by the
Trustees.
4.6 Vice President. In the absence of the president or in the event of his
--------------
inability or refusal to act, the vice president shall perform the duties of the
president. The vice president shall perform such other duties as from time to
time may be prescribed by the president or the Board of Trustees.
4.7 Treasurer and Assistant Treasurer. Subject to any arrangement made by the
---------------------------------
Trustees with a bank or trust company or other organization as custodian or
transfer or shareholder services agent, the treasurer shall be in charge of the
Trust's valuable papers and shall keep or cause to be kept correct and complete
books and records of account. The treasurer shall keep such records of the
financial transactions of the Trust as the Board of Trustees shall prescribe.
The treasurer shall have power to sign all certificates for shares of beneficial
interest, if authorized by the Trustees, and shall perform such other duties as
from time to time may be prescribed by the president or the Board of Trustees.
Any assistant treasurer shall have such duties and powers as shall be designated
from time to time by the Trustees.
4.8 Secretary and Assistant Secretary. The secretary shall record all
---------------------------------
proceedings of the shareholders and the Trustees in books to be kept therefor,
which books shall be kept at the principal office of the Trust. In the absence
of the secretary from any meeting of shareholders or Trustees, an assistant
secretary, or if there be none or he or she is absent, a temporary clerk chosen
at the meeting, shall record the proceedings thereof in the aforesaid books.
Section 5. Resignations and Removals
-------------------------------------
Any Trustee, officer or advisory board member may resign at any time by
delivering his or her resignation in writing to the president, the vice
president or the secretary or to a meeting of the Trustees. The Trustees may
remove any officer elected by them with or without cause by the vote of a
majority of the Trustees then in office. Except to the extent expressly provided
in a written agreement with the Trust, no Trustee, officer, or advisory board
member resigning, and no officer or advisory board member removed, shall have
any right to any compensation for any period following his or her resignation or
removal, or any right to damages on account of such removal.
4
<PAGE>
Section 6. Vacancies
---------------------
A vacancy in any office may be filled at any time. Each successor shall hold
office for the unexpired term, and in the case of the president, the vice
president, the treasurer and the secretary, until his or her successor is chosen
and qualified, or in each case until he or she sooner dies, resigns, is removed
or becomes disqualified.
Section 7. Shares of Beneficial Interest
-----------------------------------------
No certificates certifying the ownership of shares shall be issued except as the
Trustees may otherwise authorize. In lieu of issuing certificates for shares,
the Trustees or the transfer agent shall keep accounts upon the books of the
Trust for the record holders of such shares, who shall be deemed, for all
purposes hereunder, to be the holders of certificates for such shares as if they
had accepted such certificates and shall be held to have expressly assented and
agreed to the terms hereof.
Section 8. Record Date and Closing Transfer Books
--------------------------------------------------
The Trustees may fix in advance a time, which shall not be more than 90 days
before the date of any meeting of shareholders or the date for the payment of
any dividend or making of any other distribution to shareholders, as the record
date for determining the shareholders having the right to notice and to vote at
such meeting and any adjournment thereof or the right to receive such dividend
or distribution, and in such case only shareholders of record on such record
date shall have such right, notwithstanding any transfer of shares on the books
of the Trust after the record date; or without fixing such record date the
Trustees may for any of such purposes close the transfer books for all or any
part of such period.
Section 9. Seal
----------------
The seal of the Trust shall, subject to alteration by the Trustees, consist of a
flat-faced circular die with the word "Delaware," together with the name of the
Trust and the year of its organization, cut or engraved thereon; but, unless
otherwise required by the Trustees, the seal shall not be necessary to be placed
on, and its absence shall not impair the validity of, any document, instrument
or other paper executed and delivered by or on behalf of the Trust.
5
<PAGE>
Section 10. Execution of Papers
--------------------------------
Except as the Trustees may generally or in particular cases authorize the
execution thereof in some other manner, all deeds, leases, transfers, contracts,
bonds, notes, checks, drafts and other obligations made, accepted or endorsed by
the Trust shall be signed, and all transfers of securities standing in the name
of the Trust shall be executed, by the president, by the vice president,
secretary, treasurer or assistant secretary or treasurer or by whomsoever else
shall be designated for that purpose by the vote of the Trustees and need not
bear the seal of the Trust.
Section 11. Fiscal Year
------------------------
Except as from time to time otherwise provided by the Trustees, the fiscal year
of the Trust shall end on December 31.
Section 12. Amendments
-----------------------
These By-Laws may be amended or repealed, in whole or in part, by a majority of
the Trustees then in office at any meeting of the Trustees, or by one or more
writings signed by such a majority.
6
